Source: https://lawprofessors.typepad.com/business_law/legislation/
Timestamp: 2019-04-20 12:48:45+00:00

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I am both a business law professor and an energy law professor, which is sometimes surprising to people. That is, some folks are surprised that have a research focus in two areas that are seemingly very distinct. In one sense, that's true, at least in the academic realm. Most energy law scholars tend to have a focus on more close related disciplines, such as environmental law, administrative law, and property law. And business law scholars tend to trend toward things like commercial law, bankruptcy, tax, and contracts.
There is substantial overlap, though, in the energy and business law spaces, as I have noted on this blog before. I am even working on some research that looks specifically at the role laws and regulations have on business and economic development. My work with the WVU Center for Innovation in Gas Research and Utilization builds on this energy and business nexus.
I am pleased to share a newly published article I wrote with Amy Stein from the University of Florida's Levin College of Law. The piece is called Decarbonizing Light-Duty Vehicles, and it appears in the July issue of Environmental Law Reporter. It is available here. This article is based on our forthcoming book chapter that will appear in Legal Pathways to Deep Decarbonization in the United States (Michael B. Gerrard & John C. Dernbach eds.) and published by the Environmental Law Institute. The book expands on the U.S. work of the Deep Decarbonization Pathways Project, and was prepared in collaboration with that organization. Following is an excerpt that gives a sense of how energy and business law and policy sometimes intersect.
A last challenge surrounds the existing business models that revolve around the [internal combustion vehicle (ICV)]. First, a number of states have a strong incentive to maintain a core of ICVs due to their heavy reliance on the gasoline tax to fund highway infrastructure in their respective states. The gasoline tax has been in place since 1956 to help pay for construction of the interstate highway system. Since that time, Congress has directed the majority of the revenues from this tax to the Highway Trust Fund (HTF). At the federal level, Congress has not increased the tax in more than 20 years, leaving it at 18.4 cents a gallon. As of July 2015, state taxes on gasoline averaged 26.49 cents a gallon, bringing the total tax on gasoline to about 45 cents per gallon. All efforts to reduce reliance on gas-dependent vehicles therefore stand in sharp contrast to efforts to maintain a healthy highway fund. The interplay between fuel economy and the dependence on gasoline tax revenues should not be overlooked, as well as the conflicting demands placed on legislators.
Second, dealers, mechanics, and gas stations have a strong incentive to maintain the dominance of ICVs. Dealers may not be as familiar with [alternative fuel vehicles (AFVs)] and so are less likely to be able to demonstrate specifics about available incentives, nor be able to exude confidence about charging, range, and battery life-span. More importantly, dealers may also be hesitant to sell AFVs for some of the same reasons that customers may be inclined to purchase them—specifically, the expectation of reduced maintenance costs. These misaligned incentives exist because an essential part of a dealer’s business model relies on post-sale revenues related to the sale of used cars, oil changes, and engine maintenance repairs, avoided costs for AFV owners. More car dealers may need to explore options that evolve with the technology, including maintaining and repairing fleets of autonomous vehicles.
In short, although the United States has begun the transition to AFVs, there are a number of obstacles, financial, psychological, and cultural, that stand in the way of a greater shift to AFVs.
Amy L. Stein & Joshua Fershée, Decarbonizing Light-Duty Vehicles, 48 Environmental Law Reporter 10596 (2018) (footnotes omitted).
Language Matters (Non-LLC edition): "Fiduciary" Does Not Mean "Financial"
I often use my space here to complain about courts and lawmakers being imprecise with regard to limited liability companies (LLCs). Today, I will focus on my home state of West Virginia, which recently passed a bill to support (and provide loans for cooperatives designed to provide) much-needed broadband development in the state. I applaud the effort, but the execution was not great.
12-6C-11. Legislative findings; loans for industrial development; availability of funds and interest rates.
(f) The directors of the board shall bear no fiduciary responsibility with regard to any of the loans contemplated in this section.
This applies to a cooperative board that takes on loans for broadband projects. But it doesn't make sense. I think they used "fiduciary" when they meant "financial," as I assume they meant to say that the board members of the organization would not have “financial liability.” I am pretty sure they did not mean to remove fiduciary duties. Then again, who knows. Maybe they are fine with the directors using loans for personal vacations. (Just kidding. I am pretty sure they'd care.) I know that in finance, the term fiduciary can be used to describe money (meaning some that that relies on public trust for value), but that does not make sense here, either.
"(f) The directors of the board are not personally liable for any of the loans contemplated in this section."
I won't hold my breath, but it's worth a try.
Another unforced error on the LLC front, again with a limited liability company being called a corporation.
This time, it is a recent Texas appellate court case where the court states: “In its pleadings, AMV contends that it is presently a limited liability corporation known as ArcelorMittal Vinton LLC.” Wallace v. ArcelorMittal Vinton, Inc., 536 S.W.3d 19, 21 n.1 (Tex. App. 2016), review denied (Mar. 31, 2017). As is so often the case, that is not accurate.
In its brief, the entity AMV simply stated, that it was a Defendant-Appellee as named in the suit, ArcelorMittal Vinton, Inc., was “n/k/a [now known as] ArcelorMittal Vinton LLC.” Carla WALLACE, Plaintiff-Appellant, v. ARCELORMITTAL VINTON, INC., Defendant-Appellee., 2015 WL 7687420 (Tex.App.-El Paso), 1. AMV’s counsel never said it was a corporation. The court did that on its own.
Sigh. Even in Texas, LLCs are not corporations. I swear! I looked at the statute.
Sec. 101.002. APPLICABILITY OF OTHER LAWS.
(a) Subject to Section 101.114, Sections 21.223, 21.224, 21.225, and 21.226 apply to a limited liability company and the company's members, owners, assignees, affiliates, and subscribers.
Added by Acts 2011, 82nd Leg., R.S., Ch. 25 (S.B. 323), Sec. 1, eff. September 1, 2011.
As Ham Porter would say, "You're killing me, Smalls."
American statutes can seem like labyrinthine mazes when compared to some countries’ legislation. French codes are admired for their intellectual elegance and clarity. Novelists and poets (Stendhal, Valéry) have considered the Code civil to be literature. Swedish legislation might be based on empirical research into problems the legislation is intended to remedy, and the drafting style, though modern today, is descended from an oral tradition of poetic narrative.
Comparing these legislative cultures with our own reveals that the main problem with American legislation is not too many words. It is too many ideas — a high ratio of concepts per legislative goal. When American, French, and Swedish legislatures address similar problems, the French and Swedes draft using far fewer concepts than Americans do. In both countries, simple solutions are preferred over convoluted ones. The drafters of the Code civil thought the highest intellectual and legislative accomplishment to be simplicity. The Swedes got to approximately the same place through a cultural value that law be understandable to the public. Where the American legislative process can seem chaotic, there has been some respect for Cartesian rationality in France and for empirical evidence in Sweden.
Even if American statutes were to be translated into ordinary English, they would still be labyrinths because our legislatures insist on addressing every conceivable detail that legislators can imagine. The result is excessively conceptualized legislation, imposing large numbers of duties. Statutory concepts cost money. They create issues, which must be decided by publicly funded courts and agencies with additional costs to the parties involved. Every unnecessary statutory concept wastes social and economic resources. And to the extent law seems incomprehensible to the public, it loses moral authority.
I digress. Back to my point, I think this statement from Neumman is spot on: "[T]o the extent law seems incomprehensible to the public, it loses moral authority." Absolute truth. And the same applies to regulations.
LIBBY HAINES-MARCHEL & ROCK ISLAND CHRONICS, LLC, Dba CHRONICS, Appellants, v. WASHINGTON STATE LIQUOR & CANNABIS BOARD, an Agency of the State of Washington, Respondent., No. 75669-9-I, 2017 WL 6427358, at *1 (Wash. Ct. App. Dec. 18, 2017) (emphasis added).
Wash. Rev. Code § 69.50.331 (b)(iii) (West). It makes some sense to restrict the business to in-state entities given the licensing restrictions that state has, although it is not clear to me that the state could not engage in the same level of oversight if an entity were, say, a California corporation or a West Virginia LLC.
The state's licensing requirements, as stated in Washington Administrative Code 314-55-035 ("What persons or entities have to qualify for a marijuana license?") provide: "A marijuana license must be issued in the name(s) of the true party(ies) of interest." The code then lists what it means to be a “true party of interest” for a variety of entities.
Sole proprietorship: Sole proprietor and spouse.
General partnership: All partners and spouses.
Limited partnership, limited liability partnership, or limited liability limited partnership: All general partners and their spouses and all limited partners and spouses.
Limited liability company: All members and their spouses and all managers and their spouses.
Privately held corporation: All corporate officers (or persons with equivalent title) and their spouses and all stockholders and their spouses.
Publicly held corporation: All corporate officers (or persons with equivalent title) and their spouses and all stockholders and their spouses.
Multilevel ownership structures: All persons and entities that make up the ownership structure (and their spouses).
Requirement for and duties of board of directors.
(1) Each corporation must have a board of directors, except that a corporation may dispense with or limit the authority of its board of directors by describing in its articles of incorporation, or in a shareholders' agreement authorized by RCW 23B.07.320, who will perform some or all of the duties of the board of directors.
(b) The business and affairs of the corporation shall be managed under the direction of its board of directors, which shall have exclusive authority as to substantive decisions concerning management of the corporation's business.
Wash. Rev. Code § RCW 23B.08.010.
Wash. Admin. Code 314-55-035. This provision would clearly include directors, but also clearly excludes spouses. That distinction is fine, I suppose, but it is not at all clear to me why one would want to treat directors differently than LLC managers (and their spouses). To the extent there is concern about spousal influence--to the level that the state would want to require qualification of spouses of shareholders in a publicly held entity--leaving this gap open for all corporate directors seems to be a rather big miss (or a deliberate exception). Either way, it's an interesting quirk of an interesting new statute.
On Monday, the Supreme Court heard argument on three cases that could have a significant impact on an estimated 55% of employers and 25 million employees. The Court will opine on the controversial use of class action waivers and mandatory arbitration in the employment context. Specifically, the Court will decide whether mandatory arbitration violates the National Labor Relations Act or is permissible under the Federal Arbitration Act. Notably, the NLRA applies in the non-union context as well.
Monday’s argument was noteworthy for another reason—the Trump Administration reversed its position and thus supported the employers instead of the employees as the Obama Administration had done when the cases were first filed. The current administration also argued against its own NLRB’s position that these agreements are invalid.
In a decision handed down by the NLRB before the Trump Administration switched sides on the issue, the agency ruled that Dish Network’s mandatory arbitration provision violates §8(a)(1) of the NLRA because it “specifies in broad terms that it applies to ‘any claim, controversy and/or dispute between them, arising out of and/or in any way related to Employee’s application for employment, employment and/or termination of employment, whenever and wherever brought.’” The Board believed that employees would “reasonably construe” that they could not file charges with the NLRB, and this interfered with their §7 rights.
The Board's rule here is correct for three reasons. First, it relies on long-standing precedent, barring enforcement of contracts that interfere with the right of employees to act together concertedly to improve their lot as employees. Second, finding individual arbitration agreements unenforceable under the Federal Arbitrations Act savings clause because are legal under the National Labor Relations Act gives full effect to both statutes. And, third, the employer's position would require this Court, for the first time, to enforce an arbitration agreement that violates an express prohibition in another coequal federal statute. (emphasis added).
Respondents claim that arbitration agreements providing for individual arbitration that would otherwise be enforceable under the FAA are nonetheless invalid by operation of another federal statute. This Court's cases provide a well-trod path for resolving such claims. Because of the clarity with which the FAA speaks to enforcing arbitration agreements as written, the FAA will only yield in the face of a contrary congressional command and the tie goes to arbitration. Applying those principles to Section 7 of the NLRA, the result is clear that the FAA should not yield.
My co-bloggers have written about mandatory arbitration in other contexts (e.g., Josh Fershee on derivative suits here, Ann Lipton on IPOs here, on corporate governance here, and on shareholder disputes here, and Joan Heminway promoting Steve Bradford’s work here). Although Monday’s case addresses the employment arena, many have concerns with the potential unequal playing field in arbitral settings, and I anticipate more litigation or calls for legislation.
I wrote about arbitration in 2015, after a New York Times series let the world in on corporate America’s secret. Before that expose, most people had no idea that they couldn’t sue their mobile phone provider or a host of other companies because they had consented to arbitration. Most Americans subject to arbitration never pay attention to the provisions in their employee handbook or in the pile of paperwork they sign upon hire. They don’t realize until they want to sue that they have given up their right to litigate over wage and hour disputes or join a class action.
As a defense lawyer, I drafted and rolled out class action waivers and arbitration provisions for businesses that wanted to reduce the likelihood of potentially crippling legal fees and settlements. In most cases, the employees needed to sign as a condition of continued employment. Thus, I’m conflicted about the Court’s deliberations. I see the business rationale for mandatory arbitration of disputes especially for small businesses, but as a consumer or potential plaintiff, I know I would personally feel robbed of my day in court.
The Court waited until Justice Gorsuch was on board to avoid a 4-4 split, but he did not ask any questions during oral argument. Given the questions that were asked and the makeup of the Court, most observers predict a 5-4 decision upholding mandatory arbitrations. The transcript of the argument is here. If that happens, I know that many more employers who were on the fence will implement these provisions. If they’re smart, they will also beef up their compliance programs and internal complaint mechanisms so that employees don’t need to resort to outsiders to enforce their rights.
Decades of Supreme Court decisions elevating the Federal Arbitration Act (FAA) have led to an explosion of mandatory arbitration in the United States. A form of dispute resolution once used primarily between merchants and businesses to resolve their disputes, arbitration has expanded to myriad sectors, such as consumer and service disputes, investor disputes, employment and civil rights disputes. This article explores this expansion to such non-traditional contexts and argues that this shift requires the arbitral forum to evolve to increase protections for forced participants and millions of potential claims that involve matters of public policy. By way of example, decades of forced arbitration of securities disputes has led to increased due process and procedural reforms, even as concerns remain about investor access, the lack of transparency and investors’ perception of fairness.
I’ll report back on the Court’s eventual ruling, but in the meantime, perhaps some policymakers should consider some of Professor Verges’ proposals. Practically speaking though, once the NLRB has its full complement of commissioners, we can expect more employer-friendly decisions in general under the Trump Administration.
Energy Impacts 2017 is a energy research conference and workshop, organized by a 9-member interdisciplinary steering committee, focused on synthesis, comparison, and innovation among established and emerging energy impacts scholars from North America and abroad. We invite participation from sociologists, geographers, political scientists, economists, anthropologists, practitioners, and other interested parties whose work addresses impacts of new energy development for host communities and landscapes.
The pace, scale, and intensity of new energy development around the world demands credible and informed research about potential impacts to human communities that host energy developments. From new electrical transmission lines needed for a growing renewable energy sector to hydraulically fracturing shale for oil and gas, energy development can have broad and diverse impacts on the communities where it occurs. While a fast-growing cadre of researchers has emerged to produce important new research on the social, economic, and behavioral impacts from large-scale energy development for host communities and landscapes, their discoveries are often isolated within disciplinary boundaries.
Through facilitated interactive workshop activities, invited experts and symposium participants will produce a roadmap for future cross-disciplinary research priorities.
I will be talking about Community Development and the North Dakota Sovereign Wealth Fund, and we'll discuss the implications of the resource curse. I am of the view that the resource curse is correlative, not causative, and that natural resource extraction can prove harmful to local communities, but that it doesn't have to be. From North Dakota's $4.33 billion fund to Norway's Government Pension Fund Global, there are examples of funding that can provide for the future. But there are numerous examples of struggling communities and bankrupt local governments where funds benefited few. And even North Dakota and Norway provide stark contrasts in how the funds are used. The point, for me, is that generalizations overstate the role of the resource and understate the role of local decision making. What we prioritize matters, and often, I think, we can do better. It's not preordained. We can do better, as long as we decide to do so.
Regardless of jurisdiction, there may be value in having an entity that plainly states the entity’s benefit purpose, but in most instances, it does not seem necessary (and is perhaps even redundant). Furthermore, the existence of the benefit corporation opens the door to further scrutiny of the decisions of corporate directors who take into account public benefit as part of their business planning, which erodes director primacy, which limits director options, which can, ultimately, harm businesses by stifling innovation and creativity. In other words, this raises the question: does the existence of the benefit corporation as an alternative entity mean that traditional business corporations will be held to an even stricter, profit-maximization standard?
I am more firmly convinced this is the path we are on. The emergence of social enterprise enabling statutes and the demise of director primacy threaten to greatly, and gravely, limit the scope of business decisions directors can make for traditional for-profit entities, threatening both social responsibility and economic growth. Recent Delaware cases, as well as other writings from Delaware judges, suggest that shareholder wealth maximization has become a more singular and narrow obligation of for-profit entities, and that other types of entities (such as non profits or benefit corporations) are the only proper entity forms for companies seeking to pursue paths beyond pure, and blatant, profit seeking. Now that many states have alternative social enterprise entity structures, there is an increased risk that traditional entities will be viewed (by both courts and directors) as pure profit vehicles, eliminating directors’ ability to make choices with the public benefit in mind, even where the public benefit is also good for business (at least in the long term). Narrowing directors’ decision making in this way limits the options for innovation, building goodwill, and maintaining an engaged workforce, to the detriment of employees, society, and, yes, shareholders.
I know there are some who believe that I see the sky falling when it's just a little rain. Perhaps. I would certainly concede that the problems I see can be addressed through law, if necessary. I am just not a big fan of passing some more laws and regulations, so we can pass more laws to fix the things we added. My view of entity purpose remains committed to the principle of director primacy. Directors are obligated to run the entity for the benefit of the shareholders, but, absent fraud, illegality, or self-dealing, the directors decide what actions are for the benefit of shareholders. Period, full stop.
Reuters reports that minor league baseball players lost a claim for artificially low" wages. The court found, appropriately: "The employment contracts of minor league players relate to the business of providing public baseball games for profit between clubs of professional baseball players."
"Obviously, we think it's wrong, and that the 'business of baseball' is a lot different today than it was in 1922. There is no reason minor leaguers should not have the right to negotiate for a competitive wage."
Kornhauser is certainly correct that things have changed in the last 100 years, though I would argue that the justification for the antitrust exemption was just as unfounded in 1922 as it is today. The origin is the Federal Baseball decision, and it was wrong then, and it is wrong now. But it is also the law of the land. The 1998 Curt Flood Act, as the court appropriately explains, "made clear [Congress intended] to maintain the baseball exemption for anything related to the employment of minor league players."
There is no question Congress can change the law, and there is no question Congress has not. This is one to be resolved via negotiation or legislation, issue, and not via the courts.
What do we know about the future of corporate governance and compliance so far under Trump?
What will happen to Dodd-Frank? There are already a number of house bills pending to repeal parts of Dodd-Frank, but will President Trump actually try to repeal all of it, particularly the Dodd-Frank whistleblower rule? How would that look optically? Former SEC Commissioner Paul Atkins, a prominent critic of Dodd-Frank and the whistleblower program in particular, is part of Trump's transition team on economic issues, so perhaps a revision, at a minimum, may not be out of the question.
Last week, via Executive Order, President Trump made it clear (without naming the law) that portions of Dodd-Frank are on the chopping block and asked for a 120-day review. Prior to signing the order, the President explained, “We expect to be cutting a lot out of Dodd-Frank…I have so many people, friends of mine, with nice businesses, they can’t borrow money, because the banks just won’t let them borrow because of the rules and regulations and Dodd-Frank.” An executive order cannot repeal Dodd-Frank, however. That would require a vote of 60 votes in the Senate. To repeal or modify portions, the Senate only requires a majority vote.
Some portions of Dodd-Frank are already gone including the transparency provision, §1504, which NGOs had touted because it forced US issuers in the extractive industries to disclose certain payments made to foreign governments. I think this was a mistake. By the time you read this post, the controversial conflict minerals rule, which requires companies to determine and disclose whether tin, tungsten, tantalum, or gold come from the Democratic Republic of Congo or surrounding countries, may also be history. The President may issue another executive order this week that may spell the demise of the rule, especially because others in Congress have already introduced bills to repeal it. I agree with the repeal, as I have written about here, because I don’t think that the SEC is the right agency to address the devastating human rights crisis in Congo.
As for the whistleblower provisions, it is too soon to tell. See #7 below.
Based on an earlier Executive Order meant to cut regulations in general and the President’s reliance on corporate raider/activist Carl Icahn as regulation czar, we can assume that the financial sector will experience fewer and not more regulations under Trump.
What will happen with the two SEC commissioner vacancies? How will this president and Congress fund the agency? 3. Will SEC Chair Mary Jo White stay or go and how might that affect the work of the agency to look at disclosure reform?
President Trump has nominated Jay Clayton, a lawyer who has represented Goldman Sachs and Alibaba to replace former prosecutor Mary Jo White. Based on his background and past representations, we may see less enforcement of the FCPA and more focus on capital formation and disclosure reform. Observers are divided on the FCPA enforcement because 2016 had some record-breaking fines. As for the other SEC vacancies, I will continue to monitor this.
How will the vow to freeze the federal workforce affect OSHA, which enforces Sarbanes-Oxley?
The Department of Labor enforces OSHA, and the current nominee for Secretary, Andy Pudzer, is a fast food CEO with some labor issues of his own. His pro-business stance and his opposition to increases in the minimum wage and the DOL white-collar exemption changes don’t necessarily predict how he would enforce SOX, but we can assume that it won’t be as much of a priority as rolling back regulations he has already publicly opposed.
In addition to the issues that Trump has with TPP and NAFTA, how will his administration and the Congress deal with the Export-Import (Ex-IM) bank, which cannot function properly as it is due to resistance from some in Congress. Ex-Im provides financing, export credit insurance, loans, and other products to companies (including many small businesses) that wish to do business in politically-risky countries.
The U.S. has pulled out of TPP. Trump has not specifically commented on Ex-Im, but many believe that prospects don't look good.
How will a more conservative Supreme Court deal with the business cases that will appear before it?
I will comment on this after the confirmation hearings of nominee Neil Gorsuch. Others have already predicted that he will be pro-business.
Who will be the Attorney General and how might that affect criminal prosecution of companies and individuals? Should we expect a new memo or revision of policies for Assistant US Attorneys that might undo some of the work of the Yates Memo, which focuses on corporate cooperation and culpable individuals?
Senator Jeff Sessions was confirmed yesterday after a contentious hearing. During his hearing, he indicated that he supported whistleblower provisions related to the False Claims Act, and many believe that he will retain retain the Yates Memo. Ironically, prior to that confirmation, President Trump fired Acting Attorney General Sally Yates, for refusing to defend the President’s executive order on refugees and travel.
What will happen with the Consumer Financial Protection Bureau, which the DC Circuit recently ruled was unconstitutional in terms of its structure and power?
Despite, running on a populist theme, Trump has targeted a number of institutions meant to protect consumers. Based on reports, we will likely see some major restrictions on the Consumer Financial Protection Bureau and the rules related to disclosure and interest rates. Trump will likely replace the head, Richard Cordray, whom many criticize for his perceived unfettered power and the ability to set his own budget. The Financial Stability Oversight Council, established to address large, failing firms without the need for a bailout, is also at risk. The Volker Rule, which restricts banks from certain proprietary investments and limits ownership of covered funds, may also see revisions.
What will happen with the Obama administration's executive orders on Cuba, which have chipped away at much of the embargo? The business community has lobbied hard on ending the embargo and eliminating restrictions, but Trump has pledged to require more from the Cuban government. Would he also cancel the executive orders as well?
I will comment on this in a separate post.
What happens to the Public Company Accounting Board, which has had an interim director for several months?
The PCAOB is not directly covered by the February 3rd Executive Order described in #1, and many believe that the Executive Order related to paring back regulations will not affect the agency either, although the agency is already conducting its own review of regulations. In December, the agency received a budget increase.
Jeb Henserling, who has adamantly opposed Ex-Im, the CFPB, and Dodd-Frank is under consideration for Treasury Secretary. What does this say about President-elect Trump's economic vision?
President Trump has tapped ex-Goldman Sachs veteran Steve Mnuchin, and some believe that he will be good for both Wall Street and Main Street. More to come on this in the future.
I will continue to update this list over the coming months. I will post separately today updating last week’s post on the effects of consumer boycotts and how public sentiment has affected Superbowl commercials, litigation, and the First Daughter all in the past few days.
In diversity actions, any party that is a limited liability corporation (L.L.C.), a limited liability partnership (L.L.P.), or a partnership must, in the disclosure statement required by Fed. R. Civ. P. 7.1, list those states from which the owners/members/partners of the L.L.C., L.L.P., or partnership are citizens. If any owner/member/partner of the L.L.C., L.L.P., or partnership is another L.L.C., L.L.P., or partnership, then the disclosure statement must also list those states from which the owners/members/partners of the L.L.C., L.L.P., or partnership are citizens.
The certification requirements of LR 7.1-1 are broader than those established in Fed. R. Civ. P. 7.1. The Ninth Circuit has held that, “[L]ike a partnership, an LLC is a citizen of every state of which its owners/members/partners are citizens.” Johnson v. Columbia Properties Anchorage, LP, 437 F.3d 894, 899 (9th Cir. 2006). Early state citizenship disclosure will help address jurisdictional issues. Therefore, the disclosure must identify each and every state for which any owner/member/partner is a citizen. The disclosure does not need to include names of any owner/member/partner, nor does it need to indicate the number of owners/members/partners from any particular state.
The problem is that the rule defines an LLC as a limited liability corporation, while the Ninth Circuit case cited in the Practice Tip was referring to limited liability companies, which are different entities than corporations. The language from Johnson v. Columbia Properties is correct, but the Oregon District Court rule does not include traditional LLCs. It includes corporations, as per the rule's definition of LLC. Corporations, of course, have shareholders, not members or partners, and for diversity jurisdiction purposes, "a corporation shall be deemed to be a citizen of every State and foreign state by which it has been incorporated and of the State or foreign state where it has its principal place of business." 28 U.S.C. § 1332 (2016). Shareholders are not part of the equation. Cf. Hertz Corp. v. Friend, 559 U.S. 77, 88 (2010).
(1) Wherever the term “person” is defined to include both a corporation and a partnership, the term “person” shall also include a limited liability company.
(a) In a limited liability company with one or more managers, to the managers of the limited liability company.
(b) In a limited liability company without managers, to the members of the limited liability company.
(3) Wherever a section of Oregon Revised Statutes applies to both “partners” and “shareholders,” the section shall also apply to members of a limited liability company.
Or. Rev. Stat. § 63.002 (2015).
Beyond potentially leaving limited liability companies out of the disclosure requirement, the rule could have another effect. The way the rule reads, although it does not change the underlying jurisdictional law, it could be read to change disclosure requirements. Though not the only possible reading, one could certainly read "owner" to include shareholders, which would require a corporation to disclose the states of citizenship of all shareholders.
This is pretty obviously an error in drafting, as the court almost certainly intended to define LLCs as "limited liability companies." See Or. Rev. Stat. § 63.002 (2015). And the court almost certainly did not intend to compel disclosure of all shareholders' states of citizenship. Nonetheless, courts generally read statutes for what they say, not for what they meant to say. This might just get a little interesting, if anyone (besides me) is paying attention.
My "New" Article on Fracking and Property Law in West Virginia: What's in a Date?
I am happy to say I just received my new article, co-authored with a former student, S. Alex Shay, who is now a Trial Attorney in the Office of the United States Trustee, Department of Justice. The article discusses property law challenges that can impeded business development and negatively impact landowners and mineral owners in shale regions, with a focus on the West Virginia portion of the Marcellus Shale. The article is Horizontal Drilling Vertical Problems: Property Law Challenges from the Marcellus Shale Boom, 49 John Marshall Law Review 413-447 (2015).
If you note the 2015 publication date, you can see the article has been a long time coming. The conference it is linked to took place in September 2015, and it has taken quite a while to get to print. On the plus side, I was able to do updates to some of the issues, and add new cases (and resolutions to cases) during the process. I just received my hard copies yesterday -- January 9, 2017 -- and I received a notice it was on Westlaw as of yesterday, too.
I always find it odd when law reviews use a specific year for an issue, as opposed to the actual publication year. I can understand how a January publication might have a 2016 date. That would have made sense, but dating the issue back to 2015, when I discuss cases decided in 2016 seems a little weird. I know there is a certain level of continuity that the dates can provide, but still, this seems too long.
When I was editor in chief of the Tulane Law Review, one of the things we prided ourselves on was not handing off any issue from our volume to the next board. A few years prior to our arrival, a committed group of Law Review folks caught up everything -- publishing, if memory serves (and legend was correctly passed on), two and a half volumes. And Tulane Law Review publishes six issues a year. They, apparently, did not sleep.
This article focuses on key property challenges appearing as part of the West Virginia Marcellus Shale play. The paper opens with an introduction to the Marcellus Shale region that is the focus of our analysis. The paper explains the horizontal drilling and hydraulic fracturing process that is an essential part of shale oil and gas development. To help readers understand the property challenges related to shale development, we include an introduction to the concept of severed estates, which can create separate ownership of the surface estate and the mineral estate. The article then focuses on two keys issues. First, the article discusses whether horizontal drilling and hydraulic fracturing constitute a “reasonably necessary” use of surface land to develop mineral rights, and concludes they are, at least in most instances. Second, the article discusses difficulties in analyzing deed language related to minerals rights and royalty interests, which has created challenges for mineral owners, leasing companies, and oil and gas developers. Please note that although the publication date is 2015, the article was not in print until January 2017 and discusses cases from 2016.
Ultimately, the article concludes, legislators and regulators may choose to add surface owner protections and impose other measures to lessen the burden on impacted regions to ease the conflict between surface owners and mineral developers. Such efforts may, at times, be necessary to ensure continued economic development in shale regions. Communities, landowners, interest groups, companies, and governments would be well served to work together to seek balance and compromise in development-heavy regions. Although courts are well-equipped to handle individual cases, large-scale policy is better developed at the community level (state and local) than through the adversarial system.

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 v. 
 v. 
 § 1332
 v. 
 § 63
 § 63