Risk Alerts

As reported by Kevin Lacroix below, two recent case rulings could be the catalyst for a potentially large decline in M&A deal litigation. In the recent Corwin case, the Delaware supreme court dismissed merger transaction challenges by way of holding applicable the business judgement rule. In the second case of Trulia, the courts ultimately denied the approval of a disclosure only settlement while setting high standards.

A new enforcement action details a new (and very creative) cyber-related market manipulation scheme. Defendant Robert Murray, created a fraudulent corporate email account in order to obtain the Edgar login credential of Fitbit. After careful research, the login credentials were then used to create a false tender offer which was ultimately fueled by false news reports causing a small spike in the stock value before settling down. Mr Murray profited a total of just over 3k before being discovered and charged by the SEC and DOJ.

A recent decision in the case of Walters vs Kimpton Hotel has given a green light for the plaintiffs to proceed with their suit despite the fact that their data had never been misused. In 2016, Kimpton Hotel suffered a malware infection which ultimately resulted in payment card information being accessed or stolen.

As a result of failing to implement sufficient/adequate anti-money laundering controls, a compliance officer for Moneygram was assessed a 1 Mill personal penalty - accused of alleged willful violations. Such fines are often not covered by D&O insurance due to the policy's willfull/intentional act exclusion and being deemed against public policy. 

A recent AIG study indicates what may become a new tactic in cyber intrusions - simultaneously coordinated attacks targeting groups of companies. Of the respondants surveyed, 20% believe as many as 100 companies at any given time may be affected by such a breach. These will likely be directed at specific industries/sectors through potential exploitation of software vulnerabilities of a common nexus. Industries most likely to be affected include: financial services, power, telecomm, healthcare and IT.

China’s Cybersecurity laws take effect June 1 2017. These laws apply to “network operators” which is a broad term. Much like US laws, these laws regulate the collection and handling of personal information and contain industry specific rules. Additionally, China's cyber laws stress the protection of individual privacy (as opposed to simply protection of data) and also require that sensitive PII be stored domestically. Penalties for violations include monetary fines, license suspensions and termination of business activities. 

A new ruling out of CA brings new concerns for private companies when issuing IPO’s. To summarize the case/ruling: (Indirect) Investors of Theranos who purchased pre-IPO shares (through funds formed by intermediaries) were ruled as allowed to file securities claims against the company and its officers despite lacking a direct relationship or owning actual shares. In addition to allegations of fraud are allegations of unfair competition.