biz org class 18

Dodd Frank Act

SOX Act

the 1933 and 1934 Acts - responses to the Great Depression: in the early 1930's the country was in a depression and it's not clear if the market crash caused the depression but it was clear that it's easy for the populace view to blame Wall Street for everything. the response was the executive response (SOX response to Enron, Dodd Frank to the risky Wall St trading, the Roosevelt responses as seen in Jones v. Harris.

33 Act is about disclosure: companies have to disclose information about their business and capital structure. they engage in the disclosure by filing an S-1 form with SEC. this form is drafted by accountants and lawyers together, and is filed and inside the form is a doc called the prospectus, which is a shorter document that is given to potential shareholders and contains info about the company. shareholders will decide whether to invest based on the prospectus

some state laws do prohibit risky ventures. some ventures like apple were procluded by state law. but under federal law, risky offerings aren't prohibited. all the info needed about the company so that the investor can make an informed decision: that's the goal of the Act is to create the info so that investors can make informed decisions. also, it's to help companies raise capital under the 33 and 34 acts. but the primary goal is to give investors the information they need.

primary market: sale of securities from the primary market.



about both disclosure and regulations.

see section 2.1 of 1933 Act: laundry list of items that are considered to be included in definition of securities. this continues

LLCs: an unincorporated business structure which combines favorable tax treatment of partnerships with the limited liability of a corporation.
- more flexibility of management than either a corp or GP
- members
- operating agreement is a contract that governs organization, structure and management

what if you're dealing with an interest that is not a stock option? what if you're dealing with an investment instrument of a different kind?

robinson v. glynn doesn't involve a corporation, it involves an LLC. as a member of an LLC, you have the same status as a shareholder in a corporation because you are shielded from personal liability.glenn made misrepresentations of giaphone technologies when he sold the phone to robinson, but the trial court gave summary judgment to glenn. why???not called stock, doesn't have characteristics of stock,

is there a transaction underwhich a person invested money?
is there an investment of money in a common enterprise?
is there an investment where investor expected profits to be derived from the (significant) efforts of others (that would make the venture a success or failure)?

common enterprise requirement: idea that there's a pooling of interest and investment for a common enterprise, as opposed to a single investor who invests in a kind of scheme or something.

is an investor passive ro active?
if active, doesn't need the protection of federal securities laws. has all the information required because of participation in the management of the business. but if passive investor, do need the protection.

general partnerships are not investment contracts because you're becoming a partner so you don't need a protection from S-1 registration because you have that information directly. as a limited partner, you don't have any right ot participate in management, and so it is an investment contract and therefore it is a security for S-1 protection.

proRo class 18

there is a fedex accident involving a driver. att interviews everyone privy to the accident. is a conversation between the corp and the worker protected under att-cli privilege?

the client is the company, not the driver. individual employees are not the entitites who can waive privilege.

upjohn.
pharma manufacturer who finds out that the subs may have paid off forgein gov'ts to obtain biz. upjohn investigates with a questionaire to collect info about practices. managers are instructed by GC that the answers are "completely confidential" and the responses are sent under that assumption to GC. upjohn submits a report to the SEC which discloses the questionable practices totalling $4.1mill. the IRS wants to see questionaires, memos, notes, info, etc. upjohn says NO - att/cli. "only for indivs at level of company (diretors) with responsibility for legal advice" CONTROL GROUP TEST

the CONTROL GROUP TEST reads the scope of att-cli narrowly.

instead, SCOTUS uses the subject matter test:

what about rhenquist's argument?
corps have all kinds of methods to induce employees to tell them what they know. why is this the CJ's argument - do we really think it's true that corps need the att-cli priv to get info from EE?

att-cli: the privilege belongs to the COMPANY.

if senior exec decide that it's important to reveal EE info to a 3d party, EE has no right to object: therefore, an EE who was more open with GC, in the expectation that his comments would be confidential, is a mistaken EE and can get squeezed by the company. caught between wanting to please/not wanting to be fired, and being nervous about what will/won't be disclosed to others and what power and control they would have over disclosure.

do you think that corp officers would support a broader att-cli for some other reason? to shield information from other outside parties, protect more work-product,

samaritan.
asking legal advice -- that's under att-cli
but notice that even when the EE is asking, an EE who merely witnesses an event and approaches counsel, this is not att-cli protected because it's factual evidence presented to counsel. the inquiry must be made to assist the counsel to assist the legal needs of the corp client. NARROW READING OF THE UPJOHN DECISION

back to fedex example: let's say EE went to counsel and reported... that would not be covered under att-cli

remember Nissig rule 1.4(2) issue, and NYS interpretation...

if you read upjohn broadly, you also think in Nissig that all employees of a corp should be considered agents of the client for purposes of the no-contact rule, then the ability of opponents of the corp to get info is seriously impaired because you're constructing a rule around the corp

the AZ legislature essentially overruled the case because you have created additional liabilityprotection around the company

Rule 1.13(a) - basic conflict of interest rule dealing with corporations, that the client is the organization
Rule 1.13(b) - if you're an att for an org and you know that an associate is either engaged in/intents to/refuses to act in a way that is a violation of law that can reasonably be imputed to the org, you as att should proceed in way that is best interest of the corp.... what does that mean?
additionally, unless you as att think it's necessary in best interest of org, then you must refer the matter to a higher/highest authority that can act on the orgs behalf.

what should you be considering? see comment (4)
-
-
- policies of org
- any other relevant consideration
- ordinarily referral would be necessary

Rule 1.13(c) is two part test:
1. if highest auth insists on doing act/failing to do in timely manner and
2. att reasonably believes the violation is reasonably certain to result in substantial injury to the org,
then att may reveal info related to rep to anyone (such as gov't prosecutors, etc)

whether or not Rule 1.6 allows this disclosure and Rule 1.13(b) is reporting up, Rule 1.13(c) is reporting out... this rule is like an additional exception to Rule 1.6(b), when it is permissible to disclose confidences.


Rule 1.13(d) says that 1.13(c) is not applicable with respect to information relating to the lawyer's representation of investigating/defending against allegation of violation of law.... don't report out under Rule 1.13(c) if you were higher specifically for investigating or defending against illegal conduct. why??? because that would defeat the very purpose of hiring you

Rule 1.13(e) what happens if you're fired or you withdraw? you must proceed as you deem reasonably necessary so that the org is informed of the facts of your discharge/withdrawal... very noncommital

Rule 1.13(f) - what should you do if you know that the interests of an org's constituent members conflict with that of the org itself? you have an affirmative obligation to explain to the constituents that the org is the client if there is this confusion

Rule 1.13(g) - allows the att to also rep an indiv assoc with the org so long as there's no 1.7 conflicts, so you have to go through the 1.7 analysis. it's like 1.13(g) goes over 1.7

you know that someone plans to do something to harm the corporation.
1. under comment 4, you see that the "get them to stop" option is available, if it's the result of a mistake or error.
but generally, if step 1 doesn't work
2. proceed in a way that is in the best interest of the corp, by reporting up the corp ladder. if that doesn't work,
3. you can disclose under Rule 1.13(c)

tekni-plex.
a corp with 18 shareholders. over time, tang becomes the sole shareholder and ceo.
M&L has represented techni for 23 years, with respect to various enviornmental issues, investigations by the state, etc.
tang plans to sell the company. acquisition is created by a different firm with the sole purpose of creating new techniplex. tang sells to acquisition for $43mill. techniplex merges into acquisition. the agreement contains certain warranties about the compliance of the company, and says that if all's not up to snuff, you can go after the shareholder. tang retains M&L to represent him in arbitration against the buyer, who also wants to retain M&L. the buyer says NO, tang shouldn't be able to use M&L. buyer also wants M&L to turnover all docs that belong to old techni.

issues: can the firm be disqualified for long term client conflict? and does att-cli pass to new management when control of the corp passes to new management?

attorney client privilege goest to new company.

grand jury subpoena.