Saturday, April 19, 2014
Today I'm plugging my colleague Elisabeth de Fontenay's new article, despite the existential threat it poses to my specialty.
InDo the Securities Laws Matter?, de Fontenay compares the market for syndicated loans, which are not treated as securities, to the market for bonds, which are. She finds that the market for syndicated loans is as deep and as liquid as the market for bonds, suggesting that the mandatory disclosure regime that governs bonds, but not loans, is unnecessary.
As she puts it in her abstract:
One of the enduring principles of federal securities regulation is the
mantra that bonds are securities, while commercial loans are not. Yet the
corporate bond and loan markets in the U.S. are rapidly converging,
putting significant pressure on the disparity in their regulatory treatment.
As securities, corporate bonds are subject to onerous public disclosure
obligations and liability regimes, which corporate loans avoid entirely. This
longstanding regulatory distinction between loans and bonds is based on
the traditional conception of a commercial loan as a long-term relationship
between the borrowing company and a single bank, in contrast to bonds,
which may be issued to widely dispersed retail investors and are traded in a
liquid market. Today, however, not only are loans funded by dispersed, nonbank
creditors, but the pricing, terms, participants, and liquidity in the two
markets are rapidly converging. Logically, securities regulators should
respond to this functional convergence by treating loans and bonds as one
and the same. While the regulatory disparity persists, however, it provides a
rare natural experiment testing the effectiveness of the securities laws. That
the loan market has achieved comparable depth and liquidity to the bond
market, even in the absence of mandatory disclosure and robust antifraud
provisions, suggests that the securities laws are not doing the work for
which they were intended.
It's a really fascinating paper.
Friday, April 18, 2014
Earlier this semester, Belmont undergraduate students competed for a total of $8,000 in a business plan competition. The first place team, What’s Hubbin’, won $5,000. Law firm Baker Donelson was one of the sponsors.
Each competition team was required to provide: (1) an executive summary, (2) a description of the business (including mission and vision), (3) plans for marketing, operating, finances, and growth, and (4) financial statements (historical, if applicable, and projected). The finalists presented in front of a team of judges, which included local attorneys, investors, and entrepreneurs. The event also attracted a strong audience of faculty members (myself included), staff, and students.
Given the evolving legal industry, and the increasing focus on Law & Technology and Law & Entrepreneurship, I could see business plan competitions like this one being a success at law schools (perhaps in coordination with their sister business schools).
One of the three What’s Hubbin’ team members is Makenzie Stokel. She is also one of my undergraduate business law students. I asked her if she would mind answering a few, short questions about the competition and about her team's business, which is one of the competition’s businesses that is already up and running. My questions and her answers are below.
HM: Will you please briefly describe your business, What’s Hubbin’, for our readers?
MS: What's Hubbin’ is a website that promotes music here in Nashville. We highlight local artists and promote events going on around town. Our site allows users to "hub" (RSVP) events and artists and have an organized profile of their music preferences. We also allow users to filter events based on their preferences to ensure that everyone finds something that they will want to do. We host events around Nashville and will be hosting a day-long festival at the end of this month. Our goal is to have everything music related all in one place so users don't have trouble finding events or discovering new music. You can find us online at www.whatshubbin.com and on Twitter at @WhatsHubbin
HM: How has participating in the competition helped your business?
MS: Participating in the business plan competition has helped promote our business a great deal. We have had multiple blogs write about us, and were even named Belmont's hottest start-up by Southern Alpha. It has really helped us get our name out there with the Belmont community and provided some validation of our business.
HM: How has participating in the competition enriched your college experience, especially your experiences in your classes?
MS: I am so glad that the What's Hubbin' team was able to participate in this competition. The competition definitely helped us with our public speaking skills, which is necessary to have in classes and after college. It also forced us to think quickly when answering the judges’ questions. When preparing for the questions that we thought they might ask, we had to determine who was best at the different aspects of our business. The competition, and the start-up process part in general, has been more relevant to some classes than others. Business Law and Foundations of Entrepreneurship are two examples of relevant classes. Also, as a result of being involved in What’s Hubbin’, I have seen ways to apply what I am learning in classes outside of school.
HM: Congratulations and best of luck.
MS: Thank you!
Thursday, April 17, 2014
Elizabeth Pollman at the Loyola Law School Los Angeles, recently posted her paper, A Corporate Right to Privacy, on SSRN (forthcoming in the Minnesota Law Review 2014). This paper timely weighs in on the corporate personhood debate by addressing one aspect of that question: privacy.
Abstract: The debate over the scope of constitutional protections for corporations has exploded with commentary on recent or pending Supreme Court cases, but scholars have left unexplored some of the hardest questions for the future, and the ones that offer the greatest potential for better understanding the nature of corporate rights. This Article analyzes one of those questions — whether corporations have, or should have, a constitutional right to privacy. First, the Article examines the contours of the question in Supreme Court jurisprudence and provides the first scholarly treatment of the growing body of conflicting law in the lower courts on this unresolved issue. Second, the Article examines approaches to determining the scope of corporate constitutional rights and argues that corporate privacy rights should be evaluated not by reference to the corporate form itself or a notion of corporate personhood, but rather by reference to the privacy interests of the various people involved in the corporation and their relationship to the corporation. Further, because corporations exist along an associational spectrum — from large, publicly traded corporations constituted purely for business purposes to smaller organizations with social, political, or religious purposes — the existence of a corporate privacy right will and should vary.
Back in August, Bloomberg reported that the legal costs for the six largest U.S. banks since 2008 totaled over $100 billion. (Yes, billion with a "B.") Bloomberg included settlement amounts in that huge number, as well as fees to lawyers.
The financial and emotional costs of litigation, not to mention the tremendous amount of time required, amazes me. Litigation has its place, but the vast majority of disputes eventually settle and many times all parties would have been better off settling earlier using some form of alternative dispute resolution (ADR).
A former colleague recently pointed me to the University of Missouri School of Law's listserv for ADR educators.
I know many of our readers only teach business law courses, but adding negotiations to my teaching package has made me see the various intersections between negotiations and business law. This semester, I set aside some time in my business law classes to discuss a bit of the negotiations literature, and the students seemed to appreciate it. I just signed up for the listserv, so I cannot speak to its quality yet, but I do think more business law professors should consider exploring the world of ADR.
Tuesday, April 15, 2014
Bringing Numbers into Basic and Advanced Business Associations Courses: How and Why to Teach Accounting, Finance, and Tax
2015 AALS Annual Meeting--Agency, Patnerships, LLCs & Unincorporated Assoc. Section
Business planners and transactional lawyers know just how much the “number-crunching” disciplines overlap with business law. Even when the law does not require unincorporated business associations and closely held corporations to adopt generally accepted accounting principles, lawyers frequently deal with tax implications in choice of entity, the allocation of ownership interests, and the myriad other planning and dispute resolution circumstances in which accounting comes into play. In practice, unincorporated business association law (as contrasted with corporate law) has tended to be the domain of lawyers with tax and accounting orientation. Yet many law professors still struggle with the reality that their students (and sometimes the professors themselves) are not “numerate” enough to make these important connections. While recognizing the importance of numeracy, the basic course cannot in itself be devoted wholly to primers in accounting, tax, and finance.
The Executive Committee will devote the 2015 annual Section meeting in Washington to the critically important, but much-neglected, topic of effectively incorporating accounting, tax, and finance into courses in the law of business associations. In addition to featuring several invited speakers, we seek speakers (and papers) to address this subject. Within the broad topic, we seek papers dealing with any aspect of incorporating accounting, tax, and finance into the pedagogy of basic or advanced business law courses.
Any full-time faculty member of an AALS member school who has written an unpublished paper, is working on a paper, or who is interested in writing a paper in this area is invited to submit a 1 or 2-page proposal by May 1, 2014. The Executive Committee will review all submissions and select two papers by May 15, 2014. A very polished draft must be submitted by November 1, 2014. The Executive Committee is exploring publication possibilities, but no commitment on that has been made. All submissions and inquiries should be directed to Jeff Lipshaw, Chair (email@example.com)
They really don't.
To be clear, this is not a post bashing corporations (or government). It's not really extolling the virtues of corporations, either. Instead, it's just to make the point that, notwithstanding Citizens United or Hobby Lobby and other cases of their ilk, the idea that corporations are people is still a legal fiction. A useful and important one, but a fiction nonetheless.
On April 11, Corey Booker posted the following on Facebook:
In awful years past, corporations polluted the Passaic river to the point that it ended the days where people could eat from it, swim in it, and use it as a thriving recreation source. Today we announced a massive initiative to clean the Passaic river and bring it back to life again. The tremendous clean up effort will create hundreds of jobs and slowly over time restore one of New Jersey's great rivers to its past strength and glory.
The river needs the clean-up, and I applaud the effort. Still, the reality is corporations did not pollute the Passaic River, at least not literally. People working for the corporation did. It is agency law that allows a corporation to act in the first place, because the fictional corporate person needs a natural person to act. (For a simple explanation, see here.) The corporation is liable for the harm caused by its agents. (And, in certain cases, the individuals would also be liable directly if their actions were, for example, illegal.)
Government doesn't really do anything, either. The clean-up proposal that Booker was referencing is a $1.7 billion Superfund river remediation project that was proposed by the EPA. Of course, government works through agents, too, and there are real people behind the proposal. Real people, through concerted action between corporations and government will actually do the clean up, too.
This is a point I have made before, but I think it's an important one. We need to remember that people are at the root of all corporate and government actions. This is important in two directions. First, for those criticizing a corporate or government action, it is critical for them to remember that there are people carrying out the action. A corporation or a government may act in an inappropriate manner, but it is also likely that the person carrying out the action is doing so with the intent to do well in the capacity in which they were fired.
Second, for people working for corporations or governments it is equally critical that they recognize that the their employer doesn't carry out actions without their help. That is, people who work for corporations or governments must recognize that they are carrying out the will of the entity they represent (and they should hold themselves responsible for doing do). Perhaps it is their boss who gave them the order (also a natural person), or even the board of directors (a group of natural people), but the charge is in fact, if not legally, being given by natural people.
Why does this matter? When we vilify or exalt the action of entities (like corporations or governments) we disconnect ourselves from the realities of the world, or at least our responsibilities within it. We become more susceptible to Groupthink in either direction. We are able to shirk our responsibilities -- as employees, as agents, as lawyers, as voters, as shareholders, as people -- to make decisions the are conscious of the world around us. In our daily lives and in our representative capacities, we all must make difficult decisions from time to time.
Sometimes, tough decisions require a cost-benefit analysis that means someone else will be worse off because of our decision. It's hard, but it's what people do. Often, it's what we must do. In doing so, though, it is essential that we hold ourselves and other people accountable as people for what we've done. Regardless of the rhetoric we often hear, the amalgamations of people who make up both governments and corporations have done some amazing and impressive things. Both have also done some horrendous and outrageous things. The people in charge, and the people who follow, are accountable in both circumstances.
In this instance, I am making a conceptual argument, not a legal one. There are legal regimes, sometimes effective, sometimes not, for holding both entities and their agents accountable for their actions (and rewarding them, where appropriate). How we think about corporations and governments and each other, though, has a broader impact. Without us -- all of us -- there are no corporations and there is no government. If we remember that, our responses to challenges are more likely to be more targeted, more effective, and more reasonable. Just because we don't always agree, doesn't mean we aren't all in this together. Whether we like it or not, we are, and it's time we acted like it.
Monday, April 14, 2014
In an opinion released earlier today, the D.C. Circuit Court struck down the SEC's Dodd-Frank Conflict Mineral Rule under the compelled speech doctrine for failing the least restrictive alternative prong.
We therefore hold that 15 U.S.C. § 78m(p)(1)(A)(ii) & (E), and the Commission’s final rule, 56 Fed. Reg. at 56,362-65, violate the First Amendment to the extent the statute and rule require regulated entities to report to the Commission and to state on their website that any of their products have “not been found to be ‘DRC conflict free.’”
Not striking down the need for information about conflict minerals, but rather the required approach, the Court suggested that:
[A] centralized list compiled by the Commission in one place may even be more convenient or trustworthy to investors and consumers. The Commission has failed to explain why (much less provide evidence that) the Association’s intuitive alternatives to regulating speech would be any less effective.
In August, 2012, the SEC released final Dodd-Frank rules for conflict minerals "requir[ing] companies to publicly disclose their use of conflict minerals that originated in the Democratic Republic of the Congo (DRC) or an adjoining country."
Delaware, like most states, has a provision in its corporate statutes allowing corporations to limit directors’ liability for breaches of fiduciary duty. Delaware section 102(b)(7) allows corporations to include in their charter “a provision eliminating or limiting the personal liability of a director to the corporation or its stockholders for monetary damages" for certain breaches of fiduciary duty.
A recent Delaware case plows a huge hole through the protection provided by a section 102(b)(7) charter provision. In the Rural Metro case [In Re Rural Metro Corp. Stockholders Litigation, 2014 WL 971718 (Del. Ch. Mar. 7, 2014)], the Delaware Court of Chancery held that a 102(b)(7) provision does not protect against claims that non-directors aided and abetted a duty-of-care violation by directors, even when the directors themselves are protected.
The Chancery Court’s reasoning is sound. Section 102(b)(7), and the associated charter provision, don’t say there’s no breach of fiduciary duty, just that directors aren’t personally liable for damages. The underlying conduct by the directors is still a breach of fiduciary duty, and injunctive relief is still available, just no money damages.Since there’s still a breach of duty, and the statute says nothing about the liability of aiders and abettors, the court concluded that aiders and abettors can still be liable if: (1) the directors breached their fiduciary duties; (2) the third party knew the directors were breaching their fiduciary duties; and (3) the third party participated in the breach.
The court ultimately held that RBC Capital Markets, LLC was liable for aiding and abetting. I can't do justice to the facts in the space available here; I highly recommend a reading of this important opinion.
The real question is whether the Delaware legislature will let this holding stand. The Chancery Court’s statutory reasoning is sound, but that doesn’t mean the result is necessarily good policy. Investment bankers, brokers, accounting firms, and other third party providers, perhaps even lawyers in some cases, are exposed to the risk of liability under this holding. Even if they ultimately win on the merits, as I suspect many will, the litigation itself will be costly. That cost will, of course, be passed on to the corporations using the services of those third parties.
There’s a possible gain associated with that cost, of course: the possible increased deterrence of breaches of fiduciary duty by corporate directors. But the Delaware legislature, in adopting section 102(b)(7), has already decided that other considerations outweigh the deterrent effect of imposing liability on the directors themselves.
Two Legislative Options
Plugging the Rural Metro hole is easy. A simple amendment to 102(b)(7) would do the trick. But how the Delaware legislature chooses to amend the statute (if it does) is important.
One way would be to authorize corporations to include provisions in their charters protecting not only directors, but also people who aid and abet violations by the directors. If that's all the Delaware legislature did, the protection from liability would not be automatic. Companies with 102(b)(7) exculpation provisions would have to amend their charters to protect aiders and abettors.
A simpler, neater solution would make the protection of aiders and abettors automatic. The legislature could just add a sentence at the end of 102(b)(7) providing that aiders and abettors are not liable when the directors themselves are protected from liability. Something like the following would work: “Unless otherwise specified in the certificate of incorporation, no person shall be liable for money damages for aiding and abetting an action protected by such a provision.” If the legislature did this, no further corporate action would be needed to make this protection effective. Only companies that did not want aiders and abettors protected would have to amend their charters.
Stay tuned to see what, if anything, the Delaware legislature does.
Sunday, April 13, 2014
My Akron colleague Bernadette Bollas Genetin recently posted “The Supreme Court's New Approach to Personal Jurisdiction” on SSRN, and I believe it may be of interest to readers of this blog. Here is the abstract:
This article provides an analysis of the Court’s two recent personal jurisdiction opinions, Daimler AG v. Bauman, 134 S. Ct. 746 (2014), and Walden v. Fiore, 134 S. Ct. 1115 (2014), and concludes that these cases suggest a new doctrinal approach to personal jurisdiction.
In Daimler AG v. Bauman, the Supreme Court narrowed the scope of general jurisdiction, making it available primarily in a corporation’s states of incorporation and principal place of business and rejecting, in most instances, the prior approach of permitting general jurisdiction based on a defendant’s “continuous and systematic” forum contacts. In Walden v. Fiore, the Court used an interest balancing approach to resolve the specific jurisdiction question at issue, turning away from its longstanding purposeful availment approach.
Together, these cases can be interpreted to reinvigorate the reasonableness analysis of International Shoe, in which the Court focused on the “relation among the defendant, the forum, and the litigation.” The Supreme Court has, famously, reversed course several times on its analysis of personal jurisdiction. The article concludes that the Court should, in the full range of specific jurisdiction cases, return to an analysis that considers all relevant interests, including the interests of the defendant, the plaintiff, and the state.
Saturday, April 12, 2014
Well, it's almost exam time at most law schools, and by the end of this week, I have to turn in my first exam to the registrar. I'm teaching Securities Litigation, and it's mostly a lecture course - the first time I've ever taught. I knew writing an exam would be difficult, but I didn't anticipate all of the types of issues I would experience.
Mostly, I'm trying to develop one or two solid issue-spotter-type questions for them to examine.
The first and most obvious concern is making sure that it has varying levels of difficulty, so that it distinguishes between students who are better and less-well prepared.
Additionally, since I haven't done this before, I need to make sure that it takes the right amount of time to complete - it's an 8 hour take home; I'm guessing that erring on the shorter side is preferable to longer, since I'm likely to underestimate the difficulty of the material.
I also find, as I develop the fact pattern, that it really forces me to confront which areas we did not cover extensively, and which areas we did (thus perhaps offering a guide for edits to the syllabus in the future) - for example, I keep discarding potential scenarios because I realize they would implicate too many issues we only touched on tangentially.
Part of the difficulty, I think, is that because the course is Securities Litigation, it includes both substantive securities doctrine, and a some civil procedure issues as they arise in the securities context. It's difficult to develop a realistic fact pattern that directs them toward precisely the topics we've covered without implicating the topics - particularly civil procedure topics - we have not covered.
Ultimately, I think I will have to sacrifice some degree of realism in order to make sure that the students' attention is directed in the right place, and I don't inadvertently end up testing them on how well they remember Civil Procedure topics they covered in other classes, but we did not discuss in my class.
Also, I have to just accept that there will be some parts of the course that simply won't be on the exam. So be it.
Friday, April 11, 2014
On March 24, the petition for certiorari was denied in the Strine v. Delaware Coalition For Open Government, Inc. case, ending the Delaware Court of Chancery's experiment with arbitration by their sitting judges. (H/T Brian Quinn).
As far as I know, however, sitting judges on the Delaware Court of Chancery still conduct mediation. A Chancellor or Vice Chancellor does not mediate his own cases, but rather mediates the cases assigned to one of the other four judges on the court (if the parties agree to submit to mediation).
More information about the Delaware Court of Chancery's mediation process is here. The benefits of the mediation include:
- Expertise. You would be hard pressed to find someone more knowledgable about Delaware corporate law and the merits of a Delaware Court of Chancery case than a sitting Delaware Chancellor or Vice Chancellor.
- Relatively Inexpensive. The fee is only $5,000 a day, for cases that are already on the Chancery docket, which is a decent amount of money, but is dwafted by the legal fees spent in almost all of these cases. For mediation only cases (cases not already on the docket), there is a $10,000 initial fee and a $5,000 for each additional day.
- Confidential. All mediation proceedings are strictly confidential.
These are many of the same main benefits as the Delaware Court of Chancery arbitration, but, of course, in mediation, the judge is not making a decision, but rather assisting the parties in reaching a voluntary settlement.
According to Steven Davidoff, in the Strine case, "the federal court found that the arbitration proceedings were effectively a civil trial, with no difference in judges, place or proceeding except the secrecy and the arbitral nature."
Mediation, however, is quite a bit different than a civil trial. While the comments of a sitting Chancellor may carry a lot weight with the parties, a mediator does not come to a determination for the party and the parties are able to walk away from the mediation at any time.
In short, judicial mediation carries many of the benefits of judicial arbitration, but the practice of judicial mediation seems to be more difficult to challenge.
Washburn University has posted an opening for an Assistant Professor of Legal Studies.
I know not everyone can move to Kansas, but when I was first on the market, I even applied to jobs like this one in Kuwait. If you really want to be a professor, you can't let location get in your way. Granted, I know I would have had to use my best negotiating skills to convince my wife to move to Kuwait (or Kansas).
The details of the Washburn University position can be found after the break.
Thursday, April 10, 2014
[I]t is counterproductive for investors to turn the corporate governance process into a constant Model U.N. where managers are repeatedly distracted by referenda on a variety of topics proposed by investors with trifling stakes. Giving managers some breathing space to do their primary job of developing and implementing profitable business plans would seem to be of great value to most ordinary investors. -Hon. Leo E. Strine Jr., Can We Do Better by Ordinary Investors? A Pragmatic Reaction to the Dueling Ideological Mythologists of Corporate Law, 114 COLUMBIA L. REV. 449, 475 (2014).
When was the last time you remember the U.S. Chamber of Commerce, the National Association of Corporate Directors, the National Black Chamber of Commerce, American Petroleum Institute, the Latino Coalition, Financial Services Roundtable, Center On Executive Compensation, and the Financial Services Forum joining forces on an issue? Well yesterday they signed on to a petition for rulemaking that was submitted to the SEC regarding the resubmission of shareholder proposals that “fail to elicit meaningful shareholder support.”
Shareholders who own at least $2,000 worth of a company’s stock for at least one year may require a company to include one shareholder proposal in the company’s proxy statement to all shareholders under Rule 14a-8(b) of the ’34 Act. Under Rule 14a-8(i)(12), companies may exclude shareholder proposals from proxy materials under thirteen circumstances, including but not limited to proposals that deal with substantially the same subject matter as another proposal that has been previously included in the company’s proxy materials within the preceding 5 calendar years and did not receive a specified percentage of the vote on its last submission. Specifically a company can exclude a proposal (or one with substantially the same subject matter) if it failed to receive 3% support the last time it was voted on if voted on once in the last five years, 6% if it was voted on twice in the last five years, and 10% if it was voted on three or more times in the past five years for resubmission. Note that the SEC itself proposed and then withdrew the idea of raising the threshold to 6%, 15% and 30% in 1997. The Resubmission Rule is supposed to protect the interests of the majority of shareholders so that a small minority cannot burden the rest of the shareholders with proposals that the majority have repeatedly expressed that they have no interest in and to ensure that management can focus on issues that are important to the company.
Why is this important? The petition includes the following enlightening statistics:
1) The two largest proxy advisory firms, Institutional Shareholder Services (ISS) and Glass Lewis command 97% of the market for proxy advisory firms meaning that they can, in the petitioners view, “dictate” what should be included in proxy solicitations. Proposals favored by ISS may receive up to 24.7% greater support than those do not have their support and proposals favored by Glass Lewis may receive up to 12.9% greater support, all independent of other factors.
2) According to the Manhattan Institute, since 2011, 437 shareholder proposals relating to questions of social policy have been submitted just to the Fortune 250. These proposals have been opposed by an average of 83.7% of votes cast.
3) Between 2005-2013, 420 shareholder proposals focusing on environmental issues were proposed to US companies but only one passed (I would note that many environmental issues never make it to the proxy because shareholders are now engaging with management earlier).
4) Between 2005-2013, 237 labor-related proposals were submitted to US companies. Only three proposals received majority support and the other 234 labor-related proposals received less than 20% support.
5) A Navigant study estimates that companies incur direct costs of $87,000 per proposal or $90 million annually in the aggregate.
6) The website shareholderactivist.com calls shareholder activism a "participatory sport" where investor activists submit similar proposals to multiple companies so that they can "advance a larger agenda.”
The petitioners argue that the current Resubmission Rule fails to protect shareholders and forces the majority of shareholders to “wade through and evaluate” numerous proposals that have already been “viewed unfavorably” by 90% or more of shareholders year after year and have no realistic likelihood of winning the support of a substantial number of shareholders. The petitioners recommend that the SEC reconsider the Resubmission Rule because the existing rule was adopted without cost-benefit analysis. To better serve shareholders, the petitioners contend that SEC should significantly increase the voting percentage of favorable votes a proposal must receive before the company is obligated to include a repeat proposal in subsequent years in its proxy. To read the Petition for Rulemaking click here. The comment period for the SEC will be open soon.
As a side note, my business associations class studied Rule 14a-8 and drafted their own shareholder proposals last week. I saw one of my students today and excitedly told her I was working on this blog post and that we were going to discuss this proposal on Monday. Her response- oh no- will we have to know this for the final? Must be the end of the semester.
April 10, 2014 in Business Associations, Corporate Governance, Corporations, Current Affairs, Financial Markets, Law School, Marcia L. Narine, Securities Regulation, Teaching | Permalink | Comments (0)
Continuing with the theme, I want to highlight a new hybrid resource, JURIFY, which is a mostly-free, online transactional law resource.
“Jurify provides instant access to high-credibility, high-relevance legal content, including forms and precedent in Microsoft Word® format written by the world’s best lawyers, white papers and webinars from top-tier law firms, articles in prestigious law journals, reliable blog posts and current versions of statutory, regulatory and case law, all organized by legal issue.”
Here are the stats: Jurify, launched in 2012, covers 5 broad transactional areas: General Corporate, Governance, Mergers & Acquisitions, Securities and Startup Companies. The 11,000+ sources that the website currently contains have been verified by transactional attorneys and generated from free on-line platforms or submitted by private attorneys who are voluntarily sharing their work. Documents are organized according to 586 tags. Three transactional attorneys started this website (husband/wife duo and their former law-firm colleague); none take compensation from editors, publishers or law firms.
Jurify is a unique transactional law resource for the following reasons:
- FREE (mostly). Website contents including primary law, secondary sources and template agreements and forms. All content is searchable; most is free; some templates/forms, available in Microsoft word version, require either a fee or a paid membership. In the future, Jurify founders hope to generate revenue by providing performance metrics and career services components.
- Emphasis on Primary Sources—collecting the most current and complete versions of governing statutes, and here is the important part—putting relevant sources together. Want to find out registration obligations? A search on Jurify will pull from several different sources to give you a comprehensive look at the governing law.
- Organization. The website resources are organized in a consumer-friendly, vertically integrated platform (like the searching functions on YouTube). If you search for one term of art, (the example used was break-up fees), the search results pull all related terms of art (i.e., termination fees, reverse break-up fees, etc.). The data base has been encoded with 1600 corporate law synonyms in the platform to facilitate more robust natural language searches.
- Multiple search modes (i.e., accessible for the novice). Non-experts can search for information using tags and drop down boxes to sort information by source type (news articles, videos, journals, statutes and regs, etc.). The site also includes a glossary of terms, and those terms serve as searchable categories that have documents associated with them.
- Narrowing the field. You don’t need every document- you just need the right document. Researchers can narrow search results through subcategories, which include definitions on all of the subcategories to assist the non-expert (i.e., students, generalist attorneys like some in-house teams). Within general categories, researchers can also conduct granular searches within a topic and can narrow by specific fields (i.e., M&A).
- Sorting the results. Search results are displayed in order of relevance. Relevance, in Jurify, is determined by the tags assigned by Jurify attorneys reviewing and labeling each document in the database. While a document may have 15 tags, 2 or 3 tags will be the primary tag, and the document will be flagged as “noteworthy” for that particular topic. The idea is that you review the most relevant documents first not just any document that contains any reference to your search fields.
- Networking Component. Some of the documents are voluntarily provided by practicing attorneys and their names remain associated with the document(s). If an attorney wants to establish herself as an expert in an area, she may do so in part, by contributing high-quality documents on that topic. Top contributors are highlighted on the website, using in part, a Credibility Score. In the future, a ranking/review feature will be added so that users can provide feedback on the quality/relevance of a document as well.
Erik Lopez, co-founder of Jurify, contacted the BLPB editors earlier this spring. As a result, I test drove the site with Erik a few weeks ago, which formed the basis of my comments above. Thanks Erik! (Note: Neither BLPB nor I, individually, received any compensation as a result of this post. I am passing it along because I genuinely am intrigued by the platform, business model, and potential for the website to be a valuable transactional resource.)
If anyone currently uses Jurify, or test drives the site after reading this post, please share your experience in the comments.
Wednesday, April 9, 2014
On March 27th, SEC commissioner Daniel M. Gallagher’s delivered the keynote address at the 26th Annual Corporate Law Institute at Tulane University Law School. Addressing the intersection of governance and securities disclosure, Commissioner’s Gallagher’s remarks (available here) are summarized below:
Dodd Frank increased the federalization of corporate law.
“This mandated intrusion into corporate governance will impose substantial compliance costs on companies, along with a one-size-fits-all approach that will likely result in a one-size-fits-none model instead.”
Shareholder proposals are costly, problematic and used by only a small group of shareholders with particular interests and agendas that may not be alligned with other shareholders. Citing first to the 41% increase in shareholder proposals post Dodd-Frank, and the meager 7% passage rate, Commission Gallagher outlined which shareholders use the proposal process and the punch line is that only 1% are brought by ordinary institutional investors.
- 34% are from organized labor;
- 25% are from social, policy or religious institutions; and
- 24% of the proposals were brought by just two individuals whom the Commissioner described as “corporate gadflies.”
The shareholder proposal process should be reformed by narrowing the scope of those eligible to bring proposals and the subject matter of the proposals.
- Increase holding amounts and time (specifics not provided);
- Clarify the application guidelines for the “ordinary business operations” exclusion and the “significant policy issue” exception to the exclusion;
- Have commissioners vote on exclusions, not leave it to the staff;
- Create greater authority to exclude misstatements; and
- Substantially strengthen resubmission thresholds (suggesting a three strikes you are out rule).
While not a heading of the remarks, another clear take away is the Commissioner’s stance against viewing climate change as a serious policy issue and that conflict mineral reports do not “provide investors with the information they need to make informed investment decisions.” To further this point, he discredited third parties, like the Sustainability Accounting Standards Board, as having no role in shaping disclosure requirements.
You should read the full remarks, if nothing else, for this line: “Mike D. of the Beastie Boys—who, by helping to bring the proposal to a vote, at least succeeded in his fight for the right to proxy.”
Tuesday, April 8, 2014
So, I am the fourth of our bloggers (here, here, and here), among others, to write on FOMO (fear of missing out), and I almost didn’t write this post for fear that my FOMO on the topic was the motivation: FOMO of FOMO. I decided that wasn't the reason and that it was worth writing (at least for me).
FOMO has always been an issue for me. I have always been a researcher, and I don’t mean just in the scholarly sense. When I look for a car (and I really like cars), everything is on the table. Few people know more about the various options and configurations of vehicles on the market than I do. It shows when I shop; I have never bought a car from someone who knows more about the product than I do. (They know more about selling cars than I do, but not about the cars themselves.)
This need to try to get it right (a common cause of FOMO) has mixed returns. I never blow the budget on the car, which means I always know what I am missing. Thus, my FOMO ensures in some instances that I will, in fact, miss out. When it comes to cars, this is not really that important in the big scheme of things. But for other personal and professional decisions, it can have an impact.
This concept has been explained well by Psychologist Barry Schwartz. I read his book, The Paradox of Choice: Why More is Less in 2010, and it helped explain a number of things to me. (You can also see Schwart’z TED Talk here.) I can’t say Schwartz helped me get rid of my FOMO, but it did help understand what’s going on. He explains:
Part of the downside of abundant choice is that each new option adds to the list of trade-offs, and trade-offs have psychological consequences. The necessity of making trade-offs alters how we feel about the decisions we face; more important, it affects the level of satisfaction we experience from the decisions we ultimately make.
I think such decisions can be especially hard for academics, though I appreciate what good fortune I have to have this “problem.” One of the reasons I wanted to become a law professor was so I could make the choices I face so regularly. I have great latitude, if not full freedom to choose what I research, what I write about, and what I teach. In practice, I did not have that kind of freedom, most of the time, and one of the many things I love about my job is that freedom. Still, as Schwartz explains, such options come with psychological consequences.
I also have flexibility in my job that I never had before. It’s easier, though not always possible, for me to participate in my children’s lives at school. I want this, and I often have the option to write or prepare for class in off hours so I can participate in their activities. Many people don’t have that flexibility, and I know I am lucky. I appreciate that flexibility, but it still points out more clearly when I have prioritized either work or family, and that’s not always pleasant in either direction. My wife and I are both on the faculty, too, so there are times when one of us must miss out on something professionally because of family obligations, at least when we aren’t able to make other arrangements.
I try to keep in mind that the whole FOMO concept, while real, is also in many ways a problem of relative affulence. We are fortunate to be healthy, and have healthcare. I don’t have to worry about whether we have food, clothes, or shelter. I get to worry about whether I should do another edit, write another chapter, revamp my lesson plan, or go to my son or daughter’s read aloud. I am now trying to remember how fortunate I am to have such choices in the first place rather than worry about the choice itself. As a friend and colleague likes to say, Good Enough is the New Perfect.
In closing, I’ll go back to some advice Barry Schwartz gives on avoiding social comparisons in assessing ourselves. He says:
1. Remember that “He who dies with the most toys wins” is a bumper sticker, not wisdom.
2. Focus on what makes you happy, and what gives meaning to your life.
Monday, April 7, 2014
My co-bloggers Haskell Murray and Anne Tucker recently posted their views on FOMO (“fear of missing out”) and family. See here and here. As an old guy, I didn’t know what FOMO meant until Haskell defined it, but I think the issues Haskell and Anne raise about balancing work and personal time are important.
My youngest child is almost 24 years old, so it’s been a while since I had to face the conflict between my professional life and raising a family. But it was a tough struggle. I decided to leave my job as a corporate litigator and enter legal education after I missed two consecutive Easters with my children due to hostile takeover cases. I loved the work, but I loved the time with my family more.
When I began teaching, I had three young children (4 months to 4 years old), and a fourth child was born three years later. I decided to pack as much work as I could into an 8:00-5:00 workday, and spend as much of the the rest of my time as I could with my kids.
It wasn’t always easy. I sometimes had to remind myself that my job was just a job and my children were my life.
Did I miss out on some professional opportunities? Absolutely. Would my scholarship and teaching have been better if I had devoted 70 hours a week to them? Probably.
But, in the final analysis, the most important thing is whether you can look your children in the eyes and say, “I tried to do my best for you.” Career is secondary. As I look back, it’s not the brilliant articles or the insightful analyses I remember. It’s the precious moments with my family. I wouldn’t trade any of those moments for professional acclaim.
As an aside, I think Haskell and Anne have their priorities clear, or they wouldn't be think about these issues at all. In my experience, the people who get it wrong often don't even realize they're making a tradeoff.
Sunday, April 6, 2014
Over at the Harvard LSFOCGAFR, Stephen Cooke, partner and head of the Mergers and Acquisitions practice at Slaughter and May, has posted a fascinating review of “10 Surprises for a US Bidder on a UK Takeover.” It’s a bit long for a blog post (16 printed pages on my end), but well worth the time if you have any interest at all in the subject matter. What follows is a very brief excerpt, which is really just a teaser in light of the excellent depth of treatment the post provides. Given my latest project, "Corporate Social Responsibility & Concession Theory," I find # 7 to be of particular interest.
Takeovers in the UK are in broad terms decided by the Target’s shareholders, with the Target Board rarely having decisive influence …. Unlike in the US, the Target Board is not the gatekeeper for offers. A Bidder may take its offer direct to shareholders and the Board has no power to block or delay an offer …. The Takeover Code (the “Code”) reflects this environment and, although changes were made post-Cadbury to reflect the interests of non-shareholder stakeholders, it remains a body of rules embodying the pre-eminence of shareholders….
1…. [I]n the UK: a potential Bidder may be publicly “outed” before it is ready to announce its offer; once outed, a potential Bidder is required to either announce a firm offer or withdraw (“put up or shut up”) within a specified period; and once a firm offer is made, there is a time limit within which the offer must succeed or fail….
2…. In the UK … you cannot combine … transaction structures and must either obtain 90% acceptances or proceed by way of the UK nearest equivalent to a merger…. There is no concept of statutory merger in the UK…. Therefore, any acquisition of a UK public company takes place through the acquisition of shares in the Target by the Bidder. This is effected either by a tender offer (referred to in the UK simply as “an offer”) or by the nearest UK analogue of a US-style merger, a “scheme of arrangement”.
3…. [I]n the UK … rules on equality of information require that any information or access to management provided by a Target to one Bidder or potential Bidder is made available on request to any other Bidder or bona fide potential Bidder, whether or not welcome….
4…. In … 2011, the Panel introduced a general prohibition on break fees (along with various other deal protection measures) in UK takeovers as part of its response to the demands from some quarters (following the Kraft/Cadbury takeover) that the balance of negotiation power be shifted away from Bidders and in favour of Targets….
6…. In the UK … financing conditions [are] prohibited (except in very limited circumstances) ….
7…. In the UK … a Bidder is required to disclose its intentions as regards the future of the Target’s business and the impact its bid may have on the Target’s employees in its offer document. In addition, the Bidder must make equivalent disclosures in respect of its own future business, employees and places of business where these are affected by the offer…. [T]he Panel has signalled a tougher approach to enforcement in this area and has stated that it expects to investigate complaints from any interested person, which would include trade unions, employee representatives and political representatives. It is also worth noting that breaches of this section of the Code can attract criminal liability as well as the more usual range of Panel disciplinary measures….
Saturday, April 5, 2014
As I write this on Friday night (to be posted automatically on Saturday morning, during which time I will be in transit), ILEP's latest symposium, Business Litigation and Regulatory Agency Review in the Era of the Roberts Court, is just concluding (you can see a list of the papers presented here, which I believe will all eventually be published in the Arizona Law review).
The biggest subject for discussion was basically the future of the securities class action - or any kind of business litigation, really - given not only the potential of Halliburton to eliminate or severely restrict securities class actions, but given recent decisions like this one upholding a mandatory arbitration provision unilaterally adopted into a REIT's bylaw.
The final panel, and thus the one freshest in my mind, explored whether states have the ability under the Federal Arbitration Act to limit the power of corporations to impose mandatory arbitration to resolve shareholder disputes. I think that's a really interesting question - whether either states can, as a function of their ability to regulate corporations, flatly forbid the adoption of mandatory arbitration agreements in corporate charters and bylaws, in the same way they otherwise regulate corporate governance matters. The FAA's nondiscrimination provisions only apply to contracts, so states' power in this regard turns on whether regulation of corporate governance and the limits of directorial power counts as a type of contractual regulation, or not. There was also a lot of discussion about whether the fact that directors have fiduciary obligations to shareholders - rather than a mere contractual relationship - gives states more of a regulatory power over their behavior (and their ability to adopt arbitration provisions) than the FAA might otherwise prohibit.
The only real question is how quickly this question gets answered. On the one hand, there seemed to be a sense of the room that it will take time for these issues to bubble up throught the courts - and maybe that's right, especially if multiple states' law has to be interpreted. And of course, the above-linked case arose in the context of the Commonwealth REIT - except the trustees' adoption of the mandatory arbitration bylaw did not, in fact, work out well for them, and may serve as a cautionary tale for corporate directors considering similar actions in the immediate future.
On the other hand, sometimes the law is developed much more quickly than anyone expects - witness the gay marriage cases, which no one would have predicted a few years ago. This immediate decision from the District of Massachusetts upholding the REIT bylaw (and the Maryland decision on which it rests) may be the proverbial camel's nose....
Friday, April 4, 2014
Tyler Cowen has more on the value of high-frequency trading here.
By the way, if you're not familiar with Tyler Cowen's blog, Marginal Revolution, you should check it out. Cowen is an economist at George Mason University and he always has interesting things to say on issues of public policy. I don't always agree with him, but his comments are always thought-provoking.