Antitrust enforcement activity is taking on an increasingly international dimension. Companies with cross-border operations should double check that their dawn raid preparedness plans are sufficiently international in scope to work across all of the jurisdictions where the company does business.

Earlier this fall, Embraco, Whirlpool Corporation's compressors division, agreed to pay the Brazilian Justice Ministry's antitrust division (CADE) a $56.5 million fee, payable in installments over the course of five and a half years. The settlement is part of the fallout of a major, on-going, internationally-coordinated investigation which started with a dawn raid that took place simultaneously in Brazil, the US, Italy and Denmark in the refrigeration compressor industry in February 2009. The February operation was the first international raid of its kind involving Brazil, one of the jurisdictions with which the US has an antitrust cooperation arrangement (the others are Australia, Canada, Germany, Israel, Japan, Mexico and the EU).

In a separate development, the Department of Justice (DOJ) and the Federal Trade Commission (FTC) have recently signed a memorandum of understanding with the Russian Federal Anti-monopoly Service. The agreement, dated November 2009, is agency-to-agency, rather than government-to-government, but is a significant step towards greater cooperation between the antitrust agencies in the two countries on matters of antitrust policy. The other major international development this year was India's adoption of its new antitrust laws, following years of challenges and delay.

Meanwhile, international cooperation also remains evident in pre-merger reviews, despite the DOJ's recent split with the EC over Oracle Corporation's proposed acquisition of Sun Microsystems Inc. While the DOJ cleared the merger in August 2009, the EC issued a statement of objections in November 2009 and has until mid-January 2010 to make a final decision. The clearances of Schering-Plough's acquisition of Merck by the EC, the FTC, the Swiss Competition Commission and the Canadian Competition Bureau, however, within a one-week span (from October 23 to October 29, 2009) are a likely indication of the coordination that took place among those authorities in reviewing that deal.

Companies should prepare for an increase in the number of shareholder proposals relating to risk and CEO succession planning.

The SEC Division of Corporation Finance (DCF) has reversed its position on what shareholder proposals may be excluded from company proxy statements. Rule 14a-8(i)(7) provides a basis for the exclusion of proposals dealing with matters relating to the company's ordinary business operations. In its Staff Legal Bulletin on this rule dated October 27, 2009, the DCF stated that it will look closely at the subject matter of shareholder proposals and, following that review, determine whether a proposal's underlying subject matter is a matter that transcends day-to-day business matters and raises significant policy issues.

The DCF indicated that companies may no longer be permitted to exclude proposals relating to environmental, financial or health risks based on the rule. The DCF also indicated in the bulletin that it now views CEO succession planning as a matter that transcends the day-to-day business of the company.

This means companies should prepare for a likely increase in the number of shareholder proposals relating to evaluations of environmental risks such as the impact of climate change on a company's business, as well as financial risks related to exposure to subprime lending. Companies should also think about adopting CEO succession policies in anticipation of increased shareholder proposals on that front.

There is no question that the focus on shareholder engagement will remain on the regulatory agenda for some time to come. NYSE Rule 452 (which eliminates discretionary broker voting in uncontested director elections) continues to be a concern for companies, e-proxy improvements are around the corner and proxy access rules are not far on the horizon (though companies are off the hook for the 2010 proxy season). "Proxy plumbing", the new buzz word for things like proxy voting mechanics and shareholder communications, is also high on the SEC's agenda as it seeks to iron out potential hitches in the proxy process.

Companies should communicate with investors, creditors and analysts to anticipate concerns about how new accounting rules FAS 166 and 167 will impact their financials.

Companies have used off-balance sheet arrangements for years for any number of reasons, and scrutiny of off-balance sheet arrangements is nothing new. But last summer, the FASB issued two rules (FAS 166 and 167) that will require companies to bring certain types of assets (such as receivables and loans) back onto their balance sheets and consolidate certain financing vehicles and other entities (such as joint ventures) into their financials.

Companies are thinking hard about how this will impact the way they are used to doing business — including their financing options and strategic relationships. Because the rules impact their existing off-balance sheet arrangements, bringing them back on to their balance sheet raises a number of challenges.

These rules will affect companies in many ways. One key consequence is the increase in a company's leverage and how that in turn will impact financial ratios, including those in the company's debt covenants.

Capital raising strategies born of the turbulence generated by the financial crisis, such as wall-crossed offerings, may raise thorny issues that issuers and their counsel should be prepared to deal with.

While equity markets and the market for converts have picked up, certainly when compared to how things were six or seven months ago, there is no question that volatility is still in the air. Some practitioners view the increasing influence of hedge funds as contributing to volatility, which is no longer the exclusive province of outside market trends.

As a result, capital raising strategies born of the financial crisis may be here to stay. One such strategy, involving SEC-registered underwritten deals that are pre-marketed to a select group of investors, has received considerable attention over the past year. Companies should tread carefully before going this route. These so-called wall-crossed offerings, where certain investors are brought over the wall and provided with material non-public information (MNPI) must be carefully structured to ensure compliance with securities laws.

One of the many issues raised by this strategy is the scenario where the pre-marketing is unsuccessful. The key question is how to deal with the MNPI to ensure compliance with Regulation FD (which generally requires companies to level the playing field if they disclose MNPI to select investors). The issuer and their counsel should discuss process and possible scenarios together with underwriters and their counsel so they are prepared in advance to deal with potential issues and investor expectations. For more information, see Practice Note, Bringing Investors Over The Wall.

The increasing number of companies receiving federal aid should assess their exposure to federal False Claims Act (FCA) liability and ensure that adequate compliance programs are in place to reduce the risk of FCA litigation.

The FCA imposes civil and criminal penalties on those who make false or misleading representations to the government in connection with the receipt of federal funding. Recently, the healthcare and insurance industries have been hard-hit by FCA litigation. Pfizer, for example, paid $1 billion in September 2009 to settle an FCA suit which charged the company with illegally promoting certain drugs for off-label use, causing fraudulent insurance claims to be submitted to federal Medicare programs. Further, in the wake of Hurricane Katrina, several major US insurance companies were sued under the FCA for allegedly mischaracterizing certain claims in an attempt to shift the burden of payment onto the federal government. In both of these scenarios the companies were sued (in part) by corporate whistleblowers under a provision of the FCA that allows persons with inside knowledge of the alleged wrongdoing to litigate on behalf of the government.

Due to the increased reliance on federal funding through TARP, the stimulus bill and other programs, FCA litigation may spread quickly to other industries. Moreover, the Fraud Enforcement and Recovery Act of 2009 (FERA), enacted in May, has expanded the reach of the FCA. FERA provides that, among other things, firms may be liable for false claims that are not directly made to government officials (as long as federal funds are used to satisfy those claims) and for failing to meet repayment obligations to the government.

Fulbright & Jaworski LLP released its 6th Annual Litigation Trends Survey Report in October 2009. Among other findings, the 64-page survey reports that:

For practical information on FCPA compliance programs, see Article, Beyond Reproach: Achieving Best Practice in FCPA Compliance.

After years of criticism that the cost of arbitration had begun to escalate to the level of litigation due to the expense of electronic discovery, arbitral institutions are feeling the legal market's pressure to lower fees to remain preferable to court trials.

A quarter of large cap companies expect an increase in the amount of international arbitrations for 2010 (see above Litigation Trends Survey), and the financial crisis has led many in-house counsel to creatively re-address alternative dispute resolution mechanisms as a way to lower legal costs.

Corporate legal departments are more than ever shopping around for the best value in terms of arbitral seat and organization, and arbitrators are taking notice. The American Arbitration Association recently reduced the mediation fee for certain types of employment arbitrations and at least one large pharmaceutical company has removed all discovery from its arbitration processes.

As companies struggle with how to control arbitration costs once the process has begun, practitioners agree that best practice is to draft a tight arbitration agreement or clause that provides for a stepped process, requiring negotiation and mediation before arbitration, for example, with time limits for each stage.

Given the surge in "401(k) fee litigation" cases and the current volatile stock market, companies should ensure they are in compliance with the Employment Retirement Income Security Act (ERISA) fiduciary duty requirements.

401(k) fee litigation has become more common in the current economic downturn. For example, Caterpillar, Inc. recently announced that a settlement has been reached in which it will pay $16.5 million to current and former participants in its four 401(k) plans. The courts have also seen a surge in similar ERISA litigation, in which 401(k) plan participants claim that plan fiduciaries breached their duties by allowing participants to invest in risky company stock, misrepresenting or failing to disclose fees and expenses paid by the plan and participants, and failing to properly select and monitor plan service providers. Companies can take steps to minimize exposure to these types of claims by monitoring the activities of the retirement plan investment committee. They can:

Although December 31, 2008 was the official deadline for bringing all deferred compensation plans and agreements into compliance with the new IRS regulations under Section 409A of the Internal Revenue Code, there are still several steps an employer can take by the end of 2009 to correct, or at least mitigate the effect of, failures to comply with IRC Section 409A relating to deferred compensation plans and agreements.

For a full breakdown of steps companies can take, see Article, End of Year Deadline for Section 409A Corrections.

Companies with significant greenhouse gas emission profiles should reexamine their litigation risk, and litigation risk disclosures, in light of two ground-breaking federal appellate court decisions.

The Courts of Appeals for the Second and Fifth Circuits recently held that federal courts must hear lawsuits alleging that climate change constitutes a public nuisance.

In State of Connecticut et al. v. American Electric Power Company Inc. et al., eight states, New York City and several land trusts sued a number of major greenhouse gas emitters for an injunction that would cap emissions from these companies. Overturning the district court decision that held that the case was non-justiciable under the political question doctrine, the Second Circuit ruled that because the executive and legislative branches have failed to address the issue of climate change, federal courts must remain open to hear these claims.

Similarly, in Comer v. Murphy Oil USA, et al., the Fifth Circuit reversed a district court's dismissal of a class action claiming defendants' emissions contributed to global warming and therefore intensified the destructive power of Hurricane Katrina. The Circuit Court ruled that owners and residents of property near Mississippi's Gulf Coast had standing to bring claims that allege greenhouse gas emissions amounted to private and public nuisance, trespass and negligence.

For more information on regulatory and litigation developments relating to climate change, including guidance on preparing climate change risk disclosures, see Article, Disclosure of Climate Change Risk to Investors.

In light of new federal policy guidelines intended to give lenders more flexibility to restructure or renew performing commercial real estate (CRE) loans, credit-worthy CRE borrowers should feel more confident about approaching their lenders to talk about workouts.

Some CRE borrowers that are experiencing deterioration in their financial condition (for example through diminished operating cash flows, depreciated collateral values, or prolonged sales and rental absorption periods) continue to be creditworthy customers. The Policy Statement on Prudent Commercial Real Estate Loan Workouts released on October 30, 2009 by federal financial regulators is a move designed to ensure that supervisory policies and actions do not inadvertently curtail the availability of credit to this type of borrower.

The two main points of policy for examiners are:

The New York State Court of Appeals has ended the uncertainty in the market that was created by the Love Funding case on champerty (which prohibits the "buying" of lawsuits). Recovering debt obligations through lawsuits forms an integral part of the viability of the syndicated loan market and secondary trading of debt instruments. The case was therefore closely followed by those involved in the distressed debt market.

On October 15, 2009, the Court issued a deciding opinion clarifying that:

For more information, see In Dispute: Love Funding.

Given the new enforcement climate at the Wage and Hour Division (WHD) of the Department of Labor, companies should have in place a plan for responding effectively to a wage and hour investigation.

Last month we reported on the increase in wage and hour class litigation that has occurred over the last few years. During much of this period, the WHD assisted corporations' compliance efforts by, for example, overseeing self audits and entering into partner agreements. The WHD's compliance assistance provided relief for good faith employers who inadvertently violated the law and wanted to correct the violations. However, the climate at the WHD dramatically changed in 2009. The WHD has indicated that it will be more aggressive in conducting wage and hour investigations going forward. Under the current administration the WHD:

For practical advice on how to respond to an investigation effectively, see Article, Wage and Hour Investigations.

Note that the following federal employment legislation is now in force:

Companies should start making preparations to be better placed to exploit and protect their brand names under new domain name programs being launched by the Internet Corporation for Assigned Names and Numbers (ICANN).

ICANN has begun accepting applications under its Fast Track Process for the Country Code Top Level Domain Name (ccTLD) program. Top level domain names (TLDs) are the two or more letters that come after the "dot" at the end of an internet address (for example, .com, .gov) used to route traffic through the internet. Up until now, ccTLDs have been two-letter domains from the Latin alphabet (for example, .us or .jp), but the Fast Track Process will allow nations and territories with official languages based on non-Latin scripts or characters to apply to operate new ccTLDs reflecting the country's name in its native characters. The ICANN approval process will include a stability evaluation ensuring government and community support.

The introduction of this program could mean more opportunities for those looking to exploit their brand names but at the same time could result in increased costs for trademark owners seeking to protect and defend their valuable brands against cybersquatters. To prepare for this upcoming initiative, companies should:

While the launch of the new ccTLD program is imminent, ICANN is still in talks to begin its new Generic Top Level Domain Name (gTLD) program, which will allow public and private organizations to apply for and operate new gTLDs, which are TLDs consisting of three or more characters (for example, .com and .gov). ICANN has not announced the date on which they will begin accepting applications under the proposed gTLD program, but has said that the process will start within a few months after the publication of the final Applicant Guidebook, which is expected in 2010. The application fee alone for the gTLD program will be $185,000, and businesses should expect additional fees where specialized process steps are required to review an application.

Companies now have until June 1, 2010 to comply with the Red Flags Rule.

The FTC recently extended the deadline for compliance with the Red Flags Rule until June 1, 2010 (the previous deadline was November 1, 2009). The Red Flags Rule requires certain "creditors" (broadly defined to include businesses or organizations that regularly provide goods or services first and allow customers to pay later) and financial institutions to develop and implement written identity theft prevention programs.

New Developments:

The level of large-deal activity was significantly up in November.

Two substantial private equity deals, both of which benefitted from some debt financing, were announced:

A number of large strategic deals were also announced, including Berkshire Hathaway's agreement to acquire the remaining outstanding shares of Burlington Northern Santa Fe for $44 billion.

For a summary of recent public merger agreements, visit PLC What's Market.

As a direct result of the UBS offshore tax evasion scandal, the Foreign Bank Account Report (FBAR) rules have been expanded to cover interests in foreign hedge funds and private equity funds, and companies should expect further changes to US federal income tax laws.

In the UBS scandal, UBS admitted to helping US taxpayers use Swiss bank accounts to evade US taxes. Following the scandal, the IRS increased efforts to curb offshore tax evasion by US taxpayers using foreign financial accounts by, among other things, expanding the FBAR rules.

US taxpayers are used to filing FBARs to disclose interests in foreign financial accounts. However, the effect of the recent changes is that FBARs must now also be filed to disclose interests in foreign hedge funds and private equity funds. The penalties for violating FBAR rules are severe.

Congress is also likely to pass legislation in response to the UBS scandal. In October, the Foreign Account Tax Compliance Act of 2009 (FATCA) was introduced. President Obama and Treasury Secretary Geithner have made statements in support of FATCA. The draft legislation contains several proposed reforms, notably including:

While FATCA is in the early stages of the legislative process, one or more of these proposals may ultimately be adopted.

After recent passage of a new law providing taxpayers with the option to extend the carryback period for net operating losses (NOLs) realized in 2008 and 2009, companies must consider whether to elect the extended carryback period.

On November 6, 2009, President Obama signed the Worker, Homeownership, and Business Assistance Act of 2009 (the Act), which includes a provision that allows electing corporations to extend the NOL carryback period for NOLs realized in 2008 and 2009. Corporations can elect to extend the carryback period from two years to either three, four or five years. A similar provision was included in the American Recovery and Reinvestment Act of 2009 (ARRA), but it was limited to eligible small businesses. Unlike the ARRA, there are generally no restrictions on the type of taxpayer that can make the election under the Act, except that certain taxpayers who received Troubled Asset Relief Program (TARP) assistance are excluded.