1. Read the filing cover to cover first. You would think this would go without saying, but sometimes people will start with the rules and try to pick through the filing to match everything up. That’s a bad strategy on several levels, specifically because (i) it’s really hard to know if you are catching everything; (ii) reading the full document gives you a chance to catch typos and question things that don’t make sense, and (iii) reading the filing gets you familiar with your client’s business generally. So spend the time and read the filing.
    
2. Redline the filing against last year’s congruent filing. If it’s a 10-Q, redline against the most recent 10-Q and last year’s 10-Q from the same period. Clients tend to see their previous filings as a form, which is fine – but it can’t be treated as a simple fill-in-the-blanks exercise. The filings need to be updated with new disclosure, responses to SEC comment letters, and changes to disclosure requirements. Redlining will let you see what is recycled and what is updated.
    
3. Check interim filings for required disclosure. The SEC’s website is pretty easy to use. You would be shocked at how frequently something from an 8-K doesn’t get included in a first draft of a 10-K. Make sure it is included in the second draft if the rules require it.
    
4. Don’t go to the CFR – go to a Red Box. You can get a paperback collection of the Red Box, which is expensive but looks good in your office. I use Wolters Kluwer’s Red Box Online, which has the advantage of being updated automatically.
    
5. Make sure that responses to past SEC comments have been included. If your client is using last year’s form and has responded to SEC comments in the past year, they may have neglected to include disclosure that they have explicitly promised the SEC. Don’t let your client fall into this trap for the wary. 
    
6. Watch for internal consistency. All the numbers need to match; it doesn’t look good if net interest income is $6.7m in one section and $4.1m in another. Granular attention to detail – that’s what transactional attorneys get paid for [at least, that’s what transactional associates get paid for].
    
7. Read the notes to the rules. Often the notes give away when disclosure can be neglected where the issue has been disclosed in another section of the filing. The notes also give a nice, plain English explanation of disclosure requirements. They’re worth a read.
    
8. Use the Industry Guides. Is your client in oil and gas? Are they a bank holding company? Well, they’ve got a special set of statistical disclosure rules to follow. Don’t neglect them just because their titles don’t begin with “Regulation S-.”
    
9. Watch the updates to disclosure requirements. Every year something is different. Last year the new change was a requirement that an 8-K be filed within four days of a shareholder vote announcing the results of voting. This year, Dodd-Frank’s “Say-On-Pay” requirements have added a couple of required shareholder votes to the proxy. Last year’s form just won’t do.
    
10. Watch the compensation disclosure. In my experience, the SEC really cares about Compensation Discussion and Analysis. They want metrics for how bonuses are calculated, and really care how performance targets are set. This is sensitive disclosure – in a culture that generally thinks it is distasteful to talk dollars and cents when it comes to what a person gets paid, companies required to file periodic disclosures are required to give the names of their top five highest paid employees and list how much they were paid to the cent, broken down by the form of compensation. Filers hate the requirement, too, because often executive pay is tied to metrics that reveal proprietary business strategies. You can refuse to disclose specifics to the extent that you can argue that competitive harm will be suffered, but it isn’t a free pass – there isn’t any magic language, and the SEC will push back.

I hope that helps someone out there. If you have any specific questions, put them in the comments and I’ll be sure to either do my best to answer or punt to someone who actually knows something about this stuff.

By Brian Malcom

Can a person be fired for what they say on Facebook on their own equipment and on their own time?  The answer seems to be, "sure, sometimes, but not all the time."  Now the National Labor Relations Board ("NLRB") is getting in the mix.  The New York Times reports that the NLRB has accused a company of illegally firing an employee after she criticized her supervisor on her Facebook page. 

According to a November 2, 2010 News Release issued by the NLRB, the NLRB's Hartford, Connecticut office issued a complaint on October 27 alleging that an "ambulance service illegally terminated an employee who posted negative remarks about her supervisor on her personal Facebook page. The complaint also alleges that the company. . . illegally denied union representation to the employee during an investigatory interview, and maintained and enforced an overly broad blogging and internet posting policy."

Apparently, an employee of the ambulance service was asked to prepare a report concerning a customer's complaint about her work.  The employee requested representation from her union in order to assist her in preparing the report, but her request was denied.  That same day, the employee logged on to her Facebook page from her home computer and posted negative criticisms of her supervisor.  It seems as though she was not the only one with a bone to pick with her supervisor.  After she posted her comments, the employee's co-workers began chiming in with their own supportive comments for the employee and their own negative comments about the same supervisor. 

The New York Times reports that "Ms. Souza . . . mocked her supervisor on Facebook, using several vulgarities to ridicule him, according to Jonathan Kreisberg, director of the [NLRB's] Hartford office, which filed the complaint. He also said she had written, “love how the company allows a 17 to become a supervisor” — 17 is the company’s lingo for a psychiatric patient."  Look for calling someone a "17" to become more popular on the social network.

The ambulance service company was not about to click the "Like" button on this activity by its employees.  The company suspended and later terminated the employee for her Facebook comments.  The company took the position that the Facebook postings violated the company's internet and social networking policies.  But the story does not end there. 

The NLRB apparently got wind of the incident and launched its own investigation of the incident.  Following the investigation, the NLRB took the position that the employee's Facebook postings constituted concerted activity that is protected under the National Labor Relations Act.  Further still, the NLRB also took the position that the company's blogging and internet posting policy contained overly broad and unlawful restrictions on employees.  The NLRB believes the company's policy chills employees from making negative comments or disparaging remarks when discussing the company or its supervisors.  The NLRB also took issue with the policy's sweeping prohibition of depicting the company in any way on the internet without the company's express permission.  Because of the overly broad nature of the policy and its chilling effect, the NLRB is of the opinion that the company's policies interfere with a company employees' exercise of their right to engage in protected concerted activity. 

The case is not set for hearing until January 25, 2011.

With this as prologue, the debate begins. Can Facebook or other social networking sites effectively be mediums for employees to self-organize, "to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection . . . " so as to invoke the protections of the National Labor Relations Act?  This blogger believes that end result will be that some activity, not all, on Facebook or other sites among employees, as defined by the Act, is within the protections of the Act.  As such, employers need to keep an eye on this case and review their own internet and blogging policies, lest they find themselves drawing the ire of the NLRB and facing allegations of unfair labor practices.

By Brian Malcom

One thing I have learned is that litigation is hard work when done well.  Sure, you can let cases trot along at their own pace and cross your fingers that things work out in the end.  Or, you can take a case by the reins and steer it towards victory.  You may cross the finish line either way, but your chances and time will be a lot better if you take the latter approach.

Sometimes litigation can drag on for years.  Sometimes it comes with a fury.  What do you do when litigation ramps up?  Here are some tips for young litigation attorneys:

1)  Get organized.  Do this as soon as possible and especially when things are slow.  When the fur starts to fly, you won't have time to hunt for a discovery document in a pile of 50 boxes.  If you have a paralegal, keep him involved from the very beginning.  You may not think you need one in the beginning, but both you and the paralegal will be grateful that the file is organized in a way that allows the paralegal to perform his duties.  There is nothing worse than trying to organize a file at the last minute.

2)  Preserve all records.  You never know when that January 3, 2006 letter may come in handy.  Sure the letter seemed innocuous enough at the time; but in litigation disputes are born of innocent transmittals and such.

3)  Know your case and file.  Learn the file and review the materials as it grows.  If you try to search for a needle in a haystack once the file reaches critical mass, you may never find it.  Familiarity with your file and with the case will help you litigate and locate more effectively.

4)  Learn your opponent.  Litigation is situational, circular, and predictably unpredictable.  Confused?  Try to anticipate your opponent's next move and begin preparing today.  What would you do in her situation?  Better yet, what is she going to do (based on her patterns and habits) in her situation.  Sometimes the extra step you gain by anticipating what's coming can mean the difference between a win and a loss.  If you're wrong about your guess this time, store your work.  Most likely, that issue will come up somewhere in the life of the case.

5)  Build a team.  Sometimes the team on a case makes all the difference.  Not all cases will require a team of lawyers, but learn to recognize the ones that do.  If you see a team forming, jump in and begin contributing.  The goal is to learn from your experienced colleagues in the trenches and to earn their respect by fighting alongside.

Don't forget to take care of yourself during litigation.  An unhealthy lawyer is far less helpful and effective than a healthy lawyer.

Given the uproar following the “offside” calls against Team USA at the 2010 World Cup, now is as good a time as any to warn young associates against an analogous infraction in law practice.

First, a wholly inadequate primer of the offside rule under FIFA Law 11: An offside offense occurs only when two conditions exist—1) the player is in an “offside position,” and 2) the player is “involved in play.”  Thus, an offside offense can occur, for example, when a player posts up near the opponent’s goal, waiting for the ball to come to him, and then tries to take what he might think will be an easy and perhaps game-winning shot.  (For those concerned with technical accuracy, check out FIFA’s animated tutorial)  But because of the speed at which the game progresses, conditions giving rise to an offense also can catch otherwise attentive players off guard.

Warning to young lawyers:  Do your part to make sure you don’t get hit with an offside offense by partners, clients, opposing counsel, or a judge.  As in soccer, an offense can occur before you know it if you lose sight of where you should be in advancing a matter, get used to waiting for others to tell you your next move, or believe that you can always take last-minute steps to make up for early inaction or carelessness.  Lest you think otherwise from Landon Donovan’s recent TV appearances , you’ll likely get little sympathy for drawing an offside offense, even if the call was made in error.

By Eileen Burkhalter Smith 

For those of us who are litigators, a referral from the corporate guy downstairs is great, right?  I have really enjoyed stepping in for a client of one of my corporate colleagues when the client is in a litigation situation.  This referral situation raises some conflict issues, though, that might be overlooked here when they would not have been for a new client off the street.  Here is what I now have on the top of my list in this situation when handling the new matter:

1. Did the guy downstairs run a conflict check on this new litigation matter?  Often some preliminary negotiations or conflict resolution may have been performed, but was a formal conflict done consistent with firm procedures?  When in doubt—run the conflict check!
   
2. Does the engagement need to be defined in a letter?  How is this matter being treated—as part of the corporate matter or a new matter completely?  I think it never hurts to put in writing your understanding of the representation.
   
3. Are the parties here the same as in the corporate matter?  This is important with entity-clients whose individuals have a litigation matter—whether personal or related to the business performed by the corporate attorneys.  Rule 1.13 of the Tennessee Rules of Professional Conduct, for example, addresses specifically Organizational Clients and “dealing with” the individuals associated therewith.
   
4. Does the dispute concern work that the firm did?  This may or may not completely prevent me from handling it.  For example, if my colleague may be a witness or documents we prepared are at issue, the Rules of Professional Conduct in Tennessee likely prevent me from handling it (See R. P.C. 3.7 and 1.10).  This may not always be the case, though.  If my corporate colleague anticipated a potential conflict and received a conflict waiver, or if his representation was narrowly defined, I might still be okay.
   
5. Is this something the firm wants to handle?  This should be part of every inquiry on a new matter, obviously.  But with this type of referral, I find that I sometimes forget to ask it.  Are other entities or parties involved in the new litigation matter that were not involved in the corporate matter?  Are there employees involved that have a precarious relationship with the corporate client/employer? 

By James Bowden 

Here are a few drafting tips that I’ve learned the hard way: 

“Due to” Always Means Money Owed – If the recession has affected a registrant’s financial position, “overall revenue decreased because of prevailing economic conditions.” Leave “due to” for promissory notes and the like. 

Define Terms and Use Them – It is best practice to write out the full “the 2010 Annual Report to Shareholders on Form 10-K (the “Annual Report”) as filed with the Securities Exchange Commission (“SEC”) on March 15, 2010” the first time the terms are used in each document. After that, writing the full description in detail is too cumbersome in a document that refers repetitively to the Annual Report and the SEC, especially since 10-K and proxy season dictates that emails to my spouse routinely refer to the Annual Report and the SEC (“I’m going to be a bit late – we’ve got to get the Annual Report to the SEC”). 

When Drafting Board Minutes, Stay Out of the Weeds - If you are drafting minutes to a meeting in which two engineers and a software executive on the Board of Directors get hot and wonky discussing the compatibility of a potential acquisition’s patented technology with the Company’s product line in endless and graphic detail, “A thorough discussion of the potential benefits of a strategic partnership ensued.” That is all. 

Triple Check People’s Names – Want to offend an executive officer who is very proud of their Scandinavian heritage? Pretend you are a customs agent at Ellis Island circa 1907 when you draft a document requiring their signature. Bonus points for feigning shock that “Bjerke” is a proper noun after granting the hapless exec an involuntary name change (“Since when is Sarah Burke our CFO?”).

 Plain Language is a Badge of Honor – Keep it direct and legible. Annihilate all unnecessary adjectives; eliminate superfluous SAT words with extreme prejudice. Leave “Whereas, the party of the first part heretofore dost transfer all dower and curtesy thereto to the party of the second part” in the nineteenth century where it belongs. The SEC has requested that I mention the benefits of justifying left. 

Replace-All Has Been Disabled – A friend of mine once told me that the fact* that the blender is always broken was the best lesson he learned in bartending school (“I’m sorry – I could spend 10 minutes making a sticky mess of the bar and ignoring other patrons while I make you a frozen daiquiri that you will not tip me for, but unfortunately the blender is broken. Can I get you a rum and coke instead?”). Similarly, it is a fact* that the “Replace-all” feature in your word-processing program has been disabled. That is, of course, unless you want to change every “unit” in your document into “membership interests,” including those in the Membership Interested States of America. It is also a fact* that reply-all has been disabled on your email.  

If you have any other drafting tips, please leave them in the comments section for my benefit. Please.

By Eileen Burkhalter Smith

So, I have just learned that there are rules in hockey about who can fight whom in a fight (the allowance of which is in and of itself an unwritten rule).  Apparently, these rules are not actually written, but they are enforced.  Check out the outrage that happens when someone doesn’t follow them here.

This made me think about the unwritten rules in a trial.  I think we can all agree that we have our fair share of written rules, but would you agree with me that there are unwritten ones as well?  Here are three (a hat trick?) that I think exist based on some recent experience:

1.  Embrace your case.  We all have to be advocates, right? I was surprised recently by seeing someone act almost sheepishly about her position in a case during a trial.  I think this might be effective during negotiations, counsel to counsel communications or in other situations, but in front of the judge? The jury?  I think you have to take a stance and believe it.  If you don’t, no one else will.

2.  Pick your battles.  A trial is different than a written motion where it may be appropriate to footnote or reference every facet of every argument.  In a trial, making a mountain out of a molehill can backfire.  Consider whether your strong dispute about a harmless hearsay statement will make the Judge less likely to give you time to argue your later motion to exclude testimony.

3.  Respect their time.  I think it is also important to edit arguments, witness examinations and even evidence depending on how a case is going.  Has the point been made?  Is it 4:00 p.m. on a Friday?  If the case allows for it, I think it is appropriate to realize that the trier(s) of fact may have made a decision and would appreciate an early end.

These are all case specific, of course, but perhaps we should learn a thing or two from hockey:  don’t run a foul of the unwritten rules; it may leave you short-handed.

By James Bowden 

A securities offering which I worked on recently required me to communicate frequently with a representative of a Self-Regulatory Organization (SRO). As all things are for a new attorney, it was a learning experience. Here are seven little nuggets of wisdom that I took away from the experience. [I know, “not another list!”]

1) Be prompt (because the person you will be working with will be). I’ll admit that I was skeptical when I sent the first package of correspondence to the catch-all SRO email address; I figured that I wouldn’t hear back from them for weeks, if at all. Wrong: I sent the first email late in the afternoon and a voicemail was waiting for me when I arrived at the office the next morning (see #3). Throughout the process I found that I could expect a response consistently within two hours. How often do you hear back from opposing counsel in two hours? Probably not often. Also, if you are a securities practitioner and your caller ID registers a 202 area code don’t let your assistant answer for you. It’s the Feds -  pick up the phone!

2) Do your homework. Know every aspect of the issue you are working on and every law/regulation/rule implicated. Believe me, your regulator does know, and they will call you, on the phone (see #3), and ask you about every single law/regulation/rule that you overlooked. “UHHHMMMMM …” is not a particularly satisfying answer. Oh, and DO NOT ask your regulator if there is any law, rule, or regulation that allows you to do what you are trying to do – and if you do, don’t be surprised when the answer is “No.” Or worse.

3) Forget about email. It sounds strange in our email-based world, but regulators use the telephone. I only received three emails from the SRO over the course of the deal: two stating simply, “thanks,” and one confirming that the review was complete.

4) Silence is not consent. Don’t try to pull the old, “If I don’t hear otherwise, I’m going to assume that you are cool with all of this.” Trust me, your regulator will not be cool with all of this

5) Do not seek approval. At least as far as securities regulators go, regulators do not  “approve” of anything. They are like the father of every woman I’ve ever taken on a date. They may not have an objection. They may agree to take no action. But they do not “approve.”

6) Don’t play hard-to-get. Regulators are not supposed to be obstructionists – you shouldn’t be one either. Work through the issues they raise with them. They are listening. Good tip: lead off by explaining your understanding of the laws, rules, or regulations and then confirm that your regulator shares the same understanding. Here’s another good tactic: when they ask you a question, try to restate their question as you understood it before you try to respond. This has the double benefit of giving you time to think about the answer and making sure that your answer will be responsive without being overly broad.

7) Be polite. OK, I learned that one in kindergarten, but I still think it is important. Here’s the thing – regulators tend to be underpaid and overworked. Sympathize with them. Or, if you aren’t the sympathetic type, commiserate with them over the weather. They had to commute across the frozen tundra this morning just like you did. The conversation will make both of your days that much more enjoyable.