The Tariff-Related Bullseye On D&Os

Directors and officers (D&Os) are leaders and often the public face of their respective organizations. With that spotlight, there can be a shadow that diminishes the glow and holds D&Os responsible when their companies fail. For those D&Os representing public companies, the potential exposure to federal securities litigation, specifically based on alleged violations of the Securities Act of 1933 and the Securities Exchange Act of 1934, is even greater.

Securities lawsuits against D&Os are often brought by shareholders who claim that D&Os withheld or misrepresented certain information that was publicly disclosed and the shareholders were damaged to the extent that the stock price was traded differently than if the proper disclosure of the information in question had been made. Questions about information disclosures, from accounting issues to cyber exposure, from environmental promises to claims of hiding sexual harassment, are some of the reasons D&Os are defendants in securities class actions. In 2025, with the change in the economic landscape based on federal tariffs, the disclosures made regarding how tariffs may impact a business is another issue that can cause a shadow on the D&Os.

Recent Complaints
In recent months, there have been four complaints, two against Dow Inc. (a securities class action¹ and a shareholder derivative suit²) and one each against iRobot³ and Tronox Holdings⁴, involving allegations of D&Os making false and misleading statements regarding their companies' financial health and ability withstand adverse market conditions, including comments regarding the impact of tariffs.

Prominently in the actions against Dow, the leadership is accused of overstating the company's resilience to tariff-related pressures, while failing to disclose the true extent of negative industry trends. Specifically, it is claimed that Dow's leadership made repeated public statements downplaying the risks and impacts of tariffs on the company's operations. It is further alleged that Dow's disclosures violated securities regulations by omitting known trends and uncertainties related to tariffs that were likely to have a material unfavorable impact on the company's business

The iRobot complaint had a strong focus on termination of the Amazon acquisition, but it was also alleged that the company failed to adequately disclose the risks and uncertainties posed by tariffs, particularly U.S. tariffs on European Union imports, which were claimed to be material to iRobot's financial outlook. The plaintiffs, citing tariffs as a factor in the company's going concerns, was only revealed after a sharp stock price decline.

In addition, the complaint against the D&Os of Tronox Holdings claimed that the company's executives made optimistic statements about the company's demand, growth, and ability to manage macroeconomic and trade-related risks, including tariffs. However, the plaintiffs claimed that in reality Tronox was experiencing significant negative impacts from tariffs and related trade uncertainties, which contributed to declining sales and missed financial projections. It is alleged that the D&Os failed to adequately disclose these risks, such as those from tariffs, until after disappointing financial results forced a downward revision of guidance and a dividend cut.

Analysis
All four of these actions are at their initial stages and there have been no significant developments in the litigations. These complaints, which all assert that the D&Os downplayed the material risks and potential impacts of tariffs on their respective companies, are additional examples of lack of transparency claims being filed against D&Os in 2025. Claims of D&Os failing to disclose risks are nothing new. Nor are corporate concerns on how tariffs may impact the financial outlook of an organization. These types of matters are typically covered under public company D&O policies.

However, tariffs have not been a pressing concern in corporate America for a variety of industries in many years, highlighting the changes in 2025 within a global landscape. As such, it is a risk that insureds and their D&O insurers may not have considered when selecting coverage last year. While there is still legal uncertainty about the tariffs and whether they can be implemented as proposed by the current administration, these four complaints put corporate disclosure about tariffs in the spotlight and may just be the start of a new type of complaints against D&Os.

Footnotes

1. Sarti v. Dow Inc. et al., U.S. Dist. Ct, ED MI (25cv12744) filed on August 29, 2025.

2. Potter v. Fitterline, et al., U.S. Dist. Ct., ED MI (25-cv-12821) filed on September 5, 2025.

3. Savant v. iRobot Corp, et al., U.S. Dist Ct. SD NY (25-cv-5563) filed on July 7, 2025.

4. Keller v. Tronox Holdings Plc et al., U.S. Dist. Ct, D. CT (25-cv-1441) filed on September 3, 2025.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Mr Jonathan E. Meer
Wilson Elser Moskowitz Edelman & Dicker LLP
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