GC Cheat Sheet: The Hottest Corporate News Of The Week

(March 6, 2020, 7:02 PM EST) -- Conference speakers urged firm general counsel to be wary as lawyers vie for cannabis work, and the U.S. Securities and Exchange Commission offered filing relief to companies affected by the coronavirus.

These are some of the stories in corporate legal news you may have missed in the past week.​

Firm GCs Must Be Aware as Shops Contend for Cannabis Work

As more states legalize cannabis for medicinal or recreational use, law firms may be eager to participate in the burgeoning industry. But general counsel must be wary of the potential landmines that lay ahead, speakers at Hinshaw & Culbertson LLP's Legal Malpractice and Risk Management Conference said Thursday in Chicago.

With a patchwork of state laws and ethical opinions to navigate and the conflicting federal law, attorneys seeking to operate in this space need to proceed with caution, said James J. Grogan, former chief counsel of the Attorney Registration & Disciplinary Commission of the Supreme Court of Illinois.

"You do your homework, you do your studying, and I think you can be successful," Grogan said, advising general counsel to start consulting bar associations or others in the professional liability space before taking the step toward establishing a cannabis team. "But you have to be so wary. You can advise something in a state tribunal, but the federal courts don't recognize it."

There are still many unanswered questions and potential risks, said Christopher Farella, general counsel at Epstein Becker & Green PC. Among them is the question of how to handle retainers and payments from clients who may be legally allowed to operate a cannabis business but may have to deal only in cash or other tenders, such as Bitcoin.

SEC Provides Filing Relief to Businesses Affected by Coronavirus

Companies affected by the coronavirus can get extra time to file certain regulatory disclosures, the U.S. Securities and Exchange Commission said Wednesday in its latest guidance on businesses' response to the outbreak.

Publicly traded companies affected by the COVID-19 virus will have an additional 45 days to file certain materials that would otherwise have been due between March 1 and April 30, the announcement said. The order may apply to U.S. companies located in areas affected by the virus or those with operations in those areas, the announcement said.

"While timely public filing of Exchange Act reports is a cornerstone of well-functioning markets, we recognize that this situation may prevent certain issuers from compiling these reports within required timeframes," SEC Chairman Jay Clayton said in a statement.

The announcement applies to a range of materials covered by the Exchange Act and associated regulations. For example, it could apply to annual reports for companies with different financial calendars, as well as the 6-Ks filed by certain foreign companies and 8-Ks, which signal notable events, said Adele Hogan, a partner at Nelson Mullins Riley & Scarborough LLP.

SEC Mulls Softening Limits on Private Offerings

The U.S. Securities and Exchange Commission on Wednesday proposed easing capital-raising rules on private companies, including increasing limits on early-stage crowdfunding and on so-called Reg A+ offerings, often described as miniature initial public offerings.

The SEC agreed by a 3-1 vote to release its proposal for public comment, potentially setting up a vote on a final draft this year. Commissioner Allison Herren Lee dissented on the proposal.

The SEC's 341-page proposal marks the agency's latest effort to spur capital raising, this time focusing on private companies after prior measures to relax rules on public issuers. The latest proposal largely focuses on two types of transactions companies might consider before or in lieu of an IPO.

The SEC is seeking to raise the limit on Reg A+ offerings to $75 million, up from the current cap of $50 million. Reg A+ offerings feature some similarities to traditional IPOs, but have stricter fundraising limits to compensate for otherwise lighter disclosure requirements.

Grammys Exec Fired Amid BigLaw Harassment Claim

The Recording Academy, the producer of the Grammy Awards, told its members it has ousted its chief executive following her public accusations of harassment against a Greenberg Traurig attorney retained as its general counsel, as well as misconduct accusations from her subordinates.

The organization said in a March 2 letter that the decision came after a third-party investigation into all allegations made by Deborah Dugan against attorney Joel Katz and allegations against Dugan by subordinates, though it did not provide details about the investigators' conclusions.

"The investigation overwhelmingly confirmed the serious complaints that had been lodged against her by a multitude of Academy staff members," Tammy Hurt, Recording Academy vice chair, said in a statement. "The damage she has caused this organization is truly heartbreaking."

Dugan, who recently updated her complaint before the Equal Employment Opportunity Commission, which she filed after being placed on administrative leave in January, criticized the decision to fire her.

Bayer, Google Among Cos. Urging Revisions to Expert Standard

Corporations including Google, PfizerAIG, Ford, Bayer US and helmet maker Riddell pressed a federal court committee on March 2 to change the standard on expert testimony in trials, saying some judges are shirking their "gatekeeper" duty by putting unscientific opinions in front of juries responsible for determining liability and awarding money.

The defense-focused group Lawyers for Civil Justice spearheaded the letter to the Committee on Rules of Practice and Procedure of the Administrative Office of the U.S. Courts, urging it to act at a meeting set for May 8 by formally opening a rulemaking process.

Liberty Mutual, Toyota, Hyundai, GlaxoSmithKline, Merck, Smithfield FoodsJohnson & Johnson and Becton Dickinson are also among the signatories, who want an amendment of Federal Rule of Evidence 702, which governs expert witnesses, who often make or break jury trials. In civil trials, injury claims require scientific support, sometimes of many flavors, for claims that a particular product or service is linked to harm.

Born of the 1993 Supreme Court ruling known as Daubert , Rule 702 has seen varying reception across the country, Lawyers for Civil Justice outside general counsel Alex Dahl told Law360.

As Legal Industry Shifts, 'Partnership Has Power'

Google Legal Operations Director Mary Shen O'Carroll encouraged the legal industry at a conference on Feb. 28 to embrace change together rather than in silos, as a massive shift occurs in the sector with an influx of new service providers and technologies.

"The ground is moving under our feet and no one person has the answers," O'Carroll said in the keynote speech at the American Bar Association's TechShow on Feb. 28. "Partnership has power."

In an industry that has traditionally been resistant to change, but where massive change has occurred and is still occurring, different organizations and groups — such as law schools, law firms, in-house legal departments and alternative legal service providers — can collaborate to find solutions to their common problems, O'Carroll said.

"I envision a legal industry that is open to new people and new ideas and where we can all work together to come up with a better future for all of us," she said.

Coronavirus Abounds In Risk Disclosures As Outbreak Spreads

Public companies are rapidly updating their risk disclosures in response to business threats posed by the deadly spread of the coronavirus, creating challenges for issuers and their attorneys alike as they try to navigate uncharted waters.

As of Feb. 28, 606 public companies have mentioned the new coronavirus in the "risk factors" section of their periodic reports and prospectuses, Securities and Exchange Commission filing data from Intelligize show. Many came in the last few days, as March 2 was an SEC deadline for certain large companies to file their annual 10-K reports, though some companies have until later in March. Intelligize is also owned by Law360 parent company Lexis Nexis.

SEC rules require that public companies warn investors of plausible business or legal risks that could affect their operations without being overly boilerplate. Failure to provide adequate "risk factor" disclosures could invite litigation from investors in the event of a stock drop.

Characterizing risks from ongoing and unpredictable events can be dicey to begin with for a company, which seeks to disclose information without sounding needlessly scary. Lawyers note that the threat posed by the coronavirus is in many ways distinct given the rapid spread of the disease and steady flow of new revelations, which have roiled global financial markets for days.

Q&A: 15 Minutes With Coinbase's Chief Legal Officer

One of Brian Brooks' missions as the chief legal officer at digital currency exchange Coinbase is to break the status quo by showing people that cryptocurrency is similar to the development of other innovations, including the telephone and the internet.

"There's an inherent, human bias in favor of the present," he said. "Long, long ago, people didn't want telephones because the telegraph and the Pony Express were well known and the telephone made noise and it intruded at dinnertime. It seems crazy today that we wouldn't have had the telephone. But that was super controversial."

He recalled being a young lawyer in the early 1990s when he said the American Bar Association advised against transmitting privileged information over the internet because doing so would waive privilege.

"Nobody thinks that today," Brooks said. "But there was such a strong bias in favor of writing letters on a typewriter that people just couldn't see the future."

In a recent interview with Law360, Brooks, who previously was the general counsel at Fannie Mae, shares more about his priorities, what attracted him to Coinbase and his 2020 predictions for the cryptocurrency space. 

--Additional reporting by Celeste Bott, Elise Hansen, Tom Zanki, Emma Cueto, Cara Salvatore and Aebra Coe. Editing by Kelly Duncan.

For a reprint of this article, please contact reprints@law360.com.

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