Corporate Update

Distinguishing Equity From Debt in Related Party Contexts

By David E. Kahen |

In his Taxation column, David E. Kahen discusses 'Bell v. Commissioner', writing: Overall, the results reached in 'Bell' are not surprising in light of the case law. This case is a reminder of the courts' willingness to reclassify transactions—including reclassification as stock of obligations intended to be debt for tax purposes—even without express authorization by statute or regulation, and to plan in a manner that avoids or minimizes such risks.

Joseph M. McLaughlin and Yafit Cohn

Preclusion in Derivative Litigation: New Uncertainty

By Joseph M. McLaughlin and Yafit Cohn |

In their Corporate Litigation column, Joseph M. McLaughlin and Yafit Cohn of Simpson Thacher & Bartlett write: Until the Delaware Supreme Court provides definitive word, managers and stockholders of Delaware corporations must make strategic decisions based on conflicting guidance on whether successive stockholders are barred from seeking to relitigate demand futility allegations.

Barbara M. Goodstein

The Central Bank Case: Trusting in True Sales of Participations

By Barbara M. Goodstein |

In her Secured Transactions column, Barbara M. Goodstein writes: When do loan participation agreements transfer the actual property rights of the originating creditor versus merely a contractual right against the counterparty to proceeds of that property? That question was the subject of a decision earlier this year. Though not groundbreaking, the case provides a thoughtful discussion on this subject, an interesting emphasis on "trust" language, and an opportunity to re-visit current thinking of courts on the issue of when participations are true sales of loan interests.

David A. Katz and Laura A. McIntosh

Common-Sense Capitalism

By David A. Katz and Laura A. McIntosh |

In their Corporate Governance column, David A. Katz and Laura A. McIntosh write: Recent developments in corporate governance indicate a welcome emphasis on common sense principles.

John C. Coffee Jr.

Cheating the Algorithm: The New 'Pump and Dump' Fraud

By John C. Coffee Jr. |

In his Corporate Securities column, John C. Coffee Jr. writes: Old frauds never die. Nor do they fade away. Rather, they mutate and morph into new configurations in response to new opportunities (which new technologies usually create). Thus, the traditional boiler room "pump and dump" scheme was a product of the widespread adoption of the telephone, which allowed high pressure salesman to reach hundreds of gullible customers in a day. Today, an analogous new technological development is inviting new forms of fraud.

Gregg Weiner

In Age of Twitter, Do Investors Need Instant Updates?

By Gregg Weiner |

Gregg Weiner of Ropes & Gray writes: The U.S. Supreme Court will review a ruling from the Second Circuit in 'Leidos', holding that Item 303 creates a duty to disclose that can subject companies to civil liabilities for securities fraud under §10(b). A ruling by the high court, expected to come in the October 2017 term, could significantly impact the scope of potential liability for nondisclosures under §10(b) and change the disclosure practices of public companies.

William F. Johnson

DOJ's Increasing Involvement in Internal Investigations

By William F. Johnson |

In his Corporate Crime column, William F. Johnson writes: Corporations and individuals cooperating in government investigations must be sharply focused on finding out the essential facts of the historical conduct at issue—what happened and why it happened. For its part, the government is also sharply focused on what happened and why. In the last few years, however, the interest of the DOJ, in particular, has expanded beyond just the what and why and it is now significantly involved in how companies actually conduct internal investigations.

Big Law's Pro Bono Hours Tick Upward

By Scott Flaherty |

The results of our 2017 Pro Bono Survey show a slow but steady increase in pro bono commitment. But the need for pro bono is likely to grow even faster.

jack-jacobs-christopher-barbuto

Corwin's Outer Boundaries: No 'Massive Eraser'

By Jack Jacobs and Christopher Barbuto |

Jack Jacobs and Christopher Barbuto write: 'Corwin' held that a post-closing claim for damages arising out of a merger not governed ab initio by the entire fairness standard will be reviewed under the business judgment rule, if the merger was “approved by a fully informed, uncoerced majority of the disinterested stockholders.” They review the latest, and highly significant, post-'Corwin' contribution to the issue: 'In re Massey'.

U.S. Supreme Court building in Washington, D.C.

Supreme Court IPR Rejection Would Be 'Very Disappointing' for Some In-House Counsel

By Jennifer Williams-Alvarez |

The U.S. Supreme Court recently agreed to take up a case on the constitutionality of inter partes review.

Legal Departments Keep Huge Percentage of Work In-House. Here's Why.

By Jennifer WIlliams-Alvarez |

Nearly 75 percent of work for legal departments is handled internally, according to a recent survey report from ALM Intelligence and Morrison & Foerster.

Corinne Ball

Successor Liability and Buyers in Bankruptcy: Will the 'Tronox' Decision Help the New GM?

By Corinne Ball |

In her Distress Mergers and Acquisitions column, Corinne Ball discusses renewed attempts by GM to defend against lawsuits stemming from alleged wrongdoings of its predecessor. GM argues that the tort claims brought against it are barred on a new theory based on a recent Second Circuit decision in 'In re Tronox'.

Elliot Pisem and David E. Kahen

Can Capital Gain Rates Apply to Income From Phantom Stock?

By Elliot Pisem and David E. Kahen |

In their Taxation column, Elliot Pisem and David Kahen discuss 'Hurford Investments No. 2 v. Commissioner', which underscores the continued potential for confusion as to the consequences of transfers of compensatory rights in non-arm's length transactions, and continued uncertainty regarding the scope of §1234A.

Joseph M. McLaughlin and Yafit Cohn

Standing to Bring Consumer Data Beach Actions

By Joseph M. McLaughlin and Yafit Cohn |

In their Corporate Litigation column, Joseph M. McLaughlin and Yafit Cohn discuss the recent Second Circuit decision in 'Whalen v. Michaels Stores', in which the court held that the plaintiff in that consumer data breach action did not allege injury sufficient to satisfy the constitutional standing requirement.

Barbara M. Goodstein

Puerto Rico Restructures: Will PROMESA Live Up to Its Promise?

By Barbara M. Goodstein |

In her Secured Transactions column, Barbara M. Goodstein writes: The potential challenges and litigation surrounding PROMESA and title III could carry on for months, or even years. While there is plenty of uncertainty surrounding how creditors' and Puerto Rico's interests will finally intersect, the only certainty is that the process is far from over.

David A. Katz and Laura A. McIntosh

Cybersecurity Must Be High on the Board Agenda

By David A. Katz and Laura A. McIntosh |

In their Corporate Governance column, David A. Katz and Laura A. McIntosh write: Recent global cyberattacks have rudely reminded corporate America that cybersecurity risk management must be at the top of the board of directors' corporate governance agenda. Companies have no choice but to prepare proactively.

John C. Coffee Jr.

Financial CHOICE Act of 2017: Will Collective Amnesia Triumph?

By John C. Coffee Jr. |

In his Corporate Securities column, John C. Coffee Jr. discusses the core ideas of the CHOICE Act, an "unedited grab bag (extending for nearly 600 pages) of pet ideas and recycled bills." Everyone recognizes that Dodd-Frank could be streamlined and simplified, but gutting it is a different matter.

Philip Berkowitz

Investigations Guidance for Multi-Nationals

By Philip M. Berkowitz |

In his Employment Issues column, Philip M. Berkowitz writes: Multinational companies should have in place well considered protocols for investigating claims of alleged internal wrongdoing. Investigation protocols should provide guidelines that assign investigation roles and responsibilities among various key stakeholders, which may include the general counsel, the chief compliance officer, chief risk officer, head of human resources, and others.

Steven M. Witzel and Nicole R. Love

Should Culpable Whistleblowers Be Eligible for SEC Whistleblower Awards?

By Steven M. Witzel and Nicole R. Love |

In their Corporate Crime column, Steven M. Witzel and Nicole R. Love of Fried, Frank, Harris, Shriver & Jacobson survey and analyze current SEC regulations concerning culpable whistleblowers, SEC orders providing monetary awards to whistleblowers under the program, Chairman Hensarling's proposed legislation, and the potential implications of eliminating monetary awards to culpable whistleblowers. They also present a potential path forward in the form of a compromise.

Corinne Ball

Mootness Protections May No Longer Preclude Review or Protect Counsel

By Corinne Ball |

In her Distress Mergers and Acquisitions column, Corinne Ball writes: The importance of finality of bankruptcy court orders has been confirmed once again. Statutory mootness protecting §363 sales may not prevent or preclude an appeal or subsequent lawsuit, but the good faith purchaser and the transfer nevertheless continue to be insulated from appellate relief or collateral attack. The extent of that protection to other parties is unclear.

Elliot Pisem and David E. Kahen

The Accumulated Earnings Tax: Back From the Grave?

By Elliot Pisem and David E. Kahen |

In their Taxation column, Elliot Pisem and David E. Kahen discuss the structure of the accumulated earnings tax and Chief Counsel Advice 201653017 (Dec. 30, 2016), a memorandum which concluded that the AET may apply to a corporation that lacks ready access to cash or other liquid assets for distribution.

Joseph M. McLaughlin and Yafit Cohn

Scope of the Dodd-Frank Act's Whistleblower Protection

By Joseph M. McLaughlin and Yafit Cohn |

Joseph M. McLaughlin and Yafit Cohn of Simpson Thacher & Bartlett discuss a question generating dispute: Is a corporate employee who reports an employer's possible violation of the securities laws to a supervisor or internal compliance officer—but not to the SEC—considered a "whistleblower" entitled to protection from retaliation under Dodd-Frank? Courts that have considered this question have reached differing conclusions.

Barbara M. Goodstein and Howard Rosen

Financing Rolling Stock: Luxembourg Rail Protocol Steams Ahead

By Barbara M. Goodstein and Howard Rosen |

In this Secured Transactions column, Barbara M. Goodstein and Howard Rosen discuss the Luxembourg Rail Protocol, how it compares to the Protocol on Matters Specific to Aircraft and its relevance to the United States.

Carlos J. Cuevas

Bankruptcy Code Section 548(c) and the Good Faith Defense

By Carlos J. Cuevas |

Carlos J. Cuevas analyzes Bankruptcy Code §548(c), which provides a transferee, the recipient of an alleged fraudulent conveyance, with an affirmative defense to the fraudulent conveyance action.

David A. Katz and Laura A. McIntosh

Preparing for and Responding to Shareholder Activism in 2017

By David A. Katz and Laura A. McIntosh |

In their Corporate Governance column, David A. Katz and Laura A. McIntosh of Wachtell, Lipton, Rosen & Katz write: Activist investors are taking advantage of favorable conditions in the 2017 market environment to further their activist agendas. Activists are eager to recoup losses from 2016, when the S&P 500 outperformed activist funds as a whole. Companies should review their overall preparedness, take a close look at their potential vulnerabilities to activist attack, and proactively shore up any weaknesses to the extent possible.

John C. Coffee Jr.

The Race to the Bottom: Is the Last Stop New York?

By John C. Coffee Jr. |

In his Corporate Securities column, John C. Coffee Jr. of Columbia University Law School discusses a recent decision of the Appellate Division, First Department, writing: 'Gordon v. Verizon Communications' will ensure that the nuisance suit remains alive and well in New York and should bring the worst of the plaintiff's bar streaming back to New York. Unless the Court of Appeals reverses, New York will become celebrated as the jurisdiction of the judicial rubber stamp.

Philip Berkowitz

Trade Secrets and Whistleblower Disclosures

By Philip Berkowitz |

In his Employment Issues column, Philip Berkowitz discusses the recent whistleblower case 'Erhart v. BofI Holding', writing that 'Erhart' does not represent an isolated occurrence. Banks and indeed all businesses must anticipate that a whistleblower may disclose highly confidential and even privileged records to an enforcement agency or third party. These disclosures, if carried out in good faith and in the reasonable pursuit of a legal claim, are likely to be held to be fully lawful.

William F. Johnson

FIFA Judge Rejects Target-Victim Common Interest Agreement

By William F. Johnson |

In his Corporate Crime column, William F. Johnson discusses the recent high-profile FIFA soccer corruption case in the Eastern District of New York, which serves as a reminder of the protections and the dangers of communications pursuant to a "common interest."