Companies whose employees participate in trade associations should be aware that the Federal Trade Commission (FTC) has recently challenged two trade associations for codes of ethics that contain provisions restraining competition.

The FTC settled charges against the Music Teachers National Association, Inc. (MTNA) and the California Association of Legal Support Professionals (CALSPro), alleging that both trade associations’ codes of ethics restrained competition in violation of Section 5 of the Federal Trade Commission Act (FTC Act). Specifically, the FTC alleged that:

Commentators questioned the FTC’s use of its limited resources to bring cases against relatively small trade associations. The FTC countered that it selects cases, in part, to provide guidance and send strong messages to others in the business community. As a result of the FTC’s aggressive stance, counsel should:

For more information on FTC Section 5 enforcement, see Section 5 of the FTC Act: Nonmerger Competition Enforcement Actions Chart.

For resources on antitrust compliance, see Antitrust Compliance Toolkit.

Companies that rely on forum selection clauses in commercial contracts to control litigation should review a recent US Supreme Court decision holding that forum selection clauses may be enforced only by filing a motion to transfer under the federal forum non conveniens law.

In Atlantic Marine Construction Co. v. US District Court for the Western District of Texas, the parties entered into a contract that specified Virginia as the forum. However, when a conflict arose one party filed suit in the Western District of Texas. The defendant, Atlantic, moved to dismiss the case for improper venue and, alternately, to transfer the case to the Eastern District of Virginia. On appeal, the Supreme Court unanimously held that:

If a valid forum selection clause exists, the plaintiff must establish that transfer to a contractually selected forum is unwarranted and cannot argue that the selected forum is inconvenient. The choice of law rules from the original forum will not attach to a claim transferred pursuant to a forum non conveniens motion.

This decision strongly favors enforcing valid forum selection clauses, and prevents parties from engaging in post-contractual forum shopping. Therefore, parties should draft either:

For more information on drafting and negotiating forum selection clauses, see Practice Note, Choice of Law and Choice of Forum: Key Issues.

Public companies should reexamine their strategies for handling shareholder proposals in light of Institutional Shareholder Services Inc.’s (ISS’s) 2014 guidelines on majority-supported shareholder proposals. For example, companies may be increasingly inclined to negotiate with proponents of corporate political spending shareholder proposals.

Under ISS’s 2014 guidelines, ISS will review the responsiveness of a board to any shareholder proposal, and potentially recommend that shareholders withhold votes from director nominees, if the proposal is supported by a majority of votes cast at an annual meeting but is not implemented. Previously, review was triggered by either the support at an annual meeting of a majority of shares outstanding or the support of a majority of votes cast at two of the past three meetings.

Shareholder proposals seeking disclosure of company policies on political spending and corporate contributions are expected to continue to be prevalent in the 2014 proxy season. Companies have successfully engaged corporate political spending disclosure proponents and agreed on mutually satisfactory alternatives to submitting proposals to a shareholder vote. For example, a proponent may agree to withdraw its proposal if the company makes its political spending policy publicly available or modifies the policy.

Notably, while the SEC indicated in 2012 that it was considering proposing rules requiring disclosure of the use of corporate resources for political activities, no reference to rulemaking on this topic appeared in the SEC’s rulemaking agenda released in December 2013.

For more information on the shareholder proposal process, see Practice Note, How to Handle Shareholder Proposals.

NASDAQ-listed companies must reevaluate the independence of their compensation committee members in accordance with recent amendments to NASDAQ’s compensation committee independence standard. Companies must comply with the standard by the earlier of their first annual meeting after January 15, 2014 or October 31, 2014.

As adopted, NASDAQ’s compensation committee independence standard required boards to consider whether committee members had affiliations that would impair their judgment. It also precluded members from accepting consulting, advisory or other compensatory fees from the listed company (with certain exceptions for board and committee fees and retirement plan compensation). Under the amended standard, the prohibition on fees no longer applies.

In determining compensation committee member independence, a listed company’s board must consider all factors specifically relevant to determining whether a director has a relationship with the company material to that director’s ability to be independent from management in performing committee duties. Factors include:

For more information on NASDAQ corporate governance standards, see Practice Note, Corporate Governance Standards: Overview.

Employers that sponsor employee benefit plans governed by ERISA should consider adding a reasonable limitations period applicable to disputed claims to their plan document and summary plan descriptions (SPDs), or should review existing provisions to ensure the period is reasonable, given a recent US Supreme Court decision.

In Heimeshoff v. Hartford Life & Accident Insurance Co., the participant filed a benefits claim under her employer’s long term disability plan with the plan’s insurer and administrator in August 2005. Following a lengthy internal administrative appeals process, the plan administrator issued a final claim denial in November 2007. The participant did not file suit under ERISA Section 502(a)(1)(B) challenging the claim denial until November 2010. At issue was whether the plan’s three-year contractual limitations period, which ran from the due date for proof of loss, was enforceable (rendering the participant’s lawsuit untimely).

The Supreme Court unanimously held that absent a controlling statute to the contrary, an ERISA plan participant and the plan may agree in the plan document to a particular limitations period, even one that starts to run before the cause of action accrues or the plan’s administrative process is exhausted, if the period is reasonable.

This decision should provide comfort to employers with ERISA plans (and insurers) that include limitations periods for disputed claims that run from the date proof of loss is due that the plan’s limitations period is enforceable, if the period’s length is reasonable.

For more information on disability claims under ERISA, see Claims Procedure Requirements for Disability Plans Checklist.

For resources to assist employers with the rules governing SPDs for employee benefit plans governed by ERISA, see Summary Plan Description (SPD) Toolkit.

Banking entities and their legal counsel should review their activities and investments to ensure they are prepared to comply with the recently issued final rule implementing the Volcker Rule.

The Volcker Rule prohibits, with certain exceptions, banking entities (including depository institutions and their parent holding companies and affiliates) from:

Among other things, the final rule:

Initially, banking entities had until July 21, 2014 to conform their activities and investments to the final rule’s requirements. Although further extensions are possible, banking entities currently have until July 21, 2015 to conform.

For a complete summary of the final rule implementing the Volcker Rule, see Legal Update, Volcker Rule Finalized.

A recent Ninth Circuit decision demonstrates for trademark litigants the further erosion of the classic presumption that trademark infringement results in irreparable harm to the trademark owner.

In Herb Reed Enterprises, LLC v. Florida Entertainment Management, Inc., Herb Reed sued for trademark infringement and sought a preliminary injunction against Florida Entertainment’s use of the trademark THE PLATTERS as a vocal group’s name. The Ninth Circuit held that the US Supreme Court’s decisions in eBay Inc. v. MercExchange, L.L.C. and Winter v. Natural Resources Defense Council, Inc., rejecting a presumption of irreparable harm upon showing likely or actual success on the merits in a patent infringement case, also apply to trademark infringement.

The Ninth Circuit found:

The Ninth Circuit ruled that to prevail on a motion for a preliminary injunction, the trademark plaintiff, like patent and copyright plaintiffs:

Practitioners should be ready for other circuit courts to find that eBay has eliminated the presumption of irreparable harm in trademark infringement actions. In particular, plaintiffs seeking injunctive relief should be prepared to show likely or actual irreparable harm, while defendants should be prepared to argue that eBay applies.

For more information on trademark infringement claims, see Practice Note, Trademark Infringement and Dilution Claims, Remedies and Defenses.

Employers should revisit their strategy when defending charges before the Equal Employment Opportunity Commission (EEOC) following the Seventh Circuit’s decision in EEOC v. Mach Mining, LLC. Deviating from the approach taken by other circuit courts, the Seventh Circuit expressly rejected an implied affirmative defense based on the EEOC’s failure to conciliate.

Given this decision, employers in the Seventh Circuit should:

Employers in the Second, Fourth, Fifth, Sixth, Tenth and Eleventh Circuits may still seek judicial review of the EEOC’s conciliation efforts, but may find the above strategies helpful if they want to resolve the issue before the EEOC commences a court action.

For more information on EEOC investigations and litigation, see Practice Note, Systemic Discrimination: Responding to EEOC Investigations and Litigation.

Employers should be aware of a recent Fifth Circuit decision that permits employers to use class and collective action waivers in arbitration agreements with employees to minimize exposure to broad class or collective action lawsuits.

In D.R. Horton, Inc. v. NLRB, the Fifth Circuit held that employees do not have a substantive right to class or collective actions. The court found that there was no conflict between the National Labor Relations Act (NLRA), which protects employees’ concerted activity, and the Federal Arbitration Act (FAA), which strongly favors enforcing arbitration agreements. Because Congress did not exempt the NLRA from the FAA, arbitration agreements must be enforced according to their terms, including class action waivers. The court also found that the National Labor Relations Board (NLRB) could not interpret the NLRA in a way that ignores other statutes.

Employers that do not require arbitration of employment-related disputes should consider establishing an alternative dispute resolution program requiring arbitration or entering into arbitration agreements with some or all of their employees. Employers with employee arbitration agreements or alternative dispute resolution programs requiring arbitration should review and consider updating their agreements or programs to ensure that they reflect the nuances of recent legal decisions, including a clear statement that employees may file a claim with an administrative agency, such as the NLRB.

For more information on the implications of the Fifth Circuit’s decision, see Article, Class Action Waivers in Employment Agreements: Expert Q&A with D.R. Horton's Counsel, Ron Chapman of Ogletree Deakins.

A recent Federal Circuit decision highlights the importance of cooperation and maintaining detailed records for parties attempting to recover e-discovery costs.

In CBT Flint Partners, LLC v. Return Path, Inc., the Federal Circuit split with the Third and Fourth Circuits regarding the e-discovery costs a prevailing party can recover from a losing party. All three circuit courts allow the prevailing party to recover its copying costs (scanning hard copy documents and converting electronic records to non-editable formats), but not the costs of preparing to produce documents (such as reviewing documents for privilege or responsiveness). However, the Federal Circuit expanded the definition of copying to include imaging hard drives (making an identical copy of the entire hard drive) and extracting individual documents with their metadata intact.

Until the US Supreme Court clarifies the scope of recoverable costs, companies, counsel and e-discovery vendors should keep detailed records of all e-discovery tasks, even if their costs are not currently recoverable in the forum court. Without contemporaneous records, companies may be unable to take advantage of favorable changes in the law.

Parties should cooperate with each other about production requirements and cost sharing to reduce unpredictability. The courts set default rules, but parties generally may agree on alternatives. If the parties cannot reach an agreement, a party producing electronic documents should consider moving to limit the scope of discovery or to shift costs to the requesting party. A successful motion can protect the party from excessive and unrecoverable costs.

For more information on ways to limit the costs and risks of e-discovery, see Legal Update, Dos and Don’ts for Combatting Discovery Costs.

Counsel seeking to restrict the review of arbitration awards cannot contractually eliminate all judicial review of awards under the FAA. Instead, they should build other mechanisms into their contracts to discourage appeals of arbitration awards.

In In re Wal-Mart Wage & Hour Employment Practices Litigation, the Ninth Circuit, in a case of first impression, held that parties could not eliminate the judicial review of arbitration awards provided by Section 10 of the FAA in an arbitration clause. After the settlement of the Wal-Mart wage and hour multidistrict litigation, the plaintiffs’ co-lead counsel submitted a dispute over the allocation of the district court’s fee award to an arbitrator for “binding, non-appealable arbitration.” After the arbitrator handed down his opinion allocating fees, one lawyer moved to confirm the arbitration award while another filed a motion to vacate it.

The US District Court for the District of Nevada granted the motion to confirm the award, and found no basis to vacate it. On appeal, the appellee argued that the court lacked jurisdiction to hear the appeal because the parties had agreed to binding, non-appealable arbitration. The Ninth Circuit found that it had jurisdiction over the appeal and affirmed the lower court’s decision. Arbitration awards are reviewable only on the limited grounds set out in FAA Section 10. The Ninth Circuit held that just as parties are prohibited from supplementing these grounds, parties also could not eliminate them.

While the Ninth Circuit found that contractual clauses eliminating judicial review of arbitration awards are unenforceable, there are still provisions counsel may wish to include to discourage appeal of arbitration awards, such as cost and attorney fee shifting provisions.