The directors’ and officers’ liability environment is always changing, but 2025 was a particularly eventful year, with important consequences for the D&O insurance marketplace. The past year’s many developments also have significant implications for what may lie ahead in 2026 – and possibly for years to come. I have set out below the Top Ten D&O Stories of 2025, with a focus on future implications. Please note that on Thursday, January 15, 2026 at 11:00 am EST, my colleagues Marissa Streckfus, Chris Bertola, and I will be conducting a free, hour-long webinar in which we will discuss The Top Ten D&O Stories of 2025. Registration for the webinar can be found here. Please join us for the webinar.
1. Federal Court Securities Suit Filings Decreased Slightly in 2025
D&O insurers closely track the annual number of securities class action lawsuit filings. The number of annual filings can provide some indication of insurers’ ultimate loss costs during the year. The current year’s filing patterns can also inform the insurers’ efforts to try to determine the profit-making price for their D&O insurance products.
The annual number of federal court securities class action lawsuit filings decreased in 2025 for the first time in three years. There were 205 federal court securities class action lawsuit filings in 2025, compared to 222 in 204, representing an annual decrease of about 7%. The 205 federal court securities suits in 2025 also represent the lowest annual number of federal court securities suit filings since 2022, when there were 197. These annual figures reflect only federal court securities suit filings; the numbers do not include state court securities class action lawsuit filings.
While the total number of 2025 filings reflect a number of ongoing securities litigation filing trends, the overall reduced number of annual filings in 2025 compared to 2024 arguably reflects the declining effect of other diminishing long-term trends.
As far as the continuing trends, the 2025 filing figures reflect as many as 14 securities suits involving artificial intelligence-related allegations, representing as much as 7% of all securities suit filings during the year. Similarly, there were eight crytpo-related securities suit filings in 2025, representing about 4% of all federal court securities suit filings during the year.
On the other hand, while there were 16 COVID-related filings during 2024, during 2025 there were by comparison only three COVID-related securities suit filings (and none at all after early July, suggesting that perhaps this long-standing filing trend may finally have run its course). Similarly, during 2024, there were nine SPAC-related securities suit filings, while during 2025, there were only five SPAC-related filings, and no SPAC-related filings at all after April. The reduced numbers of these two categories of filings account for the entire difference between the higher overall number of filings in 2024 and the lower overall number of filings in 2025.
The 2025 federal court securities class action lawsuit filings were first-filed 36 different federal district courts. The federal court with the highest number of first-filed securities suit complaints in 2025 was the Southern District of New York, which had 49 class action lawsuit filings during the year, representing about 24% of all 2025 filings. The district courts with the next highest number of first-filed securities suit complaints were the Northern District of California (23) and the District of New Jersey (14).
The 2025 federal court securities class action lawsuit filings were filed against a wide variety of different kinds of companies. The 205 federal court securities class action lawsuits were filed against companies in 85 different Standard Industrial Classification codes. The SIC Code with the highest number of 2025 filings was SIC Code Category 2834 (Pharmaceutical Preparations), which had 29 federal court securities class action lawsuit filings in 2025, representing about 14% of all 2025 federal court securities suit filings.
The SIC Code Industry Group with the most 2025 federal securities suit filings was the 283 SIC Code Industry Group (Drugs), which had 42 securities suit filings, representing about 21% of all 2025 securities suit filings. In addition to the filings in the 283 Industry Group, there were an additional eight securities suits filed in the 384 SIC Code Industry Group (Surgical and Medical Instruments). Together, lawsuit against companies in these two industry groups totaled 50 federal court securities suit filings in 2025, meaning that about one-quarter of the total number of 2025 securities suits were filed against biotechnology and medical device companies.
Companies in the SIC Industry Group 737 (Computer Programming and Data Processing) collectively had 30 securities suit filings in 2025, meaning that lawsuits filed against companies in the high technology industry represented about 15% of all 2025 federal court securities class action lawsuit filings.
Of the 205 federal court securities class action lawsuit filings in 2025, 33 (16%) were filed against companies either organized under the laws of a country outside the United States or that have their principal place of business outside the U.S. The companies named in these suits represented 12 different countries. The countries with the highest number of 2025 securities suit filings were Canada (8), the United Kingdom (7), China (3), Ireland (3), and Israel (3).
2. AI-Related Developments Transform the Business Environment and Translate into D&O Risk
AI-related news dominates the business pages these days. Many companies increasingly are adapting their business processes to incorporate AI-related operations, and a growing number of companies are adjusting their business strategies to accommodate AI. While these changes present a host of opportunities, they also involve risks. These developments are transforming the business environment. In many cases, they are also translating into D&O claims, presenting an arguably new category of D&O risk exposure, including the possibility of AI-related corporate and securities litigation.
Much of the AI-related corporate and securities litigation to this point has involved so-called “AI-washing” allegations – that is, allegations that the defendant company misrepresented its AI prospects or AI opportunities. An example of this kind of case is the securities class action lawsuit filed in June 2025 against AI-based healthcare company Tempus AI. As discussed here, the plaintiff raised a number of allegations in the lawsuit, including the allegation that the company’s actual AI capabilities were overstated, resulting in an overstatement of the company’ business and revenue prospects.
In another example of an AI-washing related securities suit, as discussed here, in March 2025, a plaintiff shareholder filed a securities class action lawsuit against AppLovin Corporation, a company whose software platform allows advertisers to enhance marketing and monetization of their content. The complaint alleges that the company misled investors by representing that its growth was due to its adaption of AI technology, when, it was alleged, that the company “used manipulative practices that forced unwanted apps on customers via a ‘backdoor installation scheme’ in order to erroneously inflate installation numbers, and in turn, profit numbers.”
More recently, AI-related securities suits involving a different kind of allegation have emerged. These suits do not allege that the defendant companies overstated their AI-related prospects and opportunities but rather allege that the companies understated their AI-related risks.
An example of this type of AI risk-related lawsuit is the case filed in June 2025 against social media platform and forum-style website Reddit, discussed here. The company earns most of its revenue from website-based advertising. The gist of the complaint is that, due to Google’s switch to AI-based search summary responses, user click-throughs to the company’s site were declining, resulting in loss of revenue. The complaint alleges that the company misled investors by downplaying the impact on the company’s site traffic and ad revenue from Google’s adoption of AI search results.
The Reddit case is not the only securities suit filed this year involving allegations that the defendant company understated its AI-related risks. For example, and as discussed here, in late October 2025, a plaintiff shareholder filed a securities class action lawsuit against the integrated circuit (IC) design software company Synopsys alleging that the company omitted to disclose that its increased focus on AI-related customers could cause the economics of its Design IP business to deteriorate because of the increased customization the AI-related customers require. Significantly, it was not Synopsis’s own adoption of AI that created the risks involved here; rather it was its customers’ AI-adoption that created the supposedly undisclosed risks for Synopsys.
Another example of this kind of AI risk-related lawsuit is the shareholder derivative lawsuit filed in December against against executives of the digital ad tracking firm DoubleVerify, alleging that the defendants had failed to disclose that AI-related developments were undercutting the company’s revenues. The DoubleVerify derivative lawsuit complaint is discussed here. Among other things, the plaintiffs alleged that the company’s ad tracking technology could not differentiate between human traffic and bad actors’ AI-generated bot traffic.
What makes these cases interesting is that the AI-related risks to each of the companies in these suits did not necessarily (or just) arise from the defendant companies’ own use or deployment of AI. Instead, the risks alleged arose from AI adoption and implementation by one of its suppliers, in the case of Reddit; from AI adoption by customers, in the case of Synopsys; and from AI adoption by bad actors and competitors, in the case of DoubleVerify.
This element of corporate risk arising from third-party AI adoption is particularly important to note. AI is transforming a wide variety of industries: healthcare and health services; transportation and logistics; asset management; legal services; education, and a host of other industries. These changes not only present opportunities; they also involve risk. And it is not just companies’ own adoption of AI that presents risks. AI adoption by customers, competitors, vendors, suppliers, or even bad actors could reshape many fundamental characteristics of the way business gets done – as the facts of the cases identified above demonstrate.
The rise of AI risk-related corporate and securities lawsuits may have D&O underwriting implications. As underwriters seek to develop tools to help them evaluate companies’ AI-related risks, the underwriters will have to assess companies’ AI-related disclosures, not just with respect to the company’s own AI-related strategies and efforts, but also with respect to the increasing deployment of AI in the general business and operating environment. A component of this underwriting assessment will necessarily have to entail the evaluation of the company’s AI risk environment, including the risks associated with AI deployment by competitors, customers, suppliers, regulators, and bad actors.
There is one other important area of concern with respect to the developing AI-related corporate liability environment and that has to do with regulation. As detailed in a recent guest post on this site, authorities in a variety of jurisdictions around the country and around the world are grappling with the right approach to regulate AI. Several U.S. state legislatures, including those in California, Colorado, Utah and Texas, among others, have already enacted AI-specific laws. On December 11, 2025, the White House issued a new Executive Order (EO) entitled “Ensuring a National Policy Framework for Artificial Intelligence” (here). The new EO seeks to override or preempt state laws on AI in favor of unified federal regulation.
Among other things, the new EO states that it is “the policy of the United States to sustain and enhance the United States’ AI global dominance through a minimally burdensome national policy framework for AI.” The EO proposes a number of steps, including the formation of an AI Litigation Task Force for the purpose of challenging State laws inconsistent with the Executive Order. The Task Force is charged to challenge State laws that “unconstitutionally regulate interstate commerce, are preempted by existing Federal regulations, or are otherwise unlawful in the Attorney General’s judgment.”
The EO seems likely to bring the White House into conflict with state legislatures, including even red state legislatures and politicians. The EO has drawn surprisingly vocal opposition from political voices that ordinarily are reliably in favor of all things MAGA. A court challenge seems likely. The Journal article quotes one commentator as saying that “the EO is going to hit a brick wall in the courts,” saying further that the EO relies on an “overly broad interpretation” of the U.S. Constitution’s Interstate Commerce Claus. (Refer here for an interesting analysis of the likely legal challenges.)
It seems likely that the question of the regulatory approach to AI is an issue that will play out in the months ahead.
One final note relevant to the corporate risks surrounding AI has to do with the level of hype surrounding AI. The sheer size of the collective investments in AI is staggering. Just four companies – Meta, Google, Microsoft, and Nvidia –in 2025 made investment commitments of several hundreds of billions of dollars. Financial valuations also reflect the enthusiasm for all things AI. There are estimates that as much as 15-20% of the S&P 500’s current valuation is attributable to expectations that AI will deliver substantial financial benefits. Some AI-related companies are trading at multiples that are far too reminiscent of Internet bubble in the early years of this century.
There are a number of dangers amidst this frenzy. One is that if investors grow impatient or lose confidence, there could be a sharp decline in market valuations for the tech giants and AI-focused companies. The decline could be significant enough to have a spillover effect on the market as a whole. There is also a danger that the competing companies could be overbuilding AI infrastructure such as data centers and cloud storage facilities and that assets now viewed as indispensable could exceed actual need, potentially requiring massive write-downs. Plaintiffs’ lawyers, armed with 20-20 hindsight, may well pursue legal claims challenging the boards’ capital allocation decisions. One real possibility is that if the AI bubble bursts, a plethora of litigation could follow.
To be sure, AI represents significant opportunities. Many companies may prosper in the AI economy. However, not every company will prosper, and some companies may fail. Many companies will see their operating environment altered beyond recognition. In short, companies face a host of AI risks. Among the risks is AI-related liability exposure. The scope of the AI-related liability exposure will continue to develop in the months ahead.
3. Enforcement Actions and D&O Claims Related to the Trump Administration’s Tariff Policies
One of the cornerstones of the current Trump Administration’s trade and economic agenda is its tariff policies. The current U.S. tariffs have deeply affected global trade, disrupted supply chains, and undercut the operations and financial results of many companies. The tariffs’ disruptive impact has been a significant factor in a number of corporate bankruptcies and potentially could result in further bankruptcies in the weeks and months ahead. In addition, the tariff policies have translated into D&O claims risk as well.
At a minimum, the Trump administration’s shifting tariff policies present compliance challenges. For example, we know from past experience that the U.S. government has actively used a variety of enforcement tools, including, for example, the False Claims Act (FCA), to enforce tariff compliance. Indeed, the current Trump administration has in fact initiated FCA actions to pursue firms the administration believes have sought to evade tariff payments, as discussed, for example, here. The government’s use of the FCA as a tariff enforcement tool carries with it the risk of subsequent civil lawsuits, such as securities suits or derivative actions, which frequently follow in the wake of FCA actions, as discussed here.
In addition to the FCA, the Trump administration has also shown a willingness to use the criminal laws to enforce the tariffs as well. For example, as discussed here, in November, the administration filed a criminal action against an Indonesian jewelry firm and several of its employees, alleging that the defendants engaged in a multi-year scheme to evade payment tariffs due on over $1 billion of jewelry and gold the company imported to the U.S.
We should expect to see further tariff enforcement actions ahead. The administration has made it clear that tariff enforcement will be a priority. For example, in May 2025, when the Criminal Division of the U.S. Department of Justice announced its enforcement priorities, the agency specifically said that among the among the areas it would prioritize are the “trade and customs fraud, including tariff evasion.” Moreover, in August 2025, the DOJ announced the formation with the Department of Homeland Security of a cross-agency task force “to bring robust enforcement against importers and other parties who seek to defraud the United States.”
An additional tariff-related D&O claims risk is the possibility of civil lawsuits, brought by shareholders or other claimants, alleging either that the defendant companies misrepresented their tariff compliance or misrepresented the anticipated impact of the tariffs on company operations and financial results. (This pattern of tariff-related factual allegations has been described by one commentator as “tariff-washing.”) There have in fact already been a number of actions filed in the wake of the current administration’s tariff policies.
For example, in August 2025, a plaintiff shareholder filed a securities class action lawsuit in the Eastern District of Michigan against Dow, Inc. As discussed here, the plaintiff claimed that during the class period, the company had said that “well positioned to weather macroeconomic and tariff-related headwinds while maintaining sufficient levels of financial flexibility to support the Company’s lucrative dividend.” However, in late July, when the company announced disappointing 2Q25 financial results, the company blamed “the lower-for-longer earnings environment that our industry is facing, amplified by recent trade and tariff uncertainties.” The complaint alleges that the company’s statements about its “ability to mitigate macroeconomic and tariff-related headwinds, as well as to maintain the financial flexibility needed to support its lucrative dividend, was overstated.” The company’s executives were also separately sued in a shareholder derivative lawsuit based on the same allegations.
A number of other companies have been hit with tariff-related securities suits. For example, and as discussed here, in November, a plaintiff shareholder filed as securities suit against used car retailer CarMax, alleging that the company misled investors by portraying the quarterly sales surge that preceded the tariffs’ impact as being due to longer-term company advantages rather than tariff-motivated consumer behavior.
The extent of the tariffs’ continued impact in the year ahead will depend in significant part on the outcome of the case currently pending in the United States Supreme Court (Learning Resources, Inc. v. Trump) in which the claimants are alleging that many of the Trump tariffs are unconstitutional. The Court heard oral argument in the case in November and a ruling is expected in early 2026. However, it should be kept in mind that even if the Court strikes down the challenged tariffs, that will not necessarily mean the end of the administration’s tariff policies. For starters, not all of the administration’s tariff impositions have been made in reliance on the statutory authority that is being challenged in the current Supreme Court case. And even if the Supreme Court case goes against the administration, the White House will have still alternative means on which to seek to impose tariffs. Of course, there is also always the possibility that the tariffs will survive the legal challenge, too.
Another factor in thinking about the tariffs’ potential impact in the coming year is whether tariffs’ disruptive effects — which have so far been somewhat muted compared to economists’ expectations when the tariffs were first imposed — will loom larger in the year ahead. As discussed at length here, observers now think that product stockpiling in advance of the tariffs’ imposition, and the overall economic impact of massive investments in AI, have so far eased the tariffs’ impact on the economy. However, the pre-tariff stockpiles have now largely been worked off and the economic boost from AI spending may diminish as investors demand more significant financial return from the AI investments. These concerns lead some observers to think that the tariff impact, muted so far, may be amplified in the months ahead.
Moreover, and even if the impact from the tariffs has so far been less than originally feared, it is not as if the tariffs have had no impact. Just to cite at least one indicator, a number of U.S. companies that declared bankruptcy this year cited the impact of the tariffs as one factor for their insolvency:
- When home retailer At Home Group filed for Chapter 11 bankruptcy in June 2025, the company cited the impact of the tariffs as a contributing cause to its filing.
- Also in June 2025, auto part supplier Marelli Holdings filed for Chapter 11 bankruptcy, stating that the U.S. tariffs worsened an already strained financial situation.
- In July 2025, when stationery and toy supplier IG Design Group Americas filed for bankruptcy protection, the company attributed its financial distress to tariff-related costs.
- In December 2025, when construction supply company Builders’ Supply filed for bankruptcy, among the reasons were the increased costs associated with the tariffs, as discussed here (here).
According to news reports (here), through the end of November, there were 14% more company bankruptcies in 2025 compared to the comparable period in 2024, to the highest levels since 2010, due at least in part to the tariffs. Were the postponed full impact of the tariffs to weigh on businesses in 2026, it could result in further bankruptcies, particularly among companies already experiencing financial strains and laboring under debt.
There are D&O insurance underwriting implications to all of this. Along those lines, it is worth thinking about which industries are likely to be impacted the most if there were to be a tariff-fueled economic downturn in 2026.
Certain industries seem particularly vulnerable; for example, small retailers (especially in apparel, shoes, and furniture, and other businesses thar rely heavily on imports); manufacturing businesses that rely heavily on imported raw materials, and other businesses that are susceptible to supply chain disruption; automotive and auto parts suppliers (who are dependent on imports from Mexico and Canada); and agricultural businesses, which are vulnerable both to increased costs for fertilizer and other supplies and to a downturn in exports as tariffed countries turn away from U.S. goods.
The impact of the tariffs in the months ahead of course remains to be seen. The outcome of the pending Supreme Court case is of course a key element here, as is the response of the Trump administration to the Court’s eventual decision.
4. Changes at the SEC Mean a Changed Corporate Regulatory and Enforcement Environment
One of the important ways a U.S. President can drive public policy is through the office’s Constitutional appointment powers. President Trump’s appointments have already had a significant impact on Trade, Defense, Immigration, Foreign Affairs, Energy, and Public Health. Another area where the President’s appointments have had a significant impact, and seem likely to have an even more significant impact going forward, is with respect to Securities Regulation. Under its Trump-appointed Chair, Paul Atkins, the SEC has gone in a number of different directions compared to the prior administration, in ways that potentially have significant implications for D&O risk exposure.
One of the most significant early changes at the agency under the current administration has to do with staffing. According to various sources, the agency’s staff and contractors – as the result of buyouts, reduction-in-force initiatives, and a hiring freeze – has shrunk by as much as 15% this year alone. Among the departures were many senior staff. The Enforcement Division apparently has been particularly hard hit. The upshot is that there are staffing shortages at the agency, resulting in bottlenecks and backlogs, including with respect to many key agency functions, including Enforcement and Corporate Finance.
The agency’s reduced staffing, and in particular the reduced Enforcement Division staffing, may explain at least in part the agency’s reduced regulatory enforcement activity. As discussed here, in the 2025 Fiscal Year, ended September 30, 2025, the number of standalone enforcement actions declined about 27% compared to the prior fiscal year. The SEC’s enforcement activity in FY25 was at its lowest level in ten years.
The SEC’s record with respect to public company enforcement activity is even more notable. According to a recent report from Cornerstone Research (discussed here), public company enforcement activity declined about 30% in FY 2025.
The reduced public company enforcement figures are even more striking when the fiscal year statistics are divided between the final months of the Biden administration and the first months of the Trump administration – that is, while the SEC filed 52 enforcement actions against public companies and their subsidiaries in the final months of the Biden administration, the SEC filed only four new actions against public companies and their subsidiaries in the first months of the current Trump administration. The four actions initiated under the new administration represent the lowest level under an incoming administration since at least fiscal year 2013.
There may be a number of reasons for these reduced enforcement figures, beyond just the reduced agency headcount. Among other things, the new head of the Enforcement Division, Margaret “Meg” Ryan (a former judge of the U.S. Court of Appeals for the Armed Forces), only took office on September 2, 2025, toward the very end of the fiscal year.
Moreover, based on public statements of Chair Atkins, and others, it would be a mistake to assume that under Atkins the SEC is going to be some sort of a tame watchdog or otherwise passive. Atkins has made it clear that he intends to refocus the agency on enforcement in traditional areas like insider trading, accounting fraud, and disclosure violations. The agency under Atkins has already launched a number of enforcement initiatives, including, for example, the September 2025 formation of a cross-border enforcement task force, focused on identifying and combating cross-border fraud harming U.S. investors.
In any event, one area has Atkins has signaled it intends to take a different approach is with respect to what he calls “regulation by enforcement,” which he says characterized agency activity under his predecessor, Gary Gensler. The characterization suggests the agency under the prior administration allegedly set regulatory standards through enforcement actions. There are at least three specific issues with respect to which the agency has shown it will take a different enforcement approach.
First, a particularly issue with respect to which the agency’s differing approach under Atkins is already apparent is with respect to cryptocurrency. The agency’s approach to cryptocurrency in many ways reflects (or is at least consistent with) President Trump’s line; among other things, the President has said that he wants the Unites States to become “the crypto capital of the world.” In a few short months the agency has dismissed or withdrawn a significant number of cryptocurrency-related enforcement actions that were initiated under the prior administration; as detailed in a lengthy December 14, 2025 New York Times article (here), many of the crypto companies benefiting from these agency actions allegedly have ties or connections to the President.
Second, the agency has signaled a change in approach to climate change disclosure. The agency under Gary Gensler had in March 2023 adopted comprehensive climate change disclosure guidelines. The guidelines were controversial and were challenged in court. However, in March 2025, the Commission voted to end the agency’s defense of the disclosure guidelines pending in the Eight Circuit. The court action remains in abeyance, perhaps indefinitely. The rules themselves (which never actually took effect) apparently are effectively terminated although not formally rescinded. The Commission’s move to withdraw the defense of the rules clearly demonstrates a shift of regulatory priorities, particularly a shift away from addressing policy issues through disclosure rulemaking.
The third issue with respect to which the agency has already shown a change in direction is with respect to cybersecurity disclosure. Under the Biden administration, the agency had taken an active approach, as evidenced most significantly with respect to the enforcement action the agency filed against SolarWinds. This enforcement was particularly noteworthy (and controversial) because the defendants named in the action included the company’s Chief Information Security Officer (CISO). However, on November 20, 2025, the agency announced that it was dismissing the action with prejudice. At a minimum, the agency’s action suggests a narrower enforcement focus with respect to cybersecurity disclosures and a stepping back from the prior administration’s more aggressive approach.
There are a host of other policy initiatives at the SEC under Atkins that could significantly affect the corporate risk environment in the months ahead. Among other things, Atkins has proposed changing the currently quarterly calendar for corporate reporting to a semi-annual calendar (discussed here); he has proposed (and the agency has approved) changing the agency’s rules for IPO companies in a way that would allow IPO companies to adopt mandatory arbitration for shareholder claims (here); he has proposed changing the procedures and requirements with respect to Wells notices (here); and he has proposed changing the rules for requiring companies to include shareholders’ proposals in proxy materials (here).
In addition, and as discussed here, in a December speech at the NYSE Atkins suggested his intend to “revitalize America’s markets” through a program of disclosure reform involving three steps or measures: the SEC must root its disclosure requirements in the concept of financial materiality; the SEC must scale its disclosure requirements with respect to a company’s size and maturity; and “reform the litigation landscape for securities lawsuits to eliminate frivolous complaints.”
These and other pending proposals suggest at a minimum that public company reporting requirements could be up for substantial revision in the months ahead. Atkins’s remarks and some of his other proposals suggest that securities litigation reform could be on the agenda in the months ahead as well.
In assessing the significance of these developments, it should be noted that the changes in direction are not limited to just the SEC. Other agencies have demonstrated a significant shift in priorities, as well. For example, and as reflected in a December 31, 2025, Wall Street Journal article (here), the first few months of the current Trump administration have seen the world of white-collar enforcement “turned upside down.” The Department of Justice has shifted away from complex investigations of, for example, foreign bribery, money laundering, and public corruption, toward such areas as immigration enforcement and violent crimes. Moreover, President Trump’s aggressive use of his pardon powers has resulted in grants of clemency to a host of corporate executives convicted or accused of white-collar crimes under the Biden administration.
The upshot is that the environment for securities enforcement and for white-collar criminal prosecutions is now substantially different than under the prior administration. How all this will play out in the months ahead remains to be seen, with significant implications for corporate risk exposure.
5. Cybersecurity Remains a Critical D&O Liability Issue
Cybersecurity has been a perennial D&O liability issue and during 2025 plaintiffs’ lawyers continued to file D&O claims involving cybersecurity-related allegations. In December, plaintiff shareholders filed two separate cybersecurity-related securities class action lawsuits. The two lawsuits, described below, are further detailed here.
The first of the two lawsuits, against South Korean e-commerce firm Coupang, involves a cyber incident that has been called “the largest data breach in South Korean history.” As many as 33 million individual records were accessed. It is believed that a former employee used his unexpired credentials to access sensitive customer information for nearly six months without being detected. The complaint alleges that the company failed to disclose that it had inadequate cyber security protocols.
The second lawsuit, filed against cloud applications security and traffic solutions provider F5, involves the company’s October 2025 disclosure that a nation-state threat actor had initiated long-term access to company systems, including the company’s product development environment and engineering knowledge management platforms. The complaint alleges that the defendants made misleading statements about the true state of the company’s security capabilities and had about its ability to safely secure data for its clients.
These two recently filed cybersecurity-related securities class actions are a reminder of the ways that cybersecurity concerns can translate into securities litigation and underscore the fact that the threat of this kind of litigation remains.
In addition to these private civil lawsuits, during 2025 there were several important cybersecurity-security-related regulatory developments as well.
First, in January 2025, in what was one of the final acts of the SEC under Gary Gensler’s leadership, the SEC filed a settled cybersecurity-related enforcement action against Ashford, an asset manager, as discussed in detail here. The firm acted as an alternative asset manager for two hotel REITS. In September 2023, at a time when it was a publicly traded company, the firm first learned that it had experienced a cybersecurity attack and ransomware incident initiated by a foreign threat actor. The intrusion resulted in the exposure of significant amounts of data including hotel guest information. The SEC alleged that Ashford “knew or should have known that its disclosures concerning the September 2023 Cyber Incident” were “false and misleading.”
At the time it was announced, the Ashford settlement was viewed as representative of the SEC’s cybersecurity approach under Gensler, amid speculation about what approach the SEC under the incoming Trump administration might take. There was at the outset of the administration conjecture that the SEC might take a more lenient approach. As things have played out, the messages have been somewhat mixed.
The SEC’s first cyber-related move under the Trump administration appeared to somewhat contradict the early expectations that the agency might take a more lenient approach to cybersecurity issues. That is, in February 2025, the agency announced the formation of a “Cyber and Emerging Technology Unit,” focused, among other things, on “combatting cyber-related misconduct,” which certainly suggested that the agency is still going to be focused on cybersecurity concerns.
In addition, other federal agencies have been pursuing their own cybersecurity-related enforcement actions. For example, and as discussed here, in July 2025, the U.S. Department of Justice announced that it had reached a settlement with the life-sciences company Illumina, in which the company agreed to pay $9.8 million to resolve allegations that it violated the False Claims Act when it sold genomic sequencing systems with cybersecurity vulnerabilities to federal agencies.
An August 7, 2025, memo from the Skadden law firm said that the Illumina settlement underscores the fact that “cybersecurity remains a significant enforcement priority for the DOJ.” The law firm memo details that the action against Illumina is actually one of a series of civil FCA cases the agency has pursued based on alleged cybersecurity deficiencies.
A development later in the year does at least suggest the possibility that the SEC under the Trump administration may be yet inclined to take a different, less-aggressive approach to cyber-related D&O issues as the agency did under the prior administration. As noted above, in November 2025, the SEC dismissed the remaining allegations against SolarWinds and its Chief Information Security Officer, in the enforcement action the agency had filed in October 2023.
There was some speculation that the agency’s move to dismiss the remaining claims was a matter of simple pragmatism; the presiding court previously had dismissed much of the SEC’s case, and the agency may well have concluded that it faced an uphill battle pursuing the remaining claims.
However, the fact is that the enforcement action, which was very high profile, had been initiated under the prior administration. The agency’s move, under the new administration, to dismiss the case was viewed by some as “part of the broader recalibration of enforcement priorities in the new administration,” and perhaps reflective of a less aggressive cybersecurity-related disclosure enforcement.
One important remaining unknown with respect to the SEC and cybersecurity under the Trump administration is the agency’s current leadership will withdraw or non-enforce the Cybersecurity Disclosure guidelines that were adopted during the Biden administration. Certain aspects of the guidelines have been widely criticized (particularly their time requirements) and at the time the guidelines were adopted the two incumbent Republican SEC commissioners voted against adopting the guidelines.
There have been calls since the advent of the current Trump administration for the agency to withdraw the guidelines. In March 2025, then acting SEC Chair (and current SEC Commissioner) Mark Uyeda had called publicly for the withdrawal of the cybersecurity disclosure guidelines. In June 2025, a coalition of banking industry groups also called on the SEC to rescind the guidelines.
To date the agency has taken no action on these requests, nor has the agency or any of its commissioners made any statements on the question (other than as noted in the preceding paragraph with respect to Mark Uyeda). However, it may be significant to note that the agency did recently scrap proposed additional cybersecurity disclosure guidelines that would have applied to investment advisory and to companies participating in the financial markets. Nevertheless, for now, at least, the Biden-era cybersecurity disclosure guidelines remain in place.
One of my own personal concerns about the cybersecurity guidelines has been the worry that opportunistic plaintiffs’ lawyers might attempt to seize upon breached companies’ alleged non-compliance the disclosure guidelines to try to boost alleged cybersecurity-related securities claims. In that regard, it is worth noting that the complaint in the Coupang action discussed above specifically alleged, in support of the plaintiffs’ securities law claims, that the defendant company had failed to comply with the SEC’s cybersecurity disclosure guidelines. From my perspective, this kind of thing represents one more reason to be concerned about the guidelines.
In any event, cybersecurity remains a serious liability concern and an important potential source of D&O liability claims. The two recently filed cybersecurity-related securities class actions are a reminder of the ways that cybersecurity concerns can translate into securities litigation and underscore the fact that the threat of this kind of litigation remains.
6. Trump Administration Targets ESG
Just a short while ago, companies faced pressure from a number of different constituencies – institutional investors, activist shareholders, government regulators – to establish and substantiate their sustainability credentials. Indeed, the pressure was sufficiently great that some companies were even alleged to have engaged in “greenwashing” – that is, to have overstated their sustainability commitments and accomplishments.
The atmosphere for ESG is much different today. Even before the advent of the current Trump administration, an ESG backlash had developed. The current administration is now actively working against many ESG objectives. One issue that falls under the “S” pillar of ESG is Diversity, Equity, and Inclusion (DEI), an area in which the Trump administration has been so active that I have set it apart as a separate topic, discussed in a separate section, below.
From its very outset, the current Trump administration has made it unmistakably clear that it will take a very different approach to ESG and Climate Change than the prior administration. For example, on the day of his second inauguration, President Trump signed an Executive Order entitled “Unleashing American Energy.” In February, the White House established an “National Energy Dominance Council,” to promote the growth of domestic energy sources, especially fossil fuels. In April, the White House issued an Executive Order entitled “Reinvigorating America’s Beautiful Clean Coal Industry,” which tells you everything you need to know about the Trump administration’s approach to ESG.
The current administration also made it clear from the very outset that it was going to be pulling back from many of the ESG-related initiatives of the Biden administration. For example, and as noted previously above, in March, the SEC disclosed that it was withdrawing its defense of the Climate Change Disclosure guidelines, which were adopted under the prior administration and face a court challenge in the Eighth Circuit.
The SEC’s withdrawal of its defense of the climate change disclosure guidelines, while the guidelines themselves remain on the books, at a minimum creates uncertainty. It also arguably suggests that other governmental authorities’ climate change-related disclosure initiatives — such as those of the EU and of the various U.S. states, especially those of California — could increase in importance, as the U.S. federal government changes its policy direction and apparently withdraws from the arena on this topic.
However, while the EU’s initiatives seemingly took on much greater significance in light of the SEC’s action with respect to its climate change disclosure guidelines, the fact is that the EU has itself recently also indicated its intent to step back some of its disclosure requirements. As discussed in detail here, in March, the European Commission proposed an “Omnibus package” of proposed revisions to streamline a number of EU laws, including the EU’s Corporate Sustainability Reporting Directive (CSRD). The CSRD would have required many companies, including many U.S. companies, to make periodic disclosures concerning climate change-related issues. The Omnibus package, if approved, will adjust and streamline the scope, timeline, and requirements of the CSRD. Many fewer companies will now be required to comply with the disclosure requirements.
With these pullbacks by the SEC and the EU from prior climate change-related disclosure requirements, the California climate change disclosure requirements potentially are now significantly more important. As discussed here, in September 2023, the California legislature enacted far-reaching climate change disclosure laws. The California requirements are set out in two pieces of legislation, SB 253 (Greenhouse Gas Emissions Disclosure), which has an initial reporting guideline of August 10, 2026; and SB 261 (Climate-Related Financial Risk Disclosure), with initial disclosures required as early as January 1, 2026. According to an April 12, 2025 post on the Harvard Law School Forum on Corporate Governance by The Conference Board (here), the California requirements “are poised to become the de facto standards for corporate climate disclosure in the U.S.”
The picture with respect to the California requirements recently became a bit murkier. In November 2025, the Ninth Circuit issued an emergency injunction staying the effectiveness of SB 261 while the appeal of the judicial challenge to the laws proceeds. The appellate court declined to enjoin SB 253 (possibly because the first reports under the statute are not due until August 2026). The injunction against SB 261 will only remain in place until the Ninth Circuit rules on the case. The appellate court is scheduled to hear oral argument in the case on January 9, 2026.
It is worth noting that California is not the only state to have enacted ESG-related legislation. The Harvard Law School Forum blog post to which I linked above notes that a number of other states have enacted “pro-ESG measures,” including Colorado, Florida, Illinois, Maine, Maryland, New Hampshire, Oregon, and Utah.
While these states may have taken their own initiative with respect to climate change disclosure issues, a federalism fight may loom ahead. Just as the White House launched a challenge to state-level AI-related legislative initiatives (as discussed above), it has also taken action against state-level climate change disclosure initiatives.
On April 8, 2025, the White House issued an Executive Order entitled “Protecting American Energy from State Overreach” targeting these various climate change-related state initiatives. The Executive Order states, with reference to the state law initiatives, that “These laws and policies weaken our national security and devastate Americans by driving up energy costs” and “undermine Federalism by projecting the regulatory preference of a few States onto all States.” The Executive Order directs the Attorney General to identify all state and local laws on the topic and “expeditiously take all appropriate action to stop the enforcement of State laws” that the AG determines to be “illegal.”
The Executive Order sets in motion a likely chain of events, one result of which could be a federalism showdown between the White House and the state government of California.
It should be noted that the Executive Order on state-level climate change disclosure initiatives is only one of several anti-ESG moves under the current Trump administration. For example, in December 2025, the White House issued an Executive Order directing the SEC and other federal agencies to take various actions “to end the outsized influence of proxy advisors that prioritize radical political agendas over investor returns.” The reference to radical political agendas relates specifically to ESG and DEI.
One might well conclude that the values embodied in the very notion of ESG are in full retreat. Companies could certainly be forgiven if they were to conclude that they can just forget about ESG and move on to other things – and, indeed, that the company’s interests might even be best served by the company taking as low a profile as possible on anything having to do with ESG.
However, the reality is that the actions companies take or fail to take today will be subject to later scrutiny and potentially could be the basis of future lawsuits. Future claimants could well judge corporate boards on the extent to which companies addressed the challenges that climate change now presents. Boards could be judged on the extent to which they prepared their companies by building in operational resiliency, built durable supply chains, and tried to anticipate the ways that the changing climate could impact their companies’ operations and finances.
In other words, the Trump administration’s approach to ESG may have altered the political dynamic, for now. However, the long-term issues, which will affect companies far beyond the duration of the current administration, have not changed. Companies and their boards will still have to address climate change, and they will be judged according to how they respond to the climate change challenge, regardless of what the current White House is now saying and doing.
7. Trump Administration Targets “Illegal DEI”
In the wake of the civil unrest following the May 2020 murder of George Floyd, many U.S. organizations adopted policies seeking to advance Diversity, Equity, and Inclusion (DEI). However, even before the beginning of the current Trump administration, a movement against DEI practices and policies was well underway. In addition, the current Trump administration has from the outset made it clear that it will target “illegal DEI.” As discussed below, the Trump administration’s anti-DEI initiatives could present significant potential exposure for companies that have or had policies that are viewed as counter to the administration’s position on DEI.
Shortly after President Trump’s January inauguration, the White House issued two executive orders staking out a strong policy position against “illegal DEI.” On January 20, 2025 – that is, on the same day as President Trump’s inauguration — the White House issued Executive Order 14151, “Ending Radical and Wasteful Government DEI Programs and Preferences.” The next day, the White House issued Executive Order 14173, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity.” Collectively, these orders emphasize a shift towards “merit-based hiring practices” and eliminating DEI-related factors in federal hiring, promotions, and contracting.
In early February, shortly after being sworn in, Attorney General Pam Bondi issued a memorandum entitled “Ending Illegal DEI and DEIA Discrimination and Preferences.” Among other things, the memorandum declared that the Department of Justice’s Civil Rights Division will “investigate, eliminate, and penalize illegal DEI and DEIA preferences, mandates, policies, programs, and activities in the private sector and in educational institutions that receive federal funds.”
On March 19, 2025, the U.S. Department of Justice (DOJ) and the Equal Employment Opportunity Commission (EEOC) issued a joint statement and released two technical assistance documents focused on educating the public about unlawful discrimination related to diversity, equity, and inclusion (DEI) in the workplace.
The agencies’ joint March 19, 2025, press release can be found here. The EEOC’s accompanying document “What to Do If You Experience Discrimination Related to DEI at Work” can be found here, and the accompanying document entitled “What you Should Know About DEI-Related Discrimination at Work” can be found here.
The most practical concern about the agency’s guidelines is they seem calculated to encourage employees and advocacy groups to legally challenge corporate DEI programs. The documents, which speak directly to employees about their putative rights with respect to employer DEI programs, also seem intended to encourage employees to consider taking action against their employers with respect to corporate DEI initiatives.
In addition, on June 11, 2025, Brett Shumate, the then-newly confirmed head of the DOJ’s Civil Division, issued a memo identifying the Civil Division’s top enforcement priorities. with DEI at the very top of the list. The memo states that the Civil Division plans to use “all available resources” to combat illegal DEI practices, specifically bringing suits under the False Claims Act, and “aggressively investigating” recipients of federal funds.
Consistent with the Civil Division memo, the Trump administration is taking steps to pursue the possibility of False Claims Act actions as part of its anti-DEI push. A December 28, 2025, Wall Street Journal article (here) reports that the Department of Justice is currently investigating companies’ DEI activities for possible False Claims Act violations. The Department of Justice’s theory, according to the article, seems to be that “holding a federal contract while still considering diversity when hiring is, in effect, fraud against the government” that entitles the government to recoup payments made. The article specifically mentions Alphabet and Verizon as among the companies under investigation for possible claims under this False Claims Act theory. Other industries the article mentions as under this kind of investigation are automotive, pharmaceutical, defense, and utilities. As several commentators note in the article, this attempt to use the False Claims Act would be both novel and arguably unprecedented.
To my knowledge, the Trump administration has not yet filed any actual lawsuits as part of its anti-DEI campaign. Instead, his administration has primarily used executive orders and federal agencies to investigate and compel compliance with new anti-DEI directives.
As discussed here, in March 2025, the EEOC acting chair sent letters to 20 large U.S. law firms seeking information about the firms’ DEI programs while noting concerns that the programs may violate civil rights laws. Some of the firms involved later entered into settlement agreements with the EEOC, by “disavowing DEI” and agreeing to institute and implement “merits-based hiring programs,” among other things.
In addition, in March, the Trump administration also sent letters to over 60 colleges and universities raises questions concerning the institutions’ DEI policies (as well as other issues), and threatening to cut or limit federal funding based on the schools’ polices on DEI and other issues, as discussed here. The Trump administration has actually cut funding at several schools, including Columbia and Harvard. Other schools, such as Brown University, have entered into settlement agreement with the administration in order to restore funding, based on the school’s agreement to change hiring and admissions policies.
While the Trump administration itself has not yet proven to be an active anti-DEI litigant, individual claimants and conservative activist groups have in recent months filed numerous complaints challenging the legality of the defendant companies’ DEI programs. According to a recent report, discussed here, there are at least 75 pending cases involving plaintiffs who allege workplace discrimination as a result of some aspect of DEI. Many of these cases are being led by activist groups. In addition, in February, the Missouri Attorney General sued Starbucks alleging that the company’s DEI program violated state and federal civil rights laws.
Companies’ potential DEI-related liability exposure may not be limited just to employee complaints or regulatory investigations and enforcement action. The DEI-related exposure may also include the possibility of corporate and securities litigation as well. Indeed, even before the recent change in the DEI landscape, plaintiff firms and political groups had begun filing claims against companies, officers, and directors concerning their DEI-related disclosures.
Perhaps most prominently among these prior lawsuits was the securities class action lawsuit filed in August 2023 by a conservative legal activist group against Target and certain of its executives. Among other things, the plaintiff alleged that Target misleadingly downplayed or failed to warn shareholders about the known risks of customer backlash in response to the company’s Pride Month campaign in June 2023. Significantly, and as discussed in detail here, in December 2024, the court entered an order denying the defendants’ motion to dismiss, finding, among other things, that the company’s risk disclosures “could be materially misleading.”
As discussed in an April 28, 2025, memo from the Winston & Strawn law firm entitled “Securities Litigation Risk in the Evolving DEI Landscape” (here), with respect to the dismissal motion denial in the Target case, “as companies face scrutiny of allegedly ‘illegal’ DEI practices, courts may view the shareholders’ theories advanced in Target to be increasingly plausible.”
In short, the current Trump administration’s policy targeting “illegal DEI” presents companies with a host of potential liability exposures, including the possibility of employment practices claims, regulatory enforcement actions, and DEI-related corporate and securities litigation.
8. SEC Changes its Policy on IPO Companies’ Mandatory Arbitration Bylaws
As noted above, one of the specific areas for action that SEC Chair Paul Atkins identified in a recent speech on the topic of “Revitalizing America’s Markets” was to “reform the litigation landscape for securities lawsuits to eliminate frivolous complaints.” Atkins did not identify in his speech specific ways he intends for the agency to reform the litigation landscape.
However, as also noted above, one initiative the agency recently approved was to change its stance on how the agency will process IPO applications for prospective IPO companies that have adopted mandatory arbitration by laws. IPO companies with this type of bylaw could require shareholder disputes to be arbitrated. Because this particular agency move has generated a great deal of interest and commentary, the agency’s changed policy with respect to IPO companies’ mandatory arbitration bylaws is discussed separately here.
The idea that companies might be able to avoid securities class action litigation by the adoption of a bylaw requiring investor disputes to be arbitrated has been around for years. However, in the past, the SEC has thrown cold water on companies’ attempts to go public with this type of bylaw in place. A detailed account of the history of the agency’s posture on this issue can be found here.
In a policy statement the agency approved on September 17, 2025, the agency changed what it would do if presented with a registration statement for a company with a mandatory arbitration bylaw provision. Under the new policy, the agency’s decisions about whether to accelerate the effectiveness of a registration statement will not be affected by the presence of a provision requirement investor claims under the federal securities laws to be arbitrated.
For many IPO companies, accelerating the effective date of the registration statement is an important part of the IPO process. It allows the company to try to ensure that the registration statement will be effective on a specific date and time. This is often done to align with market conditions or a planned offering schedule. The SEC’s new policy ensures that the prospective IPO company’s inclusion in the registration statement of corporate bylaws including a mandatory arbitration provision will not affect the agency’s decision whether or not to accelerate the registration process.
The SEC’s new policy expressly is not an endorsement of investor arbitration requirements. The policy statement specifically says that “nothing in this statement should be understood to express any views on the specific terms of an arbitration provision, or whether arbitration provisions are appropriate or optimal for investors.”
That said, there is no doubt that the Commissioners who voted in favor of the policy statement viewed what they were doing as supportive of arbitration bylaws and as favorable for IPO companies. Indeed, press reports about the agency’s new policy quote SEC Chair Paul Atkins as saying the agency’s prior policy “effectively strangled” IPO companies and that the agency’s new policy would “make IPOs great again.”
There is also no doubt that the agency’s action at least potentially opens the door for the possibility of prospective IPO companies adopting mandatory arbitration provisions. Many of the press reports about the SEC’s new policy have contained statements from observers saying that the agency’s approval of the new policy will “open the floodgates” to company’s adoption of mandatory arbitration provisions. However, before that happens, there are a number of things that are going to have to get sorted out.
For starters, the SEC may have changed what it will do if a prospective IPO company has a mandatory arbitration bylaw, but whether or not the company actually can adopt the bylaw in the first place is a matter of law of the state in which it is incorporated. It is highly relevant that many prospective IPO companies are Delaware companies. Under Delaware law, mandatory arbitration bylaws are effectively prohibited, as discussed here. To be sure, there is (as discussed in the next section) an ongoing debate right now about whether or not companies should incorporate elsewhere, but for remaining Delaware companies, a mandatory arbitration bylaw may not be an option.
As for the “floodgate” possibilities, it is important to note that the agency’s new policy affects only prospective IPO companies. The policy says nothing about companies that are already public. For example, nothing about the new policy says what the agency would do if there were to be a shareholder proposal now for an existing public company to amend its company’s bylaws to provide for mandatory arbitration of federal securities claims – about which please see below.
In addition, everyone involved in these kinds of arbitration bylaw initiatives should understand that the enforceability of the bylaws will be challenged. For a very long time, the SEC itself viewed bylaws of this type as inconsistent with the anti-waiver provisions in the federal securities laws. It may be that a court or courts will also conclude that the mandatory arbitration bylaws violate the anti-waiver provisions.
There is one other practical consideration here. Not every company is going to conclude that mandatory arbitration is the best approach. For all their flaws, class actions are efficient. Moreover, judicial proceedings, unlike arbitration proceedings, are subject to appeal. The automatic stay of discovery while motions to dismiss are pending is also a considerable advantage. Class-wide settlements provide a class-wide release, even as to litigants not active in the proceeding (at least if they do not opt out).
To be sure, the advocates of mandatory arbitration provisions argue that the arbitration process could be appealing to at least some companies, owing to the non-public forum and the suggestion that arbitration is less costly. As to the cost, however, it is worth considering whether mass arbitration of shareholder claims actually would be less costly than class action litigation in a single, consolidated proceeding.
It remains to be seen how many prospective IPO companies will seek to take advantage of the apparent opening on mandatory arbitration bylaws. The financial markets may be a constraint for some companies; the prospective public company may want to avoid making a move that investors may disfavor. Indeed, CalPERS (California Public Employees’ Retirement System), the largest public pension fund in the U.S. has publicly come out against the SEC’s new policy on mandatory arbitration provisions. provisions. Similarly, the Council of Institutional Investors (“CII”) maintains that mandatory arbitration clauses “undermine shareholder rights by restricting access to judicial forums.” BlackRock, Franklin Templeton, and numerous state pension funds have strongly opposed the SEC’s policy change supporting mandatory arbitration clauses.
To my knowledge, only one company so far has moved to try to take advantage of the agency’s revised position. On December 1, 2025, Zion Oil & Gas became the first company to adopt a mandatory arbitration provision following the SEC’s policy shift. The amendment to the company’s bylaws—enacted solely by board approval under Texas law—did not require a shareholder vote. Zion is an interesting company: it is, according to a recent news report, a Dallas-based firm that “uses Bible verses to search for oil deposits in Israel.” It is also already a public company, not a prospective IPO company, which poses some interesting questions.
The topic of mandatory arbitration has generated a great deal of interest and commentary. Indeed, some have even raised the question whether mandatory arbitration provision could mean the end of securities class action litigation (even if the factors noted above may suggest that this kind of speculation may be considerably overblown). One factor that could make this topic particularly worth watching in 2026 is the fact that the IPO market in the U.S. seems poised for growth. Indeed, in a December 18, 2025, article (here), the Wall Street Journal asked whether 2026 “could be the biggest year ever for IPOs in the U.S.” It will be interesting to see how many (if any?) of the current plentiful crop of prospective IPO companies will seek to take advantage of the SEC’s new policy position in the months ahead.
9. DExit Questions Roil Corporate America
Since the early 20th century, Delaware has been the premier U.S. state for the organization of business entities. More than 2 million businesses are organized under the laws of Delaware, including more than two-thirds of the Fortune 500 companies. Delaware’s preferred position is due to a variety of factors, including the State’s flexible legal framework, its corporate-friendly tax structure, and the Delaware Court of Chancery’s expertise in adjudicating corporate disputes.
In recent months, however, a growing chorus of voices has argued that Delaware is no longer the most advantageous state for companies. A number of commentators have urged companies to leave Delaware (a process that has been dubbed as a “DExit”) and reincorporate in Texas, Nevada, or other states that promise a more deferential approach — less oversight, more flexibility.
Conservative commentators sparked the dialog; for example, in November 2023, Republican former Attorney General William Barr and another Republican former official published an op-ed piece in the Wall Street Journal (here), arguing that Delaware’s courts are driving corporations away and suggesting that companies increasingly will find it more attractive to be incorporated in Nevada or another state. The DExit movement received a very public boost after Elon Musk famously said, in the wake of the Delaware Chancery Court’s decision voiding his $55.8 billion pay package, that he will seek to reincorporate Tesla in Texas. (On December 19, 2025, the Delaware Supreme Court reversed the lower court’s decision cancelling Musk’s pay package).
The DExit debate arguably hit a couple of key inflection points in 2025. First, in June 2025, the largest U.S. venture capital company, Andreesen Horowitz, very publicly announced that it is leaving Delaware for Nevada, and, perhaps even more significantly, encouraging its portfolio companies to incorporate in Nevada as well. In a July 9, 2025, three principals of the firm posted an open letter on the firm’s website, entitled “We’re Leaving Delaware, And We Think You Should Consider Leaving, Too” (here), announcing the firm’s intent to reincorporate in Nevada. The authors noted that while incorporation in Delaware was once “a no-brainer,” recent Delaware Court of Chancery decisions “have injected an unprecedented level of subjectivity and judicial uncertainty into what was once consider the gold standard of U.S. corporate law,” while at the same time Nevada has “taken significant steps in establishing a non-technical, non-ideological forum for resolving business disputes.”
Then in November 2025, the cyptocurrency exchange Coinbase also announced that it was leaving Delaware and reincorporating in Texas. In a November 12, 2025 Wall Street Journal op-ed piece (here), Coinbase’s Chief Legal Counsel explained the company’s move, asserting that Delaware’s courts have become less predictable, while “Texas offers efficiency and predictability, in part thanks to recent corporate-law reforms that enhance governance flexibility and legal predictability.”
The Delaware legislature has of course noted both the dialog and the departures, and in March 2025, enacted S.B. 21 to try to address a number of the concerns that have been expressed. Among other things, the legislation enacted safe harbor provisions for conflicted controller transactions and changed the rights of shareholders for books and records inspections. The constitutionality of S.B. 21 has been challenged in court, and the court challenge has made its way to the Delaware Supreme Court. The Delaware Supreme Court heard oral arguments in the case on November 5, 2025, on the issue of whether the whether the bill’s “safe harbors” for corporate deals overstep legislative power and infringe on the Court of Chancery’s equity jurisdiction. A decision is expected in early 2026.
Meanwhile, Texas and Nevada have not been idle. As discussed here, Texas, for example, has “enacted a series of sweeping amendments … to try make Texas a more attractive destination for businesses.” Among other things, Texas has established a specialized business court; has codified and expanded the business judgment rule; narrowed books and records inspection rights; established limits on who may bring derivative suits (allowing companies to establish limits on derivative suit rights to shareholders with 3% of ownership); setting limits on the fees that plaintiffs’ attorneys may recover in derivative suits; allowing companies to waive jury trials in their corporate documents; and a host of other reforms giving companies greater flexibility and subjecting companies to fewer restrictions.
Nevada has also tried to make itself more attractive as a place for states to incorporate. The state has certain baseline advantages – for example, it has no personal or corporate income taxes. Nevada also aims to create its own specialized business court, which it hopes to have online by 2028. Not to be outdone by Delaware and Texas, in May 2025 Nevada enacted a number of legislative reforms. As discussed here, Nevada’s legislature has codified (and reduced) the fiduciary duties and liability of Nevada corporation controlling stockholders and allowed Nevada companies to waive jury trials.
As should be apparent from this lengthy list of developments in just 2025 alone, it is game on between Delaware, Texas, and Nevada when it comes to competition for company incorporations. Indeed, a number of companies have left Delaware; not just Andreesen Horowitz, Coinbase, Tesla, as noted above, but also Neuralink, Dropbox, The Trade Desk, Roblox, TripAdvisor, and Pershing Square Capital.
The high-profile DExits have captured the headlines. However, the reality may be something less than the headlines might suggest. As discussed here, as of mid-November 2025, only 28 companies had de-incorporated from Delaware in 2025, while nearly 250,000 firms were organized in Delaware in 2025, representing a 14% increase from the same period in 2024.
The fact is that there arguably are a host of reasons for companies to remain in Delaware or to consider incorporating in Delaware: an experienced professional judiciary and a well-developed body of case law on a wide variety of business issues; statutory flexibility in business organization; and no taxes on business revenue outside of Delaware. Like it or not, Delaware is still preferred by capital markets and investors. It should also be noted that while many companies that have moved have cited the reliability of predictability of Nevada or Texas courts, the fact is that Delaware has decades of developed law while Texas and Nevada have far less (especially when it comes to those states’ new business courts).
For D&O insurance practitioners, this is not just high-level chit-chat. These developments potentially could have important implications. If more startups and tech firms really do start to favor Nevada or Texas over Delaware as the state of initial incorporation, not only will there be fewer companies in Delaware, but there will be less corporate litigation in Delaware’s courts and there could be more corporate and securities litigation in the courts of Nevada and Texas. A litigation shift to Nevada and Texas could have significant implications for D&O risk, if for no other reason than that the legislatures of those states very deliberately set out to make their laws more company friendly, which could mean a more defendant friendly environment in the states’ courts.
More than once this year, I have been asked whether these changes could mean lower D&O insurance premiums. In a pricing environment that is, as discussed below, already soft, any current pricing change is unlikely. Moreover, insurers are unlikely even to consider making adjustments to their pricing models based on these developments until there are concrete facts and figures showing that the D&O liability risk actually has changed.
There are many, many questions here. The bottom line is that the whole DExit issue is a very fast-moving topic and further developments undoubtedly lie ahead as we head into the New Year. My crystal ball is no better than anyone else’s, but I will say at least that these developments at least have the potential to substantially disrupt the heretofore relatively orderly world of corporate law in the U.S.
10. The D&O Insurance Market Remains in the Soft Phase of the Cycle – At Least for Now
The market for D&O Insurance, like the insurance market generally, is cyclical. The cycle is governed by the iron laws of supply and demand. In particular, when supply (insurance capacity) is scarce, the market for D&O insurance is said to be “hard.” When supply is abundant, the market is “soft” – meaning that most insurance buyers can find insurance at relatively advantageous prices and on attractive terms and conditions.
The D&O insurance market is currently in the soft phase of the cycle. It is important to see how the market got where it is to understand the current conditions. During the period 2019-2021, after years of underpricing and also after severe reserving strengthening, D&O insurance was in a hard market. Insurance pricing was, during that period, substantially higher than during the preceding years. Insurers also reduced the limits of liability they were willing to extend and insisted upon larger self-insured retentions.
The sustained higher pricing environment during the hard market attracted new players to the marketplace, which also meant increased insurance capacity. The arrival of the new capacity coincided with the collapse of the market for IPOs and SPACs, meaning that as insurance supply expanded, insurance demand declined. Abundant supply and diminished demand meant that competition returned to the D&O insurance marketplace. As a result, starting in 2022, and continuing to today, insurance buyers have enjoyed a relatively favorable environment.
In most cases, most buyers have seen their D&O insurance premiums decline. (Of course, not all buyers have seen their premiums decline. Financially trouble companies, companies with complicated claims histories, and companies in certain disfavored industries – may actually have seen their premiums increase.) The price decreases were steeper in 2022 and 2023 than in more recent years. But by and large, most buyers have continued to see their premiums decrease.
As always happens during the soft phase of the market cycle, some commentators have tried to suggest that the pricing decreases have gone too far, meaning they have gone below risk-based pricing levels. Whether or not that is true, the problem for the market is that the conditions that caused the soft market remain firmly in place, at least for now. Insurance capacity remains abundant. As long as the capacity remains abundant, it is unlikely the market will shift to the next phase of the cycle.
The fact is that the hard phases of the cycle are infrequent and short, while the soft phases of the cycle tend to be longer and more frequent. For now, at least, given the abundant insurance capacity, it seems unlikely that D&O insurance market will move into the next phase of the cycle anytime soon.
To be sure, there have been recent signs that the pricing declines have started to level out, particularly with respect to primary limits. In at least some cases, the leveling out at the primary level is offset by decreases in the excess layers, meaning that the overall insurance costs for many buyers are continuing to decline, albeit more slightly than at the outset of the current soft cycle phase.
It seems likely as we head into 2026 that buyers, at least in the near term, will continue to enjoy a favorable D&O insurance pricing environment. Many factors – particularly macroeconomic, geopolitical, geophysical, and climatological factors — could come into play in the months ahead that potentially could push the market to the next cycle phase. Policyholders will want to closely consult with their insurance advisors to try to discern what all of this may mean for their 2026 insurance renewals.
**********************
The D&O Diary Has Its Own LinkedIn Page: The D&O Diary now has its own LinkedIn page. The goal is to use the LinkedIn page to supplement The D&O Diary’s blog posts, with further information and commentary about the world of directors’ and officers’ liability and insurance. I encourage everyone to visit and to follow the new page. The D&O Diary’s LinkedIn page can be found here.
Interview with LexBlog’s Kevin O’Keefe: It was my honor and pleasure earlier this fall to sit down for a podcast interview with LexBlog Founder and CEO Kevin O’Keefe. We had a lot of fun in the interview, talking, among other things, about the history and future of blogging. Please see the full interview here.
Top Travel Pictures of 2025: You may not have seen it over the holidays, but in late December I published a post with review of my top travel pictures of 2025. The post can be found here. I hope readers will take a moment to review the travel pictures post, and I also hope readers will take my up on my invitation to send me their own top 2025 travel pictures. I am hoping to publish a post in the next few days with readers’ travel pictures.
Travel Hacks, Gripes and Likes: Readers may also have missed my post over the holidays in which I listed my top travel hacks, gripes, and likes. The post can be found here. I am hoping readers will take a look at the post, and I am also hoping that readers will send me their own travel hacks, which I also hope to publish in a future post.