Gino DiCaro

Mixed results for Corporate Counsel bills

By Gino DiCaro, VP, Communications

Capitol Update, June 30, 2006 Share this on FacebookTweet thisEmail this to a friend

Two bad corporate counsel bills were stopped this week, while two others moved out of committee:  

  • AB 2122 (Johan Klehs) failed passage in the Senate Banking and Insurance, fortunately. It prohibits any California corporation or any of its subsidiaries from making a distribution to a shareholder if either has failed to make a payment under a defined benefit plan. The bill not only proposes to regulate that which is currently governed by federal law, but also places members of a Board of Directors who receive a distribution prohibited by this bill liable to the corporation for the dividend payment, plus interest, regardless of whether he or she had any knowledge of impropriety.   

  • SB 1354 (Joseph Dunn, D-Santa Ana), for much of the year, has sailed through the legislature.  It came to an abrupt stop, however, when it failed passage before the Assembly Banking and Finance Committee earlier this week. It seeks to require shareholder consent in order for corporations to engage in political activity with regard to financial contributions to candidates and/or issues. Objecting shareholders would be entitled to a refund based on a pro rata share of their stock value.

  • SB 1489 (Denise Ducheny, D-San Diego) proposes to unfairly require companies that are sued by the Attorney General (AG) to pay for all costs of investigations, expert witnesses and attorney's fees whenever the AG "prevails." Additionally, the bill applies retroactively to any pending lawsuits as far back as 2003 or 2004. By not defining the term "prevail" in the bill, the AG is granted tremendous settlement advantage as the term has been loosely defined in the courts to include settlements, any change in operation by a defendant or even a minuscule monetary award. SB 1489 was approved by the Assembly Judiciary Committee this week, with a minor amendment to allow a judge the option to require corporate reimbursal. The bill remains a threat as it still sets up tension between choosing worthy cases that would protect the public and choosing cases that only have the potential to augment the AG's budget.

  • SB 1737 (Liz Figueroa, D-Sunol) was approved by the Assembly Business and Professions Committee this week with minor amendments and will likely go straight to the full Assembly Floor for consideration in August.  The bill further regulates manufacturers' and retailers' rebates to consumers.  It allows for very weak proof of purchase standards, imposes mandated timelines for consumers to submit their rebate requests and short timelines for manufacturers to fulfill those requests, imposes on-site rebate form requirements and requires specific packaging elements.

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