Analysis: The Courts Weigh In on the Definition of a “Whistle-Blower”
The vagaries of the Dodd-Frank Act have left much room for interpretation of what protections Congress intended to provide financial fraud whistle-blowers, according to an analysis on the New York Times DealBook blog yesterday. One of the central questions of the provision has been whether a whistle-blower has to first report information about questionable practices to the Securities and Exchange Commission in order to be protected from firing, demotion or harassment. The federal courts have been split on this question. But the anti-retaliation provision in the Dodd-Frank Act provides a strong and important protection for whistle-blowers. To encourage disclosure of corporate wrongdoing, the SEC has taken an expansive view that would protect from retaliation any employee who reports information either internally or to a government agency. The legal problem is that Congress appeared to require reporting to the SEC as a prerequisite to applying the anti-retaliation provision. The law defines a whistle-blower as someone who provides "information relating to a violation of the securities laws to the commission." The U.S. Court of Appeals for the Fifth Circuit found in Asadi v. G.E. Energy that the law "clearly expresses Congress's intention to require individuals to report information to the SEC to qualify as a whistle-blower under Dodd-Frank." Read more.
DELAWARE RULINGS UPHOLD STATE COURT DISCRETION
The Delaware Supreme Court held in December that a lower court could limit a plaintiff's use of a books and records inspection to litigation in the state. On Jan. 2, a Chancery Court judge held that he didn't have to permit an interlocutory appeal of a ruling to prevent a shareholder vote on the Family Dollar Stores Inc. merger in the face of a competing offer, Bloomberg News reported yesterday. The Delaware Supreme Court case resulted from the fallout from a federal investigation into United Technologies Corp. for allegedly exporting technology to China illegally. The company entered into a deferred-prosecution agreement settling the case in 2012. Two shareholders subsequently sued. One sought to inspect the company's records under section 220(c) of Delaware's corporate law, but United Technologies argued to limit the use of the information to litigation in Delaware. The lower court held that it lacked the power to restrict the use, but the Supreme Court reversed and sent the case back to the lower court. The court also said that corporate bylaws that restrict litigation to Delaware — which United Technologies had — are valid even if adopted after a plaintiff has purchased the shares in the company. Separately, in the case involving Family Dollar, judge Andre Bouchard denied an appeal of his decision last month in which he refused to block Family Dollar Stores Inc. shareholders from voting on Dollar Tree Inc.'s $8.5 billion takeover bid. That vote was nonetheless postponed until Jan. 22. Read more.
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WHY NEW CREDIT CARDS MAY FALL SHORT ON FRAUD CONTROL
Big U.S. banks are steering clear of an advanced security measure used in credit cards around the world, opting for a system that is more convenient for shoppers but may leave them vulnerable to fraud, the Wall Street Journal reported yesterday. This year, firms ranging from JPMorgan Chase & Co. to Discover Financial Services Inc. are expected to roll out more than a half-billion new credit cards embedded with computer chips that create a unique code for each transaction, making counterfeiting much more difficult. In a retreat for the industry, however, the new cards don't use some technology that could prevent fraud if a card is lost or stolen. Instead of requiring customers to put in a personal identification number, or PIN, the new cards need users to authenticate credit card transactions the same way they often do now, with a signature. PINs are widely considered to be more secure than signatures, which can be easily copied. Read more. (Subscription required.) For more on cybersecurity and financial products, be sure to watch Winter Leadership speaker Theresa Payton, former White House CIO, provide her perspectives on cybersecurity and privacy.
OBAMA SAID TO PICK FORMER HAWAII COMMUNITY BANKER TO BE FED GOVERNOR
President Barack Obama plans to nominate Allan Landon, the former chief executive officer of the Bank of Hawaii Corp., to be a Federal Reserve Board governor, Bloomberg News reported today. Landon was chairman and CEO of Bank of Hawaii from September 2004 to July 2010, according to a biography on the website of the University of Hawaii at Manoa's William S. Richardson School of Law, which lists him as a lecturer with a degree from Iowa State University. While the Fed Board traditionally has had a community banker or supervisor on the seven-seat board, that role hasn't been filled since Governor Elizabeth Duke, a former executive at a Virginia community bank, retired in August 2013. The Fed Board has had two empty seats since the departure of governors Sarah Bloom Raskin in March and Jeremy Stein in May. Obama hasn't yet nominated a Fed vice chairman for supervision, a new position created by the Dodd-Frank Act of 2010. The role has been unofficially performed by Fed Governor Daniel Tarullo. Read more.
COMMENT DEADLINE FRIDAY: USTP NOTICE OF PROPOSED RULEMAKING ON CHAPTER 11 MONTHLY OPERATING REPORTS
Section 602 of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) authorizes the U.S. Trustee Program (USTP) to issue rules requiring uniform periodic reports by debtors in possession or trustees in non-small business cases under chapter 11. The USTP just published in the Federal Register a notice of proposed rulemaking seeking public comment on the proposed rule and periodic report forms. The proposed rule is published in the Federal Register at 79 FR 66659 (Nov. 10, 2014) (to be codified at 28 C.F.R. pt. 58). The proposed rule, along with the proposed periodic report forms and instructions, may be viewed on the USTP's website. The proposed rule may also be accessed at www.regulations.gov. All public comments must be submitted on or before January 9, 2015, via www.regulations.gov. Please note that the proposed rule and forms only apply in chapter 11 cases filed by debtors that are not small businesses. Small business debtors are already required to use Official Form 25C, "Small Business Monthly Operating Report."
DON'T MISS THE ACB FOURTH CIRCUIT FREE PROGRAM EXAMINING ABI'S REPORT ON CHAPTER 11 REFORM ON FEB. 13 IN WASHINGTON, D.C.
Register today for the American College of Bankruptcy Fourth Circuit Program, "Considering ABI's Report on Chapter 11 Reform," being held held on Feb. 13 on Capitol Hill. The free event will take place in Room 226 of the Rayburn House Office Building from 9:30 a.m. to 1:00 p.m. (EST). The program will include discussion of:
- The Commission's overall philosophy and approach
- Treatment of SMEs
- 363 sales, DIPs, safe harbors, and labor issues
- Valuation and distribution issues. Faculty will include:
- Hon. Thomas Ambro, U.S. Court of Appeals for the Third Circuit
- Michael Bernstein, Arnold Porter
- Mark Ellenberg, Cadwalader
- Professor Michelle Harner, University of Maryland Francis King Carey School of Law
- Craig Goldblatt, WilmerHale
- Bob Keach, Bernstein Shur
- Danielle Spinelli, WilmerHale
- Steven Schwarcz, Duke Law
Additional faculty to be announced.
For more information and to register, please click here.
NEW CASE SUMMARY ON VOLO: ARAYA V. JPMORGAN CHASE BANK, N.A., ET AL. (D.C. CIR.)
Summarized by Bruce Weiner of Rosenberg, Musso & Weiner
The U.S. Court of Appeals for the D.C. Circuit ruled that the federal district court abused its discretion when it maintained jurisdiction over a removed case involving only state law and common law claims after the federal claims were dismissed. There are more than 1,500 appellate opinions summarized on Volo, and summaries typically appear within 24 hours of the ruling. Click here regularly to view the latest case summaries on ABI's Volo website.
NEW ON ABI'S BANKRUPTCY BLOG EXCHANGE: THE KEY TO WIPING OUT OLD TAX LIABILITY
A recent blog post examines how to wipe out old tax liability in a bankruptcy case. Be sure to check the the site several times each day; any time a contributing blog posts a new story, a link to the story will appear on the top. If you have a blog that deals with bankruptcy, or know of a good blog that should be part of the Bankruptcy Exchange, please contact the ABI Web team.
ABI Quick Poll
"Executoriness" should be dropped as a threshold requirement in § 365.
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