Business Law Prof Blog

Tricks and Treats: My October as a Law Professor

My October included some signifiant tricks and a bunch of parallel treats.  I will highlight but a few of each here.  They illustrate, in my view, the busy mid-semester lives that law professors may have.

The Tricks

It was a real trick for me to give three distinct presentations in three cities (two in person and one virtually) in a two-day period early in the month.  On the morning of October 6, I participated in a panel discussion at The Crowdfunding Conference in New York City (New York).  That afternoon, I jumped on a plane for Little Rock (Arkansas), where I gave a continuing legal education presentation on crowdfunding for the Arkansas Bar Association as part of a program on "Capital Raising Today and Securities Law Issues."  Finally, later that day, I was Skyped into a the North Carolina Law Review 2016 annual symposium in Chapel Hill (North Carolina) on "The Role of Law in Entrepreneurship," at which I presented a draft paper, forthcoming in the North Carolina Law Review, on the important role of business finance lawyers in entrepreneurial enterprise.  

It then was a trick to refocus my energy on faculty hiring a few days later.  That next week, I jetted off to Washington (DC) with my fellow Appointments Committee members and our Dean and Associate Dean for Academic Affairs for a UT Law alumni reception and the Association of American Law Schools (AALS) 2016 Faculty Recruitment Conference.  We were successful in interviewing a variety of folks for our two business law openings--one in the clinic and one in the doctrinal faculty.

After only a few nights home in my own bed, it was (again) a trick to haul my body into the car to drive to Lexington (Virginia) to participate in and attend the Washington and Lee Law Review's 2016 Lara D. Gass Annual Symposium, an event focusing on "Corporate Law, Governance, and Purpose: A Tribute to the Scholarship of Lyman Johnson and David Millon."  At that symposium, my presentation addressed shareholder wealth maximization as a function of firm-level corporate governance.  My essay on that topic will be published in a forthcoming issue of the Washington and Lee Law Review.

Before the next week was out, I accomplished yet another trick.  I drove up to Louisville (Kentucky) to offer my thoughts on current securities litigation issues for the Kentucky Bar Association 2016 Securities Law Conference.  I was asked to cover insider trading and liability under federal and state securities laws.  In fulfillment of this charge, I delivered a presentation entitled "Where There’s a Securities Market, There’s Fraud (and Other Misconduct): Hot Topics in Federal Securities Litigation."

My final October trick?  Fitting in my Business Associations oral midterm examinations and my Monday and Wednesday class meetings for Business Associations and Corporate Finance with all these trips.

The Treats

All of that effort was an investment, however.  The trips, presentations, and other interactions all yielded multiple benefits.  Most of them may be obvious, but I will list a few in any case.

• I met lots of new and interesting folks from the crowdfunding industry, local bar associations, the AALS applicant pool, and the law academy (from the United States and abroad).
• I got great feedback on my current work and new ideas, research avenues, and citation sources for my ongoing work.
• I was able to honor two amazing colleagues, Lyman Johnson and David Millon.
• I participated meaningfully in the important task of recruiting new faculty to UT Law.
• I squeezed in some important family and personal time around the edges, including in attending the Knoxville Brewers Jam with my hubby (the tickets having been part of my anniversary gift to him back in August).

I am grateful for safe travels throughout the month.  Having said that, I admit that I am relieved all that travel and activity is over and done.  I look forward to a more calm November and a fun holiday season to follow.  In the mean time, however, I will continue to enjoy the fall, with pumpkins being among my favorite hallmarks of the season.

ICYMI: Tweets From the Week (Oct. 30, 2016)

"SEC Proposes Amendments to Require Use of Universal Proxy Cards" https://t.co/sJJ0JD5Mbc #corpgov

— Stefan Padfield (@ProfPadfield) October 26, 2016

litigation may generate "quality information on...behavior of market participants (a positive externality)" https://t.co/7jJRsdjKEp #corpgov

— Stefan Padfield (@ProfPadfield) October 28, 2016

"despite ... the fact that the corporation cannot be constructed solely out of voluntary contract ...." https://t.co/KwWd2HqVsL #corpgov

— Stefan Padfield (@ProfPadfield) October 28, 2016

"an autonomous system may 'inhabit' a company and thereby gain some of the incidents of legal personality" https://t.co/tFir8RN4r8 #corpgov

— Stefan Padfield (@ProfPadfield) October 28, 2016

ICYMI: "Grade inflation is back on Wall Street ... Moody’s bumped many ratings up, but none down." https://t.co/ZaEMVTJisB #corpgov

— Stefan Padfield (@ProfPadfield) October 28, 2016

Gender again

A couple of interesting studies about gender in the business context have recently been released.

First, a study by A. Can Inci, M.P. Narayanan, and H. Nejat Seyhun concludes – based on profits earned from insider trading - that women executives have less access to inside information than do men with similar positions.  They attempt to control for the fact that women may simply be more risk averse by controlling for trade size; they find, however, that even when doing so, men make more than women.  Of particular interest is the fact that even though their study goes back to 1975 (when there were fewer women executives), they find that the gender differences are stronger in more recent years, from 1997-2012.  They believe that the differences are attributable to informal networking that grants men access to better information than women; these differences fall away for firms that have a greater proportion of women executives.

Second, the Rockefeller Foundation finds that when a company experiences a crisis and the CEO is a woman, eighty percent of news stories cite her as a problem; when the CEO is a man, only thirty-one percent of news stories cite him as a problem.

Of course, it’s possible that the reporting is entirely accurate – maybe women CEOs are responsible for crises more often than men.  But there are, of course, other potential explanations.  For example, biases against women generally – a sense that she doesn’t deserve the position – or perhaps the fact that women generally only achieve CEO status when a company is already experiencing problems.   I’ll also throw out another possibility: Salience.  There’s a fairly well-documented psychological phenomenon whereby people attribute causality to whatever is salient about a situation.  The thing that draws their attention is assumed to be the cause.  That thing might be an entirely neutral characteristic – like having red hair in a group of brunettes, or wearing a striped shirt – or, in the case of CEOs, being a woman in a position typically held by men. Of course, if salience is partially the cause, I'd expect successes also to be disproportionately credited to women - and I have no idea whether that's the case, or whether an interaction of biases could prevent such a phenomenon from surfacing. 

What it comes down to is, we can really only be sure of our perceptions when enough women occupy the CEO position to make them unnoticeable.

Large Firm Practice Areas and Relative Flexibility

Building on Joan’s personal reflection about her time in practice and stemming from a conversation with a student this week, I decided to post (and solicit comments) on the BigLaw practice areas that are most/least conducive to part-time work or work while raising children. While no practice areas in BigLaw are well known for being incredibly flexible, it did appear that certain practice areas were more flexible than others.

In my view, tax appeared to be the most flexible practice group area and M&A (my first practice group area) appeared to be the least flexible. Granted, I never practiced tax law, but as an M&A attorney you solicit comments from many areas within the firm and you get a sense of their schedules.

The advantages of the tax group were a high billing rate (some of the very highest in the firm) and a lot of piecemeal, often not urgent, work. Sure, we “urgently” needed tax comments on most of our deals, and when clients are paying BigLaw rates, they almost always want a prompt response. But in my limited experience, the tax lawyers controlled their timelines more so than any of the other attorneys I worked with. There were few enough excellent tax attorneys that if they said – I will get to that tomorrow or next week – you often did not have much recourse. Perhaps this was just my own perception or simply unique to my firms. That said, I have also seen tax lawyers pull off the “part-time” or "flexible schedule" role better and more often than other areas. Areas like Patent and ERISA may have similar attributes.

In M&A, however, flexible, part-time work was almost impossible to obtain. I’ve witnessed some M&A attorneys try to go part-time, and I have never seen it go very well or last very long. M&A attorneys are the quarterbacks of the deal, so even if you are only assigned to one deal – you have to be involved in all aspects of the deal and have to be on call 24/7 when that deal is moving quickly. And a deal often lasts for months. And there isn’t much piecemeal work that you can just pop in and do without staying intimately involved. After practicing in an M&A/Corporate group for a few years, I moved to a business litigation/corporate governance group. While the litigation/corporate governance group was not necessarily flexible, and you do have to be "all-in" if a case is heading to trial, there seemed to be a lot more room for flexible, part-time research and writing. In M&A there were some opportunities for these sorts of things, but many fewer of them and often they were simply nonbillable client alerts.

Again, maybe this is just my own perception, I’d love to hear thoughts in the comments or via e-mail from readers, as those thoughts could be helpful in advising students. Which practice group area or areas in a large firm offer the most flexibility?

The Business of Being a Law School Dean

Fresh on the heels of reading several Dean search announcements come across email the last several days, the following ABA article on the rise of female Law Deans caught my eye: Cynthia L. Cooper, Women Ascend in Deanships as Law Schools Undergo Dramatic Change, ABA Perspectives Summer 2016.

The list of current deanship openings is available at The Faculty Lounge, as well as a run down of of positions filled last year.

Sorry folks...sick little one on my hands today!

-Anne Tucker

Business Law Faculty Opening - Washington and Lee University School of Law

The Washington and Lee University School of Law seeks to hire a faculty member with research and teaching interests in the fields of corporate law, securities regulation, and regulation of financial industries. Our school has a long history of distinction in these areas, and we are excited to advance our trajectory with this new hire. In addition to this subject area focus, we look for an individual who will embrace and meaningfully contribute to our close-knit, collegial, and intellectually vibrant community.

We warmly invite applications for a tenure-track or tenured position beginning July 1, 2017, and we are particularly focused on lateral candidates. In all cases, candidates for the position must clearly demonstrate a record of excellence in teaching and scholarship. Appointment rank would be commensurate with the candidate’s qualifications and experience.

Washington and Lee University School of Law is an Equal Opportunity employer that adheres to a robust nondiscrimination policy. Our school has a firm commitment to enhancing the diversity of our faculty and, in that regard, we welcome candidates who are members of communities traditionally under-represented in the legal profession and academia.

Kindly direct applications and questions to the Chair of the Faculty Appointments Committee. Applicants should submit (by e-mail) a current cv, a statement of teaching interests / experience, a research agenda, and a letter of interest by email to:

Mark Drumbl
Chair, Faculty Appointments Committee
Washington and Lee University, School of Law
Lewis Hall
Lexington VA 24450 USA
540-458-8531
[email protected]

All inquiries will be treated with the strictest confidence and discretion.

Review of applications will begin immediately and continue until the position is filled.

The In-House Business Law Practice Alternative, A Personal Reflection

The summer before I entered law school, I worked in the legal department of a major international business firm.  I learned a lot.  But I realized by the end of the summer that most of the interesting legal questions and matters that the business firm generated (requiring transactional and litigation work) were farmed out to a veritable stable of law firms that represented the business firm on a regular basis.  I then determined (based on my very unscientific single-firm study) that in-house work was not for me.  That was 1982.

Fast-forward 15-or-so years.  By then, I had been working at a major international law firm for twelve years doing transactional work I enjoyed.  A client asked me to interview for an open in-house position.  I did.  I was ready to focus my attention on one business and had a good relationship with the in-house lawyers at the client firm.  Many friends had successfully moved to in-house jobs and were happy and well-adjusted in them (some after trying several to get the right fit).  I was in line to get the job.  But the client then determined to downsize and eliminated the open position.  

Several years later, I resolved to pursue a different path.   I decided to spend my second career teaching and writing about business law--a road well suited to me in many ways but less traveled by business law colleagues.  This was a harder decision to reach in many ways.  But I knew it was right, and in the end, I jumped in with two feet.  In 2000, The University of Tennessee College of Law gave me that opportunity.  The rest is a history that readers likely already know well.

What of the in-house road not taken?  

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AALS 2017 Annual Meeting: Overview of Socio-Economics Programs

 

The Association of American Law Schools (AALS) Annual Meeting will be held Tuesday, January 3 – Saturday, January 7, 2017, in San Francisco.  Readers of this blog who may be interested in programs associated with the AALS Section on Socio-Economics & the Society of Socio-Economics should click on the following link for the complete relevant schedule: 

Download Socio-Economic AALS Participants + Descriptions 161018

Specifically, I'd like to highlight the following programs:

On Wednesday, Jan. 4:

9:50 - 10:50 AM Concurrent Sessions:

1. The Future of Corporate Governance:
   How Do We Get From Here to Where We Need to Go?
   andre cummings (Indiana Tech)                            Steven Ramirez (Loyola - Chicago)
   Lynne Dallas (San Diego) - Co-Moderator        Janis Sarra (British Columbia)
   Kent Greenfield (Boston College)                        Faith Stevelman (New York)
   Daniel Greenwood (Hofstra)                                 Kellye Testy (Dean, Washington)
   Kristin Johnson (Seton Hall)                                 Cheryl Wade (St. John’s ) Co-Moderator
   Lyman Johnson (Washington and Lee)
2. Socio-Economics and Whistle-Blowers
   William Black (Missouri - KC)                                 Benjamin Edwards (Barry)
   June Carbone (Minnesota) - Moderator             Marcia Narine (St. Thomas)

1:45 - 2:45 PM Concurrent Sessions:

1. What is a Corporation?
Robert Ashford (Syracuse) Moderator                             Stefan Padfield (Akron)
Tamara Belinfanti (New York)                                             Sabeel Rahman (Brooklyn)
Daniel Greenwood (Hofstra)

On Thursday, Jan. 5:

3:30 - 5:15 pm:
Section Programs for New Law Teachers
Principles of Socio-Economics
in Teaching, Scholarship, and Service
Robert Ashford (Syracuse)                                                     Lynne Dallas (San Diego)
William Black (Missouri - Kansas City)                             Michael Malloy (McGeorge)
June Carbone (Minnesota)                                                     Stefan Padfield (Akron)

On Saturday, Jan. 7:

10:30 am - 12:15 pm:
Economics, Poverty, and Inclusive Capitalism
Robert Ashford (Syracuse)                                                     Stefan Padfield (Akron)
Paul Davidson (Founding Editor                                          Delos Putz (San Francisco)
Journal of Post-Keynesian Economics)                             Edward Rubin (Vanderbilt)
Richard Hattwick (Founding Editor,
Journal of Socio-Economics)

Is bigotry really profitable?

The Economist recently published an opinion piece arguing that bigotry has become a lucrative business.  As the magazine puts it:

The country is in an unusually flammable mood. This being America, there are plenty of businesspeople around to monetise the fury—to foment it, manipulate it and spin it into profits. These are the entrepreneurs of outrage and barons of bigotry who have paved the way for Donald Trump’s rise….

Breitbart News, in particular, has excelled in pushing boundaries. … It has provided platforms in its comment section for members of far-right hate groups who rail against immigration and Jews.

The outrage industry has clearly reached a milestone with Donald Trump’s presidential campaign. …He won the hearts of 13m Republican primary voters by recycling conservative media hits such as “build a wall” and “ban all Muslims”. …

There are big bucks in bigotry

Twitter has been a particularly virulent source of online bigotry and abuse.  Buzzfeed recently published an article on Twitter’s 10-year failure to halt hate speech – often targeted at particular users – that stems from a combination of corporate dysfunction, failure of (white, male) corporate leadership to recognize the problem, and business exigencies that emphasized user growth.  In this election season, Twitter has become a famous platform for bigoted trolling, often aimed at journalists who oppose Donald Trump.

But it appears that bigotry as a profit-center only goes so far.  Twitter has been plagued recently by a stagnant user base and correspondingly declining stock price; as a result, it has been seeking an acquirer.  But according to recent news reports, Twitter’s troll problems are driving away potential bidders.

So, it seems there’s at least a built-in limit as to how far bigotry can take you.

Legal Issues for Startups and Small Businesses

Sadly, I am still in the midst of grading business associations and civil procedure midterms so I cannot finish my substantive post on Wells Fargo yet. WF is the gift that keeps on giving from a teaching perspective, though. Yesterday I showed students some of the litigation that has come out of the debacle to illustrate the difference between a direct and derivative suit (and to reinforce some civil procedure principles too).

Last night I took a break from grading to go to a Meetup called Ask a Start Up Lawyer. I hope to teach a 2-credit skills course on legal issues for startups, small businesses, and entrepreneurs next semester and I have found that going to these sessions and listening to actual entrepreneurs ask their questions helpful. Last night's meetup was partcularly enlightening because a number of international entrepreneurs here in Miami for a State Department initiative attended. While in the past some of these sessions have focused on funding options and entity selection, last night's "students" mainly wanted to learn about intellectual property and international protection. Many of them come from countries with no copyright law, for example. Others come from countries where owning shares is a rarity. Although my course will focus on domestic entities, given the South Florida market in which I teach, I may need to add some of these comparative components to my already ambitious draft syllabus covering tax, employment, entity selection, governance, IP, business torts, basic securities regulation, social entrepreneurship, and exit strategies. 

If you have taught a course like this or have any ideas on materials to use, please comment below or send me a message at [email protected]. 

Belmont Law Professor Position

Belmont University College of Law in Nashville, TN has posted a professor opening and the school's areas of interest include business law. My appointment is in Belmont's business school, but I also occasionally teach in the law school, and I could not recommend the school (or the city of Nashville) more highly. I have updated my business law professor openings post here and am happy to add other postings. 

----------------

Belmont University College of Law, located in vibrant Nashville, Tennessee, invites applications from entry- to mid-level candidates for a tenure-track faculty position to begin in 2017-18.  Our primary areas of recruiting focus include criminal law, business law, and health law.

Applicants should have an exemplary academic record and should demonstrate outstanding achievement or potential in scholarship and teaching.  Our goal is to recruit dynamic, bright, and highly motivated individuals who are interested in making significant contributions to our law school and its students.  Practice experience is preferred, and teaching experience is desirable.  For more information about the College of Law, visit our website at www.belmont.edu/law.

Belmont University College of Law is an ABA accredited law school with approximately 300 students in the heart of Nashville, one of the fastest growing and most culturally rich cities in the country.  In 2015, graduates of the College of Law had the highest bar passage rate in Tennessee, and the school continues to produce strong employment outcomes for its students.  For more information about the College of Law, visit our website at www.belmont.edu/law.

Belmont University is a private, coeducational university in a quiet area convenient to downtown Nashville and adjacent to Music Row.  It is the largest Christian-centered university in Tennessee and among the fastest growing in the nation.  Among its student body of over 7,500 are students from nearly every state and more than 25 countries. In addition to seven baccalaureate degrees in over 50 areas of study, Belmont offers master’s degrees in Business Administration, Accountancy, English, Education (including Sports Administration), Music, Nursing and Occupational Therapy, and doctorates in Occupational Therapy, Physical Therapy, Pharmacy, and Law.

The successful candidate will also share the University’s values and support our mission and vision of promoting Christian values by example.  To apply, please contact [email protected].

A comprehensive, coeducational university, Belmont is a student-centered, teaching university focusing on academic excellence.  The university is dedicated to providing students from diverse backgrounds an academically challenging education.  Belmont is an EOE/AA employer under all applicable civil rights laws.  Women and minorities are encouraged to apply.

Guest Post: Controlling Shareholders and the Geography of MFW-Land*

 

*The guest post is contributed by Itai Fiegenbaum who teaches corporate law at Tel Aviv University and Ramat Gan College of Law and Business.  

Today's post continues the discussion started by Anne’s informative post regarding the law of controlling stockholders. Anne astutely notes that the MFW “enhanced ratification” framework was rendered in connection with a going private merger. Although I recognize the intuitive appeal, I wish to call into question the impact of MFW’s holding on other manners of controlling shareholder transactions.

Going private transactions differ from going concern transactions in that their successful completion wipes out the minority float. This distinction accelerates stockholders' divergent incentives and raises the possibility for minority stockholder abuse. An unscrupulous controller might structure the transaction in a manner that captures all unlocked value for later private consumption. Going private transactions allow controlling stockholders to shed the restrictions of the public market, thereby evading future retribution by minority stockholders. Policy considerations accordingly call for superior protection of minority stockholders participating in a going private transaction.

Since MFW establishes a procedure for achieving less intrusive judicial review for going private transactions, it stands to reason that this procedure should apply to all transactions involving a controlling stockholder. Indeed, without addressing the distinction between going private and going concern transactions in this context, a fairly recent Chancery Court decision has explicitly opined that the MFW framework applies to all controlling stockholder transactions (In re Ezcorp Inc. Consulting Agreement Derivative Litig., 2016 WL 301245, at *28 (Del. Ch. Jan. 25, 2016)).

In a forthcoming article at the Delaware Journal of Corporate Law, I argue that the borders of "MFW-Land" are not as clear-cut as they appear. The Delaware Supreme Court decision does not create a universally-applicable safe harbor procedure for all manner of controlling stockholder transactions. Two main arguments form the basis of this contention. 

The dual tenets of doctrinal clarity and cohesion underpin the first argument. A careful reading of the MFW decision fails to detect any mention of competing precedent or a general proclamation regarding its applicability to other types of controlling stockholder transactions. MFW is clearly situated on a path of doctrinal evolution of judicial inspection of going private transactions with controlling stockholders. Canons of judicial interpretation counsel against an indirect reversal or modification of established precedent.

Additionally, the theoretical justifications for the MFW decision hold significantly less weight in the going concern context. MFW's doctrinal shift is grounded on the twin pillars representing the competency of independent directors and non-affiliated stockholders. Whatever the validity of these mechanisms in the freeze out context, the legal and financial scholarship does not validate an extension to going concern transactions. Serious flaws hamper the ability of independent directors and non-affiliated stockholders to pass meaningful judgment on going concern transactions. In the final tally, MFW does not produce an all-encompassing framework for all controlling stockholder transactions.

 

The War on Coal is Also a Technology Issue (Despite the Politics)

Last week, I explained that the "War on Coal" Is Really A Competition Issue, with cheap natural gas prices as a major reason coal production and use have declined. Beyond the impact of natural gas on coal jobs, technology is also an issue. Technology is making mining more efficient, but it is making the market harder for coal miners. Following is a chart I created from Energy Information Administration data that shows coal production and employment statistics for 2013 and 2014.

Coal Production Data

	2014		2013		Percent Change
Coal-Producing	Number of Mines	Production	Number of Mines	Production	Number of Mines	Production
State and Region1
Appalachia Total	804	266,979	877	269,672	-8.3	-1

-- Underground

292

193,434

339

188,090

-13.9

2.8

-- Surface

512

73,545

538

81,582

-4.8

-9.9

Powder River Basin (surface)

16

418,156

16

407,567

-

2.6

Coal-Related Employment Data

Coal-Producing	Underground	Surface	Total	Underground	Surface	Total	Underground	Surface	Total
State and Region
Appalachia Total	32,545	12,141	44,686	35,740	14,115	49,855	-8.9	-14	-10.4
Powder River Basin	-	6,592	6,592	-	6,635	6,635	-	-0.6	-0.6

The data show the coal-production and employment figures for 2013 and 2014.  Surface mining in the Powder River Basin (the highest producing region in the country) increased coal production 2.6% and employment dropped 0.6%, while underground mining production for Appalachia increased 2.8% even though employment dropped 8.9%.  For the United States, overall coal production increased 1.5% between 2013 and 2014, while the number of employees dropped 6.8%. Thus, even as coal production increased modestly, the number of employees holding those jobs declined significantly. 

This doesn't deter politicians from making other claims, though.  As I noted last week, the presidential race has included rhetoric claiming anti-coal regulations are what really hurt coal jobs. And it's not just at the presidential level.  Coal states often feature politicians promising to bring back coal jobs. In my home state of West Virginia, for example, both candidates for governor are making such a promise.  

As an aside, in the Ohio U.S. Senate race between Rob Portman and Ted Strickland, Sen. Portman has made use of this similar line of attack, claiming that former Ohio and governor and U.S. Representative Strickland "turned his back" on Ohio by not supporting coal jobs. The advertisement, available here, features workers from (at least for a West Virginian) an interesting choice of mine: Rosebud Mining.  (A perceptive former student, Ken Bannon, alerted me to the ad or I would have missed it.)  

People outside of West Virginia may not recall the chemical spill in January 2014 that contaminated the Elk River and left 300,000 West Virginians without drinking water.  As I noted in a post back then, the company that owned the chemical site was Freedom Industries, which listed as its sole owner, Chemstream Holdings, a company owned by J. Clifford Forrest.  Forrest also owns the Pennsylvania company (that also has Ohio operations) Rosebud Mining, which was located at the same address Chemstream Holdings listed for its headquarters. It appears that Portman has a solid lead in the race, and if I were part of the campaign, I'd probably not feature a mining company that had been linked (through an executive) to such a major recent environmental disaster.  

Despite the data (and the economic realities), claims of a war on coal continue. Even where there is some truth to the idea -- recent regulations are not especially coal friendly -- there are simply too many hurdles to overcome for coal employment numbers to go back to prior levels.  One can conceivably win a war on regulations, but technology and the marketplace are far less forgiving. It's time we embrace that reality.  

 

Do Partners Have Actual Authority as a Matter of Status?

    Does a partner have actual authority, simply as a matter of his "partner" status, to bind the partnership to an ordinary business transaction?  On the one hand, RUPA § 401(j) states that "[a] difference arising as to a matter in the ordinary course of business of a partnership may be decided by a majority of the partners."  That suggests that a partner is not authorized to act absent a majority vote.  On the other hand, RUPA § 301(1) states that "[e]ach partner is an agent of the partnership," and comment 2 states that "[t]he effect of Section 301(1) is to characterize a partner as a general managerial agent having both actual and apparent authority co-extensive in scope with the firm's ordinary business" (emphasis added)).

    The comment to § 301 has always struck me as an odd place for discussing actual authority.  Actual authority is based on a partner's relationship to the other partners and the partnership.  Section 301, however, is in the Article dealing with a partner's relationship to non-partner outsiders.  Section 301(1) in particular is about apparent authority.  What supports the assertion in the comment, therefore, that a partner has ACTUAL authority co-extensive in scope with the firm's ordinary business?

 

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Research and Writing Question of the Day . . . .

Assume a state trial court issues an opinion in a particular case and the case is not appealed.  Should a legal scholar using the opinion to support or refute a key point (in the text of a written work) characterize the weight or status of the opinion (e.g., noting that it is a trial court opinion and that is has not been appealed)?  Justify your answer.

If the trial court at issue is the Delaware Chancery Court and the opinion addresses matters under the Delaware General Corporation Law, does that alter your answer?  Why?  Why not?

I am having fun considering these issues today in connection with my work on a symposium paper.  I have not yet decided how to handle the specific matter that raises the questions.  Accordingly, it seemed like a good idea at this juncture to share my questions and seek collaboration in answering them . . . .

Colesanti & Eng on Federal Arbitration Act Vacatur in the Second Circuit

The following post comes to us from Prof. J. Scott Colesanti and a former student of his, Karen Eng. Scott is a Professor of Legal Writing at the Maurice A. Deane School of Law at Hofstra University, a former co-editor of this blog, and author of "Legal Writing, All Business."

F.A.A. VACATUR IN THE SECOND CIRCUIT: NOW THAT TOM BRADY HAS SAT, WHERE DO WE STAND?

By J. Scott Colesanti and Karen Eng (October 12, 2016)

1. Introduction

Late in the summer, New England Patriots quarterback Tom Brady announced that he would not further appeal the discipline imposed against him by the National Football League ("NFL"). That decision ended an 18-month ordeal which highlighted, among other things, the unpredictability of sports league sanctions, in general, and the finality of penalties under NFL Collective Bargaining Agreement ("CBA") Article 46, in particular. This article examines the resulting state of the law in the Second Circuit regarding review of arbitrations under Sections 10(a)(2) and (3) of the Federal Arbitration Act ("F.A.A."), which provided – in part - the means for Brady's appeal.

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“I would have written a shorter letter, but I did not have the time.”

That Pascal quote encapsulates why I strongly disagree with Noah Feldman’s Bloomberg column on the new word limits for federal appellate briefs. 

The new rules reduce the number of words in opening briefs by 1,000, and in reply briefs by 500.  Feldman argues that the reduction will cut down billable hours.  He’s wrong; it will do the opposite.

When I was in practice, I spent nearly as much time cutting words from briefs as I did doing the initial draft.  Every first draft clocked in at more than the then-limit of 14,000 words; in some cases, I was closer to 21,000 words my first time through.  Only after substantial editing – going over each sentence again and again, and (naturally) taking serious liberties with Bluebook format – was I able to bring briefs within the limit.  (I never went this far, though.)

(Note to Lexis:  You are at a disadvantage relative to Westlaw because your citation format for unpublished cases has more words. I did initial research on Lexis but then translated all citations to Westlaw to bring my word count down.  Rookie mistake, guys.)

For what it’s worth, I think the new limits are a travesty.  Judges often berate attorneys for prolix writing – particularly when they’re drafting complaints, while trying to meet increasingly byzantine pleading standards – and it’s unfair.  Yes, there are extreme cases of bad writing and bad lawyering, but at the end of the day, if lawyers had the talent of Hemingway, they wouldn’t be lawyers, and there’s a certain limit to what can be reasonably demanded.  Judges assume that if word limits are reduced, lawyers will cut the excess verbiage – usually unnecessarily florid language, hyperbole, etc – but there is just no assurance of that; lawyers often ex ante misjudge what is hyperbolic and what is substantive.   The wasted pages are a small price (for clerks) to pay in order to make sure that attorneys can get their arguments heard.  (Especially in light of evidence that word reductions harm appellants more than appellees, which I assume is due to the fact that the appellee has the district court opinion to function as a supplementary brief on its behalf).

Frankly, if there’s a pressing need to reduce judges’ reading load, I recommend jettisoning the reply brief.   Though certainly many plaintiffs make good use of replies, in my experience both as a clerk and in practice, the vast majority of replies did nothing more than repeat arguments in the opening brief, without truly responding to the arguments made in the response brief.  So if something has to be cut, that's what has my vote.

DiMatteo on Strategic Contracting

As a professor who moved from a law school to a business school, I remain amazed how little the two legal scholarly worlds overlap. I do, however, think the overlap is increasing somewhat, as more professors move between the two types of schools and the conferences and journals becoming a bit less segregated. That said, I imagine that many of our law professor readers may have missed legal studies professor Larry DiMatteo's (University of Florida, Warrington College of Business) 2010 American Business Law Journal article on strategic contracting. I had not read it until I moved to a business school and met Larry at a legal studies conference. Larry's article is proving useful in my current work, so I thought I would share it here with our readers. Abstract reproduced below:

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This paper uses sources taken from the legal literature, as well as literature from strategy and human resource management. It explores Professor Gilson’s noted remark in the Yale Law Journal that “business lawyers serve as transaction cost engineers and this function has the potential for creating value.” This exploration focuses on the strategic use of contract law in gaining a competitive advantage and to create value. It begins by differentiating two frames of the contract paradigm. One is the internal frame in which contract law’s inherent flexibility allows for its use as a source of competitive advantage. The second frame is external since it focuses on the use of the contract paradigm in non-contractual contexts.

The paper examines the use of contract to create value and uses for examples, the commodification of information, licensing and IT outsourcing, and franchising. From there, the paper explores the use of contracts to sustain a competitive advantage (strategic contracting) and to create shared competitive advantages (strategic collaboration). It uses the creation and use of patent pools to illustrate both strategic uses of contract law. The next part focuses on the use of contracts to mitigate uncertainty in business transactions. It explores the strategic use of existing contract doctrines, the use contracts to insure performance and to deter opportunistic behavior, and the use of contracts to develop a preventive legal strategy. This is followed by the examination of contracting for innovation and contracts’ role in creating private governance structures, such as strategic joint venturing.

The final parts explore the use of contract as metaphor in nexus of contact theory in corporate law, psychological contract theory in employment law, and the potential abuse of the freedom of contract paradigm in limited liability company law. The paper then examines strategic responses to regulation by asking whether strategic avoidance or non-compliance to regulations has a place in a company’s legal strategy? The paper concludes by asking how does strategic contracting impact contract law? It answers the question by arguing that contract law change is inevitable due to a feedback loop.

Wells Fargo as a Teaching Tool on Corporate Governance

Today I used Wells Fargo as a teaching tool in Business Associations. Using this video from the end of September, I discussed the role of the independent directors, the New York Stock Exchange Listing Standards, the importance of the controversy over separate chair and CEO, 8Ks, and other governance principles. This video discussing ex-CEO Stumpf’s “retirement” allowed me to discuss the importance of succession planning, reputational issues, clawbacks and accountability, and potential SEC and DOJ investigations. This video lends itself nicely to a discussion of executive compensation. Finally, this video provides a preview for our discussion next week on whistleblowers, compliance, and the board’s Caremark duties.

Regular readers of this blog know that in my prior life I served as a deputy general counsel and compliance officer for a Fortune 500 Company. Next week when I am out from under all of the midterms I am grading, I will post a more substantive post on the Wells Fargo debacle. I have a lot to say and I imagine that there will be more fodder to come in the next few weeks. In the meantime, check out this related post by co-blogger Anne Tucker.

University of Nebraska College of Law - Chair in International Trade and Finance

Job posting from an e-mail I recently received:

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The UNIVERSITY OF NEBRASKA COLLEGE OF LAW invites applications for

lateral candidates for a tenured faculty position to hold the Clayton K. Yeutter Chair at

the College of Law. This chaired faculty position will be one of four faculty members to

form the core of the newly-formed, interdisciplinary Clayton K. Yeutter Institute for

International Trade and Finance. The Institute also will include the Duane Acklie Chair at

the College of Business Associations, the Michael Yanney Chair at the College of

Agricultural Sciences, and the Haggart/Works Professorship for International Trade at the

College of Law. The Yeutter Chair, along with the other three professors, will be

expected to support the work and objectives and ensure the success of the Yeutter

Institute. The Yeutter Chair will teach courses at the College of Law, including

International Finance. Other courses may include Corporate Finance and/or other related

classes pertaining to issues arising in international business and finance. More on the

Yeutter Institute can be found at http://news.unl.edu/newsrooms/today/article/giftsestablish-

endowed-chairs-for-yeutter-institute/ .

 

Minimum Required Qualifications: J.D Degree or Equivalent; Superior Academic

Record; Outstanding Record of Scholarship in International Finance and/or other areas

related to international business; and Receipt of Tenure at an Accredited Law School.

General information about the Law College is available at http://law.unl.edu/. Please fill

out the University application, which can be found at

https://employment.unl.edu/postings/51633, and upload a CV, a cover letter, and a list of

references. The University of Nebraska-Lincoln is committed to a pluralistic campus

community through affirmative action, equal opportunity, work-life balance, and dual

careers. See http://www.unl.edu/equity/notice-nondiscrimination. Review of applications

will begin on November 5, 2016 and continue until the position is filled. If you have

questions, please contact Associate Dean Eric Berger, Chair, Faculty Appointments

Committee, University of Nebraska College of Law, Lincoln, NE 68583-0902, or send an

email to [email protected].