BLT: January 2020


Featured Articles

Business & Corporate

Border Control: The Enforceability of Contractual Restraints on Bankruptcy Filings, Part 2

As discussed in part one of this two-part article, there is a general premise in bankruptcy law that waiving or contracting away the right to file for relief under the Bankruptcy Code[2] is contrary to public policy. Thus, contractual waivers of such rights are generally deemed invalid. Nevertheless, as the case law has developed over the years, a number of courts have held that operating agreement provisions that set limits on the authority of members or managers of a limited liability company to file a bankruptcy case are enforceable. In recent years, lenders have become more creative in seeking to reduce or eliminate their bankruptcy risk. In this regard, a common approach is to create a bankruptcy-remote limited liability company by obtaining, either directly or through a nominee, a so-called golden share in their borrower. Contemporaneously, the lender insists that its borrower incorporate various blocking provisions into their operating agreement such that it can utilize a bankruptcy approval requirement to effectively preclude a bankruptcy filing. When a bankruptcy is filed notwithstanding the inclusion of such provisions, challenging issues are raised. Part two of this article will discuss how courts have dealt with such issues.

Business & Corporate

Common-Law Drafting in Civil-Law Jurisdictions

A key distinction in international transactions has been whether a contract is governed by the law of a civil-law jurisdiction or the law of a common-law jurisdiction. For purposes of contracts, the structural distinctions between civil law and common law have diminished in significance, but use of common-law terminology in contracts governed by the law of a civil-law jurisdiction remains a source of confusion. After considering the historical difference between civil-law and common-law contracting, this article suggests how to avoid that confusion.

Business & Corporate

Kisor v. Wilkie: A New Limit on Agency Deference and Its Implications for Banking Organizations

The U.S. Supreme Court recently narrowed the circumstances under which a court will defer to an agency’s interpretation of its own regulation. In Kisor v. Wilkie, the Court considered whether to overturn a line of precedent that requires courts to defer to the agency’s interpretation unless it is “plainly erroneous or inconsistent with the regulation.”[1] Although all of the justices agreed to uphold this so-called Auer deference, Kisor may render agencies’ deference “maimed and enfeebled,” at least according to one justice’s concurring opinion. It may also provide banking organizations with new methods to encourage agencies to engage in more open, transparent, and careful decision making.

Business & Corporate

Blockchain 101: The Basics Every Energy Lawyer Should Know

The energy industry is exploring a variety of technological innovations that will make energy cheaper, greener, and more reliable.* For instance, distributed energy resources, microgrids, and battery storage have the potential to fundamentally reshape energy markets. Blockchain is another such innovation that has garnered attention from utilities, energy electricity suppliers, prosumers, FinTechs, and other industry participants. Some of the buzz relates to blockchain’s potential to enable high-volume, peer-to-peer electricity transactions across the distribution grid. Industry participants also recognize blockchain’s advantages within traditional energy market structures, such as the potential efficiency gains from improving data traceability, integrity, and security and automating functions.

Business & Corporate

The Changing Transnational Tax Environment: What Business Lawyers Need to Know

Innovation in internet and related communication technology has spawned new ways for firms to tap into the marketplace. Business models built on digital platforms can generate significant income from remote markets through network connections without a significant physical presence in the form of facilities or personnel. The sharing economy, cloud computing, streaming services, electronic marketplaces, advertising, and software services provide examples of activities that can target remote markets from operational bases that could be anywhere. Moreover, these activities are now common components in many business models.

Business & Corporate

Independence With a Purpose: Facebook’s Creative Use of Delaware’s Purpose Trust Statute to Establish Independent Oversight

When one thinks about the dynamics of a trust created by agreement (at its most basic level) and the normal progression of its creation and administration, there typically are several parties that are thought to be integral to the entire structure. Most notably, these are the grantor (or settlor), the trustee, and the beneficiaries. Once the trust is created and funded by the grantor, the trustee is charged with managing the assets of the trust in accordance with the express provisions of the trust agreement for the benefit of the beneficiaries. If the trustee mismanages the trust assets or takes some action that is not in the interests of the beneficiaries, those beneficiaries (or someone acting on their behalves) may bring an action against the trustee to enforce the terms of the trust and seek a remedy. Under this traditional trust framework, a trust without a beneficiary would not be enforceable. As a consequence, courts historically refused to permit such arrangements unless the trustee was willing to carry out the purpose of the trust, thus honoring a trust-like relationship that otherwise would have failed as a traditional trust (this trust-like relationship commonly is referred to as an “honorary trust”).

Business & Corporate

Another “Well-Pled” Caremark Claim Survives a Motion to Dismiss

In a recent decision, In Re Clovis Oncology, Inc. Derivative Litigation,[1] the Delaware Court of Chancery held that stockholders of Clovis Oncology, Inc. (Clovis), a developmental biopharmaceutical company, adequately pled facts that supported a pleading stage inference that the Clovis board of directors breached its fiduciary duties by failing to oversee the clinical trial of the company’s most promising drug, and then allowing the company to mislead the market regarding the drug’s efficacy. This decision follows the Delaware Supreme Court’s recent reversal in Marchand v. Barnhill,[2] which involved the dismissal of Caremark claims arising from a listeria outbreak at Blue Bell Creameries USA, Inc., resulting in a number of deaths.

Business & Corporate

Creating a Mindful Information Culture

Acme’s cloud storage provider just got hacked. Private information was exposed. Acme’s customers who lost information in the hack are angry and don’t care that it was a third party that failed to secure the information or that some maleficent hacker from across the globe got into their system. Likewise, their customers don’t care how difficult it is for Acme to migrate data, or how they retain and store their records, or what regulations govern each part of Acme’s business. Acme’s customers care only about their information, their data, and whether Acme performs for them.