This month’s “Inside Business Law” provides an overview of the winter 2015–2016 issue of The Business Lawyer and a reminder about the upcoming Business Law Section’s 2016 Spring Meeting to be held from April 7–9, 2016, in Montréal, Québec.
The Business Lawyer, one of the premier business law journals in the country, is distributed to approximately 40,000 Business Law Section members and countless libraries. The Section is seeking article submissions for The Business Lawyer. Please contact Diane Babal at email@example.com for further information or with any questions.
The Business Lawyer
The winter 2015–2016 edition of The Business Lawyer, Volume 71, Issue 1, was recently published by the Business Law Section. If you have not received your hard copy in the mail, you can access an electronic copy.
The winter 2015–2016 issue of The Business Lawyer includes articles that delve into the backlash leveled against the Securities and Exchange Commission for its use of administrative proceedings to aggressively prosecute securities laws violations and the impact of the Delaware Court of Chancery’s In re Rural/Metro decision on financial advisor engagement letters in the context of mergers and acquisitions. This edition of The Business Lawyer also publishes clarifying amendments to Section 8.70 of the Model Business Corporation Act drafted by the Section’s Corporate Laws Committee and that committee’s proposal of a new subchapter E of chapter 1 of the Model Business Corporation Act to permit the ratification of defective corporation actions as well as amendments to Sections 11.04 and 13.02 of the Model Business Corporation Act. In addition, the Subcommittee on Securities Law Opinions of the Section’s Federal Regulation of Securities Committee updates their 2007 report on “no registration” opinions. The winter issue also includes a report by the Section’s Legal Opinions Committee addressing, for the first time in a bar association report, third-party legal opinions given by U.S. lawyers in cross-border transactions. This edition of The Business Lawyer closes with surveys from the Section’s Corporate Compliance Committee and the Committee on Cyberspace Law. The following are more in-depth abstracts of the winter 2015–2016 issue’s offerings:
SEC Administrative Proceedings: Backlash and Reform, by Alexander I. Platt. A recent uptick in the Securities and Exchange Commission’s prosecution of securities violations through administrative proceedings has generated considerable backlash. This backlash has taken the form of challenges by key stakeholders to the legitimacy of the agency’s enforcement regime and broad constitutional challenges by the regulated industry and its attorneys. These challenges principally focus on deeply entrenched features of administrative adjudication, but have already begun to prove successful, and threaten significant transformations to the Securities and Exchange Commission and beyond. Platt examines and interprets this backlash through the lens of recent Securities and Exchange Commission history and suggests how the agency can take measures to mitigate the harm this backlash poses to the legitimacy of its enforcement program.
Financial Advisor Engagement Letters: Post-Rural/Metro Thoughts and Observations, by Eric S. Klinger-Wilensky and Nathan P. Emeritz. The Delaware Court of Chancery’s In re Rural/Metro decision, which emanated from Warburg Pincus LLC’s acquisition of Rural/Metro Corporation, held RBC Capital Markets, LLC liable for aiding and abetting breaches of fiduciary duty by the board of directors of Rural/Metro Corporation. In rendering its decision, the Court of Chancery stated that a “part of providing active and direct oversight is acting reasonably to learn about actual and potential conflicts faced by directors, management and their advisors.” Klinger-Wilensky and Emeritz address how financial advisor engagement letters can be used by a board of directors as an efficient tool to vet potential financial advisor conflicts and suggest specific contractual provisions that may prove helpful in providing the active and direct oversight that the Court of Chancery found lacking in Rural/Metro.
Changes in the Model Business Corporation Act to Section 8.70, by Corporate Laws Committee. The Corporate Laws Committee proposes clarifying amendments to Sections 2.02 and 8.70 of the Model Business Corporation Act, along with related changes to Sections 1.43, 8.31 and 8.60, to permit advance action to limit or eliminate the duties of directors or officers with respect to business opportunities. The text of the proposed clarifying amendments is available in the winter 2015–2016 issue of The Business Lawyer.
Changes in the Model Business Corporation Act – Proposed Subchapter E of Chapter 1 Permitting Ratification of Defective Corporate Actions, by Corporate Laws Committee. Subchapter E provides a statutory ratification procedure for corporate actions that may not have been properly authorized and shares that may have been improperly issued. Subchapter E also provides for retroactive validity of subsequent actions taken in reliance on the validity of the defective action that is ratified. Subchapter E provides two alternative paths – remedial action taken by a corporation by action of the board of directors and, if required, the shareholders or a court proceeding initiated by the corporation or other interested constituencies. The text of proposed subchapter E, an explanatory introduction and instructions for submitting comments on the proposal are available in the winter 2015–2016 issue of The Business Lawyer.
Changes in the Model Business Corporation Act – Proposed Amendments to Section 11.04 and Section 13.02, by Corporate Laws Committee. The proposed amendments to Section 11.04 and Section 13.02 of the Model Business Corporation Act establish a procedure that permits a corporation to consummate a merger without a shareholder vote if the merger follows a tender offer that results in the tender offer or owning sufficient shares to approve the merger if it were submitted to a vote at a meeting at which all shares entitled to vote were present and voted. The amendments are intended to permit the corporation and such a tender offer or to avoid the time and expense of holding a shareholder meeting that would be a mere formality. The text of proposed amendments and an explanatory introduction, as well as instructions for submitting comments on the proposed amendments, are available in the winter 2015–2016 issue of The Business Lawyer.
No Registration Opinions (2015 Update), report of the Subcommittee on Securities Law Opinions, Federal Regulation of Securities Committee. Section 4(a)(2) of the Securities Act of 1933 provides an exemption from registration for “transactions by an issuer not involving any public offering.” In connection with many of such transactions and similarly exempt transactions, attorneys opinions to the effect that registration of the related securities under the Securities Act is not required. The report in the winter 2015–2016 edition of The Business Lawyer updates the 2007 report in light of amendments adopted by the Securities and Exchange Commission in 2013 to Rule 144A and Rule 506 of Regulation D under the Securities Act implementing the JOBS Act. The report also provides two illustrative opinion letters which address the typical transactions in which a no registration opinion is given.
Cross-Border Closing Opinions of U.S. Counsel, by Legal Opinions Committee. The embodiment of many years of work by lawyers experienced in the field, this report addresses a subject that has never before been the sole focus of a bar association report: third-party legal opinions given by U.S. lawyers in cross-border transactions. An increase in the frequency of international transactions has led to an uptick in requests for U.S. lawyers to deliver cross-border closing opinions. Language barriers and differences in legal systems, customs and expectations have contributed to making the negotiation and delivery of opinions in cross-border transactions more difficult and more costly than in domestic U.S. transactions. The Legal Opinions Committee’s report attempts to promote a better understanding of the opinion practice in these transactions and concludes by providing an appendix of illustrative opinion language, with accompanying assumptions, exceptions and qualifications.
Survey – Corporate Compliance, by Paul E. McGreal. The 10th survey from the Corporate Compliance Committee summarizes selected legal developments regarding corporate compliance and ethics programs. The survey discusses revisions to federal guidance under the Foreign Corrupt Practices Act, a recent federal court decision interpreting the Foreign Corrupt Practices Act, the application of attorney-client privilege to internal investigations, and case law developments in the areas of corporate law, federal employment discrimination law, and state employment law.
Survey of the Law of Cyberspace: An Introduction, by John A. Rothchild. As a primer for the 11 essays that follow, this introduction groups the contributions to this year’s Cyberspace Law Committee survey into five categories – cybersecurity and privacy, social media, intellectual property, contracting and payments, and network neutrality – and provides a brief overview of each of these categories.
What Made the Ostrich Lift Its Head? Significant Developments in Cybersecurity, by Roland L. Trope and Lixian Loong Hantover. The profile of cyber threats and risks to U.S. business enterprises changed profoundly between May 2014 and May 2015. During this period, nation-states and adversaries sought increasingly to cause enterprise-wide damage and disruption. Against the backdrop of the North Korea triggered cyber-attack against Sony Pictured Entertainment and other similar attacks, Trope and Hantover discuss the warning and guidance offered by U.S. intelligence agencies, U.S. military officials and regulators of U.S. critical infrastructure companies, President Obama’s executive orders to target cyber adversaries, the Securities and Exchange Commission’s adoption of Regulation Systems Company and Integrity (Reg. SCI) and measures taken by the Financial Industry Regulatory Authority (FINRA), the U.S. Department of Justice and the New York Department of Financial Services.
Developments in Data Security Breach Liability, by David L. Silverman. In 2014 and 2015, as data security breaches continued to spawn litigation, motions to dismiss kept the focus on what kinds of alleged injury arising from a breach can support Article III standing. Silverman notes that following the application of the U.S. Supreme Court’s “certainly impending” standard from Clapper v. Amnesty International USA, standing remains a significant hurdle in data security breach liability litigation.
After Google Spain and Charlie Hebdo: The Continuing Evolution of European Union Data Privacy Law in a Time of Change, by W. Gregory Voss. The Court of Justice of the European Union’s Google Spain decision and its European Union member state court decisions recognizing a so-called “right to be forgotten”, along with threats of terrorism and the terrorist attack on the Paris headquarters of Charlie Hebdo, have transformed the European Union’s data privacy laws, with consequences for various sectors of business. Voss surveys the impact of the Google Spain decision and similar member state court decisions on the privacy policies of organizations falling within the scope of such court’s jurisdiction, the enhanced security measures and the antiterrorism legislation enacted or proposed across Europe that followed in the aftermath of the Charlie Hedbo attacks, and ongoing European Union data protection law reforms.
Privacy Developments: TCPA Litigation, FTC Privacy Enforcement Actions, and the FTC’s Internet of Things, by Greg Dickenson. For businesses that maintain personal information of consumers, two of the key areas of privacy-related legal risk are private litigation under the Telephone Consumer Protection Act (TCPA) and enforcement actions by the Federal Trade Commission (FTC). In this survey, Dickenson reviews the key developments in the TCPA and the FTC’s enforcement actions over the past year. Dickenson also considers the FTC’s initial policy foray addressing the Internet of Things.
Developments in Social Media: First Amendment, Privacy, and Misappropriation, by Brandon J. Huffman. During the past year, courts have continued catching up with a changing social media landscape, and decisions involving free speech, privacy, and misappropriation are becoming more common. Huffman surveys the U.S. Supreme Court’s decision in Elonis v. United States, the Ninth Circuit’s decision in Garcia v. Google, Inc. and related circuit court decisions before delving into cyberbullying, workplace use of social media, and privacy in the context of several social media platforms. Huffman concludes with a discussion of recent cases and legislation responding to revenge pornography.
Developments in Employment Law and Social Media, by Charles J. Stiegler. This survey addresses recent employment law developments as they pertain to social media, both within and outside the workplace. A recent wave of legislation has placed strict limits on how and why employers may access their employee’s personal social media accounts. In addition to examining this legislation, Stiegler also considers the National Labor Relations Board’s increasing scrutiny of employer policies and practices related to employee social media accounts and employers’ use of employees’ posts to social media accounts as evidence in defending against employee lawsuits.
Copyright in Cyberspace: Sword and Shield in the Dissemination of Online Content, by Jonathan Rubens. Rubens considers a new set of cases in which litigants invoke copyright, desperately or ingeniously, to thwart or protect the online dissemination of material. This survey revisits the Garcia v. Google, Inc. decision, examines several cyberspace fair use cases involving the online distribution and sharing of copyrighted material, as well as several cases involving the Digital Millennium Copyright Act safe harbors, and concludes with a brief abstract of Gardiner v. CafePress Inc.
Cyberspace-Related Patents Since Alice, by Lois D. Mermelstein. This survey discusses the impact of the U.S. Supreme Court’s 2014 Alice v. CLS Bank decision in determining subject matter eligibility for patents involving computer-implemented inventions. As this survey reveals, many patents have been found to be drawn to abstract ideas, but that alone need not doom a patent. The more firmly rooted claims are in a specific technology and the more they incorporate meaningful technical limitations, the more likely these patents are to survive a section 101 challenge in the post–Alice v. CLS Bank environment.
Developments in the Law Affecting Electronic Payments and Financial Services, by Sarah Jane Hughes and Stephen T. Middlebrook. Electronic payments and financial services have continued to prompt significant regulatory and enforcement-agency attention since the 2014 Survey of the Law of Cyberspace. In this year’s survey, Hughes and Middlebook focus on developments affecting providers of services related to bitcoin and other cryptocurrencies, prepaid cards including payroll cards, and other e-payments products, services, and providers. The authors also note other developments that readers will want to follow in the coming year.
The Federal Communications Commission’s Network Neutrality Order, by C. Douglas Jarrett. In late February 2015, the Federal Communications Commission adopted the Open Internet Order, also known as the Network Neutrality Order. The Open Internet Order regulates Internet service providers, which includes cable companies, telephone companies, fixed wireless and mobile service carriers, and defines what constitutes “broadband Internet access services.” Jarrett provides a basic overview of the Open Internet Order and surveys the impact of the Open Internet Order on the scope of the Federal Communications Commission’s regulatory authority, the Open Internet Orders’ rules of conduct and the implication of the Open Internet Order on providers and end-users.
2016 Spring Meeting
You won’t want to miss the 2016 Business Law Section Spring Meeting, which will be held from April 7–9, 2016, in beautiful Montréal, Québec, at Fairmont Queen Elizabeth, Montréal, and Hotel Bonaventure, Montréal. Register now for the Spring Meeting. The Spring Meeting will offer
- more than 70 CLE programs prepared and presented by practice-area experts
- up-to-the-minute topical sessions covering the latest business law issues relevant to your practice
- social events designed to facilitate networking with new contacts and reconnecting with friends
- hundreds of committee and subcommittee meetings addressing developments in all areas of business law.