‘Retaliatory Amendment’ of an LLC Operating Agreement

Like all contracts, operating agreements — which are celebrated for allowing business partners to freely define their relationship by contract — can be amended and modified, according to a post in The LLC Jungle.

Author Kevin Brodehl discusses a recent opinion from the Supreme Court of New York that illustrates how the process of amending an LLC’s operating agreement can sometimes be used to gain the upper hand in a dispute between members.

The case involves a majority of members amending the operating agreement to remove the manager and escalate capital calls.

Read the article.



Contract ‘Busts’: Trying to Decipher Provisions That Literally Make No Sense

In an ABA Journal column, Bryan Garner explores the curiosity of “busts”—the prevalence of contractual provisions, sometimes perpetuated in deal after deal, that make no literal sense at all.

“That they exist at all is something of a marvel. After all, you’d think that transactional lawyers would adopt a protocol of reading and rereading each contract that goes out the door,” he writes. “Given that critical thinking and close reading are prized habits for lawyers, contradictory or outright nonsensical provisions should be exceedingly rare. Alas, they’re not.”

Garner discusses the dangers of flawed forms and word swaps, such as mixing up “lessor” and “lessee.”

Read the article.



Supply Chain News: Getting Outsourcing Contracts Right

When contracting with outsourcing firms, there is often a lot of dissatisfaction with the outcomes, says Kate Vitasek, a consultant and University of Tennessee faculty member. And that is because companies don’t get the contracting part correct.

She is quoted in a report in the Supply Chain Digest.

Vitasek says she and other researchers at the University of Tennessee have uncovered a better, more user-friendly way of getting to a sound sourcing agreement,” according to the report. “That insight came after studying some of the most successful outsourcing agreements from such companies as Procter & Gamble, Microsoft and McDonald’s, in research funded by the US Air Force that lasted almost a decade.”

The article lists five rules for successful outsourcing contracts.

Read the article.




Tesla Replaces General Counsel With Seasoned Beltway Trial Lawyer

Tesla announced on Friday that General Counsel Todd Maron is leaving the electric vehicle maker, the second high-ranking attorney to do so this quarter.

CNBC reports that the move comes a month after Phil Rothenberg left his post as Tesla’s vice president of legal to become general counsel at Sonder, a hospitality start-up.

CNBC’s Lora Kolodny reports:

“The electric car company said it plans to replace Maron with seasoned Beltway trial lawyer Dane Butswinkas, a chairman at Williams & Connolly, who was also a Co-Chair in the firm’s Commercial Litigation, Financial Services and Banking Groups.”

Read the CNBC article.




Judge Sets Apple v. Qualcomm Trial Date as Apple Lawyer Refutes Possibility of Settlement

A jury trial in Qualcomm’s wide-ranging legal war with Apple has been set to begin April 15 in San Diego federal court, with a settlement looking unlikely at this point, reports The San Diego Union-Tribune.

U.S. District Judge Gonzalo Curiel scheduled the trial at hearing Friday. Qualcomm had sought to begin the trial in February, but Curiel said the April date was needed to accommodate the court’s schedule.

Qualcomm Chief Executive Steve Mollenkopf had previously told CNBC’s Jim Cramer that the San Diego cellular technology firm was “on the doorstep of finding a resolution” to the dispute with Apple, according to Union-Tribune reporter Mike Freeman.

But Apple attorney William Isaacson told Curiel on Friday that a settlement wasn’t in the cards.

Read the San Diego Union-Tribune article.



U.S. Judge Gives Preliminary OK to VW Investor Settlement

VolkswagenReuters is reporting that a U.S. judge in California has granted preliminary approval to a $48 million settlement for investors who said Volkswagen AG made false and misleading statements over its excess diesel emissions.

Reuters reporter explains:

Lawyers for the investors, who include police and other municipal pension funds, had estimated that the maximum they could have recovered was $147 million. But Judge Charles Breyer said the settlement agreed in August appeared “fair, adequate and reasonable.”

The German automaker admitted in September 2015 to secretly installing software in nearly 500,000 U.S. cars to cheat government exhaust emissions tests, writes Reuters reporter David Shepardson.

Read the Reuters article.



Solving the Mystery of Contracting By Hyperlink

A discussion on the Troutman Sanders website addresses the current state of the law governing a key link to remote contracting — hyperlinks — with the goal of advising how to successfully incorporate by reference separate contract terms using hyperlinks for purposes of contract formation.

“In a series of recent decisions, courts are developing an increasingly consistent view of what is required to successfully incorporate contract terms by reference using hyperlinks,” write Alan Wingfield and Troy Jenkins. “This emerging consensus focuses on four elements: labeling of the hyperlink; the location and prominence of the hyperlink; the accessibility of the information hyperlinked; and the consumer’s assent.”

They discuss those four elements and offer a list of rules to do and another list of methods to avoid.

Read the article.




Morgan Lewis: Royalty Refresh (Part 1)

The first in a series of posts on royalty calculation and payment from Morgan, Lewis & Bockius focuses on issues related to defining the relevant scope of royalty calculations in an agreement.

“While the specific terms governing a royalty will vary based on numerous factors, including the nature of the products and the underlying licensed materials and the contemplated commercialization structure, many concepts are useful across the board.” according to the post’s authors, Mike Pierides and Eric J. Pennesi.

They discuss fixed amounts vs. percentage of revenue, gross vs. net revenue, revenue from initial sales and renewals and add-ons, specific revenue exclusions, and discounts.

Read the article.



Guidelines for GDPR Compliance in Third-Party Contracts

General Data Protection Regulation requirements might look like a new bureaucratic threshold for doing business in the European Union. But sooner or later, a strict regulation in this area is likely to occur in every country, points out Vladislav Nekrutenko in an article for IoT Evolution.

The acceptance of the California Consumer Privacy Act 2018 and the Brazil Personal Data Protection Law are good examples in this regard, he explains.

His article details some steps that can help a company fulfill its obligations in contracts with third parties and mitigate risks regarding third parties’ data misuse.

Read the article.




When are Unilateral Termination Rights in a Commercial Lease Enforceable?

Image by Nick Youngson

Lowndes, Drosdick, Doster, Kantor & Reed takes a look at commercial leases that provide a right of termination to only one of the parties to the lease. such agreements raise the question: “Is this really a contract if one party can walk away at any time?”

The author, James E. Walson, provides a short answer: Unilateral termination rights without any limitation or condition render a contract illusory and make that contract terminable by either party. If, however, the contract places minimal limitations on the unilateral termination, even if not rigorous or burdensome, the contract is not illusory and will be upheld.

“When drafting unilateral termination provisions that require minimal conditions to their being triggered, one should be cognizant that some condition or burden must be placed on the terminating party so as not to void the entire agreement,” Walson writes.

Read the article.



CVS-Aetna Closes Deal; Not So Fast, Judge Says

Reuters is reporting that a federal judge on Thursday raised the prospect of not approving CVS Health Corp’s deal to buy insurer Aetna Inc, which closed earlier this week, during a routine portion of the legal process.

“I was reviewing your motion, which, of course is not opposed. And I kind of got this uneasy feeling that I was being kept in the dark, kind of like a mushroom,” Judge Richard Leon of the U.S. District Court for the District of Columbia told lawyers for the Justice Department and the two companies, noting that the American Medical Association, among others, had objected to the deal.

“I’m very concerned, very concerned that you all are proceeding on a rubber-stamp approach to this,” he told them, according to a transcript of the hearing.

Read the Reuters article.



‘An’ Versus ‘Any’: When One Word Makes a Profound Difference in an Insurance Contract

There may be certain circumstances based upon specific policy wording in a commercial general liability insurance policy in which there is coverage for an insured-employer for its vicarious liability arising out of the intentional and excluded conduct of its employees, writes Jeff Collins in an article for Jones, Skelton & Hochuli.

He discusses a case in which the words “the,” “an” and “any” have been assigned significant importance in the case law, and are also at issue in cases examining other liability exclusions.

In the case, a  court held that the phrase “any insured” in an exclusionary clause means something more than the phrase “an insured.”

Read the article.




Contract Review Tips for Long-Term Care Facilities

A long-term care facility can execute contracts with many different vendors including food product and service vendors, laundry and linen providers, IT companies, and others, points out a post from Poyner Spruill.

“Whether working for a single-site operator or a multi-facility system, a thorough review of all contracts and a careful consideration of the ‘what-ifs’ are crucial steps,” write the article’s authors, Christopher S. Dwight and Iain M. Stauffer.

They discuss eight key tips to help with the process, including defining the contract, contract intake, the review process, determining who has authority to sign the contract, the length of the term, termination provisions, dispute resolution and venue, and maintaining the executed copy of the agreement.

Read the article.




Electronically Signed Email Exchange May Constitute Enforceable Real Estate Contract

If you don’t want your emails to be binding contracts, don’t sign them, or better yet, don’t write them in the first place, warns a post in the Ohio Real Estate Law Blog of Kohrman, Jackson & Krantz.

The case involved the attempted sale of a high-end residential property in Ohio. The buyers argued that the sellers had agreed by a series of email exchanges (electronically signed) to sell their home to the buyers and that the sellers breached that agreement.

An appellate court remanded the case, explaining: “Given the circumstances surrounding the parties’ email exchange and later discussions, including that other terms of the sale had yet to be agreed upon, an issue of fact exists as to whether the parties had a present intention to be bound at the time of the email exchange, or whether the parties did not intend to be bound until execution of the more formal contract.”

Read the article.





Best Practices in Commercial Real Estate: Commitment Letter

Banking -financeWhile a commitment letter in the real estate lending process fleshes out any issues or misunderstandings between the parties prior to the preparation of the ultimate loan documents, it is important to be aware of some potential pitfalls and issues that it can present, warns Benjamin Bruner in a Dickinson Mackaman Tyler & Hagen web post.

The post outlines some of the dangers that cause problems for parties to the contract and then discusses some fundamental terms  that a commitment letter should include for the protection of the bank.

Read the article.



Court Reconsiders and Reverses Earlier Ruling Finding That Contractual Consent Cannot Be Revoked

TCPAland reports on a reversal of fortune: The Northern District of Alabama has officially been reconsidered and reversed itself on a contractual consent decision.

The court originally ruled that the plaintiff “could not unilaterally revoke her consent to receive debt-collection calls because she agreed to provide that consent as part of a bargained-for exchange.”

The court revisited some of the authorities surrounding its original ruling, and decided that it was wrong, and that a consumer may freely revoke contractual consent unless some term in the contract limits that right. explains Shane Micheil of Womble Bond Dickinson.

Read the article.



Non-Compete Cautionary Tale

A recent post on Robinson+Cole’s Manufacturing Law Blog discusses a recent court decision that underscores the need for manufacturers to exercise caution when seeking to impose post-employment restrictions on key employees.

Author Matthew Miklave explains that manufacturers often seek to bind employees to such restrictions (non-compete, non-solicitation and confidentiality obligations) in order to protect customer lists, pricing information and other confidential or “inside” information which gives them a competitive advantage in the market-place.

The case, Oxford Global Resources, LLC v. Hernandez, is an example of why these agreements must be carefully drafted to be effective when needed.

Read the article.




Blockchain Alliance Reaches 100 Members

Steptoe & Johnson LLP announced that the Blockchain Alliance, a public-private forum to combat criminal activity involving cryptocurrencies and blockchain technology, has grown to include 100 industry and government agencies in 19 countries.

Founded in October 2015 by the Chamber of Digital Commerce and Coin Center and led by Steptoe, the Alliance is comprised of a broad coalition of companies and government agencies that work to make the blockchain ecosystem more secure through education and dialogue between government and industry. In less than three years, the Alliance has grown from 17 industry members and six U.S. federal agencies to a total of 100 participants all over the world, including not only cryptocurrency and blockchain technology companies but also regulatory and enforcement agencies on six continents, as well as international entities including Interpol and Europol.

Steptoe partner Jason Weinstein (former deputy assistant attorney general in charge of cybercrime investigations at the Department of Justice and a member of the strategic advisory boards of BitFury, Coin Center and the Chamber of Digital Commerce) serves as the group’s director. Steptoe of counsel Alan Cohn (former assistant secretary for strategy at the Department of Homeland Security and a strategic advisor to several blockchain startups) serves as counsel to the Alliance.

“The growth of this Alliance – with 100 members around the world representing industry and government – is remarkable and reflects the growth of the cryptocurrency and blockchain space as a whole,” Cohn said. “Our mission is to enable industry and law enforcement to jointly protect public safety and help create an environment where innovation can thrive, and it’s working.”

“The Blockchain Alliance is an important organization that furthers vital communication between blockchain-oriented businesses and government agencies to help strengthen their understanding of enforcement objectives and cooperation,” said Amy Kim, chief policy officer of the Chamber of Digital Commerce. “The group’s work is critical in fostering the development of properly functioning markets involving virtual currency in particular and is much needed at a time when policy makers continue to have questions about this space. Its efforts have been instrumental in aiding law enforcement to detect crime and prosecute wrongdoers.”

The Blockchain Alliance serves as a resource for law enforcement and regulatory agencies to benefit from the expertise of some of the brightest minds in the blockchain industry for technical assistance in response to challenges faced during investigations. The Alliance also serves as a platform for open dialogue among law enforcement and regulatory agencies and the blockchain community about issues of concern to make blockchain technology more secure and to deter its use for unlawful purposes.

Additionally, the Alliance provides education and technical assistance regarding cryptocurrencies and other applications for blockchain technology, including through a series of webinars that have reached almost 700 participants in more than 35 countries.

“We are proud of the meteoric growth of the Alliance in just three years. The companies in the Alliance are good corporate citizens, and they deserve the credit for their commitment to working proactively with governments around the world to promote a secure blockchain ecosystem – for the benefit of government, industry, consumers, and the public,” Weinstein said.



2018 Third-Party Risk Management Benchmark Report

NAVEX Global has published a new report discussing how to assess your program maturity, gain organizational buy-in and understand the value of a comprehensive third-party due diligence program.

The report can be downloaded from the NAVEX website at no charge.

“Third parties are an extension of your business and expose your organization to reputational and business risks,” NAVEX says on its website. “Help protect your organization with the latest insights, benchmarks and trends around how to manage these business partners.”

The report answers questions such as:

  • What strategies do organizations use to manage third-party risks?
  • How do organizations employ risk-based procedures to manage third-party risks?
  • How do respondents measure the effectiveness of their program?

Download the report.



IADC Journal Covers Asbestos, Punitive Damages and Manufacturers’ Legal Hurdles

The International Association of Defense Counsel (IADC), an invitation-only global legal organization for attorneys who represent corporate and insurance interests, has published its fourth quarter 2018 Defense Counsel Journal (DCJ) with articles on current trends in the practice of law.

The current DCJ issue’s articles explore asbestos tort reform on the state level, the growth of punitive damages in Anglo-Canadian contract law, and legal hurdles that manufacturers face when launching products in the United States.

In a release, the organization, said the DCJ is a quarterly forum for topical and scholarly writings on the law, including its development and reform, as well as on the practice of law in general. DCJ articles are written by members of the IADC, which is a 2,500-member, invitation-only, worldwide organization that serves its members and their clients, as well as the civil justice system and the legal profession.

The DCJ is available for free and without a subscription via the IADC’s website.

The current DCJ issue is the first to be overseen by new editor and former IADC board member Kenneth R. Meyer, a partner in the products liability practice group at McCarter & English, LLP, in Newark, N.J. The issue also is the first under the leadership of new IADC president Craig A. Thompson, a partner at Venable LLP.

Following are brief summaries of key articles included in the fourth quarter 2018 issue of the DCJ:

— “The More Things Change: Bankruptcy Trust Reform and the Status Quo in Asbestos Litigation” – The article debunks plaintiffs’ lawyers’ arguments that trust transparency reforms would delay litigation, deny compensation to the most sympathetic of plaintiffs, and divest plaintiffs of their traditional control over the trust and tort systems. The authors explain how trust transparency reforms have not delayed litigation and have, in fact, accelerated compensation from the asbestos trusts. The article also describes that, where reforms have been enacted, they have achieved their purpose of fostering communication within the two-tiered system of asbestos compensation so that juries can properly account for all of a plaintiff’s exposures to asbestos.

— “Moving Beyond Uberrima Fides? The General Duty of Honesty in Contractual Performance and Punitive Damage Awards in Anglo-Canadian Contract Law” – The article’s authors suggest that the characterization of punitive damages as “the bane of corporate defendants” has perhaps never been more true under Anglo-Canadian contract law. This article demonstrates that while punitive damages for pure breach of contract are undoubtedly exceptional remedies at common law, they are generally larger and more common than ever before, which marks an extraordinary development in Anglo-Canadian contract law considering that only 30 years ago punitive damages were barred for pure breach of contract.

— “Entering the U.S. Market: Legal Hurdles That Manufacturers Must Overcome” – Investigates the life cycle of a product’s development and marketing and provides insight into some of the most common legal hurdles – especially consumer protection lawsuits – faced by manufacturers entering the U.S. market.