The portion of Norton Rose Fulbright’s 2017 Litigation Trends Annual Survey that covers alternative fee arrangements presents a puzzling picture that probably reveals the challenges of bringing about changes in the way external counsel are instructed, the firm reports.

Last year, 37 percent of respondents predicted they were going to increase their use of AFAs.

“Those who have used AFAs over the year are almost universally satisfied with the quality of the work they have received,” according to the report. “But, despite this, the use of AFAs (56 percent) and their average spend under an AFA (28 percent) are largely unchanged since last year.

“The inherent unpredictability of many types of dispute could be placing a ceiling on the proportion of matters where both parties feel confident operating under an AFA. However, staged approaches to AFAs can help to overcome this. Predictions for 2018 once again show a rise in AFAs – it will be interesting to see if this materializes or whether inertia persists.”

The survey also looks in detail at other major areas of concern, including regulatory investigations; class actions and environmental disputes.

Read the survey report.

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Silicon Valley software startup Zenefits and its co-founder Parker Conrad have been fined nearly $1 million by the U.S. Securities and Exchange Commission as part of a settlement over charges that they had misled investors, reports Reuters.

Zenefits will pay a $430,000 penalty and Conrad, who resigned as chief executive from the company in early 2016, has been fined more than $533,000, according to Reuters reporter Heather Somerville.

“The SEC found that Zenefits made ‘false and misleading statements and omissions’ to company investors by failing to disclose that it was not compliant with state insurance regulations,” Somerville reports. “Zenefits employees had sold health insurance without proper licensing, the company said, a violation that led to fines from several states.”

Read the Reuters article.

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Former law school classmates and professors of Roy Moore — the candidate likely to become the next U.S. senator from Alabama — shared stories with The New Yorker about the student who one professor nicknamed “Fruit Salad.”

That student went on to become chief justice of the Alabama Supreme Court but was removed twice for violating the Alabama Canons of Judicial Ethics.

Writer Charles Bethea quotes one former Moore classmate: “I remember our constitutional-law professor really ripping Roy apart using the Socratic method and thinking, in retrospect, ‘I can’t believe this man went to West Point.’ Because you kind of think that you have to be smart to go to West Point.”

And Julia Smeds Roth, a partner at the law firm Eyster Key, in Decatur, said : “He’d go to class, but he was argumentative, very stubborn, and not very thoughtful in his analysis of the cases. He was not a very attentive student. For the most part, students didn’t respect him much.” She added, “Of all my classmates, he was the least likely I’d think would become a U.S. senator.”

Read The New Yorker article.

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By Keli Johnson Swan
Scott & Scott LLP

Virtualization can reduce the number of physical machines required in an environment and have several other benefits, but it can also require an understanding of complex technical and licensing concepts. Failure to properly license the environment can subject the company to unbudgeted licensing and compliance fees. The following list includes several common questions and concerns related to licensing VMware.

I. Third Party Use: Can VMware Tools be accessed by third parties?
Yes, a third party may access VMware Tools on a machine owned by the licensee, but only if a Guest Operating System is installed within a Virtual Machine. The End User License Agreement defines a Guest Operating System as “instances of third-party operating systems licensed by You, installed in a Virtual Machine and run using the Software.” It is critical to note that the customer is responsible for ensuring that any third party it distributes VMware Tools to complies with the terms of the license agreement, or it may be liable for potential copyright infringement and breach of contract claims. See VMware End User License Agreement (“EULA”), Sections 1.3 and 2.5.

II. What other restrictions apply to Third Party Use?
Although a customer may use VMware to deliver hosted services to third parties, there are numerous restrictions regarding what functionality may be shared without VMware’s written consent. Third parties may not use the software as service bureaus or application service provider or similar capacities, and licensee must not transfer or sublicense any software without VMware’s consent. Further, certain benchmark testing results may not be shared externally, nor any reverse engineering information of the software. The license agreement also restricts circumvention of any security protocols, which are also covered by the Digital Millennium Copyright Act (“DMCA”). See VMware End User License Agreement (“EULA”), Section 3.1 and 17 U.S.C §1201.

III. Conflicting Terms: Does an Order supersede the End User License Agreement?
No. All terms of the Order are subject to the EULA and are not deemed valid until accepted by VMware. The Order may outline specific use of a product but if the terms conflict, look to the EULA. A change to the EULA requires VMware’s written agreement to change standard license terms. See VMware End User License Agreement (“EULA”), Section 4.

IV. Audit Rights and Record Retention: What are VMware’s audit rights?
The EULA grants VMware the right to audit a company at any time during the License Term (identified in the Order) and two years following the expiration of the license term. This provision requires the customer to retain records for up to two years following the expiration of the license term and allow VMware to conduct a software audit to ensure compliance with the license agreement.

VMware or a third-party auditor may audit a customer with “reasonable notice” once in a 12-month period during normal business hours. A customer must immediately remediate any non-compliance. If the audit reveals the customer has underpaid license fees of more than 5% or failed to maintain proper records of software use, it must pay VMware’s costs to audit in addition to any fees for remediation. See VMware End User License Agreement (“EULA”), Section 5.

This provision represents one of the largest risks during a customer’s relationship with VMWare. The customer must accurately maintain all records related to VMware usage and license information. If a customer fails to properly account for its usage, VMware may attempt to extrapolate the data in a light least favorable to the customer, which could significantly increase its monetary damages for non-compliance. Additionally, failure to comply with the terms of the license agreement could result in involuntary termination. See VMware End User License Agreement (“EULA”), Section 10.

V. Termination: Does VMware have the right to terminate the licenses?
Yes. VMware is allowed to terminate the license pursuant to the EULA for the following reasons:

a. Breach of the Agreement
VMware is allowed to terminate the agreement for non-payment of the Order within 10 days of sending the customer a written notice. Additionally, VMware is allowed to terminate the licenses if a customer breaches the terms of the agreement and does not correct the breach within 30 days of receipt of VMware’s written notice. This provision is particularly important because VMware can terminate the licenses for failing to comply with the licensing terms.

b. Insolvency
VMware may also terminate the licenses if a customer becomes insolvent (through the admission in writing or in bankruptcy proceedings).

The End User License Agreement does not contemplate termination by the licensee except upon the termination of the license term. See VMware End User License Agreement (“EULA”), Section 10.

VI. Effects of Termination: What happens to the licenses after Involuntary Termination?
If VMware terminates a license, the customer no longer has the right to install or access the software. Additionally, the EULA requires the customer to immediately stop using the software and uninstall it and return any media. See VMware End User License Agreement (“EULA”), Section 10.

VII. Confidentiality: Can a customer share VMware pricing or purchase orders?
No. Specific information, including license keys, pricing, marketing materials, or any other non-public information exchanged between the customer and VMware are confidential and may not be shared without VMWare’s permission. It is important to note that this provision survives the termination of the agreement. See VMware End User License Agreement (“EULA”), Section 10 and 11.1.

VIII. Data Privacy Implications: Does VMware protect customer data?
The EULA acknowledges that VMware may obtain and share with a worldwide group of companies in furtherance of providing software services, but it agrees to act as the controller of this information and to comply with the applicable data protection legislation. See VMware End User License Agreement (“EULA”), Section 11.4.

Customers should carefully analyze VMware’s license terms and agreement in order to ensure that VMWare’s protections are sufficient for the customer’s needs.

See “VMware Audits – What You Need to Know About Licensing Rules Pt. I.”

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Image by Nick Youngson

For those lawyers who are intimidated by the prospect of marketing themselves, Amy Boardman Hunt of Muse Communications offers some advice: Have a plan, and start small.

“Formulating a plan will ensure that you’re not just throwing money and time into the wind, and starting small can help prevent overwhelm,” she writes on the Muse website.

In the “Creating a Plan” section, she writes that you should start by answering three questions: 1. Who are your prospective clients? 2. How can you get in front of them? 3. Why should they hire you?

The article also covers the topics of demonstrating knowledge, automation and accountability, combining business development with civil and social action, and outsourcing.

Read the article.

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Tom Melsheimer

The University of North Texas Press is releasing a lawyers’ guide to courtroom preparation and strategy titled “On the Jury Trial: Principles and Practices for Effective Advocacy.”

Texas trial lawyer and Winston & Strawn Dallas managing partner Tom Melsheimer and Texas judge Craig Smith wrote the book, which covers jury selection, witness preparation, opening statements, jury research, and more.

Judge Craig Smith

“In an age when the jury trial is vanishing, I think a book such as ours is a must-read,” said Melsheimer. “To preserve the jury trial, we must preserve the skills involved in trying a case effectively and efficiently. Judge Smith and I wrote this to add to that effort.”

Trial lawyers whose comments appear on the book’s jacket laud the work for its down-to-earth advice, illustration and commentary.

“Real-world, real-life insights. A book that every lawyer should read,” said Michael E. Tigar, author of “Persuasion: The Litigator’s Art and Examining Witnesses.”

“I will definitely order a copy of this book for every associate in my firm and recommend that others do so too,” said Steve Susman of Susman Godfrey L.L.P.

Before being elected to the 192nd District Court in Dallas County in 2006, Judge Smith was a trial lawyer for more than 25 years. As a judge, he was honored as Trial Judge of the Year by the Dallas Chapter of the American Board of Trial Advocates and was elected president of the Texas Association of District Judges in 2010.

Melsheimer has tried cases for more than 30 years. He is a past “Trial Lawyer of the Year” by the Texas Chapters of the American Board of Trial Advocates and by the Dallas Bar Association. He is a Fellow in the International Academy of Trial Lawyers and an Advocate in the American Board of Trial Advocates.

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Corporate legal departments say their most effective cost controls are enforcement of billing guidelines, reductions on invoice expenses, and working with law firms that pro-actively show their value. At the same time, many legal departments are not using fixed or flat fees, matter budgets, competitive bidding through requests for proposals (RFPs) or reallocation of work to smaller firms with lower rates.

That’s according to the Thomson Reuters Legal Tracker LDO Index, a new semiannual report based on anonymized data from over 1,100 legal departments. In addition, the report separately surveyed 155 legal departments on their use of cost controls.

Seventy-six percent of legal departments surveyed said that controlling outside counsel costs is a high priority, more than any other factor. This is not surprising, considering that 65 percent said the volume of legal matters they handle increased over the last six months, while only 30 percent said their total legal department budget increased.

Most Effective Cost Controls

When asked how effective various cost control methods are, nearly 80 percent of legal departments said moderate enforcement of billing guidelines and reduction of invoice expenses were effective or highly effective.

Alternative fee arrangement (AFA) use remains at low levels. While 83 percent of legal departments use AFAs, 55 percent use them for less than 20 percent of their legal spend. Seventeen percent do not use AFAs at all.

As far as other cost controls, most legal departments say they either do not use RFPs, matter budgets or limitations on the use of first-year associates, or do not find those cost control measures effective.

However, most legal departments say they prioritize working with firms that are proactive in showing their value, rather than simply reallocating work to smaller firms with lower rates.

Law Department Operations Roles Growing

Fifty-six percent of legal departments now have a dedicated legal operations function, up from 51 percent from the previous LDO Tracker survey conducted in April. Similarly, legal departments are now more likely to rank their level of sophistication in managing outside legal spend as “proactive” or “optimized,” while fewer legal departments say they are “reactive.”

And these law department operations professionals are making these improvements despite continued budget pressure. The percentage of law departments who have increased their technology budgets has only risen to 22 percent compared to 18 percent in June.

“Efficiency is increasingly the watchword as corporate legal departments strive to streamline operations and manage challenging budgets,” said Mark Haddad, head of the Corporate segment for Thomson Reuters. “More legal departments are taking an operationally focused approach to optimize processes, rather than relying solely on blanket approaches such as fixed fees or matter budgets. This is helping legal departments more effectively manage their outside counsel spend. And this approach will benefit those firms that adopt a proactive strategy in delivering and demonstrating their value.”

See the full report of the Thomson Reuters Legal Tracker LDO Index.

NAVEX Global will stage a unique, once-a-year virtual conference to help particpants learn about current best practices and new emerging compliance issues.

The free webinar will be on Thursday, Nov. 9, 2017.

More than 4,000 legal, audit and compliance professionals are expected for the 2017 Ethics & Compliance Virtual Conference to hear speakers like:

• Shankar Vedantam, Host of the Hidden Brain Podcast and NPR’s Science Correspondent

• Kristy Grant-Hart, CEO, Spark Compliance Consulting

• Richard Bistrong, CEO, Front-Line Anti-Bribery LLC

This year’s conference will have 23 sessions throughout the day with three specialty tracks on Aligning Corporate Risk & Culture, Leading for the Future and Investing in Corporate Culture.

Participants are free to come and go as they please. Anyone unable to access the live webinar may register to obtain access to the sessions later.

Register for the webinar.

Foley & Lardner LLP announced that Dorothy Watson has rejoined the firm’s Environmental Regulation practice as of counsel in the Orlando office.

Watson has 10 years of experience as an environmental lawyer from both an outside and in-house counsel perspective. For the last four years, Watson has been environmental counsel for multiple business lines within Schlumberger, the world’s leading provider of technology for the oil and gas industry. While there, she advised management teams on environmental risks and provided legal compliance counsel for matters arising under various state, federal and international environmental laws and regulations, including the Resource Conservation and Recovery Act, Toxic Substances Control Act and REACH, as well as regulations under the authority of OSHA, MSHA and the FAA.

Watson began her environmental law practice at Foley & Lardner in 2007 as an associate where she advised clients on state and federal waste, air, water and OSHA compliance issues, including site remediation and permitting strategies.

“We are excited to have Dottie return to our team,” said Gary Rovner, chair of Foley’s Environmental Regulation practice. “The business-oriented practicality she gained working as in-house counsel for an industry leader will complement the firm’s expertise to position us to successfully address the most pressing environmental issues facing businesses today. We look forward to helping her grow her practice with us.”

Mike Okaty, managing partner of Foley’s Orlando office said, “Dottie brings with her an ideal skill set for our clients. Her knowledge of the U.S. EPA and the Florida Department of Environmental Protection will help serve the needs of our clients in our burgeoning Florida market and throughout the country.”

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Sidley Austin LLP announced that it will add a team of five partners to its Capital Markets and M&A practices, four of whom – David Buck, Jon Daly, Angela Richards and George Vlahakos – will be based in its Houston office, with the remaining partner – Bill Cooper – splitting his time between Houston and Washington, D.C. Buck, Daly, Vlahakos and Cooper will join Sidley November 1, while Richards will follow in early December.

“David, Bill, John, Angela and George are widely known in the energy sector and recognized for their experience and industry insights,” said Kevin Lewis, co-managing partner of Sidley’s Houston office. “For the past two decades they have been advising energy companies, investment banks, funds and others on complex and innovative transactions, including for master limited partnerships. Their coveted MLP capital markets and tax work will be an important addition to our office, and together with their broader capital markets and M&A capabilities will complement Sidley’s formidable, globally recognized capital markets and M&A practices.”

Their arrival is coming on the heels of several other energy partners that have recently joined Sidley, including David Asmus, Brian Bradshaw and Brian Minyard in Houston, and Emily Pitlick Mallen in Washington, D.C.

The firm provides the following biographical information for each of the new partners:

David Buck – Buck is a senior capital markets and M&A partner with a distinguished corporate and securities law practice emphasizing transactional and governance matters. His corporate finance practice includes representing both issuers and investment banks in initial public, private equity and debt offerings. He has particular industry experience with domestic and international energy, including oil and gas exploration and production, midstream, offshore drilling, seismic and other energy services. Buck advises special committees and financial advisers concerning merger and acquisition transactions, joint ventures and private equity investments. Additionally, Buck regularly counsels public clients regarding compliance with periodic reporting, proxy solicitation, corporate governance matters and other requirements of the federal securities laws, the New York Stock Exchange, the NASDAQ Stock Market and other exchange rules.

Bill Cooper – Cooper concentrates his practice on complex capital markets transactions representing both issuers and underwriters on initial public offerings (IPOs), follow-on equity offerings, traditional private placements, Rule 144A offerings and private investments in public equity. He has substantial experience with master limited partnerships (MLPs), including private formation transactions, IPOs, sponsor drop-down transactions and conflicts committee representation.

Jon Daly – Daly focuses his practice on corporate and securities law. He represents public and private companies, MLPs and investment banks in all forms of capital raising transactions, including IPOs, registered offerings of equity and debt securities, as well as private placements of equity and debt securities. In addition, he advises on corporate governance matters, periodic reporting and other requirements of federal securities laws, and the requirements of the New York Stock Exchange and the NASDAQ Stock Market.

Angela Richards – Richards advises clients in the energy sector on various federal income tax matters, particularly on domestic business transaction planning. She counsels MLPs on mergers and acquisitions, capital formation, acquisition and recapitalization issues. She has also served as tax counsel to both issuers and underwriters in connection with numerous MLPs, IPOs and follow-on offerings.

George Vlahakos – Vlahakos has experience in a broad range of transactional and corporate governance matters. His practice includes representing public and private entities, investment banks and private equity firms in connection with IPOs, mergers and acquisitions, private equity investments and registered offerings, as well as private placements of equity and debt securities. He also counsels MLPs and clients across the energy value chain, including those engaged in upstream, midstream, downstream and oilfield service-related matters.

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The International Association of Defense Counsel (IADC) has been named the 2017 Outstanding Alliance Award recipient by the U.S. Chamber Institute for Legal Reform (ILR).

The award recognizes the IADC’s collaboration with ILR on reform issues that are central to ILR’s program abroad, such as third-party litigation funding transparency and class action reform in Canada. The IADC also was honored for its work as a valuable partner with ILR on reform issues in the United States, including preventing the expansion of class actions in the states and addressing regulation through litigation.

“The IADC is tremendously honored to be recognized by the U.S. Chamber Institute for Legal Reform for its collaboration with ILR on many critical areas of legal reform in the United States and around the world,” said Andrew Kopon Jr., IADC President and a founding member of Kopon Airdo, LLC in Chicago. “We are grateful to the leadership of ILR for the opportunity to work together and to provide an important avenue for the IADC’s 2,500-plus members to contribute to these efforts in meaningful ways.”

In a release, the association said:

The Outstanding Alliance Award is part of ILR’s Annual Legal Reform Awards that honor individuals and organizations whose outstanding work in partnership with ILR has contributed to making the United States and key foreign civil justice systems simpler, fairer, and more efficient for all. The IADC and its leadership were formally recognized at ILR’s 18th Annual Legal Reform Summit on Oct. 25 in Washington, D.C.

“Receiving ILR’s Outstanding Alliance Award demonstrates that the IADC has emerged as a valuable partner and strong voice for reforms that seek to improve civil justice systems,” said Mark Behrens, chair of the IADC’s Civil Justice Response Committee and co-chair of the Public Policy Group at Shook Hardy & Bacon in Washington, D.C.

The following are among the IADC’s recent legal reform initiatives on which it has partnered with ILR:

Opposed the proposed adoption of a rule to permit a class action procedure in Mississippi’s state court system;

Supported requiring disclosure of third-party litigation funding at the outset of a lawsuit, specifically joining ILR’s petition proposing an amendment to the Federal Rules of Civil Procedure to require disclosure;

Opposed the proposed American Bar Association (ABA) resolution attacking restrictions on punitive damages for manufacturers of FDA-approved drugs and devices, specifically leading a coalition of opposition that included all leading national organizations for lawyers who primarily represent civil defendants (the ABA did not move forward with the proposed resolution); and

Provided expert input into the ILR’s consideration of the options for meaningful class action reform in Canada.

“The IADC’s alliance with ILR is another example of a highly successful IADC program that benefits our in-house counsel, insurance executive, and outside lawyer members in the United States, Canada, and abroad and also helps the IADC attract the best and brightest defense lawyers from around the globe to support these advocacy efforts,” said Gordon McKee, an IADC Board member and a partner with Blake, Cassels & Graydon, LLP, in Toronto, who leads the IADC’s efforts on Canadian class action reform.

According to Kopon, the IADC’s partnership with ILR has been highly successful, with the IADC consulting for ILR on numerous matters, and ILR leaders supporting multiple IADC initiatives. ILR President Lisa Rickard has spoken at several IADC events, including its domestic and international Corporate Counsel College education programs.

“The IADC looks forward to continuing to support ILR in the furtherance of legal reform in many areas in the coming year,” Kopon said.

ILR, which is a separately incorporated affiliate of the U.S. Chamber of Commerce, is the country’s most influential and successful advocate for civil justice reform in the United States and abroad. ILR conducts cutting-edge research, advances pragmatic solutions and advocates for those solutions with Congress, state legislatures, federal regulators, international policymakers and the courts to effect meaningful change. To read more about ILR, visit http://www.instituteforlegalreform.com.

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Ian Forbes has joined DLA Piper’s telecommunications practice as an associate in the Washington, DC office.

He previously served in a number of positions at the Federal Communications Commission’s Wireline Competition Bureau, most recently as Deputy Chief of the Telecommunications Access Policy Division. While in law school, Forbes clerked at both the FCC and the Subcommittee on Communications and Technology to the House Energy and Commerce Committee.

He earned his J.D., cum laude, from Catholic University, where he obtained a certificate from its Institute for Communications Law Studies, and his B.A. from American University.

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The Senate has voted 51-50 to get rid of a banking rule that allows consumers to bring class-action lawsuits against banks and credit card companies to resolve financial disputes, NPR reports.

Vice President Pence cast the tie-breaking vote to rollback the Consumer Financial Protection Bureau rule banning restrictive mandatory arbitration clauses found in the fine print of credit card and checking account agreements, writes NPR reporter Scott Neuman.

President Trump is expected to sign the measure, which has already been approved by the U.S. house.

Neuman writes: “CFPB said it was redressing a situation in which consumers were forced ‘to give up or go it alone — usually over small amounts,’ while companies were able to ‘sidestep the court system, avoid big refunds, and continue harmful practices.'”

Read the NPR article.

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A ruling that throws out a plaintiff’s $417 million jury verdict against John & Johnson will affect many of the nearly 5,000 women who claim they developed ovarian cancer from J&J power containing talc, reports Reuters.

“The judge’s skepticism about causation will reverberate across the talc litigation in California because she’s overseeing all of the more than 800 suits by women who attribute their cancer to J&J powders that contained talc,” writes Alison Frankel. “Unless their lawyers can come up with better evidence than Echeverria – or unless scientific developments boost causation theories – Judge Nelson’s decision is ominous for plaintiffs and a boon for J&J and its subsidiary.”

Read the Reuters article.

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A former Dentons associate who was fired and then allegedly threatened to leak sensitive information taken from the email account of a managing director of the firm has taken a plea deal on a lesser charge to avoid spending more than two decades behind bars.

Above the Law reports that Michael Potere accepted the deal that included dismissal of an underlying indictments that included a charge of extortion. That charge carried a possible sentence of up to 20 years in prison.

“This summer, Potere was arrested and indicted on charges of extortion and attempted extortion affecting interstate commerce, as well as transmitting threatening communications with intent to extort,” according to reporter Staci Zaretsky. “At the time, the ex-Biglaw associate was represented by a public defender and faced up to 22 years in prison.”

Read the Above the Law article.

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Optimus BT will present a free webinar providing a comprehensive overview of Legal Contract Collaboration by Optimus and Forrester for the Microsoft Cloud.

The webinar will be Thursday, Nov. 2, 2017, beginning at 11 a.m. ET / 8 a.m. PT.

Forrester, a leading analyst firm, along with Optimus, a leading Microsoft Cloud Contracts Platform, will be conducting this webinar to provide an overview of the key issues facing business and legal collaboration with a presentation along with scenario based demos of Contracts and Legal solutions for both SharePoint & Office 365.

The presentation will also highlight integrations with Outlook and Word to improve legal work productivity.

“We will review various aspects of the Contract Lifecycle including document and outlook based collaboration, contract metadata management, review and approval workflows, electronic signature integration, contracts search, repository and document generation processes, reporting and metrics, alerts setup and management, among others,” the company says on its website.

Register for the webinar.

The heir of Texas oil tycoon H.L. Hunt involved in a bitter decade-long dispute with his son over control of a $1 billion trust wants the Texas Supreme Court to declare illegal his lawyer’s request to be paid $48,000 an hour for his legal services, reports The Houston Chronicle.

Janet Elliott of The Texas Lawbook writes that attorney Gregory Shamoun claims to have made a 50 percent contingency agreement with Albert Hill Jr. to settle the high-dollar family fight.

Then, when Shamoun negotiated a global settlement for $40.5 million that left Hill Jr. in exclusive control of the family trust, Hill Jr. refused to pay the 50 percent. He claimed the legal fee was ludicrously too high, Shamoun sued and won a $7.25 million award – or an estimated $48,000 an hour – from a jury.

Read the Chronicle article.

Steptoe & Johnson’s Energy and Environmental, Products & Mass Tort Groups will host a webinar to discuss the implementation of the Coal Ash Rule, the current litigation landscape surrounding coal ash, and strategies for avoiding courtroom and regulatory challenges.

The complimentary one-hour event will be Wednesday, Dec. 13, 2017, at noon Eastern time.

The Disposal of Coal Combustion Residuals from Electric Utilities Final Rule (the Coal Ash Rule) is the first federal rule to regulate coal ash waste disposal, the firm says on its website. The Coal Ash Rule has proven controversial since it was first announced in 2015 and has given rise to regulatory changes, mass tort actions, and citizen suits under the Resource Conservation and Recovery Act (RCRA). The US Environmental Protection Agency recently announced that it is considering rolling back portions of the Coal Ash Rule. Growing controversies over the disposal of coal ash, the Coal Ash Rule, and the future of coal ash regulation are not likely to end soon.

Register for the webinar.

The U.S. Supreme Court declined last week to consider two cases concerning the Computer Fraud and Abuse Act (CFAA), leaving certain questions unresolved regarding liability for computer hacking and the prospect for potentially harsh criminal and civil penalties, according to a post on the website of Androvett Legal Media & Marketing.

“Given the current state of the law, someone could potentially be put in jail or subject to civil liability under the CFAA in one jurisdiction and not in another for the very same act,” said attorney Shain Khoshbin of Dallas-based Munck Wilson Mandala. “In fact, someone could be potentially criminally prosecuted and civilly liable simply for password sharing.”

The CFAA was originally intended to criminally prosecute individuals who accessed classified information by hacking into government computers. The federal statute was later amended to allow private civil actions for violation of the act. This allowed businesses to take the offensive against hackers and those who improperly access digital assets stored in computers.

“As the definition of ‘computer’ continues to expand, and computer networks continue evolving to include social media platforms, cloud storage and a wide variety of subscription-based services, the CFAA will undoubtedly continue to be tested in the court system,” said Khoshbin.

“The CFAA is a valuable tool for businesses to use as part of their crisis management plan for data breaches, and to seek justice from those who improperly access electronic assets. But the judiciary or Congress needs to address and resolve some important issues so the law can be applied consistently.”

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By Christopher Barnett
Scott & Scott LLP

Many of our clients have been contacting us in recent weeks (mid-late 2017) regarding notices they received from Microsoft requesting an internal self-assessment of their license positions under their Services Provider License Agreements (SPLAs). Naturally, many of those clients have questions about that process and the ramifications of cooperating with Microsoft.

For those who may be unaware, SPLA is the principal licensing framework that Microsoft uses in order to enable online service providers to incorporate Microsoft’s software products in the solutions that those providers host for their customers over the Internet. Unlike traditional license agreements, which typically entail capital expenditures in order to acquire perpetual software licenses that can last longer than the term of the purchasing agreement, SPLA entails a monthly reporting model. Each month, service providers measure their usage of Microsoft products in their hosted environments, and they report that usage to authorized SPLA resellers. The resellers then generate invoices based on those reports, which the service providers typically pay as an operating expense.

Like all commercial Microsoft licensing agreements, SPLA gives Microsoft the right to conduct audits to verify that its products are being used (and reported) consistent with applicable licensing terms. In many cases, Microsoft designates third-party firms, such as KPMG, Deloitte or Pricewaterhouse, to gather the necessary inventory data and to prepare a report comparing the usage previously reported under SPLA against the deployments measured based on the audit data. Microsoft then reviews the auditors’ reports, and the audited companies then usually place supplemental license orders under their SPLAs in order to resolve any under-reporting identified through the audit process. For service providers with high volumes of monthly usage, the dollar amounts of those supplemental orders can be well into the millions of dollars.

Under most SPLAs, Microsoft has the express right to require its SPLA licensees to complete the self-assessment process in lieu of submitting to a “traditional” SPLA audit conducted according to the process described above. However, even if that right were not stated in the SPLA, we would recommend that our clients comply with the self-assessment process in an effort to avoid any more burdensome audit activity to be undertaken by a third-party auditor. The self-assessment process represents a much more favorable framework for verifying compliance with SPLA, for at least the following reasons:

• No deployment or usage information needs to be submitted to Microsoft. In most cases, the self-assessment process typically is completed when a licensee provides a signed, written certification confirming that it has completed an internal review and either (1) that all SPLA usage has been properly reported, or (2) that a supplemental report has been submitted in order to resolve any identified, past under-reporting. It usually is not necessary to provide Microsoft with any deployment counts or any further details regarding the results of the internal review.
• No under-reporting penalties appear to apply. The SPLA self-assessment notice message typically requires only that a licensee report additional license quantities to the reseller in order to resolve any past errors. In other SPLA audits, Microsoft has the right to apply a contractual penalty for any under-reporting, and that penalty typically consists of 25% markup over list SPLA prices. The self-assessment notice does not indicate that the contractual penalty would apply for any supplemental orders placed as a result of the self-assessment process.

We therefore ordinarily recommend that our clients cooperate with SPLA self-assessment requests.

In theory, the self-assessment process should mirror a SPLA licensee’s monthly reporting process. If the licensee has mature software asset management (SAM) processes in place, then each month it should be gathering and archiving all the data that it should require in order to confirm its usage of any Microsoft products installed in its environment. For that reason, a confident licensee in that position could sign and return the requested self-assessment certification immediately upon receiving the self-assessment request.

However, many licensees are not in that position, and for them, the self-assessment represents an excellent opportunity to assess and review their internal monthly reporting processes. We regularly work with SPLA licensees to conduct those sorts of initiatives, identifying tools that would be capable of gathering information relevant to licensing information as well as reports that should be generated and gathered each month in order to confirm usage levels. While the kinds of reporting used will vary, depending on the kinds of Microsoft products being licensed under SPLA, the typical set of reports includes the following:

• Hardware Inventory – One or more reports identifying all physical and virtual servers and the operating systems running on those machines.
• Software Inventory – One or more reports showing all Microsoft products installed on the computers identified in the hardware inventory.
• Virtualization Data – Reporting that maps virtual machines to their physical hosts and provides relevant information regarding those hosts’ hardware configurations.
• Active Directory – Reporting that identifies the computers included in the hosting domain(s) and also the user groups and accounts with access to those computers.
• Secondary Inventories – While not requested in every audit, Microsoft’s auditors also may ask for secondary data sources to validate the completeness of the device inventories generated from the other sources identified above. The list of devices from an anti-virus solution is a common request.

We also typically advise our clients to create and maintain archives of all reports gathered each month in order to support their SPLA reports, so that historical usage may be validated during any SPLA conducted in the future by one of Microsoft’s selected audit firms. Absent that kind of historical data repository, Microsoft’s auditors often attempt to extrapolate historical usage levels based on data collected during the audit – those extrapolated findings often are inaccurate and can result in inflated SPLA audit resolution demands from Microsoft.

Business leaders who receive self-assessment requests from Microsoft should work with their teams to determine their level of confidence regarding the monthly SPLA-reporting practices. If there is any doubt regarding the maturity of those practices, then the team should undertake an initiative to implement any appropriate improvements and, absent any unique concerns, to provide a timely response to the self-assessment request. If the team believes that it lacks any subject-matter expertise in order to complete that initiative, then it makes sense to engage a knowledgeable attorney to assist with the process.