BLT: June 2020

 

Featured Articles

Business & Corporate

Distressed Company M&A in the Time of COVID-19: Benefits and Risks of Section 363 Sales

The COVID-19 pandemic and the drastic measures taken in an effort to mitigate its adverse impact have sent shock waves throughout the US and global financial systems. COVID-19 and related measures including travel bans, shelter-in-place orders and widespread business closures have caused precipitous changes in customer spending and demand, supply chain disruptions, sharp declines in revenue, and other operational issues across a wide range of economic sectors. Businesses worldwide now confront unprecedented and mounting challenges and distress.

Business & Corporate

Delaware Corporations Can Keep Federal Securities Law Claims Out of State Courts: Delaware Supreme Court Overrules Sciabacucchi

In December 2018, the Delaware Court of Chancery issued an opinion holding that federal-forum charter provisions—those that require plaintiffs to bring actions under the federal securities laws in federal court and not in state court—are “ineffective and invalid.”* Sciabacucchi v. Salzberg, 2018 Del. Ch. LEXIS 578 (Del. Ch. Dec. 19, 2018).

Business & Corporate

The Coming Tsunami: Anticipated Regulatory and Enforcement Trends in the Wake of COVID-19 and the Unique Role of State Attorneys General

Throughout the 20th and 21st centuries, every national crisis in the United States has left a long wake of investigations in its trail at all levels of government. Those governmental investigations and enforcement actions have followed a familiar pattern when arising out of a public crisis.

Business & Corporate

The Return of Employees, Business Partners, and Vendors to the Office: Five Steps to Protect Trade Secrets

As workforces shifted to remote work during the pandemic, trade secret information may have been subject to relaxed protective measures, inadvertent disclosures, or misappropriation. Employees, business partners, and vendors may have accessed information using unsecure personal devices, uploaded information to less secure cloud storage systems (intentionally or unintentionally), or printed sensitive documents on home printers, among other possibilities. As shuttered offices reopen, companies should develop a process to understand how employees, business partners, and vendors stored, transmitted, and otherwise used (or misused) trade secret information while working remotely and act to identify issues and resolve any problems identified.

Business & Corporate

To Offset or Not to Offset: The Interaction between CARES Act Payments/PPP Loans and Insurance Recoveries Due to COVID-19

The unprecedented impact of COVID-19 on the American economy has forced many businesses of all sizes and in all industries to seek some form of financial relief. Perhaps the most prominent source is the Coronavirus Aid, Relief, and Economic Security Act (commonly known as the CARES Act), which provides over $2 trillion in assistance through the largest economic stimulus package in U.S. history. A common example of funding under the CARES Act is through the Paycheck Protection Program (PPP) in the form of loans to certain businesses. The CARES Act allocates funds through numerous provisions, the two largest of which are dedicated to corporate and small business loans. Many businesses that receive federal funds will also seek recovery from a second, hotly debated source: insurance. Whether companies are pursuing payment for business interruption, event cancellation, or some other loss, the coming years will bring litigation over coverage and a critical question: Are insurance companies entitled to an offset for any relief that a business receives from the CARES Act (or are losses reduced by any of the ancillary payments for other reasons)? As is often the answer in the legal world, it depends.

Business & Corporate

Coronavirus, Physical Damage, and the Need for a Positive Presumption

As a result of the COVID-19 pandemic, businesses across the United States are suffering from unprecedented losses.* In cities and suburbs around the country, commerce has ground to a halt as businesses close their doors because of potential exposure to the deadly virus and in response to state and local government orders. Which of these businesses will be able to reopen will depend largely on how they are able to manage those losses.

Business & Corporate

Rise in Employment Law Claims: Knowing the Risks and the Long-Term Legal Implications Anticipated from the COVID-19 Pandemic

The COVID-19 pandemic hit employers hard and fast—it caused employers to deal with loss of revenue, tough decisions about workforce and pay issues, and new laws and other guidelines that had to be analyzed and implemented quickly, with little time for planning or preparation. As states begin the process for what is hoped to be an eventual return to some sort of "new" normal, employers must be ready to recognize the risks, mitigate those risks, and be prepared to defend the actions and decisions they made in response to the COVID-19 pandemic. In the course of the next several months (and perhaps over the next several years), we anticipate employers will be faced with several types of employment lawsuits stemming from the COVID-19 pandemic.

Business & Corporate

Expert Analysis: Data Collection, Personal Privacy, and COVID-19 Contact Tracing How the Virus and New Tech Triggered Thorough Review and Clarification Surrounding Privacy Laws

As the world grapples with the continued spread of COVID-19, along with the unsettling public health and economic concerns, there are a number of uncertainties surrounding data security and privacy.* Efforts to contain the virus differ from country to country, as do the strategies surrounding the collection of data to aid in “contact tracing” that will surely be the subject of debate for years to come, with legal experts defining—or redefining—just how far governments and tech companies can go.

Business & Corporate

The Need to Be “Information Lean” After COVID-19

Many things will never be the same after the COVID-19 affliction. More and more employees will spend less and less time at an office. As more employees work remotely, they will use more technologies to connect and collaborate, and they will store more company information in the Cloud and on various home devices with a range of setups and vulnerabilities. Bad actors, cyberthieves, and hackers will undoubtedly have greater luck exploiting the resulting chinks in the information security armor. Indeed, hackers and cyberwarriors began attacking the soft underbelly of corporate security—the devices employees use (sometimes their own and sometimes provided by the company) and the networks on which they connect—right after COVID-19 hit. Businesses must have a concrete plan to deal with these new realities and become more “information lean.”

Business & Corporate

Contradictory Responses by Privacy Regulators Post- COVID-19: Balancing the Economy with Cybersecurity in a Changed World

The COVID-19 pandemic has had a disparate effect on privacy regulators, with varying levels of enforcement advocated by different government entities. The California Attorney General, the U.S. Department of Health and Human Services (HHS), European data protection authorities, and other regulators have taken different, often contradictory, approaches to dealing with the competing interests of a struggling economy and the threat of increased privacy and cybersecurity violations. These contradictions are likely to persist, as competing privacy legislation was recently introduced in Congress to regulate the collection and use of personal information during the COVID-19 pandemic.

Business & Corporate

Mostly Dead but Slightly Alive: M&A Deals of 2020

COVID-19 has claimed many M&A deals in March, the largest being Xerox Holdings Corporation’s termination of its proposed $32.85 billion hostile takeover of HP Inc. on March 31, 2020. Xerox wrote in its press release that “[t]he current global health crisis and resulting macroeconomic and market turmoil caused by COVID-19 have created an environment that is not conducive to Xerox continuing to pursue an acquisition of HP Inc.” Quite a few companies are finding themselves in a similar situation, with reports of deal terminations and delays continuing through April and into May.

Business & Corporate

Distressed Company M&A in the Time of COVID-19: Benefits and Risks of Section 363 Sales

The COVID-19 pandemic and the drastic measures taken in an effort to mitigate its adverse impact have sent shock waves throughout the US and global financial systems. COVID-19 and related measures including travel bans, shelter-in-place orders and widespread business closures have caused precipitous changes in customer spending and demand, supply chain disruptions, sharp declines in revenue, and other operational issues across a wide range of economic sectors. Businesses worldwide now confront unprecedented and mounting challenges and distress.

Business & Corporate

Material Regulatory Risks in Healthcare Services Acquisitions

The healthcare industry remains a significant portion of the U.S. economy and will be so for the foreseeable future.* The U.S. Centers for Medicare and Medicaid Services (CMS) reported that in 2018, the overall share of U.S. gross domestic product (GDP) related to healthcare spending was 17.7 percent. Moreover, national health expenditures are projected to grow at an average annual rate of 5.4 percent for 2019–28 and to represent 19.7 percent of GDP by the end of the period. A large portion of that spending is related to payment for the provision of healthcare services. As such a large portion of the economy, both activity and interest in acquisitions of healthcare services companies has been incredibly robust for at least the last 25 years. There does not seem to be any indication of a significant slow-down any time soon. In middle-market private equity transactions alone, valuation of healthcare services companies continues to rise to unprecedented levels.

Business & Corporate

The Primacy of Deal Price in Recent Delaware M&A Appraisal Litigation

Among the interesting data points highlighted in a new report on M&A appraisal litigation in Delaware is the steep decline in both appraisal petitions and cases since 2016.[1] That year, the Delaware Court of Chancery saw its highest-ever number of petitions (76) and cases (47), but over the past two years, those numbers have declined significantly. There were only 26 petitions in 2018, the lowest number since 2012; likewise, cases decreased to their 2012 levels as well. What explains this multiyear decline?

Business & Corporate

SEC Encourages Disclosure of COVID-19 Impacts by Municipal Securities Issuers

On May 4, 2020, U.S. Securities and Exchange Commission (“SEC”) Chairman Jay Clayton (“Chairman”) and SEC Director of the Office of Municipal Securities Rebecca Olsen (“Director”) recommending that municipal securities issuers and obligors (each of these, herein, “issuer(s)”) provide robust, timely, and accurate disclosures regarding the impact of and uncertainties caused by the COVID-19 health crisis. This statement issued on April 8 by the Chairman and the Director of the Division of Corporation Finance William Hinman concerning disclosures by public companies in light of COVID-19. Both statements urge current and, to the extent feasible, forward-looking disclosure, as outlined in the corporate issuer disclosure statement.

Business & Corporate

Delaware Corporations Can Keep Federal Securities Law Claims Out of State Courts: Delaware Supreme Court Overrules Sciabacucchi

In December 2018, the Delaware Court of Chancery issued an opinion holding that federal-forum charter provisions—those that require plaintiffs to bring actions under the federal securities laws in federal court and not in state court—are “ineffective and invalid.”* Sciabacucchi v. Salzberg, 2018 Del. Ch. LEXIS 578 (Del. Ch. Dec. 19, 2018). At that time I wrote: “Assuming that Sciabacucchi is not reversed on appeal, Delaware law allows Delaware corporations to adopt forum selection bylaws or charter provisions governing actions related to the internal affairs of the corporation, but does not allow Delaware corporations to adopt federal-forum provisions governing federal securities law claims.” https://blog.hfk.law/sciabacucchi/ Sciabacucchi has now been reversed by the Delaware Supreme Court. Salzberg v. Sciabacucchi, 2020 Del. LEXIS 100 (Del. Mar. 18, 2020).

Month-In-Brief