Legal Update

1
Legal Update

• Claire H. Topp, Legal Counsel
• Michael Lindsay, Legal Counsel
• 30 March 2006 Piscataway, NJ

2
Initial Responsibilities

• Understand fiduciary duties, as required by New
  York Not-for-Profit Code
• Duty of Care
• Duty of Loyalty
• Duty of Obedience

3
Duty of Care

• Be informed and act as a reasonable person would
  act, in making decisions which are in the best
  interests of IEEE (even if such act would be
  contrary to the interests of your employer).
• Understand tax exempt status
• Educational and scientific act in best
  interest of public
• NOT - Trade association act in best
  interest of industry

4
Duty of Care

• Act carefully in fulfilling the task of actively
  monitoring and directing the activities of the
  IEEE-SA within the scope of the Standards Board
  oversight.

5
Duty of Loyalty

• Exercise powers in good faith and in the best
  interests of IEEE, rather than in own interests,
  interests of employer or interests of other third
  party.
• Particularly important areas
• Conflicts of interest/usurping opportunities for
  IEEE
• Confidentiality

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Duty of Obedience

• Duty to obey the law
• Review and be familiar with IEEE governing
  documents
• IEEE Constitution and Bylaws
• IEEE Policies, including Ethics Policy
• IEEE-SA Standard Board Member Position
  Description
• IEEE-SA Operations Manual

7
The Law and Anticompetitive Conduct in Standards
Activities
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Standards Antitrust Liability

• SDO Liability - Hydrolevel
• Participant Liability Allied Tube

9
ASME vs. Hydrolevel

• Brooklyn Union Gas Company decided to switch
  suppliers of probes from McDonnell Miller
  (MM) to Hydrolevel
• A MM Vice President was the vice chairman of the
  subcommittee which drafted, revised and
  interpreted Section IV of the ASME Boiler and
  Pressure Vessel Code
• MM officials, including the vice chairman of the
  subcommittee, met with the chairman of the
  subcommittee and decided to send an inquiry to
  ASME asking whether one aspect of Hydrolevels
  product would satisfy the requirements of Section
  IV

10
ASME vs. Hydrolevel

• Under ASMEs procedures at the time, the
  subcommittee chairman could draft a response to a
  public inquiry without referring it to the entire
  subcommittee if he treated it as an unofficial
  communication
• The chairman, who helped to author the inquiry,
  prepared the response that indicated that
  Hydrolevels product would not conform to the
  standard
• The interpretation was printed on ASME stationary
  and signed by an ASME employee without necessary
  diligence
• MM used this response to discourage customers
  from buying Hydrolevels product

11
Hydrolevel SDO Liability

• U.S. Supreme Court held SDO is responsible for
  preventing antitrust violations through the
  misuse of its reputation by its agents
• including members who are merely unpaid
  volunteers, even though the SDOs directors and
  staff neither authorized nor ratified the acts
  and even though the acts did not benefit the SDO
• settled ASME had to pay Hydrolevel 4.75 million

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Hydrolevel SDO Liability

• Majority decision pointed out that SDOs are "rife
  with opportunities" to violate the antitrust
  laws.
• Principal concern was that ASME had failed to
  implement any meaningful safeguards that would
  prevent its reputation from being used to hinder
  competition in the marketplace.

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Hydrolevel SDO Liability

• Only ASME can take systematic steps to make
  improper conduct on the part of its agents
  unlikely, and the possibility of civil liability
  will inevitably be a powerful incentive for ASME
  to take those steps. Thus, a rule which imposes
  liability on the standard-setting organization
  which is best situated to prevent antitrust
  violations through the abuse of its reputation-is
  most faithful to the congressional intent that
  the private right of action deter antitrust
  violations

14
Hydrolevel SDO Liability

• The problem in Hydrolevel, of course, was that
  two renegades, operating within the rules of the
  system, were able to work a significant
  anti-competitive effect. But the "renegade"
  problem is capable of solution-the solution lies
  in the promulgation of procedures that are
  designed to limit effectively the abilities of
  one bent on wrongdoing from being in a position
  to realize his objectives.
• William H. Rockwell, Legal Counsel,
• American National Standards Institute (1983)

15
Allied Tube Participant Liability

• Indian Head initiated a proposal to include
  polyvinyl chloride conduit as an approved type of
  electrical conduit in the 1981 edition of the
  National Electrical Code
• After this was approved by one of the NFPA
  standards panels, the proposal was scheduled for
  consideration at an annual meeting where it could
  be adopted or rejected by a simple majority of
  the NFPA members present.
• Allied Tube, concerned that this new product
  might pose a competitive threat to steel conduit,
  met and planned a strategy with other steel
  conduit manufacturers and others.

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Allied Tube Participant Liability

• They collectively agreed to exclude this new
  product from the Code by packing the annual
  meeting with new NFPA members whose only
  function would be to vote against the polyvinyl
  chloride proposal
• Lined up some 230 persons to join NFP. The
  steel group voters were instructed where to sit
  and how and when to vote by group leaders who
  used walkie-talkies and hand signals to
  facilitate communication.

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Allied Tube Participant Liability

• Few of the steel group voters had any of the
  technical documentation necessary to follow the
  meeting.
• None of them spoke at the meeting to give their
  reasons for opposing the proposal to approve
  polyvinyl chloride conduit.

18
Allied Tube Participant Liability

• Members of SDOs often have economic incentives
  to restrain competition
• The product standards set by such associations
  have a serious potential for anticompetitive harm

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U.S. Justice Department Robotic Welding

• We look to see whether the process of
  standard-setting has been abused to seek an
  unfair competitive advantage and whether the
  proposed standard is the product of any
  anticompetitive conduct on the part of the
  organization or its members.

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QUESTIONS