Legislation

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This post is related to another great post from Tom Rutledge at the Kentucky Business Entity Law Blog, Diversity Jurisdiction and Jurisdictional Discovery: The Third Circuit Holds That “Hiding The Ball” Will Not Work. Tom’s post is about Lincoln Benefit Life Company v. AEI Life, LLC, No. 14-2660, 2015 WL 5131423, ___ F.2d__ (3rd Cir. Sept. 2, 2015), which is available here. 

Lincoln Benefit allows a plaintiff, after a reasonable inquiry into the resources available (like court records and public documents), to allege complete diversity in good faith, if there is no reason to believe any LLC members share the same state of citizenship.  Thus, the diversity claim can be made on “information and belief.”  Tom explains that

While it may do nothing to address the fact that diversity jurisdiction may be unavailable consequent to de minimis indirect ownership  . . .  it does limit the ability of a defendant to “hide the ball” as to its citizenship while objecting that the other side has not adequately pled citizenship and therefore diversity. 

This concern arises out of the fact that LLCs, as unincorporated associations, are treated like partnerships for purposes of federal diversity jurisdiction, meaning that an…

Has Wal-Mart reformed? Last week I blogged about whether conscious consumers or class actions can really change corporate behavior, especially in the areas of corporate social responsibility or human rights. I ended that post by asking whether Wal-Mart, the nation’s largest gun dealer, had bowed down to pressure from activist groups when it announced that it would stop selling assault rifles despite the fact that gun sales are rising (not falling as Wal-Mart claims). Fellow blogger Ann Lipton did a great post about the company’s victory over shareholder Trinity over a proposal related to the sale of dangerous products (guns with high capacity magazines). There doesn’t appear to be anything in the 2015 proxy that would necessitate even the consideration of a change that Wal-Mart fought through the Third Circuit to avoid.

So why the change? Is it due to the growing public weariness over mass shootings? Did they feel the sting after Senator Chris Murphy praised them for ceasing the sale of Confederate flags but called them out on their gun sales? Even the demands of a Senator won’t overcome the apparent lack of political will to enact more strict gun control, so fear of legislation is not…

I’m the socially-conscious consumer that regulators and NGOs think about when they write disclosure legislation like the Dodd-Frank conflict minerals law that I discussed last week. I drive a hybrid, spend too much money at Whole Foods for sustainable, locally-farmed, ethically-sourced goods, make my own soda at home so I minimize impacts to the environment with cans and plastic bottles, and love to use the canvas bags I get at conferences when I shop at the grocery store. As I (tongue in cheek) pat myself on the back for all the good I hope to do in the world, I realize that I may be a huge hypocrite. I know from my research that consumers generally tell survey takers that they want ethically sourced goods, but they in fact buy on quality, price, and convenience.

I thought about that research when I read the New York Times expose and CEO Jeff Bezos’ response about Amazon’s work environment. As a former defense-side employment lawyer and BigLaw associate for many years, I wasn’t in any way surprised by the allegations (and I have no reason to believe they are either true or false). I have both provided legal defenses and lived…

Today’s post will discuss the DC Circuit’s recent ruling striking down portions of Dodd-Frank conflict minerals rule on First Amendment grounds for the second time. Judge Randolph, writing for the majority, clearly enjoyed penning this opinion. He quoted Charles Dickens, Arthur Kostler, and George Orwell while finding that the SEC rule requiring companies to declare whether their products are “DRC Conflict Free” fails strict scrutiny analysis. But I won’t engage in any constitutional analysis here. I leave that to the fine blogs and articles that have delved into that area of the law. See here, here here, here, here, and more.  The NGOs that have vigorously fought for the right of consumers to learn how companies are sourcing their tin, tungsten, tantalum and gold have had understandably strong reactions. One considers the ruling a dangerous precedent on corporate personhood. Global Witness, a well respected NGO, calls it a dangerous and damaging ruling.

Regular readers of this blog know that I filed an amicus brief arguing that the law meant to defund the rebels raping and pillaging in the Democratic Republic of Congo was more likely to harm than help the intended recipients—the Congolese people.

Last week I attended a panel discussion with angel investors and venture capitalists hosted by Refresh Miami. Almost two hundred entrepreneurs and tech professionals attended the summer startup series to learn the inside scoop on fundraising from panelists Ed Boland, Principal Scout Ventures; Stony Baptiste, Co-Founder & Principal, Urban.Us, Venture Fund; Brad Liff, Founder & CEO, Fitting Room Social, Private Equity Expert; and (the smartest person under 30 I have ever met) Herwig Konings, Co-Founder & CEO of Accredify, Crowd Funding Expert. Because I was typing so fast on my iPhone, I didn’t have time to attribute my notes to the speakers. Therefore, in no particular order, here are the nuggets I managed to glean from the panel.

1) In the seed stage, it’s more than an idea but less than a business. If it’s before true market validation you are in the seed round. At the early stage, there has been some form of validation, but the business is not yet sustainable. Everything else beyond that is the growth stage.

2) The friend and family round is typically the first $50-75,000. Angels come in the early stage and typically invest up to $500,000.

3)…

Among the DGCL amendments this year were a number of amendments to the Delaware Public Benefit Corporation (“PBC”) Law. 

I refer to the Delaware PBC amendments as “The Etsy Amendments” because I believe (without being sure) that a main motivation in passing these amendments was to make it easier for Etsy (among other companies) to become a Delaware PBC. These amendments are effective as of August 1, 2015.

As mentioned in a previous post, Etsy is a certified B corporation and a Delaware C-corporation. According to B Lab’s terms for certified B corporations, Etsy will have to convert to a Delaware PBC by August 1, 2017 or forfeit its certification. This assumes that B Lab will not change its requirements or make an exception for publicly-traded companies.

The amendments to the PBC law are summarized below:

  • Eliminates requirement of “PBC” or “Public Benefit Corporation” in the entity’s formal name. This amendment makes it easier and less costly for existing entities to convert, but the amendment also makes it more difficult for researchers (and the rest of the public) to track the PBCs. In addition to the cost of changing names, Rick Alexander notes in his

…

As I earlier noted, on June 23rd, I moderated a teleconference on proposals to shorten the Section 13(d) reporting period, currently fixed by statute and regulation at 10 days.  If you don’t mind registering with Proxy Mosaic, you can listen to the program.  The link is here.

The discussion was lively–as you might well imagine, given that one of the participants represents activist shareholders and the other represents public companies.  A number of interesting things emerged in the discussion, many (most) of which also have been raised in other public forums on Schedule 13D, including those referenced and summarized here, here, and here, among other places.

  • Exactly how does the Section 1d(d) reporting requirement protect investors or maintain market integrity or encourage capital formation?  Or is it just a hat-tipping system to warn issuers about potential hostile changes of control, chilling the potential for the market for corporate control to run its natural course?  Of course, the answer to many questions about Section 13(d) depends on our understanding of the policy interests being served.  It’s hard to tinker with the reporting  system if we cannot agree on the objectives it seeks to achieve . .

…

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…

Last week I posted the first of three posts regarding doing business in Cuba. In my initial post I discussed some concerns that observers have regarding Cuba’s readiness for investors, the lack of infrastructure, and the rule of law issues, particularly as it relates to Cuba’s respect for contracts and debts. Indeed today, Congress heard testimony on the future of property rights in Cuba and the claims for US parties who have had billions in property confiscated by the Castro government- a sticking point for lifting the embargo. (In 1959, Americans and US businesses owned or controlled an estimated 75-80% of Cuban land and resources). Clearly there is quite a bit to be done before US businesses can rush back in, even if the embargo were lifted tomorrow. This evening, PBS speculated about what life would be like post-embargo for both countries. Today I will briefly discuss the Cuban legal system and then focus the potential compliance and ethical challenges for companies considering doing business on the island.

Cuba, like many countries, does not have a jury system. Cuba’s court system has a number of levels but they have both professional judges with legal training, and non-professional judges who are…

Public opinion polls often make news, but they don’t necessarily improve discourse or policy decisions.  This is true in business and politics, at least where the polls are created primarily for news purposes. Not all polls are bad, of course, and groups like Pew and some others can offer useful starting points for policy discussions. Still we should be skeptical of public opinion polls. 

A new poll released today provides a good example of how unhelpful polls can be. Robert Morris University (RMU) today issued a press release (about a new poll) that says Pennsylvanians “expressed both overwhelming support and strong environmental misgivings, about” hydraulic fracturing (fracking). This framing of the poll does not seem to reveal any inherent inconsistencies. It would be entirely reasonable for people to recognize the potential value fracking for oil and gas can have, while at the same time being worried about the environmental risks that come with fracking (or any other industrial process).  

In fact, I have argued that this is the proper way to consider risks and benefits to help ensure oil and gas operations are as environmentally sound as possible to ensure sustainable development. Unfortunately, the poll indicates some internal inconsistencies among…