The National Law Forum

Final Family and Medical Leave Act (FMLA) Military Leave Regulations Issued

The National Law Review recently published an article by John A. Vering, III, Shelley I. Ericsson, and Michael B. Kass with Armstrong Teasdale regarding FMLA Military Leave:

The Department of Labor (DOL) recently issued final regulations addressing an amendment to the Family and Medical Leave Act (FMLA) that requires employers covered by the FMLA to provide certain types of military-related leave. The regulations, which will take effect on March 8, 2013, determine how the provisions are to be interpreted and implemented. The DOL’s new regulations will require employers to update their FMLA policies, posters and forms and, among other things, change the way they administer family leave for servicemembers caregivers and employees with family members in the military. The text of the Final Rule can be found here: www.dol.gov/WHD/FMLA/2013rule/.

A brief overview of some of the changes in this Final Rule is set forth below. Please take specific note of the new FMLA poster requirement and new forms near the end of this Alert.

Qualifying Exigency Leave

The Final Rule revises regulations dealing with qualifying exigency leave to (a) include eligible employees with family members serving in the regular armed forces in a foreign country; (b) more clearly define what constitutes a qualifying exigency and adds a new qualifying exigency for parental care; and (c) increase the length of time an eligible family member may take for qualifying exigency leave for rest and recuperation from five days up to a maximum of 15 days.

Military Caregiver Leave

With respect to military caregiver leave, the new Rule: (a) specifically defines what conditions constitute a serious injury of illness for a current member of the Armed Forces or a covered veteran, and expands that definition; (b) defines who is a covered veteran; and (c) allows private physicians, outside the military healthcare system, to certify a serious injury or illness, but allows employers to request a second or third opinion if the employer questions the certification of one of these private physicians.

Calculation of Intermittent or Reduced Schedule Leave

The Final Rule also clarifies the calculation of intermittent leave for FMLA purposes to make clear that an employer cannot require that intermittent FMLA leave be taken in increments longer than the shortest period of time that the employer uses to account for use of other forms of leave provided that it is not greater than one hour and provided further that FMLA leave entitlement may not be reduced by more than the amount of leave actually taken.

New FMLA Poster and New Forms Required

The DOL is requiring a new FMLA poster and use of new FMLA forms effective March 8, 2013. A copy of the poster can be found on the DOL’s website and downloaded atwww.dol.gov/whd/regs/compliance/posters/fmla.htm. DOL has also created at least one new form and revised other key forms (the new form is WH-385-V, and the revised forms include WH-381, WH-384, and WH-385). The following FMLA forms can now be found on the internet atwww.dol.gov/whd/fmla/2013rule/militaryForms.htm:

Conclusion

The FMLA generally applies to employers who have at least 50 employees within a 75-mile radius of a single site of employment. If the FMLA applies to your company, in light of these new regulations, you will want to review and likely revise your written FMLA policies and ensure your compliance going forward.

IP Law Summit – March 21-23, 2013

The National Law Review is pleased to bring you information about the upcoming IP Law Summit:

The IP Law Summit is the premium forum for bringing senior IP Counsel and service providers together. As an invitation-only event taking place behind closed doors, the Summit offers an intimate environment for a focused discussion of cutting edge technology, strategy and products driving the IP market place.

The one-on-one business meetings provide access to Senior IP Counsel within the largest corporations across the United States. A thorough selection process ensures a qualified audience, which grants unparalleled business and networking opportunities in a luxurious and stimulating environment.

March 21-23, 2013

The Broadmoor, Colorado Springs, CO

Protect Your CEO’s Tweets and Posts from U.S. Securities Exchange Commission (SEC) Enforcement Action

Mark F. Foley with von Briesen & Roper, S.C. had an article, Protect Your CEO’s Tweets and Posts from U.S. Securities Exchange Commission (SEC) Enforcement Action, recently featured in The National Law Review:

The U.S. Securities Exchange Commission (SEC) Enforcement Division altered the jet stream of blogosphere commentary last December by, for the first time, recommending legal action against a CEO on account of a Facebook post. Immediately after the announcement, a blizzard of articles, tweets, and blogs buried the mediascape with opinions about the critical role of CEO social media use in the new economy, the wisdom or foolishness of allowing CEO’s to Tweet or post, and whether the SEC should be time warped back to the Stone Age it seems to prefer.

Sweeping away the accumulated hyperbole reveals two important takeaways from the SEC’s announcement, applicable to both public and private companies: i) the more things change, the more they remain the same, and ii) this latest “grave threat” to the modern world is not a crisis, but an opportunity. Social media can be a valid, legal, and effective way to communicate with investors, if it’s done right.

About Regulation FD

The SEC’s action responded to a July 2012 Facebook post by CEO Reed Hastings stating that members watched over 1 billion hours on Netflix in June. Netflix estimated that Hastings had reached 200,000 people through his Facebook, Twitter, and LinkedIn accounts. The SEC felt this was material information for investors and that by announcing it through social media, rather than more traditional outlets, Netflix had violated Regulation Fair Disclosure (Reg. FD).

The SEC adopted Reg. FD in 2000 to fix a perceived lack of fairness in the public securities markets. Before Reg. FD, public companies could share material information with analysts who participated in conference calls or meetings not open to smaller investors. Well-connected investors got trading advantages over the general public. Reg. FD prohibits public companies from providing material information to limited groups of investors without simultaneously making the information available to the entire marketplace.

Under Reg. FD, public disclosures must be made by “filing or furnishing a Form 8-K, or by another method or combination of methods that is reasonably designed to effect broad, non-exclusionary distribution of the information to the public.” The “other method” most often employed is a press release to an array of media outlets likely to disseminate the information broadly and quickly. Individuals and companies violating Reg. FD risk injunctions and monetary penalties.

Use of Social Media Growing, Creating Risks

Social media channels first became critical communication tools for companies after adoption of Reg. FD. A 2010 study of the 100 largest companies in the Fortune 500 found that 79% were using at least one of the four most popular social media platforms. See Burson-Marsteller Fortune Global 100 Social Media Study, Feb. 23, 2010, available at http://www.burson-marsteller.com/Innovation_and_insights/blogs_and_podcasts/BM_Blog/Lists/Posts/Post.aspx?ID=160

A 2012 Forbes article cited an IBM study saying 57% of surveyed CEO’s likely would be using social media by 2017. Mark Fidelman, IBM Study: If you Don’t Have a Social CEO, YourGoing to be Less Competitive, FORBES, May 22, 2012.

The SEC itself uses social media to disclose important information such as speeches, trading suspensions, litigation releases, and administrative proceedings.

While some CEOs see social media as “part of their job description,” others try to minimize risk by having employees write or review tweets before posting, and some CEOs have already tried social media and moved on. See Leslie Kwoh and Melissa Korn, 140 Characters of Risk: Some CEO’s Fear Twitter, WALL STREET JOURNAL, September 26, 2012.

Not everyone does, or should, use all forms of social media. The point of Twitter, for example, is to provide information contemporaneously with the occurrence of a thought or an event. This promptness is both the differentiating touchstone of the medium and its source of danger. Quick, unconsidered, unscripted communications by senior executives of public companies pose risks in the form of leaked intellectual property, disclosed business plans, angered customers, litigious investors, and frothy regulators. The SEC Netflix announcement demonstrates the potential for liability arising from disclosures of information requiring consideration through social media focused solely on promptness. A Facebook post subjected to prior review might have been a better choice.

Even where the SEC does not act, executives may be at risk. In May 2012, retailer Francesca’s Holdings Corporation fired its CFO, Gene Morphis after he tweeted: “Board meeting. Good numbers = Happy Board.” Mr. Morphis, who was also active on other social media outlets, had a history of postings about earnings calls, road shows, and other work related matters. Morphis lost his job even though the SEC took no action. Rachel Emma Silverman, Facebook and Twitter Postings Cost CFO His Job, WALL STREET JOURNAL, May 14, 2012.

Social Media Without Big Risk

The SEC has never issued guidance about the use of social media, but it has issued guidance that websites could be deemed sufficiently “public” to satisfy Reg. FD when: (1) it is a recognized channel of distribution, (2) posting on the web site disseminates the information in a manner making it available to the securities marketplace in general, and (3) there has been a reasonable waiting period for investors and the market to react to the posted information. Indeed, “for some companies in certain circumstances, posting … information on the company’s web site, in and of itself, may be a sufficient method of public disclosure,” SEC Release No. 34-58288 (Aug. 7, 2008) at 18, 25.

This is an example of how “the more things change, the more they stay the same” when it comes to the intersection of law and technology. The purpose of Reg. FD is to make sure that all investors have access to the same information roughly simultaneously. The specific communications method is not important so long as the principle of public disclosure to the general market, not subsets of investors, is served. Because 8-K filings and press releases were the most common ways to quickly and broadly disseminate information in the past, investors knew where to look for them and could monitor those information outlets. Now, when companies establish their websites as well-known places to find press releases, SEC filings, and supplemental information, they, too, have become acceptable means for Reg. FD disclosures.

The same analysis applies to social media, as well as any new communications technology that may exist in the future. The critical question is: has the company sufficiently alerted the market to its disclosure practices based on the regularity, prominence, accuracy, accessibility, and media coverage of its disclosure methods? If so, social media should be just as acceptable as any other communication tool.

One company seems to have found the right balance. Alan Meckler, CEO of WebMediaBrands Inc. drew the SEC’s attention after a pattern of regularly disclosing company information through social media back in December 2010. The SEC’s Division of Corporation Finance questioned whether Mr. Meckler’s Tweets “conveyed information in compliance with Regulation FD.”SEC letter dated December 9, 2010. Despite, the investigation, the SEC brought no enforcement action.

To use social media with minimum SEC risk, the company must educate investors so that they know such communications will always occur at a particular place and at least simultaneously with other outlets. This is done by a regular pattern of social media disclosure and links to other sources, such as SEC filings, showing the way. A company should not force investors to win a shell game, finding the nut of important information in Twitter this time, on Facebook the next time, and Instagram after that. Consistency, predictability, and transparency are key. Used this way, social media present an opportunity to communicate with investors in new ways, not a source of legal problems.

Chief Litigation Officer Summit – March 21-23, 2013

The National Law Review is pleased to bring you information about the upcoming Chief Litigation Officer Summit:

The primary objective of the Chief Litigation Officer Summit is to explore the key aspects and issues related to litigation best practices and the protection and defense of corporations. The Summit’s program topics have been pinpointed and validated by leading litigation counsel as the top critical issues they face.

March 21-23, 2013

The Broadmoor, Colorado Springs, CO

Can Having Employees Pose for the Camera Pose Problems for You?

The National Law Review recently featured an article regarding Employee Photos written by Amy D. Cubbage with McBrayer, McGinnis, Leslie and Kirkland, PLLC:

Employers have a variety of reasons for using employee photos, including:

internal company use (for a company directory or in the break room);
external use (such as the company website or a blog post—you’ll find my picture below);
for safety precautions (name badges or scan cards); and
for commercial use in advertisements or marketing.

Employees are usually amendable to having their picture taken. But, there may be a few who express their genuine disinterest in being photographed. Such employees could simply be camera shy; others may have a more serious reason to refuse to have an image published. Some may need to protect anonymity for personal reasons, such as past domestic abuse. Others may adhere to religions forbidding taking pictures.

There are generally no legal ramifications for using employee photos, unless it is for commercial purposes. Most states, including Kentucky, have laws that require permission before using an individual or their “likeness” for commercial purposes. This is due to the commonly held notion that a person has property rights in his or her name and likeness and those rights should be shielded from exploitation. Kentucky’s law is codified in KRS 391.170.

If you need to use employee photos for a commercial use, there is a simple solution. Have employees sign releases in which they acknowledge that their picture may be used in a company advertisement and they will receive no compensation for the use of their photo. Keep these releases on file.

Even in a state where consent is not required, it is always a smart approach to use a release so that employees will not be surprised when they see their face plastered on a promotional piece. If minors appear in the commercial materials always use extra caution. Use a consent form, whether required or not, to be signed by the child’s parents.

A warning about taking photos of potential employees: if you take photographs of applicants applying for a job (to help remember who’s who), it may put you at risk for a discrimination claim. A photograph creates a record of certain protected characteristics (i.e., sex, race, or the presence of a disability) that employers generally cannot use in hiring considerations. If this information is collected and a discrimination claim arises, the burden will be on the employer to prove the photographs were not used to make a discriminatory employment decision.

I will leave you with a little common sense about employee photos. Always remember to publicize when the office picture day will be; no one likes showing up ill-prepared. Offer a “redo day” for those who are truly unhappy about how their picture turned out. If all else fails, resort to photoshopping. A little lighting adjustment or cropping can work wonders for a shutterbug humbug.

3rd Annual International Trade Compliance Conference

The National Law Review is pleased to bring you information about the upcoming Marcus Evans conference – 3rd Annual International Trade Compliance Conference:

Navigating the Latest Changes in Trade Regulations and Global Controls for Improved Compliance

24-26 Apr 2013
venue to be confirmed – Chicago, IL, United States of America

Building from the success of our 2012 conference, the marcus evans 3^rd Annual International Trade Compliance Conference will bring together senior executives looking to improve processes with evolving global markets, trade agreements, technology requirements and compliance. Additionally, this conference will provide attendees with the latest updates in international trade regulations, as well as insights and tools for strengthening internal operations in order to remain compliant with critical requirements on a day-to-day basis.

The 3^rd Annual International Trade Compliance Conference features two distinct tracks; allowing attendees to fully customize their agenda.

Track one focuses specifically on advanced import & customs topics, such as identifying the latest changes to the ISA program, discovering advancements in supply chain programs and applying recent FDA regulation updates to your business plan.

Track two is entirely centered on export controls. Featured topics include evaluating the recent updates to the ECR, understanding requirements for OFAC compliance and dissecting US and global technology regulations for secure transfers.

Delegates are able to mix and match sessions from both tracks to create a complete conference experience that covers every area of interest.

Attending this conference will enable you to:

1.) Identify the latest regulatory changes within emerging markets for seamless trade operations

2.) Navigate Free Trade Agreements to increase efficiency and decrease corporate costs

3.) Institute a successful global trade compliance program to improve company procedures

4.) Conquer import and export classification for more effective business practices

5.) Tackle the latest regulations and requirements for technology transfers and determine various tactics for remaining compliant

Industry leaders attending this conference will also benefit from a dynamic presentation format consisting of workshops, panel-discussions, and industry-specific case studies that provide accurate, real-world knowledge. Attendees will experience highly interactive conference sessions, 10-15 minutes of Q&A time after each presentation, 4+ hours of networking, and exclusive online access to materials post-event.

Who Should Attend

marcus evans invites Heads, Vice Presidents, In-House Counsel, and government agencies with responsibilities in the following areas:

-Global/International Trade Compliance
-Import/Export Trade Compliance
-Global Customs Compliance
-Import/Export Operations
-Export Controls

Administration Launches Strategy on Mitigating Theft of U.S. Trade Secrets

The National Law Review recently published an article, Administration Launches Strategy on Mitigating Theft of U.S. Trade Secrets, written by Lauren M. Papenhausen with McDermott Will & Emery:

The strategy announced on February 20, 2013, should serve as both a wake-up call from the government and an offer of assistance. Given the losses that can arise from competitors’ purposeful theft of trade secrets, entities should review the announcement and decide whether they need to be more active in protecting their trade secrets. The strategy also offers opportunities for increased collaboration with the government.

On February 20, 2013, the White House announced an “Administration Strategy on Mitigating the Theft of U.S. Trade Secrets.” Companies should view the announcement of this strategy as both a wake-up call from the government and an offer of assistance. Given the losses that can arise from competitors’ purposeful theft of trade secrets, entities should review this government announcement and decide whether they need to be more active in protecting their trade secrets.

The administration strategy articulates a broad governmental commitment to addressing an “accelerating” threat to U.S. intellectual property. The strategy encompasses five action items:

Focusing diplomatic efforts to protect trade secrets through diplomatic pressure, trade policy and cooperation with international entities
Promoting voluntary best practices by private industry to protect trade secrets
Enhancing domestic law enforcement, including through outreach and information-sharing with the private sector
Improving domestic legislation to combat trade secret theft
Improving public awareness and stakeholder outreach

Three main themes emerge from the administration strategy that are important for U.S. businesses.

First, the strategy and its supporting documentation highlight how frighteningly real the prospect of trade secrets theft is. The White House report is peppered with references to household name companies that have been victimized by trade secrets theft over the past few years, often at a cost of tens of millions of dollars or more. Mandated reports from the defense industry to the government indicate a 75 percent increase between FY2010 and FY2011 in reports of suspicious activity aimed at acquiring protected information. Coupled with a recent New York Times article asserting Chinese government involvement in more than 100 attempted cyber attacks on U.S. companies since 2006, these reports warrant sitting up and taking notice. According to a report by the Office of the National Counterintelligence Executive, particular targets include companies that possess the following:

Information and communications technologies
Business information that relates to supplies of scarce natural resources or that gives foreign actors an edge in negotiations with U.S. businesses or the U.S. government
Military technologies, particularly in connection with marine systems, unmanned aerial vehicles and other aerospace/aeronautic technologies
Civilian and dual-use technologies in sectors likely to experience fast growth, such as clean energy, health care and pharmaceuticals, advanced materials and manufacturing techniques, and agricultural technology

Second, the government alone cannot solve the problem. The administration commits to making the investigation and prosecution of trade secret theft a “top priority” and states that the Federal Bureau of Investigation has increased the number of trade secret theft investigations by 29 percent since 2010. On its face, however, a 29 percent increase in investigations cannot keep pace with a 75 percent increase in attempted trade secret thefts. Historically, as a result of limited resources, the government has been able to address only a tiny fraction of trade secret thefts, and there is no indication that there will be the massive influx of resources necessary to change this dynamic materially. Indeed, the administration strategy recognizes the need for public-private partnerships on this issue and asks companies and industry associations to develop and adopt voluntary best practices to protect themselves against trade secret theft. And, of course, there are significant drawbacks to any after-the-fact solution, whether relying on government intervention or a private lawsuit.

The best solution is to prevent a trade secret theft from ever occurring. Even if that is not possible, having taken strong measures to protect trade secrets will aid success both in any civil litigation against the perpetrator and in any criminal action the government may bring. Entities should consider at least the following types of protective measures:

Research and development compartmentalization, i.e., keeping information on a “need to know” basis, particularly where outside contractors are involved in any aspect of the process
Information security policies, e.g., requiring multiple passwords or multi-factor authentication measures and providing for data encryption
Physical security policies, e.g., using controlled access cards and an alarm system
Human resources policies, e.g., using employee non-disclosure agreements, conducting employee training on the protection of trade secrets and performing exit interviews.

It also will be important in any future litigation that a company has clearly designated as confidential any materials it may wish to assert are trade secrets.

Third, the new administration approach to trade secrets offers some opportunities for U.S. companies.

The government interest in enhancing law enforcement operations indicates that businesses may have a better chance of encouraging the government to investigate and bring criminal charges under the Economic Espionage Act (EEA) against the perpetrators of trade secret thefts. The possibility of seeking government involvement is a powerful tool that should be considered and discussed with counsel any time there is a significant suspected trade secret theft. Obtaining government involvement in specific instances of trade secret theft can allow businesses to take advantage of information learned via government tactics such as undercover investigations and search warrants. It also can significantly enhance any civil litigation—for example, a finding of criminal liability can make a civil outcome a foregone conclusion.

The administration strategy’s focus on improving domestic legislation and increasing communication with the private sector suggests that there is an opportunity for the private sector to collaborate with government actors in communicating industry needs and shaping policy. For example, it is possible that the time is ripe for an amendment to the EEA (currently a federal criminal statute that offers no private right of action) to create a federal, private cause of action for misappropriation of trade secrets. A bill to this effect was introduced in Congress in 2012 and did not progress, but two other amendments to strengthen the EEA that passed overwhelmingly in December 2012, plus the recently issued administration strategy, suggest there may be gathering momentum for such a change.

In an executive order signed on February 12, 2013, entitled “Improving Critical Infrastructure Cybersecurity,” President Obama outlined government plans to significantly increase the amount of information that the government shares with private sector entities about cyber threats. Specifically, the order directs government agencies to develop procedures to create and disseminate to targeted entities unclassified reports of cyber threats that identify them as targets, to disseminate classified reports of cyber threats under certain circumstances to “critical infrastructure entities,” and to expand the Enhanced Cybersecurity Services program (previously available only to defense contractors to assist in information-sharing about cyber threats and protection of trade secrets) to “eligible critical infrastructure companies or commercial service providers that offer security services to critical infrastructure.” The directives in the executive order are in addition to and complement various information-sharing tactics set forth in the administration strategy designed to provide warnings, threat assessments and other information to industry. Companies, particularly those involved in the power grid or the provision of other utilities or critical systems, should be aware of the possibility of obtaining additional information from the government about threats to protected information.

Cutting Edge Issues in Asbestos Litigation Conference – March 18-19, 2013

The National Law Review is pleased to bring you information about the upcoming Perrin Cutting Edge Issues in Asbestos Litigation Conference:

Monday, March 18th – Tuesday, March 19th, 2013
Beverly Wilshire, A Four Seasons Hotel
Beverly Hills, CA

Three Provisions You Cannot Operate Without In Your Operating Agreement

Thomas D. Flanigan of McBrayer, McGinnis, Leslie and Kirkland, PLLC recently had an article featured in The National Law Review titled, Three Provisions You Cannot Operate Without In Your Operating Agreement:

Deciding on the entity form to use for your business depends on a number of factors, but for many entrepreneurs, an LLC is the best fit. An LLC is a hybrid entity as it provides liability protection similar to a corporation and favorable income tax treatment similar to a partnership. If you are starting or currently operating a business through an LLC, your most important organizational document is the agreement between you and your partners: the Operating Agreement. An operating agreement establishes the internal operations of the business in a way that suits the specific needs of the business owners. Once signed by the members of the LLC, it is an official binding contract.

Another benefit of using an LLC to operate your business is the flexibility LLC owners have to structure their operations and business relations with their partners. While the Kentucky Limited Liability Company Act contains default provisions for many of the organizational issues that may arise, members of an LLC may agree to operate under provisions other than the Act’s default provisions. No matter the nature of your business, your LLC should have an operating agreement that includes details such as voting rights and responsibilities, powers and duties of members and managers, allocation of profits and losses, and distribution of capital, whether the members agree to use the LLC Act’s default provisions or alternatives to the default language.

As an example of the flexibility of the Act, and also of the importance of carefully considering the effects of each section of your operating agreement, consider the following three provisions that will help your business run smoothly.

1. Transfer provisions.

An operating agreement typically contains some language about the circumstances under which a member may or must transfer his ownership interest in the LLC to another person or entity. Under the Act, a member may freely transfer membership interest to anyone. There are a number of provisions in the Act that tell us how the transferring member and the new owner are to be treated, one of which is that the new owner will not be a full member with the right to vote unless a majority of the other members vote to make the new owner a full member. If members are allowed to freely transfer their interests however, founding members may find themselves faced with new business partners they did not approve. Moreover, a member’s interest could be transferred involuntarily, such as by death, divorce, or bankruptcy. For these and other reasons, you and your business partners may decide on a transfer provision that would limit uncertainty in these situations. Terms in the operating agreement may require a majority of members to vote to allow a proposed transfer before it can occur, or give the company or the members a right of first refusal to purchase the membership interest subject to a proposed transfer. The members might agree to purchase life insurance policies to provide the funds to purchase the membership interest of a member at death. The operating agreement may also prohibit members from pledging (granting a lien on) membership interest. Putting restrictions on transferability gives members control over when, how, and why membership interests are transferable.

2. Deadlock provisions.

Management or member deadlock occurs when a company’s decision makers are evenly split on a matter and neither side will relent. It is a potentially fatal problem and, thus, should always be addressed within the operating agreement. Under the Act, the remedy for deadlock is judicial dissolution. A court “may dissolve a limited liability company in a proceeding by a member if it is established that it is not reasonably practicable to carry on the business of the limited liability company in conformity with the operating agreement.” Once the LLC is dissolved, it cannot carry on business, but must wind up and liquidate its business. There are, however, many strategies that can be put into your operating agreement to avoid this problem:

· The opposing member may be allowed to withdraw from the LLC.

· The operating agreement may require that a deadlock at the manager level be subject to a vote of the members.

· The members may agree to be bound by a coin flip.

· The members may be required to take the issue to binding arbitration.

· The members may incorporate a buy-sell provision that would require one member to provide a purchase price to the other member and then require that other member to purchase or sell the membership interest in the LLC at that purchase price such that the selling member ceases to be a member of the LLC.

With each of these strategies, the common feature is that the LLC is likely to continue as a functioning business after the deadlock is resolved.

3. Additional Capital Contributions.

A company operating agreement will usually state the amount of money or the value of property each member initially contributes to the company for operations, known as initial capital contributions. As an example, three people may decide to start a business and agree that each of them will give the company $3,000 so the company has $9,000 in start-up capital. Most operating agreements also have language about additional money from the members, known as additional capital contributions. Because the Act allows flexibility here as well, that language may state that members are not required to make additional capital contributions, or it may require additional capital contributions and allow for one member to make an additional capital contribution for another member that fails to make that contribution when due in exchange for a portion of that member’s membership interest. There are many possibilities. But frequently, when considering these possibilities, members fail to consider the effect of the additional capital contribution language on the limited liability feature of the LLC.

One important function of an LLC is that the members are not individually liable for the debts of the LLC if the LLC cannot pay its creditors. That protection from individual liability is not absolute, however. Among other things that may cause a court to ignore limited liability protection, including fraud, intentional misconduct, or the failure to maintain a real distinction between the LLC and its members, the additional capital contribution language can be read to require the members to pay LLC debt that the LLC cannot pay itself. The members may avoid this by affirmatively stating in the operating agreement that additional capital contributions are never required and the members have no personal liability for the debts of the LLC, but that may cause problems later if the LLC needs additional capital. The members may instead decide to have additional capital contribution language, but to have it drafted carefully so as to avoid unintentionally negating the limited liability protection generally afforded by the LLC. The important thing is to consider and plan for the potential needs of the LLC, and to do so in a way that doesn’t result in unintended consequences for the LLC or its members.

Every successful business encounters bumps in the roads. An operating agreement is a road map, a tool to navigate through the difficult obstacles.

National Institute on E-Discovery 2013

The National Law Review is pleased to bring you information regarding the upcoming ABA Conference – National Institute on E-Discovery 2013:

When

April 05, 2013

Where

Proskauer Rose LLP
Eleven Times Square
New York, NY 10036-8299
United States of America

Nationally-acclaimed e-discovery professionals and judges will convene for a full day to analyze and discuss the latest developments and best strategies for managing the e-discovery process.

Program Focus

Attendees of this program will learn:

Comprehensive and practical “issue-spotting”
About the continuing rules amendment process directly from members of the federal judiciary, as well as leading-edge issues emerging in their courts
How to choose, search, and review technology that fits your case
Tips for cost-effective and defensible project management for both requesting parties and producing parties
The latest information on e-discovery of “personal data sources” including social media and personal devices
How to navigate “discovery about discovery,” including important privilege considerations

The National Law Forum

IP Law Summit – March 21-23, 2013

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