Navigating D&O Fiduciary Duties in the Zone of Insolvency

Avoiding and Defending Fiduciary Duty Claims and Maximizing D&O Insurance Coverage

Recording of a 90-minute premium CLE webinar with Q&A


Conducted on Tuesday, June 4, 2019

Recorded event now available

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Program Materials

This CLE webinar will provide bankruptcy counsel with a review of fiduciary duties directors and officers owe shareholders and creditors as a company faces insolvency, offer strategies to avoid and defend against breach of fiduciary duty lawsuits, and analyze the impact of bankruptcy on existing D&O insurance coverage.

Description

When companies fail, whether due to market forces, macroeconomic trends, bad luck or other problems, frequently management and officers are blamed for that failure—often in the form of a breach of fiduciary duty or similar claim.

Shareholders and creditors frequently challenge actions taken by a company that led to financial insolvency. Directors and officers must head off such claims because a breach of duty by directors and officers can lead to lawsuits against the corporation. Case law, particularly the seminal Delaware case Bridgeport Holdings Inc. Liquidating Trust v. Boyer, guides directors and officers of companies facing bankruptcy on their fiduciary duties and offers practical steps for directors and officers to shield themselves from liability.

Legal battles arise in bankruptcy over whether the proceeds of a D&O policy belong to the estate or the individual directors and officers. Though they may have assumed they had adequate coverage, directors and officers may face significant out of pocket legal fees to establish their right to insurance proceeds.

Listen as our authoritative panel of attorneys explains the fiduciary duties of directors and officers when a company faces insolvency and offers their differing perspectives on how to identify the existence of a potential claim against the former directors and officers, interpret the applicable insurance policy, and how to investigate, prosecute and, if possible, resolve such claims. The panel will also address strategies to avoid and defend against breach of fiduciary duty lawsuits, including D&O insurance coverage issues that arise in bankruptcy.

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Outline

  1. D&O duties from "facing" to "filing" bankruptcy
    1. Duties to shareholders
    2. (Potential) duties to creditors
    3. Conflict in case law regarding fiduciary duties
  2. Potential claims
    1. Identifying the existence of a potential claim against the former directors and officers
    2. Interpreting the applicable insurance policy
    3. Investigation, prosecution, and resolution of such claims
  3. Strategies to avoid and defend against breach of fiduciary duty lawsuits
    1. When can directors and officers be sued and by whom?
    2. Retain independent counsel to the board
    3. Retain outside experts
    4. Business judgment rule and "entire fairness" test
    5. Disguised "deepening insolvency" claims
    6. Claim preclusion
    7. Derivative suits
    8. Indemnification
  4. Impact of bankruptcy on D&O insurance coverage
    1. D&O insurance proceeds: who owns?
    2. Effect of automatic stay on an insurer's ability to advance defense costs
    3. Insured vs. insured policy exclusion
    4. D&O coverage for companies emerging from bankruptcy
    5. Policy provisions that provide maximum protection to directors and officers

Benefits

The panel will review these and other key issues:

  • What strategies can counsel for directors and officers employ to defend against breach of fiduciary duty lawsuits?
  • How can corporations avoid and defend derivative lawsuits arising from director and officer actions?
  • What D&O insurance policy provisions provide maximum protection for directors and officers in the event of the company's bankruptcy?

Faculty

Amron, Brett
Brett M. Amron

Partner
Bast Amron

Mr. Amron advises clients in complex business and bankruptcy litigation matters with an emphasis on director and...  |  Read More

Foreman, Michael
Michael E. Foreman

Managing Director and Head of NY Office
Borrelli Walsh

Mr. Foreman is a senior corporate restructuring professional and independent director, who combines major law firm...  |  Read More

Hardiman, Alexander
Alexander D. Hardiman

Partner
Pillsbury Winthrop Shaw Pittman

Mr. Hardiman has successfully litigated, arbitrated and settled hundreds of complex insurance coverage claims. He...  |  Read More

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