Court Invalidates Ambush Election Regulation
Mark A. Carter of Dinsmore & Shohl LLP recently had an article, Court Invalidates Ambush Election Regulation, published in The National Law Review:
On May 14, 2012, the United States District Court for the District of Columbia invalidated the controversial regulation of the National Labor Relations Board (NLRB) that would have dramatically reduced the time frame of union organizing campaigns from the filing of a representation petition to the representational election. Chamber of Commerce, et al. v. NLRB. The “ambush election” regulation, which was implemented on April 30, 2012, was roundly criticized because it limited the ability of employers to exercise their right under §8(c) of the National Labor Relations Act to communicate with employees regarding the impact of selecting a collective bargaining representative.
In an 18 page opinion, Judge James E. Boasberg granted summary judgment to the United States Chamber of Commerce (US Chamber) and the Coalition for a Democratic Workforce (CDW), agreeing that the NLRB did not have statutory authority to implement the regulation because the NLRB was not possessed of a quorum when the regulation was voted on. On December 16, 2011 the vote on the regulation was conducted by e-mail. While Chairman Mark Pearce and former Member Craig Becker both voted to implement the regulation, Member Brian Hayes did not vote. The US Chamber and the CDW argued that as Member Hayes did not “participate” in the vote, there was not a quorum of three NLRB members on the vote, and as such, the implementation was invalid. The NLRB argued that as Hayes had an “opportunity” to vote, the NLRB did have a quorum and, therefore, the regulation was validly implemented as a quorum existed.
The Court disagreed, citing a Woody Allen observation that “eighty percent of life is just showing up.” The Court held that the statutory mandate of a quorum for an administrative agency to implement a regulation was a foundational requirement. In the e-mail era, that mandate was not fulfilled simply because a Board Member received an opportunity to vote. Rather, active participation in the vote is required. The Court noted that while it was unnecessary to treat the issue of whether the failure to participate in the vote was “intentional,” the parties were well served to acknowledge that “such things happen all the time.” (citing a New York Times story reporting on the Wisconsin legislators who fled the state in an effort to deny Republican legislators the ability to form a quorum to vote on legislation limiting the rights of public unions in that state)
The Court concluded that the “ambush election” regulation was invalid, granting judgment against the NLRB, and directing that “representation elections will have to continue under the old procedures.” While the Court did not enter an injunction prohibiting the NLRB from enforcing the final rule, this opinion is a final adjudication on the merits of the case in the district where the NLRB is headquartered and willful disobedience of the Court’s judgment is unlikely. An appeal of the decision by the NLRB is likely.
© 2012 Dinsmore & Shohl LLP
2012 National Law Review Law Student Writing Competition
The National Law Review is pleased to announce their 2012 Law Student Writing Competition
The National Law Review (NLR) consolidates practice-oriented legal analysis from a variety of sources for easy access by lawyers, paralegals, law students, business executives, insurance professionals, accountants, compliance officers, human resource managers, and other professionals who wish to better understand specific legal issues relevant to their work.
The NLR Law Student Writing Competition offers law students the opportunity to submit articles for publication consideration on the NLR Web site. No entry fee is required. Applicants can submit an unlimited number of entries each month.
- Winning submissions will be published according to specified dates.
- Entries will be judged and the top two to four articles chosen will be featured on the NLR homepage for a month. Up to 5 runner-up entries will also be posted in the NLR searchable database each month.
- Each winning article will be displayed accompanied by the student’s photo, biography, contact information, law school logo, and any copyright disclosure.
- All winning articles will remain in the NLR database for two years (subject to earlier removal upon request of the law school).
In addition, the NLR sends links to targeted articles to specific professional groups via e-mail. The NLR also posts links to selected articles on the “Legal Issues” or “Research” sections of various professional organizations’ Web sites. (NLR, at its sole discretion, maydistribute any winning entry in such a manner, but does not make any such guarantees nor does NLR represent that this is part of the prize package.)
Congratulations to our 2012 and 2011 Law Student Writing Contest Winners
Winter 2012:
- Increasing Offshore Wind Projects: A Focus on Regulatory Authority by Kiboni Yarling from the Florida Coastal Law School
- The Florida Environmental Approach: Water Management by William Kirilloff from the Florida Coastal Law School
- Will A Moratorium on Confined Animal Feedling Operations Ever Get Through the Indiana General Assemblyby Emily Abraham from the Northeastern University School of Law
- A Void for Vagueness: Florida Confinement Law/How Animal Welfare Litigators Can Seize Upon a Semantic Loophole by Gautam Jagannath from the Northeastern University School of Law
Fall 2011:
- Trademark Counterfeiting and Individual Purchaser Liability by Lisa Lyne Cunningham from University of Baltimore School of Law
- Ford Motor Credit Company v. Chesterfield County: Reading Constitutional Fairness And Supply Side Economics Into The Virginia Tax Code by Adam Blander from Brooklyn Law School
- Cost Shifting in e-Discovery: A Comparative Analysis Between America and Europe by Umar Bakhsh from Chicago-Kent College of Law
- Football and Antitrust Law: American Needle v. NFL and It’s Meaning for Combinations in Restraint of Trade and the Rule of Reason in the 21st Century by Michael Sabino from Brooklyn Law School
Why Students Should Submit Articles:
- Students have the opportunity to publicly display their legal knowledge and skills.
- The student’s photo, biography, and contact information will be posted with each article, allowing for professional recognition and exposure.
- Winning articles are published alongside those written by respected attorneys from Am Law 200 and other prominent firms as well as from other respected professional associations.
- Now more than ever, business development skills are expected from law firm associates earlier in their careers. NLR wants to give law students valuable experience generating consumer-friendly legal content of the sort which is included for publication in law firm client newsletters, law firm blogs, bar association journals and trade association publications.
- Student postings will remain in the NLR online database for up to two years, easily accessed by potential employers.
- For an example of a contest winning student written article from Northwestern University, please click here or please review the winning submissions from Spring 2011.
Content Guidelines and Deadlines
Content Guidelines must be followed by all entrants to qualify. It is recommended that articles address the following monthly topic areas:
- March Topic Feature: Environmental and Energy, Insurance and Intellectual Property Law
- March Submission Deadline: Tuesday, February 21, 2012
- May Topic Feature: Tax, Bankruptcy and Restructuring and Healthcare Law
- May Submission Deadline: Monday, April 16, 2012
Articles covering current issues related to other areas of the law may also be submitted. Entries must be submitted via email to lawschools@natlawreview.com by 5:00 pm Central Standard Time on the dates indicated above.
Articles will be judged by NLR staff members on the basis of readability, clarity, organization, and timeliness. Tone should be authoritative, but not overly formal. Ideally, articles should be straightforward and practical, containinguseful information of interest to legal and business professionals. Judges reserve the right not to award any prizes if it is determined that no entries merit selection for publication by NLR. All judges’ decisions are final. All submissions are subject to the NLR’s Terms of Use.
Students are not required to transfer copyright ownership of their winning articles to the NLR. However, all articles submitted must be clearly identified with any applicable copyright or other proprietary notices. The NLR will accept articles previously published by another publication, provided the author has the authority to grant the right to publish it on the NLR site. Do not submit any material that infringes upon the intellectual property or privacy rights of any third party, including a third party’s unlicensed copyrighted work.
Manuscript Requirements
- Format – HTML (preferred) or Microsoft® Word
- Length – Articles should be no more than 5,500 words, including endnotes.
- Endnotes and citations – Any citations should be in endnote form and listed at the end of the article. Unreported cases should include docket number and court. Authors are responsible for the accuracy and proper format of related cites. In general, follow the Bluebook. Limit the number of endnotes to only those most essential. Authors are responsible for accuracy of all quoted material.
- Author Biography/Law School Information – Please submit the following:
- Full name of author (First Middle Last)
- Contact information for author, including e-mail address and phone number
- Author photo (recommended but optional) in JPEG format with a maximum file size of 1 MB and in RGB color format. Image size must be at least 150 x 200 pixels.
- A brief professional biography of the author, running approximately 100 words or 1,200 characters including spaces.
- The law school’s logo in JPEG format with a maximum file size of 1 MB and in RGB color format. Image size must be at least 300 pixels high or 300 pixels wide.
- The law school mailing address, main phone number, contact e-mail address, school Web site address, and a brief description of the law school, running no more than 125 words or 2,100 characters including spaces.
To enter, an applicant and any co-authors must be enrolled in an accredited law school within the fifty United States. Employees of The National Law Review are not eligible. Entries must include ALL information listed above to be considered and must be submitted to the National Law Review at lawschools@natlawreview.com.
Any entry which does not meet the requirements and deadlines outlined herein will be disqualified from the competition. Winners will be notified via e-mail and/or telephone call at least one day prior to publication. Winners will be publicly announced on the NLR home page and via other media. All prizes are contingent on recipient signing an Affidavit of Eligibility, Publicity Release and Liability Waiver. The National Law Review 2011 Law Student Writing Competition is sponsored by The National Law Forum, LLC, d/b/a The National Law Review, 4700 Gilbert, Suite 47 (#230), Western Springs, IL 60558, 708-357-3317. This contest is void where prohibited by law. All entries must be submitted in accordance with The National Law Review Contributor Guidelines per the terms of the contest rules. A list of winners may be obtained by writing to the address listed above. There is no fee to enter this contest.
Kansas Supreme Court Decision Declares Resale Price Maintenance Per Se Illegal Under State Antitrust Statute
The National Law Review recently published an article by Lawrence I. Fox, Megan Morley, and Joseph F. Winterscheid of McDermott Will & Emery regarding Resale Price Maintenance in Kansas:
The Kansas Supreme Court recently determined resale price maintenance isper se illegal under state law, becoming the latest state to reject the rule of reason standard mandated by the Supreme Court of the United States. The decision serves as a reminder that although a supplier’s pricing policies may be permissible under federal law, they may nevertheless be subject to per se condemnation under certain state statutes.
On May 4, 2012, the Kansas Supreme Court announced that resale price maintenance (RPM) is per se illegal under Kansas law in O’Brien v. Leegin Creative Leather Products, Inc. With this ruling, Kansas joined a growing number of states—including Maryland, New York and California—that have refused to follow the Supreme Court of the United State’s 2007 holding in Leegin Creative Leather Products, Inc. v. PSKS, Inc. that the legality of RPM should be assessed under the rule of reason. The O’Brien decision therefore serves as yet another sobering reminder that suppliers need to be mindful that although RPM may be subject to rule of reason analysis at the federal level, it remains subject to per secondemnation at the state level in many states under state antitrust statutes
In O’Brien, the plaintiff, a purchaser of accessories, filed a class action litigation against Leegin Creative Leather Products, a manufacturer and retailer of Brighton fashion accessories and luggage (Brighton)—the same defendant involved in the U.S. Supreme Court’s landmark 2007 eponymous decision—alleging Brighton’s pricing practices violated the Kansas Restraint of Trade Act (KRTA). These practices included calling for retailers to sell Brighton products at a “keystone” price determined by Brighton and for certain “heart store” retailers to sell Brighton products at a “suggested price every day, 365 days a year.” Brighton did admit to investigating reports it received regarding alleged violations of the policy and, although not occurring in Kansas, it acknowledged refusing to deal with retailers that intentionally violated the policy.
Upon motion for summary judgment, the trial court held the plaintiff’s RPM claims should be evaluated under the rule of reason. To determine that a rule of reason analysis is appropriate, the court invoked language from Heckard v. Park, 188 P.2d 926, 931 (1948), and Okerberg v. Crable, 341 P.2d 966, 971 (1959): “The real question is never whether there is any restraint of trade but always whether the restraint is reasonable in view of all the facts and circumstances and whether it is inimical to the public welfare.” Using this standard, the court refused to grant summary judgment because it believed there was a genuine issue of material fact as to the reasonableness of Brighton’s pricing policies. The trial court, however, still granted Brighton’s summary judgment motion after ruling the plaintiff would be unable to prove antitrust injury.
On the plaintiff’s appeal, the Kansas Supreme Court overturned the ruling of the trial court and declared that horizontal and vertical restraints of trade, including RPM, are per se illegal. In reaching this decision, the Kansas Supreme Court examined the plain language of KRTA, federal antitrust rulings and past Kansas precedent.
First, the court looked at the statutory language of KRTA. Section 50-101(d) provides “[a]ny such combinations are declared to be against public policy, unlawful and void.” Section 50-112 states “[a]ll arrangements, contracts, agreements, trusts, or combinations … designed or which tend to advance, reduce, or control the price … to the consumer … are hereby declared to be against public policy, unlawful, and void.” Because these statutes do not mention reasonableness, the court believed that this “clear statutory language draws a bright line” against the use of a rule of reason standard.
Second, the court briefly addressed and then dismissed the notion that federal antitrust rulings, such as Leegin, compelled a rule of reason analysis. Citing a string of Kansas decisions, the court determined “that federal precedents interpreting, construing, and applying federal statutes have little or no precedential weight when the task is interpretation and application of a clear and dissimilar Kansas statute.”
Third, the Kansas Supreme Court looked at prior state cases to assess whether a reasonableness standard should be read into KRTA. Three of these cases were decided under Kansas’s General Statutes of 1915 and Revised Statutes of 1923, which the court described as the “legislative ancestor[s]” of KRTA and which contained similar language to the present day statute. In each of these cases, the Kansas Supreme Court held the vertical price-fixing agreements at issue were unenforceable and per se illegal.
In 1937, however, the state legislature enacted the Kansas Fair Trade Act (KFTA). This statute both permitted contracts controlling resale prices and authorized private actions to punish deviations from these contracts. Although the legislature repealed this statute in 1963, the Kansas Supreme Court examined whether the per se rule adopted in these pre-KFTA cases had been overruled while KFTA was in effect. The only relevant cases decided during this period were the aforementioned decisions in Heckard and Okerberg, which did indeed adopt a reasonableness standard.
Analyzing these KFTA-era cases, however, the Kansas Supreme Court determined that this “reasonableness rubric” did not apply to alleged price-fixing agreements. The restraints of trade at issue in those cases—non-compete covenants and requirements contracts—were “factually and legally distinct from vertical and horizontal price-fixing.” Moreover, the court went on to state it would have to read unwritten elements into the unambiguous statutory language of KRTA to impose a rule of reason in price-fixing cases, which would require the court to impermissibly encroach on the legislative function. The court concluded that if Heckard andOkerberg were before it today, it would not impose a reasonableness standard because the clear statutory language does not require it. The Kansas Supreme Court therefore overruled the reasonableness standard adopted in Heckard andOkerberg and held that price-fixing violations are per se illegal under KRTA.
With the decision in O’Brien, Kansas is the latest state to reject the rule of reason standard mandated by Leegin for federal RPM cases when applying state antitrust statutes. This decision serves as a reminder to suppliers that although their pricing policies may be permissible under federal law, these same policies may nevertheless be subject to per se condemnation under certain state statutes. Any programs directed at affecting downstream resale prices must therefore be crafted carefully to ensure they are legally compliant at both the state and federal levels.
© 2012 McDermott Will & Emery
Rainmaker Retreat: Law Firm Marketing Boot Camp
The National Law Review is pleased to bring you information about the upcoming Law Firm Marketing Boot Camp:
WHY SHOULD YOU ATTEND?
Have you ever gone to a seminar that left you feeling motivated, but you walked out with little more than a good feeling? Or taken a workshop that was great on style, but short on substance?
Ever been to an event that was nothing more than a “pitch fest” that left a bad taste in your mouth? We know exactly how you feel. We have all been to those kinds of events and we hate all those things too. Let me tell you right up front this is not a “pitch fest” where speaker after speaker gets up only trying to sell you something.
We have designed this 2 day intensive workshop to be content rich, loaded with practical content.
We are so confident you will love the Rainmaker Retreat that we offer a 100% unconditional money-back guarantee! At the end of the first day of the Rainmaker Retreat if you don’t believe you have already received your money’s worth, simply tell one of the staff, return your 70-page workbook and the CD set you received and we will issue you a 100% refund.
We understand making the decision to attend an intensive 2-day workshop is a tough decision. Not only do you have to take a day off work (all Rainmaker Retreats are offered only on a Friday-Saturday), but in many cases you have to travel to the event. As a business owner you want to be sure this is a worthwhile investment of your time and money.
WHO SHOULD ATTEND?
Partners at Small Law Firms (less than 25 attorneys) Solo Practitioners and Of Counsel attorneys who are committed to growing their firm. Benefits you will receive:
|
Solo practitioners who need to find more clients fast on a shoe-string budget. In addition to all the above benefits, solo attorneys will receive these massive benefits:
|
Law Firm Business Managers and Internal Legal Marketing Staff who are either responsible for marketing the law firm or manage the team who handles the law firm’s marketing. In addition to all the above benefits, Law Firm Business Managers and Internal Legal Marketing Staff will also receive these benefits:
|
Of Counsel Attorneys who are paid on an “eat what you kill” basis. In addition to all the above benefits, Of Counsel attorneys will also receive these benefits:
|
Associates who are either looking to grow their book of new clients in the next 6-12 months or want to launch their own private practice. In addition to all the above benefits, Associates will also receive these benefits:
|
WHAT MAKES THIS SO DIFFERENT FROM EVERY OTHER LEGAL MARKETING SEMINAR?
1. Specifically Designed for Owners and Managing Partners at Small Law Firms and Solo Practitioners.While Associates, Of Counsel, and Partners at large firms (50+ attorneys) are welcome to attend and will receive benefit from attending, the Rainmaker Retreat is specifically designed to meet the needs, challenges, and financial budgets of solo practitioners and small law firms.
You won’t find any strategies that cost tens of thousands of dollars in this seminar. In fact, many of our strategies have little to no cost and with many of them we will tell you how to trade more of your time instead of spending your money if you’re marketing your practice on a shoe-string budget. Nor will you hear about generic marketing ideas that only work if you have a large staff or a separate marketing department.
2. This is an Advanced Legal Marketing Workshop. We work very hard to make the material easy to understand and simple to apply, but please understand this is an advanced, in-depth, hard-hitting law firm marketing course!
If you are just starting out or have never done legal marketing or business development before you will likely find the volume and depth of our strategies to be a little overwhelming at times.
A common remark we hear from experienced attorneys is that attending the Rainmaker Retreat is like “trying to drink from a fire hydrant” because we will provide you will dozens of time tested legal marketing strategies each day of the workshop.
At the Rainmaker Retreat, you will not hear any generic marketing advice like “just buy more Yellow Page ads” or “try to get more referrals from clients.” The Rainmaker Retreat focuses on in-depth discussions of cutting-edge strategies and revealing secrets of highly successful attorneys used by only an elite group of lawyers.
3. You will be taught How to Track and Measure Every Legal Marketing Effort! You will find a big emphasis on tracking the results of your attorney marketing efforts so if you are a numbers kind of person you will LOVE the Rainmaker Retreat!
There are 3 major areas you need to analyze and every one of your current challenges is directly related to problems in one or more of these 3 areas. We will teach you what the 3 areas are and how to use this tool to diagnose your problems and what “marketing treatment” you need to prescribe.
4. You will learn a Proven Lead Conversion System. The biggest area attorneys overlook in their legal marketing efforts is how to convert more prospects into paying clients. You will learn the 5 numbers you need to track in your law firm.
We will give you the tools and teach you how to use them so you can start tracking: (1) where every incoming lead is coming from, (2) how many of those leads turn into appointments, (3) how many appointments show up, (4) how many of those appointments retain at the initial consult, and (5) how many retain at a later date. We will introduce you to our Rainmaker Follow Up System that can be used to determine your Cost Per Lead (CPL) and Cost Per Client (CPC).
5. It is a Working Retreat. This means that several times each day you will be given specific marketing tasks to complete with step-by-step instructions. You not only come to listen, learn and discover, but also to practice and apply.
By the end of the Rainmaker Retreat you will:
- Create a written 90-day Marketing Action Plan (MAP) for your law firm
- Discover your firm’s Unique Competitive Advantage (UCA)
- Identify a profile of your Ideal Target Market (ITM)
- Have written strategies for improving your internet presence and search engine optimization
- Develop your own plan for leveraging the power of blogging and social media following the Rainmaker Social Media Blueprint
- Create a letter of introduction to potential Strategic Referral Partners (SRPs)
6. There is a Strong Focus on Return on Investment (ROI)! Everything about this workshop is focused on one goal—helping you achieve the best possible results by finding more and better clients in the least amount of time using the least amount of money possible!
For most attorneys,landing just 1 new client as a result of this workshop will more than pay for your attendance. But that’s not our goal! Our goal is to teach you how to gain dozens of new clients in the next 60-90 days.
Please note, ethically we cannot guarantee those kinds of results, but we work hard to provide you with all of the tools you will need to find more and better clients on a consistent basis. With that kind of Return on Investment, can you afford not to attend?
7. 100% Money Back Guarantee! We are so confident you will benefit from the Rainmaker Retreat that we offer a 100% money back guarantee. If you are not completely satisfied at the end of the first day, just let us know, turn your materials in and we will refund your money.
We guarantee you will come out of these 2 days with a step-by-step Marketing Action Plan (MAP) to make very specific changes to your marketing and how you go about building your legal practice.
Impact of New Medicare Investment Tax on Trusts and Estates
As part of the Patient Protection and Affordable Care Act enacted in 2010, Section 1411 was added to the Internal Revenue Code. Beginning in 2013, this section imposes an additional tax on individuals and on trusts and estates. It is a tax on net investment income tax. Net investment income includes capital gains.
It has generally been reported that the tax on individuals does not apply unless their modified adjusted income exceeds $200,000 ($250,000 for a married couple).
What is less well known is that this new investment tax applies to trusts and estates at a much lower income level. Section 1411 provides that the new tax applies when income reaches the level at which it is taxed at the highest marginal rate. In 2012, the highest marginal tax rate is reached when undistributed net income reaches $11,650. This figure will be adjusted for inflation in 2013.
Depending upon what the income tax rates are in 2013, a trust or estate which has a substantial amount of undistributed net taxable income may find itself paying federal income tax of 43.4 percent (39.6 + 3.8) on much of that income. This is in addition to any state income tax (6 percent on income in excess of $9,000 in Missouri).
This makes careful income tax planning for estates and trusts more important than it has ever been.
© Copyright 2012 Armstrong Teasdale LLP
Canadian International Trade Compliance Conference – August 21-23, 2012
The National Law Review is pleased to bring you information about the upcoming Canadian International Trade Compliance Conference:
- Addressing the Global Trade Compliance Concerns Involving Export Controls, Custom Compliance and Cross Border Trade in Canada
Event Date: 21-23 Aug 2012
Location: Toronto, Ontario – VENUE TO BE CONFIRMED, Canada
- Key conference topics
-
- Assess the latest export permit requirements in Canada with Pratt and Whitney Canada
- Address re-exports of U.S. origin goods from Canada to comply with both Canadian and U.S. export controls with Future Electronics
- Integrate an effective anti-corruption compliance program as part of a global trade compliance program with Methanex Corporation
- Analyze supply chain security concerns when dealing with cross border trade with Stanley Black & Decker, Inc.
- Uncover the updates to the Export Controls List and their impact upon Canadian companies with Research in Motion Limited
Currently, international trade compliance professionals need to stay up to date on the changing regulations within Canada and also abroad. With the changes to the Export Controls List and the ever-complex nature of Canadian-U.S. cross border trade, companies need to be aware of how these changes affect their international trade compliance programs.
Canada’s relationship with the U.S. makes it imperative that the International Trade Compliance community is informed on the impact that U.S. rules and regulations can have on Canadian companies.
Building upon the success of the 2nd Annual International Trade Compliance Conference, the marcusevans Canadian International Trade Compliance conference addresses the Global Trade Compliance Concerns involving export controls, customs compliance and cross border trade in Canada.
By attending this event, industry leaders will be able to overcome any potential challenges in crafting and sustaining a comprehensive trade compliance program.
Attending This Conference Will Enable You To:
1. Dissect the latest updates from the Department of Foreign Affairs and International Trade with Research in Motion Limited
2. Comprehend the U.S. Export Reform Initiative and the impact upon Canadian companies with Public Works and Government Services Canada
3. Develop and understanding of import value and transfer pricing with Ericsson Canada Inc.
4. Focus on NAFTA and other Free Trade Agreements with Plains Midstream Canada
Industry leaders attending this event will benefit from a dynamic presentation format consisting of workshops, panel discussions and case studies. Attendees will experience highly interactive conference sessions, 10-15 minutes of Q&A time after each presentation, 4+ hours of networking and exclusive online access to materials post-event.
Audience:
SVPs, VPs, Directors, Superintendents, Supervisors, Engineers, Specialists, Leaders and Managers from the Chemical, Petrochemical, and Refining Industries with responsibilities in:
- EHS Environmental Health and Safety
- Safety/Process Safety Management
- Plant Management/Operations
- Inspection/Reliability
- Mechanical/Asset Integrity
- Manufacturing/Technology
- Training & Development
Pennsylvania Adopts Significant Tort Reform Eliminating Joint and Several Liability: Fair Share Act Signed into Law
The National Law Review recently published an article by Meredith N. Reinhardt of Drinker Biddle & Reath LLP regarding Tort Law Reform in Pennsylvania:
In our June 2011 Newsletter, we discussed the status of important pending legislation in Pennsylvania (the Fair Share Act) designed to eradicate the common law doctrine of joint and several liability. As of the date of that article, the Pennsylvania House of Representatives approved the Fair Share Act (H.B. 1), and the Act was before the Pennsylvania Senate for consideration. After extensive debate, the Senate ultimately approved a bill substantively identical to H.B. 1.
On June 28, 2011, Governor Tom Corbett signed the Fair Share Act into law, effective immediately. The Fair Share Act, (42 Pa. Cons. Stat. § 7102), provides for proportionate share liability among joint tortfeasors and eliminates the common law doctrine of joint and several liability in all but a few limited situations. Under the new law, each defendant is liable for “that proportion of the total dollar amount awarded as damages in the ratio of the amount of that defendant’s liability to the amount of liability attributed to all defendants and other persons to whom liability is apportioned under subsection (a.2).” 42 Pa. Cons. Stat. § 7102(a.1)(1). Joint and several liability still applies where there is an intentional misrepresentation, an intentional tort, a claim under section 702 of the Hazardous Sites Cleanup Act, a violation of section 497 of the Liquor Code or where a defendant is liable for 60% or greater of the total liability apportioned to all parties. 42 Pa. Cons. Stat. § 7102(a.1)(3).
The Fair Share Act is a significant victory for product manufacturers, insurance companies and other businesses who are often hauled into litigation because of their “deep pockets” even if they might be only minimally liable. Reactions from these groups has been overwhelmingly positive. Pennsylvania Chamber of Business and Industry Vice President Gene Barr commented that the Fair Share Act “restores fairness and predictability to the state’s legal system, encouraging business investment and job growth.”1 The Chairman of the Insurance Agents & Brokers of Pennsylvania further praised the new law: “The act is a win for consumers, businesses and the insurance industry, which all carry the financial burdens of such a litigious environment.”2
Conclusion
As a practical matter, passage of the Fair Share Act will likely decrease the frequency “deep pocket” defendants with minimal liability are brought into litigation. Even if such defendants are joined in litigation, the Fair Share Act will reduce the possibility of inequitable judgments. As time passes, product manufacturers, insurance companies and other business who are often co-defendants in various litigations will continue to see the benefits of this significant tort reform.
1 Press Release, Gov. Corbett signs Chamber members’ No. 1 lawsuit abuse reform priority (June 28, 2011) (on file with author and available at: http://www.pachamber.org/www/news/press_releases/2011/Gov%20Corbett%20signs%20Chamber%20members%20No%201%20lawsuit%20abuse%20reform%20priority.php)
2 Press Release, IA&B applauds Pennsylvania lawsuit-abuse reform (June 28, 2011) (on file with author and available at: http://www.iabgroup.com/press_center/releases/2011/06_28_tort_reform.html).
5th Product and Pipeline Enhancement for Generics Conference, July 17-19, 2012
The National Law Review is pleased to bring you information about an upcoming conference:
5th Product and Pipeline Enhancement for Generics Conference, July 17-19, 2012 in Washington, DC
The marcus evans 5th Product and Pipeline Enhancement for Generics Conference will host industry leaders within the Generic Pharmaceutical, Branded Pharmaceutical and API industries operating globally as they share best practices, strategies and tools on portfolio management and business strategy, as well as legal, intellectual property and patent issues.
Featuring case studies from leading generics experts, including:
- Richard Dicicco, Chairman at Harvest Moon Pharmaceutical
- Dr. Vijay Soni, Executive Vice President, IP, BD and Product Portfolio at Glenmark Pharmceuticals
- Candis Edwards, Senior Vice President, Regulatory Affairs & Compliance at Amneal Pharmaceuticals
- Gregory Fernengel, Senior Intellectual Property Counsel at Ben Venue Laboratories, Inc.
- Markus H. Meier, Assistant Director, Health Care Division, Bureau of Compensation at Federal Trade Commission
- Vishal K. Gupta, Chief Scientific Officer, Vice President, Research & Development at CorePharmaLLC
- Sherri Leonard, VP, Business Development and Portfolio Management at OrchidPharma, Inc.
Attendees will leave this conference with a better understanding of:
1. Current and upcoming FDA proposals and regulations to ensure compliance
2. Innovation in the drug pipeline
3. Portfolio management and business development
4. How to protect the company’s patents’ and intellectual property
5. Expanding the commercial reach through biosimilars
6. Market changes and future industry developments
Testimonials:
“Great in-depth coverage of hot topics in an intimate setting that lent itself to excellent discussions.” – Novartis
”Terrific chance to connect with other industry traders to exchange ideas and explore solutions to the challenges we all face.” – OrchidPharma
Unclaimed Property in M&A Transactions: The Potential for an Unwelcome Surprise
As the economy continues to recover, an increase in M&A activity is expected. A target company’s historical compliance with unclaimed property laws is an important, but often overlooked, area for due diligence in M&A transactions. A target company’s failure to comply with unclaimed property laws can potentially create multi-million dollar exposure for the buyer. The transaction itself may have the effect of drawing the attention of state unclaimed property regulators and third party contingency fee auditors. There are various ways, as discussed below, for the buyer to control or limit its potential exposure.
A Brief Introduction to Unclaimed Property
While the exact parameters of what constitutes “unclaimed property” vary from state to state, unclaimed property generally consists of a wide range of both tangible and intangible property held by a business. Once the business has held the property for a statutorily mandated holding period without communication with the owner, it becomes unclaimed property subject to escheat. Some examples of unclaimed property include: un-cashed rebate checks and other customer credits; unused gift certificates and gift cards; un-cashed vendor checks; un-cashed dividend checks; insurance proceeds; and the underlying stock or other evidence of an ownership interest in a business.
Businesses are responsible for reporting unclaimed property to the states on an annual basis in accordance with priority rules established by the U.S. Supreme Court. The first-priority rule is that unclaimed property escheats to the state of the apparent owner’s last known address, as shown on the company’s books and records. The second-priority rule provides that the unclaimed property escheats to the state of the company’s incorporation if: (1) the apparent owner’s address is unknown, (2) the last known address is in a foreign country, or (3) the last known address is in a state that does not provide for escheat of the property in question. As the unclaimed property laws vary from state to state, the outcome of this jurisdictional priority analysis can have a meaningful impact on the property required to be escheated. Some states even require negative reports to be filed, stating that no unclaimed property is due and owing to the state.
The Importance of the Transaction’s Structure
A transaction’s structure can significantly impact the unclaimed property exposure that a buyer may inherit from the target. In an asset purchase, the buyer acquires only those liabilities specifically identified in the purchase document. While it is still possible for the buyer to acquire certain unclaimed property liabilities in an asset purchase (such as those associated with bank accounts, accounts receivable, or gift cards), the buyer’s potential exposure for the target’s failure to comply with unclaimed property laws will typically be less than in a stock purchase where the buyer generally acquires all of the target’s disclosed and undisclosed liabilities, including its unclaimed property liabilities.
In addition, unclaimed property can arise in the context of a merger involving a share exchange, where the former stockholders (who now cannot be located) fail to receive the shares issuable to them in the merger. At least one SEC reporting company recently entered into a settlement with the State of Delaware as a result of more than four million shares which were reserved for issuance in the merger, but which were not claimed by former stockholders. The settlement resulted in the SEC reporting company making a $20,000,000 cash payment to the State of Delaware.
The Impact of a Target’s Failure to Comply with Unclaimed Property Laws
There are a number of factors that can make a target’s failure to comply with the unclaimed property laws very costly for a buyer. In many states, there is no statute of limitations on unclaimed property. As a result, even voluntary compliance arrangements with the states can result in a look-back period of five to ten years or even longer. Audit look-back periods can be significantly longer. Oftentimes, the buyer will not have complete records from the target. In such situations, state regulators in a post acquisition audit have been known to use various formula to estimate the liability. The target may have made acquisitions itself prior to being acquired, further compounding the potential for non-compliance. Once interest (and potentially even penalties) is added to the equation, a potential multi-million dollar exposure can be created — definitely an unwelcome surprise for the buyer.
Methods for Avoiding an Unwelcome Surprise
Prospective buyers can take proactive steps to manage and minimize potential exposure. Below are a few such steps:
Structure of Transaction. If possible, buyers should consider structuring a transaction as an asset purchase to minimize the unclaimed property liabilities inherited from the target. The purchase document should be carefully drafted and negotiated to leave any unclaimed property liabilities out of those liabilities acquired by the buyer.
Due Diligence. Oftentimes, unclaimed property compliance is overlooked in the due diligence process. As a starting point, buyers should request copies of the target’s unclaimed property policies and procedures, a description of the target’s unclaimed property due diligence process, copies of historical unclaimed property reports filed by the target, correspondence with state unclaimed property regulators, and any unclaimed property audit notifications. Given the current interest, especially in Delaware, in equity property (e.g., stock, dividends, etc.), buyers should make sure the target’s response includes materials that permit the buyer to determine the target’s compliance for this property type, especially because this information may be in possession of the target’s transfer agent or other third party. Depending on the materials provided, additional due diligence may be warranted.
Representations and Warranties. Unclaimed property is not a tax and thus is typically not covered by the tax representations and warranties. The purchase document should include specific representations and warranties of the target, backed by an indemnity and an escrow if possible, regarding the target’s historical unclaimed property compliance. The target’s indemnity obligations should be excluded from any basket and cap exceptions applicable to indemnities. Most representations and warranties only survive for a specified period following the closing of the transaction. However, as discussed above, oftentimes there is no statute of limitations with respect to unclaimed property compliance. If possible, the target’s representations and warranties regarding unclaimed property compliance should survive closing indefinitely. Additionally, even if the target is current in its compliance, provision should be made for property still in its dormancy period, i.e., property that may be abandoned but not yet subject to escheat.
Voluntary Compliance Initiatives. If it is determined that the target is not in compliance with the unclaimed property laws, the buyer should consider whether voluntary compliance is a viable option. Many states offer voluntary compliance programs with limited look-back periods.
©2012 Greenberg Traurig, LLP
NY City Bar White Collar Crime Institute
The National Law Review is pleased to bring you information about the inaugural White Collar Crime Institute, on Monday, May 14, 2012 from 9 a.m. to 5 p.m. in New York City, NY.
This excellent review of developments in criminal and regulatory enforcement has been organized by our White Collar Criminal Law Committee, chaired John F. Savarese of Wachtell Lipton Rosen & Katz. Our program will feature keynote addresses by Preet Bharara, United States Attorney for the Southern District of New York, and Eric Schneiderman, Attorney General of the State of New York. The panels on key legal and strategic issues will include senior government officials, federal judges, academics, general counsel of leading New York based corporations and financial institutions, and top practitioners in the field. We have crafted the program to maximize their value for white collar practitioners and corporate counsel.
- Providing perspectives of top general counsel concerning the challenges they confront in this new era of expanded corporate prosecutions
- Discussions of the increasing importance of media coverage in these cases and its impact on prosecutorial decision-making.
Break-out sessions will address:
- Techniques for winning trials
- Ethical issues presented by white-collar corporate investigations
- Trends in white-collar sentencing, and
- The special challenges of handling cross-border investigations.
National Law Forum
