Friday, January 26, 2024

Are Lawyers, Lawmakers, and Law Professors Really Ready for AI in 2024?

We just finished our second week of the semester and I’m already exhausted, partly because I just submitted the first draft of a law review article that’s 123 pages with over 600 footnotes on a future-proof framework for AI regulation to the University of Tennessee Journal of Business Law. I should have stuck with my original topic of legal ethics and AI.

But alas, who knew so much would happen in 2023? I certainly didn’t even though I spent the entire year speaking on AI to lawyers, businesspeople, and government officials. So, I decided to change my topic in late November as it became clearer that the EU would finally take action on the EU AI Act and that the Brussels effect would likely take hold requiring other governments and all the big players in the tech space to take notice and sharpen their own agendas.

But I’m one of the lucky ones because although I’m not a techie, I’m a former chief privacy officer, and spend a lot of time thinking about things like data protection and cybersecurity, especially as it relates to AI. And I recently assumed the role of GC of an AI startup. So, because I’m tech-adjacent, I’ve spent hours every day immersed in the legal and tech issues related to large and small language models, generative AI (GAI), artificial general intelligence (AGI), APIs, singularity, the Turing test, and the minutiae of potential regulation around the world. I’ve become so immersed that I actually toggled between listening to the outstanding Institute for Well-Being In Law virtual conference and the FTC’s 4-hour tech summit yesterday with founders, journalists, economists, and academics. Adding more fuel to the fire, just before the summit kicked off, the FTC announced an inquiry into the partnerships and investments of  Alphabet, Inc., Amazon.com, Inc., Anthropic PBC, Microsoft Corp., and OpenAI, Inc. Between that and the NY Times lawsuit against OpenAI and Microsoft alleging billions in damages for purported IP violations, we are living in interesting times.

If you’ve paid attention to the speeches at Davos, you know that it was all AI all the time. I follow statements from the tech leaders like other people follow their fantasy football stats or NCAA brackets. Many professors, CEOs, and general consumers, on the other hand, have been caught by surprise by the very rapid acceleration of the developments, particularly related to generative AI.

However, now more members of the general public are paying attention to the concept of deepfakes and demanding legislation in part because the supernova that is Taylor Swift has been victimized by someone creating fake pornographic images of her. We should be even more worried about the real and significant threat to the integrity of the fifty global elections and occurring in 2024 where members of the public may be duped into believing that political candidates have said things that they did not, such as President Biden telling people not to vote in the New Hampshire primary and to save their votes for November.

For those of us who teach in law schools in the US and who were either grading or recovering from grading in December, we learned a few days before Christmas that Lexis was rolling out its AI solution for 2Ls and 3Ls. Although I had planned to allow and even teach my students the basics of prompt engineering and using AI as a tool (and not a substitute for lawyering) in my business associations, contract drafting, and business and human rights class, now I have to also learn Lexis’ solution too. I feel for those professors who still ban the use of generative AI or aren’t equipped to teach students how to use it ethically and effectively.

Even so, I’m excited and my students are too. The legal profession is going to change dramatically over the next two years, and it’s our job as professors to prepare our students. Thompson Reuters, the ABA, and state courts have made it clear that we can’t sit by on the sidelines hoping that this fad will pass.

Professionally, I have used AI to redraft an employee handbook in my client’s voice (using my employment law knowledge, of course), prepare FAQs for another client’s code of conduct in a very specialized industry, prepare interview questions for my podcast, and draft fact patterns for simulations for conferences and in class. I’ve also tested its ability to draft NDAs and other simple agreements using only ChatGPT. It didn’t do so well there, but that’s because I know what I was looking for. And when I gave additional instructions, for example, about drafting a mutual indemnification clause and then a separate supercap, it did surprisingly well. But I know what should be in these agreements. The average layperson does not, something that concerns Chief Justice Roberts and should concern us all.

How have you changed your teaching with the advent of generative AI? If you’re already writing or teaching about AI or just want more resources, join the 159 law professors in a group founded by Professors April Dawson and Dan Linna. As for my law review article, I’m sure a lot of it will be obsolete by the time it’s published, but it should still be an interesting, if not terrifying, read for some.

January 26, 2024 in Business Associations, Compliance, Consulting, Contracts, Corporate Governance, Corporate Personality, Corporations, CSR, Current Affairs, Ethics, Human Rights, Intellectual Property, International Law, Jobs, Law Firms, Law School, Lawyering, Legislation, Marcia Narine Weldon, Research/Scholarhip, Science, Teaching, Technology, Web/Tech | Permalink | Comments (0)

Thursday, December 14, 2023

Widener Law Seeks Tenure-Track Contracts Professor

Widener Law Commonwealth seeks an entry-level or pre-tenure lateral faculty member to fill one tenure track position starting in the 2024-2025 academic year. We have a specific need in our year-long Contracts course. The remainder of the teaching package is flexible. This position reports to the dean of the law school.

WLC is a dynamic community of teachers and scholars. We pride ourselves on our dedication to our students, our engagement with teaching, and our scholarly impact. Many of our scholars are actively engaged in law reform efforts at both the state and federal level.

The law school is committed to fostering an environment in which faculty, staff, and students from a variety of backgrounds, cultures, and personal experiences are welcomed and can thrive. Faculty and staff are active participants in our work to enhance diversity, equity, inclusion, and belonging. We welcome applications from members of historically underrepresented groups.

Established in 1989, Widener Law Commonwealth is an independently accredited law school within Widener University. Located in Harrisburg, PA, the law school’s location in the capital of Pennsylvania provides impactful experiences for both our faculty and students. . . .

+++++

The full position announcement is here.

December 14, 2023 in Contracts, Joan Heminway, Jobs | Permalink | Comments (0)

Sunday, October 1, 2023

DEIB and Business Law Program this Week

 

BLPB(DiversityProgramGraphic)

RWU Law looks forward to the next installment of the Integrating Doctrine & Diversity Speaker Series:

HOW DOES DIVERSITY, EQUITY, INCLUSION AND BELONGING PEDAGOGY FIT IN BUSINESS ISSUES AND FINANCIAL AFFAIRS CLASSES? LEADING WITH DEIB IN WILLS, TRUSTS, ESTATES, INSURANCE, CONTRACTS, AND TAXATION LAW CLASSES

Wednesday, October 4 | 2:00 – 3:00 PM EST

Zoom Webinar Registration here.

Details about the Featured Speakers & Program here.

October 1, 2023 in Conferences, Contracts, Insurance, Joan Heminway, Teaching | Permalink | Comments (0)

Friday, July 28, 2023

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. 

 

 

 

 

 

 

 

 

 

 

 

July 28, 2023 in Compliance, Conferences, Contracts, Corporate Finance, Corporations, Current Affairs, Ethics, Law Firms, Law Reviews, Law School, Lawyering, Marcia Narine Weldon, Teaching, Technology, Web/Tech, Writing | Permalink | Comments (0)

Saturday, January 14, 2023

Can The Next Generation of Lawyers Save the World?

An ambitious question, yes, but it was the title of the presentation I gave at the Society for Socio-Economists Annual Meeting, which closed yesterday. Thanks to Stefan Padfield for inviting me.

In addition to teaching Business Associations to 1Ls this semester and running our Transactional Skills program, I'm also teaching Business and Human Rights. I had originally planned the class for 25 students, but now have 60 students enrolled, which is a testament to the interest in the topic. My pre-course surveys show that the students fall into two distinct camps. Most are interested in corporate law but didn't know even know there was a connection to human rights. The minority are human rights die hards who haven't even taken business associations (and may only learn about it for bar prep), but are curious about the combination of the two topics. I fell in love with this relatively new legal  field twelve years ago and it's my mission to ensure that future transactional lawyers have some exposure to it.

It's not just a feel-good way of looking at the world. Whether you love or hate ESG, business and human rights shows up in every factor and many firms have built practice areas around it. Just last week, the EU Corporate Sustainability Reporting Directive came into force. Like it or not, business lawyers must know something about human rights if they deal with any company that has or is part of a supply or value chain or has disclosure requirements. 

At the beginning of the semester, we discuss the role of the corporation in society. In many classes, we conduct simulations where students serve as board members, government officials, institutional investors, NGO leaders, consumers, and others who may or may not believe that the role of business is business. Every year, I also require the class to examine the top 10 business and human rights topics as determined by the Institute of Human Rights and Business (IHRB). In 2022, the top issues focused on climate change:

  1. State Leadership-Placing people at the center of government strategies in confronting the climate crisis
  2. Accountable Finance- Scaling up efforts to hold financial actors to their human rights and environmental responsibilities
  3. Dissenting Voices- Ensuring developmental and environmental priorities do not silence land rights defenders and other critical voices
  4. Critical Commodities- Addressing human rights risks in mining to meet clean energy needs
  5. Purchasing Power- Using the leverage of renewable energy buyers to accelerate a just transition
  6. Responsible Exits- Constructing rights-based approaches to buildings and infrastructure mitigation and resilience
  7. Green Building- Building and construction industries must mitigate impacts while avoiding corruption, reducing inequality, preventing harm to communities, and providing economic opportunities
  8. Agricultural Transitions- Decarbonising the agriculture sector is critical to maintaining a path toward limiting global warming to 1.5 degrees
  9. Transforming Transport- The transport sector, including passenger and freight activity, remains largely carbon-based and currently accounts for approximately 23% total energy-related CO2 global greenhouse gas emissions
  10. Circular Economy- Ensure “green economy” is creating sustainable jobs and protecting workers

The 2023 list departs from the traditional type of list and looks at the people who influence the decisionmakers in business. That's the basis of the title of this post and yesterday's presentation. The 2023 Top Ten are:

  1. Strategic Enablers- Scrutinizing the role of management consultants in business decisions that harm communities and wider society. Many of our students work outside of the law as consultants or will work alongside consultants. With economic headwinds and recessionary fears dominating the headlines, companies and law firms are in full layoff season. What factors should advisors consider beyond financial ones, especially if the work force consists of primarily lower-paid, low-skilled labor, who may not be able to find new employment quickly? Or should financial considerations prevail?
  2. Capital Providers- Holding investors to account for adverse impacts on people- More than 220 investors collectively representing US$30 trillion in assets under management  have signed a public statement acknowledging the importance of human rights impacts in investment and global prosperity. Many financial firms also abide by the Equator Principles, a benchmark that helps those involved in project finance to determine environmental and social impacts from financing. Our students will serve as counsel to banks,  financial firms, private equity, and venture capitalists. Many financial institutions traditionally focus on shareholder maximization but this could be an important step in changing that narrative. 
  3. Legal Advisors- Establishing norms and responsible performance standards for lawyers and others who advise companies. ABA Model Rule 2.1 guides lawyers to have candid conversations that "may refer not only to law but to other considerations such as moral, economic, social and political factors, that may be relevant to the client's situation." Business and human rights falls squarely in that category. Additionally, the ABA endorsed the United Nations Guiding Principles on Business and Human Rights ten years ago and released model supply chain contractual clauses related to human rights in 2021. Last Fall, the International Bar Association's Annual Meeting had a whole track directed to business and human rights issues. Our students advise on sanctions, bribery, money laundering, labor relations, and a host of other issues that directly impact human rights. I'm glad to see this item on the Top 10 list. 
  4. Risk Evaluators- Reforming the role of credit rating agencies and those who determine investment worthiness of states and companies. Our students may have heard of S&P, Moody's, & Fitch but may not know of the role those entities played in the 2008 financial crisis and the role they play now when looking at sovereign debt.  If the analysis from those entities  are flawed or laden with conflicts of interest or lack of accountability, those ratings can indirectly impact the government's ability to provide goods and services for the most vulnerable citizens.
  5. Systems Builders- Embedding human rights considerations in all stages of computer technology. If our students work in house or for governments, how can they advise tech companies working with AI, surveillance, social media, search engines and the spread of (mis)nformation? What ethical responsibilities do tech companies have and how can lawyers help them wrestle with these difficult issues?
  6. City Shapers-  Strengthening accountability and transformation in real estate finance and construction. Real estate constitutes 60% of global assets. Our students need to learn about green finance, infrastructure spending, and affordable housing and to speak up when there could be human rights impacts in the projects they are advising on. 
  7. Public Persuaders- Upholding standards so that advertising and PR companies do not undermine human rights. There are several legal issues related to advertising and marketing. Our students can also play a role in advising companies, in accordance with ethical rule 2.1, about persuaders presenting human rights issues and portraying controversial topics related to gender, race, indigenous peoples, climate change in a respectful and honest manner. 
  8. Corporate Givers- Aligning philanthropic priorities with international standards and the realities of the most vulnerable. Many large philanthropists look at charitable giving as investments (which they are) and as a way to tackle intractable social problems. Our students can add a human rights perspective as advisors, counsel, and board members to ensure that organizations give to lesser known organizations that help some of the forgotten members of society. Additionally, Michael Porter and Mark Kramer note that a shared-value approach, "generat[es] economic value in a way that also produces value for society by addressing its challenges. A shared value approach reconnects company success with social progress. Firms can do this in three distinct ways: by reconceiving products and markets, redefining productivity in the value chain, and building supportive industry clusters at the company's locations." Lawyers can and should play a role in this. 
  9. Business Educators- Mainstreaming human rights due diligence into management, legal, and other areas of academic training. Our readers teaching in business and law schools and focusing on ESG can discuss business and human rights under any of the ESG factors. If you don't know where to start, the ILO has begun signing MOUs with business schools around the world to increase the inclusion of labor rights in business school curricula. If you're worried that it's too touchy feely to discuss or that these topics put you in the middle of the ESG/anti-woke debate, remember that many of these issues relate directly to enterprise risk management- a more palatable topic for most business and legal leaders. 
  10. Information Disseminators- Ensuring that journalists, media, and social media uphold truth and public interest. A couple of years ago, "fake news" was on the Top 10 and with all that's going on in the world with lack of trust in the media and political institutions, lawyers can play a role in representing reporters and media outlets. Similarly, lawyers can explain the news objectively and help serve as fact checkers when appearing in news outlets.

If you've made it to the end of this post, you're either nodding in agreement or shaking your head violently in disagreement. I expect many of my students will feel the same, and I encourage that disagreement. But it's my job to expose students to these issues. As they learn about ESG from me and the press, it's critical that they disagree armed with information from all sides.

So can the next generation of lawyers save the world? Absolutely yes, if they choose to. 

January 14, 2023 in Business Associations, Business School, Compliance, Conferences, Consulting, Contracts, Corporate Finance, Corporate Governance, Corporate Personality, Corporations, CSR, Current Affairs, Ethics, Financial Markets, Human Rights, International Business, International Law, Law Firms, Law School, Lawyering, Management, Marcia Narine Weldon, Private Equity, Shareholders, Stefan J. Padfield, Teaching, Technology, Venture Capital | Permalink | Comments (0)

Friday, December 23, 2022

Give Yourself the Gift of Understanding Contract Drafting and Negotiation In Miami or Virtually February 2023

It's the holidays and it's time to treat yourself and members of your team to practical training and fantastic networking in sunny Miami in February. We don't have bomb cyclones down here. The Transactional Skills Program at the University of Miami School of Law couldn't be more excited to host the How to Contract Conference from February 15-17, 2023. 

Thumbnail_ContractsCon Flyer - 1 page (12-23-2022)

  • ContractsCon is a training and networking EXTRAVAGANZA focused on the practical contract drafting and negotiating skills that in-house counsel and contracts professionals need to know. 
  • This event is a zero-fluff, to-the-point training on the nitty-gritty details. ContractsCon includes:
    • speakers who get the in-house experience and can explain why we draft the way we do
    • training centered around provision-level playbooks for you and your company to use when you return to work
    • workshops that provide a deeper dive into more nuanced topics and include interactive group activities
    • ContractsCon Playbook, featuring the advice and drafting approaches discussed at ContractsCon
    • access to How to Contract’s SaaS Contracts Training Library, with 20+ hours of training videos, the Cloud Services Agreement Playbook, and lots more (through March 31, 2023)
    • CLE pending in 26 states for up to 7 hours for virtual ticket holders and up to 13 hours for in-person attendees
  • ContractsCon is an annual training and networking event for in-house counsel and  contract professionals presented by How to Contract and Law Insider and hosted by University of Miami School of Law. This 2-day event will feature over 20 live training sessions with some of the most well-known contract experts.
  • Our promise is to share with you the core skills and expertise you need to work in-house on commercial contracts. All you have to do is show up ready to learn.
  • ContractsCon is designed for in-house lawyers and professionals who want to learn:
    • the insights and techniques needed to handle the commercial contracts filling their inbox every day,
    • how experienced lawyers manage risk, work efficiently, and make the hard decisions in challenging circumstances,
    • WHAT to say, WHY to say it that way, and HOW to reach the best-negotiated deal you can with your contract counterparties.
  • Give us two days of your time and you'll walk away with enhanced skills that enable you to better protect your company and clients. You'll gain more confidence.  You'll finally leave those "I don't know" and "I'm not sure" frustrations behind you. You'll also be able to network with other lawyers and professionals who share your desire to improve your skills and overcome any traces of imposter syndrome. 

Click here to get your ticket. And I'll see you in Miami, mojito in hand (after I do my session, of course).

December 23, 2022 in Conferences, Contracts, Corporations, Current Affairs, Law Firms, Law School, Lawyering, Marcia Narine Weldon, Negotiation | Permalink | Comments (0)

Friday, October 7, 2022

How to Contract Conference- February 16-17 in Miami

I had originally planned to post Pt. 2 of the blog post I did a couple of weeks ago, but this announcement is time sensitive.

I'm thrilled to announce that the Transactional Skills Program at the University of Miami School of Law is partnering with Laura Frederick for the second How to Contract conference. It's time sensitive because we are considering holding a side event with a contract drafting and negotiation competition for law students if there's enough interest. If you think you would be interested, please email me at [email protected].

For lawyers, there are virtual and live options for the contract conference. I've cut and pasted from the website so you can see why you should come to sunny Miami (and it won't be hurricane season):

It is not about the mega deals.

ContractsCon is about the contracts you work on EVERY DAY. We want to help you learn how to draft and negotiate the deals you see all the time.

Because for every 100-page specialized contract sent to outside counsel, there are thousands of smaller but important ones that in-house counsel and professionals do day in and day out.

ContractsCon focuses on how we manage risk and make the tough decisions with less time and information than we need.

It is not a summary of recent case law.

ContractsCon is about providing actionable advice to help you do the work that you have sitting in your inbox RIGHT NOW.

It's not about case names or citations and we don't get into academic explanations.

ContractsCon focuses on the real-world expertise from experienced practitioners that you need to improve your contract skills and expertise and become better at drafting and negotiating in the real world.

It is not going to put you to sleep.

ContractsCon is about the fun and awesomeness of contracts. We are organizing it to be a true lovefest for everything contracts.  

Why not combine learning about contracts with having fun?

You'll meet other lawyers and professionals passionate about contract drafting and negotiating. Our sessions and workshops feature contracting superstars who love what they do and will share their excitement with you. Plus we're planning a ton of activities on-site and online to keep you engaged. 

ContractsCon is designed for in-house lawyers and professionals who want to learn:

  • the insights and techniques needed to handle the commercial contracts filling their inbox every day,
  • how experienced lawyers manage risk, work efficiently, and make the hard decisions in challenging circumstances,
  • WHAT to say, WHY to say it that way, and HOW to reach the best-negotiated deal you can with your contract counterparties.

Virtual ticket holders get access to 6 HOURS of no-fluff practical contract training by experienced practicing lawyers.

People who attend in person in Miami get 12 HOURS of training, including 6 hours of interactive skills workshops.

I hope to see you in Miami in a few months. Don't forget to follow Laura Frederick on LinkedIn for great contract drafting tips and to let me know whether you and your students might be interested in participating in a contract drafting competition. 

 

 

 

 

 

 

October 7, 2022 in Commercial Law, Conferences, Contracts, Corporations, Law Firms, Law School, Lawyering, LLCs, M&A, Marcia Narine Weldon, Negotiation, Teaching, Unincorporated Entities | Permalink | Comments (0)

Monday, July 4, 2022

Celebrating Independence without the Trappings: A Business Law Prof "Take"

Stefan's Independence Day post is far more erudite than mine.  Kudos and thanks to him for the substantive legal content.  This post covers more of a teaching point--one that I often think about in the background but want to being to the fore here.

I am focused in writing this on things like family reunions, local holiday festivities, grilling out, and fireworks.  It has been a rocky road to the Fourth in these and other aspects this year.  Overlapping causes can easily be identified.  As if the continuing COVID-19 nightmare were not enough . . . .

I will start with COVID-19, however.  I have heard of many who are missing family and other events this weekend because of positive COVID-19 diagnoses, test results, or exposures.  I was sad to learn, for example, that Martina Navratilova had to miss the historic Wimbledon centennial celebration, including the Parade of Champions, yesterday.  But there is more.

The air travel debacles have been well publicized.  Weather, labor shortages, and other issues contribute to the flight changes and cancellations airlines need to make on this very popular travel weekend--expected to set records.  And gas prices have stymied the trips of some by land (again, at a time during which travel was expected to be booming), although news of some price drops in advance of the weekend was certainly welcomed.  Even for those who are well and able to travel to spend holiday time with family, it has been a challenge.

The cost of your cookout this year also may be higher, should you choose to have one.  Supply chain turmoils and the effects of inflation and the war in Ukraine all are listed as contributing factors.  (The linked article does note that strawberries are a good buy, nevertheless, which is welcome news to me.)

And yes, fireworks displays also have been disrupted.  The causes include both concerns about weather (dry conditions and flammables do not mix well!) as well as the impact of labor shortages, inflation, and other factors influencing the supply of goods.  Of course, there also is a high demand for fireworks in the re-opened socio-economic environment.  All have been widely reported.  See here, here, here, and here.

These holiday weekend disappointments create personal strife.  But why should a business law prof care about all of this? 

I find that stepping back and looking at the state of business at given times can be instructive in reflecting on the ways in which business law policy, theory, and doctrine do and should operate in practice.  In an inflationary period with labor shortages, what profit-seeking business would not be looking at customers, clients, and employees as an important constituencies?  In an era of supply chain dislocations, what business managers would not be focused on strong, positive relationships with those who sell them goods and services significant to their business?  And, of course, with investment returns of direct and indirect import to the continued supply of funding to business ventures, firms need to pay heed to investor concerns.  Note how these observations allow for commentary on principles of/underlying contract law, contract drafting, securities regulation, fiduciary duty in (and other elements of) business associations law, insurance law, and more.

Looking at legal theory, policy, and doctrine in practical contexts can useful to a business law prof for teaching, scholarship, and service--depending on the nature of a person's appointment and the institution at which the prof teaches.  The current Fourth of July woes are but one example of how those connections can be made.  But I want to invite folks to make them, especially in their teaching--in current courses (if you are teaching over the summer) and in fall and spring course planning, which I know many folks are now doing.

In closing, I send sympathetic vibes to all who had plans foiled by (or who decided to have a "staycation" and avoid) some or all of the holiday weekend dislocations I highlight in this post.  I hope you found joy in your Independence Day weekend nonetheless.

July 4, 2022 in Business Associations, Contracts, Corporate Finance, Current Affairs, Financial Markets, Insurance, Joan Heminway, Law School, Lawyering, Research/Scholarhip, Service, Teaching | Permalink | Comments (0)

Monday, June 6, 2022

Colin Marks: Total Return Swaps ≡ Secured Transactions?!

I am excited to be promoting here an inventive and interesting paper, Total Return Meltdown: The Case for Treating Total Return Swaps as Disguised Secured Transactions, written by friend-of-the-BLPB Colin Marks (St. Mary's School of Law).   The SSRN abstract follows.

Archegos Capital Management, at its height, had $20 billion in assets. But in the spring of 2021, in part through its use of total return swaps, Archegos sparked a $30 billion dollar sell-off that left many of the world’s largest banks footing the bill. Mitsubishi UFJ Group estimated a loss of $300 million; UBS, Switzerland’s biggest bank, lost $861 million; Morgan Stanley lost $911 million; Japan’s Nomura, lost $2.85 billion; but the biggest hit came to Credit Suisse Group AG which lost $5.5 billion. Archegos, itself lost $20 billion over two days. These losses were made possible due to the unique characteristics of total return swaps and Archegos’ formation as a family office, both of which permitted Archegos to skirt trading regulations and reporting requirements. Archegos essentially purchased beneficial ownership in large amounts of stocks, particularly ViacomCBS Inc. and Discovery Inc., on credit. Under Regulation T of the Federal Reserve Board, up to 50 percent of the purchase price of securities can be borrowed on margin. However, to avoid these rules, Archegos instead entered into total return swaps with the banks whereby the bank is the actual owner of the stock, but Archegos would bear the risk of loss should the price of the stock fall and reap the benefits if the stock were to go up or were to make a distribution. Archegos would still pay the transaction fees, but the device permitted Archegos to buy massive amounts of stock without having the initial margin requirements, thus making Archegos heavily leveraged. This article argues that the total return swap contracts are analogous to and should be re-characterized as what they really are – disguised secured transactions. Essentially the banks are lending money to enable the Archegoses of the world to buy stocks, and are simply retaining a security interest in the stocks. Such a re-characterization should place such transactions back into Regulation T and the margin limits. But re-characterization also offers another contract law approach that is more draconian. If the structure of the contract violates a regulation, then total return swaps could be declared void as against public policy. This raises the specter that a court could apply the doctrine of in pari delicto and leave the parties where they found them in any subsequent suits to recover outstanding debts.

I do not teach, research, or write in the secured transactions space, but this work engages corporate finance and contract law as well.  (I am grateful that Colin, among others, has encouraged my forays into contract law research over the years.)  I was privileged to have the opportunity to preview Colin's arguments and offer some feedback during his research and writing of this paper, which is forthcoming in the Pepperdine Law Review.  I find his argument creative and intriguing.  I think you may, too.

June 6, 2022 in Contracts, Corporate Finance, Financial Markets, Joan Heminway, Securities Regulation | Permalink | Comments (1)

Monday, May 9, 2022

Pandemic Fallout: Legal Questions About Relational Contracts

In a recent article, I offer a description and critique of the utility of "formal relational contracts" when the going gets rough for businesses.  That article, The Potential Legal Value of Relational Contracts in a Time of Crisis or Uncertainty, 85 Law & Contemporary Probs. 131 (2022), was published as part of a symposium volume focusing on "Contract in Crisis" (co-edited by Temple Law's Jonathan C. Lipson & Rachel Rebouché).  The table of contents for the entire volume can be found here.  The abstract for my article follows.

A co-authored October 2020 Harvard Business Review (“HBR”) article promotes the use of “formal relational contracts” as a means of obviating or limiting opportunistic behaviors by contracting parties, including parties contending with cataclysmic events or factors in or outside the business that place significant financial stress on the business and its relations with others. The HBR co-authors note that the uncertainties exposed by and emanating from the ongoing COVID-19 pandemic are formative to their proposition. They specifically focus their attention on supply contracts, although their ideas may have broader application. This article preliminarily inspects the claims made in that HBR article from the standpoint of U.S. legal doctrine and lawyering and suggests avenues for future research, with the limited goal of offering legal commentary on a broad-based contract design idea that responds to the need for business operations flexibility in a pandemic or in other times of systemic or individualized crisis.

Many of us in business law watched as the pandemic raised significant questions about supply agreements, distribution agreements, merger/acquisition agreements, insurance contracts, and more.  I found it interesting to inquire, investigate, and contemplate whether any type of contract design fares more or less well in circumstances of crisis impacting businesses.  Over a period of months, in sessions with many of the authors of work in this symposium book, I had the opportunity to do that and to write up some of my thoughts.  As many readers may realize, I do not publish pure contract pieces often.  But I was inspired and encouraged to research and write this one.

May 9, 2022 in Contracts, Joan Heminway | Permalink | Comments (4)

Friday, December 31, 2021

New Year's Resolution for Lawyers

People rarely keep resolutions, much less ones they don’t make for themselves, but here are some you may want to try.

  1. Post information about the law and current events that lay people can understand on social media. You don’t need to be a TikTok lawyer and dance around, but there’s so much misinformation out there by “influencers” that lawyers almost have a responsibility to correct the record.
  2. Embrace legal tech. Change is scary for most lawyers, but we need to get with the times, and you can start off in areas such as legal research, case management, accounting, billing, document automation and storage, document management, E-discovery, practice management, legal chatbots, automaton of legal workflow, contract management, artificial intelligence, and cloud-based applications. Remember, lawyers have an ethical duty of technological competence.
  3. Learn about legal issues related to the metaverse such as data privacy and IP challenges.
  4. Do a data security audit and ensure you understand where your and your clients’ data is and how it’s being transmitted, stored, and destroyed. Lawyers have access to valuable confidential information and hackers know that. Lawyers also have ethical obligations to safeguard that information. Are you communicating with clients on WhatsApp or text messages? Do you have Siri or Alexa enabled when you’re talking about client matters? You may want to re-think that. Better yet, hire a white hat hacker to assess your vulnerabilities. I'll do a whole separate post on this because this is so critical. 
  5. Speaking of data, get up to speed on data analytics. Your clients use data every day to optimize their business performance. Compliance professionals and in-house lawyers know that this is critical. All lawyers should as well.
  6. Get involved with government affairs. Educate legislators, write comment letters, and publish op-ed pieces so that people making the laws and influencing lawmakers can get the benefit of your analytical skills. Just make sure you’re aware of the local, state, and federal lobbying laws.
  7. Learn something completely new. When you do your CLE requirement, don’t just take courses in your area of expertise. Take a class that has nothing to do with what you do for a living. If you think that NFTs and cryptocurrency are part of a fad waiting to implode, take that course. You’ll either learn something new or prove yourself right.
  8. Re-think how you work. What can you stop, start, and continue doing in your workplace and family life?
  9. Be strategic when thinking about diversity, equity, and inclusion. Lawyers talk about it, but from what I observe in my lawyer coaching practice and the statistics, the reality is much different on the ground and efforts often backfire.
  10. Prioritize your mental health and that of the members on your team. Do you need to look at billable hours requirements? What behavior does your bonus or promotion system incentivize? What else can you do to make sure that people are valued and continually learning? When was the last time you conducted an employee engagement survey and really listened to what you team members are saying? Whether your team is remote or hybrid, what can you do to make people believe they are part of a larger mission? There are so many resources out there. If you do nothing else on this list, please focus on this one. If you want help on how to start, send me an email.

Wishing you a safe, healthy, and happy 2022.

December 31, 2021 in Compliance, Contracts, Corporations, Current Affairs, Ethics, Film, Intellectual Property, Jobs, Law Firms, Lawyering, Legislation, Management, Marcia Narine Weldon, Technology, Wellness | Permalink | Comments (0)

Monday, December 13, 2021

Classifying and Labeling Standard M&A Contract Provisions

I spent a bunch of the day today reading an excellent draft paper written by one of my 3L students.  The paper is about fraud carveouts in no seller indemnity deals backed by representations and warranties insurance.  But this post is not about that.  It is about a question I asked the student (and myself) in connection with my review of the paper about how to classify or label certain provisions she was describing.

The standard structure of an M&A agreement includes articles clearly labeled as including representations and warranties, covenants, and conditions.  However, other articles are not as transparent in advertising their contents.  An article entitled "Indemnification" typically does include an express agreement (sometimes mutual agreements) to indemnify that would easily be classified as a covenant.  But that article also may include an exclusive remedy provision, restricting recourse for a breach of representation or warranty to the indemnification.  An example would be as follows (courtesy of Law Insider):

Sole and Exclusive Remedy. From and after the Closing, the indemnification provisions of this Article XII shall be the sole and exclusive remedy of each Party (including the Seller Indemnified Parties and the Purchaser Indemnified Parties) (i) for any breach of any Party’s representations, warranties, covenants or agreements contained in this Agreement or (ii) otherwise with respect to this Agreement or the transactions contemplated hereby with respect to the Company, other than in the case of (i) and (ii) instances of fraud or intentional misconduct or claims for non-monetary relief with respect to the enforcement of Section 6.02 or 8.03. In furtherance of the foregoing, each Party hereby waives, to the fullest extent permitted under Applicable Law, any and all rights, claims and causes of action it may have against another Party hereunder or under Applicable Law with respect to the claims described in clauses (i) and (ii) above, other than instances of fraud or intentional misconduct or claims for non-monetary relief with respect to the enforcement of Section 6.02 or 8.03.

The first part of this provision is treated as an enforceable agreement between the parties even though it reads somewhat more like an acknowledgement, affirmation, or promise. Indeed, the provision expresses an understanding between the parties.  So it also is likely best classified as a covenant.  The last part is a waiver.

But what about some of the provisions included in the M&A article entitled "Miscellaneous" (or sometimes "General" or the like)?  Let's take an integration clause like this one (also courtesy of Law Insider):

Integration Clause. This Agreement, including all attachments and exhibits hereto, supersede[s] all prior oral or written agreements, if any, between the parties and constitutes the entire agreement between the parties with respect to the work to be performed.

Or an non-reliance provision like this one (again, courtesy of Law Insider):

Non-Reliance. Each Party acknowledges that in agreeing to this Agreement it has not relied on any oral or written representation, warranty or other assurance, except as otherwise set forth in this Agreement, and waives all rights and remedies which might otherwise be available to it in respect thereof, except that nothing in this Agreement will limit or exclude any liability of a Party for fraud.

How might we classify and label those provisions?  Neither reads like a covenant--an actionable, enforceable, agreement or promise.  Each provides atmosphere or context.

Are these provisions acknowledgments?  (The non-reliance provision even uses that word instrumentally!)  Or maybe they are representations, affirmations, or even warranties . . . .

All of this worry about classification and labeling may not be worth much in the end.  Apart from accurate descriptions in expository writing, do we really care how these contract provisions are classified and labeled?  Certainly, it helps us to have labels that we can attach to performance and compliance descriptors in discussing contract enforcement (e.g., representations and warranties are accurate and complete or breached; covenants are complied with or there is a failure of compliance).  But maybe there is not much else in a label . . . .  Admittedly, I have not researched the matter or thought through any significant legal ramifications; I am just sharing reactions and impressions based on my review of a student paper.  As a result (and as always), your views and ideas are welcomed.

December 13, 2021 in Contracts, Joan Heminway, Teaching | Permalink | Comments (0)

Monday, November 22, 2021

JP Morgan Sued Elon Musk’s Tesla For Breach Of Contract: How Did I Predict It? - Lécia Vicente (Guest Post)

Friend-of-the-BLPB Lécia Vicente sent along the following post, which I thought our readers might find interesting, especially in light of the blog's prior posts on Elon Musk and his conduct (including those from Ann and me, like this one--citing to many others--and that one).  Enjoy!  Comment, as desired.  I have my own comments, which I will share in due course.

And (in this week of giving thanks) I offer gratitude to Lécia for bringing this post to us!  (You may remember that she guest blogged with us last December--almost a year ago.  Where did the time go?)

+++++

On November 6th 2021, Elon Musk polled his Twitter followers to determine if he should sell 10% of his stake in his company, Tesla. He wrote, “[m]uch is made lately of unrealized gains being a means of tax avoidance, so I propose selling 10% of my Tesla stock. Do you support this?”

On November 8th 2021, two days after Musk’s tweet, I tweeted the following question, "[c]an Musk actually be sued if he doesn’t follow through on his pledge to sell?” Initially, I was more concerned about securities law. Based on Musk’s tweets, shareholders might be misled to sell, meaning that Musk could be sued for misrepresentation. Similar scenarios of securities fraud involving Tesla and Elon Musk have happened before. In addition, Musk’s tweets could trigger claims of breach of contractual duties. A week after my tweet, on November 15th 2021, JP Morgan filed a complaint against Tesla for breach of contractual duties. I guess I predicted it.

Specifically, in JP Morgan Chase Bank, National Association, London Branch v. Tesla, Inc, JP Morgan is suing for the Tesla CEO’s tweet on August 7th 2018 when he stated “Am considering taking Tesla private at $420. Funding secured.” This statement came from the chair of Tesla’s board of directors and controlling shareholder. While the tone and seriousness of the announcement is debatable, JP Morgan took it seriously. Seriously enough to sue.

On February 27th 2014 and March 28th 2014, JP Morgan entered a series of agreements with Tesla in which JP Morgan would buy Tesla stock warrants at a specified “strike price.” Additionally, the warrants maintained an adjustment clause in case of an announcement of a significant corporate transaction involving Tesla, such as an acquisition. The purpose of the adjustment clause was to protect the parties from adverse economic effects. The 2021 Warrants expired between June and July 2021.

As explained in the complaint, in a Form 8-K filed on November 5th 2013, Tesla identified Elon Musk’s personal Twitter account “as a source of material public information about the company” and encouraged investors to review that account. The complaint also stated that:

Because the tweet violated NASDAQ rules requiring at least 10 minutes’ advance notice before a listed corporation publicly disclosed a going-private transaction, NASDAQ temporarily halted trading in Tesla’s stock following Mr. Musk’s tweet, evidencing that the exchange considered the tweet to constitute an announcement by the company itself.

After Mr. Musk’s tweet, Tesla’s Chief Financial Officer, its head of communications, and its General Counsel drafted an email—attributed to Mr. Musk—detailing the going-private plan. The email was sent to Tesla employees and published the same day on both Mr. Musk’s Twitter account and Tesla’s blog (which Tesla had also designated as a source of material public information about the company). In the email, and in a series of tweets responding to his Twitter followers, Mr. Musk elaborated on his plans to take Tesla private. He concluded in a tweet that “Investor support is confirmed. Only reason why this is not certain is that it’s contingent on a shareholder vote.”

That same day, in response to various inquiries from research analysts, Tesla’s head of investor relations confirmed that Mr. Musk’s tweet signified a “firm offer” to take Tesla private that was “as firm as it gets.” Specifically, she wrote in response to press inquiries about the tweet:

  • “I can only say that the first Tweet clearly stated that ‘financing is secured.’ Yes, there is a firm offer.”
  • “[A]part from what has been tweeted and what was written in a blog post, we can’t add anything else. I only wanted to stress that Elon’s first tweet, which mentioned ‘financing secured’ is correct.”
  • “The very first tweet simply mentioned ‘Funding secured’ which means there is a firm offer. Elon did not disclose details of who the buyer is . . . .  I actually don’t know [whether there is a commitment letter or a verbal agreement], but I would assume that given we went full-on public with this, the offer is as firm as it gets.”

It turns out that Elon Musk’s announcement of an acquisition was false. However, JP Morgan and all the banks that had entered similar contracts with Tesla, namely Goldman Sachs, did not know that at the time of the announcement. Still, JP Morgan adjusted the terms of the 2021 Warrants as a result of Tesla’s announcement of acquisition and, later, its abandonment of the transaction on August 24th 2018. JP Morgan considered that such adjustments were contractually required. Tesla refused to settle and pay in full what JP Morgan claimed Tesla owed as a result of the adjustments. JP Morgan ended up suing Tesla for $162,216,628.81, to be precise, for breach of contractual duties.

So, did Elon Musk’s tweet on August 7th 2018 constitute an announcement of an acquisition? Was it a “firm offer” to enter into a contract?”

Interestingly, JP Morgan’s complaint resonates with Johnson v. Capital City Ford, a case decided by the Louisiana Court of Appeal, in 1955. In Johnson v. Capital City Ford Co., the Court had to determine whether a unilateral declaration of will like an advertisement constituted a firm offer. Capital City Ford found itself with a surplus of 1954 Fords. To get rid of them, the company placed an advertisement in the local newspaper, the gist of which was “[c]ome in, buy a 1954 Ford and, when the new models come in, we will let you trade in the 1954 model for a 1955 model at no extra charge.”

In response to the announcement, Johnson went to Capital City’s lot, picked out a 1954 model, and bought it. When the new models arrived a short time later, Johnson returned to the Capital City lot and demanded a trade. Capital City refused, claiming that the advertisements “were not intended as offers, but merely as invitations to come in and bargain.”

The Court advanced the following major premises: (1) A newspaper advertisement may constitute an offer, acceptance of which will consummate a contract and create an obligation in the offeror to perform according to the terms of the published offer. (2) An offer to be effective, need not be addressed to determinate offerees; it can, instead, be addressed to the public at large. (3) Whether a particular advertisement is an offer, rather than an invitation to make an offer or enter negotiations, depends on “the legal intention of the parties and the surrounding circumstances.” (4) If the meaning of a declaration of will is doubtful or uncertain due to “want of explanation” that the declarer should have given or from “any other negligence of fault of his,” then “the construction most favorable to the other party shall be adopted.”

The Court held the advertisement was an offer. To a reader, the wording of the advertisement denoted a bona fide offer, and it was certain and definite enough to constitute a legal offer. If Capital City Ford really intended the advertisement not as an offer but as an invitation to make an offer, it should have said something to that effect. The advertisement created a risk of uncertainty through its ambiguous statements. Therefore, the onus was on Capital City Ford to clear up the ambiguity. Since the company did not do so, the Court construed the advertisement against Capital City.

In Johnson v. Capital City Ford, the Court applied another case R. E. Crummer & Co v. Nuveen et al. (1945). In Crummer & Co v. Nuveen, the US Court of Appeals for the Seventh Circuit had to decide if a notice published in a regular paper circulated among municipal bond dealers was a mere solicitation for offers to sell the bonds or an offer to purchase them. The notice reads as follows:

For the convenience of bondholders who may wish to surrender their bonds, the Board […] has arranged to provide funds for the purchase of the above described bonds at par and interest to December 1, 1941. Holders may send their bonds to the Manufacturers Trust Company for surrender pursuant to such terms.

The plaintiff was the owner and holder of $458,829 principal amount of the bonds, dated June 1st 1940 and due June 1st 1970. The defendants arranged with the Manufacturers Bank of New York (“Bank”) to deposit funds necessary to cover all such bonds presented for payment pursuant to the terms of the notice. The plaintiff, in reliance on the notice, delivered its bonds to the Bank on December 11th 1941. However, the Bank refused to pay the principal amount as provided by the notice. The plaintiff attempted to sell the bonds to other parties at par, but the bid for them was substantially less than par resulting in damages of $35,000. The defendants moved to dismiss the complaint on the grounds that the notice was merely a solicitation for offers to sell the bonds and not an offer to purchase them.

The US Court of Appeals maintained:

We cannot believe that the ordinary business man could be expected to read the advertisement as an invitation to send bonds from wherever he might be to New York on the chance that when they got there the advertiser would accept his offer to enter into negotiations for the purchase of the bonds. Rather, we think the wording of the advertisement is such as to show "an intent to assume legal liability thereby." [emphasis added].

In other words, the US Court of Appeals considered the notice as an offer to purchase bonds and not a mere solicitation for offers to negotiate the sale of bonds.

The agreements JP Morgan entered with Tesla included an announcement event protection clause. An “announcement event” is contractually defined in the agreements as follows:

(i)        The public announcement of any Merger Event or Tender Offer or the announcement by the Issuer of any intention to enter into a Merger Event or Tender Offer,

(ii)       the public announcement by Issuer of an intention to solicit or enter into, or to explore strategic alternatives or other similar undertaking that may include, a Merger Event or Tender Offer or

(iii)      any subsequent public announcement of a change to a transaction or intention that is the subject of an announcement of the type described in clause (i) or (ii) of this sentence (including, without limitation, a new announcement relating to such a transaction or intention or the announcement of a withdrawal from, or the abandonment or discontinuation of, such a transaction or intention) (in each case, whether such announcement is made by Issuer or a third party);

provided that, for the avoidance of doubt, the occurrence of an Announcement Event with respect to any transaction or intention shall not preclude the occurrence of a later Announcement Event with respect to such transaction or intention. 

Did Tesla’s CEO manifest a plain and clear intention to make a firm offer to sell his stock? Were his tweets mere invitations to negotiate rather than firm offers? Was there consideration or any sort of reward if the potential offerees satisfied specified requirements? Was his August 7th 2018 tweet a promise to enter contracts to sell stock?

Potentially, Musk's tweet could be seen as an offer to sell his stock to his Twitter followers if it gave the public the right to acquire Tesla’s stock when Tesla sold them. In this scenario, if those who accepted the offer paid for the stock when it was sold, then a contract would have been formed. In addition, Musk’s tweet could be seen as a promise to sell stock. In this case, offerees have a right to demand that Musk sell the stock. If this is a promise Musk did not intend to keep, then the SEC can understandably view it as a false statement.

More important than Elon Musk’s behavior is the actions as a result from his tweet on August 7th 2018. Why did he do it? It is doubtful that the tweet was originally intended as an offer to sell stock. It is not clear if Tesla’s CEO’s intention was to have his Twitter followers contact him with an acceptance and form a contract. That investors feel strongly about Elon Musk’s tweets is not surprising. As Jeremy Grantham said in a 2019 interview to CNBC news channel, Tesla “is an extreme demonstration of growth.”

The bottom line is that there is space to explore what substantiates an offer-via-tweet in the context of corporate transactions such as initial public offerings, takeovers, mergers and acquisitions. Even if one concludes Musk did not provide a firm offer, the contractual terms of JP Morgan and Tesla’s 2021 Warrants help expand this interesting area of contract law.

*           *           *

Thank you to Nathan B. Oman, Rollins Professor of Law and Co-Director of the Center for the Study of Law and Markets at William and Mary Law for comments and fruitful interaction on this issue via Twitter.

November 22, 2021 in Ann Lipton, Contracts, Joan Heminway, Securities Regulation | Permalink | Comments (0)

Friday, September 24, 2021

Ten Ethical Traps for Business Lawyers

I'm so excited to present later this morning at the University of Tennessee College of Law Connecting the Threads Conference today at 10:45 EST. Here's the abstract from my presentation. In future posts, I will dive more deeply into some of these issues. These aren't the only ethical traps, of course, but there's only so many things you can talk about in a 45-minute slot. 

All lawyers strive to be ethical, but they don’t always know what they don’t know, and this ignorance can lead to ethical lapses or violations. This presentation will discuss ethical pitfalls related to conflicts of interest with individual and organizational clients; investing with clients; dealing with unsophisticated clients and opposing counsel; competence and new technologies; the ever-changing social media landscape; confidentiality; privilege issues for in-house counsel; and cross-border issues. Although any of the topics listed above could constitute an entire CLE session, this program will provide a high-level overview and review of the ethical issues that business lawyers face.

Specifically, this interactive session will discuss issues related to ABA Model Rules 1.5 (fees), 1.6 (confidentiality), 1.7 (conflicts of interest), 1.8 (prohibited transactions with a client), 1.10 (imputed conflicts of interest), 1.13 (organizational clients), 4.3 (dealing with an unrepresented person), 7.1 (communications about a lawyer’s services), 8.3 (reporting professional misconduct); and 8.4 (dishonesty, fraud, deceit).  

Discussion topics will include:

  1. Do lawyers have an ethical duty to take care of their wellbeing? Can a person with a substance use disorder or major mental health issue ethically represent their client? When can and should an impaired lawyer withdraw? When should a lawyer report a colleague?
  2. What ethical obligations arise when serving on a nonprofit board of directors? Can a board member draft organizational documents or advise the organization? What potential conflicts of interest can occur?
  3. What level of technology competence does an attorney need? What level of competence do attorneys need to advise on technology or emerging legal issues such as SPACs and cryptocurrencies? Is attending a CLE or law school course enough?
  4. What duties do lawyers have to educate themselves and advise clients on controversial issues such as business and human rights or ESG? Is every business lawyer now an ESG lawyer?
  5. What ethical rules apply when an in-house lawyer plays both a legal role and a business role in the same matter or organization? When can a lawyer representing a company provide legal advice to an employee?
  6. With remote investigations, due diligence, hearings, and mediations here to stay, how have professional duties changed in the virtual world? What guidance can we get from ABA Formal Opinion 498 issued in March 2021? How do you protect confidential information and also supervise others remotely?
  7. What social media practices run afoul of ethical rules and why? How have things changed with the explosion of lawyers on Instagram and TikTok?
  8. What can and should a lawyer do when dealing with a businessperson on the other side of the deal who is not represented by counsel or who is represented by unsophisticated counsel?
  9. When should lawyers barter with or take an equity stake in a client? How does a lawyer properly disclose potential conflicts?
  10. What are potential gaps in attorney-client privilege protection when dealing with cross-border issues? 

If you need some ethics CLE, please join in me and my co-bloggers, who will be discussing their scholarship. In case Joan Heminway's post from yesterday wasn't enough to entice you...

Professor Anderson’s topic is “Insider Trading in Response to Expressive Trading”, based upon his upcoming article for Transactions. He will also address the need for business lawyers to understand the rise in social-media-driven trading (SMD trading) and options available to issuers and their insiders when their stock is targeted by expressive traders.

Professor Baker’s topic is “Paying for Energy Peaks: Learning from Texas' February 2021 Power Crisis.” Professor Baker will provide an overview of the regulation of Texas’ electric power system and the severe outages in February 2021, explaining why Texas is on the forefront of challenges that will grow more prominent as the world transitions to cleaner energy. Next, it explains competing electric power business models and their regulation, including why many had long viewed Texas’ approach as commendable, and why the revealed problems will only grow more pressing. It concludes by suggesting benefits and challenges of these competing approaches and their accompanying regulation.

Professor Heminway’s topic is “Choice of Entity: The Fiscal Sponsorship Alternative to Nonprofit Incorporation.” Professor Heminway will discuss how for many small business projects that qualify for federal income tax treatment under Section 501(a) of the U.S. Internal Revenue Code of 1986, as amended, the time and expense of organizing, qualifying, and maintaining a tax-exempt nonprofit corporation may be daunting (or even prohibitive). Yet there would be advantages to entity formation and federal tax qualification that are not available (or not easily available) to unincorporated business projects. Professor Heminway addresses this conundrum by positing a third option—fiscal sponsorship—and articulating its contextual advantages.

Professor Moll’s topic is “An Empirical Analysis of Shareholder Oppression Disputes.” This panel will discuss how the doctrine of shareholder oppression protects minority shareholders in closely held corporations from the improper exercise of majority control, what factors motivate a court to find oppression liability, and what factors motivate a court to reject an oppression claim. Professor Moll will also examine how “oppression” has evolved from a statutory ground for involuntary dissolution to a statutory ground for a wide variety of relief.

Professor Murray’s topic is “Enforcing Benefit Corporation Reporting.” Professor Murray will begin his discussion by focusing on the increasing number of states that have included express punishments in their benefit corporation statutes for reporting failures. Part I summarizes and compares the statutory provisions adopted by various states regarding benefit reporting enforcement. Part II shares original compliance data for states with enforcement provisions and compares their rates to the states in the previous benefit reporting studies. Finally, Part III discusses the substance of the benefit reports and provides law and governance suggestions for improving social benefit.

All of this and more from the comfort of your own home. Hope to see you on Zoom today and next year in person at the beautiful UT campus.

September 24, 2021 in Colleen Baker, Compliance, Conferences, Contracts, Corporate Governance, Corporate Personality, Corporations, CSR, Current Affairs, Delaware, Ethics, Financial Markets, Haskell Murray, Human Rights, International Business, Joan Heminway, John Anderson, Law Reviews, Law School, Lawyering, Legislation, Litigation, M&A, Management, Marcia Narine Weldon, Nonprofits, Research/Scholarhip, Securities Regulation, Shareholders, Social Enterprise, Teaching, Unincorporated Entities, White Collar Crime | Permalink | Comments (0)

Tuesday, September 14, 2021

Campbell University - Norman A. Wiggins School of Law - Hiring

Campbell University's Norman A. Wiggins School of Law in Raleigh, NC is hiring for two positions. They are especially interested in candidates in the following areas: (1) business organizations, (2) commercial law (including sales law), and/or contracts. Details here or after the break. 

Continue reading

September 14, 2021 in Business Associations, Commercial Law, Contracts, Haskell Murray, Jobs | Permalink | Comments (0)

Monday, July 19, 2021

Since the Pandemic is Still with Us . . .

 . . . I figure it is still OK to publish a link to the SSRN posting of my co-authored article from the 2020 Business Law Prof Blog symposium, Connecting the Threads.  Published earlier in the spring, this piece, entitled Business Law and Lawyering in the Wake of COVID-19, was written with two of my students: Anne Crisp (who will start her 3L year in about a month) and Gray Martin (who graduated in May and will take the bar exam next week).  My March 30, 2021 post on business interruption insurance came from this article.  The SSRN abstract is included below.

The public arrival of COVID-19 (the novel coronavirus 2019) in the United States in early 2020 brought with it many social, political, and economic dislocations and pressures. These changes and stresses included and fostered adjustments in business law and the work of business lawyers. This article draws attention to these COVID-19 transformations as a socio-legal reflection on business lawyering, the provision of legal services in business settings, and professional responsibility in business law practice. While business law practitioners, like other lawyers, may have been ill-prepared for pandemic lawyering, we have seen them rise to the occasion to provide valuable services, gain and refresh knowledge and skills, and evolve their business operations. These changes have brought with them various professional responsibility and ethical challenges, all of which are ongoing at the time this is being written.

No doubt both the changes to business lawyering and the lessons learned from the many substantive, practical, and ethical challenges that have arisen in the wake of COVID-19 will survive the pandemic in some form. This offers some comfort. While the thought of another systemic global crisis is unappealing at best, what we have experienced and learned will no doubt be useful in maneuvering and surviving through whatever the future may bring.

This article came to be because I agreed to take on additional research assistants after summer jobs were scuttled for many students in the spring of 2020.  I shared the germ of an idea with Anne and Gray.  They took that idea and ran with it, adding important new concepts and support.  The writing collaboration naturally followed.  They co-presented the article with me at the symposium back in October.  Working with them throughout was so joyful and fun--a true pandemic silver lining.

July 19, 2021 in Contracts, Corporate Governance, Current Affairs, Ethics, Joan Heminway, Law Firms, Lawyering | Permalink | Comments (0)

Sunday, June 27, 2021

Adjuncts needed for Transactional Skills Class ASAP- can teach remotely

Our relatively new Transactional Skills program has been such a success that we need to hire one or two additional adjuncts immediately for the Fall.  Our current adjuncts work for BigLaw, in-house, and boutique firms. Classes start in August but the current sections are full and 2Ls start registration on Tuesday. 


The course description is below:

This interactive, practice-oriented course will be structured around the acquisition of an asset or business and some of the key agreements required to complete the transaction. Students will act as junior associates and work on one deal throughout the semester representing either the buyer or seller. Although the class will focus on certain provisions common to all contracts, students will negotiate and draft documents which may include a non-disclosure agreement, letter of intent outlining the main terms, due diligence memo, portions of an asset purchase agreement, a licensing agreement, or an employment agreement. Students will also communicate in writing to their clients throughout the duration of the transaction and will learn the proper selection and use of form agreements. Grades will be based on class participation, group and individual assignments, and a take-home exam, which will consist of writing an agreement. Students will watch videos each week from Professor Weldon discussing foundational drafting concepts and common contracts used in commercial transactions and will work in small groups with practitioners in class to work on drafting, negotiations, and simulations. 

There is a small stipend but the real reward is when you hear students say that this was the most valuable course they took in law school. If you live in South Florida, you can choose to teach in person or online.  It’s a lot of work but I prepare all materials.  The adjunct brings in experiences and  forms (not required);  has one mandatory meeting with the student; and marks up an NDA and the final contract.  

If you or someone you know has at least ten years of experience as a transactional lawyer and has an interest, please email a resume to me at [email protected]. I’m happy to answer questions if you want more information before applying.

We would like to get adjuncts  on board ASAP so that we can add sections. Students are already registering and the current sections have waiting lists. 

 

June 27, 2021 in Contracts, Jobs, Law School, Marcia Narine Weldon, Teaching | Permalink | Comments (0)

Friday, April 9, 2021

New ABA Model Contract Clauses

As regular readers of the blog know, my passion is business and human rights, particularly related to supply chain due diligence and disclosure. The ABA has just released thirty-three model clauses  based on the United Nations Guiding Principles on Business and Human Rights, and the OECD Due Diligence Guidance for Responsible Business Conduct. The ABA committee's reasoning for the model clauses is here:

The human rights performance of global supply chains is quickly becoming a hot button issue for anyone concerned with corporate governance and corporate accountability. Mandatory human rights due diligence legislation is on the near-term horizon in the E.U. Consumers and investors worldwide are increasingly concerned about buying from and investing in companies whose supply chains are tainted by forced or child labor or other human rights abuses. Government bodies such as U.S. Customs and Border Protection are increasingly taking measures to stop tainted goods from entering the U.S. market. And supply chain litigation, whether led by human rights victims or Western consumers, is on the rise. There can therefore be little doubt that the face of global corporate accountability for human rights abuses within supply chains is changing. The issue is “coming home,” in other words. ... Some of the key MCCs 2.0 obligations include: (1) Human Rights Due Diligence: buyer and supplier must each conduct human rights due diligence before and during the term of the contract. This requires both parties to take appropriate steps to identify and mitigate human rights risks and to address adverse human rights impacts in their supply chains. (2) Buyer Responsibilities: buyer and supplier must each engage in responsible sourcing and purchasing practices (including practices with respect to order changes and responsible exits). A fuller description of responsible purchasing practices is contained in the Responsible Buyer Code of Conduct (Buyer Code), also developed and published by the Working Group. (3) Remediation: buyer and supplier must each prioritize stakeholder-centered remediation for human rights harms before or in conjunction with conventional contract remedies and damage assessments. Buyer must also participate in remediation if it caused or contributed to the adverse impact.

Even if you're not obsessed with business and human rights like I am, you may find the work product provides an interesting context in which to discuss contract clauses such as representations, warranties, and damages either in a first-year contract course or a transactional drafting course. 

April 9, 2021 in Compliance, Contracts, Corporate Governance, Corporations, CSR, Current Affairs, Human Rights, International Business, Marcia Narine Weldon | Permalink | Comments (0)

Tuesday, March 30, 2021

COVID-19 and Business Interruption Insurance

As a teaser to a forthcoming article I coauthored with two of my students (who co-presented with me) for the Business Law Prof Blog symposium back in the fall, I offer a short excerpt on business interruption insurance litigation resulting from governmental actions forcing business closures as a result of the pandemic, focusing on a recently decided Tennessee case.

In general, business lawyers got inventive in bringing legal claims of many kinds. A federal district court case recently decided in Tennessee, Nashville Underground, LLC v. AMCO Insurance Company, No. 3:20-cv-00426 (M.D. Tennessee, March 4, 2021), offers a notable example involving the interpretations of a business interruption insurance policy. The plaintiff in the action, a Nashville bar, restaurant, and entertainment venue, claimed coverage under the food contamination endorsement in its business interruption insurance policy for the damages suffered when it was forced to close its doors by governmental orders issued in March 2020 in response to the COVID-19 pandemic. The insurer denied coverage. The court held for the defendant insurer on its motion to dismiss for failure to state a claim, finding the contract language unambiguous. The court’s conclusion in its opinion noted sympathy, in spite of the outcome.

Like many Americans, the undersigned can sympathize with Plaintiff and so many of our other small to medium-sized businesses that seem to have borne much of the brunt of the effects of the COVID-19 pandemic. One could understand if Plaintiff (or anyone else) lamented that it simply is not right that this should be the case. But it also is not right, or lawful, for a business's insurer to be on the hook for coverage it simply did not contractually commit to provide. Presumably like a myriad of other enterprises throughout this nation, Plaintiff in retrospect perhaps would have bargained for broader coverage but simply did not foresee such need before the unprecedented pandemic conditions arose in 2020. Accordingly, Plaintiff was unfortunately left without the coverage it now asks this Court to find in an insurance policy that simply does not provide it.

Nashville Underground, supra.  Sympathy notwithstanding, cases of this kind are decided on the basis of specific contract language. Although overall insurers tend to be winning in these contract interpretation battles, insureds are prevailing in some cases, at least in pretrial and summary judgment motion battles. See, e.g., Kenneth M. Gorenberg & Scott N. Godes, Update on Business Interruption Insurance Claims for COVID-19 Losses, NAT’L L. REV. (Oct. 29, 2020), https://www.natlawreview.com/article/update-business-interruption-insurance-claims-covid-19-losses; Richard D. Porotsky Jr., Recent Federal Cases in the N.D. Ohio Split on COVID-19 Business Interruption Insurance Coverage, NAT’L L. REV. (Jan. 26, 2021), https://www.natlawreview.com/article/recent-federal-cases-nd-ohio-split-covid-19-business-interruption-insurance-coverage; Jim Sams, Judge Rules in Favor of 3 Policyholders With COVID-19 Claims in Consolidated Case, CLAIMS J. (Feb. 21. 2021), https://www.claimsjournal.com/news/national/2021/02/24/302197.htm.

The opinions in these cases constitute an interesting emergent body of decisional law relevant to contract and insurance law and practice.  Along with litigation relating to, e.g., force majeure and material adverse change/effect, the legal actions interpreting language in business interruption insurance contracts are bound to offer important lessons and tips for legal counsel and their clients--a legacy likely to affect practice and litigation for many years to come.

The article from which the above quoted text (reformatted for posting here) comes, Business Law and Lawyering in the Wake of COVID-19, is scheduled for publication later this spring in Transactions: Tennessee Journal of Business Law.  I will promote the article here once the final version is available and has been posted to SSRN.  In the meantime, you have a a short preview of one part of the article in this post!

March 30, 2021 in Contracts, Insurance, Joan Heminway | Permalink | Comments (2)

Monday, November 16, 2020

Relational Contracts in a COVID-19 World

A number of years ago, I became acquainted with Kate Vitasek, a colleague in The University of Tennessee's Haslam College of Business.  She introduced me to a way of supply contracting called "vested."  Vested relationships are characterized by the following attributes that may differentiate them from traditional contractual relationships (as identified in the FAQs on the vested website):

  • "Uses flexible Statements of Objectives, enabling the service provider to determine 'how'”
  • "Measures success through a limited number of Desired Outcomes"
  • "Uses a jointly designed pricing model with incentives that optimize the overall business and fairly allocates risk/reward"
  • "Focuses on insight, using governance mechanisms to manage the business with the supplier"

When I first talked to Kate and her colleagues about vested, I remember noting for her that the vested approach sounded like a specific type of relational contract . . . .

Recently, Kate and I reconnected.  She informed me about her recent coauthored Harvard Business Review article.  It merits  promotion here.

The main point of the article is to highlight the possible advantages of relational contracting in the current environment. Here's the crux:

For procurement professionals at large multinational companies, the temptation is to use their company’s clout to pressure suppliers to reduce prices. And when the supplier has the upper hand, it is hard to resist the opportunity to impose price increases on customers. Witness how the shortage of personal protective equipment (PPE) and ventilators led to skyrocketing prices. . . .

A better alternative is formal relational contracts that are designed to keep the parties’ expectations continuously aligned. This kind of agreement is a legally enforceable written contract (hence “formal”) that puts the parties’ relationship above the specific points of the deal. The parties embrace the fact that all contracts are incomplete and can never cover all the contingencies that may occur. This time it is a pandemic. Next time it will be something else.

The coauthors conclude:

Given the uncertainty that lies ahead, it is especially important now that companies try to avoid antagonizing the members of their ecosystems. Formal relational contracts, which can turn adversarial relationships into mutually beneficial partnerships, is a proven means to such an end.

This all makes great sense to me, especially for contracting parties who have long-term relationships or are repeat players in the same market.  The article both explains the concept and offers several examples of how relational contracting can foster more collaborative relationships that enable contracting parties to "ride the bumps" in their relationship.  Specifically the parties are incentivized to work together to devise solutions to transactional problems as they arise.

The article reminded me about the relational aspects of M&A contracting and, more specifically, Cathy Hwang's Faux Contracts as well as her work with Matthew Jennejohn--including their Deal Structure article.  In Deal Structure, Cathy and Matthew write that "[r]elational contracts blend formal contract terms, which are enforceable in court, with informal constraints, such as reputational sanctions, to create strong relationships between parties." [p. 311]

Law folks and business folks should talk more often.  As the pandemic continues, parallel avenues of work like this in business and law can have important practical implications for business.  This collective body of business and legal scholarship may have significant value to both business managers and the legal advisers who represent them.  Collaboration between business and law experts can only enhance that value.

November 16, 2020 in Contracts, Joan Heminway, M&A | Permalink | Comments (2)