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Marcia Narine Weldon

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Professor Narine Weldon is the director of the Transactional Skills Program, Faculty Coordinator of the Business Compliance & Sustainability Concentration, Transactional Law Concentration, and a Lecturer in Law.

She earned her law degree, cum laude, from Harvard Law School, and her undergraduate degree, cum laude, in political science and psychology from Columbia University. After graduating, she worked as a law clerk to former Justice Marie Garibaldi of the Supreme Court of New Jersey, a commercial litigator with Cleary, Gottlieb, Steen and Hamilton in New York, an employment lawyer with Morgan, Lewis and Bockius in Miami, and as a Deputy General Counsel, VP of Global Compliance and Business Standards, and Chief Privacy Officer of Ryder, a Fortune 500 Company. In addition to her academic position, she serves as the general counsel of a startup and a nonprofit.  Read More

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I know I am Johnny One Note on this, but while researching another project, I decided to check again if litigators (and courts) are still referring to veil piercing of LLCs as “corporate veil piercing.” As I have noted before, for LLCs, it should be “piercing the LLC veil” or, more generally, “piercing the limited liability veil.”  Or “PLLV,” as I like to call it. (Not as catchy is “PCV,” but it is far more universally accurate.)

Sure enough, last week, a New York court refused to denied the defendants’ motion to dismiss the plaintiff’s third amended complaint, deciding that “Plaintiff has adequately pled facts sufficient to defeat the Individual Defendant’s motion to dismiss Plaintiff’s claim for piercing the corporate veil.” Capital Inv. Funding, LLC v. Lancaster Grp. LLC, No. CIV.A. 8-4714 JLL, 2015 WL 4915464, at *7 (D.N.J. Aug. 18, 2015).  But Plaintiff is seeking to piercing the veil of an LLC.  As such, I think they need a fourth amended complaint.  

Also last week, in an unpublished opinion, a Minnesota court upheld a decision to pierce the limited liability veil of Alpha Law Firm, LLC.  The court found the court below “did not abuse its discretion…

Over at the Kentucky Business Entity law blog, Thomas Rutledge discusses a recent decision from the United States District Court for the Southern District of Indiana, affirming a Bankruptcy Court decision that finding that when a member of an LLC with voting control personally files bankruptcy, that right to control the LLC became a vested in the trustee because the right was part of the bankruptcy estate. The case is In re Lester L. Lee, No. 4-15-cv-00009-RLY-WGH, Adv. Proc. No. 14-59011 (S.D. Ind. August 10, 2015) (PDF here).

A key issue was that the bankruptcy filer (Lester Lee) had 51% of the vote, but no shares. The court then explains:

7.  . . . [t]he Operating Agreement states . . .

(D) Each member shall have the voting power and a share of the Principal and income and profits and losses of the company as follows:

Member’s Name (Share) (Votes)

Debra Jo Brown (20%)  (10)

Brenda R. Lee (40%) (20)

Larry L. Lee (20%) (10)

Melinda Gabbard (20%) (10)

Lester L. Lee (0%) (51)

. . . .

8. . . . Trustee’s counsel became aware of the Debtor’s 51% voting rights as a member, and that pursuant to

…

It is orientation time for West Virginia University College of Law, and I am sure other law schools around the country. If not, it’s coming soon. I always like the buzz of the new students returning to the building, though it is a little bittersweet as the time I had for other projects is clearing nearing the end. All in all, though, I miss the students and the activity, so I’m happy the new year is getting ready to start. 

The combination of excitement and trepidation (if not fear) seems to be what stands our to me the most. It makes sense. Law school is a big undertaking, and it’s not easy.  And it can be hard because it can be challenging both academically and socially.  As my wife has noted, “Law school can be more like high school than high school.”  (I had a distinct advantage in skipping a lot of that because we were married when we started law school.)

To that end, here are my suggestions, based on the promises I made to myself when I left my job and went back to law school. Give it a try (and I welcome additions to the list…

Readers of this blog know I am fond of writing about Henry Ford and the Dodge v. Ford case (PDF here).  This summer, I am still working my way through Fordlandia, by Greg Grandin.  It’s a really interesting read.  

Henry Ford had plans to build a town in the Amazon that would run like an ideal American town.  The industry would be rubber for car tires, and he was sure he could make a town that produced rubber AND moral people.  He was wrong.  

The book provides more about Ford than just his Amazon city planning. It highlights all sorts of what I will call “interesting” ideas Ford had (many of the quite appalling), and it provides context for a person who was far more interesting and disruptive than many people appreciate.  A good summary of the book is available from NPR here, where the author explains:

“Ford basically tried to impose mass industrial production on the diversity of the jungle,” Grandin says. But the Amazon is one of the most complex ecological systems in the world — and didn’t fit into Ford’s plan. “Nowhere was this more obvious and more acute than when it came to rubber

…

A lawyer representing Fordham Law School Professor (and Riverbed Technology shareholder) Sean Griffith argued in Delaware court that a class action settlement related to Riverbed Technology’s  $3.6 billion sale to private equity firm Thoma Bravo was bad for shareholders and good for the lawyers involved, Reuters reports.  

Prof. Griffith told Reuters that “he has been buying stock of companies that have announced merger deals and intends to object to settlements if he feels the litigation is not serving stockholders.” He asserts that the shareholders’ attorneys “are in cahoots” to reach a settlement, without regard to value.  

This raises some interesting questions of law and policy with regard to the Professor’s role here.  As a shareholder, Griffith has the right to object (assuming his time of ownership satisfies the applicable statute).  But how should a court assess the objection of a shareholder who has admitted that he bought stock for the purpose of objecting to settlements not in the interests of shareholders, when that shareholder has expressed ideological concern about the value of all disclosure-only settlements? 

Is Prof. Griffith’s desire to protect shareholders a desire to enhance short- or long-term wealth of the entity from greedy lawyers and bad managers?

The West Virginia Constitution provides for corporations in Article XI, and states the traditional understanding related to liability: 

11-2.  Corporate liability for indebtedness.

      The stockholders of all corporations and joint-stock companies, except banks and banking institutions, created by laws of this state, shall be liable for the indebtedness of such corporations to the amount of their stock subscribed and unpaid, and no more. 

So, suppose that one seeks to pierce the corporate veil.  Does this provision allow for that? Typically, common law allowed veil piercing and constitutions often provide that something that existed in common law remains (which appears to be the case here).  I guess, then, veil piercing is okay, though I think one could argue that a constitutional basis for limited liability should be stronger than a statutory one. 

The better argument, I think, is that veil piercing disregards the entity.  Thus, the constitutional protection does not connect, because there is no corporation.  If we thought of things this way, we’d probably be more reluctant to veil pierce, because it would be a judicial statement that the corporation that was purportedly formed does not exist because of the failures of those in charge of the entity.

Where the…

A while back, I wrote about CVS’s choice to eliminate tobacco products from its stores.  I noted that it seemed clear to me that CVS could make that choice, even thought it would mean lower short-term profits, because it was a decision that is clearly protected (or should be) by the business judgment rule. 

Today, according to an LA Times piece, 

[CVS] stood up for its principles.

The pharmacy giant announced it was quitting the U.S. Chamber of Commerce after reports that the influential business organization was lobbying against anti-smoking laws around the world.

CVS bolted because of the Chamber’s views on tobacco sales.  In 2009, Apple and Nike made waves with the Chamber of its policy position on climate change. I find this interesting, and I have no reason to doubt that all of these companies are following their corporate values, though I also think they see public relations value in the noisy withdrawal.  

That some big companies have stepped away from the Chamber is less surprising to me than the fact that the Chamber has maintained such strength with small business owners, while advocating for many big business positions that don’t help, and may hurt, small businesses. …

A recent unanimous decision from the Supreme Court of the United Kingdom, Anson v. Commissioners for Her Majesty’s Revenue and Customs [2015] UKSC 44, determined that a U.S. limited liability company (LLC) formed in Delaware will be treated for U.K. tax purposes as a partnership, and not a corporation. This is a good thing, as it provides the LLC members the ability to reap more completely the benefits of the entity’s choice of form.

What is not so good is that the court left unaddressed a lower court determination as follows, was quoted in para. 47: 

“Delaware law governs the rights of the members of [the LLC] as the law of the place of its incorporation, and the LLC agreement is expressly made subject to that law. However, the question whether those rights mean that the income of [the LLC] is the income of the members is a question of domestic law which falls to be determined for the purposes of domestic tax law applying the requirements of domestic tax law ….” (para 71) (emphasis added)

An LLC does not have a place of incorporation!  It has a place of formation.  Here is the link to Delaware’s Certificate of…

Last week, S.E.C Commissioner Daniel M. Gallagher, gave a speech, Activism, Short-Termism, and the SEC: Remarks at the 21st Annual Stanford Directors’ College. I agree with many of Commissioner Gallagher’s views on short-termism, and (I will semi-shamelessly note) he cited one of my earlier posts about the role of activists on board decision making. In his remarks, he said, with regard to short-termsim (i.e., companies operating for short term rather than long-term gains):

The current picture is bleak . . . 

Clearly, there’s a way for all the parties . . . to co-exist peacefully. The SEC sets a level playing field; companies manage themselves for the long-term with the vigorous oversight of the board; and activists put pressure on those companies that fall short of that ideal.[47] Unfortunately, we are not in that happy place. Rather, there seems to be a predominance of short-term thinking at the expense of long-term investing. Some activists are swooping in, making a lot of noise, and demanding one of a number of ways to drive a short-term pop in value: spinning off a profitable division, beginning a share buy-back program, or slashing capital expenditures or research and development expenses. Having inflated

…

It’s always nice to blog and research about a hot topic. Last week I wrote about compliance challenges for those who would like to rush down to do business in Cuba- the topic of this summer’s research. Yesterday, Corporate Counsel Magazine wrote about the FCPA issues; one of my concerns. Earlier this week, I attended a meeting with the Greater Miami Chamber of Commerce and the United States International Trade Commission. Apparently, on December 17th, the very same day that President Obama made his surprise announcement that he wanted to re-open relations with Cuba, Senator Ron Wyden coincidentally sent a request to the USITC asking for an investigation and report on trade with Cuba and an analysis of restrictions. Accordingly, the nonpartisan USITC has been traveling around the country speaking to lawyers and business professionals conducting fact-finding meetings, in order to prepare a report that will be issued to the public in September 2015. Tomorrow the Miami Finance Forum is holding an event titled the New Cuba Revolution.

This will be my third and final post on business and Cuba and in this post I will discuss the focus of my second potential law review article…