I am so amused by this brief opinion in Manti Holdings v. The Carlyle Group.

The case is a continuation of Manti Holdings, LLC v. Authentix Acquisition Co.  There, as many of you know, the Delaware Supreme Court held that a shareholder agreement among sophisticated investors in a private company could waive appraisal rights associated with a merger.

Well, the same shareholders who sought appraisal are now instead suing for breach of fiduciary duty in connection with the merger, and the defendants argued that the same shareholder agreement not only waived appraisal rights, but also waived the right to sue for breach of fiduciary duty.  We know, of course, that you cannot waive fiduciary duties in corporate constitutive documents; the question for VC Glasscock was whether you can waive them in personally-negotiated shareholder agreements.  Glasscock held that he did not need to reach that question, because even if such waiver was possible, the agreement here was not clear about it. 

But his reasoning is what fascinates me.

The agreement required that shareholders “consent to and raise no objections against such transaction,” i.e., the merger, thus raising the question whether an action for fiduciary breach is the equivalent of…

Robert Miller has posted How Would Directors Make Business Decisions Under a Stakeholder Model? on SSRN (here).  The abstract:

Strong forms of the stakeholder model of corporate governance hold that, in making business decisions, directors should consider the interests of all corporate constituencies (employees, customers, suppliers, shareholders, etc.) in such a way that directors may sometimes decide to transfer value to a non-shareholder constituency even though doing so produces no net benefit for shareholders even in the long-term. This article makes four main points about the stakeholder model. First, although its advocates often speak as if the model placed all corporate constituencies on a par, in fact the model uniquely disadvantages shareholders: since the claims of other constituencies arise in contract or by law, directors have no power to invade these claims for the benefit of shareholders; hence, business decisions made under a stakeholder model will often transfer value from shareholders to other constituencies but never from other constituencies to shareholders. Second, although critics of the stakeholder model have long argued that the model provides no definite standard by which directors may decide what to do in particular cases, this greatly understates the point. In fact, the stakeholder…

Previously, I announced that my paper, Capital Discrimination, would be forthcoming in the Houston Law Review, and had just been posted publicly to SSRN.  As I explained in that post, the paper explores the problem of gender discrimination against women as business owners and capital providers, and proposes changes to both statutory law and common law fiduciary duties in order to address gender-based oppression in business.

The paper itself describes several business law cases from different jurisdictions, including Shawe v. Elting, a matter very familiar to business lawyers, and which involved an acrimonious dispute in the Delaware courts.  Just before Christmas, an attorney representing Philip Shawe sent this cease and desist letter to SSRN, demanding that the paper be removed from that site as defamatory. 

On New Year’s Day, SSRN removed the paper in response to Shawe’s letter.  After that, Houston Law Review could no longer assure me that the article would run in its journal, and stated that they would not preclude me from submitting the paper for publication elsewhere.   

Tulane’s counsel has sent a response letter to SSRN in hopes of having the paper restored but for now, to ensure that the paper is…

The SEC has been quite busy recently, and among other proposed rules, there’s this package of reforms that would impose some fairly dramatic new requirements for private funds.  The proposing release documents problems and conflicts in the industry that are both hair-raising and, really, quite well known.  In addition to just generally opaque fees and valuations, fund managers often charge fees to provide services to portfolio firms, which benefit the manager but eat into investor returns; some investors get preferred terms (extra liquidity, relief from fees, selective disclosures) that harm returns to other investors, and ultimately benefit the manager who can maintain relationships with the favored investors, and so forth.

So, in addition to requiring more disclosures to investors, audits, and the like, the SEC is also proposing to flat out prohibit certain practices.  For example, fees associated with a portfolio investment would have to be charged pro rata, rather than forcing some investors or funds to bear more expenses.  Funds would be prohibited from selectively disclosing information to preferred investors, or permitting them to have preferred redemption terms.  Advisors would be prohibited from seeking exculpation or indemnification from liability for breach of fiduciary duty, bad faith, recklessness, or even…

According to their website, on November 15, 2021, the Center for Individual Rights (CIR) filed a complaint alleging workplace political opinion discrimination in the case of Krehbiel v. BrightKey, Inc.  An amended complaint was filed on Jan. 3, 2022.  You can find links to both complaints here.  What follows is a brief description of the case as per CIR (emphasis mine).

On November 15, the Center for Individual Rights filed a political opinion and racial discrimination lawsuit against BrightKey, Inc., a Maryland corporation, which fired its vice president of operations, Greg Krehbiel, over views that he expressed in his off-work podcast. BrightKey violated Krehbiel’s rights under county, state, and federal anti-discrimination law.

In his podcast, Krehbiel questioned diversity hiring requirements and enhanced penalties for “hate crimes.” Other BrightKey employees discovered Krehbiel’s podcast. They objected to the content because his views were the product of “white privilege.” Shortly after discovering the podcast, a group of employees walked out and demanded the company fire Krehbiel. BrightKey swiftly acceded to the employees’ demands.

CIR is suing BrightKey for firing Krehbiel over the political opinions that he expressed in his podcast. Howard County, Maryland is one of many jurisdictions around the country …

On January 25, 2022,  Fulton Superior Court Judge Belinda Edwards issued an order vacating a FINRA arbitration award and finding, among other things that “Wells Fargo and its counsel manipulated the arbitrator selection process.”   Yesterday, the Public Investors Advocate Bar Association (PIABA) issued a statement calling for a Congressional investigation into whether FINRA’s arbitration forum tilts the scales in favor of industry firms by manipulating the arbitrator selection process. The Wall Street Journal has already started covering the fracas.  What happened here? 

This story starts in the standard fashion.  Wells Fargo managed the claimants accounts and allegedly over-concentrated their accounts into single stocks and industries.  When the claimants suffered some losses and complained, Wells Fargo assigned a different broker to their account.  The claimants became increasingly dissatisfied with Wells Fargo’s management of their accounts and eventually brought an arbitration claim in the FINRA forum because their Wells Fargo account opening agreement contains a pre-dispute arbitration agreement.  All perfectly normal.   

Things soon became more interesting.  Wells Fargo hired Terry Weiss as outside counsel to defend it.  The arbitration proceeded in the normal course.  FINRA circulates lists of potential arbitrators for the parties to rank and potentially strike before FINRA assigns…

Dear BLPB Readers,

I hadn’t heard about the FDIC and FinCEN Tech Sprint until today and wanted to help spread the word!  The registration period closes on February 15 at 5p.m. ET, so don’t delay if you’re interested!  A short summary paragraph of the program is below and more information can be found here.

“The Federal Deposit Insurance Corporation (FDIC) and the Financial Crimes Enforcement Network (FinCEN) today announced a Tech Sprint to develop solutions for financial institutions and regulators to help measure the effectiveness of digital identity proofing- the process used to collect, validate, and verify information about a person.  Read more about FDIC and FinCEN’s Tech Sprint, Measuring the Effectiveness of Digital Identity Proofing for Digital Financial Services.”