Tuesday, May 14, 2019
So, this post is about shameless self-promotion and a cautionary tale. A while back I was asked to write the West Virginia section of Texas A &M Journal of Property Law's Oil and Gas Survey. It's a short overview of recent developments, and one of the many perils of the law review process is how long such things take to get to print.
Even worse than a slow timeline, a miscommunication meant that my final round of edits did not make it into the piece, and there are a couple of errors. The editors were appropriately apologetic, and I know it all happened in good faith. I take some ownership, too, in that I was not at all demanding about knowing the schedule for the next round of edits or the overall timeline.
Ultimately, despite the (nonsubstantive) errors, I hope the piece will be helpful to some folks. There are some interesting oil and gas cases happening in West Virginia (and around the country), and how they turn out could have a significant impact on the oil and gas business.
Here's the abstract to my article, which you can find here:
This Article summarizes and discusses important recent developments in West Virginia’s oil and gas law, including legislative action and case law. This Article is divided into three Sections. First, West Virginia’s evolution in its approach to fractional mineral owner disputes in the Marcellus Shale. After multiple efforts to pass a forced pooling bill, the state settled instead on a cotenancy solution. Second, West Virginia addressed flat-rate royalties, following two court cases, a legislative response, and a subsequent court challenge to the legislation. Finally, this Article discusses three developments in lease interpretation: (1) what will be deemed “reasonably necessary” for oil and gas development in West Virginia; (2) if implied pooling rights are included in West Virginia leases that are silent on the matter; and (3) whether non-executory and non-participating royalty owners have rights to approve pooling.
Friday, May 10, 2019
Join me in Miami, June 26-28.
June 26-28, 2019
Managing Compliance Across Borders is a program for world-wide compliance, risk and audit professionals to discuss current developments and hot topics (e.g. cybersecurity, data protection, privacy, data analytics, regulation, FCPA and more) affecting compliance practice in the U.S., Canada, Europe, and Latin America. Learn more
See a Snapshot: Who Will Be There?
Learn More: Visit the website for updated speaker information, schedule and topic details.
This program is designed and presented in collaboration with our partner in Switzerland
May 10, 2019 in Compliance, Conferences, Corporate Governance, Corporations, CSR, Current Affairs, Ethics, Financial Markets, International Business, Law Firms, Law School, Marcia Narine Weldon, White Collar Crime | Permalink | Comments (0)
Monday, May 6, 2019
This was a busy semester, but I still managed to read a few books. Always open to recommendations.
Enough. John Bogle (Business) (2009). Vanguard’s founder reflects on business, money, satisfaction, and life. Easy read. Read this during a 2+ hour faculty meeting.
Half an Inch of Water - Percival Everett (Fictional Short Stories) (2015). A series of stories situated in the western U.S.--about loss, love, youth, aging, corruption, animals, and the wilderness. My favorite story is “A High Lake” because it reminds me of my grandmothers’ independence, intelligence, and care before they died.
The Enduring Community - Brian Habig and Les Newsom (Religion) (2001). Co-authored my a minister to two of my siblings while they were at the University of Mississippi (Newsom). Attempts to clarify the roles of the Church in community.
Heavy - Kiese Laymon (Memoir) (2018). Raw memoir in which the author struggles with his weight, abuse, racism, addiction, and depression. Laymon was raised in Jackson, MS and is an English professor at University of Mississippi, after a number of years on the faculty at Vassar College.
Educated - Tara Westover (Memoir) (2018). Pitched as the remarkable story of the author’s journey from a survivalist family that did not believe in formal schooling to a Cambridge PHD. But I think the book is more interesting as a look at how memories are formed, abuse, family, and mental illness.
Friday, May 3, 2019
I blogged two weeks ago about whether we were teaching law students the wrong things, the wrong way, or both. I’ve been thinking about that as I design my asynchronous summer course on transactional lawyering while grading asset and stock purchase agreements drafted by the students in my spring advanced transactional course. I taught the spring students face to face, had them work in groups, required them to do a a negotiation either in person or online, and am grading them on both individual and group work as well as class participation. When I looked at drafts of their APAs and SPAs last week, I often reminded the students to go back to old PowerPoints or the reading because it seemed as though they missed certain concepts or maybe I went through them too quickly— I’m sure they did all of the reading (ha!). Now, while designing my online course, I’m trying to marry the best of the in person processes with some of the flipped classroom techniques that worked (and tweaking what didn’t).
Unlike many naysayers, I have no doubt that students and lawyers can learn and work remotely. For the past nine years, I have participated as a mentor in LawWithoutWalls, a mostly virtual experiential learning program started by University of Miami professor Michele DeStefano. Also known as LWOW, the program matches students from around the world with business people and practicing lawyers to develop a project of worth over sixteen weeks. Team members meet in January in person and never see each other in person again until April during a competition that is judged by venture capitalists, lawyers, entrepreneurs, and academics. I mentored a team of students from Bucerius in Germany, Wharton in Pennsylvania, and the University of Miami. Banking behemoth HSBC sponsored our project and staffed it with lawyers from Singapore, Canada, and the UK. Other mentors on the team hailed from Spain and the UK. On any given week, 7-10 people joined Skype calls, chatted in WhatsApp, drafted on Google Docs, and accessed Slack. They attended mandatory webinars weekly via Adobe Connect on developing business plans, pitching to VCs, and working with clients. Seventy percent of the people on the seventeen teams spoke languages other than English as the first language.
How did this virtual experience work? Extremely well, in my view. After some growing pains, students adjusted quickly as did the business partners, who are used to setting up conference calls and working across borders. Some of the winning teams developed projects that provided virtual reality training on implicit bias for police officers; informed consumers about food freshness to combat food waste; and organized health information for foster care children on a blockchain-powered platform. Humble brag- my team won best overall project by developing a solution to use blockchain and smart contracts in syndicated lending that has the potential to save the bank almost 2 million per year. I also mentored last year’s winner, Team Spotify, with students from Miami, Colombia, and Chile and lawyers housed in Sweden, California, and New York. Each year, teams do almost all of this hard work remotely, across time zones, and with language differences. Students collectively interview hundreds of subject matter experts over 16 weeks, and the vast majority of those interviews take place via phone or video and with people in different countries. Other sponsors for LWOW included Accenture, White and Case, Pinsent Mason, Microsoft, Cozen O'Connor, LegalZoom, Eversheds Sutherland, LatAm Airlines, and Legal Mosaic-- all companies and law firms that see the benefit of these skill sets. Significantly, every year, a cohort of teams does all of the work virtually, never meeting in person for a kickoff. That virtual team winner competes in person with the traditional teams each April, and often wins the whole competition. Clearly, these students develop special skills by necessity. I plan to learn from those experiences as I design my course.
My experience with LawWithoutWalls and as a former compliance officer (where we often did training online and via video) makes me optimistic about online learning and working. In my summer course, I will have students work in groups, where they will use the latest virtual teaming tools. I will have live office hours via Skype, Zoom, or FaceTime, and I will require that some of the groups do their meetings via video as well to have a connection outside of email. Students will draft and edit on community bulletin boards. They will post their own video presentations and "webinars" geared toward fictitious business clients. Working collaboratively and creatively are key skills in the real world, and they will be key in my class.
But there is a lot of resistance in both the legal community and academia regarding the online world. Last week, I attended a seminar at a law firm and met a member of the Florida Board of Bar Examiners. I asked his opinion on the state of students and young lawyers. I was particularly interested in his thoughts because he’s also a partner at a large law firm in our state. Like some quoted in my prior post, he believes that online coursework is a poor substitute for face to face learning. He further opined that when people don’t work in offices, they miss the camaraderie of being around peers and their work suffers. These are valid concerns. Many lawyers are unhappy in general, and the way people hide behind digital devices (even when in the same room/office) can lead to isolation, depression, and poor networking and social skills.
But these drawbacks should not doom online learning and remote working. Most of my graduating 3Ls will take their bar prep courses online. They claim that it makes no sense to drive to campus “just to watch a video of a professor speaking.” They also like the idea of being able to rewind videos to take notes. The indicated that they will meet up with friends when they want to study together and may even come on campus to watch their online coursework for a sense of community. But significantly, they don’t see the need to learn in the traditional ways. Personally, I love good online courses but I also love the ability to have face to face interaction with teammates- even if that’s via video. Being in the same physical space also allows for chance interactions that can lead to enriching conversations. On the other hand, sometimes there's no choice. Many readers may remember that years ago, in harder economic times, companies cancelled non essential business travel and people got used to video meetings. Many employers now interview candidates by Skype first before bringing them in. Learning and working virtually is no longer a novelty. Some of our students will work in co-working spaces for firms or companies where everyone works from home.
Change is coming and in many places, already here. Law professors must prepare students to practice in this new world while not sacrificing pedagogical gains. This requires training on project management and effective communication with team members— all non-substantive topics and that will give many people pause. We also need to make sure that students know how to communicate with clients and employers face to face in business and social settings. Some professors will say- correctly- that they have enough to contend with making sure students understand the law and can pass the bar. But, for those of us interested in online learning, we need to do more. We have to make sure that we prepare students for both the "hard" and "soft" skills. Most important, we need to make sure that these online courses have the rigor of traditional classes-- US News is watching.
I’m open to suggestions of what has worked for you and what hasn’t so please feel free to comment below or email me at email@example.com.
Thursday, May 2, 2019
Okay, not really. But my daily Westlaw search for "limited liability corporation" recently started delivering contract award announcements from the Department of Health and Human Services (DHHS) related to contract awards. DHHS reconds many "business types" for their records, such as "Minority Owned Business" and "For Profit Organization. And now, apparently, "limited liability coroporation" is one of them. ARRRRRGHH! LLCs are "limited liability companies" and are not corporations. An internet search shows that there are at least 78 of these DHHS designations out there (and I'll wager there are more).
Following is an excerpt of one such announcement. You'll note that, according to the announcement, Seba Professional Services LLC is both a "Partnership or Limited Liability Partnership" and a "Limited Liability Corporation." Sigh. Really, they're making my stomach hurt:
Department of Health and Human Services awarded contract of IGF::CT::IGF PATIENT MESSENGER AND TRANSPORT SERVICES to SEBA PROFESSIONAL SERVICES LLC
Woman Owned Business
Women Owned Small Business
Economically Disadvantaged Women Owned Small Business
Minority Owned Business
Black American Owned Business
Partnership or Limited Liability Partnership
Limited Liability Corporation
For Profit Organization
DoT Certified Disadvantaged Business Enterprise
Self-Certified Small Disadvantaged Business
8a Program Participant
Monday, April 29, 2019
My essay, "Mr Toad's Wild Ride: Business Deregulation in the Trump Era," was recently published by the Mercer Law Review as part of a volume featuring works from a recent symposium on "Corporate Law in the Trump Era." The symposium was held back in October and resulted from ideas shared at a discussion group on "Corporate and Financial Reform in the Trump Administration" convened for the 2017 Southeastern Association of Law Schools conference. A portion of the introduction explaining the overall nature of the essay follows (footnote reference omitted).
This Essay identifies and takes stock of the Trump Administration’s deregulatory efforts as they impact business interests, with the thought that even incomplete or biased information may be useful to transactional business lawyering. What of significance has been done to date? With what articulated policy goals, if any? How may—or how should—the success of the administration’s business deregulatory plans and programs be judged? What observations can be made about those successes? For example, who may win and lose in the revised regulatory framework that may emerge? The Essay approaches these questions from a transactional business law perspective and offers related observations. Spoiler Alert: to date, the deregulatory journey is characterized by haphazardness not unlike the motorcar experience that is the subject of the beloved Disneyland attraction, Mr. Toad’s Wild Ride—a joyride that includes surprises and may sometimes feel like it is taking us “merrily, merrily, merrily, merrily, merrily on our way to nowhere in particular!”
This is the second essay in a pair that I wrote over the past year on deregulation and the presidency. I posted on the first essay here, with a bit of information about the project as a whole (which had its genesis in BLPB posts by Anne Tucker and me).* I also posted on this project back in September, here. Thanks to those of you who responded with ideas in the comments and in private messages in response to these earlier posts.
Although not all of those comments made it into my work implicitly or explicitly, they were nevertheless helpful as I researched and thought through my theses on these two short reflective pieces. I do have many more ideas relating to this topic. No doubt those ideas--and some of yours--will find their way into other work as time moves on.
* In reviewing my prior posts for this post, I noted that the text of this post has the year of the Southeastern Association of Law Schools discussion group wrong. It did, in fact, occur in 2017, and it therefore preceded the Association of American Law Schools conference discussion group referenced in the post. I left a postscript on that page, but I wanted to clarify the matter here also.
Friday, April 19, 2019
It's that time of year again. Many states have released February 2019 bar passage rates. Thankfully, the rates have risen in some places, but they are still at suboptimal levels. Indeed, the July 2018 MBE results sunk to a 34- year low. A recent article on law.com lists some well-known statistics and theories, explaining, in part:
Kellye Testy, president of the Law School Admission Council . . . suspects the falling pass rates are the results of a combination of factors, the most obvious being the lower credentials of incoming students. The declining quality of public education—meaning an erosion of the reading and writing foundations children develop in elementary and high schools—may also be a contributor, she said. Moreover, the evolving way that law is taught may explain why today’s law graduates are struggling more on the bar exam, said Testy, whose organization develops the LSAT. Professors now put less emphasis on memorizing rules, and have backed off on some of the high-pressure tactics—like the Socratic method—that historically dominated the classroom. “The way we used to teach wasn’t as good for caring for the student, but it made sure you could take a closed-book exam,” she said. “You knew the doctrine. It was much more like a bar exam, in some ways. Today, when you go into a classroom, it’s all PowerPoint. The teachers give them an outline, the students are on computers. There’s a different student approach and a different faculty approach.” The fact that so many law graduates now take bar preparation courses online rather than in person is another avenue worth examining for a potential correlation to falling pass rates, said Judith Gundersen, president of the National Conference of Bar Examiners. “You used to have to go to a lecture and show up every day,” she said. “Now so much of it is online. People are wondering whether that’s changing how people prepare, because there just isn’t that communal aspect where, ‘I have to prepare in case I get called on.’”
I'm not sure how I feel about these assertions. I agree that many students lack some of the key critical thinking and writing skills needed to analyze legal problems. I also see far fewer professors using the strict Socratic method and more allowing computers in class. I allow computers for specific activities but not throughout the class. I also employ more of a modified Socratic method, use powerpoint, and often post it in advance with questions for students to answer prior to class so that we can spend time in class applying what the students have learned. Am I doing a disservice to my students with a flipped classroom? Do we need to go back to rote memorization and cold calling students for the bar passage rates to rise? And if so, will that make our students better lawyers?
I remember how difficult it was to take the Florida bar after three years of law practice in New York. The rote memorization helped me pass the bar exam while working a full time job and caring for an infant as a single mother. But it didn't make me a better lawyer. Having worked for three years, I remember slogging through bar study thinking that what I was learning in bar prep had little to do with what I actually did in practice. When I prepared for the New York and New Jersey bars, I went to classes live but some were in a classroom via video. I'm not even sure that purely online courses were an option back in 1992. When I moved to Florida and studied for that bar, I used tapes in my car (yes, it was 1996). I had tried the live courses for a few days and realized that my time was better spent reciting the rules of evidence to my son in lieu of nursery rhymes. I passed three bars using two different methods but I wonder how well I would have done with an online version, the way most students study for the bar now.
I no longer teach courses tested on the bar, but when I did, I had the perpetual conflict-- how do I make sure that the students pass the bar while instilling them with the knowledge and skills they will actually need in the real world? I see now how some of my transactional lawyering students dread going to the bar prep classes offered during the semester. But they also consider these classes a necessity to pass the bar even through they will engage in full time bar prep upon graduation. Does the proliferation of these law school bar prep classes mean that the doctrinal professors aren't teaching the students the way we learned? Or does it mean that that the students are no longer learning the way we did? I don't have the answers.
But these articles do have an effect on how and what I teach. Under ABA Standard 306, law schools can offer up to one-third of their credits online, including up to ten credits for first-year coursework. As I prepare to teach my contract drafting and negotiation class asynchronously online for the first time this summer, I'm learning about presenting information in short, digestible chunks for the students- no more than 15-20 minutes per video, and preferably even shorter, I'm told. I'm also reviewing the conflicting evidence about whether online courses are a help or a hindrance.
Some of my students have taken many courses online as undergraduates. As a compliance officer, I required employees to take courses online and did live training. Personally, I like taking online courses. But I don't know enough about how well students retain the information and how well they learn to use key skills to serve clients. I'm fortunate, though, to have excellent instructional designers working with me who understand adult learning much better than I do. I'm convinced that more students will seek online courses and more schools will adopt them as a way of earning more revenue through developing programs for working professionals and JD students who need more flexible schedules. This means many more of us may need to prepare for this new way of teaching and learning.
Tuesday, April 16, 2019
My friend and colleague, Priya Baskaran, asked me to post the following, which I am happy to do:
Over the past year, a critical mass of law school faculty and staff have expressed interest in establishing an AALS Section on Community Economic Development (CED). The proposed section will provide a dynamic, collaborative environment to enhance the scholarship, activism, and direct legal work of CED-focused faculty and professional staff. Notably, the section will help bridge existing gaps between various actors in the CED universe by increasing opportunities for networking and enabling greater synergy and collaboration between scholars and experts in various substantive subjects and disciplines related to CED. Interested faculty and professional staff are invited to read the full petition.
I think this is a great idea, and I will be signing the petition (here). I have been working with an interdisciplinary group on my campus, WVU Center for Innovation in Gas Research and Utilization (CIGRU). We are a multidisciplinary group of researchers who are experts in science, engineering, environmental, policy, law, and finance. The CIGRU conducts research and services relevant to gas, oil, and chemicals. Our experimental research includes broad areas covering catalysis, reaction engineering, material science, power generation, and gas turbine. The CIGRU undertakes U.S. government- and industry-funded research projects developing clean and renewable energy technologies. Our services include air emission control, regulatory and policy, law and finance relevant to shale gas.
I have been leading CIGRU's Economic and Community Development Group for the past few years. About 18 months ago, CIGRU earned a five-year seed grant awarded by the West Virginia Higher Education Policy Commission, under its Research Challenge Grant program. The WVU gas utilization team includes eight CIGRU researchers, working in partnership with Marshall University, the WVU Energy Institute, the WVU Bureau for Business and Economic Research, the West Virginia Chemical Alliance Zone, Morgantown’s National Energy Technology Laboratory and the Mid-Atlantic Technology, Research and Innovation Center. So, this idea resonates with me. I think this is a great idea, and it has my support. If you agree, I hope you'll sign on, too.
For anyone interested, CIRGUs grant announcement and a description of the program are available after the jump.
Friday, April 12, 2019
As a former compliance officer who is now an academic, I've been obsessed with the $25 million Varsity Blues college admissions scandal. Compliance officers are always looking for titillating stories for training and illustration purposes, and this one has it all-- bribery, Hollywood stars, a BigLaw partner, Instagram influencers, and big name schools. Over fifty people face charges or have already pled guilty, and the fallout will continue for some time. We've seen bribery in the university setting before but those cases concerned recruitment of actual athletes.
Although Operation Varsity Blues concerns elite colleges, it provides a wake up call for all universities and an even better cautionary tale for businesses of all types that think of bribery as something that happens overseas. As former Justice Department compliance counsel, Hui Chen, wrote, "bribery. . . is not an act confined by geographies. Like most frauds, it is a product of motive, opportunity, and rationalization. Where there are power and benefits to be traded, there would be bribes."
My former colleague and a rising star in the compliance world, AP Capaldo, has some great insights on the scandal in this podcast. I recommend that you listen to it, but if you don't have time, here are some questions that she would ask if doing a post mortem at the named universities. With some tweaks, compliance officers, legal counsel, and auditors for all businesses should consider:
1) What kind of training does our staff receive? How often?
2) Does it address the issues that are likely to occur in our industry?
3) When was the last time we spot checked these areas for compliance ? In the context of the universities, were these scholarships or set asides within the scope of routine audits or any other internal controls or reviews?
4) What factors or aspects of the culture could contribute to a scandal like this? What are our red flags and blind spots? Do we have a cultural permissiveness that could lead to this? In the context of the implicated universities, who knew or had reason to know?
5) How can we do a values-based analysis? Do we need to rethink our values or put some teeth behind them?
6) How are our resources deployed?
7) Do we have fundamental gaps in our compliance program implementation? Are we too focused on one area or another?
8) Are integrity and hallmarks of compliant behavior part of our selection/hiring process?
Capaldo recommends that universities tap into their internal resources of law and ethics professors who can staff multidisciplinary task forces to craft programs and curate cultures to ensure measurable improvements in compliance and a decrease in misconduct. I agree. I would add that as members of the law and business community and as alums of universities, we should ask our alma maters or employers whether they have considered these and other hard questions. Finally, as law and business professors, we should use this scandal in both the classroom and the faculty lounge to reinforce the importance of ethics, internal controls, compliance with law, and shared values.
April 12, 2019 in Business School, Compliance, Corporate Governance, Corporations, CSR, Current Affairs, Ethics, Law Firms, Law School, Lawyering, Management, Marcia Narine Weldon, Sports, Teaching | Permalink | Comments (0)
Thursday, March 28, 2019
According to people with knowledge of the cases, once Nike heard Mr. Avenatti’s claims, it acted to inform federal officials of the allegation that the company’s employees were paying players. The nature of the discussion with Mr. Avenatti raised the possibility that extortion was taking place.
Monday, March 18, 2019
OK. So, the title of this post is clickbait of sorts. I am not writing about Monty Python, sorry to say. But I am writing about something completely different for me--very outside my norm. In fact, this past year, I have been researching and writing a bit outside my norm . . . .
It all started with two blog posts here on the BLPB--here and here. My posts, focusing on Trump's deregulatory promises and early pronouncements, followed an earlier one written by Anne Tucker. Anne and I then organized an discussion group at the 2018 Association of American Law Schools Annual Meeting focusing on regulation in the Trump Era: "A New Era for Business Regulation?" I then presented some of my research on business deregulation at the National Business Law Scholars ("NBLS") conference in June 2018. A related Southeastern Association of Law Schools ("SEALS") discussion group followed later in the summer of 2018.
As I began to accumulate observations and information from these academic encounters, I came to vision a series of two papers that would enable me to engage in related research and make some observations. (I first shared my conception for the two-paper series in my NBLS presentation.) Thanks to an invitation from the UMKC Law Review to publish an administrative law reflection of my choice and an invitation from the Mercer Law Review to turn our SEALS discussion group into a published symposium volume, I was able to channel my curiosity about presidential deregulation and my research and writing energy into developing law review essays based on the two papers I had conceptualized.
From the start, my interest in presidential deregulation was driven by my interest in business and business law, and the essays reflect that interest and bias. In the first essay, I set out to explore the ways in which a U.S. president may fulfill deregulatory campaign promises and objectives. As someone who [ahem] underachieved her potential (shall we say) in Constitutional Law in law school, I was challenged in this task from the get-go. But I persevered and learned a lot from the Constitution itself and the work of administrative law scholars. In the second essay, I aimed to make observations about what successful presidential efforts at deregulation look like by reviewing the perceived successes of the Trump administration's deregulatory initiatives to date. This inquiry resulted in some interesting--even if somewhat predictable--findings.
The first essay, Designing Deregulation: The POTUS's Place in the Process, was just released. You can find it here. The last two paragraphs of the abstract follows.
This essay interrogates the role of the president in deregulation at the federal level. The interrogation is designed to serve two principle goals. First, the essay sets out to identify and explain the president’s role in the deregulatory process from a legal and practical perspective. Second, with the knowledge gained in better understanding the nature of the president’s optimal role in deregulating, the essay offers a perspective and practical advice for use by a president in constructing and implementing a deregulatory agenda.
Ultimately, the essay suggests that the president assume the roles of change leader and fiduciary in meeting deregulatory promises and expectations. The role of change leader focuses the president on processes geared to foster lasting change; the role of fiduciary focuses the president on trustworthy conduct in a relationship with the public that allows for discretion yet demands accountability. The two roles are not mutually exclusive. They have the capacity to work together as complements.
Both this essay and the forthcoming one are limited-scope works. My hope is that by having invested time in attempting to understand the current deregulatory environment, my ongoing work in securities regulation and other federal regulatory environments will be enriched. Regardless, I have become a more educated consumer of presidential power and authority in the process of my research and writing. Perhaps my work in this area also will offer some of you a bit of new information or a novel idea that helps you in your work--or at least in social conversation--as deregulatory efforts progress.
[Postscript, April 29, 2019: In reviewing this post for a subsequent post, I noted that this post has the year of the Southeastern Association of Law Schools discussion group (entitled "Corporate and Financial Reform in the Trump Administration") wrong. It did, in fact, occur in 2017, and it therefore preceded the Association of American Law Schools conference discussion group also referenced in this post. My apologies for the error.]
Friday, March 15, 2019
Hundreds of men have resigned or been terminated after allegations of sexual misconduct or assault. Just last week, celebrity chef/former TV star Mario Batali and the founder of British retailer Ted Baker were forced to sell their interests or step down from their own companies. Plaintiffs lawyers have now found a new cause of action. Although there a hurdles to success, shareholders file derivative suits when these kinds of allegations become public claiming breach of fiduciary duty, unjust enrichment, or corporate waste among other things. Examples of alleged corporate governance missteps in the filings include: failure to establish and implement appropriate controls to prevent the misconduct; failure to appropriately monitor the business; allowing known or suspected wrongdoing to persist; settling lawsuits but not changing the corporate culture or terminating wrongdoers; and paying large severance packages to the accused. Google, for example, announced earlier this year that it had terminated 48 people with no severance for sexual misconduct, but until it became public, the company did not disclose a $90 million payment to a former executive, who had allegedly coerced sex from an employee. Earlier this week, Google acknowledged another $35 million payment to a search executive who had been accused of sexual assault. This second payment was revealed after lawyers filed a shareholder derivative suit in January. CBS, on the other hand, denied a $120 million severance package to its former head, Les Moonvies, who has demanded arbitration.
So what happens when a company knows that a prominent executive has engaged in misconduct? How does a company prevent the conduct and then react to it? Board members and rank and file employees are undergoing more training even as people talk of a #MeToo backlash. But is that enough? Should companies now discuss potential or alleged sexual harassment by executives as a material risk factor in SEC filings? One panelist speaking at the 37th Annual Federal Securities Institute last month suggested that board counsel needed to consider this as an option.
#MeToo has also affected M&A deals with over a dozen companies now inserting a "Weinstein clause" representing, for example that “To the knowledge of the company, no allegations of sexual harassment have been made against any current or former executive officer of the company or any of its subsidiaries” Other "#MeToo reps" require a target company to confirm that it “has not entered into any settlement agreements” with perpetrators of sexual misconduct. Clawbacks are also increasingly common both in M & A deals and executive compensation agreements. Some companies have even asked newly-hired executives to represent that they have not been accused of or engaged in sexual misconduct.
I expect these #MeToo reps, clawbacks, and other disclosures to become more mainstream for a few reasons. First, there's a steady stream of news keeping these issues in the headlines, and many states have banned or are considering banning nondisclosure agreements in sexual harassment cases. Second, women leaders may now play a larger role in changing corporate culture. California requires that publicly held corporations whose “principal executive office” is located in California include at least one female board member by 2019 and even more depending on the size of the board. See here for some perspective on whether more female board members would lead to fewer sexual harassment scandals. Third, proxy advisory firms sounded the alarm on #MeToo in early 2018 and both ISS and Glass Lewis have issued statements about what they plan to recommend when there are no women on boards. Finally, BlackRock, the world's largest asset manager has made it clear that it expects to see women on boards. Some people do not agree that these guidelines/laws will work or are even necessary. Indeed, it will take a few years for empirical evidence to reveal whether having more women on boards and in the C suite will make a meaningful difference.
Personally, I believe it will take a combination of new leadership, successful shareholder derivative suits, and a continuation of the social due diligence in the hiring and M & A context. Sexual misconduct is wrong but it's also expensive. Companies are spending hundreds of thousands of dollars and sometimes more to investigate claims and prepare reports that they know will likely be made public at some time. Conduct won't change unless there are real financial and social penalties for wrongdoers.
Saturday, March 9, 2019
Yesterday was International Women's Day and I was supposed to post but couldn't think of what to write. I simply had too many choices based on this week's news. It's no coincidence that three months before the World Cup and on International Women's Day, the U.S. Women's Soccer Team sued U.S. Soccer for gender discrimination based on pay and working conditions, including medical treatment, travel arrangements, and coaching. On the one hand, some argue that the women should not receive the same amount as their male counterparts because they do not draw the same crowds or generate the same revenue. The plaintiffs argue that they cannot draw the same crowds in part because they do not get the same marketing and other financial support. In their defense, the U.S. women have won the World Cup three times and have won gold four times at the Olympics. The men's team has never won either tournament and didn't even qualify for the 2018 World Cup. I was in Brazil for the 2014 World Cup and when the men advanced, people were genuinely shocked. No one expected it and I was able to get a ticket to that match 15 minutes before start time for pennies on the dollar. Yet the men earn more.
If U.S. Soccer followed a pay for performance model, the women would and should clearly earn more. But, it's more complicated than that. As the NY Times explained, "each team has its own collective bargaining agreement with U.S. Soccer, and among the major differences are pay structure: the men receive higher bonuses when they play for the United States, but are paid only when they make the team, while the women receive guaranteed salaries supplemented by smaller match bonuses." Even so, the union for the U.S. Men's team supports the lawsuit, stating "we are committed to the concept of a revenue-sharing model to address the US Soccer Federation's "market realities" and find a way towards fair compensation. An equal division of revenue attributable to the MNT and WNT programs is our primary pursuit as we engage with the US Soccer Federation in collective bargaining. Our collective bargaining agreement expired at the end of 2018 and we have already raised an equal division of attributable revenue. We wait on US Soccer to respond to both players associations with a way to move forward with fair and equal compensation for all US soccer players." I will follow the lawsuit filed by Winston & Strawn and report back.
The other stories I considered writing about concerned the ouster Chef Mario Batali and resignation of the founder of UK retailer Ted Baker over sexual harassment allegations. I will save that for next week when I will discuss whether companies should consider listing sexual harassment/misconduct as a material risk factor in SEC filings.
Monday, February 25, 2019
A bunch of us sensed that it was coming. I raised the question in an October 8, 2018 post here. Now, it has actually happened.
Tesla Chief Executive Officer Elon Musk has finally caught the negative attention of the U.S. Securities and Exchange Commission (SEC) with yet another of his reckless tweets. The WaPo reported earlier tonight that "[t]he Securities and Exchange Commission . . . asked a federal judge to hold Tesla CEO Elon Musk in contempt for violating the terms of a recent settlement agreement . . . ." That settlement agreement, as readers will recall, relates to SEC allegations that Musk lied to investors when he posted on Twitter that he had secured the funding needed to take Tesla private. The settlement agreement provides for the review and pre-approval of Musk's market-moving public statements.
Ann Lipton and I, as BLPB's resident fraud mongers, have been following the Musk affaire de Twitter for a number of months now. (See, e.g., here, here, and here.) Based on our prior posts, it seems clear the world was destined for this moment--a moment in which the SEC not only catches Musk in a tweeted misstatement but also can prove that the tweet was not pre-approved, as required under the terms of the settlement agreement. The WaPo article notes evidence that breaches of the agreement may be the rule rather than the exception. (Why does that not surprise me?)
Let's see where this goes next . . . .
Wednesday, February 13, 2019
I have been told there may be some flexibility on the March 1 deadline.
The UMKC Law Review is pleased to announce a call for submissions relating to the law surrounding distributed ledger ("blockchain") technology. Selected papers will be published in the Special Topics Symposium, Summer 2019 edition of the UMKC Law Review. This symposium invites proposals for papers that explore the legal and regulatory issues involved in blockchain technology. Today, blockchain technology is used to build tools and infrastructure that help lawyers draft contracts, record commercial transactions, and verify legal documents. In general, investments in blockchain technology has surged over the past year, inviting both legitimate businesses and modern-day scammers. To date, regulatory agencies have yet to determine a consistent approach to the technology that protects the public while not stifling innovation. Issue 1 of UMKC Law Review’s 88th Volume will explore these and related topics with the goal of advancing awareness of blockchain technology and cryptoassets. Articles and essays of all lengths and papers by single authors or multiple authors are invited. Preference will be given to works between 5,000 and 25,000 words. To be accepted for publication in UMKC Law Review, articles must not have been previously published. Papers are due March 1, 2019.
Authors will have the opportunity to immediately publish submitted drafts to UMKC Law Review’s Special Topics Symposium webpage during the editing process. Proposals for papers should be submitted to the attention of
Ashley Crisafulli (firstname.lastname@example.org); and
Prof. Del Wright (email@example.com).
Proposals should include the following information:
Proposed title of paper
Anticipated length as either an article or essay
Abstract or brief description of the topic
Questions may be addressed to Ashley Crisafulli (firstname.lastname@example.org)
Tuesday, January 15, 2019
I am wading back into a jurisdiction case because when it to LLCs (limited liability companies), I need to. A new case from the United States Court of Appeals for the Sixth Circuit showed up on Westlaw. Here's how the analysis section begins:
Jurisdiction in this case is found under the diversity statute 28 U.S.C. § 1332. John Kendle is a citizen of Ohio; defendant WHIG Enterprises, LLC is a Florida corporation with its principal place of business in Mississippi; defendant Rx Pro Mississippi is a Mississippi corporation with its principal place of business in Mississippi; defendant Mitchell Chad Barrett is a citizen of Mississippi; defendant Jason Rutland is a citizen of Mississippi. R. 114 (Second Am. Compl. at ¶¶ 3, 5) (Page ID #981–82). Kendle is seeking damages in excess of $75,000. Id. at ¶¶ 50, 54, 58, 64, 71 (Page ID #992–95). The district court issued an order under Rule 54(b) of the Federal Rules of Civil Procedure that granted final judgment in favor of Mitchell Chad Barrett, and so appellate jurisdiction is proper. R. 170 (Rule 54(b) Order) (Page ID #3021).
Kendle v. Whig Enterprises, LLC, No. 18-3574, 2019 WL 148420, at *3 (6th Cir. Jan. 9, 2019).
No. No. No. An LLC is not a corporation, for starters. And for purposes of diversity jurisdiction, "a limited liability company is a citizen of any state of which a member of the company is a citizen." Rolling Greens MHP, L.P. v. Comcast SCH Holdings L.L.C., 374 F.3d 1020, 1022 (11th Cir. 2004). As such the where the LLC is formed doesn't matter and the LLC's principal place of business doesn't matter. All that matters is the citizenship of each LLC member.
In this case, I can tell from the opinion that Kendle and Rutland are "co-owners" of WHIG Enterprises. The opinion suggests there may be other owners (i.e., members). The opinion refers to the plaintiff suing "WHIG Enterprises, LLC, two of its co-owners, and another affiliated entity." Kendle v. Whig Enterprises, LLC, No. 18-3574, 2019 WL 148420, at *1. The opinion later refers to Rutland as "another WHIG co-owner." If we want to know whether diversity jurisdiction is proper, though, we'll need to know ALL of WHIG's members.
Now, it may well be that there is diversity among the parties, but we don't know, and neither, apparently, does the court. That may not be an issue in this case, but if people start modeling their bases for jurisdiction on the Kendle excerpt above, things could get ugly. The Eleventh Circuit, as noted above. A more recent case further reminds us to check diversity for all members in an LLC. Thermoset Corporation v. Building Materials Corp. of America et al, 2017 WL 816224 (11th Cir., March 2, 2017).
I figured that I should give a shout out to folks getting right, given all my criticism of those getting it wrong. Come, Sixth Circuit, let's get it together.
Friday, January 11, 2019
I wasn't one of those people who decided to become a lawyer after watching To Kill a Mockingbird, Witness for the Prosecution, and Twelve Angry Men, but they were some of my favorite movies. These movies and TV shows like Suits, How to Get Away with Murder, and Law & Order "teach" students and the general public that practicing law is sexy and/or confrontational. When I teach, I try to demystify and clear up some of the falsehoods, and that's easy with litigation-type courses. When I taught Business Associations, it was a bit tougher but we often used movies or TV shows to illustrate the right and wrong ways to do things. As an extra credit assignment, I asked students to write a critique of what the writers missed, misrepresented, or completely misunderstood.
This semester, I will be teaching a transactional drafting course where the students represent either the buyer or the seller of a small, privately owned business. I would like to recommend movies or TV shows that don't deal with multibillion dollar mergers, but I haven't been watching too much TV lately. I'm looking for suggestions along the lines of Silicon Valley (which past students have loved) or Billions. If you have any suggestions, please comment below or email me at email@example.com.
Saturday, January 5, 2019
It's the start of a new year and a new semester. As Joan wrote earlier this week, we need to step back and take stock of our mental health. I'm the happiest lawyer I know and have been since I graduated from law school in 1992, but many lawyers and students aren't so lucky. In fact, I probably spend 25-35% of my time on campus calming students down. Some have normal anxiety that fades as they gain more confidence. I often recommend that those students read Grit or at least listen to the Ted talk. Others tell me (without my asking) about addictions, clinical depression, and other information that I should not know about. I know enough to refer to them to help. Closer to home, my 22-year old son has lost several friends to suicide. Many of those friends went to the best high schools and colleges in the country and seemed to have bright futures. And as we know, the suicide rate for lawyers is climbing.
Thankfully, the American Bar Association has gathered a number of resources for law students here. Practicing lawyers can find valuable tools for lawyer well-being here and a podcast for lawyers in recovery here. Law students can access their own ABA wellness podcast here. To help keep my energy high, I listen to a lot of podcasts of all types. I’ve found that listening to wellness podcasts, meditating, and exercising instead of watching the news has had a dramatic impact on my health. I know for a fact that the wellness stuff works. Due to significant stressors as a caretaker, my blood pressure spiked to a clinically dangerous level last week. This week, with mindfulness exercises and other wellness activities, I was able to lower it to normal levels without my new medication having kicked in yet. This is a big deal for me because despite my professional happiness, I’ve been hospitalized twice in 14 months for medical conditions exacerbated by stress. Being calm and stress free is literally a matter of life and death for me. Some of the podcasts I listen to are probably too “woo woo” to post for this audience but if you’re interested, you can email me privately at firstname.lastname@example.org. I’ll keep your secret.
Mainstream lawyer/business wellness podcasts include:
The Happy Lawyer Project (“The Happy Lawyer Project is an inspirational podcast for young lawyers looking to find happiness in life with a law degree. Each episode provides you with the tips, advice, encouragement and inspiration you need to craft a life and career you love.")
The Resilient Lawyer (“Practical and actionable information you can use to be a better lawyer. The Resilient Lawyer podcast is inspired by those in the legal profession living with authenticity and courage. Each week, we share tools and strategies for finding more balance, joy, and satisfaction in your professional and personal life! You'll meet lawyers, entrepreneurs, mentors and teachers successfully bridging the gap between their personal and professional lives, connecting the dots between their mental, emotional, physical and spiritual selves.”)
Happy Lawyer, Happy Life ("A knowledge centre for lawyers who want to make the best of their life in and outside of the law.")
The Tim Ferris Show (“Each episode, I deconstruct world-class performers from eclectic areas (investing, sports, business, art, etc.) to extract the tactics, tools, and routines you can use. This includes favorite books, morning routines, exercise habits, time-management tricks, and much more.”)
The Mindful Lawyer (it's no longer running, but my colleague Scott Rogers pioneered the field and these are short tracks.)
Dina Cataldo Soul Roadmap (“So, you’re a lawyer who doesn’t have it all figured out? Design the life you deserve. Stop killing yourself to achieve success and redefine it instead.”)
You may need more than a podcast to get you through whatever you're going through right now. If you, a student, a colleague, or family member needs immediate help, please get it. I’ve cut and pasted the resources below from our law school’s web page for students.
Key National Referral Services
Chemical Dependency and Self-Help Sites
Addition Recovery Resources for Professionals, 540-815-4214
Alcoholics Anonymous (AA), 212-870-3400
American Medical Association, 800-621-8335
Center for Substance Abuse Treatment (CSAT), 240-276-1660
Cocaine Anonymous (CA), 310-559-5833
CODA Drug Abuse Hotlines, 1-877-446-9087
Crystal Meth Anonymous (CMA), 213-488-4455
Dual Recovery Anonymous (DRA), 913-991-2703
International Lawyers in A.A. (ILAA), 944-566-9040
Marijuana Anonymous (MA), 800-766-6779
Narcotics Anonymous (NA), 818-773-9999
National Clearinghouse for Alcohol and Drug Information(SAMHSA), 1-877-SAMHSA (726-4727)
National Institute on Drug Abuse (NIDA), 301-443-1124
Nicotine Anonymous (NA), 415-750-0328
Anorexia Nervosa & Associated (Eating) Disorders (ANAD), 630-577-1330
Overeaters Anonymous (OA), 505-891-2664
Adult Children of Alcoholics (ACOA), 562-595-7831
Nar-Anon Family Groups, 310-534-8188
Co-Dependents Anonymous (CODA), 888-444-2359
Co-Dependents of Sex Addicts (COSA), 763-537-6904
Mental Health Sites
Anxiety Disorders Association of America (ADAA), 240-485-1001
Journal of General Psychiatry (JAMA), 1-800-262-2350
Children and Adults with Attention Deficit/Hyperactivity Disorder(CHADD), 1-800-233-4050
Depression and Bipolor Support Alliance (DBSA), 800-826-3632
Lawyers with Depression
National Alliance on Mental Illness (NAMI), 800-950-6264
National Institute of Mental Health (NIMH), 1-866-615-6464
National Mental Health Association (NMHA), 703-684-7722
Sexual Addiction and Compulsivity
I'm sure that I've missed a number of resources. I just finished attending a wellness tea brunch at a French patisserie with fresh baked goods and champagne so I'm incredibly relaxed (#selfcare). If you have more resources to add, please feel free to comment below. Let’s make this the best year yet for our students and for ourselves. If I can ever be an ear for anyone, I’m always available.
Friday, December 21, 2018
If you are looking for podcasts over the break, I recommend Professor Brian Frye's Ipse Dixit. I have only listened to a handful of the 75 episodes, but I learned something new in each one.
A big thanks to Brian for putting all of these podcasts on legal scholarship together. The podcasts cover a wide range of legal topics, mostly in an interview format with other professors.
Tuesday, December 11, 2018
Jack Welch, former GE CEO (1981 to 2001) was revered for his ability to maximize shareholder value. Yet in 2009, he explained that shareholder value was
“the dumbest idea in the world. Shareholder value is a result, not a strategy... your main constituencies are your employees, your customers and your products. Managers and investors should not set share price increases as their overarching goal… Short-term profits should be allied with an increase in the long-term value of a company.”
This runs contrary to how many people think about the role of the CEO and the board of directors. I think it's spot on, and it is a key reason the business judgment rule, and its role in preserving director primacy, is so critical.
Last week, a Wall Street Journal article about Dick's Sporting Goods made the rounds. The article reported:
Ed Stack, the chairman and chief executive of Dick’s Sporting Goods Inc., arrived at work the Monday after a gunman killed 17 people at a school in Parkland, Fla., nearly certain the outdoor retailer should limit sales of some guns.
. . . .
Dick’s Financial Chief Lee Belitsky asked, “So what’s the financial implication here?” according to Mr. Stack. “I basically said, I don’t really care what the financial implication is, but you’re right, we should look.”
Company executives convened the board via teleconference to explain the proposed plan, took some time to reflect, then gathered again a few days later to vote. “It was unanimous that we should do this and stand up and take a stand,” said Mr. Stack, whose family holds a controlling stake in the retailer.
This revelation led many folks to question whether Stack's statement that he did not "really care" about the financial implications was a breach of fiduciary duty. The concern was buoyed by the reality that store sales had dropped about 3% to 4% for the year, and the drop was linked to the decision to limit certain gun sales.
That said, a drop in sales does not mean there was a breach of any duty any more than an increase in sales means no breach occurred. Results may be evidence, but that's all they are. Part of the story. Incidentally, though it is not proof, either way, it is worth noting that Dick's sales dropped, but profits rose after the decision because the company cut costs by replacing some guns with higher-margin items.
It seems like every time a CEO or board issues a decision that is controversial or chooses to say that he or she supports a certain course of action because they think it is the "right thing to do," the questions begin about whether either the duty of care or loyalty has been breached. I maintain that a statement (or series of statements) like that is not sufficient to overcome the business judgment rule to allow a review of the decision.
This is especially true where, like in the Dick's situation, there is evidence that the company deliberated appropriately. The WSJ article noted that company executives called together the board to explain the proposed plan, "took some time to reflect, then gathered again a few days later to vote." The vote was unanimous to end all assault-style weapons sales and to and stop selling guns or ammunition to those under 21 years of age. Interestingly, Walmart Inc. and other retailers followed Dick's lead later that day. If the deliberative process is a concern, it would seem those following Dick's should be more vulnerable to a fiduciary duty/business judgment rule challenge than Dick's.
For what it's worth, I think Dick's or any store deciding NOT to change their sales practice would also be protected by the business judgment rule, just as I think Chick-Fil-A's decision not to open on Sundays should be protected by the business judgment rule (though if it were a Delaware corporation, I am not sure it would be).
This is not to say I don't believe in fiduciary duties. I very much do. I just also believe in a strong business judgment rule, ideally enforced as an abstention doctrine. (I believe in lots of things.)
I need more than a few public statements before I think anyone should be looking behind an entity's decision making. Recent examples raising entity fiduciary duty questions, like Dick's and Nike's Colin Kaepernick ads, have had positive financial outcomes of the entities, but it shouldn't matter. The business judgment rule is there to protect all the decisions of the board that are not the product of fraud, illegality, or self-dealing, not just correct decisions.