Upload
gyles-norris
View
216
Download
0
Tags:
Embed Size (px)
Citation preview
LEGAL ISSUES FOR AMCS LEGAL ISSUES FOR AMCS AND THEIR CLIENTSAND THEIR CLIENTS
C. Michael Deese
Howe & Hutton, Ltd.
Washington, DC
February 15, 2013
AMC ISSUES TO BE AMC ISSUES TO BE ADDRESSEDADDRESSED
ACCREDITATION UPDATEEMPLOYEE HANDBOOK
“CONTRACTS”AVOIDING CLIENT TRANSITION
PROBLEMS– Incoming– Outgoing
CLIENT ISSUES TO BE CLIENT ISSUES TO BE ADDRESSEDADDRESSED
NONPROFIT CORPORATION LAW CHANGES
HANDLING DIRECTOR CONFLICTS OF INTEREST
USE AND MISUSE OF BOARD EXECUTIVE SESSION
CHAPTER RELATIONSHIPSANTITRUST DEVELOPMENTS
ACCREDITATION UPDATEACCREDITATION UPDATE
AMCI’s ANSI standard being revised– Canvass process almost complete
Changes could be effective by mid-year– Applies to new accreditation and
reaccreditation after effective date
ACCREDITATION UPDATEACCREDITATION UPDATE
Changes to the standard include:– 3.1: Written contract with clients required; not
just whenever feasible– 3.6: Client contract must address client and
AMC IP rights re materials and software systems
– 4.6: AMC must have a policy for advising clients regarding protection of client IP
ACCREDITATION UPDATEACCREDITATION UPDATE
Changes to the standard include:– 4.7: AMC must have written social media
policies for AMC and clients– 6.7: If AMC recommendation to client board
regarding CGL and APL insurance is declined, must be recorded in board minutes
– 10.6: AMC must disclose conflicts of interest regarding purchases with client funds
ACCREDITATION UPDATEACCREDITATION UPDATE
Changes to the standard include:– 11.1: Record retention policy specifically
applies to electronic records as well as hard copy documents
Not a change, but important:– 11.3: AMC must have written business
continuity plan (data back-up; communication plan; evacuation plan; alternate site)
ACCREDITATION UPDATEACCREDITATION UPDATE
AMCI Best Practices Document– Revised February 9, 2011– Goes well beyond ANSI Standard
Identifies substantive issues with which an AMC owner is expected to be familiar
Client relations; financial management; technology; human resources; legal; business leadership (running your AMC)
EMPLOYEE HANDBOOK EMPLOYEE HANDBOOK “CONTRACTS”“CONTRACTS”
December 2012 Illinois federal court decision– Employee handbook disclaimer (“handbook not
an enforceable contract, may be changed at any time by employer, etc.”) may not always be effective
– Handbook terms may be an enforceable “agreement,” even if not a contract, as long as in effect
AVOIDING TRANSITION AVOIDING TRANSITION PROBLEMSPROBLEMS
Plan in Advance– Address incoming transition in response to RFP
and in management agreement
– Address outgoing transition in management agreement
Required by ANSI standard (3.5)
INCOMING TRANSITIONSINCOMING TRANSITIONS
Should be part of your response to an RFP– Avoid tortious interference claim
Also address in management agreementRequires outgoing management cooperationMore than a checklistTransfer of functions over time
– Does not happen all at once
INCOMING TRANSITIONSINCOMING TRANSITIONS
Due diligence before deciding to take on new client requires inquiry regarding:– Corporate good standing in appropriate jurisdictions– Tax filings up to date– Pending or threatened lawsuits– Insurance in place– Accurate picture of staff hours expended– IT compatibility/difficulty (website; database and files
within database; conversion of financial history)
INCOMING TRANSITIONSINCOMING TRANSITIONS
Transition fees are important– Determine current management “attitude”
Incoming transition fees should reflect:– Services almost always more than expected– Underbidding leads to understaffing and level of
service below what is required– Inadequate service leads to client dissatisfaction
Client should expect to pay 2 AMCs during transition
INCOMING TRANSITIONSINCOMING TRANSITIONS
Dealing with uncooperative current management– Personal relationships with management and IT
provider can be helpful– Using “back door” to obtain client data– Using legal counsel as a last resort
OUTGOING TRANSITIONSOUTGOING TRANSITIONS
Address in management agreement– Termination notice provisions (90-120 days)– AMC service through termination date– Client payments through termination date– Anticipate need for a transition agreement
BE “NICE”
OUTGOING TRANSITIONSOUTGOING TRANSITIONS
Transition Agreement– Transfer of management functions over time
Document everything transferred (3.5.1.)
– Retain financial responsibility until specified date Audit upon conclusion (3.5.6.)
– Transition services description and fees– Guaranteeing payment to AMC
More difficult if client controls funds Separate account for management fee funds AMC taking funds in advance
OUTGOING TRANSITIONSOUTGOING TRANSITIONS
Avoid losing clients to employees– Law varies by state– Address in employment agreement or handbook
Consideration and signature required
– Non-compete vs. client specific restriction Must be reasonable
– Restriction upon use of confidential information Define what is confidential Easier to enforce than non-compete
– Address in client contract (“no raid” provision)
NONPROFIT CORPORATION NONPROFIT CORPORATION LAW CHANGESLAW CHANGES
Vary by jurisdictionJurisdiction of client incorporation governsMajor types of changes include:
– “Default” provisions (notice, Board terms, power to amend bylaws, etc.)
– Limitation of liability of volunteers if so provided in Articles of Incorporation
NONPROFIT CORPORATION NONPROFIT CORPORATION LAW CHANGESLAW CHANGES
Major types of changes include:– Notice of meetings, elections and board
unanimous written consent now permitted electronically almost everywhere
– Board action by email now permitted in CO, GA, ND, TN and WI
– TX allows a non-voting director to serve without having fiduciary duties
NONPROFIT CORPORATION NONPROFIT CORPORATION LAW CHANGESLAW CHANGES
AMC should undertake a review of client organizing documents to determine whether changes in applicable law permit articles or bylaw amendments that would be beneficial to the client
HANDLING DIRECTOR HANDLING DIRECTOR CONFLICTS OF INTERESTCONFLICTS OF INTEREST
Clients should have COI Policy and required disclosure– To whom does COI Policy apply?– Include instruction in new director orientation– COI is OK; undisclosed COI is not– Disclosure annually plus as a conflict arises– Logistics of disclosure process important
Director personal liability for approval of interested party transaction (New York case)
BOARD EXECUTIVE SESSIONBOARD EXECUTIVE SESSION
What do we mean by “executive session”?– Open vs. closed board meetings– Executive docket
Executive session at every board meeting or only when necessary– Who remains in the board room?– Appropriate topics (COI, AMC contract)– How to go into executive session
Danger of misuse, particularly in trade associations in concentrated industries
CHAPTER RELATIONSHIPSCHAPTER RELATIONSHIPS
To incorporate or not to incorporate– Effect upon chapter officers and directors– Worst case: unincorporated, separate entity
How to minimize national liability for acts of the chapter – Treat as part of the national (assume responsibility) and
control activities tightly– Treat as separate entity without actual authority and
minimize apparent authority (require disclosures)
CHAPTER RELATIONSHIPSCHAPTER RELATIONSHIPS
Evaluate insurance coverage under national’s policies
Affiliation agreement necessary to control national’s intellectual property
Separately incorporated chapters may be included within national’s group tax exemption
ANTITRUST LAW ANTITRUST LAW DEVELOPMENTSDEVELOPMENTS
Class action certified against titanium dioxide producers in price-fixing case– Allegation that price increases corresponded
with trade association meeting dates– Trail scheduled in federal court in Maryland for
September, 2013
ANTITRUST LAW ANTITRUST LAW DEVELOPMENTSDEVELOPMENTS
FTC action against ductile iron pipe fitting manufacturers still pending against 2 manufacturers– Allegation that association facilitated
agreement to monopolize and fix prices through the exchange of monthly sales and production volume information
– One alleged co-conspirator settled
ANTITRUST LAW ANTITRUST LAW DEVELOPMENTSDEVELOPMENTS
Heightened enforcement risk for trade and professional associations in Canada– 2 recent cases by Canadian Competition Bureau
Toronto Real Estate Board Canadian Wireless Telecommunications Association
– Interim Commissioner of Competition remarks Using standards to limit competition or raise barriers to entry Using information exchanges to reduce incentives to compete
ANTITRUST LAW ANTITRUST LAW DEVELOPMENTSDEVELOPMENTS
Issue for AMCs, particularly those managing trade associations:– Both private and government lawsuits are back– Plaintiffs are looking at associations as fertile ground
for conspiracies– Antitrust compliance policies more important than ever– AMC staff must be aware of the law and of how to stop
a meeting if necessary– Check APL insurance policy for antitrust sublimit
THANK YOUTHANK YOU
C. Michael Deese
Howe & Hutton, Ltd.
1901 Pennsylvania Avenue, N.W.
Washington, DC 20006
(202) 466-7252