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Thanks for your informative post, Anne.  I started drafting this post as a comment to yours, and then I realized it was its own post.   [sigh]

It seems to me that the U.S. Department of HHS and any commentators must grapple with what has been a difficult, fact-based question in determining how to define “closely held” to effectuate the Supreme Court’s intent in as expressed in the Hobby Lobby opinion.  That question?  What “control” means in this context.

The Court said in the Hobby Lobby opinion:  “The companies in the cases before us are closely held corporations, each owned and controlled by members of a single family, and no one has disputed the sincerity of their religious beliefs.”  More specifically, the Court notes that the Hahns (owners of shares in Conestoga) “control its board of directors and hold all of its voting shares” and notes that Hobby Lobby and Mardel “remain closely held, and David, Barbara, and their children retain exclusive control of both companies.”  [Emphasis has been added by me in each quote.]

The definition of “control” primarily has been a question of fact in business law, making the task of defining it here somewhat difficult.  Some questions and considerations to grapple with are set forth below the fold.  I am sure that others can come up with more.  I am posting these as a way of getting the collective juices flowing.

As I have pointed out in earlier posts on this blog, the June decision in Hobby Lobby failed to define closely-held business for purposes of the religious exemption.  On August 22nd, the U.S. Department of Health and Human Services (HHS) issued proposed rules, open for comments for 60 days, that include a definition of closely-held under one of two approaches borrowed from state law definitions like with S corporations and from IRS regulations.

In common understanding, a closely held corporation – a term often used interchangeably with a “close” or “closed” corporation – is a corporation the stock of which is owned by a small number of persons and for which no active trading market exists. ….Under the first proposed approach, a qualifying closely held for-profit entity would be an entity where none of the ownership interests in the entity is publicly traded and where the entity has fewer than a specified number of shareholders or owners….

Under a second, alternative approach, a qualifying closely held entity would be a forprofit entity in which the ownership interests are not publicly traded, and in which a specified fraction of the ownership interest is concentrated in a limited and specified number of owners.

HHS invites…

Two news articles about the Dodd-Frank whistleblower law caught my eye this week. The first was an Op-Ed in the New York Times, in which Joe Nocera profiled a Mass Mutual whistleblower, who received a $400,000 reward—the upper level of the 10-30% of financial recoveries to which Dodd-Frank whistleblowers are entitled.

Regular readers of this blog may know that I met with the SEC, regulators and testified before Congress before the law went into effect about what I thought might be unintended effects on compliance programs. I have blogged about my thoughts on the law here and here. 

The Mass Mutual whistleblower, Bill Lloyd, complained internally and repeatedly to no avail. Like most whistleblowers, he went external because he felt that no one at his company took his reports seriously. He didn’t go to the SEC for the money. As I testified, people like him who try to do the right thing and try resolve issues within the company (if possible) deserve a reward if their claims have merit.

The second story had a different ending. The Wall Street Journal reported on the Second Circuit opinion supporting Siemens’ claim that Dodd-Frank’s anti-retaliation protection did not extend to its foreign…

OK.  So, I am stretching a bit here.  But yoga may be considered a sport, athletic clothing is a kind of fashion, and securities fraud prohibitions and corporate director fiduciary duty involve law.  So, I stand by my blog title in the face of any criticism that may follow this post.

I do yoga four times a week when I am not traveling.  I also work out, sometimes on days when I am not doing yoga.  So, I have a fair number of pieces of yoga wear and other athletic clothing.  This means that I get regular mail and email solicitations from the firms that purvey these clothing items.

I recently received a catalog from one of my favorite athletic clothing brands, Sweaty Betty, which I discovered originally when I was teaching in Cambridge, England in one of our study abroad programs a few years ago.  I noticed, with some amusement, that the new catalog harps on the opacity of the firm’s yoga bottoms or trousers (as the British like to call them).  The website does the same–“100% opaque” labels abound.  As an astute consumer and securities lawyer, I immediately jumped to the conclusion, whether…

I have read about the economic boom in North Dakota. The state has the highest economic growth rate and the lowest unemployment rate in the nation, primarily due to energy production using hydraulic fracking. But I didn’t really appreciate the statistics until I recently had an opportunity to see what that boom looks like “on the ground.”

Last week, my wife and I went to western North Dakota, the heart of the fracking industry, to backpack in Theodore Roosevelt National Park. When we weren’t backpacking, we got a chance to see the North Dakota economy first-hand. What we saw amazed us:

  • Motels in remote places like Dickinson and Watford City charging more than $200 a night. Not four-star hotels. Chains like AmericInn and La Quinta. And these are not prime tourist locations. Look for Watford City on a map; it’s in the middle of nowhere. (No disrespect intended to any North Dakota readers, but you have to admit that, but for the fracking boom, Watford City is not prime real estate.)
  • Temporary housing everywhere. One reason the hotel rates were high is that many of them are housing workers on a permanent basis. There is a serious housing

…

A brief ten-question survey is one of the most effective tools I have used in my three years as an academic. I first used one when teaching professional responsibility and then used it for my employment law, corporate governance seminar, and business associations courses. I’m using it for the first time with my civil procedure students. I count class participation in all of my classes for a portion of their grade, and responding to the survey link by the first day of class is their first “A” or first “F” of the semester.

I use survey monkey but other services would work as well. The survey serves a number of uses. First, I will get an idea of how many students actually read my emails before next Tuesday’s first day of class—interestingly as of Thursday morning, 62% of my incoming 1Ls have completed their survey, while 42% of the BA students have done theirs. Second, my BA students work in mini law firms for a number of drafting exercises and simulations. The students can pick their own firms, but I designate a “financial expert” to each firm based upon the survey responses. I remind them that they should never leave …

Kinder Morgan, a leading U.S. energy company, has proposed consolidating its Master Limited Partnerships (MLPs) under its parent company. If it happens, it would be the second largest energy merger in history (the Exxon and Mobil merger in 1998, estimated to be $110.1 billion in 2014 dollars, is still the top dog). 

Motley Fool details the deal this way:

Terms of the deal
The $71 billion deal is composed of $40 billion in Kinder Morgan Inc shares, $4 billion in cash, $27 billion in assumed debt. 

Existing shareholders of Kinder Morgan’s MLPs will receive the following premiums for their units (based on friday’s closing price):

  • Kinder Morgan Energy Partners: 12%
  • Kinder Morgan Management: 16.5%
  • El Paso Pipeline Partners: 15.4%
Existing unit holders of Kinder Morgan Energy Partners and El Paso Pipeline Partners are allowed to choose to receive payment in both cash and Kinder Morgan Inc shares or all cash. 
As I understand it, the exiting holders of the partnerships would have to pay taxes on the merger (this is partnership to a C-corp), but please, consult your tax professional.  
 
The goal here is said to be to increase dividend potential and use the C-corp structure to

…

On June 5, 2014, SEC Commissioner Dan Gallagher commemorated the agency’s 80th anniversary by, among other things, repeating the criticisms of the various nonfinancial disclosures that companies are compelled to make by law or asked to make through shareholder proposals. In his view, “companies’ disclosure documents are being cluttered with non-material information that can drown out or obscure the information that is at the core of a reasonable investor’s investment decision.  The Commission is not spending nearly enough time making sure that our rules elicit focused, meaningful disclosures of material information.” I assume that he is referring to the various environmental, social and governance proposals (“ESG”) brought by socially responsible investors and others. I’m writing this blog post while taking a break from reviewing dozens of these proposals for an article that I am writing on how consumers and investors evaluate ESG disclosures and those required in other countries in the human rights context.

Citing Chair White’s quote about “information overload,” last week the US Chamber of Commerce’s Center for Capital Markets Competitiveness released a list of relatively non-controversial recommendations on how the SEC can modernize the current disclosure regime so that it can better serve the investing public.

Last week on this blog, I wrote about the revived trend of corporate inversions where, through a merger transaction a US company re-domiciles outside of the US for business reasons, including the desire to avoid paying US corporate taxes.  Walgreens was rumored to be negotiating with Alliance Boots, a UK company in which the US drugstore chain already held 45%.  The merger announcement today, in a deal valued at $5.27 billion for the other 55% of Alliance Boots will keep the merged company’s headquarters in Chicago.   Citing, in part to public reaction and the drug store’s brand here in the US, “The company concluded it was not in the best long-term interest of our shareholders to attempt to re-domicile outside the U.S.”

The full article in the DealBook is available here.

-Anne Tucker

Warning- do not click on the first link if you do not want to see nudity.

Dov Charney founded retailer American Apparel in 1998 and it became an instant sensation with its 20-something year old consumer base. He mixed a “made in America- sweatshop free” CSR focus with a very sexy/sexual set of ads (hence the warning- – when I first created the link, the slideshow went from a topless “Eugenia in disco pants in menthe” (seriously) to a shot of adorable children’s clothing in about 10 seconds).  No wonder my 18-year old son, who leaves for art school in two weeks, appreciates the ad campaigns. Most of his friends do too- both the males and females. In fact, he indicated that although they all know about the “sweatshop free” ethos, because “it’s in your face when you walk in the stores,” that’s not what draws them to the clothes. As a person who blogs and writes about human rights and supply chains, I almost wish he had lied to me. But he’s no different than many consumers who over-report their interest in ethical sourcing, but then tend to buy based on quality, price and convenience. I am still researching…