May 2016

Money Monster, directed by Jodie Foster, is the latest addition to the pop cultural anti-finance zeitgeist.  George Clooney plays – well, Jim Cramer, with Julia Roberts as his long-suffering director.  Their usual television buffoonery is interrupted by a disgruntled investor who lost his life savings by following Clooney’s advice to invest in – well, Knight Capital.  Now he insists on holding Clooney hostage at gunpoint until he can get an explanation for the trading “glitch” that caused his investment to go sour.

Warning:  Below be spoilers, though I’ll try to keep them to a minimum (roughly movie review standards).

Yesterday, I presented on negotiation theory and stakeholder engagement at the Center for Nonprofit Management’s Bridge to Excellence Conference.

At a session after mine, I was directed to a PowerPoint entitled What Every Board Member Should Know: A Guide for Tennessee Nonprofits. The PowerPoint was authored by the Tennessee Attorney General, the Tennessee Secretary of State, and the President of the Center for Nonprofit Management. The document is rather simple, but might be useful as a primer for nonprofit board members in Tennessee.  

The conference attendees appeared to be a few hundred nonprofit practitioners and only about three or four professors, two of whom were among the presenters. After my morning presentation, I stuck around and listened to some of the other speakers and enjoyed an excellent lunch. I am a sucker for free food. 

At the conference, I was struck by how nonprofit board members were discussed by some of the speakers and attendees. One question that was posed was – “how do you deal with a board member who is not pulling his or her weight as a fundraiser?” I guess I knew that nonprofit board members were chosen, at least in part, for their ability…

For my second blog posting, I thought I would get into a bit of what I am working on in my research.

As Anne said in her intro, my work is interdisciplinary. The other discipline in which I work is moral philosophy and the branch of it that has to do with institutions, political philosophy. I believe that moral and political philosophy can help a great deal in our understanding of the law on banking, finance, and corporate governance, adding insights that often get overlooked in the dominant interdisciplinary approaches related to these areas of law. I have only a subsidiary interest in legal philosophy and to this end I would direct your attention to “Analytical Jurisprudence and the Concept of Commercial Law,” published in the Penn State Law Review in 2009, in which I developed a concept of a transnational commercial law on legal positivist grounds.

Some questions of interest to me are:

  • What is the moral responsibility of individual agents in mitigating collective harm associated with the financial system? “Individual agent” refer to any person with moral capacity, from homeowner to senior bank manager. Once we get clear on how to allocate moral responsibility, we can then decide whether regulation by law is required or preferred or whether ethics alone is enough.  
  • What is a fair or just distribution of systemic financial risk? How shall we structure institutions to get this distribution right?
  • Issues of egalitarian justice associated with debt and access to credit. Debt has a disproportionately greater adverse effect on the less well off, who tend to rely on it more to buy things necessary for a decent life in their society, such as housing, education, cars to get to work, health care (in the USA) etc.

See my article, “Luck, Justice and Systemic Financial Risk,” published in the Journal of Applied Philosophy. (email to request a copy). I am also working on another piece more for the law audience entitled “Debt in Just Societies”.  The abstract follows:

A post-Great Recession consensus has emerged that persons, firms, banks, and governments have too much debt. The article deals with legal solutions to the dilemma that debt presents to societies: successful societies benefit from a substantial

I had a plan to write on something else today, but I got a note from Keith Bishop sharing his blog post, which he was right to think I would appreciated.  In his post, Bishop discusses a California case: 

The LLC May Well Be The Platypus Of Business Organizations

What happens to the attorney-client privilege when a corporation dissolves?  Magistrate Judge Sallie Kim recently answered that question in Virtue Global Holdings Ltd. v. Rearden LLC, 2016 U.S. Dist. LEXIS 53076 (N.D. Cal. April 5, 2016):

When a corporation ceases to exist, “the corporate powers, rights and privileges of the corporation shall cease.” Cal. Corp. Code §1905(b). In that case, no entity holds the attorney-client privilege for Original MO2. City of Rialto, 492 F.Supp.2d at 1197 (“a dissolved corporation is not entitled to assert the attorney-client privilege”).

I am somewhat baffled by the ruling because the entity asserting the privilege in the case was not a corporation at all (Section 1905 is in the General Corporation Law).  The entity attempting to claim the privilege was, according to the information provided in the opinion, indubitably a California limited liability company.  Thus, the court should be citing the California Revised Uniform Limited

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This is just to give everyone a “heads up” on a symposium being held this fall (Friday, October 21 and Saturday, October 22) to honor Lyman Johnson and David Millon.  The symposium is being sponsored by the Washington & Lee Law Review (which will publish the papers presented), and I am thrilled to be among the invited speakers.  I will have more news on the symposium and my paper for it as the date draws nearer.  But I wanted everyone to know about this event so that folks could plan accordingly if they want to attend.  I understand Lexington, Virginia is lovely in late October . . . .  Actually, it’s always been lovely when I have been up there! And the honorees and contributors are a stellar group (present company notwithstanding).  I hope to see some of you there.

At the 2017 AALS annual meeting, January 3-7 in San Francisco, the AALS Sections on Agency, Partnerships LLCs, and Unincorporated Associations & Nonprofit and Philanthropy Law will hold a joint session on LLCs, New Charitable Forms, and the Rise of Philanthrocapitalism.

In December 2015, Facebook founder Mark Zuckerberg and his wife, Dr. Priscilla Chan, pledged their personal fortune—then valued at $45 billion—to the Chan-Zuckerberg Initiative (CZI), a philanthropic effort aimed at “advancing human potential and promoting equality.” But instead of organizing CZI using a traditional charitable structure, the couple organized CZI as a for-profit Delaware LLC. CZI is perhaps the most notable example, but not the only example, of Silicon Valley billionaires exploiting the LLC form to advance philanthropic efforts. But are LLCs and other for-profit business structures compatible with philanthropy? What are the tax, governance, and other policy implications of this new tool of philanthrocapitalism? What happens when LLCs, rather than traditional charitable forms, are used for “philanthropic” purposes?

From the heart of Silicon Valley, the AALS Section on Agency, Partnerships LLCs, and Unincorporated Associations and Section on Nonprofit and Philanthropy Law will host a joint program tackling these timely issues. In addition to featuring invited speakers, we seek speakers

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[Please keep in mind as you read this post that my daughter is a Starbucks partner.  Any pro-Starbucks bias in this post is unintended.  But you should factor in my affiliation accordingly.]

Maybe it’s just me, but the publicity around the recent suit against Starbucks for putting too much ice in their iced beverages made me think of Goldilocks and her reactions to that porridge, those chairs, and those beds.  First it was McDonald’s, where the coffee was too hot.  Now it’s Starbucks, where the coffee is too cold–or, more truthfully, is too watered down from frozen water . . . .  (And apparently I missed a Starbucks suit earlier this year on under-filing lattes . . . .)  

Different types of tort suits, I know.  I always felt bad about the injury to the woman in the McDonald’s case, although the fault issue was truly questionable.  The recent Starbucks case just seems wrong in so many ways, however.  This is a consumer dispute that is best addressed by other means.  I admit to believing this most recent suit is actually an abuse of our court system.

How might a customer who is truly concerned about a substandard beverage attempt to remedy the wrong?

Thought Josephine Sandler Nelson’s recent Oxford Business Law Blog post on Volkswagen might be of interest to our readers. It is reposted here with permission.

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Fumigating the Criminal Bug: The Insulation of Volkswagen’s Middle Management

New headlines each day reveal wide-spread misconduct and large-scale cheating at top international companies: Volkswagen’s emissions-defeat devices installed on over eleven million cars trace back to a manager’s PowerPoint from as early as 2006. Mitsubishi admits that it has been cheating on emissions standards for the eK and Dayz model cars for the past 25 years—even after a similar scandal almost wiped out the company 15 years ago. Takata’s $70 million fine for covering up its exploding air bags in Honda, Ford, and other car brands could soon jump to $200 million if a current Department of Justice probe discovers additional infractions. The government has ordered Takata’s recall of the air bags to more than double: one out of every five cars on American roads may be affected. Now Daimler is conducting an internal investigation into potential irregularities in its exhaust compliance.

A recent case study of the 2015-16 Volkswagen (‘VW’) scandal pioneers a new way to look at these scandals…