BLT: September 2018

     

    Feature Articles

    Business & Corporate

    Navigating the New CFIUS Landscape

    Christopher L. Mann, Eric J. Kadel, Jr.

    On August 13, 2018, President Donald Trump signed into law the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) as part of the John S. McCain National Defense Authorization Act for Fiscal Year 2019. FIRRMA amends section 721 of the Defense Production Act of 1950, the statute that governs the operations and powers of the Committee on Foreign Investment in the United States (CFIUS, or the Committee).

    Business & Corporate

    The Practical Implications of Janus v. AFSCME Council 31

    Daniel D. Schudroff, Megann K. McManus

    In Janus v. AFSCME Council 31, 138 S. Ct. 2448 (2018), the United States Supreme Court recently held that legislation requiring public-sector employees in units represented by public-sector unions to pay “fair share fees” (sometimes referred to as “agency fees”) violates the First Amendment because it compels individuals to subsidize the speech of other private parties. Writing for the majority, Justice Samuel Alito stated, “Neither an agency fee nor any other payment to the union may be deducted from a nonmember’s wages, nor may any other attempt be made to collect such a payment, unless the employee affirmatively consents to pay [the union].” The immediate impact of Janus is that public-sector employees cannot be required to pay for any union activity without their clear and affirmative consent. This article explores the practical considerations of Janus and provides a framework for public employers to follow prospectively.

    Business & Corporate

    Taking on Amazon: Unauthorized Dealers of "Genuine" Products

    Robert W. Payne

    The online retail marketplace bedevils major brand owners. It provides a vast, new market channel; it destroys brand owners’ exclusive channels. Amazon.com is not only a major force in the former but also the prime mover in the second. Take, for example, Versace’s “Bright Crystal” eau . Multiple sellers are linked to the product page on Amazon, offering the same, new product, often at reduced prices which may compromise Versace’s authorized dealer network’s profitability and stability.

    Business & Corporate

    Supreme Court of Delaware Emphasizes “Careful Application of Corwin” in Morrison v. Berry

    Jacqueline A. Rogers, Timothy R. Dudderar

    Among the most important recent developments in Delaware corporate law is the establishment (or re-establishment) of the potentially case-dispositive impact of an affirmative stockholder vote in M&A litigation. The Supreme Court of Delaware’s 2015 decision in Corwin v. KKR Financial Holdings LLC held that a fully informed vote in favor of a transaction by disinterested stockholders invokes the application of the business judgment standard of review. Given that application of the deferential business judgment standard of review renders the challenged transaction almost certainly immune from further judicial scrutiny, it is difficult to overstate Corwin’s impact. Few cases survive Corwin’s application, an unsurprising result given that a faithful application of the doctrine places a significant burden on a stockholder plaintiff to allege, without the aid of discovery, a material omission or misstatement in connection with a stockholder vote.

    Business & Corporate

    Death, Dissolution, and Dissociation: Louisiana Court Considers the Effect of Seriatim Deaths

    Thomas E. Rutledge

    A recent decision by the Louisiana Court of Appeals considered the effect of the seriatim deaths of several members of an LLC and, ultimately, whether an action for judicial dissolution initiated by a member who subsequently passed away could continue. In this instance, the court found that the action for judicial dissolution of the LLC could continue. Schauf v Schauf, No. 51, 919-CA, __ So.3d __, 2018 WL 1937068 (La. App. 2d Cir. Apr. 25, 2018).

    Business & Corporate

    Possible Shift in Delaware Law: Buyer’s Silence on Sandbagging Is Not Golden

    Sara Garcia Duran, Sacha Jamal

    The law regarding sandbagging (which refers to a buyer that brings a claim for misrepresentation post-closing even though the buyer knew the representation was false before closing) in Delaware seemed clear to many practitioners. Vice Chancellor Laster stated in a 2015 oral ruling that “Delaware is what is affectionately known as a ‘sandbagging’ state.” In addition, then-Vice Chancellor Strine held that a buyer need not establish justifiable reliance in order to bring a breach of contract claim arising out of an acquisition agreement, and given that the reliance element is what creates a problem for a buyer attempting to sandbag, this decision is often interpreted as a pro-sandbagging holding. Additionally, the 2017 ABA Deal Point study seems to confirm that practitioners have this view by finding that 51 percent of deals were silent on the point. After all, many buyers reason that if Delaware is a pro-sandbagging state, why use negotiating capital to get a clause that is unnecessary?

    Business & Corporate

    Cleanup on Title 5: Executive Agencies and Courts Begin to Unpack Lucia, as Litigants Eye Challenges to the Administrative State

    Peter Isajiw, Kenneth Fowler, Carmen Lawrence, Richard Walker, Stephanie F. Johnson, Bruce L. Richadson, Jeffrey M. Telep, Ashley C. Parrish, Albert Kim, Nikki Reeves, Dixie Johnson, Mark S. Brown

    On June 21, 2018, the Supreme Court decided Lucia v. SEC, No. 17-130, 138 S. Ct. 2044, holding that the SEC’s Administrative Law Judges (ALJs), appointed under Title 5 of the U.S. Code, were “Officers of the United States,” that the Appointments Clause of the Constitution requires those ALJs to be appointed by the President, a court of law, or the Commission itself, and that an SEC order following a hearing before an improperly appointed ALJ was invalid. The Supreme Court, however, expressly declined to resolve several other constitutional questions raised by the case.

    Business & Corporate

    Size Matters: Reduced Compliance Cost Alternative Made Possible by the SEC

    Sanjay M. Shirodkar, David J. Lavan

    Recently, the Securities and Exchange Commission (SEC) adopted amendments to the smaller reporting company (SRC) definition to increase the thresholds for eligibility and to adopt certain other changes. Under the new SRC definition, a company with less than $250 million of public float will be eligible to provide scaled disclosures. Companies with less than $100 million in annual revenues and either no public float or a public float that is less than $700 million will also be eligible to provide scaled disclosures. The SEC made no revisions to the actual scaled disclosure requirements available to SRCs. The revised SRC qualification rules are effective on September 10, 2018.

    Business & Corporate

    SEC Adopts Final Disclosure Update and Simplification Amendments

    Nicole Brookshire, Kenneth Guernsey, Chadwick Mills, Cydney Posner, Brent Siler, Nancy Wojtas

    On August 17, 2018, the SEC adopted final amendments relating to an ambitious housekeeping effort, "Disclosure Update and Simplification," a component of the SEC's disclosure effectiveness project. The final amendments address certain disclosure requirements that have become redundant, duplicative, overlapping, outdated, or superseded in light of other SEC disclosure requirements, US GAAP or "changes in the information environment." The "demonstration version" of the final amendments provides a blacklined version displaying the changes. The final rules become effective 30 days after publication in the Federal Register, and the staff has indicated that it will review the impact of the amendments within five years thereafter.

    Month-in-Brief