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archive fall 2021

Each week I move material from the BA front page to this page. I add the material to this page at the top so the beginning of the semester appears at the bottom.

Week 13: November 15-19 The last reading assignment for the semester is pages 468-502 of the Casebook ((Goodwin v Agassiz, SEC v Texas Gulf Sulphur, Dirks v SEC, Salman v US, US v O’Hagan).

Asynchronous lectures for week 12 Examples of securities fraud claims ;Insider Trading: Goodwin v Agassiz and Texas Gulf Sulphur (audio from 2020); Securities Regulation: Insider Trading (Insiders); Securities Regulation: Insider Trading (Misappropriation)

The last scheduled class for section A is on Tuesday November 23 and the last scheduled class for section B is on Tuesday November 30. I plan to schedule review sessions for some times on the Thursday and Friday of the week after Thanksgiving. And I plan to be available for much of that week to meet with you to answer questions over zoom. And I am also happy to respond to email questions.
The exam will be a self-scheduled take-home exam which you will be able to take any time during the exam period (Dec. 6-17).
I will be willing to answer questions about the material up to and including December 5th but not after that date.

Week 12: November 8-12 Please read pages 410-468 of the Casebook (Robinson v Glynn, Doran v Petroleum Management Corp., Escott v Bar-Chris Construction Corp., Halliburton Co. v Erica P John Fund, Inc., West v Prudential Securities, Inc., Santa Fe Industries v Green, Deutschman v Beneficial Corp.)

Asynchronous lectures for week 12 Securities: Definitions; Securities: Registration and Liability; Securities: §10(b) and Rule 10b-5 ; Securities: Santa Fe v Green

Here is a Memo on the Fall 2021 Mid Semester Assignment

Week 11: November 1-5 This week we are focusing on derivative litigation and the Delaware Supreme Court has just issued a couple of significant judgments in this area in Brookfield Asset Management v Rosson (Del. 2021) and United Food and Commercial Workers Union v. Zuckerberg (Del. 2021). In class we will need to focus on these cases, and because they are significant I am going to ask you to read the judgments in addition to CB pages 358-410 (In Re Medtronic Inc. Shareholder Litigation, Grimes v Donald, Marx v Akers, Auerbach v Bennett, Zapata v Maldonado, Delaware County Employees Retirement Fund v Sanchez, In Re China Agritech Inc. Shareholder Derivative Litigation) and In re Oracle Corporation Derivative Litigation (Del. Ch. 2019).

I am sorry to land such a lot of reading on you at this stage, but these are important decisions.

Here are some examples of derivative suits from the cases we studied earlier: Kamin v Amex (dividend policy rather than a shareholder’s claim to be entitled to dividends), Shlensky v Wrigley, Walt Disney, Stone v Ritter.

A corporate opportunities case would be a derivative claim if brought by a shareholder, but whereas E-bay is a derivative claim, Broz is a case brought after a change in control of the corporate decision-making process (Pricellular acquisition, change in board composition).

Smith v Van Gorkom (transactions in corporate control unfairly affecting the plaintiff shareholder where directors have a duty to shareholders) is an example of a direct claim by shareholders.

Some issues (think, for example about Caremark-type situations) can be analyzed either as breaches of directors’ duties (derivative) or as securities claims, focusing on failures with respect to disclosure (direct).

Before Brookfield Asset Management I would have told you that dilution claims (e.g. think Benihana) could be stated as direct claims.

Asynchronous lectures for week 11Corporations: Direct or Derivative?; Corporations: Demand; Corporations: Special Litigation Committees; Corporations: Sanchez and China Agritech; Corporations: Oracle

Here is a Memo on the Fall 2021 Mid Semester Assignment

Week 10: October 25-29 We will begin next week’s classes with the Caremark issues (Stone v Ritter, Marchand v Barnhill). I also want to look at some cases involving questions of control, and the different procedures the Delaware Courts have mandated, depending on whether a controlling stockholder is involved. So I am also asking you to read In re Tesla Motors, Inc. Stockholder Litigation (Del. Ch. 2020). In the powerpoint lecture on this case I will discuss Kahn v M & F Worldwide Corp (Del. 2014, noted in the Tesla decision at fn 54) and Corwin v KKR Financial Holdings LLC (Del. 2015) which I am not requiring you to read (although Kahn is in your casebook at p 752). Please do read In Re Mindbody, Inc. Stockholders Litigation (Del. Ch. 2020).

In 2018 Vice Chancellor Slights found that it was reasonably conceivable that Elon Musk, as a controlling stockholder, controlled the Tesla Board when it approved the acquisition of Solarcity, a corporation set up by Musk and 2 cousins which had been experiencing financial difficulties. The idea of Musk being a controlling stockholder was based partly on his 22.1% shareholding at the time and also on other factors, including Musk’s significance to Tesla (the VC noted that Musk might be the minority blockholder who could rally other stockholders to bridge the gap between the 22.1% and a majority holding and that the Plaintiffs had alleged that investments in Tesla represented investments in Musk and his vision for Tesla’s future (this was not enough on its own)), his willingness in the past to facilitate the ouster of senior management which might have influenced the Tesla directors, and the fact that practically no steps were taken to separate Musk from the Board’s consideration of the acquisition (for example there was no independent committee).

Corwin holds that the business judgment rule applies to a transaction decision made by the Board which is approved by a majority of disinterested, fully informed and uncoerced stockholders, so long as there is no conflicted controlling stockholder. Kahn provides that a transaction involving a controlling stockholder will be subject to the business judgment rule if it is both (i) negotiated by a well-functioning special committee of independent directors and (ii) conditioned on the approval of a majority of the minority shareholders. This is another example of the focus on process we have noticed before. The involvement of a controlling stockholder has implications for how much process is necessary to ensure that the business judgment rule applies. Tesla shows how flexible the definition of control is.

Where Board members want to rely on stockholder approval it is important to note that the stockholder vote must be by disinterested, fully informed, and uncoerced stockholders. Material misstatements and/or omissions in disclosures to the stockholders will remove the protective effect of the stockholder vote. Where negotiation of the transaction by a special committee is required (where there is a controlling stockholder) the directors who are members of the committee must be independent (and this is another area of uncertainty, like the definition of control).

Asynchronous lectures for week 10Corporations: Oversight Liability (1); Corporations: Oversight Liability 2; Corporations: Corwin, Kahn, Tesla; Corporations: Mindbody

Week 8: October 11-15: Fall Break. I hope you have a good break.
Your answers to the Business Associations Fall 2021 Mid-Semester Writing Assignment are due October 8, 2021. Please send your answer, marked with your AGN to Claire Amador at camador@law.miami.edu.

Week 9: October 18-22 Reading assignment for week 9: Please read Casebook pages 296-358 and Marchand v Barnhill (Del. Supr. 2019). (Francis v United Jersey Bank; Bayer v Beran, Benihana of Tokyo v Benihana, Broz v Cellular Information Systems Inc., In Re eBay Inc. Shareholders Litigation, Sinclair Oil Corp. v Levien, Zahn v Transamerica, Fliegler v Lawrence, In Re the Walt Disney Co. Derivative Litigation [Stone v Ritter, Marchand v Barnhill]).

Asynchronous lectures for week 9:Corporations: Conflicts of Interest, Corporate Opportunities; Corporations: Controlling Stockholders; Corporations: Walt Disney; Corporations: Oversight Liability

Question to consider for class discussion:

Anna, the CFO and a director of Beta, Inc, agrees to go on an all-expenses paid trip to the Gammaco investment banking trip in a luxury resort with her family. Anna’s cousin is the CEO of Gammaco. Their families have always been very close, vacationing together every summer on the family farm for as long as they can both remember.

Three other members of the (7 member) Beta board also go on the trip to the luxury resort. After the trip, Anna recommends to the board that Beta hire Gammaco as its investment banker for Beta’s planned acquisition of Targetco. With no discussion the board agrees to the recommendation on the terms proposed by Gammaco. The attempt to acquire Targetco fails, but Beta is contractually obliged to pay a very large fee to Gammaco for its work.

Della, a shareholder in Beta, learns about Anna’s relationship with the CEO of Gammaco and wants to know if there is a basis to challenge the contract between Beta and Gammaco.

Week 7: October 4-8 Your answers to the Business Associations Fall 2021 Mid-Semester Writing Assignment are due October 8, 2021. Please send your answer, marked with your AGN to Claire Amador at camador@law.miami.edu.

Reading assignment for week 7: Casebook pages 240-296 (Elf Atochem North America Inc. v Jaffari, Fisk Ventures LLC v Segal, Netjets Aviation Inc. v LHC Communications LLC, McConnell v Hunt Sports Enterprises, Racing Investment Fund 2000 LLC v Clay Ward Agency, Inc., New Horizons Supply Co-operative v Haack, Kamin v American Express Company, Smith v Van Gorkom).

In the synchronous sessions this week we will discuss the readings and any questions you may have about the material.

Asynchronous lectures for week 7: LLCs Part 1; LLCs Part 2; Corporations: Duty of Care

With respect to the break up of relationships in an LLC., as well as focusing on dissolution you should be aware that, in contrast to the partnership default rules, LLC rules may result in a member of an LLC who leaves being stuck with a financial interest in the LLC which they are unable to liquidate. The Florida statute provides for dissociation of a member to occur, but there is not a statutory buy-out. Under §605.0603 “a transferable interest owned by the person in the person’s capacity immediately before dissociation as a member is owned by the person solely as a transferee.” The ex-member loses management rights but retains financial rights. But unless there is a provision in the operating agreement this does not include a right to be bought out. And although the statute provides for dissolution, including court orders for dissolution which apply in a range of circumstances including deadlock, these provisions can be invoked by members and managers but not by ex-members. If those running the LLC decide not to make financial payments to the ex-member there may not be anything the ex-member can do about the situation – there’s a risk of being financially locked in but frozen out of decision-making and information. In the corporate context this sort of situation could be addressed by remedies for oppression. In the partnership context there would be a buyout right under RUPA. In the LLC typically this is an issue that is only resolved if there is a provision in the operating agreement.

This is the article on veil piercing I mentioned in class: Jonathan Macey and Joshua Mitts, Finding Order in the Morass: The Three Real Justifications for Piercing the Corporate Veil, 100 Cornell L. Rev. 99 (2014).

Week 6: September 27- October 1: In the week 5 class discussion sessions I did not address the veil piercing material, so that will be included in the week 6 synchronous sessions. For week 6 please read pages 214-276 of the Casebook, dealing with the role and purposes of corporations and LLCs (it is possible that in the discussion sessions we will not be able to cover all of the LLC material).

In the discussion sessions this week we will start with questions you may have about veil piercing, then think about the corporate purpose materials (for example, do you think about ethical/social impact issues in making purchasing decisions?) and LLCs.

The Florida Corporations Statute allows for bylaws or articles of incorporation to contain exclusive forum provisions see FL. Stats.§§ 607.0206, 607.0208 but prohibits fee-shifting bylaws. The Florida Statue also expressly addresses the arbitration issue in §607.0208(3): “No provision of the articles of incorporation or the bylaws may prohibit bringing an internal corporate claim in all courts in this state or require such claims to be determined by arbitration.”

With respect to the break up of relationships in an LLC., as well as focusing on dissolution you should be aware that, in contrast to the partnership default rules, LLC rules may result in a member of an LLC who leaves being stuck with a financial interest in the LLC which they are unable to liquidate. The Florida statute provides for dissociation of a member to occur, but there is not a statutory buy-out. Under §605.0603 “a transferable interest owned by the person in the person’s capacity immediately before dissociation as a member is owned by the person solely as a transferee.” The ex-member loses management rights but retains financial rights. But unless there is a provision in the operating agreement this does not include a right to be bought out. And although the statute provides for dissolution, including court orders for dissolution which apply in a range of circumstances including deadlock, these provisions can be invoked by members and managers but not by ex-members. If those running the LLC decide not to make financial payments to the ex-member there may not be anything the ex-member can do about the situation – there’s a risk of being financially locked in but frozen out of decision-making and information. In the corporate context this sort of situation could be addressed by remedies for oppression. In the partnership context there would be a buyout right under RUPA. In the LLC typically this is an issue that is only resolved if there is a provision in the operating agreement.

The asynchronous lectures for week 6 will appear here:
Corporations: Veil Piercing; Corporations: Role and Purposes (note that I have updated the text to reflect changes to the Department of Labor’s attitude to ESG since the Presidential transition, although the soundtrack still refers to the prior administration’s views); LLCs Part 1

Week 5: September 20-24
As you will have noticed, we have deviated slightly from the indicative syllabus I posted at the beginning of the semester. In the reading assignment I am posting here I am again running slightly behind what that syllabus would suggest.
Reading Assignment: Casebook pp. 166-211 (Kovacik v Reid, G&S Investments v Belman, In Re El Paso Pipeline Partners LP Derivative Litigation, Boilermakers Local 154 Retirement Fund v Chevron Corp., Walkovsky v Carlton, Sea-Land Services Inc. v Pepper Source , Frigidaire Sales Corp. v Union Properties Inc.), also Salzberg v. Sciabacucchi (Del. Sup. 2020) (the case belongs on page 198 just after the discussion of the ATP Tour case). We will look at limited liability partnerships (see Florida Statutes § 620.8306), and we will also look at Florida Statutes § 620.8103 (which addresses the issue of contracting around default rules).

As a footnote to the Boilermakers case, the Florida Corporations Statute allows for bylaws or articles of incorporation to contain exclusive forum provisions see FL. Stats.§§ 607.0206, 607.0208 but prohibits fee-shifting bylaws. The Florida Statute also expressly addresses the arbitration issue in §607.0208(3): “No provision of the articles of incorporation or the bylaws may prohibit bringing an internal corporate claim in all courts in this state or require such claims to be determined by arbitration.”

Assignment for class discussion:In the discussion sessions this week we can address any questions you may have, and let’s also consider this hypo:

Ally and Billy set up a partnership in Florida five years ago and filed as a LLP immediately. In the second year of the business they forgot to file the required annual report and pay the filing fee by the deadline, and the Department of State notified them that they were no longer a LLP as of the 4th Friday in September. They were very busy at the time and did not get around to applying for reinstatement (including filing the missing annual report) until the following January. In the December before they applied for reinstatement some of their customers sued them for injuries they claim were caused by the partnerships’s products which the customers had acquired at the beginning of November. In what circumstances will Ally and/or Billy face personal liability for any damages?

The asynchronous lectures for week 5 will appear here:
Partnership Part 6
Corporations: Promoters; Controlling Litigation ; Corporations: Veil Piercing

Week 4: September 13-17
Reading Assignment: Casebook pages 122-166 (Lawlis v Kightlinger
& Gray, In Re Fulton, National Biscuit Company v Stroud, Summers v Dooley, Day v Sidley & Austin, Owen v Cohen, Collins v Lewis, Giles v Giles Land Company, Prentiss v Sheffel, Pav-Saver Corporation v Vasso Corporation).

Assignment for class discussion: The hypothetical on page 134 of the Casebook, and then we will work through the dissolution/dissociation material.

The asynchronous lectures for week 4 will appear here:
RUPA; Partnership Part 4; Partnership Part 5

Monday September 13: Here is the Business Associations Fall 2021 Mid-Semester Writing Assignment due October 8, 2021. I am not specifying a length limit but think that somewhere between 4-6 pages would be an appropriate length for your answers. I will post details about submission in a couple of weeks. You will need to submit your answers with your AGN (the one for assignments during the semester).

In case it is useful, here is the

Business Associations Fall 2020 Writing Assignment, and here is my outline Memo on the Midsemester Assignment.

Week 3: September 6-10 Reading Assignment: Please read the Florida Revised Uniform Partnership Act (the Florida version of the Revised Uniform Partnership Act). It is a good idea to have a sense of the entire statute although we will focus on some specific provisions.
Please also read Casebook pages 83-139 (Fenwick v Unemployment Compensation Commission, Martin v Peyton, Southex Exhibitions v Rhode Island Builders Association, Young v Jones, Meinhard v Salmon, Sandvick v LaCrosse, Meehan v Shaugnessy, Lawlis v Kightlinger & Gray, In Re Fulton, National Biscuit Company v Stroud, Summers v Dooley, Day v Sidley & Austin)

Assignment for Class Discussion: Questions for discussion for week 3

The asynchronous lectures for week 3 will appear here: Partnership Part 1; Partnership Part 2; Partnership Part 3; RUPA; Partnership Part 4

Week 2: August 30-September 3 I have moved the week 1 assignment and lectures to the archive page. I will do this each week on Thursday or Friday. For week 2 classes, please read Casebook pages 25- 82 (Botticello v Stefanovicz, Hoddeson v Koos, Atlantic Salmon v Curran, Humble Oil v Martin, Hoover v Sun Oil, Murphy v Holiday Inns, Miller v McDonald’s, Ira S Bushey & Sons v US, Manning v Grimsley, Arguello v Conoco, Majestic realty v Toti Contracting, Reading v Regem, Rash v JV Intermediate, Town & Country House & Home Service v Newbery).
Assignment for Class Discussion: Here are Agency hypotheticals for week 2 for discussion on Tuesday/Thursday.
The asynchronous lectures for week 2 will appear here:
Agency Part 3 (narration begins on slide 2); Agency Part 4; Agency Part 5; Agency Part 6

First Class Assignment for classes on Tuesday August 24 and Thursday August 26. Please read pages 1-24 in the Casebook. By August 16 I will also post to this blog the lectures for the first week (on class organization and policies, Casebook pages 1-24 and on the relationship between business and society) and the syllabus and class policies. Please note that most of my asynchronous lectures for this class are in powerpoint format but they are narrated so that you can hear me talk through the slides.

If you do not manage to acquire a copy of the Casebook before the first class you could read the cases online (I have listed them) or just rely on my lectures where I am outlining the main points I would like you to take from the cases. The issues we should cover in class in week 1, in addition to any questions you may have so far, really relate to the question of the risk that a relationship will be characterized as an agency relationship, and drawing distinctions between implied actual authority and apparent authority.

WEEK 1: August 23-27: Reading Assignment: Casebook pages 1-24 (Gorton v Doty, A,. Gay Jenson Farms v Cargill, Inc., Mill Street Church of Christ v Hogan, Three-Seventy Leasing Corporation v Ampex Corp., Watteau v Fenwick) Note: You can access the Restatement 3rd of Agency via the Hein Online link on the Law School Library web page (look in Hein Online (via the quick link) and then find the American Law Institute Library). Assignment for Class Discussion: Introduction to Business & Society and Agency (discussion based on Gorton v Doty, Cargill and authority)

Here is the Syllabus

Here is Chapter 1of the Casebook in case you are waiting for it to arrive.

I have scheduled the synchronous zoom class sessions through Blackboard and you should have received the announcement.

Lectures: Welcome to Business Associations; Course Objectives and Plan, An Introduction to Business and Society, Agency Part 1, Agency Part 2