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Professors Johnson & Millon respond to forthcoming piece by Professors Bebchuk and Jackson

March 14, 2014 Leave a comment

Washington & Lee Law Professors Lyman Johnson and David Millon have just posted a critique of a forthcoming piece by Professors Bebchuk and Jackson.  Their post is available at the Professor Bainbridge blog:

Preempting Professors Bebchuk and Jackson: Poison Pills, State Corporate Law, and the Williams Act

by

Lyman Johnson & David Millon

Washington & Lee University School of Law

Lyman Johnson

Prof. Lyman Johnson

Professors Lucian Bebchuk and Robert Jackson recently posted a provocative paper,Towards a Constitutional Review of the Poison-Pill, forthcoming in the Columbia Law Review.  The paper, regrettably, makes several claims that are flatly wrong, and it also misreads the Williams Act.

First, Professors Bebchuk and Jackson assert that “corporate law scholars have overlooked the unresolved validity of state-law poison-pill rules”; such scholarship has “focused exclusively on anti-takeover statutes, ignoring the validity of state-law poison-pill rules”; and, [the Bebchuk-Jackson paper is the] “first systematic analysis of the possibility that these rules are preempted by the Williams Act…”

These assertions are incorrect.  Twenty-five years ago, we wrote a lengthy article that pointedly examined possible Williams Act preemption of all non-statutory state corporate law rules, including those sanctioning poison pills, that might impede corporate takeovers.[1] We took no final position on the preemption issue in that piece (we addressed that larger question in a companion article published in the Michigan Law Review discussed below[2]) but instead sought only to extend the then lively preemption debate beyond its narrow focus on anti-takeover statutes.  Thus, we expressly considered whether state legal rules condoning poison pills might be preempted, concluding, critically, that if “the Williams Act mandates shareholder autonomy, this state law rule clearly undermines that federal policy.”  We also explicitly noted that, under the so-called “meaningful opportunity to succeed” standard crafted by federal district judges in Delaware, state common law rules upholding poison pills lack just such a safety valve, and thus may be preempted under that test.

Prof. David Millon

Prof. David Millon

Moreover, we did not confine our analysis to poison pills, but more broadly subjected to preemption analysis all state corporate law rules that might impede takeover bids, including Delaware’s quite extensive judge-made law of takeovers.  State decisional law, like state statutes, must, of course, yield to federal law under the Supremacy Clause.  Unlike Professors Bebchuk and Jackson, therefore, we were able to explain (in our footnote 15) precisely why it is not the poison pill plans themselves but, rather, judicial rulings upholding them that comprise the state “law” subject to constitutional review.  This is a particularly important point for any preemption attack on Delaware poison pill law because it is almost exclusively common law in origin.  In focusing on statutes authorizing poison pills and, in the absence of statute, on poison pills as “private contracts,” Professors Bebchuk and Jackson therefore continue to underestimate the potential breadth of the preemption issue we first identified in 1989 and actually make the preemption analysis as to non-statutory poison pills much more elaborate than it needs to be.

Second, Professors Bebchuk and Jackson state that “no court has ever expressly considered a preemption challenge to the validity of state-law poison-pill rules.”  That too is an inaccurate statement.  In 1995, the Fourth Circuit Court of Appeals rejected a preemption challenge to four of Virginia’s corporate statutory provisions, including a provision authorizing poison pills and a provision codifying the director standard of conduct as being ‘good faith business judgment.”[3]  The Williams Act challenge thus went far beyond the Control Share Acquisition and Business Combination statutes. The Fourth Circuit considered the argument made by Tyson Foods, the challenger, that Virginia’s statutes were, in concert, so potent that they made it “impossible” in practice to succeed with a bid.  The Court, in forthrightly rejecting the Delaware federal court’s “meaningful opportunity to succeed” standard, observed that the Williams Act did not protect bidders, and upheld all of Virginia’s laws, including the pill provision, against both Supremacy and Commerce Clause attacks.  The Supreme Court denied certiorari.[4] Presumably the same analysis would apply to state court judgments validating poison pills in the absence of a statute.

Third, and perhaps of greatest importance, Bebchuk and Jackson’s arguments about the Williams Act’s preemption of poison pill rules are faulty regardless of whether they are sanctioned by statute or judicial decision.  As we explained at length in our Michigan Law Review article cited above, the Williams Act does not mandate a federal pro-takeover policy.  Rather, Congress chose not to take a position on one side or the other of the then novel debate about the costs and benefits of hostile takeovers.  For example, the Senate Report on the bill that became the Williams Act states that it “avoids tipping the balance of regulation either in favor of management or in favor of the person making the hostile takeover bid.”  SEC Chairman Cohen echoed this sentiment when he stated that “[t]he Commission does not believe that any bill should be adopted which would either encourage or discourage takeover bids . . ..”  Instead, Congress’ objective was the more modest one of requiring disclosure of information relevant to shareholders confronted with a tender offer (consistent with the basic premise of federal securities regulation) and alleviating pressures on shareholders to tender who might otherwise prefer to hold their shares.

As we noted in our Michigan piece, we think the mistake that scholars like Bebchuk and Jackson make when they ascribe preemptive force to the Williams Act results from a mistaken equation of Congressional assumptions about the world of hostile takeovers in 1968 with Congressional intentions about the appropriate balance of power between target company management and shareholders then and in the future.  In 1968 state corporate law did little to limit the freedom of shareholders to decide for themselves whether to accept a hostile bid.  Congress took that fact for granted and sought to enhance the ability of shareholders to make these choices in an informed, deliberate manner within the existing legal framework.  It is wrong, however, to claim that Congress sought not only to make a limited adjustment to the then current legal regime but sought also to in effect freeze that larger context and preserve it for future generations.  In 1968, Congress had no reason to foresee that by the late 1980s state legislation and judicial opinions would confer broad authority on target company management to block shareholder access to hostile bids.  That was not the problem that Congress chose to address in the Williams Act.  That statute thus is irrelevant to current debates about the lawfulness of poison pills and other state law anti-takeover devices.  Those seeking to resolve such questions in favor of shareholder autonomy need to look elsewhere for legal support.

Shareholder decisions about whether to accept hostile tender offers are more than simply choices about whether to sell or hold securities.  Because hostile bids are designed to achieve a change of control, shareholder responses have important corporate governance implications.  In this respect, efforts to tie target company management’s hands by attacking the legality of poison pills are not just an effort to give target company shareholders the opportunity to realize short-term gains.  They are also part of the larger shareholder empowerment agenda that would limit the discretion of management to determine the long-run best interests of the corporation and its shareholders.  That’s a bad idea in other contexts and it’s a bad idea here too.


[1] Lyman Johnson and David Millon, Does the Williams Act Preempt State Common Law in Hostile Takeovers?, 16 Sec. Reg. L.J. 339 (1989).

[2] Lyman Johnson and David Millon, Misreading the Williams Act, 87 Mich. L. Rev. 1862 (1989).

[3] WLR Foods, Inc. v. Tyson Foods, Inc., 65 F.3d 1172 (4th Cir. 1995).

[4] 516 U.S. 1117 (1996).

Prof. Lyman Johnson Presents at First Annual Workshop for Corporate & Securities Litigation at Illinois College of Law

November 12, 2013 Leave a comment
Lyman Johnson

Prof. Lyman Johnson

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.

George Mason Law & Economics Center 2014 Workshops for Law Professors

October 17, 2013 Leave a comment

The Law & Economics Center at George Mason University School of Law invites applications for four LEC Workshops for Law Professors in 2014:

1. LEC Workshop for Law Professors on Risk, Injury, Liability, and Insurance
http://www.masonlec.org/events/event/156-lec-workshop-law-professors-risk-injury-liability-insurance
January 30 – February 2, 2014, Hawks Cay Florida Keys Resort, Duck Key, FL

2. LEC Workshop for Law Professors on Public Choice Economics
http://www.masonlec.org/events/event/126-lec-workshop-law-professors-public-choice-economics
March 20-23, 2014, Sheraton Palo Alto and Stanford University, Palo Alto, CA

3. LEC Workshop for Law Professors on Empirical Methods
http://www.masonlec.org/events/event/152-lec-workshop-law-professors-empirical-methods
May 19-23, 2014 (lodging is not included), George Mason University School of Law, Arlington, VA

4. LEC Economics Institute for Law Professors
http://www.masonlec.org/events/event/157-lec-economics-institute-law-professors
June 15-27, 2014, Sheraton Steamboat Resort, Steamboat Springs, CO

TERMS AND CONDITIONS APPLICABLE TO ALL FOUR WORKSHOPS:

1. NO TUITION
2. REFUNDABLE DEPOSIT: For each workshop, accepted applicants must make a deposit bonding their attendance within 30 days of acceptance. For each workshop, the deposit is refunded within 30 days after successful completion of the workshop.
3. APPLICATION PROCEDURE: Please use the link below to apply: http://www.cvent.com/Surveys/Welcome.aspx?s=921dfb49-5ceb-44bd-87df-bd63d4acc371&cp=1
4. ACCEPTANCE: The LEC will begin evaluating applications on October 15, 2013

ADDITIONAL INFORMATION: For more information regarding these conferences or other initiatives of the Law & Economics Center, please visit: http://www.MasonLEC.org

Call or send an email to Jeff Smith, Coordinator, Henry G. Manne Program in Law & Economics Studies, at 703.993.8382 or jsmithQ@gmu.edu

New York University School of Law Global Fellows Program

October 16, 2013 Leave a comment

FELLOWSHIP APPLICATIONS FOR NEW YORK UNIVERSITY SCHOOL OF LAW
NOW AVAILABLE FOR THE 2014-2015 ACADEMIC YEAR

New York University School of Law is currently accepting applications for the following fellowships:

Global Fellows Program
Deadline: January 6, 2014

The Global Fellows Program offers an opportunity for academics, lawyers, government officials and post-doctoral students to spend up to a year in residence at NYU School of Law.  The principal objective of the Global Fellows Program is the production of scholarship through the advancement of research. We have a notable history of hosting distinguished scholars, judges, lawyers and government officials who wish to spend time advancing their scholarship and engaging in the intellectual life of the Law School.  Fellows are welcome to participate in academic activities such as fora, lectures, colloquia, seminars and conferences. They are also invited to various social events, including some organized specifically for Global Fellows and others aimed at the broader community.

Through the Global Fellows Forums, Global Fellows share their research with colleagues, students, and faculty and receive comment and feedback.  In this way, they contribute to the intellectual life of the Law School and provide an opportunity for the community to learn about current law research from a global perspective and in a wide range of topics.  The primary goal of the Global Fellows Program is the enhancement of research and it is expected that participation in the Program will result in a substantial publishable piece of scholarship.

In recent years, we have introduced a specialized post-doctoral programming component designed especially for our Post-Doctoral Global Fellows (fellows who have attained their doctoral degrees within the past four years and who have not yet secured a tenure-track academic appointment at an institution), in partnership with the J.S.D. program, to provide opportunities for the presentation of works-in-progress  and the exploration of methodological questions in legal research.

The Global Fellows Program currently offers fellowship opportunities for scholars in the following categories:

1.  Global and Senior Global Research Fellows
Global Research Fellows are tenured or tenure-track academics with a demonstrable background of strong legal scholarship.  More senior academics (for example, faculty members tenured for ten years or more) may be designated as Senior Global Research Fellows at the discretion of the selection committee.

2. Global and Senior Global Fellows from Practice & Government
Global Fellows from Practice & Government are government officials, judges, officials from international organizations and lawyers in private practice who wish to take a semester or academic year away from their posts to engage in serious scholarship.  More experienced officials and practitioners may be designated as Senior Global Fellows from Practice & Government at the discretion of the selection committee.

3. Post-Doctoral Global Fellows
Post-Doctoral Global Fellows are post-doctoral scholars who have attained their doctoral degrees within the past four years and who have not yet secured a tenure-track academic appointment at an institution.  Post-Doctoral Global Fellows meeting certain eligibility requirements may be considered for one of six merit-based Post-Doctoral Stipends of US$30,000 for the academic year (or US$15,000 per academic semester), subject to tax.

For more information and to apply:
http://www.law.nyu.edu/global/globalvisitorsprogram/index.htm

Call for Papers: CONVERGE! Conference

September 26, 2013 Leave a comment

Dear Friends,

Please join us for the CONVERGE! Conference.

CONVERGE! Re-Imagining the Movement to End Gender Violence
February 7-8, 2014
Fri. 8:30 a.m. – 5:30 p.m.   |   Sat., 8:30 a.m. – 4 p.m.

Hosted by University of Miami School of Law, University of Miami School of Law Race & Social Justice Law Review, Miami Worker’s Center Sisterhood of Survivors, and Center on Applied Feminism-University of Baltimore School of Law.

Register   |   Call for Papers & Presentations

For more than 40 years, gender violence has been the focus of U.S. feminist activism.

Where are we headed now?

The CONVERGE! conference will bring together survivorsactivistslawyersservice providers, and academics to reconsider the dominant U.S. responses to gender violence, to build capacity for political mobilization and reform, to share innovative approaches to gender violence, and to promote cross-fertilization and collaboration. Join the CONVERGE! conversation to build a transformative political agenda to refocus U.S. priorities in ways that better address the intersecting inequalities that create and maintain gender violence.

 

Sincerely,

CONVERGE! Co-Chairs
Donna Coker, University of Miami School of Law
Marcia Olivo, Miami Worker’s Center Sisterhood of Survivors
Leigh Goodmark, Co-Director, Center on Applied Feminism, University of Baltimore School of Law

Call for Papers Corporate Governance Symposium

September 12, 2013 Leave a comment

March 19, 2014, John L Weinberg Center for Corporate Governance, Alfred Lerner College of Business & Economics, University of Delaware

The John L Weinberg Center for Corporate Governance and the Finance Department of the Alfred Lerner College of Business & Economics at the University of Delaware will host a Corporate Governance Symposium on March 19, 2014. The focus of the Symposium will be on “Critical Issues for Boards and Institutional Investors in 2014.” The Symposium will feature up to four academic papers on corporate governance and a panel discussion featuring speakers from the Delaware judiciary and the academic, business and legal communities.

The John L. Weinberg Corporate Governance Best Paper Award will be presented during the symposium luncheon. Additionally, all travel and lodging expenses will be reimbursed for the presenting authors and discussants.

TOPICS: We encourage submission of unpublished papers addressing topics within the field of corporate governance that are of critical importance in 2014 for boards of directors and institutional investors with a focus on: board and committee composition and structure, board and/or management succession planning, dual role of the CEO/Chairman, the board’s role in monitoring risk, executive and director compensation, shareholder engagement, the role and regulatory issues relating to the proxy advisory industry, and corporate governance reform measures associated with the foregoing.

Faculty from both business and law schools are encouraged to submit their research.

Finally, we welcome everyone to attend the conference whether or not you are a program participant.

PAPER SUBMISSION PROCEDURE: Please submit papers in a PDF version no later than November 25, 2013. Please use the following format as the file name when you save your paper: Last name (all caps), underscore, shortened name of paper, period, pdf (e.g., DOE_Shareholder Engagement.pdf). Please submit your papers to Louisa Cresson atWeinberg-corp-gov@udel.edu. Alternatively, you may send a hard-copy to:

Louisa K. Cresson
John L. Weinberg Center for Corporate Governance
Alfred Lerner College of Business & Economics
University of Delaware
Alfred Lerner Hall
Suite 103
20 Orchard Road
Newark, DE 19716
302-831-2786

Decisions regarding the symposium program will be made by January 17, 2014. General inquiries regarding the conference should be directed to Louisa Cresson.

Call For Academic Papers and Conference Announcement The 21st Belle R. and Joseph H. Braun Memorial Symposium

September 12, 2013 Leave a comment

July 10 and 11, 2014, Chicago, Illinois, USA

The 2014 International Elder Law and Policy Conference will be held on Thursday, July 10, and Friday, July 11, 2014, in Chicago. This conference will be funded primarily by the Belle R. and Joseph H. Braun Endowment Fund of The John Marshall Law School.

CONFERENCE ORGANIZERS AND HOSTS: The Conference Organizers and Hosts are: The John Marshall Law School, Chicago, Illinois, USA; Roosevelt University, College of Arts and Sciences, Chicago, Illinois, USA; and, The East China University of Political Science and Law, Shanghai, China.

PURPOSE OF THE CONFERENCE: The Conference will bring international scholars, advocates and policy makers together to participate in an academic discussion about the law, policy, and implementation of legal protections for the elderly around the globe. This conference is purposely intended to parallel the current discussions of the United Nations’ Open-Ended Working Group on Aging. The Conference organizers are hoping to draft and develop a model International Bill of Rights for Elderly Individuals based on the research presented and the ensuing discussions.

DETAILS/TOPICS: There will be 6 to 8 general sessions over a two-day conference, and each session is expected to have 2 to 3 authors discussing their current research, with other academics and experts serving as moderators and discussants on the panel. This conference is meant to complement and supplement the discussions being held through the United Nations pursuant to General Assembly resolution 65/182, based on the following general topics:
– The elimination of age discrimination;
– Autonomy, independent living, and health care issues affecting the elderly;
– Life continuing with dignity because of adequate access to social security and other financial resources;
– The prevention of elder abuse and violence; and
– Access to justice for elderly individuals in need of assistance.

The final agenda for the conference will be determined based on the exact topics and countries analyzed in the abstracts accepted for presentation.

CALL FOR ACADEMIC ARTICLES AND PAPERS: There is a call for original academic research on laws and policy that can protect elderly individuals around the world, which will be presented at the 2014 International Elder Law and Policy Conference in Chicago. From the submitted abstracts, the Conference organizers will develop the agenda for the conference.

The original research can be based on the following general themes (either limited to one or two countries, or a broader analysis of multiple countries):
– The elimination of age discrimination;
– Autonomy, independent living, and health care issues affecting the elderly;
– Life continuing with dignity because of adequate access to social security and other financial resources;
– Prevention of elder abuse and violence; and
– Access to justice for elderly individuals in need of assistance.

ABSTRACT SUBMISSION PROCEDURE: Abstracts may be submitted by academics, graduate students, advocates, and other interested individuals and groups, of all disciplines, as long as the proposals focus on the law and public policy. Abstracts must be written in English, and should be submitted to 2014elderlawconference@jmls.edu by October 31, 2013; and, the Conference organizers will contact all authors by November 15, 2013 with decisions on which abstracts have been accepted. Late submissions may be accepted if space remains available.

THE FINAL ACADEMIC PAPER SUBMISSIONS: Authors of abstracts accepted by the Conference organizers will be expected to submit a draft of the basically complete article, in English, by April 28, 2014. After some general peer-reviewed comments, suggestions, and questions are provided back to each author by May 30, 2014, each author will then re-submit a revised draft, incorporating the comments, suggestions and questions, by June 16, 2014. All revised draft papers will be posted on the conference website ahead of the conference, and all will clearly be marked “Draft Only – Do not Cite or Distribute.” After discussing their research at the Conference, authors will then have until August 15, 2014 to submit the final article, which, if accepted as publishable through peer review, will be published in one of the academic journals or law reviews associated with The John Marshall Law School, Roosevelt University, or East China University of Political Science and Law.

Any other author can submit an original academic article or paper in final form by August 15, 2014 for consideration of publication, even if the author did not participate in the conference.

CONFERENCE CO-SPONSORS (still in formation):
The Braun Lecture Fund, The John Marshall Law School, Chicago, Illinois, USA
The Chicago Bar Association
The Sino-American Research Center for an Aging Population
Chicago Sister Cities International, China Committee
Chinese American Service League, Chicago

THE CONFERENCE: Information about the 21st Braun Memorial Symposium, including registration links and travel and lodging suggestions, will open by January 15, 2014, through http://www.jmls.edu/braun

FURTHER INFORMATION: All questions about this conference, or submission of abstracts or articles, should be directed to Barry Kozak at bkozak@jmls.edu; 1.312.427.2737 ext. 524.

Please feel free to post this call for papers and conference announcement, and to pass it along to your colleagues. 

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