Author: National Law Forum

A group of in-house attorneys developed the National Law Review on-line edition to create an easy to use resource to capture legal trends and news as they first start to emerge. We were looking for a better way to organize, vet and easily retrieve all the updates that were being sent to us on a daily basis.In the process, we’ve become one of the highest volume business law websites in the U.S. Today, the National Law Review’s seasoned editors screen and classify breaking news and analysis authored by recognized legal professionals and our own journalists. There is no log in to access the database and new articles are added hourly. The National Law Review revolutionized legal publication in 1888 and this cutting-edge tradition continues today.

Retail Law Conference 2012

The National Law Review is pleased to bring you information about the upcoming Retail Law Conference:

at the Westin Galleria in Dallas, Texas

November 7-9, 2012

This event is the perfect opportunity to discuss the latest issues affecting the retail industry while obtaining important continuing legal education (CLE) credits.

Open to retail and consumer product general counsel, senior legal executives and in-house attorneys and their teams, the exceptional dialogue presented at this conference will help your organization navigate the current legal landscape of the industry.

Unpaid Internships: Free Today . . . Costly Tomorrow

An article by Rachel D. Gebaide and Melody B. Lynch of Lowndes, Drosdick, Doster, Kantor & Reed, P.A. was published recently in The National Law Review:

With the summer season approaching, college and high school students will be looking for opportunities to improve their resumes and gain valuable experience. The prospect of hiring a talented student – or someone transitioning between careers – who is willing to work for free is enticing to many employers.

In many cases, however, the unpaid aspect of the internship violates the Fair Labor Standards Act (FLSA). Lawsuits by unpaid interns to recover wages, including liquidated damages and attorney’s fees, although still uncommon, are on the rise.

Unpaid internship programs can be an appropriate method of providing training if they are designed properly and are primarily for the benefit of the intern and not the employer. However, to paraphrase this week’s Time magazine article titled “Hard Labor: Inside the Mounting Backlash Against Unpaid Internships,” employers are not entitled to free labor just because they slap the title “intern” on the position.

The U.S. Department of Labor uses the six criteria below to determine whether an unpaid internship falls outside the employment context covered by the FLSA.

  • The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
  • The internship experience is for the benefit of the intern;
  • The intern does not displace regular employees, but works under close supervision of existing staff;
  • The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
  • The intern is not necessarily entitled to a job at the conclusion of the internship; and
  • The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

We recommend that you evaluate your internship programs against these six criteria prior to extending offers of unpaid employment to prospective interns. Interns are unlikely to be exempt employees under the FLSA. As a result, if your internship program does not meet all six criteria, you should plan to pay interns at least minimum wage, currently $7.67 in Florida, and, when necessary, the applicable overtime rate for hours worked over 40 in a work week.

© Lowndes, Drosdick, Doster, Kantor & Reed, PA

8th Annual FCPA & Anti-Corruption Compliance Conference

The National Law Review is pleased to bring you information about the upcoming 8th FCPA & Anti-Corruption Compliance Conference:

8th FCPA and Anti-Corruption Compliance Conference
Identifying Changes to the Global Anti-Corruption Compliance Landscape to Maintain and Upgrade Your Existing Compliance Program

Event Date: 12-14 Jun 2012
Location: Washington, DC, USA

Beyond dealing with the FCPA and UK Bribery Act, there are upcoming changes to global Anti-Compliance initiatives being enacted by other major countries. It is imperative that organizations are made aware of these new rules and regulations to be able to meld them all into their organization’s anti-corruption compliance program. Maintaining a robust global compliance program along with performing proper and detailed 3rd party due diligence is of the upmost importance.

Marcus Evans invites you to attend our 8th Annual Anti-Corruption & FCPA Conference. Hear from leading executives within various industries on how to identify new areas of concern when dealing with bribery or working within a company to update an anti-corruption compliance program.

Attending this event will allow you to learn how to mitigate the effects of any possible instances of corruption and bribery both at home and abroad. Discuss solutions and best practices that companies have found when dealing with their anti-corruption compliance programs. This conference will not only review the newest enforcement cases, but also highlight practical solutions to problems dealing with FCPA and global anti-corruption measures.

Attending this conference will allow you to:

-Overcome the issues in dealing and conducting an internal investigation with Dell
-Identify anti-corruption liability concerns for US companies when engaging in Joint Ventures and Mergers and Acquisitions with Crane Co.
-Perform anti-corruption audits to better identify gaps in the compliance program with SojitzCorporation of America
-Promote a culture of ethics within an organization to combat non-compliance with Morgan Stanley
-Assess the continued challenges in conducting a 3rd party due diligence program with Parker Drilling

The marcus evans 8th Annual Anti-Corruption & FCPA Conference is a highly intensive, content-driven event that includes, workshops, presentations and panel discussions, over three days. This conference aims to bring together heads, VP’s, directors, chief compliance officers, and in-house counsel in order to provide an intimate atmosphere for both delegates and speakers.

This is not a trade show; our 8th Annual Anti-Corruption & FCPA Conference is targeted at a focused group of senior level executives to maintain an intimate atmosphere for the delegates and speakers. Since we are not a vendor driven conference, the higher level focus allows delegates to network with their industry peers.

DOJ Reverses Course and Announces Favorable Internet Gambling Policy

Sills Cummis & Gross P.C. attorney, Jason K. Gross recently had an article, DOJ Reverses Course and Announces Favorable Internet Gambling Policy published in The National Law Review:

On December 23, 2011, the Office of Legal Counsel (“OLC”) of the U.S. Department of Justice (“DOJ”) revealed that the DOJ had wholly rejected its long-held interpretation of the 1961 Federal Wire Act, 18 U.S.C. § 1084 (“Wire Act”) by concluding that the Wire Act prohibits only sports betting.Until then, the DOJ had consistently declared that the Wire Act barred both casino games and sports betting. The DOJ’s significant policy shift increases the likelihood of legal Internet casino gambling in the U.S., although the DOJ policy does not actually legalize such Internet gambling.

The scope of the Wire Act has been subject to varying interpretations over the past dozen years. The uncertain legal status of Internet gambling in the U.S. has frustrated many U.S. casino gaming companies, which have not participated in the Internet gambling boom for fear of violating applicable law and losing their valuable casino regulatory licenses. These companies have watched as U.S. citizens spend an estimated $4 billion annually gambling online at Internet casinos located outside the U.S. The U.S. gaming industry has recently acknowledged what the casual player has been saying for years – namely, that regulation and not prohibition is needed.

The prior DOJ position has also frustrated U.S. online gamblers, who play online poker and other games at Internet casinos run by offshore casino operators. First and foremost, some online gamblers are concerned that they may not be able to cash out their wagering accounts and will have less than ideal enforcement remedies in the event of any such difficulty. Similarly, some online gambling sites may not be subject to the stringent internal controls and regulatory rules that are prevalent in Las Vegas, Atlantic City and other U.S. jurisdictions that permit commercial casino gaming. Online gamblers have begrudgingly accepted such uncertainty and risk in exchange for the convenience and excitement of gambling online.

In the U.S., lawful brick-and-mortar casinos and sports betting operations are regulated by individual states through casino regulatory agencies, which enact laws to permit such activities. The new DOJ policy does not constitute federal regulation of Internet gambling, but it removes significant obstacles that have prevented state governments from implementing laws, rules and regulations to regulate Internet gambling and issue licenses to Internet gambling operators and their technology providers. The DOJ’s policy shift will likely encourage individual state governments and/or the U.S. Congress to enact the necessary legislation to permit lawful Internet gambling in the U.S.

The DOJ Letters

The DOJ policy is summarized in letters sent by Assistant Attorney General Ronald Weich of the OLC to U.S. Senators Harry Reid and Jon Kyl on December 23, 2011 (“DOJ Letters”). The DOJ Letters are based on an OLC memorandum dated September 20, 2011, authored by Assistant Attorney General Virginia A. Seitz (the “OLC Memorandum”), which the DOJ did not publicly disclose until December 23, 2011. The DOJ Letters confirmed that the DOJ had historically interpreted the Wire Act to ban all forms of Internet gambling, including sports betting and traditional casino-type games like poker. The DOJ noted, however, that there appeared to be a conflict between the Wire Act and a different law relating to Internet gambling, the Unlawful Internet Gambling Enforcement Act of 2006 (“UIGEA”). As more fully described below, the “unlawful Internet gaming” of the UIGEA does not include intra-state transactions that, among other things, are routed across state lines.

The DOJ Letters provide that, according to the OLC, “the Wire Act only applies to the transmission of bets or information assisting in the placing of bets or wagers relating to sporting events or contests.” See DOJ Letter to Senator Harry Reid dated December 23, 2011, at 1. The OLC Memorandum, which is discussed below, explains the DOJ’s reasoning and specifically addresses why and how the OLC rejected the prior DOJ interpretation of the Wire Act.

The Wire Act

The Internet did not exist when the 1961 Federal Wire Act was enacted, but the Internet has led to increasing debate over its applicability to certain forms of gambling. If the Wire Act is read broadly to apply to all forms of gambling, then all Internet gambling is illegal in the U.S. However, if the Wire Act is interpreted narrowly to apply only to sports betting, then some forms of Internet gambling could be legal (subject, of course, to other U.S. laws). The Wire Act provides that

[w]hoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, shall be fined under this title or imprisoned not more than two years, or both. 18 U.S.C. § 1084(a).

The DOJ Office Of Legal Counsel Memorandum

The OLC Memorandum specifically considered the issue of whether proposals by the states of New York and Illinois to use the Internet and out-of-state transaction processors to sell lottery tickets to in-state adults violate the Wire Act. In connection with its analysis, the DOJ also addressed the particular concerns raised by Senators Reid and Kyl related to the Wire Act, i.e., whether it prohibits all gambling or just sports betting.

The OLC Memorandum discussed the following factual scenarios: New York’s lottery proposal contemplated the printing of some virtual tickets that would be electronically delivered over the Internet to computers or mobile phones located inside the state of New York, as well as the routing of all transaction data from the customer’s location in New York to the lottery’s data centers in New York and Texas through networks controlled in Maryland and Nevada. Illinois’ proposal involved the sale of lottery tickets to adults over the Internet, which could have included the routing of data across state lines over the Internet.

In analyzing the relevant issues, the OLC sought to distinguish its own analysis and conclusions from that of the DOJ’s Criminal Division. As part of its research, the OLC sought the Criminal Division’s interpretation of the Wire Act. The Criminal Division advised the OLC that

“[t]he Department has uniformly taken the position that the Wire Act is not limited to sports wagering and can be applied to other forms of interstate gambling.” The [Criminal] Division also explains that “the Department has consistently argued under the Wire Act that, even if the wire communication originates and terminates in the same state, the law’s interstate commerce requirement is nevertheless satisfied if the wire crossed state lines at any point in the process.” Taken together, these interpretations of the Wire Act, “lead[] to the conclusion that the [Act] prohibits” states from “utiliz[ing] the Internet to transact bets or wagers,” even if those bets or wagers originate and terminate within the state. OLC Memorandum, at 2 (quoting Memorandum for David Barron, Acting Assistant Attorney General, Office of Legal Counsel, DOJ, from Lanny A. Brewer, Assistant Attorney General, Criminal Division, DOJ (July 12, 2010) (internal citations omitted).

The Criminal Division acknowledged to the OLC, however, that it had doubts about its long-held position. The Criminal Division noted that its own interpretation of the Wire Act seemed to conflict with another gambling law, the UIGEA, 31 U.S.C. §§ 5361-5367 (2006) (prohibiting any person engaged in the business of betting/wagering from accepting any credit or funds from another person in connection with the latter person’s engaging in “unlawful Internet gambling”), which appears to allow intermediate out-of-state routing of electronic data related to lawful lottery transactions that otherwise occur in-state. OLC Memorandum, at 2. The OLC added that, under the UIGEA, “‘unlawful Internet gambling’ does not include bets ‘initiated and received or otherwise made exclusively within a single State.’” Id. (quoting 31 U.S.C. § 5362(10)(B)).

The OLC’s analysis was based, in large part, on its interpretation of the actual language of the Wire Act, which differed from that of the Criminal Division. Of particular interest, the OLC determined that Subsection 1084(a) contained two (2) broad clauses (as opposed to the Criminal Division, which had interpreted the same provision to have three (3) separate clauses), as follows:

  • Clause 1 prohibits anyone engaged in the business of betting or wagering from knowingly using a wire communication facility “for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest.” See OLC Memorandum, at 4 (quoting 18 U.S.C. § 1084(a)).
  • Clause 2 prohibits any such person from knowingly using a wire communication facility to transmit communications that entitle the recipient to “receive money or credit” either “as a result of bets or wagers” or “for information assisting in the placing of bets or wagers.” Id.

Regarding Clause 1, the OLC concluded that “sporting event or contest” modifies both instances of the phrase “bets or wagers,” even though the contrary interpretation is plausible. Id. at 5. In reaching this conclusion, the OLC reasoned, in part, that the contrary interpretation would make absolutely no sense, stating that, “it is difficult to discern why Congress, having forbidden the transmission of all kinds of bets or wagers, would have wanted to prohibit only the transmission of information assisting in bets or wagers concerning sports, thereby effectively permitting covered persons to transmit information assisting in the placing of a large class of bets or wagers whose transmission was expressly forbidden by the clause’s first part.” Id. (citations omitted) (emphasis in original). Therefore, the OLC concluded that the Wire Act was intended to prohibit the use of wire communication facilities to transmit (a) bets or wagers on sporting events or contests, and (b) betting or wagering information on sporting events or contests.

Regarding Clause 2, the OLC stated that the references to “bets or wagers” refer to “bets or wagers on any sporting event or contest,” as it concluded in regard to Clause 1. Id. at 7. While recognizing that the language could certainly have been more clearly stated, the OLC found comfort in “the fact that the phrase ‘in interstate and foreign commerce’ is likewise omitted from the second clause, even though, in the OLC’s opinion Congress likely intended all the prohibitions in the Wire Act, including those in the second clause, to be limited to interstate or foreign (as opposed to intrastate) wire communications.” Id. (citations omitted) (emphasis in original).

The OLC determined that limiting the Wire Act to sports-related betting is the better interpretation. Moreover, the OLC asserted that it is counter-intuitive for subsection 1084(a) to contain some prohibitions that apply solely to sports-related gambling and others to all gambling. To emphasize its argument, the OLC stated:

We think it is unlikely that Congress would have intended to permit wire transmissions of non-sports bets and wagers, but prohibit wire transmissions through which the recipients of those communications could receive money or credit as a result of those bets. We think it similarly unlikely that Congress would have intended to allow the transmission of information assisting in the placing of bets or wagers on non-sporting events, but then prohibit transmissions entitling the recipient to receive money or credit for the provision of information assisting in the placing of those lawfully-transmitted bets. Id. at 8.

The OLC also engaged in a lengthy analysis of the legislative history of Section 1084(a) and concluded that Congress’s overriding goal in the Wire Act was to stop the use of wire communications for sports-related betting. In addition, the OLC found support in the fact that Congress enacted a separate gambling statute, the Interstate Transportation of Wagering Paraphernalia Act, 18 U.S.C. §1953 (“Paraphernalia Act”) on the same day as Congress enacted the Wire Act. OLC relied on the fact that the Paraphernalia Act expressly regulated lottery-style games in addition to sports-related gambling in that statute, but not in the contemporaneous Wire Act, to support its conclusion that Congress did not intend to reach non-sports wagering in the Wire Act. Id. at 11.

The OLC determined that it did not need to specifically answer the narrow question relating to lotteries – whether the federal gambling laws prohibit state lotteries from using the Internet to sell tickets to in-state adults where the transmission crosses state lines or is routed to an out-of-state transaction processor –  because the OLC determined that, “the Wire Act only applies to sports-related gambling activities in interstate and foreign commerce” Id. at 12. Having determined that the state lotteries conducted by New York and Illinois do not relate to sporting events, the operation of such lotteries on the Internet would not violate the Wire Act.

Next Steps

A. State Legislation

For several years, certain U.S. states have sought to enact legislation to license operators of intrastate-only Internet gambling, despite the confusion over the legality of such activity.  Many of these state bills have been specifically limited to online poker, due to a general perception that legislators and the public would be more receptive to online poker than a full roster of online casino-type games.

In fact, the state of Nevada on December 22, 2011 — one day before the DOJ publicly announced its policy change — approved its own comprehensive regulatory framework for conducting online poker solely within Nevada.  Several other states have introduced, or are seeking to introduce, intra-state online gambling legislation, including the states of California, Florida, Iowa and New Jersey, as well as Washington DC.  It is also conceivable that U.S. states could agree with each other to allow inter-state Internet gambling, much like states have done with horse racing and lotteries, such as Mega Millions and Lotto.

B. Federal Legislation

Federal regulation would provide a single, comprehensive mechanism for consistent licensing, operation and enforcement of U.S. Internet gambling laws.  The American Gaming Association, which represents the U.S. commercial casino industry by addressing federal legislative and regulatory matters, supports federal legislation that would regulate online gambling. Such legislation could (1) assist law enforcement to shut down illegal Internet gambling operators; (2) prevent fraud and money laundering; (3) address problem gambling and underage gambling; (4) ensure players aren’t cheated; and (5) provide consistency in laws applicable to all U.S. citizens who wish to gamble on the Internet. However, passage of such a federal body of laws, at least in the short term, seems unlikely because Congress has not in the past sought to expressly regulate brick-and-mortar casino gambling, and it would seem difficult to enact federal Internet gambling legislation in an election year.  Therefore, the more likely scenario is that certain states, such as Nevada, will step up to regulate intra-state Internet gambling.

C.  The Courts

U.S. courts have considered the Wire Act’s applicability to non-sports Internet gambling and have reached differing results.  In 2002, the Fifth Circuit affirmed a lower court finding that the Wire Act only prohibits gambling on sporting events. In re MasterCard Int’l Inc., 313 F.3d 257 (5th Cir. 2002). The Fifth Circuit’s decision is consistent with the new DOJ policy. In that case, the plaintiffs were gamblers who used their credit cards to open online gambling accounts with an Internet casino and proceeded to lose thousands of dollars playing Internet casino-type games. Plaintiffs commenced a class action lawsuit against their credit card companies and issuing banks, alleging that such banks had violated the Wire Act by processing the transactions, among other claims.  The district court had held that the Wire Act applies only to gambling on sporting events or contests (and not on non-sports games) and that the plaintiffs had failed to allege that they engaged in Internet sports betting. The district court relied on the following three (3) factors:

  • the plain language of the Wire Act only prohibits gambling on a sporting event or contest;
  • the legislative history of the Wire Act demonstrates that the intent was to address “wagers or bets and layoffs on horse racing and other sporting events;” and
  • prior and then-ongoing legislation seeking to amend the Wire Act to expressly prohibit all forms of Internet gambling, which the district court reasoned supported its conclusion that the Wire Act was not so broad as to include casino-type gambling. In re MasterCard Int’l Inc., 132 F.Supp.2d 468 (E.D.La. 2001).

In 2007, the district court of Utah disagreed, holding that the Wire Act prohibited all types of Internet games, not just those relating to sporting events or contests.U.S. v. Lombardo, 639 F.Supp.2d 1271, 1275 (D.Utah 2007). The court interpreted Section 1084(a) as having three (3) distinct prohibitory clauses, as follows:

The statute proscribes using a wire communication facility (1) “for the transmission . . . of bets or wagers or information assisting in the placing of bets or wagers of any sporting event or contest”; or (2) “for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers”; or (3) “for information assisting in the placing of bets or wagers.” Id. at 1281.

The court concluded that the limiting phrase, “sporting event or contest,” only applied to the first portion of the statute since that limiting language did not appear in the second or third prohibitory clauses. The court also reasoned that, “[s]ince both the first and the third prohibitions use the phrase “information assisting in the placing of bets or wagers,” the third prohibition would be unnecessary unless it had a wider scope than the first prohibition’s “sporting event or contest.” In addition, the court determined that a reference in the Wire Act’s legislative history to “like offenses” could be interpreted to refer to more than just sports betting. Id. at 1280-81.

Summary

The DOJ has completely changed its long-standing policy on Internet gambling. As a consequence, the prohibitions in the 1961 Federal Wire Act that the federal government previously determined to apply to companies engaged in the businesses of casino betting and sports betting will no longer apply to casino betting. This policy decision seems likely to incentivize U.S. states to enact legislation to regulate Internet gambling and license companies to provide online poker within state borders as a first step into legalized U.S. Internet gambling.

This article appeared in the March 2012 issue of The Metropolitan Corporate Counsel. 

The views and opinions expressed in this article are those of the author and do not necessarily reflect those of Sills Cummis & Gross P.C.  

Copyright © 2012 Sills Cummis & Gross P.C.

Upcoming Spring 2012 CLE National Institutes

The National Law Review is pleased to bring you information about the ABA’s Upcoming Spring 2012 CLE National Institutes:

Learn and network at these in-person,full-day or multi-day seminars held live in various locations across the country that draw lawyers from across the nation.

Some Indiana Local Government Entities May Qualify for Loans Due to Past Misapplied Maximum Fund Rate Calculations

The National Law Review recently published an article by Randal J. Kaltenmark and Jeffery J. Qualkinbush of Barnes & Thornburg LLP titled, Some Indiana Local Government Entities May Qualify for Loans Due to Past Misapplied Maximum Fund Rate Calculations:

Qualified Indiana local government entities – school corporations, cities, towns, counties and library districts – may wish to review their 2012 or prior year budgets due to misapplication of the maximum capital projects fund rate calculation under Indiana statute (Indiana Code 6-1.1-18-12).

Of immediate note is that changes made to this law during the 2012 Session of the Indiana General Assembly allow Indiana local governmental entities to obtain an interest free loan from the State of Indiana for what such entity should have received in 2012 in such rate-capped funds after applying the corrected calculation. The window on obtaining this money this year will be closing in less than 30 days.

The issue originally came to light after Barnes & Thornburg LLP’s representation of two school districts, DeKalb County Eastern Consolidated School District and, most recently, the Metropolitan School District of Pike Township in appeals before theIndiana Tax Court. The misapplications, which were calculated by the Indiana Department of Local Government Finance (DLGF) cost these governmental units more than $1 million per year, collectively.

In both of these cases, the Indiana Tax Court agreed with the firm’s conclusions that the DLGF’s interpretation of the statute was incorrect and ordered those miscalculations to be corrected in the future budget years. On May 4, 2012, the Indiana Supreme Court denied the DLGF’s request to review these Tax Court decisions.

Attorneys involved believe many of the qualified Indiana local governmental entities have been the victim of one or more of these same miscalculations in connection with their 2012 or prior budgets.

© 2012 BARNES & THORNBURG LLP

ICC Institute Masterclass for Arbitrators

The National Law Review is pleased to bring you information about the upcoming ICC Conference  Masterclass Arbitrators:

Join us for an intensive 2 1/2 day training for professionals interested in working as international arbitrators!

June 4-6, 2012 at ICC Headquarters in Paris.

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:

Fall 2011:

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:
    1. Full name of author (First Middle Last)
    2. Contact information for author, including e-mail address and phone number
    3. 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.
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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