Business Law Prof Blog

Arizona Shooting Raises Questions About Costs of Vitriol in Politics and Elsewhere

You can find some background on the shooting here.  For whatever reason, the story made me search "civility party" on delicious.  I came up with an article from 11 months ago entitled "The Civility Tour."  Here is the quote that jumped out at me:

"Polarizing rhetoric can precipitate violence," Leach said. It "takes a commitment to listen, to watch, read and think" in ways that allow the imagination to put oneself in another's shoes. "If we can't respect our neighbors, how can we expect others to respect us, our values and our way of life?"

SJP

 

Oil Commission Overstates Ability to Avoid Deepwater Spills

The National Oil Spill Commission yesterday released a chapter of its report on the blowout of BP’s Macondo well in the Gulf of Mexico.  The portions released solidly place the blame for the blowout on BP, Transocean, and Halliburton, finding that the blowout is attributable "to a single overarching failure—a failure of management."  I certainly agree that better management would have reduced the risk of the blowout, as well as likely improved the response and mitigated some of the damages. I don't, however, agree that management was singularly the cause of the blowout or that better management would have eliminated the risk. This view is both wrong and dangerous.

Here's the a statement from the report that states at least one of the commission's conclusions:

Better management by BP, Halliburton, and Transocean would almost certainly have prevented the blowout by improving the ability of individuals involved to identify the risks they faced, and to properly evaluate, communicate, and address them.”

 The report continues:

The blowout was not the product of a series of aberrational decisions made by rogue industry or government officials that could not have been anticipated or expected to occur again. Rather, the root causes are systemic and, absent significant reform in both industry practices and government policies, might well recur.

This latter statement is more accurate, and makes clear that there are systemic problems, not just problems with BP and other's oversight and management of this well. (For the record, Exxon Mobil's CEO disagrees, stating, "I do not agree that this is an industrywide problem.") But the truth is that deepwater drilling is still inherently risky.  Certainly the risks of a blowout were dangerously understated, but just as important is that the risks are not completely avoidable.  We need to understand this as we continue to drill (and we are -- new deepwater sites have been already approved), there is always a chance of a blowout. 

The question is not whether a blowout is completely preventable. It's not. The question is whether the risks can be reduced to the point that the drilling is worth doing.  Steps in both aviation and medicine (such as in the administration of anesthesia), usually through protective independent redundancies, have made those processes much safer.  Deepwater drilling is similar in that remote shutoffs and pre-drilled relief wells can help.  But, just as in medicine and aviation, bad things can still happen.  We need to know this and remember this when we decide to drill in deepwater. 

The commission report appears to have some good analysis, ideas, and recommendations and should be considered carefully.  We must, however, resist the urge to believe that this was simply a bad result caused only by some bad actors.  It's not just that simple. 

--JPF

 

Hayden and Bodie on the Unraveling of 'Nexus of Contracts' Theory

Grant Hayden and Matthew Bodie have posted a paper forthcoming in the Michigan Law Review entitled "The Uncorporation and the Unraveling of 'Nexus of Contracts' Theory."  Here's the abstract:

This is a review of The Rise of the Uncorporation, by Larry E. Ribstein (Oxford University Press 2010). The Rise of the Uncorporation gives a compelling account of the increasing reliance on business forms other than the corporation. These new organizational forms - such as limited liability companies, limited liability partnerships, partnerships, and the like - give businesses greater freedom to structure themselves in ways that best facilitate their particular needs. And this, according to Ribstein, is an unqualified good, for it allows firms to operate more efficiently than if they were forced to assume an intensely regulated form.

Like most stories, though, this one has a heavy, and here it is the corporation. The corporate form, which dominated the landscape for much of the twentieth century, is contrasted with the uncorporation and presented as the product of forced, not free, choice. This is, perhaps, the most surprising (and welcome) aspect of the book, for the corporation has long been theorized as a product of contractual freedom and championed for its resulting efficiency. Now that we (with Ribstein’s help) have dispensed with the myth that the corporation is merely a nexus of contracts, we can focus our attention on the significant role that government plays in all forms of organizational form, corporate and otherwise.

SJP

Preview: Lawyers in Corporate Decision-Making

Robert Eli Rosen's book, Lawyers in Corporate Decision-Making, was just released in paperback by Quid Pro Books.  I have not had a chance to read the book, yet, but my excellent professional responsibility professor at Tulane, Alan Childress, started the publishing company, and he was kind enough to bring this to my attention.  (For what it's worth, I know I don't need to flatter him anymore, it's just true.) I look forward to reading the book, and I will follow up with some thoughts here when I do. In the meantime, here's an excerpt from the book description: 

A recognized study of the disparate roles that corporate attorneys play in representing and advising their institutional clients. Long passed around and cited by scholars and practicing lawyers as an unpublished manuscript, this book insightfully explores the choices that lawyers, managers and executives make about how lawyers are involved in corporate processes.

. . . 

The author, now a senior professor at the University of Miami Law School, repeatedly calls on attorneys to understand the organizational context of their work. His book repeatedly calls out attorneys who ill serve their clients because they failed as organizational analysts. It has since been recognized by legal, ethical, and sociological theorists as a rich resource of corporate analysis and the divergent roles that lawyers play.

The groundbreaking research was conducted at six major manufacturing companies as Rosen interviewed a triad of inside counsel, outside counsel and managers who worked on particular problems. This novel method allowed self-serving statements (especially by the lawyers involved) to be checked and placed in realistic context. More important, because it triangulated how the legal problem was understood, the method brought out how the legal task had been structured. The frames that the lawyers, managers and organization imposed on the legal problems varied widely—and the sources and consequences of these variations are detailed and explained.

I am a firm believer that lawyers need to be better counselors, and this study seems to provide evidence for this point. Even when lawyers are acting in good faith (and I still believe the vast majority are), there is a big difference between giving "correct" advice and "good" advice. That is, a lawyer can be right in interpreting the law, but wrong for the client in how they frame what that interpretation means. My current case book (Business Associations: Agency, Partnerships and Corporations, 7th Ed., from Professors William A. Klein, J. Mark Ramseyer, and Stephen M. Bainbridge) makes this point in a planning question at the end the book's very first section. I chose this book in part because it clearly frames this issue at the outset of the course (and continues the theme throughout).  

I look forward to seeing how Professor Rosen's research adds to this.  

--JPF

(Hopefully) Signs of a Recovery

Stocks are up to begin the new year, U.S. manufacturing and U.S. auto sales appear to have fared comparatively well over the past well, and even housing did better in 2010 than was expected (although expectations were admittedly low).  

Some other signs indicate at least some additional expectations of an improved economy:

• The Detroit Auto Show is expanding for 2011;
• Construction spending was up for the third month in a row;
• IPO activity appears to be on the upswing (thanks, in part, to China); and
• Goldman Sachs and a Russian investor just put $500 million into Facebook. 

Okay, so the last one is probably not inherently much of an indicator of an improving economy, but Goldman doesn't tend to bet poorly that often, so I take it as a good sign that Goldman thinks people are confident enough to keep on networking socially.  Perhaps that means people will keep spending like it's 2007, which may or may not be a good thing, but at least some people seem to think it is. Of course, not everyone thinks spending equals confidence, and that is probably true, although I tend to think people who increased spending this year over last year were probably more confident than they were last year, even if they would not call themselves "confident" when asked now.  

Anyway, here's hoping that 2011 brings a healthier and more prosperous year than 2010.  Happy New Year.

--JPF

Some Energy for Those New Year's Resolutions

If these two House music podcasts don't get you through that last mile, you may be dead (the links take you to a list of podcasts, make sure you pick the ones listed below--not all podcasts are created equal):

1. Club Life Episode 193

2. Pacha NYC Podcast 79

Enjoy!

SJP