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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

The Delaware Court of Chancery recently denied a motion to dismiss in In re Comverge, Inc. Shareholders Litigation. In this case, the plaintiff claimed bad faith by the board of directors that approved an allegedly unreasonable termination fee in a merger agreement. Transactional attorneys and professors who teach M&A will want to read this case.  

I am deep into grading my business associations exams, so I will outsource to a nice client alert on the case by Steven Haas at Hunton & Williams. A bit of the alert is below, and you can access the entire alert here.

The court then found that the termination fees of 5.55% of equity value (or 5.2% of enterprise value) during the go-shop period and 7% of equity value (or 6.6% enterprise value) after the go-shop period “test the limits of what this Court has found to be within a reasonable range for termination fees.” The court also analyzed the termination fee in connection with the convertible note held by the buyer in connection with the bridge financing. The plaintiff alleged that the conversion feature in the note, which allowed the buyer to purchase common stock at a price below the merger consideration, would

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An early, brief look at some of the social enterprise data I have been collecting with Kate Cooney (Yale School of Management), Justin Koushyar (Emory University, PHD student) and Matthew Lee (INSEAD, Singapore Campus), is up on the Stanford Social Innovation Review (SSIR). 

The charts produced over at SSIR include the number of social enterprise statutes passed per year, total number of L3Cs and benefit corporations formed, and — the most difficult data to track down — the number of social enterprises formed by state.

We are still working to refine the state-by-state data, hope to continue to update it, and may use it for future empirical work. 

I watch a lot of Shark Tank episodes. Like most “reality shows,” Shark Tank is somewhat artificial. The show does not purport to be an accurate portrayal of how entrepreneurs typically raise capital, but I still think the show can be instructive. From time to time, mostly in my undergraduate classes, I show clips from the show that are available online.

Shark Tank
(creative commons image, no attribution requested)

After the break I share some of the lessons I think entrepreneurs (and lawyers advising entrepreneurs) can learn from Shark Tank. After this first list of lessons, I share a second list — things folks should not take from the show. 

The federal government has a limited amount of money available for student financial aid. Many people believe the size of that financial aid pot should be increased. That may be true but, until that happens, the government should try to allocate the limited funds it has as efficiently as possible. So I ask, should the government be giving that money to law students?

I have great respect for my profession. I think lawyers serve an extremely important function. I’m a strong believer in individual liberty and many of our personal liberties have been preserved through the law and the efforts of lawyers. But it’s hard to argue that the most important issue in the United States today is a shortage of lawyers.

We need more scientists, engineers, mathematicians, and primary care physicians. So why is the government paying for students to major in fields like political science, sociology, and law, just to name a few? Wouldn’t we be better off allocating more money to math and the hard sciences, to give students an incentive to move into those areas? (Or, since many students aren’t prepared to move into those areas, perhaps some of that money needs to be used to…

Steve Bainbridge at ProfessorBainbridge.com has posted a couple of discussions of fee-shifting bylaws.

As many of you know, last spring, in the ATP Tour case, the Delaware Supreme Court upheld a bylaw requiring the losing party in shareholder litigation to pay the other side’s attorneys’ fees. The case involved a non-stock membership corporation, but there’s no relevant distinction between non-stock corporations and ordinary corporations in either the opinion or the statute. A bill was introduced in the Delaware legislature to amend the statute to overturn the ATP Tour decision, but the legislature deferred any action pending further study.

Professor Bainbridge argues in favor of the ATP Tour result. His first post is here. The second post is here.

Regular readers of this column know that I’m a strong supporter of a federal crowdfunding exemption, which would allow companies to sell securities online to ordinary investors without registration.

The SEC’s Foot-Dragging

The JOBS Act, passed in April 2012, included a crowdfunding exemption, but, 956 days later, the SEC still has not adopted rules to implement it. Last month, I complained about the SEC’s failure to adopt those rules. Now, I’m not so sure I want that to happen.

 A Little Legislative History

Why have I changed my mind? First, a little legislative history. The House originally passed a crowdfunding bill, sponsored by Representative Patrick McHenry, that was much less regulatory than the final law. Unfortunately, the Senate amended the JOBS Act to substitute the version that was eventually enacted into law. That final version is much more regulatory than Congressman McHenry’s version, and is riddled with errors and ambiguities. The House accepted that Senate substitution, probably because fighting would have risked everything else in the JOBS Act.

As I wrote shortly after the JOBS Act passed, the exemption that came out of the Senate is flawed and unlikely to be effective. If so, it’s not the SEC’s…

In a 2012 article on securities crowdfunding, I warned about the U.S. securities law issues raised by foreign crowdfunding sites selling securities to U.S. investors. I pointed out that “some of those foreign sites also sell to U.S. investors, and some of the investments they sell would almost certainly qualify as securities under U.S. law.”

A recent SEC consent order involving Eureeca Capital shows that the SEC is well aware of the issue and willing to go after foreign sites that sell to U.S. investors.

According to the consent order, Eureeca, based in the Cayman Islands, operates a global crowdfunding platform that connects non-U.S. issuers with investors interested in buying equity securities. Eureeca had a disclaimer on its website that the securities were not being offered to U.S. residents, but it nevertheless allowed U.S. residents to invest in some of the offerings. Eureeca apparently knew these investors were Americans; they provided copies of their passports and proof of U.S. addresses before investing.

The consent order finds that these unregistered sales of securities violated section 5 of the Securities Act and also that Eureeca was acting as an unregistered broker, in violation of section 15 of the Exchange Act. Eureeca…

What’s it like to fight the SEC? For 13 years? The defense attorneys in SEC v. Obus, an insider trading case that the SEC lost last spring, try to answer that question in the latest edition of The Review of Securities & Commodities Regulation. (SEC v. Obus: A Case Study on Taking the Government to Trial and Winning, 47 REV. SEC. & COMMOD. REG. 247 (Nov. 5, 2014). (If the case name is familiar to you, it’s probably because in 2012 the Second Circuit issued an important opinion in the case addressing the misappropriation theory of insider trading.)

The article provides a great insider’s view of the case, including suggestions for attorneys fighting SEC actions. The authors’  criticism of the procedures when Obus was required to testify under oath at the SEC is priceless. Obus was not told whether he was a target of the investigation. He was not allowed to review documents to refresh his recollection. His attorneys were not allowed to object to questions (although they apparently did anyway). They were told not to take notes and they were not allowed to review the transcript for errors. Home court advantage and all that, I guess.…

Note to all legislators and regulators: don’t do anything until you’ve thought through all the consequences.

One of the most important things I learned as a student of public policy was the difference between static and dynamic analysis. Static analysis looks only at the immediate consequences of a change. Dynamic analysis looks at the long-term consequences of a change, taking into account how people will adjust to that change.

If I tell my students they must write a 50-page paper by Friday or fail, most of them will at least try to write the 50-page paper. That’s the static effect. But no one will ever take my Business Associations class again. That’s the dynamic effect.

For some people today, including an increasing number of politicians on both sides of the aisle, neither static nor dynamic effects matter. It’s enough just to have good intentions. “Don’t you care?”, those people ask. “We need to do something.”

Even when policy makers do consider the effects of their policy choices, many of them consider only the immediate effects—static analysis—and don’t think about the long-term consequences. That’s unfortunate, because legislation and regulation often have unintended consequences.

That’s the point of Thomas E. Hall’s new…

Daniel Fisher at Forbes has posted an interesting story about Columbia Law Professor Robert Jackson’s attempt to obtain information about investment advisors from the SEC. The SEC first denied they had the information, then said it would be too burdensome to produce the information. The kicker: an SEC economist has published a study using that very data. Fisher provides copies of Professor Jackson’s persistent FOIA requests and the SEC’s responses.

It’s a fascinating study in bureaucratic favoritism and stubbornness. Not particularly surprising, but fascinating.