Everyone, including Christine, thought that Carlyle's plan to require arbitration for "any disputes arising out of or relating in any way to our partnership agreement or the common units, including those under the federal securities laws of the United States" would encounter resistance. Today, Carlyle removed the provision after the SEC told the company that it would not approve the IPO.

I stand with Harvey Pitt on this one: "If somebody tells you that you’re going to have a very different set of remedies if you make this investment, and you still want to invest, it seems to me government has done its job."

And Hal Scott: "What’s at stake is the competitiveness of our capital markets. If the SEC is going to take this position, we are all entitled to know why they think securities class actions are helpful."

This is a nice example of how the right rules could encourage companies to become laboratories of corporate governance. If investors don't like arbitration provisions, let them punish the unit price, but if investors are willing to buy the units, why should the SEC stand in the way? The investors are not vulnerable consumers who need the SEC to evaluate the merits of the deal. Disclose the terms and let the market set the price.

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I spent two hours this morning with a state court judge. He told me that a decade ago he had 30-35 jury trials, and this year he has had two. Both criminal trials. We didn't have an opportunity to explore all of the variables that might have produced this result, but his point was that people (and businesses) simply don't use the judicial system anymore for civil litigation. This is not a new point, I realize, but it still made me pause and reflect on the litigation-oriented curricula at most law schools.

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