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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

Interesting news today that North Dakota may not actually be a proper state.  It seems that the state’s constitution lacks a requirement that the state’s executive officers uphold the U.S. Constitution, thus violating Article VI.  

If the state is not really a state, then would that mean that corporations under “state” law are not really formed either? Would the fictional corporate person suddenly become a fictional, fictional person? Heady stuff.  

Add to this the fact that most of the state is violating North Dakota law by reporting that the flooding in Minot (the western part of the state) is caused by the Souris River, using the French (and Canadian) name, rather than the English (and state-mandated) name, the Mouse River.

Even if most people are getting name of the river that is causing the flooding wrong, the flooding is very, very real. Please help if you can. Here are a couple places:  http://minotfloodshirts.myminto.com/ and http://minotredcross.org/.

–JPF

As the discussion about law reviews and the value (or lack thereof) of student-edited reviews continues, I can’t help but feel like some very thoughtful people are talking past each other. (See, e.g., here, here, and here.) As I mentioned last week, I see both sides of the story, and I often find myself agreeing in part with both camps. I am a former editor in chief (EIC) of the Tulane Law Review, and a law professor, and a law review advisor (the latter two at the University of North Dakota). I mention this because I feel like I have seen all sides of the law review process in a way that is (I think) different from many. 

As I noted before, I don’t think that those who have expressed frustration with law reviews are mean spirited or inherently wrong. They have a point, but I can’t quite get there. I simply think we can do better without scrapping everything. So, to add to the discussion (or further muddy the waters), here are some thoughts and examples from both sides of the experience:

(1) When I took over as EIC, I followed the format…

Whether it’s energy policy or financial policy, “people” want to be protected from bad things.  Things like blackouts, high gas prices, housing bubbles and failed credit markets.  But we also, apparently, want these things to occur cost free.  It’s not clear to me whether “people” are the masses or our representatives in government, but it doesn’t seem to matter. 

Take, for example, discussions about cybersecurity.  One report indicates that at least some in Congress believe our greatest national security threat is to the electric power grid.  In testimony before the House Energy and Commerce Subcommittee, ABC News quotes Rep. Trent Franks, R-Ariz. as saying the following about a national grid cyber attack:  

The sobering reality is this vulnerability, if left unaddressed, could have grave, societal-altering consequences. We face a menace that may represent the gravest short term threat to the peace and security of the human family in the world today.

Wow. That’s a huge deal. And I agree it is a serious threat, even though I wouldn’t go quite that far.  

To address these concerns, one of the legislative proposals is the GRID Act (H.R. 5206), proposed last year. That act:

Amends the Federal Power Act

…

Robert Krulwich, on his NPR blog, writes that that people are “pattern-finding animals.”  He goes on to say:

Do any of us live beyond pattern? Do great musicians, breakthrough artists, great athletes operate pattern free? Pattern indifferent?

I don’t think so. Artists may be, oddly, the most pattern-aware. Case in point: The totally unpredictable, one-of-a-kind novelist Kurt Vonnegut (Slaughterhouse-Five, Cat’s Cradle, God Bless You, Mr. Rosewater) once gave a lecture in which he presented — in graphic form — the basic plots of all the world’s great stories. Every story you’ve ever heard, he said, are reflections of a few, classic story shapes. They are so elementary, he said, he could draw them on an X/Y axis.

The site then has a link (here) to a short excerpt of a talk from Kurt Vonnegut that is worth a look. (I think, anyway, but I am huge Vonnegut fan.) 

What does this have to do with business law?  Well, maybe not that much, but it seems relevant to me in the context of the discussion about the recent, but not new, concerns about law reviews Steve Bradford, Stephen Bainbridge, and others are talking about.  The current…

Lewis Lazarus recently posted Directors Designated By Investors Owe Fiduciary Duties to the Company as a Whole and Not to the Designating Investor at the Delaware Business Litigation Report.  In his article, he explained

[The Delaware] cases teach that directors designated by particular stockholders or investors owe duties generally to the company and all of its stockholders.  Where the interests of the investor and the company and its common stockholders potentially diverge, the directors cannot favor the interests of the investor over those of the company and its common stockholders.

Professor Bainbridge weighs in (here), agreeing that the above is the general rule, but that in some cases that may not be best.  He gives a few examples, such as a struggling company granting a union nominee a board position or a time when preferred shareholders can elect a board majority because no dividends were paid for a sufficient period of time. He then notes that a director’s “sponsor might reasonably expect the directors not just to ‘advocate’ for the shareholder’s position, but to vote for it and take other action.”  Professor Bainbridge concludes that he still doesn’t “think the sponsor should be able to punish…

Chancellor Chandler issued his ruling yesterday upholding the poison pill Airgas, Inc.’s board of directors adopted in response to Air Products and Chemicals, Inc.’s $5.8 billion hostile takeover ($70/share, all cash). Chancellor Chandler determined that the Airgas board of directors “acted in good faith and in the honest belief that the Air Products offer, at $70 per share, is inadequate.”  (PDF of the case here, thanks to Francis G.X. Pileggi.)

One reason this decision bugs me is that I suspect a good number of people who don’t like insider trading restrictions would be supportive of this decision.  To me, it’s the same question:  What does the shareholder want for his or her shares?  Period.  

For some who don’t like insider trading restrictions, they argue that, at least in non-face-to-face insider trading transactions, the sharedholder did not suffer harm. (See, e.g., Henry Manne.) Sharedholders were offered a price they deemed acceptable, and sold.  Who cares who was on the other side of the transaction?  I find parts of this rationale compelling, although I also find the property rights concerns related to insider trading even more compelling. (See, e.g., Professor Bainbridge.)

For me, the anti-insider-trading rationale…

I continue thinking about Chancellor Chandler’s opinion in eBay v. Newmark, and I still find myself troubled by the determination that, by embracing it’s “community service mission,” craigslist was being run improperly as corporate entity (see my prior post here).  To recap, Chancellor Chandler explained that by choosing “a for-profit corporate form, the craigslist directors are bound by the fiduciary duties and standards that accompany that form. Those standards include acting to promote the value of the corporation for the benefit of its stockholders.”

As I mentioned before, in apparent contrast to Chancellor Chandler, I don’t think it necessarily follows that embracing a “community service mission” is inconsistent with “promot[ing] the value of a corporation for the benefit of its stockholders.”  In fact, it may be that the community service mission is the precise reason that stockholders are gaining the benefit.  Take, for example, Ben and Jerry’s Ice Cream. Ben and Jerry’s began as a small start-up looking to expand its business.  Over time, the company began to grow, and along with this growth, embraced environmental causes and created a foundation giving 7.5% of pretax profits for distribution to worthy causes.  (See Ben & Jerry’s History here.)  Of course, the company would…

According to Paul Volcker, the “financial system is broken.”  Furthermore, with regard to limits on the abilities of regulators, he says: “Relying on judgment all the time makes for a very heavy burden whether you are regulating an individual institution or whether you are regulating the whole market.” 

He’s right on that.  If we like markets (and I think we do), then we need to recognize we can’t always regulate (or, for that matter, buy) our way out of some of these messes.  I am now firmly of the mind that we should have a five-year moratorium (minimum) on financial regulation.  This goes both ways — nothing can be repealed and nothing can be added. 

I am of a mixed mind on the new financial regulations, but since they already passed, I say leave them alone and let the market adjust. Similarly, with regard to Sarbanes-Oxley, regardless of whether one likes it, it’s part of the current market, and companies have adjusted to it.  So – leave it all alone. Regulators need to work with what they have, and businesses have to work with what is there.

I happen to think that we have a fairly solid system in place, but there…

When Chancellor Chandler decided eBay v. Newmark (pdf) (aka “the craigslist case”), the case triggered all kinds of discussions, including the implications of poison pills and analogies to Dodge v. Ford. I remain interested in the Dodge v. Ford angle and the role of philanthropic goals of a corporation.

There are some who see the craigslist case as an adoption of the Sen. Al Franken version of a corporation’s obligations to shareholders: “[I]t is literally malfeasance for a corporation not to do everything it legally can to maximize its profits.” Of course, there are others who disagree. The Franken-like argument seems be that Delaware’s Revlon duty (as explained in Time, Inc. – pdf) of requiring the “board to enhance short-term shareholder value” now applies all the time, not just when the board puts the company up for sale. While that makes for good sound bites, and I suppose it is a plausible interpretation, that’s pretty clearly not what Chancellor Chandler meant.

Instead, the Chancellor stated that craigslist’s majority owners “prove[d] that they personally believe craigslist should not be about the business of stockholder wealth maximization, now or in the future.” Thus, he concluded…

At The Conglomerate, Gordon Smith notes some comparisons between Dodge v. Ford (pdf here) and eBay v. Newmark (pdf here). I certainly see the comparison (and I think his post here on the case and Christine Hurt’s earlier post here are great).  Still, I think I am a little more critical of the Dodge v. Ford analogy than Professor Smith. Here’s why:

In Dodge v. Ford, Henry Ford stated clearly that he was operating the business as he saw fit and that he was changing toward supporting philanthropic purposes. As the Dodge v. Ford opinion notes:

‘My ambition,’ declared Mr. Ford, ‘is to employ still more men; to spread the benefits of this industrial system to the greatest possible number, to help them build up their lives and their homes. To do this, we are putting the greatest share of our profits back into the business.”

. . . .

The record, and especially the testimony of Mr. Ford, convinces that he has to some extent the attitude towards shareholders of one who has dispensed and distributed to them large gains and that they should be content to take what he chooses to give. His testimony creates the

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