Business Law Prof Blog

The supper dictates the song

Securities regulations have increasingly required disclosure of, and shareholder input into, corporate executives’ pay.  For years, public corporations have been required to disclose the salaries of named executive officers, Dodd-Frank instituted (nonbinding) shareholder say-on-pay votes, and very soon, companies will be required to disclose the ratio of the CEO’s pay to median employee pay.

Many have argued that disclosure creates a Lake Wobegon effect:  No one wants to admit that their CEO gets below-average pay, and so disclosure ends up causing pay levels to rise across the board.

Now, a new study by Hongyan Li and Jin Xu looks at the effect in the context of CFO pay.  

Prior to 2006, the SEC required disclosure of the pay of five highest paid executive officers, including the CEO.  In 2006, however, the SEC changed its regulations to require disclosure of CFO pay, regardless of whether the CFO was one of the most highly paid.  The authors used the change as a natural experiment to discover the effect of disclosure on both CFO salary levels and CFO behavior.

Using a sample of S&P 1500 firms from 1999 through 2013, they find that at firms that had not previously disclosed CFO pay, CFO pay increased at a greater rate than at firms that had been disclosing CFO pay all along.  More worryingly, they also found that after companies began disclosing CFO pay, the quality of financial reporting deteriorated.  I.e., it seems as though once the CFO position becomes more prominent – and more highly paid – CFOs feel more need to “sing for their supper” in the form of generating positive (and potentially artificial) results.

That said, there seems to be room for further analysis.  The authors divide companies into 4 groups based on whether they reported CFO pay prior to the 2006 changes (always reported, often, seldom, and never) and they find that on some measures, the increase in earnings management is confined to the seldom and/or often groups.  So the story is not as simple as disclosure = deterioration.  Still, the study highlights flaws in a regulatory philosophy based on the disciplining effects of disclosure.

B Lab and HB2

Earlier this month, B Lab, the 501(c)(3) nonprofit organization that oversees the certification of B corps, announced that it will move its October 2016 retreat from North Carolina because of North Carolina’s controversial House Bill 2 (“HB2”).

In an April 12 e-mail to “Friends of the B Corp Community,” the B Lab team wrote:

Standing for inclusion, the global B Corp community has decided to relocate the 2016 B Corp Champions Retreat and related events from North Carolina in light of the newly-enacted State law HB2 which limits anti-discrimination protections, particularly for members of the LGBT community.

Immediately, B Lab will work with the North Carolina B Corp community and others to get HB2 off the books and make North Carolina more inclusive and business-friendly.

B Lab also linked to this longer statement in that e-mail.

The Model Benefit Corporation Legislation and the laws following the Model require that a third-party standard be used by benefit corporations to measure their social and environmental impact. B Lab’s standard is currently the most popular standard, but it is not required or even mentioned by the benefit corporation statutes. Allowing for various third-party standards helps prevent the benefit corporation law from being overly political. I do wonder, however, if B Lab’s public stand on this issue will make the benefit corporation laws harder to pass in more conservative states, because of B Lab’s large role in cultivating both the certified B corp and benefit corporation communities.

Further, this situation leads to a question I asked in 2012 --- would B Lab exercise their veto power and deny certification to Chick-fil-A, if Chick-fil-A applied for certification and managed the required social score? As I wrote in 2012, I don’t see anything in the benefit corporation laws that would prevent Chick-fil-A from becoming a benefit corporation, but I am less sure if Chick-fil-A would be successful in obtaining certification from B Lab. B Corp certification is separate from the entity formation process, and the certification is under the control of B Lab rather than the government. 

Also, I am not a nonprofit expert, but I wonder whether B Lab is flirting with the lobbying restrictions for 501(c)(3)s, especially when it promises to “work with the North Carolina B Corp community and others to get HB2 off the books.” They also seem to be involved in the attempts to pass benefit corporation laws in states across the country. (Thoughts from nonprofit lawyers or professors welcomed in the comments or by e-mail...I am told that 501(c)(3)s are allowed to do an "insubstantial" amount of lobbying).

In any event, in seems that non-profits, social enterprises, and traditional for-profits are becoming more and more active in social and political debates. And these organizations are often powerful, influential players. 

Visiting Tax Professor Position at Tulane

Hello, everyone - I'm passing this along in case any of our readers have an interest, or know anyone who might have an interest.  And if anyone needs convincing as to why they should spend a semester or a year in New Orleans, email me privately and allow me to extol the city's virtues.

Tulane Law School is currently accepting applications for a visiting tax professor for either the Fall of 2016 or for the entire 2016-2017 Academic Year.  Visitors would be expected to teach basic Income Tax and other tax related courses.  Applicants at any career stage are encouraged.  To apply, please submit a CV along with a statement of interest and any supporting documentation.  Applications and questions may be directed to Vice Dean Ronald J. Scalise Jr. at [email protected].   Tulane University is an equal opportunity/affirmative action employer committed to excellence through diversity.  All eligible candidates are invited to apply. 

 

Old Dog, New Tricks: Acquiring Empirical Skills

The shimmering mirage of summer has cast its spell on me, which means I am laboring under the delusion that I will have so much more time to do the thinking, learning, and writing that I want to be doing.  My work is increasingly dependent upon statistical evaluations that others do, and occasionally involves my own work in the area.   Several years ago I attended an empirical workshop for law professors at USC (something like this) taught by Lee Epstein and Andrew Martin that was an instrumental introduction and my only formal foundation in the area.  I have the bug and want to learn more!  But I don't know the best way to go about it-- piecemeal or full immersion--or even what all is available.  I compiled my research below and share the list for interested readers.  Comments encouraged by anyone who wants to share their experience with a listed option, general advice,  or add to this meager list.

Empirical Skills Resources:

Blogs like: Andrew Gelman &  Empirical Legal Studies Blog

Introduction/Immersion Workshops like:

• George Mason’s empirical workshop 
• Duke/Northwestern’s causal inference workshop 
• SELS pre-conference empirical training 
• Estimate--Michigan State’s summer econometrics workshop
• ICPSR summer offerings – 

 

Free electronic courses:

See, e.g., Stanford Introduction to Statistics (for more information on itunes university, see this article)

Recomended text books/books

Epstein/Martin Introduction to Empirical Research

Wooldridge, Introductory Econometrics 

Enroll in a course at your university (audit or pursue another degree) such as basic statistics or an Econometrics course.

-Anne Tucker

Top Five Best Beers "Created" By Law

Beer is good.  It's an opinion based on serious research.  A lot of beer laws are not good.  They often restrict beer distribution, limits sales, and generally make it harder for us to access good beverages.  

There have been some benefits of these restrictions.  The main one, probably, is that it provided the storyline for Smokey and The Bandit: 

Big Enos (Pat McCormick) wants to drink Coors at a truck show, but in 1977 it was illegal to sell Coors east of the Mississippi River without a permit. Truck driver Bo "Bandit" Darville (Burt Reynolds) agrees to pick up the beer in Texas and drive it to Georgia within 28 hours. When Bo picks up hitchhiker Carrie (Sally Field), he attracts the attention of Sheriff Buford T. Justice (Jackie Gleason). Angry that Carrie will not marry his son, Justice embarks on a high-speed chase after Bandit.

(Note that IMDB's description -- "The Bandit is hired on to run a tractor trailer full of beer over county lines in hot pursuit by a pesky sheriff." -- seems to have confused the film with the Dukes of Hazzard.  Crossing state, not county, lines was the issue and Rosco P. Coltrane was not part of the Bandit films.  I digress.)  

In my home state of West Virginia, getting craft beer, until 2009, was hard. Beer with more than 6% ABV could not be sold in the state. All beer in the state is "non-intoxicating beer" but the definition was raised from 6% so that it now includes (and allows) all malt-based beverages between 0.5% and 12% ABV.  

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Congratulatons to the Newly Appointed Dean of the J. Reuben Clark Law School at Brigham Young University!

Although other outlets in the blogosphere (including the blog he founded, The Conglomerate) beat us to the punch by a few weeks (see, e.g., here and here), I want to take time out today to congratulate D. Gordon Smith, currently Glen L Farr Professor of Law at BYU Law, on his appointment as Dean of BYU Law commencing May 1.  (That's this coming Sunday!)

I have had the privilege of working with Gordon a number of times over the years (perhaps most notably in the formation and leadership of the AALS Section on Transactional Law and Skills and with The Conglomerate), and he is a consummate professional.  He represents his institution impeccably as a scholar and servant of the academy and the profession.  He has great judgment and is a kind, considerate soul.  I know that he will be a great leader for BYU Law.

My only regret is that Gordon will likely have to step back from the many leading roles he has had in pushing business transactional law scholarship forward.  His service as a symposium sponsor, conference panel organizer, moderator, discussant, and presenter are so appreciated by me.  [sigh]

Nevertheless, I admit it's great to see another strong business law teacher, scholar, and servant in a law deanship.  I am delighted for him.  And I wish him all the best.

ICYMI: Tweets From the Week (April 24, 2016)

"theoretical assumptions of...contractarian theory [of corporate governance] have turned out to be invalid" https://t.co/w0CMpm6rEg #corpgov

— Stefan Padfield (@ProfPadfield) April 19, 2016

"[P]olicy advocacy is essential for..s/h value" but "[r]ational investors don’t consider [it] material"? https://t.co/apdemaYRro #corpgov

— Stefan Padfield (@ProfPadfield) April 19, 2016

"firms with media professionals on their boards experience both greater coverage and more favorable slant" https://t.co/VrLaPili4q #corpgov

— Stefan Padfield (@ProfPadfield) April 19, 2016

"Solomon v A Solomon & Co Ltd is ... often cited as the foundation of modern company law" https://t.co/sE6XHHIjpe #corpgov

— Stefan Padfield (@ProfPadfield) April 20, 2016

"hard to appreciate ... how enmeshed global governance has been for decades until you see the connections" https://t.co/uBbctZ8kv7 #corpgov

— Stefan Padfield (@ProfPadfield) April 21, 2016

ICYMI, ICYMI, FOMO, and TMI are in the dictionary now: https://t.co/So9cOQi6S7

— Merriam-Webster (@MerriamWebster) April 20, 2016

Introducing the Surly Subgroup

I wanted to drop a quick plug for the latest addition to the blawgosphere:  The Surly Subgroup: Tax Blogging on a Consolidated Basis.  My colleague, Shu-Yi Oei, is one of the founding members, and they've put together a really nice group of professors with a variety of interests who will post about a range of tax-related issues.  They just went live this week, but already there are a couple of posts up that may be of interest to BLPB readers, including one on the new regulations for Uber and Lyft drivers in San Francisco, one on whether organizations that distribute marijuana are eligible for charitable organization status for tax purposes, one on Donald Trump's tax proposals, and one on Prince's tax dispute with the French government.

If you're like me, you have no idea what the phrase "Surly Subgroup" means.  No matter; Shu-Yi's helpfully posted an explanation here.  Basically, affiliated corporate groups may file a consolidated tax return, raising questions about the extent to which losses in one can offset the income of another.  "Separate Return Limitation Year" (SRLY) rules govern that question for corporations that have losses prior to their affiliation with the group.  And those rules allow the "subgrouping" of corporations that were affiliated with each other prior to joining the larger group - hence, SRLY subgroups.

Reflecting on the MALSB Conference

Last week I attended the Midwest Academy of Legal Studies (MALSB) Conference in Chicago, IL. MALSB is one of the 12 regional associations of legal studies professors in business schools that has an annual conference. The Academy of Legal Studies of Business (ALSB) is the national association and the annual national conference is similar to AALS.

Given that I started my academic career at a law school, and still attend some law school professor conferences, I notice differences between law school and business school legal studies professor conferences. While there are plenty of similarities between the conferences, I note some of the differences below.

Pedagogy Presentations. While law school professor conferences do usually address pedagogy in a few panels, the business school legal studies conferences I have attended seem to have a much stronger emphasis. For example, I think the regional and national ALSB conferences tend to have 30%+ of the presentations dedicated to pedagogy. Many of the business school legal studies conferences have master teacher competitions as well, where finalists present their teaching ideas or cases to the audience and a winner is chosen by vote. I think some of this focus on pedagogy is because a fair number of business school legal studies professors are full-time, non-tenure track instructors without research responsibilities. In any case, I generally find the pedagogy presentations quite useful and think law school professor conferences could increase their focus on the area.

Relative Lack of Subject Area Silos. Maybe the biggest difference I have noticed between law school professor conferences and business school legal studies conferences is the relative lack of subject area silos at the legal studies conferences. At most law school professor conferences I attend, I can and do spend the entire time listening to only business law (narrowly defined) presentations. I leave small and big law school conferences only having heard about business associations, corporate governance, M&A, and securities law. At MALSB I heard those presentations, but also heard talks on employment, constitutional, contract, tax, and white collar criminal law. The conference organizers try to keep the panels in generally the same subject area, but the panels bleed into other areas and there is almost never enough pure business presentations to keep you fully occupied at a legal studies conference. The relative lack of subject area silos is good and bad. It is good because the exposure to other areas can lead to new insights about your own areas, but I still attend some law school professor conferences for more focus and depth.   

Associated Journals. Most of the regional and national legal studies associations run blind, peer-reviewed law journals. In my opinion, these journals are excellent for our field and offer a nice alternative to law reviews. I've stuck with the national journals to date because a number of the regional journals do not have WestLaw or Lexis contracts yet. As I have said before, I think there is room for even more traditional peer-reviewed law journals, perhaps run by law schools or by law school associations.

Enjoyed my time at MALSB. The people and the presentations were definitely worth the trip.   

Fulbright Scholar Program in Law Announcement

The Fulbright Scholar Program offers teaching, research or combined teaching and research awards in over 125 countries for the 2017-2018 academic year. Opportunities are available for college and university faculty and administrators, as well as for legal professionals and independent scholars.

This year, the Fulbright Scholar Program is offering over 90 awards in the field of Law. Exciting opportunities are available in many countries, including but not limited to:

• Brazil: Fulbright Distinguished Chair in International Relations
• Canada: Research Chairs in Governance
• Ghana: Law
• Japan: Study of the United StatesPublish
• Jordan: Public Policy and International Relations
• Kazakhstan: All Disciplines (Law is a preferred discipline)
• Macedonia: Rule of Law, Judiciary Reform and Civil Society
• Norway: International Courts and Tribunals
• Russia: Distinguished Chair in Sustainable Development
• Sweden: Fulbright-Lund University Chair in Public International Law

We recently hosted a webinar on Fulbright opportunities in law. Staff provided an overview of awards open to academics and professionals, and a 2015-16 Fulbright alumnus spoke about his experiences and answered questions. Please follow this link to listen to the recording.

For further awards in the field of Law, please visit our new Opportunities in Law webpage. There you will find award highlights and examples of successful projects in the discipline.

 
For eligibility factors, detailed application guidelines and review criteria, please follow this link. Interested scholars may also wish to join My Fulbright, a resource center for applicants interested in the program.

Applicants must be U.S. citizens and the current competition will close on August 1, 2016.

Call for Papers-The New Corporatocracy and Election 2016

ClassCrits IX

The New Corporatocracy and Election 2016 

Sponsored by

Loyola University Chicago School of Law

and The Loyola University Chicago Business Law Center

 Chicago IL * October 21-22, 2016

Call For Papers and Participation 

We invite panel proposals, roundtable discussion proposals, and paper presentations that speak to this year’s theme, as well as to general ClassCrits themes.

Proposal due: May 31, 2016.

As the U.S. presidential election approaches, our 2016 conference will explore the role of corporate power in a political and economic system challenged by inequality and distrust as well as by new energy for transformative reform. 

How might a sharper understanding of corporate power shed light on the current context of inequality and distrust?  How have legal changes in corporate rights and regulation reshaped political and social as well as economic activity?  Does the contemporary corporation simply empower individual human interests, as the Supreme Court suggested in the recent Hobby Lobby decision, or do the legal rights of corporations operate to narrow, distribute, and distort human rights and interests and citizenship?  What kind of person is the contemporary corporation and what does this mean for society, government, and law?   What is missing from the prevailing legal theory of the corporation as a nexus of contracts reflecting individualized economic transactions?  How does the contemporary legal understanding of the corporation help enforce and excuse inequality and instability? What structures of race, gender, and class have been advanced or obscured by the corporatocracy?   And finally, what law reforms might best reshape the corporation?  What alternative forms of business organization might offer better opportunities for more inclusive and responsible economic coordination? And, how might insights from other disciplines, including studies on religion and mindfulness, inform and inspire alternative visions and practices of law, democracy and political economy that promote human and (planetary) thriving? 

We invite panel proposals and paper presentations that speak to this year’s theme as well as to general ClassCrits themes.  See the full call for participation for details.

 In addition, we extend a special invitation to junior scholars (i.e., graduate students or any non-tenured faculty member) to submit proposals for works in progress. A senior scholar as well as other scholars will comment upon each work in progress in a small, supportive working session. 

Proposal Submission Procedure and Deadline

Please submit your proposal by email to [email protected] by May , 2016. Proposals should include the author’s name, institutional affiliation and contact information, the title of the paper to be presented, and an abstract of the paper to be presented of no more than 750 words.  The Conference also welcomes panel proposals.  Junior scholar submissions for works in progress should be clearly marked as “JUNIOR SCHOLAR WORK IN PROGRESS PROPOSAL.” 

CFTC Regulation & Enforcement of the Swaps Marketplace

As a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the US Commodity Futures Trading Commission (CFTC) promulgated rules to regulate the swaps marketplace, securities trades that were previously unregulated and a contributing factor in the 2008 financial crisis.  The CFTC oversees the commodity derivatives markets in the USA and has dramatically increased regulations and enforcement as a result of Dodd-Frank.  As of January 2016, the CFTC finalized Dodd-Frank Rules  exemptive orders and guidance actions. Commodity derivatives market participants, whether acting as a commercial hedger, speculator, trading venue, intermediary or adviser, face increased regulatory requirements including:

• Swap Dealer Regulation such as  De Minimis Exceptions, new capital and margin requirements to lower risk in the system, heightened  business conduct standards to lower risk and promote market integrity, and increase record-keeping and reporting requirements so that regulators can police the markets.
• Derivative Transparency and Pricing such as regulating exchanges of standardized derivatives  to increase competition, information and arbitrage on price. 
• Establishing Derivative Clearinghouses for standardized derivatives to regulate and lower counter party risks

The full list of CFTC Dodd Frank rulemaking areas is available here. In conjunction with the new regulations, the CFTC has stepped up enforcement actions according to a 2015 CFTC  enforcement report detailing 69 enforcement actions for the year.  Through these enforcement actions, the CFTC collected $2.8 billion in fines (outpacing SEC collections of $2 billion with a much larger agency budget and enforcement docket).

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Veil Piercing or Alter Ego Doctrine in a Criminal Suit? No Thanks.

A recent Illinois case uniquely applied the alter ego doctrine in the context of a criminal case.  See People v. Abrams, 47 N.E.3d 295, ¶¶ 57-61, 399 Ill. Dec. 790 (2015) ( slip op. PDF here ).  In my view, not quite right, either.

In the case, the defendant (Abrams) stole $1.87 million from the victim (Lev), which led to a restitution order for that amount and a twelve-year prison sentence for Abrams.  The conviction was for a Class 1 felony, for the the theft of property exceeding $500,000.  Id.¶ 23 (citing 720 Ill. Comp. Stat. Ann. 5/16-1(a(2) (West 2012)).  The statute provides, "Theft of property exceeding $500,000 and not exceeding $1,000,000 in value is a Class 1 non-probationable felony." 720 Ill. Comp. Stat. Ann. 5/16-1(b)(6.2). 

On appeal, the defendant argued the indictment was wrong in that it stated the money was stolen from Lev, when most of the money actually belonged to Lev's company, The Fred Lev Company (presumably a corporation, but that is not stated expressly).   Abrams claimed: 

the State did not prove he obtained “unauthorized control” of more than $500,000 of Lev’s property. Abrams recognizes the evidence presented at trial established that over $1.8 million was taken. Abrams contests the finding that the entire amount was taken from Lev and not The Fred Lev Company. 

Abrams, 47 N.E.3d 295 ¶ 57.  The court countered: "This is a distinction without a difference. Two separate doctrines of law guide our decision." Id. Although I think the court is probably right on the outcome, one of the rationales is wrongly explained.

The court's first assertion is as follows: 

First, the alter ego doctrine of corporate law was developed for and has been traditionally used by third persons injured due to their reliance on the existence of a distinct corporate entity. In re Rehabilitation of Centaur Insurance Co., 158 Ill. 2d 166, 173 (1994). “The doctrine fastens liability on the individual or entity that uses a corporation merely as an instrumentality to conduct that person’s or entity’s business.” Peetoom v. Swanson, 334 Ill. App. 3d 523, 527 (2002). In the context of “piercing the corporate veil,” an alter ego analysis starts with examining the factors which reveal how the corporation operates and the particular party’s relationship to that operation. A.G. Cullen Construction, Inc. v. Burnham Partners, LLC, 2015 IL App (1st) 122538, ¶ 43. Generally, did the corporation function simply as a facade for the dominant shareholder? Id. Here, without question, the corporate entity, The Fred Lev Company, served as the alter ego or business conduit of Lev, and Abrams’ own testimony confirmed it. 

Id.¶ 58. This is an overreach, as far as I am concerned, and I don't like the ease with which the court uses veil piercing without a detailed analysis. I believe that veil piercing, if it is to be used, should have some consistency, though I know that's now how it tends to work (i.e., without consistency).  Here, would the court have pierced the veil if this were a creditor bringing suit directly against Lev because his corporation couldn't satisfy a judgment? I think it would be wrong to do so on similar facts, so I think it is careless to apply the alter ego doctrine in this manner here.  

The court continues:

Second, the indictments sufficiently apprised Abrams of the charges against him. See People v. Collins, 214 Ill. 2d 206, 219-20 (2005) (any variance was neither material nor prejudicial to defendant). We do not believe that the defendant was in any way prejudiced by the indictments at issue. 

Id.¶ 59. I totally and completely buy this.  And, in addition, the court noted:

Even more convincing is that in opening statements to the jury, defense counsel told the jury that the checking accounts “were not used solely for [Lev’s and Abrams’] corporate work. They didn’t separate the corporation from their personal lives and personal expenses. *** They were using everything that went into that corporate account and writing checks on it for their own personal private, for their own person use. There was a commingling.” Additionally, defense counsel referred to “Fred Lev and Company” as being both Abrams and Lev. In closing argument, defense counsel argued that the company was “a small-time operation” with “one corporate book” that both Lev and Abrams used as “their own personal piggybank.” 

Id.¶ 60.  In the trial, it was determined that the statutory felony monetary amount threshold was met.  And the defendant admitted that he considered the funds to be Lev's and that he (the defendant) disregarded the entity.  I see no notice problem as to the defendant, and I have no concern that a jury couldn't understand whether the theft occurred in the amount claimed. I can see an argument, perhaps, that the prosecution should still get it right as to whom the money actually belonged, but it seems to me correct to say the crime was properly analyzed and assessed as to the criminal elements, so the claim is harmless error in this instance. Lev would have been the one to assert the claim for the Company, so it is hard to see how Abrams was harmed. 

I will maintain, though, that the veil piercing rationale is unnecessary and overstated. (I might be comfortable if they used the analogy to explain harmless error, but the way it was done is too much for me.)  Furthermore, as to the judgment for restitution to Lev, it is wrong. That money (or some portion of it) belongs to The Fred Lev Company.  Suppose there are creditors out there who have gone unpaid.  Or they are unpaid down the road.  At a minimum, the funds stolen from the company should go back through the company so it could be clear what funds were there and should have been available. Thus, as to the charges, I think the court probably got it right.  But as to respecting the entity (and protecting creditors now, and in the future), this could have been handled better. 

H/T Prof. Gary Rosin

2016 Society of American Law Teachers (SALT) Teaching Conference - Call for Panels and Papers

Call for Panels and Papers

Society of American Law Teachers (SALT) Teaching Conference
in partnership with the
LatCrit-SALT Junior Faculty Development Workshop

www.saltlaw.org
Friday and Saturday, September 30 and October 1, 2016
The John Marshall Law School, Chicago, Illinois

From the Classroom to the Community: Teaching and Advancing Social Justice

In 2015, law school applications hit a fifteen-year low. The drop reflects a radically changed employment market and a prevailing view that law school is no longer a sound investment. To attract qualified applicants and respond to a changing marketplace, many law schools have embraced experiential learning mandates and other “practice-ready” curricular shifts. The plunge in applications has also prompted law schools to lower admissions standards. In turn, the admission of students with below-average LSAT scores and modest college grade point averages has created new concerns about bar passage, job placement, and prospects for longterm professional success.

In this environment, the legal academy is faced with unprecedented challenges. On one hand, pressure exists to ensure that students are adequately prepared to navigate a courtroom, draft legal documents, and exhibit other “practice-ready” skills upon graduation. At the same time, law professors are urged to cover a wide spectrum of theory, rules, and doctrine to increase prospects for bar passage. In the struggle to achieve both goals, the critical need to integrate social justice teaching into the curriculum is often overlooked, rejected as extraneous, or abandoned in light of time constraints.

To the contrary, social justice teaching plays an essential role in improving legal analysis, enhancing practical skills, and cultivating professional development. Moreover, social justice teaching can help instill passion, commitment, and focus into students burdened with debt and facing an uncertain job market. Most important, as the legal marketplace contracts, access to counsel for lower- and middle-income people continues to grow -- creating a pressing need for effective and committed pro bono lawyers.

In response to new educational and professional challenges, law schools and the legal profession must join in a concerted effort to integrate social justice teaching into the classroom and expand social justice throughout the community. This conference will provide opportunities to engage in broad, substantive, and supportive discussions about the role of legal education and the legal profession in teaching students to become effective social justice advocates and the ways faculty can set an example through their own activism.

Suggested topics include, but are not limited to:

1. Innovative methods to incorporate social justice concepts into the law school curriculum.
2. Strategies to encourage students to become more engaged in academic and community activism.
3. Collaborative efforts between law schools and the legal profession to respond to the need for greater
access to legal services.
4. Techniques to help law students and new lawyers develop resilience, stamina, and “grit” to face the
enduring challenges of social justice advocacy.
5. Responses to the ever-increasing cost of legal education and its impact on social justice and access
to justice.

We welcome other related topics and encourage a variety of session formats. You may submit a proposal as an individual speaker, as a panel, or group. Whatever your topic and format, please use the required format as provided below for your proposal.

Please send your proposals to Hugh Mundy ([email protected]) by June 15, 2016.

Other members of the SALT Teaching Conference Committee include Margaret Barry ([email protected]), Emily Benfer ([email protected]), Davida Finger ([email protected]), Allyson Gold ([email protected]), and Aníbal Rosario Lebrón ([email protected]). Please share information about
the Teaching Conference with your colleagues, particularly new and junior faculty, who are not yet members of SALT. Visit www.saltlaw.org for additional details.

Required Format for Proposed Presentations

Please submit all proposals by using the bolded headings set forth below.

1. Title of proposed presentation

2. Presenter name and contact information

Submit contact information for each individual who will participate in the presentation; however, you must identify one person to serve as the primary contact person. The contact person is responsible for receiving and transmitting information about the SALT conference to the other members of the panel.

Contact person:

Presenter’s school (as listed in the AALS Directory) and mailing address
E-mail
Office phone number
Mobile phone number
Fax number

Other panel members (if applicable):

Presenter’s school (as listed in the AALS Directory)
E-mail

3. Summary of the proposed presentation.

The description or narrative portion of the proposal should accurately and succinctly describe the content, format, and anticipated duration of the presentation. The ideal length of the summary is approximately one page of double-spaced text.

4. Related papers or documents (if applicable).

We do not expect all submissions to include related scholarship or documents- especially at this early point in the process; however, if you have any related documents that help to support or illustrate your proposed presentation, feel free to attach them to your submission.

SAVE THE DATE: Central States Law Schools Scholarship Conference

The Central States Law Schools Association 2016 Scholarship Conference will be held on Friday, September 23 and Saturday, September 24 at the University of North Dakota School of Law in Grand Forks, ND.  

CSLSA is an organization of law schools dedicated to providing a forum for conversation and collaboration among law school academics. The CSLSA Annual Conference is an opportunity for legal scholars, especially more junior scholars, to present working papers or finished articles on any law-related topic in a relaxed and supportive setting where junior and senior scholars from various disciplines are available to comment. More mature scholars have an opportunity to test new ideas in a less formal setting than is generally available for their work. Scholars from member and nonmember schools are invited to attend. 

Registration will formally open in July. Hotel rooms are already available, and more information about the CSLSA conference can be found on our website at www.cslsa.us.

Imagine This: First-Semester Second-Year Students in Your Business Associations Class Who Already Have a Sense of Transactional Practice . . .

This is not a pipe dream!  I honestly believe that in the fall of 2017, this will be a reality for me.  (I typically teach Business Associations in the fall semester to a large number of students who understand "cases," not "deals.")

The reason for my good spirits and honest belief in the positive change in my students?  Our new 1L curriculum, which is rolling out this fall.  No doubt, we will find some changes that need to be made as we implement our relatively bold plan.  But I am truly excited that the new first-year curriculum exposes every student to a transactional experience in the first year of law school.  

There are many reasons for implementing this kind of change, of course.  Among other things, this new approach to the first year at UT Law responds to suggestions that we got from our students and represents an effort to better connect the 1L year to our upper division curriculum (on which we have spent a lot of time over the years).  The new 1L transactional offering is part of a larger plan constructed by a College of Law committee, chaired by my colleague (and e-discovery queen) Paula Schaefer, that spent several years looking at our overall curriculum and that of many other schools before fashioning a number of alternative options for the faculty to review.  

The implementation involves a lot of work.  Many colleagues are chipping in to construct new courses and re-fashion existing courses to meet the new curricular requirements.  It takes a village.  I am grateful for all of the work being put in.  I work with a great bunch of folks.

An article in the National Jurist last week describes the new 1L curriculum in general.  Our academic policies, however, add some detail.  I quote from them below, with some reformatting for easier reading in this space.

For students entering in or after Fall 2016, the first-year curriculum is as follows:

First Semester
Civil Procedure I* (3)
Contracts I (3)
Criminal Law (3)
Lawyering & Professionalism (1) Legal Process I (3)
Torts I* (3)

Second Semester
Civil Procedure II (3)
Contracts II (3)
Legal Process II (3)
Property (4)
Torts II (2)
Transactional Lawyering Lab (1)

*First-year students enroll in an experiential section of either Civil Procedure I or Torts I. The experiential sections include three graded, simulation-based assignments. Each simulation places students in the role of lawyer, raises professionalism issues, requires students to perform a lawyering skill, and results in a written and/or oral work product. In addition to a final examination, the course also includes a midterm exam that includes at least one essay question.

We are pretty excited to get this new curricular show on the road.  I look forward to sharing more with you as we see how students react in the short term and long term.  But my UT Law colleagues and I are very hopeful that this new approach to the first year will lay a strong foundation for upper division academic work and for practice.

 

ICYMI: Tweets From the Week (April 17, 2016)

"Government will not seek Supreme Court review of conflict minerals decision" https://t.co/WZqjhyqx5s #corpgov

— Stefan Padfield (@ProfPadfield) April 12, 2016

"without...fee-shifting...'it will be hard for any individual...to go into a case against a big company'" https://t.co/IEjctXMWna #corpgov

— Stefan Padfield (@ProfPadfield) April 12, 2016

ICYMI: "the potential antitrust implications of the rise of institutional shareholders" https://t.co/SElgy3D7K6 #corpgov

— Stefan Padfield (@ProfPadfield) April 13, 2016

ICYMI: "A $5.1 billion fraud settlement from Goldman Sachs, a $1.2 billion fraud agreement w/ Wells Fargo" https://t.co/tRAxRqjpUh #corpgov

— Stefan Padfield (@ProfPadfield) April 15, 2016

ICYMI: "Technology companies simply aren't taking activists seriously enough" https://t.co/DKDyxCzURc #corpgov

— Stefan Padfield (@ProfPadfield) April 16, 2016

It's a reversal! Our First Appellate Interpretation of Halliburton II Has Arrived

A few days ago, the Eighth Circuit became the first appellate court to interpret Halliburton Co. v. Erica P. John Fund, Inc., 134 S. Ct. 2398 (2014) (Halliburton II), relying on that case to reverse a district court’s class certification order in IBEW Local 98 Pension Fund v. Best Buy Co.

The case is interesting because it has an unusually clean fact pattern for analyzing some basic dilemmas in the law governing Section 10(b) actions.

The facts are these:

On the morning of September 14, 2010, before the market opened, Best Buy issued a press release that increased its full-year earnings guidance.  By the time of the opening, its stock price was up 7.5% from the prior day’s close.  Two hours after the press release issued, Best Buy held a conference call with market analysts, during which the CFO stated that the company was “on track to deliver and exceed” its EPS guidance. 

On December 14, 2010, Best Buy issued a press release announcing a decline in sales and reduction in EPS guidance, causing a stock price decline.

The plaintiffs alleged that both the September 14 press release, and the subsequent conference call, were fraudulent.  The district court held that the press release was immunized as a forward-looking statement, accompanied by sufficient cautionary language, under the PSLRA’s safe harbor.  However, the court held that the “on track” representation was not forward looking, and claims based on that statement could proceed.

The problem, however, as the plaintiffs’ own expert eventually opined, was that Best Buy’s stock price increased after the immunized press release, and did not appear to react to the earnings conference call.  The plaintiffs’ expert also opined that the conference call conveyed information that was “virtually the same” as the information in the press release. 

The plaintiffs offered two theories to explain how the conference call may have impacted Best Buy’s stock price.  First, they claimed that the conference call caused an upward earnings drift over the next several weeks.  And second, they claimed that the “on track” confirmatory statements served to maintain Best Buy's stock price, already boosted by the press release.  Accepting this evidence, the district court certified the class.

On appeal, the Eighth Circuit reversed.  It concluded that, in accordance with Halliburton II, the defendants had rebutted the presumption that the conference call impacted Best Buy's price.  In the Eighth Circuit’s view, because the plaintiffs' own expert agreed that the stock price had only increased in response to the immunized press release, and agreed the conference call conveyed no new information, the conference call could not have had an effect.  The court rejected the "earnings drift" theory as contrary to the efficient market hypothesis, but did not – in explicit terms – weigh in on the plaintiffs’ price maintenance theory, except to say that this was unlike situations where a third-party confirms an earlier corporate statement.

Judge Murphy, in dissent, faulted the majority for failing to directly confront the plaintiffs’ price maintenance theory – which, she believed, had not been rebutted.

There are several interesting things to comment on here.

[More under the jump]

Continue reading

Krug on Mutual Fund Governance

I'm at the MALSB Conference in Chicago, but saw Anita Krug's recently posted book chapter entitled Toward Better Mutual Fund Governance. Worth reading. Abstract below.

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This chapter evaluates the implications of an emerging model of mutual fund governance for effective oversight and regulation. As in the traditional model, in which a board of directors or trustees serves as the board of multiple discrete funds managed by a single investment adviser, this alternative model similarly contemplates the creation of multiple funds, but it eschews a single investment adviser charged with managing each fund’s assets. Rather, there are numerous advisers, each managing one or a small number of funds within the group. Although the new model may portend an improvement over the traditional model in some respects, questions arise as to whether it introduces concerns of its own and whether those concerns are more or less manageable than those to which the traditional model gives rise. The chapter contends that, although the new model produces risks not associated with the traditional model, there are reasons to believe, at least preliminarily, that it is at least as effective as the traditional model.

Can Consumer or Investor Pressure Make a Difference on Corporate Actions? The Carnival Conundrum

Today in my Business and Human Rights class I thought about Ann's recent post where she noted that socially responsible investor Calpers was rethinking its decision to divest from tobacco stocks. My class has recently been discussing the human rights impacts of mega sporting events and whether companies such as Rio Tinto (the medal makers), Omega (the time keepers), Coca Cola (sponsor), McDonalds (sponsor), FIFA (a nonprofit that runs worldwide soccer) and the International Olympic Committee (another corporation) are in any way complicit with state actions including the displacement of indigenous peoples in Brazil, the use of slavery in Qatar, human trafficking, and environmental degradation. I asked my students the tough question of whether they would stop eating McDonalds food or wearing Nike shoes because they were sponsors of these events. I required them to consider a number of factors to decide whether corporate sponsors should continue their relationships with FIFA and the IOC. I also asked whether the US should refuse to send athletes to compete in countries with significant human rights violations. 

Because we are in Miami, we also discussed the topic du jour, Carnival Cruise line's controversial decision to follow Cuban law, which prohibits certain Cuban-born citizens from traveling back to Cuba on sea vessels, while permitting them to return to the island by air. Here in Miami, this is big news with the Mayor calling it a human rights violation by Carnival, a County contractor. A class action lawsuit has been filed  seeking injunctive relief. This afternoon, Secretary of State John Kerry weighed in saying Carnival should not discriminate and calling upon Cuba to change its rules. 

So back to Ann's post. In an informal poll in which I told all students to assume they would cruise, only one of my Business and Human Rights students said they would definitely boycott Carnival because of its compliance with Cuban law. Many, who are foreign born, saw it as an issue of sovereignty of a foreign government. About 25% of my Civil Procedure students would boycott (note that more of them are of Cuban descent, but many of the non-Cuban students would also boycott). These numbers didn't surprise me because as I have written before, I think that consumers focus on convenience, price, and quality- or in this case, whether they really like the cruise itinerary rather than the ethics of the product or service. 

Tomorrow morning (Friday), I will be speaking on a panel with Jennifer Diaz of Diaz Trade Law, two members of the US government, and Cortney Morgan of Husch Blackwell discussing Cuba at the ABA International Law Section Spring Meeting in New York. If you're at the meeting and you read this before 9 am, pass by our session because I will be polling our audience members too. And stay tuned to the Cuba issue. I'm not sure that the Carnival case will disprove my thesis about the ineffectiveness of consumer pressure because if the Secretary of State has weighed in and the Communist Party of Cuba is already meeting next week, it's possible that change could happen that gets Carnival off the hook and the consumer clamor may have just been background noise. In the meantime, Carnival declared a 17% dividend hike earlier today and its stock was only down 11 cents in the midst of this public relations imbroglio. Notably, after hours, the stock was trading up.