SUMMARY

As a result of the $700 billion bailout bill passed by Congress and signed into law on October 3, 2008, US fund managers will no longer be able to defer income from offshore funds.

The bill includes a new section of the Internal Revenue Code (Section 457A) that disallows deferrals of compensation from offshore entities that are not subject to either US income tax or "comprehensive" foreign income tax, which includes most offshore funds.

Income earned for years beginning January 1, 2009 and later cannot be deferred.

Any deferrals currently in place for amounts earned (or to be earned) prior to January 1, 2009, may remain deferred, but only until 2017.  Any deferral elections currently in place that provide for payment later than December 31, 2017  (or, for fiscal year entities, the end of the last taxable year beginning before 2018) must be amended to provide for earlier payment; guidance is expected shortly as to the deadline for making such changes.

SUMMARY

Extenders for a series of key tax credits aimed at supporting the development of renewable energy generating facilities were passed today by the House 263 to 171 as part of the financial rescue bill, H.R. 1424 (the “Bill”), aimed at addressing the recent credit crisis. The renewable energy production tax credit (“PTC”) gives qualified facilities placed into service by a statutory cutoff date a tax credit equal to 1.5 cents per kilowatt hour of electricity generated. The PTC cutoff date had been set for January 1, 2009, and legislation to extend that cutoff date had been stalled in Congressional negotiations. The PTC extenders were among the amendments added by the Senate, which took up the Bill after the House failed to pass its version of a financial rescue bill on September 29, 2008. The President is expected to sign the Bill.

SUMMARY

1. Prohibition on Short Selling in Financial Companies

On October 1, 2008, the Securities and Exchange Commission (“SEC” or the “Commission”) extended the emergency order (the “Order”) prohibiting short selling in the securities of financial companies. The Order was issued pursuant to the Commission’s authority under Section 12(k)(2) of the Securities Exchange Act of 1934.

The Order will be extended beyond its currently scheduled expiration to allow time for completion of work on the anticipated passage of the Economic Stabilization Act of 2008 (the “Legislation”). The Order will now expire at 11:59 p.m. ET on the third business day after enactment of the Legislation, but in any case no later than 11:59 p.m. ET on Oct. 17, 2008.

2. Requirement of Institutional Investment Managers to Report New Short Sales

On October 1, 2008, the SEC also extended the emergency order (the “Second Order”) requiring institutional investment managers (those required to file a Form 13F) to report information concerning daily short sales of securities. The Second Order was also issued pursuant to the Commission’s authority under Section 12(k)(2) of the Securities Exchange Act of 1934.

The Second Order will also be extended to 11:59 p.m. ET on Oct. 17, 2008, but the Commission intends that the reporting requirement will continue in effect beyond that date without interruption in the form of an interim final rule. The Commission will seek comments on all aspects of the anticipated rulemaking. The SEC has also now indicated that disclosure of short positions reported under the Second Order will be made only to the SEC. This is a modification of the Second Order and will avoid public disclosure. It is unclear whether public disclosure will be required under any final rule.

SUMMARY

The operators of the Regional Greenhouse Gas Initiative, or RGGI Inc., announced yesterday  that all of the 12,565,387 CO^₂ allowances offered for sale in the first RGGI auction on September 25, 2008 were purchased at $3.07 per allowance. This is above the auction reserve price of $1.86 per allowance, and below recent prices on the Chicago Climate Futures Exchange.

SUMMARY

Yesterday, President Bush signed into law the ADA Amendments Act of 2008, which expands the protections of the Americans with Disabilities Act (the “ADA”). The purpose of the new law is to overturn two decisions of the United States Supreme Court -- Sutton v. United Air Lines, Inc. and Toyota Motor Manufacturing, Kentucky, Inc. v. Williams -- in order to broaden the scope of who is disabled under the ADA.

SUMMARY

Yesterday, in Broadcom Corp. v. Qualcomm Inc. (Nos. 2008-1199, -1271, -1272), the Federal Circuit held that an accused infringer’s failure to obtain an opinion of counsel may be considered as evidence to support a determination that it actively induced infringement by a third party. Specifically, the Court ruled that the presence or absence of an opinion is relevant to whether an accused infringer “‘knew or should have known’ that its actions would cause another to directly infringe.”

SUMMARY

As a follow up to our Foley Adviser on September 19, 2008, we have prepared answers to the following frequently asked questions regarding the Securities and Exchange Commission’s (“SEC” or the “Commission”) emergency order (the “Order”) requiring institutional investment managers to report information concerning daily short sales of securities.

Questions Include:

• What is Form SH?
• Who must file?
• When is the filing required?
• How is the filing made?
• How soon will Form SH information be publicly available?
• What transactions are reportable?
• Are small short sales reportable?
• What must be disclosed on Form SH?
• What about pre-existing short positions?
• What if I increase a pre-existing short position?

SUMMARY

Section 409A is an extremely broad law that covers many arrangements not generally considered deferred compensation, such as stock options, bonus plans, and severance and change in control agreements. In general, 409A governs any arrangement where an employee or consultant has a vested right to compensation in one year that will be paid in a later year, unless the arrangement fits into one of the exemptions to 409A. Arrangements subject to 409A must comply with strict rules as to the time and form of payment, and it is very difficult to make changes to an arrangement once it is in place. Any deferred compensation arrangement that does not comply with 409A will subject the employee or consultant to income tax liability at the time that the right to payment vests (even if there is no right to receive payment at that time), together with a 20% penalty tax on the deferred amount. (continues)

SUMMARY

SEC Issues Emergency Order to Prohibit Short Selling of Financial Stocks to Protect Investors and Markets

On September 19, 2008, the Securities and Exchange Commission (“SEC” or the “Commission”) issued an emergency order (the “Order”) to prohibit short selling in the securities of 799 financial companies (the “Securities”), which are identified in Exhibit A. The Order was issued pursuant to the Commission’s authority under Section 12(k)(2) of the Securities Exchange Act of 1934.

Under the Order, all persons are prohibited from short selling the Securities except for registered market makers, block positioners, or other market makers obligated to quote in the over-the-counter market. The Order will be immediately effective and will terminate at 11:59 p.m. ET on October 2, 2008. The SEC may extend the Order beyond 10 business days if the SEC determines that the continuation of the Order is necessary in the public interest and for the protection of investors, but not for more than 30 calendar days in total duration. (continues...)

SUMMARY

Three years ago, the Massachusetts Supreme Judicial Court held in Modern Continental/Obayashi v. Massachusetts Commission Against Discrimination that an employer may be held liable under Massachusetts state law for discrimination committed by persons who are not its employees. The Massachusetts Appeals Court recently held that the converse is also true: an employer may be held liable for the discriminatory acts of its employees against employees of another employer.

SUMMARY

Included in this Issue:

• A Market Perspective

  Ham Lord, Managing Director, Launchpad Ventures

  Angel financing is more than just seed round financing for future venture capital deals. In fact, angels fund 10 to 20 times more companies than venture firms do on an annual basis. This is because many angel deals will never need the type of large financing ($10M+) that is typical of most venture deals.

• Structuring a Seed Stage Investment

  David A. Broadwin, Partner, Foley Hoag LLP

  Many of the entrepreneurs who walk through our doors at the EEC are at the seed/angel stage and are looking for those kinds of investments as well as advice around how to structure the investments so as to (a) fund the early needs of the business and (b) not create barriers to a larger investment later in the life of the business.

SUMMARY

The Green Communities Act (the “Act”) authorized the Department of Energy Resources (“DOER”) to promulgate regulations implementing Massachusetts’ new renewable portfolio standard (RPS) and alternative energy portfolio standard (APS) programs.  To meet the deadlines established by the Act, DOER is currently accepting comments on (1) the feasibility of regulations governing renewable energy credit (REC) imports, (2) Class I and Class II RPS regulations, and (3) APS regulations.  The Act gives DOER only a brief window of time to make its determinations and promulgate regulations, so stakeholders wishing to participate in this process should take immediate action to formulate and submit comments.

SUMMARY

The Supreme Judicial Court (SJC) recently provided important guidance for determining whether a Massachusetts organization is properly classified as a nonprofit entity for exemption from local property tax.

SUMMARY

The Massachusetts Health Care Reform Law permits the state to assess an annual per-employee fee called the Fair Share Contribution (FSC) against non-contributing employers with 11 or more full-time equivalent employees. The fee can be as much as $295 per employee. To avoid the fee, the law requires an employer to offer a group health insurance plan and to make a “fair and reasonable” premium contribution towards that insurance.

SUMMARY

Foley Hoag LLP publishes this quarterly Update concerning developments in Product Liability and related law of interest to product manufacturers and sellers.

Included In This Update:

• Massachusetts Supreme Judicial Court Holds Motor Vehicles’ Failure to Comply with Applicable Safety Regulations Constitutes Injury For Purposes of Unfair or Deceptive Practices Statute Even Where Plaintiffs Suffer No Physical Injury or Financial Loss; Also Adopts Heightened Pleading Standards
• Massachusetts Federal District Court Remands Asbestos Failure-to-Warn Claims to State Court Where Affidavits Failed to Demonstrate Colorable Federal Contractor Defense
• Massachusetts Federal District Court Upholds Removal of Asbestos Failure-to-Warn Claims to Federal Court Under Federal Officer Removal Statute Because Defendant Established Colorable Military Contractor Defense
• Massachusetts Federal District Court in Tractor Back-Over Case Grants Summary Judgment Against Failure-to-Warn Claims Because Plaintiff Did Not Read Warnings, Grants Summary Judgment Against Punitive Damages Claims, Finds Genuine Issues of Fact Regarding Design Defect Claim
• First Circuit Enforces Contractual Provision Relieving Manufacturer in Commercial Case of Liability for Negligent Design, Manufacture and Advertising of Goods
• Massachusetts Federal District Court Holds Medical Journal’s Interest in Confidentiality of Peer Review Process Outweighs Defendant’s Need for Discovery of Communications Between Journal Editors and Authors

For more information about the Product Liability and Complex Tort Practice Group, please contact Dave Geiger.

SUMMARY

On August 7, 2008, Massachusetts Governor Deval Patrick signed the "Global Warming Solutions Act," which will impose the most stringent greenhouse gas (GHG) reduction requirements in the nation. The Act creates Chapter 21N, which mandates a reduction of GHG emissions of 10% to 25% below 1990 levels by 2020 and 80% below 1990 levels by 2050, with intermediate caps for 2030 and 2040. Although the details for implementing these caps will not be known until regulations are promulgated, the emission reductions required to meet these caps must be measurable and enforceable.

Whereas most existing GHG reduction programs in the United States focus on the electric generating sector, this Act empowers the Executive Office of Energy and Environmental Affairs (EEA) to regulate a wide variety of sources across the commonwealth, and sets in motion the regulatory process to enforce an economy-wide cap on GHGs. Failure to meet the required reductions can result in administrative civil penalties for violators as high as $25,000 per day.

SUMMARY

We recognize that many Massachusetts- and New England-based companies have employees in California, and therefore wanted to make you aware of a recent decision from California’s Supreme Court holding that noncompetition agreements are invalid under California law, even when they are carefully drafted to prohibit only certain competitive activity.

SUMMARY

In a notice published in the August 1, 2008 Federal Register, the United States Environmental Protection Agency (“EPA”) announced that it will begin following a new approach to applying its policy on Incentives for Self-Policing: Discovery, Disclosure, Correction and Prevention of Violations (65 Fed. Reg. 19618) (“Audit Policy”) to new owners that wish to make a “clean start” at newly acquired facilities. EPA will begin applying the Interim Approach to Applying the Audit Policy to New Owners (the “Interim Approach”) in order to encourage new owners to audit newly acquired facilities and to disclose, correct and prevent to recurrence of instances of environmental noncompliance.

SUMMARY

In a decision that will have far reaching implications for drug and medical device development, the Court of Appeals for the Federal Circuit held yesterday that the Hatch-Waxman safe harbor of 35 U.S.C. § 271(e)(1) is inapplicable to patented research tools that are not themselves subject to the FDA review process. While the decision is good news for the providers of research tools such as drug screening assays, it will make drug and medical device development in the United States costlier and more risky.

SUMMARY

In recent months, the Massachusetts Legislature has been considering legislation to limit or ban certain marketing activities of pharmaceutical and medical device companies. On the last day of the legislative session, July 31, the House and Senate voted to accept the conference committee report concerning health care cost containment legislation, (Senate 2863.) This legislation includes the provision regulating gifts by pharmaceutical and medical device manufacturers to physicians.