In a shot across the bow to the digital payments industry, the U.S. Consumer Financial Protection Bureau (“Bureau”) has issued a proposed rule to expand its oversight authority to nonbank providers of consumer payment apps.[1] These apps include digital wallets, funds transfer services, and peer-to-peer apps—for both U.S. dollar payments and, surprisingly, also bitcoin and other crypto-asset payments. The Bureau anticipates that the proposal would cover about seventeen companies based on data from various sources, including information it has collected from Amazon, Apple, Facebook, and others with respect to their payment offerings.[2]
Under the proposed rule, if finalized, the Bureau would exercise the full plate of supervisory authority over “larger participants” in this market. On top of its existing rule-writing and enforcement powers, the Bureau would exercise examination powers under the Consumer Financial Protection Act (“CFPA”) over these larger participants, such as conducting on-site examinations, imposing reporting requirements, and conducting periodic monitoring.
These supervisory activities would impose new costs on nonbank providers. The more significant impact to the digital payments industry, however, is the broad line of sight that the Bureau would gain into the activities of leading market participants. Areas of potential scrutiny where the Bureau has strongly signaled interest include the novel ways that consumer financial data and behavior data are used together in “super apps” and in embedding payments within a social media feed.[3] This proposed rule comes hot on the heels of the Bureau’s proposed rule to accelerate open banking, as the Bureau is laying the groundwork for a greater role at the intersection of digital payments and data.[4]
Scope of the Proposed Rule
The proposed rule homes in on the “general-use” digital consumer payment apps market, in recognition of its tremendous growth in recent years.[5] However, the Bureau’s examination authority under the proposed rule would apply to only a subset of nonbank providers in this market—those that are deemed “larger participants.”
The CFPA grants the Bureau broad discretion to choose criteria for assessing whether a nonbank provider is a “larger participant.” Under its proposed criteria, a nonbank provider would be a “larger participant” if it satisfies the following two prongs:
Payment transaction volume prong: The nonbank provider and its affiliates, in aggregate, have an annual “consumer payment transaction” volume of at least five million transactions, and
Entity size prong: The nonbank entity would not be a small business concern as defined by the Small Business Administration size standards for its primary industry (the likely classification would be “Financial Transactions Processing, Reserve, and Clearinghouse Activities”).[6]
A key metric in determining whether a nonbank provider would be considered a “larger participant” for purposes of the proposed rule, therefore, is the volume of “consumer payment transactions” that it facilitates. To fall within that definition (and be counted toward the payment transaction volume prong of the proposed “larger participant” criteria), a transaction must be primarily for personal, family, or household purposes; purely commercial or business-to-business payments would be outside the definition.
The following table summarizes additional nuance from the proposed rule on the definition of “consumer payment transactions”:
What is a “consumer payment transaction” under the proposed rule?
What is covered?
Any payment transaction that results in a transfer of funds by or on behalf of a consumer to a third party
Focus is on the sending of a payment, not the receipt
Encompasses a consumer’s transfer of the consumer’s own funds (such as where the nonbank provider transfers the consumer’s balance or instructs the consumer’s bank, on the consumer’s behalf, to make a funds transfer)
Also encompasses the use of a consumer’s account or payment credentials to make a payment (such as digital wallet functionality to hold and transmit the consumer’s credit card information)
Digital assets, including bitcoin, that are used to make a payment by or on behalf of a consumer to a third party
What is excluded?
International payments, such as remittances
Exchange transactions (such as conversions of U.S. dollars to a different foreign currency or purchases, sales, or exchanges of digital assets)
A consumer’s payment to a marketplace or merchant for the sale or lease of goods or services from that marketplace or merchant (such as by using payment credentials stored by an online marketplace)
Consumer lending activities, such as digital apps through which a nonbank lends money to consumers to buy goods or services
Examination Authority
Under the proposed rule, the Bureau would examine for compliance with federal consumer financial protection laws, such as the CFPA’s prohibition against unfair, deceptive, and abusive acts and practices; the privacy provisions of the Gramm-Leach-Bliley Act and its implementing Regulation P;[7] and the Electronic Fund Transfer Act and its implementing Regulation E.[8] Under the proposed rule, the Bureau would notify a nonbank provider when it intends to undertake supervisory activity, and the provider would then have an opportunity to claim that it is not a larger participant.
The Bureau’s examination authority would coexist with state oversight of money transmission. While holding a state license would not shield from Bureau oversight a money transmitter that also meets the “larger participant” criteria, the proposed rule notes that the Bureau’s prioritization of supervisory activity among nonbank providers would take into account the extent of relevant state oversight and that the Bureau would coordinate with appropriate state regulatory authorities in examining larger participants.
The Bureau is inviting public comment on the proposed rule through January 8, 2024.
The Bureau characterizes “general use” by the absence of significant limitations. For example, a digital app whose payment functionality is used solely to purchase or lease a specific type of services, goods, or property (such as transportation, lodging, food, an automobile, real property, or consumer financial products and services) would not have “general use.” Similarly, a digital app that helps consumers split a bill for a specific type of goods or services (such as a restaurant) would not have “general use” for purposes of the rule. ↑
Good communication between a lawyer and their client is paramount. After all, a lawyer cannot do their job if a client hasn’t shared important details. Business lawyers work hard to resolve matters ranging from corporate tax compliance to lawsuits that make national news. There’s no room for error.
Effective lawyer and client communications should be a priority. Without it, you run the risk of:
Making your client feel ignored or devalued
Your client forgetting important information
Relationships between you and your client falling apart
Less room to negotiate with clients
Losing out on future work with that client or business
But it’s not as simple as just telling your team to “communicate better.” Effective communication takes time, effort, and learning a unique skill set. Of course you should listen to your client. Of course you should communicate with them regularly. But what does that really mean?
It means more than just being a good listener. Improving client communication means building a framework that standardizes your communication process. Once that framework is in place, you can refer back to it time and time again. And if you review the tools you use each day with that in mind, you can make great communication easier than ever.
In this article, we’ll discuss the best practices for improving client relationships, and how you can start to build them.
Establish clear communication channels
Do you prefer to communicate by email? What about your client? Would they rather you just give them a call?
Establishing clear communication channels takes communication, and different conversations require different channels. An open conversation requires a meeting or call, but a quick update may just need an email or text.
Discuss preferred channels of communication up front, and establish when those channels are appropriate. If you send regular updates by email, make sure your client is happy to receive them, and make sure your team has the tools to streamline that process. Consider software that will let you send updates automatically. If you find your office is overwhelmed by incoming calls, consider contact center AI solutions to get queries and messages to where they need to be.
Practice active listening skills to comprehend client concerns
Source: Pexels.
Being a good listener is easier said than done. Lawyers deal with so many clients that it can often feel like you’ve heard everything. And therein lies the problem. Switching off, making assumptions, or jumping to conclusions is tempting, but every person, client, business, and case is unique. If you don’t make clients the center of your world, you miss a crucial piece of information.
Active listening is a skill set that takes more than just words into consideration. It involves:
Maintaining good eye contact (even on a video call!)
Looking for non-verbal cues, like physical signs of anxiety, sadness, or anger, and using those cues to offer appropriate support
Asking open-ended questions to gain more information and express genuine interest
Paraphrasing the talker’s words and reflecting them back to demonstrate close attention
Active listening helps you better understand the client’s thoughts and emotions. Being an active listener helps your client feel more comfortable, encouraging them to trust you, open up more, and ultimately help you serve them better.
Simplify complex legal terms for client comprehension
Legal jargon can seem impenetrable, even for seasoned professionals, so think of how your clients feel when you’re spouting complex legal terms at them. Jargon might make communication more efficient between lawyers, but after smiling and nodding through a meeting, clients can leave feeling belittled, confused, and less confident in your genuine desire to help them.
Source: Pexels.
Use simple language to describe legal concepts. Explain legal processes thoroughly in a way your client will understand, and don’t be afraid to ask if they understand something.
Establish a communication schedule for updates
Every client thinks their case or transaction is the most important in the world. To them, it is.
For you, though, their matter is just one of many important responsibilities. Lawyers are busy, and it’s impossible to stay in constant contact with every single client. Creating realistic expectations from the beginning is the key to avoiding resentment down the line.
However, a client might be anxious or impatient. It’s important to have frank discussions up front about what is and is not practical.
Define what counts as an essential update and guarantee contact when said update occurs.
Create a realistic timeframe for email, call, or message replies. For example, guarantee a reply within one or two business days.
Schedule regular conversations with clients to set aside time for updates, concerns, or simply touching base.
Don’t set yourself up for failure by promising clients the world and then disappointing them.
Your clients want to feel kept in the loop, but you don’t want to be inundated. Setting realistic expectations and communication schedules can help avoid clients chasing you for updates.
Maintain detailed records of client communications
Your case is missing a vital piece of information. The client swears they told you over the phone a few weeks ago. You’re sure they didn’t, but now you’re doubting yourself.
Keeping detailed communication records is another thing that sounds like common sense, but it can be overlooked when so much information is flying back and forth.
Record phone and video calls when appropriate, keep email and messaging records, and record or take detailed notes during in-person conversations. There are CRM tools, cloud storage solutions, and virtual assistant tools to help keep everything recorded and stored securely.
If something is overlooked, you can prove to your client that it wasn’t your negligence that caused it and maintain a good level of trust.
Seek feedback from clients
Being receptive to feedback is one of the easiest and most effective ways to improve your skills. After all, most people are happy to give feedback when asked.
Positive feedback can help boost confidence and allow you to stick to the things you’re doing right. Negative feedback is even more valuable, if a little intimidating. Constructive criticism helps us to learn, grow, and improve on our weaknesses.
Asking for feedback is a double win: it shows your clients that you care, and you’ll gain valuable insight into your own work. As a bonus, if you ask for feedback publicly, potential clients looking for a good lawyer will be able to see it.
Improving your firm’s client communications
Lawyers only have so much time and energy. Being a law professional often means long hours and stressful workloads.
Creating clear, realistic, and empathetic lines of communication between yourself and your clients is paramount to easing both your and your clients’ stresses. Improving lawyer and client communication makes your job easier, facilitating honest and open discussion, building trust, and ultimately leading to wins.
As we reflect on the sixtieth anniversary of the assassination of President John F. Kennedy this month, consumer finance lawyers may take interest in a little-noticed bit of history. The assassination delayed Congressional consideration of the Truth in Lending Act (TILA). A Boston field hearing on TILA that fateful day was abruptly halted upon news of the tragedy. The hearing continued two months later, in early 1964, but momentum for the law, which had been increasing over recent years, began to wane dramatically. As the country reeled and new political realities set in, lawmakers’ focus drifted elsewhere. TILA would have to wait another five years until its eventual passage in 1968.
On the morning of November 22, 1963, while the president traveled to Dallas, a Senate Committee on Banking and Currency subcommittee convened in the president’s home state of Massachusetts, in Boston, for the first of what would have been two days of hearings on S. 750, an early version of the legislation that eventually became TILA. The Boston hearing followed similar field hearings that year in New York, Pittsburgh, and Louisville, as well as several other hearings on the legislation dating back to 1960. Senator Paul H. Douglas (D-IL) chaired the hearing, as he did in the other cities. In Boston, just one other senator, Wallace F. Bennett (R-UT), joined him.
The two heard from several proponents of the legislation during the morning session, which began at 10:00 a.m. eastern time. (The president was in Houston then, preparing to fly to Dallas.) The first witness was the governor of Massachusetts, Endicott Peabody, who expressed support for the bill and welcomed a federal solution to the “incongruous hodgepodge of laws” governing consumer credit in Massachusetts and other states. Other witnesses included the state’s commissioner of banks, three state representatives, and several banking and retail industry representatives.
The hearing adjourned at 1:07 p.m. for lunch, with an announced resumption time of 2:30. The president was now in Dallas, where it was 12:07 p.m. central time. He was seventeen minutes into his motorcade route through the city, on his way to a luncheon at the Dallas Trade Mart. While the senators in Boston began their break, Kennedy may have been shaking hands with a supporter or chatting with a nun during one of two impromptu stops along the way. Twenty-three minutes later, at 12:30, the president was shot.
In Boston, Senators Douglas and Bennett were presumably just sitting down for lunch. All three major TV networks dispensed with their normal programming that afternoon, but it was on CBS where Walter Cronkite delivered the command performance that lives on in popular memory. The network initially cut into its daytime programming to cover the shooting at 1:40 p.m. eastern time, with the first report stating only that the president was shot and wounded. The two senators were no doubt informed immediately and may have watched the unfolding broadcast on CBS or elsewhere. Cronkite relayed wire service updates as they were handed to him, each more grim than the prior, culminating in his enduring proclamation: “From Dallas, Texas, the flash apparently official—President Kennedy died at 1 p.m. central standard time, two o’clock eastern standard time, some thirty-eight minutes ago.”
Senator Douglas immediately reconvened the hearing:
“Ladies and gentlemen, the President of the United States is dead. The country and the world has suffered a great loss. The hearings will be adjourned. Those who wish to submit statements will send them to Washington to be filed. I am going to ask that we all stand and observe a minute of silent prayer and then I am going to ask Father McEwen to lead us in prayer.”
Rev. Robert J. McEwen was chair of the Boston College economics department and slated to testify in support of the bill the next day. After a moment of silence was observed, he recited the Lord’s Prayer, which is noted in the record. According to the hearing transcript, the subcommittee adjourned for good at 2:37 p.m. The slight timing difference between Cronkite’s announcement and the hearing’s adjournment may be explained by out-of-sync clocks, or Senator Douglas may have received some reliable confirmation of Kennedy’s death just prior to the Cronkite report (ABC is said to have broken the news just before CBS). In any event, the hearing adjourned, and the senators returned to Washington.
On January 11, 1964, the hearing resumed in Boston. Senators Douglas and Bennett were joined this time by Senator Milward Simpson (R-WY) Chairing the hearing, Senator Douglas acknowledged “the tragic and terrible assassination” and expressed his desire to complete the aborted hearing. Witnesses in favor (including Father McEwen) and against the legislation alternated throughout the morning and afternoon sessions. When the January hearing concluded, it would be the last TILA hearing for more than three years, a marked break from the increasing drumbeat of hearings that had started in 1960 and gained momentum in the following three years.
The assassination permeated and disrupted every aspect of life in the United States that day. It tinged the course of history in countless ways, large and small, including the development of consumer credit regulation. While the sudden cancellation of the Boston field hearing on TILA on November 22, 1963, is a minor historical footnote to a devastating day in America, it’s also a reminder of the unsparing reach of tragedy.
In the halls of justice and chambers of law, the narrative of women has evolved from whispers to powerful testimonials of achievement and ambition. The legal system, renowned for its rigorous traditions, has historically been a bastion of male dominance. Nevertheless, through perseverance, talent, and a fierce commitment to justice, women have slowly but surely carved out a place of honor and respect within its esteemed corridors. This article aims to trace the journey of women in the legal profession, from trailblazing pioneers of yesteryear to contemporary advocates striving for equal representation and rights. Leveraging insights from prominent legal luminaries—Monika McCarthy, Danielle Hall, Valerie Hletko, Jonice Gray Tucker, and Lynette Hotchkiss—at the panel discussion titled “See Her, Hear Her: Historical Evolution, Advocacy, and the Path Ahead” at the American Bar Association’s Business Law Fall Meeting in Chicago on September 8, 2023, this article explores women’s challenges, milestones, and future prospects in the legal domain, framed against the broader canvas of societal change and the enduring quest for gender parity.
Historical Context
“Women belong in all places where decisions are being made. It shouldn’t be that women are the exception.” —Ruth Bader Ginsburg
The legal profession boasts a rich history marked by pioneering achievements of women. From the 1600s through today, women have consistently forged paths, shattered traditional barriers, and claimed their deserving space in a field once predominantly ruled by men.
Pioneers in the Legal Arena
Margaret Brent stands out as America’s first woman lawyer in 1648. A significant figure in Maryland, her achievements set the stage for more to come. Following in her footsteps was Arabella Mansfield, the first woman to be admitted to a state bar in the United States in 1869. Diversity further expanded with Charlotte E. Ray becoming the first African American woman lawyer and the first woman admitted to the bar in the District of Columbia in 1872. The twentieth century witnessed milestones like Florence E. Allen becoming the first woman to serve on a state supreme court in 1920 and Pauli Murray, known for her invaluable contributions to civil and women’s rights, becoming the first African American recipient of a JSD from Yale Law School in 1965. Fast-forward to recent times: Sandra Day O’Connor became the first female justice to serve on the U.S. Supreme Court, appointed by President Ronald Reagan in 1981, and Paulette Brown stands tall as the first African American woman to ascend to the ABA presidency in 2014.
However, it is essential to zoom out beyond these individual stories of triumph and resilience and examine the broader progression.
The Ebb and Flow of Women in Law: 1951–2022
Data spanning over seven decades paints an intriguing picture for women in law. While the 1950s witnessed a mere trickle of female representation, the percentage of legal practitioners that are women increased to 38 percent by 2022.[1] The 1970s, in particular, marked a dramatic uptick.[2] Yet, the last decade’s modest growth suggests that the journey to equality is far from over.[3]
Delving into the world of legal academia, the trends are equally riveting. While the turn of the millennium saw more women entering law schools, there is an alarming drop-off in the transition from law school to professional attorney. However, the last two decades have seen a surge in female law school deans, hinting at a changing leadership landscape.
Women as a Percentage of All Law Students: 2000–2021[6]
But what about the labyrinth of law firms? While women make up 47 percent of associates in law firms, the numbers drastically decrease further up the hierarchy.[8] Only 22 percent of equity partners and 12 percent of managing partners are women.[9] And the gender pay gap? It further widens this divide.
However, it is not just about representation in law firms’ highest echelons; delving into firm policy perceptions offers more nuanced insights. For instance, 88 percent of male attorneys believe that their law firm acknowledges gender diversity as a priority, while only 54 percent of their female peers shared this sentiment.[10] This disparity in perception permeates other areas, from leadership promotions to retention policies.
To truly grasp the dynamics at play, however, one must look beyond these corporate metrics to consider the lived daily experiences of female attorneys. At the panel discussion at the American Bar Association’s Business Law Fall Meeting, panelists McCarthy, Hall, Hletko, Tucker, and Hotchkiss highlighted these day-to-day experiences.
McCarthy shared her initial experiences in a small law firm where she was the only female attorney. From male colleagues not knowing how to act around her to learning about sports to fit in, her narrative painted a picture of the unique challenges faced by women in male-dominated settings. She also highlighted the discomfort of working closely with a partner who smoked cigars in his office, revealing the distinct professional challenges of the time.
Hall emphasized that while her firm had several female partners offering mentorship, there remained an evident disconnect. Casual discussions, often centered on sports, sometimes left her feeling out of the loop, even if broader strides were being made.
Hletko traced the evolution of law firms, spotlighting her time at a firm. She observed an early commitment to gender inclusivity and the presence of influential female partners who shaped the firm’s culture.
Tucker delved into the pressures of managing work and family life and pay equity challenges. Her narrative of working beyond committed hours yet receiving only 80 percent of the salary that her male counterparts received resonated as a stark example of gender disparities in compensation.
Hotchkiss recounted the dual pressures of work and motherhood while practicing in Anchorage, Alaska, in the 1980s. Her stories of gender biases in courtrooms and often being mistaken for a secretary unveiled the subtler, daily challenges that women in law endure.
Day-to-day interactions and experiences, often unseen in broader statistics, can significantly shape an attorney’s sense of self and career direction. From missed assignments and overlooked promotions to demeaning encounters and identity mix-ups, female attorneys face numerous daily challenges.
Female Equity Partners in Law Firms: 2006–2020[11]
From Corporate Legal Departments to Courtrooms: A Mixed Bag
Beyond law firms, the in-house and judiciary landscapes present a mix of progress and stagnation. The promising 67 percent of general counsel roles occupied by women contrasts sharply with the subdued representation in the judiciary, especially at the federal level.[19]
The surge in women general counsels can be attributed to a couple of factors. Firstly, over the last couple of decades, corporate environments have increasingly recognized diversity’s value at decision-making levels. Companies believe that diverse leadership brings varied perspectives, promoting innovative solutions and better decision-making.[20] Secondly, corporate mentoring programs and initiatives to foster female talent have become more commonplace. Such programs and initiatives provide women the necessary resources, guidance, and opportunities to ascend to top legal positions within companies.[21] And, in good news for women, industries are increasingly inclined to hire general counsels with experience: 41 percent of externally hired general counsels in 2020 had experience; since then, that percentage has jumped to 60 percent.[22]
However, while the corporate world may be progressing, it’s evident that the judiciary still has some catching up to do. The disparity in representation at the federal level can be attributed to various historical, institutional, and societal factors that have traditionally limited opportunities for women in the judiciary.[23]
The tale of women in law is a saga of relentless determination, marked triumphs, and persistent challenges. The landmarks are many, but the journey to comprehensive gender parity remains ongoing. It is not just about achieving numerical equality but forging a future that ensures fair work distribution, equitable pay, and an inclusive environment for all.
Advocacy and Activism
“Each time a woman stands up for herself, without knowing it possibly, without claiming it, she stands up for all women.” —Maya Angelou
In the intricate tapestry of the legal profession, the need for gender equality remains pressing. Advocacy, activism, and allyship stand at the forefront of this evolving narrative. This section sheds light on the pivotal role of these pillars, focusing on the strategies that women can employ to advocate for themselves and their counterparts. Furthermore, it emphasizes men’s integral role as allies, advocating for and alongside their female colleagues. By merging the forces of self-advocacy, collective activism, and intentional allyship, we aim to guide the legal community toward a landscape that not only is equitable but also thrives on collective strength and unity.
Allyship
Historically, the legal sphere has been dominated by men. However, women have established their rightful place through consistent advocacy and persistence. Today, it is vital to recognize the crucial role men play as allies, working in tandem with women to cultivate an ethos of mutual respect and collaboration.
For men seeking to be proactive allies, here are some actionable steps:
Celebrate Achievements: Actively acknowledge and appreciate the accomplishments of female peers.
Promote Equitable Distribution: Move beyond gendered expectations and ensure fair delegation of responsibilities.
Champion Safe Spaces: Advocate for settings where open and unbiased dialogues can thrive.
Facilitate Networking: Guarantee that female colleagues have equivalent access to pivotal career opportunities.
Encourage Feedback: Understand that being an ally is an evolving commitment; remain receptive to change.
Invest in Mentorship and Sponsorship: Harness your influence to propel the careers of female colleagues.
This topic was another focal point during the panel discussion at the American Bar Association’s Business Law Fall Meeting. McCarthy emphasized the vital nature of allyship, touching upon persistent biases that women face and urging active countermeasures against such biases. Hletko brought forward the nuanced strategy employed by some male allies of tactfully steering conversations back to their female colleagues when someone attempts to direct questions and comments to the male attorney. Tucker illuminated potential biases that women might harbor against one another, emphasizing that advocacy against gender discrimination should transcend individual perspectives, and noted the intersectional nature of the challenges that many female attorneys face.
Genuine gender parity in the legal domain requires comprehensive allyship. This entails dismantling entrenched biases and fostering a genuinely equitable work environment. As we further delve into the intricacies of women’s experiences in the legal realm, it becomes evident that mentors play a pivotal role in shaping these journeys.
The Transformative Influence of Mentors
Mentorship is a beacon in the maze of professional journeys, guiding and molding individuals’ trajectories. The essence of mentorship transcends mere knowledge transfer; it encapsulates confidence-building and perspective-sharing. A paradigm shift is imperative for meaningful mentorship: firms and senior attorneys must move away from delegating rudimentary tasks to women. The emphasis should be on equipping mentees, especially those from diverse backgrounds, with the requisite tools to navigate specialized fields like law.
Hall candidly shared, “As a first-generation college and law student, I have been blessed with both formal and informal mentorship throughout my journey. One of the biggest game changers is having a mentor who gets where you’re coming from, understand[s] those knowledge gaps, and provid[es] insights without always waiting for you to ask.”
Hotchkiss reflected on her early career, stating, “The term ‘mentor’ wasn’t familiar to me early on. However, in the late eighties, I had the privilege to work with leading banking and consumer finance attorneys across the country. They mentored me in ways they probably weren’t aware of. Most were males, yet they were supportive, encouraging, and accepting. Throughout my career, I’ve been told by many women that they see me as a mentor—often, it was unbeknownst to me. The ABA has offered me numerous opportunities, and I always urge women to engage, especially within the Consumer Financial Services Committee. It’s essential to identify one’s passion, skills, and aptitudes and foster them. Whether it’s organizing, speaking, or writing, everyone has a unique contribution to make. Tailoring mentorship based on individual skills and passions is the most effective way forward.”
Grasping the difference between mentorship and sponsorship is crucial in the legal world. Both offer distinct advantages: mentors provide guidance and share wisdom, while sponsors directly influence an individual’s career. The complex law landscape further highlights the need for mentors and sponsors, particularly as advocates for visibility and representation. The ripple effects of a sponsor or mentor’s visibility and accessibility are profound. Channeling and amplifying one’s strengths under such guidance can shape a lasting legacy. Ultimately, mentorship and sponsorship are not just tools but essential forces, driving representation and advocacy and instilling a responsibility to uplift the coming generation of professionals.
Additionally, in the demanding environment of the legal profession, there is a compelling argument to be made for the significance of professional coaching. McCarthy’s experience serves as a poignant testament to this. She remarked, “Being in-house, I was very blessed in my career to work for a large company and had the privilege of having a professional coach for seven years. While some might raise an eyebrow at the fact that he was an older white male, he proved to be an invaluable coach.” Emphasizing the sheer pace and pressure of juggling various roles, from professional duties to personal responsibilities such as parenting or caregiving, McCarthy said, “In such times, a professional coach becomes indispensable. They guide you, helping outline and stick to your short-term and long-term goals.” McCarthy’s unequivocal endorsement of the coaching approach underscored its transformative potential: “I highly recommend it.”
The dynamics among advocacy, activism, and allyship are crucial for reshaping and refining professional trajectories in the legal profession. As we have delved into the transformative impact of mentorship and sponsorship, it is evident that these instruments are not just about climbing the professional ladder but about building more robust, more inclusive rungs. Both male allies in the legal field and mentors of all genders have the power to redefine industry norms, ensuring that every voice is heard, every accomplishment acknowledged, and every bias actively addressed. In embracing these roles, we challenge the status quo and set a precedent for future generations. The insights shared by respected professionals like McCarthy, Hletko, Tucker, Hall, and Hotchkiss serve as a testament to this evolution. As the legal field continues to evolve, each professional must champion these ideals, fostering an environment where growth is collective and individualized. In doing so, we create a legacy that outlives our careers, pushing the legal profession into a more inclusive and progressive future.
Future of the Legal Profession
“The question isn’t who’s going to let me; it’s who’s going to stop me.” —Ayn Rand
The modern legal landscape is considerably more inclusive than a century ago, yet the work is far from done. The legal profession is undergoing transformative shifts as technology, globalization, and societal values evolve. Women lawyers today are not merely active practitioners but also innovators, thought leaders, and influencers. In exploring the trajectories of women in law, the panelists shared their insights and predictions for the future.
Hall emphasized the importance of recognizing and addressing the distinct experiences of women of color and their white counterparts. In the evolving legal environment, it is imperative to advance, notice, and genuinely understand these nuances, relentlessly propelling women of color forward.
Hletko’s voice added a layer of urgency, raising concerns about potential challenges facing diversity, equity, and inclusion (“DEI”) programs, especially in the wake of specific lawsuits and decisions. Given the indispensable value these programs bring, she noted that there is a critical need for firms to unite in ensuring that DEI initiatives are defended and strengthened.
Tucker’s journey further enriched the discussion. Her discussion of her unexpected appointment as an independent director for a major corporation shed light on the significance of women expanding their horizons and the importance of representation in diverse boards and platforms. Her story underscored the value of mentorship and sponsorship, showcasing how key figures can open unforeseen doors.
Highlighting another facet of the discussion, Hotchkiss drew attention to an alarming inconsistency: the gap between the number of women in law schools and those in active practice. Understanding the reasons behind this disparity is as crucial as developing strategies to eliminate these barriers, she said. Moreover, she pointed to the rise of remote work, catalyzed by COVID-19, as a possible game changer. This shift in how we work offers a renewed perspective on work-life balance, which could significantly reshape women’s roles in the legal realm.
The future of the legal profession, while challenging, holds promise. Guided by mentorship, strengthened by representation, and backed by progressive workplace dynamics, women are poised not just to navigate but to lead tomorrow’s legal world. The journey ahead, while demanding, offers views of unparalleled opportunities and achievements for women in law.
Conclusion
The march of women through the archives of the legal profession is a story of a tenacious battle against established norms, yet it also heralds a promise of a more democratic future. The women chronicled in this article symbolize individual victories and collective strides toward breaking barriers and forging a path paved with equity, respect, and opportunity. As we reflect on history and anticipate the future, it is imperative to recognize the shared responsibility of the entire legal community, irrespective of gender, to ensure that the scales of justice balance the letter of the law and the spirit of inclusivity and fairness. While significant progress has been made, the journey ahead requires continued vigilance, relentless advocacy, and an unwavering commitment to ensuring that every voice within the legal profession is both seen and heard. The stories of these remarkable women serve not just as inspiration but as a clarion call for collective action, urging us to build upon the foundations they have laid and push forward toward a more inclusive legal horizon.
Jaline Fenwick, Esq., serves as vice president and assistant general counsel at JP Morgan Chase Bank, N.A. The views expressed herein are those of the author; they do not reflect the views of JP Morgan Chase Bank, N.A.
Nearly everyone is on the generative AI bandwagon, and understandably so. But we are starting to hit some bumps in the road, rattling confidence and dampening enthusiasm. As legal professionals, we shouldn’t be deterred. Instead, we must take a measured and conscientious approach to tool selection and implementation.
The problem is that while we haven’t necessarily uncovered generative AI’s ideal application, AI-powered products are flooding the market. Some are useful; others not so much. Legal professionals must consider several key factors when selecting an AI-powered legal technology product.
How does it use our data?
Legal practice is deeply rooted in confidential and private information. When exploring a legal tech solution, legal teams must ask these essential questions:
How will the platform process and use our information?
Any legal tech solution must be built with privacy in mind from the ground up. Period. Peek behind the curtain to understand the underlying algorithm and its confidentiality implications. Without this insight, you cannot rely on a tool to protect your clients’ information or ensure that your organization is compliant with privacy laws and regulations.
Is it designed for our use case?
The legal field contains countless nuances. You wouldn’t task a person who has no legal background with reviewing contracts. Follow the same principle for AI.
An effective legal tech solution based on a large language model (LLM) requires customization. LLMs trained on general datasets lack the specific knowledge necessary to complete legal tasks effectively and accurately. Without a custom model, the algorithm’s knowledge base is too broad; it can miss critical context, resulting in contracts that do not apply to the circumstance, deviate from established best practices, or are unenforceable.
Legal teams need an LLM trained specifically on legal content; many tools are simply an interface for a general LLM. Once again, legal professionals need insight into a platform’s training data and use cases to understand if it aligns with their needs.
Does it help us improve workflows and performance?
Any legal technology tool must be built with human-centered AI. This design leverages the strengths of human critical thinking, creativity, and empathy while incorporating AI capabilities to automate repetitive tasks and free human bandwidth for high-value tasks.
When evaluating a tool’s fit for your team, consider:
What tasks does it accomplish?
Do its capabilities address pain points?
Does it streamline processes or add additional steps?
Each organization’s needs are different. The right solution will augment your people’s work, not impede it.
Generative AI alone is not enough
Generative AI is a piece of the puzzle, not the solution. The technology works best as part of a robust workflow involving a tech stack of established tools like rule-based AI. This form of AI functions on a set of predetermined rules to make decisions and solve problems, so its results are more predictable than generative AI. Examples of everyday use of rule-based AI include email spam filters, which rely on specific keywords and sender email addresses to flag potential spam, and e-commerce recommendations, which are powered by parameters such as products that are often purchased together.
Ideally, your chosen solution should be accessible from your team’s primary workspace, which for many legal professionals is Microsoft Word. Cumbersome, inconvenient solutions that require application toggling do not foster adoption. And if nobody uses the legal tech, no one benefits.
No matter how powerful AI becomes, technology can’t replace people. Your team possesses originality, experience, situational comprehension, and critical thinking that no machine will ever replicate. Any tool you select should support—not appropriate—legal professionals’ work.
The benefits of AI-powered legal tech
AI can deliver many advantages when leveraged correctly. Some of these benefits include:
Enforcement of best practices AI makes it possible to universally enforce best practices. Algorithms trained on a company’s or client’s legal playbooks can review contracts and replace language deviations with company-specific standardized definitions, preferred negotiation positions, and best practices, eliminating variations between contract writers and ensuring documents meet expectations.
Accelerated review Legal teams can leverage AI to review lengthy, complex contracts in just minutes. Automated processes reduce time-consuming manual tasks and errors and streamline redlining, resulting in faster negotiations and approvals.
Enhanced risk assessment and mitigation AI-powered reviews can assess contract risks and flag problematic language, uncovering potentially overlooked issues and allowing lawyers to prioritize high-urgency tasks.
Reduced workloads Completing repetitive, low-level tasks drains creativity and creates frustration. Lawyers want to make a positive impact, not push papers. AI platforms can bear some of the administrative burden, decreasing human workloads and empowering legal professionals to spend more time on high-value, rewarding activities like building client relationships.
Legal teams should consider embracing generative AI, as long as they are mindful of the risks. While many people may jump off the AI bandwagon as it bumps along the rough road, riding through its inevitable stops and slow progress ensures a faster arrival at the ultimate destination of mature technology.
The Federal Reserve Board has proposed a new rule for public comment that would significantly lower the cap on interchange fees that debit-card-issuing banks (issuers) may charge a merchant’s bank (an acquiring bank) for processing debit card transactions. Importantly, the proposal also includes a formula that would periodically adjust the interchange fee cap based on data voluntarily reported to the Board by debit card issuers. If adopted, this formulaic approach would result in automatic revisions to the amount of the interchange fee cap every two years, without any public comment.
Significantly, an exemption to the interchange fee cap for small issuers, defined as debit card issuers with consolidated assets of less than $10 billion, would remain intact. Fintech companies that partner with these small issuers, such as neobanks and digital wallets, can breathe a sigh of relief.
Debit cards are a vital component of the payments ecosystem, remaining the most popular form of noncash payment. Interchange fees are a key source of revenue for banks and their fintech partners. In 2021, interchange fees across all debit card transactions totaled $31.6 billion, a 19.1 percent increase from 2020. Market distortions inevitably result from price regulation, and this proposed rule, which would amend Regulation II, is no exception. Ramifications from this proposed rule, if adopted, will reverberate across the payments and banking industries.
Background
The Board first adopted debit card interchange fee standards in 2011, as mandated by Congress in the statutory provision known as the Durbin Amendment. Specifically, the statute requires the Board to establish standards for assessing whether the amount of any interchange fee received by a debit card issuer is “reasonable and proportional” to the cost incurred by the issuer with respect to the debit card transaction, while allowing for an adjustment to account for the costs incurred by the issuer to prevent fraud.
Under the current rule, each interchange fee received by a debit card issuer for a debit card transaction can be no more than the sum of 21 cents plus a small ad valorem component keyed to the amount of the debit card transaction and a small fraud prevention adjustment. The proposed rule would lower the cap of the base component to 14.4 cents per transaction such that, for example, the maximum permissible interchange fee for a $50 debit card transaction would be 17.7 cents under the proposal, down from 24.5 cents under the current rule.
Additionally, the proposal includes a mechanism that will, every other year, automatically adjust all three components of the interchange fee cap based on data reported to the Board in a voluntary survey of large debit card issuers. These future updates to the interchange fee cap would not be subject to public comment and would be published by March 31 of odd-numbered years, with the new amounts taking effect on July 1 and remaining in effect for two years until the next update.
Ramifications for Industry Participants and Consumers
Interchange fees are a zero-sum game between issuing banks and acquiring banks, with the latter tending to pass their costs on to merchants. Interestingly, the Board has noted (citing a study conducted by Board staff) that the introduction of the interchange fee cap in 2011 resulted in covered issuers increasing customer fees on checking accounts more than they otherwise would have, presumably to offset the lost revenue.
Although the proposed rule would apply only to large issuers, i.e., those with more than $10 billion in assets, small issuers exempt from the rule “do not exist in a vacuum” and could potentially indirectly face fee pressure in operating debit card programs, as Governor Michelle W. Bowman noted in a strong dissent. The impact of the proposed rule across the payments ecosystem may also be exacerbated by the Board’s recent revisions to debit card transaction routing rules for card-not-present transactions, which came into effect in July.
The Board is inviting public comment on the proposed rule until February 12, 2024.
In June 2023, the Connecticut legislature passed amendments to the Small Loan Lending and Related Activities Act. On September 11, 2023, the Connecticut Department of Banking (“Department”) subsequently issued related guidance on the scope of the Act and its requirements (“Guidance”). The amendments to the Act, which became effective on October 1, 2023, have potential implications for a wide range of financial services providers.
In addition to requiring the calculation of the annual percentage rate (“APR”) in accordance with the method prescribed by Military Lending Act, instead of by the method prescribed by federal Truth-in-Lending Act as had previously been done, the amendments broadened the scope of the Small Loan Lending and Related Activities Act in a number of ways. First, the amendments raised the dollar limit threshold for application of the Act from $15,000 to $50,000. The amendments also expressly imposed licensing on persons acting as agents, service providers, or in another capacity for persons who are exempt from licensure (such as a bank) under certain circumstances. Finally, the amendments simplified the definition of “small loan” in a manner that is arguably more inclusive.
The Department Guidance confirmed that imposing licensing on certain agents of exempt entities was designed to “codif[y] existing common law ‘true lender’ principles… to require licensure of partners to banks when the following conditions are met”:
Such person holds, acquires, or maintains, directly or indirectly, the predominant economic interest in a small loan;
such person markets, brokers, arranges, or facilitates the loan and holds the right, requirement, or right of first refusal to purchase the small loans, receivables, or interests in the small loans; or
the totality of the circumstances indicates that such person is the lender and the transaction is structured to evade the licensing requirements.
Inclusion of the predominant economic interest standard, consistent with similar recent legislation in other states (including Illinois, Maine, and New Mexico), would potentially require licensing of many fintech providers, as the nonbank partner in a bank partnership will often retain a greater financial interest in the transaction than the bank partner. The Department Guidance also confirms that the Department will consider the true lender factors set forth above, in addition to case law precedent construing such factors, to determine whether loans made on and after October 1, 2023, must comply with the provisions of the Act as amended, including its APR limitations. Additionally, those who service loans made by a bank pursuant to a “true lender” arrangement on and after October 1, 2023, will need to obtain licensure.
The amendments also changed the definition of a covered “small loan” to “any loan of money or extension of credit, or the purchase of, or an advance of money on, a borrower’s future potential source of money, including, but not limited to, future pay, salary, pension income or a tax refund” that was within the amount (now $50,000) and above the rate (12% APR) thresholds under the Act. The Act previously defined a covered “small loan” as “any loan of money or extension of credit, or the purchase of, or an advance of money on, a borrower’s future income” that met the amount and rate thresholds under the Act. The Act also previously defined “future income” to mean “any future potential source of money, [which] expressly includes, but is not limited to, a future pay or salary, pension or tax refund.”
The Department Guidance provided examples of nontraditional loan products that are generally covered by the Act as amended, when within the Act’s amount and rate thresholds. These include but are not limited to lawsuit settlement advances, inheritance advances, earned wage access advances, and income share agreements. While the Guidance conceded that applicability of the Act must be evaluated on a case-by-case basis, the Guidance also noted that “an advance of money on an individual’s future potential source of money of $50,000 or less with an APR greater than 12% will likely be covered by the Small Loan and Related Activities Act.” The Guidance further explained that an earned wage product, or an advance of money on future wages or salary that have been earned but not yet paid, will generally be covered by the Act as amended when the amount is $50,000 or less and the APR exceeds 12% when considering any finance charges. Notably, the Guidance states that “[i]n substance, the revised definition remains the same as the previous iteration concerning the types of transactions considered [covered small loans]” and simply “streamline[d] the small loan definition by removing this intermediary definition [of future income].” Accordingly, although the new definition of covered “small loans,” which is not limited by the term “future income,” may appear broader than the prior iteration, the Department’s position appears to be that the nonloan products identified in the Guidance as subject to the Act were also potentially subject to the Act before the amendments.
The Guidance also expresses a No-Action Position stating that the Department will not take enforcement action alleging unlicensed activity against a person that newly requires licensure for small loan activities under the Act as amended if the person filed an application for licensure by October 1, 2023.
One of the most basic questions that policyholders consider when assessing insurance policies is “who (or what) is covered?” Some policies, such as commercial general liability policies, answer that question more directly using standard form sections with titles like “Who Is an Insured.” Other liability policies, like those for directors and officers (D&O) liability or errors and omissions (E&O) coverage, may be less straightforward and require a more nuanced analysis of the various policy forms, definitions, and endorsements. In all cases, a good place to start is the policy declarations page, which typically identifies one or more “named insureds.” Those key insureds are the persons or entities who own the policy and whose names appear at the beginning of the policy.
Although the scope and amount of coverage available to entities or individuals varies significantly based on the type of coverage, policy terms, and facts giving rise to a particular claim, attention to the kind of insureds protected under a particular insuring agreement or policy is always critical. One event that could impact—or even eliminate—coverage for insureds is a name change, acquisition, merger, asset sale, or other change in corporate form. This article discusses several common insurability issues related to the corporate form for policyholders to consider when placing or renewing coverage.
Preserving Coverage in Deals
Nuanced analysis of who or what is covered may be academic if a change to corporate form following a deal negates potential coverage under legacy policies altogether. These insurance pitfalls can arise in a variety of ways.
For “claims-made” policies like D&O and E&O policies, an M&A transaction, restructuring, or other change to corporate form may result in a “change in control.” This matters because those policies typically will only cover wrongful acts by insureds that were alleged to occur before the closing date. A change in control sends the policy into “runoff,” which limits coverage to pre-transaction conduct and cuts off going-forward coverage for the company and its directors, officers, or employees.
The runoff terms depend on both the language of the seller’s D&O policy, which may provide for automatic conversion to runoff upon a change in control, and the effective date of the deal. Whether those provisions are triggered—and, if so, when the change in control occurs—can impact coverage for claims for pre-transaction wrongful acts that arise after the triggering event occurs.
To combat the risk of losing future coverage for pre-transaction acts, it is common (and encouraged) for buyers to require targets to obtain “tail” coverage for their policies for pre-transaction liabilities. Tail coverage extends the reporting period for a target’s current policy for a specified period of time. The period of the tail coverage can vary, but three to six years is most common. Tail coverage can protect buyers for claims that may have occurred prior to the consummation of the M&A transaction, and a buyer will want to avoid the risk that a claim is made against the target officers and directors after the acquisition and after expiration of the target’s D&O policy period. It is important to consider that many insurance companies will only provide D&O tail policies to a target company that already had D&O insurance in place before it received an offer to be bought.
Finally, careful attention must also be given to preserving insurance assets as part of any deal. In many deals, a surviving or acquiring entity does not assume all liabilities of the company it is acquiring. Many times, the successful transfer of interests under insurance policies in a particular transaction can turn on applicable state law. Limiting the transfer of liabilities or assets can have potential adverse impacts on the surviving entity’s ability to access historic insurance policies or to trigger coverage for legacy liabilities related to pre-transaction conduct.
Policy Changes May Lead to Unintended Consequences
There is no one-size-fits-all approach to modifying insurance policies to account for changes to corporate form. For example, there may be unintended consequences from identifying named insureds and any associated “dbas” (doing business as) or trade names in the declaration pages of liability policies. Some policyholders have found out the hard way, in litigation, that coverage may be limited depending on the specific wording of named insureds in an insurance policy. See, e.g., Masonic Temple Ass’n of Quincy, Inc. v. Patel, 185 N.E.3d 888 (Mass. 2022); see also Cent. Mut. Ins. Co. v. Davis, 576 F. Supp. 3d 493 (S.D. Tex. 2021) (stating as a matter of first impression that a designation of insured doing business as a named entity may still serve as a limiting phrase if the policy language shows that the parties intended to limit insurance coverage to one specific sole proprietorship).
In Masonic Temple Association of Quincy, Inc., for example, the Massachusetts Supreme Judicial Court held that a company was not covered under a liability policy where the company’s liabilities arose from activities outside the “dba” name identified in the policy’s declarations. The insured hotel business obtained several million dollars in general liability and umbrella coverage. When a dispute arose at a construction project about whether the business had adequate insurance to cover the work, the president of the company reached out to his insurance agent to modify the policies, including by listing the insured with reference to a “dba,” which led to a resumption of the construction project.
Following a fire at the property, an insurer denied coverage on the ground that it insured the hotel business only for operations at the “dba” address listed in the policy. In the coverage litigation that followed, the policyholder argued that the use of a “dba” name did not create a separate legal entity, so all of the company’s activities were covered under the policy, whether they related to the “dba” name or not. But the Massachusetts Supreme Judicial Court disagreed and held that the “ordinary understanding” of the phrase “doing business as” a particular entity meant that the policy only covered liability arising from activities undertaken while doing business as the listed entity. Any other interpretation, the court reasoned, would render the “dba” designation superfluous.
The Masonic Temple decision shows that clarifications to named insured provisions, even if well-intentioned, may have adverse consequences by unintentionally limiting coverage.
Takeaways
Insurance-related considerations for changes to corporate form are not limited to modified declarations pages or tail policies. For example, even in the absence of a change in control, policies may have other requirements related to acquisitions of new subsidiaries or similar operational changes that could jeopardize coverage if violated. Policyholders may have to undergo additional underwriting, or pay additional premiums, to cover the new acquisition. Even where coverage for new subsidiaries is automatic, policies may require notice or acceptance of special terms or exclusions related to the transaction to preserve coverage beyond an initial grace period. Engaging insurance coverage counsel as part of a deal team can help monitor these insurance requirements, ensure continuity of coverage, and avoid any unexpected coverage gaps.
The above concerns require nuanced analysis based on the specific lines of coverage, policy language, and circumstances giving rise to the name change or corporate restructuring. As just one example, the potential adverse impact of modifying named insureds to reflect trade names stands in contrast to insurance requirements in some jurisdictions where state regulators may require proof of name changes in certain policies when filing for a new “dba” or assumed name.
Careful analysis of insurance considerations in conjunction with changes to corporate form is of paramount importance in order to identify and resolve any issues before they cause problems securing coverage months, or even years later, when it may be too late. Retaining insurance coverage counsel early and often in the deal process can help minimize these risks and maximize recovery in the event of a claim.
This article is an introduction to the following article,[1] which was written by this author and published in the October 2023 issue of the Penn State Law Review’s online companion, the Penn Statim:
The Summary of New Developments article is based on the recent update of the New Developments section of chapter 1 of this author’s six-volume book, Mergers, Acquisitions and Tender Offers, which is published by the Practising Law Institute and updated twice a year. This New Developments section is divided into the following principal sections:
Section I, Recent Data: Macro View of the Recent Economic and Financial Impact of M&A, Sections 1:7.5 through 1:7.10;
Section II, Recent Data: Structural Issues in Recent M&A Deals, Sections 1:7.11 through 1:7.19;
Section III, Recent Data: Takeover Defenses, Tender Offers, and Related Issues, Sections 1:7.20 through 1:7.31;
Section IV, Recent Data: Cross Border M&A, Sections 1:7.32 through 1:7.36; and
Section V, Recent Data: Other M&A Issues, Section 1:7.37 through 1:7.43.
It must be emphasized that this Summary of New Developments focuses principally on the recent economic and financial aspects of M&A, and not on substantive legal developments. Those developments are addressed in the relevant chapters of the book, which has twenty-eight chapters. All mentions of specific chapters in the following text refer to Mergers, Acquisitions and Tender Offers.
The following sections of this article briefly discuss some of the highlights addressed in the five major sections of the Summary of New Developments. The emphasis here is on “some,” as there are many important concepts not discussed in this document.
Part I, Macro View of the Recent Economic and Financial Impact of M&A (Sections 1:7.5 through 1:7.10 of the Article)
The Rollercoaster Ride in Recent M&A. From 2013 through 2020, U.S. M&A activity was fairly level in both dollar value and number of deals. However, there was a “rollercoaster ride” from 2020 to 2022, with a significant increase in both deal volume and number of deals from 2020 to 2021, followed by a significant decrease in both of these measures from 2021 to 2022. Worldwide M&A activity generally followed this same pattern.
The fall in U.S. M&A activity from 2021 to 2022 was largely attributable to rising interest rates, which were engineered by the Federal Reserve Board in its fight against inflation.
M&A and GDP. M&A deal volume tends to move in lockstep with the growth or decline in aggregate Gross Domestic Product (GDP).[2] If GDP falls, which happens in a recession such as the recent one attributable to COVID-19, then M&A deal volume tends to fall.
M&A activity is also generally correlated with increases and decreases in the stock market. As inflation increases, interest rates will generally increase, and stock prices will generally fall. In addition, the S&P 500 (a broad measure of the value of stock) and total M&A transaction value generally move in lockstep, with both moving up or down together. However, during the COVID-19 years from 2019 to 2020, the stock market went up rather dramatically, while M&A volume dropped significantly, as did gross domestic product (GDP). This is an indication that the stock market is forward looking, whereas the growth in GDP from year to year is a function of the then-current economic performance.
Also, generally, when domestic M&A activity is robust, foreign M&A activity also tends to be robust, and when domestic activity declines, as was the case in 2022, foreign activity tends also to decline. This may mean that M&A activity, whether domestic or foreign, is driven by the same factors.
Cash or Stock? Most M&A transactions are all-cash deals, and this has remained true in recent years. As discussed in chapter 9, all-cash deals are virtually always taxable to the Target’s shareholders. On the other hand, if the consideration is all stock of the Acquirer, the transaction is generally tax free to the Target’s shareholders. In most years, in approximately 15% of all deals, stock of the Acquirer is the sole consideration.
Top Target Industries. For 2022, the top target industry in terms of both number of deals and dollar value of deals was “Technology Services.”
Domestic vs. Foreign Deals. Although in many years the value of U.S. deals exceeds the value of foreign deals, in all but one year since 2013 (2015), the number of foreign deals exceeded, by a wide margin, the number of U.S. deals. This indicates that the average value of foreign deals is substantially less than the average value of U.S. deals.
Overall Assessment of M&A in 2022. This brings us to the following overall assessment of M&A in 2022 by the Wachtell Lipton law firm, one of the most active law firms specializing in M&A:
The year 2022 was a tale of two halves for M&A. The beginning of the year was active, as robust deal-making carried over from the record-breaking levels of 2021 . . . . [However,] M&A activity slowed considerably after the first half of 2022, [as a result of] [1] a substantial dislocation in financing markets, [2] an increasingly volatile stock market, [3] declining share prices, [4] concerns over inflation, [5] rapidly increasing interest rates, [6] war in Europe, [7] supply chain disruption, and [8] the possibility of a global recession[.][3]
The article points out that “[n]otwithstanding lower overall activity, a number of megadeals were signed in 2022.”[4]
Part II, Structural Issues in Recent M&A Deals (Sections 1:7.11 through 1:7.19 of the Article)
Relative Numbers and Values of Public and Private Deals. While the number of public acquisitions and mergers is significantly less than the number of such private deals, the aggregate deal value of public deals is significantly more than the aggregated deal value of private deals. For example, for 2022, there were 216 acquisitions of publicly held U.S. Targets for a total of $653 billion, while, on the other hand, in the same year, there were 10,900 acquisitions of privately held domestic Targets for a total consideration of $252 billion.[5]
Thus, while the business press is full of articles discussing deals in which a publicly held Target is acquired, the number of these deals is nowhere near the number of non-public deals. However, the average value of these public deals generally exceeds by a wide margin the average value of private deals.
The EBITDA Valuation Metric. As discussed in chapter 11, which deals with valuation, a common deal metric is the comparison of (1) the Target’s earnings before interest, taxes, depreciation, and amortization (EBITDA) with (2) the Target’s total invested capital (TIC) or enterprise value (EV). Both TIC and EV mean the fair market value of the firm’s total debt (net of cash held) and equity. In addressing the EV/EBITDA ratio of the market generally as of the beginning of 2023, the Litera 2023 M&A Report explains:
Perhaps the biggest finding in this report is around EV/EBITDA valuations, which appear to be coming down at long last. Since 2016, the median M&A multiple has hovered around 10x, briefly wading into 11x territory in the buying frenzy of late 2021. For the first time in six years, however, the median EV/EBITDA multiple fell below 10x in Q3 2022, and the fourth quarter is following the same trajectory.[6]
In virtually all cases, the M&A multiple will be higher than the S&P 500 multiple because Acquirers have to pay a price that is higher than the going market price in order to get a sufficient number of a Target’s shareholders to accept the transaction.
Impact of Rising Interest Rates and PE Deals. It can be expected that as interest rates rise, thereby increasing the cost of financing acquisitions, the price Acquirers will be willing to pay for Targets will fall. Also, the increased interest rates in 2022 and 2023 have led some Private Equity (PE) deals (see chapter 14) to be done on an all-equity basis.
The Level of PE Activity. As an illustration of the significance of PE in M&A deals, it has been reported that over the years the following PE firms have completed the indicated number of deals: (1) Shore Capital Partners—586; (2) The Carlyle Group—485; and (3) KKR—438.[7]
Overpayments by Acquirers. In public deals, there is a tendency for the Acquirer to overpay. Investors’ concern about overpayment is illustrated in the 2020 acquisition of Slack by Salesforce. In that transaction, one source reported that the shares of Salesforce fell from around $264 before the deal became known to $220.78 at the end of the day the transaction was announced. The loss was 16.5% of the pre-announcement value, representing a $18.7 billion loss in value, which apparently was more than the amount paid for Slack.[8]
Part III, Takeover Defenses, Tender Offers, and Related Issues (Sections 1:7.20 through 1:7.31 of the Article)
The Pill. As discussed more fully in chapter 5, the most potent defensive tactic against a hostile takeover attempt is the Shareholder Rights Plan (i.e., Poison Pill), and although there had been a decrease in the number of companies with pills from 2006, there appears to have been a slight uptick in the number since COVID. However, a pill can be adopted in a “moment” after a Target’s board receives “notice” of an unwelcome offer.
The potential ineffectiveness of a pill in preventing a hostile takeover is illustrated in the 2022 acquisition by Elon Musk of Twitter. For example, an article in the New York Times on April 15, 2022, discussing the adoption of Twitter’s pill was entitled “Twitter Counters a Musk Takeover with a Time-Tested Barrier.”[9] Twitter’s “Time-Tested Barrier” was effective for exactly ten days, because, as a result of shareholder complaints and threats of suit, Twitter’s board entered into a merger agreement with Musk on April 25, 2022.[10]
This is an illustration that in Delaware, where Twitter is incorporated, a Target cannot use a pill to “Just Say No.” On the other hand, it may be possible for a Target incorporated in certain other states, such as Pennsylvania, to use a pill to “Just Say No.”
There is often a lot of interest in hostile tender offers. These are transactions in which a hostile Acquirer makes an unwanted bid directly to the shareholders of the Target. Tender offers can also be non-hostile as a first step in effectuating a two-step merger. As indicated in chapter 4, in many cases a consensual tender offer followed by merger can be effectuated much more quickly than a one-step merger.
Notwithstanding the large interest in hostile tender offers, they are rare. For example, in 2018 and 2019, there were only three; in 2020, there were six; in 2021, there was one; and in 2022, there were four. The treat of a hostile tender offer can cause a Target’s management to pay closer attention to their jobs; however, with the pill and the threat of a pill, potential hostile Acquirers are significantly deterred.
Deal Protection Devices; Direct and Reverse Termination Fees. A significant amount of time and effort goes into the planning and negotiating of a consensual deal, and an Acquirer will naturally be concerned that it will spend a lot of time and effort in securing a deal and then seeing the deal snatched by a higher bidder. One way of reducing the risk of loss is for the Acquirer to negotiate for a termination fee to be paid by the Target if the Target accepts a higher bid from a third party. As demonstrated in chapter 5, there can be a breach of the fiduciary duties of the Target’s directors if the termination fee is so high that potential topping bidders would be deterred from putting in a higher bid.
In addressing this issue in 2022, the average termination fee when measured against (1) the Target’s Total Invested Capital (i.e., equity and debt) was 4.1%, and (2) deal size was 3.3%.[11] As discussed in chapter 5, absent unusual circumstance, a court is likely to find a termination fee at these levels acceptable.
While termination fees are generally present in negotiated acquisitions of a public Target, they are rare in acquisitions of closely held Targets.
A termination fee paid by the Target to the Acquirer is commonly referred to as a Direct Termination Fee. A termination fee running from the Acquirer to the Target if the Acquirer walks away from the transaction is referred to as a Reverse Termination Fee, and as discussed in chapter 5, as a general matter, they do not present the same fiduciary duty issues as a Direct Termination Fee. Consequently, generally there is no limit on the size of a Reverse Termination Fee. In many transactions, such as in the Twitter deal, the Direct and Reverse Termination Fees are the same size.
In most public deals and in virtually all private deals, there will be a “No Shop” provision, which will, after the signing of the deal, prevent the Target’s board from actively seeking a higher deal. As indicated in chapter 5, while these provisions are generally acceptable in Delaware, they generally cannot be used by a Target’s board to “Just Say No” if it is approached by a potential higher bidder.
In some deals, the Target’s board may be given a “Go Shop,” which will for a specific period of time after the signing of the deal permit the Target’s board to seek an alternative buyer. As a general matter, the Termination Fee the Target will have to pay if it goes with a topping bidder that arises in the Go Shop period will be less than the Termination Fee that will have to be paid if the topping bidder shows up after the Go Shop period.
Banks and Bankruptcies. Virtually every business executive and business lawyer is aware of the bankruptcies of several banks that occurred in 2023. As addressed more fully in chapters 16 and 17, as a result of the Federal Reserve Board’s tight monetary policy (i.e., higher interest rates) for fighting inflation, there were the following three major bank bankruptcies during calendar year 2023 as of June 15, 2023:
Signature Bank;
Silicon Valley Bank; and
First Republic Bank of San Francisco.
In each of the above three transactions the banks were taken over by a profitable bank holding company. As of November 9, 2023, there were also bankruptcies by the following two banks: Citizens Bank, Sac City, Iowa and Heartland Tri-State Bank, Elkhart, Kansas.[12]
As discussed more fully in chapter 16, which deals with bankruptcy generally, and chapter 17, which deals with bank acquisitions, as a general matter, the cause of these bankruptcies was higher interest rates engineered by the Fed in its fight against inflation. Rather than borrowing low and lending high, these banks got caught into the trap of having to borrow high and lend low.
Most Active Investment Banks and Law Firms. As indicated from the following Figure 1-30 in the Summary of New Developments article, many of the usual investment banking firm and law firm “suspects” were the most active in M&A for 2022:
Figure 1-30
Top 10 M&A Investment Banking Firms and Law Firms Ranked by U.S. Deal Volume 2022
Investment Banking Firms (a)
Law Firm (b)
1
Goldman Sachs & Co. LLC
Simpson Thacher & Bartlett LLP
2
JPMorgan Chase & Co.
Sullivan & Cromwell LLP
3
Morgan Stanley
Skadden, Arps, Slate, Meagher & Flom LLP
4
Bank of America Securities Inc.
Latham & Watkins LLP
5
Citigroup Inc.
Wachtell, Lipton, Rosen & Katz
6
Barclays Bank Plc
Kirkland & Ellis LLP
7
Credit Suisse
Weil, Gotshal & Manges LLP
8
Evercore, Inc.
Gibson, Dunn & Crutcher LLP
9
Wells Fargo & Co.
Debevoise & Plimpton LLP
10
Allen & Co., Inc
Cravath, Swaine & Moore LLP
Sources: (a) 2022 Mergerstat Financial Advisor Rank by Total Value, 2023 FactSet Review at 74. (b) 2022 Mergerstat Legal Advisor Ranking by Total Value, 2023 FactSet Review at 75.
Proxy Contests. As discussed more fully in chapters 5 and 8, a proxy contest can involve, inter alia, (1) an attempt by an insurgent individual or group to gain control of the board of a publicly held company, and (2) an attempt by a potential Acquirer to replace the board of a publicly held Target company with the purpose of facilitating the acquisition of the Target by the Acquirer. Proxy contests may also involve the efforts of an activist shareholder, such as Carl Icahn, to use such a technique to gain control of the board for the purpose of changing the Target corporation’s business policies. Activist proxy contests are generally addressed in the next section.
The number of these contests ranged from 102[13] in 2018 to 85 in 2022, with the number going straight down yearly from 2018 to 2022. The reasons for this drop are not clear to this author; however, it can be expected that the SEC’s new “Universal Proxy” rules, which were adopted in 2021, could have had a depressing impact on the number of proxy contests.
Activist Shareholders. As discussed in chapter 28, activist shareholders are involved in many proxy contests. However, the activist does not prevail often; for example, in 2022 the Activist prevailed in eight of the 85 contests. As indicated next, an activist may employ a short selling strategy.
Short Selling and the Attack on Ichan Enterprises. Although short selling strategies are not included in the Summary of New Developments, there could be a heightened interest in short selling strategies as a result of the short selling attack on Icahn Enterprises, controlled by Carl Ichan, arguably one of the “Kings of Short Sellers.”
A traditional short selling investment strategy could include the following steps taken by the Short Seller:
The Short Seller borrows stock of the Short Selling Target;
The Short Seller then sells the borrowed stock on the open market at the going price, say $20 per share;
The Short Seller then talks down the price of the stock through publicly distributed analyses that show that the stock of the Short Selling Target is over-priced; and
After the expected fall in the price of the stock of the Short Selling Target, say to $12 per share, the Short Seller purchases the stock at $12 per share and uses that stock to close out the original borrowed stock position, which was $20 per share.
When the dust settles, the Short Seller has a profit of $8 per share before expenses.
Thus, rather than following the usual investing strategy of buying low and then selling high, the short seller sells high and then buys low, with that stock used to close out the high price position that was financed with debt.
As discussed in chapter 28, Icahn Enterprises, L.P., a publicly held firm controlled by Carl Icahn, came under a short selling attack in 2023 by a short selling firm, Hindenberg Research. As a result of that attack, there was a significant drop in the trading price of Ichan Enterprises, leading one source to title its report on the situation as “Icahn Got Icahn’ed.”
As a result of this situation, it can be expected that there will be a heightened interest in short-selling strategies.
Part IV, Cross Border M&A (Sections 1:7.32 through 1:7.36 of the Article)
In General. Chapters 19 through 22 address various aspects of inbound (i.e., acquisitions by a Foreign Acquirer of a US. Target) and outbound (i.e., acquisitions of by a U.S. Acquirer of a Foreign Target) cross border M&A. This section provides a high-level review of some of the financial and economic considerations of this activity.
Wachtell Lipton publishes an annual Cross-Border M&A Guide,[14] and the 2023 Guide, which was issued in early 2023 covering principally 2022 activity, provides the following overview of cross border M&A activity during 2022:
[Cross Border M&A Generally:] Cross-border merger and acquisition (“M&A”) transactions are a significant part of the global M&A landscape, representing approximately a third of all deal activity annually in recent years.
[The “Reversion to the Mean”:] After a record-shattering year for M&A in 2021, the year 2022 represented a reversion to the mean in terms of M&A volume, reflecting the impact of [1] Russia’s invasion of Ukraine, [2] interest rate spikes, [3] challenging debt markets, [4] ongoing supply chain disruption, and [5] the Covid-19 pandemic.
Worldwide M&A volume decreased to $3.6 trillion in 2022, compared to an average of $4.3 trillion annually over the prior ten years (in 2022 dollars). Cross-border deal volume in 2022 was $1.1 trillion, equivalent to 32% of global M&A volume and consistent with the average proportion (35%) over the prior decade.
[Inbound Transactions:] Acquisitions of U.S. companies by non-U.S. acquirors constituted $217 billion in transaction volume and represented 19% of 2022 cross-border M&A volume.[15]
It is interesting to note that, as would be expected, the bulk of M&A activity takes place in North America and Europe.
The Impact of the Exchange Rate. The foreign exchange rate can have a significant impact on inbound acquisitions and outbound acquisitions. For example, if the dollar becomes weaker (that is, it takes less of a foreign currency to purchase a dollar) when measured against the currencies of the major trading partners of the United States, then (1) it will be cheaper for potential Acquirers located in such countries to buy U.S. Targets, and (2) at the same time, it will become more expensive for potential U.S. Acquirers to buy Targets located in such countries. The reverse is true if the dollar becomes stronger (that is, it takes more of a foreign currency to purchase a dollar).
The UNCTAD World Investment Report. This Report, which was not available at the time of the writing of the Summary of New Developments, gives the following high-level overview regarding the level of M&A in 2022:
The multitude of crises and challenges on the global stage – the war in Ukraine, high food and energy prices, risks of recession and debt pressures in many countries – negatively affected . . . cross-border mergers and acquisitions (M&As), [which] were especially shaken by stiffer financing conditions, rising interest rates and uncertainty in financial markets.[16]
It can be expected that the war between Israel and Hamas, which began in October 2023 (and is still raging as this article is being written in early November 2023) will have a depressing impact on cross border M&A involving a company located in, or doing significant business in, the Middle East.
Another section of the UNCTAD Report provides the following observations on the M&A component of Foreign Direct Investment (FDI), which is investment by a company located in one country, such as the U.S., into another country, such as France:
In 2022, FDI flows to developed countries as a group fell by 37 per cent, largely in Europe and North America. In the other developed countries, they rose . . . In the United States, flows declined by 26 per cent to $285 billion, mainly due to the halving of cross-border M&As, which generally account for a large share of inflows. Among the 10 largest [M&A transactions], only one occurred in the United States. The decrease in M&As had a direct impact on the equity component of FDI, which fell by 35 per cent. . . . [I]n Canada [FDI] decreased by 20 per cent to $53 billion, as cross-border M&A sales fell by 37 per cent.
While cross-border M&As declined to $11 billion, announced greenfield [new investment] projects rose 28 per cent, to $25 billion.[17]
U.S. Acquirers of Foreign Targets, and Foreign Acquirers of U.S Targets. From 2018 to 2023, the number of Foreign Targets of U.S. Acquirers in outbound acquisitions exceeded the number of U.S. Targets of Foreign Acquirers in inbound acquisitions. Thus, over this period there were, and generally there are, more U.S. Acquirers of Foreign Targets than Foreign Acquirers of U.S. Targets. However, the number of inbound and outbound acquisitions for each of those years were not dramatically different. For example, in 2022, there were (1) 2,519 acquisitions by U.S. Acquirers of Foreign Targets and (2) 1,842 acquisitions by Foreign Acquirers of U.S. Targets.[18]
In elaborating on one aspect of inbound activity, a 2021 article entitled American Companies You Didn’t Know Were Owned By Chinese Investors contains, inter alia, discussions of the following U.S. companies that have significant Chinese shareholders: (1) AMC; (2) Shanghai Automotive Industry Corp (SAIC), which has a partnership with GM; (3) Spotify; (4) Hilton; and (5) GE’s appliance division.[19]
CFIUS-Type Restrictions. As a result of the growth in cross border acquisitions and ownership, many countries have adopted investment restrictions for investments by foreign persons similar to the Committee on Foreign Investment in the United States (CFIUS) law in the United States, which is discussed in chapter 19. On this development, the UNCTAD World Investment Report 2023 says:
[T]he trend observed in recent years towards introducing or tightening national security regulations that affect FDI in strategic industries continued and expanded. The approach to FDI screening varies significantly from country to country, resulting in a patchwork of different regimes. Together, countries with FDI screening regimes accounted for 71 per cent of global FDI flows and 68 per cent of FDI stock in 2022, compared with 66 and 70 per cent, respectively, in 2021. Furthermore, the number of merger and acquisition (M&A) deals valued at more than $50 million withdrawn by the parties for regulatory or political concerns in 2022 increased by a third, and their value increased by 69 per cent.[20]
These foreign CFIUS-type restrictions are discussed in chapter 20, which deals with outbound acquisitions.
Part V, Other M&A Issues (Sections 1:7.37 through 1:7.43 of the Article)
Recent Developments with Special Purpose Acquisition Companies (SPACs). SPACs, which are addressed generally in chapter 6, are companies organized through a blank check initial public offering (IPO). In these transactions, at the time of the IPO, the issuing company has no business other than the plan to use the funds raised in the IPO to acquire an operating company. When a SPAC completes an acquisition, the transaction is sometimes referred to as a de-SPAC. Obviously, SPAC transactions are heavily regulated by the SEC.
As indicated in the Summary of New Developments article, the number of SPACs between 2018 and 2022 has been on a “roller coaster” ride with (1) 2018 and 2019 having 29 SPACs each; (2) 2020 jumping to 98; (3) 2021 more than doubling at 210; and (4) 2027 more than halving to 127. Also, through August 2023, there were just 22, an 80% decline. [21]
Introduction to Blockchain and Cryptocurrency M&A. Although this topic is introduced in the Summary of New Developments, this author has limited expertise in this area. However, it appears that the SEC disclosures by Coinbase, which was the first major crypto company to go public in an initial public offering, can provide helpful information on this topic. For example, Coinbase’s April 1, 2021, IPO prospectus provides the following background information on Bitcoin, the largest cryptocurrency:
Bitcoin sparked a revolution by proving the ability to create digital scarcity: a unique and finite digital asset whose ownership could be proven with certainty. This innovation laid the foundation for an open financial system. Today, all forms of value – from those natively created online such as in-game digital goods to traditional securities like equities and bonds – can be represented digitally, as crypto assets. Like the bits of data that power the internet, these crypto assets can be dynamically transmitted, stored, and programmed to serve the needs of an increasingly digital and globally interconnected economy.
Today, we enable customers around the world to store their savings in a wide range of crypto assets, including Bitcoin and USD Coin, and to instantly transfer value globally with the tap of a finger on a smartphone.[22]
Coinbase’s more recent SEC filings may be helpful in understanding this topic as well.
For an excellent review of many of the legal issues impacting cryptocurrencies in the context of M&A, see the following article: Blockchain M&A: The Next Link in the Chain.[23] Among other things this article addresses the following issues:
U.S. Federal Securities Laws Considerations. [See chapter 6]
Commodities Regulation Considerations.
Federal and State Money Transmission Considerations.
U.S. Anti-Money Laundering Considerations.
Sanctions Considerations.
1940 Act Considerations.
IP Rights Considerations.
Privacy and Cybersecurity Considerations.
CFIUS Considerations [See chapter 19]
Tax Considerations [See chapter 9]
The Impact of Environmental, Social, and Governance (ESG) on M&A. Two lawyers from Wachtell Lipton paint the following picture of the potential impact of ESG on M&A in 2022:
In the past year, ESG has played an increasingly prominent role in activist campaigns, most dramatically exemplified by Engine No. 1’s success in electing three directors to Exxon Mobil’s board, as well as by the development of the two-front activist “pincer” attack in which an ESG activist attack is followed by an attack from an activist focusing on financial returns. Activists have also leveraged ESG to further their M&A theses: Third Point called for the breakup of Royal Dutch Shell, Elliott called for the separation of SSE’s renewables business and Bluebell called on Glencore to divest its coal business.
ESG’s influence is also increasingly evident in the context of M&A negotiations and larger deal considerations. As one example, it has become ever more critical for acquirors to comprehensively diligence the ESG profile of potential Targets—a result of the SEC’s increased focus on the adequacy of ESG disclosures and the growing legal, financial and reputational costs of ESG underperformance.[24]
This topic is discussed from a due diligence perspective in chapter 3.
The Impact of ChatGPT and Other Artificial Intelligence (AI) Firms on M&A. Business activity with AI is fast moving as indicated by the announcement in January 2023 by Microsoft of the expansion of its partnership with OpenAI, a leader in the AI business. A Microsoft press release[25] on the transaction explained:
Today, we [Microsoft] are announcing the third phase of our long-term partnership with OpenAI through a multiyear, multibillion dollar investment to accelerate AI breakthroughs to ensure these benefits are broadly shared with the world.
This agreement follows our previous investments in 2019 and 2021. It extends our ongoing collaboration across AI supercomputing and research and enables each of us to independently commercialize the resulting advanced AI technologies.
Supercomputing at scale – Microsoft will increase our investments in the development and deployment of specialized supercomputing systems to accelerate OpenAI’s groundbreaking independent AI research. We will also continue to build out Azure’s leading AI infrastructure to help customers build and deploy their AI applications on a global scale.
New AI-powered experiences – Microsoft will deploy OpenAI’s models across our consumer and enterprise products and introduce new categories of digital experiences built on OpenAI’s technology . . . .
Exclusive cloud provider – As OpenAI’s exclusive cloud provider, Azure [a computer system] will power all OpenAI workloads across research, products and API services.[26]
Obviously, this is a very complex topic, and the discussion here and in the Summary of New Developments is designed only to alert the reader to some of the issues related to AI.
Preliminary Report on M&A Activity in 2023. This section of the Summary of New Developments article discusses some of the M&A developments occurring in 2023 that are not discussed in the preceding sections. The developments discussed here generally occurred after the submission of the New Developments sections to PLI at the end of June 2023 and before September 30, 2023, several days before the publication of the Summary of New Developments on the Penn Statim.
This section of the article shows that both worldwide “Value” and “Number of Deals” were down dramatically through August 2023. With respect to the dollar size of deals, through August 2023, there were twenty-nine deals with an acquisition price of $5 billion or more, whereas in the same period during 2023 there were forty-nine deals of that size.[27]
I thank my following Penn State Law Research Assistants for comments on this article: Akshaya Senthil Kumar, an LLM student, and William Schroeder, a third-year student. ↑
GDP is the dollar value of aggregate purchases of new products and services by (1) consumers, (2) firms, (3) federal, state, and local governments, and (4) foreign persons (netted against foreign purchases by U.S. persons). ↑
Igor Kirman, Victor Goldfeld, Elina Tetelbaum, Wachtell Lipton Rosen & Katz, Takeover Law and Practice: Current Developments, Harv. L. Sch. F. Corp. Governance (May 3, 2023), https://perma.cc/95JP-2CD3. ↑
FactSet Mergerstat, 2023 FactSet Review, at 25 (Table 1-3, Composition of Aggregate Net Merger and Acquisition Announcements, with respect to Number of Deals) and at 31 (Table 1-5, Composition of Net Merger and Acquisition Announcements, 2018-2022, with respect to Value of Deals) (May 2023). ↑
Litera Corp., 2023 M&A Report: Return to Normal: Resilience and Resetting 12 (Dec. 1, 2022), https://perma.cc/QS5E-BVKA. ↑
Since 1992, shortly after the breakup of the Soviet Union, the Commercial Law Development Program of the U.S. Department of Commerce (CLDP) has aided post-conflict and developing countries through commercial law reform. These reforms are critical in establishing legislative, regulatory, and judicial environments conducive to international trade and investment, and in creating a level playing field for U.S. firms seeking to conduct business abroad.
CLDP works closely with the U.S. Department of State and engages in capacity-building technical assistance legal training programs with more than seventy foreign governments. These programs draw upon highly experienced regulators, judges, policymakers, business leaders, and attorneys from both public and private sectors to deliver results that make meaningful and lasting changes to legal and business environments in the host countries (seethe CLDP’s website). By providing technical legal assistance to countries seeking to understand and embrace international best practices in the development and implementation of commercial law, CLDP contributes to the global building and strengthening of the rule of law.
Expertise involved
CLDP attorneys and experts advise on commercial law topics, including energy transition, ethics and anti-corruption, information and communications technology, infrastructure (public private partnerships and project finance), intellectual property, private sector development, arbitration, procurement, bankruptcy, investment, and trade.
What does CLDP do and where?
CLDP operates worldwide and offers volunteer opportunities for legal experts to contribute to efforts that advance the rule of law through commercial legal reform. Current programming is conducted in the following regions of the world:
Europe and Eurasia;
Latin American and the Caribbean;
the Middle East and North Africa;
South Asia;
Southeast Asia and the Pacific; and
sub-Saharan Africa.
There are also global initiatives that target the development of commercial law frameworks; regulations and policies in energy sectors; women-owned and small business access to government contracts; digital connectivity; and international commercial arbitration.
Sample projects
A sample of regional projects illustrates the breadth of subject matter involved. For example:
To assist the transition of countries to stable, market-based economies that are integrated with the world’s economies, CLDP works with countries to align their rules and processes with international best practices [Eastern Europe, Southeastern Europe, the Southern Caucasus, and Central Asia].
CLDP works with government procurement agencies to improve transparency and effectiveness of systems and procedures, and it also supports better insolvency practices [Latin America and the Caribbean].
In the Middle East and North Africa, CLDP connects U.S. experts with country counterparts to assist and train on a range of commercial and legal issues, including insolvency in commercial arbitration.
Relying upon private sector lawyers, businesspersons, and professionals along with governmental officials, CLDP programming in South Asia includes trade and investment assistance, intellectual property protection, technology transfer and innovation, competition and consumer protection, company and franchise law reforms, energy and mining extractive concerns, information and communication technology, transportation and infrastructure, eCommerce and cyber law, banking and financing, insolvency and bankruptcy, ADR, and women’s economic empowerment.
CLDP also works with Southeast Asian and Pacific Island countries to develop transparent legal and procedural frameworks to oversee complex infrastructure projects to attract high-quality investors and developers [Thailand, Cambodia, Burma, Myanmar, Malaysia, Timor-Leste, Indonesia, Philippines, Vietnam, and the Pacific Islands].
In sub-Saharan Africa, CLDP seeks to reform and strengthen intellectual property legislation, administration, and enforcement on a country basis [Ghana, Nigeria, Liberia, Mali, South Africa, and Kenya]; and on a regional basis with the Economic Community of West African States (ECOWAS), Southern Africa Development Community (SADC), and East African Community (EAC).
On a global-initiative level, CLDP helps countries on the verge of becoming major oil and gas producers establish the capacity to manage resource revenues, maximizing value and transparency.
These projects rely on many pro bono lawyers and experts to help build and implement commercial law frameworks incorporating best practices of contracting, accounting, and taxation to attract foreign investment.
Role of volunteers (pro bono) and their expertise
CLDP operates only when invited by the host government, and first seeks to identify and assess problematic points in a host country’s commercial law framework. CLDP attorneys, who have experience employing a variety of development approaches, assess whether improvements needed in a host country commercial law framework are substantive or procedural, human or institutional. If expertise is needed from the private sector, pro bono volunteers conduct capacity-building training or legislative and regulatory reviews. The CLDP lawyer handling the project works to identify volunteers with the appropriate expertise from various channels, including federal and state judicial organizations and bar associations. The rich range of expertise found in the ABA Business Law Section would greatly enhance pro bono lawyer contributions to CLDP’s work and strengthen the global rule of law.
Procedure for your involvement
As a channel for announcements of CLDP opportunities, the Business Law Section (BLS) Rule of Law Committee will receive periodic notices of CLDP project opportunities and then liaise with BLS committees with the relevant expertise. The type of legal expertise is specified in the CLDP announcement, and CLDP will invite volunteers whose expertise matches CLDP’s project requirements and who are interested in participating for a video interview with CLDP project coordinators. Under this new cooperative program with the BLS, volunteer lawyers—if selected after the interview—may be offered the opportunity to provide in-person or remote technical legal assistance, including, inter alia:
seminar-type presentations for foreign officials;
simulation-styled training for the development of negotiation skills of foreign officials;
desktop or in-person review of draft laws and regulations to ensure they are compatible with international best practices;
revision of national investment laws ensuring they are conducive for foreign investors; or
service as arbitrators or judges for international moot court competitions.
While some CLDP projects are being conducted on a remote basis, many programs now involve volunteers conducting training programs in foreign countries and engaging in person-to-person interactions with foreign government officials, diplomats, and lawyers. In such cases, the volunteer’s pro bono contribution is time and expertise; CLDP will pay for the international travel costs.
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