Friday, May 3, 2019
I blogged two weeks ago about whether we were teaching law students the wrong things, the wrong way, or both. I’ve been thinking about that as I design my asynchronous summer course on transactional lawyering while grading asset and stock purchase agreements drafted by the students in my spring advanced transactional course. I taught the spring students face to face, had them work in groups, required them to do a a negotiation either in person or online, and am grading them on both individual and group work as well as class participation. When I looked at drafts of their APAs and SPAs last week, I often reminded the students to go back to old PowerPoints or the reading because it seemed as though they missed certain concepts or maybe I went through them too quickly— I’m sure they did all of the reading (ha!). Now, while designing my online course, I’m trying to marry the best of the in person processes with some of the flipped classroom techniques that worked (and tweaking what didn’t).
Unlike many naysayers, I have no doubt that students and lawyers can learn and work remotely. For the past nine years, I have participated as a mentor in LawWithoutWalls, a mostly virtual experiential learning program started by University of Miami professor Michele DeStefano. Also known as LWOW, the program matches students from around the world with business people and practicing lawyers to develop a project of worth over sixteen weeks. Team members meet in January in person and never see each other in person again until April during a competition that is judged by venture capitalists, lawyers, entrepreneurs, and academics. I mentored a team of students from Bucerius in Germany, Wharton in Pennsylvania, and the University of Miami. Banking behemoth HSBC sponsored our project and staffed it with lawyers from Singapore, Canada, and the UK. Other mentors on the team hailed from Spain and the UK. On any given week, 7-10 people joined Skype calls, chatted in WhatsApp, drafted on Google Docs, and accessed Slack. They attended mandatory webinars weekly via Adobe Connect on developing business plans, pitching to VCs, and working with clients. Seventy percent of the people on the seventeen teams spoke languages other than English as the first language.
How did this virtual experience work? Extremely well, in my view. After some growing pains, students adjusted quickly as did the business partners, who are used to setting up conference calls and working across borders. Some of the winning teams developed projects that provided virtual reality training on implicit bias for police officers; informed consumers about food freshness to combat food waste; and organized health information for foster care children on a blockchain-powered platform. Humble brag- my team won best overall project by developing a solution to use blockchain and smart contracts in syndicated lending that has the potential to save the bank almost 2 million per year. I also mentored last year’s winner, Team Spotify, with students from Miami, Colombia, and Chile and lawyers housed in Sweden, California, and New York. Each year, teams do almost all of this hard work remotely, across time zones, and with language differences. Students collectively interview hundreds of subject matter experts over 16 weeks, and the vast majority of those interviews take place via phone or video and with people in different countries. Other sponsors for LWOW included Accenture, White and Case, Pinsent Mason, Microsoft, Cozen O'Connor, LegalZoom, Eversheds Sutherland, LatAm Airlines, and Legal Mosaic-- all companies and law firms that see the benefit of these skill sets. Significantly, every year, a cohort of teams does all of the work virtually, never meeting in person for a kickoff. That virtual team winner competes in person with the traditional teams each April, and often wins the whole competition. Clearly, these students develop special skills by necessity. I plan to learn from those experiences as I design my course.
My experience with LawWithoutWalls and as a former compliance officer (where we often did training online and via video) makes me optimistic about online learning and working. In my summer course, I will have students work in groups, where they will use the latest virtual teaming tools. I will have live office hours via Skype, Zoom, or FaceTime, and I will require that some of the groups do their meetings via video as well to have a connection outside of email. Students will draft and edit on community bulletin boards. They will post their own video presentations and "webinars" geared toward fictitious business clients. Working collaboratively and creatively are key skills in the real world, and they will be key in my class.
But there is a lot of resistance in both the legal community and academia regarding the online world. Last week, I attended a seminar at a law firm and met a member of the Florida Board of Bar Examiners. I asked his opinion on the state of students and young lawyers. I was particularly interested in his thoughts because he’s also a partner at a large law firm in our state. Like some quoted in my prior post, he believes that online coursework is a poor substitute for face to face learning. He further opined that when people don’t work in offices, they miss the camaraderie of being around peers and their work suffers. These are valid concerns. Many lawyers are unhappy in general, and the way people hide behind digital devices (even when in the same room/office) can lead to isolation, depression, and poor networking and social skills.
But these drawbacks should not doom online learning and remote working. Most of my graduating 3Ls will take their bar prep courses online. They claim that it makes no sense to drive to campus “just to watch a video of a professor speaking.” They also like the idea of being able to rewind videos to take notes. The indicated that they will meet up with friends when they want to study together and may even come on campus to watch their online coursework for a sense of community. But significantly, they don’t see the need to learn in the traditional ways. Personally, I love good online courses but I also love the ability to have face to face interaction with teammates- even if that’s via video. Being in the same physical space also allows for chance interactions that can lead to enriching conversations. On the other hand, sometimes there's no choice. Many readers may remember that years ago, in harder economic times, companies cancelled non essential business travel and people got used to video meetings. Many employers now interview candidates by Skype first before bringing them in. Learning and working virtually is no longer a novelty. Some of our students will work in co-working spaces for firms or companies where everyone works from home.
Change is coming and in many places, already here. Law professors must prepare students to practice in this new world while not sacrificing pedagogical gains. This requires training on project management and effective communication with team members— all non-substantive topics and that will give many people pause. We also need to make sure that students know how to communicate with clients and employers face to face in business and social settings. Some professors will say- correctly- that they have enough to contend with making sure students understand the law and can pass the bar. But, for those of us interested in online learning, we need to do more. We have to make sure that we prepare students for both the "hard" and "soft" skills. Most important, we need to make sure that these online courses have the rigor of traditional classes-- US News is watching.
I’m open to suggestions of what has worked for you and what hasn’t so please feel free to comment below or email me at email@example.com.
Friday, December 21, 2018
If you are looking for podcasts over the break, I recommend Professor Brian Frye's Ipse Dixit. I have only listened to a handful of the 75 episodes, but I learned something new in each one.
A big thanks to Brian for putting all of these podcasts on legal scholarship together. The podcasts cover a wide range of legal topics, mostly in an interview format with other professors.
Saturday, September 1, 2018
Did I lose you with the title to this post? Do you have no idea what a DAO is? In its simplest terms, a DAO is a decentralized autonomous organization, whose decisions are made electronically by a written computer code or through the vote of its members. In theory, it eliminates the need for traditional documentation and people for governance. This post won't explain any more about DAOs or the infamous hack of the Slock.it DAO in 2016. I chose this provocative title to inspire you to read an article entitled Legal Education in the Blockchain Revolution.
The authors Mark Fenwick, Wulf A. Kaal, and Erik P. M. Vermeulen discuss how technological innovations, including artificial intelligence and blockchain will change how we teach and practice law related to real property, IP, privacy, contracts, and employment law. If you're a practicing lawyer, you have a duty of competence. You need to know what you don't know so that you avoid advising on areas outside of your level of expertise. It may be exciting to advise a company on tax, IP, securities law or other legal issues related to cryptocurrency or blockchain, but you could subject yourself to discipline for doing so without the requisite background. If you teach law, you will have students clamoring for information on innovative technology and how the law applies. Cornell University now offers 28 courses on blockchain, and a professor at NYU's Stern School of Business has 235 people in his class. Other schools are scrambling to find professors qualified to teach on the subject.
To understand the hype, read the article on the future of legal education. The abstract is below:
The legal profession is one of the most disrupted sectors of the consulting industry today. The rise of Legal Tech, artificial intelligence, big data, machine learning, and, most importantly, blockchain technology is changing the practice of law. The sharing economy and platform companies challenge many of the traditional assumptions, doctrines, and concepts of law and governance, requiring litigators, judges, and regulators to adapt. Lawyers need to be equipped with the necessary skillsets to operate effectively in the new world of disruptive innovation in law. A more creative and innovative approach to educating lawyers for the 21st century is needed.
For more on how blockchain is changing business and corporate governance, come by my talk at the University of Tennessee on September 14th where you will also hear from my co-bloggers. In case you have no interest in my topic, it's worth the drive/flight to hear from the others. The descriptions of the sessions are below:
Session 1: Breach of Fiduciary Duty and the Defense of Reliance on Experts
Many corporate statutes expressly provide that directors in discharging their duties may rely in good faith upon information, opinions, reports, or statements from officers, board committees, employees, or other experts (such as accountants or lawyers). Such statutes often come into play when directors have been charged with breaching their procedural duty of care by making an inadequately informed decision, but they can be applicable in other contexts as well. In effect, the statutes provide a defense to directors charged with breach of fiduciary duty when their allegedly uninformed or wrongful decisions were based on credible information provided by others with appropriate expertise. Professor Douglas Moll will examine these “reliance on experts” statutes and explore a number of questions associated with them.
Session 2: Fact or Fiction: Flawed Approaches to Evaluating Market Behavior in Securities Litigation
Private fraud actions brought under Section 10(b) of the Securities Exchange Act require courts to make a variety of determinations regarding market functioning and the economic effects of the alleged misconduct. Over the years, courts have developed a variety of doctrines to guide how these inquiries are to be conducted. For example, courts look to a series of specific, pre-defined factors to determine whether a market is “efficient” and thus responsive to new information. Courts also rely on a variety of doctrines to determine whether and for how long publicly-available information has exerted an influence on security prices. Courts’ judgments on these matters dictate whether cases will proceed to summary judgment and trial, whether classes will be certified and the scope of such classes, and the damages that investors are entitled to collect. Professor Ann M. Lipton will discuss how these doctrines operate in such an artificial manner that they no longer shed light on the underlying factual inquiry, namely, the actual effect of the alleged fraud on investors.
Session 3: Lawyering for Social Enterprise
Professor Joan Heminway will focus on salient components of professional responsibility operative in delivering advisory legal services to social enterprises. Social enterprises—businesses that exist to generate financial and social or environmental benefits—have received significant positive public attention in recent years. However, social enterprise and the related concepts of social entrepreneurship and impact investing are neither well defined nor well understood. As a result, entrepreneurs, investors, intermediaries, and agents, as well as their respective advisors, may be operating under different impressions or assumptions about what social enterprise is and have different ideas about how to best build and manage a sustainable social enterprise business. Professor Heminway will discuss how these legal uncertainties have the capacity to generate transaction costs around entity formation and management decision making and the pertinent professional responsibilities implicated in an attorney’s representation of such social enterprises.
Session 4: Beyond Bitcoin: Leveraging Blockchain for Corporate Governance, Corporate Social Responsibility, and Enterprise Risk Management
Although many people equate blockchain with bitcoin, cryptocurrency, and smart contracts, Professor Marcia Narine Weldon will discuss how the technology also has the potential to transform the way companies look at governance and enterprise risk management. Companies and stock exchanges are using blockchain for shareholder communications, managing supply chains, internal audit, and cybersecurity. Professor Weldon will focus on eliminating barriers to transparency in the human rights arena. Professor Weldon’s discussion will provide an overview of blockchain technology and how state and nonstate actors use the technology outside of the realm of cryptocurrency.
Session 5: Crafting State Corporate Law for Research and Review
Professor Benjamin Edwards will discuss how states can implement changes in state corporate law with an eye toward putting in place provisions and measures to make it easier for policymakers to retrospectively review changes to state law to discern whether legislation accomplished its stated goals. State legislatures often enact and amend their business corporation laws without considering how to review and evaluate their effectiveness and impact. This inattention means that state legislatures quickly lose sight of whether the changes actually generate the benefits desired at the time off passage. It also means that state legislatures may not observe stock price reactions or other market reactions to legislation. Our federal system allows states to serve as the laboratories of democracy. The controversy over fee-shifting bylaws and corporate charter provisions offers an opportunity for state legislatures to intelligently design changes in corporate law to achieve multiple state and regulatory objectives. Professor Edwards will discuss how well-crafted legislation would: (i) allow states to compete effectively in the market for corporate charters; and (ii) generate useful information for evaluating whether particular bylaws or charter provisions enhance shareholder wealth.
Session 6: An Overt Disclosure Requirement for Eliminating the Duty of Loyalty
When Delaware law allowed parties to eliminate the duty of loyalty for LLCs, more than a few people were appalled. Concerns about eliminating the duty of loyalty are not surprising given traditional business law fiduciary duty doctrine. However, as business agreements evolved, and became more sophisticated, freedom of contract has become more common, and attractive. How to reconcile this tradition with the emerging trend? Professor Joshua Fershée will discuss why we need to bring a partnership principle to LLCs to help. In partnerships, the default rule is that changes to the partnership agreement or acts outside the ordinary course of business require a unanimous vote. See UPA § 18(h) & RUPA § 401(j). As such, the duty of loyalty should have the same requirement, and perhaps that even the rule should be mandatory, not just default. The duty of loyalty norm is sufficiently ingrained that more active notice (and more explicit consent) is necessary, and eliminating the duty of loyalty is sufficiently unique that it warrants unique treatment if it is to be eliminated.
Session 7: Does Corporate Personhood Matter? A Review of We the Corporations
Professor Stefan Padfield will discuss a book written by UCLA Law Professor Adam Winkler, “We the Corporations: How American Businesses Won Their Civil Rights.” The highly-praised book “reveals the secret history of one of America’s most successful yet least-known ‘civil rights movements’ – the centuries-long struggle for equal rights for corporations.” However, the book is not without its controversial assertions, particularly when it comes to its characterizations of some of the key components of corporate personhood and corporate personality theory. This discussion will unpack some of these assertions, hopefully ensuring that advocates who rely on the book will be informed as to alternative approaches to key issues.
September 1, 2018 in Ann Lipton, Compliance, Conferences, Contracts, Corporate Governance, Corporate Personality, Corporations, Current Affairs, Employment Law, Human Rights, Intellectual Property, International Business, Joan Heminway, Joshua P. Fershee, Law School, Lawyering, LLCs, Marcia Narine Weldon, Real Property, Shareholders, Social Enterprise, Stefan J. Padfield, Teaching, Technology, Web/Tech | Permalink | Comments (0)
Monday, January 29, 2018
Indiana University legal studies professor Abbey Stemler sent along this description of an article she co-wrote with Harvard Business School Professor Ben Edelman. They recently posted the article to SSRN and would love any feedback you may have, in the comments or via e-mail.
Perhaps the most beloved twenty-six words in tech law, Section 230 of the Communications Decency Act of 1996 has been heralded as a “masterpiece” and the “law that gave us the modern Internet.” While it was originally designed to protect online companies from defamation claims for third-party speech (think message boards and AOL chat rooms), over the years Section 230 has been used to protect online firms from all kinds of regulation—including civil rights and consumer protection laws. As a result, it is now the first line of defense used by online marketplaces to shield them from state and local regulation.
In our article recently posted to SSRN, From the Digital to the Physical: Federal Limitations on Regulating Online Marketplaces, we challenge existing interpretations of Section 230 and highlight how it and other federal laws interfere with state and local government’s ability to regulate online marketplaces—particularly those that dramatically shape our physical realities such as Uber and Airbnb. We realize that the CDA is sacred to many, but as Congress pays renewed attention to this law, we hope our paper will support a richer discussion about what the CDA should and should not be expected to do.
Monday, November 20, 2017
The Oklahoma Law Review recently published an article I wrote for a symposium the law review sponsored last year at The University of Oklahoma College of Law. The symposium, “Confronting New Market Realities: Implications for Stockholder Rights to Vote, Sell, and Sue,” featured a variety of presentations from some really exciting teacher-scholars, some of which resulted in formal published pieces. The index for the related volume of the Oklahoma Law Review can be found here. I commend these articles to you.
The abstract for my article, "Selling Crowdfunded Equity: A New Frontier," follows.
This article briefly offers information and observations about federal securities law transfer restrictions imposed on holders of equity securities purchased in offerings that are exempt from federal registration under the CROWDFUND Act, Title III of the JOBS Act. The article first generally describes crowdfunding and the federal securities regulation regime governing offerings conducted through equity crowdfunding — most typically, the offer and sale of shares of common or preferred stock in a corporation over the Internet — in a transaction exempt from federal registration under the CROWDFUND Act and the related rules adopted by the U.S. Securities and Exchange Commission. This regime includes restrictions on transferring securities acquired through equity crowdfunding. The article then offers selected comments on both (1) ways in which the transfer restrictions imposed on stock acquired in equity crowdfunding transactions may affect or relate to shareholder financial and governance rights and (2) the regulatory and transactional environments in which those shareholder rights exist and may be important.
Ultimately, the long-term potential for suitable resale markets for crowdfunded equity — whether under the CROWDFUND Act or otherwise — is likely to be important to the generation of capital for small business firms (and especially start-ups and early-stage ventures). In that context, three important areas of reference will be shareholder exit rights, public offering regulation, and responsiveness to the uncertainty, information asymmetry, and agency costs inherent in this important capital-raising context. Only after a period of experience with resales under the CROWDFUND Act will we be able to judge whether the resale restrictions under that legislation are appropriate and optimally crafted.
Those familiar with the literature in the area will note from the abstract that I employ Ron Gilson's model from "Engineering a Venture Capital Market: Lessons from the American Experience" (55 Stan. L. Rev. 1067 (2003)) in my analysis.
I know others are also working in and around this space. I welcome their comments on the essay and related issues here and in other forums. I also know that we all will "learn as we go" as the still-new CROWDFUND Act experiment continues. Securities sold in the early days of effectiveness of the CROWDFUND Act (which became effective May 16, 2016) are just now broadly eligible for resale. Stay tuned for those lessons learned from the school of "real life."
Friday, October 27, 2017
A former student brought this fundraising website to my attention: To the Stars Academy of Arts and Sciences ("TTS Academy). (Image above from a Creative Commons search).
This article describes TTS Academy as follows: "Former Blink-182 singer and guitarist Tom DeLonge is taking his fascination with/conspiracy theories about UFOs to their logical conclusion point: He's partnering with former government officials on a public benefit corporation studying 'exotic technologies' from Unidentified Aerial Phenomenon (UAP) that the consortium says can 'revolutionize the human experience.'"
Remember the Blink-182 song Aliens Exist?
I couldn't make this up. And I did spend some time trying to determine if it was a joke, but TTS Academy's 63-page offering circular suggests that it is no joke. And TTS Academy appears to have already raised over $500,000.
According to the organization's website, Tom DeLonge of Blink-182 fame is in fact the CEO and President. Supposedly, DeLonge has teamed with former Department of Defense official Luis Elizondo who confirmed to HuffPost that the TTS Academy is planning to "provide never before released footage from real US Government systems...not blurry, amateur photos, but real data and real videos." Rolling Stone reports that "DeLonge has long been interested in UFO and extraterrestrial research. After parting ways with Blink-182 in 2015, he delved deeper into the subject, releasing the book Sekret Machines: Gods earlier this year and he's also working on a movie that is related to those interests called Strange Times." TTS Academy is a Public Benefit Corporation, formed in Delaware.
The TTS Academy website states: "To The Stars Academy is a Public Benefit Corporation (PBC), which means our public benefit purpose is a core founding principle of our corporate charter alongside the traditional goal of maximizing profit for shareholders." Hmm... How does one pursue a public benefit purpose and seek to maximize profit for shareholders? A main point of benefit corporations is liberate companies from the perceived restrictions of shareholder wealth maximization.
The website continues: "Our public purpose: Education - Community - Sustainability - Transparency. PBCs have enjoyed a surge in popularity as the public becomes more interested in corporate responsibility, transparency, and more recently, the concept of impact investing.* It’s clear that an expanding portion of the general population is looking to make an impact on the world around them, not only through volunteering, or speaking out on social media, but through financial decision making.** We believe raising resources through Regulation A+ crowdfunding will allow us to expedite expansion of TTS Academy’s PBC initiatives, like promoting citizen science, enhancing traditional education with science, engineering and art-related programming, supporting veterans and their families, and promoting underrepresented people in film." Color me skeptical.
As Professor Christine Hurt noted way back in 2014/15, the crowdfunding and social enterprise circles may overlap significantly. Professor Hurt wrote, "for-profit social entrepreneurship may find equity crowdfunding both appealing and available. For-profit social entrepreneurs may be able to use the crowdfunding vehicle to brand themselves as pro-social, attracting individual and institutional cause investors who may operate outside of traditional capital markets and may look for intangible returns. Just as charitable crowdfunders rebut the conventional wisdom that donors expect tax-deductibility, prosocial equity crowdfunders may rebut the conventional wisdom that early equity investors expect high returns or an exit mechanism." Not sure if she, or any of us, predicted exactly this type of company.
Friday, October 20, 2017
The Harvard Law School Forum on Corporate Governance and Financial Regulation recently contained a notice about the Delaware Corporate Law Resource Center, which I thought might interest our readers as well. The post is reproduced below the line.
The oral histories of iconic Delaware cases are the most interesting, and useful, part of the website to me, though some of the cases do not appear to have materials yet. In addition to the cases, there is an oral history on 102(b)(7) to which my judge (VC Stephen Lamb) and others contributed. I hope the existing materials will be added to and expanded over time.
The University of Pennsylvania Law School Institute for Law and Economics (ILE) is pleased to announce the creation and public availability of a new website devoted to resources relating to the development of the Delaware General Corporation Law and related case law. This website (the Delaware Corporation Law Resource Center) has two principal components. The first is a compilation of resources relating to the Delaware General Corporation Law itself, including a link to the text of the statute, and links to the bills to amend the statute since its general revision in 1967. This portion of the website also includes links to annual commentaries on those amendments, the reports and minutes generated in the 1967 revision process, and memoranda disseminated by the Council of the Delaware State Bar Association Corporation Law Section describing some of the more significant and controversial amendments to the statute.
The second component of the website is a repository for materials constituting oral histories of iconic corporate law decisions of the Delaware courts since 1980, dealing with the director’s fiduciary duty of care, duties in takeovers, and freezeouts by controlling stockholders. This portion of the website is a work in progress, but for some of the cases it already contains the opinions in the case, briefs, selected transcripts of oral arguments, and selected key documents from the record. Most notably, the oral history compilation includes high quality videotaped interviews of lawyers and judges involved in the case, who describe the back story of the case with details not available through review of the courts’ opinions.
The oral history portion of the website also includes the first in a series of composite videos setting forth the background of each case. That premiere video describes the background of Smith v. Van Gorkom and presents, in narrative fashion, selected excerpts from the video interviews of the participants.
ILE hopes and expects that this website, which is freely available to the public, will prove to be a valuable resource for the teaching and development of Delaware corporate law. ILE welcomes suggestions for ways in which the website can be made even more useful to those interested in its subject.
The new website is available here.
Monday, October 16, 2017
Blockchain-Based Token Sales, Initial Coin Offerings, and the Democratization of Public Capital Markets. Oh, My!
My UT Law colleague Jonathan Rohr has coauthored (with Aaron Wright) an important piece of scholarship on an of-the-moment topic--financial instrument offerings using distributed ledger technology. Even more fun? He and his co-author are interested in aspects of this topic at its intersection with the regulation of securities offerings. Totally cool.
Here is the extended abstract. I cannot wait to dig into this one. Can you? As of the time I authored this post, the article already had almost 700 downloads . . . . Join the crowd!
Blockchain-Based Token Sales, Initial Coin Offerings, and the Democratization of Public Capital Markets
Jonathan Rohr & Aaron Wright
Best known for their role in the creation of cryptocurrencies like bitcoin, blockchains are revolutionizing the way tech entrepreneurs are financing their business enterprises. In 2017 alone, over $2.2 billion has been raised through the sale of blockchain-based digital tokens in what some are calling initial coin offerings or “ICOs,” with some sales lasting mere seconds. In a token sale, organizers of a project sell digital tokens to members of the public to finance the development of future technology. An active secondary market for tokens has emerged, with tokens being bought and sold on cryptocurrency exchanges scattered across the globe, with often wild price fluctuations.
The recent explosion of token sales could mark the beginning of a broader shift in public capital markets—one similar to the shift in media distribution that started several decades ago. Blockchains drastically reduce the cost of exchanging value and enable anyone to transmit digitized assets around the globe in a highly trusted manner, stoking dreams of truly global capital markets that leverage the power of a blockchain and the Internet to facilitate capital formation.
The spectacular growth of tokens sales has caused some to argue that these sales simply serve as new tools for hucksters and unscrupulous charlatans to fleece consumers, raising the attention of regulators across the globe. A more careful analysis, however, reveals that blockchain-based tokens represent a wide variety of assets that take a variety of forms. Some are obvious investment vehicles and entitle their holders to economic rights like a share of any profits generated by the project. Others carry with them the right to use and govern the technology that is being developed with funds generated by the token sale and may represent the beginning of a new way to build and fund powerful technological platforms.
Lacking homogeneity, the status of tokens under U.S. securities laws is anything but clear. The test under which security status is assessed—the Howey test—has uncertain application to blockchain-based tokens, particularly those that entitle the holder to use a particular technological service, because they also present the possibility of making a profit by selling the token on a secondary market. Although the SEC recently issued a Report of Investigation in which it found that one type of token qualified as a security, confusion surrounds the boundaries between the types of tokens that will be deemed securities and those that will not.
Blockchain-based tokens exhibit disparate features and have characteristics that make current registration exemptions a poor fit for token sales. In addition to including requirements that do not fit squarely with blockchain-based systems, the transfer restrictions that apply to the most popular exemptions would have the perverse effect of restricting the ability of U.S. consumers to access a new generation of digital technology. The result is an uncertain regulatory environment in which token sellers do not have a sensible path to compliance.
In this Article, we argue that the SEC and Congress should provide token sellers and the exchanges that facilitate token sales with additional certainty. Specifically, we propose that the SEC provide guidance on how it will apply the Howey test to digital tokens, particularly those that mix aspects of consumption and use with the potential for a profit. We also propose that lawmakers adopt both a compliance-driven safe harbor for online exchanges that list tokens with a reasonable belief that the public sale of such tokens is not a violation of Section 5 as well as an exemption to the Section 5 registration requirement that has been tailored to digital tokens.
Friday, September 15, 2017
From August 31 to September 10, I participated in an excellent 6-week online boot camp called Miler Method. The camp is led by 2x Olympic medalist in the 1500m, Nick Willis, and his wife Sierra. The camp led up to the New Balance 5th Avenue Mile in NYC.
As I have posted about before, I have enjoyed taking some massive open online courses (MOOCs), and I think all educators should familiarize themselves with this form, as the online world is already impacting even the most traditional courses.
The Miler Method, like MOOCs, taught me not only valuable substantive information, but also further instructed me on the art of online education. Below are a few reflections on the pros and cons of the online format as applied to the Miler Method running training camp. My thoughts follow below the page break.
Monday, August 14, 2017
Former BLPB editor Steve Bradford has posted a new paper adding to his wonderful series of articles on crowdfunding (on which I and so many others rely in our crowdfunding work). This article, entitled "Online Arbitration as a Remedy for Crowdfunding Fraud" (and forthcoming in the Florida State University Law Review), focuses on a hot topic in many areas of lawyering--online dispute resolution, or ODR. Steve brings the discussion to bear on his crowdfunding work. Specifically, he suggests online arbitration as an efficacious way of resolving allegations of fraud in crowdfunding. Here's the abstract:
It is now legal to see securities to the general public in unregistered, crowdfunded offerings. But offerings pursuant to the new federal crowdfunding exemption pose a serious risk of fraud. The buyers will be mostly small, unsophisticated investors, the issuers will be mostly small startups about whom little is known, and crowdfunded offerings lack some of the protections available in registered offerings. Some of the requirements of the exemption may reduce the incidence of fraud, but there will undoubtedly be fraudulent offerings.
An effective antifraud remedy is needed to compensate investors and help deter wrongdoers. But, because of the small dollar amounts involved, neither individual litigation nor class actions will usually be feasible; the cost of suing will usually exceed the expected recovery. Federal and state securities regulators are also unlikely to focus their limited enforcement resources on small crowdfunding offerings. A more effective remedy is needed.
Arbitration is cheaper, but even ordinary arbitration will often be too expensive for the small amounts invested in crowdfunding. In this article, I attempt to design a simplified, cost-effective arbitration remedy to deal with crowdfunding fraud. The arbitration remedy should be unilateral; crowdfunding issuers should be obligated to arbitrate, but not investors. Crowdfunding arbitration should be online, with the parties limited to written submissions. But it should be public, and arbitrators should be required to publish their findings. The arbitrators should be experts on both crowdfunding and securities law, and they should take an active, inquisitorial role in developing the evidence. Finally, all of the investors in an offering should be able to consolidate their claims into an arbitration class action.
Although I haven't yet read the paper (which was just posted this morning, it seems), Steve's idea totally makes sense to me on so many levels. Among other things, ODR has a history in e-commerce and social media, two front-runners and foundations of crowdfunding. Also, the dispute resolution expense issue that Steve alludes to in the abstract is real. It has been raised by a number of us, including by me in this draft paper, in which I assert, among other things:
Prosecutors and regulators may not be willing or able to devote financial and human resources to enforcement efforts absent statutory or regulatory incentives or extraordinary policy reasons for doing so . . . . Individual funders also are unlikely to bring private actions or even engage alternative dispute resolution since the cost of vindicating their rights easily could exceed their invested money and time, although the availability of treble damages (often a statutory right for willful violations of consumer protection statutes) or other extraordinary remedies may change the calculus somewhat.
. . . [C]lass actions tend to be procedurally complex—difficult to get in front of a court—and may not be available in some jurisdictions. Moreover, the prospects for recovery are unknown and, based on recent information from U.S. securities class action litigation, financial compensation to individual members of the plaintiff class is likely to be relatively insignificant in dollar value and in relationship to losses suffered, even if the aggregate amount of damages paid by the defendant is relatively high . . . . Accordingly, class action litigation also may be of limited utility in bringing successful legal claims in the crowdfunding context.
This will be an area for much further thought as the crowdfunding adventure continues . . . .
Friday, July 7, 2017
A few weeks ago, Stephen Bainbridge asked about the benefits of the social media site LinkedIN. His question caused me to revisit the costs/benefits of social media. Below I reflect on the social media websites I use.
With so many professors getting in trouble on social media - see, e.g., here, here, here, here, and here - it may make sense to ask if any of the websites are worth the risk. As long as you are wise when you post, and assume a post will be seen in the worst possible light, I think social media can be worth using.
- Benefits. Facebook has a broader network of people than any of the other social media sites I use. My parents are on Facebook, as is my wife's grandmother and great aunt, as are my peers, as are my much younger cousins. Facebook also has a wide range of user generated content -- photos, links, short & long posts, groups, etc. The "Friends in ___ City" feature has allowed me to catch up with old acquaintances when traveling for conferences or family trips. Just a few weeks ago, I visited with two of my old coaches for the first time since high school. Neither of their e-mails were online, and I have only kept up with them via Facebook.
- Costs. For me, Facebook is the biggest time waster among the various social media sites. Recently, I deactivated my Facebook account for the time being. I will probably be back at some point. The benefits of Facebook could probably be achieved in about 30 minutes a week, but until I learn to limit my use to around that amount of time, I will likely continue to deactivate for periods of time to cut back usage.
- Use for Work. I don’t allow current students to “friend” me, given the more personal nature of Facebook, but I have allowed alums to connect, which has been rewarding. I follow my university and my alma maters on Facebook. I am Facebook friends with a handful of professional contacts.
- Benefits. I have kept Twitter almost entirely professional; I rarely tweet about my family or my personal hobbies. As such, for me, the benefits of Twitter are captured in the "Use for Work" section below.
- Costs. Twitter can also eat time, though unlike Facebook, I am rarely tempted to spend long amounts of time on Twitter. Twitter doesn't allow for very nuanced debate and your posts can be taken the wrong way. Professor Eric Posner recently posted some harsh comments about Twitter; his comments have a kernel of truth. That said, I do think he is overly negative. For example, I think Twitter can actually be better than newspapers for some information. With Twitter you get the news directly from the source, and the news reaches you more quickly and with fewer words. Also, newspapers are unlikely to cover niche topics, like the latest happenings in social enterprise law.
- Use for Work. I maintain two hashtags - #MGT2410 and #MGT6940 – for news tweets related to my two primary courses. I allow current students to follow me, though I do not require it nor do I post anything necessary for my classes. I follow mostly professional contacts and professional organizations on Twitter. Given the accounts that I follow, Twitter can be a relatively good place to get quick news. Finally, I have found that a number of C-level executives, lawyers, and well-known academics are easier to engage via Twitter than any other medium.
- Benefits. In thinking about Steven Bainbridge’s question about LinkedIN, I had a difficult time thinking of many significant benefits. I see LinkedIN as a place to connect with professional contacts that you want to share less information than you share on Facebook. I rarely log into LinkedIN, but I haven’t deleted my account either, as the costs of being on the website are incredibly low.
- Costs. LinkedIN takes the least amount of my time among the various social media sites. I spend 0 to 30 minutes on LinkedIN most months. There does appear to be a fair bit of spam in the various work groups I have joined, but it is pretty easy to ignore by unsubscribing to group e-mail updates.
- Use for Work. LinkedIN seems to be my MBA students' preferred method of connecting, and the site is worthwhile just to stay connected to them. I belong to a number of work related LinkedIN groups, but, as mentioned, most have been overtaken by spammers, so I almost never read the shared content.
- Benefits. Strava is a social media website for runners, cyclists, and swimmers. For me, Strava’s main purpose is as an online place to log my runs without annoying my friends on other social media websites. On Strava, I only have about 30 friends, all of whom are committed to fitness. The website is an incredibly good accountability tool, as those friends can see if you have been slacking for a few days, and some of them will even call you out. It is also nice to have a few people notice when you have a good race or workout. You can also borrow workout ideas from posts.
- Costs. I don't love that people can tell when you are out of town, based on the location of your runs, but with only 30 friends and the privacy settings set tight as to other users, this isn't a huge issue. Strava doesn't take much time. The routes automatically upload from my Garmin and the newsfeed isn't designed to keep you engaged with it.
- Use for Work. I don't really use Strava for work other than staying in touch with a couple attorney runner friends.
Instagram, Pinterest, Etc. I never got into Instagram, Pinterest, or any other social media websites. Instagram does seem to be quite popular among my somewhat younger friends and students, but it also appears to be a giant time waster, so I am glad I never got hooked.
Feel free to share any comments or additional thoughts.
Monday, May 8, 2017
Call for Papers
Financial Inclusion: A Sustainable Mission from Microfinance to Alternative Finance
Social and Technological Paradigms
December 7-8, 2017
CEREN, EA 7477, Burgundy School of Business - Université Bourgogne Franche-Comté
Microfinance has sought to include individuals that financial institutions exclude. The mission has been progressively widening to alternative finance, which has thrived outside of conventional financial instruments and channels.
Alternative finance takes different forms, such as angel investment, asset funding, cash flow funding, crowdfunding, crypto-currencies (Bitcoin), fair investment, fintech, slow money, pension fund investments, social impact bonds, etc. All the types have resulted from social and/or technological innovations or a mix of both. They provide significant values to customers and investors. Some of the benefits include absence of lengthy applications, low documentation, almost no collateral, minimum or no credit score requirements, high approval rates, and fast funding.
Alternative finance has also widened the base of customers. While microfinance mainly aimed at making financial services available to people at the ‘Bottom of the Pyramid’, alternative finance has gone beyond to target not only the poor, but also small enterprises, young and innovative ventures, women, minorities, individuals with no credit history, and any other audience excluded by the conventional institutions. While microfinance’s target is mainly the poor, alternative finance’s finance is the excluded.
The Burgundy School of Business will organize the 8th edition of its annual conference “Institutional and Technological Environments of Microfinance” (ITEM) on "financial inclusion" in Dijon, France on 7th and 8th December 2017.
The conference welcomes research papers, monographies, case studies, PhD research-in-progress and experiential insights on different topics and experiments of alternative finance. ITEM encourages in particular reflections on the social and technological innovations, which broaden and deepen the range of alternative finance.
The leading topic is "Financial Inclusion: A Sustainable Mission from Microfinance to Alternative Finance--Social and Technological Paradigms". However, the conference welcomes other related topics that scope out the perspective and discussion on financial inclusion.
As the preceding editions, the ITEM conference provides a forum for both academic researchers and practitioners to discuss and exchange.
Proposals: All contributions require a proposal in the first instance. A proposal is a short abstract between 300 and 500 words, containing the research objectives, methodology, findings, recommendations and up to five keywords, the full names (first name and surname, not initials), email addresses of all authors, and a postal address and telephone number for at least one contact author.
Submission period for the proposals: Up to September 15, 2017.
Acceptance of proposals: By September 30, 2017. Notifications will be sent out to relevant authors. Please indicate clearly the contact author(s) and their email address(es).
Full paper: Upon acceptance of proposal, full papers are required. The paper includes abstract, keywords, references and a text of less than 5000 words.
Due date for the full papers: Up to November 30, 2017.
Publication opportunity: Papers presented at the conference will also be considered for publication in collaborating journals.
Fees for registration:
- 300 Euros for academic and professional participants and presenters
- 250 Euros for early-bird (before October 31)
- 100 Euros for students
- 70 euros for early bird students (before October 31)
All are invited to complete registration and payment by November 30, 2017.
Details are also available on the ITEM 8 website.
Web site: http://item-8.blogspot.com
Special attraction: The flying club of Darois is willing to take you for an aerial trip over the historical wine region in a ULM (ultra-léger motorisé--ultra-light aircraft) for a modest fee. Depending on the number of people interested, they will fix the price.
Tuesday, February 14, 2017
I hope this Valentine's Day is a good one for you, dear readers. Mine started with a random (minor) dog bite on my morning run, followed by some time with some very nice health care professionals and quite a few less pleasant needles.
A friend alerted me to the law-related Twitter hashtag #AppellateValentines. Some of them are quite funny. See, e.g.,
Your wish is my mandamus. #AppellateValentines— Emil J. Kiehne (@EmilKiehne) February 14, 2017
There is also a #BusinessValentines hashtag, which is less creative, but has its moments. Of course, there was no #BusinessLawValentines, but there should be and there is now. I went first. Join in, if you're so inclined.
Even if we lived in Delaware, I'd never disclaim my duty of loyalty to you #BusinessLawValentines— Joshua Fershee (@jfershee) February 14, 2017
If you loved me back, we could be Citizens United #BusinessLawValentines— Joshua Fershee (@jfershee) February 14, 2017
And, of course, I could not resist:
Monday, February 13, 2017
News on TaxJazz: The Tax Literacy Project from Tulane Law colleague Marjorie Kornhauser:
TaxJazz provides individuals with non-partisan, non-technical, accessible tax information to help people participate in discussions about tax policy and problems facing the nation. TaxJazz already addresses basic tax questions, such as: Why do we have taxes? Are there any legal constraints on taxation? What can be taxed? How do we decide what is a fair tax? It plans to add material on particular tax issues and provisions.
The readings, worksheets, dialogues and other materials are suitable for use by individuals or by groups in a variety of situations. They have already been used 7 times in different settings including high schools, a city recreation department’s after-school program, and a community senior center. They have already been used by over 350 people between the ages of 12 and 80.
For more information, please Contact Us.
Looks like I may need to spend some time over there at TaxJazz. I certainly do not consider myself tax literate! Maybe this will help. A quick pass over the materials on the site reveals catchy graphics and coverage of salient issues about taxing authority and tax policy. I know a few legislators who need to better understand the tradeoffs as among different types of taxation . . . . Maybe I can convince them that learning about taxation can be fun?!
In addition, I wonder if we "firm governance folks" could increase literacy in our field with a project like this. Hmm. Food for thought.
Friday, December 16, 2016
My favorite new (to me) podcast is NPR's How I Built This. They describe the podcast as "about innovators, entrepreneurs, and idealists, and the stories behind the movements they built. Each episode is a narrative journey marked by triumphs, failures, serendipity and insight — told by the founders of some of the world's best known companies and brands."
So far, I have listened to two of the episodes: one about the Sam Adams founder Jim Koch and one about the Clif Bar co-founder Gary Erickson.
On the Sam Adams episode, I liked Jim Koch's distinction between scary and dangerous -- repelling off a mountain with an expert guide is scary but not not necessarily dangerous; walking on a snow-covered, frozen lake on a sunny day is dangerous but not necessarily scary. Jim said that his comfortable job at Boston Consulting Group was not scary, but it was dangerous in luring him away from his true calling. However, founding his own company (Sam Adams) was scary, but not really as dangerous as working for BCG. Also, it was interesting to find out that Jim Koch is a Harvard JD/MBA.
On the Clif Bar episode, though I have eaten more than my share of Clif Bars, I was surprised to learn that the bars were named for Gary's father, Clif. The Clif Bar episode also gave great insight into the emotions that can come out when deciding whether to sell your business; Gary decided not to sell to Quaker Oats at the last minute and then needed to buy-out his partner. Separately, Gary talked about the need for corporate counsel (and how a "handshake deal" with a distributor almost cost him his business), but he also noted how many attorneys are simply too expensive for small businesses.
Both entrepreneurs drew on lessons they learned during their outdoor adventure experiences. And both entrepreneurs discussed some combination of lawsuits, contracts, and regulatory challenges.
Looking forward to listening to more episodes.
Friday, September 23, 2016
In January 2015, I wrote about a resolution to take a break from e-mails on Saturdays.
That resolution failed, quickly.
Since then, I have been thinking a lot about my relationship with e-mail.
On one hand, I get a lot of positive feedback from students and colleagues about my responsiveness. On the other hand, constantly checking and responding to e-mails seems to cut against productivity on other (often more important) tasks.
Five or six weeks ago, I started drafting this post, hoping to share it after at least one week of only checking my e-mail two times a day (11am and 4pm). Then I changed the goal to three times a day (11am, 4pm, and 9pm and then 5am, 11am, 4pm). Efforts to limit e-mail in that rigid way failed, even though very little of what I do requires a response in less than 24 hours. On the positive side, I have been relatively good, recently, at not checking my e-mail when I am at home and my children are awake.
A few days ago, I read Andrew Sullivan’s Piece in the New York Magazine on “Distraction Sickness.” His piece is long, but worth reading. A short excerpt is included below:
[The smart phone] went from unknown to indispensable in less than a decade. The handful of spaces where it was once impossible to be connected — the airplane, the subway, the wilderness — are dwindling fast. Even hiker backpacks now come fitted with battery power for smartphones. Perhaps the only “safe space” that still exists is the shower. Am I exaggerating? A small but detailed 2015 study of young adults found that participants were using their phones five hours a day, at 85 separate times. Most of these interactions were for less than 30 seconds, but they add up. Just as revealing: The users weren’t fully aware of how addicted they were. They thought they picked up their phones half as much as they actually did. But whether they were aware of it or not, a new technology had seized control of around one-third of these young adults’ waking hours. . . . this new epidemic of distraction is our civilization’s specific weakness. And its threat is not so much to our minds, even as they shape-shift under the pressure. The threat is to our souls. At this rate, if the noise does not relent, we might even forget we have any. (emphasis added)
Academics seem to vary widely on how often they respond to e-mails, but I’d love to hear about the experience and practices of others. Oddly, in my experience with colleagues, those who are most prompt to respond to e-mails are usually also the most productive with their scholarship. I can’t really explain this, other than maybe these people are sitting at their computers more than others or are just ridiculously efficient. As with most things, I imagine there is an ideal balance to be pursued.
One thing I have learned is that setting expectations can be quite helpful. With students, I make clear on the first day of class and on the syllabus that e-mails will be returned within 24 business hours (though not necessarily more quickly than 24 business hours). I often respond to e-mails much more quickly than this, but this is helpful language to point a student to when he sends a 3am e-mail asking many substantive questions before an 8am exam.
Our students also struggle with "distraction sickness," and most of them know they are much too easily distracted by technology, but they are powerless against it. Ever since I banned laptops in my undergraduate classes, I have received many more thanks than pushback. The vast majority of students say they appreciate the technology break, but some can still be seen giving into the technology urge and (not so) secretly checking their phones.
Interested in how our readers manage their e-mails. Any tricks or rules that work for you? Feel free to e-mail me or leave your thoughts in the comments.
Wednesday, June 15, 2016
Starting 2 weeks ago at Law & Society, I began participating in a series of conversations that can be boiled down to this: Artificial Intelligence and the Law. Even the ABA is on to this story, which means it has reached a peak saturation point. Exciting, scary, confusing, skeptical and a variety of other reactions have been thrown into the conversations across the legal studies gamut from algorithms in parole & criminal sentencing to its use to generate social credit scores (thank you Nizan Packin for opening my eyes to this application). In another LSA shout out, I want to highlight to forthcoming scholarship of Ben Edwards at Barry College where he criticizes the conflicts of interest in investment advise channels. One possible work around he explores is relying on robo-advisors: In the few years since I have looked at digital investment advise, the field has changed, matured, grown! So much so that FINRA has issued a report on digital investment advise, and is unsurprisingly skeptical of the technology application that poses a significant threat to its members (new release synopsis available here). For the uninitiated, check out this run down of popular robo-advisors and Forbes article. Skepticism about the sustainability of low-fee model can be found here; and optimism about its ability to change the world can be found here.
A robo-advisor (robo-adviser) is an online wealth management service that provides automated, algorithm-based portfolio management advice without the use of human financial planners. Robo-advisors (or robo-advisers) use the same software as traditional advisors, but usually only offer portfolio management and do not get involved in more personal aspects of wealth management, such as taxes and retirement or estate planning.
Monday, February 22, 2016
Free Web Seminar: The Opportunities and Pitfalls of Cybersecurity and Data Privacy in Mergers and Acquisitions
One of my two former firms, King & Spalding, is hosting a free interactive web seminar on cybersecurity and M&A on February 25 at 12:30 p.m. Thought the web seminar might be of interest to some of our readers. The description is reproduced below.
An Interactive Web Seminar
The Opportunities and Pitfalls of Cybersecurity and Data Privacy in Mergers and Acquisitions
February 25, 2016
12:30 PM – 1:30 PM
Over the last several years, company after company has been rocked by cybersecurity incidents. Moreover, obligations relating to cybersecurity and data privacy are rapidly evolving, imposing on corporations a complex and challenging legal and regulatory environment. Cybersecurity and data privacy deficiencies, therefore, might pose potentially significant business, legal, and regulatory risks to an acquiring company. For this reason, cybersecurity and data privacy are becoming integral pre-transaction due diligence items.
This e-Learn will analyze the (1) special cybersecurity and data privacy dangers that come with corporate transactions; (2) strategies to mitigate those dangers; and (3) benefits of incorporating cybersecurity and data privacy into due diligence. The panel will zero in on these issues from the vantage point of practitioners in the deal trenches, and from the perspective of a former computer crime prosecutor and a former FBI agent who have dealt with a broad range of cyber risks to public and private corporations. This e-Learn is for managers and attorneys at all levels who are involved at any stage of the M&A process and at any stage of cyber literacy, from the beginner who is just starting to appreciate the complex nature of cyber risks to the expert who has addressed them for years. The discussion will leave you with a better understanding of this critical topic and concrete, practical suggestions to bring back to your M&A team.
Robert Leclerc, King & Spalding’s Corporate Practice Group and experienced deal counsel; Nick Oldham, King & Spalding, and Former Counsel for Cyber Investigations, DOJ's National Security Division; John Hauser, Ernst & Young, and former FBI Special Agent specializing in cyber investigations.
Friday, January 8, 2016
In short, temptation bundling is putting something you want to do together with something you should do.
Temptation bundling can make both activities more enjoyable --- you feel better about the want activity because you also accomplished a should activity, and the should activity is less difficult because it is married with a want activity. For example, temptation bundling is what I have been doing with podcast listening; I only listen to podcasts (want) when I workout (should).
Below are a few temptation bundles that might work for professors:
- Drinking caffeinated drinks only while researching;
- Listening to your favorite music only while grading; and
- Eating chocolate only when in faculty meetings.
Friday, December 11, 2015
Amazon Prime Now has debuted in Nashville. Amazon Prime Now offers free two-hour delivery on many items for Prime members. The service is amazing and is already changing the way I shop. I really dislike shopping malls, especially during the busy holiday season, but I also dislike waiting weeks (or even days) for shipments to arrive, so Amazon Prime Now is a perfect solution.
With Amazon Prime Now expanding, I imagine even more brick and mortar retailers will be headed to bankruptcy unless they find a way to differentiate their companies and add more value.
Brick and mortar retailers may find differentiation through community building services. I already see some retailers attempting this. Running footwear and apparel stores are offering free group runs starting from their storefronts and/or group training programs for a fee. Grocery stores are offering group cooking classes. Book stores are offering book clubs. The list goes on.
These brick and mortar retailers are finding it more and more difficult to compete with e-retailers on price and convenience. With the rise in technology, however, face to face community seems to be increasingly rare. Brick and mortar retailers that aid in community building may be able to justify higher prices for their goods, and the fee-based training programs may add another solid revenue stream.
Similarly, in my classes, I consistently ask myself: How am I providing value beyond what students could receive from an online course? I have made changes (like more group work, more case method work, more writing-based assessments, and more face to face advising) in response to this question, and I continue to look for ways to improve. Adapt or die.