Woodruff Sawyer
MONTH-IN-BRIEF (Apr 2025)
SPAC Directors and Officers Team Up with D&O Insurer to Sue SPAC Target
By Yelena Dunaevsky, Woodruff Sawyer
On April 14, 2025, a group of directors and officers of a former SPAC (“D&O Plaintiffs”) filed a lawsuit in the Delaware Court of Chancery against the ultimate owner of the company that merged with their SPAC, Spartan Acquisition Corp. II. Strong v. Sunlight Financial Holdings Inc., No. 2025-0399. The complaint is to enforce the directors’ and officers’ indemnification and advancement rights flowing from the merger and related agreements that they entered into with Sunlight Financial. What is interesting and unusual here is that along with the SPAC’s directors and officers, the SPAC’s D&O insurance carrier, Beazley, which has been a very active player in the SPAC market, is also a plaintiff in this suit.
The complaint stems from defense, settlement, and books and records demands costs incurred by the plaintiffs in underlying federal securities action and Delaware Chancery Court lawsuits (“Underlying Lawsuits”). Although the entity that merged with the SPAC (the “deSPAC”) has acknowledged that it owes indemnification and advancement obligations to the D&O Plaintiffs, it has failed to fulfill these obligations. Beazley is joining the D&O Plaintiffs in this suit because it provided “Side A” D&O liability insurance coverage to the SPAC’s officers and directors and is required to cover them if an indemnitor fails or refuses to meet its indemnification obligations.