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The North American Securities Administrators Association just released proposed model whistleblower legislation.  At first glance, the legislation looks similar to the federal whistleblower bounty program enacted as a part of Dodd-Frank, only at the state level:

Among other provisions, the proposed model act provides a state’s securities regulator with the authority to make monetary awards to whistleblowers based on the amount of monetary sanctions collected in any related administrative or judicial action, up to 30 percent of the amount recovered. The model act also would protect whistleblower confidentiality, prohibit retaliation by an employer against a whistleblower, and create a cause of action and provide relief for whistleblowers retaliated against by their employer.

NASAA seeks comments by June 30, 2020.  Hopefully, they’ll get plenty of insightful comments informed by studying the flaws with the SEC’s bounty program. 

As Andrew Jennings pointed out to me, the language seems to track the federal language.  This may generate some of the the same difficulties for internal reporters.  At the federal level, whistleblowers who try to work within the organization to fix a problem do not receive the same protection from retaliation as those that go directly to the SEC. 

Although federal law may…

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It’s been 11 weeks since the WHO declared the coronavirus outbreak a pandemic, and the NBA cancelled games. As of this writing, the NY Post reports: Total cases globally = 5,589,626; Deaths = 350,453.

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The World Bank and IMF recently released a joint note, COVID-19: The Regulatory and Supervisory Implications for the Banking Sector (here).  It’s a great resource for those focused on banking, offering “a set of high-level recommendations that can guide national regulatory and supervisory responses to the COVID-19 pandemic” and “an overview of measures taken across jurisdictions to date.”  Annex 1: Overview of Statements and Guidance Provided by Standard-Setting Bodies in Response to the COVID-19 Pandemic is a particularly helpful reference.  

Yesterday’s post by Ann Lipton about DoorDash and pizza arbitrage reminded me that food is a really fun, relatable topic for legal/classroom discussion, especially in a transactional or entrepreneurial law course.  In the current issue of Food & Wine, I enjoyed “From the Lawyer’s Desk,” a short blurb attached to the article, Positive Partnerships One reason why chefs are partnering with hotels to open restaurants? Risk reduction, in which hospitality lawyer, Jasmine Moy, discussed common chef-hotel partnership deals.  Unfortunately, I couldn’t find a link to this for readers, but I did see other legally oriented possibilities (for example, Don’t Open a Restaurant Until You Read This).   

Breath.  Both Joan Heminway and I have…

So, this blog post about DoorDash and pizza arbitrage has been making the internet rounds; you’ve probably already seen it, but if not, it’s well worth a read.  It highlights some of the irrationalities of the platform-food-delivery business – irrationalities that have resulted in losses despite the fact that the pandemic has caused business to boom.  UberEats and GrubHub are now considering a merger, and I suppose their lack of profit might be interpreted as the result of predatory pricing, which would raise antitrust concerns, but honestly it looks more like they are just having trouble making the business model work. 

So what struck me about the blog post was this:

You have insanely large pools of capital creating an incredibly inefficient money-losing business model. It’s used to subsidize an untenable customer expectation. You leverage a broken workforce to minimize your genuine labor expenses. The companies unload their capital cannons on customer acquisition, while this week’s Uber-Grubhub news reminds us, the only viable endgame is a promise of monopoly concentration and increased prices. But is that even viable?  

Third-party delivery platforms, as they’ve been built, just seem like the wrong model, but instead of testing,

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I’ve written about the expungement process stockbrokers now use to suppress public information before.   We know that brokers who receive expungements are statistically more likely to cause harm than the average broker–about 3.3 times as likely to cause harm.  We also know that customers usually don’t get much notice before an expungement hearing will held.  We also know that brokers have used claims for nominal damages to cut costs and ensure that only a single arbitrator will hear the matter.

But I had not yet realized another problem with the system.  Brokers often succeed at expunging information after more than six years have passed.  Generally, a broker should not be able to secure an arbitration award recommending expungement after more than six years from the occurrence or event giving rise to the claim has passed.  I suppose some arbitrators might buy an argument that the presence of the information in the public record creates a type of continuing harm and that the claim continues to arise.  It’s a bit like arguing that a scar from a twenty-year old injury means you should be able to sue about it because seeing the scar continues to harm you.  Of course, many brokerage…

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It’s been ten weeks since the WHO declared the coronavirus outbreak a pandemic, and the NBA cancelled games. As of this writing, the NY Post reports: Total cases globally = 4,897,492; Deaths = 323,285.

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It’s long been blackletter law that a Section 10(b) claim can be rooted in statements that are not targeted to the company’s investors, and are not specifically about the health of the company, so long as investors rely on them, or the speaker should have expected such reliance.  See, e.g., In re Carter-Wallace, Inc. Sec. Litig., 150 F.3d 153 (2d Cir. 1998); Semerenko v. Cendant Corp., 223 F.3d 165 (3d Cir. 2000).  As a result, even product advertisements and other consumer-facing material can form the basis of a securities fraud claim.  Notably, in the recent case of Roberts v. Zuora Inc. et al., 2020 WL 2042244 (N.D. Cal. Apr. 28, 2020), the plaintiffs based their 10(b) claims both on the company’s statements to investors and its general product advertisements, and the court – denying a motion to dismiss – drew no distinction between the two.

Which is why I thought Background Noise? TV Advertising Affects Real Time Investor Behavior by Jura Liaukonyte and Alminas Zaldokas was so interesting (you can read the paper at this SSRN link, and their summary at CLS Blue Sky Blog here).  In the paper, the authors find that after…

States are struggling to figure out the right approach to administering bar exams in the middle of a pandemic.  Nevada has proposed moving to an online bar exam over the summer.  You can find the Nevada proposal and my comment letter here.  There are thoughtful comments from law professors including Claudia Angelos (NYU), Judith Wegner (UNC & Carnegie Report), Debby Merritt (OSU), Andi Curcio (GSU), Carol Chomsky (MN), Sara Berman (now AccessLex), and Eileen Kaufman (Touro), Steven Silva (TMCC), and Lori Johnson (UNLV).  Hopefully we can find a way to administer a fair exam without putting anyone at undue risk.

But I wanted to flag another issue about the Nevada bar exam, one near and dear to Joshua Fershee‘s heart.  Nevada’s official subject matter outline for the Nevada bar calls for exam takers to know about “Limited Liability Corporations.”  It’s listed as a subheading within “Corporations.” I checked the Nevada corporation code, and no such entity exists.  The closest we get is Chapter 86 for limited liability companies.  As Fershee has explained again and again and again and again and again, limited liability companies are not corporations.  There is not real difference between saying “corporation” and “limited…

As reported here,

Thirty-one fellow CEOs wrote May 1 to BlackRock CEO Laurence Fink to argue that a publicly traded company is responsible to investors and shouldn’t engage in politics in the midst of an economic crisis.

What follows are some excerpts from the letter, which can be found in full here.

The word “stakeholder,” when used in this context, is intentionally nebulous. It can mean whatever the user chooses it to mean. And therefore, it means nothing….

any honest assessment of the successful “shareholder” model MUST acknowledge that it is inarguably stakeholder friendly as well. The distinction between the two models is purely cosmetic, an artificial construct purposefully fashioned to sow confusion and to permit its architects to pursue their own ends rather than those of American business.

In most cases, these ends are political. By adopting an explicitly “stakeholder”-centered model, activists are attempting to subvert the great American process of self-government, substituting their own views and beliefs for those of the people. By drawing a false distinction between shareholders and stakeholders, asset managers like BlackRock, CalPERS, and countless others intend to “target” corporations whose business models don’t meet their personal definitions of acceptable behavior. Whether done…

I’ve blogged a lot about the complexities of Delaware’s controlling-stockholder jurisprudence (here, here, here, here, here, and here), and written an essay on the subject.  The latest Chancery opinion on this issue, Gilbert v. Perlman, represents another, unusual, addition to the genre.

In Gilbert, Francisco Partners was the controlling stockholder of Connecture with a 56% stake.  During its tenure, however, it worked closely with Chrysalis Ventures, a firm that it had coordinated with in prior ventures, and who was the next largest Connecture blockholder with an 11% interest.  A Chrysalis partner, Jones, also served as Connecture’s Chair.  Eventually, Francisco proposed to buy out the minority Connecture shareholders in a deal that was neither conditioned on the approval of an independent director committee nor a majority of the minority shareholder vote.

According to the proxy statement, the Connecture board, in the course of its internal deliberations, considered it important that Chrysalis support any proposed transaction.  Chrysalis suggested that it be permitted to roll over its shares in the new entity, which would, it believed, allow Francisco to bump up the price for the remaining minority shareholders.  A few days later,…