It seems that in the wake of Donald Trump’s remarkable political ascent, a number of CEOs have developed their own political ambitions.

Facebook’s Mark Zuckerberg famously embarked on an anthropological tour of the United States, rubbing shoulders with the struggling common folk in Iowa, as well as in Wisconsin, Ohio, and South Carolina.  Disney’s Bob Iger says a lot of people are saying that he should run.  Starbucks’s Howard Schultz (okay, former CEO, still Executive Chair) visited the Houston victims of Hurricane Harvey, later explaining, “I wanted to see the aftereffects, but mostly I wanted to talk to people. And you learn a few things that are heartbreaking. You know, 40 percent of American households don’t have $400 of cash available to them….I think the country needs to become more compassionate, more empathetic. And we can’t speak about the promise of America and the American Dream and leave millions of people behind.”

Now, I suppose one could ask all kinds of questions about whether the Trump phenomenon should be interpreted to mean that America hungers for a closer relationship between corporations and politics, but my immediate reaction is, how do you square the fiduciary obligations associated with running a company with the demands of the political sphere?

I mean, leaving aside the obvious pull on a CEO’s attention and time, Schultz – apparently while harboring presidential ambitions – announced that Starbucks would hire 10,000 refugees (a decision that, arguably, negatively impacted his company’s stock price).  Bob Iger has had to navigate such highly charged issues as his presence on Trump’s Advisory Council, and the political commentary of Jimmy Kimmel at ABC, and Jemele Hill at ESPN.  Facebook, of course, has had to address issues of foreign interference with American elections, and has recently announced that it will voluntarily require disclosures akin to those required of television ads.  And that doesn’t even get into any gratuitous political speeches.

I’m not taking a position over whether these executives did the right or the wrong thing in each instance, but I am concerned that when CEOs simultaneously run their companies and run for president, it’s difficult to discern whether their political moves are intended to benefit the corporation (including, as relevant, all stakeholders), or their own political careers.  Under these conditions, how can shareholders be certain that their CEOs’ actions – on everything from labor conditions to executive pay to environmental footprints – are intended to advance the best interests of the company?

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A former student brought this fundraising website to my attention: To the Stars Academy of Arts and Sciences (“TTS Academy). (Image above from a Creative Commons search).

This article describes TTS Academy as follows: “Former Blink-182 singer and guitarist Tom DeLonge is taking his fascination with/conspiracy theories about UFOs to their logical conclusion point: He’s partnering with former government officials on a public benefit corporation studying ‘exotic technologies’ from Unidentified Aerial Phenomenon (UAP) that the consortium says can ‘revolutionize the human experience.'” 

Remember the Blink-182 song Aliens Exist? 

I couldn’t make this up. And I did spend some time trying to determine if it was a joke, but TTS Academy’s 63-page offering circular suggests that it is no joke. And TTS Academy appears to have already raised over $500,000. 

According to the organization’s website, Tom DeLonge of Blink-182 fame is in fact the CEO and President. Supposedly, DeLonge has teamed with former Department of Defense official Luis Elizondo who confirmed to HuffPost that the TTS Academy is planning to “provide never before released footage from real US Government systems…not blurry, amateur photos, but real data and real videos.” Rolling Stone reports that “DeLonge has long been interested in UFO and extraterrestrial research. After parting ways with Blink-182 in 2015, he delved deeper into the subject, releasing the book Sekret Machines: Gods earlier this year and he’s also working on a movie that is related to those interests called Strange Times.” TTS Academy is a Public Benefit Corporation, formed in Delaware. 

The TTS Academy website states: “To The Stars Academy is a Public Benefit Corporation (PBC), which means our public benefit purpose is a core founding principle of our corporate charter alongside the traditional goal of maximizing profit for shareholders.” Hmm… How does one pursue a public benefit purpose and seek to maximize profit for shareholders? A main point of benefit corporations is liberate companies from the perceived restrictions of shareholder wealth maximization. 

The website continues: “Our public purpose: Education – Community – Sustainability – Transparency. PBCs have enjoyed a surge in popularity as the public becomes more interested in corporate responsibility, transparency, and more recently, the concept of impact investing.* It’s clear that an expanding portion of the general population is looking to make an impact on the world around them, not only through volunteering, or speaking out on social media, but through financial decision making.** We believe raising resources through Regulation A+ crowdfunding will allow us to expedite expansion of TTS Academy’s PBC initiatives, like promoting citizen science, enhancing traditional education with science, engineering and art-related programming, supporting veterans and their families, and promoting underrepresented people in film.” Color me skeptical. 

As Professor Christine Hurt noted way back in 2014/15, the crowdfunding and social enterprise circles may overlap significantly. Professor Hurt wrote, “for-profit social entrepreneurship may find equity crowdfunding both appealing and available. For-profit social entrepreneurs may be able to use the crowdfunding vehicle to brand themselves as pro-social, attracting individual and institutional cause investors who may operate outside of traditional capital markets and may look for intangible returns. Just as charitable crowdfunders rebut the conventional wisdom that donors expect tax-deductibility, prosocial equity crowdfunders may rebut the conventional wisdom that early equity investors expect high returns or an exit mechanism.” Not sure if she, or any of us, predicted exactly this type of company. 

Today I sat through a panel at the ABA International Law Section Meeting entitled, I, Robot – The Increasing Use and Misuse of Technology by In-House Legal Departments. I have already posted here about Ross and other programs. I thought I would share other vendors that in-house counsel are using according to one of the panelists: 

  • Deal point – virtual deal room.
  • Casetext – legal research.
  • Disco AI; Relativity; Ringtail – apply machine learning to e-discovery.
  • Ebrevia; Kira Systems; RAVN – contract organization and analysis.
  • Julie Desk – AI “virtual assistant” for scheduling meetings.
  • Law Geex – contract review software that catches clauses that are unusual, missing, or problematic.
  • Legal Robot – start-up uses AI to translate legalese into plain English; flags anomalies; IDs potentially vague word choices.
  • LexMachina – litigation analytics.
  • NeotaLogic – client intake and early case assessment.
  • Robot Review – compares patent claims with past applications to predict patent eligibility.
  • Ross Intelligence – AI virtual attorney from IBM (Watson).

These and their future competitors lead to new challenges for lawyers, law professors, and bar associations. Will robots engage in the unauthorized practice of law? What are the ethical ramifications of using artificial intelligence in legal engagements? How much do you tell clients about how or what is doing their legal research? What about data security issues for this information? How do we deal with discovery disputes? Can robot lawyers mediate? Why should lawyers who bill by the hour want the efficiency of artificial intelligence and machine learning? Finally, how do we help students develop skills in “judgment” and how to advise and counsel clients in a world where more of the traditional legal tasks will be automated (and 23% of legal task already are)?  These are frightening and exciting times, but I look forward to the challenge of preparing the next generation of lawyers.

A recent magistrate judge’s recommendation on a motion to strike in Hawaii alerted me to a problem with the Hawaii Local Rules of Practice for the United States District Court for the District of Hawaii.  The mistake is not the judge’s; it is in the rules.  The recommendation explains: 

[An] LLC must be represented by an attorney. See Local Rule 83.11 (“[b]usiness entities, including but not limited to … limited liability corporations … cannot appear before this court pro se and must be represented by an attorney”) . . . .

THE BANK OF NEW YORK MELLON FKA THE BANK OF NEW YORK, AS TRUSTEE FOR THE CERTIFICATE HOLDERS OF THE CWMBS INC., CHL MORTGAGE PASS-THROUGH TRUST 2006-OA5, MORTGAGE PASS THROUGH CERTIFICATES, SERIES 2006-OA5, a Delaware corporation, Plaintiffs, v. LEN C. PERRY JR.; NATHAN JON LEWIS; 3925 KAMEHAMEHA RD PRINCEVILLE, HI 96722, LLC, Defendants., No. CV 17-00297 DKW-RLP, 2017 WL 4768271, at *1 (D. Haw. Oct. 2, 2017), report and recommendation adopted sub nom. THE BANK OF NEW YORK MELLON fka THE BANK OF NEW YORK, AS TRUSTEE FOR THE CERTIFICATE HOLDERS OF CWMBS INC.; CHL MORTGAGE PASS-THROUGH TRUST 2006-OA5, MORTGAGE PASS THROUGH CERTIFICATES, SERIES 2006-OA5, a Delaware corporation, Plaintiff(s), v. LEN C. PERRY, JR.; NATHAN JON LEWIS; 3925 KAMEHAMEHA RD PRINCEVILLE, HI 96722, LLC Defendant(s)., No. CV 17-00297 DKW-RLP, 2017 WL 4767667 (D. Haw. Oct. 20, 2017).  (I know this could be cited more succinctly, but I thought this was pretty great so I went with the whole enchilada.)

The local rules, available here, state, as quoted, 

LR83.11.  Business Entities.

Business entities, including but not limited to corporations, partnerships, limited liability partnerships, limited liability corporations, and community associations, cannot appear before this court pro se and must be represented by an attorney. (emphasis added)

LLCs (limited liability companies) are still not corporations, and too often courts and local rules insist on saying they are. But help is available.  I made my first trip this summer to Hawaii with my family, and it was amazing. So I put this offer out there: if anyone in Hawaii would like some help cleaning up local rules (and other business-entity related laws, rules, and regulations) count me in.  This rule is wrong, but there is a whole lot right about Hawaii. 

NotreDamerLawLogo
 
 
University of Notre Dame: The Law School
Director, California Innovation Intensive

Location: Palo Alto, California

Notre Dame Law School invites applications to serve as the inaugural full-time Director of the Law School’s new California Innovation Clinic.  The Clinic will provide transactional services and related advice to individuals or entities in the Bay Area seeking to start or expand their own ventures.  The Clinic will operate out of the Notre Dame California center in Palo Alto, California.

The Clinic will provide students, under the supervision of the Clinic Director, opportunities to serve the transactional needs of early-stage startup ventures. The services offered by the Clinic will depend in significant part on the background and skills of the Clinic Director, but we anticipate that the Clinic will assist clients with some or all of the following: entity formation, founder agreements, non-disclosure agreements, ownership agreements, licensing and/or freedom to operate agreements, and privacy and data security policies. Specific client matters will be determined by the Clinic Director, although decisions about the overall direction of the Clinic’s work will be made in consultation with the Dean and other law school faculty members.

The Director will be a full-time staff attorney or non-tenure track faculty member, with responsibility for all aspects of the Innovation Clinic, including client development, client representation, law student supervision, and classroom instruction. The Innovation Clinic will be one of six clinics at the Law School.

Responsibilities of the Director will include: 

  • Developing a consistent and appropriate base of clients for the clinic;
  • Designing and implementing the Clinic infrastructure including a curriculum, a case management system, and relationships with partner organizations;
  • Providing transactional services to Clinic clients;
  • Supervising up to 8-10 law students per semester, and approximately
    1-2 law students each summer, in direct client representation;
  • Providing law students with instruction in substantive and procedural law necessary to effectively represent Clinic clients;
  • Providing law students with training in core lawyering skills necessary to carry out client representation, including interviewing and counseling, fact investigation, negotiation, drafting corporate  agreements, and oral advocacy;
  • Developing and teaching a companion course covering the range of legal issues that arise at different stages of a startup venture’s development;
  • Collaborating with clinical and other faculty at the Law School;
  • Collaborating with leaders of other entrepreneurship-related activities within the broader University, including the IDEA Center;
  • Attending conferences and interacting with faculty at other institutions; and
  • Assisting in the development of additional financial resources for the Clinic.
QUALIFICATIONS

The ideal candidate will have the following qualifications:

  • A Juris Doctor degree from an ABA-accredited law school and at least 8-10 years of practice experience relevant to the representation of startup ventures in transactional matters;
  • Excellent supervisory and communication skills;
  • A commitment to instructing and supervising law students;
  • Ability to work in a self-directed and entrepreneurial environment;
  • An academic record that demonstrates the capacity to be an active participant in the Law School’s academic community and in the national clinical-education community; and
  • A license to practice law in the State of California.

Term and Compensation: The position is full-time with a salary commensurate with experience, plus benefits, which include medical, dental, and retirement.  The initial contract will be for a two-year term beginning July 1, 2018, or as soon as possible.  

APPLICATION INSTRUCTIONS

Application Process and Deadline:  Applicants should submit a cover letter and a Curriculum Vitae.

The Search Committee will begin reviewing applications immediately.  The position will remain open until filled. 

For more information contact Professor Mark McKenna at 574-631-9258 or markmckenna@nd.edu.

Readers of the blog know that a few months ago, the University of Tennessee hosted a BLPB symposium, with essays to be published in a forthcoming volume of Transactions: The Tennessee Journal of Business Law.  It was a terrific amount of fun, where we bloggers who usually just interact over the internet got a chance to see each other face to face (in some cases, for the first time!)

Anyhoo, I just posted my contribution to the symposium, Family Loyalty: Mutual Fund Voting and Fiduciary Obligation, to SSRN.  Here is the abstract:

In recent years, institutional investors have increasingly come to dominate the market for publicly-traded stock.  Mutual funds have become especially important, controlling trillions of dollars of corporate equity.

The SEC has made clear that it is the fiduciary responsibility of fund administrators to vote their shares in a manner that benefits investors in the fund.  Sponsoring companies have responded by creating centralized research offices that determine the voting policies across all of the funds they administer.  Though there may be some variation at the individual fund level, most fund families vote as a block.

The practice of centralized voting raises the question whether each fund is promoting the best interests of its investors.  For example, one fund may hold stock in an acquisition target, while another holds stock in the acquirer; one fund may hold stock in a target, while another holds debt.  These funds have different interests, but voting policies rarely differentiate among them.

This Essay argues that mutual fund boards should develop procedures to ensure that fund shares are voted with a view toward advancing the best interests of that particular fund.  If such procedures cannot be implemented in a manner that justifies their costs, funds should refrain from voting their shares at all. 

In addition to benefitting fund investors, this proposal may also have a salutary effect on portfolio firms.  In recent years, commenters have expressed concern about the voting power exerted by mutual fund managers, who may pressure firms to avoid competition within an industry, or who may encourage short-term financial engineering over long-term growth.  Decentralization may diminish asset managers’ power, thereby alleviating these effects.

Thanks so much to the University of Tennessee College of Law, and to all of the students – and especially to Joan – for the opportunity.

American University Washington College of Law is seeking applications, both entry-level and lateral, for tenure-track or tenured appointment to the faculty.  The law school is looking at several areas, but fields of particular need are securities regulation, corporate finance, business associations, and the regulation of banks and financial institutions.  The official announcement contains more details, but applications should not be sent through Interfolio; instead please send a cover letter and CV directly to Brian Coffill, Faculty Coordinator, at bcoffill@wcl.american.edu.

Below the line is a call for papers that I just received.

The Atlantic Law Journal is a double-blind peer-reviewed law journal, and it is one of the regional publications of the Academy of Legal Studies in Business.

————

The Atlantic Law Journal is now open for submissions and is soliciting papers for its upcoming Volume 20 with an expected publication date in summer 2018.  The Atlantic Law Journal is listed in Cabell’s, fully searchable in Thomson-Reuters Westlaw, and listed by Washington & Lee.   The journal is a double-blind peer-reviewed publication of the Mid-Atlantic Academy of Legal Studies in Business (MAALSB).  Acceptance rates are at or less than 25%, and have been for all our recent history.  We publish articles that explore the intersection of business and law, as well as pedagogical topics. Please see our website at http://www.atlanticlawjournal.org/submissions/ for the submission guidelines, the review timeline, and more information regarding how to submit.  Submissions or questions can be sent to Managing Editor, Evan Peterson, at petersea [at] udmercy.edu.