The issue in this case was whether the First Amendment to the US Constitution prevents Illinois from enforcing a state eavesdropping statute against individuals that openly record police officers performing their official duties in public. At issue in this case is Illinois statute 720 Ill. Comp. Stat. 5/14-2(a)(1) which makes it a felony to audio record “all or any part of any conversation” unless all parties to the conversation give their consent. The Court held that the “Illinois eavesdropping statute restricts far more speech than necessary to protect legitimate privacy interests; as applied to the facts alleged here, it likely violates the First Amendment’s free-speech and free-press guarantees”.

The State of Illinois asserted that “openly recording what police officers say while performing their duties in traditional public fora – streets, sidewalks, plazas, and parks – is wholly unprotected by the First Amendment” and the court noted this was an “extraordinary argument”. The court explains that “the eavesdropping statute operates at the front end of the speech process by restricting the use of the common, indeed ubiquitous, instrument of communication. Restricting the use of an audio or audiovisual recording device suppresses speech just as effecting as restricting the dissemination of the resulting recording.”

The court indicates that the First Amendment issues are very strong in this case. The Illinois statute “prohibits nonconsensual audio recording of public officials performing their official duties in public” and “[T]here is practically universal agreement that a major purpose of’ the First Amendment ‘was to protect the free discussion of governmental affairs’…” citing Ariz. Free Enter. Club’s Freedom Fund PAC v. Bennett, 131 S. Ct. 2806, 2828 (2011).

What does this mean?

The court entered a preliminary injunction blocking enforcement of the eavesdropping statute as applied to the audio recordings policy officers performing their official duties in public.

Stay tuned to see how this issues plays out.

Thanks to Arstechnica for alerting us about this opinion. Image used under the creative comments license from Electronic Frontier Foundation.

The United States Department of Interior (www.doi.gov) issued a press release yesterday containing a draft rule that requires the public disclosure of chemicals used in hydraulic fracturing (fracking) on public and Indian lands. The main goals of the proposed rule include

• disclosure of chemicals used during hydraulic fracturing
• assurances that wells are construct to prevent fluids from escaping
• confirming the well operators have  a water management plan in place for fluids that flow back to the surface.

We will see how this is received by the gas well industry and if it is used as a model for local and state regulation. A copy of the proposed rule is available here.

Photo used on the creative commons license from Esteban Maringolo

If you missed the deadline, Cuyahoga County is currently in the process of revaluing real estate for January 1, 2012. Keep on the lookout for notices from the County and for informal opportunities to discuss the valuation of real estate.

“Allow entrepreneurs to raise up to $1 million per year through an SEC-registered crowdfunding portal. Free people to invest a percentage of their income. For investors with an income of less than $100,000, investments will be capped at the greater of $2,000 or 5% of income. For investors within an income of more than $100,000, investments will be capped at 10% up to $100,000. Require crowdfunding portals to provide investor protection, including investor education materials on the risks associated with small issuers and illiquidity.”

A copy of the text of the CROWDFUND ACT is available here. If passed by the House and signed by President Obama, this should pave the way for small investments in start up companies using the crowdfunding model.

As the law currently stands, and before the CROWDFUND ACT is passed and implemented, issues of securities are generally prohibited from (a) using advertising to solicit investments (including facebook, linkedin and twitter) and (b) raising capital from non-accredited investors unless specific disclosures are provided.

The SEC takes this seriously and intervened in one transaction where a group was trying to raise money to buy a beer company using a crowdfunding model. A copy of the cease and desist order is available here. This group created the buyabeercompany.com website and attempted to solicit pledges to invest in the future.

WHAT DOES THIS MEAN IF YOU AM LOOKING TO RAISE CAPITAL USING CROWDFUNDING? Sit tight and lets see what the final law looks like.

Where can I find a copy of the proposed notice? A copy of the proposed notice is available here.

What are the consequences for not posting the notice? There are a variety of consequences including (a) the extension of the 6 month statute of limitations for a charge of unfair labor practices and (b) the failure may be considered evidence of unlawful motive in an unfair labor case.

Where can businesses find additional information? The NLRB has a FAQ site that answer common questions and has links the laws.

What is the impact of the SEC’s new rule if an investor seeks to qualify as an accredited investor solely based upon net worth?

If an investor seeks to qualify as an accredited investor solely on net worth, the new formula for determining net worth requires that:

• the primary residence is not included as an asset
• debt secured by the primary residence is not generally included as a liability
• any increased debt secured by refinancing debt secured the primary residence within 60 days before the accredited investor determination will be counted as a liability reducing net worth
• any debt secured by the primary residence that exceeds the fair market value of the primary residence will be counted as a liability reducing net worth
• debt secured in connection with the acquisition of the primary residence will not be counted as a liability

When does the new rule go into effect?

The new rule will take effect 60 days after publication in the federal register which is viewable here and will occur on Friday, December 29, 2011.

How was the personal residence treated for calculation of net worth before Release No. 33-9287?

Before Release No. 33-9287, the value of an investors primary residence would be included in the net worth calculation with certain qualifications.

Are there any transition rules if an investor already invested an entity?

The new rule provides that the former accredited investor test will apply if (i) the rights were held on July 20, 2010, (ii) the person qualified as an accredited investor at the time the rights were acquired, or (iii) the person held securities of the issuer, excluding new rights, on July 20, 2010. The general impact of the transition rule will be to permit investors to exercise rights they were entitled to old definition.

It is important to review the facts and circumstances of an an investor’s status under the old rule and the new release for all future offerings and the exercise of any rights of investors.

Image used under the creative commons license from Images_of_money.

I have recently witnessed lenders taking a confession of judgment on a promissory note which did not contain the statutory warning require by Ohio Revised Code 2323.13(D) which states:

“(D) A warrant of attorney to confess judgment contained in any promissory note…is invalid and the courts are without authority to render a judgment based upon such a warrant unless there appears on the instrument evidencing the indebtedness, directly above or below the space or spaces provided for the signature of the makers… in such type size or distinctive marking that it appears more clearly and conspicuously than anything else on the document:

“Warning — By signing this paper you give up your right to notice and court trial. If you do not pay on time a court judgment may be taken against you without your prior knowledge and the powers of a court can be used to collect from you regardless of any claims you may have against the creditor whether for returned goods, faulty goods, failure on his part to comply with the agreement, or any other cause.” [Emphasis Added]

The first thing any maker or borrower under a promissory note should due upon receiving notice that a judgment has been taken is to review the actual promissory note. There may be a defect in the language of a promissory that enables a maker or borrower to argue for a motion for relief from judgment under Civ. Rule 60(B).

The most common defects involve the failure to include the statutory warning in Ohio Revised Code 2323.13(D):

• in the exact and verbatim manner set forth in Ohio Revised Code 2323.13(D)
• “more clearly and conspicuously than anything else on the document”
• directly above or below the signature of each maker (such as splitting the warning on 2 pages)

My next post will disclose some of the applicable case law on this point.

The US Occupational Safety & Health Administration (OSHA) issued a news release last week encouraging retailers to take precautions to prevent worker injuries.  You can review the radio station transcript or statements here. OSHA also publishes a fact sheet outlining crowd management safety guidelines which, although expressly stating it does not impose any new compliance requirements, outlines good practices for retailers. OSHA’s guidelines breaks its guidelines into 4 main elements:

• Planning
• Pre-Event Setup
• During the Sales Event
• Emergency Situation

Many of OSHA’s guidelines are common sense and a few that jump out at me are:

• hiring trained security or crowd management personnel and have a crowd management plan in place
• set up barricades away from the front entrance with sufficient breaks and turns to avoid pushing
• make sure crowd management has communications devices to reach store employees and emergency responders
• using wristbands, tickets or lottery system in the lines
• allowing customers into the store in small batches and limiting the number of customers  in the store at one time
• communicate with the customers and advise them of the retailer’s entrance process and policies
• make sure security and crowd management personnel are located at the sides of the entering and exiting public and not directly in their path of travel
• provide a safe entrance for people with disabilities.

I recently purchase the new IPhone 4s form the Apple store in Legacy Village in Cleveland, Ohio the day it was released around 10:30 AM. There was a small line at the time. After reading OSHA’s guidelines and reflecting on that purchase, Apple appears to have designed their crowd management policy for the release of the new IPhone taking into account OSHA’s guidelines. Apple set up a barricaded area slightly away from the store entrance, had turns, had exterior security, issued tickets and limited customers in the store at one time. I expect they also implemented many of the behind the scenes items outlined in OSHA’s guidelines.

Hopefully retailers will review the guidelines and implement safe crowd management policies this holiday season.  Landlord may also want to request and review retailer’s crowd management plan before they authorize a retailer to set up exterior barricades for Black Friday.