Corporate The Counselor - Blank Rome

By Sandra Feldman

This edition of the Quarterly State Compliance Review looks at some legislation of interest to corporate lawyers that went into effect on Jan. 1. It also ex-amines some recent decisions of interest, including one from the Delaware Supreme Court dealing with an appraisal, and two from the Delaware Chan-cery Court dealing with Dela-ware’s alternative business or-ganizations.

IN THE STATE LEGISLATURES

In several states, legislation af-fecting corporations, LLCs and other types of business organiza-tions went into effect on Jan. 1. Highlights include the following:

In California, Assembly Bill 1394 amends the penal code sec-tion imposing punishment on a corporation that willfully manu-factures, intentionally sells, or knowingly possesses for sale any counterfeit registered trade-mark to make the punishment also applicable to LLCs and part-nerships. In addition, Assembly Bill 2749 provides that a Califor-nia state depository corporation may merge with a corporation or other business entity that is not a depository corporation if the California state deposi-tory corporation is the survivor. Formerly, such a merger was prohibited.

In Hawaii, Senate Bill 3171 requires every public benefit

By Mark Blondman and Brooke Iley

In November 2008, the U.S. Department of Labor published revised regula-tions to the Family and Medical Leave Act (FMLA or the Act) for the first time in the Act’s 15-year history. The much anticipated regulations are over

750 pages long and take effect on Jan. 16, leaving scant time for employers to implement new procedures to comply with the law. The most significant of these changes are addressed herein.

Top FIvE CHANGESNew Entitlements to Military FMLA Leave

The National Defense Authorization Act (NDAA), signed by President Bush last January, amended FMLA to provide two new entitlements, military caregiver leave and qualified exigency leave. Both of these new leaves may be taken on an intermittent or reduced schedule basis. The new FMLA regulations define these leaves as follows:Military Caregiver Leave

Eligible employees who are family members of “covered servicemembers” may take up to 26 workweeks of leave in a 12-month period to care for a servicemem-ber with a serious illness or injury incurred in the line of duty. A covered service-member must be a member of the Armed Forces, including the National Guard or Reserves, who has a serious injury or illness for which he or she is undergoing medical treatment, recuperation or therapy; otherwise in outpatient status; or otherwise on the temporary disability retired list. Former members and members on the permanent disability retired list are not covered.

To be eligible, an employee must be the “next of kin” of a covered servicemem-ber, which is defined as the servicemember’s nearest blood relative, other than his or her spouse, parent, son or daughter, in a particular order of priority. A cov-ered servicemember may, however, designate in writing another blood relative

In This IssueNew FMLA Regulations . . . . . . . . 1Quarterly State Compliance Review . . 1Confidential Information . . . . . . . . 3Q&A with Joseph Speelman . . . . . . . . . 5Data Mapping . . . . . . 7SEC Enforcement Settlements . . . . . . . 11

PERIODICALS

Volume 23, Number 8 • January 2009

Corporate Counselor®

The

New FMLA Regulations: What Every Employer Should Know

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Quarterly State Compliance Review

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2 The Corporate Counselor ❖ www.ljnonline.com/alm?corp January 2009

EDITOR-IN-CHIEF . . . . . . . . . . . . Adam J . SchlagmanEDITORIAL DIRECTOR . . . . . . . . Wendy Kaplan AmpolskMARKETING DIRECTOR . . . . . . . Jeannine KennedyGRAPHIC DESIGNER . . . . . . . . . . Louis F . Bartella

BOARD OF EDITORSJONATHAN ARMSTRONG . . Eversheds, LLP London, UKHEATHER R . BADAMI . . . . . Bryan Cave LLP Washington, DCSTEVEN M . BERNSTEIN . . . . Fisher & Phillips, LLP AtlantaVICTOR H . BOYAJIAN . . . . . .Sonnenschein Nath & Rosenthal LLP Short Hills, NJJONATHAN M . COHEN . . . . Gilbert Oshinsky LLP Washington, DCDAVID M . DOUBILET . . . . . . . Fasken Martineau DuMoulin, LLP TorontoSANDRA FELDMAN . . . . . . . CT Corporation New YorkWILLIAM L . FLOYD . . . . . . . McKenna Long & Aldridge LLP AtlantaJONATHAN P . FRIEDLAND . . Levenfeld Pearlstein LLP ChicagoBEVERLY W . GAROFALO . . . Thelen Reid Brown Raysman & Steiner LLP Hartford, CT

ROBERT J . GIUFFRA, JR . . . . Sullivan & Cromwell LLP New YorkMICHAEL L . GOLDBLATT . . Tidewater, Inc New OrleansHOWARD W . GOLDSTEIN . . Fried, Frank, Harris, Shriver & Jacobson New YorkROBERT B . LAMM . . . . . . . .Pfizer Inc . New YorkJOHN H . MATHIAS, JR . . . . . Jenner & Block ChicagoPAUL F . MICKEY JR . . . . . . . . Steptoe & Johnson LLP Washington, DCELLIS R . MIRSKY . . . . . . . . . The Network of Trial Law Firms Tarrytown, NYREES W . MORRISON . . . . . . Rees Morrison Associates Princeton Junction, NJE . FREDRICK PREIS, JR . . . . Lemle & Kelleher, L .L .P . New OrleansSEAN T . PROSSER . . . . . . . . Morrison & Foerster LLP San DiegoDAVID B . RITTER . . . . . . . . . Neal, Gerber & Eisenberg LLP ChicagoDIANNE R . SAGNER . . . . . . .FTI Consulting, Inc . Annapolis, MDMICHAEL S . SIRKIN . . . . . . Proskauer Rose LLP New YorkR . MICHAEL SMITH . . . . . . . Dechert LLP Washington, DCSTEWART M . WELTMAN . . . Weltman Law Firm Chicago

The Corporate Counselor® (ISSN 0888-5877) is published by Law Journal Newsletters, a division of Incisive Media . © 2009 . Incisive

US Properties, LLC . All rights reserved No reproduction of any portion of this issue is allowed without written permission

from the publisher . Telephone: (800) 999-1916 Editorial e-mail: wendy .ampolsk@incisivemedia .com Circulation e-mail: customercare@incisivemedia .comReprints e-mail: lauren .melesio@incisivemedia .com

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as “next of kin” for purposes of mili-tary caregiver leave. In the absence of a designation, all family members sharing the closest level of familial relationship to the servicemember shall be considered the servicemem-ber’s next of kin. This means that when a servicemember has three siblings, all three siblings could be considered next of kin and eligible to take 26 weeks of leave, even if working for the same employer. This definition alone significantly broad-ens employees who could be eligi-ble for FMLA leave.Qualifying Exigency Leave

The new regulations also define under what circumstances military families can utilize FMLA leave. Employees with a “covered military member” serving in the National Guard or Reserves may take up to 12 weeks of job-protected, unpaid leave for any “qualifying exigency” arising out of the fact that a covered military member is on active duty or called to active duty status. A cov-ered military member refers only to members of the National Guard or Reserves, not to members of the Armed Forces generally.

The final rule defines what types of events are a qualifying exigency: 1) short-notice deployment in sup-port of a contingency operation; 2) military events and related activities; 3) non-routine childcare and school activities; 4) financial and legal ar-rangements; 5) counseling, pro-vided that the need for counseling arises from the active duty or call to active duty status of a covered mili-tary member; 6) spending time with a covered military member who is on short-term, temporary, rest and recuperation leave; 7) post-deploy-ment activities; and 8) activities not

encompassed in the other catego-ries, but agreed to by the employer and employee.

CERTIFICATIoN pRoCEdURESMedical Certification Process

Under the old regulations, em-ployers were barred from directly contacting health-care providers to discuss medical certifications. Now, employers may directly contact an employee’s health-care provider, with some limitations. First, the em-ployer must provide the employee an opportunity to cure any deficiencies in the certification. If the deficien-cies are not rectified, the employer must use a health-care provider, hu-man resources professional, leave administrator, or a management of-ficial to contact the provider. Under no circumstances, however, may an employee’s direct supervisor contact the employee’s provider.Fitness-for-Duty Certifications

Under the current regulations, em-ployers could only require a “simple statement” from the health-care provider regarding the employee’s ability to return to work. Under the new regulations, the employer can require the fitness-for-duty report to address the “essential functions” of the job, as long as the employer pro-vides a list of the essential job func-tions to the employee when leave is originally designated.

With respect to intermittent leave, employers could not require an em-ployee on such leave to submit a fitness-for-duty certification before returning to work. Under the new regulations, employers can require employees on intermittent leave to submit a fitness-for-duty certification before returning to work as often as every 30 days when leave is taken during that time period, if there are reasonable safety concerns present, and the practice or policy is uniformly applied for all leaves of absence.Recertification Procedures

Previously, employers could gen-erally request a recertification after the durational period specified in the original medical certification passed. Consequently, for many chronic or lifetime conditions, health-care

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FMLA Regulationscontinued from page 1

Mark Blondman and Brooke Iley are partners in the Employment, Benefits and Labor practice at Blank Rome LLP in Washington, DC. Blond-man may be reached at [email protected] or 202-772-5800, Iley may be contacted at 202-772-5816 or [email protected].

January 2009 The Corporate Counselor ❖ www.ljnonline.com/alm?corp 3

By David J. Walton

What is confidential information? Just about every employer has infor-mation it claims is “confidential” — typically something unique to the business. But many employers mis-takenly believe all of their informa-tion is “confidential” under the law. In fact, many standard confidential-ity clauses classify everything, in-cluding the proverbial kitchen sink, as confidential.

These overbroad notions actu-ally do a disservice to companies — making it increasingly difficult for courts to determine what is truly confidential and deserves legal pro-tection. Because their analysis is very fact-intensive, courts have actually reached conflicting and sometimes contradictory decisions. As a result, it can be challenging for companies to predict exactly what information will be deemed confidential.

With this complicated landscape — and a down economy making competitive information even more vulnerable — now is the time to ensure your confidentiality policies and practices are sound and defend-able. Here’s a look at the dichotomy between trade secrets and confi-dential information; the common misconceptions about confidential information; how to make the con-fidentiality argument; and tips for counsel to preserve confidentiality.

TRAdE SECRETS vS. CoNFIdENTIAL INFoRmATIoN

There are two types of confidential information: trade secrets and the ubiquitous confidential information.

A trade secret usually includes a formula, drawing, pattern, compila-tion (possibly including a customer list) program, device, method, tech-nique or process. It is something that has independent economic value, because it is not generally known or readily ascertainable by others. Trade secrets also have some economic value from their disclo-sure or use.

And, importantly, companies must take reasonable efforts to protect their trade secrets, generally protect-ed under some version of the 1979 Uniform Trade Secret Act (“UTSA”). Since its inception, numerous states have adopted a version of UTSA, and most states simply parrot the language.

But UTSA’s trade secret definition clearly does not apply to all types of information that an employer would consider confidential. Some courts have ruled that if a state adopts UTSA, then an employer has no legal protection for confidential in-formation that is not a trade secret. Other courts have taken the oppo-site approach, finding an employer still has legal protection for trade secrets and confidential informa-tion that does not rise to the level of trade secrets. The key is to separate fact from fiction and understand what information can be protected in court.

CommoN mISCoNCEpTIoNSBeyond mistakenly assuming that

if it’s confidential, it must be a trade secret, there are other misconcep-tions regarding confidential infor-mation.

Myth: We say it’s confidential, so it is. Many companies believe that everything at, about and learned in their workplace is legally confi-dential and cannot be disclosed to a competitor. But not everything that an employee learns is confidential. If it was, then all employees would have to receive a frontal lobotomy if they left their current employer to join a competitor. Calling something confidential is less important than how an employer actually treats the information.

Myth: All proprietary information is confidential. Just because the em-ployer owns the information does not mean it is confidential. If the in-formation is available from another publicly available source, a court will not treat it as legally confiden-tial.

Myth: The identity of customers and knowledge of their preferences are always private. Many employers believe that the identity of their cus-tomers is sacrosanct. Once they ex-pose an employee to their customer base, the argument goes, the em-ployee is not permitted to go to the competition because he/she knows the identity of his/her former em-ployer’s customers.

More often than not, this is not true. It can be easier than you think to find out who the customers are for a given product or service. Nu-merous trade associations, indus-try and lobbying groups post their membership lists on the Internet. And, there are many organizations dedicated to providing potential customer lists and leads to various types of companies. Unless your company has a secret customer that no one else knows about, the iden-tity of customers alone is probably not confidential.

What’s more, many claim knowl-edge regarding customer prefer-ences (e.g., purchasing preferences) is highly confidential. While this may be true because you would not want your competition to have this type of information, it does not mean that employees should be prevented from going to the compe-tition mainly because they have this information in their heads. If the competition knows who the poten-tial customers are, this type of infor-mation could be available simply by asking these particular customers what they like and dislike about a certain product or service.

Myth: Non-compete agreements are easy to enforce, so we don’t have to worry about employees taking our confidential information to a com-petitor. A non-compete agreement is not automatically enforceable,

David J. Walton ([email protected]) is a member in Cozen O’Connor’s La-bor & Employment Practice Group. Vice-chair of the firm’s E-Discovery Task Force, Walton recently won a $7 million jury verdict on behalf of a U.S. company whose trade secrets were stolen by former employees.

Company Confidential

Building the Case for Protection

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with some states actually outlawing certain types of non-compete agree-ments. Even in the states where these agreements are enforced, courts uni-versally disfavor them and require that they be narrowly tailored. In fact, some courts will not enforce a non-compete if it’s overbroad. Thus, while non-competes are a great way to protect confidential information, they must be carefully drafted and used only in certain states.mAkING THE CASE FoR CoNFIdENTIALITy

First, the most important thing is to treat confidential information as actually being confidential. If you are going to claim that client identi-ties or client lists are confidential, then ensure you do not identify your key clients on your website. If a particular document or data com-pilation is considered to be confi-dential, stamp it confidential. It’s much easier to persuade a jury that a document is confidential when the employer actually designates it as such from the beginning. While this isn’t foolproof, you don’t want to be on the stand trying to convince a jury that a document is confidential, when the actual word is not on it.

The general rule is that the eas-ier it is to acquire the information, the less confidential the court will consider it to be. Therefore, sec-ond — with courts looking at how much time was spent on developing or compiling the information — be vigilant in tracking your efforts to develop certain types of informa-tion. Think in terms of hours and re-lated resources, using cost-account-ing methods to record how much it costs your company to develop and maintain a customer database, central lead network and financial information. This is the type of evi-dence that jurors and judges look for when deciding if your informa-tion is worthy of legal protection.

Third, don’t classify information that is old and has no historical val-ue as confidential. We live in a digi-tal age where information becomes stale within days, if not minutes.

Fourth, don’t make a trade secret publicly available. However, if it’s confidential, information can still be publicly available and warrant some legal protection. For example, a list of customers’ names may be avail-able on the internet. But, if an em-ployee steals a list of these names and uses it to compete, the employer is still injured. In these cases, courts treat the list as proprietary and find that the employee can be liable for stealing and using the list.

pRESERvING CoNFIdENTIALITyOnce you make the argument for

confidentiality, there are strategies you can use to gain ground in pre-serving critical company informa-tion and strengthening your argu-ment in court.

Train your employees. It’s a no-brainer to ensure everyone signs confidentiality/non-disclosure poli-cies explicitly outlining what’s con-fidential and what cannot be dis-closed outside the workplace or to a competitor. But it is also important to train employees at orientation time about how to treat such private information and the importance of preventing breaches. This is good evidence that a company took rea-sonable steps to protect its secrets.

Use non-compete and non-solic-itation agreements. Failure to use a non-compete or non-solicitation agreement can be used against you. It shows that the information truly is not confidential if you have not taken the basic measures to protect it. Have your employees agree to a non-compete or non-solicitation, and ensure it is enforceable in your particular jurisdiction. Often, these agreements alone can provide all the protection an employer needs to protect its confidential information. But, at the same time, as discussed, it’s important to ensure non-com-petes are legal in your jurisdiction and drafted to maximize their po-tential enforceability. An overbroad non-compete is worthless.

Limit access to your confidential information. Of course, third par-ties should not have access to your confidential information unless there is a non-disclosure or a confidenti-

ality agreement in place. Similarly, you should not allow third parties to freely roam your workplace. Imple-ment a security protocol for visitors. Juries expect companies, at a mini-mum, to put these security measures into place. For your employees, make sure that truly confidential informa-tion is not disseminated to employ-ees who do not need to know about it. Also, consider storing your really confidential information on a sepa-rate network that only certain em-ployees can access. Again, this will help convince a jury that you took extra care to protect your most sensi-tive information.

Watch your Web sites. There are numerous instances where compa-nies have claimed that information is confidential, only to later discov-er that it is actually live on their site. So, be very careful of what you post. Ensure that someone outside of your technical group monitors what is posted so you can avoid these types of embarrassing and costly situations.

Eliminate confidential informa-tion at home. Telecommunicating can present dangers for possible breaches. If a lot of your employees work from home, you need to be careful about them keeping all kinds of information on their home com-puters. Once the confidential infor-mation leaves your workplace, it is difficult to track. Consider adopting a policy where employees are not permitted to store company infor-mation on their home computers.

Restrict/prohibit use of flash drives. Flash drives also can jeopardize confidential information. It is very easy to copy an e-mail with a con-fidential attachment from a work computer to a flash drive and then take that information home. Think about setting up your computers so they are not able to download in-formation to flash drives. This may prevent a lot of future headaches.

Go old-school — use paper. Con-sider disseminating confidential in-formation via the old-school paper way rather than through e-mails with attachments. Once you click

Company Confidentialcontinued from page 3



As the rate of litigation against corporations continues to increase, the majority of lawsuits are still set-tling out of court as large compa-nies try to buy off their adversaries. Joseph Speelman, Associate General Counsel of Fortune 100 chemical company LyondellBasell, is a prom-inent exception to this trend. He settles only as a last resort and will simply refuse to pay tribute.

Here, Mr. Speelman discusses how he has transformed the company’s legal department into a profit cen-ter with an aggressive strategy to fight unwarranted lawsuits and pur-sue plaintiff actions in B2B disputes when appropriate.

Mr. Speelman began his 12-year tenure with Koch Industries, Inc. in 1980, later becoming General Coun-sel of Koch Oil Company. Upon join-ing Lyondell Petrochemical Compa-ny in 1993, he was named Associate General Counsel for Commercial Law and Litigation. There, he has successfully participated in the trial and management of litigation relat-ed to business activities for several companies, including Lyondell, in disputes with national and inter-national opponents. He also over-sees corporate security and compli-ance matters and has presided over claims involving antitrust, complex environmental issues, mass tort liti-gation (including lead paint, asbes-tos, benzene and MTBE litigation), internal corporate investigations, and complex international claims involving entities owned by foreign sovereigns.

Q.: Tell us about LyondellBasell Industries (including the recent merger that created the company). What is its primary business within the chemical industry? What does it

produce, distribute, etc?A.: LBI is a large chemical and re-

fining conglomerate headquartered in Rotterdam, Holland. Our primary businesses are ethylene production, refining, fuels production, and poly-mers manufacturing.

Q.: We understand you recently spoke at the LMA’s Houston chapter meeting about litigation manage-ment and strategy. Is litigation the company’s biggest legal issue? What other legal challenges affect your work?

A.: Litigation is indeed one of the company’s biggest legal problems — but only because it is a big prob-lem for all companies that have a large U.S. presence. While litigation is a concern, we have drastically re-duced our costs in this area because of an aggressive strategy of taking many cases to trial. LyondellBasell has secured enough verdicts and dismissals that are reflected in our bottom line. In addition, I believe this strategy has prevented some suits from ever being filed because plaintiffs counsel know that if they bring an action, there will be no settlement.

Our other problems are the ones companies also typically face while trying to make, buy, and sell things in the U.S. in the current environ-ment: high raw material costs, low margins, demanding regulatory agencies, and a shaky economy.

Q.: Within litigation, what are the primary types of cases? Where is the greatest volume? Where is the great-est severity?

A.: We have toxic torts, antitrust, commercial disputes, employment, environmental, intellectual property, regulatory, personal injury, property damage, and shareholder suits. The greatest volume is probably toxic tort, which includes asbestos, but most of them are facility cases. Tox-ic tort is where the greatest severity and risk are, especially lead-related litigation.

Unfortunately, a “settlement cul-ture” dominates tort law. When I joined the company 16 years ago, I realized this philosophy would be financially devastating. Too many

decision are made today by accoun-tants, not lawyers. And this “account-ing mentality” results in individual decisions that lead a company to bankruptcy, one case at a time.

Because LBI has developed a rep-utation for refusing to settle frivo-lous claims, its case count is much lower than most companies — and certainly much lower than all com-panies our size.

Q.: How has the merger affected your work? Are there now global di-mensions to your work that were not there before and, if so, what steps have you taken to address that?

A.: The merger has resulted in a few more high-profile matters, but not many. It was Lyondell that brought the U.S. litigation to the merger, while Basell brought quite a bit of non-U.S. activities that do not have significant volume or seri-ous types of litigation or claims.

Of course there are global as-pects to all litigation. I wouldn’t call the post-merger global dimensions “new,” but certainly the cross-border issues involving discovery, investiga-tions, compliance, and antitrust are more complicated and require quite a bit more coordination internally.

Q.: How would you differentiate your litigation strategy and can you give us specific examples of how it’s paid off for LyondellBassell?

A.: I would characterize our liti-gation strategy as philosophy rath-er than a strategy or a tactic. It is principle-based. We make litigation-related decisions based on a clear set of principles that reflect the core values of the company itself. Impor-tantly, we do not settle cases where we have done nothing wrong. We relentlessly contest frivolous liti-gation and mass litigation driven solely by the narrow interests of the plaintiffs’ bar.

Our strategy paid off recently with the complete vindication of an LBI subsidiary in the Rhode Island lead paint litigation. We had a judgment reversed and rendered in our favor by the Rhode Island Supreme Court. Our strategy likewise paid off with the resolution of 59 MTBE cases for

Turning a Legal Department into a Profit Center

Q & A with Joseph Speelman, Associate General Counsel of LyondellBasell

continued on page 6


a diminimous amount. While co-defendants, notably including major U.S. refiners, paid over $423 million. LBI paid $449,000, essentially noth-ing.

I believe this litigation philosophy is not a choice, but rather a neces-sity. When roughly 90% of toxic tort claims are frivolous, for instance, why is it 90% of toxic tort cases are settled? If LBI is not responsible, we simply will not settle.

Q.: Your philosophy is “fight, don’t settle, when you’ve done nothing wrong” — do you find that message resonates with outside counsel? Do they push back against this notion?

A.: Absolutely. LBI has created a passionate, loyal community of law-yers from many different firms.

We choose lawyers, not firms. The outside counsel who represent us expect and appreciate our philoso-phy. In fact, the strategy is some-thing they have now come to insist upon in the cases they handle for us. As attorneys, they respect direct-ness and integrity in the litigation decision-making process.

It’s a simple but very significant fact: Lawyers want to win. Unfortu-nately, they find it quite rare that a client will insist on winning. Clients must embrace this philosophy in or-der for it to be successful, and they need to have the stomachs to see it through. I’m sure that many of these lawyers get frustrated. With us, they are free to be aggressive and to suc-ceed. They are exhilarated to be working with us, and very, very in-tense in how they go about it.

Q.: Do you find that your liti-gation philosophy is having any impact on other companies or in-house counsel?

A.: I can’t say LBI’s approach has had a direct impact on counsel for other companies. In terms of the other companies with which we have direct contact during multi-party litigation, some of their out-side counsel have expressed outrage that we would not go along with certain settlements they cooked up. I suspect our approach was making

them look like they overpaid settle-ments, or that they did not assert their clients’ interests effectively enough.

I believe the settlement mental-ity runs deep and there just aren’t enough trial attorneys in the field. They understand the long-term fi-nancial benefits to fighting frivolous payouts. However, there are other large companies that do share our philosophy. Exxon Mobile, for in-stance, has also developed a reputa-tion for fighting unnecessary settle-ments, and they’ve become less of a target because of it. Once a com-pany proves that it is not easily in-timidated, it will be left alone.

Q.: You’ve said that the Lyondell-Bassell litigation practice is actually a profit center, rather than a cost center. How basically can corporate counsel achieve that?

A.: We take responsibility for all litigation in which the company is involved both as a defendant and plaintiff. The costs and results, ei-ther a settlement or judgment, against or for LBI, are accounted for by the litigation group and reported monthly to the senior management of the company.

By rejecting unnecessary settle-ments, we have reduced costs and the incidence of claims against us, and, at the same time, by assist-ing in the appropriate assertion of claims in situations where LBI is owed money, LyondellBassell is in a “negative” true cost of litigation.

It is unheard-of for major U.S. corporations, but I maintain that in-house counsel can achieve such results by adopting the resolute principle-based litigation strategy process that we’ve discussed. And, they should do so, not just with their client’s consent, but with the client’s active involvement.

Q.: You’ve used famous plaintiff’s firms as part of your litigation strat-egy. What are your thoughts on the dynamics — how they differ from traditional firms, how other in-house counsel should consider us-ing them?

A.: Effective plaintiffs’ counsel are very aggressive. We pick attor-

neys based on their ability to see the issues in a matter quickly and they work together in this “virtual firm” we’ve created. Our firms, like Susman Godfrey, seize on the key points immediately. They are agile and mobile and incredibly efficient. They are trained and accustomed to being very, very efficient because they often are working on their own money. It’s in their interest to be cost-efficient. LBI’s counsel are recognized for their good work and it’s my job to keep people out of their way.

Counsel should use plaintiff firms to do plaintiff work. It is simply common sense.

Q.: Is there any other advice re-garding litigation you’d like to offer to other in-house counsel?

A.: Litigation is not a side show. Nor is it something that lawyers can or should avoid in their careers. 2009 is predicted to be “the Year of Litiga-tion” or to put it in the terms com-mon in Chinese culture, I refer to it as “the Year of the Rat and Snake.” This will be especially true for the fi-nancial industry in months to come. Therefore, all — I repeat, ALL — in-house counsel should spend signifi-cant time working in litigation as a practitioner or manager. It trains

Q&Acontinued from page 5

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By Brett Tarr

For many in-house counsel, staying afloat in today’s litigation and finan-cial environment has become increas-ingly difficult. The amount of data that flows through companies has ex-ploded while compliance measures have increased and deadlines for dis-covery have gotten shorter. The cur-rent economic troubles can slam legal departments in several ways — not only are companies tightening their belts wherever possible, but certain types of lawsuits tend to increase dur-ing financial downturns.

According to the U.S. Equal Em-ployment Opportunity Commission, the number of discrimination com-plaints increased 9% in 2007. The EEOC speculates that at least some of that growth is due to “changing economic conditions.” And if the past year is a guide, discrimination lawsuits could certainly increase as the economy looks turbulent for the foreseeable future, and organi-zations will be forced to continue downsizing their workforce.

The struggle to stay on top of liti-gation in 2009 could get worse be-fore it gets better for corporate legal departments. It’s enough to make many wish they had a field guide to find their way through the forest of lawsuits. Fortunately, there are ways that in-house counsel can proactively prepare for litigation and regulatory and compliance issues, easing the burden of discovery while increasing the defensibility of their processes and procedures. Developing a data map of an organization’s information flow is one important step.

WHAT IS A dATA mAp?A data map is a visual reproduc-

tion of the ways that electronically stored information (ESI) moves throughout companies, from the point it is created to its ultimate destruction as part of the organiza-tion’s document retention program. At its heart, data maps address how people within the organization com-municate with one another and with others outside the organization.

A comprehensive data map pro-vides legal and IT departments with a guide to the employees, processes, technology, types of data, and busi-ness areas, along with physical and virtual locations of data throughout a company. It includes information about data retention policies and enterprise content management pro-grams, as well as identifies servers that contain data for various depart-ments or functional areas within the organization. This highly effective form of information organization also takes into account high-risk is-sues such as the type of litigation a company is facing or is likely to encounter in the future.ELEmENTS oF dATA mAppING

A data map represents the intersec-tion of the expertise of IT and legal departments, and it should illustrate the limitations or boundaries of how information is moved and stored. It allows in-house counsel to see where data resides, not just for litigation purposes but for regulatory and com-pliance issues, as well as proactive in-formation management initiatives.

In order to be effective, a well-constructed data map should il-lustrate several aspects: it should offer a snapshot of employees and the technology tools they use and it should show which servers and which types of servers are utilized by each functional area and depart-ment within the organization. An-other key element that can be dis-cerned from a data map is whether an organization’s data tends to be more unidirectional or bidirection-al. Unidirectional data flows one way, from the source to the target. Bidirectional data flows two ways. Different types of information lend themselves to either being unidirec-tional or bidirectional, and it is im-

portant for in-house counsel issuing litigation hold notices and conduct-ing discovery to understand how both fit into an organization.

The locations, formats and methods for storing data represent major is-sues in e-discovery, and these should be thoroughly recorded on a data map. That includes detailing whether data is stored online, near-line or of-fline. Under the revised Federal Rules of Civil Procedure and according to some recent case law, data that is not “reasonably accessible” does not need to be produced in a lawsuit. However, there is not a bright-line rule in many jurisdictions for what constitutes “reasonably accessible.” If a company claims that certain data is difficult to access, a map that shows where that data can be found and in what formats it exists can help courts more effectively determine whether such data is inaccessible and weigh the cost and burden of forcing pro-duction of such data.

Beyond tracking whether data is accessible or not, a properly devel-oped data map also can help the legal department ensure that data is being backed up and stored properly, in accordance with the organization’s document retention procedures. For example, if the company retention policy calls for all backup tapes to be discarded after three years, a data map should reflect that and counsel actually can isolate where data would be kept and confirm the presence or absence of data outside of the rel-evant retention period. At the same time, when an organization needs to issue a litigation hold notice, knowing which employees represent potential custodians and others that are closely connected to these custodians can help in crafting an effective but not overly broad litigation hold; this will serve to not only simplify the task of ensuring that potentially discoverable information is being exempted from the usual data destruction cycle, but also reduce the costs of discovery by limiting the pool of data retained un-der the litigation hold.HoW To TRACk ANd LoCATE INFoRmATIoN

The goal of a well-constructed data map should be to connect people to

Finding Your Way Through Discovery By Data Mapping

continued on page 8

Brett Tarr serves as general counsel for eMag Solutions, based in Atlanta. Before joining eMag, he worked as a practicing attorney at King & Spald-ing LLP, and has held chief operat-ing officer, legal counsel, and senior marketing executive positions for several corporations over the past 10 years. Tarr can be reached at [email protected].


the information they create, and in-house counsel will need the assis-tance of the IT department to do a thorough job. The human resources department also may need to be involved in the process, to provide updated organizational charts and insights into the activities of differ-ent employees.

But it is the IT department that can provide the information about the different hardware, software, serv-ers and formats the company utiliz-es. The experts in IT should know, among other things, which depart-ments have data stored on which servers, which personnel have ac-cess to different data stores, as well as more granular information such as which employees have personal digital assistants and whether infor-mation from those PDAs resides in separate areas from traditional e-mail and other electronically stored information.

With the overview offered through creation of a comprehensive data map, it may be possible to simplify server and data storage systems as well. By tying organizational charts to information flow, in-house coun-sel can save a great deal of time and effort during discovery. If the entire finance department’s data re-sides on a single server, it becomes much easier to hone in on relevant information during discovery.

oNE ASpECT oF THE E-dISCovERy STRATEGy

A data map should be one part of a company’s records management policy and e-discovery strategy. Dur-ing a typical litigation case, the le-gal department works with outside counsel, consultants, and other ser-vice providers to begin scoping po-tentially relevant information. This process typically starts with review-ing an organizational chart to iden-tify key potential custodians. With a data map, the legal department can quickly drill down to identify sourc-es of potentially relevant discover-able data. An organizational chart will tell you who a given employee is connected to in an authority rela-tionship (both subordinate and su-

periors), but it will not necessarily reveal the communication patterns across departments, and between finance, HR and legal. A data map, however, will allow organizations to examine e-mail threads and chart communication patterns of individ-uals, revealing previously unconsid-ered patterns and relationships that may not be obvious from a flat, hier-archical organization chart.

The pressure on in-house counsel to conduct quick, efficient discovery has increased since 2006, when the federal rules were amended; under the revised federal rules, litigants have a limited amount of time to pre-pare for the initial meet-and-confer with opposing counsel, where they identify and attempt to resolve issues that relate to preserving and produc-ing ESI. So the faster in-house coun-sel can identify and collect poten-tially discoverable information, the more time they have to review it.

A data map also can be extremely helpful in defending the company’s discovery processes and proce-dures before the court and oppos-ing counsel. With a data map readily available, it becomes easier to show how a company has complied with the terms of discovery and makes their internal processes more trans-parent to both opposing counsel as well as the courts. FoUR TIpS oN CREATING ANd mAINTAINING A dATA mAp

Creating a data map that fits the needs of the legal department can be a considerable undertaking, and will involve close communication with IT professionals; but when it is done properly, a data map will save time, money, and frustration amidst the stress of issuing litigation hold no-tices and engaging in discovery. To ensure that your data map is ready and effectively allows you to access the information you need when you need it, follow these four steps:Involve Other Departments and Managers Early On

IT and HR are valuable partners in the creation of organizational data maps, and so are departmental managers. Managers know the peo-ple, systems and technology in their departments and divisions. By get-ting their buy-in early on, in-house

counsel can save a great deal of time and aggravation and ensure that data maps are accurate and timely. Develop Logical, Comprehensive Practices for Managing Data

Identifying data sources is a key step in creating a company-wide document retention policy. As new technologies explode, it is important to regularly educate employees about the organization’s data management policies, so they understand, for ex-ample, that the instant messages they send at work don’t just disap-pear into the ether but may someday come back as part of a lawsuit.Create Clear Pathways of Communication

At many organizations, one di-vision often doesn’t know what the other division is doing. Unbe-knownst to legal, IT may be testing a new backup system for part of the company’s data. Employees may be adopting many different types of cell phones they use to send text messages that relate to their jobs or their coworkers. When it comes to data, it’s important that different groups within the organization com-municate regularly to avoid building silos of information that can hamper e-discovery.Don’t Just Create, Update

A data map is only useful if it in-cludes current, accurate information about the personnel within the orga-nization, the technology tools, and the pathways that data travels. Data maps must be updated regularly to stay relevant. Employees come and go, terminologies change and tech-nology is constantly evolving. The data map should be reviewed on a regular basis to ensure information is still relevant.CoNCLUSIoN

When lawsuits arise, many in-house counsel find themselves scrambling to identify potential cus-todians and potentially relevant ESI. But with a data map, it becomes easier to navigate through discov-ery. With the means to quickly zero in on the right custodians and the right data, in-house counsel have more time to focus on developing strategies for litigation that can fur-ther the company’s business goals.

Data Mappingcontinued from page 7

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corporation domiciled in Hawaii and every charitable organization not otherwise exempt to register with the state attorney general be-fore making any charitable solici-tations and to file annual financial reports. In Iowa, House Bill 2633 adopts the Revised Uniform Lim-ited Liability Company Act. The re-vised Act applies to LLCs formed or qualified on or after Jan. 1, 2009 and to pre-existing LLCs that elect to be governed under the Act. The revised Act applies to all LLCs on Jan. 1, 2011. In Minnesota, House Bill 3500 adds a subdivision to the LLC act to provide for the formation of nonprofit LLCs. The bill provides that the articles of organization must state that it is a nonprofit LLC. The bill also contains limitations on pecuniary gain and distributions to members and restricts the type of persons who may be members.

In Ohio, House Bill 332 adopts the Revised Uniform Partnership Act. The revised Act applies to gen-eral and limited liability partner-ships formed on or after Jan. 1, 2009 and to pre-existing partnerships that elect to be governed under the Act. The revised Act applies to all part-nerships on Jan. 1, 2010. In Wash-ington, Senate Bill 5882 (approved during the 2007 session) provides that a new $5 fee will be added to the fees already collected for fil-ing domestic formation and foreign registration documents for business corporations, LLCs, LPs, and LLPs. And in Wyoming, Senate Bill 18 pro-vides that a person who knowingly or willfully files a false document with the Secretary of State commits a felony, removes the requirement that the Secretary of State publish a notice of forfeiture of an LLC’s au-thority to do business, adds a penal-ty of $250 if an LLC fails to maintain

a registered agent, and adds new grounds for administratively dis-solving an LLC.

IN THE STATE CoURTSDelaware Supreme Court Rules That Chancery Court May Not Correct an Appraisal Opinion After the Parties Have Settled

Crescent/Mach I Partners LP v. Dr Pepper Bottling Co. of Texas, No. 330, 2008, decided Dec. 1, 2008, arose out of a merger. Certain minority share-holders of the merged corporation dissented and brought a statutory appraisal action. In the action, the Chancery Court awarded the share-holders $32.31 per share. The share-holders and acquirer then entered into a settlement agreement that was based in part on the court’s award. The acquirer then learned that the Chancery Court’s appraisal contained errors and that the shares should have been appraised at $30.04 per share. The acquirer moved to have the Chancery Court correct its opin-ion. The shareholders argued that the settlement had rendered the motion moot. The Chancery Court granted the motion and amended its opinion to reflect the $30.04 per share valua-tion. The shareholders appealed.

The Delaware Supreme Court re-versed. The court noted that Dela-ware law favors settlements and treats them as binding contracts. Here, the parties’ settlement agree-ment fully and finally resolved the dispute over the appraised value of the corporation’s shares. Upon the execution of that agreement, the ap-praisal opinion ceased to govern the litigating parties’ relationship. In vol-untarily settling both parties assumed the risks that there might be errors in the Chancery Court’s appraisal opinion. Thus, the parties’ settlement foreclosed any action to modify the appraisal opinion because there was no longer a justiciable controversy. Delaware Chancery Court Rules That Parent of a Statutory Trust’s Fiduciary May Owe the Statutory Trust Fiduciary Duties

Cargill, Inc. v. JWH Special Circum-stance, LLC, C.A. No. 3234, decided Nov. 7, 2008, is one of the few deci-sions dealing with the fiduciary du-

ties owed to a Delaware statutory trust. In this case the representative of a statutory trust alleged a breach of fiduciary duties on the part of the statutory trust’s managing entity and the managing entity’s grandparent and parent corporations. The claim arose out of an agreement entered into by the grandparent corporation to sell certain of its assets and its promise to make sure that certain of the statutory trust’s agreements were assigned to the asset buyer. The man-aging entity’s grandparent and par-ent corporations sought a declaratory judgment that they did not owe the statutory trust fiduciary duties.

The Delaware Chancery Court held that the grandparent and par-ent corporations could be held di-rectly liable for breaching fiduciary duties owed to the statutory trust based on the USACafe line of cases. That is a line of partnership cases holding that if a corporate parent of a partnership’s fiduciary exer-cises dominion and control over the fiduciary in connection with a transaction that benefits the parent at the expense of the partnership, the parent may owe fiduciary du-ties directly to the partnership. The court rejected the grandparent and parent’s argument that USACafe did not apply to statutory trusts because the theory was based on common law trust principles and these prin-ciples were preempted by the Dela-ware Statutory Trust Act. The court found that neither the Act nor the trust agreement at issue in this case preempted common law trust prin-ciples. In addition, the court found that the statutory trust’s representa-tive, in its counterclaim, adequately pleaded facts which, if true, would support a reasonable inference that the grandparent and parent were li-able under USACafe. Thus, their mo-tion to dismiss the breach of fidu-ciary duty claims was denied.Delaware Chancery Court Rules That Statute of Frauds Applies to LLC Agreements

In Olson v. Halvorsen, C.A. No. 1884, decided Oct. 22, 2008, a member of a Delaware LLC sought


Compliance Reviewcontinued from page 1

Sandra Feldman. a member of this newsletter’s Board of Editors, is a publications and research attorney for New York-based CT (www.ctle-galsolutions.com), a Wolters Kluwer business.


providers denoted the durational pe-riod as “lifetime” or “unknown.” To address this, the new rule permits recertifications every six months in all cases.

NEW dEFINITIoNSSerious Health Condition (Including Changes to Chronic Conditions)

The FMLA includes six differ-ent definitions of the term “serious health condition.” The new regula-tions attempt to clarify three of these definitions. First, when an employee or family member experiences more than three consecutive, full calendar days of incapacity, plus “two visits to a health-care provider,” the rule clarifies that the two visits must oc-cur within 30 days of the beginning of the period of incapacity, and the first visit to the health-care provider must take place within seven days of the first day of incapacity.

Second, when an employee or fam-ily member experiences more than three consecutive, full calendar days of incapacity plus “a regimen of con-tinuing treatment,” the rule requires the first visit to the health-care pro-vider take place within seven days of the first day of incapacity.

Third, the definition of “periodic visits” for chronic serious health conditions is now defined as at least two visits to a health-care provider per year.

NoTIFICATIoN pRoCEdURESEmployer Obligations

The new rule lengthens the time frame that the employer is respon-sible for designating leave as FMLA-qualifying and for giving notice of the designation to the employee from two business days to five busi-ness days. In addition, the final rule revises the “categorical penalty” pro-vision. Previously, when an employ-er failed to timely designate FMLA leave, some courts required the em-ployer to provide leave beyond the

12-week statutory entitlement. Now, a failure to timely designate leave as FMLA-qualifying will only result in a cognizable claim if the employee suffered individualized harm as a result of a violation. Employee Obligations

The final rule modifies the cur-rent interpretation that employees can provide notice to an employer of the need for FMLA leave up to two full business days after an ab-sence, even if they could have pro-vided notice more quickly. Now, an employee needing FMLA leave must follow the employer’s usual and customary call-in procedures for re-porting an absence, absent unusual circumstances.



to enforce an earnout provision set forth in an unsigned LLC agree-ment. The provision entitled retir-ing members to a percentage of the LLC’s profits for 6 years after retire-ment. The primary issue before the Chancery Court, and a matter of first impression, was whether the Dela-ware statute of frauds applies to LLC agreements.

The Delaware Chancery Court not-ed that the Delaware LLC Act allows oral LLC agreements but does not ad-dress whether the statute of frauds applies to them. The court then held that as a matter of law the statute of frauds does apply to LLC agreements. As a result, if an LLC agreement con-tains a provision that cannot possibly be performed within one year, that provision is unenforceable under the Delaware statute of frauds. The court stated that this decision is in line with the policy behind the enactment of the statute of frauds — which is to protect defendants against unfound-ed or fraudulent claims that would

require performance over an ex-tended period of time. However, the court also recognized that the legis-lature has expressed its intent, in the LLC Act, to give maximum effect to the enforceability of LLCs. Conse-quently, provisions of an oral LLC agreement that could possibly be performed within one year will re-main enforceable.

The court went on to hold that the earnout provision in this case was unenforceable because it imposed certain obligations on the remaining members that lasted for more than one year and because the earnout could not be calculated until more than one year after an event trigger-ing the payment obligation.Texas Supreme Court Rejects Single Business EnterpriseLiability Theory

SSP Partners and Metro Novelties, Inc. v. Gladstrong Investments (USA) Corporation, No. 05-0721, decided Nov. 14, 2008, arose out of a prod-ucts liability claim. The plaintiffs set-tled with the company that sold them the allegedly defective product. The seller then sought indemnity against

a subsidiary of the corporation that manufactured the product, pursuant to a Texas statute entitling sellers to indemnity from manufacturers. One of the seller’s arguments for holding the subsidiary liable was that the parent and subsidiary were part of a single business enterprise.

The Texas Supreme Court held that corporations cannot be held liable for each other’s obligations merely because they were part of a single business enterprise. The court stated that the limitation on liability afforded by the corporate structure can be ignored only when the cor-porate form has been used as part of an unfair device to achieve an in-equitable result. The single business enterprise liability theory, however, does not entail the level of abuse re-quired. The theory advocates liability when two corporations coordinate operations and combine resources in pursuit of the same business pur-pose. However, as the court noted, there is nothing abusive or unjust about this practice.

Compliance Reviewcontinued from page 9

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The publisher of this newsletter is not engaged in rendering legal, accounting, financial, investment advisory or other professional services, and this publication is not meant to constitute legal, accounting, financial, investment advisory or other professional advice. If legal, financial, investment

advisory or other professional assistance is required, the ser-vices of a competent professional person should be sought.


By Marcia Coyle

U.S. Securities and Exchange Com-mission enforcement action settle-ments were expected to hit a three-year high in 2008, according to a new study released by a New York economic consulting firm.

The study, by NERA Economic Consulting, projects that the SEC was on pace to reach 739 settle-ments by year-end, “continuing a dynamic period of SEC enforcement since the enactment of Sarbanes-Oxley (SOX) in 2002,” said NERA.

Settlements totaled 702 in 2007, and 663 in 2006.LARGE pENALTIES

The post-SOX era also has wit-nessed the SEC’s imposition of record monetary penalties on a range of de-fendants, according to the study. Be-fore SOX, the largest penalty imposed in an enforcement action against a publicly traded company for finan-cial fraud was a $10 million penalty against Xerox in April 2002. By con-

trast, according to NERA’s research, since SOX, the SEC has imposed penalties of $10 million or more against 115 parties, including 14 that were penalized at least $100 million.

oTHER FINdINGSNERA, which has been analyz-

ing trends in securities litigation for more than 15 years, reported other findings, including:

The number of settlements •with individuals was on the rise, projected to reach 568 for 2008. Company settlements, on the other hand, were declining, and were projected to total just 171 by year-end, which would be the lowest number in any full year since SOX. Fifty-six percent of SEC settle-•ments with company defen-dants since SOX have includ-ed monetary penalties. In 2007, the median company •settlement dropped to $0.7 million, less than half the 2006 high of $1.5 million.Forty-three percent of com-•pany payments have been in the form of disgorgement, and 57% in the form of civil penalties; for individuals, dis-gorgement penalties account for 88% of payments. Insider trading is the most fre-•quent allegation in SEC settle-

ments for individuals; NERA projected 92 settlements with individuals will have occured in 2008, compared with 52 in 2007.Misstatements and omissions •are among the allegations most frequently brought by the SEC, and account for the majority of cases brought against publicly traded com-panies. These cases include al-legations of false public state-ments or important omissions about the company’s finances or business prospects, such as earnings misstatements and incorrect press releases. The number of settlements involv-ing company misstatements rebounded strongly in 2007, after three years of declines: After reaching a high of $50 million in 2006, the median company settlement value fell to $26.5 million in 2007 and $12 million in the first three quarters of 2008.

CoNCLUSIoNIn performing the study, NERA re-

viewed every SEC litigation release and administrative proceeding doc-ument published from July 31, 2002 through Sept. 30, 2008.

SEC Enforcement Settlements to Hit Three-Year High

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“send,” you lose track. If you have a confidential report or other docu-ment you want to discuss with em-ployees at a meeting, hand it out to them at the meeting and then collect it back. This way you can verify the information does not wind up in the wrong hands — also demonstrating to the court you are taking extreme measures to treat this information as being truly confidential.

Adopt a document retention and destruction policy. How you discard your trade secrets and confidential information can be as important as how you maintain them. Don’t just dump your secrets in the trash. Shred them, burn them or do some-thing to make sure they don’t fall

into the wrong hands. This is anoth-er reasonable step to protect your information.

Utilize exit interviews effectively. Whenever employees leave, ask them if they have your information on any personal computers or flash drives. Remind them of their obligation to return all of this information. (Many times employees have this informa-tion at their homes — for purely in-nocent reasons – and forget that it’s there.) Also, when employees inten-tionally take your secrets, juries like to hear that the employer reminded the employee of their obligation to return information during an exit in-terview. This preempts the “I didn’t realize that I had it” defense.

Call the Feds. Stealing confidential information and trade secrets may be a crime. Under federal law, the Com-

puter Fraud and Abuse Act and the Economic Espionage Act may be vio-lated when employees steal confiden-tial information and/or trade secrets. If an employee steals your secrets, you may be able to file a criminal complaint and really increase the pressure.

CoNCLUSIoNProperly classifying your confiden-

tial information and putting crucial protections in place will ultimately be your company’s best defense.

Company Confidentialcontinued from page 4

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Marcia Coyle is a reporter for the Na-tional Law Journal, an Incisive Media sister publication of this newsletter.

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NEW FoRmSDOL has issued the following

new/revised forms: Certification of Health Care Provider for Employ-ee’s Serious Health Condition (WH-380E); Certification of Health Care Provider for Family Member’s Seri-ous Health Condition (WH-380F); Notice of Eligibility and Rights & Responsibilities form (WH-381); Designation Notice to Employee of FMLA Leave (WH-382); Certification of Qualifying Exigency for Military Family Leave (WH-384); and Certi-fication for Serious Injury or Illness of Covered Servicemember for Mili-tary Family Leave (WH-385).

oTHER kEy CHANGESCoverage and Eligibility

To be eligible for leave, an em-ployee must have been employed by the employer for at least 12 months. The existing regulation provides only that the 12 months need not be consecutive. The new rule clarifies that employment periods prior to a break in service of seven years or more need not be counted, except if the employee’s break in service is occasioned by the fulfillment of his or her National Guard or Reserve military service obligation; or a written agreement, including a col-lective bargaining agreement, exists concerning the employer’s intention to rehire the employee after the

break in service (e.g., for purposes of the employee furthering his or her education or for childrearing purposes).

In addition, the new rule clarifies that an employee may be on “non-FMLA leave” at the time he or she meets the eligibility requirements, and in that event, any portion of the leave taken for any FMLA-qualifying reason after the employee meets the eligibility requirement would be FMLA leave.Substitution of Paid Leave

Generally, FMLA leave is unpaid leave; however, employees can sub-stitute accrued paid leave for FMLA leave. Previously, employers could place no restrictions on the sub-stitution of paid leave for FMLA leave. The revised rules clarify that employees may substitute the ap-plicable paid leave by complying with the terms and conditions of the employer’s normal leave policy. For example, if an employer’s paid sick leave policy prohibits the use of sick leave in less than full-day increments, employees would have no right to use less than a full day of paid sick leave regardless of wheth-er the sick leave was being substi-tuted for unpaid FMLA leave. Or, if the policy requires two days notice for personal time off, that notice requirement would still apply for using paid leave concurrently with FMLA leave. The new rules require employers to notify employees of

any procedural requirements for the use of paid leave.

pRACTICAL STEpS To ASSURE CompLIANCE

Although these are the most sig-nificant changes, employers must be-come familiar with all of the revisions and should have implemented a com-pliance plan before the rules go into effect on Jan. 16, To ensure compli-ance and to take full advantage of the new rules, corporate counsel and HR executives are encouraged to:

Ensure that their HR Depart-•ment or leave administrator is trained on the new regulations. Ensure that the new FMLA •policies and procedures are applied consistently. In the new regulations, the DOL placed special emphasis on consistency, indicating this would be an enforcement fo-cus going forward. Ensure that job descriptions •are current and complete so that the employer can lever-age the fitness for duty cer-tification and the expanded medical certification form. Ensure that general releases •include a waiver of retrospec-tive FMLA rights.Obtain new FMLA forms and/•or revise existing forms.Obtain and post a new FMLA •poster.


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lawyers to see problems in the same kind of commercial transactions that they themselves will later be negoti-ating or drafting.

Most important, litigation trains lawyers to use judgment. It trains them to understand what is over-reaching, what, in terms of adopting positions and approaching cases, is

“too cute by half.” Litigation trains lawyers to understand that, just as certain approaches don’t work in liti-gation, they do not work in other ar-eas of the practice of law either, and do not ultimately serve the client's interests. Litigation promotes matu-rity and better, more tough- minded attorneys.

One other thing I’d like to say … Difficult times lie ahead. It will no longer be just an option to confront

and fight our adversaries … It is es-sential to do so now. In the coming days, it will be increasingly a matter of survival.

But you can’t fight if you do not know how. Lawyers must develop the skills, and the philosophy, need-ed to win. We will face significant consequences if they don’t.

Q&Acontinued from page 6

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Documents

Corporate The Counselor - Blank Rome