2.3 M&A Litigation By now we are all used to seeing merger objection suits when public companies are acquired. These suits continue to be filed, although they are now happening in federal instead of state court. A ray of sunshine, however, is the decline in appraisal suits filings. Moreover, recent coverage litigation suggests that appraisal rights suits may be covered by D&O insurance policies in some circumstances. The Supreme Court ruling in Cyan isn't just a problem for IPOs; Cyan is causing expensive headaches for mature public companies, too. Post-Cyan, public companies that register their shares to use as currency for M&A deals are being sued in state court. We saw this trend start in 2018, and the trend will continue through the rest of 2019 and into 2020. Just because an M&A deal closes and various merger objection suits have been settled, that doesn't mean a company is out of the woods yet. As we've noted in earlier reports, M&A integration issues are one of the leading causes of securities class action suits.
2.4 Cyber Stumbles When it comes to the board's role in cyberrisk oversight, the pressure continues to
LOOKING AHEAD 2020 | WOODRUFF-SAWYER & CO.
mount as the stakes get higher and higher. Three areas of concern are fines, derivative suit settlements, and securities class action lawsuits. In 2019, European regulators came out of the gate with a large fine against Google. Not to be outdone, the United States Federal Trade Commission approved a $5 billion fine for Facebook related to the Cambridge Analytica scandal. As regulators continue to grapple with data breach, privacy, and other cyber-related issues, the pressure on regulators to impose ever-greater fines will not relent. Derivative suits will also continue to be filed against directors and officers of companies that cyber stumble. The $29 million settlement by Yahoo! in 2019 was the first monetary derivative suit settlement to be paid in a data breach case. Now that plaintiffs have breached this dam, we should expect to see more cases of this type. Business interruption losses due to cyber breaches are not new, but a securities class action lawsuit against a company related to business interruption losses due to cyber breaches is new. Long predicted by cyber liability experts like Lauri Floresca, FedEx is the unfortunate target of this type of securities class action suit. No doubt, plaintiffs will find more targets in 2020.
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