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As part of a recent move to revise its body of business law, the Council of Washington D.C. has adopted an amended Title 29 of the District of Columbia Code on Business Organizations. Chapter 4 applies specifically to rules pertaining to Nonprofit Organizations. Also known as the Nonprofit Corporation Act of 2010 (the “Act”), as of January 2012, chapter 4 has applied to all non-profit corporations that existed after 1962. Nonprofit corporations that existed prior to 1962 will have until January 2014 to give notice waiving application of the Act to their operations. If pre-1962 corporations fail to file such notice by January 2014, the Act will apply to their operations.

A nonprofit organization’s Articles of Incorporation or Bylaws may replace most of the provisions of the Act. The Articles of Incorporation or bylaws serve as a set of specific laws that govern the operations and structure of each individual corporation. The revised Act may still provide new benefits for such companies. For instance, under section 29-102.11 of the Act, nonprofit corporations must now file their biennial reports by April 1st, not January 15th. In addition, according to section §29-401.03, nonprofit organizations must give notice in the form of a record. Under the Act, a “record” includes e-mails, taxes, and telegrams. However, a nonprofit corporation may include a provision in its Articles of Incorporation of bylaws, allowing for oral notice. The Act also allows nonprofit organizations to provide for electronic meetings– annual, regular, or special–under section 29-405.01-02. In the case of elections, section 29-405.28 now allows nonprofit corporations to appoint election inspectors to manage elections. When forming committees, the Act allows nonprofit organizations to only have a single member as the director of the committee. Furthermore, whereas nonprofit corporations’ directors held fiduciary duties towards the organization, including, but not necessarily limited to, duty of loyalty and duty of care under case law, now section 29-406.30-31 of the Act holds such duties. Finally, under section 29-406.70 of the Act, a transaction that bears the risk of a conflict of interest is not automatically voidable if the corporation has taken the steps to approve the transaction with shareholders. Additionally, a conflict of interest transaction may not necessarily be voidable if the corporation can demonstrate that the transaction was fair to the organization at the time that it was approved by the board of directors.

At the Law Offices of Salar Atrizadeh, we guide our clients in legal matters by using extensive knowledge and skills to create innovative solutions. Please contact us today to set up a confidential consultation.

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Employers use non-compete agreements often to protect trade secrets and keep valuable employees from moving to competing firms. Most employers who conduct business involving highly valuable business secrets require employees to sign non-compete agreements before commencing employment. These contracts prohibit employees from releasing trade secrets to competing companies. Additionally, non-compete agreements prevent employees from working for a direct competitor within a period of time after leaving the company.

In light of the emphasis that the legal system places on an individual’s right to earn a living, courts require a high level of reasonableness to uphold non-compete agreements. Courts generally look at the length of time, geographic area, and types of business that these contracts cover to determine whether they place an undue hardship on an employee’s ability to seek employment. In states that allow for non-compete agreements, courts require reasonable scope and duration in order to uphold such contracts. Furthermore, non-compete agreements may be valid regardless of whether an employee leaves of his own choosing or is terminated.

California’s policy regarding non-compete agreements emphasizes a strong public interest in open competition. The California Business and Professions Code § 16600 dictates that any contract that restricts business is “void” unless the agreement falls within the exception outlined in Business and Professions Code Section 16601. The exception looks to whether competition would dispose of a substantial ownership interest or goodwill of the company. However, California employers maintain the option of using non-solicitation agreements and non-disclosure agreements to protect trade secrets and employees from competitors. Non-solicitation agreements prevent employees from seeking out the company’s clients after leaving, unless the employee developed a relationship with the client before working for the company. Nondisclosure agreements are contracts that hold the parties responsible for protecting confidential information utilized in the course of employment or during a business transaction.

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The proliferation of cloud computing has given rise to increased privacy concerns. These concerns are especially grounded in Google’s new terms of service that allow the company to gather user information and data and release it to government entities upon request, without obtaining user consent. According to these new terms, as of March 1, 2012, Google has been consolidating data on users who access Google and creating a single profile that contains all of this information. Google’s new terms have caused concern with the Electronic Privacy Information Center (“EPIC”), which argues that these terms conflict with an FTC Consent Order that outlined privacy standards for all Google products and services. The order required Google to obtain users’ consent before gathering and sharing personal user information with third parties.

In response to Google’s new terms, EPIC petitioned the Federal Trade Commission (“FTC”) to compel Google to abide by the terms of the 2011 consent order. EPIC brought suit in the United States District Court of the District of Columbia against the FTC, urging the organization to enforce the consent order, and stop Google’s new policy of gathering and storing user information in individual profiles. The court heard EPIC v. FTC in 2012 and ruled that the court lacked the jurisdiction over the FTC to compel it to act according to EPIC’s demands. Nonetheless, the court noted that it had “serious concerns” regarding Google’s revised terms of service.

The National Association of Attorneys General sent a letter to Google on behalf of 36 states, expressing concern with Google’s intention to gather information about users from all products that utilize Google services, such as cell phones, computers, and tablets. This is especially concerning for Android smartphones, which rely heavily on Google systems and products. Users with electronic devices use various Google products, such as Gmail, YouTube, and the Google search engine, in different ways. However, according to Google’s new terms, user profiles would consolidate usage from all such products into a single profile for each user. The Attorneys General also voiced a specific complaint towards users’ inability to opt out of these new terms. According to the letter, the lack of choice poses a severe threat to individual privacy.

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The Electronic Communications Privacy Act of 1986 (“ECPA”) prohibits disclosure of stored communications without a court order. This includes instant messages, emails, and communications on Facebook. The issues that can arise from such a standard came to light in 2005, when Loren Williams died in a motorcycle accident in Arizona, and his mother attempted to access his Facebook account in the hopes of feeling closer to her son. However, according to the ECPA, Loren’s mother did not have the authority to access her son’s Facebook account. Loren’s mother eventually sued Facebook in 2007 and a court granted an order allowing her to access his Facebook account. Facebook has revised its policy, allowing relatives to report a death online, at which time, Facebook allows restricted access to an account for friends and relatives.

However, Facebook was merely abiding by the terms and conditions that Loren had agreed to when he signed up for his Facebook account. Under these terms, the “assets” that fell under the license agreement become subject to licensing rules. Accordingly, a license expires when the license owner dies. The rights to that license and those assets do not automatically transfer to the next of kin or to the decedent’s estate upon death. Many states throughout America are in the midst of considering legislation that would allow access to online accounts after death. However, any law in this field is still in its early stages.

In light of these legal circumstances, family members file lawsuits against email servers to gain access to emails after the owner of the account dies. In some cases, the courts have allowed the servers to release the emails as raw data to family members, but courts rarely allow access to accounts. To avoid costly litigation in order to gain access to such accounts, individuals could begin incorporating social media account access and the respective passwords in their wills. Alternatively, individuals could create accounts under a trust to ensure that other members of the trust can access the account in the event that one member passes away. This issue is especially impactful in light of all the other tasks that people are able to conduct online. For example, many people manage their banking online by and through the bank’s website.

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The Americans with Disabilities Act (“ADA”) requires public businesses to provide equal access to their venues for persons with disabilities. Under Subchapter III of the ADA, such public establishments include, among others, restaurants, movie theaters, stores, and places of education. Now, the increases in businesses that operate exclusively online, without a physical location, call the reach of the ADA into dispute.

In June 2012, the United States District Court for the District of Massachusetts decided this issue of first impression in National Association of the Deaf v. Netflix, Inc. The court held that the ADA applies to businesses that operate exclusively on the Internet. The National Association of the Deaf sued Netflix, Inc., arguing that by failing to provide closed captioning for all of its content, Netflix was in violation of the ADA. Netflix, Inc. argued that it was not required to provide disability access to its site because it was not a “place of public accommodation” within the meaning of the ADA. The court based its opinion on the public policy underlying the ADA, which aims to provide equal access to public amenities for persons with disabilities. With the exponential rise in online businesses, the court found that it was within this public policy to allow persons with disabilities to access these sites alongside other members of society. One month later, the United States District Court for the Northern District of California reached the opposite conclusion in Cullen v. Netflix, Inc. In this case, the court looked to its prior decisions and held that the ADA’s reach is limited to public establishments with “physical structures.” These two opposite holdings show that the nature and reach of the ADA, as it pertains to online businesses, has not been solidified yet.

The Department of Justice has reviewed the ADA and provided regulations and guidelines for accessible website designs. For example, business can make their sites accessible to persons with disabilities by adopting a simple page layout throughout the site. This makes it especially easier for visitors with visual impairments to locate information quickly and easily. Websites may also provide transcriptions for any video or audio on the site for visitors with hearing impairments. Finally, websites may improve accessibility for persons with disabilities by inviting such visitors to notify website managers of ways to improve site accessibility. Nonetheless, in the absence of a binding uniform standard for website access, the reach of the ADA towards online businesses is still very much in the hands of courts in their individual jurisdictions.

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The possibility of identity theft is a growing concern. However, banks, credit card companies, and various other institutions that house private information regularly take steps to protect customers’ identities. Nonetheless, a different type of identity theft continues to thrive. Online impersonation is a quick and easy form of identity theft that takes place over the Internet. It is an easy type of identity theft given the breadth and convenience of social media and expanding networking sites. However, in light of the Sandy Hook Elementary School incident, state and federal authorities are considering the possibility of bringing criminal charges for online impersonation.

State legislatures called for laws against online impersonation following the case of Megan Meier, a 13-year-old girl who killed herself after a woman impersonated a boy and engaged in cyberbullying. After the Sandy Hook shooting, people began posting incorrect information about the shooting and the suspect. Others began posing as the shooter and staging crime scenes similar to the shooting. Connecticut State Police Lieutenant J. Paul Vance called attention to this matter in a public press conference. He noted that these posts, in addition to being highly inappropriate, were also threatening and criminal in nature.

A spokesman for Commissioner Reuben Bradford stated that, harassing anyone who was a victim of the shooting would be criminally prosecuted. He noted that harassment would not only include in person contact, but also harassment through via the Internet and social media sites. Charges could include criminal impersonation and criminal misrepresentation. California and several other states have established online impersonation as a criminal offense. Critics argue that criminal regulations that prohibit online impersonation may arm interest groups with the power to suppress speech. For example, Electronic Frontier Foundation argues that such laws could silence groups like The Yes Men, which utilizes online impersonation as a form of commentary on the government and large corporations.

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Starting an online business requires acquiring many of the same permits and licenses that are generally required for a traditional business. Generally a business, including an “e-business” or a company that operates on the web, requires a business license before it begins to operate. When a city grants a business license, it permits the business to operate within that city. A business license also registers the business for tax purposes.

Certain cities and counties may also require additional permits to operate a business in that location. Different types of businesses also have different license and permit requirements. The California Secretary of State can provide all the requirements for starting a business. Also, certain trades require professional or occupational licenses. For example, contractors, doctors, accountants, real estate agents, and lawyers must all acquire the required license before they may begin to practice. Each occupation has specific procedures and requirements for obtaining the required licenses. The respective licensing agencies provide the standards and procedures for these requirements. Licenses may also be required based on the products the business sells. For example, selling alcohol, firearms, or gasoline requires specific licenses.

Businesses that operate on the Internet may also be required to collect sales tax if the business maintains a physical presence in the state. Without a physical presence, such as an actual store or warehouse, an e-business is not required to charge sales tax. Some states do not have a sales tax or tax exemptions for specific items such as food or clothing. Before a business can sell taxable goods on the Internet, the business must obtain a certificate allowing the business to collect sales tax. In order to properly charge sales taxes, businesses must also be familiar with the appropriate tax rates. Online businesses may use programs that calculate sales tax for each transaction based on the items and applicable rates. Examples of these licensed shopping carts, or e-commerce platforms — include Magento, LemonStand, and IBM WebSphere Commerce. In an effort to improve tax-collecting efforts for businesses, some states have passed the Streamlined Sales and Use Tax Agreement. This Agreement aims to pass federal regulations that will make tax collection across the country more uniform in order to simplify the process.

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Bullying has plagued people of all ages for many generations. Now, with the expansion of the Internet, bullies are able to threaten and harass people at an even greater level through cyberbullying. Stopbullying.gov, a government supported website aimed at spreading awareness, defines cyberbullying as any bullying that involves electronic technology such as computers and cell phones. Instances of cyberbullying aimed towards adults are generally referred to as cyber-harassment or cyber-stalking, whereas cyberbullying generally refers to harassment directed towards children.

Since cyberbullying can largely remain anonymous, it can be very difficult to trace the harassment back to a specific user. The effects of cyberbullying also last longer because the inappropriate posts or messages may be difficult to delete and therefore, have a permanent presence on the Internet. Cyberbullying is also not reserved to the Internet, since cyber-bullies often also target their victims in person. However, due to the expansive nature of the Internet, victims face cyberbullying at all times of the day.

Examples of this harassment includes sending vulgar or threatening messages directly to another person, posting inappropriate information about another person online, pretending to be another person online with the intent of ruining a reputation, posting inappropriate pictures of another person online, harassing another person with a multitude of text messages, or hacking into another person’s online account. Cyberbullying can take place through email, in online chatrooms, on webpages, or through text messages. Advanced features on social networking sites have also led to increased avenues for cyberbullying. For example, the ability to tag other people in a picture on Facebook has led to instances of cyber-bullies posting inappropriate pictures of other people and tagging them in these pictures.

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Cloud computing offers a revolutionary new way to conduct business over the Internet. This service is a form of cyber-outsourcing where virtual servers provide certain services or applications for consumers online. Cloud computing vendors include, IBM SmartCloud, Cisco Cloud Computing, Amazon Elastic Compute Cloud (aka Amazon EC2), and various smaller vendors. These providers offer a range of services including storage services and spam filtering.

There are various forms of cloud computing available over the Internet. Managed Service Providers (“MSPs”) are the oldest form of cloud computing. A “managed service” is an application such as virus scanning for email or anti-spam services. The most common form of cloud computing is through Software as a Service (“SaaS”), which delivers an application to multiple customers through a browser using a multi-tenant architecture. Customers benefit because they do not have to invest in servers or purchase software licenses. Providers benefit because they are able to reduce costs because they only need maintain one application for their multiple customers. Salesforce.com is a well-known example of SaaS cloud computing, but Google Cloud Storage is a fast growing option as well.

Similar to SaaS computing, some providers offer Application Programming Interfaces (“APIs”), which allow developers to offer certain functions over the Internet without having to offer entire applications. These functionalities range from specific business services to wider-ranging APIs, such as Google Maps. Another version of SaaS computing allows users to develop their own application and offer the application through a provider’s infrastructure over the Internet. The developers are limited by the provider’s capabilities, but the developers benefit from the established predictability. Google App Engine is an example of such cloud computing.

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Former CIA Director David Petraeus from his position after the FBI looked through Petraeus’ private Gmail account and discovered that he was having an extramarital affair. These events have brought to light the fragile state of individual privacy on the Internet, particularly in relation to individual email accounts.

According to the Electronic Communications Privacy Act of 1986 (“ECPA”), which is current and applicable cyber law, the FBI has the authority to look through any email account simply by accessing the account through providers such as Yahoo or Gmail. Under the ECPA, law enforcement agencies do not need a search warrant to look through such accounts if the message is more than 180 days old.

In addition, the Foreign Intelligence Surveillance Act of 1978 (“FISA”), under Title 50, sections 1801 et seq. of the United States Code, allows the government to monitor communications between foreign parties, without a search warrant. A 2008 amendment to FISA further allows the government to monitor communications between American parties if the government does not know of the parties’ exact locations or identities. A group of attorneys raised a constitutional challenge to this amendment, and the matter is now before the United States Supreme Court. The justices have focused on whether the amendment offers the government an inappropriate range of power, or whether the amendment simply expands the government’s resources to protect America.

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