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Thursday, November 30, 2017

ICYMI: #corpgov Midweek Roundup (Nov. 30, 2017)

By Stefan J. Padfield

November 30, 2017 in Stefan J. Padfield | Permalink | Comments (0)

Wednesday, November 29, 2017

Tenure-Track Legal Studies Position at Oakland University (Michigan)

By Haskell Murray

From an e-mail I received today. Tenure track legal studies professor position at Oakland University (Michigan). Details below the page break. 

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November 29, 2017 in Business School, Haskell Murray, Jobs | Permalink | Comments (0)

Call for Papers. Deadline 12/15

By Marcia Narine Weldon

I’m proud to be part of this project and to have written a chapter on corporate social responsibility in Latin America that stemmed from my time in Guatemala two years ago. 

 

2018 SNX (South-North Exchange Conference)

Antigua, Guatemala

May 18-19, 2018

 

From Extraction to Emancipation: Development Reimagined 

 

Call for Papers

 

Sponsored by:

Latina & Latino Critical Legal Theory, Inc. (LatCrit), the UC Davis Journal of International Law and Policy, and _________ [other sponsorships are under consideration, and please suggest your own school or program]

 

In July 2015, a delegation of law professors and lawyers from the United States and Canada traveled to Guatemala to study sustainable development. That study inspired the group to produce an edited volume, to be published in early 2018 by the ABA Section of International Law, that considers Guatemala as a case study to examine broad global themes arising from development practices in emerging economies around the world. The 2018 SNX conference provides an opportunity to continue the discussions and further engage and involve the local victims of unfettered globalization. 

 

This project offers important lessons to policy makers, corporate investors, and affected individuals and communities on strategies to improve distributional justice and respect for the rule of law, including human rights and environmental norms and aspirations. It also connects to such global themes as climate change, labor regimes in the context of trade, and forced migration, all of which have transborder implications and across-border commonalities. 

 

The 2018 SNX conference posits extraction as a metaphor for looking at exploitation from a wider lens. Although the conference is grounded in the Guatemalan experience, we invite speakers from a broader global context whose work is informed by similar experiences. We seek  papers that look at exploitation and resistence from a variety of perspectives and experiences. Particularly, we invite papers across disciplinary boundaries and from all constituencies on the following topics, as well as other topics you might suggest of relevance to the Global South:

 

• Trade/Economies
• Migration—Economic and Refugee
• Human Rights
• Natural Resources and the Environment
• Labor/Precarity
• Globalization
• Women’s Rights
• Violence and Gender Violence
• Children’s Rights
• Poverty/Class
• Corruption/Constitutional Crisis
• Corporate Social Responsibility
• Indigenous Peoples

 

The conference’s proceedings will be held in Spanish and English (with simultaneous translation). 

 

To be considered for participation, please send a brief abstract (not exceeding 500- 600 words) of your presentation and your contact info by December 15, 2017 to: [email protected] and to:[email protected]. Decisions will be announced in December 2017. The UC Davis Journal of International Law and Policy will publish a symposium volume to include selected papers from the conference. Please indicate in your abstract if you are interested in this publication opportunity. 

 

Conference Information: The 2018 SNX will be held at the Posada de Belen facility in Antigua, Guatemala. The organizing committee is currently negotiating a conference rate with a hotel(s) close to our conference venue.

 

Conference Registration fees, to include some meals and in-country transportation, are subject to change, but estimated for now as:

• Participants from the Global North $225
• Student Participants from the Global North $100
• Participants from the Global South $75
• Student Participants from the Global South $25

 

If you have any questions, please contact the program coordinators: Raquel Aldana (UC Davis), Steven Bender(Seattle University), Anibal Rosario Lebron (Howard) [email protected], Willmai Rivera-Perez (Southern) [email protected], Yanira Reyes (InterAmerican) [email protected], or Sheila Vélez Martínez (Pitt) [email protected].

 

November 29, 2017 | Permalink | Comments (0)

Tuesday, November 28, 2017

LLCs Are Still Not Corporations, And At Least One Judge (In Dissent) Knows It

By Joshua Fershee

A recent Pennsylvania opinion makes all sorts of mistakes with regard to a single-member limited liability company (LLC), but in dissent, at least some of the key issues are correctly framed. In an unreported opinion, the court considered whether a company (WIT Strategy) that required an individual to form an LLC as a predicate to payment was an employee eligible for unemployment compensation. WIT Strategy v. Unemployment Compensation Board of Review, 2017 WL 5661148, at *1 (Pa. Cmwlth. 2017).  The majority explained the test for whether the worker was an employee as follows:

The burden to overcome the ‘strong presumption’ that a worker is an employee rests with the employer. To prevail, an employer must prove: (i) the worker performed his job free from the employer's control and direction, and (ii) the worker, operating as an independent tradesman, professional or businessman, did or could perform the work for others, not just the employer.

Id. at *3. (quoting Quality Care Options v. Unemployment Comp. Bd. of Review, 57 A.3d 655, 659-60 (Pa. Cmwlth. 2012) (citations omitted; emphasis added)).

As to the first prong, the Unemployment Compensation Board of Review (UCBR) determined, and the court confirmed, that WIT Strategy had retained control over the claimant consistent with the type of control one exerts over an employee.  I might disagree with the assessment, but the test is correct, and the analysis reasonable, if not clearly correct.  Assessment of the second prong, though, is flawed.  

The court quotes the UCBR's conclusions:

The [UCBR] does not find that [C]laimant was operating a trade or business, customarily or otherwise. The only reason [C]laimant formed the LLC was because WIT required it, claiming that it needed to pay [C]laimant through the LLC. WIT also claimed that doing so was a ‘common agency model’ for its kind of agency. The [UCBR] does not credit WIT's testimony. Rather, although [C]laimant did perform two projects for other entities, each for under $600 [.00], there is no evidence that [C]laimant solicited business through her LLC since its inception in 2013 through her termination in 2015. [C]laimant worked for WIT 40 hours per week and did not have employees of the LLC to solicit business for her. Further, although WIT claimed that all its team members were required to have additional clients through their LLCs to share with it, WIT did not prove that [C]laimant had such clients. As [C]laimant did not operate a trade or business, but rather the LLC was formed as a type of shell corporation, the fact that [C]laimant was the single-member owner is not dispositive. [C]laimant was not customarily engaged in a trade, occupation, profession or business.

Id. at *4 (emphasis and modification in original).
 
Enter President Judge Mary Hannah Leavitt.  In dissent, Judge Leavitt writes what should be the majority opinion.  First, she notes that "quality control" is not the same thing as control by an employer.  I think her analysis of the control prong is the better one, but again, reasonable minds can assess these facts differently. As the second prong, Judge Leavitt also quote the UCBR, then proceeds to assess it correctly. She explains: 
The legal form by which Claimant provided public relations and communications services to WIT-provided clients and to her own clients is irrelevant. A sole proprietor may establish a single-member LLC for many reasons, the obvious being a desire to limit individual liability. It is not known what the Board meant by a “shell corporation,” and there is no evidence on this point. A limited liability company is not even a corporation. The Pennsylvania Associations Code provides as follows:
One or more persons may act as organizers to form a limited liability company ....
15 Pa. C.S. § 8821. A single-member LLC, such as Jilletante Creative, is a perfectly lawful and valid alternative to a sole proprietorship.
Claimant continued to operate as an LLC even after her separation from WIT. The record includes Claimant's two-page detailed proposal to a potential client on “Jilletante Creative, LLC” letterhead, signed as “Jilletante Creative, LLC; By: Jillian Ivey, sole member.” R.R. 10a-11a. Jilletante Creative is not a sham or “shell” corporation, and characterizing it as such is a red herring in the analysis of whether Claimant worked for WIT clients as an employee of WIT or as an independent contractor.
Id. at *12 (Leavitt, Pres. J, dissenting). Yes!   "It is not known what the Board meant by a 'shell corporation,' and there is no evidence on this point. A limited liability company is not even a corporation." This is exactly right. Further, there is nothing wrong with an LLC serving one client. Whether its because it is a requirements contract (e.g., I will do as much work for you as you require) or simply that the LLC's owner is comfortable with the revenue coming from a single client, having only one client does not make you an employee.  
 
As a side note, as someone who has worked both for a law firm and a public relations agency, it is not at all uncommon for people in each profession to work as independent contractors.  A lawyer can be a solo and work for one client, or that lawyer can be hired an brought into the firm or in-house.  Same with PR professionals.  They may work as employees, but it is not uncommon to work as an independent contractor, in part to maintain the flexibility of work location, hours, and manner in which the work is completed.  
 
In the unemployment compensation context, what constitutes an employee can often be different than what one might deem an employee in the agency context. And that's okay. Sometimes we craft different definitions for different purposes or policy goals.  But disregarding an entity as a "shell" merely because there is only one member is wrong because the law says it is wrong.  If a state wants to outlaw single-member entities, they can (they'd be wrong to do so, but that's a different discussion).  But as long as the law allows it, the courts should respect it.  
 
Furthermore, when a person creates an LLC, they are actively engaging in the process of defining their relationship with others. I can come up with scenarios where maybe the existence of an LLC should be disregarded in the employment analysis, but more often than not the use of an LLC in the relationship should be compelling evidence of the type of relationship the parties have.  
 
Although this opinion still gets it wrong, there is hope. The dissent has set forth a proper path, and I can only hope others will follow. 
 
 

November 28, 2017 in Case Law, Corporations, Employment Law, Joshua P. Fershee, LLCs | Permalink | Comments (3)

Monday, November 27, 2017

Immigrants Need Legal Representation, But . . . .

By joanheminway

Friend-of-the-BLPB Ben Edwards penned a nifty op ed that was published yesterday (Sunday, November 26) in The Wall Street Journal.  (Sorry.  It's behind a firewall, available only to subscribers.)  It covers a subject near and dear to my heart and does so in a novel way.  Specifically, in the WSJ piece (entitled "Immigrants Need Better Protection—From Their Lawyers") Ben deftly describes the extremely low quality representation that immigrants receive in the United States, notes the market's inability to self-correct to remedy the situation, shares his view that "the best solution--a right to immigration counsel similar to the right to a criminal defense lawyer--" is unlikely to attract and sustain the necessary legislative support, and proposes a novel second-best solution to the problem.

In a forthcoming article in the Washington and Lee Law Review, I argue that requiring disclosure of immigration lawyers’ track records could improve the market for representation. It almost certainly would drive some of the worst out of business. Who wouldn’t shop around after discovering a lawyer ranked in the bottom 10% by client outcomes? Although no lawyer should be expected to win them all, immigrants should get nervous if their lawyer always loses.

Ben uses the concept of a prospectus as his template reference point for the disclosure concept he describes in the article--unsurprising, perhaps, given his professional practice experience as a business litigator and the fact that his academic endeavors leverage that practice experience.  The title of the article is: The Professional Prospectus: A Call for Effective Professional Disclosure.  

I became aware of the many problems that immigrants have in securing adequate legal representation back in 1990.  Susan Akram (now Director of the International Human Rights Clinic at the Boston University School of Law, but then the Executive Director of the Political Asylum/Immigration Representation (PAIR) Project in Boston) came to the Skadden, Arps office in Boston, where I then was an Associate, and informed us about the particular difficulties in securing representation for asylees, whose chances of success in proving and prevailing in their asylum applications was almost nil without representation and relatively high with pro bono representation.  I left the room knowing I needed to help.  

The situation then described continues to exist today.  Ben notes in the WSJ op ed that

the best immigration lawyers may struggle to make a living because their corner-cutting competitors depress the price of services. That’s part of why many talented practitioners choose to abandon immigration law. This has led to a shortage of representation. One 2015 study found that only 37% of people in removal proceedings have lawyers.

He also relates that "[p]ro bono lawyers—who handle less than 10% of cases—win about 90% of the asylum claims they file."

Over the years, working with the PAIR Project, I was proud to represent or assist in representing refugees from Somalia, Zaire (now the Democratic Republic of the Congo), Haiti, Burma (now Myanmar), and Ethiopia.  My Somali client married a U.S. citizen, became a permanent legal resident, and later became a U.S. citizen.  The daughter of the Zairean couple I worked with--who was separated from her parents in the journey to the U.S. but eventually reunited with them here with my assistance (and Senator Ted Kennedy's help) is a nurse.  There are other stories, of course, as well.  Although I have lost track of many of the clients and their families over time, the pride in helping them has not diminished.

Ben's professional prospectus idea has merit in the immigration lawyering context.  In my view, it is unlikely, alone, to completely solve the problem, and it may have trouble getting traction in the communities that would be responsible for its promotion and implementation.  But it is a step in the right direction in ensuring that immigrants get meaningful representation in navigating our complex legal waters, which currently are populated by too many sharks.

November 27, 2017 in Human Rights, Joan Heminway, Lawyering | Permalink | Comments (6)

Sunday, November 26, 2017

ICYMI: #corpgov Weekend Roundup (Nov. 26, 2017)

By Stefan J. Padfield

November 26, 2017 in Stefan J. Padfield | Permalink | Comments (0)

Saturday, November 25, 2017

Fourth Circuit Breaks New Ground in Raising the PSLRA Pleading Standard

By Ann Lipton

The PSLRA requires that complaints alleging Section 10(b) violations plead facts that raise a “strong inference” that the defendant acted with intent or recklessness.  15 U.S.C. § 78u-4.  A “strong inference” is one that, taking into account “plausible opposing inferences,” is “at least as compelling as any opposing inference one could draw from the facts alleged.”  Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007).

It has long been an axiom of PSLRA pleading that a strong inference may be raised by alleging that the defendant knew his or her statements were false, or knew facts that contradicted his or her public statements.  See, e.g., Novak v. Kasaks, 216 F.3d 300 (2d Cir. 2000); Miss. Pub. Emples. Ret. Sys. v. Boston Sci. Corp., 523 F.3d 75 (1st Cir.2008); Fla. State Bd. of Admin. v. Green Tree Fin. Corp., 270 F.3d 645, 665 (8th Cir.2001); Zucco Partners, LLC v. Digimarc Corp., 552 F.3d 981 (9th Cir. 2009); Pugh v. Tribune Co., 521 F.3d 686 (7th Cir. 2008).  Indeed, allegations of actual knowledge of falsity are sufficient to plead scienter even in the context of forward-looking statements, which are subject to their own special heightened pleading requirements.  See 15 U.S.C. §78u-5.

In Maguire Fin. LP v. PowerSecure Int'l Inc., 4th Cir., No. 16-2163, the Fourth Circuit concluded that even when a plaintiff pleads that a CEO had knowledge of the falsity of the statements he issued on an analyst conference call, that is not sufficient to allege scienter under the PSLRA.

The basic claim was that the CEO told analysts that the company was “blessed to announce securing a $49 million three-year contract renewal, both the renewal and expansion with one of the largest investor [owned] utilities in the country,” when, in fact, the referenced contract was a new contract with an existing client, rather than a renewal.  As it turned out, the expenses on this new contract caused the corporation to experience losses and, eventually, a dramatic stock price drop.

The Fourth Circuit accepted that the CEO knew the nature of the new contract when he described it to market analysts, but refused to accept the inference that the mischaracterization was intentional or reckless.  Instead, the court argued that the CEO had no reason to believe the new contract would be unprofitable – and thus no reason to want to deceive the market about it – and though ordinary persons may have read the CEO’s statement to mean that a contract had been renewed, the CEO might not have realized that this was the common interpretation.  The court reasoned that if the CEO had, in fact, intended to deceive investors about whether the contract was new, he would have elaborated on his statement, and offered additional false claims about it.  The fact that he had not done so, the court concluded, contributed to an inference that he had not intended to deceive in the first place.  The court ultimately opined, “Appellant alleges facts that permit an inference that Hinton knew his statement was false, and then asks us to infer from that inference that Hinton acted with scienter. We decline to do so because stacking inference upon inference in this manner violates the statute’s mandate that the strong inference of scienter be supported by facts, not other inferences.”

Look, I agree that on these facts, it’s very possible that the CEO misspoke.  And I personally would like to know whether analysts reacting to the original conference call made their misunderstanding clear (so that the company could not claim to be unaware that the market had misunderstood the CEO’s representations).  But this is a complaint.  The issue is whether the plaintiffs have identified sufficient facts to get to discovery.  The Fourth Circuit seems to have lost sight of this basic function of the pleading requirements, and instead interpreted its mandate to require dismissal so long as there is any nonculpable interpretation of the facts.  The Circuit’s eagerness to draw exculpatory inferences from the CEO’s failure to tell an even greater lie bears a resemblance to pre-Tellabs caselaw reasoning that if an executive fails to dump his stock when making allegedly false statements – thus coupling a deceptive statement with a violation of insider trading prohibitions – the executive must not have acted with scienter.  Such logic was, of course, rejected by the Supreme Court in Tellabs: not every instance of fraud is part of a carefully-calibrated scheme.

Meanwhile, the Court ignored the very damning fact that the company’s highest officer issued a knowing falsehood and allowed it to stand uncorrected for several months.  The Circuit’s extraordinarily technical reason for rejecting the plaintiffs’ inferences – that the plaintiffs asked for an inference based on other inferences, rather than on facts – not only introduces an entirely unnecessary level of technicality into PSLRA pleading, but also contradicts the basic manner in which humans understand the world and attribute motivations and intentionality to other humans.  When someone says things he knows are untrue, we infer that there was deceptive intent.  Maybe that’s not the case, but the burden’s now on the speaker, not the listener.  And if plaintiffs are not entitled to the basic inference that the defendant knew what his own words meant, the pleading standard serves no legitimate screening function; it’s simply an arbitrary barrier to the filing of securities claims.

If nothing else, the case highlights the essential folly at the core of the PSLRA heightened pleading requirements.  Whether a complaint raises a “strong inference” of scienter depends entirely on the court’s background assumptions about plausible behavior from corporate officers.  To some, it is plausible that a CEO could make such an innocent misstatement and fail to correct it for nearly a year; but surely one could plausibly believe that CEOs carefully prepare before they speak to analysts, and do not often make these kinds of mistakes unintentionally.  One could plausibly believe that if the misstatement was innocently made, then the company would have corrected it shortly thereafter, and the fact that it did not do so suggests the statement was not so innocent after all.  It might also be plausible that CEOs calibrate just how much they’re willing to lie to analysts, and are willing to be somewhat vague on certain matters in hopes of leaving a false impression, without being willing to go so far as to outright invent new facts to mislead the market.  What seems plausible is entirely a function of one’s understanding of, and experience with, the world – and that’s quintessentially the function of the jury. 

November 25, 2017 in Ann Lipton | Permalink | Comments (0)

Friday, November 24, 2017

Thanksgiving 2017: In Memory of Septima Holmes Porcher Murray

By Haskell Murray

2014-06-19_222029521_F7EB2_iOS

About five months ago, on June 18, 2017, my paternal grandmother, Septima "Buddy" Holmes Porcher Murray, passed away at age 91. At the time, she was my last living grandparent.

Relevant to this blog, she also provided me a place to live during my second and third years of law school, as she transitioned, slowly on my account, from Atlanta to Charleston. 

Buddy was one of the most positive and generous people I knew. On this Thanksgiving, I am especially thankful for the time I had with Buddy, and that she was able to meet and interact with her great-grandchildren a number of times.

While I am still processing her death, I have decided to post something I wrote shortly after hearing the news and also read at her funeral. These thoughts on Buddy and her life are posted below the break. Buddy's formal obituary is posted here. 

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November 24, 2017 in Haskell Murray, Law School | Permalink | Comments (2)

Thursday, November 23, 2017

ICYMI: #corpgov Midweek Roundup (Nov. 23, 2017)

By Stefan J. Padfield

November 23, 2017 in Stefan J. Padfield | Permalink | Comments (0)

Wednesday, November 22, 2017

Are American Businesses Wasting Time and Money on Sexual Harsssment Training?

By Marcia Narine Weldon

Greetings from Barcelona. Perhaps it’s the time diference and it’s still early in the U.S. but for the first time in days I haven’t been overwhelmed with text messages from news outlets about another senator, congressman, policial candidate, actor, talk show host, porn star, or other public figure being accused of sexual harassment by multiple women.  

I spent twenty years in the employment law field investigating and defending harassment claims both as outside counsel and in house. None of what I’m hearing now surprises me. I am surprised by some of the jaw dropping settlement amounts for some single-plaintiff cases.

I agree with the sentiments in this recent NPR story. Sexual harassment training often fails because employees believe it’s a check the box exercise, especially, I would imagine in states like California where it’s mandatory for certain employers every two years. More important, it fails because until now, very few men in power paid any consequences for their actions. Dov Charney of American Apparel was a notable exception of a CEO who cost the company so much in settlements that the board had to oust him. 

When I conducted training, I told employees that if they didn’t want someone saying or doing  the same thing to their wife, sister, or daughter as they were about to say or do in the workplace then they should know it’s wrong. That common sense lecture took about 5 minutes in training that usually lasted a few hours (covering other kinds of harassment and discrimination as well).

Unconscionable behavior will persist, however, as long as companies turn a blind eye to it. In the current environment, that will be nearly impossible. Companies are now terminating contracts  with accused public figures even before they have had a chance to do a thorough investigation and even when the accused denies the wrongdoing. 

Companies  lose talented women or potential recruits because of perceptions of a culture that ignores harassment and discrimination. They pay astronomical settlements because they choose to retain superstars who repeatedly violated company policy and/or the law. Boards and shareholders must therefore pay closer  attention to what has always been but is now becoming a steep financial, and more important, high human capital cost. 

November 22, 2017 | Permalink | Comments (0)

Tuesday, November 21, 2017

Hardesty on Law Students as Future Leaders: Using Neutral Facilitation Techniques to Teach Leadership Skills

By Joshua Fershee

I have had the pleasure to work with a diverse and impressive group of people on the law faculties upon which I have had the privilege to serve.  One of those people is  David C. Hardesty, Jr., President Emeritus of West Virginia University and Professor of Law at the WVU College of Law. President Hardesty holds degrees from West Virginia University, Oxford University (which he attended as a Rhodes Scholar), and Harvard Law School, but more impressive is the time he spends mentoring students and faculty.  He remains committed to the college, university, and state, and we are fortunate he continues to share his time with us.  

President Hardesty teaches a course on leadership, called Lawyers as Leaders, which would be highly relevant at any law school, but it especially important at a school like ours where we are the only law school in the state.  In addition to serving clients big and small, our students consistently go on to hold public office, advise legislators and regulators, and run large companies in the state.  President Hardesty recently wrote an article for the West Virginia Law Review Online that explains part of how he helps prepares lawyers to be leaders.  The article is Law Students as Future Leaders: Using Neutral Facilitation Techniques to Teach Leadership Skills, 120 W. Va. L. Rev. Online 1 (2017).  The introduction explains: 

Lawyers lead in America. They always have. They probably always will. This Article suggests the reasons why. It also argues that if lawyers are destined to lead, then law schools should help law students develop an understanding of leadership theory and foster leadership skill development. The Article describes how a course called “Lawyers as Leaders” is taught at the West Virginia University College of Law, employing neutral facilitation techniques, as well as lectures, group discussions, journaling, and simulation activities. It then describes a powerful pedagogical tool that can be used to develop future leaders: “student-centered neutral facilitation.” It explains why neutral student-centered facilitation is an effective method for teaching leadership skills to law students. The Article begins and ends with two “facilitation stories,” highlighting the use of facilitation by experienced lawyers and law students alike. The first story is about the use of facilitation to help clients achieve their goals. The second is about a student in the midst of learning how to facilitate a discussion.

As we continue to evolve how we think about educating lawyers, and what we hope to accomplish, courses that discuss options and expectation in context can play a significant role in preparing our students.  Hardesty explains:  

Research has found that the student-centered discussion process enriches student learning. In particular, the incorporation of the student-centered discussion process into the classroom “has the potential of enhancing the level of student learning about the course content and about the way they and others think about difficult issues.” This finding makes sense given that students tend to remember course content based on their level of involvement it.  Faculty members have reported that content coverage in their courses has not declined in student-centered classrooms; rather, they have found that their students experience a deeper understanding of the course’s fundamental concepts. One explanation for this deeper level of understanding is that students discover for themselves the essential concepts that would normally be presented through course readings or lecture material. In addition, “[f]aculty report that they have seen students who have not been ‘stars’ in previous classes suddenly ‘blossom’” in the student-centered classroom environment. Because students feel safe and comfortable working with their teammates, student-centered discussions can bring out the potential that some students have but may not otherwise reveal in more traditional classroom environments. (footnotes omitted)

As the semester draws to a close, I thought this one was worth a look as you gear up for next semester's courses.  It helped me think about some new ideas, anyway. Happy Thanksgiving! 

 
 
 

November 21, 2017 in Joshua P. Fershee, Law School, Lawyering, Teaching | Permalink | Comments (3)

Monday, November 20, 2017

Resales of Crowdfunded Equity: A Market to Watch

By joanheminway

The Oklahoma Law Review recently published an article I wrote for a symposium the law review sponsored last year at The University of Oklahoma College of Law.  The symposium, “Confronting New Market Realities: Implications for Stockholder Rights to Vote, Sell, and Sue,” featured a variety of presentations from some really exciting teacher-scholars, some of which resulted in formal published pieces.  The index for the related volume of the Oklahoma Law Review can be found here.  I commend these articles to you.

The abstract for my article, "Selling Crowdfunded Equity: A New Frontier," follows.

This article briefly offers information and observations about federal securities law transfer restrictions imposed on holders of equity securities purchased in offerings that are exempt from federal registration under the CROWDFUND Act, Title III of the JOBS Act. The article first generally describes crowdfunding and the federal securities regulation regime governing offerings conducted through equity crowdfunding — most typically, the offer and sale of shares of common or preferred stock in a corporation over the Internet — in a transaction exempt from federal registration under the CROWDFUND Act and the related rules adopted by the U.S. Securities and Exchange Commission. This regime includes restrictions on transferring securities acquired through equity crowdfunding. The article then offers selected comments on both (1) ways in which the transfer restrictions imposed on stock acquired in equity crowdfunding transactions may affect or relate to shareholder financial and governance rights and (2) the regulatory and transactional environments in which those shareholder rights exist and may be important.

Ultimately, the long-term potential for suitable resale markets for crowdfunded equity — whether under the CROWDFUND Act or otherwise — is likely to be important to the generation of capital for small business firms (and especially start-ups and early-stage ventures). In that context, three important areas of reference will be shareholder exit rights, public offering regulation, and responsiveness to the uncertainty, information asymmetry, and agency costs inherent in this important capital-raising context. Only after a period of experience with resales under the CROWDFUND Act will we be able to judge whether the resale restrictions under that legislation are appropriate and optimally crafted.

Those familiar with the literature in the area will note from the abstract that I employ Ron Gilson's model from "Engineering a Venture Capital Market: Lessons from the American Experience" (55 Stan. L. Rev. 1067 (2003)) in my analysis.

I know others are also working in and around this space.  I welcome their comments on the essay and related issues here and in other forums.  I also know that we all will "learn as we go" as the still-new CROWDFUND Act experiment continues.  Securities sold in the early days of effectiveness of the CROWDFUND Act (which became effective May 16, 2016) are just now broadly eligible for resale.  Stay tuned for those lessons learned from the school of "real life."

November 20, 2017 in Conferences, Corporate Finance, Joan Heminway, Securities Regulation, Web/Tech | Permalink | Comments (0)

Sunday, November 19, 2017

ICYMI: #corpgov Weekend Roundup (Nov. 19, 2017)

By Stefan J. Padfield

November 19, 2017 in Stefan J. Padfield | Permalink | Comments (0)

Saturday, November 18, 2017

How 'Bout Them Lady Vols?

By joanheminway

Quietly, just over two months ago, we got our Lady Vols back.  As you may recall, back in 2014, The University of Tennessee, Knoxville decided to consolidate its athletic branding behind the ubiquitous orange "Power T." The women's basketball team was exempted from the brand consolidation and retained the Lady Vol name and old-school logo in honor of our beloved departed coach, Pat Head Summitt. (See here.)

Many can be credited with the revival of the Lady Vols brand (and I do consider it to be an accomplishment), although perhaps these five heroic women are owed the largest debt of gratitude for the achievement.  I guess my earlier envisioned dreams of profiting from the abandonment of the trademarked Lady Vols logo will not soon be realized . . . .

There are lingering lessons in this affair for businesses and their management--and universities (as well as their athletic departments) are, among other things, businesses.  Knoxville's former Mayor weighed in with comments on the matter in a recent local news column, advising "you need to be sensitive to what the customer likes." He concludes (bracketed text added by me):

People will speculate for a long time on how UT let itself get caught up in this unfortunate situation for three years. It did not have to happen. It can be a valuable lesson, if once leaders realize a mistake has been made, postponing a resolution does not improve it. Better to make amends and move on.

Hopefully, DiPietro [the university's President] has learned from this that it is better to get ahead of a volatile issue than to be consumed by it. Currie [the university's new Director of Athletics] and Davenport [the campus's new Chancellor] solved it for him. They have won considerable good will for themselves and the university.

From Coca-Cola and its disastrous New Coke introduction (mentioned in the article) to Google Glass (which may have better applications, for the moment, than the general consumer market), businesses and their management have learned these lessons over and over.  Listen to the customer, and if you make a miscalculation, admit it and move on.

As law schools and law instructors continue to innovate to serve students, our universities (for those who are part of one), and the profession (among other constituencies), we may be able to learn a lesson or two from some of the broader experimentation in the business world in the introduction of new products and services.  Change for the sake of change or for the sake of branding simplicity, without an understanding of the relevant constituents, certainly is a risky proposition.  I hope that we can be thoughtful and consider all affected interests as we innovate.  And I also hope that when we fail in our change efforts (and some of us will fail) we can cut our losses and re-appraoch change with new knowledge and renewed energy to succeed. 

Getting back to those Lady Vols, our women's basketball team is now 2-0 with convincing wins over ETSU and James Madison.  The next game is Monday against Wichita State, followed by a Thanksgiving evening match against Marquette.  Go Lady Vols!

November 18, 2017 in Intellectual Property, Joan Heminway, Law School, Management, Sports | Permalink | Comments (3)

Friday, November 17, 2017

Pre-law advisors, the GRE, and U.S. News

By Haskell Murray

Paul Caron (Pepperdine) reports that Wake Forest Law has become the 10th law school to accept the GRE. The law school will continue to accept the LSAT.  

Those ten law schools (in chronological order, from earliest adopter to most recent adopter) are:

This shift to accepting the GRE at Wake Forest Law has, apparently, been in the works for over 18 months, and Christine Hurt (BYU) had a nice post on some of the early discussion. Around that time, in February of 2016, Arizona became the first law school to accept the GRE.

Like Christine Hurt, I think this move to including the GRE is probably a good thing, especially if the GRE is shown to be just as predictive as the LSAT. The GRE is offered much more frequently than the LSAT and some pre-law students will have already taken the GRE. Also, I am generally in favor of competition, and the LSAC/LSAT has had a monopoly on law school admissions tests for quite a long time.  

It looks like U.S. News is already converting GRE scores into comparable LSAT scores for ranking purposes. If U.S. News had not acted, this would have been a pretty big loophole for law schools to exploit. 

For pre-law advisors, like me, I think we should definitely let students know of the GRE option at some schools. The GRE may be an especially good option for students who are likely to go to graduate school, but are not yet entirely sure which direction they will go. It also may give students more options if the LSAT's limited testing dates do not work for them. Finally, I don't think the GRE has logic game questions, which some students really struggle with, and therefore students could avoid those questions with the GRE. On the downside, only about 5% of ABA-accredited schools currently accept the GRE. That said, I expect the number of law schools accepting the GRE to rise rapidly over the next few years.

November 17, 2017 in Current Affairs, Haskell Murray, Law School, Pre-Law | Permalink | Comments (0)

Thursday, November 16, 2017

ICYMI: #corpgov Midweek Roundup (Nov. 16, 2017)

By Stefan J. Padfield

November 16, 2017 in Stefan J. Padfield | Permalink | Comments (0)

Wednesday, November 15, 2017

Call For Papers-3rd Global Meeting Indiana University Europe Gateway, Berlin, Germany July 10 & 11, 2018

By Marcia Narine Weldon

I'm passing this on from Karen Bravo at IU  given all of the ESG disclosures on slavery, supply chains, and human trafficking. 

Call for Papers: 

SLAVERY PAST, PRESENT & FUTURE: 3rd Global Meeting

Indiana University Europe Gateway, Berlin, Germany
July 10 & 11, 2018

 

Throughout history, slavery (the purchase and sale of human beings as chattel), enslavement (through conquest, and exploitation of indebtedness, among other vulnerabilities), and similar extreme forms of exploitation and control have been an intrinsic part of human societies. 

Is slavery an inevitable part of the human condition?

Controversial estimates indicate that up to 35 million people worldwide are enslaved today.  This modern re-emergence of slavery, following legal abolition over two hundred years ago, is said to be linked to the deepening interconnectedness of countries in the global economy, overpopulation, and the economic and other vulnerabilities of the individual victims and communities.

This conference will explore slavery in all its dimensions and, in particular, the ways in which individual humans and societies understand and attempt to respond to it. 

The varieties of contemporary forms of exploitation appear to be endless.  Consider, for example, enslavement or mere “exploitation” among:

  • fishermen in Thailand’s booming shrimping industry,
  • children on Ghana’s cocoa plantations,
  • immigrant farmworkers on U.S. farms,
  • truck drivers in the port of Los Angeles.
  • prostituted women and girls on the streets and in the brothels of Las Vegas,
  • the dancing boys (bacha bazi) of Afghanistan,
  • the sex workers of The Netherlands’ Red Light Districts and in Italian cities,
  • Eritrean and other sub-Saharan Africans fleeing to Israel and trafficked and exploited in the Sinai,
  • Syrian refugees in Jordan, Turkey, and Lebanon, and
  • migrant workers from Southeast Asia and other countries who flock to the oil rich Gulf States for work.

Does the persistence and mutations of different forms of extreme human-of-human exploitation mean that the world may not have changed as much as contemporary societies would like to believe since worldwide abolition and the recognition of universal individual and collective human rights?  Like the ‘consumers’ of past eras, such as early industrialization, are we dependent on the abhorrent exploitation of others? 

Potential themes and sub-themes of the conference include but are not limited to:

  1. Defining Slavery:
    1. What do we mean when we talk about “slavery”
    2. Using “slavery” to obscure other endemic forms of exploitation
    3. Teaching and learning about historic slavery and contemporary forms of exploitation
  2. Slaveries of the Past
    1. Classical (Egyptian, Greco-Roman, etc.) slavery
    2. Conquests and colonizations – Aboriginal Australians, indigenous peoples of the New World, dividing and colonizing Africa and Asia
    3. Slaveries in Europe before the Trans-Atlantic Slave Trade and Industrialization, such as villeinage and serfdom
    4. Trans-Atlantic Slavery and the trans-Atlantic Slave Trade
    5. Systems of slavery in tribal and traditional societies
    6. WWII and post-WWII forced labor camps
  3. Human Trafficking and other Forms of Contemporary Exploitation
    1. Definitions
    2. Types of human trafficking
    3. Organ trafficking
    4. The focus on sex trafficking: reasons, purpose, effects
    5. Can nation states enslave?
    6. Is human trafficking “slavery”
    7. Contemporary usage and depictions of slavery
    8. Civil society anti-trafficking activism:

                                                               i.      Methodologies

                                                             ii.      Effectiveness

    1. Anti-trafficking policies and legislation
    2. Assessing contemporary anti-trafficking and/or anti-“slavery” Initiatives
  1. Systems and Structures of Enslavement and Subordination (historic and contemporary)
    1. Role of slavery in national and global economies
    2. Economic, political, legal structures – their role in enslavement and exploitation
    3. Slavery’s impact on culture
    4. Cultural impacts of historic slavery
  2. Voices of the Enslaved
    1. Slave narratives of the past and present
    2. Descendants’ interpretation of their enslaved and slave-holding ancestors
  3. Legacies of slavery
    1. Identifying and mapping contemporary legacies – economic, social, cultural, psychological
    2. Assessment of slavery’s impact – economic, political, other
    3. Commemorations of enslavers and/or the enslaved
    4. Debating reparations
  4. Anti-slavery movements:
    1. Reparations
    2. Economic compensation
    3. Restorative justice
    4. Teaching and learning about slavery
    5. Relationship to the global racial hierarchy
    6. Abolitionism and law: effects and (in)effectiveness
    7. The role of media and social media

Submissions to this conference are sought from people from all genders and walks of life, including academics (from multiple disciplines, such as art, anthropology, sociology, history, ethnic studies, politics, social work, economics) and non-academics; social workers, activists, and health care professionals; government representatives and policy makers; former slaves and indentured laborers; members of at-risk populations such as migrant and guest workers, non—regularized immigrants, and refugees.  

Conference Committee:

Karen E. Bravo (Indiana University Robert H. McKinney School of Law, IN, USA)
David Bulla (Augusta University, GA, USA)
Sheetal Shah (Webster University, Leiden, The Netherlands)
Polina Smiragina (University of Sydney, Australia)

 

Submitting Your Proposal

Proposals should be submitted no later than Friday, March 2, 2018 to:

Karen E. Bravo, Indiana University Robert H. McKinney School of Law, Indianapolis: [email protected]

E-Mail Subject Line: Slavery Past Present & Future 3 Proposal Submission

File Format: Microsoft Word (DOC or DOCX)

 

The following information must be included in the body of the email:

1.  Author(s)

2. Affiliation as you would like it to appear in the conference program

3.  Corresponding author email address

 

The following information must be in the Microsoft Word file:

1. Title of proposal

2.  Body of proposal (maximum of 300 words)

3.  Keywords (maximum of ten)

 

Please keep the following in mind:

1. All text must be in Times New Roman 12.

2. No footnotes or special formatting (bold, underline, or italicization) must be used.

 

Evaluating Your Proposal

All abstracts will be double-blind peer reviewed and you will be notified of the Organizing Committee’s decision no later than Friday, 16 March 2018.  If a positive decision is made, you will be asked to promptly register online. You will be asked to submit a draft paper of no more than 3000 words by Friday, 01 June 2018.

The conference registration fee is Euro (€) 200. Please note that we are not in a position to provide funding to facilitate your participation.

Publication:

A selection of papers will be published in an edited volume, to be submitted to Brill’s ‘Studies in Global Slavery’ book series.

 

November 15, 2017 in Call for Papers, Conferences, CSR, Human Rights, Marcia Narine Weldon, Research/Scholarhip | Permalink | Comments (0)

Tuesday, November 14, 2017

No Need to Veil Pierce an LLC When Direct Liability Is Available (and LLCs Are Still Not Corps)

By Joshua Fershee

A new Maryland case deals with claims against a limited liability company that the plaintiff claimed was "registered as a limited liability corporation ('LLC')." Farm Fresh Direct Direct By a Cut Above LLC v. Downey, 2017 WL 4865481, at *2 (D. Md., 2017).  The court repeats the mistake, but the complaint is the original source, as it incorrectly identifies the LLC as a "corporation" and not a company.  The court then explains some of the allegations as follows: 
Plaintiff alleges that Sinsky violated 15 U.S.C. § 1125(a)(1)(A) and engaged in unfair and deceptive trade practices, in violation of Maryland common law. ECF 1, ¶¶ 17-22, 23-26. At its core, plaintiff's contention is that “Sinsky is the resident agent and incorporator” of Farm Fresh Home (ECF 1, ¶¶ 12-13), and in that capacity she “filed” the articles of organization for Farm Fresh Home, creating a name for the “competing company” that is “intentionally confusing” because of its similarity to Farm Fresh Direct. ECF 1, ¶ 12.
. . . .
*4 Farm Fresh Home is a limited liability company. As a threshold matter, I must determine whether Sinsky is subject to suit in light of Farm Fresh Home's status as a limited liability company.
Id. at *3–4. 
 
That is not quite right. The complaint alleges that Sinsky, by helping to form the LLC, violated the Lanham Act and Maryland common law (the court repeats the complaint's "incorporator" language, but presumably this is meant to refer to the formation of the LLC).  The question, at least initially, should not be whether Sinksy is subject to suit as a member of the LLC.  The question, then, is whether there is a direct claim against Sinsky for creating the competing entity.
 
The court seems to understand this is at least part of the analysis because the opinion discusses veil piercing (in the corporate context, of course) as well as the concept of direct liability.  As to direct liability, the opinion correctly explained: “An LLC member is liable for torts he or she personally commits, inspires, or participates in because he or she personally committed a wrong, not ‘solely’ because he or she is a member of the LLC.” Id. at *5 (quoting Allen v. Dackman, 413 Md. 132, 158, 991 A.2d 1216, 1228 (2010)). The opinion further states that there can be direct liability under the Lanham Act and for unfair trade practices, even when an entity is involved.  This is (at least conceptually) correct.  Despite this, the opinion ultimately misses the mark: 
The question here is not whether plaintiff will ultimately prevail. Its allegations as to Sinsky border on thin. But, for purposes of the Motion, plaintiff adequately alleges sufficient facts and inferences that Sinsky participated in the creation of Farm Fresh Home for the purpose of using a confusingly similar name to compete with Farm Fresh Direct. See A Society Without a Name, 655 F.3d at 346. Therefore, plaintiff is not entitled to the protection of the corporate shield at this juncture.
Id. at *7 (emphasis added). No and no. First, LLCs do not have corporate shields. They have LLC or limited liability shields, but You Can’t Pierce the Corporate Veil of an LLC Because It Doesn't Have One!  Second, there is no need to consider veil piercing at this point. The court has found sufficient claims as to Sinsky's participation to support direct liability. The inquiry should end there. And even if there were value in discussing both direct liability and veil piercing (there is not), the court's own citation to Allen v. Dackman should indicate that this section is not solely related to entity-derived liability.  
 
I don't mean to be too hard on anyone here.  This is not personal -- it simply about identifying and trying to correct errors related to entity status. I know that not all courts or practicing attorneys spend the amount of time I do with entities and their nuances.  And this case involves a pro se party, which can make things even more challenging.
 
I just still maintain that this is something we can correct. Apparently, one blog post at a time. 

November 14, 2017 in Accounting, Corporate Personality, Corporations, Intellectual Property, Joshua P. Fershee, Litigation, LLCs | Permalink | Comments (5)

Monday, November 13, 2017

Oei & Ring: The Senate Tax Bill And The Battles Over Worker Classification

By Ann Lipton

Today's post is by Shu-Yi Oei (Boston College) & Diane M. Ring (Boston College), and originally appeared at TaxProf Blog:

Senate Republicans released their version of tax reform legislation on Thursday, November 9. The legislative language is not available yet, but the Description of the Chairman’s Mark (prepared by the Joint Committee on Taxation) suggests that one of the key provisions in the bill will clarify the treatment of workers as independent contractors by providing a safe harbor that guarantees such treatment. The JCT-prepared description tracks the contents of the so-called “NEW GIG Act” proposed legislations introduced by Congressman Tom Rice (R-S.C.) in the House and Senator John Thune (R-S.D.) in the Senate in October and July 2017, respectively. “NEW GIG” is short for the “New Economy Works to Guarantee Independence and Growth (NEW GIG) Act.” But notably, and as we further discuss below, the legislation is not limited in its application to gig or sharing economy workers.

Assuming the Senate Bill adopts the basic parameters of the NEW GIG proposed legislation — which looks to be the case based on the JCT-prepared description — we have some concerns. In brief, this legislation purports to simply “clarify” the treatment of workers as independent contractors and to make life easier for workers by introducing a new 1099 reporting threshold and a new withholding obligation. But the legislation carries potentially important ramifications for broader fights over worker classification that are raging in the labor and employment law area. Despite possibly alleviating tax-related confusion and reducing the likelihood of under-withholding, we worry that there are quite a few underappreciated non-tax hazards for workers if these provisions go through.

Summary of the Legislation

The legislation (assuming the Senate Bill more or less tracks the NEW GIG Act language) purports to achieve such “clarification” of worker classification status by doing the following:

First, the legislation introduces a safe harbor “which, if satisfied, would ensure that the worker (service provider) would be treated as an independent contractor, not an employee, and the service recipient (customer) would not be treated as the employer.” The legislation creates three objective tests, which, if met, ensure that the worker would be treated as an independent contractor rather than an employee. Very generally, those tests focus on (1) the relationship between the parties (including specificity of the task, exclusivity of the relationship, and whether the service provider incurs their own expenses), (2) the location of services or means by which they are provided, and (3) the existence of a written contract stating the independent-contractor relationship and acknowledging responsibility for taxes and a reporting/withholding obligation. (See JCT-prepared Description pp. 155-57.)

The first two tests are pretty easy for any sharing economy business to meet. In fact, many non-sharing businesses, such as those contracting with a broad swath of freelancers, could satisfy the safe harbor requirements, thereby extending the true reach of the legislation well beyond the gig economy. The “written contract” test is also not onerous. That requirement is essentially met if there is a written contract that makes the right noises in which the parties agree to independent contractor treatment. (Unsurprisingly, a contractual limitation is often not really a limitation at all.)

Second, the legislation clarifies the information reporting rules: It establishes a $1,000 threshold for Form 1099-K reporting and raises the 1099-MISC threshold from $600 to $1,000. (Under current law, there is some question of whether a Form 1099-K needs to be provided if the transactions do not exceed $20,000 and more than 200 transactions. We detail this issue in our article, “Can Sharing Be Taxed?”.)

Third, the legislation also requires the service recipient/payor to withhold limited amounts on payments made to independent contractor workers covered by the safe harbor. From the JCT-prepared description: “The proposal imposes an income tax withholding requirement with respect to compensation paid pursuant to a contract between a service provider and a service recipient (or payer) that meets the [safe harbor] requirements. For this purpose, a payment of such compensation is treated as a payment of wages by an employer to an employee. However, the amount required to be withheld is five percent of the compensation and only on compensation up to $20,000 paid pursuant to the contract.”

Fourth, the legislation limits the IRS’s ability to reclassify service providers as employees (and service recipients/payors as employers) in cases where the parties try in good faith to comply with the safe harbor but fail. The legislation only allows the IRS to recharacterize the relationship as an employment relationship on a prospective basis.

Finally, the legislation amends Tax Court jurisdiction: Under the current IRC § 7436 mechanism for challenging worker classification, only the person for whom the services are performed may petition the Tax Court regarding misclassification of workers. The bill would expand current law to allow the worker/service provider to bring such a case as well. 

[More under the cut]

Continue reading

November 13, 2017 in Ann Lipton | Permalink | Comments (0)

Sunday, November 12, 2017

Call for Papers/Participants: The Role of Corporate Personhood in Masterpiece Cakeshop

By Stefan J. Padfield

I am putting together a panel or discussion group (depending on how many folks respond positively) for the SEALS conference for next summer, which is scheduled to be held August 5-11, 2018, at the Marriott Harbor Beach Resort & Spa in Fort Lauderdale, Florida (details here).

Here is the proposed title and a brief draft description (which may have to be shortened for the submission):

The Role of Corporate Personhood in Masterpiece Cakeshop

The United States Supreme Court is scheduled to hear arguments in the case of Masterpiece Cakeshop, Ltd. v. Colorado Civil Rights Commission on Dec. 5, 2017 (SCOTUSblog summary here). The issue presented in that case is: “Whether applying Colorado's public accommodations law to compel the petitioner to create expression that violates his sincerely held religious beliefs about marriage violates the free speech or free exercise clauses of the First Amendment.” A group of corporate law professors have filed an amicus brief in support to the CCRC (available here). One of the two arguments in that brief is: “Because Of The Separate Legal Personality Of Corporations And Shareholders, The Constitutional Interests Of Shareholders Should Not Be Projected Onto The Corporation.” This [panel] [discussion group] features [paper presentations] [a dialogue] on the pros and cons of this argument, together with related analysis and observations. Please note that the Supreme Court will likely have issued its opinion in the case by the time of the panel/discussion.

Please email me at [email protected] if you would like to participate in this program, letting me know if you are interested in presenting a paper, participating in a discussion, or both. Also, let me know if you know of anyone else who may want to participate—or just pass this on to others. I must file the proposal soon in order to ensure its consideration (the “best practices” deadline for submissions has already passed).

November 12, 2017 in Business Associations, Call for Papers, Conferences, Constitutional Law, Corporate Governance, Corporate Personality, Corporations, Current Affairs, Family Business, Stefan J. Padfield | Permalink | Comments (0)

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