Chunk of Change
Economists declared in September that the recession had been over for 15 months, but inside companies, the effects of the economic crisis continue. Although corporate legal departments may face a reprieve from the ruthless cost-cutting of the past few years, they're not simply reverting back to the old way of doing things.
Health Care Overhaul
Creating what arguably is the most sweeping change in domestic policy since Social Security, a bitterly divided Congress passed health care reform legislation in March. In doing so, it set off a firestorm from critics who claimed it would cost too much and provide too little, create more government intrusion into private lives and jeopardize the financial stability of small and mid-size employers.
As its name implies, the Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law July 21, is aimed directly at protecting consumers from deceptive or overly risky practices in the financial services industry. Critics blamed a lack of government scrutiny of such practices for devastating millions of investment and retirement accounts and instigating the mortgage foreclosure crisis. Congress responded by restructuring the industry's regulatory institutions, eliminating some existing agencies and adding others, including the Bureau of Consumer Financial Protection, which will oversee every entity offering consumer financial products.
When union attorney Craig Becker took his seat on the National Labor Relations Board (NLRB) in April, many management side labor attorneys warned that the board would try to implement the Employee Free Choice Act (EFCA) through regulation.
Labor Secretary Hilda Solis spent 2010 cracking down on employers, with a focus on worker safety, independent contractors and unpaid interns. For example, in the spring 15,000 workplaces with rates of injury and illness higher than the national average received letters from the Department of Labor (DOL). The DOL's message: Workplace safety is a top priority.
In the widely followed workplace-privacy case City of Ontario v. Quon, the Supreme Court ruled June 17 that an employer could review employees' electronic activities if it has a reasonable purpose for the search and limits the search to that purpose.
It had all the elements of a Hollywood blockbuster, starting with a global cloak-and-dagger sting. FBI undercover agents posed as emissaries of an African government official seeking bribes in return for gun contracts. The unwitting targets attended a Las Vegas convention where federal officials swooped down on 21 executives and employees of military and police weapons supply companies. On Jan. 19, the Department of Justice described the operation as the largest single investigation of individuals in the history of the Foreign Corrupt Practices Act (FCPA). The Las Vegas arrests--and one later in Florida--demonstrated that small as well as large companies need to scrutinize their foreign business practices.
In-house counsel have no "legal professional privilege," in their communications with their corporate clients, the European Court of Justice (ECJ) ruled in its September decision in Akzo Nobel Chemicals v. European Commission. Specifically, the court ruled that communications are not privileged in European Union competition law cases and investigations.
Perhaps the biggest news in the intellectual property world this year came in June when the Supreme Court passed down its long-awaited decision in Bilski v. Kappos. The divided court ruled 5-4 that business methods can, in fact, be patented. Although the decision ultimately reaffirmed the traditional limits on patentability, the court ruled that the business method in Bilski was not patentable, thereby calling many existing business method patents into question.
For the first time in history, women represent one-third of the Supreme Court.
The Federal Circuit's December 2009 decision in Forest Group, Inc. v. Bon Tool, Co., which changed both the interpretation of the false marking statute and the fines that can be imposed for violating it, opened the floodgates for a wave of false patent marking suits. The language of the statute calls for fines of "not more than $500 for every such offense" and, for years, courts had interpreted an "offense" to be one continuous violation. The Forest Group decision, however, reinterpreted "offense" to refer to each falsely marked article, meaning those hit with false marking suits were at risk of fines in the billions.
Part of the federal mail and wire fraud law, the "honest services" statute encompasses schemes or artifices "to deprive another of the intangible right of honest services." It has been used broadly by federal prosecutors in combating not just misconduct by public officials but also breaches of fiduciary duty by executives at public companies.
Innovative law departments looking for cost savings, predictability and risk-sharing backed away from the billable hour in favor of alternative fee arrangements (AFAs) in 2010. A majority--51 percent--of in-house counsel respondents to Fulbright & Jaworski's 2010 Litigation Trends survey said they used alternative fee arrangements, up from 45 percent last year.
Clause and Effect
The Supreme Court took on arbitration clauses in two 2010 cases exploring the scope of the Federal
Arbitration Act, with both business-friendly rulings relying on "the foundational FAA principle that arbitration is a matter of consent," as the majority put it in Stolt-Nielsen S.A. v. AnimalFeeds International Corp.
In Too Deep
When news broke the night of April 20 about an explosion involving the Deepwater Horizon semi-submersible Mobile Offshore Drilling Unit in the Gulf of Mexico, no one suspected the situation would unfold as it did. But the Deepwater Horizon oil spill--also referred to as the BP oil spill--turned into the largest environmental disaster in U.S. history, resulting in deaths, billions of dollars in losses and myriad lawsuits.
Hewlett-Packard Co. has suffered through a tough decade. First, there was the controversial 2002 merger with Compaq, which Dell Inc. founder Michael Dell referred to as "the dumbest deal of the decade." Not long after it was clear the merger actually was proving to be successful, the company found itself in the news again--this time over the board's forced resignation of CEO Carly Fiorini in 2005. The following year, the company was confronted with an infamous spying scandal, in which HP's GC and chairwoman hired a team of independent investigators to spy on board members and journalists to uncover the source of an information leak.
The Supreme Court's Jan. 21 ruling in Citizens United v. FEC landed with fanfare and controversy, and the country continued to feel its impact through the midterm elections in November. The 5-4 majority in Citizens United overruled two precedents to strike down provisions of the Bipartisan Campaign Finance Reform Act of 2002, or McCain-Feingold. The ruling said that prohibiting corporations from paying for certain "electioneering communications" in advance of an election infringes on their First Amendment rights.
Five months passed between the infamous Lexus ES 350 crash (pictured)--which involved the car accelerating uncontrollably and killing all four passengers--and the massive recall of millions of Toyota's popular vehicles.
In-house counsel continued to take the lead in fighting ongoing attempts by the Financial Accounting Standards Board (FASB) to expand disclosure requirements for loss contingencies. Proposed Financial Accounting Standard 5 (FAS 5) is a slightly diluted revision of a 2008 proposal that also generated a corporate outcry. Even with the changes, public companies still fear the requirement that they disclose the amount of money they've set aside for litigation, regulatory matters and settlements. More than 150 corporate legal officers from companies including AT&T, Google and Intel have signed on to a comments letter to FASB circulated by the Association of Corporate Counsel (ACC).
This year, two cases changed the class action landscape for employers. Although different, the decisions handed down just a few weeks apart in Dukes v. Wal-Mart and Velez v. Novartis Pharma Corp. got the attention of employers and may have prompted legal departments to re-examine their employment practices.