2021 Advanced Business Law

New special purpose acquisition company (SPAC) IPOs fall QoQ but remain far above the long-term average. Q2 recorded 106 SPAC IPOs that raised $20.9 billion, representing a 66.5% decline on count and 81.3% decline in capital raised relative to the record-shattering Q1. We believe the cost of the traditional IPO process is a strong enough push to sustain the need for SPACs in the current ecosystem, albeit at a level closer to what we recorded in Q2. SPAC business combinations start to ramp up. We tracked 48 closed acquisitions through Q2 and 69 added so far in Q3, putting this quarter on pace to set a new record for SPAC acquisition deal count. Billion- dollar SPAC acquisitions have driven the majority of this acquisition value each quarter, accounting for 90.1% and 96.8%, respectively, of Q2’s and Q3’s total acquisition values. The future success of SPACs faces uncertainty. The recent lackluster aftermarket performance for SPACs, both pre- and post-acquisition, could intensify the downward pressure on new SPAC IPO issuance and general enthusiasm for the product. We expect a related decline of investor sentiment around SPACs, if returning capital due to failure to find a target becomes a regular occurrence. Regulation and litigation risks are also looming, which may discourage new SPAC activity

There are currently approximately $2.5 trillion worth of digital assets created and being traded, worldwide. That is a significant amount of value which requires governments and international organizations to consider how to interact with this asset class. There is a current clamor that the U.S. Congress must regulate digital assets or risk being unable to control transactions in that asset class at all. Also, there is a clamor from market participants for more clarity and the industry has spent approximately $2.5 million in lobbying the U.S. Congress in 2021 as they anticipate regulation. Despite these calls, I would argue that U.S. regulatory agencies have had digital assets in their sites for some time. While the CFTC could use some additional statutory language that would make its jurisdiction more straightforward, it has not hesitated to act. The SEC has issued fairly clear guidance to persons trying to legitimately be involved in these markets while also going after cases of fraud. This paper discusses the technical bases for digital assets and use cases, categorization and where most U.S. federal regulatory action exists currently.

This is the PowerPoint slide deck for the presentation.

On July 9, 2021, the Delaware Court of Chancery issued its latest decision determining whether a buyer's attempted invocation of a Material. Adverse Effect (MAE) clause was effective to excuse the buyer's failure to close an acquisition of the target company pursuant to a signed merger agreement. While the court relied upon well-trodden paths in reaching its determination that no MAE had in fact occurred, there are a few takeaways worthy of note i.e., (a) the seemingly "unknown event" element of IBP, Inc.'s theoretical underpinnings to the purpose of an MAE clause generally, is not a built-in requirement to invoking an otherwise carefully defined MAE clause, (b) durational significance remains a key ingredient in determining whether an material adverse effect has occurred, (c) carve-outs can eliminate otherwise truly material adverse effects from constituting an MAE, and (d) the effectiveness of "disproportional effect" exclusions to MAE carve-outs are dependent upon the industry participants that are used to make the disproportionality comparisons.

We are several months into a world with COVID-19 vaccines. However, for a variety of reasons, many remain unvaccinated. Employers are asking the question: “Can we require employees to be vaccinated against COVID-19?” In general, the answer is yes. Indeed, the Biden administration has tasked OSHA with rule-making that would require Employers with 100+ employees to mandate a vaccine or weekly testing. Employers may implement mandatory vaccination programs, subject to limited exemptions. Although the issue is only now coming to the forefront of our national conscience, mandatory vaccinations in the workplace are not new, and are particularly prevalent among healthcare providers. Some variability exists under federal law and among federal agencies, but for the most part, mandatory programs are permissible, as long as employers consider religious accommodation requests under Title VII of the Civil Rights Act of 1964 (Title VII) and medical accommodation requests under the Americans with Disabilities Act (ADA).

In its U.S. Remote Work Survey published in January 2021, PriceWaterhouseCooper (PwC) concluded that “Remote work has been an overwhelming success for both employees and employers.” And while a return to work in- person remains a moving target for many businesses and the law firms representing them as vaccination rates fluctuate and COVID variants remain a concern, less than 20% of the business executives surveyed by PwC say they want to return to the office environment as it was before the pandemic. Yet even as businesses and law firms alike have embraced the benefits of virtual meetings and remote practice, there are important considerations. For lawyers, there are ethical ramifications that are part and parcel of the remote practice of law. In addition, there are evidentiary issues and other concerns for lawyers and their clients to be mindful of when it comes to the proliferation of new forms of electronic communications. Likewise, both attorneys and businesses have firsthand knowledge of the many things that can go wrong when you’re not careful in using virtual meeting platforms like Zoom. In this article, we will examine each of these areas and offer some best practices for working remotely, meeting virtually, and communicating electronically.

As the Texas Supreme Court has noted, “the attorney-client privilege protects a relationship that is integral to the administration of justice as well as a government that functions for the benefit of the people.” However, it is not uncommon for it to be taken for granted, assuming elements of the privilege are met whenever a lawyer is involved in a communication. Both Texas state and federal case law make clear that is not the proper inquiry. The elements of the attorney-client privilege in Texas are (1) a confidential communication; (2) made for the purpose of facilitating the rendition of professional legal services; (3) between or amongst the client, lawyer and their representatives; and (4) the privilege has not been waived. While these elements are generally well known and easily recited, the components of each element have nuances that are vital to practice business law. This article will discuss issues that arise in striking a balance between sellers preserving the privilege while providing appropriate and necessary disclosures in the M&A context. First, by providing an overview of the attorney-client privilege under Texas state law and federal common law, and then by adding typical examples of disclosure considerations that arise in an M&A transaction. Because a lawyer’s ethical obligations are another backdrop to any disclosure consideration, this article will summarize the pertinent Texas Disciplinary Rules of Professional Conduct as well. To a buyer in a transaction, there is value in obtaining disclosure from a seller. However, that value should be balanced with the risks of a potential privilege waiver that can ultimately inure to the buyer’s detriment. If challenged in subsequent litigation, the inquiry of whether a communication with counsel was made for the purpose of rendering legal advice can be fact intensive. In particular, the concept that counterparties with a common business interest can be simultaneously adverse yet aligned on some matters is an area that has been repeatedly misunderstood. By carefully communicating about matters where preserving the attorney-client privilege is important, and judiciously focusing only on the disclosure of facts, sellers’ counsel can balance preserving the attorney-client privilege while complying with disclosure obligations in M&A transactions. Likewise, by remaining mindful of the elements of the attorney-client privilege, buyers’ counsel can calibrate how disclosure is valued.

In Texas, an enforceable, binding agreement typically has the following elements: 1) an offer; 2) an acceptance in strict compliance with the terms of the offer; 3) mutual assent or a “meeting of the minds”; 4) each party’s consent to the terms; and 5) execution and delivery of the contract with the intent that it be mutual and binding.1 There must also be consideration. An agreement does not always have to be in writing for it to be binding. A now-infamous deal that was “done Texas-style, with a handshake,” was found by a Texas jury in 1985 to have amounted to an enforceable contract, resulting in a $10.53 billion damages award. The Texas Supreme Court issued a decision last year confirming that it will enforce an unambiguous written agreement as written, even where one party claims (and a jury finds) that the party justifiably relied on oral representations made by the other party during negotiations. The Court held that there can be no justifiable reliance when the alleged oral representations are contradicted by the contract’s written terms—particularly where the parties are sophisticated and negotiated at arm’s length. According to the Court, the “parties’ relationship and sophistication required greater diligence than the execution of a written contract that directly contradicted [the plaintiff’s] assumed bargain and assertion of fraudulent inducement.” A few months later, the Court also refused to consider industry custom and usage in a hotly-contested 5-4 decision regarding an unambiguous consent-to-assign provision in a farmout agreement. When there is a written contract between sophisticated parties, their bargained-for agreement can be expected to be enforced by the courts as written—because, as one commentator explained: “the contract is the contract.”

This paper describes what attorneys need to know about incorporating companies that rely heavily – if not exclusively – on blockchains. Because technology is central to this topic, references will be provided for a brief introduction to: cryptocurrencies, blockchains (which is the underlying technology to cryptocurrencies), smart contracts, and distributed autonomous organizations. Finally, this paper will discuss the peculiar requirements for incorporating a blockchain-based company.

ESG stands for environmental, social, and governance (“ESG”) and seeks to set standards that can be used to evaluate the societal impact of an action, such as a company’s operations or an investment. Environmental criteria consider a project’s relationship to nature and whether it has a damaging, neutral or positive impact. Social criteria examine how it manages relationships with employees, suppliers, customers, and the communities where it operates. Governance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights. Interest in ESG has surged in recent years, leading to an influx in the market in ESG investing, reporting, and lending. While it is difficult to correctly quantify the amount of ESG related investing or financing, by any metric, it has grown exponentially in recent years and is expected to continue its incredible growth in the next decade. As companies have increased their ESG investing, they have likewise looked to both traditional and alternative financing sources to provide capital for investments. Consequently, ESG and Green Lending have likewise grown exponentially. This article will discuss the history and current trends of ESG with a focus on ESG financing structures and considerations for lenders and borrowers looking to utilize an ESG facility.

The Sarbanes-Oxley Act of 2002 (H.R. 3763) (“SOX”) was enacted as a means to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws. SOX and the rules enacted thereafter affect how issuers of securities make disclosures, the protocols auditors use to audit their financial statements, and how lawyers respond to auditor requests for information regarding issuer loss contingencies. Among other things, SOX amended the Securities Exchange Act of 1934 (the “1934 Act”) and the Securities Act of 1933 (the “1933 Act”). Although SOX does have some specific provisions, and generally establishes some important public policy changes, it has been implemented in large part through rules adopted and to be adopted by the Securities and Exchange Commission (“SEC”) and the Public Company Accounting Oversight Board (“PCAOB”), which have impacted auditing standards and have increased scrutiny on auditors’ independence and procedures to verify company financial statement positions and representations. Further, while SOX is by its terms generally applicable only to public companies, its principles are being applied by the marketplace to privately held companies and nonprofit entities.