What will happen in US D&O litigation in 2023?

The past year has seen US-listed companies battle growing economic headwinds, a fast-changing roster of Federal Judges and a more aggressive regulator. All these factors are set to change the D&O landscape, according to the corporate attorneys we polled in the Inigo 2023 Defense Counsel Survey.

Following on from the success of last year’s inaugural survey, this year’s poll was even bigger, in which we canvassed the opinions of the top 50 securities defense law firms in the US. Their responses produced some surprising and informative revelations.

The number of securities class actions being dismissed by Federal Judges will drop, defense attorneys predict, because of the many new judges chosen by the Biden Administration. Around one in ten Federal Judges have been appointed since President Biden took office in January 2021. Many are former public defenders, rather than ex-corporate lawyers, who are more likely to allow plaintiffs their day in court, respondents told us.

Also, more publicly listed companies going out of business is likely to mean a lot more business for the plaintiff’s bar. Breach of fiduciary duty and fraudulent transfer cases are on the rise as more companies fall into contested Chapter 11 and Chapter 7 administration, particularly in the retail and real estate sectors. Directors of distressed firms need to be particularly careful of how they behave to avoid being sued later, defense attorneys warn.

Other key findings include:

• Derivative settlements are continuing to increase in severity, as the Caremark standard comes under increasing pressure.

• The SEC is aggressively pursuing individual directors and officers from the start of investigations, making these cases much more expensive to defend.

But defense attorneys don’t predict a flood of ESG-related class actions, despite the SEC’s new disclosure rules for businesses on their climate-related risks and greenhouse gas emissions, contrary to predictions in the press of a torrent of climate-related lawsuits.

We have stuck our necks out and made five predictions for 2023, which we will mark when we write next year’s report. Some of the predictions we made last year turned out to be true, others didn’t – at least not in the year we made it, in one case.

We also asked defense attorneys to tell us which of their adversaries they respect – or fear. There’s a lot of admiration for the competence, savviness, and tenacity of some of the top plaintiff’s law firms.

To see the full survey, as well as much more analysis, please click on this link.