December 2016

Happy (Almost) New Year!  As 2016 draws to a close, I offer three quick hits of interesting recent business law developments:

First:  The endlessly-running case of Erica P. John Fund v. Halliburton has finally settled!  Halliburton has been a particular obsession of mine lo these past 6 years or so, and I even attended the Fifth Circuit oral argument held in September.  (My report of that argument is here, where I link to my prior blog posts on the subject).  I’m sort of sad to see it go, even though I found many of the opinions frustrating.  In any event, Alison Frankel has a nice retrospective of the case, including how David Boies ended up as lead attorney for the plaintiffs after the death of his daughter, the previous lead.  

Second: I previously posted about Facebook’s move to create a nonvoting class of stock, essentially as a mechanism to allow Mark Zuckerberg to have his cake and eat it too (i.e., divest his stock while still maintaining voting control).  The move was duly approved by an independent special committee, but – as was recently revealed in a shareholder lawsuit – one of the committee members appears…

As avid readers of this blog already know, I am a fan of New Year’s Resolutions. I usually set over twenty goals for each year, and they prove helpful in directing effort during the year. 

Over the past few years, my employer (Belmont University) has been engaged in Vision 2020, which should amount to something like New Year’s Resolutions for the University (to be accomplished by 2020). I recently served on the committee for the Athletics Department’s contribution to Vision 2020, which was an enjoyable and interesting experience. 

My time on the Vision 2020 committee and my years of doing my own resolutions have taught me a few things. Most importantly, I have learned that SMART goals tend to be the most useful and effective. (For those who don’t know, SMART usually stands for Specific, Measurable, Attainable, Relevant, Time-Based, though there are variations).

The most difficult part, in my view, is finding appropriate measurements. Some items are easy to measure – movements in endowment, enrollment, incoming student GPA and standardize test scores, rankings, etc. There are plenty of items that are important, but much more difficult to measure. And measurements can be overdone, especially if the focus on the measurement overshadows the

At the end of every semester I resolve to give less work to my students so that I don’t have so much to grade. This upcoming semester I may actually keep that resolution, but I do plan to keep my blogging assignment. In each class, I provide an extra credit or required post or series of posts of between 200-500 words so that students can learn a fundamental legal skill—communicating clearly, correctly, and concisely.

If you are reading this post, then you are already a fan of legal blogs. Academics blog to get their ideas out quickly rather than waiting for the lengthy law review cycle to publicize their thoughts. Academics can also refine ideas they are incubating by blogging and receiving real time feedback from readers. Practicing lawyers blog (or should) for a slightly different reason. Blogging can enhance a lawyer’s reputation and visibility and ultimately lead to more business.

Yesterday, I met with an attorney who will speak to the students in my new course on Legal Issues for Startups, Entrepreneurs, and Small Businesses. I mentioned to him that I found his blog posts enlightening and that they filled a gap in my knowledge base. Although I practiced…

Ten days ago, I posted on conflicts of interest and the POTUS.  Today, friend-of-the-BLPB Ben Edwards has an Op Ed in The Washington Post on conflicts of a different kind–those created by brokerage compensation based on commissions for individual orders.  The nub:

In the current conflict-rich environment, Wall Street gorges itself on the public’s retirement assets. While transaction fees are costs to the public, they’re often juicy paydays for financial advisers. A study by the White House Council of Economic Advisers found that Americans pay approximately $17 billion annually in excess fees because of such conflicts of interest. The high fees mean that the typical saver will run out of retirement money five years earlier than he or she would have with better, more disinterested advice.

The solution posed (and fleshed out in a forthcoming article in the Ohio State Law Journal, currently available in draft form on SSRN here):

[S]imply banning commission compensation in connection with personalized investment advice would put market forces to work for consumers. This structure would kill the incentive for financial advisers to pitch lousy products with embedded fees to their clients. While the proposal might sound radical, Australia and Britain have…

My friend and colleague, Jena Martin’s coauthored book (which she wrote with another West Virginia University professor Karen Kunz) has just been released: When the Levees Break: Re-visioning Regulation of the Securities Markets. I have just started the book, and I look forward to working my way through it. I cannot say Prof. Martin and I always see eye to eye on things (though we often do), she always has a thoughtful and interesting take. It’s been an interesting read so far, and I recommend taking a look. Following is a synopsis of the book: 

The stock markets. Whether you invest or not, the workings of the stock market almost certainly touch your life. Either through your retirement fund, your mutual fund or just because you work for a place that invests (or is invested in)—the reach of the securities markets is expanding, like an ever growing tidal wave. 

This book discusses what happens when that wave hits the shore. Specifically, this book argues that, given the mounting deluge from misplaced regulation, fast-paced technology, and dominant financial players, the current US regulatory structure is woefully inadequate to hold back the tide. 

Using vivid imagery and plain language, Karen Kunz and Jena

…

The end of the calendar year brings many things–among others: the holidays (and I hope you have enjoyed and are enjoying them), the release of the last Oscar-contender movies, and the publication of oh-so-many “top ten” lists.

Apropos of the last of those three, I admit to being a bit proud, in a perverse sort of way, about spotting a “top ten” and commenting on it here on the BLPB.  Back in May and June, I blogged about consumer litigation against Starbucks (my daughter’s employer) involving coffee–too much ice, too hot, etc.  Apparently, those types of legal actions are among the “Top Ten Most Ridiculous Lawsuits of 2016.”  Specifically, two of those lawsuits against Starbucks (the one for too much ice and another alleging too much steamed milk) are #1 on the list.  Another consumer suit takes the #2 spot–a legal action asserting that a lip balm manufacturer’s packaging is misleading (specifically, making customers beehive there is more product in the tube than there actually is).  I continue to maintain (while acknowledging that consumer class action litigation can be useful when employed in cases that present a true danger to the consuming public), as I noted…

I previously posted in praise of Sandys v. Pincus for its excellence as a teaching tool – which meant that its reversal was inevitable, as occurred days after classes concluded. (Same with the Salman v. United States decision, though that changed little; naturally; we won’t even what get into what changes midstream when I’m teaching Securities Regulation).  The reversal itself is quite interesting, though, as the latest entry in the Delaware Supreme Court’s developing jurisprudence on friendship/social ties as a basis for director disqualification.  And, strikingly for Delaware, it generated a dissent.

In Sandys, the basic dispute involves a secondary offering by the social-media game company Zynga.  The plaintiffs filed a derivative lawsuit alleging that the secondary offering was designed to allow major insiders – including the controlling shareholder, himself a member of the Zynga board – to cash out before a disappointing earnings announcement.  As a result, the secondary offering materials were alleged to have omitted critical facts about the company, ultimately exposing Zynga to a securities fraud lawsuit.

The Chancery decision held that demand was not excused, resting in large part on the court’s conclusion that the directors who were not directly implicated in…

I recently updated my list of business law teaching positions. At this point, a number of the positions have probably been filled, but I put posted dates by the more recently posted positions. I still get asked, on a fairly regularly basis, about how one breaks into law teaching, and while I do have thoughts on that topic (basically, write, write, write), I think folks wanting to enter the legal academy should ask themselves a few questions first. 

  1. Are you truly drawn to both teaching and research (or are you just tired of practicing)?
  2. Are you geographically flexible? (You have to be both really good and really lucky to pick your geographic location in legal academia)
  3. Do you have a few years to devote to pursuing a career in legal academia? (these days, it often takes a VAP or two, and/or a few years on the market to secure an academic job).
  4. If you are in BigLaw, are you truly comfortable with a sizable pay cut?
  5. Can you be patient with students, administrators, staff, etc.? (things typically move much more slowly in academia than in practice)

Once you have received one of more offers, I would ask the following…

A year and a half ago I was attending a panel discussion on sports law issues at the Academy of Legal Studies in Business (ALSB) Conference in Philadelphia.  A meaningful discussion arose about the logistics of moving toward the pay-for-play model in college sports.  At one point somebody asked whether anyone has thought about the tax consequences of moving towards that model, to which my co-author Adam Epstein (who was one of the panelists) responded yes, and noted that our paper analyzing the state tax implications of paying student-athletes was our most downloaded article on SSRN.

Thus far the NCAA hasn’t evolved from the paradigm of amateurism, but every time the debate seems to quiet down about whether it should something new pops up that brings the idea of paying student-athletes back into the spotlight.  This week it was the headline, Could Fournette, McCaffrey Skipping Bowls Lead to NCAA Paying Players?  As long as there is a remote possibility of moving in that direction in the future, tax issues should be included in the overall discussion of the effects of pay-for-play on college sports.

This past November I presented a working paper at the Southeastern Academy of Legal Studies…