Bankruptcies in Class Actions

Happy New Year everyone!  Apologies for the long silence on our blog.  It’s been a busy holiday season perfecting our new database, writing papers, beginning work on creating a public-facing website with user-available analytic tools among a myriad of smaller projects.  We (somewhat) recently wrote a guest piece on Kevin LaCroix’s fantastic D&O Diary site looking at class actions when issuers have filed for bankruptcy.  An excerpt of that post is available below, and the full article can be read here:

“One out of every seven securities class actions filed since 2000 involves a company in bankruptcy. This important subset of class actions has some important features that warrant empirical examination. In this blog, we use our database of securities class actions filed from 2000 to the present to shed light on how cases involving bankrupt companies differ from cases against solvent corporations.[i] Specifically, we address the following questions.

  • Are cases involving bankrupt corporations more successful than cases against solvent corporations?
  • Is the timing of settlement affected?
  • How protective is D&O insurance for officers and directors when a company is bankrupt? Specifically, how much does D&O insurance pay out and how frequently do individual officers or directors make personal, out-of-pocket payments into a settlement?
  • Is there a basis for inferring that additional Side A coverage would have provided more protection for those individuals who paid into settlements?”