While at first glance, an engagement with the federal government may appear lucrative, the venture comes with many strings attached, and the cost of compliance with the rules can quickly outweigh the financial benefit of the contract itself, warns Jennifer S. Cluverius in an article on the website of Nexsen Pruet, LLC.

She writes that a lack of experience can lead a federal contractor or subcontractor can encounter these pitfalls.

The article discusses some of the most costly and often-unnoticed employment-related compliance obligations.

Read the article.

In a dispute that touches on the intersection of copyright, contract law and cloud technology, the Second Circuit affirmed the dismissal of copyright claims against Barnes & Noble related to ebook samples stored on a user’s B&N-provided cloud-based locker, writes Jeffrey Neuburger in Proskauer Rose LLP’s New Media and Technology Law Blog.

“Notably, the Second Circuit dismissed the case on contractual grounds, declining the opportunity to opine on two important modern copyright doctrines that are often implicated when users store copyrighted content on the cloud,” he explains.

Neuburger discusses the case, concluding with, “[T]he dispute underscores the importance for copyright holders to understand the scope of any content distribution license involving cloud storage by users, particularly when broad language is used with respect to the rights of the licensee.”

Read the Proskauer article.

Practical Law and Epstein Becker Green attorneys will present a free, 75-minute webinar providing insights into recent developments and expected trends in the evolving legal landscape of trade secrets and non-competition agreements on Wednesday, Nov. 30, 2016, at 1 p.m. EST. This webinar will focus on how to navigate this developing area and effectively protect client relationships and proprietary information.

Epstein Becker lawyers Peter A. Steinmeyer, Robert D. Goldstein and Anthony J. Laura will be presenters.m The moderator will be Barbara J. Harris, Senior Legal Editor, Practical Law Labor & Employment.

Topics will include:

• The Defend Trade Secrets (DTSA), including the new federal remedies available to employers and the steps they need to take to fully benefit from them.
• Newly passed state statutes addressing restrictive covenants, including who can enter into them, industry restrictions, and temporal restrictions.
• Recent decisions regarding what constitutes adequate consideration for a non-compete.
• Interesting developments determining choice of law issues, including a new California statute restricting choice of law provisions.
• Administrative agency developments, including agency enforcement actions cracking down on non-competes.

A short Q&A session will follow.

Register for the webinar.

Image by Insider Monkey

Senior Morgan Stanley executives, including the firm’s chief legal officer, collectively earned about $10.5 million over the past week by exercising options and selling shares, Reuters is reporting.

Reporter Olivia Oran writes that most of the profits came from an election-fueled rally in bank stocks, according to securities filings.

“The executives made the sales after shares of Morgan Stanley, which traded as low as $22 in the last 12 months, reversed course to become the best performing of the six largest U.S. banks so far this year, closing Monday at $39.35,” she reports.

Chief Legal Officer Eric Grossman exercised options and sold stock on Friday, earning $475,206.

Read the Reuters article.

Joyce Mazero, partner and co-chair of the Global Supply Network Industry Practice at Gardere Wynne Sewell LLP, recently spoke at the National Restaurant Association’s Supply Chain Management Conference in Orlando, Florida.

Presenting alongside leaders from restaurant brands including Church’s Chicken, Dunkin’ Donuts and Shake Shack, Mazero discussed key issues and strategies important to restaurant operators and supply chain executives charged with expanding their businesses outside the U.S. Topics included sourcing products, identifying and vetting suppliers in foreign markets, enforcing Q&A standards and limiting liability abroad. Mazero also addressed the important role of thorough investigatory methods in determining whether a supplier can satisfy the quality and performance criteria demanded by U.S. brands, the challenges of obtaining current and useful data about international operations, and the modifications that U.S. brands are making to meet consumers’ demand for information about the origin and content of food products sourced, distributed and served globally.

In a release, the firm said:

“It was a privilege to moderate a panel of distinguished supply chain executives and leaders, including Joyce,” said Sam Khoury, president of Next Stage Partners and operating partner with CIC Partners. “Joyce’s strong understanding of our specific food and restaurant business enhanced the valuable content provided to our audience of executive supply chain leaders.”

“Joyce provided critical insight on potential landmines in negotiating and developing international supply chain contracts based on her extensive experience in this area,” said Steve L. Pattison, chief financial officer and vice president of business analysis and risk management at Restaurant Services Inc. “Overall, the session knocked it out of the park for any restaurant chains in the process of international expansion.”

Mazero works with product- and serviced-based client companies and leads them through major initiatives. These include financings, mergers and acquisitions, registration and disclosures, as well as negotiations of strategic alliances, joint ventures, and domestic and international licensing, franchising, manufacturing and logistics deals. Joyce has been ranked in Band 1 for Franchising nationwide by Chambers USA since 2008 and is recognized by Chambers Global, which recently highlighted her “very strong sense of what it takes to drive a business” and “well-rounded viewpoint on transactions.”

Gardere’s Global Supply Network Industry Practice is comprised of a cross-disciplinary team of legal professionals with decades of experience assisting clients in implementing effective supply chain strategies both domestically and abroad. The team handles myriad supply network legal needs, including structuring, negotiating and enforcing business arrangements for research, design and development of new ingredients, products and technology as well as sourcing, manufacturing, licensing, logistics, transportation and cross-border trade.

The National Restaurant Association is the largest food service trade association in the world and supports more than 500,000 global restaurant businesses. The organization represents and advocates for food service industry interests by taking on financial and regulatory obstacles before they hit their members’ bottom line.

Black Duck Software has posted a complimentary ondemand webinar discussing the top five open source issues that impact transactions for both buyers and sellers in M&A transactions.

The 60-minute webinar is titled “Top 5 Open Source Issues – Stories from the M&A Trenches.”

“Open source risk is a significant issue for both buyers and sellers in M&A transactions,” Black Duck says on its website. “Although open source comprises 30-50% of the code in an average application, sellers rarely know what open source they’re using and there are often serious risks associated with open source components in code assets.”

In this session, Jim Markwith, a technology attorney who handles complex IP licensing transactions, and has been involved in scores of M&A deals, provides in-depth descriptions of the challenges encountered and their impact on the transaction, punctuating the presentation with insightful stories from the M&A trenches.

Register for the ond-demand webinar.

The U.S. Consumer Financial Protection Bureau, already in legal limbo after an October court decision, could find its powers scaled back by President-elect Donald Trump and a Republican-led Congress, according to members of both political parties, lobbyists and lawyers, Reuters reports.

The agency, created in response to the 2007-09 financial crisis, is a target for some critics for such proposals an attempt to stop companies from blocking customers from class action lawsuits and another one to limit payday lending.

“Many Republicans opposed the agency’s creation. They now say they dislike its structure and believe it oversteps its authority in enforcement,” writes reporter Lisa Lambert.

Read the Reuters article.

When parties enter into a domestic commercial contract, they may not think critically enough about what will happen if the relationship goes south and how the contract provisions that they chose to include—or did not choose to include or accepted without negotiation—will affect how and where they resolve a dispute and shape the remedies to which they may be entitled, according to an article on the website of K&L Gates.

“Contractual provisions that parties choose to include in their agreement depend on a number of factors including, among others, the identity of and relationship between the parties and the size and nature of the transaction,” write Lauren Garraux, Jacquelyn S. Celender.

In their article, they identify and discuss four types of provisions commonly included in commercial contracts that can have significant ramifications for contracting parties if a dispute between them arises.

Those types include alternative dispute resolution provisions, choice of forum and law provisions and jury trial waivers, damages clauses, and insurance provisions.

Read the K&L Gates article.

U.S. District Judge Gonzalo Curiel

The U.S. judge overseeing a lawsuit against President-elect Donald Trump and his Trump University told both sides they would be wise to settle the case “given all else that’s involved,” Reuters reports.

In the suit, some former students claim they were they were lured by false promises to pay up to $35,000 to learn Trump’s real estate investing “secrets” from his “hand-picked” instructors.

The statement by U.S. District Judge Gonzalo Curiel came after he had tentatively rejected a bid by Trump to keep some statements from the presidential campaign out of the fraud trial.

“Trump owned 92 percent of Trump University and had control over all major decisions, the students’ court papers say. The president-elect denies the allegations and has argued that he relied on others to manage the business,” according to the report by Dan Levine and Karen Freifeld.

Read the Reuters article.

Image by NY Photographic

While consumers may not have many choices when signing agreements that contain arbitration clauses, commercial parties often negotiate every last term of their agreements, according to a post on Shutts & Bowen LLP‘s website.

“This includes whether to require the parties to arbitrate their disputes or take them to court. There are advantages to each, so here are five things to consider when deciding whether to include an arbitration clause in a real estate contract, such as a purchase and sale agreement or lease,” write Al LaSorte, Matthew R. Chait and Matthew S. Sackel.

Those considerations include time, money, convenience, discovery and rules. The authors discuss the finer points of each one.

Read the Shutts & Bowen article.

The Ninth U.S. Circuit Court of Appeals overturned an arbitration award in a multimillion-dollar investment case Friday because the lead arbitrator impersonated a California attorney — something he did in dozens of cases before being exposed, the San Francisco Chronicle reports.

U.S. prosecutors are bearing down on generic pharmaceutical companies in a sweeping criminal investigation into suspected price collusion, a fresh challenge for an industry that’s already reeling from public outrage over the spiraling costs of some medicines, reports Bloomberg.

David McLaughlin and Caroline Chen write that the antitrust investigation by the Justice Department spans more than a dozen companies and about two dozen drugs. A grand jury is examining whether some executives agreed with one another to raise prices, and the first charges could emerge by the end of the year, sources told the reporters.

“Among the drugmakers to have received subpoenas are industry giants Mylan NV and Teva Pharmaceutical Industries Ltd. Other companies include Actavis, which Teva bought from Allergan Plc in August, Lannett Co., Impax Laboratories Inc., Covis Pharma Holdings Sarl, Sun Pharmaceutical Industries Ltd., Mayne Pharma Group Ltd., Endo International Plc’s subsidiary Par Pharmaceutical Holdings and Taro Pharmaceutical Industries Ltd.,” according to the report.

Read the article.

China has become the second largest economy in the world due to its manufacturing expertise, superior logistics, lower labor costs, strong government support of business, including tax incentives, and lax oversight of environmentally risky practices. However, writes Jeffrey Klink, a former U.S. Department of Justice prosecutor and CEO of Klink & Co., organizations also are increasingly facing bigger and more complex risks in China.

“Vendor kickback schemes are endemic throughout China and only increasing. Theft of intellectual property remains a major issue for global businesses in China. Theft, embezzlement and fraud continue on as if no one is watching,” Klink says.

He discusses a case study about an American company that purchased a profitable Chinese manufacturing operation. Soon, however, the company began seeing increasing compliance issues regarding irregularities involving vendors and senior employees.

Klink & Co.’s investigation revealed, “Vendors, reportedly producing large quantities of goods for our client’s manufacturing needs, were located in alleyways, deserted buildings and residential apartments.” And many vendors were actually shell corporations based in off-shore banking locations.

He concludes his article with a seven-point list of takeaways of what the American company could have done differently.

Read the article.

Image by Yoel Ben-Avraham

It’s common to see SaaS (software as a service) startups initially price their products on a monthly basis, then add an enterprise “Call Me” plan which hides behind it an annual contract. As the business increases its price point, it may eventually book contracts spanning two, three or even five years, explains Tomasz Tunguz, a venture capitalist at Redpoint.

“This pricing pattern has a certain rationale to it. It enables an early-stage software company to rapidly gather feedback,” he writes in the article. “At the outset, when the business prices on a monthly basis, the startup is looking for as much information about the strength of their product market fit as possible.”

“Annual contracts bring predictability to a SaaS startup. Revenues committed for 12 months, and the cash flow characteristics of annual prepay contracts are an enormous boon for the business, reducing the total amount of financing the might have to raise.”

Read the article.

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In the latest hit to the battered bank, Wells Fargo has agreed to pay $50 million to settle a class-action lawsuit that accused the bank of overcharging hundreds of thousands of homeowners for appraisals ordered after the homeowners defaulted on their mortgage loans, reports The New York Times.

Under the settlement, Wells Fargo will mail checks to more than 250,000 customers whose home loans were serviced by the bank between 2005 and 2010.

“The checks will typically be for $120, according to Roland Tellis, a lawyer with Baron & Budd, the law firm that represented Wells Fargo’s customers,” writes Stacy Cowley. “If a judge signs off on the settlement, as expected, the checks will be distributed next year.”

The settlement is the latest blow for Wells Fargo, after a scandal involving the creation of millions of unauthorized accounts for existing customers.

Read the article.

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The U.S. Securities and Exchange Commission, along with the U.S. Department of Justice and Brazilian authorities, have reached a global settlement that requires aircraft manufacturer Embraer S.A. to pay more than $205 million to resolve alleged violations of  the Foreign Corrupt Practices Act, reports 24/7 Wall St.

The SEC alleged Embraer made more than $83 million in profits as a result of bribe payments from its U.S.-based subsidiary through third-party agents to foreign government officials in the Dominican Republic, Saudi Arabia and Mozambique, including $3.52 million in bribes to a Dominican Republic air force official to secure a military aircraft contract in that country. Another allegation claimed Embraer paid $1.65 million in bribes to an official in Saudi Arabia.

“Under the settlement, Embraer must pay a $107 million penalty to the DOJ as part of a deferred prosecution agreement, as well as more than $98 million in disgorgement and interest to the SEC., reports Chris Lange.

Read the article.

While a company cannot eliminate risks involving compromised data and systems, there are some actions that a company should take to protect data in the hands of third-party suppliers, advises Mayer Brown LLP.

In an article posted on the firm’s website, authors Rebecca S. Eisner, Lei Shen and Lindsay T. Brown discuss five privacy- and security-related questions that a general counsel should ask regarding company data in the hands of third-party suppliers and other business partners.

They questions they discuss at length are: Have We Assessed Our Security and Privacy Risks? How Robust Is Our Oversight of Third Parties Who Have Our Data or Access to Our Networks? Do We Have Appropriate Contractual Protections? How Do We Monitor Developments? and Do We Address Privacy and Security in Other Transactions, Such as M&A?

Read the article.

When a party breaches a contract and the contract does not contain a valid liquidated damages clause, the non-breaching party may be entitled to compensatory damages. Charles B. Jimerson and Kayla A. Haines of Jimerson & Cobb, P.A. explain that the appropriate measure of damages arising from a breach of an enforceable contract is usually “the difference between the value expected from the contract and the value actually received by the non-breaching party.”

In their article, they write: “Many factors can impact the recoverability of consequential damages, such as common law implied warranties, or indemnity provisions. Therefore, when entering into a construction contract, parties should carefully evaluate the proposed contract language to fully comprehend the risks they are about to assume. In order to prevent any extensive consequential damages that might result from a construction project, parties should use whatever power they may have while creating their contract to predestine certain expenses that a party would incur in the event of pervasive defects or significant project delays.”

Read the article.

Practical Law will present a webinar highlighting common constraints on carve-out plans in the U.S. tax regime, including Section 409A (regulating deferred compensation arrangements) and Section 280G (regulating golden parachute payments). We will also discuss new proposed regulations and recent Delaware case law on these topics.

The event, featuring presenters from Fenwick & West LLP, will be Wednesday, Nov. 2, beginning at 1 p.m. EDT.

A carve-out plan is a type of instrument to incentivize current executives, employees and other service providers by committing to make a payout at a change in control. This arrangement allows the executives working hard to get a struggling company to a liquidity event to share in the value they create for the shareholders. Carve-out plans are typically tense negotiations of competing interests to encourage retention for senior management and maximize value for shareholders. To further complicate matters, carve-out plans are subject to a unique and complicated set of tax rules.

Register for the webinar.

The discussion will include:
* Should compensatory arrangements be reduced for other payouts?
* Should the carve-out awards settle in stock or cash?
* Must employees be employed at the time of the change in control to receive a payout? Should the carve-out forfeit under certain conditions?
* What should happen to the forfeited amounts?
* How can the plan be amended?

A short Q&A will follow.

Presenters:
Marshall Mort, Associate, Fenwick & West LLP
Marshall Mort focuses his practice on compensation and employee benefits matters. Marshall particularly enjoys developing creative solutions that support attractive compensation plans. Working with both private and public companies, Marshall excels in navigating complex tax, securities, and accounting issues within the equity and executive compensation environment. This includes maximizing tax efficiency, and advice that further supports HR policies to promote retention and mitigate risk. Marshall writes and speaks on equity compensation and benefits issues, and has served as an adjunct lecturer at Santa Clara University-Leavey School of Business.

Taylor Cashwell, Associate, Fenwick & West LLP
Taylor Cashwell focuses his practice on a broad variety of corporate matters to support clients in the high technology and life sciences industries. While attending law school, Taylor was a concurrent member of the Hastings Law Journaland Hastings Women’s Law Journal. He served on the executive board of OutLaw and externed as Law Clerk for the National Center for Lesbian Rights, where he later served as Fenwick & West Public Interest Fellow.

Amy Adams, Senior Legal Editor, Practical Law Employment Benefits & Executive Compensation (Moderator)

Respondents to Dykema’s 12th Annual M&A Outlook Survey predict a flat year ahead with steady deal flow, expressing an overall neutral viewpoint coinciding with the recent leveling off of the global M&A market.

Nearly half (47 percent) of respondents said they expect the market will see no significant change in the next 12 months, up from 43 percent in last year’s survey. Executives expressed some concerns about the effects corporate tax increases, increased federal regulation and taxation of carried interest could have on M&A in the coming year. But they believe other hot button news like Brexit fallout, financial-institution regulatory reform and uncertainty about the upcoming presidential election, will have a negligible effect on deals.

“When it comes to M&A in 2017, the biggest determining factor is likely the fate of the U.S. economy,” opined Thomas Vaughn, co-leader of Dykema’s M&A practice. “It’s not surprising that respondents – seeing a decline in 2016 deal volume after several years of strong growth – are taking a wait-and-see approach.”

The survey yielded a number of other interesting conclusions, including:

• By a two-to-one margin, respondents said the policies of Republican Donald Trump, if elected, would be more supportive of the U.S. M&A market than Democrat Hillary Clinton. But a plurality of respondents said both candidates would have a neutral effect on the U.S. M&A market in 2017.
• About half of respondents (49 percent) said availability of capital was most responsible for fueling current M&A activity, essentially the same percentage as in 2015. Twenty-five percent of respondents credited favorable interest rates, a 7 percentage point increase from 2015 despite the Federal Reserve’s December 2015 rate increase.
• Respondents said U.S. financial buyers had the most influence on U.S. deal valuation over the past 12 months. This was the first time strategic U.S. buyers weren’t seen as the most influential since the 2008 survey – even if financial buyers beat out strategics by only 5 percentage points.
• Sixty-eight percent of respondents said they expected an increase in M&A activity from privately owned businesses in 2016, down from 72 percent last year. The 4 percent difference basically mirrors the drop in the percentage of respondents predicting M&A growth this year.
• Despite the drop in overall confidence, 70 percent of respondents said they expect an acquisition involving their company or one of their portfolio companies in the next 12 months, up from 67 percent in 2015. Forty-eight percent expected a sale, compared with 42 percent last year.
• Aging business owners seeking to sell were again seen as the top driver for growth in M&A activity from privately owned businesses.

“While this year’s report demonstrates a more neutral sentiment for the global M&A market as a whole, there are segments of the market catching attention, including the energy, healthcare and technology sectors,” said Jeff Gifford, co-leader of Dykema’s M&A practice. “On the international front, the pace of outbound acquisitions by Chinese companies, particularly in the U.S. and Europe, does not appear to be slowing down anytime soon. This trend is in large part due to an increasing level of comfort navigating Chinese regulatory bodies and growing confidence that these deals will go through successfully.”

Survey results are being released this week at Dykema’s exclusive annual M&A outlook events in Detroit, Chicago and San Antonio.

See the full report.