Lexis Practice Advisor Journal Fall 2018 Prospecting

The LEXIS
PRACTICE ADVISOR Journal

TM
BROADER
IMPLICATIONS OF
BROADER
CALIFORNIA'S
IMPLICATIONS
SWEEPING OF
ONLINE
AD PLACEHOLDER CALIFORNIA'S
DATA PRIVACY STATUTE
SWEEPING ONLINE
FALL 2018
DATA
Pros andPRIVACY
Cons of STATUTE
Shared Space Agreements
Pros and Cons of
Taxing
Shared Online Sales:
Space Agreements
What if your legal research takes Impact of the South Dakota
v. Wayfair Decision
you places it never could before? Taxing Online Sales:
Impact of the South Dakota
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v. Wayfair Decision
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Contents FALL 2018
Practice News Practice Notes
4 CURRENT UPDATES AND LEGAL 48 PROS AND CONS OF SHARED SPACE

DEVELOPMENTS AGREEMENTS
Data Privacy & Security, Labor & Employment, Immigration, Real Estate
Finance
52 STRATEGIC USE OF PATENT EXAMINER
7
SPECIAL COVERAGE: BROADER INTERVIEWS
IMPLICATIONS OF CALIFORNIA'S Intellectual Property & Technology
SWEEPING ONLINE DATA PRIVACY
STATUTE 58 UNWINDING THE DEPARTMENT OF
LABOR'S FIDUCIARY RULE
Practice Tips Employee Benefits & Executive Compensation
11 ENFORCING SETTLEMENTS AND

GC Advisory
CONSENT DECREES
Civil Litigation 67 KEY CONSIDERATIONS FOR DRAFTING
COMPLIANT ENGLISH-ONLY POLICIES
17 HIDING CONTRACTUAL PROVISIONS IN Labor & Employment
DOCUMENTS THAT DON'T LOOK, FEEL,
OR SMELL LIKE CONTRACTS Market Trends
Commercial Transactions
75 STRUCTURED FINANCE, SECURITIZATION
22 TOP 10 PRACTICE TIPS: RISK FACTOR AND DERIVATIVES
Capital Markets & Corporate Governance
DISCLOSURES
Capital Markets & Corporate Governance
Practice Trends
26 TAXING ONLINE SALES: IMPACT OF THE

26 48
SOUTH DAKOTA v. WAYFAIR DECISION
Tax
35 RANSOMWARE PLANNING AND RESPONSE

BEST PRACTICES
Data Security and Privacy
43 TELEMEDECINE AND DIGITAL HEALTH:

STRATEGIC OPPORTUNITIES AND LEGAL
CONSIDERATIONS FOR PRIVATE EQUITY
INVESTMENT
Corporate and M&A
7
EDITORIAL ADVISORY BOARD Letter From The Editor
Distinguished Editorial Advisory Board Members for The Lexis
Practice Advisor Journal are seasoned practitioners with extensive
FALL 2018 (Volume 3, Issue 4) background in the legal practice areas included in Lexis Practice
Advisor®. Many are attorney authors who regularly provide their we offer a look at the consumer protections for companies and employers considering
expertise to Lexis Practice Advisor online and have agreed to offer that will be required under the new law and implementing legally-compliant English-only
EDITOR-IN-CHIEF
insight and guidance for The Lexis Practice Advisor Journal. Their provide initial guidance on how to prepare for policies in the workplace, as well as a look
Eric Bourget
collective knowledge comes together to keep you informed of its implementation. Developments, new laws at both the benefits and inherent risks of
VP, LEXIS PRACTICE ADVISOR Rachel Travers current legal developments and ahead of the game when facing and regulations will only continue to expand in such policies.
AND ANALYTICAL emerging issues impacting your practice. the data protection and cybersecurity space.
Recognizing the need for greater focus in this Also in this edition, litigation authority
VP, ANALYTICAL LAW Aileen Stirling
Andrew Bettwy, Partner Joseph M. Marger, Partner area, Lexis Practice Advisor recently launched Jim Wagstaffe discusses how to enforce
& LEGAL NEWS Proskauer Rose LLP Reed Smith LLP
a new Data Privacy and Security practice area settlements and consent decrees in federal
MANAGING EDITOR Lori Sieron Finance, Corporate Real Estate
to bring you the tools and guidance you need court, along with guidance on the court’s
Jennifer Shadbolt
DESIGNER Julie M. Capell, Partner Alexandra Margolis, Partner
to stay up to date on developments in this jurisdiction over enforcement, court-ordered
Davis Wright Tremaine LLP Nixon Peabody LLP
Kelsey Cable
MARKETING very active area. remedies, and related motion practice.
Labor & Employment Banking & Finance
Darcy Tyrell
Online sales and use tax is another area Finally, we provide guidance around navigating
Karen Victoriano Candice Choh, Partner Matthew Merkle, Partner
Gibson Dunn & Crutcher LLP Kirkland & Ellis International LLP that is rapidly evolving. The Supreme Court shared office space agreements as co-working
CONTRIBUTING EDITORS Corporate Transactions, Capital Markets issued a landmark decision in South Dakota spaces become a more popular option for
Mergers & Acquisitions
Timothy Murray, Partner vs. Wayfair that will significantly impact online many businesses.
Antitrust Jessica Kerner
S. H. Spencer Compton, VP, Murray, Hogue & Lannis sales and use tax collection by e-retailers
Banking Law Matthew Burke Laws continue to evolve as new practice
Special Counsel Business Transactions and companies doing business online.
Capital Markets Burcin Eren First American Title Insurance Co. areas like data privacy emerge and others
Michael R. Overly, Partner Lexis Practice Advisor also recently expanded
Commercial Transactions Anna Haliotis Real Estate such as tax develop rapidly to keep pace with
Foley & Lardner Eric Bourget, Editor-in-Chief to include a Tax practice area that provides
Corporate Counsel Carrie Wright Linda L. Curtis, Partner Intellectual Property, Technology today’s globally-driven online economies.
insights related to the Wayfair decision as well
Gibson, Dunn & Crutcher LLP We will continue to provide you with the latest
Data Privacy & Security Chad Perlov Global Finance Leah S. Robinson, Partner as general practical guidance for state and
Mayer Brown LLP
2018 IS PROVING TO BE AN IMPORTANT insights, practice tips, and guidance in these
Employee Benefits Bradley Benedict federal tax practitioners. We provide you with
Tyler B. Dempsey, Partner State and Local Tax year for changes to laws regulating personal rapidly evolving practice areas so that you may
& Executive Compensation a comprehensive look at the implications of
Troutman Sanders LLP data protection. In May, the European get up to speed quickly, enabling you to work
Finance, Financial Robyn Schneider Mergers & Acquisitions, Scott L. Semer, Partner the Wayfair decision in this edition.
Restructuring & Bankruptcy Union enacted the General Data Protection
Joint Ventures Torys LLP more efficiently and better serve your clients
Tax, Mergers and Acquisitions Regulation imposing strong data protection The telemedicine and digital health industries
Intellectual Property & Technology Jessica McKinney or company.
James G. Gatto, Partner mechanisms and personal data safeguards on have been growing rapidly in recent years
Labor & Employment Elias Kahn Sheppard, Mullin, Richter & Claudia K. Simon
companies that do business in Europe or with as consumers and medical practitioners
Mergers & Acquisitions Sharon Tishco Hampton LLP Corporate, Mergers & Acquisitions
European citizens. One short month later, begin to embrace the concept of virtual care.
Intellectual Property, Technology
Oil & Gas, Jurisdictional Cameron Kinvig Lawrence Weinstein, This exponential growth brings about merger
California passed the California Consumer
Real Estate Lesley Vars Ira Herman, Partner Corporate Counsel and private equity investment interest. This
Blank Rome LLP The Children’s Place Inc. Protection Act (CCPA), a law with even
ASSOCIATE EDITORS Maureen McGuire greater protections and opt-out procedures issue provides a discussion on strategic
Insolvency and Commercial Litigation
Mia Smith Kristin C. Wigness, First V.P. opportunities and legal considerations for
for consumers. The CCPA will go into effect
Ethan Horwitz, Partner & Associate General Counsel investment in this developing market.
Shannon Weiner January 1, 2020 and is expected to impact
Carlton Fields Jorden Burt Israel Discount Bank of New York
Ted Zwayer Intellectual Property Lending, Debt Restructuring, companies across the United States and Our drafting guidance in this issue discusses
Insolvency potentially worldwide as it could affect the perils associated with burying contractual
PRINTED BY Cenveo Publisher Services Glen Lim, Partner
3575 Hempland Road Katten Muchin Rosenman LLP Patrick J. Yingling, Partner businesses that gather and use personal provisions in receipts, websites, online order
Lancaster, PA 17601 Commercial Finance King & Spalding information about California residents. In this pages, and other non-contractual documents.
Global Finance edition of the Lexis Practice Advisor Journal, Additionally, this edition provides guidance
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Practice News
PUBLIC SECTOR UNIONS CANNOT IMPOSE FEES

ON NON-MEMBERS, SUPREME COURT RULES
PUBLIC SECTOR UNIONS CANNOT REQUIRE NON-MEMBERS affirmed. Janus v. AFSCME, Council 31, 851 F.3d 746 (7th Cir. 2017).
to contribute to expenses related to union business, the U.S. The Supreme Court subsequently granted Janus’ petition for review.
Supreme Court ruled, overturning a 41-year-old decision. Janus v.
Reversing, the court overruled the holding in Abood, saying,
AFSCME, Council 31, 2018 U.S. LEXIS 4028 (June 2018).
“The state’s extraction of agency fees from nonconsenting public-
In a 5-4 ruling, the high court held that the imposition of so- sector employees violates the First Amendment. Abood erred in
called agency fees on public sector employees violates the First concluding otherwise and stare decisis cannot support it. Abood is
Amendment of the U.S. Constitution. The fees, usually based on a therefore overruled.”
percentage of the dues paid by union members, are meant to cover The court acknowledged the financial impact of its ruling on unions,
costs incurred in the collective bargaining process. but said that factor must be weighed against “the considerable
The ruling came in a suit brought by Mark Janus, an employee of the windfall that unions have received under Abood for the past 41 SUPREME COURT RULES IN FAVOR OF CLASS
WAIVERS IN EMPLOYMENT CONTEXT
Illinois Department of Healthcare and Family Services, against the years.” Although the ruling applies only to public sector unions,
American Federation of State, County and Municipal Employees, related concerns about imposition of fair share fees in the private
which represents public employees in Illinois. Janus, who was not sector will likely come to the forefront.
a member of the union and therefore did not pay union dues, was Justice Samuel A. Alito Jr. wrote the majority opinion, in which THE U.S. SUPREME COURT HAS HELD IN EPIC SYS. CORP. v. U.S. Court of Appeals for the Fifth Circuit in Murphy Oil USA, Inc. v.
assessed an agency fee of approximately $535 per year. Chief Justice John G. Roberts Jr. and Justices Anthony M. Kennedy, Lewis, 138 S. Ct. 1612 (2018), that agreements requiring employees NLRB, 808 F.3d 1013 (5th Cir. 2015), rejected the NLRB’s position.
The U.S. District Court for the Northern District of Illinois dismissed Clarence Thomas, and Neil Gorsuch joined. Justice Sonia Sotomayor to arbitrate claims against employers on an individual, rather than Writing for the majority, Justice Neil M. Gorsuch said, “The NLRA
the suit in Rauner v. AFSCME, 2015 U.S. Dist. LEXIS 65085 (N.D. filed a dissenting opinion. Justice Elena Kagan also filed a dissent, collective or class action, basis do not violate the National Labor secures to employees rights to organize unions and bargain
Ill. May 19, 2015), citing the U.S. Supreme Court’s ruling in Abood in which Justices Sotomayor, Stephen G. Breyer Jr., and Ruth Bader Relations Act (NLRA). collectively, but it says nothing about how judges and arbitrators
v. Detroit Bd. of Educ. (431 U.S. 209 (1977), which upheld the Ginsburg joined. must try legal disputes that leave the workplace and enter the
The 5-4 ruling came in three cases consolidated for argument before
right of unions to require non-members to contribute toward courtroom or arbitral forum. This Court has never read a right to
the high court to resolve a conflict among federal circuit courts on
activities related to the unions’ “duties as collective-bargaining RESEARCH PATH: Corporate Counsel > Labor & class actions into the NLRA—and for three quarters of a century
the question. At issue was the National Labor Relations Board’s
representative.” The U.S Court of Appeals for the Seventh Circuit Employment Law > Articles neither did the National Labor Relations Board. Far from conflicting,
(NLRB) position, set forth in In re Horton, 357 NLRB No. 184
the Arbitration Act and the NLRA have long enjoyed separate
(January 2012), that the NLRA guarantees the right of employees
spheres of influence and neither permits this Court to declare the
to act collectively to address employment claims and that requiring
parties’ agreements unlawful.”
employees to waive that right is a violation of the statute.
Chief Justice John G. Roberts and Justices Samuel A. Alito, Anthony
The U.S. Court of Appeals for the Seventh Circuit in Lewis v. Epic M. Kennedy, and Clarence Thomas joined in the majority opinion,
Sys. Corp., 823 F.3d 1147 (7th Cir. 2016), and the U.S. Court of with Justice Thomas writing a separate concurrence.
Appeals for the Ninth Circuit in Morris v. Ernst & Young, LLP, 834
In a dissent, Justice Ruth Bader Ginsburg cited the history of the
F.3d 975 (9th Cir. 2016), agreed with the NLRB’s stance, while the
NLRA. In enacting the statute, she said, “Congress acted on an acute
awareness: For workers striving to gain from their employers decent
terms and conditions of employment, there is strength in numbers.
Related Content A single employee, Congress understood, is disarmed in dealing with
an employer. The Court today subordinates employee-protection
For related Labor & Employment content, see labor legislation to the Arbitration Act.”
> THE EMPLOYMENT LITIGATION ARBITRATION
Justices Stephen G. Breyer, Sonia Sotomayor and Elena Kagan joined
PRACTICE NOTES PAGE
in the dissent.
RESEARCH PATH: Labor & Employment >
Employment Litigation > Arbitration > Practice Notes
RESEARCH PATH: Labor & Employment > Employment
Contracts > Waivers and Releases > Articles
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Practice News Current Awareness
SUPREME COURT UPHOLDS TRUMP Broader Implications of

ADMINISTRATION’S TRAVEL RESTRICTIONS CALIFORNIA’S SWEEPING
PRESIDENT DONALD J. TRUMP ACTED WITHIN THE AUTHORITY In an opinion written by Chief Justice John G. Roberts Jr., the high ONLINE DATA PRIVACY
STATUTE
granted to him by the Immigration and Nationality Act (INA), court held that issuance of the Proclamation was a valid exercise of
8 U.S.C.S. §1101, et seq., in issuing an executive order restricting the president’s authority under §1182(f) of the INA.
the entry of certain foreign nationals into the United States, the “By its plain language, §1182(f) grants the President broad discretion
Supreme Court ruled. Trump v. State of Hawaii, 2018 U.S. LEXIS to suspend the entry of aliens into the United States,” the majority
4026 (2018). said. “The President lawfully exercised that discretion based on his
In a 5-4 ruling, the high court vacated an injunction prohibiting

findings—following a worldwide, multi-agency review—that entry Includes Analysis by Mark W. Brennan HOGAN LOVELLS US LLP
of the covered aliens would be detrimental to the national interest.
enforcement of Proclamation 9645 (The Proclamation), entitled and Elizabeth A. Rogers MICHAEL BEST & FRIEDRICH LLP
And plaintiffs’ attempts to identify a conflict with other provisions
“Enhancing Vetting Capabilities and Processes for Detecting in the INA, and their appeal to the statute’s purposes and legislative
Attempted Entry Into the United States by Terrorists or Other history, failed to overcome the clear statutory language.”
Public Safety Threats”. 82 Fed. Reg. 45,161 (Sept. 17, 2017).
The majority rejected the plaintiffs’ argument that the Proclamation
The Proclamation, signed by President Trump on Sept. 24, 2017, is aimed at banning the entry of Muslims into the country in
sought to restrict citizens of Chad, Iran, Libya, North Korea, Syria, violation of the Establishment Clause of the First Amendment of the
Venezuela, Yemen, and Somalia from entering the United States U.S. Constitution, citing prior statements made by President Trump
both before and after his election.
because of deficiencies in the countries’ “identity-management and
information-sharing capabilities, protocols, and practices.” Chad was “The Proclamation is expressly premised on legitimate purposes:
later removed from the Proclamation in recognition of its updated preventing entry of nationals who cannot be adequately vetted and
identity-management procedures. inducing other nations to improve their practices,” the Court said.
“The text says nothing about religion.”
The State of Hawaii filed suit on Oct. 17 in the U.S. District Court THE SIGNING OF A WIDE-RANGING DATA PRIVACY LAW “In March 2018, it came to light that tens of millions of people had
Justices Anthony M. Kennedy, Clarence Thomas, Samuel A. Alito
for the District of Hawaii, seeking an injunction against enforcement in California should serve as a signal to all businesses that collect their personal data misused by a data mining firm called Cambridge
Jr., and Neil Gorsuch joined in the majority opinion, with Justices
of the order. The court granted the injunction in Hawaii v. Trump, personal information about state residents to review and update
Kennedy and Thomas filing concurring opinions. Justice Stephen G. Analytica,” the preamble states. “A series of congressional hearings
265 F. Supp. 3d 1140 (D. Haw. 2017). The government appealed; their data collection, storage, and disclosure practices.
Breyer filed a dissenting opinion in which Justice Elena Kagan joined. highlighted that our personal information may be vulnerable to
the Ninth Circuit affirmed in part, Hawaii v. Trump, 878 F.3d 662 Justice Sonia Sotomayor filed a dissenting opinion in which Justice The California Consumer Privacy Act of 2018 (CCPA), signed into
misuse when shared on the Internet. As a result, our desire for
(9th Cir. 2017), limiting the injunction to “persons who have a Ruth Bader Ginsberg joined. law by Governor Edmund G. Brown on June 28, gives consumers
privacy controls and transparency in data practices is heightened.”
credible bona fide relationship with a person or entity in the United greater control over how businesses can use their personal
information. The preamble goes on to say, “Therefore, it is the intent of the
States.” The government successfully petitioned for review by the RESEARCH PATH: Labor & Employment > Business
Legislature to further Californians’ right to privacy by giving
Supreme Court. Immigration > Employment Eligibility Verification > Articles Governor Brown signed the bill a week after its introduction and
just hours after its unanimous approval by the State Assembly and consumers an effective way to control their personal information, by
Senate. The new law was fast-tracked by the legislature in return for ensuring the following rights:"
a pledge by consumer advocates to abandon their campaign to place
(1) The right to know what personal information is being collected
an initiative bearing the same name on the November 2018 ballot.
about individuals
Under the new law, which takes effect on January 1, 2020,
consumers will have the right to request that businesses disclose (2) The right to know whether their personal information is sold or
how their personal information is used and to ask that personal disclosed and to whom
information be deleted under some circumstances.
(3) The right to say no to the sale of personal information
Legislative Intent
(4) The right to access their personal information
In its preamble, the CCPA cites the recent Cambridge Analytica
incident—in which the personal data of millions of Facebook users (5) The right to equal service and price, even if they exercise their
was compromised—as an impetus for the legislation. privacy rights
Requirements for Businesses Collecting Data
Among the specific requirements imposed by the statute are Related Content
the following:
For an overview of the major privacy and data security laws in
■■ Businesses must make available two methods for consumers to California, see
submit requests, including a toll-free number and, if the business > PRIVACY AND DATA SECURITY FUNDAMENTALS
has a website, a website address. Requests for information (CA)
must be fulfilled at no cost to the consumer within 45 days in RESEARCH PATH: Data Security & Privacy > State
most cases. Law Surveys and Guidance > Practice Notes
■■ Businesses that have an online privacy policy or website are

charged with including a number of items, including a description For a discussion on the General Data Protection Regulation in
Europe, see
of consumers’ rights under the statute and a list of categories
of personal information it has collected, sold, or disclosed in the > GENERAL DATA PROTECTION REGULATION
preceding 12 months. The information must be updated every RESEARCH PATH: Data Security & Privacy >
12 months. International Compliance > Practice Notes
■■ Businesses that operate websites must include a clear and

For additional information on data privacy policies, see
conspicuous link titled “Do Not Sell My Personal Information”
that takes consumers to a web page where they can opt out of > PRIVACY POLICIES: DRAFTING A POLICY
the sale of personal information. RESEARCH PATH: Data Security & Privacy > Privacy
Policies > Practice Notes
■■ Businesses must ensure that all individuals charged with handling
consumer inquiries are informed of the statute’s requirements > PRIVACY POLICY CHECKLIST
and know how to direct consumers to exercise their rights RESEARCH PATH: Data Security & Privacy > Privacy
under the statute. Policies > Checklists
Consumer Protections and Basic Requirements for ■■ Has annual gross revenues in excess of $25 million
Enforcement and Damages
Businesses ■■ Annually buys, receives, sells, or shares personal information of
Enforcement of the statute lies largely with the Attorney General,
Specifically, the CCPA requires businesses that collect personal 50,000 or more consumers, households, or devices but provides for a private cause of action in cases of unauthorized
information to:
■■ Derives 50% or more of its annual revenue from selling access, theft, or disclosure of a consumer’s nonencrypted or
■■ Inform consumers as to the categories of personal information to nonredacted personal information. Consumers must first notify the Brennan also noted the timing of the statute’s enactment, just
consumers’ personal information
be collected and the purposes for which it is used business of the alleged violation in writing and give the business an weeks after the effective date of the European Union’s General Data
■■ Delete a consumer’s personal information upon request Personal Information Protected Under the CCPA opportunity to correct it. In addition, a consumer seeking damages Protection Regulation (GDPR) (EU) 2016/679, which strengthened
must notify the Attorney General before filing suit. and extended the reach of EU Data Protection Directive 95/46/EC.
■■ Disclose to a consumer specific information about the personal The statute broadly defines personal information to include
information it has collected “information that identifies, relates to, describes, is capable of being Statutory damages available in a consumer’s civil suit are limited to Differences Between the CCPA and GDPR
the greater of between $100 and $750 per consumer per incident
■■ Disclose to a consumer whether personal information is sold or associated with, or could reasonably be linked, directly or indirectly, Although both regulations are designed to protect consumers
and actual damages.
otherwise shared and to whom with a particular consumer or household.” by granting greater control over personal data, Brennan has the
For violations other than those subject to a private cause of action,
■■ Comply with a consumer’s request that personal information not Specifically included in the definition are such identifiers as name, following advice for companies: “The new portability, access, and
the Attorney General may seek $2,500 per violation for negligent
be sold to third parties deletion rights, among others, are different enough from the GDPR
alias, address, unique personal identifier, IP address, email address, violations and $7,500 for intentional violations.
■■ Obtain affirmative authorization before selling the personal that companies will need to take a fresh look at their operational
account name, Social Security number, driver’s license number, Analysis
information of a consumer under the age of 16 compliance processes. Many companies are under the wrong
and passport number, among others. A catch-all provision includes
Reacting to the speed with which the statute was enacted, Mark assumption that GDPR compliance is sufficient, and unfortunately a
■■ Refrain from discriminating against consumers who exercise their
inferences drawn from the enumerated identifiers “to create a W. Brennan, a partner at Hogan Lovells US, said, “It seems like the
rights under the statute number of systems that were launched by May 25 will no longer be
profile about a consumer reflecting the consumer’s preferences, rushed CCPA was handled a bit like building a plane while trying sufficient,” Brennan said.
Businesses Required to Comply with the CCPA characteristics, psychological trends, preferences, predispositions, to fly it. There will need to be some technical amendments to
Further, Brennan noted, “The applicability of the CCPA to non-U.S.
The statute defines business as “a sole proprietorship, partnership, behavior, attitudes, intelligence, abilities, and aptitudes.” address mislabeled sections and to clarify the intent of the drafters,
limited liability company, corporation, association, or other legal including on the data disclosures and the enforcement provisions," companies is a bit uncertain, and even more unclear is the extent to
Excluded from the definition is information that is publicly available, which the California Attorney General or private litigants will really
entity” that collects personal information, determines how to use he added. "It would be prudent to wait for the dust to settle a bit
the information, does business in California, and satisfies at least defined as “information that is lawfully made available from federal, on the CCPA before considering whether any other legislation be able to enforce the CCPA abroad. Such limits underscore how the
one of three thresholds: state, or local government records.” is necessary.” CCPA could put U.S. companies at a competitive disadvantage.”
Practice Tips | Lexis Practice Advisor® Civil Litigation
Broader Impact Throughout the United States ■■ Establishing exceptions necessary to comply with state and
federal law
Now that California has passed the strictest online privacy law in
the United States, questions arise as to whether other states will ■■ Establishing rules and procedures related to consumer opt-out
feel pressure to follow suit and implement greater protections for procedures
consumer data. Elizabeth A. Rogers, partner with Michael Best & ■■ Adjusting monetary thresholds to reflect changes in the
Friedrich predicts, “I think that it will depend more on the political
Consumer Price Index
and economic climate of a particular state’s lawmakers (whether Jim Wagstaffe AND THE WAGSTAFFE GROUP
that is right or wrong) than whether a consumer’s data in California ■■ Ensuring that notices and information required to be provided by
businesses are easily understood by consumers
Enforcing Settlements
should receive universal treatment across the states." Rogers
explained, “States that are interested in maintaining or recruiting a Interim Steps for Businesses Preparing for
large population of businesses are not likely to be issuing regulations Implementation of the CCPA
and Consent Decrees

that create more exposure to litigation or that make it difficult to
Businesses affected by the statute should examine their data
compete with other states.”
privacy procedures and policies over the 18 months leading up to
Texas, for example, has focused more on cybersecurity than privacy,
the statute’s effective date. Companies impacted by the statute
according to Rogers. “The Texas legislative session of 2017 resulted
must consider compliance obligations and evaluate arrangements
in passage of the most cybersecurity laws than any other state.
So far, they govern only state agencies and institutions of higher
with partners, customers, and suppliers related to consumer data This article discusses how to enforce settlements and consent decrees in federal court and
collection practices.
education. It may be a while before there are any privacy measures covers topics such as the requirements to enter into a settlement or consent decree, the court’s
specific to the private sector because our (Texas) economy thrives, While preparing to meet the compliance responsibilities related
to the CCPA, businesses should consider the possibility that other
jurisdiction over enforcement, court-ordered remedies, and related motion practice.
and relocations of corporate headquarters have occurred, in part
because of the business-friendly climate of our (Texas) laws.” states may adopt similar data protection regulations, which could
expand protections to additional jurisdictions. COURTS HAVE INHERENT POWER TO ENFORCE SETTLEMENTS
What to Expect Going Forward
Businesses required to comply with the CCPA should monitor, or between the parties in cases pending before them.1 However,
Rogers notes that data security and privacy laws will continue
potentially participate in, the Attorney General’s regulation adoption courts have no inherent power to enforce settlement
to adapt to the technology. “As with any revolution, there are a
process to ensure compliance with the statute’s requirements. A agreements after a case has been dismissed: “Enforcement of
series of evolutions that follow. The same is true in the context of
jurisprudential revolutions. In the years since Y2K, the information the settlement agreement . . . is more than just a continuation
This article was written by the Lexis Practice Advisor Attorney Team
age has ushered in technology innovations that have unintended or renewal of the dismissed suit, and hence requires its own
with analysis included by Mark W. Brennan, Hogan Lovells US LLP
and intended consequences. Federal and state laws and regulations basis for jurisdiction.”2
are just now beginning to catch up to define boundaries between
and Elizabeth A. Rogers, Michael Best & Friedrich LLP. A partner
the information that can be processed in smart technology, the in Hogan Lovells’ Washington, D.C. office, Mark Brennan leads an Finalizing Settlement Through Consent Decree
internet of things, and data analytics and what information should integrated technology practice that spans privacy, communications, Court Approval Required
The parties’ settlement may be embodied in an injunction
remain private and in control of the consumer.” and consumer protection issues. He advises on connected devices,
requiring continuing compliance by the parties. This is known Most courts will not blindly lend their imprimatur to stipulated
artificial intelligence, cloud offerings, tech policy, and other
Rogers went on to explain, “While not all states are home to giant as a consent decree. “A consent decree is no more than a consent decrees (for example, imposing future non-monetary
cutting-edge challenges and is also well-known for his victories on
technology companies like California, most state lawmakers across obligations) because enforcement may affect the rights of third
Telephone Consumer Protection Act issues. Mark also leads Hogan settlement that contains an injunction.” 3
the nation are becoming increasingly informed about the fiduciary parties or otherwise be unjust. The court will want to know
Lovells’ U.S. LGBT+ affinity group and is a chair of the firm’s Pride+ A consent decree can provide greater relief than originally
responsibilities associated with processing large amounts of non-
global ally network. Elizabeth A. Rogers is a partner with Michael the background of any consent decree and insist on deciding
public information about their residents. As history demonstrates, requested, as a judgment entered pursuant to a settlement
Best & Friedrich LLP. She focuses her practice on issues including whether the order is one that the court would approve.5 The
California has become a legislative trendsetter in this information agreement need not be limited to relief the court could grant on
breach responses, privacy risk assessments, and enterprise-wide criteria applied in deciding whether to approve and enter a
age, so we can reasonably expect other liberal states to follow suit.” the merits. So long as the pleadings state a claim within federal
cybersecurity compliance frameworks across industries such as retail, proposed consent decree are whether it is “fair, adequate, and
Future Regulatory Action health care, financial services, energy and retail electric providers, subject matter jurisdiction and the settlement is “within the reasonable, as well as consistent with the public interest.”6
The CCPA calls for the California Attorney General to “solicit broad education, and state and local governments. A former chief privacy general scope of the case made by the pleadings,” the judgment The court may not modify a consent decree sua sponte. It must
public participation” in fashioning regulations to effectuate the officer in Texas state government, she brings a unique and informed can grant whatever relief is agreed to by the parties. 4
approve or reject the decree as it is presented.7
statute before its effective date of January 1, 2020. Among the perspective to her practice.
areas suggested for consideration are:
1. Román-Oliveras v. Puerto Rico Elec. Power Auth. (PREPA), 797 F.3d 83, 86–87 (1st Cir. 2015) (power to enforce binding oral settlement before case dismissal); Hensley v. Alcon Labs., Inc., 277 F.3d 535,
■■ Updating the enumerated categories of personal information 540 (4th Cir. 2002); Dacanay v. Mendoza, 573 F.2d 1075, 1078 (9th Cir. 1978). 2. Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 378 (1994); Langley v. Jackson State Univ., 14 F.3d 1070,
1073 (5th Cir. 1994). 3. In re Masters Mates & Pilots Pension Plan, 957 F.2d 1020, 1025 (2d Cir. 1992); see Taylor v. United States, 181 F.3d 1017, 1032 n.10 (9th Cir. 1999); Hook v. State of Ariz., Dept. of
and definitions contained in the statute to reflect changes in RESEARCH PATH: Data Security & Privacy > Privacy Corr., 972 F.2d 1012, 1014 (9th Cir. 1992). 4. Sansom Comm. v. Lynn, 735 F.2d 1535, 1538 (3d Cir. 1984). 5. See United States v. Int’l Bhd. of Teamsters, 970 F.2d 1132, 1137 (2d Cir. 1992); In re Masters
Mates & Pilots Pension Plan, 957 F.2d at 1026. 6. United States v. Lexington-Fayette Urban County Gov’t, 591 F.3d 484, 489 (6th Cir. 2010). 7. Molski v. Gleich, 318 F.3d 937, 946 (9th Cir. 2003) (district
technology and data collection practices Policies > Articles court cannot unilaterally modify the provisions of a consent decree through its order approving the proposed decree).
Modifying a Consent Decree of finality to a negotiated bargain between private parties.
Thus, courts consider the circumstances leading to the decree,
Even if there has been a significant change of circumstances,
a party cannot disobey the decree. Rather, it must seek
the degree of hardship faced by the party seeking modification, When the district court has retained jurisdiction to enforce
and the opposing party’s need for continuation of the decree.18
modification from the court, which retains continuing a settlement agreement, federal jurisdiction exists over either a
jurisdiction to modify a consent decree. Situations in which Enforcing a Consent Decree
modification might be appropriate are: motion to enforce the settlement in the original action or a
A district court retains continuing jurisdiction to enforce its
■■ One or more of the obligations placed on the parties later judgments, including those obtained through consent decrees.19 new federal action alleging breach of the agreement.
becomes impermissible under federal law.
The parties to a consent decree, as well as its intended
■■ Statutory or decisional law has changed in such a way as to beneficiaries, have standing to seek enforcement of the
make legal what the decree was designed to prevent. resulting judgment: “When an order is made in favor of a
person who is not a party to the action, that person may the terms of the settlement agreement in the order of dismissal “pursuant to” that settlement agreement, sufficiently
■■ The parties entered into the decree under the mistaken
enforce obedience to the order by the same process as if also creates jurisdiction. In the latter event, breach of the manifests the court’s intent to retain jurisdiction.34
belief certain conduct was constitutionally mandated.8
a party.”20 However, incidental beneficiaries of a consent settlement agreement violates the court’s order, thereby Even if a permanent injunction is entered pursuant to
The proper procedure for modifying a consent decree is a decree (as opposed to its intended beneficiaries) lack standing creating ancillary jurisdiction to enforce the agreement.27 settlement, it does not confer on the court ancillary jurisdiction
motion for relief from the judgment under Rule 60(b).9 For to enforce it.21 When a consent decree requires continuing
Neither the parties’ nor the court’s agreement to retain to issue a permanent injunction enforcing any aspect of the
example, modification is often sought under Rule 60(b)(5) supervision, it may be refused enforcement if it does not serve
jurisdiction is sufficient absent language in the dismissal order settlement agreement the parties did not specify could be
when applying the consent decree “prospectively is no longer any federal interest.22 A party may move to vacate a consent
equitable.”10 It is also possible to seek modification through a expressly retaining such jurisdiction.28 enjoined. The agreement and the court order incorporating
decree when the judgment has been satisfied, released, or
motion to alter or amend the judgment under Rule 59(e). 11 it must meet the requirements of Rule 65(d)35 for injunctive
discharged through substantial compliance.23 A settlement agreement providing that, in event of breach, the
relief (describing in reasonable detail the specific conduct to
plaintiff could “reinstitute this action” does not preserve the
The party seeking modification bears the initial burden of
Enforcing a Settlement Agreement be enjoined and the reasons for issuance of an injunction).36
showing a significant change either in factual conditions or the court’s jurisdiction following dismissal.29
Courts have inherent power to enforce settlements between the When the settlement agreement has been incorporated into
law that makes compliance with the decree substantially more
parties in cases pending before them.24 An order for dismissal that merely states it is “based on” or a judgment and provides for liquidated damages in event
onerous.12 The fact it is no longer convenient for the parties to
“pursuant to” a settlement does not embody the agreement, of breach, the court may impose “sanctions in the form of
adhere to the terms of a consent decree is insufficient to justify However, courts have no inherent power to enforce settlement
and there is no ancillary jurisdiction to enforce the agreement.30 liquidated damages” for breach of the settlement agreement
modification. Significant changed circumstances must always agreements after a case has been dismissed: “Enforcement of
be shown.13 Minor changes to which a party should ordinarily the settlement agreement . . . is more than just a continuation The court’s “mere awareness and approval” of the settlement and judgment based thereon.37
consent (for example, paint color of building) may be made or renewal of the dismissed suit, and hence requires its own agreement “do not suffice” to make the terms part of the When the district court has retained jurisdiction to enforce a
even if one party refuses. In such circumstances, the moving basis for jurisdiction.”25 When the original action has been dismissal order for purposes of retaining jurisdiction.31 settlement agreement, federal jurisdiction exists over either a
party need only show a reasonable basis for the change.14 dismissed (without retention of jurisdiction to enforce the motion to enforce the settlement in the original action or a new
Although a dismissal order to which the settlement agreement
settlement agreement), a new action must be filed in a court
The moving party does not always need to show the changed is attached may indicate the judge’s awareness and approval federal action alleging breach of the agreement.38
having subject matter jurisdiction. This generally means
circumstances were unforeseen or unforeseeable. However, 15
diversity jurisdiction because enforcing a settlement does not

of the settlement, it does not “incorporate” the agreement Exclusivity of Retained Jurisdiction
if, when a party agreed to a consent decree, it anticipated
into the order as required by Kokkonen; that is, there is no
involve a federal question.26 Unless the order provides otherwise, a federal court’s retention
changing circumstances, that party would bear a heavy burden
incorporation by implication.32
to convince the court to modify the decree. 16
Court Does Not Retain Jurisdiction Absent Language in the of jurisdiction to enforce a judgment is deemed exclusive of
Order Jurisdiction is not reserved if the case is dismissed without state courts: “(I)t would make no sense for the district court to
Rufo’s flexible standard for modification has also been applied
prejudice to reinstatement if the settlement agreement “is retain jurisdiction to interpret and apply its own judgment . . .
to consent decrees other than those involving institutional Parties who wish to retain the court’s jurisdiction to enforce
not consummated.” Mere reference to the fact of settlement yet have a state court construing what the federal court meant
reform.17 When the consent decree is based on settlement of their settlement agreement may do so by having the court
does not incorporate the settlement agreement into the in the judgment.”39
private, commercial litigation, some courts insist the power to expressly retain jurisdiction in the order of dismissal. Although
modify must be sparingly exercised, reflecting the importance this is the better, more straightforward, course, incorporating dismissal order.33
The district court may enjoin litigation in state court that
A settlement agreement that authorizes the parties to seek would pose a significant risk of frustrating the district court’s
enforcement in the trial court, and a dismissal ordered exclusive jurisdiction over the judgment.40
8. Rufo v. Inmates of Suffolk County Jail, 502 U.S. 367, 388–390 (1992); see United States v. City of Chi., 978 F.2d 325, 333 (7th Cir. 1992). 9. See Hook, 972 F.2d at 1016. 10. Fed. R. Civ. P. 60(b)(5).
11. Fed. R. Civ. P. 59(e). 12. Rufo, 502 U.S. at 384 (modification under Rule 60(b)(5) of consent decree governing institutional reform of prison conditions). 13. Rufo, 502 U.S. at 383. 14. Rufo,502 U.S. at 383
n.7; United States v. Sec’y of Housing & Urban Develop., 239 F.3d 211, 217 (2d Cir. 2001). 15. Rufo, 502 U.S. at 385; see New York State Ass’n for Retarded Children, Inc. v. Carey, 706 F.2d 956, 969 (2d
Cir. 1983). 16. Rufo, 502 U.S at 385. 17. See United States v. Asarco Inc. 430 F.3d 972, 979–982 (9th Cir. 2005) (in case involving environmental clean-up consent decree, court held that Rufo applies “to
all petitions brought under Fed. R. Civ. P. 60(b)(5)” to modify consent decrees). 18. See Alexis Lichine & Cie. v. Sacha A. Lichine Estate Selections, Ltd., 45 F.3d 582, 586 (1st Cir. 1995). 19. Pigford v. Vilsack, 27. Kokkonen, 511 U.S. at 381 ; K.C. v. Torlakson, 762 F.3d 963, 967 (9th Cir. 2014); See Hill v. Baxter Healthcare Corp., 405 F.3d 572, 576–577 (7th Cir. 2005). 28. Arata v. Nu Skin Int’l, Inc., 96 F.3d 1265,
777 F.3d 509, 514 (D.C. Cir. 2015) (jurisdiction to enforce empowered court to correct facilitator’s error in transmitting claim to wrong resolution track—adjudication rather than arbitration); Florida Ass’n for 1269 (9th Cir. 1996) (court had discretion to terminate previously retained jurisdiction to enforce settlement agreement); see SmallBizPros, Inc. v. MacDonald, 618 F.3d 458, 463 (5th Cir. 2010) (court’s
Retarded Citizens, Inc. v. Bush, 246 F.3d 1296, 1298 (11th Cir. 2001) (court may assert jurisdiction to enforce terms of consent decree even after case is administratively closed); Hook, 972 F.2d at 1014. attempt to enforce settlement agreement after stipulated dismissal ineffective when dismissal stipulation failed to expressly provide for such jurisdiction and filing’s effectiveness not contingent on future
20. Hook, 972 F.2d at 1014 (internal quotes omitted) (new inmates had standing to enforce consent prison conditions); see Fed. R. Civ. P. 71. 21. See Hook, 972 F.2d at 1015. 22. Evans v. City of Chi., 10 action of court). 29. Ortolf v. Silver Bar Mines, Inc., 111 F.3d 85, 87 (9th Cir. 1997) (further holding that no new jurisdiction existed because amount in controversy was insufficient). 30. Hospitality House,
F.3d 474, 475 (7th Cir. 1993) (consent decree requiring city to pay tort judgments in order of their entry refused enforcement because it was not supported by any substantial federal due process or equal Inc. v. Gilbert, 298 F.3d 424, 433 (5th Cir. 2002); Caudill v. North Am. Media Corp., 200 F.3d 914, 916–917 (6th Cir. 2000); In re Phar-Mor, Inc. Secur. Litig., 172 F.3d 270, 274 (3d Cir. 1999); O’Connor v.
protection claim); see Labor/Community Strategy Ctr. v. L.A. County Metro. Transp. Auth., 263 F.3d 1041, 1050 (9th Cir. 2001) (federal court must not unduly insert itself into institution’s management). 23. Colvin, 70 F.3d 530, 532 (9th Cir. 1995). 31. Kokkonen, 511 U.S. at 381; see Hendrickson, 791 F.3d 354, 360 (court lacked jurisdiction when dismissal order mentioned that parties had reached settlement
Jeff D. v. Otter, 643 F.3d 278, 283–284 (9th Cir. 2011). 24. Román-Oliveras, 797 F.3d at 86 (power to enforce binding oral settlement before case dismissal); Hensley, 277 F.3d at 540; Dacanay, 573 F.2d at but did not retain jurisdiction or incorporate terms). 32. Hospitality House, Inc., 298 F.3d at 431. 33. Shaffer v. GTE N., 284 F.3d 500, 503 (3d Cir. 2002). 34. Schaefer Fan Co., Inc. v. J & D Mfg., 265 F.3d
1078. 25. Kokkonen, 511 U.S. at 378; Langley,14 F.3d at 1073. 26. Hendrickson v. United States, 791 F.3d 354, 362 (2d Cir. 2015) (absent retention of jurisdiction, post-dismissal enforcement of settlement 1282, 1287 (Fed. Cir. 2001). 35. Fed. R. Civ. P. 65(d). 36. William Keeton Enters., Inc. v. A All Am. Strip-O-Rama, Inc., 74 F.3d 178, 182 (9th Cir. 1996). 37. Baella-Silva v. Hulsey, 454 F.3d 5, 11–12 (1st Cir.
agreement resides in state courts unless independent basis for federal jurisdiction exists); Limbright v. Hofmeister, 566 F.3d 672, 676 (6th Cir. 2009) (court with subject matter jurisdiction can summarily 2006) ($50,000 awarded as liquidated damages for breach of confidentiality clause in settlement agreement). 38. Myers v. Richland County, 429 F.3d 740, 747 (8th Cir. 2005) (including actions by third-
enforce settlement agreement that resulted in dismissal of earlier lawsuit). party beneficiary of settlement agreement); Montgomery v. Aetna Plywood, Inc., 231 F.3d 399, 411 (7th Cir. 2000). 39. Flanagan v. Arnaiz, 143 F.3d 540, 545 (9th Cir. 1998). 40. Flanagan, 143 F.3d at 545.
When the Court Retains Jurisdiction
Related Content As distinguished from enforcing the settlement agreement,
the court clearly has ancillary jurisdiction to enforce its own
For guidance on making an offer of judgment, see
orders and decrees. Therefore, to the extent the settlement is
> RULE 68 OFFER OF JUDGMENT: MAKING THE
embodied in the judgment, the court can enforce it by execution
OFFER (FEDERAL)
and by contempt proceedings in appropriate cases.45
RESEARCH PATH: Federal Civil Practice >
Settlement > Practice Notes When breach of the settlement agreement itself gives rise to a
federal question, the district court has an independent basis for
For a discussion of preliminary injunctions, see subject matter jurisdiction.46
> PRELIMINARY INJUNCTIONS: SEEKING A If the dismissal is not final,47 the court has continuing
PRELIMINARY INJUNCTION (FEDERAL)
jurisdiction to enforce, modify, or vacate the settlement
RESEARCH PATH: Federal Civil Practice > Pretrial
agreement. When an order of dismissal is interlocutory, “no
Injunctive Relief > Practice Notes
reservation of jurisdiction over the parties’ dispute is needed
because jurisdiction has never been lost.”48
For assistance on drafting settlement agreements, see
> SETTLEMENT AGREEMENT AND RELEASE Settlement Agreement Disputes
(FEDERAL) AND STIPULATION OF DISMISSAL AND
Most courts hold disputes concerning a settlement agreement
PROPOSED ORDER (FEDERAL)
are governed by applicable state contract law, whether the
RESEARCH PATH: Federal Civil Practice > Settlement Agreement Not Signed those concerned with the rights and obligations of the United
underlying claim is state or federal.49 Federal law governs
Settlement > Forms States, interstate and international disputes implicating
settlements that depend on application of a federal statute or When a settlement agreement contemplated that the parties
would sign a release at a later date but did not state a signed the conflicting rights of States or our relations with foreign
regulation.50
release was required for contract formation (rather than as nations, and admiralty cases” and the issue of an attorney’s
Settlement Must Contain Enforceable Agreement a condition for payment), the fact that the plaintiff did not authority to settle on the client’s behalf does not come within
The Anti-Injunction Act generally bars federal courts from The court cannot enforce a settlement agreement when there ultimately sign the release was immaterial to the issue of any of those narrow areas.58 If the action is still pending or the
is none; a completed agreement that has been authorized by whether the parties formed a binding settlement agreement.54 federal court otherwise has jurisdiction, either party may move
enjoining state court proceedings but authorizes a stay “where
necessary in aid of its jurisdiction, or to protect or effectuate the parties is necessary to establish a breach of a settlement Authorizing a Settlement Agreement for an order to enforce a settlement agreement.59
its judgments.”41 The parties may apply to a court that has

agreement. The power to enforce a settlement cannot be
When the agreement was negotiated between counsel, the Court’s Authority
exercised unless the terms have been agreed to, though they attorneys were required to have their respective clients’ actual
retained jurisdiction to enforce a settlement for an injunction The interpretation of a settlement agreement may be a mixed
need not be in writing. The district court “may not enter a authority. Attorneys do not have inherent power by virtue of
requiring dismissal of a rival action.42 question of law and fact. Thus, “(i)f the settlement agreement
‘consent’ judgment without the actual consent of the” parties.51 their employment alone to compromise a client’s claim.55
is ambiguous, then interpretation of the agreement presents a
Reopening Original Controversy for Breach Oral Settlement Courts are split on whether state law or federal common law fact issue that cannot be resolved on a motion to dismiss.”60
governs whether an attorney who appears in federal court is
The U.S. Supreme Court has not decided whether breach of A settlement may be enforced although none of its terms were The court has the power to adjudicate disputed issues of fact
authorized to bind a client to a settlement agreement. Several
put on the record or reduced to writing, so long as the moving relating to the settlement, such as whether there was a meeting
a settlement agreement is a sufficient ground under Rule circuits apply federal common law with a presumption favoring
party demonstrates there was in fact such an agreement.52 If of the minds, whether the agreement was authorized, or
60(b) to set aside a dismissal and reopen the lawsuit (in the attorney’s authority.56 Other courts hold state law governs
no writing exists, the court must always determine whether it whether grounds for rescission exist.61
which jurisdiction existed).43 Lower courts are sharply divided whether an attorney is authorized to settle on behalf of
was a completed agreement or whether the parties intended
a client.57 In adjudicating disputed factual issues, it appears that the
on whether, in the absence of fraud or undue influence, a to be bound only upon execution of a final written settlement
The Supreme Court seems to side with this latter view, stating court must conduct a plenary hearing and make findings on the
settlement bars reopening the original controversy.44 agreement.53
that federal common law “exists only in such narrow areas as disputed facts.62
41. 28 U.S.C.S. § 2283. 42. Syngenta Crop Prot., Inc. v. Henson, 537 U.S. 28, 33 (2002). 43. Kokkonen, 511 U.S. at 378. 44. Keeling v. Sheet Metal Workers Int’l Ass’n, 937 F.2d 408, 410 (9th Cir. 1991)
(breach of settlement allows relief under Rule 60(b)); see Sawka v. Healtheast, Inc., 989 F.2d 138, 140–141 (3d Cir. 1993) (contra); see also McAlpin v. Lexington 76 Auto Truck Stop, Inc., 229 F.3d 491, 503 54. In re Deepwater Horizon, 786 F.3d 344, 355–356 (5th Cir. 2015) (however, evidentiary hearing was required regarding issue of whether settlement agreement was fraudulently induced). 55. Higbee v.
(6th Cir. 2000) (revival of suit under Rule 60(b) is contrary to Kokkonen). 45. TNT Mktg., Inc. v. Agresti, 796 F.2d 276, 278 (9th Cir. 1986). 46. Bd. of Trs. of Hotel & Rest. Empls. Local 25 v. Madison Hotel, Sentry Ins. Co., 253 F.3d 994, 999 (7th Cir. 2001); see Edwards v. Born, Inc., 792 F.2d 387, 390 (3d Cir. 1986) (result contra when client tells opposing parties his attorney has authority to settle). 56. See
Inc., 97 F.3d 1479, 1484–1486 (D.C. Cir. 1996) (suit to enforce settlement raised federal question because enforcement required construction and application of ERISA (and because ERISA rights were Larson v. Heritage Square Assoc., 952 F.2d 1533, 1537 (8th Cir. 1992) (“heavy burden” to rebut presumption that attorney had authority to act on client’s behalf); Fennell v. TLB Kent Co., 865 F.2d 498,
involved, federal court had exclusive jurisdiction)). 47. See Fed. R. Civ. P. 54(b). 48. Consolidation Coal Co. v. United States Dept. of Interior, 43 F. Supp. 2d 857, 863 (S.D. Ohio 1999). 49. Skilstaf, Inc. v. 501 (2d Cir. 1989); Mid-South Towing Co. v. Har-Win, Inc., 733 F.2d 386, 389 (5th Cir. 1984). 57. Anand v. Cal. Dep’t. of Developmental Servs., 626 F. Supp. 2d 1061, 1066 (E.D. Cal. 2009); Makins v.
CVS Caremark Corp., 669 F.3d 1005, 1017 (9th Cir. 2012); Dillard v. Starcon Int’l, Inc., 483 F.3d 502, 506 (7th Cir. 2007) (settlement of federal claim enforced “just like any other contract”); Panduit Corp. District of Columbia, 277 F.3d 544, 547–548 (D.C. Cir. 2002); Pohl v. United Airlines, Inc., 213 F.3d 336, 338 (7th Cir. 2000). 58. Tex. Indus., Inc. v. Radcliff Materials, Inc., 451 U.S. 630, 640–641 (1981).
v. HellermannTyton Corp., 451 F.3d 819, 825 (Fed. Cir. 2006) (state law governs interpretation of patent infringement settlement agreement that did not require reference to patent statute). 50. Dillard, 59. See Golden v. Cal. Emergency Physicians Med. Grp., 782 F.3d 1083, 1088 (9th Cir. 2015) (plaintiff’s former attorney sought to enforce settlement agreement to collect contingency fee). 60. ASARCO,
483 F.3d at 507 (federal law governs interpretation and validity of settlement of Title VII employment discrimination claims when “knowing and voluntary” release of claim required); Stroman v. West Coast LLC v. Union Pac. R.R. Co., 765 F.3d 999, 1008–1009 (9th Cir. 2014). 61. See Chavez v. New Mexico, 397 F.3d 826, 830–831 (10th Cir. 2005) (under New Mexico law, court denied enforcement and
Grocery Co., 884 F.2d 458, 461 (9th Cir. 1989) (same); Maynard v. Durham & Southern Ry. Co., 365 U.S. 160, 161 (1961) (federal law determines validity of releases under Federal Employers’ Liability Act). rescinded settlement agreement because plaintiffs’ counsel failed to disclose to defense counsel existence of second lawsuit similar to one parties were attempting to settle); see also Facebook, Inc. v. Pac.
51. United States v. Ward Baking Co., 376 U.S. 327, 334 (1964) (emphasis added); see Diaz v. First Am. Home Buyers Prot. Corp., 732 F.3d 948, 954 (9th Cir. 2013) (“unaccepted settlement offer—like any Northwest Software, Inc., 640 F.3d 1034, 1038 (9th Cir. 2011) (settlement agreement enforced). 62. Adams v. Johns-Manville Corp., 876 F.2d 702, 709 (9th Cir. 1989) (no right to jury trial because motion
unaccepted contract offer—is a legal nullity, with no operative effect”). 52. Lynch, Inc. v. SamataMason Inc., 279 F.3d 487, 489–490 (7th Cir. 2002) (magistrate judge’s recollection of terms of oral settlement akin to specific performance); Callie v. Near, 829 F.2d 888, 890 (9th Cir. 1987) (hearing required if dispute concerns existence or terms of settlement); Ozyagcilar v. Davis, 701 F.2d 306, 308 (4th Cir. 1983)
sufficient for enforcement). 53. Wang Labs., Inc. v. Applied Comput. Scis., Inc., 958 F.2d 355, 359 (Fed. Cir. 1992). (matter cannot be resolved on affidavits).
Practice Tips | Lexis Practice Advisor® Commercial Transactions
becomes binding even if a party has a change of heart after
Related Content (he or she) agreed to its terms but before the terms are reduced
to writing.”69
For a list of steps to take in memorializing a settlement
agreement, see The court has inherent power to sanction a party for bad faith
> SETTLEMENT: DRAFTING A SETTLEMENT
Timothy Murray MURRAY, HOGUE & LANNIS
conduct in executing the settlement—for example, repeatedly
AGREEMENT CHECKLIST (FEDERAL) AND
advising the court a settlement had been reached while at
Drafting Blunder:
SETTLEMENT: REVIEWING A SETTLEMENT
AGREEMENT CHECKLIST (FEDERAL) the same time making demands to change the settlement
RESEARCH PATH: Federal Civil Practice > terms, refusing to sign the agreement, seeking extensions of
Hiding Contractual Provisions
Settlement > Checklists the payment due date, and failing to make timely payment as
required under the agreement.70
For more information on class action settlements, see
Appeals
in Documents That Don’t Look,

> CLASS ACTION FUNDAMENTALS (FEDERAL) AND
SETTLING A CLASS ACTION (FEDERAL) An order denying a motion to enforce a settlement agreement
RESEARCH PATH: Federal Civil Practice > Class ordinarily is not immediately appealable as a collateral order or
Actions > Practice Notes
Feel, or Smell Like Contracts

otherwise (unless a final judgment has previously been entered
in the case, making it appealable as a post judgment order): The
“rights under private settlement agreements can be adequately
There is no need for an evidentiary hearing if the parties have vindicated on appeal from the final judgment.”71 A
made an oral settlement on the record in open court. The court
BUSINESSES OFTEN CONDUCT THEIR TRADES BY UTILIZING
may require the parties to comply with their representations
James M. Wagstaffe is a renowned author, litigator, educator, and documents that don’t appear to be contractual in nature but
without holding a hearing.63
lecturer, and the premier industry authority on pretrial federal civil that contain contractual provisions—the information brochure
When evidence outside the record affects enforceability of a accompanying a smartphone might include a mandatory
procedure. He is a partner and co-founder of Kerr & Wagstaffe LLP,
settlement agreement reached in court (for example, additional arbitration clause; a dry-cleaning ticket might have a limitation
where he heads the firm’s Federal Practice Group. He maintains a
terms not mentioned in court), counsel should request an of liability printed on the back; an online retailer’s order page
diverse litigation practice, including complex litigation, professional might have a hyperlink to its terms of use. If a legal dispute
evidentiary hearing pursuant to Rule 43(c). 64
and governmental representation, will and trust disputes, legal arises between the parties, the business likely will try to
The court has wide discretion in deciding whether to permit
ethics, First Amendment cases, and appeals in state and federal enforce a contractual provision in the document. But unless the
or deny oral testimony on a motion hearing.65 When factual
courts. He has particular expertise on virtual world issues, including recipient was somehow alerted to it or stumbled across it by
questions “are not readily ascertainable from the declarations mindful of one of the most basic of all legal concepts: although
happenstance, courts often hold that the recipient had no duty
of witnesses or questions of credibility predominate, the electronic discovery and wi-fi technology. In 2017, California Lawyer there is a duty to read a contract, there is no duty to read a
to read it and is not bound by it—because the document where
district court should hear oral testimony.”66 named him Attorney of the Year for his successful representation non-contractual document even if it happens to contain a
it appears doesn’t look, feel, or smell like a contract.
Court Ordered Remedies of The State Bar of California in a high-profile privacy trial. He has contractual provision.
This is an all-too common phenomenon that is largely ignored.
The court has power to order specific performance of the authored and co-authored a number of publications, including Drafters: Don’t Lose the Advantage of the Duty
But it means that a party may be bound by a provision tucked
settlement agreement or to award damages against the party in The Wagstaffe Group® Practice Guide: Federal Civil Procedure away in the underbrush of a multi-page document brimming to Read
breach or to impose sanctions for contempt.67 Before Trial. As one of the nation’s top authorities on federal civil with legalese so long as the document looks like a contract— Everyone knows that, typically, a party can’t sign a contract
For a settlement to be enforceable by contempt, the provisions procedure, Jim has helped shape the direction and development of but not by a one-sentence disclaimer of liability on the back of and later claim that it isn’t binding simply because he or she
must be specifically set forth in a court order (that is, no federal law. a dry-cleaning receipt since the receipt isn’t generally regarded didn’t read it. The duty to read allows courts to bind parties
incorporation by reference).68 as a contract. to boilerplate provisions in a multi-page document1 even
A party may, on noticed motion, be sanctioned for refusing to The problem of hiding contractual provisions in non- though, in the case of consumer contracts, it is most unlikely
sign a written settlement that embodies terms orally agreed RESEARCH PATH: Federal Civil Practice > Settlement > contractual documents and doing nothing to alert the recipient that consumers bother to read a word of it.2 The law, frankly,
to before the court: “An agreement announced on the record Practice Notes to the provisions has lately reared its ugly head in high-profile doesn’t care whether parties read contracts when they
cases involving the sale of smartphones and online orders manifest assent to them. All that matters is that the parties
of all kinds. It can almost always be avoided if the drafter is were provided a meaningful opportunity to do so. “The duty to
63. Doi v. Halekulani Corp., 276 F.3d 1131, 1138 (9th Cir. 2002). 64. See Fed. R. Civ. P. 43(c); Bath Junkie Branson, L.L.C. v. Bath Junkie, Inc., 528 F.3d 556, 561 (8th Cir. 2008). 65. Fed. R. Civ. P. 43(c). 66.
United Comm’l Ins. Service, Inc. v. Paymaster Corp., 962 F.2d 853, 858 (9th Cir. 1992) (emphasis added); see United States v. Mahoney, 247 F.3d 279, 285 (D.C. Cir. 2001) (opportunity for cross-examination
required when there is genuine dispute whether parties have entered into binding settlement); but see United Comm’l Ins. Service, Inc. 962 F.2d at 858 (if motion based on interpretation of settlement
documents and extrinsic evidence is undisputed, oral testimony is rarely required). 67. TNT Mktg., 796 F.2d 276 at 278. 68. See Fed. R. Civ. P. 65(d); Consumers Gas & Oil, Inc. v. Farmland Indus., Inc. 84
F.3d 367, 371 (10th Cir. 1996) (retention of jurisdiction to enforce settlement not enough). 69. Doi, 276 F.3d at 1138 (parentheses added; internal quotes omitted) (monetary sanctions imposed); see Lynch, 1. See, e.g., Signor v. GWC Warranty Corp., 2018 N.J. Super. Unpub. LEXIS 1160 (May 17, 2018); Manopla v. Raymours Furniture Co., 2018 U.S. Dist. LEXIS 109024 (D. N.J. June 29, 2018). 2. Debra
279 F.3d 487, 491 (case dismissed with prejudice when plaintiff refused to sign settlement agreed to before judge). 70. Farmer v. Banco Popular of N. Am., 791 F.3d 1246, 1258 (10th Cir. 2015). 71. Dig. Cassens Weiss, Chief Justice Roberts Admits He Doesn’t Read the Computer Fine Print, ABA Journal, Oct. 20, 2009, http://www.abajournal.com/news/article/chief_justice_roberts_admits_he_doesnt_
Equip. Corp. v. Desktop Direct, Inc., 511 U.S. 863, 869 (1994). read_the_computer_fine_print/ (last visited May 7, 2018).
read rule derives from the objective theory of contracts, under (or action) without fear that the latter may subsequently void the bailee who takes the plaintiff’s property might hand the plaintiff had no duty to read the Welcome Kit since it did not
which one party to a contract must be permitted to rely on the the contract by claiming failure to read or understand.” 3
plaintiff a small ticket or claim check that the plaintiff sticks appear to be a contract, and the contractual provisions were
manifested assent demonstrated by the other party’s signature in a pocket without reading. If the ticket contains words not called to his attention.15
But the duty to read can be lost. When that happens, drafters
lose an incalculable advantage. For example, the recipient has that purport to limit the bailee’s liability, it is unlikely that
■■ Jacob Brogley signed a contract because the plaintiff had
no duty to read a document when the other party deceives him the bailee’s attendant will alert the plaintiff to them. If the
falsely led Brogley to believe that he wanted to see how
Related Content or her about its contents.4 No drafting advice can whitewash a bailee loses the property, it probably will offer to pay for it— Brogley spelled his name. Since Brogley didn’t know he was
drafter’s fraud. but only up to the amount listed on the small ticket. In the signing a contract, he had no duty to read it, and he was not
For more information on contracts for the sale of goods and ensuing litigation, courts often hold that the plaintiff had
The duty to read can also be lost in the absence of bad faith. bound by it.16
services, see
no duty to read the words on the ticket because the ticket
> CONTRACTS FOR GOODS OR SERVICES This occurs “when the writing does not appear to be a contract ■■ An employee who wanted to lodge a discrimination
didn’t seem to be a contract but just a means of identifying
and the terms are not called to the attention of the recipient.”5 grievance with his employer was told he needed to fill out a
RESEARCH PATH: Commercial Transactions > the property as the plaintiff’s. By taking the ticket, the
Supply of Goods and Services > Supply and Purchasing Of course, all manner of documents are “so obviously form before his claim could be investigated. The employee
plaintiff agreed to nothing, and the limitation of liability is
Products > Practice Notes contractual in form as to give the customer reason to know filled out the form not knowing that it included a mandatory
not binding.
their character.” In these cases, the recipient’s failure to read
6 arbitration provision. When the employee later filed suit, the
■■ Webpages designed for online ordering of books or other court held that the arbitration clause was not enforceable
For guidance in properly drafting sales and purchase the document will not excuse him or her of the obligations it
products or services include a hyperlink to the site owner’s because the form did not look like a contract, and the
agreements, see imposes. The great Justice Benjamin N. Cardozo construed a
terms of use. The webpage is designed to make ordering employee was unaware that he had signed an arbitration
> KEY PROVISIONS OF SALES AND PURCHASE “cabin passage contract ticket” for a steamship that provided,
easy and to advertise other products sold by the site owner. agreement.17
AGREEMENTS in large print, that “this contract ticket is issued by the
Whatever contractual significance it has seems limited to
RESEARCH PATH: Commercial Transactions > company and accepted by the passenger on the following terms ■■ A former employee was not bound to an arbitration provision
placing an order. The user has no duty to read through the
Supply of Goods and Services > Supply and Purchasing and conditions.” Justice Cardozo explained that “[t]his ticket, contained in a form she filled out when she applied for
order page to find the hyperlink to the terms of use. Unless
Products >Practice Notes to the most casual observer, is . . . plainly a contract, burdened employment. She was told that the form was needed for a
the site owner provides a conspicuous notice of the hyperlink,
with all kinds of conditions . . . . In such circumstances, the background check and was given no indication that it was a
the user will not be bound by the terms of use. Many
act of acceptance gives rise to an implication of assent.” The contract.18
For a discussion on the use of pre-printed forms in contract prominent online retailers have been stung by this rule.12
formation, see document looked like a contract, and “[t]he passenger who
■■ Plaintiff delivered a new jukebox to defendant’s business
omits to read takes the risk of the omission.”7 ■■ Recent cases in the U.S. Courts of Appeal for the Ninth and
> BATTLE OF THE FORMS to replace an older one. The plaintiff’s truck driver handed
But in many instances, the realities of the marketplace lead Third Circuits have refused to enforce arbitration provisions
RESEARCH PATH: Commercial Transactions > a paper to defendant and represented that it was merely a
businesses to insert contractual provisions in documents and contained in brochures found in-the-box with mass-
Supply of Goods and Services > Contract Formation, receipt and requested him to sign it. In fact, the reverse side
webpages that are not obviously contractual in nature or that produced consumer products, such as smartphones. The
Breach and Remedies Under the UCC > Practice Notes of the paper was replete with contractual terms. The court
have a limited contractual purpose. “The same document may consumer didn’t have reasonable notice that the brochures
refused to enforce the agreement because the defendant
serve both contractual and other purposes, and a party may contained contractual provisions. Since the brochures did
For tips on how to avoid mistakes in drafting contracts for the didn’t know that it was a contract.19
assent to it for other purposes without understanding that it not appear to be contracts, there was no duty to read the
sale of goods, see
provisions hidden in them, which were not enforced.13 On and on it goes—there is not enough space to chronicle the
embodies contract terms.”8 When that occurs, the business
> SALE OF GOODS AGREEMENTS: AVOIDING many instances where this phenomenon occurs. In many of
COMMON PITFALLS needs to be aware that it loses the advantages of the duty ■■ A brochure from a car manufacturer that included facts
these cases, it would have taken the plaintiff just a few seconds
to read unless it takes extra steps to put the recipient of the about the capabilities of a vehicle was not a contract because
RESEARCH PATH: Commercial Transactions > to read the limitation of liability or arbitration provision, but he
document on inquiry notice by alerting him or her that the it did not appear to be contractual in nature.14
Supply of Goods and Services > Contract Formation, or she never saw it and had no obligation either to look for it or
document has contractual provisions.
Breach, and Remedies under the UCC > Practice Notes ■■ Plaintiff bought a new vehicle that included a 90-day trial read it. This is in contrast to any number of formal documents
This Phenomenon Occurs in Many Settings subscription to a satellite radio service. Weeks later, he that consumers sign every day—insurance policies, car rental
For a list of drafting tips for creating ironclad contracts, see There is no typical scenario where this phenomenon occurs— received a Welcome Kit from the radio service containing a agreements, bank loans, and credit card agreements—that
> CONTRACT DRAFTING LANDMINES perhaps that’s why businesses aren’t on the lookout for it. customer agreement with an arbitration provision. The radio are often much lengthier documents and more difficult to
RESEARCH PATH: Commercial Transactions > Some examples: service claimed that his assent to the arbitration provision understand, yet because everyone understands that they
General Commercial and Contract Boilerplate > was manifested by not canceling the trial subscription to are solemn legal obligations, the purchaser has a duty to
■■ The classic examples: when a plaintiff checks a bag or package
Contract Boilerplate and Clauses > Practice Notes the radio service. Litigation erupted, and the court held that read them.
in the parcel room of a railway station,9 drops off a coat at
a dry cleaner,10 or leaves a car at a public parking garage,11
12. Specht v. Netscape Communs. Corp., 306 F.3d 17, 31 (2d Cir. 2002) (Sotomayor, J.) (“[P]laintiffs’ ‘apparent manifestation of . . . consent’ was to terms ‘contained in a document whose contractual nature
[was] not obvious.’”). See also, e.g., Nicosia v. Amazon.com, Inc., 834 F.3d 220 (2d Cir. 2016) (website clutter rendered the conspicuity of the terms a question of fact); Herman v. SeaWorld 2016 U.S. Dist.
3. Allied Office Supplies, Inc. v. Lewandowski, Cox & W.B. Mason, Co., 261 F. Supp. 2d 107, 112 (D. Conn. 2003). 4. E.g., 7 Corbin on Contracts § 29.9; Toy v. Metro. Life Ins. Co., 928 A.2d 186 ( Pa. 2007). LEXIS 181173 (M.D. Fla. Aug. 26, 2016). 13. Norcia v. Samsung Telecomms. Am., 845 F.3d 1279 (9th Cir. 2017); Noble v. Samsung Elecs. Am., Inc., 682 Fed. App’x 113 (3d Cir. 2017); Samsung Elecs. Am.,
5. Marin Storage & Trucking, Inc. v. Benco Contracting & Eng’g, Inc., 89 Cal. App. 4th 1042, 1049-50. See also Schnabel v. Trilegiant Corp., 697 F.3d 110 (2d Cir. 2012); Hirsch v. Citibank, N.A., 2014 U.S. Inc. v. Ramirez, 2018 U.S. Dist. LEXIS 80983 (E.D. Cal. May 14, 2018); Jones v. Samsung Elecs. Am., Inc., 2018 U.S. Dist. LEXIS 84586 (W.D. Pa. May 21, 2018). In-the-box contracting is an example of a
Dist. LEXIS 83534 (S.D.N.Y. June 10, 2014); Metters v. Ralphs Grocery Co., 161 Cal. App. 4th 696, 702 (2008). 6. Restatement (Second) of Contracts, § 211 cmt. D (1981). 7. Murray v. Cunard S.S. Co., rolling contract—some jurisdictions hold that contract formation is not finalized until after the consumer purchases the product, brings it home, opens the box, sees the contractual provisions, and decides
139 N.E. 226, 228 (N.Y. 1923). See also Kai Peng v. Uber Techs., Inc., 237 F. Supp. 3d 36 (E.D.N.Y. 2017). 8. Restatement (Second) of Contracts, § 211 cmt. d. 9. Klar v. H. & M. Parcel Room, 270 A.D. 538 whether to accept the provisions by retaining the product or to reject the provisions by returning the product. Not all states accept this theory of formation. Then-Judge Gorsuch said that the “rolling
(1st Dep’t 1946), aff’d, 73 N.E.2d 912 (N.Y. 1947); Healy v. N.Y., C. & H. R. R. Co., 153 A.D. 516, 519-520 (3rd Dep’t 1912); Kergald v. Armstrong Transfer Exp. Co., 113 N.E.2d 53, 54 (Mass. 1953). 10. contract formation theory may be about as controversial an idea as exists today in the staid world of contract law.” Howard v. Ferrellgas Partners, L.P., 748 F.3d 975, 982 (10th Cir. 2014). 14. Lewand v.
Ginsberg v. Spring Dry Cleaners, Inc., 2002 N.Y. Misc. L EXIS 135 (N.Y. App. Term 2002). 11. Palazzo v. Katz Parking Systems, Inc., 64 Misc. 2d 720 (N.Y. Civ. Ct. 1970) (disclaimer of liability on parking garage Mazda Motor of Am., Inc., 2017 U.S. Dist. LEXIS 218371 (C.D. Cal. Aug. 8, 2017). 15. Knutson v. Sirius XM Radio Inc., 771 F.3d 559 (9th Cir. 2014). 16. Alexander v. Brogley, 41 A. 691 (N.J. 1898). See
claim check). See also California’s statute providing that bailment contracts for parking lots are not valid unless the contract meets certain standards of conspicuity and copies of the contract are placed on Gabriel v. Glickman, 51 A.2d 106 (N.J. 1947). 17. Metters, 161 Cal. App. 4th at 702. 18. Adams v. Superior Court, 2010 Cal. App. Unpub. LEXIS 1236 (Feb. 22, 2010). 19. Capitol Automatic Music Co. v.
sizeable signs at the parking lot entrances. Cal Civ. Code § 1630. Jones, 114 N.Y.S.2d 185 (Mun. Ct. 1952).
Takeaways needs to have conspicuous language on its cover alerting the
purchaser that important contractual provisions are contained
If the contractual provision is inserted in a document or a
website that is primarily intended to serve a non-contractual or in the document. If the brochure that accompanies the product
a limited contractual purpose, the drafter needs to be cognizant contains a limitation of liability or arbitration provision,
that there will be no duty to read the provision unless it is the notice on the cover of the brochure may be insufficient
brought to the attention of the recipient, and the recipient is if it merely indicates that it contains a warranty because
put on inquiry notice of it. This includes contractual provisions
warranties are generally thought of as imposing obligations on
hyperlinked on an online order page or tucked away in the
manufacturers, not purchasers. The notice should signal that
information brochure that comes with a new smartphone.
the document contains important contract provisions, or words
In the examples above, one of the chief reasons that the
to that effect.
recipient didn’t know the document was a contract was because
the drafter’s representative who presented the document to Your client needs to understand that lawyers should be
the recipient either didn’t tell the recipient or misrepresented consulted not just about drafting the contractual provision that
the contents. The drafter’s representative needs to understand will be included in a non-contractual document or webpage,
that the document contains a contractual provision that won’t but also about how to notify the recipient that the document
be binding unless it is brought to the attention of the recipient.
or webpage contains a contractual provision. For example,
The representative must never misrepresent the document’s
contents or suggest that it has no contractual significance.
In certain circumstances, the representative may need to
this may require that the lawyer be involved in the design of
a website or a brochure accompanying smartphones or other Use know-how to get to can-do.
be charged with affirmatively alerting the recipient to the products. After all, the provision is worthless if the recipient
provision. has no duty to read it. A Tasked with drafting new data privacy policies for your company? Looking for the right form to jump-start
transactional work? Begin with the Lexis Practice Advisor® service for practical guidance and proven tools
The most prudent course of action in many settings is to have
Timothy Murray, a partner in the Pittsburgh, PA law firm Murray, from experienced attorneys. Hone governance and compliance policies, draft commercial agreements and
the recipient sign off on a document indicating that he or
accelerate business dealings, from M&A to IP.
she has had an opportunity to see and read the contractual Hogue & Lannis, is co-author of the Corbin on Contracts Desk
provisions. Such a practice would obviate disputes about what Edition (2017) and writes the biannual supplements to Corbin
Get more done, in-house, faster. See how at lexisnexis.com/know-how or call 800.628.3612
the recipient actually saw or was told. on Contracts.
When a provision is contained in a brochure in-the-box with
the product, depending on the jurisdiction, the seller may
need to provide notice to the purchaser at the time of purchase RESEARCH PATH: Commercial Transactions > General
Commercial and Contract Boilerplate > Contract Boilerplate
Lexis Practice Advisor ®
that additional contractual provisions will be found in the PRACTICAL

GUIDANCE
TRUSTED FORMS &
PRACTICE NOTES
EXPEDITED
DRAFTING
box. The document inside the box containing the provisions and Clauses > Articles
LexisNexis, Lexis Practice Advisor and the Knowledge Burst logo are registered trademarks of RELX Inc. © 2018 LexisNexis. BLCL00027-0 0718
Practice Tips | Lexis Practice Advisor® Capital Markets & Corporate Governance
to all companies will often impact your company as well, and
these types of risks may be among the most material risks Related Content
faced by your company. Examples of such risks may include
failure to compete successfully, dependence on management For advice on drafting or reviewing risk factors for a registration
statement, see
Stuart Gelfond and Joshua Wechsler team, cybersecurity concerns, and general economic and/or
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON LLP consumer spending conditions. You should disclose these types > RISK FACTOR DRAFTING FOR A REGISTRATION
STATEMENT
Hayley Cohen TRADEWEB of broad risks in your filings, assuming they are material to
RESEARCH PATH: Capital Markets & Corporate
you, but you should tailor the risk to your specific business and
Governance > IPOs > Drafting the Registration
include a clear explanation as to how each broad risk applies
Top 10 Practice Tips:

Statement > Practice Notes
specifically to your company. For example, general economic
conditions may impact all companies but housing prices in
California may impact your company specifically. For a sample risk factor form describing cybersecurity issues
Risk Factor Disclosures

that may be included in a public company’s registration
Review the risk factors of competitors.
2 statement, see
For risk factors associated with the particular industry > CYBERSECURITY RISK FACTOR
in which a company participates, reviewing the SEC filings of RESEARCH PATH: Capital Markets & Corporate
peers is particularly important. Reviewing these risk factors Governance > IPOs > Drafting the Registration
Item 503(c) (17 C.F.R. § 229.503) of Regulation S-K requires that an issuer include in its Statement > Forms
can help provide ideas for areas that your risk factors should
registration statement a risk factor disclosure, which sets forth the possible circumstances or cover as well as ensure that your disclosure is in line with what
situations that could make investing in a company’s securities risky or speculative. While it is is currently required by the market for liability purposes. When For information on drafting the risk factor disclosure for an
benchmarking against other companies, define competitor Form S-1 registration statement, see
rare that an investor will base its investment decision solely on what is included in the company’s broadly and try to find competitors in each business unit, > FORM S-1 REGISTRATION STATEMENTS
risk factors, risk factors are a key component of a company’s offering document as well as its even if a single competitor is not competitive in each of your RESEARCH PATH: Capital Markets & Corporate
business units. Some companies may compete in one or two Governance > IPOs > Drafting the Registration
annual and quarterly reports.
segments of your business but may have described the risks Statement > Practice Notes
to those segments separately. In addition, different types of
ONE PURPOSE OF RISK FACTORS IS TO EDUCATE POTENTIAL securities may warrant different types of risks. As a result,
investors on the risks of investing in a business; however, when reviewing the SEC filings of peers, you should look for
Review the entire document.
risk factors also serve as a substantial mitigating factor in
any lawsuit brought against a company in the event that the
filings in which a company is selling similar types of securities. 4
Make sure to also review a competitor’s quarterly reports, Risk factors should not be drafted in a vacuum.
company and its securities do not perform as expected. As which will show changes in risk factors during the year. Review the period to period comparisons in the Management’s
a result, in addition to being required by the Securities and When there is a significant change in business climate or the Discussion and Analysis of Financial Condition and Results of
Exchange Commission (SEC), risk factors are important for law, it can also be helpful to look at the risk factors of other Operations section (MD&A), in particular, to see if there were
liability protection reasons. If an investor loses money on companies that are not necessarily competitors. For example, any negative changes in the periods presented and the cause of
an investment but is properly cautioned about the potential changes such as the bankruptcy of Lehman Brothers or LIBOR such changes. For example, if the MD&A discloses that revenue
risks of the investment, a court may in certain circumstances being disbanded have had and will have an impact on most was up 8% for the year due to increased sales in China offset
find in favor of a defendant company even if the stock price businesses and are described in the risk factors of companies by currency losses, make sure there is a risk factor on currency
falls dramatically. In addition, the securities laws provide a across various industries. issues. Review the company’s balance sheet and note if there
safe harbor for forward-looking statements if the company are decreases in one category of assets or increases in one
has set forth appropriate disclosure regarding the risks and 3 Interview management.
category of liabilities as well as the reasons for such changes.
uncertainties that may cause such forward-looking statements Risk factors are intended to provide investors with Determine when large liabilities, such as long-term debt, are
to be untrue. a sense of management’s perspective on the factors that due and discuss with the finance staff how they will be paid. This
may adversely impact a company’s business. As a result, it is disclosure may be more appropriate in MD&A but if there is no
Below are 10 practice points that can help you craft an effective
risk factors section to ensure that all relevant risks relating to a important to talk to the company’s management about what definitive plan for repayment, that fact should also be described
company are properly disclosed. aspects of the business keep them up at night and compare in a risk factor. Examine the company’s long-term debt and
those concerns to existing risk factors. One would be surprised make sure key factors are accurately described in the risk factors,
Tailor risks applicable to any company.
1 at how often the two lists do not match. In addition, be sure to including change in control and other items that can accelerate
The SEC has indicated that risks that apply to any interview people with different specialties within the company. the debt. The risks associated with such long-term debt
company (or any offering) should not be disclosed as risk The accountants may worry about different things than the should also be accurately addressed. You may want to use cross
factors. However, many of the risks that apply across the board individuals focusing on the company’s international business. references to other sections in the document when appropriate.
included in their Form 10-K and subsequent Form 10-Qs, to the
Related Content extent applicable. Regardless of the requirement to update, the
drafter of the risk factors section and the company’s disclosure
For guidance on describing the relevant risk factors that should
be included in Form 10 under Section 12 of the Securities committee should regularly review the company’s risks at least
Exchange Act of 1934, see quarterly and update the risk factor section in each periodic
> FORM 10 DRAFTING filing. Note that updating risk factors may include not only
RESEARCH PATH: Capital Markets & Corporate adding risk factors to address new material risks that may
Governance > Registration under the Exchange Act >
have arisen, but may also require editing or removing existing
Section 12 Registration > Practice Notes
risk factors that are no longer material and reordering risk
factors to reflect changes in priorities, as necessary (although
For a list of practice points that issuers and counsel need to
consider during the registration process, see deleting risk factors is not generally market practice for filings
> TOP 10 PRACTICE TIPS: DRAFTING A made on Form 10-Q). Some companies have included all of its
REGISTRATION STATEMENT risk factors in each quarter; however, in our experience, most
RESEARCH PATH: Capital Markets & Corporate companies just include its updated risks in quarterly filings. A
Governance > IPOs > Drafting the Registration
Statement > Practice Notes
Stuart H. Gelfond is a partner at Fried Frank and co-head of the
firm’s Capital Markets practice. Mr. Gelfond concentrates his
For a detailed overview of the laws, rules, and regulations
practice on corporate finance transactions, including representation
applicable to securities offerings registered under the Securities
Act of 1933, see of issuers and underwriters in domestic and international high-
> REGISTERED OFFERINGS: APPLICABLE LAWS, yield, investment-grade, and convertible debt offerings, acquisition
RULES, AND REGULATIONS financings, and IPOs. Mr. Gelfond has extensive experience serving
RESEARCH PATH: Capital Markets & Corporate as counsel to corporations and broker-dealers on securities,
5 Consider both significance and probability. of the Private Securities Litigation Reform Act of 1995 safe
harbor and the bespeaks caution doctrine as well as compliance
Governance > IPOS > Conducting an IPO >
corporate governance, and other regulatory issues. He has also
Practice Notes
The SEC requires disclosure of all risks that the
with Item 503(c) of Regulation S-K. As a result, additional been actively involved in corporate restructurings, including acting
company believes are material at the time of disclosure.
disclosure of risks can play an important role in staving off as lead counsel to ACA Capital Holdings and Sonic Automotive in
When determining materiality, you should consider both the
antifraud liability and regulatory action for non-compliance. their corporate reorganizations. He also regularly represents clients
significance of the risk and the probability of occurrence of the
the risk as well as the primary effects that the risks may have in private equity and acquisition transactions. Joshua Wechsler is
risk and update general risks to include specific events that 7 Stick to the risks.
on the company’s business, financial condition, or results
a corporate partner in Fried Frank’s New York office. Mr. Wechsler
have recently happened or are expected to happen. If a risk can Risk factors are intended to note the risks that a of operations. If a risk factor discusses many risks, it may be
be very material but is unlikely, it still may need to be disclosed company faces, and the section should not be used to explain
concentrates his practice in corporate finance and the U.S. securities
prudent to break the risk factor into multiple risk factors, each
due to the magnitude of the potential problem. If a risk has mitigating factors associated with a given risk. Minimizing or with a separate caption discussing a separate risk.
laws, representing issuers, underwriters, and sponsors in a variety
already begun to materialize, highlighting it in the abstract may eliminating risks with caveats often reduces the protection of financing transactions, including initial public offerings, private
not be sufficient. One needs to discuss the specific facts that afforded to the company by the disclosure and is a perennial 9 Organize your risk factors.
placements, high-yield debt offerings, and cross-border financings.
are occurring (e.g., it is not enough to say that the weather may hot-button issue with the SEC. If you feel that such Risk factors should be organized logically and
Mr. Wechsler has represented an array of underwriters including
impact the business when the flood in Houston from Hurricane explanations are warranted, they should be addressed in the should be broken into subsections relating to industry risk,
Bank of America Merrill Lynch, Credit Suisse, Goldman Sachs, JP
Harvey has shut down a plant). In addition, when considering MD&A or Business section. In addition, if the mitigating factors company risk, and investment risk, which will make it easier
Morgan, and UBS. Mr. Wechsler served as a staff attorney in the
risks relating to litigation, the decision to include a risk factor are significant, consider that the risk may not be material and for investors and the SEC to follow. In addition, risks should
cannot be based solely on the probability of prevailing in the generally be listed from the most significant to the least SEC’s Division of Corporation Finance from 1994 to 1997. Hayley
may not need to be disclosed.
case, but must also take into account the significance of a significant. Items that pose the greatest risk to the company or Cohen was an associate at Fried, Frank, Harris, Shriver & Jacobson,
Choose captions carefully.
negative outcome, both from a strictly monetary perspective as 8 are of the greatest concern to management should be included LLP focusing on capital markets transactions, as well as governance
well as other potential impacts on the business The SEC often comments not only on the types early in the list of risk factors. and securities law reporting. She is currently corporate counsel at
of risks disclosed, but the language used to describe those
When in doubt, disclose. Update in future filings. Tradeweb Markets LLC.
6 risks. The SEC and courts have previously commented on the 10
If you are not sure whether a risk is material, you inadequacy of risk factor captions when they are not specific While the risks set forth in an offering document
should err on the side of caution and disclose it. As discussed enough or adequately descriptive of the risk discussed in the generally speak to the date of the document (and any obligation
above, risk factors, and risk disclosure generally, often satisfy accompanying text. As a result, each risk factor should, in plain to update that document other than as required by law can RESEARCH PATH: Capital Markets & Corporate
the dual purpose of serving as cautionary language for purposes English, have an appropriate caption that adequately describes be disclaimed), companies are required to update risk factors Governance > IPOS > Conducting an IPO > Practice Notes
Practice Trends | Lexis Practice Advisor® Tax
This article discusses the impact of the U.S. Supreme Court’s landmark decision in South
Dakota v. Wayfair, Inc.1 and provides guidance related to resulting changes. In addition to
evaluating the ruling in Wayfair and the precedents that went before it, this article offers
TAXING
a primer on the fundamental concepts of state sales and use tax principles underpinning
Wayfair, including substantial nexus, economic nexus, physical and economic presence, the
Commerce Clause, the dormant Commerce Clause, and the Due Process Clause.
ONLINE SALES: THE COURT’S RULING IS OF VITAL IMPORTANCE TO TAX a Court that was overstepping its authority, as it should be the
responsibility of Congress to change the physical presence standard.
Impact of the
practitioners because of its sales and use tax collection impact
that will reach large and small companies’ internal processes and Sales and Use Tax Nexus v. Income Tax Nexus
compliance systems. Attorneys who represent remote sellers and
Nexus means the minimum level of activity a taxpayer must have
e-retailers should evaluate the ruling’s implications with respect
South Dakota v.
in a state before that state has the right to tax the taxpayer. For
to their e-retailer clients’ new burdens to record, collect, and remit corporate income tax purposes, several states have adopted an
sales tax from many state and local tax jurisdictions. economic nexus standard for determining whether an out-of-
state taxpayer is subject to tax on its business income in the state.
Sales Tax Overview
Wayfair Decision
Economic nexus is premised on a theory of regular and continuous
The Wayfair ruling overturns prior Supreme Court precedent in Quill exploitation of the in-state market. Thus, a certain amount of a
Corp. v. North Dakota and Nat’l Bellas Hess v. Dep’t of Revenue. In
2 3
taxpayer’s business income can be apportioned to the state if the
the Quill and Bellas Hess decisions, the Court ruled that out-of-state level of activity in that state meets a prescribed threshold, regardless
sellers are obligated to collect and remit sales tax on in-state sales of whether the taxpayer ever sets foot in that state.
only where the company has a physical presence. The Wayfair ruling State Sales and Use Tax Principles
overturns Quill, with the majority opinion holding that it was the The essence of the Wayfair case is the collection and remittance
Court’s obligation to make amends for Quill’s unsound and incorrect responsibilities of out-of-state sellers. In other words, the case
reading of the Commerce Clause. Conversely, Chief Justice Roberts focuses on the ability of states to require internet sellers that reach
and his fellow dissenters felt that the Wayfair ruling exemplified out to in-state consumers to assess, collect, and remit sales taxes
Includes Analysis by
Carolynn Kranz KRANZ & ASSOCIATES PLLC
Mark Muntean, Charles Swenson
Commerce Clause, Dormant Commerce Clause, and Due Process Analysis
and Iris Kitamura KRANZ & ASSOCIATES PLLC
The foundational principles of state taxation involve the Commerce Clause and the Due Process Clause. These concepts are important in evaluating
Wayfair because state taxation cases hinge upon whether the state’s system of taxation interferes with interstate commerce. Also of importance is the
dormant Commerce Clause, which was used to decide Quill.
Commerce Clause
The Commerce Clause4 addresses the right of the federal government to regulate interstate commerce. With state tax cases, the initial evaluation is
whether the state’s system of taxation interferes with the principles of interstate commerce. In order to satisfy the Commerce Clause, the activity taxed
must have a substantial nexus to the taxing state.
Dormant Commerce Clause
Carolynn Kranz Charles Swenson
The Quill court based its ruling on the dormant Commerce Clause, the legal doctrine that prevents a state from interfering with interstate commerce
unless Congress gives its authorization. However, in Quill, the Court ruled that the dormant Commerce Clause did not prevent North Dakota from
imposing a sales tax on online retailers located out of the state.
Due Process Clause
The Due Process Clause5 is rooted in the concept of fairness to the selling business. The seller needs to have nexus with the state. If the seller does not
have physical presence in the state, then the state cannot force the seller to collect taxes on behalf of that state. Due process issues are the exclusive
domain of the courts. Due process, though, does not mandate physical presence. Due process considers whether the individual has enough nexus to
meet the standards of fairness.
1. 201 L. Ed. 2d 403 (2018). 2. 504 U.S. 298 (1992). 3. 386 U.S. 753 (1967). 4. U.S. Const. Art. I, § 8, Cl 3. 5. U.S. Const. Amend. XIV § 1.
maintenance of the suit does not offend traditional notions of fair
play and substantial justice.”12
. . . a business needed to be more Due process does not require physical presence; instead, due
process is concerned with giving an individual notice and fairness. To
than a mail order operation;
meet the due process standards, purposeful direction of the seller’s
the business was required to have activities at the state’s residents must be shown, and the tax has to
a retail store in the taxing state be related to the benefits that the seller derives from the state. The
Quill case may have met these standards.
or office space in the taxing state.
The Court ruled that Quill, Inc. had sufficient nexus to the state of
North Dakota under the Due Process Clause because the company
had “purposefully directed its activities at North Dakota residents,
minimum contacts analysis under the Due Process Clause and a that the magnitude of those contacts is more than sufficient for due
substantial nexus test under the Commerce Clause. In addition to 10 process purposes, and that the use tax is related to the benefits
addressing the concept of nexus, the Quill case is vital because it Quill receives from access to the State.13” In short, the Quill Court
ruled that physical presence is not required for specific jurisdiction
established the concept of physical presence, which the Wayfair case
with respect to due process.
has reversed.
Commerce Clause
Quill Corporation was a mail-order company that distributed office
to the state. While the use tax mechanism supplements the sales Complete Auto Transit, Inc. v. Brady equipment and supplies and sold its products to North Dakota Although the Quill Court stated that there is a close relationship
tax mechanism, the use tax relies on taxpayers to assess their own buyers through catalogues. The company did not have a physical between the Due Process Clause nexus and Commerce Clause
Complete Auto Transit, Inc. v. Brady 7 is at the foundation of much
tax liability. As a result, many taxable purchases are unreported or presence in North Dakota and did not collect state sales tax on its nexus, the company did not have substantial nexus under the
of state and local taxation, particularly state sales and use tax. The
underreported, and a significant amount of revenue is lost. In fact, sales to North Dakota customers. The Court held that an out-of- Commerce Clause because it lacked actual physical presence in
Court’s ruling in Complete Auto provides the following four-pronged
the Government Accountability Office has estimated that the Quill state retailer was not required to collect and remit sales tax on the state. Under Quill, to meet the test for sufficient nexus for the
test to determine whether a state tax is constitutional:
case’s prohibitions against collecting sales tax cost the states over remote sales to an in-state purchaser if the retailer did not have Commerce Clause, a business needed to be more than a mail order
$13 billion last year.6 ■■ The tax can be applied only to an activity having a substantial operation; the business was required to have a retail store in the
a physical presence in the state. The Quill decision reaffirmed the
nexus with the taxing state. taxing state or office space in the taxing state.
Sales Tax Court’s Bellas Hess decision. In order to satisfy the Commerce
■■ The tax is fairly apportioned. Clause’s substantial presence test, a physical presence was needed. Under the Commerce Clause, there is a higher standard so as to not
For many years, most states have relied heavily on the collection
■■ The tax does not discriminate against interstate commerce. Justice John Paul Stevens, author of the majority opinion in Quill, impose a burden on interstate commerce. In short, “a corporation
and remittance of sales and use taxes to generate revenue.
stated that taxing out-of-state businesses would “unduly burden may have the minimum contacts with a taxing state as required by
Generally, the seller has the primary responsibility to collect and ■■ The tax is fairly related to the services provided by the states.
interstate commerce.”11 the Due Process Clause and yet lack the substantial nexus with that
remit sales tax to the state. When sales concern in-state sellers,
Wayfair focuses on the first prong of Complete Auto, where the state as required by the Commerce Clause.14” The purpose of the
this is not a problem. Clearly, there is a connection between Did Quill meet the Due Process and Commerce Clause
Court explained that, for a state tax obligation to pass constitutional Commerce Clause is to prevent discrimination against interstate
the state and the taxpayer. The collection and remittance of tax
muster for purposes of the dormant Commerce Clause, the tax
Standards?
commerce. The Commerce Clause is not concerned with fairness,
becomes more complex, though, when out-of-state sellers engage
must be “applied to an activity with a substantial nexus with the In Quill the Court applied separate Due Process Clause nexus and but rather, what are the effects of state regulation to the broader
in transactions with in-state customers. taxing State.”8 Commerce Clause nexus requirements in its analysis of whether the national economy.
Use Tax corporation had the requisite nexus to North Dakota. The Court
Nat’l Bellas Hess v. Dep’t of Revenue South Dakota v. Wayfair
States that impose sales tax also impose a complementary use tax decided that there was sufficient nexus under the Due Process
Bellas Hess involved a Massachusetts mail order business that had Wayfair is a challenge to the Quill physical presence standard
for those transactions in which the in-state customer purchases Clause, but not under the Commerce Clause, because physical
no property, office, outlets, or sales representatives in the state of arising as a result of the growth of e-commerce. Because under
tangible personal property outside the state for use in the state and presence in the state was required.
Illinois. The Court held that under the dormant Commerce Clause, a Quill sellers were not required to collect sales tax on sales made to
for which sales tax has not been imposed on the transaction. So, Due Process customers where the seller was not physically present, the in-state
state could not require retailers without a physical presence in that
for example, if you live in New York and purchase an item in New state to collect taxes on the sale of goods to its residents. 9
purchaser was not charged sales tax. Although the purchaser had
The Due Process Clause is vital in a state tax case because it is
Hampshire for use in New York, you still have an obligation to pay a requirement to pay use tax on these tax-free purchases, use tax
Quill Corp. v. North Dakota the constitutional glue that requires that a state have a sufficient
use tax to New York, the state in which you live and where you are compliance was very low.
relationship with a person to justify exercising jurisdiction. In the
going to use the property. Consumers usually fail to pay the use tax In Quill, the seminal case for sales and use tax nexus since 1992,
important due process case International Shoe Co. v. Washington, In Wayfair, the Court held that the Quill and Bellas Hess Courts had
because it is self-assessed. The taxpayer’s failure to pay use taxes the Court expanded on the concept of nexus for purposes of state
the Court explained that due process standards are met if there incorrectly interpreted the Commerce Clause.15 As a result, retailers
was a factor in South Dakota’s actions in Wayfair. taxation. The Quill Court stated that nexus consists of both a
are sufficient minimum contacts with the state “such that the can no longer rely on the physical presence test to determine
6. See GAO, Report to Congressional Requesters: Sales Taxes, States Could Gain Revenue from Expanded Authority, but Businesses Are Likely to Experience Compliance Costs 5 ((GAO–18–114, Nov. 2017) (Sales
Taxes Report)). 7. 430 U.S. 274 (1977). 8. Id. at 279. 9. Nat’l Bellas Hess, 386 U.S. at 760. 10. Quill, 504 U.S. at 313. 11. Id. 12. 326 U.S. 310, 316 (1945). 13. Quill, 504 U.S. at 308. 14. Quill at 313. 15. Wayfair, 201 L. Ed. 2d at 426.
remote seller nexus. The Court held that the economic nexus stayed until the constitutionality of the law had been clearly
standard outlined in the South Dakota statute, 2016 S.D. S.B. 106 established.17 South Dakota’s intention was for retailers outside of
(S.B. 106), met the requirements of the Commerce Clause because South Dakota meeting these thresholds to collect South Dakota
it was not overly burdensome to remote sellers. In addition, the sales tax and remit the tax to South Dakota. South Dakota sued
sales and transaction-based nexus thresholds were coupled with several out-of-state retailers, including Wayfair, Overstock.com,
non-retroactive application and South Dakota’s participation in the and Newegg.
Streamlined Sales and Use Tax Agreement (SSUTA).
South Dakota’s goal was for Quill to be overturned. South Dakota
Background to Wayfair / S.B.106 filed a declaratory judgment in its state court against specific
In 2016, South Dakota challenged the inequalities of Quill by internet merchants with no employees or office buildings in the
enacting S. 106: “An Act to provide for the collection of sales taxes state who also failed to collect sales tax on their internet sales.
from certain remote sellers, to establish certain Legislative findings, South Dakota also sought an injunction to force these internet
and to declare an emergency.” The legislature found that the inability merchants to register for business licenses in the state and to remit
to collect sales tax from remote sellers was “seriously eroding the sales taxes to the state. In response, the merchants moved for
sales tax base” and “causing revenue losses and imminent harm . . . summary judgment, stating that S.B. 106 was unconstitutional. The
through the loss of critical funding for state and local services.” 16 South Dakota courts sided with the merchants, holding the law to be
S.B. 106 created an economic nexus test requiring a remote seller unconstitutional, and in turn, the Supreme Court granted certiorari.
that did not have a physical presence in the state to register, collect As noted above, the Court referenced South Dakota’s
and remit sales tax if, in the previous calendar year, the seller met participation in the SSUTA as a factor to consider in upholding
the following thresholds: the constitutionality of the law.18 The purpose of the SSUTA
■■ The seller had over $100,000 of gross revenue from the sales of is to simplify and modernize sales and use tax administration
concurring opinions. Justice Kennedy’s opinion begins with a At first blush, states may see themselves as the big winners in
tangible property, digital property transfers, or services in South in its member states to substantially reduce the burden of tax
detailed analysis of Commerce Clause jurisdiction. cheering the end of Quill’s physical presence test. It is reasonable
Dakota. compliance. The agreement focuses on improving sales and use tax
to expect states to begin to broaden their legislation in an effort
administration systems for all sellers and for all types of commerce. The majority held Quill’s physical presence test to be unsound and
■■ The seller engaged in 200 or more separate transactions in to expand their online sales tax collections, now that states can
incorrect. The Court ruled that a business did not need a physical
tangible property, digital product transfers, or services delivered Majority Opinion require online retailers to collect sales tax even where the retailer
presence to meet the substantial nexus requirements outlined
within the state of South Dakota. has no physical presence in the state subject to the limitations
Justice Anthony Kennedy wrote the majority opinion, and he was in Complete Auto Transit. The majority analogized Quill to a tax
provided by the Court. However, the limitations on state taxation
S.B. 106 foreclosed the retroactive application of these joined by Justices Clarence Thomas, Ruth Bader Ginsburg, Samuel
shelter whereby businesses were using technology to avoid their may be problematic for some states. State legislatures eager to
requirements and provided means for the statute to be appropriately Alito, and Neil Gorsuch. Justices Thomas and Gorsuch filed separate
physical presence and still sell their goods and services to a state’s increase tax revenues can end up discriminating against interstate
consumers.19 commerce or imposing undue burdens on interstate commerce.25
Wayfair Concurrence and Dissent Summaries

What is vital to understand is that Wayfair rejected the physical What is Next?
Justice Thomas’ Concurrence presence of Quill. However, the constitutionality of S.B. 106 was
For the parties involved in Wayfair, the next step is for the lower
In Justice Clarence Thomas’ concurrence in Wayfair, he offered his regret for not voting to overrule Bellas Hess in Quill. Only Justice White voted to not determined in its entirety. Instead, the Court held that S.B. 106
court to resolve those issues that the Court directed to resolve on
overrule Bellas Hess, and Thomas stated that he should have joined him in that dissent. Thomas explained in his concurrence that twenty-five years of
satisfied the substantial nexus requirement of Complete Auto as that
experience had taught him that Bellas Hess and Quill “can no longer be rationally justified.”21 remand. As the Court noted, since the issue of physical presence
requirement applied to Wayfair and remanded the case to the lower was the focal point of the case, and under the Quill standard the
Justice Gorsuch’s Concurrence
Justice Neil Gorsuch discussed the lack of cohesion between the concept of nexus in the dormant Commerce Clause and the Commerce Clause. court to ascertain whether all four prongs of the Complete Auto test lack of physical presence would have invalidated the law, other
He honed in on the mistake of his predecessors on the Court in creating a judicial tax break for out-of-state internet and mail-order companies at the are met.20 issues that arise with respect to satisfaction of the Commerce
expense of brick and mortar Main Street business. Justice Gorsuch underscored the need of the Court to do some housekeeping on the disconnect
Wayfair Winners and Losers Clause requirements were not briefed or litigated.26 Thus, the Court
between the Commerce Clause and the negative, or dormant, Commerce Clause. He noted that the dormant Commerce Clause cases suggest that
remanded the case to the lower court for a determination as to
Article III courts may invalidate state laws that offend no congressional statute. Justice Gorsuch noted, though, that how this can be reconciled with
So, who are the winners and losers in the fight over sales tax whether the law satisfies the Commerce Clause requirements that
the express language of the Commerce Clause or justified by stare decisis were questions for another day.22
collection? Tax attorney and author Mark Muntean says that brick it not discriminate against, or place an undue burden on, interstate
Chief Justice John Roberts’ Dissent in Wayfair
Chief Justice John Roberts wrote the dissent for the Court, joined by Justices Stephen Breyer, Elena Kagan, and Sonia Sotomayor. Although the and mortar businesses may be winners, while online retailers are the commerce. The law must still meet the applicable four-pronged test
dissenting opinion agreed that Bellas Hess was wrongly decided, the dissenters opined that it was Congress’ job to alter the physical presence rule.23 obvious losers (as well as consumers, who will pay additional taxes). of Complete Auto to satisfy its constitutionality. The Court did tip its
The dissent cited the fact that e-commerce is a significant component of our national economy. The dissenters believed that a disruption of the Brick and mortar stores will no longer be at a price disadvantage. hand when it listed the reasons that the law would be constitutional,
physical presence rule would serve to disrupt economic policy, of which Congress is in control.24
Muntean thinks that states may not be big winners, though. including noting the relative ease of its compliance requirements,
19. Id. at 411. 20. Id. at 427. 21. Id. at 428. 22. Id. at 428. 23. Id. 24. Id. at 432. 25. Mark Muntean, South Dakota v Wayfair: The Evolution of State Sales Tax, 2018 Emerging Issues 8655. 26. Wayfair, 201 L.
16. 2016 S.D. S.B. 106. 17. Id. 18. Wayfair, 201 L. Ed. 2d at 426. Ed. 2d at 426.
transactions across state borders, contains several simplification
Related Content and uniformity requirements that participating states must adopt to
remove or reduce the undue burdens on all sellers.
For an example on how the concept of nexus for out-of-state
retailers has been expanded by a state law that includes a safe The Court noted that “South Dakota’s tax system includes several
harbor threshold, see
features that appear designed to prevent discrimination against or
> SALES AND USE TAX CONSIDERATIONS (CT) undue burdens upon interstate commerce,” including membership
RESEARCH PATH: Tax > State and Local Tax > Sales, in the Streamlined Sales Tax Governing Board. The Court explained
Use, Property, and Local Taxes > Practice Notes
that, “[t]his system standardizes taxes to reduce administrative and
compliance costs: It requires a single, state level tax administration,
For a discussion on the nexus standard for out-of-state retailers uniform definitions of products and services, simplified tax rate
as a result of the increase in online shopping, see
structures, and other uniform rules. It also provides sellers access to
> SALES AND USE TAX CONSIDERATIONS (FL) sales tax administration software paid for by the State.”28
RESEARCH PATH: Tax > State and Local Tax > Sales,
Attorneys Carolynn S. Kranz and Iris M. Kitamura, who specialize in
the standardized system of collection that reduces administrative of $100,000 or 200 transactions. How does this impact other Use, Property, and Local Taxes > Practice Notes
local and state tax issues, assert that only states that have adopted
costs and burdens, its participation in the SSUTA, and its safe states with thresholds lower than South Dakota or that do not
the provisions of the SSUTA and have addressed retroactivity and
harbor threshold. have thresholds built in to the law? For small businesses doing For information on how a state can create legislation and
small business protection should be convinced that Wayfair is a win.
Other State Laws limited business across state lines, this can have significant impact. regulations to require out-of-state retailers to collect sales
The Court found that the South Dakota law was not a burden on taxes, see However, non-member SSUTA states, like Connecticut, Hawaii,
Currently, there are 31 states that have enacted laws that are similar,
interstate commerce in part because it did not place an undue > SALES AND USE TAX CONSIDERATIONS (MA) and Louisiana, that have not adopted the simplified SSUTA
but not necessarily identical, to that of South Dakota for imposing
burden on small businesses or small taxpayers engaged in a minimal RESEARCH PATH: Tax > State and Local Tax > Sales, framework that the Court noted provided certain protections,
collection responsibilities on sellers with respect to internet sales.
level of interstate activity. Whether the failure to incorporate a Use, Property, and Local Taxes > Practice Notes may face a challenge to any assertion that their economic
The decision in Wayfair does not give states a free pass, but requires
threshold level of activity in a law would affect the constitutionality nexus laws pass constitutional muster under Wayfair. The Court
that these states examine how closely aligned their laws are with the
or validity of the law remains an outstanding issue. For a description on the application of a click-through nexus warned that “[c]omplex state tax systems could have the effect
South Dakota law.
If Congress does decide to address the issue of marketplace fairness, law on out-of-state retailers, see of discriminating against interstate commerce.” Certainly, the U.S.
While remanding the case to the state court for a determination as Supreme Court’s decision in Wayfair should prompt more states to
the level of activity is one that would have to be worked out. With > SALES AND USE TAX CONSIDERATIONS (NY)
to the Commerce Clause, Justice Kennedy addressed concerns that consider adoption of the SSUTA. 29
modern technology and the relative ease of reporting, particularly in RESEARCH PATH: Tax > State and Local Tax > Sales,
South Dakota’s tax system could result in discrimination against,
those states that participate in the SSUTA, even the low threshold Use, Property, and Local Taxes > Practice Notes Congressional Action?
or undue burdens on, interstate commerce. In his opinion, Justice
level of $100,000 would most likely not unduly burden relatively
Kennedy noted that South Dakota has a standardized collection Congress has been given the opportunity in recent years to apply a
small sellers. For best practice guidance on when an out-of-state retailer is
mechanism built in to it, and the state’s tax system includes several uniform standard to the issue of marketplace fairness and remote
required to collect and remit sales taxes to a state, see
mechanisms to prevent discrimination against, or undue burdens on, Retroactive Application? sellers. Although several bills have been introduced to address
> SALES AND USE TAX CONSIDERATIONS (OH)
interstate commerce.27 The Court was supportive of South Dakota’s Another consideration for practitioners in other states is whether the issue, none has made it out of the House or Senate. In light of
sales tax law because the state took steps to ensure that the RESEARCH PATH: Tax > State and Local Tax > Sales,
the standard enunciated by the Court can be applied retroactively. Wayfair, Congress might want to consider the need for uniformity
Use, Property, and Local Taxes > Practice Notes
Commerce Clause was not violated. Among the steps taken were: Although it is not a consideration in South Dakota, whose law and consistency in multistate transactions, particularly those
■■ South Dakota provided out-of-state retailers with free software provides for prospective only application, some practitioners conducted in e-commerce.
For an exploration on what creates sufficient nexus between a
to assist them in complying with its sales tax. South Dakota has have expressed concerns that those states that are searching for
seller and the state to subject the seller to sales tax liability, see Muntean suggests that online retailers may look to Chief Justice
a single, centralized tax collection agency, and taxpayers are not much needed revenue and that do not have a built-in prospective
> SALES AND USE TAX CONSIDERATIONS (TX) Roberts’ dissent for their best strategy going forward.
required to deal with individual city or county taxing authorities application will aggressively seek to have the Wayfair decision
applied retroactively. Despite retroactivity not being an issue in this RESEARCH PATH: Tax > State and Local Tax > Sales, The Chief Justice noted that Congress has in fact been considering
to collect and remit local taxes.
case, Justice Kennedy’s majority opinion did note that the South Use, Property, and Local Taxes > Practice Notes whether to alter the rule established in Bellas Hess for some time.
■■ As a participating member state in SSUTA, South Dakota
Dakota law is prospective only, but he did not elaborate on what . . . In 2018, three bills addressing the issue were pending in
has adopted a simplified and uniform mechanism to alleviate
this meant with respect to earlier transactions. If, as the majority Congress. The Chief Justice stated that the Wayfair decision does
compliance burdens for multistate taxpayers in the sales and use
indicated, Quill was a misapplication of substantial nexus, and the nothing to stop Congress from continuing to seek a legislative
tax realm. Compliance Issues?
standard should not have required physical presence, then to what solution. . . . Congress may consider a national solution, such as
Safe Harbor Threshold extent can the law exclude the physical presence requirement in The Court found that the state's participation in the SSUTA a national sales tax, preempting state sales tax all together. The
One of the considerations as to the constitutionality of the South determining substantial nexus? Although it seems unlikely that any reduced the potential to impose undue compliance burdens. The revenue from a national sales tax could be remitted back to the
Dakota law was the fact that the law has a safe harbor threshold law would be applied retroactively, the possibility remains open. SSUTA, which simplifies compliance for taxpayers who engage in states on an equitable basis.30
27. Id. at 425. 28. Id. at 426-427. 29. Carolynn S. Kranz and Iris M. Kitamura, Streamlined Sales Tax States Win, Will Others Follow Their Lead?, 2018 Emerging Issues 8657. 30. Muntean, supra note 25.
Practice Trends | Lexis Practice Advisor® Data Security and Privacy
Impact of Wayfair on State and Local Income Taxes additional compliance will be required to the extent that there are
While the Wayfair decision applies to the imposition of sales over 9,000 taxing jurisdictions and a myriad of exemptions and
taxes, Professor Charles Swenson foresees potential income tax exclusions depending on jurisdictions. Relatedly, the practitioner
implications as well. may need to guide the client through exemption certificates and
In the past, states have generally applied a physical presence collection responsibilities for each new jurisdiction.34 A
standard to income tax nexus. States have modified this to the
extent that a company’s affiliates or agents have such physical Mark Muntean, J.D., LL.M. Taxation (Georgetown) is a business and Nolan Goldberg and Anisha Shenai-Khatkhate PROSKAUER ROSE LLP
presence. But states have also increasingly used an economic tax lawyer in the San Francisco Bay Area of California with nearly 40
Ransomware Planning
nexus standard, whereby the company is deemed to have enough years of experience in federal, state, and international tax matters.
activities in the state as exhibited by significant activities in the state He represents clients in connection with IRS and state tax matters,
aimed toward establishing and maintaining a market. As a result, a excise tax matters, criminal tax issues, mergers and acquisitions,
and Response Best Practices

number of states have adopted factor presence nexus, whereby
31
private equity, and other business law matters. Mr. Muntean is
nexus is established if sales exceed a certain threshold. With the
a regular contributor to the Lexis Quarterly Tax Journal, is the
language and logic in Wayfair, states may feel more emboldened to
co-author of Ballantine & Sterling California Corporate Laws
employ similar laws. This may be enabled by state department of
revenue data showing which companies filed sales tax returns in a (Matthew Bender), and is the author of Business Organizations:
state under new Wayfair-based sales tax laws. The practitioner and Professional Corporations and Associations (Matthew Bender). Ransomware attacks have become a prevalent cybersecurity threat. These attacks pose
companies should, in addition to monitoring state rules on sales tax, Charles Swenson, CPA, PhD, is Professor and Leventhal Research significant legal and financial risks to both individuals and organizations. This article addresses
keep a wary eye on income tax law changes as well.32 Fellow at the Marshall School of Business at the University of
steps to take to minimize the risk of a ransomware attack and reduce the harm that a successful
Guidance for Businesses and Their Legal Counsel Southern California. He is also the co-founder of IITGDiscover.com.
An author of more than 50 articles and books, he is General Editor attack can cause.
Kranz and Kitamura provide this advice for businesses who are
of Bender’s State Taxation: Principles and Practice (Matthew
unsure on how to proceed after Wayfair.
Bender). Carolynn Kranz is the founder and managing member of What Is Ransomware?
From a practical standpoint, businesses should closely follow
Kranz & Associates PLLC (www.saltattorneys.com), a boutique law
what the individual sales tax states are doing legislatively and Ransomware is a form of malicious software (malware)
firm specializing in state and local tax matters in the 50 states and installed by a hacker that blocks access to files on an infected
administratively. They should plan for implementation of sales tax
collection. And most importantly they should, through advisors, District of Columbia. She is also the founder and managing member computer or network until the victim pays the hacker a fee or
proactively reach out to state taxing authorities for guidance. In of Industry Sales Solutions, LLC, a company that offers a subscription ransom. The malware often disables access using one of the
this time of transition, where the state sales and use tax landscape database containing the sales and use taxability of software related following methods:
has been turned upside down, taxpayers need the certainty that transactions. In addition to her sales and use tax expertise, Carolynn ■■ Encryption. The ransomware software encrypts whatever
they will receive only by engaging in discussions with the states has significant experience in state and local income / franchise files it can access and informs the user that access will be
that are proceeding based on Wayfair.33 tax, as well as federal tax matters. Iris Kitamura is an associate at restored in return for a demanded sum.
Professor Swenson urges legal counsel to work with their business Kranz & Associates, PLLC, a law firm specializing in state and local ■■ Lock-out. Another method involves locking victims out of
clients to ensure that their clients’ sales tax software will meet the tax consulting. Iris specializes in state and local tax matters on a their operating systems so that the victims cannot access
requirements of Wayfair. multistate basis, particularly in the area of sales and use taxes. anything on their computers.
Practitioners will need to monitor state tax authorities’ actions to She has over 15 years of experience in state and local taxation and
Hackers typically demand payment in Bitcoin or other
see if and when sales threshold rules are put into place. Unlike contributes to the LexisNexis publication State Tax Guide to Digital cryptocurrency because these forms of payment are difficult to
nexus studies in the past where a more complex set of criteria Content and Cloud Services, and co-authored “Taxing Software trace. Hackers often impose a deadline for making payment,
were examined, going forward practitioners will now need to and Cloud Computing: Yesterday’s Law and Today’s Technology,” claiming that if a victim does not pay by a certain date, the
advise their clients to keep track of sales by state to see if state
Tax Analysts Special Report (2011). hacker will permanently destroy the hijacked files or increase
sales thresholds are exceeded, in which case those clients would For example, a hacker may display the FBI logo along with a
the amount of the demanded ransom. These time-sensitive
be required to collect tax. To the extent that clients are already false message that illegal download or file-sharing activity was
tactics reinforce the importance of preemptively developing
using software to administer sales taxes, the scope of such detected on the computer, and the victim must pay a fee to
and training on a response and recovery plan as there may not
software may have to be expanded to the extent the client has RESEARCH PATH: Tax > State and Local Tax > Sales, Use, regain access.
be time to responsibly develop and execute a plan when an
new states requiring sales tax collection. And for those new states, Property, and Local Taxes > Practice Notes
attack occurs. Each year, the frequency of these attacks increases. Some of
Often hackers fraudulently use law enforcement images, the criminals behind these attacks are countries desperate for
31. California (Cal. Rev. & Tax. Code § 23101(b)), Colorado (Colo. Rev. Stat. § 39-22-301(2)), Connecticut (Conn. Gen. Stat. § 12-216a(a), Informational Publication 2010 (29.1)), New York (N.Y. Tax Law messages, or symbols in a ransomware attack to make victims hard currency. For example, North Korea is widely believed
§ 209(1)(b)), Ohio (Ohio Rev. Code Ann. § 5751.01(I)), and Washington (Wash. Rev. Code Ann. § 82.04.067). 32. Charles Swenson, A New Paradigm for Sales Tax: The Wayfair Decision and Nexus, 2018
Emerging Issues 8656. 33. Kranz and Kitamura, supra note 29. 34. Swenson, supra note 32. believe they are obligated to pay due to their own wrongdoing. to have been behind the worldwide WannaCry attacks in
2017. However, ransomware authoring tools are available on Preventing a Ransomware Attack
the internet. As a result, a relatively unskilled criminal can
A company risks being harmed twice when an attack occurs.
undertake a complex attack. In addition, the rise of anonymous
First by the attack itself, and then by the litigation and …emails with malicious links
cryptocurrencies makes it difficult to track the ransom
regulatory consequences that may follow. However, these or attachments are among
payment to the criminal.
difficulties are not insurmountable. Companies can take
the most common methods on
Key Ransomware Risks affirmative steps to lower the risk of ransomware attacks
occurring, mitigate the potential damage resulting from which hackers rely to infect
While ransomware is difficult to prevent, recovering from
an attack, and meet their legal obligations to implement
a successful attack can be even more difficult. Typically, a computers with ransomware.
reasonable security measures discussed above, including:
ransomware attack’s sole purpose is to force its victim to give
money to a hacker. Similar to any other criminal extortion ■■ Developing ransomware policies and procedures
scheme, the impact to victims can be far more severe than the ■■ Conducting ongoing training on preventing and responding
actual cost of the demanded ransom. to ransomware attacks might require an organization to run scans for unpatched
vulnerabilities once every quarter. The standard could provide
A ransomware victim could permanently lose irreplaceable data ■■ Utilizing technology to help detect and defend against
that for a particular system, the company must use a certain
and may suffer a disruption in the ability to conduct business. attacks
tool to conduct the scan and follow specific instructions to
In extreme circumstances, that disruption can have severe ■■ Implementing business continuity processes to minimize correctly undertake the scan.
consequences to the public. For example, in 2017, computers the risk of disruption
Set Appropriate Security Levels
belonging to the National Health Service (NHS) in England and
Develop Policies and Procedures to Prevent Ransomware
Scotland were paralyzed by a WannaCry ransomware attack. As Ensure that the security program sets out the appropriate
Attacks
a result, the NHS couldn’t access patient files, and its ability level of security required to reasonably guard each type of data
to provide patient care was disrupted. Even in less severe A robust cybersecurity policy typically sets forth broad security against cybersecurity threats. If the level of security is set
requirements that apply throughout an organization, including: too low for the types of data stored, then the entire security
situations, when knowledge of the attack becomes public, the
program may found to be unreasonable. If the level of security
harm to consumer confidence and the resulting brand damage ■■ Information security
is set too high, then the security program may unnecessarily
can be extreme. ■■ Data governance and classification burden the organization financially and unreasonably interfere
Victims do not always regain access to their data after ■■ Asset inventory and device management with the company’s core operations.
making the demanded payment. In many cases, hackers stop
In addition, health care providers are subject to cybersecurity ■■ Access controls and identity management Consider Industry Standards
corresponding after a victim has paid the ransom, and the
obligations under the Health Insurance Portability and
victim is never able to regain access to their files. ■■ Business continuity and disaster recovery planning and Most major industry security standards and specifications
Accountability Act of 1996 (HIPAA). The HIPAA Security Rule
resources have already considered the ransomware threat, including
Legal Obligations requires various administrative, physical, and technological
those published by the Payment Card Industry (PCI) Security
safeguards to protect the security of electronic protected health ■■ Systems operations and availability concerns
Given the foreseeability of ransomware attacks and the Standards Council and the National Institute of Standards
information.2 It is expressly up to individual organizations ■■ Systems and network security and Technology (NIST). As a result, a company should
likelihood of severe consequences should an attack occur,
companies may be legally required to include a formal to decide what safeguards would be most reasonable and ■■ Systems and network monitoring benchmark the level of security required by its security policy
ransomware prevention and response program in their appropriate for their specific organizations. Like the FTC, 3
against industry standards that apply to the types of data the
■■ Systems and application development and quality assurance
cybersecurity risk management plans. the U.S. Department of Health and Human Services (HHS) organization is trying to protect.
has interpreted that these HIPAA regulations extend to ■■ Physical security and environmental controls
For example, the Federal Trade Commission (FTC) often acts
The Policy Should be Practical
ransomware, stating, “The HIPAA Security Rule requires ■■ Customer data privacy
against companies that it believes have not implemented Drafting an appropriately calibrated security policy is not
implementation of security measures that can help prevent the
reasonable measures to detect and prevent unauthorized access ■■ Vendor and third-party service provider management enough to provide reasonable security. The policy must be
introduction of malware, including ransomware.”4
pursuant to its authority under Section 5 of the Federal Trade ■■ Risk assessment procedures followed in practice. You should conduct regular internal or
Commission Act, which prohibits unfair or deceptive practices Similarly, certain states have enacted laws requiring businesses third-party audits of your organization’s compliance with the
■■ Incident response (discussed below)
in the marketplace. In a speech on September 7, 2016, FTC dealing with personal information to implement and maintain security policy and take appropriate corrective action to prevent
Chairwoman Edith Ramirez confirmed that the prevention of reasonable security measures to protect personal information The policy should also describe the various types of data future missteps. In addition, you should periodically revisit and
from potential cyberattacks. In many cases, these laws also that might be stored by a company and identify the general revise your policy as security standards evolve over time.
ransomware fell within this obligation when she stated, “A
measures the company should undertake to protect each type
company’s unreasonable failure to patch vulnerabilities known will likely impose obligations that encompass ransomware Conduct Training
of data.
to be exploited by ransomware might violate the FTC Act.”1 prevention.
Companies should regularly educate and train employees
Detail the Specifications and Standards
who will have data security responsibilities on the threat
Specifications and standards describe the specific procedures of ransomware and the policies in place to help prevent
1. Opening Remarks of FTC Chairwoman Edith Ramirez, September 7, 2016, https://www.ftc.gov/system/files/documents/public_statements/983593/ramirez_-_ransomware_remarks_9-7-16.pdf.
2. See 45 C.F.R. §§ 160, 162, and 164. 3. 45 C.F.R. § 164.306(b). 4. Fact Sheet: Ransomware and HIPAA, https://www.hhs.gov/sites/default/files/RansomwareFactSheet.pdf. needed to implement the policy. For example, a security policy ransomware attacks.
For example, emails with malicious links or attachments are the download. When the software recognizes that the website
among the most common methods on which hackers rely to Related Content has a low reputational score, it will block access to that site.
infect computers with ransomware. As a result, companies Installation Considerations
typically implement the following basic training of proper For information on planning for and responding to data
breaches, see Consider where in the network the detection software should
email practices as a ransomware deterrent:
> DATA BREACH PLANNING AND MANAGEMENT be installed. One common approach is to install software on
■■ Avoid opening attachments and clicking on links in emails the user’s computer itself (endpoint approach). The drawback
RESEARCH PATH: Data Security & Privacy > Data
from unknown or suspicious senders of this approach is that the malicious software is allowed into
Breaches > Planning > Practice Notes
■■ Delete emails from unfamiliar senders without opening any the company’s network, and if the detection software misses it
attachments and without clicking any links at the endpoint, there are no further opportunities to block it
For a list of steps to take to take to safeguard websites and IT
from running.
■■ If an email arrives from a known sender, but appears systems against malicious attacks, see
suspicious, verify that it is actually from the person it claims > PREVENTING ATTACKS ON IT SYSTEMS AND Alternatively, companies install security software or hardware
to be from before opening any attachments or clicking on WEBSITES CHECKLIST between the endpoint and the internet (gateway approach).
any links RESEARCH PATH: Data Security & Privacy > Data Using this technique, the malicious email can be detected
Breaches > Planning > Checklists before it arrives at the endpoint. And if the malware does evade
■■ Be especially cautious about enabling macros if the email
detection, there is still a second chance to detect it if endpoint
requests it
For examples of internal policies regarding data security best detection software is used in combination with the gateway
A company also should document its compliance with its practices, see software.
training programs to use as a defense of its efforts to provide > CYBERSECURITY RESILIENCE IMPLEMENTATION Network Design Considerations
reasonable security in any future litigation. PLAN AND WRITTEN INFORMATION SECURITY
PLAN Consider designing a network in a way that minimizes the
Implement Detection and Security Technology harm an infection can cause if ransomware evades security
RESEARCH PATH: Data Security & Privacy > different type of behavioral analysis can address that problem
Early detection is essential to preventing ransomware safeguards. One useful approach is segmentation, where a
Cybersecurity Risk Management > Forms
by observing how a system behaves during normal operations
from taking control of a system or network. Typically, single physical network is split up into many separate virtual
and then building a model of that expected behavior. When networks and communications across these virtual networks
however, standard anti-virus software cannot reliably detect
For a detailed discussion about the Federal Trade Commission’s observed behavior diverges from that model, the detection
ransomware. Anti-virus software generally searches for an are heavily restricted. If one network is compromised, the harm
(FTC) role in regulating and protecting consumer privacy, see
software can presume that the code causing that divergence is is minimized because the infection typically cannot reach the
exact match to the codes of particular known viruses. However,
> FTC DATA SECURITY GUIDANCE AND ENFORCEMENT malware and then block and flag it for further evaluation. This
hackers can easily make small changes to the code to avoid other networks.
RESEARCH PATH: Data Security & Privacy > technique allows the behavioral analysis to detect new malware
detection by traditional pattern-matching methods.
Cybersecurity Risk Management > Practice Notes Access Restrictions
whose malicious behavior has not been previously modeled.
As a result, companies often employ the following two Companies can restrict user permissions to the minimum
detection techniques that are generally more effective against
Reputational Analysis
For more guidance on state laws regarding data protection necessary for specific employees to perform their jobs. If a user
ransomware: obligations, see Reputational analysis allows a company to leverage threat can access only certain databases and not others, then it is
> DATA BREACH NOTIFICATION ENFORCEMENT AND intelligence collected by a third-party security provider through less likely that an infection of the user’s computer will impact
■■ Behavioral analysis
PENALTIES STATE LAW SURVEY, IDENTITY THEFT its various intelligence channels (e.g., other customers and law the databases to which the user has no access. Limiting the
■■ Reputational analysis STATE LAW SURVEY, PROTECTION OF PERSONAL applications that a user can install and use may also prevent
enforcement). For example, detection software provided and
INFORMATION IN GOVERNMENT RECORDS STATE
Behavioral Analysis updated by a particular security provider can use the provider’s the inadvertent execution of malicious code.
LAW SURVEY, AND THIRD-PARTY DISCLOSURE OF
Under the behavioral analysis method, detection software PERSONAL DATA STATE LAW SURVEY reputational database that collects information from other Business Continuity Measures
evaluates how specific software code behaves when it executes RESEARCH PATH: Data Security & Privacy > State customers that previously downloaded malware.
Companies and institutions should also consider ransomware
(i.e., operates). If the detection software identifies behavior Law Surveys and Guidance > Privacy & Data Security When another customer of that security provider downloads when formulating incident response and business continuity
typically associated with malware, it can block that code and State Law Surveys > Practice Notes
ransomware from a website, the URL of the malicious website plans. Such plans should consider, for example:
flag it for closer analysis. For example, the detection software can be flagged in the provider’s reputational database and
■■ The internal methods for containing a ransomware attack
could look for encryption activity, which might be a symptom given a reputational score. This score may change over time
of executing ransomware. The software could then quickly ■■ Implementation of alternative means of accessing crucial
technique, the detection software can observe behavior and to reflect an increased risk as the security provider finds
block the execution of that code before it can fully encrypt the systems and data in case access to the primary systems is
additional infections that are associated with that source. The
identify malware before it harms the network or system. disrupted (e.g., database mirroring)
company’s data and reverse the relatively minor damage that security provider can then make this database of crowdsourced
the ransomware inflicted. One challenge with looking for known bad behavior is that the information available to all its customers. If an employee, ■■ Conducting regular penetration tests and vulnerability
Alternatively, prior to executing the unknown code on a user’s detection software will not always know how the suspected unaware of the impending danger, attempts to download assessments
computer, the detection software could instead first execute malware will behave and, as a result, will fail to recognize content from the malicious website, the detection software will ■■ Ensuring that data backups are separately secured from
that code in a virtual environment called a sandbox. Using this the presence of malicious code until it is too late. However, a first check the provider’s reputational database before allowing cybersecurity threats
While no court or legislature has specifically addressed the The statute describes several factors that can be considered
Related Content legality of paying the demanded ransom to a hacker, the FTC when determining if data has been acquired:
notes that law enforcement does not recommend paying the
■■ Information is in the physical possession and control of a
For the key issues to consider before purchasing a policy ransom.5 In addition, the hacker may not necessarily return
person without valid authorization, such as a lost or stolen
insuring against losses that result from cybersecurity breaches, access to the victim’s files upon receipt of the ransom payment
see computer or other device containing information
as discussed above.
Responding to a Ransomware Attack > CYBERSECURITY INSURANCE INITIAL ■■ Information has been downloaded or copied
CONSIDERATIONS Contact Law Enforcement
Even with the best cybersecurity measures in place, ■■ Information was used by an unauthorized person, such as
RESEARCH PATH: Data Security & Privacy > Regardless of whether you decide to pay the ransom, you
ransomware attacks are not completely preventable. fraudulent accounts opened or instances of identity theft
Cybersecurity Risk Management > Practice Notes should contact law enforcement for assistance and take a
Responding to an incident is a critical part of a reasonable reported
screenshot or photograph of the ransom note for the police
security effort and should be memorialized in a company’s ■■ Information has been made public, such as posting on a
For assistance in drafting a comprehensive data breach investigation. At a minimum, filing a police report creates
incident response plan. A company’s response should consider: website
avoidance plan, see an evidentiary record if you file a claim under an existing
■■ Best practices for identifying, containing, and removing the > DATA BREACH AVOIDANCE AND RESPONSE PLAN cybersecurity insurance policy. In light of this guidance, ransomware may not be considered a
infection, including whether to pay the demanded ransom CHECKLIST data acquisition under Vermont’s statute. However, guidance
Consider Breach Notification Laws
■■ Whether the incident is a breach requiring notice to RESEARCH PATH: Data Security & Privacy > provided by the HHS in the context of HIPAA, which also
Determine whether the incident is a breach that requires you
customers or regulators Cybersecurity Risk Management > Checklist relies on the data acquisition standard, advocates the opposite
to provide notice to affected customers or regulators. Fulfilling
conclusion:
Contain the Attack the notice requirement may turn a matter into a public
For an overview of the General Data Protection Regulation, see When electronic protected health information (ePHI) is encrypted
incident, which can result in far more risk for an organization.
You should deploy cybersecurity professionals as soon as
> GENERAL DATA PROTECTION REGULATION (GDPR) The issue of whether ransomware requires public notice is as the result of a ransomware attack, a breach has occurred
possible to help identify, contain, and remove the infection, as AND MANAGING DATA SECURITY BREACHES UNDER
not straightforward, as it falls into an area where the various because the ePHI encrypted by the ransomware was acquired
well as attempt to recover impacted data. During this phase: THE GENERAL DATA PROTECTION REGULATION
sources of notice obligations appear to disagree. (i.e., unauthorized individuals have taken possession or
(GDPR)
■■ Identify the source and type of infection control of the information), and thus is a disclosure not
RESEARCH PATH: Data Security & Privacy > The simplest case is where a notice statute defines breach as
permitted under the HIPAA Privacy Rule.
■■ Remove the ransomware from the network or system International Compliance > General Data Protection including mere access to personal information (PI) alone. For
Regulation (GDPR) > Practice Notes example, New Jersey’s data breach law defines a data breach as: Unless the covered entity or business associate can
■■ To the extent possible, reverse the damage inflicted by the
demonstrate that there is a “ . . . low probability that the
ransomware to restore access to the lost or compromised unauthorized access to electronic files, media, or data
PHI has been compromised,” based on the factors set
data containing personal information that compromises the
forth in the Breach Notification Rule, a breach of PHI is
security, confidentiality, or integrity of personal information
■■ Where impacted data cannot be directly recovered, restore presumed to have occurred. The entity must then comply
unnecessarily generating documents that could be later used by
when access to the personal information has not been secured
the data from available back-ups with the applicable breach notification provisions, including
an adversary to support a liability claim.
by encryption or by any other method or technology that
Ensure the ransomware has not already infected the data notification to affected individuals without unreasonable
Under the dual-purpose doctrine, where applicable, the renders the personal information unreadable or unusable.6
backups. Sophisticated attackers sometimes lurk in the infected delay, to the Secretary of HHS, and to the media (for
existence of a business purpose does not prevent a lawyer’s
It appears straightforward that ransomware accesses PI when it breaches affecting over 500 individuals) in accordance with
system for some time before taking any malicious action. Under analysis from receiving privilege or work-product protections.
encrypts that data, and thus, notice likely must be provided. HIPAA breach notification requirements. See 45 C.F.R.
this approach, backups may also become infected. As a result, companies often desire to have counsel (including
Where the statute defines a breach in terms of data acquisition, 164.400-414.8
In many cases it is prudent to use third-party specialists rather outside counsel) retain and supervise the work of third-party
investigators. Similarly, the output of this analysis (e.g., the notice issue becomes more complex. While hackers Accordingly, organizations cannot rely on the data acquisition
than internal resources to assist in ransomware recovery, as
privileged reports) should be appropriately marked and their typically do not view or take the PI, there appears to be standard alone to conclude that notice is not required and
these specialists generally have more familiarity with these
use restricted. In certain cases, particularly where litigation some disagreement on whether a ransomware attack can be must instead look to how that term has been construed in each
types of attacks and have access to specialized tools.
is foreseeable, companies prefer taking a dual track approach considered a data acquisition. particular context.
Engage Legal Counsel where privileged and non-privileged investigations run side by For example, Vermont’s data security law defines a data breach Other notice statutes define a data breach in terms of an access
Given the need for attorneys to analyze relevant breach side, each with an appropriately tailored scope. as the: or acquisition, but also require some showing of specific harm
notification statutes (discussed below) and the possibility Determine Whether to Pay the Ransom to the public. For example, the EU’s General Data Protection
unauthorized acquisition of electronic data or a reasonable
of regulatory inquiry, you should engage legal counsel belief of an unauthorized acquisition of electronic data that Regulation (GDPR) imposes a 72-hour notification rule that
When undoing the damage caused by a ransomware attack is
immediately on learning of a ransomware attack. compromises the security, confidentiality, or integrity of a applies to situations where personal data is accessed. The GDPR
not possible (e.g., unbreakable encryption, or no back-ups
Legal counsel should consider that these incident-response available) companies are forced to consider whether to pay the consumer’s personally identifiable information maintained requires notification to local data protection authorities and
activities can be protected by privilege or work-product ransom. Even if recovery is theoretically possible, paying the by the data collector. 7
to consumers. However, notification is only required where
protections. While it is often necessary following an attack to ransom may seem an attractive option compared to the costs of
understand if a company might have done something wrong restoring files from a backup, lost productivity, and the harm
5. How to Defend Against Ransomware, https://www.consumer.ftc.gov/blog/2016/11/how-defend-against-ransomware. 6. N.J. Rev. Stat. § 56:8-161. Emphasis added. 7. 9 Vt. Stat. Ann. tit. 9, § 2430
to allow the attack to occur, care needs to be taken to avoid that could result should the incident become public. Emphasis added. 8. FACT SHEET: Ransomware and HIPAA, https://www.hhs.gov/sites/default/files/RansomwareFactSheet.pdf. Emphasis added.
Practice Trends | Lexis Practice Advisor® Corporate and M&A
the breach resulted in a risk to the rights and freedoms of information arising from cyberattacks. The reasonable efforts
consumers. So, while the EU’s data regulations impose a breach standard rejects requirements for specific security measures
notification requirement, whether any particular ransomware (such as firewalls, passwords, and the like) and instead adopts
Christopher Donovan,
attack caused enough harm to trigger this notification is a fact- a fact-specific approach to business security obligations that
Heidi Jeffery,
specific inquiry. requires a process to assess risks, identify and implement
Nathaniel Lacktman,
appropriate security measures responsive to those risks, verify
Recently, regulators have expressed interest in amending and Melesa Freerks
that they are effectively implemented, and ensure that they are
existing data breach notification laws to expressly require FOLEY & LARDNER LLP
continually updated in response to new developments.11
notice of ransomware attacks. For example, North Carolina
Telemedicine and Digital Health:

introduced a bill in January 2018 to amend its data breach The opinion also provides a list of factors to consider when
notification laws to expressly cover ransomware: determining the severity of the preventive measures that must
be implemented to fulfill this obligation, including the:
Any incident of unauthorized access to or acquisition of
Strategic Opportunities and

someone’s personal information is a breach. The new ■■ Sensitivity of the information
definition will now include Ransomware attacks—these are
■■ Likelihood of inadvertent disclosure
when personal information is accessed but is not necessarily
■■ Cost and difficulty of implementing safeguards
acquired. As a result, the breached organization must notify
both the affected consumer(s) and the Attorney General’s
office. This will empower the affected person and the
Attorney General’s Office to determine the risk of harm—
■■ Extent to which the safeguard will impede the lawyer’s
ability to represent their client Legal Considerations for
Private Equity Investment
Given the foreseeability of ransomware threats, lawyers should
not the breached organization.9
interpret the ethical obligation to prepare for cyberattacks to
Unlike in other types of data breaches, a company may not be include measures to defend against ransomware. A
able to identify with particularity the identity of the impacted
data subjects while the data is inaccessible. Without access Nolan Goldberg is a litigator with Proskauer Rose LLP, whose
THIS ARTICLE ASSESSES THE CHARACTERISTICS OF THE
to the data, a company may not be able to determine with practice focuses on matters that have complex computer
precision which particular breach notification statutes have technology-related issues, including cyberlaw, patent and trade digital health industry and examines whether the market is
been triggered. In these circumstances, a company may need secret litigation, and commercial disputes. In the context of data ripe for notable private equity investment. The broad scope
to make good faith decisions to meet these obligations as best security, Nolan uses his electrical engineering background, coupled of digital health includes categories such as mobile health,
as it is able (e.g., provide substitute notice) and be prepared to with a litigation and risk management-centric focus, to assist health information technology, wearable devices, telehealth
defend its response before applicable regulators. companies in all phases of incident response. Nolan often acts as
and telemedicine, and personalized medicine. After several
Finally, be aware of the increasing recognition that ransomware a bridge between the technical and legal response teams (both
years of exponential growth, the telemedicine and digital
harms consumers.10 If regulators or courts accept this theory of inside and outside forensic consultants) and uses this intimacy with
health industry has reached an inflection point—moving
consumer harm in connection with a ransomware attack and the facts to develop defenses and strategies that might otherwise
be overlooked or less effective. And when it comes time to defend from infancy to adolescence—as consumer-oriented digital
the harm is more easily quantifiable, an influx of ransomware-
related class action lawsuits may result similar to other types of the company in litigation or before the regulators, Nolan uses health care solutions gain popularity and traditional health
data breach-related lawsuits. this deep familiarity with the company and its systems to great care providers turn to virtual care. Naturally, investment in
effect. Nolan is certified by the International Association of Privacy digital health companies has seen a corresponding increase,
Ethical Obligations for Lawyers Professionals as a Certified Information Privacy Professional (CIPP)
primarily led by venture capital. But with the increasing size of
Law firms, with large repositories of sensitive and valuable and a Certified Information Privacy Technologist (CIPT). Nolan is
venture investments deployed into fewer emerging companies,
client data, are tempting targets for hackers and attacks of all also frequent author and speaker on the intersection of technology
and law. Anisha Shenai-Khatkhate is an associate in the Litigation telemedicine is just now starting to gain the interest of
types, including ransomware. As a result, lawyers are under an
ethical obligation to take the necessary steps to protect client Department at Proskauer Rose LLP. Her practice focuses on matters private equity. Moreover, a handful of notable mergers could
data from these types of attacks. pertaining to intellectual property and privacy law. signal more industry consolidation, another sign of market
The ABA Standing Committee on Ethics and Professional maturation in this still nascent industry. Clearly, many health Recent Private Equity Activity in the Digital
Responsibility Opinion 477R (Revised May 22, 2017) imposes care institutions are investing in telemedicine and digital Health Space
a fact-specific obligation on lawyers to undertake “reasonable RESEARCH PATH: Data Security & Privacy > Cybersecurity health (including via their own venture funds), if only to
Companies that have proven themselves early successes
efforts to prevent inadvertent or unauthorized access” to client Risk Management > Practice Notes remain competitive. What is it that has venture capital, private in digital health are maturing out of their initial stages of
equity, and other players so interested in digital health? And development. These companies seek capital investment not
9. Act to Strengthen Identity Theft Protections, http://ncdoj.gov/CMSPages/GetFile.aspx?nodeguid=89988b8d-2bbe-4854-bc7f-a77cfc4b38b2&lang=en-US. 10. Ransomware: A Closer Look, https://www. what are the key legal considerations an investor should note to fund the development of their idea, but instead to fuel
ftc.gov/news-events/blogs/business-blog/2016/11/ransomware-closer-look). 11. Opinion 477R (Revised May 22, 2017), https://www.americanbar.org/content/dam/aba/administrative/professional_
responsibility/aba_formal_opinion_477.authcheckdam.pdf. when evaluating a telemedicine or digital health investment? marketing and business development to expand their service
into new geographies. As a result, digital health is no longer industry characteristics have emerged, signaling the time Regulatory and Reimbursement Changes Support
exclusive to venture capital, as private equity firms and larger is right for investment opportunities. These characteristics Investment in Digital Health Related Content
companies have begun to enter the field, targeting digital include, but are not limited to: Recent changes in the regulatory and reimbursement landscape
health companies that have demonstrated that they are For a discussion of the legal considerations applicable to
■■ A reasonable history of financial performance. Several also support the rise in investment in the telemedicine and physician practice acquisitions, see
more than just cash flow positive and are in fact profitable,
digital health industry. Some of these changes include:
heating up deal activity. In 2017, roughly 224 companies made companies within the telemedicine and digital health > PHYSICIAN PRACTICE ACQUISITIONS: AVOIDING
funding announcements constituting just over $5 billion in industry maintain a start-up mentality but have realized ■■ In 2018, the President signed into law the Bipartisan Budget LEGAL PITFALLS
investments. This was roughly twice the amount announced in the history of financial performance necessary for outside Act, which introduced some of the most significant changes RESEARCH PATH: Corporate and M&A > M&A by
2016. Several notable deals include: ever made to Medicare law to use telehealth, including Industry > Healthcare M&A > Practice Notes
investment and should no longer be considered start-ups.
eliminating rural restrictions for certain services and
■■ Modernizing Medicine, which makes a mobile-based
■■ Scalability. Some digital health companies have obtained allowing Medicare reimbursement for telehealth while the
electronic health record for specialists, raised $231 million For an overview of factors applicable to participants in
scalability through previous alignments and are able to patient is located at his/her home (something previously Medicare and Medicaid during a health care M&A transaction,
from global private equity firm Warburg Pincus.
demonstrate to sophisticated investors how they will drive never allowed). Some of the changes become effective see
■■ GTCR, a leading private equity firm, acquired GreatCall, in 2019 while others go live in 2020. Either way, the law > MEDICARE AND MEDICAID CHANGE OF
future growth. Furthermore, they can demonstrate how to
Inc., the largest provider of connected health and personal marks significant expansion of telehealth reimbursement, OWNERSHIP CONSIDERATIONS IN HEALTHCARE
deliver a digital product in a manner that is cost-efficient
emergency response services for senior citizens, serving particularly for stroke and dialysis services. INDUSTRY M&A
and offers a high-quality user experience. Health plans
more than 800,000 subscribers across the United States. RESEARCH PATH: Corporate and M&A > M&A by
■■ States continue to pass laws requiring health insurance plans
and hospitals also seem to support the industry through Industry > Healthcare M&A > Practice Notes
■■ Verily, the Alphabet subsidiary formerly known as Google to reimburse for services delivered via telehealth in the same
adoption of various digital health technologies. The
Life Sciences, raised $800 million in funding from Temasek, manner plans reimburse for services delivered in person.
greater the sales volume/margin, the greater the potential For answers to questions about regulatory issues and
a Singapore-based investment company. These laws, called telehealth commercial coverage laws,
profitability and accompanying return on investment for negotiating tactics, see
currently exist in 36 states and the District of Columbia, and
■■ Bright Health, the Minnesota-based health insurance
the investor. Private equity firms will also focus on areas the list of states continues to grow. > EXPERT INSIGHTS: REGULATORY AND
startup that boasts “a smarter, more connected” experience,
NEGOTIATING ISSUES IN U.S. HEALTHCARE
of digital health that have products and services that need
raised a new round of $160 million. ■■ Starting January 2018, Medicare now pays a monthly INDUSTRY M&A TRANSACTIONS
capital to increase sales to the masses, along with the impact recurring reimbursement for remote patient monitoring
■■ American Well, the Boston-based telemedicine software RESEARCH PATH: Corporate and M&A > M&A by
these companies have on the economy and society. services, which will significantly assist in accelerating the Industry > Healthcare M&A > Practice Notes
company, acquired Avizia for an undisclosed amount,
adoption and use of these virtual care technologies.
strategically expanding American Well’s footprint with ■■ Value proposition. Companies in the digital health space
health systems and institutional providers. that satisfy the above criteria tend to attract interest from ■■ State laws have evolved such that a physician can create
a valid doctor-patient relationship via telemedicine,
Mature Digital Health Companies Satisfy Criteria private equity firms and other investors if they offer services
Teladoc, Inc. v. Tex. Med. Bd., 2015 U.S. Dist. LEXIS 166754
without an in-person exam, in all 50 states. In 2017, Texas
Private Equity Firms Desire and products in the following areas of health care:
(W.D. Tex. Dec. 14, 2015). As a result, Texas became the last
Governor Greg Abbott signed new telemedicine laws (SB
A decade ago, the digital health industry was in its infancy. •• Technology and technological products 1107/HB 2697), bringing to a close some significant antitrust state to allow physicians to connect with new patients via
Participants in the space consisted mostly of start-ups and litigation brought against the Texas Medical Board. See telehealth, rather than having to first meet in person.
•• Consumer-oriented health care services
small, emerging companies with limited financial backing.
Companies sought venture capital funding, as well as multiple •• Clinical decision support
partnership arrangements with erstwhile competitors, in an
•• Precision medicine
attempt to expand their product and service capabilities. The
companies that survived have proven themselves and are •• Artificial intelligence and machine learning
taking the next developmental step toward mature operations.
•• Disease monitoring and diagnosis
These companies are seeking larger investments and the
opportunity to grow. Private equity firms and other investors ■■ Sustainability of the company. Private equity firms tend to
are just now beginning to respond by dipping their toes in the seek sustainability. This could mean choosing to invest in
industry to fund these companies. It is still early, and most digital health companies that were consolidated or merged
private equity firms interested in telemedicine and digital with other digital health companies in the early stages of
health are interested in the technology as a value-add to their
development or digital health companies that offer multiple
existing portfolio companies. While there are some notable
products and services that display continued growth year
pure telemedicine private equity deals, those have been few
after year. Some investors prefer not to place all their eggs
compared to the numerous venture funding deals. However,
this will change over the next few years, and the market will see in one basket, so if a digital health company can show it has
more private equity come to the table. As investors continue to several successful products or services as opposed to just
explore the new opportunities offered by digital health, certain one, it might garner more attention from private equity.
■■ Antitrust compliance. Pre-merger notification filings under increase in venture capital, private equity firms, and other
the Hart-Scott-Rodino Act (15 U.S.C. § 18a) may be required investors entering the digital health investment space.
if the transaction exceeds $84.4 million.
Companies with reasonable histories of financial performance,
■■ HIPAA and state privacy laws. The Health Insurance scalability, and sustainability may present the most attractive
Portability and Accountability Act of 1996 (HIPAA) (42 U.S.C. opportunities for investors. With the reimbursement and
§ 1320d) and state privacy laws surrounding patient privacy legal/regulatory scheme changing at the federal and state
and data security may require increased scrutiny for digital levels to support the growth of the digital health industry,
health when determining compliance. investors should seriously consider opportunities in this
■■ State licensing requirements. All states require physicians growing market. A
to be licensed to practice in the state in which the patient
is located, which means physicians providing services via Christopher J. Donovan is a partner and health care lawyer with
digital health (i.e., telemedicine) will sometimes require Foley & Lardner LLP. He focuses his practice on advising companies
licenses from multiple states and different medical boards and their investors and lenders in mergers and acquisitions,
and will be subject to differing credentialing regulations. recapitalizations, buyouts and restructurings as well as advising
on a broad range of commercial arrangements. Mr. Donovan has
■■ Corporate practice of medicine rules. Because many states
restrict the employment of physicians by non-physicians,
particular experience in the health service, particularly post-acute,
counsel should examine the rules in each jurisdiction and
and life sciences sectors. He has a unique blend of deep regulatory as
review all employment relationships for compliance. well as corporate and finance experience to bring to a transaction as
a result of his consummating dozens of health and life science deals,
■■ Civil monetary penalty laws and the False Claims Act
both domestic and international. Heidi H. Jeffery is a partner and
(31 U.S.C. § 3729). These laws prohibit different forms of
business lawyer with Foley & Lardner LLP. Ms. Jeffery has experience
inappropriate business practices, such as submitting false
in general municipal, private activity bond, housing, student loan,
claims for payment to the federal government or failing
health care, and senior living finance. In such transactions, she has
to return overpayments. A billing and coding audit may be
served as bond counsel and counsel to developers, underwriters,
useful to ensure compliance with these laws at the federal
credit enhancers, issuers, and borrowers. Ms. Jeffery is a member
and state levels.
and former vice chair of the firm’s Senior Living Team. She is also
■■ FDA regulation. The FDA has oversight of medical devices, a member of the firm’s Finance & Financial Institutions, Health
including software as a medical device. Telemedicine and Care Finance, and Public Finance Practices and the Health Care
The Food and Drug Administration’s (FDA) Center for Devices consideration and sophistication are mandatory in a digital
digital health companies must determine whether or not Industry Team. Nathaniel (Nate) Lacktman is a partner and health
and Radiological Health (CDRH) adopted the Digital Health health transaction in order for the buyer to meaningfully
their product is a regulated medical device and if it requires care lawyer with Foley & Lardner LLP. He is the chair of the firm’s
Innovation Action Plan, which outlines the FDA’s approach for determine whether or not the target company is in compliance FDA clearance or approval before it can be sold.
Telemedicine Industry Team and co-chair of the firm’s Digital Health
assuring that all Americans, including patients, consumers, and with state and federal laws. Some of the key due diligence
■■ Tax-exempt considerations, if applicable. Tax-exempt Work Group. He advises health care providers and technology
other health care customers have timely access to high-quality, considerations for digital health transactions include:
providers also face the risk of entering into transactions companies on business arrangements, compliance, and corporate
safe, and effective digital health products. This plan lays out
■■ State telehealth laws. State laws vary on what constitutes with private equity investors. The parties in investment matters, with particular attention to telehealth, digital health, and
the CDRH’s vision for fostering digital health innovation while
digital health, the services it covers, and those that can transactions must take care to structure transactions health innovation. Melesa A. Freerks is an associate and health
continuing to protect and promote the public health.
provide services. However, the location of the patient typically between tax-exempt providers and for-profit entities care business lawyer with Foley & Lardner LLP. She is experienced
Key Due Diligence Considerations for Digital Health is what dictates which state law applies; telemedicine so as not to jeopardize the tax-exempt status of a with advising clients regarding corporate transactions, compliance
Transactions providers therefore potentially need to understand and hospital organization or create private use, which could programs, fraud and abuse issues, reimbursement arrangements,
Health care is one of the most highly-regulated industries in comply with the laws of 50 states. There are compliant
jeopardize the tax-exempt status of outstanding bonds regulatory compliance, privacy issues, tax-exempt status, and
or generate unrelated business income for the hospitals. general counsel matters. Ms. Freerks provides transactional counsel
the United States and constitutes 18% of the nation’s gross solutions, but it is important to identify and address risky
Notwithstanding these challenges, private equity remains to health care organizations where her practice focuses on mergers,
domestic product. While telemedicine and digital health offer shortcuts or failures during the due diligence stage.
an interesting option for a non-profit provider looking to acquisitions, corporate restructurings, joint ventures, general
the promise of transformative care delivery and bending the
■■ Stark Law. Stark Law (42 U.S.C. § 1395nn) and state law finance or develop its digital health network. corporate matters, and health care regulation. The authors would
cost curve, health technology has its own unique risks to
counterparts prohibit most self-referrals of Medicare
investors and is subject to significant regulations, making Conclusion like to acknowledge Paige Papandrea, summer associate, for her
“designated health services” to entities in which a physician assistance with this article.
due diligence critical for potential investments. Digital health The telemedicine and digital health industry meets many
or family member has a financial interest.
is not geographically limited in the same ways as traditional criteria making it ripe for private equity investment. The
medical practices, and a telemedicine provider can be subject ■■ Anti-kickback statutes. Federal and state anti-kickback industry has grown extensively in the past several years, and
to the laws of each state where its patients are located. Because statutes bar exchanges intended to induce or reward the outside investment in digital companies has likewise increased RESEARCH PATH: Corporate and M&A > M&A by Industry
of this complexity and multi-state legal issues, additional purchase of goods or referral of health care services. in recent years. Consequently, there has been a notable > Healthcare M&A > Practice Notes
Practice Notes | Lexis Practice Advisor® Real Estate
With co-working spaces such as WeWork growing in popularity, real estate attorneys are
frequently called upon to help clients navigate the pitfalls of shared space agreements.
This article discusses shared space agreements generally, how these agreements differ from
leases, advantages and disadvantages of these agreements from the user’s perspective, and
considerations for counsel to both the user and the tenant/licensor.
Daniel A. Suckerman and Stacey C. Tyler LOWENSTEIN SANDLER LLP
What Does a Shared Space Arrangement Look Like? Advantages of Shared Space Agreements from the
Typically, a shared space arrangement takes the form of a large User’s Perspective
space within an office building that is broken down into cubicles,
Pros and Cons of

Shared space agreements are appealing to the user for many
conference rooms, offices, and ancillary spaces (such as a cafeteria reasons, most of which come down to ease and simplicity.
or a message center) that are shared by multiple users from
different organizations. Users are allotted a certain amount of work
Quick and Dirty
SHARED SPACE
space within the larger shared space, but the space is typically License agreements are usually short, simple contracts written
not separately demised (i.e., there are no walls or locking doors in plain language rather than legalese. Licensees appreciate that
separating one user’s space from another’s). The space is usually licenses are easier to understand than leases, and negotiations are
fully furnished and operational, so all a user needs to do to start usually quicker because there is less to hash out.
AGREEMENTS
working in the space is sit down and plug in his or her laptop.
Less Expensive than Leasing
Differences between a Lease and a License
Licensing space is usually much less expensive than leasing space.
Lease Defined
Licensees can contract for exactly how many work stations they
Contracts governing shared space arrangements typically take need rather than taking on an entire demised space, and it is usually
the form of a license agreement (if not in name, then at least in at a much cheaper transaction cost. They often pay one flat fee
substance), which is legally distinct from a lease. A lease is governed that covers all other ancillary charges typically passed through to a
by real property and landlord/tenant law and is generally a more tenant under a lease (e.g., utilities and common area maintenance).
legally stringent and involved document. Pursuant to a lease, the
Additionally, there is less upfront cost in a license than in a lease
tenant is given a real property interest in the premises for the
because licensors usually require less (or no) security deposit,
term set forth in the lease agreement and receives the benefit of
guaranty, and insurance coverage.
landlord/tenant law in the jurisdiction where the property is located.
Generally, the landlord under a lease can evict a tenant prior to the Flexibility
expiration of the lease term only in compliance with the default License agreements are typically much shorter in term than leases
and remedies provisions of the lease or pursuant to an eviction
and offer early termination options to both the licensor and licensee.
proceeding, which can be a lengthy process. Finally, since a lease
Start-ups especially like the flexibility of licenses because often they
is typically a large commitment and investment, landlords often
are not able to predict their space needs over the long term and do
impose stringent underwriting requirements on tenants and require
not want to be locked into a years-long lease.
substantial security deposits, guaranties, and insurance coverage to
protect themselves. Casual Environment
License Defined Shared space providers frequently create a trendy atmosphere
A license, on the other hand, is a creature of contract law and appealing to younger companies and often specifically catering to
generally a more amorphous document. A license grants the the Silicon Valley-type of user (imagine an open floor plan, lots of
licensee a contractual right to enter upon and use a space but does glass, and space for gaming and socializing).
not bestow an interest in the underlying real property (meaning
Disadvantages of Shared Space Agreements from
licensees do not receive the benefit of landlord/tenant law). Licenses
the User’s Perspective
are usually revocable and/or terminable upon 30 days’ notice or
less, without the necessity of an eviction proceeding. (For purposes While shared space agreements provide ease and flexibility, these
of this article, references to shared space agreements should be characteristics also give rise to several disadvantages that users
understood to refer to license agreements.) must carefully consider.
Fewer Legal Protections make sure that your client is aware of this if they have heightened When reviewing a license agreement on behalf of a shared space
or particular needs, such as a virtual private network internet user, consider the following: Related Content
While licenses have much less onerous requirements than leases,
connection or Bloomberg terminal.
they also offer fewer protections for users. Since a licensee does ■■ Termination. Make sure you understand when and how the
For a detailed discussion on office leasing, see
not have a real property interest in the space like a tenant under a Regulatory Risks agreement can be terminated by licensor and your client.
lease would, the statutory and other legal protections that exist for > OFFICE LEASING RESOURCE KIT
Depending on the user’s industry, it may be subject to regulatory ■■ Utilities and services. The license agreement should spell out
tenants do not apply. RESEARCH PATH: Real Estate > Commercial Leasing
requirements that do not align with the short term, and sometimes which utilities and services the licensee will receive as part of its
> Lease Agreement > Practice Notes
Uncertainty ad hoc, nature of shared space agreements. For instance, some flat fee. Typically, these are utilities and services in the shared
financial services entities may be required to provide lease space. These items will of course be limited by what the licensor
Licenses are generally terminable by the licensor on 30 days’
documents to regulators to show they are operating in a legal space For an office leasing form to be used in a commercial real
notice or less. When representing the user, make sure your client receives under its lease for the space.
estate leasing transaction, see
that they have the right to occupy. Depending on the formality of
understands that they should have a back-up plan in place in case ■■ Ask for a rider. Many license agreements state that the licensor
the license agreement, it may not pass muster with those regulators. > OFFICE LEASE AGREEMENT
their license is unceremoniously terminated. can amend them at will or are designed as rules and regulations
RESEARCH PATH: Real Estate > Commercial Leasing
Confidentiality and Privacy Concerns Considerations for the User’s Counsel that can be updated by posting them in the shared space. If that > Lease Agreement > Forms
As counsel to a potential user/licensee, your ability to negotiate is the case, you should include any terms that are deal breakers
In a co-working environment, a user may be surrounded by other
the shared space agreement varies greatly depending on the for your client, such as the specific technological, confidentiality,
people in a large, noisy, and unpredictable room. Your client’s space For a sample license agreement form, see
sophistication of the licensor and the structure of their form or regulatory requirements mentioned above, in a rider or side
might even be subject to unilateral relocation by the licensor, > LICENSE AGREEMENT (TENANT AS LICENSOR)
agreement. For the most part, licensors offer space pursuant to agreement so that they will be binding.
meaning that their agents are authorized to move your client’s RESEARCH PATH: Real Estate > Commercial Leasing
personal property to elsewhere in the space. This arrangement might a standardized license agreement that many users sign without Considerations for the Licensor/Tenant’s Counsel > Lease Agreement > Forms
not work well if your client handles sensitive information, needs to negotiation. Often these agreements are short, very licensor-
The popularity of shared space arrangements has created
have confidential discussions, or otherwise needs to be in absolute friendly, and modifiable without licensee consent. Corporate
opportunities for tenants with space to spare to offer desk sharing For more information on the issues specific to leasing space to
control over its data and communications. Any specific needs in this licensors are often unwilling to deviate much from their form
as a sort of sublease lite. This is especially attractive to a start- technology companies, see
area would need to be carefully negotiated and perhaps set forth in agreements and have little incentive to do so when most of their
up client whose personnel needs may fluctuate, or who may > TECHNOLOGY COMPANY OFFICE LEASES
a rider to the license agreement as discussed below. users are easily replaceable, small operations with little to no
need to lease more space than it can currently fill. If you have a RESEARCH PATH: Real Estate > Commercial Leasing
bargaining power. Licensors without a large corporate umbrella may
Technological Limitations client interested in this possibility, you can request during lease > Lease Agreement > Practice Notes
have more flexibility to tailor their agreements to a particular user’s
Users typically utilize the electrical and internet services provided needs. Note that, in most circumstances, the user and its counsel negotiations that the landlord allow a certain amount of square
within the shared space but have little to no control over the type are not given the opportunity to review the licensor’s lease for footage to be used for desk sharing. Failure to include a provision For a desk-sharing lease clause that can be included in an
of services provided or the hardware used. If you represent the user, the space. explicitly allowing the tenant to share space can result in a shared office lease, see
space arrangement falling under the assignment and subletting > DESK-SHARING CLAUSE (OFFICE LEASE)
provisions of the lease and requiring the landlord’s consent. RESEARCH PATH: Real Estate > Commercial Lease >
Landlords are often amenable to these arrangements if they are Lease Agreement > Clauses
narrowly defined and subject to certain limitations, such as:
■■ Users may not have any signage rights.

Daniel A. Suckerman is a resident in Lowenstein Sandler LLP’s New York
■■ The space will not be further demised or altered.
City and Roseland, New Jersey offices. He represents a broad range of
■■ The number of users in the space is limited.
clients in commercial real estate transactions, including acquisitions,
■■ Use must be in accordance with the lease. Thus, at the lease leasing, financing, negotiation of joint venture agreements, and matters
negotiation stage, the tenant should request a broad permitted relating to asset management. Daniel’s practice is national in scope and
use such as general office use rather than a very specific use that
crosses all asset classes, keeping him on top of commercial real estate
might make it difficult to find an appropriate licensee.
trends. Stacey C. Tyler is an associate at Lowenstein Sandler LLP. She
■■ A default by a space user will be deemed a default by the tenant, handles a broad array of real estate transactions, including acquisitions,
and the tenant will need to take steps to cure.
dispositions, development, leasing, financing, hospitality deals, and public-
■■ Users must be affiliated in some way with the tenant entity. private partnerships. Stacey served as an Intern to the Honorable Carolyn
(Landlords are generally more comfortable with affiliates using E. Demarest of the Kings County Supreme Court, Commercial Division.
the space because they are less likely to affect the landlord’s
risk profile.)
■■ Users may not be charged more than their allocable share of the RESEARCH PATH: Real Estate > Commercial Leasing >
rent for the entire premises. A Lease Agreement > Practice Notes
Practice Notes | Lexis Practice Advisor® Intellectual Property & Technology
After First Office Action
Related Content After a patent application is filed and examined, the USPTO
will issue an office action treating the claimed invention
For a general overview of the patent examination process, see on the merits. After the issuance of a first office action, the
> UTILITY PATENT APPLICATION EXAMINATION patent examiner must grant an interview, if requested by the
PROCESS patent application, as a matter of right. This means that, if
RESEARCH PATH: Intellectual Property & Technology
Frank DeLucia and Luciano Ricondo MERCHANT & GOULD appropriately requested, the examiner must grant the request
> Patents > Patent Prosecution > Practice Notes for interview. The interview may be held at any time within the
Strategic Use of
permitted statutory period (e.g., typically six months). There is
For an example of an interview summary, see no fee for an interview even if requested after the expiration of
> STATEMENT OF SUBSTANCE OF EXAMINER the shortened statutory period (e.g., typically three months).
INTERVIEW
Patent Examiner Interviews

After Final Office Action
RESEARCH PATH: Intellectual Property &
In practice, most examiners will grant an interview after a
Technology > Patents > Patent Prosecution > Forms
final office action has issued if an interview is deemed to be
helpful to the advancement of the application’s examination
For advice on appealing from an unsuccessful patent
process. See MPEP 713.09. However, a request for interview
After a patent application is filed in the U.S. Patent and Trademark Office (USPTO), and during examination, see
made after issuance of a final office action may be refused by
> APPEALS FROM PATENT EXAMINATION
the stage in which the application is being examined by a patent examiner, it can often be the examiner if, for example, the patent applicant seeks only to
RESEARCH PATH: Intellectual Property & Technology restate previously made arguments in favor of patentability or
helpful to conduct an interview with the examiner in an attempt to advance the prosecution > Patents > Patent Prosecution > Practice Notes to discuss new claim limitations that would require more than
of the application towards allowance. This article provides guidance for practitioners on when nominal reconsideration or new search.
For a copy of the form needed to obtain a hearing before the
an interview with a patent examiner is permitted under USPTO rules, who can participate in After Appeal Brief Has Been Filed
Patent Trial and Appeal Board, see
the interview, practical tips on how to request and conduct an interview, what to do after the > REQUEST FOR ORAL HEARING BEFORE THE
Interviews after an appeal brief has been filed are not granted
PATENT TRIAL AND APPEAL BOARD because, at this stage of prosecution, the application has been
interview is conducted, and USPTO programs that affect examiner interview practice. transferred to the Patent Trial and Appeal Board (PTAB), and
RESEARCH PATH: Intellectual Property &
Technology > Patents > Patent Prosecution > Forms the examiner no longer has jurisdiction over the application.
SUCH AN INTERVIEW IS TYPICALLY CONDUCTED BETWEEN A See MPEP 713.05.
representative of the patent applicant (e.g., an attorney or After Notice of Allowance
patent agent) and the examiner and, on certain occasions, may
After the USPTO deems that a patent application is in condition
also include the patent applicant/inventor and one or more associated with the patent application process, the inventor
for allowance, the USPTO issues a notice of allowance to the
supervisory examiners. The interview can be helpful to provide will need to pursue other investigative avenues. For example, patent applicant. The USPTO states that an interview is not
the examiner with a better understanding of the invention many inventors conduct prior art searches and/or consult with permitted after a notice of allowance has been mailed in the
claimed in the application, as well as how the claimed invention an attorney or patent agent with expertise in the field before application “except in unusual situations.” See MPEP 713.05.
is distinguishable over the prior art of record, in addition to deciding whether to pursue a patent. While an inventor may However, in practice, various issues often may be discussed
addressing other substantive issues that may be outstanding. conduct a search on his or her own, most inventors lack the with an examiner after allowance, such as procedural issues
As a preliminary matter, the rules and procedures governing know-how to do so, and thus, it is often best to have the search (e.g., an unacknowledged claim to priority or information
interviews in patent applications are largely covered by Section conducted by an expert who has access to the appropriate disclosure statement citation form) or a possible amendment
713 of the Manual of Patent Examining Procedure (MPEP), search databases. after allowance under 35 U.S.C. § 312.
2016-700 Manual of Patent Examining Procedure 713. The Not Permitted before the Filing of a Patent Application Before First Office Action Who Can Participate in an Examiner Interview
Patent Office also has made available helpful Interview Practice
An interview with an examiner before an application is filed An interview before a first office action is ordinarily not Various parties may participate in an interview, including
FAQs at https://www.uspto.gov/patent/laws-and-regulations/
is generally never permitted. The USPTO does not permit a granted unless the application is a continuation application. registered practitioners, inventors/applicants, examiners,
interview-practice/interview-practice-faqs.
patent applicant to feel out an examiner on his or her opinion and supervisory examiners. Each of these is discussed in
See MPEP 713.02. Also, if the application is filed under a special
When Is an Examiner Interview Permitted? about an invention or to attempt to gauge the prospects of program such as the First Action Interview Pilot or Accelerated
turn below.
It is important to know the USPTO’s rules governing when an obtaining a patent on aspects of an invention before a patent Examination, an interview may be appropriate according to Registered Practitioners
interview may be granted. The following sections describe rules application for the invention is filed in the USPTO. See MPEP the published guidelines of that program. See https://www. Most interviews are conducted by practitioners who are
and circumstances for granting an interview at different stages 713.03. Thus, to the extent an inventor desires to investigate uspto.gov/patent/initiatives/accelerated-examination for more registered to practice before the USPTO, such as a registered
of the patent application process. beforehand whether it is worth incurring the time and expense information about the Accelerated Examination. patent attorney or agent representing the applicant. While in
practice most interviews are conducted without the applicant when scheduled, must be held on a USPTO campus where the speed up the examination of the application because it can lead
or inventor being present, those parties are permitted to examiner is located. The USPTO is headquartered in Alexandria, to some form of agreement being reached during the interview
attend the interview, as mentioned below. It is important Virginia, and this is where most in-person interviews take place. as to how to overcome an issue raised in an office action,
An interview affords a patent applicant
to note that an interview typically will not be granted to a However, an interview may also take place at a regional office if thereby enabling the patent applicant to tailor the written
registered practitioner unless a power of attorney granting with an opportunity to explain that is where the examiner is located. Currently, the USPTO has response to the office action accordingly. Indeed, oftentimes
the practitioner the right to represent the applicant is filed in to the examiner why it is believed regional offices in San Jose, Denver, Detroit, and Dallas. during an interview, the examiner may propose a claim
the USPTO. that a claimed invention is worthy of Some examiners work remotely, and thus an in-person amendment or other course of action to advance prosecution.
Unregistered or Suspended Practitioners patent protection… interview with them may not be possible. In such cases, the Interview agendas are typically faxed to an examiner; however,
USPTO also allows an interview to be conducted via video in some cases they can be emailed to the examiner. If emailed,
Examiners are forbidden to hold either oral or written
conference. See MPEP 713.01. If an interview is conducted via examiners typically require the signing of an Authorization for
communications with an unregistered or a suspended
video conferencing, the video conference must originate or Internet Communications form, authorizing communication
attorney or agent regarding an application, and thus, any
be hosted by the examiner. Examiners are prohibited from via email. When submitting an interview agenda, the agenda
such parties are not permitted to conduct an interview with a Consideration Pilot (AFCP) 2.0 program is filed. (The AFCP 2.0 conducting interviews via a video conference hosted by a patent should be labeled Unofficial Communication to indicate that it
patent examiner. program requires that the applicant be willing and available to applicant or third party. See MPEP 713.01. is not a formal written response, in the event that it becomes
Inventors/Applicants participate in any interview requested by examiner). However,
an interview can be helpful in the event an impasse is reached Requesting an Examiner Interview part of the USPTO file. This can be helpful to avoid possible
Inventors/applicants may participate in an interview with future issues relating to patent prosecution history estoppel in
with the examiner during the prosecution process. In practice, Most examiner interviews are requested by calling the examiner
an examiner. These parties can be persuasive because they the event that a patent, once granted, later becomes involved
having an interview provides an opportunity to have the directly. The examiner’s telephone number is included in the
may be experts in their respective fields and have first-hand in litigation. It also is prudent to label the agenda Privileged
examiner explain, first-hand, the reasons for rejecting a patent conclusion section of every office action. An applicant may
knowledge of the claimed invention and how it distinguishes and Confidential.
application. An interview also affords a patent applicant with also submit an Applicant-Initiated Interview Request Form to
over the prior art of record. Nonetheless, care should be
an opportunity to explain to the examiner why it is believed request an interview; however, this is less common and less Practical Considerations for Conducting an Examiner
taken to avoid such parties unwittingly stating something
that a claimed invention is worthy of patent protection and to time-efficient than calling the examiner directly to request Interview
unnecessary on the record that can be used against the patent
discuss with the examiner possible ways to amend the claims an interview.
application or the interpretation of claims. If the interview is to be conducted via telephone or video
of a patent application, if deemed appropriate, to overcome
Preparing for an Examiner Interview conference, find a quiet room for conducting the interview.
Pro Se Applicant grounds of rejection.
For most registered practitioners, this means their office or
Although an interview agenda is not required by the rules, in
A pro se applicant may conduct an interview without a An examiner interview is also helpful when there is a clear a conference room. If multiple people will participate in the
practice it often is best for a patent applicant to provide an
registered practitioner. However, because the patenting misunderstanding that can be resolved easily during a verbal interview (e.g., more than one registered practitioner, multiple
agenda for the interview to the examiner at least 24 hours
process is complicated and governed by many detailed rules conversation versus in writing. For example, it may sometimes inventors, etc.), a large conference room should be used for
before the interview is scheduled to take place so that the
requiring specialized knowledge, it is strongly recommended be easier to articulate a mistake made by the examiner in an conducting the interview.
examiner can adequately prepare for the interview. The agenda
practitioners advise patent applicants to use a registered office action (e.g., misidentified prior art or the like) by way
will help guide the interview and provide a focused discussion It is advisable to start the interview by providing a short
practitioner to conduct the process, including any interviews. of an interview versus by way of a written response. Verbal
on the issues that will be discussed during the interview. introduction of the invention (e.g., describe the invention,
communication also has the benefit of substantively enabling
Examiners The interview agenda should include the date and time of the its objectives, the problems and limitations in the relevant
issues to be discussed and addressed while minimizing what
The examiner responsible for examining the patent application interview, the names of the persons who will participate in industry and/or state of the art, and how the invention
is placed in the written USPTO record for a patent application,
will participate in the interview and may be accompanied the interview, and the location of the interview if it is being overcomes those problems and limitations). That introduction
thereby reducing possible file history estoppel issues.
by other examiners including his or her supervisor (as conducted in person. The interview agenda should briefly cover should be followed by addressing the substantive issues
There are no USPTO fees associated with having an examiner raised in the office action. For example, in the case of a prior
described below). the matters that will be addressed during the interview. For
interview. Thus, an examiner interview will not cost anything, art rejection, a description of how the invention, as claimed,
example, a hypothetical agenda could list the matters such as:
Supervisory Examiners aside for possible time spent by a registered practitioner distinguishes over the prior art used in the rejection should
preparing for and conducting the interview. ■■ The rejections under 35 U.S.C.S. § 102 and 35 U.S.C.S. § 103
In some instances, the examiner’s supervisor may participate be provided.
for lack of novelty and non-obviousness, respectively
in the interview, either alone or with a primary examiner. In-Person vs. Telephone Interviews If the examiner is not persuaded by these arguments, a
This may occur when the examiner directly responsible for ■■ The rejection under 35 U.S.C.S. § 101 for unpatentable subject
Most interviews are conducted via telephone, as this is the proposed claim amendment can be discussed that might
examining a patent application does not have negotiating matter
easiest and most convenient way to reach an examiner. persuade the examiner to withdraw the rejection. Otherwise, if
authority to grant an application. Whether a supervisory ■■ The rejections under 35 U.S.C.S. § 112(a), (b)
Some patent examiners work off-site from USPTO offices, as it is strongly believed that the claimed invention is patentable
and/or primary examiner participates in an interview will be
mentioned below, and thus prefer telephone interviews. ■■ The objections to the claims over the prior art without any additional claim amendment
determined by the USPTO.
being made, then no claim amendment need be proposed, and
An applicant may consider having an in-person, face-to-face The interview agenda may also include proposed claim
When an Interview Is Helpful interview. This type of interview can be helpful to develop amendments. In practice, this can be helpful because it enables
normal written prosecution, including a possible appeal to the
PTAB, should then be pursued.
There is no requirement to conduct an interview with an rapport with an examiner and can be especially helpful if it an applicant to receive feedback from the examiner about a
examiner in the normal course of patent prosecution, except is desired to employ exhibits or invention prototypes during proposed claim amendment before filing a formal, written During the interview, it is also advisable to discuss the
in the case where a request to participate in the After Final the interview. See MPEP 713.08. An in-person interview, response to an office action. This approach can save costs and substance of a written interview summary with the examiner.
be made part of the record. See MPEP 713.04. The PTOL-413
typically includes the following information:
1. Application number
2. Name of applicant
3. Name of examiner
413 is entered. Regarding the general thrust of the arguments
4. Date of interview
(item 5) for PTOL-413, the identification of arguments need
5. Type of interview (personal, telephonic, or video not be lengthy or elaborate, and a verbatim or highly detailed
conference) description of the arguments is not required. Typically, the
identification of the arguments is sufficient if the general
6. Name of participant(s) (applicant, applicant’s
nature or thrust of the principal arguments can be understood
representative, etc.)
in the context of the application file.
7. An indication whether or not an exhibit was shown or a
An applicant must also submit an interview summary except
demonstration conducted
where the interview was initiated by the examiner and the
8. An identification of the claims discussed examiner indicated on PTOL-413B that the examiner will
9. An identification of the specific prior art discussed provide a written summary. If an interview summary is not
submitted by the applicant before or with a written response
10. An indication as to whether an agreement was reached, and
filed in reply to an office action, the response may be deemed
if so, a description of the general nature of the agreement
not fully responsive by the USPTO, and the USPTO will give the
11. The signature of the examiner who conducted the interview applicant a two-month time period to submit the interview
12. Names of other USPTO personnel present at the interview summary. An examiner will check the applicant’s interview
summary for accuracy. If there is an inaccuracy, the examiner
The PTOL-413 form also contains a statement reminding the
will point it out in the next communication (e.g., rejection,
applicant of his or her responsibility to record the substance
interview summary, or notice of allowability).
of the interview. Often the examiner will attach the interview
agenda to the Interview Summary. Although the interview summary can be filed as a separate
document in the application file, the interview summary
The Interview Summary Form PTOL-413B will not be considered
typically is included in the body of the written response filed
a complete and proper recordation of the interview unless it
after the interview and in reply to the outstanding office action.
As is described in more detail below, the examiner must submit that the examiner will need to conduct a further search after includes, or is supplemented by the applicant or the examiner
It is important to remember that an interview or interview
a written interview summary after the completion of each a written response to an office action is filed before deciding to include, the following items (if applicable):
summary does not obviate the need to file a written response
interview with an applicant. The interview summary will form a whether to allow the claims of the application. However, this 1. A brief description of the nature of any exhibit shown or any to an office action, even if an informal agreement was reached
part of the written record of the application. Thus, it is helpful should not discourage a patent applicant from conducting demonstration conducted with the examiner during the interview. Indeed, if a written
to discuss the contents of the examiner’s interview summary the interview because it often is a good sign that the response to the office action is not filed by the applicable
2. Identification of the claims discussed
with the examiner during the interview to ensure the interview examiner agrees to the position taken by the applicant during deadline, the application will become abandoned. A
summary on the record reflects the applicable content in a light the interview. 3. Identification of specific prior art discussed
most favorable to the applicant. 4. Identification of the proposed amendments, unless these Frank DeLucia is a partner at Merchant & Gould. His practice
Following Up after the Examiner Interview
You and anyone accompanying you should be courteous are already described on the interview summary form focuses on patent prosecution, contested proceedings before the
A written statement of the substance of the interview must completed by the examiner USPTO, strategic international management of patent portfolios,
and respectful during the entire interview. Typically, most
interviews last approximately 30 minutes; however, depending be made of record, whether or not an agreement as to the invalidity and non-infringement opinions, and client counseling. In
5. The general thrust of the arguments of the applicant and
on the discussion and the subject matter of the interview, an status of the claimed invention was reached with the examiner addition to his patent practice, Frank has experience in prosecuting
the examiner
interview can be shorter or longer. during the interview. See MPEP 713.04. The only instances trademarks. Luciano Ricondo is an associate at Merchant and
6. A general indication of any other pertinent matters
when an interview summary is not required to be made Gould. He prepares and prosecutes domestic and foreign utility
Many times, an examiner will inform a patent applicant at the discussed
of record (by either the examiner or the applicant) are for patent applications in the mechanical, electrical, computer, and
conclusion of an interview that he or she will need to further
discussions regarding merely procedural matters, such as, 7. If appropriate, the general results or outcome of the software-related arts. He also prepares and prosecutes domestic and
consider the arguments and/or claim amendments after a
restriction requirements (see MPEP 812.01), or typographical interview foreign design patent applications.
written response to an office action is filed before making a
or other procedural errors in a written office action or other
formal decision on the merits of a claimed invention. Even if In the case of an interview via electronic mail, a paper copy
communication from the USPTO.
an examiner agrees that an argument or claim amendment will of the contents exchanged over the internet must be made
overcome an issue (e.g., a prior art rejection) raised in an office After an interview is completed, the examiner must complete and placed in the patent application file as required by the RESEARCH PATH: Intellectual Property & Technology >
action, the examiner will most often then inform the applicant and issue an Interview Summary Form PTOL-413 that will Federal Records Act in the same manner in which the PTOL- Patents > Patent Prosecution > Practice Notes
Practice Notes | Lexis Practice Advisor® Employee Benefits & Executive Compensation
What Types of Products and
Services Should Service Providers
be Particularly Concerned
about When Reevaluating Their
Potential Status as Fiduciaries
George M. Sepsakos and Michael P. Kreps under the Five-part Test?
GROOM LAW GROUP, CHARTERED
Service providers should evaluate
any product or service that provides
Unwinding the Department

ongoing investment recommendations
to retirement plans, participants, or
IRAs and other accounts subject to
of Labor’s Fiduciary Rule

Section 4975 where they receive direct
or indirect compensation. This includes
robo-advisors or investment education
providers as it is not uncommon for
those vendors to provide advice under
This article discusses the implications of the Fifth Circuit Court of Appeals’ vacatur of the
the five-part test without being aware of
Department of Labor’s (DOL) Fiduciary Rule1 and related amendments to other prohibited their status as a fiduciary.
transaction exemptions (PTEs) in Chamber of Commerce of the United States v. United States To Comply with the Fiduciary
Dep’t of Labor, 885 F.3d 360 (5th Cir. 2018). Rule, Financial Institutions Have
moneys or other property of such plan, 3(21)(A)(ii) where the person (1) makes Adopted Policies and Procedures
or has any authority or responsibility recommendations as to the value of Regarding, for Example,
BY REPLACING A LESS RESTRICTIVE entering of its mandate on May 7, 2018, Rule conflicted with the underlying
to do so; or (3) he has any discretionary securities or other property or makes Communications that Would
five-part test regulating the scope of ERISA’s definition of investment advice statutory text.
authority or discretionary responsibility recommendations as to the advisability Constitute Fiduciary Investment
persons who fit the definition of an fiduciaries will revert to the original 1975
What Types of Service Providers in the administration of such plan. of investing in, purchasing, or selling Advice Recommendations as Well
investment advice fiduciary under regulation’s five-part test.
Can Expect to Retain Fiduciary The court’s ruling affected the DOL’s securities or other property; (2) on a as the Best Interest Standard
Section 3(21) of the Employee Retirement
On What Grounds Did the Fifth Status under the Five-part Test? definition of a fiduciary providing regular basis; (3) pursuant to a mutual Imposed by the Related PTEs.
Income Security Act of 1974 (ERISA) and
Circuit Vacate the Fiduciary Rule? Many service providers that were investment advice under ERISA Section understanding; (4) that such advice To What Extent Should Financial
Section 4975 of the Internal Revenue
Code (I.R.C.),2 the Fiduciary Rule The Fifth Circuit determined that fiduciaries under the Fiduciary Rule are 3(21)(A)(ii). However, the ruling did will be a primary basis for investment Industries Modify or Abandon
expanded the types of activities that are the Fiduciary Rule conflicts with the likely to retain fiduciary status after the not affect service providers who are decisions; and (5) that the advice will be These Policies and Procedures?
statutory text of Section 3(21)(A)(ii) vacatur. ERISA provides a functional fiduciaries under other prongs of the individualized to the plan.3
considered investment advice subject to Service providers should review
of ERISA and with the counterpart test for determining whether a person statute, such as discretionary asset
the ERISA and the prohibited transaction any and all policies and procedures
In most cases, investment advisers will
provision in Section 4975 of the I.R.C. becomes a fiduciary, meaning that there managers who maintain discretionary
provisions of the I.R.C. The new PTEs implemented as a result of the
The Fifth Circuit vacated the Fiduciary control respecting the disposition of remain fiduciaries as they most likely
are several avenues to a service provider
and amendments published along with Fiduciary Rule to determine whether
Rule on the basis that the common law becoming a fiduciary. In this respect, the plan’s assets or an outsourced will satisfy the five-part test because
the Fiduciary Rule were designed to avoid their ongoing implementation makes
meaning of the word fiduciary requires ERISA Section 3(21) provides that a plan administrator who maintains they are generally hired to provide
conflicts of interest and ensure that sense. Notwithstanding the vacatur of
a relationship of trust and confidence person is a fiduciary with respect to a discretionary authority respecting the investment recommendations and
retirement industry professionals who the Fiduciary Rule, there is a risk that
and that Congress codified that common plan to the extent (1) he exercises any administration of the plan will remain monitoring services on a regular basis,
provide investment advice (including, for other regulators could enforce a service
law meaning in the statutory text. discretionary authority or discretionary unaffected by the Fifth Circuit’s ruling. and it is understood that such advice
the first time, to owners of IRAs) do so in provider’s policies to the extent that
By attempting to broadly expand the control respecting management of such is individualized to the plan. Whether
the best interest of their clients. The status of service providers who make they’re not followed internally. For
universe of persons to whom fiduciary plan or exercises any authority or control the adviser acts as a fiduciary under the
investment recommendations to plans or instance, the Enforcement Section of
In response to the Fiduciary Rule, the status is assigned to include ordinary respecting management or disposition
IRAs may change with the return to the five-part test for purposes of rollover the Massachusetts Securities Division
retirement industry spent millions of salespersons, such as many broker- of its assets; (2) he renders investment
five-part test. Under the five-part test, decisions will depend on the status of the Office of the Secretary of the
dollars in preparation for compliance. dealers and insurance agents, the advice for a fee or other compensation,
a person would be deemed to provide of the Deseret Opinion4 (discussed Commonwealth filed a complaint
However, after the Fifth’s Circuit’s Fifth Circuit ruled that the Fiduciary direct or indirect, with respect to any
investment advice under ERISA Section further below). against a service provider based on
1. 81 Fed. Reg. 20,946 (Apr. 8, 2016) (the Fiduciary Rule), 81 Fed. Reg. 21,002 (Apr. 8, 2016) (Best Interest Contract and Principal Transactions Exemptions), as corrected at 81 Fed. Reg. 44,773 (July 11,
2016) and 81 Fed. Reg. 21,089 (Apr. 8, 2016). 2. 40 Fed. Reg. 50,842 (Oct. 31, 1975). 3. 29 C.F.R. § 2510-3.21(c)(1)(ii)(B). 4. DOL Adv. Op. 2005-23A, 2005 ERISA LEXIS 24.
alleged violations of their internal (3) the Disclosure Obligation. These at a minimum disclose or eliminate, Disclosure Obligation. Importantly, a
policies and procedures adopted in Related Content obligations are discussed below. all material conflicts of interest that broker-dealer’s Disclosure Obligation is
light of the Fiduciary Rule. Importantly, are associated with recommendations in addition to and distinct from the Form
Care Obligation
that complaint alleged violations of For more information on the duties and obligations of fiduciaries under the Employee covered by Regulation Best Interest; CRS obligation which must be satisfied
Massachusetts state law and not the Retirement Income Security Act of 1974 (ERISA) and on prohibited transaction The Care Obligation requires that broker-
and (2) establish, maintain, and by both broker-dealers and registered
exemptions, see dealers exercise reasonable diligence,
Fiduciary Rule. enforce written policies and procedures investment advisers.
> ERISA FIDUCIARY DUTIES care, skill, and prudence to:
reasonably designed to identify, and
Certain service providers may decide The Disclosure Obligation requires
RESEARCH PATH: Employee Benefits & Executive Compensation > ■■ Understand the potential risks disclose and mitigate, or eliminate,
to keep in place certain policies that, prior to or at the time of a
Retirement Plans > ERISA and Fiduciary Compliance > Practice Notes and rewards associated with a material conflicts of interest arising from
implemented in response to the recommendation, the broker-dealer—or
recommendation and have a financial incentives associated with such
Fiduciary Rule. For instance, firms a natural person who is an associated
expecting to take advantage of the For guidance on fiduciary duties that apply to ERISA discretionary investment reasonable basis to believe that the recommendations.
person of a broker or dealer—reasonably
managers, see recommendation could be in the
DOL’s temporary non-enforcement The SEC’s interpretation of the term disclose to the retail customer, in
policy (discussed more fully below) > ERISA FIDUCIARY COMPLIANCE FOR INVESTMENT MANAGERS best interest of at least some retail
financial incentive is very broad. For writing, the material facts relating to
may keep policies and procedures in RESEARCH PATH: Employee Benefits & Executive Compensation > customers
example, the SEC described material the scope and terms of the relationship
place for the time being to demonstrate Retirement Plans > ERISA and Fiduciary Compliance > Practice Notes ■■ Have a reasonable basis to believe that conflicts that arise from financial with the retail customer and all material
compliance with the DOL’s temporary the recommendation is in the best incentives to include: conflicts of interest associated with the
non-enforcement policy. Moreover, For a description of the principal rules under Title I of ERISA, including fiduciary interest of a particular retail customer recommendation.
■■ Compensation practices established by
as discussed immediately below, we standards and duties, see based on the retail customer’s
the broker-dealer including fees and At the outset, the SEC notes that broker-
suspect that the best interest concept is > ERISA TITLE I FUNDAMENTALS investment profile and the potential
charges for products sold, employee dealers should have the flexibility to
not going away any time soon, meaning RESEARCH PATH: Employee Benefits & Executive Compensation > risk and rewards associated with the
compensation, or employment make disclosures by various means.
that policies and procedures employed Retirement Plans > ERISA and Fiduciary Compliance > Practice Notes recommendation
incentives (quotas, bonuses, sales The SEC noted that disclosures are
by service providers to ensure that
■■ Have a reasonable basis to believe that contests, special awards) required to be made prior to the time a
brokers and advisers make best interest
For an update on ERISA prohibited transactions, see a series of recommended transactions, recommendation is made.
recommendations may be required by ■■ Differential or variable compensation
> ERISA LEGISLATIVE DEVELOPMENTS even if in the retail customer’s best
and incentives tied to appraisals or
other laws in the future. The material facts relating to the scope
RESEARCH PATH: Employee Benefits & Executive Compensation > interest when viewed in isolation,
performance reviews of the relationship, which must be
What Effects Do You Expect Retirement Plans > ERISA and Fiduciary Compliance > Practice Notes is not excessive and is in the retail
■■ Compensation practices involving disclosed would include:
the Recently Proposed Rules customer’s best interest when
third parties, including compensation
and Related Interpretation by For a list of steps for a practitioner to follow when applying for a prohibited transaction
taken together in light of the retail ■■ That the broker-dealer is acting in a
for sub-accounting or administrative
the SEC of the Best Interest and exemption under ERISA, see customer’s investment profile broker-dealer capacity with respect to
services to a mutual fund, receipt of
Fiduciary Standards Will Have on > PROHIBITED TRANSACTION EXEMPTION APPLICATION CHECKLIST While the Care Obligation largely tracks
commissions or sales charges, or other
the recommendation
the Financial Industry (Assuming RESEARCH PATH: Employee Benefits & Executive Compensation > existing suitability rules issued by the
differential or variable compensation,
■■ The fees and charges that apply to
They Are Finalized)? How Do Retirement Plans > ERISA and Fiduciary Compliance > Checklists Financial Industry Regulatory Authority
whether paid by the retail customer or
the retail customer’s transactions,
These Rules Compare with the (FINRA) in that it would require that
a third party
holdings, and accounts
Standards that the Department broker-dealers continue to abide by
■■ The type and scope of services
■■ Sales of propriety products or services
of Labor Intended to Implement Reasonable Basis Suitability, Customer
or products of affiliates and principal
provided by the broker-dealer,
under the Fiduciary Rule and its Specific Suitability, and Quantitative
transactions including the monitoring the
provides an arguably reduced standard recommendation ahead of the interest of Suitability, the proposed rule does
Related PTEs? performance of the retail customer’s
of care and maintains less extensive the retail customer.” include what can be described as a In the case of material conflicts of
account
The Securities and Exchange Commission process element similar to that found interests associated with financial
disclosure obligations than the BIC Unlike the Fiduciary Rule and BIC
(SEC) was substantially influenced by the under DOL rules and regulations. The incentives, the proposal would require How Did the Fiduciary Rule Affect
Exemption. Exemption, the SEC’s best interest
DOL in its promulgation of Regulation inclusion of the term “prudence” for broker-dealers to either eliminate the the Compensation Structures of
standard of care does not require that
Best Interest, as the SEC cited to the Regulation Best Interest would require
the recommendation be made “without
instance, is not found under existing conflict entirely or mitigate the conflict Financial Industry Professionals?
Best Interest Contract (BIC) Exemption that broker-dealers and their associated
regard to the financial or other interests”
securities rules. in addition to providing disclosure. The Will the Demise of the
340 times within the preamble to its
persons “act in the best interest of of the broker-dealer. Conflict of Interest Obligation
SEC did state that material conflicts of Fiduciary Rule Mean that These
proposed regulation. While Regulation
the retail customer at the time the interests could be mitigated through Professionals Will Revert to Prior
Best Interest largely tracks existing A broker-dealer is deemed to comply The SEC’s Conflict of Interest
suitability requirements, it also
recommendation is made without
with Regulation Best Interest if it Obligation requires that broker-
various conflict mitigation strategies.
Arrangements?
placing the financial or other interest dealers (1) establish, maintain, and
Disclosure Obligation The Fiduciary Rule and interpretive
incorporates several concepts raised satisfies the regulation’s three core
by the DOL under the BIC Exemption. of the broker-dealer or natural person obligations: (1) the Care Obligation, (2) enforce written policies and procedures Regulation Best Interest also requires guidance issued by the DOL affected
Having said that, the SEC’s effort who is an associated person making the the Conflict of Interest Obligation, and reasonably designed to identify, and that broker-dealers satisfy the compensation structures of financial
professionals in a dramatic way. In this should be the same within product the law. In a 2005 advisory opinion to
respect, the BIC Exemption’s warranty categories and that differentials Deseret Mutual Fund administrators,
requirements required the financial between product categories must the DOL concluded that an investment In the case of sales of shares of mutual funds, the disclosure
institution to warrant that its policies adviser who was not otherwise a fiduciary
may be satisfied by distribution of the mutual fund prospectus
be justified by neutral factors. Grids
and procedures did not permit the use were required to provide only for would not be deemed a fiduciary with
of or reliance upon quotas, appraisals, gradual increases in compensation and respect to the ERISA plan solely on the if it contains the required information.
performance or personnel actions, increases in compensation were unable basis of making a recommendation
bonuses, contexts, special awards, to be retroactive. In the DOL’s view, to a plan participant to take a plan
differential compensation, or other retroactive grids were likely to create distribution and invest it in an IRA,
actions or incentives that are intended acute conflicts of interest. even if the adviser gave specific advice We discuss both PTE 84-24 and 86-128 insurance agent or broker or their
is an oversight in compliance with other
or would reasonably be expected to cause as to how to invest the distributed
What Changes, if any, Should available exemptions. below. affiliates
advisers to make recommendations funds.5 In reaching this conclusion, the
Service Providers Consider DOL interpreted its pre-Fiduciary Rule Otherwise, service providers should PTE 84-24 The conditions under PTE 84-24
that are not in the best interest of the
Making to Their Customer investment advice regulation at 29 C.F.R. review how they are compensated and The Fifth Circuit’s decision will likely
include, among others, certain general
retirement investor. The BIC Exemption
expressly held that differential
Agreements and Disclosures, § 2510-3.21(c). The Deseret Advisory consider other available exemptions that reverse these changes to PTE 84-24.
conditions, relationship conditions, and
compensation could be paid to financial Marketing Materials, and/or Opinion stated further, however, that may permit the receipt of compensation. Importantly, with the loss of the BIC
disclosure and approval conditions.
professionals if it was based on neutral Business-to-business Agreements where a plan officer who is already Many exemptions that have been Exemption, it is important to focus on First, the general conditions under
factors that resulted from different levels (such as Selling Agreements)? a fiduciary to the plan responds to around for years prior to the Fiduciary the types of transactions covered by Section IV of PTE 84-24 require that:
of service required in the delivery of questions regarding a plan distribution Rule have been reinstated. Therefore, PTE 84-24 and the terms and conditions
Service providers should review all ■■ The transaction is effected in the
different types of investments. or the investment of amounts withdrawn service providers should look to these
client-facing agreements to ensure under which relief will be available. ordinary course of business of the
from the plan, such fiduciary would be exemptions (many of which are described
The DOL issued additional guidance on that they reflect the current state of PTE 84-24 provides exemptive relief principal underwriter, insurance
exercising discretionary management
the law and have not inadvertently below) in order to map out an effective company or insurance agent or broker.
October 26, 2016, that affected broker- for the sale of shares of a registered
over the plan.
dealer compensation practices. The DOL established a heightened standard of exemption strategy.
investment company (i.e., a mutual ■■ The transaction is on arm’s length
What Exemptive Relief Should
addressed certain back end recruitment care through contact. Service providers
How Will the Vacatur of the fund) if certain conditions are met. terms.
should also establish a game plan in Service Providers (Who Are
compensation paid to broker-dealers Amendments to the Other PTEs Specifically, regarding mutual fund ■■ The combined total of all fees,
who were changing firms within FAQ the event that they accepted fiduciary Fiduciaries under the Five-part
(PTE 77-4, PTE 75-1, PTE 80-83, shares, PTE 84-24 exempts: commissions and other consideration
12. Under the DOL’s view, the large all status via contract in response to the Test) and Who Had Planned on
PTE 83-1, PTE 84-24, and PTE is reasonable.
or nothing arrangements that were Fiduciary Rule. Relying on (1) the Best Interest ■■ The effecting of a plan’s purchase of
contingent upon the adviser meeting a Contract Exemption and (2) the 86-128) Result in the Expanded mutual fund shares by the mutual Second, the relationship conditions,
Separately, those who revised
production or assets under management agreements and issued disclosures Principal Transactions Exemption Availability of These Exemptions? fund principal underwriter or its under Section V(a) of PTE 84-24, prohibit
the principal underwriter, insurance
target were inconsistent with the to satisfy the Independent Fiduciary Consider as Alternatives, and As noted above, the result of the vacatur affiliates
company, insurance agent or broker
warranty requirements under the Exemption that provided relief from under What Circumstances? is that the DOL’s changes to prohibited ■■ The receipt of sales commissions
BIC Exemption. and any of their affiliates from having
the Fiduciary Rule should review those transaction exemptions under the by the principal underwriter or its
The DOL has issued Field Assistance certain types of relationships with
Similarly, firms relying on the BIC agreements and disclosures to determine Fiduciary Rule are also rescinded. affiliates in connection with sales of
Bulletin 2018-02, which provides for a the plan. Specifically, they may not be
Exemption were required to revisit whether some or all of the disclosures While the DOL’s changes to certain of shares of the mutual fund
temporary non-enforcement policy for (1) a trustee of the plan (other than a
escalating compensation grids. This remain necessary. those service providers who accepted the exemptions, including PTE 77-4,
In connection with plan purchases of nondiscretionary trustee who does not
is because under the BIC Exemption’s Can Providing Advice Regarding fiduciary status under the Fiduciary PTE 80-83, PTE, 83-1, were limited to insurance and annuity contracts, PTE 84- render investment advice with respect
warranty provisions, questions were
Rollovers Still be Considered Rule but may no longer rely on the BIC the inclusion of the Impartial Conduct 24 exempts: to any assets of the plan), (2) a plan
raised as to whether a firm could
Fiduciary Investment Advice Exemption as a result of the vacatur by Standards, other exemptions commonly
■■ The plan’s purchase of an insurance
administrator (within the meaning of
provide a greater proportion of the Fifth Circuit. FAB 2018-02 effectively
under the Five-part Test? If relied on by the industry, including PTEs
or annuity contract from an insurance
Section 3(16)(A) of ERISA and Section
revenue to advisers that were more extended the initial transition relief
so, What Could This Mean for 84-24 and 86-128, were substantially
company
414(g) of the I.R.C.), (3) an employer any
productive. While the DOL answered under the BIC Exemption on an ongoing
that compensation grids were permitted,
Fiduciaries? basis through a non-enforcement policy.
modified and the broad relief previously of whose employees are covered by the
available under these exemptions was no ■■ The effecting of the plan’s purchase of plan, or (4) a fiduciary who is expressly
compensation grids were required to be The answer to this question is largely While FAB 2018-02 is not an exemption the insurance or annuity contract by
longer available. The DOL’s justification authorized in writing to manage, acquire
tailored to avoid certain conflicts. For unclear. Much depends on whether and could be rescinded at any time by an insurance agent or broker or their
for these changes was that service or dispose of the assets of the plan on a
instance, the DOL warned that revenue the Deseret Advisory Opinion again the DOL, it may be relied upon while it affiliates
providers would now have exemptive discretionary basis.
that was fed into a compensation grid constitutes the DOL’s interpretation of remains effective to the extent that there
relief available to them for common ■■ The receipt of sales commissions Finally, the disclosure and approval
brokerage and annuity transactions in connection with the sale of an conditions under Section V(c) of PTE 84-
5. Id. under the BIC Exemption. insurance or annuity contract by an 24 require that, before the transaction is
the exemption is not available if the must provide to the independent brokerage services by an affiliate of a
investment manager or its affiliate is a fiduciary either: plan fiduciary also involves possible
discretionary plan trustee (i.e., a trustee prohibited transactions under
■■ A confirmation slip within 10 business
other than a directed trustee), unless ERISA Section 406(a), the brokerage
days of each covered securities
the plan has assets over $50 million and transactions also must satisfy conditions
transaction
certain other conditions are met.7 under the statutory exemption under
■■ A quarterly report of all securities
Advance Disclosure and Authorization. ERISA Section 408(b)(2), including the
transactions (whether executed
An independent fiduciary (which may condition that fees paid by the plan for
by the affiliated broker-dealer or
be the plan sponsor or administrator, brokerage services are not more than
otherwise) specifically identifying
or, for a participant-directed plan, the reasonable. A
the total compensation paid by the
individual participant) must give written
plan for securities transactions and
authorization in advance of any securities George M. Sepsakos is a partner at Groom
the amount of such compensation
transactions that would be covered by Law Group where he represents clients
retained by the affiliated broker-
the exemption.8 on a broad range of ERISA, federal tax,
dealer
Within three months before this
and securities law matters. His practice is
Annual Summary. Under PTE 86-128,
authorization is given, the investment
primarily focused on issues related to Title I
Section III(f), the independent fiduciary
manager must provide the independent of ERISA, including fiduciary responsibility
must receive an annual report that
fiduciary with any reasonably available and prohibited transaction issues. Prior to
summarizes information previously
information that the investment joining the firm, George worked as an ERISA
provided in the confirmations or
manager reasonably believes is enforcement advisor within the Office of
quarterly reports. The report must be
necessary for the independent fiduciary Enforcement of the Department of Labor
provided within 45 days after the end of
to determine whether to make the Employee Benefits Security Administration.
the period to which it relates, and must
authorization.9 This includes: Michael P. Kreps is a principal at Groom
specifically include:
Law Group, where he counsels employers,
■■ A copy of PTE 86-128
■■ The total of all securities transaction- plan sponsors, financial institutions, trade
effected, an independent plan fiduciary account in connection with the plan’s controlling, controlled by, or under ■■ A form for terminating the related charges incurred by the plan associations, and coalitions on retirement,
receive certain information in writing, transaction. With respect to participant- common control with the person. authorization during the period health, tax, and employment matters.
including information about sales directed plans, disclosures can be made The exemption applies only to agency ■■ A description of the investment ■■ The amount of the securities- Mr. Kreps specializes in issues relating to
commissions and any other charges, to, and approval can be obtained from, transactions and only to the extent that manager’s brokerage placement transaction related charges retained public policy, fiduciary responsibility, and
fees, discounts, penalties, or adjustments plan participants. the transactions are not excessive under practices by the investment manager and plan funding and restructuring. Previously,
that may be imposed in connection with the circumstances, in either amount or
PTE 86-128 ■■ Any other reasonably available
its affiliated broker-dealer and the Mr. Kreps served as the Senior Pensions and
the purchase, holding, exchange, or frequency.
information regarding the matter that
amount paid over to other persons for Employment Counsel for the U.S. Senate
sale of the recommended securities or If required conditions are met, Section
Importantly, if securities transactions are the authorizing independent fiduciary
execution and other services Committee on Health, Education, Labor,
annuity contract. In the case of sales of II(a) under PTE 86-128 exempts from
effected under PTE 86-128 on behalf of requests ■■ A description of the investment and Pensions from the 110th through the
shares of mutual funds, the disclosure ERISA Section 406(b) a plan fiduciary’s
IRAs that are not ERISA-covered plans, manager’s broker placement 114th Congress.
may be satisfied by distribution of the (e.g., a plan investment manager’s) use Plan Termination Rights. The
no additional conditions apply. However, practices, if the practices materially
mutual fund prospectus if it contains the of its authority to cause a plan to pay a independent fiduciary’s authorization
additional conditions apply where an changed during the year
required information. fee for effecting or executing securities must be terminable at will without any
To read the full version of this guidance,
investment manager effects transactions penalty to the plan. At least annually, ■■ Disclosure of the plan’s portfolio
Based on the disclosure, an independent transactions to itself or an affiliated see the complete practice note in Lexis
for ERISA-covered plans through its the investment manager must provide turnover ratio calculated in a manner
plan fiduciary must approve the broker-dealer. (The language of PTE Practice Advisor.
affiliated broker-dealer, as follows. the independent fiduciary written notice reasonably designed to provide
investment before the transaction is 86-128, Section II(a), exempts a plan
fiduciary’s causing a plan to pay fees Relationship Conditions. The plan of the right to terminate, together with the independent fiduciary with the
executed. The independent plan fiduciary
for effecting securities transactions investment manager engaging in a form that can be used to terminate the information needed to discharge its
who approves the transaction may not be RESEARCH PATH: Employee
to that person. Under Section I(a), the the securities transactions (or any authorization. PTE 86-128 § III(c). duty of prudence
the principal underwriter of the mutual Benefits & Executive Compensation
fund and may not receive, directly term person includes the affiliates of a of its affiliates) may not be the plan Periodic Reports. Under PTE 86-128, Finally, PTE 86-128 only provides > Retirement Plans > ERISA and
or indirectly, any compensation or person, including (among others) any administrator or an employer whose Section III(e), the investment manager exemptive relief from ERISA Section Fiduciary Compliance > Practice Notes
consideration for his or her own personal person directly or indirectly controlled, employees are covered by the plan.6 Also, (or its affiliated broker-dealer affiliate) 406(b). Because the provision of
6. PTE 86-128, § III(a). 7. Section III(h) to PTE 86-128. 8. PTE 86-128, § III(b). 9. PTE 86-128, § III(d).
GC Advisory | Lexis Practice Advisor® Labor & Employment
Jamala S. McFadden, Chandra C. Davis,

and Raquel H. Crump MCFADDEN DAVIS, LLC
Key Considerations for Drafting

Compliant English-Only Policies
This article provides guidance for drafting, implementing, and enforcing effective and legally
compliant English-only policies in the workplace. English-only policies require employees to
speak English while on the job. While there are definite benefits to employers from enacting
such policies, they are not without risk.
BECAUSE OF THE DISPARATE IMPACT SUCH POLICIES CAN

have on foreign-born employees, English-only policies are
often the source of discrimination claims. As such, well-
advised employers generally narrowly tailor these policies to
particular job positions, times, circumstances, and work areas
where speaking English serves a legitimate business need,
What if you could navigate

such as by improving safety, promoting customer service, or
enhancing employee supervision.
antitrust with greater speed Benefits of English-Only Policies

Despite the risks inherent in English-only policies (as
and confidence? described below), many employers nevertheless choose to

utilize them for the role they may play in creating a safe and
effective workplace. The benefits to employers from using
Antitrust is a labyrinth of legal and business issues. Attorneys must understand any twist or turn they’ll
English-only policies can include:
encounter in antitrust investigations, litigation, mergers, compliance and even common business transactions.
Count on the new Lexis Practice Advisor® Antitrust offering to deliver the practical tools and guidance you ■■ Facilitating relations with English-speaking customers
need to help clients navigate the antitrust maze.
■■ Promoting effective communication between employees and
Risks of English-Only Policies
supervisors
Master the antitrust maze at lexisnexis.com/antitrust-practice or call 800.628.3612 The primary risk of implementing an English-only policy is
■■ Allowing supervisors to more easily gauge employee that, if improperly drafted or implemented, it will expose the
performance employer to discrimination claims and liability. Imposing
Lexis Practice Advisor Antitrust ®
■■ Promoting employee morale and unity an English-only rule also may have an adverse effect on
17 ATTORNEY 50+ PRACTICE 10+ PRACTICE advancing what’s possible business operations by preventing employees whose primary
AUTHORS FORMS TOPICS ■■ Enhancing workplace safety and preventing injuries
language is not English from interacting at work in their most
■■ Improving the quality of products and services effective language.
66 LexisNexis, Lexis Practice Advisor and the Knowledge Burst logo are registered trademarks of RELX Inc. © 2018 LexisNexis. IMC00093-0 0518
www.lexispracticeadvisor.com www.lexispracticeadvisor.com 67
cautious employers should nevertheless comply with the EEOC
guidelines to survive any scrutiny by the administrative agency
English-only rules are more likely and avoid running afoul of courts that follow its guidance.
to be deemed job-related and consistent The EEOC has delineated rules addressing when English-only
with business necessity when the rules are permissible. According to the EEOC, English-only
employer does not apply the rules rules are unlawful when the employer does either of the
following:
at all times and/or to all jobs
■■ Adopts them for discriminatory reasons. Examples
in the workplace….
include propagating English-only rules to avoid hearing
foreign languages in the workplace, to generate a reason to
discipline or terminate people who are not native English
Additionally, English-only policies may diminish morale speakers, or to create a hostile work environment for certain
among employees who lack English skills. These employees non-English speaking workers.
may be frustrated by the struggle to communicate effectively ■■ Applies them in a discriminatory manner. Examples
and will likely receive significantly more discipline for violating include prohibiting employees from speaking one foreign
the English-only policies than native English-speaking language but not others or imposing more severe discipline
employees. on employees of one particular national origin who violate
When Are English-Only Policies Lawful? the policy.
Title VII of the Civil Rights Act of 1964 (Title VII) does not English-only rules are more likely to be deemed job-related
expressly prohibit discrimination on the basis of native and consistent with business necessity when the employer
language. Yet, certain English-only policies continue to be does not apply the rules at all times and/or to all jobs in the
fodder for lawsuits. As described in detail below, the Equal workplace, since having employees speak English during lunch,
Employment Opportunity Commission (EEOC) and courts have breaks, and other personal times while on the employer’s
outlined the contours of permissible English-only rules that property is not necessary to promote safe and efficient job
provide guidance on drafting and implementing such policies. performance or business operations.
Title VII – National Origin Discrimination English-only rules may also be justified when the employer
Court Guidance on English-Only Policies circumstantial evidence. If there is no direct evidence of
limits their application to:
Title VII prohibits employment practices that discriminate discrimination, a plaintiff usually must satisfy the three-part
Courts are not bound by EEOC guidance, and at least two
against employees on the basis of their national origin.1 ■■ Communications with customers who only speak English burden-shifting test from McDonnell Douglas Corp. v. Green,
circuits have rejected the EEOC guidelines on English-only
Title VII does not expressly identify language as a protected ■■ Communications with supervisors or co-workers who only 411 U.S. 792 (1973):
policies.6 To date, the U.S. Supreme Court has not examined
characteristic nor does the statute expressly prohibit English- speak English the lawfulness of English-only policies, so the legality of (1) The plaintiff must first establish a prima facie case of
only policies. Nevertheless, English-only policies can, in some
■■ Emergencies or other situations in which workers must a particular English-only rule may vary according to each discrimination by showing four elements:
circumstances, indicate discrimination based on national origin
speak a common language to promote safety jurisdiction’s own precedent. Thus, be sure to research case
because national origin is closely tied to a person’s native (a) He or she is a member of a protected class
law in your circuit when assessing the validity of an employer’s
language. ■■ Cooperative work assignments in which the English-only (b) He or she is qualified for the position
language requirements.
rule is needed to promote efficiency4
EEOC Guidance on English-Only Policies (c) He or she suffered an adverse employment action
As discussed below, plaintiffs may prove that an English-only
Notice Requirements
The EEOC states that rules that require employees to speak only policy is discriminatory through a disparate treatment or (d) The circumstances give rise to an inference of
English in the workplace are unlawful unless the employer can Even if there is a business need for an English-only rule, the disparate impact claim. discrimination
show that they are job related and consistent with business EEOC guidelines state that the agency will consider the rule
Disparate Treatment Claims (2) The burden of production (but not persuasion) then shifts
necessity.2 To meet the burden of establishing business discriminatory if the employer fails to notify its workers about
to the defendant to articulate a legitimate, non-
necessity, the employer must present detailed, fact-specific, the rule and subsequently takes adverse action against the Disparate treatment occurs when an employer takes an adverse
discriminatory reason for its decision.
and credible evidence showing that the language-restrictive individual for violating the rule. Specifically, the employer action against an employee due to his or her membership in
policy is necessary to safe and efficient job performance or must notify workers about when or under which circumstances a protected class. A plaintiff may prove disparate treatment (3) The burden then shifts back to the plaintiff to show that
safe and efficient business operations.3 While courts are not they are to speak only English and the consequences they will through direct evidence—such as discriminatory remarks the employer’s proffered reason is pretextual and that
bound by the EEOC’s guidance and have diverged from it, face for violating the rule. 5
made by decision-makers—or, more commonly, through intentional discrimination motivated the adverse action.
1. 42 U.S.C.S. § 2000e-2. 2. 29 C.F.R. § 1606.7. 3. EEOC Enforcement Guidance on National Origin Discrimination (see Section V.C.3.d). 4. EEOC Enforcement Guidance on National Origin Discrimination 6. See, e.g., Garcia v. Spun Steak Co., 998 F.2d 1480, 1489 (9th Cir. 1993); Long v. First Union Corp. of Virginia, 894 F. Supp. 933, 940 (E.D. Va. 1995), aff’d, 86 F.3d 1151 (4th Cir. 1996); but see EEOC v.
(see Section V.C). 5. 29 C.F.R. § 1606.7(c). Synchro-Start Prods., 29 F. Supp. 2d 911, 915 (N.D. Ill. 1999) (following EEOC guidelines in upholding Title VII claim based on English-only rules).
Disparate Impact Claims
Plaintiffs may also prevail under Title VII on a disparate impact Related Content
theory of discrimination where an employer has a policy or
For a discussion of compliance issues under Title VII, see
practice that, although neutral on its face, has the effect of
> TITLE VII COMPLIANCE ISSUES
discriminating against the members of a protected class.
In the context of English-only policies, courts analyze disparate RESEARCH PATH: Labor & Employment >
Discrimination, Harassment, and Retaliation > EEO
impact claims using the following three-stage burden-shifting
Laws and Protections > Practice Notes
framework:
(1) The plaintiff must demonstrate that the defendant uses a

For more information on disparate treatment claims, see
particular employment practice that causes a disparate
> DISPARATE TREATMENT: KEY CONSIDERATIONS
impact on the basis of national origin.
RESEARCH PATH: Labor & Employment >
(2) The burden then shifts to the defendant to demonstrate Discrimination, Harassment, and Retaliation > EEOC
that the challenged practice is job-related for the position in Laws and Protections > Practice Notes
question and consistent with business necessity.
(3) The burden then shifts back to the plaintiff to establish an

alternative policy or practice that would satisfy the asserted
business necessity without producing the disparate effect.17
Less Discriminatory Alternatives
The Prima Facie Case actionable when an employee suffers an adverse action. Thus,
Courts have emphasized that an important factor in
employee plaintiffs who are bilingual may not prevail by The Prima Facie Case
Discriminatory intent. Courts evaluating disparate treatment determining business necessity is whether or not there is a
demonstrating the mere existence of an English-only policy
claims based on English-only policies often assess whether the As with disparate treatment claims (as discussed above), fully less discriminatory alternative to the English-only policy that
since, being fluent in English, they are not adversely affected
employer implemented the policy with discriminatory intent in bilingual employees may not prevail on disparate impact would serve the same purpose.
by the requirement to speak English on the job.12 Rather, they
order to determine whether the plaintiff has made a prima facie claims on the basis of a narrowly tailored English-only policy
must demonstrate that they suffered an adverse employment In Sephora, the plaintiffs failed to demonstrate a less
case of discrimination.7 alone. This is because a policy requiring employees to speak
action related to the employer’s English-only rule. 13 discriminatory alternative to the employer’s English-
Courts have generally held that English-only policies are only English while working does not deny any privileges of only policy. Specifically, the alternative measure plaintiffs
not, alone, evidence of discriminatory intent under Title
Legitimate, Non-discriminatory Reason employment to bilingual employees.18 suggested failed because it did not address when the employer
VII.8 However, such policies may violate Title VII when other If the plaintiff succeeds in making a prima facie case, the On the other hand, courts have found for the plaintiff where: could have required employees to speak English.23
evidence besides the policy itself suggests the employer burden shifts to the defendant employer to articulate a
■■ The English-only policy applied only to employees who are What Are the Key Considerations in Drafting an
enacted it because of discriminatory animus toward the legitimate, non-discriminatory reason for the English-only
not fluent in English. 19 English-Only Policy?
employee’s national origin.9 policy. Courts have found the following to be legitimate, non-
discriminatory reasons for having an English-only policy: ■■ The English-only policy required employees to speak English When drafting an English-only policy, consider taking the
For example, courts have found prima facie discrimination
at all times, including during lunch, breaks, and other following measures to minimize the risk of liability.
where: ■■ Relieving a tense working environment between English and
personal time. Determine Whether to Have an English-Only Policy at All
20
Spanish-speaking employees14
■■ The employer laid off a majority of the Hispanic employees
and replaced them with non-Hispanic employees, Hispanic ■■ Helping hospital patients feel comfortable and allowing Business Necessity As discussed at the beginning of this article, language-
employees had to use a pay phone outside the building to English-speaking supervisors to properly monitor their restriction policies are not without risks. Apart from the
If the plaintiff succeeds in his or her prima facie case, the
make personal calls in which they spoke Spanish, and the employees’ work performance 15 legal exposure an employer faces if its English-only policy is
defendant must demonstrate that its English-only policy was
president of the company used ethnic slurs.10 overbroad, unjustified, or applied in a discriminatory manner,
Pretext job-related and consistent with business necessity. Courts have
employers also risk causing inefficiencies and diminishing
■■ Management was aware that the English-only policy would found the following justifications for an English-only policy to
If the employer meets its burden, the plaintiff must prove morale among their workers by forcing them to communicate
lead to mocking of Hispanic employees, the employer be valid:
that the employer’s explanation is pretextual. Note that an in a language that they are not comfortable speaking.
adopted the policy without consulting Hispanic employees,
employer’s rescission of an English-only policy that was ■■ Enhancing the politeness and approachability of sales staff
and the defendant’s mayor derided the Spanish language in Nevertheless, employers whose businesses are impeded by
previously in place is not likely to be deemed an indication or as components of customer service21
a news interview. 11 employees not speaking English on the job may view these
admission of discrimination.16 Therefore, employers concerned
■■ Preventing employees from intentionally using their fluency risks as justifiable. Consider whether the employer’s concerns
Adverse action requirement: bilingual employees. It is about the lawfulness of their policies may rescind them without
in Spanish to separate and intimidate members of other are based on actual, practical concerns, or merely theoretical
important to note that disparate treatment claims are only fearing these consequences.
ethnic groups 22
ones. Has the employer received customer complaints or
7. See Long, 894 F. Supp. at 941–42. 8. See, e.g., Lopez v. Flight Servs. & Sys., 881 F. Supp. 2d 431, 439–40 (W.D.N.Y. 2012). 9. Id. 10. EEOC v. Premier Operator Servs., 113 F. Supp. 2d 1066, 1071 (N.D.
Tex. 2000). 11. Maldonado v. City of Altus, 433 F.3d 1294, 1308 (10th Cir. 2006). 12. Lopez, 881 F. Supp. 2d at 440. 13. Id. 14. Long, 894 F. Supp. at 942. 15. Pacheco v. N.Y. Presbyterian Hosp., 593 F. 17. EEOC v. Sephora USA, LLC, 419 F. Supp. 2d 408, 413–14 (S.D.N.Y. 2005). 18. Garcia, 998 F.2d at 1487–88. 19. Synchro-Start Prods., 29 F. Supp. 2d at 912–15. 20. Premier Operator Servs., 113 F.
Supp. 2d 599, 614 (S.D.N.Y. 2009). 16. See Long, 894 F. Supp. at 941–42. Supp. 2d at 1074–76. 21. Sephora, 419 F. Supp. 2d 408. 22. Long, 894 F. Supp. at 941. 23. Sephora, 419 F. Supp. 2d at 418.
Examples of circumstances where employers generally may
require employees to speak English include when they:
Employers should consider including this policy in their employee handbooks or
■■ Perform job duties that involve safety concerns, including
handling potentially dangerous substances or operating presenting it to employees during the onboarding process. The employer should
heavy equipment or machinery make sure that employees sign and acknowledge that they have received and
■■ Regularly converse with customers who speak English
understand the policy and consent to its terms.
■■ Have English-speaking supervisors who monitor their
performance
■■ Use their fluency in a foreign language to separate and

are required to speak English and the consequences of violating What Are the Best Practices for Implementing and
intimidate members of other ethnic groups
the English-only policy. Consider providing notice in multiple Enforcing an English-Only Policy?
On the other hand, an English-only policy implemented languages and having a grace period before the effective date of
When implementing and enforcing an English-only policy,
to alleviate concerns that employees are speaking foreign the policy. If employees in certain positions will be required to
consider taking the following steps to minimize the risk of legal
languages during breaks or while off-duty is far harder to speak English, include that requirement in the job description
action.
justify as a business necessity. to avoid misunderstandings after hiring the applicant.
■■ Obtain employee acknowledgments. Employers should
Because of the potential disparate impact of English-only Limit Discipline
consider including this policy in their employee handbooks
policies on employees of foreign national origins, employers
other feedback from clients requesting that the company’s Limit disciplinary measures to willful violations. Not punishing or presenting it to employees during the onboarding process.
should have detailed, fact-specific, and credible evidence to
employees speak English around them? Have supervisors employees for inadvertent violations aids in the establishment The employer should make sure that employees sign and
show the business necessity of these policies to pass muster
complained that they have trouble managing or ensuring the of a business necessity. Consider including a clause in your acknowledge that they have received and understand the
under Title VII.
English-only policy explicitly stating that they will not be policy and consent to its terms. If the employee has difficulty
safety of employees when they do not speak English? And, if
Clearly State Objectives disciplined for using non-English in emergency situations or understanding English, offer the employee a version of the
so, is there an alternative solution to the problem the employer
Clearly state the objectives of the English-only policy in the in circumstance that cause the employee to speak in a language policy written in his or her native tongue to ensure that his
is facing besides implementing an English-only policy? If an
policy itself. Acceptable objectives that you may wish to state other than English due to the employee’s comfort with such or her consent is informed.
employer finds that workplace safety, efficiency, coordination,
include: language.
customer relations, supervision and evaluation, or employee ■■ Enforce the policy evenhandedly. When implementing and
morale and unity are suffering (and there is no adequate ■■ Encouraging inclusiveness and harmony among employees Consult Employees Affected by the Policy enforcing English-only policies, employers should apply
alternative solution), it should consider enacting a narrowly Consult with employees who speak languages other than the policies uniformly to all employees regardless of their
■■ Promoting better collective communication and distribution
tailored English-only policy. English before, during, and after drafting the policy to address preferred language. An employer who applies the policy
of information to team members
any concerns they might have. Should the policy become the selectively or doles out more severe discipline to certain
Consider the Composition of the Workforce ■■ Ensuring better supervision of employee duties by managers
subject of litigation, consulting with the affected employees groups or speakers of particular languages creates a strong
Before implementing an English-only policy, employers should ■■ Ensuring better communication with customers, as well inference of discriminatory animus.
will bolster the employer’s argument that they did not harbor
consider the effect it will have on its workforce. If all of the as maintaining politeness in front of English-speaking any discriminatory animus in creating the policy. ■■ Train supervisors. Provide training to supervisors and
affected individuals are bilingual, an English-only policy is customers management on how to enforce the English-only policies
Consider State Law
far less likely to adversely affect employees. Similarly, if the Limit the Circumstances in Which the Policy Applies fairly and consistently. You should also make sure managers
workforce is entirely American-born, the employer is less likely While Title VII does not expressly prohibit discrimination
know how to properly address complaints that the policy is
An English-only policy should be limited to only the times, against native language or English-only policies, some
to encounter a national origin discrimination claim. not being followed or fairly applied and who to contact in
job positions, circumstances, and locations that speaking jurisdictions have passed laws governing English-only policies.
If, on the other hand, a significant number of employees Human Resources to investigate the complaint.
English is a business necessity. Narrowly tailoring the policy’s For example, under Illinois law, it is unlawful for an employer
are foreign-born and struggle to speak English—or the application minimizes the disparate impact on non-English ■■ Implement and enforce anti-discrimination policies.
to implement an English-only policy for “communications
employer’s job descriptions do not require employees in speaking employees and bolsters the employer’s case that its When determining whether an English-only policy was
that are unrelated to the employee’s duties.” California and 24
certain positions to speak English—then the policy is almost policy is a business necessity. motivated by discriminatory animus, courts often look
Tennessee law allow employers to implement English-only
certain to adversely affect and disparately impact non-native to other evidence of discriminatory behavior. By limiting
The employer should also provide exceptions to the English- policies at certain times if the rule is justified by a business
speakers. It is imperative for employers in the latter scenario discrimination in the workplace, employers minimize the
only policy, such as by allowing employees to speak in a foreign necessity and employees are notified of the circumstances
to have a compelling non-discriminatory business reason for risk of falling victim to such claims.
language with customers or vendors who prefer to speak in and times when they must speak only in English and of the
implementing the policy. other languages or permitting employees to report emergencies consequences of violating the rule.25 Thus, before drafting and ■■ Offer English lessons. Consider providing English training
Ensure Business Necessity in their native tongue. implementing an English-only policy, be sure to research state to workers with limited English skills to help advance the
and local laws to ensure compliance. policy. A
To stem disparate impact claims, employers should ensure their Provide Adequate Notice
English-only policies are consistent with business necessity Under the EEOC rules, employers must provide notice to
(i.e., necessary for an employer to operate safely or efficiently). employees to communicate the circumstances in which they 24. 775 Ill. Comp. Stat. Ann. 5/2-102. 25. Cal. Gov. Code § 12951; Tenn. Code Ann. § 4-21-401(c).
Market Trends | Lexis Practice Advisor® Capital Markets & Corporate Governance
Sample English-Only Policy

Jordan Yarett, Mikhel Schecter,
In order to improve customer relations, ensure effective supervision and evaluation of employees, promote employee and Bryant Mendel
safety, and enhance workplace morale, it is the policy of [employer name] (the Company) that only English must be spoken PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP
for all work-related and business communications, with the exception of those circumstances where it is necessary or
Market Trends:
prudent to communicate with a client, customer, supplier, or vendor in his or her native language due to the person’s limited
English language skills.
During lunch, breaks, and employees’ personal time, employees may speak any language that they wish, as this policy does
Structured Finance,
not apply to strictly private communications so long as the communications are limited in time and are not disruptive to
the work environment. Further, employees shall not be subject to discipline under this policy when reporting an emergency
involving personal distress or other reasonable extenuating circumstance that cause the employee to speak in a language
Securitization and Derivatives

other than English due to the employee’s comfort with such language.
Nevertheless, employees must be aware of the presence of other individuals in the area where the non-English
conversation is taking place and the potential perception that a conversation in a language not understood by those
individuals may be disrespectful. Also, personal conversations (in any language) in public/working areas of the building
should be kept to a minimum so as not to disturb employees who are working or other individuals in the building. Personal
ABS Issuance Growth by Sector ($bn)
conversations must never interfere with workplace duties or responsibilities or the duties and responsibilities of other
employees and are subject to the Company’s discrimination policies. Employees may not use fluency in other languages in a 120
manner that may lead other employees to suffer humiliation or feelings of exclusion.
100 108
Violations of this policy may result in disciplinary action, up to and including termination. 99
Any questions about this policy, including any concern about the ability to comply with this policy due to language issues, 80
should be addressed to Human Resources.
60
54
40 47
43
34
20
14 16
11 13
0
Auto-related Credit Card Student Loans Equipment Non-Traditional
Jamala S. McFadden is a co-founding partner of The Employment chair in over 25 litigation matters and managed investigative files
Law Solution: McFadden Davis, LLC. Her practice focuses on all for over 250 charges for the purpose of recommending the initiation
aspects of employment law, including advice and counseling, of litigation in connection with various civil actions. She has also
representation in litigation and agency matters, and corporate developed training programs for the EEOC and multi-national
transactions. She has advised more than 100 small-to-midsize STRONG ECONOMIC GROWTH AND HISTORICALLY LOW The biggest driver in 2017 was the boom in the collateralized
corporations. Raquel H. Crump focuses her practice on advice and
to Fortune 100 organizations in varied industries. McFadden counseling, litigation and agency matters, trainings, employment
interest rates boosted U.S. structured finance issuance to $510 loan obligation (CLO) market. New CLO issuances were the
conducts internal investigations and has trained more than 1,000 policies, and agreements. Her experience with a large retailer
billion in 2017, a 37% increase over 2016 volume. This growth second highest year on record, reaching $118 billion in the
management and staff employees on harassment and discrimination occurred across a wide range of asset classes. Up and down the United States, up 64% from the prior year. A record number of
gives The Employment Law Solution insight into how to resolve
policies. Additionally, she drafts workforce-related agreements, credit curve, spreads (i.e., the difference between what the existing CLOs were refinanced or reset, which in combination
employment challenges in the industry.
policies, and handbooks and assists executives in employment issuer receives from the underwriter and what the underwriter with new CLO issuances resulted in total issuances of over $250
contract matters, including negotiating severance agreements. receives upon resale) on asset-backed securities (ABS) were billion in 2017. Some industry commentators pointed to the
Chandra C. Davis is a co-founding partner of The Employment Law stable or grew tighter in both developed and developing recently effective risk retention requirements as part of the
Solution and has been practicing employment law for over 14 years. RESEARCH PATH: Labor & Employment > Discrimination, markets as demand far outpaced supply. Investors continued driving force behind such growth; more than 50% of new CLOs
She has extensive experience as a management side lawyer and as Harassment, and Retaliation > Policies and Procedures > their hunt for yield further down the capital stack as well and complied with the risk retention requirements by retaining
a Trial Attorney for the EEOC. At the EEOC, Chandra served as first Practice Notes into the more esoteric corners of the market. an eligible horizontal residual interest in the issuing entity
in an amount equal to at least 5% of the fair value of all ABS as of December 24, 2015), issuers of other ABS adapted well to
interest issued as part of the securitization transaction, thereby the new requirements. Some of the notable changes to deal Related Content
resulting in less availability for third-party investors. Many market participants agree terms are summarized later in this article.
To learn more about asset-backed securities (ABS) and other
Another 2017 highlight was the non-traditional ABS sector or
that structured finance can Indemnification Tied to Risk Retention securitization transactions, see
so-called esoteric ABS market, which comprises assets other
than the usual sources for ABS financing such as auto-related, weather interest rate hikes Underwriters, initial purchasers, and other market participants > SECURITIZATION
now require securitization sponsors to provide certain RESEARCH PATH: Capital Markets & Corporate
credit card, student loan, or equipment assets. Overall, the so long as they are not representations, warranties, and indemnifications related to Governance > Structured Finance and Securitization >
esoteric ABS market was up approximately 41% year-over-
year, with issuances rising to over $50 billion. Consumer loan,
sudden and steep. risk retention including: Securitization > Practice Notes
whole-business, aircraft lease, single-family rental, and mobile ■■ Confirmation that the sponsor, as such term is defined in
device payment ABS led in this market, representing 61% of the Risk Retention Rule, has been selected appropriately For details on the methods that are available to enhance the
credit of securitized assets, see
such issuance in 2017.
■■ Confirmation that the sponsor or a majority-owned affiliate
> CREDIT ENHANCEMENT IN SECURITIZATIONS
Whole-business volumes notably increased 171% from the prior the ABS industry have noted that the Coinstar type of deal may thereof will hold an amount equal to at least 5% of the fair
year with $7.6 billion of new issuance. The large increase was represent another active source of future ABS financing. value of all ABS interest (as such terms are defined in the
Governance > Structured Finance and Securitization >
driven by $2.1 billion and $1.6 billion offerings from Domino’s Risk Retention Rule)
In another unique securitization, Angel Oak Capital Advisors, Securitization > Practice Notes
and Dunkin’ Brands, respectively; however, smaller restaurant
LLC (Angel Oak) sponsored the issuance of a $90 million ■■ Confirmation that the sponsor has complied with (and was
franchises were also in the market, including Jimmy John’s,
securitization backed by loans originated by an affiliated direct solely responsible for) the disclosure requirements under the For an explanation of the primary types of structured securities
Five Guys, and TGI Fridays.
investment property lender. The notes are backed by loans Risk Retention Rule issued by aircraft leasing companies, see
Notable Transactions known as fix-and-flip loans, which are issued to residential > AVIATION INDUSTRY PRACTICE GUIDE
■■ General indemnification for any liability related to the
As noted above, the whole-business securitization market real estate investors. Traditionally, fix-and-flip loans, which RESEARCH PATH: Capital Markets & Corporate
Risk Retention Rule
experienced significant growth in 2017. One deal in particular are short-term loans to developers and speculators who buy Governance > Industry Practice Guides > Aviation &
stood out: Coinstar, LLC (Coinstar). Coinstar issued a first-of- run-down houses to quickly fix and resell, have been difficult Disclosure Trends Aerospace > Practice Notes
its-kind $900 million whole-business securitization of its coin to securitize. That is in part because the loans typically mature
Generally, the Risk Retention Rule requires a list of specific
exchange business. Coinstar operates automated coin-counting in 6-12 months, which can be too short to support bonds with
disclosures be provided to prospective investors a reasonable For a discussion on ABS for commercial paper financing, see
kiosks that enable customers to deposit coins and receive the average lives long enough to appeal to most investors.
period of time prior to the sale of the ABS. Additionally, in > ASSET-BACKED COMMERCIAL PAPER FACILITIES
equivalent in cash or vouchers, less a transaction fee. The With its 2017 issuance, however, Angel Oak created a structure certain circumstances, additional disclosures are required to be RESEARCH PATH: Capital Markets & Corporate
$900 million of notes, rated BBB by Kroll and Morningstar, using a revolving trust (which the company claimed was the provided a reasonable time after closing. Governance > Structured Finance and Securitization >
were backed by Coinstar’s coin kiosks, intellectual property first of its kind) that allows the issuer, over the course of 18 Securitization > Practice Notes
(including proprietary software and patents related to coin Furthermore, the rule requires the sponsor to retain all
months, to acquire new loans as the original loans are paid off.
counting and sorting), contractual arrangements with retailers information regarding the investor disclosure (including
This attracted the attention of the market with some seeing
descriptions of methodology used to calculate fair values, For guidance on shelf registration for offerings of investment
and stored value card providers, and international royalty it as a possible roadmap for other issuers. The total dollar grade ABS and the application of Regulations AB and AB II, see
payments. In contrast to a traditional securitization, where the volume of financed home flip purchases was $16.1 billion for key inputs, and assumptions) until three years after all ABS
securitized cash flows are payments by contractually obligated > LEGAL FRAMEWORK OF SECURITIZATION
homes flipped in 2017, up 27% from 2016 and the highest level interest is no longer outstanding and disclose such information
TRANSACTIONS
parties, the main securitized cash flow in this transaction was since 2007. to the Securities and Exchange Commission (SEC) and other
Coinstar’s profit margin on the coins deposited into kiosks regulators upon request.
by the general public. The deal introduced a unique cash flow
Deal Terms Governance > Structured Finance and Securitization >
structure and cash management arrangement that allowed Impact of Credit Risk Retention on ABS Deal Terms in 2017
Legal and Regulatory Trends Securitization > Practice Notes
Coinstar to continue to operate its business as usual, but The Risk Retention Rule was implemented with relative calm;
The credit risk retention rule for ABS (the Risk Retention
which was also acceptable to rating agencies and attractive however, regulation remains a hot topic. Significant regulatory
Rule) promulgated pursuant to the Dodd-Frank Wall Street
to investors. items of note include (1) the United States Court of Appeals
Reform and Consumer Protection Act1 became effective for all D.C. Court Ruling on Risk Retention
The Coinstar deal showed that securitization of assets other securitizations as of December 24, 2016. The Risk Retention
2 for the District of Columbia (the D.C. Court) risk retention
than the traditional kinds of ABS assets, when structured Rule requires any securitizer of ABS to retain an economic ruling in February 2018 with respect to open-market CLOs, Under the current Risk Retention Rule applicable to CLOs,
appropriately, can be attractive to potential investors. The interest equal to at least 5% of the aggregate credit risk of (2) the potential impact of the December 2017 tax reform CLO collateral managers are required to purchase notes
innovative securitization structure may have wider application the assets collateralizing the issuance. Taking its cues from bill on structured finance and the securitization market, and representing at least 5% of the credit risk associated with each
to a variety of businesses that, like Coinstar, rely on margins the residential mortgage-backed securities (RMBS) and CLO (3) the October 2017 U.S. Treasury Department report on CLO that they structure. The Loan Syndications and Trading
on individual transactions for their revenue. Commentators on markets (which were initially subject to the Risk Retention Rule capital markets. Association (LSTA) challenged this requirement as applied to
1. 111 P.L. 203, 124 Stat. 1376. 2. See 17 C.F.R. §§ 246.1 - 246.22. 3. Loan Syndications & Trading Ass’n v. SEC, 223 F. Supp. 3d 37 (D.D.C. 2016).
Treasury Report on Capital Markets of the risk retention requirement and recommended that the
“federal banking regulators expand qualifying risk retention
On February 3, 2017, President Trump issued Executive Order
exemptions across eligible asset classes based on the unique
13722, which, among other things, directed the Secretary of
characteristics of each securitized asset class . . . ”5 It is too
Treasury to examine the existing laws, treaties, regulations,
early to predict the exact scope or long-term impact of this
guidance, reporting, and recordkeeping requirements to
report on the risk retention requirements or the securitization
ensure they promoted the core principles for regulating
and structured finance markets.
the U.S. financial system. In response, in October 2017, the
Treasury Department released a paper on capital markets Market Outlook
that included a chapter on securitizations. Among the most Market views remain positive going into 2018 with many
notable recommendations, the paper questioned the breadth forecasting continued growth. Standard & Poor’s stated in
January 2018 that since securitization still represented a
relatively low percentage of the total U.S. loans outstanding,
Related Content there appeared to be significant opportunity for expansion

in most U.S. loan sectors. Several sectors in particular are
managers of open-market CLOs and brought action against the ■■ Can the D.C. Court’s ruling be applied to other structured For a review of the roles that the key parties play in packaging, expected to play an outsized role in 2018. The CLO, RMBS,
SEC and the Board of Governors of the Federal Reserve System. asset classes? servicing, selling, and administrating ABS, see and consumer lending markets are all areas to keep an eye on
In 2016, in response to this lawsuit, a District of Columbia > PARTIES AND DOCUMENTS IN SECURITIZATION
■■ Will the market demand that managers still hold risk or will in 2018.
district court held that the Risk Retention Rule was a valid TRANSACTIONS
exercise of federal agency authority deferring to the agencies’ investors be willing to buy securities from issuers who do not Nonetheless, the 2018 outlook for structured financing is
interpretation of the term securitizer to include open-market hold any risk? not without risks. Many expect interest rates to rise in 2018
CLO managers.3 (albeit gradually) with the appointment of a new chairman of
Tax Reform Bill Securitization > Practice Notes
the Federal Reserve Board, and questions linger regarding the
On February 9, 2018, a three-judge panel of the D.C. Court
On December 22, 2017, President Trump signed the Tax effect that such anticipated interest rate hikes will have on the
disagreed with the district court’s ruling and invalidated the For a description of the various items that are prepared in
Cuts and Jobs Act of 2017 (TCJA). The law includes several structured finance market. Many market participants, however,
Risk Retention Rule, as it applies to the collateral managers anticipation of the closing of a securitization transaction, see
changes that may have an impact on structured finance agree that structured finance can weather interest rate hikes so
of open-market CLOs.4 Specifically, the court ruled that > CLOSINGS IN SECURITIZATION TRANSACTIONS
and securitization markets. Of note, the TCJA reduced the long as they are not sudden and steep. A
collateral managers of open-market CLOs are not securitizers RESEARCH PATH: Capital Markets & Corporate
under the Dodd-Frank Act and, accordingly, are not subject to cap on principal balances entitled to take mortgage interest Governance > Structured Finance and Securitization >
the requirements of the Risk Retention Rule. Given that the
Jordan E. Yarett is a partner in the Corporate Department at Paul,
deductions from $1 million to $750,000 for mortgage loans Securitization > Practice Notes
rule defines a securitizer as, among other things, an entity Weiss, Rifkind, Wharton & Garrison LLP and is head of the firm’s
originated (or subject to a written binding contract) after
that transfers assets to an issuer of ABS, the court explained Securitization Practice Group. Mr. Yarett has over 25 years of
December 15, 2017. The new law also appeared to suspend the For information on the legal opinions that are commonly
that managers of open-market CLOs characteristically never experience as a financing lawyer focusing on structured finance
ability of borrowers to deduct interest for existing and future required to be delivered by counsel in most securitization
own the assets that collateralize a CLO, and therefore cannot transactions, see and securitization transactions. He has handled both innovative
home equity lines of credit (HELOCs) for the taxable years
transfer them to the issuer. Instead, the managers act as structured finance deals involving unusual asset classes as well
> LEGAL OPINIONS IN SECURITIZATIONS
beginning on or after January 1, 2019, with such suspension as securitizations and bond financings involving a wide range of
agents of the issuers in selecting the assets to be purchased
by the issuers from third parties. After the March 26 deadline ending for taxable years beginning after December 31, 2025. more traditional assets. Mikhel Schecter and Bryant J. Mendel
for appeal by regulators had passed, the D.C. Court ordered However, the Internal Revenue Service clarified in a bulletin are associates in the Corporate Department and members of the
Securitization > Practice Notes
summary judgment for the LSTA. With the deadline for seeking on February 21, 2018, that HELOC interest would continue to be Finance Group at Paul, Weiss, Rifkind, Wharton & Garrison LLP.
review by the U.S. Supreme Court having passed, the D.C. deductible under the TCJA to the extent that the loan was used They focus on representing private equity funds and their portfolio
For an overview of the major provisions of the Dodd-Frank Act,
Court's ruling is the final word: the Risk Retention Rule will no to “buy, build or substantially improve the taxpayer’s home companies in a variety of corporate finance transactions, including
see
longer apply to open-market CLO managers.
that secures the loan.” The implications of the new law are leveraged buyouts, debt restructurings, distressed debt purchases,
> DODD-FRANK WALL STREET REFORM AND
While there are many theories as to how this decision will and portfolio company financings.
still unclear but could have a negative effect on the market for CONSUMER PROTECTION ACT KEY PROVISIONS
impact the market, the implications of the ruling are not yet higher balance mortgage loans and HELOCs used for purposes RESEARCH PATH: Capital Markets & Corporate
clear. Some open questions include: Governance > Corporate Governance and Compliance
other than to make home improvements. In particular, it could
■■ How will new CLOs be structured? have a downward effect on the value of related mortgaged Requirements for Public Companies > Corporate Governance RESEARCH PATH: Capital Markets & Corporate
> Practice Notes Governance > Market Trends > Structured Finance >
■■ How will managers of open-market CLOs approach their properties and prevent or delay borrowers from selling or
Practice Notes
contractual obligations to comply with risk retention? refinancing their mortgaged properties in the future.
5. See U.S. Department of the Treasury, A Financial System That Creates Economic Opportunities: Capital Markets (October 2017) at 103, https://www.treasury.gov/press-center/press-releases/
4. Loan Syndications & Trading Ass’n v. SEC, 882 F.3d 220 (D.C. Cir. 2018). Documents/A-Financial-System-Capital-Markets-FINAL-FINAL.pdf.
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Practice News Practice Notes

4 CURRENT UPDATES AND LEGAL 48 PROS AND CONS OF SHARED SPACE

11 ENFORCING SETTLEMENTS AND

26 TAXING ONLINE SALES: IMPACT OF THE

35 RANSOMWARE PLANNING AND RESPONSE

43 TELEMEDECINE AND DIGITAL HEALTH:

PUBLIC SECTOR UNIONS CANNOT IMPOSE FEES

SUPREME COURT UPHOLDS TRUMP Broader Implications of

In a 5-4 ruling, the high court vacated an injunction prohibiting

■■ Businesses that have an online privacy policy or website are

■■ Businesses that operate websites must include a clear and

and Consent Decrees

diversity jurisdiction because enforcing a settlement does not

its judgments.”41 The parties may apply to a court that has

in Documents That Don’t Look,

Feel, or Smell Like Contracts

that additional contractual provisions will be found in the PRACTICAL

Top 10 Practice Tips:

Risk Factor Disclosures

Wayfair Concurrence and Dissent Summaries

and Response Best Practices

Telemedicine and Digital Health:

Strategic Opportunities and

Pros and Cons of

License Defined Shared space providers frequently create a trendy atmosphere

narrowly defined and subject to certain limitations, such as:

■■ Users may not have any signage rights.

Patent Examiner Interviews

Unwinding the Department

of Labor’s Fiduciary Rule

Jamala S. McFadden, Chandra C. Davis,

Key Considerations for Drafting

BECAUSE OF THE DISPARATE IMPACT SUCH POLICIES CAN

What if you could navigate

antitrust with greater speed Benefits of English-Only Policies

and confidence? described below), many employers nevertheless choose to

(1) The plaintiff must demonstrate that the defendant uses a

(3) The burden then shifts back to the plaintiff to establish an

■■ Use their fluency in a foreign language to separate and

Sample English-Only Policy

Securitization and Derivatives

Related Content there appeared to be significant opportunity for expansion

REACT Platform Seeks to

The Global Business Coalition for Education (GBC-Education) has

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4 CURRENT UPDATES AND LEGAL 48 PROS AND CONS OF SHARED SPACE

11 ENFORCING SETTLEMENTS AND

26 TAXING ONLINE SALES: IMPACT OF THE

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43 TELEMEDECINE AND DIGITAL HEALTH: