News

Ex-Pilot President Asks for Christmas Break Before Starting Fraud Sentence

The convicted former president of Pilot Flying J has asked a federal judge if he can have until after Christmas to begin serving his 12 ½ years in prison for fraud, Knoxnews reports. U.S. District Court Judge Curtis Collier already granted Mark Hazelwood’s request to postpone his reporting to prison until after Thanksgiving, and now his attorneys say in a motion filed last week that it’s only fair to grant him Christmas as well. Hazelwood was convicted in a scheme to rip off small trucking companies of more than $50 million.
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Basic Tech Checklist for Firms

Law firms attempting to stay competitive and state-of-the-art need to consistently evaluate their use of technology. In addition to staying competitive, technological competency is required. In 2017, the Tennessee Supreme Court amended Rule 8 of the Rules of Professional Responsibility to include this obligation. Above the Law presents a simple and straightforward tech checklist for law firms or lawyers seeking guidance in this area.   

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ABA Issues Formal Opinion on Lawyers' Duty in Case of Cyber Attack

The American Bar Association Standing Committee on Ethics and Professional Responsibility released a formal opinion this week that reaffirms the duty of lawyers to notify clients of a data breach and details reasonable steps to be taken to meet obligations set forth in model rules. “When a breach of protected client information is either suspected or detected, Rule 1.1 requires that the lawyer act reasonably and promptly to stop the breach and mitigate damage resulting from the breach,” Formal Opinion 483 says. “Lawyers should consider proactively developing an incident response plan with specific plans and procedures for responding to a data breach. The decision whether to adopt a plan, the content of any plan and actions taken to train and prepare for implementation of the plan should be made before a lawyer is swept up in an actual breach.” Read more here.
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Global Study Finds Businesses Unknowingly Breaching Copyright Law with Background Music

Nielsen Music has released a global study of the background music business and found that composers, artists and musicians could be missing out on an estimated $2.65 billion a year, Forbes reports. Many small businesses are streaming personal music without obtaining a commercial license, violating copyright laws. The study found that 71 percent of small business owners in the U.S. incorrectly believed they could use their personal (B2C) music service for background music. In reality, they need a licensed business-to-business (B2B) music service. Although there are some organizations that do store visits, the story points out, there are too many small businesses for these organizations to effectively regulate their background music use.   

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Sears Files for Bankruptcy

Sears Holdings has filed for Chapter 11 bankruptcy following its inability to make a $134 million debt payment, which was due Monday, CNN Business reports. The company’s chairman and largest shareholder, Eddie Lampert, gave up the title of CEO. Last month, Lampert proposed restructuring Sears’ finances in order to avoid filing for bankruptcy; however, the creditors instead decided to head to bankruptcy court. With the advent of online shopping and big box stores, Sears has been struggling for several years. The last profitable year for the 132-year-old company was 2010. In addition to the 46 store closings planned for next month, the company will also close 142 stores near the end of the year.

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October TBJ Highlights Online Sales Tax, Celebrate Pro Bono Month

What does a South Dakota case have to do with us here in Tennessee? After Wayfair, our cover story points out, there will be significant impact on commerce and tax collection in our state, too. Also, it is the 10th anniversary of Celebrate Pro Bono Month! Read about its impact and how you can get involved; a word from TBA President Jason Pannu on the legal needs of low-income Tennesseans; and the remembrance of pro bono lawyer and historical hero, Lutie Lytle. Read the whole October issue here.

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S.E.C. Sues Tesla CEO Elon Musk

The Securities and Exchange Commission filed a lawsuit in New York Federal Court accusing Tesla CEO Elon Musk of committing fraud by making false public statements on Twitter that had the potential to hurt investors, the New York Times reports. The suit aims to bar Musk from serving as an executive or director of publicly traded companies, such as Tesla; this type of punishment is one of the harshest that the S.E.C. can impose on corporate executives. In the Aug. 7 tweet, Musk said he was considering taking Tesla private and that the financing for this possible conversion was "secured." However, neither Tesla nor Musk had actually secured financing beyond initial conversations with investors. A 2013 S.E.C. policy permits companies to disclose market-moving information via Twitter, provided investors are given advance notice that the corporation may do so. Tesla had given investors notice that Musk’s Twitter account is one venue the company may deliver significant announcements.

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Tech Companies Encourage National Data Privacy Laws to Preempt California Law

During a Senate hearing Wednesday, major technology and internet companies — including Apple, Alphabet, Amazon, AT&T, Charter and Twitter — encouraged the passage of federal legislation to protect data privacy that would preempt the tough privacy law that California adopted, set to take effect in 2020, Reuters reports. The companies acknowledged the importance of being more transparent with personal data use and giving users more control over their data, but argue that California’s legislation is too burdensome due to confusing language, making compliance difficult. In addition to California adopting tough privacy laws, the European Union General Data Protection Regulation took effect in May. Violations carry stiff fines in the millions of dollars. The U.S. Commerce Department is seeking comments on how to set nationwide data privacy laws.  

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U.S. Bankruptcy Judge Rules in Favor of Toys 'R' Us

U.S. Bankruptcy Judge Keith L. Phillips ordered Fung Retailing Ltd., a joint venture partner of Toys “R” Us Inc., to drop a court action against the retailer yesterday in Richmond, Virginia, Bloomberg reports. This decision negates a Hong Kong court order to suspend the auction of Toys’ Asia operation, of which Fung owns 15 percent stake. Fung claims it will be harmed by the way Toys is pursuing a sale, while Toys claims Fung is attempting to scare off opposing bidders in order to buy out Toys’ stake at a discount.   

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CEO of Sears Proposes Rescue Plan to Avoid Bankruptcy

Upcoming debt payments and a limited cash flow loom over Sears Holdings Corp. CEO Edward Lampert tells the Wall Street Journal. In order to avoid a bankruptcy filing, Lampert, who is also Sears’s chairman, controlling shareholder and biggest creditor, is encouraging creditors to restructure over $1 billion of debt coming due in the next two years. He also proposes that the Sears board sell an additional $1.5 billion of real-estate and divest $1.75 billion of assets, which would include Sears Home Services and the Kenmore appliance brand.  In August, Lampert made an offer to buy the brand for $400 million in cash, but the board has yet to approve it. His proposal requires approval from multiple stakeholders, including Sears’s independent board committee and bondholders.

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West Tennessee Legal Services Seeking Volunteers for Obion County Clinic

The Pro Bono Project at West Tennessee Legal Services has scheduled a Free Legal Clinic on Oct. 5 from 10 a.m. to 2 p.m. at the Troy United Methodist Church. The clinic will be held in the church’s Activities Building located at 226 W. Westbrook St., Troy, Tennessee, 38260. All lawyers are invited to help at this counsel and advice-only clinic. To volunteer or for more information contact Ginny Brimm, 731-426-1308, or go online here.
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Uber Settles Hacking Disclosure Litigation, Tennessee Gets $1.7M

Earlier this week, Uber Technology Inc., best known for its ride-share services, settled a multi-state legal action based on its alleged failure to completely and accurately disclose information relating to a 2016 data security breach that compromised personal information about riders and drivers, Reuters reports. The settlement involved all 50 states and the District of Columbia. An Associated Press report carried by Usnews.com reports that Tennessee’s share of the settlement totals $1.7 million. 

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Monkey Business

In other public offering news, SurveyMonkey’s parent corporation, SVMK Inc., began trading as a public company on Sept. 26. Known by many as a go-to resource for simple online surveying, SurveyMonkey raised more than $180 million in its initial public offering, according to The New York Times DealBook. SVMK is trading on the Nasdaq Stock Market under the ticker symbol “SVMK." 

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Even Bitcoin Needs Traditional Finance . . .

Bitcoin and other cryptocurrencies have raised issues under securities laws in the United States because of concerns that certain cryptocurrencies may themselves be securities. But Bitmain Technologies Ltd., a leader in cryptocurrency mining, has chosen to undertake capital financing through a more traditional means: an initial public offering — in Hong Kong. The success of the offering is, however, uncertain. As The Wall Street Journal notes, “the potential offering comes at a difficult time for both the cryptocurrency and public-equity markets.” Nevertheless, this is a financing that many markets will watch.  The New York Times also reported on this offering.

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Ex-Pilot Flying J President Sentenced to 150 Months in Prison

U.S. District Judge Curtis Collier today sentenced former Pilot Flying J President Mark Hazelwood to 150 months in prison, Knoxnews reports. Hazelwood was also fined $750,000. The judge has not yet decided whether Hazelwood can remain free pending appeal. Hazelwood was found guilty for his role in a five-year plot to scam smaller trucking companies with fuel discounts and then shorting them.
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Avvo to Improve Lawyer-Rating Transparency, Pay $50K in Agreement with NY AG

Online legal marketplace Avvo has reached an agreement with the New York Attorney General’s Office to increase the transparency of the online legal directory’s lawyer-rating system, The ABA Journal reports. The changes include consumer disclosures about how lawyers are rated and how legal forms are posted to the website. The company will also pay a $50,000 fine to cover the cost of the AG’s investigation.
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State AGs Reach Settlement with Uber, Tennessee to Receive $1.7 Million

Attorney General Herbert H. Slatery III along with the other 49 states and the District of Columbia, has reached an agreement with California-based ride-sharing company Uber Technologies Inc. to address the company’s one-year delay in reporting a data breach to its affected drivers. Uber learned in November 2016 that hackers had gained access to personal information Uber maintains about its drivers, including drivers’ license information. Uber has agreed to pay $148 million to the states. Tennessee will receive nearly $1.7 million which will be directed into the state’s general fund. Uber has also agreed to strengthen its corporate governance and data security practices to help prevent a similar occurrence in the future.
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The Final Frontier: Ethics and the Malpractice Risks of Protecting Electronic Information – Knoxville, Nashville, Memphis

Just in time for the end-of-the-year CLE rush, the TBA has a variety of ethics CLE options across the state. As quickly as client information and case management technology evolves, so too does the legal profession’s duty to safeguard it. Join us in Knoxville, Nashville and Memphis on Oct. 23, 24, and 25 for this annual event, with three hours of dual CLE, guiding attendees through malpractice risks and how to prevent them from happening in the ever-changing electronic age.

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Walmart Changing Legal Operations

The Corporate Counsel blog takes a look at changes in Walmart's legal operations. At the recent annual Federation of Defense and Corporate Counsel Symposium in Philadelphia, Alan Bryan, senior associate general counsel for Walmart Inc. discussed Walmart’s new cost cutting measures. Walmart has entered into partnership with LegalMation and is using software to take complaints filed against the company, generally in tort and general litigation matters, then feeding them into the system. Within two minutes, the system kicks out an answer, a first set of interrogatories and a first set of requests for production. “We’ve found that it is saving 60 to 70 percent of the time that would normally take to review a complaint,” Bryan explained. 

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3 Dual Hours in Memphis, Nashville and Knoxville

The TBA is offering a three-hour CLE focused on ethics and malpractice risks in protecting electronic information in Middle, East and West Tennessee. The CLEs will start in Knoxville on Oct. 23. Topics include: case management technology, professional duty, financial exposure and risk management. See all locations and dates here.
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Upcoming Business Law Events at the UT College of Law

The Tennessee Journal of Business Law is hosting two upcoming events at the UT College of Law that are of interest to business lawyers in East Tennessee. On Friday, September 14, from 8:00 a.m. to 3:45 p.m., the law school is hosting “Connecting the Threads II,” a series of presentations from business law professors who teach throughout the United States. On Friday, September 21, from 8:30 a.m. to 4:00 p.m., the law school is hosting “Law and Business Tech: Cybersecurity, Blockchain and Electronic Transactions,” a one-day event bringing together representatives from the business world, the cybersecurity field, and the legal profession. Both events are free and open to the public, with CLE credit available for a fee.

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Delaware Chancery Court Awards Fair Value to Expelled LLC Member

In a recent decision, Domain Associates, L.L.C. v. Shah, the Delaware Chancery Court determined that an expelled member of a member-managed LLC was entitled to the fair market value of his member interest. Shah was forced to withdraw by the other members of Domain, a venture capital firm registered as a member-managed Delaware LLC. Domain argued that Shah was entitled only to the value of his capital account under the LLC agreement. Vice Chancellor Laster held that although the forced withdrawal was authorized under the LLC agreement, the agreement was silent on the amount Shah would receive upon withdrawal. Because the agreement was silent, and Section 18-604 of the Delaware LLC Act applies only to voluntary withdrawals, no provision of the LLC Act controlled. Domain had chosen a member-managed model, “whose governance structure resembled a partnership.” Therefore, the court applied a 2006 Chancery Court decision interpreting the Delaware Revised Uniform Partnership Act and held that Shah was entitled to a payout “equal to the fair value of [his] economic interest.”  

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Moonves Forced to Retire After Sexual Harassment Allegations

CBS announced on Sunday that its long-time Chairman and CEO, Leslie Moonves, would be departing the company in the wake of sexual harassment allegations. “In the end, it was the evidence that Mr. Moonves had misled his board — even more than the allegations of abuse from multiple women — that doomed him,” reported the New York Times. How to deal with the allegations against Mr. Moonves was the latest challenge for a board that already had been split by the ongoing dispute between Mr. Moonves and CBS’s controlling shareholder, Shari Redstone.

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GDPR Privacy Complaints Filed Against Google in the EU

Privacy complaints against Google have been filed in Ireland and Britain by Brendan Eich, known for being the creator of JavaScript, co-founding the web browser Mozilla and founding the private web browser Brave, Reuters reports.  The European General Data Protection Regulation (GDPR) is a new privacy law that had a two-year lead-in period to provide time for companies to comply. However, the complaint argues that Google and the advertising technology industry are not processing personal data in a way that properly secures it.  Noncompliance with the GDPR carries heavy fines for serious violations. This test case could trigger an article in the GDPR and spur an EU-wide investigation.

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Legal Startup Atrium Raises $65 Million

Justin Kan’s one-year-old legal firm and tech startup Atrium has announced that it has raised $65 million in an investment round led by Andreessen Horowitz, Forbes reports.  Over the past year, Atrium has served as the law firm for some of tech’s fastest-growing companies while providing technology to automate filings. It has also helped 250 clients raise a combined $500 million, including scooter company Bird, Alto and Sift Science. Atrium specializes in helping startups with startup financings, commercial contracts, blockchain and outside counsel.

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