April 28, 2007
50,000 Discrete Visits To Occasionally Discreet Posts
The prize-winner, number 50k, was apparently surfing at 1:50 a.m. from Cordova, Tennessee. Contact Jeff to collect your prize.
Truly, all, thanks for your clicks and support since September 18, 2006.
--Jeff, Mike, Nancy, and Alan
April 27, 2007
Should This Letter Have Gone In The Circular File?
The Kansas Supreme Court suspended an attorney for three months. After a public censure, the attorney sent a lenghty letter to 281 people that characterized the sanction as a slap on the wrist and denounced the process by which discipline had been imposed. The court found that the content of the letter was prejudicial to the administration of justice in violation of Rule 8.4(d). A minority would have imposed a less severe sanction. (Mike Frisch)
One of my traditions in teaching professional responsibility is to show a film called "Legal Heroes" by Larry Dubin in the last class. It is the inspiring story of three lawyers of diverse backgrounds who made remarkable contributions to the cause of social justice. Watching the film last night called to mind my own legal hero, Father Robert Drinan. I encourage readers to take note of the flood of remembrances that came after we lost Father at the beginning of this semester. His impact on so many from all walks of life is an inspiration to all of us. He is greatly missed and dearly loved.
The other legal hero who has inspired me throughout my professional life is Professor Sam Dash. Sam was not just a legend in the law. He was a courageous champion of the less fortunate in society who battled injustice all over the world. He was also as dedicated and popular a teacher as I have ever known. His international stature did not make him in any way remote or inaccessible to his colleagues and students -- like Father Drinan, he was as loved as he was respected. (Mike Frisch)
Living A Lie
The revelation that the Dean of Admissions at MIT falsified her academic credentials and was discovered 28 years after her hiring brings to mind our recent discussions about bar admission. It shows that a misrepresentation of credentials is a ticking time bomb to a professional career notwithstanding years of apparently high quality job performance.
There are a number of very interesting cases of lawyer impersonation. Perhaps the most famous D.C. case involved a "lawyer" whose real name was Daniel Jackson Oliver Wendell Holmes Morgan, an escaped convict who had an active practice under the name of L.A. Harris. He was outed after he was involved in a traffic accident with a real lawyer, who asked about his credentials in discovery, leading to him taking it on the lam. He was eventually arrested and convicted. The fascinating story is told in No Time For Dying, co-written by a client that Morgan had represented who was on death row when it was discovered that his trial lawyer was an impostor.
Then there was a case I prosecuted involving one Regis Toomey (I am not making these names up). He was admitted to the D.C. Bar but omitted mention of the fact that he had been barred and disbarred in Texas. The court revoked his license rather than disbar him, meaning that he could never seek reinstatement.
There was another fellow who slithered his way into the D.C. Bar when the D.C. Court of Appeals took over the jurisdiction of the bar from the District Court in 1972--he was discovered as a result of client complaints. (MIke Frisch)
Johnson and Ricca on Ethical Duty to Advise Corporate Officers About Fiduciary Duties
Posted by Alan Childress
Lyman Johnson (W&L--Law), left, and Rob Ricca (atty, Fenwick & West) have posted to SSRN, "(Not) Advising Corporate Officers about Fiduciary Duties." It will be in 47 Wake Forest Law Review, 2007. Here is their abstract:
This Article explores the intersection of an important, unresolved corporate law issue and an overlooked professional responsibility issue persistently arising in the corporate milieu. The corporate law question currently unaddressed in Delaware law is whether the fiduciary duties of corporate officers, as agents, are the same as, or different from, the fiduciary duties of corporate directors. A related question is whether, in reviewing officer conduct, courts will apply the business judgment rule in the same broad (and protective) manner in which it is applied to assessing director behavior.
The professional responsibility issue concerns whether, and how well, lawyers are advising corporate officers about their fiduciary duties. In recent years, much attention has been given to the professional obligations of a corporate lawyer upon learning, ex post, of corporate wrongdoing, including director and officer breaches of fiduciary duty. Virtually no attention has been paid to whether, ex ante, lawyers are adequately helping to prevent such misconduct by fully and properly advising corporate officers as to the scope and thrust of their fiduciary duties. Fiduciary duties, as an element for shaping officer conduct to promote healthy corporate governance, are of little preventive value if not properly transmitted to officers, given that officers are unlikely on their own to understand those duties. As is the case with directors, lawyers are the obvious means by which such communications to officers would be expected to occur. How well are they fulfilling this vital role?
We obtained information on this subject in two ways. First, as a pilot project we sent a survey questionnaire to corporate lawyers serving primarily as outside legal counsel in major U.S. metropolitan areas. We intend to later survey in-house counsel by means of a separate questionnaire. Second, we examined the websites of fifteen major law firms to learn what they say about themselves on the topic of advising corporate officers as to fiduciary duties. Overall, the results from our initial survey and website research suggest that many lawyers do not provide full-bodied fiduciary duty advice to officers in their capacity as officers at all, much less advising them as to the possibility that their duties might be stricter than those of directors or cautioning that the business judgment rule may not apply to officer conduct in the same way it applies to directors.
The paper also offers several reasons why lawyers should advise corporate officers as to their fiduciary duties. Doing so serves to highlight the key governance role played by officers, thereby partially re-directing corporate law's customary and inappropriately exclusive focus on directors. The paper closes by describing a proposed procedure for assuring directors that legal counsel is regularly providing fiduciary duty advice to senior officers.
April 27, 2007 in Abstracts Highlights - Academic Articles on the Legal Profession | Permalink | Comments (0) | TrackBack
Update to Apple Backdating Post
One of the upsides of blogging on substantive issues is the immediate engagement between theory and events. One of the downsides is that the speed by which the blogger can engage means that the vetting in the more traditional venues does not occur. But, of course, one of the upsides, as institutionalized, say, in Wikipedia, is that the connection is transparent, and subject to readers' immediate scrutiny.
An insightful reader took issue with my characterization of speech act theory in connection with the Apple, Inc. backdating issues, and I agree it was imprecise. I've updated the post below. More on the relationship between speech act theory and deception, if you are interested, in Peter Meijes Tiersma, "The Language of Perjury: 'Literal Truth,' Ambiguity, and the False Statement Requirement," 63 S. Cal. L. Rev. 373 (1990).
MoneyLaw's currently talking about creating a market in law professors, akin to other types of markets. Take a look at the posts: Paul Caron (MoneyLaw2.0: The Law Prof Exchange), Jeff Harrison (Is There Hope for MoneyLaw?), and mine (A new market: law professors?).
Posted by Nancy Rapoport.
April 26, 2007
Gift for the Legal Profession? Billable Hour Clocks
Although Nancy Rapoport writes on the demise of the billable hour in the legal profession of The Future, there are still some pockets left of its occasional use. One webplace, The Billable Hour, sells traditional-style analog watches and clocks -- but divided by tenths of an hour rather than five-minute increments. They also sell law-related gifts and humorous greeting cards. The timepieces do look like lovely gifts for your Lawyer Loved Ones (that almost sounds oxymoronic), but really I don't think they are all that practical. Could become like giving Black's Law Dictionary to an aspiring lawyer: they may not use it much but it is traditional. Better than a tie or pen for Mother's Day or Father's Day.
More to the point, my tip for hiring a lawyer is to avoid any that really has trouble calculating tenths of an hour in their heads. Especially while being hopelessly distracted by the admittedly arbitrary and capricious norm that their regular clock draws a line every five minutes. [Alan Childress]
UC Boalt Dean Says Law School Has Recommended Explusion for Hastings Scare
Travis Hodgkins has the letter here on a Hastings student blog, posting a letter from Dean Edley at Berkeley that was also sent to the Hastings community -- as well as a nice letter to Hastings from Boalt students. [Alan Childress]
Cherry Blossom Time in the Nation's Capital
The D.C. Court of Appeals issued an opinion today that demonstrates how the applicable standard of review impacts on the outcome of attorney discipline cases. The matter involved two lawyers, one prosecuted in Maryland, the other in the District of Columbia, for a course of conduct where lawyer Wiggins advised lawyer Pennington that it was ethically permissible to deceive her clients after the clients' claim had been dismissed.
Pennington was disbarred for her deceitful conduct in Maryland. The D.C. Board recommended a 30 day suspension with automatic reinstatement as reciprocal discipline. The court rejected this incomprehensible leniency and ordered a two-year suspension with fitness. The court (and not for the first time,see linked cases here and here) took the Board to task because it "re-characterized the misconduct in a manner forbidden [by the reciprocal discipline rules]." In essence, the Board improperly imposed its own de novo judgment of the misconduct and ignored or obscured the central findings of Maryland's highest court.
As to Wiggins, the court accepted the lenient recommendation of a 60 day suspension with 30 days stayed in favor of probation and completion of a CLE ethics course. Citing the rule that makes the Board's proposed sanction presumptively correct "although the matter is not free from difficulty", the court deferred to the Board's judgment.
Once again, it's good to be a dishonest lawyer in the District of Columbia, with the sympathetic understanding of the "Board on Professional Responsibility." (Mike Frisch)
Center for the Study of the Legal Profession
The Center for the Study of the Legal Profession at Georgetown University Law Center is "devoted to promoting interdisciplinary scholarship on the legal profession informed by awareness of the dynamics of modern practice." The Center is co-directed by Georgetown Law Professors Mitt Regan and Jeffrey Bauman and will bring together leading scholars, practicioners and students in a wide array of settings "designed to foster exchanges...about the ongoing evolution of law practice and the aims and commitments of the profession." The Center, led by these two outstanding teachers and scholars, promises to be on the cutting edge of issues that confront the profession in the future.
Attached is information about the Center and a recent exchange of correspondence that discusses pending legislation in the United Kingdom that would permit non-lawyer equity investment in law firms, subject to oversight, and its potential for impact on practice in the United States in light of Model Rule 5.4. The Center will bring renewed vigor to both the development and study of the modern legal profession. (Mike Frisch)
April 25, 2007
The Apple GC, Speech Acts, and the Backdated Options
Posted by Jeff Lipshaw
There is a fascinating linguistic issue at work in the civil complaint just filed by the SEC against Nancy Heinen and Fred Anderson, the former general counsel and chief financial officer, respectively, of Apple, Inc. arising out of allegedly backdated options, which is a hot news story today. I'm going to assume the allegations to be true for purposes of some observations as to what I would call standard practice, but not necessarily of legal liability.
1. The hair on the back of my neck certainly went up when I read the allegations that Heinen had "altered company records" (Paragraph 1), and "fabricated or falsified" company records, "including the creation of minutes for a non-existent Board of Directors meeting" (Paragraph 2). So I flipped the pages looking for the particulars.
2. The complaint is about two different grants. The first was to the Apple Executive Team. There is no question under these allegations that the selection of a January 17, 2001 date was backward-looking and designed to find a day that had a low closing price, but that would also fall on a day after some recent public announcements that might have raised an inside information issue. But interestingly, on this one, I cannot find an allegation of a falsely dated document. First, the complaint leaves out any allegation as to the dates on the actual grant document, simply referring to it as "option grant paperwork" that was undertaken in February. Second, and more significantly, the complaint alleges that on February 1, 2001, "Heinen began the process of preparing false paperwork to submit to Apple's Board of Directors so that it could authorize the grant." The very next allegation says that she directed the preparation of a "Unanimous Written Consent" with an effective date of January 17, 2001. This is a little ambiguous, but it looks to me like the UWC was simply made "effective January 17, 2001."
That in itself, if I have the facts correct, is not a false statement. The law has long recognized that you can do something "now for then" or nunc pro tunc. Moreover, Section 141(f) of the Delaware GCL makes it clear that a unanimous consent is not the same thing as a meeting. It is an action in lieu of the meeting. And one can imagine benign circumstances in which the Board might well want its consent to have been effective retroactively. Nothing in the Delaware GCL, as far as I can tell, bars that. Certainly nothing in Section 141(f) does so.
The real problem here is the distinction between what Searles calls illocutionary and perlocutionary acts. The statement of the effective date is an illocutionary act because it is asserting something to the listener. Searle says: "Correlated with the notion of illocutionary acts is the notion of the consequences or effects such acts have on the actions, thoughts, or beliefs, etc., of hearers."
So it is possible that an assertion, wholly true in itself, may have the effect by itself or in conjunction with other statement in particular circumstances, of meaning something else to the listener. In other words, the speech act in context is perlocutionary. [See update below.]
At this moment, I'm agnostic (but leaning toward a view that there was deception) on the overall context. But the mere creation of the UWC with an earlier effective date was not, in my view, irregular.
3. But it does get worse. The second grant was in October, 2001, and that is the one for Steve Jobs himself. Here, Heinen created minutes of a Special Meeting of the Board as of an earlier date, where that meeting had not occurred. That does raise the hair on the back of my neck. I think I would have said, "I am not going to make up meetings of the Board of Directors of a public company that did not occur. There is a device called the written consent that we use in lieu of a meeting when there was no meeting." (I would also distinguish the following. The discussion at a real meeting gets garbled. I look around at the directors and say "I think you mean this for your action - I will straighten it out in the minutes." There is no objection, and I do it. I don't have a problem with that; minutes are not a transcript, they are minutes.)
Now we are beyond a true illocutionary act that may be (intentionally or not) deceptive in its perlocutionary context. The propositions within the illocutionary act are false. There are references and predicates to things that did not occur.
It also looks like Heinen, without the consent of the Board, removed the reference in the minutes to discussion of option grants to Jobs at an earlier meeting. This may be false in itself or false in the context; I can't tell from the complaint.
As with the Executive Team options, there is no allegation about the dating on the option grants themselves. Obviously, there's an inference to be drawn if the option grant dates were accurate, but all the auditors got were either UWCs or meeting minutes suggesting that the option grants actually took place before they did.
So merely the UWC in itself wouldn't raise an issue for me. But the use of the UWC in context with the auditors as a means of fudging the date of a grant, if as alleged, as well as the creation of minutes to a meeting that didn't occur, would bother the hell out of me as a lawyer and the certifying secretary.
UPDATE: One of Larry Solum's readers has rightly taken issue with my sloppy turn of phrase on perlocutionary acts. She writes that I have misunderstood speech act theory regarding perlocutionary acts as follows: "Assertions may of course elicit a range of perlocutionary effects, but the meaning of the assertion does not turn on these effects (an assertion that p that elicits fear in A does not mean something different vis-a-vis B, who reacts with joy). Nor can an assertion be understood "in context" as a perlocutionary act!"
Let me clarify. The next sentence in Searle after the one quoted above is: "For example, by arguing, I may persuade or convince someone, by warning him I may scare or alarm him, by making a request I may get him to do something, by informing him I may convince him (enlighten, edify, inspire him, get him to realize)."
My point was that the propositional act in the UWC was a referral to a board and an effective date and options and a predicate that they were approved. The illocutionary act in the UWC is an assertion by someone in the company that options were approved effective January 17. That meaning is what it is. I think the perlocutionary act in this case is the convincing of an auditor by the making of the statement that the options were actually issued then. Because that's how the listener hears the statement. And then there is the second order question whether the speaker intended the deception. But my point there was that there was nothing false in itself about the statement in the UWC.
I am thinking of the example of a trial lawyer who is cross-examining a witness about a letter the lawyer believes the witness sent but has not yet tracked down. The lawyer picks up a sheet of paper that the witness cannot tell is blank and stares at it for several seconds. "It's true, isn't it," says the lawyer, waving the paper, "that you sent a letter to Mrs. X on December 4." There is no ambiguity whatsoever about the meaning of the assertion; the witness understands it just as the lawyer intended it to be understood. The witness was prepared to lie in response, but thinks the blank piece of paper is the letter, and is frightened by the possibility of being impeached. So she answers "yes, I did." Isn't the frightening and/or deception of the witness by the assertion a perlocutionary act with a perlocutionary effect? In later commentary, Searle refers to necessary "stage-setting" to be able to assess perlocutionary versus illocutionary acts, and it seems to me that has to be "context." I think of the UWC in the same way. There was no real issue as to either the clarity or the correctness of its propositional and illocutionary aspects. But the way it was used induced a particular effect in the listeners.
I agree my original post was incorrect in stating "In other words, the speech act in context is perlocutionary" and in conflating the meaning of the assertion with the perlocutionary effect. More precisely, the speech act is the speech act. The perlocutionary act is the fact that by making the statement I may deceive the listener, and, indeed, the listener is deceived.
The "Do We Need to Know..." Trilogy: Part 3 - The Skeptical Client
When I was the general counsel of a large publicly-held company, we had a chief executive officer, my primary advisee (not my primary client, mind you, that was the corporate entity), who I think truly believed that the law and lawyers were put in the world for no reason other than to place barriers or hurdles between where he was and where he wanted to be. No surface answer was ever sufficient to satisfy him. "Why can't we buy back stock now?" "Why can't we sell stock in our public traded subsidiary?" "Why can't we sue X or Y for this?" "Because that's the law" or "because I said so" was never enough. And despite the fact that he wasn't a lawyer, his natural smarts and suspicious take on the whole game made the cross-examination as intense as any grilling to which a Kingsfield-like law professor could ever subject a student.
Before I would talk to him about a matter, particularly one as to which I knew he would not like my answer, I asked myself the question "what do I need to know?" and the answer was often that I needed to peel the artichoke all the way down to the heart.
The "Do We Need to Know..." Trilogy: Part 2 - The Little Judgment Calls Real Lawyers Make Right from the Start
Another one of my evasions to the "do we need to know..." question (besides saying that students should think of the law as Jewish scholars thought of the Talmud - a sea across which we could never swim) is to recall the first time I had to write a research memo for a partner in a law firm as a summer associate. As is often the case with summer associate research assignments, the issue was particularly arcane and fact specific. The partner didn't give me a page or word limit. He didn't say "just restrict your research to the Michigan digests." He didn't say how long I should spend on it. All he gave me was the assignment and a due date.
The fact is that he didn't know the answer, which is why I got the assignment. Any question akin to a pre-test "do we need to know?" (like "do I need to look at?" or "how long should I spend?") would have provoked different and perhaps unpleasant responses, depending on the lawyer (caveat to the "how long" question - you might get a response that says if you haven't anything in X hours of research time, come back to me). While the more senior lawyers in the litigation or in the transaction make the BIG judgment calls, young lawyers start making little judgment calls right off the bat. "I am the only person researching this issue, and only I know if I have looked hard enough for the answer. Only I know if I have gone past the time of diminishing returns in the research. Only I know if it's time to stop researching and time to start writing. Only I know if I need to know anything else to answer the question."
The "Do We Need to Know..." Trilogy: Part 1 - The Artichoke Answer
In a review session for Secured Transactions (Article 9) yesterday, a student asked (with some obvious trepidation, knowing how erratic my behavior can become when faced with this question) whether "we needed to know" some aspects of Article 8 (having to do with what it means to "control" a securities account). Here was my response, as best I recall twelve hours later:
Do you need to know it? Hmm. There is probably no limit to the depth you could go in answering any law school exam question, particularly one involving the U.C.C., but do you need to know it? Think of answering the question as unpeeling an artichoke. You don't need to unpeel it down to the heart to write a merely decent answer, but the more you unpeel it the better the answer will be, and a truly great answer would unpeel it in an organized and transparent way, and do it very deeply. So could you do okay without knowing the specific provisions of Article 8? Maybe. However you did otherwise, though, would you do better if you knew Article 8? The answer to that has to be yes. I don't mean to be evasive, but that's the best answer I can give to that question.
UPDATE: I realize from talking to colleagues that it may be relevant that I have a very, very liberal open book exam policy, which pretty much allows anything except purchased and non-assigned commercial supplements.
April 24, 2007
McGowan on the Yoo-Delahunty Memo
David McGowan (San Diego) (LPB's favorite Humean) has posted Decency, Due Care, and Lawyering in the 'War on Terror' on SSRN. This is a slightly different argument on the general topic that he and Brad Wendel have been debating over at Legal Ethics Forum, and on which we commented just a while back. It's a good read, like much of David's work, accessible, to the point, brightly written, and not burdened by excessive footnoting. Here is the abstract:
This essay considers recent controversy regarding a memorandum written by John Yoo and Robert Delahunty when they worked for the Justice Department's Office of Legal Counsel. Scholars have claimed the memorandum (the YDM) was incompetently done and, therefore, that Yoo and Delahunty bear moral responsibility for the abuse of persons detained at Guantanamo Bay, Cuba and in the Abu Ghraib prison in Iraq.
I argue that this criticism misconceives the relationship between competence and ethics. Competent, professional conduct may be indecent, and appeals to decency say nothing about (and do not depend on) competence. I illustrate this point by examining in detail criticism of the YDM as incompetent. I conclude that the criticism is unsound. I also consider whether it may be criticized on grounds of decency even though it is competent. I argue that such criticisms must be made with care, so they do not violate the standards they seek to uphold, and that the facts disclosed to date do not justify such criticism.
April 24, 2007 in Abstracts Highlights - Academic Articles on the Legal Profession | Permalink | Comments (0) | TrackBack
Are Australian Lawyers Disproportionately Depressed?
A California blog called Legal Pad (part of Law.com) reports and links a news story from Australia on high rates of depression, and self-medication, in the legal profession. The blog post is called, Lawyer: It's Australian For 'Depressed,' Mate. [Alan Childress]
Admission On Motion Denied
Does teaching in a law school clinical setting involve the active practice of law? No, according to a recent decision of the Vermont Supreme Court. An attorney who had served as assistant director and director of a clinical internship program at Suffolk University Law School sought admission on motion to the Vermont Bar. The court held that many of the clinic duties were administrative in nature rather than practice related. "Underlying the active practice requirement is the reasonable assumption that lawyers who have been able to sustain themselves for the requisite period of years by representing clients...or by working in the judicial decision-making process as judges or law clerks, necessarily possess the skills required to practice law within the State of Vermont." The court also rejected a number of claims that its admission-on-motion rules were unconstitutional. (Mike Frisch)
Posted by Jeff Lipshaw
I recently thought about changing mine to "Cash" Sunstein or "Bryce" Ackerman to see if it would help in the law review article placement process, but no, this post not about that. I decided to re-title an article that was already out to the law reviews and posted on SSRN. It was bugging me, because having "futility" as the second word just wasn't right, and it wasn't just about self-referential systems. Plus it didn't capture the additional thread of tension or paradox between the first person and third person views of the relationship underlying a contract. So it's now Instrumentality, Objectivity, Self-Reference, and the Futility of Justifying Contract Law. (Hmm. For some reason, the revised abstract is not up. Note to self: always remember to click on "Save.")
Aproposner* of similar name issues, there is a lawyer out there who has had a spectacularly successful career and who I respect immensely. I would hire him in a heartbeat. Let's call him Abraham Smith. The only problem was that when Abe showed up as a young associate many years ago, one of the even more spectacularly successful lawyers and a named partner in the firm also happened to be named Abraham Smith. Abraham Smith the elder made it clear that Abraham Smith the younger was going to have to do something to make sure that there was no confusion in the mail room or otherwise between the two. So for the rest of his career, the younger one added his middle name "Spencer" to the letterhead, and was known for the next thirty years or so as Abraham Spencer Smith. I'm sure I was no different than anybody else, but I had a several transactions in which lawyer Smith was on the other side, and true to my note-taking style of referring to participants by their initials, he was, of course, ASS. I wonder if his parents thought about this. And I always felt a little guilty because I really did think he was a good guy.
* HT to Professor Childress, who coined this phrase.
April 23, 2007
Random Bar Admission Questions
The application for admission to the Maryland Bar asks the following question: "Have there been any circumstances or unfavorable incidents in your life, whether at school, college, law school, business or otherwise, which may have a bearing on your character and fitness to practice law, not called for by the questions contained in this questionnaire or disclosed in your answers?"
Iowa: Are you currently, or in the past three years, engaged in the illegal use of drugs? Applicants are instructed that "you may assert the Fifth Amendment privilege against self-incrimination."
New York asks about any child support obligations and,if so, if there are more than four months of arrearages. (Mike Frisch)