January 7, 2012
Slightly Delayed "Live-Blogging" From the AALS
Over at the Glom, Gordon Smith recounts some of the discussion from the recent Business Associations Section meeting at the AALS Annual Meeting this past Thursday. Like Gordon, I was particularly struck by the remarks of Delaware Chancery Court Vice Chancellor J. Travis Laster on the issue of Say-on-Pay. Here is some of Gordon's summary (you can find his entire post here):
[I]s there room for a Delaware claim on executive compensation in the wake of Say on Pay? Teasing the assembled law professors, Vice Chancellor Laster suggested that the Delaware courts could decide to review pay decisions with a form of enhanced scrutiny (because that standard of review applies to situations involving structural bias), but he rightly observed that such a move would be comparable to Smith v. Van Gorkom in 1985…. The more likely path to a claim is one already being pursued by a number of plaintiffs lawyers, namely, going after a board of directors for waste of the corporate assets…. If you couple such a claim with a bad vote on Say on Pay, you might have something.
One of the other things that struck me from Vice Chancellor Laster's remarks was his statement (according to my notes) that the Delaware judiciary is very aware of the "Zeitgeist." This means that while subjecting compensation decisions to enhanced scrutiny may constitute a "thermonuclear explosion" in corporate law, Delaware may nonetheless get there if the threat of further federalization of corporate law in this area becomes great enough.
For those of you not familiar with Vice Chancellor Laster, here is a short video wherein he mentions that his preferred theory of the corporation is "utilitarian":
January 6, 2012
Strict Criminal Liability, Regulation, and Ben Franklin
Long ago, Ben Franklin warned, "Laws too gentle are seldom obeyed; too severe, seldom executed." Unfortunately, following massive environmental disasters (and financial disasters) legislators and regulators tend to respond to public outcry by seeking better ways to "put the bums in jail" without assessing the real problems.
Building on this point, I wrote my article, Choosing a Better Path: The Misguided Appeal of Increased Criminal Liability after Deepwater Horizon, which was just published in the William & Mary Environmental Law and Policy Review (available here). In the article, I argue that increased criminal liability for energy company employees is not likely to be effective in preventing disasters like the blowout of BP Macondo well in the Gulf of Mexico. And increased liability is simply not the best way. The abstract:
Despite the potential appeal of dramatically increased liability and sentences in the wake of environmental disasters like the Deepwater Horizon oil blowout in the Gulf of Mexico, this Article argues that more aggressive criminal provisions and enforcement related to environmental harms, up to and including strict criminal liability, are not likely to protect the environment better or lead to safer work environments. This Article first considers the history and legality of, and the rationale behind, policies designed to make it easier to convict allegedly responsible parties and also discusses the pursuit of increased liability in relation to disaster-related and tragedy-related events in the financial and criminal sectors. The Article then discusses the use of reduced burdens and strict liability in environmental law in both civil and criminal contexts, and argues that the use of strict liability is less effective than a negligence standard because it tends to reduce penalties, which can limit the direct punishment to violators, as well as the prophylactic potential of the laws. Finally, the Article concludes that, rather than reducing mens rea standards and increasing criminal liability, U.S. energy and environmental law needs to focus on encouraging proper risk assessment and risk management to promote safe and effective energy extraction and production while encouraging and protecting both the environment and the economy.
What's all of this mean? There are no easy answers, but here's my conclusion:
One of the greatest risks to the continued economic success of energy-related activities is an environmental disaster. As such, disaster avoidance is a benefit to all stakeholders: lawmakers, regulators, oil companies, and people generally have reason to support a safer energy industry. The first step, then, is to adopt a proper mindset to help avoid disasters. Rather than pursuing with vigor penalties to punish a future perpetrator or seeking creative ways to use obscure laws that have a slight chance of success, efforts should look to ways to prevent the next disaster.
This means carefully assessing risk, then developing plans and programs to minimize that risk. This is not something that can happen in a vacuum. It requires coordinated efforts from industry, government, and the public. We all must understand and appreciate the risks before us, then be prepared to accept the costs of our decisions.
January 4, 2012
Lowell Milken Institute Law Teaching Fellowship
The Lowell Milken Institute for Business Law and Policy at UCLA School of Law is accepting applications for the Lowell Milken Institute Law Teaching Fellowship. The Institute describes the fellowship as follows:
This fellowship is a full-time, year-round, one or two academic-year position (approximately July 2012 through June 2013 or June 2014). The position involves law teaching, legal and policy research and writing, preparing to go on the law teaching market, and assisting with organizing projects such as conferences and workshops, and teaching. No degree will be offered as part of the Fellowship program.
Fellowship candidates must hold a JD degree from an ABA accredited law school and be committed to a career of law teaching and scholarship in the field of business law and policy. Applicants should have demonstrated an outstanding aptitude for independent legal research, preferably through research and/or writing as a law student or through exceptional legal experience after law school. Law Teaching Fellowship candidates must have strong academic records that will make them highly competitive for law teaching jobs.
Applications are due by March 1, 2012. More information about the Institute and on the fellowship can be found here.
-- Eric C. Chaffee
Texas Tech University School of Law Seeking Business Law Visitor (2012-13)
As a courtesy to our friends at Texas Tech -- please find the following announcement. They say that "business/securities/corporate courses" are their priority:
Texas Tech University School of Law is seeking applications for one- and two-semester (full time) visitors during the 2012-13 academic year. Anticipated curricular needs include courses in business entities, business analysis for lawyers, corporate governance, securities regulation, mergers and acquisitions, property, energy law, agricultural law, natural resources law, environmental law, employment law, employment discrimination law, civil procedure, criminal procedure, criminal law, health law, animal law, and law and science. Applicants with full-time law school teaching experience fitting the curricular needs are especially encouraged to apply, as are women, minorities, and veterans. Along with a resume (PDF), an applicant should e-mail a single page cover letter (PDF) identifying the two or three courses he or she is best prepared to teach. Texas Tech University is an Affirmative Action/Equal Opportunity Employer. Applicants should e-mail Professor Michael Hatfield c/o Michele Thaetig at firstname.lastname@example.org with “2012-13 Faculty Visitor Application” and the two or three specific courses in the subject line. Review of applications will begin in mid-January.
A Year in Review: Top Delaware Cases from 2011
The Delaware Corporate and Commercial Litigation Blog has posted Noteworthy 2011 Corporate and Commercial Decisions from Delaware’s Supreme Court and Court of Chancery. As always, they provide useful and insightful information about Delaware cases, and the post and the blog are worth a read.
Among the key cases they highlight are several that we at the BLPB have discussed. As a year in review of the BLPB Delaware case discussions, here are a few:
I'm sure I have missed others, especially other cases my colleagues discussed, and I hope they will free to add (or create their own) year in review.
The First Amendment Versus Corporate Law
The headline reads: Montana High Court Says 'Citizens United' Does Not Apply In Big Sky State. I have not had a chance to read the entire 80-page decision, but I did want to share some thoughts that struck me when I read the headline--acknowledging that they may not be relevant to the particular dispute itself.
I have written here and here about my belief that Citizens United is more about corporate theory than the espoused First Amendment rights of listeners. If nothing else, even if one gives great weight to the rights of listeners it seems difficult (if not impossible) to decide whether corporations fit within the narrow class of cases allowing for identity-based restrictions under the First Amendment without resolving the fervent corporate theory debate the majority and dissent in Citizens United engage in (all while claiming corporate theory is irrelevant). In trying to unravel the mystery of this apparent inconsistency, I have noted that one explanation is the problems created by admitting corporate theory is dispositive--one of which is that this acknowledgement raises the very serious specter of these questions being more about state corporate law than First Amendment rights. To that end, this quote from the [reluctant] dissent in the Montana case seems relevant: "Corporations are artificial creatures of law. As such, they should enjoy only those powers—not constitutional rights, but legislatively-conferred powers—that are concomitant with their legitimate function, that being limited liability investment vehicles for business."
January 3, 2012
A Ribstein Legacy: Politics, Scholarship, and the Value of Discourse
Last month, there was something of a squabble with Professors Ribstein, Romano, and Bainbridge on one side and Professor Coffee on the other. The squabble highlighted some differences in views among some of the truly elite business law scholars -- mostly about the value of securities regulation and how Professor Coffee characterized the views of the others -- which I found interesting because I agree with all of them about some significant portion of business law. The squabble had scholarly, as well as political, overtones. A summary of the difference of opinion is here and the conclusion is here and here.
The passing of Larry Ribstein has caused me to reflect on what his scholarship meant to me as a developing business law professor. I agree with most of Ribstein's writing about LLCs and corporate obligations, and this agreement represents an evolution in my way of thinking about entity governance and operations. What is particularly appealing to me about this is that, from his blog posts, I get that sense that Professor Ribstein and I were not necessarily on the same page politically. Nonetheless, even when I disagreed with what seemed to be the motivations for his thinking, I usually thought his analysis was right.
His writing on LLCs and "uncorporations" had a particularly profound impact on how I view business entities because he helped (and perhaps caused) me to think about the value in multiple options among enitities. He explained how the LLCs and corporations are different in their respective histories and how those histories should inform the law's view of each entity. In his book, Rise of the Uncorporation he explains, at page 6:
Uncorporations are characterized by their reliance on contracts. This is an aspect of uncorporations’ partnership heritage, as partnerships are contracts among the owners. . . . In contrast, corporate law is mainly couched in mandatory terms. . . . [T]he corporation’s special regulatory nature emerged from its historical roots. The corporation initially was a vehicle for government enterprises, monopolies, or franchises.
See more of his thoughts on this here. It was, in part, Professor Ribstein's writings that spurred me to write the short piece, LLCs and Corporations: A Fork in the Road in Delaware? (Harvard Business Law Review Online).
As I think about it, through their books, articles, and blogging, Professors Ribstein and Bainbridge have probably had more of an influence on my views of corporations and LLCs than anyone, even though I tend to disagree on any number of political issues. I suspect part of it is that I like to be engaged by people with different views, and I want them to have the chance to change my view. If I'm not questioning my rationale, I'm not learning. Changing my mind doesn't happen that often, but it does happen. In turn, I hope to be given the same opportunity to influence others from time to time.
This is just one more small reason, among many large ones, why Larry Ribstein will be missed.
January 1, 2012
Happy New Year!
If you want to spend a little time looking back at 2011, you might try going over to The Race to the Bottom and checking out Jay Brown's overview of Delaware's worst shareholder decisions for 2011.