Following is a guest post from by J. Scott Colesanti and Madeline Rasmussen. Scott is a former contributing editor to this Blog, and I am happy to share the post post below.  This is sports and labor law post, to be sure, but employment issues, especially big time sports-related ones, are business law, too.  

Why NFL Players Might Want the NFL to Win Its Appeal of Brady v. NFL

by J. Scott Colesanti and Madeline Rasmussen

It feels like weeks since we saw a meaningful NFL contest (well, actually it has been a little over a week).  But it is nonetheless still weeks until the Brady appeal before the Second Circuit in March.  Should the vacatur of the superstar’s 4-game suspension in “Deflategate” be upheld, alternative means of both implementing and reviewing NFL punishment seem likely, alternatives none too comforting for future disciplined football players.

Continue Reading Guest Post: Why NFL Players Might Want the NFL to Win Its Appeal of Brady v. NFL

“Why don’t conservative activists use SEC Rule 14a-8 (the so-called shareholder proposal rule) to put proposals on corporate proxy statements?” and speculates that to the extent conservatives do submit such proposals, they are likely to be excluded as ordinary business matters.

Well, I don’t know if this represents a new trend or anything, but at least one conservative group was recently successful under 14a-8.  The National Center for Public Policy Research submitted a proposal to have Deere & Co provide a yearly report to stockholders on whether its political spending was in line with the company’s stated values.  According to the proposal, Deere & Co has stated that it advocates for a free marketplace, and that it only supports candidates who share its “pro-business” outlook and commitment to “free enterprise,” but at the same time, it has joined the Climate Action Partnership, withdrawn its support for the conservative ALEC, and has donated to politicians who voted for the Affordable Care Act and Dodd-Frank.  The proposal asks that the Board develop a policy for ensuring congruency between the company’s corporate values and its political activity, and report to shareholders on the company’s compliance with that policy.

The SEC denied Deere & Co’s request for no-action relief in December, and the proposal has been included in the corporate proxy for Wednesday’s shareholder meeting.

I was fortunate to hear Angela Walch (St. Mary’s) present on this paper at SEALS last summer. Her article, The Bitcoin Blockchain as Financial Market Infrastructure: A Consideration of Operational Risk, has now been published in the NYU Journal of Legislation and Public Policy and is available on SSRN. The abstract is reproduced below:

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“Blockchain” is the word on the street these days, with every significant financial institution, from Goldman Sachs to Nasdaq, experimenting with this new technology. Many say that this remarkable innovation could radically transform our financial system, eliminating the costs and inefficiencies that plague our existing financial infrastructures, such as payment, settlement, and clearing systems. Venture capital investments are pouring into blockchain startups, which are scrambling to disrupt the “quadrillion” dollar markets represented by existing financial market infrastructures. A debate rages over whether public, “permissionless” blockchains (like Bitcoin’s) or private, “permissioned” blockchains (like those being designed at many large banks) are more desirable.

Amidst this flurry of innovation and investment, this paper enquires into the suitability of the Bitcoin blockchain to serve as the backbone of financial market infrastructure, and evaluates whether it is robust enough to serve as the foundation of major payment, settlement, clearing, or trading systems.

Positing a scenario in which the Bitcoin blockchain does serve as the technology enabling significant financial market infrastructures, this paper highlights the vital importance of functioning financial market infrastructure to global financial stability, and describes relevant principles that global financial regulators have adopted to help maintain this stability, focusing particularly on governance, risk management, and operational risk.

The paper then moves to explicate the operational risks generated by the most fundamental features of Bitcoin: its status as decentralized, open-source software. Illuminating the inevitable operational risks of software, such as its vulnerability to bugs and hacking (as well as Bitcoin’s unique 51% Attack vulnerability), uneven adoption of new releases, and its opaque nature to all except coders, the paper argues that these technology risks are exacerbated by the governance risks generated by Bitcoin’s ambiguous governance structure. The paper then teases out the operational risks spawned by decentralized, open-source governance, including that no one is responsible for resolving a crisis with the software; no one can legitimately serve as “the voice” of the software; code maintenance and repair may be delayed or imperfect because not enough time is devoted to the code by volunteer software developers (or, if the coders are paid by private companies, the code development may be influenced by conflicts of interest); consensus on important changes to the code may be difficult or impossible to achieve, leading to splits in the blockchain; and the software developers who “run” the Bitcoin blockchain seem to have backgrounds in software coding rather than in policy-making or risk-management for financial market infrastructure.

The paper concludes that these operational risks, generated by Bitcoin’s most fundamental, presumably inalterable, structures, significantly undermine the Bitcoin blockchain’s suitability to serve as financial market infrastructure.

I am looking forward to presenting at this conference next month. Looks like a great group of academics and practitioners.

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University of Cincinnati College of Law

The 29th Annual Corporate Law Center Symposium – Corporate Social Responsibility and the Modern Enterprise

March 18, 2016

8:45 a.m. – 3:30 p.m.

Hilton Netherland Plaza

Pavilion Ballroom

 

This event is free. CLE: 5.0 hours, pending approval.

Presented by the University of Cincinnati College of Law’s Corporate Law Center and Law Review.

Symposium materials will be available on March 14 at: law.uc.edu/corporate-law-center/2016-symposium

Please register by contacting Lori Strait: email Lori.Stait@uc.edu; fax 513-556-1236; or phone 513-556-0117

 

Introduction, 8:45 a.m.

Keynote, 9:00 a.m.

Clare Iery, The Procter & Gamble Company

Social Enterprises and Changing Legal Forms, 9:30 a.m.

Mark Loewenstein, University of Colorado Law School

William H. Clark, Jr., Drinker Biddle & Reath LLP

Haskell Murray, Belmont University College of Business

Russell Menyhart, Taft Stettinius & Hollister LLP

Sourcing Dilemmas in a Globalized World, 11:00 a.m.

Steve Slezak, University of Cincinnati College of Business

Marsha A. Dickson, University of Delaware Department of Fashion & Apparel Studies

Tianlong Hu, Renmin University of China Law School

Anita Ramasastry, University of Washington School of Law

CSR and the Closely Held Company, 1:15 p.m.

Eric Chaffee, The University of Toledo College of Law

Michael Petrucci, FirstGroup America, Inc.

Lisa Wintersheimer Michel, Keating Muething & Klekamp PLL

Sourcing From the Enterprise Perspective, 2:30 p.m.

Christopher Bedell, The David J. Joseph Company

Walter Spiegel, Standard Textile Co. Inc.

Martha Cutright Sarra, The Kroger Co.

Conclusion, 3:30 p.m.

One of my two former firms, King & Spalding, is hosting a free interactive web seminar on cybersecurity and M&A on February 25 at 12:30 p.m. Thought the web seminar might be of interest to some of our readers. The description is reproduced below.

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An Interactive Web Seminar

The Opportunities and Pitfalls of Cybersecurity and Data Privacy in Mergers and Acquisitions

February 25, 2016

12:30 PM – 1:30 PM

Over the last several years, company after company has been rocked by cybersecurity incidents. Moreover, obligations relating to cybersecurity and data privacy are rapidly evolving, imposing on corporations a complex and challenging legal and regulatory environment. Cybersecurity and data privacy deficiencies, therefore, might pose potentially significant business, legal, and regulatory risks to an acquiring company. For this reason, cybersecurity and data privacy are becoming integral pre-transaction due diligence items.

This e-Learn will analyze the (1) special cybersecurity and data privacy dangers that come with corporate transactions; (2) strategies to mitigate those dangers; and (3) benefits of incorporating cybersecurity and data privacy into due diligence. The panel will zero in on these issues from the vantage point of practitioners in the deal trenches, and from the perspective of a former computer crime prosecutor and a former FBI agent who have dealt with a broad range of cyber risks to public and private corporations.  This e-Learn is for managers and attorneys at all levels who are involved at any stage of the M&A process and at any stage of cyber literacy, from the beginner who is just starting to appreciate the complex nature of cyber risks to the expert who has addressed them for years.  The discussion will leave you with a better understanding of this critical topic and concrete, practical suggestions to bring back to your M&A team.

Program Speakers

Robert Leclerc, King & Spalding’s Corporate Practice Group and experienced deal counsel; Nick Oldham, King & Spalding, and Former Counsel for Cyber Investigations, DOJ’s National Security Division; John Hauser, Ernst & Young, and former FBI Special Agent specializing in cyber investigations.             

Click Here to Register.

“[T]he effective date of a registration statement shall be the twentieth day after the filing thereof.” That statement, in section 8(a) of the Securities Act of 1933,  makes the process seem so reassuringly quick and simple. If I want to offer securities to the public, I file a registration statement with the SEC and, less than three weeks later, I’m ready to go. But, as every securities lawyer knows, it isn’t really that easy.

It can take months for the registration statement in an IPO to become effective. The statutory deadline is circumvented through the use of a delaying amendment, a statement in the registration statement that automatically extends the 20-day period until the SEC has finished its review. See Securities Act Rule 473, 17 C.F.R. § 230.473.

But wouldn’t it be so much more conducive to capital formation if there really was a hard 20-day deadline? I understand that the SEC doesn’t have the staff to complete a full review in that time frame, but it would force them to focus on the important disclosure issues rather than some of the trivialities one sees in the current comment letters.

I’d like to see someone test that automatic 20-day effectiveness—file a complete registration statement without the delaying amendment and wait to see what happens. The issuer would, of course, be stuck with a price set 20 days before sale, because section 8(a) provides that amending the registration statement resets the 20-day clock. But that’s not the biggest problem.

The biggest problem is that the SEC would undoubtedly seek a stop order under section 8(d) of the Act. It’s only supposed to do that if it appears the registration statement contains a materially false statement or omits a material fact required to be included or necessary to keep the registration statement from being misleading. But I have no doubt that the SEC staff would argue that something in the registration statement was materially misleading, no matter how complete and carefully crafted it was.

Still, it would be nice to see someone try, just to see the SEC scramble to deal with such an unprecedented lack of obeisance. Unfortunately, no one would risk it—unless . . . Mr. Cuban?

A couple of days ago, the SEC announced that it had filed a settled administrative action against former Deutsche Bank research analyst Charles Grom. The administrative order is interesting because it gives a little glimpse into the lives of sell-side research analysts in the wake of early 2000s reforms. It also serves as an object lesson in the failures of attempts to “level the playing field” regarding access to inside information.

[More under the cut]

Continue Reading Of Research Analysts and Opinions

I love your most recent post, Josh, and have been truly enjoying the ensuing commentary/conversation. I took on the “is it a contract?” issue in the LLC context because of questions similar to those raised in your post and in the comments it generated. I admit that the partnership issue on which you posted has fascinated me for quite some time. (I first encountered it when I undertook to teach Business Associations almost 16 years ago . . . .)

I have to push back on your analysis a bit, however.  In particular, here’s the part of your post with which I have some trouble:

There must be an agreement to associate for a purpose. To me, that requires consideration and assent.  If one has associated sufficiently under the law to make one both a partner and an agent of another (and thus liable for the partner), I don’t see how there is a lack of sufficient consideration or assent to form a contract.

Why does an association for a purpose require an agreement? To “associate” is to combine, connect, or link. The concept of an association builds from that: “connection or combination” or “an organization of people with a common purpose and having a formal structure.”  It is clear in the comments to the RUPA that the drafters use “associate” and “association” in these common forms. In fact, the drafters refer to various forms of association created under other statutes, including “corporations, limited partnerships, and limited liability companies.” See RUPA Section 202, cmt 2.  

It is the association–of two or more persons to carry on as co-owners a business for profit–that creates an agency relationship and third-party liability for the obligations of the firm (unless the parties separately agree to those matters–which they may do independently or coincident with the formation of a partnership).  Those parts of the relationship are attributes of a partnership–aspects of the relationship that flow from the legal conclusion that a partnership has been formed. In other words, because of the formation of a partnership, the partners are agents of the partnership and are liable for partnership obligations.

Even assuming an agreement, however, it certainly is true that not every agreement is a contract.  Offer, acceptance, and (as you note) consideration would be required at common law to form a contract.  (Mohsen adds value to that analysis as well in his comment, even if he refers to the partnership agreement as opposed to partnership formation.)  Partners may and do, in fact, contract with each other under that legal meaning.  But I am not confident that a contract is required.  

Tell me what I am missing in all this . . . .

Parenthetically, I will note that I am extending my work on LLC operating agreements as contracts (referenced favorably at the outset in your post, for which I thank you) in future work, and I will be presenting the preliminary ideas on that at KCON XI next weekend in San Antonio.  It will be interesting to share some of these ideas with folks for whom contracts is their primary area of legal inquiry.  And since my associate dean is making noises about me teaching contracts sometime soon, I’d best get myself up to speed with the experts in any case . . . .