FTCs COPPA Rule Workshop: A Summary of Priorities from Advocates and Industry and the FTCs Poker Face
The Federal Trade Commission held a workshop yesterday in Washington, D.C., to discuss possible updates to the COPPA Rule, which implements the Children’s Online Privacy Protection Act (“COPPA”). COPPA was originally enacted in 1998 and regulates the way entities collect data and personal information online from children under the age of 13. The Rule hasn’t been updated since 2013, and the intervening years have produced seismic technological advances and changes in business practices, including changes to platforms and apps hosting third-party content and marketing targeting kids, the growth of smart technology and the “Internet of Things,” educational technology, and more.
For the most part, FTC staff moderators didn’t tip their hand as to what we can expect to see in a proposed Rule revision. (One staff member was the exception, whose rapid-fire questions offered numerous counterpoints to industry positions, so much so that the audience would be forgiven for thinking they were momentarily watching oral argument at the Supreme Court.) Brief remarks from Commissioners Wilson and Phillips staked out their positions more clearly, but their individual views were so different that they too offered little assistance in predicting what a revised Rule may look like. Commissioner Wilson opened the workshop by sharing her own experience as a parent trying to navigate and supervise the games, apps and toys played by her children, and emphasized the need for regulation to keep up with the pace of technology to continue protecting children online. Commissioner Phillips also referred to his children at one point, but his remarks warned against regulation for regulation’s sake, flagged the chilling effect on content creation and diversity when businesses are saddled with greater compliance costs, and advocated a risk-based approach.
The divergent views of the Commissioners were echoed throughout the workshop’s many panels, which comprised members of industry, consumer advocacy groups and academia. A majority of the participants agreed that the COPPA Rule should be updated and enforcement stepped up, but agreement largely ended there.
Industry clamored for clarity in the COPPA Rule, particularly in terms of the multifactor test for determining that a service is child-directed. Industry representatives also sought consistency across legal regimes, noting that COPPA, the European Union General Data Protection Regulation, the California Consumer Privacy Act, and various similar laws around the world set different age limits and impose differing legal obligations. Some in industry also feared regulations that would require them to collect more personal information than they currently do, and argued that doing so undermines the principle of data minimization. As would be expected in any discussion about regulation, industry also argued against any Rule changes that increase the cost of doing business. Finally, many of the industry representatives expressed a strong desire to continue limiting the COPPA Rule to one addressing the collection of children’s data, and to confine the rulemaking proceeding accordingly. They opposed turning COPPA Rule reform into a referendum on children’s content standards.
By contrast, consumer and child privacy advocates argued against weakening existing protections and repeatedly pressed the Commission to invoke its 6(b) authority to gather more information from industry. They argued that children’s privacy cannot be protected without understanding current industry practices on child data collection, use and disclosure, as well as the relative value of various advertising types and algorithms that utilize varying degrees of personal information for targeting and personalization. Advocates also pushed to expand the list of factors for child-directed services to include operators’ representations about their audiences. They argued that if an operator tells app stores, investors, advertisers, ad networks and others that their service is a good way to reach children, it constitutes constructive knowledge at the very least. Finally, advocates argued that teens have been largely ignored and should be offered some level of protection through regulation.
All in all, the workshop made for a lively day of discussion on what, if anything, should be done to update the COPPA Rule, with FTC staff listening intently to the discussions. If you’re interested in this topic and missed the workshop, it is not too late for your voice to be heard. The public comment period is open until October 23 and comments can be submitted here. This rulemaking is critically important to multiple industries and is of particular relevance to online video/streaming platforms, esports/gaming companies, and app developers, among others. If you would like to discuss the COPPA Rule or possible updates, or would like assistance submitting a comment, please feel free to contact Katie, Chris, or Melissa.
via Tumblr FTC’s COPPA Rule Workshop: A Summary of Priorities from Advocates and Industry, and the FTC’s Poker Face
It depends on which “debate” you’re talking about. What if there were an honest debate about all aspects of climate change? It wouldn’t be a faux debate about whether the world will end before the next Mardi Gras or during Lent, … or before the next most-important election in history! The discussion could include the causes, the extent, the effects, and the solutions. We could have a panel! The participants would be people who actually know something about the science and the economics (Some do say the world’s standard of living counts. Perhaps the average UN bureaucrat’s can take a hit but there are others who aren’t so fortunate.)
These people are out
I would exclude those who are “all-in”, others who are irrational, and especially those who are both. Thus, the following:
These people are in
I would include
Why should we even bother?
Because, for example:
via Tumblr Is the Climate Change Debate Over?
Earlier this year, in Marchand v. Barnhill, the Delaware Supreme Court underscored that boards that fail to establish oversight procedures for their company’s mission critical functions can be held liable for breach of their Caremark duties. In an October 1, 2019 decision in the Clovis Oncology Derivative Litigation, the Delaware Chancery Court provided further perspective on directors’ potential liability for breaches of the duty of oversight. The Chancery court held, citing Marchand, that boards not only must be able to show that they have made good faith efforts to implement an oversight system, but that also that they monitor the system – particularly when a company operates in a highly regulated industry. The Chancery Court’s October 1, 2019 decision in the Clovis Oncology Derivative Litigation can be found here.
Clovis is a developmental stage biotechnology company. During the relevant period, the company’s fortunes largely rested on Roci, a developmental drug intended to treat a type of lung cancer. In order to test Roci, the company established a clinical trial procedure using widely recognized and rigorous testing and reporting protocols. Under these protocols, the success of the trial, the likelihood of FDA approval, and the possibility of later physician update would depend on confirmed clinical responses, as unconfirmed clinical responses were viewed as less reliable.
In the subsequent shareholder derivative complaint, the plaintiffs alleged that the company misrepresented to investors and others the level of confirmed responses in the Roci clinical trial process. When the FDA later declined to approve the drug and when the actual confirmed response rate became public, the company’s share price declined precipitously.
The plaintiff shareholders filed a derivative lawsuit against the individuals on the company’s board of directors. The plaintiffs alleged that the board had breached its fiduciary duties under Caremark by failing to fulfill their duties to oversee the Roci clinical trials. The defendants moved to dismiss asserting that the plaintiffs had failed to make the requisite demand on the board of directors and also asserting that the plaintiffs had failed to plead a claim on which relief could be granted.
Although not directly relevant to the derivative lawsuit, it is interesting to note that these circumstances involved in derivative suit were also the subject of securities class action litigation. The securities suit ultimately settled for $25 million in cash and $117 million in Clovis stock. The SEC also pursued an enforcement action against three Clovis officials, which led to a consent decree requiring the three defendants to pay $20 million, $250,000 and $100,000 in civil penalties.
The October 1, 2019 Opinion
In an October 1, 2019 opinion, Vice Chancellor Joseph R. Slights III denied the defendants’ motion to dismiss with respect to the duty of oversight claim.
In ruling on the motion to dismiss, Vice Chancellor Slights noted the Delaware Supreme Court’s decision in Marchand v. Barnhill, which, he said, “underscores the importance of the board’s oversight function when the company is operating in the midst of a ‘mission critical’ regulatory compliance program.” He also noted that Marchand “makes clear” that where a company operates in a “mission critical” regulatory environment, “the board’s oversight function must be more rigorously exercised.” In order to show fulfillment of this oversight function, the board must show “a good faith effort to implement and oversight system and then to monitor it.”
Vice Chancellor Slights did find that the plaintiffs’ could not establish a breach of the first prong of the oversight duty, as the board did have oversight and reporting systems in place for the clinical trials. However, he did find that the plaintiffs’ allegations were sufficient to state a claim with regard to the second prong – that is, the duty to monitor the oversight systems.
In reaching this conclusion, Vice Chancellor Slights found that the plaintiffs had alleged that “the Board consciously ignored red flags that revealed a mission critical failure to comply” with the rigorous clinical trial protocols and associated FDA regulations, and that “this failure of oversight caused monetary and reputational harm to the Company.” The Vice Chancellor specifically found that the plaintiffs had alleged that the “Board ignored multiple warning signs that management was inaccurately reporting” the cancer drug’s efficacy.
Vice Chancellor’s reliance upon and citation to the Delaware Supreme Court’s Marchand v. Barnhill decision underscores the importance of that decision and its significance for directors’ potential liability for breach of fiduciary duty claims based on alleged breaches of the duty of oversight.
However, in Marchand, the Court was focused primarily on the alleged failure of the board in that case to have made a good faith effort to establish appropriate oversight systems in connection with a mission critical regulatory compliance issue. By contrast, in the Clovis Oncology case, the focus was not on the failure to have an oversight system, but the alleged failure to monitor the oversight system.
As noted in an October 5, 2019 post by attorneys from the Wachtell, Lipton on the Harvard Law School Forum on Corporate Governance and Financial Regulation (here), the Clovis Oncology decision represents a ruling “further extending the practical reach of the Caremark doctrine.” Having a compliance program alone is not enough; directors must have procedures in place to “ensure that the board itself monitors ‘mission critical’ corporate risks.”
While the Marchand and Clovis Oncology decision unquestionably have important implications for directors’ potential liabilities for alleged breaches of their duty of oversight, there are several important considerations to keep in mind.
First, in both Marchand and Clovis Oncology, the courts took great pains to underscore the fact that Caremark breach of the duty of oversight cases face a “high bar” and noting that Delaware’s courts have said, and repeated, that a Caremark claim “is among the hardest to plead and prove.” Nothing about the courts’ decision in these cases eliminated the “onerous” burden for plaintiffs to establish a Caremark claim.
Second, both Marchand and Clovis Oncology involved egregious circumstances that arguably colored the courts’ perceptions of the subsequent derivative lawsuits. In Marchand, the background included the deaths of customers that had consumed the defendant company’s product. In Clovis Oncology, the derivative claim related to circumstances that had already been the subject of a massive securities class action lawsuit settlement and also the subject of a settled SEC enforcement action. Clearly, neither of these cases represent routine or run of the mill circumstances.
Third, both Marchand and Clovis Oncology emphasized that the board’s oversight responsibilities were particularly important with respect to “mission critical” regulatory requirements. That is, the claims arose out of circumstances that involved compliance requirements that the board had to be watching, given the importance of the requirements to the company’s operations and business success.
In other words, these recent cases do not imply some massive expansion of boards’ oversight duties. They are not likely to result in some huge influx of duty of oversight claims.
Nevertheless, these cases do have important implications. Among other things, the courts’ decisions in these cases, which both involved denials of motions to dismiss, establish that while the burden for plaintiffs to establish a claim for breach of the duty of oversight is “onerous,” the standards are not insurmountable, and that allegations can be presented that meet these pleading requirements.
The decisions also establish that boards’ responsibilities do include both the establishment of and the monitoring of processes to oversee their companies’ “mission critical” regulatory compliance requirements. Further, the decisions establish that boards that do not fulfill these oversight requirements can be held liable for breaches of their fiduciary duties.
As I noted in a recent post with respect to boards’ oversight duties, these lessons are relevant with respect to any number of challenges that companies might face, but they arguably could have significant implication with respect to two areas that are the subject of particular regulatory focus at the moment, cybersecurity and privacy.
The post Caremark Duties Include Duty Not Only to Establish Oversight Processes but Also to Monitor Them appeared first on The D&O Diary.
via Tumblr Caremark Duties Include Duty Not Only to Establish Oversight Processes but Also to Monitor Them
Lettuce Turnip the Beet: When puns are “functional”
In LTTB LLC v. Redbubble, Inc., plaintiff LTTB, an online apparel company, contended its success was “largely due to public fascination with its Lettuce Turnip the Beet trademark,” and alleged that defendant Redbubble’s sale of products featuring the phrase “Lettuce Turnip the Beet” infringed its mark, 18-cv-00509-RS. Redbubble, an online marketplace selling products made by independent artists, argued that LTTB was not entitled to preclude others from using the “Lettuce Turnip the Beet” pun absent any evidence of source confusion. On July 12, 2019, the Northern District of California issued its decision granting summary judgment in favor of defendant Redbubble, finding that LTTB did not have an exclusive right to sell products displaying the pun “Lettuce Turnip the Beet,” and that LTTB therefore did not have a viable trademark infringement claim.
The court’s decision turned on its application of the “aesthetic functionality doctrine,” a controversial trademark law principle unevenly applied by federal courts. See McCarthy on Trademarks and Unfair Competition § 7:80 (5th ed.). Under the aesthetic functionality doctrine, when goods are bought largely for their aesthetic value, their features may be functional – if a feature is an important ingredient in the commercial success of the product, the interest in free competition permits its imitation in the absence of a patent or copyright. See Pagliero v. Wallace China Co., 198 F.2d 339 (9th Cir. 1952). The issue in LTTB was whether LTTB had a viable infringement claim where the alleged infringing products merely displayed the pun “Lettuce Turnip the Beet” and did not otherwise include any indication that they were produced by LTTB. In other words, was the pun “Lettuce Turnip the Beet” a functional feature permitting imitation? The LTTB court explained that while the Ninth Circuit’s modern application of the “aesthetic functionality” doctrine has been more limited, the circumstances of the LTTB case “undeniably” called for the application of the aesthetic functionality doctrine.
The court in LTTB concluded that no reasonable trier of fact could find that consumers sought to purchase products based on LTTB’s reputation, rather than mere interest in the pun “Lettuce Turnip the Beet.” The court found that LTTB’s products were simply the vehicle for distributing the claimed “trademark” on the pun “Lettuce Turnip the Beet” rather than the other way around, where a trademark is used to identify the source of the goods. The court also clarified, however, that nothing in its ruling precluded LTTB from enforcing its rights against a party that markets a product misleadingly suggesting LTTB as the product’s source.
Feyonce v. Beyoncé: When puns dispel potential confusion between trademarks
In another noteworthy case involving the ability to enforce trademark rights as to a pun or play on words, Beyoncé Knowles-Carter and BGK Trademark Holdings, LLC dismissed their trademark infringement action in the Southern District of New York against defendant Feyonce, Inc., an apparel company marketing its FEYONCE-branded merchandise toward the engaged-to-be-married. Knowles-Carter v. Feyonce, Inc., 16-CV-2532 (AJN). Knowles-Carter and BGK had alleged that defendant’s Feyonce-branded merchandise infringed the famous BEYONCE trademarks; Feyonce, Inc. disputed the infringement allegation and argued that FEYONCE was not confusingly similar to the BEYONCE marks. Whereas the LTTB decision turned on whether the plaintiff had an exclusive right to use a pun in its product names, the Feyonce court discussed whether the defendants’ use of a pun was sufficient to dispel confusion with plaintiff’s nearly identical mark.
Before ultimately voluntarily dismissing their claims, plaintiffs Knowles-Carter and BGK Trademark Holdings moved for partial summary judgment as to their trademark infringement claims, which was denied. The court explained that the “critical question” was “whether a rational consumer would mistakenly believe FEYONCE products are sponsored by or affiliated with BEYONCE products.” In other words, was the pun was sufficient to dispel a likelihood of confusion among the consuming public? The court found that the answer could be yes.
While the court could not conclude that FEYONCE rose to the level of a parody of BEYONCE, it explained that “even a pun on an existing mark that does not contain an expressive message may avoid infringing if it is adequately distinguishable from the existing mark by virtue of pun.” Id. citing Tommy Hilfiger Licensing, Inc. v. Nature Labs, LLC, 221 F. Supp. 2d 410, 417 (2002).
In denying Beyoncé’s motion for summary judgment as to the trademark infringement claim, the court reasoned that “even though the marks were “certainly extremely similar in text, font, and pronunciation,” “because of the additional connotation of ‘fiancé,’ a reasonable jury could conclude that consumers looking for BEYONCE products were “unlikely to select a FEYONCE product inadvertently.” By choosing a mark that sounds identical to the word “fiancé,” Defendants could be said to have “purposefully differentiated their products by eliciting a mental association with a word that has a dictionary definition unrelated to Beyoncé.” Defendants’ mark could be considered a pun because it was clearly a reference to Beyoncé but was “just as clearly a signifier of a specific relationship status.”
FEYONCE’s play on words could dispel consumer confusion that might otherwise arise because of its facial similarity to the BEYONCE mark. The court emphasized that there is no likelihood of confusion “if the similarity [between the marks] merely results in an association between the products in a consumer’s mind, as opposed to confusion regarding the source, sponsorship, or affiliation of the products.”
via Tumblr We Got The Beet: Trademark Claims and Puns
In a prior post, I noted recent academic research detailing the rise of mootness fee dismissals in federal court merger objection litigation. In these merger-related lawsuits, the plaintiffs agree to dismiss their suit based on the defendants’ agreement to make changes to the merger documents – thus, making the merger suit moot – and to pay the plaintiffs’ attorneys a mootness fee. An October 4, 2019 Law 360 article entitled “Plaintiffs Firms Follow Easy Merger Money to Federal Court” (here, subscription required) takes a look at the small group of plaintiffs’ law firms that the most active in filings these kinds of cases and obtaining mootness fees, in a process that at least one federal district judge has characterized as no better than a “racket.”
The current merger objection lawsuit practice in which plaintiffs’ voluntarily dismiss their suit based on defendants’ changes to the deal-related proxy statement and the payment of a mootness fee has its roots in the Delaware Chancery Court’s January 2016 decision in the Trulia case in which the Court rejected a disclosure only settlement of a merger objection suit.
That Chancery court ruling has led the plaintiffs’ lawyers to shift their merger suit filings from state court to federal court. Before Trulia, 97% of the merger objection lawsuits were filed in state court (during the period 2009 to 2015). However, in 2018, only 34% of mergers that resulted in merger litigation faces state court suits, while 91% were challenged in federal court . (Some mergers were challenged in both state and federal court.)
The Trulia decision is also arguably the source of the current mootness fee phenomenon. In his Trulia opinion, one of Vice Chancellor Bouchard’s concerns about the disclosure only settlements in merger objection suits is that the defendants extracted as part of the settlement a total release of all claims, even those that had not been asserted. Bouchard suggested voluntary dismissals with the payment of a mootness fee; this approach would not involve the problems he perceived with respect to comprehensive claims releases, and he assumed the defendants’ incentives would motivate them to police the amount of the fees paid to the plaintiffs’ attorneys.
In practice, the defendants are not policing the mootness fees because it is easier and less bother just to pay the plaintiffs lawyers to go away. As the Law 360 article notes these dismissals and fee payments face “little scrutiny from judges” as a result of which the practice surrounding these mootness fee cases “amounts to a shakedown with little benefit beyond lining attorneys’ pockets.” It is a practice that, as one of the authors of the academic paper cited below notes, amounts to “blackmail,” noting that the defendant companies are paying the fees “just to make these cases go away.”
The Plaintiffs’ Firms
The interesting thing about the Law 360 article is that it details which plaintiffs’ firms are the ones whose pockets are being lined. There are, in fact, only a very small number of plaintiffs’ firms that are responsible for the vast majority of merger objection lawsuit filings in recent years and also in collecting mootness fees. The law firm information in the article comes from the May 29, 2019 paper entitled “Mootness Fees” (here), Matthew Cain and Steven Davidoff Solomon of UC Berkley Law School, Jill Fisch of Penn Law School, and Randall Thomas of Vanderbilt Law School, about which I previously reported in the blog post to which I linked at the top of this post.
The academic paper’s authors note that mootness fees generated more than $23 million in mootness fee payments for plaintiffs’ law firms in 2017. The amount of fees in any given case in the past has ranged between $50,000 and $300,000, but more recently the range has narrowed to between $50,000 and $150,000.
According to the information in the Law 360 article, three law firms – Monteverde, Ridgorsky & Long, and RM Law – are “driving the shift” of merger objection cases from state court to federal court. Ridgorsky & Long has filed 163 federal district courts YTD in 2019, all but one involving mergers and other transactions. RM law has served as co-counsel to Ridgorsky & Long in 106 of the complaints. The Monteverde law firm has filed 76 federal district court complaints so far this year, all but five involving a corporate transaction.
For these firms and others active in this space, the majority of the cases they file are voluntarily dismissed with the payment of mootness fees. For the Monteverde law firm, a whopping 80% of merger objection suits the firm filed between 2017 and January 2019 were voluntarily dismissed with the payment of a mootness fee. For the Ridgorsky & Long firm, 68% of the merger objection suits it filed were dismissed with the payment of a mootness fee. For the RM Law firm, the figure is 65%.
This practice has become pervasive among the small number of plaintiffs’ firms active in this space. According to the academics’ research, none of the six plaintiffs firms most active in this area reached court-approved settlements in more than 4% of these cases. Instead, the plaintiffs’ firms are avoiding judicial scrutiny through the voluntary dismissal and mootness fee approach. Each of the six most active firms dismissed their lawsuits and negotiated mootness fees at least 65% of the time.
Earlier this year, when Northern District of Illinois Judge Thomas Durkin ordered the plaintiffs’ attorneys in the Akorn merger objection lawsuit to return the $322,000 mootness fee they had negotiated in exchange for what Judge Durkin characterized as “worthless” additional disclosures, I was hopeful that the ruling might represent “the beginning of the end” of the merger objection lawsuit mootness fee racket. And indeed other courts have rejected merger objection plaintiffs’ mootness fee requests.
However, by and large, the mootness fee racket continues unabated. Plaintiffs’ lawyers are simply avoiding the jurisdictions where the process might face questions. As one commentator quoted in the Law 360 article notes, “plaintiffs’ lawyers [are] going throughout this country picking jurisdictions or picking courts that they believe they’ll get a higher fee.”
The fact that this practice is permitted to continue or even to exist is an embarrassment to our entire legal system. The plaintiffs’ lawyers have found a way to set themselves up as toll takers, where they extract a payment from merger parties for doing nothing except filing a complaint. When commentators in other legal systems talk about abuses in the U.S. system of litigation, they are talking about practices like this mootness fee racket. Worse still, if these practices are, as one academic notes in the Law 360 notes, “blackmail,” it is blackmail achieved by use of the courts.
It may be that over time enough judges will find their way to the same conclusions about these kinds of cases as Judge Durkin did in the Akorn lawsuit. Even if that ever happens, it will likely take a considerable amount of time. It may be that legislative measures are required.
As I have noted in several prior posts, there are efforts afoot to initiate another round of securities class action litigation reform. The efforts include, for example, suggestions to try to address the unfortunate side effects resulting from the U.S. Supreme Court’s March 2019 decision in Cyan. Many of the proposed reforms have significant merit, and should be pursued. As these initiatives progress, I hope the litigation reform dialog also includes a discussion of ways to squash the merger objection litigation racket.
The federal courts in this country should not be the instrument for the extraction of blackmail payment. Litigation that has absolutely no socially redeeming value and does nothing except enrich a very small number of plaintiffs’ lawyers must be eliminated.
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via Tumblr Plaintiffs’ Lawyers, Merger Objection Litigation, and Mootness Fees
In the latest securities class action lawsuit to be filed against a company that has experienced a data breach or other cybersecurity incident, a plaintiff shareholder has filed a securities suit against Capital One in connection with the company’s recent massive data breach. While there have been a number of data breach-related securities suits before, there are some unique features of the Capital One situation that make it distinctive and interesting, as discussed below. The plaintiff shareholder’s October 2, 2019 complaint can be found here.
The Capital One Data Breach
In a July 29, 2019 press release, Capital One announced that on July 19 the company had determined that there had been unauthorized access to its systems by an individual who had obtained personal information of the bank’s credit card applicants and customers. The company said that the breach involved the personal information of over 100 million customers in the U.S. and another 6 million in Canada. The company’s press release announced that the company had notified the FBI of the breach and that the person responsible for the data breach had been arrested and was in custody. On the news of the breach, the company’s share price dropped approximately 6%.
In the days following the news of the breach, news reports identified the hacker responsible for the data breach as Paige Adele Thompson, a former employee of Amazon’s cloud computing division that according to the reports was responsible for running much of Capital One’s information technology infrastructure. On July 29, 2019, the U.S. Department of Justice filed a criminal complaint against Thompson that provides many of the details surrounding Thompson’s hack of the Capital One data. Subsequent filings in the criminal proceeding on behalf of the government alleged that Thompson had in fact targeted a number of companies and other organizations.
One of the features of the hack that immediately attracted attention was the fact that Thompson accessed the Capital One customer data by hacking improperly secured Amazon cloud accounts, as discussed in greater detail in a guest post on this blog (here).
The Securities Class Action Lawsuit
On October 2, 2019, a plaintiff shareholder filed a securities class action lawsuit in the Eastern District of New York against Capital One, its CEO, Richard Fairbank, and its CFO, R. Scott Blackley. The complaint purports to be filed on behalf of a class of persons who purchased Capital One securities between February 2, 2018 and June 29, 2019. [Note: the complaint identifies the class end date as June 29, 2019, but that is almost certainly a typographical error, as the date on which Capital One released the news of the data breach was July 29, 2019, not June 29, 2019, and the complaint refers extensively to the company’s July 29 press release.]
The plantiff’s brief complaint consists of a series of block quotations from various Capital One SEC filings in which the company made a number of statements about its privacy security, as well as the data security of third-party service providers. The complaint also verbatim quotes the July 29 press release and includes quotations from the criminal complaint against Thompson. The complaint alleges that the company’s share price dropped 5.9% on the news of the breach.
The complaint alleges that these various statements were materially false and misleading because the mispresented or failed to disclose that: “(1) the Company did not maintain robust information security protections, and its protection did not shield personal information against security breaches; (2) such deficiencies heighted the Company’s exposure to a cyber-attack; and (3) as a result, Capital One’s public statements were materially false and misleading at all relevant times.”
The complaint seeks to recover damages on behalf of the class based on allegations that the defendants’ alleged misrepresentations or omissions violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.
In the wake of the news of the Capital One cybersecurity breach, a number of different people expressed surprise to me that there was not, at least not right away, a data breach-related D&O lawsuit filed against the company or its senior management. The incident was after all very high profile. In the immediate aftermath of the news of the data breach, there were in fact a number of plaintiffs’ law firm “trolling” press releases through which the plaintiffs’ lawyers sought to find a plaintiff shareholder on whose behalf they might sue the company.
In the end, the complaint that was eventually filed was filed by one of the so-called “emerging law firms” that have been responsible for so much of the elevated levels of securities class action lawsuit filing activity in recent years. In that regard, it is worth noting that in addition to being a data breach-related securities lawsuit, this lawsuit is also an example of event-driven securities litigation – that is, where the securities suit is not based on traditional allegations of accounting misrepresentations or financial fraud, but rather based on a negative development in the company’s business operations the risk of which the investors supposedly were not adequately warned. The plaintiffs’ law firm that filed this suit is one of the very small number of “emerging law firms” that have been actively filing these kinds of event-based securities suits.
As is the case with so many event-driven securities suits, the scienter allegations in this complaint are notably scarce – as in, the court is going to have a really hard time finding anything in this complaint that remotely resembles an allegation of scienter.
This lawsuit is the latest in a series of suits filed in recent months against companies that have experienced cybersecurity incidents. Recent high profile examples of these kinds of lawsuits include the suit filed in June 2019 against FedEx (about which refer here) and the securities lawsuit filed last year against Marriott related to a data breach that occurred at the company’s recently acquired Starwood division.
In many instances, data breach-related D&O lawsuits have not fared particularly well. For example, late last year the court granted the defendants’ motion to dismiss in the data breach-related securities suit that had been filed against PayPal. (The district court in that case recently granted the defendants’ renewed motion to dismiss – with prejudice, this time – the plaintiffs’ second amended complaint.)
To be sure, there have been instances where plaintiffs have been more successful in data breach-related D&O lawsuits. For example, the data breach-related securities class action lawsuit filed against Yahoo ultimately settled for $80 million. A related shareholder derivative suit was later settled for $29 million. However, the Capital One lawsuit arguably lacks many of the important features of the Yahoo lawsuits – unlike the Yahoo lawsuit, this case does not involve long delays in communicating the news of the data breach, and also does not involve the kind of direct and demonstrable financial losses that were part of the Yahoo lawsuits.
Whether or not the new lawsuit ultimately is successful, there are a number of circumstances surrounding the Capital One data breach that are relevant for corporate boards. Among the most important is that the data breach involved data storage and networking arrangements with a third-party vendor, in this case Amazon’s cloud services.
As discussed in John Reed Stark’s thoughtful guest post on this site (here), the third-party vendor aspect of the Capital One data breach has important implications for corporate boards’ cybersecurity oversight responsibilities.
The significance of these oversight responsibilities appears even greater in light of the Delaware Chancery Court’s recent decision in Marchand v. Barnhill; as discussed here, the Marchand decision has important implications for corporate boards’ liability exposures arising out of their cybersecurity and privacy oversight responsibilities.
On a slightly different note, John Reed Stark also published a separate guest post on this site (here) discussing the intriguing question of whether Amazon itself has any liability for the Capital One hack. Indeed, as Stark notes in his guest post, at least one consumer privacy lawsuit filed in the wake of the Capital One data breach names Amazon as one of the defendants.
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via Tumblr Data Breach-Related Securities Suit Filed Against Capital One
Many in the industry are familiar with the following scenario. A young gamer, grinding tirelessly for untold hours perfecting her skill, honing her strategy, finally qualifies for an eSports tournament. For that gamer, the true hard work begins after qualification. She now has to try to convince her parents to agree to let her participate, which may include travel (though compensated) to a far off location. In many cases, the first time the parents become aware that their child even entered a tournament (much less won an all-expense paid trip to an eSports tournament) is this conversation—after the child has already been offered compensation to travel to and compete in the tournament.
If you are a game publisher, tournament organizer, or otherwise involved in the logistical chain of events described herein, there may be a big problem. The collection and use of data provided by children is regulated in the United States by the Children’s Online Privacy Protection Act (“COPPA”). COPPA is designed to protect the privacy of children by establishing certain requirements for websites that market to children. Most notably, COPPA requires website operators to obtain “verifiable parental consent” before collecting personal information from children. The FTC operates under the assumption that if children are the target demographic for a website, the website must assume that the person accessing the website is a child, and proper consent must be obtained. This assumption exists even if the website did not start with children as the target audience.
Failure to adhere to COPPA’s requirements can result in heavy penalties and negative publicity. The FTC brought actions against Musical.ly for its TikTok platform and Google for its YouTube platform, settled for $5.7 million and $170 million respectively.
Next week, the FTC will host a workshop on COPPA to address how consent should be obtained in many situations, such as our gaming tournament scenario. The workshop will discuss compliance as it relates to image data, voice data, and education technology. This workshop will be especially important for the gaming and eSports industry because many entities within this industry market directly to children. Indeed, because games, tournaments, and general content are (in large part) targeted to those that are protected by COPPA, compliance issues abound in the industry.
The workshop will be on October 7, 2019, in Washington, D.C. The Venable team plans to attend the workshop. If you have any concerns that you would like voiced during the workshop, please feel free to contact me. Stay tuned to Venable’s All About Advertising Law Blog and Close-Ups Entertainment and Media Blog for our thoughts on the workshop next week.
via Tumblr Update Required for Youth Esports
Being able to advertise your product as “Made in the USA” can be a key advantage to marketers and is an attribute that is important to many consumers. Aware of this, the FTC has been on the watch for deceptive Made in the USA claims. Last week, the FTC held a workshop on “Made in the USA” claims to consider consumer perception of these claims and the need for any changes to the existing guidance provided by the FTC.
Current FTC guidance on these claims stems from a 1997 FTC Enforcement Policy Statement in which the FTC concluded consumers are likely to understand an unqualified U.S. origin claim to mean that the advertised product is made in the USA with “all or virtually all” of the components made in the United States.
The workshop began with a discussion on current consumer perceptions of what a “Made in the USA” label means, and why consumers buy “Made in the USA” labeled products. Panelists discussed research showing that consumers purchased “Made in the USA” labeled products: (1) to help keep jobs in America; (2) to support the U.S. economy; (3) because of a perception that products made in the USA are more reliable than products manufactured abroad; (4) because of a perception that working conditions for manufactures in the U.S. are better than those abroad; and (5) because consumers believe it is patriotic to buy American. The panel also discussed survey evidence indicating that American consumers are increasingly concerned with transparency, responsible sourcing, and an ethical supply chain when they are considering what products to buy; with these factors being particularly important to millennial consumers.
Panelists then discussed the difficulties with doing business under the current policy. A recurring theme was the ambiguity surrounding the “all or virtually all” standard for unqualified “Made in the USA” claims and the difficulties many manufactures face in trying to meet this standard. The FTC requires significant parts and processes that are not made in the USA to be “negligible,” but provides no numerical standards for “all or virtually all”. Also confusing matters is the California law that prohibits Made in USA claims “when the merchandise or any article, unit, or part thereof, has been entirely or substantially made, manufactured, or produced outside of the United States.” The California law makes allowances for products based on the percentage of non-U.S. made parts or services in the wholesale value of the end product. The panelists remarked how these ambiguities have forced some manufactures to either make a qualified claim or, because of the extensive cost and time involved in figuring out if their claim is compliant with the FTC standards, decline to make the claim altogether.
To conclude the workshop, FTC staff explored potential remedies or changes to the FTC’s existing guidance with the panelists. Some panelists argued for tougher penalties for violators (including monetary damages and a mandatory notice of violation) as a more effective deterrent to bad actors, along with better follow up by the FTC on previous violators who had received closing letters. The FTC staff remarked that it would be difficult for them to expand their enforcement efforts via litigation because of staff and budgetary restraints. Nearly all of the members of the panel agreed that the policy statement and the “all or virtually all” standard should be codified in a rule that would help clear up some of the ambiguities currently surrounding the “Made in the USA” claim process. The FTC encouraged panelists and the public to comment on potential changes to the policy via their website. What, if anything, the FTC does next remains to be seen.
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In Mary et al. QEP Energy Company the question was, given an encroachment of a pipeline onto the property of another, what is the test for determining the good faith, or not, of the party in possession?
Ms. Mary and QED were parties to a Pipeline Servitude Agreement and what appears to be an oil and gas lease (the court could have just called it that). Ms. Mary et al claimed that QED’s gas pipelines unlawfully extended onto their property by 31 feet and 15 feet and sought disgorgement of the profits derived from the pipelines. The issue was to determine the source of the liability of QED, the encroacher, which would determine damages.
Louisiana Civil Code Art. 486 allows a possessor of property in good faith to maintain the ownership of fruits he has gathered, and a possessor in bad faith is bound to restore to the owner the fruits he has gathered or their value, subject to a claim for reimbursement of expenses. There are different ways under the law to approach the question.
The parties each had their favorite statutory solution. CC Art. 670, cited by the plaintiffs, addresses a landowner who constructs a building in good faith that encroaches on adjacent estate. The district court went with Art. 670. But the Fifth Circuit observed that Art.670 addresses a “building” built by a “landowner” and determined that a servitude holder is not a landowner and a pipeline is not a building in the ordinary sense of the word. The Fifth Circuit went with Art. 487, championed by QEP, which addresses the doctrine of accession.
“For purposes of accession a possessor is in good faith when he possesses by virtue of an act translative of ownership and does not know of any defects it is ownership. He ceases to be in good faith when these defects are made known to him or an action is instituted against him by the owner for the recovery of the thing.
So what is accession? Harking back to simpler times, the Louisiana Civil Code designates material or intangible objects that are susceptible of appropriation as “things”. Land is a “thing”, for example. The ownership of the “thing” confers upon the owners “the ownership of everything that [the thing] produces or is united with it … ”. Secondary things are known as accessories. Accession is a right of ownership over a thing by virtue of it being an accessory.
What’s the point?
An owner is entitled to profits from a thing because profits of the type of accession known as fruits. The parties were fighting over the fruits (profits) of a thing (land) on which the pipelines are located. Those profits accrue to the owner of the land because they are accessories of the land itself. In other words, said the court, they accrue by accession. The Fifth Circuit concluded that the profits belong to the possessor in good faith and sent the case back to the district court to figure out whether QEP met the test for good faith
Before you go deriding Louisiana law for calling things “things” (which is what they are, after all) know that it has its own big words that you don’t understand: the reconventional demand, the usufructuary and sibling the naked owner, incorporeal movables, toleration of the enjoyment, … I could go on.
What does the King of Zydeco think about these odd-sounding words?
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In the following guest post, Richard M. Leisner, a Senior Member in the Trenam law firm in Tampa, takes a look at an unusual and interesting recent decision from the Delaware Chancery Court, Stacey Kotler v. Shipman Associates, LLC (here). Regardless of where you sit, this decision is worth consideration, as the parties had a fully executed stock purchase agreement yet as a result of the court’s decision the intended beneficiary came up empty. As Richie points out, there are some important lessons from this decision. I would like to thank Richie for allowing me to publish his article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this site’s readers. Please contact me directly if you would like to publish a guest post. Here is Richie’s article.
In a recent Delaware Chancery decision, Stacey Kotler v. Shipman Associates, LLC, 2019 WL 3945950 (Del. Ch. Aug. 21, 2019), Vice Chancellor Joseph R. Slights, III found that a fully executed stock purchase warrant agreement was unenforceable. This somewhat unexpected decision and the details in its underlying facts harbor important lessons for transactions attorneys in today’s fast paced corporate practice.
In 1999, Marissa Shipman began mixing cosmetics in her kitchen sink, launching a business that became known as “theBalm.” In 2003, Ms. Shipman hired her friend Stacey Kotler as an independent contractor salesperson. Ms. Shipman and Ms. Kotler proved to be a good team and theBalm flourished. Working on a “handshake” agreement for commissions, Ms. Kotler eventually was designated as the company’s Vice President of Sales and Business Development. By 2017, when the litigation was filed, Ms. Shipman was CEO of a privately owned family business tagged with a value of between $600 and $700 million.
The litigation concerned the validity of a stock purchase warrant agreement allegedly granted to Ms. Kotler in 2007 giving her the right to acquire up to 5% of the company’s equity. Using the low end of the 2017 valuation, Ms. Kotler’s warrant would have covered equity with a value of approximately $30 million.
The first steps down the road to the current litigation began with Ms. Kotler’s repeated requests for equity ownership in theBalm. The parties are in agreement that Robert Shipman, the founder’s father who handled the operational side of the business, repeatedly promised Ms. Kotler she would be rewarded with a measure of equity ownership. Over a period of approximately eight months in 2007, the parties exchanged and negotiated several drafts of a stock purchase warrant agreement.
Oliver Brahmst, a partner in the New York City office of White & Case, was the company’s principal lawyer. In something of a departure from customary practice, it appears Mr. Brahmst did not communicate regularly with Ms. Kotler’s attorney or copy Ms. Kotler with draft agreements as they were prepared. Instead, Mr. Brahmst sent drafts to the company which in turn forwarded documents to Ms. Kotler. Ms. Kotler then sent her comments and suggested changes to the draft warrant agreements back to Robert Shipman at the company. Ms. Kotler did not send copies to Mr. Brahmst. Apparently, Mr. Shipman negotiated directly with Ms. Kotler and Ms. Shipman did not participate actively in the negotiations. The opinion does not report the extent to which Mr. Brahmst or Ms. Kotler’s counsel were involved in the parties’ negotiations or whether there were any counsel-to-counsel negotiations.
In the litigation, the discovery process failed to develop many of the key the facts regarding the history of the warrant agreement negotiations. Ms. Kotler was unable to recall key elements of the underlying facts at several junctures. These lapses in Ms. Kotler’s memory extended to the name of her lawyer. Ms. Kotler’s memory issues were exacerbated by similar memory lapses by each of Marissa and Robert Shipman and a paucity of documentary evidence. Neither side retained emails or other correspondence. Indeed, the court described theBalm’s informal corporate recordkeeping practices as “at best, careless.” In addition, many corporate records “disappeared” sometime after the 2007 warrant agreement negotiations, making them completely unavailable in the litigation. The court lamented that, other than the various draft warrant agreements, the record held very little in the way of helpful contemporaneously created records.
Early in the 2007 negotiations, the parties agreed the warrant would cover approximately 5% of the company’s stock. However, the parties did not agree on company requested restrictive covenants. As proposed, the covenants prohibited Ms. Kotler from engaging in certain broadly defined competitive activities (for convenience, “no compete” and “no solicit” provisions). The no compete and no solicit provisions would never expire. Violation of the no compete or no solicit provisions would automatically trigger total forfeiture of the warrant’s stock purchase rights.
Ms. Kotler initially objected to any restrictive covenants after her relationship with the company ended. Eventually, it appears Ms. Kotler may have been agreeable to a no compete and no solicit while she was an independent contractor and a no solicit that would survive for 18 months after she and the company ended their relationship. Neither side could recall having changed from their initial positions regarding the no compete covenant.
The court recounts in excruciating detail the multiple drafts and varying negotiating positions and arguments, including drafts of February 25, June 8, August 6, September 5, September 12, September 17 and September 25. Chancellor Slights’ factual summary occupies most of the opinion. The opinion is augmented by 206 footnotes, many of which are rich with more facts or reference to specific pages of the trial transcript, joint trial exhibits and pretrial stipulation. Nevertheless, the parties’ memory lapses and modest records outside the drafts leave events and issues shrouded in uncertainty.
The most important uncertainties surround Marissa Shipman’s execution of the signature page of the fully executed “wet ink” warrant agreement referenced in the opening paragraph of this article (the September 17 draft).
Did Ms. Shipman sign an “orphan” blank signature page provided by Ms. Kotler; did Ms. Shipman sign the signature page at the end of or accompanied by the September 17 draft; or did she sign a different draft of a complete agreement? Did Ms. Kotler “switch” the signature page from the earlier September 12 draft with its perpetual no compete and 24 month post termination no solicit or did Ms. Shipman simply sign the September 17 draft without reviewing it?
Significantly, Ms. Kotler prepared the September 17 draft making changes from the September 12 draft prepared by Mr. Brahmst. Among the changes Ms. Kotler made in the September 12 draft were a reduction in the number of shares from 533 to 502 shares and including no solicit, no compete and forfeiture provisions that were far less restrictive (less company favorable) than had been demanded by the company up to that point in the negotiations.
What happened next is unclear. Chancellor Slights noted: “… of course, none of the witnesses had a clear memory of what happened.”
What is known according to the court’s opinion is that:
From later events, it appears that a few days after September 17, Ms. Kotler executed the signature page Marissa Shipman executed (and previously sent to Ms. Kotler). This fully executed signature page became part of what Ms. Kotler later referred to as the “wet ink” fully executed warrant agreement.
Stacey Kotler’s relationship with theBalm ended in the spring of 2009, after the company rejected Ms. Kotler’s demands for more compensation, more equity and greater responsibility. In July 2009, shortly before launching a competing venture, Ms. Kotler sent a letter to the company claiming that she held a warrant for 502 shares of common stock and requesting that she be notified of any triggering events. The company did not respond to this letter or contact Mr. Brahmst at White & Case.
In 2013, the September 17 draft executed by Ms. Kotler (but not by Ms. Shipman) was found in the company’s records. In 2016, as the company pursued a possible sale, questions arose regarding the validity of Ms. Kotler’s warrant and Ms. Kotler’s counsel provided the company with a copy of the “wet ink” fully executed September 17 draft warrant agreement. The company engaged separate counsel to pursue settlement with Ms. Kotler. Those efforts were not successful. This litigation followed in 2017.
Chancellor Slights ruled that Ms. Kotler failed to meet the plaintiff’s burden of proof: to prove the existence of a binding warrant agreement by a preponderance of the evidence. True, there was a fully executed warrant agreement, but there also were the defendant’s credible assertions that the company would never have agreed to the significantly reduced restrictive no compete and no solicit covenants that were found in Ms. Kotler’s fully executed agreement.
The Chancellor then turned a bit philosophical about his ruling:
It is certainly fair to leave this case with questions about the “fairness” of the court’s ruling. The company repeatedly promised Ms. Kotler that she would receive equity in the company, but the court left Ms. Kotler empty handed on the courthouse steps.
There was a signed warrant agreement with valid signatures. In the absence of fraud or other extenuating circumstances, parties signing written agreements will find courts enforce such agreements according to their terms. The court in this litigation could have chosen to give the company the unenviable task of carrying the burden to prove why the signed agreement shouldn’t be enforced. The court took a different approach, one that brought victory to the defendant.
The court gave Ms. Kotler the burden of proof to establish that a meeting of the minds occurred in 2007. Marissa and Robert Shipman argued that they would “never have agreed to the terms” in the executed warrant agreement. It seems that the parties’ collective significant memory lapses, while straining credulity, ultimately worked to the great benefit of the defendant’s side of the argument.
In retrospect, regardless of how one feels about the court’s ruling, this case begets several practical lessons for today’s corporate transactions lawyers.
* * * *
 Originally incorporated in 1999 as “The Balm.com,” the company soon changed its name to “Shipman Associates, Inc.” The warrant purchase agreement drafts prepared in 2007 covered shares of common stock of Shipman Associates, Inc. In 2014, the company completed a complex holding company reorganization. For convenience, references in this article to “equity” are to the common stock of Shipman Associates before the reorganization.
 This projected valuation was reported in The Wall Street Journal and was noted in the parties’ pretrial stipulation.
 Although the number of shares covered by the draft warrant agreement changed several times, the record indicates that the parties in the litigation ultimately agreed to 502 shares or approximately 5% of the company’s undiluted common stock. The first draft covered 1,055 shares, approximately 10% of the company’s stock; subsequent drafts covered 533 shares, 5% of the equity on a fully-diluted basis; late in the negotiations, after in person discussions between Mr. Shipman and Ms. Kotler, there was agreement to a further reduction to 502 shares, 5% of the undiluted stock.
 The first draft of the warrant agreement in February 2007 omitted any no compete or no solicit provisions. In subsequent drafts, the company included no compete and no solicit provisions with perpetual terms.
 The footnotes occupy 7.5 pages while the body of the opinion uses only 6.5 pages.
 There was no suggestion that Ms. Shipman’s signature was forged. It was admitted that she signed the signature page.
 All the other drafts had been prepared by Mr. Brahmst of White & Case. The September 17 draft apparently was based upon the September 12 draft prepared by Mr. Brahmst which included a signature page, making it suitable for becoming a binding agreement upon execution by the parties.
 Despite the apparent impasse on the no compete and no solicit provisions, the court reported that both sides believed they had in September 2007 reached agreement and signed a binding warrant agreement. The court did not explain how the parties arrived at these beliefs or which versions of the no compete and no solicit provisions were in their binding agreements. There were no contemporaneous records evidencing the parties’ beliefs in September 2007 about having signed a binding warrant agreement.
 All the documents exchanged at this time were limited to paper versions; no digital copies of these materials were provided to the parties in the exchanges described above.
 The letter was sent by certified mail, return receipt requested.
 2019 WL 3945950, 2
 As a general proposition, a party signing an agreement without reading it, in the absence of fraud, is going to find the agreement is enforceable. 6 William Meade Fletcher, et al., Fletcher Cyclopedia of the Law of Corporations §2585.10 (Westlaw, September 2019 Update), nn. 34, 35 & 36.
 The court found it unnecessary to rule on the allegations that Ms. Kotler defrauded the Shipmans; nevertheless, Chancellor Slights’ dicta about this issue indicates such allegations most likely would have been unsuccessful.
 Special thanks to Francis G. X. Pileggi of Eckert Seamons who first blogged about the Kotler Shipman litigation a few days after the decision, highlighting the risks of orphan signature pages and suggesting that counsel keep agreements and signature pages “together” at all times, “Fully Executed Contract Ruled Unenforceable,” Delaware Corporate & Commercial Litigation Blog (August 26, 2019) available at www.delawarelitigation.com/ (last visited September 18, 2019).
 A phrase widely attributed to President Ronald Reagan in connection with the negotiation of nuclear disarmament terms with the Soviet Union. Also, claimed by some sources as a Russian folk proverb.
 It is easy on a first reading of the opinion to be confused trying to keep track of the multiple drafts and negotiating positions. I was reminded of the Bud Abbot and Lou Costello classic “Who’s on First” vaudeville routine, available at https://www.youtube.com/watch?v=kTcRRaXV-fg (last visited September 12, 2019).
 A working group list, often in tabular form, shows principal parties (including key individuals and respective support staff members at each entity), the respective advisers to the principal parties. The information on these lists would usually include individual names, employer name, position, mailing address, email, telephone and fax numbers and other contact information. Sometimes, particularly on larger transactions, these working group lists would note which parties on the list were to receive particular types of communications (all, only execution copies, none, etc.). Even without such helpful designations, the act of preparing the working group list usually triggers an informal discussion with support staff and clients about who was to receive which types of communications.
 Breaches of this informal rule today are not subject to the same opprobrium as in years past, because most deal documents are prepared and circulated as electronic documents. If a party who does not hold the drafting pen prepares and circulates a revised draft, the other parties can easily redline the new draft against the old. Before relining software was readily available, reviewing a new draft for changes required one person to “read” the new draft aloud, one word at a time to a second person holding a copy of the last draft listening for any change or omission.
 Mr. Brahmst prepared a September 25 draft reducing to 502 shares from 533 shares shown on his September 12 draft on instructions from Robert Shipman that Ms. Kotler had just agreed to 5% of undiluted equity and had undertaken to modify her copy of the agreement. The September 25 draft included an 18-month post separation no solicit and perpetual no compete. Mr. Brahmst did not circulate the September 25 draft.
 The court noted that both parties thought that in September 2007 they had reached agreement and had signed a binding warrant agreement (2019 WL 3945950, 1), although a reading of the full opinion and the facts cited therein raises doubts about the accuracy of this assertion. Importantly, it appears that the company took no actions in the fall of 2007 consistent with the existence of a valid stock purchase warrant. Mr. Shipman failed before 2013 to take note of and review the September 17 warrant agreement executed by Ms. Kotler in 2007 that had been in the company’s possession since 2007. In addition, in 2009 when Ms. Kotler began to compete with theBalm, she was not told her warrant rights had been forfeited. During the litigation, the company explained that it had assumed the warrant was forfeited automatically and that no notification was needed.
Richard M. Leisner
Richard Leisner is an experienced expert witness in complex commercial litigation and legal malpractice cases. In addition, Richard enjoys a broad-based corporate and securities transactions practice.
Richard has been recognized in every edition of The Best Lawyers in America (1983-2020), Corporate, Securities/Capital Markets, Securities Regulation and Corporate Governance Law.
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