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Can shareholders bring derivative action for harms that have not yet-and may never-happened?

Shareholder thinks corporation has done something that might harm it in the future. Is derivative suit ripe yet? I think the answer is no. Instead, I believe the injury must have happened before the suit was brought:

• "Ohio law requires as a prerequisite to any shareholder's derivative suit that the corporation sustain damage as a consequence of the allege wrong. Barsan v. Pioneer Savings and Loan Co., 163 Ohio St. 424, 127 N.E.2d 614 (1955). Shareholder's derivative actions are governed by Rule 23.1 of the Federal Rules of Civil Procedure, and federal courts apply the law of the state in which the company is incorporated. Burks v. Lasker, 441 U.S. 471, 99 S.Ct. 1831, 60 L.Ed.2d 404 (1979), In re General Tire and Rubber Co. Securities Litigation, 726 F.2d 1075 (6th Cir.1984). Ferro is an Ohio corporation, and, as pointed out above, Ohio law requires proof of damages to the corporation before a shareholder's derivative action can be maintained.” Brown v. Ferro Corp., 763 F.2d 798, 802-03 (C.A.6 (Ohio),1985).
• "As a prerequisite, the stockholder must state first that he was a record or beneficial stockholder when the injury occurred (or his shares or interests thereafter devolved upon him by operation of law from a person who was such an owner at that time)."In re Jackson, 141 B.R. 909, 917 (Bkrtcy.N.D.Tex.,1992).
• "The circuit court correctly explained that, in the context of a corporate derivative suit, “the corporation must have suffered an actual injury for there to be grounds for a shareholder's derivative suit, and ... the only damages recoverable in a derivative suit are those related to the loss or damage proximately caused by the wrong committed.” (citing Michaud v. Morris, 603 So.2d 886, 887 (Ala.1992)).” Little v. Cooke, 652 S.E.2d 129, 136, 274 Va. 697, 709 (Va.,2007).

So an allegation that the corporation had done something that might in the future result in a loss is not yet ripe. Right?

The Non-Existent Tension Between Conservative Corporate Law Theory and Citizens United

Leo Strine and Nicholas Walker's provocative article Conservative Collision Course?: The Tension Between Conservative Corporate Law Theory and Citizens United has now been published in the Cornell Law Review (100 Cornell L. Rev. 335). So this seems like an opportune moment to remind you of my response Corporate Social Responsibility in the Night Watchman State: A Comment on Strine & Walker (September 9, 2014), available at SSRN: http://ssrn.com/abstract=2494003:

Delaware Supreme Court Chief Justice Leo Strine and Nicholas Walter have recently published an article arguing that the U.S. Supreme Court’s decision in Citizens United v. FEC undermines a school of thought they call “conservative corporate law theory.” They argue that conservative corporate law theory justifies shareholder primacy on grounds that government regulation is a superior constraint on the externalities caused by corporate conduct than social responsibility norms. Because Citizens United purportedly has unleashed a torrent of corporate political campaign contributions intended to undermine regulations, they argue that the decision undermines the viability of conservative corporate law theory. As a result, they contend, Citizens United “logically supports the proposition that a corporation’s governing board must be free to think like any other citizen and put a value on things like the quality of the environment, the elimination of poverty, the alleviation of suffering among the ill, and other values that animate actual human beings.”

This essay argues that Strine and Walker’s analysis is flawed in three major respects. First, “conservative corporate law theory” is a misnomer. They apply the term to such a wide range of thinkers as to make it virtually meaningless. More important, scholars who range across the political spectrum embrace shareholder primacy. Second, Strine and Walker likely overstate the extent to which Citizens United will result in significant erosion of the regulatory environment that constrains corporate conduct. Finally, the role of government regulation in controlling corporate conduct is just one of many arguments in favor of shareholder primacy. Many of those arguments would be valid even in a night watchman state in which corporate conduct is subject only to the constraints of property rights, contracts, and tort law. As such, even if Strine and Walker were right about the effect of Citizens United on the regulatory state, conservative corporate law theory would continue to favor shareholder primacy over corporate social responsibility.

Francis Pileggi's Annual review of Key Delaware Decisions

Somehow I missed it when it came out last week. So here's a belated link to one of the most useful annual posts in the corporate law blogosphere.

A non-traditional three meat slow cooker quasi-bolognese sauce

I was in the mood for a sauce that was more meaty than tomato-ish, so I started with a couple of trusted bolognese sauce recipes and modified like crazy.

Pour 1 14.5 oz. can diced tomatoes with their juices into the ceramic insert of your slow cooker (I like Muir's Organic tomatoes). Drain 1 28 oz can diced tomatoes and add them to the cooker. Set cooker on high heat.

Pour one cup of not very oaky white wine (e.g., Pinot Grigio) into a pyrex measuring cup. (I put a chop stick in the cup to give bubbles something against which to form.) Microwave on high until boiling. Add 1/2 ounce dried porcini mushrooms. Steep 30 minutes. Drain, reserving liquid. Finely chop mushrooms and add to cooker. Pass reserved liquid through a coffee filter (use a funnel). Add strained liquid to cooker.

Meanwhile, add 1 tsp dried italian herb seasoning, 1 tsp dried oregano, and 1 tsp dried basil to cooker. Stir. Add 1 tbsp low sodium soy sauce (trust me, it really ramps up the meat flavor) to cooker. (I told you it was non-traditional).

In a large skillet over medium heat, brown 1 pound lean ground beef. Transfer beef to a plate lined with paper towels to drain. Add 1 pound ground lamb to skillet. Brown. Transfer lamb to a plate lined with paper towels to drain. Add 1 pound ground pork to skillet. Brown. Transfer pork to a plate lined with paper towels to drain. Add meats to cooker. (BTW, on all three meats, I had my butcher grind them very coarse. Large pieces do better in the slow cooker. Also, I debated adding a pound of ground veal, but decided against it. I wanted several days worth of leftovers ... not a month!)

Prepare a mise en place of 2 oz finely diced pancetta, 1 medium yellow onion diced, 1 rib celery diced, 1 medium carrot diced. Slice 1 to 4 cloves garlic (depending on your taste, I like a lot) very, very thin. (If you know the famous dinner scene in Goodfellas, that's what you're trying to emulate when you slice the garlic. And, of course, that scene has good advice when it comes to adding onions to the sauce.) 

Blot skillet dry with paper towels. Pour 1 tsp olive oil (not extra virgin) into skillet and heat on medium setting. Saute pancetta until it begins to crisp. Add onions, celery, and carrot. Saute until softened and just starting to turn golden. Add garlic to skillet. Stir. Add 4 tbsp tomato paste (again, I like Muir). Saute 1 minute. Add 1 cup white wine. Raise heat to high. Bring to boil, stirring constantly. Transfer all to cooker.

Add enough low sodium organic beef broth to cover solids in cooker. Stir to combine. Cover. Walk away and clean up kitchen.

After 2 hours, reduce heat to low. Add 1 cup milk. After 2-4 hours more on the low setting, taste. Adjust seasonings with salt, freshly ground black pepper, crushed red pepper flakes, nutmerg, and/or allspice to your taste. How long you cook it really depends on how much integrity you want the pieces of diced tomato to retain. I like them to remain fairly intact, so I err on the short end but YMMV.

Serve over fresh fettucine or papardelle (I prefer the latter). I like to top it with freshly grated Parmesan and a dash of very good extra virgin olive oil. Pour something red from Tuscany.

The shareholder proposal rule has become a distressing mess

Marcia Narine has a nice post summarizing the current craziness surrounding Rule 14a-8.

The Economist remains ineducable on the subject of shareholder activism

The Economist is at it again, with yet another paean to shareholder activism. Or, more precisely,two: The latest print issue has both a leader and a briefing on the subject.

Neither contains any new arguments. Most of the briefing is devoted to a more or less accurate (albeit slanted) factual summary of the current state of play. The "analysis" is short, one-sided, and really doesn't say anything new about the merits of shareholder activism. There is no effort to engage the counter-arguments; indeed, there is virtually no acknowledgement that there are serious theoretical and empirical arguments against shareholder activism.

Instead of recounting those arguments, however, I will simply point you to my prior efforts to help The Economist see the light:

The Economist is ineducable on shareholder activism ...   Mar 7, 2013 ... The Economist is ineducable on shareholder activism. I still enjoy reading The Economist even though it seems at times to be drifting away from ... www.professorbainbridge.com/.../the-economist-is-ineducable-on- shareholder-activism.html

Everything The Economist says about shareholder activism is wrong ...   Feb 13, 2014 ... From this week's leader: An analysis of around 2000 interventions in America during 1994-2007 found not only that the share prices and ... www.professorbainbridge.com/.../everything-the-economist-says-about- shareholder-activism-is-wrong.html

The Economist is at it again, making a case for shareholder activism ...   Oct 9, 2014 ... The latest edition of The Economist is once again beating the drums for shareholder activism. (As I've said before, I love them despite their ... www.professorbainbridge.com/.../the-economist-is-at-it-again-making-a-case- for-shareholder-activism.html

Wild Turkey American Honey versus Jack Daniels Tennessee Honey

Regular readers know that come the weekend I like to enjoy a post-dinner Dunhill Peravia cigar with a relaxing adult beverage. In the winter months, the tipple of choice is Dow Tawny Port. Ten year old most nights, but I'll spring for 20 year old when I feel like pushing the boat right out. Forty year old for my birthday. When it gets hot out, however, port no longer refreshes. Instead, it cloys and tastes mainly of alcohol.

So I switch gears. Oddly enough, to a higher alcohol tipple. Since my college days, the summer month post-dinner drink of choice was Wild Turkey Liqueur on ice. (Lots of ice.) A few years ago they changed the name to American Honey, reflecting the fact that it is a blend of bourbon whiskey and honey liqueur. A bit hard to find, but well worth it.

The resurgence of interest in brown liquors and, especially, whiskey has been accompanied by new whiskey-based liqueurs. (The less said about Jim Beam's Red Stag cherry flavored bourbon, the better IMHO.)

Tonight, however, I tried one of Wild Turkey's main competitors: Jack Daniel's Tennessee Honey liqueur.

As a preliminary matter, I must confess that straight whiskey is not my tipple of choice in this setting. As suggested by my love of Port, when it comes to a post-dinner drink with a smoke, my sweet tooth demands satisfaction. Hence, my preference for whiskey-honey blends.

Tasting the two side-by-side tonight as I enjoyed a Peravia , I concluded that I still prefer Wild Turkey's American Honey. The Wild Turkey liqueur is a bit more syrupy. The honey elements are less assertive, but the finish is still softer and sweeter.

The Tennessee Honey is thinner. It has a much longer finish, but a much less pleasant one. There is a mixture of nutty, vegetal, and smoky flavors on the finish that isn't very pleasant (to my palate).

The nutty/vegetal elements of the Tennessee Honey also don't mesh as well with the creamy vanilla, buttered toast, cedar flavors of the Peravia as do the citrus and sweet flavors of the American Honey.

In sum, American Honey is harder to find (at least in LA) than its newer competitor, but I still prefer it.

Behrens & Hitchcock The Contender (Napa Valley) 2003

A blend of 73% Cabernet Sauvignon, 22% Cabernet Franc, 4% Merlot, and 1% Petit Verdot. (When I see these sort of blends, I'm always curious to know if the winemaker thought that the 1% Petit Verdot made a real difference or if he just had a barrel of it laying around and wanted to use it up.) Anyway, at this stage, this is a very good but not great wine. Despite having thrown a lot of sediment, the wine still has a ton of tannin. Needs decanting and time to breathe. Initially, there was an odd hoppy/resinous aroma, but it blew off with some aeration. Plums and prunes. Cassis. Mint. Grade: B/B+

Wine with fast food

I just ran across an old Washington Post article on matching wine with fast food. The trouble with the article is it suggests very specific matches for particular fast food entrees, but what we really need are principles. Even a cellar as deep and broad as mine (not to brag or anything) rarely has all (or even any of) the specific wines recommended in articles like this one. But if you know the basic principles, even a simple cellar typically will have at least one wine that will work with most foods, even fast foods.

• Fast foods tend to be simple meats and carbs, which would go with lots of wines. 
• Unless you've got Bill Gates money and a post-modernist sense of irony, there's no real point in pushing the boat out too far. Chateau Petrus might work okay with burgers, but I save first growths for simply sauced organic lamb. 
• Fast food tends to be high in fat, which begins to limit our choices. KFC fried chicken may be the extreme, but even supposedly healthy options are often pretty unctuous. As a result, we're thinking high acid wines to cut through the fat. 
• Fast food also often is served with intensely flavored condiments, often with a distinctly sweet component. Catsup on burgers or salsa on a Baja Fresh burrito spring to mind as examples. Tannic red wines or highly oaked whites will clash with these condiments ... and not in a good way. At the same time, these are strongly flavored foods that will wash out all but the strongest flavored wines.

When you put it all together, I think the principles are pretty obvious. If you like red wine, stick to those with high acid and intense forward fruit. Basic Chianti works well when tomatoes are the dominant condiment. Beaujolais or inexpensive Australian Shiraz will work with lots of beef-based fast foods too. Acidic whites like Italian pinot grigio or the new unoaked Australian and New Zealand chardonnays will work well with chicken and pork-based entrees.

Off-dry whites will work with a lot of mildly flavored fast food, especially if the condiments tend to be sweet and spicy. I like Alsatian and California Riesling or Gewurztraminer with Chicago-style hot dogs, for example. With grilled bratwurst dabbed with a good brown mustard, I like a good Halb-trocken German Riesling to honor the German pioneers that settled in Sheboygan, which besides being the single greatest city name in history is also the bratwurst capital of the US.

Now we come to my favorite fast food and the ideal match. I love NY- style pepperoni pizza with extra cheese. It's a tough match for wine. You've got the bread of the crust, the acidic and often rather sweet tomato sauce, the salty meat, the rich and unctuous cheese. You need an acidic wine to slice through the fats, big flavors to stand up to the salt and tomatoes, and something to scrub the palate. In my book, the ideal match is a good Australian sparkling shiraz. It has all the requisite attributes. Indeed, if you can literally feeling your arteries clogging as you eat a good pizza, you can also feel a good sparkling red wine cleaning them out. It's the roto-rooter of Wine matches.

What I want to know is why California can't do the same thing with zinfandel. Indeed, I sometimes think I should make it my life's work to persuade some top California zinfandel producer to make a methode champenoise sparkling red wine.

Cook book recommendations: Slow Cooker Revolution Volumes 1 and 2

I've been cooking a lot lately out of the Slow Cooker Revolution. This weekend, for example, I made the Balsamic-Braised Chicken with Swiss Chard and the Short Ribs in Red Wine Sauce. Both were big hits. Deep, rich flavor. Easy to make, easy to like. I love this cookbook, so I just ordered Slow Cooker Revolution Volume 2.

One of the real advantages of this cookbook series is that they show you how to use your slow cooker to make a host of meals beyond the usual braises, stews, and soups. As the blurb for Volume 2 explains:

With this volume, we looked at this must-have appliance in new ways to truly maximize its potential. You'll learn how to make a host of dishes like Garlicky Shrimp, Chicken Soft Tacos, and Flourless Chocolate Cake--recipes you'd never expect to see coming out of a slow cooker. The moist heat of the slow cooker is tailor-made to serve up flavorful stews, chilis, and braises (and don't worry--we've included a good number of these), but with our smart strategies and clever ingredient selections, we were also able to pull off spice-rubbed roast chicken, ziti with meaty ragu, rare roast beef, poached salmon and even cheesecake.

Peter Henning on Insider Trading Post-Newman

From DealBook:

In reversing the convictions of Anthony Chiasson and Todd Newman for trading on information received through a chain of tips, the appeals court described what was necessary to show that the original tipper had received a benefit for passing on the information, a requirement to prove this form of insider trading. ...

Although the Newman decision appears to create a “buddy exception” to insider trading, prosecutors can still pursue cases based on friendship as long as there is some evidence of a benefit that could be considered valuable. There are cases in which information is passed simply because the recipient is a friend, but often something more valuable is exchanged when confidential information is doled out secretly. ...

The United States Court of Appeals for the Second Circuit has made proving insider trading more difficult in tipping cases but did not erect an insurmountable hurdle.

Go read the whole thing.

Why do zebras have stripes?

UCLA study finds that regulating body temperature may be a key factor