Practical Law has completed its annual survey of public M&A transactions, the fourth to analyze deal-protection measures binding target companies.

The company will discuss the survey results in a complimentary 60-minute webinar scheduled for April 26 at 1 p.m. EDT.

This year’s edition reviews the first full year of public merger deals to have been negotiated following the Delaware Supreme Court’s seminal 2015 decision in Corwin v. KKR, which held that an informed stockholder vote can restore the presumptions of the business judgment rule in the target board’s favor. The study provides a timely snapshot of how practitioners have begun responding to this increased deference toward director decision-making in M&A.

The Practical Law study examines how various deal characteristics — including buyer type, form of consideration, deal size, and financing—affect the negotiations and ultimate agreement between the transaction parties. The study also reviews the deal protections negotiated by buyers who require their own stockholder approval before closing. This analysis has two goals: to learn how frequently those buyers agree to symmetrical deal-protection measures, and to determine how reciprocally binding covenants and remedies affects the deal protections agreed to by the target company.

Daniel Rubin, Senior Legal Editor, Practical Law Corporate and M&A and primary author of the study, will review the study’s results, including its findings on no-shop and go-shop provisions, fiduciary outs and matching rights, termination rights, and break-up fees.

Following the webinar, attendees will receive a link via e-mail to these Practical Law resources:

Fiduciary Duties in M&A Transactions
Fairness Opinions

Register for the webinar.

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The Boston Herald is reporting that United Airlines — embroiled in controversy after it forcibly removed a doctor from an overbooked flight — could be in for a legal beatdown if the passenger takes the beleaguered carrier to court, according to legal experts.

Reporter Bob McGovern quotes Anthony Tarricone, a Boston attorney who has handled cases involving aircraft accidents and disasters: “I think they are going to have a serious legal issue on their hands. United might say they didn’t hurt him, and that it was security, but United set that situation in motion.”

“United CEO Oscar Munoz may have shot the company in the foot when he told the airline’s employees on Monday that they ‘followed established procedures,’” writes McGovern. “Instead of pegging the case on rogue security personnel, attorneys may be able to point to the statement as an acknowledgement that the company backed the behavior.”

Read the Boston Herald article.

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A review of 10 trademark databases shows that President Trump’s enterprise has 157 trademark applications pending in 36 countries, reports The New York Times.

This business enterprise poses legal and moral perils to the president, even though that business now is run by his two sons. A team of constitutional lawyers and ethics lawyers brought litigation arguing that the Constitution prohibits the president from accepting any economic benefit, including trademark approvals, from foreign governments, write Sharon LaFraniere and Danny Hakim.

“The legal question is whether new foreign trademark registrations and other transactions between Mr. Trump’s businesses and foreign governments violate the emoluments clause of the Constitution,” according to the Times. “The clause prohibits federal officials from accepting ‘any present, emolument, office or title of any kind whatever from any king, prince or foreign state.’”

Read the NYT article

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The third-generation leader of South Korea’s top conglomerate was mostly silent at his first court appearance in what has been called the “trial of the century,” as his lawyers labored to portray him as an innocent bystander in a graft scandal, reports Reuters.

Jay Y. Lee, the 48-year-old de facto leader of Samsung Group, could face a prison sentence of up to 20 years on charges including bribery and embezzlement in a scandal that led to the ouster of President Park Geun-hye, writes Joyce Lee.

“The leader of the smartphones-to-biopharmaceuticals business empire is the only founding family member among the country’s most powerful conglomerates, called chaebol, to be indicted in a graft scandal that led to Park becoming South Korea’s first democratically elected leader to be removed from office,” according to the report.

Read the Reuters article.

Smart contracts are digitally signed promises, which are executed automatically by software code built on blockchain technology. But what are the features of smart contracts that make them more suitable to some sectors than others?

In an article written by David E. Brennan, Jocelyn S. Paulley and Penny Ann Sanders, the English firm of Gowling WLG offers some some points to keep in mind when answering that question.

The authors write that it seems that contracts based on words cannot be totally dislodged and replaced by software code. “However, it is still important to understand blockchain technology, how smart contracts can take advantage of that technology and who can verify that the terms translated into software are the same as those written in roman characters.”

They cover the subject with headings such as smart opportunities, financial services, digital content, supply chain and trade finance, provenance, land transactions, government, machine-to-machine transactions, and challenges to going smart.

Read the article.

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Gardere Wynne Sewell LLP, an AmLaw 200 firm, announces the launch of Gardere Catalyst, a legal incubator initiative that provides early-stage, high-growth potential startups with strategic guidance and legal counsel.

The program includes participation from lawyers across multiple specialty areas, including intellectual property, labor and employment, tax and corporate, and provides startups access to seasoned legal counsel at a price that is scaled based on growth, the firm said in a news release.

The release continues:

“We believe that offering qualified emerging companies an opportunity to hire a premier, full-service law firm with experienced counsel is critical to help entrepreneurs attract the right investors, strategic partners and employees,” said Holland N. O’Neil, chair of the board of directors at Gardere. “We have purposefully tied our success to our clients’ success. We see ourselves as an extension of the client’s team, and we want everyone to be focused on the same goal. Having a program specifically built for emerging businesses was a strategic decision for the firm to grow trusted partnerships that drive innovation.”

Gardere Catalyst’s legal services include:
Formation of the company – serves as the foundation to raise capital, protect IP, build a staff and employ innovative long-term equity incentive programs
IP – filing trademarks/provisional patents and drafting licensing agreements, privacy policies and terms of use
Employment / Executive Compensation – such as offer letters, non-competition agreements and confidentiality protections, proprietary information and invention assignment agreement (PIIA) and equity plans
Tax – tax guidance
Financing – convertible notes, simple agreements for equity (SAFEs), and other seed-stage investments

The program was founded by the co-chairs of the venture capital (VC) and emerging business practice group, Adam Hull, Rick Jordan, Glenn Singleton, as well as Majorie Winters.

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Twitter, Yelp, Instagram, Foursquare and a few other apps are agreeing to a $5.3 million settlement to an invasion-of-privacy class action in which the companies’ apps were accused of accessing the address books of iOS users without their knowledge or consent, reports Arstechnica.com.

Fees for the lawyers who brought the suit on behalf of an estimated 7 million members of the class will be about $1.59 million. Individual class members are in for a payday of about 53 cents each.

Class members in a suit against Dunkin’ Donuts won’t even get money. They’re in for a payoff of free buttered treats, according to the Associated Press. Their lawyers, however, will collect $90,000 in fees in the settlement.

Thomas Shapiro, the lead attorney for the plaintiffs, said it wasn’t a profitable case for his firm.

Read the stories in Arstechnica and the AP.

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Keller and Heckman will produce a new seminar, “The Connected Product Intensive: A Framework for Regulatory Compliance and Risk Management,” May 2-3, 2017 in San Francisco, CA.

Keller and Heckman’s Connected Products Team will focus on the regulatory and litigation risks affecting connected products, and offer practical tips on compliance, risk avoidance, and risk management. Learn how to keep your customers safe and secure and to protect your company’s reputation and investments.

Highlights from the agenda include:

• Guidance on developing compliance frameworks
• Drafting privacy policies
• Responding to a security breach and best practices for encryption
• Environmental considerations including California’s Proposition 65 and state green chemistry laws
• FCC issues from equipment certifications through spectrum availability
• Handling product recalls, crisis management, and product liability litigation
• Energy efficiency considerations
• Advertising and marketing emphasizing claims, price, safety, and social media
• Rules surrounding In-app purchases
• End-User License Agreements

Register for the seminar.

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Former Trump University students who claimed a share of the $25 million settlement that Donald Trump agreed to shortly after he was elected president will recover 80 percent of the money they spent on the real-estate seminars, according to a Bloomberg Law article.

Plaintiffs claimed the university made false promises of riches and instant success. Trump fought the allegations for years but finally agreed to the deal.

“A total of 2,471 claims seeking $21.3 million in refunds had already been verified, according to the filing. With hundreds of claims still being reviewed, the lawyers expect that refund requests will rise to $25 million,” writes Bloomberg’s Edvard Pettersson.

Read the Bloomberg article.

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A recent ruling in a New Jersey federal count stated that a contractual term, like an arbitration clause, is binding only when the terms are reasonably conspicuous, rather than in a manner that de-emphasizes its provisions.

Writing in Carlton Fields’ Reinsurance Focus, shareholder Jeanne Kohler described the case involving a Samsung smart watch. The suit accused the company of deceptive marketing and pricing. Samsung moved to compel arbitration, based on an arbitration provision on page 97 of a 143-page “Health and Safety and Warranty Guide” in the watch box.

The appellate court wrote that the clause “did not appear to be a bilateral contract, and the terms were buried in a manner that gave no hint to a consumer that an arbitration provision was within.”

Read the article.

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A recent ruling by a U.S. district court’s in New York is another example of a court using public policy reasons to override voluntarily entered into contractual choice-of-law provisions, according to an article published by Paul Hastings LLP.

The court ruled in the remand of Madden v. Midland Funding, LLC that New York’s fundamental public policy against usury overrode a credit card agreement’s Delaware choice-of-law provision, write Thomas P. Brown, Lawrence D. Kaplan, Gerald S. Sachs, Amanda M. Kowalski and Laura E. Bain.

“Madden is the latest decision to look past the contractual agreement of the parties to apply state usury and other consumer protection requirements to consumer credit and collections activity. Various courts have taken up some version of the issues presented in Madden, but none have held that bank originated loans sold are subject to interest rate determinations based on the location of collection (as opposed to the location of origination),” according to the article.

Read the article.

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Whether a mixed insurance contract (i.e., an insurance contract with maritime and non-maritime elements) permits the exercise of admiralty jurisdiction is a complicated question for parties and for the courts, writes Eric Chang in an alert for Montgomery McCracken Walker & Rhoads LLP.

He writes that admiralty jurisdiction can be the basis for subject matter jurisdiction for the federal courts.

“Historically, admiralty jurisdiction was limited to contracts that were purely maritime – involving rights and duties pertaining to ships, vessels, and the navigation thereof on the ocean or elsewhere,” he explains.

That changed, however, when the U.S. Supreme Court exercised admiralty jurisdiction in a “maritime case about a train wreck.”

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Amazon.com scored a big victory Thursday against the IRS in a case that the company says could have cost it about $1.5 billion, reports The Seattle Times.

The IRS contended that the e-commerce giant had inappropriately brought down its U.S. tax bill by grossly undervaluing the assets it transferred to its Luxembourg subsidiary, which the company created more than a decade ago.

“Judge Albert Lauber of the U.S. Tax Court ruled that the IRS’ determination of those assets’ worth was ‘arbitrary, capricious, and unreasonable.’ He also broadly sided with Amazon on the way the U.S. company calculates how it shares costs with its European subsidiary,” writes reporter Ángel González. “The ruling, in favor of Amazon, untangles part of the complex web of tax litigation the retailer faces as authorities in the U.S. and Europe review how they deal with global companies that straddle many jurisdictions seeking advantageous tax deals.”

Read the Seattle Times article.

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Many legal battles in the construction industry revolve around contract interpretation disputes. Care in contract drafting is a valuable way to avoid disputes, writes Michael Wilson in Greensfelder, Hemker & Gale’s Construction Law Blog.

“A fundamental principle of contract interpretation is to ascertain and give effect to the parties’ objectively expressed intent. What a party was trying to say, without accurately expressing it, does not count. Contract terms are usually given their ordinary (i.e., dictionary) meaning unless the contract specially defines them or the industry has adopted a special meaning known to both parties,” Wilson writes.

In his article, he discusses at length the principle of identifying and interpreting ambiguity, and the tools that can be used to improve a contract.

Read the article.

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By Keli Johnson Swan
Scott & Scott LLP

Mergers and acquisitions typically require extensive financial and legal disclosures, due diligence, and complex contract language to protect buyers from legal issues that may arise from the purchase. Potential liability arising from intellectual property issues is a significant factor to consider in any M&A transaction.

There following are a few key considerations to negotiate during any corporate transaction.

(1) Transferring Ownership of Existing Trademarks, Copyrights, and Patents.

Often a purchaser will acquire a company that will continue to operate as it was, continuing to use its existing trademarks, copyrights, or patents. Each of these intellectual property rights must be evaluated carefully and negotiated as part of the transaction. The purchaser should investigate any existing infringement claims against the seller prior to acquiring ownership of any marks or IP rights. Additionally, the purchaser will be required to appropriately register the transfer, and continue enforcing these rights with take-down notices and any other necessary legal means or risk losing the ability to enforce them.

(2) Transferring Ownership of IT Assets, Including Copyrighted Software

Depending on the nature of the transaction, the purchasing company may choose to dissolve the target company and dispose of its assets. In some instances, the purchaser chooses to retain the assets.

If the purchaser chooses to retain the IT assets, it assumes the responsibility of ensuring that all software complies with the relevant licensing agreement or risks potential copyright infringement liability. There are a number of steps the purchaser should take to mitigate potential exposure, including conducting an internal audit of the new IT assets, evaluate any existing licenses, and determine whether any remediation is required in order to become compliant.

Some larger companies have Enterprise agreements with Microsoft and other software publishers that may include affiliates that are acquired after the agreement is signed. The purchaser will need to determine whether the software on its newly acquired assets fall within the scope of any Enterprise agreement and take the appropriate steps to ensure the software is included in the user counts for any true-ups required pursuant to the agreement.

Even if a diligent audit and assessment of the company’s network reflects no potential claims for copyright infringement, the purchasing company may still face hurdles to properly transferring ownership of the copyrighted software.

Many software publishers include a provision barring the transfer of ownership of a software license in the license agreement. Others allow the transfer, subject to written consent from the software publisher. This final step is key to ensuring the assets acquired during the transaction are properly licensed. In the event of a software audit, the purchasing company will be required to prove ownership of the software installed on all of its computers and servers. Therefore, it is important that the transfer of ownership is documented with the software publisher for recordkeeping.

Alternatively, some purchasing companies choose to avoid the time and expense of a full audit of the newly acquired assets, and instead reformat the computers and install a predetermined set of software. Although this method can be effective if properly managed, it is important to verify that there are sufficient licenses for all of the installations.

(3) Indemnification Against Existing Claims

In addition to various potential legal issues that may arise in a transaction, an M&A contract should contemplate any potential claims or include who will be responsible for any existing intellectual property claims. Depending on the size of the company and the scope of non-compliance, copyright infringement damages could soar into the 7 figures.

If a copyright (or trademark or patent) infringement claim is known at the time of the purchase, it is critical to obtain an independent valuation of the potential exposure by an expert. Correctly calculating estimated damages is incredibly complex. The most prudent approach is to engage an expert to conduct its own analysis of the raw data, licenses, or legal issues and prepare an independent estimate for resolving the claims.

(4) Escrow Accounts To Resolve Claims

Once the purchaser is aware of the estimated liability of any potential or existing claims, it may choose to require that a specific sum of money be placed in escrow in order to resolve the matter. Escrow contracts may be a valuable tool for a purchaser seeking to mitigate risk and liability from intellectual property liability or any unforeseen risks arising from the sale.

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Employers may think their noncompete agreement or restrictive covenant prohibiting departing employees from taking a similar job at a competitor is ironclad, but that’s not always true, warns David B. Ritter, a partner in the Chicago office of law firm Barnes & Thornburg.

Ritter participated in a question-and-answer exchange with SHRM Online about the enforceability of restrictive covenants, what to consider when crafting them and which states limit enforcement of these agreements.

The discussion covered such questions as: What should HR know about the enforceability of restrictive covenants? What else should employers consider when crafting these measures? Which states are particularly limiting when it comes to restrictive covenants?

The discussion is on the site of the Society for Human Resource Management.

Read the article.

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One of the more litigated issues in transactional law is whether parties to a writing evidencing preliminary intent to proceed with a proposed transaction actually contracted and, if so, to what extent, writes Glenn West in Weil’s Global Private Equity Watch.

His article discusses two recent cases, one from England and one from New York, that illustrate the difficulty this issue can present to deal professionals and their counsel.

“In some sense, the term ‘preliminary agreement’ is an oxymoron,” West writes. “If the so-called agreement is truly preliminary, in the sense that it does not evidence a fully-baked deal, with agreement on all the essential terms, it really isn’t an agreement at all.”

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The New York Times is reporting that German authorities searched the offices of the American law firm Volkswagen hired to conduct an internal investigation of its emissions fraud.

Jack Ewing and Bill Vlasic write that the carmaker confirmed the raid on the German offices of Jones Day, which since 2015 has been conducting a wide-ranging inquiry into who at Volkswagen was responsible for an emissions cheating scheme that has already led to more than $22 billion in fines and settlements.

“Evidence collected by the law firm and shared with the American authorities formed the basis for Volkswagen’s guilty plea in the United States last week over charges tied to emissions deception involving diesel engines,” according to the report.

But the search by prosecutors suggests that authorities believe the firm has not divulged all documents that may be relevant to the case, which could lead to a blow to Jones Day’s reputation, the reports say.

Read the NYT article.

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When eDiscovery involves data from more than one country, it increases the complexity of the task at hand, writes counsel Greg Mitchell on the website of UnitedLex.

The proliferation of electronic data and complexity in international privacy laws only add to the burden and cost of litigation. Given the increased legal, regulatory, and reputational complexity and risk, organizations need to be prepared to take a proactive approach to cross-border eDiscovery,” Mitchell explains.

He says the biggest challenge in cross-border eDiscovery is a lack of understanding of data privacy laws in different jurisdictions.

“Due to the nature of litigation, cross-border eDiscovery often places U.S. corporations in the tumultuous position of potentially violating foreign privacy laws. Broadly speaking, the U.S takes a different and less restrained approach to data privacy compared to the rest of the world and many countries view this approach as inadequate,” Mitchell writes.

The blog post includes a link to a UnitedLex white paper on cross-border eDiscovery.

Read the article.