Business Law Brief (September, 2002)

The Business Law Brief ^sm(September, 2002)

Your comments and suggestions are always welcome.  We'd love to hear from you.

WTO Authorizes $4 Billion in Sanctions Against the United States.
The World Trade Organization (WTO), the recognized arbiter of international trade disputes, has announced its ruling that the European Union may impose $4 billion in penalties on the United States because its tax break for foreign sales corporations is illegal. Under current US law, offshore subsidiaries of US corporations sell US goods without paying taxes, which the EU has consistently maintained is an illegal tax subsidy. The WTO agreed. While EU leaders have indicated that they will not impose sanctions if the US changes the law, trade experts observe that the face of future negotiations on disputed trade issues between the EU and the US has been changed dramatically. For more information, see "Trade Panel" at www.nytimes.com. (Requires free subscription.)
EDGAR Online Adds International Company Data from 45 Countries.
EDGAR Online, Inc. a service which gathers public company information from SEC filings, has expanded its database to include data from more than 13,000 companies in 45 countries. For more information, see the report at finance.yahoo.com.
SEC I: SEC's Pitt to Lawyers: You're Next.
Speaking to the American Bar Association (ABA) at its annual meeting, Harvey Pitt, Chairman of the Securities & Exchange Commission (SEC) made clear the agency's intention to regulate the conduct of lawyers pursuant to the recently enacted Sarbanes-Oxley Act of 2002. Pitt reminded the corporate lawyers present that, "Lawyers for public companies represent the company as a whole and its shareholder-owners, not the managers who hire and fire them." The SEC will institute regulations pursuant to Section 307, requiring corporate lawyers to report "material" violations of the law by their corporate clients, in spite of the attorney-client privilege. See the report at www.law.com. And the fallout continues...
SEC II: SEC Approves Certification Rules, Accelerates Periodic Filings.
The SEC has amended its rules for the filing of financial reports, has accelerated quarterly reporting, and has specified the method for certifying such reports. An SEC press release lists highlights of the new rules.
SEC III: SEC to Fine Brokerage Firms For Failure to Retain Emails.
Reportedly angered by the fact that missing emails are hampering their investigation of alleged conflicts of interest among stock analysts at six of Wall Street's largest brokerage firms, the SEC is contemplating fines of up to $10,000,000, for their failure to retain the emails as required. Under investigation are the Salomon Smith Barney unit of Citigroup, Morgan Stanley, the Goldman Sachs Group , Merrill Lynch, Deutsche Bank and U.S. Bancorp Piper Jaffray. See "Wall Street Banks" in the New York Times.
"Split-Dollar" Policies for Top Execs Now Illegal?; Sales Halted.
A feature of corporate executive compensation for nearly 40 years, the sale of "split-dollar" policies, has been halted, since they may be construed as illegal "loans" to executives, now forbidden under Section 402 of the Sarbannes-Oxley Act of 2002. Under split-dollar plans, typically, the company pays most of the premiums for the policies, which continue to grow tax-free, and when the executive retires, the company is repaid, without interest, and the executive retains the rest. Under the new Act, such a transaction can be construed as an interest-free "loan" to the corporate executive. See "Insurance Plans" at www.nytimes.com.
D&O Insurance Coverage Disappearing?; Advice for Corporate Counsel.
Formerly easily obtained, Directors & Officers Insurance coverage for company officers and directors, is becoming increasingly hard to find at reasonable prices. The scope of coverage has narrowed, premiums have increased, and for some sectors, the coverage may no longer be available, as reported by www.law.com.
Given the changing landscape for corporate counsel, www.law.com asked three experts to consider the task of corporate counsel under todays' challenging environment. Here's their advice.
Dueling ERISA Decisions re Bad Faith Claims Under State Law.
Last month, we reported that, for the first time, a Federal District Court had ruled that a state claim for bad faith against an insurer is not pre-empted by ERISA, and that such a plaintiff may pursue a claim for punitive damages. The case was Rosenbaum v. UNUM Life Insurance Co., No. 01-6758, US Dist. Ct., ED Pa, (July, 2002). Since then, however, a colleague on the same court has refused to follow that decision in Sprecher v. Aetna U.S. Healthcare Inc., No. 02-CV-00580, USDC, ED Pa. (August 19, 2002).
City of San Francisco To Legal, Medical, Accounting Partnerships: "Never Mind."
Last month, we reported that the City of San Francisco was considering a proposal to extend the city's controversial 1.5% payroll tax to the partnership distributions made to lawyers, doctors, accountants and other professionals based in the city. Now,citing a possible negative impact on small businesses, the measure has died. As reported at www.law.com.
ABA Passes Resolutions for MJP and A Summary Procedure for Permanent Admission to Practice Across State Borders.
As part of its package of resolutions designed to help lawyers to serve clients in more than one state, the American Bar Association (ABA) House of Delegates easily passed a proposal recommending Multi-Jurisdictional Practice (MJP) at its Annual Meeting in Washington, D.C. But in addition, the Delegates adopted a model rule that would allow veteran lawyers to apply for permanent admission in any state without taking that state's bar exam. Under the new Model Rule on Admission by Motion, no bar exam would be required of lawyers who hold a degree from one of the ABA-accredited law schools and have been engaged in the active practice of law in a state for five of the seven preceding years.
Employee Stock Ownership Plans Cannot be Aggregated to Meet Minimum Participation Requirements.
Employee Stock Ownership Plans (ESOPs) may not be aggregated to meet minimum participation requirements pursuant to Section 401(a)(3) of the Internal Revenue Code, even if the aggregation is between a company and its subsidiary, the Eighth Circuit Court has ruled in an appeal from the Tax Court. Beals Bros. Management Corp. vs. Comm'r of Internal Revenue, No.01-3922, 8th Cir.Ct.App., August 27, 2002.
"You" In Corporate Auto Policy Does Not Mean "Employee".
Construing an employer's business automobile policy coverage, a 1st Circuit Court of Appeals has determined that the definition of "you," as used in the policy, does not extend to that corporation's employee, even though acting in the course of her employment. Seaco Insurance Co. vs. Davis-Irish, No. 02-1143 1st Cir.Ct.App., August 20, 2002.
Cookies & Web Bugs Do Not Violate Federal Wiretap or Privacy Laws.
A Massachusetts Federal District Court has ruled that the use of cookies and web bugs to collect personal information, including confidential health information, about visitors to a pharmaceutical company Web site and to track their web browsing habits, without their consent, does not violate federal wiretap and computer privacy laws. In Re Pharmatrack Inc. Privacy Litigation, No. 00-CV-11672-JLT, DC. Mass, August 13, 2002.
Where Payee(s) Ambiguous, Either May Sign Under UCC 3-310.
Because checks were made payable to "EMERGENCY DAMAGE CONTROL CHARLES AND MARSHA HARDER," which was ambiguous, checks could be endorsed in the alternative by Charles and Marsha Harder or by Emergency Damage Control pursuant to Section 3-310 of UCC, and bank was not liable for negligent payment. Harder v. First Capital Bank, No. 4-00-1005 4th Dist., ILApp.Ct., McLean County, July 29, 2002.
Is Information Obtained from the Internet Reliable?
Ever wonder whether your internet sources for news or information are reliable? Try this handy I.Q. checklist, prepared by The Virtual Chase, www.virtualchase.com.

© 2002, Perfectly Legal Publications, Inc. <http://www.PerfectlyLegalPubs.com/>
All Rights Reserved
Some links are not permanent and may expire.
The Business Law Brief was written as a public service.