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After my long trip away from my wonderful family in western North Dakota, I stopped in Chicago for the ABA Site Evaluation Workshop on my way home.  I’m not quite where my co-blogger is on the whole accreditation thing, but it was not my favorite thing to add another day away from my family. On the plus side, I got to see my brother and his family the night before it, and I appreciated my time with my colleagues from WVU and beyond, so it was okay.  

It was hard to be away, but it sure was a great to get home. I even got to come home to this after a long five days: 

H

On so many levels, I am very, very fortunate. 

The Solicitor General recently filed a brief with the Supreme Court recommending that the Court grant certiorari in the Ninth Circuit case of Moores v. Hildes, No. 13-791.  If the Court takes this recommendation (which I’m guessing it will), it will be the third Section 11 case scheduled to be heard this Term.  (I’ve blogged about the prior two here and here.)

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Daniel K. Tarullo, the Fed governor overseeing regulatory policies, testified before the Senate Banking Committee on Tuesday and signaled the central bank’s intent to increase special capital requirements for the largest banks to 11.5 percent.  The Fed’s plans are more conservative than new international regulations that require 9.5 percent reserves.  The eight banks currently deemed globally significant and therefore subject to the requirements are: Bank of America, Bank of New York Mellon, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, State Street and Wells Fargo.   The market reacted negatively to the news, dropping the stock price of the institutions. 

Even if banking regulations aren’t in your immediate wheel house of interest, an increase in reserves of 3% means about 17B for a bank like Goldman which would pad its reserve through measures like selling stock, holding on to profits or cutting its business operations.  The impact of these regulations could be felt all areas of business (perhaps why these particular banks are considered to be globally significant institutions). These changes will certain spark a lot of debate both in the academic and the practice worlds.

-Anne Tucker

One thing that distinguishes excellent lawyers (or excellent academics, for that matter) is the ability to see more than one side of a legal question—to marshal all the arguments for and against a position, and weigh their relative strengths.

A lawyer drafting a contract needs to foresee the various ways a contract might be interpreted and try to minimize the ambiguities. A lawyer advising a client about regulatory compliance needs to understand the different ways the applicable statutes and regulations might be read. A lawyer litigating a case needs to anticipate her opponent’s best arguments and the weaknesses in her own arguments to be an effective advocate.

But how does one teach open-mindedness to law students? It’s a problem on exams. Students often fixate on one view and ignore any arguments against their chosen positions.

It’s also a problem in the classroom. Once some students have taken a public position, it’s very hard to get them to concede that any argument against that position has validity. And some students come to class having already formulated a position about a particular case or policy issue, making the task even harder.

I have been teaching for over 25 years, and I’m still…

Since Delaware decisions like Boilermakers Local 154 Ret. Fund v. Chevron Corp., 73 A.3d 934 (Del. Ch. 2013) and ATP Tour, Inc. v. Deutscher Tennis Bund, 91 A.3d 554 (Del. 2014), there have been renewed calls for corporations to amend their charters and/or bylaws to require that shareholder lawsuits – including securities lawsuits – be subject to individualized arbitration.

This is actually a big interest of mine – I’m currently working on a paper concerning the enforceability of arbitration clauses in corporate governance documents.  Critically, I do not believe these decisions support the notion that arbitration provisions can control securities claims – at best, they suggest that arbitration provisions in corporate governance documents can control governance claims (i.e., Delaware litigation – concerning directors’ powers and fiduciary duties).

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I began my twenty-ninth year of law school teaching this week. It has now been thirty-six years since I entered law school as a student. Except for  four years of practice, I have been there ever since.

The world has changed significantly, but legal education hasn’t changed much.

When I entered law school in 1978,

  • the Internet was still unknown to the general public, a concept that scientists and the government were still developing. 
  • The personal computer was just beginning to take off, and no one I knew had one. 
  • Laptops were where your child sat.
  • Lexis computerized research was just beginning.
  • PowerPoint presentations did not exist. 
  • You bought your telephone, securely connected to your wall, from Ma Bell.

It’s amazing, given all the changes since then, how little has changed in legal education.

When I began law school, grades were determined primarily by a single end-of-semester exam. In most cases, they still are.

When I began law school, the focus was on the development of analytical skills, and clinical education was secondary. Not much change there (yet).

When I began law school, professors were using chalk and blackboards. They’re now using whiteboards and PowerPoint slides, but primarily just to…

Adam Levitin at Credit Slips has an interesting breakdown of MBS litigation settlements.  He points out that of the $94.6 billion in settlement funds, only 2% has gone to private investors alleging securities-fraud-type claims.

He concludes:

First, it shows that legislative reforms and court rulings have seriously impeded the effectiveness of securities class action litigation. If ever there were an area ripe for private securities litigation, private-label RMBS is it, yet almost all of the recoveries are from six settlements.  This should be no surprise, but it’s rare to see numbers put on the effect.  This is what securities issuers and underwriters have long wanted, and the opposition has mainly been the plaintiffs’ bar, but perhaps investors will take note of the effect too. 

Second, the distribution shows how badly non-GSE investors got shafted. Remember, that private-label securitization was over 60% of the market in 2006. Yet investors have recovered only 38% of that which the GSEs/FHFA have recovered, and most of that is from the trustee settlements or proposed settlements (I’m not sure that any have actually closed). Private securities litigation has recovered a mere 4% of what the GSEs/FHFA have recovered. 

The real question is whether investors have learned that they cannot rely on either trustees or the securities laws to protect them from fraud, and if they have, what they plan to do about it. One sensible thing would be simply to invest in other asset classes. The other would be to try and reform the trustee system and/or the securities laws.

I’m sure there are many reasons for the disparity, but I think one major contributor is a series of rulings narrowing the definition of standing in the class action context. 

(okay, that was my attempt to jazz up a procedural post)

Anyway, these standing issues are now pending – sort of – before the Supreme Court, as I previously posted.  What’s interesting is that these standing rulings have had a dramatic effect on private investors’ ability to bring claims, but they aren’t usually mentioned in the same breath as other, more obvious, limitations on securities class actions. 

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