This week's corporate law news roundup includes discussions of Laureate Education being the first benefit corporation to successfully complete an initial public offering (IPO), a California federal district court's holding that the protection of whistleblowers under the Sarbanes-Oxley Act (SOX) preempts the attorney-client privilege, and the elimination by the Trump administration of the SEC's resource extraction rule.
TRUMP ADMINISTRATION ELIMINATES SEC'S RESOURCE EXTRACTION RULE
On February 14, 2017, President Trump signed a joint resolution of Congress to eliminate the SEC's rule requiring resource extraction issuers to disclose payments made to the U.S. federal government or foreign governments for the commercial development of oil, natural gas or minerals. This joint resolution was passed under the Congressional Review Act (CRA), which allows for recently finalized regulations to be nullified by a simple majority vote of both Congressional chambers with the President's signature. The resource extraction rule was created under a directive of the Dodd-Frank Act of 2010, and resource extraction issuers would have been required to comply with the disclosure requirements beginning with their fiscal years ending on or after September 30, 2018. Companies doing business in Canada and the European Union will still need to comply with those countries' resource extraction disclosure requirements, which remain in effect. For more information, see https://www.congress.gov/bill/115th-congress/house-joint-resolution/41/text.
LAUREATE EDUCATION IS THE FIRST BENEFIT CORPORATION TO COMPLETE AN INITIAL PUBLIC OFFERING
On February 1, 2017, Laureate Education, Inc. became the first public benefit corporation to consummate an initial public offering. Laureate raised approximately $456.5 million (after deducting underwriting discounts and commissions and estimated offering expenses) by offering 35 million shares at a price of $14 per share. Unlike traditional corporations, benefit corporations are required to pursue positive social and environmental impact along with creating financial value for stockholders. For example, Laureate's public benefit is "to produce a positive effect for society and students by offering diverse education programs both online and at campuses around the globe." According to Laureate's Chief Executive Officer, Laureate registered as a benefit corporation so that it would be clear to its IPO investors that the company takes its social mission seriously and intends to balance the needs of stockholders with the needs of students, employees and communities in which the company operates. For more information, see http://investors.laureate.net/phoenix.zhtml?c=91846&p=irol-newsArticle&ID=2243413.
CALIFORNIA FEDERAL COURT HOLDS THAT SARBANES OVERRIDES ATTORNEY-CLIENT PRIVILEGE
According to a recent California federal district court decision, the protection of whistleblowers under the Sarbanes-Oxley Act of 2002 preempts the attorney-client privilege. In Wadler v. Bio-Rad Laboratories, a Northern District of California court held that a fired general counsel could use attorney-client privileged materials to support his claims that he was terminated in retaliation for reporting concerns about the company's potential violations of the Foreign Corrupt Practices Act. The fired general counsel ultimately prevailed in a jury trial and was awarded $3 million in lost wages and $5 million in punitive damages. The court's holding is a departure from the norm followed by prior whistleblower retaliation cases involving former general counsels, which had held that materials protected by the attorney-client privilege were inadmissible to support a former general counsel's claims. For more information, see http://hr.cch.com/ELD/WadlerBioRad122016.pdf.
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