Thursday, February 28, 2019
Da Lin recently posted Beyond Beholden, a paper tackling a new issue in director independence. Although most corporate law focuses on whether there is a stick a controlling shareholder can use to punish directors if they fail to follow orders, Lin looked to see if she could see any carrots a controlling shareholder could use to lead a director around. This bit from the article captures it nicely:
Corporate governance scholarship focuses extensively on the incentives generated by the controlling shareholder’s ability to retaliate against insubordinate directors. What the literature overlooks, however, is that directors may also be influenced by the prospect of reward. What happens when the controlling shareholder is not angered but instead pleased?
The result, it turns out, is often new opportunities or future benefits from the controlling shareholder to the favored directors. Controlling shareholders can direct their resources or those owned by the controlled company in ways that reward friends.
Lin's article looks at how controlling shareholders may reward ostensibly independent directors by appointing them to other lucrative board positions under their control. A director who approves a sale of the company may soon find herself out of a six-figure job when the company gets absorbed through a merger. In theory this fact cuts against the argument that the independent director simply approved the transaction to please a controlling shareholder. If the punishment a controlling director could apply would simply be the loss of the board seat--approving the sale has the same result. Lin looks further than others and sees that an independent director might also be motivated by the prospect of future board seats at other companies also controlled by the controlling stockholder. To get a sense about how this works, she looked at recent freezeouts with Delaware targets. Her research found that controllers often reappoint cooperative directors to other firms:
I find that some controlling shareholders regularly re-appoint cooperative “independent” directors to executive and board positions at other firms under their control. 36 percent of the controlling shareholders in my sample have re-appointed at least one nominally independent director in this way. Illustrating this point from a different angle, 20 percent of the directors in my data have served on the board or as an executive in at least two different companies controlled by the same controlling shareholder. In many cases, the director was independent in the conventional sense when he negotiated the freezeout, meaning that he had no ongoing or prior connections with the controller at that time. But after the freezeout closed, he obtained a job at another company that the controlling shareholder controlled. From a director’s perspective, these findings mean that he can obtain future benefits from the controlling shareholder if he acts in the controlling shareholder’s interests.
She closes by highlighting the implications for doctrine focused strictly on evaluating whether supposedly independent directors are "beholden" to controllers:
Judges and scholars miss half the story when they view independence solely through the lens of beholdenness and retribution. I show that controlling shareholders can and do form repeat relationships with the nominally independent directors who serve on their boards, and the prospect of this patronage can compromise those directors’ ability to prevent controlling shareholder opportunism.
I saw Lin present the paper in 2018 at the National Business Law Scholar's Conference. It changed how effective I thought the "beholden" standard may be as well as how to think about special litigation committees. She was also kind enough to let me steal some slides from her presentation for when I taught director independence. Some of the graphics in the paper may help students or executives get a real sense about these ties. For example, this illustration shows webs of interconnected companies and director relationships:
She will be joining University of Richmond School of Law in the fall.
Wednesday, February 27, 2019
"Organized by peak business associations, the purpose of ... 'business-class CSR mobilizations' was to weaken the state in its relation to corporations and increase the control of business over social trends." https://t.co/EBH7JWtrZ8 #corpgov— Stefan Padfield (@ProfPadfield) February 21, 2019
"study of buybacks ... found that 'right after the company tells the market that the stock is cheap, executives overwhelmingly decide to sell.' And it is almost unheard of for companies to adjust their EPS targets for incentive compensation to reflect the reduction in shares" https://t.co/DsYCpoSY1f— Stefan Padfield (@ProfPadfield) February 22, 2019
"Zion Williamson blows out his shoe, injures knee, and Nike gasps in horror"; "Social media was quick to pounce .... Puma tweeted, then deleted: 'Wouldn’t have happened in the pumas.'" https://t.co/Q9cTvc8KIb #corpgov— Stefan Padfield (@ProfPadfield) February 21, 2019
"we hope to move much of our excess liquidity into businesses that Berkshire will permanently own. The immediate prospects for that, however, are not good: Prices are sky-high for businesses possessing decent long-term prospects." https://t.co/v0hhsMosn3 #corpgov— Stefan Padfield (@ProfPadfield) February 24, 2019
Boston University School of Law, in conjunction with the University of Illinois College of Law, UCLA School of Law, and the University of Richmond School of Law, invites submissions for the Seventh Annual Workshop for Corporate & Securities Litigation. This workshop will be held on Friday, September 27 and Saturday, September 28, 2019 at Boston University School of Law.
This annual workshop brings together scholars focused on corporate and securities litigation to present their scholarly works. Papers addressing any aspect of corporate and securities litigation or enforcement are eligible, including securities class actions, fiduciary duty litigation, and comparative approaches. We welcome scholars working in a variety of methodologies, as well as both completed papers and works-in-progress.
Authors whose papers are selected will be invited to present their work at a workshop hosted by Boston University. Hotel costs will be covered. Participants will pay for their own travel and other expenses.
If you are interested in participating, please send the paper you would like to present, or an abstract of the paper, to firstname.lastname@example.org by Friday, May 24, 2019. Please include your name, current position, and contact information in the e-mail accompanying the submission. Authors of accepted papers will be notified by late June.
Any questions concerning the workshop should be directed to the organizers: David Webber (email@example.com), Verity Winship (firstname.lastname@example.org), Jim Park (James.email@example.com), and Jessica Erickson (firstname.lastname@example.org).
Tuesday, February 26, 2019
Westlaw recently posted an interesting Massachusetts case at the intersection of criminal law and business law. Massachusetts (the Commonwealth) sought to commit a defendant as a sexually dangerous person. Commonwealth v. Baxter, 94 Mass. App. Ct. 587, 116 N.E.3d 54, 56 (2018). The defendant was (at the time) an inmate because of a probation violation related to offenses of rape of a child and other crimes. The Commonwealth retained Mark Schaefer, Ph.D., for an expert opinion, and Dr. Schaefer concluded that the defendant was, under state law, a sexually dangerous person. The hearing judge found probable cause to think the defendant was a sexually dangerous person and had him temporarily committed for examination by two qualified examiners, as required by law. Dr. Joss determined that the defendant was sexually dangerous, and Dr. Rouse Weir determined he was not.
After the reports of the qualified examiners were submitted to the court, the defendant moved to exclude Dr. Joss from providing evidence at trial, or in the alternative, to appoint a new qualified examiner to evaluate the defendant. As grounds therefor, the defendant alleged that Dr. Joss and Dr. Schaefer were both among six “member/partners in Psychological Consulting Services (‘PCS’), a limited liability corporation [LLC] based in Salem, Massachusetts.” He argued that the members of the LLC have a fiduciary duty of loyalty to the company and are necessarily “dedicated to [its] financial and professional success.” Because Dr. Schaefer and Dr. Joss were “intertwined both professionally and financially,” through their partnership in PCS, the defendant claimed that their relationship “create[d] a conflict of interest and raise[d] a genuine issue of Dr. Joss's impartiality in his role as a [qualified examiner].” The defendant offered no affidavit in support of his motion, and did not request an evidentiary hearing.
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 . . . .
Business Law and Ethics Faculty Position (Tenure-Track) - Suffolk University, Sawyer Business School
BUSINESS LAW & ETHICS FACULTY POSITION
SAWYER BUSINESS SCHOOL
BOSTON, MASSACHUSETTS 02108
POSITION: Business Law & Ethics Faculty position at the Assistant Professor rank. The anticipated start date is Fall 2019. This is for a tenure-track position. Applications will be accepted until the position is filled.
- J.D. from and ABA-accredited law school.
- B.A or other relevant graduate business degree from an AACSB-accredited school.
- A relevant Ph.D. from an AACSB-accredited school may be substituted for the graduate degree requirement.
- Potential for excellent teaching and research.
- Candidates with industry experience are encouraged to apply.
- Candidates with an expertise in corporate compliance, intellectual property, or data privacy are encouraged to apply.
JOB RESPONSIBILITY: Suffolk University emphasizes both teaching and research. The standard teaching load is 5 semester courses per academic year. Candidates must have a commitment to research which leads to quality refereed publications. BLE faculty conduct research in various business law and ethics journals which may include both legal and social science outlets.
THE BUSINESS SCHOOL: The Sawyer Business School offers undergraduate and graduate degrees, including BSBA, MBA and other graduate programs along with several joint degrees The Sawyer Business School has over 100 full-time faculty members and is internationally accredited in business and accounting by the AACSB.
THE UNIVERSITY: Suffolk University is a private school located in Boston, next to the financial district. The university serves a culturally-diverse student population who come from all over the world.
APPLICATION: Candidates are invited to send an application letter; resume; as well as, the following documents where applicable: teaching evaluations; a copy of their transcript; and names, addresses and phone numbers of at least three references to: Jason Peterson, Chair and Associate Professor, Business Law & Ethics Department; Suffolk University, Boston, MA.
Please send (email only) all application materials c/o:
Business Law & Ethics Department
***Please refer to this listing in the Subject Line of your email.*
Sunday, February 24, 2019
In today’s post, I address the second of the two questions at the heart of Wharton Professor Richard Shell’s Springboard: Launching Your Personal Search for SUCCESS: How will I achieve my idea of success (see last week's post for question 1)?
Shell offers 5 Steps covered in Chapters 5-9 (if you’ve yet to formulate your idea of success, jumpstart with his Six Lives Exercise)
Step #5: Look Inside to Find Your Unique Combination of Capabilities
I love the quoted Danish folk saying that opens this chapter: “You must bake with the flour you have.” Given my affinity for cooking, I was intrigued by its opening story about the circuitous life path of the famous French chef Julia Child (want details? read the book!). Using the story of Child and others, Shell steers the reader through a reflection upon one's achievement skills, backyard diamonds, and personality strengths through his SAME assessment exercise.
I think the genius of this chapter is that it seems to suggest that just as we all have a unique combination of DNA, we all have a unique mix of gifts, talents, personality strengths etc. and that it’s in understanding, nurturing, and harnessing this unrepeatable mix that we’re most likely to flourish.
Step #6: Energize Yourself by Combining Satisfaction-Based and Reward-Based Motivations
Do you know the significance of the number 32,850? Shell asks the reader. Do you? It’s the number of days you’ll live if you someday celebrate your 90th birthday. Time is short, so get energized and get moving! But how? Shell suggests a balanced combination of inner (satisfaction-based) and outer (reward-based) motivations adapted to one’s personality strengths (do the SAME assessment!). Being a runner, I love his rationale: “Satisfaction-based motivation is best for endurance. Reward-based energy is best for sprints.”
Step #7: Cultivate Self-Confidence
In essence: learn to fail. It’s not fun (at least at first), but it’s so important to one’s growth. Shell discusses two types of confidence in this Chapter: Level 1 (your sense of your “true-self”) and Level 2 (skills-based). He notes that “Your confidence is what gives you the courage to try, fail, learn, grow, and, ultimately, succeed.”
Step #8: Focus the Powers of Your Mind to Achieve Long-Term Goals
Charles Lindbergh’s audacious goal of being the first to make a nonstop transatlantic flight is among the many stories in Springboard. Achieving important goals requires effectively harnessing and focusing four powers of the mind: passion, imagination, intuition, and reason.
True confession: the runner in me has been waiting for the opportune moment to share a recent, utterly inspiring WSJ article about Gene Dykes, the spouse of Shell’s Wharton colleague Olivia Mitchell, who had the audacious goal (at least for most of us!) of running a marathon in less than 3 hours. The ability to effectively harness one’s mental powers is absolutely essential in endurance running. Without doubt, Dykes succeeded at this: in December 2018, he “ran a world record sub-three hour marathon…at age 70.” WOW!!
Step #9: Engage Others-Exercise Influence
Here, credibility is key. It establishes trust. And trust is the basis of true cooperation. To illustrate, Shell quotes Mark Twain: “Always do right. This will gratify some people and astonish the rest.”
In Springboard’s closing paragraph, Shell states that “My goal has been to make this experience a living workbook about you, your goals, and your life.” Based upon comments I’ve heard from various sources (students, friends, siblings, business contacts etc.), Shell has succeeded. It’s a truly worthwhile read!
Saturday, February 23, 2019
I had a great time reading Guhan Subramanian & Annie Zhao’s new paper, Go-Shops Revisited. It follows up on Prof. Subramanian’s earlier study of their effects, Go-Shops vs. No-Shops in Private Equity Deals: Evidence & Implications, 63 Bus. Law. 729 (2008). In the original study, Prof. Subramanian found that go-shops generally had beneficial effects for target companies: bidders would pay a little bit more for the privilege of something like exclusivity in the original negotiations, and not infrequently, a superior proposal would materialize during the go-shop period. But in the new paper, the authors conclude that go-shops are no longer an effective tool for price discovery, in large part because changes in their design make it much less likely that a superior proposal will emerge.
There are a lot of interesting observations in the new paper, with the basic point being that deal attorneys – aware that Delaware courts focus a lot on things like the size of termination fees – instead manipulate aspects of the go-shop that tend to escape judicial notice, and that collectively function to make go-shops less effective. One particular point that stood out: The authors note that PE firms have changed how they compensate CEOs who remain with the company after the buyout. Today, they pay based on whether the firm achieves certain multiples of invested capital, a metric that CEOs might view as functionally guaranteeing them a healthy payout, and one that incentivizes them to keep the deal price as low as possible. (The authors contrast with earlier IRR-based payouts, which were so difficult to achieve as to render compensation speculative). And even if the CEO does not negotiate compensation with the PE firm until after a deal price is reached, the CEO will know the PE firm’s practices and past history. The authors got a kind of amazing quote from an unnamed PE investor who said his firm tries to “corrupt” management; the multiple-of-invested-capital compensation structure, argue the authors, contributes to that corruption.
Point being, there are a lot of wonderful nuggets in the paper, and I highly recommend it.
Friday, February 22, 2019
Tulane Law School invites applications for three positions: a Forrester Fellowship, a visiting assistant professorship, and a Yongxiong Fellowship.
All three positions are designed for promising scholars who plan to apply for tenure-track law school positions. All three positions are full-time faculty in the law school and are encouraged to participate in all aspects of the intellectual life of the school. The law school provides significant support, both formal and informal, including faculty mentors, a professional travel budget, and opportunities to present works-in-progress in various settings.
Tulane’s Forrester Fellows teach legal writing in the first-year curriculum to two sections of 25 to 30 first-year law students in a program coordinated by the Director of Legal Writing. Fellows are appointed to a one-year term with the possibility of a single one-year renewal. Applicants must have a JD from an ABA-accredited law school, outstanding academic credentials, and significant law-related practice and/or clerkship experience. Candidates should apply through Interfolio, at http://apply.interfolio.com/59403. If you have any questions, please contact Erin Donelon at email@example.com.
Tulane’s visiting assistant professor (VAP), a two-year position, is supported by the Murphy Institute at Tulane (http://murphy.tulane.edu), an interdisciplinary unit specializing in political economy and ethics that draws faculty from the university’s departments of economics, philosophy, history, and political science. The position entails teaching a law school course or seminar in three of the four semesters of the professorship (presumably the last three semesters). It is designed for scholars focusing on regulation of economic activity very broadly construed (including, for example, research with a methodological or analytical focus relevant to scholars of regulation). In addition to participating in the intellectual life of the law school, the VAP will be expected to participate in scholarly activities at the Murphy Institute. Candidates should apply through Interfolio, at http://apply.interfolio.com/59420, providing a CV identifying at least three references, post-graduate transcripts, electronic copies of any scholarship completed or in-progress, and a letter explaining their teaching interests and their research agenda. If you have any questions, please contact Adam Feibelman at firstname.lastname@example.org.
Tulane’s Yongxiong Fellow will teach a required course in U.S. legal research and writing to a cohort of LLM students at Tulane Law School under the auspices of the Yongxiong-Tulane Center for International Credit Law. The Fellow will also teach one upper-level course in a topic relating to financial markets, banking or credit law. The Fellow will be appointed to a two-year term with the possibility of renewal. Applicants must have a JD or graduate degree in law from an ABA-accredited law school, outstanding academic credentials, excellent research and writing skills, and scholarly interests related to financial regulation. Applicants proficient in Mandarin Chinese are especially encouraged to apply, although there is no language requirement for the position. Candidates should apply through Interfolio, at http://apply.interfolio.com/59521, providing a CV identifying at least three references, post-graduate transcripts, electronic copies of any scholarship completed or in-progress, and a letter explaining their teaching interests and their research agenda. If you have any questions, please contact Adam Feibelman at email@example.com.
The law school aims to fill all three positions by March 2019. Tulane is an equal opportunity employer and encourages women and members of minority communities to apply.
Thursday, February 21, 2019
Aspiring business law professors may want to apply for the fellowship at the Rock Center for Corporate Governance at Stanford Law School. The posting describes the position as follows:
The Fellow will be expected to conduct independent research leading to major academic journal or law review publication, and will receive support from faculty in developing and executing those projects. The Fellow will also engage in a broad mix of research and analysis under the supervision of Stanford Law School, Rock Center, and other affiliated faculty. Potential projects include research in the areas of: executive compensation, proxy voting, rating agencies, securities and corporate litigation, investment vehicle structures, Environmental Social and Governance (ESG) Issues, diversity on corporate boards, the Foreign Corrupt Practices Act, and the financial regulatory system. The Fellow will also develop law school and/or Rock Center course materials and educational materials for directors of publicly traded corporations, and help support research conferences and seminars. Fellows are encouraged to attend weekly faculty lunch seminars and participate in activities with the other fellows at Stanford Law School to learn more about their scholarship and academic life. The Fellow will report to the Managing Director of the Rock Center, but will work under the direction of an assigned faculty member. We provide office space, a competitive stipend, and a generous benefits package.
It's a great program. Applications are due on or before March 22, 2019.
Wednesday, February 20, 2019
"Invention by artificial intelligence is the future of innovation.... this Article employs Coase Theorem and its corollaries to determine who should be allowed to secure these patents to maximize economic efficiency."@Prof_Schuster, 75 Wash. & Lee L. Rev. 1945 #corpgov— Stefan Padfield (@ProfPadfield) February 17, 2019
judge denied motion to dismiss lawsuit against domestic corporations under Alien Tort Statute "over their alleged participation in a secret U.S. government experiment ... that infected hundreds of Guatemalans with syphilis"— Stefan Padfield (@ProfPadfield) February 17, 2019
33 No. 06 Westlaw Journal White-Collar Crime 08 #corpgov
"In Schnatter v. Papa John’s (Jan. 15, 2019), the Delaware Court of Chancery ruled that a director had the right, under DGCL Section 220, to inspect the corporate books and records that related to the board’s determination to seek to sever ties with him." https://t.co/wrC6kJKXRL— Stefan Padfield (@ProfPadfield) February 15, 2019
"According to the global market research firm's report, six weeks into 2019, U.S. retailers have announced 2,187 closings, up 23 percent compared to last year.... Bankruptcies also are continuing at a rapid pace ...." https://t.co/ECOPrBt0Kz #corpgov— Stefan Padfield (@ProfPadfield) February 15, 2019
Tuesday, February 19, 2019
Conference Announcement -- Artificial Intelligence: Thinking About Law, Law Practice, and Legal Education
Thinking About Law, Law Practice, and Legal Education
Hosted by the Duquesne University School of Law
Friday & Saturday, April 26-27, 2019
Developments in artificial intelligence are changing virtually all aspects of our world, ranging from autonomous vehicles to robotic surgery, and from smartphones to smart speakers. Lawyers, legal educators, and policymakers are already experiencing the effects of computers that aid and, in some cases, replace the often-tedious work done by lawyers and other members of society. Law school graduates will need to understand how intelligent systems can enhance and streamline the work that they do, and how their careers may be changed in the future. Furthermore, artificial intelligence technology will likely call for greater government oversight, result in new laws, and trigger litigation.
This two-day conference will feature presentations by educators, practitioners, policymakers, and computer scientists that will demonstrate how the development of artificial intelligence is affecting society, the law, the legal profession, and legal education. The Duquesne Law Review will dedicate space in its Winter 2019 symposium issue to publishing papers from this conference.
Presenters & Agenda, Day One (Law and Law Practice):
- Dean Alderucci (Carnegie Mellon Univ.): Customized Artificial Intelligence Techniques for the Patent Field
- Kevin Ashley (Univ. of Pittsburgh): Connecting Case Texts and Computational Models of Legal Reasoning
- Kristen Baginski (Lexis): Lexis Advance and the Use of AI and Analytics: A Brief Overview of Recent and Upcoming AI and Analytic Enhancements to the Lexis Advance Platform
- Kishor Dere (Indian Society of International Law): Role of Artificial Intelligence in Predicting the Speed and Results of Judicial Decision-Making
- Tabrez Y. Ebrahim (California Western Univ.): Autonomous Vehicles Ethics & Law: An Artificial Intelligence Trolley Problem
- Brian S. Haney (Martian Technologies): The Optimal Agent: The Future of Autonomous Vehicles & Liability Theory
- Patrick Juola (Duquesne Univ.): Specificity and Sensitivity in Discovery: What Artificial Intelligence Can Offer
- Ganes Kesari (Gramener, Inc.): Smart Contract Risk Identification with AI
- Timothy Lau, Esq. (Federal Judicial Center): Educating Federal Judges on AI
- Oliver Round, Esq., Seema Phekoo, Esq., & Kyle Johnson (BNY Mellon), & Scott Curtis (Deloitte LLP): Practical Applications of Artificial Intelligence and Machine Learning in Corporate Legal Departments
- Emile Loza de Siles, Esq. (Technology & Cybersecurity Law Group): Algorithmic Justice: A New Proposal Toward the Identification and Reduction of Discriminatory Bias in Artificial Intelligence Systems
- Igor Vuletić (Josip Juraj Strossmayer Univ.): Criminal Law Facing Challenges of Autonomous Technology: Who Is Liable for a Traffic Accident Caused by an Autonomous Vehicle?
Presenters & Agenda, Day Two (Legal Education):
- Dionne E. Anthon, Prof. Anna P. Hemingway, & Prof. Amanda Sholtis (Widener Law Commonwealth): Practice-Ready Millennials: Technology Training for Efficient and Effective Communication
- Jamie J. Baker (Texas Tech Univ.): Legal Research and The Duty of Technology Competence: Regulating Algorithms in Law
- Randy J. Diamond (Univ. of Missouri): Technology Skills for Lawyers
- Kristi Gedid (Mylan), Virginia L. Zaccari (Duquesne Univ.), & Kevin Miller (LegalSifter): How Artificial Intelligence is Transforming the Legal Sector
- Emily Janoski-Haehlen & Librarian Sarah Starnes (Univ. of Akron): From AI to IoT: Using Legal Innovations to Teach Legal Technology Competency Across the Curriculum
- Kate Norton (Duquesne Univ.): Artificial Intelligence as a Path to Closing the Justice Gap
- Julie Oseid (Univ. of St. Thomas), Prof. Melissa Love Koenig (Marquette Univ.), & Amy Vorenberg (Univ. of New Hampshire): OK Google, Will Artificial Intelligence Replace Human Lawyering?
- Teresa Godwin Phelps (American Univ.) & Richard B. Phelps (Broadcast Media):“Alexa, Write a Memo”: The Promise and Challenges of AI and Legal Writing
- James B. Schreiber & Prof. Ashley London (Duquesne Univ.): Considerations Surrounding the Data Science World We Are In
- Drew Simshaw (Georgetown Univ.): Teaching Legal Research and Writing in an Era of Artificial Intelligence
Conference Registration Fees:
- Presenters and Duquesne faculty – Free
- Other registrants with a full-time academic or government agency affiliation - $50 per day
- All others, including attorneys seeking CLE credits -- $90 per day (yielding three hours of CLE credit each day)
Duquesne will provide free on-site parking to conference attendees. A continental breakfast, snacks, and lunch will be provided each day, and a conference-closing reception will take place in the Bridget and Alfred Peláez Legal Writing Center, the home of Duquesne’s Legal Research and Writing Program.
Pittsburgh is an easy drive or short flight from many cities. Duquesne has arranged for blocks of discounted rooms at two hotels near to campus, within walking distance of the law school and downtown Pittsburgh. Attendees can enjoy Pittsburgh area attractions, including our architectural treasures, museums, art collections, shopping, and world-class professional sports teams.
For more information, and to complete the online registration for the conference and hotels, please visit https://www.law.duq.edu/news/artificial-intelligence-conference-april-26-27th-2019. Hotel registration will close soon, so please make your reservations now.
Monday, February 18, 2019
Couples Cooking with Plated: Curried Lamb Tacos
with Cabbage Slaw and Cilantro-Lime Yogurt
Since I last wrote about meal kits--those boxes of goodness (recipes and ingredients, all shipped to your door)--they have continued to be in the news. There's been some consolidation in the industry (referenced here), continued speculation about whether the industry is sustainable (for a negative view, see here), and ongoing interest in what meal kits are all about (here). Now, there even is an industry information page dedicated to meal kits (here).
A central concern in much of what is being written is competition. But I have my own perspective on competition in this industry: if enough of these firms can find a financially sustainable, cost-effective business model (and I certainly hope they do), I have a good feeling about the continued survival of a few of these firms. Why? Because each of the three firms I have ordered from--Blue Apron, Hello Fresh, and Plated--has evolved toward each other a bit as time has gone on, converging toward better service norms. Among the areas of convergence: segregated ingredients (put in a separate bag or mini-box) and lower calorie/simpler preparation options. In other words, the service elements of the businesses appear to be learning from each other's successes in meaningful ways. I actually enjoy all three services.
Having said that, there are certain competitive service advantages, as I perceive them, that Plated has over Blue Apron and Hello Fresh. What are those important competitive features? Bottom Line: the fact that Plated has (1) relatively simple, (2) varied, recipe/meal choices--all of which are (3) just a bit more sophisticated than we normally would eat and (4) delicious--at (5) an affordable cost and are (6) available in a two-meal-a week-for-three-people format. Basically, Plated has everything I want and need. And the few deliveries that have not been perfect have either included a substitute for the unavailable item (with a message to that effect) or have been remedied by a discount off a future order. (Honestly, I have been impressed by the level of customer service in all three firms when I have had a question or complaint. Good for all of them.)
This does not mean that I do not still enjoy Blue Apron and Hello Fresh, but neither, for example, has a three-person meal option . . . .
Perhaps I will have more to say about this industry at some point in the future. But this (finally) completes the three-part series I started and promised over a year ago. Honestly, and I tell just about everyone this, other than general convenience and great food, one of the best things about getting meal kits delivered is just what my husband originally intended to give me in the first place when he began ordering Blue Apron for us: easy time with him in the kitchen creating a family meal together, glass of wine in hand . . . .
Sunday, February 17, 2019
During the first-half of this spring semester, I’m teaching an MBA-level Business Ethics/Legal Studies course. On Tuesday, we’ll discuss one of my absolute favorite books: Springboard: Launching Your Personal Search for Success by Wharton School Professor Richard Shell. Making this book required reading reinforces the course’s emphasis on ethics and values, and is designed to help students articulate long-term core values around meaningful work. Given that a Gallup 2017 State of the Global Workplace survey reports that “85% of employees worldwide are not engaged or are actively disengaged in their job,” this objective strikes me as a meaningful task.
In the Introduction, Shell chronicles generally what he terms his “odyssey years,” which included a variety of short-lived jobs, self-help research and seminars, travels across the globe, and collapsing in the mud with hepatitis in Afghanistan one Christmas Eve (for more, read the book!). Ultimately, the experiences and lessons learned during these years led Shell to his first academic position at Wharton at age 37, and to a life-long interest in the study of success. He recalls: “If you had told me that night [that Christmas Eve] that I would one day graduate from law school near the top of my class, clerk for a federal appeals court in Boston, and become a professor of law, ethics, and management at the Wharton School, I would have questioned your sanity.” (p.5)
Springboard is based on Shell’s highly-popular course at the Wharton School: The Literature of Success: Ethical and Historical Perspectives. Its ultimate purpose is to help the reader answer two big questions everyone would benefit from personal reflection upon: 1) What is success?, and 2) How will I achieve it? Shell explains that, “By investigating the meaning of success, you begin the lifelong process of deciding what is worth doing.” (p.11) The first-half of Springboard (Chapters 1-4) addresses Question #1, and the second-half, Question #2 (Chapters 5-9).
Chapters 1-4 encourage readers to “Choose Your Life,” by focused reflection on one’s ideas about happiness, the sources of such ideas (family, community, culture, etc.), the various aspects of happiness, and the relationship between success and meaningful work, including its seven foundations. Intrigued? The Six Lives Exercise can help begin your quest. Want more about Part II? Come back next Sunday!
As many readers know, Shell is a phenomenally successful, world-class academic who has authored several books, including Bargaining for Advantage, a standard text in many Negotiation courses. And as some readers know, Shell was my dissertation advisor. I’ll always be immensely grateful to Richard and the additional members of my committee (Kenneth Shropshire, David Skeel, and Franklin Allen) for their time, invaluable guidance, continued mentorship, and enabling the success of my dissertation on the regulation of the OTC derivative markets.
While working on my dissertation, I was also working on my 200-Hour Yoga Teacher Training Certification. It’s been a while since I’ve taught yoga. Recently, I decided that for me, a successful 2019 includes a return to occasional yoga teaching. Co-blogger Joan Heminway’s enthusiasm and dedication in this area has inspired me (thanks, Joan!). I’m excited we’ll be encouraging each other and sharing with readers about this topic that is meaningful for both of us. In “The Lottery Exercise” (p.80), Shell asks the reader to reflect upon what they’d do with their life if they won $1 million dollars (after taking care of family and investing prudently). I’m working on a complete answer to that question. However, I know that I’d want it to include teaching. Stay tuned for more!
Saturday, February 16, 2019
Where we left things, Delaware Vice Chancellor Laster had just ruled in Sciabacucci v. Salzberg that Delaware corporate charters and bylaws may only govern matters of corporate internal affairs, including litigation related to internal affairs; they may not be used to govern external matters like securities litigation. For that reason, forum-selection provisions purporting to require that Section 11 claims be filed in federal court were invalid. The implication – though not part of his holding – was that a similar result would obtain for charter and bylaw provisions that purport to require individualized arbitration of securities claims.
After that, the defendants, predictably, appealed to the Delaware Supreme Court, and we were all waiting (im)patiently to see how that would unfold when – alas! – a panel consisting of Strine, Vaughn, and Seitz dismissed the appeal as prematurely filed due to a pending attorneys’ fee petition in Chancery.
Speaking as someone who once did in fact have to litigate the issue of whether a notice of appeal was prematurely filed, thus depriving the appellate court of jurisdiction, all I can say is – oof! Then again, in my case, the matter wasn’t raised until it was too late to file a corrected notice; if we’d lost, the entire appeal would have been lost. Happily for the Sciabacucci defendants, their situation is not nearly as dire; presumably they’ll just refile their notice once the fee petition is addressed. But it does mean it will be a little while longer before the Delaware Supreme Court weighs in on this issue.
But that’s not all!
Hal Scott, a law professor at Harvard, has long been an advocate for using corporate charters and bylaws to mandate individualized arbitration of federal securities claims, and in November, he submitted a 14a-8 proposal to Johnson & Johnson to have shareholders vote to request that its Board adopt such a bylaw.
In the past, the SEC has taken the position that bylaws of this sort would violate federal law, specifically, the anti-waiver provisions of the securities laws, but the Supreme Court’s recent jurisprudence on arbitration has weakened that argument. Professor Scott presumably figured the time was ripe to try again, especially since SEC Commissioners have been making noises about being more receptive to the idea. And indeed, when J&J first submitted a request for no-action relief to the SEC, its grounds for exclusion was simply that the proposal would violate federal law.
(You can find the correspondence at this link.)
But then Sciabacucci happened. Except, J&J is incorporated in New Jersey, not Delaware, raising the question whether the Sciabacucci decision would travel. (I previously posted about New Jersey’s law back when they amended their corporate code to permit forum selection provisions.)
J&J quickly submitted an attorney opinion letter expressing the view that NJ law maps to that of Delaware, and therefore the proposal was excludable as violative of state law. Professor Scott shot back with the argument that Sciabacucci was incorrectly decided (previewing, I assume, arguments we can expect to see in the Delaware Supreme Court).
And then J&J brought in a ringer: It submitted a letter by New Jersey’s Attorney General opining that Sciabacucci represents the law of New Jersey.
(There were some other documents submitted as well, not all of which are included with the No-Action materials on the SEC’s website - which raises a procedural question, btw, why some and not others? For example, NASAA submitted its own letter in support of J&J, and so did the Council of Institutional Investors.)
Since no-action relief is typically granted when there “appears to be some basis” for the company’s view that the proposal is excludable under 14a-8, you would think that that J&J had by now gone above and beyond.
But you would be wrong.
Because while the SEC did grant the no-action request, it did so with, shall we say, a reluctant air. The SEC’s letter said:
When parties in a rule 14a-8(i)(2) matter have differing views about the application of state law, we consider authoritative views expressed by state officials. Here, the Attorney General of the State of New Jersey, the state’s chief legal officer, wrote a letter to the Division stating that “the Proposal, if adopted, would cause Johnson & Johnson to violate New Jersey state law.” We view this submission as a legally authoritative statement that we are not in a position to question. In light of the submissions before us, including in particular the opinion of the Attorney General of the State of New Jersey that implementation of the Proposal would cause the Company to violate state law, we will not recommend enforcement action to the Commission if the Company omits the Proposal from its proxy materials in reliance on rule 14a-8(i)(2). To conclude otherwise would put the Company in a position of taking actions that the chief legal officer of its state of incorporation has determined to be illegal. In granting the no-action request, the staff is recognizing the legal authority of the Attorney General of the State of New Jersey; it is not expressing its own view on the correct interpretation of New Jersey law. The staff is not “approving” or “disapproving” the substance of the Proposal or opining on the legality of it. Parties could seek a more definitive determination from a court of competent jurisdiction.
We are also not expressing a view as to whether the Proposal, if implemented, would cause the Company to violate federal law. Chairman Clayton has stated that questions regarding the federal legality or regulatory implications of mandatory arbitration provisions relating to claims arising under the federal securities laws should be addressed by the Commission in a measured and deliberative manner.
That’s a lot of words! I mean, literally, it’s a lot of words, considering that usually no-action relief is granted in a short paragraph.
And it didn’t stop there. SEC Chair Jay Clayton actually issued a statement on the matter, reiterating the importance of the Attorney General’s letter in the Commission’s decisionmaking, and emphasizing that the SEC itself was taking no position on the question whether such provisions violate federal law. If anything, the statement went out of its way to signal that the SEC’s views on the federal legality of arbitration provisions have shifted; as Clayton put it, “Since 2012, when this issue was last presented to staff in the Division of Corporation Finance in the context of a shareholder proposal, federal case law regarding mandatory arbitration has continued to evolve.”
Such action is quite extraordinary as a matter of SEC procedure, especially the part where Clayton came close to inviting Professor Scott or a similarly-minded proponent to take the issue to court:
More generally, it is important to note that the staff’s Rule 14a-8 no-action responses reflect only informal views of the staff regarding whether it is appropriate for the Commission to take enforcement action. The views expressed in these responses are not binding on the Commission or other parties, and do not and cannot definitively adjudicate the merits of a company’s position with respect to the legality of a shareholder proposal. A court is a more appropriate venue to seek a binding determination of whether a shareholder proposal can be excluded.
It’s not clear where things go from here; the most obvious possibility would be to wait for the Delaware appeal (now, ahem, delayed) to shake out and/or find a state willing to break with Delaware on this issue (which then, I previously argued, might potentially tee up some constitutional questions about the scope of the internal affairs doctrine, though I think it also would depend a lot on how a case was brought.)
But according to news reports, Professor Scott may continue to pursue the matter at J&J, possibly by appealing to the full Commission (which seems unlikely to succeed, since we know where Clayton stands, and even Commissioner Peirce has said state law determines whether these bylaws are permissible).
Either way, I’m sure I’ll be blogging about it, so watch this space.
Update: Prof. Scott did, in fact, request that CorpFin seek full Commission review of J&J’s request for no-action relief, arguing, among other things, that the New Jersey Attorney General conceded that there was no settled law in New Jersey on the issue and therefore his letter should not be taken as an authoritative interpretation of state law. Prof. Scott also argued (as he did in his original correspondence) that if New Jersey law does prohibit his proposed bylaw, the Federal Arbitration Act would preempt it (an argument that I find quite unpersuasive, since the FAA only prohibits laws that disparately target arbitration; a rule that restricts charters and bylaws to matters of internal affairs does not single out arbitration, as the Sciabacucci case itself demonstrates). In a letter signed by the Director of CorpFin, the Division denied the request on the ground that, in light of the Attorney General’s letter, the issues presented were not “novel or highly complex” and therefore did not meet the standard for Commission resolution. Correspondence available here.
Friday, February 15, 2019
When I was in house, the biggest compliment I could receive was “sometimes I forget that you’re a lawyer.” Of course, you don’t want to hear that from certain clients because that means that you haven’t clearly established your role and authority. But, when dealing with business people, they want to know that you understand business strategy and their pain points and not just the law.
Last Saturday, Laura Zagustin, the General Counsel for Viacom International Media and the Americas, served as the keynote speaker for the Miami Law Symposium on doing business in Latin America. She told the audience that although she’s the general counsel, she tries not to be “too much like a lawyer.” She didn’t expand on this, but during the Q&A, a student asked about the tensions between the profit driven requests of the business people and the need to follow the law. Zagustin focused on the necessity to protect the company and secure revenue while educating internal clients. She’s actually become so business savvy that she’s been able to negotiate with a business counterpart without any of her company’s business people with her.
She advised students to learn how to develop solutions but most important, to act as a business partner and not just a lawyer. She has also told her outside counsel that they need to act as business partners too.
As she spoke about business and political risks with foreign direct investment and doing business in politically volatile environments, I realized how little junior lawyers at law firms know about what their clients really deal with. It may not be as drastic as the potential or nationalization of company assets, but every business from
a restaurant owner to a multinational conglomerate has a risk tolerance and counsel often don’t appreciate that sensitivity. Good lawyers know how to understand that and render advice accordingly.
Whenever I teach a class on business or compliance issues, I teach from the perspective of the client because I was a client for so many years. The students don’t typically have the “aha” moment about what I’ve said until a guest speaker comes in and says the same thing. But that’s ok.
Below are a few suggestions for law schools/professors to prepare students for practice in the real world.
- Teach students that business people care about tax implications, levels of control, mitigating risk, and legal liability, regardless of business type or size. Students must be able to advise through that lens or associate with others with appropriate specialties (such as tax) when needed.
- Add more compliance coursework that includes skills-based work. The GC who spoke indicated that it’s a number one concern for US public companies. Private companies and those considering an IPO also have significant compliance obligations.
- Encourage students to take courses in the business school. Sitting with business students will provide an entirely different perspective. Similarly, open more law school classes to business school students.
- Weave in risk management issues into the curriculum.
- Have as many business people speak to students as possible. Students will quickly learn how much the theory they learn does not correlate to the work that real-world clients face.
- Add more business clinics. This allows students to meet with budding entrepreneurs. Their readings on entity selection will come to life.
- Ensure that students have at least one course that deals with international issues. The business world is global and even the smallest businesses are often part of a global supply chain.
- Have panels at the law school with in house lawyers, lobbyists, and lawyers who don’t work for firms so that students can get another perspective on practicing law. Have them focus specifically on the realities of dealing with business clients.
- Consider short courses on negotiation for business clients. Even better, have a full course on business negotiation. Most law schools focus on litigation, leaving students who want to practice transactional law underprepared.
- I know that law students are focused on ABA requirements and bar passage rates, but encourage students to take coursework on employment law, tax, cybesecurity/data protection, intellectual property, and administrative law. Even if students take short courses in these topics, they will have an enormous advantage when starting out.
- Ensure that transactional drafting courses include real world examples of risk allocation when discussing representations, warranties, and indemnities.
- Encourage students to read comment letters on regulations. That will show students what business people really care about when laws and regulations are in the drafting stage.
- Teach about emotional intelligence, resiliency, and grit. Lawyers aren’t usually known for their EQ but it’s important, especially when dealing with business owners.
If you have additional suggestions or disagree with me, please post your comments below.
Wednesday, February 13, 2019
"in the United Kingdom there is now an express inclusion of the duty of a director to consider “long-term consequences of decisions” as part of acting in a way that benefits shareholders as a whole"— Stefan Padfield (@ProfPadfield) February 10, 2019
8 Mich. Bus. & Entrepreneurial L. Rev. 1 #corpgov
"Freedom of thought and speech are the essence of the American experiment. That the First Amendment protects both offensive thought and speech is the price of democracy."— Stefan Padfield (@ProfPadfield) February 10, 2019
79 La. L. Rev. 419 #corpgov
blockchain systems: "the term 'decentralized' ... functions as a liability shield for those operating the systems ... creating ... a 'Veil of Decentralization' and giving a core benefit of organizational law ... without accompanying obligations" https://t.co/nCk7S82oXd #corpgov— Stefan Padfield (@ProfPadfield) February 8, 2019
"the law requires certain publicly traded companies with their principal executive offices in California to have at least one female director.... I have come across two proxy statements discussing California's new law." https://t.co/eoQ8FfaZQY #corpgov ht @AnnMLipton— Stefan Padfield (@ProfPadfield) February 12, 2019
"United Paperworkers Intern. Union v. Intl. Paper Co., 985 F.2d 1190, 1198 (2d Cir. 1993) ... held that any shareholder (not just the proponent) could bring a 14a-9 suit where management's response to a shareholder proposal put forward under Rule 14a-8 was fraudulent." #corpgov https://t.co/zR1ZYkSCNa— Stefan Padfield (@ProfPadfield) February 9, 2019
John Marshall Law School in Chicago is looking for a Corporations/Business Associations visitor for next year.
The following comes to us from David Sorkin, Associate Dean, Academic Programs, The John Marshall Law School.
Full-Time Faculty Podium Visitors for 2019-2020
The John Marshall Law School in Chicago seeks two or more experienced faculty members to serve as full-time visiting professors for the 2019-2020 academic year (one or both semesters). We need coverage in the areas of Civil Procedure, Corporations, Employee Benefits, Estates & Trusts, Income Taxation, Legal Research and Writing, and Property. Candidates must have law school teaching experience. It is contemplated that the successful candidates will be current full-time faculty members at ABA-approved law schools, although others with extraordinary credentials may be considered.
To apply, submit a current CV, cover letter, and three professional references to Associate Dean David Sorkin at firstname.lastname@example.org. The Committee will begin reviewing applications as they are received and will continue on a rolling basis until the positions are filled. We may conduct an interview via Skype or a similar platform or in person, and may request submission of teaching evaluations or other materials.
The John Marshall Law School is committed to diversity, access, and opportunity. Subject to the approval of our accreditors, JMLS is in the process of being acquired by the University of Illinois at Chicago, with an anticipated closing date in August 2019. For more information, visit www.jmls.edu and jmls.uic.edu.
The John Marshall Law School, finding any invidious discrimination inconsistent with the mission of free academic inquiry, does not discriminate in admission, services, or employment on the basis of race, color, sex, religion, national origin, ancestry, age, disability, veteran status, marital status, sexual orientation, gender identity, gender expression, genetic characteristics, or any other characteristic protected by applicable law.
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 (email@example.com); and
Prof. Del Wright (firstname.lastname@example.org).
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 (email@example.com)