LexisNexis® Legal Newsroom
To Whom Are Directors' Duties Owed?

It is generally understood that corporate directors act in a fiduciary role in performing their board duties. But to whom do directors owe their fiduciary duties? That was the question asked in a November 8, 2013 decision from the North Carolina Supreme Court, in which the Court reversed a trial verdict...

First Circuit: D&O Insurer Must Advance Failed Bank Directors and Officers’ Defense Expenses

In an interesting March 31, 2014 opinion ( here ), the Unites States Court of Appeals for the First Circuit, applying Puerto Rico law, affirmed a district court’s ruling that the D&O insurer for the failed Westernbank of Mayaguez, Puerto Rico must advance the bank’s former directors’...

Rogue CFO - Part I: Introduction

by David Carroll Small, privately owned corporations deal with all types of challenges: competition, government regulations, recessions, rising cost of benefits for employees —the list is long. But one area that seems to be a persistent problem for small businesses is the area of fraud, in particular...

Supreme Court Affirms Oral Resignation of Director

Biolase, Inc. v. Oracle Partners, L.P . , Del. Supr., No. 270, 2014 (Del. Ch. June 12, 2014) [ an enhanced version of this opinion is available to lexis.com subscribers ]. Issue Addressed : Whether a director may resign by an oral statement alone, pursuant to DGCL Section 141(b). Answer : Yes. ...

Who Is an “Officer”? A Critical Inquiry For Indemnification and Insurance

Many companies provide advancement, indemnification and insurance benefits and protection for their officers and directors. However, it is not always clear who is an “officer” for purposes of claiming the benefits and protection. The long-running and high-profile saga of Sergey Aleynikov...

Advice for Deal Advisors

In the context of a merger and in the making of other decisions, boards are entitled to rely on advice from experts and advisors. When they do so in good faith, board members are "fully protected" to use the words of 141(e). In the wake of Rural Metro, bankers now seem to feel that the target...

Should There Be More Litigation Against Corporate Officers? (Uh, No.)

Over the past fifteen years, there has been a steady progression of corporate scandals, from Enron to options backdating to the excesses that led to the global financial crisis. These debacles were followed by waves of shareholder litigation. However, according to one legal scholar, the shareholder lawsuits...

An Alarming Liability Award Against Not-for-Profit Organization’s Directors and Officers

A question that frequently recurs when I am speaking to directors and officers of non-profit organizations is why – given that their firms have no shareholders – they need to bother with D&O insurance. The reality is that even though officials at non-profit firms don’t have to worry...

Defenses to Advancement Based on Conditions in Agreement Rejected

Blankenship v. Alpha Appalachia Holdings, Inc., C.A. No. 10610-CB (Del. Ch., May 28, 2015) [ an enhanced version of this opinion is available to lexis.com subscribers ]. This is the latest Delaware Court of Chancery decision in a long series of recent Delaware decisions (and one of two opinions handed...

Protecting Corporate Executives’ Rights to Advancement and Indemnification

Most senior corporate executive have a general understanding of the importance to them of their corporate indemnification rights. As discussed here , a related but sometimes even more important corporate benefit is the right to advancement – that is, the right to have their defense fees paid on...

Dispute on Advancement of Fees to Corporate Directors; Court Requires Discussion During a Meal

Advancement of fees to corporate directors has been the focus of many decisions of Delaware’s Supreme Court and Court of Chancery that have been highlighted on these pages over the last ten years. Both the statute and the cases that interpret them are often counterintuitive and one of the more...

Taking Control of Cybersecurity: A Practical Guide for Officers and Directors

Major cybersecurity attacks of increased sophistication — and calculated to maximize the reputational and financial damage caused to the corporate targets — are now commonplace. These attacks have catapulted cybersecurity to a top priority for senior executives and board members. To help...

Advancement Claim Addressed in Receivership Context

The Delaware Court of Chancery opinion in Andrikopoulos v. Silicon Valley Innovation Company, LLC, C.A. No. 9899-VCP (Del. Ch. July 30, 2015), addressed the priority of an advancement claim in the context of a receivership under Delaware law [subscribers can access an enhanced version of this opinion...

Independent Directors Have New Ammunition to Obtain Dismissal of Suits

A recent Delaware Supreme Court decision that provides independent directors with a new basis to be dismissed from lawsuits against them, was highlighted in my latest article published in Directorship , the magazine of the National Association of Corporate Directors. The case is styled: In re Cornerstone...

Delaware Court of Chancery Invalidates Attempt of Majority Stockholder to Appoint Officers

In Gorman v. Salamone, C.A. No. 10183-VCN (Del. Ch. July 31, 2015), the Court of Chancery affirms the board-centric foundation of Delaware corporate law, and describes the limitation on the ability of a majority stockholder to appoint officers directly–even though a majority stockholder might have...

Tenth Circuit: D&O Insurance Policy’s Insured vs. Insured Exclusion Unambiguously Precludes Coverage for FDIC’s Failed Bank Claims

In an important decision concerning D&O insurance coverage in connection with failed bank claims, the Tenth Circuit, applying Kansas law, held that a D&O policy’s insured vs. insured exclusion unambiguously precluded coverage for claims brought by the FDIC as receiver of a failed bank against...

What We Recommend: Three Very Cool Apps for Your Phone

I have been fairly slow in joining the 21 st century. For example, I did not finally purchase an iPhone until last December. I have been trying to make up for lost time, among other things by becoming better acquainted with some of the available apps. In this post, I review three of my favorite new app...

The Short-Termism Debate: Are There D&O Liability Issues Involved, Too?

In recent months, commentators from across the political spectrum, largely in response to perceived excesses of activist investors, have called for changes to discourage “ short-termism ” – that is, the perceived excessive focus of businesses on short-term results rather long-term value...

When Data Hacks Lead to D&O Lawsuits, Actual and Threatened

Many observers, including even this blog, have speculated whether the rising wave of data breaches and cyber security attacks will result in litigation against the directors and officers of the affected companies. Indeed, in 2014, there were two sets of lawsuits filed against the boards of companies...

Rare Rejection of Advancement Claim

In the recent Chancery decision of Lieberman v. Electrolytic Ozone, Inc., C.A. No. 10152-VCN (Del. Ch. Aug. 31, 2015), the court rejected claims for advancement by former officers and directors who sought to have their former company pay for the attorneys’ fees they incurred in defending a suit...

Somewhat Rare Denial of Advancement Claim in the Delaware Court of Chancery

In a rare denial of a claim for advancement, the Delaware Court of Chancery in the opinion styled Charney v. American Apparel, Inc. , C.A. No. 11098-CB (Del. Ch., Sept. 11, 2015), rejected the claims by a former chairman and CEO (and founder), based on the provisions for advancement in the company’s...

Book Review: Cyber Risks, Social Media and Insurance

We live in a world in which rapidly shifting technologies and communications modalities have changed the way we interact and conduct business. These new media and means of interaction have introduced innumerable benefits and efficiencies. Unfortunately, these new alternatives have down sides; among other...

A Guide to Directors’ Duties and Liabilities in Europe

One of the vestiges of the global financial crisis is that company directors and officers now face more scrutiny than ever. This scrutiny, in turn, has led to a greater liability exposure for corporate officials, as well. This increased scrutiny and amplified liability exposure applies not only in the...

The “Myth” of Outside Director Liability and the Critical Importance of D&O Insurance

In the world of corporate governance, there are a number of common presumptions about board structure and practices. However, according to a recent paper, many of these presumptions may in fact represent corporate governance “myths.” In their September 30, 2015 paper entitled “Seven...

A Trio of Delaware Decisions Reaffirms Corporate Director Protections

Because the vast majority of U.S. publicly traded companies are incorporated in Delaware, legal developments in Delaware have a particularly important impact on legal standards governing corporate conduct in the U.S. Delaware law is particularly influential with respect to the responsibilities and potential...