Business Law Prof Blog

Davidoff on "how globalization increasingly allows companies to avoid United States taxes and regulation."

Over at DealBook, Steven Davidoff has posted "The Benefits of Incorporating Abroad in an Age of Globalization."  Davidoff uses Michael Kors Holdings as a case study demonstrating how companies are incentized to incorporate abroad in order to take advantage of tax savings, decreased regulatory burdens, and a decreased threat of shareholder litigation.  He notes further that this is not an isolated case, as "[p]rivate equity firms have been buying American companies with significant foreign operations and reorganizing them as foreign corporations."  To the extent that this creates problems for the U.S., he suggests that "[p]erhaps it is time for the United States to adopt a tax system more in line with the rest of the world."  What I found more interesting, however, was his suggestion that "American investors may be investing in Kors and other companies incorporated outside the United States without appreciating that they are not subject to the same United States laws that other publicly traded companies are."  This seems to me to be the crux of the debate about whether corporate regulation generally follows a race to the bottom or the top.  The greater the likelihood that signifcant portions of the investing community do not properly value the jurisdiction of incorporation, the greater the likelihood that the race is to the bottom rather than the top.

SJP

Sticks and stones may break my bones ....

In case you've missed the name-calling drama playing out in the legal scholar blogosphere, here's a recap:

1. Stephen Bainbridge takes issue with John Coffee calling him (and Larry Ribstein & Roberta Romano) names (here).

2. My first reaction to this was that it was somewhat of an odd response, given how many times Bainbridge has seen fit to call people idiots and other names on his blog.  Matt Bodie beat me to the punch, however, here.

3.  Bainbridge responds by claiming it's okay to call people names in blog posts (here).

Personally, I'm unclear as to how a lack of civility is ever really defensible.  Bainbridge quotes Brian Leiter as saying (here):

Some philosophers with Kantian intuitions think that civility is always a general requirement of respect for persons, an intuition that I do not share, and for which I can not think of any compelling arguments, and many objectionable counter-examples, like those in the text: treating Nazis in Weimar with civility seems to me a moral failing on the part of their opponents, not a requirement of respect. Such a demanding conception of civility would also be incompatible with derisive polemics (think H.L. Mencken), which often play an important role in political and social life.

My answer is simply that the moral failing in the Weimar case would be to not hold the Nazis accountable.  Using their behavior as an excuse to act in an uncivilized manner yourself strikes me as simply another form of moral failing.  And saying that derisive polemics have worked in the past is not the same thing as saying that they represent the best way to get things done.  That's sort of like saying we shouldn't strive to keep our anger in check because it can sometimes serve as a proxy for clarity.

We are currently struggling as a nation with competing ideologies that sometimes make it seem like we might be stuck in standoff mode for much longer than is good for anyone.  A lack of civility has been blamed for inflaming this standoff, and I believe we have a responsibility as law professors to not place our stamp of approval on that type of behavior--in our scholarship or our blogging.  Of course, even those of us who agree with this ideal will frequently fall short (particularly in blog posts and during live presentations) because we are ultimately all human and therefore, I believe, all greatly flawed by definition.  Nonetheless, I believe civility is a goal worth striving for in all our affairs.

SJP

ADDENDUM (12/22): In re-reading my post, I realized that I left out what I hope would be obvious but may nonetheless be better stated affirmatively: If sacrificing civility could be shown to be somehow necessary in order to stop the Nazis, then I agree it would be a moral failing to cling to civility.  However, I consider this to be a false dichotomy and believe that it is possible to effectively oppose evil without sacrificing civilized behavior.  Obviously, much of this turns on one's definition of civilized behavior.  However, I think it is fair to say that one need not spit on someone or insult them in order to, for example, justifiably lock them up or even kill them in self-defense.  I realize I've now drifted far afield of the issue regarding civility in scholarship versus blogging, but re-reading my post just left such a bad taste in my mouth that I felt compelled to clear up any confusion I may have created.  I also acknowledge that I may yet be convinced that there are indeed situations where a choice must be made between civility and justice, but I'll leave that for another day.

Good Business: An "Unless" Clause Means What It Says

The North Dakota Supreme Court recently determined in Beaudoin v. JB Mineral Services, LLC, that an "unless" clause in an oil & gas lease means what it says.  That is, unless the lessee makes the a specified payment by a specified date, the lease terminates.  The provision at issue required:

1. Notwithstanding anything to the contrary contained in said lease, it is agreed that said lease shall terminate as of120 business days from date of notarized signature (hereinafter referred to as the Termination Date) unless Lessee, on or before said Termination Date, shall pay or tender to the Lessor(s), or any successor bank, as a Supplemental Bonus Payment, the sum of Forty Five Dollars ($45.00) per net mineral acre owned by Lessor(s) and covered by said Lease. The payment or tender of said sum may be made by cash, check, or draft, mailed or delivered to the Lessor(s) or to said bank on or before said Termination Date.

2. If said supplemental bonus payment is timely paid or tendered, then said lease shall be and continue in full force and effect according to its terms. If such sum is not timely paid or tendered, then said lease shall terminate and be of no further force or effect as of the Termination Date. It is understood and agreed that Lessee has the right to, but is not obligated to, make said supplemental bonus payment. In the event said supplemental bonus payment is not made as set forth above and said lease has been filed in the records of said County and State, it is agreed that Lessee shall promptly execute and file of record a release of said lease.

As the Court notes, the clause doesn't require to lessee to make a payment. It simply provides that the lease will end unless the lessee acts.  The Court also explained that "the 'unless' clause was developed for the benefit of the lessee, and is strictly construed against the lessee even though harsh results may occur."  

I like this -- it is a contract with a clause for a specific purpose, and the court is enforcing it with gusto. I would note, too, that this is not a case where a mistake was claimed or where the lessee tried to comply, but somehow erred.  This was a case where the lessee made an argument that if, "[c]arried to its logical extreme . . .[would mean] the lessee would be allowed to effectively extend the termination date indefinitely [without actually making the requirement payment]." 

In a time where where many landowners and others are expressing concern about how oil and gas companies are treating those with whom they do business, here's at least one example where the lessor is likely to get what he or she bargained for.

--JPF 

Assessment, Teaching, and Memory: More to Think About

James M. Lang's article, Teaching and Human Memory, Part 2, is now available at the Chronicle of Higher Education website.  I wrote about Part 1 on November 28, 2011 (here), focusing on the article's point that information about how best to teach students varies widely and often conflicts.  For this second article, Dr. Lang discussed some teaching and learning research with Dr. Michelle Miller of Northern Arizona University. Dr. Lang explains: 

[M]emory matters, even for those of us teaching the most complex cognitive skills we can imagine. Given its importance to our work in higher education, I sought help from [Dr. Michelle] Miller, first of all, in thinking about how her research might apply to the design and presentation of college courses.

"The mind isn't a sponge that absorbs whatever disjointed information we happen to pick up through our senses," she said. "Rather, we acquire information from the environment that we (a) understand, and (b) care about. It follows that when we design our courses, we should start by asking ourselves how we will capture and direct students' attention, and then plan how we will frame the information in a meaningful, interpretable way. This is different from the traditional approach of starting with the material to be covered and how we plan to spread it out over the course of the semester."

As law schools are now increasingly being asked to consider learning outcomes assessments of law students (and often resisting that request), it's worth knowing what the research says in this area.  I'm not one who believes that all law schools are broken or that there is one way to teach anything. Different styles and processes can and should be used to achieve different goals. Students should have different kinds of courses, different assessment methods, and different expectations from year to year and class to class.  

It's worth knowing, though, that Dr. Miller's research does not suggest "that certain types of assignments or exams were better than others."  Instead, she says, "frequency is more important than format" with regard to assessment.  Dr. Lang builds on this: 

[The research thus] suggests that we should be testing, quizzing, and assigning homework to our students as frequently as possible—or perhaps as frequently as we can handle the challenge of grading all of that work. A course with a dozen low-stakes exams or quizzes, and plenty of homework, will do a much better job of promoting retention of course material than a class with only two or three high-stakes exams.

I use multiple quizzes and exercises in two of my courses (and it does make grading rather onerous), but I still use one, all-inclusive final exam to end the semester for my Business Associations courses. This is planned -- I think the value of seeing how interconnected agency, partnership and corporate concepts are as a whole, as opposed to viewing them discretely, has value. I also think there is value in preparing students for the bar exam by replicating that process to some degree, because passing the bar is still a threshold requirement to practicing law (barring a few exceptions).  

I do use exercises and problems in my BA courses, too, but they are not formally assessed in any way. That's not all bad, either, as it allows students to get a sense of where they are without having the problems impact their grade.  Of course, that presumes they care and are engaging in both the exercise and the self-assessment opportunity that follows.  My experience suggests that many are and many are not.  

Ultimately, as I consider these suggestions as they connect to my courses, it's clear to me I can do better. One of the challenges of making changes to a course to "do better" is that it comes with a risk that I will do something worse.  I think it's worth the risk, though, because I want to be a better teacher. And my students deserve that. To that end, I have always found the great basketball coach John Wooden's advice to be especially insightful and motivating on this front. He's was a teacher first and a coach second, just as I strive to be a teacher first and law professor (with all that encompasses) second. Here are a few of my favorite Coach Wooden quotes: 

"If you're not making mistakes, then you're not doing anything. I'm positive that a doer makes mistakes."

"Failure is not fatal, but failure to change might be."

"Don't measure yourself by what you have accomplished, but by what you should have accomplished with your ability." 

--JPF

What constitutes and adequate law school ROI?

University of Louisville Law School Dean Jim Chen argues that law school graduates typically need to generate an annual income equal to three times their annual law school tuition in order for their investment in law school to leave them with adequate economic viability, assuming they incurred debt to cover the entire cost of tuition (and nothing more).  The National Law Journal has the story here.  Dean Chen's paper is available here.

SJP