December 2016

In July, Delaware Chancellor Andre Bouchard found that payday lender DFC Global Corp was sold too cheaply to private equity firm Lone Star Funds in 2014.  Chancellor Bouchard held that four DFC shareholders were entitled to $10.21 a share at the time of the deal, or about 7 percent above the $9.50 per share deal price that was approved by a majority of DFC shareholders.

A Gibson Dunn filing related to the DFC case on appeal before the Delaware Supreme Court sheds light on the appraisal process in Delaware.  The claim is the Chancellor Bouchard manipulated the calculations to reach the $10.21 prices.  The full brief is available here, but this summary might provide easier reading.  Reuters reports:

Bouchard made a single clerical error that led him to peg DFC’s fair value at $10.21 per share.

DFC’s lawyers at Gibson Dunn & Crutcher spotted the mistake and asked Chancellor Bouchard to fix the erroneous input. If he did, the firm said, he’d come up with a fair value for the company that was actually lower than the price Lone Star paid. The chancellor agreed to recalculate – but in addition to fixing the mistaken input, Bouchard adjusted DFC’s projected long-term

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During the recent presidential campaign, there was a lot of talk the evil of “political correctness” or (PC).  A lot has been said about this concept on social media, and I got to thinking about the legal applications of what PC means. This post is my first look the concept from a legal perspective and looks briefly at the legal origins and applications of the idea. 

Speechwriter (and author and columnist) Barton Swaim has said that “Political correctness is an insidious presence in American life.” PC is generally seen (and criticized) as a product of the political left. 

And the political right has a companion, “patriotically correct,” and that idea was recently explained in a popular article by Alex Nowrasteh, an immigration policy analyst at the Cato Institute’s Center for Global Liberty and Prosperity. Nowrasteh notes that political correctness has been a “major bugaboo of the right” in recent years and explains:

[C]onservatives have their own, nationalist version of PC, their own set of rules regulating speech, behavior and acceptable opinions. I call it “patriotic correctness.” It’s a full-throated, un-nuanced, uncompromising defense of American nationalism, history and cherry-picked ideals. Central to its thesis is the belief that nothing in America can’t be fixed by more

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In her post on Saturday, co-blogger Ann Lipton offered observations about possible legal issues resulting from the President-Elect’s tweets regarding public companies.  She ends her post with the following:

So, it’s all a bit unsettled. Let’s just say these and other novel legal questions regarding the Trump administration are sure to provide endless fodder for academic analysis in the coming years.

Probably right.

Today, I take on a somewhat related topic.  I briefly explore the President-Elect’s conflicting interests through the lens of a corporate law advisor.  For the past few weeks, the media (see, e.g., here and here and here) and many folks I know have been concerned about the potential for conflict between the President-Elect’s role as the POTUS, public investor and leader of the United States, and his role as “The Donald,” private investor and leader of the Trump corporate empire.

The existence of a conflicting interest in an action or transaction is not, in and of itself, fatal or even necessarily problematic.  In a number of common situations, fiduciaries have interests in both sides of a transaction.  For example, a business founder who serves as a corporate director and officer may lease property she owns to the corporation.  What matters under…

The University of Akron invites applications and nominations for the position of Dean of the School of Law, with an anticipated start date of July 1, 2017.  Review of applicants will begin immediately and continue until the position is filled. 

The University of Akron School of Law is a public law school of approximately 450 students, with both full-time and part-time programs, and opportunities to begin study in either the Fall or the Spring.  The school offers the J.D., five joint-degree programs, an LL.M. in Intellectual Property, and various certificate programs for both J.D. and non-J.D. students.  Since its founding in 1921, the school has graduated over 6,300 men and women.  The school has historically embraced a strong commitment to teaching and public service in the community. 

Akron Law has recently experienced tremendous upward trajectories in admissions in terms of applications, selectivity, yield, and the size and quality of the incoming class.  The employment rate for graduates is above the national average. The school boasts several Centers with opportunities for students to distinguish themselves in their education and practice-ready preparation: a Center for Intellectual Property Law and Technology; a Constitutional Law Center, one of only four such centers established by Congress; and the Joseph G. Miller and William C. Becker Institute for Professional Responsibility.  The Akron trial advocacy program also consistently ranks among the top in the nation.  Clinical programs in a wide variety of areas have won awards recently for their excellence and innovation, and new clinical programs continue to be added under growing faculty numbers and associations with outside practitioners.

Akron Law and its programs have been showered over the past year with national recognition, including a #7 ranking for training prosecutors and public defenders, an “A” grade for our Intellectual Property program, a Top 50 ranking in 2015-16 from Above The Law, a Top 25 recognition for bar exam preparation, and a Top 8 rating for affordable living and quality of education.  Akron Law also continues to be recognized as a Best Value school.

One of the more … striking … habits of President-Elect Trump is his tendency to use Twitter to attack specific companies that have displeased him in some way.  For example, after the CEO of Boeing criticized him, he tweeted:

After Vanity Fair published a scathing review of Trump Grill, he tweeted:

And other times, Trump seems to simply be reacting to whatever he sees on the news.

These tweets might explicitly threaten to harm their targets through the exercise of government power – such as the threat to cancel Boeing’s Air Force One contract – but even if they don’t, the implicit possibility is there.  As a result, Trump’s tweets move the market.  Boeing’s stock reacted negatively to Trump’s tweet (though it rebounded).  Shares of Lockheed Martin dropped dramatically after Trump criticized one of its fighter jets as too expensive.

Wall Street traders have begun building a Trump tweet effect into their models.  One anecdotal report says that compliance departments have lifted bans on trader Twitter usage, aware that presidential-tweet monitoring is now a necessary part of the job.

The Wall Street Journal even published a blog post recommending four proactive steps all businesses take in anticipation of a Trump twitter attack.

All of this has prompted some accusations of market manipulation and insider trading.  For example, it’s been reported that some lucky trader started dumping shares of Lockheed Martin six minutes before Trump tweeted, though that could simply be the result of hedge funders correctly predicting where Trump would tweet next.

For the sake of argument, let’s say that Trump’s tweet attacks – at least some of them – are calculated to drive down stock prices in order to allow someone (maybe Trump himself, maybe someone in his circle) to make a profit.  Is there anything illegal here?

[More under the jump]

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…

This post is not about politics, although it does concern President-elect Trump’s cabinet pick, ExxonMobil head, Rex Tillerson. I first learned about Tillerson during some research on business and human rights in the extractive industries in 2012. I read the excellent book, “Private Empire” by Pultizer-prize winner Steve Coll to get insight into what I believe is the most powerful company in the world.

Although Coll spent most of his time talking about Tillerson’s predecessor, Lee Raymond, the book did a great job of describing the company’s world view on climate change, litigation tactics, and diplomatic relations. Coll writes, “Exxon’s far flung interests were at times distinct from Washington’s.” The CEO “did not manage the corporation as a subordinate instrument of American foreign policy; his was a private empire.” Raymond even boasted, “I am not a U.S. company and I don’t make decisions based on what’s good for the U.S.” Indeed, the book describes how ExxonMobil navigated through Indonesian guerilla warfare, dealt with kleptocrats in Africa, and deftly negotiated with Vladmir Putin and Hugo Chavez. 

Before I read the book, I knew that big business was powerful–after all I used to work for a Fortune 500 company. But Coll’s work described a company that…

As I mentioned in my “Show Me the Money!” blog last week, back in March of 2014 the Chicago District (Region 13) of the National Labor Relations Board (NLRB) held that Northwestern University football players qualified as employees and could unionize and bargain collectively.  Although this decision was later overturned, the national level NLRB’s final holding specifically targeted unionization efforts at private schools – leaving the door wide open to revisit this issue at some point with respect to public universities.

Although the Regional decision was reversed, I was interested in Peter Sung Ohr’s (Director of Region 13) analysis, especially with respect to athletic scholarships.  He noted that although student-athletes don’t officially receive paychecks from universities, they do receive “a substantial economic benefit for playing football” in the form of scholarships.  He also focused on the extent of control exerted by coaches on players (something that has been touched on quite a bit in academic literature) and the amount of time players spend on football related activities, ultimately concluding that receiving scholarships in exchange for playing football amounts to a contract-for-hire between employer and employee.

I was inspired to write my 3rd sports/ tax paper, Northwestern, O’Bannon And …

UC Irvine law professor, David Min, has a new article titled, Corporate Political Activity and Non-Shareholder Agency Costs, in theYale Journal on Regulation.  Professor Min examines corporate constitutional law  in recent examples such as Citizens United, through the lens of nonshareholder dissenters.  

The courts have never considered the problem of dissenting nonshareholders in assessing regulatory restrictions on corporate political activity. This Article argues that they should. It is the first to explore the potential agency costs that corporate political activity creates for nonshareholders, and in so doing, it lays out two main arguments. First, these agency costs may be significant, as I illustrate through several case studies. Second, neither corporate law nor private ordering provides solutions to this agency problem. Indeed, because the theoretical arguments for shareholder primacy in corporate law are largely inapplicable for corporate political activity, corporate law may actually serve to exacerbate the agency problems that such activity creates for non-shareholders. Private ordering, which could take the form of contractual covenants restricting corporate political activity, also seems unlikely to solve this problem, due to the large economic frictions facing such covenants. These findings have potentially significant ramifications for the Court’s corporate political speech

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