I cannot imagine an academic law conference I would have less interest in attending or at which I would be less welcome. Since YMMV, however, here's the rundown. If you go, don't forget to check all of your privileges at the door.)
I cannot imagine an academic law conference I would have less interest in attending or at which I would be less welcome. Since YMMV, however, here's the rundown. If you go, don't forget to check all of your privileges at the door.)
Posted at 06:57 PM | Permalink
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Professor Paula Franzese of Seton Hall law school is something of a patron saint of law students. Widely known for her upbeat energy, kindness, and tendency to break into song for the sake of helping students remember a particularly challenging point of law, Paula has literally helped hundreds of thousands of lawyers pass the bar exam through her video taped Property lectures for BarBri.
Paula is such a gifted teacher that she won teacher of the year almost ever year until Seton Hall implemented a rule to give others a chance: no professor can win teacher of the year more than two years in a row. Since the rule was implemented, Paula wins every other year. She’s also incredibly generous, leading seminars and workshops to help her colleagues improve their teaching.
Paula recently wrote a book encouraging law students to have a productive, upbeat happy, and grateful outlook on life (A short & happy guide to being a law school student).
Paula’s well-intentioned book has rather bizarrely been attacked by scambloggers as “dehumanizing”, “vain”, “untrustworthy” and “insidious.” The scambloggers are not happy people, and reacted as if burned by Paula’s sunshine.
Point 1. I can empathize with many of the scambloggers' complaints. A lot of law schools did puff their job numbers, bar passage rates, and so on. And a lot of law schools happily took the money of people who never should have been accepted in the first place.
Point 2. But I can also empathize with the view that the scambloggers are a surly lot whose sole enjoyment seems to come from stewing in their own misery. The law professor scambloggers-- in addition to mainly being a bunch of failed academics--seem to be an equally dour and miserable lot (is their a causal link to the fact that they're all mostly to the left of Bernie Sanders? But I digress.).
Now, however, we come to an issue on which I must at least partially dissent. He also writes:
Happiness and success tend to go together. Some people assume that success leads to happiness. But an increasing number of psychological studies suggest that happiness causes success. (here and here) ....
Happiness research is very much a mixed bag. Largely because it depends in large part on self reporting of happiness, but also because of the well known phenomenon that only positive results tend to make it into the literature. When I drilled down into the happiness literature on productivity, for example, a few years ago, it quickly became apparent that the was no evidence of causation and very little evidence of correlation:
A Concurring Opinions post by Michelle Harner seems to invoke the idea that happy workers are more productive workers:
Employing a workforce that enjoys coming to work, is comfortable communicating throughout the firm and portrays that positive image to the outside world potentially holds real value.
It makes some intuitive sense, I suppose. As I detail in my article, Privately Ordered Participatory Management, however, the evidence does not support that hypothesis:
Over two decades ago, Nobel economist Kenneth Arrow opined that “the empirical evidence, such as it is, points to very little relation between the morale of workers and their performance.” Kenneth J. Arrow, The Limits of Organization 76 (1974). The intervening years have done little to change that conclusion. A more recent literature review likewise concluded that there is “simply no direct connection between job satisfaction and subsequent productivity.” Edwin A. Locke et al., Participation in Decisionmaking: When Should it be Used?, 14 Org. Dynamics 67, 71 (1986). Accord Thomas A. Kochan et al., The Transformation of American Industrial Relations (rev. ed. 1994) (same); Oliver E. Williamson, The Economic Institutions of Capitalism 270 (1985) (same); Tom Juravich, Empirical Research on Employee Involvement: A Critical Review for Labor, 21 Lab. Stud. J. 51, 56 (1996) (based on research to date no proof that “happy workers are necessarily more productive”); Charles D. Watts, Jr., In Critique of a Reductivist Conception and Examination of “The Just Organization,” 50 Wash. & Lee L. Rev. 1515, 1518 (1993) (“I do not see the propagation of just or participative organizations that one would expect if these benefits [i.e., increased job satisfaction etc...]” were as significant as the proponents of participatory management suggest); cf. Alan Hyde, In Defense of Employee Ownership, 67 Chi-Kent L. Rev. 159, 201 (1991).
Because that article was written circa 1997, of course, there may be more recent research. And so there is. But the more recent research is consistent with my rather pessimistic view:
Job satisfaction has traditionally been thought of by most business managers to be key in determining job performance. The prevailing thought is if you are satisfied and happy in your work, you will perform better than someone who isn’t happy at work.
Not so, according to a research project by Nathan Bowling, Ph.D., an assistant professor of psychology at Wright State. His findings, which will be published soon in the Journal of Vocational Behavior, show that although satisfaction and performance are related to each other, satisfaction does not cause performance.
“My study shows that a cause and effect relationship does not exist between job satisfaction and performance. Instead, the two are related because both satisfaction and performance are the result of employee personality characteristics, such as self-esteem, emotional stability, extroversion and conscientiousness,” he explained.
Bowling, who specializes in industrial and organizational psychology, said his findings are based on reviewing data from several thousand employees compiled over several decades. His subjects, mostly in the United States, involved several hundred different organizations.
Bowling said the public, and even researchers, can get confused over the relationship between job satisfaction and job performance. “Just because two things are related doesn’t mean that one causes the other. For example, there is a relationship between the amount of ice cream sold on a given day and the crime rate for that day. On days when ice cream sales are high, the number of crimes committed will also tend to be high. But this doesn’t mean that ice cream sales cause crime. Rather, ice cream sales and crime are related because each is the result of the outdoor temperature. Similarly, satisfaction and performance are related because each is the result of employee personality.”
Why does this matter? In the first place, firm HR efforts to boost employee morale may be unproductive. In the second place, some liberal labor theorists argue that the government ought to try to promote worker happiness so as to promote competitiveness. With President Obama apparently about to go on a competitiveness kick, it may prove necessary to once again nip the happiness fable in the bud.
Jesse Fried has posted a very interesting and persuasive article on executive compensation clawbacks:
On July 1, 2015, the Securities and Exchange Commission (SEC) proposed an excess-pay clawback rule to implement the provisions of Section 954 of the Dodd-Frank Act. I explain why the SEC’s proposed Dodd-Frank clawback, while reducing executives’ incentives to misreport, is overbroad. The economy and investors would be better served by a more narrowly targeted “smart” excess-pay clawback that focuses on fewer issuers, executives, and compensation arrangements.
Fried, Jesse M., Rationalizing the Dodd-Frank Clawback (April 12, 2016). Available at SSRN: http://ssrn.com/abstract=2764409
It'd be interesting to see his analysis frame applied to the new compensation clawback rule for banks.
For dinner tonight I made Michael Chiarello's Italian Meatloaf and roasted Italian cauliflower. Both were very easy and delicious recipes. With it we had the 2012 Foxen Volpino,which is a blend of 78% Sangiovese and 22% Merlot. Despite its youth, the Volpino had a developed bouquet of black cherry, blackberry, and plum. On the palate, I tasted the same fruit flavor associations plus some spice, earth, and leather. Bright acidity and a firm tannic backbone suggest that it has some aging potential, but it is hard to resist now. This is one of the better Cal-Ital wines. Grade: 90
The first decade of the new millennium was bookended by two major economic crises. The bursting of the dotcom bubble and the extended bear market of 2000 to 2002 prompted Congress to pass the Sarbanes-Oxley Act, which was directed at core aspects of corporate governance. At the end of the decade came the bursting of the housing bubble, followed by a severe credit crunch, and the worst economic downturn in decades. In response, Congress passed the Dodd-Frank Act, which changed vast swathes of financial regulation. Among these changes were a number of significant corporate governance reforms.
Corporate Governance after the Financial Crisis asks two questions about these changes. First, are they a good idea that will improve corporate governance? Second, what do they tell us about the relative merits of the federal government and the states as sources of corporate governance regulation? Traditionally, corporate law was the province of the states. Today, however, the federal government is increasingly engaged in corporate governance regulation. The changes examined in this work provide a series of case studies in which to explore the question of whether federalization will lead to better outcomes. In it, I analyze these changes in the context of corporate governance, executive compensation, corporate fraud and disclosure, shareholder activism, corporate democracy, and declining U.S. capital market competitiveness.
This paperback edition includes a new conclusion updating the key arguments.
Posted at 06:21 AM | Permalink
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A user of the Klein Ramseyer Bainbridge casebook recently sent along this question:
I've been using your text for years now and in teaching Paramount v. Time today, it occurred to me - what standing did Paramount have?The decision talks about the Shareholder claims which sought to invoke Revlon duties, and then the Paramount claims which sought to invoke Unocal duties.It was not clear from the decision however that Paramount was even a shareholder.
Starting with the general issue of bidder qua bidder standing, there is surprisingly little law on this subject. Let's start with a 1988 Business Lawyer article (vol. 53, pp 767) by Travis Laster (who now, of course, is a Vice Chancellor on the Delaware Chancery Court). Back then my fellow UVa law alum Laster (he was ten years after me in the Class of 1995) argued that Delaware courts had developed "sub silentio a pragmatic approach to standing that permits potential acquirors to raise breach of fiduciary duty claims where resolution of the dispute is supported by other factors, such as the presence of target-stockholder plaintiffs raising the same or similar claims, the amount of resources already expended on the case, and the alignment of the bidder's interests with the interests of the stockholders." J. Travis Laster, The Line Item Veto and Unocal: Can A Bidder Qua Bidder Pursue Unocal Claims Against A Target Corporation's Board of Director's, 53 Bus. Law. 767, 768 (1998). He contended the courts thus recognized that, "in some cases, a potential acquiror's Unocal action should proceed whether or not the potential acquiror is a stockholder." Id. at 796. According to VC Laster, this "framework thus enables the Delaware Court of Chancery to decide litigable Unocal cases on public interest grounds, while allowing the court to avoid on a combination of standing and public policy grounds those cases where resolution of a potential acquiror's Unocal or Revlon claim is inappropriate." Id. I recommend reading it for its careful analysis of the doctrinal and policy issues.
In the infamous Omnicare litigation, however, then VC Stephen Lamb rejected bidder qua bidder standing:
Omnicare suggests that it nonetheless should be accorded standing to pursue these claims because it is making a bona fide bid for control of NCS. Omnicare argues that the policy limiting the right to initiate litigation relating to the internal affairs of a Delaware corporation to those who were participants in the corporate enterprise at the time of the alleged misconduct is designed to prevent “strike suits” and should not prevent a person such as Omnicare, which has a substantial and legitimate interest in the outcome of the litigation, from filing or prosecuting its suit. Instead, Omnicare urges the court to adopt a policy-based approach and allow standing for bidders without regard to their stock ownership in breach of fiduciary duty cases if failure to do so would disserve the interests of the parties, the stockholders, and the public.20 For the reasons that are briefly discussed hereinafter, the court is unwilling to extend the law in this fashion.... Omnicare is unable to cite any case holding that a bidder that did not own shares at the time of the alleged breach of fiduciary duty by the target board nonetheless had standing to sue. ...... Delaware courts have shown considerable latitude in entertaining fiduciary duty litigation brought by stockholders who are also themselves bidders for control. The only consistent limitation placed on those persons is that they also be stockholders at all relevant times and, thus, among those to whom a duty was owed, even if they only own one share.
Unfortunately, VA Lamb's Omnicare decision does not discuss VC Laster's article at any length, contenting himself by observing that:
If, as Omnicare suggests, persons external to those relationships are acknowledged to have standing to sue to enforce them, it is not immediately apparent why competing bidders are the only ones to whom such standing might be accorded.
VC Laster's article was also discussed in one of the only other subsequent Delaware cases, In re Gaylord Container Corp. Shareholders Litigation, 747 A.2d 71, 77 n.7 (Del. Ch. 1999), in which the court held that the bidder's standing was “putatively tethered, if only by a bare thread, to its status as a stockholder." As to Laster's argument, the court in Gaylord offered this dicta:
There are very sound practical, value-enhancing reasons for the case law according bidders standing, even though the practice of according bidders standing as stockholders leads to a certain amount of undeniable doctrinal incoherence. See generally J. Travis Laster, The Line Item Veto and Unocal:Can a Bidder Qua Bidder Pursue Unocal Claims Against a Target Corporation's Board of Directors?, 53 Business Lawyer 767 (1998). There are also very sound doctrinal reasons for recognizing that defensive measures primarily affect stockholders as prospective sellers and bidders (regardless of stockholder status) as prospective buyers, and enabling each to bring individual actions to protect their legitimate interests in being able to deal with each other without improper (i.e., not fiduciarily compliant) interference by corporate boards. Such a reality-based approach seems to have little downside and is a more straightforward manner in which to address cases implicating Unocal.
Id. at 81 n.14. Which doesn't really answer the question.
Speaking of policy, the policy arguments have been aptly summarized by Robert Haig as follows:
The general rule is that only a stockholder may assert claims against a director for breach of a fiduciary duty. Whether a potential acquiror also has standing to pursue a breach-of-fiduciary-duty claim against a target's board of directors is an unsettled issue, but one worthy of careful consideration in bringing or defending such claims. The key standing cases in this context were decided under Delaware law. Arguments in favor of an exception to the general rule are that the board's failings adversely affect the potential acquiror's success and that interests underlying a bidder's demand for injunctive relief to remedy alleged misconduct are identical to the stockholders' interests in receiving a higher value for their shares. Arguments against standing in this context include the belief that allowing a bidder to sue for breach is akin to allowing the bidder to “purchase” a lawsuit against the company after the fact, which is generally disfavored and, more generally, that only those with a legitimate relationship with the corporation should be permitted to sue over that corporation's internal affairs.
Because of the uncertainty regarding “bidder standing,” companies contemplating a potential hostile acquisition often acquire a small position in the potential target company, which generally permits them to bring claims as a stockholder rather than as a potential acquiror.
4C N.Y.Prac., Com. Litig. in New York State Courts § 89:28 (4th ed.). See also Sean J. Griffith, Correcting Corporate Benefit: How to Fix Shareholder Litigation by Shifting the Doctrine on Fees, 56 B.C. L. Rev. 1, 59 n.275 (2015) ('The ability of an intervening bidder as such to sue on the basis of fiduciary duty is unclear. However, intervening bidders are likely also to be shareholders with standing to sue on that basis.") (citation omitted).
Turning to the Paramount case, our edit of the case refers to the "Shareholder Plaintiffs" (747) as bringing a Revlon claim. As edited (same page) the text states "Paramount asserts only a Unocal claim in which the shareholders plaintiffs join." As that suggests, there were two sets of plaintiffs in the suit. In an introductory paragraph to the unedited opinion, the Delaware Supreme Court in fact explained that:
Paramount Communications, Inc. (“Paramount”) and two other groups of plaintiffs (“Shareholder Plaintiffs”), shareholders of Time Incorporated (“Time”), a Delaware corporation, separately filed suits in the Delaware Court of Chancery seeking a preliminary injunction to halt Time's tender offer for 51% of Warner Communication, Inc.'s (“Warner”) outstanding shares at $70 cash per share. The court below consolidated the cases and, following the development of an extensive record, after discovery and an evidentiary hearing, denied plaintiffs' motion.
Paramount Commc'ns, Inc. v. Time Inc., 571 A.2d 1140, 1141-42 (Del. 1989). It probably would have been helpful to have left that in, but some of us have very sharp editorial pencils.
Curiously, however, neither the full Supreme Court nor the lower Chancery Court decision discusses Paramount's standing to sue. Was it essentially ignored because the shareholder plaintiffs were bring the same claims (although that would argue for tossing Paramount's suit)?
My guess is that Paramount owned some Time Inc. stock. So I have been looking for any of the following, which might shed light on the issue: Paramount's Schedule 13D filing(s), Paramount's Schedule 14d-1 filing(s), Paramount's complaint against Time-Warner. So far with no luck.
Any readers know where we could get them?
Francis Pileggi recently observed that:
A recent Delaware Court of Chancery transcript ruling is notable for stating that there is no per se affirmative obligation, absent a request for stockholder action, in a closely held company, to produce financial statements. The court, held however, that under certain circumstance, for example in response to a demand under DGCL Section 220, it could raise a fiduciary duty question if no financial statement were prepared in order to keep the minority “in the dark.” The Ravenswood Investment Company, L.P. v. Winmill & Co. Inc., C.A. No. 7048-VCN (Transcript) (Del. Ch. Feb. 25, 2016).
This prompted Keith Paul Bishop to caution that:
In The Ravenswood Investment Company, L.P. v. Winmill & Co. Inc., C.A. No. 7048-VCN (Transcript) (Del. Ch. Feb. 25, 2016), former Vice Chancellor John W. Noble wrote:
That brings us to Delaware disclosure law which generally does not require disclosures to shareholders unless shareholder action is sought. Winmill seeks no such action. Thus, the failure to provide financial reporting, by itself, does not state a claim. Whether that is good policy or bad policy is not my task to resolve today.
The failure to provide the audited annual financial reports, without more, does not state a claim under Delaware law, especially because it appears that accounting records are maintained, bills are being paid, and one presumes tax returns are being filed.
That may be the law in Delaware, but many Delaware corporations maintain their executive offices in California or customarily hold meetings of their boards of directors in California. These corporations are subject to the annual report requirement in Section 1501 of the California Corporations Code. That statute requires the Board of Directors to cause an annual report to be sent to the shareholders not later than 120 days after the close of the fiscal year, unless in the case of a corporation with less than 100 holders of record of its shares (determined as provided in Section 605) this requirement is expressly waived in the bylaws. If no annual report for the last fiscal year has been sent to shareholders, the corporation must, upon the written request of any shareholder made more than 120 days after the close of that fiscal year, deliver or mail to the person making the request within 30 days thereafter the financial statements.
Even if a Delaware corporation does not maintain its executive office or customarily hold board meetings in California, it could be subject to the annual report requirement in Section 1501. Foreign corporations subject to Section 2115 of the Corporations Code are subject to Section 1501. Cal. Corp. Code § 2115(b).
Keith later elaborated by noting that:
The annual report requirement, however, does not apply if a corporation has fewer than 100 holders of records (as determined under Section 605 of the California Corporations Code) and expressly waives the annual report requirement in its bylaws. As a result, many California practitioners include such a waiver in their standard form of bylaws. However, I find that the option of waiving the annual report requirement is often overlooked in the case of foreign corporations. Although the title of this post refers to Delaware corporations, the statute can apply to any foreign corporation, as defined in Section 171 of the California Corporations Code.
All of which strikes me as sensible and good advice.
But I want to focus on VC Noble's observation that "the failure to provide financial reporting, by itself, does not state a claim. Whether that is good policy or bad policy is not my task to resolve today." In this post, I take up that task.
In my book Agency, Partnerships and LLCs, I discuss the legal rules governing disclosure within partnerships. This is a good place to start because close corporations are often referred to as "incorporated partnerships." Meiselman v. Meiselman, 309 N.C. 279, 288, 307 S.E.2d 551, 557 (1983) ("Indeed, the commentators all appear to agree that '[c]lose corporations are often little more than incorporated partnerships.'"). As a result, courts not infrequently "stress the ‘partnership’ nature of the close corporation and reason by analogy from the Partnership Law." Application of Surchin, 55 Misc. 2d 888, 890, 286 N.Y.S.2d 580, 582 (Sup. Ct. 1967). But while we may want to start here, we may not want to end up here.
In Day v. Sidley & Austin, 394 F. Supp. 986 (D.D.C. 1975), plaintiff was a senior partner in the defendant law firm and the managing partner of its Washington, DC, office. When Sidley & Austin merged with another DC law firm, Day was demoted (at least in his eyes) to co-chairman of the office. Day sued. Among other things, Day claimed that his fellow partners breached their fiduciary duties by not disclosing the effect the merger would have on internal firm governance. The court characterized Day’s claim as concerning non-disclosures relating to the internal structure of the firm, as to which the court held that no duty to disclose exists: “No court has recognized a fiduciary duty to disclose this type of information, the concealment of which does not produce any profit for the offending partners nor any financial loss for the partnership as a whole.” In other words, there is no freestanding duty of disclosure absent a conflict of interest. (There is some case law to the contrary, however. See, e.g., Appletree Square I Ltd. Partnership v. Investmark, Inc., 494 N.W.2d 889, 892 (Minn.App.1993) (“The relationship of partners is fiduciary and partners are held to high standards of integrity in their dealings with each other. … Parties in a fiduciary relationship must disclose material facts to each other.”).)
Day likely would be in a much better position today. UPA (1914) § 20 limited intra-partnership disclosure duties (other than access to the books) to situations in which a partner made demand for information of all things affecting the partnership. In contrast, UPA (1997) § 408(c)(1) imposes a duty to disclose, without demand, any information concerning the partnership’s business and affairs reasonably required for the proper exercise of the partner’s rights and duties. This includes “any information concerning the partnership’s … financial condition … which the partnership knows and is material to the proper exercise of the partner’s rights and duties,” which presumably includes financial statements. (Going back to Mr. Day, because Day had a right to vote on the merger, the partnership and its partners had a duty to disclose any information relating to the merger.)
I tend to think that a rule mandating disclosure is optimal in the partnership setting. I base my argument here on Michael P. Dooley, Enforcement of Insider Trading Restrictions, 66 VA. L. REV. 1, 64-66 (1980), which argued that if partners can withhold information from each other, then each has an incentive to drive the other out so as to take full advantage of the information. As each incurs costs to exclude the other, or to take precautions against being excluded, the value of the firm declines. Accordingly, a legal rule vesting the firm with a property right to the information and requiring disclosure is more efficient than forcing the partners to draft disclosure agreements and monitor one another’s behavior. Note that this rule does not discourage the production of new information; the partners still have incentives to produce information because they share in its value to the firm. As no one will withhold information, however, the firm’s productivity is maximized.
If we think of close corporations as incorporated partnerships, then mandatory disclosure would make sense in that context too. But therein lies the difficulty. Unlike the partnership setting, it is far less clear to me that mandatory disclosure makes sense in the public corporation context. See my article Mandatory Disclosure: A Behavioral Analysis. 68 University of Cincinnati Law Review 1023 (2000) (available at SSRN: http://ssrn.com/abstract=329880).
So should we treat close corporations like partnerships or like public corporations. As we saw above, courts have often opted for the former. In general, however, I have a strong presumption in favor of the latter. In my book Corporate Law, I critique the analogous question of whether the Massachusetts line of cases imposing partnership-like fiduciary duties on close corporations:
… while the partnership analogy is a useful one, we should not overstate it. Investors are heterogeneous and the best approach may be to offer them standard form contracts—off the rack rules—that provide significant choice. Corporate and partnership law differs in many respects. Courts will maximize investor welfare by letting investors choose the form best suited to their business. If investor choice is a virtue, in other words, Massachusetts’ decision to harmonize close corporation and partnership law was wrongheaded. A better approach would be to retain a real choice by not imposing higher fiduciary duties on close corporation shareholders. To be sure, in the past, some investors probably preferred partnership rules but felt it necessary to incorporate so as to get the benefit of limited liability. These days, such investors can form a limited liability company, which combines a more-or-less partnership-like governance structure with limited liability. Accordingly, the case for maintaining a clear distinction between partnership and corporate law has become even stronger.
So is this is a case for the general rule? Or for an exception? I think the former. Section 410 of the Uniform Limited Liability Company Act adopts the same rule as the partnership statute. Hence, if a rule of mandatory disclosure is optimal in the parties’ setting, they can get it by forming an LLC without giving up the benefit of limited liability. In turn, a clear rule against mandatory disclosure in the close corporation setting would force parties who want a corporation rather than an LLC to solve the issue by contract tailored to their needs.
In closing, I caution that if courts opt to impose such a duty, they ought to limit it to very basic financial information like a balance sheet and income statement. The last thing we want to do is to use state law fiduciary duties to replicate the overly burdensome and costly federal securities law disclosure regime. (Avoiding doing so strikes me as another reason for opting against a duty of affirmative disclosure in the close corporation setting.)
Alison Frankel describes a case she calls "a sticky wicket":
Just two years ago, plaintiffs lawyers were squirming under the strictures of forum selection bylaws and charter amendments that required shareholders to litigate their claims in Delaware Chancery Court rather than friendlier jurisdictions. But now plaintiffs’ lawyers at Andrews & Springer and Gainey McKenna & Egleston are suing board members at the biopharma company CytRx for waiving the company’s forum selection bylaw.
Their derivative complaint asserts (among many other things) that CytRx directors breached their duty to shareholders by waiving the forum selection bylaw they unilaterally adopted in 2013 in order to settle overlapping derivative claims filed in federal court in Los Angeles. CytRx, represented by Skadden Arps Slate Meagher & Flom, has moved in March to stay the Andrews & Springer case, which was filed – natch – in Delaware Chancery Court. The Delaware plaintiffs’ latest brief argues that Chancery Court has a policy interest in deciding, as a matter of first impression, whether corporations can decide to abandon their own forum selection clauses whenever it suits their purposes.
But I don't see why this case is hard. First, one of the hoariest chestnuts of Delaware law is Kahn v. Sullivan, 594 A.2d 48 (Del. 1991), which generations of law students have learned means that the first plaintiff to settle gets to set the terms of the deal.
Second, the idea that directors could not waive a forum selection bylaw is absurd. The law is quite clear that because "the board of directors have [sic] power to adopt the bylaws they, of necessity, have the power to waive the by-laws, unless this right is restricted by statute." State ex rel. Guaranty Building & Loan Company v. Wiley, 100 Ind.App. 438, 196 N.E. 153, 154.
The provisions of a by-law may be waived by the corporation in favor of third persons, and, as a corporation may at any time amend its by-laws by proper corporate action, it may expressly or impliedly waive the provisions of a by-law, even in favor of or as against stockholders or members by action which is binding on the corporation.
Likewise, it is a basic principle of contract law that forum selection clauses may be waived. See, e.g., Mabon Ltd. v. Afri-Carib Enterprises, Inc., 29 S.W.3d 291, 298 (Tex. App. 2000) ("A forum selection clause may be waived just as any other contractual right.").
Some common sense from the Journal's readers (including former SEC Commissioner Gallagher):
For the past several years, a small group of politically motivated investors has submitted corporate proxy proposals related to lobbying and public-policy advocacy expenditures, ranging from requiring companies to disclose their trade association contributions to banning political spending and lobbying altogether. With very few exceptions, supermajorities of shareholders reject these proposals year after year at company after company. The reason is clear: Investors interested in economic returns, rather than political goals, realize that public-policy advocacy is essential for building shareholder value in corporations (“Political Giving Captures Spotlight,” Business & Tech., April 5).
Frustrated by this dearth of shareholder support, special-interest groups have sought to pressure the SEC to adopt rules that they believe would curtail disagreeable corporate speech. Fewer than a dozen union, special-interest shareholders and partisan political groups flooded the SEC with 1.2 million mostly identical form letters demanding a rule-making.
Ultimately, the SEC isn’t the appropriate body to address this issue, primarily because the SEC has the authority to require disclosure only of information on material expenditures. Rational investors don’t consider this information material to their investment decision-making. Disclosure, untethered to materiality, becomes a political game inviting limitless potential for mischief. The SEC is ill-suited to regulate campaign finance and should instead focus on its mission of regulating capital markets and protecting investors.
Daniel M. Gallagher
Mr. Gallagher served as a commissioner of the U.S. Securities and Exchange Commission from 2011-15.
Why the passion for disclosure of political spending details related to an expense item that is de minimis? The only purpose of disclosure is so liberals can use the information to pressure companies that support conservative causes and politicians. Whether one believes that full transparency is a Holy Grail, one has to be impressed by the persistence of the left’s proxies—public-employee and union retirement systems with trillions of dollars in aggregate assets—in using proxy season to keep the spotlight on corporate political spending. Transparency advocates will plug away at shareholder resolutions until companies one-by-one give way or until the SEC acts. It is impossible for conservatives to be nearly as passionate about keeping nonmaterial expense items out of the spotlight although the implications of not doing so are material for union-friendly politicians.
Liberals have been complaining for years now about the supposed way Citizens United allows corporations license to finance election campaigns (curiously, they never mention that it also allows unions to do so). One wonders, of course, whether the high profile help big corporations have been giving to causes like LGTB rights may change their tune. But one also wonders if they ever worry about the potential for specific corporations to much more directly impact elections. Which brings me to Glenn Reynolds worrisome column:
Facebook’s founder and CEO Mark Zuckerberg is no stranger to political involvement, and a lot of his employees would like him to go further still. But if companies like Facebook get involved in politics, will users lose trust and abandon them? And given the possibility of under-the-table hanky-panky, will opponents call for regulation to ensure transparency?
Speaking at Facebook's annual conference F8 last week, Zuckerberg launched into an attack on Republican front-runner Donald Trump's policies. It’s not surprising that Zuckerberg, who has been a big fan of H-1B visas that critics say hold wages down for programmers and software engineers hired by companies like Facebook, doesn’t think much of Trump’s plan to limit immigration. But so what? Lots of people are for open borders, even people who, unlike Zuckerberg, don’t stand to make billions off of them.
Somewhat more troubling, though, was that a bunch of Facebook employees asked Zuckerberg if there was anything they could do to stop a Trump presidency: “What responsibility does Facebook have to help prevent President Trump in 2017?” ...
Facebook uses tricky and undisclosed algorithms to decide what to show us, and it’s already experimented with manipulating those to affect users’ emotional states. So the idea that it might tinker with things in an attempt to swing an election isn’t shocking. As tech journalist Julian Sanchez remarked, “Facebook and Google almost certainly have the power and legal ability to swing any remotely close national election.” ...
But even the possibility that by using Facebook you’re opening yourself up to manipulation by someone for political reasons may give users pause. And the employees’ question itself, as law professor Ann Althouse notes, suggests that Facebook has a diversity problem when it comes to politics. Althouse writes: “For one thing, there's an unexamined premise that everyone already shares a political position — Trump shouldn't win — and that speaks of a lack of political diversity and pressure on dissenters within the organization to keep silent. For another thing, it omits any thought of a counter-responsibility to keep neutral politically, the idea that the highest duty is to the freedom of speech of those who use Facebook.”
She concludes: “It is true that Facebook would be protected by the First Amendment, even as it screwed with the freedom of speech of over a billion human beings. What's tremendously important here is to maintain pressure on Facebook to respect our freedom. We don't have a legal right to assert against Facebook, but that is absolutely not a reason to give up and let Facebook do what it wants to repress speech. We have moral, political, social, and economic power, and we should assert it.”
For the "pasta":
Using your KitchenAid Spiralizer Attachment (you do have one, don't you?), process the zucchini into zoodles, toss them with a pinch of kosher salt and a heavy pinch or two of McCormick Gourmet Collection Cajun Seasoning, and wrap in paper towels to drain off as much liquid as possible.
Heat your trusty All-Clad Tri-Ply Stainless 3 Qt Saute Pan (you do have one, don't you?) over medium-high heat for a few minutes. Add a couple of dashes of (non-EVOO) olive oil and when the oil just starts to shimmer add the chicken and sausage. Cook the meats (stirring occasionally) until they just start to brown. Using a slotted spoon remove the meat to a paper towel-lined plate to drain. Eyeball the fat remaining in the pan. If it's about a tablespoon you're good to go. If it's more, blot some up with a paper towel. If it's less, add some (non-EVOO) olive oil.
Add the onions to the pan, lightly season with a small pinch of kosher salt and Cajun seasoning, reduce heat to medium, and sauté until they are translucent. Add the mushrooms and sauté until they are tender. Add the garlic slices and sauté for another 30 seconds. By now you should have built up a substantial fond on the bottom of the pan. Add the white wine, crank the heat to full blast, and deglaze the pan, stirring constantly. Reduce heat to medium. Add the pasta sauce and tomatoes. Cook for a couple of minutes and then taste. Adjust seasoning with sea salt, freshly ground black pepper, and Cajun seasoning to taste. (I like mine very spicy. I cook with basic Morton Kosher Salt but I finish recipes with Maldon Sea Salt.)
Add the zoodles to the pan, return the sauce to a simmer, and cook for 4-6 minutes or until the zoodles are al dente. Zoodles exude a lot of liquid, so you may want to hit the sauce with some Wondra flour to thicken it at the end.
Most true cajuns would blanch at the idea of jambalaya without bell peppers. I omitted them, but you may want to add diced green and red bell peppers with the onions.
Jambalaya is not really a wine dish. If one must have wine (and I must), an off-dry white would be a good choice, especially if you cranked up the spice. If you can find one, an "extra dry" domestic sparkling wine would be a great choice. Slight sweetness to counter the heat of the spices with refreshing bubbles to scrub the palate.
But I wanted red wine, so I popped a Ridge Ponzo Zinfandel (Russian River Valley) 2013. When drunk with spicy food most red wines just taste like tannin and alcohol. For some reason, however, Zinfandel does okay with spicy food.
The 2013 Ridge Ponzo is 93% Zinfandel and 7% Petite Sirah. Deep purple with no sediment at this point. Medium strong bouquet suggesting raspberry, blueberry, and warm spices. On the palate, it suggests ripe berry fruit, prunes,and a dash of pepper. This is not a complex wine nor a wine for the cellar, but for short-term drinking with this sort of meal it's very enjoyable. Grade: 88
Dinner tonight started with a 3 ½ pound spaghetti squash. Using a sharp paring knife, I pierced it three times in a line running lengthwise, after which I rotated the squash 180° and repeated the piercing process. The squash went into a glass dish and then into the microwave for 12 minutes on high. I let it cool for 7 minutes before cutting it in half, removing the seeds, and shredding the flesh (leaving about a ¼ to a ½ inch thickness of flesh attached to the rind so that each half formed a bowl).
Meanwhile, I had removed the casings from 3 Italian sausages, broke the sausages into small pieces, and sautéed them until just done. I drained the sausage pieces on paper towels and then combined the spaghetti squash fibers, sausage pieces, a ½ cup of diced sun-dried tomatoes, about half a jar of marinara sauce, about 4 ounces of shredded mozzarella and a good handful of shredded Parmesan cheese in a metal mixing bowl. I spooned the mix into the squash "bowls," topped them with more mozzarella and Parmesan, and then baked them at 350° for 25 minutes (until the cheese on top started to brown).
Yum, if I do say so myself. To be sure, we had a LOT of leftovers. One bowl probably would be enough for two (albeit hard to make). But we have tomorrow's lunch ready to go.
I poured the 2012 Foxen 7200 Guillermo Grosso, which is a blend of 50% Sangiovese and 50% Cabernet Sauvignon. This is one of my favorite Cal-Ital wines. At age 3 ½, it is still a deep purple with very little sediment. I did not decant it but did let it breathe for about 30 minutes before pouring, On the nose, it suggests plums, black cherry, and blackberry. On the palate, things get a bit funkier, as the fruit is supplemented with earthy, leathery, peppery, and tobacco-ish notes. Granted, it is not a vin de garde to be treasured for decades. But good acidity and relatively soft tannins make it an excellent near-term food wine, ideal to pair with Cal-Ital cuisine such as tonight's dinner.
If you need a speaker on these issues, my PowerPoint deck and I are available.
Posted at 05:11 PM | Permalink
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