ba archive fall 2023
This is the archive page for Business Associations for Fall 2023. Once each week material is transferred from the front page to this page.
Casebook: Stephen M. Bainbridge, Business Associations: Cases and Materials on Agency, Partnerships, LLCs, and Corporations (11th Edition, 2021). I will assign some additional cases, and provide links to statutes on this blog.
Preparing for the final exam
Themes of the course:
Form and Substance
Indeterminate/ fuzzy rules
Contracting and fiduciary duties: what is the role of contract in business organization law?
Control of litigation (e.g. forum provisions, rules on derivative litigation)
Here is the List of Cases ( I will include this as an appendix to the exam)
List of statutes you should know for the final exam. It is a short list and we clearly looked at other statutes but primarily through the cases so with respect to much of the statutory material I think studying the cases should be sufficient. I did not, for example , include s 10(b) of the Securities Exchange Act and R. 10b-5, although I might ask about cases relating to those provisions.
If I expect you to engage in analysis of the precise wording of a statute I will provide it in the exam.
Florida Revised Uniform Partnership Act §§ 620.8103 (RUPA § 103 and compare RUPA 2013 s 105 (see blog archive at week 5)), 620.8202 (RUPA § 202), 620.8404 (RUPA § 404 AND compare this provision with RUPA § 409 set out in the Casebook at pp. 117-118), 620.8401 (RUPA § 401).
DGCL §102(b)(7)(see blog archive at week 9)
NRS 78.138 (7) (see blog archive at week 12).
Week 15 (November 28, 30)
On Tuesday we will continue to discuss the Spring 2019 exam, and then look at the Fall 2020 exam.
On Thursday we will discuss the Fall 2022 exam.
Week 14 (November 21)
We will begin by discussing this Amicus Brief by ICAN in SEC v Panuwat. Then we will focus on review. I will discuss my exam instructions.
If you have particular questions you would like me to address in this session or either of the others (November 28, 30) please let me know. I will take questions in the sessions, so it is not necessary to ask in advance. I am also happy to answer questions outside of class, either by email, or by zoom. I will answer your questions up until midday on December 11.
On November 21 we will discuss the Spring 2019 exam, and, if there is time, begin to look at the Fall 2020 exam.
Week 13 (November 14, 16)
On Tuesday next week we will begin with the cases we didn’t get to from this week’s reading (West v Prudential Securities, Inc., Santa Fe Industries v Green, Deutschman v Beneficial Corp.)
For Tuesday’s class, please read Casebook pp 423-449 (Goodwin v Agassiz, SEC v Texas Gulf Sulphur, Dirks v SEC, Salman v US).
For Thursday please read pages 449-458 (US v O’Hagan). We will also think about the SEC’s arguments relating to shadow trading in SEC v Panuwat. An SEC litigation release described the facts as follows:
According to the SEC’s complaint, filed in the U.S. District Court for the Northern District of California, Matthew Panuwat, the then-head of business development at Medivation, a mid-sized, oncology-focused biopharmaceutical company, purchased short-term, out-of-the-money stock options in Incyte Corporation, another mid-cap oncology-focused biopharmaceutical company, just days before the August 22, 2016 announcement that Pfizer would acquire Medivation at a significant premium. Panuwat allegedly purchased the options within minutes of learning highly confidential information concerning the merger. According to the complaint, Panuwat knew that investment bankers had cited Incyte as a comparable company in discussions with Medivation and he anticipated that the acquisition of Medivation would likely lead to an increase in Incyte’s stock price. The complaint alleges that Medivation’s insider trading policy expressly forbade Panuwat from using confidential information he acquired at Medivation to trade in the securities of any other publicly-traded company. Following the announcement of Medivation’s acquisition, Incyte’s stock price increased by approximately 8%. The complaint alleges that, by trading ahead of the announcement, Panuwat generated illicit profits of $107,066.
Please read this Amicus Brief by ICAN in SEC v Panuwat.
November 15. Here is the list of statutes you should know for the final exam. It is a short list and we clearly looked at other statutes but primarily through the cases so with respect to much of the statutory material I think studying the cases should be sufficient. I did not, for example , include s 10(b) of the Securities Exchange Act and R. 10b-5, although I might ask about cases relating to those provisions.
If I expect you to engage in analysis of the precise wording of a statute I will provide it in the exam.
Florida Revised Uniform Partnership Act §§ 620.8103 (RUPA § 103 and compare RUPA 2013 s 105 (see blog archive at week 5)), 620.8202 (RUPA § 202), 620.8404 (RUPA § 404 AND compare this provision with RUPA § 409 set out in the Casebook at pp. 117-118), 620.8401 (RUPA § 401).
DGCL §102(b)(7)(see blog archive at week 9)
NRS 78.138 (7) (see blog archive at week 12).
Week 12 (November 7, 9)
We will finish up the semester by focusing on disclosure, and in particular disclosure, fraud liability and insider trading under the federal securities laws. This is a major area where legal malpractice occurs, so it is useful to have a sense of the issues. While we will focus on securities law issues relating to business entities be aware that a range of investment schemes can be securities schemes and therefore involve legal risks.
For Tuesday’s class, please read Casebook pp 365-402 (Robinson v Glynn, Doran v Petroleum Management Corp., Escott v Bar-Chris Construction Corp.). I also want to focus on issues relating to whether and when cryptocurrencies are securities.
Please also read this SEC Memorandum of Law in support of Motion for Summary Judgment in SEC v Terraform (we will discuss this document after Robinson v Glynn).
SEC enforcement action with respect to cryptocurrencies is one context in which commentators are invoking the major questions doctrine. The SEC, of course, argues that it is not in this context exercising any powers it is not expressly authorized to exercise. And, if we read the definition of security, it is quite clear that Congress tried to draft a very very broad provision that would include instruments which might be sold to investors who would need to be protected against fraud.
For Thursday please read pages 402-423 (Halliburton Co. v Erica P John Fund, Inc., West v Prudential Securities, Inc., Santa Fe Industries v Green, Deutschman v Beneficial Corp.).
I mentioned the Nevada statute addressing directors’ and officers’ fiduciary duties: NRS 78.138 (7) a director or officer is not individually liable to the corporation or its stockholders or creditors for any damages as a result of any act or failure to act in his or her capacity as a director or officer unless: (A) the [bjr] presumption … Has been rebutted; and (B) it is proven that:
(1) the director’s or officer’s act or failure to act constituted a breach of his or her fiduciary duties as a director or officer; and (2) such breach involved intentional misconduct, fraud or a knowing violation of law.
Week 11 (October 31, November 2)
On Tuesday we will begin with Delaware County Employees Retirement Fund v Sanchez, City of Birmingham Ret. and Relief System v Good and Notes on Special Litigation Committees and Derivative Suits.
Please also read Casebook pages 686-716 (Weinberger v UOP, Kahn v M&F Worldwide) and 778-782 (Corwin v KKR Financial Holdings LLC). Here are some Notes on Conflicted Controller Transactions.
On Thursday I think we will still have some of Tuesday’s assigned material to discuss. Then we will focus on In Re Mindbody, Inc. Stockholders Litigation (Del. Ch. 2023)(post-trial opinion). This is a very long opinion, but I think it will be helpful to focus on the case. Last year we read an earlier decision in this same litigation.
This case introduces us to issues relating to disclosure. In City of Fort Myers General Employees Pension Fund v Haley (Del. 2020) the Delaware Supreme Court found that a CEO’s failure to disclose post-merger compensation was material. In a pretrial opinion in Mindbody, VC McCormick wrote:
As Haley illustrates, fraud-on-the-board theories frequently involve two materiality inquiries—the first is whether the key fiduciary’s alleged conflicts were material to him, and the second is whether the board would have viewed information concerning those alleged conflicts as material.
strong>Week 10 (October 24, 26)
On Tuesday we will begin by discussing the 2 mid-semester hypotheticals I linked to before the break.
Business Associations Fall 2021 Mid-Semester Writing Assignment
Business Associations Fall 2020 Writing Assignment
Here is a memo I wrote on the 2021 hypo:
Memo on the Fall 2021 Mid Semester Assignment
On Tuesday we will also discuss oversight liability and, in particular, Marchand v Barnhill (Del. Supr. 2019) and In re McDonald’s Corporation Stockholder Derivative Litigation (Del. Ch 2023).
Next week we will also focus on derivative litigation. We may or may not be able to begin looking at derivative litigation on Tuesday. So, for Tuesday I am going to ask you to read my Notes on Derivative Litigation as the starting point. Please read also Brookfield Asset Management v Rosson (Del. 2021).
For Thursday please read CB pp 319-328 (Grimes v Donald), 335-365 (Auerbach v Bennett, Zapata v Maldonado, Delaware County Employees Retirement Fund v Sanchez, City of Birmingham Ret. and Relief System v Good). Here are some Notes on Special Litigation Committees and Derivative Suits (to read after the assigned pages in the CB).
Week 9 (October 17, 19)
On Tuesday we will begin with the 2 corporate opportunities cases (Broz v Cellular Information Systems Inc., In Re eBay Inc. Shareholders Litigation). Please also read to page 305 (Sinclair Oil Corp. v Levien, Zahn v Transamerica, Fliegler v Lawrence, In re Investors Bancorp, Inc. Stockholder Litigation, In Re the Walt Disney Co. Derivative Litigation) (if we start looking at the Walt Disney case on Tuesday we will not finish it that day).
For Thursday please read to page 313 (Stone v Ritter) and also read Marchand v Barnhill (Del. Supr. 2019) and In re McDonald’s Corporation Stockholder Derivative Litigation (Del. Ch 2023).
On conflicting interest transactions, compare DGCL §144 with Fl. Stats. §607.0832.
Oct 4, 2023: DGCL §102(b)(7) provides the certificate of incorporation may include:
“A provision eliminating or limiting the personal liability of a director or officer to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director or officer, provided that such provision shall not eliminate or limit the liability of:
(i) A director or officer for any breach of the director’s or officer’s duty of loyalty to the corporation or its stockholders;
(ii) A director or officer for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
(iii) A director under § 174 of this title;
(iv) A director or officer for any transaction from which the director or officer derived an improper personal benefit; or
(v) An officer in any action by or in the right of the corporation.
No such provision shall eliminate or limit the liability of a director or officer for any act or omission occurring prior to the date when such provision becomes effective.
An amendment, repeal or elimination of such a provision shall not affect its application with respect to an act or omission by a director or officer occurring before such amendment, repeal or elimination unless the provision provides otherwise at the time of such act or omission.
All references in this paragraph (b)(7) to a director shall also be deemed to refer to such other person or persons, if any, who, pursuant to a provision of the certificate of incorporation in accordance with § 141(a) of this title, exercise or perform any of the powers or duties otherwise conferred or imposed upon the board of directors by this title.
All references in this paragraph (b)(7) to an officer shall mean only a person who at the time of an act or omission as to which liability is asserted is deemed to have consented to service by the delivery of process to the registered agent of the corporation pursuant to § 3114(b) of Title 10 (for purposes of this sentence only, treating residents of this State as if they were nonresidents to apply § 3114(b) of Title 10 to this sentence).”
Week 8 (October 9-13): Fall Break
I wish you all a good fall break. If you choose to spend the break reviewing material for BA you may find it helpful to look at these mid semester hypotheticals I wrote for this class:
Business Associations Fall 2021 Mid-Semester Writing Assignment
Business Associations Fall 2020 Writing Assignment
Week 7 (October 3, 5)
On Tuesday we will begin with Dodge v Ford Motor Co and Shlensky v Wrigley. Please read to page 240 in the Casebook (Kamin v American Express Company, Smith v Van Gorkom). If we get to begin discussing Smith v Van Gorkom we won’t get to finish it on Tuesday.
DGCL §102(b)(7) was amended in 2022 to allow for officer exculpation, although not where the claim is a derivative claim.
I have put links to the Florida and Delaware corporations statutes on the course materials page.
For Thursday please read to page 273 (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).
Here is the “Worthless Clause” I mentioned, which was discussed in NY v Trump (the judgment is not an assigned reading. I am provising the link in case you are interested):
Assets are stated at their estimated current values and liabilities at their estimated current amounts using various valuation methods. Such valuation methods include, but are not limited to, the use of appraisals , capitalization of anticipated earnings, recent sales and offers, and estimates of current values as determined by Mr.Trump in conjunction with his associates and, in some instances , outside professionals. Considerable judgment is necessary to interpret market data and develop the related estimates of current value. Accordingly , the estimates presented herein are not necessarily indicative of the amount that could be realized upon the disposition of the assets or payment of the related liabilities . The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated current value amounts .
Week 6 (September 26, 28)
On Tuesday we will continue to look at the LLC material, beginning with VGS v Castiel. Please also read Casebook pages 179-190 for Tuesday (Boilermakers Local 154 Retirement Fund v Chevron Corp.) I also want to focus on post Boilermakers developments. Rather than assigning the entire judgment in Salzberg v. Sciabacucchi (Del. Sup. 2020) I am going to provide you with some discussion of the case and a couple of subsequent cases. Here are some Notes on Contracting under the DGCL (September 2023).
As we study these materials we learn more about the issue of the relationship between statutory rules and contracts. We are also beginning to see the development of a theme around litigation in large corporations and the desire of corporate managements to control that litigation.
For Thursday please read Casebook pages 190-224 (Walkovsky v Carlton, Sea-Land Services Inc. v Pepper Source , Frigidaire Sales Corp. v Union Properties Inc., A.P. Smith Manufacturing Co. v Barlow, Dodge v Ford Motor Co, Shlensky v Wrigley).
WEEK 5: September 19, 21 On Tuesday we will begin with the El Paso Pipeline case, and we will then begin to think about limited liability as we transition to thinking about LLCs.
For Tuesday please read Florida Statutes §620.8306 and § 620.9001 and § 620.9003.
For Tuesday please also read Casebook pages 871-899 (Duray Developments LLC v Perrin, Elf Atochem North America Inc. v Jaffari, Fisk Ventures LLC v Segal, Netjets Aviation Inc. v LHC Communications LLC).
For Thursday please read Casebook pp 899-931 (McConnell v Hunt Sports Enterprises, Racing Investment Fund 2000 LLC v Clay Ward Agency, Inc., VGS v Castiel, Reese v Newman, Haley v Talcott).
Here is a link to the Florida LLC statute
In class on September 14 I discussed issues relating to contracting around fiduciary duties in a partnership. Florida statutes §620.8103 addresses non-waivable provisions of the statute and states: “… the partnership agreement may not … (d) Eliminate the duty of loyalty under s. 620.8404(2) or s. 620.8603(2)(c), but: 1. The partnership agreement may identify specific types or categories of activities that do not violate the duty of loyalty, if not manifestly unreasonable”.
§105 of the 2013 version of RUPA provides that the partnership agreement may not “) alter or eliminate the duty of loyalty or the duty of care, except as otherwise provided in subsection (d)…. (d) Subject to subsection (c)(8), without limiting other terms that may be included in a partnership agreement, the following rules apply: (1) The partnership agreement may: (A) specify the method by which a specific act or transaction that would otherwise violate the duty of loyalty may be authorized or ratified by one or more disinterested and independent persons after full disclosure of all material facts…
(2) To the extent the partnership agreement expressly relieves a partner of a responsibility that the partner would otherwise have under this [act] and imposes the responsibility on one or more other partners, the agreement also may eliminate or limit any fiduciary duty of the partner relieved of the responsibility which would have pertained to the responsibility.
(3) If not manifestly unreasonable, the partnership agreement may:
(A) alter or eliminate the aspects of the duty of loyalty stated in Section 409(b);
(B) identify specific types or categories of activities that do not violate the duty of loyalty;
(C) alter the duty of care, but may not authorize conduct involving bad faith, willful or intentional misconduct, or knowing violation of law; and
(D) alter or eliminate any other fiduciary duty.
(e) The court shall decide as a matter of law whether a term of a partnership agreement is manifestly unreasonable under subsection (c)(6) or (d)(3). The court:
(1) shall make its determination as of the time the challenged term became part of the partnership agreement and by considering only circumstances existing at that time; and
(2) may invalidate the term only if, in light of the purposes and business of the partnership, it is readily apparent that:
(A) the objective of the term is unreasonable; or
(B) the term is an unreasonable means to achieve the term’s objective.” (compare s 105 of the Florida LLC statute).
WEEK 4: September 12, 14
On Tuesday we will begin where we left off on Thursday, with Sandvick v LaCrosse, and please read to page 149 of the Casebook (Meehan v Shaugnessy, Lawlis v Kightlinger & Gray, In Re Fulton, National Biscuit Company v Stroud, Summers v Dooley, Day v Sidley & Austin).
For Thursday please read pages 150-178 (Giles v Giles Land Company, Kovacik v Reid, G&S Investments v Belman, In Re El Paso Pipeline Partners LP Derivative Litigation).
We may not get to the El Paso Pipeline case as I would like to discuss this Question for discussion for Week 4 before that case.
WEEK 3: September 5, 7
On Tuesday we will begin with Rash v JV Intermediate, Town & Country House & Home Service v Newbery,and question 1 of the Agency hypotheticals for week 2. We will then move on to partnership.
For Tuesday’s class, please look at 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 (look at the list of provisions) although we will focus on some specific provisions. In particular, to begin with, § 620.8202 (formation of partnership) and § 620.8401 (partner’s rights and duties).
Please also read Casebook pages 92-108 for Tuesday’s class. (Fenwick v Unemployment Compensation Commission, Martin v Peyton, Southex Exhibitions v Rhode Island Builders Association).
For Thursday’s class, please read Casebook 108-140 (Young v Jones, Meinhard v Salmon, Sandvick v LaCrosse, Meehan v Shaugnessy, Lawlis v Kightlinger & Gray, In Re Fulton).
Read Florida Revised Uniform Partnership Act § 620.8404. You will want to compare this provision with RUPA § 409 set out in the Casebook at pp. 117-118.
I hope you have a happy Labor Day weekend.
WEEK 2: August 29, 31
Reading Assignment for Week 2: Casebook pages 34-92 (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)
On Tuesday August 29 we will begin with Watteau v Fenwick and I expect to be able to cover the cases up to Miller v McDonald’s.
Here are some Agency hypotheticals for week 2 (for Thursday’s class).
WEEK 1: August 22, 24
Assignment for the first class on Tuesday August 22
In the first week of class we will spend some time thinking about the relationship between business and society before moving on to learn about agency law. You will have noticed Governor DeSantis’ actions with respect to Disney, which reflects the idea in some groups in the US right now that corporations are paying too much attention to progressive policy priorities (wokeness generally, diversity and inclusion, climate change) and that they need to be encouraged or told to stop. Limiting the investment of state funds (eg state pension funds) in companies that adopt disfavored policies is one aspect of this approach. Traditionally progressive policy-makers were more inclined in the US to regulate business activity, and this new approach contrasts quite dramatically with a more traditional approach that saw the role of law as being to facilitate, rather than regulate, business activity.
So, I would like you for the first class to read Freedom Conservatism: A Statement of Principles
Please also read Gorton v Doty (Casebook pp 1-6). [Here is a pdf of the 1st chapter of the 10th edition of the Casebook where you can read this case if you do not already have the Casebook: Chapter 1.
[This Chapter of the Casebook is the same as the 11th edition except for the substitution of Ackerman v Sobol Family Partnership LLP 298 Conn. 495 (2010) for the 370 Leasing case].
For the second class on August 24 please read Casebook pp 6-34 (A. Gay Jenson Farms v Cargill, Inc., Mill Street Church of Christ v Hogan, Ackerman v Sobol Family Partnership LLP, 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 and then find the American Law Institute Library).
Here is my Class Policies and Syllabus document.