Supreme Court’s Decision In Famous Hale & Norcross Mining Case

Having read Professor Stephen Bainbridge‘s post about the origins of the judicial doctrine that directors must act on an informed basis, I passed along a reference to the California Supreme Court’s in Fox v. Hale & Norcross Silver Mining Co.,  108 Cal. 369, 41 P. 308 (1895).   The Hale and Norcross mine was a famous silver and gold mine in Nevada’s Comstock mining district.  Samuel Clemens (aka Mark Twain), who had worked in Virginia City, Nevada, even bought shares in the mine on margin, as he related in Chapter 15 of his autobiography:

“One day I got a tip from Mr. Camp, a bold man who was always making big fortunes in ingenious speculations and losing them again in the course of six months by other speculative ingenuities. Camp told me to buy some shares in the Hale and Norcross. I bought fifty shares at three hundred dollars a share. I bought on a margin, and put up twenty per cent. It exhausted my funds. I wrote Orion [his brother and the first and only Secretary of the Nevada Territory] and offered him half, and asked him to send his share of the money. I waited and waited. He wrote and said he was going to attend to it. The stock went along up pretty briskly. It went higher and higher. It reached a thousand dollars a share. It climbed to two thousand, then to three thousand; then to twice that figure. The money did not come, but I was not disturbed. By and by that stock took a turn and began to gallop down. Then I wrote urgently. Orion answered that he had sent the money long ago–said he had sent it to the Occidental Hotel. I inquired for it. They said it was not there. To cut a long story short, that stock went on down until it fell below the price I had paid for it. Then it began to eat up the margin, and when at last I got out I was very badly crippled.”

Samuel Clemens disappointing investment predated by a number of years the litigation that resulted in the California Supreme Court’s opinion.

The Hale and Norcross mine was located in Nevada, but the corporation that owned it was incorporated in California.  That is why the shareholders sued the directors in the Golden, rather than the Silver, state.  The Supreme Court’s decision was big news.  The day after the decision was issued, The San Francisco Call published this lengthy article that not only described the case, but also published the decision itself and a drawing of the plaintiff, M.W. Fox.

Article By Keith Paul Bishop of Allen Matkins Leck Gamble Mallory & Natsis LLP

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© 2010-2022 Allen Matkins Leck Gamble Mallory & Natsis LLP

Unfashionably Late: Seventh Circuit Rejects Misappropriation Claim Premised On Prototype Created Eleven Years Prior

The Seventh Circuit recently affirmed summary judgment in favor of a former employee and his new employer on claims for misappropriation of trade secrets relating to a prototype of an actuator created eleven years prior, holding that the inference that the defendant used his knowledge of the prototype more than a decade later was “barely conceivable” and “exceptionally unreasonable.” REXA, Inc. v. Chester, — F.4th —, 2022 WL 2981167, at *6 (7th Cir. 2022) (internal quotation marks omitted).

In 2002, Mark Chester, an engineer at Koso America, Inc. (“Koso”), participated in a project to create a new valve for a hydraulic actuator. An actuator is a component of a machine that produces motion. While the project was unsuccessful, it did produce an experimental prototype of another actuator. Koso shelved the experimental prototype due to the improbability of commercial success. The following year, Chester left Koso.

After more than a decade had passed since Chester worked on the 2002 project for Koso, Chester and his new employer, MEA Inc. (“MEA”), built a new actuator prototype, later known as the Hawk. Chester and MEA filed a related patent application, which was approved in part. REXA, Inc. (“REXA”), a company affiliated with Koso, brought suit against Chester and MEA for misappropriation of trade secrets under the Illinois Trade Secrets Act (“ITSA”), among other claims. REXA argued that Chester and MEA’s actuator incorporated and disclosed confidential designs contained within the prototype Koso developed in 2002. The district court granted summary judgment in favor of Chester and MEA. REXA appealed.

On appeal, the Seventh Circuit affirmed summary judgment in favor of defendants on the misappropriation claims. First, the Seventh Circuit agreed that REXA failed to identify a concrete trade secret, as the Court was unable to determine which aspects of the 2002 designs are known to the trade, and which are not. The Court explained that several aspects of the 2002 actuator prototype are widely known in the industry, which by definition, is not sufficiently secret to qualify for protection under the ITSA.

Second, the Seventh Circuit held that even if REXA had identified a trade secret, REXA had not established that defendants misappropriated trade secrets when MEA filed its patent application or developed the Hawk actuator. With respect to MEA’s patent application, the Court explained that REXA’s allegations “rest on a series of untenable inferences.” Id. Indeed, eleven years had passed since Chester worked on the actuator prototype, and it was undisputed that he never saw or took any documents with him when he left Koso. Additionally, REXA did not cite any case where a court “inferred” a misappropriation of trade secrets despite a lack of evidence that the defendant seized or possessed documents, nor could the Seventh Circuit find any such case. As such, the Court found the lack of evidence, coupled with the eleven-year gap, “renders the inferences that REXA asks us to draw exceptionally unreasonable.” Id.

Regarding the design of MEA’s Hawk actuator, the Seventh Circuit held that the 2002 prototype did not include features of the patent application that made the Hawk both a non-obvious improvement over prior art and commercially valuable. Thus, Chester and MEA could not have misappropriated trade secrets contained within the 2002 prototype.

REXA serves as an important reminder that trade secret claimants must identify with specificity the elements that distinguish the alleged trade secret from general knowledge in the field or public domain. Additionally, REXA confirms that, at least in the Seventh Circuit, courts are hesitant to draw inferences supporting misappropriation claims without any evidence the defendant seized or possessed documents from the plaintiff, particularly if a significant period of time passes before the alleged misappropriation occurs.

Article By Mikela T. Sutrina and Jenna G. Crawford of Sheppard, Mullin, Richter & Hampton LLP

For more intellectual property legal news, click here to visit the National Law Review.

Copyright © 2022, Sheppard Mullin Richter & Hampton LLP.

THE NEXT TCPA MEGA-TRIAL APPEARS TO BE SET: Coldwell Banker and Realogy Appear to Be Headed to the Jury On $225MM TCPA Claim

As I reported a couple months back, a Court in California certified a TCPA class action against brokerage giant Realogy related to calls made by Coldwell Banker agents, amongst others.

The classes have enough members to put at least $225MM at stake in the case (and it could be a lot more.)

Well just last Thursday the Court just denied Reaolgy’s request to seek reconsideration of the certification ruling. So Realogy appears to be stuck in a certified class action, which is barreling toward trial.

In fact, the Court just issued an order setting a pretrial conference for November 10, 2022, and trial is set for November 28, 2022!

In the meantime, the Court also just denied motions challenging the Plaintiff’s expert Anya Verkhovskaya, meaning that she’ll get to testify at trial.

TCPAWorld hasn’t seen a true mega trial–i.e. a trial of a certified class action with nine (or ten) figure exposure in some time. Will be extremely interesting to see where this goes.

And while Realogy has added new counsel recently, I don’t see any true Czar-level “monster trial lawyer” types on their side just yet. (Maybe I’m missing it.)

Definitely don’t want to walk into this unless you’re loaded for bear folks.

Anyway, I’ll keep an eye on this one. I suspect it will settle for some ridiculous number. But if not I may send Kiera down to take notes on the trial. We’ll see.

Article By Eric J. Troutman of Troutman Firm

For more communications, media, and internet legal news, click here to visit the National Law Review.

© 2022 Troutman Firm

August 2022 Legal Industry News Updates: Law Firm Hiring and Expansion, Industry Awards and Recognition, and Women in the Legal Field

Welcome back to another edition of the National Law Review’s legal news roundup! We hope you remain safe, healthy, and cool as the summer winds down. Read on below for the latest in law firm hiring and expansion, industry awards, and a spotlight on women in the legal industry!

Additionally, be sure to check out the latest episode of our podcast, Legal News Reach, featuring Chris Fritsch, founder of CLIENTSFirst Consulting!

Law Firm News and Updates

Sunstein LLP has added attorneys Shane Hunter and T.J. Clark as partners. Previously the founders of Hunter Clark PLLC, an intellectual property law firm, both attorneys focus their practice in this field: Mr. Hunter assists individuals in developing billion-dollar companies and helps to protect their intellectual property. Mr. Clark’s practice focuses on patent prosecution and intellectual property portfolio counseling for software and web-based business methods, biomedical devices, and semiconductor processing.

“Shane and T.J. bring impressive backgrounds as engineers and skills as attorneys that greatly complement our firm’s focus on helping technology clients leverage their diverse IP portfolios,” said Chair of the Sunstein Patent Group, Kathryn Noll. “They are a great addition to our team.”

Insurance attorney Graham Pulvere has joined Wilson Elser’s Birmingham office as a partner. Mr. Pulvere’s practice focuses on litigating insurance coverage and bad faith actions. With experience representing clients in areas such as legal malpractice actions, bar disciplinary proceedings, and errors and omissions actions against insurance agents and brokers, he will be joining the Insurance & Reinsurance Coverage and the Professional Liability & Services practice group as well as the London Practice.

London Practice Chair David Holmes said, “Graham has significant experience working with the London market on first-party and bad faith matters and will add to our strong ability to handle complex coverage and bad faith matters not only in Alabama but also in Mississippi and Louisiana.”

Steptoe & Johnson welcomes associate Evan Janc to the business litigation practice group. Practicing in the firm’s Dallas office, Mr. Janc has experience representing clients in construction litigation, public finance, and real estate in front of Texas state agencies and government entities. Evan also analyzes and drafts construction contracts and real estate agreements.

Sidley Austin LLP added Jay Jariwala, Senior Director, Regulatory Compliance to the firm’s Food, Drug, and Medical Device Compliance and Enforcement practice. Joining the firm’s Washington, D.C. office, he previously served in the FDA’s Center for Drug Evaluation and Research, Office of Compliance, and Office of Manufacturing Quality. Mr. Jariwala brings more than 13 years of regulatory and leadership experience to Sidley.

Raj Pai, partner and global leader of Sidley’s Food, Drug, and Medical Device Compliance and Enforcement group, said, “We’re happy to welcome Jay to our growing team of former FDA officials who have world-class experience and insights. Jay’s background will strengthen our team’s ability to help clients understand, assess, and address compliance concerns effectively.”

Industry Awards and Recognition

Benjamin F. Wilson, former Chairman of Beveridge & Diamond PC, has been honored with the 2022 Environmental Achievement Award from the Environmental Law Institute. Recognized for his visionary leadership and service to local communities over the span of his entire career, Mr. Wilson has provided representation on a wide range of clients on environmental matters, both at Beveridge & Diamond and in other private practices. He has previously served in the Civil Division of the U.S. Department of Justice, and he established the African American General Counsel and Managing Partner Networks in 2012, as well as founding the Diverse Partners Network in 2008.

“Ben is a remarkable environmental lawyer whose impact reverberates so far beyond his immediate circle. An astounding number of people call him a mentor, and his lasting impacts are felt not only in the legal profession, but across diverse communities nationwide,” said Jordan Diamond, President of the Environmental Law Institute. “He spent a career championing the interplay of environmental and civil rights, and we are all better for it.”

Twelve attorneys at Clifford Law Offices have been recognized by Law Bulletin Media as Leading Lawyers. They are as follows:

According to the Leading Lawyers website, less than five percent of all lawyers licensed in each state have received this prestigious distinction. Recipients are selected based on external attorney surveys that ask which of their peers they would most likely recommend to a family member or friend.

Lawmatics has recently been ranked as a high performer in G2’s Summer 2022 Grid®️ Report for Legal Practice Management Software. G2, formerly known as G2 Crowd, is a peer-to-peer review site that collects information for various types of business software; to qualify for the Grid®️ Report in the Legal Practice Management category, the product must:

  • Manage law firm client information

  • Store relevant legal documents

  • Integrate with or provide functionality similar to legal case management solutions

  • Be designed for independent law firm use

In addition to the high overall satisfaction rating that Lawmatics boasts, the Summer 2022 report also found that 100% of Lawmatics customers rated the service 4 or 5 stars, 92% stated they were likely to recommend Lawmatics to their peers, and 90% believed their quality of support goes “above and beyond.”

Women in the Legal Field

The American Bar Association awarded five legal practitioners with the 2022 Margaret Brent Women Lawyers of Achievement Award at the ABA Annual Meeting in Chicago on August 7th. The prestigious award has been given to numerous pioneers in its more than 30-year history, including former U.S. Supreme Court Associate Justices Sandra Day O’Connor and Ruth Bader Ginsburg. This year, the recipients were health law and bioethics innovator Michele Goodwin, IP expert and radio personality Christina L. Martini, AbbVie executive Laura J. Schumacher, corporate executive and DEI leader Wendy Shiba, and Myra C. Selby, the first African-American woman to serve as Associate Justice for the Indiana Supreme Court.

“We are honored to recognize this spectacular group of women who have been trailblazers throughout their careers,” says Maureen Mulligan, chair of the ABA Commission on Women in the Profession. “They are role models for all women in the legal profession.”

Benchmark Litigation has recognized three Bradley attorneys on their 2022 Top 250 Women in Litigation List.  Birmingham’s Leigh Anne Hodge, Nashville’s Lela M. Hollabaugh, and Huntsville’s Kimberly B. Martin were all selected due to their respected positions in the legal community and overwhelmingly positive client feedback.

Ms. Hodge leads Bradley’s Litigation Practice Group and is a member of the Healthcare Practice Group, where she assists clients with matters related to insurance, medical malpractice, licensing board hearings, and product liability. Ms. Hollabaugh is a lead trial lawyer who has worked on dozens of jury and bench trials while helping infrastructure clients with land acquisition, construction, and operations. She recently co-authored an amicus curiae brief for the U.S. Supreme Court related to the Natural Gas Act and 11th Amendment immunity. Ms. Martin handles international health product liability and white-collar claims.

Bradley Chairman of the Board and Managing Partner Jonathan M. Skeeters said, “We are proud of Leigh Anne, Lela, and Kim and congratulate them on their continued recognition as top female litigators. Their inclusion on this prestigious list is well deserved.”

Varnum LLP Partner Maureen Rouse-Ayoub has been featured in Michigan Lawyer Weekly’s 2022 Class of Influential Women of Law. The list celebrates women in the legal profession who have attained excellence in their field and made significant contributions through leadership, mentorship, and volunteering. When she isn’t leading Varnum’s Labor and Employment Practice team out of the Novi office, Ms. Rouse-Ayoub speaks about labor law issues at the Michigan Chamber of Commerce and works with the State Bar of Michigan Labor and Employment Section and Michigan Chamber of Commerce Health and Human Resources Committee. In her spare time, she volunteers with Northern Michigan Adaptive Sports, where she uses special tools and instructions to teach alpine skiing to people with disabilities. Rouse-Ayoub and her fellow awardees will be celebrated at a September 23rd ceremony in Detroit, followed by a September 26th magazine profile.

Article By Chandler Ford, Crissonna Tennison, and Shelby Garrett of the The National Law Review / The National Law Forum LLC.

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Copyright ©2022 National Law Forum, LLC

5 Ways Legal Billing Software Increases Law Firm Revenue

In any business, keeping an eye on the bottom line is essential. For law firms, this can be a challenge, as there are many ways that money can be lost throughout a case. From inefficient time-tracking to inaccurate billing, there are many potential pitfalls. However, there is one solution that can help to increase law firm revenue: legal billing software. Choosing the right legal billing software is essential for maximizing its benefits. Consider time-tracking, billing accuracy, and customer service when evaluating different packages. Take a look at solutions built specifically for the legal industry to get the most out of your investment.

3 Common Ways Law Firms Lose Money

Time Tracking Issues

Many lawyers still rely on manual methods of tracking time by using spreadsheets or notepads. This antiquated approach to timekeeping is fraught with problems, including the potential for lost billable time and revenue, vulnerability to billing disputes, and high administrative costs.

With spreadsheet or notepad timekeeping, it is easy for lawyers to forget to record their time or lose track of their records, leading to lost billable hours and ultimately lost revenue for the firm. Manual timekeeping doubles the work since someone must manually enter all data into the system.

Manually keeping track of time leaves attorneys vulnerable to billing disputes. If a client questions a lawyer’s billing records, it can be difficult for the attorney to prove that the charges are accurate without detailed and meticulous records.

Invoicing Frequency

When it comes to law firm revenue, timely billing is everything. The longer you wait to send a bill, the longer you wait to get paid. Clients can’t pay a bill they haven’t received.

Not billing promptly sends the message to your client that prompt payment is not that important to you. Sending your invoices at the end of each month helps to avoid confusion or miscommunication and ensures that you and your clients are on the same page.

Billing Bottlenecks

Getting paid by clients is a significant problem for 61% of small law firms, according to 2019 research conducted by Thomson Reuters Legal Executive Institute. Law firms that don’t provide clients with various payment options, like online payments and accepting credit card payments, are more vulnerable to decreased law firm revenue due to not getting paid on time.

What is Legal Billing Software?

Legal billing software is downloadable or cloud-based that helps lawyers accurately track their time and invoice their clients. A robust software, like Bill4Time, will have the capability to track time, LEDES billing format, create custom invoices, accept online payments, and meet state bar regulations for billing. Law firms use dedicated legal billing software to improve their bottom line by improving invoicing processes and reducing inaccurate time management and billing bottlenecks.

What Billing Software do Law Firms Use?

Lawyers are always looking for ways to be more efficient and maximize their billable hours, so they prioritize cloud-based software solutions that have integrated time tracking, easy invoice options, and a client portal for online payments.

Law firms need industry-specific features like trust & IOLTA accounting which allows lawyers to reconcile trust accounts without a secondary application. They also look for software that provides LEDES billing, the most widely used e-billing standard for law firms invoicing corporate clients.

Why Does My Law Firm Need Legal Billing Software?

As a law firm, you know that time is money. Every minute spent on administrative tasks is a minute that could be spent on billable hours.

Automate the billing process

You, and your team, enter matter information as time-tracked once, and the software will take care of the rest, generating invoices and sending them out to clients on your behalf.

Manage your cash flow

You will always have a clear record of what has been billed and remains outstanding. You can responsibly allocate your resources to maximize your profits.

Track payments and expenses

Having this information organized and readily available can save you a great deal of time and hassle when it comes time to file taxes or apply for loans or lines of credit.

Billing automation will save you and your team considerable time each month, which can be spent growing your business.

How to Identify the Best Legal Billing Software

When choosing legal billing software, there are a few key factors to keep in mind.

Choosing a program compatible with your firm’s existing tech stack, including your law practice management software, is critical to success. Consider the cost, ease of use, and customer support options. Mobile access is also crucial for lawyers who can access their files on any device — iPhone, iPad, or Android.

And finally, security is always a top priority when it comes to sensitive legal information. Look for software that has industry-standard security protocols in place to protect your data.

By keeping these factors in mind, you’ll choose the best legal billing software for your needs.

Best Practices for Implementing a Legal Billing Software

There are many different types of legal billing software on the market, and it can be challenging to decide which one is right for your law firm.

When choosing new software for your law firm, there are a few important factors to remember:

  • You must ensure that the software is compatible with your existing legal practice management software.

  • Be sure to clearly understand your law firm’s billing policies before setting up the software to ensure everything is billed correctly.

  • The software should be easy to use, but you still need to take time to train your staff on how to use the new software.

  • You want a responsive and helpful company when you run into problems. If you run into issues, you can contact the support team.

A little upfront investment will pay off in the long run by preventing billing mistakes and increasing efficiency. Following these simple tips, you can set your law firm up for success with legal billing software.

Increase Law Firm Revenue with Legal Billing Software

Ultimately, you can improve your firm’s bottom line and the client experience by investing in legal billing software. Here are five ways a legal billing software can help you achieve success:

1 ) Accurate Time Tracking

Time entry and expense tracking are crucial for any organization looking to boost productivity and improve profitability. Yet many organizations struggle with manually tracking time and expenses, leading to inaccuracies and lost data. The software makes tracking time and expenses by the user, client, or project easy.

Move beyond the notepad, and start tracking your time with a cloud-based software solution.

Whether on the go or at the office, easy time entry makes it simple to run timers simultaneously, record multiple time entries on one screen, and automatically convert appointments into time entries. You’ll always know your organization’s productivity and financial status with daily and weekly time summaries.

2 ) Automated Billing

Automated billing and online payments can make it easier for clients to pay their invoices, resulting in quicker payment turnaround times. Clients tend to delay payment if they don’t understand the invoice. Prevent this from happening by providing detailed and informative invoices.

With legal billing software, you can set up invoice templates with custom settings such as your billing policy and payment links to pay online —  you can even perform batch invoice creation to save administrative time.

You can even extend your brand while increasing workflow efficiencies by personalizing and creating branded invoices with your logo.

3 ) Online Payments

Online payments are becoming increasingly popular, and customers expect businesses to offer this option. You may even miss out on potential customers if you don’t offer online payments.

Online payments allow firms to quickly and easily receive payments from clients. This can be done via credit card, debit card, or even PayPal. In addition, online payments are more secure than traditional methods, such as mailing a check.

4 ) Custom Reporting

Real-time data is essential for any growing business and managing cash flow. You’ll want a solution with comprehensive reporting to manage your firm’s financial performance better and identify trends to ensure success—review payment history, balance due, collections, expenses, productivity, and summary reports.

Legal billing software should be able to run user activity reports, so you can get detailed insights into how your team works, including efficiency, expense, schedule, and internal tracked time.  This data can help you identify areas of improvement so your team can work smarter, not harder.

5 ) Enhanced Client Experience

Client portals are a great way to provide your clients with more information and control over their billing. Empower your clients to log in, view their account balances, make payments, and see a detailed fee history.

Grow Your Law Firm Revenue with Legal Billing Software

The legal industry is one of the most competitive and rapidly-changing fields. To succeed, law firms must be cutting edge in all aspects of their business – including billing. With so much at stake, it’s no wonder that more and more law firms are turning to legal billing software to help them stay ahead of the competition.

This article was authored by Dan Bowman of Bill4Time.

For more business of law legal news, click here to visit the National Law Review.

©2006-2022, BILL4TIME. ALL RIGHTS RESERVED.

Cal/OSHA COVID-19 Regulations Will Likely Continue in 2023

The current Cal/OSHA COVID-19 Emergency Temporary Standard (ETS) expires at the end of 2022. But Cal/OSHA is not done with COVID-19 regulations. There is a Non-Emergency Regulation in process. The Standards Board recently published its proposed non-emergency regulation and announced a public hearing for September 15, 2022.

Though the proposal is a non-emergency regulation, the proposed text states the requirements would only remain in effect for two years, except for certain recordkeeping requirements.

Here are other highlights of the proposed regulation:

  • Directs employers to include COVID-19 procedures in their written Injury and Illness Prevention Program (IIPP) or as a separate document.

  • As part of an employer’s COVID-19 procedures, an employer must provide training to employees regarding COVID-19

  • Employers must have effective methods and procedures for responding to COVID-19 cases in the workplace such as exclusion and quarantine requirements.

  • Employers will still have certain notice requirements regarding positive cases in the workplace.

  • Face covering requirements shall still follow California Department of Public Health requirements

One notable omission from the proposed regulation is exclusion pay, which was a very contentious requirement under the ETS.

Article By Sean Paisan of Jackson Lewis P.C.

For more coronavirus legal news, click here to visit the National Law Review.

Jackson Lewis P.C. © 2022

5 Keys to SEC Compliance Success

The best way to avoid the scrutiny from the Securities and Exchange Commission (SEC) that can lead to significant legal liability is to strictly comply with all of the agency’s rules and regulations. Unfortunately, given the complexity of these regulations and the constantly changing legal landscape of securities laws, such as the Securities Act of 1933 and Securities Exchange Act of 1934, this is much easier said than done.

Here are five keys to SEC compliance.

1. Identify Your Particular Needs

It should be an obvious first step, but many compliance attorneys treat all clients the same and offer a one-size-fits-all approach to complying with the regulations promulgated by the Securities and Exchange Commission (SEC). While this might not be a terrible approach – so long as it is all-encompassing, it will keep your company in line with the SEC across the board – it can saddle your firm with concerns and extraneous internal rules that have no bearing on how you conduct business.

A great example is a cryptocurrency. The SEC is, belatedly, beginning to issue rules and regulations for financial firms that focus on and trade in Bitcoin and other cryptocurrencies. If your brokerage firm is not buying or selling securities in crypto-assets and has no plans to do so soon, then implementing compliance measures for cryptocurrency regulations has no benefit to your company. Those measures will, however, make the regulated securities professionals who work for your firm jump through pointless hoops in the ordinary course of their business.

Adopting a compliance strategy that more precisely meets your company’s needs will let your workers perform to their full capacity while still insulating your firm from legal liability or SEC scrutiny. It will just have to be updated if you choose to expand into new forms of securities trading.

2. Craft an All-Encompassing Compliance Strategy

Based on your firm’s precise regulatory needs, the next key to success is to come up with a compliance strategy that takes into account all of the SEC’s rules that could impact your company. Given the breadth of the SEC’s jurisdiction and the sheer number of regulations that it has put forth, this can take a while.

Once your firm’s legal requirements have been ascertained, the next step is to come up with ways that you can satisfy them during the day-to-day business activities at your firm. This is another reason why every compliance strategy should be tailored to your business – a compliance technique that works well and is easy for one firm may be onerous and inconvenient for another one.

As Dr. Nick Oberheiden, founding partner of the SEC compliance law firm Oberheiden P.C., often tells clients, “All SEC compliance measures should protect the securities firm from SEC liability. However, those measures should also be judged by how burdensome they are on the firm that is employing them. The least inconvenient method to adequately insulate your firm from liability is the best. Learning about a brokerage firm and understanding its strengths and weaknesses and its capabilities help compliance lawyers craft the best solutions for their clients. Unfortunately, one of the most common complaints that securities professionals have about attorneys is that they do not listen to their particular concerns. We strive to do better.”

3. Train, Train, and Retrain Your Workers

No compliance strategy is effective if it is not implemented. Training your employees and workers in the intricacies of the compliance strategy, explaining why it is important for them to follow it strictly, and describing the penalties for noncompliance is the next key to success.

Even here, though, it is not a matter of simply giving your employees a handbook of rules, policies, and procedures to memorize. Just like how the compliance strategy should be tailored to your firm, so too should the instruction materials be tailored to each type of worker at your company. While it can help to train non-regulated administrative staff how to detect the signs of financial misconduct or fraud, there is no reason to bog them down in the details of SEC regulations that only pertain to traders – doing so can overload them with irrelevant information and make them lose sight of what they need to know.

It is also important to remember that training is not a one-time ordeal. New hires must be onboarded and taught the rules of internal compliance. Existing workers should be retrained to keep them apprised of any updates and to ensure that they remember their roles in the compliance protocol.

4. Keep Your Compliance Strategy Updated

Keeping your compliance strategy updated is also essential when it comes to compliance inspections. An out-of-date compliance protocol may still cover many of the bases for SEC compliance. However, there will be gaps in the compliance requirements that you will be unaware of, giving you a false sense of security.

The compliance strategy should not just be updated to account for new SEC regulations, though: It should also get updated whenever your brokerage firm branches out into new types of trading or adds a new kind of financial service to its portfolio. With that new line of business will likely come new SEC regulations to abide by.

5. Audit Yourself Regularly

Even if you have a good compliance program or plan, have trained workers to follow it, and keep the protocols updated, you are still moving forward blindly if you do not regularly conduct internal audits of your company to make sure that those compliance rules are working. Many compliance programs and strategies check off all of the boxes, only to lead to an SEC investigation that finds problems because a single worker did not actually understand how to correctly perform a job task.

These situations of compliance issues are incredibly frustrating. They can also be detected, identified, and corrected through a compliance strategy that includes internal auditing by outside counsel or an SEC compliance attorney with prior experience investigating securities fraud.

Article By Dr. Nick Oberheiden of Oberheiden P.C.

For more securities and SEC legal news, click here to visit the National Law Review.

Oberheiden P.C. © 2022

DOJ Forces $85M End to “Long-Running Conspiracy” to Suppress Poultry Wages

Three poultry processors and a consulting firm that circulated wage information among them have entered a consent decree with the Department of Justice to end a “long-running conspiracy to exchange information about wages and benefits for poultry processing plant workers and collaborate with their competitors on compensation decisions,” a violation of the Sherman Antitrust Act. The poultry companies — Cargill Inc. and Cargill Meat Solutions Corp., Sanderson Farms Inc., and Wayne Farms LLC – agreed to pay nearly $85 million. In addition to the payment, the producers must submit to antitrust monitoring for 10 years.

The decree brings a halt to the exchange of compensation information and deceptive conduct toward chicken growers designed to lower their compensation. The DOJ charged two of the poultry processors – Sanderson Farms, which was just acquired via joint venture between Cargill and Continental Grain Co., and Wayne Farms, owned by Continental – with violating the Packers and Stockyards Act. The companies engaged in deceptive practices via a “tournament system” which pit chicken growers against each other to determine their compensation. Jonathan Meng, meanwhile, president of the data firm Webber, Meng, Sahl & Company, is banned from the industry for his role as information broker for the producers.

Cargill is a privately held, multinational corporation based in Minnetonka, Minn. The corporation’s major businesses are trading, purchasing and distributing grain and other agricultural commodities. In 2021, Cargill generated revenue of about $134.4 billion. In the meat and poultry processing industry, Cargill’s $20 billion in revenue in 2021 put it in third place behind Tyson Foods Inc. ($43 billion) and JBS USA Holdings, Inc. ($39 billion) and one notch ahead of Sysco Corp. ($18 billion).

Just days before the settlement, Bloomberg Law reporter Dan Papsucn wrote, Sanderson Farms was acquired for $4.5 billion via joint venture between Cargill and Continental Grain Co. Wayne Farms was already owned by Continental. The acquisition combined the third and sixth-largest companies in U.S. chicken production to form the new Wayne-Sanderson Farms company. Before they were merged, Sanderson Farms and Wayne Farms annually were generating approximately $3.56 billion and $2.2 billion, respectively.

The DOJ’s investigation continues into the activities of several unnamed co-conspirators.  The government’s suit was filed in federal court in Maryland (U.S. v. Cargill Meat Solutions Corp., et al., No. 1:22-cv-01821 D. Md.).

Increased Federal Attention

The poultry industry case demonstrates that the antitrust law enforcers at DOJ, in addition to those at the Federal Trade Commission, remain dedicated to increasing competition in such concentrated labor markets. Worker mobility is something President Biden has promised to protect. FTC Chairwoman Lina Khan is considering new regulations to ban non-competes and to target them with enforcement actions, according to Wall Street Journal reporters Dave Michaels and Ryan Tracy.

Agreements entered without the cloak of legitimate competitive concerns by employers are called “naked” agreements. In 2016 DOJ and FTC jointly declared that naked wage-fixing or no-poaching agreements were per se illegal under antitrust laws. If the agreement is separate from or not reasonably necessary to achieve a larger legitimate collaboration between the employers, the agreement is deemed illegal without any inquiry into its competitive effects. Legitimate joint ventures (including, for example, appropriate shared use of facilities) are not considered per se illegal under antitrust laws. For these legitimate ventures the DOJ advocates the “rule of reason” or “quick-look analysis.” Also in 2016, DOJ said it would proceed with criminal actions against naked wage-fixing or no-poaching agreements.

Of course, support for the legitimacy of non-competes and no-poaching agreements splits along party lines. Sometimes the issue isn’t whether the agreements should be eliminated, but who should eliminate them. The question becomes: Is this the purview of the federal government or is it up to state legislatures?

Private Litigation

Private actions are another consideration for employers. Auto repair chain Jiffy Lube, which is owned by Shell Oil Company, recently agreed to pay $2 million to settle claims that it used illegal no-poaching agreements which prevented franchise owners from hiring current or recent employees of other Jiffy Lube franchises. The settlement will be shared among 1,250 hourly workers in the Philadelphia metropolitan area in Pennsylvania, New Jersey and Delaware.

According to the class action complaint, Jiffy Lube used these agreements to suppress wages and prevent workers from achieving better terms of employment. Employees had to wait six months after leaving one Jiffy Lube shop before attempting to work at another, according to the terms. Workers sued claiming this was a violation of the Sherman Antitrust Act.

The case was filed in U.S. District Court for the Eastern District of Pennsylvania (Victor Fuentes v. Royal Dutch Shell PLC, et al., Case No. 2:18-cv-05174, E.D. Pa.).

Employers Beware

As these cases demonstrate, many employers don’t realize (or may not care) that these types of arrangements can be considered anticompetitive or that their employment agreements can create substantial antitrust liabilities. In addition to public and private litigation, restrictive employment agreements can tank business deals. Imagine your M&A deal craters when a buyer discovers you have a no-poach agreement with competitors.  You might not have seen it as problematic until your prospective buyer walks away because of the risk and your once promising deal is over.

Employers and business owners who wish to protect themselves when employees leave for new positions need to be careful how they go about building their defenses because doing it wrong can mean both civil and criminal charges against corporations and individuals, as these cases illustrate. Critical questions need to be answered in employment agreements and business deals. Is the employer – such as a franchisor – trying to stop intramural poaching within its own system, effectively causing vertical restraint? Or is it trying to legitimately protect itself from losing employees to competitors, or horizontal restraint? These are questions best addressed by counsel with a sophisticated understanding of antitrust law, employment agreements, and mergers and acquisitions.

Article By Jennifer M. Oliver of MoginRubin

For more antitrust legal news, click here to visit the National Law Review.

© MoginRubin LLP

MLB To Allow CBD Sponsorships

Recently, Major League Baseball (MLB) informed teams that cannabidiol (CBD) sponsorships were no longer off limits and that they were free to pursue sponsorships in the CBD category under certain conditions. CBD companies will also no longer be prohibited from airing commercials during MLB game telecasts.

According to MLB’s Chief Revenue Officer Noah Garden, to be permitted, CBD sponsorships must promote products that are certified as not containing psychoactive levels of THC, the main active ingredient of cannabis. Any CBD product with concentrations of THC above 0.3% would not be permitted, as it is classified as marijuana, which is a Schedule I illicit substance. All CBD sponsorships will also require signoff by the MLB Commissioner’s Office.

MLB is the first of the four major US sports leagues to permit CBD sponsorships. Previously, only UFC and NASCAR had opened up the CBD sponsorship category for sale. And while MLB has opened the door to certain CBD sponsorships, for now, neither MLB nor any of the other major US sports leagues permit sponsorships in the broader cannabis category.

This change follows the new MLB collective bargaining agreement freeing up MLB teams to sell advertising positions on team jerseys and player batting helmets beginning with the 2023 season. MLB has confirmed that these lucrative jersey and batting helmet positions will not be off-limits to CBD companies. Garden noted specifically that “[MLB is] open-minded to doing a patch deal [in the CBD category], depending on the brand and what that brand represents. It has to [be] a brand that represents sports.”

Time will tell if MLB, its teams, and its fans embrace CBD sponsorships, but with cannabis industry valuations exceeding $13 billion in 2021, the rule change opens the door to a potentially lucrative sponsorship category.

Article By Richard L. Brand, Shahiedah Shabazz, and Zak Welsh of ArentFox Schiff LLP

For more entertainment and sports legal news, click here to visit the National Law Review.

© 2022 ArentFox Schiff LLP

Federal Reserve Doubles Down on Oversight of Crypto Activities for Banks

The Federal Reserve Board (the “FRB”) issued Supervision and Regulation Letter 22-6 (“SR 22-6”), providing guidance for FRB-supervised banking organizations (referred to collectively herein as “FRB banks”) seeking to engage in activities related to cryptocurrency and other digital assets.  The letter states that prior to engaging in crypto-asset-related activities, such FRB banks must ensure that their activities are “legally permissible” and determine whether any regulatory filings are required.  SR 22-6 further states that FRB banks should notify the FRB prior to engaging in crypto-asset-related activities.  Any FRB bank that is already engaged in crypto-asset-related activities should notify the FRB promptly regarding the engagement in such activities, if it has not already done so.  The FRB also encourages state member banks to contact state regulators before engaging in any crypto-asset-related activity.

These requirements send a clear message to FRB banks and in fact to all banks that their crypto-asset related activities are considered to be risky and not to be entered into lightly.

Indeed, the FRB noted that crypto-asset-related activities may pose risks related to safety and soundness, consumer protection, and financial stability, and thus a FRB bank should have in place adequate systems, risk management, and controls to conduct such activities in a safe and sound manner and consistent with all applicable laws.

SR 22-6 is similar to guidance previously issued by the OCC and FDIC; in all cases, the agencies require banks to notify regulators before engaging in any kind of digital asset activity, including custody activities. The three agencies also released a joint statement last November in which they pledged to provide greater guidance on the issue in 2022.  Further, in an August 17, 2022 speech, FRB Governor Bowman stated that the FRB staff is working to articulate supervisory expectations for banks on a variety of digital asset-related activities, including:

  • custody of crypto-assets
  • facilitation of customer purchases and sales of crypto-assets
  • loans collateralized by crypto-assets, and
  • issuance and distribution of stablecoins by banking organizations

Interestingly, SR 22-6 comes a few days after a group of Democratic senators sent a letter to the OCC requesting that the OCC withdraw its interpretive letters permitting national banks to engage in cryptocurrency activities and a day after Senator Toomey sent a letter to the FDIC questioning whether it is deterring banks from offering cryptocurrency services.

Although past guidance already required banks to notify regulators of crypto activity, this guidance likely could discourage additional banks from entering into crypto-related activities in the future or from adding additional crypto services. In the end, it could have the unfortunate effect of making it more difficult for cryptocurrency companies to obtain banking services.

Article By Grant F. Butler, Jeremy M. McLaughlin, Anthony R.G. Nolan, and Judith E. Rinearson of K&L Gates

For more finance and banking legal news, click here to visit the National Law Review.

Copyright 2022 K & L Gates

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