January 2014

An announcement from the Faculty Lounge that may be of interest to some of our readers is reproduced below:

“The National Business Law Scholars Conference (NBLSC) will be held on Thursday, June 19th and Friday, June 20th at Loyola Law School, Los Angeles.

This is the fifth annual meeting of the NBLSC, a conference which annually draws together dozens of legal scholars from across the United States and around the world. We welcome all scholarly submissions relating to business law. Presentations should focus on research appropriate for publication in academic journals, especially law reviews, and should make a contribution to the existing scholarly literature. We will attempt to provide the opportunity for everyone to actively participate. Junior scholars and those considering entering the legal academy are especially encouraged to participate.

To submit a presentation, email Professor Eric C. Chaffee at eric.chaffee@utoledo.edu with an abstract or paper by April 4, 2014. Please title the email “NBLSC Submission – {Name}”. If you would like to attend, but not present, email Professor Chaffee with an email entitled “NBLSC Attendance.” Please specify in your email whether you are willing to serve as a commentator or moderator. A conference schedule will be circulated in late

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Even before I read the book The Happy Lawyer by my former colleagues Nancy Levit and Doug Linder, I loved every legal job I ever had from judicial law clerk to BigLaw associate (twice), to deputy general counsel. I am still a happy lawyer after twenty-two years in the profession. I am clearly an anomaly among my attorney friends, most of whom looked at me with envy when I said that I was leaving practice to pursue academia. One friend, a partner in a South Florida firm quipped, “litigation has to be one of the only professions where your client hates you, your opposing counsel hates you, and the judge probably thinks you’re an idiot. When the outcome is positive, the client loves you until they see the bill.” No wonder lawyers aren’t happy.

But the situation for lawyers is more serious than a few clients grumbling about high bills. Earlier this week CNN reported that lawyers are the 4th most unhappy professionals behind dentists, pharmacists, and physicians, and are 3.6 times more likely to suffer from depression than non-lawyers. According to the article, 40% of law students report that they have suffered from depression before graduation. That acknowledgement…

Aaron George at Under30CEO has a nice post on the top five legal mistakes made by startups. Not much new to those of us who are lawyers, but it’s a nice summary of some of the mistakes startups can make.

I could quibble with his list. I think selling securities without complying with securities law ought to be there somewhere, and I think his No. 5–not hiring a lawyer–ought to be No. 1. But his list does include some of the common legal mistakes made by budding entrepreneurs.

Today marks the 4 year anniversary of the Citizens United decision and tomorrow marks the 41st anniversary of Roe v. Wade.  Corporations, the First Amendment, and Reproductive choice/freedom may have seemed like odd bed-fellows, but all three issues come together in the upcoming Hobby Lobby case challenging the application of access to birth control required under the health care law to a corporation whose owners oppose the extension on the grounds of religious freedom. 

Consider this a teaser on the issues offered up in the Hobby Lobby case.    Law professors are filing amicus briefs on this case coming down on either side of the issue.  One group arguing that religious views of the owners should not protect the corporation from complying and another arguing that the religious views of the owners can be imputed to the corporation and thus exempt it from compliance.  This is set to be a fantastically interesting issue, and hopefully one that will generate some healthy debate on this blog.  There will be more to come from me on this issue, but for now…consider this a teaser (or a place holder).

And if you crave more substance and internet sleuthing this afternoon, let me…

Freedom Industries — the company apparently responsible for contaminating the Elk River (and, along with it, 300,000 West Virginia residents’ drinking water) – has filed for Chapter 11 bankruptcy.  The company wasted little time filing for reorganization, and the process already has some people on edge. 

From a public relations perspective, this kind of cases does not serve the concepts of Business Organizations especially well.  The use of limited liability vehicles is sanctioned by law, and such use has been credited with creating all kinds of opportunities for growth through pooled resources that would not otherwise occur without the grant of limited liability.  I happen to think that’s true.  (See, e.g., Corporate Moral Agency and the Role of the Corporation in Society, p. 176, By David Ronnegard) 

Still, one of the issues is that figuring out who owned Freedom Industries took some sleuthing (reporter’s findings here).  It appears the structure is as follows: 

Freedom Industries’ Chapter 11 documents list its sole owner as Chemstream Holdings, which is owned by J. Clifford Forrest.  Forrest also owned the Pennsylvania company, Rosebud Mining, which is located at the same address Chemstream Holdings lists for its headquarters.  The Reports note that…

Late last month, the SEC released its Report on Review of Disclosure Requirements in Regulation S-K. This report is in response to section 108(a) of the JOBS Act, which provides that

The Securities and Exchange Commission shall conduct a review of its Regulation S-K . . . to

(1) comprehensively analyze the current registration requirements of such regulation; and

(2) determine how such requirements can be updated to modernize and simplify the registration process and reduce the costs and other burdens associated with these requirements for issuers who are emerging growth companies.

The SEC is required by section 108(b) to transmit the report to Congress, including “the specific recommendations of the Commission on how to streamline the registration process in order to make it more efficient and less burdensome for the Commission and for prospective issuers who are emerging growth companies.”

This report was supposed to be submitted by October 2, 2012, 180 days after the passage of the JOBS Act. It was actually released on December 20, 2013, more than a year after that deadline.

The SEC apparently believes this report satisfies the requirements of section 108. The first page of the report includes a label “As Required…

Donna M. Nagy recently posted “Owning Stock While Making Law: An Agency Problem and A Fiduciary Solution” on SSRN.  Here is the abstract:

This Article focuses on Members of Congress and their widespread practice of holding personal investments in companies that are directly and substantially affected by legislative action. Whether entirely accurate or not, congressional officials with investment portfolios chock full of corporate stocks and bonds contribute to a corrosive belief that lawmakers can – and sometimes do – place their personal financial interests ahead of the public they serve.

Fiduciary principles provide a practical solution to this classic agency problem. The Article first explores the loyalty-based rules that guard against self-interested decision-making by directors of corporations and by government officials in the executive and judicial branches of the federal government. It then contrasts the strict anti-conflict restraints in state corporate law and federal conflicts-of-interest statutes with the very different set of ethical rules and norms that Congress traditionally has applied to the financial investments held by its own members and employees. It also confronts the parochial view that lawmakers’ conflicts are best deterred through public disclosure of personal investments and the discipline of the electoral process.

My Akron colleague Will Huhn just posted “2013-2014 Supreme Court Term: Court’s Decision in Daimler AG v. Bauman, No. 11-965: Implications for the Birth Control Mandate Cases?” over at his blog wilsonhuhn.com.  Here is a brief excerpt, but you should go read the entire post:

On January 14, 2014, the Supreme Court issued its decision in favor of Daimler AG (the maker of Mercedes-Benz), ruling that the federal courts in California lacked personal jurisdiction over Daimler to adjudicate claims for human rights violations arising in Argentina. The ruling of the Court may have implications for the birth control mandate cases pending before the Court in Hobby Lobby Stores and Conestoga Wood Specialties…. In those cases the owners of two private, for-profit business corporations contend that their individual rights to freedom of religion “pass through” to the corporation — that the corporations are in effect the “agents” of the principal shareholders, and that this is why the corporations have the right to deny their employees health insurance coverage for birth control. In Daimler the Ninth Circuit Court of Appeals had held that MBUSA was the “agent” of Daimler AG, and that the substantial business presence of…

Last week, the New York Times Dealbook ran a story entitled, Wall Street Shock: Take a Day Off, Even a Sunday.  The story details how Bank of America Merrill Lynch is supposedly encouraging its investment banking analysts and associates to take four days a month off…on the weekends. 

As the authors note, “[s]uch an offer from an employer would sound like punishment for the average worker. But for junior employees of Bank of America Merrill Lynch, that recommendation was intended as a bit of relief.”  The memorandum was probably a relief …if the Merrill Lynch really meant it, and if it will be respected by the various managing directors.

At many large investment banks (and law firms), true rest is largely absent.  Analysts and associates are pushed, and push themselves, to the brink.  Call me cynical, but I doubt Merrill Lynch is doing this primarily for the good of its employees.  Perhaps Merrill Lynch thinks the diminishing returns of working 80+-hour weeks and the high employee turnover are impacting their bottom line. 

While the lack of true rest is glaring on Wall Street, I think any modern employee can suffer from…

In my posts last Thursday (see here and here) and in others, I have explained why I don’t think that the Dodd-Frank conflicts minerals law is the right way to force business to think more carefully about their human rights impacts.  I have also blogged about the non-binding UN Guiding Principles on Business and Human Rights, which have influenced both the Dodd-Frank rule, the EU’s similar proposal, and the State Department’s required disclosures for businesses investing in Burma (see here). 

For the past few months, I have been working on an article outlining one potential solution.  But I was dismayed, but not surprised to read last week that the US government’s procurement processes may be contributing to the very problems that it seeks to prevent in Bangladesh and other countries with poor human rights records. This adds a wrinkle to my proposal, but my contribution to the debate is below:

Faced with less than optimal voluntary initiatives and in the absence of binding legislation, what mechanisms can interested stakeholders use as leverage to force corporations to take a more proactive role in safeguarding human rights, particularly due diligence issues in the supply chain?  Can new disclosure…