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The following excerpt is taken from Reorganizing Failing Businesses, Revised Edition A Comprehensive Review and Analysis of Financial Restructuring and Business Reorganization by Weil Gotshal & Manges LLP, Copyright 2006 by the ABA Section of Business Law. Reprinted here with permission. The material contained herein represents the
opinions of the authors and editors and should not be construed to be the action of either the
American Bar Association or the Section of Business Law unless adopted pursuant to the bylaws of
the Association. Nothing contained herein is to be considered as the rendering of legal advice for
specific cases, and readers are responsible for obtaining such advice from their own legal counsel.
To request reprint permission, contact the Manager, Copyrights and Licensing, at (312) 988-6102.
For the complete excerpt, click here
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Message from the Chair, Linda C. Hayman
The Section of Business Law has a long history of making positive
contributions to national debates on complex and difficult issues.
Recently, the scope of federal preemption of state laws has become such a
subject. The issue is of particular importance to members of Section
committees, including Banking Law, Consumer Financial Services, Federal
Regulation of Securities and State Regulation of Securities.
The case of Bates v. Dow Agrosciences LLC, 544 U.S. 431 (2005), in
which the Supreme Court held that the Federal Insecticide, Fungicide, and
Rodenticide Act ("FIFRA") did not preempt certain state law
claims against a manufacturer, prompted another ABA Section to ask the
House of Delegates to revise existing ABA policy on federal preemption. In
Bates, the Supreme Court stated that in areas of traditional state
regulation, it would assume that a federal statute has not supplanted state
law unless Congress has made such intention clear and manifest. While the
Bates case was decided in the context of federal preemption of state tort
law and breach of warranty litigation against a manufacturer, the issues
for the Section of Business Law reach well beyond the facts addressed in
Bates.
For example, many consumer financial services products (for example, credit
cards and mortgage loans) can be offered more widely and more efficiently
on an interstate basis. Federal banks rely on federal preemption of state
laws to offer such products. The issuance and distribution of securities
are also dependent upon federal preemption of state law. As recently as
1996, Congress passed legislation that adjusted the jurisdiction of the
U.S. Securities and Exchange Commission and the various state securities
regulators over the regulation of investment advisers, and the review and
substantive comment of investment company prospectuses.
To respond to this development, the Section has created a new Ad Hoc
Committee on Federal Preemption of State Law. Lynne Barr and Myles Lynk
have agreed to serve as co-chairs. Other members of the committee include
Michael Flynn, Dixie Johnson, Donald Lampe, Jeffrey Langer, Ellen
Lieberman, Martin Lybecker and James Scott.
The Ad Hoc Committee on Federal Preemption of State Law will be a
clearinghouse for the Section's considerable store of knowledge on this
important topic. The first task of the new ad hoc committee will be to
communicate with all of our committee chairs to determine the impact of
this issue throughout the Section. Members of the ad hoc committee will then
be preparing white papers. If you are interested in the work of this
committee, please click here to subscribe to the special listserve that has
been established for the group.
Other sections of the ABA, including the Tort Trial and Insurance Practice Section
("TIPS") and the Section of Administrative Law and
Regulatory Practice, also have an obvious interest in the subject
of federal preemption. TIPS and Administrative Law have agreed to form a
task force to explore this issue to determine whether new ABA policy in
this area is appropriate and if so, what that policy should be. Our
Section is eager to work with TIPS and Administrative Law in this endeavor,
and I have charged the new ad hoc committee with representing the Section
in this process.
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Linda C. Hayman
Chair, Section of Business Law
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"Daubert": More Important Than You Think in Business Litigation.
Review some of the most recent cases involving the admissibility of expert
witness testimony in business disputes, especially the testimony of
financial experts.
Deepening Insolvency as a Cause of Action—DOA in Delaware.
The Delaware Court of Chancery has issued a clear renunciation of an
independent cause of action based upon the theory of deepening insolvency.
Is the World Really an Oyster: Current Issues in Trade Finance.
Trade Finance—the financing of the importing and exporting of goods to
and from the United States—involves a consideration of: (1) various
bodies of law that affect sellers', buyers' and secured parties' interests
in goods that are moving between foreign ports and the United States; and
(2) the types of available commercial finance for these transactions.
Is Open Source Incompatible with Intellectual Property?
Proponents of open source software and other business models that seek to
provide public domain access to creative works are often critical of strong
intellectual property protection—especially as to legislation that
recognizes the right of copyright owners to utilize digital rights
management technologies, judicial interpretations of copyright law that
restrict file sharing, liability for contributory infringement of
copyright, and patentability of computer software and business methods.
Practice and Perils of Opinions on Alternative Entities.
Learn about the difficult issues involved in issuing opinion letters as to
alternative entities, especially as to limited liability companies.
M&A Agreement Can Constitute an Amendment of an ERISA
Plan.
Halliburton Company agreed, in a 1998 merger agreement governing the merger
of Dresser Industries, Inc. into a wholly owned subsidiary of Halliburton,
to maintain the Dresser retiree medical plan except to the extent
modifications were consistent with changes in medical plans provided by
Halliburton and its subsidiaries to active employees. Five years after the
merger, Halliburton, acting through its plan administrator, amended three
subplans of the Dresser retiree medical program with the goal of achieving
parity for all Halliburton and Dresser retirees. The amendments were not
consistent with changes in plans for active employees, as contemplated by
the merger agreement. The Fifth Circuit Court of Appeal enforced the
provision of the merger agreement that obliged the buyer to continue the
Dresser's benefit programs for its retirees.
M&A Nugget: Stapled Financing.
Stapled financing is a technique sometimes used in an auction of a company.
The investment banker conducting the auction offers prospective buyers -
often private equity funds - a package of financing that they can use to
consummate the acquisition. There are a number of positive aspects about
stapled financing, but some negative aspects as well.
PNB Holding: "Majority-of-the-Minority" Clarified.
In a recent decision, captioned In re PNB Holding Co. Shareholders
Litigation, 2006 WL 2403999 (Del. Ch. Aug. 18, 2006), the Delaware
Court of Chancery provided important guidance with respect to, among other
things, the possibility of using (and the proper standard for calculating)
a fully-informed, non-coerced vote of a majority of disinterested
stockholders (a "majority-of-the-minority") in order to invoke
the substantive protections of the business judgment rule in a case where
there is no controlling stockholder on both sides of a merger transaction.
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Committee Spotlight
To learn more about or join the committees that contributed to this month's practice points, just click on the committee name below.
Section members are eligible to join the Section's committees at no
additional cost. Become involved or simply stay in the information
flow. It's FREE!
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