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FCPA Internal Investigations: Key Concepts and Considerations
The globalization of national economies has created an increasing number of cross-border business opportunities for American companies. As a result, more and more businesses find at least some portion of their operations based or conducted in various foreign countries.1 This expansion into foreign markets creates significant opportunities for companies, but it also gives rise to a number of challenges. Foreign markets are often subject to different laws, customs, and standards and companies must take these issues into account to successfully operate. One of the most significant issues that companies must confront when conducting business operations in foreign countries is compliance with the Foreign Corrupt Practices Act (“FCPA”).2 In general, the FCPA prohibits payments and other transfers of value to foreign officials for the purpose of obtaining a commercial advantage.3 While such a practice would be naturally viewed as improper within the United States, corruption is more common in many foreign countries, and is often tolerated or allowed to flourish due to weak enforcement of local anti-corruption laws.4 The FCPA attempts to fill any such enforcement gaps by prohibiting companies subject to the law from engaging in such practices.
How to Write a Bad Arbitration Clause
Arbitration is here to stay. Driven by what parties perceive as deficiencies of the formal judicial system, including expense, protracted length, gamesmanship, belligerency and wastefulness, arbitration has grown exponentially in the last ten years. Because of its confidentiality, empirical statistics are difficult to come by. Nonetheless, the American Arbitration Association, the largest administrator in the world, notes a 46% increase in total case filings 2007 to 2012 — i.e., from 127,729 to 187,596 cases per year (including commercial, employment, labor, construction and no-fault issues). Courts, both federal and state, continue wholeheartedly to sanction this trend. Hence, arbitration is highly favored under the law. Moses H. Cone Memorial Hospital v. Mercury Constr. Corp.,460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983); Safer v. Nelson Financial Group, 422 F.3d. 389, 293 (5th Cir. 2005); Ponderosa Pine Energy, LLC v. Tenaska Energy, Inc., 376 S.W.3d 358, 369 (Tex. App. — Dallas, 2012, no pet. history) (citing Prudential Securities , Inc. v. Marshall, 909 S.W.2d 896, 898 (Tex. 1995).
Keeping Client Data and Your Law License Secure
The practice of law has changed dramatically since the days of carbon paper, fax machines, and dusty libraries. Today, an attorney’s computer contains everything needed to manage a law firm’s entire business including the confidential and proprietary data of the firm and its clients, the equivalent of complete file rooms and libraries of documents and data. With laptops, attorneys travel everywhere with thousands of file drawers of information. Unfortunately, power and portability provide opportunities for loss of client data. This article will highlight the facts and figures of data breaches, the data and information impacted, the ethics and attorney duties to protect the information, the penalties for disclosure, and some practical tips on protecting the information.
Regulatory Issues of Social Media
Today most companies perceive social media as a beneficial way to advertise their brands and increase their web presence. They also view social media as a way to enhance their relationships with customers and clients, recruit new employees, make corporate announcements, and acquire information regarding customer preferences. Companies are increasingly mindful of the potential benefits of using social media for marketing, recruiting new employees, connecting with clients, and effectively making announcements to a vast audience in a cost-effective manner. Of course, the potential benefits of social media come with costs, including potential legal liabilities. Many companies may not be fully cognizant of the legal issues that arise from the use of social media in the workplace, in the marketplace, and in litigation. This paper explores the use of social media in these three arenas. First, what issues emerge from employees using social media and employers attempting to regulate such use? Employers and their counsel need to understand employee privacy rights as well as the risk that overly broad social media restrictions could run afoul of worker protections under the National Labor Relations Act concerning employee discipline. Second, what limitations exist on companies using social media for commercial purposes? Public companies face SEC restrictions on disclosures made through social media. Public and private companies deal with FTC rules on advertising and a host of laws addressing trademark protection. Finally, how does the use of social media impact litigation? Companies in litigation must be prepared to address the preservation of social media content, discovery of social media, and the potential misuse of social media in jury trials.
Misbehaving Directors, Including Directors' Duties to Maintain the Confidentiality of Information
The conduct of corporate directors and officers is subject to particular scrutiny in the context of business combinations (whether friendly or hostile), executive compensation and other affiliated party transactions, allegations of illegal or improper corporate conduct, and corporate insolvency. The individuals who serve in leadership roles for corporations are fiduciaries in relation to the corporation and its owners. Increasingly the courts are applying principals articulated in cases involving mergers and acquisitions (“M&A”) to cases involving executive compensation, perhaps because both areas often involve conflicts of interest and self-dealing or because in Delaware, where many of the cases are tried, the same judges are writing significant opinions in both areas. Director and officer fiduciary duties are generally owed to the corporation and its shareholders, but when the corporation is insolvent, the constituencies claiming to be beneficiaries of those duties expand to include the entity’s creditors.
Shareholder Oppression: Is It a Cause of Action?
In troubled economic times, the temptation to exercise power over business partners can be overwhelming—whether borne out of greed, a sense of entitlement, or even a perceived need for self-preservation. This article deals with the rights of individual shareholders in closely held corporations. This is an area that is poorly developed in Texas law and plagued with apparent contradictions in the dicta. The most common case arising out of the abuse of corporate powers has to do with officers or directors using their power to steal from the corporation (and thus from the shareholders as a group). Shareholders often bring these cases, and a very common result is the dismissal of the lawsuit because the duties violated are owed to the corporation and not to the shareholders individually. Several Texas cases seem to suggest that there are no (or at least very few) duties owed to shareholders individually. In recent years, individual shareholders have been prevailing in lawsuits asserting claims for shareholder oppression—claims based on duties owed to the shareholders individually. In this article, we will explore the basis of these claims. We will not deal with the closely related issue of derivative suits or with duties owed by officers and directors to corporations.
Hot Topics In Employment Law
Fiduciary Duties in Alternate Entities
Overview of Traditional Fiduciary Duties and Alternate Entities Relevant Delaware Statutes Governing Alternate Entities Relevant Texas Statutes Governing Alternate Entities Standard Contractual Provisions in Alternate Entity Agreements Delaware Supreme Court Cases
The Corporation's Duty to Protect: The Morning After the Hack (Part 1)
Assuring cybersecurity has become a necessity for businesses across all industries. According to an FBI study in March 2009, cybercrime — with over $1 trillion in annual revenues — is now the largest illegal global business. Any business with computers and internet access is vulnerable not only from outsiders waiting to pounce but also from within the enterprise as a result of human error or bad intentions. Given the size of this problem, it is not surprising that the National Association of Corporate Directors has stated that to make real progress in the cybersecurity area, businesses must treat cybersecurity as a matter of “corporate best practices” and not just a technology issue. Companies face the risk of substantial damage from loss of customer confidence, decrease in market value and damage to their reputations as well as litigation and regulatory risks in the event of a cybersecurity breach. As October draws near, Cybersecurity Awareness Month sponsored by the Department of Homeland Security may be the perfect time for you to refocus on whether your business has adequately planned for the security of its assets.
The Corporation's Duty to Protect: The Morning After the Hack (Part II)
While sipping your first cup of coffee on your morning drive to work your phone rings: it is the General Counsel of Paysthemortgage Corp., your largest and best client. Breathlessly, she informs you that at 4 a.m., anonymous hackers infiltrated Paysthemortgage’s network, stealing thousands of unencrypted customer files, including credit card numbers and personal information. The Chairman of Paysthemortgage is demanding to know: ‘Are we prepared for this?’ and ‘What is our exposure?’ As Paysthemortgage’s trusted outside counsel, she has called you for the answers. The Art of Data Breach Response, available from the author, addresses the first question. This paper tackles the second. While no a priori legal analysis can do justice to the important question of a corporation’s potential exposure after a data breach, this paper provides the practitioner with an analysis of the various claims and defenses available in each jurisdiction, and, at a minimum, provides a starting point for this analysis. On a circuit-by-circuit basis, this paper examines fifteen recent federal court decisions adjudicating claims for damages arising out of a data breach. While not canvassing the entire geographical and temporal universe of data breach jurisprudence, the selected cases highlight key developments therein, and provide a substantive baseline for corporate and class counsel alike to assess the potential exposure of a corporation the morning after the hack.
Recent Case Law Developments for Texas Business Law Practitioners
Summarized below are selected recent cases of interest to the Texas business law practitioner. This survey covers opinions issued since the beginning of 2012 and concentrates on Texas Supreme Court opinions and opinions dealing with “hot topics” or issues that are not well-developed or well-settled. A couple of significant opinions issued by courts of appeals in 2011 are pending before the Texas Supreme Court, and they are noted at the end of the paper. In addition, one recent unpublished bankruptcy court opinion is noted because it analyzes the nature and extent of an LLC managing member’s duties to the LLC and the other members, which is a question that has not been the subject of a great deal of analysis in the Texas case law.
The Regulation of Swaps and Derivatives and Its Impact on Business After Dodd-Frank
The Dodd-Frank Wall Street Reform Act (the “Dodd Act”) is the most significant financial legislation since the Depression-era reforms 75 years ago. It was signed into law on July 21, 2010 and is 2,300 pages long. Despite its length, it is a more like a set of guidelines than a specific law, with a directive to regulators to craft regulations to take control of a vast and complicated financial system. The law itself required regulators to draft and finalize these regulations within one year. It did not happen that way. As of the third anniversary of the Dodd Act, according to one law firm’s estimates, even though 13,789 pages of rules containing 15 million words have been written by ten different regulators, the process is only 39% complete. At this pace it would take several more years to complete. For a large number of businesses, one segment of the law affects them the most: the regulation of swaps that they use to hedge against price swings for things like commodities or interest rates. These businesses have become known as “end users” because they are at the end of the market and because they use swaps to reduce risk arising out of their commercial enterprise. In dollar terms, the end users are a small part of the overall market, less than 10%. But the number of end users is large. The U.S. Commodities Futures Trading Commission (“CFTC”) estimates that 125 entities will fit under the swap dealer (“SD”) definition, which is down from its estimate of 300 last year, while the number of end users may be greater than 100,000. This paper will focus on the end users and the major issues they are facing currently under the Dodd Act.
Fiduciary Duties of Partners, Members & Managers
The sum and substance of the fiduciary duty is the duty to place the interests of one or more other parties before his or her own. This is the highest duty imposed in law, and it logically applies to limited categories of relationships. Where a fiduciary duty exists, the compliance burden is very high. Parties in litigation often dispute the existence of the relationship as well as its substance. Increasingly, parties seek to limit the scope of fiduciary duties by contract before litigation arises. This article will address these efforts as well as the scope of the fiduciary duty in partnerships, limited partnerships and limited liability companies. Finally, the article will address causes of action related to fiduciary duty issues in smaller companies, specifically, aiding and abetting a breach of fiduciary duty and shareholder oppression.
The Growing Breadth of Anti-Money Laundering Laws
This paper will provide a summary overview of the laws commonly referred to as “anti-money laundering laws” and the expansion of these laws after September 11, 2001 to industries beyond banking as a result of the enactment of the USA PATRIOT Act. The paper will also look at potential future coverage of the legal profession under these laws. This paper will also provide useful resources for practitioners who are faced with providing advice to clients who may be faced with complying with the anti-money laundering laws.
Legislative Update: Certain 2013 Amendments to the Texas Business and Commerce Code
This article summarizes several pieces of legislation passed by the Texas Legislature in its 2013 Regular Session that amend the Texas Business & Commerce Code (“TBCC”). Senate Bill 847 (“S.B. 847”) was authored by Senator John Carona, sponsored by Representative Rene Oliveira, signed into law by Governor Rick Perry on May 2, 2013 and becomes effective on September 1, 2013. In addition to amendments to the Texas Business Organizations Code, S.B. 847 makes an amendment to the fraudulent transfer provisions of the TBCC. House Bill 1624 (“H.B. 1624”) was authored by Representative Philip Cortez, sponsored by Senator Van de Putte, signed into law by the Governor on June 14, 2013 and becomes effective on September 1, 2013. H.B. 1624 amends the TBCC’s provisions to require a limited liability company to file an assumed name certificate if a series of the limited liability company operates under an assumed name. Senate Bill 474 (“S.B. 474”) was authored by Senator John Carona, sponsored by Representative Mike Villareal, signed into law by the Governor on June 14, 2013 and becomes effective on July 1, 2013. S.B. 474 makes several amendments to Chapter 9 Secured Transactions of the TBCC relating to the contents of financing statements, which are based on uniform amendments to the Uniform Commercial Code (the “UCC”) approved at the national level. Senate Bill 230 (“S.B. 230”) was authored by Senator John Carona, sponsored by Representative Joe Deshotel, signed into law by the Governor on May 10, 2013, and becomes effective on September 1, 2013. S.B. 230 amends Chapter 4A Funds Transfers of the TBCC based on a uniform amendment to the UCC approved at the national level relating to the applicability of Chapter 4A to “remittance transfers.” Senate Bill 699 (“S.B. 699”) was authored by Senator John Carona, sponsored by Representative Villalba, signed into law by the Governor on June 14, 2013, and becomes effective on September 1, 2013. S.B. 699 amends the assumed name provisions of the TBCC to simplify some of the information required in assumed name certificates filed with the Texas Secretary of State and offices of county clerks in Texas.
Preparing for Securities Litigation
Securities litigation is, in many respects, different from other types of business litigation. In an effort to bring order and structure to securities litigation, Congress enacted legislation specifically to address securities class actions. The Private Securities Litigation Reform Act (PSLRA) and Securities Litigation Uniform Standards Act (SLUSA) are two major statutes affecting securities class actions. The PSLRA sets out procedures uniquely applicable to securities class actions. In enacting the PSLRA, Congress acknowledged that private securities litigation provides defrauded investors with an important tool to recover losses. Congress nevertheless wanted to curb frivolous claims, vexatious discovery, and lawyer-driven litigation. H.R. Conf. Rep. No. 104-369, pp. 31 -32 (1995). Defending securities litigation is expensive, and Congress wanted to ensure that plaintiffs could not use the threat of protracted litigation as a means of extracting outsize settlements. To achieve this goal, the PSLRA sets exacting standards for alleging fraud. Discovery is restricted until the court has made a preliminary ruling on the merits of the complaint. The PSLRA provides a transparent process for selecting class representatives, mandates sanctions for frivolous suits, and specifies the process for settling cases. Business lawyers, especially in-house lawyers for publicly-traded companies, should take note of these special requirements. This paper is intended to help lawyers who do not regularly handle securities class actions to understand some of the unique aspects of this litigation and to prepare should they or their clients become involved.
Affordable Care Act and Its Impact on Business
This article provides an overview of some of the key provisions of the Patient Protection and Affordable Care Act. It also discusses the reaction of the private sector to those provisions. This article will address the present challenges that face the healthcare system in the United States, the ways in which the Patient Protection and Affordable Care Act (“ACA”) attempts to address those challenges and the way that the public sector is reacting to the changes in the payment model. The payment emphasis in ACA on compensation for quality and the importance of primary care is a different approach than the traditional fee for service environment and is causing changes in the ways healthcare is delivered and the manner in which practitioners are compensated. This payment model has caused a reassessment of the business of healthcare and the structures that are necessary to accomplish the highest levels of payment under the new reimbursement models.
7 Deadly Sins of Boilerplate: How Cut and Paste Can Get You Sued
Those “standard” sections at the end of a contract may look like the same provisions you have seen in hundreds of contracts. But those tried and true, cut and pasted, provisions can often create, rather than resolve, problems. The fallout from improperly drafted (and typically neglected) boilerplate provisions can determine the enforceability of a contract, the value to be received by a party, and the remedies available to the parties.
A Rubik's Cube of Ethical Dilemmas Faced by General and Corporate Counsels
Ethics and the resolution of ethical dilemmas have been, and continue to, an area of indelible and deep interest to me. This focus of ethics and the related dilemmas has been with me since I was a child, as a Certified Public Accountant, and in all the roles in which I have been involved, personally and professionally. As Vice President and Associate General Counsel at JPMorgan, I was a member of the Global Conflict of Interest Committee for JPMorgan and I was the Committee’s representative in Texas. The first article that I penned for the Houston Bar Association when I was featured as “Profile in Professionalism” was centered on the subject matter of ethics and the ethical duties of an attorney. Basically, thought the subject matter of the many articles that I have written for the Texas Lawyer is not directly on ethics, the theme within those articles on diversity and inclusion is squarely about “doing the right and ethical thing.”