ProfessorBainbridge.com

Useful Delaware Caremark/Derivative suit opinion

In In re China Agritech Inc. Shareholder Derivative Litigation, C.A. 7163-VCL (May 21, 2013), Delaware VC Travis Laster has put forward a factually rich and legally detailed analysis of how 220 books ands records inspections, Caremark claims, demand futility, and 102(b)(7) exculpation clauses fit together. I'll never convine Bill and Mark to put it in the case book, but I will probably use it as a supplement to review and pull together the doctrines. As such, I'll slot it into the syllabus after I've covered derivative suits, oversight, and shareholder inspection rights. (HT: McNally) Kevin Brady's detailed post on the case can serve in lieu of a teacher's manual entry.

Drudge having fun at Andrew Weiner's expense

Notice the top headline in the upper left hand corner of this screen capture (5/13/2013 at 11:41 AM). Freudian slip or intentional pun? (Click on image for larger size)

 

"If Obama Were a CEO, Government Would Hold Him Responsible for Scandals"

A few days ago, I argued for affirmative answer to the question If Obama was CEO of a public corporation and I was the company's general counsel, would I have told him about an audit of misbehaving employees? Now Heritage Foundation blogger Daniel Dew tackles a similar question, concluding that If Obama Were a CEO, Government Would Hold Him Responsible for Scandals.

It is interesting to note, however — by way of analogy only — that under the DOJ’s standard of “responsibility,” if President Obama were the head of a corporation, he would be responsible and could be prosecuted.

The Responsible Corporate Officer Doctrine allows federal prosecutors to criminally prosecute business owners and officers for the criminal activity of their businesses, regardless of whether they had knowledge of the illegal activity. The only requirement for criminal liability is “some relationship between the executive’s supervisory responsibilities and the underlying misconduct.” Put another way, in order to obtain a conviction, the government need only prove (1) illegal conduct occurred, and (2) the corporate officer had authority to exercise control over the activity.

The DOJ has used the Responsible Corporate Officer Doctrine to make criminals out of many well-meaning business people. In United States v. Park, the Food and Drug Administration (FDA) prosecuted the president of a corporation under the theory that his subordinates committed violations of the Food, Drug, and Cosmetic Act that the president had the ability to prevent or correct. Park, the company president, had delegated responsibility to correct the violations to one of his employees, who, regrettably for Park, did not follow through on his responsibilities. Park was convicted for FDA violations that he did not commit, order committed, or conspire to commit.

Just to be clear, there is no evidence in the recent Obama Administration scandals that criminal behavior took place, but the executive branch should stick to one definition of “responsible.” The DOJ definition of “responsible” is especially troubling in the context of a criminal prosecution where a person’s individual liberty is at stake—not just news stories that make the President look bad.

Point very well taken.

Today's gadget plug: AcuRite 75077 Wireless Weather Forecaster with Remote Sensor and Atomic Clock

I recently bought an AcuRite 75077 Wireless Weather Forecaster with Remote Sensor and Atomic Clock. I've got that one upstairs telling me the inside temperature and time in the kitchen and the outside temperature on the sun deck. I love this thing so much I bought a second one to put downstairs in my study with the outside sensor down at the bottom of the yard by the pool, so I can tell at a glance whether it's warm enough for a swim.

A Weiner tweet

How Long Can Weiner Go? (I got a million of 'em.)pjmedia.com/vodkapundit/20…

— Stephen Green (@VodkaPundit) May 22, 2013

New article by yours truly

Stephen M. Bainbridge, "The New Investor Cliffhanger" uclalawreview.org/?p=4584

— UCLA Law Review (@UCLALawReview) May 22, 2013

Catholic Charities collecting tornado disaster relief funds

Catholic Charities of Oklahoma City announces that:

In response to the rash of tornadic activity that central Oklahoma has suffered over the past 48 hours, including the communities of Carney, Moore and Shawnee, Catholic Charities of the Archdiocese of Oklahoma City is offering help to those affected. Catholic Charities’ Disaster Recovery Services will offer aid with immediate and long-term needs during the recovery process. ...

Catholic Charities will provide critical, immediate needs to all regardless of race, gender or religion. Services to be offered include: emergency assistance funds for food, shelter, clothing and other necessities; financial assistance vouchers; networking with other agencies serving those affected; and, counseling services. ...

In an effort to help with the long-term recovery process, Catholic Charities OKC has set- up a disaster relief fund. All donations made to this fund will support recovery for victims, such as temporary housing, food, medical bills and more. Catholic Charities OKC will not divert these funds to other purposes or administrative costs. To donate to the Catholic Charities Disaster Recovery Fund, visit www.catholiccharitiesok.org or call 405-523- 3000. 

Please join me in supporting this worthy effort.

Cylons and humans fighting side by side

The U.S. Navy has created its first aviation squadron that includes both manned (eight Seahawk) and ten unmanned (MQ-8B Fire Scout UAVs) helicopters. The new unit (HSL-35, or Helicopter Maritime Strike Squadron 35) will use its aircraft on various warships (LCS for the UAVs and destroyers and cruisers for the Seahawks.) These mixed squadrons are the future as far as the navy is concerned.

via www.strategypage.com

How American Corporate and Securities Law Drives Business Offshore

The American Illness: Essays on the Rule of Law is a new book from Yale University Press edited by Frank Buckley. Amazon's description informs that:

This provocative book brings together twenty-plus contributors from the fields of law, economics, and international relations to look at whether the U.S. legal system is contributing to the country’s long postwar decline. The book provides a comprehensive overview of the interactions between economics and the law—in such areas as corruption, business regulation, and federalism—and explains how our system works differently from the one in most countries, with contradictory and hard to understand business regulations, tort laws that vary from state to state, and surprising judicial interpretations of clearly written contracts. This imposes far heavier litigation costs on American companies and hampers economic growth.

Yale's site offers up these blurbs:

"Buckley has assembled essays by many, perhaps most, of the best economic and legal scholars in the Anglo-American world to consider seriously the ways in which the American legal system burdens our citizens and our economy and puts us at an international competitive disadvantage. The "rule of law" we so earnestly commend to other countries is clearly in need of serious reform at home. The rigor of these historical, economic, and comparative studies, and the logic of the framework within which Buckley presents them, make a compelling case for law reform scaled to our needs for the 21st Century."—Judge Douglas H. Ginsburg, U.S. Court of Appeals and NYU Law School

"This book presents strong evidence of American hyper-litigiousness and the social costs it creates. The editor has assembled an impressive array of authors, who attack these issues with rich empirical evidence."—Eugene Kontorovich, Northwestern University School of Law

"This authoritative collection of essays draws a vivid portrait of a legal system that is out of control. The Rule of Law in America has become a kind of Frankenstein’s monster, bashing indiscriminately both good and bad conduct without proportion or self-awareness. These vivid essays let the facts drive you to this unavoidable conclusion: American law is indeed “exceptional”—but no longer in a way that supports either freedom or regulatory protection."—Philip K. Howard, author of The Death of Common Sense and Chair of Common Good  

I was privileged to be one of those asked to contribute an essay to the project. My offering is entitled "How American Corporate and Securities Law Drives Business Offshore," a preview of which is available here.

I've been reading the other essays in the volume and each is a gem. Collectively, they are essential reading for anyone interested in how law is choking our economy and society.

A conservative case for immigration reform

Over on Twitter I saw this sadly predictable tweet about the immigration reform bill that just got out of committee on the Senate side of the Hill:

Amnesty Passes through Committee 13-5 - Senators Cruz and Sessions Cite Concerns(Video) breitbart.com/InstaBlog/2013… #Convo via @breitbartnews

— Nice Deb (@NiceDeb) May 22, 2013

My essay from 2004 on immigration reform is obviously dated, but I think the main points still hold true, especially with respect to the question of whether calling reform amnesty is accurate or Orwellian and heartless.

It's been a very long time since U.S. politicians addressed illegal immigration in anything approaching a comprehensive way. President Bush came into office planning to change that through negotiations with Mexico and new legislation. Those plans got derailed by 9-11, but last week the President put illegal immigration back on the policy front burner with a major policy address.

The reactions across the political spectrum were predictable but still disappointing. The extreme left dismissed President Bush's plan as an effort to revive the controversial post-World War II bracero program. The Democratic presidential candidates mostly supported the idea of immigration reform, while claiming they would do it better, fairer, or whatever. And, not surprisingly, many voices on the right condemned the plan as an amnesty that will encourage even more illegal immigration. The National Review Online's Corner blog, to cite a particularly prominent example, has been dominated by vehement attacks on Bush's plan, such as Rich Lowry's call for "conservatives [to] go to the mattresses on this one."

Granted, the devil is in the details, but the broad outline set out by President Bush deserves praise rather than censure. The plan is good for the economy. It will contribute to our national security. It will address pressing humanitarian problems posed by the current system. ...

There are somewhere between 8 and 12 million undocumented aliens in the U.S. At least three quarters of a million more arrive each year. Stepped up border enforcement hasn't stopped people from coming to this country. It just made it harder, forcing them to try more hazardous routes and to rely on exploitative smugglers. If people are willing to die to come work in this country, how are we going to close our borders -- let alone deport all the undocumented aliens who are already here -- without becoming a de facto police state?

Our current immigration policy is badly broken. It has failed to stop illegal immigration, succeeding only in creating a shadow economy and a humanitarian crisis along the border.

In fixing our immigration system, conservatives should take heed of Russell Kirk's famous dictum that conservatives are wary "of 'sophisters, calculators, and economists' who would reconstruct society upon abstract designs." Instead, as Kirk explained: "All that we reasonably can expect is a tolerably ordered, just, and free society, in which some evils, maladjustments, and suffering will continue to lurk." President Bush has come forward with a pragmatic and realistic proposal that will enhance orderliness, justice, and freedom. Instead, it is his critics on the right who are pursuing the utopian dream that we can deport and deter all illegal immigrants.

Once again, the "A word" is what passes with too many of my fellow conservatives for reasoned argument.

I am Justice Samuel Alito

At least, according to this flowchart. (HT: Olson)

The Non-Expert Agency: Using the SEC to Regulate Partisan Politics

Given these important First Amendment concerns, and wary of creating the actuality or appearance of partisan advantage, Congress has entrusted interpretation and enforcement of the campaign finance laws to the Federal Election Commission (FEC). This agency is unique in a number of ways. Perhaps most fundamentally, it includes six commissioners evenly divided between the two major parties. Furthermore, having been the defendant in many of the most important First Amendment lawsuits of the past 40 years, it has considerable expertise in dealing with the intricate intersection of campaign finance regulation and constitutional liberties.

Nevertheless, believing that the FEC’s bipartisan composition has frustrated a drive toward more intrusive regulation of political speech, many prominent voices on the political left have attempted to bypass the FEC in the area of campaign finance regulation. This has included calls for rulemaking or enforcement by the Internal Revenue Service (IRS) and the Federal Communications Commission (FCC). Most recently, the Securities and Exchange Commission (SEC) has been asked to require disclosure of corporate political spending, including payments to nonprofits and industry organizations, even where those payments would not be considered material under current and traditional securities laws.

While unaffiliated with the partisan debates surrounding campaign finance regulation, Professors Lucian Bebchuk and Robert Jackson have been at the fore of intellectual arguments urging the SEC to engage in regulation of this kind. This has included a petition for rulemaking submitted to the SEC on behalf of a number of prominent academics in August 2011, and a forthcoming defense of that petition, Shining Light on Corporate Political Spending, 101 Geo. L.J. 923 (2013).

In The Non-Expert Agency: Using the SEC to Regulate Partisan Politics, 3 Harv. Bus. L. Rev. __ (forthcoming 2013), we respond to a number of particular arguments advanced by Professors Bebchuk and Jackson. Equally important, we argue that whatever the theoretical merits of the position put forth by Professors Bebchuk and Jackson, the reality is that the current pressure on the SEC to adopt new compulsory disclosure laws is a direct result of a desire to use the SEC to regulate not just corporate governance or the world of investment and trading, but also campaign finance. As a result, we suggest that any rules adopted are likely to be ill-advised and co-opted for partisan purposes in the enforcement process.

via blogs.law.harvard.edu

It's a must read.