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Archive for the ‘Commercial Litigation/Directors & Officers’ Category

Finding Shelter from the Storm: SBA Issues New Guidance on Safe Harbors for PPP Borrowers

Posted on: May 20th, 2020

By: Anastasia Osbrink

The safe harbor period for businesses that received the Small Business Administration’s (“SBA”) Paycheck Protection Program (“PPP”) loans expired on May 18, 2020 after a 4-day automatic extension. That safe harbor provided that businesses that repaid loans by that date would automatically be deemed to have satisfied the “good faith” requirement of the PPP wherein borrowers certified that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” This safe harbor arose after reports of large businesses, such as Shake Shack and the NBA, receiving loans under the program. Under normal circumstances, a business must provide documentation of making unsuccessful attempts to obtain loans from other sources prior to receiving an SBA loan. However, the PPP required self-certifications of good faith and eligibility without requesting separate documentation. The purpose of this was to quickly get an injection of cash into the economy – particularly to small businesses – so that companies could retain and rehire employees. When it came out that large companies were also receiving these loans, a public outcry ensued and the SBA provided additional guidance allowing for this safe harbor period so that large businesses would be encouraged to repay loans without facing any further investigation, audits, or consequences based on the “good faith” certification. Many of these larger businesses may still satisfy the “good faith” requirement, but making quick repayments creates good optics for these companies and eliminates further audits based on this certification.

Now, in a further effort to conserve resources and protect small business’ payroll capacities, the SBA has announced an additional safe harbor. This second safe harbor provides for an automatic assumption of good faith for any borrower that, along with its affiliates, received under $2 million in PPP loans, regardless of whether that loan was repaid by May 18, 2020. This means that audits for good faith will only be conducted for companies that received over $2 million and did not repay that loan by May 18th. The SBA cited three reasons for this additional safe harbor: 1)  borrowers that received under $2 million are more likely to satisfy the “good faith” requirement because they are less likely to have had access to other loan sources; 2) it will help promote economic stability by helping small businesses retain and rehire employees that otherwise may not have the ability to do so; and 3) it will enable the SBA to conserve resources by only investigating and auditing those companies that received bigger loans, which could yield larger returns if successful. It should be noted, though, that neither of these safe harbors apply to other requirements, such as the eligibility certification, or outright false statements or fraud. However, except where there is evidence of actual fraud, it appears that companies that fall into one of the safe harbors are unlikely to be audited.

It also seems that the SBA is less focused on punishment and more focused on recouping loans that did not satisfy the good faith requirement. That is because the SBA additionally stated that if it does determine a company failed to satisfy the good faith requirement after being audited, the company will not face any further action or fines if it repays the loan in full. This though, again, does not apply to determinations of actual fraud.

As the focus shifts to larger companies and the safe harbor for these larger loans expires, the Securities and Exchange Commission (“SEC”) is ramping up its investigations of public companies that received PPP loans. The SEC is seeking information from several of these public companies in order to ascertain whether they satisfied the PPP requirements. As part of this sweeping probe, the SEC is sending out letters to these public companies entitled “In the Matter of Certain Paycheck Protection Program Loan Recipients,” in which it requests additional information and documentation. This again demonstrates the focus of audits and investigations on large companies that received significant loans rather than on small businesses.

If you have questions or would like more information, please contact Anastasia Osbrink at [email protected].

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis.  Click here to view upcoming webinars.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

Supreme Court to Hear Arguments Remotely, Including TCPA Constitutional Challenge

Posted on: April 16th, 2020

By: Matthew Foree

This week, the United States Supreme Court announced that it would hear oral arguments remotely for the first time in its history.  The Court will hear oral arguments by telephone conference on certain dates in May in a limited number of cases that had previously been postponed.  The cases are to be assigned dates for argument after confirming counsel’s availability.

The Court’s press release provides that “[i]n keeping with public health guidance in response to COVID-19, the Justices and counsel will all participate remotely.”  Interestingly, the Court stated that it “anticipates providing a live audio feed of these arguments to news media” and that “[d]etails will be shared as they become available.”

Among the cases the Court is set to hear in May is Barr v. American Association of Political Consultants, Inc., which concerns a constitutional challenge to the Telephone Consumer Protection Act (“TCPA”).  The Court has just scheduled argument in the Barr case for Wednesday, May 6, 2020.The TCPA generally prohibits calls to a cellular telephone using either an “automatic telephone dialing system” (ATDS) or an “artificial or prerecorded voice,” unless the call is made with the prior express consent of the recipient.  In a 2015 amendment to the TCPA, Congress exempted from this prohibition calls “made solely to collect a debt owed to or guaranteed by the United States.” 

In 2016, the Respondents in Barr initiated a declaratory judgment action against the Federal Communications Commission (“FCC”) and the Attorney General, arguing that the TCPA’s content-based ban on protected speech violated the First Amendment.  They sought declaratory relief and an injunction restraining the Government from enforcing the ban against them.  The case made its way to the U.S. Court of Appeals for the Fourth Circuit, which found a First Amendment violation and determined that the government-debt exception was severable from the rest of the TCPA.    

As we have discussed previously, TCPA litigation often centers around whether calls were made using an ATDS.  The current litigation landscape concerning the interpretation of the definition of ATDS has caused a split in the Circuit Courts and generated significant confusion that continues to this day.  In Barr, Respondents argue that the TCPA’s automated call restriction, not just the government-debt exception, violates the First Amendment.  Accordingly, practitioners in this area are anxious for the ruling on this matter, particularly as it relates to how far the Supreme Court will go to resolve the constitutional issue, which can have a major impact on the statute and TCPA litigation moving forward.  

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include COVID-19’s impact on finances and loans, the FFCRA, the CARES Act and more. Click here to view upcoming webinars.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

Georgia Supreme Court Overrules Precedent on Attorney’s Fees for Counterclaimants

Posted on: April 8th, 2020

By: Jake Carroll

Georgia law permits the award of attorney’s fees to a claimant where the party defending the claim has “acted in bad faith” in making the contract, has been stubbornly litigious, or has caused the plaintiff unnecessary trouble and expense. O.C.G.A. § 13-6-11. The “bad faith” refers to bad faith in the making or performance of the contract, and may exist whether or not there is a bona fide controversy otherwise existing between the parties.  Thus, “bad faith” relates to the making or performance of the contract and not the conduct of the litigation. The terms “stubbornly litigious” and “unnecessary trouble and expense” relate to the conduct of the litigation and may be found to exist where there is a lack of bona fide controversy.

Both the Georgia Supreme Court and Court of Appeals have repeatedly held that “the award of expenses of litigation under O.C.G.A. § 13-6-11 can only be recovered by the plaintiff in an action under the language of the statute; therefore, the defendant and plaintiff-in-counterclaim cannot recover such damages where there is a compulsory counterclaim.”[1]

However, the decision in SRM v. Travelers overrules prior holdings, and allows a counterclaimant to recover attorney’s fees under O.C.G.A. § 13-6-11, regardless of whether the counterclaim is independent of the plaintiffs claim.

In light of the Travelers decision, claimants should evaluate the potential risk of claims for attorney’s fees from their counterclaimants. In commercial and construction contract disputes, the Travelers decision impacts risk for counterclaims of attorney’s fees based on a claimant’s conduct during litigation, as well as bad faith in making or performing the underlying contract.

For Georgia insurers, this ruling does not call into question the status of Georgia’s insurance bad faith statute, O.C.G.A. § 33-4-6, which is the exclusive remedy for and insurer’s refusal to pay a “covered loss.” Although the claims at issue in SRM were against an insurance company, they involved the calculation of premium as opposed to a coverage issue within the purview of Section 33-4-6. Be sure to follow FMG’s Insurance Coverage and Bad Faith BlogLine for analysis of current state-wide and national trends in insurance litigation.

If you have questions regarding this decision, or any other construction or commercial contract questions, Jake Carroll practices construction and commercial law as a member of Freeman Mathis & Gary’s Construction Law, Commercial Litigation, and Tort and Catastrophic Loss practice groups. Mr. Carroll represents business and commercial entities in a wide range of disputes and corporate matters involving breach of contract and warranty claims, business torts, and products liability claims. He is available at [email protected].


[1] See Byers v. McGuire Properties, Inc., 679 S.E.2d 1 (Ga. 2009); Graybill v. Attaway Constr. & Assocs., 802 S.E.2d 91 (Ga. Ct. App. 2017) (attorney’s fees not permitted on compulsory counterclaim);Singh v. Sterling United, Inc., 756 S.E.2d 728 (Ga. Ct. App. 2014); Sanders v. Brown, 571 S.E.2d 532 (Ga. Ct. App. 2002).

Zoom Class Action Raises Privacy Concern with Favored Online Meeting Platform

Posted on: April 2nd, 2020

By: Barry Miller

A class action filed March 30 alleges that the popular Zoom Video Communications platform is rife with privacy concerns.

That story has piqued the interest of the legal community, as Zoom has become the platform of choice among mediators working to resolve disputes during a time when in-person meetings are prohibited or discouraged.

The class action, Cullen v. Zoom Video Communications, Inc., 5:20-cv-02155 (N.D. Cal.), alleges that Zoom “has failed to properly safeguard the personal information of the increasing millions of users of its software application….” It states that “[u]pon installing or upon each opening of the Zoom App, Zoom collects the personal information of its users and discloses, without adequate notice or authorization, this personal information of its users….”

The lawsuit states claims under the California Consumer Privacy Act, as well as the state’s Unlawful and Unfair Business Practices and Consumers Legal Remedies laws. It also makes common-law claims for negligence, invasion of privacy, and unjust enrichment.

Forbes magazine reported yesterday that some users are complaining that the recording of private chats in Zoom results in disclosing chats thought to be private. Messages to other chat users are visible when the chat is downloaded, according to a Twitter user Forbes quoted. Zoom this in its story, although it did say that if a host records a Zoom meeting locally, private chats become part of that recording. Another outlet is reporting that Zoom meetings do not support encryption end-to-end.

Both the U.S. Attorney General and the N.Y. Attorney General are investigating Zoom privacy concerns. As a result of such investigations and complaints, Zoom has reportedly removed code that sent user data to Facebook without clearly disclosing that to the user.

Zoom has said that its app did not share sensitive data, such as user names, emails, or phone numbers, but did provide information about user devices (including specifications), operating systems, and time zones.

The federal and New York investigations bear watching by attorneys. Since mid-March, when COVID-19 caused many state and federal courts to close or restrict access to courthouses and ban in-person proceedings, mediators have (commendably) continued to work at getting cases settled without in-person meetings. Most court orders encourage the use of technology to continue the progress of cases. Mediators were among the first to heed that encouragement, and the Zoom platform emerged as their consensus choice.

California mediator Jean Lawler does not believe mediators will stop using Zoom, but she does believe both mediators and the attorneys they work with must have a good understanding of the technology before using it. She notes that Zoom gives users the ability to control settings, and users must be aware of how they are set. “[A]nyone who hosts an online meeting, on any platform, would be well advised to very judiciously take a look at their settings and options to ensure settings that can protect the privacy of the participants,” said Lawler in an email.

Among the most important things, she said, is not to allow recordings of mediation sessions, not allowing chat, requiring unique identifiers and passwords from attendees, and having attendees go to a virtual waiting room so the mediator can allow them into mediation after confirming their identity.

Zoom makes similar security recommendations in a whitepaper available on its site.

Attorneys may also wish to review Zoom’s Compliance Statement with the European Union’s General Data Protection Regulation, and inquire whether the same protective steps have been taken to protect data in the United States. This is particularly true if the mediation may involve the data of EU residents, or data collected from someone while they were visiting the EU.

Another mediator told FMG that confidential information in his mediations continues to be exchanged by mail and email. None of that information is exchanged via Zoom.

As government leaders talk about flattening the contagion curve, Zoom is a reminder that attorneys, mediators, and judges are finding they must accelerate their technology learning curve.  

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include COVID-19’s impact on the construction industry, employment issues arising from the virus, the real-world impact of business restrictions, and education claims. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.** 

FCC Confirms COVID-19 Pandemic Constitutes Emergency Under TCPA

Posted on: March 23rd, 2020

By: Matthew Foree

The Federal Communications Commission (“FCC”) has just issued a Declaratory Ruling confirming that the coronavirus pandemic constitutes an emergency under the Telephone Consumer Protection Act (“TCPA”). The Declaratory Ruling can be found here. Consequently, “hospitals, healthcare providers, state and local health officials, and other government officials may lawfully communicate information about the novel coronavirus as well as mitigation measures without violating federal law.”

The TCPA prohibits autodialed, pre-recorded, or artificial voice calls to wireless telephone numbers, with certain exceptions. The TCPA expressly exempts calls made for emergency purposes. The FCC’s rules define “emergency purposes” to mean “calls made necessary in any situation affecting the health and safety of consumers.” The exception is intended for “instances [that] pose significant risks to public health and safety, and [where] the use of prerecorded message calls could speed the dissemination of information regarding . . . potentially hazardous conditions to the public.”

The FCC recognized that a critical component of the nation’s efforts to address and contain the pandemic is the ability of healthcare and public safety organizations to communicate effectively with the public.  Therefore, it found that the current pandemic constitutes an imminent health risk to the public.  The FCC found that in determining whether a call relating to the pandemic qualifies as a call made for an emergency purpose, it looks to (1) the identity of the caller and (2) the content of the call. Under the first prong, “the caller must be from a hospital, or be a healthcare provider, state or local health official, or other government official as well as a person under the express direction a such an organization and acting on its behalf.” Under the second prong, “the content of the call must be solely informational, made necessary because of the COVID-19 outbreak, and directly related to the imminent health or safety risk arising out of the COFIC-19 outbreak.”

The FCC gave multiple examples of calls that would fall within the emergency exception. For example, “a call originating from a hospital that provides vital and time-sensitive health and safety information that citizens welcome, expect, and rely upon to make decisions to slow the spread of the COVID-19 disease would fall squarely within an emergency purpose.” The FCC also recognized that calls that contain advertising or telemarketing of services do not constitute calls for an emergency purpose. Furthermore, calls made to collect a debt, even if it arises from related healthcare treatment, are not made for an emergency purpose. Such calls still require the prior express consent of called party.

Finally, the FCC recognized that consumers have already received telemarketing and fraudulent robocalls related to the pandemic, including scam text messages and calls offering home testing kits and promoting bogus cures. The FCC stated that it would be vigilant in monitoring complaints about these calls and would not hesitate to enforce its rules when appropriate.

If you have any questions about the FCC’s Declaratory Ruling, or any obligations under the TCPA during this time, please do not hesitate to contact Matt Foree at [email protected].

Additional information: 

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues every day for the next week. We will discuss the impact of Coronavirus for companies in general, but also for business in insurance, healthcare, California specific issues, cybersecurity, and tort. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients. Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the Coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments. For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER: The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19. The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement. We can only give legal advice to clients. Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG. An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest. As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce educational content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such. We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**