Rep. Paul Ryan says he will debate anyone who calls the Schumer-Rubio bill "amnesty." I accept his challenge, and will be happy to debate him at the time and place of his choosing (though I'm booked on June 27 and 28). Does Ryan realize the "path-to-citizenship" provisions he thinks preclude an appellation of "amnesty" are riddled with loopholes and opportunities for executive-branch waivers? If he thinks that the Obama Administration DHS is not going to turn this proposed law into de facto amnesty, he is getting rolled by Senator Schumer; if he's aware of it, he's selling out conservative principles for cynical reasons that are almost certainly political miscalculations.
Last Friday, U.S. District Judge Beryl Howell handed down a second opinion in the Commodity Future Trading Commission's favor as the agency spars with the industry over its Dodd-Frank rules. (Judge Howell's first opinion was a ruling last December against the Investment Company Institute and the U.S. Chamber of Commerce, which are challenging a CFTC rule governing mutual funds.) Last week, she ruled against Bloomberg in its challenge of a CFTC rule that Bloomberg contends will affect the business prospects of its swap execution facility, an electronic trading platform for swaps. The Bloomberg case is a temporary victory for the CFTC, but it's not necessarily a long-term win for the agency as it remakes the swaps markets under Dodd-Frank.
There has been much discussion recently of the merit of the SEC's no-admit settlement policy. Companies and individuals routinely enter into enforcement settlements with the SEC that include a detailed rendition of the facts as the SEC sees them and a disclaimer that the company or individual is settling without admitting or denying the allegations. The practice has allowed the SEC to be very sloppy in constructing its enforcement actions.
We discussed the case of Sears v. Butler, and I expanded on it at Forbes.com. The Supreme Court chose not to put it on the oral-argument calendar, but asked the Seventh Circuit to reconsider in light of Comcast v. Behrend. [Fisher; see also Olson]
Andrew Trask thinks this shows that Comcast v. Behrend is having "real effect," but I think it's too soon to tell whether lower courts will give the decision narrow or broad reach. I think at least one of the three remands given will result in reaffirmation of the pre-Comcast decision.
Every plaintiff's and every defendant's attorney know that, for any given alleged tort, damages determined by a jury are likely to be higher, ceteris paribus, if the defendant is a corporation than if the defendant is a human person. [There are lots of scholarly confirmations of this jury bias: see, for example, Hammitt, Carroll & Relies, Tort Standards and Jury Decisions, 14 J. LEGAL STUD. 751 (1985).] This is in no small part because compensatory damages include "pain and suffering", which have no explicit market evaluation, thus allowing for much subjective leeway against juries, who may well conclude that a "deep-pocketed" corporation will not itself feel "pain" by having to compensate a plaintiff more fully.
The Alabama Supreme Court this week tackled a very interesting ethical issue arising from this commonly held belief in jury bias against corporations. The issue, in a nutshell, was the following: if a plaintiff's attorney sues a human being, but negligently fails to sue a corporation that would have been held jointly and severally liable with that individual, and if as a direct result of this failure the plaintiff receives less money than he otherwise would have received, is the plaintiff's attorney liable (for malpractice) for the difference?
The facts in Hand v. Howell et al. were, in essence, as follows:
-Tommy Hand, driving a truck as part of his own employment, was struck and injured by a vehicle negligently driven by the personal auto of Julie Bennett, who "was on-duty and working within the line and scope of her employment with the Montgomery Advertiser" at the time.
-Hand consulted the Howell law firm, which sued Bennett BUT NOT the Montgomery Advertiser (or its parent, Gannett). By the time Hand fired the Howell firm and hired new attorneys, the statute of limitations had run against the Advertiser.
-Hand suffered severe back injuries. His economic damages alone were about $872,000, and of course he also had "pain and suffering" damages.
-Bennett's personal auto insurance limit was the state minimum $25,000 (and Bennett was manifestly insolvent). However, fortunately for Hand, the Advertiser's $5 Million liability policy actually named Bennett as being insured.
-After complicated proceedings, Hand settled with Bennett for approximately $625,000, of which $25,000 was paid by her personal liability policy and the rest by the Advertiser's insurer.
-But Hand's new attorneys produced evidence that the settlement value of the suit HAD IT BEEN FILED AGAINST THE ADVERTISER would have been between $1 million and $1,200,000. This amount would have recoverable, of course, since the newspaper's liability limit was $5 million
Against this backdrop, the plaintiff sued the Howell law firm for the difference between what he recovered (which was not even enough to pay for his economic costs) and what he would likely have recovered had the employer been sued.
A bare majority of the Alabama Supreme Court approved granting summary judgment to the Howell firm. According to the court, the only reason the settlement value of a suit against the employer was greater than the settlement value of a suit against the negligent employee is jury bias against corporations. But, stated five of eight Justices (this number included one concurring Justice), such bias may not be considered as a matter of law. The three dissenting Justices noted that negligence, causation and damages had been properly alleged and prima facie proven, thus entitling the plaintiff to pursue his legal malpratice case to a jury.
Crucial, of course, was the fact that the newspaper's liability policy personally covered the defendant -- otherwise there would have been damages aplenty as plaintiff would have recovered only $25,000. The dissenting Justices are clearly correct that plaintiff had offered proof of negligence, causation and damages. Only the refusal to acknowledge the truth of jury bias precluded recovery against the negligent law firm.
Should the majority have prevailed? Should plaintiff benefit from anti-corporate jury bias if his case is properly pleaded to a jury, but not benefit from it against his lawyer if the latter negligently failed to avail himself of it? Of course, in the former case no judge ever admits that there is bias -- the judge merely issues a judgment on the jury verdict. In the latter case, for the plaintiff to prevail against his lawyer, a court would have had to officially acknowledge jury bias. That is one thing the Alabama court (and, we think, most courts) would be loathe to do. The emperor remains fully clothed!
On Wednesday, the Securities and Exchange Commission announced a settlement with NASDAQ for the exchange's mishandling of last year's Facebook initial public offering. NASDAQ's preparations for the high-stakes Facebook offering proved inadequate. The intense volume of orders overwhelmed NASDAQ's technological capabilities, many traders were left uncertain about whether their trades had gone through, and the IPO was widely panned as a failure. Even absent the SEC action, NASDAQ would have faced market pressure to demonstrate that the troubles of the Facebook IPO would not be repeated. Now that the SEC has worked out a settlement with NASDAQ, it should look at its own role in the Facebook incident and other recent exchange issues.
This entry is cross-posted at publicsectorinc.org, where Steve Eide is a regular contributor.
American states differ, but generally not so much in how they operate their pension systems. Consensus reins over investment allocations and benefit structures. Most trustees and administrators don't believe radical pension reform is necessary, regardless of if they hail from a rich or poor state or red state or blue state. Shareholder activism is an exception. A few blue state pension funds, particularly in New York, adopt a highly activist posture during proxy voting season, while most funds are barely active at all. Proxy Monitor, a project of the Manhattan Institute's Center for Legal Policy, lays out the details in a new report.
Shareholder activism can take various forms. Public pension funds are particularly keen to advance "agenda[s] unrelated to share value" which attempt to "mobilize the power of the capital markets for public purpose" (that's former California state treasurer Phil Angelides speaking).
Public-employee pension funds...have generally been much more likely to sponsor proposals related to social or public-policy issues unrelated to corporate governance or executive compensation--such as those involving the environment, corporate political spending or lobbying, and human rights--than have other shareholders. Social and policy issues have been the focus of only 38 percent of shareholder proposals sponsored by investors generally dating back to 2006 but 64 percent of all shareholder proposals sponsored by state and local employee pension funds.
And public pension funds have been increasingly active, putting forth even more proposals this year than private union funds, traditionally the leading source of shareholder activism.
But mostly just in New York (see charts).
Even CalPERS, despite its vocal commitment to socially responsible investing, has not been anywhere near as active on the proxy front as the New York City and State funds. According to Proxy Monitor, CalPERS' few recent proposals have focused on corporate governance issues with at least an arguable connection to shareholder value. By contrast, the New York funds' proxy agendas are unabashedly social. In addition to going after companies for failing to toe the line on gender identity and the environment, Comptroller DiNapoli, trustee of the $160 billion New York State Common Retirement Fund, has employed the proxy process to harass companies for giving money to Republicans and for lending support to public collective bargaining reform. Among the 119 shareholder proposals the New York City pension funds have sponsored since 2006, 89 have been about "social or policy issues." (Nearly all have been voted down by shareholders.)
Here's the problem. Public pensions' shareholder activism tends to advance a very partisan understanding of taxpayer/shareholder interests, and it politicizes a government function--pension fund management--that should be purely administrative. There's no smoking gun evidence that New York funds' activism have caused the funds to lose value. But using pension funds to advance a social agenda aggrandizes pension policy, which already consumes far too much public attention. The dreamers among us yearn for a time in which public officials may devote their attention exclusively to matters that may yield some benefit to the public, such as how to improve park service, snow removal, or the schools. Pensions, by contrast, should be a minor administrative responsibility guided only by the humble principle of stewardship: don't lose the money, and make a small return with it. Elected comptrollers and treasurers should stick to their knitting. We elect them to collect revenues, not advance social agendas.
Front-loading machines use less water and energy than traditional top-loaders. But because the rubber door gasket is on the side of the machine instead of the top, water can collect around it; if a user does not wipe the door clean between uses, or does not use bleach in his most recent washes, mold can develop and give off what Consumer Reports has called a "musty" smell. The problem affects less than three percent of washers. Even with this possible side effect, Consumer Reports has rated this class of machines "best all around," and notes that users can prevent any mold problems with simple precautionary cleaning.
Nevertheless, Whirlpool has been targeted in an unfairly expansive group of class action lawsuits. The plaintiffs allege that the very fact that any mold reveals itself at all demonstrates the product is defective and that every washing-machine owner is entitled to damages, whether or not they've encountered mold. The claim that Whirlpool has done something wrong becomes substantially less sympathetic when one realizes that every major washing-machine manufacturer is facing a similar class action. Trial lawyers are seeking to profit off of manufacturers' efforts to produce environmentally-friendly machines.
Read the whole thing.. Compare and contrast Andrew Trask's discussion of a Louisiana federal court's rejection of a similar lawsuit, Duvio v. Viking Range Corp., where plaintiffs made a vague kitchen-sink (ahem) set of product-defect allegations against the entire product line produced by Viking Range.
This week, the inspector general of the Commodity Futures Trading Commission released his report on the CFTC's regulatory oversight of MF Global, the financial firm that collapsed in October 2011 and had a shortfall of approximately $1.6 billion of customer funds in the process. The report, which came in response to a request by Senator Richard Shelby looked at (i) the CFTC's oversight leading up to MF Global's collapse, and (ii) CFTC Chairman Gensler's initial involvement in MF Global matters and subsequent recusal because of his prior working relationship with MF Global head Jon Corzine. The report provides a number of lessons for the CFTC as it begins to wield its massive new Dodd-Frank powers.
In pre-market trading, Procter & Gamble market cap is up $7 billion on the return of A.G. Lafley to the CEO's chair—more if you consider that the market as a whole is down. Either the collective wisdom of the market is en masse making a huge mistake in valuing the difference an executive makes to shareholder value, or Mr. Lafley's $2 million base salary is a bargain. If a company I held stock in could make an investment with a 350,000% return, I'd sure want them to do it.
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