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Trust The

A Publication of Smith, Gambrell & Russell, LLP

Leaders

Issue 19 / Summer 2007

Telling your customers what they don't want to hear

Data Security Breaches

Winne 2007 Go r ld GAMM A Awar for Be st Cust d Publica om tion

Atlanta | Frankfurt | Jacksonville | Washington, D.C. | www.sgrlaw.com

Ira Genberg L. Brett Lockwood J. Rodgers Lunsford, III Howard E. Turner Paul G. Durdaller

James H. Morgan, Jr.

Thomas W. Rhodes

David W. Santi

Michael Haber Stephen E. O'Day Lisa L. Ballentine Kathryn M. Zickert James P. Monacell Dale Lischer

Stephen M. Forte

Congratulations to SGR's 2007 "Super Lawyers," selected by their peers and featured in Atlanta Magazine.

Not pictured: Thomas H. Asselin and Robert C. Schwartz

Smith,Gambrell Attorneys a aw &Russell,t Lllp

The

Trust Leader

Trust The

A Publication of Smith, Gambrell & Russell, LLP

Leaders

Issue 19 / Summer 2007

Data Breach Laws 16 Notification

Understanding when to notify customers of a breach in data security.

Handling Physical 4Evidence

Standards for preserving, inspecting and testing physical evidence.

21 Inadvertent Arms Exports

Companies engaging in international trade should familiarize themselves with International Traffic in Arms Regulations.

Minority Business 8Enterprises

Government programs can provide great benefits to qualifying businesses.

26 A Day in the Life

Follow an SGR Fellow into the trenches at Atlanta Legal Aid.

Departments

14 Legal Briefs

Recent accomplishments of SGR attorneys.

33 The Finish Line

Diversity at Smith, Gambrell & Russell, LLP.

31 Client Profile

The president and founder of HRworks discusses recruitment in today's marketplace.

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Poolside Reading

Welcome to the Summer 2007 issue of Trust The Leaders. I think you'll find that our publication makes a great accompaniment to a lazy day at the pool or the beach. Here's what's inside: All of us have had occasion to provide personal information ­ social security number, birth date and the like ­ to financial institutions, retailers and other service providers in order to obtain credit cards, set up accounts or perform other business transactions. Some of us have had the unfortunate experience of being the victim of identity theft. Each time we hear that the security of our personal information has been compromised, either through theft or negligence, our ears certainly perk up. But what should a company do if it suffers a breach of the security of its customer data? What are the obligations of such an entity under federal and state law to notify its customers that their personal information may have fallen into the wrong hands? Brett Lockwood addresses this complicated topic in our cover story, which will be of interest to every company that maintains some form of proprietary customer or client data. Tim Bumann's article discusses national standards for the handling of physical evidence ­ a topic that is relevant whenever there is a product, vehicle or other piece of evidence the condition of which is critical to the claim or defense of a party to a product liability, negligence or other case. In his article on minority business enterprises, or "MBE's," Florian Stamm sets out the requirements for one of the federal government's most accessible MBE financial assistance programs administered by the Small Business Administration. Emily Sacco Avant and Tim Bumann explore the provisions and application of the U.S.'s International Traffic in Arms Regulations. Understanding the regulations is critical to anyone engaged in international trade. Under the right conditions, exportation of even seemingly innocuous products could constitute a violation of the regulations and result in hefty fines. One of the founding members of this law firm, E. Smythe Gambrell, was also the founder of the Atlanta Legal Aid Society, which offers critical legal services to Atlanta's indigent

From The Editor

population. In keeping with this proud tradition, each year, SGR "loans" one of its associate attorneys to work full time at Atlanta Legal Aid for three months as the SGR Fellow. In this issue, Shayne Clinton, SGR's most recent Fellow, recounts a typical Dana Richens day in the life of an attorney Editor in Chief working for Legal Aid. Reading [email protected] Shayne's account will no doubt give you a true appreciation for the important work that Atlanta Legal Aid performs every day. This issue's Client Profile features HRworks, which provides recruiting and executive search functions to meet the special requirements of today's global economy. "The Finish Line" provides an overview of the steps the firm has taken in recent months to formalize its long-standing commitment to diversity among our attorneys and staff. Finally, I'd like to share with you our delight in Trust The Leaders having received the 2007 gold GAMMA award for Best Custom Publication from the Magazine Association of the Southeast (MAGS). What makes us especially proud is that one of the principal judging criteria is how well a publication provides "intrinsically valuable information" to its readership. It is an honor to be recognized for achievement toward our core mission, which has always been to provide our clients and other readers with information that is useful to them in their professional and personal lives. Have a great rest of the summer!

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timbumann

Handling Physical Evidence

Standards and Practices

E

vidence is necessary to support or defend against claims or lawsuits, and it can take many forms. Often, it is a tangible object. To be useful, physical evidence must be preserved, inspected and tested using methods that maintain the evidence and make it available to all interested parties. If evidence is altered or destroyed, making it useless or inadmissible, such evidence is deemed "spoliated." Parties often cannot use spoliated evidence and their legal positions are thus compromised. This outcome is obviously unfair, particularly if one party has had the benefit of testing the evidence while another is deprived of the opportunity.

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EV I

DE

Not all jurisdictions have causes of action for spoliation, but all will punish a litigant for NC spoliation in some fashion. E

For example, assume a circuit breaker in an electrical panel fails in a building housing a retail store. The building erupts in flames. An employee is injured jumping out a second-story window to escape. The owner of the property, the injured worker, the manufacturer, distributor and seller of the circuit breaker, and any entities that have serviced the circuit breaker (and all of the insurance carriers involved) are all interested in preserving the circuit breaker. If the building owner keeps the circuit breaker and has it tested and in the process it is disassembled and cleaned, or perhaps lost, all the other parties have been harmed since they were not there to document the condition of the product and at least observe the work, if not direct it themselves. The other parties will always be at a disadvantage in defending themselves in any resulting litigation. This outcome is obviously unfair. Parties that spoliate evidence are usually penalized. Some states provide that injured parties can sue a spoliator. Not all jurisdictions have causes of action for spoliation, but all will punish a litigant for spoliation in some fashion. At a minimum, spoliation will raise a strong inference that the evidence altered or destroyed was harmful to the offending party.

theastmstandards

Much has been said and written lately concerning the changes to the Federal Rules of Civil Procedure regarding preservation and discovery of electronically stored information (see, e.g., Trust The Leaders, Issue 18). But there are also other standards published by ASTM International, formerly known as the American Society for Testing and Materials, concerning preservation of physical evidence. Anyone who handles or takes custody of physical evidence should be aware of these standards and treat them as minimum applicable

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{

1.scope

Key ASTM Standards Pertaining to Litigation

astme1188-05 Standard Practice for Collection and Preservation of Information and Physical Items by a Technical Investigator 1.scope This practice sets forth guidelines for handling of items that may have been involved in a specific incident that is or is reasonably expected to be the subject of criminal or civil litigation. ... This practice sets forth the guidelines for the examination and testing of evidence that is, or may become involved in litigation. It outlines procedures to be followed to document the nature, state, or condition of evidence. It also describes specific actions that are required if planned testing, examination, re-examination, disassembly, or other action is likely to alter the nature, state, or condition of the evidence so as to preclude or adversely limit additional examination and testing. ... If proposed tests, examinations, or other actions are likely to alter the nature, state, or condition of the evidence so as to preclude or limit additional examination and testing, the person, firm, or corporation planning to perform the proposed action shall: ... 1.1 This practice covers guidelines for the collection and preservation of information and physical items by any technical investigator pertaining to an incident that can be reasonably expected to be the subject of litigation. ... This practice is intended for use by any technical investigator when investigating an incident that can be reasonably expected to be the subject of litigation. The intent is to obtain sufficient information and physical items to discover evidence associated with the incident and to preserve it for later analysis. The quality of evidence may change with time, therefore, special effort should be taken to preserve it. This practice sets forth guidelines for the collection and preservation of evidence for further analysis. ... Physical Evidence ­ Obtain and preserve items as early as possible. Plan the investigation to protect physical evidence significant to the incident. The plan should consider the possibility of identity loss, physical loss, deterioration or destruction of information due to environmental effect, or recovery and collection activities. When physical items cannot be preserved in their found state, document it. ...

astme860-97 Standard Practice for Examining and Preparing Items That Are or May Become Involved in Criminal or Civil Litigation

1.1

3.significanceanduse 3.1 3.1

3.significanceanduse

3.2

4.procedure... 4.2

4.procedure... 4.2

4.2.2 Recommend that its client notify other interested parties of the proposed action described in 4.2, and 4.2.3 Recommend to its client that other interested parties be given the opportunity to participate in the procedures described in 4.1 or to witness and record any such actions. ...

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It is good practice to send copies of the applicable standards to the custodian of any physical evidence, putting him on notice of the standards and informing him that you are relying on his compliance.

standards across all jurisdictions. Compliance with ASTM standards may help shield against negative inferences associated with the handling of physical evidence. There are six ASTM standards that may apply to parties handling physical evidence. They are: ·e620 Standard Practice for Reporting Opinions of Scientific or Technical Experts ·e678 Standard Practice for Evaluation of Technical Data ·e860 Standard Practice for Examining and Preparing Items That Are or May Become Involved in Criminal or Civil Litigation ·e1020 Standard Practice of Reporting Incidents That May Involve Criminal or Civil Litigation ·e1188 Standard Practice for Collection and Preservation of Information and Physical Items by a Technical Investigator ·e2332 Standard Practice for Investigation and Analysis of Physical Component Failures For our purposes here, E 860 and E 1188 are the most important (see box on page 6). Language was deleted from the 1982 version of E 860 that excluded changes made to physical evidence during "ordinary service or repair operations." Now, activities such as those are within the scope of the standard. Therefore, E 860 should be reviewed as part of the ordinary course of preparation for service or repair of equipment, systems and vehicles.

It is good practice to send copies of the applicable standards to the custodian of any physical evidence, putting him on notice of the standards and informing him that you are relying on his compliance. If an opposing party is the custodian of the evidence and does not object or respond, you have an argument that he has undertaken a duty to preserve the evidence separate from any duty he may have in law. If the subject evidence is then lost, altered or destroyed, your position has been protected. The best approach is to be proactive and let the ASTM standards be your guide. Make sure your employees are briefed on their obligations. For example, sales, parts and service personnel in particular should be educated on ASTM standards and trained to be sensitive to clues that an accident may have happened. Orders for durable parts or goods may be an indication of a failure or an accident. Service orders to repair significant damage due to fire or dynamic failure are almost always indicators that evidence preservation is an issue. Copies of the complete ASTM standards cited are available at astm.org. The standards change periodically so you should contact counsel when you suspect evidence preservation is, or may become, an issue.

timbumann

Partner Litigation Practice Group [email protected]

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florianstamm

Qualifying as a Minority Business Enterprise

A

ccording to the U.S. Census Bureau's 2005 American Community Survey, more than 73 million Americans, or 25 percent of the U.S. population, are members of ethnic minorities. However, such individuals have been and continue to be underrepresented in the business-ownership population. In 2002, the last year for which the U.S. Department of Commerce figures are available, minority-owned businesses represented only 18 percent of all U.S. businesses by number ­ less than their pro rata share of the population. Additionally, minority-owned businesses typically are smaller and have fewer employees than non-minority-owned businesses. Average gross receipts of minority-owned businesses are about one third of their non-minority counterparts. But by another measure, minority business enterprises are doing well. Between 1997 and 2002, the number of minorityowned businesses in the United States increased by 35 percent, while the number of non-minority businesses increased by only 6 percent. The growth of minority business enterprises is in large measure due to the availability of a number of programs

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on the federal, state, county and city levels designed to support and foster minority business enterprises. Some large corporations also provide programs similar to those offered by the government. These programs provide, among other benefits, support for government contractors, access to capital, and management, technical and export assistance. Qualifying for any one of these programs can provide immeasurable benefits to a minority-owned business seeking to grow and expand. Some of the more common assistance programs and their names and abbreviations are: federalprograms · Small Business Administration: 8(a) BD, Small Disadvantaged Business (SDB) and HUBZone

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· U.S. Department of Transportation: Disadvantaged Business Enterprise (DBE) state,county,city&corporateprograms (where available) · Minority Business Enterprise (MBE) · Disadvantaged Business Enterprise (DBE) · Small Business Enterprise (SBE) ­ typically race neutral This article focuses on the requirements of the Section 8(a) BD Program, administered by the Small Business Administration (SBA). The SBA also oversees the Small Disadvantaged Business (SDB) Certification Program. While the 8(a) BD Program offers a broad scope of assistance to socially and economically disadvantaged firms, SDB certification pertains

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that is (2) unconditionally owned and (3) controlled by (4) one or more socially and economically disadvantaged individuals who are (5) of good character and (6) citizens of the United States, and that (7) demonstrates potential for success. smallbusiness An applicant for 8(a) BD status must qualify as a "small business" concern. The Small Business Act provides that a small business is "one that is independently owned and operated and which is not dominant in its field of operation." The law also states that in determining what constitutes a small business, the definition will vary from industry to industry to reflect industry differences accurately. The SBA's Small Business Size Regulations in turn implement the Small Business Act. The SBA has established a table of size standards for small businesses, matched to the North American Industry Classification System (NAICS). The table may be found at sba. gov/size/sizetable2002.html. sociallyandeconomicallyDisadvantagedindividuals Socially disadvantaged individuals are those who have been subjected to racial or ethnic prejudice or cultural bias within American society because of their identities as members of certain groups. The social disadvantage must stem from circumstances beyond their control. There is a rebuttable presumption that members of certain ethnic groups, including AfricanAmericans, Hispanic Americans, Native Americans and certain groups of Asian-Americans are socially disadvantaged. Economically disadvantaged individuals are socially disadvantaged individuals whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities as compared to others in the same or similar line of business who are not economically disadvantaged. unconditionalownership An applicant for 8(a) BD status must be at least 51 percent unconditionally and directly owned by one or more socially and economically disadvantaged individuals. "Unconditional ownership" means ownership that is not subject to conditions precedent, conditions subsequent, executory agreements, voting trusts, restrictions on or assignments of voting rights, or other arrangements causing or potentially causing ownership benefits to go to another, non-disadvantaged person. The pledge or encumbrance of stock or other ownership interest as collateral, including seller-financed transactions, does not affect the unconditional nature of ownership if the terms follow normal commercial practices.

strictly to benefits in federal procurement. Section 8(a) BD firms automatically qualify for SDB certification. To remain compatible with federal programs, many state and local programs mirror the requirements of the federal programs.

the8(a)bDprogram

The purpose of the 8(a) BD Program is to help eligible small, disadvantaged businesses compete in the American economy through business development. An application for 8(a) BD program admission must be filed with the SBA Division of Program Certification and Eligibility (DPCE) field office serving the territory in which the principal place of business of the applicant is located. Generally, an applicant meets the basic requirements for admission to the 8(a) BD Program if it is (1) a small business

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The growth of minority business enterprises is in large measure due to the availability of a number of programs on the federal, state, county and city levels designed to support and foster minority business enterprises.

(a) wnership must be direct. Ownership by one or o more disadvantaged individuals must be direct. An applicant owned principally by another business entity or by a trust (including employee stock ownership trusts) that is in turn owned and controlled by one or more disadvantaged individuals does not meet this requirement. However, ownership by a trust, such as a living trust, may be treated as the functional equivalent of ownership by a disadvantaged individual where the trust is revocable and the disadvantaged individual is the grantor, a trustee or the sole current beneficiary of the trust. (b) wnershipofapartnership. In the case of an entity o organized as a partnership, at least 51 percent of every class of partnership interest must be unconditionally owned by one or more individuals determined by the SBA to be socially and economically disadvantaged. The ownership must be reflected in the partnership agreement. (c) wnershipofalimitedliabilitycompany. In the case o of a limited liability company, at least 51 percent of each class of member interest must be unconditionally owned by one or more individuals determined by the SBA to be socially and economically disadvantaged. (d) wnershipofacorporation. In the case of an entity o organized as a corporation, at least 51 percent of each class of voting stock outstanding and 51 percent of the aggregate of all stock outstanding must be unconditionally owned by one or more individuals determined by the SBA to be socially and economically disadvantaged. (e) ffectofstockoptionsonownership. In determine ing unconditional ownership, the SBA will disregard any unexercised stock options or similar agreements held by disadvantaged individuals. However, any unexercised stock options or similar agreements (including rights to convert non-voting stock or debentures into voting stock) held by non-disadvantaged individuals will be treated as exercised.

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(f ) ividendsanddistributions. One or more disadvanD taged individuals must be entitled to receive: (i) At least 51 percent of the annual distribution of dividends paid on the stock of a corporate applicant; (ii) 100 percent of the value of each share of stock owned by them in the event that the stock is sold; and (iii) At least 51 percent of the retained earnings of the entity and 100 percent of the unencumbered value of each share of stock owned in the event of dissolution of the corporation. managementandcontrol Disadvantaged individuals managing the entity must have managerial experience of the extent and complexity needed to

run the business. A disadvantaged individual need not have the technical expertise or possess a required license to be found to control an applicant if he or she can demonstrate ultimate managerial and supervisory control over those who possess the required licenses or technical expertise. However, where a critical license is held by a non-disadvantaged individual having an equity interest in the applicant, the non-disadvantaged individual may be found to control the firm. A number of specific requirements exist in order to satisfy the "control" element of 8(a) BD eligibility: (a) An applicant must be managed on a full-time basis by one or more disadvantaged individuals who possess requisite management capabilities. (b) A disadvantaged full-time manager must hold the highest officer position (usually president or chief executive officer) in the applicant. (c) One or more disadvantaged individuals who manage the applicant must devote their full-time efforts to the business during the normal working hours of firms in the same or similar line of business. Work in a wholly owned subsidiary of the applicant may be considered to meet the requirement of full-time devotion (this condition refers only to a subsidiary owned by the 8(a) BD enterprise, and not to businesses in which the disadvantaged individual has an ownership interest). (d) Any disadvantaged manager who wishes to engage in outside employment must notify the SBA of the nature and anticipated duration of the outside employment and obtain the prior written approval of the SBA. The SBA will deny a request for outside employment that could conflict with the management of the firm or hinder it in achieving the objectives of its business development plan. (e) A disadvantaged owner's unexercised right to cause a change in the control or management of the applicant concern does not in itself constitute disadvantaged control and management, regardless of how quickly or easily the right could be exercised. (f ) In the case of a partnership, one or more disadvantaged individuals must serve as general partners, with control over all partnership decisions. A partnership in which no disadvantaged individual is a general partner will be ineligible for participation. (g) In the case of a limited liability company, one or more disadvantaged individuals must serve as management members with control over all decisions of the company.

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(h) One or more disadvantaged individuals must control the board of directors of a corporate applicant or participant. The SBA will deem disadvantaged individuals to control the board of directors where: (i) a single disadvantaged individual owns 100 percent of all voting stock of the entity; (ii) a single disadvantaged individual owns at least 51 percent of all voting stock of the entity, the individual is on the board of directors and no super-majority voting requirements exist for shareholders to approve corporation actions. Where super-majority voting requirements are provided for in the entity's articles of incorporation, its by-laws or by state law, the disadvantaged individual must own at least the percent of the voting stock needed to overcome the super-majority voting requirements; or (iii) more than one disadvantaged shareholder seeks to qualify the entity (i.e., no one individual owns 51 percent), each such individual is on the board of directors, together they own at least 51 percent of all voting stock, no super-majority voting requirements exist, and the disadvantaged shareholders can demonstrate that they have made enforceable arrangements to permit one of them to vote

the stock of all as a block without a shareholder meeting. Where the entity has super-majority voting requirements, the disadvantaged shareholders must own at least that percentage of voting stock needed to overcome any such super-majority ownership requirements. Where an applicant does not meet the "control" requirements, the disadvantaged individual(s) upon whom eligibility is based must control the board of directors through actual numbers of voting directors or, where permitted by state law, through weighted voting (e.g., in a concern having a two-person board of directors where one individual on the board is disadvantaged and one is not, the disadvantaged vote must be weighted ­ that is, worth more than one vote ­ in order for the business to be eligible for 8(a) BD participation). reasonableprospectsforsuccess The applicant must possess reasonable prospects for success in competing in the private sector to be admitted to the 8(a) BD program. To do so, it must have been in business in its primary industry classification for at least two full years immediately prior to the date of its 8(a) BD application, unless the SBA grants a waiver for this requirement.

conclusion

If you are a small business, you may be able to take advantage of the various federal, state and local programs designed to assist minority business enterprises. Which program a minority business should look to depends on the goals of the business, its geographic location and the requirements of the available programs. The 8(a) BD program described in this article provides a good starting point. In addition, the following Web sites: · Small Business Administration: sba.gov/8abd/ · Minority Business Development Agency: mbda.gov/ are good resources for small businesses seeking minority certification.

florianstamm

Associate Corporate Practice Group [email protected]

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Legal Briefs

From Our Offices

Denwebb,marcieernst and Joecooley co-authored the annual survey of Zoning and Land Use Law in Georgia for the recently published Mercer Law Review: Annual Survey of Georgia Law, June 1, 2005-May 31, 2006, 58 Mercer L. Rev., No. 1 (Fall 2006). In early 2007, Davidnewman and colinDelaney successfully concluded a matter in which they represented a mid-sized German manufacturing concern in a contract dispute with a large Ohio-based manufacturing and marketing firm known for its internationally recognized household-products brand. SGR's representation began when the American company alleged that our German client had breached a joint venture agreement by granting a technology license to a South Korean conglomerate. When negotiations failed to result in a commercially acceptable resolution, arbitration proceedings were initiated before the Paris-based International Court of Arbitration of the International Chamber of Commerce. SGR defended the case before a three-member tribunal comprised of American, German and British arbitrators sitting in New York City. A unanimous award exonerated SGR's client of wrongful conduct in granting the license, rejected the American company's potentially ruinous claim for nearly $30 million in damages, and ordered further proceedings on limited ancillary matters. Taking full advantage of SGR's European office near Frankfurt, the client leveraged the favorable award into a global settlement agreement that wound up the joint venture and secured greater commercial access to a major market than the joint venture agreement had allowed before the dispute arose. Successfully defending the arbitration and terminating the joint venture agreement became key final steps of the client's remarkable restructuring and turnaround. SGR intellectual property attorneys Joyce klemmer, mike makuch, Dennis rodgers, scott woldow, Jim menker and chrisholland attended the 129th Annual Meeting of the International Trademark Association (INTA) in Chicago, April 28 to May 2, 2007. During the INTA conference, SGR hosted two luncheons for approximately 50 intellectual property lawyers from major law firms around the world, allowing SGR to maintain important ties with non-U.S. law firms with whom SGR works on a regular basis.

kathy Zickert, who heads SGR's Land Use and Zoning Practice Group, and Den webb recently secured rezoning approval for Sembler's mixed-use project on Peachtree Road in Brookhaven, near Oglethorpe University, in Atlanta. The development, which is expected to be completed in summer/ fall 2009, will contain 600,000 square feet of retail space, 150,000 square feet of office space, 1,500 housing units (including senior housing) and substantial green space to benefit the public. The project's size is second in the metropolitan area only to Midtown's Atlantic Station. Sembler has been nationally recognized as the premier developer of neotraditional mixed-use communities. Kathy has also recently chaired land use seminars for Lorman Education Services and National Business Institute. More than two dozen members of the SGR family participated on April 13 in the annual "Relay for Life" at Emory University sponsored by the American Cancer Society. SGR's involvement was inspired by SGR's own beloved partner ronwells, who was battling pancreatic cancer. "Ron's Ramblers," as the SGR team was named, raised $10,000 for the ACS ­ the most of any participating organization. The event was highlighted by a 12-hour overnight walk by SGR paralegal pennystandley and, of course, the uplifting presence of Ron and his wife, Judy. Sadly, Ron succumbed to the disease on April 26. The entire SGR community mourns the loss of this unassuming yet exceptionally gifted and compassionate lawyer and friend.

Ron and Judy Wells (front row, far right) with SGR's "Relay for Life" participants.

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Jane haverty was recently selected as a member of the Leadership Atlanta Class of 2008. Leadership Atlanta is the longest-running community leadership program in the country. Charged with Leadership Atlanta's credo of "building community by inspiring leadership committed to service," its 2,400 alumni include many of the most prominent business, government and community leaders in metro Atlanta. Georgia Governor Sonny Perdue recently appointed David burge to the Board of the Georgia Superior Court Clerks' Cooperative Authority (GSCCCA). The GSCCCA provides an online access network for all Georgia real estate, UCC, tax and judgment lien, real estate plat and notary records that are kept by the 159 county superior court clerks. It also provides IT and other technical support to the clerks in both litigation and real estate records management. florian stamm recently gave a presentation on drafting outsourcing agreements at the annual meeting of the State Bar of Georgia Section of International Law. The presentation addressed the most common contentious issues between companies seeking to outsource a business process and outsourcing vendors. Florian also was recently elected to the Executive Committee of the Southeast chapter of the SwissAmerican Chamber of Commerce, on which he will serve as Secretary. In September, SGR will host the first annual meeting of all Swiss-American Chamber of Commerce chapters in the United States. The meeting will be attended by the Swiss ambassador to the United States as well as the head of the Swiss Chamber of Commerce, who will travel to the event from Zurich. suzannahsundby has been appointed to the Public Affairs Committee for the American Chemical Society, CSW (Washington, DC Chapter). The American Chemical Society is a self-governed individual membership organization that consists of more than 160,000 members at all degree levels and in all fields of chemistry. The organization provides a broad range of opportunities for peer interaction and career development, regardless of professional or scientific interests. The programs and activities conducted by ACS today are the products of a tradition of excellence in meeting member needs that dates from the Society's founding in 1876.

steve o'Day spoke recently at a seminar and a continuing legal education luncheon on the subject of conservation easements in Georgia. Steve also was asked by the Executive Editor of the Fulton County Daily Report to write a tribute to the late Ogden Doremus, the drafter of the unique Georgia Coastal Marshlands Protection Act and a founder of the Georgia Center for Law in the Public Interest, who passed away in April.

Pictured (from left): SGR's John Saunders, AirTran's Fred Cannon, Tommy Nobis and AirTran Call Center employees James Ashworth and Tony Randolph.

John saunders is Chairman of the Board of The Tommy Nobis System, the sponsor of the Tommy Nobis Center, a nonprofit organization that provides job training to individuals with disabilities. John recently presented the Center's awards at its 2007 Galaxy of Stars event. Among the award recipients was SGR client AirTran Airways, which received the "Visionary Award of Employers of People with Disabilities" for its training and hiring of severely visually disabled and totally blind persons into AirTran's Reservations and Customer Relations Call Center. anton mertens, who heads SGR's Immigration Practice, recently participated in the 2007 Citizenship Day Naturalization Drive sponsored by the Atlanta Chapter of the American Immigration Lawyers Association. The group partnered with 20 community-based organizations to provide legal assistance with applications for naturalization to more than 100 individuals.

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brettlockwood

When the Dam Breaks

Compliance With Data Breach Notification Laws

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D

ata privacy compliance continues to bedevil executive management, especially chief information officers. The list of businesses and other

organizations confronted with high-profile data security breaches is extensive and touches many sectors: ChoicePoint, Circuit City, the Department of Veterans Affairs, Wells Fargo, Emory University, the Georgia Technology Authority, Aetna, Hotels.com and, most recently, the retailer TJX (T.J. Maxx and Marshalls), among many others.

Breaches of data privacy ­ whether due to unauthorized access or accidental disclosure ­ impose specific obligations upon the entity holding the data under what is currently a patchwork of somewhat unclear state laws. Provided below is an overview of these state laws and some suggested approaches to dealing with data breach issues. whose unencrypted personal information was ... acquired by an unauthorized person." This language is intended to have a very broad scope and is the essential obligation imposed by most state laws. However, because many variations exist as to key terms and qualifications, an inconsistent compliance pattern exists. For instance, Florida, Tennessee and other states require that the breach must have "materially" compromised the personal information, but do not provide sufficient guidance on this materiality threshold. Another significant area where the states differ is the scope of the covered personal information. California's law covers a person's name in combination with a social security number, driver's license number or account number, while others, such as Georgia, do not require in all cases that a person's name be connected with other data. Some states include birth dates and other information types.

stateDatabreachnotificationlaws

In July 2007, Michigan became the 36th state to put into effect a law imposing specific obligations in the event of a data security breach. Among these states are Georgia, California, Florida, New York, Illinois and virtually all the states in the Southeast ­ in short, practically every state in which the nation's most significant business centers are located. Most of these states patterned their laws after California's pioneering statute, which in 2002 became the first such state law addressing notification requirements. The general structure of most of the state notification statutes is the same: a "person" (defined very broadly to include most businesses) or agency is under an obligation to provide specified timely notices to individuals within a given state whose personally identifiable information held by such person or agency has been improperly accessed or disclosed. However, the difficulty in compliance becomes clear when even a handful of the state laws are compared. Definitions differ, scope varies and triggering events are not always comparable. Because many states patterned their breach notification statute after California's, it is useful to review that statute as a standard reference point. California Code Section 1798.82(a) states, in part: "Any person or business that conducts business in California, and that owns or licenses computerized data that includes personal information, shall disclose any breach of the security of the system ... to any resident of California

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Moreover, Georgia's law applies only to "information brokers," meaning persons or entities that collect personal data that is made available for a fee. The form and timing of notices that must be provided and exceptions also vary. Generally, the statutes require notice to be

stateDatabreachstatutes­

selectedprovisions

Is Doing Business Paper Encrypted in State Records Data Required? Covered? Exception? nostatute nostatute Y N Y N N Y Y Y Y Y N Y Y N Y Y N Y nostatute Y N Y N N Y N Y Y Y N Y N N Y N Y Y nostatute Y N Y nostatute Y N Y N N Y nostatute nostatute N Y Y Y N Y nostatute nostatute Private Cause of Action?

State AL AK AZ AR CA CO CT DE DC FL GA HI ID IL IN IA KS KY LA ME MD MA MI MN MS MO

N N Y N N N N N Y N Y N N Y N

State MT NE NV NH NJ NM NY NC ND OH OK OR PA RI SC SD TN TX UT VT VA WA WV WI WY

Is Doing Business Paper Encrypted in State Records Data Required? Covered? Exception? Y Y Y Y N Y N N Y Y N Y Y N Y nostatute Y N Y Y N Y Y N Y Y N Y N/A N Y nostatute Y N Y N N Y nostatute nostatute Y N Y Y N Y N N Y N N Y nostatute Y N Y nostatute Y N Y Y N N

Private Cause of Action? Y N N Y Y N Y Y N N N Y

Y Y N N Y Y N

Y Y

provided in the most expedient manner possible without unreasonable delay ­ a formulation laden with ambiguity. A small number of states also require notification to consumer credit bureaus and governmental agencies, although the threshold for such reporting varies. And this is just the tip of the iceberg. Except for truly localized businesses, the reality for most businesses and organizations is that the content of their various databases and information repositories of whatever type most likely include information on individuals in numerous

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The general structure of most of the state notification statutes is the same: a "person" or agency is under an obligation to provide specified timely notices to individuals within a given state whose personally identifiable information held by such person or agency has been improperly accessed or disclosed.

states. It is also worth noting that a significant minority of states with data breach notification laws do not require that a company actually do business in the state to be covered by the law. As a result, most businesses do not have the luxury of limiting their review to the laws of only their home state. Most of the notification statutes provide that violations may only be the subject of an administrative action by the state agency charged with enforcing the law ­ most typically, the state attorney general. Applicable civil penalties are steep, usually ranging from $10,000 to $50,000 per violation with some states imposing even stricter sanctions. In addition, at least a dozen states allow private causes of action, which raises the very real specter of class actions and their attendant substantial costs. In the aftermath of the massive data breach suffered in 2006 by the retailer TJX at its T.J. Maxx and Marshalls stores, at least eight class actions have been filed against that company from banking groups, consumers and shareholders seeking recovery of costs and other damages incurred in dealing with that breach. It is estimated that TJX has already spent more than $20 million dealing with this situation.

federalproposals

In light of the divergent state laws dealing with notification of data breaches and the related compliance burden, many business groups reluctantly have championed legislation at the federal level to bring uniformity to this area. While several notable bills have been proposed in Congress, to date no applicable federal legislation has been enacted. Among the many reasons that none of the widely discussed bills has been passed thus far has been the inability to reconcile the inherent competing interests between consumer groups, who want to have federal requirements layered onto co-existing state requirements, and the demands of the business community for a single federal regime that would preempt state laws and possibly relax some of the more stringent state requirements, such as those imposed by California.

whattoDo

In the absence of a uniform federal approach, a business faced with a data security breach, or one contemplating how to respond in the event of such an occurrence, should consider the following: · Most fundamentally, comply with any applicable state laws and assume that if the personal data of a resident of any particular state is implicated, you will have to comply with that state's statute or at least review the statute to determine whether compliance is required. Skilled counsel can assist you with this. · Adopt a "best practices" approach when faced with a breach, which is evolving into using the lowest common denominator as the safest course of action. Thus, if any data under your control or which was obtained through you (for instance, by a contractor of yours) is improperly accessed or disclosed, you should consider erring on the side of providing notice to affected individuals as a matter of good business policy. While you may not be liable in any event, by being overly cautious and proactive in dealing

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While several notable bills have been proposed in Congress, to date no applicable federal legislation has been enacted.

with the situation, you will have established good potential defenses to claims that may arise, and you will also minimize adverse customer reactions. · Include a provision in your agreements with contractors, service providers and anyone else to whom you allow access to your data that imposes an affirmative obligation on them to provide you prompt notice of any breaches of which they become aware and to hold you harmless from any resulting problems caused by their negligence. Many of the notable data breach cases have involved significant delays by third parties in reporting known breaches, which potentially compounds any resulting problems. · Implement a clear plan now that assigns defined roles and responsibilities in the event of the most-likely-to-occur data breach scenarios in your business. A swift response in such an event will help to minimize any adverse impact. · Evaluate security measures governing access to, encryption of, and portability of, sensitive data and correct any deficiencies. Notably, many of the most egregious data security breaches have involved misplaced or stolen laptop computers that reportedly required no password access or other security restrictions.

lookingforward

The foregoing is only a brief summary of data breach notification issues, which should be seen in the broader context of a still-developing legal framework ­ statutorily and through case law ­ directed toward imposing minimum security standards on the handling of sensitive data. It is almost certainly the case that in the near future some form of broad federal legislation will be enacted dealing with data breach notification. Additional prominent data breach cases may finally tip the balance on the federal side. Until then ­ and, most likely, even after ­ the various states can be expected to continue enacting new laws and modifying existing ones in this area. As an example, the TJX case noted earlier has already prompted at least six states to propose amendments to their data breach laws to impose further costs on merchants who bear some responsibility for data breaches. Given this environment, businesses must be alert to the fact that compliance requirements for data breaches will continue to be subject to an uncertain and evolving legal landscape for some time to come.

The author wishes to thank Cylinda Parga, Elizabeth Spivey and Jared Westbroek, SGR Summer Associates, for their assistance in compiling the information contained in the chart on page 18.

brettlockwood

Partner Corporate Practice Group [email protected]

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Pandora's Box

emilysaccoavant andtimbumann

Inadvertent Export of Arms Technology During Ordinary Business Activities

T

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he International Traffic in Arms Regulations ("ITAR")1 comprise but one of many U.S. export controls with surprisingly broad reach. ITAR, implemented pursuant to the Arms Control Export Act (the "ACEA") in furtherance of "world peace and security and foreign policy of the United States," governs, among other things, the export of "defense articles."2 ITAR defines the terms "export" and "defense article" very broadly, such that the applicability of ITAR is by

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does not purport to address all relevant trade compliance issues (whether related to ITAR or otherwise) that may pertain to a particular company. Note that ITAR is only one of many U.S. trade controls, and there may be other laws or regulations in addition to or in lieu of ITAR ­ including, by way of example, the Export Administration Regulations, 15 C.F.R. §§ 730774 ­ that may apply to a company's exporting activities.

fromautomaticweaponstosafetygoggles: itar'sbroadDefinitionofDefense Articles

The United States Munitions List (the "USML") is the section of ITAR that contains descriptions of all defense articles, technical data and defense services regulated by ITAR.3 The USML is comprised in large part of firearms, other armaments and ammunition that, by nature, seem defense-related. Other items, such as scuba equipment and cameras, are considered "defense articles" whenever they are designed, modified or configured for military application.4 As a general rule, any item, including each of the following items listed below, that is designed, modified or configured for military application will be covered by the USML:5 · · · · · · · · · · · · · · · · · · Electronics or components Switches Aircraft and/or component parts Wiring Chemicals Temperature-control devices Software Metals Protective equipment (including eyewear) Navigation devices (including GPS components) Dyes Scuba equipment Fabric Medical equipment Energy storage devices (including batteries) Engines or power transmission equipment Generators Tooling

no means limited to companies who manufacture and ship weapons to foreign military entities. To the contrary, under ITAR, even day-to-day activities, such as e-mailing and Internet downloading, can potentially constitute "exports," and commonplace objects that intuitively may seem unrelated to military use, such as eye goggles and radios, will in some cases be considered "defense articles." The United States Department of State Directorate of Defense Trade Controls (the "DDTC") vigorously enforces ITAR, and companies that violate their ITAR compliance obligations may find themselves subject to crippling fines or their principals subject to jail time. Thus, it is crucial that every company examine whether its business activities may be governed by ITAR. This article will provide a compliance starting point for any company that may be unaware of ITAR's requirements. The article is intended as a basic overview of ITAR only and

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Even the slightest modification made to an item for the purpose of meeting military specifications can potentially transform an item into a defense article. For example, U.S. Army fatigues traditionally have been fungible with their civilian version. However, the issue item now incorporates

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The United States Department of State Directorate of Defense Trade Controls vigorously enforces ITAR, and companies that violate their ITAR compliance obligations may find themselves subject to crippling fines or their principals subject to jail time.

infrared reflective squares. The purpose of these squares is to enable soldiers to discriminate between "friend and foe" using night-vision equipment. The incorporation of these squares turns ordinary clothing into "defense articles." An item that contains a "defense article" as a component part may itself be considered a "defense article." Also, the intended use of the article or service after the export (i.e., whether it will be used for a military or civilian purpose) is generally irrelevant in determining whether that item is a "defense article" or "defense service."6 For example, toothbrushes manufactured for issue by the Marine Corps would probably not be considered a defense article, because even though the toothbrushes are intended for military use, the brushes would not have been designed, modified or configured for military use.7 It can be difficult to determine whether a particular item or service falls within the definition of "defense article" set forth in the USML. If, after reviewing the USML, a company is unsure whether its items or services are covered by ITAR, it may wish to request guidance from the DDTC in the form of a Commodity Jurisdiction Request (CJR).8 Unfortunately, the processing time for CJRs can significantly delay business dealings, since the processing will take at a minimum 95 days, and an item under commodity jurisdiction review by the DDTC should not be exported unless and until the DDTC renders its decision.

fromoverseasshipmentstointernet Downloads:itar'sbroadDefinitionofExports

ITAR defines "export" very broadly to include, among other things, (a) the sending or taking of a defense article outside of the U.S. in any manner; (b) the transfer or oral or visual disclosure of technical data to a foreign person, whether in the U.S. or abroad; and (c) the performance of a defense service on behalf of, or for the benefit of, a foreign person, whether in the U.S. or abroad.9 The term "foreign person" refers to a natural person who is neither a U.S. citizen nor a U.S. permanent resident alien, and any foreign corporation, business association or other entity or group that is not organized to do business in the U.S.10 With these definitions in mind, depending on the circumstances, any of the following may be considered to be "exporting": · having a conversation with a foreign national employed by your company in your U.S. office in which you discuss technical specifications for a type of fabric used to manufacture medical facemasks; · sending an e-mail to a non-U.S. citizen that contains drawings for a piece of equipment;

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The amount and type of penalty imposed for an ITAR violation is determined in the DDTC's sole discretion.

· discussing software development plans with an employee or intern who is a foreign person; · providing maintenance services to foreign users of software; and · the downloading by a non-U.S. citizen of a PDF file containing technical data from an online data room set up by a U.S. company. Clearly, the definition of "export" is not limited to traditional overseas shipments. Almost any communication, transport or delivery can potentially constitute an "export" under ITAR.

itarregistrationandlicensing

ITAR provides that any person intending to export a defense article to a foreign person must register with the DDTC and apply for a license.11 The license application may take anywhere between two weeks and two months or longer to process, depending in part on whether the DDTC involves other federal agencies in the review of an application. Companies should be aware that approximately 15 percent

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of all license applications are returned without action because "some required documentation is missing or because DDTC does not have confidence in some specific aspect of the transaction."12 Roughly 30 percent of license applications are approved subject to specific conditions or provisos, while only one percent of license applications are denied.13

or defense-related transactions. Unfortunately, the AECA subjects ITAR violators ­ including unintentional violators ­ to steep fines, debarment and, in some cases, even imprisonment. These potential consequences should prompt every company to examine its business dealings to determine what its ITAR or other U.S. trade-compliance obligations may be.

endnotes 1. 2. 3. 22 C.F.R. §§ 120-30. See 22 U.S.C. § 2778(a)(1). ITAR also governs the temporary import, manufacturing and brokering of defense articles. See generally 22 C.F.R. §§ 122, 123. The general focus of this article will be the export of defense articles. Technical data refers to software, plans, instructions and documentation, to the extent that such items or information are not publicly available and do not constitute marketing materials or general information taught in schools. Defense services generally refers to any service provided in connection with a defense article, such as training, maintenance or repair. See 22 C.F.R. §§ 120.9, 10. Any reference in this article to a "defense article," unless the context requires otherwise, refers to all descriptions contained in the USML including technical data and defense services. See generally 22 C.F.R. § 121.1. Id. See 22 C.F.R. § 120.3. See, e.g., http://www.exportcontrolblog.com/blog/itar/index.html, current as of the date of this article, from Update Day 1: State Department Export Controls, posted October 16, 2006. See 22 C.F.R. § 120.4. See 22 C.F.R. § 120.17. See 22 C.F.R. § 120.16. See 22 C.F.R. § 123. Note that registration requirements may apply even if no export activities will occur. For example, manufacturers of defense articles are required to maintain a current registration with the DDTC. See 22 C.F.R. § 122.1. Defense Trade Controls Overview, page 5, found at pmddtc.state.gov/docs/defense_trade_ overview_2006.pdf, current as of the date of this article. Id. See 22 U.S.C. §§ 2278, 2289(a) and 2780. See 22 C.F.R. §§ 127.6, 7. Supra, n.12 at 8. See 22 U.S.C. § 2778(a)(1). See 22 U.S.C. § 2278. See 22 C.F.R. § 127.7(c).

itarviolations

Violations of ITAR ­ even if inadvertent ­ can have devastating consequences. The AECA provides that civil violations of ITAR are punishable by a maximum penalty of $500,000 per violation.14 Violations of ITAR may also result in the immediate suspension of all trade activities (called "debarment") and the seizure of any articles (and the vessel carrying such articles) in transport to a foreign person.15 The DDTC takes ITAR violations very seriously. Over the last few years, the U.S. State Department has imposed the largest administrative fines in history for violations of the AECA and ITAR, including the following: · · · · · · · · · · Boeing Company ($15 million) EDO Corporation ($2.5 million) General Motors/General Dynamics ($20 million) Goodrich/L3 ($7 million) Hughes Electronics ($32 million) ITT ($8 million) L3 Communications Corporation ($1.5 million) Lockheed-Martin ($3 million) Loral ($20 million) Raytheon ($25 million)16

4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19.

The amount and type of penalty imposed for an ITAR violation are determined in the DDTC's sole discretion. Because the exportation of defense articles is considered a sensitive matter involving national security, the DDTC's decisions regarding ITAR violations are final and not subject to judicial review.17 In addition to civil penalties, the AECA provides that "willful" violation may result in criminal penalties in the amount of $1,000,000 per offense or up to 10 years imprisonment.18 Criminal violators, like their civil counterparts, are also subject to debarment.19

emilysaccoavant

Associate Corporate Practice Group [email protected]

conclusion

Because of the broad reach of ITAR, companies may be surprised to find that they are subject to ITAR even if their business dealings seemingly involve no international activity

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timbumann

Partner Litigation Practice Group [email protected]

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shayneclinton

A Day in the Life of the SGR Fellow

Each year, Smith, Gambrell & Russell, LLP selects an associate to spend three months working full time at Atlanta Legal Aid Society, Inc. as part of the firm's ongoing commitment to providing legal services to Atlanta's indigent population. The appointment provides the "SGR Fellow," as the person holding the position is known, an invaluable opportunity to work "in the trenches" representing the poor in matters ranging from landlord-tenant disputes and evictions to federal subsidized-housing problems to "loans" with questionable interest and repayment rates. Shayne Clinton spent the first three months of 2007 working at Atlanta Legal Aid on behalf of the firm as the SGR Fellow. The following is an example of a day in Shayne's practice while at Legal Aid. 9:00a.m. ­ I arrived at the Atlanta Housing Authority (AHA) for a 9:00 a.m. appointment to review my client's file stored at AHA. I needed to review the client's file to investigate the facts of the case. The client lost her Section 8 federal housing assistance shortly after moving to Atlanta. She received a voucher to find rental property but approximately two weeks after she signed her lease, AHA terminated her voucher. AHA accused her of submitting false information regarding her employment to obtain Section 8 assistance. AHA had attempted to verify the client's employment by contacting what it thought was

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her employer. However, AHA erroneously contacted not the client's employer but the contractor for whom the client's employer was a subcontractor. Results of Representation: After reviewing the client's file at AHA, I sent AHA a demand letter to reinstate the client's housing assistance and attached documents to show that the client did not submit false information. A couple of weeks later, I spoke with AHA's general counsel, and AHA agreed to reinstate the client's federal housing assistance. While investigating this matter, I also learned that the rental property had been sold to a third party. I assisted the client to transition her lease to the new landlord. 10:30a.m. ­ When I arrived at the Atlanta Legal Aid office after my appointment with AHA, I opened my mail and learned that a client had won her unemployment benefits hearing before the Georgia Department of Labor (DOL). The client is a single mother of two children, and a Japanese immigrant, struggling to make ends meet. She was discharged from her job, and the employer gave her a recommendation letter stating that it had to discharge her due to budgetary problems. The termination letter did not state any other reasons for firing her. When the client applied for unemployment benefits, the employer then claimed that it fired her not because of budgetary problems but due to her incompetence. The DOL initially denied the client her unemployment benefits based on the employer's statements. At the hearing, I had had the opportunity to cross-examine the employer's two representatives through a DOL-appointed Japanese interpreter. The representatives admitted that the company never gave the client prior warnings and also admitted that the company gave her the recommendation letter. I then had the client testify to the facts of the case. The client

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was thrilled to have the unemployment benefits reinstated to help her care for her children as she looks for a new job. 11:00a.m. ­ I served a subpoena upon a witness who lives in a local housing project for an upcoming hearing before the Georgia DOL. The DOL had initially denied the client's unemployment benefits, and the hearing was a de novo appeal of that initial decision. The client was incarcerated on a Sunday and did not show up for work for two days. When he returned to work, the employer fired him for unrelated insubordination claims. The client was never given any warnings, and having a prior warning is a factor that the DOL should have considered in deciding whether to award unemployment benefits. Moreover, the DOL denied his benefits because of the incarceration. However, the employer's stated reason for discharging him did not mention the incarceration.

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Results of Representation: At the hearing, I was able to crossexamine the employer's representative, and the representative admitted that the company never gave the client any prior warnings. I also had the client testify to the facts of the case. The client won, and the DOL reinstated the client's unemployment benefits. 11:45a.m. ­ On the way back to the office, I had lunch with one of the Atlanta Legal Aid attorneys to discuss the status of current cases. 12:30p.m. ­ I filed a lawsuit on behalf of a client. The lawsuit concerns several claims against a mechanic for breach of contract, trover, conversion, negligence and punitive damages. The mechanic has had the client's vehicle since August of 2006. The client originally hired the mechanic to replace the car's timing belt. While attempting

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to replace the timing belt, the mechanic damaged the vehicle's engine. Instead of repairing the damage he caused, the mechanic refused to return the vehicle. The client left notes and attempted to call the mechanic several times before contacting Atlanta Legal Aid. However, the mechanic refused to return the car. Moreover, the mechanic removed the vehicle's wheels so the client could not remove the vehicle from the mechanic's property. I sent a demand letter to the mechanic, but the mechanic did not contact me so I filed the lawsuit, which remains pending.

1:00 p.m. ­ I returned to my office for final preparations for a trial scheduled to begin at 4:00 p.m. While reviewing my arguments for trial, I received a telephone call from a client ecstatic that she was living in her new apartment. I was excited to learn that she no longer has to live with rats and cockroaches and with holes in her apartment floor. She also informed me that her new apartment is much larger than her old one and that the heat actually works. The client had contacted Atlanta Legal Aid with respect to problems with AHA and her landlord. She had entered

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into a lease with a landlord under a Section 8 federal housing assistance program. She was obligated to pay a small portion of the rent, and AHA was responsible for paying the remaining amount to the landlord. In December 2006, the apartment failed an AHA inspection. The landlord refused to correct the problems; as a result, AHA terminated the lease as of January 31, 2007. The client attempted to contact AHA on numerous occasions throughout December 2006 and January 2007 to receive a new voucher to move to another apartment. AHA failed to provide the client with a new voucher to move. In February 2007, the landlord filed a dispossessory action to evict the client, and the client came to Atlanta Legal Aid for help. I filed an answer and asserted several defenses under federal and state law. At the same time, I sent AHA a demand letter to get the client a new voucher to move to a new apartment. The client was literally threatened with being placed out on the street, as she has no relatives or friends with whom she could live. Ultimately, AHA's general counsel agreed to expedite AHA's process so the client could move. I also spoke with the landlord's attorney after he received the client's answer, and he agreed to dismiss the dispossessory action. Despite these successes, AHA's expedited process turned out to be very slow. At the end of February, the landlord again threatened to file another dispossessory action. I spoke with opposing counsel, and he agreed to cancel the dispossessory filing before it was served on the client. I contacted AHA several times to get the process truly expedited. Finally, in the last week of February, AHA inspected a new apartment for the client so she could move in. 1:30p.m. ­ While continuing to review arguments for trial, I received another call from a client, letting me know that the Social Security Administration (SSA) office confirmed that it had received a check from his former representative payee, and that he would be getting his money soon. The client is a former homeless man who receives social security disability benefits because he suffers from schizophrenia. While he was homeless, his former SSA-appointed representative payee gave him only a portion of his disability benefits, shorting him by approximately $2,700. The new representative payee learned of this and asked the former representative payee to return the money. However, the former representative payee ignored the requests, and the new representative payee contacted Atlanta Legal Aid for help (the

new representative payee was taking care of the client by giving him a place to live as well as administering his benefits). I sent a demand letter to the former representative payee asking for an accounting. I also spoke with the former representative payee, and she agreed to provide us with an accounting and return any money she owed the client. After she sent me the statement of account, she agreed that she owed approximately $2,700. She delivered a check to the SSA, and the SSA will now pay the money over to the new representative payee for distribution to the client. 1:45p.m. ­ For this afternoon's trial, I had a conference with my client and two witnesses that I had planned to use at trial. We went over the types of questions that I was going to ask them, and I prepared them for what to expect during the trial. The client had her lease terminated and a dispossessory action filed against her. She has lived in the same HUD public housing community since 1997. In the middle of December 2006 while she was in the hospital, her adult son forced himself into her apartment and held a gun to his head and threatened to commit suicide while the client's grandson attempted to stop him. The grandson ran out of the apartment and retrieved his

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mother, and they called the police. When the police arrived, the officers arrested the client's son on unrelated child neglect charges and took him to Grady Memorial Hospital for psychiatric evaluation. Later, the grandson's mother determined that the gun was not real but a toy. The public housing community terminated the client's lease and her subsidized housing assistance because she purportedly had a guest who engaged in criminal activity. However, she had been in the hospital when the event took place, and she had not seen her adult son since 2003. The landlord also alleged that a gun was fired in her apartment. I filed an answer and asserted several defenses under state and federal law. In February, the case was on the dispossessory calendar, and the case was sent to mediation. At mediation, I met with the housing community's representative and its attorney. We could not reach a settlement, and the case was reset for trial this afternoon. 3:30p.m. ­ I arrived at the Fulton County Courthouse along with the client and the two witnesses for the trial. At the beginning of the bench trial, opposing counsel informed the court that he had mailed subpoenas to three police officers to testify. However, two of the three officers were not available, and he requested a continuance. I objected to the continuance under Georgia law for his failure to prop-

erly serve the witnesses. The judge agreed and denied the request for a continuance. I also moved to exclude some of the landlord's proposed evidence. The landlord wanted to submit evidence that was not included in the original termination notice. I argued that under federal law the landlord had to rely solely on the reasons stated in the "for cause" termination notice that was sent to the client. The judge agreed and excluded the evidence. After opening statements, the plaintiff 's representative began testifying. Before she had an opportunity to testify from a police report of the events in question, I objected on hearsay grounds. The judge sustained my objection, and opposing counsel had no further evidence to prove his case. After opposing counsel finished his case-in-chief, I moved for directed verdict and the judge granted my motion. After the trial, the client was thrilled and very appreciative. She is a grandmother responsible for raising her grandchild. She told me how relieved she was when the judge told her that she could stay in her apartment and that she could continue to receive federal housing assistance. Without the assistance, she could not have afforded to live in an apartment and take care of her grandchild. 5:45 p.m. ­ I returned to the Atlanta Legal Aid office to draft memos of the day's events and to prepare for the next day as an SGR Fellow working to help Atlanta's indigent population.

Atlanta Legal Aid Society, Inc. was founded in 1924 by E. Smythe Gambrell, the principal of one of SGR's predecessor law firms, who also served as the Society's president for most of two decades. The Society's Fellowship Program began in 1995, and approximately 13 Atlanta law firms now participate by sending associates to one of the Society's five area offices. Atlanta Legal Aid provides representation exclusively in civil (non-criminal) matters to clients who have an income at or below 125 percent of the federal poverty guidelines and who reside in either Fulton, DeKalb, Clayton, Cobb or Gwinnett counties. Such clients must also have priority cases, which include housing, consumer fraud, public benefits, employment, education, health, spouse abuse and child custody cases. For more information, visit atlantalegalaid.org.

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bykurtronn

Client Profile

MANAGING CHANGE, MITIGATING RISK

Positioning talent to drive business success

K

urt Ronn is president and founder of Atlanta-based HRworks, a national recruitment firm, and developed the company's process and approach to large-scale recruiting and executive searches. For the past 10 years, HRworks has helped many of the world's most-recognized brands solve their recruitment challenges. Ronn speaks nationally on diversity, recruitment process related to managing organizational change, and governance related to recruiting compliance. He is a member of the RPO (Recruitment Process Outsourcing) Association Board of Directors. The global economic landscape has seen significant growth of private equity firms either taking companies private, or buying distressed companies and rolling them up into new companies. This trend, which is likely to continue, brings about much change in scope to businesses and individual job functions. It is critical, therefore, to commit resources and planning to structure the right talent pool for a company's long-term success.

How is the growth of private equity deals impacting talent acquisition?

which we label as A, B and C. The "A" group is the talent that you know will stay with the new company, so there is no need to recruit for these positions. The "B" group is the talent pool that is undecided about migrating to the new company because of relocation issues or a spouse. And the "C" group is made up of the known openings and potentially new positions, either because the individual is not joining the new Kurt Ronn is president and company or because the scope of founder of Atlanta-based the job has changed so dramatiHRworks. cally new openings were created. The strategy then should be to recruit the B's and C's ­ those that are undecided ­ in conjunction with the new openings. If the B category makes the leap, then you have minimized downside by being proactive.

One of the most important keys to success during private equity deals is to properly address the talent needs of the new company. Here, speed is critical, as a short window exists to position the right talent in place to drive the new business. Company management is less visible to the external market than public companies, but the pressure to perform is just as great. Waiting to address talent needs is a common mistake.

Why doesn't this happen in most deals?

What should companies do to address the issue of speed?

Time is of the essence, yet most companies only recruit known openings. There are three types of recruitment needs,

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There are a number of reasons ­ undercapitalizing the deal, belief that the existing group of talent can support the new organization, or poor talent planning. These scenarios often result in slow and painful change. Undercapitalization, or "boot-strapping" reorganization, is a problem, as many companies simply do not budget for the recruitment of talent. The chance that the existing recruitment organization can build the new company fast enough is similar to a doctor performing surgery on him or herself; outside help is critical. The success of a new company is as much about cultural fit as it is about skill. There is a reasonable chance that the existing talent will not be able to handle new roles created by

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What is significantly different about the OFCCP's approach to the new Internet Applicant guidelines that should cause employers concern?

the merger, acquisition or bankruptcy. Many companies wait for the players to fail rather than evaluating the talent objectively based on the new role. Recognize the reality that the status quo evaporated along with the change. Keep in mind that investors are more tolerant of trouble at the point of integration than further down the road. Too often, the deal is so focused on the product or service offering that an actionable workforce plan does not exist. A comprehensive strategy relating to assessing existing talent, identifying future roles and planning the aforementioned ABC's of talent acquisition can result in a smoother transition.

So, what should private equity or senior managers do to be prepared for change?

When major events challenge the talent pipeline, it is crucial to have a strategy in place to address the expanded talent needs. I have yet to meet an investor or business manager who did not wish he or she had acted more quickly to address situations. Good planning and good partners improve performance and the likelihood of success. In addition to the current trend of public companies going private, another hot issue is compliance. Employers have spent much time and energy over the past year reacting to the new Internet Applicant Rule promulgated by the Office of Federal Contract Compliance Programs (OFCCP). However, the OFCCP has fundamentally changed the way it investigates applicant adverse impact. Coupled with the ruling, there are major implications for federal contractors and the third-party search firms they use. The OFCCP implemented the Internet Applicant ruling in February 2006. The lengthy definition considers the electronic advancements in recruiting. It defines Internet Applicants, identifies specific electronic data techniques, creates a new "Basic Qualification" standard and sets the record-keeping requirements necessary to be compliant.

It is the responsibility of the company to keep the records necessary for the OFCCP to review the hiring process. Failure to produce proper records will force the OFCCP to reconstruct your hiring process and the related data. The record-keeping requirements extend to all of the activities by all of parties involved, including hiring managers and recruiters, both internal and external. "Systemic discrimination," as defined by the law, can be present at any stage within the hiring process and is inclusive of the entire queue of candidates, not just those selected for the final interview. Basically, it involves any decisions made that result in an "adverse impact," such as selecting fewer women to advance to the next round of interviews. The electronic nature of recruitment provides much more data, and the analysis of the data gives better visibility to systemic discrimination issues than ever before. The impact on the recruiting landscape is huge; the recruitment industry is now subject to a much higher level of governance. Additionally, the Equal Employment Opportunity Commission (EEOC) is heading in the same direction, as indicated in the EEOC's Systemic Task Force Report of March 2006.

How can companies mitigate risk?

Companies need to analyze both their internal recruitment process and their external recruitment relationships and require compliance. Waiting until the OFCCP comes to audit practices before instigating changes is not prudent, as issues of systemic discrimination can be both expensive and disruptive to business. Consider centralizing your recruitment functions. Such a focused approach can ease training, certification and auditing. Bonus benefits include better performance and economies of scale. External search-firm contracts should be amended to include specific OFCCP-compliant language, particularly related to record keeping. Then, you need to regularly audit the practices of all players, both internal and external, to ensure the recruitment execution from Internet search to hiring-manager interview and offer is compliant. For more information, visit HRworks.com. SGR provides employer services to HRworks.

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The Finish Line

iversity. It's the "D" word everyone is talking about. And we'd like to tell you about diversity at Smith, Gambrell & Russell, LLP. At SGR, we recognize that attracting the widest possible array of talent enhances our ability to serve our clients and our communities. We are therefore dedicated to providing a work environment where each person is valued for his or her perspectives, skills and talents, is treated respectfully, is able to communicate openly and is encouraged to develop to his or her full potential as a contributor to the success of the firm and the communities we serve. Among the principles that guide SGR's approach to diversity management is our recognition that diversity management is simply the right thing to do. In addition, managing our diversity allows us to enhance the workplace and, in so doing, achieve competitive advantage. "In the context of a law firm like SGR, `diversity' means bringing different perspectives and experiences to bear on finding solutions for our clients," explains Steve Forte, SGR's managing partner. "That is a win-win for our clients and for this law firm." In order to formalize our long-standing commitment to diversity, SGR formed in March 2006 a Diversity Council comprised of 12 attorneys and staff members representing each of SGR's three U.S. offices. Council membership is diverse across many attributes including gender, race and ethnicity, and sexual orientation. The Council meets regularly, often with firm management, to lead and guide the diversity management process with respect to firm policies and practices. Since the summer of 2006, more than 400 attorneys and staff members in SGR's three U.S. offices have participated in formal diversity training under the direction of Roosevelt Thomas Consulting and Training. Diversity training is now an integral part of all new-hire orientation. We also have implemented ways to encourage open communication among all who work here ­ for example, through participation in a diversity survey and establishment of town hall meetings where issues arising from our differences can be explored and solutions created.

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D

"SGR is moving beyond traditional diversity training that focuses only on understanding differences," says Melanie Miller, a diversity consultant who has trained hundreds of SGR attorneys and staff and meets regularly with its Diversity Council. "Instead, they are taking a strategic approach to diversity management, combining things like recruiting, inclusion, systems, and clients' and employees' needs. In my opinion, this approach wisely recognizes diversity for what it has become: an internal and external business imperative." SGR recruits top students from a variety of law schools, including the law schools of several historically black universities. We participate in the Southeastern Minority Job Fair and the Minority Clerkship Program sponsored by the Atlanta Bar Association, and we maintain relationships with and sponsor events on behalf of minority student bar associations at local and regional law schools. But we recognize that it is not enough simply to get qualified minority law students "in the door." Instead, through formal and informal mentoring, training and other programs, we strive to foster an environment where all of our lawyers, including minority lawyers, can flourish and build a career. The firm's commitment to diversity includes its offering of domestic-partner benefits, the option of a non-partnership career track, and the firm's commitment to the Bright Horizons Day Care Center. The firm also financially supports and sponsors attorney membership in organizations such as the Georgia Association of Black Women, the Gate City Bar Association, Atlanta Women In Business, the Atlanta Women's Foundation, the Human Rights Campaign, and the Stonewall Bar Association. "The management of this firm is thoroughly committed to diversity and inclusion, and it is our mission to have every attorney and staff member here recognize and embrace the important role that he or she plays in diversity management," says Forte. For more information, contact Dana Richens, Diversity Partner, at (404) 815-3659 or [email protected]

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