|By Barry Klinckhardt, ACC St. Louis 2015 President|
Fall in St. Louis! My favorite time of the year. The weather is nearly perfect, the trees are hinting at changing colors, football season is in high gear, the Blues season is starting and the Cardinals are making their annual trip through the playoffs. For your Chapter, this is also an exciting time of year as we try to finish 2015 strong, with a great slate of upcoming programs and events throughout the rest of the year while also making plans for 2016.
While this may be my favorite time of the year, it also can be one of the most hectic times of the year, with the holidays right around the corner and everyone at work trying to wrap things up before the end of the year. With everything else going on, it can be difficult to make time to attend Chapter events but, in addition to our monthly CLE programs presented by our firm sponsors and the monthly Career Development Committee luncheons, the Chapter has some upcoming special events that you will not want to miss. On October 22 we are hosting a special cooking class event to kick off our new Mentor/Mentee program. The event will pair attendees into groups who will prepare and cook special recipes from the Schnucks kitchen. This promises to be a fun evening of cooking and socializing with wine, cheese and a four course meal. If you have any interest in being a mentor or a mentee, or learning about the program, please sign up for this unique event. On November 3 the Chapter hosts its 5th Annual Corporate Counsel Day held at Washington University’s School of Law. This year’s topic will cover hot ethics issues faced by in-house counsel and is followed by a networking reception at the Crowder Courtyard at the law school. It’s a great way to satisfy your ethics CLE requirements in one afternoon, learn more about handling tricky ethics issues, network with other in-house lawyers and see the beautiful Washington University law school building. And of course, in December the Chapter will again host its ever popular Winter Social at Fleming’s. This is always a great event.
The Chapter is perhaps most excited to invite you and a guest to the ACC St. Louis Chapter Corporate Counsel Celebration being held on Saturday, November 7, at the Missouri Botanical Garden from 6:30 p.m. to 10:30 p.m. This will be a unique event for our Chapter with each member and guest invited to enjoy an evening of live music, dancing, cocktails, and hors d’oeuvres. You truly will not want to miss this event as the Chapter is both figuratively and literally “rolling out the red carpet” for its members and sponsors. This will be a wonderful event where you can enjoy the company of old in-house friends, make some new in-house friends and just have a fun, music filled evening.
There of course will be many more Chapter events and activities over the next few months so please continue to look for our announcements in your email or at the Chapter website (acc.com/stlouis). You can also get “linked in” and be kept abreast of all Chapter happenings and resources by joining the Chapter LinkedIn page.
As always, please feel free to contact me with any questions, suggestions or comments you may have for the Chapter at firstname.lastname@example.org or 314-983-7686.
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|ACC St. Louis Chapter 4th Annual Diversity Summer Internship Program Has Another Successful Year!|
The 4th Annual Diversity Summer Internship program recently wound up with another successful year! This program is designed to give law students from diverse backgrounds substantive experience and meaningful exposure to in-house practice with our member companies.
This year six member companies, Bunge North America, Caleres, Missouri American Water, MSD, Sigma-Aldrich, and UniGroup hosted interns in the program. Each intern in the program is supported by at least two mentors - one from the hosting member company and an additional ACC member. Interns, mentors and host-company representatives come together for a variety of professional development and program activities. Funding for the program is provided by the participating member companies, the Chapter and Armstrong Teasdale, our firm sponsor.
We visited with one of the interns participating in the program, Enrique Miranda, who interned at Caleres (formerly known as Brown Shoe Company) and his Caleres mentor, Tom Burke, who shared their thoughts on the Diversity Summer Internship program.
Member company mentor Tom Burke with Diversity Summer Intern Enrique Miranda.
Interview with Tom Burke:
Tom, what led to your company’s initial involvement with the program?
We are strong believers in the power of diversity. Having a program that combined outreach to our local law schools to educate future lawyers about in-house practice with furtherance of the Chapter’s diversity initiatives seemed like a perfect fit for Caleres.
Can you explain a little about the mechanics of the program from the company’s perspective?
Students work for ten weeks during the summer. They are assigned to us by the team of Chapter members who interview and vet the candidates after we provide some perspective on our needs as a company and legal department. Once assigned, the students work 40 hours per week. We are flexible in our scheduling to accommodate the specific projects the intern is working on.
As the host-company representative and mentor what is your role with the summer intern during their time with the company?
My role is to ensure that the intern has a meaningful opportunity to learn about the in-house practice of law, grow his or her skills through a variety of assignments that allow the intern to interact with, and learn from, the members of the legal department and our business partners. Our goal as a department is to provide practical, meaningful mentoring to the intern throughout the summer.
How did Caleres manage the supervision and assignment of work to the intern?
The members of the legal department meet well in advance of the intern’s arrival to discuss and plan out a variety of short and long term assignments that span a variety of practice areas. I make sure the volume and timing of assignments is appropriate throughout the summer, but each attorney actively manages, supervises and mentors the intern on the specific projects for which they are responsible. That way all members of the department are committed to the program and the intern benefits from different work and coaching styles, client groups and legal disciplines.
Can you describe the type of projects or work activities in which the intern is involved with your company during the program?
Our intern, Enrique Miranda, worked on a number of matters including:
employment and HR matters (drafted responses to EEOC charges and participated in employment mediations, performed research for multi-state wage and hour compliance and presented findings to business partners)
commercial litigation matters (including witness preparation for a trial)
Does the management of the program by the company take much time or is it a burden?
No and no. And we partnered with our HR team to make sure that our intern was also included with the Company’s annual summer intern program for the business units. Between the ACC, the legal department and our HR group, there is plenty of help to ensure a successful experience.
What benefits do you believe Caleres receives as a result of its participation in this program?
The program allows us to demonstrate our commitment - as a Company and as a legal department - to diversity. It also gives us the opportunity to actively participate in the in-house legal community in St. Louis in a way that gives us not only professional and personal satisfaction, but is also aimed at helping the next generation of attorneys who will follow us.
How about you, what benefits do you believe you get from your personal involvement with the program?
I think attorneys naturally enjoy mentoring and teaching. For me, it’s always gratifying to be able to pass on the lessons I’ve learned over my career to those who are just starting theirs.
Would you recommend the program to other companies? Why or why not?
Yes. Great chance to get involved with young attorneys and the Chapter in driving an important initiative.
Any other thoughts on the program that you would like to pass on to ACC members?
ACC makes it easy to participate and I would encourage other companies to sponsor a student if they are even thinking about furthering diversity in a concrete, actionable way.
Interview with Enrique Miranda:
Enrique, what initially sparked your interest in wanting to pursue a career as a lawyer?
I originally was interested in becoming a lawyer when I was trying to decide what to major in undergrad. I spoke with someone and they advised me to major in business and that I decided I still wanted to go to law school I would be able to. After completing undergrad I took a year and a half off where I really evaluated my options and decided that I really wanted to return to school to attend law school.
How did you learn of the internship program? Were you aware of others who had participated previously?
I believe I received an email from the office of multicultural affairs at SLU and that is where I first found out about the program. After applying to the internship program I went to the office of Career Services and they gave me the contact information of a student that had previously gone through the internship. I connected with him before interviews to hear about his experiences and he highly recommended the internship program and enjoyed his experiences.
Before this internship opportunity arose had you thought of pursuing a career as an in-house lawyer?
I had not thought of pursuing a career in-house before this internship. I knew it was a career path for some lawyers but it was not on the raider as an option for me until I received the email about the program. Once I was able to read about the program, I decided this was a great opportunity for my 1L summer to learn about a career path that I had not considered previously. Since a lot of in house departments do not hire out of law school, this experience allowed me to see what the work is like for an in house attorney and seriously consider the career path for my future.
Have you enjoyed the internship?
I really enjoyed this experience. In talking to classmates I have has the opportunity to experiences that they have not been able to participate in. I feel like I really got substantive work and was really able to assist the lawyers I worked with.
What type of projects did you work on during the internship?
I helped draft EEOC responses and work on assignments that were used to train and instruct the business side of the company, along with a variety of other projects. I had substantive projects all summer long that allowed me to learn a TON!
What have you found to be most surprising about the experience?
I think the amount of substantive work that I worked on this summer surprised me. I have talked to classmates and their work has not been nearly as substantive for some of them as mine.
Any great lessons you have learned as a result of this experience?
I believe that I learned what it is like for an in-house attorney day to day. Being able to get this experience and understand the work they do can allow me to make informed decisions about my career down the road.
Did you find your mentor(s) to be helpful?
My mentors were awesome! They were always eager to share with me their experiences and explain anything I did not understand. I found them to be very helpful and insightful.
Overall, do you believe you have benefited from this experience?
I know I benefited tremendously from this experience. This was a great opportunity and I am coming away from this internship with experience and knowledge that I had not know before. I learned a lot this summer and hope I get to apply what I learned in my classes next year.
Has this experience made you more or less likely to pursue an in-house position after graduation?
I think this experience made me more likely to pursue an in-house position after graduation. I now have a better idea for the position and what is demanded as an in-house attorney.
If another student asked you whether they should participate in the ACC St. Louis Diversity Summer Internship program what would you tell them?
I will highly encourage incoming students to apply for the ACC St. Louis Diversity Summer Internship program. They will get a lot of substantive work in a variety of areas of law.
Any other thoughts or comments about the program, the company with which you worked or your observations on the legal profession?
I enjoyed my time as an intern in the ACC St. Louis Diversity Summer Internship program. I hope this program continues so future students can benefit from this program as I did.
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|It's Not Too Late! Join an ACC St. Louis Committee Today!|
There are plenty of ways for Members to become more involved in ACC St. Louis Chapter activities and programs. Much of the work to plan and implement these programs and events happens through our committees. There is a variety of committees which meet everyone’s interest and ability to serve. There is no significant commitment of time required to join a committee, and it is a great way to network and to get to know more ACC St. Louis Chapter members.
The following ACC-STL committees are always seeking new members:
Advocacy – This committee helps to inform the Chapter of relevant issues and proposed laws or regulations which are relevant to the in-house bar. This committee is chaired by Heather Paraino, UniGroup, Inc. (email@example.com)
Career Development – This committee provides programing specifically tailored to enhance the career development of in house lawyers. In addition, the committee holds monthly meetings for in-transition lawyers, providing networking opportunities and career counseling from a professional career management coach This committee is chaired by Barbara Barrett, Reliant Care Management Co. (firstname.lastname@example.org)
Communications – This committee produces all chapter communications (with the assistance of paid staff) including newsletters. New work is planned this year for using social media, such as Linkedin or Twitter. Please contact Greg Standeford with any questions about the committee. (email@example.com)
Corporate Counsel Institute – This committee, in conjunction with BAMSL, helps to plan the annual CCI CLE event held each April/May. This committee is chaired by Ty Ulmer, Boeing Company (firstname.lastname@example.org)
Diversity – This committee organizes and implements our Chapter’s diversity programs including the Street Law and Summer Diversity Internship programs. This committee is chaired by Kristol Whatley, Ameren Services (email@example.com)
Golf/Spa– This committee plans our Chapter’s annual golf and spa event, held in September. This committee is chaired by Peter Barkofske, Graybar Electric Company (firstname.lastname@example.org)
Law School Relations – This committee cultivates relationships with local law schools and implements programs intended to inform law students about the in-house practice of law. This committee is chaired by John Rebman, Monsanto Company (email@example.com)
Membership – This committee works to grow the Chapter’s membership by reaching out to potential members and hosting membership events. This committee is chaired by Rachel Paul, Midwest Employers Casualty Co. (firstname.lastname@example.org)
Pro Bono – This committee organizes and implements our Chapter’s pro bono efforts and programs, including the Chapter program with LSEM. This committee is chaired by Paula Finlay, AT&T Services (email@example.com)
Programs – This committee helps to organize, plan and implement our Chapter’s monthly CLE programs, including programs carried out by our Chapter’s sponsors. This committee is chaired by Robert Jett, Reinsurance Group of America, Inc. (firstname.lastname@example.org)
Social – This committee organizes and implements a variety of social events for our Chapter’s Members and their families. This committee is chaired by Toni Duaihy, Macy's Inc. (email@example.com)
Feel free to contact any of the committee chairs with questions or to join!
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|ACC St. Louis Members Support Our Community Through Pro Bono Efforts|
Our Chapter Pro Bono Committee continues its partnership with Legal Services of Eastern Missouri to provide assistance to its Community Economic Development (CED) Program. The CED Program provides free business legal assistance to entrepreneurs who are starting or expanding small businesses that provide a benefit to the communities that LSEM serves and to non-profit entities that promote community development to benefit people who are low-income. Through these efforts, the CED Program helps generate jobs, create healthy communities, and provide a long-term solution to alleviate poverty. All of our ACC lawyers have opportunities to support these efforts and make an impact in our community in a number of ways.
ACC volunteers staff monthly Nonprofit Legal Clinics. Our lawyers meet with prospective LSEM clients for brief one-one-one sessions to respond to questions they may have on legal issues they confront in the formation and/or management of a community business or nonprofit organization. Working with LSEM, we have developed a Nonprofit Checklist that we use to issue help our lawyers identify key issues. We also provide a packet of background materials for our lawyers to get an overview of the essentials for advising nonprofits.
We staff similar Business Legal Clinics for entrepreneurs at the St. Louis Agency on Training on Employment (SLATE) Missouri Career Center. At the SLATE clinics, we provide brief one-on-one sessions to provide general guidance on questions involved in starting or expanding businesses on issues including entity formation, employment, intellectual property, corporate governance, real estate zoning compliance, contracts, commercial loans and franchising.
We also share opportunities for one-on-one legal representation of LSEM clients for start-up and existing enterprises on discrete business law matters.
We are working with LSEM to develop a Speakers Bureau through which we supply volunteer lawyers to speak for an hour or two at Legal Workshops for entrepreneurs or non-profit managers on topics they need to know in starting or growing a business or organization. In-demand topics include contracts, employment, intellectual property and real estate matters including commercial leases and complying with zoning restrictions.
For more information on how to help, contact Paula Finlay at (314) 235-2322 or firstname.lastname@example.org.
Non-Profit Legal Clinic at Legal Services of Eastern Missouri (10 am - Noon)
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|Missouri Lawyers' Assistance Program|
As members of the Missouri Bar St. Louis Chapter members have access, free of charge, to the Missouri Lawyers' Assistance Program. Anne Chambers, Director of the Missouri Lawyers' Assistance Program, has provided the following description of the program and its benefits.
The Missouri Lawyers’ Assistance Program (MOLAP) is a professional, confidential counseling program that serves Missouri Bar members, law students and immediate family members who reside with them. The program addresses substance concerns, depression, marital and family issues, stress and burnout or other personal problems that adversely affect personal or professional well-being. Services are provided free of charge.
The program director, a licensed clinical social worker, provides evaluation, counseling, and referral services. Counseling is done via phone or face-to-face at the program office in Jefferson City. The program maintains a toll-free number (1-800-688-7859) for ready access. MOLAP services include unlimited access to a licensed clinical social worker, assessment of problems, counseling, information and referral, crisis intervention, coaching and case management. MOLAP also assists in providing support for persons impacted by suicide and can assist in coordinating crisis intervention services for individuals and law firms.
The director also makes presentations about MOLAP related topics to various bar groups, law schools and conferences. Topics have included professionalism and self-care, challenges and resources for law students, battling compassion fatigue, conquering procrastination, the emotional and social aspects of retirement, recovering from burnout, substance abuse issues and depression. MOLAP also provides articles for personal growth on the Missouri Bar’s website, a quarterly newsletter, and holds the annual Missouri Lawyers’ Assistance Conference. The MOLAP website address is www.mobar.org/molap.
MOLAP has served more than 2,400 people since the program began. MOLAP services can be accessed 24 hours a day, seven days a week, by calling 1-800-688-7859. There is no charge for MOLAP services or to request a presentation on a related topic for your firm, local bar or legal profession group.
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|A Word From the Business Defense Bar on the Upcoming Judicial Commission Elections in Missouri|
|By: John Farmer, Thompson Coburn LLP|
As part of our efforts to inform the Chapter members of issues relevant to the in-house bar, the Chapter is please to present this guest article provided by John Farmer, a partner at Thompson Coburn and the Past President of the Missouri Organization of Defense Lawyers.
I spent the last year as President of the Missouri Organization of Defense Lawyers (“MODL”). We’re the trial lawyers who defend businesses and their insurance companies. If you are a member of the ACC, there’s a good chance that your outside litigation counsel in Missouri is a MODL member.
As a business defense bar, MODL does some great things - we train lawyers, lobby for legislation for our business clients, and provide terrific CLE.
But we’ve got some unfinished business. There’s still one thing we need to do better (time to channel our inner Jack Palance (think Curly from City Slickers) and figure out our “One Thing.”). Friends, our One Thing is: GOTV...
Get. Out. The. Vote.
Quick civics recap: Our appellate judges in Missouri (and the circuit judges in our largest counties) are selected by the governor from a list chosen by a judicial commission. Our system is known as the Missouri Non-Partisan Court Plan. See the Missouri Constitution, Article V, section 25. The appellate judicial commission is composed of seven members: three lawyers elected by the bar, three citizens appointed by the governor, and the chief judge of the Supreme Court. Each circuit commission is comprised of two lawyers elected by the bar, two citizens appointed by the governor and the chief judge from the Appellate court in which that circuit sits.
Our main interest is of course in the lawyers on the commissions. In October 2015, elections for lawyer positions will take place for the commissions in St. Louis County, the City of St. Louis, Jackson County and the Western District Court of Appeals. The positions are for six year terms. The elections are conducted by the Missouri Bar. Lawyers vote in the circuit in which they reside (i.e., you’ve got to live in Jackson County in order to vote in the Jackson County commission race).
Here’s the problem - the majority of eligible lawyers do not vote in these commission elections. The last time around in each of these circuits, the lawyer voter turnout averaged 25%. Think about that. We are officers of the court. We are granted the privilege of choosing who will serve as judges by our state’s Constitution. And yet, only a quarter of the lawyers in each circuit bothered to vote. Voting does not take much effort - the MoBar sends the ballots by email. All you need is the little number in the corner of your Missouri bar card. You do not event have to leave your desk.
So when I had lunch with a group of in-house lawyers last year and explained that most lawyers do not bother to vote in the commission elections, I was embarrassed. And although the in-house lawyers were frustrated, I suppose they were not all that surprised.
Ironically, the lawyer elections are often decided by slim margins. Why the poor voter turnout? My guess is the lawyers in the big firms are not voting.
If you have a big defense firm of say 200 lawyers, how many of them vote? Here’s how it goes down: Half of the big firm’s attorneys are litigators. The litigators surely (hopefully) know what the ballot is when they receive the email, but save it in their in-box for later. Fifty of them vote and the other fifty eventually delete it. They are very busy people.
The other 100 attorneys in the firm are corporate lawyers. And although they work for the same business clients as the litigators (and should have the same interests in the judiciary and how it affects those clients), they delete the ballot without opening the email. They assume the "court stuff" is meant for the litigators. Fifty votes out of a firm of 200 lawyers.
The message here is simple: Big firms in St. Louis and Kansas City, get the vote out! You have the entire month of October to vote. Litigators, corporate lawyers, everyone. As supporters of our state’s Court Plan, it’s high time our bar members learn to use it.
Message to in-house counsel: We need your help. When you read this column, urge your in-house lawyers to vote. Then call your outside counsel in St. Louis and Kansas City and kindly ask them to wake up and vote in October. As a business defense bar, this is our One Thing.
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|Welcome New Chapter Members!|
Please help us welcome the following New Members, who joined since July 1, 2015.
Michael C. Christman, Senior Counsel, Macy's Inc.
Shonagh Clements, General Counsel, Aboussie & Associates
Matthew Diddy, Associate General Counsel, Edward Jones
Priscilla Duncan, Assistant General Counsel, SEC, SunEdison, Inc.
Nick Eckelkamp, Legal Counsel - Corporate/M&A, Belden Inc.
Clay L. Grumke, Assistant General Counsel, Wells Fargo Law Department
Phyllis A. Hartrich, Vice President & Counsel, Edward Jones
Matthew S. Hendricks, Senior Counsel, Macy's Inc.
CG Hintmann, Senior Director of Legal Affairs, Associate General Counsel, Lumara Health Inc.
Sarah Holdener, General Counsel, FKG Oil Company
Nathan Howard, Chief Compliance Officer, Moneta Group Investment Advisors, LLC
Jill Joerling, Counsel, Novus International, Inc.
Molly Jones, Assistant General Counsel, Monsanto Company
Courtney Lang, Corporate Attorney, Monsanto Company
Danielle E. Langeneckert, Senior Contract Manager, Resource Optimization & Innovation
Aaron McDonnell, Staff Attorney, Abeinsa Business Development, LLC
Deborah Price, VP of Business Development & General Counsel, Missouri Partnership
Traci Ransom, Associate General Counsel, Edward Jones
Dan Schoenekase, VP & General Counsel, Infrastructure Solutions, Aegion Corporation
Amanda Wolter, Corporate Attorney, Monsanto Company
Mark Wylie, Associate General Counsel, Edward Jones
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|Congratulations to the Following Chapter Members on Reaching Their Milestone Anniversary!|
WE CONGRATULATE THE FOLLOWING CHAPTER MEMBERS REACHING THEIR MILESTONE ANNIVERSARY OF CONTINUOUS MEMBERSHIP IN ACC IN 2015!
30 YEAR ANNIVERSARY
Ingraham, Craig S.
Keating, Michael J.
Roslund, Carol L.
25 YEAR ANNIVERSARY
Miller, Scott D.
20 YEAR ANNIVERSARY
Carr, Joseph C.
Fencl, Eric R.
Fishbein, Susan G.
Hostetler, Brian J.
Kim, Ruth E.
Rollins, Luther J.
Wagner, Kenneth L.
Wiegert, Robert F.
15 YEAR ANNIVERSARY
Foster, Laura L.
Miller, George L.
Williams, Patricia S.
10 YEAR ANNIVERSARY
Abramov, Kirill Y.
Ballengee, Jennifer V.
Bradley, Kathryn M.
Bunning-Stevens, Barbara A.
Darrell, Mark C.
Duft, Patricia H.
Ellenhorn, Laura E.
Goetz, Kenneth D.
Hayes, Christopher J.
Mariani, Randy R.
Pacer, Valerie J.
Pfefferkorn, Michael G.
Quatmann, Edmund L.
Swiecicki, Christopher S.
Wagner, Jennifer L.
Wilson, Lora H.
5 YEAR ANNIVERSARY
Avioli, Nancy Marshall
Baer, Timothy M.
Barrett, Katherine M.
Barry, Patrick O.
Bartholomew, David M.
Bromberg, Rebekah E.
Covington, Brent M.
Dietrich, Thomas W.
Eberlein, Justin D.
Fehlig, Ryan S.
Fox, Susan C
Frontczak, Mary L.
Fryer, Ed S.
Gallant, Steven M.
Garr, Louis J.
Gray, Diedre J.
Hutton, William L.
Johnson, Peter C.
Kirkpatrick, Philip R.
Knapp, George M.
Knudson, Lori A.
Kovenock, Sarah B.
Mays, Derek C.
McKenzie, Vanessa R.
Miller, Jeffrey R.
Mitchell-Bromfman, C. Michelle
Monroe, Kimber L.
Morrison, Matthew J.
Rye, Jason M.
Scheidt, Matthew C.
Schenk, Renee H.
Shelton, Reuben A.
Shields, Bridgid M.
Siman, Craig D.
Sullivan, Edward L.
Thomas, Juanita M.
Todd, Jonathan R
Walbert, Cameron D.
Watson, Lyndsey A.
Weir, David T.
Whatley, Kristol L.
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The St. Louis Chapter offers a variety of programs and events designed for their Members’ unique needs. Keep your eye on the Chapter calendar (www.acc.com/chapters/stlouis) and be sure to mark your calendars for a few of the special events coming soon:October 22, 2015 Schnucks Cooks Event for Mentors & Mentees
November 3, 2015 5th Annual Corporate Counsel Day at Washington University
Hot Ethics Topics for In-House Counsel
November 4, 2015 Career Development Series Lunch "Network Development - Dig the Well Before You're Thirsty"
Facilitated by: Wendy Werner of Werner Associates
November 7, 2015 Diversity Celebration
Live music, dancing, cocktails & hors d'oeuvres at the Missouri Botanical Garden. Thanks to Chapter Diversity Sponsor Thompson Coburn LLP.
December 9, 2015 Holiday Social at Fleming's Prime Steakhouse & Wine Bar
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We miss you! If
you sign up for an ACC St. Louis event (even an event with no cost to members) and
find that you cannot attend, please let the Chapter Office know just as soon as you can. You can email the office at email@example.com. Sometimes we have
other members on our waiting list who would love to fill in for
you. Sometimes our sponsors can make adjustments to food and beverage
orders. Always, we want to avoid disappointing our sponsors and our members who
are counting on seeing you.
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|Listing of Upcoming Events|
Click here for a listing of all upcoming ACC St. Louis events.
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ACC Contracts Portal
ACC understands that you have better things to do than continually reinvent the wheel. This powerful tool puts a clause database, model-form library and contract-benchmarking system at your fingertips, allowing you to adopt or customize materials that represent best practice.
Drafting & Benchmarking: Use the Contract Advisor to access model contracts, view thousands of sample clauses, run draft language through the benchmark tool to identify any missing or uncommon clauses, download model forms and customize your contracts. Also access ACC's virtual library of sample forms and policies, as well as other drafting and benchmarking resources
Negotiations: Prepare yourself for contract discussions with a variety of resources related to negotiation.
Management: Gain control of your contracts with practical resources focused on effective process management and best practices.
Visit http://www.acc.com for more member resources, educational opportunities and to view the ACC Docket.
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|First Steps in Managing Mass Tort Litigation|
|By:Jeff Muskopf, Partner, SmithAmundsen, LLC|
Agent Orange. Silicone gel breast implants. Tobacco. Direct mail sweepstakes. Microwave popcorn. They have all had their day as “the next big thing” in mass tort litigation.
Of course, asbestos litigation is the king of them all. Most of today’s practicing lawyers were in diapers when the avalanche of asbestos cases was triggered in 1973. Nearly forty years later, well over $100 billion had been spent on asbestos claims (>$70 billion on transaction costs and ~$30 billion paid to claimants). Around 100 U.S. companies have filed for bankruptcy reorganization in whole or in part as a result of asbestos liabilities. Countless companies have been dragged into this next big thing litigation. The asbestos litigation machine is still running at full steam.
Across the entire market of goods and services, companies of all sizes can be targeted in mass tort litigation. As in-house counsel for a company that is facing a new mass tort claim, the way in which you handle these cases from the outset can have significant long-term implications. In this article, we offer an outline of steps to consider in designing a strategic and effective plan to manage the unique risks presented by mass torts.
The first order of business is to figure out what the new claim or lawsuit is really all about. Is this a mass tort that is just emerging or one that is in a mature stage? What are the claims and what are the injuries? Is the scope local, regional, national, or even international? Who are the plaintiff’s lawyers, judges, and other defendants that have a significant impact on the course of the litigation? Has there been legislation in direct response to the underlying risks to the public or to the subsequent litigation? These are a few of the fundamental questions to ask in framing the issues.
You can find a wealth of information without leaving your desk. Google; Westlaw or Lexis; online court dockets; media outlets; verdict reports; social media; medical journals; and conferences put on by groups like DRI and Harris Martin are just a few potential sources of good information. And don’t forget to check with experts and business people within your company, with colleagues at other companies, and with groups like the Association of Corporate Counsel.
- Estimate Your Total Exposure
Nearly every strategic decision will be driven by what’s at stake. In addition to the financial exposure you are facing, your company’s relationships with the public, the government, other businesses, and its shareholders may be affected. In order to quantify the risks, you need to identify your company’s products, premises, or services that are at issue. What time frame is involved? It might be five months or it might be 50 years. How many potential claimants are there? Is there a single class of potential claimants or could there be multiple classes? In how many different jurisdictions might you be defending these claims? Is it possible to estimate the lifespan of the litigation itself? Is the exposure significant enough that it should be reported to your company’s independent auditors or in SEC filings?
- Keep Key Personnel Informed
Your CEO, CFO, Board of Directors, and communications department may all have significant roles in managing the litigation. After you have determined who needs to be involved, establish regular reporting and meeting schedules to keep everyone fully informed. Someone in the law department should be responsible for monitoring, managing, and reporting on the new claim(s).
- Develop a Budget and a Project Plan
You might not be able to immediately estimate how much it will cost to defend emerging claims, but it’s not too early to get the framework of a budget in place and then add to it as your plan for managing the claims develops. If you’re not familiar with Legal Project Management, you may want to consult the many resources available through the ACC website (enter “legal project management” in the search dialogue box at the ACC home page: acc.com). Putting these principles to work in managing mass tort litigation is an excellent practice.
Accurate and complete information will be extremely helpful throughout the life of the litigation. Start capturing data from the very start. It will be useful in managing exposure at a macro level, evaluating and defending individual claims at a micro level, and maintaining consistency in how claims are defended and settled. This information is also necessary in determining insurance coverage, successor liability, and indemnification issues.
Knowledge is (or can be) power. It is imperative to track spending in detail; you should know how much you are spending on each claim and exactly what is being done to defend them. Also, with enough information, significant litigation trends may become apparent. Correlate spending with litigation trends and you can more accurately budget for future spending and more effectively make strategic decisions. The management of mass tort litigation involves both claims administration and the practice of law. The proportion of each component can vary widely.
Managing mass tort litigation on any scale involves many different tasks. Whether to perform these functions in house or to outsource them to a law firm or other vendor depends on a number of circumstances unique to your situation. You will need to decide which roles are necessary for the effective management of the claims and then to clearly define the division of labor. In large scale, multi-jurisdictional mass tort litigation, you may need national coordinating counsel, local counsel, and teams to handle trial, discovery, settlement, insurance coverage, expert witnesses, and medical and technical issues.
No matter how you assign the various responsibilities, the importance of coordination, communication, and consistency across all teams truly cannot be overstated. For an excellent discussion of the subject that can be found through the ACC website, see W. Hesler, Managing the Geographic Realities of a Mass Tort Claim: Coordination Strategies for Litigating in Multiple Jurisdictions—From a Defense Counsel Perspective (2003). There are any number of articles and court cases that serve as cautionary tales of how to cause huge problems through what are fundamentally administrative missteps.
You may use a request for proposal process in selecting outside counsel or you may handle this informally. Either way, it is critical to establish and communicate clear guidelines for your outside counsel in reporting, claim handling, and billing.
- Investigate Insurance Coverage
There is often insurance coverage for toxic tort claims based on exposures that occurred many years ago, but you may have to dig for it. Dusting off old files and calling your risk management department or insurance broker may be well worth it. The timely tender of claims to the appropriate insurers is critical. You may need analysis and advice from coverage counsel if your claims are denied. There are often multiple carriers involved in defending toxic tort claims. Negotiating cost-share agreements and the ongoing management of carrier involvement can be time-consuming.
- Research Successor Liability Issues
Whose liability is it? You may need to work your way through a long succession of mergers, stock and asset purchases, and indemnity provisions in order to find out. Choice and conflict of laws issues can add another layer of complexity.
- Collect All Relevant Documents and Exemplar Products
In order to estimate your exposure and make informed decisions about how to respond to mass tort claims, you must evaluate your available defenses. Your defenses are often only as good as your documents. What’s worse than bad documents? Good documents that have been destroyed.
If your company’s product is at issue, you need to see the critical documents relating to product development and testing, intellectual property, warnings and instructions, marketing, sales records, consumer complaints and claims, etc. Having exemplars for testing or for demonstrative use can be advantageous. If a company facility is at issue, you may need to study relevant contracts, engineering drawings, construction project plans, equipment manuals, health and safety policies and records, workers’ compensation claims, employment records, and the like.
- Identify Company Personnel with Relevant Knowledge
Be mindful of attorney-client privilege issues when contacting company personnel and take note of who would and would not be good witnesses. Identify and interview sales people, engineers, plant managers, product managers, and others who may have relevant work experience, expertise, or knowledge.
- Designate a Corporate Representative Witness
One of the few things that truly lasts forever is bad testimony from a 30(b)(6) witness in mass tort litigation. In many jurisdictions, the corporate representative is not required to have any personal knowledge. Instead, the person or persons designated should be prepared to exhaust the collective corporate knowledge on designated subjects. This means that you can designate whomever you like, including persons who have never been company employees.
Clearly, the designee should be an outstanding witness, capable of communicating effectively with a jury, whether under hostile cross-examination or in response to questions from your own lawyers. Excellent corporate representatives can often be found among retired company personnel. The time involved in preparing for and giving testimony of such a witness is not disruptive to the ongoing business of the company and their schedules are easy to work with (neither of which can be said for most active company executives). Other advantages to using former company personnel are that their hearts are often in the right place, they understand the company’s culture, and they seldom charge as much as typical outside retained experts.
As part of your overall defense strategy, you will need to hire and develop the appropriate expert witnesses. This takes time and it should complement your development of a corporate representative. It can be unwise to rely exclusively on retained experts; juries often like to see that company personnel are capable of defending their own actions and products.
- Ongoing Evaluation of Effectiveness in Managing Claims
By using the data you collect and the budget and Project Plan you developed with legal project management principles, you can monitor and evaluate the effectiveness with which the mass tort claims are being managed.
- The advent of asbestos litigation as a mass tort is attributed to the case of Borel v. Fibreboard Paper Products Corp., 493 F.2d 1076 (5th Cir. 1973). R. Nagareda, Mass Torts in a World of Settlement, Univ. of Chicago Press 2007, p. 13, fn 4.
- D. Rosenberg, Mesothelioma and the Law—presentation at 11th International Conference of the International Mesothelioma Interest Group (2012).
- L. Dixon, G. McGovern, and A. Coombe, Asbestos Bankruptcy Trusts, Rand Institute for Civil Justice 2010, figure S.1.
- For example, in response to the public health risks presented by coal worker’s pneumoconiosis (black lung disease), the Federal Coal Mine Health and Safety Act of 1969 was enacted.
- With impressive alacrity, the Illinois legislature amended the Interest Act to quell lawsuits against banks for using the “365/360” method of calculating interest on loans. 815 ILCS 205/4(5); Asset Exch. II, LLC v. First Choice Bank, 2011 IL App (1st) 103718, ¶ 22, 953 N.E.2d 446, 452.
- E.g, LinkedIn’s Asbestos Defense Group.
- Occupational lung diseases caused by exposure to mineral dusts such as silica, coal, and asbestos typically have long latency periods. There can be as much as 50 years between the date of last exposure and the onset of the disease.
- See, e.g., A.O. Smith Corp. v. SPX Corp., 2007 WI App 19, ¶ 1, 298 Wis. 2d 548, 727 N.W.2d 373 (construing a 1972 stock purchase agreement under Wisconsin law to determine liability for lawsuits filed in 2002 and later).
- See, e.g., Ferguson v. Air & Liquid Sys. Corp., No. 2:11-CV-63523-ER, 2014 WL 7652953, at *12 (E.D. Pa. Dec. 3, 2014) (plaintiff’s use of 30(b)(6) testimony from an unrelated case in 2007 in summary judgment proceedings in 2014).
W. Jeffrey Muskopf is a Partner in SmithAmundsen’s St. Louis, Missouri office. Jeff practices across a wide range of complex litigation matters, and is co-chair of the firm’s Toxic Tort & Environmental practice group. For more information about Jeff, view his bio or contact him by phone: 314.719.3708 or email: firstname.lastname@example.org.
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|Indemnity Protection for Infringement in Your Purchase/Supply Contracts - Does UCC §2-312(3) Apply? And, If So, Do You Really Want It To?|
|By: Don V. Kelly, Evans & Dixon, LLC|
As most every GC now realizes, risk of infringement of someone else's intellectual property rights lurks around almost every corner of business operations. From banal acts such as buying office equipment and entering into software licenses to meeting supply contract obligations for complex devices, IP infringement is a real concern. Though many of these transactions may be treated as routine by GC's for which boilerplate indemnity provisions provide adequate protection, that may not be the case. In fact, many a GC may be surprised to learn (or forgot from law school) that there already exist state laws that dictate indemnity rights for intellectual property infringement liability. These laws must be taken into account when entering into any sales agreement.
The UCC has been adopted in some form by all states, though Louisiana has not adopted Article II. In particular, subsection (3) of § 2-312 of the Uniform Commercial Code speaks directly to assessing indemnity liability for infringement between buyers and sellers of infringing goods. In this regard, § 2-312(3) specifically states:
Unless otherwise agreed a seller who is a merchant regularly dealing in goods of the kind warrants that the goods shall be delivered free of the rightful claim of any third person by way of infringement or the like but a buyer who furnishes specifications to the seller must hold the seller harmless against any such claim which arises out of compliance with the specifications.
Section 2-312(3) makes clear that ultimate responsibility between buyers and sellers of goods for infringement of another's patent, trademark or copyright shifts depending upon the circumstance. First, as between a buyer and seller, it is the seller of infringing products that is normally ultimately liable for liability caused by infringing products. Stated otherwise, the implied warranty against infringement runs in favor of the buyer. Second, where the infringement liability arises by virtue of product specifications furnished by the buyer, it is the buyer who is ultimately responsible to the seller to indemnify against infringement liability. The foregoing constitutes about the extent of §2-313(3)'s clarity. The remainder of it has required judicial interpretation to assess its meaning.
For example, note that § 2-312(3)'s indemnity terms apply, "unless otherwise agreed" by the parties. One would think that it would be simple to determine when two contracting parties "otherwise agree" to their own terms of indemnity. This is not the case. In § 1-201(b)(3), the UCC defines "agreement," indicating one can "otherwise agree" by language or be "inferred from other circumstances, including course of performance, course of dealing, or usage of trade."
The case of Mas Corp. v. Thompson is instructive as to the dangers of how parties can "otherwise agree." In this respect, this case effectively holds that providing even vague language that touches upon infringement indemnity in a contract means that the parties meant to avoid subjecting their transaction to 2-312(3). Mas Corp. v. Thompson, 302 S.E.2d 271, 275 (N.C. Ct. App. 1983). On this point, the Mas Corp. court ominously noted:
Thompson's evidence tends to show that the parties agreed Siddiqui would be liable for any infringement. Even if it is unclear what, precisely, was "otherwise agreed", the statute only applies if nothing was said as to liability, and the other conditions are fulfilled. In this situation, where the parties thought they had agreed to something, what their agreement actually was is a question of fact for the jury.
Mas Corp., 302 S.E.2d at 275.
Note further that the indemnity protection of §2-312(3) only applies to a "rightful claim" of infringement. There have been several well-discussed cases that have tried to establish parameters for the phrase "rightful claim." In the 84 Lumber case, the court ruled that a rightful claim is one that falls somewhere between purely frivolous claims and claims where liability is proven. 84 Lumber Co. v. MRK Technologies, Ltd., 145 F. Supp. 2d 675, 680 (W.D. Pa. 2001). More recently, a California appellate court has held that a rightful claim is one that has a significant and adverse effect on the buyer's ability to make use of the goods. Pacific Sunwear of California, Inc. v. Olaes Enterprises, Inc., 167 Cal. App. 4th 466, 481 (Cal. Ct. App. 2009). Other courts have also weighed in on the definition and the proof needed to establish a rightful claim. The bottom line is that under §2-312(3) simply having a claim made against your company is not enough to trigger a duty to defend and indemnify.
Note also that another practical limitation on indemnity under §2-312(3) stems from the fact that the warranty provided by that section only covers the goods as they are delivered and does not cover infringement that results from using the goods. Motorola, Inc. v. Varo, Inc., 656 F. Supp. 716, 718-19 (N.D. Tex. 1986); Chemtron, Inc. v. Aqua Prods., Inc. 830 F. Supp. 314, 315 (E.D. Va. 1993). This is particularly problematic in terms of patent infringement as many patents are only infringed by how a product is used and not by virtue of the product's features as built. Hence, with such patents it is not the manufacturer or supplier of the product that risks infringing a patent, it is the customer.
In view of the above, perhaps some changes to your indemnity boilerplate are in order. Here are some suggestions:
First, consider providing for specific language stating that § 2-312(3) does or does not apply to the agreement. Exclude 2-312(3) only if you actually have some form of indemnity protection, otherwise, in the face of the exclusion there will be no protection at all.
Second, make sure that the indemnity provided covers any claim of infringement and does not import the UCC's term "rightful claim."
Lastly, if you are the buyer add language that the protection of indemnity extends to claims of using supplied goods and not just the condition of the goods at the time of delivery.
Mr. Don V. Kelly counsels clients in connection with intellectual property protection and claims. He concentrates his litigation practice in the areas of patent infringement, trademark infringement, trade secret litigation, non-compete agreements and business disputes. He has handled numerous multi-million dollar trade secret, franchise, contract and intellectual property cases. He has served as lead counsel in both state and federal jury and non-jury trials.
As a registered patent attorney he has drafted and prosecuted patent applications in a wide array of technologies including food storage and serving apparatus, engine components, medical devices, fuel systems, refrigeration/AC systems, industrial tools, network security, optical coatings and optical cleaning methods. He also counsels clients in connection with trademark, copyright, trade secrets, technology license agreements and intellectual property opinions and infringement analyses. Mr. Kelly is qualified as a mediator under Missouri Supreme Court Rule 17.
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|Unmanned Aircraft Systems/Drones: State of the Law & Avenues for Commercial Use|
|By: Thomas L. Gemmell, Partner, Husch Blackwell LLP|
The range of commercial uses of unmanned aircraft systems (UAS), or “drones,” is as expansive as human thought. If one can think of a way to use UAS, it either has been done or will be done in the near future.
While much of the recent attention has focused on Amazon seeking to use UAS to deliver packages, due to increased safety, reduced costs and greater productivity when compared to the same operations performed by manned aircraft or traditional ground-based methods, industries seeking to use UAS literally run the gamut from A to Z.
According to the Association for Unmanned Vehicle Systems International (AUVSI), the trade group that represents producers and users of UAS, the economic impact of UAS upon integration into the National Airspace System (NAS) is expected to be more than $13.6 billion within the first three years and more than $82 billion and 103,776 jobs in ten years.1 Agriculture (remote sensing and precision application) at 80 percent of the known potential markets, has been identified as the most promising commercial use2, with the greatest interest, based on the initial 500 requests to the Federal Aviation Administration, being in real estate, agriculture and construction.3
But currently UAS are not permitted to be used commercially in the United States without specific authorization from the FAA.4 As a result, companies have increasingly turned to petitioning the FAA under the FAA Modernization and Reform Act5 (FMRA) Section 333, Special Rules for Certain Unmanned Aircraft Systems (Section 333)6, for exemption from rules and regulations governing manned aircraft to allow them to use UAS to support their commercial operations.
In part recognizing the rapidly increasing interest in and benefits from using UAS, in 2012 Congress enacted the FMRA, which, among other things, mandates that the FAA, through the Department of Transportation, safely integrate UAS into the NAS by September 30, 2015.7
Under Section 333, Congress gave the FAA the flexibility to expedite operational authorization of certain UAS before completion of the Comprehensive Plan for UAS integration and rulemaking. Congress mandates that the FAA “shall determine if certain unmanned aircraft systems may operate safely in the national airspace system before completion of the plan and rulemaking required by section 332 of this Act or the guidance required by section 334 of this Act”8 upon consideration of its “size, weight, speed, operational capability, proximity to airports and populated areas, and operation within visual line of sight.”9 If such a determination is made, the FAA is required to “establish requirements for the safe operation.”10 To be granted exemption, the petitioner must show both an equivalent level of safety to those regulations from which it seeks exemption and that granting the petition would be in the public interest.11
In May 2014, the FAA began accepting petitions for exemption under Section 333, and four months later approved the first commercial use of UAS to six companies in the television and movie industry.12 Though the FAA had previously issued the first two civil Certificates of Waiver or Authorization (COA) to allow BP and Conoco Phillips to patrol pipelines in the Arctic13, this was the first time that it had granted exemptions from rules and regulations originally crafted for manned aircraft so as to allow businesses to operate unmanned aircraft.
In granting these first exemptions, the FAA resolved upon a wide-ranging “how-to” guide for petitioning the FAA under Section 33314. However, the FAA’s guidelines – many of which were self-imposed by the movie and television petitioners – did little to advance, and even hindered, Congress’ directive to expedite operational authorization of UAS deemed to be safe.15 The FAA noted that while under Section 333 Congress provided it with “statutory flexibility” relative to 49 USC 44704 and 44711 to determine whether an airworthiness certificate is required for a particular UAS, there was no such flexibility for other sections of 49 USC or FAR and, therefore, among other requirements, UAS operators must hold a private pilot’s license and have a third class medical certificate.16 The FAA further directed petitioners to include detailed preflight inspection, maintenance and repair procedures, as well as UAS pilot qualifications and training requirements.17
The FAA has since made a number of changes to its Section 333 petition guidance in an effort to streamline the process, including reducing the level of airman certification from a private pilot license to a sport or recreational pilot license, allowing a valid U.S. driver’s license in lieu of a third-class medical, and providing for the summary grant of petitions when a similar request has previously been granted.18 The FAA has also simplified requirements for operating under a Section 333 exemption by provided a “blanket” COA for those small UAS (sUAS) operating during the daytime at or below 200 feet within visual line of sight (VLOS) of the pilot in command.19 As a result, the FAA has to date granted more than 1,100 UAS exemptions, spanning more than 20 major industries,21 with an additional 50 requests being granted each week.22
In addition, in February of this year the FAA proposed rules governing the commercial operation of sUAS,23 such rules expected to be implemented in late 2016. The new rules are consistent with the FAA’s current guidelines (i.e. low altitude, daylight only, within VLOS of the pilot in command), with certain notable exceptions, including providing for a UAS operators certificate in lieu of airman certification and allowing flights at or below 500 feet, as well as in class B, C, D and E airspace with Air Traffic Control’s permission. And, most recently, in May, Congress introduced a temporary law, the Commercial UAS Modernization Act, that would establish temporary rules to regulate and manage sUAS between now and implementation of sUAS rules.24
But to truly integrate UAS into the national airspace system and unlock the full potential of this technology, specifically as it relates to extended operations, beyond visual range, at any altitude, a number of persistent technological and legal challenges must be overcome.
On the technology front, the foremost challenges to expansion of commercial UAS are endurance and autonomy. Endurance, particularly as it relates to rotor sUAS, is constrained by existing fuel/battery-charge technologies. Current lithium-ion polymer (LiPo) batteries provide flight times far less than that needed to meet expected commercial demands. Promising current and prospective technologies to meet this challenge include hybrid fuel-electric, solar, and improved fuel cell technologies.
Perhaps the greatest technological barrier to realizing the benefits of commercial UAS, however, is their tether to human involvement. The true benefits will come when UAS are capable, and permitted, to operate autonomously. This requires the unmanned aircraft to be able to “see” other aircraft and objects on the ground to execute separation and avoidance protocols. The size and expense of current sense-and-avoid systems, however, are prohibitive of ubiquitous application. Solutions may be found in nanotechnology and improved ADS-B and sensor technologies, such as radar and cameras.
Foremost among the legal challenges to expanded commercial UAS is privacy concerns.25 Though National Telecommunications and Information Administration (NTIA) has been tasked to coordinate voluntary privacy guidelines with industry,26 NTIA’s “multi-stakeholder” process promises to delay the guidelines well past the expected 2016 implementation of the sUAS rules.27 The current case-by-case approval process will soon be replaced by a framework that will allow anyone who follows the rules to fly UAS. The number of UAS – estimated at more than 7,50028 – expected to be airborne within five years, heightens the need for privacy guidelines.
Undoubtedly we are at the very beginning of this emerging technology. The flood of exemption requests to the FAA reveals a robust UAS commercial market waiting to be unleashed. Though regulations do not currently permit for widespread commercial use of UAS, opportunities will continue to grow, even exponentially, once rules governing UAS operations are implemented and the technology and its applications develop and mature.
AUVSI, The Economic Impact of Unmanned Aircraft Systems Integration in the United States (March 2013), https://higherlogicdownload.s3.amazonaws.com/AUVSI/958c920a-7f9b-4ad2-9807-f9a4e95d1ef1/UploadedImages/New_Economic%20Report%202013%20Full.pdf.
AUVSI, Snapshot of the First 500 Commercial Exemptions, http://higherlogicdownload.s3.amazonaws.com/AUVSI/f28f661a-e248-4687-b21d-34342433abdb/UploadedFiles/Section333Report.pdf.
FAA, Unmanned Aircraft Operations in the National Airspace System, 72 Fed. Reg. 6689 (FAA, Notice 07-01). In contrast, non-commercial or hobby use of UAS remains unregulated. See FAA Modernization and Reform Act (PUBLIC LAW 112–95—Feb. 14, 2012), Section 336, Special Rule for Model Aircraft. Despite the FAA providing specific examples of the hobby/commercial divide (FAA, Interpretation of Special Rule, 72 Fed. Reg. 36,172 (June 2014)), however, there continues to be confusion as to permitted use. Those who misunderstand the law, or otherwise proceed to fly without FAA exemption, are subject to steep fines of $10,000 per incident. Further, those who are found in violation face an uphill battle if they seek thereafter to obtain the FAA’s permission.
PUBLIC LAW 112–95 (FEB. 14, 2012).
See FMRA § 333, Special Rules for Certain Unmanned Aircraft Systems. Authorization has also been provided in limited circumstances under civil Certificates of Authorization or Waiver.
Id. at § 332(a)(3). Though the FAA has taken significant steps toward meeting Congress’ mandate, such as establishing the FAA’s UAS Integration Office, standing up UAS test sites, and promulgating proposed rules for small UAS, The FAA has determined that it will not meet the September 2015 deadline. See U.S. Department of Transportation Inspector General, Feb. 5, 2014, statement before the Committee on Transportation and Infrastructure, Subcommittee on Aviation. By most estimates, at the earliest, UAS rules are expected to be out for public comment in 2016 and implemented in 2018.
Id. at § 333(a).
Id. at § 333(b)(1).
Id. at § 333(c).
FAA, Public Guidance for Petitions for Exemption Filed under Section 333, http://www.faa.gov/uas/legislative_programs/section_333/how_to_file_a_petition/media/section333_public_guidance.pdf.
FAA, Media Advisory, http://www.faa.gov/news/press_releases/news_story.cfm?newsId=17194&cid=TW251. A seventh petition was granted in October.
FAA, Press Release, FAA Approves First Commercial UAS Flights Over Land, http://www.faa.gov/news/press_releases/news_story.cfm?newsId=16354.
See FAA, Public Guidance for Petitions for Exemption Filed under Section 333, http://www.faa.gov/uas/legislative_programs/section_333/how_to_file_a_petition/media/section333_public_guidance.pdf.
See Law360, FAA Drone Guidance Doesn’t Advance Congress’ Mandate, http://www.law360.com/articles/596579/print?section=aerospace.
See e.g. FAA Exemption No. 11213, http://www.faa.gov/uas/legislative_programs/section_333/333_authorizations/media/aeryon_labs_inc_11213.pdf.
FAA, Press Release, FAA Summary Grants Speed UAS Exemptions, http://www.faa.gov/news/updates/?newsid=82485.
FAA, Press Release, FAA Streamlines UAS COAs for Section 333, http://www.faa.gov/news/updates/?newsId=82245.
See FAA, Legislative Programs, Section 333, http://www.faa.gov/uas/legislative_programs/section_333/.
See AUVSI, Snapshot of the First 500 Commercial Exemptions, http://higherlogicdownload.s3.amazonaws.com/AUVSI/f28f661a-e248-4687-b21d-34342433abdb/UploadedFiles/Section333Report.pdf.
FAA-2015-0150; Notice No. 15-01, Small UAS Notice of Proposed Rulemaking, http://www.faa.gov/regulations_policies/rulemaking/recently_published/media/2120-AJ60_NPRM_2-15-2015_joint_signature.pdf.
See Commercial UAS Modernization Act, S. 1314.
Data security concerns will also need to be addressed. Myriad disparate regulations will also need to be unified so there is consistent application across the spectrum to accommodate a mix of both manned and unmanned operations in the NAS.
White House, Press Release, FACT SHEET: Promoting Economic Competitiveness While Safeguarding Privacy, Civil Rights, and Civil Liberties in Domestic Use of Unmanned Aircraft Systems, https://www.whitehouse.gov/the-press-office/2015/02/15/fact-sheet-promoting-economic-competitiveness-while-safeguarding-privacy.
As a result of the FAA not addressing privacy issues in proposing the new sUAS rules, privacy advocate Electronic Privacy Information Center (EPIC) sued the FAA contending that such address is required by Congress’ under the Comprehensive Plan. See EPIC v. FAA et al., Docket No. 15-1075 (D.C. March 31, 2015).
FAA, News, Busting Myths about the FAA and Unmanned Aircraft—Update, http://www.faa.gov/news/updates/?newsId=76381.
Thomas L. Gemmell is a partner at Husch Blackwell LLP and Co-Lead of the firm's Unmanned Aircraft Systems team. As a former F-15 fighter pilot, he is proficient in UAS systems technologies, including precision targeting, data-link and encryption, as well as flight operations in the NAS and international airspace. Mr. Gemmell represents clients across a wide range of industries, including energy, construction, GIS/mapping, agriculture, and movie and television, and is among the first to obtain exemptions from the FAA to allow for the commercial use of UAS. He can be contacted at (312) 526-1523 or by email at email@example.com.
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|More 'Waiving' Goodbye to Juries - Almost a Decade Later|
|By: James M. Paul & Harrison Kuntz, Ogletree Deakins Law Firm|
Several years ago, we began to suggest that such waivers could offer employers a more beneficial means of adjudicating employment disputes compared to arbitration agreements. In the last ten years, additional obstacles to arbitration agreements1 have arisen, while more jurisdictions have examined and accepted pre-dispute jury trial waivers as enforceable contractual agreements. The opportunities for employers to successfully obtain the alternative dispute resolution benefits of pre-dispute jury trial waivers, therefore, continue to increase.
The utilization of arbitration agreements by employers has highlighted a number of pitfalls with that procedure. Arbitration can quickly become an expensive proposition because the costs are borne by the parties, rather than by the court system. Typically, employers in arbitration proceedings lack the valuable ability to dispense with meritless claims through dispositive motions. The absence of well-defined discovery procedures in arbitration can also have the effect of closing the door to helpful evidence. Furthermore, while a judicial decision may be appealed and receive substantive legal and/or factual reconsideration, arbitration decisions are generally not subject to meaningful review on appeal.
Compounding these procedural shortcomings, the National Labor Relations Board has adopted the stance that arbitration agreements with class action waivers unlawfully interfere with employees’ rights under Section 7 of the Wagner Act.2 The Board’s position is based on concerns about the effects of such agreements on employees’ abilities to pursue class action lawsuits and statutory claims as a group. Although this standard may change based on future judicial or political developments, the cumulative effects of arbitration’s uncertainties strongly incentivize a move towards other dispute resolution options. Bench trials within an existing court system that is able to accommodate and/or parse apart class action claims would avoid this NLRB scrutiny.
Such bench trials can also provide employers with higher degrees of litigation certainty. Judges are generally viewed as more predictable decision-makers than are juries. The court system, as opposed to arbitration, also offers predictable systems for motions, discovery, and trial procedures. Bench trials, in particular, can be relatively cost-effective, less formal and more streamlined due to the elimination of voir dire, jury instructions, sidebar conferences, jury deliberations, and motions in limine.
Nationwide Jury Waiver Enforcement Standards
Federal courts have been especially receptive to pre-dispute jury trial waivers. All federal appellate courts (except the Federal Circuit, which has not addressed the issue) have held that pre-dispute jury waivers may be enforced. Two circuits, the Sixth and the Eighth, have found jury waivers to be enforceable in the employment context, as have District Courts within the Second, Fourth, and Tenth Circuits.
Federal courts also generally hold that jury waiver enforcement in federal court is a matter of federal law, even when the waiver is applied to substantive claims arising out of state law. The only exceptions to this useful standard are the recent holdings of two District Courts in Georgia. In LSREF2 Baron, LLC v. Alexander SRP Apartments, LLC, 15 F. Supp. 3d 1295, 1310 (N.D. Ga. 2013) and GE Commercial Fin. Bus. Prop. Corp. v. Heard, 621 F. Supp. 2d 1305, 1308-09 (M.D. Ga. 2009), the courts ruled that the Erie doctrine requires application of Georgia’s stricter state law prohibiting jury waivers because state law does not diminish a federal right that either party possesses.3
However, in accordance with the majority approach, California’s anti-jury waiver stance has not precluded enforcement regarding state claims federal court, at least not in the Northern District of California. See Cannon v. Wells Fargo Bank N.A., 917 F. Supp. 2d 1025, 1057-60 (N.D. Cal. 2013); Applied Elastomerics, Inc. v. Z-Man Fishing Products, Inc., 521 F. Supp. 2d 1031, 1044 (N.D. Cal. 2007). Employers in locations other than Georgia can therefore feel comfortable that their jury waivers are enforceable if otherwise valid in federal courts - even regarding underlying state claims.
State courts themselves have been increasingly receptive to pre-dispute jury trial waivers. Courts in 28 states and Puerto Rico have either enforced jury waivers or indicated that such waivers would be enforceable if otherwise valid. Courts in 12 states have enforced or given a positive indication to jury waivers specifically in the employment context, nine of which were opinions from that state’s highest Court. Texas, Alabama, and Pennsylvania courts have approved of jury waivers that were independent of arbitration agreements in the employment context.
Outside of California and Georgia, no reported state court decisions have found jury waivers to be per se unenforceable in the past decade. The California and Georgia Supreme Courts’ determinations in Grafton Partners L.P. v. Superior Court, 116 P.3d 479 (Cal. 2005) and Bank South, N.A. v. Howard, 444 S.E.2d 799 (Ga. 1994) that their states’ constitutions do not permit jury waivers are a very isolated minority. Beyond those states, only a 1993 North Carolina statute prohibiting jury waivers would likely prevent enforcement in that state. N.C. Gen. Stat. Ann. § 22B-10. Importantly, courts in the remaining 19 states have not yet reached the issue.
The steady trend towards enforcement of pre-dispute jury waivers was illustrated by the South Carolina Supreme Court in 2014. Apparently unpersuaded by its neighbors to the north and south, the Court in Wachovia Bank, Nat. Ass'n v. Blackburn, 755 S.E.2d 437 (S.C. 2014), reh'g denied (Apr. 2, 2014), enforced jury waivers in note and guaranty agreements even though the lendees claimed to be unaware of the waiver provisions.
The Texas Supreme Court announced a significant employment law decision in 2012 that is of particular assistance to employers. The Court in In re Frank Motor Co., 361 S.W.3d 628 (Tex. 2012) enforced a jury waiver agreement signed by an employee as a condition of continued employment. Although the employee claimed that the threat of discharge from his job of 28 years was coercive, the Court emphasized the at-will nature of his employment in enforcing the waiver.
The Wachovia and Frank Motor decisions are only part of a larger trend. The highest courts of Nevada and Idaho reached the same conclusion in 2012. Lower courts in states such as Delaware, Tennessee, Ohio, Colorado, and others have also enforced jury waivers since 2011.
Other states’ courts have given strong indications in arbitration agreement cases that they would enforce jury waivers if and when such cases come before them. For example, in 2011, the Massachusetts Supreme Judicial Court enforced an employment arbitration agreement that expressly stated, “I understand and acknowledge that my agreement to submit all applicable disputes as described above to binding arbitration means that with respect to all such claims I am knowingly, and voluntarily waiving my right to a trial by jury…” Joule, Inc. v. Simmons, 944 N.E.2d 143, 146 (Mass. 2011). The Nevada Supreme Court enforced a similar provision against an employee in Whitemaine v. Aniskovich, 183 P.3d 137, 144 (Nev. 2008).
Although such decisions may have been subconsciously influenced by the strong statutory and public policy support for arbitration, the presence of express jury waiver provisions in those arbitration agreements indicates that those courts are likely to enforce independent jury waivers as well. Other courts have sent even stronger signals in arbitration agreement cases by articulating, in response to employees’ constitutional arguments against arbitration, that the right to a jury trial may be waived. The Oregon Supreme Court offered such analysis in Hatkoff v. Portland Adventist Med. Ctr., 287 P.3d 1113, 1119-20 (Or. 2012) in an age discrimination suit. The Illinois Supreme Court also utilized such analysis while compelling arbitration of a worker’s compensation retaliatory discharge claim. Melena v. Anheuser-Busch, Inc., 847 N.E.2d 99 (Ill. 2006). These precedents directly undermine claims that jury waivers infringe upon (state or federal) constitutional rights. Employees resisting enforcement of jury waivers in these states would face a high hurdle.
Practical Tips for Implementing Enforceable Waivers
All jurisdictions that enforce pre-dispute jury waivers require that the waivers be “knowing and voluntary” or some variation of that standard (for example, some jurisdictions add or substitute virtually analogous terms such as “intelligent,” “unmistakable,” “express,” or “unambiguous”). Waivers that are “buried” within other terms and conditions are less likely to be enforced. Employers can follow some basic guidelines to maximize the probability of enforcement:
- Present the jury waiver agreement as a stand-alone document, rather than as a provision within a larger agreement;
- Use clear language rather than technical legal terms;
- Encourage employees to consult with an attorney prior to executing the agreement;
- Ensure that all terms of the agreement apply to both parties in an equal and identical manner, i.e., “mirror-image” obligations and waivers by both the employee and the employer;
- Place a large, bold-face, capitalized statement directly above the agreement’s signature line that states, for example, "THIS CONTRACT CONTAINS A BINDING JURY TRIAL WAIVER PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.”
Additionally, in accordance with the principles of contract law, courts generally require consideration in order for the agreement to be enforceable. Although some courts view continued employment to be sufficient consideration, the timing and nature of the agreement can help meet this requirement regardless of jurisdiction. Some best practices include:
- Require execution of the agreement at the interviewing/hiring stage, so that the further consideration of the application and any offer of employment may serve as consideration;
- For current employees, present a jury waiver agreement in the context of a raise, promotion, or other benefit conditioned on execution of the agreement;
- State that the agreement is mutually enforceable and non-revocable by the parties.
As with any binding agreement, careful analysis of other considerations that could affect the employer’s particular interests is necessary. Such considerations might include:
- The need to state the agreement’s applicability to related corporate entities and all managers/supervisors accused of acting within the scope of their employment;
- Choice-of-law and forum selection clauses where enforceable and beneficial to the employer;
- A statement clarifying that the agreement does not guarantee employment for any definite period of time, and that the employee remains employed at-will;
- A statement defining the agreement’s scope as encompassing all disputes arising out of the application and/or employment relationship, including any language necessary for coverage of particular claims;
- A severability or savings clause;
- An attorney’s fees provision in favor of a successful litigant on the issue of enforceability of the jury waiver agreement.
State and federal courts across the nation have, with few exceptions, expressly confirmed or strongly signaled that employers may implement and enforce pre-dispute jury trial waivers. If properly implemented, the resulting bench trials could offer significant reductions in time, resources, and uncertainty compared to jury trials and arbitration. Of course, to ease the judge’s increased involvement and workload in a bench-tried case, great care should be taken to make the judge’s elevated role as easy as possible with proposed findings of fact and conclusions of law. Remember that - in addition to his/her normal duties - the judge will now have to fulfill the jury’s functions of weighing evidence, determining credibility, rendering a verdict and assessing damages.
In the end, there is no real downside to attempting this procedure. Even if a jury waiver is ultimately not enforced by a court, the employer remains in the same legal position as if the waiver had never been implemented, i.e., facing the same jury trial as if there were no jury waiver in place. The developments of the past decade in this area have therefore presented employers with a no-risk opportunity worthy of serious consideration.
- Will Employers and Employees 'Waive' Goodbye to Juries?, http://www.lorman.com/resources/will-employers-and-employees-waive-goodbye-to-juries-15599 (2006).
- Murphy Oil USA, Inc., 361 NLRB No. 72 (Oct. 28, 2014); reaffirming D.R. Horton, Inc., 357 NLRB No. 184 (2012). The Board has not yet resolved a split amongst its Administrative Law Judges regarding whether opt-out provisions in arbitration agreements cure their purported unlawfulness. Compare RPM Pizza, 2014 WL 3401751 (July 11, 2014) with Bloomingdales, Inc., 2013 WL 3225945 (June 25, 2013).
- As a general proposition, the Erie doctrine requires federal courts to apply state substantive law and federal procedural rules to state law claims adjudicated in a federal court forum. See Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938); Byrd v. Blue Ridge Rural Electric Cooperative, Inc., 356 U.S. 525 (1958); Hanna v. Plumer, 380 U.S. 460 (1965).
James M. Paul (firstname.lastname@example.org) is a Shareholder in the St.
Louis office of the national labor and employment law firm of Ogletree
Deakins, and Harrison Kuntz is a Law Clerk at the firm and a 2017 J.D.
Candidate at Washington University in St. Louis. Mr. Kuntz also served
as a Field Examiner at the National Labor Relations Board prior to
entering law school.
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|Trade Secrets - An Overview|
|By: Jeffrey L. Schultz, Partner, Armstrong Teasdale LLP|
With the standards of patentability becoming increasingly more difficult to meet1, the advantages of trade secret protection for a company’s intellectual property are receiving renewed attention and increasing in importance. In fact, because of the importance of trade secrets, there has been a significant focus on the possibility of federal trade secret legislation, such as the Defend Trade Secrets Act of 20142 and the Trade Secrets Protection Act3. These proposed laws track the current model law - the Uniform Trade Secrets Act (“UTSA”), which has been adopted in part by 48 states4 - and would grant trade secret owners more enforcement options, such as the ability to sue in state or federal court, and help to eliminate state variations in the UTSA.5
This article will focus on what types of information can receive trade secret protection, ways corporate counsel can improve the security of a company’s trade secrets, and the practical steps they can take if there is a misappropriation. Although much of the authority cited in this article is from state and federal courts in Missouri, the following analysis has broader implications in light of the fact that Missouri has adopted a version of the UTSA.
Understanding Trade Secrets
Although trade secrets are an important category of intellectual property, their treatment under the law differs from other familiar types of intellectual property. Specifically, trade secret laws focus on the secrecy and value, not the novelty or nonobviousness, of information, and “are meant to govern commercial ethics.”6 Accordingly, “[t]rade secret protection “does not shield an idea from ‘infringing’ other uses of the idea; instead it protects valuable information from being misappropriated despite reasonable efforts to keep it secret.”7
Also, unlike other forms of intellectual property, which are protected by federal law, trade secret rights generally are protected by the laws of each individual state. Missouri adopted its version of the UTSA - the MUTSA - in 1995.8 The body of case law concerning the MUTSA has developed significantly in recent years. In 2014, the Missouri Supreme Court confirmed for the first time that there are three general elements for a claim of misappropriation of trade secrets under the MUTSA: “(1) a trade secret exists; (2) the defendant misappropriated the trade secret; and (3) the plaintiff is entitled to either damages or injunctive relief.”9
In light of the importance of trade secrets and the continuing development of technologies that allow vast amounts of information to easily be copied, stored, and transported, the MUTSA undoubtedly will continue to be of significant value to Missouri businesses, continue to be the subject of litigation, and receive further analysis by Missouri courts in the foreseeable future.
What Is A Trade Secret?
A determination that information is a trade secret on “the value of a secret, not the merit of its technical improvements.”10 The MUTSA defines a trade secret as:
Technical or nontechnical data, a formula, pattern, compilation, program, device, method, technique, or process that: (a) [d]erives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by other persons who can obtain economic value from its disclosure or use; and (b) [i]s the subject of efforts that are reasonable under the circumstances to maintain its secrecy.11
In addition to the key requirements set forth in the MUTSA, courts sometimes rely on six factors from the Restatement (First) of Torts, in determining whether information is a trade secret:
- the extent to which the information is known outside the plaintiff’s business;
- the extent to which it is known by employees and others involved in the business;
- the extent of the measures taken by the plaintiff to guard the secrecy of the information;
- the value of the information to the plaintiff and its competitors;
- the amount of effort or money expended by the plaintiff in developing that information; and
- the ease or difficulty with which the information could be properly acquired or duplicated by others.12
Ultimately, the existence of a trade secret is a conclusion of law based on the applicable facts.13
What Type of Information Has Been Determined to Warrant Trade Secret Status?
Information need not rise to the level of the Coca-Cola formula or the Kentucky Fried Chicken recipe to qualify as a trade secret. The following types of information are examples of information that qualified as trade secrets:
- detailed customer contacts, product specifications, price information and material requirements contained in a book;14
- “dimensions and tolerances” for a product, engineering drawings, “product pricing information, customer-specific product purchases, [and] quantities of products” purchased by specific customers;15
- lead sheets and customer files containing proprietary computer analyses of potential customers’ financial needs;16
- advertising materials and marketing plans presented at a company’s annual planning meeting, changes and additions to services offered to customers, and compensation and pricing issues;17
- a concept that solved a problem for a type of financial product;18
- insurers’ market share and premium data for residential insurance broken down by specific zip codes;19
- revised helicopter overhaul documents containing details about processes, procedures, techniques, and material specifications, which were prepared by a helicopter engine manufacturer to update approved overhaul procedure for engines;20
- documents listing current and future features of a remote patient monitoring system, documents identifying functionality currently lacking in the system, and documents identifying the core functionalities of the system;21 and
- PowerPoint presentations containing compiled research on consumer behavior in the greeting cards market.22
Reasonable Steps to Maintain Secrecy
Since the party trying to establish the existence of a trade secret must establish that the information “[i]s the subject of efforts that are reasonable under the circumstances to maintain its secrecy,”23 there are certain policies and procedures that businesses can implement to help establish trade secret status. For example, although their absence is not dispositive of the issue of reasonable efforts, “[t]he use of proprietary legends on documents or the existence of confidentiality agreements are frequently-considered factors in establishing or denying a trade secrets claim.”24
As already noted, the standard is whether there were “reasonable measures,” not foolproof safeguards. Courts are mindful of costs and practical considerations, and look to the facts of the particular case; thus, it is not necessary for a business to institute all possible measures of protection. Accordingly, examples of some basic steps to protect trade secrets include:
- adopting a comprehensive policy to protect key information;
- allowing employees or contractors access to information on a “need to know” basis, giving each employee or contractor access only to that level of information that is required to perform his or her job function;
- requiring employees and third parties who will have access to trade secrets to sign separate confidentiality or non-disclosure agreements;
- including a separate confidentiality policy within an employee handbook requiring the employee to l abide by the terms of the handbook;
- limiting access to electronic data through the use of multiple authentication techniques, such as passwords, tokens that generate new access codes over time, personal identification numbers, or other safeguards;
- stamping key documents “confidential” or “proprietary”;
- storing hard copies of trade secret information in locked cabinets or rooms;
- prohibiting the copying of trade secrets;
- instituting and enforcing guidelines or procedures concerning the handling of trade secrets by employees and contractors who must have access to such information off of a company’s premises;
- encrypting trade secret information that is stored and transmitted by employees or contractors;
- conducting regular audits to identify trade secrets and other competitively sensitive information and to assess the strength of protections required;
- conducting training for new employees regarding the types of information the company considers to be confidential, the company’s policy for handling such information, and the employees’ duty to maintain the confidentiality of such information;
- conducting regular training to remind existing employees of their confidentiality obligations; and
- requiring employees to return all company documents and electronic data when requested and upon termination.
In addition to the above-mentioned steps to safeguard information, businesses should consider taking additional steps when dealing with a departing employee. Immediately upon a departure, companies should either terminate the employee’s network and other online access to company data, or, if permitted by company policy, arrange for the employee’s email and computer network activity to be monitored. Additionally, companies should require the employee to immediately return (1) all tools for accessing physical and virtual office spaces, such as keys, access cards, and Citrix key fobs, (2) all documents obtained during the course of employment, and (3) all company property on which company data may be stored, including computer equipment, cell phones, and other devices.
In addition to gathering important items from the departing employee, companies should conduct an exit interview with the employee, reminding the employee of the promises contained within confidentiality or non-disclosure agreements. Among other things, confirm that all company documents, data and equipment have been returned, and all email and data files containing confidential company information located on any equipment owned by the employee have been deleted. Businesses should also provide departing employees with copies of their executed confidentiality or non-disclosure agreements, verify that any separation agreements do not release the employee’s non-disclosure, non-compete, and non-solicitation obligations, and remind the employee that federal and state computer tampering laws and trade secret laws impose civil damages and criminal penalties for violations.
Finally, rather than immediately repurposing computer hardware used by departing employees, businesses should consider powering it down and placing it in a secure environment where it will not be used, altered, or otherwise disturbed for a period of time. This will allow a forensic review of such hardware to search for valuable evidence of misappropriation.
Practical Steps After A Misappropriation Occurs
With today’s technology, it is easy, quick, and inexpensive to copy, store, and transmit vast amounts of information. When corporate counsel suspects that valuable information has been misappropriated - whether by an employee, an outside contractor, or an unrelated third party - quick action is required.
An employer faced with misappropriation by a departing employee should determine whether the employee misappropriated the trade secrets to help a competitor. If so, in addition to determining whether the employee signed a non-disclosure or confidentiality agreement, the employer should ascertain whether the former employee signed a non-competition agreement or similar restrictive covenant.
Before filing suit, an employer should also consider interviewing the supervisor or co-workers of the former employee. These interviews can provide important information regarding the types of information to which the employee had access, and potentially the employee’s motives for leaving.
Furthermore, an employer should consider a forensic examination of the employee’s computer. These examinations can be critical in determining whether and what type of misappropriation occurred, and often lead to the discovery of “smoking gun” evidence of misappropriation.
Forensic evidence also can be important evidence in persuading a court to enter a temporary restraining order, even when a non-compete covenant does not exist. Courts often are more willing to enter a temporary restraining order if there is forensic evidence - such as an email - indicating that a former employee misappropriated electronic data with the intent of unfairly competing against a former employer.
Counsel for an employer who suspects that a former employee transferred electronic data should also consider sending preservation letters demanding the former employee and new employer preserve and not delete any electronic data in their computer systems, both at the office and at home.
Counsel representing the former employee or new employer should determine whether the former employee transferred any electronic data to the new employer, a home computer, or downloaded the data in some fashion. If so, counsel should ascertain whether the information is, in fact, a trade secret and develop a strategy for handling any such information.
Trade secret laws can be a very effective, and sometimes critical, means to protect certain types of intellectual property. Corporate counsel should be aware of these laws to properly advise clients on what constitutes a trade secret, how to safeguard valuable information, and what to do in the event of misappropriation.
- Alice Corp. v. CLS Bank Int’l, 573 U.S. __, 134 S. Ct. 2347 (2014).
- Defend Trade Secrets Act of 2014, S. 2267, 113th Cong. (2013-2014).
- Trade Secrets Protection Act of 2014, H.R. 5233, 113th Cong. (2013-2014).
- Trade Secrets Act, THE NATIONAL CONFERENCE OF COMMISSIONERS ON UNIFORM STATE LAWS, http://www.uniformlaws.org/Act.aspx?title=Trade+Secrets+Act (last visited June 29, 2015).
- See Eric Goldman, Congress Is Considering A New Federal Trade Secret Law. Why?, FORBES, Sep. 16, 2014, http://www.forbes.com/sites/ericgoldman/2014/09/16/congress-is-considering-a-new-federal-trade-secret-law-why/.
- AvidAir Helicopter Supply, Inc. v. Rolls-Royce Corp., 663 F.3d 966, 972-973 (8th Cir. 2011).
- Id. at 973.
- See BP Chemicals Ltd. v. Jiangsu Sopo Corp., 285 F.3d 677, 682 (8th Cir. 2002).
- Cent. Trust & Inv. Co. v. SignalPoint Asset Mgmt., L.L.C., 422 S.W.3d 312, 321 (Mo. banc 2014) (citing §§ 417.453, 417.455 (claims for injunctive relief), and 417.457 (claims for damages) RSMo).
- AvidAir Helicopter Supply, 663 F.3d at 972.
- Section 417.453(4), RSMo. See also Conseco Fin. Serv. Corp. v. N. Am. Mortg. Co., 381 F.3d 811, 818-19 (8th Cir. 2007) (citing Lyn-Flex West, Inc. v. Dieckhaus, 24 S.W.3d 693, 697-98 (Mo. App. 1999)); Victoria’s Secret Stores, Inc. v. May Dept. Stores Co., 157 S.W.3d 256, 262 (Mo. App. 2004); Cerner Corp. v. Visicu, Inc., 667 F. Supp. 2d 1062, 1076 (W.D. Mo. 2009); AvidAir Helicopter Supply, 663 F.3d at 972.
- Cerner, 667 F. Supp. 2d at 1076-77 (noting that in determining whether the information involved in a case constitutes a trade secret under the MUTSA, courts have utilized these factors); Lyn-Flex West, Inc. 24 S.W.3d at 698 (noting that courts in states that have adopted the Act have found that those factors provide guidance in determining whether the information in a given case constitutes trade secrets within the definition of the Act). See also Healthcare Servs. of the Ozarks, Inc. v. Copeland, 198 S.W.3d 604, 611 (Mo. banc 2006); Brown v. Rollet Bros. Trucking Co., 291 S.W.3d 766, 776 (Mo. App. 2009); Am. Family Mut. Ins. Co. v. Mo. Dept. of Ins., 169 S.W.3d 905, 909-10 (Mo. App. 2005); AEE-EMF, Inc. v. Passmore, 906 S.W.2d 714, 721-22 (Mo. App. 1995).
- AvidAir Helicopter Supply, 663 F.3d at 971; Lyn-Flex, 24 S.W.3d at 698.
- Lyn-Flex, 24 S.W.3d at 698-699.
- Synergetics, Inc. v. Hurst, 477 F.3d 949, 957 (8th Cir. 2007).
- Conseco Fin. Serv. Corp., 381 F.3d 811, 815, 819.
- H&R Block E. Tax Servs., Inc. v. Enchura, 122 F. Supp. 2d 1067, 1074 (W.D. Mo. 2000). The Enchura court’s discussion of what materials constituted the plaintiffs’ trade secrets was arguably dicta. Although the court observed that plaintiffs were “somewhat broad in their designation of materials as trade secrets” and determined that some of the materials were not trade secrets, the court apparently never tried the issue of whether there were trade secrets. Rather, the court focused on the issue of whether there was threatened misappropriation of the alleged trade secrets. Id.
- Bancorp Servs. L.L.C. v. Hartford Life Ins. Co. (Bancorp II), No. 4:00-CV-70 CEJ, 2002 WL 32727080, at * 2 (E.D. Mo. Nov. 20, 2002).
- Am. Family Mut. Ins. Co., 169 S.W.3d at 908, 910-911.
- AvidAir Helicopter Supply, Inc., 663 F.3d at 970, 975.
- Cerner, 667 F. Supp. 2d at 1069.
- Hallmark Cards, Inc. v. Monitor Clipper Partners, L.L.C., 758 F.3d 1051 (8th Cir. 2014).
- Section 417.453(4), RSMo.
- Lyn-Flex West, Inc., 24 S.W.3d at 699; see also Bancorp II, 2002 WL 32727080, at *2. AvidAir Helicopter Supply, Inc., 663 F.3d at 974.
Jeffrey L. Schultz is a litigation partner at Armstrong Teasdale LLP and co-chair of the firm’s Data Security and Privacy Practice. Jeff is also a Certified Information Privacy Professional through the International Association of Privacy Professionals. He may be reached at (314) 259-4732 or email@example.com.
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|Explosive Changes in White Collar Prosecutions Coming?|
|By: Patrick J. Cotter, Greensfelder, Hemker & Gale, P.C.|
DOJ “Yates Memo” and release of 20-year study of white collar prosecutions suggest major changes in the way white collar crime is prosecuted and defended.
Two separate news items, each released on Sept. 10, 2015, are well worth noting by all practitioners of white collar criminal defense, general counsel for corporations, business executives and employees and, indeed, the general public.
The first news item, which has received the most media attention, is the new Department of Justice memo titled, “Individual Accountability for Corporate Wrongdoing.” The memo, authored by Deputy Attorney General Sally Quillian Yates and addressed to all of the divisions of the U.S. Department of Justice as well as every U.S. Attorney in the nation, has received a great deal of media coverage (e.g., a front page article in the New York Times). The Yates Memo, as it will no doubt be known, seeks to do nothing less than redirect all federal prosecutors, civil and criminal, to focus their efforts to an unprecedented degree on individual corporate executives and employees.
The Yates Memo also redefines the standard corporations seeking “cooperation credit” from the DOJ as part of resolving federal investigations will have to meet. These changes may dramatically raise the personal risks for all such individuals while also placing new pressure on any corporation DOJ attorneys opt to target. Attorneys attempting to defend and give counsel to such corporations and individuals will need to take these new policies into account.
The second important news item - much less noticed in the mainstream media - is a report about a recent study researchers at Syracuse University conducted that relied upon Department of Justice statistics. The Syracuse Study found a truly stunning overall decline in federal white collar criminal prosecutions, more than 36 percent over the past 20 years. The Syracuse Study also noted that this downward trend, at least up to now, appears to be continuing.
The Syracuse Study’s finding of an unprecedented drop in the number of white collar prosecutions, in juxtaposition with the Yates Memo’s newly minted far more aggressive approach to white collar cases, portends that large and potentially ominous changes are in store for all businesses and business people. The picture presented is of a white collar criminal prosecution landscape that has been at historically low levels of late, but which is primed to soon become much more active in ways not seen before.
Each news item deserves more examination.
As noted, the Syracuse Study, which was originally released in April 2015 but only reported in major news media now, looked at DOJ white collar prosecutorial statistics going back 20 years to reach their conclusion about the precipitous drop in such prosecutions. Indeed, the study noted that the downward trend appears to be ongoing, with current statistics suggesting that 2015 white collar prosecutions are projected to be 12.3 percent lower than the 2014 figure and are down 29.1 percent from five years ago.
The Syracuse Study identifies two possible explanations for the precipitous drop in white collar prosecutions. First, they note that the amount of federal resources devoted to investigating white collar crime has shrunk over the years, including a 15 percent drop since 2011 in the number of Department of Justice employees engaged in white collar investigations and prosecutions.
A second explanation the Syracuse researchers advance is potentially even more intriguing. They posit that the decline in white collar criminal prosecutions at the federal level may also be the result of more attorneys and law firms around the country engaging in more proactive, preventive lawyering on behalf of those engaged in business activities that might be targeted for white collar criminal investigations. Thus, they suspect, many prosecutions likely have been avoided altogether by early and effective attorney representation.
This observation by the Syracuse researchers validates the model of legal representation adopted by a small but growing number of otherwise traditional white collar practitioners around the country, including Greensfelder, Hemker & Gale’s Government Interaction & White Collar Practice Group. These practitioners seek to work with clients likely to have interactions with the government to prepare in advance for any problem and, when possible, take steps to avoid the kinds of situations that can lead to white collar criminal prosecutions. The Syracuse researchers’ observation of the impact of such forward-looking legal representation is significant.
The Yates Memo
Whether the Department of Justice was aware of, or considered, the results of the Syracuse University study before they issued the Yates Memo is unknown. What is clear is that the DOJ has decided to take a significantly more aggressive position regarding federal prosecutions for white collar crime. Only time will tell whether the DOJ’s aggressive new stance will reverse the current historically low level of federal white collar prosecutions identified by the Syracuse Study. But, of key importance, the Yates Memo elevates the investigation and prosecution of individual corporate employees to the first rank of importance for all federal criminal and civil attorneys.
While it would be an overstatement to suggest that the Yates Memo represents a complete break with prior DOJ policy, it is important to note that it is unmistakably intended to send a very clear message that individual criminal prosecutions are to be given a higher priority and, in fact, any federal prosecutor anywhere in the country bringing a white collar case that does not include charges against individuals will have a heavy burden of justifying that decision to her or his superiors in Washington. Moreover, corporations must now deal with the reality that to gain cooperation credit from the DOJ, they will be expected to provide a perhaps unprecedented degree of information to the government about their own employees.
The Yates Memo identifies what it describes as “six key steps to strengthen our pursuit of individual corporate wrongdoing:”
- Corporations may only receive “cooperation credit” if they provide to the DOJ all information in their possession regarding individuals who are potentially responsible for misconduct;
- All criminal and civil corporate investigations should focus on individuals from the beginning of the investigation;
- Criminal and civil DOJ attorneys working on a corporate investigation should be in “routine communication” with one another throughout the investigation;
- “Absent extraordinary circumstances or approved departmental policy” the DOJ will not release individuals from civil or criminal liability when resolving a matter with a corporation;
- DOJ attorneys are instructed to not resolve matters with corporations without a clear plan regarding individual cases and any decision to decline to pursue individuals in such cases will have to be “memorialized;” and
- Civil attorneys should “consistently focus on individuals” and evaluate whether to bring suit against an individual based on considerations not including whether the individual in question has any ability to pay any civil judgment that is obtained.
The Yates Memo describe these “six key steps” in greater detail over approximately seven single-spaced pages, but the import of the “six key steps” is clear: Corporate individuals are now a priority target. In any event, while a detailed analysis of the entire memo is beyond the scope of this blog posting, some initial observations may be useful.
First, as is well known, the DOJ has received significant criticism since the so-called “economic collapse” for allegedly being too ready to be content with monetary settlements with large corporations while not pursuing prosecutions of specific corporate employees. How much of this criticism is warranted by the reality of the facts and the law is a matter for reasonable debate, but the magnitude of the criticism is undeniable.
Second, the Yates Memo is clearly intended to respond to this criticism. Whether this very public move on the part of the DOJ represents the beginning of a radically changed prosecution practice in white collar cases, or is mere window dressing designed to appease the critics, remains to be seen. However, anyone who has ever worked for the Department of Justice as an attorney would recognize that given the unambiguous marching orders contained in the Yates Memo, every DOJ attorney in the country is now on notice that their bosses want them to go out and prosecute individuals in white collar cases and that if they fail to do so, they will likely have some explaining to do.
Third, every corporation in the country, and every one of their general counsel, is now on notice that if they come under DOJ scrutiny, they will be faced with unprecedented pressure to provide evidence to the government against their own individual employees. Specifically, the DOJ’s insistence that to gain credit for cooperating with a government investigation, the corporation must disclose “all information” it has about its employees has profound implications for how internal investigations should be conducted. As the Yates Memo makes clear, the DOJ attorneys will define what “all information” means in this context, and so corporations will be pressured to independently gather information about which of their employees are responsible for whatever the government is investigating if the corporation wants to get cooperation credit. Also, it appears that a corporation’s ability to protect its employees and “carve them into” settlements with the government may now be severely limited. In addition, and very troubling, is the fact that the potential implications for the future status of attorney-client privilege in such investigations will be numerous and potentially profound. It is hard to imagine that changes wrought by the Yates Memo will not dramatically alter how corporations respond to government investigations and how corporate individual employees choose to cooperate during the course of internal investigations.
Indeed, in a speech at New York University School of Law on the same day that the Yates Memo was released, Deputy Attorney General Yates herself noted that these changes in policy by the DOJ may very well lead to fewer settlements of federal white collar investigations and more trials. Yates’ comments are as good a confirmation as there could be that the Yates Memo raises significant issues for corporations, their general counsel, individual corporate employees and the outside white collar attorneys who advise them all and may very well lead to explosive changes in white collar prosecutions.
Patrick J. Cotter is an officer in the Government Interaction & White Collar Practice Group at Greensfelder, Hemker & Gale, P.C. He can be reached at firstname.lastname@example.org.
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|Personal Liability for Customs Violations: The Impact of the Trek Leather Case on Importers, Their Boards, Officers & Employees|
|By: Melissa Proctor, Polsinelli, PC|
The U.S. v. Trek Leather case1 has triggered more heartburn than usual for many board members, officers and compliance professionals of companies that import raw materials, parts, components and finished goods into the United States. In that case, the Court of Appeals for the Federal Circuit (“Federal Circuit”) held for the first time that individuals may themselves be held liable for their companies’ negligent import violations under 19 U.S. Code §1592.2 It remains to be seen whether U.S. Customs and Border Protection (“CBP”) will modify its current enforcement strategy and begin targeting individuals in connection with their companies’ customs violations. The following provides a detailed analysis of U.S. v. Trek Leather, as well as key lessons that can be drawn from the case.
It all began in 2004, when Trek Leather, Inc. began importing men’s suits into the United States. Harish Shadadpuri was the President and sole shareholder of the company. Through Trek Leather and other companies that he owned, Mr. Shadadpuri supplied fabrics free of charge to foreign manufacturers which were used in the production of the suits. However, the cost of the fabrics and their associated transportation costs were not included in the dutiable value of the suits when they arrived in the United States. As knowledgeable customs valuation enthusiasts are aware, the provision of items to foreign manufacturers free of charge or at a reduced cost is an assist. Thus, Trek Leather undervalued the imported suits and failed to pay the total amount of duties that were due and owing to CBP. There were a total of seventy-two shipments that were undervalued in this manner.
The shipments were originally invoiced to a company called Mercantile Electronics. Mr. Shadadpuri was part-owner of the company, and served as its President. While the shipments were on the water, Mr. Shadadpuri issued instructions to transfer title to Trek Leather, which stepped into the role of importer of record. The entry summaries for the shipments were prepared by Trek Leather’s customs broker based on information shown on the invoices and other information provided by Mr. Shadadpuri or his employees. However, the invoice values did not include the assist costs, and Trek Leather underpaid the duties by more than $133,000. Mr. Shadadpuri knew that assists were dutiable as he had been informed of this fact by CBP officials two years earlier in an investigation of another company that he owned - in fact, that company tendered more than $46,000 in duties to CBP for failure to declare assists.
CBP issued a penalty notice to Trek Leather. Liability for customs violations is based on the degree of the importer’s culpability: negligence; gross negligence; or, fraud. Civil penalties range from 2 to 4 times the loss of revenue to CBP in negligence or gross negligence cases, and up to the domestic value of the goods in fraud cases. Where the goods are duty-free, civil penalties can range from 20% to 40% of the value of the merchandise in ordinary or gross negligence cases, and up to the domestic value of the goods in fraud cases. Trek Leather did not respond to CBP’s penalty notice.
CBP then filed a complaint in the U.S. Court of International Trade (“CIT”), alleging that both Trek Leather and Mr. Shadadpuri violated Section 1592(a) of the Customs Regulations.3 The CIT concluded that both Trek Leather and Mr. Shadadpuri were liable for gross negligence and were jointly and severally liable for the civil penalty totaling more than $534,000. Mr. Shadadpuri appealed the case.
A Federal Circuit panel heard the appeal and reversed the CIT’s decision, concluding that Mr. Shadadpuri was not liable for ordinary or gross negligence because he was not the importer or an agent authorized to make entry.4 The court focused on the fact that the duty to exercise reasonable care falls on the importer, which was Trek Leather. As Mr. Shadadpuri was not the importer, he could not have breached the duty of reasonable care. The Federal Circuit stated that Mr. Shadadpuri could only be liable if CBP had pierced the corporate veil, showed that he had committed fraud, or showed that he had aided or abetted Trek Leather’s fraudulent activities.
CBP requested a rehearing of the panel’s decision. An en banc rehearing by the Federal Circuit was granted, and on September 14, 2014, the Federal Circuit reversed its prior decision finding that Mr. Shadadpuri could indeed be held liable for the customs violations. Because the statutory language covers owners, importers, consignees, agents and other persons, the court found that there was no basis for narrowing the term “persons” to exclude Mr. Shadadpuri, and the legislative history also showed no Congressional intent to narrow the meaning of that term.
The court then found that the term “introduce” captured acts that bring goods to the point of entry. The court stated that -
What Mr. Shadadpuri did comes within the commonsense, flexible understanding of the ‘‘introduce’’ language of section 1592(a)(1)(A). He ‘‘imported men’s suits through one or more of his companies.’’... While suits invoiced to one company were in transit, he ‘‘caused the shipments of the imported merchandise to be transferred’’ to Trek by ‘‘direct[ing]’’ the customs broker to make the transfer... Himself and through his aides, he sent manufacturers’ invoices to the customs broker for the broker’s use in completing the entry filings to secure release of the merchandise from CBP custody into United States commerce... By this activity, he did everything short of the final step of preparing the CBP Form 7501s and submitting them and other required papers to make formal entry.
While only importers or their agents may be held liable for entry violations, the court found that the term “introduce” covers negligent or grossly negligent acts by other persons, such as Mr. Shadadpuri.
In February 2014, Mr. Shadadpuri filed a writ of certiorari with the U.S. Supreme Court; however, cert was denied. Thus, the Federal Circuit’s decision currently stands. Individuals found to be involved in activities that constitute “introducing” goods into the commerce of the U.S. may be liable for their companies’ import violations. However, Mr. Shadadpuri played an active role in sourcing, manufacturing operations, transportation and provision of documents for import - all of which the court found to fall within the scope of Section 1592(a). He was not targeted merely because he was the company’s president and sole shareholder.
There are key lessons that can be drawn from this case that should alleviate any cause for alarm and the resulting heartburn, headaches and lack of sleep. For example -
- An formal compliance program overseen by knowledgeable personnel, documented policies and procedures, recurrent training for personnel, and routine internal audits are all critical for reducing the occurrence of import errors. Importers are already expected to implement such controls and processes, as mandated by the Customs Modernization Act.5 Thus, the rollout of a robust compliance program will also protect individuals within the organization.
- Employees should have a firm grasp on both the customs valuation rules and the potential consequences for customs non-compliance.
- Trek Leather should have responded to the original penalty notice. Upon the receipt of a penalty notice, importers have sixty days to submit a petition responding to the allegations and presenting additional information to CBP. Often, these petitions result in CBP’s cancellation of the proposed penalty, or in its reduction. In most cases, CBP will grant extensions where extra time is needed to prepare the petitions. Importers should establish formal processes for: (1) routing penalty notices and other CBP communications to the appropriate compliance personnel for handling; (2) investigating the allegations for purposes of responding to the penalty and assessing the violation’s impact on other shipments; (3) engaging outside customs counsel when warranted; (4) requesting extensions if necessary; and, (5) ensuring timely responses to CBP.
It remains to be seen how and whether CBP may react to this case, and what future court decisions may hold. Nonetheless, there are steps that importers should take now to shore up compliance gaps, significantly reduce the occurrence of customs violations, and limit potential exposure.
- United States v. Trek Leather, Inc., No. 2011-1527 (Fed. Cir. 2014).
- Per Section 1592(a), no person, by fraud, gross negligence or negligence may (a) enter or introduce any merchandise into the U.S. by means of any document, information, act or omission that is material and false, or (b) aid or abet any other person to violate (a).
- United States v. Trek Leather, Inc., Slip Op. 11-68, 781 F. Supp.2d 1306 (Ct. Int’l Trade 2011).
- United States v. Trek Leather, Inc., 724 F.3d 1330 (Fed. Cir. 2013).
- See Pub. L., 103-182, 107 Stat. 2057.
Melissa Proctor, a Shareholder with Polsinelli, P.C., has been advising clients for nearly 20 years on the full range of issues involving international trade, customs laws and regulations, export controls, and embargoes and economic sanctions. She may be reached at (602) 650-2002 or via e-mail at email@example.com.
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