“… the enforceability of restrictive covenants often depends on which state’s law applies to the dispute. For example, California is well known for refusing to enforce employee non-competition agreements and, recently, refusing to honor forum selection clauses in agreements with California employees without the employee first receiving legal advice. In contrast, with limited exceptions, most other states will generally enforce restrictive covenants. Consequently, for employers, controlling and choosing the correct law to apply to its restrictive covenant agreements can be critical to protection of its business interests,” writes Marcus Mintz, Jeremy Cohen and Erik Weibust in Seyfarth’s News & Insights.

“In a recent dispute between an Ohio employer and a California-based employee, the 6th Circuit Court of Appeals affirmed the enforcement of a non-competition covenant over the employee’s objection … The employee appealed the district court’s application of Ohio law because of ‘California’s hostility towards covenants not to compete.’ … In reaching its decision to affirm the lower court’s application of Ohio law, the 6th Circuit conducted a choice-of-law analysis and held that because the agreement contained an express choice-of-law provision, the court needed only to examine whether California, the employee’s home state, has a ‘materially-greater-interest’ in the dispute than Ohio … Applying its own precedent, the 6th Circuit held that while ‘California has a meaningful interest in protecting its resident from Down-Lite’s desire to restrict competitive conduct,’ such interest was not ‘materially greater than Ohio’s interest in protecting one of its closely held businesses operating in the global economy.”

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“A court may not refuse to enforce contractual terms on the basis that the enforcement would, in its subjective view, be unfair, unreasonable or unduly harsh. It is only where a contractual term or its enforcement is so unfair, unreasonable or unjust that it is contrary to public policy that a court may refuse to enforce it. The public policy considerations are informed by the wide range of constitutional values,” writes Donald Dinnie in Norton Rose Fulbright’s Insurance.

“Courts do not make decisions about the enforcement of contractual provisions on the basis of abstract considerations of good faith, reasonableness or fairness. They do so on the basis of established legal rules. Good faith, reasonableness and fairness form the basis of our law but are not themselves, legal rules.”

“The Constitutional Court in Barkhuizen said that, while public policy imports notions of fairness, justice and reasonableness into our law, parties are generally required to honour contractual obligations that they have freely and voluntarily undertaken.”

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“Simon Property Group, Inc. (“Simon”) wants out of a deal to acquire its competitor, Taubman Centers, Inc. (“Taubman”), due to the COVID-19 pandemic,” reports Amy E. Lott and Lynsey J. Hyde in Gray Reed’s M&A Insights.

“Simon, the buyer, is an Indiana-based company that owns malls, outlets, and shopping centers. Its last 10-K filed with the Securities and Exchange Commission states that it had an interest in more than 200 properties in the United States. For example, in Texas, Simon owns The Galleria in Houston, Katy Mills, Grapevine Mills, Houston Premium Outlets in Cypress, and The Domain in Austin, among others.”

“Taubman, the seller, is a Michigan-based company that also owns malls, outlets, and shopping centers. Its portfolio includes shopping centers in the United States and Asia, including the Beverly Center in Los Angeles, the International Place Market in Waikiki, the Starfield Hanam in South Korea, and The Mall of San Juan in Puerto Rico.”

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“In corporate democracy, the default system is voting, but shareholders are free to contract over their votes. In private companies, shareholders routinely do so, using shareholder agreements — contracts amongst the owners of a firm — to bargain directly over directorships and other rights of control. Why? Why use a contract to shape control rather than corporate law’s more familiar instruments — the charter and bylaws? This article shows that shareholder agreements’ distinctive role in corporate governance arises both because of contracts’ distinctive procedural attributes, and because corporate law empowers shareholders to personally waive rights by contract that the charter and bylaws cannot remove. Statutory rules that are mandatory for the charter and bylaws do not bind shareholder agreements,” writes Gabriel V. Rauterberg of the University of Michigan Law School in SSRN.

“This article offers a theoretical, legal, and empirical study of shareholder agreements. Its implications range across a number of foundational debates in corporate law and governance.”

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“Simpson Thacher & Bartlett has filed a lawsuit contending that it is entitled to return of rent on unoccupied New York City offices during the COVID-19 pandemic,” reports Debra Cassens Weiss in ABA Journal.

“The breach of contract suit, filed Monday in state court in New York, seeks $8 million in damages, Law.com reports. The suit also seeks a declaratory judgment that the law firm is entitled to rent abatement while the pandemic continues or government mandates continue.”

“According to the suit, Simpson Thacher’s lease has a ‘relatively unique clause’ in the lease for its offices at 425 Lexington Ave.”

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“The recently enacted Small Business Reorganization Act (‘SBRA’) is available to help ‘small business debtors’ with debts of no more than $2,725,625 (temporarily increased to $7,500,000 for one year by the CARES Act). Although there are several requirements that must be satisfied in order to qualify as a ‘small business debtor’ under the Bankruptcy Code, courts have recently considered whether an individual debtor must be engaged in “commercial or business activities” at the time of his or her bankruptcy filing. Both courts which have considered the question have answered ‘no,'” reports Megan R. I. Baxter-Labut, Ronald A. Spinner and Marc N. Swanson in Miller Canfield’s resources.

“Two recent bankruptcy cases, one from South Carolina and another from Louisiana, construe this phrase broadly, holding that a person is ‘engaged in commercial or business activities’ for the purposes of the SBRA if the person’s debts arose primarily from business activities (including guaranties of business debt). This is true regardless of whether the person seeks to reorganize an ongoing business or currently conducts business of any kind. If other courts follow suit, more debtors will qualify to file under the SBRA than creditors may have originally expected, making it more important than ever for creditors to fully understand this new ‘subchapter V of chapter 11’ of the Bankruptcy Code.”

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“The COVID-19 pandemic has caused cost overruns and project delays that construction owners and contractors could have never imagined before 2020,” write
Elizabeth D. Charnowski and Carl R. Pebworth in Faegre Drinker’s Insights.

“These unanticipated circumstances can create contract application and interpretation challenges for the unwary construction partner. For example, even if a prime contract expressly requires a specific notice period for change orders, parties can waive or circumvent these requirements in a range of ways. Now, more than ever, prudent construction partners must act carefully to avoid unforeseen impacts. That is especially true when project sites shut down due to executive orders and as work later restarts. Many contractors may now be seeking extra time or compensation for these project delays. How do prudent owners and contractors navigate these uncertain circumstances?”

They provide some considerations to bear in mind.

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“The current COVID-19 pandemic has forced many businesses online in order to survive. In many cases, businesses had no plans to be online. Others were forced to move online more quickly than planned,” writes John E. Ottaviani in Partridge Snow & Hahn’s Client Alerts.

Partridge Snow & Hahn “have prepared a series of articles discussing some of the more important legal issues to address when moving your business online. Website Terms discusses online terms and conditions to protect your business. Privacy Policy discusses how your business collects, uses and discloses personal information of others. Third Party Content discusses the risks of copying photos, music, videos, and other content created by third parties onto your website. E-Commerce Policies discusses e-commerce policies that a website selling products or services should have in place. Creating Enforceable Contracts discusses the safest method to ensure that you can enforce your online terms and conditions protecting your business. Written Information Security Programs (WISPs) discusses several reasons why it is important for all businesses to prepare a WISP and to keep it updated. Protecting Your Brand discusses the process of selecting and protecting your brand.”

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“Arbitration agreements are an increasingly popular way for employers to manage employment disputes effectively and efficiently. A common provision in arbitration agreements is a class action waiver, wherein the parties agree to resolve any dispute on an individual basis. Any employer who has faced a wage and hour class action understands how complex and expensive such cases can be to defend, regardless of merit,” warns Michael Thompson in California Employment Law Report.

“A recent published decision from the California Court of Appeal reminds us that arbitration agreements are subject to many of the pitfalls of contract. Specifically, regardless of what you want it to accomplish, a contract is only as good as what it actually says.”

Read the article.

“Although many companies are already revisiting contractual provisions relating to nonperformance, like force majeure clauses, as the coronavirus (COVID-19) pandemic continues to wreak havoc on public health and the economy, other proactive (but less publicized) contractual measures can facilitate early discovery and mitigation of potential nonperformance,” discuss Barbara Murphy Melby and A. Benjamin Klaber in Morgan Lewis’ Tech & Sourcing.

“As part of third-party vendor management or sourcing procedures, it is common practice for many companies to vet their vendors prior to contract signing for financial viability and wherewithal. In some cases, like contracts for critical products or services or larger vendor relationships, companies include contractual provisions that provide for regular information sharing regarding a vendor’s financial status and specific rights, including step-in and termination, if the financial status materially adversely changes. While these types of provisions are not new, in light of the impact of COVID-19 on supply and demand for certain products and services and the corresponding potential impact on certain critical or strategic vendors, they are gaining more attention from third-party vendor management and sourcing organizations. Companies, which previously looked to rights and remedies such as non-exclusivity and early termination without penalty as sufficient to address the potential risk, increasingly are focused on financial viability provisions to allow for early warning of a potential problem and early action, if necessary, to avoid disruption.”

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“Recently, the National Labor Relations Board (NLRB), overruling an important Obama-era decision, held that employers do not have a pre first-contract duty to bargain before disciplining employees in a manner consistent with an existing policy or practice. The Board’s Care One at New Milford unanimously overruled Total Security Management Illinois 1, LLC, and will be applied retroactively to all cases pending before the NLRB,” write Anne Marie Buethe and Matthew C. Tews in Stinson’s News & Insights.

“In Care One, an employer suspended three employees and discharged another pursuant to its disciplinary policy. The employees were newly union-represented, but not yet covered by a collective bargaining agreement (CBA). The employer did not provide the union with prior notice or an opportunity to bargain. The union brought an unfair labor practice charge claiming that the employer violated the Total Security rule. The Board’s 2016 Total Security decision had held that an employer must provide a newly certified union with notice and an opportunity to bargain before imposing serious discipline (i.e., suspension, demotion, discharge), during the time after the union was certified but before the parties had entered a first CBA if the imposition of such discipline involved any discretion.”

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“A Ninth Circuit opinion handed down in January affirmed the First Amendment principle that the right of public access to new court filings attaches as soon as the clerk receives them,” writes Bill Girdner in Courthouse News Service.

“But during the preceding oral argument at the Ninth Circuit’s Pasadena courthouse, Judge Mary Murguia asked a natural question: ‘Doesn’t Ventura County have to docket those physical files first?'”

“Those procedures are part of intake, the actual filing of a legal document, not the later work of putting that filing into the court’s docket. Rulings in both cases — one against a clerk in California, the other against two clerks in Virginia – affirmed a First Amendment right of access at the point of the clerk’s receipt. But both cases also involved courts based on paper, a medium that is fast disappearing in the rearview mirror of history.”

“So the same question will be asked by a judge in the future about a digital court: ‘Doesn’t the court need to docket those electronic files first?’”

Read the article.

“As is common with a blockbuster drug, AbbVie’s Humira faced an antitrust challenge from third-party payers,” writes Richard D. Kelly in Oblon’s Publications.

“The third-party payers filed an antitrust action claiming AbbVie’s patent strategy stifled competition by forcing prospective competitors to settle on terms allowing Humira to enjoy a monopoly long after patent protection should have ended. The complaint alleges that AbbVie cornered the market for Humira and its biosimilars by obtaining a thicket of patents which allowed it to gain the market power it needed to prevent competitors from entering the U.S. market (violation of Sherman Act section 2). It used this market power to enter into settlement agreements with potential competitors to keep their products out of the U.S. market in return for early launch dates in Europe, also an important market which they termed a pay-for delay and market division (violation of Sherman Act section 1). ”

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There are some nuanced—and frequently sticky—issues regarding third-party products and how they can be resolved, discuss Barbara Murphy Melby and A. Benjamin Klaber in Morgan Lewis’ Tech & Sourcing.

“The indemnifying party commonly takes the position that it should not be responsible for infringement arising from combinations with other products or services. But what if the indemnifying party delivers or provides access to third-party products (e.g., software) as part of the overall design or relationship? Or what if certain ‘third party’ products are produced or distributed by one of the indemnifying party’s affiliates? Or what if the indemnifying party provides documentation or instructions that specifically recommend third-party products as compatible with the underlying technology? Or what if specific third-party products are necessary for the operation of the underlying technology? Under these circumstances, the indemnifying party’s core argument—that it has no control over third-party products or services—requires careful consideration.”

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“The first reported substantive ruling by a judge sitting in Illinois on the legal implications of whether COVID-19 and the resulting governmental shelter-in-place orders relieve a tenant’s obligation to pay rent pursuant to a force majeure provision in a commercial lease agreement was entered by U.S. Bankruptcy Judge Donald Cassling on June 3, 2020,” write Paul W. Carroll and Daniel E. Crowley in Gould + Ratner’s Publications.

“The ruling in In re Hitz Restaurant Group, LLC, (N.D. Ill., Case No. 20-05012) came in response to a landlord’s motion to force a restaurant tenant to come current on unpaid post-petition rent. The court sided with the tenant and reduced its post-petition rent obligation by 75%.”

“The ruling already has garnered widespread attention as a potential bellwether on the applicability of force majeure clauses in commercial leases.”

This article provides five to know about this decision.

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“The US Court of Appeals for the Fifth Circuit held that, under Texas law, a plaintiff can sustain an action for trade secret misappropriation even if the plaintiff voluntarily communicated the alleged trade secrets to the defendant,” writes David Mlaver in McDermott Will & Emery’s IP Update Trade Secrets.

“HAT Contract hired Hoover Panel Systems to design and manufacture a power beam for desks in an open office environment. The parties engaged in oral negotiations that culminated in a written contract, which provided that ‘any . . . proprietary information shall be considered confidential and shall be retained in confidence by the other party.’ The contract also provided that the ‘parties agree to keep in confidence . . . all information disclosed by the other party, which the disclosing party indicates is confidential or proprietary or marked with words of similar import.’ Hoover developed a prototype and forwarded it to HAT, but never marked any information as confidential. HAT approved the prototype and placed several orders, although far fewer than Hoover expected. Hoover discovered that HAT had sent the prototype to at least one overseas manufacturer and was using it to manufacture products similar to those Hoover manufactured.”

“Hoover sued HAT in state court. HAT removed to federal court. Hoover then amended its complaint to recite causes of action for breach of contract, trade secret misappropriation, promissory estoppel, quantum meruit and unjust enrichment. HAT asserted affirmative defenses of waiver and ratification and a counterclaim of bad faith, but the district court declined to consider the counterclaim as untimely filed. HAT moved for summary judgment on all of Hoover’s claims and its waiver and ratification defenses, which the district court granted. Both parties appealed.”

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“Once parties agree to arbitrate, courts generally defer to the arbitrator’s judgment regarding resolution of a dispute,” discuss Jim Archibald, Amandeep S. Kahlon & Luke D. Martin in Bradley’s BuildSmart Arbitration. “The prevailing approach in many states is to not set aside an arbitration award unless the arbitrator clearly exceeded his or her authority and to exercise every reasonable assumption in favor of the validity of an award. The Minnesota Court of Appeals recently confirmed this view in Faith Technologies, Inc. v. Aurora Distributed Solar LLC.”

“In that case, the court upheld the arbitrator’s award for equitable relief, despite the parties’ contract prohibiting the arbitrator from providing any equitable remedy. The court found the parties’ stipulation to arbitrate all disputes effectively waived the contractual prohibition on equitable relief, especially where the equitable claim for abandonment was pled and not objected to until after the final award.”

“In 2016, Aurora hired Biosar to design and construct solar-power generators for a project in Minnesota. Biosar hired Faith Technologies to provide labor, materials, and services for the project. The EPC contract between Aurora and Biosar permitted arbitration to resolve disputes arising out of the contract but prohibited the arbitrator from ‘awarding nonmonetary, injunctive, or equitable relief.'”

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“E-commerce and tech behemoth, Amazon, has filed a lawsuit against the former vice president of marketing for its Amazon Web Services division, Brian Hall, alleging that his new role at Google Cloud violates the terms of his non-compete agreement,” report Peter S. Lubin and Patrick Austermuehle in Lubin Austermuehle’s Chicago Business Litigation Lawyer Blog.

“In its complaint, Amazon alleges that Hall’s employment with Google threatens to cause irreparable harm and risks exposing valuable competitive information to one of its biggest rivals. Amazon seeks both money damages and injunctive relief, requesting that the court enjoin Hall from working for Google for the remainder of the 18-month non-compete period set forth in the agreement.”

“This lawsuit is the latest in a series of lawsuits filed by Amazon to enforce non-compete clauses in employment contracts. In 2017, Amazon sued another former vice president who left Amazon Web Services to take a job with a Seattle-area software company but dropped the suit shortly after filing it. In 2019, Amazon filed a similar suit against a former Amazon Web Services sales executive after he too left the company to take a job with Google Cloud. A judge ultimately agreed to partially limit certain aspects of that employee’s role at Google but did strike down certain portions of the restrictive covenant as ‘unreasonable’ and took Amazon to task for taking a one-size-fits-all approach to its non-compete agreement. This latest lawsuit comes after Washington state enacted a new law last year that severely restricted the use of non-compete agreements within the state.”

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“In Lun v. Lun 2020 BCSC 871 the court considered whether the sale of the family insurance business, as ordered by the court, provided the court with jurisdiction to order the husband to sign a Non-Compete Agreement, as part of the sales contract, in circumstances where the husband resisted signing,” reports Georgialee Lang in Lawdiva’s Blog.

“The parties owned a business that sold commercial insurance products and motor vehicle insurance. The wife brought an application to court for the sale of the business, which was contested. The court granted the order sought, with joint conduct of sale to the parties.”

“A condition of the sale was that Mr. Lun sign a non-competition agreement that would prevent him from being involved in the insurance industry for a period of two years.”

“Mrs. Lun brought an application asking the court to order Mr. Lun to agree to the non-compete term in the contract. Mr. Lun opposed the application as he had been in the insurance industry for 20 years and wished to continue in the industry.”

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“In recent months, the Food and Drug Administration (FDA) has issued a record number of Emergency Use Authorizations (EUAs) under Section 564 of the Federal, Food, Drug, and Cosmetic Act (FDCA). With a large number also pending, this review pathway is becoming almost common for a wide range of products, predominantly devices, although drugs and biologics are also eligible,” reports Jeffrey K. Shapiro in Hyman, Phelps & McNamara’s FDA Law Blog.

“In this light, some questions of law and policy already settled regarding 510(k) submissions or premarket approval (PMA) applications may need to be re‑analyzed to determine if the answer is the same in the EUA context. With the COVID emergency likely to continue for some time, these questions will not soon disappear.”

“The question of whether a company may lawfully advertise a device with an EUA pending (prior to issuance of the EUA)? For more than 40 years, FDA’s policy has been that a device with a 510(k) pending may be advertised (promoted) prior to clearance.”

Read the article.