Washington and Lee law professor Christopher Bruner has published an article titled “Is the Corporate Director’s Duty of Care a ‘Fiduciary’ Duty? Does It Matter?” in the Wake Forest Law Review. From the abstract:
While reference to “fiduciary duties” (plural) is routinely employed in the United States as a convenient short-hand for a corporate director’s duties of care and loyalty, other common-law countries generally treat loyalty as the sole “fiduciary duty.” This contrast prompts some important questions about the doctrinal structure for duty of care analysis adopted in Delaware, the principal jurisdiction of incorporation for U.S. public companies. Specifically, has the evolution of Delaware’s convoluted and problematic framework for evaluating disinterested board conduct been facilitated by styling care a “fiduciary” duty? If so, then how should Delaware lawmakers and judges respond moving forward?
In this Essay I argue that styling care a “fiduciary” duty has impacted Delaware’s duty of care analysis in ways that are not uniformly positive. Historically, loyalty has been aggressively enforced, while care has hardly been enforced at all – the former approach aiming to deter conflicts of interest through probing analysis of “entire fairness,” while the latter aims to promote entrepreneurial risk-taking through a hands-off judicial posture embodied in the business judgment rule. Conflation of these differing concepts as “fiduciary duties,” however, has facilitated a tendency toward over-enforcement of care, periodically threatening to impair entrepreneurial risk-taking until arrested by a countervailing legislative or judicial response. Additionally, their conflation threatens to erode the duty of loyalty by fueling the contractarian argument that the sole utility of such “fiduciary duties” is to fill contractual gaps, and that corporations therefore ought to possess latitude to “opt out” of loyalty to the degree already permitted with respect to care.
Prof. Bruner’s new article is available for download from SSRN. In addition, Prof. Bruner has also published a book review of Directors’ Duties and Shareholder Litigation in the Wake of the Financial Crisis by Joan Loughrey (ed). The review appears in the Cambridge Law Journal and is available for download for the journal’s website.
On Dec. 4, Washington and Lee law professor Josh Fairfield will present during a plenary session at the Minnesota Annual Judicial Conference. The title of his talk is ”We the People in a Virtual World.” Below is the abstract for the talk:
What if The Matrix were real? Through virtual world technology, users experience persistent and interactive computerized three dimensional worlds populated by many other people, all while sitting at their computer, or even as they walk or drive around. There is a lot of money at stake in this technology. Millions of citizens spend thousands of hours and billions of dollars in virtual worlds, for digital objects, or to buy digital currency. Virtual worlds, social networks, and augmented reality enable people to live out their economic, social and political lives in new online communities. Because citizens care deeply about their property, personhood, and community, they will bring claims of harm or disputes needing resolution to courts.
In the common law system, state courts see technology cases first. The common law often is technology law. New cases are often cases of first impression because of new technology. Virtual world technology has brought multi-million-member communities together online and supported a multi-billion dollar economy, but it has also afforded new opportunities for fraud, crime, or disputes over property. Claims of theft of virtual property, fraud through Ponzi schemes based on virtual currency, and questions who inherits virtual property or social network accounts either have or will soon come before courts.
This presentation will touch on core common law areas, and show how they are likely to be affected by the rise of virtual worlds, social networks, virtual currency, and wearable computing. The presentation will begin with an introduction to virtual world technology, continue with a description of the present and near-future cases that courts have or will soon engage, and conclude with a further-future look at the future of crypto-currencies. Finally, the developments of the past year make it clear that virtualization technologies will not merely remain in virtual worlds, but increasingly impact everyday life. Virtual currencies let drug dealers sell real drugs. Wearable computing like Google’s Glass take virtual worlds out of the desktop computer and overlay it on top of the real world. This look into the further future will also engage mixed and augmented reality technologies: computer technologies that bring these virtual experiences into the real world.
Professors Vinayagamoorthy and Shannon Presented at ASIL’s International Economic Law Interest Group Junior Scholars Research Forum
On Friday, November 22, Professors Kish Vinayagamoorthy and Victoria Shannon presented their scholarship at the American Society of International Law (ASIL) International Economic Law Interest Group Junior Scholars Research Forum hosted by the University of Pennsylvania School of Law and the Wharton School. Their proposals were selected through a competitive process by members of the ASIL International Economic Law Interest Group, and senior scholars in the field commented on their work.
Professor Vinayagamoorthy presented on improving corporate social responsibility in global supply chains. Professor Shannon presented on optimal dispute systems for third-party funding.
Washington and Lee law professor Jim Moliterno was one of a small number of panelists invited to present earlier this month at an Aspen Institute Law & Justice Symposium on mass atrocities. The event was titled “Trying Atrocity Crimes: The Khmer Rouge Trials, Transitional Justice, and the Rule of Law; An Aspen Institute Symposium for Judges and Scholars.” Prof. Moliterno presented during a session titled “Recent Experiences from the Field.” His role was to situate his work on legal institution building within the context of prevention and remedy for atrocities.
Prof. Moliterno is an acknowledged international expert in legal ethics and professionalism and has traveled throughout the world to help countries develop ethics policies and training programs. He has engaged in substantial international legal ethics and legal education reform work, designing new lawyer and judge ethics courses in Serbia, Armenia, Georgia, Czech Republic, Japan, Indonesia and Thailand. He has trained law professors in China, Thailand, Georgia, Armenia and Serbia. He has trained judges in Kosovo and both judges and prosecutors in Indonesia. He has worked to revise the lawyer ethics code in Thailand and Georgia and lectured extensively on international lawyer ethics topics in Spain, Czech Republic, and Slovakia.
Washington and Lee law professor Mark Drumbl presented during this year’s Washington and Lee University Nobel Prize Symposium, in which W&L faculty members present on the year’s Nobel Prizes, giving background on the winners and the work that earned those honors.
Prof. Drumbl spoke on this year’s Peace Prize, which was awarded to the Organization for the Prohibition of Chemical weapons, an intergovernmental organization that implements the Chemical Weapons Convention. Prof. Drumbl’s subjects included the law of war, the Organization and its work, the effects of chemical weapons, and the Syrian situation.
Earlier this month, Washington and Lee law professor Susan Franck went straight from teaching her International Commercial Arbitration course to fly to South Korea. But this time her students were government officials and other representatives from members of APEC–the Asia-Pacific Economic Cooperation.
In connection with the Free Trade Agreement Asia Pacific (FTAAP), APEC countries came together in Seoul to participate in a workshop designed to build capacity and foster policy debates related to dispute resolution under international trade and investment treaties. Professor Franck presented her research to representatives from Brunei Darussalam, Chile, China, Hong Kong, Indonesia, Japan, Korea, Malaysia, The Philippines, Singapore, Chinese Taipei, and Viet Nam who were in Seoul to learn more about how to prevent, manage and resolve international economic disputes. She primarily focused upon the empirical analysis of investment treaty arbitration and paid particular attention to reality-testing conventional wisdom on investment treaty arbitration with a unique focus on the experience of APEC to help government officials consider how best to manage their disputes and negotiate their treaties.
Highlights of the presentation related to a detailed assessment of the identity of foreign investors making claims and whether and how those investors were reliably linked to outcomes. The presentation also provided specific assessment of APEC-related risk for investment treaty arbitration. While the data demonstrated that APEC states are relatively standard respondent states — particularly in terms of types of investors bringing claims and the ultimate outcomes — there were a few variations related to industrial sectors involved and the location of claims that suggested that APEC states should take a careful and strategic approach to treaty negotiations.
Her designated commentators were Professor Joung-Wook Hwang of the Hankuk University of Foreign Studies in Korea and Mr. Jaywang Huang, from the office of Trade Negotiations for the Ministry of Economic Affairs in Chinese Taipei.
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.
On November 12, Washington and Lee law professor David Bruck will speak in Atlanta at the National Symposium on the Modern Death Penalty in America. Former President Jimmy Carter will open the American Bar Association-sponsored event, which will feature many special issue panels.
Prof. Bruck’s panel is titled “Professionalism: The Role of the Courts, Prosecutors, and Defenders in the Death Penalty System,” and will also include recently retired Sixth Circuit Judge Boyce Martin, former Texas Governor Mark White, and exonerated Texas death row inmate Anthony Graves.
Last month, Washington and Lee law professor Susan Franck presented her research on treaty-based investment arbitration at the Fifth International Conference on Law and Economics of International Arbitration at St. Gallen, Switzerland.
Professor Franck’s presentation was focused specifically on the law and economics of investment treaty arbitration, with a focus upon systematically considering the risks and costs of dispute resolution. The conference involved a series of other presentations related to arbitration in emerging markets, competition law, financial services arbitration, and sports by international arbitration scholars and practitioners. The conference also involved a special address by Richard A. Posner on the topic of “What do Arbitrators Maximize?” During that presentation, Professor Franck had an opportunity to discuss her research with Judge Posner and explore the perennial question about whether arbitrators’ award are a proverbial “splitting of the baby”.
On Thursday and Friday, November 7 and 8, the Frances Lewis Law Center at Washington and Lee School of Law is hosting the first-ever Works-in-Progress Roundtable for Third-Party Funding Scholars for scholars who write in the area of third-party funding of litigation and arbitration.
Third-party funding is a phenomenon by which an outside entity financially supports the legal representation of a party’s claim in exchange for the promise of a share of the proceeds if the party recovers any money. On the defense-side, the funding arrangement typically involves the defendant making payments (similar to an insurance premium) to the funder in exchange for the funder paying the defendant’s legal expenses in the case.
Over the next two days, eight eminent scholars will present works-in-progress and share feedback on wide-ranging and cutting-edge topics in the field of third-party funding. Here are their names and topics:
- Nora Freeman Engstrom of Stanford Law School: “Lawyer Lending: Costs and Consequences”
- Anthony J. Sebok of the Benjamin N. Cardozo School of Law: “What Do We Talk About When We Talk About Control?”
- Brian T. Fitzpatrick of Vanderbilt Law School: “Should Third-Party Litigation Financing Come to Class Actions?”
- Manuel A. Gómez of Florida International University College of Law: “Alternative Litigation Financing Heads South: The Potential for and obstacles to third party funding in Latin America”
- Selvyn Seidel of Fulbrook Capital Management LLC: “Buying and Selling Claims – Why Not?”
- Maya Steinitz of the University of Iowa College of Law: “Incorporating Legal Claims”
- Benjamin Spencer of Washington and Lee School of Law: “The Law of Litigation Finance”
- Victoria Shannon of Washington and Lee School of Law: “Optimal Dispute Systems for Third-Party Funding”