Insider trading issues

I received an email from a student re insider trading, specifically re what is a tippee.  Take a look at my post a couple of years ago on the Supreme Court case of Salman v. US.

The Supreme Court clarified that “a tippee’s liability for trading on inside information hinges on whether the tipper breached a fiduciary duty by disclosing the information.   A tipper breaches such a fiduciary duty, we held, when the tipper discloses the inside information for a personal benefit.”

The Supreme Court then said that a “close personal relationship” is enough as far a receiving a personal benefit.

Keep in mind that many cases require “scienter” i.e., bad intent, intent to avoid a law.  Keep in mind also that the information must be “material non-public information.”

The student also asked whether the same transaction could also violate general securities laws, i.e., a sale of a security that is not registered and not otherwise exempt.  Answer:  Of course and that must be considered.

Bridging the Gap – Saturday March 30, 2019

This is a great program

Save the Date: Bridging the Gap—Saturday, March 30, 2019

If you are a recent law school student graduate or young attorney, you will not want to miss Bridging the Gap 2019 – From Books to Billable – A Primer for Success on Saturday, March 30, 2019.  This free one-day program is designed to help first- and second-year attorneys make the transition from law school student to legal professional.  Bridging the Gap features prominent “faculty” with specific area expertise sharing their insights for new attorneys.  We encourage you to take advantage of this free program to expand your professional network with LACBA’s Barristers/Young Attorneys and other section leaders.  Event registration will open in early 2019.  

Response from the Bar Monitor re Whether Lower Bar Pass Rate Will Increase Disciplinary Issues

Thanks to Prof. Robert Barrett for this article.   Prof. Fellmeth is responding to the article by the two Pepperdine professors, When bar exam scores go low, discipline rates go high.   You can access the LA Daily Journal Article by Prof. Fellmeth here.  The Pepperdine professors argue that the bulk of the state bar disciplinary actions are against attorneys who take the bar exam more than once.  Therefore they say, reducing the pass level will increase the number of disciplinary actions in the future.

That’s not right says Prof. Fellmeth for the following reasons:

  • “Bar discipline is not directed at incompetence itself.”   Incompetence is resolved typically through malpractice actions, i.e., the client sues his lawyer and seeks damages.  Of course lowering the pass rate could increase the number of malpractice actions in the future.
  • Bar discipline is minimal in any event.  Professor Fellmeth says that the bar files a Notice of Disciplinary Charge against about 3 lawyers per 1,000 each year.  He says if the Pepperdine study is right, the number of NDCs might increase to 4 per 1,000.
  • He says the high passing score tends to reduce the number of attorneys in active practice which he calls “supply constriction.”  That tends to keep prices high which tends to affect attorney supply for the poor and middle class.  I’m sure that’s right but I have a tough time saying that we should reduce the minimum passing score so that there will be more attorneys, thus more reasonable pricing?
  • He seems to argue that passing a higher percentage of those who take the bar will not lower the overall quality of practicing attorneys in California today.  If he is right about that, I am for reducing the raw pass score.  As I said in my last post, if everyone who scores between 1400 and 1440 eventually passes, then the higher raw score is simply forcing those who fall between those numbers to take the exam more than once.  It does not “weed out” those who are not competent.

Continue reading

Some Thoughts about the Bar Exam and UWLA

A student sent me the following comment to my last post about whether the bar exam specs should be lowered (no – says I).

what do you think about this argument from two years ago?

The post and the article is thought-provoking and I appreciate the comment.
The article makes the following comments:

  • The bar exam was designed and continues to operate as a mechanism for excluding the lower classes from participation in the legal services market.
  • {T]he bar exam “is an unpredictable and unacceptable impediment for accessibility to the legal profession.”
  • The burden of the bar exam falls disproportionately on low-income earners and ethnic minorities who lack the ability to pay for law school or to assume heavy debts to earn a law degree.  Passing a bar exam requires expensive bar-exam study courses and exam fees, to say nothing of the costly applications and paperwork that must be completed in order to be eligible to sit for the exam.

I have thought about my response for a day or so now.   I personally believe that the people of color in this country “have been given a bad check” as Martin Luther King said in 1963 when I was in grade school.  It is a national shame that we as a country cannot and do not do more to fix this.   That is one reason I continue to teach at UWLA.   (Make no mistake, the biggest reason is the Chatsworth campus is so close to my home.)  But I do enjoy doing my little bit to help people of color and those who want to be an attorney but cannot get into or cannot afford the major schools.  UWLA creates a nice and very much needed niche providing an opportunity to become an attorney to those who, again, cannot get into or cannot afford the major schools. Continue reading

The High Cost of Lowering the Bar

Two professors from Pepperdine wrote this article which “present[s] data suggesting that lowering the bar examination passing score will likely increase the amount of malpractice, misconduct, and discipline among California lawyers.  Our analysis shows that bar exam score is significantly related to likelihood of State Bar discipline throughout a lawyer’s career.”  As you might expect they have received some serious criticism for their conclusions.

Today they responded to those criticisms with an article in the Los Angeles Daily Journal.  They are both good reading.

You Can Pass the Bar Exam

The bar exam is coming – late July – 5-6 more weeks.  I can tell because the complaining on facebook and other social media is increasing.   None of the complainers really say the exam is too hard; the complaints are that the passing rate is too low, sort of a back door complaint that it is too hard, or perhaps graded too hard.

My students have heard me say many times over the years that the bar exam is a function of effort.   You will pass the bar exam if you make sufficient effort.  If you have finished law school and got at least Cs in the foundational courses, Contracts, Property, Constitutional Law etc you will pass the bar exam if you prepare properly. Continue reading

Contracts Basics

I have commented to my students many times that one reason they  have trouble with Biz Orgs is that they lack a basic foundation in contract law.   Why is this, I wonder?  Students think of contracts as offer, acceptance, consideration, counter-offers, the mail box rule, the mirror-image rule and so on.  It’s really far  more simple than that.  I gave an exam in my UCC class once where a guy bought a computer at Frys.  When paying for the computer, he gave the check-out person a purchase order.  The purchase order had a bunch of terms, which, of course, were completely to the benefit of the buyer.  But the clerk took the form, took his money, and the guy walked out the door with the computer.  Most of the students struggled trying to identify the “offer,” the “acceptance,” etc.   The issue was whether the terms of the buyer’s purchase order were part of the contract.  There is clearly a contract.  There was never any conceivable issue about whether a contract existed.     Continue reading