SEC Issues Final “Conflict Minerals” Rule
The SEC has issued its final rule to implement the “conflict minerals” disclosure requirements in Dodd-Frank. The SEC originally issued proposed rules with a comment period that was to have ended in January 2011. Final rules were required to be published by April of 2011. The SEC formally extended the public comment period by 30 days and then spent nearly 17 months receiving thousands of letters, meeting with many “interested persons,” and hosting an SEC Roundtable. Dodd Frank amended the SEC Exchange Act of 1934 by adding a requirement that the SEC publish disclosure rules concerning the use of certain minerals that originate in the Democratic Republic of the Congo. To learn more about the disclosures required by the rule, please click here to read the Bulletin published by the Corporate Finance and Securities Client Service Group on August 29, 2012.
The Contraceptive Mandate: What Do Religious Employers Do Now?
In a landmark 5-4 decision announced in June, the United States Supreme Court upheld the key provisions of the Patient Protection and Affordable Care Act (ACA). Perhaps most noteworthy for religious employers are the provisions requiring group health plans to provide preventive health services without charging a co-pay. In August, the Department of Health and Human Resources (HHS) adopted guidelines outlining the required preventive health care for women. That guidance requires coverage for all FDA-approved contraceptive services, including the “morning after” pill and the “week after” pill. Coverage of these services at no cost is required for plan years beginning on or after August 1, 2012. To learn more about the decision and exemptions for certain employers, please click here to read the Alert published by the Religious Organization Team on August 7, 2012.
What do video game, music, and free online telephone networks have in common? If your employees use them they can lead to a FTC data security investigation.
Although the days of Napster and Gnutella may be over, the technology upon which those applications were based — peer-to-peer networks or “P2P” — is alive and well in modern-day programs that share video games and music. As two recent Federal Trade Commission enforcement actions illustrate, companies that permit employees to use P2P applications — either knowingly or unknowingly — may face government investigations and possible liability. To learn more, please click here to read the Bulletin published by the Data Privacy & Security Team on June 19, 2012.
FTC Cracks down on the Collection of Social Media Data For Employment Decisions
A survey released this year indicates that in some industries almost 40% of employers reviewed job candidates’ profiles on social media sites before making employment decisions. Ordering a candidate’s social media history is, in many companies, becoming as routine as ordering a credit report or background check. Most employers do not realize, however, that the Federal Trade Commission has taken the position that social media reports share something else with credit reports — they are covered under the privacy protections of the Fair Credit Reporting Act. In June the FTC filed a lawsuit in the Central District of California against a company which marketed social media reports to employers to use as “a factor in deciding whether to interview a job candidate or whether to hire a job candidate after a job interview.” To read more, please click here to read the Bulletin published by the Data Privacy & Security Team on June 14, 2012.
Record Settlement in a Sanctions Case Reached by ING Bank, N.V.
On June 12, 2012, ING Bank, N.V. settled alleged violations of U.S. trade sanctions with the U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”) for a record $619 million penalty. ING Bank’s violations of OFAC sanctions involved more than $1.6 billion worth of funds that were unlawfully routed through the United States despite U.S. sanctions. To learn more about the allegations against ING Bank and the Settlement Agreement reached, please click here for the International Regulatory Bulletin No. 497 published June 13, 2012 by the International Trade Group.
9th Circuit Holds TILA Bars Rescission Suits Filed More Than 3 Years After Consummation
In McOmie-Gray v. Bank of America (9th Cir. Feb. 8, 2012), the Ninth Circuit Court of Appeals held that under the Truth in Lending Act (“TILA”), “rescission suits must be brought within three years from consummation of the loan, regardless whether notice of rescission is delivered within that three-year period.” It ruled that the three year period in the Act is an absolute limitation on rescission actions and that the one year period for bringing claims applies only to damages actions and does not extend the time to file a claim for rescission even where the borrower has sent the Bank a written notice of rescission within three years of loan signing or “consummation.” To learn more about the facts in this case and the Court’s decision, please click here to read the Alert published by the Commercial Litigation Client Service Group and the Financial Institutions Client Service Group on March 6, 2012.
How Long Should You Retain Data? Recent Developments May Add Confusion Not Clarity
Businesses have always collected information about their customers, but with the explosion of on-line commerce the quantity of information collected has ballooned. One question that necessarily arises for almost any business is deciding how long it will keep the data it collects. Businesses are aware that future developments in technology will improve the usefulness (and value) of the data that is currently in their possession. Retaining consumer data, however, raises a number of legal risks which are often difficult to quantify in light of the changing regulatory and litigation landscape. For a discussion of how recent developments add to the legal complexity, please click here to read the Bulletin published by the Data Privacy & Security Team on March 16, 2012.
Supreme Court Weakens EPA’s Enforcement Regine
The United States Supreme Court handed landowners a major victory against the United States Environmental Protection Agency (EPA) in its unanimous decision in Sackett v. EPA, No. 10-1062. The decision announced March 21, 2012, held that Clean Water Act compliance orders can be challenged in court under the Administrative Procedures, undercutting EPA’s historic practice of using compliance orders to, in the words of the Court, “strong-arm” parties into voluntary compliance. To learn about the case and the Court’s decision, please click here to read the Alert published by the Environmental Client Service Group on March 22, 2012.
FINRA Issues Guidance on Protection of Customer Accounts
A recent alert from the Financial Industry Regulatory Authority (“FINRA”) is encouraging broker-dealers to reexamine their policies and procedures relating to protection of customer assets and accounts. FINRA Regulatory Notice 12-05 advises broker-dealers that FINRA has received an increasing number of reports of customer funds being stolen as a result of instructions e-mailed to firms from customer e-mail accounts that have been compromised. With that notice, FINRA also issued an Investor Alert advising the public about the reported incidents. To learn more about the Notice and Alert, please click here to read the Alert published by the White Collar Defense & Investigations and Securities Litigation & Enforcement Client Service Groups and Data Privacy & Security Team on February 6, 2012.
Reporting Cybersecurity Risks — New Obligations for Publicly Traded Companies
Most companies are aware that they may be required to report data security breaches to consumers and, in some instances, state attorneys general, the FTC, or HHS. Publicly traded companies should bear in mind that they have to notify another group — their investors. The SEC last year offered first-of-its kind guidance on when companies should report cybersecurity incidents in their disclosure statements. To learn more about the new requirements, please click here to read the Alert published by the Data Privacy & Security Team on February 14, 2012.
DOL Issues Final Fee Disclosure Rule
Earlier this year, the Department of Labor issued a final rule on the disclosure requirements for a contract or arrangement for services to a covered plan to be deemed “reasonable” under Section 408(b)(2) of the Employee Retirement Income Security Act of 1973 (“ERISA”). These disclosure requirements become effective July 1, 2012 and apply to service contracts and arrangements entered into both before and after that date. To learn more about the disclosures required and what plans or contracts may be excluded from the rule, please Click here to read the Alert published by the Employee Benefits and Executive Compensation Client Service Group on February 7, 2012.
U.S. Supreme Court Upholds Arizona’s Employment Verification Law
On May 26, 2011, the U.S. Supreme Court upheld the Arizona law that sanctions employers for hiring unauthorized aliens and endorsed Arizona’s requirement that employers use the federal E-Verify screening program. A 5-3 majority of the Court found that language in the Immigration Reform and Control Act of 1986 did not pre-empt the Arizona Law. For the answers to frequently asked questions about the Arizona law, please click here to read the Client Alert published by the Labor & Employment Client Service Group on August 4, 2011.
Employers Should Consider Expressly Prohibiting FMLA Fraud
Many employers have updated their FMLA policies to reflect recent amendments to the law and revisions to the regulations. Another aspect of an FMLA policy that merits attention is ensuring that the policy expressly prohibits FMLA fraud and specifies the penalty for the offense. The United States Court of Appeals for the Ninth Circuit issued an unpublished opinion earlier this year that reinforces the need for express fraud prohibition. To learn more about the implications of the opinion, please click here to read the Client Alert published by the Labor & Employment Client Service Group on August 19, 2011.
SEC Proxy Access Rule Vacated by Federal Court
The U.S. Court of Appeals for the District of Columbia Circuit recently set aside and vacated Exchange Act Rule 14a-11 concerning shareholder proxy access, adopted by the SEC on August 25, 2010. On a petition for review, a panel held that the SEC had “failed adequately to consider the rule’s effect upon efficiency, competition and capital formation,” as the SEC was required to do under its enabling statutes. Thus, the Court held that adoption of the Rule was “arbitrary and capricious” and vacated the Rule. To read more about the decision, please click here to read the Alert published by the Corporate Finance and Securities Client Service Group published August 4, 2011.
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Updated Claim Procedure Requirements for Non-Grandfathered Health Plans
The Internal Revenue Service, Department of Health and Human Services and Department of Labor have revised the interim final regulations governing internal claims and appeals and external reviews for non-grandfathered group health plans under the 2010 health reform law. The have also revised the forms for adverse benefit determinations and updated the list of state consumer assistance programs. Many of the changes ease the burden of plan administration. To learn more, please click here to read the Alert published by the Employee Benefits & Executive Compensation Client Service Group on July 1, 2011.
IRS Issues Guidance on Health Plan Excise Tax Returns, Code Section 162(m)
On June 24, 2011, the IRS finalized rules on automatic extensions for Form 8928 Excise Tax Returns for employer-sponsored health plans and also released guidance on performance-based compensation plans of public companies. For highlights of the rules, please click here to read the Alert published by the Employee Benefit & Executive Compensation Client Service Group on July 7, 2011.
FTC Suit Signals Increased Scrutiny of Advertising Endorsements
In May, the FTC brought suit against a company that sold a promissory note business system based upon the allegation that the company used consumer testimonials that could not be substantively substantiated, and that the company did not adequately disclose the typical performance that consumers were likely to achieve. This marks the thirteenth case this year in which the Commission has alleged that a company has deceptively used testimonials and endorsements. To read more, please click here for the Bulletin published by the Consumer Protection Group on July 5, 2011.
EPA Issues The Cross-State Air Pollution Rule To Reduce Power Plant Emissions In the Eastern United States
In July the U.S. Environmental Protection Agency (EPA) issued the Cross-State Air Pollution Rule (Cross-State Rule), requiring power plants in 27 states to reduce their emissions of nitrogen oxides and power plants in 23 of these states to also reduce their emissions of sulfur dioxide. The purpose of the rulemaking is to ratchet down power plant emissions that contribute to elevated concentrations of ozone in downwind states. For a summary of the relevant provisions of the Clean Air Act and the new Cross-State Rule, please click here to see the Bulletin published by the Environmental Client Service Group on July 22, 2011.
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Department of Labor Extends Non-Enforcement Period for Certain Internal Claims and Appeals Requirements Applicable to Non-Grandfathered Plans Under the Affordable Care Act
On March 18, 2011, the Department of Labor issued Technical Release 2011-01 extending, with some modifications, the enforcement grace period established under DOL Technical Release 2010-02 until plan years beginning on or after January 1, 2012. To learn more the extension of the enforcement grace period, please click here to read the Employee Benefits and Executive Compensation Client Service Group’s Alert published March 21, 2011.
Reporting for Participants with Deferred Vested Benefits – IRS Replaces Schedule SSA
Plan administrators are required to report certain information regarding participants who separate from service with the right to a deferred vested retirement benefit. In Announcement 2011-21, the IRS designated Form 8955-SSA to be used to satisfy this reporting requirement, replacing Schedule SSA. To learn more about the filing requirements for the new form, please click here to read the Employee Benefits & Executive Compensation Client Service Group’s Alert published March 28, 2011.
Supreme Court Says Two Exemptions are Unavailable to Companies Trying to Protect Their Information from Disclosure under FOIA
Companies frequently find that information they submit to the Federal government is sought by others — perhaps competitors — under the Freedom of Information Act. The submitting company may be able to block the disclosure if the information falls within one of the exemptions in FOIA. On March 1 the Supreme Court made two of those exemptions unavailable to companies. To read more about the Court’s decision in FCC v. AT&T Inc. please click here to read the Government Contracts Team Alert published March 3, 2011
FTC Takes a Bite Out of Cookie-Based Behavioral Advertising
On March 14, 2011, the Federal Trade Commission announced a settlement with a behavioral advertising company that places cookies in consumers’ internet browsers to track online activities. This settlement marks one of the agency’s first enforcement actions against a behavioral advertising company and signals that the FTC has begun to act on its repeated warnings about scrutinizing behavioral advertising more closely. To learn more about the settlement, please click here to read the Consumer Protection Group’s Alert published March 17, 2011.
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SEC Issues Final “Say-on-Pay” and “Golden Parachute” Rules
On January 25, 2011, the Securities and Exchange Commission released its final “say-on-pay” and related golden parachute rules to implement the provisions of Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. For a summary of the rules, please click here to read the Bulletin published by the Corporate Finance and Securities Group on January 27, 2011.
SEC Issues Proposed Rules for “Conflict Minerals” Disclosure
The Securities and Exchange Commission has issued proposed rules to implement the “conflict minerals” disclosure requirements in Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Section 1502 amended the Securities Exchange Act of 1934 (the “Exchange Act”) by adding Section 13(p). Section 13(p) requires the SEC to promulgate disclosure rules concerning the use of certain minerals that originate in the Democratic Republic of the Congo or its adjoining countries (the “DRC countries”). For more information on the proposed rules, please click here to read the Client Alert published by the Corporate Finance and Securities Client Service Group on January 3, 2011.
When All Appropriate Inquiry Isn’t Enough: Court Highlights the Significance of Other Factors in the Bona Fide Prospective Purchaser Defense
Anyone who has been involved in a real estate transaction relating to commercial or industrial property has likely dealt with conducting “All Appropriate Inquiry” into the site, which generally includes the preparation of a Phase I Environmental Site Assessment and may include Phase II sampling work. All Appropriate Inquiry (“AAI”) is one necessary component of the “bona fide prospective purchaser” (“BFPP”) defense established under the 2002 Brownfields amendments to Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”). The BFPP defense is intended to protect property owners from liability for contamination that clearly occurred prior to their period of ownership. However, conducting AAI is not the only prerequisite to establishing a BFPP defense. The BFPP requirements beyond AAI are highlighted in Ashley II of Charleston, LLC v. PCS Nitrogen, et al., 2010 U.S. Dist. LEXIS 104772 (D.S.C. Sep. 30, 2010), one of the first cases to address in detail the BFPP defense. To learn more about this case, please click here to read the Client Alert published by the Environmental Client Service Group on January 3, 2011.
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Court Highlights the Significance of Other Factors in the Bona Fide Prospective Purchaser Defense
(Print Friendly version of this Alert)
Anyone who has been involved in a real estate transaction relating to commercial or industrial property has likely dealt with conducting “All Appropriate Inquiry” into the site, which generally includes the preparation of a Phase I Environmental Site Assessment and may include Phase II sampling work. All Appropriate Inquiry (“AAI”) is one necessary component of the “bona fide prospective purchaser” (“BFPP”) defense established under the 2002 Brownfields amendments to Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”). The BFPP defense is intended to protect property owners from liability for contamination that clearly occurred prior to their period of ownership. However, conducting AAI is not the only prerequisite to establishing a BFPP defense. The BFPP requirements beyond AAI are highlighted in Ashley II of Charleston, LLC v. PCS Nitrogen, et al., 2010 U.S. Dist. LEXIS 104772 (D.S.C. Sep. 30, 2010), one of the first cases to address in detail the BFPP defense.
In this case, Ashley purchased property that had a long history of industrial use. In conjunction with that purchase, Ashley’s environmental consultant performed Phase I and Phase II work. After the purchase, Ashley demolished many of the above-ground improvements on the property. When liability for contamination at the property was addressed, a significant battle between several potentially responsible parties arose. Ashley sought to take advantage of the BFPP defense to avoid liability. The elements of the BFPP defense are, in summary: (a) disposal of hazardous substance occurred prior to acquisition; (b) the purchaser conducted AAI; (c) the purchaser provided all required notices with respect to the discovery or release of any hazardous substance; (d) the purchaser exercises appropriate care with respect to hazardous substances found; (e) the purchaser cooperates with agencies; (f) the purchaser complies with institutional controls; (g) the purchaser complies with information requests or administrative subpoena; (h) the purchaser is not affiliated with a potentially responsible party. In the end, the court closely scrutinized each element of the test and determined that Ashley was not a BFPP.
All Appropriate Inquiry
Significantly, this is one of the first cases to address the proper conduct of AAI. The court found that although there were “inconsistencies” between the Phase I reports and the relevant ASTM standard, those inconsistencies lacked significance. The Court stated that “[w]hat is important is that Ashley acted reasonably; it hired an expert to conduct AAI and relied on that expert to perform its job properly.” Because the Court did not explain what the “inconsistencies” are, it is difficult to determine how strictly a Phase I must comply with ASTM. Interestingly, no federal agencies were involved in this case. EPA has stated that they will insist on very strict compliance with the ASTM standards in order to find that AAI was conducted. This case may (or may not) take some wind out of that sail. While strict compliance with the ASTM standards is still highly recommended, this case provides some potential relief for past transactions where the acquiring party is trying to mount a BFPP defense but the adequacy of its AAI is called into question due to the absence of strict compliance with the ASTM.
Appropriate Care
The court did find that Ashley failed to prove that it exercised appropriate care with respect to known contamination when it did its demolition work. In doing this work, Ashley did not clean out and fill in known underground sumps and concrete pads, which failure could have exacerbated known releases and contamination. Ashley also failed to prevent debris piles from accumulating, and failed to investigate and remove the debris piles on a timely basis. Ashley also failed to maintain run off controls.
IRS Has Announced its 2011 Cost-of-living Adjustments for Retirement Plans
On October 28 the IRS issued a press release announcing its 2011 cost-of-living adjustments for retirement plans. For a chart reflecting the qualified plan limits for years 2008-2011, please click here to see the Employee Benefits & Executive Compensation Group’s Client Alert published October 28, 2010.
SEC Issues Proposed “Say-on-Pay” and “Golden Parachute” Rules
The SEC has released its proposed “say-on-pay” and related golden parachute rules to implement the provisions of Dodd-Frank set forth in new Section 14A of the Securities Exchange Act of 1934. The comment period will close on November 18, 2010 and the SEC plans to issue final rules in early 2011. For a discussion of the proposed rules, please click here to read the Bulletin published by the Corporate Finance and Securities Group on October 20, 2010.
Employee Benefits Provisions of the Small Business Jobs Act of 2010
On September 27, 2010, the Small Business Jobs Act of 2010 was signed into law. While the Act mainly focuses on providing tax and other assistance to small businesses, it also includes provisions aimed at promoting retirement preparation that are not limited to small business. For a discussion of these provisions, please click here to read the Employee Benefits & Executive Compensation goup’s client alert Alert published October 4, 2010.
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