Yup, two posts in one day – and early in the week for me – but this seems to be a day for an outpouring of corporate governance news. I reserve the right to take the week off at some future date.

Anyhoo, NASDAQ adopted a comply-or-explain rule for board diversity, which was approved by the SEC, and it was immediately challenged.  Unconstitutional, beyond SEC authority, major questions, etc etc. 

A rare Democratic Fifth Circuit panel upheld the rule, but then the case went en banc, and today, the full Court struck the rule in a 9-8 ruling.

The striking thing about the Fifth Circuit’s opinion is how narrowly it construes the purpose of the securities laws.  Sure, it unsurprisingly cast doubt on the evidence that NASDAQ offered regarding the benefits of diversified boards, but most of the opinion is devoted to a reinterpretation of the Exchange Act to focus nearly exclusively on the prevention of fraud and manipulation.

For example, some excerpts:

We (B) explain that an exchange rule is not related to the purposes of the Exchange Act simply because it is a disclosure rule. The Act exists primarily to protect investors and the macroeconomy from speculative, manipulative, and fraudulent practices, and to promote competition in the market for securities transactions. A disclosure rule is related to the purposes of the Act if it has some connection with those purposes, but not otherwise….

Congress enacted these disclosure provisions to protect investors and prevent speculation. … Second, it thought disclosure would facilitate “the evaluation of prices of securities” and therefore promote the efficient “direction of the flow of savings into industry.” .. Or put differently, disclosure would stabilize markets by curbing speculation.

See what they did in that latter paragraph? I deleted the citations but note how they acknowledged the price formation function of the securities laws but immediately reinterpreted it to be entirely about fraud prevention.  And then there’s:

That makes sense. If companies could hide their financial conditions, they could defraud investors or whip them into a speculative frenzy. Disclosure of basic corporate and financial information was a sound antidote. But it was not an end in itself; it served a purpose—essentially the same purpose served by restrictions on margin loans and short sales. That much is clear from the fact that Congress carefully limited SEC’s power to compel disclosure to the kinds of information that are most likely to eliminate fraudulent and speculative behavior.

By contrast, the original panel opinion (and the dissent here) read the purpose of the securities laws as to mandate disclosure.  Here are quotes from the original panel:

The “fundamental purpose” of the Securities Exchange Act of 1934 (Exchange Act), codified as amended at 15 U.S.C. § 78a et seq., is to enforce “a philosophy of full disclosure . . . in the securities industry.”…

The “fundamental purpose” of the Exchange Act is “implementing a philosophy of full disclosure,” …—not just the disclosure of information sufficient to state a securities fraud claim.  Indeed, the Exchange Act gives the SEC “very broad discretion to promulgate rules governing corporate disclosure.”  To give one example, for a security to be registered on an exchange, the SEC can require the issuer to disclose any information about “the organization, financial structure, and nature of the business” as is “necessary or appropriate in the public interest or for the protection of investors.”  15 U.S.C. § 78l(b)(1)(A).  Nothing in this provision or the provision governing exchange rules cabins disclosure rules to information that would meet the materiality element of a securities fraud claim.  And, as the SEC Approval Order explains, “[e]xchanges have historically adopted listing rules that require disclosures in addition to those required by [SEC] rules.”  …

That’s a crucial difference, because – while there surely are those who approach things differently – I’d argue the mainstream view today is that the meta purpose of the securities laws is to ensure that investors have sufficient information to accurately price securities (according to risk/return), with the broader goal of ensuring efficient capital allocation throughout the economy.  We want investors to give money to useful and productive businesses, and not to businesses that will set resources on fire, and the securities laws facilitate that.  (Here are two cites; there are countless more)

Fraud prevention suggests a much narrower scope for SEC disclosure regulation than does regulation for accuracy in pricing.

So, it’s not surprising that the Fifth Circuit went from there to hold that the diversity disclosure rule does not serve the narrow purpose of preventing fraud.  At one point, it went so far as to suggest the rule might be barred even if it provided financially useful information to investors:

Moreover, SEC may have asked the wrong question. SEC considered evidence respecting the effects of diversity on firm performance. See JA9. But it is not clear what firm performance has to do with the Exchange Act. Of course, investors generally like it when firms make more money, but Congress did not pass the Exchange Act for the purpose of maximizing shareholder wealth. It passed the Act to protect investors from fraud, manipulation, speculation, and anticompetitive exchange behavior. Firm performance has little to do with those objectives.

(As part of its logic, the Fifth Circuit also attacked the rule on MQD grounds by writing that “the SEC has never claimed the authority to impose diversity requirements, or anything resembling them, on corporate boards.” Item 407(c)(vi) would never)

So I am less concerned about the fate of this particular rule, than I am for the rhetoric here that suggests a dramatic curtailment of all securities disclosure requirements.

At which point I have to mention the climate change rules.

Those are currently being challenged in the Eighth Circuit.  With the election, who knows how that challenge will proceed; what’s certain is that the Trump Admin will end up unwinding the rules.

But in general, both the diversity rules, and the climate change disclosure rules, tend to be challenged with the same arguments.  Opponents accuse the SEC of stepping outside its lane to solve problems allocated to other agencies – to solve climate change, which is the EPA’s job, or to solve workplace discrimination, which is the EEOC’s.  When presented with evidence that major investors want these disclosure rules, there tend to be sideswipes to suggest these investors – BlackRock, for example – aren’t really seeking investment related information, but are instead trying to impose their own (Larry Fink’s) notion of the social good on corporate America.  The challengers also point out that the rules themselves are structured as disclosure rules, but function as governance rules – “disclose your process for evaluating climate risk,” for example, technically allows a company to say “we don’t evaluate that,” but no company wants to admit as much, so, in fact, the rule forces companies to start evaluating climate risk (or diversifying their board, or whatever), and that, opponents say, is bad. 

That’s definitely what the Fifth Circuit said in this case about the diversity rules (e.g., “If Congress had granted a diversity mandate to any agency … we would have expected Congress to give it to the Equal Employment Opportunity Commission or even the Department of Justice”; “corporations that do not meet those objectives must explain why they failed. That is not a disclosure requirement. That is a public-shaming penalty for a corporation’s failure to abide by the Government’s diversity requirements.”), and you see it in the briefing and general commentary on the climate change disclosure rules.

The challengers are half right.  Because, I tend to agree that diversity disclosure rule is not, in fact, intended to help investors price securities or even to adopt governance practices that contribute to wealth creation; it is more in the category of the kind of rule that serves a kind of signaling function, that the corporation is exercising its power responsibly and inclusively.  It’s a display of self-governance and discipline, in a manner that costs corporations very little but perhaps wins them legitimacy.  It benefits companies and investors, but not in the traditional manner by which the securities laws operate; it does so by contributing to their social license to operate. (Yeah, I talk about that in my paper, Of Chameleons and ESG).

But that’s not what the climate change rules do.  The climate change rules force companies to evaluate the actual financial impact of climate change on their business, and that is crucial information not to fight climate change (which the SEC is accused of trying to do), but to ensure that companies – and investors – accurately begin to weigh the financial costs of climate change.  And on a broader level, to encourage investors to seriously stop allocating capital to areas and industries that will simply not survive the transition.  Which is exactly what the function of the securities laws should be in our society.

That said, my fear with the challenges to the climate change rules was, the rules were so obviously financially-relevant that any decision by a court striking them down would necessarily have spillover effects to other, more traditional securities disclosure rules, which would damage the entire system.  How ironic that the Fifth Circuit did that anyway with the diversity rules – only it did so, as far as I can see, quite intentionally, in what looks like the first step in a project to pare back the securities laws across the board.

Anyhoo, in case you missed it, Mike Levin and I talked about the climate change disclosure rules on our podcast a few episodes ago – here on Apple, and here on Spotify.

First, the Supreme Court DIG’d the NVIDIA case. I previously blogged about that case here; it, along with the Facebook case (which was also DIG’d), was a spectacularly bad grant resulting from disgruntled defendants who successfully made it appear that their extraordinarily fact-specific pleading-stage losses presented grand overarching legal questions that necessitated Supreme Court guidance. Belatedly, the Supreme Court realized they did not. Would that it had done so for other securities cases.

Second, the 2024 DGCL proposed amendments are out. As far as I can tell, the big change concerns litigation limiting bylaws and forum selection provisions (a subject I have addressed … frequently). The backstory here is, after a pair of decisions – Boilermakers Local 154 Retirement Fund v. Chevron Corp, 73 A.3d 934 (Del. Ch. 2013) and ATP Tour Inc. v. Deutscher Tennis Bund, 91 A.3d 554 (Del. 2014) – Delaware amended its code to address charter or bylaw provisions that govern internal-affairs-like state law stockholder claims. Specifically, corporations may require all such claims be brought in a particular forum, as long as plaintiffs retain access to the Delaware Superior Court or the Delaware Court of Chancery, but they may not require fee-shifting for unsuccessful shareholder claims.

In Salzberg v. Sciabacucchi, the Delaware Supreme Court functionally held that corporations may also adopt bylaws and charter provisions to govern non internal affairs claims that may be brought by stockholders – like federal securities claims – but these preexisting code provisions would not govern those claims. In practical effect, then, corporations could adopt bylaws and charter provisions that required fee shifting for unsuccessful federal securities claims, and that selected any forum for federal securities claims, including arbitral forums.

Hal Scott tried to get an arbitration bylaw passed at J&J for federal securities claims; a lot of 14a-8 litigation followed until Scott’s dispute was mooted.

Meanwhile, two companies, Boeing and Gap, adopted bylaws that purported to require that all “derivative” claims be brought in the Delaware Court of Chancery. I would literally bet body parts that the bylaws were intended to apply to state law fiduciary derivative claims, which would make the provisions unremarkable. But then, both companies became the target of exceedingly rare derivative Section 14(a) claims under federal law (Boeing also became the target of a derivative 10(b) claim, though that was dropped), and both companies argued that their bylaws required (1) the cases be filed in the Delaware Court of Chancery, and (2) they then be dismissed, since the Delaware Court of Chancery has no jurisdiction to hear claims under 14(a) (or 10(b)).

The Seventh and the Ninth Circuit split (blog posts here and here), meaning, the Ninth Circuit allowed companies to unilaterally select Delaware state courts for at least some federal securities claims, which would then require the claims’ immediate dismissal, since federal law requires those claims be brought in federal court.

Professors Mohsen Manesh and Joseph Grundfest wrote a long paper on the correctness of CA9’s ruling with respect to derivative 14(a) claims (well, the paper was in draft form, CA9 cited it, then they finalized it), while I wrote a paper on the general horror show of permitting state constitutive documents to govern federal securities claims at all, and then I wrote a response to Manesh and Grundfest specifically on derivative 14(a) claims, to which they responded here.

And thank god those latter papers were published in the last week or so, because of course now the DSBA is proposing amendments to the DGCL that would render all of the arguments moot. Specifically, the proposals would amend Delaware law to prohibit corporations from adopting bylaw/charter provisions that would (1) require fee shifting for non internal affairs claims, and (2) deny access to any Delaware court with jurisdiction to hear those claims. In practical effect, corporations must at least grant shareholders access to the District of Delaware for any securities claims that must be brought in federal court.

So, yay, I win, sort of!

And wow, that’s an awfully plaintiff-friendly proposed amendment, so *eyebrow raise* again!

Except, you know, from what I’ve seen, notwithstanding CA9’s holding, this is exactly what’s become market standard. No one is seeking fee-shifting or exclusive arbitration anymore; companies are generally adopting bylaw and charter provisions that would permit access to federal courts for claims that cannot be brought in state court. This does not, in other words, practically change the landscape.

And that’s particularly true because CA9’s decision permitting forum-selection provisions forcing federal claims into a state court with no jurisdiction was limited to derivative 14(a) claims – which is a very rare beast to begin with.

Point being, I don’t think the DSBA made many concessions here, and if I may say, this looks like a kind of plaintiff-friendly cover to paper over the rifts from last year’s SB 113 battles and whatever is coming for 2025 (my bet – limiting controlling shareholder liability).

And another thing: New Shareholder Primacy podcast is up! Me and Mike Levin talk about Chancellor McCormick’s latest ruling in the Musk pay package case, and what’s next. Available at Apple, Spotify, and YouTube.

Ferdinand Bratek, April Klein, and Yanting (Crystal) Shi have recently posted to ssrn The Market Value of Pay Gaps: Evidence from EEO-1 Disclosures.

Most companies are required to file reports with the EEOC regarding the diversity of their workforce, however, these EEO-1 reports are confidential unless the companies choose to release them. In 2023, a FOIA lawsuit forced the public release of EEO-1 reports for government contractors. The authors use this newly-released granular workforce data to confirm that women and people of color are paid less than white men in a variety of positions, and also that firms financially benefit by having more women and people of color in their workforce. In general, analysts often tout the purported financial benefits that diversity brings to a firm, but these authors suggest the disturbing possibility that diversity benefits a firm by lowering its labor costs.

Most strikingly, the authors find that when this particular EEO-1 data became public, the firms with greater pay gaps experienced more positive shareholder returns. In other words, the market, as well, recognized the value of underpaying women and people of color.

From a ruthless shareholder wealth maximization perspective, that makes perfect sense. But I note that pay-equity shareholder proposals are a popular genre and proceed from the (apparently?) false premise that investors value equality rather than discrimination.

And another thing: New Shareholder Primacy podcast is up – this time, Mike Levin and I talk about Caremark claims in Delaware, and the information that Broadridge can supply to activists. Available at Spotify, Apple, and YouTube.

Yesterday, Judge Badalamenti denied Target’s motion to dismiss a securities fraud claim against it arising out of its decision to run a pride campaign. The securities fraud claim was brought by America First Legal and other firms. They issued the following statements after the decision:

Statement from Reed D. Rubinstein, America First Legal Senior Vice President:

“Today’s decision is a warning to publicly traded corporations’ boards and management: Our federal securities laws mandate fair and honest disclosure of the market risk created by management when it uses shareholder resources, including consumer goodwill, to advance idiosyncratic and extreme social or political preferences. The risk of ESG mandates and DEI initiatives, such as Target’s “Pride Month” that targeted young children, cannot be whitewashed with boilerplate language or ignored,” said Reed Rubinstein.

Statement from Jonathan Berry, Managing Partner of Boyden Gray PLLC:

“Today’s ruling is an important win for our clients; we look forward to continuing to litigate this case to obtain relief for our clients and hold Target accountable for their actions,” said Jonathan Berry.

The decision certainly sends a message to corporations about what to expect. Candidly, the decision surprised me. After the initial complaint in the matter, I expected the case to get dismissed and for the court to order sanctions against them for filing the suit. I even wrote an opinion piece last year making that point.

But the Court had its own view of the pleadings. Two things surprised me about the decision. The first is that it allowed claims to go forward on the possibility that statements might be false. The other is that it found scienter by ruling that a business decision was reckless–not that a statement was recklessly made.

Possibly False Statements

Let’s start with the alleged misstatements. Target’s 2021 Annual Report contained a risk factor disclosing that it could face boycotts for things that it does. It specifically states:

It may be difficult to control negative publicity, regardless of whether it is accurate. Target’s responses to crises and our position or perceived lack of position on environmental, social, and governance (ESG) matters, such as sustainability, responsible sourcing, and diversity, equity, and inclusion (DE&I), and any perceived lack of transparency about those matters, could harm our reputation. While reputations may take decades to build, negative incidents involving us or others with whom we do business can quickly erode trust and confidence and can result in consumer boycotts, workforce unrest or walkouts, government investigations, or litigation.

To me, this and other similar disclosures appear to cover the possibility that people could boycott it if Target did something the public disliked. Consumers boycotted Target after its 2023 pride campaign. This seems like the sort of risk that the risk factor contemplates.

The plaintiffs alleged, without any evidence I can see, that “’the known risk of [] reactions was not being monitored or addressed by the Board” and because of this, “Target was thus not attempting to ‘preserve Target’s reputation’ or ‘control negative publicity’.”

The Court allowed the claim to go forward on the possibility that Target might have made a false statement. It explained that “[t]o be clear, the Court is not finding that Defendants’ 2021 disclosure is misleading because such an assertion would be premature at this stage in the proceedings.” As best I can understand it, the Court let the case go forward on the theory that the disclosure might be false if discovery can establish that Target’s board actually did not monitor or consider the risk of backlash from a pride campaign.

Later, the Court allows plaintiffs to explore whether a statement was false again. Consider this language:

These pleaded facts demonstrate that it is plausible that Target, its Board, and its GSC may have ignored social and political risks relating to the 2023 Pride Month Campaign . . .

This seems inconsistent with the way the PSLRA is supposed to work. I understood it to prohibit fishing expeditions to see whether or not some statement was false. Target ran a pride campaign. Target experienced backlash. There doesn’t appear to be any factual allegation to support the view that Target’s leadership or board did not consider the possibility that they would face backlash. Instead the plaintiffs just baldly assert that Target failed to disclose that it wasn’t considering these risks. Apparently that was enough for the Court.

It’s entirely possible that Target thought about backlash risk and just misjudged it. I would even say that is the stronger inference available from the known facts.

The Court also disagreed with Target’s argument that shareholders understood the risk that it could be boycotted for pride campaigns because it had been boycotted for pride campaigns before. It found that the prior campaigns didn’t put shareholders on notice of risks that might arise from “placing potentially controversial merchandise at the center of its stores—could be construed as a change to their ESG/DEI campaigns in prior years.”

I take it from this that if Target were to relocate adult-oriented merchandise from one location to another in the store, it might also be securities fraud? This issue isn’t limited to Target. Could Walmart face securities fraud liability under this theory if it relocates products from one area to another? Do we want retailers to really add risk factor disclosures that they could be boycotted if they do something differently than they did it in the past? How does that substantially alter the total mix of information available?

Scienter

The Court also found fraudulent intent with the following reasoning:

Plaintiffs pleaded that Defendant Cornell acted with severe recklessness because he knew that the 2023 Pride Campaign carried the risk of customer backlash. . . Severe recklessness constitutes a strong inference of scienter. . . . Severe recklessness is established by showing “highly unreasonable omissions or misrepresentations that involve not merely simple or even inexcusable negligence, but an extreme departure from the standards of ordinary care, and that present a danger of misleading buyers or sellers which is either known to the defendant or is so obvious that the defendant must have been aware of it.” . . .

Here, the Court finds that Plaintiffs have adequately pleaded severe recklessness. Specifically, Plaintiffs have pleaded that Cornell had knowledge that prior LGBT campaigns led to backlash, such as Target’s opposition to the North Carolina transgender bathroom law. . . Target’s reaction to the law caused 1.5 million people to pledge to boycott Target, and Target’s sales fell in the following three quarters following Target’s opposition. . . . Further, Plaintiffs pleaded that—not only did Cornell know about the boycott—he admitted that Target “didn’t adequately assess risk” in the matter. . . These facts demonstrate severe recklessness. It is highly unreasonable that Cornell would approve a new, more aggressive LGBT campaign in 2023 after allegedly admitting that Target didn’t adequately assess the risk of boycotts in a prior campaign. Plaintiffs have pleaded that Cornell’s decision to issue a new aggressive campaign—knowing that the preceding campaign received immense backlash—is an extreme departure from the standards of ordinary care that was so obvious that Cornell should have been aware of it. Accordingly, Plaintiffs have adequately pleaded scienter . . .

As best I can understand it, the scienter reasoning here seems entirely disconnected from the alleged possible misstatements. The reasoning seems to find, in hindsight, that the business decision to run a pride campaign was “severely reckless” because Target had faced a boycott before. That doesn’t seem like securities fraud to me.

As many already know, earlier this week, a Texas federal district court issued a nationwide preliminary injunction against enforcement of the Corporate Transparency Act (“CTA”). Many questions are being raised by the court’s memorandum opinion and order, which can be found here. In addition, law firm memos and newsletter articles have become available and are being circulated, including this one from Stoll Keenon sent to me by friend-of-the-BLPB Tom Rutledge and this one from Wilson Sonsini (which included the opinion link provided above).

Also, members of the American Bar Association’s LLCs, Partnerships and Unincorporated Entities Committee are hosting a free Webinar tomorrow on the Texas opinion. The program, The Corporate Transparency Act Update: Texas Decision, is scheduled for Friday, December 6, 2024, 3:30 p.m. E.T. Program information is included below. I registered and plan to be there!

* * *

On Tuesday, December 3, 2024, a Texas Federal District court issued a preliminary injunction against the Corporate Transparency Act. Please join in this discussion and gain a head start on drafting client communications of this significant development. The panel will review the best information available as to what this means for you and your clients. The LLCs, Partnerships and Unincorporated Entities Committee has been in front of this issue since it developed, and it’s the best place to keep updated with changes to the CTA.

Our panelists include:
Christina M. Houston, DLA Piper, Wilmington, DE
Bob Keatinge, Holland & Hart LLP, Denver, CO
Thomas E. Rutledge, Stoll Keenon Ogden PLLC, Louisville, KY
James J. Wheaton, William & Mary Law School, Williamsburg, VA

Registration
This event is open to all and free to Business Law Section members. Business Law Section members will also be able to access a recording of the webinar after the event. Register today by visiting the ABA website.

Access Information
Upon registration, access information will be emailed to you along with a link to add the event to add a reminder to your calendar. Email Heather.Wallace@americanbar.org with any questions.

Program Materials and Past Programs
There are no planned written materials for this program. All recordings and materials from this program and previous programs are available for free for ABA Business Law section members at the ABA Business Law Section website. The content of this program does not meet requirements for continuing legal education (CLE) accreditation.

Dear Readers:

“The Department of Insurance, Legal Studies and Real Estate in the Terry College of Business at The University of Georgia invites applications for a full-time non-tenure-track faculty position in Legal Studies at the lecturer level, beginning in fall semester 2025, with an employment start date of August 1, 2025.

Candidates must hold a juris doctorate or equivalent degree. Strong communication skills and demonstrated potential for excellent teaching are required. The position is renewable based on performance and promotion to Senior Lecturer is possible after six years of service. For information regarding the requirements for each faculty rank, please see the University of Georgia Guidelines for Appointment and Promotion of Lecturers (https://provost.uga.edu/policies/appointment-promotion-andtenure/guidelines-for-appointment-and-promotion-of-lecturers/).

Participation in service activities appropriate to the rank is expected. Salary is competitive and commensurate with qualifications.”

The complete announcement regarding this position is here: UGA Legal Studies Lecturer – Start Fall 2025

Dear Readers:

“The Midwest Academy of Legal Studies in Business (MALSB) Annual Conference is held in
conjunction with the MBAA International Conference. MBAA International draws hundreds of academics from business-related fields such as accounting, business/society/government, economics, entrepreneurship, finance, health administration, information systems, international business, management, and marketing. The MALSB has its own program track on Legal Studies and attendees may take advantage of the multidisciplinary nature of this international conference and attend sessions held by the other program tracks.

Presentations in 2025 will have the option of in person or live online delivery. Tentatively MALSB paper and panel in person/live online presentations are scheduled to begin Thursday morning (April 10, 2025) and conclude Friday afternoon (April 11, 2025). If registration numbers require additional sessions, they will be held Wednesday afternoon (April 9, 2025).”

Note that the registration/submission deadline is January 26, 2025.  The complete call for conference participation is here.”

It’s the day after Thanksgiving so I’ll post part 2 of my discussion in ESG in the Trump/Vance era next week.

Today, as students are stressed out over finals, here’s a post to brighten their day. Please share and forward far and wide.

We are pleased to invite your school to send a team to participate in the inaugural University of Miami Transactional Skills Competition, designed to provide law students with an unparalleled opportunity to refine their transactional lawyering skills in a challenging and dynamic setting.

In keeping with the vibrant culture of Miami, the details and challenges for this competition will be sophisticated, unexpected, and innovative, embodying the city’s forward-thinking ethos. This competition presents a distinctive opportunity for law students to engage with real-world, progressive transactional scenarios in emerging industries.

Unlike traditional moot court or contract negotiation contests, this event invites participants to navigate the complexities of contract drafting while considering broader business factors. Through a blend of virtual and in-person rounds, students will manage high-stakes negotiations while developing essential skills in negotiation, strategic thinking, and client representation. This comprehensive experience prepares participants to excel in transactional law, providing them with the expertise necessary to succeed at the intersection of law and business.

Why Your Students Should Participate:

· Substantive Legal Tasks: This competition emphasizes practical skills by engaging participants in drafting contracts and negotiating substantiative legal and business deal terms, closely mirroring real-world transactional practice.

· Networking Opportunities: Attendees will have access to multiple networking events, fostering connections with peers, legal practitioners, and industry leaders.

· Recognition and Prizes: Teams will compete for cash prizes, including an award for the Best Drafted Contract.

· A Distinctive Miami Experience: The competition is held in the vibrant city of Miami, reflecting the city’s innovative and progressive spirit through cutting-edge, real-world scenarios.

Competition Format and Key Dates:

· Written Round: Teams will draft and submit a contract by January 13, 2025. Scores from this round will combine with in-person negotiation scores to determine which teams advance to the final round. More details will be provided following the close of the registration period.

· In-Person Rounds: The competition will take place at the University of Miami Coral Gables campus from January 16-17, 2025. Round 1 will be held on Thursday, January 16th, with Round 2 and the Championship Round on Friday, January 17th.

Important Details and Eligibility:

· Participation is limited and teams will be accepted on a first-come, first-served basis. Registration closes on December 20, 2024, or when we have reached our 12-team capacity.

· A school may send up to two teams.

· Each team may include up to one coach (student, professor, or practicing attorney), though coaches may not provide assistance during the competition rounds.

· Each team may consist of two participating students, each of whom must be enrolled in or completed a transactional skills or contract drafting course, or who have had significant exposure to transactional practice through internships or clinical work.

· Registration requires the submission of a completed registration form, including contact details for each team member and their coach, along with emergency contact information.

How to Register: To confirm your participation, please complete the registration form here.

Should you have any questions or require additional information, please do not hesitate to reach out to Paul Berkowitz via email at pxb403@miami.edu (please copy me at at mweldon@law.miami.edu). Further details about the competition, including rules and logistics, will be provided following registration.

We look forward to welcoming your students to Miami for this exceptional opportunity to engage in meaningful legal practice and showcase their skills.

I was struck by this article recently published in the WSJ on the use of AI for investor relations:

Investor relations departments at companies such as shoe brand Skechers USA and networking-systems and software provider Ciena have begun using generative artificial-intelligence to help prepare their earnings commentary.

Some have used generative AI to predict the questions analysts might ask, for example, and to ready the best answers….

Executives at many companies are using AI to refine word choice in their prepared remarks, for instance, in deciding whether to say the quarter was “strong” or “solid,” said Dan Sandberg, head of quantitative research and solutions at S&P Global Market Intelligence. The firm’s tool recently preferred “strong,” based on the earnings metrics of other companies that used the word on their earnings calls, he said. 

Generative AI can also read the harmonics in executives’ prepared statements on earnings, assessing them as upbeat, gloomy or something more measured…

As any securities litigator knows, these are exactly the kinds of nuances of communication that – when they become the subject of a securities fraud lawsuit – are routinely dismissed by courts as “puffery,” i.e., conveying no material information to investors. For example, a very quick Westlaw search yielded case after case treating the characterization of “strong” as inactionable. See, e.g., Ray v. StoneCo, 2024 WL 4308130 (S.D.N.Y. Sept. 25, 2024); Robeco Capital Growth Funds SICAV v. Peloton Interactive, 2024 WL 4362747 (S.D.N.Y. Sept. 30, 2024); Lloyd v. CVB Fin. Corp., 811 F.3d 1200 (9th Cir. 2016); Hawes v. Argo Blockchain, 2024 WL 4451967 (S.D.N.Y. Oct. 9, 2024).

Once again we see that securities cases are litigated in a world that is somewhat distinct from how corporations – and markets – actually function.

Last week, Delaware corporate law was on my mind, as it sometimes is. Thursday, alone, was a banner day for thinking, talking, and writing about Delaware corporate law. Tennessee Law had the pleasure of hosting Álvaro Pereira from Georgia State Law to talk about his work at the intersection of venture capital financings and Delaware corporate law. Earlier in the day, I was on the telephone talking to my Tennessee Bar Association colleagues about our April 2025 Business Law Forum that features a session on recent Delaware corporate law happenings.

Then, late Thursday, I learned that friend-of-the-BLPB Larry Cunningham also was thinking (and writing) about Delaware corporate law last week. In a Bloomberg Law article posted Thursday, Delaware Corporate Law Still Gold Standard Amid ESG Blowback, Larry pushes back against the wholesale federalization of corporate governance in response to the debate over the consideration of environmental, social, and governance factors in board decision making.

Delaware maintains its stature because it favors no one. Critics from the right declare it has adopted an anti-shareholder and approach sympathetic to the environmental, social, and governance movement, while critics from the left blame Delaware for stalling ESG. Logic suggests that one of these sides must be wrong. The reality is, they both are.

Among other things, Larry argues that the ESG corporate governance debate itself serves a public good and that Delaware responds by flexibly adjusting within what we lawyers might term a “range of reasonableness.”

While such competition is real, it has always helped Delaware maintain its leadership and double down on the reasons for the state’s success. Federal intervention risks replacing a rationally flexible system with a one-size-fits-all approach that would ignore the diverse needs of businesses across states.

Delaware’s system, built on moderation and business sense, provides the adaptability companies need while maintaining a robust legal framework. It’s this balance that has allowed Delaware to maintain its position as the gold standard for corporate law.

I always appreciate Larry’s perspectives on business law issues, even when we disagree. I enjoyed the Bloomberg piece as part of last week’s Delaware corporate law bonanza. The article is worth a read–even if you disagree.