July 2020

The dreaded “limited liability corporation” strikes again.  In today’s find, the United States District Court for the North District California makes a boo boo. In assessing whether a court had jurisdiction over an LLC (limited liability company), the court proceeded through the following:
 
As to the first element, the Court agrees that the Eastern District of Michigan would have subject matter jurisdiction pursuant to the Class Action Fairness Act, 28 U.S.C. § 1332(d)(2). The Class Action Fairness Act vests federal courts with original jurisdiction over class actions that meet the following prerequisites: (1) “the matter in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs”; (2) the parties meet minimal requirements for diversity such that “any member of a class of plaintiffs is a citizen of a State different from any defendant”; and (3) the class equals to or exceeds 100 individuals in the aggregate. 28 U.S.C. § 1332(d). Those requirements are satisfied here. … [A]t least one class member is a citizen of a different state from Defendant: Plaintiff Esquer is a citizen of California, id. ¶ 17, whereas Defendant is a Michigan limited liability company with its principal place of business in Michigan, id.

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The title of this post is the title of a panel discussion I organized for the 2019 Business Law Prof Blog symposium, held back in September of last year.  (Readers may recall that I posted on this session back at the time, under the same title.)  The panel experience was indescribably satisfying for me.  It represented one of those moments in life where one just feels so lucky . . . .

Why?  Because it fulfilled a dream, of sorts, that I have had for quite a while.  Here’s the story.

About ten years ago, I ended up in a conversation with two of my beloved Tennessee Law colleagues while we were grabbing afternoon beverages.  One of these colleagues is a tax geek; the other is a property guy.  Somehow, we got into a discussion about mergers and acquisitions.  I was asked how I would define a merger as a matter of corporate law, and part of my answer (that mergers are magic) got these two folks all riled up (in a professional, academic, nerdy way).  The conversation included some passionate exchanges.  It was an exhilerating experience.

I have remembered that exchange for all of these years, vowing to myself…

What remains when the intoxicating distractions of life are removed?

Albert Camus in The Plague (1947) engages this question, and nearly 70 years later, so does Doctor Paul Kalanithi in When Breath Becomes Air (2016).

I read both of these books on vacation at Ocean Isle, NC late last month; this was not exactly light, uplifting beach reading.

Before the plague engulfed the Algerian coastal town of Oran, Camus’ narrator notes that:

Our citizens work hard, but solely with the object of getting rich. Their chief interest is in commerce, and their chief aim in life is, as they call it, “doing business.” Naturally they don’t eschew such simpler pleasure as love-making, sea bathing, going to the pictures. But, very sensibly they reserve these past times for Saturday afternoons and Sundays and employ the rest of the week in making money, as much as possible . . . . Nevertheless there still exist towns and countries where people have now and then an inkling of something different. In general it doesn’t change their lives. Still they have had an intimation, and that’s so much to the good. Oran, however, seems to be a town without intimations; in other words,

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It seems we’re all talking about VC Laster’s recent opinion in In re Dell Technologies Class V Stockholder Litigation.  Stefan posted about Laster’s taxonomy of coercion earlier this week; for me, I want to focus on another aspect of the case, the one that Stephen Bainbridge latched onto as indicative of his “director primacy” view.

The basic set up in Dell was that controlling shareholders – Michael Dell and Silver Lake – engineered a transaction whereby Dell would redeem Class V stock from its holders, and they wanted to cleanse the deal using Kahn v. M&F Worldwide Corp., 88 A.3d 635 (Del. 2014) (“MFW”) procedures to ensure it would receive business judgment review.  To that end, they conditioned the transaction on special committee approval and unaffiliated shareholder approval.  Dissatisfied stockholders sued, claiming that despite those efforts, the MFW conditions were not satisfied, and, for the purposes of a 12(b)(6) motion, Laster agreed. 

Laster actually found that, as alleged, the departures from MFW were many and varied, but there’s one aspect in particular I want to focus on, namely, the curious role of the “stockholder volunteers.”  After months of negotiation, the special committee reached a deal with…

It seems that every day, more schools are announcing that they will re-open either totally or mostly online in the Fall. If you’re still debating whether opening face-to-face in the Fall is safe, I recommend that you read this compelling essay by my colleague, Bill Widen. I live in a COVID hotspot in Miami, Florida, and fortunately, I had already been assigned to teach online. Unlike many of you who may find out about your school’s plans at the end of July, I’ve already been focusing on upping my online game.

Last week, in Part II of this series, I promised to summarize what I have learned from some of my readings from  Learning How to Learn, Small Teaching Online, and Online Learning and the Future of Legal Education. Alas, I haven’t even had time to look at them because I’ve been teaching two courses, watching webinars on teaching, and taking two online courses for my own non-legal certifications. But it wasn’t a waste of time because it allowed me to look at online learning from a student’s perspective. Next week, I’ll summarize the readings in the sources listed above, but this week, I’ll provide…

The states and XY Planning have failed in their bid to stop Regulation Best Interest.  The Second Circuit found that the SEC had discretionary authority to enact a regulation short of a uniform fiduciary standard.  It also found that the states lacked standing to sue because their theory that their tax revenue would decline was “speculative.”

With Reg BI going into effect, states must decide whether to simply pass their own statutes and rules.  As it stands, Nevada remains the nation’s only state to have a state fiduciary statute.  Other states, notably New Jersey and Massachusetts have pursued administrative rule making approaches. The next fight will likely be about the scope of state authority to regulate securities sales practices.  

Industry lawyers will likely do all they can to forestall the promulgation of state regulation or, if that fails, seek to have it struck down as somehow preempted by federal law. Some academic work has begun to explore this issue.  Columbia Law’s Yerv Melkonyan has a forthcoming Note exploring the topic (it was also featured on Andrew Jennings’s podcast here).  In a symposium piece, I took a close look at one preemption argument industry representatives made in comment letters…

Yesterday, the Bank for International Settlements (BIS), whose ownership consists of 62 central banks, released its Annual Economic Report (here).  It’s a treasure trove of information for banking and financial market regulation types (like me!) and includes a plethora of informative data and graphs.  It’s divided into three main parts: 1) A global sudden stop, 2) A monetary lifeline: central banks’ crisis response, and  3) Central banks and payments in the digital era.  Definitely well worth reading!