In their new article, Litigation Discovery and Corporate Governance: The Missing Story About the ‘Genius of American Corporate Law,’ Érica Gorga and Michael Halberstam argue that the U.S.’s unique, liberal discovery standards in private civil litigation have had an important role in shaping the content of corporate law.

They make a number of interesting claims in the paper, including that civil discovery provides detailed data for courts and regulators to use when creating legal standards, and that the omnipresent threat of civil discovery forces corporate managers to run their companies with more care: they must engage in extensive internal monitoring and recordkeeping in order to protect themselves should a dispute arise.  Additionally, the internal process of having attorneys and other experts review documents in anticipation of litigation – even if the documents are never turned over to the plaintiffs – generates information that assists managers, in their monitoring roles, and assists gatekeepers – attorneys, experts, etc – in understanding both the specific firm targeted and the industry in general.  Gorga and Halberstam also argue that the standards for adequacy of corporate internal investigations – which themselves play a growing role in corporate governance – are informed by the standards set by civil discovery in litigation.  Finally, the authors argue US Style corporate governance and securities laws cannot be easily exported to legal systems that do not have civil discovery, because civil discovery is a necessary part of the US’s ex post enforcement mechanism.

I found the paper very interesting, and I agree that discovery is critical to a regime that depends on private ex post litigation to enforce legal rules.  That said, I think the authors do not give sufficient weight to the argument that corporate managers – aware of civil discovery – are incentivized to keep records to the bare minimum necessary to establish that they met their obligations.  Board meeting minutes, for example, are often extremely sparse, describing the basic agenda and topics covered, but giving no sense of the color and tenor of the discussion.  High level corporate officers have been known to refuse to use email at all for fear of generating incriminating electronic trails.  There are limits to managers’ ability to protect themselves this way – modern business often requires electronic communication, and god knows every litigator has, at one point or another, dug up the incriminating email trail that finishes with someone saying “DELETE THIS.”  But the point remains that the possibility of discovery can be just as much of an incentive for managers to create misleadingly exculpatory paper trails as to engage in careful monitoring.

Every semester, in an attempt to learn my students’ names and a bit about them, I ask my students to fill out a student information form with a few questions. This semester I added the question: “What do you think makes a professor effective?”

The vast majority of the responses fell into one of the four categories below (listed in order, from most to least responses):

  1. Real world experience/real world examples
  2. Fairness in grading 
  3. Clarity in teaching 
  4. Approachability and accessibility 

I am teaching over 100 total students (undergraduate and MBA) this semester, and nearly every student mentioned something that would fall into at least one of those four categories.

Perhaps these responses do not surprise readers, and they were not incredibly surprising to me. The ordering, however, was a bit surprising, and I am not sure I would have expected to see “approachability” in the responses as much as I did. In any event, the responses were helpful in confirming that my time “staying current,” meeting with local attorneys/business people, and consulting is well spent – at least in the eyes of my students. 

Is there anything in the students’ responses that is surprising to readers? Is there anything missing from the list? (There were plenty of other answers but most of the repeated answers fell into one of the four categories.)

Greetings from Dublin. Between the Guinness tour, the champagne afternoon tea, and the jet lag, I don’t have the mental energy to do the blog I planned to write with a deep analysis of the AALS conference in DC. I live tweeted for several days and here my top 25 tweets from the conference. I have also added some that I re-tweeted from sessions I did not attend. I apologize for any misspellings and for the potentially misleading title of this post:

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Next week I will write about the reason I’m in Dublin.

Financial reforms/un-reforms depending upon your view are unsurprisingly set to be front and center in some upcoming debates.  Here are two interesting articles on the upcoming fight on financial measures taked onto must-pass bills like the budget, the exposure game and the likely resulting pressure.  Either way, financial regulation is keyed to be a big news cycle item in the upcoming political season.

These two articles just state the stance of the Obama Administration– please leave a note in the comments if you have any sources stating the opposition view.  Would love to present a balanced view of this, and am asking for the reader’s help to do so on this time-crunched Wednesday.

Anne Tucker

When I first started teaching at the University of North Dakota School of Law, I had the pleasure of having Patti Alleva as a colleague and mentor. She is one of the workshop presenters of the program listed below. Patti is an oustanding teacher, and a teacher of teachers.  

One of the great things I took away from my time with her is to teach intentionally.  That is, we all have different styles and goals, and that’s okay.  In fact, it’s a good thing.  We don’t all need to teach the same way, but we all should think about what we do, learn about how others learn, and then make decisions in the classroom for a reason.  Risks are okay (and, with Patti, encouraged)  — some things we try don’t work. We learn from that, too, and they can make us better.  The key is to try to maximize the learning experience for students.

I think, in the big scheme of things, I am an okay teacher.  I work at it; I care, and I genuinely want my students to learn and succeed.  And I do things in my classes for a reason.  How good I am, is really for others to answer. I know I am not as good as some.  I’m not in the same ballpark as Patti, or, for that matter, my wife.  She and Patti are two of the best I know.  But, without question, I’m a better teacher for having learned some of the craft from Patti, and I know many others who agree.  

If this kind of conference is an option and you’re interested, I highly recommend you give it a shot.  

Engaging the Entire Class: Strategies for Enhancing Participation and Inclusion in Law School Classroom Learning 

Register and pay online
(through UCLA website)

“Engaging the Entire Class: Strategies for Enhancing Participation and Inclusion in Law School Classroom Learning” is a one-day conference being presented by the UCLA School of Law and the Institute for Law Teaching and Learning (ILTL) in Los Angeles, California on February 28, 2015.

Conference Structure

The conference will include an opening and closing led by ILTL Co-Directors and Consultants, and five workshop sessions. Each workshop session will be presented by a teacher featured in What the Best Law Teachers Do.

Workshop presenters include:

·         Patti Alleva, University of North Dakota

·         Steven Friedland, Elon University

·         Steven K. Homer, University of New Mexico

·         Nancy Levit, University of Missouri-Kansas City

·         Hiroshi Motomura, UCLA

By the end of the conference, participants will have concrete ideas for enhancing participation and inclusion in law school classrooms to take back to their students, colleagues, and institutions.

Who Should Attend

This conference is for all law faculty (full-time and adjunct) who want to learn about enhancing participation and inclusion in law school.

Conference Schedule

All Sessions will take place at the UCLA School of Law on Saturday, February 28, 2015.

·         8:00-8:40 a.m.: Registration and Continental Breakfast

·         8:40-9:00 a.m.: Welcome and Opening

·         9:00-10:00 a.m.: Workshop 1

·         10:00-10:20 a.m.: Break

·         10:20-11:20 a.m.: Workshop 2

·         11:20-11:40 a.m.: Break

·         11:40 a.m.-12:40 p.m.: Workshop 3

·         12:40-1:30 p.m.: Lunch

·         1:30-2:30 p.m.: Workshop 4

·         2:30-2:50 p.m.: Break

·         2:50-3:50 p.m.: Workshop 5

·         3:50-4:10 p.m.: Break

·         4:10-4:30 p.m.: Closing

·         4:30 p.m.: Adjourn

Registration Fee

Through February 12, 2015

·         $250 – General Attendance

·         $100 – Gonzaga University, University of Arkansas Little Rock, or Washburn University full/part-time faculty

·         $0 – UCLA Law full/part-time faculty (registration required)

After February 12, 2015

·         Registration is on-site only

·         $300 – General Attendance

·         $300 – Gonzaga University, University of Arkansas Little Rock, or Washburn University full/part-time faculty

·         $0 – UCLA Law full/part-time faculty (registration required)

Registration fee includes:

·         all materials, and

·         breakfast, lunch, and snacks.

Location

Conference activities will be held at UCLA School of Law, 385 Charles E. Young Drive East, 1242 Law Building, Los Angeles, California 90095 (Directions and Maps).

Transportation

Participants are responsible for their own travel arrangements to the conference.

Lodging

A block of rooms has been reserved until January 25, 2015 for the nights of February 27 and February 28 at:

·         UCLA Guest House
330 Charles E. Young Dr. East
Los Angeles, CA 90095
$177.00: queen bed
$182.00: queen bed with kitchenette
$182.00: queen bed with twin bed

Make reservations by calling the hotel directly at (310) 825-2923 and mentioning that you are participating in the UCLA School of Law’s “Institute for Law Teaching and Learning Conference at UCLA”.

Please note: UCLA Guest House offers complimentary continental breakfast each morning but is not a full-food service hotel – meaning that they do not provide the service of ordering food via room service, and there is not a lobby restaurant. There are, however, many restaurants in Westwood Village, which is less than a 15 minute walk from the hotel. Also: On-site parking at the Guest House is free, but limited, on a first-come, first-served basis. If the hotel parking lot is full, the Guest House sells parking passes for the closest UCLA parking structure number 3.

I recently was afforded the opportunity to draft a short article for the William & Mary Journal of Women and the Law that combines my research on crowd theory (from the crowdfunding space) and my research on women and corporate governance.  The opportunity arose out of a celebration of the 20th anniversary of the journal, for which I had been a published author in the past.  (The journal published my article on women as investors in the context of securities fraud, Female Investors and Securities Fraud: Is the Reasonable Investor a Woman?, back in 2009.)

I just posted the recently released final version of the 20th anniversary article, entitled Women in the Crowd of Corporate Directors: Following, Walking Alone, and Meaningfully Contributing, to the Social Sciences Research Network.  My application of crowd theory to the gender composition of corporate boards of directors in this article does not provide significant new insights on the decision making of female corporate directors.  However, it does result in the observation that women on corporate boards may foster the establishment of new board structures and policies that have the potential to favorably impact board decision making.  The bottom line?  More–and more novel–research still is needed on the presence and contribution of women on corporate boards of directors.

My article represents a brief exploration, but I may well continue my work in this general area.  Accordingly, I would be interested in knowing about others doing similar or related research.  Let me know in the comments or by email message if you would like to alert me to your relevant research and writing.

I recently traveled to far western Texas to backpack in Big Bend National Park. An ice storm hit west Texas shortly before my trip. The ice cleared before I drove out from Dallas, but knocked out the power in the area I was visiting for several days. That power outage taught me several important lessons.

The Resilience of Small Businesses

The power outage demonstrated yet again the resilience of American small businesses. I was amazed at how well, and how quickly, businesses were able to adjust to the loss of power, computers, and the Internet. Those adjustments make life much easier for people like me, stuck in the area with no local support.

It’s obvious to me now, but I never thought about the fact that gas stations can’t pump gas without power. I will forever be grateful to the gentleman who owns the small Fina station in Marathon, Texas. He hooked up a portable generator to one of his gas pumps and hand-pumped gas for people like me who would have been stranded in the middle of nowhere without it. (Marathon, Texas truly is in the middle of nowhere; look it up if you don’t believe me.) He even resurrected an old mechanical credit card imprinter to allow customers to pay by credit card. His price was higher than normal, but, frankly, he didn’t charge as much as he should have.

I had similar experiences as I continued on to Terlingua, Texas, just outside the park, and into the park itself. The Starlight Theatre, a wonderful restaurant in Terlingua, connected their stove, refrigerator, and lights to a propane generator so they could continue to serve meals. The lights dimmed every time the refrigerator cooler powered on, but I had a wonderful dinner.

The concession restaurant in Big Bend National Park was also cooking using propane, with lanterns and candles providing lighting. Their food supplies were limited, but they managed to juggle what they had to create a limited menu for those who needed to eat. The concession hotel also had no power, but provided lodging (albeit cold lodging) to those who had nowhere else to go. The restaurant and hotel took down credit card information by hand, to be entered later when the computers came back online.

In short, the capitalist system works, even when little else is working.

Our Dependence on Computers and the Net

My experience without power also reminded me of how much we depend on computers and Internet access. Interconnectedness has made life much easier for all of us, including businesses, but, when we lose those connections, serious adjustments are required. I read a lot of apocalyptic science fiction, and this is a recurring theme of that genre, so it didn’t really surprise me—but it was interesting to experience it firsthand.

I also realized how much time I waste on the Internet and my phone. We were without Internet or phone access for five days, including the three days we were backpacking. (Power was restored right before we emerged from the wilderness.) I missed it, but I caught up in about a day, and the five-day delay had almost no effect on my life. Apparently, it’s really not that important that I keep up with events on a minute-by-minute basis.

Kudos to the National Park Service

Finally, I was reminded how much I like the National Park Service. I backpack a lot, and I have had many experiences with National Park Service employees, both rangers and temporary employees. I have never had a negative experience. If every government worker was as efficient and worked as hard as the National Park Service employees I have encountered over the years, our country would be in much better shape. The National Park Service does more with less than any other government agency, state or federal, than I have dealt with. They also deal courteously with some truly idiotic behavior by tourists. Kudos to them.

It’s nice to know that at a time when law firms are feeling financially squeezed, and hiring has been greatly reduced, one firm still seems to be able to write its own ticket.  That firm would be Wachtell Lipton, whose M&A billing practices were exposed in a lawsuit by Carl Icahn alleging that Wachtell committed malpractice in the course of its representation of a target company that – unsuccessfully – sought to fend off Icahn’s takeover bid.

As the American Lawyer reports, Wachtell does not charge hourly rates to its M&A clients, nor does it provide a breakdown of “services or details as to particular lawyers and hours.”  Instead – according to its fee agreement – it apparently selects a fee based on its own internal calculations of the value of what it has accomplished, taking into account “the intensity of the firm’s efforts, the responsibility assumed, the complexity of the matter and the result achieved.”  Though it claims not to base fees on deal size, it informs clients that fees tend to be approximately 1% or more of deal size for matters under $250 million, and 0.1% or less on matters over $25 billion.

The interesting thing about Wachtell’s fee practices is that they are, in fact, old school – as James B. Stewart recounts, back in the day, this is precisely how Cravath used to bill its clients.  And if the clients wanted more detail as to how the fee was generated, well, according to one Cravath partner, “That’s not the kind of client we’d want to have.”

Still, in today’s world, Wachtell’s practices are very unusual.  One M&A partner at a rival firm told American Lawyer that “The rest of us are enduring increased scrutiny and fly specking [from clients].  It’s not that the rest of us are suffering, but these guys are getting away with something that no one else gets away with.  They operate in a different world altogether.”

That said, Icahn’s lawsuit is certainly unusual – and Wachtell claims that it’s intended to intimidate the firm with respect to future deals.  After all, it would be a helluva deterrent against vigorous representation of takeover targets if, after a failed defense, the acquiring firm – now in control of the target – refused to pay its legal bills.

There are many Delaware cases from 2014 that are worth reading, but below are three relatively recent Delaware cases that I found worthwhile.  I provide the case name, my very short takeaway, and links to the case and additional commentary for those who wish to dive deeper.

In re Zhongpin Inc. Stockholders Litigation, controlling stockholders, decided Nov. 26, 2014. In denying a motion to dismiss, the Delaware Court of Chancery found a reasonable inference that a 17.3% stockholder/CEO could be a “controlling stockholder.” I have not done an exhaustive search on this issue, but this is a lower percentage of ownership for a “controlling stockholder” than I have seen in most cases, though (of course) the analysis is case specific. Additional commentary by Toby Myerson (Paul Weiss).

C.J. Energy Services, Inc. et al v. City of Miami General Employees’ and Sanitation Employees’ Retirement Trust, M&A/Revlon, decided Dec. 19, 2014. The Delaware Court of Chancery held that “there was a ‘plausible’ violation of the board’s Revlon duties because the board did not affirmatively shop the company either before or after signing.” (pg. 3). The Delaware Court of Chancery enjoined the shareholder vote on the transaction at issue for 30-days and “required [the defendant] to shop itself in violation of the merger agreement . . . which prohibited [the defendant] from soliciting other bids.” Id.  In this case, the Delaware Supreme Court reserved, stating that the Court of Chancery did not fulfill the stringent requirements for issuing a mandatory injunction, reminding that there are various ways to satisfy Revlon, and mentioning that this case did not have evidence of “defensive, entrenching motives,” as seen in Revlon and QVC. Note that the 38-page opinion was cranked out in just two days after the case was submitted. The handling of these expedited cases by the Delaware courts is one of the things that make Delaware attractive to corporations. Additional commentary by Brian Quinn (Boston College).

United Technologies Corp. v. Lawrence Treppel, books and records, decided Dec. 23, 2014.  The Delaware Supreme Court reversed the Delaware Court of Chancery’s holding that the Court of Chancery did not have authority to restrict documents produced in a books and records inspection to use only in cases filed in Delaware courts. The Delaware Supreme Court remanded to the Delaware Court of Chancery to decide whether the Court of Chancery will exercise its discretion to so restrict the use of the information obtained in the books and records inspection. In this case, United Technologies insisted that Treppel sign a confidentiality agreement when he sought to inspect books and records, which is fairly common, but the confidentiality agreement also limited the forum, of any claim brought using the information inspected, to Delaware courts. At the time of the inspection request, United Technologies did not have a forum selection clause in its bylaws, but it later adopted one. As the broader forum selection debates continue, it will be interesting to see how the Delaware Court of Chancery handles this case in the books and records context, especially because the Delaware Court of Chancery has been encouraging plaintiffs to use the “tools at hand,” such as books and records requests, before filing derivative lawsuits.  Beyond the substance, one remarkable thing about this decision is that Chief Justice Leo Strine authored an opinion that was only 14 pages. When he was on the Court of Chancery he would author 100+ page opinions with some regularity. Granted, the Court of Chancery is a trial court and their opinions tend to be a good bit longer than the Delaware Supreme Court opinions, regardless of the judge. Additional commentary by Celia Taylor (Denver Law).  

For reading beyond these three cases, former Delaware Supreme Court Justice Jack Jacobs comments on two additional recent Delaware cases here (M&A related).