Sunday, September 25, 2016

ICYMI: Tweets From the Week (Sep. 25, 2016)

September 25, 2016 in Stefan J. Padfield | Permalink | Comments (0)

Saturday, September 24, 2016

Thinking about Theranos

I’m sure I’m not alone in having followed the spectacular fall of Theranos over the past year.  Elizabeth Holmes was a fairytale come to life – and now, the main question seems to be whether she intentionally defrauded her investors and the public, or whether she was simply in denial about the limitations of her technology.

(I personally don’t see the two as mutually exclusive – many fraudsters lie in the expectation that they can soon turn things around and no one will be any the wiser.  In this case, there’s just too much evidence that Holmes was consciously evasive when questioned about her technology for me to believe that she wasn’t intentionally misleading people)

It’s probably too tempting to try to draw lessons from the Theranos debacle, but there are some interesting issues it raises.

First, I wonder whether Theranos is an argument for or against initiatives like the JOBS Act that make it easier for companies to raise large amounts of capital without holding an IPO.

On the one hand, because Theranos never went public, the fallout was contained; we haven’t seen the spectre of thousands of retail investors directly or indirectly losing their pensions.

On the other hand, Theranos illustrates exactly why we subject companies to the IPO process.  There were, apparently, plenty of red flags right from the beginning, which caused the most savvy venture capitalists to steer clear of it.   If the company had been forced to file an S-1 and subject it to general scrutiny, the problems might have been uncovered a lot sooner, and a lot of the damage prevented.  If the company had been forced to file an S-1 before raising such large amounts of capital, it probably never would have raised the capital at all.

If nothing else, then, Theranos highlights the inadequacy of the accredited investor definition.

The second aspect of Theranos that I find fascinating is that a young woman was able to pull off this kind of fraud.  It’s no secret that women in general have a hard time raising start up capital; in general, it’s the province of white men – relying on a pedigree and an image – to bewitch investors so thoroughly.  Yet somehow Elizabeth Holmes was able to sell a convincing story built on technobabble and a romantic story.  It’s almost heartening, in a dark sort of way – how far we’ve come! – but more seriously, I worry that Holmes will now serve as a cautionary tale for investors considering companies helmed by women.

With all that said, I'm filled with glee at the prospect of the movie – which apparently will star Jennifer Lawrence, under the direction of Adam McKay (who also directed The Big Short).  That’s going to be a hoot!

September 24, 2016 in Ann Lipton | Permalink | Comments (1)

Friday, September 23, 2016

"Distraction Sickness"

In January 2015, I wrote about a resolution to take a break from e-mails on Saturdays.

That resolution failed, quickly.

Since then, I have been thinking a lot about my relationship with e-mail.

On one hand, I get a lot of positive feedback from students and colleagues about my responsiveness. On the other hand, constantly checking and responding to e-mails seems to cut against productivity on other (often more important) tasks.

Five or six weeks ago, I started drafting this post, hoping to share it after at least one week of only checking my e-mail two times a day (11am and 4pm). Then I changed the goal to three times a day (11am, 4pm, and 9pm and then 5am, 11am, 4pm). Efforts to limit e-mail in that rigid way failed, even though very little of what I do requires a response in less than 24 hours. On the positive side, I have been relatively good, recently, at not checking my e-mail when I am at home and my children are awake. 

A few days ago, I read Andrew Sullivan’s Piece in the New York Magazine on “Distraction Sickness.” His piece is long, but worth reading. A short excerpt is included below:

[The smart phone] went from unknown to indispensable in less than a decade. The handful of spaces where it was once impossible to be connected — the airplane, the subway, the wilderness — are dwindling fast. Even hiker backpacks now come fitted with battery power for smartphones. Perhaps the only “safe space” that still exists is the shower. Am I exaggerating? A small but detailed 2015 study of young adults found that participants were using their phones five hours a day, at 85 separate times. Most of these interactions were for less than 30 seconds, but they add up. Just as revealing: The users weren’t fully aware of how addicted they were. They thought they picked up their phones half as much as they actually did. But whether they were aware of it or not, a new technology had seized control of around one-third of these young adults’ waking hours. . . . this new epidemic of distraction is our civilization’s specific weakness. And its threat is not so much to our minds, even as they shape-shift under the pressure. The threat is to our souls. At this rate, if the noise does not relent, we might even forget we have any. (emphasis added)

Academics seem to vary widely on how often they respond to e-mails, but I’d love to hear about the experience and practices of others. Oddly, in my experience with colleagues, those who are most prompt to respond to e-mails are usually also the most productive with their scholarship. I can’t really explain this, other than maybe these people are sitting at their computers more than others or are just ridiculously efficient. As with most things, I imagine there is an ideal balance to be pursued.

One thing I have learned is that setting expectations can be quite helpful. With students, I make clear on the first day of class and on the syllabus that e-mails will be returned within 24 business hours (though not necessarily more quickly than 24 business hours). I often respond to e-mails much more quickly than this, but this is helpful language to point a student to when he sends a 3am e-mail asking many substantive questions before an 8am exam.

Our students also struggle with "distraction sickness," and most of them know they are much too easily distracted by technology, but they are powerless against it. Ever since I banned laptops in my undergraduate classes, I have received many more thanks than pushback. The vast majority of students say they appreciate the technology break, but some can still be seen giving into the technology urge and (not so) secretly checking their phones.

Interested in how our readers manage their e-mails. Any tricks or rules that work for you? Feel free to e-mail me or leave your thoughts in the comments.

September 23, 2016 in Business School, Current Affairs, Haskell Murray, Law School, Teaching, Technology, Web/Tech | Permalink | Comments (0)

Thursday, September 22, 2016

What Do Donald Trump, Hillary Clinton, and 220 Law Professors Have in Common?

Lately, I’ve been researching the twelve nation Trans-Pacific Partnership Treaty (“TPP”) because I am looking at investor-state dispute settlements (ISDS) in my work in progress proposing a model bilateral investment treaty between the U.S. and Cuba.

The TPP, which both Trump and Clinton oppose, has the support of U.S. business. Although President Obama has pushed the treaty as part of his legacy, just this morning, Vice-President Biden added his pessimistic views about its passage. More interestingly, over 220 law and economics academics, led by Harvard’s Laurence Tribe, have come out publicly to oppose TPP, stating:

ISDS grants foreign corporations and investors a special legal privilege: the right to initiate dispute settlement proceedings against a government for actions that allegedly violate loosely defined investor rights to seek damages from taxpayers for the corporation’s lost profits. Essentially, corporations and investors use ISDS to challenge government policies, actions, or decisions that they allege reduce the value of their investments... Through ISDS, the federal government gives foreign investors – and foreign investors alone – the ability to bypass th[e] robust, nuanced, and democratically responsive legal framework. Foreign investors are able to frame questions of domestic constitutional and administrative law as treaty claims, and take those claims to a panel of private international arbitrators, circumventing local, state or federal domestic administrative bodies and courts. Freed from fundamental rules of domestic procedural and substantive law that would have otherwise governed their lawsuits against the government, foreign corporations can succeed in lawsuits before ISDS tribunals even when domestic law would have clearly led to the rejection of those companies’ claims. Corporations are even able to re-litigate cases they have already lost in domestic courts. It is ISDS arbitrators, not domestic courts, who are ultimately able to determine the bounds of proper administrative, legislative, and judicial conduct… This system undermines the important roles of our domestic and democratic institutions, threatens domestic sovereignty, and weakens the rule of law.

Senator Warren, who also opposes TPP has argued, "“ISDS allows a small group of ultra-rich investors to extract billions of dollars from taxpayers while they undermine financial, environmental and public health rules across the world.”  I look forward to the upcoming debates to see whether either Trump, who has labeled the proposal the “rape of our country,”  or Clinton, who previously supported the deal, will cite the academics' letter as additional reason to oppose TPP. 

September 22, 2016 in Constitutional Law, Corporations, Current Affairs, International Business, International Law, Marcia Narine | Permalink | Comments (1)

Wednesday, September 21, 2016

Friend or Foe to Insider Trading Law? Salman v US

The enticing facts of insider trading have me writing about the topic again (see an earlier post here) as the US Supreme Court prepares to hear oral argument in Salman v. US on October 5th.  In Salman, the Supreme Court is asked to draw some careful lines in the questions: what benefit counts and how to prove such a benefit under Dirks v. SEC.  

Recall that in Dirks, the Supreme Court focused the test on whether an insider benefitted—either by trading or by tipping in exchange for a benefit from the person to whom she tipped material nonpublic information. After Dirks, the 10b inquiry is whether the insider breached a duty by conveying the information for the insider’s personal benefit, and whether the tippee knows or at least should know of the breach. The Court explained that even in a case against a tippee who trades "Absent some personal gain [by the insider], there has been no breach of duty to stockholders. And absent a breach by the insider, there is no derivative breach [by the tippee]."

The Salman case highlights a circuit split:  the Second Circuit case United States v. Newman and the Ninth Circuit's ruling in Salman.  In Salman, the question is whether prosecutors had to prove that the brother-in-law, Maher Kara, disclosed nonpublic securities information in exchange for a personal benefit. Is it enough that the insider and the tippee shared a close family relationship or must there be direct evidence as required in Newman?  

The Ninth Circuit framed the benefit requirement inquiry, established in Dirks, as a gift of confidential information to a trading relative or a friend. The prosecution offered direct evidence of nonpublic information as a gift. The Ninth Circuit, and the Government, relied upon this passage in Dirks:

There may be a relationship between the insider and the recipient that suggests a quid pro quo from the latter, or an intention to benefit the particular recipient. The elements of fiduciary duty and exploitation of nonpublic information also exist when an insider makes a gift of confidential information to a trading relative or friend. The tip and trade resemble trading by the insider himself followed by a gift of the profits to the recipient.

The Second Circuit read the Dirks benefit test more narrowly, saying it required “proof of a meaningfully close personal relationship that generates an exchange that is objective, consequential and represents at least a potential gain of a pecuniary or similarly valuable nature.”

So what is the right answer?  The Government lamented the Newman decision as "dramatically limit[ing] the Government’s ability to prosecute some of the most common, culpable, and market-threatening forms of insider trading.” Whereas others (see here) have criticized the Government's position in Newman and the subsequent basis of the Salman ruling as reviving the “parity of information” standard rejected by Supreme Court in both Chiarella and Dirks.  Focusing on friendship and defining it broadly weakens the benefit test advanced in Dirks.

As someone who teaches insider trading and has followed the fascinating case facts for years, I am looking forward to oral argument and see the next step in the evolution of insider trading.  Co-blogger Ann Lipton tee'd up the Salman case in her post earlier this week with her usual whit and charm.

-Anne Tucker 

 

 

September 21, 2016 in Ann Lipton, Anne Tucker, Constitutional Law, Securities Regulation | Permalink | Comments (1)

Tuesday, September 20, 2016

Hermés: The Limited Liability Corporation That's Actually A Corporation

Here’s a new one on the “LLC as corporation” front.  A court in the Southern District of New York says the following:

[T]his Court has subject matter jurisdiction, since the parties are diverse and the amount in controversy exceeds $75,000. Hermes and Swain are “citizens” of different states; Hermes, a French limited liability corporation, has its headquarters in New York, while Swain is a New Jersey resident.

Hermés of Paris, Inc. v. Swain, 2016 WL 4990340, at *2 (S.D.N.Y., 2016)

In most such circumstances, when a court refers to a “limited liability corporation,” it meant to say “limited liability company.” See, e.g., Avarden Investments, LLC v. Deutsche Bank Nat'l Trust Co., No. 16-CV-014-LM, 2016 WL 4926155, at *2 (D.N.H. Sept. 15, 2016) (“Avarden is a limited liability company organized under the laws of New Hampshire. New Hampshire law permits a limited liability corporation to assign management responsibility of a limited liability company to a ‘manager.’ RSA 304-C:13.”). But not this time.

Bloomberg says Hermès of Paris, Inc. operates as a subsidiary of Hermes International SA.  The French version of an LLC is not an SA, it often viewed as an SARL.  

So, technically, a corporation is a “limited liability corporation” because corporations come with a grant of limited liability. The source of this language in this opinion is, in seems, the petition to compel arbitration, which states in paragraph 10: “Petitioner Hermés, an entity engaged in ‘commerce’ as defined in the FAA §1, is a limited liability corporation, with its United States headquarters in New York, New York.” 

Another interesting (to me) note is that that court and the pleadings don’t ever say where Hermés is incorporated. They just say where it is headquartered.  I see nothing that says its state of origin. I am not as up on my civil procedure (jurisdiction) as maybe I should be, but couldn’t that matter? That is, if Hermés of Paris, Inc., is a New Jersey corporation with headquarters in New York, might that not be a problem for diversity jurisdiction? (It looks like it’s not, though. I looked. But they do have a New Jersey warehouse. Still, the state of formation seems mildly important to note.)

Anyway, although I don’t like the use of the term at all, because it creates potential for confusion (is it an LLC or a corporation?), at least this time the words are correct, even if that’s not generally how we refer to the entity type. I’d still prefer the court to have just called it a corporation, though.

 

September 20, 2016 in Corporations, Joshua P. Fershee, LLCs | Permalink | Comments (0)

Monday, September 19, 2016

Crowdfunding and Creatives

This Friday, I will co-present on a continuing legal education panel on "The New Crowdfunding Laws for Private Investors & Other Ways to Legally Raise Money For Your Project" at the Americanafest--the Americana Music Festival and Conference.   The program description is set forth below.

There have been significant changes in federal and state laws related to soliciting investors through crowdfunding and other types of investment activities.  These new changes are designed to make certain types of investments easier and more accessible to people and businesses who seek investors for their projects. This panel will discuss those new laws and strategies of how to seek small to moderate size investments under today’s federal and state law. The panel will also discuss “dos” and “don’ts” for those seeking out investors and what to look for when offered an investment opportunity.

I love cultivating this ground, even if I have done much of it in the past with different audiences.  I will prepare some specialized information relating to financing music and other creative projects, for example, for this program.  I also plan to discuss important traps for the unwary.

What I really want to know is: what else might folks working with and in the music industry (or with other artistic and creative business venturers) want to know?  I have some ideas based on my research on crowdfunding to date.  But send me your ideas . . . .  No doubt, a whole new discussion may be generated from audience questions.  But I would love to be as prepared as possible.

September 19, 2016 in Conferences, Crowdfunding, Joan Heminway | Permalink | Comments (2)

Sunday, September 18, 2016

ICYMI: Tweets From the Week (Sep. 18, 2016)

September 18, 2016 in Stefan J. Padfield | Permalink | Comments (0)

Saturday, September 17, 2016

SEC Gets the Last Laugh

As part of my “scared straight” strategy for teaching insider trading, I like to tell my students horror stories of attorneys who have been caught up in scandals (as well as the collective *facepalm* reaction of the bar, which is as much due to the stupidity of the schemes as to their immorality).

Last year, I recounted the curious case of Robert Schulman and King Pharmaceuticals.

Schulman was an attorney representing King Pharmaceuticals, and he learned that the company would soon be acquired by Pfizer.  He told his friend and investment adviser, Tibor Klein, who promptly purchased King shares for himself and his clients (some of which were allocated to Schulman’s account).  All told, Klein generated about $328K in profits.

The SEC charged Klein with insider trading in 2013.  Interestingly, the SEC did not accuse Schulman of tipping; instead, the SEC’s theory was that Schulman had gotten tipsy at dinner and shot off at the mouth, ultimately blurting out, “It would be nice to be King for a day.”  (When I tell my students this part, I imagine how that might have been said – presumably, with an exaggerated  wink and heavy emphasis on the word “King”).  Klein, having been given the information in confidence, wronged Schulman by misappropriating it for his own use. 

Except it seemed to me that the SEC never really believed Schulman’s claim that he had never intended to tip his friend.  Why?  Because most of the time, when the SEC files a complaint that involves nonparties, the SEC is careful to conceal their names.  (For example)  If necessary, the SEC might describe them as Person A or Witness B, that kind of thing.

But not in the King case.  There, the SEC could not have been more forthcoming with Schulman’s name, which it repeated ad nauseam throughout the complaint – along with the potentially career-destroying details of his drunkenness, and his desire to impress his friend as a “big shot.”  So it always struck me that the subtext here was, if the SEC couldn’t prove that Schulman intended to tip his friend, by god, it was going to embarrass him as much as it could.

Well, it took another three years, but the SEC has finally gotten its man, in a way: the Brooklyn US Attorney has charged both Schulman and Klein with criminal insider trading, with potential penalties of up to 20 years in prison.  

King for a day, under a sword of Damocles.

September 17, 2016 in Ann Lipton | Permalink | Comments (0)

Friday, September 16, 2016

2016 SEALSB Conference - November 10-12 - Durham, NC

For the fourth straight year, I plan to present at the Southeastern Academy of Legal Studies in Business ("SEALSB") Annual Conference, and I am on the SEALSB executive committee.  SEALSB is one of eight regional associations under the Academy of Legal Studies in Business (ALSB), and ALSB is the national organization for legal studies professors in business schools.

More information about the conference can be found here and deadlines are included below. Today is the deadline for early bird registration, best paper submissions, and award nominations. 

Friday, September 16: 

Friday, September 30: 

  • Abstract submission deadline to be a conference presenter

Tuesday, October 11:

  • Hotel cutoff date for group rate (subject to room block availability)

Friday, October 14:

  • Submission of papers (not for award consideration) to be included on USB flash drive. (Otherwise, bring 25 copies to the conference.)

September 16, 2016 in Business School, Conferences, Haskell Murray | Permalink | Comments (0)

Is the Era of Conflict Minerals Disclosure Coming to an End?

Earlier this week the House Financial Services Committee voted to repeal the Dodd-Frank Conflict Minerals Rule, which I last wrote about here and in a law review article criticizing this kind of disclosure regime in general.

Under the proposed Financial Choice Act (with the catchy tagline of "Growth for All, Bailouts for None"), a number of Dodd-Frank provisions would go by the wayside, including conflict minerals because:

Title XV of the Dodd-Frank Act imposes a number of overly burdensome disclosure requirements related to conflict minerals, extractive industries, and mine safety that bear no rational relationship to the SEC’s statutory mission to protect investors, maintain fair, orderly, and efficient markets, and promote capital formation. The Financial CHOICE Act repeals those requirements. There is overwhelming evidence that Dodd-Frank’s conflict minerals disclosure requirement has done far more harm than good to its intended beneficiaries – the citizens of the Democratic Republic of Congo and neighboring Central African countries. SEC Chair Mary Jo White, an Obama appointee, has conceded the Commission is not the appropriate agency to carry out humanitarian policy. The provisions of Title XV of the Dodd-Frank Act are a prime example of the increasing use of the federal securities laws as a cudgel to force public companies to disclose extraneous political, social, and environmental matters in their periodic filings.

The House report cites a number of scholars and others who raise some of the same issues that I addressed in an amicus brief when the case was litigated at the trial and appellate level years ago.

This weekend I am attending the Business and Human Rights Scholars Conference co-sponsored by the University of Washington School of Law, the NYU Stern Center for Business and Human Rights, the Rutgers Business School, the Rutgers Center for Corporate Law and Governance, and the Business and Human Rights Journal. I present on Cuba, human rights, and investor-state dispute resolution, but a number of papers concern conflict minerals and disclosure in general.

As I have argued in the past, I’m not sure that repeal is the answer. I do believe that the law should be re-examined and possibly reformed to ensure that the diligence and disclosure actually leads to tangible and sustained benefits for the Congolese people. In short, I want to see some evidence of linkages between this corporate governance disclosure and reductions in rape, violence, child slavery, pillaging of villages, and forced labor. I want to see proof that the individual ethical consumers who claim in surveys to care about human rights have actually changed their buying habits because of this name and shame campaign.

Although I do not agree with many of the proposals in the House report and I am not against all disclosure, I do not believe that the SEC is the appropriate agency to address these issues. The State Department and others can and should take the lead on the very serious security and justice reform issues that I witnessed firsthand in Goma and Bukavu  when I went to the DRC to research this law five years ago. These issues and the violence perpetrated by rebel groups, police, and the military persist.  I look forward to hearing how and if proponents of the conflict minerals rule address this report during the conference.

September 16, 2016 in Compliance, Corporate Governance, Corporations, CSR, Current Affairs, Human Rights, Marcia Narine, Securities Regulation | Permalink | Comments (0)

Wednesday, September 14, 2016

CWRU Conference on Business in the Roberts Court

The following is being posted on behalf of Jonathan Adler, the Johan Verheij Memorial Professor of Law, and Director of the Center for Business Law and Regulation, at Case Western Reserve University School of Law.

In recent years, the Supreme Court appears to have taken a greater interest in "business" issues, leading court watchers to question whether this is a change in the Court's orientation, or if it is the natural outcome of the appellate process. Is the Court "pro-business"? If so, in what ways do the Court's decisions support business interests and what does that mean for the law and the American public? On September 23, the Center for Business Law and Regulation at Case Western Reserve University will host a conference, "Business in the Roberts Court" to explore these questions. Speakers include Catherine Sharkey (NYU), Todd Henderson (Chicago), James Copland (Manhattan Inst), Brianne Gorod (CAC), Suzette Malveaux (Catholic), Cassandra Robertson (CWRU), Mitch Pickerill (NIU), Andrew Grossman (Baker & Hoestetler), Jonathan Adler (CWRU), Karen Harned (NFIB) and Ohio State Solicitor Eric Murphy. The conference is open to the public and 4.5 hours of CLE credit are available. It will also be webcast live. Details are here.

September 14, 2016 in Stefan J. Padfield | Permalink | Comments (0)

Dear Business Law Casebook Authors,

As you know, assessment is of critical importance these days, and I am confident that in a few years most, if not all, law school casebooks will come with effective, out-of-the-box, turnkey assessments. If you believe your book is already there, or even close, please send your pitch to me at spadfie@uakron.edu. Assuming no unforeseen problems, I plan to post these pitches here, as I am sure they will be of interest to many of our readers.

September 14, 2016 in Books, Business Associations, Law School, Stefan J. Padfield, Teaching | Permalink | Comments (5)

Americold & Diversity Jurisdiction

Last spring, in the wake of Justice Scalia's passing, I blogged about Justice Scalia's final business law case: Americold Realty Trust v. ConAgra Ltd. The oral argument signaled that the Court's preference for a formalistic, bright line test that asked whether the entity involved was an unincorporated entity, in which case the citizenship of its members controlled the question of diversity, or whether it was formed as an corporation, in which a different test would apply.  The Supreme Court issued its unanimous (8-0) opinion in March, 2016 holding that the citizenship of an unincorporated entity depends on the citizenship of all of its members. Because Americold was organized as a real estate investment trust under Maryland law, its shareholders are its members and determine (in this case, preclude) diversity jurisdiction.   

S.I. Strong, the Manley O. Hudson Professor of Law at the University of Missouri, has a forthcoming article, Congress and Commercial Trusts: Dealing with Diversity Jurisdiction Post-Americold, forthcoming in Florida Law Review.  The article addresses the corporate constitutional jurisprudential questions of how can and should the Supreme Court treat business entities.  What is the appropriate role of substance and form in business law?  Her article offers a decisive reply:

Commercial trusts are one of the United States’ most important types of business organizations, holding trillions of dollars of assets and operating nationally and internationally as a “mirror image” of the corporation. However, commercial trusts remain underappreciated and undertheorized in comparison to corporations, often as a result of the mistaken perception that commercial trusts are analogous to traditional intergenerational trusts or that corporations reflect the primary or paradigmatic form of business association.

The treatment of commercial trusts reached its nadir in early 2016, when the U.S. Supreme Court held in Americold Realty Trust v. ConAgra Foods, Inc. that the citizenship of a commercial trust should be equated with that of its shareholder-beneficiaries for purposes of diversity jurisdiction. Unfortunately, the sheer number of shareholder-beneficiaries in most commercial trusts (often amounting to hundreds if not thousands of individuals) typically precludes the parties’ ability to establish complete diversity and thus eliminates the possibility of federal jurisdiction over most commercial trust disputes. As a result, virtually all commercial trust disputes will now be heard in state court, despite their complexity, their impact on matters of national public policy and their effect on the domestic and global economies.

Americold will also result in differential treatment of commercial trusts and corporations for purposes of federal jurisdiction, even though courts and commentators have long recognized the functional equivalence of the two types of business associations. Furthermore, as this research shows, there is no theoretical justification for this type of unequal treatment.

This Article therefore suggests, as a normative proposition, that Congress override Americold and provide commercial trusts with access to federal courts in a manner similar to that enjoyed by corporations. This recommendation is the result of a rigorous interdisciplinary analysis of both the jurisprudential and practical problems created by Americold as a matter of trust law, procedural law and the law of incorporated and unincorporated business associations. The Article identifies two possible Congressional responses to Americold, one involving reliance on minimal diversity, as in cases falling under 28 U.S.C. §§1332(d) and 1369, and the other involving a statutory definition of the citizenship of commercial trusts similar to that used for corporations under 28 U.S.C. §1332(c). In so doing, this Article hopes to place commercial trusts and corporations on an equal footing and avoid the numerous negative externalities generated by the Supreme Court’s decision in Americold.

A special thanks to Professor Strong who read the blog's coverage of Americold and shared her scholarship with me.

-Anne Tucker

September 14, 2016 in Anne Tucker, Constitutional Law, Corporate Governance, Corporate Personality, Corporations, Litigation, Shareholders, Unincorporated Entities | Permalink | Comments (2)

Tuesday, September 13, 2016

Free Speech and Free Markets Go Together

I think, by now, most people have heard about Colin Kaepernick's protest, which he manifested by his refusal to stand for the national anthem before the 49ers' August 26 preseason game against the Green Bay Packers.  Kaepernick explained his actions as follows: 

I am not going to stand up to show pride in a flag for a country that oppresses black people and people of color. To me, this is bigger than football and it would be selfish on my part to look the other way. There are bodies in the street and people getting paid leave and getting away with murder.

Many were offended by his decision; others have applauded it.  What is it that makes people (particularly white people) so upset about someone choosing not to stand for the national anthem? I thought the anthem and flag were supposed to stand for freedom, which includes the freedom to dissent and disagree. It fascinates me that one football player could get this much press for deciding not to do something he was under no obligation to do (as his employer made clear). But it certainly explains why he did it. If nothing else, Colin Kaepernick reminded of us both of our ability to speak freely and that there are potential costs when doing so. He got people to talk about an important issue, and he used his platform to focus on a necessary conversation.

Free speech can, though, have consequences. And in many ways, it should. The Bill of Rights just protects our right to speech and limits the government's ability to impose consequences for exercising that right. The Denver Broncos' Brandon Marshall lost a credit union sponsorship for his actions in support of Kaepernick's protest. Personally, if I did business with that sponsor, they'd lose my money because I support his Marshall's right to protest and because I think the the protest, conducted in a peaceful way, raised issues worthy of discussion.  (I will note that the sponsor cut ties in what appears to be a respectful and above-board way. I just disagree with the decision).  That's the free market working in a (mostly) free country.  I don't have any problem with the sponsor acting as they did, either.  They, too, were exercising their rights (assuming they did not breach a contract, and I have seen no evidence they did). I am not mad the credit union made the decision it did; I just disagree with the decision, and I would let them know that by walking away. 

Most striking to me about this uproar is the apparently binary way so many people view protests. One can love this country and hate injustice. We can protest as we try to reach our ideals. And we can disagree about the method of protest or the ideals themselves. But let's consider the point and be respectful of one another as we try to work through our differences. Brandon Marshall stated this position especially well. He explained, "I'm not against the military. I’m not against the police or America. I’m just against social injustice.”

Businesses, like people, have the right to associate with those they choose, and consumers (in turn) have a right to respond.  That is not just free speech, it is how a free market operates. 

Th United States, to me, is a great, yet greatly flawed, nation. The flag (and our national anthem) can represent the best of this nation and its people. The song and flag, like almost anything related to this nation that is more than 200 years old, also has ties to some of our very worst history, including slavery. That is also a reality. We have real and significant remaining institution problems related to race and gender, even if we're better than we used to be.  

No matter what, the national anthem and the flag are neither bigger than, nor more important than, the citizens they are intended to represent. Speaking freely, even when it is not popular, is honoring the best of what the flag should represent, the best of this nation’s history, and (I sincerely hope) a sign of a great future. Free speech is not a liberal or conservative issue, and exercising our right to speak should be celebrated, whether you agree with the speech or not.  Free speech begets free markets. 

“All we say to America is, ‘Be true to what you said on paper.’ If I lived in China or even Russia, or any totalitarian country, maybe I . . . could understand the denial of certain basic First Amendment privileges, because they hadn’t committed themselves to that over there. But somewhere I read of the freedom of assembly. Somewhere I read of the freedom of speech. Somewhere I read of the freedom of press. Somewhere I read that the greatness of America is the right to protest for right.”
— Martin Luther King, Jr., Civil Rights Leader

 

“We are so concerned to flatter the majority that we lose sight of how very often it is necessary, in order to preserve freedom for the minority, let alone for the individual, to face that majority down.”
— William F. Buckley Jr., founder of National Review magazine

 

“We cannot have a society half slave and half free; nor can we have thought half slave and half free. If we create an atmosphere in which [people] fear to think independently, inquire fearlessly, express themselves freely, we will in the end create the kind of society in which [people] no longer care to think independently or to inquire fearlessly.”
— Henry Steele Commager, U.S. historian

 

September 13, 2016 in Corporations, Current Affairs, Human Rights, Joshua P. Fershee, Law and Economics, Sports | Permalink | Comments (2)

Monday, September 12, 2016

[Over]confidence in the C-Suite, Politics, and the Employment Interview Process

Interesting research has been done on overconfidence in business leadership (see, e.g., herehere, and here) and political behavior (see, e.g., here and here).  I periodically consult the literature in this area for use in my work.  It is fascinating and often helpful.

In my continuing career development advice to law students, and as a member of our faculty appointments committee at UT Law this year, however, I recently have come to notice and be concerned about overconfidence in job searches.  Specifically, I see law students who, in testing out a new confidence in their knowledge and skills, overdo it a bit and over-claim or come across as unduly self-important.  I also see faculty candidates who have registered for the Association of American Law Schools Faculty Appointments Register (FAR) puff and oversell--using the comment areas to make cringe-worthy self-aggrandizing statements about their teaching or scholarly background or abilities.

Most of us prefer to associate with confident people.  Confidence in a leader or colleague is an attractive trait--one that we associate with strong governance and high levels of performance.  Confidence wins appointments, elections, and jobs.  Yet overconfidence, if recognized, is unattractive and often means lost opportunities.

Overconfidence is common.  Don Moore, a faculty member at Berkeley's Haas School of Business, notes this in a recent blog post on Overconfidence in Politics.

I study overconfidence among all sorts of people, from business leaders and politicians to college students and office workers. And my research shows that most people are vulnerable to overconfidence. We are excessively confident that we know the truth and have correctly seen the right path forward to prosperity, economic growth and moral standing. Research results consistently show that people express far more faith in the quality of their judgment than it actually warrants. . . .

How do those of us who advise law students enable them to be confident and show confidence without becoming overconfident--or projecting overconfidence?  In his post on résumés and interviews two years ago, co-blogger Haskell Murray advised students to avoid overstating their accomplishments.

Lawyers, perhaps more than other professionals, will call you out on any overstated items on your resume. While I have met plenty of arrogant lawyers, and perhaps was one, arrogance isn’t going to win you many supporters in the interview. Avoid vague self-congratulations (e.g., “provided excellent customer service.”). Stick to the specific, verifiable facts (e.g., “voted employee of the month in April 2012” or “responsible for a 35% increase in revenue from my clients.”).

I totally agree.  I also made a related point regarding the written word in my post on cover letters back in January.

. . . I see a significant number of cover letters that use strident adjectives and adverbs to help make their points. The sentences in these letters tend to smack of over-claiming. Also, in many cases, these adjectives and adverbs represent poor substitutes for well-chosen . . . stories. Most employers are likely to be more favorably disposed to the documentation of specific facts substantiating an applicant's suitability for an open position than they would be to sentences consisting of self-selected (and sometimes over-blown) characterizations of the applicant's suitability for that position.

But I have learned that the line between confidence and overconfidence, as important as it is in the job search process, can be a thin one.  And decisions about how to confidently--but not overconfidently--communicate with contacts, mentors, and prospective employers (among others) often must be made on one's own and quickly.  So, my bottom line advice to students is to focus generally in all communications, oral and written, on being other-regarding.  This article written by a Forbes Contributor makes some great observations and offers tips along those lines.  And if you can ask a trusted mentor to help you prepare for common questions or review the text of emails or letters, that's great.  

What else?  You tell me.  I am not confident that I know more . . . .  :>)

September 12, 2016 in Behavioral Economics, Joan Heminway, Jobs, Psychology | Permalink | Comments (8)

Sunday, September 11, 2016

ICYMI: Tweets From the Week (Sep. 11, 2016)

September 11, 2016 in Stefan J. Padfield | Permalink | Comments (0)

Saturday, September 10, 2016

Harvard Negotiation & Mediation Clinical Program Positions

HLS

Harvard Negotiation & Mediation Clinical Program is looking to fill two clinical instructor positions (one with a focus on facilitation and political dialogue) for July 2017.

Details about the positions are available here

September 10, 2016 in ADR, Clinical Education, Haskell Murray, Jobs, Negotiation | Permalink | Comments (0)

More thoughts about the Epipen

I’m finding the controversy over the Epipen price increases fascinating, because of its hoist-by-their-own-petard quality.

When Mylan acquired Epipen in 2007, it wasn't a particularly popular product.  Then Mylan started a heavy marketing push, which included increasing awareness of the dangers of allergies, publicizing how Epipen could save lives in emergencies, and lobbying for legislation requiring that Epipens be stocked in public places as an emergency health device, like defibrillators.  Because Mylan did a tremendous job of persuading the public that the Epipen was a critical medical device, it was able to raise prices dramatically - and now, having convinced everyone and his mother that Epipens are indispensable, the company is getting backlash for price gouging on this life-saving technology (not to mention becoming the target of investigations and lawsuits over, among other things, Medicaid fraud and state law antitrust violations).

Haskell previously posted about the Epipen situation, and connected the issue to the shareholder wealth maximization norm in corporate law.  Going further, he asked whether, from a policy perspective, we particularly want to encourage some other sort of stakeholder model for the healthcare industry.

I guess my point is, the issue is not just price increases; it extends to profit motive in determining what counts as a health threat in the first place.

Further to that, it’s worth highlighting that the FDA has been easing its prior restrictions on off-label drug marketing, out of concerns that suppressing the dissemination of truthful information may violate corporate free speech rights.  That has ominous implications for the pharmaceutical industry – why would companies go through extensive hoops to expand a drug’s labeling when they can get it approved for a single use, and then just market it for everything else? – and it also makes me wonder when we’re going to see more First Amendment challenges to securities regulation.

September 10, 2016 in Ann Lipton | Permalink | Comments (2)

Friday, September 9, 2016

Nifty Student Question Regarding Career Communications By Email

As many of you already know, I regularly advise students (as so many of us do) on career planning and job searches.  This advice extends to communications in connection with career planning and job searches.  And I have blogged about all this.  I have posted in the past, for example, on networking letters (my post is here) and cover letters, for example (my most recent post is here). 

Yesterday, I got an email message from a student with a great question related to all this.  Here is the question: "What would you recommend as the subject line of an email to a contact you have been referred to by someone else?"  Nice.  Here's what I ended up writing back, in pertinent part.

 . . . Email titles are tricky.

The first thing I would do is ask if the person making the connection can e-introduce you with an email message and copy you in.  I have done that many times.  My script usually goes something like this:

[X], e-meet [Y].  As I explained to you earlier today, [Y] is the [title & affiliation].

[Y], [X] is a [year] at UT Law who is considering [career goal].  [X] is especially interested in working with [specific practice interest].  S/he has M/W/F time free in her/his academic schedule this fall, and she/he would love to find a targeted internship involving all or part of that time.  I thought you might be able to help me identify opportunities for [X}.  So, I offered to introduce you to each other by email in the hopes that you could help [X] find something suitable.

[Y], I know that you are always busy.  If this request is unduly burdensome, I fully understand.  Just let us know.  But if you have a little bit of time to make some suggestions to me and [X] on this, I hope that you will do so.

Best to all,

Joan Heminway

If that doesn't work, we're back to you sending the email on your own.  You may want to ask the person who gave you the connection if it's OK to copy him or her on the message you send, btw.  I think that adds credibility and can have other advantages, too.

As with many things, the answer to your question about recommended email subject lines is "it depends."  More specifically, it depends on the precise content, the context, and your style.  Sometimes, and this is consistent with my style, I will entitle an email like this--one to a stranger with whom I have some affinity--by referring to this affinity relationship in some way.  So, if the person is, e.g., an alum of UT Law, I might entitle the message: "Greetings from the UT College of Law."  If the only affinity is the mutual friendship, a similar approach might lead to a title like:  "E-introduction with Regards from Joan Heminway."

Do those kinds of suggestions resonate with you?  Let me know.  We can consider this the start of a conversation . . . .

I am not wholly satisfied with this response.  The first suggested subject line may be too generic (even though I have used it in the past) and the second sounds a bit formal for most students.  Maybe the second one is better cast this way: "E-introduction (and Warm Regards from Joan Heminway)."  At any rate, your ideas are most welcomed.  As I noted in my response to the student, I think this is an ongoing conversation . . . .

September 9, 2016 in Joan Heminway, Jobs | Permalink | Comments (3)