Judy Kwan

Managing Associate

San Francisco


Read full biography at www.orrick.com
Judy Kwan, a managing associate in the San Francisco office, is a member of the Securities Litigation, Investigations and Enforcement Group. Her practice in complex litigation matters focuses on defending companies, officers and directors in shareholder class actions, derivative suits and regulatory proceedings and investigations in state and federal district and appellate courts throughout the country.

Representative cases include defending a former corporate officer in regulatory investigations, multi-district litigation and appeals involving mortgage-backed securities; defending corporation, directors and officers in securities class actions and derivative suits involving claims including fraud, conspiracy, and insider trading; and defending city employee in connection with SEC action over alleged misstatements in connection with the issuance of municipal bonds. Pro bono matters include representing peaceful protestors appealing convictions before the U.S. Court of Appeals for the Sixth Circuit; parapalegic bringing claim of deliberate medical indifference against a federal prison in California, and domestic violence victim seeking permanent restraining order on behalf of herself and her family. Judy has also helped write amicus briefs in the U.S. Supreme Court and the California Supreme Court on issues involving the Voting Rights Act and whether undocumented immigrants should be able to practice law in the state of California.

Judy regularly contributes to Orrick's blog on Securities Litigation and has written for the Securities Reform Act Litigation Reporter and Orrick's Guide to Securities Litigation.

During law school, she was a summer law clerk at Orrick and was also a summer law clerk at the Federal Trade Commission in the Bureau of Consumer Protection in Washington, D.C. Prior to attending law school, she worked as a case assistant at Kirkland & Ellis LLP.

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Posts by: Judy Kwan

Delaware Supreme Court Wastes No Words: Summarily Affirms In re Volcano Corp. Stockholder Litigation, Upholding Business Judgment Rule and Dismissing Remaining Waste Claim

On February 9, 2017, the Supreme Court of Delaware summarily affirmed the Court of Chancery’s decision in In re Volcano Corp. Stockholder Litigation which had dismissed plaintiffs’ complaint on defendants’ 12(b)(6) motion to dismiss.

Plaintiffs, former stockholders of Volcano Corporation, had brought an action against defendants for breaches of fiduciary duty arising from the all-cash merger between Volcano and Philips Holding USA Inc. The parties had disputed what standard of review the Court of Chancery should apply: the Revlon test, as plaintiffs claimed, because Volcano’s stockholders received cash for their shares, or the irrebuttable business judgment rule, as defendants argued, because Volcano’s stockholders were “fully informed, uncoerced, and disinterested” when they approved the merger by tendering a majority of Volacano’s shares into a tender offer.  As the Court of Chancery explained, if a business judgment rule is irrebuttable, plaintiffs could only challenge the transaction on the basis of waste.  Thus, plaintiffs also argued in the alternative that if the business judgment rule did apply, it should only be a rebuttable presumption.

The Court of Chancery recognized that recent Delaware Supreme Court decisions have confirmed that the approval of a merger by a majority of a corporation’s outstanding shares pursuant to a statutorily required vote of the corporation’s fully informed, uncoerced, disinterested stockholders renders the business judgment rule irrebuttable. Moreover, it found that the stockholder approval under the merger via acceptance of the tender offer, under Section 251(h), had the same cleansing effect as a vote in favor of said transaction.  Thus, because Volcano’s stockholders were fully informed, disinterested and uncoerced, the business judgment rule irrebuttably applied to the merger.

Since the irrebuttable business judgment rule applied, the only viable claim left was plaintiffs’ claim for waste. However, the Court of Chancery was quick to dismiss this claim as well, finding that the complaint failed to plead how the merger constituted waste and noting that it was “logically difficult” to even “conceptualize how a plaintiff can ultimately prove a waste or gift claim in the face of a decision by fully informed, uncoerced, independent stockholders to ratify the transaction” when “the test for waste is whether any person of ordinary sound business judgment could view the transaction as fair.”

The Delaware Supreme Court’s affirmance of the Court of Chancery’s decision decisively put to rest the question of whether a fully informed, uncoerced, disinterested approval of a merger by a majority of a corporation’s outstanding shares pursuant to a statutorily required vote renders the business judgment rule irrebuttable. It does, and subjects a post-closing damages action challenging a merger to dismissal.

SEC Granted Reversal, Remand and Jury Trial from the Ninth Circuit

court decision

On August 31, 2016, the SEC caught a break when a Ninth Circuit panel reversed Judge Manuel L. Real’s bench trial verdict for defendants, former corporate officers of the now-defunct Basin Water, Inc., finding that the SEC was wrongfully denied its shot at a jury trial in a securities fraud action involving alleged false reporting of millions of dollars in unrealized revenue.  The panel vacated the judgment and remanded for a jury trial, noting that the SEC had not consented to the defendants’ withdrawal of their jury demand, and in fact, consistently demonstrated its objection to a bench trial, preserving its objection all the way to the appellate court. READ MORE

Shareholder Derivative Suit Following Data Breach Misses Target

On July 7, 2016, Judge Paul A. Magnuson of the United States District Court for the District of Minnesota granted Defendants’ Motions to Dismiss a shareholder class action that had been initiated following a 2013 holiday season data breach involving customers of Target Corporation (“Target,” or “the Company”).  The data breach, which resulted in the release of information of approximately 70 million consumer credit and debit cards, made headlines as one of the biggest privacy hacks at the time.  Initially disclosed to the public in December 2013, with an estimated 40 million credit and debit cards affected, Target subsequently revealed a little less than a month later that additional consumer data, including customers’ names, mailing addresses, phone numbers and email addresses, were also stolen, and increased its initial estimate to 110 million.

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Here’s a Tip: “Substantial and Important Contributions” to Pre-Existing SEC Investigations Can Pay Off For Whistleblowers

In a move evidencing the SEC’s continued commitment to its whistleblower program, the Commission announced on Friday that it has awarded a whistleblower over $3.5 million for providing information that did not lead to a new investigation, but rather only served to bolster an ongoing investigation.  This decision came after the SEC’s Claims Review Staff preliminarily determined that the SEC should deny the whistleblower claim because the information provided by the individual did not appear to “cause Enforcement staff to open the investigation or to inquire into different conduct, nor . . . to have significantly contributed to the success” of the action.  But after reviewing the whistleblower’s written response for reconsideration, in addition to factual information from staff in the Division of Enforcement, the Commission changed course, determining that the information indeed “significantly contributed” to the success of the SEC’s action, and approving the award.

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The SEC is focusing its enforcement and investigation efforts on preparers and auditors of financial statements, Mary Jo White tells accountants

In a recent address, SEC Chair Mary Jo White stated that the SEC had focused its reinvigorated investigation and enforcement efforts on holding preparers and auditors accountable for their work on financial statements.  She alerted the 2015 American Institute of Certified Public Accountants (“AICPA”) National Conference to the weighty responsibilities and challenges faced by auditors and preparers, as well as audit committee members, standard setters and regulators, when endeavoring to ensure high-quality, reliable financial reporting.

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SEC Enforcement Director Tells House Judiciary Committee That Investigation Agencies Should Not Need Warrants to Access Email Data Directly from Internet Service Providers

On Tuesday, Andrew Ceresney, Director of the Securities and Exchange Commission’s Division of Enforcement, told the House Judiciary Committee that the Email Privacy Act (H.R. 699) and the Electronic Communications Privacy Amendments Act (S. 356) should not be amended to require prosecutors and civil enforcement agencies to obtain criminal warrants when requesting emails and other electronic data directly from internet service providers (“ISPs”), which include cloud-based storage services.  READ MORE

Another Round of Favorable SEC Settlements, But Only for Underwriters that Self-Reported

Pen and Calculator

The SEC has rolled out its second wave of enforcement actions against 22 municipal underwriting firms for alleged securities violations in municipal bond offerings in connection with its Municipalities Continuing Disclosure Cooperation (MCDC) Initiative.  As previously reported, the MCDC initiative was announced in March 2014 to address potential securities violations by municipal bond underwriters and issuers.  Under this initiative, the SEC offered favorable settlement terms to those who self-reported by the end of 2014.

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SEC Rolls Out First Wave of MCDC Settlements with Underwriters

Last Thursday, the SEC announced it reached settlement agreements with 36 municipal securities underwriting firms pursuant to its Municipalities Continuing Disclosure Cooperation (MCDC) Initiative.  These settlements mark the first enforcement actions against underwriters of municipal securities under the MCDC Initiative. READ MORE

Who Wants to be a Millionaire? Compliance Officer Whistles His Way to a Million Dollar Pay Day

Whistle

Last week the SEC announced an award of between $1.4 to $1.6 million to a whistleblower who provided information that assisted the SEC in an enforcement action. The enforcement action against the whistleblower’s company resulting in monetary sanctions exceeding $1 million.  This marks the second award to a whistleblower with an internal audit or compliance function at a company.  The first was back in August 2014, when the SEC awarded a whistleblower in internal auditing/compliance with over $300,000.  Here, as with the prior award, the officer had a reasonable basis for believing that disclosure to the SEC was necessary to prevent imminent misconduct from causing substantial financial harm to the company or investors.  In both cases, responsible management was made aware of the potential harm that could occur, yet failed to take steps to prevent it.

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Tweet, Tweet: The SEC Gets Social

The SEC recently issued an investor alert to warn investors about potential fraudulent investment schemes involving popular social media sites such as Facebook, YouTube and Twitter, turning its eye towards investor fraud perpetuated via social media. The alert, issued by the SEC’s Office of Investor Education and Advocacy, provides five tips to help consumers recognize and avoid investment fraud, easily made anonymous online, using social media websites and services: (1) be wary of unsolicited offers to invest; (2) look for “red flags,” e.g., offers that sound too good to be true or that “guarantee” returns; (3) look for “affinity frauds,” which are “investment scams that prey upon members of identifiable groups, such as religious or ethnic communities, the elderly or professional groups;” (4) be thoughtful about privacy and security settings; and (5) ask questions and investigate investment opportunities thoroughly. The alert also describes common investment scams that have used social media and the internet to gain traction, including “Pump-and-dump” schemes, fraudulent “research opinions” or “investment newsletters,” high-yield investment programs, and offerings that just fail to comply with applicable registration provisions of the federal securities laws.

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