A Bridge Over Troubled Waters: The Role of Due Diligence in Mitigating SPAC Litigation Risks
Business Law Today, August 2021
The ABA’s Business Law Today has published an article by Principal Kevin Gold, Vice President Ahmer Nabi, and affiliated due diligence and corporate governance expert Gary M. Lawrence, exploring the role of due diligence in mitigating litigation and enforcement action risks associated with special purpose acquisition company (SPAC) IPOs and subsequent de-SPAC business combinations. In their article, “A Bridge Over Troubled Waters: The Role of Due Diligence in Mitigating SPAC Litigation Risks,” the authors offer an in-depth discussion of the unique complexities and attributes of SPAC transactions, summarize the relevant laws and regulations that give rise to SPAC litigation, and explain the role of due diligence (including explicit and implicit due diligence defenses) within the context of these laws and regulations.
The authors then provide a summary of the litigation landscape involving SPACs, including case examples of pending SPAC lawsuits focusing on allegations of unreasonable due diligence performed by the various parties involved in the SPAC transaction that have been brought under the Securities Act, the Exchange Act, state securities laws, and various fiduciary duty laws. The authors conclude by offering general recommendations to mitigate litigation and regulatory risks associated with SPAC transactions.