Think Twice Before Suing to Enforce a Confidentiality Agreement

This past October, in nClosures Inc. v. Block and Company, Inc., the 7th Circuit Court of Appeals ruled that under Illinois law, a confidentiality agreement is not enforceable in absence of proof that reasonable efforts were undertaken to maintain the confidentiality of information shared pursuant to the agreement.

A. Why is this ruling important?

Virtually every company uses confidentiality agreements. Many do so routinely — with the full expectation they will be enforced on the basis that the parties contractually agreed to treat all information shared as confidential.

The nClosures ruling turns that expectation on its head and indicates that confidentiality agreements are not automatically enforceable and are only enforceable when the shared information is actually confidential. (more…)

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EPA Revises RCRA Definition of Solid Waste

On December 10 2014, EPA pre-published certain revisions to RCRA’s definition of solid waste. This is a pre-published version of the final rule that EPA is submitting for publication in the Federal Register. The final rule is of greatest impact to the manufacturing sector.  Those areas of the manufacturing sector impacted the most by this final rule consist of metals, metal products, machinery, computer & electronics, electrical equipment, transportation equipment, furniture, wood products, paper, printing, petroleum & coal products, chemicals plastics and rubber products, and nonmetallic mineral products, and other miscellaneous manufacturing sectors. The final rule would also have more limited applicability on the public administration factor and the professional, scientific, technical sectors.

First, the rule revises the exclusion for Hazardous Secondary Materials (HSMs) that are legitimately reclaimed under the control of the generator. The revisions include: (1) adding a codified definition of “contained,” (2)  adding recordkeeping requirements for same-company and toll manufacturing reclamation; (3) making notification a condition of the exclusion; (4) adding a requirement to document that recycling under the exclusion is legitimate; and (5) adding emergency preparedness and response conditions.

The rule also proposes to amend the speculative accumulation exclusion under RCRA. Specifically, the rule would add a record keeping requirement to this exclusion. The record keeping requirement would apply to all persons subject to the speculative requirement.

Second, the final rule would replace the exclusion for HSMs that are transferred for purposes of reclamation with a “Verified Recycler Exclusion.” This revision would apply to generators who send their HSMs for reclamation to a verified recycler who has obtained a solid waste variance from EPA or an authorized state. In order to obtain a variance, the recycler must: (1) demonstrate their recycling is legitimate; (2) have financial assurance in place to properly manage the hazardous secondary material when the facility closes; (3) not be subject to a formal enforcement action in the previous three years and not be classified as a significant non-complier under RCRA Subtitle C, or must provide credible evidence that the facility will manage the hazardous secondary materials properly; (4) have the proper equipment and trained personnel, and meet emergency preparedness and response conditions to safely recycle the material; (5)  manage the residuals from recycling properly; and (6) take steps to protect nearby communities and reduce risk of potential unpermitted releases of the permit (such as a permit to discharge to water or air).

EPA is also finalizing a “Remanufacturing Exclusion” to exclude from the definition of solid waste certain higher-value solvents transferred from one manufacturer to another for the purpose of extending the useful life of the solvent by remanufacturing the spent solvent back into the commercial grade solvent.

Fourth, the rule revises the definition of legitimacy and prohibits “sham recycling.” This would codify a long-standing policy aimed at prohibiting materials that are sham recycled from being excluded from the definition of solid waste under RCRA. This policy will be codified at 40 CFR 261.2(g).

EPA has also changed the definition of legitimate recycling, which is found in 40 CFR 260.43. In addition to the existing four criteria evaluated by EPA in determining if certain types of recycling are legitimate, EPA has added an element of flexibility to determine legitimacy.

Finally, the rule proposes to revise solid waste variances and non-waste determinations. The revisions include: (1) requiring facilities to send a notice to the Administrator (or State Director, if the state is authorized) and potentially re-apply for a variance in the event of a change in circumstances that affects how a hazardous secondary material meets the criteria upon which a solid waste variance has been based; (2) establishing a fixed term not to exceed ten years for variance and non-waste determinations, at the end of which facilities must re-apply for a variance or non-waste determination; (3) requiring facilities to re-notify every two years with updated information; (4) revising the criteria for the partial reclamation variance to clarify when the variance applies and to require, among other things, that all the criteria for this variance must be met; and (5) for the non-waste determinations in 40 CFR 260.34, requiring that petitioners demonstrate why the existing solid waste exclusions would not apply to their hazardous secondary materials.

This rule will become effective 180 days after publication in the Federal Register.

For more information on this final rule or general questions regarding RCRA compliance, please contact Shawna Bligh at sbligh@evans-dixon.com.

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Missouri Attorney General Files TRO to keep Ebola Medical Waste Out of St. Louis Treatment Facility

The Missouri Attorney General’s Office seeks to enjoin an Illinois-based company with a facility in north St. Louis from accepting Ebola medical waste from Texas. The Attorney General’s action is due to the facility’s prior compliance history, namely its past violations of Missouri medical waste laws and regulations. In light of the threat posed by the Ebola virus, the Missouri Attorney General is not confident that the facility is capable of carrying such a large responsibility for the proper handling, treatment and disposal of the Ebola medical waste. The attorney general’s action is demonstrative of the importance of a facility’s environmental compliance record, particularly when lack of compliance poses a potentially substantial public health risk. The occurrence of Ebola in the United States brings to prominence the importance of proper handling, treatment and disposal of medical waste and the substantial consequences associated with strict compliance with these laws and regulations.

Gene Schmittgens and Shawna Bligh will be presenting on compliance with medical waste laws at an upcoming conference of the St. Louis Association of Healthcare Risk Managers. Contact gschmittgens@evans-dixon.com or sbligh@evans-dixon.com for more information on federal and state medical waste laws.

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Sumpin’ New on All Appropriate Inquiries

Since the last blogs on what one needs to do when acquiring an interest in real estate, there have been a change or two which are kind of important. See examples 12 and/or 3. The most significant is that there is a new ASTM 1527 standard; ASTM 1527-13 to be exact. In the event one does not know why we get to do an environmental site assessment with each acquisition of any interest in real estate, just re-read the above posts, or read the following brief review. (more…)

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Inherently Confusing: Bikes and Trademarks (Part 3)

What we Learned From the Specialized Trademark Incident

Part 3 – The Internet Determines Whether Marks are Confusingly Similar.

In my last post, I followed upon the discussion of the Specialized trademark saga. That saga provides another important pointer for trademark practitioners.

A trademark can only have one owner — the owner is the exclusive source or quality control agent of the goods sold under the mark. (That owner may in turn license others if the owner is monitoring the quality of goods sold under the mark. So in the case here, ASI was assumedly monitoring the quality of Specialized bikes sold under the Roubaix mark.) This is an important point, because it puts a trademark owner in a difficult position. (more…)

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Inherently Confusing: Bikes and Trademarks (Part 2)

What we Learned From the Specialized Trademark Incident

Part 2 – Never Miss an Opportunity to Publicly Scold Your Competitor.

In my last post, I opened a discussion on the Specialized trademark saga, with the goal of highlighting what hard rules, according to the Internet, apply when dealing with a mark infringement issue.  Our first take-away point was this little gem:  Mark owners who fear infringement must investigate the veteran status of the alleged infringer before sending out a cease and desist letter.  The saga teaches us a second rule, which I explain below. (more…)

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Inherently Confusing: Bikes and Trademarks (Part 1)

What We Learned From the Specialized Trademark Incident…
Part 1 – Always Investigate the Infringer’s Military Service History

People always complain: Why must everything in the law be so uncertain? What happened to black and white rules of law? How come everything involves a multi-factor balancing test that depends upon facts that require a 36-month lawsuit to uncover and a jury three days to decide? Well, sometimes, current events provide us a lesson that does provide us with black and white principles of law.

For example, three months ago the Specialized Bicycle company sparked a wildfire of Internet discussion when it sent a letter to a Cochrane, Alberta bicycle shop requesting it cease from using the word ROUBAIX as part of its name. It seems the bicycle shop decided to call itself “Café Roubaix.” The backlash supposedly went “viral” and even included reports appearing on cycling media outlets. An example of the “jumping on the pile” response from the Internet are the several articles appearing last December on the Velonews website. I especially liked the story objectively entitled: “Specialized’s disastrous trademark case is unnecessary to defend the brand.” So what are the hard and fast rules of law we learned from this incident? Well, here is the first rule: Investigate whether the alleged infringer is a war veteran.

Every story I came across about this matter pointed out that the bicycle shop owner was a veteran of the Afghanistan war. And though I am greatly in favor of veteran rights and accommodations (and was so years before it became Hollywood fashionable to do so), I was not sure what veteran status had to do with trademark rights. Of course, the Internet is never wrong. In discussing the pertinent merits of the Specialized trademark matter, the Internet nabobs would certainly not key onto an immaterial point just to create press? Would they? That would be so highly unusual.

I instruct all clients forming a new business or rolling out a new brand that the best money one can spend is on a comprehensive search to determine what other marks and names may be out in the business world that could pose infringement issues. In this case, the bike shop’s owner apparently opened his shop without even checking the Canadian intellectual property office’s registry of marks. Had he, he would have seen that Specialized owned a registration for the mark “ROUBAIX” for use in connection with bicycles and bicycle components. (Be honest reader, if you saw that registration, would you open up a bicycle shop named “Café Roubaix” without evaluating the trademark risks?) Nevertheless, comment posters vilified Specialized as a trademark bully. So putting aside the question of whether there is any type of infringement between Specialized’s registered mark and “Café Roubaix,” the Internet tells us that mark owners who fear infringement must investigate the veteran status of the alleged infringer before sending out a cease and desist letter. According to the Specialized case, this is a relevant inquiry under trademark law. By extension of this first rule, one must not assert mark rights against a veteran of the Afghanistan conflict. I have no idea what should happen if the alleged infringer has a blemished military record.

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Sole Owner LLC – Is Your Liability Really Limited?

paper(275)You are proud of yourself. You went on-line at the Secretary of State’s website and filed your Articles of Organization. This means that you have limited your personal liability right? Well … maybe.

People rarely understand that what they do AFTER filling Articles of Organization is as important as the filing itself.

You are living under a rock if you think that one of your creditor’s attorneys will say this:

“Oh, my, she has an LLC. I guess there’s no way to hold her personally liable.”

NOT …….

There will be a search to see if you have maintained the appropriate separation between you and your company. You formed an entity, and now the question is whether you acted like an entity. If not, you’ll be a target … personally.

What must you do to protect yourself? Keep these reminders handy: (more…)

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Leases – Reasonable Wear and Tear Excepted

bell(275)Every commercial lease has a sentence that reads like this: “… at the end of the lease term, the Tenant must return the leased premises to the Landlord in the same condition as when the lease term began, normal wear and tear excepted.” Sounds pretty simple. But what about all of the improvements you made, like cabinets, lighting and partitions?”  Those improvements weren’t there when you signed the lease.  So, returning to the “same condition” may not include those improvements. Who pays to remove them and return your space to its original condition?” Most likely, it’s you. (more…)

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Conditions and Covenants in a Business Acquisition Agreement

Graph(275)Business acquisition agreements have special features that you wouldn’t normally expect to see in run-of-the-mill contracts. This articles discusses two such features: pre-closing covenants and closing conditions.

Pre-closing covenants
Business acquisition agreements generally include a few covenants which obligate the purchaser and seller to do, or refrain from doing, certain things. In deals where there is a period of time between signing the purchase agreement and the closing (similar to buying a house where you sign a contract and then close the deal a few weeks later), there are normally a number of pre-closing covenants.

The purchaser usually performs extensive due diligence of the target company’s operations and records during the period between signing the purchase agreement and the closing. (Again, this is similar to the period after signing a purchase agreement for a house during which inspections are made and bank financing is lined up.) The parties also begin obtaining consents and making governmental filings and their legal counsel draft documents necessary for the closing. The parties generally agree to do — or refrain from doing — certain things during this period. Here are some examples of the seller’s pre-closing covenants:

  • provide access to its records, assets, and facilities for the purchaser’s due diligence;
  • continue to operate the business in the normal course;
  • not amend its corporate documents;
  • not sell additional equity;
  • not do anything that would have an adverse effect on the business or its assets or operations;
  • obtain required consents;
  • refrain from negotiating with any other potential purchasers; and
  • use its best efforts to fulfill the conditions to closing.

The purchaser’s covenants are not nearly as extensive. The purchaser might covenant for the following:

  • obtain required consents; and
  • use its best efforts to fulfill the conditions to closing.

Closing conditions
Business acquisition agreements generally provide that certain things must happen before the purchaser has an obligation to proceed with closing, and certain things must happen before the seller is obligated to sell. These are known as closing conditions. In transactions where there is a simultaneous signing and closing (i.e., the acquisition agreement is signed at the same time that the transaction closes), closing conditions aren’t necessary.

Here are some examples of typical closing conditions that must be met before the purchaser is required to close the deal:

  • the representations and warranties are true and accurate;
  • required consents have been obtained;
  • the seller has performed its pre-closing covenants;
  • there has been no material adverse change in the business, or its assets or operations; and
  • there has been no legal proceeding that would stop the transaction from proceeding.

If the respective closing conditions aren’t met, the parties aren’t obligated to close the transaction.

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