The Clients’ Waiver of Their Rights Under Regulation BI of the Securities and Exchange Commission

TAMAR FRANKEL

BU Law emerita professor Tamar Frankel discusses the Securities and Exchange Commission (SEC)’s Regulation Best Interest (BI), which imposes on broker-dealers a commitment to act in the best interests of their clients. Specifically, Frankel addresses the SEC’s treatment of client waivers of the Regulation BI, which goes even further than general fiduciary law to prohibit any waiver of the broker-dealer’s conflicting interests.

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Walgreen Co. v. Johnson & Johnson

Docket: 19-1730

Opinion Date: February 21, 2020

Judge: Jordan

Areas of Law: Antitrust & Trade Regulation, Contracts

Walgreen sells Remicade, a drug used to treat autoimmune diseases that is marketed and manufactured by Janssen. Walgreen procures Remicade from the Wholesaler, which acquires Remicade pursuant to a Distribution Agreement with JOM, a Janssen affiliate. Only Wholesaler and JOM are identified as parties to the Distribution Agreement. New Jersey law governs the Distribution Agreement, which contains an Anti-Assignment Provision, stating that “neither party may assign, directly or indirectly, this agreement or any of its rights or obligations under this agreement … without the prior written consent of the other party.” In 2018, Wholesaler assigned to Walgreen “all of its rights, title and interest in and to” its claims against Janssen “under the antitrust laws of the United States or of any State arising out of or relating to [Wholesaler]’s purchase of Remicade[.]” Walgreen filed suit against Janssen, asserting various federal antitrust claims relating to Remicade, citing exclusive contracts and anticompetitive bundling agreements with health insurers that suppressed generic competition to Remicade, which allowed Janssen to sell Remicade at supra-competitive prices. If the Anti-Assignment Provision prevented the assignment, then, under Supreme Court precedent, Walgreen, an “indirect” Remicade purchaser, would lack antitrust standing to assert claims against Janssen. The district court granted Janssen summary judgment. The Third Circuit reversed. The antitrust claims are a product of federal statute and thus are extrinsic to, and not rights “under,” a commercial agreement.

United States v. Baxter

Docket: 18-3613

Opinion Date: February 21, 2020

Judge: Smith

Areas of Law: Constitutional Law, Criminal Law

Customs and Border Protection K-9 Officer Lopez was working at the airport in St. Thomas and took his certified canine, Bo, into a cargo plane to inspect incoming mail. Bo alerted to a package, indicating the presence of drugs. The package purportedly had been sent by Price, whose address was in South Carolina, and had been mailed to Meade in St. Thomas. Kouns removed it from the plane, opened the box and brought out a piece of clothing that smelled strongly of marijuana, although no drugs were found. When Kouns returned the item to the box, a magazine and round of ammunition fell to the floor. The officers discovered the unassembled parts of a gun. Days later, a postal inspector contacted Customs regarding another package, bearing the same names and addresses. Lopez and Kouns responded. Because of the addresses and the package's weight, Kouns suspected it might contain another gun. An x-ray revealed items an apparent gun and ammunition. Kouns opened the package and discovered a gun and ammunition. Homeland Security arranged a controlled delivery of the packages. Authorities apprehended Baxter as the sender of the packages; he was charged with two counts of illegal transport of a firearm, 18 U.S.C. 922(a)(5). The District Court of the Virgin Islands granted his motion to suppress. The Third Circuit vacated, holding that Customs permissibly conducted the searches pursuant to the border search exception to the Fourth Amendment.