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Corporate Counsel Connect collection

May 2014 Edition

Board crisis preparation and management; autodialed and prerecorded calls; survival of arbitration clauses

Board Crisis Preparation and Management

A recent negative social media campaign and boycott against Mozilla resulting from its CEO's personal donation to a political cause underscores for boards the importance of crisis management preparation.

Mozilla, an open-source software company best known for its Firefox web browser, recently issued a public apology for its handling of a difficult situation that played out in mainstream and social media. In 2012, it was publicly reported that six years before his promotion to Mozilla's CEO, Brendan Eich had donated $1,000 to support Proposition 8 (an initiative to prevent same-sex marriage in California). After Eich was promoted, a firestorm ensued, including employee social media posts strongly condemning Eich's appointment and organized boycotts of Firefox. Eich soon resigned. Mozilla's Executive Chairwoman apologized for the situation and expressed regret that the company did not address various stakeholders' concerns sooner.

Good crisis management requires boards to always be prepared to promptly identify the problem, come to a decision and resolve the issue in a manner that conveys appropriate concern and credibility. Boards should run crisis response simulations of hypothetical scenarios and should consider including scenarios that involve moral, religious and political backlash as a result of charitable giving or activism.

Boards may also wish to consider whether to:

  • Seek to better understand the donation history and pattern of their executives, perhaps through open discourse or D&O questionnaires.
  • Implement a policy that restricts executive donations unless they are anonymous.

These courses of action may raise labor and employment law concerns so boards must weigh the benefits and risks.

For more information on how boards can prepare for and respond to corporate crisis, see Article, Corporate Crisis: Board Preparation and Response.

Autodialed and prerecorded calls

Following a recent Eleventh Circuit decision, businesses making non-emergency autodialed and prerecorded calls to cell phone numbers should ensure that any consent they receive to make these calls meets the prior express consent requirement under the TCPA.

In Osorio v. State Farm Bank, F.S.B., the Eleventh Circuit adopted the Seventh Circuit's interpretation of "called party" under Section 227(b)(i) of the TCPA to mean the account's current subscriber. The TCPA, among other things, prohibits making non-emergency autodialed and prerecorded calls to cell phone numbers unless the caller has obtained the prior express consent of the called party.

At least in the Seventh and Eleventh Circuits, companies making autodialed and prerecorded calls to cell phone numbers should take steps to minimize the risk of liability, for example, by having a person make an initial verifying call and complying with all requests to stop calling.

For more information on these recent circuit court decisions, see Commercial: TCPA Strict Liability.

Survival of arbitration clauses

The Sixth Circuit's recent decision in Huffman v. Hilltop Companies, LLC further expands the deference federal courts give to arbitration clauses. The court held that an arbitration clause omitted from the contract's survival clause remained in force, even though the contract had expired.

In Huffman, the Sixth Circuit noted that the arbitration clause at issue was "broad," meaning that the burden was on the plaintiffs who challenged the survivability of the clause to rebut the strong presumption in favor of arbitrability. The plaintiffs argued that the omission of the arbitration clause from the survival clause demonstrated a "clear implication" that the arbitration clause was meant to expire.

The Sixth Circuit disagreed, reasoning that the parties did not intend for the survival clause to serve as an exhaustive list of the provisions that would outlast the expiration of the contract. Because other clauses that remained in effect post-expiration were not listed in the survival clause, the court could not find that the omission of the arbitration clause clearly indicated that the clause expired with the contract. The court noted, however, that it might have reached a different conclusion if the survival clause listed 23 out of the contract's 24 provisions, omitting only the arbitration clause.

For resources to assist counsel with drafting alternative dispute resolution clauses and agreements, see the US Arbitration Toolkit.

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