Category Archives: Corporate Civil Liability

U.S. Buyer Of Looted Antiquities Pays Steep Price To U.S. Government: Hobby Lobby Forfeits Thousands of Ancient Iraqi Artifacts, Pays $3M, and Admits Fault To Settle Civil Forfeiture Action

by David W. Bowker, Sharon Cohen Levin, Michael D. Gottesman, Laura M. Goodall, Kelsey M. McGregor, and Aleksandr Sverdlik

The U.S. government’s settlement with Hobby Lobby on July 5, 2017 is part of its broader effort to combat trafficking in looted antiquities from the war-torn Middle East and to reduce market demand for such objects by punishing participants in the black market.  Having scored this high-profile settlement in an early test case, the U.S. government likely will try to build on this success with additional investigations and enforcement actions. Continue reading

Denials and Admissions in Civil Enforcement – Looking Beyond the SEC

by Verity Winship and Jennifer K. Robbennolt

Should agencies require admissions of guilt from the targets of civil enforcement?  The SEC’s policy of letting enforcement targets settle while neither admitting nor denying allegations provoked judicial rebukes and a public debate. But the SEC is only the tip of the iceberg. Administrative agencies rely heavily on settlement as a key enforcement tool.  Admissions of guilt—or, more commonly, declarations that nothing is admitted—form part of these settlement agreements and the underlying negotiations.

Our recent article, Admissions of Guilt in Civil Enforcement, uses the explicit debate over the SEC’s practices to draw attention to the high (and mostly unexamined) stakes of admissions for civil enforcement throughout the administrative system. Continue reading

SEC Private Equity Enforcement:  A More Aggressive Approach

by Andrew J. Lichtman and Howard S. Suskin

Over the last several years, the Securities and Exchange Commission (“SEC”) has targeted private equity funds for various fee allocation arrangements and conflicts of interest.  Rather than describing the fee practices as fraudulent, which would require a showing of scienter, the SEC has concluded that the private equity advisers committed disclosure violations.  However, a recent proceeding in which the SEC secured a settlement based on both breach of fiduciary duty and fraud may foreshadow a more aggressive approach.  Some context first. Continue reading

Third Circuit Finds FCRA Violation Alone Confers Standing for Data Breach Suit

by Thomas P. Kurland and Michael F. Buchanan

The United States Court of Appeals for the Third Circuit recently ruled that a data breach class action may proceed on the basis of a Fair Credit Reporting Act (FCRA) violation alone, even where the putative class members do not allege that they were actually harmed by the breach.  The ruling, which both relies on and distinguishes the Supreme Court’s recent analysis of FCRA standing in Spokeo v. Robins, suggests that at least in the Third Circuit, “injury” from a data breach may be presumed from the fact of the breach itself.  This, in turn, could have the effect of expanding potential liability for any consumer-facing entity that suffers a breach.

The case, In re: Horizon Healthcare Services Inc. Data Breach Litigation, stems from a theft of two laptop computers in November 2013 from Horizon, a New Jersey health insurer with over 3.7 million members.   Continue reading

Beyond Caremark: Individual and Corporate Liability Considerations

by Michael W. Peregrine

Delaware court interpretations of the Caremark standard provide a daunting pleading barrier to derivative actions based on alleged breach of compliance oversight responsibilities. The Chancery Court’s October 18 decision in Reiter v. Fairbank is particularly notable for its thoughtful analysis of the duty of oversight. But corporate leadership should recognize that these decisions may not provide impenetrable protection to them, and to the corporation, from compliance-based liability exposure, especially in the current individual accountability environment. Continue reading

Breach of Contract ≠ Fraud

by Geoffrey Parsons Miller

The Second Circuit’s May 23 “mortgage hustle” decision corrects a questionable interpretation of the mail and wire fraud statutes.[1]

Countrywide Home Loans – now a subsidiary of Bank of America – entered into contracts to sell mortgages to Fannie Mae and Freddie Mac. The contracts contained representations regarding the quality of the mortgages that would be transferred. Allegedly, the loans didn’t measure up.

Freddie and Fannie might have sought redress on a simple breach of contract theory: Countrywide did not carry through on its promise to supply good quality loans, and as a result the purchasers were entitled to damages. Regrettably, however, the government litigated this action on a different theory. Continue reading