Crowdfunding and Sport: How Soon Until the Fans Own the Franchise?

Posted by:
Category: Corporate Law, Legal Scholarship, Public, Sports & Law
1 Comment »

Jamaika-BobThe latest issue of the Marquette Sports Law Review is now available online.  This is a faculty symposium issue.  I am proud to have my article, “Crowdfunding and Sport: How Soon Until the Fans Own the Franchise?,” included in this issue.  Here is the introduction.

The Green Bay Packers football team operates as a nonprofit corporation that has been publicly-owned since 1923.  Since that time, the franchise has raised capital by selling shares of stock in five different stock offerings, and there are currently over 350,000 individual members of the public who are shareholders of the team.  These shareholders are the joint owners of a sports franchise that is currently valued at $1.375 billion.

The public ownership of the Green Bay Packers is often noted in the media, and it is generally praised for contributing to the team’s strong tie to the surrounding community.  However, it is highly unlikely that any other N.F.L. team will follow in Green Bay’s footsteps.  Public ownership of franchises is actually prohibited under the current N.F.L. Constitution, and Green Bay’s ownership structure persists solely because of a grandfather clause that excludes the Packers from the prohibition.  Moreover, the unique nature of the Packer’s public ownership structure extends beyond the boundaries of the N.F.L.  The Green Bay Packers are currently the only wholly publicly owned franchise among all of the four major sports leagues (football, baseball, basketball and hockey) in the United States.

There is no reason why publicly owned professional sports teams cannot thrive and succeed at the same level as privately owned teams.  While public ownership of professional sports teams is relatively rare in the United States, it is common overseas.  Notable examples of publicly owned soccer teams are Real Madrid and Barcelona FC, both of which play in Spain’s Liga Nacional de Fútbol Profesional, commonly known as “La Liga.”  These teams are operated as “socios,” a form of nonprofit organization where fans of the club pay an annual membership fee for the right to buy season tickets in a special section of the stadium and the right to vote on certain management decisions.  Another team that plays in La Liga, Real Oviedo FC, has maintained consistent and significant numbers of public owners despite the relative disadvantage of being based in the region of Asturias, far from Spain’s major population centers.

It is not just that the United States lacks more than one example of a major league team that is wholly owned by the public.  It is also uncommon for American major league sports teams to have a minority ownership stake comprised of public shareholders.  In recent decades, the private owners of several major league franchises have experimented with establishing and maintaining a publicly owned minority stake, seeking to inject additional capital into their team whilst still maintaining control over the enterprise.  However, in each instance the private ownership group used a stock offering in order to create a minority interest, only to subsequently abandon the structure and negotiate the sale of the entire team to new owners.  For example, the Cleveland Indians baseball team held a public offering of shares in 1998 but went wholly private again in 1999.  The Boston Celtics basketball team had a longer run with minority public shareholders, holding a public stock offering in 1986 but eventually reverting to wholly private ownership in 2002.

Today the ownership of major league sports teams in the United States remains almost exclusively the province of large corporations, wealthy individuals or ownership groups comprised of these same two actors. Read more »

Print Friendly



Some Perspective from Five Marquette Lawyers Who Are General Counsel

Posted by:
Category: Corporate Law, International Law & Diplomacy, Legal Practice, Public, Speakers at Marquette
1 Comment »

You are the general counsel of a large corporation. Your company is involved in negotiations to buy a competitor and there are layers upon layers of complexity and risk. Is a lawsuit against the competitor a deal-killer or no big deal? Why is a key employee of the other company about to bolt for a third company? Business for your own company has been slipping. Do you need this deal to save your company or will the deal wreck what you do have? The questions—and the pressure—build.

Ray Manista, Cari Logemann, Paul Dacier, Julie Van Straten, and Frank Steeves in Eckstein Hall’s Appellate Room

Ray Manista, Cari Logemann, Paul Dacier, Julie Van Straten, and Frank Steeves in Eckstein Hall’s Appellate Room

Paul Dacier, L’83, outlined the scenario before a capacity audience in the Appellate Courtroom of Eckstein Hall on Feb. 20, and as he did so, he asked members of the audience how they would handle each step.

As Dacier’s story comes to a head: The CEO calls you into his office. “It’s just the two of you in the room and the CEO is sweating bullets,” Dacier says. He wants to know what you as general counsel recommend.

Read more »

Print Friendly



Supreme Court Roundup Part Two: Burwell v. Hobby Lobby Stores, Inc.

Posted by:
Category: Business Regulation, Constitutional Law, Corporate Law, First Amendment, Health Care, Public, Religion & Law, U.S. Supreme Court
Leave a Comment »

the bosses of senateOn October 30, I participated in a presentation entitled “Supreme Court Roundup” with Ilya Shapiro of the Cato Institute.  The event was sponsored by the Law School chapters of the Federalist Society and the American Constitution Society.  We discussed three significant cases from the 2013-2014 Supreme Court term: McCutcheon v. FEC, Burwell v. Hobby Lobby and Harris v. Quinn.  It was a spirited discussion, in which Mr. Shapiro and I presented opposing views, but I want to thank Mr. Shapiro for taking the time to visit the Law School and sharing his perspective with the students.

This is the second of three blog posts on the presentation.  Readers can find the first post here.  What follows are my prepared remarks on Burwell v. Hobby Lobby.  Readers interested in Mr. Shapiro’s position on the case can refer to the amicus brief that he filed on behalf of the Cato Institute.

The legal issue in Burwell v. Hobby Lobby Stores can be described simply.  Under the provisions of the Affordable Care Act, the Department of Health and Human Services requires employers to provide health insurance plans making contraception available to their female employees at no cost.  In the NFIB v. Sebelius decision in 2012, the Supreme Court upheld Congress’ power to pass the Affordable Care Act as an exercise of its taxing power.  But even if Congress has the power to pass the law, can a for profit corporation nonetheless avoid following the law by arguing that the contraception provisions burden the corporation’s free exercise of religion in violation of the Religious Freedom Restoration Act (RFRA)?

The rights of the individual shareholders that own the corporation were not at issue.  The law does not act on the individuals, and does not require these human beings to do anything.  The only legal requirement imposed by the law is imposed on the corporate entity.

So what did Congress intend to do when it passed RFRA in 1993?  As I will explain, the Hobby Lobby case presents two opposing views as to what Congress attempted to accomplish by passing that law.  The dissent by Justice Ginsburg argues that the intent of RFRA was to create a statutory remedy for burdens on religious expression that adopted the standard for evaluating First Amendment violations prior to the 1990 Employment Division v. Smith case. The majority opinion by Justice Alito argues that by passing RFRA Congress created a statutory remedy that protected more “persons” than the pre-Smith caselaw protected and that granted them greater protections than the pre-Smith caselaw granted. Read more »

Print Friendly



What Is the NBA?

Posted by:
Category: Corporate Law, Public, Sports & Law
1 Comment »

basketballProfessor Nadelle Grossman has another forthcoming publication, “What Is the NBA?”, written for the faculty symposium issue of the Marquette Sports Law Review.  The abstract is below, and you can access the full article at SSRN:

The NBA’s organizational structure is curious.  While courts at times refer to the NBA as a joint venture and at other times as a single entity, their analyses are conducted not for state organization law purposes but to assess the NBA’s compliance with federal antitrust law.  Commentators, too, consistently address the NBA’s organizational structure only under antitrust law and not state organization law. As I argue, given the different purposes of these two legal regimes — antitrust law to protect consumers through preserving competition, and state organization law to ensure managers are faithful to the business purpose and to create a default structure among owners and managers — conclusions about the NBA’s organizational structure for purposes of compliance with antitrust law does not control the analysis of the NBA’s structure for purposes of state organization law.

To fill the gap in case law and commentary, this article analyzes the NBA’s organizational form under state organization law.  This analysis is important because the NBA’s organizational form impacts the rights and duties of the member team-owners of the NBA.  If, for example, the NBA is a joint venture partnership under state organization law — that is, an association of team owners who have come together to pursue a limited scope business for profit — then by default, its members would owe fiduciary duties to the other members and any member could seek judicial expulsion of a recalcitrant member.

Print Friendly



Casual Convergence in Unincorporated Entity Law

Posted by:
Category: Corporate Law, Public
Leave a Comment »

offices-at-night-smProfessor Nadelle Grossman has a forthcoming book chapter entitled “Casual Convergence in Unincorporated Entity Law” in the Research Handbook on Partnerships, LLCs and Alternative Forms of Business Organizations (Robert W. Hillman & Mark J. Loewenstein eds., Edward Elgar Publ’g forthcoming 2015).  The abstract is below. You can access Prof. Grossman’s full book chapter at SSRN.

As seemingly uniform as the surface of the sea, unincorporated entity acts in most states are drafted from one of the National Conference of Commissioners on Uniform State Law’s (NCCUSL) uniform acts.  In fact, by the end of 2013, seven states had adopted NCCUSL’s latest uniform act governing limited liability companies (LLCs), called the Revised Uniform Limited Liability Company Act, or RULLCA, and more have since followed.

Supporters of uniformity, including NCCUSL, argue that uniformity among state LLC acts generates administrative and cost savings.  Critics, on the other hand, argue that uniformity undermines state experimentation to achieve more efficient LLC laws.

However, I argue in the chapter that these debates about uniformity are misguided.  Read more »

Print Friendly



US Supreme Court Review: Two Employee Benefit Cases (Dudenhoeffer and Hobby Lobby)

Posted by:
Category: Business Regulation, Corporate Law, Health Care, Labor & Employment Law, Public, U.S. Supreme Court
Leave a Comment »

US Supreme Court logo(This is another post in our series, Looking Back at the U.S. Supreme Court’s 2013 Term.) This blog post is the third of three on labor and employment law cases by the United States Supreme Court in the last Term. This post focuses on two employee benefit law/ERISA cases: Fifth Third Bancorp v. Dudenhoeffer and Burwell v. Hobby Lobby Stores, Inc. First, a disclosure: Along with six other law professors, I co-wrote an Amicus Curiae brief in support of the Dudenhoeffer plaintiffs.

Dudenhoeffer involves so-called ERISA stock-drop litigation, which has been rampant in the federal courts for a couple of decades now. The basic formula of these cases is that, as part of the employer-sponsored retirement plan (whether an employee stock ownership plan (ESOP) or a participant-directed 401(k) plan), the employer offers its own stock as either the entire pension plan investment or part of the pension plan investment.   When the company goes south and its stock price falls, plan fiduciaries find themselves in a difficult position as far as whether to sell the stock or to hold on to it. This is especially so when the plan fiduciary has conflicting duties as an officer of the company and as a fiduciary of the plan. As a corporate officer, not only is the person supposed to act in the best interests of shareholders to maximize the value of the company, but securities law forbids them to trade stock based on non-public material information. As a fiduciary to the ESOP or 401(k) plan, ERISA gives that same person an obligation to act in the best interest and with the same care as a prudent fiduciary would when making decisions about that employee benefit plan. And in case you are wondering, ERISA Section 408(c)(3) gives employers the ability to assign the same person both officer and plan fiduciary roles or set up so-called “dual-role fiduciaries.” Read more »

Print Friendly



Protecting the Public from (Certain) Emerging Growth Companies

Posted by:
Category: Business Regulation, Corporate Law, Public
Leave a Comment »

JOBS ActPart one of this blog post concluded that Fantex’s IPO represents an unintended consequence of the 2012 JOBS Act.  The costs imposed on startups attempting to go public are significant, and the burden of complying with mandatory disclosure laws can deter even the most-attractive startups from commencing an IPO.  The JOBS Act is intended to decrease the burden on startups attempting to raise necessary capital by reducing the financial disclosure requirements normally imposed on public companies.

One way the Act reduces disclosure is through the status of “emerging growth company.”  Most notably, an emerging growth company is defined as an entity with less than $1 billion in annual revenue.  By falling within this broad definition, a startup may take advantage of reduced disclosure requirements for up to five years.

Based on this $1 billion threshold, the definition of emerging growth company is broad enough to encompass companies either experiencing an accelerated growth rate or with high-growth potential.  Unfortunately, Fantex also falls within this broad definition of emerging growth company, as noted in its prospectus.  Therefore, the real question is whether the definition is too broad so that companies with little, or no, demonstrated growth are being granted the same access to the investing public as companies that are actually growing. Read more »

Print Friendly



SEC Issues Rule on CEO-to-Worker Pay Ratio Disclosures

Posted by:
Category: Corporate Law, Labor & Employment Law, Public
1 Comment »

money_bag_svgLast week, the Securities and Exchange Commission (SEC) released a rule requiring companies to disclose the CEO-to-worker pay ratio.  Despite objections by many corporations, the rule covers all employees including seasonal, international, and part-time workers.  The SEC provides companies the option of using the entire workforce or a representative sample in the calculation.

There will now be a 60-day comment period.  The SEC voted for the rule 3-2, with the two Republican Commissioners who voted against the proposal calling it a special interest provision and proclaiming “shame on the SEC.”

Proponents of the rule argue that it will give shareholders and other stakeholders a clear line of sight into human capital management and worker pay.  Read more »

Print Friendly



Paul Dacier (L ’83) Assumes Presidency of the Boston Bar

Posted by:
Category: Corporate Law, Legal Practice, Legal Profession, Marquette Law School, Public
1 Comment »

Paul Dacier

Paul Dacier (Boston Globe)

An important part of professionalism is, well, participating in the profession. The Law School has a rich record of alumni and faculty involvement in most walks of the profession, including leadership positions in local and state bar associations. Many alumni have also been recognized for their outstanding work as lawyers.

Paul Dacier (Arts ’80; L ’83) is part of this distinguished cohort. In 2013 Paul has garnered well-deserved recognition for his legal work on behalf of EMC Corp., while also serving as the President of the Boston Bar Association (BBA) for 2013-14. Indeed, the Boston Globe reports that Paul is the first general counsel to assume the BBA’s presidency in its over 250 year history.

Paul is general counsel for EMC, a $20 billion, publicly traded corporation with over 60,000 employees and a legal department of over 100 lawyers. EMC is one of the nation’s leading corporations specializing in information storage (“the cloud”) and related technology. Under Paul’s direction, the legal department has successfully defended EMC’s position in high-visibility patent litigation and developed innovative approaches to mergers and acquisitions. The National Law Journal recently named EMC’s legal department as the Boston Legal Department of the year (August 2013).

Read more »

Print Friendly



Farewell to Ronald H. Coase

Posted by:
Category: Corporate Law, Public, Tort Law
Leave a Comment »

CoaseAlmost every student who has attended law school in the past 40 years has encountered Ronald Coase and the Coase Theorem. Even professors who disagree with Coase feel compelled to expose their students to his famous theorem, even if only to rebut its argument. As a long-time teacher of both Torts and Property who is not an advocate of law and economics, I cannot imagine teaching either course without references to the Coase Theorem as a way of evaluating the correctness of legal rules.

In a nutshell, Coase, widely acknowledged as the founder of the law and economics movement, posited that in a world without transaction costs, individuals would bargain with each other to achieve the most efficient use of resources, and legal rules would be irrelevant. As a consequence, in a world with transaction costs, Coase seemed to suggest that legal rules should be constructed so that they favor the most efficient user, since that is the party who will eventually end up with the resource . The Coase Theorem was presented to the world in a 1960 article entitled, The Problem of Social Cost, which appeared in the Journal of Law and Economics and is still the most frequently cited law review article in history. Read more »

Print Friendly



Shareholder “Say on Pay” – Can it Expose Directors to Liability?

Posted by:
Category: Corporate Law, Public
Leave a Comment »

[Editor’s Note: Over the past month, faculty members have been posting on upcoming judicial decisions of particular interest. This is the fourth post in the series.]

In January of 2011, the Securities and Exchange Commission, as part of its implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act, began requiring U.S. public companies to provide their shareholders with a non-binding vote on the compensation of certain executive officers. This “say on pay” gives shareholders an advisory say on the amount of compensation paid to those executives. Related disclosure is also designed to prompt the board to consider how the “say on pay” vote affects its broader executive compensation policies and practices.

The Dodd-Frank Act specifically provides that the shareholder say-on-pay vote is not intended to affect directors’ fiduciary duties. Despite this, in at least two cases, shareholders have sued directors for breaches of their fiduciary duties, primarily on the basis that they implemented compensation practices that shareholder had voted against. Read more »

Print Friendly



Best of the Blogs: The Ernst & Young Case

Posted by:
Category: Corporate Law
1 Comment »

It’s not really my area, but I’ve been especially interested this week in reading about the new civil fraud case brought by the State of New York against Ernst & Young.  The case arises from E&Y’s auditing work for Lehman Brothers, an early and important casualty of the financial crisis.  In this post, Matt Taibbi explains the basics of the Repo 105 transactions that Lehman used to hide its precarious financial position.  E&Y is now in trouble for signing off on Lehman’s questionable accounting statements.

For some helpful commentary on E&Y’s expected defense, see this post by Caleb Newquist at Going Concern.  In essence, E&Y’s position seems to be that it cannot be held liable under the New York law because it was Lehman, not E&Y, that produced the misleading financial statements and that used the statements to sell billions of dollars of securities before the collapse.  Apparently, there is no precedent under the state law for the prosecution of an accounting firm based on its role as an auditor, so the courts may have to wrestle with some difficult questions in the case.

What particularly interests me about the case is the way it echoes the prosecution of Arthur Anderson, which destroyed the venerable accounting firm as a result of its role in the Enron collapse.   Read more »

Print Friendly