Friday, July 18, 2014
At the risk of overdoing what may have been a good thing, I contributed a disclosure-oriented post to the Hobby Lobby symposium on The Conglomerate earlier today. It includes new information about a U.S. Department of Labor Q&A posted yesterday, among other things. Enjoy or not, as you so please . . . .
Monday, July 14, 2014
My post last week spawned more commentary than usual--on the BLPB site and off. So, I am regrouping on the same issue for my post today and plan to push forward a bit on some of the areas of commentary. Also, since The Conglomerate is running a Hobby Lobby symposium this week, I thought it might be nice to offer some thoughts on disclosure up here and (maybe) later chime in at The Conglomerate on this or other issues relating to the Hobby Lobby case later in the week . . . .
Monday, July 7, 2014
The Court's Hobby Lobby decision, as noted in post-decision commentary (see, e.g., Sarah Hahn's guest post earlier this week), apparently relies in part on the fact that shareholders (and, potentially, employees and other relevant constituents of the firm) know that the firm has sincerely held religious beliefs and what those beliefs mean for business operations and legal compliance. The Court does not directly address this in its opinion. Rather, the opinion includes various references to owner engagement that imply buisness owner awareness. The Court states:
- For-profit corporations, with ownership approval, support a wide variety of charitable causes . . . . (Op. 23, emphasis added)
"So long as its owners agree, a for-profit corporation may take costly pollution-control and energy conservation measures that go beyond what the law requires." (Op. 23, emphasis added)
In making these statements and reasoning through this part of the opinion, the Court relies on state corporate law principles and allusions.
Importantly, the Court also indicates its views on how the policy underlying the RFRA favors an interpretation that includes corporations as persons:
An established body of law specifies the rights and obligations of the people (including shareholders, officers, and employees) who are associated with a corporation in one way or another. When rights, whether constitutional or statutory, are extended to corporations, the purpose is to protect the rights of these people. For example, extending Fourth Amendment protection to corporations protects the privacy interests of employees and others associated with the company. Protecting corporations from government seizure of their property without just compensation protects all those who have a stake in the corporations’ financial well-being. And protecting the free-exercise rights of corporations like Hobby Lobby, Conestoga, and Mardel protects the religious liberty of the humans who own and control those companies.
(Op. 18, emphasis in original) Note how the last sentence reduces the protected category of persons under the RFRA to those who "own and control" the firm at issue. This represents an interesting narrowing of constituency groups from the more inclusive treatment in the first sentence of the paragraph. The reason for this narrowing may be (likely is) a practical one, evidencing judicial restraint. The plaintiffs in the Hobby Lobby actions were those who owned or controlled the corporation, and the decision likely will be limited in its application accordingly.
Given these breadcrumbs from the Court's opinion, should disclosure to shareholders or other constituencies be required, and if so, where would those disclosure rules reside as a matter of positive law? A blog post may be the wrong place to begin to address this issue (which is admittedly complex and involves, potentially, areas of law somewhat unfamiliar to me). But indulge me in a thought experiment here for a minute.
Saturday, July 5, 2014
The blogosphere has been a-twitter with commentary on Jamie Dimon's revelation earlier this week that he has throat cancer and will be undergoing treatments in the hope of eradicating it. From the public news, his prognosis sounds good. For that, I am sure all are grateful.
As some of you may know, my interest in issues relating to disclosures of facts from executives' private lives stems from my fascination, starting about 12 years ago, with the Martha Stewart disclosure cases (about which I wrote in law journals and in several chapters of a book that I edited). After co-writing the book about the basic concerns in Stewart's insider trading, misstatements/omissions securities fraud, and derivative fiduciary duty actions, I focused in additional articles on some finer points relating to her case. Two of these works covered the disclosure of private facts. Among the types of private facts covered are those relating to executive health concerns.
Monday, June 30, 2014
Today, the body of former Senator Howard H. Baker Jr. lay in repose across the street from my office in the building that houses the academic center benefacted by and named after him. (The building itself also bears his name.) His coffin, draped elegantly in the American flag, is a reminder of a political era essentially gone--but not forgotten (at least by me).
Senator Baker was a distinguished alumnus and benefactor of The University of Tennessee and the College of Law. Our main rotunda on the first floor of the law building is named for him. I dropped by today at the Baker Center for Public Policy to say goodbye to this revered statesman. I did not make the trip across the street to pay my respects primarily because he was a UT alumnus or benefactor--or even because I knew him (although we shook hands and chatted pleasantly at least once that I can remember) or knew any member of his family. I went because I deeply admire him and what he did with his public life. He was the kind of guy--known as "The Great Conciliator"--who exhibited political patience, valued compromise, and didn't let party politics or ideology stand in the way of what he knew in his gut was right.
In the obituary published by the American Bar Association in the ABA Journal, the following quote caught my eye:
“We are doing the business of the American people,” Baker said in a 1998 speech to members of Congress, explaining his philosophy of government. “And if we cannot be civil to one another, and if we stop dealing with those with whom we disagree, or that we don’t like, we would soon stop functioning altogether.”
Of course, the last bit stings a bit in light of the recent government shutdown. But . . . doing the business of the American people. Hmm. This part of the quote reminded me of the public fiduciary arguments that Donna Nagy raises in her 2011 Boston University Law Review article entitled "Insider Trading, Congressional Officials, and Duties of Entrustment." A great read, for those who haven't yet set aside the time.
However, the quote also made me think about Senator Baker's engagements over the years with legal issues impacting businesses. He was certainly pro-business, but he also fought for environmental protection and civil rights, among other things, even when those issues appeared, at least in the short term, to be a net negative for businesses. What, then, would Senator Baker have said about today's decision in Hobby Lobby? Well, we'll never know. But I will take a few guesses, and those who knew him or know his politics better than I can feel free to question and correct my prognostications.
Wednesday, June 25, 2014
Harumph. Business as usual at the SCOTUS . . . . As a student and teacher of Basic v. Levinson and its progeny, I guess I had hoped for more from the U.S. Supreme Court's opinion in Halliburton, released two days ago. I haven't yet read all the articles on the case that were published since the release of the opinion (as usual, quite a number), so my thoughts here represent my personal reflections.
After engaging in some self-analysis, I have determined that my disappointment with the Court's opinion stems from the fact that I am a transactional lawyer . . . and the Court's opinion is about procedure. Not that civil and criminal procedure do not impact transactional law. Au contraire. The procedure and substance of Section 10(b)/Rule 10b-5 claims are intertwined in many fascinating ways. I will come back to that somewhat in a minute. But the Court's opinion in Halliburton just doesn't satisfy the transactional lawyer in me.
This also is somewhat true of the SCOTUS opinions in both Dura Pharmaceuticals and Tellabs, which deal with pleading (in)sufficiencies in Section 10(b)/Rule 10b-5 litigation rather than (as in Halliburton) class certification questions. In its class certification focus, Halliburton is much more the sibling of Amgen, which I find infinitely more satisfying because it (like Basic and Matrixx) focuses on materiality, which infuses all disclosure decisions. All of these cases, however, center on a defendant's ability to get dismissal of an action at an early stage, something that defendants in Section 10(b)/Rule 10b-5 cases desperately want to do. The longer the case goes on, the more incentive defendants have to settle--oftentimes (in my experience) foregoing the opportunity to defend themselves against specious claims because of the ongoing drain on financial and human resources.
Monday, June 23, 2014
This past week, I joined a group of our business law prof colleagues at the National Business Law Scholars Conference out at Loyola Law School in Los Angeles. Headlined by a keynote presentation on "the audience" for business law scholarship from Frank Partnoy and an author-meets-reader session on Michael Dorff's new book, Indispensable and Other Myths: The True Story of CEO Pay, the conference featured a staggeringly interesting array of panels on everything from standard corporate governance to financial regulation. Kudos to the planning committee.
Steve Bainbridge presented Must Salmon Love Meinhard? Agape and Partnership Fiduciary Duties in an opening concurrent panel. If you haven't read it yet, I recommend it. Admittedly (as I told Steve), I have an especial interest in the Meinhard case and in the expressive function of decisional law. But most of us in the business law professor group teach the case in one course or another, and his paper is relevant to many in that context.
Monday, June 16, 2014
I have been working on a draft article for the University of Cincinnati Law Review based on a presentation that I gave this spring at the annual Corporate Law Symposium. This year's topic was "Crowdfunding Regulations and Their Implications." My draft article addresses the public-private divide in the context of the Capital Raising Online While Deterring Fraud and Unethical Non-Disclosure Act--more commonly known as the CROWDFUND Act. I am using two pieces coauthored by Don Langevoort and Bob Thompson (here and here), as well as three works written by Hillary Sale (here, here, and here) to engage my analysis.
I also will be participating in a discussion group at the Southeastern Association of Law Schools annual conference in August on the publicness theme. That session is entitled "Does The Public/Private Divide In Federal Securities Regulation Make Sense?" and is scheduled for 3:00 pm on Augut 6th, for those attending the conference. Michael Guttentag was good enough to recruit the group for this discussion.
All this work on publicness has my head spinning! There are a number of unique conceptions of pubicness, some overlapping or otherwise interconnected, with different conceptions being useful in different circumstances. I am attracted to a number of observations in both the Langevoort/Thompson and Sale bodies of work, but there's clearly a lot more to think about from the standpoint of both scholarship and teaching.
So, today I ask: What does publicness mean to you? Does there continue to be salient meaning in the distinction between piublic and private (offerings, companies, etc.)? If so, what should publicness mean in these contexts? I am curious to see what others think.
Monday, June 9, 2014
Today, we finished two days of amazingly rich discourse on business law issues at the Association of American Law Schools (AALS) Workshop on Blurring Boundaries in Financial and Corporate Law in Washington, DC. (Full disclosure: I chaired the planning committee for this AALS midyear meeting.) All of the proceedings have been phenomenally interesting. I have learned so many things and been forced to think about so much . . . . For those of you who couldn't be there, I tried to faithfully pick up a bunch of salient points from the talks and discussions on Twitter using #AALSBB2014. Moreover, some of the meeting was recorded. I will try to remember to let you know when, to whom, and how those recordings are being made available. (Feel free to remind me if I forget . . . .)
One idea shared at the workshop that I am particularly intrigued by is the use of a new standard in federal securities regulation, suggested by Tom Lin in his talk as part of this morning's plenary panel on "Complexity". He argues for an "algorithmic investor" standard (working off/refining the concept of the reasonable investor) in light of the growth of algorithmic trading. It's predictable that I would be interested in this idea, given that I write about materiality in securities regulation (especially insider trading law, in articles posted here and here), in which the reasonable investor standard is central. (In fact, Tom was kind enough to mention my work on the resonable investor standard in his talk.)
Tom is not the first to argue for a securities regulation standard that better serves specific investor populations. Memorable in this regard, at least for me, is Maggie Sachs's paper arguing for a standard focused on the "least sophisticated investor". But many other fine works contending with materiality or the concept of the reasonable investor in securities regulation also question (among other things) the clarity and efficacy of the reasonable investor standard in specific contexts.
Monday, June 2, 2014
Thanks for the warm welcome to the Business Law Prof Blog, Stefan et al. Having avoided a regular blogging gig for many years now (little known fact: I was the first guest blogger on The Conglomerate – or at least the first one formally listed as a guest – back in 2005), I recently determined that I should sign on to work with this band of thieves scholars on a regular basis. I appreciate the invitation to do so.
I already feel right at home, given that my post for today, like Steve Bradford's, is on mandatory disclosure. Unlike Steve, however, my focus is on the creep of mandatory disclosure rules in U.S. securities regulation into policy areas outside the scope of securities regulation. I think we all know what "creep" means in this context. But just to clarify, my definition of "creep" for these purposes is: "to move slowly and quietly especially in order to not be noticed." I participated in a discussion roundtable in which I raised this subject at the Law and Society Association annual meeting and conference last week.
My concerns about this issue were well expressed by Securities and Exchange Commission Chair Mary Jo White back in early October 2013 in her remarks at the 14th Annual A.A. Sommer, Jr. Corporate Securities and Financial Law Lecture at Fordham Law School:
When disclosure gets to be too much or strays from its core purposes, it can lead to “information overload” – a phenomenon in which ever-increasing amounts of disclosure make it difficult for investors to focus on the information that is material and most relevant to their decision-making as investors in our financial markets.
To safeguard the benefits of this “signature mandate,” the SEC needs to maintain the ability to exercise its own independent judgment and expertise when deciding whether and how best to impose new disclosure requirements.
For, it is the SEC that is best able to shape disclosure rules consistent with the federal securities laws and its core mission. But from time to time, the SEC is directed by Congress or asked by interest groups to issue rules requiring disclosure that does not fit within our core mission.
She goes on to note that some recent disclosure rules mandated by Congress:
. . . seem more directed at exerting societal pressure on companies to change behavior, rather than to disclose financial information that primarily informs investment decisions.
That is not to say that the goals of such mandates are not laudable. Indeed, most are. Seeking to improve safety in mines for workers or to end horrible human rights atrocities in the Democratic Republic of the Congo are compelling objectives, which, as a citizen, I wholeheartedly share.
But, as the Chair of the SEC, I must question, as a policy matter, using the federal securities laws and the SEC’s powers of mandatory disclosure to accomplish these goals.
Parts of these remarks—those on information overload—were echoed in a speech that Chair White gave to the National Association of Corporate Directors Leadership Conference.
Chair White's words ring true to me. I derive from them two main contestable points for thought and commentary.