Have you ever wanted to learn the basics about blockchain? Do you think it’s all hype and a passing fad? Whatever your view, take a look at my new article, Beyond Bitcoin: Leveraging Blockchain to Benefit Business and Society, co-authored with Rachel Epstein, counsel at Hedera Hashgraph.  I became interested in blockchain a year ago because I immediately saw potential use cases in supply chain, compliance, and corporate governance. I met Rachel at a Humanitarian Blockchain Summit and although I had already started the article, her practical experience in the field added balance, perspective, and nuance. 

The abstract is below:

Although many people equate blockchain with bitcoin, cryptocurrency, and smart contracts, the technology also has the potential to transform the way companies look at governance and enterprise risk management, and to assist governments and businesses in mitigating human rights impacts. This Article will discuss how state and non-state actors use the technology outside of the realm of cryptocurrency. Part I will provide an overview of blockchain technology. Part II will briefly describe how public and private actors use blockchain today to track food, address land grabs, protect refugee identity rights, combat bribery and corruption, eliminate voter fraud, and facilitate financial transactions for those without access to banks. Part III will discuss key corporate governance, compliance, and social responsibility initiatives that currently utilize blockchain or are exploring the possibilities for shareholder communications, internal audit, and cyber security. Part IV will delve into the business and human rights landscape and examine how blockchain can facilitate compliance. Specifically, we will focus on one of the more promising uses of distributed ledger technology — eliminating barriers to transparency in the human rights arena thereby satisfying various mandatory disclosure regimes and shareholder requests. Part V will pose questions that board members should ask when considering adopting the technology and will recommend that governments, rating agencies, sustainable stock exchanges, and institutional investors provide incentives for companies to invest in the technology, when appropriate. Given the increasing widespread use of the technology by both state and non-state actors and the potential disruptive capabilities, we conclude that firms that do not explore blockchain’s impact risk obsolescence or increased regulation.

Things change so quickly in this space. Some of the information in the article is already outdated and some of the initiatives have expanded. To keep up, you may want to subscribe to newsletters such as Hunton, Andrews, Kurth’s Blockchain Legal Resource. For more general information on blockchain, see my post from last year, where I list some of the videos that I watched to become literate on the topic. For additional resources, see here and here. 

If you are interested specifically in government use cases, consider joining the Government Blockchain Association. On September 14th and 15th,  the GBA is holding its Fall 2019 Symposium, “The Future of Money, Governance and the Law,” in Arlington, Virginia. Speakers will include a chief economist from the World Bank and banking, political, legal, regulatory, defense, intelligence, and law enforcement professionals from around the world.  This event is sponsored by the George Mason University Schar School of Policy and Government, Criminal Investigations and Network Analysis (CINA) Center, and the Government Blockchain Association (GBA). Organizers expect over 300 government, industry and academic leaders on the Arlington Campus of George Mason University, either in person or virtually. To find out more about the event go to: http://bit.ly/FoMGL-914.

Blockchain is complex and it’s easy to get overwhelmed. It’s not the answer to everything, but I will continue my focus on the compliance, governance, and human rights implications, particularly for Dodd-Frank and EU conflict minerals due diligence and disclosure. As lawyers, judges, and law students, we need to educate ourselves so that we can provide solid advice to legislators and business people who can easily make things worse by, for example, drafting laws that do not make sense and developing smart contracts with so many loopholes that they cause jurisdictional and enforcement nightmares.

Notwithstanding the controversy surrounding blockchain, I’m particularly proud of this article and would not have been able to do it without my co-author, Rachel, my fantastic research assistants Jordan Suarez, Natalia Jaramillo, and Lauren Miller from the University of Miami School of Law, and the student editors at the Tennessee Journal of Business Law. If you have questions or please post them below or reach out to me at mweldon@law.miami.edu. 

 

 

A few weeks ago, we had an interesting opinion out of the 10th Circuit interpreting the scope of primary liability under Section 10(b) in the wake of the Supreme Court’s Lorenzo v. SEC decision.  The short version is that in Malouf v. SEC, the Tenth Circuit found that scheme liability under Section 10(b) (and parallel provisions of Section 17(a) and the Investment Advisers Act) may be incurred when a defendant knowingly fails to correct someone else’s false statement.  But matters are actually a bit more complicated.

More under the jump; warning, this post assumes basic familiarity with Janus Capital Group, Inc. v. First Derivative Traders, 564 U.S. 135 (2011) and Lorenzo.  If you want that backstory, see this post on Janus and the Lorenzo cert grant and my discussion of the actual Lorenzo decision.

Continue Reading Lorenzo and the Duty to Correct

Continuing to work my way through Mass Tort Deals by Elizabeth Chamblee Burch.  If you’re interested in the earlier post on it–it’s available here.  

The chapter is titled “Quid Pro Quo Arrangements” for good reason.  I finished the chapter with the sense that attorneys in the space negotiate with defendants to bargain away plaintiff rights in exchange for things the plaintiffs’ attorneys want for themselves and the defense lawyers want for their clients.  As someone who also teaches professional responsibility, I struggled to understand how many practices and agreements could ever be consistent with the ethics rules.

Take the settlement-recommendation provisions.  Lawyers enter into settlement agreements in these cases where they agree that they will recommend to every client in their “inventory” that they accept the settlement.  In many instances, they also put in writing that they will flat out drop clients and withdraw from representation if the clients do not agree to settle.  The ethics rules make whether to take a settlement offer a client decision.  And these “attorney-recommendation” provisions are common.  84% of the settlement agreements in the dataset have them.  53% of the time they also have the withdrawal provisions. 

What do you do if you have a client who would be better served by not agreeing to the settlement?  Settlements will probably be right for some clients and wrong for others.  An attorney who binds herself to give a particular recommendation to a client surely impairs her ability to give independent advice.  The Connecticut Bar Association issued an ethics opinion sharing my view that these provisions fall over the line.  Despite this, the provisions keep showing up in these settlements.  And these are not the only, shall we say, ethically complex provisions showing up.

Consider settlement “reversion” terms.  Funds within the settlement pool that don’t get used up will revert back to the defendant.  This also creates an incentive to include terms making it harder for plaintiffs to actually access the settlement.  In some instances, the agreements will set up claim review boards or other gateways plaintiffs must pass through to recover.  Of course, this allows the lead attorneys involved to collect large fees off a big settlement fund and the defendant to claw most of the money back when few plaintiffs can actually collect.

These troubling practices may persist because mass tort deals work differently than their more orderly cousins–the class actions.  There just isn’t any procedure available for objecting to these settlement structures. 

Enormous rewards await attorneys involved in striking these deals.  Not only do they get “common benefit” fees premised on the idea that their leadership work gave value to all other plaintiffs, they also get other benefits.  For example, in situations where a settlement matrix gets created, they design the matrix, point system, and guidance documents used to determine how much a particular plaintiff will take home.  This gives them an undeniable edge when they bring their own clients to the table.  They know how to position them in ways that other attorneys do not.  It would not surprise me if some tilted the matrix to favor their particular inventory if they were able to sign up more plaintiffs with particular characteristics.

Today marks the 125th anniversary of our celebration of Labor Day as a U.S. national holiday.  As the U.S. Department of Labor reminds us:

Labor Day, the first Monday in September, is a creation of the labor movement and is dedicated to the social and economic achievements of American workers. It constitutes a yearly national tribute to the contributions workers have made to the strength, prosperity, and well-being of our country. . . .

The vital force of labor added materially to the highest standard of living and the greatest production the world has ever known and has brought us closer to the realization of our traditional ideals of economic and political democracy. It is appropriate, therefore, that the nation pays tribute on Labor Day to the creator of so much of the nation’s strength, freedom, and leadership – the American worker.

Certainly, there remains much to celebrate.  Yet, an online piece written two years ago that focuses in on the history in a more detailed way offers words of caution:

The original holiday was meant to handle a problem of long working hours and no time off. Although the battle over these issues would seem to have been won long ago, this issue is starting to come back with a vengeance, not for manufacturing workers but for highly skilled white-collar workers, many of whom are constantly connected to work.

[Note: I have been accused of being constantly connected to work–or the equivalent.  Sometimes rightly so.]  The article goes on to urge taking a day off and enjoying time at a barbecue. I want to offer an additional idea: consider adding mindfulness to your tool kit (and more specifically a simple practice).

Yes, I have extolled the virtues of mindfulness practices before, including here and here.  Marcia has, too.  I want to incorporate by reference here all that we have collectively said in that regard.  But I also want to emphasize in today’s post a new application of the concept–one that I learned in a series of beginner meditation classes that I completed yesterday.

All of us have thoughts relating to our work (and our personal lives) that niggle at us over time or disrupt our flow in the moment.  They may involve, for example, a grudge against a colleague or anger at an administrator or anxiety about a student or upcoming project or event.  These ongoing meddlesome thoughts interfere with our work and our lives outside work.  Specifically, they distract us and make us unhappy, inefficient, and unproductive.  They can lengthen our work days and extend the work week into weekends.  They can ruin our time with family–even at a Labor Day barbecue.

There are ways of managing this kind of stress in our work lives.  The instructor in my meditation class offered the technique (labeled, apropos of today’s holiday, “The Work”) suggested and promoted in Loving What Is: Four Questions That Can Change Your Life, by Byron Katie and Stephen Mitchell.  As the title of the book suggests, the approach consists of four questions.  They are:

  • Is it true?
  • Can you absolutely know that it’s true?
  • How do you react, what happens, when you believe that thought?
  • Who would you be without that thought?

In addition to the book, a website offers guidance, including a series of videos.  The same coauthors have written a follow-on book, A Mind at Home with Itself: Finding Freedom in a World of Suffering.  (Byron Katie apparently has two other books–one also coauthored with Stephen Mitchell, here and here.  They also may be helpful but may not be as central to using The Work.)  I have not read any of the books, but I plan to practice the use of the four questions.

Why would I invest in this?  If used properly and successfully, what can these four questions do for me?  Here’s what I have learned so far.

The four questions and the way in which they are used in The Work invite us to compartmentalize a thought that troubles us, allowing us to explore its contours and question it and ourselves.  In the process, we can reduce the suffering it causes us and slow down any reaction process that we determine is needed.  Ultimately, this method of addressing troubling thoughts has the capacity to free us from the drag that our niggling thoughts have on our working and personal lives.  The Work also may enable us to take required action to address true concerns in the workplace and at home in a manner that is more compassionate and less driven by the exigencies of the moment.

I offer this new mindfulness process for what it may be worth to you, in the spirit of personal wellness, institutional health, and Labor Day–to allow you more “time off” from work (among other things).  Regardless of the appeal–or lack thereof–The Work may hold for you, I wish you all a happy and restful Labor Day.  I am making a special brunch that I will enjoy with my husband and daughter.  No family or neighborhood barbecue is planned, but who knows?  My hubby and I may just make our own . . . .

I want to wish all BLPB readers a wonderful Labor Day weekend holiday!  Enjoy!

I’ll also make a brief plug for the 2019 Annual Meeting of the Southeastern Academy of Legal Studies in Business (early bird deadline is September 15) in Montgomery, Alabama, November 7-9.  It will be a great conference – packed full of interesting presentations, and opportunities to meet/reconnect with business law scholars writing on diverse topics.  More information can be found here: SEALSB 2019.  It’s an event that will always be near and dear to my heart as it ultimately led me to writing for this blog!  Hope to see many of you in Montgomery in November!   

Delaware Chancery court is apparently being dragged into the presidential race, via a new attack ad against Joe Biden.  As reported by Shane Goldmacher, well:

There is so much to talk about here.

First, there’s the fact that the advertisement is misleading; Biden and Warren were apparently sparring about bankruptcy courts, not Chancery.

Second, there’s the fact that Biden – as a federal legislator – has no authority over Delaware Chancery. 

Third, there’s the fact that while I won’t dispute that Delaware courts are too white, Delaware Chancery, at least, now has 3 women and 4 men.  I’d be delighted to see more women on Chancery – and certainly the Delaware Supreme Court – but criticizing Chancery as too male is so last year.

Fourth, there’s the shifting numbers about the size of the ad buy; original reports said $500K, then the number was upped to $1 million, with print as well, and to be honest, I suspect that by blogging it I’m probably giving it the free attention that was the real aim.

But really the salient point is the identity of the buyer: Shirley Shawe, one of the litigants involved in the long-running TransPerfect dispute, tried before Chancellor Bouchard (which is why he is singled out for criticism in the advertisement).

TransPerfect was formed by Shirley Shawe’s son, Philip Shawe, and his one time-fiancee, Elizabeth Elting.  They ended their romantic relationship but continued with the business.  Elting had a 50% interest, and Philip Shawe a 49% interest, with 1% going to his mother so that the business as a whole could qualify as women-owned.  Since Shirley always voted with her son, this meant that authority was split 50/50.

The business was successful but the working relationship was not, leading to prolonged and acrimonious litigation.  Frankly, the Delaware opinions describing the fights between Shawe and Elting read more like a stalking complaint or domestic abuse than a business falling-out; among other things, Shawe was found to have hacked into Elting’s personal email, and – on two! occasions – hidden under her bed. 

Ultimately, Chancellor Bouchard ordered that the company be sold, and Philip Shawe purchased it.  The matter was not settled, though, because after that, the Shawes claimed that the Skadden partner who ran the auction “looted” the company.

Even today, the Shawes can’t let the matter go.  From what I can glean, Shirley Shawe is involved with this nonprofit, formed in the wake of the TransPerfect dispute and devoted to criticizing the Delaware Chancery court (the group is not officially connected to Shawe, but this article describes her as a “driving force” behind it, and reports that she funded and starred in its advertisements).  And now, of course, there’s this bizarrely irrelevant advertisement in the presidential race.

What the whole thing highlights, I think, is how business disputes that are tangled with family disputes don’t unfold like ordinary business matters, because the issues are far more personal.  And business courts don’t really know how to address the family dynamics.  That’s very much on display in TransPerfect, and it’s also the point of Allison Tait’s article, Corporate Family Law, 112 Nw. U. L. Rev. 1 (2017).  Though she doesn’t talk about TransPerfect specifically, the situation really illustrates her point.

If you’re interested in mass litigation–either through class actions or multi-district litigation–you undoubtedly know that the area can be overwhelmingly and mind-numbingly complex.  Mass Tort Deals by Elizabeth Chamblee Burch cuts through with simple language and accessible stories to help frame the key policy issues.  So far, I’m through the first chapter and have some thoughts.

The book frames the key issues well–how do we balance competing interests and resolve mass tort disputes.  And there are plenty of interests sitting in tension with each other:  judicial economy, efficiency, judicial desires for novelty and importance, plaintiffs’ counsel fees, lead plaintiff counsel fees, defense interests in global resolution, and more.  How we set the procedures up for these cases effectively controls how these cases will be resolved.  If judges lock less cooperative litigants out and limit access to discovery or other information, it essentially forces them to come to the table and play ball with the court’s chosen lawyers for a case.

From someone who has studied the class action context closely, one of the most surprising things to me about norms in the non-class mass tort space has been that the leadership arrangements seemingly operate as a lawless scrum.  There are no clear rules for how to set up a mass action governance structure for moving these claims through pre-trial proceedings.  This sets the stage for all sorts of jockeying by lawyers.  Even the lawyers courts appoint as lead counsel cannot keep control:

Lead counsel negotiate settlements and dictate trial strategy, but few rules govern this undemocratic process.  For example, Judge Susan Wigenton appointed a five-member plaintiffs’ liaison counsel . . . to head lawsuits against Zimmer over its poorly designed Durom hip cup.  Yet, Chris Seeger, one of those five members, quietly joined forces with nonlead lawyer Mark Lanier.  Without the other counsel’s members’ knowledge or consent, Lanier and Seeger hashed out a global deal with Zimmer, which they signed on behalf of something they dubbed, the ‘claimants’ liaison counsel.’  Judge Wigenton ‘approved’ their private deal over the real liaison counsel’s objections. Seeger later suggested that instituting rules ‘would take the fun out of mass torts.’

This is wild!  I can see how it would be fun to steal the initiative from the other plaintiffs’ lawyers and just forge the deal you think right if they don’t agree with you.  But you have to wonder about who really benefits from this dynamic?  Defense counsel certainly has an incentive to strike a deal with a wildcat if it will give better terms to the corporation.  This risks leaving money on the table for the plaintiffs.

Burch’s book isn’t without detractors.  As I read the above paragraph, I recalled something I’d seen when I bought the book off Amazon.  One reader thought the book was terrible.

Seeger

You have to wonder if it’s the same guy.

 

 

 

 

 

 

Back in April, I posted on a leadership conference focusing on lawyers and legal education, sponsored by and held at UT Law.  I also posted earlier this summer on the second annual Women’s Leadership in Legal Academia conference.  I admit that I have developed a passion for leadership literature and practices through my prior leadership training and experiences in law practice and in the legal academy.

Because lawyers often become leaders in and through their practice (both at work and their other communities) and because leadership principles interact with firm governance, I want to make a pitch that we all, but especially all of us teaching business associations (or a similar course), focus some attention on leadership in our teaching.  It is a nice adjunct to governance.  For example, management and control issues, especially director/officer processes in corporations, are a logical place to discuss leadership.  Who are the managers and the rank-and-file employees inspired by in managing and sustaining the firm?  Who is able to persuade the board to take action?  Is it because of that person’s authority, or does that person hold a trust relationship with others that motivates them to follow?  And speaking of trust, it is an element of both leadership and fiduciary duty . . . .

As you consider my teaching suggestion, I offer you my latest blog post on our Leading as Lawyers blog.  It involves the importance of process to effective leadership.  The bottom line?

One can have a promising vision and strategy that emanate from the best of all intentions and ideas. But without engaging a process that includes effectual communication and input from, candid interchanges with, expressions of appreciation for, and buy-in from the relevant affected populations, those worthy intentions may be misinterpreted and those good ideas may die on the vine or not be implemented effectively.

We have all seen this happen in business governance.  Let’s let our students in on the role that leadership plays in the practical application of business law.  It is bound to inform both their law practice and their lives.