Uncategorized

Subscribe to Uncategorized via RSS

In ATP Tour, Inc., et al. v. Deutscher Tennis Bund, et al., the Supreme Court of Delaware upheld a fee-shifting provision in a non-stock corporation’s bylaws, providing that unsuccessful plaintiffs in intracorporate litigation would be required to pay the fees and costs of defendants.

The court was answering a certified question from the Third Circuit, and thus was careful to note that it was only answering the question in the abstract, and that any such bylaw would have to be tested in a particular instance to determine if it was equitable.  But the court agreed that the bylaw appropriately concerned the “business of the corporation, the conduct of its affairs,
and its rights or powers or the rights or powers of its stockholders, directors, officers or employees” as the DGCL requires, and therefore was within the power of the directors to adopt.  The court also held that the purpose to deter litigation was not, in the abstract, “improper,” such that the bylaw could be invalidated on that ground.

The court was careful to repeat that this was a “nonstock” corporation, but nothing in the opinion suggests that the outcome would be any different for a publicly-traded corporation.

I’ve…

As a student, I hated exam review sessions. I considered them coercive. I felt compelled to attend even if I had no questions, lest I miss something important the professor might say.

Because of that, I have always been reluctant to hold exam review sessions in my own classes. But I recently realized that technology can eliminate the coercion. As long as I record the review session and make it available to all students, no one is compelled to attend. Students who skip the voluntary review session can check the recording to make sure they didn’t miss anything of interest.

I have been making recordings of my classes available to students for several years, so I should have thought of this much sooner. I usually blame my spouse for my failures, so I’ll try to think of some way to blame this on her as well.

I’m not sure why students still want exam review sessions. In this era of ubiquitous email, you don’t need to have the professor in the room to ask questions. And my email responses are probably better than off-the-cuff answers in class. But, for whatever reason, students still like review sessions and, now that the…

June 6-7 Emory Law’s Conference on Transactional Law–register here; view program here

June 7-9 AALS Workshop on Blurring Boundaries in Financial and Corporate Law–information here; registration here.  (early bird ends today, May 2nd).

-AT

Felix Chang, at the University Of Cincinnati College Of Law, recently posted a draft of his excellent paper, The Systemic Risk Paradox: Banks and Clearinghouses Under Regulation.  The paper will be published in the Columbia Business Law Review (congrats Felix!) in the fall.  I first read Felix’s paper in conjunction with the George Washington University C-Leaf Junior Scholar workshop earlier this spring. After the workshop, I asked him to let me know when a draft was ready to share with BLPB readers, and here is the Abstract:

Consolidation in the financial industry threatens competition and increases systemic risk. Recently, banks have seen both high-profile mergers and spectacular failures, prompting a flurry of regulatory responses. Yet consolidation has not been as closely scrutinized for clearinghouses, which facilitate trading in securities and derivatives products. These nonbank intermediaries can be thought of as middlemen who collect deposits to ensure that each buyer and seller has the wherewithal to uphold its end of the deal. Clearinghouses mitigate the credit risks that buyers and sellers would face if they dealt directly with each other. 

Yet here lies the dilemma: large clearinghouses reduce credit risk, but they heighten systemic risk since the collapse of one

…

I have three really interesting recent books sitting on my reading pile. (Much of my reading is now on a Kindle, so I guess “reading pile” is no longer appropriate.)

Unfortunately, I am unlikely to make a dent in that “pile” for a bit. Exams and a couple of article deadlines are going to keep me busy in the near future. But, just in case some of you have a little more spare time than me, I wanted to bring these important books to your attention.

Erik F. Gerding, Law Bubbles, and Financial Regulation (Routledge 2014).

Gerding is a law professor at the University of Colorado. He examines the history and causes of market bubbles, with special attention to the crisis of 2007-2008, and attempts to fight bubbles. It’s a fairly expensive book so, with apologies to Erik, I suggest you try to find it in your library if you can. If they don’t have it, do what I did and ask your library to order it. An introductory chapter is available here.

Omri Ben-Shahar and Carl E. Schneider, More Than You Wanted to Know: The Failure of Mandated Disclosure (Princeton University Press 2014).

Ben-Shahar is a law professor…

FINRA and NASD rules have long provided that customers must arbitrate individual disputes with their brokers, but that class claims can be brought in court (and are not subject to arbitration).

In 2011, after the Supreme Court’s decision in AT&T Mobility v. Concepcion, the brokerage company Charles Schwab amended all of its customer agreements to require that the customer waive the right to bring class claims and agree to resolve all disputes in individual arbitration.

FINRA brought an enforcement action against Charles Schwab for violation of its rules, and in 2013, a hearing panel concluded that the FINRA rules were unenforceable because they conflicted with the Federal Arbitration Act.

On Thursday, that decision was overruled by the FINRA Board of Governors.  FINRA concluded that its rules, promulgated in conjunction with, and under the oversight of, the SEC, represent valid exercises of regulatory authority that override the FAA.

 Obviously, this conclusion raises a lot of interesting legal questions about the authority of the SEC to abrogate the FAA, and conflicts between the Exchange Act and the FAA (Barbara Black and Jill I. Gross have written extensively on this issue).

But the part that immediately interests me is FINRA’s…

Steve Bainbridge has an excellent post on the insider trading liability of secondary tippees: where, for example, an insider provides nonpublic information to Tippee #1, and Tippee #1 gives that information to Tippee #2.

He argues that Tippee # 2 should be liable under the Dirks case only if Tippee #2 knew or should have known that the insider provided the information for a personal gain. He’s clearly right under Dirks. Dirks says that a tippee is liable only if he knew or should have known that the insider tipped the information in breach of a fiduciary duty, and Dirks says, that for this purpose, a breach of fiduciary duty requires some sort of personal gain. But, as Professor Bainbridge points out, the lower courts have not consistently got this right.