Tag Archives: shareholder activism

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Expert Speakers at WLF Program Address Promise and Perils of FTC “Green Guides”

ecofriendlyAt a February 21 WLF Web Seminar, Sustainable “Green Advertising”: Implications of FTC’s Guidelines for Public, Private, and Self-Regulation, two private attorneys and a forestry trade association environmental expert offered a revealing tour through the provisions and pitfalls of the Federal Trade Commission’s (FTC) guidelines for “green advertising.” The Commission issued the third edition of its “Green Guides” in October 2012.  The Guides inform FTC’s use of its “unfair advertising” authority under Section 5 of the FTC Act and are also specifically incorporated by reference in numerous state consumer protection acts, most prominently California’s.

The presenters at this hour-long program, which can be viewed for free by clicking the title above, were Crowell & Moring partner Christopher Cole and associate Natalia Medley, along with American Forest & Paper Association Senior Director of Energy and Environmental Policy Jerry Schwartz.

The speakers organized their remarks with a Powerpoint presentation, which is available visually to those who view the program.  The slide deck is also available here.

Some of the interesting insights that you will hear from our speakers include:

  • Products which may meet the thresholds required under federal environmental regulations to qualify as “non-toxic” may not be marketed as such under the Green Guides if trace amounts of toxic materials are present.
  • The marketing of products as “non-toxic” or “free of” certain substances will likely be two of the most challenged practices under the guides.  Those challenges will most likely be brought by companies against other companies, especially larger companies vs. smaller companies.
  • The concept of “recycled content” was one of the most hotly contested during debate and discussion leading to the finalization of the Guides.  For instance, textile and paper companies which utilize scraps of materials generated from production in further production cannot claim such products were made with “recycled content” because in the FTC’s mind, such usage is a routine industry practice.
  • Class action plaintiffs’ lawyers might use the Green Guides as a baseline for filing private shareholder class action lawsuits challenging public companies’ “sustainability reports”.
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Annual Meeting Holdup: Securities Class Action Lawyers’ Latest Scheme

Cross-posted at Forbes.com WLF contributor site

You’re a publicly traded company, and it’s a week before your annual meeting.  The SEC had no objections to your proxy statement, and it’s been sent to shareholders. Your focus should be on final meeting details, but instead, you are working with your lawyers to fend off a class action lawsuit which threatens to forestall the meeting.

This is not a bad dream, but an awake nightmare that an increasing number of public companies are facing. It’s the latest securities class action lawsuit “innovation” — just before an annual meeting, allege that a company’s proxy statements omit “material” information and thus violate general state-law duties to disclose; demand trivial changes to the proxy and high-six-figure fees; and stalk your next victim.

As leading securities defense litigator Bruce Vanyo noted at D&O Diary, at least 20 companies have faced such suits this year, with most claims involving advisory “say on pay” votes and votes on other compensation issues such as stock purchases. The suits are a mutation of disclosure-oriented class actions that are routinely filed against companies going through mergers or acquisitions. These new proxy challenges are of the cookie-cutter ilk common in securities class actions, with the same law firm and often the same investor acting as the lead plaintiff. Continue reading →

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SEC Conflict Minerals & Resource Extraction Rules Are Legally Suspect

Guest Commentary

by Steven A. Engel and Katherine M. Wyman, Dechert LLP*

Of the various U.S. departments and agencies responsible for policing U.S. activities abroad, the Securities and Exchange Commission (SEC) does not readily come to mind.  Nonetheless, the Commission recently stepped into those waters by issuing two rules implementing provisions buried deep within the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”).  Those rules put the SEC’s “mission” to “maintain fair, orderly and efficient markets” in the United States in direct conflict with their supporters’ interests in policing the activities of U.S. corporations in international hotspots.  In all likelihood, litigation will soon follow.

Section 1502 of Dodd-Frank amended the Securities Exchange Act of 1934 (“Exchange Act”) by adding Section 13(p), which directs the Commission to issue rules requiring certain issuers to disclose their use of so-called “conflict minerals” (tantalum, tin, gold, and tungsten) that originated in the Democratic Republic of the Congo or in adjoining countries.  Section 1504 similarly adds Section 13(q) and directs the Commission to put out rules requiring “resource extraction” issuers (namely oil, gas, and mining companies) to disclose certain payments made to U.S. and foreign governments.  Continue reading →

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SEC: Businesses Need to Disclose More about Cybersecurity Practices

Just when you thought that federal agencies might finally get the message, the Securities and Exchange Commission has found a new area in which they may want to regulate, or at least require businesses to manage more paperwork.

On October 13, the SEC’s Division of Corporation Finance published a Disclosure Guidance relating to cyber security. The basic thesis of the guidance is that while current requirements do not explicitly refer to cybersecurity, it is the Division’s belief that the requirements “may impose an obligation on registrants to disclose such risks and incidents.” For example, businesses may need to disclose risk factors for investors, such as certain aspects of the business or operations that could create cybersecurity risks and the potential costs and consequences. Registrants with the SEC should avoid giving just boilerplate disclosures, though, which should be “tailored to their particular circumstances.” Good luck trying to figure out how particular it should be. Continue reading →

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Two New WLF Papers Detail Overlooked Consequences of Federal Food Advertising “Principles” Draft

The majority of analysis, discussion, and debate over the congressionally charged ”Independent Working Group” (IWG) and its Preliminary Proposed Nutrition Principles to Guide Industry Self-Regulatory Efforts has focused on its impact on print, broadcast, social media, and other forms of advertising. Two other implications of the proposal – its impact on brands and trademarks and its chilling or curtailing of corporate philanthropic efforts – have been largely overlooked.

Today, Washington Legal Foundation released papers in its two-page Legal Opinion Letter format which separately focus attention on these two areas.

Will Federal Food Ad “Guidelines” Tread On Brand Trademarks?, authored by Davis & Gilbert LLP attorneys Joseph Lewczak and Angela Bozzuti, explain how the IWG proposal as currently drafted could act as a seizure of protected corporate trademarks worth billions of dollars, and lead to the end of such “legacy” brands as Frosted Flakes and the Pepperidge Farm Goldfish.

“Voluntary” Food Marketing Limits: A Hazard To Philanthropy’s Health, by WLF Senior Litigator Cory Andrews explains how countless corporate charitable efforts, some of which directly benefit the health of children, would be curtailed or cease under the proposal.

In testimony before a House Energy and Commerce Committee hearing last week (discussed in detail here), the Federal Trade Commission’s David Vladeck asserted that provisions related to trademarks and philanthropic activity would be altered in the final document. FTC, however, is only one of four agencies involved in the IWG, and consumer advocates and politicians will work hard to keep those provisions intact. Also, even if the provisions are removed or weakened, the seeds of future action have been planted for shareholder activists, plaintiffs’ lawyers, and international bureaucrats to pursue.

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SEC: Securities and ENVIRONMENT Commission?

Cross-posted by Forbes.com at On the Merits and WLF’s Forbes contributor page.

Regulators regulate. It’s a simple concept, but one which seems to escape even the highest of government officials. Some in the Obama Administration must be disappointed by the lukewarm reception business leaders and the public have given to recent regulatory red-tape cutting efforts. But when you read stories like “SEC Bears Down on Fracking“, which appeared in this morning’s Wall Street Journal (online subscription required), you cannot be surprised that serious doubts exist over the federal government’s wherewithal to rationalize regulation.

It must have been hard for securities regulators to see their counterparts at the EPA, the Department of Energy, and the Army Corps of Engineers, not to mention state, county, and city regulatory entities, getting a piece of the action on hydraulic fracturing, aka, “fracking.” Pursuit of reportedly 110 years’ worth of natural gas trapped in rock formations like the New York-to-Kentucky Marcellus Shale is now possible with new technology. Regulators are, as always, struggling to keep up with this new technology. Job-creating companies, aware that regulation is inevitable and, if done right, can lend credibility to their natural gas extraction, are working with many officials to craft disclosure and other rules. Continue reading →

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WLF Program Explores Impact of Dodd-Frank Law on 2011 Public Company Meetings and Proxy

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 weighs in at a robust 2,300 pages in length, and likely two or three that amount of printed or on-screen pages of coverage and analysis have been devoted to its provisions.  A fraction of those pages of coverage and analysis have been devoted to the law’s provisions that relate to the corporate governance of all U.S. public companies.  But these provisions, which increase shareholder participation and expand disclosure requirements,  may have more immediate impact on free enterprise and economic conduct than any other part of the law.

This morning, Washington Legal Foundation broadcast its latest Web Seminar program, The 2011 Public Company Proxy Season: The Playing Field after Dodd-Frank and Strategies to Manage More Active Shareholders, featuring two Weil, Gotshal & Manges LLP partners, Holly J. Gregory and Catherine T. Dixon (both pictured above).  The on-demand video of the seminar can be accessed here.  The set of slides Ms. Gregory and Ms. Dixon devised for their presentations are here.

The timing of the Web Seminar was rather fortuitous, since just yesterday the Securities and Exchange Commission issued proposed rules on two critical Dodd-Frank shareholder access provisions: the non-binding “say-on-pay” shareholder vote on executive compensation and the advisory vote on compensation arrangements arising out of merger transactions, a.k.a. ”golden parachute” arrangements.  The deadline for submitting comments on those proposals is November 18.  Ms. Dixon devoted some of her presentation to the details of these proposals.

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Last Week At WLF

New Litigation:

  • Matrixx Initiatives, Inc. v. Siracusano
    On August 27, 2010, WLF filed a brief in the U.S. Supreme Court, urging it to overturn an appeals court decision that permitted a securities fraud lawsuit to go forward against a pharmaceutical company based on its failure to disclose to investors alleged safety concerns regarding one of its drugs.

From The Legal Pulse:

 

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Finger on the Pulse: From Our Blogroll and Beyond

  • Beware “tech” companies: A judge may use your tech savvy against you if you violate federal discovery rules (New York Law Journal)
  • Does search and advertising giant’s entry into “free” phone services raise privacy regulatory issues? (Computerworld)
  • A hostile legal environment means “the next big thing will not be invented here,” says Intel CEO (CNET)
  • SCOTUS’s Honest Services Fraud rulings have immediate impact (WSJ Law Blog)
  • SEC expands shareholder activists’ power.  Prof. Larry Ribstein wonders, “now what?” (Truth on the Market)
  • Wal-Mart asks SCOTUS to hear appeal of its 9th Circuit class action loss (SCOTUSblog) (WLF’s 9th Cir. amicus brief)
  • A $38 quadrillion lawsuit? Really? (Overlawyered)
  • Court rules in key battle between generic and branded drug makers over bioequivalence (FDA Law Blog)
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Last Week At WLF.

New Litigation

The Legal Pulse