Data Breaches Pose D&O Liability Risks
This week, Home Depot announced that it was investigating a reported theft of customer debit and credit card information from its systems. This may be just the latest in a series of high-profile data breaches for U.S. public companies. When a major breach occurs, shareholder derivative litigation may follow, as demonstrated by suits filed against Target and its directors and top executives related to the data breach last year. The Target suits claim that directors and executives breached their duties to shareholders when they failed to prevent the breach and also when they responded inadequately to the breach once identified. Insurance professionals have noted a recent uptick in inquiries from companies wondering if their D&O insurance covers the liability. What should directors be doing?
SEC Awards Internal Audit Whistleblower $300,000
The SEC recently announced a whistleblower award of more than $300,000 to a company employee who performed audit and compliance functions. It was the first award under the SEC's award program for a whistleblower in such a role. The employee reported wrongdoing to the SEC after the company failed to take action within 120 days of the employee's first report to company personnel, including a supervisor. According to the SEC, the report led directly to an SEC enforcement action. Whistleblower complaints under the program have grown from 334 in 2011 to 3,238 in 2013. To qualify for an award under the SEC's Dodd-Frank whistleblower program, a whistleblower must voluntarily provide the SEC with original information that leads to successful enforcement.
Delaware Amends Statute of Limitations for Breach of Contract Claims
Effective August 1, 2014, Delaware amended the statute of limitations applicable to Delaware contracts. The amendment will be an important factor for M&A transactions governed by Delaware law that seek to extend indemnification claims beyond the statutory limitation period. Prior to the amendment, parties entering into an acquisition agreement governed by Delaware law were limited to a three-year period for indemnification claims under the statute, unless they entered into a contract "under seal." The amendment gives contracting parties the ability to extend the statute of limitations for a specified period of up to 20 years for claims arising out of Delaware contracts, as long as the contract is in writing and involves at least $100,000.
The Ticker is published by Fredrikson & Byron’s Public Companies Group and shares recent developments in SEC compliance, capital markets, corporate governance, executive compensation and other matters important to public companies and their officers and directors.