Business Law Prof Blog

The Ribstein Model

The passing of Larry Ribstein caught everyone off guard, and I'm not sure I have much to add. Nonetheless, the sense of loss I feel in his learning of his passing compels me to write something.  So here it is:

Even without meeting him, Professor Ribstein taught me how I can be a better scholar. If he had something to say, he wrote an article or a blog post about it (usually both, it appears). He wrote with others, assisted countless more in their efforts, and still found time to seek out new opportunities.  And he worked to ensure that his efforts were understood in context, not just cited.

Earlier this year, Professor Ribstein wrote an amicus brief in Roni v. Afra, a  New York case regarding fiduciary duties in LLCs. In the brief he responded to criticisms that he was an "extremist."  He wrote:

Instead  of  citing  cases  and  authorities  relevant  to  my  arguments,  including  my distinction between LLCs and corporations, Respondents attack my reputation by falsely  labeling me  as  an extremist  (p.  26  n.25).  My national reputation discussed  above  should  amply refute this characterization.  In any event Respondents'  culling of  thousands of  blog posts and hundreds of  articles produces three pieces of  evidence that are not only irrelevant to the issues in this case but do not support Respondents' characterization of my positions.  One cited post takes a position on market efficiency supported by mainstream finance experts, another aligns with the position of a majority of  the U.S  Supreme Court, and the only article cited is completely mischaracterized in a way that suggests that Appellant was misled by its ironic title and did not actually read it.

I did not know Professor Ribstein, but I loved reading his work in books, articles, and blogs.  He was deliberate, careful, and specific, and he said what he thought.  This amicus brief was no different.  He analyzed the issues, explained his reasoning, and confronted what needed to be confronted. He wasn't afraid to say when he disagreed, but he didn't look for more conflict than was necessary.  He understood the difference between argument and arguing.

The loss of his scholarly impact pales in comparison to the loss his friends and family are experiencing, and I share my deepest condolences.  By all accounts I have seen, his was a life well-lived, scholarly and personally, and not necessarily in that order. He will be missed, and I'm glad to have been a contemporary, even if it was not for long enough.

--JPF

What constitutes and adequate law school ROI?

University of Louisville Law School Dean Jim Chen argues that law school graduates typically need to generate an annual income equal to three times their annual law school tuition in order for their investment in law school to leave them with adequate economic viability, assuming they incurred debt to cover the entire cost of tuition (and nothing more).  The National Law Journal has the story here.  Dean Chen's paper is available here.

SJP

The Rise of Small Firms

In an article posted on Monday, Debra Cassens Weiss of the ABA Journal reports that an increasing number of associates at big firms are leaving their jobs to start their own practices.  This article evidence at least two things.  First, the need for practical skills training is increasing even at the upper eschelons of the legal academy.  Second, all law schools should be offering at least one course in law practice management.  Put another way, law schools need to be preparing graduates to "hit the ground running" at the beginning of their careers.

-- Eric C. Chaffee

Email: For Lawyers, It's Legal Writing; For Educators, It's An Opportunity

The Maryland Law Review Endnotes has posted The New Legal Writing: The Importance of Teaching Law Students How to Use E-Mail Professionally, by Kendra Huard Fershee.  Before you read any further, I want to be clear of my potential biases: Kendra is my wife (and, lest there be any doubt, I think she's great). And while students should be taught proper use of email in the legal world, it's not just students. If you read legal blogs, such as Above the Law, which has an email scandals section of the blog, you know that the proper use of mail is a lesson that needs to be learned by students in and outside of courses (see, e.g., here and here), law professors, and by lawyers everywhere.

Here's an excerpt rom the article:

The benefits of e-mail to lawyers are vast and cannot be easily quantified, but lawyers who are not careful can also suffer greatly through the misuse of e-mail. Problems with tone can inadvertently and counterproductively anger a client, opposing counsel, or the court.  . . . [A] lawyer can build credibility by evincing intelligence in her writing, and being articulate is one way to do that. It is, however, unfortunately much easier to lose credibility by sending inarticulate communications, particularly those that can be easily shared with others. E-mail mistakenly forwarded to the wrong person can create embarrassing consequences—even professional ethics repercussions—for the person forwarding the information.  And including sensitive client information in e-mail can create discovery problems that can adversely affect clients who are under investigation or engaged in litigation.

While electronic communication has a few potential downsides, the good news is that lawyers and law students can be trained to use e-mail properly. In fact, lawyers and law students must be trained to use e-mail properly to help them avoid making mistakes that electronic communication can invite. Obviously, there is no way to avoid every mistake that can be made in e-mail, but with careful instruction, those mistakes can be limited to the good old fashioned kind that lawyers have made on paper since the beginning of the legal profession. The combination of common use among lawyers and the potential for dangerous errors in e-mail make it imperative that legal writing professors include instruction about how to write e-mail as part of their curriculum. Failing to teach students how to use e-mail professionally could be likened to failing to teach students how to write a legal memorandum (setting aside, for the moment, the burgeoning debate about whether the legal memo is dead with the advent of the shorter, more direct legal analysis e-mail lawyers commonly use now).

There is empirical evidence that e-mail is the most commonly used form of legal communication, meaning it is a part of practice with significant risk and high potential rewards. To take this a step further, in my view, it's not just legal writing faculty who need to be teaching about the use of email; it's all faculty. If we are to prepare students for practice, they need to know that poor quality emails reflect poorly on their abilities as lawyers.  We need to provide feedback when email is used sloppily or inappropriately, and we need to provide opportunities for students to use email in professional or semi-professional settings. And this can be minor or major part of a course.  As a small example, when I require a paper in a course, I require students to turn in a hard copy and send me a soft copy via email.  I can use that opportunity to reinforce what I expect, individually and/or as a group. (The article has some useful tips for teaching in this context (e.g., "Remember Your Audience and Avoid Finger-Wagging"). 

Email is a major part of what most of us do, and we need to respect it as part of the educational process. It's one of many ways law schools can help demonstrate, on day one, that their graudates are in fact ready for the professional world, because most of them are. We should make sure they know how to demonstrate that in all settings, or we've come up short. 

--JPF

Musings on Chancellor Chandler at The Glom

Over at the Conglomerate, is hosting a "Masters Forum on William B. Chandler III's contributions to the Delaware Chancery Court. There are a series of posts discussing Chancellor Chandler's Disney decisions, M&A (and Airgas), his views on the practice of corporate law and more.  I highly recommend taking a look.

I'd still like to hear more about his eBay v. Newmark decision, which I have posted about here and here. I, like the Masters who have written about Chancellor Chandler, think highly of his work and his decisions. That doesn't mean, though, as my views on his eBay and Airgas decisions indicate, that I necessarily agree with him in every case.  

--JPF

NFL, Supreme Court Share View on Message Control

The Wall Street Journal has an interesting article about a unique-angle NFL video coverage that is shared on a very limited basis.  The video, known as "All-22," shows the whole field and every player.  The angle thus allows viewers to see everything, from defensive and offensive alignments to each player's actions during a play.  

The NFL apparently considered sharing the video (or otherwise selling it), but many football people objected to it.  According to the article: 

Charley Casserly, a former general manager who was a member of the NFL's competition committee, says he voted against releasing All-22 footage because he worried that if fans had access, it would open players and teams up to a level of criticism far beyond the current hum of talk radio. Casserly believed fans would jump to conclusions after watching one or two games in the All 22, without knowing the full story.

"I was concerned about misinformation being spread about players and coaches and their ability to do their job," he said. "It becomes a distraction that you have to deal with." Now an analyst for CBS, Casserly takes an hour-and-a-half train once a week to NFL Films headquarters in Mt. Laurel, N.J. just to watch the All-22 film.

I suppose he could be right that there could be more criticisms of coaches and players if the video were released, but I'm not convinced.  And, more important, it appears that with the All-22 video, the criticisms would be more accurate than they are currently.  In fact, the article gives an example of a TV producer with access to the All-22 video who explained how an in-game analyst was wrong to blame a player for being "late" on a play, because the player was doing his job in the defensive scheme. The play call was right to beat the defensive scheme, and the offense executed the play.

Certainly, there might be a learning curve. Fans would need to understand that players and coaches make mistakes in every game and that one or two plays may not be a fair representation of the body of their work.  But that's already true today.  For every player or coach who might take unfair criticism, the All-22 video is likely to exonerate another (or provide credit where credit was actually due).

In some ways, I suppose this is like the the question of whether video cameras should be allowed in the United States Supreme Court.  After all, in that case, people would be provided access to something they don't fully understand, and it might lead to unfair criticism of the Justices, lawyers, and the legal system. Still, regardless of your view of cameras at the Supreme Court, there is one big difference here: football is a game; it is, at it's core, entertainment. 

So, NFL, entertain us. Let's see the All-22. 

--JPF

Decision Fatigue: An Attorney's (And Law Prof's) Occupational Hazard

This New York Times report asks, Do You Suffer From Decision Fatigue?: 

The mental work of ruling on case after case, whatever the individual merits, wore [judges] down. This sort of decision fatigue can make quarterbacks prone to dubious choices late in the game and C.F.O.’s prone to disastrous dalliances late in the evening. It routinely warps the judgment of everyone, executive and nonexecutive, rich and poor — in fact, it can take a special toll on the poor. Yet few people are even aware of it, and researchers are only beginning to understand why it happens and how to counteract it.

Decision fatigue helps explain why ordinarily sensible people get angry at colleagues and families, splurge on clothes, buy junk food at the supermarket and can’t resist the dealer’s offer to rustproof their new car. No matter how rational and high-minded you try to be, you can’t make decision after decision without paying a biological price. It’s different from ordinary physical fatigue — you’re not consciously aware of being tired — but you’re low on mental energy. The more choices you make throughout the day, the harder each one becomes for your brain, and eventually it looks for shortcuts, usually in either of two very different ways. One shortcut is to become reckless: to act impulsively instead of expending the energy to first think through the consequences. (Sure, tweet that photo! What could go wrong?) The other shortcut is the ultimate energy saver: do nothing. Instead of agonizing over decisions, avoid any choice. Ducking a decision often creates bigger problems in the long run, but for the moment, it eases the mental strain. You start to resist any change, any potentially risky move — like releasing a prisoner who might commit a crime. So the fatigued judge on a parole board takes the easy way out, and the prisoner keeps doing time.

This is something to keep in mind in every facet of being an attorney, and being a law professor, too. I didn't necessarily know what to call it, but I know that over time there is a diminishing return to my continued work. It's why I grade exam questions in a different order, and it's why I try not to grade late into the night. I try to make sure that some portion of each student's work is viewed in a favorable time slot, to help ensure as equitable a review as possible.  

Of course, it's impossible to avoid decision fatigue if you're trying to work at a high rate and a strong output. That's just the way it is. But we can try to structure our days to be more productive. The close of the article explains it well:

“Even the wisest people won’t make good choices when they’re not rested and their glucose is low,” Baumeister points out. That’s why the truly wise don’t restructure the company at 4 p.m. They don’t make major commitments during the cocktail hour. And if a decision must be made late in the day, they know not to do it on an empty stomach. “The best decision makers,” Baumeister says, “are the ones who know when not to trust themselves.”

--JPF

What Is a Mentor and Does It Matter?

Over at Above the Law, Mark Herrmann says, "Don't be a Mentor!"  He explains:

I am not a mentor!

Never have been. Never will be. Don’t care to be.

I’m a lawyer. I’m a co-worker. In some cases, I may be a friend. But I’m not a mentor; I have no time for that crap.

It's an interesting article, written exactly as you would expect from the author of The Curmudgeon’s Guide to Practicing Law.  Mr. Herrmann makes some very good points, and provides some good advice. He notes in his conclusion:

Don't be a mentor!

Just be a decent human being who respects the feelings of others, and work collegially with people to achieve your common goals. That’s plenty. That’s really all there was before they invented the concept of “mentoring,” and it’s really all there’ll ever be. 

Mr. Herrmann takes issue with the current concept of mentoring. He explains, "Mentoring means that you go out of your way to help people. . . .  Surely 'mentoring' isn’t just working with colleagues in a way that makes sense. That’s just doing your job; it’s not mentoring."  I appreciate his point, at least in one sense.  In my experience, both as a faculty member and as an attorney, formal mentoring programs usually involved someone with more experience (a little or a lot) taking another person to lunch and talking awkwardly about things loosely related to life and career.  Sometimes the programs provided "mentors" who were only participating because they had to do so.  Other times it meant providing an already needy mentee another person to torture with their laments. Sure, the program worked once in a while, but it was usually what my wife calls "forced fun," which is really the former and not the latter.  

Unfortunately, I think some people (especially lawyers) use calls "not to mentor" like Mr. Herrmann's to shirk their duties. That is, as an excuse to treat people poorly and harshly, rather than being "a decent human being who respects the feelings of others, and work[s] collegially with people to achieve [their] common goals." The people who I think of as mentors were not, I don't think, actively mentoring me.  They were doing exactly what Mr. Herrmann describes.  They were working with me so that we could produce better work product, and serve our clients or students, depending on the setting, better.  

Regardless of their intent, I think of these people as mentors.  But perhaps Mr. Herrmann is right -- maybe they weren't mentors. Maybe they were (and are) facilitators, teachers, colleagues, counselors, or friends (or some combination of those). Whatever you call them, I'm glad they were there, and I hope to make them proud by being whatever it is they were to me, to others. 

--JPF

Learning from Women and Other Professions

I read with interest Victoria Pynchon's article from Forbes, Women's Negotiation "Problem" May Be Power, Not Gender.  Pynchon argues that despite that dramatic increase in the number of women attending business and law schools, the fields of business and law are still largely dominated by men.  I think that's largely true.  She explains what she calls the "Old Negotiation Normal": 

Because women came so late to the game of commerce, most broken business deals I litigated during my twenty-five year legal career were negotiated by businessmen, drafted by male lawyers, and breached by male managers and executives. The agreements were reached in competitive distributive bargaining sessions. They were drafted in adversarial settings. And too often they were breached because the party that squeezed the last dime out of his opponent got a little karmic payment in the courtroom.

The solution? Pynchon asks, "what if women's styles are the new normal and men's begin to be labeled uncooperative, disruptive, self-centered and privileged?"  I would add some modifiers to the proposed solution, and note that the styles referenced are traditionally viewed as male or female, but obviously aren't solely used by one gender or the other.  

Not all fields are dominated by men.  Public relations, for example, is a field that has a number of women in leadership positions.  I worked in public relations for two agencies before law school, and my bosses were female, my clients were female, and many of my co-workers were female. (And I worked in the video game industry.)  The management style was, I think, more collaborative than it was as compared to my life in law practice, but I can also say my PR experience was not any less competitive, deadline driven, or quality focused than my law practice.  

In fact, working in a PR agency was great experience for legal practice (as I tend to think many jobs are). My PR background also informs my teaching, both in terms of how I teach, and how I communicate about what life in practice can and should be. Of course, I needed my legal knowledge base to do my job as a lawyer, but I had already managed a million-dollar client budget, worked with clients who had the option to find someone new, worked with support staff and outside vendors, and understood the difficulty of balancing financial restraints of clients with the expectations of those clients.  

The main thing I learned was that I needed to train those who worked for me, not just finish client work. So, when my account executive drafted a press release or part of a PR plan, I needed to mark it up, and give it back so that he would know what I wanted (and the client wanted).  My inclination was to clean it up, fix it, and send it out.  What happens when you do that?  You tend to get the same quality of work every time, because you are accepting it. By training the people who worked for me, I could get the client a better product, in two ways: (1)  account executive hourly rates are lower than account supervisor rate and (2)  I could focus on account-supervisor-level work, and not account-executive-level work.  

I traditionally think of that as good client service, and delivering quality work product at appropriate value.  I suppose that style of working, and thinking about work, could be deemed "women's style." Either way, count me in. 

--JPF

Refresher on Partnerships, A North Dakota Example

Last month, the North Dakota Supreme Court decided Zink v. Enzminger Steel, LLC, 2011 ND 122, and the case serves as a good reminder of how partnerships are formed, in large part for what the case doesn't say. The basic facts are summarized as follows:

Enzminger Steel contracted with Doug Zink to supply components for a new grain drying site. This contract lists Zink as the purchaser of Enzminger Steel's materials. Zink and his son, Jeremy Zink, signed this contract. Doug Zink and [Ted] Keller contend, however, that they had formed a partnership for the purposes of constructing and operating this grain drying site. They further allege that it was this partnership, not the Zinks separately, that entered into the contract with Enzminger Steel.

Keller represented himself at the hearing, but the Zinks did not attend because, they said, they did not oppose any of the motions that were to be considered at a hearing scheduled for that purpose. The district court expressed concern with what it suspected was Keller's unauthorized practice of law. Keller reiterated that he and Doug Zink were partners, but said his appearance was only for himself, and not Zink or the claimed partnership.

Because of its questions about Keller's role, the district court

verbally ordered that it would dismiss the action brought by Keller and Doug Zink unless either could prove the existence of a partnership within four days. If documents were produced proving the existence of a partnership, Keller would be joined as a party to the action brought by Enzminger Steel. If these documents were not produced, the court stated the action brought by Zink and Keller would be dismissed and Enzminger Steel would be awarded its attorney's fees because the pleadings were made in bad faith.

Ultimately, when the documents weren't produced to prove the partnership, the district court dismissed the claim and ordered attorney's fee be awarded to Enzminger Steel.  The North Dakota Supreme Court reversed, finding that Zink did not have proper notice of the issue, which the district court had raised on its own motion.  That all seems about right to me, but the Supreme Court failed to address one other big issue:  that the district court seems to have required documents to prove the existence of a partnership.  

Under the North Dakota Century Code, 45-13-01, consistent with many such laws, a partnership is defined as follows:

19. "Partnership" means an association of two or more persons to carry on as coowners a business for profit formed under section 45-14-02, predecessor law, or comparable law of another jurisdiction.

20. "Partnership agreement" means the agreement, whether written, oral, or implied, among the partners concerning the partnership, including amendments to the partnership agreement.

Note that a partnership agreement can be written, but it need not be.  It can also be oral or implied.  As such the district court should have required "evidence" of the partnership, not "documents" proving the partnership existed. I suppose one could argue that the court meant that any evidence needed to be reduced to a document filed with the court, but that's not how I read this. It sounds like the district court was skeptical enough that it wanted some hard proof.  The problem is, that simply is not what is needed to prove a partnership in North Dakota.  

In 2005, the North Dakota Supreme Court made clear that "a partnership could be created regardless of the parties' subjective intent, making it possible for individuals to inadvertently create a partnership despite their expressed subjective intent not to do so." Ziegler v. Dahl, 691 N.W.2d 271 (N.D. 2005). And, in 1992, the Supreme Court reviewed the dissolution of farming partnership that was created by an oral agreement among three partners, expressly stating, "In this case, there were no written partnership agreements."  First Nat. Bank of Belfield v. Candee, 488 N.W.2d 391 (N.D. 1992).

Ultimately, I think the court got this case right, but I always appreciate a little more precison when it comes to the process of creating, and then proving the existance of, partnerships.  This Fall, my BA I students will get a very up-to-date reminder of that.  

--JPF

A Colleague Lost: Rest in Peace, David Getches

David Getches, who was the University of Colorado Law School dean until last week, passed away Tuesday. Less than a month ago, he was diagnosed with pancreatic cancer. 

I had only met David a few times, but he is someone I will miss.  I knew about David long before I met him.  In law school, I was excited to take a Native American Law seminar, where I read a number of his writings. At that point, he was something of a rock star to me, in a scholarly sort of way. 

Over the past four years, I have had the privilege to serve as the University of North Dakota School of Law's Trustee to the Rocky Mountain Mineral Law Foundation, which is where I had the opportunity to meet David. We never talked much (I mostly watched and listened), but in my experience, he was someone who commanded respect, but never demanded it.

About this time last year I had the pleasure of sharing an airport shuttle with David back to Calgary (from Banff). I wanted to speak with him, but I did not want to bug him, either. I briefly re-introduced myself, then quietly went back to reading.  At one point, though, I decided to ask a question; I'm glad I did.  We had a nice conversation for the rest of the ride, where he shared with me some of his experiences as a, lawyer, law professor, and dean.  He talked as someone who truly loved his career, his family and friends, and his life.  

David's primary focus was Indian law and natural resources law, which is not directly relevant here. But David's expertise was far broader that those subject areas. As lawyer, a law professor, and law dean, he influenced the entire legal community, in addition to students and the academy, in way that will last well beyond his time with us.

Even after meeting David, he remains something of a rock star to me, and I'm honored to have spent a little time with him. My thoughts are with his family and friends.  He will be missed. 

--JPF

Misinformation About Lawyers As Directors

A Reuters special report (Shell Game) is making the rounds, and it has some interesting information.  The report is part of a series "exploring the extent and impact of corporate secrecy in the United States."  In it, the authors report that Wyoming Corporate Services is a company that creates "paper entities" for people to "hide assets."  The company has registered more than 2,000 companies, all at a single address in Cheyenne, Wyoming.

One thing that caught my eye was the claim in the report that

Wyoming Corporate Services will help clients create a company, and more: set up a bank account for it; add a lawyer as a corporate director to invoke attorney-client privilege; even appoint stand-in directors and officers as high as CEO.

That attorney-client privilege thing is not quite right. Just being a lawyer does not create privilege for actions of a director who happens to be a lawyer.  If a lawyer-director is somehow engaged to render a legal opinion, then privilege may attach, but having a lawyer-director at a board meeting does not mean everything discussed is privileged.  Here's one court's view in this context: 

The attorney-client privilege is a tenuous one, at best, with multifarious exceptions and conditions upon its applicability. Inasmuch as its enforcement impedes the search for truth, we think it may be stated with assurance, as a general principle, that the ethical and evidential strictures are brought into play only when a professional confidential relationship in its purest sense has been established. The attorneys selected by a client must, from one point of view, be dealing at arm's length with the client, as independent legal advisors, bearing in mind, of course, the fiduciary nature of the relationship. 

The relationship must be one which supports the reason for the ethical and evidentiary sanctions, that is, the public policy promoting full disclosure in the interests of obtaining sound and well-considered legal advice. When the attorney and the client get in bed together as business partners, their relationship is a business relationship, not a professional one, and their confidences are business confidences unprotected by a professional privilege.

Federal Sav. & Loan Ins. Corp. v. Fielding, 343 F. Supp. 537, 546 (D. Nev. 1972).

Not all courts will go that far, but just having a lawyer on a board of directors does not do what is implied by the Reuters report.

Lawyer-directors, to the detriment of their corporate clients, may affect the protection provided by the privilege. The privilege may be lost if the party seeking discovery can show that the communications in question were communicated in the role as director, and not strictly as a lawyer.

James H. Cheek, III & Howard H. Lamar, III, Lawyers as Directors of Clients: Conflicts of Interest, Potential Liability and Other Pitfalls, 22nd Annual Institute on Securities Regulation, Vol. 1 at 461, 483 (PLI Corp. Law & Practice Course Handbook Series No. 712, October 1990).

The other thing worth mentioning is that corporations and LLCs are not inherently evil.  Sure they can be used to help facilitate some bad things, but it doesn't take a corporation or an LLC to do evil. Individuals, sole proprietorships, and partnerships can all be pretty scummy, too. It has to do with the people running them, not an entity form.

I'm all for a little monitoring of bad behavior, but a some self policing can help, too.  Among the reasons people claim to want to form a company is to make it look like their operation is bigger or more established. Before doing business with anyone, we all need to do our due diligence. Check financials and get personal guarantees if that's necessary.  And if we don't care to check, then caveat emptor is still usually an appropriate rule.  And if we do check, and it's a well-played scam, well, it's not the entity that is the problem. It's criminal behavior, that happened because of the criminal, not the corporate code.  

--JPF 

Would You Hire a Disbarred Attorney to Mediate Your Case?

That's just what former securities class action lawyer Melvyn I. Weiss is hoping, according to the New York Times Dealbook. Mr. Weiss was disbarred after pleading guilty in 2008 to making illegal kickback payments to his plaintiff-clients in securities litigation.

There are some possible ethical concerns with Mr. Weiss working as a mediator because he would be drawing on his legal experience. I have not done much research in that area, but I can see both sides of the issue.  I could imagine someone wanting Mr. Weiss's input, given his experience, but I just can't see hiring him as a mediator. Even if it's permissible for him to act as a mediator, it just doesn't seem like a good idea.  

Perhaps I am wrong and he brings something so unique to the table that it would make it worth hiring him.  I don't know what that would be, but I welcome any thoughts.

--JPF

ND Chief Justice Requests Comments for the ABA 20/20 Commission

Chief Justice Gerald W. VandeWalle of the North Dakota Supreme Court today issued the State of the Judiciary Report 2011.  The Chief Justice "serve[s] on the ABA 20/20 Commission whose charter is to examine the ethical and regulatory impact of advancing technology and increasing globalization on the legal profession and to make recommendations to the House of Delegates." Chief Justice VandeWalle is always thoughtful in his approach, and he means it when he asks for input.  In closing the report, he noted a few things of potential interest to business lawyers. 

The Commission has agreed on some recommendations on outsourcing, confidentiality-related ethics issues for lawyers' use of technology, and rules relating to inbound foreign lawyers. For the most part the latter would amend Rules 5.5 and 8.5 to allow foreign lawyers the right to temporarily practice in a jurisdiction that is given to lawyers from other states in this country. The big issues, alternative business structures, including non-lawyer ownership of a law firm, and alternative litigation financing are under hot debate.

If you have an interest in these matters I urge you to go to the ABA website carrying the 20/20 reports, requests for comment and recommendations. It is:  http://www.americanbar.org/groups/professional_responsibility/aba_ commission_on_ethics_20_20.html. In fact I urge you to look at it even if you are not interested to the end that in the future you will not ask "why didn't someone tell me about this?"

I close with the observation that while we are not without flaws, I believe the state of the Judiciary in North Dakota is vigorous, vital and healthy.

--JPF

Possible Lessons from Business Education for Legal Education

The Economist has two stories that caught my eye this morning.  The first is Tutors to the world: Business schools are globalising at a furious pace—which is largely a good thing. The article explains that business schools (graduate programs providing the MBA) are expanding and growing globally. While those schools are increasing their reach, they also run the risk of diluting the quality of education. Still, 

the benefits of global business education far outweigh the costs. Business is globalising: the proportion of the world’s largest 500 firms that hail from emerging markets has doubled in five years, from 8.2% in 2005 to 17.4% in 2010. Business schools have no choice but to follow suit. 

The article further notes that as business education takes a more global focus, it is becoming decidely "less American."  That may or may not be a good thing, but my sense is that many think it is a postive turn.

The second is The Race to the Bottom, which reports that undergraduate "business studies" students are "according to a long article in The Chronicle of Higher Education, by far the idlest and most ignorant."  The article continues:

What accounts for this educational wasteland? To some extent it is a matter of self-selection. Many people choose business studies precisely because they don't have a lot going on upstairs. And they prefer to spend their time networking and looking for jobs rather than, say, grappling with Schumpeter's ideas about business cycles. But universities also bear some of the blame. Many universities have treated business studies as a cash cow: there is lots of demand, business students do not require expensive laboratories, and business academics can supplement their incomes with outside consultancy. Business studies is also a mish-mash of subjects, many of them soft and ill-defined, like leadership and business ethics. It is notable that students who focus on “hard” subjects, such as finance, put in much more work than those who study “leadership” and the like.

Two thoughts/questions: 

(1) Are business schools that different from law schools? On the one hand, of course they are.  Business is viewed globally, while law is (often) viewed locally (see, e.g. licensing requirements). As such, requirements and processes for students tend to vary (I think) much more significantly in law than in business from country to country.  But as most of us know, the law is constantly becoming less local and more global. If business leaders are taking a global approach, it means they will need global counsel. Local counsel in every jurisdiction still works okay for litigation (it seems to me), but it doesn't work as well for transactional work.  Good counsel understands the appliable legal regime as well as their client's business goals.  As such, law schools need to work to keep up, and so do law firms.  

Just adding a Singapore office doesn't make a firm any more global than a summer program in Greece or Norway makes a law school global. (I say this as someone who took and benefitted greatly from a summer law school program overseas.) It's what happens in those locations, who is part of what happens, and what comes back to the school/firm that matters.  Just having the location is mostly marketing unless there is some real integration.  

(2) Might student's choices of course be as telling in law school as it appears to be in undergraduate schools? Law students are often thought to "grade shop" and perhaps "effort shop" for courses that are likely to lead to good grades/less work. I don't know these "shopping" problems are as pervasive as some think, but it's worth trying to find out. (And I'm working on that.)  Either way, it's worth knowing if there is a correlation between course choices and performance, both in school and beyond.  

--JPF

Making a Difference As Lawyers and Educators

Yesterday I received a copy of Professor Matthew Fraidin’s Keynote Address to the Bergstrom Child Welfare Law Training Program, University of Michigan Law School (May 24, 2011) via two of my favorite lawyers (my wife and my aunt).  The address was in the context of child welfare law, but his message is, I think, applicable to all lawyers. In fact, I think it is a particularly important message for business lawyers, and it is a message that applies to transactional lawyers as well as litigators.  Professor Fraidin argues:

Lawyers.do.things.  They don’t stand and watch and think it’s right because everyone else does it, because the courthouse culture has always done it this way, because the oldtimers do it this way, or even because a law professor tells them to do it this way.  Lawyers don’t stand idly by just because that’s what a judge wants. . . . .

We can assume that every client and every litigant and every witness is different from every other one.  We can’t assume we’ve seen this one before, that we can spot this kind of case a mile away.  We have to resist the tendency to say “Oh, yeah, sure, this is the FILL IN THE BLANKS kind of case.”  This is the “mother who is a victim of domestic violence” case.  This is the “untreatable manic-depressive” case.  “This is the immature-father-still-sponging-off-his-mother” case.

Because if we know all the answers from the outset, we don’t get to do any thinking.   We don’t get to get to know this particular client, this particular human being.   We don’t get to hear her story, because we don’t have to.  And we can just stand around and let the world take its course. 

But that’s not what lawyers do.  We change the course of events.  We add value.  We make a difference.

I think he’s absolutely right, or at least he can be.  As lawyers, as educators, and as law students, we should all be listening more.  We should be trying to find answers and proposing solutions, but first we need to know what is behind the client's question or goal, and seek the root of their problem, not just the symptom. 

This is a great call to action for all lawyers, and especially for law professors.  We can’t assume we know all the answers or the best way to teach, just because we have done it before or the “great ones” did it a certain way.  We should asking what we can do better, and who are we teaching, and why we are teaching them. 

We must remember that we are not just teaching law students to be lawyers. We are teaching them to be lawyers who can serve other people.  If we focus on the serving people part a little more, I think, in the end, our students will become better lawyers.  And that’s one way we can make a difference. 

--JPF

A Little Perspective on Legal Fees and the Legal Profession

The Wall Street Journal reports that Goldman Sachs spent $700 million on legal fees last year, including $434 million for outside counsel.  This is a lot of money, although I'd note that Goldman also had more than $39.16 billion in revenues for 2010 (10-k pdf here).  

At the New York Times Dealbook, Professor Peter Henning discusses the high costs of internal inquiries, which are often related to SEC and Justice Department investigations. Professor Henning explains that some companies, like Avon, have broad indemnification policies for employees that require the company to cover legal expenses for any investigations related to their employment, as long as employees agree to repay the expenses if indemnification is not warranted at the conclusion of the case.  These costs are so high, though, that the legal fees often can't be recovered, because the employee simply doesn't have the means to repay the obligation.  

Professor Henning closes with this:

Legal fees could easily run into the millions of dollars for any individual defendant, all payable — at least initially — by Avon. While crime does not pay, it sure can be lucrative for law firms.

On the one hand, this is true.  But I can't help but take issue with posture of such statements. We don't very often hear something like, "While cancer is unfortunate, it sure can be lucrative for doctors."  I continue to bristle at statements that expand the "ambulance chaser" narrative into the corporate context and make lawyers look like opportunists who are seeking to capitalize on the misfortune of others. I feel like a lot of us, whether in practice or in the academy, have unwittingly bought into this narrative.  I know I have at times, and I don't mean to pick unfairly on Professor Henning.

Of course, I know there are lawyers who are opportunists, but that is not at all a fair charcterization of the profession in my experience.  Most attorneys I know really believe in providing good representation for their clients, and they worry about their clients' well being.   Suppose a client comes in and says she has been working for a company conducting overseas business. She's trying (as she should) to expand the business into a new area. She takes a few people to dinner, buys a few drinks, and the next thing she knows, the Justice Department is investgiating a Foreign Corrupt Practices Act claim against her.  When she sits down in your office, I don't think the first thought most lawyers have is -- Cha-Ching!  Maybe I have just worked with and for some really good people (and I have), but that is simply not my experience.  

I like the concept that the legal profession is a noble profession, and I still believe it is largely true. As attorneys, I admit we often don't live up to the highest ideals, but that's doesn't make it not true. Failure is a human trait, and it is not true only of those in the legal profession. Doctors and clergy, for example, have had their failures, too.  

It's easy to get angry at laywers for legal fees, especially in the litigation context, because the costs are usually to protect something the client already thought was theirs.  That's true whether it's a criminal case (even if the defendant wins, the cost is usually to keep his or her freedom).  And it's true in the civil context (where the defendant might be suing to get the benefit of his or her bargain).  And the client may very well be right.  But, ulimately, it was usually not the lawyer who created the problem; it was the investigator or the counterparty or the client, or some combination of those.  

I guess I'm just done with accepting the current narrative.  I may be a little bit of an idealist, but I'm still proud of the profession I chose, even when I'm not always proud of those in the profession.  I think that those of us who still believe in what we do, and why we do it, need to be careful with our language, and be more focused on the bigger picture than we have been when discussing our profession.  After all, it's what good lawyers do.

--JPF

What Do Sokol and Vizzini Have in Common?

So many others have said this better than I will already, but a couple of quotes from Delaware cases keep coming to mind as I think of David Sokol's probable upcoming litigation. Regardless of how the insider trading cases go, Sokol was, in this instance (as Prof. Bainbridge noted), a really bad agent. Here are the quotes:

“[A] cognizable claim is . . .  stated on the common law ground that an agent is under a duty to account for profits obtained personally in connection with transactions related to his or her company.” In re eBay, Inc. Shareholders Litigation, 29 Del. J. Corp. L. 924 (2004) (not reported in A.2d)

“Conduct that does not run afoul of the corporate opportunity doctrine may nonetheless constitute a violation of the broader, and more fundamental, fiduciary duty of loyalty.” Gibralt Capital Corp. v. Smith, 2001 WL 647837, at *9 (Del. Ch. May 8, 2001)

And, in light of the extraordinary efforts of our military and everyday, unexpected heroes, I'm going to go ahead and suggest Mr. Sokol consider rethinking his rhetoric when it comes time for a trial. He says, via his attorney:

At all times he [Sokol] faithfully discharged his fiduciary duties to Berkshire, a company he heroically served and continues to regard with reverence.

With regard to Sokol's view of "heroically," I think I'll look to Inigo Montoya for the words used when he famously explained to Vizzini the meaning of inconceivable, "I do not think it means what you think it means."

--JPF 

 

Round 2: Another Judge Gets It Right on Professionalism

Sometimes lawyers lose their minds.  Fortunately, this time, Judge Melgren kept his.  In a pending case in Kansas, the defendant's counsel made a motion for a continuance because one of the key attorneys was expecting his first child during what was likely to be the time frame of the trial schedule. Plaintiff's counsel refused to agree to a revised schedule.

As Judge Melgren noted, "Regrettably, many attorneys lose sight of their role as professionals, and personalize the dispute; converting the parties’ disagreement into a lawyers’ spat."  Here is more from Judge Melgren (from the order here):

First, Plaintiffs make a lengthy and spirited argument about when Defendants should have known this would happen, even citing a pretrial conference occurring in early November as a time when Mr. Erman “most certainly” would have known of the due date of his child, and even more astonishingly arguing that “utilizing simple math, the due date for Mr. Erman’s child’s birth would have been known on approximately Oct. 3, or shortly thereafter.”  For reasons of good taste which should be (though, apparently, are  not) too obvious to explain, the Court declines to accept Plaintiffs’ invitation to speculate on the time of conception of the Ermans’ child.

. . . .

Certainly this judge is convinced of the importance of federal court, but he has always tried not to confuse what he does with who he is, nor to distort the priorities of his day job with his life’s role. Counsel are encouraged to order their priorities similarly.

Defendants’ Motion is GRANTED.  The Ermans are CONGRATULATED.

I, for one, think he nailed it.

--JPF

Bankruptcy Judge Takes Mortgage Lenders to Task

Gretchen Morgenson of the New York Times reports that Judge Elizabeth W. Magner, a bankruptcy court judge in the Eastern District of Louisiana, has had enough with sloppy mortgage lenders and their foreclosure processes.  On April 7, Judge Magner issued an opinion related to a case in which Lender Processing Services tried to foreclose on a couple who was current on a workout plan approved by the court in 2007.  Oops.  

Morgenson explains the case background:

The first problem arose when the Lender Processing software was not updated to reflect that the Wilsons were operating under a payment plan approved by a bankruptcy court. Then, the couple’s checks were not posted to their account by a lawyer for their lender, who inexplicably held onto the checks.

Says Judge Magner: 

ONE too many times, this court has been witness to the shoddy practices and sloppy accountings of the mortgage service industry. With each revelation, one hopes that the bottom of the barrel has been reached and that the industry will self correct. Sadly, this does not appear to be reality.

It looks to me like Lender Processing Services and a certain lawyer are going to face some serious consequences.  Here are a some quick practice tips, (hopefully) as a refresher:  

(1) DO NOT deposit checks that are not yours into your account. Commingling, in case you may have forgotten, is still bad.  Very bad.  

(2) DO deposit checks you receive for clients in the appropriate account.  Holding on to money that isn't yours, is also bad, and will cause serious problems for your client, which will eventually be a serious problem for you.  

--JPF