3 Steps to Network Your Law Firm on LinkedIn

LinkedIn is all about making business connections and luckily for you, there are several great tools on the site that makes networking on this platform a breeze. Once you have your profile in place and have made sure all the information is up to date, that you have some blog posts connected to it, and have added a video or two, you are set to network. Here are the three key steps you need to take:

Step 1: Have LinkedIn import your address book and search your email account.

The site will then suggest some connections based on who you already know. Send those suggested connections a connection request and you are on your way.

Step 2: Find and connect with potential clients.

  • Search by industry first to see if you already have any connections at companies you are targeting for potential new business.

  • If you find that you have a first-degree connection to a prospective client, call or email your first-degree connection and ask them to make an introduction.

  • If the connections you find are further down the scale (2nd or 3rd tier connections), use the InMail feature to invite those people to connect with you. Customize your request to provide context for the connection.

  • Be sure you have opted in to LinkedIn alerts for all your connections. Once you receive an alert that someone you’re connected with has published an article or has a new job, send them an email to reconnect and rekindle the relationship.

  • If you receive an alert that someone has viewed your profile who could be a potential new client, send that person an InMail message asking if you can help.

Step 3: Cultivate new referral sources.

  • Find LinkedIn groups that match up with your practice area and join them. Participating in these groups helps drive traffic to your LinkedIn profile page.

  • Showcase your expertise by starting your own LinkedIn group and inviting your connections to join.

  • Post blogs, articles, firm announcements, press releases, videos on your profile page and in your groups.

  • Examine your client’s networks to see if there are any potential prospects you’d like to be introduced to and then ask your current or former client if they would be a referral source for you.

Once you get the hang of how things work on LinkedIn — and how easy it is to connect — you will find that it is ripe for networking successfully. And you don’t even have to leave home or the office to do it!

This post was written by Stephen Fairley of The Rainmaker Institute, All Rights Reserved ©
For more legal analysis, go to The National Law Review

Contingent Business Interruption Coverage: Insuring the Far-Reaching Effects of Tropical Storm Harvey

Manufacturers and producers are keenly aware of the value provided by business interruption coverage. Typically, this coverage is sold to companies as one of several coverages under their commercial property insurance package. Business interruption coverage is generally triggered by physical damage to a company asset (e.g., a manufacturing plant), which causes a suspension of business activities resulting in a loss of business income.

Tropical Storm Harvey has forced manufacturers and producers across Southeastern Texas to shut down operations while repairing their damaged facilities. These companies will turn to their business interruption carriers to recoup their business income lost during this period. However, for companies doing business in that region, but physically located outside the reach of Harvey, business interruption coverage may not protect them from lost profits caused by the storm.

For example, say a company owns a manufacturing facility in California where it assembles cars. The manufacturer purchases its engines from a company located in the flood-ravaged portions of Texas. If the Texas company is unable to build and deliver engines to California, the manufacturer might be unable to assemble cars for days, possibly weeks. Any business income losses incurred by the California company are unlikely to trigger standard business interruption coverage because the California manufacturing facility did not suffer any physical damage. To fill the gap, manufacturers and producers often purchase contingent business interruption coverage (CBI).

CBI coverage is, in effect, an extension of business interruption coverage to the business activities of suppliers and customers. If an upstream supplier or downstream customer suffers an interruption in business activities, CBI coverage should kick in to reimburse the policyholder for certain lost profits. CBI coverage can be written on specific properties owned by suppliers or customers and/or on a blanket basis.

The value of CBI coverage may vary depending on the precise language of the coverage grant.

Compare Millennium Inorganic Chems. Ltd. v. National Union Fire Ins. Co., 744 F.3d 279, 285-86 (4th Cir. 2014) (CBI coverage was expressly limited to “direct contributing properties” therefore, the presence of an intermediary between policyholder and supplier precluded coverage) to Archer-Daniels-Midland v. Phoneix Assur. Co., 936 F. Supp. 534, 544 (S.D. Ill. 1996) (CBI coverage was not limited to “direct suppliers,” therefore, CBI coverage was appropriate despite an intermediary in the supply chain).

There are a myriad of issues that arise when a company tenders a claim for CBI coverage, all of which need to be carefully considered on a case-by-case basis. For manufacturers and producers that rely on companies in Southeastern Texas, CBI coverage may become vital.

This post was written by Joshua B. Rosenberg of BARNES & THORNBURG LLP© 2017

Troll Hunting: Practical Strategies for Businesses to Combat Anonymous Online Trolls

No matter the business you operate, modern commerce increasingly takes place online, rarely putting the consumer and your business face-to-face. A recent study revealed that approximately 80% of American consumers buy products online, and 74% of consumers think it is extremely or somewhat important to read online reviews before making a purchasing decision.[1]  The average consumer reviews three online sources for information before soliciting a local business, typically: a search engine, the business’s website, and a website containing reviews or testimonials.[2]  Small and local businesses are not immune to the internet’s influence, as nearly 40% of consumers seek out online testimonials, ratings, or reviews to evaluate when considering whether to engage a local business for products or services.[3]  In fact, consumers cite negative online ratings and reviews as the second greatest reason not to consider a local business for products or services, behind only high prices.[4]  

Because consumers consistently turn to online resources to determine whether to do business with you, managing your online reputation is an essential task. You must actively control information about your products, address negative reviews, optimize search engines, and improve your customers’ online experience. In fact, many companies employ full time personnel solely to manage their social media presence.

But monitoring your online reputation becomes even more critical when an anonymous user (aka a “troll”) begins posting harmful or false information. The danger lies in the very nature of the internet, as “any person with a phone line can become a town crier with a voice that resonates farther than it could from any soapbox.”[5]  When that voice spreads false information, interferes with your business, or divulges your trade secrets, what can you do to identify the anonymous user and hold them liable for the harm caused?

Understanding The First Amendment and Anonymous Online Speech

To pursue a claim against an anonymous online user, you must first understand the First Amendment protection afforded online speech. Internet speech is generally granted the same protection as traditional offline speech; that is, most types of speech on the internet are protected to some degree.[6]

The right to free speech online also includes a right to remain anonymous.[7]  Far from being hostile to such online secrecy, the courts have held that careful safeguards to protect anonymous online speech are important to preserve “the robust exchange of ideas and allows individuals to express themselves freely without fear of economic or official retaliation [or] concern about social ostracism.”[8] 

As in the traditional offline arena, some categories of speech, such as fighting words, obscenities, and false statements, are not protected by the First Amendment.[9]  Thus, when trolls exploit the anonymous nature of the internet to post false or damaging information about you, they often exceed the First Amendment’s protections for anonymous online speech. For example, anonymous online users may step beyond the boundaries of protected speech by:

• Creating an email account to distribute your CEO’s sensitive personal emails to senior management.[10]

• Creating online accounts to conduct a smear campaign against you with the objective of inducing employees to quit.[11]

• Posting reviews about working for you that disclose confidential or trade secret information.[12]

• Creating a website using your name to complain about your business practices and post negative reviews.[13]

• Posting false reviews of you online by posing as a former customer.[14]

If not for the use of an anonymous online persona, each of these actions could be addressed by filing a lawsuit against the troll. However, anonymity adds a layer of complication as you must either first find a way to unmask the troll’s identity or stop the harmful conduct by some other means.

Strategies to Address Harmful Online Comments Short of Litigation

Before filing a lawsuit to unmask your troll, first consider whether less costly means might stop the conduct or remove the harmful comments. This approach typically depends on the voluntary compliance of companies hosting the content, and thus is not guaranteed to succeed. However, the low cost of this initial step makes it worth considering. Further, pursuing these strategies, whether successful or not, may cause the troll to stop harming you, or to remove the content voluntarily, thereby accomplishing the end goal.

One alternative to litigation is to determine whether the online statements violate the online service provider’s “Terms of Service.” For example, Facebook’s® Terms of Service prohibit users from posting content that “infringes or violates someone else’s rights or otherwise violates the law” and authorizes Facebook to “remove any content or information” posted on Facebook that “violates this Statement or our policies.”[15]  Twitter® also requires users to ensure that posts comply “with applicable laws, rules, and regulations” and permits Twitter to remove “any Content.”[16]  Large online service providers typically offer reporting platforms where you can report a violation of the terms of service and ask to have the false or harmful content removed.[17] Thus, where a post or comment violates the terms of service, a letter to the internet service provider bringing the issue to its attention may be all that’s needed to get the offending content removed.

Another option is to request that search engines, such as Google® or Bing®, “de-index” the page on which the comments appear. “De-indexing” is a request that the search engine voluntarily remove a website from its index, thereby ensuring it will not appear in response to a search about you. Most search engines retain the right to remove offensive content. For example Google’s ® Terms of Service state that Google “may review content to determine whether it is illegal or violates our policies, and . . . may remove or refuse to display content that we reasonably believe violates our policies or the law.”[18]  The result is that, while the website containing the false statement still exists, it can’t be accessed in response to a search. The effectiveness of this step depends on whether the content clearly violates the applicable terms of service or is blatantly unlawful, and a search engine may require a court order finding the content to be unlawful before it will agree to de-index the website.

A final alternative is to address the comments from a public relations perspective. You can choose to simply engage the troll in the online forum itself, to address the falsity of the comments or steer the

discussion in a more beneficial direction. However, this approach carries significant risk that your comments may be used against you, or may even incite a more passionate, negative response. Thus, this approach should be reserved for unique factual situations that justify a public relations response instead of a legal one.

Identifying the Anonymous Online User

If you cannot stop the harmful online comments through one of the strategies above, you should consider filing a lawsuit to identify the troll and assert the appropriate claims against them. First, however, you need to analyze the conduct and determine whether you have a legal claim against the anonymous user. If so, you can file a lawsuit against the troll and attempt to uncover his or her identity.

Step One: Determine Whether the Conduct is Actionable

The types of claims available to combat online misconduct are generally the same as those available in traditional offline situations.

The most common claim pursued against trolls is a claim for defamation. When a person publishes false, harmful statements of fact about your business ethics or financial integrity, they are likely liable for defamation.[19]  Libel—defamation in writing—consists of publishing a false written statement, either deliberately or with at least a negligent disregard for the truth.[20] 

In evaluating whether you have a claim for defamation, you must candidly consider whether there is any truth to the comments, as truth is an absolute defense.[21]  Likewise, opinions are not actionable. So, if the statements are arguably just opinion, as opposed to a statement of fact (or an opinion that could reasonably be interpreted as stating facts), the anonymous speaker will not be liable.[22]  Finally, you must evaluate whether you will be deemed a “public figure,” in full or in a limited capacity.[23]  If you are a public figure, whether limited or not, you will be required to prove that the speaker acted with “reckless disregard of the truth.” Because this is a higher standard than negligence, there is a greater likelihood that the troll will not ultimately be held liable for defamation.

In addition to defamation, there are a number of other claims that you may be able to pursue against your troll:

• If the user is directing its harmful comments at a vendor, business partner, or potential customer, the user may be liable to you for tortious interference with a contract or a business expectancy. To succeed, you must have a valid contract or business expectancy; the anonymous user must both know about it and interfere with it, so as to cause its breach or termination; and have no legal justification for doing so.[24]

• If the user publishes false information about your products or services, the user may be liable for trade libel or business/product disparagement. Each of these claims has similar elements, requiring proof that the anonymous user posted a false statement concerning your products or services to dissuade a potential customer from doing business with you.[25] 

• If the user is a competitor, and the comments contain false or misleading advertisements about your products or services, the user may also be liable for unfair competition under the Lanham Act.[26]  

• If the user posts information containing your trade secrets, the user may be liable under state or federal trade secret laws.[27]

• If the user is a former employee, or had a contractual relationship with you, then the online conduct may violate provisions of that contract, such as nondisclosure or non-compete provisions.

This list is not exhaustive and there may be other potential claims to assert against an anonymous online user.

Step Two: File An Anonymous Lawsuit to Unmask the Troll

Once you identify a viable claim or claims against the anonymous online user, the next step is to file a lawsuit to discover the troll’s identity.

Such a lawsuit is typically filed against an anonymous defendant—John Doe for example—and a subpoena is then issued to the service provider or to the website hosting the content requiring it to identify the user. The service provider or website will likely object, and you will need to ask the Court for an order compelling disclosure of the user’s identity.

There is no universal standard governing when a court will order the disclosure of an anonymous user’s identity. However, most courts apply one of two generally-accepted tests, both of which require a significant showing early in the case that you are likely to succeed on your claims.

The less stringent test requires that you allege facts that—assumed to be true—demonstrate that the anonymous user committed an act giving rise to civil liability.[28]   Because the Court is looking only at whether you have sufficiently alleged a valid claim, your initial complaint is the operative document that the court will consider. You must also demonstrate to the Court’s satisfaction that (1) you have identified the anonymous user and the user is subject to personal jurisdiction; (2) you have made a good faith effort to locate and identify the anonymous user; and (3) the discovery sought is sufficiently limited to identify the appropriate user or users.[29]  This test, or some variation of the test, is used in some Federal Courts—typically in cases involving less protected forms of speech, like commercial speech—and state courts in Wisconsin, and Illinois.[30]

Most jurisdictions apply the second, more stringent test, which requires you to present facts, in the form of admissible evidence or sworn testimony, establishing that you can prove each element of your claim.[31]  This test requires you to provide more than just the pleadings, typically in the form of a statement of facts with supporting documents and testimony. Most states employing this test also require some further steps as well, such as proof that you attempted to notify the anonymous user of the pending proceeding[32]  or satisfaction of an additional balancing test to justify unmasking the troll.[33]  Federal Courts, and many state courts—including Arizona, Kentucky, Michigan, New York, Pennsylvania, Texas, California, Maryland, New Hampshire, and the District of Columbia—have adopted some version of this more stringent test.[34]

If it is not obvious from the nature of the statements that they are actionable, some courts may also require an evidentiary showing that you can prove a valid claim before they will order the troll’s identity disclosed.[35] 

Thus, if you file a lawsuit to identify the anonymous user, you must be prepared to present the facts that support your claim much earlier than in traditional litigation. Since most states apply the more stringent “evidentiary” test, the best practice is to prepare to satisfy that test, even if the less stringent test might be applied.

The factual evidence necessary to compel disclosure of an anonymous user’s identity will likely include, at a minimum: (1) copies of the offending posts; (2) sufficient evidence to demonstrate the posts are false, unlawful, or violate the terms of an agreement; (3) sufficient evidence to show that the comments are directed at you, if necessary; and (4) evidence demonstrating that you have suffered damage as a result of the comments. You should be careful to save copies of the offending posts before alerting the anonymous user that action is being taken, in order to guard against any attempt to edit, delete, or restrict access to the comments.

Step Three: Sue The Troll!

Once you have an order compelling disclosure of the anonymous user’s identity, you can serve that order on the service provider or website and expect a response. However, the response may not always identify the user, but may only give you the user’s IP address or other electronic information. You may need to issue additional subpoenas to service providers in order to identify the user of the IP address and ultimately discover the anonymous user’s identity.

Despite having an order in hand compelling disclosure of the anonymous user’s identity, you may still face obstacles from the service provider or website. Typically, large companies that host comments online resist disclosure of their users’ personal information for as long as possible. Thus, they may raise objections to disclosure, justified or not, ranging from invocation of the Stored Communications Act to the Video Privacy Protection Act. But, with the order in hand, you should be able to dispose of these objections through letter-writing, involving the court only if necessary.

Once you know the identity of the anonymous user, you can now amend the lawsuit to substitute the appropriate person for “John Doe.” With an actual defendant named, you can then begin the lawsuit in earnest to hold the no-longer-anonymous user liable for trolling online.

Conclusion

The prospect of trying to identify an anonymous online user can be daunting. But, armed with an understanding of the First Amendment and the applicable procedure, you can readily evaluate whether an anonymous user has engaged in unlawful conduct and whether you can successfully hunt down the troll to hold him or her liable. Good hunting!


References:

[1] Pew Research Center, December, 2016, “Online Shopping and E-Commerce.”

[2] YP Marketing Solutions, 2016, “The Why Before the Buy.”

[3] Id.

[4] Id.

[5] Reno v. ACLU, 521 U.S. 844, 897, 117 S. Ct. 2329, 2344 (1997).

[6] In re Anonymous Online Speakers, 661 F.3d 1168, 1173 (9th Cir. 2011) (citing Meyer v. Grant, 486 U.S. 414, 422, 425, 108 S. Ct. 1886, 100 L. Ed. 2d 425 (1988)).

[7] McIntyre v. Ohio Elec. Comm’n, 514 U.S. 334, 342, 115 S. Ct. 1511, 1516 (1995) (“[A]n author’s decision to remain anonymous, like other decisions concerning omissions or additions to the content of a publication, is an aspect of the freedom of speech protected by the First Amendment.”); Anonymous Online Speakers, 661 F.3d at 1173 (“Although the Internet is the latest platform for anonymous speech, online speech stands on the same footing as other speech—there is “no basis for qualifying the level of First Amendment scrutiny that should be applied” to online speech.”); Doe v. Reed, 561 U.S. 186, 218, n.4, 130 S. Ct. 2811, 2831 (2010) (recognizing that the freedom of speech “can be burdened by a law that exposes a speaker to harassment, changes the content of his speech, or prejudices others against his message”)

[8] Anonymous Online Speakers, 661 F.3d at 1173.

[9] Chaplinsky v. N.H., 315 U.S. 568, 571-72, 62 S. Ct. 766, 769 (1942).

[10] Mobilisa, Inc. v. Doe, 217 Ariz. 103, 106-7, ¶¶ 2-9, 170 P.3d 712, 715-16 (Ct. App. 2007).

[11] Anonymous Online Speakers, 661 F.3d at 1173.

[12] Glassdoor, Inc. v. Superior Court, 9 Cal. App. 5th 623, 626-27, 215 Cal. Rptr. 3d 395, 399-400 (Cal. App. 6th Dist. 2017).

[13] Salehoo Group, Ltd. v. ABC Co., 722 F. Supp. 2d 1210, 1212-13 (W.D. Wash. 2010)

[14] Yelp, Inc. v. Hadeed Carpet Cleaning, Inc., 62 Va. App. 678, 686-88, 752 S.E.2d 554, 557-58 (Va. Ct. App. 2014).

[15] https://www.facebook.com/terms.

[16] https://twitter.com/tos?lang=en.

[17] https://www.facebook.com/help/contact/191381691012854; https://support.twitter.com/articles/15789.

[18] https://www.google.com/intl/en-GB/policies/terms/.

[19] Seitz v. Rheem Mfg. Co., 544 F. Supp. 2d 901, 907 (D. Ariz. 2008) (“Although a corporation may maintain an action for libel, it has no personal reputation and may be libeled only by imputation about its financial soundness or business ethics.”).

[20] Desert Palm Surgical Group, P.L.C. v. Petta, 236 Ariz. 568, 579, ¶ 26, 343 P.3d 438, 449 (Ct. App. 2015).

[21] Read v. Phoenix Newspapers, 169 Ariz. 353, 355, 819 P.2d 939, 941 (1991) (“In a civil action for libel, the truth of the contents of the allegedly libelous statement is a complete defense.”)

[22] Yetman v. English, 168 Ariz. 71, 76, 811 P.2d 323, 328 (1991) (“The key inquiry is whether the challenged expression, however labeled by defendant, would reasonably appear to state or imply assertions of objective fact.”)

[23] Makaeff v. Trump Univ., LLC, 715 F.3d 254, 270 (9th Cir. 2013) (recognizing that a limited liability company can be an all-purpose public figure or a limited purpose public figure)

[24] Dube v. Likins, 216 Ariz. 406, 411, ¶ 8, 167 P.3d 93, 98 (Ct. App. June 28, 2007) (citing Miller v. Hehlen, 209 Ariz. 462, 471, ¶ 32, 104 P.3d 193, 202 (App. 2005)).

[25] W. Tech. v. Sverdrup & Parcel, Inc., 154 Ariz. 1, 4 (Ct. App. 1986)

[26] POM Wonderful LLC v. Coca-Cola Co., 134 S. Ct. 2228, 2234 (2014) (“The Lanham Act creates a cause of action for unfair competition through misleading advertising or labeling.”)

[27] 18 U.S.C. § 1836; A.R.S. § 44-401, et seq.

[28] Columbia Ins. Co. v. Seescandy.com, 185 F.R.D. 573, 578-80 (N.D. Cal. 1999); see also Anonymous Online Speakers, 661 F.3d at 1177 (recognizing that “[t]he lowest bar that courts have used is the motion to dismiss or good faith standard.”).

[29] Id. at 578-80.

[30] Anonymous Online Speakers, 661 F.3d at 1176-77; Salehoo, 722 F. Supp. 2d at 1216 (finding that “the prima facie standard is appropriate in order to guarantee that the plaintiff has brought viable claims in connection with his or her attempt to unmask the anonymous defendant.”); Lassa v. Rongstad, 294 Wis. 2d 187, 215 (Wis. 2006) (applying the motion to dismiss standard before compelling disclosure of anonymous identity); Hadley v. Doe, 2015 IL 118000, ¶ 27 (Ill. 2015).

[31] John Doe No. 1 v. Cahill, 884 A.2d 451, 460 (Del. 2005)

[32] Cahill, 884 A.2d at 460; Mobilisa, 217 Ariz. at 110, ¶ 22; Solers, Inc. v. Doe, 977 A.2d 941, 954 (D.C. 2009); Doe v. Coleman, 497 S.W.3d 740, 747 (Ky. 2016); Ghanam v. Does, 303 Mich. App. 522, 541-42 (2014); Ottinger v. Non-Party The Journal News, 2008 N.Y. Misc. LEXIS 4579, **4-7 (N.Y. Sup. Ct. 2008); Pilchesky v. Gatelli, 12 A.3d 430, 442 (Pa. Super. Ct. 2011); In re Does 1-10, 242 S.W.3d 805, 821-23 (Tex. App. Texarkana 2007); Krinsky v. Doe 6, 159 Cal. App. 4th 1154, 1167-73 (2008); Indep. Newspapers, Inc. v. Brodie, 966 A.2d 432, 457-58 (Md. 2009); Mortgage Specialists v. Implode-Explode Heavy Indus., 999 A.2d 184, 193, ¶ 13 (N.H. 2010).

[33] Mobilisa, 217 Ariz. at 112, ¶ 28; Coleman, 497 S.W.3d at 747; Ottinger, 2008 N.Y. Misc. LEXIS at **4-7; Brodie, 966 A.2d at 457-58;Mortgage Specialists, 999 A.2d at 193, ¶ 13.

[34] Mobilisa, 217 Ariz. at 112, ¶ 28; Solers, 977 A.2d at 954; Dendrite Intern., Inc. v. Doe No. 3, 342 N.J. Super. 134, 156-58 (2001); Ghanam, 303 Mich. App. at 541-42; Ottinger, 2008 N.Y. Misc. LEXIS at **4-7; Krinsky, 159 Cal. App. 4th at 1167-73; Brodie, 966 A.2d at 457-58;Mortgage Specialists, 999 A.2d at 193, ¶ 13.

[35] Glassdoor, 9 Cal. App. 5th at 636, 215 Cal. Rptr. 3d 395, 407.

This post was written by Kevin Heaphy of   2017 Ryley Carlock & Applewhite. A Professional Association

This Week in Congress – February 2, 2015 re: 2016 Budget Proposal, DHS, and more

Covington_NL

President Obama will release his Fiscal Year (FY) 2016 budget proposal today, requesting roughly $4 trillion in spending for the upcoming year and specifying the Administration’s views on how and from what sources the federal government should be raising money and how and on what it should be spending it for the fiscal year beginning October 1.  The President’s budget sets off a fiscal showdown with the Republican-led Congress, whose members generally view the Administration’s proposals as higher taxes and higher government spending.  Many of President Obama’s cabinet members will be on Capitol Hill this week and in the coming weeks, testifying before House and Senate committees as to the merits of the budget proposal and highlighting areas of potential compromise as Congress develops its own budget for FY 2016.  Treasury Secretary Jacob Lew will be before the House Ways and Means and Senate Budget Committees on Tuesday, while IRS Commissioner John Koskinen will be before the Senate Finance Committee.  On Wednesday, Shaun Donovan, Director of the Office of Management and Budget, is scheduled to appear before the House Budget Committee and Sylvia Mathews Burwell, Secretary of the Department of Health and Human Services, appears before the Senate Finance Committee.  In addition, the Senate Armed Services Committee will hold the confirmation hearing this week for Ashton Carter to serve as Secretary of Defense.  With Committee Chairman John McCain’s strong desire for increased defense spending, the budget will no doubt be front and center in that hearing as well.

The House of Representatives returns to legislative business on Monday taking up three bills concerning programs at the Department of Homeland Security.  On Tuesday, the House will vote on H.R. 596, a bill that would repeal the Affordable Care Act while directing House committees to develop alternatives.  Since the Affordable Care Act was signed into law in 2010, Congress has voted 54 times on measures to repeal, revamp, or make technical changes to it.  On Wednesday, members will consider H.R. 50, the Unfunded Mandates Information and Transparency Act of 2015, sponsored by Rep. Virginia Foxx.  This legislation, which passed the House in 2014 by a vote of 234-176, would impose stricter requirements for how and when federal agencies must disclose the cost of federal mandates and equips both Congress and the public with tools to determine the true costs of regulations.  On Thursday, the House will vote on H.R. 527, the Small Business Regulatory Flexibility Improvements Act of 2015, sponsored by Representative Steve Chabot, which requires federal agencies to consider the economic effects of regulations on small business before imposing overly burdensome mandates that prevent growth and job creation.  This legislation has also passed the Republican-controlled House in the two previous Congresses.

The Senate returns on Monday and is expected to vote on H.R. 203, the Clay Hunt Suicide Prevention for American Veterans Act, a bill that the House passed unanimously.  The bill would require annual evaluations of the Department of Veterans Affairs’ mental health and suicide prevention programs.  The Senate will then seek to turn to H.R. 240, an appropriations bill that will fund the Department of Homeland Security for the remainder of 2015; the current budget for DHS expires  Feb. 27. While the bill provides $40 in funding for DHS, it also blocks any of the funds from being used to carry out President Obama’s new immigration and deportation policy announced in an executive order last November.  President Obama has pledged to veto the measure if the immigration rider is included.  Leader McConnell is unlikely to be able to get the 60 votes needed on cloture on the motion to proceed to the appropriations bill.  Once the cloture vote fails, he will need to figure out an alternative means of considering the legislation.  He has put a clean Democratic DHS appropriations bill on the Senate Calendar under Rule 14, so moving to that bill after the failed cloture vote is one possibility.

In addition to the hearings focused on the President’s budget and on the Defense Secretary nomination, a list of other key congressional hearings this week is included below:

 Feb. 3

 House Committees

Global Threat Assessment
House Armed Services
Full Committee Hearing
Feb. 3, 10 a.m., 2118 Rayburn Bldg.

Flu Preparation and Prevention
House Energy and Commerce – Subcommittee on Oversight and Investigations
Subcommittee Hearing
Feb. 3, 10 a.m., 2123 Rayburn Bldg.

U.S. Interests in Western Hemisphere
House Foreign Affairs – Subcommittee on the Western Hemisphere
Subcommittee Hearing
Feb. 3, 11 a.m., 2172 Rayburn Bldg.

Immigration Law Assessment
House Judiciary
Full Committee Hearing
Feb. 3, 11 a.m., 2141 Rayburn Bldg.

Inspectors General Oversight
House Oversight and Government Reform
Full Committee Hearing
Feb. 3, 10:15 a.m., 2154 Rayburn Bldg.

NSF Research Facility Oversight
House Science, Space and Technology – Subcommittee on Oversight; House Science, Space and Technology – Subcommittee on Research and Technology
Committee Joint Hearing
Feb. 3, 10 a.m., 2318 Rayburn Bldg.

Energy and Transportation Issues
House Transportation and Infrastructure – Subcommittee on Railroads, Pipelines and Hazardous Materials
Subcommittee Hearing
Feb. 3, 10 a.m., 2167 Rayburn Bldg.

Fiscal 2016 Budget Issues – Treasury Secretary Jacob Lew
House Ways and Means
Full Committee Hearing
Feb. 3, 10 a.m., 1300 Longworth Bldg.

Airport Access Control Measures
House Homeland Security – Subcommittee on Transportation Security
Subcommittee Hearing
Feb. 3, 2 p.m., 311 Cannon Bldg.

Wounded Warrior Program
House Armed Services – Subcommittee on Military Personnel
Subcommittee Hearing
Feb. 3, 3:30 p.m., 2118 Rayburn Bldg.

Senate Committees

Military Compensation and Retirement Modernization Commission
Senate Armed Services
Full Committee Hearing
Feb. 3, 9:30 a.m., G-50 Dirksen Bldg.

Fiscal 2016 Budget – Treasury Secretary Jacob Lew
Senate Budget
Full Committee Hearing
Feb. 3, 10 a.m., 608 Dirksen Bldg.

U.S.-Cuba Relations
Senate Foreign Relations – Subcommittee on Western Hemisphere, Transnational Crime, Civilian Security, Democracy, Human Rights and Global Women’s Issues
Subcommittee Hearing
Feb. 3, 10 a.m., 419 Dirksen Bldg.

IRS Fiscal 2016 Budget Request – John Koskinen, Commissioner, Internal Revenue Service
Senate Finance
Full Committee Hearing
Feb. 3, 10:30 a.m., 215 Dirksen Bldg.

No Child Left Behind and Student Needs
Senate Health, Education, Labor and Pensions
Full Committee Hearing
Feb. 3, 10 a.m., 216 Hart Bldg.

Joint Committees
Veterans Affairs Issues
House Veterans’ Affairs; Senate Veterans’ Affairs
Committee Other Event
Feb. 3 TBA, Veterans Affairs, 810 Vermont Ave. NW

Feb. 4

House Committees

Military Compensation and Retirement Commission
House Armed Services
Full Committee Hearing
Feb. 4, 10 a.m., 2118 Rayburn Bldg.

Fiscal 2016 Budget Issues – Shaun L.S. Donovan, Director, Office of Management and Budget
House Budget
Full Committee Hearing
Feb. 4, 10:30 a.m., 210 Cannon Bldg.

U.S. Schools and Workplaces
House Education and the Workforce
Full Committee Hearing
Feb. 4, 10 a.m., 2175 Rayburn Bldg.

HUD Ethical Oversight
House Financial Services – Subcommittee on Oversight and Investigations
Subcommittee Hearing
Feb. 4, 10 a.m., 2167 Rayburn Bldg.

U.S.-Cuba Policy Assessment
House Foreign Affairs
Full Committee Hearing
Feb. 4, 10 a.m., 2172 Rayburn Bldg.

Legal Workforce Act
House Judiciary – Subcommittee on Immigration and Border Security
Subcommittee Hearing
Feb. 4, 10 a.m., 2141 Rayburn Bldg.

Furthering Asbestos Claim Transparency Act
House Judiciary – Subcommittee on Regulatory Reform, Commercial and Antitrust Law
Subcommittee Hearing
Feb. 4, 1 p.m., 2141 Rayburn Bldg.

Palestinian Authority and International Criminal Court
House Foreign Affairs – Subcommittee on the Middle East and North Africa
Subcommittee Hearing
Feb. 4, 2 p.m., 2172 Rayburn Bldg.

Senate Committees

Secretary of Defense Nomination
Senate Armed Services
Full Committee Confirmation Hearing
Feb. 4, 9:30 a.m., G-50 Dirksen Bldg.

HHS Fiscal 2016 Budget Request – Sylvia Mathews Burwell, Secretary, United States Department of Health and Human Services
Senate Finance
Full Committee Hearing
Feb. 4, 10 a.m., 215 Dirksen Bldg.

Cybersecurity and Private Sector Issues
Senate Commerce, Science and Transportation
Full Committee Hearing
Feb. 4, 10 a.m., 253 Russell Bldg.

Implications of Immigration Action
Senate Homeland Security and Governmental Affairs
Full Committee Hearing
Feb. 4, 10 a.m., 342 Dirksen Bldg.

Vessel Discharge Regulations
Senate Commerce, Science and Transportation – Subcommittee on Oceans, Atmosphere, Fisheries and Coast Guard
Subcommittee Hearing
Feb. 4, 2:30 p.m., 253 Russell Bldg.

Indian Affairs Legislation
Senate Indian Affairs
Full Committee Markup
Feb. 4, 2:30 p.m., 628 Dirksen Bldg.

Loan Leveraging Issues
Senate Indian Affairs
Full Committee Oversight Hearing
Feb. 4, 2:30 p.m., 628 Dirksen Bldg.

Financial Exploitation of Seniors
Senate Special Aging
Full Committee Hearing
Feb. 4, 2:15 p.m., 562 Dirksen Bldg.

Joint Committees

Proposed Waters Rule
Senate Environment and Public Works; House Transportation and Infrastructure
Committee Joint Hearing
Feb. 4, 10 a.m., HVC-210 Capitol Visitor Center

Feb. 5

House Committees

Drinking Water Protection Act
House Energy and Commerce – Subcommittee on Environment and the Economy
Subcommittee Hearing
Feb. 5, 10 a.m., 2123 Rayburn Bldg.

Senate Committees

Treasury Fiscal 2016 Budget Request – Treasury Secretary Jacob Lew
Senate Finance
Full Committee Hearing
Feb. 5, 10 a.m., 215 Dirksen Bldg.

Joint-Employer Standard
Senate Health, Education, Labor and Pensions
Full Committee Hearing
Feb. 5, 10 a.m., 430 Dirksen Bldg.

Judiciary Issues

Senate Judiciary
Full Committee Business Meeting
Feb. 5, 10:30 a.m., 226 Dirksen Bldg.

Kaitlyn McClure, Covington & Burling LLP Policy Advisor, co-authored this post.

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GoPro Announces Plans to Sell Millions In Stock

McBrayer NEW logo 1-10-13

Stock sell-off, a term which our readers may have come across before, refers to the selling of securities by a company, whether stocks or bonds or other commodities. According to Investopedia.com, sell-offs can occur for a variety of reasons, such as after a less than satisfactory earnings report or when oil prices significantly increase. A sell-off can be a smart way for companies to deal with uncertainties in the stock market, depending on how they are handled.

Recently, GoPro—the company famous for designing and manufacturing high-definition personal cameras—announced that it would be selling off $100 million worth of stock in order to free up capital to expand its business. The company went public in June, and it is not uncommon for companies to sell stock after a successful initial public offering, particularly when there is still a need to raise capital to launch the company to greater success.

In addition to the $100 million sell-off, existing shareholders are going to sell off $700 million. In total, the sell-off could increase the company’s capital by over 40 percent. That money will reportedly be going toward investment in human capital, technology, as well as infrastructure and potential acquisitions.

There are a variety of ways companies can utilize sell-offs to better position themselves in the marketplace. Regardless of the approach used, it is critical that the sell-off is situated in the context of a long-term plan for the company’s success. Companies considering a sell-off should, naturally, work with an experienced legal team to ensure the success of their efforts.

Source: San Jose Mercury News, “GoPro plans $100 million cash boost with stock sale,” Heather Somerville, Nov. 10, 2014.

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Jumpstart Your Startup: Entity Selection and Formation

vonBriesen

When starting a business, you must decide what form of business entity to establish. The “choice of entity” decision is one of the most important decisions facing new business owners. There are several forms of business to choose from, each of which generates different legal and tax consequences. That said, there is no single form of entity that is appropriate for every type of business owner.

The most common forms of business are the sole proprietorship, partnership, C corporation, S corporation, and limited liability company.

Sole Proprietorship

A sole proprietorship is the simplest business structure. It is an unincorporated entity owned and run by one individual with no distinction between the business and the individual owner. The owner is entitled to all profits and is personally responsible for all the business’ debts, losses, and liabilities.

A sole proprietorship needs to obtain the necessary licenses and permits for the industry in which the sole proprietorship does business. If the business operates under a name different than the individual, registering that name (e.g., DBA name, short for “doing business as”) with a state agency may be required.

Because the business and the owner are one and the same, the business itself is not taxed separately. The owner is responsible for and reports income, losses and expenses for income tax purposes.

Partnership

A partnership is the relationship between two or more persons who join to carry on a trade or business. Each partner may contribute money, property, labor, and/or skill, and, in return, each partner shares in the profits and losses of the business.

Because partnerships involve more than one person, it is important to develop a partnership agreement. The partnership agreement should document how future business decisions will be made, including how the partners will divide profits, resolve disputes, change ownership (i.e., bring in new partners or buy out current partners) and under what circumstances the partnership would be dissolved. In addition, owners of a partnership should determine which type of partnership to establish. The three most common types of partnership arrangements are:

  • General Partnership: Profits, liability, and management duties are presumed to be divided equally among all partners. If an unequal ownership distribution is preferred, the partnership agreement must document that preference. A general partnership ordinarily owns its assets and is responsible for its debts. It is important to note that in a general partnership, the individual partners are personally liable for all partnership debt, obligations and liabilities. No formal state registration and/or filing is required to form a general partnership.
  • Limited Partnership: A limited partnership requires at least one general partner and one limited partner. Limited partners are generally not liable for the debts and obligations of the limited partnership (though the general partners will be liable), but they must have restricted participation in management decisions. Limited partnerships ordinarily must be filed with a state.
  • Limited Liability Partnership: A limited liability partnership generally operates and is governed by the same rules as a general partnership, except: (1) its partners have limited liability for partnership debt, (2) it can choose to be taxed as a corporation or a partnership, and (3) it is formed by filing the appropriate documentation with a state.

Generally, a partnership must file an annual information return to report income, deductions, gains, and losses from its operations, but it does not pay income tax. Instead, it “passes through” any profits or losses to its partners. Each partner includes his or her share of the partnership income or loss on his or her individual tax return.

C Corporation

A C corporation is an independent legal entity incorporated in a single state, although it may do business in other states. Because a corporation is an independent legal entity, its existence continues until formally dissolved under the laws of the state in which it is incorporated. Ownership of a corporation is in the form of shares of stock, there is no limit to the number of stockholders, and there is no limit on the number of classes of stock a C corporation can issue. Additionally, the corporation itself, not the stockholders, is generally liable for the debts and obligations of the business.

For corporate governance, a corporation generally has a board of directors and bylaws. The initial directors may be named in the articles of incorporation or elected shortly after filing the articles of incorporation. Thereafter, directors are elected as set out in the articles of incorporation or bylaws.

For federal income tax purposes, a C corporation is recognized as a separate taxpaying entity. The profit of a C corporation is taxed to the corporation when earned, and then is taxed to the stockholders if and when distributed as dividends. This creates a double tax. The corporation does not receive a tax deduction when it distributes dividends to stockholders and stockholders cannot deduct any loss of the corporation.

S Corporation

An S corporation is similar to a C corporation, except that an S corporation passes income, losses, deductions, and credits through to its stockholders for federal tax purposes. Stockholders of an S corporation report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. Thus, an S corporation generally avoids double taxation on corporate income.

In order to become an S corporation, the corporation must make appropriate filings with the IRS. To qualify for S corporation status, the corporation must meet the following requirements:

  • Be a domestic corporation;
  • Have only allowable stockholders, which are individuals, certain trusts and estates, and may not include partnerships, corporations (unless owned as a qualified subchapter S subsidiary), or non-resident aliens;
  • Have no more than 100 stockholders;
  • Have only one class of stock; and
  • Not be an ineligible corporation (e.g., certain financial institutions and insurance companies).

S corporations file specific tax returns and tax forms with the IRS.

Limited Liability Company

A limited liability company (“LLC”) is a hybrid entity that is treated like a corporation for limited liability purposes, but for tax purposes can choose to be taxed either as a corporation, partnership, or, in some cases, a disregarded entity (i.e., single-member LLC). A limited liability company is created under state law by filing articles of organization with a state. The owners of an LLC are referred to as “members” and generally may include individuals, corporations, other LLCs and other types of entities. There typically is no maximum number of members.

LLCs with more than one owner should have an operating agreement. An operating agreement usually includes provisions that address ownership interests, allocation of profits and losses, and members’ rights and responsibilities, among others.

Since the federal government does not consider an LLC a separate legal entity, an LLC with at least two members is, by default, classified as a partnership for federal tax purposes unless it files with the IRS and affirmatively elects to be treated as a corporation for tax purposes. An LLC with only one member is referred to as a single-member LLC and is treated as one and the same as its owner for income tax purposes (but as a separate entity for purposes of employment tax and certain excise taxes), unless it affirmatively elects to be treated as a corporation. An LLC may also elect to be taxed as an S corporation.

The business structure you choose will have significant legal and tax implications. In order to identify the best structure for you, it is important to understand your business goals and how the characteristics of each type of business entity can help you achieve those goals.

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Can the Town Make Me Change My Sign?

Giordano Logo

A business’ signage can be one of the most distinctive characteristics of its brand and one of its most important assets.  This is especially true when the sign display’s the business’ federally registered trademark and color is a feature of the mark.  But what happens when that brand runs afoul of state and local laws?

It is common place for commercial real estate development plans to impose requirements on the characteristics of the signs that tenants may display in the development.  Sometimes, those requirements impose restrictions on the colors that such signs may display.  For owners of federally registered trademarks where color is claimed as a feature of the mark, the last thing they want is to have to change the color of their sign.

For example, imagine telling McDonalds that its famous golden and red sign must be displayed in other colors, say, like this:

McDonalds Logo w Inverted Colors

For most consumers, I suspect this sounds ridiculous.  But that is exactly the obstacle that federal brand owners must overcome when faced with local zoning restrictions on color.

Fortunately, the federal trademark law provides some relief.  Or does it?   The Lanham Act expressly provides that federal law preempts state law by providing (in part):

No State or other jurisdiction of the United States or any political subdivision or any agency thereof may require alteration of a registered mark …. (15 USCA §1121(B))

While this may seem pretty clear on its face, courts are split as to whether towns can lawfully impose color restrictions on signs displaying a federally registered trademark.

Two courts in the 9th Circuit (including the 9th Circuit Court of Appeals) have shot down Tempe, Arizona’s attempts to impose such color restrictions under this section of the Lanham Act.  Blockbuster Videos, Inc. v. City of Tempe, 141 F.3d 1295 (1998); Desert Subway, Inc. v. City of Tempe, 322 F. Supp.2d 1036 (2003).  Conversely, two courts in the 2d Circuit (including  the 2d Circuit Court of Appeals) have upheld town zoning boards’ imposition of signage color restrictions as superior to the rights of federally registered trademark holders.  Payless Shoesource, Inc. v. Town of Penfield, NY, 934 F. Supp. 540 (1996); Lisa’s Party City, Inc. v. Town of Henrietta, 185 F.3d 12 (1999).

According to the 9th Circuit courts, from looking at the legislative history, it is clear that while local governments can prohibit the display of outdoor signs altogether, there is nothing to suggest that local zoning ordinances may require alteration of trademarks.  Looking at the identical legislative history and, in some cases, quoting from the same testimony, the 2d Circuit courts agreed that the law would allow local zoning ordinances to prohibit outdoor signs altogether or even materially restrict their size.  However, the 2d Circuit found that the statute was intended to prohibit state-mandated changes in the trademark  itself since the brand owner would be free to use the unaltered mark in every other aspect of its business.

So who is right?

Like any other situation where courts are split geographically, they both are.  Until the Supreme Court takes up the issue, local ordinances in the 2d Circuit are free to place restrictions on colors used in trademarks displayed on signs, whereas in the 9th Circuit (especially, Tempe, Arizona), local ordinances may not.  For those of us in other circuits, the moral of the story for brand owners is to be mindful of local zoning restrictions before committing to a store location.  Real estate developers should also be mindful of signage restrictions included in their plans when seeking local approvals.

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