Taking Care of Business – Emerging legal issues impacting the business community.

01 Jul

Businesses Should Strike the Proper Balance Between Their Desire for Management Autonomy With Sensitivity to Social Justice Issues

Business

American business has been preparing to return to normal operations, with some tweaking due to COVID-19-related governmental guidelines, for weeks. Owners, managers and supervisors are being (or should be) trained about enforcing social distancing and the wearing of masks. As we return to the workplace, businesses should also focus on creating a safe and socially-conscious workplace for all employees. The failure to do so puts an employer at risk in the long term. The combination of savvy union organizers and the Black Lives Matter movement is putting the spotlight on injustice and can endanger the viability of an employer who chooses not to strike the proper balance. (more…)

18 Jun

Cannabis Reform Introduced as a Response to the COVID-19 Crisis

Cannabis

By: Christopher Wisniewski and Ryan J. Udell

On May 15, 2020, the House of Representatives passed the Economic Recovery Omnibus Emergency Solutions (HEROES) Act. Coming in at over 1,800 pages, there are sure to be a few surprises tucked into such a massive piece of legislation. One such financial services component is the reintroduction of the Secure and Fair Enforcement (SAFE) Banking Act. Ostensibly, as a response to the COVID-19 crisis, the stated purpose of the SAFE Banking Act is to “increase public safety by ensuring access to financial services to cannabis-related legitimate businesses and service providers and reducing the amount of cash at such businesses.” (more…)

09 Jun

Supreme Court Limits Fiduciary Actions Under ERISA

Business, Labor and Employment

By: L. Stephen Bowers

On June 1, the Supreme Court of the United States decided Thole v. U.S. Bank, National Association, a case involving a breach of fiduciary duty claim under the Employee Retirement Income Security Act (ERISA). In affirming the Eighth Circuit’s decision, the Court determined that Article III of the U.S Constitution does not permit individual participants and beneficiaries to bring such claims against fiduciaries responsible for the investment of assets for defined benefit pension plans.

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09 Jun

From Both Sides Now: Looking at Contracts Through a Post-Pandemic Lens

Contracts

By: Lori S. Smith

A little over a year ago, I wrote a blog post about the danger of relying on precedent. Now, more than ever, clients and their advisors need to revisit contract forms on which they may have been relying for years. While many of us have lived through times that required certain adjustments in how we viewed contractual obligations — recessions, wars, oil embargoes, natural disasters, 9/11 — none of these events had the widespread and long-lasting impact that the current COVID-19 pandemic is having. None of these events shut down the U.S. economy and impacted global supply chains across every industry in the manner we are now experiencing. (more…)

01 Jun

Southern District of New York Reaffirms That Syndicated Bank Loans Are Not Securities

Securities

By: Alexandria E. Kane

On May 22, 2020, Judge Paul G. Gardephe of the Southern District of New York, in Kirschner v. JPMorgan Chase, reaffirmed that syndicated bank loans are not securities. In Kirschner, the plaintiff alleged that a $1.77 billion syndicated bank loan made to Millennium Laboratories LLC (Millennium), a California-based urine testing company and subsequently sold to 70 institutional investors was, in fact, a security — affording it additional protections under the certain state “blue sky” securities laws. The plaintiff alleged that defendants J.P. Morgan Chase Bank, N.A., J.P. Morgan Securities LLC, Citibank, N.A., Citigroup Global Markets, Inc., Bank of Montreal, BMO Capital Markets Corp., SunTrust Bank and SunTrust Robinson Humphrey, Inc., sold debt obligations to the investors but “misrepresented or omitted…material facts in the offering materials they provided and communications they made to Investors regarding the legality of [Millennium’s] sales, marketing, and billing practices” and “the known risks posed by a pending government investigation into the illegality of such practices.” Shortly after the closing of the loan transaction, Millennium lost an important litigation matter that resulted in a $500 million decrease to its valuation and, in addition, entered into a $256 million settlement with the Department of Justice (DOJ) over claims related to alleged healthcare law violations. Within a month of finalizing the DOJ settlement, Millennium defaulted on the loan and filed for bankruptcy. (more…)

13 May

Are We Entering Another “Nuclear Winter” for Venture Capital Financing?

Business, COVID-19, Securities

By: Lori S. Smith and Joshua G. Galante

The U.S. and many other countries are stuck in, or just emerging, from stay-at-home orders that, among countless other consequences, have largely shut down the pipeline for new investment in early stage ventures. According to PitchBook, after a robust investment market in the 4^th quarter of 2019 and 1^st quarter of 2020, the amount of new financings since the pandemic began has fallen off a cliff, with steep declines in both numbers of completed deals and total dollars invested compared to April 2019. To those of us who lived through previous downturns, this change feels a lot like the dot com bust circa 2000 or the “Great Recession” that followed the global financial crisis of 2008 all over again.

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04 May

M&A Risk Allocation: Drafting and Litigation Considerations in the Era of COVID-19

Litigation, Mergers and Acquisitions

By: Marc S. Casarino, Thomas B. Fiddler, Lori S. Smith and Eric B. Porter

Risk allocation between parties is a key consideration in the negotiation of merger and acquisition (M&A) agreements. These contractual provisions are garnering even more attention as deal challenges continue to arise from business disruptions caused by or related to the COVID-19 pandemic. As previously discussed, several lawsuits recently filed in the Delaware Chancery Court reflect key battle lines over whether, and how, pandemic-related operational challenges square with clauses covering material adverse effect (MAE), ordinary course of business covenants, specific performance and other provisions of these agreements. In the past few days, several additional cases have been filed which continue to highlight these issues as well as others, such as failure to provide access to diligence.

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17 Apr

Choosing Delaware Law Does Not Mean You Can Litigate In Delaware – The Sequel

Business, Delaware

By: Marc Casarino and Lori Smith

In our August 2017 alert, we cautioned that Delaware choice-of-law provisions standing alone will not confer jurisdiction in Delaware. To best support an argument for litigating in Delaware, we advised that a combination of contractual provisions distinctly establishing consent to Delaware law, forum and jurisdiction should be incorporated into the parties’ agreement. A pair of recent decisions ratify this advice, and serve as further reminder that failure to expressly cover selection of venue and consent to jurisdiction, in addition to choice of governing law, could frustrate a party’s ability to litigate in Delaware. (more…)

14 Apr

M&A Litigation Rising Amidst COVID-19 Uncertainty: Considerations for Litigators and Deal-Makers

Business, Litigation

By: Marc Casarino, Thomas Fiddler, Lori Smith and William Fedullo

Just as no human being is naturally immune to the COVID-19 virus, no industry is immune to its economic effects—and related M&A activity across all industries proves no exception. In the weeks following the issuance of stay-at-home orders in states across the country, multiple lawsuits have been filed by parties to agreements whose terms have been rendered economically dubious, impracticable or contrary to the fundamental assumptions on which the parties relied because of the pandemic: in the Delaware Court of Chancery alone, WeWork has filed suit to compel a Japanese investor to close a $3 billion tender offer; Bed Bath & Beyond has attempted to force 1-800-Flowers to complete a $252 million purchase of its subsidiary, PersonalizationMall.com; and a franchisee has sued its franchisor, CorePower Yoga LLC, for specific performance of a pre-pandemic agreement to buy its thirty-four yoga studios. Though all three of these cases are in the early stages of litigation—only the complaints have been filed—they involve issues and circumstances that are certain to recur in actions throughout the country. These cases represent only the tip of the iceberg when considering the types of litigation that are likely to arise from both pending and closed M&A deals and the issues that M&A attorneys and commercial litigators should be considering in addressing upheaval to the deal market caused by COVID-19. (more…)

02 Apr

Board of Directors Guidance When Addressing Emergency Circumstances Occasioned by the COVID-19 Pandemic

Business, COVID-19

By: Marc Casarino, Lori Smith and Gwenn Barney

The COVID-19 pandemic has sent massive shockwaves throughout the global economy. This crises requires business leaders to confront a host of deleterious effects on an emergency basis – the likes of which many companies have never experienced. Boards of directors must remain cognizant of their oversight responsibilities in these trying times. This post offers guidance to directors of Delaware companies for addressing emergency circumstances occasioned by the COVID-19 pandemic. (more…)

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