ProfessorBainbridge.com

What is a university?

I just discovered this wonderful quote from former UC President Clark Kerr, who defined a university “as a series of individual faculty entrepreneurs held together by a common grievance over parking.”

So true.

Glendon, Garvey, and others blast Obama contraception "compromise"

I've had the privilege of meeting both Harvard Law Professor and former US Ambassador to the Vatican Mary Ann Glendon and Catholic University of America President John Garvey, both of whom are tremendously smart and accomplished lawyers/academics. Along with  Princeton Professor Robert George, Notre Dame Law Prof. Carter Snead, and EPPC Fellow Yuval Levin, they've sent an open letter to President Obama rejecting the so-called compromise on contraception coverage as "unacceptable":

This so-called “accommodation” changes nothing of moral substance and fails to remove the assault on religious liberty and the rights of conscience which gave rise to the controversy.  It is certainly no compromise.  ...

It is no answer to respond that the religious employers are not “paying” for this aspect of the insurance coverage.  For one thing, it is unrealistic to suggest that insurance companies will not pass the costs of these additional services on to the purchasers.  More importantly, abortion-drugs, sterilizations, and contraceptives are a necessary feature of the policy purchased by the religious institution or believing individual.  They will only be made available to those who are insured under such policy, by virtue of the terms of the policy.

It is morally obtuse for the administration to suggest (as it does) that this is a meaningful accommodation of religious liberty because the insurance company will be the one to inform the employee that she is entitled to the embryo-destroying “five day after pill” pursuant to the insurance contract purchased by the religious employer.  It does not matter who explains the terms of the policy purchased by the religiously affiliated or observant employer.  What matters is what services the policy covers.

Go read the whole thing, please.

Once again, Obama proves to be clueless about economics or religious liberty

The Washington Post (of all places) explains why Obama's so-called contraception coverage compromise is all smoke and mirrors:

... on Friday, the White House rolled out a new rule, where insurance companies, rather than faith-based agencies, will offer birth-control coverage directly to these employees and foot the bill.

 “If a charity, hospital or another organization has an objection to the policy going forward, insurance companies will be required to reach out to directly offer contraceptive care free of charge,” one administration official explained.

The first thing I learned in Econ 101 is that there is no such thing as a free lunch. Somebody is going to have to pay for the birth control pills. Back to WaPo:

By one report’s measure, it costs about $21.40 to add birth control, IUDs and other contraceptives to an insurance plan. Those costs may be offset by a reduction in pregnancies. But unless drug manufacturers decide to start handing out free contraceptives, the money to buy them will have to come from somewhere.

Where will it come from, since neither employers nor employees will be paying for these contraceptives? That leaves the insurers, whose revenues come from the premiums that subscribers pay them. It’s difficult to see how insurance companies would avoid using premiums to cover the costs of contraceptives. 

Indeed. As Tom Maguire explains for the simple minded:

If the insurance company can reasonably predict that a certain number of employees will take up the "free" contraceptive coverage, the quoted premium will be adjusted accordingly.

And so the Church will still end up paying for services it belives are immoral.

Predictably, Planned Parenthood is pleased, but still felt it necessary to fire a shot over Obama's port side:

... we will be vigilant in holding the administration and the institutions accountable for a rigorous, fair and consistent implementation of the policy, which does not compromise the essential principles of access to care. The individual rights and liberties of all women and all employees in accessing basic preventive health care is our fundamental concern.

Curious. I don't recall learning anything about a right to health care when I studied Consitutional law. I do, however, seem to recall something about "Congress shall make no law ... prohibiting the free exercise" of religion. What part of "no law" is former law professor Obama unable to understand?

Coordinated plaintiffs' bar attack on Delaware exclusive jurisdiction provisions

Broc Romanek reports:

Here's news from Steven Haas of Hunton & Williams ...: In recent days, shareholders have filed several class action complaints in Delaware .... The litigation will require Delaware courts to review a bylaw that would increase Delaware's market share of corporate litigation. A ruling upholding these bylaws would likely cause numerous other corporations to adopt them. 

An exclusive forum provision typically provides as follows:

Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation's stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, or (iv) any action asserting a claim governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article __.

These provisions gained traction, particularly for IPO companies, ever since Vice Chancellor Laster suggested in a 2010 opinion that they would be enforceable (see In re Revlon S'holders Litig., 990 A.2d 940 (Del. Ch. 2010)). Claudia Allen of Neal Gerber recently updated her study detailing that, as of December 31st, 195 Delaware corporations have adopted or proposed exclusive forum charter or bylaw provisions. Although a California court refused to enforce Oracle's exclusive forum bylaw last year, this is the first time the issue has been squarely presented to the Delaware courts. Steven Davidoff (aka The Deal Professor) previously offered his thoughts on the issue.

Friend of PB.com Francis Pileggi also reports on the issue, explaining that:

These new suits challenge bylaws in several companies that require shareholder suits to be filed exclusively in the Delaware Court of Chancery.  If suits are filed elsewhere, the company threatens to sue those shareholders to recoup fees for breach of the bylaw provision. The challenge is based on the alleged violation of due process rights because there was no mutual consent by the shareholders. The suits were filed by the highly-regarded corporate litigator Michael Hanrahan of the Prickett Jones firm in Wilmington. Among the companies sued by shareholders challenging the exclusive forum bylaw provision, in separate lawsuits, are the following Delaware corporations: Navistar International Corp., AutoNation, Inc. Chevron Corp., SPX Corp., Superior Energy Services, Inc., Franklin Resources, Inc., Curtiss-Wright Corp., Danaher Corp., and Solutia Inc.

Thomson Reuter’s Alison Frankel wrote an excellent article about these cases that provides a very helpful overview and also has a link to the actual complaints.

He includes links to many additional analyses of the issues.

Personally, I think these provisions should be upheld. Contracts routinely include exclusive jurisdicton provisions and they are routinely enforced. The corporation's organic documents (i.e., the articles of incorporation and bylaws) represent a contract between the corporation and its shareholders. Hence, like any other contract, an exclusive jurisdiction provision in those documents should be enforced by the courts.

As I wrote the last time this issue was in the news:

Keeping these cases in Delaware courts [via exclusive jurisdiction provisions] strikes me as preferable [to allowing plaintiff to select any forum it wants]. Expert judges. No juries. No home state bias in favor of one side or the other, since usually both sides will have their principal place of business elsewhere. Promotes consistency of outcomes. Delaware courts more rigorous than most in policing plaintiff lawyers bringing suits not in the best interests of the corporation or its shareholders as a whole.

There's a direct analogy here to mandatory arbitration provisions of the sort Carlyle Group was going to include in its articles (until it spinelessly changed its mind). As I wrote about them:

See Charles Nathan's post on the analogous issue of the enforceability of exclusive jurisdiction provisions:

In a recent decision, In re Revlon, Inc. Shareholders Litig., newly-appointed Vice Chancellor Laster suggested a solution. In dicta, he endorsed a Delaware entity’s right to mandate in its governance documents a chosen forum for the resolution of state law-based shareholder class actions, derivative suits and other intra-corporate disputes. Vice Chancellor Laster stated that “if boards of directors and stockholders believe that a particular forum would provide an efficient and value-promoting locus for dispute resolution, then corporations are free to respond with charter provisions selecting an exclusive forum for intra-entity disputes.” Presumably, the Vice Chancellor had Delaware in mind.

Nathan goes on to discuss the legal issues at some length. In any case, assuming Laster wasn't simply trying to build up business for Delaware courts, there's no immediately obvious policy reason why the same result would not apply to mandatory arbitration provisions.

And vice-versa.

Another Obama "green" company in trouble

President Obama's "green" industrial policy took a huge hit when Soyldra went down the tubes amidst charges of crony capitalism and so on. Now another beneficiary of centralized "green" planning is in trouble. Autoweek reports that:

Work on the Fisker Nina family sedan has temporarily halted at the Fisker Automotive plant in Wilmington, Del., while the carmaker and the federal government hash out details of the company's $529 million Department of Energy loan. The interruption has resulted in the layoff of 26 people at its Delaware plant and a number of contract engineers at Fisker's Anaheim, Calif., headquarters.

And the WSJ reports that:

Fisker spokesman Roger Ormisher said ... his company wasn't in peril. "We are still continuing to raise equity. We raised $260 million in the last three or four months," he said. The company said in a statement that it had raised $850 million in equity from private sources. But the future of the Nina and the 2,500 jobs in Delaware will depend on whether Fisker can revive the federal loans, or replace them, Mr. Ormisher said.

"There comes a point where you say, 'We can't keep putting money into that project,' " he said.

At the very least, it's another bump in the road for industrial policy.

On to 1000

As of this morning, I cracked the 900 follower level on Twitter. On to 1000!

House passes STOCK Act

House majority leader Eric Cantor kept his word and got the House to pass the STOCK Act, 417-2!, albeit only after stripping out the so-called political intelligence provision. I'm okay with that change for reasons Richard Painter explained:

... some hedge funds and other investment firms learn nonpublic government information before the rest of the investing public.  Sometimes this is done through “political intelligence” firms that arrange meetings and conference calls with government officials and use other techniques to obtain nonpublic information which is then made available to clients for a fee.   As I told the Wall Street Journal last year, gathering and selling confidential government information is a very good business model, if you can get away with it.  This isn’t fair and something should be done about it.

The Grassley amendment responds to this problem by requiring firms that gather political intelligence to register under the LDA.   The problems with this approach are many.  First, persons who do not fit the definition of a “political intelligence” firm in the statute will not be required to register and will continue to gather nonpublic government information and use it for securities trading.   Second, a definition of a “political intelligence” firm will need to be exceedingly broad if it hopes to include a significant portion of the persons and entities that use nonpublic government information for securities trading.  Drafting such a definition is nearly impossible.  Third, a broad definition of “political intelligence” firm that is coupled with a registration requirement imposes an undue burden on persons who seek to gather information about what their government is doing, a critical function in any democratic society. ...

The answer to selective disclosure (“leaks”) by government officials of nonpublic government information is not requiring people to register before they gather information about their government.  The answer is stricter rules for government employees who selectively disclose government information to persons outside the government without disclosing the same information publicly.  As I pointed out in a chapter on insider trading in my 2009 book on government ethics, selective disclosure by government officials needs to be regulated just as selective disclosure by officials in public companies is regulated by the SEC’s Regulation FD (“Fair Disclosure”).  Donna Nagy and I are presently writing an article on how the executive and legislative branches could adopt and adhere to a Regulation FD regime.  In short Congress should consider imposing on government some of the rules it imposes on the private sector, rather than trying to solve a problem in government ethics by enacting yet more regulation and a burdensome registration requirement for the private sector.

Anyway, I've been deeply suspicious of Cantor throughout this process. Whether he was really on the side of the angels all along or just saw the political handwriting on the wall, however, is now irrelevant. He got the job done and for that he gets my thanks.

Obama versus the Bishops

If forced to chose between Barack Obama and the Catholic Bishops, I'd be inclined to invoke Henry Kissinger's quip about the Iran-Iraq war; i.e., it's a pity they can't both lose. I'm one of those Catholics who believes with St. John Chrysostom that the road to hell is paved with the skulls of bishops.

In the kerfuffle over contraception, however, I'm squarely with the Bishops. So a couple of great op-eds in today's WSJ caught my eye. First, Daniel Henninger:

The question raised by the Catholic Church's battle with ObamaCare is whether anyone can remain free of a U.S. government determined to do what it wants to do, at whatever cost.

Older Americans have sought for years to drop out of Medicare and contract for their own health insurance. They cannot without forfeiting their Social Security payments. They effectively are locked in. Nor can the poor escape Medicaid, even as the care it gives them degrades. Farmers, ranchers and loggers struggled for years to protect their livelihoods beneath uncompromising interpretations of federal environmental laws. They, too, had to comply. University athletic programs were ground up by the U.S. Education Department's rote, forced gender balancing of every sport offered. ...

The Catholic Church has stumbled into the central battle of the 2012 presidential campaign: What are the limits to Barack Obama's transformative presidency? The Catholic left has just learned one answer: When Mr. Obama says, "Everyone plays by the same set of rules," it means they conform to his rules. What else could it mean?

Likewise, John Cochrane opines that:

When the administration affirmed last month that church-affiliated employers must buy health insurance that covers birth control, the outcry was instant. ... Critics are missing the larger point. Why should the Department of Health and Human Services (HHS) decree that any of us must pay for "insurance" that covers contraceptives? ...

By focusing on an exemption for church-related institutions, critics effectively admit that it is right for the rest of us to be subjected to this sort of mandate. They accept the horribly misnamed Patient Protection and Affordable Care Act, and they resign themselves to chipping away at its edges. No, we should throw it out, and fix the terrible distortions in the health-insurance and health-care markets.

Sure, churches should be exempt. We should all be exempt.

Both are great reads.

Meanwhile, the Obama administration is talking out of both sides of its mouth:

White House press secretary Jay Carney, defending the decision for the third consecutive day, reiterated on Wednesday that the administration would work to address concerns while maintaining that it would continue to require free contraceptive coverage for all women except those covered by a narrow exemption, such as those working directly for churches.  ...

How do you address the concern while refusing to address the source of the concern?

Did the (alleged) asset shielder who adopted his girlfriend jump from the frying pan into the fire?

A while back I noted a report from Dealbreaker on the "billionaire polo mogul" John Goodman "who ran someone over while [allegedly] driving his Bentley drunk" and then "adopted his girlfriend" Heather Hutchins to allegedly "shield his assets from a lawsuit [NYP]."

Slate explains:

On Feb. 10, 2010, Palm Beach air-conditioning mogul John Goodman allegedly ran a stop sign. His Bentley convertible struck a Hyundai being driven by Scott Wilson, a 23-year-old civil engineer. Wilson’s car landed in a nearby canal where the young man drowned. The near-billionaire then fled the scene. Police say Goodman had a blood alcohol content of 0.177, twice the legal limit. Not surprisingly, Goodman is being sued by Wilson’s parents for a great deal of money. (He also faces criminal charges that could put him in jail for 30 years).

Fortunately for Goodman, he had set up a very large trust (currently worth “several hundred million dollars” according to Goodman’s attorney) years earlier for the benefit of his two children, with distributions to be dispersed when each child reached the age of 35. West Palm Beach Judge Glenn Kelley ruled early in the Goodman civil lawsuit that the jury could not be told of the large trust’s existence because it might encourage jurors to impose a larger verdict against Goodman, despite the fact that he, in theory, has no control over the trust.

But what about Goodman?  If a jury verdict were to bankrupt him, would he be left penniless while his children continued to benefit richly from their trust income?  Enter the shrewd estate planning attorney who recommended that the 48-year-old Goodman adopt his 42-year-old girlfriend, Heather Laruso Hutchins, thus making her a beneficiary of the trust that Wilson’s parents cannot mention or touch. (In this arrangement, Hutchins is the beneficiary to roughly $70 million, which she would presumably share with Goodman, her doting dad-slash-boyfriend.) Elegant. Brilliant. And actually not that uncommon, it turns out.

Our interest in the case was occasioned by the business law aspects of shielding one's assets in such an unusual way, but a couple of my readers left comments asking whether Goodman would commit incest if he and Hutchins engaged in hanky panky now that they're father and daughter. This seems like an opportune way of procrastinating on reading galleys, so i did a little digging:

Florida law defines incest as:

826.04 Incest. ---
Whoever knowingly marries or has sexual intercourse with a person to whom he is related by lineal consanguinity, or a brother, sister, uncle, aunt, nephew, or niece, commits incest, which constitutes a felony of the third degree, punishable as provided in s. 775.082, s. 775.083, or s. 775.084. "Sexual intercourse" is the penetration of the female sex organ by the male sex organ, however slight; emission of semen is not required. 

On our facts, the key issue is whether Goodman and Hutchins are now "related by lineal consanguinity" as a result of the adoption. I found a Florida case, Beam v. State, which held that:

... it is clear that the legal definition of incest is limited to persons who are related either by lineal consanguinity or collateral consanguinity. It does not extend to persons who are related by affinity or adoption, but not biologically by blood.

We are not alone in our conclusion. Numerous decisions rendered by courts in other states hold that incest does not encompass conduct between persons related only by adoption.   See, e.g., People v. Kaiser, 119 Cal. 456, 51 P. 702, 703 (1897) (“The word ‘daughter’ means, and is generally understood to mean, ‘an immediate female descendant,’ and not an adopted daughter, a step-daughter, or a daughter in law.”);  State v. Lee, 196 Miss. 311, 17 So.2d 277 (1944) (defendant could not be convicted of incest with an adopted daughter);  State v. Rogers, 260 N.C. 406, 133 S.E.2d 1, 3 (1963) (recognizing that the statutory crime of incest is not applicable to a sexual relationship between a man and his adopted daughter);  State v. Youst, 74 Ohio App. 381, 59 N.E.2d 167 (1943) (statutory crime of incest is not applicable to a sexual relationship between a man and his adopted daughter);  State v. Bale, 512 N.W.2d 164, 166 (S.D.1994) (holding that sexual penetration between an adoptive parent and child is not incest;  explaining that “[t]he legislature could have easily prohibited sexual relations between relatives by affinity and by adoption, but did not do so.”).

So despite whatever kinky fantasy games to which Goodman and Hutchins may put their new relation, it appears that they're legally okay on this issue. (OTOH, that Slate article claims that the law in "at least 25 states and territories, representing over 140.8 million people" does include adoptive relationships within the definition of incest.)

Whether the effort to shield Goodman's assets will hold up as the wrongful death suit continues is yet to be resolved. One hopes not.

We now return you to your regular non-prurient programming.

Should students profit off my classes? And, if so, how I could strike back.

California Watch reports:

California State University and University of California campuses are taking new steps to limit what students can do with their class notes: At least one CSU Chico student recently was reported to judicial affairs for selling notes to a website, while a newly updated UC Berkeley policy restricts how students share their notes with others. ...

The CSU and UC systems have made efforts to shut down private note-selling websites for some time. As early as 1999, the note-selling website Versity.com sparked officials' furor at UC Berkeley. In fall 2010, CSU sent a cease-and-desist order to NoteUtopia, which allows students to upload course notes, study guides and outlines to a website, then set a price and earn cash for their work. 

More recently, both UC and CSU have sent cease-and-desist letters toNotehall, a note-selling website owned by Santa Clara-based Chegg. ...

The letter from CSU to Chegg cited CSU's own student policies and the California Education Code, both of which prohibit selling, distributing or publishing class notes for a commercial purpose.

Personally, I tend to agree with those who think this is making a mountain out of a molehill:

"Given the amount of money students are paying to go to school right now, to ... confront them with these policies and say, 'You don't even have the right to use your own notes any way you want,' seems to be the wrong message to be sending," said Jason M. Schultz, assistant clinical professor of law at UC Berkeley and director of the university's Samuelson Law, Technology & Public Policy Clinic. 

Precisely. Besides which, I've figured out a much more fun solution to the problem: I'm going to buy some of these note sets and outlines being sold for my classes. I'll go through them and find all the mistakes. And then I'll write exam questions testing on those very same mistakes. If we all did that, the market would dry up pretty quick.

Carlyle's Retreat

Ted Frank has a wonderful post on Carlyle Group's decision to drop its effort to require mandatory arbitration of corporate and securities laws claims by shareholders (actually, limited partners). Money quote:

Shareholders who think class actions are good things can invest in one of the thousands of other securities out there; those who think class actions divert shareholder resources to attorneys now have a new, improved, investment option. Let the market decide which type of stock should trade at a premium and which at a discount.

Go read the whole thing.

Update: I also am in completely agreement with Gordon Smith's take on the issue. Money quote:

This is a nice example of how the right rules could encourage companies to become laboratories of corporate governance. 

Today's procrastination project

So I set up a Google Scholar page to track citations to my work [Insert self-deprecating reference to Carly Simon's "You're So Vain here]. Although I'm well familiar with Brian Leiter's citation count system, in which I've done quite well [Insert another self-deprecating reference to Carly Simon's "You're So Vain here], Google Scholar uses a different set of citation indices:

All Since 2007 Citations 4435 2230 h-index 36 27 i10-index 56 45

So today's procratination project is figuring out whether, say, an h-index of 27 is good, bad, or mediocre.

In any case, it was interesting to see which of my articles and books are most frequently cited. Several projects over which I slaved long hours and ended up being quite proud of are disappointingly low on the list. I would have hoped that my treatise Corporation Law and Economics would have garnered more cites, for example, considering it was the biggest project of my professional life. I am pleased to see, however, that my main article on director primacy is my most frequently cited work. It's certainly the piece of which I am most proud and the one I think made my most important contribution. [Insert a particularly self-deprecating reference to Carly Simon's "You're So Vain here]