The 8th Circuit Court of Appeals recently addressed an issue that frequently arises in the non-compete context: what happens when a company buys the assets of another and then tries to enforce non-compete agreements?

Michael Elkon of Fisher & Phillips LLP explains in the article: Two employees worked as mobile x-ray technicians for Ozark Mobile Imaging. Both signed non-compete agreements saying they could not work in the mobile diagnostic business in a set geographic area for a two-year period after the end of their employment. Mobilex later bought Ozark in an asset purchase, and both employees declined offers to work for Mobilex, citing inferior terms of employment, and instead took positions with a competitor. Mobilex filed suit against the ex-employees for breach of contract, but the district court granted summary judgment to Greenbaum and Tabanag, finding that because they had not consented to the assignment of their contracts at the time of the asset purchase.

The appellate court reversed, providing a reminder that “it is important to pay attention during the sale process to ensure that there will be no issues with the purchaser enforcing the seller’s restrictive covenant rights with employees,” Elkon writes.

Read the article.

The 7th Circuit Court of Appeals had to decide a case in which the parties disagreed as to whether there was even a contract, raising the obvious question is whether there is a document with both parties’ signatures. But this is not always definitive, explains Stephen M. Proctor in a Risk Management Update for Masuda Funai.

C.G. Schmidt, Inc. was a general contractor managing part of the construction of an 18-story office building in downtown Milwaukee for $52 million, explains Proctor. It negotiated with Permasteelisa North America to supply a custom outer covering for weatherproofing and aesthetics and a substantial part of the project. “CGS won the bid for the building relying on PNA’s bid. But PNA backed out. CGS claimed that it had an agreement with PNA for the curtainwall and relied on PNA’s Subcontract when it submitted the bid. CGS sued PNA for breach of contract and promissory estoppel,” Proctor explains.

It’s clear there was no formal written contract with both CGS’s and PNA’s signature, but this did not prevent CGS from prevailing. In the end, CGS did not prevail, but it raised some arguments that the judge discussed at length.

Read the article.

In St. John’s Holdings, LLC v. Two Electronics, LLC, the Massachusetts’ Land Court concluded (in what appears to be a case of first impression) that a string of text messages can constitute a writing under the Statute of Frauds sufficient to bind the parties to sell certain property, writes Matthew DeVries on Burr & Forman LLP‘s Best Practices Construction Law blog.

DeVries explains in the article: The transaction involved included four drafts of a letter of intent from Buyer to Seller for purchase of a piece of property, none of which were signed by Buyer. Ultimately, Seller’s agent texted Buyer’s agent, asking him to sign the letter and provide a deposit. About two hours later, after Buyer signed the letter and provided a deposit, Buyer’s agent sent a text to Seller’s agent saying he had signed the letter of intent. The two agents met later that day to deliver and accept the letter and deposit, and the seller’s agent sent a text saying the Seller was unavailable and would respond the next day. But it was determined later that the Seller accepted a third party’s offer to purchase the property at the same time, and refused to execute and deliver the letter of intent from the original Buyer.

“The court concluded that the text message from Seller’s agent was a writing that, read in the context of the email exchanges between the parties, contained sufficient terms to state a binding contract between Seller and Buyer. In addition, the court found that the final text message contained a valid electronic signature to be ‘signed’ within the meaning of the law,” DeVries explains.

Read the article.

The Federal Trade Commission has determined that Herbalife is not a pyramid scheme, but the nutritional supplement marketer will still be required to pay $200 million to consumers and “fully restructure” its “unfair” business in a comprehensive settlement, the federal regulator said Friday, according to a report by USA Today.

“The settlement caps a two-year investigation by the FTC, which probed Herbalife over accusations that the company’s main focuses less on retail sales of products than on on bringing in increasing numbers of new sales people who were deceived into believing they could reap substantial profits by selling diet, nutritional supplement and personal care products,” report Nathan Bomey and Kevin McCoy.

Under the settlement, Herbalife must “fundamentally restructure its business, so that participants are rewarded for what they sell, not how many people the recruit,” FTC Chairwoman Edith Ramirez said in a statement.

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Reuters is reporting that the U.S. Department of Justice has begun a rare internal examination of what went wrong in the prosecution of a controversial drug conspiracy case against delivery service Federal Express, according to the department’s top prosecutor in San Francisco.

“The review plays into a broader debate about how the government prosecutes suspected corporate wrongdoing and could influence its approach to such cases in the future,” write Dan Levine and David Ingram.

FedEx was indicted in 2014 on charges the company had knowingly helped Internet pharmacies ship illegal pills. Then, four days into a trial in San Francisco last month, the DOJ dropped all charges, a decision the judge praised, saying it was clear FedEx was “factually innocent.”

The new review will examine why prosecutors brought the case, what oversight supervisors provided and what role officials in Washington D.C. played.

Read the article.

The decision to end a supplier relationship can be a difficult one, often reached only after multiple attempts to fix problems have failed and various alternatives to termination have been fully considered, writes Robert F. Ware of Thompson Hine.

“When the decision is finally made, the focus turns to effecting the termination and transitioning to a new supplier as quickly and seamlessly as possible. Having reached this stage, it can be frustrating to encounter legal issues that delay the conversion or require a change in strategy. Even worse is a legal dispute that causes delay and significant unanticipated costs,” Ware writes.

He offers some strategies to consider at the outset of any discussion about a possible supplier termination.

Read the article.

Western business people have been falling for a classic Chinese scam for a long time, writes Dan Harris in Harris Moure, LLP’s China Law blog, and it seems to be rapidly accelerating of late.

“The scam consists of the Chinese company (actually, in every instance when our firm has done any investigation at all we immediately learned that there is actually no real company there) luring in the Western company with promises of big money for services (or sometimes products) to be supplied by the Western company. There is just one small hitch: the Western company must go to China,” he explains.

Once the Westerner gets to China, the local representative profits by splitting inflated costs incurred at hotels and restaurants and from fake notary charges.

Read the article.

Texas Lawyer’s annual listing of the top verdicts in Texas includes last year’s trial win by Dallas-based Rose•Walker for firm client ThermoTek Inc. as one of the state’s top contract verdicts.

In November of last year, Judge Sidney Fitzwater of the U.S. District Court for the Northern District of Texas in Dallas entered a judgment of $9.6 million for medical products manufacturer ThermoTek. The judgment followed a unanimous verdict in which jurors agreed with Rose•Walker’s argument that a competitor fraudulently obtained ThermoTek’s business information for a series of physical therapy machines.

“We’re always happy to walk out of court with a win on behalf of our clients,” says firm founder Marty Rose, who represented ThermoTek at trial along with firm partner Chris McDowell. “But to have our work recognized among other top trial wins is a special honor.”

Read the article.

BP Plc faces more than $20 million in penalties and surrendered profits after a U.S. regulator found that the energy giant manipulated commodity markets in Texas, according to a report by Bloomberg and published by The Business Times.

The case dates back to 2008, when — according to the Federal Energy Regulatory Commission — BP rigged prices at a Texas natural gas hub.

The order upholds an earlier ruling by the agency’s judge. BP had denied the allegations, Bloomberg reports.

“We find the violation here to have been very serious,” the commission said. “BP manipulated the market to profit from a natural disaster, and it did not stop after a trade or two but rather kept the scheme going for nearly three months.”

Read the article.

Image by Marc van der Chijs

Google’s self-driving car project has created a general counsel position—and hired Kevin Vosen, the chief legal officer of The Climate Corporation to fill it—as it prepares to shift from moonshot to company, reports Kirsten Korosec for Fortune.

“Alphabet’s Google has teams of lawyers. And even the Google self-driving project, which is housed under X (the division where the company’s experimental projects reside), has lawyers. But until now, it’s never had one dedicated to the project full time and of this level of seniority,” she writes.

The article points out that the hiring comes at a critical time as Google aims to commercialize self-driving cars by 2020. With a CEO and a director already in place, a chief lawyer has been a missing piece.

Read the article.

One of the founders of futuristic transportation start-up Hyperloop One has filed a wrongful termination suit against his former co-founder, alleging nepotism and harassment, CNN is reporting.

The company is competing to build a Hyperloop transportation system to transport people and cargo up to 760 mph in a partially pressurized tube.

“On the outside, Hyperloop One appeared to be leading the competition with plans to have a working Hyperloop by 2020.” report Heather Kelly & Laurie Segall. “Inside, the startup was apparently being torn apart by mismanagement and growing tensions between leaders, according to the lawsuit filed in Los Angeles Superior Court on July 12.”

Plaintiffs allege the current leaders of the company gave  lucrative jobs and raises to relatives and, and in one case, a girlfriend, pocketed money themselves and harassed other employees.

Read the article.

Onex Corporation and Baring Private Equity Asia have announced their affiliated private equity funds have agreed to acquire the Intellectual Property & Science business (IP&S) from Thomson Reuters, for $3.55 billion. IP&S owns a collection of leading subscription-based businesses that provide a diverse customer base with access to scientific literature, patent, trademark, pharmaceutical and other curated content. The transaction is expected to close later this year subject to customary closing conditions and regulatory approvals.

Latham & Watkins LLP advised Onex and Baring Asia on the transaction with an M&A team led by Washington, D.C. partner Paul Sheridan and Chicago partner Shaun Hartley. Advice was also provided on benefits and compensation matters by Washington, D.C. partner Adam Kestenbaum; on tax matters by New York partner Lisa Watts; on intellectual property matters by New York partner Steven Betensky and Washington D.C. counsel Kieran Dickinson; on real estate matters by New York partner Dara Denberg; on senior secured bank financing matters by Washington, D.C. partner Jeffrey Chenard; on bond financing matters by Washington, D.C. partners Rachel Sheridan and Shagufa Hossain; on antitrust matters by Washington, D.C. partner Marc Williamson and Brussels partner Sven Völcker; and on other corporate matters by Boston partner William Schwab.

In a release, the company said IP&S provides comprehensive intellectual property and scientific information, decision support tools and services that enable academia, corporations, governments and the legal community to discover, protect and commercialize content, ideas and brands that are important to them. Its portfolio includes Web of Science, Thomson CompuMark, Thomson Innovation, MarkMonitor, Cortellis and Thomson IP Manager. Headquartered in Philadelphia, IP&S employs approximately 4,100 people across more than 75 offices in over 40 countries.

The release continues:

“IP&S is a diversified portfolio of high-quality, well-positioned businesses providing proprietary, curated content through products and services that are entrenched in their customers’ day-to-day activities,” said Kosty Gilis, a Managing Director with Onex. “We are delighted to have the opportunity to acquire the company and partner with management and Baring Asia to enhance IP&S’ operations and support its growth in the years to come.”

“We look forward to partnering with IP&S management and Onex to support the development of the company globally, particularly in Asia where we see a differentiated growth opportunity,” said Jean Eric Salata, Founder and Chief Executive of Baring Asia. “Already an established leader in China and across the region, we believe the outlook for the business is underpinned by an increasing shift towards more knowledge driven economies and a continued emphasis on research and development.”

“We are pleased to announce the agreement today to sell our Intellectual Property & Science business to Onex and Baring Asia,” said Jim Smith, President and Chief Executive Officer of Thomson Reuters. “With the completion of this divestiture, Thomson Reuters will be even more focused on operating at the intersection of global commerce and regulation.”

The transaction is expected to be funded with an equity investment of approximately $1.6 billion for 100% ownership of IP&S. Onex’ portion of the equity investment (approximately $1.2 billion) will be made by Onex Partners IV and certain limited partners as co-investors, including Onex.

Latham & Watkins LLP is serving as legal advisor to Onex and Baring Asia on the transaction.

About Onex 
Onex is one of the oldest and most successful private equity firms. Through its Onex Partners and ONCAP private equity funds, Onex acquires and builds high-quality businesses in partnership with talented management teams. At Onex Credit, Onex manages and invests in leveraged loans, collateralized loan obligations and other credit securities. The Company has approximately $23 billion of assets under management, including $6 billion of Onex proprietary capital, in private equity and credit securities. With offices in Toronto, New York, New Jersey and London, Onex invests its capital through its two investing platforms and is the largest limited partner in each of its private equity funds.

Onex’ businesses have assets of $36 billion, generate annual revenues of $23 billion and employ approximately 145,000 people worldwide. Onex shares trade on the Toronto Stock Exchange under the stock symbol OCX. For more information on Onex, visit its website at www.onex.com. The Company’s security filings can also be accessed at www.sedar.com.

About Baring Private Equity Asia
Baring Private Equity Asia is one of the largest and most established independent alternative asset management firms in Asia, with a total committed capital of over $10 billion. The firm runs a pan-Asian investment program, sponsoring management buyouts and providing growth capital to companies for expansion or acquisitions, as well as a pan-Asian real estate private equity investment program. The firm has been investing in Asia since its formation in 1997 and has over 125 employees located across seven Asian offices in Hong Kong, Shanghai, Beijing, Mumbai, Singapore, Jakarta, and Tokyo. Baring Asia currently has over 35 portfolio companies active across Asia with a total of 150,000 employees and sales of approximately $31 billion in 2015. For more information, please visit www.bpeasia.com.

U.S. securities regulators have accused a KPMG partner and two other individuals of insider trading on tips about three pending corporate mergers on which the accounting firm was providing advice, Reuters is reporting.

The U.S. Securities and Exchange Commission filed the suit in federal court in Atlanta, claiming KPMG tax partner Thomas Avent of passed tips to his stockbroker, Raymond Pirrello, writes Nate Raymond. The SEC says Pirrello told a friend, Lawrence Penna, who with his family made more than $111,000 trading on the information.

The report says KPMG said on Friday that it was “deeply troubled” by the allegations and had placed Avent, a 63-year-old Atlanta resident, on administrative leave.

Read the article.

Limited Liability Companies, or LLCs, are now the most popular legal entity for organizing businesses in the United States, according to a new report issued by Berkman Solutions.

“While it is tempting to conclude that S Corporations are substantially more popular than LLCs, this conclusion is based on the total number of legal entities. S Corporations have a more than 15 year head start on LLCs. Adjusting for that head start, the data reveals that LLCs are eclipsing S Corps,” according to Berkman’s analysis.

“Looking at the year-over-year net change in tax filings demonstrates that LLCs have a slight edge over S Corporations since 2004, except for 2006,” it continues. “The year-over-year net change captures the addition (or reduction) in tax returns from the prior year by legal entity type.”

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Archer Norris published its second annual California Business Litigation Report, revealing that corporate lawyers continue to view many aspects of California’s business environment as perplexing, downright exasperating, and in many ways more challenging than other states.

In a release, the firm said employment laws and labor issues were found to be by far the most significant legal concern of companies doing business in California, reported by 62% of respondents. When it comes to areas in which litigating in California is more challenging than in other states, employment law and labor issues again landed in the top spot (69%), followed by environmental law and regulation (57%). The survey showed that the most-cited legal stumbling blocks also include commercial litigation, product liability, intellectual property, land use, and health care. Among out-of-state counsel specifically, regulatory compliance was repeatedly cited as a chief challenge across a wide spectrum of legal concerns.

Conducted in partnership with ALM Marketing Services, Archer Norris’s survey polled general and corporate counsel with business interests in California on their opinions of the California legal climate, how they evaluate litigation matters, and how they choose outside counsel for handling these matters.

This year, Archer Norris also examined current attitudes toward hot issues such as cybersecurity, finding that anxiety about exposure to cyber risks indeed runs deep among in-house counsel, with nearly two-thirds reporting they are “very concerned.” They are most worried about information loss and associated costs resulting from data leakage or systems attacks, damage to critical IT infrastructure, and risk arising from malware and computer viruses.

“The results of our 2016 survey make it clear the legal terrain in California continues to prove daunting not only to companies new to litigating in the state, but also to those who have been handling matters here for some time,” said Gene Blackard, Managing Partner of Archer Norris. “In order to overcome these challenges, it’s more critical than ever for companies doing business in California to have highly responsive and knowledgeable outside counsel. Archer Norris has guided hundreds of businesses through the complex litigation and transactional landscape here, with the goal of seeing our clients succeed in California long-term. With more than 100 attorneys practicing in five offices across the state, we’re exactly where our clients need us to be to best handle their diverse needs.”

The survey also yielded insights about how in-house counsel evaluate which outside California counsel is the right partner. While 55% of respondents noted the importance of a firm offering competitive rates and fees, a number of other factors were deemed more important than cost. Respondents first and foremost look for dependability and consistency (74%), followed by responsiveness, depth of experience, knowledge of the business and industry, and whether the law firm is one known for thoroughly exploring options for resolution other than going to trial.

Respondents reported spending about one-quarter of their overall legal budgets on outside counsel, and most said their budgets will stay the same or increase this year (37% and 29% respectively) compared to last. Many admit they would consider paying “premium” fees (up to 30% above the norm) to defend “bet the company” issues (23%) or legal matters where the client risks losing $1 million or more (32%).

The previous Business Litigation Playbook white paper, which also reveals corporate counsels’ greatest legal concerns within a variety of practice areas, can be downloaded.

Theranos Inc.’s Chief Executive Officer Elizabeth Holmes was banned for two years from owning or operating laboratories by U.S. regulators, a major blow against the controversial blood-testing startup that’s come under scrutiny for risking patient harm with unreliable tests, reports Doni Bloomfield for Bloomberg Technology.

“The once high-flying Silicon Valley company was also penalized for an undisclosed amount and lost its eligibility to get payments from federal health insurance programs for lab services, according to a statement late Thursday from Theranos, citing a notice it received from the Centers for Medicare and Medicaid Services,” the report says. “The closely-held firm is shutting down its Newark, California, lab and plans to rebuild it, Holmes said.”

The company founded by Holmes at one time had a $9 billion private valuation, based on technology that it said would allow for cheap, less-painful blood tests processed with breakthrough analyzers. Regulators soon stepped in, citing violations that put patients’ health and safety at risk.

Read the article.

Reuters is reporting that the U.S. Internal Revenue Service said Facebook Inc. may have understated the value of intellectual property it transferred to Ireland by “billions of dollars,” unfairly cutting its tax bill in the process, according to court papers.

A Justice Department lawsuit filed in federal court in San Francisco seeks to enforce IRS summonses served on Facebook and to force the company to produce various documents as part of the probe, report Nate Raymond and Tom Bergin.

“The tax authority is examining whether Facebook understated its U.S. income by selling rights to an Irish subsidiary too cheaply,” according to the report. “Doing so could boost taxable profits in Ireland, which has a corporate tax rate of 12.5 percent, and reduce taxable income in the United States which has a rate of at least 35 percent.”

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A supposedly rogue investigation that Uber originally claimed it knew nothing about — and which could turn out to be a costly embarrassment for the ride-hailing giant — began with a 10-word request from the company’s general counsel, reports Matthew Flamm in Crain’s New York Business.

By email in 2015, Uber GC Salle Yoo asked the company’s security chief, “Could we find out a little more about this plaintiff?”

The Uber email, along with some others, eventually led to involvement by global intelligence firm Ergo, court records reveal.

“They were entered in support of a motion for relief brought by Connecticut conservationist Spencer Meyer—the mysterious plaintiff about whom Yoo inquired immediately after Meyer filed an antitrust class-action suit charging Uber Chief Executive Travis Kalanick with price fixing,” Flamm reports. The plaintiff claims the Ergo investigator used a ruse to snoop on him on his lawyer.

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It is becoming common for more and more transactions to be created, negotiated, finalized and executed electronically, according to an alert from Arnall Golden Gregory LLP. From a real estate perspective, virtually all documents other than those that are being recorded are exchanged electronically.

The article addresses whether, and under what circumstances, contracts executed via the internet or otherwise are enforceable under applicable federal and state laws.

Topics covered include e-signatures, the applicability of general contract principles, and commercial real estate agreements.

The conclusion is that “it is clear that binding real estate transactions have been and will continue to be conducted via electronic transfer of signatures.”

Read the article.

With the recent passage of the Defense of Trade Secrets Act (DTSA), businesses are welcoming the many benefits the statute brings, including federal jurisdiction, robust equitable relief, and the ability to recover compensatory damages, punitive damages, and attorneys’ fees, writes Michael Greco in Fisher Phillips’ Non-Compete and Trade Secrets blog. However, in the midst of celebrating this new federal cause of action, many employers are overlooking a requirement embedded deep within the statute.

“Namely, employers are required to provide employees with notice that they are entitled to immunity if they disclose a trade secret for the purpose of reporting suspected illegal conduct,” he writes. “If employers fail to give notice in the manner required by the DTSA, they will not be able to recover punitive damages or attorneys’ fees. Consequently, employers must pay careful attention to the DTSA notification requirements, which are not as straightforward as many believe.”

He explains that “the immunity notification requirements of the DTSA are less than straightforward. If employers intend to avail themselves of the new federal cause of action, they should carefully analyze their agreements and policies to ensure compliance.”

Read the article.