Law Firm News

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Edwards & Angell, L.L.P.

International Registry Issues List
Ed Kammerer, a partner in the Providence Office, serves an an observer on the The International Registry Advisory Board. In his role as observer, Ed represents the interests of the Business Aviation community. The International Registry is a new electronic registry which evidences the creation of interest in aircraft including sales and security interests. IRAB continues to work with Aviareto, the company that manages and runs the day to day operations of the International Registry, to improve system flexibility and reliability. IRAB has developed a Priority List of proposed improvements and changes to the International Registry. IRAB continues to solicit industry comments on the IR and the Priority List.

08-14-2007

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Davies, Ward, Phillips & Vineberg, LLP

Flash: National class action settlement against Canada Post: Québec stands apart
The Québec Court of Appeal rendered its judgment refusing to approve a class action settlement reached in the rest of Canada of an action instituted against Canada Post Corporation as a result of the interruption of its free "lifetime" internet access after only one year of operation. Three motions to certify a class action had been filed against Canada Post, first in Québec, followed by Ontario and then, British Columbia.

In July 2003, a settlement was reached between Canada Post, the internet supplier, Cybersurf Corp, and the class action plaintiffs in Ontario and British Columbia, pursuant to which every person in Canada who had subscribed to the service would be entitled to the reimbursement of the purchase price ($9.95) in exchange for the return of the software. While this settlement specifically provided that it was subject to the authorization of the Ontario and British Columbia courts, no mention was made of the class action instituted in Québec, or of the need for the settlement to be approved by the Québec courts.

On December 22, 2003, the settlement was approved in Ontario with respect to all Canadian residents, with the exception of those residing in British Columbia having regard to the class action instituted in that jurisdiction. Despite a specific request by counsel for the Québec plaintiffs, the Ontario court did not include a similar exception with respect to the Québec class action. The settlement was later approved in British Columbia on April 7, 2004.

On July 20, 2005, the Québec Superior Court refused Canada Post's request to approve in Québec the settlement reached in the rest of Canada. By its judgment of August 10, 2007, the Québec Court of Appeal upheld this decision.

The Québec Court of Appeal was troubled by the fact that the Ontario court approved a national settlement of the class action without regard for the fact that a class action was pending before the Québec courts and while the Ontario court made a specific exception to the settlement for British Columbia residents. The Court of Appeal did not mince its words and stated that it was perplexed by the fact that the Ontario court had shown a courtesy to British Columbia, the last jurisdiction where the class action was launched, that it refused, without explanation, to extend to Québec.

The Québec Court of Appeal held that the Ontario judge should have declined jurisdiction with respect to Québec residents. In addition, it held that the notices that were published advising class members of the proposed settlement were confusing and inadequate as they did not clearly provide for the position of Québec class members and that this constituted a violation of the fundamental principles of procedure which justified the refusal to approve the settlement in Québec.

Despite its holding in this case, the Court of Appeal specifically indicated that its judgment did not mean that a national or international class action was not possible in Québec; to the contrary, the Court noted that questions of provincial jurisdiction which would result in an unnecessary increase in class actions was to be avoided. It reiterated that each case will be decided on its own merits.

From a practical standpoint, this judgment is an important reminder to parties who want to settle a national class action when proceedings are pending in Québec and elsewhere. Excluding Québec counsel from the settlement discussions may lead the courts in Québec to refuse to approve the settlement.

In summary, while the class action against Canada Post is settled in the rest of Canada, it will continue to follow its course in Québec. It will not be surprising if Canada Post seeks leave to appeal this decision to the Supreme Court of Canada. It has 60 days to do so.

08-14-2007

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Cooley Godward Kronish LLP

Report Highlights Regional Differences in Venture Capital Financing
Cooley Godward Kronish LLP today released its most recent report on venture capital financing terms. The report analyzes the Firm’s venture capital transactions nationwide that closed in the six quarters ending with the first quarter of 2007, as well as Q1 2007 trends. In addition, this issue of the report highlights key differences and similarities between East and West Coast private financing deals.

Overall, in the first quarter of 2007, later-stage financings cooled slightly while early-stage financings continued at a brisk pace. In addition, median company valuations for later stage transactions declined in the first quarter from their highs in 2006. The percentage of up-round financings – transactions in which the valuation of the company increased relative to the prior round of financing – declined steadily over the last year from a high of 88 percent in the first quarter of 2006. Even with the decline, up-round financings remain strong, accounting for 68 percent of all Q1 2007 deals.

Key regional trends highlighted in the report include:

* Increased Interest in Multiple Liquidation Preferences on East Coast. The East Coast has witnessed a relatively steady decrease in deals with a simple 1X liquidation preference over the last several quarters. During the last three quarters there has been an increase in deals with multiple liquidation preferences. By contrast, deals on the West Coast have seen liquidation preference terms remain fairly steady from the fourth quarter of 2005 through the first quarter of 2007.

* Early Stage Financing Trend on East Coast. Another distinguishing characteristic between regions is the differences between the number of Series C and later stage financings. From the fourth quarter of 2005 through the first quarter of 2007, the West Coast accounted for an average of 36 percent of all Series C and later stage transactions, while the East Coast only saw an average of 21 percent during this same time period.

* West Coast Yields Higher Median Valuations. Along with a greater percentage of later-stage transactions, the West Coast also had higher median valuations at each stage of financing. While the median pre-money valuation for Series A financing was only slightly higher on the West Coast than the East Coast, valuations were considerably higher for later-stage financings on the West Coast.

"The industry has long spoken about ‘East Coast’ versus ‘West Coast’ with respect to deal terms,” said Jim Fulton, a partner in Cooley's Palo Alto office, and head of the Firm's Emerging Companies practice group. “While it’s interesting to see some of the most significant differences, it’s also important to keep in mind that there are generally more similarities than differences when it come to overall deal terms.”

Cooley's Private Company Financings Report is published approximately every quarter and is based on private company transactions in which the Firm served as counsel to either the issuing company or the investors. A complete version of the report is available at www.cooley.com.

In 1959, Cooley formed the first institutional venture capital limited partnership in the western United States. Since then the Firm has been at the vanguard of private company financings, both as a representative of hundreds of venture capital and private equity partnerships and as counsel to companies and entrepreneurs raising money from the venture capital community. Industry sectors include all areas common to venture capital financings, including communications, computer hardware and networking, consumer electronics, general retail, Internet, life sciences, semiconductors, and software.

08-14-2007

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Robinson & Wood

Judgment Reversed
Chris Nielsen and Anne Miller recently obtained a reversal of a judgment against their client E-Fab, Inc. in a negligent misrepresentation case against an employment placement agency. Nielsen and Miller represent a corporation that sued defendant Accountants Inc. for failing to investigate the criminal background of an individual that Accountants Inc. placed with E-Fab after representing that the person had been "screened". The representation occurred in 1996. Over the course of seven years the employee embezzled approximately $1,000,000 from the plaintiff. After the embezzlement was discovered the police informed E-Fab that the employee had a prior criminal record for grand theft and welfare fraud. E-Fab filed a complaint in 2005 that contained causes of action against the embezzler and the employment agency. Accountants, Inc demurred to the complaint and alleged that the statute of limitations had run on the breach of contract and negligence claims. The Superior Court agreed and dismissed E-Fab's complaint. The Court of Appeal reversed the judgment against E-Fab and held that the delayed discovery rule allowed E-Fab to sue even though the misrepresentation regarding the employee occurred in 1996. The matter was remanded to superior court and will be set for trial.

The case is important as most employers are left without a remedy when an employee embezzles significant sums of money. Actions against a bank that honors fraudulent transactions are limited to a one year period of time and in some cases it is presumed that the employer has constructive notice that the employee was stealing. Here the court agreed with E-Fab that a misrepresentation of an employee's background only becomes actionable when the misrepresentation is uncovered regardless of when the misrepresentation occurred. The case will now proceed to trial against Accountants Inc. and plaintiff will seek damages of $1,800,00 a sum that represents the embezzled funds plus interest and attorney fees.

08-14-2007

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Robinson & Wood

2007 Super Lawyers:
Robinson & Wood proudly announces four of their senior shareholders have been recognized by their peers as 2007 Super Lawyers. The organization of Law & Politics performs the polling, research and selection of Super Lawyers in a process designed to identify lawyers who have attained a high degree of peer recognition and professional achievement. Super Lawyers is a comprehensive and diverse guide to outstanding attorneys, representing a wide range of practice areas, firm sizes and geographic locations. Only 5 percent of the lawyers in each state or region are named Super Lawyers. Congratulations to Archie Robinson, David Henningsen, Jesse Ruiz and Christian Nielsen for their selection as Super Lawyers.

08-14-2007

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Groom Law Group, Chartered

Lou Mazawey participated on an ALI-ABA sponsored conference call on 403(b) regulations
The U.S. Treasury Department and Internal Revenue Service released long-awaited final regulations for Section 403(b) plans. For the first time in 43 years, there are comprehensive IRS rules governing these plans, which the Tax Code allows to be set up by public schools, colleges or universities, and charitable entities that are tax-exempt under Section 501(c)(3). Lou Mazawey participated in and ALI-ABA sponsored conference call discussing the new regulations on August 9, 2007.

The new Regulatory package contains highly significant controlled group rules for all tax-exempt organizations for all benefits purposes where a controlled group determination is relevant. Don't overlook this first piece of regulatory guidance on the existence of controlled groups in the tax-exempt world.

Virtually every 403(b) plan will be affected by the new written document requirement and a myriad of other changes and restrictions. Many observers believe the new rules will prompt affected employers to totally restructure their arrangements. In addition, new Department of Labor guidance may cause employers who have not treated their plans as ERISA plans to reexamine their positions.

Topics covered included:

* the newly required plan documents, and what they must contain
* special contribution limits for 403(b) plans
* employees who can be excluded from the option to make voluntary 403(b) deferrals, and the conditions attached to those exclusions
* changes from current law regarding contract-to-contract transfers
* plan freezes and terminations
* ERISA coverage issues
* when tax-exempt employers are treated as members of a "controlled group"; and more generally, what needs to be done and by when as a result of the regulations.

08-13-2007

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Groom Law Group, Chartered

David Powell participated in ABC conference call on final 403(b) regulations
The Council held a Benefits Briefing conference call to discuss the final regulations governing Internal Revenue Code Section 403(b).

The conference call was moderated by Jan Jacobson. Bill Bortz, Associate Benefits Tax Counsel at the U.S. Department of Treasury, Brian Keene, partner at the Benefits Group of Davis & Harman LLP, and David Powell, principal at Groom Law Group, were also on hand to provide expert analysis and answer member questions.

08-13-2007

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