February 04, 2009
Creditors and Interests in LLEs: A Rant on Reading Hotel 71 Mezz Lender LLC v. Falor
In Hotel 71 Mezz Lender LLC v. Falor, 2008 NY Slip Op 09848 (NY AD [1st], December 16, 2008), the Court correctly vacated a trial court
pre-judgment order confirming the ex parte attachment of their membership interests in 23 entities, including Delaware, Georgia and Florida limited liability companies and a solely owned Florida corporation, and the subsequent orders conditionally appointing a receiver of those out-of-state interests.
Slip Op at 2.
The odd thing about the trial court order, and in the appellate opinion, is the absence of recognition of the concept of charging orders. In most states, including New York, a charging order is the exclusive manner by which a creditor can get at an interest in a limited liability entity (LLE). One would hope that somewhere among the trial court judge, the four appellate justices, and the eleven (!) lawyers listed in the opinion--and their associates or clerks), someone might have brought that concept to the attention of the court. Perhaps someone did, but that person's advice was ignored.
Certainly, that must say something about the state of legal education system and its products (lawyers). But only about a third of law schools offer a separate course in Agency, Partnerships and LLEs. Even in those schools, most students do not take both Corporations and A&P. The usual Business Associations course virtually ignores agency, and only gestures in the direction of partnerships and LLEs; then it's off to talk about public corporations and control transactions.
posted by Gary Rosin
December 04, 2008
Mastering Corporations and Other Business Entities
Lee A. Harris (Memphis) has this student supplement forthcoming from Carolian Academic Press. The abstract is available on SSRN.
posted by Gary Rosin
November 25, 2006
I have learned that the Oklahoma Bar Association is considering whether to add "limited liability companies" to the topics that the Oklahoma Bar Examination tests in the category of "Business Associations." If anyone knows of any state bar examination that currently tests limited liability companies, please let me know in the comments.
Additionally, a colleague and I are considering designing a Business Planning course that focuses primarily on LLCs. Most of our students who go into business practice handle small to medium-sized business transactions, and need more practical experience with issues affecting LLCs. If you have a syllabus for such a course, I would appreciate you sharing it with me here, and I would be happy to post any syllabi that I receive.
November 22, 2006
Professors Are Violating Copyright Infringement Laws
A November 17 article by James M. O’Neill of Bloomberg.com discusses how professors are coming under more and more scrutiny for violating copyright laws by posting long texts from copyrighted sources on their web sites for students. One example is of a professor who allegedly made available to students the first chapter of Thomas Friedman’s book The World Is Flat.
Here is an excerpt from the Bloomberg article:
U.S. college professors are flunking basic copyright protection law. Book publishers say professors who post long excerpts of protected texts on the Internet without permission cost the industry at least $20 million a year. Cornell University, the Ivy League college in Ithaca, New York, agreed in September to regulate work its faculty puts on the Web, in response to a threatened lawsuit from the Association of American Publishers. Professors are making material available free rather than requiring students to buy $100 textbooks. While faculty members from Harvard University to the University of Pennsylvania complain of a restricted flow of ideas, publishers say they must protect $3.35 billion in annual U.S. college textbook sales.
Hat Tip: TaxProf Blog
October 28, 2006
The Classiness Of Harvard Law School Dean Elena Kagan
I am ambivalent about my experience at Harvard Law School (J.D. 1995) but as of late, I am proud to be an alumnus.
Dean Elena Kagan led the Harvard Law School faculty to agree unanimously to overhaul the first-year curriculum. She is reaching out to students, faculty, and alumni. She is the frontrunner to fill the Harvard University Presidency. And somehow, she had time to write to me.
I received a letter from Dean Kagan last week congratulating me on my appointment to the Tulsa University College of Law faculty and my entry into the teaching profession. Dean Kagan wrote a personal note on the letter and signed it "Elena." She is class.
October 08, 2006
At the University of Tulsa College of Law, we held a teaching colloquy (as a break from our scholarship colloquy series) the other week. Many of the faculty discussed philosophies and strategies that have enriched their teaching.
I have already borrowed a strategy suggested by my colleague Tom Arnold who teaches Contracts, Agency, Partnership & LLCs, and Introduction to Corporate Law. Professor Arnold read about this idea but had not tried it himself.
He suggested that we assign a student each class to ask at the beginning of that class a question to enable the professor to clarify the murkiest concept leftover from the proceeding class. So far, so good. I have done this for a week now, with the assigned student "tagging" the student to ask the question for the next class. I have learned what the students find "murky" - and have tried to address the murkiness to the extent possible.
October 07, 2006
Harvard Law School Enacts Sweeping First-Year Curricular Reform
The Harvard Law School faculty have unanimously reformed the first-year curriculum constricting the traditional first-year courses (civil procedure, contracts, criminal law, property, and torts) to make room for courses on policy (Legislation and Regulation) ,international law ( a choice of Public International Law, International Economic Law, and Comparative Law), and a course on Problems and Theories. The story is here.
I do agree with the importance of integrating policy, international law, and problem solving into the first-year curriculum but prefer an approach that incorporates those topics into the traditional first-year courses. For example, in Contracts, one of my colleagues regularly draws comparisons between the UCC and the CISG, and I explore the tension between freedom of choice and public regulation throughout the course. I also regularly assign my students to work in teams to confront the types of problems that lawyers encounter (more in the B-School model).
And as I have found at several law schools at which I have taught that students in upper-year business and transactional courses generally do not have a sufficient background, I am against narrowing students' exposure to business and transactional lawyering (in Contracts and to some extent in Property) in the first year. Consistent with that, I think that we need to use courses in Contracts and Property to expose students to the role of lawyers in business and financial transactions and not to necessarily expand the types of course offerings.
Professor Paul Caron of TaxProf Blog lists the press coverage of the changes here.
August 20, 2006
Teaching Agency & The Restatement (Third)
We have described recently a run of agency cases on the blog, and it is only fitting, because, for many of us, the new school year starts tomorrow and it is the beginning of the first full semester since the American Law Institute adoped The Restatement (Third) of Agency. Deborah DeMott of Duke Law School was the Reporter. The AALS Section on Agency, Partnership, LLCs, and Unincorporated Business Entities has already decided to devote its 2008 Annual Meeting Program to the Restatement (Third).
The Restatement (Third) of Agency devotes more attention than its predecessor to agency issues that arise in organizations as well as agency issues that affect representatives of corporations, partnerships, and other business entites.
I wonder if faculty who teach Agency, Partnership & LLCs and textbook authors should abandon the traditional approach (those who have not abandoned it already) of starting the course with several weeks devoted to the principles of agency law, and instead integrate the agency problems that arise in practice into their teaching of the various types of business entities. As cases are decided under the Restatement (Third) of Agency, there should be more primary source material to support such an approach. Or are the principles of agency law so fundamental that they deserve study apart from unincorporated organization law?
August 15, 2006
Teaching About LLCs: Part II
I wrote here about the need to familiarize students with the limited company (the LLC). One approach is for faculty to give more emphasis to LLCs in either the traditional Agency & Partnership course or in the Business Organizations course and to teach those courses from a planning perspective. A second alternative is for law schools to offer a Business Planning course, in which students draft Articles of Organization and an Operating Agreement for a hypothetical client(s).
There is a third alternative. Over the past ten years there has been a rise in the number of small business clinics at law schools. Maybe that is the best context to teach students about the LLC because the students can realize in a clinical setting the utility and pervasiveness of LLCs.
I subscribe to LAWBUS, a listserv of faculty teaching in transactional clinics and faculty teaching transactional skills in the classroom. Professor Thomas Morsch of the Northwestern University of School of Law manages the list. He and others have organized a conference over the past couple of years for faculty teaching transactional skills either in the classroom or in clincs.
I hope that not only the number of transactional clinics continue to grow, but that there are increasing synergies between clinicians teaching in such clinics and doctrinal faculty teaching transactional courses.
August 10, 2006
Teaching Franchise Law
Related to the previous post, maybe there should be more courses on franchise law in law schools. At the heart of franchises are contract, property, and intellectual property rights, and we could not teach franchise law without exploring various forms of entities that franchisees choose, most notably the limited liability company. Further, the formation of franchises raises agency issues. For example, in the famous case of Hoffman v. Red Owl Foods, Inc., the Wisconsin Supreme Court considered whether a representative of Red Owl Foods, Inc. had sufficient authority to bind Red Owl to granting the Hoffmans a franchise. I wrote extensively on that case in Red Owl's Legacy, 87 Marq. L. Rev. 297 (2003).
I would be interested in hearing from faculty who have taught courses or seminars on franchise law.
August 09, 2006
Teaching About LLCs
MOVED TO THE TOP
With the new semester about to start, I have been thinking about how business law faculty teach students about limited liability companies (LLCs). While the LLC continues to rise in popularity as a business entity, I believe that the LLC (and the LLP) do not receive the attention they deserve in the law school curriculum.
Faculty antecdotally have shared with me that they do not have enough credits in the traditional Agency & Partnerships or Business Organizations courses to spend more than a couple of classes on limited liability companies. I wonder whether there is a strong correlation between credit hours in those courses and coverage of LLCs; even at schools with three- or four-credit Agency & Partnerships courses and four- or five-credit Business Organizations courses, I have, with limited exceptions, not seen signinifcant coverage of LLCs on the syllabi for those courses (about two-dozen of which I found searching the Internet last night).
A second reason why faculty do not devote more attention to LLCs is perhaps that there are fewer cases on LLCs than there are on agency, partnerships, and corporations. However, there are an increasing number of LLC cases as Professor Ribstein discusses here and as I have discussed on this blog. I suspect that a greater reason is that teaching about LLCs (and LLPs) requires greater attention to business planning and drafting, and less attention to the cases that make up the traditional Agency & Partnerships and Business Organizations courses.
I taught a Business Planning course two years ago, in which the students spent the first eight weeks forming an LLC, and drafting the Articles of Organization and the Operating Agreement. Even though most of the students had taken Agency & Partnerships and Business Organizations, I found that they lacked foundation in how to approach transcational or planning issues. Consequently, I was limited in the sophisitication with which I could approach the material.
Some faculty have reported great success in teaching the Agency & Partnerships and Business Organizations courses with a planning emphasis. Maybe as business law faculty we should consider emphasizing planning and problem-solving more in our courses, and the LLC (and LLP) are excellent vehicles in which to do so.
I, of course, welcome comments from faculty, but also from business practitioners (especially those who recently graduated from law school or who are exposed to recent law school graduates) with thoughts about how law school can prepare better young attorneys to advise small businesses.
Larry Ribstein comments here.
July 13, 2006
Online Bullying At Law Schools
Professors Brian Leiter and Daniel Weddle talk here and here, respectively, about the recent and alarming phenomenon of online bullying by law students against their fellow students and faculty. As Professor Weddle notes, the bullying and intimidation occur primarily through blogs maintained by the law students that are “frequently rife with epithets and directed at various minority groups.”
There appear to be various factors contributing to online bullying at law schools. First, the nature of the internet, and indeed of all forms of written communication, is that people have far less social inhibitions. With written communications such as blogs, e-mails, and text messages, we are not faced with any immediate human responsive emotions such as the displays of hurt on the receiver’s face, and, consequently, the human empathic response is less likely to be triggered. Additionally, as Darby Dickerson, Dean of the Stetson University College of Law noted in a recent article titled Cyberbullies on Campus, internet technology “allows tormentors to act under a veil of anonymity, which only increases the maliciousness.” Finally, whereas most law schools enforce codes of conduct on their campuses, they do not appear to be monitoring student-run blogs, so the bullying students face little risk of formal reprisal by the law schools or by state bar character and fitness committees.
As for why online bullying is becoming a problem at law schools in particular, it may be because the grading system and competitiveness in law school tends to bring out the baser aspects of human nature such as jealousy, resentment, and the need for revenge. That is, students are ranked relative to their peers. So there is instilled in the law school environment a competitiveness that does not tend to foster friendships or collegiality among students and can, indeed, lead to hostility and resentment against peers and faculty.
Darby Dickerson’s article on online bullying is Cyberbullies on Campus, 37 Univ. Toledo Law Rev. 51 (Fall 2005).
July 04, 2006
The Laptop Debate Continues
The “laptops in the classroom” debate is not going away, according to a recent article in The National Law Journal (June 30), and schools are taking proactive measures to end the in-classroom internet shopping, e-mail checking, and solitaire-playing. As we mentioned previously, at least one school in the Boston area has installed technology that blocks internet access in the classroom. According to the National Law Journal article, other schools, including the University of Michigan Law School and the University of Virginia School of Law, have now done the same thing. It will be interesting to see whether law students at any of these institutions try to come up with some creative legal arguments for why their in-classroom internet access may not be blocked. As the Law Journal article reports, a group of students at the University of Memphis Cecil C. Humphreys School of Law filed a complaint with the American Bar Association challenging the total ban of laptops by one of their professors, but the complaint was predictably dismissed.
Finally, we earlier cited a Boston Globe article which stated that faculty members at Harvard Law School were considering a vote this fall on whether to ban laptops from all classes. The National Law Journal article reports that this rumor is unfounded and that each professor is allowed to decide whether to permit laptops in his or her classroom, with no impending vote on a school-wide ban.
To read the National Law Journal article, go here.