ProfessorBainbridge.com

My wine cellar as of the end of 2014

The economics of defined benefit pension plans are really complicated

My head hurts

The wussification of law school continues

Prawfsblawg reports that Yale is offering stress relief dogs for its pampered pups students:

It seems that things have become so stressful for some law students that therapy dogs are in order. 

In my day, we had to walk ten miles to school to take our exams. Through knee deep snow. Uphill. Both ways.

Delaware Chancery Court Upholds Advance Notice Bylaws

 AB Value Partners, LP v. Kreisler Manufacturing Corp., C.A. No. 10434-VCP (Del. Ch. Dec. 16, 2014). This Chancery opinion can be highlighted with a few bullet points:

• A motion for a TRO will be reviewed under the standard for a motion for preliminary injunction if a more developed record is presented to the court, but in any event, a mandatory injunction requires a much greater showing than a typical status quo injunction. Neither standard was satisfied in this case.
• Advance notice bylaws are commonplace and will only be enjoined due to inequitable circumstances, not evident in this case. A review of Delaware cases where such bylaws were upheld, and those in which such bylaws were stricken, provide a useful guide for future reference.

via www.delawarelitigation.com

Thanks to Francis Pileggi.

Tweets of the day: Dissing Doonesbury

There's phoning it in. Then there's #Doonesbury http://t.co/POi86kTqlh HT @robbysoave

— Nick Gillespie (@nickgillespie) December 29, 2014

Seriously, is there one person outside the WaPo retirement village who reads Doonesbury? Lawrence Welk for elderly hippies.

— David Burge (@iowahawkblog) December 29, 2014

I especially like it when Trudeau injects groovy teen rap lingo in Doonesbury. Like 1970 Bob Hope in a hippie wig.

— David Burge (@iowahawkblog) December 29, 2014

Is the law school slump starting to affect student quality?

From Prawfsblawg:

Over at his blog Excess of Democracy, Derek Muller (Pepperdine) has a provacative post titled "NCBE Has Data To Prove Class of 2014 Was Worst in a Decade, And It's Likely Going to Get Worse."  Derek recounts that the overall bar passage rate across the country for the July 2014 sitting was down as compared to previous years, and he posits that the lower results were caused by "student quality and law school decisionmaking."  He believes that the data suggests that lower quality students, and educational decisions of law schools, are producing graduating classes that are less qualified overall, in turn resulting in lower bar passage rates.

In essence, students come into law school having done worse on the LSAT, and they leave law school doing worse on the bar exam.  

Apropos of which, Paul Caron has the latest California bar passage data:

The big story this year is the striking decline in the bar passage rate:

• First time test takers from ABA-aproved law schools:  down 6.5 percentage points
• All test takers:  down 7.1 percentage points

These declines are concentrated in the lowest ranked schools:

• First time test takers at the 5 highest ranked schools:  down 1.5 percentage points
• First time test takers at the 5 lowest tanked schols:  down 12.3 percentage points

This is not unique to California. Bar passage rates have been dropping nationally. In Illinois, for example:

The state’s overall passing rate has declined in the past five years, from 89 percent in 2009 down to 80.9 percent this year.

One might reasonably infer that the slump in law school applications has meant that all schools are taking in students today that they would not have taken 10 years ago, but that the bottom tier schools have been disproportionately affected by this trend, which makes sense. As Brian Tamanaha has noted:

A sharp decline in applicants inevitably leads to a decline in the quality of law students, manifested in declining LSAT/GPA medians and rising acceptance rates.  A decade ago, for the entering class of 2003, only 4 law schools accepted 50% or more of their applicants (the highest at 55.4%).  Jump forward to 2011: 42 law schools accepted 50% or more of their applicants, broken down as follows: 29 schools accepted between 50% and 59%; 7 schools accepted between 60% and 69%; 5 schools accepted between 70% and 79%; one law school accepted 80.1%.

Here is another comparison to put the decline in perspective: A little more than half of the applicants who applied to law school in 2004 were accepted somewhere; in 2013, around seventy-five (and perhaps eighty) percent of the people who apply will be admitted somewhere.  As law schools reach ever deeper into the applicant pool, they will admit students who should not be in law school.  Applicants with low LSAT/GPA scores, in particular, have a higher risk of failing out and a higher risk of not passing the bar exam.

The bottom tier schools now are truly scraping the bottom of the barrel, which is reflected in their bar passage rates.

Former SEC Chair Harvey Pitt joins the Macey v Grundfest grudge match

With a long post at the Harvard governance forum.

Deferred prosecution agreements should be treated as rules and subject to the APA

When a government agency regulates people and businesses, it must comply with the Administrative Procedure Act (APA) and various other federal statutes that limit government power. It has four basic purposes:

1. To require agencies to keep the public currently informed of their organization, procedures and rules (sec. 3).

2. To provide for public participation in the rule making process (sec. 4).

3. To prescribe uniform standards for the conduct of formal rule making (sec. 4 (b)) and adjudicatory proceedings (sec. 5), i.e., proceedings which are required by statute to be made on the record after opportunity for an agency hearing (secs. 7 and 8).

4. To restate the law of judicial review (sec. 10).

Note carefully the requirement for transparency (#1) and public participation (#2).

In addition, many government agencies are required to conduct cost benefit analyses of their rules so as to ensure that the regulatory burden is not excessive relative to the benefits.

All of thse protections--public scrutiny, public awareness, cost effectiveness-get tossed out the window, however, when the government regulates by prosecution. To be sure, this is a long tanding problem. Law professor Roberta Karmel wrote a great book Regulation by Prosecution on the problem as far back as 1982. But now the problem is far worse, as an expose by Fortune explains:

If you’re running a Fortune 100 company, there’s a 10% chance you’ve got Justice Department lawyers helping you out.

That’s according to preliminary data compiled by researchers at George Mason University, who studied more than 500 criminal settlements between the Justice Department and public companies between 1984 and 2011. The data, which will be refined and released in a report in early 2015, shows that the Justice Department has drastically increased its use of non-prosecution (NPA) and deferred prosecution agreements (DPA) since 2003.

NPAs and DPAs are agreements between prosecutors at the Justice Department and corporations in which the DOJ grants amnesty from criminal conviction in return for the defendant agreeing to a set of requirements, which range from the payment of fines to submitting to new regulations and the creation of new business plans. ...

Copland points to examples where such agreements have resulted in corporate monitors firing executives and board members and changing sales and marketing plans. He argues that these agreements have led to the creation of a “shadow regulatory state” that has not been sanctioned by Congress or, in some cases, even reviewed by a judge.

If the government is going to persist in using NPAs and DPAs as a de facto substitute for regulation, then the government should be forced to ensure that these agreements are subject to the same transparency, public participation, and cost benefit analysis as regulations.

Prayer for Good Humor by St. Thomas More

Grant me, O Lord, good digestion, and also something to digest. 

Grant me a healthy body, and the necessary good humor to maintain it. 

Grant me a simple soul that knows to treasure all that is good 
and that doesn’t frighten easily at the sight of evil, 
but rather finds the means to put things back in their place. 

Give me a soul that knows not boredom, grumblings, sighs and laments, 
nor excess of stress, because of that obstructing thing called “I.” 

Grant me, O Lord, a sense of good humor. 

Allow me the grace to be able to take a joke to discover in life a bit of joy, 
and to be able to share it with others.

If you live by the sword....

I had a slip and fall at a restaurant tonight after Christmas Eve dinner. (No. It's not what you're thinking. I had only had two beers. It was dark and the step was hard to see.) The manager freaked and then double freaked when I mentioned I was a lawyer. My first thought was "payday!" Mega-settlement baby.

But my second thought was that it was just a scraped knee and injured pride. And then my third thought was about all those nasty things I've said about trial lawyers over the years. And then my fourth thought was that I'd end up as a story on Walter Olson's Overlawyered blog! And my final thought was I'd never be able to hold my head up around my tort reform pals again!

So I'm just going to put some ice on it and forget about it.

Why we do Christmas Lite

As a conservative and unabashed proponent of democratic capitalism (as the great Michael Novak defined it), you might think I have no problem with the commercialization of Christmas. But you would be wrong. I hate it. It distracts our focus from the child in the manger and the mission for which he became both wholly God and wholly human.

Some years ago Helen and I chose to opt out. We decorate lightly and give gifts to a few close family members. But we stopped giving each other gifts. Instead, we donate the money we used to spend on gifts to Catholic Charities LA and the Los Angeles Mission, both of which do great work for the poor and homeless in our community. It makes the season far less stressful and reminds us annually of what the season is supposed to be about.

You too may find that not buying into the Hallmarkization of Christmas makes it more meaningful.

True Confession: I too love Harbaugh pants (just bigger)

From Jason Gay's WSJ column:

For years, bossy men’s magazines have been telling us it’s all about plain fronts and narrow silhouettes; basically, they want everyone to dress like Daniel Craig’s butler. Harbaugh does not dress like Daniel Craig’s butler. He has alternated between pleats and flat fronts, but he likes his pants roomy and airy like a McMansion’s wine cellar. Harbaugh’s wife Sarah did a hilarious mock PSA in which she lamented her husband’s condition of “dad pants,” and her description is perfect. It doesn’t matter if you have kids or not—if you wear Jim Harbaugh pants three days in a row, you wind up buying a minivan.

But I loved these khakis. I loved them the second I put them on. Harbaugh is a sartorial genius. You wear these khakis and within two minutes, you forget you’re wearing pants. You’re free, relaxed, comfortable, happy. In Harbaugh pants, I felt like Brando in Tahiti.

I adopted Harbaugh pants (plus golf shirt and sneakers) as my daily uniform several years ago. They're utterly unfashionable, but I love them. Sadly, if my student evaluations are anything to go by, my students do not share my affection for them.

The numerous Dodd-Frank reform bills killed by Harry Reid's do nothing senate

Jim Hamilton has a list of seven "pieces of legislation amending the Dodd-Frank Act passed the House in the 113th Congress by a bi-partisan vote, sometimes an overwhelming bi-partisan vote, but were never taken up the Senate." 

Delaware Chancellor Says Family Dollar Stores Deal Triggers Revlon. I disagree.

Delaware Chancellor Bouchard has issued an opinion in the Family Dollar Stores shareholder litigation, in which he concludes that the Revlon standard was triggered by a "sale of control." The opinion is devoid of analysis of why the transaction in question constitutes a sale of control but I assume Bouchard was relying on the fact that "75% of the consideration [was] to be paid in cash and 25% to be paid in [acquiror] Tree common stock."

Sigh. This opinion thus perpetuates what I believe to be a serious error--both as a matter of doctrine and sound policy--by the Delaware Chancery Court; namely, the application of Revlon simply because a certain percentage of the deal is in the form of cash.

In my article, The Geography of Revlon-Land (July 23, 2012), available at SSRN: http://ssrn.com/abstract=2115769, I argued that:

A number of Chancery decisions have drifted away from the doctrinal parameters laid down by the Supreme Court. In this article, I argue that they have done so because the Chancellors have misidentified the policy basis on which Revlon rests. Accordingly, I argue that Chancery should adopt a conflict of interest-based approach to invoking Revlon, which focuses on where control of the resulting corporate entity rests when the transaction is complete.

The focus on the form of consideration is inconsistent with binding Supreme Court precedent and bad public policy. Sadly, that focus now seems to be entrenched on the Delaware Chancery Court. I retain some hope, however, that the Delaware Supreme Court will eventually overturn these cases and restore the Revlon analysis to its correct context.

The Macey v Grundfest battle over Bebchuk's Shareholder Rights Project continues

In this corner, we have  Stanford law professor Joseph Grundfest counterpunching earlier criticism by Yale law professor Jonathan Macey:

It takes some fancy footwork even to argue that the Harvard Proposal, with its glaring omissions, complies with SEC regulations. And, I am happy to concede that Professor Macey is a talented and clever dancer. But the problem with Professor Macey’s arguments in defense of the Harvard Proposal is that they get tripped up by the facts and the law.

Pow!

But back comes Macey with a combination of jabs and uppercuts:

As I explain below, the Reply reverses field and drastically modifies and weakens the authors’ allegations. Furthermore, in conceding some key points that I made and in failing to address some others, the Reply itself demonstrates that Gallagher/Grundfest wrongfully accused the SRP and should withdraw their allegations.

Kapow!

I jest, of course, but it really is a bit like watching a heavyweight fight. The difficulty that Joe and Jon now find themselves in, however, is that once you start one of these fights, you have to win.