A while back, when the Twitter/Musk mishegoss was just gearing up, there was a whole political aspect to the thing whereby conservatives accused Twitter’s board of intentionally stonewalling Musk’s takeover bid in order to advance their liberal commitments.  At the time, I said that it was comforting to know that whatever legal battles resulted, they would be decided by the relatively neutral principles extant in Delaware law.

Which is why I was so pleased to see Is Corporate Law Nonpartisan?, by Ofer Eldar and Gabriel Rauterberg, forthcoming in the Wisconsin Law Review, pop up on SSRN.  The authors use Carney v. Adams – the case where the Supreme Court considered, but did not decide, whether Delaware’s party-balance mandate for its judiciary violates the First Amendment – as a jumping off point, and from there conclude that many states’ corporate law is shaped by their party politics.  Delaware, by contrast, has been able to compete successfully for corporate charters because of its deliberately nonpartisan approach, which assures dispersed shareholders that their interests will not be subrogated to those of concentrated local stakeholders.  They also point out that Delaware can maintain this nonpartisan commitment in part because it’s such a small state, and substantively hosts so few businesses, which prevents local interests from hijacking the political process.

(To circle this back to Twitter, now it’s Musk resisting the purchase and Twitter trying to force it through.  Ken Paxton of Texas, apparently trying to ingratiate himself with Musk, has announced an investigation to back up Musk’s claims that Twitter lied in its securities filings.  How much do you imagine Twitter’s shareholders appreciate that?)

This system is certainly beneficial to Delaware in some ways but we may question how well this serves Delaware’s residents overall.  Delaware’s population is majority-Democratic, and, in addition to its role in generating corporate law, the state has all the usual issues associated with statehood, including criminal disputes, property disputes, and so forth.  One might reasonably ask whether it’s good for Delaware’s residents that the state has an ongoing commitment to, essentially, elevate a minority party within the judiciary.  On this, it’s worth going back to the important role that Delaware courts played in school desegregation, as highlighted in Omari Simmons’s paper, Chancery’s Greatest Decision: Historical Insights on Civil Rights and the Future of Shareholder Activism, 76 Wash. & Lee L. Rev. 1259 (2019).  Delaware does more than just corporate law.  Though, I suppose, if Delaware’s residents are being mildly disenfranchised, not having to pay sales tax takes some of the sting out of it.

Mississippi College School of Law invites applications from entry-level candidates for multiple tenure-track faculty positions expected to begin in July 2023. Our search will focus primarily on candidates with an interest in teaching one or more of the following subject areas: Civil Law, Civil Procedure, Contracts, First Amendment, Commercial Law, Cyber Law/Law & Technology, Estates & Trusts, and Race and the Law. We seek candidates with a distinguished academic background (having earned a J.D. and/or Ph.D.), a commitment to excellence in teaching, and a demonstrated commitment to scholarly research and publication. We particularly encourage applications from candidates who will enrich the diversity of our faculty. We will consider candidates listed in the AALS-distributed FAR, as well as those who apply directly.

Applications should include a cover letter, curriculum vitae, a Mississippi College Faculty Application (found on this website), a scholarly research agenda, the names and contact information of three references, and teaching evaluations (if available).

Applications should be sent in a single PDF to Professor Jonathan Will, Chair, Faculty Appointments Committee, via email at will@mc.edu. Here’s a link to the job posting.

Dear BLPB Readers:

“Creighton University School of Law seeks to hire multiple tenure-track faculty members, and invites both entry-level and lateral candidates to apply, one of which will be focused on Academic Success & Bar Exam Preparation. The Law School is particularly interested in candidates with teaching and research interests in the field of Contracts, including Business Associations and Commercial Law and in the field of Evidence, including Criminal Law and Procedure. The Law School’s current curriculum requires these courses, which are also offered during the summer due to our robust Accelerated J.D. (AJD) program. The Law School has secondary needs in Human Rights, Constitutional Law, and in multiple areas of Private International Law, Sports & Entertainment Law, ADR, and Environmental & Natural Resources Law.

Continue Reading Creighton Law Is Seeking Entry-Level and Lateral Candidates

Jason Brennan has posted Diversity for Justice vs. Diversity for Performance: Philosophical and Empirical Tensions on SSRN (here).  The abstract:

Many business ethicists, activists, analysts, and corporate leaders claim that businesses are obligated to promote diversity for the sake of justice. Many also say—good news!—that diversity promotes the bottom line. We … need not choose between social justice and profits. This paper splashes some cold water on the attempt to mate these two claims. On the contrary, I argue, there is philosophical tension between arguments which say diversity is a matter of justice and (empirically sound) arguments which say diversity promotes performance. Further, the kinds of interventions these distinct arguments suggest are different. Things get worse when we examine the theory and empirical evidence about how diversity affects group performance. The kind of diversity which promotes justice and the kind which promotes the bottom line are distinct—and the two can be at odds.

I am back in the classroom teaching Business Associations (year 23 of teaching) on Wednesday.  As I was reviewing my course objective for the course this year, I wondered how different my learning objectives for my students are from those of others.  So, I decided I would share mine here and ask for comments.  Here it is:

*          *          *

Course objective:  The doctrinal content of this course is calibrated to prepare you for the business associations portion of the bar exam.  More specifically, the course is designed to enable you to:

  • compare and contrast core legal rules relating to the existence, structure, governance, liability, and financing of basic forms of for-profit business entity (and distinguish these forms of entity from sole proprietorships governed by common law principles, including those found in agency law, as well as contract, tort, and property law) through the review and analysis of state statutory and decisional law;
  • become familiar with basic concepts addressed in U.S. federal securities regulation, including the definition of a security, the registration of securities offerings, public company registration and reporting, proxy regulation, and securities fraud;
  • understand the framework of business entity regulation and key business law tools, concepts, and principles at the intersection of theory, policy, doctrine, and practice;
  • observe how economic, social, and political dynamics impact and are impacted by the law governing for-profit businesses; and
  • apply, both in writing and through oral expression, basic principles of state business entity law and U.S. federal securities law through legal analysis in advocacy, transactional, and other legal advisory settings.

In this course, you are required to act as legal decision-makers, advocates, and advisors—both individually and as part of a group—and your performance will be assessed both individually and in a group context (with all members of the group being collectively responsible for the group’s performance, as lawyers are in law practice).  As a result, oral and written skills of various kinds (reading and listening closely and critically, analyzing methodically, persuading effectively and efficiently, self-assessing and peer assessing constructively, etc.) will be at a premium in all that we do.  Group dynamics also will play a role.  As the course permits, we will engage in contextual discussions about these kinds of skills and other aspects of lawyering (including legal ethics and professional responsibility, which pervade the course material).

*           *          *

I suspect that those of us who teach the course all have a core set of substantially similar objectives,  However, I also suspect that there is a lot of variance beyond that as to the scope of doctrine (how far beyond bar exam basics one goes) and the nature of other expectations.  Let me know in the comments or by private message if you have any comments or other reactions.  I remain curious . . . .

Hi, so first, if you’re reading this, you probably already noticed, but for what it’s worth, it appears that email notifications of new posts have entirely stopped.  So, if you’ve been following us via email up until now, please be aware you’ll need to switch to another method – I personally use Feedly to keep track of blog updates.

With that out of the way, obviously, my specialty is corporate and securities law, and one of the odder things about this space is that while it has incredibly well-developed standards for evaluating and litigating fraud claims, those standards are very different from the standards for fraud claims in other areas of law.

I was reminded of this when I read the decision denying a motion to dismiss in Fishon v. Peloton Interactive, 2022 U.S. Dist. LEXIS 143930 (S.D.N.Y. Aug. 11, 2022).  Fishon is a consumer fraud action brought under New York law against Peloton for misrepresenting the breadth of its song catalog.  Defendants argued, among other things, that the plaintiffs could not prove they had heard any misrepresentations, and therefore they had not been injured. The court rejected that argument, holding:

a plaintiff can also plead both injury and causation under GBL §§ 349 and 350, by alleging that the defendant’s misleading or deceptive advertising campaign caused a price premium, that the price premium was charged both to those who saw and relied upon the false representations and those who did not, and that, as a result of the price premium, plaintiff was charged a price she would not otherwise have been charged but for the false campaign….

These cases persuade the Court that, while a reliance- or exposure-based theory of injury is one way to plead that a defendant’s misrepresentation caused harm, it is not the only way. The operative question is whether a plaintiff suffered an injury because of a defendant’s misrepresentation; it is not whether that injury was tied to plaintiff’s reliance on the misrepresentation. Plaintiffs have alleged that Defendant made misrepresentations that would have mislead a reasonable consumer, that those misrepresentations were consumer-facing and had broad impact, and that as a result of those widespread misrepresentations that mislead reasonable consumers, they paid higher costs. By alleging that they paid a higher price—“increased costs”—for their products because of Defendant’s widespread misrepresentations about the value of the product, Plaintiffs have pleaded an injury that was attributable to Defendant’s alleged misrepresentation, regardless whether they ever personally saw the representation.

That’s fraud on the market. It’s fraud on the market in a consumer action.  And, in fact, this kind of holding is not unusual; there are cases with similar holdings under other states’ consumer protection laws. See, e.g., Hasemann v. Gerber Prod. Co., 331 F.R.D. 239 (E.D.N.Y. 2019); Nelson v. Mead Johnson Nutrition Co., 270 F.R.D. 689 (S.D. Fla. 2010).  What’s striking here is that a securities fraud plaintiff would absolutely not be able to recover under similar facts, because there has been no showing of market efficiency.  And, in fact, courts have rejected attempts by securities fraud plaintiffs to use fraud-on-the-market for primary market transactions, which are of course akin to consumer purchases.  See, e.g., Freeman v. Laventhol & Horwath, 915 F.2d 193 (6th Cir. 1990).

What’s the difference? It appears to me that, doctrinally, the reason for the difference is that the consumer protection statutes at issue require causation, but they do not require reliance.  So plaintiffs are permitted to argue that a lie generally increased prices, but they don’t have to argue that any consumer subjectively believed that price to be indicative of the product’s value.

That’s different than in the securities context.  Securities fraud requires a showing of reliance.  Fraud-on-the-market therefore permits two separate and independent presumptions that benefit plaintiffs.  First, that false statements impact prices, and second, that investors subjectively believe those prices represent something when they purchase.  There’s lots of debate over what, exactly, they’re supposed to subjectively believe,  and this “subjective” component has been the subject of academic criticism, see, e.g. Donald C. Langevoort, Judgment Day for Fraud-on-the-Market: Reflections on Amgen and the Second Coming of Halliburton, 57 Ariz. L. Rev. 37 (2015); James D. Cox, Understanding Causation in Private Securities Lawsuits: Building on Amgen, 66 Vand. L. Rev. 1719 (2013); John C.P. Goldberg & Benjamin Zipursky, The Fraud on the Market Tort, 66 Vand. L. Rev. 1755 (2013), but it is real.  And it means that, for example, when plaintiffs bring 10(b) claims against underwriters and accountants for a fraudulent offering, they are told:

The security’s promoter and other entities involved in the issuance, such as the underwriter, the auditor, and legal counsel—the very entities often charged with fraud—cannot be reasonably relied upon to prevent fraud.

Malack v. BDO Seidman, LLP, 617 F.3d 743 (3d Cir. 2010).  In other words, no matter the fraud’s effect on security prices, investors are not justified in believing those prices represent something significant in an inefficient market, and therefore they cannot use the fraud-on-the-market doctrine to satisfy the element of reliance.

To some extent, Section 11 claims are akin to consumer actions in this way; Section 11 claims, unlike 10(b) claims, do not require a showing of reliance, but they do require causation (with the burden of proof on defendants rather than plaintiffs).  Thus, Section 11 claims are permitted even in inefficient markets, and the theory behind them – as the legislative history makes clear – is that false statements in a registration statement are likely to influence market prices. See 78 Cong. Rec. 10186 (1934) (“When an issue of securities is proposed, a banking house will investigate the financial statement of the corporation. Based upon the statements contained in the registration statement of the corporation, a banking house will offer the securities at a certain price. Therefore, the market value is fixed by the false statement of the corporation. The individual investor relies upon the investigation made by the banker. It is fair to assume that this situation continues until such time as the corporation makes available a statement showing its earnings for 12 months. Then the market value is influenced by the statement of actual earnings and not by the statements contained in the registration statement, which deceived the underwriter or banker and the investor.”); see also William O. Douglas & George E. Bates, The Federal Securities Act of 1933, 43 Yale L. J. 171 (1933) (“the registration statement will be an important conditioner of the market. Plaintiff may be wholly ignorant of anything in the statement. But if he buys in the open market at the time he may be as much affected by the concealed untruths or the omissions as if he had read and understood the registration statement.”)

I don’t think the cases are perfectly consistent with this doctrinal lineup, but it has some explanatory power, which means in some circumstances, consumers have an easier time alleging fraud-by-price-impact than investors do.

Tulane University Law School seeks candidates in a variety of specialties including, but not limited to, Constitutional Law; Race and The Law; Racial Justice; and Critical Race Theory, for a position with a start date of July 1, 2023.

Tulane University Law School invites applications from entry-level or pre-tenure lateral candidates for one or more tenure-track faculty positions. We welcome applications from candidates with teaching and research interests in all topics, and we particularly welcome candidates who focus on constitutional law, race and the law, racial justice, and critical race theory. We especially invite applications from candidates who will enhance the diversity of the law faculty and whose research, teaching, and service have prepared them to contribute to the strong commitments Tulane has to equity, diversity, inclusion (EDI), and anti-racism. Applications and queries should be addressed, preferably via email, to committee chair, Professor Stacy Seicshnaydre sseicshn@tulane.edu. For further information about Tulane University Law School, consult: www.law.tulane.edu. Tulane University is an Equal Employment Opportunity/Affirmative Action (EEO/AA) employer committed to a non-discriminatory, diverse work and learning environment.

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Financial Restructuring Roundtable
Call for Papers 

The Financial Restructuring Roundtable (formerly the West Coast Bankruptcy Roundtable) will be held in person on April 6, 2023 in New York City. Spearheaded by Tony Casey, Samir Parikh, Robert Rasmussen, and Michael Simkovic, this invitation-only event brings together practitioners, jurists, scholars, and finance industry professionals to discuss important financial restructuring and business law issues. 

The Roundtable invites the submission of papers. Selected participants will receive a $2,000 stipend and have the opportunity to workshop their papers in an intimate, collegial setting. Last year’s attendees included Ken Ayotte, Douglas Baird, Bruce Bennett, Jared Ellias, Anna Gelpern, Marshall Huebner, Ed Morrison, Mark Roe, David Skeel, and Jamie Sprayregen. 

We seek papers exploring diverse topics and will be interested in interdisciplinary perspectives. Papers will be selected through a blind review process. Scholars are invited to submit a 3 – 5 page overview of a proposed paper. Submissions may be an introduction, excerpt from a longer paper, or extended abstract. The submission should be anonymized, and – aside from general citations to the author’s previous articles – all references to the author should be removed.

Please submit proposals by October 1, 2022. Invitations will be issued via email by November 1.  Working drafts of papers must be available for circulation to participants by February 10, 2023.  

Proposals – as well as questions and concerns – should be directed to Samir Parikh at sparikh@lclark.edu. 

The Financial Restructuring Roundtable is hosted by the University of Chicago Law School, USC Gould School of Law, and Lewis & Clark Law School in partnership with the Penn Restructuring Institute and Sidley Austin.

Seton Hall University School of Law welcomes applications for tenure-track positions to begin July 1, 2023. Candidates must have a J.D. or equivalent degree and a record of academic excellence. Candidates should demonstrate (i) scholarly promise, (ii) the ability or potential to be an outstanding teacher and mentor who can prepare students for the practice of law, and (iii) leadership in service toward building an equitable and diverse academic community.

We will consider entry-level and lateral candidates in a variety of subject areas. We have particular teaching needs in administrative law, civil procedure, contracts/business associations, clinics, estates and trusts, evidence, and health law/FDA, but we also are interested in candidates engaged in scholarship and teaching in race and gender, employment/labor, environmental law, family law, international law, and professional responsibility.

Candidates can go here for more information and to submit an application.

Questions should be sent to Professor Timothy Glynn, Chair, Faculty Appointments Committee, at lawfacultyappointments@shu.edu.

For those BLPB readers watching the derivatives markets, specifically CDS (credit default swaps), an interesting development to be following right now is the potential auction related to the EMEA (Europe) Determinations Committee’s decision that a failure to pay credit event had occurred with respect to the Russian Federation.

Really really briefly – if you want a deeper dive into CDS and the Determinations Committees, see here – CDS are insurance-like contracts in which a protection buyer makes periodic payments akin to an insurance premium to a protection seller to financially “protect” them should a credit event (failure to pay, bankruptcy, etc.) occur on an underlying reference entity, for example, the Russian Federation.  The protection buyer may or may not have actual economic exposure to the underlying entity.   

The importance of a credit event determination is that it triggers the CDS protection seller’s payout obligation.  In general, the amount of this payout obligation is determined by an auction.  The Credit Derivatives Determinations Committees is the dispute resolution mechanism which decides whether or not a credit event has occurred and, if so, whether a settlement auction will be held.  The decision of a Committee applies market-wide.  There are five regional Committees: Americas, Australia-New Zealand, Asia (non-Japan), Japan, and EMEA (Europe).  In general, each Committee is responsible for decisions surrounding reference entities related to their region.  An independently managed subsidiary of ISDA, DC Administration Services, is secretary to each Committee.  The voting members of a full Committee consist of 10 dealer members and 5 non-dealer members.  The most recent list of Determinations Committees members is here.

On June 1, 2022, the EMEA (Europe) Determinations Committee decided “Yes” in answer to the question: “Has a Failure to Pay Credit Event occurred with respect to the Russian Federation under the 2014 Definitions and the Updated 2003 Definitions?”  Generally, a Committee votes to hold a settlement auction following its determination that a credit event has occurred.  However, the EMEA Determinations Committee decided to defer making a decision about whether to hold an auction.  As noted in its Meeting Statement of July 25, 2022: “On 9 June 2022, the EMEA DC announced that it was deferring making a decision on holding an Auction and the date of any Auction. Such deferral was as a result of the publication by OFAC [Office of Foreign Assets Control] of updated FAQs on 6 June 2022 in respect of new investment prohibitions relating to entities in the Russian Federation (further to Executive Order (E.O.) 14066, E.O. 14068, and E.O. 14071).”  On June 24, 2022, a Bloomberg news article noted “Swaps Panel Asks US Treasury for Russia Sanctions Workaround.”  On July 22, 2022, OFAC released General Licenses No. 45 “Authorizing Transactions Related to the Wind Down of Certain Financial Contracts Prohibited by Executive Order 14071” and No. 46 “Authorizing Transactions in Support of an Auction Process to Settle Certain Credit Derivative Transactions Prohibited by Executive Order 14071.”

An August 5, 2022, Determinations Committee website update (the latest as of this post) shares that the EMEA Committee has now published a “Preliminary List of Deliverable Obligations for the purposes of a potential auction” and also that “The EMEA DC continues to consider the potential impact of restrictions on settlement of the debt obligations of the Reference Entity within clearing systems, including the restrictions on transfer of debt obligations within Clearstream referenced in the DC Meeting Statement of 25 July 2022.” 

With CDS and clearing involved, this is definitely a developing story I’ll continue to follow, think about, and write on!