D&O Fiduciary Duties in the Zone of Insolvency: Impact of Purdue, Avoiding Claims, Maximizing Insurance in Bankruptcy
Course Details
- smart_display Format
On-Demand
- signal_cellular_alt Difficulty Level
Intermediate
- work Practice Area
Bankruptcy
- event Date
Thursday, October 10, 2024
- schedule Time
1:00 p.m. ET./10:00 a.m. PT
- timer Program Length
90 minutes
-
This 90-minute webinar is eligible in most states for 1.5 CLE credits.
This CLE course will provide bankruptcy counsel with updated and current instruction on the fiduciary duties of loyalty, due care, and oversight that directors and officers owe to the corporation and shareholders as a company slides into insolvency and who can enforce those duties if the company files bankruptcy. The panel will analyze the impact of bankruptcy and insolvency on existing D&O insurance coverage, discuss the anticipated tightening of D&O coverage after SCOTUS decisions, and offer strategies both to avoid and to defend breach of fiduciary duty lawsuits.
In his commercial bankruptcy and financially-distressed transactions practice, Mr. Koenig counsels a variety of clients including creditors, debtors, bankruptcy trustees, creditor committees, and post-bankruptcy investors, to help them evaluate risks, minimize their exposure, maximize their recoveries, structure transactions, and cost-effectively resolve issues. His experience includes: formulating strategies to assist banks and companies dealing with financially-distressed and bankrupt customers to maximize their recoveries; negotiating out-of-court workout and forbearance agreements; counseling creditors, debtors, and investors in commercial transactions and foreclosures, including mortgage foreclosure proceedings, strict foreclosure actions, and UCC sales; and litigating matters in state and federal courts, including actions under guaranties, replevin actions, avoidance actions, objections to discharge, dischargeability actions, preference claims, subordination claims, and equitable recharacterization claims, among others.
Mr. Dietderich is co-head of S&C’s Global Finance & Restructuring Group. His practice focuses on the legal challenges faced by companies and their stakeholders during periods of change, activist attention or financial distress. Mr. Dietderich is a generalist lawyer with experience in most areas of transactional law. He also started S&C’s lauded corporate restructuring practice and is recognized in Chambers as a “strategy genius, who is able to boil down complex concepts into things clients can easily understand.” Mr. Dietderich has represented debtors, strategic partners and proactive creditors in some of the largest and most challenging corporate restructurings in U.S. history, including Garrett Motion, Eastman Kodak, Chrysler, Caesars and General Growth Properties.
Ms. Cunha has a broad array of experience guiding high-growth companies from early stage to exit. She provides strategic counsel on critical issues such as corporate structure, governance, capital raising, mergers and acquisitions, and various commercial matters. Ms. Cunha's practice includes advising on health care transactions and regulatory compliance for a diverse client base, including health care technology companies, medical device manufacturers, durable medical equipment providers, physician and dental practices, hospitals, home health and hospice agencies, laboratories, telemedicine providers, skilled nursing and long-term care facilities, and other ancillary health care providers. She assists clients in purchasing or selling distressed assets through out-of-court workouts and formal bankruptcy proceedings. Ms. Cunha also acts as outside general counsel to clients and collaborates with legal teams across different practice areas, both domestically and internationally. Her unique blend of experience in corporate restructuring, commercial litigation, and in-house counsel roles for a regional health care system and a technology startup equips her to address the multifaceted challenges that high-growth companies encounter daily and develop innovative solutions.
Regardless of why companies become insolvent and seek refuge in bankruptcy, management and officers are frequently blamed and face lawsuits challenging the actions--such as transferring assets and incurring debt--taken to address the situation. Who can assert these claims is in some flux, but they always allege breach of fiduciary duty or similar allegations.
What these fiduciary duties are, practical steps for directors and officers to shield themselves from liability, and cautionary tales about independent directors and sponsor-controlled boards can be found in recent case law.
If officers and directors are sued, legal battles arise over whether the proceeds of a D&O policy belong to the estate or to the individual directors and officers. Truck Insurance Exchange v. Kaiser Gypsum Co. Inc., 602 U.S. ___ (2024), and Harrington v. Purdue Pharma L.P., 603 U.S. ___ (2024), however, may have materially changed the rights and balance of power among the relevant parties.
Listen as our distinguished panel 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 and interpret the applicable insurance policy, as well as 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.
- D&O duties from "facing" to "filing" bankruptcy
- What is the zone of insolvency?
- Does insolvency create new duties?
- Shareholders vs. creditors as the beneficiary of fiduciary duties
- Who can bring a derivative action? When?
- Conflicts between stockholder and creditor interests
- Are fiduciary duties different for portfolio and other controlled companies?
- Sources of D&O liability other than fiduciary duties
- Available protections for directors
- Are the days of easy releases over?
- General defensive practices for directors
- Oversight duties and Caremark liability
- The controversy surrounding independent restructuring directors
- Corporate indemnification in bankruptcy
- LLCs and other "light duty" corporate forms
- D&O insurance coverage
- D&O insurance proceeds: who owns?
- Recommendations on pre-Chapter 11 D&O coverage (extensions, tail, etc.)
- Policy "gotchas" and exclusions
- Effect of the automatic stay on an insurer's ability to advance defense costs
- Policy provisions that provide maximum protection to directors and officers
- Settlements that limit recoveries to "only insurance"
- The resolution of fiduciary duty claims in a liquidation
- The resolution of fiduciary duties claims in a reorganization
- Plan releases and their limits
- Standing to investigate and settle
- Alternatives to plan releases
The panel will review these and other key issues:
- What strategies can counsel for directors and officers employ to avoid breach of fiduciary duty lawsuits?
- How are fiduciary duty claims best addressed as part of Chapter 11 planning?
- What D&O insurance policy provisions provide maximum protection for directors and officers in the event of the company's bankruptcy?
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