Abstract

http://ssrn.com/abstract=2208131
 


 



Double Trouble: Collateral Shareholder Litigation Following Foreign Corrupt Practices Act Investigations


Amy Westbrook


Washburn University School of Law

2012

Ohio State Law Journal, Vol. 73, No. 5, p. 1217, 2012

Abstract:     
A recent surge in government enforcement of the U.S. Foreign Corrupt Practices Act (FCPA) has increased opportunities for private plaintiffs to bring collateral civil actions. In response to FCPA investigations, shareholders now routinely file derivative suits, securities fraud class actions, or both. Collateral shareholder lawsuits may allege, for example, that the directors violated their fiduciary duties by failing to oversee the company and avoid or detect the FCPA violation or that the company misled shareholders by not disclosing the conditions that led to the violation. To date, FCPA-based shareholder litigation has enjoyed limited success, with many actions dismissed at early stages of the lawsuits. Nevertheless, a number of the suits have been settled, some for amounts exceeding the government penalties paid by the company for the FCPA violations.

Shareholder litigation based on company behavior that violates the FCPA is significant for several reasons. In the FCPA context, the threat of private litigation increases the impact of an FCPA violation by increasing a company’s liability. Moreover, parallel shareholder litigation may also subtly expand FCPA liability by functioning as an FCPA private right of action.

FCPA-related shareholder lawsuits may also be of more general doctrinal significance. Allegations that directors failed to fulfill their fiduciary duties of oversight may constitute “Caremark claims,” which inform the fundamental duties of corporate managers. Similarly, shareholder allegations of inaccurate books and records and inadequate accounting controls may be brought as securities fraud class action suits based on the company’s misleading disclosure. Both corporation and securities law cases, in the FCPA context, may disturb the uneasy allocation of state and federal regulation of business associations.

This article examines recent shareholder litigation based on company behavior that violates the FCPA. Part II introduces the FCPA and the current surge in its enforcement. Part III examines the increase in shareholder actions based on FCPA violations. Parts IV and V analyze shareholder derivative and securities fraud class action lawsuits, respectively, in terms of what shareholders are alleging and how their suits are faring. Part VI draws preliminary conclusions about the legal consequences of increased collateral shareholder litigation based on FCPA violations.

Number of Pages in PDF File: 36

Accepted Paper Series


Download This Paper

Date posted: January 30, 2013  

Suggested Citation

Westbrook, Amy, Double Trouble: Collateral Shareholder Litigation Following Foreign Corrupt Practices Act Investigations (2012). Ohio State Law Journal, Vol. 73, No. 5, p. 1217, 2012. Available at SSRN: http://ssrn.com/abstract=2208131

Contact Information

Amy Westbrook (Contact Author)
Washburn University School of Law ( email )
1700 College Avenue
Topeka, KS 66621
United States
Feedback to SSRN


Paper statistics
Abstract Views: 299
Downloads: 47

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo3 in 0.797 seconds