Thursday, September 3, 2015

Wal-Mart and the Social License to Operate

Has Wal-Mart reformed? Last week I blogged about whether conscious consumers or class actions can really change corporate behavior, especially in the areas of corporate social responsibility or human rights. I ended that post by asking whether Wal-Mart, the nation’s largest gun dealer, had bowed down to pressure from activist groups when it announced that it would stop selling assault rifles despite the fact that gun sales are rising (not falling as Wal-Mart claims). Fellow blogger Ann Lipton did a great post about the company’s victory over shareholder Trinity over a proposal related to the sale of dangerous products (guns with high capacity magazines). There doesn’t appear to be anything in the 2015 proxy that would necessitate even the consideration of a change that Wal-Mart fought through the Third Circuit to avoid.

So why the change? Is it due to the growing public weariness over mass shootings? Did they feel the sting after Senator Chris Murphy praised them for ceasing the sale of Confederate flags but called them out on their gun sales? Even the demands of a Senator won’t overcome the apparent lack of political will to enact more strict gun control, so fear of legislation is not a likely factor either. Selling guns doesn't even conflict with the very specific initiatives in their comprehensive GRI-referenced global responsibility report.

Maybe the CEO just wants to do what he believes is the right thing. After all, he announced to great fanfare in February that the retailer would be raising minimum wages for associates. But just this week the chain announced that it would be cutting back on worker hours in many stores. Was the pay raise a “cruel PR stunt” as some have complained or it good business sense for a company that has failed to live up to investor expectations and needs to retain good talent and reduce turnover?

A few weeks ago when I did a crash course in US corporate law and governance in Panama, I had a lengthy debate with the head of CSR for a Latin American company. I (cynically) told her that in my ideal(ist) world, companies should adopt a stakeholder view and look beyond profit maximization. However, I believed that most large companies in fact implemented CSR programs to enhance reputation, avoid onerous legislation, and mitigate enterprise risks. The company that builds the school or the drinking well in a remote area of a third-world country does good for the community but it also has workers who can send their children to school, educates the next generation of employees, and makes sure that the community has potable water so that workers don't get sick. Its CSR builds good will in the community that can be worth more than gold. The smart company makes sure that it has a social license to operate as well as legal license.

So back to Wal-Mart. Does the retailer need a social license to boost sagging sales or does it just need different merchandise?  In other words is the retailer trying to get more customers by stopping the sale of assault rifles? Was that announcement timed to blunt the effect of the announcement about cutting back hours? Or is Doug McMillon simply doing what he believes makes sense for the shareholders and the stakeholders? The cynic in me says that there’s a business reason other than low sales for the change in position on guns and that there was always a business reason for the rise in wages.

September 3, 2015 in Ann Lipton, Commercial Law, Compliance, Corporate Governance, Corporations, CSR, Current Affairs, Human Rights, Legislation, Marcia Narine, Shareholders | Permalink | Comments (1)

Wednesday, September 2, 2015

Calling All M&A Instructors: Request for Practical Teaching Tools

As many readers already know, I teach Corporate Finance in the fall semester as a three-credit-hour planning and drafting seminar.  The course is designed to teach students various contexts in which valuations are used in the legal practice of corporate finance, the key features of simple financial instruments, and legal issues common to basic corporate finance transactions (including M&A).  In the process of teaching this substance, I introduce the students to various practice tips and tools.

As part of teaching M&A in this course and in my Advanced Business Associations course, I briefly cover the anatomy of an M&A transaction and the structure of a typical M&A agreement.  For outside reading on these topics, I am always looking for great practical summaries.  For example, Summary of Acquisition Agreements, 51 U. Miami L. Rev. 779 (1997), written by my former Skadden colleagues Lou Kling and Eileen Nugent (together with then law student, Michael Goldman)  has been a standard-bearer for me.  In recent years, practice summaries available through Bloomberg, LexisNexis, and Westlaw (Practical Law Company) have been great supplements to the Miami Law Review article.  In our transaction simulation course, which is more advanced, I often assign part of Anatomy of a Merger, written many moons ago by another former Skadden colleague, Jim Freund.  Just this past week, I came across a new, short blog post on the anatomy of a stock purchase agreement on The M&A Lawyer Blog.  Although I haven't yet given the post a review for teaching purposes, it is a nice summary in many respects and makes some points not made in other similar resources.

I will be revisiting my approach to the M&A part of my Corporate Finance course in the coming weeks.  I am curious about how others teach M&A in a context like this--where the topic must be covered in about three-to-five class hours and include practice points, as well as a review of doctrine, theory, and policy.  I am always interested in new materials and approaches that may reach more students better.  I invite responses in the comments that may be useful to me and others.

September 2, 2015 in Business Associations, Corporate Finance, Corporations, Joan Heminway, Lawyering, M&A | Permalink | Comments (6)

Tuesday, September 1, 2015

Ten Promises For New (and Old) Law Professors to Consider

A couple weeks ago, I wrote Ten Promises For New Law Students to Consider, which discussed the promises I made to myself when I went to law school.  It seems to me appropriate that I should follow up with something applies to me now.

This list for law professors (or at least, this law professor) includes some of the promises I made myself when I left practice, and some that have evolved over the almost decade I have been teaching.  It's hard to believe this is my tenth year as a full-time teacher. 

To that end, here are my suggestions for faculty members, based on my experience. I don't always keep these promises, but (as I did with the law school promises) I try.  This list is even less exhaustive than my last effort, and I welcome additions to the list in comments. I am not going to lie, this was a harder list to make, and it's a challenge to fulfill them all (especially #6). 

I promise: 

 

(1) To be intentional.  That is, I will choose books, assign readings and exercises, and draft paper assignments and exams with a purpose.  They may not always be the best choice, but there will be a reason (supported by good intent) they were chosen. 

 

(2) To remember, whether it's related to demeanor, effort, or analysis, that I cannot be the benchmark for all my students.  They are not me, and I am not them.  We all have a story, and it is (in some way) unique. 

 

(3) To remember that, while kindness, sympathy, and empathy are essential skills to being a good teacher, colleague, and human being, they are not inconsistent with high expectations.

 

(4) To keep connected to practice and to people with non-academic jobs so that I can keep current and  grounded in the practical realities of life as an attorney and member of a broader community. 

 

(5)  To take pride (and risks) in my work in an effort to be better at what I do and to evolve in all aspects of my work -- teaching, research, and service.  (Old dogs can learn new tricks.)

 

(6) To recognize boundaries and to be kind and patient with my family because who I am at home impacts who I am at work (and vice versa).

 

(7) To do my best to get enough sleep and enough exercise. 

 

(8) To find the fun in my work when I can, and not forget that one of the best parts of being an academic is writing about things I choose (not that my clients choose) and taking positions I think are right.

 

(9) To be friendly and helpful to build relationships so that the community I know is a community I want. This includes my faculty colleagues, our staff and support colleagues, and our student colleagues.  

 

(10) To understand that I cannot be everything to everyone and that opportunity costs are real.  Thus, as I seek to fulfill John Wooden's ideal -- "Don't measure yourself by what you have accomplished, but by what you should have accomplished with your ability."-- I will keep in mind that accomplishments are more than articles written and classes taught. They include those, but they also include things like laughs, hugs, bike rides, soccer games, swing sets, sunsets, beaches, and good food. Beer, wine, and cocktails, are sometimes a nice touch, too. 

September 1, 2015 in Joshua P. Fershee, Law School, Research/Scholarhip, Teaching | Permalink | Comments (2)

Monday, August 31, 2015

Andrew Vollmer on SEC Enforcement

Andrew Vollmer, a law professor at the University of Virginia and a former SEC deputy general counsel, has written two excellent papers on SEC enforcement.

The first, SEC Revanchism and the Expansion of Primary Liability under Section 17(a) and Rule 10b-5, is a critical look at the SEC’s decision in the Flannery administrative proceeding. If you’re a securities lawyer and you’re not familiar with Flannery, you should be. It stakes out a number of broad interpretations of liability under Rule 10b-5 and section 17(a) of the Securities Act. I (and Professor Vollmer) believe some of those positions are inconsistent with Supreme Court precedent, but the SEC’s is clearly trying to set up an argument for judicial deference under Chevron.

Professor Vollmer’s second article is Four Ways to Improve SEC Enforcement. He discusses the problems with SEC administrative proceedings and how to fix them.

Both articles are definitely worth reading.

August 31, 2015 in C. Steven Bradford, Research/Scholarhip, Securities Regulation | Permalink | Comments (1)

Sunday, August 30, 2015

ICYMI: Tweets From the Week (Aug. 30, 2015)

August 30, 2015 in Stefan J. Padfield | Permalink | Comments (0)

Saturday, August 29, 2015

But how will they sleep?

Apparently, Paul Hastings is planning to bring lawyer cubicles to New York.  First and second year associates won't get an office; instead, they'll get a cubicle.  The firm pitches this as a move to enhance creativity; conveniently, it also saves expenses on office space.

Whenever I hear about moves like this - which include offices with glass walls, or offices shares by multiple people - I always wonder: But how will they sleep?

Leaving aside the sleep research demonstrating the cognitive benefits of naps, I know from personal experience that I cannot get through a full working day - let alone the kind of long day that lawyers often must work - without one or two 20-minute naps.  I've talked to other lawyers and I've heard the same thing; they loathe glass walls and other open-office plans not simply for the lack of privacy, but because they need space to sleep.

Google is famous for, among other things, counterbalancing shared offices and glass walls with sleeping pods - which likely benefits employee productivity (and also, presumably,  is part of a strategy to keep employees from ever leaving the complex).  I suppose Paul Hastings could try something similar, but I'm guessing the cultural taboos against napping - especially among lawyers, who take punishing hours are taken as proof of commitment to the firm - would inhibit their use.

I get why firms may feel the need to cut costs - and lots of attorneys, as well as workers in other fields, have long toiled in cubicles or at shared desks - but won't someone think of the nappers? 

 

August 29, 2015 in Ann Lipton | Permalink | Comments (8)

Friday, August 28, 2015

Finally, I Can Agree with SEC Commissioner Luis Aguilar

I don't agree with SEC Commissioner Luis Aguilar on many issues. But I agree with his recent call for transparency in the disqualification waiver process.

A number of SEC rules, such as some of the offering registration exemptions, are not available to companies that have engaged in certain misbehavior in the past. But the SEC has the authority to waive those disqualifications, and it often does. Or, I should say, the SEC staff often does. As Commissioner Aguilar points out, the commissioners are often unaware that a waiver has been requested. And, as with staff no-action letters, it's often unclear why some waivers are granted and others are not.

I'm not a fan of the whole idea of discretionary waivers. Allowing government employees to waive the law on a case-by-case basis with little explanation strikes me as inconsistent with the rule of law. But, if we're going to have them, the process should be as transparent as possible.

August 28, 2015 in C. Steven Bradford, Securities Regulation | Permalink | Comments (0)

Can Conscious Consumers or Class Action Lawsuits Change Corporate Behavior?

I’m the socially-conscious consumer that regulators and NGOs think about when they write disclosure legislation like the Dodd-Frank conflict minerals law that I discussed last week. I drive a hybrid, spend too much money at Whole Foods for sustainable, locally-farmed, ethically-sourced goods, make my own soda at home so I minimize impacts to the environment with cans and plastic bottles, and love to use the canvas bags I get at conferences when I shop at the grocery store. As I (tongue in cheek) pat myself on the back for all the good I hope to do in the world, I realize that I may be a huge hypocrite. I know from my research that consumers generally tell survey takers that they want ethically sourced goods, but they in fact buy on quality, price, and convenience.

I thought about that research when I read the New York Times expose and CEO Jeff Bezos’ response about Amazon’s work environment. As a former defense-side employment lawyer and BigLaw associate for many years, I wasn’t in any way surprised by the allegations (and I have no reason to believe they are either true or false). I have both provided legal defenses and lived the life alleged by some former and current Amazonians. But now that I research and teach on corporate social responsibility and strive to be more socially conscious myself, can I in fact shop at Amazon? I considered this because I ordered almost a dozen packages to be delivered to me over the past weeks. I was literally about to click “order now”  for another delivery when I was reading the article. And then I clicked anyway.

I confess that I may be the consumer discussed in an article I cite in my research entitled “Sweatshop Labor is Wrong Unless the Shoes are Cute: Cognition Can Both Help and Hurt Moral Motivated Reasoning.” As the authors point out, “Our findings show that consumers will actually change what they believe if they strongly desire a product … As long as companies continue to create value and maintain loyalty, it is likely store shelves won’t see ‘sweatshop-free’ products.”

I’ve argued that for that reason, consumers generally don’t have as much impact as people think. While hashtag activism in an era of slacktivism may raise awareness in social movements, I’m not sure that it does much to change company behavior, with the notable exception of SeaWorld, which has seen a drop in attendance after a CNN story about treatment of killer whales and subsequent calls for boycott.

Maybe I’m wrong. I look forward to seeing what, if anything, Costco shoppers do when/if they learn about the putative class action lawsuit filed this week in California claiming that Costco knowingly sold shrimp farmed by Thai slaves and misled consumers. According to the complaint (which has graphic pictures), “this case arises from the devaluing of human life. Plaintiff and other California consumers care about the origin of the products they purchase and the conditions under which the products are farmed, harvested or manufactured. Slavery, forced labor and human trafficking are all practices which are considered to be abhorrent, morally indefensible and acts against the interests of all humanity.” The complaint also cites Costco’s supplier code of conduct and notes that its practices are inconsistent with its statement of compliance with the California Transparency in Supply Chain Act, another name and shame disclosure law meant to root out slavery and human trafficking. This is the first US lawsuit related to these kinds of disclosures, but may not be the last.

Costco was supposed to be one of the good guys with its fair wages and benefits compared to its competitors and  its “reasonable” CEO salary. This favorable PR has likely cloaked Costco with the CSR halo effect, where consumers believe that when a company does something good for workers, for example, the company also cares about the environment, even though there may be no relationship between the two. This may cause them to spend more money with the company, and some believe, may cause regulators to look more favorably upon a firm.

Will socially conscious consumers stop buying at Costco? Will they stand their ground and rush over to Whole Foods? Although I don’t have a Costco card, I admit I have considered it because I liked the labor practices and for years have refused to shop in another big box retailer because of its treatment of workers. I’m also interested to see what investors think of Costco. What will the shareholders resolutions look like next year? In 2015, the only shareholder proposal in the proxy concerned “reducing director entrenchment.” How will this lawsuit affect the stock price, if at all?

Next week I will explore the Wal-Mart decision to stop selling assault rifles. Did Trinity and other socially-responsible investors get their way after all?? Wal-Mart’s CEO says no, but I’m not so sure.

 

 

 

 

August 28, 2015 in Compliance, Corporate Governance, Corporations, CSR, Current Affairs, Human Rights, Legislation, Marcia Narine, Shareholders | Permalink | Comments (1)

Planet Fitness: Business Plan and IPO

Back in January, I joined Planet Fitness. The $10/month membership seemed too good to be true. Most gyms I had joined in the past had cost 3-5X that amount, and the equipment looked pretty similar. Also, the advertisement of No Commitment* Join Now & Save! (small font – *Commitments may vary per location) gave me pause.

Like a good lawyer, I read all the fine print in the membership contract, looking for a catch. There wasn’t really a catch – except for a small, one-time annual fee (~$30), if I did not cancel before October.

I signed up, enjoyed the gym, and canceled a few months later, as soon as the weather outside improved. (When I exercise, which is not as consistently as some of my co-bloggers, it is mostly just running, and I prefer to run outside if the weather is decent).

So, in total, I paid around $30 for three months of access to a single location of a decent gym.

This deal is still somewhat puzzling to me. If Planet Fitness’ business model makes sense, why aren’t more competitors coming close to the $10/month price point?

Here are some of my guesses (based on my brief experience at one location and pure speculation):

  • Planet Fitness may have a lower cost structure than some gyms. While I thought the equipment was fine, most of the equipment seemed to be of the “no frills variety.” For example, none of the treadmills at my location had color screens and most of the machines appeared to be base models. I did, however, appreciate that Planet Fitness seemed to pay attention to what machines members use regularly – like treadmills, bikes, and ellipticals –  and devoted most of their space to those machines.
  • Planet Fitness may be taking a page from the behavioral economist’s playbook. Planet Fitness made signing up extremely easy and automatically deducted the fee from the member's checking account each month. Canceling was slightly more difficult. You had to physically come into the gym to sign cancellation paperwork, or you could snail mail your cancellation. You also had to give a bit of notice, prior to cancellation, to avoid getting charged for the following month.  The slight difficulty canceling, coupled with the very low monthly fee might result in some folks forgetting about their membership for a while, simply taking a while to cancel, or purposefully avoid canceling, in hopes they would return to working out. I will say that I did not find canceling at Planet Fitness terribly difficult. However, when I was a member of LA Fitness a number of years ago, I remember their cancellation process, through certified “snail-mail” letter, being a pain. 
  • Planet Fitness may have been offering $10/month as a "teaser rate" to attract members, with plans to increase rates once members had developed habits of going to their gyms.  My gym has already increased the “no commitment” membership to $15/month, while the $10/month membership now comes with a 1-year commitment.
  • Judging from these complaints, many members may not understand the annual fee, the commitments (on some plans), and the cancellation requirements. Perhaps these parts of the contracts are helping off-set the low monthly price.
  • Planet Fitness may have been trying to increase their membership numbers in advance of their IPO this summer.

This last bullet-point, regarding increasing membership numbers to help their IPO, is the one I find most interesting. If the valuation of certain tech-companies, like Instagram, can be based on, at least in part, “number of users,” I think it is reasonable to assume that “number of members” is an important metric for the valuation of gyms.

On August 5, The Wall Street Journal reported that Planet Fitness priced its IPO at $16/share and raised $216 million. Planet Fitness disappointed in early trading (See here and here), then rose to just under $20/share, and is now back around its IPO price. Given the prevalence of IPO under-pricing, I imagine early investors hoped for better. That said, I plan to follow Planet Fitness and see if their business model is one that works in the long-term. If they have continued success, I imagine other companies will attempt to imitate. 

Update: Will Foster (Arkansas) passed along this interesting public radio podcast on gym memberships, which discusses Planet Fitness. Basically, it suggests that many gyms seek members who will not show up regularly (or at all). Maybe this is a key to Planet Fitness' business model; Planet Fitness advertises itself as a "no judgment" gym and even has a "lunk alarm" that it rings on weightlifters who grunt or drop weights. Members seeking "no judgment" may come to the gym much less frequently than serious weightlifters. In fact, at the Planet Fitness featured, 50% never even showed up once. That location has ~6000 members, but a capacity of ~300. Also, this podcast makes sense of why Planet Fitness has free candy, bagels, mixers, massage chairs, and pizza parties - again this attracts less serious gym members and it also gives some value to those who come to the gym only to socialize and eat. Listen to the whole thing. 

August 28, 2015 in Business Associations, Corporate Finance, Corporations, Haskell Murray | Permalink | Comments (3)

Thursday, August 27, 2015

The University of Utah S.J. Quinney College of Law Hiring in Business and Tax Law

As mentioned in my post about law schools hiring in business law areas, we received the following posting from The University of Utah S.J. Quinney College of Law.

------

University of Utah Hiring in Business and Tax Law

The University of Utah S.J. Quinney College of Law invites applications for a tenure-track faculty position at the rank of associate professor beginning academic year 2016-2017. Qualifications for the position include a record of excellence in academics, successful teaching experience or potential as a teacher, and strong scholarly distinction or promise. The College is particularly interested in candidates in the areas of business and tax law. Interested persons can submit an application to the University of Utah Human Resources website at https://utah.peopleadmin.com/postings/43173 (please note that the application requires a cover letter, CV, and list of references). Baiba Hicks, Administrative Assistant to the Faculty Appointments Committee (Baiba.hicks@law.utah.edu or 801-581-5464) is available to answer questions.

The University of Utah is an Equal Opportunity/Affirmative Action employer and educator and its policies prohibit discrimination on the basis of race, national origin, color, sex, sexual orientation, gender identity/expression, religion, age, status as a person with a disability, or veteran’s status. Minorities, women, veterans, and those with disabilities are strongly encouraged to apply. Veterans’ preference is extended to qualified veterans. To inquire further about the University’s nondiscrimination and affirmative action policies or to request a reasonable accommodation for a disability in the application process, please contact the following individual who has been designated as the University’s Title IX/ADA/Section 504 Coordinator: Director, Office of Equal Opportunity and Affirmative Action, 201 South Presidents Circle, Rm. 135, Salt Lake City, UT 84112, (801)581-8365, email: oeo@utah.edu.

August 27, 2015 in Business Associations, Haskell Murray, Jobs, Law School | Permalink | Comments (0)

Wednesday, August 26, 2015

Important 30th Anniversaries

Yesterday, my husband and I celebrated our 30th wedding anniversary.  I am married to the best husband and dad in the entire world.  (Sorry to slight all of my many male family members and friends who are spouses or fathers, but I am knowingly and seriously playing favorites here!)  My husband and I bought the anniversary memento pictured below a few years ago, and it just seems to be getting closer and closer to the reality of us as a couple (somewhat endearing, but aging) as time passes . . . .

IMG_0872

Of course, our wedding was not the only important event in 1985.  There's so much more to celebrate about that year!  In fact, it was a banner year in business law.  Here are a few of the significant happenings, in no particular order.  Most relate to M&A doctrine and practice.  I am not sure whether the list is slanted that way because I (a dyed-in-the-wool M&A/Securities lawyer) created it or whether the M&A heyday of the 1980s just spawned a lot of key activity in 1985.

  1. Smith v. Van Gorkom was decided.  It was my 3L year at NYU Law.  I remember the opinion being faxed to my Mergers & Acquisitions instructor during our class and being delivered--a big stack of those goofy curly thermal fax paper sheets--to the table in the seminar room where we met.  Cool stuff.  As I entered practice, business transactional lawyers were altering their advisory practices and their board scripts to take account of the decision.

  2. Unocal v. Mesa Petroleum was decided.  The Delaware Supreme Court established its now famous two-part standard of review for takeover defenses, finding that "there was directorial power to oppose the Mesa tender offer, and to undertake a selective stock exchange made in good faith and upon a reasonable investigation pursuant to a clear duty to protect the corporate enterprise. Further, the selective stock repurchase plan chosen by Unocal is reasonable in relation to the threat that the board rationally and reasonably believed was posed."  (The italics were added by me.)  More changes to transactional practice . . . .

  3. Moran v. Household International was decided.  As a result, I spent a large part of my first five years of law practice promoting and writing poison pills that innovated off the anti-takeover tool validated in this case.  The firm I worked for was on the losing side of the Moran case, so we determined to build a better legal mousetrap, which then became the gold standard.

  4. The Revised Uniform Limited Partnership Act (RULPA) was amended by the Uniform Law Commission.  Among the 1985 changes was an evolution of the rules relating to the liability of limited partners for partnership obligations.  The 2001 version of the RULPA took those evolutions to their logical end point, allowing limited partners to enjoy limited liability for partnership obligations even if the limited partners exercise management authority over the partnership.

  5. Landreth Timber Co. v. Landreth was decided.  Stock is a security under the Securities Act of 1933, as amended, unless the context otherwise requires.  The Court determined that instruments labeled stock that have the essential attributes of stock should be treated as stock in an offering context, even when the stock is transferred to sell a business.  Bye-bye "sale of business" doctrine . . . .

That's enough on 30th anniversaries  for this post.  I am sure you all will think of more 30th anniversaries in business law that we can celebrate in 2015.  Feel free to leave those additional 1985 memories in the comments.

August 26, 2015 in Business Associations, Corporate Governance, Corporations, Delaware, Joan Heminway, M&A, Teaching | Permalink | Comments (10)

Tuesday, August 25, 2015

LLCs Still Don't Have Corporate Veils. Really.

I know I am Johnny One Note on this, but while researching another project, I decided to check again if litigators (and courts) are still referring to veil piercing of LLCs as "corporate veil piercing." As I have noted before, for LLCs, it should be "piercing the LLC veil" or, more generally, "piercing the limited liability veil."  Or "PLLV," as I like to call it. (Not as catchy is "PCV," but it is far more universally accurate.)

Sure enough, last week, a New York court refused to denied the defendants' motion to dismiss the plaintiff's third amended complaint, deciding that "Plaintiff has adequately pled facts sufficient to defeat the Individual Defendant's motion to dismiss Plaintiff's claim for piercing the corporate veil." Capital Inv. Funding, LLC v. Lancaster Grp. LLC, No. CIV.A. 8-4714 JLL, 2015 WL 4915464, at *7 (D.N.J. Aug. 18, 2015).  But Plaintiff is seeking to piercing the veil of an LLC.  As such, I think they need a fourth amended complaint.  

Also last week, in an unpublished opinion, a Minnesota court upheld a decision to pierce the limited liability veil of Alpha Law Firm, LLC.  The court found the court below "did not abuse its discretion by piercing Alpha's corporate veil." Guava LLC v. Merkel, No. A15-0254, 2015 WL 4877851, at *8 (Minn. Ct. App. Aug. 17, 2015). Again, though, the LLC did not have such a veil because it was not a corporation.  

This should be easier to keep straight in Minnesota than most places. Minnesota has a statute the specifically allows for LLC veil piercing, and states that the corporate law concept applies to the LLC.  But it also calls it "piercing the veil" in the LLC statute, which means the veil is an LLC veil, and not a corporate one.  The statute: 

MINN. STAT. ANN. § 322B.303(2)

. . . .

Subd. 2.Piercing the veil. The case law that states the conditions and circumstances under which the corporate veil of a corporation may be pierced under Minnesota law also applies to limited liability companies.

I am sympathetic (to a point).  As Guava points out, when a statute brings corporate veil piercing into the LLC world, it can be awkward.  Another excerpt from Guava makes that obvious:

Hansmeier next challenges the district court's decision to pierce on the merits. “In certain circumstances, it is possible to ‘pierce the corporate veil’ and hold a shareholder personally liable .” Gunderson v. Harrington, 632 N.W.2d 695, 705 (Minn.2001) (Gilbert, J., dissenting) (citing Victoria Elevator Co. of Minneapolis v. Meriden Grain Co., 283 N.W.2d 509, 512 (Minn.1979)). Veil piercing applies to LLCs as well as corporations. Minn.Stat. § 322B.303, subd. 2 (2014). A court may pierce a corporate veil when there is fraud or when the shareholder is the “alter ego” of the corporation. Gunderson, 632 N.W.2d at 705.
Guava, 2015 WL 4877851, at *6.
 
LLCs don't have shareholders, they have members, so that's a little confusing.  And note how the courts operates back and forth between corporate and LLC concepts.  It can be complex. Still, I'd really like a court in every state to take the time to set the standard and separate the concepts, so that future courts can always have a place to cite.  Consider this as an alternative paragraph for Guava
 
Hansmeier next challenges the district court's decision to pierce on the merits. “In certain circumstances, it is possible to ‘pierce the corporate veil’ and hold a shareholder personally liable .” Gunderson v. Harrington, 632 N.W.2d 695, 705 (Minn.2001) (Gilbert, J., dissenting) (citing Victoria Elevator Co. of Minneapolis v. Meriden Grain Co., 283 N.W.2d 509, 512 (Minn.1979)). A court may pierce a corporate veil when there is fraud or when the shareholder is the “alter ego” of the corporation. Id. at 705. Veil piercing applies to LLCs as well as corporations. Minn.Stat. § 322B.303, subd. 2 (2014). Thus, a court may pierce the veil of an LLC when there is fraud or when the member is the “alter ego” of the LLC. See Minn.Stat. § 322B.303, subd. 2 (2014); Gunderson, 632 N.W.2d at 705.
Just a thought. 

August 25, 2015 in Corporations, Joshua P. Fershee, LLCs, Shareholders | Permalink | Comments (4)

Monday, August 24, 2015

Belmont University (Massey College of Business) Professor Position - Healthcare Management/Health Law

Belmont University's Massey College of Business (my employer) has an open Assistant Professor of Management position that may interest some of our readers.

As stated below, a PHD in Management and/or a JD is required. Healthcare management expertise is strongly preferred. The recently retired professor whose line we are filling was a JD, MBA, RN with significant healthcare management and health law experience. I am not on the hiring committee, but am happy to discuss Belmont University in general, and I can point interested parties in the right direction.

The online application can be accessed here.

---

The College of Business Administration at Belmont University is seeking applications for a tenure-track faculty position at the rank of Assistant Professor beginning August 2015.

The faculty member in this position will teach both graduate and undergraduate management classes. The area of specialization/certification that will be given preference for this position is healthcare management. Ability and willingness to teach healthcare law, patient-centered care, business law, principles of management, and/or strategic management is preferred. Clinical experience or familiarity with the clinical setting will be looked upon quite favorably, as well.  Candidates should be able to demonstrate a well-developed research agenda with promise of publishing in high quality, peer reviewed management or business law journals.

An interest and/or experience in engaging students in undergraduate research will be considered favorably, as will teaching experience at the university level.  Completion of a Ph.D. in management from an AACSB or CAHME accredited/AUPHA member institution by the time of employment is required. A Doctorate of Jurisprudence (JD) is also acceptable.  Belmont University is particularly seeking applicants who can demonstrate the interest and ability to work collaboratively in course design and to teach interdisciplinary and topical courses in this program. 

Belmont University seeks to attract and retain highly qualified faculty and staff that share the University’s values and will contribute to its mission and vision to be a leader among teaching universities bringing together the best of liberal arts and professional education in a Christian community of learning and service. For additional information about the position and to complete the online application, candidates are directed to https://jobs.belmont.edu. During the application process, applicants will be asked to respond to Belmont’s mission, vision, and values statements, articulating how the candidate’s knowledge, experience, and beliefs have prepared him/her to contribute to a Christian community of learning and service and give a brief statement of teaching philosophy. An electronic version of a Cover Letter, Curriculum Vitae, List of References, Teaching Philosophy, and a Response to Belmont’s Mission, Vision, and Values must be attached in order to complete the online application.  Review of applications will begin immediately and continue until the position is filled.

A comprehensive, coeducational university located in Nashville, Tennessee, Belmont is among the fastest growing Christian universities in the nation. Ranked No. 5 in the Regional Universities South category and named for the seventh consecutive year as one of the top “Up-and-Comer” universities by U.S. News & World Report, Belmont University consists of approximately 7,300 students who come from every state and 25 countries. The university’s purpose is to help students explore their passions and develop their talents to meet the world’s needs. With more than 75 areas of study, 20 master’s programs and four doctoral degrees, there is no limit to the ways Belmont University can expand an individual's horizon.

Belmont University is an equal opportunity employer committed to fostering a diverse learning community of committed Christians from all racial and ethnic backgrounds. Women and minorities are encouraged to apply. The selected candidate for this position will be required to complete a background check satisfactory to the University. 

August 24, 2015 in Business School, Haskell Murray, Jobs | Permalink | Comments (0)

Thoughts on Beginning My 30th Year of Law Teaching

I begin my 30th year of law teaching today. I can still remember that hot August day I first stepped into the huge, tiered classroom at SMU. Standing on the raised platform facing a mob of over a hundred eager students. The low hum generated by dozens of pre-class conversations. The feeling of inferiority as all those pairs of eyes checked out the newest professor.

I was scared to death. I had spent the summer reviewing the law of business associations—reading and highlighting the casebook; reading a corporate law treatise; reading law review articles. I had extensive teaching notes in front of me that first day, some of them cribbed from class notes that the late Alan Bromberg had generously shared with me. But I didn’t have a clue how to teach. For the most part, I was mimicking what my own law school professors had done, without realizing why they had done what they did.

It didn’t go well at first. I was shy and hesitant, and students could sense my lack of confidence. Many of the students weren’t as prepared as I’d hoped, and I wasn’t sure how to draw them out and build on what they understood. Some of the students weren’t that eager to learn the law of business associations, and I didn’t have a clue how to motivate them. My first-semester evaluations were horrible.

Things have changed significantly since I began teaching. I’ve changed. I’m no longer afraid as I walk into the classroom; decades of teaching have turned my fear into just a slight tinge of anxiety. The evaluations aren’t as bad; I’ve learned how to teach, and I succeed more often than not. I have even won teaching awards.

The classroom has also changed. When I started teaching, I wasn’t competing with Facebook, online shopping, and email. I don’t think anyone in my first class had a laptop. When I started teaching, PowerPoint wasn’t an option. SMU didn’t even have whiteboards; I had to regularly brush chalk off my clothes. When I started teaching, professors distributed syllabi and supplemental reading via photocopy and e-books weren’t available. Today, I distribute all supplemental material over the Internet and one of my courses is wholly online.

Some things haven’t changed that much. Some of the students are still underprepared. Some of them still aren’t that interested in business associations, taking the class only because they know it will be on the bar. And it’s still a chore to end that hum of pre-class conversations when it’s time to start.

But it’s been a great career. I enjoy what I’m doing, except when administrative hassles interfere with my teaching and research—something that, unfortunately, seems to happen more often with seniority.

If you’re new to law teaching, persevere through the challenges. Learn as your students learn and try to have fun. Law teaching is an awesome responsibility, but, in spite of the struggles, it can be an incredibly rewarding experience. I hope you too can look back after thirty years with a feeling of satisfaction and accomplishment.

If you're a student, give those new teachers a break. They're learning, just like you. Take out your frustrations on the old fogies like me.

August 24, 2015 in C. Steven Bradford, Law School, Teaching | Permalink | Comments (6)

Sunday, August 23, 2015

ICYMI: Tweets From the Week (Aug. 23, 2015)

August 23, 2015 in Stefan J. Padfield | Permalink | Comments (0)

Saturday, August 22, 2015

En banc we go?

As Marcia just discussed, the D.C. Circuit recently issued its decision in its rehearing in National Association of Manufacturers v. SEC (“NAM”), and it once again held that neither the SEC nor Congress may require public companies to disclose whether they use in their products certain “conflict minerals” that originated in the Democratic Republic of Congo or adjoining countries.  Marcia has a really important discussion of the question whether a disclosure requirement is even likely to be effective to accomplish Congress’s goals, but I also find the new opinion fascinating and fraught in its own right – and, incidentally, deeply disdainful toward the en banc opinion in American Meat Institute v. U.S. Department of Agriculture, 760 F.3d 18 (D.C. Cir. 2014) (“AMI”).  Probably not coincidentally, neither of the two judges in the NAM majority were part of the en banc decision in AMI, because both have senior status (the third member of the NAM panel, Judge Srinivasan, was in the AMI majority, and dissented in NAM).

[More after the jump]

Continue reading

August 22, 2015 in Ann Lipton | Permalink | Comments (2)

Friday, August 21, 2015

Salman Rushdie on When to Stop Editing

One of the hardest things for me as a writer is knowing when I'm done. September's Harvard Business Review (p. 128) has a great quote from Salman Rushdie on that question. They asked him how he knows he's finished a book. He says:

"There's a point at which you're not making it better; you're just making it different. You have to be good at recognizing that point."

August 21, 2015 in C. Steven Bradford, Writing | Permalink | Comments (0)

The Conflict over Conflict Minerals and Other Social Governance Disclosures

Today’s post will discuss the DC Circuit’s recent ruling striking down portions of Dodd-Frank conflict minerals rule on First Amendment grounds for the second time. Judge Randolph, writing for the majority, clearly enjoyed penning this opinion. He quoted Charles Dickens, Arthur Kostler, and George Orwell while finding that the SEC rule requiring companies to declare whether their products are “DRC Conflict Free” fails strict scrutiny analysis. But I won’t engage in any constitutional analysis here. I leave that to the fine blogs and articles that have delved into that area of the law. See here, here here, here, here, and more.  The NGOs that have vigorously fought for the right of consumers to learn how companies are sourcing their tin, tungsten, tantalum and gold have had understandably strong reactions. One considers the ruling a dangerous precedent on corporate personhood. Global Witness, a well respected NGO, calls it a dangerous and damaging ruling.

Regular readers of this blog know that I filed an amicus brief arguing that the law meant to defund the rebels raping and pillaging in the Democratic Republic of Congo was more likely to harm than help the intended recipients—the Congolese people.  I have written probably a dozen blog posts on Dodd-Frank 1502 and won’t list them all but for more information see some of my most recent posts here, here, and here. The goal of this name and shame law is to ensure that consumers and investors know which companies are sourcing minerals from mines that are controlled by rebels. The theory is that consumers, armed with disclosures, will pressure companies to make sure that they use only “conflict-free” minerals in their cameras, cell phones, toothpaste, diapers, jewelry and component parts. I assume that the SEC will seek a full re-hearing or some other relief even though Chair May Jo White has said, “seeking to improve safety in mines for workers or to end horrible human rights atrocities in the Democratic Republic of the Congo are compelling objectives, which, as a citizen, I wholeheartedly share … [b]ut, as the Chair of the SEC, I must question, as a policy matter, using the federal securities laws and the SEC’s powers of mandatory disclosure to accomplish these goals.”

I agree with Chair White even though I applaud the efforts of companies like Apple and Intel to comply with this flawed law. Indeed, the Enough Project, which with others has led the fight for this and other laws, now reports that there are 140 “conflict-free” smelters. But the violence continues as just this week the press reports that the Congolese government announced that it is investigating its own peacekeeprs/soldiers for rape in the neighboring Central African Republic and the UN acknowledged that fighting between armed militias is still a problem and that they are still resisting state authority. News reports indicated two days ago that clinics are closing because of fear of attack by Ugandan rebels.  This hits particularly close to me because my connection with DRC and the conflict mineral fight stems from the work that an NGO that I work with has done training doctors and midwives in the heart of the conflict zone there.

I don’t know how effective Dodd-Frank will be if the issuers don’t have to disclose what the court has called the Scarlet letter of “non DRC-conflict free.” But more important, as I argue in my writings, I don’t think that consumers’ buying habits match what they say when surveyed about ethical sourcing. In my most recent article (which I will post once the editors are done), I point out the following:

A recent survey used to support the new UK Modern Slavery Act indicates that two-thirds of UK consumers would stop buying a product if they found out that slaves were involved in the manufacturing process and that they would be willing to pay up to 10% more for slave-free products…The numbers are similar but slightly lower for those surveyed in the United States. But note, “when asked if they would be willing to pay more for their favourite products if this ensured they were produced without the use of modern slavery: 52% of American consumers said they would pay more to ensure products were produced without modern slavery; 27% were not sure; 21% said they would not pay more.” This means that at least 20% and possibly almost half of informed consumers would not likely change their buying habits. (italics added).

I’m probably more informed than most about the situation in the DRC because I have been there and read almost every report, blog post, article, hearing committee transcript and tweet about conflict minerals. I have seen children digging gold out of the ground while armed rebels stood guard. I have met the village chiefs in the conflict zones. I have been detained by the UN peacekeepers who wanted to know what I was researching and then warned me not to visit the mines because of the five dead bodies (which I saw) lying in the road from a rebel attack the night before. I have stayed in monasteries guarded by men with machine guns and been warned that if I left after dark I was just as likely to be raped by a police officer as a rebel. I have met with many women who were gang raped by rebels and members of the Congolese army. I have had dinner with Nobel nominee Dr. Denis Mukwege, who back in 2011 wanted to know why the US wasn’t stopping the atrocities. I know the situation is terrible. But it won't change and hasn’t changed because of a corporate governance disclosure that most average consumers won’t read (even if the SEC had prevailed) and won’t necessarily act on if they did read it.

Next week I will post about my personal conflict with disclosures. Should I, who refuses to shop at a certain big box retailer, still shop at Amazon now that an expose has revealed a very harsh workplace? What about Costco and others? Stay tuned.

 

August 21, 2015 in Corporate Governance, Corporate Personality, Corporations, CSR, Current Affairs, Human Rights, International Business, International Law, Legislation, Marcia Narine, Nonprofits, Securities Regulation | Permalink | Comments (1)

Interview with CJ Leo Strine and the Nabors Case

In this interview, Delaware Supreme Court Chief Justice Leo Strine singles out C & J Energy Services, Inc. v. City of Miami General Employees’ ("Nabors"), 107 A.3d 1049 (2014) as, perhaps, the most important opinion he has authored as CJ.

Given such an endorsement, I took time to read the case yesterday. The following paragraphs get to the heart of the case, which overturned the Delaware Court of Chancery's mandate to shop the company at issue.

Revlon does not require a board to set aside its own view of what is best for the corporation’s stockholders and run an auction whenever the board approves a change of control transaction. As this Court has made clear, “there is no single blueprint that a board must follow to fulfill its duties,” and a court applying Revlon ‘s enhanced scrutiny must decide “whether the directors made a reasonable decision, not a perfect decision.”

 

In a series of decisions in the wake of Revlon, Chancellor Allen correctly read its holding as permitting a board to pursue the transaction it reasonably views as most valuable to stockholders, so long as the transaction is subject to an effective market check under circumstances in which any bidder interested in paying more has a reasonable opportunity to do so. Such a market check does not have to involve an active solicitation, so long as interested bidders have a fair opportunity to present a higher-value alternative, and the board has the flexibility to eschew the original transaction and accept the higher-value deal. The ability of the stockholders themselves to freely accept or reject the board’s preferred course of action is also of great importance in this context.

 

pgs. 1067-68.

August 21, 2015 in Delaware, Haskell Murray, M&A | Permalink | Comments (0)

Wednesday, August 19, 2015

Wag More; Bark Less

20150813_080513_resized

This post is dedicated to our family's dear Tara, who left our Earth in peace yesterday.  She went lame on both ends--back first, then front.  The likely cause of her troubles, at age 12, was degenerative myelopathy.  But it's hard to tell since that's apparently a disease of exclusion.  No matter.  Gratefully, she was not in any perceptible pain.  And that strong tail of hers did still wag, right up to the very end.

As fate would have it, on the way to the veterinary hospital yesterday, the car in front of us had a sticker on the back bearing the words that became the title for this post: "Wag More; Bark Less."  It looked like a faded version of the picture included below.

218jxKddCSL

With classes beginning today and Tara's incessant tail wagging still very much on my mind, I found myself wondering whether this bumper-sticker philosophy is good counsel for law students.  My general conclusion?  Yes, this mantra can be usefully embraced by law students.

My thoughts on this are simple.  Finding the joy in law and learning law is what motivates us to stay on task and keeps us happy in our journey as lawyers.  So, in this new beginning--a new semester--I urge students to find and share the joy in their law school journey.  As a business lawyer and business law professor, I am passionate about what I do and teach.  Apparently, it shows.  I am often called out for wagging my tail.  I truly enjoy seeing my students wag theirs a bit as they strive to meet their (and my) learning objectives in the courses I teach.

This is not to say that there will not be barking--or that barking is not sometimes desirable or necessary to the task.  It is.  It may be important for lawyers and law students to loudly object, stridently argue, or otherwise attract attention.  I just advise picking those battles wisely and choosing words and tone carefully.

Barking can even be joyful.  There's clearly room for that kind of barking in a productive, engaged program of legal education.  For example, law students should broadcast their accomplishments and sing the praises of others at appropriate times and with suitable, tailored content and the proper ethos.

As this posts, I already have been in the classroom again.  There were at least a few tails wagging in my Business Associations class this morning.  That was good to see.  There was no barking (except from me--about the need to follow instructions and communicate more effectively).  Now, it's time to think about creating some joy in Corporate Finance this afternoon . . . .

Three cheers for the new semester!

August 19, 2015 | Permalink | Comments (7)