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On June 23, 2006, the jurisdiction that invented the 'zone of insolvency' delivered its latest lesson on the fiduciary duties of directors and officers of insolvent companies. The Delaware Bankruptcy Court, in <i>In re Scott Acquisition Corp.</i>, ___ B.R. at ____, 2006 WL 1731277 (Bankr. D.Del. 2006), ruled that directors and officers of insolvent subsidiary companies owe fiduciary duties to both its creditors and the subsidiary itself. Before this, leading cases on this issue held that fiduciary duties were owed only to creditors and the single-shareholder, parent companies. Though the decision stands on some firm legal ground, it is sure to create more uncertainty and doubt in the boardroom.
The propriety of postpetition plan support agreements (aka 'lockup' agreements) has been the subject of considerable controversy since 2002 when Judge Mary Walrath of the U.S. Bankruptcy Court for the District of Delaware issued two unreported decisions announcing a 'bright-line' rule that such agreements are 'solicitations' within the meaning of ' 1125(b) of the Bankruptcy Code. In light of these rulings, parties seeking to memorialize a heavily negotiated consensus to support confirmation of a plan of reorganization have run the risk that any such consensus that is reduced to writing could be deemed a violation of ' 1125(b) unless it was accompanied by a prior court-approved disclosure statement. Furthermore, parties to such agreements also faced the significant risk that they could be disenfranchised from the Chapter 11 process through designation of their votes regarding the plan that they have agreed to support.
These are challenging times for those of us who represent and defend corporations in litigation. The recent criminal convictions of Enron's Ken Lay and Jeffrey Skilling only confirm what we have known for quite some time ' jurors are skeptical of, and even hostile toward, corporations and corporate executives. '
Features
Highlights of the latest product liability cases from around the country.
<i>'Men occasionally stumble over the truth, but most of them pick themselves up and hurry off as if nothing ever happened.'</i> In this author's opinion, Winston Churchill's keen observation of human nature is an apt description for how the pharmaceutical industry deals with dangers revealed or at least signaled in clinical trials. For years, plaintiffs' lawyers have honed in on clinical trials conducted by pharmaceutical companies when preparing for and trying cases. These studies, often the banner touted by defendants as evidence of their innocence, are a natural place to begin the search for what went wrong when a drug is subsequently pulled from the market despite the supposed 'rigors' of clinical testing. While there is nothing new about plaintiffs' lawyers reviewing clinical trials with a fine-toothed comb, there has been a radical and bold step taken in the world of medical/science academia. Specifically, major publications such as the New England Journal of Medicine ('NEJM') and the Journal of the American Medical Association ('JAMA') are ensuring that industry-sponsored studies do not merely contain partial truths.
In recent large-scale pharmaceutical litigation, plaintiffs' counsel have concentrated significant resources seeking the details of how individual patients in pre- and post-marketing company clinical trials were assessed, characterized, and reported to the Food and Drug Administration ('FDA'). The reason is clear: They are seeking to develop (in the author's opinion unfairly) a story that the pharmaceutical company hid risks and overstated benefits. The efficacy and safety data generated by industry-sponsored studies, and the manner in which the data are analyzed and reported, have therefore become the focus of large-scale pharmaceutical litigation.
Features
In-depth analysis of a recent ruling.
