On sabbatical, so this was a pretty good semester of reading (for me). 23 books and two online courses. A good bit about contemplation and religion with some philosophy and fiction. The Remains of the Day and A River Runs Through It were probably my two favorite, though the Merton and Willard books were meaningful too.  

Private Government: How Employers Rule Our Lives (and Why We Don’t Talk About it) – Elizabeth Anderson (2017)  (Philosophy). Tanner Lectures on Human Values at Princeton University. Four commenting essays by different professors follow, then Professor Anderson responds. Her main claim is that Adam Smith and others envisioned a free market with large amounts of self-employment. But powerful modern employers have become “unaccountable communist dictators” who use the rhetoric of freedom, but provide very little of it within their firms. Many employees have no “dignity, standing, or autonomy” in their firms and Anderson calls for more of an employee role in governance, perhaps along the German codetermination model. 

Invitation to Solitude and Silence- Ruth Haley Barton (2004) (Religion). “We are starved for quiet, to hear the sound of sheer silence that is the presence of God himself.”

The Stranger – Albert Camus (1942) (Novel). Death, relationships, crime, and the absurd. “I opened myself to the gentle indifference of the world.” 

The Shallows: What the Internet Is Doing to Our Brains – Nicholas Carr (2011) (Culture). Extending Marshall McLuhan’s Understanding Media (1964) and Neil Postman’s Amusing Ourselves to Death (1985) to the Internet. Since reading Postman’s book, I’ve been curious about what he would say about the Internet, and Carr attempts to do some of that work, looking especially at our diminished attention spans. 

My Name is Hope – John Mark Comer (2011) (Religion). Faith, anxiety, and depression. A bit memoir and a bit self-help. Admits that he is not a doctor or a therapist, but posits that there are root situational or historic causes under most cases of anxiety and depression. Makes calls for attention to the mind/body connections, prayer and meditation, and transparency and forgiveness. 

Garden City – John Mark Comer (2015) (Religion). Faith, work, and rest. “The American Dream…has devolved over the years into a narcissistic desire to make as much money as possible, in as little time as possible, with as little effort as possible, so that we can get off work and go do something else.”

Happy Money – Elizabeth Dunn and Michael Norton (2013) (Behavioral Science). Buy experiences, not stuff. Make it a treat, not daily indulgence. Savor. Buy time;  outsource dreaded time-consuming tasks. Time affluence tied to greater happiness. Stay present. The slow movement. Buy now, consume later (“delaying consumption allows spenders to reap the pleasures of anticipation without the buzzkill of reality, vacations provide the most happiness before they occur.”) Invest in others; people who donate to charity report feeling wealthier. 

The Happiness Hypothesis – Jonathan Haidt (2006) (Psychology). Happiness and meaning and positive psychology through the lens of ancient wisdom. Elephant (desire) and the rider (reason). Happiness = Set Point (Meditation, Cognitive Therapy, Prosac) + Living Conditions ($70K, commute, relationships) + Voluntary Activities (gratitude, building community, being useful).

The Remains of the Day – Kazuo Ishiguro (1988) (Novel). British butler ponders duty, dignity, family, love, bantering, and tradition on a few days of countryside driving and reminiscing. 

How to Be an Antiracist – Ibram X. Kendi (2019) (Race). The expectations and comments of his teachers struck me. I have known about the powerful positive potential of our words as professors, but Kendi’s work reminds me that we can do great harm as well. Kendi writes “ I internalized my academic struggles as indicative of something wrong not just with my behavior but with Black behavior as a whole, since I represented the race, both in their eyes – or what I thought I saw in their eyes-and in my own.” He noted that “Black students who have at least one Black teacher in elementary school are 29 percent less likely to drop out of school.” He did a nice job showing problems with standardized testing, but did not have much in terms of detailed proposals in changing college admissions. 

The Practice of the Presence of God – Brother Lawrence (1895) (Religion). “His only thought was about doing little things for the love of God, since he was not capable of doing great things. Afterward, whatever happened to him would be according to God’s will, so he was not at all worried about it.” “Our sufferings will always be sweeter and more pleasant when we are Him, and without Him, our greatest pleasure will be but a cruel torture.” “I would like to be able to persuade you that God is often nearer to us in our times of sickness and infirmity than when we enjoy perfect health.” 

Abolition of Man – C.S. Lewis (1943) (Education). Short book on education, truth, the doctrine of objective value, recognizing our flaws (Lewis did not like being around small children). justice, and valor. 

Extraterrestrial: The First Signs of Intelligent Life Beyond Earth- Avi Loeb (2021) (Space). Harvard astronomy professor discusses Oumaumua, an odd interstellar object, sighted for 11 days in October of 2017 and the possibility that we are not alone in the universe. He bemoans the closed mindedness of some academic disciplines and argues for humility (even as he brags a bit about his accomplishments). 

A River Runs Through It – Norman Maclean (1989) (Novel). Family and fishing. Younger brother, troubled and beautiful. Supposedly first novel published by University of Chicago Press.  

No Man is an Island- Thomas Merton (1955) (Religion). OK to be ordinary. “All things are at once good and imperfect. The goodness bears witness to the goodness of God. But the imperfection of all things reminds us to leave them in order to live in hope. They are themselves insufficient. We must go beyond them to Him in Whom they have their true being.” “Everything in modern city life is calculated to keep man from entering into himself and thinking about spiritual things. Even with the best of intentions a spiritual man finds himself exhausted and deadened and debased by the constant noise of machines and loudspeakers, the dead air and the glaring lights of offices and shops, the everlasting suggestions of advertising and propaganda.” (108-09). “The cornerstone of all asceticism is humility.” (113). “A [person] who is not at peace with himself projects his interior fighting into the society of those he lives with, and spreads a contagion of conflict all around him….In order to settle down in the quiet of our own being we must learn to be detached from the results of our own activity. We must withdraw ourselves, to some extent, from effects that are beyond our control and be content with the good will and the work that are the quiet expression of our inner life…Our Christian identity is, in fact, a great one; but we cannot achieve greatness unless we lose all interest in being great.” 

New Seeds of Contemplation- Thomas Merton (1964) (Religion). “There is no true peace possible for the man who still imagines that some accident of talent or grace or virtue segregates him from other men and places him above them” “Hate in any form is self-destructive, and even when it triumphs physically it triumphs in its own spiritual ruin.”  “Hurry ruins saints as well as artists.” “If we were incapable of humility we would be incapable of joy, because humility alone can destroy the self-centeredness that makes joy impossible.” “A humble man can do great things with an uncommon perfection because he is no longer concerned about incidentals, like his own interests and his own reputation, and therefore he no longer needs to waste his efforts in defending them.” 

In the Name of Jesus – Henri Nouwen (1989) (Religion). From Harvard to working with people with mental challenges at L’Arche. Brought Bill with him to talk to aspiring ministers in Washington D.C. – “we did it together.”

Can You Drink the Cup? – Henri Nouwen (1996) (Religion). “Joys are hidden in sorrow.” “We want to drink our cup together and thus celebrate the truth that the wounds of our individual lives, which seem intolerable when lived alone, become sources of healing when we live them as part of a fellowship of mutual care.” 

The Tyranny of Merit – Michael Sandel (2020) (Philosophy). Even if we had a level playing field, the talented would win and talent is not deserved or earned. A bit short on solutions, but suggests a lower bar for elite college admissions and then lottery to select who goes. Thinks this would inject a bit of humility into the process and dispel that elite college admissions is earned by the individual. 

The Ethics of Authenticity – Charles Taylor (1991) (Philosophy). Searches for a nuanced view of authenticity–exploring subjectivism, narcissism, apathy, horizons of significance, dialogue, and social traditions. (Lectures entitled “Malaise of Modernity”)

The Spirit of the Disciplines – Dallas Willard (1988) (Religion). Disciplines of Abstinence (solitude, silence, fasting, frugality, chastity, secrecy, sacrifice). Disciplines of Engagement (study, worship, celebration, service, prayer, fellowship, confession, submission).

The Great Omission – Dallas Willard (2014) (Religion). The great commission is not just about conversions, but about making *disciples* of all kinds of people. 

Called to Business – Dallas Willard (2019) (Religion) Extremely short book. A few articles on faith and work; serving others while making a living. 

Selected Listening.

The Promise Podcast (2020) – ~5 hours. Season 2. East Nashville public schools, diversity, wealth, and school choice. 

Justice. Professor Michael Sandel (Harvard) (edX Online).

Philosophy and Science of Human Nature – Tamar Gendler (Yale) (Open Online).

A few weeks ago, I posted on COVID-19 and business interruption insurance, quoting from part of a forthcoming coauthored article presented at the Business Law Prof Blog symposium last fall.  This week, I am posting a few more teaser paragraphs from that same article, which focuses overall on business law issues, practice changes, and professional responsibility challenges emanating from the pandemic.  Today’s excerpts focus on lawyers working from home.  Second-year UT Law student Anne Crisp is the primary author of the part of the paper that includes these paragraphs (from which footnotes have been omitted).

 . . . While the work-from-home movement was already taking off in many sectors prior to COVID-19, the legal sector had been slow to adopt this working model. Leaving aside multijurisdictional practice challenges, lawyer resistance to remote work has been attributed in large part to the perceived relationship-based nature of lawyering and the perception that at least some clients expect to meet with their legal counsel in well-appointed offices. But along came COVID-19, and lawyers could no longer avoid the pull of the work-from-home movement. If lawyers wanted to bill hours, they were going to have to work from home.

As lawyers began working from home, law offices were forced to enhance their technological resources and capabilities to meet the needs of the firm and to confront the technological challenges associated with such developments. Issues around laptop-versus-desktop use, home Wi-Fi capacity and security, and virtual private networks emerged as pressing problems to address. Lawyers, like everyone else in the world, began using videoconferencing and telecommunication platforms such as Zoom to meet with clients, colleagues, and the courts on a regular basis, rather than in specific circumstances. Lawyers adapted to the work-from-home model not by choice, but out of necessity.

Law firms also had to address security concerns that arise as a result of remote working. Malware infections, hacking, and other challenges are more difficult to prevent once workers are no longer regularly connected to a law office’s computer network. Firms with appropriate cybersecurity systems in place had to ramp up their availability to cover more workers; those without appropriate security technologies needed to acquire and implements them on an urgent basis.

Moreover, communication complications became manifest, and the need to address them holistically became important. “In a remote working world, everyone’s delegation/supervision/feedback skills must be even better—more frequent, more clear and more realistic—than usual.” For example, in a private firm, a practice group leader may need to intentionally ask how an individual is doing because the leader can no longer gauge this based on their interaction with the individual in the office. Junior lawyers in office settings must be more transparent and realistic about their own constraints as their home environments change. It has also become more important for junior lawyers to take clear ownership of the work they are doing so that senior lawyers, whose focus is on more directly helping clients navigate the issues arising, can more easily monitor who is working on what and keep track of the status of projects. Before the pandemic, communication challenges of the kinds mentioned here may have been barriers to lawyers working from home. Now, lawyers have no choice but to overcome them.

While the work-from-home movement has presented new challenges surrounding security and communication, it has also produced some positive effects. Working from home often creates a more relaxed work environment that has been shown to lead to more creativity. Additionally, lawyers are enjoying the benefits of having no commute. Many lawyers have liked working from home so much that they hope to continue to do so once the pandemic is over. It remains to be seen whether law firms will allow them to continue to do so in a post-pandemic world.

There is so much I could say about all this.  But I will confine myself here to two points, both stemming from the text of that last quoted paragraph. The positive aspects of lawyers’ adaptive work-from-home lives generate their own set of challenges. 

First, law firms are making decisions about the extent to which they will allow work-from-home after the pandemic.  (So are law schools.)  The managing shareholder of a regional law firm’s Knoxville office participated in my Advanced Business Associations class last week, and he indicated his concern that new and junior associates be physically present in the office in order to ensure that they are exposed and acclimate to the firm’s culture. 

Second, return-to-the-workplace mandates will result in some bumpy transitions back to full in-person operations.  Child, elder, and general family care routines devised for use during the pandemic may be as (or more) difficult to unwind than they were to create.  For many, it is not an option to merely go back to the way things were before COVID-19.

I suspect that, as we come out of the pandemic, different firms will handle 2021 work location transitions in different ways based on their size, market, reputation, culture, and more.  The type of work being performed by the lawyers and client preference are likely to play specific guiding roles in the analysis.  This certainly will be an area to watch.

The Eastern District of Pennsylvania recently issued a lengthy opinion, largely refusing to dismiss a Section 10(b) complaint alleging that Energy Transfer LP made a series of misstatements about certain pipelines that were under construction.  See Allegheny County Employees’ Ret. Sys. v. Energy Transfer LP, 2021 WL 1264027 (E.D. Pa. Apr. 6, 2021). There’s probably a lot worth examining here but I’m actually just going to use it as a jumping off point to talk about the PSLRA safe harbor.

The safe harbor insulates forward-looking statements from private securities fraud liability if:

(A) the forward-looking statement is—

(i) identified as a forward-looking statement, and is accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statement; or…

(B) the plaintiff fails to prove that the forward-looking statement–

(i) if made by a natural person, was made with actual knowledge by that person that the statement was false or misleading; …

(2) Oral forward-looking statements

In the case of an oral forward-looking statement …the requirement set forth in paragraph (1)(A) shall be deemed to be satisfied–

(A) if the oral forward-looking statement is accompanied by a cautionary statement—

…(ii) that the actual results might differ materially from those projected in the forward-looking statement; and

(B) if–

(i) the oral forward-looking statement is accompanied by an oral statement that additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statement is contained in a readily available written document, or portion thereof;

(ii) the accompanying oral statement referred to in clause (i) identifies the document, or portion thereof, that contains the additional information about those factors relating to the forward-looking statement; and

(iii) the information contained in that written document is a cautionary statement that satisfies the standard established in paragraph (1)(A).

15 U.S.C 78u-5.

There are certain preconditions, then, for safe harbor protection based on cautionary language: first, that the statements be identified as forward-looking explicitly, and second, that the cautionary language be included in a written document, or incorporated by reference if made orally.

In Energy Transfer, the court concluded that while some of defendants’ forward-looking statements qualified for safe harbor protection based on cautionary language, some did not meet the preconditions, see 2021 WL 1264027, at *5, *9, and went on to conclude that the plaintiffs had adequately alleged claims based on some of the unprotected ones.

The reason this intrigues me is that, as far as I know, courts have been rather free with allowing defendants to claim the protection of the safe harbor even if they fail to meet the preconditions (for example, if they fail to incorporate the warnings by reference in an oral statement, or try to incorporate by reference for a written one), so long as the cautionary language appears somewhere in a public document.  The Seventh Circuit laid out the rationale in Asher v. Baxter Int’l, 377 F.3d 727 (7th Cir. 2004).  (Disclosure: I was one of the attorneys representing the plaintiffs in Asher v. Baxter).  In that case, the Seventh Circuit said:

When speaking with analysts Baxter’s executives did not provide them with …directions to look in the 10–K report for the full cautionary statement. It follows, plaintiffs maintain, that this suit must proceed with respect to the press releases and oral statements even if the cautionary language filed with the SEC in registration statements and other documents meets the statutory standard.

…[T]his is not a traditional securities claim. It is a fraud-on-the-market claim. None of the plaintiffs asserts that he read any of Baxter’s press releases or listened to an executive’s oral statement. Instead the theory is that other people (professional traders, mutual fund managers, securities analysts) did the reading, and that they made trades or recommendations that influenced the price. In an efficient capital market, all information known to the public affects the price and thus affects every investor. …

When markets are informationally efficient, it is impossible to segment information as plaintiffs propose. They ask us to say that they received (through the price) the false oral statements but not the cautionary disclosures. That can’t be; only if the market is inefficient is partial transmission likely, and if the market for Baxter’s stock is inefficient then this suit collapses because a fraud-on-the-market claim won’t fly.

The problem with that logic, though, is that PSLRA safe harbor protection is not predicated on the idea that cautionary statements will impact prices in the same way as the initial false statement and thereby nullify the effects of the lie.  True, the common law bespeaks caution doctrine insulates all forward looking statements if cautionary language renders them immaterial, Harden v. Raffensperger, Hughes & Co., 65 F.3d 1392 (7th Cir. 1995), but the PSLRA standards are more forgiving.  Defendants need only identify “important factors that could cause actual results to differ materially from those in the forward-looking statement,” 15 U.S.C. § 78u-5(c)(1)(A)(i), and “[f]ailure to include the particular factor that ultimately causes the forward-looking statement not to come true will not mean that the statement is not protected by the safe harbor.” H.R. Conf. Rep. No. 104-369, at 44 (1995).

Under the PSLRA, then, courts rarely, if ever, test whether the cautionary language was sufficient to offset the misleading effects of the projection.  This is precisely why some courts have described the safe harbor as a “license to defraud,” In re Stone & Webster, Inc., Sec. Litig., 414 F.3d 187 (1st Cir. 2005) – because even if the cautionary language is insufficient to nullify the effects of the false statement – so that, by hypothesis, markets were actually misled by the projection – defendants may still be protected.

Given that, the Seventh Circuit’s invocation of the fraud-on-the-market doctrine seems inapposite, because the cautionary language that suffices to trigger safe harbor protection isn’t really about ensuring that prices fully incorporate the risks associated with false projections, or at least, that’s not its primary function. Plus, Congress enacted the PSLRA in response to what it perceived as abusive class actions – if it wanted to distinguish between the preconditions for fraud-on-the-market actions and other actions, it certainly could have done so.

If all that’s right, then what does the safe harbor do? 

Well, I’m not a fan of the safe harbor but if I am going to justify it, I’d say the formalities associated with the safe harbor could prompt mindfulness on the part of corporate actors.  They have extra protection for projections – so they’ll be more inclined to make them – but they also know they can’t simply speak off-the-cuff; they must take care to include the warnings.  That enforced thoughtfulness may itself serve as some kind of protection against statements that aren’t rooted in reality, and it’s why the Seventh Circuit, in my view, was wrong to ditch the formalities.  Also, if defendants were truly held to the requirement that they identify which exact statements they believed to be forward-looking as a precondition of claiming protection via cautionary language, I think that would spare everyone a lot of litigation and force corporate speakers to be clearer about their claims. 

Anyway, in related news, Acting Corp Fin Director John Coates recently delivered a speech on the safe harbor and SPACs.  Going public via SPAC, rather than traditional IPO, is all the rage right now, apparently at least in part because while traditional IPOs are excluded from safe harbor protection entirely, the de-SPAC merger is not.  Specifically, the safe harbor says:

this section shall not apply to a forward-looking statement… that is… made in connection with an initial public offering…

15 U.S.C. 78u-5(b)(2)(D).

That regulatory distinction has led to some companies to offer wildly optimistic projections about SPAC acquisitions, a lot of which do not, ahem, come true.

Coates’s speech was notable in that he not only objected to the differential regulatory treatment on policy grounds – as he explained, companies going public for the first time pose particular risks to investors no matter what method they use to do so – but he also suggested that, read broadly, the existing safe harbor exclusion for initial public offerings might also be read to exclude de-SPAC transactions.  Full quote:

[T]he PSLRA’s exclusion for “initial public offering” does not refer to any definition of “initial public offering.” No definition can be found in the PSLRA, nor (for purposes of the PSLRA) in any SEC rule. I am unaware of any relevant case law on the application of the “IPO” exclusion. The legislative history includes statements that the safe harbor was meant for “seasoned issuers” with an “established track-record.”…

The economic essence of an initial public offering is the introduction of a new company to the public. It is the first time that public investors see the business and financial information about a company….

If these facts about economic and information substance drive our understanding of what an “IPO” is, they point toward a conclusion that the PSLRA safe harbor should not be available for any unknown private company introducing itself to the public markets. Such a conclusion should hold regardless of what structure or method it used to do so. The reason is simple: the public knows nothing about this private company. Appropriate liability should attach to whatever claims it is making, or others are making on its behalf…

[A]ll involved in promoting, advising, processing, and investing in SPACs should understand the limits on any alleged liability difference between SPACs and conventional IPOs. Simply put, any such asserted difference seems uncertain at best.

It should be noted that Commissioner Hester Peirce tweeted her (tentative) disagreement with his reading of the statute, but if he’s right, it would mean that all these companies who thought their cautionary language insulated them from liability … were, you know, wrong.

As regular readers of the blog know, my passion is business and human rights, particularly related to supply chain due diligence and disclosure. The ABA has just released thirty-three model clauses  based on the United Nations Guiding Principles on Business and Human Rights, and the OECD Due Diligence Guidance for Responsible Business Conduct. The ABA committee’s reasoning for the model clauses is here:

The human rights performance of global supply chains is quickly becoming a hot button issue for anyone concerned with corporate governance and corporate accountability. Mandatory human rights due diligence legislation is on the near-term horizon in the E.U. Consumers and investors worldwide are increasingly concerned about buying from and investing in companies whose supply chains are tainted by forced or child labor or other human rights abuses. Government bodies such as U.S. Customs and Border Protection are increasingly taking measures to stop tainted goods from entering the U.S. market. And supply chain litigation, whether led by human rights victims or Western consumers, is on the rise. There can therefore be little doubt that the face of global corporate accountability for human rights abuses within supply chains is changing. The issue is “coming home,” in other words. … Some of the key MCCs 2.0 obligations include: (1) Human Rights Due Diligence: buyer and supplier must each conduct human rights due diligence before and during the term of the contract. This requires both parties to take appropriate steps to identify and mitigate human rights risks and to address adverse human rights impacts in their supply chains. (2) Buyer Responsibilities: buyer and supplier must each engage in responsible sourcing and purchasing practices (including practices with respect to order changes and responsible exits). A fuller description of responsible purchasing practices is contained in the Responsible Buyer Code of Conduct (Buyer Code), also developed and published by the Working Group. (3) Remediation: buyer and supplier must each prioritize stakeholder-centered remediation for human rights harms before or in conjunction with conventional contract remedies and damage assessments. Buyer must also participate in remediation if it caused or contributed to the adverse impact.

Even if you’re not obsessed with business and human rights like I am, you may find the work product provides an interesting context in which to discuss contract clauses such as representations, warranties, and damages either in a first-year contract course or a transactional drafting course. 

The AALS Section on Business Associations has two calls for papers.  Both are below.

 

Call for Papers for the

Section on Business Associations Program on

Race and Teaching Business Associations

January 5-9, 2022 AALS Annual Meeting

The AALS Section on Business Associations is pleased to announce a Call for Papers for its program at the 2022 AALS Annual Meeting, which will be held virtually. The topic is Race and Teaching Business Associations. Up to two presenters will be selected for the section’s program.

Business Associations classes taught in most law schools spend little if any time on issues relating to racial discrimination and inequity. But as important social institutions, businesses have long had a significant impact on racial equity. The increasing scrutiny of the lack of diversity on public company boards is one of several fronts where businesses are facing both legal and social pressure to address racial inequity. Students are increasingly interested in understanding how the law governing business organizations reflects or contributes to racial injustice. Many law professors want to do more to cover topics relating to race in their Business Associations course and are seeking guidance on how to do so. This panel will provide a forum where teachers of Business Associations can share ideas for incorporating the subject of racial discrimination and inequity into their classes. 

Submission Information:

Please submit an abstract or a draft of an unpublished paper to Jim Park, james.park@law.ucla.edu, on or before Friday, August 20, 2021.  Authors should include their name and contact information in their submission email but remove all identifying information from their submission.  Papers will be selected after review by members of the Executive Committee of the Section. Presenters will be responsible for paying their registration fee, if applicable. 

We recognize that the past year has been incredibly challenging and that these challenges have not fallen equally across the academy.  We encourage scholars to err on the side of submission, including by submitting early stage or incomplete drafts.  Scholars whose papers are selected will have until December to finalize their papers.   

Please direct any questions to Jim Park, UCLA School of Law, at james.park@law.ucla.edu.  

 

This is the second:

 

Call for Papers

AALS Section on Business Association

New Voices in Business Law

January 5-9, 2022, AALS Annual Meeting

The AALS Section on Business Associations is pleased to announce a “New Voices in Business Law” program during the 2022 AALS Annual Meeting, which will be held virtually. This works-in-progress program will bring together junior and senior scholars in the field of business law for the purpose of providing junior scholars with feedback and guidance on their draft articles. To complement its other session at the Meeting, this Section is especially interested in papers relating to race and business law, but it welcomes submissions on all business-related topics.

FORMAT:  Scholars whose papers are selected will provide a brief overview of their paper, and participants will then break into simultaneous roundtables dedicated to the individual papers.  Two senior scholars will provide commentary and lead the discussion about each paper.

SUBMISSION PROCEDURE:  Junior scholars who are interested in participating in the program should send a draft or summary of at least five pages to Professor Eric Chaffee at Eric.Chaffee@utoledo.edu on or before Friday, August 20, 2021.  The cover email should state the junior scholar’s institution, tenure status, number of years in his or her current position, whether the paper has been accepted for publication, and, if not, when the scholar anticipates submitting the article to law reviews.  The subject line of the email should read: “Submission—Business Associations WIP Program.”

Junior scholars whose papers are selected for the program will need to submit a draft to the senior scholar commentators by Friday, December 10, 2021.

ELIGIBILITY:  Junior scholars at AALS member law schools are eligible to submit papers.  “Junior scholars” includes untenured faculty who have been teaching full-time at a law school for ten or fewer years.  The Committee will give priority to papers that have not yet been accepted for publication or submitted to law reviews. 

Pursuant to AALS rules, faculty at fee-paid non-member law schools, foreign faculty, adjunct and visiting faculty (without a full-time position at an AALS member law school), graduate students, fellows, and non-law school faculty are not eligible to submit.  Please note that all presenters at the program are responsible for paying their own annual meeting registration fees and travel expenses.  

Professor Christina Parajon Skinner recently posted her new article, Central Bank Activism (forthcoming, Duke Law Journal).  The topic couldn’t be more timely or important.  Here’s the abstract:

Today, the Federal Reserve is at a critical juncture in its evolution. Unlike any prior period in U.S. history, the Fed now faces increasing demands to expand its policy objectives to tackle a wide range of social and political problems—including climate change, income and racial inequality, and foreign and small business aid.

This Article develops a framework for recognizing, and identifying the problems with, “central bank activism.” It refers to central bank activism as situations in which immediate public policy problems push central banks to aggrandize their power beyond the text and purpose of their legal mandates, which Congress has established. To illustrate, the Article provides in-depth exploration of both contemporary and historic episodes of central bank activism, thus clarifying the indicia of central bank activism and drawing out the lessons that past episodes should teach us going forward.

The Article urges that, while activism may be expedient in the near term, there are long-term social costs. Activism undermines the legitimacy of central bank authority, erodes its political independence, and ultimately renders a weaker central bank. In the end, the Article issues an urgent call to resist the allure of activism. And it places front and center the need for vibrant public discourse on the role of a central bank in American political and economic life today.  

Just a quick reminder that paper submissions for the National Business Law Scholars Conference for this year are due on or before April 9–this Friday.  The conference is scheduled for June 17-18, 2021 and is being hosted by The University of Tennessee College of Law in a hybrid or virtual format.  Submissions can be made through the conference website.

The full call for papers is posted here.  Feel free to leave comments or questions below.  Questions also can be directed to Eric Chaffee, the member of the planning committee in charge of program structuring logistics.

When Goldman Sachs petitioned the Supreme Court to grant certiorari from the Second Circuit’s affirmance of a class certification grant, it described the case as having “enormous legal and practical importance,” and later reiterated that it would be “hard to overstate the legal and practical importance of this case.”

By the time we got to oral argument, though … not so much.

I blogged about Goldman Sachs v. Arkansas Teacher Retirement System when it was before the Second Circuit (see here and here), but I only minimally discussed the Supreme Court iteration, in part because I couldn’t figure out what the legal issue was, other than that Goldman thought Amgen Inc. v. Connecticut Ret. Plans & Tr. Funds, 568 U.S. 455 (2013) was wrongly decided.

Well, that was my mistake, because it’s clear now that in fact, Goldman does not think that Amgen was wrongly decided, and the legal issue is that it doesn’t like the fact that it lost in the Second Circuit Court of Appeals.

That was evident in the briefing, in which it invited the Supreme Court to review the expert evidence submitted to the district court and reweigh it in its favor. (Seriously. Check out the Reply Brief at 8-9, 19-21)

Goldman does have a whole separate argument about Federal Rule of Evidence 301 and who has the burden of production/persuasion when it comes to the issue of reliance at class certification.  This idea was first proposed, as far as I can tell, in an article by Wendy Couture, but was rejected by the Second Circuit in Waggoner v. Barclays PLC, 875 F.3d 79 (2d Cir. 2017).  I won’t weigh in on that piece except to say that most Justices – with Alito and Gorsuch as exceptions – did not seem interested, but then, it’s hard to say with remote arguments because there isn’t room for the kind of back and forth you get with in-person presentations.  So it’s possible the Rule 301 argument here is a wild card, but I don’t know anything about it and will therefore skip it.

So, all that aside, what’s going on here?

The plaintiffs alleged that Goldman falsely claimed to adhere to high ethical standards when managing its conflicts of interest, and that these statements were revealed to be false when various governmental entities filed enforcement actions.  Goldman argued that its statements were immaterial as a matter of law, and when it lost on that argument, it argued at class certification that these statements were too generic to have had any impact on the price of its securities.  The district court found that Goldman had not rebutted the presumption of price impact and certified the class.  Goldman appealed to the Second Circuit, where it argued that the “generic” nature of the statements defeated class certification as a matter of law in any case where the plaintiffs argued that the false statements maintained stock prices rather than initially inflating them.  The Second Circuit, by a 2-1 vote, rejected that claim as inconsistent with Amgen.

Before the Supreme Court, Goldman’s argument underwent a makeover. As you can see from the transcript, it abandoned any claim that, at the class certification stage, courts should determine whether statements are too generic to impact price as a matter of law, whether in the price maintenance context or anywhere else.  Instead, it argued that “genericness” is a relevant fact to be considered at class certification in service of the price impact inquiry, along with any other evidence on the subject.  Goldman’s claim was not that courts should revisit the question of materiality at class cert – which tests what a hypothetical reasonable investor would have thought about the statements – but that in weighing whether the statements actually had an effect on prices, it is legitimate for courts to consider the generic nature of the statements at issue.  And it further argued that the Second Circuit erred by rejecting the notion that genericness can ever be considered as relevant to the price impact inquiry.

In other words, Goldman drew a distinction between materiality, which concerns whether there is a “substantial likelihood” that a “reasonable investor” would have traded on the information, and price impact, which concerns whether there actually was an effect on stock prices.  See Petitioners’ Brief at 32.  All relevant facts, said Goldman, should be part of the impact inquiry, and genericness is a relevant fact even if it is also relevant to materiality.

At this point, the plaintiffs agreed with Goldman that genericness is a relevant fact to be considered by courts as part of the price impact inquiry, subject to appropriate expert evaluation.  And, the plaintiffs pointed out, Goldman actually submitted evidence in this case to the district court that the genericness of the statements meant that there was no price impact – there was a whole expert report on the subject.  But the district court certified the class despite that report.  See Resp. Brief at 11-12.

Which meant, the disagreement between the parties boiled down to whether (1) the Second Circuit had erred by rejecting the notion that genericness is relevant if not dispositive and (2) whether the Supreme Court should itself reweigh the evidence and determine that Goldman’s carried the day.

Let’s assume (2) is off the table.  Come on.

The question then is whether the Second Circuit, considering Goldman’s appeal from the district court’s class cert decision, improperly refused to allow the generic nature of the statements to play any role in the price impact inquiry.

And that depends on how you read the Second Circuit’s opinion.

On the one hand, the Second Circuit held: “Whether alleged misstatements are too general to demonstrate price impact has nothing to do with the issue of whether common questions predominate over individual ones.” Ark. Teachers Ret. Sys. v. Goldman Sachs, 955 F.3d 254 (2d Cir. 2020).

Sounds pretty definitive, right?  The Second Circuit seems here to be clearly rejecting the notion that genericness should even be part of the evidence.

On the other hand, the Second Circuit made those statements in response to arguments by Goldman that genericness should be determinative of the price impact inquiry.

Which is why the Solicitor General admitted that the Second Circuit could be read either way – maybe it meant that genericness is categorically irrelevant, but maybe it meant only to reject Goldman’s argument at the time that genericness was dispositive.  See Brief of U.S. at 26; see also Transcript at 45-46.

So the parties are functionally reduced to fighting over what the Second Circuit meant, and whether the Supreme Court should vacate the Second Circuit’s opinion for a do-over, or whether the Supreme Court should affirm but clarify that it understands the Second Circuit to not have categorically barred the introduction of evidence of genericness at the class certification stage.

Let’s just say that on this question, I’m with Justice Breyer: “this seems like an area that the more that I read about it, the less that we write, the better….”

We are looking to make up to two tenure-track hires at Mississippi College School of Law. I’m chairing the search committee, so please don’t hesitate to reach out to me directly if you are interested. Here’s the announcement:

Mississippi College School of Law invites applications from entry-level candidates for multiple tenure-track faculty positions expected to begin July 2021. Our search will focus primarily on candidates with an interest in teaching one or more of the following courses: Contracts, Professional Responsibility, Business Associations, Commercial Paper, Antitrust, Wills and Estates, Trusts, Domestic Relations, Criminal Procedure, Evidence, and Trial Advocacy. We seek candidates with a distinguished academic background (having earned a J.D. and/or Ph.D.), a commitment to excellence in teaching, and a demonstrated commitment to scholarly research and publication. We particularly encourage applications from candidates who will enrich the diversity of our faculty. We will consider candidates listed in the AALS-distributed FAR, as well as those who apply directly. Applications should include a cover letter, curriculum vitae, a scholarly research agenda, the names and contact information of three references, and teaching evaluations (if available). Applications should be sent in a single PDF to Professor John P. Anderson, Chair, Faculty Appointments Committee, via email at jpanders@mc.edu.

Christina Sautter and Sergio Alberto Gramitto Ricci recently uploaded Corporate Governance Gaming to SSRN.  This is the abstract:

The GameStop saga and meme stock frenzy have shown the pathway to the most disruptive revolution in corporate governance of the millennium. New generations of retail investors use technologies, online forums, and gaming dynamics to coordinate their actions and obtain unprecedented results. Signals indicate that these investors, whom we can dub wireless investors, are currently expanding their actions to corporate governance. Wireless investors’ generational characteristics suggest that they will use corporate governance to pursue social and environmental causes. Their engagement with corporate governance has the potential to spark a social movement. The movement would be based on disintermediation of investments and aimed at bringing business corporations to serve their original partly-private-partly-public purpose. This article discusses premises, architecture, and characteristics of the movement that would cause business corporations to re-marry their partly-private-partly-public purpose. If such a movement proves successful, the paradigm shift that finally makes corporations serve the welfare of a broader range of stakeholders would happen at the hands of shareholders.

Sautter and Gramitto are the first I know of to tackle what the new dynamics the Gamestop affair ushered in mean for corporate governance.  As I read through the paper, I thought about how the SEC now grapples with how to oversee securities markets with retail investors trading meme stocks.  Sautter and Gramitto are likely right in predicting that younger retail investors may be more inclined to vote and may prioritize ESG matters in ways that institutional intermediaries have not.  They even document evidence of massive retail investor coordination now occurring around shareholder votes for certain memestock companies. 

Changes in the regulatory environment may accelerate retail investor impact on corporate governance.  The Biden-era SEC seems poised to carefully consider how investor demands and preferences have changed.  The SEC may soon facilitate ESG disclosures of intense interest to retail investors.  Meaningful ESG disclosures would likely catalyze the dynamics Sautter and Gramitto recognize.

Sautter and Gramitto are also correct that social media has diminished coordination costs for retail investors, enabling them to organize, strategize, and vote on governance matters in ways that we have not seen before.  If these shareholders vote for directors who prioritize ESG issues as Sautter and Gramitto predict, they will shift corporate behavior, possibly reducing short-term thinking and increasing corporate focus on ESG issues. 

Ultimately, the return of retail investor voice to corporate governance may moot debates over corporate purpose.  As Utah’s Jeff Schwartz pointed out, securities market dynamics have largely forced corporate management to single mindedly pursue shareholder wealth maximization.  If retail investors change these dynamics in the ways foreseen by Sautter and Gramitto, corporate management will behave differently.