LEGAL
A recent U.S. District Court for the Southern District of New York decision emphasizes the importance of taking precautions at the outset of an internal investigation to preserve the attorney-client privilege and work product protections.
In In re General Motors LLC Ignition Switch Litigation, General Motors (GM) retained outside counsel to conduct an internal investigation after the recalls of certain vehicles based on an ignition switch defect and a resulting criminal investigation by the DOJ. GM's counsel interviewed hundreds of current and former employees and compiled the results of the investigation in a report. GM provided the report and the documents cited in the report to Congress, the DOJ and, ultimately, the plaintiffs.
The plaintiffs moved to compel the production of materials underlying the investigation, including all notes and memoranda relating to the witness interviews conducted by GM's outside counsel. The court denied the plaintiffs' motion, holding that GM and its counsel sufficiently maintained the attorney-client privilege and work product protection over the interview materials.
To preserve the attorney-client privilege and work product protection when conducting witness interviews during an internal investigation, counsel should:
For more information on the attorney-client privilege and work product protection in internal investigations, see Practice Note, Internal Investigations: US Privilege and Work Product Protection.
Recent developments are fostering the expansion of public company shareholder proxy access rights. Companies without a procedure for shareholders to include director nominees in company proxy materials should:
In January 2015, SEC Chair Mary Jo White directed the SEC staff to review Exchange Act Rule 14a-8(i)(9), which permits any shareholder proposal that "directly conflicts" with a management proposal to be excluded from company proxy materials. A few companies had attempted to rely on this provision to exclude shareholder proxy access proposals and instead include management proposals for restrictive proxy access rights. The SEC staff announced that pending the review, it would stop granting no-action relief under Rule 14a-8(i)(9). It also withdrew relief granted to Whole Foods Market, Inc. regarding its planned exclusion of a shareholder proxy access proposal on that basis.
In February 2015, Institutional Shareholder Services Inc. (ISS) updated its voting policy, announcing it will generally recommend in favor of management or shareholder proxy access proposals with requirements no more restrictive than that a proponent (or group of proponents) hold at least 3% voting power for at least three continuous years, with a cap on nominees generally of 25% of the board.
ISS also announced it will recommend a vote against one or more directors if a company excludes a properly submitted shareholder proposal without obtaining a voluntary withdrawal by the proponent, no-action relief from the SEC or a court ruling stating that it can exclude the proposal from its ballot.
Several companies, including General Electric Co., Prudential Financial, Inc. and Citigroup Inc., have announced the adoption of (or plans to adopt) a proxy access by-law, or recommended in favor of a negotiated shareholder proxy access proposal. The parameters of proxy access in these cases are mostly aligned with ISS's new policy. For an overview of the shareholder proposal process, including the steps a company should take after it receives a proposal, see Practice Note, How to Handle Shareholder Proposals.
The Department of Labor recently issued a final rule redefining "spouse" so that eligible employees in legal same-sex and common law marriages have the same rights to take Family and Medical Leave Act (FMLA) spouse-related leave as other married employees. Effective March 27, 2015, the legality of a marriage is based on the place of celebration, rather than place of residence, so that all legally married couples are treated equally.
Companies operating in multiple states can now implement consistent leave policies for all employees. However, to verify an employee's marital status before granting FMLA leave, employers may need to understand marital laws in states where they do not conduct business.
To comply with the final rule, covered employers should:
Employers should consider accepting employees' statements that they are legally married as sufficient proof of marriage, especially if that has been their practice to date. Employers may want to err on the side of granting leave if the law or the employee's marital status is ambiguous.
For an overview of the FMLA and military leave law, see Practice Notes, Family and Medical Leave Act (FMLA) Basics and Military Leave Law.
This look at the major issues on the horizon for corporate counsel comes from Practical Law – an online legal know-how service. View all the looming issues now – compliments of Practical Law The Journal, which covers the latest transactional and compliance topics that impact your practice. To gain access to more related know-how resources, please visit us.practicallaw.com.
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