Wednesday, August 26, 2015

Important 30th Anniversaries

Yesterday, my husband and I celebrated our 30th wedding anniversary.  I am married to the best husband and dad in the entire world.  (Sorry to slight all of my many male family members and friends who are spouses or fathers, but I am knowingly and seriously playing favorites here!)  My husband and I bought the anniversary memento pictured below a few years ago, and it just seems to be getting closer and closer to the reality of us as a couple (somewhat endearing, but aging) as time passes . . . .

IMG_0872

Of course, our wedding was not the only important event in 1985.  There's so much more to celebrate about that year!  In fact, it was a banner year in business law.  Here are a few of the significant happenings, in no particular order.  Most relate to M&A doctrine and practice.  I am not sure whether the list is slanted that way because I (a dyed-in-the-wool M&A/Securities lawyer) created it or whether the M&A heyday of the 1980s just spawned a lot of key activity in 1985.

  1. Smith v. Van Gorkom was decided.  It was my 3L year at NYU Law.  I remember the opinion being faxed to my Mergers & Acquisitions instructor during our class and being delivered--a big stack of those goofy curly thermal fax paper sheets--to the table in the seminar room where we met.  Cool stuff.  As I entered practice, business transactional lawyers were altering their advisory practices and their board scripts to take account of the decision.

  2. Unocal v. Mesa Petroleum was decided.  The Delaware Supreme Court established its now famous two-part standard of review for takeover defenses, finding that "there was directorial power to oppose the Mesa tender offer, and to undertake a selective stock exchange made in good faith and upon a reasonable investigation pursuant to a clear duty to protect the corporate enterprise. Further, the selective stock repurchase plan chosen by Unocal is reasonable in relation to the threat that the board rationally and reasonably believed was posed."  (The italics were added by me.)  More changes to transactional practice . . . .

  3. Moran v. Household International was decided.  As a result, I spent a large part of my first five years of law practice promoting and writing poison pills that innovated off the anti-takeover tool validated in this case.  The firm I worked for was on the losing side of the Moran case, so we determined to build a better legal mousetrap, which then became the gold standard.

  4. The Revised Uniform Limited Partnership Act (RULPA) was amended by the Uniform Law Commission.  Among the 1985 changes was an evolution of the rules relating to the liability of limited partners for partnership obligations.  The 2001 version of the RULPA took those evolutions to their logical end point, allowing limited partners to enjoy limited liability for partnership obligations even if the limited partners exercise management authority over the partnership.

  5. Landreth Timber Co. v. Landreth was decided.  Stock is a security under the Securities Act of 1933, as amended, unless the context otherwise requires.  The Court determined that instruments labeled stock that have the essential attributes of stock should be treated as stock in an offering context, even when the stock is transferred to sell a business.  Bye-bye "sale of business" doctrine . . . .

That's enough on 30th anniversaries  for this post.  I am sure you all will think of more 30th anniversaries in business law that we can celebrate in 2015.  Feel free to leave those additional 1985 memories in the comments.

August 26, 2015 in Business Associations, Corporate Governance, Corporations, Delaware, Joan Heminway, M&A, Teaching | Permalink | Comments (10)

Thursday, August 6, 2015

The Business Case for Obergefell (?)

We here in Tennessee took a strong interest in the decision in Obergefell v. Hodges, since one of the cases being decided was from Tennessee (Tanco v. Haslam). We at The University of Tennessee were especially interested. The plaintiffs in the Tanco case are University of Tennessee faculty members at the College of Veterinary Medicine, located on our adjacent sister campus (for The University of Tennessee Institute of Agriculture) here in Knoxville. As East Tennessee awaited the Supreme Court's decision--and in the aftermath of the opinion's release, the press sought for and found many angles on the case.

Of interest to me, as a business lawyer, was the interaction of the case with local business--existing and potential. As with most things, there were (and are) two sides to this coin. Locally, and nationally, both have gotten some play. For opportunistic business lawyers, both sides present advisory possibilities.

Some press time was spent on what I call the "Sweet Cakes" issue (covered by blogs as well as the traditional press, with my favorite law coverage coming from Eugene Volokh over at The Volokh Conspiracy, including this post). Sweet Cakes is, of course, the now-famous family-owned-and-run Oregon wedding cake purveyor that expressly refused to sell wedding cakes to same-sex couples. Eugene outlines a number of interesting legal issues in his posts, and regardless of whether you agree with his conclusions, you can see there is much lawyering involved in the business decisions of those who are intent on being conscientious objectors to same-sex marriage through their business activities. In Tennessee, the Obergefell decision has been famously followed with reports of anti-same-sex marriage signage, like this press item on a sign posted by the owner/proprietor of a hardware store.

The other side of the coin is, of course, the new opportunities that same-sex marriage creates for existing businesses and entrepreneurs. In the run-up to the Supreme Court's ruling, The Tennessean reported that "[o]pening marriage to same-sex couples would yield an additional $36.7 million in spending in Tennessee in three years as more than 5,400 same-sex weddings are expected to be held in the state during that period, according to estimates from the Williams Institute, a think tank at UCLA Law dedicated to sexual orientation and gender identity research." And after the decision, the Nashville Business Journal reiterated the message. New businesses formed to take advantage of this new market for marriages in the state will need--you guessed it--lawyers!  Since Gatlinburg--in the Smoky Mountains just a stone's throw from Knoxville--is a wedding destination, our end of the state should see its fair share of that "action," assuming the business environment is welcoming . . . .  This article indicates there may be some businesses in that part of the state that are willing to participate in same-sex weddings.

So, as with other legal changes of any magnitude, we may conceptualize Obergefell as a full-opportunity-for-lawyers act, and those opportunities will likely enure to business lawyers as well as others.

 

August 6, 2015 in Current Affairs, Entrepreneurship, Family Business, Joan Heminway | Permalink | Comments (2)

Wednesday, August 5, 2015

Responses to Students Who Ask About the Use of Outdated Course Materials

I am sure that many of you, like me, are deluged with email messages at this point in the year from well-meaning students taking your fall courses who ask whether a particular text--or version of a text--marked as "required" on the book list is really required. There are many ways to respond to these requests.  A number of my my Facebook friends--including former students--suggest a simple response, something akin to: "What part of required do you not understand?"

While that kind of a response sometimes is very appealing (especially when I get two emails asking about this kind of thing on the same day), I have decided to use these interactions as a teaching moment--of sorts. Set forth below is a version of a message that I send, in case it is of some use to you in this or another similar context. The specific inquiry to which I am responding relates to a student's question about using a 2013 "statutory supplement" in my Fall 2015 Business Associations course.

Hey, [name of student]. Thanks for reaching out to me. This is a common question. It has an easy (although perhaps unpalatable) answer. I marked the 2015 statutory resource book (not really a supplement, but the core of our work in this course) as required for the course. I will be working from the 2015 version in and outside class. I cannot ensure that the 2013 version—or even the 2014 version—will have everything you need. While I know the authors, I do not control and am not privy to what they include and exclude every year. So, I cannot recommend your use of the 2013 version, and if you use it, you will be responsible for noting where the gaps or changes are. There may be none, but I cannot guarantee that.

I regret making students pay the money for a new paperback every year. But I have come to consider it an investment. Of course, as you already know, lawyers should never use an outdated version of the law for their research. It can be the basis of a claim of malpractice or sanctions on the basis of incompetence or a lack of diligence. So, my required use of a current version of the restatement provisions, statutes, rules, and other materials in the statutory resource book is also a way of encouraging professionally responsible, low-risk legal practice.

I will not be policing the use of outdated or other supplements—or even online versions of the statutes, rules, and other materials (which include a sample corporate charter and bylaws, for example)--instead of the assigned statutory resource book for class. So, it's all up to you. Others have used outdated or online or photocopied versions of the materials in the statutory resource book in the past and done very well in the course. But they typically put in significant work on their own to ensure they had what they needed for the exams and assignments.

See you in a few weeks. I will look forward to having you in class. You already have exhibited professionally responsible behavior in contacting me in advance and asking about the resource book. That's a great start to the semester.

Joan Heminway

Incidentally, in case you wondered, most students respond to my email thanking me and noting they will acquire the 2015 edition.  Many students do not contact me at all about this issue and just go ahead and use outdated materials.  Some of these non-communicative students have later admitted to me they regretted that decision.

Also, I have tried in the past to just assign online versions of the restatement provisions, statutes, and rules.  There are two main disadvantages that I identified to this approach.  First, I found that students did not bring the necessary legal provisions to class with them in electronic or hard-copy form or did not bring a computer to access rules that come up in class in an unplanned manner.  Relatedly, it is important to note that, when the students take my open-book midterm (oral) and final (written) exams, they really need to have hard copies of the relevant rules with them, which means printing them out and collecting them in a book or folder anyway (since I do not allow electronic devices, other than ExamSoft-modified computers, in my examinations). Second, my statutory resource book has materials other than restatement, statutory, and regulatory provisions in it.  If the book is not required, I must supplement the text with these additional materials, where necessary or desired.  

Let me know your thoughts and share comments for improvement.  Or tell me I am being too nice and should push back harder at my students.  The type of response I have included above is generally consistent with my overall communication style with my students, which could be characterized as compassionate but direct.  Others may have very different approaches to instructor-student communications or course objectives that make my response undesirable or even counterproductive.  Please do share those kinds of reactions in the comments.

August 5, 2015 in Books, Business Associations, Joan Heminway, Law School, Teaching | Permalink | Comments (1)

Saturday, August 1, 2015

Hey! We're Hiring at The University of Tennessee

As you may have seen elsewhere already (but just to make it abundantly clear):

THE UNIVERSITY OF TENNESSEE COLLEGE OF LAW invites applications from both entry-level and lateral candidates for as many as two full-time, tenure-track faculty positions to commence in the Fall Semester 2016. The College is particularly interested in the subject areas of business law, including business associations and contracts; gratuitous transfers/trusts and estates; and health law. Other areas of interest include legal writing, torts, and property.

A J.D. or equivalent law degree is required. Successful applicants must have a strong academic background. Significant professional experience is desirable. Candidates also must have a strong commitment to excellence in teaching, scholarship, and service.

In furtherance of the University’s and the College’s fundamental commitment to diversity among our faculty, students body, and staff, we strongly encourage applications from people of color, persons with disabilities, women, and others whose background, experience, and viewpoints would contribute to a diverse law school environment.

The Faculty Appointments Committee will interview applicants who are registered in the 2015 Faculty Appointments Register of the Association of American Law Schools at the AALS Faculty Recruitment Conference in Washington, D.C. Applicants who are not registered in the AALS Faculty Appointments Register are advised to send a letter of interest, resume, and the names and contact information of three references by September 30, 2015 to:

Sean Gunter
On behalf of Becky Jacobs and Michael Higdon
Co-Chairs, Faculty Appointments Committee
The University of Tennessee College of Law
1505 W. Cumberland Avenue
Knoxville, TN 37996-1810

All qualified applicants will receive equal consideration for employment and admissions without regard to race, color, national origin, religion, sex, pregnancy, marital status, sexual orientation, gender identity, age, physical or mental disability, or covered veteran status. Eligibility and other terms and conditions of employment benefits at The University of Tennessee are governed by laws and regulations of the State of Tennessee, and this non-discrimination statement is intended to be consistent with those laws and regulations. In accordance with the requirements of Title VI of the Civil Rights Act of 1964, Title IX of the Education Amendments of 1972, Section 504 of the Rehabilitation Act of 1973, and the Americans with Disabilities Act of 1990, The University of Tennessee affirmatively states that it does not discriminate on the basis of race, sex, or disability in its education programs and activities, and this policy extends to employment by the University. Inquiries and charges of violation of Title VI (race, color, and national origin), Title IX (sex), Section 504 (disability), ADA (disability), Age Discrimination in Employment Act (age), sexual orientation, or veteran status should be directed to the Office of Equity and Diversity (OED), 1840 Melrose Avenue, Knoxville, TN 37996-3560, telephone (865) 974-2498. Requests for accommodation of a disability should be directed to the ADA Coordinator at the Office of Equity and Diversity.

I hope a number of our readers will be interested in applying.  Feel free to contact me if you have questions or need more information (although please note that I am not on the Faculty Appointments Committee).

August 1, 2015 in Business Associations, Corporations, Joan Heminway, Jobs, Law School, Unincorporated Entities | Permalink | Comments (0)

Wednesday, July 29, 2015

Comparative Corporate Law - Important New Teaching Text

My friend and corporate law colleague Marco Ventoruzzo (Penn State Law and Bocconi University) recently let me know that he and several others--Pierre-Henri Conac, Gen Goto, Sebastian Mock, Mario Notari, and Arad Reisberg--have published a coauthored teaching text entitled (and focused on) Comparative Corporate Law.  As someone who has taught that subject (as well as comparative and cross-border mergers and acquisitions) in the past, I have been very interested in taking a look at the book--the first of its kind, as far as I know.  Luckily, I was able to grab a review copy from the publisher, West Academic Publishing (American Casebook Series), at the Southeastern Association of Law Schools (SEALS) conference, which I am attending this week.  This post shares a bit about the book (based on a relatively quick examination--peeking more closely into some chapters than others) and my ideas for teaching from it.  

I recommend the book and would use it in a course I would teach on the subject matter.  The content is really wonderful.  Nearly everything I need as a foundation for a course in comparative or cross-border corporate law is included.  However, I have a few general criticisms, primarily based on my personal teaching perspective, that I will note in this post.

Continue reading

July 29, 2015 in Books, Business Associations, Corporations, Joan Heminway, Teaching | Permalink | Comments (0)

Wednesday, July 22, 2015

The Powers and Perils of Using Group Oral Midterm Examinations in Business Associations

For a number of years now, I have been using group (3-person teams) oral midterm examinations in my Business Associations course.  I have found these examinations to be an effective and rewarding assessment tool based on my teaching and learning objectives for this course.  At the invitation of the Saint Louis University Law Journal, as part of a featured edition of the journal on teaching business associations law, I prepared a short article giving folks the "why, how, and what" of my experience in taking this approach to midterm assessment.  The article was recently published, and I have posted it to SSRN.  The abstract reads as follows:

I focus in this Article on a particular way to assess student learning in a Business Associations course. Those of us involved in legal education for the past few years know that “assessment” has been a buzzword . . . or a bugaboo . . . or both. The American Bar Association (ABA) has focused law schools on assessment (institutional and pedagogical), and that focus is not, in my view, misplaced. Until relatively recently, much of student assessment in law school doctrinal courses was rote behavior, seemingly driven by heuristics and resulting in something constituting (or at least resembling) information cascades or other herding behaviors.

In the fall of 2011, I began offering an oral midterm examination to students in my Business Associations course as an additional assessment tool. This Article explains why I started (and have continued) down that path, how I designed that examination, and what I have learned by using this assessment method for three years. Although some (probably most) will not want to do in their Business Associations courses exactly what I have done in mine (as to the midterm examination or any other aspects of the course described in this Article), I am providing this information to give readers ideas for, or courage to make positive changes in, their own teaching (for a course on business associations or anything else).

You may think I am crazy (even--or especially--after reading this article).  Regardless, I do hope the article sparks something positive in you regarding your teaching in Business Associations or some other course.  Since I am working on finishing a long-overdue book on teaching business associations for Aspen this summer, I would welcome your honest reactions to the article and your additional thoughts on assessment or other aspects of teaching Business Associations.

July 22, 2015 in Business Associations, Corporate Governance, Corporations, Joan Heminway, LLCs, Teaching | Permalink | Comments (0)

Wednesday, July 15, 2015

Shareholder Proposals and Legal Scholarship

I read with interest the recently released opinion of the U.S. Court of Appeals for the Third Circuit in Trinity Wall Street v. Walmart Stores, Inc.  The Wall Street Journal covered the publication of the opinion earlier in the month, and co-blogger Ann Lipton wrote a comprehensive post sharing her analysis on the substance of the decision over the weekend.  (I commented, and Ann responded.)  Of course, like Ann, as a securities lawyer, I was interested in the court's long-form statement of its holding and reasoning in the case.  But I admit that what pleased me most about the opinion was its use of legal scholarship written by my securities regulation scholar colleagues.

Tom Hazen's Treatise on the Law of Securities Regulation is cited frequently for general principles.  This is, as many of you likely already know, an amazing securities regulation resource.  I also will note that many of my students find Tom's hornbook helpful when they are having trouble grappling with securities regulation concepts covered in the assigned readings in my class.

Donna Nagy's excellent article on no-action letters (Judicial Reliance on Regulatory Interpretation in S.E.C. No-Action Letters: Current Problems and a Proposed Framework, 83 Cornell L. Rev. 921 (1998)) also is cited by the court.  This piece is not praised enough, imho, for the work it does in the administrative process area of securities law.  I see the citations in the opinion as an element of needed praise.

And finally, Alan Palmiter's scholarship also is cited numerous times in the opinion.  Specifically, the court quotes from and otherwise cites to The Shareholder Proposal Rule: A Failed Experiment in Merit Regulation, 45 Ala. L. Rev. 879 (1994).  Again, this work represents an important, under-appreciated scholarly resource in securities law.

At least one other law review article is cited once in the opinion.

[Note: Alison Frankel also points out that Vice Chancellor Laster cites formatively to a paper co-authored by Jill Fisch, Sean Griffith, and Steve Davidoff Solomon in a recent opinion.  More evidence that our work matters, at least to the judiciary.]

As Ann's post notes, the Trinity opinion also is worth reading for its substance.  In addition to the matters Ann mentions, the opinion includes, for example, a lengthy, yet helpful, history of the ordinary business exclusion under Rule 14a-8.  And the analysis is instructive, even if unavailing (unclear in its moorings and effect in individual cases).

Finally, it's worth noting that the opinion is drafted with a healthy, yet (imv) professional, dose of humor.  The opinion begins, for example, as follows:

“[T]he secret of successful retailing is to give your customers what they want.” Sam Walton, SAM WALTON: MADE IN AMERICA 173 (1993). This case involves one shareholder’s attempt to affect how Wal-Mart goes about doing that.

And the conclusion of the opinion includes the following passage that made me smile:

Although a core business of courts is to interpret statutes and rules, our job is made difficult where agencies, after notice and comment, have hard-to-define exclusions to their rules and exceptions to those exclusions. For those who labor with the ordinary business exclusion and a social-policy exception that requires not only significance but “transcendence,” we empathize.

(This is part of the "scolding" Ann references in her post.)

Read the concurring opinion of Judge Shwartz, too.  It is thoughtful (even if not entirely helpful, as Ann notes) in making some nice additional points worth considering.

July 15, 2015 in Corporate Governance, Current Affairs, Joan Heminway, Securities Regulation | Permalink | Comments (1)

Saturday, July 11, 2015

Mylan and Mandatory Disclosure

I noted with favor the other day (to myself, privately) the helpful and interesting commentary on The Glom of our trusted colleague and co-blogger, Usha Rodrigues, regarding the recent press reports on Mylan N.V.'s related-party disclosures.  As the story goes, a firm managed and owned in part by the Vice Chair of Mylan's board of directors sold some land to an entity owned by one of the Vice Chair's business associates for $1, and that entity turned around the same day and sold the property to Mylan for its new headquarters for $2.9 million.  Usha's post focuses on both the mandatory disclosure rules for related-party transactions and the mandatory disclosure rules on codes of ethics.  Two great areas for exploration.

A reporter from the Pittsburgh Tribune-Review called me Thursday to talk about the Mylan matter and some related disclosure issues.  He and I spoke at some length yesterday.  That press contact resulted in this story, published online late last night.  The reporter was, as the story indicates, interested in prior related-party disclosures made by Mylan involving transactions with family members of directors.  This led to a more wide-ranging discussion about the status of family members for various different securities regulation purposes.  It is from this discussion that my quote in the article is drawn.  But our conversation covered many other interesting, related issues.

Continue reading

July 11, 2015 in Corporate Governance, Current Affairs, Joan Heminway, Securities Regulation | Permalink | Comments (0)

Wednesday, July 8, 2015

LLC [Operating] Agreements as Contracts

Last September, I authored a post here on the BLPB on judicial opinions and related statutes regarding LLCs as non-signatories to LLC operating agreements (simply termed "LLC agreements" in Delaware and a number of other states).  I recently posted a draft of an essay to SSRN that includes commentary on that same issue as part of a preliminary exploration of the law on LLC operating agreements as contracts.  (Readers may recall that I mentioned this work in a post last month on the Law and Society Association conference.)  I am seeking comments on this draft, which is under editorial review at the SMU Law Review as part of a symposium issue of essays in honor of our departed business law colleague, Alan R. Bromberg, who had been an SMU Dedman School of Law faculty member for many years before his death in March 2014.  My SSRN abstract for the essay, entitled "The Ties That Bind: LLC Operating Agreements as Binding Commitments," reads as follows:

This essay, written in honor and memory of Professor Alan R. Bromberg as part of a symposium issue of the Southern Methodist University Law Review, is designed to provide preliminary answers to two questions. First: is a limited liability company (“LLC”) operating agreement (now known under Delaware law and in certain other circles as a limited liability company agreement) a contract? And second: should we care either way? These questions arise out of, among other things, a recent bankruptcy court case, In re Denman, 513 B.R. 720, 725 (Bankr. W.D. Tenn. 2014).

The bottom line? An operating agreement may or may not be a common law contract. But that legal categorization may not matter for purposes of simple legal conclusions regarding the force and effect of operating agreements. A state’s LLC law may provide that LLCs are contracts or are to be treated as contracts in general or for specific purposes and may establish the circumstances in which operating agreements are valid, binding, and enforceable. However, in the absence of an applicable statute, the legal conclusion that an operating agreement is or is not a common law contract may matter in legal contexts that depend on the common law of contracts for their rules. In either case, the bar may want to participate in clarifying the status of operating agreements as binding commitments.

Any and all comments on the essay are welcomed.  Comments that decrease the length of the essay are especially appreciated, since I am admittedly over the allotted word limit. (These essays are meant to be very short pieces so that many of us can contribute to honoring Alan.)  Of course, there's always time to write another, lengthier piece on this topic later, if there's enough more to be said . . . .

Also, I will note that the Association of American Law Schools Section on Agency, Partnership, LLC's and Unincorporated Associations is planning a program on the role of contract in LLCs at the 2016 annual meeting in January.  I have been asked to participate, and the panel promises to have some additional members that will attack the embedded issues from a number of interesting angles.  Stay tuned for more on that.

July 8, 2015 in Conferences, Corporations, Joan Heminway, LLCs, Unincorporated Entities | Permalink | Comments (0)

Wednesday, July 1, 2015

Section 13(d) Reporting: A Securities Regulation Hot Mess?

As I earlier noted, on June 23rd, I moderated a teleconference on proposals to shorten the Section 13(d) reporting period, currently fixed by statute and regulation at 10 days.  If you don't mind registering with Proxy Mosaic, you can listen to the program.  The link is here.

The discussion was lively--as you might well imagine, given that one of the participants represents activist shareholders and the other represents public companies.  A number of interesting things emerged in the discussion, many (most) of which also have been raised in other public forums on Schedule 13D, including those referenced and summarized here, here, and here, among other places.

  • Exactly how does the Section 1d(d) reporting requirement protect investors or maintain market integrity or encourage capital formation?  Or is it just a hat-tipping system to warn issuers about potential hostile changes of control, chilling the potential for the market for corporate control to run its natural course?  Of course, the answer to many questions about Section 13(d) depends on our understanding of the policy interests being served.  It's hard to tinker with the reporting  system if we cannot agree on the objectives it seeks to achieve . . . .  (Read the remaining bullets with this in mind.)
  • We're not in the 1960s, 1970s, or 1980s any more.  If market accumulations are deemed to present dangers to investors today (and that case needs to be made), why are they not just an accepted risk of public market participation?  Shouldn't every investor know that market accumulations are a risk of owning publicly traded securities?  And how does the reporting requirement really protect them from harm?  Is this just over-regulation that treats investors as nitwits?
  • Not all activist investors are the same.   Some act or desire to act as a Section 13(d) group; others don't.   Some seek effective or actual control of an issuer; some don't.
  • Provisions within the Section 13(d) filing requirements interact.  So, can we really talk about decreasing disclosure time periods without also talking about triggering thresholds and mandatory disclosure requirements?
  • Why is 5% beneficial ownership the triggering threshold for reporting?  What's the magic in that number--and if it were to be changed, should it be lower or higher?
  • Schedule 13D is a disclosure form fraught with complexity.   Many important judgment calls may have to be made in completing the required disclosures accurately and completely, depending on the circumstances.  Is all this complexity needed?  In particular, can the Item 4 disclosure requirement be simplified?  And is the group concept necessary?
  • What is the value, if any, in looking at the issue from a comparative global regulatory viewpoint?  Toward the end of the call, international comparisons were increasingly being made and used as evidence that a change in U.S. regulation is needed or desirable.  But are other markets and systems of regulation enough like ours for these comparisons to work?  E.g., although other countries require Schedule 13D-like filings fewer days after attainment of a triggering threshold of ownership, does that mean we also should reduce the time period for mandatory disclosure here in the U.S.?

Lots of questions; I am beginning to think through answers.  Regardless there's much food for thought here.  Any reactions?  What do you think, and why?

July 1, 2015 in Corporate Finance, Current Affairs, Joan Heminway, Legislation, Securities Regulation | Permalink | Comments (0)

Wednesday, June 24, 2015

Toward a Better Understanding of the Business Judgment Rule . . . .

I had the privilege of sitting in on a stimulating paper session on "Private Fiduciary Law" at the Law and Society Association conference in Seattle last month.  The program featured some super work by some great scholars.  My favorite piece from the session, however, is a draft book chapter written by Gordon Smith that he recently posted to SSRN.  Aptly entitled The Modern Business Judgment Rule, the chapter grapples with the current state of the business judgment rule in Delaware by tracing its development and reading the disparate doctrinal tea leaves.  Here is a summary of his "take," as excerpted from his abstract (spoiler alert!):  "The modern business judgment rule is not a one-size-fits-all doctrine, but rather a movable boundary, marking the shifting line between judicial scrutiny and judicial deference."

In the mere 18 pages of text he uses to engage his description, analysis, and conclusion, Gordon gives us all a great gift. His summary is useful, his language is clear, and his analysis and conclusions are incredibly useful, imho.  I am no soothsayer, but I predict that this will be a popular piece of work.

Gordon posted on his paper the other day on The Glom.  He is inviting comments, and I know him to be serious in wanting to receive and incorporate them.  So, have at it!

June 24, 2015 in Business Associations, Corporate Governance, Corporations, Delaware, Joan Heminway | Permalink | Comments (2)

So Happy Together?! Me and You and Intellectual Property Law Reform

The Turtles continue to have salience in the music world.  Now, they also are a "happening thing" in legal circles.  Two recently published law review articles take on an interesting issue in copyright law relating to pre-1972 sound recordings that has been the subject of legal actions brought by members of The Turtles.  The articles (both of which use the song Happy Together, a Turtles favorite, in their titles) are authored by my University of Tennessee College of Law colleague, Gary Pulsinelli, and Georgetown University Law Center Professor Julie L. Ross.  

In his abstract, Gary summarizes the problem as follows:

Federal copyright law provides a digital performance right that allows owners of sound recordings to receive royalties when their works are transmitted over the Internet or via satellite radio. However, this federal protection does not extend to pre-1972 sound recordings, which are excluded from the federal copyright system and instead left to the protections of state law. No state law explicitly provides protection for any type of transmission, a situation the owners of pre-1972 sound recordings find lamentable. These owners are therefore attempting to achieve such protection by various means. . . . 

He concludes:

[S]tate law cannot provide the remedy that the owners of pre-1972 sound recordings seek. Their concerns, however, should not be dismissed. The exclusion of pre-1972 sound recordings from the federal system does deprive the owners of such recordings of royalties received by similarly situated owners whose recordings happen to have been made after that date. Because state law cannot remedy the problem, federal law must. Pre-1972 sound recordings should be brought into the federal system, on essentially the same terms as other works from the same era that are already protected by federal copyright.

Professor Ross reaches the same conclusion, as summarized in her abstract:

[G]iven the delicate balancing that has gone into Congress’ recognition of a limited digital performance right and creation of a compulsory statutory licensing system, any remedy for the inequity to owners of pre-1972 sound recordings must be left to Congress. Allowing individual courts in individual states to craft a patchwork of inconsistent remedies would disrupt the balance struck by Congress and interfere with the functioning of the compulsory license system for digital sound recording performances. This is a result that the Supremacy Clause does not permit.

Last week, I posted on federal securities law reform.  It looks like federal copyright law also is in need of some fixing . . . .  However, the copyright issue addressed in these two papers seems like an easy one to fix efficiently and effectively, unlike some of the federal securities law issues on the current reform agenda.  Regardless, I'll raise three cheers to fixing what's legally broken in the most efficacious way!

Imagine how the world could be
So very fine
So happy together . . . .

June 24, 2015 in Joan Heminway, Music | Permalink | Comments (0)

Wednesday, June 17, 2015

Tinkering With Securities Regulation: When Is Leaving "Good Enough" Alone?

In response to one of my posts last week, co-blogger Josh Fershee raised concern about making minor changes to securities regulation--in that case, in the context of the tender offer rules.  Specifically, after raising some good questions about the teaser questions in a marketing flyer regarding a program I am moderating, he adds:

This reflects my ever-growing sense that maybe we should just take a break from tweaking securities laws and focus on enforcing rules and sniffing out fraud. A constantly changing securities regime is increasingly costly, complex, and potentially counterproductive. 

Admittedly, I am not that close to this, so perhaps I am missing something big, but I’m thinking maybe we should just get out of the way (or, probably better stated, keep the obstacles we have in place, because at least everyone knows the course).

Although I pushed back a bit, I generally agree with his premise (and I told him so).  I will leave the niceties regarding the tender offer rule at issue for another day--perhaps blogging on this after the moderated program takes place.  But in the mean time, I want to think a bit more out loud here about Josh's idea that, e.g., mandatory disclosure and substantive regulation should be minimal and fraud regulation should be paramount.  Not, of course, a new idea, but a consideration that all of us who are honest securities policy-makers and scholars must address.

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June 17, 2015 in Joan Heminway, Securities Regulation | Permalink | Comments (0)

Wednesday, June 10, 2015

Random Thoughts on the Beneficiaries of Corporate Board Decision Making

Last week, I attended the National Business Law Scholars Conference at Seton Hall University School of Law in Newark, NJ.  It was a great conference, featuring (among others) BLPB co-blogger Josh Fershee (who presented a paper on the business judgment rule and moderated a panel on business entity design) and BLPB guest blogger Todd Haugh (who presented a paper on Sarbanes-Oxley and over criminalization).  I presented a paper on curation in crowdfunding intermediation and moderated a panel on insider trading.  It was a full two days of business law immersion.

The keynote lunch speaker the second day of the conference was Kent Greenfield.  He compellingly argued for the promotion of corporate personhood, following up on comments he has made elsewhere (including here and here) in recent years.  In his remarks, he causally mentioned B corporations and social enterprise more generally.  I want to pick up on that thread to make a limited point here that follows up somewhat on my post on shareholder primacy and wealth maximization from last week.

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June 10, 2015 in Business Associations, Conferences, Corporate Governance, Corporate Personality, Corporations, CSR, Current Affairs, Delaware, Joan Heminway, Litigation, Social Enterprise | Permalink | Comments (6)

Call for Papers - AALS Section on Securities Regulation

Courtesy of AALS Section on Securities Regulation Chair Christine Hurt:

Call for Papers

AALS Section on Securities Regulation - 2016 AALS Annual Meeting

January 6-10, 2016 New York, NY

The AALS Section on Securities Regulation invites papers for its program on “The Future of Securities Regulation: Innovation, Regulation and Enforcement.”

TOPIC DESCRIPTION: This panel discussion will explore the current trends and future implications in the securities regulation field including transactional and financial innovation, the regulation of investment funds, the intersection of the First Amendment and securities law, the debate over fee-shifting bylaws, the ever-expanding transactional exemptions including under Regulation D, and judicial interpretations of insider trading laws. The Executive Committee welcomes papers (theoretical, doctrinal, policy-oriented, empirical) on both the transactional and litigation sides of securities law and practice.

ELIGIBILITY: Full-time faculty members of AALS member law schools are eligible to submit papers. Pursuant to AALS rules, faculty at fee-paid law schools, foreign faculty, adjunct and visiting faculty (without a full-time position at an AALS member law school), graduate students, fellows, and non-law school faculty are not eligible to submit. Please note that all faculty members presenting at the program are responsible for paying their own annual meeting registration fee and travel expenses. NOTE FURTHER, AALS has announced reduced registration fees for junior faculty for the 2016 conference.

PAPER SUBMISSION PROCEDURE: Up to four papers may be selected from this call for papers. There is no formal requirement as to the form or length of proposals. However, more complete drafts will be given priority over abstracts, and presenters are expected to have a draft for commentators two weeks prior to the beginning of the AALS conference.

Papers will be selected by the Section's Executive Committee in a double-blind review. Please submit only anonymous papers by redacting from the submission the author's name and any references to the identity of the author. The title of the email submission should read: "Submission - 2016 AALS Section on Securities Regulation."

Please email submissions to the Section Chair Christine Hurt at: hurtc@law.byu.edu on or before August 21, 2015.

June 10, 2015 in Call for Papers, Joan Heminway, Securities Regulation | Permalink | Comments (0)

Friday, June 5, 2015

Evidence that Corporate Law Matters (!) (?)

This week, while preparing for and attending the National Business Law Scholars Conference, I have had to deal with a Tennessee corporate law "brushfire" of sorts generated by a Nashville Business Journal (NBJarticle published earlier this week.  The article, written by a Nashville lawyer, took a somewhat alarmist--and substantively inaccurate--view of a recent addition to the Tennessee Business Corporation Act drafted by the Business Entity Study Committee (BESC) of the Tennessee Bar Association, of which I am a member (and about which I have written here in the past, including here, here, and here).  Specifically, the author asserted that Tennessee's adoption of the text of Model Business Corporation Act Section 14.09 creates new liability for Tennessee corporate directors--especially directors of insolvent Tennessee corporations.  Somewhat predictably, calls and emails from directors, executives, and the Tennessee Secretary of State's office (which, itself, received many calls) ensued.

By design, and (we believe) by effect, the statutory section at issue clarifies the duties of directors of dissolved Tennessee corporations and establishes a safe harbor from liability.  Accordingly, the drafting team from the BESC (me included) believed we had to jump in and correct the mischaracterizations in the article, which the author apparently was unwilling to retract or self-correct.  The NBJ, greatly to its credit, understood our concerns and published a rebuttal from the BESC chair, which the BESC collaborated in drafting and co-signed.  In addition, the Chattanooga Times Free Press published an article that outlines the debate (in which the BESC chair and I am quoted).

So, folks do pay attention to corporate law--and they think it matters! Unfortunately, sometimes, they get it wrong. This leads to a number of lessons . . . .  Apropos of that thought, it's important that a lawyer measure twice and cut once, especially when writing a critical exposé intended and destined to receive attention from an important audience--one personally affected by the contents of the exposé.  Moreover, the need for experienced corporate legal counsel--lawyers steeped in the structure and function of corporate law--continues to be important in the drafting of, and public education regarding, complex corporate legal rules.

June 5, 2015 in Business Associations, Corporate Governance, Corporations, Current Affairs, Joan Heminway, Legislation | Permalink | Comments (0)

Wednesday, June 3, 2015

Shareholder Primacy/Wealth Maximization

I just returned early Monday from this year's Law and Society Association conference.  I presented my paper on LLC operating agreements as contracts--about which I later will blog here--on a panel as part of a CRN (Collaborative Research Network) on corporate and securities law.  I enjoyed the conference and being in Seattle (a city I rarely get a chance to visit).

I noticed something in a number of the sessions I attended, however, that I want to share here.  A number of scholars referenced, in their presentations or in comments to the presentations of others, "shareholder primacy."  As I listened, it was clear these folks were referring to the prioritizing of shareholder interests--especially financial interests--ahead of the interests of other stakeholders in corporate decision-making, rather than the elements of corporate control (few as there are) enjoyed by shareholders.  As I began to recognize this, several things happened in rapid succession.

First, I remembered David Millon's recent paper on this subject, which (among other things) tells a history of the use of the "shareholder primacy" term.  It's well worth a read.  Or a re-read!

Second, I remembered Steve Bainbridge's earlier work on this same topic. Ditto on that paper; read it or re-read it.  His chart in Figure 1 of that paper is an amazing visual summary.

Third, and largely as a result of those two papers, I wondered why we use the same term for these two aspects of corporate modeling (whether you label them them radical versus traditional shareholder primacy, shareholder protection versus monitoring, corporate ends versus means, or anything else).  It's confusing!  I kept wanting to interrupt, as folks were using "shareholder primacy," to ask: "which kind?" to move my understanding and analysis further forward faster.

Here's my pitch.  I advocate moving away from using the term "shareholder primacy" when a more specific term is available.  In the alternative, I advise defining the use of "shareholder primacy" in context when it is used, whether orally or in writing.  Am I alone in being unsettled by this?   Am I being too pedantic or controlling in my advocated solution or advice?  I welcome your views.

June 3, 2015 in Business Associations, Corporate Governance, Corporations, Joan Heminway | Permalink | Comments (5)

Wednesday, May 27, 2015

Social Enterprise, Brazilian Style

As a semi-closeted (now "out," I guess) foodie* and as a lover of "things Brazilian" (including Havaianas flip-flops and Veja sneakers, as well as churrascarias and caipirinhas), I read with interest a recent electronic newsletter headline about a thriving Brazilian chef.  I clicked through to the article.  I loved it even more than I had thought I would.

The article tells the story of an emergent Brazilian chef and restauranteur, Rodrigo Oliveira, and his flagship establishment (Mocotó), as promised.  That was great.  But that was not all.  The piece also told the story of a business run using a "holistic business model."

Today, Oliveira focuses on his employees as much as his customers. . . .  Oliveira pays for his employees’ part-time education. And their kids’ health care. And daily jiujitsu and yoga classes in the room he built upstairs. It’s a rarely encountered, holistic business model that contributes to his restaurant’s roaring success. . . .

 . . . 

Beneath the street level they’re boring out new dormitories for employees, for a quick nap and shower between jiujitsu, work and class. . . .

He also seems to be attentive to the greater local community beyond his customers and employees, preferring (to date) to expand his business locally rather than into larger metropolitan areas.  Good business?  Yes!  But it seems like more than that.  This business appears to have more than one bottom line!

Perhaps this is not a remarkable story, in the end.  Regardless, I wanted to share it.  Another Brazilian social enterprise, Ashoka, gets a lot of attention.**  But it's now clear to me that we can and should look beyond larger, storied examples of social entrepreneurship for other manifestations of social enterprise in action in Brazil.

 

*Yes, Steve Bainbridge, I do read  your wonderful posts on food and beverage pairings, including this one on my birthday earlier this month.

**Actually, much to my surprise, Ashoka is a U.S. organization that networks social enterprises across the globe.  So, it's not even Brazilian!  Having been in Rio teaching for a few summers and known of its presence there, I  assumed it was a Brazilian organization.  Please forgive the error.  Hat tip to co-blogger Haskell Murray for pointing it out to me.

 

May 27, 2015 in Entrepreneurship, Family Business, Food and Drink, Joan Heminway, Social Enterprise | Permalink | Comments (0)

Wednesday, May 20, 2015

Crowdfunding and the Public/Private Divide in U.S. Securities Regulation

Some of you may recall that I blogged last summer about a SEALS (Southeastern Association of Law Schools) discussion group on "publicness."  That post can be found here.  My contribution to the discussion group was part of a paper that then was a work-in-process for the University of Cincinnati Law Review that I earlier had blogged about here.

That paper now has been released in electronic and hard-copy format.  I just uploaded the final version to SSRN.  The abstract for the paper reads as follows:

Conceptions of publicness and privateness have been central to U.S. federal securities regulation since its inception. The regulatory boundary between public offerings and private placement transactions is a basic building block among the varied legal aspects of corporate finance. Along the same lines, the distinction between public companies and private companies is fundamental to U.S. federal securities regulation.

The CROWDFUND Act, Title III of the JOBS Act, adds a new exemption from registration to the the Securities Act of 1933. In the process, the CROWDFUND Act also creates a new type of financial intermediary regulated under the Securities Exchange Act of 1934 and amends the 1934 Act in other ways. Important among these additional changes is a provision exempting holders of securities sold in crowdfunded offerings from the calculation of shareholders that requires securities issuers to become reporting companies under the 1934 Act.

This article attempts to shed more light on the way in which the CROWDFUND Act, as yet unimplemented (due to a delay in necessary SEC rulemaking), interacts with public offering status under the 1933 Act and public company status under the 1934 Act. Using the analytical framework offered by Don Langevoort and Bob Thompson, along with insights provided in Hillary Sale’s work, the article briefly explores how the CROWDFUND Act impacts and is impacted by the public/private divide in U.S. securities regulation. The article also offers related broad-based observations about U.S. securities regulation at the public/private divide.

I hope that you are motivated to read the article--and that you get something out of it if you do read it.  The thinking involved in creating the article was often challenging (even if the expressed ideas may not reflect or meet that challenge).  Yet, writing the article, in light of the super work already done by Don Langevoort, Bob Thompson, and Hillary Sale, was joyful and illuminating for me in many ways.  

I often say that I stand on the shoulders of giants in my teaching and scholarship.  That was transparently true in this case.  If only all academic research and writing could be so rewarding.  

May 20, 2015 in Corporate Finance, Joan Heminway, Securities Regulation | Permalink | Comments (1)

Wednesday, May 13, 2015

Additional May Guest Blogger - Marcos Mendoza

I am delighted to introduce Marcos Antonio Mendoza as an additional BLPB guest blogger for this month.  He plans to do several posts here over the next few weeks.  I look forward to his contributions.

Marcos is a graduate of Washburn University School of Law (J.D.) and the University of Connecticut School of Law (LL.M.), with Honors.  His recent article in the Connecticut Insurance Law Journal, "Reinsurance as Governance: Governmental Risk Management Pools as a Case Study in the Governance Role Played by Reinsurance Institutions,"  is a continuance of “insurance as governance” scholarship through the empirical examination of reinsurer relationships.  With more than 25 years in the insurance and self-funded pooling industries, he currently is an assistant director with the third party administrator for one of the largest public-entity risk management funds in the U.S., based in Austin, Texas.

Marcos is a regular reader of--and sometimes-commenter on--the BLPB.  His perspectives have been quite valuable to me.  I hope that you will find his insights helpful to your work.

May 13, 2015 in Joan Heminway | Permalink | Comments (0)