I’m traveling today so this will be quick (actually, I drafted this in advance to go up automatically and I’m very much hoping that whatever happens, the appeal won’t have been decided before this post appears).

Earlier this year, Chancellor Bouchard decided Sandys v. Pincus, regarding whether demand was excused in a derivative action against the board of Zynga.  And I love this case because it is a shockingly good teaching tool for the concept of demand excusal.  The plaintiffs filed three claims – I edit out the last one and just stick with counts I and II.

The opinion beautifully describes the nature of the inquiry, and it even has a nice chart showing the differences in composition between the board accused of wrongdoing, and the demand board.

In the first two counts, there is a sharp distinction drawn between board members who are potentially interested because of liability due to personal benefits/self-dealing, and board members who are potentially interested because they face personal liability for other reasons.

The court also clearly marches through the question of whether any disinterested board members are nonetheless dependent on interested directors, demonstrating how – despite rather extensive social and business ties – none of it is enough to meet the standard to show dependence.  To make matters even better, one of the interested directors is a controlling shareholder, allowing for discussion of independence/dependence when a controlling shareholder is in the mix.

And as a bonus, the case involves a set of companies that are likely to be familiar to students – Zynga, with discussions of Facebook, LinkedIn, and Mozilla.

Honestly, this case is so ideal for a complex subject that I’m mostly just crossing my fingers that nothing in the appeal – whether the plaintiffs ultimately win or lose – undermines the usefulness of the Chancery decision.

(By the way, the appeal also may represent an opportunity for the Delaware Supreme Court to finally merge Aronson and Rales – which Chancellor Bouchard almost seems to be inviting the Court to do.  If nothing else, that much would certainly simplify the teaching.)

From Hobby Lobby to Chick-fil-A to Indiana’s RFRA to wedding photographers and wedding cake bakers, “faith and business” has been in the headlines quite a bit over the past few years.

Over the next few weeks, I plan to write a series of posts exploring developments in this area of faith and business. I plan three additional posts, looking at faith and business (sometimes called, “faith and work”) initiatives in (1) universities, (2) churches, and (3) businesses. My comments in this series will have a Christian focus, as that is my faith and is the area with which I am most familiar, but I welcome comments from any faith tradition.

Based on what I have seen around the country, many universities, churches, and businesses seem to be increasing their focus on the integration of faith and business. For some, this is a terrifying development. For others it is long overdue. I submit that both sides should attempt to engage in perspective-taking and nuanced discussion in an attempt to reach common ground.

As someone who prioritizes his faith, I also want to share my personal thoughts on the area of “faith and business” in this introductory post. First, some Christians, myself included, often lose sight of the fact that Jesus said that all the law hangs on loving God and loving others. Jesus cared for the societal outcasts (here, here, and here), while strongly (but lovingly) criticizing the spiritual leaders. He had and has followers with a diverse variety of political views. Jesus did things like healing people on the Sabbath that appeared to break religious law, but actually fulfilled the true, loving spirit of the law. Second, as Inside Edition correspondent Megan Alexander reminded Belmont University students and faculty last week, Christians should focus on doing high quality work, because the Christian scripture instructs for us to our work “heartily, as for the Lord.” This is a tough one for me, as I am often dissatisfied with my work product, but I think the call is to do the absolute best work you can do, with your talents and given your various responsibilities. Third, and finally, I think participants in the “faith and business” conversation have to realize that people of faith are unlikely to be able to leave their faith at home. There can be good conversations about how that faith can and should be expressed in business, but I don’t think it is realistic to think that serious people at faith can just turn off their beliefs while at work. While the discussions about the interplay of faith and business may be difficult, they are important discussions to have in this pluralistic society.

General Electric (GE)  and Baker Hughes (BHI) announced on Monday, October 31st, a proposed merger to combine their oil and gas operations.  GE and Baker Hughes will form a partnership, which will own a publicly-traded company.   GE shareholders will own 62.5% of the “new” partnership, while Baker Hughes shareholders will own 37.5% and receive a one-time cash dividend of $17.50 per share.  The new company will have 9 board of director seats:  5 from GE and 4 from Baker Hughes.  GE CEO Jeff Immelt will be the chairman of the new company and Lorenzo Simonelli,  CEO of GE Oil & Gas, will be CEO. Baker Hughes CEO Martin Craighead will be vice chairman.

Reuters is describing the business synergies between the two companies as leveraging GE’s oilfield equipment manufacturing (“supplying blowout preventers, pumps and compressors used in exploration and production”) and data process services with Baker Hughes’ expertise in ” horizontal drilling, chemicals used to frack and other services key to oil production.”

Baker Hughes had previously proposed a merger with Halliburton (HAL), which failed in May, 2016, after the Justice Department filed an antitrust suit to block the merger. Early analysis suggests that the proposed GE & Baker Hughes will pass regulatory scrutiny because of the limited business overlap of GE and Baker Hughes.

As I plan to tell my corporations students later today: this is real life!  A high-profile, late-semester merger of two public companies is a wonderful gift.  The proposed GE/Baker Hughes merger illustrates, in real life, concepts we have been discussing (or will be soon) like partnerships, the proxy process, special shareholder meetings, SEC filings, abstain or disclose rules, and, of course, mergers.

 

Continue Reading Ripped from the Headlines: GE & Baker Hughes Proposed Merger

I often complain about courts and their unwillingness to require plaintiffs to make appropriate claims about veil piercing in the context of limited liability companies (LLCs).  That is, courts too often allow plaintiffs to seek to “pierce the corporate veil” of LLCs, which (of course) do not have corporate veils.  They have limited liability veils, but they are decidedly not corporate.  I will complain about that again, but in the process, I will note that the court does a great job of general veil piercing analysis that is worthy noting.  
 
In Skanska USA Bldg. Inc. v. Atl. Yards B2 Owner, LLC, on Oct. 20, 2016, the Supreme Court, Appellate Division, First Department, New York, decided to dismiss a veil piercing claim based on what I see as very sound reasoning.  I would have like the court to note it was not a corporation, and instead an LLC, that the plaintiff sought to pierce, but nonetheless, I think the court got the rest right.  The court found that the plaintiff failed to plead a sufficient veil–piercing claim and explained, “both parties were very sophisticated, and negotiated in minute detail all aspects of their agreements to build [defendant] using innovative technology. That the project failed does not lead to a veil–piercing claim, especially since plaintiff failed to identify the alleged fraud or other wrongdoing. Skanska USA Bldg. Inc. v. Atl. Yards B2 Owner, LLC, No. 1352, 2016 WL 6106652, at *1 (N.Y. App. Div. Oct. 20, 2016) (emphasis added). 
 
The court continued:
Far from alleging that FCRC used B2 Owner to perpetrate a fraud, plaintiff, a sophisticated party, admits that it knowingly entered into the CM Agreement with B2 Owner, an entity formed to construct the project. Nowhere in the complaint does plaintiff allege that it believed it was contracting with or had rights vis-à-vis FCRC or any entity other than B2 Owner. Indeed, plaintiff could have negotiated for such rights. Having failed to do so, plaintiff cannot now claim that it was tricked into contracting with B2 owner only and thus should be allowed to assert claims against FCRC . . . . Thus, the veil–piercing claim should be dismissed.

Id. at *7.
 
I think this is spot on. Far too often courts seem to give credence to veil-piercing claims that seem predicated primarily on a lack of ability to pay or the fact that there is a financially sound parent company.  That is simply not the standard.  This is not true only for sophisticated parties, but it is especially true of them. Although I feel badly for an entity that is not able to recover all it is owed, I do not think courts should provide what amounts to a guarantee from another entity when such resources were neither promised nor bargained for in the contracting process. Judge Acosta got this part right.  Now if he would just be sure to distinguish veil piercing by entity … 
  
 
 

My October included some signifiant tricks and a bunch of parallel treats.  I will highlight but a few of each here.  They illustrate, in my view, the busy mid-semester lives that law professors may have.

The Tricks

It was a real trick for me to give three distinct presentations in three cities (two in person and one virtually) in a two-day period early in the month.  On the morning of October 6, I participated in a panel discussion at The Crowdfunding Conference in New York City (New York).  That afternoon, I jumped on a plane for Little Rock (Arkansas), where I gave a continuing legal education presentation on crowdfunding for the Arkansas Bar Association as part of a program on “Capital Raising Today and Securities Law Issues.”  Finally, later that day, I was Skyped into a the North Carolina Law Review 2016 annual symposium in Chapel Hill (North Carolina) on “The Role of Law in Entrepreneurship,” at which I presented a draft paper, forthcoming in the North Carolina Law Review, on the important role of business finance lawyers in entrepreneurial enterprise.  

It then was a trick to refocus my energy on faculty hiring a few days later.  That next week, I jetted off to Washington (DC) with my fellow Appointments Committee members and our Dean and Associate Dean for Academic Affairs for a UT Law alumni reception and the Association of American Law Schools (AALS) 2016 Faculty Recruitment Conference.  We were successful in interviewing a variety of folks for our two business law openings–one in the clinic and one in the doctrinal faculty.

After only a few nights home in my own bed, it was (again) a trick to haul my body into the car to drive to Lexington (Virginia) to participate in and attend the Washington and Lee Law Review‘s 2016 Lara D. Gass Annual Symposium, an event focusing on “Corporate Law, Governance, and Purpose: A Tribute to the Scholarship of Lyman Johnson and David Millon.”  At that symposium, my presentation addressed shareholder wealth maximization as a function of firm-level corporate governance.  My essay on that topic will be published in a forthcoming issue of the Washington and Lee Law Review.

Before the next week was out, I accomplished yet another trick.  I drove up to Louisville (Kentucky) to offer my thoughts on current securities litigation issues for the Kentucky Bar Association 2016 Securities Law Conference.  I was asked to cover insider trading and liability under federal and state securities laws.  In fulfillment of this charge, I delivered a presentation entitled “Where There’s a Securities Market, There’s Fraud (and Other Misconduct): Hot Topics in Federal Securities Litigation.”

My final October trick?  Fitting in my Business Associations oral midterm examinations and my Monday and Wednesday class meetings for Business Associations and Corporate Finance with all these trips.

The Treats

All of that effort was an investment, however.  The trips, presentations, and other interactions all yielded multiple benefits.  Most of them may be obvious, but I will list a few in any case.

  • I met lots of new and interesting folks from the crowdfunding industry, local bar associations, the AALS applicant pool, and the law academy (from the United States and abroad).
  • I got great feedback on my current work and new ideas, research avenues, and citation sources for my ongoing work.
  • I was able to honor two amazing colleagues, Lyman Johnson and David Millon.
  • I participated meaningfully in the important task of recruiting new faculty to UT Law.
  • I squeezed in some important family and personal time around the edges, including in attending the Knoxville Brewers Jam with my hubby (the tickets having been part of my anniversary gift to him back in August).

I am grateful for safe travels throughout the month.  Having said that, I admit that I am relieved all that travel and activity is over and done.  I look forward to a more calm November and a fun holiday season to follow.  In the mean time, however, I will continue to enjoy the fall, with pumpkins being among my favorite hallmarks of the season.

Bigstock-Pumpkin-Patch-68311816

A couple of interesting studies about gender in the business context have recently been released.

First, a study by A. Can Inci, M.P. Narayanan, and H. Nejat Seyhun concludes – based on profits earned from insider trading – that women executives have less access to inside information than do men with similar positions.  They attempt to control for the fact that women may simply be more risk averse by controlling for trade size; they find, however, that even when doing so, men make more than women.  Of particular interest is the fact that even though their study goes back to 1975 (when there were fewer women executives), they find that the gender differences are stronger in more recent years, from 1997-2012.  They believe that the differences are attributable to informal networking that grants men access to better information than women; these differences fall away for firms that have a greater proportion of women executives.

Second, the Rockefeller Foundation finds that when a company experiences a crisis and the CEO is a woman, eighty percent of news stories cite her as a problem; when the CEO is a man, only thirty-one percent of news stories cite him as a problem.

Of course, it’s possible that the reporting is entirely accurate – maybe women CEOs are responsible for crises more often than men.  But there are, of course, other potential explanations.  For example, biases against women generally – a sense that she doesn’t deserve the position – or perhaps the fact that women generally only achieve CEO status when a company is already experiencing problems.   I’ll also throw out another possibility: Salience.  There’s a fairly well-documented psychological phenomenon whereby people attribute causality to whatever is salient about a situation.  The thing that draws their attention is assumed to be the cause.  That thing might be an entirely neutral characteristic – like having red hair in a group of brunettes, or wearing a striped shirt – or, in the case of CEOs, being a woman in a position typically held by men. Of course, if salience is partially the cause, I’d expect successes also to be disproportionately credited to women – and I have no idea whether that’s the case, or whether an interaction of biases could prevent such a phenomenon from surfacing. 

What it comes down to is, we can really only be sure of our perceptions when enough women occupy the CEO position to make them unnoticeable.

Building on Joan’s personal reflection about her time in practice and stemming from a conversation with a student this week, I decided to post (and solicit comments) on the BigLaw practice areas that are most/least conducive to part-time work or work while raising children. While no practice areas in BigLaw are well known for being incredibly flexible, it did appear that certain practice areas were more flexible than others.

In my view, tax appeared to be the most flexible practice group area and M&A (my first practice group area) appeared to be the least flexible. Granted, I never practiced tax law, but as an M&A attorney you solicit comments from many areas within the firm and you get a sense of their schedules.

The advantages of the tax group were a high billing rate (some of the very highest in the firm) and a lot of piecemeal, often not urgent, work. Sure, we “urgently” needed tax comments on most of our deals, and when clients are paying BigLaw rates, they almost always want a prompt response. But in my limited experience, the tax lawyers controlled their timelines more so than any of the other attorneys I worked with. There were few enough excellent tax attorneys that if they said – I will get to that tomorrow or next week – you often did not have much recourse. Perhaps this was just my own perception or simply unique to my firms. That said, I have also seen tax lawyers pull off the “part-time” or “flexible schedule” role better and more often than other areas. Areas like Patent and ERISA may have similar attributes.

In M&A, however, flexible, part-time work was almost impossible to obtain. I’ve witnessed some M&A attorneys try to go part-time, and I have never seen it go very well or last very long. M&A attorneys are the quarterbacks of the deal, so even if you are only assigned to one deal – you have to be involved in all aspects of the deal and have to be on call 24/7 when that deal is moving quickly. And a deal often lasts for months. And there isn’t much piecemeal work that you can just pop in and do without staying intimately involved. After practicing in an M&A/Corporate group for a few years, I moved to a business litigation/corporate governance group. While the litigation/corporate governance group was not necessarily flexible, and you do have to be “all-in” if a case is heading to trial, there seemed to be a lot more room for flexible, part-time research and writing. In M&A there were some opportunities for these sorts of things, but many fewer of them and often they were simply nonbillable client alerts.

Again, maybe this is just my own perception, I’d love to hear thoughts in the comments or via e-mail from readers, as those thoughts could be helpful in advising students. Which practice group area or areas in a large firm offer the most flexibility?

Fresh on the heels of reading several Dean search announcements come across email the last several days, the following ABA article on the rise of female Law Deans caught my eye: Cynthia L. Cooper, Women Ascend in Deanships as Law Schools Undergo Dramatic Change, ABA Perspectives Summer 2016.

The list of current deanship openings is available at The Faculty Lounge, as well as a run down of of positions filled last year.

Sorry folks…sick little one on my hands today!

-Anne Tucker

The Washington and Lee University School of Law seeks to hire a faculty member with research and teaching interests in the fields of corporate law, securities regulation, and regulation of financial industries. Our school has a long history of distinction in these areas, and we are excited to advance our trajectory with this new hire. In addition to this subject area focus, we look for an individual who will embrace and meaningfully contribute to our close-knit, collegial, and intellectually vibrant community.

We warmly invite applications for a tenure-track or tenured position beginning July 1, 2017, and we are particularly focused on lateral candidates. In all cases, candidates for the position must clearly demonstrate a record of excellence in teaching and scholarship. Appointment rank would be commensurate with the candidate’s qualifications and experience.

Washington and Lee University School of Law is an Equal Opportunity employer that adheres to a robust nondiscrimination policy. Our school has a firm commitment to enhancing the diversity of our faculty and, in that regard, we welcome candidates who are members of communities traditionally under-represented in the legal profession and academia.

Kindly direct applications and questions to the Chair of the Faculty Appointments Committee. Applicants should submit (by e-mail) a current cv, a statement of teaching interests / experience, a research agenda, and a letter of interest by email to:

Mark Drumbl
Chair, Faculty Appointments Committee
Washington and Lee University, School of Law
Lewis Hall
Lexington VA 24450 USA
540-458-8531
drumblm@wlu.edu

All inquiries will be treated with the strictest confidence and discretion.

Review of applications will begin immediately and continue until the position is filled.