BLT: August 2019


Featured Articles

Business & Corporate

Circuit Split Deepens: Bankruptcy Court’s Jurisdiction over Social Security and Medicare Claims

Under 42 U.S.C. § 405(h), no plaintiff may bring a claim arising under the Social Security Act under 28 U.S.C. §§ 1331 and 1346 until they have exhausted administrative appeal remedies (the Exhaustion Requirement). The latter provisions provide federal jurisdiction for district courts related to federal questions and contract claims against the United States, respectively. But bankruptcy courts exercise federal jurisdiction under 28 U.S.C. § 1334. Thus, relying on the plain text of section 405(h) in a bankruptcy adversary proceeding, the Fifth Circuit held that bankruptcy courts are not barred from exercising their jurisdiction under section 1334 to hear Social Security claims. Benjamin v. United States (In re Benjamin), No. 18-20185, 2019 WL 3334653 (5th Cir. July 25, 2019). Given that this bar applies to healthcare companies operating in the Medicare Program pursuant to 42 U.S.C. § 1395ii, the In re Benjamin decision is important for healthcare entities filing for bankruptcy protection.

Business & Corporate

The Globalization of U.S. Patent Law: Companies May Risk Infringement Even Without Significant U.S. Presence

Traditionally, a U.S. patent could only be enforced against activities occurring within the U.S. The globalization of industries and markets over the past 50 years has brought down trade and communication barriers and integrated markets across the world. This has changed many companies from local or regional concerns into global players in the international supply chain. These changes have created conflict with existing U.S. patent law, in some cases allowing companies with infringing products to avoid liability by, for example, manufacturing the infringing product outside of the U.S. U.S. patent law has expanded over the last half century to address these loopholes. Many foreign activities that U.S. patent law traditionally carved out are now subject to liability, and the pace of change appears to be quickening. Although U.S. courts still discuss the traditional presumption against extraterritorial application of patent law,[1] in reality there are many exceptions to this presumption that allow enforcement of U.S. patents for activities occurring outside of the U.S.

Business & Corporate

The Biggest Data: Advising Clients about Alternative Lending Models and the Regulatory Scrutiny They Generate

The Equal Credit Opportunity Act (ECOA) was one[1] of the seminal anti-discrimination standards set in the lending/credit industry. It set the standard for preventing discrimination in lending. When it was enacted, ECOA was meant to offer similarly qualified borrowers equity in lending transactions regardless of race, color, marital status, age, religion, sex, or national origin. Before ECOA, lenders, who held the reigns on financing, could easily turn away a black family or an unmarried woman simply because they wanted to.

Business & Corporate

Wildfires, Renewable Resources, and Chapter 11: The Latest in the PG&E Story

After months of speculation, California’s largest utility, Pacific Gas and Electricity Corporation (PG&E), filed for protection under chapter 11 of the U.S. Bankruptcy Code on January 29, 2019. In the papers filed by the debtors, the affidavit in support of the filing, sworn out by Chief Financial Officer Jason P. Wells, aptly captured the reasons the company had given for the exigent filing: “[t]he chapter 11 filings were necessitated by a confluence of factors resulting from the catastrophic and tragic wildfires that occurred in Northern California in 2017 and 2018, and PG&E’s potential liability . . . made it abundantly clear that PG&E could not continue to address . . . claims and potential liabilities in the California state court system, continue to deliver safe and reliable service to its 16 million customers, and remain economically viable.”[1] The estimates for PG&E liability due to the wildfires, as reported by the company to the Securities and Exchange Commission through its January 14, 2019 Form 8-K, could exceed $39 billion.[2] California state fire investigators reported on January 20, 2019, that the devastating Sonoma county 2017 wildfire, known as the Tubbs fire, originated from a private electrical system and not by PG&E.[3] That brief respite was not enough to turn the tide, as a combination of heavy criticism from the public, regulators, the state’s newly sworn in governor, and the specter of liability from the other wildfires that had plagued the utility, buoyed the decision of PG&E to seek bankruptcy protection.

Business & Corporate

Cashing In on Cannabis: Current Issues in Financing, Operations, Banking, and Regulations in the Cannabis Industry, and a Comparative Analysis of the U.S. and Canadian Landscapes

The laws impacting cannabis and marijuana-related businesses (MRBs) have been an evolving landscape in both the United States and Canada. The U.S. landscape for MRBs has been difficult to navigate in that there are a number of inconsistencies between federal and state laws that make it increasingly difficult for stakeholders in MRBs to determine what is legal. Twenty-nine states plus the District of Columbia have legalized marijuana for medical purposes; six states have legalized marijuana for recreational use; and Maine and Massachusetts have approved legalization measures that have not yet taken effect.

Business & Corporate

Legal Interpretation Is Not Like Reading Poetry: How to Let Go of Ordinary Reading and Interpret the Legal Framework of the Regulatory State

Reading poetry, or any fictional text, is a mental dialogue between author and reader. Each of us is free to bring our own life experience and emotional reaction to how we interpret the text. The precise words, the author’s intent, and whether those words exist within the poem or commentary around it matter less than our reactions. Reading the law of the modern regulatory state is fundamentally different. It is not like reading fiction, or even the news, because the legal framework of the regulatory state is about the power of the government over the governed. The legal texts set the limits of the power of those who govern us. The words of the legal framework create the tools by which the three branches of government exercise that power. So, the words matter, the intent matters, and where in the hierarchy of power—and by whom—the words have been written matter. Given that it is about the power of the state, legal reading is constrained by its own norms and principles. It is not ordinary reading.

Business & Corporate

Let’s Make a Deal: Four D&O Coverage Issues to Consider in M&A Transactions

Insurance coverage is an important, but sometimes overlooked, component of any M&A transaction. Many deal lawyers have a working knowledge of directors and officers insurance and how to protect businesses and decision makers in the event of a claim, but oftentimes insurance issues take a back seat to other aspects of transactions. As In re Glasshouse Technologies, Inc and other cases show, however, the devil is in the (insurance) details, and companies should not assume that the status quo will be preserved or that existing policies will offer adequate protection for current or future liabilities after closing. This article presents a brief overview of key insurance coverage issues to consider when structuring M&A deals to mitigate risk and maximize short- and long-term recoveries should a claim arise.