Tax Case Sparks Shareholder Derivative Suit

By on July 28, 2016

A company never litigates in a vacuum: statements in pleadings or court papers and testimony by company officials can be used against the company in parallel or subsequent proceedings, even unrelated cases. Eaton Corporation PLC was sued recently for alleged violations of federal securities laws because one of its officers made an admission on an earnings call that provisions of federal tax law barred Eaton from making tax-free spinoffs for a limited period of time, and the company’s prior statements allegedly suggested such spin-offs could occur. Eaton Corp. Sued Over Statements About Post-Inversion Spinoff. Companies make similar statements in litigation on a regular basis. Often, such statements form a necessary component of a company’s litigation position. Nevertheless, companies should carefully consider the risk that a statement will expose it to a shareholder-derivative lawsuit and incorporate that risk into its litigation strategy.

 

Joshua D. Rogaczewski
  Joshua David Rogaczewski focuses his practice on complex civil litigation in a variety of substantive areas, including retirement-benefit disputes under ERISA and the Labor–Management Relations Act of 1947; employment discrimination litigation under Title VII of the Civil Rights Act of 1964 and the Rehabilitation Act of 1973; challenges to program accessibility under Title II of the Americans with Disabilities Act of 1990; trademark disputes; patent infringement disputes, including those before the US International Trade Commission; challenges to government action under the Administrative Procedures Act in Medicare reimbursement and other areas; and False Claims Act litigation. Read Joshua Rogaczewski's full bio.

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