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Haskell Murray

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Professor Murray teaches business law, business ethics, and alternative dispute resolution courses to undergraduate and graduate students. Currently, his research focuses on corporate governance, mergers & acquisitions, sports law, and social entrepreneurship law issues.

Professor Murray is the 2018-19 President of the Southeastern Academy of Legal Studies in Business (“SEALSB”) and is a co-editor of the Business Law Professor Blog. His articles have been published in a variety of journals, including the American Business Law Journal, the Delaware Journal of Corporate Law, the Harvard Business Law Review, and the Maryland Law Review. Read More

California is the back on my short list for the state’s inability to successfully differentiate between corporations and limited liability companies (LLCs).  Last week, an “unpublished/noncitable” decision that was published on Westlaw provided a good example.

The opinion states: 

A corporation—including a limited liability corporation—may be served by effecting service on its agent for service of process. (Code Civ. Proc., § 416.10, subd. (a); see also Corp.Code, § 17701.16, subd. (a) [allowing service on limited liability corporations under Code Civ. Proc., § 413.10 et seq.].)7
*12 One of the ways a limited liability corporation can be served is by substituted service. (1 Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2015) ¶ 4:172, p. 4–26.) This requires that a copy of the summons and complaint be left at the office of the person to be served (or, in some cases, at the mailing address of the person to be served), in the presence of a person who is apparently in charge, “and by thereafter mailing a copy of the summons and complaint by first-class mail, postage prepaid to the person to be served at the place where a copy of the

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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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In follow up to my post yesterday, my trusted and valued co-blogger Joan Heminway asked a good question (as usual) based one of my comments.  My response became long enough that I thought it warranted a follow-up post (and it needed formatting).  Joan commented: 

you say: “there should be no problem if, for example, Delaware corporate law did not allow a for-profit entity to exercise religion for the sole sake of religion. I think that is the case right now: that’s not a proper corporate purpose under my read of existing law.” Are you implying that a corporate purpose of that kind for a for-profit corporation organized in Delaware would be unlawful? Can you explain?

My response: I am suggesting exactly that, though I concede one might need a complaining shareholder first. My read of eBay, and Chief Justice Strine’s musing on the subject, suggest that an entity that is run for purposes of religion (not shareholder wealth maximization) first and foremost, is an improper use of the Delaware corporate form. (“I simply indicate that the corporate law requires directors, as a matter of their duty of loyalty, to pursue a good faith strategy to maximize profits for…

A recent Vanity Fair article discussing Citizens United is making the rounds. (I saw it on Facebook!)  The article notes:  

It had already been established, in Buckley v. Valeo (1976), that anyone has a First Amendment right to spend his or her own money advancing his or her own cause, including a candidacy for political office. Citizens United extended this right to legally created “persons” such as corporations and unions.

I have been giving some more thought to whole “personhood” discussion of late, and my thoughts have taken me back to both Hobby Lobby and Citizens United. What follows is a long blog post that pulls together my thoughts on these two cases in an admittedly not well developed way.  But it’s a start (though I really should be grading).  

Beer is good.  It’s an opinion based on serious research.  A lot of beer laws are not good.  They often restrict beer distribution, limits sales, and generally make it harder for us to access good beverages.  

There have been some benefits of these restrictions.  The main one, probably, is that it provided the storyline for Smokey and The Bandit: 

Big Enos (Pat McCormick) wants to drink Coors at a truck show, but in 1977 it was illegal to sell Coors east of the Mississippi River without a permit. Truck driver Bo “Bandit” Darville (Burt Reynolds) agrees to pick up the beer in Texas and drive it to Georgia within 28 hours. When Bo picks up hitchhiker Carrie (Sally Field), he attracts the attention of Sheriff Buford T. Justice (Jackie Gleason). Angry that Carrie will not marry his son, Justice embarks on a high-speed chase after Bandit.

(Note that IMDB’s description — “The Bandit is hired on to run a tractor trailer full of beer over county lines in hot pursuit by a pesky sheriff.” — seems to have confused the film with the Dukes of Hazzard.  Crossing state, not county, lines was the issue and Rosco P. Coltrane was not part of the Bandit films.  I digress.)  

In my home state of West Virginia, getting craft beer, until 2009, was hard. Beer with more than 6% ABV could not be sold in the state. All beer in the state is “non-intoxicating beer” but the definition was raised from 6% so that it now includes (and allows) all malt-based beverages between 0.5% and 12% ABV.  

A recent Illinois case uniquely applied the alter ego doctrine in the context of a criminal case.  See People v. Abrams, 47 N.E.3d 295, ¶¶ 57-61, 399 Ill. Dec. 790 (2015) ( slip op. PDF here ).  In my view, not quite right, either.

In the case, the defendant (Abrams) stole $1.87 million from the victim (Lev), which led to a restitution order for that amount and a twelve-year prison sentence for Abrams.  The conviction was for a Class 1 felony, for the the theft of property exceeding $500,000.  Id.¶ 23 (citing 720 Ill. Comp. Stat. Ann. 5/16-1(a(2) (West 2012)).  The statute provides, “Theft of property exceeding $500,000 and not exceeding $1,000,000 in value is a Class 1 non-probationable felony.” 720 Ill. Comp. Stat. Ann. 5/16-1(b)(6.2). 

On appeal, the defendant argued the indictment was wrong in that it stated the money was stolen from Lev, when most of the money actually belonged to Lev’s company, The Fred Lev Company (presumably a corporation, but that is not stated expressly).   Abrams claimed: 

the State did not prove he obtained “unauthorized control” of more than $500,000 of Lev’s property. Abrams recognizes the evidence presented at trial established that over $1.8 million was taken. Abrams contests the finding that

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Short post today:  I spent Business Organizations today whining that Benefit Corporations dilute the business judgment rule for regular corporations.  I do this, in part, because I hate it, but I also do it because students can see (I think) how the concept of the business judgment rule works in practice. 

I left class to find that Coca-Cola is providing paid leave for new fathers, not just new mothers.  I fully support this, and think it is both wise and moral.  The report notes: 

Coke said one motivation is to help it recruit and retain millennials.

This makes total sense to me. And I think it good business.  But I still hope the reason to say this is that it is (in the Board’s judgment) good business, and not because the board thinks they otherwise need to justify such a decision. 

AP reported yesterday:

NEW ORLEANS (AP) — A federal judge in New Orleans granted final approval Monday to an estimated $20 billion settlement over the 2010 BP oil spill in the Gulf of Mexico, resolving years of litigation over the worst offshore spill in the nation’s history.

The settlement, first announced in July, includes $5.5 billion in civil Clean Water Act penalties and billions more to cover environmental damage and other claims by the five Gulf states and local governments. The money is to be paid out over roughly 16 years. The U.S. Justice Department has estimated that the settlement will cost the oil giant as much as $20.8 billion, the largest environmental settlement in U.S. history as well as the largest-ever civil settlement with a single entity.

The settlement with the government (private claims remain) reminds me of a post I made almost six years ago, where I argued that it was not the federal government’s job to avoid the harm of such an oil spill, and it was neither advisable nor reasonable to expect that the government could handle such an event.  I explained my thinking: 

Just imagine what would have happened six months [before the oil

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Wyoming has added two new sections to its Code Section 17-29-304, which is related to veil piercing of a Wyoming LLC.  The additions are a response of a court decision from last year, Green Hunter Energy, Inc. v. Western Ecosystems Technology, Inc., No. S-14-0036, 2014 WL 5794332 (Wyoming Nov. 7, 2014), which is summarized nicely here. The first added section provides:
(c) for purposes of imposing liability on any member or manager of a limited liability company for the debts, obligations or other liabilities of the company, a court shall consider only the following factors no one (1) of which, except fraud, is sufficient to impose liability:
 
(i)         Fraud;
(ii)        Inadequate capitalization;
(iii)       Failure to observe company formalities as required by law; and
(iv)       Intermingling of assets, business operations and finances of the company and the members to such an extent that there is no distinction between them. 
Although some might view this as a significant change to the veil piercing of a Wyoming LLC, this largely confirms and clarifies the law prior to GreenHunter.  The rule from that case was set forth as follows: 
The veil of a limited liability company may be pierced under

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March has provided a slate of mistakes as to entity form, focusing (as it almost always does) on limited liability companies (LLCs) and various outlets calling such entities “corporations.”  These are not in any particular order, but lists are neat. Enjoy! 

(1 ) Politifact Checks Trump Facts, Forgets to Check Entity Law Facts

In an article on Politifact.com, Donald Trump incorrectly says Virginia winery is the largest on East Coast, which determines that Trump’s claims about the size of a winery that his son runs to be false and notes some statements are incorrect. Ironically, the article also claims: 

A legal disclaimer on the winery website says the GOP presidential candidate doesn’t own the winery. The venture is a limited liability corporation, and its owners are not a matter of public record.

Wrong. The winery site says, “Trump Winery is a registered trade name of Eric Trump Wine Manufacturing LLC, which is not owned, managed or affiliated with Donald J. Trump, The Trump Organization or any of their affiliates.”  An LLC is still not a corporation. 

(2) Big Bang Theory: Big Brains Don’t Know Entity Law

I don’t watch the Big Bang Theory, but my colleague at Valparaiso University, Professor Rebecca J. Huss, is a reader…