BLT: March 2018

     

    Featured Articles

    Business & Corporate

    Potential Auditor Liability in the Wake of Colonial Bancgroup

    David Deitch, Reid Skibell

    In a rare loss by an audit firm in a case involving financial-crisis-era fraud, an Alabama federal court recently held accounting giant PricewaterhouseCoopers (PWC) liable to the Federal Deposit Insurance Corporation (FDIC) for its failure to detect a $2 billion fraud. Judge Barbara Jacobs Rothstein’s December 28, 2017 liability opinion in The Colonial Bancgroup, Inc., et al. v. PricewaterhouseCoopers LLP, et al. departed from the typical rule that because receivers like the FDIC stand in the shoes of their debtors, they can only recover where the debtor itself could recover—which excludes cases where the debtor has “unclean hands.”

    Business & Corporate

    What's Lurking Back There: Cybersecurity Risks in Legacy Systems

    Jordan L Fischer

    The term “legacy systems” plays an increasing role in business risk management. Legacy systems commonly refer to outdated computer systems, networks, programming languages, or software. The definition of “legacy system” is subjective because these systems may vary in outdatedness. For example, hardware has age limits, and software ceases to be updated and becomes incompatible with new operating systems.

    Business & Corporate

    U.S. Border Searches of Electronic Devices: Recent Developments and Lawyers’ Ethical Responsibilities

    Keith Fisher

    Early into the Obama Administration, the U.S. Customs and Border Protection (CBP) and Immigration and Customs Enforcement (ICE)—both agencies within the Department of Homeland Security (DHS)—adopted policies to search, sometimes seize, and review the content of electronic devices at U.S. border crossings. Since the inception of the program, the numbers of these searches have steadily increased from approximately 8,500 in 2015; 19,000 in 2016; and 30,000 in 2017.

    Business & Corporate

    Risky Business: What You Didn’t Know About Veil Piercing of Wholly Owned Subsidiaries

    Daniel R.H. Mendelsohn, Carmen Fonda

    Companies both large and small enter new ventures all the time. Netflix was originally a DVD delivery service, Amazon sold only books until 1998, and Pixar Animation was only a computer engineering and special-effects company for more than a decade. When businesses diversify, they may seek to insulate an established line of business from the liabilities of a new venture by forming separate, wholly owned subsidiaries.

    Business & Corporate

    Federal Circuit Clarifies On-Sale Bar to Patentability for “Secret Sales”

    Joseph Marinelli

    U.S. patent laws bar patentability of an invention if it was “on sale” more than one year before a patent application is filed, but what if the invention was on sale in a nonpublic way? For decades, courts have held that even so-called secret sales of an invention may still trigger a bar to patentability. In 2011, however, the American Invents Act (AIA) modified patent laws in a way that many argued precluded secret sales from serving as a bar to patentability.

    Business & Corporate

    How Small-Fund Advisors Can Mitigate Money-Laundering Risks

    Mark D. Hobson

    The red flags of foreign investment—purposeful obfuscation and lack of a legitimate business purpose—are prominent in today’s media. Advisors of lower-market private equity funds must find the cacophony of public condemnation and scrutiny surrounding the Panama Papers and the more recent Paradise Papers disconcerting. Should advisors of lower-market funds be concerned about money laundering? Does a lower-market fund even have an obligation to adopt an anti-money-laundering program (AML program)?

    Business & Corporate

    Preparing for a Successful Settlement Agreement

    Brendon Ishikawa

    Effective settlement agreements convert the risks, delays, and expenses of lawsuits into solutions that the parties choose for themselves. Many settlement agreements are reached as the product of mediation, a process that helps parties transform misunderstanding into understanding, conflict into resolution, and the stress of litigation into freedom from worry. Settlement agreements do not instantly spring into being, however, fully formed and ready to be enforced.

    Business & Corporate

    Foreign Investments in Infrastructure in Brazil

    Ricardo Barretto Ferreira, Camila Taliberti Ribeiro da Silva

    The Brazilian Constitution of 1988 established a new scenario for Brazilian socioeconomic development. Since 1988, the Brazilian legal framework has strongly fostered national and international companies’ investment in infrastructure through concessions and the privatization of several sectors—logistics, electric power, sanitation, oil and gas, mining, and telecommunications, among others.

    Business & Corporate

    The Risk Retention Rule: LSTA's Victory and What It Means for CLOs and Other Securitizations

    Henry G. Morriello, Howard Goldwasser, Daniel J. Hartnett, Lawton M. Camp, Skanthan Vivekananda, Eric Whitney, Karsten Giesecke, Michael Karol, Aaron F. Miner, Peter C. Seel

    In its February 9, 2018 decision The Loan Syndications and Trading Association v. Securities and Exchange Commission and Board of Governors of the Federal Reserve System (Court Decision), the United States Court of Appeals for the District of Columbia Circuit (DC Circuit) overruled the decision of a United States District Court and decided that collateral managers for open market collateralized loan obligation transactions (open-market CLOs ) are not subject to the risk retention requirements of Section 941 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) and the risk retention regulation (Regulation) promulgated by the Securities and Exchange Commission (SEC)

    Business & Corporate

    De Facto Merger: The Threat of Unexpected Successor Liability

    Gary Matsko

    It is an article of faith among transactional practitioners that an entity seeking to acquire another entity without being saddled with its liabilities does so by acquiring assets. As a general proposition, that method works. “Most jurisdictions, including Massachusetts, follow the traditional corporate law principle that the liabilities of a selling predecessor corporation are not imposed upon the successor corporation which purchases its assets.

    Business & Corporate

    Supreme Court Holds Section 546(e) Safe Harbor Does Not Apply to All Transfers Made Through Financial Institutions

    Seth Grosshandler, Michael H. Krimminger, Lisa M. Schweitzer, Sean A. O'Neal, Luke A. Barefoot, Sandra M. Rocks, Penny Christophorou, Humayun Khalid, Knox McIlwain, Thomas Kessler, Brandon M. Hammer

    At the end of February, the U.S. Supreme Court issued its unanimous decision in Merit Management Group, LP v. FTI Consulting, Inc., holding that 11 U.S.C § 546(e), which creates a safe harbor against the avoidance of certain transfers made “by or to (or for the benefit of)” financial institutions, does not apply merely because the challenged transfer is completed through a financial institution. This holding effectively overrules prior decisions of the Second, Third, Sixth, Eighth and Tenth Circuits that had adopted a more expansive view of the safe harbor protection.

    Business & Corporate

    What the Supreme Court’s Whistleblower Decision Means for Companies

    William R. Baker III, Linda M. Inscoe, Roman Martinez, Marcy C. Priedeman, Nathan H. Seltzer, Eric R. Swibel, Norman G. Anderson, Matthew J. Peters

    In Digital Realty Trust, Inc. v. Somers, the Supreme Court of the United States defined the class of individuals protected by the anti-retaliation provision contained in the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). The Court held that to constitute a protected “whistleblower” under Dodd-Frank, a person must first “provid[e] ... information relating to a violation of the securities laws” to the Securities and Exchange Commission (SEC, or the Commission). Any company that retaliates against such a whistleblower is potentially subject to damages and injunctive relief.

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