Friday, December 8, 2017
I have had an opportunity to read the oral argument transcript (112 pages) from Tuesday's oral argument in the Masterpiece Cakeshop case.
One of the first things that struck me was that it seemed pretty clear that most of the justices have already taken sides. This is not surprising, but it does sadden me.
I wish that judges, especially justices on the Supreme Court of the United States, were really trying to get the "correct" answer rather than reasoning backward from some predetermined outcome. Perhaps that is naive. Perhaps that is not possible. My former Constitutional Law professor warned of some of the political issues with the Supreme Court and recently wrote about the issues in his book Supreme Myths: Why the Supreme Court Is Not a Court and Its Justices Are Not Judges.
Only Justice Kennedy is thought to be "in play" in this case. All intelligent people of integrity, however, should be aware of their biases, open to the possibly that their initial thoughts are wrong, and open to persuasion based on the law and the facts. Maybe that is too much to ask. Or maybe on of the "reliably conservative" or "reliably liberal" justices will surprise us in this case. In any event, I am definitely looking forward to reading this opinion; it will undoubtedly bring significant consequences.
(As an aside, corporate law scholars may be interested in pages 96-98 regarding who is speaking - Masterpiece Cakeshops (the entity) or Jack Phillips (the individual)).
Friday, December 1, 2017
I have written about Etsy in at least three past posts: (1) Etsy becoming a certified B Corp, (2) Etsy going public, and (3) Delaware amending it's public benefit corporation laws (likely, in part, to help Etsy convert to a PBC, which Etsy would need to do to maintain its certification because it incorporated in a non-constituency statute state that does have a benefit corporation statute (Delaware)).
In May, some questioned whether Etsy would keep its social focus after a "management shakeup." In September, B Lab granted Etsy an extension on converting to a PBC. That article claims that B Lab would reset the deadline for conversion to 2019, if Etsy re-certified as a B Corp by the end of 2017 and would commit to converting to a PBC.
The 2019 date was 4 years from the 2015 Delaware PBC amendments (instead of 4 years from Etsy's first certification). One of B Lab's co-founder reportedly said that the statutory amendments were needed because the original 2013 version of the Delaware PBC law was "perfectly fine for private companies and unworkable for public companies."
Just a few days ago, however, Etsy announced that it would abandon its B Corp certification and not reincorporate as a Delaware PBC. Josh Silverman (CEO since the May shakeup) is quoted in that New York Times article as saying "Etsy’s greatest potential for impact is helping sellers — many of whom are women running small businesses — increase their sales." He sounds a lot like Milton Friedman's article The Social Responsibility of Business is to Increase its Profits. Mr. Silverman also said that Etsy "had the best of intentions, but wasn’t great at tying that [sales] to impact....Being good doesn’t cut the mustard.”
Other than the New York Times article, the press around Etsy's announcement to let its B corp certification lapse seems to be relatively light. In the short-term at least, this move probably hurts B Lab and the social enterprise community more than it hurts Etsy given how few big companies are certified. In the long-term, however, Etsy may experience significant negative consequences, as it seems that this move to drop its certification is being done in conjunction with Etsy shedding a lot of the culture that made it a beloved company.
Update: Perhaps Etsy is bracing for competition from Amazon. (Or maybe, and this is complete speculation on my part, Etsy is trying to make itself a more attractive acquisition target for Amazon, if Amazon realizes it cannot replicate Etsy on its own. Now, it is debatable whether Etsy is more valuable with or without its B Corp certification).
Wednesday, November 29, 2017
Friday, November 24, 2017
About five months ago, on June 18, 2017, my paternal grandmother, Septima "Buddy" Holmes Porcher Murray, passed away at age 91. At the time, she was my last living grandparent.
Relevant to this blog, she also provided me a place to live during my second and third years of law school, as she transitioned, slowly on my account, from Atlanta to Charleston.
Buddy was one of the most positive and generous people I knew. On this Thanksgiving, I am especially thankful for the time I had with Buddy, and that she was able to meet and interact with her great-grandchildren a number of times.
While I am still processing her death, I have decided to post something I wrote shortly after hearing the news and also read at her funeral. These thoughts on Buddy and her life are posted below the break. Buddy's formal obituary is posted here.
Friday, November 17, 2017
Paul Caron (Pepperdine) reports that Wake Forest Law has become the 10th law school to accept the GRE. The law school will continue to accept the LSAT.
Those ten law schools (in chronological order, from earliest adopter to most recent adopter) are:
- Washington University,
- St. John's,
- Texas A&M,
- Wake Forest
This shift to accepting the GRE at Wake Forest Law has, apparently, been in the works for over 18 months, and Christine Hurt (BYU) had a nice post on some of the early discussion. Around that time, in February of 2016, Arizona became the first law school to accept the GRE.
Like Christine Hurt, I think this move to including the GRE is probably a good thing, especially if the GRE is shown to be just as predictive as the LSAT. The GRE is offered much more frequently than the LSAT and some pre-law students will have already taken the GRE. Also, I am generally in favor of competition, and the LSAC/LSAT has had a monopoly on law school admissions tests for quite a long time.
It looks like U.S. News is already converting GRE scores into comparable LSAT scores for ranking purposes. If U.S. News had not acted, this would have been a pretty big loophole for law schools to exploit.
For pre-law advisors, like me, I think we should definitely let students know of the GRE option at some schools. The GRE may be an especially good option for students who are likely to go to graduate school, but are not yet entirely sure which direction they will go. It also may give students more options if the LSAT's limited testing dates do not work for them. Finally, I don't think the GRE has logic game questions, which some students really struggle with, and therefore students could avoid those questions with the GRE. On the downside, only about 5% of ABA-accredited schools currently accept the GRE. That said, I expect the number of law schools accepting the GRE to rise rapidly over the next few years.
Friday, November 10, 2017
After my daughter Allie's first stay at Vanderbilt Children’s hospital, with what we think was a virus that attacked her lungs, Allie seemed to return to normal for a couple weeks before having another episode. This time, we spent 4 days in the hospital. The praise I lavished on Vanderbilt last time was less deserved on this trip, mostly blamed, staff repeatedly claimed, on a new computer system. (Note: In a place like a hospital, don’t you think you should provide adequate training and work out the bugs before launching a new computer system?)
In any event, Allie is back home again, though we are still working with doctors to uncover the precise cause.
Obviously, my daughter’s health is much more important than work, but I do need to continue to work (if for no other reason than health insurance...we would be bankrupt without health insurance). Given that my focus has been diverted, I have had to push on quite a number of deadlines -- 4 writing assignments and 2 speaking engagements -- and have been slower than normal in returning graded work. Thankfully, students, editors, and colleagues have been quite understanding.
As a professor and a person, I am a big believer in meeting deadlines, so it has been difficult for me to ask for extensions. When asking for extensions, I do think students and professors can “cry wolf” too often, and then, when true emergencies do arise, it becomes harder for the other side to happily grant the extension. This situation has made me even more committed to hitting every deadline I can, so that when I do ask for an emergency extension, people know it is for a valid reason.
Also, this situation has reminded me of the need to create some margin in my life. This past month was going to be a busy one, even without my daughter’s situation. It was doable, but all time needed to be available and efficiently used. Without margin, many projects were impacted, in domino fashion. Now, this situation with my daughter was unexpected and extraordinary and difficult to plan for, and I am not suggesting that we all run at 50% capacity in case of an emergency, but I do think I could have benefited from having built a bit more flexibility into my schedule. (Note: As a law review adviser, I recommended that my students to build some of this margin into their publishing schedule for professors. For example, tell the professors you need the article about a month before you actually do because various issues almost invariably arise.)
In any event, I am quite appreciative to all those who have been so understanding, and I am catching up. Barring any future issues, I think I will be back in the grove and on schedule in about 10 days or so, just in time to gear up for finals.
Friday, October 27, 2017
A former student brought this fundraising website to my attention: To the Stars Academy of Arts and Sciences ("TTS Academy). (Image above from a Creative Commons search).
This article describes TTS Academy as follows: "Former Blink-182 singer and guitarist Tom DeLonge is taking his fascination with/conspiracy theories about UFOs to their logical conclusion point: He's partnering with former government officials on a public benefit corporation studying 'exotic technologies' from Unidentified Aerial Phenomenon (UAP) that the consortium says can 'revolutionize the human experience.'"
Remember the Blink-182 song Aliens Exist?
I couldn't make this up. And I did spend some time trying to determine if it was a joke, but TTS Academy's 63-page offering circular suggests that it is no joke. And TTS Academy appears to have already raised over $500,000.
According to the organization's website, Tom DeLonge of Blink-182 fame is in fact the CEO and President. Supposedly, DeLonge has teamed with former Department of Defense official Luis Elizondo who confirmed to HuffPost that the TTS Academy is planning to "provide never before released footage from real US Government systems...not blurry, amateur photos, but real data and real videos." Rolling Stone reports that "DeLonge has long been interested in UFO and extraterrestrial research. After parting ways with Blink-182 in 2015, he delved deeper into the subject, releasing the book Sekret Machines: Gods earlier this year and he's also working on a movie that is related to those interests called Strange Times." TTS Academy is a Public Benefit Corporation, formed in Delaware.
The TTS Academy website states: "To The Stars Academy is a Public Benefit Corporation (PBC), which means our public benefit purpose is a core founding principle of our corporate charter alongside the traditional goal of maximizing profit for shareholders." Hmm... How does one pursue a public benefit purpose and seek to maximize profit for shareholders? A main point of benefit corporations is liberate companies from the perceived restrictions of shareholder wealth maximization.
The website continues: "Our public purpose: Education - Community - Sustainability - Transparency. PBCs have enjoyed a surge in popularity as the public becomes more interested in corporate responsibility, transparency, and more recently, the concept of impact investing.* It’s clear that an expanding portion of the general population is looking to make an impact on the world around them, not only through volunteering, or speaking out on social media, but through financial decision making.** We believe raising resources through Regulation A+ crowdfunding will allow us to expedite expansion of TTS Academy’s PBC initiatives, like promoting citizen science, enhancing traditional education with science, engineering and art-related programming, supporting veterans and their families, and promoting underrepresented people in film." Color me skeptical.
As Professor Christine Hurt noted way back in 2014/15, the crowdfunding and social enterprise circles may overlap significantly. Professor Hurt wrote, "for-profit social entrepreneurship may find equity crowdfunding both appealing and available. For-profit social entrepreneurs may be able to use the crowdfunding vehicle to brand themselves as pro-social, attracting individual and institutional cause investors who may operate outside of traditional capital markets and may look for intangible returns. Just as charitable crowdfunders rebut the conventional wisdom that donors expect tax-deductibility, prosocial equity crowdfunders may rebut the conventional wisdom that early equity investors expect high returns or an exit mechanism." Not sure if she, or any of us, predicted exactly this type of company.
Friday, October 20, 2017
Below the line is a call for papers that I just received.
The Atlantic Law Journal is a double-blind peer-reviewed law journal, and it is one of the regional publications of the Academy of Legal Studies in Business.
The Atlantic Law Journal is now open for submissions and is soliciting papers for its upcoming Volume 20 with an expected publication date in summer 2018. The Atlantic Law Journal is listed in Cabell's, fully searchable in Thomson-Reuters Westlaw, and listed by Washington & Lee. The journal is a double-blind peer-reviewed publication of the Mid-Atlantic Academy of Legal Studies in Business (MAALSB). Acceptance rates are at or less than 25%, and have been for all our recent history. We publish articles that explore the intersection of business and law, as well as pedagogical topics. Please see our website at http://www.atlanticlawjournal.org/submissions.html for the submission guidelines, the review timeline, and more information regarding how to submit. Submissions or questions can be sent to Managing Editor, Evan Peterson, at petersea [at] udmercy.edu.
The Harvard Law School Forum on Corporate Governance and Financial Regulation recently contained a notice about the Delaware Corporate Law Resource Center, which I thought might interest our readers as well. The post is reproduced below the line.
The oral histories of iconic Delaware cases are the most interesting, and useful, part of the website to me, though some of the cases do not appear to have materials yet. In addition to the cases, there is an oral history on 102(b)(7) to which my judge (VC Stephen Lamb) and others contributed. I hope the existing materials will be added to and expanded over time.
The University of Pennsylvania Law School Institute for Law and Economics (ILE) is pleased to announce the creation and public availability of a new website devoted to resources relating to the development of the Delaware General Corporation Law and related case law. This website (the Delaware Corporation Law Resource Center) has two principal components. The first is a compilation of resources relating to the Delaware General Corporation Law itself, including a link to the text of the statute, and links to the bills to amend the statute since its general revision in 1967. This portion of the website also includes links to annual commentaries on those amendments, the reports and minutes generated in the 1967 revision process, and memoranda disseminated by the Council of the Delaware State Bar Association Corporation Law Section describing some of the more significant and controversial amendments to the statute.
The second component of the website is a repository for materials constituting oral histories of iconic corporate law decisions of the Delaware courts since 1980, dealing with the director’s fiduciary duty of care, duties in takeovers, and freezeouts by controlling stockholders. This portion of the website is a work in progress, but for some of the cases it already contains the opinions in the case, briefs, selected transcripts of oral arguments, and selected key documents from the record. Most notably, the oral history compilation includes high quality videotaped interviews of lawyers and judges involved in the case, who describe the back story of the case with details not available through review of the courts’ opinions.
The oral history portion of the website also includes the first in a series of composite videos setting forth the background of each case. That premiere video describes the background of Smith v. Van Gorkom and presents, in narrative fashion, selected excerpts from the video interviews of the participants.
ILE hopes and expects that this website, which is freely available to the public, will prove to be a valuable resource for the teaching and development of Delaware corporate law. ILE welcomes suggestions for ways in which the website can be made even more useful to those interested in its subject.
The new website is available here.
Tuesday, October 17, 2017
The information below the line is from an e-mail I received about the SEALSB Conference. The SEALSB conference is the southeastern regional conference for law professors in business schools, but we have had practicing lawyers (especially those hoping to break into academia) and law school professors participate in the past.
The conference rotates locations in the southeast, and this year the conference will be held in Atlanta, GA from November 9-11.
SEALSB Conference 2017
The deadline to upload papers for inclusion in the conference materials has been extended to this Friday, October 20th. You may upload your paper by clicking on the following link: Paper Upload. Otherwise, please bring 25 copies to the meeting.
Friday, October 20th is also the conference registration deadline, so if you are planning to attend the conference but have not yet registered please make sure you do so sometime this week!
Additional information is available on the Conference Website. We look forward to seeing you at the Georgian Terrace!
Friday, October 13, 2017
Earlier this week, my two-year old daughter was in the pediatric ICU with a virus that attacked her lungs. We spent two nights at The Monroe Carell Jr. Children's Hospital at Vanderbilt (“Vanderbilt Children’s). Thankfully, she was released Wednesday afternoon and is doing well. Unfortunately, many of the children on her floor had been in the hospital for weeks or months and were not afforded such a quick recovery. There cannot be many places more sad than the pediatric ICU.
Since returning home, I confirmed that Vanderbilt Children’s is a nonprofit organization, as I suspected. I do wonder whether the hospital would be operated the same if it were a benefit corporation or as a traditional corporation.
Some of the decisions made at the hospital seems like they would have been indefensible from a shareholder perspective, if the hospital had been for-profit. Vanderbilt Children’s has a captive market, with no serious competitors that I know of in the immediate area. Yet, the hospital doesn’t charge for parking. If they did, I don’t think it would impact anyone’s decision to choose them because, again, there aren’t really other options, and the care is the important part anyway. The food court was pretty reasonably priced, and they probably could have charged double without seriously impacting demand; the people at the hospital valued time with their children more than a few dollars. The hospital was beautifully decorated with art aimed at children – for example, with a big duck on the elevator ceiling, which my daughter absolutely loved. There were stars on the ceiling of the hospital rooms, cartoons on TVs in every room, etc. All of this presumably cost more than a drab room, and perhaps it was all donated, but assuming it actually cost more, I am not sure those things would result in any financial return on investment.
As we have discussed many times on this blog, even in the traditional for-profit setting, the business judgment rule likely protects the decisions of the board of directors, even if the promised ROI seems poor. But at what point – especially when the board knows there will be no return on the investment at all - is it waste? (Note: Question sparked by a discussion that Stefan Padfied, Josh Fershee, and I had in Knoxville after a session at the UTK business law conference this year). And, in any event, the Dodge and eBay cases may lead to some doubt in the way a case may play out. And even if the law is highly unlikely to enforce shareholder wealth maximization, the norm in traditional for-profit corporations may lead to directorial decisions that we find problematic as a society, especially in a hospital setting.
Now, maybe the Hippocratic Oath, community expectations, and various regulations make it so nonprofit and forprofit hospitals operate similarly. As a father of a patient, however, even as a free market inclined professor, I would prefer hospitals to be nonprofit and clearly focused on care first. Also, some forprofit hospitals are supposedly considering going the benefit corporation route, which may be a step in the right direction – at least they have an obligation to consider various stakeholders (even if, currently, the statutory enforcement mechanisms are extremely weak) and at least there are some reporting requirements (even if , currently, reporting compliance is miserable low in the states I have examined and the statutory language is painfully vague).
I am not sure I have ever been in a situation where I would have paid everything I had, and had no other good options for the immediate need, and yet I still did not feel taken advantage of by the organization. There is much more that could be said on these issues, but I do wonder whether organizational form was important here. And, if so, what is the solution? Require hospitals to be nonprofits (or at least benefit corporations, if those statutes were amended to add more teeth)?
Friday, October 6, 2017
I assume most readers are familiar with Stonyfield Yogurt, and perhaps a bit of its story, but I think the podcast goes far beyond what is generally known.
The main thing that stuck out in the podcast was how many struggles Stonyfield faced. Most of the companies featured on How I Built This struggle for a few months or even a few years, but Stonyfield seemed to face more than its share of challenges for well over a decade. The yogurt seemed pretty popular early on, but production, distribution, and cash flow problems haunted them. Stonyfield also had a tough time sticking with their organic commitment, abandoning organic for a few years when they outsourced production and couldn't convince the farmers to follow their practices. With friends and family members' patient investing (including Gary's mother and mother-in-law), Stonyfield finally found financial success after raising money for its own production facility, readopting organic, and finding broader distribution.
After about 20 years, Stonyfield sold the vast majority of the company to large multinational Group Danone. Gary explained that some investors were looking for liquidity and that he felt it was time to pay them back for their commitment. Gary was able to negotiate some control rights for himself (unspecified in the podcast) and stayed on as chairman. While this sale was a big payday for investors, it is unclear how much of the original commitment to the environment and community remained. Also, the podcast did not mention that Danone announced, a few months ago, that it would sell Stonyfield.
Personally, I am a fan of Stonyfield's yogurt and it will be interesting to follow their story under new ownership. I also think students and faculty members could benefit from listening to stories like this to remind us that success is rarely easy and quick.
Friday, September 29, 2017
I recently finished Elizabeth Pollman and Jordan Barry's article entitled Regulatory Entrepreneurship. The article is thoughtfully written and timely. I highly recommend it.
This Article examines what we term “regulatory entrepreneurship” — pursuing a line of business in which changing the law is a significant part of the business plan. Regulatory entrepreneurship is not new, but it has become increasingly salient in recent years as companies from Airbnb to Tesla, and from DraftKings to Uber, have become agents of legal change. We document the tactics that companies have employed, including operating in legal gray areas, growing “too big to ban,” and mobilizing users for political support. Further, we theorize the business and law-related factors that foster regulatory entrepreneurship. Well-funded, scalable, and highly connected startup businesses with mass appeal have advantages, especially when they target state and local laws and litigate them in the political sphere instead of in court.
Finally, we predict that regulatory entrepreneurship will increase, driven by significant state and local policy issues, strong institutional support for startup companies, and continued technological progress that facilitates political mobilization. We explore how this could catalyze new coalitions, lower the cost of political participation, and improve policymaking. However, it could also lead to negative consequences when companies’ interests diverge from the public interest.
Tuesday, September 26, 2017
Belmont University's College of Law is hiring for two professor position. I am in Belmont's College of Business, and have taught in our College of Law, so I selfishly hope they make some great hires across campus. My family loves Nashville and Belmont University is a great place to work.
The Belmont University College of Law, located in vibrant Nashville, Tennessee, invites applications from entry-level and experienced candidates for two anticipated tenure-track faculty positions to begin in 2018-2019. For the first tenure-track position, our primary areas of recruiting interest include business associations, secured transactions and family law. The second tenure-track position is in Belmont’s legal writing, research and advocacy program. Belmont is an EOE/AA employer under all applicable civil rights laws. Women and minorities are encouraged to apply.
Applicants for both positions must have an exemplary academic record and possess a J.D. or equivalent degree. They should demonstrate outstanding achievement or potential in teaching and scholarship, and also share the University’s values and support its mission and vision of promoting Christian values by example. Our goal is to recruit dynamic, bright, and highly motivated individuals who are interested in making significant contributions to our law school and its students. Practice experience is preferred, and teaching experience is desirable. To apply, please contact email@example.com.
The Belmont University College of Law is an ABA accredited law school with approximately 275 students in the heart of Nashville, one of the fastest growing and most culturally rich cities in the country. The Belmont faculty is dedicated to teaching, service to the community, and an active engagement in scholarship. Professors at the College of Law have published in top academic journals, written scholarly books and treatises, and addressed academic conferences across the country. The median LSAT and GPA for the 112 students who entered the law school in August 2017 were 155 and 3.47 (75th percentile: 158 and 3.70; 25thpercentile: 152 and 3.16). The two-year average pass rate (90.5%) for graduates of the College of Law on the Tennessee Bar Examination was the highest among Tennessee law schools. The employment statistic reported to the ABA for the class of 2016 is 94.2%. For more information about the College of Law, please visit our website at www.belmont.edu/law.
Belmont University is a private, comprehensive university, focusing on academic excellence. The university is a student-centered teaching university, dedicated to providing students from diverse backgrounds an academically challenging education. It is located in a quiet area convenient to downtown Nashville and adjacent to Music Row. It is the second largest private university, and the largest Christian-centered university, in Tennessee. Belmont’s student body of over 8,000 includes students from every state and more than 25 countries. It offers seven baccalaureate degrees in over 50 areas of study, master’s degrees in Business Administration, Accountancy, English, Education (including Sports Administration), Music, Nursing and Occupational Therapy, and doctorates in Occupational Therapy, Physical Therapy, Nursing Practice, Pharmacy, and Law.
Friday, September 22, 2017
Below are a few wellness tips, with a focus on student life. I didn’t do all, or even many, of these things consistently well when I was in school, but I was better off when I did, and I paid for it when I didn’t. Many of these things are obvious, but many are also ignored.
Consistent Sleep. Sleep is incredibly important. So many of the things we do during waking hours depend on getting good sleep. Shoot for going to bed at a consistent time and waking up at a consistent time. This might be difficult with roommates and you may need to request new roommates. All-nighters, either from studying or social events, are relatively common in college and law school, but all-nighters almost always produce more poor results than if the studying or social events were more evenly distributed across the semester. Sadly, I see too many students sleep walking through the day, armed with caffeine to self-medicate.
Eat Well. I am always in search of fast, healthy, and inexpensive meals. The options are not plentiful, but I can really feel it when the quality of my food slips. Thankfully, most colleges, like Belmont, have a well-stocked cafeteria, but students still have to make the right choices within the cafeteria.
Intentional Quiet Time. Carving out time that is intentionally quiet and reflective is a constant struggle, but it can really improve the day, even if it is just 10-15 minutes.
Distraction-Free Studying. Sometimes students who did poorly on an exam claim that they studied for “48 hours straight” for my exam. As discussed above, this is a bad idea because it interrupts consistent sleep. I also ask where this studying was done. Often this studying was done in a noisy dorm room, with the TV on, which simply isn’t a very efficient way to study. Students may not read many physical books these days, but the library is still a great place to get in some focused, distraction-free studying.
Quality Social Time. During my first two years of college I had much more social time than during the last two, but I had more quality time during the last two years. Too much of social time is unintentional and low quality – playing video games comes to mind. Better, I think, is to spend social time creating memories, taking trips, having focused conversations.
Extracurricular Focus. Opinions will differ on this, but I think it is better to do a few extracurricular activities really well rather than being involved in fifteen different things, on a very surface level. Personally, I am more impressed by someone who was a captain of a sports team or president of a serious organization or founded and grew their own organization or worked dozens of hours a week or started their own business than I am by someone who just showed up for a plethora of somewhat unrelated organizations. That said, college and even graduate school can and should be places to explore, so, by all means, check out many different extracurricular activities, but try to just pick a couple, relatively early on, to do with excellence.
Wednesday, September 20, 2017
Friend of the blog and South Texas College of Law (Houston) Professor Joe Leahy sent over the following post he authored. It is cross-posted at UberLaw.Net and Medium. Embarrassingly, I had not heard about Loftium before reading this post, though at least I know of and have used Airbnb. Joe has some interesting thoughts, and I am happy to include his post on this blog.
Loftium will provide prospective homebuyers with up to $50,000 for a down payment, as long as they are willing to continuously list an extra bedroom on Airbnb for one to three years and share most of the income with Loftium over that time.
At first glance, the arrangement between Loftium and participating homebuyers might sound like a loan. (Indeed, the Times even describes it as such in an infographic.) But upon a closer look, the arrangement that Loftium contemplates with homebuyers clearly is not a loan. First of all, Loftium says it is not a loan; rather, according to Loftium, the down payment assistance it provides to homebuyers is “a part of a services agreement” lasting 12-36 months. Second, and more important, the arrangement between Loftium and homebuyers has none of the characteristics of a traditional (term) loan. There is no “principal” amount that the homebuyer is required to repay in a set period of time, and Loftium does not charge the homeowner any “interest.” In fact, the homebuyer is not required to make anypayments to Loftium in return for the company’s cash (unless the homeowner breaches the parties’ agreement and stops renting on Airbnb before the term expires).
All the homebuyer must do in exchange for Loftium’s money is (1) list her spare room on Airbnb continuously through the term of her agreement with Loftium, (2) be a decent host (i.e., “not be rude to guests”) and (3) split her Airbnb rental revenue with Loftium (with two-thirds going to the company.) If, at the end of the term, Loftium has not been repaid its initial investment, the homeowner is not required to repay Loftium’s initial contribution. Hence, if renting out the homeowner’s spare room is not profitable during the term of the parties’ agreement, “Loftium takes full responsibility for that loss.”
Of course, Loftium expects that the total income from renting out a homeowner’s spare room will greatly exceed the amount that it originally provided to the homebuyer, so that both will profit. If Loftium makes more in rental income than it pays towards the homeowner’s down payment, Loftium will make a profit.
Further, by all appearances, there is no cap on Loftium’s potential profit is its business arrangement with homebuyers. In fact, Loftium makes clear that it wants to maximize the income that it splits with homebuyers: Loftium promises that it will work with them “to increase monthly bookings as much as possible, so both sides can benefit from the additional income.” To that end, Loftium provides homebuyers with some start-up supplies for their spare bedroom (and a keyless entry lock), access to advice and know-how regarding how to rent an Airbnb room, and online tools to help maximize their rental income.
So, if the business arrangement between Loftium and homeowners is not a loan, what is it? It is almost certainly a general partnership for a term (i.e., a “joint venture”).
[Post continues after the page break]
Sunday, September 17, 2017
As I earlier reported, on Saturday, The University of Tennessee College of Law hosted "Business Law: Connecting the Threads", a conference and continuing legal education program featuring most of us here at the BLPB--Josh, me, Ann, Doug, Haskell, Stefan, and Marcia. These stalwart bloggers, law profs, and scholars survived two hurricanes (Harvey for Doug and Irma for Marcia) and put aside their personal and private lives for a day or two to travel to Knoxville to share their work and their winning personalities with my faculty and bar colleagues and our students. It was truly wonderful for me to see so many of my favorite people in one place together enjoying and learning from each other.
Interestingly (although maybe not surprisingly), in many of the presentations (and likely the essays and articles that come from them), we cite to each other's work. I think that's wonderful. Who would have known that all of this would come from our decision over time to blog together here? But we have learned a lot more about each other and each other's work by editing this blog together over the past few years. As a result, the whole conference was pure joy for me. And the participants from UT Law (faculty, students, and alums) truly enjoyed themselves. Papers by the presenters and discussants are being published in a forthcoming volume of Transactions: The Tennessee Journal of Business Law.
My presentation at the conference focused on the professional responsibility and ethics challenges posed by complexity and rapid change in business law. I will post on my related article at a later date. But if you have any thoughts you want to share on the topic, please let me know. A picture of me delivering my talk, courtesy of Haskell, is included below. (Thank you, Haskell!) So, now you at least know the title, in addition to the topic . . . . :>) Also pictured are my two discussants, my UT Law faculty colleague George Kuney and UT Law 3L Claire Tuley.
Friday, September 15, 2017
From August 31 to September 10, I participated in an excellent 6-week online boot camp called Miler Method. The camp is led by 2x Olympic medalist in the 1500m, Nick Willis, and his wife Sierra. The camp led up to the New Balance 5th Avenue Mile in NYC.
As I have posted about before, I have enjoyed taking some massive open online courses (MOOCs), and I think all educators should familiarize themselves with this form, as the online world is already impacting even the most traditional courses.
The Miler Method, like MOOCs, taught me not only valuable substantive information, but also further instructed me on the art of online education. Below are a few reflections on the pros and cons of the online format as applied to the Miler Method running training camp. My thoughts follow below the page break.
Friday, September 8, 2017
Gabriel (“Gabe”) Azar and I graduated one year apart, from the same law school. He has an undergraduate degree in electrical engineering from Georgia Tech and started his legal career as an associate practicing patent law at Finnegan, Henderson, Farabow, Garrett & Dunner, LLP. He moved from Finnegan to Paul Hastings and from there to an in-house position with FIS. Currently, he is Senior Patent Counsel at Johnson & Johnson. I’ve admired, mostly from a distance (he lives in Jacksonville, FL now), how Gabe has balanced family, work, and health. We recently reconnected on Strava, and it has been inspiring to see a dedicated husband/father/attorney taking his fitness seriously.
The interview is below the page break.
Thursday, September 7, 2017
As previously mentioned, I am always looking for good podcasts. I listen to podcasts while mowing our lawn and on road trips.
StartUp is the latest podcast series that I have uncovered, thanks to a recommendation from my sister Anna who works for a media/marketing start up herself.
From what I have uncovered so far, StartUp seems to be quite like NPR's How I Built This, which I mentioned in a previous post. Hosts of both podcasts interview entrepreneurs about the founding of their businesses and the ups and downs thereafter. The biggest difference I see is that StartUp seems to focus on smaller companies (a number that I had never heard of), while How I Built This seems to focus on companies that are now quite large and successful. In early seasons of StartUp there appear to be a number of the podcasts that depart from the entrepreneur-interview model, but I haven't dug into the early seasons yet. I am mainly focused on the recent podcasts.
Perhaps most interestingly, I recently listened to a podcast on StartUp about Mokhtar Alkhanshali and his specialty coffee. Mokhtar sources his coffee beans from war-torn Yemen and a cup of his coffee sells for $16 a cup. At first, this seemed like a ridiculous price for a cup of coffee, but after hearing how Mokhtar risked his life for his business in Yemen (bombings, escaping on a tiny boat, being captured, etc.) and listening to the specialty coffee to wine comparison, the pricing does make more sense. I might pay $16 once, just for the story, but I couldn't see a $16 cup of coffee becoming even a semi-regular purchase for me. That said, I know people who are getting increasingly serious about their coffee and perhaps it can be sustained in some cities.