This week, we got two denials of class certification in 10b-5 securities cases involving meme stocks.  The first concerned Bed Bath and Beyond, the second concerned a fintech called Rocket Companies, which is not one of your more famous meme stocks, but apparently met the definition for 2 days out of a 2-and-a-half month class period.  One case presented a refreshingly accurate application of current doctrine.  The other presented a clarifying illustration of the doctrinal mess created by the Supreme Court’s decision in Goldman Sachs v. Arkansas Teacher Retirement System and its subsequent interpretation by the Second Circuit.

[More under the jump]

Section 10(b), and Rule 10b-5, prohibit fraud in connection with securities transactions.  Among other things, they prohibit corporate executives from publicly lying about a company, which typically causes the stock price to go up – only to crash again when the truth is revealed.

But when a plaintiff tries to sue in these cases, she confronts a fundamental problem: Fraud claims require proof of reliance.  And most stock purchasers may have trouble proving they relied on any specific false statement.  Maybe the investor didn’t hear the statement personally; maybe they relied on analyst advice – or an index.  Plus, most investor losses are too small to be worth suing over individually; the claims only make sense brought as a class action.  But if each investor has to prove that she personally relied on the false statement, there are too many issues to adjudicate collectively. 

The solution to this problem is the fraud on the market doctrine, adopted by the Supreme Court in Basic, Inc. v. Levinson (1988), and reaffirmed in Halliburton Co. v. Erica P. John Fund, Inc. (2014).  The doctrine consists of two presumptions – I call them the “objective” presumption and the “subjective” presumption – that benefit 10b-5 plaintiffs to help them satisfy the element of reliance on a classwide basis.

The first presumption is that, in an open and developed market – wide trading, lots of analyst coverage, and so forth – material information impacts stock prices.  The second presumption is that investors, subjectively, rely on prices as an unbiased assessment of market value when making an investment.  Together, the presumptions establish that the defendants’ fraud impacted stock prices, and investors relied on those prices – so, by syllogism, investors relied on the fraud.  Therefore, plaintiffs can satisfy the element of reliance at trial and – crucially – because these presumptions apply to all purchasers, plaintiffs can also get a class certified.

But, as Halliburton made clear, these are only presumptions; defendants are permitted to try to rebut them, and if they do so successfully, they can prevent class certification.

Which brings us to In re Bed Bath & Beyond Securities Litigation, 2024 WL 4332616 (D.D.C. Sept. 27, 2024).

Ryan Cohen took a 10% stake in Bed Bath & Beyond.  Later, as the company ran into trouble, he issued a tweet that included a “moon” emoji, which retail investors took to mean he planned to stay in for the long haul.  Other Cohen filings – a 13D, a Form 144 – also suggested he’d stand pat.  Retail investors piled in, the stock price rose, but tanked when it was revealed Cohen sold his stake. A class action followed, alleging Cohen misrepresented his intentions.  The court denied Cohen’s motion to dismiss, leading to the motion for class certification.

In evaluating the motion, the court began by correctly identifying the objective and the subjective presumptions that comprise the fraud on the market doctrine.  The court then observed that during this period, Bed Bath & Beyond’s stock was going nuts.  It was entirely untethered from fundamentals because it was a meme stock.  Under those circumstances, Judge McFadden refused to presume that Cohen’s false statement affected its price.

But think about this for a moment.  The stock was erratic; you can’t simply presume any particular piece of information is affecting prices.  Yet, plaintiffs might still be able to affirmatively prove the statement affected prices.  If so, they’ve satisfied the first half of the fraud on the market syllogism – the stock price was affected.  So long as the second half remains intact – a presumption that investors relied on stock prices – they can still prove their case classwide.

In fact, that’s precisely the argument I laid out before in my blog post about a case against Robinhood, In re January 2021 Short Squeeze Litigation.

Judge McFadden understood that, as well, because he did not rest on his conclusion that there could be no presumption of price impact.  Though he didn’t organize his reasoning the way I’d recommend, he still recognized that plaintiffs might simply introduce direct evidence that the price was impacted – but they had failed to do so.  As he put it:

Bratya argues that price impact from the August 12 tweet is visible to the naked eye. Pl.’s Reply at 17. A graph of BBBY’s price that day shows the price steadily rising from the market opening until 10:41 am, when Cohen sent out his tweet. Fischel Report ¶ 40. And it continues to rise at a steady rate before rising more dramatically around 12:30 pm. Id. Fischel claims that this steady, continuous rise does not register any price bump following Cohen’s tweet. Id. ¶ 40. To the Court’s eyes, however, the graph in fact does show a bump in BBBY’s price in the hour following the tweet, with a more dramatic price increase occurring just two hours later, between 12:30 pm and 1:15 pm. But neither Fischel nor Cain offer analysis on whether these blips are significant or noise. And having been lectured by both parties on the importance of statistical rigor, the Court will not make any conclusions about price impact by eyeballing one graph.

Thus, since there could be no presumption of price impact, and there was not sufficient affirmative direct evidence of price impact, the first leg of the fraud on the market syllogism failed; so, no classwide proof of reliance, and no class certification.  I’m not going to weigh in on whether McFadden correctly evaluated the weight and direction of various pieces of evidence, but I admire his clarity in identifying the correct questions: namely, was the market of a character such that we can presume price impact and, if not, is there other evidence of such impact?

Though McFadden did not, we could go further.  Remember, the second half of the syllogism is a presumption that investors rely on stock prices.  What does that even mean?  To be honest, it’s doctrinally unclear, see Donald C. Langevoort, Basic at Twenty: Rethinking Fraud on the Market, 2009 Wis. L. Rev. 151, but it does at minimum suggest investors believed the price to be validly set by supply and demand through honest investor assessment of information available.  And it’s very difficult to say this condition would be met for a meme stock.  For a meme stock, the entire point is that retail investors collectively decide to manipulate the stock price to something other than what a sober assessment of the company’s prospects would suggest.  At bare minimum, we might say that even if some retail investors “relied” on stock prices, so many of them did not that we’d create individualized issues for defendants’ rebuttal rights. 

The upshot being, it may very well be the case that individual investors relied on Cohen’s statements – and if they brought claims individually, they could prove their reliance.  But it’s more difficult to presume reliance on a classwide basis. 

But then we turn to the second meme-stock-class-cert case, Shupe v. Rocket Cos., 2024 U.S. Dist. LEXIS 178076 (E.D. Mich. Sept. 30, 2024).

Rocket Companies is a fintech that allegedly lied when it claimed that rising interest rates were having no impact on demand for its loans.  When the truth of declining margins and loan volume was disclosed, its stock price dropped.  Shareholders brought a 10b-5 class action, and the court denied class certification on the ground that the defendants had sufficiently rebutted the fraud on the market presumption.

What evidence did they offer?

As with Bed Bath & Beyond, the defendants focused on the objective presumption – namely, the presumption that their false statements impacted market prices.  To rebut that presumption, they first brought in an expert who pointed to public information about how rising interest rates were likely to harm Rocket’s business, including the risk warnings included in Rocket’s own SEC filings.  She also demonstrated that market analysts at the time were focused on these indicators, and did not appear to rely on Rocket’s statements to the contrary.

In securities litigation parlance, I find this evidence similar to what we usually call “truth on the market” evidence, namely, evidence that sufficient truthful information was swirling around to offset the impact of the defendant’s lies.  Except “truth on the market” evidence is exactly the analysis that the Supreme Court held in Amgen Inc. v. Connecticut Retirement Plans, 568 U.S. 455 (2013), may not be considered on a motion for class certification.  And in Goldman Sachs v. Arkansas Teacher Retirement System, the Supreme Court reaffirmed the correctness of the Amgen holding.

Now, the Goldman Sachs decision by the Supreme Court, echoed by the Second Circuit on remand, also suggested that if the original false statement is much more “generic” than the revelation of the truth, there may be an inference that any price drops associated with the disclosure did not reflect the dissipation of artificial inflation introduced by the lie.

Is that this case?

Yes, according to the Rocket court.  The false statements were that Rocket saw “strong consumer demand,” and that its networks were “growing.”  The corrective disclosure was that Defendants expected “[c]losed loan volume of between $82.5 billion and 87.5 billion”; (2) “[n]et rate lock volume between $81.5 billion and $88.5 billion”; and (3) “[g]ain on sale margins of 2.65% to 2.95%,” – numbers that were far lower than Rocket had reported previously.

See?  The defendants told everyone things were going well, and then disclosed specific figures showing they were going poorly, and the stock price tanked.  How could anyone possibly think the two were connected?

(That was my sarcastic voice.)

This is exactly what I predicted would happen after the Second Circuit’s Goldman decision: namely, plaintiffs and defendants would fight about whether corrective disclosures are sufficiently similar to the initial lie, untethered any determinate standard other than the trial judge’s gut feeling. 

Does anyone remember when, in the context of loss causation – which, nominally, courts may not consider on class certification – courts held that disclosures need not be “mirror images” of the initial lie, because that would functionally require corporate managers to admit to fraud, see Freudenberg v. E*Trade Financial Corp., 712 F. Supp. 2d 171 (S.D.N.Y. 2010), and “would eliminate the possibility of 10b–5 claims altogether”  In re Williams Sec. Litig., 558 F.3d 1130 (10th Cir. 2009)? 

And remember when the Second Circuit held in Goldman that “the question here—whether there is a basis to infer that the back-end price equals front-end inflation—is a different question than loss causation, and, in light of Goldman, requires a closer fit (even if not precise) between the front- and back-end statements….” Op. at 54 n.11?

Yeah, I remember that, too.

And another thing: New Shareholder Primacy podcast up!  This time, Mike Levin and I talk 10(b) actions by shareholders of pre-merger SPACs, and the Tesla pay case (not that one – the other one).  Here at Apple; here at Spotify; here at Youtube.

FORDHAM UNIVERSITY SCHOOL OF LAW invites applications for a full-time tenure, tenure-track, or long-term contract faculty position to direct our Entrepreneurial Law Clinic.  The faculty member will join a vibrant clinical program that has 15 full-time clinicians who teach, practice, and lead. We welcome interest both from those new to clinical legal teaching and from experienced clinicians; an appointment could be made to Associate Clinical Professor, Associate Professor, Clinical Professor, or Professor.

We seek dynamic candidates who are excited about clinical legal education, deeply committed to the academic enterprise, and able to collaborate with diverse groups inside and outside our university. We also welcome candidates who possess the capacity and inclination to support and advance law reform.  Commitment to principles of experiential learning and clinical pedagogy is central to the position; those who are not already conversant with these principles should be committed to developing in this domain.  The faculty member will have primary responsibility teaching and supervising students in the Entrepreneurial Clinic at our in-house law firm (Lincoln Square Legal Services, Inc.).  They will also have primary responsibility for selecting clients and matters and structuring the overall design and goals of the clinic.

In its current form, the highly successful Entrepreneurial Law Clinic provides pro bono transactional legal services to under-resourced entrepreneurs and small business owners and participates in community outreach to educate entrepreneurs about legal issues.  Students work with clients to form entities, structure incentive compensation for founders, protect clients’ intellectual property rights, help clients build their workforce, as well as draft shareholder, operating, vendor, customer, lease and/or employment agreements.  We are open to candidates who wish to work within the Clinic’s current form as well as those who wish to advance their own distinctive vision of an Entrepreneurial Clinic at Fordham Law School.

We welcome applications from all qualified candidates, including those applicants facing barriers to or who have been underserved by legal education and in the legal profession. The salary range for this job is $175,000-$290,000, dependent on experience. Any summer case coverage or research funding is in addition.

Qualifications

Candidates must hold a JD or its equivalent and be members of the New York Bar (or be eligible to seek membership as soon as reasonably possible after committing to join us). A period of at least three years of practice experience in transactional practice is preferred.

Application Instructions

Candidates can review the full job posting and apply for the position through Interfolio. Applications should consist of a C.V. and a cover letter stating the applicant’s vision for the clients and communities the clinic would serve, the range of matters to be handled, and the clinic’s student learning objectives. The cover letter should also indicate aspects of the candidate’s practice experience that render them suitable for the position.  Candidates seeking a tenure or tenure-track position should include a separate research agenda and potential job market paper.

For questions, please contact Professor Tracy Higgins or Professor Paul Radvany, Co-Chairs of the Clinical Faculty Appointments Committee, at thiggins@fordham.edu, radvany@fordham.edu.

Applications will be accepted until the position is filled but applicants are strongly encouraged to submit their materials by October 15, 2024 or earlier.

The SEC recently settled an enforcement action against Zymergen for making false projections about its business.  Prior to its IPO in April 2021, many of these projections were given directly to analysts.  Zymergen did not include the projections in its registration statement, because companies are strictly liable to investors for false statements in a registration statement under Section 11 of the Securities Act, and so they generally try to avoid making projections that may turn out to be overly optimistic.  Instead, Zymergen gave the false projections to analysts, so the analysts would take the projections, and use them in building their models, which they would pass on to investors with a recommendation of some sort.

One question then, is, if the SEC had not brought an enforcement action, could Zymergen have been liable to investors for passing on bad info to analysts?

The answer is, maybe not.  Certainly not under Section 11, which only applies to information in a registration statement.  And maybe not under Section 10(b), the general antifraud statute, because Stoneridge v. Scientific-Atlanta holds that public investors are not deemed to “rely” on behind-the-scenes conduct that’s filtered to the public through the false statements of another entity.  (But see Janus Capital Group, Inc. v. First Derivative Traders, raising the possibility, without deciding, that statements to analysts are public for 10(b) purposes).

Could the analysts themselves be liable for passing on targets based on false projections?  Certainly not under Section 10(b), unless they knew or were reckless about falsity, because Section 10(b) only applies to intentional frauds.

What about under Section 12, which imposes negligence liability for anyone who distributes a false offer for the sale of securities (which could theoretically apply to Zymergen, as well?)

It’s complicated.  The Supreme Court has narrowed the application of Section 12 in ways that are somewhat convoluted, and might preclude liability here, though in the pre-IPO context it’s hard to say.  But a second issue concerns whether the research report could be considered an offer in the first place.  Maybe so, except in the JOBS Act of 2012, Congress legislated an exception to the definition of offer, so that any research report is not an offer if it concerns an IPO of an emerging growth company.  So, because Zymergen (like most IPOs) was an emerging growth company, the analysts themselves were free to distribute Zymergen’s false information, without fear of Section 12 liability; they could only be liable if they themselves acted intentionally under Section 10(b). 

The combination creates some… well, troubling incentives, especially for analysts who work for investment banks that are part of the selling group and therefore may feel some pressure to offer positive coverage.  The analyst report itself won’t trigger negligence liability as a false Section 12 prospectus (because of the carveout), shareholders who read the analyst report (probably) can’t sue Zymergen under 10(b) (because of Stoneridge), and neither Zymergen, nor the underwriters who might even employ the analyst, will be liable under Section 11 for false statements in the registration statement, because those false statements were by hypothesis carved out of the registration statement to be farmed out by the analysts instead.

Now, after the dot com scandals of the early 2000s, the SEC procured settlements from the largest investment banks to separate their underwriting and research segments and new FINRA rules also required such separation but, you know, the Zymergen situation does raise the question whether this is the correct balance, especially since I gather it is fairly common practice for pre-IPO firms to share revenue guidance with analysts, in the expectation those analysts will present the information to investors.

On this point, I note that Zymergen’s registration statement contains the following standard language:

We are responsible for the information contained in this prospectus. We and the underwriters have not authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses prepared by us or on our behalf. We and the underwriters take no responsibility for any other information that others may provide you.

The SEC doesn’t mention it; still, it’s weird to me that these companies are permitted to filter their projections through analysts in hopes of flogging an IPO, while simultaneously publicly disclaiming any of that analysis.

That said, investors did, in fact, identify some allegedly false statements that were directly included in Zymergen’s registration statement, and those are the subject of an ongoing securities case under Section 11.  So … all’s well that ends well?

And finally, the latest Shareholder Primacy podcast is up.  This time me and Mike Levin talk TripAdvisor (pending before the Delaware Supreme Court) and 14a-4 shareholder proposals.  Available on Spotify, Apple, and YouTube. 

If you’re in North Carolina, or just passionate about the topic, consider coming to the NCCU 2024 Law and Technology Symposium and Summit October 10–11, 2024 at the Durham Convention Center. The symposium dives deep into generative AI and its impact on healthcare, while the summit offers a broader look at AI, data privacy, cybersecurity, emerging trends in tech policy, legal services regulation, and more. 

To register for the Symposium on October 10, please email techlawpolicyctr@nccu.edu.

To register for the Summit on October 11, where I’m speaking,  click on the “Register Today” link.

The organizers are still finalizing speakers, but if you come, look out for me on the Legal Risks in Cybersecurity Investigations panel. My co-panelists include Tylin Woodstock of Cisco Systems and Daniel Shin of William & Mary Law School.

The full agenda and impressive line up of speakers for the October 11 Summit , including two members of Congress, is below.

8:00 AM ET

Registration

8:00 AM-3:00 PM8:40 AM ET

Welcome

8:40 AM-8:45 AM

April Dawson

Associate Dean of Technology and Innovation and Professor of Law 

North Carolina Central University School of Law 8:45 AM ET

Greetings

8:45 AM-9:15 AM

Alyn Goodson

Executive Vice Chancellor 

North Carolina Central University 

Patricia Timmons-Goodson

Dean 

North Carolina Central University School of Law 9:00 AM ET

Special Remarks

Featured

9:00 AM-9:15 AM

Dyann Heward-Mills

CEO 

Hewardmills 9:20 AM ET

Bridging the Gap: Legislative Responses to Emerging Technologies

9:20 AM-10:20 AM

Valerie Foushee

Member of Congress 

U.S. House of Representatives 

Deborah Ross

Member of Congress 

U.S. House of Representatives 10:30 AM ET

Bridging the Justice Gap: Innovations in Access to Legal Services

10:30 AM-11:30 AM

Lakethia Jefferies

Clinical Director & Supervising Attorney of the Pro Bono Clinic, Externship Program Director 

NCCU School of Law 

Sonja Ebron

CEO and Cofounder 

Courtroom5 

How do you Begin and Grow a career in the Data Privacy Field?

10:30 AM-11:30 AM

Jonathan Cantor

Senior Vice President & Deputy Chief Privacy Officer 

Truist 

Terrance Reeves

Senior Manager of Data Privacy 

HP Inc. 

Responsible AI, Privacy and the Cost of Invisibility of the Global Majority

10:30 AM-11:30 AM

Charlotte Jones

Head of Product, Privacy & Regulatory Legal 

Five9 

William Pagán

Patent Attorney & Co-Owner 

Coats & Bennett, PLLC 11:45 AM ET

Intellectual Property Rights in the Age of AI

11:45 AM-12:45 PM

Jennifer Hayes

Principal 

Jordan IP Law, LLC 

Zaneta Robinson

Associate Clinical Professor and Founding Director of the Intellectual Property Law Clinic 

Wake Forest University School of Law 

Liability and Legal Consequences of Cybersecurity Breaches

11:45 AM-12:45 PM

De’Von Carter

Attorney 

The Law Office of De’Von Carter, PLLC 

Bahiya Lawrence

Senior Counsel 

New York City Office of Technology and Innovation, Office of Information Privacy 

Navigating the Legal Landscape of Gaming and Gambling: Interfaces and Intersections

11:45 AM-12:45 PM

Daphne Benford-Smith

Counsel 

Holon Law Partners, LLP 

David Greenspan

Adjunct Professor and consultant 

Santa Clara University School of Law 12:45 PM ET

Awards Lunch & Keynote Speaker

Featured

12:45 PM-2:15 PM

Nicol Turner Lee

Senior Fellow & Director of the Center for Technology Innovation 

The Brookings Institution 2:30 PM ET

Navigating of IP Attorney Practices: Leveraging Technology in Academia, Private Practice, and In-House Roles

2:30 PM-3:30 PM

Kevin Greene

Law Professor 

Southwestern Law School 

Vedia Jones-Richardson

Partner 

Olive & Olive 3:45 PM ET

Judicial Perspectives on Emerging Technologies

3:45 PM-4:45 PM

Paul Grimm

Director, Bolch Judicial Institute and David F. Levi Professor of the Practice of Law 

Duke Law School 

Martin (Marty) McGee

Senior Resident Superior Court Judge (Cabarrus) 

State of North Carolina 

Legal Risk in Cybersecurity Investigations

3:45 PM-4:45 PM

Marcia Narine Weldon

Director of Transactional Skills, Lecturer; General Counsel of an AI Startup 

University of Miami School of Law 

Daniel Shin

Cybersecurity Researcher & Adjunct Professor of Law 

William & Mary Law School 4:45 PM ET

Networking Reception

Reincorporations from Delaware to Nevada and elsewhere remain in the news with the Delaware Supreme Court awaiting oral argument in the TripAdvisor case.  I’ve covered the issue here before and written about Nevada with our Secretary of State for the Wall Street Journal.  Nevada offers an alternative to Delaware and a different litigation environment.  In that op-ed, we framed the issue this way:

The likelihood of expensive, meritless or value-destroying litigation leads public companies in Delaware to avoid deals they would otherwise make. Another of the three public companies that recently decided to exit, Fidelity National Financial, explained in a shareholder letter that the state’s approach “may discourage pursuit of transactions the Board might otherwise believe to be in the best interests of the Company and its stockholders” because of litigation costs.

This issue looms particularly large for corporations with significant shareholders. Although Delaware law offers a process for companies to manage transactions with conflicts outside court, Delaware jurists themselves don’t always agree about how much information corporate boards must push out to shareholders to avoid litigation. When the process becomes too costly and cumbersome, deals don’t get done.

This brings me to the most recent reincorporation proxy filed this week–Trade Desk, Inc.–a company with a market capitalization of over $50 billion.  The preliminary proxy contends that Delaware has grown uncertain and overly litigious for their tastes and that Trade Desk has been left burned by litigation distractions in Delaware.  The preliminary proxy explains:

The Trade Desk has felt the weight of this trend in Delaware courts. Our litigation wins in Delaware have not been without cost.. . . .

. . .  Even after following the time-consuming and costly process set out in MFW, we were still sued in Delaware based on allegations that we did not follow the requisite process, that our independent committee members were conflicted and that we provided supposedly deficient disclosures. This resulted in the Company expending significant time and resources to defend the case. Two years [later] . . . the case was dismissed after the judge determined the plaintiffs failed to state a claim against the Company and its then-directors. Although we were successful on the merits and the plaintiffs’ case was dismissed in full, it was not without significant diversion of time and resources from our business.

We and certain of our directors again face time-consuming and costly litigation in Delaware in connection with the market-based performance award granted to Mr. Green in 2021 (the “CEO Performance Option”), for which the proceeding was initiated in May 2022. We continue to view the CEO Performance Option as an appropriate tool for incentivizing Mr. Green and creating a long-term incentive to further align his interests with stockholder interests. As of September 23, 2024, litigation over the CEO Performance Option remains pending, and we are awaiting the court’s decision on the defendants’ motions to dismiss. 

Controlled corporations may conclude that the game of going through a conflict cleansing procedure under MFW may not be worth the candle because they get sued anyway and spend years litigating it even if they win.  The board concluded that they believed “flexibility and certainty in corporate decision-making can offer the Company competitive advantages needed to stay nimble and compete effectively in the years to come” and “determined it was in the best interests of the Company and our stockholders to evaluate reincorporating to a jurisdiction that we believe could provide this flexibility.”

As part of that exploration, the board ultimately settled on Nevada and obtained advice from Latham & Watkins LLP and Wilson Sonsini Goodrich & Rosati PC.  They even hired Steven Davidoff Solomon to evaluate differences in the jurisdictions.  He provided an “academic review of incorporation and reincorporation, including principles of corporate governance, the value attributable to a company’s situs of incorporation and legal and policy distinctions between Delaware and Nevada.”  Some of his findings and observations include:

  • Academic studies do not support the conclusion that there is additional value in incorporating in Delaware.
  • My own empirical analysis supports the view that reincorporation from Delaware to another state does not incur a negative premium.
  • Nevada and Delaware corporate law is largely similar with respect to many governance rights, including economic rights associated with holding common stock.
  • The differences between Nevada and Delaware law, often cited in the literature, stem from each state’s policy choices.
  • In assessing the differences between Delaware and Nevada law, the Board, under its duty of care, should determine which laws and internal governance structures best serve the interests of the Company and its shareholders.

Trade Desk appears likely to win its vote.  Jeff Green, the CEO, has 48.6% of the voting power.

It’s still early to see how many corporations might migrate away from Delaware.  As Vice Chancellor Laster memorably put it, the noise around Nevada as an alternative domicile to Delaware might just be a “practitioner-driven stormlet.”  To run with this theme, it could also turn into a controller cloudburst or some other weather pattern.  For now, it appears that corporations with controllers or other large shareholders may be closely considering this question.  It will be interesting to watch this continue to play out.

And here, I want to pause and plug my co-blogger’s excellent podcast on the TripAdvisor case that came out a few days ago.  If you want another way to get up to speed on this issue, it’s worth a listen.

Widener University Delaware Law School located in Wilmington, Delaware, currently has multiple, full time, tenure-track faculty opportunities available to begin January 1, 2025, or July 1, 2025. Applications for visitors for the upcoming Spring 2025 Semester are also welcome. 

We welcome applications from candidates with teaching interests in required and bar tested courses.

Continue Reading Widener Law Seeking Business Law Faculty!

Dear BLPB Readers:

“The American Business Law Journal (ABLJ) is seeking manuscripts for a special issue on “Rescuing Organizations in Financial Distress.”

Organizations around the globe, both private businesses and public entities, are currently experiencing extraordinary financial pressure and distress. A panoply of internal and external causal factors are contributing to the financial distress. While some organizations can overcome their financial predicament through continued operations, others require legal mechanisms to facilitate a path to rescue. The failure of a private business or the collapse of a public organization has a cascading impact on a host of stakeholders and interests, leading to significant detrimental outcomes well beyond the organization in financial distress. The special issue explores what businesses, regulators, lawmakers, and attorneys should do to provide effective rescue regimes and tools for organizations in financial distress.”

The deadline for submissions is February 3, 2025.  The complete call for papers is here:  Download Updated ABLJ 2025 Special Issue Call for Papers – Sept 2024.

UIC Law is currently looking to hire for an entry-level tenure-track position. They are inviting candidates to apply directly for consideration in their faculty hiring. The announcement is below. UIC requires candidates to apply directly before they can invite a candidate to interview with them. Candidates can follow this link to the webpage to apply by October 7, 2024.

+++++

UIC Law, Chicago’s only public law school, invites applications for one entry-level tenure-track candidate to teach Torts and Products Liability with secondary needs of Business Associations and Constitutional Law.

Candidates must have a Juris Doctor from an ABA-approved law school or its equivalent from a foreign country; a record of teaching excellence or demonstrated potential to become an excellent teacher and a record of high-quality scholarship or demonstrated potential to produce high-quality scholarship; and demonstrated interested in serving the academy, the community, and the legal profession at an urban, public, Research 1 university. Excellent writing and communication skills and demonstrated ability to mentor students is highly preferred. Salary will be commensurate with experience and qualifications.

Confidential review of materials and screening of candidates will be ongoing and will continue until the position is filled. For fullest consideration, apply online at https://jobs.uic.edu by October 7, 2024. Include a letter of intent, a current CV/resume, and the names of three professional references.

The University does not engage in discrimination or harassment against any person because of race (ethnicity), color, religion, sex, pregnancy, disability, national origin, citizenship status, ancestry, age, order of protection status, genetic information, marital status, sexual orientation, gender (including gender identity and gender expression), arrest record status, unfavorable discharge from the military, or status as a protected veteran (military status) and complies with all federal and state nondiscrimination, equal opportunity, and affirmative action laws, orders, and regulations.

The University of Illinois may conduct background checks in compliance with the Fair Credit Reporting Act on all job candidates upon acceptance of a contingent offer. The University of Illinois System requires candidates selected for hire to disclose any documented finding of sexual misconduct or sexual harassment and to authorize inquiries to current and former employers regarding findings of sexual misconduct or sexual harassment. For more information, visit www.hr.uillinois.edu/cms/…

A while ago, I posted about an SEC enforcement action against Wahed Invest.  Wahed Invest is a religious investment advisor that purported to select and monitor investments to ensure compliance with Shari’ah law.  In fact, according to the SEC, it did not in fact have policies in place to assess ongoing Shari’ah law compliance,  

At the time, I noted that I had not before seen an enforcement action based on false nonfinancial representations – that were nonetheless material to investors’ nonfinancial goals – and I compared it to the then-proposed climate change rule’s consideration for the nonfinancial goals of investors.  Specifically, the proposed rule justified, in part, its requirement that companies disclose GHG emissions on the ground that some investors have made net-zero commitments, regardless of whether the emissions data would be financially material to the operating company.

Well, this morning, I learned about a new SEC enforcement action against Inspire Investing.  Like Wahed, Inspire is a religious investment advisor, and like Wahed, it purported to engage in a “biblically responsible” investment strategy that required it to use sophisticated data analysis to ensure no companies in its ETFs engaged in certain prohibited activities.  In fact, its methods were far more slipshod than it represented, resulting in a number of verboten companies being included in its funds.

So, once again, the SEC took action to protect investors’ nonfinancial goals, i.e., it adopted a concept of materiality that originated from investors’ values, but was not tied to financial values.

Which is useful to consider in light of the final climate change rules.  Not only is the GHG emissions disclosure requirement softened to focus solely on materiality to the company (previously, that was only for disclosure of Scope 3 emissions, which requirement is eliminated entirely), but the references to investor net zero commitments – investor financial goals – is (as far as I can tell, it’s a very long document) gone. 

(To be fair, a lot of institutions have left the alliances that previously were committed to net zero goals, and one alliance has disbanded entirely, but a lot of that movement happened after the rules were finalized and some investors maintain their commitments).

Point being, we are in a world where apparently materiality for the purposes of assessing fraud can include nonfinancial information, but for the purpose of affirmative disclosure requirements, its status remains uncertain.

And another thing…

The latest episode of my Shareholder Primacy podcast with Mike Levin is up; this one deals with Moelis/SB313 and advance notice bylaws.  Links on Spotify, Apple, and YouTube.

One of the best ways for students to feel like “real lawyers” is for them to negotiate and draft contracts. The University of Miami will be announcing an inaugural invitational in the coming weeks so if you want to be in sunny Florida in early February, stay tuned. That competition will not require knowledge of M&A.

If M&A is your happy place, here’s a fantastic opportunity from the American Bar Association. 

MAC CUP II- ABA M&A Committee Invitational

Fall 2024 – January 2025

Application and Preliminary Instructions

The M&A Committee of the American Bar Association’s Business Law Section is seeking applications from JD students enrolled in ABA-approved law schools in the US and Canada to participate in its annual ABA M&A Committee Invitational (the “MAC Cup”).

Get your sunscreen and sunglasses ready — the “Final Four” teams will win an expense-paid trip to Laguna Beach, California, to compete for the championship at the ABA M&A Committee’s annual meeting on January 30 – 31, 2025.

Students should apply, and will participate, in teams of two. Qualifying rounds will be held during Fall 2024, with final rounds in January 2025. Additional information is attached below. Materials from last year’s MAC Cup, and other information, is available at the MAC Cup homepage: .

Students seeking an invitation to participate in the MAC Cup should:

(i) complete the application (see the website),

(ii) provide blinded resumes,

(iii) prepare the one page statement of interest described below.

These materials should be sent to both: (i) Thaddeus Chase, McDermott Will & Emery, at techase@mwe.com and (ii) the MAC Cup Subcommittee at TheMACCup@mwe.com.

Students on a proposed team should complete a single application and statement of interest together and submit them (along with each of their resumes) jointly.

The application deadline is September 25, 2024. 

Team Application Period – September 3-25, 2024

First Open Round – October 26/27, 2024 (Virtual)

Second Open Round – November 2/3, 2024 (Virtual)

Elite 8 Negotiations – January 25, 2024 (Virtual)

Semi-Finals – January 30, 2025, Laguna Beach California

Finals – January 31, 2025, Laguna Beach California

Good luck!