I’m finding the controversy over the Epipen price increases fascinating, because of its hoist-by-their-own-petard quality.

When Mylan acquired Epipen in 2007, it wasn’t a particularly popular product.  Then Mylan started a heavy marketing push, which included increasing awareness of the dangers of allergies, publicizing how Epipen could save lives in emergencies, and lobbying for legislation requiring that Epipens be stocked in public places as an emergency health device, like defibrillators.  Because Mylan did a tremendous job of persuading the public that the Epipen was a critical medical device, it was able to raise prices dramatically – and now, having convinced everyone and his mother that Epipens are indispensable, the company is getting backlash for price gouging on this life-saving technology (not to mention becoming the target of investigations and lawsuits over, among other things, Medicaid fraud and state law antitrust violations).

Haskell previously posted about the Epipen situation, and connected the issue to the shareholder wealth maximization norm in corporate law.  Going further, he asked whether, from a policy perspective, we particularly want to encourage some other sort of stakeholder model for the healthcare industry.

I guess my point is, the issue is not just price increases; it extends to profit motive in determining what counts as a health threat in the first place.

Further to that, it’s worth highlighting that the FDA has been easing its prior restrictions on off-label drug marketing, out of concerns that suppressing the dissemination of truthful information may violate corporate free speech rights.  That has ominous implications for the pharmaceutical industry – why would companies go through extensive hoops to expand a drug’s labeling when they can get it approved for a single use, and then just market it for everything else? – and it also makes me wonder when we’re going to see more First Amendment challenges to securities regulation.

As many of you already know, I regularly advise students (as so many of us do) on career planning and job searches.  This advice extends to communications in connection with career planning and job searches.  And I have blogged about all this.  I have posted in the past, for example, on networking letters (my post is here) and cover letters, for example (my most recent post is here). 

Yesterday, I got an email message from a student with a great question related to all this.  Here is the question: “What would you recommend as the subject line of an email to a contact you have been referred to by someone else?”  Nice.  Here’s what I ended up writing back, in pertinent part.

 . . . Email titles are tricky.

The first thing I would do is ask if the person making the connection can e-introduce you with an email message and copy you in.  I have done that many times.  My script usually goes something like this:

[X], e-meet [Y].  As I explained to you earlier today, [Y] is the [title & affiliation].

[Y], [X] is a [year] at UT Law who is considering [career goal].  [X] is especially interested in working with [specific practice interest].  S/he has M/W/F time free in her/his academic schedule this fall, and she/he would love to find a targeted internship involving all or part of that time.  I thought you might be able to help me identify opportunities for [X}.  So, I offered to introduce you to each other by email in the hopes that you could help [X] find something suitable.

[Y], I know that you are always busy.  If this request is unduly burdensome, I fully understand.  Just let us know.  But if you have a little bit of time to make some suggestions to me and [X] on this, I hope that you will do so.

Best to all,

Joan Heminway

If that doesn’t work, we’re back to you sending the email on your own.  You may want to ask the person who gave you the connection if it’s OK to copy him or her on the message you send, btw.  I think that adds credibility and can have other advantages, too.

As with many things, the answer to your question about recommended email subject lines is “it depends.”  More specifically, it depends on the precise content, the context, and your style.  Sometimes, and this is consistent with my style, I will entitle an email like this–one to a stranger with whom I have some affinity–by referring to this affinity relationship in some way.  So, if the person is, e.g., an alum of UT Law, I might entitle the message: “Greetings from the UT College of Law.”  If the only affinity is the mutual friendship, a similar approach might lead to a title like:  “E-introduction with Regards from Joan Heminway.”

Do those kinds of suggestions resonate with you?  Let me know.  We can consider this the start of a conversation . . . .

I am not wholly satisfied with this response.  The first suggested subject line may be too generic (even though I have used it in the past) and the second sounds a bit formal for most students.  Maybe the second one is better cast this way: “E-introduction (and Warm Regards from Joan Heminway).”  At any rate, your ideas are most welcomed.  As I noted in my response to the student, I think this is an ongoing conversation . . . .

Last year, on the suggestion of an ALSB colleague, I did a post on promotion, tenure, and administrative appointment news for legal studies professors in business schools. I continue that series this year, below. I am happy to add to this list, as I am sure it is incomplete. Congrats to all!

Robert Bird (UConn) – promoted to full professor

De Vee Dykstra (South Dakota) – appointed associate dean of Beacom School of Business

Marc Edelman (CUNY) – promoted to full professor and awarded tenure

Josh Perry (Indiana-Kelley School of Business) – appointed to Dean of Undergraduate Affairs

Jamie Prenkert (Indiana-Kelley (Bloomington Campus)) – appointed Associate Vice Provost

Scott Shackelford (Indiana-Kelley) – promoted to associate professor and awarded tenure

 

I recently received the following information regarding two positions at The Harvard Law School Program on Corporate Governance. Many readers, I assume, will be familiar with their co-sponsored excellent blog, The Harvard Law School Forum on Corporate Governance and Financial Regulation. 

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Executive Director

The Harvard Law School Program on Corporate Governance invites applications for the position of Executive Director. Together with the Faculty Director and others, the Executive Director of the Program works on building, developing, and managing the full range of activities of the Program. Under the Faculty Director’s oversight, the Executive Director manages the wide range of the Program’s operations; collaborates with major corporations, law firms, investors, advisers, and other organizations; participates in developing and directing conferences and other events for the Program; and manages the administration and personnel of the program, including fellows, research assistants, and staff. The Executive Director also collaborates with constituent groups and other professionals; participates in fundraising activities; interacts with donors and visitors; and takes on other management roles within the Program as needed. The Executive Director is involved in overseeing the Program’s website and other media outreach efforts, as well as the Program’s blog, the Harvard Law School Forum on Corporate Governance and Financial Regulation.

Applications will be considered on a rolling basis. Candidates should have a J.D. or another graduate degree in law, policy, or social science, and 3+ years of experience in a relevant field of law or policy. This is a full-time term appointment.Start date is flexible. Additional information on the Executive Director position, as well as detailed instructions on how to apply, is available through ASPIRE.

Academic Fellow

The Harvard Law School Program on Corporate Governance invites applications for Post-Graduate Academic Fellows. Candidates should be interested in spending two or three years at Harvard Law School in preparation for a career in academia or policy research, and should have a J.D., LL.M. or S.J.D. from a U.S. law school (or expect to have completed most of the requirements for such a degree by the time they commence their fellowship). During the term of their appointment, Post-Graduate Academic Fellows work on research and corporate governance activities of the Program, depending on their interests and Program needs. Fellows may also work on their own research and publishing, and some former Fellows of the Program now teach in leading law schools in the U.S. and abroad.

Applications are considered on a rolling basis. Interested candidates should submit a CV, list of references, law school grades, and a writing sample and cover letter to the coordinator of the Program, Ms. Jordan Figueroa, atcoordinator@corpgov.law.harvard.edu. The cover letter should describe the candidate’s experience, reasons for seeking the position, career plans, and the kinds of Program projects and activities in which they would like to be involved. The position includes Harvard University benefits and a competitive fellowship salary. Start date is flexible.

Many thanks to the Business Law Prof Blog for giving me the opportunity to post here.

I’d like to start off with a brief observation: corporations are more international than they have ever been.  Just in the last week, we have witnessed the European Commission ordering Apple to pay $14 billion in back taxes to Ireland, Samsung recalling its Galaxy Note phones from 10 countries due to battery fires in the devices, and Caterpillar announcing a global restructuring that could lead to the closing of its factory in Belgium in favor of a location in Grenoble, France.

While the globalization of international business today benefits society in a number of ways, it also has costs.  One of these costs is the increasing difficulty of regulating globalized companies.  When companies can easily restructure and relocate in order to avoid burdensome regulation, government regulators face a stark choice: they can pursue their policy priorities and risk causing companies to flee their jurisdiction (see the inversion craze of the last few years), or they can abandon those priorities in the hopes of attracting and retaining corporate business.  Neither of these is a particularly attractive option.

International cooperation provides one resolution to this dilemma.  By binding countries to particular regulatory frameworks, multilateral agreements can prevent the kind of “race to the bottom” dynamic that government regulators fear.  And indeed, a growing number of scholars have argued that international agreements are necessary to solve the regulatory problems associated with the internationalization of business.  But multilateralism suffers from a number of well-known flaws, including the difficulty of negotiating, monitoring and enforcing international agreements. 

In my forthcoming article, Unilateral Corporate Regulation, due out next semester in the Chicago Journal of International Law, I argue that the emphasis on multilateral solutions obscures the extent to which individual countries, and in particular large economic powers like the United States, China and the European Union, can unilaterally impose their domestic regulations on international firms.  This kind of unilateral corporate regulation can solve, or at least mitigate, many of the global problems that government decisionmakers face.  The United States, for example, imposes its corruption norms (the FCPA) and banking rules (FATCA) on foreign companies, even when those companies have minimal ties to the US.  The European Union does the same with its data privacy rules. 

At the same time, the rise of unilateralism raises a number of important questions for the future of corporate regulation.  How can we ensure that unilateral regulation by individual countries is fair and balanced?  How can we prevent biased and conflicting regulation from sprouting up around the world?  And what are the ethical limits on a country’s imposing its laws on businesses outside its borders?  These are difficult questions, and ones that are largely overlooked in the current debate.

    First of all, I want to thank the editors of the Business Law Prof Blog for allowing me to guest blog over the summer.  I thoroughly enjoyed my stay here and they have been kind enough to let me continue posting from time to time as a contributing editor.  Thanks again to all of you.

    The National Conference of Commissioners on Uniform State Laws (“NCCUSL”) (also known as the “Uniform Law Commission”) promulgates several influential business organization statutes:  the Revised Uniform Partnership Act (1997), the Revised Uniform Limited Partnership Act (1985), the Uniform Limited Partnership Act (2001), and the Revised Uniform LLC Act (2006), to name a few.  Some of these statutes have been widely adopted.  The Revised Uniform Partnership Act, for example, has been adopted by 38 states (as well as the District of Columbia and the Virgin Islands) according to the Uniform Law Commission’s website.  As another example, the Uniform Limited Partnership Act (2001) has been adopted by 19 states (as well as the District of Columbia) according to the same website.

    From 2009-2013, NCCUSL engaged in an intensive effort to harmonize all of the uniform acts covering unincorporated business organizations.  The “Harmonization Project” included the compilation of a Uniform Business Organizations Code, which comprises a “hub” of common provisions and various spokes addressing different business organizations (e.g., general partnerships or limited partnerships).  Each spoke has also been promulgated as a stand-alone act in the event that a jurisdiction does not want to adopt the entire Business Organizations Code.

    The result of this Harmonization Project is that NCCUSL’s uniform acts covering unincorporated business organizations have all changed.  Among others, there is now a 2013 version of the general partnership statute, the limited partnership statute, and the limited liability company statute that differ — in some places materially — from the prior versions that you may be familiar with.  The comments have also been rewritten.

    In future posts, I plan on discussing some of the changes that the Harmonization Project has brought about.  If you are interested, please stay tuned . . . .

Stock pricing in the securities market responds to supply and demand.  This is intuitive with regard to individual securities.  We understand that if more people want to buy a stock (demand) than sell it (supply), then the price moves up. Conversely, the price decreases if more want to sell than buy.  I wonder to what extent regulators have examined the role of retirement saving plans in flooding the market with demand to buy new securities and which can drive up stock prices overall.  Consider this historical graph of the NYSE trading average.  Observe the sharp rise beginning in the late 1980’s with the introduction of individual retirement savings plan and the beginning of the defined contribution society. 

Nyse-composite-may

chart source: Forecast Chart

New Department of Labor regulations open the door for state governments to sponsor retirement savings plans for non-government workers.  See for example, California’s proposed plans.  The rules, proposed in 2015, became final on August 30, 2016.  You can read a summary of the proposed plans published by The Brookings Institute and a DOL interpretive bulletin.  Also being considered are proposed rules authorizing high-population cities to sponsor similar plans in states that don’t create the non-government worker retirement savings plans.  Collectively, these regulations are intended to facilitate the retirement savings of the estimated 55 million small business workers who do not currently have the option of participating in a retirement savings plan.  This policy decision  encourages retirement saving and promotes individual financial stability.  It also means that more worker/saver/investors (a group I have called Citizen Shareholders in prior works) will be encouraged to invest in the private securities market.  The demand cycle continues and can be sustained so long as there are as many or more worker/saver/investors as there are folks  liquidating their retirement savings. In other words, a severely aging workforce/population could pose a demand/supply problem for the securities market.

-Anne Tucker

 

What does it mean to opt out of fiduciary duties?  In follow-up to my co-blogger Joan Heminway’s post, Limited Partnership Law: Should Tennessee Follow Delaware’s Lead On Fiduciary Duty Private Ordering?, I will go a step further and say all states should follow Delaware’s lead on private ordering for non-publicly traded unincorporated business associations. 

Here’s why:  At formation, I think all duties between promoters of an unincorporated business association (i.e., not a corporation) are always, to some degree, defined at formation. This is different than the majority of other agency relationships where the expectations of the relationship are more ingrained and less negotiated (think employee-employer relationship).  

As such, I’d make fiduciary duties a fundamental right by statute that can be dropped (expressly) by those forming the entity.  I’d put an additional limit on the ability to drop fiduciary duties: the duties can only be dropped after formation if expressly stated in formation documents (or agreed unanimously later). That is, if you didn’t opt out at formation, tell all those who could potentially join the entity how you can change fiduciary duties later. This helps limit some (though not all) freeze-out options, and I think it would encourage investors to check the entity documents closely (as they should).

At formation, the concerns we might have of, for example, an employee without fiduciary duties, are not the same as they are for co-venturers. Those starting an entity have long negotiated what is a breach of the duty of loyalty, for example.  In contrast, I think fiduciary duties in most employer-employee (and similar) relationships reflect the majoritarian default and they facilitate the relationship existing at all. For LLCs and partnership entities, I think that’s less clear. Entity formation is relatively rare compared to how often we enter other agency relationships, and they almost always involve significant negotiation (if not planning).  And if they don’t, the rules we expect traditionally should be the default. But where the parties talk about it, and they usually do, allowing a more robust sense of freedom of contract has value.  

Even in Delaware, where one can negotiate out of fiduciary duties, there remains the duty of good faith and fair dealing. I think of that as meaning that the parties still have a right to the essence of the contract.  That is, the contract has to mean something.  It has to have had a purpose and potential value at formation, and no party can eliminate that.  But, the parties only have a right to what was bargained for.  As such, what we might traditionally consider a breach of the duty of loyalty could also breach the duty of good faith and fair dealing, but a traditional breach of the duty of loyalty might not be sufficient to find liability where there is expressly no duty of loyalty. Instead, the act must so contradict the purpose of the contract that it rises to the level of a breach the duty of good faith and fair dealing. 

Part of the reason I support this option is that I think case law has already validated it, but in such an inartful manner that it confuses existing doctrine. See, e.g., McConnell v. Hunt Sports Enterprises, 132 Ohio App. 3d 657, 725 N.E.2d 1193 (Ct. App. 1999) (“An LLC, like a partnership, involves a fiduciary relationship. Normally, the presence of such a relationship would preclude direct competition between members of the company. However, here we have an operating agreement that by its very terms allows members to compete with the business of the company.”).

In closing, I will note that I am all for express provisions that require investors to pay attention at the outset. I don’t believe in helping cheaters hide the ball. I just think law that encourages investors and others joining new ventures to pay attention is useful and will provide long-term value to entities.  I don’t think that eliminated fiduciary duties at formation raise any more of a risk than we already have with limited or modified fiduciary duties at formation. With the more limited protections described above, freedom of contract should reign. 

I originally was going to write about overconfidence today.  But I will reserve that post for a later date.  Instead, for today, I am sharing with you a Tennessee legislative drafting issue on which my voice (together with the voices of others) has been solicited and asking for your views and comments.

A committee of the Tennessee Bar Association has been working on proposed revisions to the Tennessee Revised Uniform Limited Partnership Act.  Several thorny issues remain for consideration and final decision making, among them, whether Tennessee law, like Delaware limited partnership and limited liability company law, should allow for the elimination of general partner fiduciary duties.  The committee soon will be voting on this issue, and we are circulating among us our current views (having earlier debated the matter in telephone conference calls).  I took a shot at writing down my views for the group and circulated them last night.  I am including the main substantive part of what I wrote here, minus some typos that I caught after the message was sent (and please forgive the disfluencies in places), and requesting comments from you:

Continue Reading Limited Partnership Law: Should Tennessee Follow Delaware’s Lead On Fiduciary Duty Private Ordering?