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BA is a required 4-credit class where I teach. Our school has a social mission and many of the students want to work in criminal defense, family law, immigration, human rights, or anything other than business. I shudder to think of how many (few) students would take the course if the school didn’t force them.

Before the course begins, I send a survey to get an idea of whether they have any business knowledge or experience, and what they hope to learn from the course. Throughout the semester I send them short YouTube videos by law firms and entrepreneurs so that they can understand some of the basics (from what is a stock to what is Reg A+). These videos were produced for lay people and I want my students to learn how to explain complex concepts in plain English- a key asset for any lawyer. To give them extra help and also see what they have learned, I have one extra credit assignment that requires them to write on a television show or movie that addresses business issues and spot what the show gets legally wrong.

Prior to the start of the semester, I also send a list of…

It looks like the Fifth Circuit is becoming increasingly isolated.

After the Supreme Court decided Dura Pharmaceuticals, Inc. v. Broudo, 544 US 336 (2005), a circuit split developed as to how plaintiffs can satisfy the element of loss causation in a Section 10(b) action.

All circuits agree that loss causation can be shown via “corrective disclosures” – some kind of explicit communication to the market that prior statements were false, followed by a drop in stock price.

However, as I’ve discussed before, there has been an alternative theory that plaintiffs can use to show loss causation, even without an explicit corrective disclosure.  The theory is usually described as “materialization of the risk.” It requires the plaintiff to show that the fraud concealed some condition or problem that, when revealed to the market, caused the stock price to drop, even if the market was not made aware that the losses were due to fraud.  For example, a company may report a slowdown in sales, causing its stock price to fall, while concealing the fact that the slowdown was due to an earlier period of channel stuffing.  By the time the channel stuffing is revealed, it may communicate no new…

You may have seen the news that Gretchen Carlson, a former Fox News anchor, is suing Roger Ailes, the Fox News Chair and CEO, for sexual harassment and retaliation.   One of the interesting things about the case is that – like a lot of people – Carlson has an arbitration clause in her contract requiring her to arbitrate all claims arising out of her employment

So how is she able to bring this case?

Well, Carlson is suing Ailes personally – not Fox News.  Her argument is that her arbitration agreement is with Fox News alone; Ailes is not a signatory to the agreement, and cannot benefit from it.

I first have to note that this argument is only available to Carlson at all because Ailes is wealthy, and (I assume) covered by insurance; most employees in similar situations don’t have the option of suing only their harasser (rather than their employer), because most individual harassers are likely to be judgment proof.

Beyond that, is Carlson right?  Is this a way around her arbitration agreement?

Well, according to Richard Frankel, there is a split of authority as to whether arbitration agreements to extend to agents of the signatories…

Speaking of tactics that managers use thwart shareholder activists –

Sean Griffith and Natalia Reisel have posted a new paper to SSRN, Dead Hand Proxy Puts, Hedge Fund Activism, and the Cost of Capital, analyzing the effects of dead hand proxy puts.  These are loan covenants that allow the lender to require complete loan repayment in the event of a change of control that results from an actual or threatened proxy contest, and that cannot be waived by the borrower – i.e., the incumbent directors cannot settle with the dissident, give their blessing to the new directors, and thereby avoid the provisions (the “dead hand”).

Now my instinct on these provisions has always been that they improperly interfere with shareholder suffrage by insulating the incumbent board from the market for corporate control.  I wondered whether these provisions were in fact valued by lenders, or whether they were inserted at the behest of management to protect themselves from challenge, with lender acquiescence/indifference.

But the authors find that these provisions do, in fact, have value to lenders – and thus to corporations.  They are more likely to be adopted by firms that are potential targets of shareholder activists (unsurprising), and, critically…

    When a law professor receives student feedback that his class is boring, should he care?  I once had a discussion with a colleague about this topic who was insistent that students care too much about being “entertained” in class and too little about actually learning the material that is conveyed to them.  While I agree that the ultimate measure of a successful class should be whether the students have learned (and can apply) the material, we shouldn’t downplay the importance of entertainment in facilitating that learning.  Indeed, I think it is wrong to think that our job description does not include “entertainer” almost as much as it does “teacher.”  (If you don’t believe me, try sitting through a colleague’s 75-minute class, as I recently had to do for evaluation purposes.  While time seems to fly as the professor, it moves at a decidedly slower pace when you are in the student’s shoes.)      

    But what does it mean to be an entertainer in class?  Must the professor tell jokes, sing songs, or swallow fire?  While I have no doubt that this would help, of course not.  Students will learn the material better when they are interested and engaged, and being…

It’s family vacation week, and I am letting securities experts provide you interesting and exciting information far beyond what I could put together (frankly regardless of whether I am away from the office or not).  The D&O Diary (a great blog) hosted a guest post by Michael Klausner, Professor of Law, Stanford Law School, and Jason Hegland, Executive Director of Stanford Securities Litigation Analytics reporting on data collected on securities litigation.  Read the full post, Deeper Trends in Securities Class Action Litigation 2006-2015, and look for these highlighted trends:

  • Increased securities class action filing and dismissals
  • Types of cases (overstated earnings and product/operations cases)
  • Targeted industries (technology and health)
  • Role of plaintiffs’ law firms; and
  • Settlement timing (discovery) and amounts

Happy Summer!

-Anne Tucker

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As an expression of love for my country, I do try to wear red, white, and blue on Independence Day and, in fact, for the entire holiday weekend.  This causes some wardrobe challenges for obvious reasons.  And it’s probably more than a bit hokey.

However, I did not plan on coordinating my food choices for the weekend with my sartorial selections!  So, when I opened the lovely yogurt parfait that I made to take to Starbucks for breakfast on Saturday morning, I was delighted and surprised to note its appropriate color scheme (and promptly posted a picture memorializing the same to Facebook).  I include the picture above.

Happy Fourth of July to one and all.  Regardless of whether you are as crazy as I am about celebrating with the colors of the day, I wish you a safe and pleasant holiday.  Happy Birthday, U.S.A.!