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If you’re going to do business with an Idaho company, then (1) don’t expect a court to enforce your forum-selection provision for either litigation or arbitration outside of Idaho, and so (2) if you get into a dispute, you’d better win a race to the courthouse in the agreed forum. We see this in an Idaho supreme court opinion this month where, with some head-scratching mental gymnastics, the supreme court held that a contract’s choice of California law required arbitration in Idaho — this, even though the contract also expressly required arbitration to be in California:

We hold that California law requires an examination of the public policy of the forum in which suit is brought, and that the forum selection clauses at issue violate the strong public policy of the State of Idaho.

We affirm the district court’s ruling that claims arising from the parties’ purchase agreement and LLC agreement must be arbitrated in Idaho.

Off-Spec Solutions, LLC v. Transp. Investors, LLC, No. 47940 (Idaho May 19, 2021) (emphasis and extra paragraphing added).

Look, it’d be one thing if the Idaho courts had relied on Idaho law to get to that result. The courts would have had a straightforward basis for doing so, namely Idaho’s forum-selection statute, which says in part:

(1) Every stipulation or condition in a contract, by which any party thereto is restricted from enforcing his rights under the contract in Idaho tribunals, or which limits the time within which he may thus enforce his rights, is void as it is against the public policy of Idaho.

Nothing in this section shall affect contract provisions relating to arbitration so long as the contract does not require arbitration to be conducted outside the state of Idaho.

Idaho Code § 29-110, quoted in Off-Spec Solutions, slip op. at 7 (extra paragraphing added).

But it’s just bizarre to assert that California’s law implicitly requires an Idaho court to concern itself with Idaho’s public policy. (The losing party had the better side of that argument; see id., slip op. at 6-7.)

Incidentally, this isn’t the first time the Idaho supreme court has engaged in such self-serving contortions: In an earlier case, the contract in suit expressly required arbitration in Dallas, but the state supreme court held that the agreement’s choice of Texas law required arbitration in Idaho. See T3 Enterprises, Inc. v. Safeguard Bus. Sys., Inc., 435 P.3d 518, 528-30 (Idaho 2019), cited in Off-Spec Solutions, slip op. at 7-8.

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A brother-in-law — a real piece of work, judging by the state supreme court’s opinion — started a real-estate business with three other family members. He was “a difficult partner,” as the trial court put it; even though the business was profitable, he sued to try to expel the other family members — and essentially had his head handed to him. The state supreme court’s opinion is interesting both for its entertainment value and for the court’s review of case law on a not-uncommon legal question. See Barkalow v. Clark, No. 19-1970 (Iowa May 14, 2021). Here are the facts of interest:

  1. Meet the family: Two brothers, the Clarks, were married to sisters; a third sister was married to an outsider, whom we’ll call Brother-in-Law, and who seems to be the main character in our little drama.
  2. Brother-in-Law was into real estate; he wanted to buy houses near the University of Iowa stadium, but he didn’t have the money. So Clark Brothers 1 and 2, plus a third brother, put up the money, and the four of them formed an LLC.
  3. All three Clark brothers loaned Brother-in-Law the money for him to buy into the LLC; this loan was done on an oral agreement without any kind of written promissory note. (Brother-in-Law never got around to repaying the Clark brothers for the money they’d loaned him until years later when things were getting seriously antagonistic.)
  4. Brother-in-Law and Clark Brothers 1 and 2 were active in the LLC’s business; Clark Brother 3 was more of a passive investor.
  5. Brother-in-Law took money out of the business for “management fees,” even though (the court trial found) everyone had orally agreed that they wouldn’t be paid for working in the business.
  6. As time went on, additional capital contributions were needed for the business. The three Clark brothers each put in extra money, but Brother-in-Law refused to do so, apparently preferring to use his funds for other business interests that he owned completely instead of just partially.
  7. Consequently, under the LLC operating agreement, the Clark brothers acquired extra ownership interests in the LLC, and as a result, Brother-in-Law’s interest was diluted down to 0.595% from his original 25%. The Clark brothers offered to buy out Brother-in-Law at undiscounted fair market value for his full 25% share. Brother-in-Law refused.
  8. Eventually the relationship between Clark Brothers 1 and 2 and Brother-in-Law soured to the point that — even though the LLC was profitable and making money — Brother-in-Law (who now owned just 0.595% of the company) filed a lawsuit against all three Clark brothers, seeking to expel them from the LLC and to dissolve it; only Clark Brothers 1 and 2 counterclaimed against Brother-in-Law, while Brother 3 tried to be a peacemaker.

After a five-day (!) bench trial, the trial judge ordered dissolution of the LLC and restoration of Brother-in-Law’s diluted capital position back to its original 25%; the judge did also order Brother-in-Law to repay more than $153K for wrongful conversion of LLC assets. (Brother 3, the peacemaker, had previously supported the 25% restoration; to me it sounds as though the trial judge was likewise trying to keep peace in the family.)

Brother-in-Law might have been OK with the trial’s outcome on balance, but he doubtless changed his mind after the appeal. The state supreme court noted (at 15):

[Brother-in-Law] contributed no money to [the LLC], not even the funds for his original capital position. He expected the Clark brothers to finance everything. He blocked efforts to obtain outside financing. He chose to pledge his own assets as collateral for an expansion of his personal real estate holdings, not for the use or benefit of the LLC in which he was only a 25% participant

Slip op. at 15. The supreme court:

  • affirmed the trial court’s order that Brother-in-Law repay $153K for wrongful conversion; and
  • reversed both the dissolution of the LLC and the restoration of Brother-in-Law’s 25% capital position; the court held that statutory requirement for judicial dissolution had not been met, because it was still reasonably practicable for the LLC to continue carrying on the business. (The supreme court’s opinion has a nice discussion of how previous courts had addressed this issue, with extensive citations from various jurisdictions; see slip op. at 18.)

So for his trouble, it seems that Brother-in-Law is now:

  • stuck with his diluted 0.595% share of the LLC;
  • also stuck with his brothers-in-law controlling the LLC, inasmuch as between them they own the remaining 99.405% of it; and
  • ordered to repay the LLC for the $153K that he took out of the business.

Karma, I guess — this could almost be an episode of one of those family-reality shows (I won’t mention any names), couldn’t it?

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I’m hived, says the judge

In a letter decision about a contract’s forum-selection provision, Vice-Chancellor Sam Glasscock addressed a separate forum-selection provision in a related agreement, which stated: “any litigation necessary to enforce any of the provision of [the Settlement Agreement] shall be venued [22] in the Circuit Court . . . in Madison, Dane County, Wisconsin.” (Emphasis added, alterations by the court.) VC Glasscock drily footnoted:

22. I understand that in the free-swinging twenty-first century, verbs and nouns are not binary concepts, and each is free to dabble in the other’s pond. Some such usages ring like a cracked bell, nonetheless. I confess, the verbal form of “venue” is one: hearing it makes me break out in hives (or, consonant with this locution, I’m hived).

NB Alternatives Advisers LLC v. VAT Master Corp., No. 2020-0930-Sg (Del. Ch. Apr. 22, 2021) (granting permanent injunction against litigation outside the agreed exclusive forum) (emphasis added).

(Hat tip: Chris Lemens in a blog comment.)

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The pandemic and Zoom-only classes of recent semesters have led to some enhancements in how I do Socratic-method teaching in my contract-drafting classes at the University of Houston Law Center (and in a new mini-course for the Rice University Jones Graduate School of Business). This approach can also work for in-person classroom settings, not just in Zoom classes.

Here’s how it works:

  • For each issue, I pre-build a Google Doc with a fact pattern, some questions, and spaces for small groups of students to collaborate in writing answers. See the excerpt below from an actual Google Doc:
  • The Google Doc is set to allow anyone having the link to comment — not to edit. That way:
    • The students’ comments are shown in different colors.
    • Students can participate without being logged into Google — and if they’re not logged in, then their comments are anonymous, which some students prefer.
  • When we’re ready for Socratic discussion of that particular issue, I send students to small groups — in Zoom breakout rooms or “turn to your neighbor” if in person — to discuss and collaboratively write answers to the questions in the Google Doc. See the different-colored student comments in the example below.
  • Importantly: I don’t join any breakout room — instead, while still in the main Zoom meeting, I “lurk” in the Google Doc. As I see students write answers in the Google Doc, I add my own real-time corrections and comments in [BRACKETED ALL-CAPS]. That gives students instantaneous feedback — visible to all students.

Each group can see each other group’s comments; that’s fine with me, because that way the groups can learn from each other.

When I see that the breakout groups have answered the questions, we come back to the main Zoom room and discuss the questions and answers in committee-of-the-whole format. This lets me “participate” in each breakout room more-or-less simultaneously.

Students seem to like this approach, both at UHLC and in my just-concluded Rice course, where the students said in a feedback form that:

  • “Discussions helped confirm everyone else was as lost. However, feedback from professor immediately was useful”
  • “[I]t was a good mechanism to keep people on task instead of wandering discussion within the breakout. Also it forced the breakouts to think through their answers as they wrote them out” 

(Emphasis added.)

Comments and suggestions are welcome.

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Author’s note: In the past few days I’ve said yes to invitations to be a panelist for three different Webinars in the next couple of months. For one of those Webinars, I just finished writing up some suggestions for the panel format, based on experience. I’m migrating the suggestions to this blog post so that I can reuse them in the future.

I’ve been speaking at conferences for more than 35 years. Too often, a so-called “panel discussion” is just a series of speeches by talking heads, often leading audience members to tune out or even walk out.

A better panel-discussion format is described below; it works well for both audiences and presenters. I’ve been using this format, typically as a panelist and often as panel chair too, for going on 25 years, for the American Bar Association’s Section of Intellectual Property Law; the Association of Corporate Counsel (ACC); the Licensing Executives Society (LES) USA/Canada; the International Association for Contract and Commercial Management (IACCM); and the State Bars of Texas and California. (I’m pretty sure I’ve done such panels multiple times for each of these organizations.)

Here’s how it works:

  1. In advance, the panelists do a 45- to 60-minute conference call to figure out the following:
    • what “thumb-sucker” (open-ended) questions to pose during the presentation; and
    • for each question: which panelist will take the lead in answering the question, along with some notes about the likely answer as brainstormed by the panelists.
  2. After that advance prep call, a designated “scribe” panelist (usually me) compiles the agreed questions, the notes, and the lead-presenter designations, into an outline.
  3. The scribe-panelist circulates the outline to the other panelists.
  4. A few days before the presentation, the panelists do a 15- to 30-minute panelist conference call to review and fine-tune the outline.
  5. The scribe-panelist emails the final draft of the outline to the other panelists.
  6. At the presentation: For each of the agreed questions in the outline (as time permits): One of the panelists (let’s call her “Alice”) addresses the question to the panelist designated to take the lead in answering that question (let’s call him “Bob”).
  7. Bob answers the question — and then Alice and other panelists Carol, Dave, etc., can chime in with any other observations or insights that they want to add. Discussion among the panelists might well ensue.
  8. For some questions, the panel might also ask audience members, “Does anyone else have any experience along these lines?” That often provokes audience input.
  9. For some questions, before the lead panelist answers the question, she might tell the audience, “Please turn to your neighbor and discuss the question among yourselves.” (For Webinars, that can be done via breakout rooms.)

The above format is quite popular with audiences, presenters, and conference organizers:

  • Audiences like this format because they get to participate, and true panel discussions are more useful (and entertaining) than a series of talking heads.
  • Presenters like this format because it lets them draw on their existing expertise without requiring them to spend a lot of time preparing formal speeches.
  • Conference organizers like the fact that such a panel discussion can be ended on time, because the content is divided into “chunks” (the questions), and the panelists can simply stop when time is up.

(End)

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