October 2015

As some of you may know, I have been focused on crowdfunding intermediation in my research of late.  My articles in the U.C. Davis Business Law Journal and the Kentucky Law Journal both touch on that topic, and a forthcoming chapter in an international crowdfunding book and several articles in process follow along that trail.  (I also have the opportunity to look into gatekeeper intermediary issues outside the crowdfunding context at an upcoming symposium at Wayne State University Law School, about which I will say more in a subsequent post.)  The underlying literature on financial intermediation is super-interesting, and it continues to grow in breadth and depth as I research and write.

Given my interest in this area, I was delighted to see that Larry Cunningham is contributing to the debate, following on his already-rich work relating to Warren Buffett and Berkshire Hathaway.  As you may recall, Larry was our guest here at the Business Law Prof Blog back in 2014.  You can read my Q&A with him here and his posts here and here.

Larry recently posted an essay responding to Kathryn Judge‘s Intermediary Influence, 82 U Chi L Rev 573 (2015).  In her article, Professor…

As a life-long Detroit Lions fan, last night’s loss to the Seattle Seahawks was largely expected.  How they lost was new, though the fact that the Lions lost in a creative way, was also to be expected.  As actor Jeff Daniels said, being a Lions fan is more painful than being a Cubs fan.

In recent years, there is ample evidence that random and uncommon rules have shown up to hurt my already mediocre team. This got me to thinking, though, of the old adage, bad facts make bad law. For the Lions, I think that’s not necessarily apt.  It may be that bad football makes for better football later.   

To understand how one might get there, one needs to know a little what it’s like to be a Lions fan, so here’s a little insight into how life as a Lions fan works: 

I watched the start of the game last night with my ten-year-old son.  Part of the pre-game programming is all of the announcers and studio people make their pick for the game.  The ten or so predictions were unanimously for the Seahawks.  I turned to my son and said, “Well, the Lions will probably…

Alicia Plerhoples (Georgetown) has the details about the first benefit corporation IPO: Laureate Education.*

She promises more analysis on SocEntLaw (where I am also a co-editor) in the near future.

The link to Laureate Education’s S-1 is here. Laureate Education has chosen the Delaware public benefit corporation statute to organize under, rather than one of the states that more closely follows the Model Benefit Corporation Legislation. I wrote about the differences between Delaware and the Model here.

Plum Organics (also a Delaware public benefit corporation) is a wholly-owned subsidiary of the publicly-traded Campbell’s Soup, but it appears that Laureate Education will be the first stand-alone publicly traded benefit corporation.

*Remember that there are differences between certified B corporations and benefit corporations. Etsy, which IPO’d recently, is currently only a certified B corporation. Even Etsy’s own PR folks confused the two terms in their initial announcement of their certification.

The authors of the business associations casebook I use have, in their latest edition, reprinted some of the relevant statutes in the casebook. One section of the Revised Uniform Partnership Act even appears twice within a span of only eight pages. (I don’t mean citations to statutes; I mean the full language of the statute.)

The authors of the book I use (which shall remain nameless) are not alone. I’ve also seen this practice in other casebooks.

I just don’t get it.

I can understand putting a few statutes or regulations in a casebook if the students are only going to look at a couple of sections in the course. It eliminates the need for students to purchase a separate statutory supplement.

But it makes no sense in courses like Business Associations or Securities Regulation, where students will be looking at dozens, even hundreds, of pages of statutory and regulatory material. The students in those courses will still have to buy a statute book; including some of the same statutory material in the casebook just increases the size (and cost) of the casebook.

Including statutory material can also accelerate the casebook’s obsolescence. Some of the sections included come from uniform…

Yesterday, the Delaware Supreme Court held that plaintiffs had pled demand excusal under Aronson v. Lewis due in part to a director’s “close friendship of over half a century with the interested party,” in combination with that director’s business relationship with the interested party.

Del. County Emples. Ret. Fund v. Sanchez involves a public company that is 16% owned by the Sanchez family.  The plaintiffs challenged a transaction in which the company paid $78 million to a privately-held entity owned by the Sanchezes, ostensibly to purchase certain properties and fund a joint venture.  The question, then, was whether plaintiffs could show that a majority of the Board was not independent, and because the Sanchezes themselves occupied 2 of the 5 seats, all eyes were on one additional Board member, Alan Jackson.

Alan Jackson, it turned out, had been close friends with the Senior Sanchez for “more than five decades,” and the Delaware Supreme Court deemed this fact worthy of of judicial notice.  Thus, in a heartwarming passage, the Court noted that though it had previously held in Beam v. Stewart, 845 A.2d 1040 (Del. 2004), that a “thin social-circle friendship” is not sufficient to excuse demand, “we did not…

Unfortunately, touting a business as socially-consious does not seem to lessen the chance of scandal.

Some companies known for their commitment to social causes have been in the news for all the wrong reasons. A few are noted below:

Predictably, the media latches onto these stories and claims of hypocrisy fly. See, e.g., Here’s The Joke Of A Sustainability Report That VW Put Out Last Year and Whole Foods Sales Sour After Price Scandal and BP’s Hypocrisy Problems.

No business is perfect, so what should social businesses do to limit the impact of these scandals? First, before a scandal hits, I think social businesses need to be candid about the fact that they are not perfect. Second, after the scandal, the social business needs to take responsibility and take significant corrective action beyond what is legally required. 

Patagonia’s founder does a really nice job of admitting the imperfection of his company and the struggles they face in his book The Responsible Company. Whole Foods supposedly offered somewhat above-market…

Today I will present on a panel with colleagues that spent a week with me this summer in Guatemala meeting with indigenous peoples, village elders, NGOs, union leaders, the local arm of the Chamber of Commerce, a major law firm, government officials, human rights defenders, and those who had been victimized by mining companies. My talk concerns the role of corporate social responsibility in Guatemala, but I will also discuss the complex symbiotic relationship between state and non-state actors in weak states that are rich in resources but poor in governance. I plan to use two companies as case studies. 

The first corporate citizen, REPSA (part of the Olmeca firm), is a Guatemalan company that produces African palm oil. This oil is used in health and beauty products, ice cream, and biofuels, and because it causes massive deforestation and displacement of indigenous peoples it is also itself the subject of labeling legislation in the EU. REPSA is a signatory of the UN Global Compact, the world’s largest CSR initiative. Despite its CSR credentials, some have linked REPSA with the assassination last month of a professor and activist who had publicly protested against the company’s alleged pollution of rivers with…

Currently, I am planning to attend the MALSB Annual Conference in Chicago this coming April. The conference is described by the organizers below. While ALSB regional meetings like this one are usually attended mostly by legal studies professors in business schools, I am told that the conference is open to all.

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The Midwest Academy of Legal Studies in Business (MALSB) Annual Conference is held in conjunction with the MBAA International Conference, long billed as “The Best Conference Value in America.”

The MBAA International Conference draws hundreds of academics and practitioners from business-related fields such as accounting, business/society/government, economics, entrepreneurship, finance, health administration, information systems, international business, management, and marketing. Although the MALSB will have its own program track on legal studies, attendees will be able to take advantage of the multidisciplinary nature of this international conference and attend sessions held by the other program tracks.

 [More details are available under the break.]

Last night, I took my husband (part of his birthday present) to see The Illusionists, a touring Broadway production featuring seven masters of illusion doing a three-night run in Knoxville this week.  I admit to a fascination for magic shows and the like, an interest my husband shares.  I really enjoyed the production and recommend it to those with similar interests.

At the show last night, however, something unusual happened.   I ended up in the show.  I made an egg reappear and had my watch pilfered by one of the illusionists.  It was pretty cool.  After the show, I got kudos for my performance in the ladies room, on the street, and in the local gelato place.

But I admit that as I thought about the way I had been tricked–by sleight of hand–into performing for the audience and allowing my watch to be taken, I realized that these illusionists have something in common with Ponzi schemers and the like–each finds a patsy who can believe and suckers that person into parting with something of value based on that belief.  That’s precisely what I wanted to blog about today anyway–scammers.  Life has a funny way of making these kinds of connections . . . .

So, I am briefly posting today about a type of affinity fraud that really troubles me–affinity fraud in which a lawyer defrauds a client.  Most of us who teach business law have had to teach, in Business Associations or a course on professional responsibility, cases involving lawyers who, e.g., abscond with client funds or deceive clients out of money or property.  I always find that these cases provide important, if difficult, teaching moments: I want the students to understand the applicable law of the case, but I also want them to understand the gravity of the situation when a lawyer breaches that all-important bond of trust with a client.