Parallel Proceedings: D&Os Caught in the Cross Fire
It is commonly recognized that the size of settlements in securities class actions against directors and officers has increased dramatically in the post-Enron environment. Equally troubling, but less publicized, is the similar increase in the frequency of proceedings against directors and officers which are separate from but related and parallel to the securities class action lawsuit.
These parallel proceedings create difficult litigation dynamics and unique D&O insurance coverage issues which further complicate the management of the claims against and exposures of the defendant directors and officers.
The following summarizes the most common parallel D&O proceedings today (other than ERISA tagalong lawsuits, which have been extensively discussed in other articles) and many of the litigation and insurance coverage issues created by each type of parallel proceeding.