Corporate Governance – Insurance

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7^th Circuit Court of Appeals

Case Name: Joy Global Inc. v. Columbia Casualty Company

Case No.: 21-2695

Officials: Easterbrook, Hamilton, and Kirsch, Circuit Judges.

Focus: Corporate Governance – Insurance

In 2016 Joy Global Inc., and Komatsu America Corp., two manufacturers of heavy equipment used in mining, agreed to merge. That step required the approval of Joy Global’s investors. As it had shares registered under the federal securities laws, Joy Global sent the investors a set of disclosures under §14 of the Securities Exchange Act of 1934, 15 U.S.C. §78n, which regulates the process of voting by proxy. Litigation ensued and was settled for roughly $21 million; the transaction closed. The surviving firm is called Komatsu Mining. Who pays for the settlement remains unresolved.

The district court, applying Wisconsin law (which the parties agree is appropriate), granted summary judgment to the insurers, holding that the $21 million loss is not covered by insurance. 555 F. Supp. 3d 589 (E.D. Wis. 2021). The judge found that the suits assert the wrongful act of failing to disclose documents that could have been used to seek a higher price. That brought the suits within the definition of “inadequate consideration claim” and activated the exclusion from indemnification (though the insurers still had to cover defense costs).

Affirmed.

Decided 01/23/23

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