Regular readers will recall that a while back I opined on the Carlyle Group's aggressive effort to include a mandatory arbitration provision in its foundational documents as it went public. Carlyle has announced that it is going to drop that provision, which prompted an outfit (of which I had never heard) called the American Association for Justice to put out a press release in which its President, some guy named Gary M. Paul, is quoted as saying that:
"With the investor community, lawmakers, and former SEC officials speaking out against the use of forced arbitration in Carlyle's proposed IPO, it was evident that this was an ill-conceived move from the start. Corporations intent on skirting accountability have used forced arbitration as a weapon to hide wrongdoing and deny legal recourse to countless workers and consumers. Today's developments should send a strong signal to other companies that forced arbitration clauses will not be accepted by investors or the SEC."
The press release continues with clips from a bunch of experts, including yours truly:
What the Experts Say
...
"If Carlyle can get away with this, you are going to have a bunch of CEOs telling their tax accountants, 'Price out what it would cost me.'" –Stephen Bainbridge, a corporate and securities law professor at the UCLA School of Law
I deeply resent the use of my name in this way. They cherry picked one quote from a news story to make it seem as though I was critical of what Carlyle was trying to do. In fact, however, I was in favor of what they were doing. In that same news story, for example, I was also quoted as saying:
The high court would be “almost certain” to strike down SEC policy if Carlyle were to push the issue, Bainbridge said. “Carlyle is admittedly taking an extremely aggressive position, but it’s a position I believe is fully consistent” with U.S. and Delaware law, he said.
And here on the blog, I wrote that:
Setting aside the issues relating to litigation rights and mandatory arbitration, I'm not especially bothered by the governance provisions of Carlyle's set up. ...
Turning to the mandatory arbitration provision, I continued:
If you can limit fiduciary duties by contract in the case of a public limited partnership, why wouldn't a mandatory arbitration clause be enforceable as well? And, if you can do that with respect to state law claims, why shouldn't you be able to do it with respect to federal claims?
In sum, FREEDOM OF CONTRACT + SUPREME COURT POLICY FAVORING ARBITRATION + MARKET WILL PRICE TERMS = the SEC policy is wrong. Mandatory arbitration clauses ought to be enforced as to both state and federal claims.
So this so-called American Association for Justice is invoking my good name to advance their nefarious pro-litigation, anti-freedom of contract goals. Where's the justice in that?
Update: It turns out that the American Association for Justice is the new name for the American Trial Lawyers Association, the plaintiffs' bar trade association. Since they'll probably sue me for saying their goals are "nefarious," I guess I should emphasize that that's an OPINION. Anyway, I called their PR person and she refused to change the press release.
