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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

Last Friday, a new opinion from the United States Court of Appeals for the First Circuit tackled a complex application of the Employee Retirement Income Security Act of 1974 (ERISA) law that required an analysis of “federal partnership law,” which assessed whether two entities had created a “partnership-in-fact, as a matter of federal common law.”  Sun Capital Partners III, LP v. New England Teamsters & Trucking Indus. Pension Fund, No. 16-1376, 2019 WL 6243370, at *5 (1st Cir. Nov. 22, 2019). I hate the idea of “federal partnership law,” but I concede it is a thing for determining certain responsibilities under the tax code and ERISA. I still maintain that rather than discussing federal entity law and entity type in these cases, we should instead be discussing liability under certain code sections as they apply to the relevant persons and/or entities.  Nonetheless, that’s not the state of the law.

Even though I don’t like the concept of federal partnership law, I can work with it. As such, I think it is fair to ask courts to respect entity types if they are going to insist on using entity types to determine liability. Alas, this is too…

It’s been a minute since I took some time to look at whether courts are still treating LLCs as corporations.  Spoiler alert: They are.  Last week, the Southern District of Florida gave a shining example:

Defendants argue that Vista, a limited liability corporation, is a citizen of any state of which a member of the company is a citizen for diversity purposes. Because the January 26, 2018 written agreement (“Agreement”) granted the PJM Defendants a 10% ownership interest in Vista, Defendants maintain that Vista is a Florida citizen by virtue of the PJM Defendants’ Florida citizenship, thereby destroying complete diversity. . . .

Plaintiffs contend that Vista is a California corporation and complete diversity exists. In support, Plaintiffs proffer Vista’s California LLC records which show that Armen Temurian is the entity’s only member. Defendants argue that these records are self-serving, and that the plain language of the Agreement contradicts these records and establishes the PJM Defendants’ ownership in Vista.  . . .

The Agreement expressly recognizes that the PJM Defendants have obtained a 10% ownership of all Vista current and future direct and indirect entities, which contradicts Plaintiffs’ proffered California LLC records on their face. . . . Because Vista is a

…

I have a new(ish) essay that focuses on the concept of eliminating the fiduciary duty in an LLC, as permitted by Delaware law, and what that could mean for future parties. The paper can be found here (new link). When parties A and B get together to create an LLC, if they negotiate to eliminate their fiduciary agreements as to one another, I’m completely comfortable with that. They are negotiating for what they want; they are entering into that entity and operating agreement together of their own free will. So there may be differences in bargaining power—one may be wealthier than the other or have different kinds of power dynamics—but they are entering into this agreement fully aware of what the obligations are and what the options are for somebody in creating this entity.

My concern with eliminating fiduciary obligations comes down the road. That is, how do we make sure that if people are going to disclaim the fiduciary duty of loyalty, particularly, what happens if this change is made after formation? In such a case, I like to look at our traditional partnership law, which says there are certain kinds of decisions, at least absent an agreement to…

The PIABA Foundation just released a study examining the results of FINRA’s expungment processes.   FINRA’s expungement rules and dispute resolution process allow brokers to obtain arbitration awards recommending the removal of customer complaints and other information from their regulatory records.  The brokers can then take the awards to court and have them confirmed.  A state court order confirming the award results in the removal of unflattering information from the CRD database. 

As this happens more and more, you should trust FINRA’s BrokerCheck system less and less. In theory, BrokerCheck should allow the public to do meaningful due diligence on brokers by looking them up to see if customers have complained. Sadly, many of the complaints customers and state regulators need to evaluate brokers have been washed away through the expungement process. The PIABA Foundation study found that expungment rates have increased dramatically in recent years.  Brokers sought to expurgate 102 complaints in 2015.  The number rose to 300 in 2016 and rose again to 756 in 2017.  Last year, brokers sought to suppress 1,036 complaints. These requests are generally successful and brokers succeed in these efforts over 80% of the time.

I’ve written about how to see if complaints…

Texas Senator Phil Gramm and his former aide-de-camp recently took to the Wall Street Journal’s opinion page to attack Senator Warren’s plan for accountable capitalism.  At base, her plan offers governance reforms that only the federal government may be able to deliver.  The reforms may increase the odds that corporations will behave responsibly in our society and limit the risk that they will use their enormous capital and clout to manipulate our political system for their own ends.

Senator Warren’s plan sounds similar to rhetoric coming from business leaders.  The Business Roundtable recently released its view on the purpose of a corporation.  These leading executives declared a shared, fundamental commitment to balancing important stakeholder interests.  Page after page of CEO signatories agree that corporations should deliver value to customers, invest in employees by providing fair compensation and benefits, deal fairly and ethically with suppliers, support communities, respect the environment, and generate long-term value for shareholders. 

Warren’s legislation offers a plan for putting the Business Roundtable’s vision into practice.  The Accountable Capitalism Act calls for federal charters for America’s largest corporations. It would allow employees to vote for a minority of corporate directors and require a supermajority of directors to…

Wrapping up the Mass Tort Deals series, we have suggestions for possible reforms.  (If you want links to the prior reviews, the Mass Torts Litigation Blog has a consolidated list here.)

Burch recognizes that getting real reforms here will be a challenge and that we are not likely to simply scrap the existing structure and start with something new for these cases.  In light of that, she focuses on empowering current and potential stakeholders who will have appropriate incentives to improve how the system functions.

Let’s start with financiers.  Burch’s scholarship has suggested empowering financiers to serve as monitors in this kind of litigation.  She continues that thread here and proposes a system where “plaintiffs could assign a financier a stake in their lawsuit as the contingent fee does now.  In exchange the financier funds the suit on a nonrecourse basis and pays attorneys a billable-hour rate plus some small percentage of the recovery as a bonus.”  In my view, this seems likely to generate much more effective and sophisticated oversight of attorney conduct.  A financier without in-house expertise in the area could simply hire sophisticated counsel to oversee the litigation.  Corporate defendants do this all the time and…

Chapter 5 in Elizabeth Chamblee Burch’s Mass Tort Deals brings together so many things.  It’s got arbitration, securities filings, banks, conflicts of interest, and so much more. (You can see some of the prior posts on this here.)

Let’s start with arbitration.  Burch gets the reality that arbitration contracts today are essentially imposed on the public by more powerful businesses.  She’s also correct that these agreements essentially cause the law to slowly, wither and lose its influence.  I’ve written about this and compared it to a dark shadow.  As arbitration supplants judicial resolution, industries insulate themselves from the threat of negative court rulings.  This procedural structure may allow bad practices to go on for far longer than they would have if courts actually decided cases.  It may also perpetuate injustices within arbitration forums.  Defendants may even argue that a claim should be denied because no precedent supports it.  Yet the precedent cannot come into existence if an industry has entrenched itself with arbitration provisions.  The lack of any precedent for relief should not doom claims in instances where courts can only rarely rule.

Mass tort settlement deals essentially shunt victims into a private dispute resolution world full of…

The fourth chapter in Mass Torts Deals tackles the role judges play in coercing facilitating mass torts settlements.  (You can find more chapter writeups here.)

In many instances, it seems as though lawyers manage to rope judges into using procedural mechanisms and their trusted status as authority figures to push plaintiffs into settlements.  The big danger seems to be that because we do not have clean, well-established procedural rules specifically for multi-district litigation proceedings, judges simply do whatever they want, often using coercive powers without any real safeguards.

In one case, Judge Susan Wigenton seemed to take a very heavy hand with objectors to a medical device settlement.  She ordered plaintiffs to “enter into a private settlement program that entailed at least 18 months of mediation unless they settled sooner.”  At the same time, she stayed the multi-district proceeding, shutting off access to discovery.  Plaintiffs were forced to participate in the program or face dismissal.

In response, many plaintiffs objected.  Lawyers advocating for the settlement contended that Judge Wigenton had “inherent authority” to manage her docket and that the authority allowed her “to send an elderly plaintiff population into a private settlement program without their consent.”  In response to…

Chapter three in Mass Tort Deals by Elizabeth Chamblee Burch tackles repeat player dynamics in aggregate litigation.  If you’re interested in earlier posts on it, they’re available here and here.  

My biggest takeaway is that for the attorneys in this space, if they want to be in the room where it all goes down, they’ve got to bro down socialize and remain well-thought of by their well-connected colleagues. A lawyer’s ability to make a living in the space and generate results for clients seems to depend on relationships with other key players. So much depends on being well-connected:

  • the ability to get a leadership appointment;
  • the ability to get some of the work flow;
  • the ability to get a decent fee allocation;
  • the ability to get a settlement favoring your “inventory” of clients; and
  • the ability to get other attorneys to back any play you make.

Functionally, this means that attorneys face intense incentives to get along with other attorneys in the space.  This probably does not produce solid strategic behavior because attorneys may be more likely to simply agree with well-connected leaders than to press for things that might rock the boat a bit but generate better outcomes…

Continuing to work my way through Mass Tort Deals by Elizabeth Chamblee Burch.  If you’re interested in the earlier post on it–it’s available here.  

The chapter is titled “Quid Pro Quo Arrangements” for good reason.  I finished the chapter with the sense that attorneys in the space negotiate with defendants to bargain away plaintiff rights in exchange for things the plaintiffs’ attorneys want for themselves and the defense lawyers want for their clients.  As someone who also teaches professional responsibility, I struggled to understand how many practices and agreements could ever be consistent with the ethics rules.

Take the settlement-recommendation provisions.  Lawyers enter into settlement agreements in these cases where they agree that they will recommend to every client in their “inventory” that they accept the settlement.  In many instances, they also put in writing that they will flat out drop clients and withdraw from representation if the clients do not agree to settle.  The ethics rules make whether to take a settlement offer a client decision.  And these “attorney-recommendation” provisions are common.  84% of the settlement agreements in the dataset have them.  53% of the time they also have the withdrawal provisions. 

What do you do if you…