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Avoiding the Pitfalls of Stipulated Settlements
An officer of a corporation is named as a defendant in a shareholder derivative suit. After reading the complaint, which includes allegations that the officer committed a breach of certain fiduciary duties owed to the corporation, the officer promptly notifies his directors and officers' liability insurer of the lawsuit. Because the applicable policy contains exclusions that may potentially exclude some, if not all, of the claims, the insurer agrees to defend the officer subject to a full and complete reservation of rights.
Upon receipt of the insurer's reservation of rights letter, the officer becomes concerned that, if the insurer later contests coverage, he may face significant personal exposure. To eliminate this risk, the officer explores the possibility of entering into a settlement with the plaintiff. The plaintiff suggests that the parties stipulate to the entry of a judgment, which is vastly in excess of the suit's true value, and the plaintiff will provide the officer with a 'covenant not to execute,' which protects the officer from personal exposure. In return, the officer will assign to the plaintiff his rights under the policy, including any claims that the insurer acted in bad faith. Armed with the stipulated judgment and an assignment from the insured, the plaintiff files a direct action against the insurer to reach and apply the insurance proceeds to satisfy the outstanding judgment and, pursuant to the assignment, seeks extra-contractual damages on the basis that the insurer acted in bad faith. Suddenly, the insurer is faced with not only litigating whether coverage exists for the inflated judgment, but also defending against a bad faith claim.
Bankruptcy Sales: Finding a Diamond In the Rough
There is no efficient market for the sale of bankruptcy assets. Inefficient markets yield a transactional drag, potentially dampening the ability of debtors and trustees to maximize value for creditors. This article identifies ways in which investors may more easily discover bankruptcy asset sales.
Judge Rules Shaquille O'Neal Will Face Securities Lawsuit for Promotion, Sale of NFTs
A federal district court in Miami, FL, has ruled that former National Basketball Association star Shaquille O'Neal will have to face a lawsuit over his promotion of unregistered securities in the form of cryptocurrency tokens and that he was a "seller" of these unregistered securities.
Why So Many Great Lawyers Stink at Business Development and What Law Firms Are Doing About It
Why is it that those who are best skilled at advocating for others are ill-equipped at advocating for their own skills and what to do about it?
Blockchain Domains: New Developments for Brand Owners
Blockchain domain names offer decentralized alternatives to traditional DNS-based domain names, promising enhanced security, privacy and censorship resistance. However, these benefits come with significant challenges, particularly for brand owners seeking to protect their trademarks in these new digital spaces.
Coverage Issues Stemming from Dry Cleaner Contamination Suits
In recent years, there has been a growing number of dry cleaners claiming to be "organic," "green," or "eco-friendly." While that may be true with respect to some, many dry cleaners continue to use a cleaning method involving the use of a solvent called perchloroethylene, commonly known as perc. And, there seems to be an increasing number of lawsuits stemming from environmental problems associated with historic dry cleaning operations utilizing this chemical.