ProfessorBainbridge.com

The Senate should ignore the American Bar Association's views on judicial nominees

They're back: The left-liberals who run the American Bar Association are once again declaring that conservative jurists are not qualified to sit on the federal courts. In my view, the Senate should join with President Trump and deny the ABA any institutional role in the nomination process.

As I explained back in 2005:

In today's WSJ ($), ABA member and section leader Joseph Smith argues that the American Bar Association's rating of SCOTUS nominee John Roberts:

... should be viewed no differently from an opinion expressed by any other special-interest group. Yet that is not how ABA ratings are received by the public or used by politicians. The ABA knows this and takes advantage of it. That's why when the ABA releases its rating on Judge Roberts, it will do so without acknowledging political motives.

Smith points out that over the last 15 years:

... the ABA has become even more stridently left-wing, yielding an organization that advances a vision more akin to Howard Dean's than James Madison's or even Bill Clinton's.

Smith therefore doesn't trust the ABA to give Robers a fair shake and points to history that bears him out:

If history is any indication, however, the ABA will struggle with the Roberts rating for a simple reason: He is conservative. For that sin, the nominee may earn a split vote or worse. That disservice was infamously done to Robert Bork in 1987, when President Reagan nominated him to the Supreme Court. Mr. Bork earned four "not qualified" votes from the ABA's 15-member committee -- an egregious insult.

In 1991, the ABA again let politics cloud its judgment when rating Clarence Thomas after the first President Bush nominated him to the Supreme Court. Two of the ABA's committee members branded him "not qualified" -- again an outrage, given his record. Some within the ABA acknowledge that the Bork and Thomas ratings were shamefully partisan. Others, however, still fail to appreciate that.

This is not just spin; nor were the Bork and Thomas episodes isolated cases. Northwestern law professor James Lindgren has documented a consisted pattern of ABA bias:

... it is an apt moment to look at the ABA's controversial judicial-evaluation process and consider whether it provides an objective, nonpartisan measure of a judicial nominee's qualifications. ...

What does the evidence show? I've just completed a statistical study of the ABA's ratings of appointees to the U.S. Courts of Appeals during the Clinton and first Bush administrations and can report that the facts don't support the ABA's claim of objectivity. The ABA may once have been objective, but it's not anymore.

I analyzed the credentials of the 108 nominees who were ultimately appointed to the federal appeals courts during the Clinton and Bush-1 administrations. The results? The ABA applied measurably different and harsher standards during President George H. W. Bush's administration than it applied during President Bill Clinton's tenure. In short, the Bush appointees got lower ABA ratings than the Clinton appointees.

And, no, it wasn't because Clinton nominated better judges:

A Clinton nominee with few of the six credentials I measured had a much better chance of getting the highest ABA rating than a Bush nominee with most of these credentials. For example: A nominee with an elite law school education, law review, a federal clerkship, and experience in both government and private practice would have only a 32% chance of getting the highest ABA rating if he were a Bush appointee, but a 77% chance if he were a Clinton appointee. A Clinton nominee with none or just one of these five credentials would still have at least a 45% chance of getting the highest rating.

It's bias, pure and simple. For that reason, neither the President nor the Senate should give the ABA's rating of Roberts any greater weight than, say, that of the People for the American Way. Indeed, one should give PFAW credit for at least being honestly liberal, while the ABA lies about its politics.

The leopard has not changed its spots.

From Forbes in 2009:

In a recent story in The New York Times, Adam Liptak reports that President Obama has restored the preferred position of the American Bar Association in evaluating the potential qualifications of potential judicial nominees on a pre-nomination basis. Liptak’s observation that the ABA might have a “liberal bias” in the critical evaluations strikes me, as it struck him, as perfectly consistent with the ABA’s current membership, which is not, to say the least, a random selection of members of the bar.

Liberals, of course, may praise Obama for letting the ABA burnish the resumes of nominees sympathetic to their cause. They can defend the bias on substantive grounds, but it is dangerous for them to deny its existence ...

From National Review in 2012:

The ABA’s glaring ideological bias has been noted by prominent commentators on the right and the left. Adam Liptak of the New York Times characterized the ABA as “a private trade association, not an arm of the government,” that “takes public and generally liberal positions on all sorts of divisive issues.” These include liberal positions on everything from same-sex marriage, gun control,and religious liberties, to even matters of national security.

But the ABA’s bias extends beyond liberal policy positions, and into the rating of a president’s judicial nominees. The Wall Street Journal just addressed this issue yesterday:

A 2009 study by the Midwest Political Science Association found that with all else equal, “nominations submitted by a Democratic president were significantly more likely to receive higher A.B.A. ratings than nominations submitted by a Republican president.”

To wit, Goodwin Liu, the liberal darling from the University of California, Berkley, (a failed Obama nominee to the Ninth Circuit and now a justice on the California Supreme Court) received the ABA’s highest rating despite not meeting the group’s own written standards for qualification for the bench. As Ethics and Public Policy Center President Ed Whelan has noted, the ABA specifies that a nominee should “ordinarily have at least twelve years experience in the practice of law,” and be a veteran of the courtroom. Mr. Liu had neither, but still got the “well-qualified” nod from the ABA.

No such love was extended to the more conservative Frank Easterbrook, who earned a “qualified/not qualified” rating from the ABA despite having served as Deputy Solicitor General and argued 20 cases before the Supreme Court.

The 2009 study found that “the most liberal nominees had a 62.3% chance of receiving a ‘well-qualified’ rating from the ABA, as opposed to only a 35.5% likelihood for the most conservative nominees.” It also found that “nominees in the Clinton Administration were 14% more likely to get the ABA’s highest rating than the nominees of Presidents Reagan, George H.W. Bush and George W. Bush.” This bias is not just a function of a liberal review committee, but is embedded into the ABA’s criterion for judicial qualifications.

 

Dick Merrill, RIP

Sad news. Richard Merrill who was Virginia's dean when I was in law school has passed.

Reflecting on his accomplishments as dean in 2007 as he was retiring, Merrill said he was proud of the faculty hired during his deanship, including Kenneth Abraham, Pamela Karlan (now at Stanford Law School), Saul Levmore (who became dean at the University of Chicago Law School), Mildred Robinson and Alex Johnson. The school also made dramatic gains in fundraising as state support was shrinking.

Former Dean John C. Jeffries, Jr. said Merrill “was a gentle leader — meticulously observant of the sensibilities of those around him, unfailingly respectful of their views and contributions, and never in such a rush to the right outcome that he stepped on anyone to get there.”

Should causing the corporation to violate the law automatically result in director liability? No.

In Kandell v. Niv, the Delaware Chancery Court held (HT: Pileggi): 

Where directors knowingly cause or permit a Delaware corporation to violate positive law, they have acted in bad faith, and are liable to the corporation for resulting damages.

Sigh. This is a topic on which I have written occasionally on this blog, but maybe it needs a law review article. Until then, may I implore Delaware jurists and lawyers to consider the arguments in these posts?

Can directors of corporations be held liable to shareholders when the corporation breaks the law

My earlier post on the corporate law aspects of the VW diesel engine scandal assumed away the issue of corporate criminality. Prompted by a complaint from my friend and coauthor Bill Klein. however, I'm revisiting the question and this t...

Does an Intentional Violation of Law = Bad Faith?

One of the most important aspects of Delaware Supreme Court Justice Jack Jacobs' opinion in the Disney case is his analysis of the directors' duty of good faith. My friend Wisconsin law professor Gordon Smith suggests that Jacobs' ...

One more form agency costs can take shape in the C-suite

From Ann Lipton comes one more thing to worry about if you worry about CEO agency costs:

I mean, leaving aside the obvious pull on a CEO’s attention and time, Schultz – apparently while harboring presidential ambitions – announced that Starbucks would hire 10,000 refugees (a decision that, arguably, negatively impacted his company’s stock price).  Bob Iger has had to navigate such highly charged issues as his presence on Trump’s Advisory Council, and the political commentary of Jimmy Kimmel at ABC, and Jemele Hill at ESPN.  Facebook, of course, has had to address issues of foreign interference with American elections, and has recently announced that it will voluntarily require disclosures akin to those required of television ads.  And that doesn’t even get into any gratuitous political speeches.

I’m not taking a position over whether these executives did the right or the wrong thing in each instance, but I am concerned that when CEOs simultaneously run their companies and run for president, it’s difficult to discern whether their political moves are intended to benefit the corporation (including, as relevant, all stakeholders), or their own political careers.  Under these conditions, how can shareholders be certain that their CEOs’ actions – on everything from labor conditions to executive pay to environmental footprints – are intended to advance the best interests of the company?

Personally, I don't think this will keep me up at night. After all, unlike some especially pernicious ways in which CEOs misbehave, this one takes place in full public view. And, of course, it's not going to be a very common problem. Still, the conflicts inherent in a CEO running for POTUS probably justify boards asking the CEO to step down.

Ridge East Bench Zinfandel with Gordon Ramsay's NY Strip Steak & Fingerling Potatoes

Last night we has a 2015 Ridge East Bench Zinfandel (Dry Creek Valley) with NY strip steaks and fingerling potatoes as inspired by a Gordon Ramsay video. The Zin was obviously very young, but nevertheless quite approachable. Lots of pepper, blackberries, and an interesting suggestion of chocolate that I rarely find in Zinfandels. Grade: 91

FYI: I used a standard Cajun spice rub. 

 

 

Butter Chicken cooked in a Fagor Lux Multi-cooker and served with with Firestone-Walker ‏IPAs

Last night, I made Butter Chicken in my Fagor4 Quart LUX Multi-Cooker using a recipe from Indian Instant Pot® Cookbook. The Fagor is an amazing multi-tasker and Urvashi Pitre's cookbook is an excellent resource for using multi-cookers. Lots of classic Indian recipes made easy for the home kitchen. I recommend both.

BTW, I generally don't try to match wine to Indian food. Instead, as we did last night, I usually opt for a Firestone-Walker IPA (I believe Union Jack in this instance).

New Delaware corporate law resource

This looks useful:

The University of Pennsylvania Law School and the Institute for Law and Economics (ILE) are pleased to announce the availability of an important new resource for scholars and students of Delaware corporate law. Constructed in cooperation with Widener University Delaware Law School and members of the Delaware Bench and Bar, and with the financial support of Penn Law, ILE and CSC Global, the Delaware Corporation Law Resource Center can now be accessed at http://www.DelawareCorporateHistory.org.
 
This website has two principal components. The first is a compilation of resources relating to the Delaware General Corporation Law, including a link to the text of the statute, and links to the bills to amend the statute since its general revision in 1967. This portion of the website also includes links to annual commentaries on those amendments, the reports and minutes generated in the 1967 revision process, and memoranda disseminated by the Council of the Delaware State Bar Association Corporation Law Section describing some of the more significant and controversial amendments to the statute.
 
The second component of the website is a repository for materials constituting oral histories of iconic corporate law decisions of the Delaware courts since 1980, dealing with the director’s fiduciary duty of care, duties in takeovers, and freezeouts by controlling stockholders. This portion of the website is a work in progress, but for some of the cases it already contains the opinions in the case, briefs, selected transcripts of oral arguments, and selected key documents from the record. Most notably, the oral history compilation includes high quality videotaped interviews of lawyers and judges involved in the case, who describe the back story of the case with details not available through review of the courts’ opinions.

Why not me?

Bloomberg reports that:

Corporate boards are at their most willing in five years to see one of their own members replaced, according to an Oct. 17 survey from consultant PwC.

Almost half of the U.S. public company directors surveyed said at least one of their peers should step aside in favor of someone new. That's the highest response PwC has gotten since it started asking the question in 2012.

I await someone's call.

The Law and Economics of the “Special” Problem of Corporate Philanthropy

I've been kicking around corporate philanthropy with a friend and fellow corporate law academic. For what it's worth, I think I offer a pretty good summary of the state of the law in my book on Corporate Law:

The law’s basic position on corporate social responsibility [—the broader doctrine of which the question of corporate philanthropy is a subset—] famously was articulated in Dodge v. Ford Motor Co.[1] In 1916, Henry Ford owned 58% of the stock of Ford Motor Co. The Dodge brothers owned 10%. The remainder was owned by five other individuals. Beginning in 1908, Ford Motor paid a regular annual dividend of $1.2 million. Between 1911 and 1915 Ford Motor also regularly paid huge “special dividends,” totaling over $40 million. In 1916, Henry Ford announced that the company would stop paying special dividends. Instead, the firm’s financial resources would be devoted to expanding its business. Ford also continued the company’s policy of lowering prices, while improving quality. The Dodge brothers sued, asking the court to order Ford Motor to resume paying the special dividends and to enjoin the proposed expansion of the firm’s operations. At trial, Ford testified to his belief that the company made too much money and had an obligation to benefit the public and the firm’s workers and customers.

The plaintiff Dodge brothers contended an improper altruism towards his workers and customers motivated Ford. The court agreed, strongly rebuking Ford:

A business corporation is organized and carried on primarily for the profit of the stockholders. The powers of the directors are to be employed for that end. The discretion of directors is to be exercised in the choice of means to attain that end, and does not extend to a change in the end itself, to the reduction of profits, or to the nondistribution of profits among stockholders in order to devote them to other purposes.

Consequently, “it is not within the lawful powers of a board of directors to shape and conduct the affairs of a corporation for the merely incidental benefit of shareholders and for the primary purpose of benefiting others.”

Despite its strong rhetoric, Dodge does not stand for the proposition that directors will be held liable for considering the social consequences of corporate actions. To be sure, having found that Ford had failed to pursue shareholder wealth maximization, the court ordered Ford Motor to resume paying its substantial special dividends. Invoking the business judgment rule, however, the Dodge court declined to interfere with Ford’s plans for expansion and dismissed the bulk of plaintiff’s complaint. The shareholder wealth maximization norm set forth in Dodge thus can be understood as a standard of conduct, while the business judgment rule remains the standard of review. Consequently, Dodge does not stand for the proposition that courts will closely supervise the conduct of corporate directors to ensure that every decision maximizes shareholder wealth. As the court’s refusal to enjoin Ford Motor’s proposed expansion illustrates, courts generally will not substitute their judgment for that of the board of directors. If a proposed course of action plausibly relates to long-term shareholder wealth maximization, courts will not intervene. Ford’s proposed expansion plans did so, and thus were allowed to go forward. Ford’s refusal to pay a special dividend, while simultaneously lowering prices, compounded by his anti-profitmaking trial testimony, did not. Accordingly, the court ordered him to pay the requested dividend. As always, authority and accountability are in tension. We have consistently argued that, absent self-dealing or other unusual circumstances, authority should prevail. Ford’s conduct lay at the outer boundary of defensible exercises of authority and the court appropriately slapped his wrist.

As the law evolved, corporate altruism began to be seen as proper so long as it was likely to provide direct benefits to the corporation and its shareholders. Applying the business judgment rule, moreover, many courts essentially presumed that an altruistic decision was in the corporation’s best interests. Shlensky v. Wrigley[2] exemplifies this approach. Recall that Shlensky, a minority shareholder in the Chicago Cubs, challenged the decision by Wrigley, the majority shareholder, not to install lights at Wrigley Field. Shlensky claimed the Cubs were persistent money losers, which he attributed to poor home attendance, which in turn he attributed to the board’s refusal to install lights and play night baseball. According to Shlensky, Wrigley was indifferent to the effect of his continued intransigence on the team’s finances. Instead, Shlensky argued, Wrigley was motivated by his beliefs that baseball was a day-time sport and that night baseball might have a deteriorating effect on the neighborhood surrounding Wrigley Field.

Despite Shlensky’s apparently uncontested evidence that Wrigley was more concerned with interests other than those of the shareholders, the court did not even allow him to get up to bat. Instead, the court presumed that Wrigley’s decision was in the firm’s best interests. Indeed, the court basically invented reasons why a director might have made an honest decision against night baseball. The court opined, for example, “the effect on the surrounding neighborhood might well be considered by a director.” Again, the court said: “the long run interest” of the firm “might demand” protection of the neighborhood. Accordingly, Shlensky’s case was dismissed for failure to state a claim upon which relief could be granted.

The rhetorical emphasis shifted significantly between Dodge and Shlensky. Where Dodge emphasized the directors’ duty to maximize profits, Shlensky emphasized the directors’ authority and discretion. Ultimately, however, they are consistent. The Illinois Appellate Court did not reject the profit-maximizing norm laid down by Dodge, but rather followed Dodge in holding that the business judgment rule immunized the directors’ decision from judicial review.

To be sure, a few cases posit that directors need not treat shareholder wealth maximization as their sole guiding star. A. P. Smith Manufacturing Co. v. Barlow, the most frequently cited example, upheld a corporate charitable donation on the ground, inter alia, that “modern conditions require that corporations acknowledge and discharge social as well as private responsibilities as members of the communities within which they operate.”[3] Ultimately, however, the differences between Barlow and Dodge have little more than symbolic import. As the Barlow court recognized, shareholders’ long-run interests are often served by decisions (such as charitable giving) that appear harmful in the short-run. Because the court acknowledged that the challenged contribution thus could be justified on profit-maximizing grounds, its broader language on corporate social responsibility is arguably mere dictum.

In any event, Dodge’s theory of shareholder wealth maximization has been widely accepted by courts over an extended period of time. Almost three quarters of a century after Dodge, the Delaware chancery court similarly opined: “It is the obligation of directors to attempt, within the law, to maximize the long-run interests of the corporation’s stockholders.”[4]

*****

As we have just seen, A. P. Smith Manufacturing Co. v. Barlow,[5] is often cited as a leading corporate social responsibility decision. Ironically, however, the specific question presented therein—the validity of corporate philanthropy—has been resolved in a more narrow way. Corporate charitable donations are subject to attack under two doctrines: ultra vires and breach of fiduciary duty. Neither is likely to succeed, so long as the amount in question is reasonable and some plausible corporate purpose may be asserted.

Virtually all states have adopted statutes specifically granting corporations the power to make charitable donations,[6] which eliminates the ultra vires issue. Although these statutes typically contain no express limit on the size of permissible gifts, courts interpreting the statutes require corporate charitable donations to be reasonable both as to the amount and the purpose for which they are given.[7] The federal corporate income tax code’s limits on the deductibility of corporate charitable giving are often used by analogy by courts seeking guidance on whether a gift was reasonable in amount.

As for breach of fiduciary duty claims, the principles announced in Dodge v. Ford Motor Co.[8] arguably require that corporate philanthropy redound to the corporation’s benefit. As Shlensky v. Wrigley[9] suggests, however, reasonable corporate donations should be protected by the business judgment rule.[10] Consequently, Barlow’s discourse on corporate social responsibility properly is regarded as mere dicta.

*****

[In an earlier edition of the book, Corporations: Law and Economic Analysis, I wrote that:]

Law professors worry a lot about corporate philanthropy—a small forest has died to print all the law review articles on the subject.^[11] Yet, the corporate law rules governing this subject are perfectly consistent with our theory of the firm. To be sure, corporate philanthropy poses a classic agency cost problem. Just as corporate managers may divert resources to perquisites for themselves, they likewise may divert resources to philanthropic giving from which they derive psychic utility. This suspicion is confirmed by Warren Buffet’s amusing anecdote:

I have a friend who is the chief fundraiser for a philanthropy. . . . All he wants is to take some other big shot with him who will sort of nod affirmatively while he meets with the CEO. He has found that what many big shots love is what I call elephant bumping. I mean they like to go to the places where other elephants are, because it reaffirms the fact when they look around the room and they see all these other elephants that they must be an elephant too, or why would they be there? . . . So my friend always takes an elephant with him when he goes to call on another elephant. And the soliciting elephant, as my friend goes through his little pitch, nods and the receiving elephant listens attentively, and as long as the visiting elephant is appropriately large, my friend gets his money. And it’s rather interesting, in the last five years he’s raised about 8 million dollars. He’s raised it from 60 corporations. It almost never fails if he has the right elephant. And in the process of raising this 8 million dollars from 60 corporations from people who nod and say it’s a marvelous idea, it’s pro-social, etc., not one CEO has reached in his pocket and pulled out 10 bucks of his own to give to this marvelous charity. They’ve given 8 million dollars collectively of other people’s money.^[12]

The identities of the typical beneficiaries of corporate philanthropy likewise confirm that it is driven more by managerial ego than corporate advantage. The charities supported by most corporations tend to be rich people’s charities: art, music, public television, and the like. One can but question how big a bang a company gets for its advertising buck in giving to those charities.

One can concede the agency cost story, however, without conceding that the legal system ought to regulate corporate charitable giving. In the first place, it seems unlikely that corporate charitable giving even remotely approaches a level that materially injures shareholders. Although estimates vary widely, it seems unlikely that corporate charitable giving amounts to more than a couple of billion dollars annually, an infinitesimally small portion of total corporate earnings.

More important, deference to corporate philanthropic decisions is consistent with—indeed, mandated by—[my director primacy] theory of the firm. ...

As noted, corporate charitable giving typically is defended on grounds that it produces good will and favorable publicity. In effect, charitable giving is simply another form of advertising. As such, it supposedly results in more business and higher profits. Who knows for sure if that is true? Maybe GM really does sell more luxury sport utility vehicles because it sponsors PBS programs—or maybe not. But that is not the right question. The right question is: who decides? The board of directors or the courts? That directors feel good about themselves for having made such a decision hardly seems like the kind of self-dealing that justifies heightened scrutiny.

Board discretion over issues like charitable giving is the inescapable side-effect of separating ownership and control. If there are good reasons for maintaining that separation, and there are, the board’s discretionary authority must be preserved. As we have repeatedly seen, holding directors accountable for their use of that discretionary authority inevitably limits that discretion. Consequently, deference to board decisions is always the appropriate null hypothesis.

There are cases where the board’s abuse of its discretionary authority warrants regulatory or judicial intervention. Breaches of the duty of loyalty spring to mind as the clearest example. As already noted, it seems doubtful that corporate philanthropy poses the sort of conflict of interest necessary to justify limiting board discretion. Yet, even if corporate philanthropy involved material sums, deference would still be appropriate. The theory of the second best holds that inefficiencies in one part of the system should be tolerated if “fixing” them would create even greater inefficiencies elsewhere in the system as a whole. Even if we concede arguendo the case against board control over corporate giving, judicial oversight or regulatory intervention still would be inappropriate if it imposes costs in other parts of the corporate governance system. By restricting the board’s authority in this context, the various academic proposals to “reform” corporate philanthropy impose just such costs by also restricting the board’s authority with respect to the everyday decisions upon which shareholder wealth principally depends. Slippery slope arguments are usually the last resort of those with no better argument, but one nonetheless must beware eviscerating exceptions that could swallow the general rule of deference. Once regulation of corporate philanthropy allows the camel’s nose in the tent, it becomes harder to justify resistance to further encroachments on board discretion.

 

The difference between class actions and derivative suits.

A Business Associations student posed this question:

Can class actions be either a derivative suit or a direct suit or are they one or the other?

They are, of course, quite different. Here's a good explanation of the difference.

The Case for Disallowing the Necessity Defense in Climate Change Cases

 I got an email today from an outfit called Kent Com LLC, which states in part that:

I've been fascinated by the necessity defense since I read Cannibalism and the Common Law: The Story of the Tragic Last Voyage of the Mignonette and the Strange Legal Proceedings to Which It Gave Rise, which is a truly great sea/law story. Based on my recollection pf the law, I didn't see how this was a proper case for the necessity defense. After going back to the law, I think it should not be allowed.

Under Minnesota law:

A necessity defense defeats a criminal charge

if the harm that would have resulted from compliance with the law would have significantly exceeded the harm actually resulting from the defendant's breach of the law.

United States v. Seward, 687 F.2d 1270, 1275 (10th Cir.1982) (quoting State v. Marley, 54 Haw. 450, 509 P.2d 1095 (1973)), cert. denied, 459 U.S. 1147, 103 S.Ct. 789, 74 L.Ed.2d 995 (1983). In addition, the defense exists only if (1) there is no legal alternative to breaking the law, (2) the harm to be prevented is imminent, and (3) there is a direct, causal connection between breaking the law and preventing the harm. Seward, 687 F.2d at 1270.

State v. Rein, 477 N.W.2d 716, 717 (Minn. Ct. App. 1991).

The necessity defense has often been urged in civil disobedience cases, but only rarely successfully. See Nadia N. Sawicki, The Hollow Promise of Freedom of Conscience, 33 Cardozo L. Rev. 1389, 1420 (2012) ("In cases of civil disobedience, defendants are rarely able to satisfy the four prongs of the narrow necessity defense....").

In a case in which defendants raised the defense of necessity to justify trespassing on property of an abortion clinic, for example, the court pointed out that:

We also observe that the necessity defense claimed by appellants was principally premised on their aim to stop abortions generally, including those permitted by law. This theory of necessity is especially flawed because it involves no cognizable harm to be avoided. The courts do not recognize harm in a practice specifically condoned by law. United States v. Schoon, 939 F.2d 826, 829 (9th Cir.1991). Moreover, Schoon may have even greater impact. Arguably, appellants committed trespass to protest the lawfulness of abortions, constituting an act of indirect civil disobedience. Id. at 828 (contrasting direct civil disobedience, where the law being broken is the object of the protest). The Schoon court determined as a matter of law that the necessity defense is unavailable regarding acts of indirect civil disobedience.

State v. Rein, 477 N.W.2d 716, 718 (Minn. Ct. App. 1991). Might one not argue that the defendant valve turners committed their offense so as to protest the lawfulness of transporting and using fossil fuels? If so, does not Minnesota law preclude the necessity defense?

Similarly, a Minnesota court has also stated that:

Applying the analysis of Rein to this case, we conclude Wicklund is not entitled to the necessity defense. First, like the defendants in Rein, Wicklund had legal remedies without committing a trespass. Wicklund had access to the state legislature, courts, and law enforcement organizations. The necessity defense is not available to protestors where there are other legal remedies. Id.

State v. Wicklund, No. C8-96-620, 1997 WL 30857, at *1 (Minn. Ct. App. Jan. 28, 1997).

This prong of the defense has been a particular problem for civil disobedience criminals claiming necessity made them do it.  See, e.g., U.S. v. Maxwell, 254 F.3d 21, 29 (1st Cir. 2001) (“Without exception, the decided cases teach that a defendant's legal alternatives will rarely, if ever, be deemed exhausted when the harm of which he complains can be palliated by political action.”); U.S. v. Quilty, 741 F.2d 1031, 1033 (7th Cir. 1984) (“There are thousands of opportunities for the propagation of the anti-nuclear message: in the nation's electoral process; by speech on public streets, in parks, in auditoriums, in churches and lecture halls; and by the release of information to the media, to name only a few.”).

U.S. v. Dorrell, 758 F.2d 427, 431 (9th Cir. 1985), seems especially apt here, because the court explained plainly that protestors cannot create "necessity" through their own impatience with the "less visible and more time-consuming [lawful] alternatives," which is precisely what seems to have happened here.

As one (seemingly pro-civil disobedience) commentator summed up the majority view:

Courts have frequently denied the necessity defense in civil disobedience cases on grounds that legal alternatives were available to the protestors instead of violating the law, even if such efforts might well be futile. The U.S. Supreme Court gave a classic statement of this factor in holding that if there is “a reasonable, legal alternative to violating the law, a chance both to refuse to do the criminal act and also to avoid the threatened harm, *140 the [necessity] defense will fail.” Lower courts have seized upon this language as an automatic ground for excluding the defense in civil disobedience cases.

The courts have consistently said that activists are free to participate in the political process, distribute literature, make speeches, petition legislators, express their disagreement with government policy in electronic and print media, and so on.For example, “[t]here are thousands of opportunities for the propagation of the anti-nuclear message: in the nation's electoral process; by speech on public streets, in parks, in auditoriums, in churches and lecture halls; and by the release of information to the media, to name only a few.”

Sometimes courts will simply refer to the notion that the defendants had “legal alternatives,” but usually courts hold that this factor requires a showing that there were no reasonable legal alternatives.Courts have been unsympathetic to the argument that legal processes to redress grievances are inadequate or ineffective.The general attitude of courts in such cases is something like the following: You still had legal alternatives available; you could have continued to petition public officials to mitigate the harm with which you are concerned and engaged in other lawful political activity to induce a change in law or policy; you could have instituted litigation against the relevant political agency in an effort to show that the agency is violating international law or violating its own regulations, and have sought adjudication of your concerns in that manner.

John Alan Cohan, Civil Disobedience and the Necessity Defense, 6 Pierce L. Rev. 111, 139–40 (2007).

Like the defendants in Rein and these other decisions, the valve turners had "had access to the state legislature, courts, and law enforcement organizations," among other legal options. There being legal remedies available, necessity is not allowed.

As I understand Minnesota law, I thus fail to see why a judge would have allowed this defense. But an answer emerges when we go back to the email:

What we have here, I suspect, is a judge who wants to go down in the history books. Or, a judge who -- like former Judge Richard Posner, doesn't care what the law says.

Anyway, back to Wicklund, which provides yet more grounds on which the 

Second, as in Rein, there is no evidence demonstrating that animal research was actually prevented by the trespass. Third, because animal research is permitted by law, there is no cognizable harm to be avoided. The theory of necessity is “especially flawed” when there is no cognizable harm to be avoided. Id.

State v. Wicklund, No. C8-96-620, 1997 WL 30857, at *1 (Minn. Ct. App. Jan. 28, 1997). Because transporting fossil fuel is permitted by law, there was no cognizable harm to be avoided, and the necessity defense should be disallowed.

Further, Wicklund's act constitutes indirect civil disobedience, and therefore, as a matter of law, the necessity defense is not available to him. See id. (determining when the necessity defense is unavailable). Consequently, we conclude the district court did not err in not allowing Wicklund to introduce evidence on the necessity defense. 

In contrast, I think the climate change court did.

In any case, I will be following this case with great interest. 

PS: Buy the book!

Various appreciations of my late friend Fred McChesney

The #MiamiLaw community mourns the passing of Professor Fred McChesney, J.D. ’78 https://t.co/CtJmcDRpFe pic.twitter.com/dDDj2dCH5c

— Miami Law School (@MiamiLawSchool) October 13, 2017

"The concept of integrating law and economics began at Miami Law in 1975, when a young Fred McChesney ...." https://t.co/8E5RRO1iZf #corpgov

— Stefan Padfield (@ProfPadfield) October 15, 2017

Just learned that Fred McChesney passed away last week. I highly recommend his 1997 book, "Money for Nothing." https://t.co/r6FVLlVT2q

— Peter G. Klein (@petergklein) October 16, 2017

Saddened by the recent passing of Prof. Fred McChesney of @MiamiLawSchool, former guest professor, and a world-class scholar and individual. pic.twitter.com/uf8zu6CHiU

— IE Law School (@IElaw) October 16, 2017

RIP Fred McChesney. One of the truly great law and economics scholars. An absolute saint to me early in my career. Crushed. I’ll miss him.

— Joshua Wright (@ProfWrightGMU) October 13, 2017

Fred McChesney, RIP

Sad news from Brian Leiter, who reports that Fred McChesney has passed:

A leading law & economics and antitrust scholar, Professor McChesney taught at Emory, Cornell, and Northwestern Universities before taking up a Chair at his alma mater, the University of Miami, in 2011. I will add links memorial notices when they appear.

He was a great scholar and good friend. We worked together on various projects over the years and his brilliance was matched by his kindness and good fellowship. 

Update: Miami has posted a rather touching obituary notice.

The Oxford Handbook of Corporate Law and Governance

The Oxford Handbook of Corporate Law and Governance can now be pre-ordered. 

Corporate law and corporate governance have been at the forefront of regulatory activities across the world for several decades now, and are subject to increasing public attention following the Global Financial Crisis of 2008. The Oxford Handbook of Corporate Law and Governance provides the global framework necessary to understand the aims and methods of legal research in this field.

Written by leading scholars from around the world, the Handbook contains a rich variety of chapters that provide a comparative and functional overview of corporate governance. It opens with the central theoretical approaches and methodologies in corporate law scholarship in Part I, before examining core substantive topics in corporate law, including shareholder rights, takeovers and restructuring, and minority rights in Part II. Part III focuses on new challenges in the field, including conflicts between Western and Asian corporate governance environments, the rise of foreign ownership, and emerging markets. Enforcement issues are covered in Part IV, and Part V takes a broader approach, examining those areas of law and finance that are interwoven with corporate governance, including insolvency, taxation, and securities law as well as financial regulation.

The Handbook is a comprehensive, interdisciplinary resource placing corporate law and governance in its wider context, and is essential reading for scholars, practitioners, and policymakers in the field.

It will include my chapter "The Board of Director." 

Investors have no business micromanaging Starbuck's parental leave program

Bloomberg reports that:

A group of investors is asking the board of Starbucks Corp. to weigh the risk that the company's new policy for paid parental leave is discriminatory.

The policy was updated Oct. 1 so that new mothers working in its coffee shops can take six weeks of leave with full pay, rather than partial pay. New mothers who work at Starbucks headquarters and other parts of the company can take up to 18 weeks of fully paid leave.

That “unequal stance” could disproportionately harm low-income workers and workers of color, investors led by Zevin Asset Management said in what they called a first-of-its-kind shareholder proposal.

This sort of micromanagement is precisely what I have argued should be barred. In my article, Revitalizing SEC Rule 14a-8's Ordinary Business Exemption: Preventing Shareholder Micromanagement by Proposal (March 29, 2016), available at SSRN: https://ssrn.com/abstract=2750153, I argued that shareholder use of the proposal rule should be substantially restricted:

Who decides what products a company should sell, what prices it should charge, and so on? Is it the board of directors, the top management team, or the shareholders? In large corporations, of course, the answer is the top management team operating under the supervision of the board. As for the shareholders, they traditionally have had no role in these sort of operational decisions. In recent years, however, shareholders have increasingly used SEC Exchange Act Rule 14a-8 (the so-called shareholder proposal rule), to not just manage but even micromanage corporate decisions.

The rule permits a qualifying shareholder of a public corporation registered with the SEC to force the company to include a resolution and supporting statement in the company’s proxy materials for its annual meeting. In theory, Rule 14a-8 contains limits on shareholder micro-management. The rule permits management to exclude proposals on a number of both technical and substantive bases, of which the exclusion in Rule 14a-8(i)(7) of proposals relating to ordinary business operations is the most pertinent for present purposes. Rule 14a-8(i)(7) is intended to permit exclusion of a proposal that “seeks to ‘micro-manage’ the company by probing too deeply into matters of a complex nature upon which shareholders, as a group, would not be in a position to make an informed judgment.”

Unfortunately, court decisions have largely eviscerated the ordinary business operations exclusion. Corporate decisions involving “matters which have significant policy, economic or other implications inherent in them” may not be excluded as ordinary business matters, for example, which creates a gap through which countless proposals have made it onto corporate proxy statements.

This article proposes an alternative standard that is grounded in relevant state corporate law principles, while also being easier to administer than the existing judicial tests. Under it, courts first look to the state law definition of ordinary business matters. The court then determines whether the matter is one of substance rather than procedure. Only proposals passing muster under both standards should be deemed proper.