Category Archive: Postscript

The Undesirability of Mandatory Time-Based Sunsets in Dual Class Share Structures: A Reply to Bebchuck and Kastiel – Postscript (Comment) by Bernard S. Sharfman

In a 2017 Virginia Law Review article, The Untenable Case for Perpetual Dual-Class Stock, Professors Lucian Bebchuk and Kobi Kastiel argued that time-based sunset provisions (the forced unification of shares into one share structure with equal voting rights after a certain period of time) should be a mandatory feature of dual class share structures (classes of common stock with unequal voting rights). This article has recently been used as authority by the Council of Institutional Investors (“CII”) to petition to the NASDAQ Stock Market (“NASDAQ”) and the New York Stock Exchange (“NYSE”) to amend their listing standards. The requested amendments would require companies seeking to go public with dual class shares to include in their certificates of incorporation a time-based sunset provision that would go into effect no more than seven years after the initial public offering (“IPO”) unless minority shareholders vote to extend it up to an additional seven years. This delayed unification based on a shareholder vote is incorporated in Bebchuk and Kastiel’s argument. 

This Article, which is based on comment letters I sent in response to the CII’s petitions, argues that such a mandatory provision would be extremely unwise and harmful to our most important public companies and their shareholders, current as well as future. As a creation of private ordering, the absence of time-based sunset provisions in dual class share structures serves a significant value enhancing purpose. It prevents the risk that a premature and therefore sub-optimal unification of shares may occur. This risk has so far been ignored by those advocating for the implementation of a mandatory time-based sunset provision. As subsequently discussed, this risk has been ignored because their analysis lacks an appreciation for how the positive skewness in stock market returns negatively impacts the value of mandatory time-based sunset provisions.

Filling the California Ninth Circuit Vacancies – Postscript (Comment) by Carl Tobias

At President Donald Trump’s inauguration, the United States Court of Appeals for the Ninth Circuit faced ample vacancies that the United States Courts’ Administrative Office labeled “judicial emergencies” because of their protracted length and its huge caseload. Recent departures by Circuit Judge Stephen Reinhardt and former Chief Judge Alex Kozinski, who occupied California posts, and other jurists’ decision to change their active status mean that the circuit has five emergencies, three in California, because Trump has appointed only three nominees. The court also resolves the most filings least expeditiously.

Limited clarity about whether more judges will leave active service over Trump’s presidency suggests that additional confirmations may be necessary; however, the selection process’s stunning politicization will compromise this initiative. For example, when the tribunal enjoined Trump’s controversial determinations which excluded immigrants from seven predominately Muslim nations, he excoriated multiple jurists of the circuit. Trump afforded numerous candidates, but merely three have received approval, partly because home state Democratic politicians retained “blue slips” when the White House minimally consulted. The vacancies—which exceed seventeen percent, and three California openings, which are ten—show the crucial need to fill more vacancies.

Crushing Creativity: The Blurred Lines Case and Its Aftermath – Postscript (Comment) by Edwin F. McPherson

On March 10, 2015, the music world was stunned when a jury in Federal District Court in Los Angeles rendered a verdict in favor of the heirs of Marvin Gaye against Pharrell Williams and Robin Thicke, who, along with rapper Clifford Harris, Jr., professionally known as “T.I.,” wrote the 2013 mega-hit song entitled “Blurred Lines.” The eight-member jury unanimously found that Williams and Thicke had infringed the copyright to Marvin Gaye’s “Got To Give It Up.” On appeal, the Ninth Circuit Court of Appeals affirmed the verdict and recently rejected Williams and Thicke’s Petition for Rehearing en banc.

The case is significant for a number of reasons. In typical music copyright cases—at least successful ones—the two works share the same (or at least a similar) sequence of pitches, with the same (or at least similar) rhythms, set to the same chords. The Blurred Lines case was unique, in that the two works at issue did not have similar melodies; the two songs did not even share a single melodic phrase. In fact, the two works did not have a sequence of even two chords played in the same order, for the same duration. They had entirely different song structures (meaning how and where the verse, chorus, etc. are placed in the song) and did not share any lyrics whatsoever.

Book Review: Law and Legitimacy in the Supreme Court by Richard H. Fallon, Jr. – Postscript (Comment) by André LeDuc

Richard Fallon has written another important book about American constitutional law. Indeed, it brings to mind Hilary Putnam’s definition of a classic: the smarter you get, the smarter it gets. Fallon presents a rich, thick description of our constitutional law and practice and an argument for how we may best continue and improve this practice. While intended to be accessible to a broad readership, Fallon’s arguments cut to the core of much current constitutional scholarship, even while urging us to move past many of these sterile debates. Most importantly, Fallon takes seriously his mission of speaking to the Court, as well as to the academy, and takes a real run at changing how the Justices decide cases and articulate their decisions. He accomplishes all of this in a startlingly concise book, running only 174 pages of text and 36 pages of notes and without even a subtitle.

Fallon sets out to explain the nature of constitutional law, the constitutional disagreements of cases, constitutional argument, and the nature of the legitimacy of Supreme Court decisions and, ultimately, the Court itself. That’s a tall order for a little book, but Fallon can make a claim to have accomplished his mission.

Supreme Court Reform: Desirable—And Constitutionally Required – Postscript (Comment) by David Orentlicher

As decisions by—and appointments to—the Supreme Court have become increasingly divisive, many observers have renewed calls for reform. For example, we could replace lifetime tenure with non-renewable terms of eighteen years, such that one term ends every two years. That way, less would be at stake with each nomination, Justices could not time their retirements for partisan reasons, and appointments would be divided more evenly between Democratic and Republican presidents. Or we could establish a non-partisan, judicial nominating commission.

Concerns about the Supreme Court are not new, but increasing political polarization and partisan maneuvering over the two most recent Court appointments have accentuated tensions. With the legitimacy of the Court at stake, reform to depoliticize the Court seems essential. And whichever reform is promoted, it is generally assumed that implementation would require a constitutional amendment, legislation, or a change in Senate rules.

But the conventional wisdom is wrong. There is a sound argument to be made that Supreme Court reform is constitutionally required.

Profound Sophistication or Legal Sophistry? – Postscript (Comment) by Ediberto Roman, Katryna Santa Cruz, Melissa Gonzalez & Dianet Torres

In the midst of growing debate and—according to widely publicized news accounts—growing evidence against President Donald Trump’s impeachment, esteemed former Harvard Law Professor and public intellectual, Alan Dershowitz, recently published The Case Against Impeaching Trump. In this brief, but passionate, defense of the President, Professor Dershowitz provides arguably the strongest legal argument against impeaching the Forty-Fifth President of the United States. Professor Dershowitz’s argument, while beautifully written, is largely a selectively applied textualist attempt to thwart the mounting evidence against President Trump and his administration.

The Weintraub Principle: Attorney-Client Privilege and Government Entities – Postscript (Comment) by Jason Batts

Amidst the backdrop of a federal investigation into the actions of President Donald Trump, a previously unexplored legal question has emerged on a topic that forms the foundation of legal practice: Can a succeeding government official revoke a predecessor’s claim of the attorney-client privilege? Although the question is novel, its role within the government context is well established—having been asserted by Presidents Richard Nixon and Bill Clinton in their respective administrations. The context of current events, however, underscores the need to further define the operation of a privilege that is once again being relied upon by a president under investigation.

Strategic Law Avoidance Using the Internet: A Short History – Postscript (Response) by Tim Wu

We are now some twenty years into the story of the Internet’s bold challenge to law and the legal system. In the early 2000s, Jack Goldsmith and I wrote Who Controls the Internet, a book that might be understood as a chronicle of some the early and more outlandish stages of the story. Professors Pollman and Barry’s excellent article, Regulatory Entrepreneurship, adds to and updates that story with subsequent chapters and a sophisticated analysis of the strategies more recently employed to avoid law using the Internet in some way. While Pollman and Barry’s article stands on its own, I write this Article to connect these two periods. I also wish to offer a slightly different normative assessment of the legal avoidance efforts described here, along with my opinion as to how law enforcement should conduct itself in these situations.

Behind regulatory entrepreneurship lies a history, albeit a short one, and one that has much to teach us about the very nature of law and the legal system as it interacts with new technologies. Viewed in context, Pollman and Barry’s “regulatory entrepreneurs” can be understood as, in fact, a second generation of entrepreneurs who learned lessons from an earlier generation that was active in the late 1990s and early 2000s. What both generations have in common is the idea that the Internet might provide profitable opportunities at the edges of the legal system. What has changed is the abandonment of so-called “evasion” strategies—ones that relied on concealment or geography (described below)—and a migration to strategies depending on “avoidance,” that is, avoiding the law’s direct application. In particular, the most successful entrepreneurs have relied on what might be called a mimicry strategy: they shape potentially illegal or regulated conduct to make it look like legal or unregulated conduct, thereby hopefully avoiding the weight of laws and regulatory regimes.

Sex, Videos, and Insurance: How Gawker Could Have Avoided Financial Responsibility for the $140 Million Hulk Hogan Sex Tape Verdict – Postscript (Comment) by Christopher C. French

On March 18, 2016, and March 22, 2016, a jury awarded Terry Bollea (a.k.a Hulk Hogan) a total of $140 million in compensatory and punitive damages against Gawker Media for posting less than two minutes of a video of Hulk Hogan having sex with his best friend’s wife. The award was based upon a finding that Gawker intentionally had invaded Hulk Hogan’s privacy by posting the video online.

The case has been receiving extensive media coverage because it is a tawdry tale involving a celebrity, betrayal, adultery, sex, and the First Amendment. The story would be better if all of the characters in the story were not, at best, anti-heroes. Hulk Hogan had sex with his best friend’s wife. Hulk Hogan’s sex partner committed adultery. Hulk Hogan’s best friend, the cuckold, allegedly was the person who videotaped the encounter and then leaked it to Gawker. And, after sleeping with his best friend’s wife, Hulk Hogan had the audacity to sue the cuckold for allegedly leaking the sex tape to Gawker, with the cuckold settling that claim by paying Hulk Hogan $5000. The cuckold then asserted his Fifth Amendment right against self-incrimination to avoid testifying in the case against Gawker. On the other side of the story, Gawker, the entity that posted the sex tape online, is a “media gossip” website host and does not look very good attempting to wear the cloak of the First Amendment by claiming that the contents of the Hulk Hogan sex video, as opposed to the simple fact that the tape existed, was newsworthy. Nor did it help Gawker’s image when Gawker’s editor testified that he would only draw the line against posting sex videos if the video included a child under four years old. It is hard to root for any of the parties in the case.

“Fair, Reasonable, and Adequate” According to Who? Cy Pres Distributions That Result in Cheap Settlements and Generous Attorney Fees, but No Financial Benefit to Class Members – Postscript (Response) by Linda Sandstrom Simard

In her recent article, Professor Rhonda Wasserman argues that class action settlements that distribute funds cy pres raise a very serious risk of prejudice to absent class members. The problem, she asserts, is the temptation for class counsel to sell out the interests of absent class members in exchange for a discounted settlement for the defendant and a generous fee for class counsel. To illustrate her concern, she cites the $9.5 million settlement in Lane v. Facebook, Inc. that directed approximately $6.5 million to a nascent charity that was controlled—at least partially—by the defendant, $3 million to class counsel and nothing to the three million absent class members. Professor Wasserman argues that courts cannot have a laissez faire attitude toward protecting absent class members and she proposes a number of procedural reforms to ensure that cy pres distributions are only used when absolutely necessary. While her proposals are likely to provoke increased judicial scrutiny of cy pres distributions, the article stops short of addressing the principal question: when, if ever, is a settlement that distributes funds cy pres “fair, reasonable and adequate” to the absent class members?