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Joan Heminway

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Professor Heminway brought nearly 15 years of corporate practice experience to the University of Tennessee College of Law when she joined the faculty in 2000. She practiced transactional business law (working in the areas of public offerings, private placements, mergers, acquisitions, dispositions, and restructurings) in the Boston office of Skadden, Arps, Slate, Meagher & Flom LLP from 1985 through 2000.

She has served as an expert witness and consultant on business entity and finance and federal and state securities law matters and is a frequent academic and continuing legal education presenter on business law issues. Professor Heminway also has represented pro bono clients on political asylum applications, landlord/tenant appeals, social security/disability cases, and not-for-profit incorporations and related business law issues. Read More

Last week, I looked lovingly at a picture of a Starbucks old-fashioned grilled cheese sandwich. It had 580 calories. I thought about getting the sandwich and then reconsidered and made another more “virtuous” choice. These calorie disclosures, while annoying, are effective for people like me. I see the disclosure, make a choice (sometimes the “wrong” one), and move on.

Regular readers of this blog know that I spend a lot of time thinking about human rights from a corporate governance perspective. I thought about that uneaten sandwich as I consulted with a client last week about the California Transparency in Supply Chains Act. The law went into effect in 2012 and requires retailers, sellers, and manufacturers that exceed $100 million in global revenue that do business in California to publicly disclose the degree to which they verify, audit, and certify their direct suppliers as it relates to human trafficking and slavery. Companies must also disclose whether or not they maintain internal accountability standards, and provide training on the issue in their direct supply chains. The disclosure must appear prominently on a company’s website, but apparently many companies, undeterred by the threat of injunctive action by the state Attorney…

I currently teach two classes that are on the bar exam—civil procedure and business associations. Many of my BA students are terrified of numbers and don’t know much about business and therefore likely would not take the course if it were not required. I know this because they admit that they take certain classes only because they are required or because they will be tested on the bar, and not because they genuinely have an interest in learning the subject. I went to Harvard for law school and although I had an outstanding education, I learned almost nothing that helped me for the NY, NJ, or FL bars (hopefully that has changed). I owe all of my bar passages to bar review courses so naturally (naively?), I think that almost any student can learn everything they need to know for the bar in a few short months assuming that they had some basic foundation in law school and have good study habits.

The pressure to ensure that my students pass the bar exam definitely informs the way I teach. Though there has only been one round of civil procedure testing on the multistate, this semester I found myself ensuring that…

I’ve been thinking a lot about whistleblowers lately. I serve as a “management” representative to the Department of Labor Whistleblower Protection Advisory Committee and last week we presented the DOL with our recommendations for best practices for employers. We are charged with looking at almost two dozen whistleblower laws. I’ve previously blogged about whistleblower issues here.

Although we spend the bulk of our time on the WPAC discussing the very serious obstacles for those workers who want to report safety violations, at the last meeting we also discussed, among other things, the fact that I and others believed that there could be a rise in SOX claims from attorneys and auditors following the 2014 Lawson decision. In that case, the Supreme Court observed that: “Congress plainly recognized that outside professionals — accountants, law firms, contractors, agents, and the like — were complicit in, if not integral to, the shareholder fraud and subsequent cover-up [Enron] officers … perpetrated.” Thus, the Court ruled, those, including private contractors, who see the wrongdoing but may be too fearful of retaliation to report it should be entitled to SOX whistleblower protection.

We also discussed the SEC’s April KBR decision, which is causing hundreds…

OK.  So, Tennessee is not Delaware.  But the Tennessee legislature and Supreme Court have been busy bees this spring on business law matters.   Here’s the brief report.

In the last week of the legislative term, the Tennessee Senate and House adopted the For-Profit Benefit Corporation Act, about which I earlier blogged here, here, and here.  Although I remain skeptical of the legislation, it looks like the governor will sign the bill.  So, we will have benefit corporations in Tennessee.  We’ll see where things go from there . . . .

The Tennessee legislature also passed a technical corrections bill for the Tennessee Business Corporation Act.  The bill was drafted by the Tennessee Bar Association’s Business Entity Study Committee (on which I serve and to which I have referred in the past), a joint project of the Tennessee Bar Association’s Business Law Section and Tax Law Section.  The governor has already signed this bill into law.

Separately, in a bit of a stealth move (!), the Tennessee Supreme Court recently announced the establishment of a business court, an institution many other jurisdictions already have.  The court is being introduced as a pilot project in Davidson County (where Nashville resides)–but only, as I understand it, to iron the kinks out before introducing the court on a permanent basis.  Interestingly, the Tennessee Bar Association Business Law Section Executive Council was not informed about the new court project until its public announcement in the middle of March.  Although we found that a bit odd, the “radio silence” is apparently attributable to the excitement of the Tennessee Supreme Court to get the project started effective as of May 1 and the deemed lack of need for a study on the subject before proceeding.  Regardless, I think it’s safe to say that the bar welcomes the introduction of a court that specializes in business law cases as a matter of principle.  Again, we’ll see where it goes from here.

A few reflections on all this follow.

Regular readers know that I have blogged repeatedly about my opposition to the US Dodd-Frank conflict minerals rule, which aims to stop the flow of funds to rebels in the Democratic Republic of Congo. Briefly, the US law does not prohibit the use of conflict minerals, but instead requires certain companies to obtain an independent private sector third-party audit of reports of the facilities used to process the conflict minerals; conduct a reasonable country of origin inquiry; and describe the steps the company used to mitigate the risk, in order to improve its due diligence process. The business world and SEC are awaiting a First Amendment ruling from the DC Circuit Court of Appeals on the “name and shame” portion of the law, which requires companies to indicate whether their products are DRC Conflict Free.” I have argued that it is a well-intentioned but likely ineffective corporate governance disclosure that depends on consumers to pressure corporations to change their behavior.

The proposed EU regulation establishes a voluntary process through which importers of certain minerals into the EU self-certify that they do not contribute to financing in “conflict-affected” or “high risk areas.” Unlike Dodd-Frank, it is not limited to Congo.

“Laws, like sausages, cease to inspire respect in proportion as we know how they are made.” — John Godfrey Saxe

This is a brief legislative update on the progress of Tennessee’s current bills, introduced in the house (HB0767–amendment not yet filed) and senate (SB0972), to institute the benefit corporation as a distinct for-profit business corporation in the State of Tennessee.  The links provided are to the current versions of the bill, which reflect a significant amendment, as described below.

As you may know from my prior posts (including here and here), I am a benefit corporation skeptic.  Please read those posts for details.  And within the Tennessee Bar Association (TBA) Business Law Section Executive Council and Business Entity Study Committee (our state bar committee that vets changes to Tennessee business associations and other business laws), I am not alone.  We have rejected bills of this kind several times over the past few years when the matter has been put to us for review by the TBA.  This year was no different.  We opposed the benefit corporation bills that were introduced in Tennessee this year, too.

What was different this time around, was that the folks at B Lab had gotten the attention of the Chamber of Commerce and Industry in Tennessee, who appear(ed) to have some misunderstandings about the current state of Tennessee corporate governance law and came to push for adoption of the bill in committee in both houses of the legislature. Given that we were late to the party and that the members of our TBA Council and Committee are very busy lawyers, our efforts to re-educate members of the relevant committees were not as effective as we would have liked.  But we ultimately were afforded two weeks to attempt to write an amended bill–one that better reflected Tennessee law and norms.

Now, any of you who have worked on a project like this before know that two weeks is not enough time to do a professionally responsible job in spotting and tracking down all of the issues that the introduction of a new business form routinely and naturally raises.  Heck.  We couldn’t even get all the constituents around the table that we would want around the table to debate and review the legislation in two weeks!  [It seems hardest to find a plaintiff’s bar lawyer to sit in with us, but we found a great one for our recent work on the Tennessee Business Corporation Act (TBCA).]  Our requests for more time to work on the proposed legislation were, however, rejected.

So, we set out to make a better sausage . . . .

It’s that time of year again where I have my business associations students pretend to be shareholders and draft proposals. I blogged about this topic last semester here. Most of this semester’s proposals related to environmental, social and governance factors. In the real world, a record 433 ESG proposals have been filed this year, and the breakdown as of mid-February was as follows according to As You Sow:

Environment/Climate Change- 27%

Political Activity- 26%

Human Rights/Labor-15%

Sustainability-12%

Diversity-9%

Animals-2%

Summaries of some of the student proposals are below (my apologies if my truncated descriptions make their proposals less clear): 

1) Netflix-follow the UN Guiding Principles on Business and Human Rights and the core standards of the International Labour Organization

2) Luxottica- separate Chair and CEO

3) DineEquity- issue quarterly reports on efforts to combat childhood obesity and the links to financial risks to the company

4) Starbucks- provide additional disclosure of risks related to declines in consumer spending and decreases in wages

5) Chipotle- issue executive compensation/pay disparity report

6) Citrix Systems-add board diversity

7) Dunkin Donuts- eliminate the use of Styrofoam cups

8) Campbell Soup- issue sustainability report

9) Shake Shack- issue sustainability report

10) Starbucks- separate…

In connection with the current legislative debate on benefit corporations in Tennessee (which has been gathering momentum since I last wrote on the topic), I have repeatedly asked about the impetus for the bill.  Of course, there is the obvious “push” for benefit corporation legislation by the B Lab folks, who have gotten the ear of folks at the Chamber, convincing them that the legislation is needed in Tennessee to protect social enterprise entities from the application of a narrow version of the shareholder wealth maximization norm (a conclusion that I dispute in my earlier post).  But what else?  What real parties in interest in Tennessee, if any, have expressed a desire that Tennessee adopt this form of business entity?

There is anecdotal information from one venture attorney that some Tennessee entrepreneurs have indicated a preference for the benefit corporation form and have specifically requested that their business be organized as a Delaware benefit corporation.  Leaving aside the Delaware versus Tennessee question, why are these entrepreneurs looking to organize their businesses as benefit corporations?  Where does this idea come from?

Earlier this week I went to a really useful workshop conducted by the Venture Law Project and David Salmon entitled “Key Legal Docs Every Entrepreneur Needs.” I decided to attend because I wanted to make sure that I’m on target with what I am teaching in Business Associations, and because I am on the pro bono list to assist small businesses. I am sure that the entrepreneurs learned quite a bit because I surely did, especially from the questions that the audience members asked. My best moment, though was when a speaker asked who knew the term “right of first refusal” and the only two people who raised their hands were yours truly and my former law student, who turned to me and gave me the thumbs up.

Their list of the “key” documents is below:

1)   Operating Agreement (for an LLC)– the checklist included identity, economics, capital structure, management, transfer restrictions, consent for approval of amendments, and miscellaneous.

2)   NDA– Salmon advised that asking for an NDA was often considered a “rookie mistake” and that venture capitalists will often refuse to sign them. I have heard this from a number of legal advisors over the past few…

Today, part of the assignment for my Securities Regulation students was to read a chapter in our casebook and, as assigned by me, come to class prepared to teach in  a three-to-five-minute segment a part of the assigned reading.  The casebook is Securities Regulation: Cases and Materials by Jim Cox, Bob Hillman, and Don Langevoort.  The chapter (Chapter 7, entitled “Recapitalization, Reorganizations, and Acquisitions”) covers the way in which various typical corporate finance transactions are, are not, or may be offers or sales of securities that trigger registration under Section 5 of the Securities Act of 1933, as amended (the “1933 Act”).  I have used this technique for teaching this material before (and also use a student teaching method for part of my Corporate Finance course), and I really enjoy the class each time.

I find that the students understand the assigned material well (having already been through a lot of registration and exemption material in the preceding weeks) and embrace the responsibility of teaching me and each other.  I am convinced that they learn the material better and are more engaged with it because they have had to read it with a different intent driven by a distinct…