A recent enforcement action by the Department of Justice (DOJ) should remind counsel that the antitrust laws do not apply solely to supply-side activities.

On September 24, 2010, the DOJ announced the settlement of charges against six high-tech companies (including Apple, Google and Intel) relating to agreements not to directly solicit each other's employees. The DOJ brought suit under Section 1 of the Sherman Act, alleging the agreements were per se illegal restraints of trade. The settlement agreement bars the companies from entering into or trying to enter into any agreements to restrict competition in hiring each other's employees.

While antitrust enforcement actions against purchasers (in this case hiring employees) are not as common as actions against sellers, counsel should keep in mind that any conversations with competitors are potentially risky. Companies also should review their employee non-compete agreements to ensure they do not run afoul of the Sherman Act.

The Federal Trade Commission's (FTC's) annual report on Hart-Scott-Rodino (HSR) activity for fiscal year 2009 (HSR Report) indicates strong enforcement despite the slowdown in M&A activity.

The HSR Report, published on October 1, 2010, describes FTC and DOJ activity regarding HSR filings, second requests and merger challenges. The number of reported transactions fell precipitously in fiscal year 2009, down 59% from the previous year. However, the percentage of transactions that resulted in second requests for information rose from 2.5% to 4.5%.

This increase is likely due in part to FTC and DOJ staff having more time to review each merger (with fewer reported deals), but it also may reflect the agencies' determination to improve enforcement. A high percentage of second requests may lead to challenges by the DOJ or FTC, so companies involved in reportable transactions should strive to make the strongest antitrust argument possible in their initial HSR filings.

Businesses making environmental marketing claims should assess them in view of the FTC's proposed revisions to its Guides for Use of Environmental Marketing Claims (Green Guides). The public comment period for the proposed revisions is open until December 10, 2010.

The proposed revisions update the guidance for certain types of environmental claims already addressed by the Green Guides and introduce guidance for other types of claims. The issues addressed include:

The FTC declined to propose specific guidance for other commonly used environmental claims not discussed in the current Green Guides, including use of the terms "sustainable," "natural" or "organic." A copy of the proposed revisions is available at www.ftc.gov/green.

For more information on advertising law generally, see Practice Note, Advertising: Overview.

Companies currently preparing proxy statements should refer to the recent SEC proposed rules implementing the say on pay requirements for guidance.

The Dodd-Frank Act requires companies to offer their stockholders a say on executive pay vote and a say on when beginning in the 2011 proxy season. Under the Dodd-Frank Act, companies must submit a resolution for stockholders to approve executive compensation as disclosed in their proxy statements at least once every three years. Also, at least once every six years, companies must include a separate resolution for stockholders to vote on whether this say on pay vote should be held every one, two or three years.

On October 18, 2010, the SEC proposed rules implementing the say on pay requirements. A key element proposed for the say on when vote would require companies to allow their stockholders to choose from one of four options: voting in favor of each year, once every other year or once every three years or, alternatively, abstaining.

The compensation committee and the board of directors will now have to consider what frequency to recommend for holding the say on pay vote, but there is no clear one-size-fits all solution. One advantage of holding a say on pay vote every three years is that this would provide interested parties a sufficient period of time to evaluate the application of the company's compensation practices and policies. However, this could cause stockholders and proxy advisory firms to seek other, less desirable avenues to express discontent about the company's compensation practices, such as by withholding votes. Given that compensation is high on proxy advisory firms' agendas, it may be appropriate to hold the vote (which is only advisory) every year to provide a safety valve and allow companies to address any concerns over compensation in a timely fashion. Still, there is no consensus over which practice will prevail and companies will need to assess how to proceed on a case-by-case basis.

The SEC is accepting comments on the proposed rules until November 18, 2010. However, under the Dodd-Frank Act, companies holding their annual meetings on or after January 21, 2011 must be prepared to include say on pay and say on when proposals in their proxy statements regardless of whether the SEC has adopted final rules.

Public companies must decide how to manage their communications with rating agencies in light of a recent SEC rule change.

The SEC has removed from Regulation FD the exemption for disclosures of material nonpublic information to credit rating agencies, as required under the Dodd-Frank Act. The rule change became effective on October 4, 2010, and the SEC has not provided additional guidance on the matter. As a result, companies should not engage in customary discussions with credit rating agencies without first having assessed the implications under Regulation FD.

Regulation FD generally requires public companies that provide material nonpublic information to specified persons to simultaneously disclose that information publicly unless an exemption applies. The penalty for violating Regulation FD is an SEC enforcement action, but Regulation FD does not provide a private right of action.

The failsafe response to the removal of the exemption is to obtain a confidentiality agreement or undertaking from the relevant credit rating agency, bringing the information that companies disclose under a different Regulation FD exemption. But some rating agencies have reportedly resisted entering into confidentiality agreements, arguing that their internal confidentiality policies should suffice for purposes of Regulation FD.

Absent further guidance by the SEC, companies must come to their own conclusions based on an understanding of available options and their risk tolerance. At a minimum, companies should stop to consider exactly what information they are turning over to credit rating agencies and the potential ramifications of making those disclosures.

For more information on Regulation FD, see Practice Note, Complying with Regulation FD (Fair Disclosure).

A recent decision of the Delaware Court of Chancery (Chancery Court) could significantly limit the effectiveness of staggered board takeover defenses for certain public companies by potentially allowing successive annual meetings to occur at shorter intervals than expected. As a result, companies with staggered boards should review their organizational documents.

The case arose in the context of Air Products' ongoing hostile takeover bid for Airgas and its proxy contest to gain control of the Airgas board. The Chancery Court upheld the validity of a stockholder-approved amendment to the by-laws of Airgas, accelerating its annual meeting to January of each year from its historical August/September timeframe (Airgas, Inc. v. Air Products & Chemicals, Inc.).

The effect of the by-law amendment was to accelerate Airgas' next annual meeting to January 2011, about four months after its September 2010 annual meeting. A shortened annual meeting period weakened Airgas' staggered board takeover defense by allowing Air Products to potentially gain control of the Airgas board almost eight months earlier than it otherwise could have. The Chancery Court concluded that the by-law amendment was valid under both the amendment and staggered board provisions of Airgas' organizational documents as well as under Delaware law.

All public companies with staggered boards should undertake a review of the relevant provisions of their organizational documents. Those companies with ambiguous staggered board language, should, if possible, amend their organizational documents to clearly specify when the annual meeting takes place as well as the durational interval of the term of the staggered board.

The SEC has stayed the effect of new Rule 14a-11 and amended Rule 14a-8 pending judicial review of a legal challenge to the rules brought by business groups. Although the SEC and the petitioners will seek expedited review of the petitioners' challenge, the timing for the court's review is unclear. But experts believe that as a result of the stay, the new proxy access and related rules are unlikely to impact the 2011 proxy season.

While this provides companies with breathing room to prepare for the new rules (assuming they are upheld), they should still review their by-laws (particularly the advance notice provisions) to identify any requirements that violate the new rules.

In addition, members of the staff of the Division of Corporation Finance have indicated that nominating stockholders must comply with requirements under both the proxy access rules and company by-laws, provided the by-laws are consistent with the SEC's rules. This means that the by-laws potentially could include reasonable nominee qualifications based on which a company could refuse to include a stockholder nominee in the company proxy statement. What specific qualifications will pass muster without impermissibly straining the purpose of Rule 14a-11 is unclear. But companies can now get a head start as they review their by-laws.

For more information on and analysis of the proxy access rules, see Article, Proxy Access. For a form of advance notice by-laws for Delaware companies with drafting notes, see Standard Clauses, By-laws (DE Public Corporation): Advance Notice.

Fulbright & Jaworski LLP released its 7th Annual Litigation Trends Survey Report in October 2010. Among other findings, the survey reports that:

For a Toolkit of relevant resources to assist an employer in conducting an internal investigation, see Conducting Internal Investigations Toolkit.

Multinationals should review the nature of their internal communications with their European in-house lawyers, particularly in relation to antitrust issues, in light of a recent decision of the European Court of Justice (ECJ).

In Akzo Nobel Chemicals Ltd. v. Commission, the ECJ held that legal professional privilege does not extend to communications between a company's employees and the company's in-house lawyers in the course of a European Commission (Commission) antitrust investigation, on the basis that in-house lawyers are not sufficiently "independent" from their employers.

Fortunately for multinationals, the ECJ's decision is confined to anti-competitive matters over which the European Union (EU) has jurisdiction. Nevertheless, to maximize the likelihood of communications being protected by legal professional privilege, corporations should involve independent outside lawyers admitted in the EU in matters that could become the subject of a Commission investigation and make sure all documents are labeled as privileged. Failure to take appropriate steps to ensure privilege protection not only makes in-house counsel's communications vulnerable to disclosure in the context of the EU investigation itself, it may also make these communications discoverable in other litigation.

A recent New York State Appellate Division decision highlights the need for counsel to draft arbitration clauses that clearly identify which arbitral body will preside over contract disputes.

In Nachmani v. By Design LLC, the First Department court ruled that an arbitration clause referencing only the rules under which the arbitration was to be conducted is merely a "choice of law" clause because it did not specifically designate the arbitral institution that is to administer the arbitration. The decision runs counter to the rules of the American Arbitration Association (AAA) (and well-established precedent) that when parties agree to arbitrate according to AAA rules, they implicitly authorize the AAA to administer the arbitration (AAA Commercial Arbitration Rule 2).

Therefore, when drafting an arbitration provision, counsel may avoid future litigation over this issue (and unintended ad hoc arbitral proceedings) by explicitly stating the arbitral organization that is to administer the arbitration in addition to the rules under which the arbitral proceedings are to be conducted.

Additionally, although Nachmani conflicts with other New York court decisions and the AAA's own rules, counsel may wish to revise boilerplate arbitration clauses in existing contracts to include reference to the arbitral institution they meant to designate as the administrator of any arbitration in connection with disputes arising out of those contracts.

For sample arbitration clauses with drafting notes, see Standard Clauses, Standard Arbitration Clauses for the AAA, ICDR, ICC and UNCITRAL.

Companies should implement procedures to require employees who are deferring 2011 compensation to make irrevocable deferral elections by December 31, 2010.

Section 409A of the Internal Revenue Code contains specific rules for determining the deadline by which an employee must execute an election to defer compensation and specify the payment schedule of the deferred amounts. Under these rules, deferrals of many types of compensation earned in 2011, including salary, and the applicable payment schedule must be irrevocably elected in writing by December 31, 2010.

For more information on the timing rules for deferral elections, see Deferral Election Deadlines Under Section 409A Chart.

Employers sponsoring 401(k) plans should consider amending them before the end of the year to allow eligible participants to take advantage of the special tax benefits of in-plan Roth conversions.

The recently enacted Small Business Jobs Act of 2010 created in-plan Roth conversions. These are elections by participants to convert their pre-tax contributions already held in the 401(k) plan that are eligible for distribution to an after-tax account held within the plan, rather than having to roll the distribution over to an outside Roth IRA.

Participants who make Roth conversions generally pay income tax at the time of the conversion and can then receive earnings tax-free on a future distribution from the plan. However, if the conversion is made before the end of 2010, participants can make a special tax election that allows the previously untaxed portion to be recognized by either:

Eligible participants anticipating increased tax rates in the future may want to pay tax now rather than at the time of a future distribution.

Plan sponsors who intend to implement in-plan Roth conversions to allow participants to take advantage of the special tax benefits by the end of 2010 must:

The Environmental Protection Agency's (EPA's) recent announcement to phase out over the next year the Climate Leaders program established in 2002 potentially strengthens the role of non-governmental organizations (NGOs) in setting the standards by which corporate climate change performance is measured. It also increases the importance of thoughtful NGO-business collaboration.

Companies participating in the program were required to complete corporate-wide inventories of their greenhouse gas (GHG) emissions, set aggressive reduction goals and submit annual progress reports to the EPA. Companies that successfully followed the guidelines were recognized by EPA for their climate change management acumen.

The EPA will retire the Climate Leaders logo and close down the website effective September 2011. The EPA has announced to current participants that it intends to pursue a jointly sponsored recognition program with one or more NGOs. The EPA has also indicated that these companies should start looking to state and NGO programs for guidelines and recognition.

While states and NGOs may be able to tailor existing or new initiatives to address the vacuum created by EPA's exit, it remains to be seen whether such initiatives will engender comparable stakeholder confidence and corporate participation. Companies aggressively reducing their GHG emissions will no longer have the EPA "national leader" endorsement driver to rally support when budget decisions are taken.

All companies that see climate change as relevant to their business strategy should assess historic return on investments in voluntary initiatives, taking stock of what has worked well (and to what purpose) and what might have worked better.

Senior executives and their counsel should also think again about opportunities and benefits (and costs) associated not only with climate change recognition platforms at the local and state level, but also with partnerships initiatives involving NGOs.

Major climate change NGOs will also likely be assessing their corporate initiatives in the wake of EPA's decision to end Climate Leaders, so it is an opportune time for proactive strategists to talk with key external stakeholders about the meaning and measurement of leadership performance in this area.

A recent Ninth Circuit decision clarifies the circumstances under which a user of a software copy is considered a licensee (and not an owner) of that copy. The distinction is important for software vendors and companies licensing third-party software because a licensee's resale of a licensed copy of the software is not protected by the first sale doctrine under US copyright law. The doctrine permits the owner of a copy of a copyrighted work to resell his copy without infringing on the copyright owner's exclusive distribution rights.

In Vernor v. Autodesk, Inc., the Ninth Circuit held that a software user is a merely a licensee when the agreement between the user and the copyright owner:

In addition to imposing the restrictions outlined by the court, software vendors seeking to limit resales or other transfers of their software should ensure that their license agreements:

Companies may face tighter enforcement of website accessibility requirements for individuals covered by the Americans with Disabilities Act (ADA).

The DOJ has issued an Advanced Notice of Proposed Rulemaking announcing that it is considering amending its regulations implementing titles II and III of the ADA to require all state and local governments and public accommodations that provide products or services to the public through the internet to make their websites accessible to and usable by disabled individuals. Public accommodations include, for example, hotels, restaurants and bars, exhibition and entertainment venues, retail stores, and exercise and recreation facilities.

The public can provide comments, including responding to specific questions posed by the DOJ, on or before January 24, 2011. A copy of the DOJ's notice is available at www.ada.gov.

The recent election challenge of an incumbent union by the National Union of Healthcare Workers at Kaiser Hospital in California was ultimately unsuccessful, but demonstrates how effectively a union can use YouTube, Facebook and Twitter as campaign tools.

Employers in a unionized workplace should:

Employers in a non-unionized workplace where no election petition has been filed can use social media by:

For a comprehensive guide to social media in the workplace, see Social Media Usage Toolkit.

The Delaware Chancery Court has clarified whether termination fees should be calculated as a percentage of the target company's equity value (market price of the company's equity) or enterprise value (equity value, plus the value of assumed debt, minus cash on the company's balance sheet).

In In re Cogent Inc. Shareholder Litigation, the Chancery Court determined that it may be appropriate to use enterprise value in a transaction in which the buyer is to assume a significant amount of the target company's debt, such as in a leveraged buyout. However, in transactions where the target has a significant net-cash position and little or no debt, the Chancery Court held that the company's equity value remains the appropriate metric.

The Cogent decision also provides comfort that top-ups are a valid tool for accelerating the timeline to closing and present low risk of a court injunction.

The Chancery Court dismissed various arguments against the use of top-ups in agreements structured as front-end tender offers. It:

For more information on judicial scrutiny of top-up options, see Article, Top-up Options: Mitigating Litigation Risks.

The IRS recently finalized and liberalized the rules requiring annual reporting of uncertain tax positions by certain business taxpayers (including many IRS Form 1120 series filers) on their tax returns starting with the 2010 tax year (see IRS Schedule UTP and IRS Announcement 2010-75). The major changes in the final rules include:

Simultaneously, the IRS:

For more information on the Schedule UTP rules, see Article, Expert Q&A on Final Uncertain Tax Position Rules and Legal Update, IRS Finalizes Uncertain Tax Position Rules.