Friday, August 31, 2012

Ultrabook Benefits for Attorneys

The big story at the 2012 Consumer Electronics Show was "ultrabooks." This new category of computer stole the thunder, at least for a few days, from tablet computers. Should lawyers be considering ultrabooks in 2012? In this episode, Dennis Kennedy and Tom Mighell take a look at the new world of ultrabooks, whether tablet computers like the iPad are taking over the computer market, and what it all means for traditional notebook computers and desktop PCs.After you listen, be sure to check out Tom & Dennis’ co-blog and book by the same name, The Lawyers Guide to Collaboration Tools and Technologies.

Source: http://legaltalknetwork.com/podcasts/kennedy-mighell-report/2012/01/ultrabook-benefits-for-attorneys/

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The Equity Gap: A Special Report on Women in the Partnership

Are big firms committed to promoting women into the equity partnership? Our study of the largest U.S. firms shows that women represent just 15 percent of equity partners. At just five firms surveyed, women make up more than 25 percent of equity partners.

Source: http://www.law.com/jsp/nlj/PubArticleNLJ.jsp?id=1202563861081&rss=nlj

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Bridging the Gap in Copyright Protection of Symbols, Shapes and Letters

In this episode of the IP Issues podcast series, Thomas McNulty and Julia Mathis of Lando & Anastasi, LLP discuss copyright protection of symbols, geometric shapes, and letters. Learn more about Lando & Anastasi, LLP at http://www.lalaw.com.

Source: http://legaltalknetwork.com/podcasts/suffolk-law/2012/02/bridging-the-gap-in-copyright-protection-of-symbols-shapes-and-letters/

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Lollipop Chainsaw (PlayStation 3) (Albuquerque Journal)

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Source: http://news.feedzilla.com/en_us/stories/law/video/239246832?client_source=feed&format=rss

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Ukraine high court denies ex-PM Tymoshenko's appeal

[JURIST] Ukraine's highest court on Wednesday upheld the abuse of office conviction against former prime minister Yulia Tymoshenko [personal website, in Ukrainian; JURIST news archive]. The country's Supreme Court [official website, in Ukrainian] reasoned [WP report] that there would be no basis to rule in favor of Tymoshenko and that the prison sentence is appropriate considering the charges against her. The verdict faced heavy criticism from Tymoshenko's supporters who characterized Wednesday's ruling as politically motivated. The government denied the allegations...

Source: http://jurist.org/paperchase/2012/08/ukraine-high-court-denies-ex-pm-tymoshenkos-appeal.php

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Gone Clio with Paul "Woody" Scott

Listen as Clio co-founder Jack Newton talks with special guest, Attorney Paul "Woody" Scott, founder of The Scott Law Firm, based in Louisiana. Jack and Woody talk about Dropbox and its integration with Clio, disaster recovery and how digital and the cloud can save on overhead in your firm.

Source: http://legaltalknetwork.com/podcasts/gone-clio/2012/04/gone-clio-with-paul-woody-scott/

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Thursday, August 30, 2012

SJC Ruling on Foreclosures

Kathleen C. Engel, law professor and Associate Dean for Intellectual Life at Suffolk Law School, discusses the Massachusetts foreclosure crisis and actions being taken against four major banks. Learn more about Dean Engel at http://bit.ly/hBaALX.

Source: http://legaltalknetwork.com/podcasts/suffolk-law/2012/03/sjc-ruling-on-foreclosures/

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The Best Resources for Staying Current in E-Discovery

How do you keep up with all that is going on in the world of e-discovery? On Digital Detectives, co-hosts Sharon D. Nelson, Esq., President of Sensei Enterprises, Inc. and John W. Simek, Vice President of Sensei Enterprises, welcome guest, Neil Squillante, publisher of LitigationWorld, who discusses his selection of resources for staying current in e-discovery. Neil tells us how to keep up with e-discovery developments, lists his favorite blogs and podcasts, and explains how you can benefit from the Sedona Conference and webinars.

Source: http://legaltalknetwork.com/podcasts/digital-detectives/2012/02/the-best-resources-for-staying-current-in-e-discovery/

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An Empirical Study of Predispute Mandatory Arbitration Clauses in Social Media Terms of Service Agreements

Michael Rustad, Thomas F. Lambert Jr. Professor of Law & Co-Director Intellectual Property Law Concentration at Suffolk Law, discusses his study on the use of mandatory arbitration clauses in social media. Read the article at: http://bit.ly/Kn6kKc.

Source: http://legaltalknetwork.com/podcasts/suffolk-law/2012/06/an-empirical-study-of-predispute-mandatory-arbitration-clauses-in-social-media-terms-of-service-agreements/

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Accelerate Your Use of Metrics

Corporate law departments want to improve their use of data and reporting to make smarter, more strategic business decisions - the question is, "how?" In this edition of Tech Experts, join Rashad Porter, Director of Business Intelligence Strategy & Solutions at Datacert, for a discussion of the Legal Business Intelligence Maturity Model. Rashad uses this tool to help you realistically evaluate where your department’s reporting stands now and outline actionable steps you can take towards becoming more strategic in your use of metrics to manage.

Source: http://legaltalknetwork.com/podcasts/tech-experts/2012/08/accelerate-your-use-of-metrics/

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Don't Ignore Governmental Mechanisms for Protecting Intellectual Property Rights

In this Intellectual Property webcast, Lee Eulgen, a partner at Neal, Gerber & Eisenberg LLP, discusses his recent article, "Don't Ignore Governmental Mechanisms for Protecting Intellectual Property Rights." Read the article at http://bit.ly/xCRaaY.

Source: http://legaltalknetwork.com/podcasts/suffolk-law/2012/03/dont-ignore-governmental-mechanisms-for-protecting-intellectual-property-rights/

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Legal Talk Network Live at LegalTechNY 2012- True Grit: E-Discovery in Big Law Firms

Monica Bay, Editor-in-chief of Law Technology News, discusses this month’s cover story, True Grit. The story dives into the intricacies of how big law firms treat E-discovery, and the surprising gray area surrounding it. Be sure to watch the interview , hosted by Legal Talk Network producer, Kate Kenney.

Source: http://legaltalknetwork.com/podcasts/law-technology-now/2012/02/legal-talk-network-live-at-legaltechny-2012-true-grit-e-discovery-in-big-law-firms/

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Wednesday, August 29, 2012

Beard-Cutting Case Tests Limits of Hate Crime Law

Sixteen members of an Ohio Amish sect are set to go on trial in federal court Monday, in Cleveland. The defendants are accused of violating U.S. hate crime laws by cutting the hair and beards of detractors. One of the accused says the police are interfering with the private affairs of his church.

Source: http://www.npr.org/2012/08/27/159985226/beard-cutting-case-tests-limits-of-hate-crime-law?ft=1&f=1070

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E-discovery Preservation: Reset to Neutral

The landmark Zubulake e-discovery decisions were the first of many to transform a narrow duty not to spoliate into a much broader duty to affirmatively preserve all possibly relevant evidence when there exists a "reasonable anticipation of litigation." But have these judicial opinions gone too far? In the December edition of Law Technology Now, Robert Owen, a partner at Sutherland Asbill & Brennan, says it’s time to shift gears and restore the balance. He talks with Monica Bay, editor-in-chief of Law Technology News, about his five proposed rules that he says will prevent substantial injustices, yet be comprehensive and comprehensible.

Source: http://legaltalknetwork.com/podcasts/law-technology-now/2011/12/e-discovery-preservation-reset-to-neutral/

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The AM Roundup: Plaintiffs Line up to Take Shots at Libor Banks, More

The Law Blog rounds up the morning's legal news.

Source: http://blogs.wsj.com/law/2012/08/27/the-am-roundup-plaintiffs-line-up-to-take-shots-at-libor-banks-more/?mod=WSJBlog

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Best Law Schools for Bargain Hunters

We're all familiar with the U.S. News & World Report law school rankings. But what if you're a value hunter? Turns out there's a list for that too.

Source: http://blogs.wsj.com/law/2012/08/28/best-law-schools-for-bargain-hunters/?mod=WSJBlog

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From the Courtroom to the Comedy Club

Lawyers are very often the brunt of jokes, but there is a group of attorneys that has turned the tables and is making people laugh with them instead of at them. Lawyer2Lawyer co-hosts and attorneys, Bob Ambrogi and Craig Williams, share the stage with two of the Comedians At Law. Alex Barnett and Matt Ritter explain how they transitioned from lawyers to comics and how they now make people laugh at the lighter side of the law.

Source: http://legaltalknetwork.com/podcasts/lawyer-2-lawyer/2012/08/from-the-courtroom-to-the-comedy-club/

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Transgender Family Law in the Courts

Advocates for the transgender community say this segment of the population faces an extremely difficult time in court because of bias and misunderstanding, especially in cases of parental rights and protection for transgender youth. Lawyer2Lawyer co-host and attorney, Bob Ambrogi breaks down the difficulties the transgender community faces every day with Attorney Jennifer L. Levi, the director of GLAD's Transgender Rights Project and Attorney Elizabeth E. Monnin-Browder from Ropes & Gray and a former GLAD attorney. Jennifer and Liz also discuss their new book, Transgender Family Law: A Guide to Effective Advocacy.

Source: http://legaltalknetwork.com/podcasts/lawyer-2-lawyer/2012/05/transgender-family-law-in-the-courts/

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Tuesday, August 28, 2012

$1,600? How Many Big Gulps Is That?

man%20in%207%20eleven.image.jpg

Has 7-Eleven gone upscale lately? If not, then what on earth did this man buy? As reported by The Burlington County Times (Pennsylvania):

Police are searching for a man who bought more than $1,600 worth of items from 7-Eleven with stolen credit cards.
The man went to the convenience store on Route 73 shortly after 5 a.m. Friday and used the cards to buy $1,633 worth of merchandise, police said Tuesday.
The man’s image was captured by video surveillance equipment at the store. At the time, he was wearing a red Nike baseball cap, white T-shirt, blue jeans, and red and white sneakers. (See above.)
Here's the source.

Source: http://rss.justia.com/~r/LegalJuiceCom/~3/AlJ4tHEaEso/post_479.html

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Revisiting Citizens United in an Election Year

Since 2010, there has been great debate over the controversial ruling, Citizens United. Most recently, the Montana Supreme Court challenged the decision while Senator McCain called it "one of the worst decisions I have ever seen." Lawyer2Lawyer co-hosts and attorneys, J. Craig Williams and Robert Ambrogi welcome, Attorney Joseph M. Birkenstock, former chief counsel of the Democratic National Committee and Bradley A. Smith, Chairman and Co-Founder of the Center for Competitive Politics and former Commissioner on the Federal Election Commission, for an in-depth discussion on the impact of the ruling during an election year and its influence on the upcoming Presidential election.

Source: http://legaltalknetwork.com/podcasts/lawyer-2-lawyer/2012/01/revisiting-citizens-united-in-an-election-year/

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IRS Confirms Charitable Contribution Deduction for Gifts Made to Single-Member LLCs

The IRS recently announced that a contribution to a domestic LLC that is wholly owned and controlled by an IRC § 501(c)(3) charitable organization will be treated as if the contribution were made directly to the charitable organization, provided that the LLC has not elected to be taxed as a corporation. Although the IRS had previously provided guidance to public charities and private foundations as to the tax treatment of operating through such single-member LLCs, the July 31, 2012 release of Notice 2012-52 was the first guidance given to individual and corporate contributors as to the deductibility of their contributions. Left unaddressed, however, is the tax treatment of a contribution to a single-member, “disregarded entity” LLC organized in a foreign jurisdiction.

To see the announcement, click here: Notice 2012-52

Source:
http://www.corporatesecuritieslawblog.com/tax-irs-confirms-charitable-contribution-deduction-for-gifts-made-to-singlemember-llcs.html

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The Legal Battle Against Drunk Driving

The fight against drunk driving has been going on for more than a century. On this week’s Lawyer2Lawyer, host Bob Ambrogi welcomes Atlanta DUI Defense Attorney, George Stein and the author of One for the Road: Drunk Driving since 1900, Dr. Barron Lerner of Columbia University Mailman School of Public Health, for an in-depth discussion on the history, laws, initiatives, and successes and failures surrounding drunk driving.

Source: http://legaltalknetwork.com/podcasts/lawyer-2-lawyer/2011/12/the-legal-battle-against-drunk-driving/

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Monday, August 27, 2012

Man Busted Using "Find My iPad" Asserts Lame Defense

oops.jpg

There comes a time in every thief's life ... Okay, so a lot of thieves won't just come clean. But seriously dude - cut a deal. Next time you'll turn the iPad off, or at least its location services. As reported by The Canberra Times (Australia):

A court has been asked to decide whether a man trying to find his allegedly stolen iPad was acting unlawfully when he tracked it down to a north Canberra townhouse using Apple's anti-theft app and a GPS.
Police, acting on the man's information, allegedly discovered the iPad and a cache of stolen items at the Forde house where 49-year-old Alden Harder lived.
Don't draw any comparisons to "the decider," but The Juice would not even take this under advisement. What's the "lame defense" referenced in the post's title?
Mr Harder's lawyer has argued the man physically trespassed on his client's property while searching for the iPad and had also committed ''trespass via radio wave'' when he activated an alarm on the device while it was inside Mr Harder's house.
Mr Harder has not been charged with any offence.
Yet.
On Monday, police applied to the ACT Magistrates Court for a forensic procedures order, asking for the man to submit to fingerprinting.
Mr Harder is fighting the order.
Police allege the iPad was stolen from a house that was under construction in Braddon on May 24 but the theft wasn't reported until three days later.
They say the owner used Apple's in-built Find My iPad service and his GPS to track down the iPad to Mr Harder's townhouse in Forde on May 25. He walked around the property and looked in a window.
Find My iPad allows users to remotely track their missing or stolen iPad via GPS and to send messages, trigger an alarm or wipe their device.
It should be noted that THIS DOES NOT WORK IF THE LOCATION SERVICES ARE DISABLED OR THE DEVICE IS OFF.
The man went to police with the information but was apparently unable to elicit action.
The court heard the man went back to the townhouse a second time on May 29 and used the app to remotely trigger the alarm on the iPad, which he then heard ringing inside the garage.
Police then obtained a search warrant for Mr Harder's house.
They allegedly discovered the iPad and a haul of other items, including laptops and a police officer's badge, which were said to have been stolen from as far back as 2009.
Jackpot!
The court heard police wanted to take Mr Harder's fingerprints to see if they matched prints taken from the scene of the iPad theft and another burglary.
But Mr Harder's lawyer Paul Edmonds argued the search was based on evidence which was obtained unlawfully because the man trespassed on his client's property while walking round the townhouse.
Blah, blah, blah. The Juice is with the prosecutor on this one.
But prosecutor Keegan Lee dismissed that argument as ''an absurd expansion of the definition of a trespass''.
Mr Lee said if electronic transmission were a trespass then ''I would safely say nearly everybody in this courtroom has committed that act by having a wireless router'' that transmitted Wi-Fi internet through their homes and into their neighbours' property.
Boom! Here's the source.

Source: http://rss.justia.com/~r/LegalJuiceCom/~3/8P5xlfmfs6k/a_court_has_been_asked.html

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Structured Settlements and NSSTA’s 2012 Mission

NSSTA stands for National Structured Settlements Trade Association - the largest gathering of top professionals in the country taking the a lead in the structured settlement industry. On Ringler Radio, host Larry Cohen welcomes Eric Vaughn, Executive Director of National Structured Settlements Trade Association, to discuss what’s ahead for NSSTA 2012. Eric addresses everything from NSSTA’s Annual Meeting to its Take the Hill initiative with Congress, and the steps individuals of retirement age should take to ensure a better financial future.

Click the link to see a video snippet of the podcast.

Source: http://legaltalknetwork.com/podcasts/ringler-radio/2012/03/structured-settlements-and-nsstas-2012-mission/

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Sunday, August 26, 2012

Act Two: Legal Tech Pioneers Return to Compete in Legal Tech Market

On Law Technology Now, host and Law Technology News magazine editor-in-chief, Monica Bay joins William Bice, co-founder and chair of LiquidPractice, and Graham Smith, founder and CEO of Opus 2 International, to talk about Law Technology News’ April cover story, "Act Two." Bice and Smith explain why they decided to return to the legal technology community after selling ProLaw and LiveNote to an industry giant.

Source: http://legaltalknetwork.com/podcasts/law-technology-now/2012/03/act-two-legal-tech-pioneers-return-to-compete-in-legal-tech-market/

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THE 2012 SURVEY OF LAW FIRM ECONOMICS

Law firms, particularly midsize and smaller players, continued to face a challenging revenue picture during the last year, our latest survey of firm finances shows. But they appear to have done a better job of managing expenses to keep profitability and partner compensation high.

Source: http://www.law.com/jsp/nlj/PubArticleNLJ.jsp?id=1202512531345&rss=nlj

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Saturday, August 25, 2012

Lollipop Chainsaw (Xbox 360) (Albuquerque Journal)

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Source: http://news.feedzilla.com/en_us/stories/law/video/240149096?client_source=feed&format=rss

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Pardon the Legal Technology Interruption 2011

What kind of year was 2011 for legal tech? What were the big developments and trends that you need to know? In this episode, Dennis Kennedy and Tom Mighell pay tribute to ESPN's "Pardon the Interruption" and adopt its format for a fast-paced and fun discussion of what transpired in legal technology in 2011. After you listen, be sure to check out Tom & Dennis’ co-blog and book by the same name, The Lawyers Guide to Collaboration Tools and Technologies.

Source: http://legaltalknetwork.com/podcasts/kennedy-mighell-report/2012/01/pardon-the-legal-technology-interruption-2011/

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Friday, August 24, 2012

Jury To Decide Apple's Patent Case Against Samsung

In one of the biggest patent infringement cases ever, Apple is suing Samsung for as much as $2.75 billion — charging that in creating its products, Samsung ripped off iPhone and iPad technology. Samsung countered with its own allegations.

Source: http://www.npr.org/2012/08/22/159679099/jury-to-decide-apple-s-patent-case-against-samsung?ft=1&f=1070

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President Obama Signs JOBS Act: Landmark Reform for Small and Emerging Growth Companies Now Law

On April 5, 2012, President Obama signed the Jumpstart Our Business Startups (JOBS) Act, enacting it into law. The JOBS Act is intended to make it easier for smaller and earlier stage companies to raise capital and also to revitalize the U.S. market for initial public offerings, which has been in decline since the beginning of the last decade.

The provisions of the JOBS Act represent a watershed change to the laws and regulations governing capital raising for private companies. Some of the provisions – such as the “IPO on-ramp” provisions and the increase in the number of holders triggering mandatory registration and public reporting under the Securities Exchange Act of 1934, are effective immediately. Others, including the new crowdfunding exemption, the removal of the ban on general solicitation for offerings under Rule 506 to accredited investors and Rule 144A to QIBs, and the new exemption modeled on Regulation A, will require SEC rulemaking before they come into force.

We have previously blogged about the original House version of the Act and the changes the Senate adopted, which changes were enacted into law. This article discusses the full Act as enacted.

Background

The U.S. House of Representatives passed the Act (H.R. 3606) on March 8, 2012 by a vote of 390-23. Despite opposition from SEC Chairman Mary Schapiro and many organizations, the Senate bypassed its normal committee process and passed the JOBS Act, with a substantially revised section on crowdfunding, on March 22, 2012. The Senate vote was 73-26. On March 26, 2012, the House passed the Senate version of the bill by a vote of 380-41. As noted above, President Obama signed the Act into law on April 5, 2012.

Overview

The JOBS Act is organized in Titles. The major titles are summarized below

Title I – IPO on-ramp provisions

  • New category of issuer: emerging growth company (EGC)
  • Allows EGCs to file registration statement confidentially and “test the waters” with large institutional investors
  • Eliminates most restrictions on research publications
  • Reduces financial reporting and executive compensation disclosure obligations for EGCs 

Implemenation: Effective immediately

Title II – Relief from ban on general solicitation

  • Removal of ban on general solicitation for Rule 506 offerings provided all purchasers are accredited
  • Removal of ban on general solicitation for Rule 144A offerings provided all purchasers are reasonably believed to be QIBs

Implementation: Exemption from broker-dealer registration for operation of a general solicitation portal (subject to conditions) SEC directed to revise Regulation D rules within 90 days; broker-dealer registration provisions effective immediately.

Title III – Crowdfunding

  • Crowdfunding exemption through funding portals for offerings up to $1 million  

Implementation: SEC directed to issue rules within 270 days.

Title IV – New “mini-public offering exemption

  • New exemption for private offerings up to $50 million, modeled on Regulation A

Implementation: SEC directed to issue rules to create exemption. No deadline set.

Titles V and VI - Relaxation of mandatory Exchange Act registration standard for record holders

  • Increases number of record holders triggering mandatory registration to 2,000, no more than 500 of which may be unaccredited
  • Excludes holders of employee benefit plan securities
  • Increases thresholds for bank holding companies

Implementation: Effective immediately.

What are the IPO on-ramp provisions?

The JOBS Act creates a new category of issuer — an emerging growth company, or EGC. An EGC is a company that has had its first registered sale of securities within its five prior fiscal years and has total annual gross revenues of less than $1 billion (subject to inflationary adjustment by the SEC every five years) and less than $700 million in publicly traded shares. Issuers that had their first registered sale of securities on or before December 8, 2011 are not eligible to be an EGC.

The JOBS Act provides the following relief from disclosure, compliance and governance obligations for EGCs:

  • Registration statements can be submitted confidentially to the SEC and need not be publicly available until 21 days prior to the first road show. The SEC has indicated it will shortly publish guidelines for confidential submission. Note that if an offering is going to proceed to a road show, the initial confidential filings will still become public, which will allow public comparisons between the initial filed documents and later filed documents.
  • Publication of research about an EGC by a broker-dealer is not considered an offer of securities, even if the broker-dealer is participating in the IPO. Broker-dealers have been restricted from publishing research reports during a “quiet period” following an IPO, and that quiet period will no longer apply to EGCs.
  • SEC and stock exchange rules limiting communications by analysts with companies and potential IPO investors must be repealed.
  • “Testing the waters” communications between companies and qualified institutional buyers (QIBs) are permitted at any time during the IPO process.
  • The IPO registration statement need only include audited financial statements (and corresponding management discussion and analysis) for the two prior fiscal years rather than the three prior fiscal years required for companies other than smaller reporting companies, and subsequent reports under the Exchange Act need not include years earlier than those required in the IPO registration statement.
  • Exchange Act reports and registration statements after the IPO registration statement will require summary financial information only for the periods starting with the earliest year of audited financial statements presented in the IPO registration statement[1]. Until now, such information has been required for the five prior fiscal years.
  • Say-on-pay and say-on-golden-parachute votes are not required during the period that the company qualifies as an EGC. Smaller reporting companies are currently exempt from these votes until 2013.
  • EGCs may use the scaled executive compensation disclosures currently permitted for smaller reporting companies. They may therefore include compensation information for fewer executive officers, omit the Compensation Discussion & Analysis (CD&A) and omit some of the compensation tables, including the burdensome table of Golden Parachute Compensation.
  • Compliance with the auditor attestation requirement of Section 404(b) of the Sarbanes-Oxley Act is not required for the period that a company remains an EGC. This extends the relief from attestation from the current two years post-IPO to up to five years. EGCs are still required to maintain adequate internal control over financial reporting and to report the assessment of their principal executive officer and principal financial officer as to the effectiveness of such internal control.
  • EGCs may pick and choose (opt-in) amongst the scaled disclosure provisions.
  • Compliance with new accounting standards is not required until such standards apply to companies that are not subject to Exchange Act reporting.
  • The SEC is ordered to conduct a study of the effect of decimal quoting of securities on IPOs and liquidity for smaller companies and report to Congress within 90 days.
  • The SEC is ordered to conduct a review of Regulation S-K to “determine how such requirements can be updated to modernize and simplify the registration process and reduce the costs and other burdens associated with these requirements for issuers who are emerging growth companies,” and then report its findings to Congress 180 days after enactment.

What will the IPO on-ramp provisions mean to companies considering going public and the market new offerings?

The IPO market is characterized not only by legal requirements but also market realities and long-standing customs. Markets can change rapidly and unpredictably. Customs are typically slow to change in response to relaxation of legal requirements. It is not clear at this point what effect the relaxation of these rules will have an companies proposing to go public via a traditional IPO. Some of the uncertainties include:

  • Will confidential filing increase the willingness of companies to file for an IPO in more uncertain market conditions?
  • Will confidential filing affect the timing for clearance of SEC comments?
  • Will companies eschew confidential filings because of the loss of public exposure that can lead to acquisition offers (the "dual track")?
  • Will broker-dealers involved in an IPO be comfortable publishing research close in time to an IPO? Will investors consider those reports to be credible?
  • How will the test the waters provisions interface with the confidential filing provisions?
  • What controls will issuers and underwriters develop to protect themselves from liability that might be associated with test the waters communications?
  • Will the market be comfortable with only two years of audited financial statements and no unaudited financial data for prior years?
  • Will the market be comfortable with the scaled executive compensation disclosures?
  • Will the relaxation of these rules meaningfully reduce the costs and risks of going public?
  • Will the elimination of the “ethical wall” between investment bankers and analysts, and possible future changes to decimalization quotation of securities, encourage boutique investment banks to re-enter the IPO business?
  • Will the market accept public offerings from smaller and/or earlier stage issuers, which tend to have a higher risk profile?

What is the elimination of the prohibition on general solicitation?

Currently, a company wishing to raise capital through the exemption from registration provided in Rule 506 of Regulation D cannot offer its securities by any form of general solicitation or advertising. The prohibition on general solicitation requires investors to be recruited based on pre-existing relationships with the issuer or an agent of the issuer that creates a reasonable basis to believe that a person would be interested in an investment of the type offered. This rule has represented the fundamental divide between registered public offerings, such as IPOs, and exempt offerings, commonly known as private placements.

The JOBS Act requires the SEC, within 90 days of enactment, to remove the prohibition on general solicitation in Rule 506 private placements provided that all the investors are accredited. The JOBS Act directs the SEC to adopt regulations to require the issuer to take reasonable steps to verify that the purchasers in Rule 506 private placements are accredited. The reform applies only to offerings under Rule 506 and does not directly affect offerings under other exemptions afforded by Regulation D or Section 4(2) of the Securities Act of 1933.

Rule 506 offerings are exempt from state blue sky qualification requirements under the National Securities Markets Improvement Act of 1996 (NSMIA), so the general solicitation that is permitted by the JOBS Act cannot be restricted by states.

In addition, the JOBS Act directs the SEC, within 90 days of enactment, to amend Rule 144A to permit general solicitations of securities sold under Rule 144A that reach investors who are reasonably believed to be QIBs.

What types of exchanges are non-broker-dealers permitted to operate for the sale of Rule 506 securities?

The JOBS Act creates an exception to broker-dealer registration rules, effective immediately, for operating a platform or mechanism to offer, sell and purchase securities sold under Rule 506 and for providing certain ancillary services associated with such securities. The permitted ancillary services are due diligence services and providing standardized transaction documents. The exception applies to online and other types of exchanges.

This exception applies only if the operator and associated persons receive no compensation in connection with the purchase or sale of securities, do not take possession of customer funds and have not been subject to a “bad boy” disqualification from a self-regulatory organization such as FINRA.

What will the elimination of the prohibition on general solicitation and requirements for broker-dealer registration for Rule 506 portals mean?

As noted above, the prohibition on general solicitation has been the fundamental divide between public and private offerings. There will remain important differences between public offerings and private placements, but the line of contrast will be significantly blurrier.

Public offerings generally have significantly greater investor protection mechanisms, including SEC review, involvement of at least one (and usually many) underwriter intermediaries, due diligence performed by both the issuer’s and the underwriters’ legal counsel, audited financial statements, and strict liability under the securities laws for issuers, and, subject to a due diligence defense, for underwriters and directors.

These investor protection mechanisms are in part responsible for the high costs of IPOs – a problem the JOBS Act has tried to address. The JOBS Act will therefore allow companies that have raised money under Rule 506 (i.e., most funded emerging growth companies) to greatly expand the audience of potential investors. That may make it easier for such companies to raise capital, particularly those whose business is interesting to the public at large. That may also make it more practical for emerging growth companies to accept smaller investments from accredited investors, which may incentivize more people to invest. However, it remains to be seen whether accredited investors recruited via general solicitation will be willing to invest, on the whole, substantial sums in riskier companies that are, for the most part, issuing illiquid securities[2]. If investors have an appetite for these securities, early stage companies will benefit greatly from this provision of the JOBS Act.

The JOBS Act requires the SEC rules to address verification of the accredited status of investors who are generally solicited. It is not clear how burdensome those rules will be or what will be the consequences if issuers fail to observe all of the requirements or if investors lie about their status and the lie is not detected. We note that the JOBS Act language relating to Regulation D, Rule 506 requires investors "are accredited," whereas the corresponding language for general solicitation of Rule 144A offerings requires only that the issuer "reasonably believe" that the investors are QIBs. The rules the SEC adopts here may become important to the practical utility of general solicitation in Regulation D offerings.

Sophisticated angel investors and venture capital funds usually negotiate for certain control rights in connection with their investments. It is unclear what types of investor control mechanisms might occur in private placements solicited generally or what effect those might have on issuers or investors.

There are a number of potential downsides to the elimination of the prohibition on general solicitation and the opening of portals to firms that are not broker-dealers.

All other things equal, companies that have been through a “capital markets scrub” (i.e., the due diligence performed by multiple intermediaries in the IPO process) are less risky than ones that have not. Moreover, the manner of soliciting public offerings is significantly restricted in the securities laws, whereas the means of general solicitation for Rule 506 offerings under the JOBS Act are unrestricted. Absent SEC rules that restrict the manner of general solicitation (which the SEC might not be able to adopt or enforce) or further lawmaking, telemarketing, infomercials and other practices historically associated with extreme investor risk and fraud. Communities of persons who are more likely to be accredited but not necessarily sophisticated investors, like retirees, would seem particularly vulnerable.

FINRA has recently been enforcing rules it believes require broker-dealers to conduct extensive due diligence in private placement transactions. These FINRA positions may help eliminate some of the abuses many fear from the JOBS Act to the extent broker-dealers are involved in private transactions. However, Title II of the JOBS Act expressly allows portals for the general solicitation of Rule 506 offerings to be operated by firms that are not registered broker-dealers. The JOBS Act imposes no due diligence requirements on these firms (compare to the requirements for funding portals for crowdfunding offerings, discussed below).

It is not clear that the change to Regulation D, Rule 506 required by the JOBS Act will change many SEC rules and interpretations that might limit general solicitations. These include rules and interpretations intended to ensure that offerings started as private finish as private and offerings started as public finish as public.

All of this means that on one hand, some and possibly many emerging growth companies will find it easier to raise capital from accredited investors, while on the other hand the public will likely receive many more and varied solicitations for investment opportunities that are riskier and more susceptible to fraud than has been the case for many decades.

What is crowdfunding, and what activities does the JOBS Act permit?

Crowdfunding is a form of capital raising where groups of people pool money and other resources to achieve a goal, including to fund a small business. As a result of the prohibition on general solicitation and the prior requirement for companies to register under the Exchange Act if they have over 500 holders of a class of equity securities and over $10 million of assets, crowdfunding in the U.S. through websites and social networks has generally been limited to activities where the investor does not receive securities in exchange for its final contribution.

The JOBS Act establishes the new crowdfunding exemption, which is designated as Section 4(6) of the Securities Act, with the following parameters:

  • The aggregate proceeds from all investments in the issuer, including amounts sold under the crowdfunding exemption during the preceding 12 months, must be less than $1,000,000.
  • The aggregate amount invested by any investor in all issuers pursuant to the crowdfunding exemption must not exceed a limit determined on a sliding scale based on net worth or annual income. The limit is 5% of net worth or annual income that is less than $100,000 (or $2,000, if greater than the 5% calculation), and 10% of net worth or annual income that is $100,000 or more. No investor may invest more than $100,000 in an issuer pursuant to the crowdfunding exemption. Income and net worth are to be calculated in the same fashion as the tests for accredited investors. Accordingly, equity in a principal residence is excluded from net worth.
  • The transaction must be conducted through an intermediary that is either a registered broker-dealer or “funding portal.”
  • Funding portals are not required to register as broker-dealers, but are subject to SEC registration and must be members of a national securities association, such as FINRA.
  • The intermediary must provide disclosures, including disclosures related to risks and other investor education materials (as determined by SEC rules).
  • The intermediary must ensure that investors review investor-education information (as determined by SEC rules).
  • The intermediary must ensure that investors answer questions demonstrating that they understand the risks of investing in startups, including the risk of loss of the entire investment, and that each investor can afford such loss.
  • The intermediary must provide the disclosures to the SEC and to investors at least 21 days prior to accepting any investments.
  • The intermediary must take fraud-prevention measures to be determined by SEC rules, including background checks of officers, directors and 20% holders.
  • The intermediary must ensure that proceeds are not released to issuers until a set target amount is reached and must allow investors to withdraw their commitment in accordance with SEC rules.
  • The intermediary must take steps to be determined by SEC rules to ensure that each investor has not exceeded its crowdfunding limit in a 12-month period, which as noted above applies to all investments in all issuers under the crowdfunding exemption.
  • The intermediary must take steps to ensure the privacy of information collected from investors in accordance with SEC rules.
  • Intermediaries cannot pay finders fees.
  • Directors, officers and partners of the intermediary may not have a financial interest in the issuer.
  • The issuer must make the following mandatory disclosures to the SEC, the intermediary and investors:
    • identifying information about the issuer, including its website
    • the names of officers, directors and 20% shareholders
    • a description of the business and the anticipated business plan
    • a description of the financial condition of the issuer, with scaled requirements depending on the target amount of the offering.
      • For offerings of $100,000 or less, the income tax return for the last completed year and financial statements certified by the principal executive officer to be true and correct
      • For offerings of $100,000 to $499,999, financial statements reviewed by an independent public accountant
      • For offerings over $500,000, financial statements audited by an independent public accountant
    • the intended use of proceeds
    • the target offering amount, the deadline to meet the target offering amount, and regular updates regarding the progress of the issuer toward the target
    • the price or the method of determining the price, and if the price is not fixed, a reasonable opportunity for the investor to rescind its commitment once the price is determined
    • detailed information about the capital structure of the issuer, the securities being offered and the risks associated with those securities
    • how the securities being offered are being valued, and how they might be valued in the future in connection with a corporate transaction
  • The issuer may not advertise the terms of the offering except for notices which direct investors to the intermediary.
  • The issuer may not compensate finders except in accordance with SEC rules that will ensure the recipient clearly discloses such compensation.
  • The issuer must file annual reports of results of operations and financial statements with the SEC and provide to investors, in accordance with SEC rules.
  • No resales are permitted for one year except to the issuer, an accredited investor, a member of the investor’s family or pursuant to a registered offering.
  • The exemption is available only for U.S. issuers that are not investment companies and are not subject to periodic reporting under the Exchange Act.
  • The issuer and its directors, partners, principal executive officer, principal financial officers and controller/principal accounting officer will be liable to investors for any material omissions or misstatements unless they can sustain the burden of proof that they did not know, and in the exercise of reasonable care, could not have known, of such untruth or omission.

It appears that securities sold under the crowdfunding exemption will be “restricted securities” and will therefore subject to Rule 144 restrictions for public resales. It appears that the one-year restriction on resale described above applies to private as well as public resales.

Investors who purchase securities in transactions under the crowdfunding exemption do not count against the holders of record test that triggers reporting obligations for companies under Section 12(g) of the Exchange Act. Moreover, offerings under the crowdfunding exemption pre-empt state blue-sky qualification laws (though the SEC must make information available to the states to facilitate state enforcement of anti-fraud laws). States may require notice filings, but only a state in which purchasers of an aggregate of 50% or more of the securities being offered reside may charge a fee in connection with such notice. States also may not regulate funding portals except for enforcement of anti-fraud laws.

Within 270 days after the enactment of the JOBS Act, the SEC is required to adopt rules for the crowdfunding exemption, including rules disqualifying “bad boys” from using the exemption.

Will crowdfunding be a viable means for emerging growth companies to raise capital?

The crowdfunding exemption ultimately passed into law is more restrictive in many ways than existing Rule 504 under Regulation D. Rule 504 permits an issuer to raise up to $1 million during a 12-month period with no mandatory disclosures, no investor qualifications and no limits on individual investments. Rule 504 also has no limits on general solicitation and does not restrict resales so long as the offer is qualified in at least one state. Offerings under Rule 504 are not pre-empted from state regulation.

The crowdfunding exemption in the JOBS Act appears more restrictive than Rule 504 in every respect except:

  • the $1,000,000 limit in the crowdfunding exemption may not be subject to integration with future offerings, whereas the Rule 504 limit is subject to integration with future offerings;
  • Rule 504 offerings are subject to state regulation, so offerings need to be qualified or determined to be exempt in each state in which the offering will occur; and
  • shareholders who purchase securities under Rule 504 are included in the count of record holders for mandatory Exchange Act registration.

In our experience, few emerging growth companies use Rule 504 because the $1,000,000 limit is too low to meet anticipated funding needs and because of the costs and delays of the blue-sky process. We question whether emerging growth companies would find the crowdfunding exemption attractive, and whether intermediaries will find the business sufficiently profitable to justify the regulatory burden.

What is the new Regulation A-like exemption and what does it mean?

Regulation A currently provides an exemption from registration for offerings of up to $5 million per year by non-reporting companies. Regulation A requires the submission of a simplified offering document to the SEC, which the SEC comments upon. Regulation A permits “testing the waters” communications. Securities sold under Regulation A are not “restricted securities,” so the investor may immediately sell such securities publicly, at least theoretically. Issuers who sell securities under Regulation A do not automatically become subject to reporting under the Exchange Act. Regulation A offerings are subject to state blue-sky qualification laws. Regulation A is rarely used because of the low $5 million offering cap and the associated regulatory burdens.

The JOBS Act requires the SEC to amend Regulation A or adopt a new exemption to increase the offering cap to $50,000,000 of securities sold in the prior 12 months in reliance on the exemption. Within 2 years of the enactment of the JOBS Act, and for every 2 years thereafter, the JOBS Act directs the SEC to review the offering cap and allows the SEC to increase it. The exemption permits “testing the waters” communications and permits offering the securities publicly, providing that securities sold in the offering are not restricted securities. The exemption requires issuers availing themselves of the modified exemption to file audited financial statements with the SEC annually and allows the SEC to impose additional conditions, including periodic reporting requirements. The exemption is available for equity securities, debt securities, convertible debt securities and guarantees.

Securities sold under the modified exemption are added to the list of covered securities under NSMIA, but only if they are offered and sold on a national securities exchange or offered and sold only to “qualified persons” as the term is defined by the SEC. NSMIA was adopted in 1996 and pre-empted state blue-sky qualification laws for securities sold to qualified persons. The SEC proposed a definition for “qualified persons” in 2001, but never adopted a definition. If the SEC does not adopt a definition in connection with the amendments to Regulation A required by the JOBS Act, issuers would have to choose between blue-sky compliance and becoming listed on a stock exchange, assuming they qualify for listing. Becoming listed on a stock exchange would in turn require issuers to report under the Exchange Act, which may eliminate many of the advantages of Regulation A over a registered public offering. The JOBS Act does however require the Comptroller General to conduct a study on the impact of blue-sky laws on Regulation A offerings and report on its findings within three months after enactment of the JOBS Act.

Depending on the regulations the SEC adopts, this new exemption may become a viable means for a company to conduct a “mini-public offering” and have a public trading market in its securities. The continuing market for reverse mergers into public shell companies, sometimes referred to as alternative public offerings, demonstrates a demand for small companies to establish public markets in their securities. The ability to raise up to $50 million publicly and the potential not to be subject to Exchange Act reporting could make the new Regulation A-type exemption a superior alternative public offering method.

Note however that the JOBS Act does not exclude holders of securities sold under this exemption from the count of holders for Exchange Act registration. Unless the SEC adopts rules to do so, companies that use this exemption may find that they quickly become subject to Exchange Act reporting. Many companies may impose contractual trading restrictions to prevent this from happening.

What are the changes to the triggers for Exchange Act registration and what do they mean?

Section 12(g) of the Exchange Act and its related rules required a company with more than $10 million in assets and more than 500 holders of record of any class of its equity securities to register under the Exchange Act and begin complying with disclosure and financial reporting compliance obligations applicable to public companies.

Effective immediately, the JOBS Act increases the holder threshold to 2,000 holders, provided no more than 500 are unaccredited investors. The JOBS Act also excludes from the “held of record” test securities held by persons who received them pursuant to employee compensation plans and securities held by persons who purchased them in transactions under the crowdfunding exemption. Within 120 days after enactment of the JOBS Act, the SEC must determine if new enforcement tools are needed to enforce the anti-evasion provisions of the rule, and report its recommendation to Congress.

The holder of record threshold for banks and bank holding companies has increased to 2,000, with no limit on the number of unaccredited investors.

As a result of these changes, the many companies that have in recent years come close to or exceeded the prior 500-holder limit will have substantial room to add more investors without needing to accelerate an IPO or register under the Exchange Act without an IPO. This change will also expand the practicality of the more liberal private offering rules under the JOBS Act.

With companies able to maintain their status as non-reporting companies for longer, and with more holders that may want liquidity, we may see more demand for secondary markets trading in private placement securities.

What should I do now?

Companies and entrepreneurs who rely on outside capital should immediately consider what these legal changes might mean to their capital raising plans. The considerations are complex and will be different for every company. We urge companies and entrepreneurs to consult with legal counsel before changing any of their plans and actions in response to the JOBS Act. Companies that believe they will benefit from attracting a larger number of investors will need to consider the disadvantages of a large shareholder base, including increased administrative cost, more difficulty with certain fundamental transactions like sale of the company or restructuring, and potentially becoming less attractive to traditional investors like venture capital funds.

Private companies that already have a substantial shareholder base should think about what possibilities are now open to them given more headroom on the number of holders. In some cases, changes may be needed to shareholder and investor agreements either to facilitate or prevent secondary markets in their shares.

Given some of the delays for required rulemaking and uncertainties as to how markets will react to these changes, the provisions of the JOBS Act will generally mean evolutionary rather than revolutionary changes to capital raising plans for most issuers for the time being. But revolutionary changes may not be far off.

What if you have questions?

For any questions or more information on these or any related matters, please contact any attorney in the firm’s corporate practice group. A list of such attorneys can be found by clicking Lawyers on this page.

John Tishler (858-720-8943, jtishler@sheppardmullin.com), Louis Lehot (650-815-2640, llehot@sheppardmullin.com), Edwin Astudillo (858-720-7468, eastudillo@sheppardmullin.com), Jason Schendel (650-815-2621, jschendel@sheppardmullin.com), Camille Formosa (650-815-2631, cformosa@sheppardmullin.com) and Nina Karalis (858-720-7466, nkaralis@sheppardmullin.com) participated in drafting this posting.

Disclaimer

This update has been prepared by Sheppard, Mullin, Richter & Hampton LLP for informational purposes only and does not constitute advertising, a solicitation, or legal advice, is not promised or guaranteed to be correct or complete and may or may not reflect the most current legal developments. Sheppard, Mullin, Richter & Hampton LLP expressly disclaims all liability in respect to actions taken or not taken based on the contents of this update.

 


[1] The JOBS Act is not clear whether the relief from summary financial information applies to the IPO registration statement, though such relief seems consistent with Congressional intent given the provisions relating to later registration statements and Exchange Act reports.

[2]We note that public companies also rely on Rule 506 to issue securities in PIPE transactions, and PIPE transactions could opened to general solicitation, with investors in those transactions receiving securities that have a safer and generally shorter path to liquidity.

 

Source:
http://www.corporatesecuritieslawblog.com/capital-markets-president-obama-signs-jobs-act-landmark-reform-for-small-and-emerging-growth-companies-now-law.html

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Wednesday, August 22, 2012

Apple vs. Samsung: Live From the Courthouse (Wall Street Journal)

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Source: http://news.feedzilla.com/en_us/stories/law/video/238772227?client_source=feed&format=rss

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Taming e-Discovery

In this episode of The Robert Half Legal Report, Charles Volkert, the executive director of Robert Half Legal, and Joel Wuesthoff, a director with Protiviti Inc., discuss how corporate legal departments are proactively managing e-discovery while limiting risks and containing costs. They share key findings from Future Law Office, Robert Half Legal's annual research program that examines important developments in the legal field.

Source: http://legaltalknetwork.com/podcasts/robert-half-legal-report/2011/11/taming-e-discovery/

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Tuesday, August 21, 2012

IRS Confirms Charitable Contribution Deduction for Gifts Made to Single-Member LLCs

The IRS recently announced that a contribution to a domestic LLC that is wholly owned and controlled by an IRC § 501(c)(3) charitable organization will be treated as if the contribution were made directly to the charitable organization, provided that the LLC has not elected to be taxed as a corporation. Although the IRS had previously provided guidance to public charities and private foundations as to the tax treatment of operating through such single-member LLCs, the July 31, 2012 release of Notice 2012-52 was the first guidance given to individual and corporate contributors as to the deductibility of their contributions. Left unaddressed, however, is the tax treatment of a contribution to a single-member, “disregarded entity” LLC organized in a foreign jurisdiction.

To see the announcement, click here: Notice 2012-52

Source:
http://www.corporatesecuritieslawblog.com/tax-irs-confirms-charitable-contribution-deduction-for-gifts-made-to-singlemember-llcs.html

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What Should Solos Be Charging?

Are you confused about what to charge your clients? New Solo host and solo practitioner, Attorney Kyle R. Guelcher talks to Attorney Jeremy Byellin, from Byellin Law, PLLC, about how a solo can determine how much to charge, the Laffey Matrix, the pros and cons of charging flat rates to clients and offers advice on how to communicate fees during the initial client meeting.

Source: http://legaltalknetwork.com/podcasts/new-solo/2012/07/what-should-solos-be-charging/

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Monday, August 20, 2012

Naked man nabbed after strolling out of Hyatt Regency (Florida Times-Union)

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Source: http://news.feedzilla.com/en_us/stories/law/video/239306073?client_source=feed&format=rss

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Federal court denies Florida attempt to limit early voting days

[JURIST] The US District Court for the District of Columbia [official website] declined to approve changes to Florida election law [HB 1355, materials] that would have reduced the number of early voting days in five of the state's 67 counties. The three-judge panel rejected [opinion, PDF] the state's arguments that minority voters would not be inequitably affected by reducing early voting days in Collier, Hendry, Osceola, Polk and Lee counties, which require Section 5 [DOJ backgrounder] "preclearance" approval under the...

Source: http://jurist.org/paperchase/2012/08/federal-court-denies-florida-attempt-to-limit-early-voting-days.php

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Sunday, August 19, 2012

Transgender Family Law in the Courts

Advocates for the transgender community say this segment of the population faces an extremely difficult time in court because of bias and misunderstanding, especially in cases of parental rights and protection for transgender youth. Lawyer2Lawyer co-host and attorney, Bob Ambrogi breaks down the difficulties the transgender community faces every day with Attorney Jennifer L. Levi, the director of GLAD's Transgender Rights Project and Attorney Elizabeth E. Monnin-Browder from Ropes & Gray and a former GLAD attorney. Jennifer and Liz also discuss their new book, Transgender Family Law: A Guide to Effective Advocacy.

Source: http://legaltalknetwork.com/podcasts/lawyer-2-lawyer/2012/05/transgender-family-law-in-the-courts/

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SORA, No Imposition There

There is little question now that Eric Wilson, a sailor convicted as one of the Norfolk Four in the rape (and murder, though wilson was acquitted of the latter) of the wife of another sailor, should never have been convicted. DNA and another person's confession made the point.  But he served his sentence, and was then conditionally pardoned by Virginia Governor Tim Kaine. who found sufficient doubt of guilt, though not absolute proof of innocence.

The upshot was Wilson was done with his sentence, but remained a convicted rapist.  And convicted rapists, of course, are sex offenders who must register.  Being innocent and all, this didn't sit well with Wilson, and so he sought to have his conviction overturned by habeas corpus. The problem, obviously, was the establishment of jurisdiction for the habe, since his sentence was over.

The solution was his sex offender registration. Or at least it seemed to be, until the Fourth Circuit in a divided opinion smacked him down.

The district court dismissed Wilson’s petition for lack of jurisdiction, holding that because Wilson had fully served the sentence for his rape conviction, he was no longer "in custody," as required by § 2254(a).

We affirm.  While it appears that Wilson has mounted a serious constitutional challenge to his conviction, in which he vigorously asserts his innocence, we conclude that the sex offender registration requirements of Virginia and Texas are collateral consequences of his conviction that are independently imposed on him because of his status as a convicted sex offender and not as part of his sentence.  We also note that the sex offender registration requirements and related consequences do not impose sufficiently substantial restraints on Wilson’s liberty so as to justify a finding that he is in the custody of state officials.

The notion of custody for habeas corpus purposes is defined as a substantial restraint on a person's liberty, which would seem a fair definition.  

To satisfy § 2254’s jurisdictional requirement that he be "in custody" at the time he filed his petition, see 28 U.S.C. § 2254(a) (granting jurisdiction to the district courts to entertain "an application for a writ of habeas corpus in behalf of a person in custody pursuant to the judgment of a State court" (emphasis added)), Wilson alleged that the sex offender registration requirements of Virginia and Texas law impose sufficiently substantial restraints on his liberty so as to amount to custody.

Parole? Custody.  Supervised release? Custody. After all, they can tell you what to do, where to go and make you pee in a cup. They can require you to go to rehab or job training, and inspect your home at will.  That's a pretty substantial restraint on liberty, right?

But not being required to comply with the requirements of sex offender registration laws.  Sure, they can require you to notify the police when you move into a jurisdiction, and can forbid you from living in most parts of town. They can require you to stay away from places where other person's walk freely, and go nowhere near children. They can limit your use of the internet or force you to include on your Facebook status that you're a sex offender.

And this is not a restraint on liberty.

The reason is summed up in two words: Collateral consequences.  The legal fiction that laws that may have been passed long after sentence was imposed and completed, laws that dictate the performance of some of the most fundamental aspects of one's life, laws that control how one exists in society for potentially the rest of one's life, are not part of the punishment for the conviction of a crime. Instead, by characterizing them as "civil" rather than criminal, they are magically not punishment but collateral consequences.

In dissent, Judge James Wynn is clearly disturbed by the fact that the decision slams shut the court doors to an innocent man.  After running through the caselaw, without reliance on the facile distinction provided by the legal fiction of collateral consequences, he concludes:

I question the majority opinion’s decision to follow the Ninth Circuit’s decade-old summary decision in Henry. Uncontestably, the in-person reporting requirements applicable to Wilson in Virginia and Texas "significantly restrain [Wilson’s] liberty to do those things which in this country free [people] are entitled to do," and, consequently, the majority opinion should squarely address the question of whether, in the Fourth Circuit, "[s]uch restraints are enough to invoke the help of the Great Writ."

Judge Wynn argues to break away from the fiction, at least within the Fourth Circuit where the court is under no constraint by holding from other circuits.  Judge Wynn looks to what the sex registration laws demand rather than the denomination of civil, and concludes the obvious, that they are a huge restraint on the liberty "to do things which in this country free [people] are entitled to do."  And once stripped of the fiction, that's the hard question.

Even so, Judge Wynn's concern isn't about the legal fiction of sex offender registration laws, but about how they foreclose redress by Wilson due to this substantial claim of innocence:

Our hands are not tied here; no precedent forecloses the relief sought in this case. Rather than blindly adhering to formalist procedural concerns, we should instead be guided by the equitable principles that traditionally govern the law of habeas corpus, Munaf v. Geren, 553 U.S. 674, 676 (2008), and by the Supreme Court’s mandate to construe the "custody" requirement liberally, particularly in cases involving deprivations on liberty, credible claims of actual innocence, and an absence of forum for redress.

The problem left on the table is that it's not just about Eric Wilson, or about defendants with substantial proof of actual innocence.  Rather, it's about a concept that was fundamentally flawed from the outset, where in society's fit of fear and outrage, they created a horrendous an ex post facto system of punishment, called it a civil regulation, and the courts shut their eyes to all reason and stamped it approved.

Whether they understood its ramifications at the time, or its expansion to such heinous crimes as public urination, or the piling on of additional restrictions that would ultimately leave registered sex offenders with neither a place to live or a chance to be law-abiding productive citizens, is unclear.  Yet that's been the end result of this fiasco.

It's cases like Eric Wilson's, because of the sympathy generated by an innocent man wrongfully convicted, that have the potential to change minds, to bring the slightest chance of reason to a fiction gone insane.  And if the court can't find it worth its while to come clean on behalf of a guy like Wilson, then there is little hope the insanity will ever come to an end.

H/T Doug Berman



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Source: http://blog.simplejustice.us/2012/08/16/sora-no-imposition-there.aspx?ref=rss

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Saturday, August 18, 2012

Putting the Web to Work for You

Have you ever wanted one action on the Web automatically trigger another action? For example, if you post a tweet, it automatically becomes a LinkedIn or Facebook update or if you star a blog post in Google Reader, it automatically gets added to your Evernote account. IFTTT (If This, Than That) is a web service does exactly that. In this episode of the Kennedy-Mighell Report, Dennis Kennedy and Tom Mighell discuss web automation and IFTTT, how it might make your life a little easier, and the role this type of service might play for the busy lawyer.

Source: http://legaltalknetwork.com/podcasts/kennedy-mighell-report/2012/08/putting-the-web-to-work-for-you/

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Second Circuit Addresses Hybrid Convertible Securities and the "Debt Previously Contracted" Exceptions to Section 16(b) of the Securities Exchange Act of 1934

In Analytical Surveys, Inc. v. Tonga Partners, L.P., 2012 WL 1970389 (2d Cir. June 4, 2012), the United States Court of Appeals for the Second Circuit addressed (among other things) the scope of two exceptions that apply to liability for short-swing profits under Section 16(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78p(b): the exception for derivative securities that do not have a fixed price and the exception for securities acquired in connection with a “debt previously contracted.” The Court concluded that the exception for derivative securities that do not have a fixed price does not apply to hybrid securities exercised at a floating price and that the “debt previously contracted” exception only applies to “mature debts.”

Analytical Surveys, Inc. (“ASI”) filed suit against Tonga Partners, L.P. (“Tonga”) seeking to recoup profits Tonga earned on the sale of ASI stock. ASI’s lawsuit arose out of two senior secured convertible notes, one entered in 2003 (the “2003 Note”) and one in 2004 (the “2004 Note”).

Under the 2003 Note, Tonga loaned to ASI $1.7 million with a maturity date in 2005. Under the terms of the 2003 Note, Tonga could, at any time, convert part or all of the 2003 Note’s principal into ASI stock. The stock’s price could be calculated by: (1) a fixed price dependent on the time of conversion or (2) a floating price dependent on ASI’s average stock price in a defined period prior to conversion. At maturity, the balance on the 2003 Note would automatically be converted into shares.

The 2003 Note also contained a default provision that would allow Tonga to accelerate the amount of debt remaining on the 2003 Note. In October 2003, ASI trigged this default provision, but Tonga chose not to exercise its rights.

Instead, Tonga and ASI negotiated the acquisition of a new note, the 2004 Note. The 2004 Note was similar to the 2003 Note, but had a later maturity date, and, unlike the 2003 Note, gave Tonga the option to convert balance into shares or accept cash payment. Approximately five months after acquiring 2004 Note, Tonga converted the outstanding balance into shares of ASI’s common stock and then proceeded to sell all of those shares for a substantial profit.

ASI filed suit, seeking disgorgement of almost $5 million in profits earned by Tonga, under Section 16(b) of the Securities Exchange Act. Pursuant to Section 16(b), an issuer’s insiders — defined as those with a beneficial ownership interest of more than 10% in an equity security — are prohibited from profiting from a purchase-and-sale or sale-and-purchase of the issuer’s securities within a six-month period. The purpose of this rule is to deter insiders from taking advantage of inside information by forcing such insiders to disgorge those profits back to the issuer. This general rule applies even where the insider acted in good faith and did not actually take advantage of any inside information in his or her purchase and sale of the issuer’s stock.

There are some exceptions to the bright-line rule of disgorgement. For example, Section 16(b) does not apply to financial instruments that can be exercised or converted into the issuer’s stock “at a price that is not fixed.” Nor does Section 16(b) apply to securities “acquired in good faith in connection with a debt previously contracted.” Tonga argued that these exceptions (as well as others) applied in this case.

Tonga first argued that the 2004 Note was not a purchase but was an “amended version” of the 2003 Note. The Second Circuit rejected this argument, noting that the 2004 Note was materially different from the 2003 Note. The later maturity date of the 2004 Note gave Tonga “more time” to determine whether and when to convert the Note into shares. So too, the option provided in the 2004 Note (but not the 2003 Note) to convert the balance to stock or convert to cash at maturity “gave Tonga latitude” to take advantage of inside information.

The Court rejected Tonga’s contention that the form of the 2004 Note — a convertible security that could be either exercised at either a fixed price or floating price, a “hybrid derivative” — fell outside Section 16(b)’s “purchase” requirement. Fixed price convertible securities fall within Section 16(b), whereas convertible securities with a floating price do. No Second Circuit case, however, addressed whether a “hybrid derivative” exercised at a floating price fall within Section 16(b).

The Second Circuit concluded that a “bifurcated approach” was required. Under a “bifurcated” approach, the acquisition of a hybrid instrument “purchase,” and the conversation of the instrument at a lower floating price is a separate “purchase” of any additional shares. Why? The opportunity to rely on inside information to time the date of exercise represents “an insider’s additional opportunity” over and above the initial insider opportunity in acquiring the hybrid derivative. Applying this “bifurcated” approach, the Court ordered Tonga to disgorge approximately $5 million in profits.

Tonga also argued that the “mature” debt in question was the debt owed on the 2003 Note, which was enforceable because of ASI’s default. The Court again disagreed, holding that ASI’s default “permitted,” but did not require, Tonga to accelerate the 2003 Note. Tonga, however, had never demanded acceleration, and, as a result, the 2003 Note “had not matured at the time that ASI issued the 2004 Note.” The acquisition of the 2004 Note, therefore, was not made ‘in connection with a debt previously contracted’ for the purpose of § 16(b).”

Analytical Systems provides some clarity with respect to what counts as a “purchase” under Section 16(b). Hybrid derivative securities exercised at a “floating” price are not merely subject to Section 16(b), but are subject to such an examination twice: once at the time of acquisition and again at the time it is exercised. Likewise, the “debt previously contracted” provision only applies where a debt is really and truly “mature”; the mere possibility that a debt could be treated as mature is itself insufficient, a debt is only “mature” if the parties treat it as such.

For further information, please contact John Stigi at (310) 228-3717 or Martin White at (415) 774-3233.

Source:
http://www.corporatesecuritieslawblog.com/securities-litigation-second-circuit-addresses-hybrid-convertible-securities-and-the-debt-previously-contracted-exceptions-to-section-16b-of-the-securities-exchange-act-of-1934.html

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