biz org class 23

exam answer:
have to give the facts, spot the issues, give the rules, give the analysis, then give the conclusion.
have to hit every element.

O'Hagen: the WSJ can trade on the information, because it owns the information.
could wyman buy shares expecting it could manipulate the price of the shares? no - that would violate 10(b)(5). but in O'Hagen, the party uses the information for his own personal benefit. there must be a rule against this to avoid this misappropriation. why must there be a rule of this? because rule 10(b)(5) demands deception of some kind. otherwise, it's not a 10(b)(5) case.

martha stewart. initially charged of insider trading but not found guilty of it. instead found guilty of obstruction of justice. thought that it would be problem for MSOM to be suspected of insider trading. so she told family and friends to sell ImClone stock, and she herself sold all the stock a day before the FDA announced that it would not approve the drug.

proxies: who pays for the solicitation?

proRo class 23

malpractice.

in the paralysis case, is the lawyer simply liable for having a good bedside manner? or did the lawyer truly breach a duty created by reliance on his words "i'll get back to you"?

ethical rules to malpractice claims: to what extent are ethical rules and their breach evidence of malpractice.

what business of ethics experts is it to testify in regards to a tort claim? if ethics standards are rules, then they are a matter of law. or maybe the rules are just the minimally acceptable standard of practice that the lawyers of a community must observe and a violation is a violation of a standard of care

test yourself on issue spotting and rule identification!!!

the majority rule: expert testimony about the ethics rule regarding standard of care is admissible provided that the ethics rule issue is intended to protect a person in the plaintiff's position. this rule is becoming increasingly prevalent. model rules also recognize increasing scope and that since the rules est standard of conduct, then breach of conduct may be established under the testimony with respect to the rules. even still, the fact that someone violated an ethical rule is not itself sufficinet to make a malpractice claim! it is just admissible in providing duty and breach.

vitner v. sweet
must prove they would have had a better deal absent malpractice or would have been better off financially if they had not done the deal at all.... if you're the vitners, how do you prove you would have gotten a better deal absent the introduction of an ambiguous term in a contract?

in a claim of breach of fiduciary duty...

millbank just stands for the proposition where you may be exempted from proving but-for causation when you are showing that the lawyers were not entitled to certain fees: in NYS, relaxation of the but-for test is only appropriate when the remedy is restitution (when we're trying to recover the fiduciary's unjust enrichment and we're trying to disgourge client fees). at that point, strict but-for causation may not be required. but NYS courts after this case have also emphasized that the but-for does apply in breach of fiduciary when the claim is for the recovery of the value of the claim that was lost -- compensatory as opposed to disengorgement issues.

atkins v. dixon experiment.
criminal D charged with 2 serious felonies. speedy trial violations. speedy trial wasn't raised on appeal. so the criminal D is stuck in jail for life. he sues. can he recover?
the cause of the defendant's imprisonment is his own factual guilt (the exoneration rule)

see j.posner critique, levene v. plane: if seeking damages for loss of liberty during rightful imprisonment, this would be not only a righteous insult but also a ... no right to a jury nullification."

criminal clients have the right to representation that is competent. how do we reconcile posner's comments? guilty is a term of art, reliant upon the facts and procedures presented by the defendant. is it fair to say she waived her 6th amendment rights?

damages in malpractice.
compensatory.

skidmore. the lawyer fails to inform the client about the possibility of punitive damages when she had to decide whether to settle. the trial court decided she was actually entitled to an additional $500K.
wiggins. the lawyer fails to make a timely request to a statutorily required damages limit.

should the lawyer have to make the clients whole for a punative damages award?

biz org class 22

chiarella
the company chiarella works for has been retained by the acquiring company, the company that is going to purchase the target company. chiarella buys shares of the target company. but he's not liable under rule 10(b) because he has no fiduciary duty to either the acquirer or the target company, but particularly no duty to the targeted company.

dirk case
can't just be that someone with more information be held liable under Rule 10(b)(5), otherwise we would be impairing analysts etc. who research companies and use their expertise to make and recommend trades that raise/lower market value. thereby we buy/sell in a market that is arguably efficient because financial analysts investigate companies and develop ideas about that company's future.

"level playing field" approach would destroy the analysts' ability to investigate companies.
we're not looking to level the playing field. there must be a fiduciary duty otherwise it will destroy incentives to give opinions.

the analysis all builds on each other in terms of insider trading.

dirks v. SEC and it all builds on information that tips, and the use of that tip information for insider trading.

wall street movie.



o'hagen case theory, involving different but applicable facts leading to liability that is different from the classic insider trading theory.

commercial arbitration class 11

preclusive effect of awards and of court decisions.

preclusive here doesn't mean stare decisis, but instead res judicata. basically, where we have more than one preceeding between the same parties and there has been either a resolution of a claim or resolution of the fact issue in one case and the issue is what impact that should have on the other case.

last week we discussed a party bringing multliple claims, some of hwich are arbitrable and some are not. like a contractor who sues for breach of contract and gender discrimination. the Bok is arbitrable but the gender discrimination is not, perhaps because of arbitrable rules. turns out teh executive was terminated for certain reasons (?). if the arbitration was done, determination for cause means that there was no determination of a prescribed reason -- the other parts of the case may not be arbitrable in court.

pre SEC arbitration mandates, if there was a case where there were state claims
federal claim requires intent as well as substandard conduct, so very hard to see how the customer could win.

res judicata - ultimate legal conclusion.  if the claim is brought with opportunity to litigate and then the claim arises in a later case, the first is determinative even if a party has new evidence.

preclusion: clients often try to get two bites at the apple

once you get beyond very small consumer claims, particularly in business area where there's significant amounts of money at issue, the idea of arbitration being final is somewhat fanciful. the fact is that as rarely as awards are overturned/modified, there are thousands of attempts in the courts to get awards tossed out. so much so that in NYS, the complaint intake report in court has "arbitration" as an option.

courts don't like to fix arbitation because either they can't tell what happened or else there's so much stuff to go through.

** must get the arbitration transcribed**

new frontier in arbitrable theory: now there is potential for there to be a meaningful expansion in judicial review particularly if that is what the parties want to have. up till now, if the parties wanted any type of meaningful arbitrable review, they had to do an appellant arbitration.

what is full judicial review? what do the appellate courts do?

most cases involve both trial and appellate court review. same with arbitration.

challenges to the correctness of an arbitration award:
- not allowing them to put the case in a certain way
- acting in excess of arbitrable power (but you can't really bootstrap them to this). if the arbitrator decides something incorrectly, that's beyond the power. but there's nothing having to do with mistake in the rules/statute. it's left to the court or to remand to the arbitrators.

there are even arbitrators that won't follow the court (i.e., ACS)

ouster situations: the courts of equity sometimes intervened for fraud, but the courts did not take the cases on the merits. which is interesting because this was back when courts didn't feel that parties should have to be bound to arbitration.
1. but parties have always been free to settle their own case if they would like to
2. judges can be either/both idiots or overworked. juries are great if you were hit by a city bus or you're walking around in a cast, but they mess cases up all the time too.

but there's more to it.
- business skills and continuity
- confidentiality 
- compromise
- custom of trade industry (laws of the shop, in unions and labor law)
- customs of cultural/religious groups

even in the arbitrable canon of ethics, there's nothing that says the arbitrator must apply the law! in emperical tests, they found that arbitrators would often apply the law and were often interested in the law but always felt that they had the right to make equitable judgments beyond the scope of the law.

"we're not dealing with mathematics"

trial court however is subject to broad appellate scrutiny. but arbitration is not. perhaps this is because its' supposed to be quicker and less expensive, and that arbitration is final.

why this impetus for broadening review?
look at what SCOTUS has done over the past 25 years in pro-arbitration:
1st - took the FAA and definied interstate commerce such that nothing except guns and abuse are IC.
2nd - told states that they must include FAA
3rd - held that statutory claims like mandatory statutory claims are arbitrable as well

it's not as if the states don't have significant restrictions on review, but you don't hear about those in these cases.

what did the SCOTUS tell us in regard to statutory claims?
when they said that they weren't arbitrable, one of the reasons for this was that the only way you can overturn an award was for "manifest disregard" (of the law) which isn't a material factual or legal error: those are not enough. the thinking behind it was that arbitrators like trial courts make presumptively correct rulings.  SCOTUS would bring us manifest disregard as early as 1995, questioning whether arbtrability could be assigned tot he arbitrator. the court has enough residual control over the process to ensure that rights are vindicated. so there was at least talk of expanding judicial review in statutory cases.

what happens when the parties themselves want to provide for arbitrated judicial review themselves? the law right now is not clear on this, but it is a "coming attraction" to this area. and there is some doubt as to whether the arbitration allows post proceedings in state court.... a lot of things up in the air

good for a law review topic...

just because the arbitrator decides differently than a court would does not make the judgement fundamentally unfair.
- botched discovery
- gross abuses of discretion
- witness must be "absent" in court

the no-nos?
fraudulent allegations to get out of a contract, and the principle in one party is the only one who knows what was/not said. the party who needs his testimony asks for an adjournment because the man's wife is very ill. the arbitrator said, no adjournment because we dont' need his testimony. the court remands on the theory that there was no opportunity to put in a case.

discovery. everything electronic is discoverable. it's the responsibility of the attorneys to tell their clients taht if there's even a slight chance of litigtation, don't touch/destroy anything. if you can show that you were denied essential discovery, you may have an argument. but it's extremely difficult to do so.

what can arbitrators do when someone is being recalcitrant?

arbitrators and lawyers in NYS have subpoena power. 


even an arbitration can be very expensive.

proRo class 22

question: what purpose does rule 5.2 actually serve?
if there's a reasonable resolution of an arguable question, it's extremely improbable the supervising lawyer will be at fault (because if reasonable then there's no need for ethics rule, and if supervisor isn't going to be disciplined of course the associate lawyer won't be because he's removed from the situation)

if a question is solved by defrauding the client, then that's unreasonable.

but if it is reasonable, what is this rule?
 

for example, you have a vindictive client who brings you up on ethics charges because you didn't win for them. the charge will be dismissed out of hand if you were reasonable in your work. if not, you could go with rule 1.4 etc.

shouldn't lawyers be responsible for their misconduct regardless of whether they were following orders? we typically don't give non-lawyers a free pass if they break the law at the direction of some kind of authority figure.

more democracy, less homogeneity.... can the partner conclude that the results are sufficient to require closer supervision of the attorney's work, who should pay for that extra time that the associate spent working when the firm should have known that there were "issues"?

how effective and permissible is proactive restriction/ attempts to limit the risk? does the firm respond to men the same way to men who don't "fit the mold"? or is the firm's image of how a single woman should behave and dress a kind of gender bias? is this something where this woman is just having to be "beyond the pale"?


the 5.1 link: if the firm is on notice of evidence of inappropriate behavior, if this associate does make a mistake and then the firm/partners are taken up on ethics charges, it will be much easier for the client and the bar to make the case that this firm was on notice and did not have apporpriate supervisory rules. the firm is on notice of the potential. must the firm wait to act???


- ways to cover yourself: document events of speaking to this attorney.


barriers that states erect to prevent lawyers from one state from practicing in another in which they are not licensed. what we're dealing with: larger question of restrictions on the practice of/doing of legal work with regards to non-lawyers and limiting the work to those with the requisite credentials.


professional adjusters v. tandon.
plaintiff engaged in law practice simply by submitting a claim to the insurer, without any negotiation etc. the court wouldn't have gone the way it did if all plaintiffs did was to just get infrmation (that's what adjusters do) -- is the authority to negotiate a settlement what's at issue here, or do you agree with the court that simple negotiation is in the realm of legal work? what's so special about an insurance claim that puts it in the realm of legal work?


adjusters of the insurance company can bind the company with respect to settlement but individual claimants can't bind the company. the individual still must deal with the insurance company's adjuster or negotiate with a lawyer.


issues like this -- who it is that can/not practice law have become more pressing, especially since the recession because the anxiety has caused the legal profession to navelgaze a bit: lawyers have been given dire warnings about outsourcing for years, and its begun to seem clear that the old ways of doing things with large leveraged law firms/ paying junior associates so much could not survive any longer in a world of enforced austerity.


richard suskin has gotten press lately for "the end of lawyers rethinking legal services" which is about the end of live legal services.


*** when sally left harry ***
from harry's point of view if there's an not insignificant risk that sally will prevail, he would be waise to negotiate. sally has a right to make that decision ethically under rule 1.2(a).

any conflict like this can make the client dubious of the conflicted lawyer. there will be questions such as did adam fail to raise the inheritance issue to not antagonize other, more powerful clients/ potential clients?

can also make a 1.7(a)(1) argument

sally wants to oppose. is that a problem? what kind of problem is it?
rule 1.7(a)(2)
what's the conflict? how do we get to the lawyer and to 1.7(a)(2) without imputing him?
we would have to say that because of 1.10(a), his behavior is imputed by the conflict.
but still, what is the conflict that the client has? depends on the nature of the partnership agreement.

what type of rule 1.7(a)(2) conflict do we have when the lawyer is making the same argument now that he was making for a former client?
if the lawyer gets up in front of the court and argues the opposite position of what he fought for in the previous litigation, that could be a question of professional integrity. the lawyer may not want to argue the exact opposite position to now counter the last position. assuming that is a conflict, does it impute?  

biz org class 21

basic v. levinson
implied right of action.

fraud on the market theory/ efficient capital market concept:
corporate statements are too technical, so if shareholders had to understand, then they would never be able to recover. but instead they have a remedy because analysts rely on statements and that's how they affect the market because they will make recommendations based on corporate statements.


west v. prudential securities
plaintiff's tried to argue fraud on the market theory but it didn't apply to these plaintiffs because the broker lied privately instead of publicly (a public lie could have been considered to have an effect on the market and on shareholder safety at large). if the NYT picked up the lie/misinformation and disseminated to the public, it might have been considered public information which impacts the market, thus changing the facts and the resultant holding. but professional investors would have been expected to investigate and then found out that no one was going to acquire jefferson saving and would have discounted, and the levels at which the stock was trading would have returned. but the information was never publicly disseminated, only privately given.

hugely matters how the misinformation was made/given. the fraud on the market applies to basic becuase they not only know about the mergers but they're also making an announcement about the merger that is purposely misleading. the identity of the party doesn't so much matter in this case. the misstatement was the wrongful conduct, and did it harm the plaintiffs? well, the Ps can't show direct harm (may not have been able to understand the paperwork) so instead to make it easier to decipher, look thorugh the lens of the market -- these misrepresentations made an effect on the market and because of this effect, the plaintiffs were harmed.

santa fe v. green
santa fe owns a subsidiary called kirby lumber. they want to get rid of the minority shareholders in kirby, and merges kirby into itself and freeze out the minority shareholders by giving them money.

short-form merger (NY and DE) there are statutes under which a parent corp can merge its sub into itself without any formal drafted agreements, without asking other shareholders to vote (remember, 2/3 have to usually agree to merge),  so long as the parent corp owns substantially all shares of the sub.

but the shareholders in kirby complained that their shares were inadequate. what's the problem and holding? these shareholders could have enjoined the merger, they could have gotten appraisal rights (rights given to minority shareholders who dissent from major corp transactions)

section 10.b5 is limited. is only violated when there's fraud or non-disclosure. only if the merger had occured and santa fe had failed to disclose all the information about the merger. 

the court talked about the policy of the sec act of 1934 and investment disclosure must be full disclosure. in the santa fe case, there was full disclosure and this was simply corporate mismanagement, which is not a federal issue.


some people argue that efficient capital market hypothesis should apply to private stock as well, and the strongest theory is that private information can still effect the market.

texas gulf sulphur
Defendants were officers, employees or were closely tied to employees of Texas Gulf. Texas Gulf, utilizing a geological survey, was conducting mining exploration in Canada. One area, called Kidd 55, was deemed promising by the survey, and a hole was drilled with the resulting core analyzed. The analysis showed that the minerals present in the area were extremely rich in minerals. Several other samples verified the findings. Defendants did not disclose the results of the analysis to outsiders, including other officers of Texas Gulf. Defendants did proceed to purchase shares and calls once they knew about the results. The trading activity and sample drilling did prompt rumors in the industry of a significant find by Texas Gulf, and on April 12, 1964. Defendants sent out a misleading press release to calm the speculation. The press release misrepresented the actual results of the samples, and made it seem like there wasn't a materially significant ore presence. If a company is misleading, then they are liable.

So Defendants decided to finally disclose to the public that it did discover a viable vein of ore on April 15, although the news did not reach the public until April 16. Defendants still traded between April 12 and April 16th. Defendants claimed that the information was not material to the value of the company and therefore did not feel obligated to publicly disclose the information. They also argued that any trading after they released the news at midnight of April 16 was legitimate because technically the news was disseminated to the public.


SEC goes after the officers for insider trading. the court's holding is to be liable all you have to do is go in on


so long as information is not disclosed to the public, then insiders have to abstain from trading. insiders have a choice - they can keep a discovery quiet so that the company can purchase the land and you don't have to disclose to the public. but so long as it's insider info, the company insiders must abstain from trading on the information.


from agassiz: materiality --  the very fact that insiders trade on some information is one that the court will use to determine if insider trading has occurred. but is that trial by ordeal??? if the insider didn't trade on information which may not have been material, then they lose an opportunity. but if the insider did make money, then the court considers it must be insider trading and the insider may be prosecuted.

proRo class 21

the question: does the state have an interest in the probity of lawyers who represent instate residents or who's work in the state will affect other people? there may be issues of honesty, integrity

long arm discipline (shoe)

even non phys practice

leis v. flynt
see rule 8.5(a)

pro hac vice: the court focuses on the lawyer's interests but not the client's. what of this? absention doctrines -- where one court won't do something because of commity,

rule amended to include 5.5(c), the safe harbor provisions

if the lawyer is practicing in the jurisdiction, do any of the safe harbors work?

the takeaway from 5.5: the rule can give some kind of protection with respect to out of state lawyers, but not total. the only thing that would give total protection is a single national bar exam.

birrbrower
this holding is read very narrowly. CA clients with CA work with CA arb agreement with CA law agreed to and lawyer's fee agreement governed by CA law. the court holds more than sufficient contacts exist by these lawyers with CA to constitute the unauthorized practice of law. the court rejects some claims by the law firm that it's unauthorized practice is only meant to apply to non-lawyers and that arbitration isn't really the practice of law. court has to decide if virtual work in CA but done in NY can constitute contacts with CA. in certain circumstances, just shooting an email to a client in CA could conceivably be unauthorized. if it's read this broadly, it's fair to say that thousands of lawyers are every month in violation of this holding and nothing happens -- the discrepancy between the law and reality needed some rationalization.

the state does have some itnerest in excluding out of state lawyers from continuous work within the state. so continuous virtual presence probably shouldn't be any different. but as far as the rule operates in practice,

NY lawyer who gives client in NY advice about CA law is fine.
NY lawyer who gives client in CA advice about CA law, without sufficient contact, is guilty of unauthorized practice.

duty to report misconduct.
8.3: general duty to report the misconduct of any other lawyer
5.1 and 2: specific duties of supervision over subordinate lawyers and duties of sub to super
particularly focus on 5.1(c): a partner who knows of violating conduct in his/her own firm who does not hing to stop or remedy the violating conduct will be held to violating rules, even if not directing or supervising the violating attorney.
rule 5.2: repsonsibilities of subordinate lawyer -
5.2(b) is odd -- see comment 2 as well
an "arguable question" is one which may illicit more than one reasonable answer

hypo.
you are working for a solo practitioner who does mainly immigration work. second day, boss wants you to show up alone to immi proceeding for which you are unprepared. you fail the clients miserably cause you don't know anything. boss says, look this is how representation goes in this business. boss gives 3 additional files and says, you're up again in 2 days. what do you do?

why do we think it matters if this firm is immigrant's best/only option?