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Stefan J. Padfield

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Director of the NCPPR's Free Enterprise Project. Prior experience includes 15+ years as a law professor, two federal judicial clerkships, private practice at Cravath, Swaine & Moore, LLP, and 6 years enlisted active duty (US Army). Immigrant (naturalized).

The following comes to us from Maximilian Martin, Ph.D., the founder and global managing director of Impact Economy, an impact investment and strategy firm based in Lausanne, Switzerland, and the author of the report “Driving Innovation through Corporate Impact Venturing.”

In 2010, despite the then-recent economic downturn, an overwhelming majority of corporate CEOs in the UN Global Compact-Accenture CEO Study on Sustainability—93 percent—responded that sustainability will be critical to the future success of their companies. What’s more, they believed that a tipping point could be reached that fully meshes sustainability with core business within a decade, fundamentally transforming core business capabilities, processes, and systems throughout global supply chains and subsidiaries. Three years later, a new 2013 edition of the study argued that many corporate CEOs have found themselves stuck on the ascent towards sustainability.

Radical change in market structures and systems is needed, and a bolder path for industry transformation needs to be charted, at a time when the logic of value creation is changing. The days of traditional corporate social responsibility (CSR)—the bolt-on approach that is compliance driven, costs money, and produces limited reputational benefits—are fast coming to an end, because sustainability is now increasingly driving value creation itself. Assessing joint opportunities for financial and social returns is the way forward.

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The Louisiana Supreme Court recently denied the state’s attempt to collect sales tax on the sale of an RV to a Montana LLC. Thomas v. Bridges, No. 2013-C-1855 (La. 2014).  The LLC was formed for the sole purpose of avoiding RV sales tax (saving the buyer as much as $47,000).  The state argued that the LLC veil should be pierced and the tax should be assessed to the LLC’s sole member claiming fraud. The court disagreed, explaining that “taking actions to avoid sales tax does not constitute fraud. Although tax evasion is illegal, tax avoidance is not.” 

There were problems with the state’s attempt from the outset.  First, the sale occurred  in Louisiana, but the RV was housed in Mississippi.  Even if the LLC were to be disregarded, Mississippi, it seems to me, would be the state that should be asserting the claim.  Second, the state attempted to collect from the LLC’s member before ever trying to collect from the LLC.  Thus,  the veil-piercing claim was being used as a post hoc justification for the attempt to recover from the LLC’s member and was not properly raised below.  

This “legal loophole” (which is redundant because if it’s a loophole, it’s legal and…

We here at the BLPB are thrilled to have Joan Heminway, W.P. Toms Distinguished Professor of Law at the University of Tennessee College of Law, join our team of weekly contributing editors. For most of our readers, no introduction will really be necessary because Joan is one of the most highly regarded and visible members of the corporate law community. In fact, I still harbor some suspicions that she may actually have figured out a way to clone herself — but that is likely just to make myself feel better when I review her productivity. Not only is she a tremendous scholar, but I know I am one of many who consider her a mentor, and her willingness to give of her time is truly inspirational. I will, as usual, leave the bulk of the introduction to her, but here is a brief excerpt from Prof. Heminway’s bio (you can read the full bio here):

Professor Heminway brought nearly 15 years of corporate practice experience when she joined the faculty of the UT College of Law in 2000. She was an attorney in the Boston office of the firm of Skadden, Arps, Slate, Meagher & Flom LLP from 1985

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A New York Times article this weekend explained that many U.S. Supreme Court decisions are altered after they have been published, sometimes quickly and other times much later.  Article author Adam Liptak explains:

The Supreme Court has been quietly revising its decisions years after they were issued, altering the law of the land without public notice. The revisions include “truly substantive changes in factual statements and legal reasoning,” said Richard J. Lazarus, a law professor at Harvard and the author of a new study examining the phenomenon.

The court can act quickly, as when Justice Antonin Scalia last month corrected an embarrassing error in a dissent in a case involving the Environmental Protection Agency.

But most changes are neither prompt nor publicized, and the court’s secretive editing process has led judges and law professors astray, causing them to rely on passages that were later scrubbed from the official record. 

I have followed this particular change because of my interest in the EPA case, but I suspect this article is the first many people had heard of it.  It makes some sense that articles would be fixed before going to final print, but the idea that opinions have been changed…

The New York Times ran two articles this week about administrator and executive pay that struck a chord with me.  One piece was about a new report linking student debt and highly paid university leaders.  The article discusses a study, “The One Percent at State U: How University Presidents Profit from Rising Student Debt and Low-Wage Faculty Labor.”  The study reviewed “the relationship between executive pay, student debt and low-wage faculty labor at the 25 top-paying public universities.”

Then-Ohio State President E. Gordon Gee was the highest-paid public university president for the time period review. The study found that

Ohio State was No. 1 on the list of what it called the most unequal public universities. The report found that from fiscal 2010 to fiscal 2012, Ohio State paid Mr. Gee a total of $5.9 million. [$2.95 million per year.] During the same period, it said, the university hired 670 new administrators, 498 contingent and part-time faculty — and 45 permanent faculty members. Student debt at Ohio State grew 23 percent faster than the national average during that time, the report found.

[In the interest of full disclosure, I should note that President Gee is the president of my institution, for…

Before I went to law school, I worked in the video game industry, first for the industry trade association, the Interactive Digital Software Association (now known as the Entertainment Software Association). From there I moved to public relations for the public relations firm Golin/Harris in Los Angeles where my work was focused on product launches for Nintendo. (This was from 1998-2000.) In those jobs, I had the chance to work with some amazing people (and clients), and the experience has served me well, even as I went on to become a lawyer and professor. 

 One of those people was the managing director of the Los Angeles Golin/Harris office when I was hired, Fred Cook, who is now the CEO of Golin/Harris.  Fred recently wrote a book that has caught the attention of the business world and is a top-25 book for corporate customers according to 800-CEO-READ.   His book is Improvise: Unconventional Career Advice from an Unlikely CEO, and it’s worth a look.

Here’s an excerpt:

People entering the business world today are a commodity. They’ve gone to the same schools, taken the same courses, read the same books, and watched the same movies. Every summer they’ve

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The Supreme Court of Appeals of West Virginia recently had the opportunity to address the role (if any) of veil piercing in West Virginia LLCs.  The state statute is silent on the subject, but the court determined veil piercing was there, anyway.  It was close, though, as the West Virginia Circuit Court took on the following question with the corresponding answer: 

Does West Virginia’s version of the Uniform Limited Liability Company Act, codified at W. Va. Code § 31B el seq., afford complete protection to members of a limited liability company against a plaintiff seeking to pierce the corporate veil?

ANSWER: YES

 Kubican v. The Tavern, LLC, 2012 WL 8523515 (W.Va.Cir.Ct.)

Under West Virginia LLC law:

[T]he debts, obligations and liabilities of a limited liability company, whether arising in contract, tort or otherwise, are solely the debts, obligations and liabilities of the company. A member or manager is not personally liable for a debt, obligation or liability of the company solely by reason of being or acting as a member or manager. . . . The failure of a limited liability company to observe the usual company formalities or requirements relating to the exercise of its company

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