Business Law Prof Blog

Colorado Law: Another Business Law Faculty Search

The University of Colorado Law School invites applications from entry-level and lateral candidates for one or more full-time, tenured or tenure-track faculty positions to begin at the start of the 2024-25 academic year. We welcome applications from candidates in all subject areas and at all levels of seniority. However, we have especially strong needs in Business/Commercial Law, Criminal Law, American Indian & Indigenous Peoples Law, Energy Law, Health Law, Intellectual Property, and Administrative Law. We strongly encourage applications from people of color, women, individuals with disabilities, LGBTQ people, veterans, and others whose background, experience, and viewpoints would contribute to the diversity of our faculty. The University of Colorado Boulder is committed to building a culturally diverse community of faculty, staff, and students dedicated to contributing to an inclusive campus environment. We are an Equal Opportunity employer, including veterans and individuals with disabilities. For questions, please contact Professor Scott Skinner-Thompson, Chair, Faculty Appointments Committee, [email protected]. Please note that application materials will not be accepted via email. For consideration, applications must be submitted through CU Boulder Jobs.

LMU Duncan Law Seeking Business Law Faculty

LINCOLN MEMORIAL UNIVERSITY DUNCAN SCHOOL OF LAW invites applications from entry-level and lateral candidates for two full-time, tenure track faculty positions starting in the 2024-2025 academic year. 

We welcome all subject areas, with particular interest in contracts and sales, business associations, criminal law and procedure, and evidence. Nonetheless, as we grow our innovative part-time/hybrid J.D. program, which is approximately two-thirds online, our needs extend across all doctrinal areas. 

Requirements include a J.D. or equivalent law degree and an unwavering commitment to educating successful lawyers and leaders. The perfect candidate will embody collaborative effort, with an outstanding academic background and firm dedication to teaching, scholarship, and service. Practical legal experience and prior teaching are highly valued, although not mandatory. We are seeking candidates with the potential to grow into excellent legal educators and scholars.

This role will operate under a twelve-month contract, with teaching duties every alternate summer. Rest assured, we consider this schedule while formulating our scholarship requirements.

In line with our commitment to diversity, we strongly encourage applications from people of color, women, individuals with disabilities, LGBTQIA+ individuals, veterans, and others who can enhance our faculty, curricular, and program diversity through unique life experiences, viewpoints, or philosophies.

As faculty, your primary duty is teaching and mentoring students. We recognize this role's importance in accomplishing our mission: providing a top-notch legal education to address the needs of the underserved. Join us in shaping the future of the legal profession.

Our law school is located in the heart of Knoxville, Tennessee, a city that offers a fusion of vibrant city life, stunning natural beauty, and a rich historical and cultural scene, complemented by the backdrop of the Great Smoky Mountains.

Interested applicants should contact Professor Syd Beckman, Chair of the Faculty Recruitment Committee, at [email protected].

Is Your Law School Ready for Generative AI? Fifteen Questions You Should Consider

Greetings from SEALS, where I've just left a packed room of law professors grappling with some thorny issues related to ChatGPT4, Claude 2, Copilot, and other forms of generative AI. I don't have answers to the questions below and some are well above my pay grade, but I am taking them into account as I prepare to teach courses in transactional skills; compliance, corporate governance, and sustainability; and ethics and technology this Fall.

In no particular order, here are some of the questions/points raised during the three-hour session. I'll have more thoughts on using AI in the classroom in a future post.

1. AI detectors that schools rely on have high false positives for nonnative speakers and neurodivergent students and they are easy to evade. How can you reliably ensure that students aren't using AI tools such as ChatGPT if you've prohibited it?
2. If we allow the use of AI in classrooms, how do we change how we assess students?
3. If our goal is to teach the mastery of legal skills, what are the legal skills we should teach related to the use of AI? How will our students learn critical thinking skills if they can rely on generative AI?
4. How should we keep up with the rapid pace of change?
5. How will adjuncts use AI with our students if they are already integrating it into their practice? Alternatively, will adjuncts see the use of AI as cheating?
6. If students use papers as writing samples, should there be attestations indicating that they are AI free? Same question for journals/law reviews.
7. Can clinicians and others use generative AI to help with access to justice? If so, how can we ensure that the information is reliable and not a hallucination??
8. How should schools assess faculty coming up for promotion and tenure? Will junior faculty feel pressured to rely on AI to be more productive?
9. Can generative AI be helpful with students with disabilities and neurodivergent students? AI tools can help with creating study schedules, note taking (organizing by topic), time management, summarizing large articles, staying on task, academic support tool, ascertaining how long will tasks take, planning meals and more. If a policy prohibits the use of generative AI in the classroom, should its use be a reasonable accommodation?
10. Do we as faculty members have the growth mindset to deal with this change? Or will we teach the way we always do, which may do a disservice to our students. How do we prepare our students to deal with generative AI in practice?
11. Do you need a uniform policy or should each professor have their own policy? Should the default policy be that students cannot use it for work that gets academic credit unless the professor has specifically opted in?
12. Should we embrace AI especially for students who can’t write? Is using ChatGPT any different from using a calculator? Is it any different from asking a partner for a template so you don't have to start from scratch?
13. Should we use more in-class exams? Should they be closed book? Do we need more oral presentations? How might this affect space planning at exam time?
14. Should class participation count for more than it already does?
15. If you're not familiar with generative AI tools, where should you start?

How many of these questions have  you asked yourself, your colleagues, or your dean? If you have some best practices or thoughts, please share them in the comments. 

 

 

 

 

 

 

 

 

 

 

 

Wyoming Law Seeks Entry-Level/Lateral Business Law Faculty

The University of Wyoming

College of Law

Qualifications and Duties: The University of Wyoming College of Law invites applications for a tenure-track position with duties commencing in the fall of 2024. We will consider entry-level and/or lateral professors with expertise and interest generally in the areas of Business Law and/or Commercial Law. Specific curricular needs include, without limitation, Accounting for Lawyers, Bankruptcy Law, Business Organizations, Consumer Protection, Contract Law, Corporate Finance, Law & Technology, Payment Systems, Secured Transactions, and Securities Regulation. 

We welcome applications from candidates who would enhance the diversity of our faculty.  Applicants for these positions should hold a J.D. degree from an accredited law school, have distinguished academic credentials, relevant legal experience, and a demonstrated commitment to outstanding teaching, research, and scholarship.  

The University: The University of Wyoming is located in Laramie, a town of 31,000 in the heart of the Rocky Mountain West. The University has proven itself a leader in academics, research, inter-disciplinary study, and outreach. The university also boasts many advantages usually found only in larger university systems, including state-of-the-art facilities and nationally recognized energy and engineering programs. In addition, while small, Laramie is known in the State for its cultural, political, and ethnic diversity. Located in a high mountain valley near the Colorado border, Laramie offers both outstanding recreational opportunities and close proximity to Colorado’s Front Range, a bustling group of metropolitan cities including Denver, Boulder, and Fort Collins. This beautiful mountain landscape offers outdoor enjoyment in all seasons, with over 300 days of sunshine annually. For more information about the region, please visit http://visitlaramie.org/.

Hiring Statement:  UW is an Affirmative Action/Equal Opportunity Educator and Employer. We are committed to a multicultural environment and strongly encourage applications from women, minorities, veterans and persons with disabilities.  

In compliance with the ADA Amendments Act (ADAAA), if you have a disability and would like to request an accommodation to apply for a position, please call 307-766-2377 or email [email protected].

To Apply: Candidates should submit: a.) a cover letter—including sections on teaching philosophy and research agenda, b.) a complete CV, c.) the names and contact information for four work related references. All of the above should be submitted through the University of Wyoming online application system at this link: Asst Professor - College of Law Deans Office - UW Candidate Experience Careers (oraclecloud.com). Questions about the position or the hiring process may be directed to Professor Jim Delaney, Chair, Faculty Appointments Committee, University of Wyoming College of Law, Dept. 3035, 1000 E. University Ave., Laramie, WY 82071, chair of the search committee, at [email protected]. Review of applications will begin immediately, with new applications considered until the position is filled. However, to be assured of full consideration, candidates should submit materials by December 1, 2023.

Not All Securities Arbitration Is The Same

Last month, the SEC released a report on Mandatory Arbitration Among SEC-Registered Advisers.  The report tackles a basic dispute resolution problem.  For context, investors with a problem with a financial adviser will likely have to go to arbitration.  If their financial adviser is an associated person for a FINRA-registered brokerage firm, the dispute will likely go through FINRA arbitration.  While the FINRA system isn't perfect, it's often much better than any other alternative out there.  FINRA has made improvements to its arbitration process over the years resulting in a forum that has become fairer for investors.

But many financial advisers are not brokers.  They are registered investment advisers.  They usually charge fees on an assets under management basis.  Where do disputes against these RIA firms go?  It depends on what kind of pre-dispute arbitration agreement exists between the adviser and the investor.  The SEC report details the current options available to investors.

Here's the short version, far too many RIAs have put in place arbitration agreements that effectively frustrate an investor's ability to resolve a complaint.  Most of these agreements force investors to resolve their disputes through AAA--the American Arbitration Association.  Within that forum, Advisers generally elect to apply the commercial arbitration rules.  The fees for commercial arbitration can be hefty and enough to deter many investors from even filing a claim.

PIABA, the Public Investor Advocate Bar Association, recently put out its view to follow on the SEC's report.  It allowed one investor to explain the impact of the arbitration provision on her ability to seek a recovery:

Marykay Dragovich, the conservator for her cousin Rita Berardelli, described the process of forced arbitration after their trusted RIA lost over $228,000 in principal investments, money that Berardelli had saved as a registered nurse before suffering two life-altering brain aneurisms that left her incapacitated.  When Dragovich investigated recovering the losses for her cousin, she learned it would cost up to $202,000 to pay the upfront costs of an arbitration hearing.  So even if Berardelli got all her money back, she would have to pay as much as 90% of it to the arbitrators as prescribed by the overlooked forced arbitration clause in the agreement with her RIA.

Congress or the SEC will need to act to ensure that investors, who are now locked out of courts by arbitration agreements, will not also be locked out of arbitration by excessive fees.

 

** Disclosure -- I am a member of PIABA.

Syndicated Loans and Also AMC

Two quick hits this week.

First, I posted over at FT Alphaville on the Kirschner v. JP Morgan case, pending before the Second Circuit.  The court is being asked to decide whether syndicated loans are securities, and my post addresses what's at stake for the parties.  Help yourself.

Second, VC Zurn rejected the first attempt at a settlement of the AMC class action over the creation of the APE preferred shares.  As I'm sure any reader of this blog knows, after AMC became a meme stock, it sought to sell more shares, but it needed a charter amendment to authorize an increase.  Retail holders of AMC stock refused to vote in favor - likely because retail simply doesn't vote at all.  AMC thought it had a clever way around that, through the issuance of a new form of preferred shares, called APEs, that could vote alongside the common and would convert into common once additional common shares were authorized.  Many APEs were publicly traded, but some were placed with a hedge fund, Antara Capital, that was contractually obligated to vote in favor of the charter amendment.  As a practical matter, then, the issuance of the APE shares assured there would be sufficient votes to pass the charter amendment authorizing additional common shares that the common shareholders had rejected.  The AMC common shareholders sued, and the parties proposed to settle by issuing new shares to the common holders, which would mitigate the dilutive effect of the APE issuance.

VC Zurn rejected the settlement because it proposed to release all claims held by the common shareholders, not only relating to any breaches of duty with respect to the common, but also with respect to any breaches of duty to the APE holders, to the extent that any common shareholders also held APEs.  I.e., if you held only APE shares, you weren't covered by the settlement, but if you held both common and APE, the settlement purported to release any claims concerning both holdings.  VC Zurn thought the release of APE claims was a bridge too far, but her reasoning was fascinating.

As I understand it, she offered two rationales.  The first was relatively mundane, and essentially was about due process in the class action context.  The claims asserted in the action were only about breaches of duty to common shareholders, not to APE shareholders.  The class reps were not appointed as representatives of the APE shareholders, and because the settlement itself - a share issuance that was dilutive to APEs - would be adverse to APE holders, class members might be differently situated with respect to APE shares (i.e., some might hold more APEs relatively to their common shares, some might hold fewer).  Under these circumstances, she held the claims alleged in the complaint were too distant from the claims being settled.

The second rationale was more interesting.  Here is what she said:

APE direct claims require not only proof of different facts than the claims asserted on behalf of the class of common stockholders: APE direct claims are appurtenant to a different security than common stock. APE direct claims can be brought only by APE unitholders. The class of common stockholders cannot release APE claims.

Under Delaware law, direct claims for violating voting rights associated with stock ownership are appurtenant to the share of stock that carries the voting power; they are not personal rights belonging to the stockholder who happens to own the shares....Any direct claims arising out of the rights appurtenant to the APE units are property rights associated with the APE units. They are not personal rights of the unitholder...

Get it? The rights attach to the shares.  The fact that a particular investor at a particular time may be holding those shares does not make them the investor's rights; the rights are share rights.  The investor is the human avatar for the real object of interest, the shares.  Therefore, a class action of common shareholders can release claims associated with those shares, but not claims associated with another security, even if held by the same investors, because that other security is not in fact before the court.  It has not made an appearance, through its human host, in the courtroom.

That idea - where the rights of the shares are abstracted away from the actual for real investors who hold them, to the point where the desires of the human investors have no role to play - has been a sub rosa theme in corporate case law for a while.  In Revlon, for example, the directors were deemed to have violated their fiduciary duties to the common stockholders by seeking a sale that would protect the value of corporate notes - even though, as Daniel Greenwood has pointed out, many of the noteholders were in fact stockholders and very possibly would have wanted a sale that balanced the value of those two securities.  But, I think more recently, Delaware's rhetoric on this has become more overt - which, by the way, is something I talk about in my paper, Every Billionaire is a Policy Failure, addressing with Elon Musk's takeover of Twitter.  (See what I did there? With the plug?). 

Anyway, none of that bodes particularly well for the claims in McRitchie v. Zuckerberg, which is a putative class action in which Meta shareholders claim that the Board violated its fiduciary duties by maximizing Facebook's wealth while externalizing costs on to the rest of society, to the detriment of diversified holders of Meta stock. But we'll see what VC Laster has to say. 

The University of Tennessee College of Law is Looking for Faculty!

POSITION NOTICE

FACULTY POSITIONS
THE UNIVERSITY OF TENNESSEE COLLEGE OF LAW

THE UNIVERSITY OF TENNESSEE COLLEGE OF LAW invites applications from both entry-level and lateral candidates for up to three full-time, tenure-track faculty positions to begin at the start of the 2024-25 academic year. The College is primarily interested in candidates with scholarly aptitude and experience in one or more of the following curricular areas: criminal law (both substantive and procedural), environmental law (including energy law), and health law. Secondary interests include business law (including bankruptcy, real estate, or secured transactions) and estate planning (including tax-related courses).

All positions require a J.D. or equivalent law degree. Successful applicants should have an impressive academic background. Candidates also must have a strong commitment to excellence in teaching, scholarship, and service. Significant professional experience is desirable.

In furtherance of the University’s and the College’s fundamental commitment to diversity, we strongly encourage applications from people of color, women, individuals with disabilities, LGBTQ+ people, veterans, and others whose background, life experiences, viewpoints, or philosophy would contribute to the diversity of our faculty, curriculum, and programs.

The University of Tennessee, Knoxville, is an R1, land-grant university located in Knoxville, Tennessee. The City of Knoxville is a hidden gem with a beautiful and walkable downtown, varied nightlife, active neighborhoods, and eclectic shopping and restaurants. UT is located within easy driving distance to Asheville, Nashville, Atlanta, and the Great Smoky Mountains. Applications must be submitted through https://apply.interfolio.com/127752.

Applicants should submit a letter of interest, including the subjects the candidate is interested in teaching, a CV, and the names and contact information for three references. While applications will be considered on a rolling basis, applicants should submit their materials no later than August 18, 2023 for best consideration. For questions, please contact Professor Zack Buck, Chair of the Faculty Appointments Committee, at [email protected].

All qualified applicants will receive equal consideration for employment and admission without regard to race, color, national origin, religion, sex, pregnancy, marital status, sexual orientation, gender identity, age, physical or mental disability, genetic information, veteran status, and parental status, or any other characteristic protected by federal or state law. In accordance with the requirements of Title VI of the Civil Rights Act of 1964, Title IX of the Education Amendments of 1972, Section 504 of the Rehabilitation Act of 1973, and the Americans with Disabilities Act of 1990, the University of Tennessee affirmatively states that it does not discriminate on the basis of race, sex, or disability in its education programs and activities, and this policy extends to employment by the university. Inquiries and charges of violation of Title VI (race, color, and national origin), Title IX (sex), Section 504 (disability), the ADA (disability), the Age Discrimination in Employment Act (age), sexual orientation, or veteran status should be directed to the Office of Equity and Diversity, 1840 Melrose Avenue, Knoxville, TN 37996-3560, telephone 865-974-2498. Requests for accommodation of a disability should be directed to the ADA Coordinator at the Office of Equity and Diversity.

The One Where They Castrated Calves Together

John Malone and Gregory Maffei are repeat players before the Delaware courts.  They often occupy complementary positions within Delaware companies, and are frequently accused of abusing their combined positions to muscle through interested transactions.  Here’s a footnote from the complaint in Atallah v. Malone, which is the subject of today’s blog post:

Malone and Maffei have been sued numerous other times for engaging in self-dealing to the detriment of public stockholders. See, e.g., New Orleans Empls. Ret. Sys. v. The DIRECTV Group, Inc., C.A. No. 4606-VCP (Del. Ch. 2009) (Malone accused of orchestrating transaction, with Maffei’s approval, to obtain supervoting shares dilutive to the minority stockholders and receiving disproportionate tax benefits); Blackthorn Partners LP vs John C Malone, et al., C.A. No. 5260-CS (Del. Ch. 2010) (Malone accused of receiving premium for high-vote shares, with Maffei’s approval, that public shareholders did not receive, with class ultimately receiving $10 million settlement); In re Sirius XM S’holder Litig., Consol. C.A. No. 7800-CS (Del. Ch. 2012) (Maffei and rest of Board accused of failing to employ anti-takeover measures thus allowing Malone affiliate to improperly obtain majority control); In re Starz S’holder Litig., C.A. No. 12584-VCG (Del. Ch. 2016) (Malone accused of structuring transaction, with Maffei’s approval, such that he received different and more valuable consideration than public stockholders regardless of stockholder vote); Tornetta vs. Gregory B. Maffei, et al., C.A. No. 2019-0649-KSJM (Del. Ch.) (Board of directors including Maffei accused of ignoring standstill agreements and relying on Malone-affiliated banker to steer sale of company to Malone affiliate rather than sell at higher value to third party); Vladimir Fishel v. Liberty Media Corp., et al., Docket No. 2021-0820-KSJM (Del. Ch.) (Board of directors including Maffei accused of using company coffers to help Malone affiliate squeeze out minority stockholders).

Not included on this list, I don’t think, is Sciabacucchi v. Liberty Broadband, 2023 WL 4157103 (Del. Ch. June 22, 2023), in which Malone and Maffei settled claims involving related party transactions at Charter Communications,

Maffei has been the subject of so many shareholder lawsuits that he’s now seeking to reincorporate two of his companies from Delaware to Nevada, apparently for the explicit purpose of engaging in interested transactions with less oversight – which reincorporation is itself the subject of another shareholder lawsuit.

So that’s the background for Atallah v. Malone, where VC Glasscock found that derivative claims were properly pled against Malone and Maffei for a conflicted transaction, and refused to dismiss the complaint.

The set up: Qurate is a publicly traded company, of which Malone held high vote shares.  These were not by themselves enough to confer hard control at the 50% level, but were controlling enough that he had – and was compensated for – a call right held by Qurate.  If a third party were to offer for his high vote shares, and he was willing to accept, Qurate could call the shares for the lower of the third party offer, or a price equal to a 10% premium over the common, publicly traded shares.

Maffei was Executive Chair at Qurate, and also had an employment agreement to the effect that if Qurate changed control, he’d be entitled to resign from Qurate and win change in control benefits.

Given the close relationship between Malone and Maffei, then, as Matt Levine might put it, there was an opportunity for a Good Trade.

Maffei could “offer” to buy Malone’s shares; that would trigger the call right by Qurate, which would buy Malone’s shares at a premium above market.  Once Malone no longer held high vote shares, that would trigger a change in control at Qurate, which would entitle Maffei to severance.

And so that’s exactly what they did.  Except, of course, neither wanted to really leave Qurate, so Malone accepted for his high vote shares payment in common stock instead of cash, at a 10% premium to market price.

Meanwhile, Maffei said, “Yes, I could resign and take my severance, but I would be willing to stay on for a renegotiated compensation package” – which Qurate did, which included granting him high vote shares.

I haven’t done the math regarding the exact number of shares involved, but in many ways, the transaction appears to be designed to transfer Malone’s high vote shares to Maffei, while simultaneously giving Malone a premium and possibly Maffei a bit of a premium in stock awards, all out of Qurate’s pocket.

So of course, shareholders sued, claiming this entire series of transactions was undertaken by a controlling shareholder group – Malone and Maffei coordinating – to benefit them both.

What’s interesting here?

[More under the cut]

Continue reading

Suing Series LLCs - Name the Specific Series

The Nevada Supreme Court recently delivered an opinion on Series LLCs.  These entities are relatively new and not much caselaw on them currently exists so it's good to get some more guidance about how to deal with them.

The case, Federal Housing Finance Agency v. Saticoy Bay LLC, reached the Nevada Supreme Court on a certified question from the Ninth Circuit about how to obtain jurisdiction over series LLC entities.  In short, the question the Ninth Circuit wanted answered was whether a court obtained jurisdiction over series entities by naming the master LLC itself or whether the individual series must be sued in its own name to establish jurisdiction over it?  Nevada's Supreme Court answered that naming the individual series LLC at issue was not an "optional" matter.  To establish jurisdiction over a series entity, the entity itself must be sued.  It found that the "plain language of NRS 86.296(2) does not allow a party to sue a master LLC in lieu of a series LLC at the party's discretion."

 

Director, Institute for Professional Leadership - Applications Remain Open!

Just a reminder that applications are open for the permanent directorship of the Institute for Professional Leadership at The University of Tennessee College of Law.  As many of you know, I have been the Interim Director of this important academic program at UT Law for three years.  It has been a great joy for me to serve, but we are ready now to find a new permanent director for the program.  Applications are being accepted here.  Additional information also is available at the same link.  And here is the general job description:

The University of Tennessee College of Law invites applications for the position of Director of the Institute for Professional Leadership. The Institute for Professional Leadership (IPL) is a unique academic program that focuses on guiding students in identifying and developing their leadership skills and professional values, in conjunction with constructing a successful career plan. The IPL offers a rich selection of courses and programs designed to prepare students to be lawyer leaders within the profession and beyond, promotes active community engagement through pro bono opportunities, and serves as a platform for research and scholarly debate in the leadership field. The Director will provide vision and oversight for the IPL’s existing programs and activities and will be responsible for expanding and enhancing the IPL’s reach and stature. The Director will be an important part of the College of Law’s administrative leadership. The position will report directly to the Dean and work more broadly with the College of Law administration to support high-quality instruction, programming, engagement, and professional leadership development. Additionally, the Director will be a member of the College of Law faculty; the nature of the appointment will depend upon the chosen candidate’s academic and professional experience and credentials.

Of course, let me know if you have questions!  I know the job well . . . .  Please pass this on to others who may be interested.

Open Tenure-track Faculty Positions - University of Alabama School of Law

Dear BLPB Readers:

"The University of Alabama School of Law seeks to fill up to five tenure-track positions for the 2024-25 academic year.

JOB QUALIFICATIONS: Candidates must have outstanding academic credentials, including a J.D. from an accredited law school or an equivalent degree (such as a Ph.D. in a related field). Entry-level candidates should demonstrate potential for strong teaching and scholarship. Qualified applicants in any of the following areas will be considered: civil procedure, criminal law, torts, property, environmental, business (all sub-fields), antitrust, healthcare, intellectual property, legal ethics, evidence, election law, employment/labor, state & local law, and law & economics. We welcome applications from candidates who approach scholarship from a variety of perspectives and methods. The University embraces diversity in its faculty, students, and staff, and we welcome applications from those who would add to the diversity of our academic community.

APPLICATIONS/FURTHER INFORMATION: Salary, benefits, and research support will be nationally competitive. All applications are confidential to the extent permitted by state and federal law. These positions will remain open until filled. Questions should be directed to Benjamin McMichael, Chair of the Faculty Appointments Committee ([email protected]). Interested candidates can apply online at https://careers.ua.edu/jobs/search/law

Visit UA’s employment website at https://careers.ua.edu/home for more information. The University of Alabama is an equal-opportunity employer (EOE), including an EOE of protected vets and individuals with disabilities."

Mississippi College Law - Faculty Search

Mississippi College School of Law invites applications from entry-level candidates for multiple tenure-track faculty positions expected to begin in July 2024. Our search will focus primarily on candidates with an interest in teaching one or more of the following subject areas: Civil Procedure, Business/Commercial Law, Contracts, Cyber Law/Law & Technology, International Law, and Sports/Entertainment Law. We seek candidates with a distinguished academic background (having earned a J.D. and/or Ph.D.), a commitment to excellence in teaching, and a demonstrated commitment to scholarly research and publication. We particularly encourage applications from candidates who will enrich the diversity of our faculty. We will consider candidates listed in the AALS-distributed FAR, as well as those who apply directly. Applications should include a cover letter, curriculum vitae, a scholarly research agenda, the names and contact information of three references, and teaching evaluations (if available). Applications should be sent in a single PDF to Professor Donald Campbell, Chair, Faculty Appointments Committee, via email at [email protected].

Ripple and Forman

Thanks to Ann for her great "So, Ripple" post last week.  I have been waiting for a case like this—one that engages a court in the details of how the Howey test applies to the way different types of  cryptoassets work.  I was especially interested in how the court in the SEC v. Ripple Labs opinion would handle the different ways in which cryptoassets are sold and traded.  Well, now we have an opinion to work with.

I especially appreciate Ann setting the stage so well with the doctrinal legal background of the case.  Well done, friend!  Like Ann, I teach Securities Regulation every year.  Unlike Ann, I am gleeful about teaching definitional content in the federal securities laws, including the definition of the term "security."  It is amazing how, as financial investment instruments have evolved, significant numbers of practitioners and their clients have paid insufficient attention to the niceties of that definition and the definition of the embedded term "investment contract."

Like Ann, I am comfortable that a single financial instrument can be a security in some contexts and not in others.  And, like Ann, I have questions about the court's analysis in Ripple.  Specifically, I am disappointed in the way the Ripple court fails to take on the profit expectations element of the Howey test head-on—especially as to the "Programmatic Sales" made by Ripple—sales made into the XRP market after Ripple's initial "Institutional Sales" were made.  Instead, the court’s opinion joins the concept profit expectations to the efforts of others in its analysis in ways that I find perplexing.  Undertaking an analysis of the profit expectations piece of the Howey test independently may be hard work.  But it may have been worth the court's while to dig in more on whether the purchasers of XRP expect profits before assessing whether those profits are generated through the efforts of others. 

For this profit expectations part of the Howey analysis, I reflect on the U.S. Supreme Court's opinion in United Housing Foundation v. Forman.  Leaving aside the fact that Forman was really a case about whether stock—not an investment contract—is a security, the Forman Court defines financial instrument profits in three distinct ways:

• "capital appreciation resulting from the development of the initial investment" (421 U.S. at 852)
• "a participation in earnings resulting from the use of investors' funds" (421 U.S. at 852)
• the ability to resell at a price that exceeds the cost of purchase (421 U.S. at 854)

The Ripple opinion somewhat addresses each of these potential types of profit, but not always directly, distinctly, or completely.  The court focuses significantly on the first of the three, noting that "the Institutional Buyers reasonably expected that Ripple would use the capital it received from its sales to improve the XRP ecosystem and thereby increase the price of XRP," but that "Programmatic Buyers could not reasonably expect the same." (And I am not sure about that latter piece, by the way.)

Considerations relating to the third profit type, however, may be the most interesting—and challenging in application.  After reading the court's analysis, I still had many questions about whether those who bought the XRP that Ripple was selling in the Programmatic sales were buying because of anticipated market appreciation—appreciation that may be generated in part by the activities of Ripple in establishing and promoting (not to mention selling) XRP—or for more instrumental reasons.  The court finds that "each Institutional Buyer’s ability to profit was tied to Ripple’s fortunes and the fortunes of other Institutional Buyers because all Institutional Buyers received the same fungible XRP."  Yet, those who purchased XRP in Programmatic Sales also receive that same fungible XRP.  In general, I wonder how the Programmatic Sales made by Ripple are different from sales of stock made by, e.g., a founder into a preexisting trading market—an analogy worth considering.

The Ripple court's analysis of profit expectations under Howey in its opinion is, however, combined with its inquiry as to the "efforts of others."  In my teaching, I separate Howey into five prongs: (1) contract, transaction, or scheme; (2) investment of money; (3) common enterprise; (4) expectation of profits; (5) efforts of others.  Overall in my work (as exemplified in this article, in which I apply the Howey test to early crowdfunding interests), I have found it helpful to engage each of these five prongs of Howey independently, then follow with a synthesis that looks at the overall context in which the security determination is being made (including the related "economic realities" of the instrument in the circumstances).  That analysis of context is, of course, invited by the lead-in to Section 2(a) of the Securities Act of 1933, as amended (the “1933 Act”), which qualifies the definitions offered in Section 2(a) by an assessment of whether "the context otherwise requires."

The Ripple court’s failure to keep the two prongs—expectation of profits and efforts of others—analytically separate handicaps the court from addressing the Forman Court's core argument relating to the connection between the investment of money prong and the expectation of profits prong: that an instrument may represent a consumption or other interest, rather than an investment or profit-making interest.  Those who invest do so with the goal of achieving financial gain or another element of value.  The Forman Court's reasoning as applied in Ripple logically would result in a judicial determination of the nature of the XRP interest purchased by those acquiring XRP in the Programmatic Sales, which may well be different from the nature of the XRP interest acquired in the Institutional Sales.  Why were purchasers of XRP acquiring it at the time Ripple was selling in the Programmatic Sales?  What was at the heart of their acquisitions of XRP? The Ripple court fails to grapple with these questions.

The Ripple court does acknowledge in its opinion that some of those purchasers may have acquired XRP because they expected profits—even profits generated through Ripple’s efforts.  The court offers: “Of course, some Programmatic Buyers may have purchased XRP with the expectation of profits to be derived from Ripple’s efforts.”  But it discounts this rationale without offering an alternative.  Instead, the court points out that Ripple never made any promises to the purchasers of XRP who bought in Programmatic Sales.  Yet, explicit promises between a seller and a buyer are not the only conduct that can lead purchasers of financial instruments to expect profits . . . .

In that regard, the Ripple opinion somewhat conflates its Howey analysis of the "efforts of others" with an assessment of whether (and if so, how) Ripple offered to sell XRP to those who bought it (which may be irrelevant since Ripple did sell XRP into the market).  Section 5 of the 1933 Act—the legal provision that the Securities and Exchange Commission asserts Ripple violated—only applies to offers and sales of securities.  Consequently, it would seem logical to determine first whether what was offered or sold is a security and only then to address whether that security was offered or sold by the defendant. 

Instead, in analyzing whether there was an expectation of profits (and whether Ripple's efforts were sufficiently connected with profit generation) under the Howey test, the Ripple court focuses on whether the XRP purchasers knew from whom they were buying and where their money was going, alluding to a privity or tracing requirement of sorts.  Specifically, the Ripple opinion avers that “with respect to Programmatic Sales, Ripple did not make any promises or offers because Ripple did not know who was buying the XRP, and the purchasers did not know who was selling it,” noting that "a Programmatic Buyer stood in the same shoes as a secondary market purchaser who did not know to whom or what it was paying its money."  These considerations are more applicable to a determination of whether Ripple was offering or selling securities to a particular purchaser—a consideration relevant in a private action under Section 12(a)(1) of the 1933 Act—than to the determination of whether XRP is a security when it is sold by Ripple into a pre-existing market.

There’s more I could say on all of this, but this post already has gotten quite long.  So, I will leave it here.  Suffice it to say, in addition to the profit expectations analysis in the Ripple opinion, I have questions about the Ripple court’s analysis of the investment of money and expectation of others prongs of the Howey test.  Perhaps some of that will be a good topic for another post . . . .

Teaching Leadership in Law Schools - Zoom Sessions

I am a member of the Executive Committee of the Association of American Law Schools (AALS) Section on Leadership.  This year, members of the  have been hosting a series of Zoom forums on teaching.  The remaining forums (although more may be scheduled) are set forth below.

Wednesday, July 19, 2023 – 12:00 p.m. – 1:00 p.m. EST – Joan Heminway, Interim Director, Institute for Professional Leadership and Rick Rose Distinguished Professor of Law, The University of Tennessee College of Law ,and Martin Brinkley, Dean and Distinguished Professor, University of North Carolina School of Law

Monday, September 25, 2023 – 3:00 p.m. – 4:00 p.m. EST – Lee Fisher, Dean, Cleveland State University College of Law

Wednesday, October 18, 2023 – 3:00 p.m. – 4:00 p.m. EST – Kellye Testy, President and CEO, LSAC, and Hillary Sale, Associate Dean for Strategy, Georgetown University

You can register for a session by clicking on the link for that session.  As you can see, I am cohosting Wednesday's forum, which will feature two adjunct professors who have worked with full-time faculty to design and implement law school leadership courses.

Business law and leadership are naturally related.  The Section on Leadership may be something you are interested in following.  If so (and you are a law professor at an AALS member school), you can register to be a member of the section here after logging into your AALS account.  

So, Ripple

This week, I was going to blog about the decision in Sobel v. Thompson, 2023 WL 4356066 (W.D. Tex. July 5, 2023), where a Texas district court relied on a forum selection bylaw to dismiss a derivative Section 10(b) claim in favor of Delaware Chancery, which – you guessed it – has no jurisdiction to hear Section 10(b) claims.  The court could have dismissed on the merits, especially given the dismissals of related cases in other jurisdictions, but instead, it purported to follow Lee v. Fisher, which I blogged about most recently here, but of course, Lee v. Fisher involved Section 14, and the court relied heavily on the purportedly-suspect pedigree of derivative Section 14 claims.  The SolarWinds court did not bother with that kind of analysis before extending Lee v. Fisher to derivative 10(b) claims and yeah, pretty much that’s it, you can read Alison Frankel’s Reuters piece here, and in the meantime just call me Cassandra.

Anyway, I was going to blog about all of that, but now I’m not, obviously, because the summary judgment opinion in the SEC’s enforcement action against Ripple finally came down, and I think I’ve made it clear by the absence of discussion that crypto is very much not my thing but sadly I do, in fact, have to teach “What is a security” to my students so I forced myself to read the decision and, well, yikes.

*deep breath*

Section 2 of the Securities Act defines a “security” to mean multiple kinds of instruments (stock, notes, voting trust certificates), and then has a catch-all provision that an “investment contract” is a security.  But “investment contract” is not a recognized type of instrument and so needed a definition.  In 1946, the Supreme Court decided SEC v. Howey Co., 328 U.S. 293 (1946), which laid out the so-called Howey test for whether a new instrument is an investment contract.  There must be an investment of money, in a common enterprise (which usually means pooling of investor resources), with the expectation of profit by the investor, derived from the efforts of others (usually, a centralized management team).

This test is, intentionally, broad, in order to prevent promoters from designing instruments that evade the Act but nonetheless are of the type that Congress felt needed regulation.  (These instruments tend to be ones where the purchaser is vulnerable to disloyalty or shirking by centralized management, and ones where a collective action problem among investors would inhibit bargaining to cure informational asymmetries.  Thus, the need for registration – forced disclosure – before their sale). 

As a result, a number of rather esoteric arrangements have been found to be investment contracts.  In Howey itself, purchasers bought small strips of land in an orange grove, coupled with a service contract to have the oranges cultivated and harvested.  The oranges from all the plots were pooled, sold, with profits returned pro rata to each investor.  The Supreme Court held that these collective arrangements were akin to buying a fractional interest in an orange business with centralized management.  In another case, investors were sold chinchillas, and promised that if they bred them, the seller would repurchase the babies at a higher price and resell them to new investors.  Investors were promised that raising chinchillas was nearly effortless.  It wasn’t, they died, and the Eighth Circuit held that the entire set of arrangements might be the equivalent of investing in a chinchilla business, and hence potentially a security.

In Ripple, the defendants created the XRP Ledger and the XRP token, which had various uses, but critically, would end up being used for cross-border payments.  Like a lot of crypto, XRP was also traded speculatively – people bought it in hopes the price would rise and they could sell it.  Additionally, as I understand it, this dynamic was necessary for the cross-border payments to work.  Someone wanting to transmit US dollars to someone else who would receive payment in Japanese yen would instead use the dollars to buy XRP, and then the XRP would be transmitted on the XRP Ledger, and the recipient would sell the XRP for yen.  That only works if there’s consistent liquidity and transparent pricing.

The defendants generated a lot of XRP token, which they sold to initial investors – mainly institutions – touting XRP as an investment tied to the company’s success.  The funds raised were used to continue to grow Ripple’s business.  Defendants also made a number of public statements about XRP’s potential, including in XRP market reports and on Reddit.

Later, once a secondary market for XRP had developed, defendants sold additional XRP tokens into the market and raised funds that way.  Defendants also paid employees in XRP token, which they could then sell in the secondary market.

The SEC brought an enforcement action claiming that XRP was a security, and therefore all of the defendants sold securities without registering them, in violation of Section 5 of the Securities Act.  The court held that the sales to institutional investors were sales of securities, but not the remaining sales. 

I’ll start with: The holding makes no sense, but to understand where it’s coming from, you need to understand the arguments, which are similar to those made in other crypto cases.

The SEC’s position was this was straight up Howey.  People paid money or other currency; the common enterprise was Ripple itself and the other crypto buyers; they expected to profit by flipping the tokens – and that expectation was cultivated by Ripple itself through its statements about the tokens’ potential – and they relied on Ripple’s management team to develop use cases for the token and otherwise market it to cause the price to rise.

Among the defendants’ arguments was the claim that when the Securities Act uses the phrase “investment contract,” it means there must be something like an actual contract – a promise, or legal obligation, of some kind, between the promoter and the investor.  Howey did not formally include such a requirement, but most of the cases do in fact have such a feature.  In Howey, the promoter promised to cultivate the land, sell the oranges, and distribute the proceeds; in the chinchilla case, the promoter promised to buy back the chinchillas, and so forth.  But with the XRP tokens, there was no obligation between Ripple/the defendants and token holders.  That might not be true for all crypto tokens – there are some where the token holder has some kind of continuing rights against the issuer – but with XRP, there were no such rights.  Therefore, argued the defendants, there was no contract, and no investment contract.

That argument, the court rejected, and decided to apply Howey as written:

The Court declines to adopt Defendants’ “essential ingredients” test, which would call for the Court to read beyond the plain words of Howey and impose additional requirements not mandated by the Supreme Court. The Court sees no reason to do so. Neither Howey, nor its progeny, hold that an investment contract requires the existence of Defendants’ “essential ingredients.” To the contrary, these cases make clear that the relevant test reflects a focus on an investor’s expectation of “profits . . . from the efforts of others,” rather than the formal imposition of post-sale obligations on the promoter or the grant to an investor of a right to share in profits.

The court further found that the initial institutional investors who bought XRP from the defendants clearly did so with an expectation of profit.  They knew Ripple planned on using their funds to develop its business and promote the token, and they agreed to lockups and resale restrictions that only made sense if one was buying as an investment.

When it came to the sales into an existing market, however, it was a different story.  Those buyers were buying in an impersonal market, and had no idea that it was the defendants, rather than anyone else, who was selling to them.  That meant they had no expectation that the money they paid for their tokens would be received by Ripple and plowed back into the business.  And that – said the court – meant they could not have invested with an expectation of profit from Ripple’s efforts.  As the court put it:

Having considered the economic reality of the Programmatic Sales, the Court concludes that the undisputed record does not establish the third Howey prong. Whereas the Institutional Buyers reasonably expected that Ripple would use the capital it received from its sales to improve the XRP ecosystem and thereby increase the price of XRP, Programmatic Buyers could not reasonably expect the same. Indeed, Ripple’s Programmatic Sales were blind bid/ask transactions, and Programmatic Buyers could not have known if their payments of money went to Ripple, or any other seller of XRP….

Therefore, the vast majority of individuals who purchased XRP from digital asset exchanges did not invest their money in Ripple at all. An Institutional Buyer knowingly purchased XRP directly from Ripple pursuant to a contract…

It may certainly be the case that many Programmatic Buyers purchased XRP with an expectation of profit, but they did not derive that expectation from Ripple’s efforts (as opposed to other factors, such as general cryptocurrency market trends)—particularly because none of the Programmatic Buyers were aware that they were buying XRP from Ripple

Now, I’m comfortable with the idea that a particular asset may be sold as a security in some instances and not others, because whether something is promoted as “for profit” may depend on the facts and circumstances.  But the distinction the court draws here does not make sense.  The purchasers may not have known they were supplying capital to Ripple, but they knew what the institutional investors knew about Ripple’s intentions.  They knew Ripple was making efforts to expand the business, promote the token, and develop it as an asset.  They almost certainly were motivated to buy it for that reason; Ripple made statements encouraging them to do so.  That they didn’t know their particular moneys would assist that effort isn’t really …. relevant.  Moreover, as I said, the cross border system depended on a liquid market for XRP – of course Ripple would promote one.

What it looks to me is going on is that the court kind of stealthily accepted defendants’ “contract” argument after all, in a way.  The judge held that it was a security for the buyers who had a direct relationship with Ripple and knew where their money was going.  For buyers who had no such relationship, there was no security.

Presumably, the outcome would have been different if, say, the instrument were more like debt sold in an impersonal at-the-market offering.  In those cases, the buyer might not know they were buying from the issuer rather than another trader, but the buyer would know they had a debt claim – a contract, with ongoing obligations – against the issuer.  Thus, an expectation of profit.

In Ripple, buyers in an impersonal market did not have any expectation of profit directly from a contractual relationship (defendants’ argument), and so the court, rather than saying a contractual relationship was necessary, instead said that absent one – by directly supplying capital – there’s no expectation of profit from Ripple’s efforts.  The court split the difference between the defendants’ argument and the SEC’s, and came up with something that is incoherent on its face.

She casually rejected other arguments that the buyers in the impersonal market might have expected profits from Ripple’s efforts even if they did not know they were supplying capital.  She said that Ripple’s public statements – some of which were inconsistent and shared across many different media – were just too complicated to assume an ordinary retail investor, rather than an institutional investor, would have understood:

There is no evidence that a reasonable Programmatic Buyer, who was generally less sophisticated as an investor, shared similar “understandings and expectations” and could parse through the multiple documents and statements that the SEC highlights, which include statements (sometimes inconsistent) across many social media platforms and news sites from a variety of Ripple speakers (with different levels of authority) over an extended eight-year period

And, she noted, the buyers in the open market did not agree to lockups and resale restrictions, the way the institutional investors did.

That also meant the XRP issued to Ripple employees was not a security.  They had not made an investment of money/currency, and they could not have functioned as underwriters with their resales because – again – sales into the impersonal market were not sales of securities.

And, with that, she said remaining issues would go to trial (these include some aiding and abetting claims, I’m not sure what else).

Okay.

Let’s just get out of the way that it’s perverse that sales to institutions are treated as securities because institutions are sophisticated.  That’s backwards; it subverts the purpose of the securities laws (to protect less sophisticated investors) and contradicts other tests for whether assets are securities (the Reves test often weights investor sophistication against finding the presence of a security).

Beyond that, I would not be surprised to see both sides seek an interlocutory appeal, in which case, the Second Circuit would get a crack at it.

What about future crypto cases?  Well, the thing about crypto is, the facts are different in every case.  Assuming the Ripple decision is followed in other cases, some would involve ongoing obligations of some kind between the issuer and the token holder, and in those cases, courts may be more likely to find there was an expectation of profit from the promoter’s efforts.  And some courts may be more sympathetic to claims that public statements promoting the token are sufficient to demonstrate an expectation of profit by open market purchasers.  Those courts don’t even necessarily have to reject the Ripple analysis; they can just distinguish it, and say well, the promoters were more blatant here.

Call for Papers - Journal of Financial Market Infrastructures

Dear BLPB Readers,

I wanted to share the below call for papers with interested readers.  Please note the submission deadline of September 15, 2023.  

"We are welcoming submissions in the form of technical papers and policy-oriented papers (forum discussions) on the listed topics below (but not limited to). Please be aware that submissions deadline expires in September 15, 2023.

Papers can be submitted here

Topics of interest:

• Payment and settlement systems;
• Digital money (including CBDCs) and central bank operations;
• Trade repositories, central counterparties (CCPs) and central securities depositories (CSDs);
• Risk management of FMIs (including liquidity, market, counterparty, operational and other risks);
• Correspondent banking and network analysis of FMIs;
• Non-bank payment service providers and access to central bank payment rails;
• Exchanges and multilateral trading platforms;
• Regulation, oversight and supervision of FMIs;
• Tokenized deposits and stablecoins;
• New technologies for FMIs, including distributed ledger technologies (DLTs), machine learning (ML) and artificial intelligence (AI).

Papers can be submitted here

To learn more about our submission guidelines, please click here"

Belmont University College of Law - Hiring For Business Law

The Belmont University College of Law invites applications for entry-level and junior-
lateral candidates in the area of business law for a tenure-track, faculty position to
begin Fall 2024. 

The Belmont College of Law encourages applications from people whose background,
life experiences, and scholarly approaches would contribute to the diversity of our
faculty, curriculum, and programs.

Applicants must possess a J.D. from an accredited U.S. law school and must
demonstrate strong scholarly potential and a commitment to excellence in teaching. 
Belmont is an EOE/AA employer.  Belmont College of Law reserves the right to
exercise a preference for those candidates who support the goals and missions of the
University.

If interested, please submit a letter of interest and curriculum vitae to the Chair of the
Faculty Recruitment Committee, Professor Kristi W. Arth, using the recruitment
committee’s email address - lawfaculty.recruitment@belmont.edu. If you have
questions about the position or Belmont University, please contact Professor Arth at
[email protected].

Belmont University is a private, Christian university focusing on academic excellence
and is located in the heart of Nashville, one of the fastest growing and most culturally
rich cities in the country.  Belmont is the second largest private university in Tennessee
approximating 9,000 students. Belmont students come from every state, more than 35
countries, and all faiths. The Belmont faculty is dedicated to teaching, service, and
active engagement in scholarship.  The median LSAT/GPA for the 124 students who
entered the law school in August 2022 were 160 and 3.70 (75th percentile: 162 and
3.88; 25th percentile: 156 and 3.47).  Belmont’s ultimate bar passage rate for 2018 and
2019 was 100%, one of only a few law schools in the country to have achieved a perfect
pass rate in those years.

Time for an Italian Symposium!

Ciao, from Italy.

Tomorrow, I have the privilege of sharing my work in an international symposium at the University of Genoa at the invitation of Vanessa Villanueva Collao.  This symposium offers a unique opportunity for transnational collaboration among corporate governance scholars.  We also are celebrating Vanessa's completion of her J.S.D. degree (University of Illinois 2023).  

I am presenting my paper, forthcoming in the Michigan State Law Review, on civil insider trading in personal networks.  This is the companion paper to my article on criminal insider trading in personal networks, recently published in the Stetson Business Law Review and part of my larger, long-term project on U.S. insider trading in friendships and family situations.  As many readers may know, this project has fascinated me for a number of years now.  Each phase of the project offers new insights.  And each audience helps provide valuable food for thought. I am confident that the participants in and audience members at tomorrow's symposium will be no exception.  I look forward to the interchanges on my work and the work of others being featured.

The program for the symposium is included below.  You will see more than a few fascinating members of the U.S. corporate governance law academic community (and friends of the BLPB) on the program for this event!  It is always good to reconnect with colleagues, especially our contributors and readers.

 

Generative AI Is the Greatest Thing Since the Discovery of Fire And/Or Will Kill Us All

Depending on who you talk to, you get some pretty extreme perspectives on generative AI. In a former life, I used to have oversight of the lobbying and PAC money for a multinational company. As we all know, companies never ask to be regulated. So when an industry begs for regulation, you know something is up. 

Two weeks ago, I presented the keynote speech to the alumni of AESE, Portugal’s oldest business school, on the topic of my research on business, human rights, and technology with a special focus on AI. If you're attending Connecting the Threads in October, you'll hear some of what I discussed.

I may have overprepared, but given the C-Suite audience, that’s better than the alternative. For me that meant spending almost 100 hours  reading books, articles, white papers, and watching videos by data scientists, lawyers, ethicists, government officials, CEOs, and software engineers. 

Because I wanted the audience to really think about their role in our future, I spent quite a bit of time on the doom and gloom scenarios, which the Portuguese press highlighted. I cited the talk by the creators of the Social Dilemma, who warned about the dangers of social media algorithms and who are now raising the alarms about AI's potential existential threat to humanity in a talk called the AI Dilemma.

I used statistics from the Future of Jobs Report from the World Economic Forum on potential job displacement and from Yale's Jeffrey Sonnenfeld on what CEOs think and are planning for. Of the 119 CEOs from companies like Walmart, Coca-Cola, Xerox and Zoom, 34% of CEOs said AI could potentially destroy humanity in ten years, 8% said that it could happen in five years,  and 58% said that could never happen and they are “not worried.” 42% said the doom and gloom  is overstated, while 58% said it was not. I told the audience about deepfakes where AI can now mimic someone's voice in three seconds.

But in reality, there's also a lot of hope. For the past two days I've been up at zero dark thirty to watch the live stream of the AI For Good Global Summit in Geneva. The recordings are available on YouTube. While there was a more decidedly upbeat tone from these presenters, there was still some tamping down of the enthusiasm.

Fun random facts? People have been using algorithms to make music since the 60s. While many are worried about the intellectual property implications for AI and the arts, AI use was celebrated at the summit. Half of humanity's working satellites belong to Elon Musk. And  a task force of 120 organizations is bringing the hammer down on illegal deforestation in Brazil using geospatial AI. They've already netted 2 billion in penalties. 

For additional perspective, for two of the first guests on my new podcast, I've interviewed lawyer and mediator, Mitch Jackson, an AI enthusiast, and tech veteran, Stephanie Sylvestre, who's been working with OpenAI for years and developed her own AI product somehow managing to garner one million dollars worth of free services for her startup, Avatar Buddy. Links to their episodes are here (and don't forget to subscribe to the podcast).

If you’re in business or advising business, could you answer the following questions I asked the audience of executives and government officials in Portugal?

• How are you integrating human rights considerations into your company's strategy and decision-making processes, particularly concerning the deployment and use of new technologies?

 

• Can you describe how your company's corporate governance structure accounts for human rights and ethical considerations, particularly with regards to the use and impact of emerging technologies?

 

• How are you planning to navigate the tension between increasing automation in your business operations and the potential for job displacement among your workforce?

 

• How does your company approach balancing the need for innovation and competitive advantage with the potential societal and human rights impact of technologies like facial recognition and surveillance?

 

• In what ways is your company actively taking steps to ensure that your supply chain, especially for tech components, is free from forced labor or other human rights abuses?

 

• As data becomes more valuable, how is your company ensuring ethical data collection and usage practices? Are these practices in line with both domestic and international human rights and privacy standards?

 

• What steps are you taking to ensure digital accessibility and inclusivity, thereby avoiding the risk of creating or enhancing digital divides?

 

• How is your company taking into account the potential environmental impacts of your technology, including e-waste and energy consumption, and what steps are being taken to mitigate these risks while promoting sustainable development?

 

• What financial incentives do you have in place to do the ”right thing” even if it’s much less profitable? What penalties do you have in place for the “wrong” behavior?

 

• Will governments come together to regulate or will the fate of humanity lie in the hands of A few large companies?

Luckily, we had cocktails right after I asked those questions.

Are you using generative AI like ChatGPT4 or another source in your business 0r practice? If you teach, are you integrating it into the classroom? I'd love to hear your thoughts. 

The one where the word "noobs" appears in an opinion of the Court of Chancery

Today, I’m blogging about Vice Chancellor Laster’s post-trial decision in In re Columbia Pipeline Group Merger Litigation.  This is a fascinating case for many reasons, starting with its procedural history.

The sum is, TransCanada bought Columbia Pipeline in 2016, and shareholders have been suing about it ever since.

First, there was a fiduciary claim against the Columbia Pipeline directors, which was dismissed on the pleadings.  Then, there was a securities action in federal court alleging disclosure failures in the merger proxy, which was also dismissed on the pleadings.  Then, there was an appraisal action, which resulted in a judgment that the deal price was equal to the fair value.  And then, finally, there was the second fiduciary action – this action, which made it to trial – and which Laster refused to dismiss on the pleadings in March 2021.  The plaintiffs brought claims against Robert Skaggs, the CEO and Chair, and Stephen Smith, the CFO and Executive VP.  They also sued TransCanada as an aider and abetter of Skaggs’s and Smith’s fiduciary breaches.

On the motion to dismiss back in 2021, no one claimed that the first fiduciary action – where the plaintiffs had not even sought books and records – was preclusive of the second one, but the defendants did argue that the earlier securities action and the appraisal action precluded – through estoppel, or as precedent, or as persuasive legal authority – the second fiduciary action.

Laster rejected both arguments.  For the earlier securities action, he spent some time on the difference between federal and Delaware’s pleading standards, but his reasoning carries a whiff of disdain for federal courts’ understanding of materiality in the merger context. 

As for the appraisal action, he held that it was asking a different legal question than the fiduciary action, namely, whether the deal price represented fair value, not whether Skaggs and Smith breached their fiduciary duties by failing to obtain the best value for the stockholders.

The upshot of all of this was that Laster permitted a fiduciary claim to proceed against Skaggs, Smith, and TransCanada.  After the Skaggs and Smith settled, the claims against TransCanada proceeded to trial, and that was the decision issued earlier this week, where Laster found that TransCanada did, in fact, aid and abet breaches of fiduciary duty.

Several things to talk about here, so behind a cut it all goes.

Continue reading