Prof. Lyman Johnson Presents at First Annual Workshop for Corporate & Securities Litigation at Illinois College of Law
On Friday, November 8, W&L Law Professor Lyman Johnson presented his paper The Dwindling of Revlon at the First Annual Workshop for Corporate & Securities Litigation at the University of Illinois College of Law. Here is an excerpt from the Introduction:
In 2012, stockholders challenged a remarkable 96% of M&A transactions with a value greater than $500 million and 93% of deals with a value greater than $100 million, a stunning upsurge since 2005. The vast majority of these lawsuits settle, largely with disclosure-only accords, but where monetary benefits are involved, the average payment has increased in the last few years. A mainstay argument by plaintiffs is that the selling company’s board of directors failed to maximize the sale price − i.e., the board breached its so-called Revlon duty. The “Revlon” in Revlon duty, of course, refers to Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., a landmark 1986 ruling by the Delaware Supreme Court. Revlon was one of a handful of takeover-fueled decisions during the 1980s that fundamentally redrew the map governing director duties in the M&A setting. Given the high volume of M&A activity in the U.S., and the frequency of court challenges to that activity, Revlon has become an assumed and accepted part of the legal landscape for both the practicing M&A bar and the judiciary.
Yet, in 2013, Delaware’s contemporary Revlon jurisprudence has come under fierce scholarly attack. Professor Stephen Bainbridge has severely criticized several Chancery Court decisions for misapplying the Supreme Court’s core teachings on Revlon, a critique Professor Mohsen Manesh counters is itself misconceived. Professor Frank Gevurtz has leveled a more fundamental broadside against Revlon, contending it lacks any defensible policy rationale, and advocating its outright abandonment.
We have an altogether different perspective than the bar, the judiciary, and other scholars. We argue that, given its intersection with another important arc of recent Delaware decisional law, Revlon today is, ex post, essentially a constrained remedies doctrine, applicable only pre-closing for possibly granting non-monetary sanctions. We arrive at our novel thesis concerning Revlon as the natural conclusion of examining the following question: Does Revlon apply only if a sales transaction is entered, or does it also govern sales efforts by boards that utterly fail even to produce a transaction? If an attempted sale failed due to a flawed process, might the directors nonetheless have breached their Revlon duty because of how poorly they conducted the selling effort? Maybe, in other words, the reach of Revlon is actually far broader than many appreciate. Probing these neglected issues through a remedies perspective offers a useful, if ironic, lens on where exactly, as it turns out, the overblown Revlon doctrine stands today.
W&L Law Professor Lyman Johnson has just published a piece entitled Rethinking How Business Purpose Is Taught in Catholic Business Education, 32 J. Cath. Higher Ed. 59 (20103). Here is the abstract:
Business education at a Catholic university should engage students and faculty across the university in critically examining the purpose of business in society. Following the best practices of leading business schools, the Catholic business curriculum has mostly focused on the shareholder and stakeholder approaches—with the shareholder approach being the predominant view. Creatively engaging the Catholic Social Tradition (especially the “community of persons”) can bring a richer appreciation of the purpose of business in our contemporary society than either the shareholder or stakeholder approaches. We argue that far more discretion to pursue various corporate purposes in manifold ways exists than is frequently appreciated by business managers and those who educate them. This article examines how, given this legal and moral discretion, the Catholic Social Tradition is a rich resource for teaching corporate purpose, and reveals how tapping into a religious tradition with a long philosophical discourse can shape a rich dialogue in the curriculum as to a company’s moral direction. We contrast two philosophies of business: an Association of Individuals (the shareholder and stakeholder approaches) and a Community of Persons (mission-centric approach), and their respective views of corporate purpose. While business scholars tend not to question their underlying anthropological presuppositions because of the desire to be “practical,” a business education grounded in the liberal arts must engage the first principles of its discourse.
Prof. Michelle Drumbl of Washington & Lee has recently made available on SSRN her forthcoming article Those Who Know, Those Who Don’t, and Those Who Know Better: Balancing Complexity, Sophistication, and Accuracy on Tax Returns, 11 Pitt. Tax Rev. ___ (2014). Here is the abstract:
Refundable credits, particularly the earned income tax credit (EITC) and the child tax credit, serve an important anti-poverty measure for low-income taxpayers. Annually, millions of taxpayers who do not owe any federal income tax must file a tax return in order to claim these credits that are in the nature of social benefits. The eligibility requirements for refundable credits are complex, and these returns are particularly prone to audit: EITC audits comprise one-third of all individual income tax audits. Because of the large dollar amounts at stake, a taxpayer’s mistaken understanding of the eligibility requirements for these refundable credits can often result in a deficiency of several thousand dollars. Though studies indicate that taxpayer error is more commonly inadvertent than intentional, the section 6662 20% accuracy-related penalty applies once the deficiency reaches a statutory “understatement” threshold; it is imposed computationally and without regard to the taxpayer’s intent.
By statute, taxpayers have the right to contest the accuracy-related penalty by demonstrating that there was reasonable cause for the underlying error and the taxpayer acted in good faith. Treasury regulations provide that such a circumstance might include “an honest misunderstanding of fact or law that is reasonable in light of all the facts and circumstances, including the experience, knowledge, and education of the taxpayer”. Yet for all of these reasons – lack of experience, lack of knowledge, and relative lack of education – the taxpayer is unlikely to have the knowledge or resources to raise the very defense that is meant to protect an unsophisticated taxpayer.
Drawing comparisons between refundable tax credits and social programs administered by other agencies, this article calls upon the IRS to better differentiate between inadvertent error (“those who don’t know”) and intentional or fraudulent error (“those who know better”). The article argues that the current accuracy-related penalty approach is unduly punitive. It concludes by proposing solutions that the IRS might consider in light of Congress’s desire for the Service to administer these social benefits through the Internal Revenue Code.
Washington & Lee Emeritus Professor of Law Denis J. Brion recently published a chapter in Anne Wagner and Richard Sherwin’s Law, Culture and Visual Studies. The chapter is entitled The Criminal Trial as Theater: The Semiotic Power of the Image. Here is the abstract:
Under the adversarial nature of the judicial process in the United States, Prague School theory provides a lens for understanding the criminal trial as a complex form of theater, with the opposing attorneys, by their trial performances, creating competing performance texts from the dramatic text of what the various witnesses potentially can offer by their evidence and testimony. The jurors, as the audience of these competing performances, have the responsibility for participating in the creation of the meaning of the dramatic text, a meaning embodied in the verdict of guilt or acquittal. The competing trial performances of the opposing counsel are, in essence, extended arguments for the meaning of the dramatic text, and the jurors will understand these performances to be extended arguments. The jurors, as well, can understand, however, much subconsciously that the trial is theatrical in nature. As such, the individual juror can understand that any element of, or action occurring anywhere within, the courtroom as being situated in the theatrical frame. And, if these elements and actions are situated within the theatrical frame, then they can be understood as part of the extended argument that constitutes the trial performance. In the course of criminal trials, particular elements and actions occurring within the theatrical frame have come under challenge as being prejudicial to the accused –such as the clothing that the accused is required to wear, the presence of uniformed officials in the court room, and the clothing, bearing texts or images, worn by trial spectators. Because the juror can, primarily at a subconscious level, understand that these elements and actions constitute arguments either for guilt or for the exercise of vengeance, then they are procedurally improper, coming into the trial in violation of the rules of evidence and process; they violate the due process rights of the accused. Although an argument for guilt, of itself is substantively proper, an argument for vengeance is not; thus, an element of the theatrical frame that can be understood as an argument for vengeance is both procedurally and substantively improper. It is altogether prejudicial to the accused and altogether in violation of the due process rights of the accused. Unfortunately, the judiciary has only fitfully recognized the semiotic power of these elements and actions for creating prejudice to the accused.
W&L Law Professor A. Benjamin Spencer has just published an article on the Supreme Court’s civil pleading jurisprudence in the UCLA Law Review. It is entitled, Pleading and Access to Civil Justice: A Response to Twiqbal Apologists. Here is the Abstract:
Professor Stephen Yeazell once wrote, “A society based on the rule of law fails in one of its central premises if substantial parts of the population lack access to law enforcement institutions.” One apparent threat to access to justice in recent years has been the erosion of notice pleading in the federal courts in favor of a plausibility-pleading system that screens out potentially meritorious claims that fail to offer sufficient specificity and support at the pleading stage. But some have questioned whether this purported threat is more perceived than real. Indeed, this doctrinal shift has been defended in several ways that each suggest—in their own way—that the critical response to Twombly and Iqbal may be much ado about little or nothing.
These apologies for the doctrinal shift, if you will, generally fall into three categories. The first consists of arguments suggesting that the standard has not really changed at all, which I will refer to as the “consistency” defense. The second group concedes that there has been a change but argues that the change has not had or will not have a substantial impact; I will call this the “inconsequentiality” defense. The final category contains those arguments asserting that the changes are consequential but in a good way, meaning that the strengthening of pleading standards was warranted and will be beneficial to the litigation system. I refer to this type of argument as the “efficiency” defense.
This essay responds to each of these apologies, finding that the consistency defense is doctrinally unsound, that the inconsequentiality defense is doubtful (if not counterfactual), and that the efficiency defense is misguided, given the patent overinclusiveness and subjectivity of the plausibility doctrine.
A. Benjamin Spencer is Associate Dean for Research, Frances Lewis Law Center Director, & Professor of Law at Washington & Lee University School of Law.
If, as they say, timing is everything, then W&L Law Professor Russell Miller has hit upon something very special with his recent receipt of a KoRSE Fellowship at the University of Freiburg in Germany. With the media still buzzing over the news of Edmund Snowden’s evasion of an American warrant after he leaked confidential documents that chronicle the American government’s extensive PRISM surveillance program and other secret surveillance activities, Miller has been invited to serve as a Fellow in the University of Freiburg’s “Network for the Law of Civil Security in Europe.” The fellowship will allow him to research and collaborate with leading scholars on the issues of security and liberty who are based at the University of Freiburg’s Center for Civil Security as well as the program’s partners at Bucerius Law School (Hamburg), the Max Planck Institute for Foreign and International Criminal Law (Freiburg), and the German Federal Police Academy.
Miller will be in residence in Freiburg on several occasions in the 2013/2014 academic year, beginning with a three-week stay in July, 2013. “I’m thrilled about the opportunity to work closely with dynamic scholars on these issues at one of Germany’s most impressive law faculties,” Miller said. He noted that the University of Frieburg is the academic home of two of the German Constitutional Court’s justices, including the Court’s President, Prof. Andreas Vosskuhle. “The KoRSE program is especially exciting,” Miller explained, ”because it deliberately seeks to embed discussions of this inherently transnational issue in a global research context.”
During his time in Freiburg Professor Miller will pursue several projects. First, he will deliver a lecture on July 10, drawing on his 2008 book U.S. National Security, Intelligence and Democracy (Routledge Press). The book reflected on the 1970s Senate Select Committee that undertook an extensive investigation of U.S. national security activities. Known as the ”Church Committee” (for its Chair, Idaho Senator Frank Church), the Senate Select Committee’s reports remain one of the most detailed accountings of the American intelligence community and the reports served as the basis for reforms that now make-up the legal and oversight framework for American intelligence programs. This, of course, is the very framework implicated by Snowden’s leaks and the PRISIM program. Miller’s lecture will detail, for a foreign audience unfamiliar with this important piece of American history, the background of the Church Committee while raising the broader questions of how a society best achieves the twin goals of providing security while ensuring liberty. Second, Prof. Miller will begin planning-in close collaboration with other researchers in Freiburg-for the fall 2013 “German Law in Context Program,” which will involve a number W&L law and undergraduate students in an intensive, interdisciplinary survey of Germany’s efforts to balance security and liberty in its unique struggle with extremism and threats to democracy. The German Law in Context Program is an annual seminar that enjoys the support of the German Law Journal, which Prof. Miller and a number of students edit at W&L. It is also one of the law school’s most visible collaborations with W&L’s undergraduate college, as faculty from the German/Russian Department, the History Department, and the Williams School’s Political Science Faculty contribute their expertise to events and programming in significant ways. Third, Prof. Miller will use his time in Freiburg to lay a research foundation for and to facilitate his in-person observations of the German Federal Constitutional Court’s imminent review of applications to ban a political party (the right-wing NPD). This is a once-in-a-generation procedure that implicates German history, society and politics in remarkable ways. In this effort, Prof. Miller will be building on the work that led to the recent publication of his book The Constitutional Jurisprudence of the Federal Republic of Germany (Duke Press).
W&L Law Professor Timothy Jost has published the Seventh Edition of Health Law: Cases, Materials, and Problems with the West Publishing Company. The Health Law casebook has been widely used throughout the United States for teaching health law since the first edition was published in 1987, and is credited as having defined the modern health law discipline. The book, which is over 1800 pages long, is also being published in an abridged (900 page) edition and as three separate “spin-off” books covering bioethics, health care organization and financing, and liability and quality. All books will be available this summer for classes in the fall. Professor Jost wrote chapters dealing with health care cost and access issues, private health insurance regulation, the Affordable Care Act, ERISA, Medicare, Medicaid, and the Children’s Health Insurance Program. These chapters have been extensively rewritten since the sixth edition because of changes made by the Affordable Care Act.
Tax Clinic: Making Peace with the IRS
Many Virginians are heaving a sigh of relief after getting tax returns done and in the mail, but for some the challenge of paying taxes as just begun.
They’re the ones who get notices from the IRS. At the very least, that’s an annoyance, and for some it’s a nightmare, but free help could be a phone call away.
Every state has at least one federally-funded office to help people having trouble with the Internal Revenue Service. In Virginia there are two: the Community Tax Law Project in Richmond and the Tax Clinic at Washington and Lee’s School of Law.
The clinic provides services at no charge to anyone who qualifies.
To hear WVTF’s report on the clinic, click here.
W&L Law Professor A. Benjamin Spencer just published an article entitled Class Actions, Heightened Commonality, and Declining Access to Justice in the Boston University Law Review. Here is the abstract:
A prerequisite to being certified as a class under Rule 23 of the Federal Rules of Civil Procedure is that there are “questions of law or fact common to the class.” Although this “commonality” requirement had heretofore been regarded as something that was easily satisfied, in Wal-Mart Stores, Inc. v. Dukes the Supreme Court gave the requirement new vitality by reading into it an obligation to identify among the class a common injury and common questions that are “central” to the dispute. Not only is such a reading of Rule 23’ s commonality requirement unsupported by the text of the rule, but it also is at odds with the historical understanding of commonality in both the class action and joinder contexts. The Court’s articulation of a heightened commonality standard can be explained by a combination of its negative view of the merits of the discrimination claims at issue in Dukes, the conflation of the predominance requirement with commonality, and the Court’s apparent penchant for favoring restrictive interpretations of procedural rules that otherwise promote access. Although an unfortunate consequence of the Dukes Court’s heightening of the commonality standard will be the enlivening of challenges to class certifications that would otherwise never have been imagined, this Article urges the Court to reject heightened commonality and read Rule 23 in a manner that remains true to the language and history of the common question requirement.
This article may be downloaded by visiting the BU Law Review website.
Professor Joshua Fairfield to Present His Work at Stanford-Peking University Conference on Internet Law and Policy
Washington and Lee law professor Joshua Fairfield will present his work on virtual currency and virtual property, as part of a panel discussing Virtual Items, at the Second Stanford-Peking University Conference on Internet Law and Policy 2013 hosted by Stanford Law School on May 3d and 4th (registration link: http://blogs.law.stanford.edu/ilpp2013/).
The conference is co-sponsored by Stanford Law School and Peking University, and draws together internationally-recognized scholars from the United States, China, and across the world. The conference addresses issues of cutting edge intellectual property and e-commercial law, including the growing trade in virtual items and currency.
Professor Fairfield’s work, entitled “Virtual Gravity,” will address the emergence of virtual items, virtual currencies, and microtransactions as a major means of financing internet services. For example, the virtual currency BitCoin has recently risen to prominence as parties seeking to shield money from the Cypriot banking crisis invest in the online money. Professor Fairfield’s research explores the differences between Europe, the United States, and China in addressing the rise of virtual items. It also explores the gravitational pull that the technology of digital objects exerts on the form and shape of the law.