December 11, 2010
Akron Soccer to Play for National Championship Second Year in a Row
December 10, 2010
Oil & Gas M&A Increasing -- Utilities Left Out?
Occidental Petroleum is buying $3.2 billion of oil-related assets in North Dakota and Texas. On the same day, it was announced that the company was selling its Argentine oil and gas interests to China Petrochemical Corporation (a/k/a Sinopec) for $2.45 billion. (Dealbook article here.)
M&A activity is picking up in the oil and gas sector, as oil prices remain relatively high, along with global demand. (In fact, gas prices are at two-year highs.) There were similar hopes for an uptick in M&A in the utility industry when the Energy Policy Act of 2005 removed the historic M&A limits of the Public Utility Holding Company Act. The idea was that removing regulatory hurdles would increase investment in the sector, in part via M&A opportunities.
Some of us were skeptical that repealing PUCHA would have much impact (see, e.g., my 2007 article here), and I think history has shown that to be true. Now if electricity prices and demand were both to increase by 20% . . .
December 9, 2010
Citizens United Skype Panel Wrap-Up
Back in November I had the pleasure of participating in a panel discussion of Citizens United that was hosted by The West Virginia University College of Law using Skype. Unfortunately, our attempts to record the discussion met with technical difficulties. Thus, we proceeded to record a wrap-up session to review both the substance of the discussion, as well as our thoughts on the technology. You can view the wrap-up here.
December 8, 2010
Social Networking, E-Discovery, and the Risks of the Internet
I am in Washington, D.C., where I will moderate an ethics panel at the Energy Bar Association's Mid-Year Meeting. The panel will feature two speakers: (1) David Bloom, a partner in the D.C. office of Mayer Brown and (2) Justice Dan Crothers of the North Dakota Supreme Court. Mr. Bloom will discuss legal ethics and social networking, and Justice Crothers will discuss ethics in E-Discovery.
As part of preparing for the panel, two items caught my eye that I thought were worth sharing. First is an article about a possible Kentucky rule that might regulate legal comments made on social networking sites such as Facebook. According to an ABA Journal article (here), "The bar has proposed a regulation that would bar solicitations through social media unless lawyers pay a $75 filing fee and permit regulation by the bar’s Advertising Commission." The article goes on to note that there would be some exceptions:
One exception is made for lawyer blogs that communicate in real time about legal issues, as long as there is no reference to an offer of legal services. “Communications made by a lawyer using a social media website such as MySpace and Facebook that are of a nonlegal nature are not considered advertisements,” the proposal says. “However, those that are of a legal nature are governed by [the advertising rules].”
The other item of note is a case from New York, Romano v. Steelcase, Inc., in which a defendant company sought an Order granting it access to "Plaintiff's current and historical Facebook and MySpace pages and accounts, including all deleted pages and related information upon the grounds that Plaintiff has placed certain information on these social networking sites which are believed to be inconsistent with her claims in this action concerning the extent and nature of her injuries, especially her claims for loss of enjoyment of life." The court explained that
when Plaintiff created her Facebook and MySpace accounts, she consented to the fact that her personal information would be shared with others, notwithstanding her privacy settings. Indeed, that is the very nature and purpose of these social networking sites else they would cease to exist. Since Plaintiff knew that her information may become publicly available, she cannot now claim that she had a reasonable expectation of privacy. As recently set forth by commentators regarding privacy and social networking sites, given the millions of users, "[i]n this environment, privacy is no longer grounded in reasonable expectations, but rather in some theoretical protocol better known as wishful thinking."
I am not sure I'd necessarily end up here, but I expect that a lot of courts, and probably most, would end up here. It's worth knowing that at least one court already did.
(H/T: Thanks to Legalethics.com for the links)
[Update: This article from Gregory M. Duhl and Jaclyn S. Miller, Social Networking and Workers’ Compensation Law at the Crossroads, is a good resource on a lot of these issues. The article will appear in the Pace Law Review.]
December 7, 2010
More SEC Tea Leaves...
Earlier today, the S.E.C. web site announced a new insider trading complaint, this one against a law firm technology manager and his brother-in-law. The case is tantalizing for several reasons.
First, some of the transactions at issue allegedly yielded profits under $2,000, thus belying the notion that only big schemes garner Commission attention.
Second, according to an S.E.C. official, the misappropriation theory utilized is premised on duties to the (unnamed) employer law firm and its clients. Thus, nearly 15 years after O'Hagan, we still don't know precisely whose confidence is betrayed by the trading of an "outsider" in these types of cases.
Finally, all three clauses of Rule 10b-5 (in relation to the activities of both the alleged tipper and tippee) are included in Count One - traditionally, an alleged insider trader was said to violate clauses one and three of the famed prohibition, without reference to the "untrue statements" provision.
The S.E.C. release (with link to Complaint) can be found at www.sec.gov/news/press/2010/2010-240.html.
December 6, 2010
The Wake of the eBay Decision: Is Ben & Jerry's Next?
I continue thinking about Chancellor Chandler's opinion in eBay v. Newmark, and I still find myself troubled by the determination that, by embracing it's "community service mission," craigslist was being run improperly as corporate entity (see my prior post here). To recap, Chancellor Chandler explained that by choosing "a for-profit corporate form, the craigslist directors are bound by the fiduciary duties and standards that accompany that form. Those standards include acting to promote the value of the corporation for the benefit of its stockholders."
As I mentioned before, in apparent contrast to Chancellor Chandler, I don't think it necessarily follows that embracing a "community service mission" is inconsistent with "promot[ing] the value of a corporation for the benefit of its stockholders." In fact, it may be that the community service mission is the precise reason that stockholders are gaining the benefit. Take, for example, Ben and Jerry's Ice Cream. Ben and Jerry's began as a small start-up looking to expand its business. Over time, the company began to grow, and along with this growth, embraced environmental causes and created a foundation giving 7.5% of pretax profits for distribution to worthy causes. (See Ben & Jerry's History here.) Of course, the company would not likely have any value if the ice cream were bad (just as craigslist would have no value if it did not work to sell things), but the company philosophy helped build the brand.
Ben & Jerry's grew to the point that it is now a wholly owned subsidiary of Unilever. The company has three-tiered mission statement, with a social mission, a product mission, and an economic mission. The economic mission is of Ben & Jerry's is:
To operate the Company on a sustainable financial basis of profitable growth, increasing value for our stakeholders and expanding opportunities for development and career growth for our employees.
Furthermore, the company explains:
Capitalism and the wealth it produces do not create opportunity for everyone equally. We recognize that the gap between the rich and the poor is wider than at any time since the 1920’s. We strive to create economic opportunities for those who have been denied them and to advance new models of economic justice that are sustainable and replicable.
Is Ben & Jerry's just as vulnerable as craigslist to a shareholder complaint? Obviously not directly, because Unilever owns all the shares. But should Unilever be permitted to allow Ben & Jerry's to operate in this manner? It seems to me that Unilever shareholders would have a legitimate complaint. After all, if the use of the corporate form for such goals is improper, it should be an improper use of Unilever's assets, too. Unilever could seek to accomplish Ben & Jerry's goals through a variety of other mechanisms, such as the use of gifts to a nonprofit entity See, e.g., A.P. Smith Mfg. Co. v. Barlow, 98 A.2d 581 (N.J. 1953). But if the use of the corporate form to pursue Ben & Jerry's goals without the primary goal of profiting for the shareholders is improper, this is a place that form should triumph over substance.
Perhaps the answer instead lies in the size of the investment or the amount of money available to be made. That is, Ben & Jerry's is a small portion of Unilever, so Unilever shareholders should not have much to complain about. Regardless of the decision, it's small potatoes. Chancellor Chandler noted that "[i]f Jim and Craig were the only stockholders affected by their decisions, then there would be no one to object. eBay, however, holds a significant stake in craigslist, and Jim and Craig’s actions affect others besides themselves." Perhaps it is this "significant stake" that is the problem. That is, if the decision pursued seems significant enough (or the potential loss of not pursuing the apparently more profitable end is great enough), then the Delaware court will step in and provide its own judgment.
If so, it seems to mean that the business judgment rule can be rebutted in another way, in addition to showing fraud, self-dealing, and illegality: by showing the likely profitability of choosing another course.
December 5, 2010
The Glom Book Club, Kindle, and Free Markets
I'm a little late to the party here, but when I was checking out the Glom's most recent book club selection, "All the Devils Are Here," I came across an interesting example of consumer activism on Amazon. Apparently, Kindle users were so upset with the book's publisher charging the same price for the electronic version of the book as the hardcover version that they decided to express their discontent by slapping low ratings on the book. Not sure whether it's related, but the Kindle price has come down in the meantime. I ended up "buying" this.