The May 2016 newsletter reviews decisions on shareholder dilution and the scope of liability for secondary market disclosure.
In LBP Holdings v Allied Nevada Gold Corp., 2016 ONSC 1629, the Superior Court confirmed that underwriters were not “experts” and claims against them had to be brought within the 180 days required by the Ontario Securities Act. Even if timely claims are commenced under Part XIII, an underwriter can assert a due diligence defence under section 130(5) by showing that it conducted a reasonable investigation so as to have a reasonable belief that there was no misrepresentation.
In Shefsky v California Gold Mining Inc., 2016 ABCA 103, the Alberta Court of Appeal dismissed a shareholder oppression claim arising out of a fight for the control of California Gold Mining Inc., a junior public mining company. Among other findings, it concluded that a last-minute and deliberate dilution of a shareholder’s potentially controlling interest is not oppressive if raising funds through the financing transaction is in the interests of the corporation.
The full text of the newsletter can be found here May 2016 D&O Newsletter.
September’s newsletter discusses the decision of the United States Court of Appeals for the Third Circuit in Sergey Aleynikov v. The Goldman Sachs Group, Inc.
In Aleynikov the Appeals Court considered whether the title of “vice president” necessarily made someone an “officer” of a corporation, which would require the corporation to indemnify Aleynikov for legal fees for criminal proceedings. While Aleynikov, a computer programmer at Goldman Sachs, held the title of “vice president”, Goldman Sachs argued that so many of its employees held the title of “vice president” that it was not indicative of being an “officer” of the company. The Appeals Court held that the issue could not be decided by way of summary judgment, and sent the issue back to the lower court to be decided by a jury.
The full article can be found here: D & O Newsletter September 2014
In “Legal Briefs: Relief From Forfeiture”, Simon Bieber and Erin Pleet comment on two recent decisions of the Court of Appeal for Ontario on relief from forfeiture in insurance contracts. In Kozel v. The Personal Insurance Company, 2014 ONCA 130, the insured’s breach was not grave and the disparity between the breach and the deprivation of the insured’s rights under the insurance contract was “enormous.”
Kozel was applied in Lavoie v. T.A. McGill Mortgage Services Inc., 2014 ONCA 257, where the Court of Appeal held that relief from forfeiture was not appropriate when the breach was a material misrepresentation in a mortgage broker’s application for professional liability insurance, namely failing to disclose a potential fraud claim. The breach was material and went to the heart of the insurer’s decision to provide coverage.
The full article was included in Canadian Insurance Top Broker’s May 2014 Legal Briefs, and can be found here.
May’s newsletter discusses recent decisions from the Superior Court of Ontario that have generated some uncertainty for corporations seeking court approval for a plan of arrangement, including (Re) Tigray Resources Inc., 2014 ONSC 1979, Re Patents Royal Host Inc., 2014 ONSC 3323, Champion Iron Mines Limited (Re), 2014 ONSC 1988 and Bear Lake Gold Ltd. (Re), 2014 ONSC 3428.
One of the court’s primary concerns on an application for approval of a plan of arrangement is to ensure that the proposed plan is “fair and reasonable” to the security holders whose rights may be affected by the plan. However these cases show conflicting analyses on how the court should weigh two commonly used factors in the “fair and reasonable” analysis: (1) the vote on the plan by affected security holders; and (2) the use of Fairness Opinions by the corporation.
The full article can be found here: D & O Newsletter May 2014
In “Legal Update: Policy Exclusions and Duty to Defend”, Simon Bieber and Terrence Liu discuss the recent New York Court of Appeals decision to revisit its June 2013 decision in K2 Investment Group, LLC v. American Guarantee & Liability Ins. Co. (“K2-1″).
In K2-1, the New York Court of Appeals held that the insurer had lost its right to rely on policy exclusions because it had wrongly refused to defend—even if those exclusions would have precluded coverage if they were raised in the first place.
In February 2014, the the New York Court of Appeals released “K2-2“, where the majority of the Court reversed K2-1 as it had failed to take into account its own 1985 decision which dealt with similar facts.
Simon and Terrence also discuss potential implications for Canadian insurers.
The article was published by Canadian Insurance Top Broker and can be found here.
March’s newsletter discusses the recent Superior Court decision in Smoothwater Capital Partners LP I v. Equity Financial Holdings Inc., 2014 ONSC 324. In Smoothwater, the Court considered whether a corporate press release that responds to allegations of misconduct by a dissident shareholder amounts to “solicitation” of shareholder proxies. The decision provides guidelines for proxy fights which are becoming more frequent in Canada and, particularly, provides some framework on when press releases can cross the line to amount to solicitation of proxies.
The full article can be found here: D & O Newsletter March 2014
In “Legal Update: Defining a ‘dishonest’ breach of trust”, Simon Bieber and Julia Wilkes discuss the decision of the Ontario Court of Appeal in Ernst & Young Inc. v. Chartis Insurance Company of Canada, 2014 ONCA 78.
In Ernst & Young Inc. v. Chartis, the Ontario Court of Appeal considered how to interpret a policy exclusion for dishonest breach of trust and whether the insured had assigned its breach of duty of good faith claim against its insurer.
The Court of Appeal distinguished a deliberate breach of trust from a dishonest breach of trust. The Court held that the trustee had acted dishonestly and its conduct was excluded from the policy. The Court of Appeal further held that while the insured had assigned the proceeds of its insurance coverage arising out of a judgment, it had not assigned the cause of action itself.
The article was published by Canadian Insurance Top Broker and can be found here.
February’s newsletter discusses the decision of the Court of Chancery of Delaware in In re BioClinica, Inc. Shareholder Litigation. In this case, the Court outlined the factors to be considered in determining whether directors breached their duties of good faith and loyalty in a proposed merger/acquisition. In considering whether the directors’ breached their duties of loyalty and good faith or obtained improper personal benefits, the Court deferred to the Board’s business judgment. This was so even where a minority of directors had an interest in the transaction.
The full article can be found here: D & O Newsletter February 2014
January’s newsletter discusses a decision of the U.S. Federal Court, denying coverage under a professional services exclusion in a D&O policy. David Lerner Associates, Inc. was properly denied coverage under its D&O policy because the business activities – conducting due diligence in connection with providing investment advice – fell within the Policy’s “professional services” exclusion.
The full article can be found here: D & O Newsletter January 2014
The article was also published by Canadian Insurance Top Broker, here.
December’s newsletter discusses a decision of the Environmental Review Tribunal. The ERT approved a settlement agreement that required the directors and officers of a bankrupt company, Northstar Aerospace (Canada Inc.) to personally pay $4.75 million for environmental remediation efforts in Cambridge, Ontario.
The settlement was controversial for a number of reasons, including that this was the first time the Ministry of the Environment held directors and officers of a publicly-traded company personally responsible for an environmental cleanup after the company has gone bankrupt, and some directors had only joined the board after the pollution occurred. The settlement raises liability and D&O insurance issues.
The full article can be found here: D & O Newsletter December 2013