ProfessorBainbridge.com

Pine Ridge Howell Mountain Cabernet Sauvignon (Napa Valley) 2000

Mature, but with some life left. Good bouquet of leather, tobacco, espresso, and prunes. On the palate, dark dried fruits dominate, but there's also some pepper (odd for Cab Sauv) and soy sauce. Very good. Grade: B++

Dinner tonight was: Hershey's cocoa-ancho pepper-rubbed beef tenderloin with maple sweet potato puree & roasted organic mushrooms, except I swapped out the Hershey cocoa for unsweetened Ghirardelli cocoa. Highly recommended but I would cut back on the chili powder by about a third and substitute some smoked paprika next time.

I wonder what this guy would make of Obama's Government Motors?

Memorial Day 2009

My father
Originally uploaded by ProfessorBainbridge.com

Arlington National Cemetery

10 Things I Think I Think

1. Frum is right and Harcourt is wrong. Being a corporate litigator does not develop the same skill set re business as being a transactional lawyer. I agree with Paul Horowitz that "it is quite possible ... to work for many years as a litigator, working for some of the nation’s largest businesses, without having a tremendously well-developed sense of the business environment, of what businesses need to do to flourish, or even of significant aspects of business law that are part of the planning rather than the litigation stage of corporate life." I think Frum gets it, which is why I don't think he's being dishonest.

2. Sotomayor will be neither strongly pro- nor anti-business.

3. Sotomayor will not be a game changer.

4. In re GM, I agree w/ Dealbreaker that "the jobs we are "saving" are getting obscenely expensive."

5. I can't believe that I owned, at varying points in my life, both a Chevy Vega and a Ford Pinto. How utterly embarrassing. 

6. The right-wing bloggers who think the GOP is going to gain seats in the House and Senate in 2010 are delusional. At the moment. But things could change.

7. I'm not on board the Susan Boyle train.

8. The person who stole my Kindle is pure evil.

9. Amazon ought to have a way to blacklist lost or stolen Kindles so that they can't be used.

10. The Kindle and the iPhone are great examples of how technology changes our lives for the better. It's worth noting neither was invented by a government-owned business.

Leiter Ads

Brian Leiter is going independent of Paul Caron's blog empire and will begin taking ads on his law school blogs. Seems awfully capitalistic of him. (FYI: I, too, can be bought.)

Getting Geared up for Fantasy Football

With OTAs under way and training camp around the corner, it's time to start thinking about the 2009 fantasy football season. After a successful inaugural ProfessorBainbriodge.com season in 2008, I plan to run two leagues in 2009: one on a free site and one on a pay site (probably Yahoo and CBS, respectively.) 

Last year, I made the mistake of structuring the PB.com league using a scoring system that was both PPC and a PPR. It put way too much emphasis on the QB.

This year, I plan to use a PPR scoring system. With the increasing dominance of RBBC in the NFL, as well as wild cards like the Wildcat formation, I think you've got to give receiving ability its due.

PPR also makes player selection more interesting. Going RB-RB in the first two rounds is key in standard scoring, but in PPR it can make sense to try schemes like RB-WR-WR-RB. PPR also throws a monkey wrench in your WR selections, as Ziza's analysis of the Pats duo suggests:

Randy Moss went very high in most leagues last year, some even in the first round, while his teammate Wes Welker could be had a handful of rounds later. Moss caught 11 touchdowns while Welker caught a measly three, or so you think. Their yardages were both comparable, Welker coming in with just 157 yards more than Moss, which in most leagues is around 15 fantasy points. With Moss leading the way in touchdowns that gave him a 48 point advantage; and with the 15 points now figured in we are looking at a 33 fantasy point edge to Moss. Now comes the eye-opener. When you add in the points-per-reception. Last year Welker had 111 receptions while Moss had only 69. That is a 42 point fantasy edge to Welker, making him the better fantasy football option in PPR leagues, where Moss would be the preference in standard leagues.

So suppose I were drafting 10th in a league that uses PPR scoring and snake drafting. I'd expect Andre Johnson to be available with the 10th pick and I'd grab him. At 2.3, I'd expect a very good RB-1 to be available: Steve Slaton, Marion Barber, or Clinton Portis. If they're all off the board, there should be some great receivers available, such as Moss or maybe even Larry Fitzgerald, in which case a WR-WR-RB-QB-RB strategy might be worth pursuing.

The big question is when will the QB run start. Once you get past Peyton Manning, Tom Brady, Drew Brees, and maybe Tony Romo and Jay Cutler, the drop off is pretty steep. If I'm drafting at 1.10, 2.3, and 3.10, I can easily imagine a scenario that goes Johnson, Fitzgerald, and Cutler, followed by a couple of RBs.

Provenance Rutherford Cabernet Sauvignon (Napa Valley) 2000

Back in September 2003, I opined that this wine needed more time. Tonight the last bottle in my cellar proved to be still quite youthful, but it was very drinkable nonetheless. An intense blast of prunes and coffee on the nose. The palate added blackberries and dried italian herbs. Good steak wine. Grade: B++

Shareholder Non-Activism at Exxon

Lisa Fairfax reports that:

Yesterday, Exxon shareholders voted against all eleven of the shareholders proposals on the company’s proxy statement. So it appears that the extra effort to reach out to mutual fund shareholders did not have the desired impact on the vote. In fact, the proposal to split the CEO and chair functions garnered only 29.5% of the vote, a ten percent decrease from last year. Moreover, despite the extra outreach by shareholders, Exxon’s annual meeting was notable because of the lack of protesters outside of the meeting place. So perhaps the meeting and its outcome reveal that the financial crisis has had an impact on shareholder activism, making shareholders more hesitant to rock the boat and less willing to support initiatives that may impinge on managers’ discretion or otherwise pressure them to divert resources on green initiatives, despite assertions that such initiatives could improve the financial bottom-line in the long term.

It just goes to show, perhaps, that shareholder activism is an expensive indulgence for people with too much time on their hands. Like other luxury items, it may disappear during bad times, even though certain people would have you believe that these sort of times are when it is needed most. 

In contrast, director primacy comes through in the clutch.

 

Update: AP reports that shareholder activism fizzled at Target too:

Target Corp.'s shareholders have re-elected the company's slate of directors, rejecting a hedge fund's alternate slate, according to preliminary vote totals.

William Ackman had sought for months to put up his own slate — including himself — to the Minneapolis-based retailer's board of directors. ...

Shareholders also sided with the company in approving a measure that sets the board's size at 12 members.

Yet, the SEC and the Congress doubtless will continue pressing for pro-activism "reforms."

An Open Letter to GM President Obama

The Detroit News reports:

Michiganians appear evenly divided in their belief that President Barack Obama's heavy involvement in restructuring the auto industry is doing more harm than good, a Detroit News/WXYZ survey shows.
With Chrysler LLC in bankruptcy proceedings and General Motors Corp. apparently ready to follow suit, 42 percent of poll respondents say Obama's role has hurt the domestic automakers while 39 percent say he's been helpful. The poll's margin of error is plus or minus 4 percentage points.
Under pressure from the federal government, GM will close 16 plants, the iconic Pontiac brand is disappearing and thousands of auto dealerships across the nation will shut their showrooms.

Those who think Obama's already done too much are in for some more bad news, because CNBC is reporting that:

Chapter 11 reorganization is likely after the company said its offer to exchange $27 billion in unsecured debt for 10 percent of the company's stock had failed. GM has received $19.4 billion in federal loans. General Motors bondholders felt they deserved something like a 58 percent stake in the company in exchange for their billions of dollars in debt. What they were offered wasn't even close. GM bondholders are owed about $27 billion, the largest chunk of GM's roughly $58 billion in debt.

The same CNBC report informs that:

There was a small hope Tuesday that GM could avoid a bankruptcy filing when the United Auto Workers union disclosed that it would take a 20 percent stake in GM — down from the original plan of 39 percent. That seemingly freed 19 percent of the Detroit-based company's shares to sweeten the pot for its recalcitrant bondholders. ... 

Because the bondholder deal did not go through, the equity freed by the UAW deal now apparently will go to the U.S. government, which may have to commit billions more for GM's restructuring in court. The government's stake in the company originally was to be 50 percent, according to GM's regulatory filings. But it now could be as high as 69 percent.

With the UAW owning 20%, only 11% of GM will remain in the hands of private investors of any stripe. In effect, GM will have been nationalized, putting Barack Obama in charge.

I haven't had a lot of experience with GM products in recent years, but when I was back east over the Memorial Day weekend, Avis upgraded my rental car to a Cadillac CTS. So I've got some advice for GM boss Obama:

The Cadillac CTS is routinely listed as one of the best American cars. CNN Money, for example, opines that:

Even at its full sticker price, the CTS is well worth the money. Here you have a car with the outstanding handling and ride qualities of its German competitors but with more room inside than a similarly-priced BMW or Mercedes-Benz.

The interior is also one of the prettiest in the business. Plus, the controls for navigation, climate control and entertainment are much easier to use than those found in most luxury cars. The CTS was also named a "Top Safety Pick" by the Insurance Institute for Highway Safety.

The inside is pretty, although I don't know about "prettiest." The ergonomics of the center console are excellent. The analog gauges are clear and easy to read in both daylight and at night. The XM radio worked great. The steering wheel feels really good in your hands.

But there are some serious issues. First, as somebody who's driven a lot of BMWs, I can fairly say that CNBC is wrong about the CTS' handling and ride qualities. The CTS doesn't handle anywhere near as well as BMW sedans. In fact, it doesn't even handle as well as the X5 SUV I once owned. The ride is too soft and too squishy at the margins. Granted, the CTS probably handles better than most American cars, but it's still short of the German benchmarks. (It's also way short of the Cosworth Vega I owned back in the 1970s, if memory serves.)

The transmission gave me fits. In automatic mode, it doesn't downshift soon enough when going up hills. You really have to floor it to get the transmission to kick down.

The seats are pretty comfortable, but lack lateral support and are a bit short even for the thighs of someone of my modest stature. 

The large C pillars and small rear view window make for big blind spots and limited rear visibility.

Fit and finish are good, but not up to BMW or Toyota standards.

Finally, there is one huge problem: the driver's footwell. After 800 miles in this car over three days, I can firmly say that the footwell is so bad that I would never buy this car. First, there's no dead pedal. Second, and most critical, however, look at these pictures:

On both the left and right side, but especially the latter, the places where one's knees naturally rest have sharp edges and are formed out of very, very hard plastics. By the end of the second day, my knees were seriously hurting. By the end of the third, I just wanted out of the damn car. This may seem like a little thing. But it is little things like this that separate good cars from great cars. Every BMW I've ever owned (and between us my wife and I have owned 5) has had a more comfortable driving position than the CTS. (And don't even get me started on how much better my Porsche is than the CTS.)

As GM's new boss, this is the sort of thing you're going to have to fix. Get it and the many other niggling details I've mentioned fixed and I might consider the CTS the next time I'm in the market. There's a lot of good stuff here, but my knees are insisting that I stick to the German benchmarks until the CTS footwell gets some padding.

Delaware Justice Jack Jacobs Interviewed

JW Verret interviews Delaware Supreme Court Justice Jack Jacobs, whose many prominent corporate law decisions have given him enormous influence in our field. (We are big Jacobs fans here at PB.com)

Some highlights:

Verret: You first joined the bench in 1985, which seems to have been a watershed period for takeover law in Delaware.  It must have been an exciting time to be on the Court of Chancery?

Justice Jacobs: It was a very exciting time, for many reasons. First, the takeover cases were at the very cutting edge of Delaware corporate law. Although we could not know it at the time, they ultimately transformed Delaware corporate jurisprudence and made merger and acquisitions law a new and important sub-specialty. It was very heady to be at the center of many of these widely publicized cases. Second, those cases presented unique intellectual challenges, not only because each new takeover dispute pushed the envelope of corporate law doctrine out one more notch, but also because it forced the judges to do their best to reconcile the rulings in each new case consistently with the doctrine developed up to that point. That was more easily said than done, and in many cases the process took years to complete. This new doctrine was a moving target that was being developed at warp speed, rather than at the tortoise’s pace which characterized corporate doctrinal development during decades before. Third, and relatedly, these cases forced the judiciary to examine several of the basic premises and underpinnings of corporate law.

Our need to shape this law into a fabric that was coherent led the Court of Chancery judges to become a very collegial group. Although each trial judge is free to decide a case as he or she deems appropriate, unencumbered by the views of colleagues, nonetheless, we found it institutionally useful and beneficial to attempt to puzzle out collectively (where possible) the difficult issues that we confronted individually, in circumstances where the decision of one judge in any particular takeover case could bind other judges in future cases. This practice also helped to avoid inconsistent adjudications and to strengthen that court as an institution.
   
Verret: What is so unique about Delaware's approach to corporate law?

Justice Jacobs: That is a subject to which corporate law academics have devoted much time and law review space. In my opinion, the quality that is most unique is its effort to reconcile, in each specific case, the requirements of law (specifically, transactional predictability and giving practical guidance to corporate fiduciaries) with the commands of equity (to arrive at results that are fair and make sense in the business world). That is often more easily said than done, but over time I believe we have been successful in doing that.

How Liberal is Sotomayor?

Walter Olson comments:

Her defenders (and less-severe critics) do make some interesting points about a judge whose friend, Yale lawprof Stephen Carter, calls her a "moderate, with liberal leanings" but not a "firebrand on a mission":

Alarms over Dabit v. Merrill Lynch notwithstanding, Paul Karlsgodt at Class Action Watch finds Sotomayor's rulings in class action and securities cases mostly unexceptional (more here). Jonathan Adler summarizes what he's found, good and bad.

Conservative California lawyer-blogger Patterico says the nominee, a former prosecutor, "appears to be OK on criminal law issues".

And at Volokh Conspiracy, libertarians David Bernstein and Ilya Somin have good words for rulings by the judge on public-employee discipline for off-job racist speech and seizure of the vehicles of persons charged with DUI.

The talk radio-types will get worked up, but it's going to be hard (based on what we know so far) to make the case that Sotomayor is so far out of the mainstream as to be unconfirmable.

 

Sonia Sotomayor and Business Law

Walter Olson comments on Barack OBama's nomination of Sonia Sotomayor to the Supreme Court:

Two 2006 cases present more problems for Sotomayor advocates, but they're on subject matter that could come off to the public as dry and remote: Merrill Lynch v. Dabit, where she held that state courts could entertain certain securities lawsuits notwithstanding the preemptive effect of federal law (reversed 8-0 by the high court), and Knight v. Commissioner, on the deductibility of certain trust fees, in which the court upheld her result but unanimously rejected her approach as one that (per Roberts) "flies in the face of the statutory language."

Issues of business law don't come across as Sotomayor's great passion one way or the other, so it's hard to know what all this portends for the high court's direction on business issues should she be confirmed. As Home Depot's ( HD - news - people ) Bernard Marcus and others have pointed out, for all of David Souter's predictable role on the court's liberal side in most high-profile cases, he in fact steered to middle-of-the-road, hard-to-characterize views on many issues of litigation, liability and procedure, either as a swing vote or as the author of opinions. (Two key issues to watch: what sort of constitutional restraints, if any, there are on punitive damages, and how much scrutiny judges should give to initial pleadings to determine whether a federal lawsuit ought to go forward.)

In a post at Point of Law, Olson reports:

Randy Maniloff at White and Williams finds that she's ruled mostly for insurers against policyholders (PDF) in coverage disputes -- not usually seen as the more "liberal" or empathy-driven way of doing things.

OTOH, the Business Law Professor observes:

I was reviewing Judge Sotomayer's record on business cases and the same word kept coming up, reversed.   There is little to be said of a consistent record learning one way or the other on the business cases except the high frequency of reversals by the Supreme Court whenever one of her cases goes up on appeal.  There is one case she wrote that I do not like at all and that is her opinion several years back giving the NYSE immunity from investor actions questioning the manipulative activities of NYSE floor brokers and specialists.  The NYSE has change enough to moot the opinion, but at the time it I found it poorly reasoned and of questionable policy to boot. 

RIP: John Cribbet

I am saddened to learn that my former University of Illinois colleague John Cribbet has passed away. The College of Law announcement informs us that:

Cribbet, chancellor of the Urbana campus from 1979-84, was a well-known legal scholar and pioneer in the field of property law. His books include the widely used "Cases and Materials on Property," a law textbook now in its eighth edition.
"John Cribbet transformed all that he touched - the university, the College of Law, and, most importantly, his students and colleagues," said Bruce P. Smith, the dean of the college and Guy Raymond Jones Faculty Scholar. "He was a legendary teacher and scholar in the field of property law. But he was also a terrific person.

I can confirm from personal experience that John was an amazing teacher (I sat in on several of his classes as a young teacher to see what the fuss was about and was blown away by his command of the classroom) and a wonderful colleague. He was a true gentlemen and scholar. (HT: Leiter)

Cuban's battle with SEC heating up

The Houston Chronicle relates:

The Dallas Mavericks are out of the NBA playoffs, and the spotlight is now following the team's controversial owner, Mark Cuban, to a different venue — federal court.
The insider trading suit filed against Cuban by the U.S. Securities and Exchange Commission last year is scheduled to receive its first hearing Tuesday when attorneys present oral arguments on a motion by the billionaire owner to have the case dismissed.
The hearing will provide yet another window to a case that has captured the attention of the country's legal minds, some of whom believe it represents an unprecedented step by the SEC....

"The basis on which they're going after Cuban hasn't been tried before," said Peter Henning, a law professor at Wayne State University in Detroit who formerly worked as an attorney in the SEC's enforcement division. "Whether the SEC is going to be able to stretch (its authority) that far certainly remains to be seen."
The SEC alleges that Cuban engaged in insider trading when he sold his shares in a Canadian Internet search engine company, Mamma.com Inc., after receiving confidential information that the company planned to sell additional shares through a private offering in 2004. Cuban was able to avoid more than $750,000 in losses by selling his shares, according to the SEC.
The government's case is based on the contention that, by violating an oral agreement to keep the sensitive information confidential, Cuban committed insider trading.
Cuban and his legal team, while not admitting that the facts detailed in the suit are true, say the government's premise is wrong. They say Cuban, whose shares represented a 6.3 percent stake in Mamma.com, was never an "insider" because he didn't have a fiduciary or similar duty in his relationship with the company.
Cuban's motion to have the case dismissed has sparked a series of pleadings and briefs in which he has attacked the government's position and the government has pushed back with equally sharp elbows.
The SEC argues that a confidential agreement is sufficient to establish a fiduciary relationship and derides Cuban's attempt to say it isn't so.
"Cuban's argument that a person can promise confidentiality and then deliberately and furtively break that promise by trading on the confidential information is shameless," the SEC stated in a memo opposing his motion to dismiss. "Cuban accepted a duty of trust and confidence to the source of the information and was therefore legally obligated to abstain from trading or first disclose his plan to trade."
Five respected law professors have filed a brief in support of Cuban's position. The professors — Alan Bromberg of Southern Methodist University in Dallas, Stephen Bainbridge of UCLA, Allen Ferrell of Harvard, Todd Henderson of the University of Chicago and Jonathan Macey of Yale — weren't compensated for signing off on the brief, according to the document.

The Prescient David Skeel

While doing some research on Google, I recently ran across a article on hedge funds by my friend U Penn bankruptcy law scholar David Skeel in the November 2005 (!) issue of Legal Affairs. Money quote:

Hedge fund misbehavior looks ominously like the edge of the next wave of financial scandals. While many top executives of Enron and WorldCom—and the investment bankers and accountants who advised them—have been punished or soon will be, the scandals they perpetrated never prompted a thorough rethinking of how American markets should work, and how best to preserve the markets' integrity. After 25 years of deregulation in financial, airline, and other industries, a high-velocity, service-oriented economy has given the wealthiest Americans more money than ever. They are pouring it into hedge funds, whose whiz-kid managers are guided by an overriding principle: Multiply the money, any way you can.

I’m not convinced that hedge funds deserve much of the blame for the current financial mess, but Skeel’s essay otherwise looks quite prescient in many respects.