Saturday, August 27, 2016
I’ve been fascinated by the efforts of various state attorneys general to investigate Exxon for securities fraud on the ground that its climate change denial misleads investors about the risks of investing in the company. Exxon has filed a lawsuit in Texas to halt the inquiries, arguing that they infringe on its free speech rights, and Congressman Lamar Smith, head of the House science committee, has subpoenaed the attorneys general involved, to determine if this is a coordinated political attack on the company. The dispute has even made it into the Democratic party platform, which states that “All corporations owe it to their shareholders to fully analyze and disclose the risks they face, including climate risk. … Democrats also respectfully request the Department of Justice to investigate allegations of corporate fraud on the part of fossil fuel companies accused of misleading shareholders and the public on the scientific reality of climate change.”
An investigation by the Virgin Islands was dropped; as far as I know, both the New York and Massachusetts investigations continue, and investigations by other states. Exxon’s lawsuit remains pending.
It’s not a new idea, to claim that securities regulation impinges on free speech rights – the DC Circuit struck down part of the SEC’s conflict minerals rule on just that ground – but usually these arguments are aimed at rules that require issuers to speak, or prohibit issuers from making truthful statements. The Exxon case is unusual because it comes in the context of, well, false statements.
At the same time, though, one cannot help but suspect that the real concern isn’t investors, but the nature of Exxon’s participation in public political debates.
[More under the jump]
Friday, August 26, 2016
During the past few days, I have participated in a lot of meetings.
This has led to some thinking on what makes a good meeting.
To me, a useful meeting is one that accomplishes things that could not be handled appropriately by an e-mail. Some meetings are held, I am convinced, because those calling the meetings are not sure that participants read and pay attention to e-mails. This worry could be best addressed, in my opinion, by making expectations regarding e-mail management clear, perhaps coupled with consequences for those who ignore the contents.
That said, e-mail is not appropriate in all cases and here are four categories where in-person meetings can work better than e-mail:
- Inspire. Perhaps some can be inspired over e-mail, but it seems much easier to inspire in person. As such, I think some good meetings can be used to inspire participants to achieve organizational goals. But inspiring others, especially sometimes cynical professors, can be difficult to do.
- Build Relationships. Sometimes the only times you see certain colleagues are at faculty meetings, so meetings can be a good way to build relationships, especially if folks hang around before and after meetings or if significant time is given for small group discussion.
- Engage in Group Discussions. E-mail is pretty good for one-way communication, but as anyone who has been on a group e-mail with hundreds of replies knows, e-mail isn’t great for dynamic group conversation. As such, it may make sense to have meetings when a group needs to converse about working through an issue. That said, preparation for the meeting can often be done alone, and the lion-share of the conversation can be done in small groups.
- Engage in Difficult Conversations. When tone is important, e-mail is often inadequate. Thus, in-person meetings may be important for communication of sensitive or controversial information.
When meetings focus on things that cannot be done remotely, I think meetings can be quite useful. Similarly, when teaching, we should think – what is it that students cannot get through an e-mail, the internet, or an online class? We should focus on those things. As such, I am trying to do even more interactive projects and small group discussions in class this semester.
Thursday, August 25, 2016
I’m now in my third year of teaching on the tenure track after two years of a VAP. I still consider myself a newbie because despite over twenty years of practice experience, teaching is a whole different ball game.
This semester I am teaching Civil Procedure, which is now a one-semester 4-credit class instead of a two-semester class, and a 4-credit Business Associations class. Both are required at my institution and bar tested in Florida. I have taught them both before and thankfully get strong reviews from my students, but I am always looking to improve.
To that end, I recently took a look at Emily Grant’s essay, Beyond Best Practices: Lessons from Tina Stark About the First Day of Class. The abstract states:
This Article reviews and expands the literature on best practices in a narrow subset --- the first day of class. As the same time it seeks to convey words of wisdom from one of the most well-known and highly-regarded legal educators: Tina Stark, a giant in transactional drafting. The first day of any law school class can be fraught with tension and nerves, even for professors. This article presents advice from Professor Stark, supplemented with guidance from best practices research, so that professors can take advantage of the opportunities that the first day of class offers to set the tone for a successful semester.
I haven’t adopted all of the suggestions-- I don’t think it’s wise, for example, for an untenured professor to have students use my first name. However, I have used some variation of her techniques to make students more comfortable both before and during class. I continue to find value in the survey that I send to students prior to the semester so that I can ascertain their level of understanding of business concepts, their learning objectives, and their expected area of practice. For the first time this semester, I will send an anonymous survey after the midterm asking students what they think is working and what they think needs improvement. I may not take all of the students’ suggestions, but because I am trying new things this semester including more graded quizzes and a flipped classroom, I don’t want to waste time using ineffective techniques.
Like Stark, I also share a “humbling story” on the first day of class. This is especially important for many of my Business Associations students who fear anything related to math, numbers, or accounting. I explain my career path as a litigator and how it was naively designed to avoid interaction with complex business topics. I also discuss how what we learn will help the family, criminal, and litigation-minded students who don’t understand how this course will apply to them after the bar.
Stark focuses on a collaborative classroom and team grading, and I do as well. For the first time, I have flipped the classroom in both Civil Procedure and Business Associations, and therefore the students see my PowerPoints and helpful videos prior to class. During class we apply what they have learned. They work in law firms during class where they caucus to determine a team answer to the problems sets I have given them in advance or they work on new problems or drafting exercises based on what they have reviewed prior to class.
Stark brings in homemade brownies for her students. I’m too lazy for that so I will bring in energy bars and Vitamin C before midterms and finals, and buy lunch or bagels for students who show up to my marathon review sessions. I agree with Stark’s view that making the students feel comfortable in a supportive learning environment makes them more apt to ask questions both in class and during office hours.
I recommend the article even though many of you may be past the first day already or veteran educators. I also welcome any suggestions that you have found helpful in improving the learning environment. Please leave comments below or email me offline at firstname.lastname@example.org
Wednesday, August 24, 2016
Increasing business demands are prompting companies to expand into new products and markets. Businesses also are engaging in mergers, acquisitions and joint ventures; issuing securities; and performing other transactions associated with business growth, which results in larger corporate teams. Many companies have a need for additional in-house legal professionals who are readily available to help manage mounting financial and industry-related regulations. Moreover, corporate legal departments often prefer to handle more routine legal work in-house and retain the services of outside counsel for specialized legal work.
Real estate, IP, health care and compliance were also mentioned along with the noted strong growth in litigation. The full report/study is available here: Download Legal_2016_job_salary_guide.
Tuesday, August 23, 2016
I am still working my way through this new paper, Seeking an Angle of Repose in U.S. Business Organization Law: Fiduciary Duty Themes and Observations, from J. William Callison of Faegre Baker Daniels LLP. It's an interesting premise, and worth a look. Here's the abstract:
This article applies liberal, neoliberal, critical, feminist and communitarian political theories to limited liability company and partnership fiduciary duty law; discusses developments in that law over the last two decades by focusing on theory; suggests a pragmatic and balanced approach to fiduciary duty law that incorporates desirable features of different approaches; and suggests that law, as developed in uniform acts, has been moving toward a balanced approach.
The paper is available here: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2827771
Monday, August 22, 2016
We are now more than three months into the Title III crowdfunding experiment. I have been wanting to get back to posting on Title III crowdfunding since my "LIVE" post back in May, but so much other fun stuff has been going on! So, to make me feel a bit better on that point, I will share some current crowdfunding data with you all in this post based on publicly available information obtained from a Westlaw search performed yesterday (Sunday, August 21, 2016). [Note to the powers that be at the SEC: EDGAR makes it hard to find the aggregated set of Form C filings unless you are collecting data on an ongoing basis. I hope that changes as EDGAR continues to improve . . . .]
At the outset, I will note that others have offered their own reports on Title III crowdfunding since I last posted (including here, here, and here). These reports offer some nice summaries. This post offers a less comprehensive data dump focusing in on completed offerings and withdrawn offerings. At the end, I offer some limited observations from the information provided here about crowdfunding as a small-business capital-raising alternative, the need for EDGAR adjustments, inferences about the success of Title III crowdfunded offerings, and platform disclosure about withdrawn offerings.
First, however, the top-level Westlaw-based summary:
Total Form C filings: 85 (275 filings show on Westlaw, but only 85 are non-exhibit filings representing distinct offerings)
Total Form C/A filings (amendments, including exhibit filings): 153
Total Form C-U filings (updates): 4
Total Form C-W filings (withdrawals): 2
The remainder of this post takes a shallow dive into the updates and withdrawals. Filings in each case are presented in reverse chronological order by filing date. All referenced dates are in 2016. Issuer names are copied from filings and may not be the actual legal names of the entities.
Sunday, August 21, 2016
Saturday, August 20, 2016
Upper level classes start next week, and I am scrambling to prepare. So for my post, I’ll just drop some quick links to things I found interesting this week:
First, a nice long read for Saturday: How Lending Club’s Biggest Fanboy Uncovered Shady Loans. This is a deep dive into the story of a retail investor who dug into Lending Club’s loan data – and discovered that Lending Club was padding its loan data before the company confessed publicly. He also seems to have discovered a pattern of repeat borrowers that the company has never disclosed.
Second, here is an editorial by a Deutsche Bank risk-officer-turned-SEC-whistleblower who says he is rejecting his reward, out of disgust that the company – and its shareholders – will be paying the fines that rightly should be charged to the company’s executives. He blames the SEC's “revolving door,” pointing out that top SEC lawyers had formerly been employed by Deutsche Bank (though they were recused from the investigation). The gesture would be slightly more impressive if it didn’t turn out that most of his reward is going to his lawyers, the experts he hired, and his ex-wife as part of his divorce settlement, and he doesn’t have the legal power to turn it down. But he totally would if he could.*
Third, the jurors in the Sean Stewart insider trading trial report that their deliberations took a long time because they couldn't quite decide if the defendant received a "personal benefit" under United States v. Newman standards by passing tips to his father. Obviously, whether a "benefit" is even necessary for a relationship this close is something that the Supreme Court is set to determine in Salman v. United States; in the meantime, it seems as though courts in New York are stuck asking about the quid pro quo between fathers and sons. Harsh, man. Couldn't the prosecutors have just argued that the father gave his son life?
*okay, I might be being unfair; his award is in excess of $8 million, so even after paying off everyone else, he may be rejecting a sizeable sum. Still, it's funny that he's trying to turn down money that, um, belongs to his ex-wife.
Friday, August 19, 2016
The concept of private prisons has always seemed off to me. Prisons have a role in society, but the idea of running such institutions for profit, it seems to me, aligns incentives in an improper way. The U.S. Justice Department apparently agrees and said yesterday that it plans to end the use of private prisons. The announcement sent stocks tumbling for two private prison companies, Corrections Corp. of America (CCA) and GEO. Both dropped as much as 40% and remain down more than 30% from where they were before the announcement.
Obviously, this can't make shareholders happy, but I figured this had to be a known risk. I was right -- CCA's 10-K makes clear that such government decisions related to future contracts could lead to a reduction in their profitability. So, the disclosure seems proper from a securities regulation perspective. Still, reading the disclosure raises some serious questions for me about the proper role of government. I frankly find this kind of outsourcing chilling. For example, CCA states:
Our results of operations are dependent on revenues generated by our jails, prisons, and detention facilities, which are subject to the following risks associated with the corrections and detention industry.
We are subject to fluctuations in occupancy levels, and a decrease in occupancy levels could cause a decrease in revenues and profitability. . . . We are dependent upon the governmental agencies with which we have contracts to provide inmates for our managed facilities.
. . . .
We are dependent on government appropriations and our results of operations may be negatively affected by governmental budgetary challenges. . . . [and] our customers could reduce inmate population levels in facilities we own or manage to contain their correctional costs. . . .
The idea of "customers" in this contest simply does not sit well with me. It suggests a desire for something that is not a positive. CCA's 10-K continues:
Competition for inmates may adversely affect the profitability of our business. We compete with government entities and other private operators on the basis of bed availability, cost, quality, and range of services offered, experience in managing facilities and reputation of management and personnel. While there are barriers to entering the market for the ownership and management of correctional and detention facilities, these barriers may not be sufficient to limit additional competition. In addition, our government customers may assume the management of a facility that they own and we currently manage for them upon the termination of the corresponding management contract or, if such customers have capacity at their facilities, may take inmates currently housed in our facilities and transfer them to government-run facilities. . . .
Competition is a good thing in many (I think most), but this is not one of them. These companies are responding to the existing demand for prison services, but there can be no question the real opportunity for market growth is to increase demand for such services (e.g., increase the number of prisoners, seek longer sentences). This, too, is made clear in the disclosures:
Our growth is generally dependent upon our ability to obtain new contracts to develop and manage new correctional and detention facilities. This possible growth depends on a number of factors we cannot control, including crime rates and sentencing patterns in various jurisdictions, governmental budgetary constraints, and governmental and public acceptance of privatization. The demand for our facilities and services could be adversely affected by the relaxation of enforcement efforts, leniency in conviction or parole standards and sentencing practices or through the decriminalization of certain activities that are currently proscribed by criminal laws. For instance, any changes with respect to drugs and controlled substances or illegal immigration could affect the number of persons arrested, convicted, and sentenced, thereby potentially reducing demand for correctional facilities to house them. Immigration reform laws are currently a focus for legislators and politicians at the federal, state, and local level. Legislation has also been proposed in numerous jurisdictions that could lower minimum sentences for some non-violent crimes and make more inmates eligible for early release based on good behavior. Also, sentencing alternatives under consideration could put some offenders on probation with electronic monitoring who would otherwise be incarcerated. Similarly, reductions in crime rates or resources dedicated to prevent and enforce crime could lead to reductions in arrests, convictions and sentences requiring incarceration at correctional facilities.
CCA does note that their "policy prohibits [them] from engaging in lobbying or advocacy efforts that would influence enforcement efforts, parole standards, criminal laws, and sentencing policies." These disclosures, though, sure make clear what kind of policies their shareholders would want to support.
I don't have any illusion that government run prisons are much (if any) better, but I do think that government's incentives are at least supposed to be aligned with the public good when it comes to the prison system. I often think government should take a more limited role than it does when it comes to regulations. That is especially true when it comes to criminal law. But privatizing prisons is not reducing the role of government in our lives -- it is simply outsourcing one key portion of the government's role. Private prisons do not equate to smaller government. Fewer laws, or relaxed enforcement and punishment, do. If the government is paying for it, it's still a government program.
Here's hoping that the reduction in use of private prisons leads to a reduction in the use of all prisons. Let's save those for truly the dangerous folks.
Belmont University starts classes on Wednesday. Below I share a few tips for new students. Josh posted a good list earlier this week, but my list is a bit different, perhaps because I teach primarily undergraduate and graduate business students. None of these is new or earthshattering, but, like many simple things, they remain difficult to put into action.
- Be Professional. As I often tell my students, you start building your reputation in school. I have declined business opportunities from former classmates because I remembered how they conducted themselves in school. Be on time, be prepared, be thoughtful, and be honest. We should recognize that people change over time and be open to giving second chances, but, unfortunately, not everyone will be quick to change an opinion they form of you while you are in school.
- Get to Know Your Classmates and Your Professors. Building relationships is an important aspect of personal and professional life. It is tempting to just put your head down in school and not spend time trying to form strong bonds. An incredible number of students never meet with their professors or only meet with them right before a project or an exam. Professors and classmates are worth getting to know as an end in and of itself, but can also have tangible benefits like better recommendation letters and client referrals.
- Use Laptops Carefully, If At All. There is a growing body of research that shows taking handwritten notes is better for learning the information than typing. For law students, I understand that it can be helpful to have your notes typed to jumpstart your outlines, but, at the very least, disable your internet connection while in class. We are not as good at multitasking as we think.
- Outline Early and Do Practice Tests. Staying on top of your outlining will give you a bit of time later in the semester to do practice tests. In graduate school, most students can memorize the course materials, but practice applying the material properly is often what propels students into the "excellent" category.
- Work Hard, but Schedule Breaks and Take Care of Yourself. It took me a while to learn this, but you actually perform better when you work hard and take care of yourself. For me, this means at least 7 hours of consistently placed sleep, nutritious meals (including breakfast), exercise at least 4x a week, and one day a week detached from work. Even during law school, I consistently put my books down for one 24-hour period during the week (with an exception for the exam period). Some students need to be reminded to work harder; law school should require the work of a full-time job in my opinion. Other students, however, get caught up in the competition and the rigor, and forget the importance of taking care of themselves.
Hope the fall semester is good to all our readers.
Thursday, August 18, 2016
There has been a lot of debate online about Ryan Lochte (#LochteGate or #LochMess) and whether he and his swimming friends were actually robbed in Rio after their Olympic events had finished. See here, here, and here for some of the commentary.
While I agree that jail time is unlikely based on the facts available at this time, Lochte's endorsements could be at risk. Earlier this year, I blogged about morals clauses in endorsement contracts. If Lochte's contracts include morals clauses (as many do), and if he lied about the robbery, it is possible that he may lose some lucrative endorsements deals. It is still not clear what the motive for lying was (if they did lie). I assume we will learn more in the next few days.
Update: Speedo and Ralph Lauren dropped (or are not renewing) sponsorship of Ryan Lochte. Spokespeople for both companies cited Lochte's statements about the occurrence in Rio. My wife let me know that some are now calling Lochte "Swim Shaddy."
Wednesday, August 17, 2016
If it is true that “a good thing cannot last forever,” the recent turn of events concerning appraisal arbitrage in Delaware may be a proof point. A line of cases coming out of the Delaware Court of Chancery, namely In re Appraisal of Transkaryotic Therapies, Inc., No. CIV.A. 1554-CC (Del. Ch. May 2, 2007), In re Ancestry.Com, Inc., No. CV 8173-VCG (Del. Ch. Jan. 5, 2015), and Merion Capital LP v. BMC Software, Inc., No. CV 8900-VCG (Del. Ch. Jan. 5, 2015), have made one point clear: courts impose no affirmative evidence that each specific share of stock was not voted in favor of the merger—a “share-tracing” requirement. Despite this “green light” for hedge funds engaging in appraisal arbitrage, the latest case law and legislation identify some new limitations.
What Is Appraisal Arbitrage?
Under § 262 of the Delaware General Corporation Law (DGCL), a shareholder in a corporation (usually privately-held) that disagrees with a proposed plan of merger can seek appraisal from the Court of Chancery for the fair value of their shares after approval of the merger by a majority of shareholders. The appraisal-seeking shareholder, however, must not have voted in favor of the merger. Section 262, nevertheless, has been used mainly by hedge funds in a popular practice called appraisal arbitrage, the purchasing of shares in a corporation after announcement of a merger for the sole purpose of bringing an appraisal suit against the corporation. Investors do this in hopes that the court determines a fair value of the shares that is a higher price than the merger price for shares.
In Using the Absurdity Principle & Other Strategies Against Appraisal Arbitrage by Hedge Funds, I outline how this practice is problematic for merging corporations. Not only can appraisal demands lead to 200–300% premiums for investors, assets in leveraged buyouts already tied up in financing the merger create an even heavier strain on liquidating assets for cash to fund appraisal demands. Additionally, if such restraints are too burdensome due to an unusually high demand of appraisal by arbitrageurs seeking investment returns, the merger can be completely terminated under “appraisal conditions”—a contractual countermeasure giving potential buyers a way out of the merger if a threshold percentage of shares seeking appraisal rights is exceeded. The article also identifies some creative solutions that can be effected by the judiciary or parties to and affected by a merger in absence of judicial and legislative action, and it evaluates the consequences of unobstructed appraisal arbitrage.
The Issue Is the “Fungible Bulk” of Modern Trading Practices
In the leading case, Transkaryotic, counsel for a defending corporation argued that compliance with § 262 required shareholders seeking appraisal prove that each of its specific shares was not voted in favor of the merger. The court pushed back against this share-tracing requirement and held that a plain language interpretation of § 262 requires no showing that specific shares were not voted in favor of the merger, but only requires that the current holder did not vote the shares in favor of the merger. The court noted that even if it imposed such a requirement, neither party could meet it because of the way modern trading practices occur.
August 17, 2016 in Anne Tucker, Business Associations, Case Law, Corporate Finance, Corporate Governance, Corporations, Delaware, Financial Markets, Private Equity, Shareholders | Permalink | Comments (0)
Tuesday, August 16, 2016
Whether we're ready or not (we mostly are), classes start tomorrow for West Virginia University College of Law. Orientation for new students started last week, and I had the chance to teach a group of our new students. I had three sessions with the group where we discussed some cases, how to brief a case, and did some writing exercises. It's been a while since I worked with first-year students, and it was a lot of fun.
In addition to the assigned work, I answered a lot of questions, in and out of the classroom. Questions focused mostly on how to succeed as a law student. Although there's plenty of advice on the internet, and whole books dedicated to subject, and even my own blog posts. Last year, I provided my Ten Promises For New Law Students to Consider. This year, I had enough similarly themed questions, that I thought I'd add some detail to my basic advice for new law students.
1) Do the work.
Some students ask -- if I work law school like a job, is that a good idea? As with everything, it depends. I don't know how you work. If you work regular hours, every day, where you focus on the task before you, then it can work well. If you're someone who sits in front of a computer doing everything but your work until a deadline is looming, it's not so likely to work for you.
So, if you work it like a job where you are the boss, and you have no employees. And the work absolutely has to get done, then yes. There will be days when you can work a normal 8 to 5 with a lunch break and get your work done, and there will be times when 80 hours a week is insufficient. If you work until the job is done, you'll be served well.
1A) Doing the work does not mean looking at the cases.
Reading for class is not about checking the box. There may have been times when "looking" at all 40 pages that were assigned would do the trick. Maybe as an undergrad. Of course, I was a mostly terrible undergrad, so I didn't even do that often enough. But law school is about figuring out what matters. That means you need to read the cases more than once. I have seen twice as the rule of thumb, though I think three times is the right place to start. It's not just about recognizing that something happened. It's knowing what happened and what that means, in the context of the case and beyond. And that requires time and careful reading. And, by the way, class is far more interesting when you know what's being discussed. Seriously.
2) Be a good classmate and be the best possible you.
You can be competitive without being a jerk. Your competition is really with yourself. UCLA basketball coach John Wooden always reminded his players to be the best they could be -- not to try to be better than someone else. If you always use someone else as the bench mark, you may be holding yourself back, even if you do better than them. Try to remember that. There will be people who are better than you, at some point, at everything. Be the best you that you can be. Good things will follow. And if it doesn't go as well as you hoped, if you did the work the best you could, you will still be okay. (See 1 and 1A above.)
3) Most people aren't cheating, but if they are, turn them in.
Every once in a while, I hear some students who are convinced that there is rampant cheating. "Some people worked together on their memo." Maybe, but usually not. "Someone's (uncle/sister/cousin) who is a (prosecutor/M&A lawyer/judge), wrote their memo!" Probably not. Most lawyers understand the ethical problems with that. And who wants to write another law school memo after you passed the bar exam? It would take a pretty odd combination of work ethic and lack of basic morals to make that a common occurrence.
But even worse -- give us some evidence if you do know something. Or some names, and we will investigate. I hate cheating, and I want it stopped. I went to law school with my wife, and we didn't even leave out any of our legal writing materials in our home. The rules matter. And you need to practice following them from day one. That said, I don't think most of my students are or were cheaters, and they have rarely given me any reason to doubt their integrity.
More than once over the years, I have also heard students say, "well, I don't want to hurt anyone's career." First, what? If you know someone is not following the rules, they need to be turned in. Lawyers have such an obligation, though I think it is one that is not often enough fulfilled. I have heard of attorneys who had opposing counsel forge their signature, and the attorney still did not turn them in. If we allow it, it continues.
In addition, I have also heard students say, "I can't prove it, but I KNOW they are cheating." If you can't point to facts that show it it, you probably don't KNOW, anything. Your strongly suspect. And might be wrong. Don't forget, lots of people posture when they are stressed or fearful. Focus on your work, and good things are likely to follow.
4) Everything is harder.
I wonder if poor grades are sometimes the reason some students decided others are cheating. I suspect it is sometimes. The numbers suggest that most of our students are used to getting good grades, so a B can seem like something went wrong. But law school is the next step up. I often use a sports analogy -- law school is like an athlete going from college to the pros (or the olympics). The competition is better because everyone at the next level has a better skill set. If there is a curve (and there usually is, official or unofficial, in the first year), then students are being compared to one another. It's not just how well did you do -- it's how well did you do relative to others. That may seem unfair, but those are (usually) the rules. Be prepared to work hard, and know others will be, too. There is room for everyone to succeed, but not everyone can be at the top.
5) You are not your grades.
Don't let a grade define you. Your paper may be a C+. But you are not. Your A* (which was how the highest grade in the course was noted when I was in law school), doesn't make you an A*, either. Your work can be a reflection of you, but it is not you. Sometimes things don't go well. Sometimes you might not have worked hard enough. Sometimes you're sick. And, yes, sometimes the professor's view of the world is flawed. Other times, a student might have studies three things all semester. And it's the three things tested on the exam. You can only control your work and your effort. You must react and respond to the rest.
So, I know I am biased. I loved law school. It's why I do what I do. Not everyone will feel that way. But give yourself a chance. Prepare. Engage. Ask questions. Be wrong. And learn.
Have a great year! Oh, and by the way, take Business Organizations before your graduate. It's pretty much essential.
Monday, August 15, 2016
As many of you know, I often like to post on issues relating to advising students (witness my cover letter posts, the most recent of which can be found here). I also like to post from time to time on issues relating to fashion and the law (e.g., this post). And sometimes, I fuse the two in a single post. This post is one of those fusion posts.
Many of us intuitively understand that clothing affects not only the perceptions others have of us but also the perceptions we have of ourselves. Some of us may even have done research to unearth evidence that these intuitions have some empirical traction. But can what you wear affect your performance? Research provides some evidence that it can.
Researchers at Northwestern University have identified a "systematic influence that clothes have on the wearer's psychological processes" that they term "unclothed cognition." Their research, published in the Journal of Experimental Social Psychology in 2012, found that the attentiveness of the subjects was higher when wearing a lab coat than it was when they were not wearing a lab coat or were wearing a lab coat described as a painter's coat. The research was fairly widely reported at the time. Although the study explored the effects of wearing a lab coat, one can see how the results may also hold for people wearing other performance-linked clothing, like athletic wear or other professional clothing, including business suits. (A subsequent study on the cognitive effects of business suits can be found here. More general commentary is available here and elsewhere.)
Admittedly, the results of these studies and others like them are qualified and the research in this field is at an early stage. Having said that, as our students start interviewing for jobs and engaging in clinical practice and other experiential learning in the new semester, the possible effect of clothing on performance may be a relevant footnote for them. I admit that I am not a fan of dress codes, as a general rule. However, I may mention these studies to my students so that they can use the information in their decision-making, if they so choose.
Sunday, August 14, 2016
"allowing a corporation to serve in Congress..consistent w/..broad interpretation of..Qualifications Clauses" 16 J. Bus.&Sec. L. 85 #corpgov— Stefan Padfield (@ProfPadfield) August 14, 2016
Saturday, August 13, 2016
One of the more interesting aspects of state corporate law – and Delaware law in particular - is the blurring of the line between substantive regulation and procedural regulation. Delaware gives corporate directors a great deal of leeway ex ante to structure transactions as they see fit, but if they structure them in a way that arouses suspicions – like, for example, failing to create an independent committee to negotiate a deal with a controlling shareholder – Delaware increases judicial scrutiny of the transaction, which, in practical terms, means that when the inevitable class action is filed, the defendants cannot win a quick dismissal on the pleadings. The “carrot” that Delaware offers directors to adopt best practices is the possibility of a quick, cheap dismissal of claims. Delaware regulates, in part, via threats of civil procedure.
This particular mode of regulation was on full display in In re Trulia, Inc. Stockholder Litig., 129 A.3d 884 (Del. Ch. 2016). There, Chancellor Bouchard held that Delaware would only approve disclosure-only settlements in deal class actions where the new disclosures were “plainly material.” Note, this is not the substantive standard for disclosures – it is not the standard necessary to win at trial. It is not the standard that an individual plaintiff would have to meet. It is only the standard for the settlement of a merger class action.
Which immediately begged the question: What happens if another state is entertaining a merger case involving a Delaware company? Does the Trulia standard count as a substantive rule of law, subject to the internal affairs doctrine, or a procedural one, that varies based on the forum?
It’s a critical issue, obviously, because if Trulia does not apply outside of Delaware, it will be very easy for plaintiffs and defendants to reach collusive settlements in foreign fora.
Well, we now have some answers, though they point in different directions: In Vergiev v. Cooper, a New Jersey state court held that Trulia is a substantive rule of law, and thus it applies even for cases brought outside of Delaware. (Opinion here; Alison Frankel blogs here). And just a few days ago, the Seventh Circuit applied Trulia in a case involving an Illinois corporation - implicitly suggesting that Trulia is a procedural (but persuasive) rule. Either way, it appears Trulia is on its way to general acceptance in the context of merger litigation.
That said, this only partly takes care of part of the problem of destructive competition among plaintiffs’ firms; as I’ve blogged before, there is still no real cure for the problem of plaintiffs who compete by racing to a settlement. Forum selection bylaws are not necessarily a panacea, because defendants can waive them – which may allow them to strategically pick off stronger plaintiffs and settle with weaker ones. The next step, therefore, is coming up with something like an MDL process for corporate litigation (a suggestion that others have made, see, e.g., Minor Myers, Fixing Multi-Forum Shareholder Litigation, 2014 U. Ill. L. Rev. 469; Elizabeth Cosenza, The Persistent Problem of Multi-Forum Shareholder Litigation: A Proposed Statutory Response to Reshuffle the Deck, 10 Va. L. & Bus. Rev. 413 (2016)).
Friday, August 12, 2016
In the spring of 2012, around the time that Facebook purchased Instagram for roughly $1 billion, I was teaching an M&A class.
At the time, I had difficulty explaining why Facebook would pay that amount of money for a company that was not only not profitable, but also had no revenue. I spoke as someone trained to use multiples EBITDA and as someone who did not (and still does not) have an Instagram account.
Now, over four years later, Forbes estimates Instagram's value at $25billion to $50billion. That valuation still requires some creativity, as Instagram had sales of "only" $630 million in 2015. Instagram, however, has added roughly 100 million new users in the last 9 months and is projected to have revenue of $1.5billion this year. While there is reason to be wary of projections, the projected sales for Instagram in 2018 is an impressive $5billion.
This drives home that valuation is as much art as science, and the conventional valuation methods will not work well for every company. In that deal, I imagine Instagram's technology, brand, and the user base were all large value drivers. With the benefit of hindsight, Instagram is looking like a good acquisition for Facebook, even if the current projections end up being a bit optimistic.
Wednesday, August 10, 2016
From an e-mail I received:
The University of Richmond School of Law seeks to fill two entry-level tenure-track positions for the 2017-2018 academic year, including one in corporate/transactional law. Candidates should have outstanding academic credentials and show superb promise for top-notch scholarship and teaching. The University of Richmond, an equal opportunity employer, is committed to developing a diverse workforce and student body and to supporting an inclusive campus community. Applications from candidates who will contribute to these goals are strongly encouraged.
Inquiries and requests for additional information may be directed to Professor Jessica Erickson, Chair of Faculty Appointments, at email@example.com.
Tuesday, August 9, 2016
Today marked the end of the 2016 conference of the Southeastern Association of Law Schools (SEALS). My discussion session on small business finance capped off the Workshop on Business Law, a series of business law programs at the conference, and closed out the conference itself just after Noon. It was great to share programs, at various points in the conference, with co-bloggers Josh Fershee, Ann Lipton, Haskell Murray, and Marcia Narine.
Here is a list of the three business law programs in the Workshop on Business Law from this year's conference:
- Discussion Group: Sustainability & Sustainable Business
- Discussion Group: Perspectives on the Future of White-Collar Crime
- Discussion Group: The Legal Aspects of Small Business Finance in the Crowdfunding Era
Other business law programs included several of the new scholar paper panels, the annual "Supreme Court Update" on "Business, Administrative, Securities, Tax, and Employment Issues," a discussion group focusing on "Big Data: Big Opportunities in Business and Government, and Big Challenges in Law and Ethics," and a discussion group in the SEALS "Works-in-Progress Series" that featured papers by veteran scholars on topics ranging from international food labeling regulation, to self-interest in financial regulation, to developing a better understanding of informational intermediaries in financial transactions, to the domestic and international regulation of non-financial disclosures.
I admit to jubilant exhaustion. As an organizer of SEALS programming, the week is always a bit of a marathon for me. But the effort is worth it. When I first came to the SEALS conference back in 2002, there was no organized business law programming. I am glad that a number of us working together ensure each year that the conference features robust, timely programming for business law teachers and scholars.
And that reminds me to mention two more things.
First, SEALS also is a great place to pick up new teaching and curricular ideas. This year's conference was no exception. I participated in a discussion session on "Strategies for Designing and Integrating Transactional Simulation Capstone Courses into the Curriculum" that covered a variety of different approaches to synthesis courses in the curriculum. I also moderated an engaging session on "Law School Specialization and Certification Programs."
Second, if you have ideas for programs for the 2017 conference, please let me know. Better yet, submit the program yourself through the SEALS website submission platform. Make sure if it is a business law session that you designate it for inclusion in the Workshop on Business Law.
I head back to Knoxville tomorrow morning to prepare for the new semester, which begins next week. No doubt some of you already are in the classroom and others will not be there for a week or more yet. Regardless, I wish you all well. I am happy to be recharged with new ideas from the SEALS conference--ideas that are a great stimulus to a productive semester and year. I hope you also find something to motivate and inspire you.
I am not the first to notice that law professors, and academics generally, have their own jargon and favorite buzzwords. Some websites do a nice job of highlighting (or mocking) many of the odds turns of phrase many of us use. Lawyers in the practicing bar do this, too, of course, and other professionals, especially business people (see, e.g., Dilbert) and public relations professionals.
I try not to be too jargon-y, but I have caught myself more than a few times. I am big on “incentivize,” for example. After attending a great SEALS Conference (likely more on that to come), I came away with a bunch of new ideas, a few new friends, and some hope for future collaboration. I also came away noticing that, sometimes, as a group, “we talk funny.” On that front, two words keep coming to my mind: “unpack” and “normative.”
So, when did we all “need” to start “unpacking” arguments?
This seemed like a relatively recent phenomenon to me, so I checked. A Westlaw search of “adv: unpack! /3 argument” reveals 140 uses in Secondary Sources. The first such reference appears in a 1982 law review article: Michael Moore, Moral Reality, 1982 Wis. L. Rev. 1061 (1982). The phrase doesn’t appear again until 1988, in this article: Jeffrey N. Gordon, Ties That Bond: Dual Class Common Stock and the Problem of Shareholder Choice, 76 Cal. L. Rev. 1 (1988). Of the 140 citations, 113 (or 80%) of those have appeared since January 1, 2000 (69, or nearly 50%, have appeared since 2010). Relatively modest numbers, frankly, compared to how often I think I heard it said, but maybe we're just getting ramped up.
And when did things become “normative?”
It also seemed to me that it’s relatively recent that the things we expect to happen (or people to do) became “normative” in legal academic circles. Before that, I think we called things the standard or the norm, but it was far less common that legal academics discussed “normative” behavior in the way we do now.
A Westlaw search bears this out, too. A search of all secondary sources on Westlaw before January 1, 2000, revealed that the term had been used in 2,668 pieces. Since that date, normative has shown up in 7,270. The term has obviously been around for a long time, and has value in many contexts, but saying “normative” is the new normal.
To be clear, I don’t think the use of all jargon is bad, and I appreciate that as law professors do more interdisciplinary work, we will expand our jargon into other fields. Sometimes specific words help us communicate more precisely in a way that increases usefulness and understanding. I like terms of art and specificity. (See, e.g., any of my rants about LLCs.) I’m just observing what seems like a shift in how we talk. That’s not necessarily a bad thing. Maybe it’s just a thing.
I welcome any comments on these terms, or even better, a list of other words or phrases I missed. I know there's a lot more out there.