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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.
Law Firms are Reducing Redundant Real Estate by Bringing Support Services Back to the Office
A trend analysis of the benefits and challenges of bringing back administrative, word processing and billing services to law offices.
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.
Bit Parts
Summary Judgment Denied Defendant in Declaratory Action by Producer of To Kill a Mockingbird Broadway Play Seeking Amateur Theatrical Rights
Risks of “Baseball Arbitration” in Resolving Real Estate Disputes
“Baseball arbitration” refers to the process used in Major League Baseball in which if an eligible player's representative and the club ownership cannot reach a compensation agreement through negotiation, each party enters a final submission and during a formal hearing each side — player and management — presents its case and then the designated panel of arbitrators chooses one of the salary bids with no other result being allowed. This method has become increasingly popular even beyond the sport of baseball.
Disconnect Between In-House and Outside Counsel
'Disconnect Between In-House and Outside Counsel is a continuation of the discussion of client expectations and the disconnect that often occurs. And although the outside attorneys should be pursuing how inside-counsel actually think, inside counsel should make an effort to impart this information without waiting to be asked.