Author: Lawrence Cunningham


Footnotes in Delaware Judicial Opinions

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Casebook editors, including Professor Stephen Bainbridge of UCLA, complain about the prodigious length of recent Delaware corporate law judicial opinions, especially those written by its Chancery Court. As I edit a round of recent cases for my spring course and new edition of my casebook, I add a related complaint: the proliferation of footnote use in Delaware court opinions. This practice tends both to lengthen opinions plus complicate practical tasks facing teachers and editors.

As a practical matter, a style has developed in Delaware over the past decade of inserting case citations and other authorities in sequentially numbered footnotes rather than in textual discussion. This practice mirrors the style traditionally used in scholarly writing and is a sharp departure from the standard practice in judicial opinions and litigation briefs.

For a casebook editor, this is annoying because it requires tracking relevant footnotes separately and then preparing selected footnotes or, for ease of student reading, relocating the relevant case citations from footnotes into bracketed citations within the text.

As to length, it is no longer uncommon to read Delaware corporate law opinions with more than 50 footnotes and a fair number bloat more than 100 footnotes. Many contain meditations on matters remote from the issues the court is required to address. They sometimes present long string cites, increasingly to include scholarly articles and treatises.

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Countrywide Sub Prime Suit May Proceed


Many securities lawsuits arising out of the sub-prime mortgage lending debacle are not showing much promise of success. But an important exception may be that concerning Countrywide. Kevin LaCroix provides analysis of the 112-opinion issued last week denying most defendants’ motions to dismiss the Countrywide securities class action complaint.

The opinion contains several points of special interest because they may seem to go against the weight of authority. This may simply reflect the procedural stage of the case. But they may also suggest that the scale and unusual nature of the sub-prime market may invite judicial reconsideration of some traditional securities law doctrines.

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Fundraising Creativity

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When times are tough, it seems especially important to remember those who rely on others for their well-being. For organizations that support those people, this means attention to fund-raising. In prosperous times, funding often seems relatively easy to generate, compared to recessionary times, when otherwise generous people opt to tighten belts and make charitable giving a first line casualty. In such periods, fund-raisers need to be creative. One way that happens is through visual imagery that compels remembering the less fortunate.

Among the inspired efforts in this season’s fund-raising efforts is the accompanying poster from a campaign for a can drive, a popular fund-raising method. This campaign, called Yes We Can, is for a middle school in New York City, Rodeph Sholom School. It taps into the prevailing thirst for optimism in the nation, reflected in President-elect Obama’s election campaign, while playfully evoking Warhol’s pop artistry. It also conveys a civics lesson to the students, parents and other community members being targeted. It was created by a teacher at the school, math and digital art whiz, Jonathan Cuba.


Baseball Player Salaries

Many people now clamor to cap corporate executive compensation, especially for those running companies seeking government financial support. Wall Street firms are laying off personnel and withholding bonuses to those lucky enough to have not been fired yet this year. Corporations are increasingly cutting their work forces, pushing tens of thousands of people out of jobs, and putting unemployment claims at a 26-year high.

Many leading universities have declared hiring freezes and budgetary constraints likely to result in caps on raises for people they cannot terminate. A recession is underway and there are essentially no positive economic signals giving reason to be optimistic about any recovery.

Yet, meanwhile, baseball players in negotiations over their contracts appear unfazed by these economic realities–despite teams and agents signaling tough economic times ahead. Even so, team owners are paying up.

The New York Yankees are offering a 6-year $140 million to pitcher C. C. Sabathia, which he has not yet accepted. The Yankees are also offering $10 million a year to veteran pitcher Andy Pettitte, who is reportedly insisting on the same $16 million salary the team paid him last year.

Two days ago, the Boston Red Sox signed a 6-year contract with the third-year player, Dustin Pedroia, set to cost the team $40.5 million. The San Francisco Giants have agreed to pay $2.75 million next year to a relief pitcher, Bobby Howry.

Where will team owners get the resources to pay baseball players annual salaries of $1 to $10 million in the next several years as the economy and workforce reel in financial straits? If such soaring salary commitments persist, look for serious financial difficulties to beset major franchises. When the salaries come down, that may be an indicator that the recession is nearing an end.


Odds on Corporate Pardons

Talk in Washington at the end of any President’s term turns to the unbridled power that US presidents have to pardon people for having committed crimes. This year, chatter debates whether President Bush will give a pass to convicted former corporate executives, despite a national mood unlikely sympathetic to redemption for financial deception.

Executives seeking pardons reportedly include criminals from the technology-sector financial scandals that erupted during President Bush’s first term. The most infamous applicant is Bernie Ebbers, now serving a 25-year federal prison term for crimes he committed at the fraud-infected telecom giant, WorldCom. That company imploded in 2002 amid $10 billion worth of deceptions that were a primary catalyst of the Sarbanes-Oxley Act of 2002, the law designed to reduce the likelihood of similar large scale corporate accounting fraud.

Other corporate criminals seeking pardons from President Bush come from yet earlier periods. They include the disgraced publishing magnate Conrad Black, and the 1980s-90s junk-bond king-pin, Michael Milken.

The Presidential pardon power can strike the ordinary civics student as bizarre. No doubt, President-elect Obama’s putative nominee for Attorney General is having second thoughts for supporting President Clinton’s late-term pardon of the tax-evading financier, Marc Rich. But Presidents face little risk of rebuke for such decisions.

The betting on whether President Bush will grant pardons to these corporate wrongdoers hedges two competing observations. On one hand, President Bush’s record on just use of law is weak (or mixed, at best), increasing the odds that pardons will be forthcoming. On the other, the country, in the early grip of a deepening recession with roots in perceived corporate financial deception, is unlikelyin in the mood to forgive or offer redemption to crooked business executives.

Net: the smart money is on pardons, for all three of these fellows–and perhaps thousands more.


List of Financial Regulation Conferences?

Financial regulation conferences are regularly held year in and year out by numerous organizations, including universities, throughout the world. But the current economic crisis seems to have caused a spike in the number and diversity of these gatherings. This may reflect how complex the current situation is.

A complete account of the precise causes of the ongoing crisis remains elusive. True, unregulated financial instruments seem to have contributed to excessive liquidity that fueled a speculative price bubble in many housing markets. But exact contours of the dynamics and the role of other forces remain uncertain.

In addition, the full consequences of these precipitating causes have not yet even manifested let alone been resolved. Billions of dollars of unregulated financial instruments remain outstanding, un-matured, and prospects for increasing default levels remain.

Efforts to mitigate or reverse the costs of the crisis, including the Treasury-Congress’s various interventions, are not working well or quickly. Additional support for the auto industry remains a political and economic challenge. Ultimately, therefore, most policy reforms designed to prevent or alleviate recurrences are necessarily made cautiously.

It is not surprising that there should be a proliferation of conferences probing the fundamental issues underlying all of this. It could be helpful to have a complete list of upcoming conferences. A short list appears below (concentrating on those with US, academic and/or law attributes). It would be wonderful if readers would use the comment feature to mention any other scheduled conferences with such attributes.

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2009 Looking up for Large Law Firms

Despite what appears to be a challenging economic environment for lawyers, including at large law firms, 2009 may bring additional work flow. According to an extensive annual survey of corporate directors and general counsel at thousands of large public companies, 80% expect to retain outside counsel in 2009 to address important legal matters. Almost of all of these cite needs in mergers, compliance, intellectual property, labor matters and contract disputes.

Demand for non-legal consultants also appears less strong, with 61% of respondents citing need to retain outside experts in those same fields plus in risk management. The survey is the 8th annual one undertaken by Corporate Board Member and FTI Consulting. The survey report also summarizes leaders’ views on topics seen as of greatest importance to corporate America and corporate governance in 2009.


Professional Ethics Rankings

Lawyers continue to receive relatively low public ratings for professional honesty and ethics, according to the annual Gallup poll on the subject. The poll, by telephone of 1,010 adult Americans, asked people to assess the standards of honesty and ethics in 21 professions as very high or high/average/low or very low.

Nurses receive the highest scores (84/14/<2), followed by pharmacists, high school teachers, doctors, cops, clergy, funeral directors and accountants. Lobbyists receive the lowest: (<9/27/64). Lobbyists are preceded in their cohort by labor union leaders (16/45/35), followed by lawyers (18/45/37), then business executives (12/49/37), advertising professionals, stockbrokers, Members of Congress, car sales-people, and telemarketers in dead last. In the middle cohort are journalists (25/44/31), bankers (23/53/23), building contractors and real estate agents. Results for most professions were roughly constant this year compared to last. But two points stand out. First, bankers took a beating this year, the first time since 1996 they registered below 30% in the very high + high category and, at 23%, the lowest they’ve received in the poll's history. The pollsters attribute the results to the economic crisis, natch. Second, business executives last year registered 14% in the very high + high category which, while not a huge drop to 12% this year, is the lowest they’ve received in the poll’s history—having hit highs of 25% in both 1990 and 2001. The economic crisis, again.


Fact, Voice, Blogs and the Times

Debate within the New York Times over longstanding distinctions between editorial opinion and journalistic reporting prompt reflection upon two parallel issues: (1) do blog readers prefer opinion to reporting and (2) do academic bloggers maintain distinctions like that and distinctions between scholarly presentation and essayistic voice?

Clark Hoyt, Public Editor at the Times, wrote in Sunday’s paper about business journalists/columnists both reporting stories and expressing prescriptive opinions on them. He instanced recent cases, including Joe Nocera and Andrew Ross Sorokin (both covering General Motors and opining strongly on whether bankruptcy versus federal financial support is the better policy) and Gretchen Morgenson (covering Congressional hearings on credit rating agencies and separately opining on the credibility of the agency witnesses).

Those writers, along with the paper’s editors, say they are evaluating applicable policies concerning the division between reporting and opinion. But, in general, all seem to suggest that there is little or nothing wrong with reporters also expressing opinions. They do recognize the importance of clearly distinguishing when one is reporting versus opining. An example of a policy they would support is that writers could not publish a news story and an opinion column on the same subject the same day.

Mr. Hoyt, essentially the public’s watchdog at the paper, expresses more serious reservations. He sees a profound problem of blurring the lines between news and opinion at the paper. The current business section’s activities are a continuing manifestation of a practice that puts the paper’s credibility at risk, he worries.

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KPMG-BCE: Auditor Conflict in Huge LBO Deal?

Green Eyeshade.jpg As one of the largest leveraged-buy out deals in history verges on collapse, much attention is being paid to a central condition in the agreement, the target’s solvency; little attention has been given to conflicts of interest facing the firm, KPMG, deciding whether the condition is met.

The deal is a $28 billion LBO for BCE, Canada’s largest telecom firm. A principal lender in the proposed deal is Citigroup, the struggling commercial bank. BCE has made clear it wants the deal to close as scheduled on December 11; Citigroup, like other lenders amid the current financial crisis, may prefer that it does not.

The agreement contains a condition to the lenders’ obligation to close that BCE shall have obtained an opinion from KPMG, or another public accounting firm, attesting to the solvency of the post-LBO company. This may be difficult to deliver, given the considerable debt being used in the LBO and terrible market and economic conditions.

Trouble is, KPMG is the outside auditor for both BCE and Citigroup, presenting it with a potential conflict of interest. One arm of KPMG may wish to bless the deal, to promote favorable relations with BCE, while another may wish to scotch it, to promote favorable relations with Citigroup.

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