Corporations

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Last week, a federal court determined that an insurance disclosure that asked about an “applicant’s” criminal history did not apply to an LLC member’s individual criminal past.  In Jeb Stuart Auction Servs., LLC v. W. Am. Ins. Co., No. 4:14-CV-00047, 2016 WL 3365495, at *1 (W.D. Va. June 16, 2016), the court explained: 

“Question Eight” on the [insurance] application asked, “DURING THE LAST FIVE YEARS (TEN IN RI), HAS ANY APPLICANT BEEN INDICTED FOR OR CONVICTED OF ANY DEGREE OF THE CRIME OF FRAUD, BRIBERY, ARSON OR ANY OTHER ARSON-RELATED CRIME IN CONNECTION WITH THIS OR ANY OTHER PROPERTY?” Hiatt, on behalf of Jeb Stuart (who [sic] was the sole [LLC] applicant for the insurance policy), answered, “No.” Hiatt signed the application and left.

As you might imagine, Hiatt had been convicted of “hiring individuals to wreck cars so that he could receive the proceeds from the applicable insurance policies,” and, yep, about a month later, the building burned down.  Id. at *2.

The insurance company cancelled the policy because it claimed Hiatt had lied on the application, and Hiatt sued for the improper cancellation of the policy because he did not lie (he prevailed) and for attorneys fees claiming…

Having helped a few Tennessee bar applicants get straight on their knowledge of agency, unincorporated business associations, and personal property law last Friday at my BARBRI lecture (such a nice group present at the taping to keep me company!), it’s now time for me to wrap up my June Scholarship and Teaching Tour with a twofer–a week of travel to two of my favorite U.S. cities: Chicago, for the National Business Law Scholars Conference and Seattle for Berle VIII.  At both events, I will present my draft paper (still in process today, unfortunately) on publicly held benefit corporations, Corporate Purpose and Litigation Risk in Publicly Held U.S. Benefit Corporations.  Here’s the bird’s-eye view from the introduction:

Benefit corporations—corporations organized for the express purpose of realizing both financial wealth for shareholders and articulated social or environmental benefits—have taken the United States by storm. With Maryland passing the first benefit corporation statute in 2010, legislative growth of the form has been rapid. Currently, 31 states have passed benefit corporation statutes.

The proliferation of benefit corporation statutes and B Corp certifications can largely be attributed to the active promotional work of B Lab Company, a nonprofit corporation organized in 2006 under Pennsylvania law that…

On Wednesday, the EU finally outlined its position on conflict minerals. The proposed rule will affect approximately 900,000 businesses. As I have discussed here, these “name and shame” disclosure rules are premised on the theories that: 1) companies have duty to respect human rights by conducting due diligence in their supply chains; 2) companies that source minerals from conflict zones contribute financially to rebels or others that perpetuate human rights abuses; and 3) if consumers and other stakeholders know that companies source certain minerals from conflict zones they will change their buying habits or pressure companies to source elsewhere.

As stated in earlier blog posts, the US Dodd- Frank rule has been entangled in court battles for years and the legal wranglings are not over yet. Dodd-Frank Form SD filings were due on May 31st and it is too soon to tell whether there has been improvement over last year’s disclosures in which many companies indicated that the due diligence process posed significant difficulties.

I am skeptical about most human rights disclosure rules in general because they are a misguided effort to solve the root problem of business’ complicity with human rights abuses and assume that consumers care…

Three Business Law Prof Blog editors (myself included) are presenting at the upcoming Berle Symposium on June 27-28 in Seattle.

Colin Mayer (Oxford) is the keynote speaker, and I look forward to hearing him present again. I blogged on his book Firm Commitment after I heard him speak at Vanderbilt a few of years ago. The presenters also include former Chancellor Bill Chandler of the Delaware Court of Chancery. Given that Chancellor Chandler’s eBay v. Newmark decision is heavily cited in the benefit corporation debates, it will be quite valuable to have him among the contributors. The author of the Model Benefit Corporation Legislation, Bill Clark, will also be presenting; I have been at a number of conferences with Bill Clark and always appreciate his thoughts from the front lines. Finally, the list is packed with professors I know and admire, or have read their work and am looking forward to meeting. 

More information about the conference is available here.

The New York Times ran the article How Donald Trump Bankrupted His Atlantic City Casinos, but Still Earned Millions last weekend. It’s an interesting piece that provides a look at Donald Trump’s east coast casino experience.  The article is, as one might expect, critical of his dealings and notes that Trump made money even when his ventures when bankrupt.  

Though I will not defend any of Trump’s dealings, there are few issues raised that I think are worthy of a some discussion and clarification.1  The post that follows suggests how to consider Trump’s business history and place that history in a political context.

This past week, I completed the second leg of my June Scholarship and Teaching Tour.  My time at “Method in the Madness: The Art and Science of Teaching Transactional Law and Skills” at Emory University School of Law last week was two days well spent.  I had a great time talking to attendees about my bylaw drafting module for our transaction simulation course, Representing Enterprises, and listening to others talk about their transactional law and skills teaching.  Great stuff.

This week’s portion of my academic tour begins with a teaching whistle-stop at the Nashville School of Law on Friday, continues with attendance (with my husband) at a former student’s wedding in Nashville on Saturday evening, and ends (my husband and I hope) with Sunday brunch out with our son (and his girlfriend if she is available).  Specifically, on Friday, I teach BARBRI for four hours in a live lecture.  The topics?  Well, I drew a short straw on that.  I teach agency, unincorporated business associations (including a bit about both extant limited liability statutes in Tennessee), and personal property–all in four hours.  Ugh.  Although I am paid for the lecture and my expenses are covered, I would not have taken (and would not continue to take) this gig if I…

If you’ve been slamming away on a writing deadline then perhaps you’ve missed the opportunity (like me) to dive into the recent Chancery Court of Delaware Dell appraisal rights opinion (downloadable here).  Have no fear, your summary is here.

Vice Chancellor Laster valued Dell’s common stock at $17.62 per share, reflecting a 28% premium above the $13.75 merger price that was paid to Dell shareholders in October 2014 in a going private transaction lead by company-founder Michael Dell. Dell’s going private transaction was opposed by Carl Icahn and this juicy, contentious transaction has its own required reading list.  When conceding defeat, Carl Icahn sent the following letter to Dell Shareholders:

New York, New York, September 9, 2013 

Dear Fellow Dell Inc. Stockholders:

I continue to believe that the price being paid by Michael Dell/Silver Lake to purchase our company greatly undervalues it, among other things, because:

1. Dell is paying a price approximately 70% below its ten-year high of $42.38; and

2. The bid freezes stockholders out of any possibility of realizing Dell’s great potential.

Fast forward nearly 3 years later and it seems Vice Chancellor Laster agrees.  VC Laster reached his undervaluation decision despite no finding of significant…

The first part of my June scholarship and teaching tour is now done.  Having just returned from the Law and Society Association conference in New Orleans (about which I will say more in later posts), I now am preparing for my presentation on Friday at “Method in the Madness: The Art and Science of Teaching Transactional Law and Skills,” this year’s conference hosted by Emory University School of Law’s Center for Transactional Law and Practice.  Emory Law convenes these conferences every other year.  The conferences always focus on teaching transactional business law and skills.

Here’s the abstract for my presentation:

Drafting Corporate Bylaws: From Alpha to Omega

The archetypal introductory law school course in business associations law characteristically introduces students to corporate bylaws. Typically, course references to corporate bylaws occur in the context of corporate formation and in cases construing corporate bylaws in the context of private ordering, fundamental corporate changes, and the like. Treatment of the subject is necessarily somewhat superficial and episodic. Although students may be exposed to bylaw provisions and even, in some cases, a sample set of corporate bylaws, little time exists in the standard basic Business Associations course to address the optimal drafting process for drafting organic documents…

This year, my research and writing season has started off with a bang.  While grading papers and exams earlier this month, I finished writing one symposium piece and first-round-edited another.  Today, I will put the final touches on PowerPoint slides for a presentation I give the second week in June (submission is required today for those) and start working on slides for the presentation I will give Friday.

All of this sets into motion a summer concert conference, Barbri, and symposium tour that (somewhere along the line) got a bit complicated.  Here are the cities and dates:

New Orleans, LA – June 2-5
Atlanta, GA – June 10-11
Nashville, TN – June 17
Chicago, IL – June 23-24
Seattle, WA – June 27

I know some of my co-bloggers are joining me along the way.  I look forward to seeing them.  Each week, I will keep you posted on current events as best I can while managing the research and writing and presentation preparations.  The topics of my summer research and teaching run the gamut from insider trading (through by-law drafting, agency, unincorporated business associations, personal property, and benefit corporations) to crowdfunding.  A nice round lot.

This coming week, I will be at the Law and Society Association annual conference.  My presentation at this conference relates to an early-stage project on U.S. insider trading cases.  The title and abstract for the project and the currently envisioned initial paper (which I would, of course, already change in a number of ways) are as follows:

A former law student of mine who practices in Delaware just alerted me to this Delaware Online article. 

The article describes the proposed bill as follows:

House Bill 371 would restrict the number of corporate shareholders who can petition the court for a stock appraisal to only those who own $1 million or more of a company’s stock or 1 percent of the outstanding shares, depending on which is less. Currently, any shareholder can ask the court to appraise their shares. Those motions are typically filed when a company is the target of an all-cash acquisition and the shareholder wants to ensure the buyer is paying a fair price for the stock. (emphasis added)

Corporate governance expert Charles Elson is quoted as saying:

. . . he understands the argument on both sides. “Anytime you attempt to restrict the rights of a smaller shareholder, it is going to be controversial whether or not the approach is warranted”

The article cites co-authored work by my Nashville neighbor, Randall Thomas (Vanderbilt Law):

A study published earlier this month by four noted corporate law professors, including Wei Jang of Columbia Business School and Randall S. Thomas of Vanderbilt Law School, found that hedge funds have

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