The Center News: November 2014

A Publication of the National Association of ManufacturerstheCenter for Legal Action

Center Perspectives

By Patrick Forrest, Vice President and Deputy General Counsel

Corporate America faces a growing number of threats relating to corporate governance and shareholder activism. These threats are increasingly becoming boardroom issues.

Many of today’s activist investors are charismatic, sophisticated and well-organized. Their interests range across a strategic spectrum. On one end, "retail" activists, often individual shareholders with nominal investments in target companies, avail themselves of the shareholder proposal process to advance a parochial agenda. Further along the spectrum, larger investors—usually state and local pension funds or pension plans associated with labor unions—use the shareholder proposal process to advance political and labor-related objectives. Finally, hedge funds and corporate raiders seek to influence management, shake up corporate boards and pursue strategies that lead to a return of capital.

Despite their varied objectives, most activist investors share a drive to pursue an idiosyncratic agenda that may not be beneficial to all investors. Frequently, their goal is not the maximization of long-term shareholder value for all investors, but rather the achievement of short-term objectives to effect fundamental changes in the business models of America’s leading corporations.

These various actors have by and large employed a divide-and-conquer strategy. They target one company at a time and are able to achieve incremental victories, realizing that many companies pursue a strategy of appeasement rather than confrontation.

There are strategies that public companies can use to engage these activists in an effort to achieve outcomes that are beneficial to all investors. Please click here to join the National Association of Manufacturers (NAM) on November 19 at 2:00 p.m. EST for a free webinar that provides an introduction to activist strategies and discusses some best practices for engagement.

MCLA in the Courts

Alien Tort Statute

NAM Supports Rehearing in Key Alien Tort Statute (ATS) Case: The NAM filed a brief urging the full Ninth Circuit to hear this case involving the ability of U.S. courts to exercise jurisdiction over a matter involving allegations of human rights violations that occurred in the Ivory Coast. The Supreme Court substantially limited such suits earlier this year.
More Information:
Doe v. Nestle USA, Inc.
(U.S. Court of Appeals for the 9th Circuit)
 
 
 

Environmental

NAM Continues Fight against Cap-and-Trade Regulation in California: After a disappointing decision from a trial court in this suit challenging the legality of California's cap-and-trade scheme, the NAM filed an appeal. Our key argument is that the system is a tax that did not go through the proper legislative channels and that it raises far more revenue than required to run the program.
More Information:
California Chamber of Commerce v. CARB (California Court of  Appeal)  
 
 

Coalition Group Would Send Greenhouse Gas (GHG) Rules Back to Drawing Board: The NAM and industry, state and public interest groups seek to have the Environmental Protection Agency (EPA) start over on its GHG regulations. A federal appeals court will decide how much of the current regulatory system will have to be changed to conform to the Supreme Court’s earlier decision in the case.

More Information:
Coalition for Responsible
Regulation, Inc. v. EPA

(U.S. Court of Appeals for the D.C. Circuit)
 
 
 

Expert Testimony

NAM Seeks to Protect D.C. Businesses from Unreliable Expert Testimony: The NAM, along with three other organizations, filed a brief asking the District of Columbia to adopt the Daubert standard for determining the admissibility of expert testimony. Adopting this standard would position D.C. courts to be better gatekeepers against unreliable expert testimony.

More Information:

Motorola, Inc. v. Murray
(D.C. Court of Appeals)

 
 
 

Labor Law

NAM Seeks Clarity in Retiree Benefits Case: The NAM filed a brief in M&G Polymers USA, LLC v. Tackett arguing that retiree health-care benefits should not be presumed as indefinite if the collective bargaining agreement is silent as to the term of the benefits.   The Supreme Court recently heard arguments in the case, and based on that hearing, it is likely that the court will direct lower courts to use ordinary contract interpretation principles in these cases and perhaps provide some instruction on what “ordinary contract principles” means.

More Information:
M&G Polymers USA, LLC v. Tackett
(U.S. Supreme Court)
 
 
 

Miscellaneous

A recent decision by a Texas appeals court would deny absolute privilege for a company’s confidential voluntary disclosure of potential Foreign Corrupt Practices Act (FCPA) violations to government investigators. In a brief before the Texas Supreme Court, the NAM argued that this decision may force employers to make the difficult decision not to disclose all of the details relating to potential FCPA violations as soon as they are aware of them.

More Information:
Shell Oil Company v. Writt
(Texas Supreme Court)
 
 

Other News

Tying Legal Reform to the Minimum Wage? Illinois lawmakers—who already preside over a state ranked 48th in terms of business climate—are rushing to hike the state’s minimum wage before the new, Republican governor takes office. The governor-elect, however, has signaled his openness to raising the minimum wage if “it also includes ‘pro-business policy’ on tort reform and workers’ compensation,” according to Bloomberg Businessweek. The Illinois plaintiffs’ lawyer community is on high alert.

Questions or Comments?

Contact Senior Vice President & General Counsel Linda Kelly at lkelly@nam.

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