Tennessee Business Litigation Law Blog

Creating an ombudsman position at your business can assist with effectively dealing with internal conflict short of litigation. Most employment litigation is originated because an employee feels like he or she has a legitimate dispute and no one in management either cares or listens. The feeling that "no one will listen to me" gives rise to a sense of disrespect and worthlessness. Lost in the sea of feelings is whether there is a real conflict and how it can be resolved. It seems that once an employee latches onto the negative feelings about either a situation or a particular manager/co-employee, the idea of a resolution becomes second priority.

The ombudsman does not replace the human resources function. The ombudsman is an additional position that is neutral and therefore should be touted as different from human resources, which many employees see as part of management. In other words, employees have an option available if they feel that human resources will simply toe the company line or, for some reason, not give them a fair shake. For example, for years many government agencies have employed an ombuds person for these very reasons.

The ombudsman position can be a very effective tool which provides an outlet for disgruntled employees to air disputes and reinstate respect in the workplace. A large percentage of litigation, including employment litigation, is spawned from misunderstanding. Imagine how much money a business can save by having an experienced neutral person review and assess a dispute before lawyers become involved. An ombudsman can also educate managers about dealing with workplace conflict and identify certain weaknesses in specific managers relating to interpersonal dealings that can be valuable come evaluation time.

The bottom line is that hiring an ombudsman is a little money spent internally to save a lot of money being sent externally to litigators. Read an interesting article on this topic relating specifically to retaliation claims here.

Corporate executives continue to be the subject of government investigations into illegal backdating of stock options. "The inquiries appear to be accelerating as prosecutors home in on cases at companies culled from the 130 or so under investigation by the Justice Department and the Securities and Exchange Commission," according to an AP story on law.com's in-house counsel's page. Other's think the pace is slowing. Read the story here.

I recommend an interesting article about corporate hot issues in 2007, highlighting new SEC rules about executive compensation disclosures and the like. If the following introduction to the article piques your interest, then read the rest of it here. Staying ahead of the curve will be harder this year because the “curve will get a lot a steeper in 2007, thanks to pressure from securities regulators, activist shareholders and hedge funds. In addition to complying with the new SEC compensation disclosure rules, companies will also have to cope with shareholders emboldened by two recent developments: a major change to Delaware's law on majority voting in director elections and a federal circuit court decision on shareholder access to proxy statements. One group of shareholders in particular -- hedge funds -- is expected to cause headaches for management well after the 2007 proxy season ends.”

The attached dissent was filed by an associate justice of the Michigan Supreme Court following the recent election of the Court’s Chief Justice.  The accusations are serious.  However, perhaps the most striking part of the dissent is the language and tenor that the Michigan Supreme Court Justices (including both the author of the dissent and the "majority of four" which the dissent decries) have begun to utilize when criticizing one and other.  The document brings several pointed questions to mind.  What is the obligation of our judiciary when they feel that their peers are abusing their power?  Can a Court function effectively when collegiality among its members has broken done to such a severe degree?  As I think you will see, the dissent is serious food for thought.   John Day has posted his thoughts on the issue over at his dayontorts blog.  What are yours...

A federal circuit court has ruled that there is no private right of action for violations of HIPAA (Health Insurance Portability and Accountability Act of 1996). The most recent court to follow the consensus is the Fifth Circuit Court of Appeals with a case out of Louisiana. So far, every district court to consider the issue has ruled the statute does not support a private right of action and no other federal appellate court has specifically addressed the issue.

The Fifth Circuit upheld the dismissal of a patient’s claim that a doctor disclosed medical information without her consent during a deposition. The court based its decision on the fact that HIPAA provides both civil and criminal penalties for the improper disclosure of medical information and gives the enforcement authority to the Department of Health and Human Services. Since HHS can enforce penalties, Congress did not intend to create a private cause of action, according to the court.  Read the opinion here.

Here are some business-related laws passed by the Tennessee legislature in 2006:

Immunity when there is a major disaster for hospitals, voluntary health care providers and community mental health care centers participating in the Emergency Management Assistance Compact or Southern Regional Emergency Management Assistance Compact. T.C.A. section 58-2-107(l).

Disclosures required when placing a hold on a customer's debit card account, violation of which is  an unfair and deceptive act or practice under the Tennessee Consumer Protection Act. T.C.A. section 47-18-128.

Disclosure of percolation test or soil absorption rate results required in residential real estate contracts. T.C.A. section 66-5-212.

Venue for workers' compensation civil actions is the county in which the governmental entity is located or county in which the incident occurred. T.C.A. section 50-6-225(a)(2)(B). 

Duties of real estate agent spelled out and agency relationship with seller of real estate defined. T.C.A. sections 62-13-401 and 62-13-404(3).

Tennessee Home Loan Protection Act established to restrict high cost home loans. T.C.A. section 47-20-101 et seq.

Statute of Frauds clarified by identifying the person to be charged in a contract for the sale of lands, tenements, or hereditaments is the party against whom enforcement of the contract is sought. T.C.A. section 29-2-101(a).

State contracts with persons who employ illegal immigrants not allowed. T.C.A. section 12-4-124.

Architects are immune from suit in certain situations. T.C.A. section 62-2-109(a).

Written contracts for payments to contractors, subcontractors and material people enforced. T.C.A. sections 66-34-202(a) and 66-34-302(a).

Penalties for the unauthorized practice of law revised. T.C.A. sections 23-3-103, 23-3-104, 23-3-112.

To read any of the above statutes, click on this link and then type in the T.C.A. section number.

Here are three news items of interest on the corporate fraud front. Since well before the Sarbanes-Oxley law was passed in 2002, the effort and energy put into investigating and dealing with corporate fraud has produced great changes for the business and government sectors. Prison time, once a rarity, no longer is; and corporate giants who thought the government was either too incompetent, politically disinterested or lazy to regulate and/or investigate them have found out otherwise. In other words, things just keep changing and evolving in this area.

SEC eases Sarbanes-Oxley financial control rules: The SEC voted yesterday to tentatively adopt a plan giving smaller companies more flexibility in how they apply financial controls under the broad 2002 Sarbanes-Oxley law, which was passed to combat corporate fraud. The proposed changes provide new guidelines about how to evaluate internal financial controls and financial reporting, among others. Overall, the changes will ease financial control rules for smaller companies and were brought about by businesses who complained that the rules were overly burdensome and costly. Here is an AP story with more information.

DOJ revises its corporate fraud guidelines: The Justice Department on Tuesday bowed to pressure from the federal bench, Congress and the business sector and relented in its “take no prisoners” stance on waiving the attorney-client privilege, among others, when deciding whether to indict. This is the third in a series of memos written by senior DOJ officials beginning in 1999, again showing just how rapidly the subject of corporate fraud is changing. This week’s memo is referred to as the “McNulty Memo” in honor of its author, Deputy Attorney General Paul McNulty, and replaces the 2003 Thompson Memo (former DAG Larry Thompson), which replaced the Holder Memo (former DAG Eric Holder). The complaints in the last few years have been about the aggressive practice in the pre-indictment phase of prosecutors asking (or expecting) companies to waive the attorney-client privilege or to cut off the payment of legal fees for employees being investigated or charged. As you can imagine, the pressure to cooperate and possibly avoid indictment is heightened when a federal prosecutor requests that the company turn over the results of an internal investigation or the strategic advice of the company’s lawyers. Now, McNulty has told prosecutors that attorney-client communications should be sought only in “rare circumstances” and, once a legitimate need for it is shown, approval must be sought up the chain from the U.S. Attorney to the Assistant Attorney General of the Criminal Division. In certain instances, McNulty will personally approve requests for obtaining privileged information. Also, for added incentive, on December 8, Senator Arlen Specter, R-Pa., outgoing chairman of the Judiciary Committee, introduced a bill that would strictly limit a prosecutor's ability to request attorney-client privileged information. Read an article at law.com

Tom Brady, quarterback of the New England Patriots, has filed suit against Yahoo!  (Note: that exclamation point is part of the company's name; I'm not expressing rampant enthusiasm or outrage). Brady claims that Yahoo! advertised its fantasy football service in Sports Illustrated using a photograph of Brady without his permission. A copy of Brady's Complaint is available at The Smoking Gun. Brady is seeking, among other things, compensatory and punitive damages in the case.

Tough month for Michigan. Passed over for the national championship game. Now this.

The Wall Street Journal's law blog features information on two pending cases from the U.S. Supreme Court that could have an impact on corporate America.  One is an employment law case, while the other is a civil antitrust lawsuit. (Found via the Delaware Corporate and Commercial Litigation Blog).

Governor Bredesen’s dispute with the Judicial Selection Committee took another twist this week.  The Governor sought summary judgment in a lawsuit challenging the Committee’s resubmission of candidate J. Houston Gordon for the current opening on the State's highest Court.  The Governor previously rejected a slate of three candidates including Gordon, asking the Committee to present him with a second slate that included qualified minority candidates.  The subsequent list of candidates submitted to the Governor included one minority candidate (Memphis judge D’Army Bailey) but also included Gordon.

In his summary judgment motion, the Governor, represented by the attorney general’s office, contends that allowing the re-nomination of a previously rejected candidate "would nullify or otherwise destroy the express authority of the governor in the statute to rejected the three nominees on the first panel.”  The Judicial Selection Committee has remained steadfast in its position to the contrary.

The case is currently pending before Davidson County Chancellor Ellen Hobbs Lyle.

Read more here.

On Thursday of this week I am speaking for the Nashville Bar Association on the topic of "What You Should Ask Yourself When Working With an Expert Witness." The CLE is focused a number of concerns that civil litigators should consider in choosing what experts to work with and how to do so.

Next month, on December 20 and 21, Branham & Day is presenting our fifth annual Fundamentals of Civil Litigation seminar at the Nashville School of Law. The seminar is geared to providing practical tips to new lawyers throughout the civil lawsuit process - from opening the case, through discovery, and into trial. For more information or to sign up, see our website at www.branhamday.com.

Tennessee is one of only six states that outlaws direct sales between citizens and out-of-state winemakers. As it stands, an out-of-state firm can only sell its alcoholic beverages to licensed Tennessee wholesalers who must then sell the beverages to a licensed Tennessee retailer.  Each step in this chain is taxed by the State. 

Rick Jelovsek of Johnson City has filed suit in Federal Court for the Eastern District of Tennessee to change all that. 

Jelovsek’s lawsuit, which has been joined with a companion lawsuit filed by an out-of-state winery, alleges that the wine import ban is in violation of the Commerce Clause of the US Constitution in that “the laws favor, protect and provide economic advantage and monopoly to in-state wholesalers, retailers and wineries and discriminate against out-of-state vendors.”

The State has countered that, under the 21^st Amendment, it has broad authority to regulate the manufacture and sale of alcoholic beverages within Tennessee’s borders, so long as it exercises that authority in an even-handed manner.

On this point however, District Judge Ronnie Greer has already taken issue with the State’s position, stating that  "these provisions on their face appear to give favor to an in-state producer of wine in the sale of wine directly to consumers…All of this arguably serves to limit competition in the wine industry in this state, limiting choice in the selection of wines, limiting competition, and potentially driving up prices."

On Tuesday, U.S. District Magistrate Judge Dennis Inman allowed the Wine and Spirits Wholesalers of Tennessee to join in defending the lawsuit, finding that it had a substantial legal interest at stake.

A trial date has not been set, but Tennessee’s resident oenophile’s (wine lovers) are sure to be following this one closely.

Read the full story from KnoxNews here.

An interesting article from the Milwaukee Journal Sentinel takes a look at public perception surrounding the accounting profession in the wake of Enron and WorldCom.  Specifically, the article examines the boom in the accounting field under Sarbanes-Oxley and growing sentiment within the profession that it has assumed the role of guardians of the public trust.   As the author puts its, the accounting field is clearly “hot” right now, as are specialty certifications within the profession dealing with fraud and information technology.  This growth is expected to see an additional boost in 2008 when smaller publicly held companies - those with a market value of less than $75 million - are scheduled to come under regulations.

Read the article at LexisOne here.

Delta Airlines has requested permission to terminate the traditional pension plan applicable to its retired pilots.  Both the airline and its creditors have taken the position that termination of the plan is the only way to save the company and eventually move it out of bankruptcy.  At least one group of retired pilots has opposed the move (though others do not) stating that the airline is exaggerating the risks of keeping the plan.

One of Delta’s consultants notes that more than 1,800 pilots are currently eligible to retire.  Under a provision in the pension plan, more than 700 would be able to get lump sums of $250,000-$500,000 immediately upon retirement according to a court filing by Delta.  Despite carrying a surplus through 2001, Delta's actuary has testified that the pilots' pension plan is currently under-funded by $2.5 billion.

Read the full story from the Atlanta Journal-Constitution here.

Over 1.78 million bankruptcies were filed in the last 12 months.  Less than 600 of those were filed involuntarily by creditors.   However, it’s a safe bet to say that none of those bankruptcies were filed under the circumstances surrounding the bankruptcy of North Carolina attorney John McCormick.

McCormick was last seen July 10, a few hours after one of his major clients sent a representative to McCormick's office in Chapel Hill to confront him over an overdue $802,000.  According to reports, McCormick stepped out a back exit and, except for a personal letter later found in his abandoned car, no one has heard from him since.

Now a number of clients and even McCormick's wife have instituted involuntary bankruptcy proceedings against the vanishing attorney.  At the same time, the North Carolina Bar has taken steps to freeze his client accounts and embezzlement charges are being investigated.  Amazingly, all of this has been done despite the fact that no one knows where McCormick is…

Articles on this developing story can be found here and here.

Indiana attorney Joe Williams called my attention this week to an opinion that, quite possibly, covers the most ridiculous litany of frivolous motions ever filed.  The case, Washington v. Alaimo, (S.D. Ga. 1996) traces the “litigation adventures” of one Mathew Washington, an inmate plaintiff whose repertoire of motions over the years have included:

“Motion to Behoove an Inquisition”

“Motion for Judex Delegatus”

“Motion for Restoration of Sanity”

“Motion for Deinstitutionalization”

“Motion for Publicity”

“Motion for Nunc pro Tunc”

“Motion for Psychoanalysis”

“Motion to Impeach Judge”

“Motion to Renounce Citizenship;” and the coup de gras:

“Motion to Invoke and Execute Rule 15-Retroactive Note: The Court's School Days are Over”

However, the motion that finally led the Court to curtail Mr. Washington’s litigation privileges arguably puts these to shame.  Readers will have to defer to the opinion itself for this one.  The cite is  934 F.Supp. 1395. 

A Delaware Court has granted summary judgment to LifePoint Hospitals, the Brentwood-based hospital chain, in its ongoing dispute with major shareholder  Accipiter Capital Management.

The lawsuit centered around Accipiter's proposed slate of candidates for Lifepoint's board of directors.   Accipiter alleged that Lifepoint had breached its fiduciary duties when it blocked Accipiter's slate.  Lifepoint maintained  that Accipiter's proposals could not be considered because the nominations were not timely made.

Read the story here.

Selling Pizza is not a novel idea.  Unfortunately, neither is selling marijuana.  Selling them as a package deal however...

Apparently, this "pizza and pot" take out service was the brainchild of a Little Caesars employee in Collierville.  The employee even allowed one customer to pay for his "order" with a debit card.  After reports from a number of patrons that drugs were on the take out menu (figuratively, of course), local law enforcement stepped in and seized over 230k in assets from the business owners. 

The owners promptly filed suit against the City of Collierville and the State of Tennessee claiming that they had no knowledge that their employee was dealing out pot alongside their pizza.  The Chancery Court is currently holding the funds pending a resolution of the dispute.

Read the story here.

Mike Rhodes authored an interesting post over on his Corporate Governance Blog exploring the evolving roles of Chief Executive Officers vs. those of Chairmen of the Board.  According to Mr. Rhode's research, there is a growing trend towards definitively separating these two roles.  Almost 30% of the S&P 500 split the positions in 2005, as compared to just over 20% in 2001.

This trend could have interesting implications in cases involving the duties, or the breaches thereof, of individuals taking on these respective roles.

The big news in the commercial litigation world is the Coke trade secrets case. (Link goes to an Associated Press article in The Seattle Times). According to the news reports, one of the defendant's lawyers harkened the case to "something out of a spy novel." On the other hand, the same attorney, who represents a secretary at Coke's headquarters in Atlanta, was quoted as questioning how secret the allegedly stolen product was, and the extent of the measures that Coke undertook to keep it secretive. Of course, the burden is on Coke to prove that the allegedly stolen product was a trade secret and that Coke did take appropriate measures to protect it.

The Legal Reader points to an actual Motion for Fist Fight, and the brief filed in opposition. It's a safe bet this would be outside the scope of discovery under Tenn. R. Civ. P. 26.

A new study suggests that the Nashville area (apparently including surrounding counties) is one of the three least expensive mid-sized cities to do business in nationwide. The KPMG study "Competitive Alternatives" is designed to compare the costs of doing business operations in nine different countries globally. According to an article in the Nashville Business Journal, the Nashville area ranked third among U.S. cities with between a half-million and 1.5 million residents. The findings on the Nashville area specifically are available here.

A recent artical from the Kansas City Daily Record examines the potential cost and benefit of instituting a standing policy of background checks for all new employees. Workplace assaults total 2 million each year. Employee theft costs $40 billion annually. Is it worth spending 40 or so dollars on the front end to verify the information on a resume?

Gene Simmons of Kiss is being sued for defamation. According to the New York lawsuit, during a television show on VH1, Simmons talked about his exploits in the band's heyday. In those segments, file footage of the plaintiff was shown. The plaintiff sued for both libel per se and slander per se. Simmons' motion to dismiss the two defamation claims was denied.

Take note if you're ever being interviewed for a "Behind the Music" episode about your life as a rock star. (Thanks to the Journal of the Business Law Society).

Taking the most ethical approach to a situation is the best way to avoid a lawsuit generally, or at least minimize the damage once you're there. Businessweek has a blog post up on business ethics. The post includes this anecdotal insight from a reduction in force:

One of my peers suggested that we say we're getting rid of dead wood, that the layoff is performance-based. "Wait a minute," I said, "we'll be stabbing our employees in the back. The layoff isn't performance-based." "But it sounds better," said my colleague, "sounds like we're tightening up the ship."

...

The rationale was that we could give a great employment reference to any individual employee who needed one, so the blanket statement about cleaning house shouldn't hurt anyone in particular. That sounded like a bogus argument to me. If a person gets laid off, and then his wife reads in the paper that the layoff is performance-based, that's adding insult to injury. But I kept my mouth shut, and I've regretted it a hundred times since then.

Here's a great table comparing ERISA section numbers to their numbers in the United States Code. For more information on ERISA and employee benefits, check out Erisa on the Web.

An interesting story from our neighbor to the north…

Biovail Corp., Canada’s largest drug maker, has filed a 4.6 billion dollar lawsuit in New Jersey state court alleging that it has been the target of a “massive and fraudulent disinformation campaign" aimed at driving down the company’s stock value. The complaint alleges that 22 defendants, including Wall Street hedge funds, investment research companies, and an analyst, violated various state laws (including New Jersey's racketeering law) by conspiring in 2003 and 2004 to drive down the price of Biovail shares and profit from the drop by short-selling the stock.

Spokesmen for the various defendants have labeled Biovail’s suit “outrageous and defamatory” and “patently false” and malicious.”

A few links to this developing story can be found here and here.

The Nashville Business Journal states the obvious: if Blackberry service goes down, we're going to stop using Blackberrys. There's been no ruling yet on the plaintiff's motion for a temporary injunction against Research in Motion for alleged copyright infringement. If it happens and effectively shuts down email service through Blackberrys, though, three-quarters of Nashville business execs would abandon ship and buy a different brand device.

The need for empirical evidence notwithstanding, I could have told you this for the small cost of a Budweiser. You can't convince me there's anyone out there who prefers and would stick with the Blackberry for its cell phone use.

This month, though, Research in Motion set up a workaround to continue Blackberry service if the court enjoins them. Assuming it works semi-painlessly for users, that could make the whole injunction a non-issue (and seriously take the wind out of the plaintiff's sails in the copyright case).

(Side note: yes, it is "Blackberrys" and not "Blackberries.")

Apparently, there are a number of web sites selling cell phone records. According to Law.com, forty or more web sites have popped up selling another person's cell phone records to lawyers and others. Not surprisingly, the FTC and cellular carriers are looking to weigh in on the legality of these services.

Bates numbering only slightly dulls the pain of wading through voluminous document production sets. John Day recently posted on the importance of Bates numbering documents - if for no other reason than being able to recall and demonstrate what documents you produced. Over at the Conglomerate Blog, there's a brief history of Bates numbers, including this classic photo depicting the joy of responding to massive written discovery requests.

In the latest installment of Blackberry saga, U.S. District Judge James Spencer has set a February 24th hearing date to consider whether an injunction will be entered against Research In Motion, the maker of the device, for patent infringement. An injuction, if entered, could mean a total shutdown of blackberry service for virtually all non-governmental users. This will be one to watch...

Read more here.

Yesterday, the SEC released a statement detailing when and how it will calculate fines against corporations. The text of the statement is available here on the SEC's website. (Look to just the first few pages; the lengthy remainder is other SEC news). According to the statement, the two primary factors to be considered are:

The presence or absence of a direct benefit to the corporation as a result of the violation.
The degree to which the penalty will recompense or further harm the injured shareholders.

In addition to these two principal considerations, there are several additional factors that are properly considered in determining whether to impose a penalty on the corporation. These are:

The need to deter the particular type of offense.
The extent of the injury to innocent parties.
Whether complicity in the violation is widespread throughout the corporation.
The level of intent on the part of the perpetrators.
The degree of difficulty in detecting the particular type of offense.
Presence or lack of remedial steps by the corporation.
Extent of cooperation with Commission and other law enforcement.

There is a good deal of elaboration on each factor in the statement, so if you're interested you should read the entire statement.

Last year Boeing paid 72.5 million to settle a discrimination lawsuit filed by a class of female employees. Yesterday, the Seattle Post Intelligencer reports that the aviation manufacturer won a victory in a separate discrimination suit filed by a class of African American workers. Boeing had originally agreed to settle this suit in 1999 for 15 million, but the settlement was subsequently thrown out by the 9th Circuit Court of Appeals after a number of class members complained that the settlement was unfairly structured (pointing, in part, to the amount of attorneys fees incorporated into the award).

Now, two years later, a jury sitting in the U.S. District Court in Seattle has rejected the class’s discrimination claim altogether. While the district judge must still rule on the “disparate impact” portion of the lawsuit, this partial verdict in favor of Boeing underscores the calculated risk that parties must consider when weighing a proposed settlement against a potential jury award (or, as here, non-award).

Last week I commented on the patent litigation coming to a head between NTP and RIM ("Research In Motion"), the maker of the blackberry device. As I noted at the time, the injunctive relief sought by NTP (i.e. a "blackberry blackout") is indicative of the leverage that a patent holder can wield when its designs are incorporated into a popular and widely disseminated product.

Now, on the heals of the NTP suit, the New York Times reports that Visto, a maker of software for wireless e-mail, has filed suit seeking to block the sale and operation of an e-mail service developed by Microsoft. Interestingly, Visto filed the suit the day after announcing that it had acquired the licenses to patents from, guess who, NTP.

Given the wave of media coverage related to the recent Supreme Court nomination of Samuel Alito, I expected there to be a wealth of information out there regarding his stance on issues relevant to the business community. Surprisingly, finding a comprehensive review of this background info was harder then I expected. For anyone out there with similar questions a good article is available from Fortune Magazine. However, as the artical notes, one should always be wary of attempting to extrapolate a judge's future based soley on the decisions in his past...

Four years of patent litigation are coming to a close and the topic of conversation at every corporate water cooler seems to be the same…are they going to shut down my blackberry?! For those who haven’t been following this story over the last few years, a company called NTP sued Research in Motion (RIM), the maker of the everpopular blackberry device, alleging patent infringement. What makes this story so compelling (and frightening to some) is that NTP has asked for an injunction that would effectively result in a blackout of virtually all blackberry service. What’s more, the federal judge handling the case has indicated that he may be inclined to grant it by Christmas.

As noted in a recent Fortune article, this case highlights the ongoing dispute regarding the propriety of injunctions in patent cases. In most instances, courts grant permanent injunctions only when a plaintiff faces "irreparable harm" beyond what can be remedied by money damages. However, the Court of Appeals for the Federal Circuit, which handles all patent appeals, has consistently held that almost any victorious patent plaintiff meets this standard. Accordingly, a patent plaintiff like NTP has tremendous leverage in that it can demand not just royalties, but that any technology which incorporates it patent be shut down. The result…any settlement (to the extent that one can be reached) could reach upwards of ten figures.

Is the DuPont model dead? Larry Bodine seems to think so.

Under the Dupont model, a corporation picked several firms to handle all of its work across the country. The practice was known as "convergence."

But legal marketing guru Bodine believes that "pinpointing" or "cherrypicking" is the model more and more corporations are adopting.

Here is an excerpt of Larry's article on the subject: "In my opinion, convergence was a failure for corporations. The Big Companies didn't save any money using the DuPont Model. Sure, they winnowed down their list of 200 law firms down to 5 law firms. But the lawyers demanded to get all of a company's legal work, charged blended rates so that the handling lawyer would probably be an associate, and insisted on bonus fees for unusually good results. In the end, the corporations wound up with 5 mega-firms, all charging $600 an hour and the company's legal costs went up. ACC research bears me out on this."

"So corporations in 2005 began seeking out litigation boutiques in Buffalo, rather than fly their megafirm lawyer up from New York City. Big Companies began hiring local specialists, who charged local rates, to handle local problems in Baton Rouge. After a while, I began to notice that lots of little firms everywhere are getting work from titanic publicly-held companies."

Read more here. Here is another article that discusses a similar concept.

We are seeing a similar trend. More and more companies seem to be understanding that a law firm known for its expertise in securities or tax may not necessarily be the best law firm for a litigation matter.

I mean, would you go to a boat dealership to fix your Mercedes just because they did a great job on your boat?

When Martha Stewert realized that she was about to be convicted and sentenced to jail time, I'm sure the last thing on her mind was taking care of her jury consultant. It appears, however, that her consultant had a somewhat longer memory and has now filed suit to collect almost 75k in allegedly unpaid jury consulting fees (for phone surveys, focus groups, etc...).
Whether or not these allegations prove to be true, they provide a poignet reminder for both attorneys and clients:

Regardless of whether a case is won or lost, somebody has to pay the bills. It's important that everyone involved is clear on the front end about who that somebody is.

Law.com has an article about a new trend in business law: companies asking courts to seal the divorce records of company executives. Given the amount of financial information in a major divorce proceeding, it may be worth sealing. The problem with sealing documents in a divorce case is that any person who later has a legitimate interest in viewing the sealed documents has already been excluded from the hearing. Unfortunately, the same problem exists whenever a party asks the court to seal documents in a pending case. (Found via the Legal Reader).

The news that Tennessee was ranked the 5th best business climate in the U.S. according to Site Selection Magazine has been circulating in the media this week. An interesting side note: the rankings are based, in part, on expanded business facility activity in the state... and came out before Nissan's expected announcement that it is moving its North American headquarters to Williamson County.

When a finance company has a loan secured by a specific piece of the debtor's personal property (such as a car loan or loan for a small business to purchase computers), if the debtor misses payment, then the creditor can take the property and sell it to pay off the remaining debt. Under Tennessee's adoption of the UCC, the finance company must notify the debtor before selling the property so that the debtor can either pay off the debt or help ensure the property sells for a fair price. Tennessee law requires that the finance company send notice to the debtor in a reasonable manner.

The Western Section Court of Appeals ruled last week that sending one notice by certified mail, with no receipt actually returned, is not reasonable. The debtor cannot actively evade notice, but neither can the creditor simply go through the motions before selling the property. In the Court of Appeals' words:

Notice which is a mere gesture is not notice. The means employed must be such as one desirous of actually informing the absent party might reasonably adopt.

Read the case, Federal Express Credit Union v. Lanier, here.

For a massive amount of tax charts for businesses, take a look at this post over at the Inhouse Blog.

An interesting article in today's Wall Street Journal examines whether businesses can structure their hiring policies to cut health costs. The focus of the article is a proposal before the Wal-Mart board of directors that would mandate the incorporation of physical activity into all jobs (think cashiers gathering shopping carts). Wal-Mart argues that this a positive effort to encourage physical health and fitness in the workplace. Workers groups counter that it is an attempt to discriminate against the elderly, the obese, and those with pre-existing medical conditions and thereby save on employee health care costs. Regardless of whether Wal-Mart adopts the proposal, this looks to be a polarizing issue that may ultimately have to be decided by the courts.

A bank has been held liable to its customer for $600,000 in unauthorizied transfers from the customer's account. Liability was imposed even though the customer did not comply with the bank's notice requirements.

Read a summary of the opinion as prepared by www.law.com or the full opinion.

In an interesting turn of events, Starr International Co., a company led by former AIG Chief Executive Officer Hank Greenberg, has counter sued the insurer claiming that Starr should have independent control over $20 billion of AIG shares. The counterclaim is the latest installment in litigation between the two that started earlier this year when Starr filed suit to secure the release of art, antiques, and other property held by the insurer that Greenberg claimed should be in his possession. Read the story at CNN.

Background checks are common in pre-employment screening. Here's an article on the types of background checks that are available, and the relative importance of each. From the article:

The U.S. Department of Commerce estimates that 30 percent of all business failures are the result of bad hiring decisions. While a typical background check costs far less than an average day's pay, one serious hiring mistake can sink a small business.

Found via the InhouseBlog.

On the road, businesspersons and attorneys often check in to the office by using a hotel, airport or other public computer. Here's an article that reminds you that using a public computer may open the door to your private information. The author also gives some tips on minimizing the risk when you need to use a public PC.

Do your employees work better if you treat them better? Yes, according to some anecdotal evidence compiled by CNN - primarily a comparison between the performance of Wal-Mart and Costco employees. (Found via the Journal of Business Law Society).

A post up at Evan Schaeffer's Legal Underground talks about a new Senate bill that would "permit" the televising of U.S. Supreme Court proceedings. According to this Pittsburgh Post Gazette article mentioned in Evan's post, however, the bill would actually mandate television coverage unless a majority of the Court decides it would violate a litigant's due process rights.

The Tennessee Department of Labor and Workforce Development website has answers to frequently asked questions, including this page about the rights and duties of small business owners in dealing with employees.

Starting a new business? Check out this new small business technical assistance guide from the State of Tennessee website. It outlines many great financial and other resources for new small businesses.

There's an emerging body of law of businesses being sued because of security breaches that allow access to customer's data. For a discussion of some recent court opinions on the subject, take a look at this post at the Privacy and Security Law Blog.

These cases arise under both contract and tort theories, including negligence. The application of Tennessee comparative fault principles - i.e., blaming the persons who actually steal the data rather than the company who fails to secure it - may lead to some interesting developments. First, comparative fault does not apply to breach of contract cases. Second, Limbaugh v. Coffee County Med. Ctr. would likely prevent the company from effectively blaming the computer hacker who stole the data. If Limbaugh logic applies to the data theft cases, then even if a company convinced the jury to put most of the fault on the hacker, the company would still be responsible for paying the judgment.

With more and more technology companies headquartering in Tennessee, we will likely see some decisions on these issues in the near future.

Yesterday, the Federal Judiciary voted to change its rules to support allowing citations to unpublished opinions. Two big caveats. One, it will only be for prospective opinions, meaning older cases are not suddenly going prime time. Two, the circuits will set their own rules for how much weight unpublished opinions should garner.

According to a study by the Milken Institute, the cost of doing business in Tennessee is lower than most of the U.S. The study ranks Tennessee 39th on the list of most expensive states for conducting business. Specifically, the study determined that the cost in Tennessee is about 86% of the national average. See the full article at the Nashville Business Journal.

Rees Morrison at the Law Department Management blog recently discussed companies hiring law firms on a contingent fee basis. Although contingency fees for a company suing another company are becoming more prevalent, a surprising number of companies don't realize how much they can improve their bottom line. As Rees points out, contingency fees "marry interests of company and outside counsel better than do hourly billing arrangements."

According to the Business Law Prof Blog, the Disney case settled while waiting on appeal. Given the Chancellor's findings of fact, this should not come as much of a surprise.

From the Nashville Business Journal: Davidson County Circuit Judge Randy Kennedy has ruled the move of the Maddox Foundation to Mississippi in 1999 was invalid because the director didn't follow Tennessee law. More here.

According to BusinessWeek, Hurricane Katrina is expected to have a significant effect on the economy. They anticipate rising oil and gasoline prices due to the shut down of rigging and importing in the Gulf states. BusinessWeek believes this will have a ripple effect throughout the national economy. The blow to the Southeastern United States should predictably be even greater. For a region dealing with the human catastrophe of a natural disaster, concerns about the near future economic forecast during recovery is salt on a fresh wound.

WIth so much customer data being stored on computers these days, potential (and actual instances of) theft is getting dangerous. If your customers' data is compromised, you have to tell your customers without endangering the relationship. Obviously, that's easier said than done. Here's a link to how to break the news to your customers that their private information may have been breached.

Over at May it Please the Court, they report that Congressman Michael Oxley calls SOX a "flawed jewel". According to the post, the Ohio Representative is looking to the SEC to relax the reporting requirements of corporations under SOX.

In the wake of the Delaware Chancery Court's ruling over Michael Ovitz's severance package, Disney has curtailed the power of its board of directors somewhat. Check out this article over at the L.A. Times.

Branham & Day is hosting two CLE seminars in December. The first, Fundamentals of Civil Litigation in Tennessee, is focused on information and techniques for new lawyers practicing civil litigation. The second, Beyond the Fundamentals, picks up where the first leaves off, providing advanced information for lawyers who have been in practice for some time. Both seminars will be held in Franklin, Tennessee. For more information, see our website or email me.

Harvard University, a professor, and a former staff member have agreed to settle a case with the U.S. Government for $30 million. Harvard agreed was under contract in the early 1990s to help reform Russia's economy into a free market. The suit alleged that the defendants made personal investments on the side.

Here is an article that analyzes the state of the law of punitive damages two years after the decision of the United States Supreme Court in State Farm v. Campbell.

The author clearly has a bias on the subject, but the article still has value.

You can file a suit for conversion if someone wrongfully prevents you from accessing your own property. What about your computer data? According to a New York judge, common law conversion works there, too. After an employee was terminated, the company locked her computer down, preventing her from accessing 14 years worth of work. The judge refused to dismiss the case.

If someone is blocking you from accessing all of your work files, my hunch is you mainly want an injunction to make them stop. A conversion suit, though, adds the possibility of recovering money for your down time.

Click here to view June County unemployment rates as posted by the Tennessee Department of Labor and Workforce Development.

There is a great post about how CEOs view the corporate legal department over at the Wired GC. It's important to remember that corporate leaders bring different mindsets to the table than the company's lawyers.