In two 2017 decisions, DFC Global Corp. v. Muirfield Value Partners, L.P. (“DFC”) and Dell, Inc v. Magnetar Global Event Driven Master Fund, Ltd. (“Dell”), the Delaware Supreme Court loosely adopted the notion that the deal price of a merger resulting from a robust, arms-length bidding process is often the best indicator of fair value in appraisal actions. This marked a major methodological shift in appraisal rights litigation; historically, the Chancery Court had opted to find the “intrinsic value” of a firm’s stock through a highly specific assessment of factual circumstances. Thus far, application of the reasoning in DFC and Dell has largely yielded awards near or below deal value. The resulting decrease in the profitability of appraisal claims has called into question the longevity of the investment strategy called “appraisal arbitrage.”
On November 8, 2019, the Supreme Court granted certiorari to review the decision in Booking.com B.V. v. United States Patent & Trademark Office. At issue is whether “Booking.com” is a distinctive mark worthy of trademark protection or whether it is a generic name simply describing the service offered by the website. The Fourth Circuit affirmed the district court’s determination “that although ‘booking’ was a generic term for the services identified, BOOKING.COM as a whole was nevertheless a descriptive mark.” The Fourth Circuit further upheld the district court’s determination that Booking.com met its burden (largely through survey evidence) of showing that the URL mark “had acquired secondary meaning, and therefore was protectable.”
Between 2015 and 2017, Delaware state courts made substantial efforts to reduce their volume of merger litigation by (1) expanding the business judgment review to cover a broader swath of mergers and (2) denying plaintiffs attorneys’ fees in disclosure suits if their lawsuits do not confer a substantial benefit on shareholders. These measures were effective; in May 2017, Law360 published an article on the “exodus” of deal suits from Delaware’s Chancery Court.The exodus, it turned out, was simply a migration to federal court, and in September 2019, federal courts attempted to stem this migration. In Scott v. DST Systems, a Delaware federal judge denied plaintiff-shareholders attorneys’ fees stemming from their suit over an allegedly misleading merger proxy statement. The case followed a typical pattern of M&A strike suits. A strike suit is typically a derivative action, “often based on no valid claim, brought either for nuisance value or as leverage to obtain a favorable or inflated settlement.” In February 2018, DST Systems solicited shareholder support for a proposed $5.4 billion acquisition by SS&C Technologies. A few weeks after the DST board published its initial proxy statement, plaintiff DST shareholders filed suit alleging material deficiencies in the proxy disclosures. The board responded with a supplemental proxy statement, curing the alleged deficiencies and mooting the plaintiffs’ suit. The plaintiffs then moved for attorneys’ fees.
Allowing NCAA Football Players to Profit from Their Name, Image, and Likeness Will Enhance Competition, Not Reduce It
College sports is big business, and college football makes up the lion’s share of the revenue. The average Division I school’s football team makes more money than the school’s next 35 sports combined, including men’s basketball. According to Forbes, the 25 most valuable college football programs generated $2.7 billion in revenue and $1.5 billion in profit, led by Texas A&M’s football program with $94 million in profit and $147 million in revenue per year. A large portion of college football revenue comes from TV contracts. ESPN is currently in the middle of a 12-year, $7.3 billion TV deal for the rights to televise the four-team playoff at the end of the season. Under that deal, ESPN is paying just under $203 million per game.
Cryptocurrency as it currently exists inherently crosses the boundaries between existing legal precedents. Though neither a sovereign currency nor a traditional investment mechanism, cryptocurrencies can operate as both in portfolios, which leaves regulators to deal with the intricacies. As a complicated and relatively new piece of financial technology, cryptocurrencies occupy a complicated place in the regulatory landscape. Globally, regulation has taken several different shapes and countries have found a variety of ways to deal with the complicated issues created by the new financial technology. Since cryptocurrencies are designed to operate as a currency, and were designed, in some ways, to operate without a traditional regulatory scheme, governments have tried a variety of strategies to deal with a technology that does not operate under traditional metrics.
The growth of the esports industry and the use of video game content on streaming and video content websites raises questions in copyright law. Esports is an industry that is growing in popularity and revenue. With an expanding audience and current predictions that the global esports market will exceed $1 billion by 2021, there are a significant number of business opportunities available in the gaming industry. One area driving growth is the use of content creators to promote esports. Most, if not all, esports organizations sponsor popular internet content creators because they attract viewers, with some of the most popular streamers having millions of followers. Content creators in this industry typically broadcast themselves playing games casually or competitively. The visibility of these content creators, in conjunction with their partnership with esports organizations, will typically result in increased opportunities to attract other sponsors and advertisers.
In June 2019, Senator Marco Rubio introduced a new bill called the Ensuring Quality Information and Transparency for Abroad-Based Listings on our Exchanges (“EQUITABLE”) Act (“the Act”) to heighten oversight of foreign companies listed on U.S. stock exchanges. Among other things, the EQUITABLE Act requires U.S. stock exchanges to de-list all foreign companies that fail to comply with federal regulations on the audits of their financial statements. This post will first set out the backgrounds of this new bill, and then analyze the applicable scope of the Act.
Regulating Private Equity by Aligning PE Fund and Stakeholder Interests? A Look at Senator Warren’s Proposal
Democratic presidential candidate Senator Elizabeth Warren has put renegotiating the relationship between workers and capital at the fore of her campaign. She wrote that her plan to rein in Wall Street “start[s] by transforming the private equity industry” and she has proposed the Stop Wall Street Looting Act of 2019 (“the Act”) to that end. The Act proposes changes, small and large, to the industry, from minor changes in regulatory oversight to provisions that would fundamentally reshape industry practices and even corporate law.
How Corporate Controversies Regarding Engagement with China Interact with the Debate over Corporate Purpose
In recent weeks, controversy over corporate concessions to China on content and employee speech has gripped public discourse. On October 4th of this year, Houston Rockets’ General Manager Daryl Morey kicked off a public relations crisis for the NBA by tweeting his support for ongoing pro-democracy protests in Hong Kong. Morey’s tweet triggered an immediate backlash from the Chinese government and public against the NBA, driving both the Rockets and the league to apologize and distance themselves from Morey. Prominent coaches and players echoed these comments, including superstar LeBron James, who criticized Morey for tweeting while “misinformed” on Hong Kong. In spite of these remedial efforts, the NBA suffered retaliation in the Chinese market including the cancellation of broadcasts and the pulling of team merchandise.
When the House Intelligence Committee met in June 2019 to discuss the most pressing threats to the upcoming 2020 presidential election, Committee Chairman Representative Adam Schiff opened with an alarming call to action: “We are on the cusp of a technological revolution,” he warned, “that could enable even more sinister forms of deception and disinformation by malign actors, foreign or domestic.”
Over the past few years, employee classification has become a more prevalent issue. Technology has advanced such that companies like Uber and Lyft provide a platform for workers to connect with consumers, classifying those workers who use the platform as “independent contractors” instead of “employees.” More and more employers are misclassifying their employees as independent contractors in order to avoid paying unemployment insurance, fair wages, and giving workers their legally entitled rights. Typically, courts look at the economic realities of a situation to determine whether a worker is an employee as opposed to an independent contractor. The traditional test looks to a myriad of factors, including the degree of control an employer exercises over the worker, how the worker is paid, the employer’s right to hire and fire the worker, and whether the performance of the worker’s duties was an integral part of the employer’s business. On September 18, 2019, California Governor Gavin Newson signed a new definition of “employee” into law in the wake of the Dynamex Operations West v. Superior Court decision.
Four years ago, the Second Circuit held that parties cannot settle Fair Labor Standards Act (“FLSA”) claims through a private stipulated dismissal with prejudice pursuant to Federal Rule of Civil Procedure 41(a)(1)(A)(ii). Under Cheeks, FLSA settlement agreements must be approved by either a court or the Department of Labor (“DOL”). In deciding Cheeks, the Second Circuit was concerned with the “disparate bargaining power between employers and employees,” and wanted to ensure that individual plaintiffs would not be pressured into unfair settlement agreements.
With the solar investment tax credit (“ITC”) beginning to phase out at the end of 2019, now is a good time to think about how current regulatory risk will affect the value proposition of residential solar. Given the anticipated utility bill savings that residential solar offers, wealthier households may choose to independently invest in residential panels. But liquidity is a problem for most American households. As a result, solar providers created third-party-owned financing models, making solar a more accessible investment.
The London interbank offered rate (“LIBOR”), a measure of short-term interest rates and a key benchmark for trillions of dollars’ worth of contracts, is dying. Market participants and financial regulators have searched for a replacement since 2012, when several banks admitted to manipulating LIBOR for profit. In response, the U.K.’s Financial Conduct Authority (“F.C.A.”) issued a warning that companies should not rely on LIBOR’s continued existence after the end of 2021. As the deadline looms, U.S. regulators, market participants, and even law firms continue to bang the warning drum: parties must voluntarily renegotiate their contracts, or else. According to a recent survey, fewer than half of companies reported feeling confident that they will be ready when LIBOR disappears. This widespread unpreparedness makes it seem increasingly likely that companies, and eventually courts, will have to deal with the “else.” The looming question, then, is not just how judges might resolve contract disputes arising out of the end of LIBOR, but how judges should resolve them
In the past month, news broke that the White House narrowed down the measures contemplated to restrict U.S. investors’ capital flows into China, including delisting Chinese companies from U.S. stock exchanges. Motivations behind such restrictions vary from protecting U.S. investors from excessive risk due to lack of regulatory compliance by Chinese businesses, to addressing national and economic security concerns associated with the Chinese government’s influence over private companies.
The recent decision in U.S. Bank National Ass'n v. Windstream Services, LLC, No. 17-CV-7857 (JMF), 2019 WL 948120 (S.D.N.Y. Feb. 15, 2019) is the subject of much heated commentary. However, little ink has been spilled about defensive changes in debt contracts after Windstream (“Windstream covenants”).
It is a well-established principle in contract law that the non-breaching party has a duty to mitigate losses after the realization of the breach. However, how long does this duty run? When should the non-breaching party be discharged from this duty? What date should the court look to when calculating damages after the breach? In a commercial setting where contracting parties have equal bargaining power, and in the absence of reliance, these questions are crucial to damage calculations because another well-established principle in contract law states that the proper amount of damages is the amount that places the non-breaching party in the same position it would have been in had the contract been properly performed.
Today, over 50 years since the Fair Housing Act of 1968 was enacted into law, the rise of sophisticated targeted digital advertising presents nuanced housing discrimination issues for our country and our tech giants like Facebook. In 2011, Facebook settled with the FTC on charges that it deceived its consumers and shared its users’ personal data with advertisers. Just last month, in March 2019, Facebook settled with the ACLU and other civil rights groups, to make “meaningful” changes to its advertising platform in an effort to reduce advertising discrimination. Despite these Settlements, Facebook’s promises to fight discrimination continue to fall shockingly short.
In March 2019, Senator Warren unveiled an ambitious antitrust proposal: breaking up Amazon, Google, and Facebook. She focused on the most controversial mergers such as Amazon’s acquisition of Whole Foods, Facebook’s acquisition of WhatsApp and Instagram, and Google’s purchase of Waze and DoubleClick. This post will analyze separately the two prongs of Senator Warren’s proposal: (1) designating large tech platforms as “Platform Utilities” and (2) appointing regulators to unwind mergers.
S&P 500 companies spent more than $800 billion on share repurchases in 2018. A 50% increase from 2017 and an all-time high in terms of dollars spent on buybacks, these statistics have intensified the debate among economists, politicians, businesspeople, and the like on the validity of this use of cash as a rational business expense and their effect on the US economy, innovation, and workers.
Initial coin offerings (“ICOs”) have served as an attractive method of start-up fundraising for a long time, but recent statistics show that investors are increasingly turning their backs on the ICO market. In 2018, ICO projects have raised $12.2 billion, but most funding was achieved during the first five months of the year. Since May of 2018, ICO funding is reported to have consistently declined, in large part due to ongoing regulatory uncertainty.
There are two ways that insurance companies today earn revenue. The first way is the most well known. The insurance company charges clients a premium and uses skilled actuaries to accurately estimate the likelihood, timing, and value of claims. By charging a premium greater than the expected value of claims, the company expects to make a profit.
“Alternative data” describes forms of data relevant to the investing process that are not “traditional” types of information. While traditional information (such as company disclosures in SEC filings or other formal public statements) has long been the focus of investing professionals, recent years have brought an explosion of interest in alternative data sources such as web scraping, credit card panel data, and satellite imagery.
Examining The Relationship Between Chapter 15 And Section 109(a) of the United States Bankruptcy Code: Why Applying Section 109(a) Is Problematic
Mt. Gox, formerly one of the world’s leading digital currency exchanges headquartered in Japan, shut its website in 2014 after asserting that it lost approximately 860,000 bitcoins due to an unidentified hacker’s attack. At that time, this amount was worth more than $500 million. Although it subsequently reported that it found 200,000 bitcoins, the company was clearly in financial distress. Indeed, Mt. Gox filed for Chapter 15 bankruptcy proceeding in March 2014, to prevent U.S. customers from seizing its U.S. assets. Mt. Gox also filed a similar proceeding in Canada. Although the case is still going on in Japan, all relevant parties involved in the Mt.Gox crisis—the bitcoin exchange itself, its’ creditors, and different courts—would not have been able to streamline this cross-border issue without use of Chapter 15.
In December of 2018, New York State Department of Financial Services completed an investigation involving Barclays’ Chief Executive James E. Staley. The Empire State’s primary regulator of banking and insurance companies fined Barclays $15 million over Mr. Staley’s attempt to uncover the author(s) of two letters from a whistleblower claiming to be a shareholder. The letters concerned the hiring of a new executive, Tim Main, who was a “friend and colleague” to Mr. Staley. While the $15 million fine was connected to the bank’s “unsafe and unsound manner by failing to implement effective governance and controls,” it has given members of the finance sector an opportunity to reflect on their whistleblowing procedures, and the regulation that governs them.
As the FTC has stepped into a role of regulating cybersecurity, there has been much debate about the relative effectiveness of standards-based versus rules-based regulation. Initially, the FTC adopted broad standards, but appears to be moving toward a more rules-based approach.
We live in an era of big business that rivals or even surpasses the Gilded Age. Our president—our wealthiest ever—is a billionaire, as are his Secretaries of Commerce and Education. Meanwhile, Amazon and Apple both claimed valuations greater than $1 trillion in 2018. There is little doubt that big business is getting bigger and politics is getting richer. It should be no surprise, then, that the long-standing American tradition of antitrust action is reawakening in popular politics.
On March 27, 2019, the United States Supreme Court decided Lorenzo v. SEC. Many eyes were on this case, because of its potential to have a significant impact on the scope of securities fraud liability. Ultimately, the Supreme Court found in favor of the Securities Exchange Commission and held that “dissemination of false or misleading statements with intent to defraud can fall within the scope of Rules 10b–5(a) and (c), as well as the relevant statutory provisions, even if the disseminator did not “make” the statements and consequently falls outside Rule 10b–5(b).” This decision clarified what the holding of Janus Capital Group, Inc. v. First Derivative Traders (2011) covers.
The dominant form of artificial intelligence in use today is machine learning, which refers to algorithms that use vast sets of data to improve their accuracy in tasks like identifying patterns, labeling information, and predicting outcomes. Machine learning-based artificial intelligence is everywhere—both in the sense that our daily lives constantly intersect with it, and in the sense that we are constantly bombarded with new, often negative, stories about it.
On September 30, 2018, the former governor of California, Jerry Brown, signed a bill into law that would require publicly held corporations in California to include women on their boards. The law“requires publicly traded corporations headquartered in California to include at least one woman on their boards of directors by the end of 2019 as part of an effort to close the gender gap in business.” Furthermore, by the end of July 2021, the law requires that “a minimum of two women must sit on boards with five members, and there must be at least three women on boards with six or more members. Companies that fail to comply face fines of $100,000 for a first violation and $300,000 for a second or subsequent violation.” By signing the bill into law, California became the first state to require that companies include women on their corporate board.
In April of 2018, the Ninth Circuit split with five other circuits in finding that Section 14(e) of the Securities Exchange Act of 1934 supports an inferred private right of action based on the negligent misstatement or omission made in connection with a tender offer. The panel reversed the district court’s dismissal and recognized its departure from previous jurisprudence, holding that the first clause of § 14(e) requires only a showing of negligence rather than scienter. The Supreme Court granted certiorari in January and is scheduled to hear arguments in April of 2019.
Pacific Gas and Electric (PG&E), California’s largest utility company, has set off a political storm in the state after filing for bankruptcy in late January—not least because of its request, in bankruptcy, to pay out more than $230 million in employee bonuses before compensating property owners for losses stemming from California’s recent devastating wildfires. Although PG&E currently has enough assets to outweigh its liabilities, prompting claims that the company has prematurely jumped into bankruptcy protection, the utility company is anticipating staggering liabilities of as much as $30 billion in the near future, arising from its role in the recent wildfires that ravaged California. California has already deemed PG&E responsible for 17 of the state’s 21 major wildfires in 2017, and still has yet to assign liability for the November 2018 Camp Fire, which left 86 dead.
At the end of 2017, when President Trump signed the 2018 Tax Cut and Jobs Act, he got rid of one of the biggest tax benefits for art collectors and investors. Section 1031 of the Internal Revenue Code, which allowed for like-kind exchanges, had previously been used as a tool for investors to defer capital gains on several types of investments. However, the reform limited the use of like-kind exchanges in deferring capital gains tax to only real estate investments. Previously, when an art collector wanted to sell a piece of art, as long as the collector used that money to acquire more art, it did not trigger a realization event.
What do Core Power Yoga, the Honey Backed Ham Company and Camp Bow Wow Franchising all share in common? All three are recipients of complaints challenging existing website accessibility measures for the blind. While the motivations behind such lawsuits have invited controversy from those labeling them as “drive-by lawsuits,” pursued by self-interested lawyers chasing payouts, the underlying criticism is simple: businesses’ websites need to be more accessible to those who cannot see.
The Aftermath of the FBI v. Apple Litigation: the All-Writs Act Explored & Unanswered Privacy Questions
A 2015 mass shooting in San Bernardino spawned one of the most controversial cybersecurity cases of the new millennium. The FBI and Apple litigation in which the FBI sought to compel Apple to create a backdoor to their security systems in order to access the shooter’s phone raised serious issues about privacy and the scope of the All-Writs Act. However, the case never saw a true resolution – the FBI withdrew their case when a third party was able to successfully access the target device. The lack of resolution to the question of whether the government can compel a company to provide a backdoor to their security systems remains unanswered, and it’s a question that technology giants must still consider.
In August 2017, a Wisconsin-based company implanted microchips fueled by radio-frequency identification technology in its employees on a voluntary basis. Initially, fifty employees—enticed by the notion of swiping into the building, unlocking their computers and paying for purchases with a wave of the hand—opted to have the grain-of-rice-sized microchip injected between their thumb and forefinger.
Influencers Under Fyre: The Case for Greater Enforcement of FTC Endorsement Guidelines Against Social Media Influencers
In late April of 2017, the Fyre Festival—a “luxury music festival” located on the Bahamian island of Great Exuma—fell apart in spectacular fashion. Fyre failed to deliver on its promises of private jets, gourmet food, and luxury villas. Instead, festival-goers were left stranded on the island, forced to spend the night in repurposed FEMA tents, and infamously served cheese sandwiches, despite tickets priced as high as $250,000. The “festival” became a viral sensation immediately after its cancellation and has re-entered the national conversation through a pair of documentaries released by competing streaming platforms Hulu and Netflix.
The 116th Congress made waves last week in the world of environmental conservation. No, not the Green New Deal—more on that later. In an exceedingly rare moment of bipartisan legislative activity, the Senate passed S.47, colloquially known as the Natural Resources Management Act, with a tally of 92 yea votes to only 8 nays. The bill, introduced by Sen. Maria Cantwell (D-WA) and Sen. Lisa Murkowski (R-AK), is the culmination of four years of work by western lawmakers and includes over a hundred unique provisions providing public land benefits across more than a dozen states—impacting over 2 million acres of federal land. S.47, which is expected to pass the House with broad support, contains several key features.
It’s been a busy year for cryptocurrencies and the regulators who oversee them. There were several concerning signs for proponents—for instance the price of Bitcoin has dropped more than $18,000 since its high in December 2017, highlighting the volatility of trading in crypto assets. In February 2018, Securities and Exchange Commission (SEC) Chairman Jay Clayton testified in a Senate hearing that every Initial Coin Offering he’d seen came within the scope of securities law, despite a lack of SEC enforcement action.
Circuit Courts are split on plaintiff standing in data breach cases and so far the Supreme Court has declined to weigh in on interpretations of Article III standing in this context. The principal split in interpretation is on whether data theft alone is sufficient for standing under Article III or whether actual misuse of the stolen information is required to have occurred for plaintiffs to have standing. The D.C., Third, Sixth, Seventh, Ninth, and Eleventh Circuits have aligned with the former of these standards, whereas the Second, Fourth, and Eighth apply the latter standard.
On January 28, 2019, federal prosecutors announced a slate of criminal charges against Huawei, China’s largest smartphone company and the second-largest vendor of smartphones in the world. Among other allegations, the indictment accused Huawei of stealing trade secrets from an American competitor, T-Mobile. The charges mark just the latest step in an escalating effort to stop the theft of American intellectual property by Chinese companies, one that has gained steam since President Donald Trump took office in January 2017. As the Trump administration navigates the broader complications of its relationship with China, it must not relax its attempts to combat the economic threat posed by trade secret theft.
Much of the nation’s attention over the past month has been focused on the government shutdown, a turbulent saga that finally came to an end on January 25 when President Trump signed a bill to temporarily reopen the government for three weeks. It appears that organized labor had a hand in helping end the impasse. Hours before Congress passed its shutdown-ending bill, amidst reports of significant disruptions at airports due to unpaid federal air traffic controllers calling in sick, the national flight attendants’ union (the Association of Flight Attendants-CWA) announced that it was “mobilizing immediately,” indicating that it could be prepared to strike in support of its federal-worker colleagues. The threat of a flight attendant strike, and the complete halt of U.S. commercial air travel that that would cause, likely played a role in the President’s decision to agree to a short-term solution that didn’t include funding for his desired border wall.
Even as recent headlines have criticized Trump administration’s regulatory enforcement record, pointing to a “62 percent drop in penalties imposed and illicit profits ordered returned by the S.E.C., to $1.9 billion under the Trump administration from $5 billion under the Obama administration,” the Commodities Futures Trading Commission (“CFTC”) has taken a different tack. The CFTC Chairman made a speech in early October emphasizing the agency’s recent increase in monetary penalties and describing this past year as “among the most vigorous in the history of the CFTC.”
In August 2018, Senator Elizabeth Warren introduced the Accountable Capitalism Act, which would require “[a]ny entity organized as a corporation, body corporate, or limited liability company” with over $1 billion in revenue to obtain a charter from the newly established Office of United States Corporations. In order to comply with the charter, the corporation must have a stated “purpose of creating a general public benefit,” which must be identified in both the charter of the United States corporation and in the incorporation documents filed in the company’s state of incorporation.
With traditional bond markets tight, investors have injected increasingly huge sums of money into the subprime auto bond market. The increase in demand for subprime auto bonds has in turn driven up demand for subprime auto loans, to a level which many observers worry is looking more and more like a bubble. In the period between 2009 and 2014 alone, subprime auto loans – loans to people with credit scores worse than 640 – increased by more than 130 percent.
In modern corporations, shareholders and the board of directors maintain a delicate balance of power: substantive business decisions are made by directors and executives, while shareholders retain their right to amend the bylaw and make procedural modifications. However, the line between procedure and substance is less clear in practice than in principle. A centralized executive and a group of dispersed shareholders often fight over the substantive policies of the company through shareholder proposals. As institutional shareholders become more proactive, even proposals that are destined to fail could have a meaningful impact on corporate governance.
Last month, The New York Times released a lengthy article following months-long reporting into the operations of Fred Trump’s real estate empire. The Times reviewed over 100,000 documents including lawsuits, financial paperwork, tax returns, and depositions. The investigation revealed numerous suspect tax practices, ranging from clever tax planning to tax avoidance and “instances of outright fraud.”
Last month, if you took your iPhone to get repaired at a third-party shop or tried to do it yourself, you could have been breaking the law. However, the right to repair movement is trying to fix this conundrum, despite the attempts of companies like Apple or John Deere to thwart the movement’s efforts.
The rise of non-depository financial technology firms has been well documented and closely followed since the close of the Great Recession. Partially as a result of the enhanced prudential regulations imposed on traditional depository institutions, a gap in the market for financial products has been filled by new actors who have employed innovative front-end technology to meet the specialized needs of a broad consumer base. However, with the recent regulatory action by the Office of the Comptroller of the Currency (OCC), the fintech space has sparked an entirely new kind of attention – that of the legal community. Most directly, the question at issue following the OCC’s announced regulatory action is whether a federal administrative agency has the authority to regulate fintech entities. The answer, although yet to be determined by the federal courts, will likely turn on whether, fintech firms are found to fall within the definition of a “bank” under the National Bank Act (12 C.F.R. §5.20).
In a recent New York Times opinion piece, Robert J. Jackson Jr., an SEC Commissioner, and Preet Bharara, a former U.S. Attorney for the Southern District of New York, argued that U.S. insider trading laws are outdated and allow fraudsters to engage in misconduct that benefits them at the expense of investors. Jackson, Jr. and Bharara claim that current laws fail to hold bad actors accountable for insider trading because the government relies on an antiquated law that prohibits “fraud” without defining “insider trading.” The lack of such definition, they argue, creates a cloud of legal uncertainty that makes enforcement against insider trading difficult. In response to this legal uncertainty hovering around the financial markets, Jackson, Jr. and Bharara have announced a new panel called the Bharara Task Force on Insider Trading to propose new insider trading reforms. This task force will address critical uncertainties currently surrounding insider trading laws that hinder the SEC’s enforcement against insider trading.
The #MeToo movement, inspired by the Harvey Weinstein controversy which erupted in October 2017, has implications far beyond the media and entertainment industry. Legislatures across the country were quick to respond, with a variety of laws seeking to protect victims of sexual harassment. The New York legislature has spearheaded this legal movement through the passage of several bills imposing new constraints and obligations on employers.In this new legal trend, New York may serve as an example for other states to look to: a system which reinforces employees’ protections, limits employers’ ability to hide allegations of sexual harassment, and sets a standard for employers to adhere by.
President Donald Trump has long called for a reconfiguration of US trade policy–pulling out of a number of trade deals, and imposing a slew of tariffs on some of the United States’ major trading partners. At the most recent meeting of the World Trade Organization (“WTO”) Dispute Settlement Body (“DSB”) on October 29, 2018, an unprecedented seven countries–Canada, China, the EU, Mexico, Norway, Russia, and Turkey–requested that the DSB establish a panel to examine US tariffs on steel and aluminum. However, the US has blocked these requests per WTO procedure, to be reconsidered on November 21, 2018. At the same meeting, the US also requested panels to investigate retaliatory measures by Canada, China, the EU, and Mexico.
In the M&A context, after lengthy negotiations, a buyer may become aware that a certain representation or warranty is false–through its own due diligence–but decide to close the deal anyway. The buyer may then decide to sue the seller for that very same breach. This practice is known as sandbagging. In other contexts, sandbagging is defined as concealing or misrepresenting one’s true position or intent with hopes of gaining an advantage over another. When the purchase agreement is silent on the sandbagging issue, governing law determines whether sandbagging is permissible.
Connor J Ritschard
The rise of social media has redefined communication in the modern world. Prominent figures ranging from CEO’s to the President of the United States now have an easy avenue to quickly disseminate their opinions and views to anyone with access to the internet. While access to information is often seen as a universal good, the recent scandals surrounding Elon Musk illustrate the difficulties of regulating disclosure and compliance with the federal security laws for public companies in the modern age. This is particularly true in regards to, as in the case of Tesla, Silicon Valley corporations led by iconic entrepreneurs who enjoy a cult following.
Ariel Micah Blask
SEC Chairman Jay Clayton recently proposed altering the Accredited Investor standard governing individual investment in private securities. The SEC’s Regulation D, promulgated in 1982, sets out that companies can raise an unlimited amount of capital in private placement securities so long as such securities are only offered to “Accredited Investors.
Edgar Chimdi Okorie
Slavery didn’t end in 1865. However, I wouldn’t blame you if you thought it did. Following an emancipation proclamation, the assassination of a president, and four years of a brutal civil war, the ratification of the 13th amendment was supposed to cement the end of slavery. Instead, it laid the constitutional foundation upon which the business of slavery could thrive under a new guise—you know, a change in business model. With 323 million people, the U.S. has less than 5% of the world’s population, but over 20% of its incarcerated population—and I know we’d like America to be first place in a lot of things, but as millennial Twitter will tell you, “this ain’t it, chief.” The interconnected relationship between the 13th amendment, U.S. incarceration rate, and economic interests continue today to sustain this “ecosystem” of modern slavery.
Joyce Jung Min Yeo
On June 25, 2018, the U.S. Supreme Court held that American Express’ anti-steering provisions do not violate the Sherman Act. In a 5-4 decision, the Court characterized the credit card market as a two-sided transaction platform, in which the credit card companies provide services to two distinct but interrelated markets: cardholders and merchants. Consequently, the plaintiffs bore the burden to prove the anticompetitive effects from both the merchants’ and the cardholders’ side before considering the procompetitive effects. While the antitrust laws are meant to promote free and fair competition that would benefit consumers through “lower prices, better quality and greater choice,” it is questionable whether the extra burden put on the plaintiffs to prove the anticompetitive effects on both sides of the market would help further such fundamental goals of antitrust. In fact, this case may create loopholes for large technology companies with two-sided platforms to abuse their market power at the expense of fair competition.
These past couple of years, academics have sparred over the question of whether common ownership of Corporate America by a handful of large institutional investors poses an antitrust risk. This theory gained significant traction with the “Azar Paper,” an empirical study linking airline prices with common ownership in the airline industry by institutional investors. The Azar Paper purportedly found evidence that increased common ownership by institutional investors causes higher prices and is therefore an antitrust concern.
Patrick J. Gallagher
One of the highest profile cases of the current Supreme Court term is likely now mooted due to a small portion of the lengthy omnibus spending bill, passed in March by Congress in a last-minute effort to avert an impending government shutdown.
Erica L. Wu
In 2014, the Supreme Court decided Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014), a landmark in patent law. Alice sets out a unified approach to determining whether inventions relying on abstract ideas, laws of nature, or products of nature constitute “patentable subject matter” under Section 101 of the patent act. Prong one under Alice asks if the patent claim is “directed to” one of those three judicially created exceptions to §101—a product of nature, a law of nature, or an abstract idea. If the claim is directed at any of them, prong two asks if there are additional elements to the claim, singly or in combination, that constitute an inventive concept to the claim and makes the invention more than simply an application of the abstract idea, law of nature, or product of nature—rendering the invention patent-eligible under §101. However, the Court did not, nor has it since Alice, specify in detail what qualifies as an “inventive concept” that makes a claim on an abstract idea, law of nature, or product of nature patent eligible, only that eligibility requires the addition of “significantly more” to the underlying idea.
Last year, entrepreneurs raised some $6 billion1 through “initial coin offerings”, or ICOs—a crowdfunding mechanism by which firms issue cryptocurrency, or digital coins, in exchange for legal tender or, usually, other cryptocurrency. Coin holders can stand to share in the projected returns of ICO-funded projects but do not necessarily receive a claim on the issuer’s earnings à la equity-holders who purchase stock in IPOs. Despite their name, digital coins serve as ‘currency’ only for the projects they are meant to finance—and serve a kind of dual function as a security as well as a utility. For instance, those who received digital coins in the ICO for Filecoin, a decentralized storage network project, will only be able to trade storage space in the Filecoin network using that particular cryptocurrency.2 Unfortunately, as The Economist puts it, many ICOs sound “like the kind of bargain that would appeal only to people who reply to e-mails from Nigerian princes offering millions.”3
Insider trading in cryptocurrency has been a hot topic in industry and (to some extent) mainstream press. Allegations that employees of Coinbase, a popular cryptocurrency exchange, bought Bitcoin Cash (BCH) in advance of its listing on the exchange sparked much of this recent interest. These allegations have even spawned a lawsuit by disgruntled BCH traders. While that is a private suit not premised on traditional theories of insider trading liability, recent enforcement practices by the Commodity Futures Trading Commission (CFTC) have raised the possibility that cryptocurrency will face insider trading regulation akin to that applied to securities by the SEC. This post will lay out the law underlying CFTC regulation of insider trading in cryptocurrency and examine the legal and policy implications of such regulation as applied to exchanges and their employees.
As corporate social responsibility becomes a more prominent and permanent interest of a significant portion of U.S. consumers, the Benefit Corporation could become a more attractive investment vehicle, and more Benefit Corporations may begin to go public. A Benefit Corporation is a legal structure that allows for-profit corporations to consider the interests of outside stakeholders in addition to shareholders, and have social purposes that go beyond maximizing share price. In other words, a Benefit Corporation allows a for-profit business to pursue social goods without necessarily breaching fiduciary duties to maximize profits for shareholders. Benefit Corporations are distinguished from nonprofits for many reasons, including the ability of a Benefit Corporation to have shareholders and strive for profits.
Tina Y. Meng
Developing a strong brand is a very important element of a company’s business, primarily because it can convey critical information about the consumer experience and what the company stands for. While companies commonly receive protection for company or product logos, seeking legal protection for colors associated with a brand has proven to be a much more difficult area of intellectual property law that companies have to navigate. Among the different tools that can be used to create exclusive rights to certain colors, corporations have found the most success with trademarks, as the process is less costly and onerous than patent protection, and copyright law usually protects original works that would not capture colors.
The average American spends roughly 42 hours per year sitting in traffic. This staggering figure helps to explain the public’s enthusiastic response to Waze, a social media platform and mobile application designed to help drivers more effectively avoid traffic and reach their destination. What sets Waze apart from other navigation applications is the platform’s ability to effectively combine electronic meta-data with user-generated reports to determine the most efficient route for a driver to take. Users, referred to as “Wazers” on the application, are able to alert other users in real time when they come across a police speed trap or a car accident that may impact travel plans. Understandably, police departments across the country tend to harbor intense criticism of the application, and argue that the application might be “misused by those with criminal intent to endanger police officers and the community.” As with most technological innovations, particularly those that utilize user information, the efficiency afforded by Waze’s technology presents some troubling issues. For example, if Waze is constantly collecting data about users’ location, movement speed, and other similar information, can law enforcement officials use this data to incriminate these individuals?
On February 15th, the Southern District of New York held in Goldman v. Breitbart that embedding copyrighted content does not protect content users from copyright infringement claims. This ruling contrasts with the Ninth Circuit holding in Amazon v. Perfect 10 and the way large publications and personal blogs have operated business.
The United States Court of Appeals for the First Circuit recently issued a ruling which has significant implications for trademark licensees. Reversing a decision by the First Circuit Bankruptcy Appellate Panel, the court held that a trademark licensor in bankruptcy may reject a trademark licensing agreement contained in an executory contract, and in such instances the trademark licensee loses the right to continue to use the trademark. The First Circuit explicitly noted that this decision rejects a contrary decision by Judge Easterbrook of United States Court of Appeals for the Seventh Circuit which found that while a debtor-licensor may reject such a contract under Section 365(a) of the Bankruptcy Code, the licensee continues to retain the trademark license for the duration of the contract.
The Supreme Court ruled on February 21st that the protections offered by the Dodd-Frank Act to corporate whistleblowers does not cover “internal” . The Court ruled in Digital Trust Realty, Inc v. Somers that the act only covers disclosures to the SEC, not to superiors or internal compliance departments. While the full impact of this determination remains to be seen, the Securities and Exchange Commission has provided a strong argument that it will undermine the efficacy of the Dodd-Frank Act’s whistleblowing protection scheme.
In the age of Trump, few issues, much less pieces of legislation, garner support from both sides of the aisle. Two commentators recently asserted that intense polarization has even “alter[ed] the zone of acceptable political behavior.” Regardless of its content, therefore, the recently introduced Foreign Investment Risk Review Modernization Act (FIRRMA) should be hailed as a political marvel. FIRRMA has received wide bipartisan support, including endorsements from Senators John Cornyn (R-TX), Marco Rubio (R-FL), Dianne Feinstein (D-CA), and Joe Manchin (D-WV), congressmen Devin Nunes (R-CA) and Denny Heck (D-WA) and, perhaps most importantly, President Donald Trump.
Shiv K. Patel
Following the Financial Crisis, Congress took what was considered strong action at the time by enacting the Dodd–Frank Wall Street Reform and Consumer Protection Act (Pub.L. 111-203, H.R. 4173). Part of this legislation created the Consumer Financial Protection Bureau, an agency that has caused controversy across Washington for a number of reasons. The agency is tasked with promulgating regulations with the goal of protecting consumers from what it deems to be abusive financial instruments. It is also able to investigate financial institutions for the purpose of obtaining information on consumer-related business.
On December 19, 2017, the Court of Appeals for the Fifth Circuit held that the debt of a bankrupt Texas businessman would be forgiven, even though he provided misleading oral statement about his company’s financial health. Under §523(a)(2)(A), debt that was obtained through false pretense or fraud cannot be discharged through a bankruptcy proceeding, except if the representation had been an oral “statement respecting the debtor or an insider’s financial information.” This decision revisited the disagreement between Court of Appeals on whether statements regarding a single asset class can qualify as statements respecting financial conditions under §523(a)(2)( )
The arguments surrounding the Alien Tort Statute (ATS), and the scope of its international jurisdictional grant of American authority, ask the courts to resolve fundamental questions about America’s role in international justice. An expansive reading of the ATS would ask America courts to adjudicate human rights abuses across the world, regardless of their connection to the Unites States. Conversely, the federal courts can, and have, narrowed the statute’s scope to only include a very narrow subset of cases. The debate between these two poles asks whether the United States legal system should focus only on domestic disputes, or if it should serve a role in furthering American human rights objectives abroad. While there are many positions along this spectrum, there is no reason to offer corporations a blanket jurisdictional exemption. The Supreme Court may do exactly that.
Earlier this month, Judge Loretta Preska of the Southern District of New York dismissed the case of Zuckerman v. Metropolitan Museum of Art. Laurel Zuckerman, the great-grandniece of Paul Leffman, brought the case, seeking the return by the Metropolitan Museum of Art of a Pablo Picasso masterpiece, “The Actor.” Zuckerman alleged that her great-granduncle, a German Jewish businessman, was forced to sell the painting at an unreasonably low amount to fund an escape from Nazi-ruled Germany and fascist-controlled Italy. Leffman sold “The Actor”, a painting from Picasso’s Rose Period, for $12,000 to allow the family to escape to Switzerland after fleeing Hitler’s Germany to Mussolini’s Italy. Zuckerman claimed that the painting was therefore sold under duress, and sought the painting’s return to her family, 100 million dollars in damages to compensate for the loss of painting, and a declaratory judgement stating that the Leffman estate is the sole owner of the painting.
On September 29th, 2017, the sports world was shocked by the arrests of several basketball coaches at high-profile universities in connection with a scheme of fraud and bribery. James Gatto, a global marketing director for Adidas, designed the game plan: pay coaches and families to convince high school players to choose Adidas-sponsored universities and then sign with sports agents who would continue the players’ relationships with Adidas through their professional career. All of these payments were conducted in violation of federal wire fraud and bribery laws for one, silly, outdated, fabricated reason: NCAA amateurism rules.
The election of Donald Trump brought renewed focus on the bank regulatory regime. Congressional efforts to rewrite financial regulation by passing the Financial CHOICE Act have stalled. However, regulatory agencies retain the power to advance a deregulatory agenda through new rules and guidance.
In early January 2018, Petroleo Brasilieiro SA (“Petrobras”), the Brazilian state-run oil company agreed to partially settle a class action lawsuit brought by purchasers of its debt and U.S. listed equity securities between January 2015 and July 2015 for $2.95 billion.
On March 19, 2014, the United States became the first G8 country to join the Extractive Industries Transparency Initiative (EITI). On November 2, 2017, the United States withdrew from the EITI. In the letter from the Director of the U.S. Office for Natural Resource Revenue to the EITI Board of Directors, the Director stated the withdrawal would be effective immediately. The EITI issued a statement shortly after receiving the letter saying, “[t]his is a disappointing, backwards step. … It’s important that resource-rich countries like the United States lead by example. This decision sends the wrong signal.”