I teach both Civil Procedure and Business Associations. As a former defense-side commercial and employment litigator, I teach civ pro as a strategy class. I tell my students that unfortunately (and cynically), the facts don’t really matter. As my civil procedure professor Arthur Miller drilled into my head 25 ago, if you have procedure on your side, you will win every time regardless of the facts. Last week I taught the seminal but somewhat inscrutable Iqbal and Twombly cases, which make it harder for plaintiffs to survive a motion to dismiss and to get their day in court. In some ways, it can deny access to justice if the plaintiff does not have the funds or the will to re-file properly. Next semester I will teach Transnational Business and Human Rights, which touches on access to justice for aggrieved stakeholders who seek redress from multinationals. The facts in those cases are literally a matter of life and death but after the Kiobel case, which started off as a business and human rights case but turned into a jurisdictional case at the Supreme Court, civil procedure once again “triumphed” and the doors to U.S. courthouses closed a bit tighter for litigants.
Enforcing Corporate Social Responsibility Codes Under Private Law
How and when should CSR codes be enforced through litigation? This short article by Jan M. Smits attempts to answer that question. The abstract is below and the link to the article is here:
A central question in the debate on corporate social responsibility is to what extent CSR Codes can be enforced among private parties. This contribution argues that this question is best answered by reference to the applicable doctrinal legal system. Such a doctrinal approach has recently regained importance in American scholarship, while it is still the prevailing method of legal analysis in Europe. Applying a doctrinal analysis of CSR Codes allows to make the possibility of private law enforcement, i.e. enforcement by means of contract or tort, dependent on three different elements: the exact type of claim that is brought, the evolving societal standards about the binding nature of CSR Codes, and the normative complexity of the doctrinal system itself. This approach allows to make a typology of cases in which the enforceability of CSR Codes can be disputed. It is subsequently argued that societal standards have not yet reached the stage where the average consumer who buys a product from a retailer can keep that
Social Business and Scandal
Unfortunately, touting a business as socially-consious does not seem to lessen the chance of scandal.
Some companies known for their commitment to social causes have been in the news for all the wrong reasons. A few are noted below:
- BP’s Deepwater Horizon oil spill
- Plum Organics (a Delaware Public Benefit Corp.) baby food recall
- Whole Food’s pricing scandal involving mislabeling weights of food and the company’s layoffs
- Volkswagen’s emission scandal
Predictably, the media latches onto these stories and claims of hypocrisy fly. See, e.g., Here’s The Joke Of A Sustainability Report That VW Put Out Last Year and Whole Foods Sales Sour After Price Scandal and BP’s Hypocrisy Problems.
No business is perfect, so what should social businesses do to limit the impact of these scandals? First, before a scandal hits, I think social businesses need to be candid about the fact that they are not perfect. Second, after the scandal, the social business needs to take responsibility and take significant corrective action beyond what is legally required.
Patagonia’s founder does a really nice job of admitting the imperfection of his company and the struggles they face in his book The Responsible Company. Whole Foods supposedly offered somewhat above-market
Illusionists and Scammers
Last night, I took my husband (part of his birthday present) to see The Illusionists, a touring Broadway production featuring seven masters of illusion doing a three-night run in Knoxville this week. I admit to a fascination for magic shows and the like, an interest my husband shares. I really enjoyed the production and recommend it to those with similar interests.
At the show last night, however, something unusual happened. I ended up in the show. I made an egg reappear and had my watch pilfered by one of the illusionists. It was pretty cool. After the show, I got kudos for my performance in the ladies room, on the street, and in the local gelato place.
But I admit that as I thought about the way I had been tricked–by sleight of hand–into performing for the audience and allowing my watch to be taken, I realized that these illusionists have something in common with Ponzi schemers and the like–each finds a patsy who can believe and suckers that person into parting with something of value based on that belief. That’s precisely what I wanted to blog about today anyway–scammers. Life has a funny way of making these kinds of connections . . . .
So, I am briefly posting today about a type of affinity fraud that really troubles me–affinity fraud in which a lawyer defrauds a client. Most of us who teach business law have had to teach, in Business Associations or a course on professional responsibility, cases involving lawyers who, e.g., abscond with client funds or deceive clients out of money or property. I always find that these cases provide important, if difficult, teaching moments: I want the students to understand the applicable law of the case, but I also want them to understand the gravity of the situation when a lawyer breaches that all-important bond of trust with a client.
Didn’t Volkswagen get the (Yates) Memo?
Last week I blogged about the Yates Memorandum, in which the DOJ announced that any company that expected leniency in corporate deals would need to sacrfice a corporate executive for prosecution. VW has been unusually public in its mea culpas apologizing for its wrongdoing in its emission scandal this week. VW’s German CEO has resigned, the US CEO is expected to resign tomorrow, and other executives are expected to follow.
It will be interesting to see whether any VW executives will serve as the first test case under the new less kind, less gentle DOJ. Selfishly, I’m hoping for a juicy shareholder derivatives suit by the time I get to that chapter to share with my business associations students. That may not be too far fetched given the number of suits the company already faces.
Are Crooked Executives Finally Going to Jail? DOJ’s New White Collar Criminal Guidelines and the Questions for Compliance Officers and In House Counsel
I think my life as a compliance officer would have been much easier had the DOJ issued its latest memo when I was still in house. As the New York Times reported yesterday, Attorney General Loretta Lynch has heard the criticism and knows that her agency may face increased scrutiny from the courts. Thus the DOJ has announced via the “Yates Memorandum” that it’s time for some executives to go to jail. Companies will no longer get favorable deferred or nonprosecution agreements unless they cooperate at the beginning of the investigation and provide information about culpable individuals.
This morning I provided a 7-minute interview to a reporter from my favorite morning show NPR’s Marketplace. My 11 seconds is here. Although it didn’t make it on air, I also discussed (and/or thought about) the fact that compliance officers spend a great deal of time training employees, developing policies, updating board members on their Caremark duties, scanning the front page of the Wall Street Journal to see what company had agreed to sign a deferred prosecution agreement, and generally hoping that they could find something horrific enough to deter their employees from going rogue so that they wouldn’t be
Reading Recommendation: How Framing Shapes Our Conduct
Scott Killingsworth, a corporate attorney at Bryan Cave who specializes in compliance and technology matters and is a prolific writer (especially for one who still has billable hour constraints!) recently wrote a short and thought-provoking article: How Framing Shapes Our Conduct. The article focuses the link between framing business issues and our ethical choices and motivations noting the harm in thinking of hard choices as merely “business” decisions, viewing governing rules and regulations as a “game” or viewing business as “war.” Consider these poignant excerpts:
We know, for example, that merely framing an issue as a “business matter” can invoke narrow rules of decision that shove non-business considerations, including ethical concerns, out of the picture. Tragic examples of this ‘strictly business’ framing include Ford’s cost/benefit-driven decision to pay damages rather than recall explosion-prone Pintos, and the ill-fated launch of space shuttle Challenger after engineers’ safety objections were overruled with a simple ‘We have to make a management decision.’ (emphasis added)
Framing business as a game belittles the legitimacy of the rules, the gravity of the stakes, and the effect of violations on the lives of others. By minimizing these factors, the game metaphor takes the myopic “strictly
CALL FOR PAPERS: A Workshop on Vulnerability at the Intersection of the Changing Firm and the Changing Family (October 16-17, 2015 in Atlanta, GA)
UPDATE: The deadline for submissions has been extended to July 21.
[The following is a copy of the official workshop announcement. I have moved the “Guiding Questions” to the top to highlight the business law aspects. Registration and submission details can be found after the break.]
A Vulnerability and the Human Condition Initiative Workshop at Emory Law
Guiding Questions:
This workshop will use vulnerability theory to explore the implications of the changing structure of employment and business organizations in the new information age. In considering these changes, we ask:
• What kind of legal subject is the business organization?
• Are there relevant distinctions among business and corporate forms in regard to understanding both vulnerability and resilience?
• What, if any, should be the role of international and transnational organizations in a neoliberal era? What is their role in building both human and institutional resilience?
• Is corporate philanthropy an adequate response to the retraction of state regulation? What forms of resilience should be regulated and which should be left to the ‘free market’?
• How might a conception of the vulnerable subject help our analysis of the changing nature of the firm? What relationships does it bring into relief?
• How have discussions about market vulnerability shifted over time?
• What forms of resilience are available for institutions to respond to new economic realities?
• How are business organizations vulnerable? How does this differ from the family?
• How does the changing structure of employment and business organization affect possibilities for transformation and reform of the family?
• What role should the responsive state take in directing shifting flows of capital and care?
• How does the changing relationship between employment and the family, and particularly the disappearance of the “sole breadwinner,” affect our understanding of the family and its role in caretaking and dependency?
• How does the Supreme Court’s willingness to assign rights to corporate persons (Citizen’s United, Hobby Lobby), affect workers, customers and communities? The relationship between public and private arenas?
• Will Airbnb and Uber be the new model for the employment relationships of the future?
Kelley School of Business at Indiana University – Law and/or Ethics Professor Positions
The Kelley School of Business at Indiana University has multiple open positions in their Business Law and Ethics Department.
Kelley is well known in business school circles for having a strong legal studies program. Among the many fine faculty members are my ALSB mentor Jamie Prenkert (department chair) and BLPB guest-blogger Todd Haugh.
Information about these positions is available after the break.
The Cuba Corporate Governance Conundrum
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