Edward T. Kang Tag Archives — Page 2 of 2

Accountants Have No Duty of Care Toward Third-Party Investors, or Do They?

October 24, 2016 | Edward T. Kang

In 2001, Anderson was one of the “Big Five” public accounting firms. Founded by Arthur Anderson, whose motto was “think straight, talk straight.” The Anderson firm was one of the most respected accounting firms in the world. A year later, Anderson was found guilty of obstructing justice for destroying Enron’s financial documents. Anderson shut its doors in the United States that same year and surrendered its licenses to practice certified public accounting. A few years later, Anderson settled with various Enron investors who brought claims against Anderson for its role in the Enron fraud. Since the Enron/Anderson scandal, the law relating to an accountant’s duty to nonclients has changed.

Traditionally, an accountant owes no duty to a nonclient. For instance, an accountant who prepares a financial statement containing material misrepresentation would not be liable to a nonclient, such as a bank, who relied on the financial statement to its detriment. As seen in the Enron/Anderson case, however, the landscape of accountant liability is changing. If the accountant aided in the commission of the fraud, or where the accountant knew the third-party nonclient (e.g., a bank) would be relying on the statements, the accountant may be liable to the nonclient.

Aiding and Abetting a Fraud

The Defend Trade Secrets Act and Its Impact on Trade Secret Litigation

July 11, 2016 | Edward T. Kang

Businesses develop mechanisms and procedures to cut costs, increase efficiency and otherwise set themselves apart from their competition. Methods and inventions developed to achieve these goals are often considered to be trade secrets of the business, and many businesses remain vigilant to guard their assets against a possible threat—for example, a departing employee who takes the business’s trade secrets and other confidential information and uses it to compete against the former employer.

To this end, businesses have lobbied for uniform federal legislation both to support businesses’ rights to protect their trade secrets and to ensure that their proprietary information will be adequately protected, regardless of the jurisdiction in which the matter arose. In 1979, the Uniform Trade Secrets Act (UTSA) was proposed by the Uniform Law Commission in an effort to provide uniformity of trade secret law across the nation and streamline trade secret litigation. Because states were free to adopt the entire act, adopt some of it, or reject it outright, many states adopted only portions of the UTSA, while customizing other sections of the act. The disjointed acceptance of the UTSA and, consequently, a divergence in courts’ interpretation of the UTSA essentially negated the “uniformity” that the UTSA sought to achieve in the first place. When facing a novel issue under the UTSA, for instance, many courts would look to their states’ “precedents” before the adoption on the UTSA rather than looking at sister courts’ treatment of the issue under their versions of the UTSA.

In a renewed effort to harmonize trade secret law, Congress passed the Defend Trade Secrets Act of 2016 (DTSA), which was enacted on May 11. Generally, the DTSA: creates a federal cause of action for misappropriation of trade secrets, thereby permitting plaintiffs to assert their claims in either state or federal courts; grants the right to seek an ex parte seizure of an alleged misappropriator’s property in an effort to contain the misappropriated trade secrets; and requires that employers provide notice of the whistleblower immunity contained within the DTSA where trade secrets or other confidential information is available to employees, consultants, and independent contractors.

Practical Guide to Restrictive Covenants in PA and NJ

May 25, 2016 | Edward T. Kang

Businesses invest time and money to develop their business procedures, relationships and information, such as marketing strategies, customer information, pricing strategies, and future business development initiatives. These models and information provide businesses a competitive edge, and employers have a strong incentive to guard such assets and protect their businesses by all means reasonably necessary. Employers can typically accomplish this through using a combination of nondisclosure agreements, nonsolicitation agreements, and other restrictive covenants.