BLT: February 2019

     

    Featured Articles

    Business & Corporate

    Encouraging Consolidation: Why the Gates are Open for Bank Consolidations

    Joseph E. Silvia

    We have been hearing (and writing) for some time now about the wave of consolidation expected to ripple through the banking industry, especially with respect to the community bank sector. Although the pace of mergers and acquisitions has been healthy, the industry has yet to see the anticipated wave of consolidation. However, legislative, regulatory, and economic changes are creating an environment ripe for mergers, acquisitions, and other strategic transactions in the banking sector.

    Business & Corporate

    Board Oversight and Governance: From Tone at the Top to Substantive Checks and Balances

    H. Stephen Grace Jr., S. Lawrence Prendergast, Susan Koski-Grafer

    In the aftermath of the widely-publicized control breakdowns at Wells Fargo Bank, and in a number of regulatory actions occurring this past year, boards of directors of public companies and financial institutions have been directed to improve oversight and corporate governance. Reacting to demands from regulators and shareholders to improve board oversight and governance, it seems that boards are evolving from an approach of focusing primarily on “tone at the top” to one of instituting substantive checks and balances and considering broader aspects of ethics, values and corporate culture.

    Business & Corporate

    Corporate Directors Must Consider Impact of Artificial Intelligence for Effective Corporate Governance

    Shani R. Else, Francis G.X. Pileggi

    The purpose of this article is to address the intersection between corporate governance and artificial intelligence (AI), and to explain why corporate board members must be familiar with basic AI concepts in order to fulfill their fiduciary duties. AI is permeating all industries, and directors must be aware of risks associated with the ever-evolving landscape of such technology. Thus, at least a basic understanding of AI and its applicability to a board’s particular industry is necessary for board directors to comply with their fiduciary duties and for effective corporate governance.

    Business & Corporate

    LLC and Partnership Transfer Restrictions Excluded From UCC Article 9 Overrides

    Carl S. Bjerre, Daniel S. Kleinberger, Edwin E. Smith, Steven O. Weise

    The organizational law of limited liability companies (LLCs) and partnerships has always fundamentally embraced an idea known as the “pick-your-partner principle,” under which transfers of a member’s or partner’s ownership interest are restricted by statute, and those restrictions may be tightened or loosened by agreement. In recent years the pick-your-partner principle has interacted in complex and not always practical ways with Article 9 of the Uniform Commercial Code (UCC).

    Business & Corporate

    Unincorporated Business Organizations and Diversity Jurisdiction: Who Is a “Member”?

    Thomas E. Rutledge

    In order to assess, for purposes of diversity jurisdiction (28 U.S.C § 1332), the citizenship of an unincorporated business organization (e.g., partnership, limited partnership, LLC, business trust, etc.), there will be attributed the citizenship of each of the members. This is in contrast to the rule applicable to the citizenship of corporations, which are the citizens of the states in which they are incorporated and maintain the principal place of business. Who, then, is a member? Although resolving this question typically will be rather straightforward, there are of course cases on the margins of the analysis.

    Business & Corporate

    Mindful Mediation: The Ways and Means of Successful Bankruptcy Mediation

    Judith W. Ross, Jessica Voyce Lewis

    The use of mediation in the bankruptcy context continues to grow, particularly in complex cases. Across the United States, a wide range of bankruptcy-related disputes have been addressed effectively through mediation, including disputes such as avoidance actions, valuation disputes, claim issues, disputes over lien priorities, confirmation issues, post-confirmation litigation, etc. Some bankruptcy courts have required mediation of such matters (such as the U.S. Bankruptcy Court for the District of Delaware), whereas other courts suggest and encourage, but do not require, mediation as a means of resolving particular disputes before a trial is necessary.

    Business & Corporate

    Section 1631 and the Farm Products Exception to the UCC Exception—Fertile Traps for the Unwary

    Brooke Schumm

    Debt limits in chapter 12 of the Bankruptcy Code are often exceeded by farm operations, necessitating a chapter 11, and issues involving perfection and realization of security interests, or voiding of rights, will be an important issue for business bankruptcy lawyers involved in farm bankruptcies—sometimes perjoratively called industrial farm bankruptcies, which tells one the scale of debt that can be involved.The issue of farm bankruptcy merited a recent Wall Street Journal article: “‘This One Here Is Gonna Kick My Butt’—Farm Belt Bankruptcies Are Soaring,” Feb. 6, 2019.

    Business & Corporate

    Artificial Intelligence and Healthcare – FAQ’s

    Dina Ross, Val Surgenor, Health IT Task Force, Cyberspace Committee

    Artificial Intelligence is becoming an increasing large part of the healthcare sector. Along with the advances it brings, it also brings a variety of new and different legal concerns. Attorneys need a basic understanding of Artificial Intelligence and how its use impacts various legal concepts in order to counsel clients. To that end, the Health IT Task Force is pleased to provide this FAQ, offering a quick, bite-size introduction to this subject. The Health IT Task Force gratefully acknowledges Rebecca Henderson, a Solicitor with MacRoberts LLP in Scotland, for her invaluable assistance in creating this FAQ.

    Business & Corporate

    Biometric Information – Permanent Personally Identifiable Information Risk

    Alan S. Wernick

    One of the most famous scenes in the movie “Minority Report” features Tom Cruise’s character Jon Anderton walking through a shopping mall as discrete scanners using iris recognition technology are hard at work, scanning his (and other shoppers’) irises. The scanners identify everyone individually to create a personalized shopping experience through targeted video screen advertisements that we can see change and move as Tom does. Far-fetched fictional technology? In the past 16 years the potential uses for biometric technology has grown (see, e.g., “Minority Report” May Come to Real World with Iris Recognition, Bloomberg Tech., Feb. 1, 2011) and today it is almost reality (see Princeton Identity looks to make “Minority Report” tech a reality, SecurityInfoWatch.com, Sept. 25, 2018).

    Business & Corporate

    Rule 23’s New Amendments: A New Era for Class Actions?

    Liv Kiser, Joe Regalia

    For the first time in 15 years, Rule 23 of the Federal Rules of Civil Procedure has been amended. The amendments mostly address class settlements, and they come during a pivotal time for class litigation. With changeups in the composition of the Supreme Court and circuits across the nation split on many class action issues, the long-term impact of these amendments on federal class action practice is likely to be significant.

    Business & Corporate

    Supreme Court Decides on Applicability of Section 1 of the Federal Arbitration Act

    Leslie Ann Berkoff

    In a term that seems to be touching upon the Federal Arbitration Act (the FAA) with unusual frequency, on January 15, 2019, the Supreme Court issued its second decision addressed to aspects of the FAA. In New Prime Inc. v. Oliveira, No. 17-340, the Court focused on the interpretation and application of section 1 of the FAA, which provides that the FAA does not apply “to contracts of employment or any other class of workers engaged in foreign or interstate commerce.” 9 U.S.C. § 1. The Court determined that independent-contractor truck drivers who drive interstate are covered by section 1 of the FAA and cannot be forced into arbitration by a court.

    Business & Corporate

    2018 Review: SEC Continues Active Oversight of Registered Private Fund Managers

    Scott Moehrke, Norm Champ, Robert Pommer, Nicholas Hemmingsen, Robert Sutton, Josh Westerholm

    In 2018, the first full year with Chairman Clayton at the helm of the Securities and Exchange Commission (“SEC”), private fund managers continued to receive significant attention from the SEC’s Office of Compliance Inspections and Examinations (“OCIE”) and Division of Enforcement, notwithstanding the SEC’s stated focus on retail investment managers. Highlights of the SEC’s activity in the private fund space and certain other regulatory developments affecting private fund managers are discussed below.

    Business & Corporate

    Searches of Electronic Devices: Recent Developments and Judges’ Ethical Responsibilities

    Keith Fisher

    Last year, I authored an article for Business Law Today discussing the ethical obligations of lawyers in connection with potential searches of confidential information on their portable electronic devices by the U.S. Customs and Border Protection (CBP) and Immigration and Customs Enforcement (ICE)—both agencies within the Department of Homeland Security (DHS).[1] This companion article briefly considers the ethical obligations in this scenario of judges—including business court judges and bankruptcy judges—under the canons of judicial conduct. Like lawyers, judges should consider whether consenting to a device search by a CBP or ICE agent is compatible with their professional responsibilities.

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