And now for some tweets:
And now for some tweets:
Anne Tucker opines:
Fellow BLPB blogers have shared on and off line their coverage scope and strategies for Business Associations/Corporations. In thinking about how to fit in big corporate constitutional questions into a syllabus that is already jam packed with topics, this 2013 article (Teaching Citizens United v. FEC in the Introductory Business Associations Course) by Michael Guttentag at Loyola Los Angeles, provides some great suggestions. Written in a post-Citizens United and pre-Hobby Lobby era, I think his insights are broadly applicable about how corporate constitutional rights illustrate the "costs that may arise from differences between manager interests and shareholder interests, the costs that may arise from following a shareholder primacy norm, and the distinctive nature of the role of the transactional lawyer." This short (8 pages) article is worth reading to identify some opportunities to discuss these important issues in a way that illustrates difficult concepts within your existing syllabus and hopefully keep students engaged throughout the semester.
I agree that you ought to read Mike's paper. But then again I think you ought to read everything Mike writes (as I do). Having said that, however, I affirmatively avoid teaching Citizens United or anything else remotely resembling constitutional law in my Business Associations course. Why?
1. The law school curriculum already over emphasizes constitutional law, elevating it as the highest and best form of law a lawyer can aspire to practice. It is the most extreme example of how all too many law schools privilege public law over private law (especially business law). So why perpetuate the problem in our own courses?
2. At many law schools, the line to teach constitutional law is huge and students fairly get the impression that the professor teaching [fill in the blank] really wants to be teaching constitutional law and that's why they're spending so much time on US Supreme Court cases. I have zero interest in teaching constitutional law and want to give students an example of at least one professor who finds business law (and Delaware Chancery Court cases) far more interesting than constitutional law. Getting students interested in business law as an intellectual exercise is hard enough without ourselves perpetuating the stereotype that business law is boring and con law is fun.
3. Mike suggests that:
One can ask: How would you feel if the managers of a corporation you owned shares in decided to oppose same-sex marriage, even if a majority of the firm's shareholders supported same-sex marriage?
Perish the thought. As a white male conservative Catholic teaching business law courses at a law school whose faculty and student body are overwhelming secular and liberal, spending class time on issues of race, gender, class, politics, religion, culture and so on would inevitably plunge me into a Kobayashi Maru scenario. Call me a wimp, but I get myself into enough trouble on those issues here on the blog without bringing them into the classroom.
4. I have enough trouble keeping up to date with Delaware corporate law without adding the need to steep myself in constitutional law. Granted, as was the case in Hobby Lobby, sometimes I touch on Supreme Court cases in my scholarship. As was also the case in Hobby Lobby, however, I ignored the constitutional issues to focus on what I saw as a potential corporate law twist to the case.
5. As Anne correctly notes, the basic Business Associations course is jam packed. As it stands, I cover most of Chapter 1, all of Chapters 2 to 5, and part of Chapter 6 of the Klein, Ramseyer, & Bainbridge casebook in the basic course. I don't have time to get to Chapters 7 or 8 at all (for which my dear friend Bill Klein periodically repreimands me, as he thinks Chapter - Debt - is essential). What core business law topics should I ditch? Granted, Mike advocates working Citizens United into the mix in three areas that i suspect most of us teach:
(1) the potential for differences between the interests of those who manage the firm and those who own the firm,(2) the costs and benefits of shareholder primacy, and (3) the role of a transactional lawyer in advising on business decisions that involve legal risks.
But I can teach those issues using plain vanilla business law courses. And prefer to do so for the reasons already set out above.
As always, your mileage may vary, but at the very least I would advise my fellow business law professors to think very carefully before following Anne and Mike's advice.
David Hyman has an answer and a reply to his critics. Constitutional Prognostication: Does Anybody Know Anything? (August 5, 2014). University of Illinois Law Review, Forthcoming. Available at SSRN: http://ssrn.com/abstract=2392042:
Every client knows that his case is a winner, but practicing lawyers know better. Indeed, practicing lawyers are extremely reluctant to make predictions about how a case will come out — and when forced to do so, they will invariably reference the hazards and uncertainties of litigation, and hedge any predictions they make. When it came to the legal challenges against the Patient Protection and Affordable Care Act ("PPACA"), law professors who teach and write about constitutional law were far less circumspect. Indeed, they seemingly competed with one another to demonstrate how confident they were that that the federal courts would reject the legal challenges to PPACA in their entirety.
How did these confident predictions fare when the cases were actually tried? Not all that well – if by "not all that well" we mean "the complete repudiation of everything that law professors believed and espoused." The University of Illinois Law Review has now published five responses to my article, by Professors Blackman, Blumstein, Koppelman, Mazzone, and Ramseyer. In this short essay, I summarize each of the responses, and offer a short reply, organized around two P’s (Predictions and Practical Knowledge), and one M (Merits).
The death penalty is back in the news and the news is not good:
For more than 20 years, the prosecutor who convicted Cameron Todd Willingham of murdering his three young daughters has insisted that the authorities made no deals to secure the testimony of the jailhouse informer who told jurors that Willingham confessed the crime to him.
Since Willingham was executed in 2004, officials have continued to defend the account of the informer, Johnny E. Webb, even as a series of scientific experts have discredited the forensic evidence that Willingham might have deliberately set the house fire in which his toddlers were killed.
But now new evidence has revived questions about Willingham’s guilt: In taped interviews, Webb, who has previously both recanted and affirmed his testimony, gives his first detailed account of how he lied on the witness stand in return for efforts by the former prosecutor, John H. Jackson, to reduce Webb’s prison sentence for robbery and to arrange thousands of dollars in support from a wealthy Corsicana rancher. Newly uncovered letters and court files show that Jackson worked diligently to intercede for Webb after his testimony and to coordinate with the rancher, Charles S. Pearce Jr., to keep the mercurial informer in line.
My views on the death penalty have evolved a lot over the years, but I've finally come to a full abolitionist position. Given that there is no humane way to execute someone and a high probability of error (not to mention prosecutorial misconduct), I see no moral justification for the death penalty absent incredibly unusual circumstances (somebody like a Hitler or Bin Laden against whom imprisonment alone may not be enough to protect society). In short, I stand with the Blessed John Paul II:
... the nature and extent of the punishment must be carefully evaluated and decided upon, and ought not go to the extreme of executing the offender except in cases of absolute necessity: in other words, when it would not be possible otherwise to defend society. Today however, as a result of steady improvements in the organization of the penal system, such cases are very rare, if not practically non-existent.
There is a very interesting debate going on at The Conglomerate on the Hobby Lobby decision. I was invited to participate, but I think I have literally run out of things to say about the case.
Usha Rodrigues has announced that the Conglomerate Blog is hosting a Hobby Lobby symposium next week. I've been invited to sit in and doubtless will. I understand my friend Wharton Professor Eric Orts will also be commenting. As I mentioned in an earlier post, I have been reading Eric's new book, Business Persons: A Legal Theory of the Firm, with great interest. Towards the end of the book Eric has an excellent analysis of Citizens United, in which he makes several key points:
Orts concludes with an extended argument that the appropriate compromise is one of "full disclosure about business participation in politics." (250).
Although I might quibble with minor points here and there, the gist of Eric's argument strikes me as being exactly right and I'm in full agreement with his conclusion.
Hence, I'll be very interested to see what Eric makes of the Hobby Lobby case. Will he support a disclosure-based compromise on the free exercise claim? (Note that Joan Heminway thinks disclosure is the solution.) if so, how would a dislcosure regime work given that most (all?) of the companies that will be able to and likely to claim exemptions under Hobby Lobby likely will be non-reporting companies. To whom and how would they disclose?
In a post prompted by Hobby Lobby, Judge Richard George Kopf comments:
In the Hobby Lobby cases, five male Justices of the Supreme Court, who are all members of the Catholic faith and who each were appointed by a President who hailed from the Republican party, decided that a huge corporation, with thousands of employees and gargantuan revenues, was a “person” entitled to assert a religious objection to the Affordable Care Act’s contraception mandate because that corporation was “closely held” by family members. To the average person, the result looks stupid and smells worse.
There you have. Proof once again that (thinly veiled) anti-Catholicism is the last acceptable prejudice among the elites.
What would have happened if the Supreme Court simply decided not to take the Hobby Lobby cases? What harm would have befallen the nation? What harm would have befallen Hobby Lobby family members who would have been free to express their religious beliefs as real persons? Had the Court sat on the sidelines, I don’t think any significant harm would have occurred.
What harm, the dummKopf asks? Forcing the owners of a family-owned business to act against their beliefs is no harm?
Back to Kopf:
Next term is the time for the Supreme Court to go quiescent–this term and several past terms has proven that the Court is now causing more harm (division) to our democracy than good by deciding hot button cases that the Court has the power to avoid. As the kids say, it is time for the Court to stfu.
Which brings me to my question. Would Judge Kopf have told the Supreme Court to shut up after Lawrence v. Texas? Roe v. Wade? Windsor v. US? Engel v. Vitale? Employment Division v. Smith? Why is it to people like this dummKopf that cases in which liberals win turn out to what Kopf calls "those rare 'fate of the nation' cases"?
I've got a suggestion for Judge Kopf: Why don't you STFU?
Update: I just learned that Judge Kopf is the same dummKopf who blogged about what one lawyer called the judge's "fondness for looking up the skirts and down the blouses of female attorneys who appear before him."
Here's what Judge Kopf wrote on that subject:
I have been a dirty old man ever since I was a very young man. Except, that is, when it comes to my daughters (and other young women that I care deeply about). And that brings me to the amusing debate about how (mostly) young female lawyers dress these days.
Editorial comment: Perhaps his proclivities as a dirty old man explain the intensity of his desire that Hooby Lobby provide its employees with all forms of contraceptives? After all, if there's a Hobby Lobby in his town, the Supreme Court decision narrows his targets.
Back to the dummKopf:
Around these parts there is a wonderfully talented and very pretty female lawyer who is in her late twenties. She is brilliant, she writes well, she speaks eloquently, she is zealous but not overly so, she is always prepared, she treats others, including her opponents, with civility and respect, she wears very short skirts and shows lots of her ample chest. I especially appreciate the last two attributes.
He goes on to offer some unsolicited advice as to how to avoid being deemed an "ignorant slut."
Dude, you really need to STFU.
In Justice Alito's Hobby Lobby decision, he ruled for the majority that "the term 'person' as used in RFRA" includes "the closely held corporations involved in these cases."
Over on Facebook, a friend and fellow corporate law professor posted this query:
... regarding the question of "what is a closely-held corporation," for purposes of the Hobby Lobby decision, do you think the Supreme Court majority relied on a 50-state survey or treatise identifying state corporate law statutory (and/or) case law definitions of closely-held corporations? If so, can you tell me where I'd find it. . . . as just comparing DE, MA and NY, there is great variety, not to mention the IRS definition or the securities law analog (of privately held vs. publicly traded for both 33 and 34 Act purposes). Thanks.
Unless I missed it, Alito's opinion nowhere defines "closely held corporation." So let's put on our thinking caps.
First, as I explain in Corporate Law, a number of states have adopted special statutes for close corporations, commonly modeled on the ABA’s former (now discontinued) Model Close Corporation Supplement. Promoters of a close corporation may opt into coverage by such statutes through an express designation of such status in the articles of incorporation. The regulatory regime for statutory close corporations is substantially more liberal in a variety of ways than is mainstream corporate law. Yet, courts frequently grant comparable benefits to nonstatutory close corporations. In Ramos v. Estrada, 10 Cal. Rptr. 2d 833 (Cal. App. 1992), for example, defendants noted that California’s close corporation statute authorizes vote pooling agreements but the general corporation statute was silent. Defendants inferred that vote pooling agreements were invalid in close corporations that had not opted into the special statute. The court rejected that argument, upholding vote pooling agreements as valid even in nonstatutory close corporations. See also Zion v. Kurtz, 428 N.Y.S.2d 199 (1980) (similar holding under Delaware law).
Indeed, in Nixon v. Blackwell, 626 A.2d 1366 (Del. 1993), the court expressly acknowledged that one could be a closely held corporation without being a statutory close corporation. Hence, my first proposition:
It is possible that courts will look to the law of the state of incorporation. One hint in this regard is provided by Justice Alito's discussion of what courts should do if a corporation's shareholders disagree about the corporation's policies:
State corporate law provides a ready means for resolving any conflicts by, for example, dictating how a corporation can establish its governing structure. ... Courts will turn to that structure and the underlying state law in resolving disputes.
But notice that Alito is referring here to resolution of disputes, not to the fundamental question of whether the entity is closely held. That is a definitional question that arises under federal rather than state law: Is this a "person" for purposes of RFRA? In turn, that requires the court to engage in what amounts to creating interstitial federal common law.
Once the problem is seen as one to be solved by application of federal common law, a choice of law question arises. Federal common law often is influenced by, and not infrequently incorporates, state law. In Burks v. Lasker, for example, a shareholder of a federally regulated investment company brought suit under the federal securities laws against the company's board of directors. The Supreme Court held that state law controls the board of directors' ability to use a special litigation committee to terminate the litigation. In Kamen v. Kemper Financial Services, Inc., the Court extended Burks, describing the federal law governing derivative suits brought under the Investment Company Act as a species of federal common law, and incorporating state law governing excusal of the demand requirement in such suits. Until quite recently, for another example, the federal courts applied state statutes of limitation to private party lawsuits under Rule 10b-5. Although the Supreme Court adopted a unique federal limitations period in Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, the Court indicated that it would continue to borrow state statutes of limitations in appropriate cases. …
[In making these decisions,] courts have two options. First, they may create a unique rule of federal common law that applies uniformly throughout the nation. The courts could draw on state law by analogy in doing so, but the rule would remain wholly federal. Second, they may adopt state law as the federal rule. If this option is selected, the substantive content of the federal rule will vary depending on which state's law controls. …
Unfortunately, the standards governing that choice are not particularly well-developed. The basic test, however, is the impact incorporation of state law would have on the relevant federal statutory policies. In Lampf, for example, the Court created a unique federal statute of limitations for implied federal rights of action because borrowing a state limitations rule would frustrate the purpose of the underlying federal statute. In Burks, the Court used state law to fill the interstices of a federal statute affecting the powers of directors because doing so did not permit acts prohibited by the federal statute and was otherwise not inconsistent with the statutory policy. In Kamen v. Kemper Financial Services, Inc., the Court reaffirmed what it termed “the basic teaching of Burks v. Lasker: Where a gap in the federal securities laws must be bridged by a rule that bears on the allocation of governing powers within the corporation, federal courts should incorporate state law into federal common law unless the particular state law in question is inconsistent with the policies underlying the federal statute.” The bottom line then is whether there are important federal interests that would be adversely affected by adopting state law fiduciary duty principles as the federal rule of decision.
Hence, proposition 2:
2. Unless the court decides that there is an essential federal interest in having an uniform national definition, courts will turn to the law of the state of incorporation.
My guess is that courts will find an uniform federal common law rule to be appropriate here, given the important federal interests at stake in the ACA and RFRA statutes.
Finally, given my inherent skepticism about the Supreme Court's institutional competence in the areas of corporate and securities law, if the issue gets back to the SCOTUS, I suspect what will really happen is some version of Potter Stewart's take on obscenity: They'll know it when they see it.
The reality-based community is having a collective meltdown over today's Hobby Lobby decision. The worst argument I've seen from that corner so far is that it's illegitimate because all members of the majority have penises. Or something.
The second worst argument flows from a Mother Jones diatribe that claims Hobby Lobby is hypocritical because some of its employees are allowed to invest some of their 401(k) savings in mutual funds that happen to own stock in companies that make contraceptives. Over on Facebook, John Carney blasted this argument out of the water:
And still more bad arguments here.
I'm giving a talk today at the 2014 National Business Law Scholars Conference on the pending Supreme Court decision in Halliburton Co. v. Erica P. John Fund, Inc. It would have been easier, of course, if the Supreme Court had decided the case by now, but ....
Anyway, here's a link to my notes and the slides are below:
I've just finished reading Alan Meese and Nathan Oman's article, Hobby Lobby, Corporate Law, and the Theory of the Firm, which somehow slipped passed the secular liberals at the Harvard Law Review. It is an excellent argument in favor of the proposition that for profit corporations are persons for purposes of the Religious Freedom Restoration Act. It's also a devastating demolition of the absurd corporate law professors brief in that case (about which I have also written).
Meese and Oman "make three basic claims":
First, corporate law does not discourage for-profit corporations from advancing religion. Second, such businesses do not undermine the goals of corporate law, nor would it undermine such goals to grant these firms religious exemptions from otherwise neutral laws in appropriate cases. Third, given the plausible reasons for protecting religious exercise by for-profit corporations, there is no reason to reject the most natural reading of RFRA’s text, namely that “person” includes private corporations of all kinds. This does not mean, of course, that every RFRA claim by a for-profit corporation should be successful. In some cases there will be no substantial burden on religious practices, and in other cases the government may have a compelling reason for regulating corporations. RFRA, however, does not assign the task of weeding out such undesirable religious exemptions to the definition of “person.” Rather, other statutory provisions do that work.
I find all three claims fully convincing. You will too.