Monday, December 8, 2014

Splitting Business Associations into Two Courses (3 + 2)

In the comments to my post last week on teaching fiduciary duty in Business Associations, Steve Diamond asked whether I had blogged about why we changed our four-credit-hour Business Associations course at The University of Tennessee College of Law to a three-credit-hour offering.  In response, I suggested I might blog about that this week.  So, here we are . . . .

At UT Law, we have split our Business Associations course into two courses effective as of this academic year.  The first course is a three-credit-hour basic comparative Business Associations offering, with a few "bells and whistles"--e.g., corporate finance (including M&A), securities regulation, complex and business litigation teasers--added to the back end of the course.  The second course is a two-credit-hour Advanced Business Associations course focusing on a deeper knowledge of corporate governance, corporate finance (including M&A), securities regulation, complex and business litigation.  I have wanted to take this approach to teaching the law of business associations since I started teaching UT Law's Business Associations course fifteen years ago.  Until recently, however, we did not have the resources to be able to implement it.  (As it is, I will be teaching five courses most years to enable to do this.)

There are a number of reasons why decreasing the credit-hours (and, therefore, the coverage) of the basic Business Associations course to three-credit-hours from four-credit-hours and creating a two-credit-hour Advanced Business Associations course are good ideas for us at UT Law, if we manage to do it properly (and I am not confident my first effort at the first piece of the two-part offering is a proper start).

  • Doctrinal Expansion - The volume of material that could be taught in a Business Associations course has expanded to the point that one simply cannot teach it all in one four-credit-hour offering.  Yet not every student needs to know all of this available material.
  • Specializing Students -  Those students who want to move on in business law (a small group at UT Law) should have exposure to more than a three-credit-hour course can offer.
  • Scheduling - A four-credit-hour course is harder to fit into student schedules than a three-credit-hour course, and we want to encourage students to take Business Associations, which is (obviously) not a required course at UT Law.  Two-credit-hour courses are attractive to many students and can be (relatively) easy to fit into schedules.

The descriptions of the two courses follow, for those who are interested.  They are not a model of clarity, and I am not fond of the way that UT likes us to draft our course descriptions, as a general rule.  But you'll get the idea . . . .

LAW 827 - Business Associations

3 Credit Hours

Legal problems associated with the formation, operation, combination, and dissolution of unincorporated and incorporated business firms; legal rights and duties of firm participants (principals and agents; partners, joint venturers, limited partners, limited liability partners, and members and managers of limited liability companies; and corporate shareholders, directors, and officers) and others with whom those participants interact in connection with the firm’s business, including attorneys. Introduction to legal issues in close corporations and federal law concerning corporations.

LAW 829 - Advanced Business Associations

2 Credit Hours

In-depth study of the legal issues associated with close corporations, public corporations and complex litigation to enforce the legal rights and obligations of constituents in business entities in the context of fiduciary duties, fundamental change and change-of-control transactions, federal and state disclosure obligations, securities fraud, insider trading, and related matters.

(DE) Prerequisite(s): 827.

I will be interested to see if the anticipated benefits--the pedagogical and curricular benefits we desire to achieve--are in fact achieved by this restructuring.  I hope so.  If any of you have related or otherwise relevant experiences with this part of the law school curriculum, I invite you to share them in the comments.

http://lawprofessors.typepad.com/business_law/2014/12/splitting-business-associations-into-two-courses-3-2.html

Business Associations, Corporate Governance, Corporations, Joan Heminway, Law School, M&A, Securities Regulation, Teaching | Permalink

Comments

Thanks for sharing this Joan. At Belmont Law, BA is a 4-hour course and is required of all 2Ls. I find it is a bit difficult to squeeze the important information into four hours, much less three. I guess you really have five hours, but at Belmont, if we switched to 3-2, I imagine most students would only take the 3 hour course and thus get less business law education than they currently do at Belmont.

Posted by: Haskell Murray | Dec 9, 2014 6:32:04 AM

If I read your post correctly, UT also offers standalone courses on Corporate Finance, Securities Regulation and M&A. Did you change those offerings now that you offer an advanced BA class?

I would also like to hear your thoughts on giving students options for their BA course. At both Maryland and Emory, we’ve offered a 3-credit and a 4-credit option for BA, and the 4-credit option is usually offered in the fall. The expectation was that students who are really interested would take the 4-credit class in the fall of their second year, and then take SecReg or M&A in the spring.

I like the idea behind the change. I teach both Securities Regulation and M&A as 3-credit classes. M&A works well in that format, but I find that Securities Regulation does not. There’s too much material for 3-credits, so it should really be a 4-credit class (or 5). But many students don’t need 4 credits of SecReg, though they would benefit (and take) a 2-credit class.

Posted by: Urska | Dec 9, 2014 6:52:05 AM

I too worry that a 4-credit survey style course in business organizations covers both too much and too little. Something about jack of all trades, master of none comes to mind sometimes. . . .

I have thought about whether it might make sense to split my course into a two credit session on unincorporated entities (partnerships, partnership variants and LLCs) and a three credit course on corporations (including a bit of M&A, capital markets, securities law stuff). There are disadvantages to this approach. For example, I wonder whether LLCs would make sense as a "hybrid" entity if the student has not had exposure to both partnerships and corporations. In addition, students who don't intend to practice in a business law field might not be happy about giving up so much "real estate" on their transcripts merely to ensure bar coverage.

Still, I wonder whether this structure might give me the time I think I need to do justice to the material.

Posted by: Christine Chung | Dec 9, 2014 8:49:04 AM

These are great thoughts, Haskell, Urska, and Christine. Haskell, we do anticipate that few students will take the Advanced BA option at UT Law. And that's OK with us. The difference is, I think, that BA is not required here at UT Law, unlike at Belmont. While I know all law students can benefit from the entirety of the material I will offer in the five-credit-hour package, most that I teach will not need or remember the more nuanced, generally corporate, law concepts that I now will teach in Advanced BA. So, I am at peace with that part.

But it does mean that one needs to think about what to put in each course. So, to Christine's idea of splitting the course into unincorporated and incorporated business entities (or something along those lines), I considered and rejected that idea. My primary reason for not advising that UT Law go in that direction is that in practice, most folks (my students included), whether they focus on transactional or advocacy-oriented practices, need to know about both. As an advisor to businesses, some of the key advice that is given is on choice of entity. But litigators need to know how to distinguish between and among business entities for various reasons. Take the form of contract I was shown this morning by one of my former students (in a potential future litigation context) that conflates an LLC and a partnership form in a single agreement, ostensibly drafted by a licensed practitioner in another state. (Believe me, you don't want the details on this one . . . .) Your point about understanding LLCs is also a very good one, Christine. And then there's the bar, that tests on all the forms . . . . So, that's why the basic course is three credit-hours and focuses on comparative attributes of all of the principal business association forms, plus basic agency law principles.

Urska, you are right that we also have courses in Securities Regulation (in which I focus on the 1933 Act and the 1934 Act's basic public company stuff, as well as securities litigation), Corporate Finance (which I teach as a planning and drafting seminar focusing on the instruments and transactions of basic corporate finance), and M&A (which is taught by an adjunct, one of my former students for whom M&A is a big part of his and his firm's practice). This year, our Clayton Center visitor is teaching an M&A deal skills offering, too, in the spring semester (which I hope to sit in on). And we have in a number of recent years offered a cross-border M&A offering that is co-taught as a survey course (but we're taking a break on that this year). So, corporate governance/corporate finance/securities regulation stuff is covered in different ways in these different courses in context.

I believe that the "3 + 2" option is better than the "choose 4 or 3" option (although we have used that here at times in the past) since it gives the students more scheduling flexibility overall. Some students will take Advanced BA on the heels of BA in their second or third year of law school; some who take BA in their second year will wait and take the Advanced BA offering in their third year, some will just skip Advanced BA altogether. Those two credit-hours can fit in nicely in a variety of places in the overall upper division schedule.

Again, thanks for the comments and suggestions. We can always make this better for our students, right? I firmly believe that.

Posted by: joanheminway | Dec 9, 2014 9:30:44 AM

Thank you for the follow up, Joan. This issue is important here in light of the priority now placed on testing business law on the California bar. With a 3 unit approach I think we run up against the problem of leaving off topics that could be tested. And of course we are not just teaching to the bar so covering what we think a successful lawyer needs is a constant challenge in the course.

Posted by: Steve Diamond | Dec 9, 2014 10:11:35 AM

No doubt, Steve.

And even teaching to the bar is a complex issue. Different state bars couch the knowledge they may test in different ways. The Tennessee guidance, for example, only states that "[t]he examination is not designed to test the applicant's knowledge of specific law school subjects. However, familiarity with the following areas of the law is essential:. . . [b]usiness organizations (including agency, partnerships and corporations)." There is no mention of the LLC form, but we do not assume the list in the parenthetical is exclusive based on the context and sentence construction. The Board of Law Examiners does (helpfully) post recent essay questions, as further guidance: http://www.tn.gov/lawexaminers/essayquestions.htm.

What does California's topic description for the bar exam include/exclude regarding business associations? I would be interested in knowing, if you know. . . .

Posted by: joanheminway | Dec 9, 2014 10:26:22 AM

Hi, Joan. Good post. I thought I’d share what we did at Texas A&M last year. We split the course, but went to a 3-3 formula. The first (required) course focuses primarily on closely held entities, while the second deals chiefly with publicly traded entities. I think that’s a natural break, because the first course allows us to focus on the kinds of problems younger lawyers are more likely to encounter (and which show up disproportionately on the bar exam), and allows us to go into more depth on those topics. Thus, we actually do more agency and partnership law than we did in the 4-hour version. We spend more time on “un-corporations,” tax aspects of choice of entity, planning and counseling issues, control mechanisms, and the particular kind of fiduciary issues that arise in closely held entities where individuals frequently have unavoidable conflicts of interest. (We also can spend more time on the duty of care, which is much more dangerous for directors in in smaller businesses than in large ones.) Our coverage of securities-related issues is limited to (a) how raise money without triggering registration, and (b) how not to get close to a situation in which you might violate the insider trading law.
Similarly, three hours for public corporations allows more in-depth treatment of much of the stuff that’s part of the usual course, but that I never could quite cover well in a four-hour course: proxy solicitations, special litigation committees, registration statements, insider trading, tender offers, takeovers, poison pills, corporate finance (above the rudimentary level). And that’s ignoring larger questions that many people want to look at, such as the role of corporations in society, questions that aren't usually raised in connection with the two-person LLC that runs the local Tex-Mex restaurant.
We’ve found that the second class is fairly popular. We market it primarily as a class for students who (a) are hoping to do big-firm stuff and want a general introduction, and (b) are real business types who are going to want to go on and take the standalone Securities Regulation and Corporate Finance classes.
As for Steve Diamond's point about the bar, I can't speak for California but the Texas bar questions are almost always related to the stuff we cover in our required first course, and thus it's good to have more time.

Posted by: Frank Snyder | Dec 9, 2014 10:32:56 AM

Super information, Frank. What you all are doing is close to what we are doing at UT Law, only we do not use "publicness" (harder to define these days) as the break point. Instead, we've taken a more textured conceptual approach that had meaning for those of us who teach the basic course here.

Since true "close corporations" are (like public companies) more rarefied forms of corporation, we have chosen to use the basic BA course to teach general corporate norms, including the key parts of the close corporation stuff and the basics of securities regulation. This includes a bit on proxy regulation and sensitizing the students to the fact that every time an interest in a firm is offered or sold, they need to think about whether that interest is a security (and, as a result, whether registration is required, etc.) . . . .

The Advanced BA course is mostly focused on public company stuff, but also covers more of the close corporation material--in more depth--as well as derivative litigation process and securities litigation, including Section 10(b)/Rule 10b-5 (which are applicable to both privately held and public firms). I do suspect that the second course will gain in popularity for some of the reasons you suggest. But everyone is just getting used to the concept at the moment . . . .

Posted by: joanheminway | Dec 9, 2014 10:56:07 AM

The bar provides a reasonably detailed outline of the scope of topics covered: https://admissions.calbar.ca.gov/Portals/4/documents/gbx/Scopeoutlines0707_R.pdf

Posted by: Steve Diamond | Dec 11, 2014 10:32:24 PM

Thanks, Steve. I will check it out.

Posted by: joanheminway | Dec 12, 2014 7:15:09 AM

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