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Adam L. Deming

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Adam Deming is an associate in the Litigation Department and a member of the Appellate and International Arbitration Groups. His practice focuses on complex commercial disputes, including corporate governance, transactions, fiduciary duties, securities and insolvency. Adam has successfully argued before state and federal appellate courts and has drafted dozens of briefs for appeals to the United States Supreme Court, various Circuit Courts of Appeals and several state appellate courts, including the New York Court of Appeals and Delaware Supreme Court. He has also played a key role in leading trial teams to winning outcomes before federal, state and arbitral tribunals.

A member of the Appellate group, Adam has represented a wide range of clients in high-stakes appeals involving commercial transactions, labor relations, life sciences, insurance, patent and constitutional law. Adam leverages his appellate expertise at the trial level to advise clients on litigation strategy, preserve appellate issues, and draft key filings spanning the litigation lifecycle. He has co-authored chapters of Principles of Appellate Litigation: A Guide to Modern Practice (PLI Press), a leading annual treatise on appellate law.

Adam also draws on his extensive experience with complex legal issues and appeals to effectively represent clients in an array of commercial disputes. He regularly represents corporations and board members in complex cases and arbitrations arising from business transactions, including matters before the Delaware Chancery Court and New York Supreme Court Commercial Division. Adam has also handled cross-border transaction cases to completion under the rules of both the American Arbitration Association and the International Chamber of Commerce. Representative matters include:

  • Pursuit of claims on behalf of an international chemical company arising out of its acquisition of a subsidiary
  • Defense of a board member and company private-equity investor against claims of breach of fiduciary duty in connection with drag-along sale of a fantasy sports company
  • Pursuit of claims on behalf of a healthcare company founder and stockholders arising from post-merger breaches of earnout provisions by acquiring company
  • Defense of a real estate company, including by the pursuit of an anti-suit injunction, against state claims for breach of corporate governance agreement by an investment entity

Adam actively maintains a pro bono practice. Recently, he represented a New York inmate in his appeal of the dismissal of his Eighth Amendment claims arising from an alleged series of abusive pat frisk searches. Arguing before the Second Circuit, Adam successfully secured a reversal of the district court’s decision.

Before joining Proskauer, Adam served as a law clerk to Judge Patty Shwartz of the Third Circuit Court of Appeals. Adam also spent a year as a litigation associate at another international law firm. Prior to his legal career, Adam spent three years as a Teach for America Corps Member in New Orleans, Louisiana, where he taught middle school English.

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In a wave of SEC rulemaking this past year, representing a “new world order” event akin to Dodd-Frank, the SEC has provided itself with a fresh set of tools to increase regulatory and enforcement scrutiny on private funds. Among other things, certain of the rules could result in fundamental changes to market practices and greater disclosure to LPs. While ongoing litigation will determine the fates of the Private Fund Adviser Rules, the Short Sale Disclosure Rule, and the Securities Lending Rule, and while other rules are awaiting final adoption, the SEC concerns underlying the rulemaking will continue regardless.   

To understand the litigation and regulatory risks that are coming in 2024 for private capital, it is helpful to look back briefly on recent events. Arguably, the single most important event over the last 18 months was the rapid increase in interest rates by the central banks in the United States, England, and Europe. From March 2022 to August 2023, the Federal Reserve increased interest rates at the fastest clip in more than 40 years, to break inflation that had reached the highest levels since the 1970s.

On November 4, 2022, compliance with amended Rule 206(4)-1 (the “Marketing Rule”) became mandatory for all investment advisers registered with the Securities and Exchange Commission (the “SEC”).[1] Seven months since the compliance date, SEC-registered investment advisers continue to discover and adapt to challenges in applying the Marketing Rule. Newly formed advisers also face significant obstacles to marketing with a predecessor-firm track record. It has also impacted advisers’ interaction with placement agents and solicitors. And finally, the SEC has begun assessing advisers’ adherence to the rule through routine compliance examinations. All parties involved continue to adapt to the new environment.

Recent enforcement actions highlight the increased regulatory scrutiny that private funds may face with respect to internal cybersecurity protocols and responses to cyber-crimes and cyber incidents under new and updated cybersecurity laws. 

As IPOs and other traditional paths to liquidity for private assets have become more challenging, GP-led secondary transactions have emerged as a powerful and popular tool across closed-end private funds, leading to explosive growth over the last five years. And while macro factors influence their prevalence year over year, these transactions remain broadly popular across the various stakeholders in these transactions, facilitating different goals for different parties: 

  • Existing Investors (LPs):  Near-term liquidity in a liquidity-constrained market, typically with an option to continue participation if desired
  • New Investors (Buyers):  Access to a mature portfolio with unrealized upside
  • Fund Adviser (GP):  Extended duration to capture future upside of well-performing assets, additional capital to support existing portfolio, and reset economics aligning with longer-term outlook

Go to any private equity event in the last 12 months, and “energy transition” will have been discussed, meaning the shift in energy production away from fossil‑based systems to low or zero carbon ones. As fund managers continue to raise funds focused on investments in this sector, we see no reason for this trend to change in 2023.

The ever-increasing web of ESG regulation is of course highly relevant for such funds and their investments, but the sector-relevant risks are much wider. There are four risks of which fund managers need to be aware.

It’s a pattern we often see in boom-and-bust cycles—disputes rising in the period after a wave crests. SPAC deal volume hit an unprecedented high in 2021, but then slowed down in 2022 alongside IPOs. However, the fallout from the SPAC wave will continue to unfold this year, generating increased regulatory attention and a growing number of disputes.

The SEC’s Enforcement Division is conducting a sweep investigation of large investment advisers regarding their employees’ use of “off-channel” communications.  The sweep, which has been widely reported in the press, focuses on text messages from personal phones, personal email, WhatsApp and other platforms not typically captured or monitored by advisers.  The sweep is causing considerable industry concern, following the SEC’s announcement of settlements against a number of large broker-dealers for use of off-channel communications, that resulted in $1.235 billion of cumulative penalties. 

Implications of SEC attempt to curb indemnification for private fund managers

The SEC spent 2022 making multiple and sweeping proposals to amend rules under the Advisers Act, many of which have the ability to significantly re-shape market standards for private funds.  Here, we focus on the SEC’s proposal to undo a common protection for private fund advisers – the ability to rely, as against the private fund or its investors, on exculpatory and indemnification provisions for a breach of fiduciary duty, willful misfeasance, recklessness, or simple negligence in providing services to the private fund.  This prohibition would relate not just to liability under the Advisers Act, but to all causes of action.

Amid rising interest rates, tightening credit markets, geopolitical concerns in Europe and Asia, stubborn inflation and continuing supply chain issues, there is a growing sense of economic uncertainty.  This uncertainty will no doubt increase the frequency of valuation disputes in the year ahead. We generally see valuation disputes spring from four primary sources:

  1. breach of representations and warranties in purchase agreements, which raise questions as to company value absent the breach;
  2. unfair prejudice to minority investors or limited partners;
  3. disagreements about price paid at exit, including earn out disputes; and
  4. increased regulatory focus on exams, which may assess valuation policies and require recurring asset valuations.

Valuation disputes tend to be centered on disagreements about accounting practices, dates of assessed value, and valuation methodology.