Record Shareholder Settlements Pressure Directors and Officers

May 24, 2015Articles Business Insurance

In 2015, trends in shareholder litigation are certain to be affected by two recent developments. First, the stakes for directors and officers, and their insurers, rose significantly when two shareholder derivative actions were settled last year for $275 million and $154 million, respectively — two of the largest settlements in history. Second, at the same time, courts have increased the risk for shareholders bringing derivative actions by upholding fee-shifting bylaws, which allow corporations to seek legal fees from unsuccessful shareholder plaintiffs.

At first blush, these two developments appear to be inconsistent. However, their combined effect may create a new equilibrium in shareholder derivative litigation, in which both sides have more at risk than ever before.

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