biz org class 11

IPO: initial offering of a class of securities to the public.

there's primary and secondary market. basically when securities are traded, bought, sold, etc
is the secondary market. the primary market is when the company creates and publicly sells
shares.

talk about how badly GM has been managed. the accounting was shotty in a mindboggling way, accounting was outsourced, hope that the government will

problem 1. suppose you are member of the board of a truck company. when the trucks are driven through PA, they are subject to a penalty of $200 fine. the risk of being caught/fined is about 20%. your practice and your competitors practice is to ignore, the alternative is to comply with the PA law. the cost of doing the alternative makes it impossible to compete without losing money.

problem 2. suppose the facts are the same as in the preceding, but you also learn that it is often possible to avoid the fine by paying a bribe to state officals. what do you do?

should shareholders be liable for breaking the law when they're breaking the law to make money for shareholders?

problem 1 and 2 are about fraud.

would you serve on a board where you would give bribes?

duty of loyalty. almost always brought with duty of care.
pre-requistes to duty of care.
- adequate care
- non gross negligence
- two approaches to the biz judgment rule as applied to duty of care

any board engaging in a grossly negligent process is a violation of duty of care.

kamen v. american express
smith v. van gorkom

all of this needs to be attached to 102(b)(7) and to the abstention approach.

duty of loyalty.
bayer v. beran
conflict of interest - this lead the court to conclude that the hiring didn't deserve the business judgment rule and the court would examine both the process and the substance of the decision. there's no judicial deference because there's a conflict of interest. the court closely examined the decision, and examined the process and then the substance as far as the fairness to the corporation.


who bears the burden of showing fairness?
business judgment rule doesnt' apply at the stage of showing conflict.

most of the board were insiders, so they were invested in the hiring of the singer.

benihana v. benihana

preferred shareholders

why did the benihana board end up in court?
because aoki sits on both sides of the transaction as beneficiary.
what saved the board is that it met to discuss the cost, the sale...
did all the things that smith v. van gorkhom didn't do

benihana made a three-member committee. the deal to sell to BFC
was better than the otehr possibilities. the full board approved the sale.
but the preferred was issued in 2 servings, which reduced the holding
company's voting power. so the sale of the prefereed diluted
benihana of tokyo in the company.

see 144(a) - only works if there's full disclosure, and BOT made a bad
argument that there wasn't full disclosure.

commercial arbitration class 6

recap:

if the claim went beyond the arbitration clause to the rest of the contract, this was not a matter for the arbitrator.

conflict between the federal and state rule. but SCOTUS says that erie doesn't apply because the roots of FAA are in the commerce clause which authorizes the fed to regulate interstate commerce under the supremacy clause. federal principles govern whenever an arbitration is under interstate commerce.

this begins the idea that in a diversity case, if the federal law of arbitration and state law conflicted the FAA would control, and the state rule would not apply despite Erie.

this still leaves a more fundamental question: given that federal court juris over federal matters involving interstate commerce would only exist in situations wehere a federal stat claim was involved, the practicality is that the vast majority of arbitratble matters involving interstate commerce will wind up in state and not federal court --- what if the state had rules concerning arbitration that are different than the case law principles articulated by the FAA? what if those differences impacted on arbitrability with the state principle being more restrictive than the federal rule? how could the state law be in violation of the federal policy?

2. state law must be applicable to all contracts
because section 2 of the FAA says that the defense must be inapplicable to contracts in general, and not just one that singles out arbitration.
this suggests that if a state legislature provides in a statute that a certain statute and the claims under it would not be subject to arbitration, then this might not be something a state can do. under state case law, if there were restrictions as to arbitrability, this might be something that states can't do. and remember that the vehicle to get before SCOTUS is under 28 USC that would allow them to take a case from the highest court of the state if it believes the court would offend SCOTUS principles.

keating.
not arbitratble if the FAA says so, or if federal determined that the status would be undermined by arbitration. the issue is, should the states have the same latitude that congress would have? the only basis for a negative answer would be that
the state does not have this power -- the idea that there is such a strong federal pro arbitrability, the states can't limit under their statutes! this is almost mind-boggling!!

the argument is that the only reason the congress put interstate into the Act is because otherwise the federal court might not have jurisdiction. is this a good argument?

remember citizen's bank, where scalia/thomas wrote that the FAA application is wrong.

even if you do have preemption in the state courts, you don't have necessarily preemption of public policy and so if the fed can't say (.... ) why can't the states? weiskopf doesn't know either.

what if there's a federal statute that exempts certain franchises from arbitrations, but then a state has a similar law that comports with the federal but that both are opposed to the FAA?

what about the forum shopping concerns? under Erie, you would apply state law if outcome determinative. but in a

see s. 2 -- you can interpret if you're using an enforcement recognized? what about public policy???

doctor's associates --

the tougher it is to waive the right, the more pro arbitratable it is.

but also, the more you can waste court time, it can be a problem, no matter how pro arbitrable you are.

affirmatively pleading arbitrability - you can compel. which is wacky. but the theory is that a motion to dismiss doesn't go to the merits of the case. going for summary judgment is different.

arbitrability also has to do with how the arbitration clause is construed -- the state court uses the FAA proarbitrability to give strange basis for claims. plus, the interpretation of contract is a matter of state law. so the way this turnes out -- the state law principles of contract construction can be used unless you use a result that is anti arbitration.

where are states free to impose thier own rules on arbitrable process without running afowl of preemption?

in many states including NYS, the tendency is to resolve arbitration cases on paper.

as long as it an arbitratbility issue in court, then they're done. that's pretty pro-arbitration.
the federal system doesn't have that in the FAA. if you don't use the CPLR 5-03(c), you run the risk that you proceede and if the opponent is against it, a year after, a challenge to the award can raise the arbitrability issue. a baiss for throwing out the award is that the powers were exceeded.

the parties contractual choice gives way.

the bulk case

see the housing case in the notes
not so broad that the parties couldn't adopt them.

can't award punitive damages garry. the problem?
brokerage firms and employers would say in the contract that disputes were governed by new york law in the hop tht arbitrator could throw out of court. after a while, the

not only is the contract held to new york law, but the courts have held that it's a no-no for a party to attempt to withold the remedies that would be available in court under statutory claims.

proRo class 11

shouldn't certain issues of obligation and loyalty.

if lawyers really couldn't accept any matter that was adverse to any former client, the ability to accept new cases in certain cases, certain subjects, and

can a law firm representing client A "fire" A when B comes to firm for a law suit against client A?

the attorney gained confidences, the presumption is that it was ethically through learning everything you can about your client. this allows the plaintiff to avoid making confidences that would just

in the event the plaintiff doesn't consent, the firm is disqualified.

supporters of screening often contend that objections to screening show skeptism/ cynicism about lawyers' ethics. the major purpose of the old rule was to put some trust back into the system.

then the recession hit, and it was felt that some relaxation of the conflict rules was in order and it was necessary to make lawyer migration from firm to firm easier. that's how we get to rule 1.10(a)(2)

the new provisions apply when
a lawyer moves from firm A to firm B and the question is if firm B can rep a matter that's the same or substantially similar to the matters/clients of the lawyer before he moved from firm A to firm B, and where the interests of the former and current client are materially adverse? YES

the lawyer only needs to follow the screening procedures under 1.10(a)(2)

under the cassis case, there may be an exception

in order to get an idea about what kind of screening procedures are sufficient, see comments 7, 8, 9, 10 on rule 1.10 which are technical requirements that make screening procedures adequate.

rule 1.10(b)
the context in which this arises: 1.10(b) covers situations in which a lawyer leaves a firm and the concern is what the old firm can do after the lawyer has left -- when a lawyer moves from firm A to B taking his clients with him, what can firm A now do? the firm is NOT precluded from representing
a client of the lawyer who left with interests materially adverse to the interests of other clients, assuming/unless
1. the matter on which the client needing new representation wants representation that is the same/ similarly related to how the former lawyer related him
2. any lawyer remaining at firm A has information protected by rules 1.6 and 1.9(c) that is material to the matter

so even if the lawyer takes off, the firm can still represent the client.
almost all imputed conflicts are consentable. the sole exception is that if the conflict is non consentable
under 1.7, then it's non consentable for the firm under 1.10.

when is a situation non consentable?
1. when prohibited by law
2. 1.7(b)(1) conflict rule

substantial relationship test: does the lawyer have information that would be useful in the current case?

hypo. "you don't know anything"

lawyer moves from PRIM law (under 4 years, represented axy-martin 

on employment matters and age discrimination) to CCC law firm. 

at CCC, is asked to do a case against axy-martin. 

1. can the lawyer take this case?

this is the playbook problem -- axy can say that the facts of the 

discrimination cases are distinct from sex discrimination but that the 

lawyer has learned details about the axy-martin employment, labor, 

salaries, past misdeeds, settlement, and business positions with are useful to discovery. is this 

a basis for finding the age and sex cases are related?

the playbook problem of litigation strategy does expand the reach of the 
substanitally related test very far. however, details with respect to 
specific employment practices of the company are substantially related 
potentially.
2. can CCC take this case?