COVID-19 Lays Bare the Cruelty of Neoliberalism

JOSEPH MARGULIES

Cornell law professor Joseph Margulies observes how the COVID-19 pandemic is exposing the cruel folly of neoliberal governance. Margulies points out that neoliberalism—the idea that social problems are better solved by the private sector than by government—has brought millions of Americans to the edge of financial and physical ruin, and COVID-19 will push them over. He argues that now more than ever, we must be communitarians rather than individualists.

Read More

Sonterra Capital Master Fund Ltd. v. UBS AG

Court: US Court of Appeals for the Second Circuit

Docket: 17-944

Opinion Date: April 1, 2020

Judge: Park

Areas of Law: Antitrust & Trade Regulation, Business Law, Civil Procedure

The Second Circuit reversed the district court's dismissal of plaintiffs' Sherman Act, RICO Act, and common-law claims against defendants for lack of Article III standing. Plaintiffs are a group of investment funds and defendants are a collection of financial institutions. Plaintiffs' claims stemmed from a scheme to fix the benchmark interest rates used to price financial derivatives in the Yen currency market. The court held that plaintiffs alleged an injury in fact sufficient for Article III standing, because plaintiffs plausibly alleged that defendants' conduct caused them to suffer economic injury. In this case, plaintiffs alleged that they entered into financial agreements on unfavorable terms because defendants manipulated benchmark rates in their own favor. Accordingly, the court remanded for further proceedings.

Campbell Family Trust v. J.P. Morgan Investment Management, Inc.

Court: US Court of Appeals for the Sixth Circuit

Dockets: 18-3239, 18-3238

Opinion Date: March 30, 2020

Judge: Gibbons

Areas of Law: Business Law, Securities Law

The plaintiffs are shareholders in mutual funds. JPMIM is paid a fee for managing the Funds’ securities portfolio and researching potential investments. The plaintiffs sued under the Investment Company Act (ICA), 15 U.S.C. 80a-1, which allows mutual fund shareholders to bring a derivative suit against their fund’s investment adviser on behalf of their fund. The plaintiffs claimed that JPMIM charged excessive fees in violation of section 36(b), which imposes a fiduciary duty on advisers with respect to compensation for services. The Sixth Circuit affirmed summary judgment in favor of JPMIM. Under section 36(b), a shareholder must prove that the challenged fee “is so disproportionately large that it bears no reasonable relationship to the services rendered and could not have been the product of arm’s length bargaining.” The district court considered the relevant factors in making its determination: the nature, extent, and quality of the services provided by the adviser to the shareholders; the profitability of the mutual fund to the adviser; “fallout” benefits, such as indirect profits to the adviser; economies of scale achieved by the adviser as a result of growth in assets under the fund’s management and whether savings generated from the economies of scale are shared with shareholders; comparative fee structures used by other similar funds; and the level of expertise, conscientiousness, independence, and information with which the board acts.

Lawler Manufacturing Co., Inc. v. Lawler

Court: Supreme Court of Alabama

Docket: 1180889

Opinion Date: March 27, 2020

Judge: Michael F. Bolin

Areas of Law: Business Law, Civil Procedure

Lawler Manufacturing Co., Inc., appealed an order requiring Chris Lawler, president of Lawler Manufacturing, among other things, to authorize and give his consent to a pending shipment of goods from China, and to refrain from engaging in conduct that is contrary to the best interest of Lawler Manufacturing. In 2019, Lawler Manufacturing sued Delmas Lawler, a shareholder, vice president, and alleged former employee of Lawler Manufacturing, and Sandra Lawler, an alleged former employee, alleging breach of fiduciary duty, theft, and conspiracy. Delmas moved the court to order Lawler Manufacturing and Chris, as president of Lawler Manufacturing, to continue the business operations of Lawler Manufacturing in the usual and customary manner in which business affairs had been conducted before the litigation was commenced, which would include authorizing the shipment of an order from China that had been placed earlier. The trial court granted the motion and ordered Chris to act in the best interest of the company. The Alabama Supreme Court determined the trial court did not have jurisdiction to enter the order. The presiding judge disqualified himself from this case, and no longer had authority to appoint his successor or to enter the order appointing the judge who entered the order requiring Chris Lawler to act in Lawler Manufacturing's best interest. " Therefore, Presiding Judge Woodruff's appointment of Judge Fannin was not a valid judicial appointment, and that order is vacated."