Month in Review News and Developments in Executive Liability and Insurance May 2014 Volume 11

General NewsDelaware Legislature Moves to Bar Enforcement of Supreme Court’s Fee-Shifting DecisionDue to its predictable and well-developed body of business-friendly law and specialized courts with expertise in such law, it is no surprise that nearly half of all public corporations elect to incorporate in Delaware. In yet another example of its courts’ willingness to adapt to evolving business practices, Delaware’s Supreme Court delivered the ATP Tours, Inc. v. Deutscher Tennis Bund decision on May 8, 2014 upholding a fee shifting (also known as “loser pays”) bylaw for a non-stock corporation. As background, ATP’s board adopted a fee-shifting provision in its bylaws for intra-corporate disputes, obligating its members to reimburse ATP’s defense expenses if the member bringing the claim “does not obtain a judgment on the merits that substantially achieves, in substance and amount, the full remedy sought.” Shortly thereafter, ATP was sued and prevailed in court, prompting it to seek reimbursement of its defense costs. The federal trial court determined the validity of the bylaw provision should first be addressed by the Delaware Supreme Court, which upheld it, finding Delaware law did not prohibit its enactment. While Delaware generally adheres to the “American Rule” in which each party bears its own legal fees, it also allows parties to contractually amend this rule. Since bylaws are considered a contract between a corporation and its shareholders, the court determined “a fee-shifting provision would not be prohibited under Delaware common law.” Corporations favorably viewed the court’s opinion as a possible deterrent to frivolous litigation in the future; however, the court did not rule on the enforceability of the specific fee-shifting provision adopted by ATP, claiming that "bylaws that may otherwise be facially valid will

not be enforced if adopted or used for an inequitable purpose." Instead, a facially valid bylaw’s enforceability will be determined by “the circumstances surrounding its adoption and use" and "[t]he intent to deter litigation … is not invariably an improper purpose." It remains to be seen under what facts and circumstances a fee-shifting bylaw will be enforced, but it appears for now that a corporate board, under certain circumstances, may potentially adopt a fee-shifting bylaw for intra-corporate litigation for the specific purpose of deterring such litigation. Shortly after the court’s decision was issued, the Corporation Law Council of the Delaware State Bar Association proposed statutory amendments to limit applicability of the opinion to non-stock corporations, and prohibit such bylaws from imposing monetary liability or corporate debts on any stockholder. While this bill was written to take effect on August 1, 2014, the Delaware General Assembly never voted on the bill due to concerns about the scope of the legislation and the haste with which the bill was drafted. Delaware's State Senate instead approved Joint Resolution #12, which was passed by its state House of Representatives and signed by its governor on the last day of the legislative session. Among other items, the resolution mandates continued examination of the anti-fee-shifting amendment prior to the next legislative session in January 2015. Bearing in mind the uncertainty over the enforceability of fee-shifting bylaws, it is important for boards of Delaware corporations to be mindful of this ongoing debate and the possibility of future legislation intended to weaken such provisions. Aon will continue to monitor the legislature’s examination of these issues.

INSIDE

Cases of Interest

SEC Filings and Settlements

Shareholder Class Action Filings, Settlements, and Dismissals

CASES OF INTEREST

Defense Costs and Forfeiture Not Covered under EPL or D&O Policies

Self-Dealing Claims Survive Dismissal Despite Board Having Fulfilled its Revlon Duties

Excess D&O Insurer’s Exhaustion Clause Upheld

Court Holds Professional Services Exclusion Bars Coverage for Claims of Mismanagement

Carrier Cannot Claw Back Defense Costs Incurred Prior to Termination of Duty to Defend

Late Notice Defense Rejected by Trail Court Affirmed on Appeal

E&O Policy Held to Cover Charter School Losses Arising From Tuition Reimbursement Dispute

Broad Shareholder Exclusion with Narrow Carve Back in Insured v. Insured Exclusion Bars Entire Claim

Criminal Acts Exclusion Bars Claims under E&O Policy Arising from Employee’s Criminal Conduct But Ambiguities and Factual Issues Prevent Judgment in Favor of Insurer

Allocation Provision Governs Determination of Covered and Uncovered Losses

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SEC’s Fair Fund Distribution StudyA paper authored by Urska Velikonja of Emory University School of Law, Public Compensation for Private Harm: Evidence from the SEC’s Fair Fund Distributions, examines the Securities and Exchange Commission’s (SEC) rise as a source of compensation for defrauded investors through fair fund distributions. As background, the Sarbanes-Oxley Act of 2002 (SOX) created fair funds which expanded the SEC’s ability to compensate investors by allowing the agency to distribute collected civil fines to harmed investors. To date, 236 fair funds were created between 2002 and 2013. The paper, which is the first comprehensive empirical assessment of the SEC’s compensation efforts, addresses criticisms that the funds are a waste of the SEC’s resources with distributions that are small and circular transfers from shareholder victims to themselves. First, the study reports the SEC distributes a large amount of money to harmed investors through fair funds with $14 billion distributed to date. Additionally, the average fair fund is similar in size to the average class action settlement in private securities litigation. Secondly, the paper reports that more than half

the time, the SEC compensates investors for losses where a private lawsuit is either unavailable or impractical. For example, two-thirds of fair funds compensate investors for consumer fraud or anticompetitive behavior by financial intermediaries. Thirdly, the study reports that individual and secondary defendants contribute to fair fund distributions more often than they pay damages to settle private securities litigation. Individual defendants are sanctioned in 67.8% of fair fund cases and contribute to fair fund in 59.7% of cases. Finally, the study shows that investor compensation through fair funds is both possible and desirable. The fact that individuals pay monetary sanctions distributed to harmed investors eliminates circularity with respect to their share of compensation. Moreover, where the firm pays to settle an enforcement action for a securities violation from which it profited, the sanction prevents the wrongdoing firm and its shareholders from profiting from misconduct. The paper is available at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2400189.

Cases of Interest Defense Costs and Forfeiture Not Covered under EPL or D&O PoliciesAn insured sought coverage under both its EPL and D&O policies for defense costs and a forfeiture award resulting from a criminal proceeding charging the insured with knowingly aiding and abetting the use of a falsified identification document. After the insured entered a guilty plea to the criminal charge, it was ordered to pay a fine of $300,000 and forfeit $100,000. The court held there was no coverage under either the EPL or D&O policies. First, the court found the criminal proceeding did not allege a “Wrongful Employment Practice,” which required the wrongful act be made “by or on behalf of an Employee, Former Employee, or applicant for employment...” Here, the lawsuit was not filed by or on behalf of an employer, former employee or applicant, but rather was brought by the U.S. Attorney on behalf of the U.S. government. Next, the court found the carve-outs in the definition of Loss for “fines,

penalties, or taxes” and “any relief, whether pecuniary or injunctive, imposed or agreed to in connection with criminal lawsuits or proceedings” were applicable. The forfeiture was excluded as a fine or penalty since it was part of the punishment for the insured’s criminal offense, and defense cost were excluded “because they constitute relief imposed in connection with a criminal lawsuit.” The court also held the criminal proceeding did not qualify as a Claim under the D&O coverage section. The D&O policy defined a “Claim” as “a civil, criminal, administrative or regulatory proceeding commenced against any Insured in which they may be subjected to binding adjudication of liability for damages or other relief…” The court concluded neither the search warrant nor “the filing of the information in this case, which did not seek restitution, could subject the [insured] to an adjudication of liability for damages or to an adjudication of liability for

… individual and secondary defendants contribute to fair fund

distributions more often than they pay

damages to settle private securities

litigation.

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other relief, as the policy requires.” Importantly, the court distinguished those cases which hold that a search warrant and subpoena qualify as a “Claim” since its definition in those cases did not require a binding adjudication of liability for damages or other relief. The court also concluded the forfeiture was not covered since the policy excluded “matters uninsurable under the law pursuant to which this Policy is construed … The purpose of criminal forfeiture is to punish the criminal by depriving him of

proceeds of his crime” and this “purpose would not be served if the wrongdoer were permitted to shift the burden of forfeiture to an insurance company.” Finally, the court noted that if the insurer had paid defense costs, the insured would need to repay those amounts because the insured’s plea and sentencing constituted a final adjudication of a criminal act. McCalla Corp. v. Certain Underwriters at Lloyd’s, 2014 U.S. Dist. LEXIS 60309 (D. Kan. 2014).

Self-Dealing Claims Survive Dismissal Despite Board Having Fulfilled its Revlon Duties

In a recent opinion from Vice Chancellor Glasscock of the Delaware Court of Chancery, the majority of claims asserted by shareholders of an acquired entity were dismissed, while a few claims rooted in alleged self-dealing by directors survived. The case arose following approval of a merger by the acquired entity’s board of directors where a fairness opinion was never obtained. Plaintiff shareholders initially challenged the merger in Minnesota state court seeking to exercise contractual rights afforded as shareholders; however, upon dismissal of that case with prejudice, the present action was brought under theories of breach of duty and quasi-appraisal. Claims were also asserted against a bank hired to advise the entity in merger negotiations for aiding and abetting breach of fiduciary duties. The financial advisor was not requested to prepare a fairness opinion and simply concluded the merger price was within a reasonable range. Plaintiffs challenged the merger on the grounds that the board minutes did not expressly reflect it was advised of its fiduciary duties prior to voting on the merger and its failure to hire a financial advisor to perform a valuation of the entity. Conceding that the directors who voted in favor of the merger were disinterested and that the entity’s board had adopted an exculpation provision, plaintiffs were required to premise their claims on breach of the duty of good faith, satisfied either by a board’s utter failure to attempt to satisfy its fiduciary duties, or by intentionally

acting with a purpose other than that of advancing the best interests of the corporation. The court characterized the question before it as whether the board knowingly and completely failed to undertake a reasonable sales process, ultimately concluding the facts alleged fell short of demonstrating bad faith. The court also found the plaintiffs failed to plead a claim for aiding and abetting against the financial advisor, finding they did not knowingly participate in any breach of duty and were limited by the scope of their engagement that did not include a full fairness opinion. “Our case law interpreting Revlon makes clear that there is no single way to sell a company – no single financial service is required, and the fact that here, the [financial advisor] agreed to participate in a transaction wherein it would not issue a fairness opinion does not demonstrate that [it] knew the failure to obtain additional services would constitute a breach of the Board’s duties.” Finally, with respect to the claims that the acquired entity’s board amended an equity incentive plan that diverted proceeds to directors after negotiating the sale price, the court allowed this claim to proceed. “[T]he pleadings can be understood to allege that the warrants arose in a context which constituted self-dealing, conferring a benefit on the directors, not shared by the stockholders; and that the diversion was material in the context of the consideration at issue.” Houseman v. Sagerman, et. al., 2014 Del. Ch. Lexis 55 (Del. Ch. 2014).

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“Our case law interpreting Revlon makes clear that there is no single way to

sell a company …”

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Excess Insurer’s Exhaustion Clause Upheld An insured purchased an $80 million tower of D&O insurance that consisted of a primary layer and seven excess layers, each with a $10 million limit of liability. A securities class action filed against the insured and its directors and officers settled for $65 million, and the primary insurer and first four excess insurers paid their limits in full toward defense costs and/or settlement. The insured sued its 6th, 7th and 8th excess insurers to cover the remainder of the settlement and unreimbursed legal fees that resulted in the 6th and 7th excess insurers settling with the insured for amounts less than the full limits on their respective policies. The 8th layer refused to settle. As a result, the insured filed an amended complaint against the 8th excess insurer seeking its full $10 million in limits. In response to the amended complaint, the insurer refused to contribute to the settlement or pay defense costs on the basis that the underlying insurers’ policies had not been exhausted. Its policy contained exhaustion language specifying “[i]t is agreed that the Insurer shall not pay any amount until all retentions and Underlying Limits of Liability have

actually been paid.” The policy went on to further state that “it is agreed that in the event and only in the event of a reduction or exhaustion of the Underlying Limits of Liability, solely as a result of actual payment of a Covered Claim pursuant to the terms and conditions of the Underlying Insurance thereunder.” At the trial court level, the insured argued the policy's exhaustion language permitted it to fill in the gap to reach the 8th excess insurer's attachment point. The trial court disagreed, finding the exhaustion language unambiguously required complete exhaustion by the underlying insurer, meaning the insured could not access the 8th excess insurer's limits. The appellate court unanimously affirmed the trial court's ruling, stating that the “motion court properly determined that the express terms of [the insurer's] policy providing excess coverage to plaintiff required the previous layer of excess insurance to be exhausted through actual payment of that policy’s limit prior to ... being required to pay.” Forest Laboratories, Inc. v. Arch Ins. Co., et al., 2014 N.Y. App. Div. LEXIS 2805 (N.Y. App. Div. 2014).

Court Holds Professional Services Exclusion Bars Coverage for Claims of Mismanagement In this coverage dispute, a court held a professional services exclusion in a management liability policy broad enough to preclude coverage for defense costs incurred by an insured in defending itself against mismanagement claims filed in the wake of the credit crisis. The impetus for the dispute was the insurers' decision to deny coverage based on the primary policy's professional services exclusion that excluded coverage for claims arising from professional services provided by

the insured to a specific entity. The insured argued the exclusion was only intended to exclude claims for services rendered to another entity, not for claims of alleged corporate mismanagement. Applying the "eight corners rule," the court found the defined terms were broad and unambiguous and thus operate to exclude coverage for all losses incurred by the insured in the underlying litigations. ACE Am. Ins. Co., Case No. 2013 CA 003190 B (D.C. Super. Ct. 2014).

Carriers Cannot Claw Back Defense Costs Incurred Prior to Termination of Duty to Defend

An insured made a claim under its Insurance Brokers and Agents Errors & Omissions policy for a suit filed against it relating to services provided in the procurement of a welfare benefits program and administrative services for a client. The carrier accepted the defense but reserved its rights under the policy, noting that most of the causes of action were not covered because it appeared the claims involved services outside

the scope of the coverage. The carrier reserved the right to withdraw the defense if it became clear no coverage was available and to seek reimbursement of amounts paid in defense. Ultimately, through its review of the discovery taken in the underlying case, the carrier believed no coverage was afforded and filed a declaratory judgment action to determine coverage issues. The court found the claims asserted were not

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… the insured argued the policy's exhaustion

language permitted it to fill in the gap to reach the

8th excess insurer's attachment point.

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covered by the policy because they involved the sale and marketing of a product that was not insurance and therefore fell outside the scope of the professional services covered under the policy. However, the carrier was not entitled to claw back all the defense costs paid because at the onset of the litigation there was a possibility of coverage. Only later, through discovery and further proceedings, did it become clear the services complained of did not involve insurance

products and were not covered by the policy. Thus, the duty to defend only terminated once those facts were developed and the carrier was only entitled to recover the costs it paid in defense subsequent to the time the carrier made its determination as to coverage and filed the declaratory action. Certain Underwriters at Lloyd’s London v. Thomas Mestmaker, et al., 2014 Cal. App. Unpub. LEXIS 3021 (Cal. App. 2014).

Late Notice Defense Rejected by Trial Court Affirmed on Appeal

This coverage dispute arose after claims were asserted regarding a merger. Directors and officers of the target company were sued for their conduct in negotiating the merger and for alleged mismanagement. Following the insurer’s attempt to disclaim coverage for several subsequent lawsuits filed regarding the merger, the insured brought this action against its insurer. The insured provided the carrier with notice of the first lawsuit but did not provide separate notice of the subsequent lawsuits. In seeking dismissal of the coverage dispute, the insurer argued it only received notice of the original suit and the insured failed to separately provide notice of the other lawsuits filed against it. The insurer relied on the notice provision of the policy which specified: “[a]s a condition precedent to any right to payment under this Policy … the Insured shall give written notice to the Insurer of any Claim as soon as practicable after it is first made.” The insured relied on the policy provision regarding interrelated claims, arguing it was not required to give prompt notice of the subsequent actions because those actions were related to the original lawsuit. The interrelated provision of the policy provided that all claims arising from the same interrelated wrongful acts were deemed to constitute a single claim made at the time the first such claim was reported to the carrier. The insurer responded by

asserting the interrelated claim provision did not alleviate the insured of its obligation to report each and every claim as soon as practicable regardless of whether they related to previously noticed claim. The trial court disagreed, concluding an ambiguity existed with respect to whether subsequent claims that relate to a previously noticed claim had to be noticed separately and as soon as practicable. On appeal, the trial court’s decision was upheld. “The subject policy … is ambiguous with respect to whether its requirement of notice with respect to ‘any’ claim pertains to claims that are related under the provisions for Interrelated Wrongful Acts.” The appellate court similarly rejected the insurer’s argument that the insured was required to seek consent to incur defense costs for the subsequent lawsuits, reasoning that if the claims are interrelated and constitute a single claim, the insured need not separately request consent to incur defense costs, as it already did so with respect to the original suit. In addition, the court determined the insurer’s letter to the insured’s broker requesting defense costs for the underlying actions “could be found to be a waiver of its right to object to defense expenses.” Sirius XM Radio Inc. v. XL Spec. Ins. Co. et al., 2014 N.Y. App. Div. LEXIS 3853 (N.Y. App. Ct. 2014 ).

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“The subject policy … is ambiguous with respect to whether its requirement of

notice with respect to ‘any’ claim pertains to claims that

are related under the provisions for Interrelated

Wrongful Acts.”

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E&O Policy Held to Cover Charter School Losses Arising From Tuition Reimbursement Dispute

After a charter school was sued for the return of tuition payments it received as reimbursement for students attending its kindergarten program who were too young to attend public kindergarten programs, it sought coverage under its errors and omissions (E&O) insurance policy. The insurer provided a defense subject to a reservation of rights but subsequently filed this case to have its obligations under the policy determined. The insurer did not dispute the lawsuit alleged a “wrongful act” covered by the policy but argued that the relief sought against the insured was not a covered loss within the terms of the policy. The complaint alleged the charter school was not entitled to the tuition reimbursement payments it received and, as such, any damages assessed in the underlying suit would constitute restitution. In deciding in favor of the charter school, the court noted restitution is “limited to restoring the status quo and ordering the return of that which rightfully belongs to” a plaintiff. Here, the insured school

incurred expenses educating the students from the public school districts and if it was ordered to repay the funds, it “would be placed in the position of having expended at least some resources … without any compensation or benefit in return.” The court went on to conclude that at least one of the claims alleged against the charter school fell within coverage afforded by the policy, thereby triggering the insurer’s duty to defend and that the complaint sought damages which qualify as loss under the policy, triggering its indemnification obligations too. In rejecting the insurer’s argument that coverage was unavailable as a matter of public policy, the court found the insured school did receive revenue from an illegal “money-making endeavor,” but was collecting payments to fund its operations and, therefore, public policy considerations did not apply. Peerless Insurance Company v. The Pennsylvania Cyber Charter School, 2014 U.S. Dist. LEXIS 65406 (D. Pa. 2014).

Broad Shareholder Exclusion with Narrow Carve Back in Insured v. Insured Exclusion Bars Entire Claim The D&O policy in dispute contained an insured versus insured (IvI) exclusion “for Loss in connection with a Claim made against an Insured ... which is brought by any Insured or by the Company ... or which is brought by any security holder of the Company … unless such security holder's Claim(s) is instigated and continued totally independent of, and totally without the solicitation of, or assistance of, or active participation of, or intervention of, any Insured or the Company." A suit by an insured was filed as well as several other suits by shareholders. The court, on its own, consolidated the suits for limited purposes. The insurer argued all of the consolidated claims were not prosecuted totally independently, totally without an insured's assistance, and totally without an insured’s active participation, and therefore the IvI exclusion applied. The insured countered the separate lawsuits would not have triggered the IvI exclusion, and therefore

coverage for the other consolidated suits should not be excluded. The court noted the exclusion clause at issue precluded coverage for any "Claim made against an Insured Person" provided that the Claim was "brought or maintained by or on behalf of any Insured." The court, in concluding the exclusion applied as to all other actions as well, held there was no ambiguity in the policy language, which it found contemplated a situation in where an insured actively participates in litigation against the insured, as happened here. In rejecting a call for allocation of the various suits, the court noted the policies in cases where courts ordered an allocation contained only an IvI exclusion, but did not contain an additional provision which existed in this policy barring coverage for claims that were not totally independent of those brought by an insured under the policy. AMERCO v. Nat’l Union Fire Ins. Co. of Pittsburgh, Pa., 2014 U.S. Dist. LEXIS 69066 (D. Az. 2014).

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The court went on to conclude that at least one

of the claims alleged against the charter school

fell within coverage afforded by the policy, thereby triggering the

insurer’s duty to defend …

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Criminal Acts Exclusion Bars Claims under E&O Policy Arising from Employee’s Criminal Conduct but Ambiguities and Factual Issues Prevent Judgment in Favor of Insurer

In this coverage dispute, the insured sought a declaration that its insurer was required to defend and indemnify it for claims stemming from criminal acts of a former employee. As part of its business, the insured delivered pre-clinical data for drug studies to its clients. The insured conducted an internal audit which found irregularities in pre-clinical data and identified the employee responsible for the falsified records. Subsequently, clients asserted claims against the insured as a result of the false data, and the employee was criminally convicted for his conduct. The insured then sought coverage from its errors and omissions (E&O) carrier, which agreed to defend the insured under a reservation of rights. The criminal acts exclusion cited by the insurer in its letter specified that: “[c]overage does not apply to any professional liability based on or arising out of a dishonest, fraudulent, criminal or malicious act by any Insured. The Company shall provide the Insured with a defense of such claim unless or until the dishonest, fraudulent, criminal or malicious act has been determined by any trial verdict, court ruling, regulatory ruling or legal admission, whether appealed or not.” The policy included employees as insureds but only with respect to professional services rendered on the insured’s behalf. The policy defined “professional services” as “those services performed by the Insured or by any other Insured on behalf of the Insured for a fee [or other remuneration] … includ[ing] pre-clinical research and other professional services for the pharmaceutical/biotechnology industry.” The court rejected the insured’s contention that an employee is not deemed an insured, and therefore his or her actions do not trigger the criminal acts exclusion, because the commission

of criminal actions were outside the scope of his employment, and therefore he was not rendering professional services on behalf of the insured. The court explained that if the insured’s contention was true, then any criminal conduct committed by an insured would never be a professional service and negate the criminal acts exclusion entirely because all criminal conduct would be deemed beyond the scope of professional services and/or scope of employment. The court also rejected the insured’s argument the parties did not intend the scope of the criminal acts exclusion to exclude coverage for criminal acts of an employee without actual knowledge of the criminal acts by the insured. The court found the policy did not articulate any language limiting the exclusion, finding it clear and unambiguous. However, since factual issues remained whether claims asserted against the company arose from conduct by other employees who were not criminally convicted, the court found further discovery was warranted. The court then addressed whether coverage was precluded under the “Performance Delay Exclusion” because the insured failed to deliver the claimants with unflawed studies. Finding the exclusion ambiguous on its face and that factual questions remained to be answered, the insurer’s request for dismissal of the coverage suit was denied. Lastly, the court also rejected the insurer’s contention that any refunds the insured might have to pay would not qualify as “damages” under the policy because the claims were based upon wrongful acts and could be paid by way of a settlement which would be covered. Aptuit, LLC v. Columbia Cas. Co., 2014 N.Y. Misc. LEXIS 2200 (NY Sup. Ct. 2014).

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Allocation Provision Governs Determination of Covered and Uncovered Losses Attempts to deny coverage under a directors and officers (D&O) policy with an errors and omissions (E&O) endorsement for a multi-million dollar verdict rendered against the insured bank were rejected, with a federal trial court holding the allocation provision governed which damages were covered and uncovered. The facts which give rise to this coverage dispute involved a corporate bank customer whose employee embezzled funds from the corporation through various means, including internet banking services provided by the insured. As a result of the embezzlement, the corporation became insolvent and sued the insured bank for its role in allowing the embezzlement to occur. The jury returned a mixed verdict, finding the insured bank liable on certain claims and innocent on others. The bank then sought coverage under the above-referenced policy, but the parties were unable to come to a resolution, which resulted in this case being filed. In determining the scope of coverage afforded by the policy, the court found the jury’s findings of negligence and breach of duty established a

wrongful act as defined in the policy had occurred, triggering the insurer’s duty to indemnify the bank. In resisting its indemnity obligations, the insurer argued the bank did not suffer a loss it was legally obligated to pay because the negligence claims were duplicative of the breach of contract claims. The court rejected this argument, finding “an indivisible injury caused by multiple causes of action does not diminish the recovery available to the insured.” The insurer also attempted to disclaim coverage based on an internet services exclusion; however, the court found some claims to fall within the exclusion, while others did not. As such, the court turned to the allocation provision, concluding the situation here “appears to be precisely the type of matter that invokes this provision” and that an allocation, either through binding arbitration, or by the court following additional discovery, was dictated by the unambiguous policy language. Bank of Rhode Island v. Progressive Cas. Ins. Co., 2014 LEXIS 67865 (D. R.I 2014).

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The documents provided herein are the copyrighted works of Aon plc, and are provided here as a matter of convenience and with the express permission of the copyright holder. Further use, distribution or reproduction of the works is not permitted without the express written consent of Aon plc.

… “an indivisible injury caused by multiple

causes of action does not diminish the

recovery available to the insured.”

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SEC Filings and Settlements* SEC Filings

The SEC filed fraud charges against Professional Investment Management, Inc. and its president, Douglas E. Cowgill. The SEC is seeking disgorgement, prejudgment interest, and civil penalties.

The SEC filed fraud charges against Aphelion Fund Management, LLC; its chief investment officer, Vineet Kalucha; and CFO, George Palathinkal. The SEC is seeking disgorgement, prejudgment interest and civil penalties.

The SEC filed fraud charges against Urban AG Corp. and its president and CEO, Billy V. Ray Jr. The SEC is seeking financial penalties, disgorgement, and prejudgment interest.

SEC Settlements

The SEC settled insider trading charges against Herbert Richard Lawson, founder and co-chairman of the board of directors of Lawson Software. Richard Lawson was ordered to pay a penalty of $1,557,384 and was barred from serving as an officer or director of a public company.

The SEC settled insider trading charges against Glenn Cohen, former director of NBTY, Inc. Cohen agreed to pay a penalty of $153,613.25 and was barred from serving as an officer or director of a public company.

The SEC filed fraud charges against DGSE Companies Inc. and its former CEO, I. John Benson. Benson was ordered to pay a $75,000 penalty and was barred from serving as an officer or director of a public company.

Final judgment was entered in connection with fraud charges against Melissa George, former COO of Inofin, Inc. George was ordered to pay disgorgement of $25,157, prejudgment interest of $2,274, and a civil penalty of $150,000.

* Source: http://www.sec.gov/litigation.shtml

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Filings, Settlements and Dismissals*

Shareholder Class Action Filings

Advanced Emissions Solutions,Inc. Industrial Goods

Blucora, Inc. Technology

Cliffs Natural Resources, Inc. Basic Materials

Covisint Corp. Technology

Dell, Inc. [2014] Technology

Doral Financial Corp. (2014) Financial

Higher One Holdings, Inc. Services

Infoblox, Inc. Technology

Insys Therapeutics, Inc. (2014) Healthcare

KBR, Inc. Services

Lihua International, Inc. Basic Materials

Och-Ziff Capital Management Group, LLC Financial

Ply Gem Holdings, Inc. Industrial Goods

PowerSecure International, Inc. Services

Prospect Capital Corp. Financial

Provectus Biopharmaceuticals, Inc. Healthcare

Regional Management Corp. Financial

Ruby Tuesday, Inc. Services

Vertex Pharmaceuticals Inc. [2014] Healthcare

Shareholder Class Action Dismissals

Achillion Pharmaceuticals, Inc. Voluntarily dismissed without prejudice

China Automotive Systems, Inc.

Dismissed with prejudice.

Dynegy Inc. [2012] Dismissed with prejudice

Health Management Associates, Inc. [2012]

Dismissed with prejudice

International Business Machines Corp. [2013]

Voluntary dismissal without prejudice.

Maxwell Technologies, Inc. Dismissed without prejudice

Peregrine Pharmaceuticals, Inc. [2012]

Dismissed with prejudice

Pfizer, Inc. [2004] Partial dismissal of one individual defendant.

Ventrus Biosciences, Inc. Dismissed with prejudice

Shareholder Merger & Acquisition Filings

Cbeyond, Inc. [2014] Technology

Chelsea Therapeutics International, Ltd. [2014]

Healthcare

DIRECTV Services

Forest Oil Corp. Basic Materials

Furiex Pharmaceuticals, Inc. Healthcare

Orbital Sciences Corporation [2014]

Industrial Goods

Pepco Holdings, Inc. Utilities

Pinnacle Foods, Inc. Consumer Goods

PokerTek, Inc. Services

Susser Holdings Corp. Services

Telik, Inc. [2014] Healthcare

Shareholder Class Action Settlements

Affymax, Inc. $6,500,000

First Regional Bancorp $5,500,000

GMX Resources, Inc. $2,700,000

Oclaro, Inc. $3,700,000

* Sources: http://securities.stanford.edu/ and https://link.issgovernance.com/

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