February 2022

❤️  It’s Valentine’s Day!

Time for candy and flowers,

Not for posting blogs.

 

Until next week, then,

When I will be back with more.

Be my Valentine?  ❤️

Previously, I announced that my paper, Capital Discrimination, would be forthcoming in the Houston Law Review, and had just been posted publicly to SSRN.  As I explained in that post, the paper explores the problem of gender discrimination against women as business owners and capital providers, and proposes changes to both statutory law and common law fiduciary duties in order to address gender-based oppression in business.

The paper itself describes several business law cases from different jurisdictions, including Shawe v. Elting, a matter very familiar to business lawyers, and which involved an acrimonious dispute in the Delaware courts.  Just before Christmas, an attorney representing Philip Shawe sent this cease and desist letter to SSRN, demanding that the paper be removed from that site as defamatory. 

On New Year’s Day, SSRN removed the paper in response to Shawe’s letter.  After that, Houston Law Review could no longer assure me that the article would run in its journal, and stated that they would not preclude me from submitting the paper for publication elsewhere.   

Tulane’s counsel has sent a response letter to SSRN in hopes of having the paper restored but for now, to ensure that the paper is…

The SEC has been quite busy recently, and among other proposed rules, there’s this package of reforms that would impose some fairly dramatic new requirements for private funds.  The proposing release documents problems and conflicts in the industry that are both hair-raising and, really, quite well known.  In addition to just generally opaque fees and valuations, fund managers often charge fees to provide services to portfolio firms, which benefit the manager but eat into investor returns; some investors get preferred terms (extra liquidity, relief from fees, selective disclosures) that harm returns to other investors, and ultimately benefit the manager who can maintain relationships with the favored investors, and so forth.

So, in addition to requiring more disclosures to investors, audits, and the like, the SEC is also proposing to flat out prohibit certain practices.  For example, fees associated with a portfolio investment would have to be charged pro rata, rather than forcing some investors or funds to bear more expenses.  Funds would be prohibited from selectively disclosing information to preferred investors, or permitting them to have preferred redemption terms.  Advisors would be prohibited from seeking exculpation or indemnification from liability for breach of fiduciary duty, bad faith, recklessness, or even…

Between the Winter Olympics and the Superbowl, this weekend is a sports-lover’s dream. But it can also be a nightmare for others. Next week in my Business and Human Rights class, we’ll discuss the business of sports and the role of business in sports. For some very brief background, under the UN Guiding Principles on Business and Human Rights, the state has a duty to protect human rights but businesses have a responsibility (not a duty) to “respect” human rights, which means they can’t make things worse. Businesses should also mitigate negative human rights impacts. I say “should” because the UNGPs aren’t binding on businesses and there’s a hodgepodge of due diligence and disclosure regimes that often conflict and overlap. But things are changing and with ESG discussions being all the rage and human rights and labor falling under the “S” factor, businesses need to do more. The EU is also finalizing mandatory human rights due diligence rules and interestingly, some powerful investors and companies are on board, likely so there’s some level of certainty and harmonization of standards. 

I’ve blogged in the past about human rights issues in sports, particularly the Olympics and World Cup in Brazil…

According to their website, on November 15, 2021, the Center for Individual Rights (CIR) filed a complaint alleging workplace political opinion discrimination in the case of Krehbiel v. BrightKey, Inc.  An amended complaint was filed on Jan. 3, 2022.  You can find links to both complaints here.  What follows is a brief description of the case as per CIR (emphasis mine).

On November 15, the Center for Individual Rights filed a political opinion and racial discrimination lawsuit against BrightKey, Inc., a Maryland corporation, which fired its vice president of operations, Greg Krehbiel, over views that he expressed in his off-work podcast. BrightKey violated Krehbiel’s rights under county, state, and federal anti-discrimination law.

In his podcast, Krehbiel questioned diversity hiring requirements and enhanced penalties for “hate crimes.” Other BrightKey employees discovered Krehbiel’s podcast. They objected to the content because his views were the product of “white privilege.” Shortly after discovering the podcast, a group of employees walked out and demanded the company fire Krehbiel. BrightKey swiftly acceded to the employees’ demands.

CIR is suing BrightKey for firing Krehbiel over the political opinions that he expressed in his podcast. Howard County, Maryland is one of many jurisdictions around the country …

OKLAHOMA CITY UNIVERSITY SCHOOL OF LAW invites applications for one or more tenured or tenure-track faculty positions to begin with the 2022-23 academic year. We welcome applications from candidates with interests in any area of law, but we are particularly interested in candidates with a teaching interest in business organizations, energy law, environmental law, healthcare law, homeland security and national security, or secured transactions. We welcome candidates whose approaches in research will add to the scope and depth of our faculty scholarship.

Candidates should have an excellent academic background, demonstrated potential to be a productive scholar, a strong commitment to the practice of inclusion, and a strong commitment to becoming an engaged classroom teacher. Candidates must have a J.D. degree from an ABA accredited law school and be licensed to practice law in one of the states or the District of Columbia.

Oklahoma City University School of Law is located in downtown Oklahoma City and is deeply engaged with the legal, business, and governmental communities. Oklahoma City has been named “American’s Most Livable Community” and is consistently ranked among the most affordable and prosperous cities, among the top cities for entrepreneurs and small businesses, and among the best-run large cities.…

In 2013, acclaimed short-story writer George Saunders gave a commencement speech on kindness at Syracuse University. The speech went viral, the transcript landed on The New York Times blog, and the talk later became the basis of a book. 

The entire speech is well worth listening to, but the gist is Saunders saying: “What I regret most in my life are failures of kindness.”

Oxford English Dictionary defines “kindness” as “the quality of being friendly, generous, and considerate.”

When I think of the profession of law, “kindness,” “friendly,” “generous,” and “considerate” are sadly not among the first words that come to mind. “Analytical,” “bold,” “competitive,” “critical,” and “justice” were the first five words I would use to describe our field. 

As C.S. Lewis reportedly said, “love is something more stern and splendid than mere kindness,” but I am not sure love is ever less than kindness. There may be ways, as negotiation theory teaches us, to “be soft on the person, but hard on the problem.” We can tackle injustice with vigor, but be mindful of the people across the tables from us. 

Pre-pandemic, I put a real premium on “tough love” and preparing students for the …

In 2011, Peter Schweizer published a book, Throw Them All Out, in which he exposed some questionable means by which (according to one study) politicians manage to increase their personal wealth 50% faster than the average American.

According to Schweizer, trading on material nonpublic information appears to be a popular method among congresspersons for achieving outsized returns on their investments. He cites one study finding:

  • The average American investor underperforms the market.
  • The average corporate insider, trading his own company’s stock, beats the market by 7% a year.
  • The average senator beats the market by 12% a year.

Schweitzer’s book was followed by a feature story on the CBS News show, 60 Minutes, highlighting some dubious stock trades by leaders of both political parties. These stories got the public’s attention and spurred Congress to act—adopting the Stop Trading on Congressional Knowledge (STOCK) Act in April of 2012.

The STOCK Act made explicit what many already understood as implicit—that congressional trading based on material nonpublic information acquired by virtue of their position as a public servant was a breach of their fiduciary duties and would therefore violate Section 10b of the Securities Exchange Act of 1934. The Act…

On January 25, 2022,  Fulton Superior Court Judge Belinda Edwards issued an order vacating a FINRA arbitration award and finding, among other things that “Wells Fargo and its counsel manipulated the arbitrator selection process.”   Yesterday, the Public Investors Advocate Bar Association (PIABA) issued a statement calling for a Congressional investigation into whether FINRA’s arbitration forum tilts the scales in favor of industry firms by manipulating the arbitrator selection process. The Wall Street Journal has already started covering the fracas.  What happened here? 

This story starts in the standard fashion.  Wells Fargo managed the claimants accounts and allegedly over-concentrated their accounts into single stocks and industries.  When the claimants suffered some losses and complained, Wells Fargo assigned a different broker to their account.  The claimants became increasingly dissatisfied with Wells Fargo’s management of their accounts and eventually brought an arbitration claim in the FINRA forum because their Wells Fargo account opening agreement contains a pre-dispute arbitration agreement.  All perfectly normal.   

Things soon became more interesting.  Wells Fargo hired Terry Weiss as outside counsel to defend it.  The arbitration proceeded in the normal course.  FINRA circulates lists of potential arbitrators for the parties to rank and potentially strike before FINRA assigns…

Dear BLPB Readers,

I hadn’t heard about the FDIC and FinCEN Tech Sprint until today and wanted to help spread the word!  The registration period closes on February 15 at 5p.m. ET, so don’t delay if you’re interested!  A short summary paragraph of the program is below and more information can be found here.

“The Federal Deposit Insurance Corporation (FDIC) and the Financial Crimes Enforcement Network (FinCEN) today announced a Tech Sprint to develop solutions for financial institutions and regulators to help measure the effectiveness of digital identity proofing- the process used to collect, validate, and verify information about a person.  Read more about FDIC and FinCEN’s Tech Sprint, Measuring the Effectiveness of Digital Identity Proofing for Digital Financial Services.”