On Sunday, the world lost a musical giant in David Bowie, who died of cancer at 69.  He was the first artist who that made me a true music fan. Like buy all the records, read the biographies, hang-posters-on-the-wall type fan.  I grew up with a love for Motown music, especially Smokey Robinson, the Supremes, and the Four Tops, that I still have, but my appreciation for that music came from listening to my parent’s records.

When it came time to choose my own artists, other kids were into Led Zeppelin and Pink Floyd, but Bowie emerged as my guy.  He was later followed by bands like R.E.M., the English Beat, and The Cure, among others, as I moved into more of the college radio scene, and I really liked Joan Jett, but Bowie was always The Guy.  My fandom started with an album I poached from my aunt, Heroes.  I also got ahold of David Live (1974), and then worked my way back before going forward.  The Rise and Fall of Ziggy Stardust and the Spiders from Mars, Space Oddity, The Man Who Sold the World, Aladdin Sane, Diamond Dogs, and Hunky Dory were the next to follow. I even own a copy of the Christmas record featuring David Bowie and Bing Crosby. 

Let’s Dance came out in 1983.  It was a hit, and yet criticized for being too mainstream. I was twelve, and thought it was great.  I still do, though in a very different way than much of his other work.  The connected tour for the album, the Serious Moonlight Tour, featured Bowie in a bow tie.  I thought it was the coolest thing. I bought one and learned to tie it myself.  I still have the tie, and I wore it to teach my first Business Organizations class of the semester on Tuesday (and my Energy Business Law and Strategy course).  Contrary to what some want to believe now that E. Gordon Gee is the president of my institution, bowties originated with Bowie for me, not President Gee.  (And yes, it is likely that only a law professor could connect someone as cool as Bowie with bowties, and probably only this law professor.)

I write this as much for me, as anything, I suppose, but a few things about David Bowie strike me as relevant to this blog. First, he was always ahead of his time, looking for what was next. He didn’t back down, he said what he thought in a strong, but usually respectful way.  He was, unfortunately, well ahead of his time in criticizing MTV for its lack of programing diversity. Not so much for calling them out — others did that, too — but in the way he did it, as you can see here.  

His eye for talent was remarkable, too.  David Sanborn played sax on David Live. Luther Vandross sang backup on Young Americans. Stevie Ray Vaughn played on Let’s Dance, and Reeves Gabrels (now with The Cure) with Tin Machine. Adrian Belew played on Lodger.  Bowie, in turn, sang back up and played sax on Lou Reed’s Transformer.  And his work with Iggy Pop, Queen, Tina Turner, Trent Reznor, and others crossed genres and time.   

Finally, he tried creative financial vehicles.  As one report explains, 

In 1997, Bowie, born David Robert Jones, securitized revenue from 25 albums (287 songs) released before 1990. At the same time, he swapped distribution rights on his back catalogue for a $30 million advance on future royalties in a deal with EMI. The 10-year “Bowie Bond” he created with banker David Pullman promised a 7.9% return and raised $55 million, along with a media frenzy. A flurry of other artists followed, but the Bowie Bonds skidded toward junk status by 2004, downgraded by Moody’s from A3 to Baa3.

The trend never really took off, though. Despite never missing a payment, the bonds did not do well, though that did not appear to hurt Bowie.  People got worried about online music sharing soon after the deal was struck.  Still, the idea of monetizing intangible assets, was rather forward looking, even if some believe that loans, and not bonds, are the better suited to assets like music. For Bowie, in music and otherwise, new things were worth trying, even if they didn’t always go as planned. I still wished I’d gotten in on that deal, regardless.  I always felt like I missed out. 

I know Bowie is something of an acquired taste for some (and an unacquirable one for others), but the outpouring of support following his death shows a tremendous amount of respect and admiration.  He may even get his first U.S. number one album with his Blackstar album, which was recently released. Some believe the track Lazarus and the related video were his goodbye to the world.  It’s hard to argue it’s not.    

He will be missed, but I’m glad his legacy provides such a tremendous body work. I think the Sirius/XM Bowie channel should be permanent, and not just a limited-run engagement.

As I write this, I got a notice that Alan Rickman, also 69, has died of cancer. Cancer sucks.  As David Bowie noted in this short, but poignant, interview from 2002, “Life is a finite thing.”  It sure is. 

This post highlights SIGA Technologies, Inc. v. PharmAthene, Inc., Del. Supr., No. 20, 2015 (Dec. 23, 2015).

At the end of 2015, the Delaware Supreme Court issued an opinion affirming its earlier holding that where parties have agreed to negotiate in good faith, a failure to reach an agreement based upon the bad faith of one party entitles the other party to expectation damages so long as damages can be proven with “reasonable certainty.”

Francis Pileggi, on his excellent Delaware Commercial and Business Litigation blog, provides a succinct summary of the case, available here.  The parties to the suit entered into merger negotiations to develop a smallpox antiviral drug.  Due to the uncertainty of the merger negotiations, the parties also entered into a non-binding license agreement, the terms of which would be finalized if the merger fell through for whatever reason.   While nonbinding, the preliminary license agreement contained detailed financial terms and benchmarks.  When the merger was terminated, SIGA proposed terms for a collaboration that departed from the preliminary license agreement.  The Delaware Supreme Court affirmed the Court of Chancery finding that SIGA’s acted in bad faith.  The question of the case became what damages were due from the bad faith breach of a preliminary agreement to “negotiate in good faith,” when all essential terms have not been agreed to by the parties?

The first gem in the opinion, and something I’ll be working into my damages lectures for first year contracts this spring,  is that: 

when a contract is breached, expectation damages can be established as long as the plaintiff can prove the fact of damages with reasonable certainty. The amount of damages can be an estimate.  

What constitutes reasonable certainty changes whether the party is establishing damages are due versus the amount of the damages.  And here is the second gem:  the standard of proof can be lessened where willful wrongdoing contributed to the breach and the uncertainty about the amount of damages.

where the wrongdoer caused uncertainty about the final economics of the transaction by its failure to negotiate in good faith, willfulness is a relevant factor in deciding the quantum of proof required to establish the damages amount.

-Anne Tucker

I, like many law professors, recently returned from the annual meeting of the Association of American Law Schools. I attended a number of interesting presentations, but the highlight of the conference for me was the opportunity to hear Frank Easterbrook speak on “The Corporate Law and Economics Revolution.”

I assume that most of our readers are familiar with Judge Easterbrook. He was a prominent corporate law scholar prior to (and after) being appointed to the Seventh Circuit Court of Appeals by President Reagan.

I have never met Judge Easterbrook. He left the academy two years before I began teaching. But I am certainly familiar with his writing. I have read several of his articles, and a well-used copy of his book (with Daniel Fischel) The Economic Structure of Corporate Law sits on my office bookshelf. And we do have a connection of sorts: my first citation ever came from him. He was kind enough to cite my very first article in one of his opinions, Amanda Acquisition Corp. v. Universal Foods Corp., 877 F.2d 496 (7th Cir. 1989).

At the conference session I attended, Judge Easterbrook’s views on law and economics were forcefully challenged by one of the other panelists. I learned two things from his response:

    1. Judge Easterbrook has definitely kept up with the economic and legal scholarship even though, by his own admission, he only sees a couple of corporate law cases a year. He may no longer be part of the academy (except as a senior lecturer at Chicago), but he’s fully aware of what we’re writing.

    2. I don’t ever want to have to argue a case before him. His grasp of the issues and the scholarship was intimidating and he gives no quarter, although he’s polite about it as he shreds you.

It’s always interesting to see in person someone whose scholarship I admire. Sometimes, I’m disappointed. The live version doesn’t live up to the writing. But that definitely wasn’t the case this time.

Spring semester classes begin on Monday, and as a newbie professor, I’ve been spending a lot of my break preparing to teach Securities Regulation for the first time. While all my pals hang out at AALS in New York (hi, guys! Hope you’re having a good time!), I’ve chosen to remain at home, with multiple casebooks spread out over my living room floor.

Though the casebooks naturally focus on federal regulation, most have at least some discussion of regulation at the state level, including a brief explanation of the term “blue sky law.”  This is a phrase whose etymology has long been shrouded in mystery; Professors Macey and Miller traced it as far back as 1910, but could not find its origins.  See Jonathan R. Macey & Geoffrey P. Miller, Origin of the Blue Sky Laws, 70 Tex. L. Rev. 347 (1991).  As a result, the casebooks I’ve seen simply quote the Supreme Court’s opinion in Hall v. Geiger-Jones Co., 242 U.S. 539 (1917), describing such laws as designed to prevent “speculative schemes which have no more basis than so many feet of ‘blue sky.’”

I mention this because a few years ago, Rick Fleming, who was then General Counsel to the Kansas Securities Commissioner, offered an alternative origin story, one both credible and colorful.  According to Mr. Fleming, J.N. Dolley – the Kansas Bank Commissioner who authored the original blue sky law in 1911 – published an article in the Topeka State Journal in 1935, where he set forth the following explanation:

I have been given credit for naming the “Blue Sky” law. That name goes back to the drouth of the nineties. We had them then, just the same as now, altho they were not so well dramatized and advertised and we had learned less about feeling sorry for ourselves.

Crops were burning up. Stock water and even water for domestic use was disappearing. It was the day of professional rain makers and some of our people felt we should make every effort to get rain. So we raised the necessary money and contracted with some Chicago slicker to supply us with the necessary quantity of moisture.

They arrived at Maple Hill with two barrels of chemicals, a string of iron pipe and some mysterious mechanical doo-dad. They set up their equipment on a platform within an enclosure to which no one was admitted. Their iron pipe pointed toward the sky. At length it began to emit a light milk colored spray. The machinery was set it (sic) motion.

The milky spray was cast up for four days and four nights. But there was no sign of rain. The fifth day our committee visited the rain makers plant, to discover that the rain makers had disappeared, leaving their equipment behind.

Some of our folks had prepared against overflow damage from rains expected, moving valuables to uper (sic) stories and other property to high grounds. Not only did we have no flood but we saved others from such a fate because the rain making equipment was left with us.

When I appeared before the judiciary committee of the Kansas house and senate with the bill to protect our people against fraudulent stock schemes, one of the senators asked me what to call the law. Remembering our experience with the blue sky artists in trying to make rain, I suggested “the blue sky law.” The name stuck.

Mr. Fleming concludes, “After all these years, let the record reflect that the term ‘blue sky’ does not refer to an investment scheme that is worth no more than air. More accurately, it refers to an investment opportunity in which the promoter promises rain but delivers blue sky.”  See Rick A. Fleming, 100 Years of Securities Law: Examining a Foundation Laid in the Kansas Blue Sky, 50 Washburn L.J. 583 (2011).

So noted!

I will miss many of you at AALS this weekend because on Sunday morning I am speaking on a panel on corporate social responsibility in small businesses and startups at a conference for the United States Association for Small Business and Entrepreneurship (USASBE) in San Diego. My co-panelists include: Julian Lange, Governor Craig R. Benson Professor of Entrepreneurship and Public Policy, Associate Professor, Babson College; Megan M. Carpenter, Professor of Law, Co-Director, Center for Law and Intellectual Property, Faculty Director, IP and Technology Law Clinic, Faculty Director, Entrepreneurship Law Clinic, Texas A&M University School of Law; Sandra Malach, Senior Instructor, Entrepreneurship & Innovation, Haskayne School of Business, University of Calgary, Canada, former counsel at the Venture Development Legal Clinic, and previous positions at Stantec Engineering, Bennett Jones Barristers & Solicitors, Enron, and SAIT; and John Tyler, General Counsel and Corporate Secretary, the Ewing Marion Kauffman Foundation. The abstract that we presented to conference organizers stated:

Entrepreneurial and small businesses are increasingly incorporating “people, planet, and profits” into their business models and operations to a degree that goes beyond simply fulfilling the requirements of government regulations. Moreover, it can be argued that expanding a company’s mission to include issues such as sustainability can create competitive advantage in nurturing customer loyalty and employee commitment to company success.   Through the use of presentations, interactive exercises, and group discussion, this workshop will provide participants with an opportunity to examine the implications for entrepreneurs and small business owners of including corporate social responsibility in their business models.

I’ll be discussing consumer attitudes toward CSR in the US, the EU, Canada, Asia and other parts of the world, and I will blog about the panel as a whole next week. Regular readers of this blog know that I am generally pretty skeptical about consumers and CSR. They often say a lot about their concern for ethical practices in surveys, but they often purchase based on quality, price, and convenience. CSR does, however, help companies with regulators. A recent study indicated that regulators may impose lighter penalties on corrupt companies with good CSR records.

If you have any thoughts, or more important, any research that you would like me to share with the audience, particularly as it relates to CSR and benefit or social purpose corporations, please leave a comment below or email me at mnarine@stu.edu (before Sunday morning if you want me to share it with USASBE).

 

I recently listened to a podcast on temptation bundling, featuring the work of Katherine Milkman (Wharton). 

Temptation bundling is explained here and here by Katherine Milkman, who (I believe) coined the term.

In short, temptation bundling is putting something you want to do together with something you should do. 

Temptation bundling can make both activities more enjoyable — you feel better about the want activity because you also accomplished a should activity, and the should activity is less difficult because it is married with a want activity. For example, temptation bundling is what I have been doing with podcast listening; I only listen to podcasts (want) when I workout (should).

Below are a few temptation bundles that might work for professors:

  • Drinking caffeinated drinks only while researching;
  • Listening to your favorite music only while grading; and
  • Eating chocolate only when in faculty meetings.

Tomorrow afternoon (as Anne promoted earlier today), I will participate in the annual Association of American Law Schools (“AALS”) panel discussion for the Section on Agency, Partnerships, LLCs and Unincorporated Associations.  The panel discussion this year is entitled “Contract is King, But Can It Govern Its Realm?” and focuses on the contractarian aspects of LLC law.  Here’s the panel description from the AALS annual meeting program:

This program will explore the role of contract in unincorporated associations, with particular emphasis on the LLC and limited partnership forms. In most jurisdictions, the sparse prescriptions in the default rules imply that the parties will draft an operating agreement that reflects the material points of their bargain. For example, Delaware emphasizes that its policy for LLCs and LPs is to give “maximum effect to the principle of freedom of contract.” Modern contract theory, however, raises significant questions about the extent to which any documentation of a transaction can be “complete,” even if sophisticated parties negotiate at arm’s length and attempt to fully reduce their expectations to writing. If complete contracts are indeed an ideal rather than the reality, can legislatures impose default rules (fiduciary or otherwise) to fill the gaps without undermining the benefits of private ordering? To what extent should judges look outside the operating agreement to determine the parties’ intent? Our format will be a lively moderated discussion, and we will invite significantly more audience participation from the outset than attendees may have come to expect from AALS section meetings.

As you may recall (and as Anne reminded us in her earlier post on the AALS conference sessions), we hosted a weblog micro-symposium on issues relating to this topic in anticipation of this annual meeting program back in November, for which the concluding post is here, and my contributions are here and here.

I expect that we will explore through the conference panel (which, as the program description indicates, will engage the audience for much of the time) the nature and status of LLC agreements as contracts and the coexistence of contract with fiduciary duties and the implied covenant of good faith and fair dealing.  I hope that we can cover points of theory, policy, doctrine, and practice.  I will be adding some non-Delaware flavor in some areas of the discussion and encouraging folks to contemplate whether LLC operating agreements are contracts or merely treated like contracts for certain LLC law purposes.  Please come join in on the fun if you are attending the conference this year!  I may have more to say after the discussion has concluded . . . .

The AALS Section on Business Associations and Law is honoring 13 exemplary mentors for their contributions to scholarship, teaching and the development of new business law scholars.  Those honored were nominated by fellow members of the AALS Section.  The mentors will be recognized at the conclusion of the AALS BA Section meeting on January 8th (1:30-3:15) at the Annual AALS meeting in New York.  Please join me in congratulating our colleagues and thanking them for their contributions to our field.

-Anne Tucker