Sunday, October 1, 2023

DEIB and Business Law Program this Week



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


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

Zoom Webinar Registration here.

Details about the Featured Speakers & Program here.

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

Saturday, September 30, 2023

I gave a talk about ESG!

I was incredibly honored to be selected by Marquette Law School to deliver this year's Boden Lecture.  The title of my talk was Of Chameleons and ESG, and it is now available for your viewing pleasure on YouTube:

September 30, 2023 in Ann Lipton | Permalink | Comments (1)

Thursday, September 28, 2023

2023 Corporate Governance Summit

Last week, we hosted the Fourth Annual Corporate Governance Summit at the Wynn in Las Vegas.  You can see the program here.  Stephen Bainbridge came in to give our keynote address in a talk focused on his new book, The Profit Motive.  We ended up drawing about 130 participants.  I'm incredibly grateful to Mike Bonner at Greenberg Traurig and the rest of the Greenberg team that helped put the event together.  We were also fortunate to have some great sponsors for the event: Joele Frank, Connor Group, Deloitte, J.P. Morgan Chase & Co., and Whittier Trust.  



September 28, 2023 | Permalink | Comments (1)

Wednesday, September 27, 2023

Fellow in Networks, Platforms & Utilities - Vanderbilt

Dear BLPB Readers:

"The Vanderbilt Policy Accelerator (VPA) seeks applications for a fellow in the field of networks, platforms, and utilities (NPUs). The two-year NPU fellowship is designed to support individuals who are interested in becoming law professors in the field of networks, platforms, and utilities, defined broadly as including transportation, communications, energy, banking, and tech platforms, and cross-cutting issues and themes across these sectors. The NPU fellow is expected to write academic articles for publication in legal journals, participate in the NPU workshop and annual NPU conference, and go on the academic job market in the second year of the fellowship. The NPU fellow will receive mentoring and guidance from Vanderbilt law faculty.

Criteria: Fellows must, by the time of the start of the fellowship, be a graduate of an accredited law school.

Salary and Benefits: Fellows receive a salary and benefits.

Location: Relocation to Nashville is preferred and encouraged, but remote work with occasional travel may be possible.

Application details: Please send cover letter, CV (including references), law school transcript, and a research agenda to"

Additional information is here.


September 27, 2023 in Colleen Baker | Permalink | Comments (0)

Tuesday, September 26, 2023

Teaching the Core of the Securities Act of 1933

It was so much find to have our business law prof colleague Erik Gerding and two fabulous key members of his staff here in Knoxville yesterday.  I had posted on this visit last week.  Our visitors regaled us on the role of the U.S. Securities and Exchange Commission ("SEC") Division of Corporation Finance, the registration requirements and exemptions under the Securities Act of 1933, as amended ("1933 Act"), and the rule-making part of the Division's (and SEC's) mission.

Erik explained how, when he is teaching Securities Regulation, he spends two classes at the beginning of the semester putting the "fear of God" into his students about the registration requirement in Section 5 of the 1933 Act.  (His point is to make the dangers clear up front, since students tend to drop the class who should take it, given that they plan to practice business law in one way or another.)  Erik's colleague, Jennifer Zepralka, Chief of the SEC's Office of Small Business Policy, similarly noted in her remarks that there are only three kinds of securities offerings: registered, exempt from registration, and illegal.  Erik's Counsel, Jeb Byrne, echoed this.  And in the session at lunch time, one of my students (bless him!) was able to articulate my way of teaching this concept, through what I call the commandment of Section 5: "Thou shalt not offer or sell securities with out registration absent an exemption."  I used forced repetition of that commandment in teaching my Securities regulation course to refocus students as we move through the material.

Teachers of Business Associations and Securities Regulation all must contend with this central premise of the 1933 Act.  Its importance truly cannot be overstated.  So, how do you teach it to your students and make it stick?  And if you do not teach, what made the core value of Section 5 salient for you?  Share your wisdom in the comments.

September 26, 2023 in Corporate Finance, Joan Heminway, Securities Regulation | Permalink | Comments (2)

Saturday, September 23, 2023

Yeah, sorry, still talking Caremark

I previously blogged about the shareholder derivative claims against Fox Corp, alleging that it violated its Caremark/Massey duties by defaming Dominion.  And then I had a few follow ups on Caremark generally here and here.

This week, sorry, still more, because two additional shareholder plaintiffs filed complaints in Fox.  One group is led by the New York City Employees’ Retirement System and includes the Oregon Public Employees Retirement Fund; the other is led by Tredje AP-Fonden.  These complaints differ from the ones filed earlier in that the plaintiffs sought books and records under 220, and incorporated the results into their pleadings.

VC Laster has scheduled a hearing on November 9 to choose the leadership structure for the action – in other words, all the cases will be combined, some plaintiff(s) will be lead, and some counsel will be lead. If the parties don’t work that out amongst themselves (and they’ve had plenty of time so far), VC Laster will select one plaintiff/counsel group to control the action.

Under Delaware law, these decisions are made according to what are known as the Hirt factors, which evaluate which group can best represent the shareholders, based on size of stake, absence of conflict, competence of counsel, and quality and vigor of prosecution of the action.  I have no opinion on which group is “better” for Hirt purposes and I have no idea what VC Laster is likely to do, but what does interest me is that the two most recently filed complaints are adopting different strategies to pleading the case against the Fox board.  And it’s worth articulating what those are.

First, the two complaints offer different explanations for the fundamental failure of Fox’s systems to identify and prevent defamation.

The NYCRS complaint alleges that going back several years, Fox News has operated under a unique business model that advances political narratives regardless of the underlying facts.  Comparisons are made to other news organizations, many of which make their editorial guidelines and standards public, while Fox does not.  The Dominion defamation claim is treated as one set of allegations among many, including claims by Seth Rich’s family, Majed Khalil, Ray Epps, and Nina Jankowicz, to demonstrate an ongoing pattern by Fox.

The Tredje AP-Fonden complaint is a bit different.  It mentions the Rich scandal, but the theory is actually that after Fox was accused of hacking cell phones in 2013, Fox entered into a settlement of a shareholder derivative action that instituted various controls.  When Fox was then spun off in 2019 in connection with an asset sale to Disney, those controls were lifted – and that’s what precipitated the defamation of Dominion.

 Second, the two complaints differ with respect to the Murdochs.  As I said in my prior post on the earlier complaints, one of the interesting things about these lawsuits from a theoretical perspective is that they allege, pretty straightforwardly, that Fox defamed Dominion to avoid losing viewers.  In other words, this was a business decision, to protect the company’s revenues and maximize wealth for shareholders.  As I said in that post, normally, corporate boards are required to maximize shareholder profits – but there’s a hard limit of doing so by illegal means, which is what gives rise to the claims here. The prohibitions on breaking the law represent the outer limit of shareholder primacy, and therefore fit a bit uneasily within corporate law’s framework.

Well, the Tredje AP-Fonden plaintiffs apparently take that to heart, because their complaint, in addition to alleging that Fox’s board knowingly broke the law by allowing Dominion to be defamed and/or didn’t adopt proper systems to prevent it, also alleges that the Murdochs personally were trying to preserve their own status within the conservative movement, which they could not maintain if Fox lost viewers.  In other words, they claim that the Murdochs operated in bad faith by putting their personal interests in maintaining clout ahead of shareholder interests.  That possibility is mentioned a bit in the NYCRS complaint, but the Tredje AP-Fonden complaint leans into it much more.  That’s interesting because a claim that the Murdochs were, essentially, conflicted, and attempting to preserve their own status, is much more of a traditional type of claim – rather than pursuing shareholder wealth, is the allegation, the Murdochs were pursuing their own interests.  That theory doesn’t depart from shareholder primacy at all. 

Also, Tredje AP-Fonden alleges that the Murdochs’ interests in maintaining political influence qualifies as a “personal benefit” justifying demand excusal, so I guess we may find out how far that concept stretches.

And the final thing that jumped out – and this actually is a similarity rather than a difference – is that both complaints mention that, after the Dominion lawsuit, an advocacy organization filed a petition to cause Fox to lose its broadcast license in Philadelphia.  I am … skeptical … that Fox will lose its license, but the allegation that Fox put its broadcast licenses in jeopardy helps bolster one of the aspects of the case that previously stood out to me as a little novel, namely, that the “law” being broken was a common law tort.  Allegations about violating the terms of regulatory benefits put the whole dispute much more firmly in traditional Caremark territory.

September 23, 2023 in Ann Lipton | Permalink | Comments (0)

Monday, September 18, 2023

Tennessee Law Welcomes the SEC Division of Corporation Finance!

We are excited to welcome our colleague Erik Gerding, the Director of the U.S. Securities and Exchange Commission Division of Corporation Finance, together with members of his staff, to The University of Tennessee College of Law a week from today. Information about the visit is included below.  If you are in the neighborhood, stop by!


September 18, 2023 in Corporate Finance, Entrepreneurship, Joan Heminway, Securities Regulation | Permalink | Comments (0)

Friday, September 15, 2023

To Whom are Caremark Duties Owed?

A while ago, the National Center for Public Policy Research – a conservative organization that focuses its advocacy in the corporate and securities space – filed a lawsuit against Starbucks, arguing that its diversity equity and inclusion program ran afoul of Title VII of the Civil Rights Act of 1964, and Section 1981.

Conservative organizations have been launching a number of Section 1981-based challenges to DEI programs, but usually these are on behalf of workers.  The NCPPR case was unusual in that it brought its claims derivatively, as a Starbucks shareholder, on the ground that the directors’ illegal conduct violated their fiduciary duties to the company.

The judge dismissed NCPPR’s complaint a while back, but only now just got around to issuing the opinion, and I find it fascinating.

Starbucks’s key argument was that NCPPR did not, in fact, represent the interests of Starbucks shareholders, and therefore was not a proper representative in a derivative action.  In particular, Starbucks argued that the NCPPR’s concerns were personal, due to its general opposition to DEI policies, and that Starbucks’s major shareholders supported its DEI efforts.  Starbucks cited the fact that BlackRock and Vanguard have both argued that companies should address DEI risks, and that NCPPR’s anti-diversity shareholder proposals had been voted down in prior years.  (In response, NCPPR argued among other things that BlackRock and Vanguard may not in fact be representing the interests of the investors in its funds.)

The judge agreed with Starbucks.  He relied on Larson v. Dumke, 900 F.2d 1363 (9th Cir. 1990) for the proposition that derivative plaintiffs are not appropriate representatives if they are advancing their personal interests, demonstrate vindictiveness, and hold only a few shares.  Here, that combination of factors was met:

This Court is not an investment counselor. Nor is it a political attaché. Courts of law have no business involving themselves with reasonable and legal decisions made by the board of directors of public corporations…It is clear Plaintiff is pursuing its personal interests rather than those of Starbucks. It has shown obvious vindictiveness toward Starbucks, that it would rather cause significant harm to Starbucks and other investors in the form of a declaratory judgment, and that it lacks the support of the vast majority of Starbucks shareholders.

Plaintiff has a clear goal of dismantling what it sees as destructive DEI and ESG initiatives in corporate America. Contempt for DEI and ESG programming and practices is clear in Plaintiff’s publications and literature. In fact, Plaintiff specifically calls for voting against every current member of Starbucks Board based primarily on support for these DEI Initiatives. Based on the briefing and nature of Plaintiff’s self-described political interests, it is clear to the Court that Plaintiff did not file this action to enforce the interests of Starbucks, but to advance its own political and public policy agendas.

Furthermore, Plaintiff owns only 56 shares of approximately 1.15 billion outstanding shares of Starbucks stock. Plaintiff’s shares are worth approximately $6,000 of a company with a market capitalization of more than $121 billion. Plaintiff’s dislike of DEI and ESG Initiatives has little support from Starbucks’ other shareholders and no support from Starbucks’ Board. In this action, Plaintiff seeks to override the authority of the Starbucks Board and obtain disproportionate control of Starbucks’ decision making to advance its own agenda….

Plaintiff is apparently unhappy with its investment decisions in so-called “woke” corporations. This Court is uncertain what that term means but Plaintiff uses it repeatedly as somehow negative. This Complaint has no business being before this Court and resembles nothing more than a political platform. Whether DEI and ESG initiatives are good for addressing long simmering inequalities in American society is up for the political branches to decide. If Plaintiff remains so concerned with Starbucks’ DEI and ESG initiatives and programs, the American version of capitalism allows them to freely reallocate their capital elsewhere…

I can’t say I disagree with this, exactly, but I do wonder how it gels with a Caremark claim of the type brought by NCPPR.  Now, Starbucks is not organized in Delaware – it’s a Washington company – but NCPPR claims that Washington law, like Delaware’s, provides illegal action is a violation of fiduciary duty, and for the purposes of this blog post, I’ll assume the laws are similar.

As I previously explained in connection with the shareholder derivative claims against Fox Corp., corporate boards are prohibited from engaging in illegal conduct, even if they conclude it’s ex ante beneficial for the company.  That is, they are not permitted to make a calculation that, given the expected benefits and the likelihood of detection, it is in fact profit-maximizing to break the law.  This was actually something that VC Laster just recently articulated:

In one hypothetical scenario, the lawyers say: “Although there is some room for doubt and hence some risk that our regulator may disagree, we believe the company is complying with its legal obligations and will remain in compliance if you make the business decision to pursue this project.”

In the other hypothetical scenario, the lawyers say: “The company is not currently in compliance with its legal obligations and faces the risk of enforcement action, and if you make the business decision to pursue this project, the company is likely to remain out of compliance and to continue to face the risk of an enforcement action. But the regulators are so understaffed and overworked that the likelihood of an enforcement action is quite low, and we can probably settle anything that comes at minimal cost and with no admission of wrongdoing.”

In the former case, the directors can make a business judgment to pursue the project. In the latter case, the decision to pursue the project would constitute a conscious decision to violate the law, the business judgment rule would not apply, and the directors would be acting in bad faith.

So, as I said in my blog post, fiduciary prohibitions on illegal conduct represent the outer limits of shareholder primacy; directors must forego profit maximizing actions in order to benefit stakeholders who are protected by positive law.  Caremark/Massey claims are therefore an odd duck in corporate law, because they are brought by shareholders, but, strictly speaking, they do not vindicate shareholders’ interests.  Liability will be imposed even if the conduct was, in fact, ex ante beneficial for shareholders. 

So, you see where I’m going with this in the Starbucks case.  I absolutely agree that the NCPPR does not represent the interests of Starbucks shareholders, and is, in fact, antagonistic to those interests.  But is that the right frame for a Caremark/Massey claim in the first place? 

September 15, 2023 in Ann Lipton | Permalink | Comments (3)

Wednesday, September 13, 2023

Professors Baker and Odinet on The Gamification of Banking

Dear BLPB Readers:

I'm delighted to share that Professor Christopher Odinet has posted our new article, The Gamification of Banking, to SSRN!  This was such a fun article to write and I'm so grateful for the opportunity to coauthor with such an amazing scholar!  Here's the abstract:

"Gamification is coming to banking. This phenomenon is already gaining ground in advertising, healthcare, manufacturing, and, more recently, with the GameStop and AMC meme stock saga in securities trading. The idea behind gamification is to make transactions seem fun, playful, and even casino-like in order to elicit habit-forming, addictive-like effects with consumers. We argue that the rise of financial technology (fintech) firms and their ever-growing business relationships with incumbent financial institutions has created the necessary conditions for gamification to take hold in the banking sector. In order to explore this observation, we undertake a study of current examples of banking gamification and create a novel taxonomy of instances where fintech firms and banks offer financial products and services using business models that rely upon on high levels of customers, transaction activity and engagement, and that frequently use the power of social media and online communities. Through our discussion of the nascent gamification of banking, we also explore the tension between consumer protection and various regulatory approaches when it comes to thinking about how to regulate the gamification in the banking sector. Lastly, we theorize banking gamification as coming in three distinct waves, with the final, yet-to-be realized wave being the advent of one-stop-shop, mega financial platforms. We conclude the paper by offering some thoughts on the benefits and costs of gamification in banking."


September 13, 2023 in Colleen Baker, Financial Markets | Permalink | Comments (0)

Monday, September 11, 2023

NFTs from a Distinctive Angle

Thanks to my dear and patient friend and colleague Nizan Packin, I set out on a research and writing adventure a bit more than eighteen months ago.  The result is a book chapter on NFTs for her forthcoming edited volume, The Cambridge Handbook for the Law and Policy of NFTs.  The chapter is entitled "Non-investment Finance in an NFT World."  At her suggestion, I recently posted the draft chapter to SSRN.  You can find it here, and the abstract is set forth below.

Recent years have witnessed the rise of NFTs as vehicles for non-investment finance, including in nonprofit and political fundraising. As with other financial sectors in which NFTs have a role, the use of NFTs in financing nonprofits and political campaigns and committees has revealed gaps and ambiguities in existing legal regulatory systems. Appetite exists to evolve legal frameworks to complete and clarify applicable bodies of law and regulation.

This chapter undertakes to illuminate and reflect on the use of NFTs in financing nonprofits, political campaigns, and political committees. It begins by reviewing general aspects of the non-investment Internet finance environment and then describes and illustrates the use of NFTs in nonprofit and political fundraising. The chapter also offers guidance and reflections on core issues under applicable law and regulation and reflections on legal and regulatory questions and approaches relevant to non-investment finance using NFTs.

Those who know my work will recognize the roots of this chapter in the research I have conducted and published on crowdfunding.  My writing on and work with nonprofits also makes a cameo appearance in the chapter.  This one stretched my brain a bit (and that of my research assistant, too).

September 11, 2023 in Corporate Finance, Crowdfunding, Joan Heminway, Nonprofits, Technology | Permalink | Comments (0)

Saturday, September 9, 2023

Can AI detect puffery?

Earlier this week, Matt Levine used his column to highlight this paper on SSRN, “Executives vs. Chatbots: Unmasking Insights through Human-AI Differences in Earnings Conference Q&A”

The authors find that on earnings calls, some executives’ responses are so predictable that they are indistinguishable from responses given by a chatbot, and others are unexpected, in the sense that a chatbot would have predicted different answers.  The unexpected/novel responses are associated with stock price reactions because they communicate new information to the market.

Anyway, this interests me because I frequently blog about the issue of puffery, and how courts go about determining whether a statement was material to investors, and I wonder whether something like this method can be useful.  I.e., is it possible shareholders could use it to show that a particular statement at a particular time was unexpected and therefore informative, in the face of a claim that it was immaterial? 

I imagine this exact method will not always be helpful – in a lot of cases, the claim is that the language remained the same even as underlying conditions changed, and so then of course, the statement would not be found to convey new information, and presumably there would be no dispute about that.  But there could be situations (like claims involving earnings calls or news interviews) where this method could assist with the materiality inquiry, especially if stock price evidence is equivocal.  It might also assist with loss causation, in situations involving “bundled” disclosures where it isn’t clear what is exerting an effect on prices.

And two other quick hits this week:

First, there’s a cert petition pending regarding whether omissions of required information in a securities filing can give rise to 10(b) liability.  The Supreme Court granted on this issue once before, and DIG’d when the parties settled, so we might see a grant this time.  Which is why I was glad to see the opinion in Phoenix Insurance Co., Ltd. v. ATI Physical Therapy, Inc., 2023 U.S. Dist. LEXIS 157803 (N.D. Ill. 2023).  The court holds that failure to disclose required information can give rise to liability, but what stood out to me was the clarity of the analysis, which is rare in these things.

Second, if you haven't seen VC Laster’s opinion denying specific performance of a SPAC merger agreement in 26 Capital Acquisition Corp v. Tiger Asia, you are in for a treat.  Don’t even worry about the legal issues; the facts alone are worth the read.  Matt Levine will be so, so happy to see someone trapped by their own euphemism for bribes.  Also, you can’t write about specific performance in a merger these days without thinking of Twitter v. Musk, and that’s as true for Laster as it is for anyone else, so, look for the Easter egg.

September 9, 2023 in Ann Lipton | Permalink | Comments (0)

Friday, September 8, 2023

Business Clinicians Sought at Cornell Law

I found the message below in my "in box" yesterday from Celia Bigoness and Beth Lyon at Cornell Law and thought it important to share the opportunities they reference with the broader BLPB community.  I hope it is useful to those of you considering long-term non-tenure-track roles in the entrepreneurial law space.

I'm happy to share that Cornell Law School is seeking two new clinicians to work in our Entrepreneurship Law Clinic (ELC) and help us create the law school's first dual-campus clinic. Expanding the ELC, made possible by a generous gift creating the Blassberg-Rice Center for Entrepreneurship Law, represents Cornell Law School's commitment to community-engaged learning and partnerships throughout New York state.

We are searching for one clinician to be based at our Ithaca campus, and one clinician to be based at the Co at Cornell Law:rnell Tech campus in New York City. Both new hires will have a full-time teaching responsibility in the ELC, working alongside the ELC's founder and the director of the new center, Celia Bigoness. Both appointments will be to the long-term, presumptively renewable, contract track for permanent clinical faculty at Cornell Law School, with voting rights and academic leave rights consistent with the other permanent clinicians.

The full job posting is linked here . . . .

The application deadline is October 15, but we encourage candidates to apply early.

If you have any questions, please contact Celia ([email protected]) and our Associate Dean for Experiential Education, Beth Lyon ([email protected]).

All the best,

Beth and Celia

September 8, 2023 in Joan Heminway, Jobs | Permalink | Comments (0)

Monday, September 4, 2023

Labor Day and Gratitude


I am the daughter of two Depression Era babies.  My parents always appreciated what they had and worked hard to earn it.  And they were aware of and respected those who contributed their time and efforts to bring them products and services.

On Labor Day, it seems appropriate to channel my parents' gratitude and share it here.  Too often, I take for granted that so much in my life comes from or relies on the labors of others.  I welcome the opportunity today to remember and give thanks.

Parenthetically, I have learned over time (through leadership training and mindfulness activities) that gratitude is an amazingly powerful character strength for lawyers.   As explained on the Via Institute on Character's website

The character strength of gratitude involves feeling and expressing a deep sense of thankfulness in life, and more specifically, taking the time to genuinely express thankfulness to others. This thankfulness can be for specific gifts or thoughtful acts. . . .Gratitude tends to foster the character strengths of kindness and love, and therefore is closely associated with empathy and with connection to others.

I am certain you can see from this excerpted description why gratitude can be a great asset in lawyering, including in business lawyering. I am lucky to have gratitude among my strongest character strengths, as assessed through the VIA Institute's character strengths survey.  I will be offering some of my thoughts on character strengths and business lawyering in my presentation at this year's Business Law Prof Blog symposium next month.  (More on that as the date gets closer.)

But for now, I will offer brief, but heartfelt, thanks to those who engage in work that benefits me, those I love, and the world around us.  Happy Labor Day, y'all.  I appreciate your hard work.  Have a relaxed, enjoyable day contemplating, honoring, and celebrating the work that you and others do in service to us all.


September 4, 2023 in Joan Heminway, Lawyering | Permalink | Comments (0)

Saturday, September 2, 2023

Berkeley Law/CSLS - 2024-25 Visiting Scholar Application Period Open

Berkeley Center for the Study of Law and Society

Applications for Visiting Scholars Program



Please submit your application by December 1, 2023 by e-mail to [email protected](link sends e-mail) 

 Inquiries may be made to CSLS at [email protected]


For more information about the Visiting Scholars program and the Center for the Study of Law and Society, see here.

September 2, 2023 in Joan Heminway, Research/Scholarhip | Permalink | Comments (0)

Friday, September 1, 2023

Code pleading

In posts in this space, and in my articles, I’ve criticized the idea that statements may be deemed immaterial or otherwise of little importance to reasonable investors merely because they are generic or stated at a particular level of generality.  Lots of really important statements are technically “generic,” I would say.  Consider fairness opinions!  Or representations that financial statements are in compliance with GAAP!

Well, joke’s on me because in New England Carpenters’ Guaranteed Annuity and Pension Funds v. DeCarlo, 2023 WL 5419147 (2d Cir. Aug. 23, 2023), the Second Circuit held that the general phrasing in a clean audit opinion may, in fact, render the statements immaterial to investors.  The court affirmed the dismissal of a securities fraud complaint on the ground that – even though the plaintiffs had shown the audit was shoddy and violated auditing standards (and the underlying financials were false) – the plaintiffs had not included specific allegations that the audit statements were material.

As the District Court concluded, the Complaint fails to allege any link between BDO’s misstatements in the 2013 Auditor Opinion and the material errors contained in AmTrust’s 2013 Form 10-K. The audit statements to which the Appellants point were so general in this case that a reasonable investor would not depend on them as a guarantee. Appellants’ claim that these statements were knowingly and verifiably false when made does not cure their generality, which is what prevents them from rising to the level of materiality required to form the basis for assessing a potential investment. We do not mean to suggest that audit opinions will always fail the materiality test because the statements they contain are too general for investors to rely on. Rather, in this case, as the District Court held, Appellants have failed “to allege any facts relevant to the way or ways in which BDO's failure to supervise, review, document, and perform in good faith the 2013 audit would have been significant to a reasonable investor in making investment decisions.” We might have come to a different conclusion had such facts been alleged.

(citations and alterations omitted)

I … do not even know what to do with this.

First of all, audit opinion language is fairly standardized; in this case, the false statements were that the audit was conducted in accordance with PCAOB standards and provided a reasonable basis for the audit opinion.

If you assume that audits matter to investors, then it has to matter that an audit was not performed appropriately; what’s the point of even having an audit, then?  And as I keep beating this lonely drum, let’s imagine what would have happened if there was no audit opinion, or if there had been one that told the truth – that the audit was shoddy.  (According to the Second Circuit, those are exactly the counterfactuals we should be considering).  I think it’s fairly obvious that investors would have considered it significant if a publicly traded company suddenly couldn’t offer up audited financials.

Yet the Second Circuit, taking the whole “generalness” thing to the point of parody, held without further comment that audit opinions may not be material if sufficiently nonspecific – which is all of them, because they all say the same thing – and therefore materiality must be explained.

To some extent, the dispute below – and that the Second Circuit hints at – was not exactly about whether the opinion was material, but about whether the precise audit failures were in fact tied to the underlying false financials.  But, rather than really say that, the Second Circuit goes much farther, treating the generalized language of the opinion as a reason to doubt its materiality.

And, frankly, even if it turned out the underlying financials were completely accurate, I still don’t think it would make the audit opinion immaterial; the purpose of the opinion is to give investors confidence in the financials.  The financials don’t have to be discounted out of fear of inaccuracy, is what the audit opinion tells you. 

So, going forward, either every securities fraud complaint will have to include some standardized language about the importance of audit opinions – and these complaints are already well over 100-pages long, which judges complain about all the time – or somehow, each plaintiff will have to find some reason why this audit in specific was really important to investors in X company.  And also, every motion to dismiss will have to include that briefing.

In 1999, Chief Judge Young lamented the “Byzantine pleading code established in recent years by Congress and the courts for securities actions.”  In re Number Nine Visual Tech. Corp., 51 F. Supp. 2d 1 (D. Mass. 1999). Twenty four years later, I’d say code pleading is looking at securities fraud complaints and wondering how things got so technical.

September 1, 2023 in Ann Lipton | Permalink | Comments (0)

Penn State Law Hiring Visitors 

Penn State Law, located in University Park, Pennsylvania, invites applications for visiting positions for the spring 2024 semester and the 2024-25 academic year. The rank of this non-tenure-track, term appointment will be Visiting Professor of Practice, Visiting Lecturer, Visiting Assistant Professor, Visiting Associate Professor, or Visiting Professor, based on the applicant's experience level. The appointment will begin in spring 2024 or fall 2024 and run from one to three semesters, depending on the applicant's start date and preferences. An extension of the appointment may be possible.

Penn State Law will consider applicants in a variety of subject matter areas. Areas of particular interest include Corporations; Contracts; Real Estate Transactions; Transactional Design and Drafting; and Law and Accounting. Other areas include Trial Advocacy; Evidence; Professional Responsibility; Contract Drafting; Arbitration; Negotiation; Mediation; Criminal Law; Criminal Procedure; Administrative Law; and Constitutional Law.

A law degree – J.D., LL.M., or J.S.D. – is required. The successful applicant will also have experience that suggests the ability to effectively teach students, prior teaching experience as an adjunct professor, guest lecturer, or other equivalent experience teaching/supervising law students in an academic context, or relevant practice experience.
The Pennsylvania State University is committed to and accountable for advancing diversity, equity, inclusion, and sustainability in all of its forms. We embrace individual uniqueness, foster a culture of inclusion that supports both broad and specific diversity initiatives, leverage the educational and institutional benefits of diversity in society and nature, and engage all individuals to help them thrive. We value inclusion as a core strength and an essential element of our public service mission. Information on the different units within Penn State Law is available at

A cover letter and curriculum vitae are required in order to be considered. Applicants with prior teaching experience will also be asked to share teaching evaluations. Questions related to this position may be directed to the search chair, Associate Dean Jud Mathews, at [email protected]. Review of applications will continue until the positions are filled.


Pursuant to the Jeanne Clery Disclosure of Campus Security Policy and Campus Crime Statistics Act and the Pennsylvania Act of 1988, Penn State publishes a combined Annual Security and Annual Fire Safety Report (ASR). The ASR includes crime statistics and institutional policies concerning campus security, such as those concerning alcohol and drug use, crime prevention, the reporting of crimes, sexual assault, and other matters. The ASR is available for review here.

Employment with the University will require successful completion of background check(s) in accordance with University policies.


Penn State is an equal opportunity, affirmative action employer, and is committed to providing employment opportunities to all qualified applicants without regard to race, color, religion, age, sex, sexual orientation, gender identity, national origin, disability or protected veteran status. If you are unable to use our online application process due to an impairment or disability, please contact 814-865-1473.

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September 1, 2023 in Joan Heminway, Jobs | Permalink | Comments (0)

Wednesday, August 30, 2023

Call for Papers - American Business Law Journal

Dear BLPB Readers:


"The American Business Law Journal (ABLJ) is currently accepting submissions for Volume 61 (2024).  

The ABLJ is a faculty-edited, triple blind, peer-reviewed journal, continuously published since 1963. The journal is ranked #4 in the 2022 Washington & Lee Law Journal Rankings for journals in Business, Corporations and Securities Law, and #2 among all refereed journals. It is ranked as an “A” journal by the Australian Business Deans Council.Our mission is to publish only top quality law review articles that make a scholarly contribution to all areas of law that impact business theory and practice, either U.S. or comparative in scope. We search for those articles that articulate a novel research question and make a meaningful contribution directly relevant to scholars and practitioners of business law. The blind peer-review process means legal scholars well-versed in the relevant specialty area have determined selected articles are original, thorough, important, and timely, and peer editors provide expert feedback and support throughout the editorial process. In particular, our editors are looking for articles that explore contemporary legal topics with direct impact on business and commerce, including:--equality and discrimination in the workplace of the future--speech in the workplace--the future of the administrative state --technology and privacy--healthcare of the future and bioethics --the Metaverse--insolvency and SMEs--alternative currencies --the impact of AI on work and healthcare 


The ABLJ is published quarterly. Articles should be between 16,000 and 20,000 words (inclusive of footnotes). We do not accept notes (student articles), book reviews, or essays. 


Authors may submit their manuscripts and CVs/resumes through Scholastica or directly via email to Robert Landry, Managing Editor at [email protected]We strongly encourage ALSB members to submit their articles outside of the normal law review submission time periods to allow more time for our review to take place and to receive feedback from peer editors. That is, we encourage you to submit from October through January, and April through July. 


For more information on submissions, please review Author Guidelines information on the ABLJ Wiley website."

August 30, 2023 in Call for Papers, Colleen Baker | Permalink | Comments (0)

Monday, August 28, 2023

Book and Upcoming Symposium: Investment Crowdfunding

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Friend-of-the-BLPB Andrew Schwartz has written his first book on a topic about which we both enjoy thinking and researching and writing: investment crowdfunding.  We have been cohabiting this corporate finance space for more than ten years now.  All credit is due to Andrew for laying down these words—his hard-fought wisdom—in a book.  He captures so much about the law and regulation of crowdfunding in the investment context in this volume.  I had the opportunity to offer some feedback to Andrew during the drafting process.   I recommend having the book on your bookshelves.

Colorado Law is hosting an event on its campus in Boulder on September 8, The Future of Startup Finance: A Symposium on "Investment Crowdfunding", honoring the release of the book, which is entitled Investment Crowdfunding.  If you are in the neighborhood, you’ll want to stop by.  Among the invited speakers are many friends from the corporate finance law academy, as well as former SEC Commissioner Allison Herren Lee.

Congrats to Andrew!

August 28, 2023 in Books, Corporate Finance, Crowdfunding, Joan Heminway | Permalink | Comments (0)

Friday, August 25, 2023

Again with the corporate scienter

I’ve previously blogged about difficulties that courts have when determining the scienter of a “corporation” in Section 10(b) cases.  The summary judgment decision Roofer’s Pension Fund v. Papa, 2023 WL 5287783 (D.N.J. Aug. 17, 2023), is another example of the genre.

There, the defendants were alleged to have concealed Perrigo’s collusion with other generic drug makers.  By the time the case got to summary judgment, however, the court concluded that the only individual defendants and named speakers had not acted with scienter.  The plaintiffs maintained that scienter could be shown against the corporate entity by virtue of the knowledge of two non-speaking executives, who were alleged to have been complicit in the collusive scheme.  The question, then, was the legal standard the court would use to determine corporate scienter.  I.e., would the non-speaking executives’ scienter be imputed to the corporate entity?

At that point, the court identified a purported difference among circuit approaches, which – the court lamented – was particularly difficult to examine in the summary judgment context because most of the prior decisions were reached on a motion to dismiss:

The narrow approach, applicable in the Fifth and Eleventh Circuits, requires a plaintiff to identify a corporate official responsible for the challenged statement who also possessed scienter…. Judge Walls rejected this narrow approach, finding it would allow corporations to escape “liability through tacit encouragement and willful ignorance,” and because it “fails to address instances where widespread corporate fraud cannot be connected to individual defendants at the pleading stage.”….

The intermediate approach taken by the Sixth Circuit looks to the state(s) of minds of certain employees to determine whether to impute scienter to the corporation. …Under this approach, courts may look to:

  1. The individual agent who uttered or issued the misrepresentation;
  2. Any individual agent who authorized, requested, commanded, furnished information for, prepared (including suggesting or contributing language for inclusion therein or omission therefrom), reviewed, or approved the statement in which the misrepresentation was made before its utterance or issuance;
  3. Any high managerial agent or member of the board of directors who ratified, recklessly disregarded, or tolerated the misrepresentation after its utterance or issuance.

The broad approach, applicable in the Second and Seventh Circuits, allows a plaintiff to establish scienter against a corporation without specifically identifying an individual in a pleading. … Under this approach, scienter can be imputed to a corporation in two ways: (1) from an individual defendant, director, or officer who either made the challenged statement, or who was “involved in the dissemination of the fraud” even if not the speaker; or (2) from the statement itself in those “exceedingly rare instances” where the statement is “so dramatic that collective corporate scienter may be inferred.” …If a plaintiff seeks to impute scienter to a corporation from a person who was “not the actual speaker” of the challenged statement, the plaintiff must establish “connective tissue between those employees and the alleged misstatements.”…

To infer scienter from the statement itself, the statement must be “so dramatic” or extreme to permit an inference that knowledgeable corporate officials approved the statement. In Makor Issues & Rights, Ltd. v. Tellabs Inc., 513 F.3d 702 (7th Cir. 2008), the Seventh Circuit gave an example of such a statement:

        Suppose General Motors announced that it had sold one million SUVs in 2006, and the actual number was zero. There would be a strong inference of corporate                   scienter, since so dramatic an announcement would have been approved by corporate officials sufficiently knowledgeable about the company to know that the                    announcement was false.

…Setting aside these varying approaches, “at the summary judgment stage, ‘[t]o prove liability against a corporation, ... a plaintiff must prove that an agent of the corporation committed a culpable act with the requisite scienter, and that the act (and accompanying mental state) are attributable to the corporation.’ ”

Plaintiffs seem to believe that Boothe's and Wesolowski's state of minds can be imputed to Perrigo, but they offer no explanation on how. They do not show any connection between Boothe's and Wesolowski's alleged misdeeds and their knowledge of the price-fixing scheme to the challenged statements at issue. Plaintiffs have left this Court clueless because they have not shown, for example, whether Boothe or Wesolowski furnished any information to Papa and Brown, or drafted, reviewed, or approved the challenged statements. … It is truly unfortunate that Plaintiffs have not adequately addressed this theory at this late stage of the case. Nonetheless, as an exercise of caution, and acutely aware that further delay will result, the Court will require additional briefing on the corporate scienter doctrine and the evidence (if any) Plaintiffs rely on to support its corporate scienter argument.

Now, first, the issue of procedural posture is something I highlighted in one of my earlier posts on the subject.  Because the question of corporate scienter comes up a lot in the motion to dismiss context, it’s often hard to tell from the rhetoric what courts are treating as the definition of corporate scienter – what does it mean, substantively, for a corporation to act with intent – versus what kind of facts are sufficient to show it, which, presumably, will vary to some extent on a motion to dismiss vs summary judgment (or trial).

Second, the court faults the plaintiffs for failing to show how these two particular executives may have been involved with any of the allegedly false statements.  And I agree with the court that under prevailing standards in all circuits, if you want to show that a non-speaking individual’s state of mind should be imputed to the corporation, you need to show some kind of connection that individual had to the allegedly false statement. 

My problem with the court’s analysis (and, to be fair, I think it’s taken from earlier decisions) is that it fails to recognize that all of these approaches are the same.  Or at the very least, we do not have enough information about them to determine where they differ.

Substantively, every single one of these approaches requires that there be someone in the corporation who was in some sense “responsible” for the false statement, and who acted with scienter.  The difference between the Second/Seventh Circuit and the others has to do with evidence.  Namely, the Second and Seventh Circuits have explicitly allowed for the possibility that under some circumstances, the plaintiff may be able to create an inference that there was such a person without in fact naming them.  I.e., if a dramatically false statement was approved by the board, you can infer that at least someone on the board knew the statement was false, because there’s no way that kind of information wouldn’t have made it to the board, even if you don’t know which board member(s) it was.

It's the same substantive standard for defining what it means for a corporation to act intentionally as prevails in the other circuits – there was a human being who had scienter and was responsible for the statement – it’s just, the Second and Seventh Circuits have been explicit that the type of proof they require does not necessarily include naming the human.  Of course, since these were motions to dismiss, one might say you need a different proof at the summary judgment stage – but the facts you’re trying to prove remain the same.



Where the circuits might differ has to do with what it means to be “responsible” for a false statement.  Almost certainly, approval by a board level official counts.  Almost certainly, drafting by a high level official, but leaving their name off of it, counts.  But the circuits get very squirrely about what other kinds of internal actions would be sufficient, and whether the responsible person has to have a certain level of authority within the entity.  That’s a potential substantive difference as to what it means for a corporation to act with intent, but it’s not reflected in the court’s opinion or the quotes the court uses.

August 25, 2023 in Ann Lipton | Permalink | Comments (0)

Thursday, August 24, 2023

Call for Papers: Second Annual Junior Faculty Business and Financial Law Workshop




The Institute for Law & Economics (ILE) at the University of Pennsylvania Carey Law School is pleased to announce its second annual Junior Faculty Business and Financial Law Workshop. The Workshop will be held in person on December 7, 2023 at Penn Carey Law.

The Workshop supports and recognizes the work of untenured legal scholars in the business and financial fields, including accounting, banking, bankruptcy, corporations, economics, finance, tax and securities, while promoting interactions with such scholars, selected tenured faculty and practitioners. By providing a forum for the exchange of creative ideas in these areas, ILE also aims to encourage new and innovative scholarship in the business and financial arena.

Approximately 6-8 papers will be chosen from those submitted for presentation at the Workshop. One or more senior scholars and practitioners will comment on each paper, followed by a general discussion of each paper among all participants. The Workshop audience will include invited untenured scholars, faculty from Penn Carey Law, The Wharton School, and other institutions, practitioners, and invited guests.

We welcome submissions from scholars within the U.S. and abroad who hold a full-time tenure-track academic appointment but have not yet received tenure as of the submission date. Scholars who do not yet hold a full-time tenure-track academic appointment such as PhD or doctoral candidates, or visiting or academic fellows without a full-time tenure-track academic appointment are not eligible for consideration. Co-authored submissions are welcome so long as each of the authors individually meet the submission criteria. Work that is published or is expected to be published by the date of the Workshop is not eligible for submission. However, submissions may include work that has been accepted for publication so long as such work is still capable of incorporating substantive edits. ILE will cover reasonable travel, hotel, and meal expenses of all presenters.

Those interested in presenting a paper at the Workshop should submit by e-mail on or before September 8, 2023. Submissions may be in the form of an abstract, summary or draft. Please submit using the following format for your file name – author’s last name.first name.title. Direct your submission, along with any inquiries related to the Workshop, to:

Professor Lisa M. Fairfax
University of Pennsylvania Carey law School
3501 Sansom Street
Philadelphia, PA 19104-6204
[email protected]

Submissions will be selected after review by members of ILE. Authors of accepted submissions will be notified by October 6, 2023. Please feel free to share this Call for Papers with any colleagues who may be interested.

August 24, 2023 in Call for Papers, Research/Scholarhip | Permalink | Comments (0)