Transactional Lawyering and Contractual Innovation
2016 AALS Annual Meeting
New York, NY
In a world of dramatic economic, technological and legal change, there is a need for contractual innovation. Contractual innovation has traditionally been challenging for transactional lawyers due to a number of factors, including stickiness in contract terms, locked-in practices, and structural impediments to better contract design. Transformative technology and stresses on the legal profession, with a focus on reducing costs, may further affect contractual innovation. An early stage technology company, for example, can easily set itself up and generate customized legal forms through online tools that will help the company establish and run its venture with minimal up-front legal costs and little involvement from transactional lawyers. Even in more complex transactions, technology has led to automation of contract design. Panel members for this program will address a number of important questions as to how to encourage innovation by transactional lawyers in the face of these challenges: What role can and should transactional lawyers play in driving contractual innovation? To what extent can innovation in designing contracts provide transactional lawyers with new opportunities for premium work? What impact does the structure of law firms play in shaping the process of contract design and production? What roles do norms and standard practices in dealmaking play in shaping innovation in contract design? Does the process of innovation differ in one area of transactional practice from another, for example mergers and acquisitions versus venture capital financing versus establishing unincorporated entities?
The first part of our program will involve a panel of speakers who will focus their comments on the questions posed above. Panel participants include Professors John Coyle, Kevin Davis and George Triantis.
The Section on Transactional Law and Skills invites submissions from any full-time faculty member of an AALS member school who has written an unpublished paper, is working on a paper, or who is interested in writing a paper on this topic to submit a 1 or 2-page proposal to the Chair of the Section by August 31, 2015. The Executive Committee will review all submissions and select proposals for presentation as part of our AALS 2016 Section Meeting.
Please direct all submissions and questions to the Chair of the Section, Afra Afsharipour, at the address below:
Professor of Law & Martin Luther King, Jr. Hall Research Scholar
UC Davis School of Law, King Hall
Tel: +1 530 754 0111
Assistant Director of the Center for Transactional Law and Practice
Emory Law School
Emory Law School seeks an Assistant Director of the Center for Transactional Law and Practice to teach in and share the administrative duties associated with running the largest program in the Law School. Each candidate should have a J.D. or comparable law degree and substantial experience as an attorney practicing or teaching transactional law. Significant contacts in the Atlanta legal community are a plus.
Initially, the Assistant Director will be responsible for leading the charge to further develop the Deal Skills curriculum. (In Deal Skills – one of Emory Law’s signature core transactional skills courses – students are introduced to the business and legal issues common to commercial transactions.) The Assistant Director will co-teach at least one section of Deal Skills each semester, supervise the current Deal Skills adjuncts, and recruit, train, and evaluate the performance of new adjunct professors teaching the other sections of Deal Skills.
As the faculty advisor for Emory Law’s Transactional Law Program Negotiation Team, the Assistant Director will identify appropriate competitions, select team members, recruit coaches, and supervise both the drafting and negotiation components of each competition. The Assistant Director will also serve as the host of the Southeast Regional LawMeets® Competition held at Emory every other year.
Additionally, the Assistant Director will be responsible for the creation of two to three new capstone courses for the transactional law program. (A capstone course is a small, hands-on seminar in a specific transactional law topic such as mergers and acquisitions or commercial real estate transactions.) The Assistant Director will identify specific educational needs, recruit adjunct faculty, assist with curriculum design, and monitor the adjuncts’ performance.
Besides the specific duties described above, the Assistant Director will assist the Executive Director with the administration of the transactional law program and the Transactional Law and Skills Certificate program. This will involve publicizing the program to prospective and current students, monitoring the curriculum to assure that students are able to satisfy the requirements of the Certificate, and counselling students regarding their coursework and careers. The Assistant Director can also expect to participate in strategic planning, marketing, fundraising, alumni outreach, and a wide variety of other leadership tasks.
Emory University is an equal opportunity employer, committed to diversifying its faculty and staff. Members of under-represented groups are encouraged to apply. For more information about the transactional law program and the Transactional Law and Skills Certificate Program, please visit our website at:
To apply, please mail or e-mail a cover letter and resumé to:
Emory University Law School
1301 Clifton Road, N.E.
Atlanta, GA 30322-2770
APPLICATION DEADLINE: April 30, 2015
Thanks to Gordon Smith for inviting me to guest blog—and kudos to Gordon for inviting Michael Burstein, who penned several insightful guest blogs here a few weeks ago—to generate some buzz about the intersection of IP and business law. In my posts over the next two weeks, I’ll follow on Michael’s outstanding foray into the overlap—and as I’ll describe, the “gap”—between IP and business law.
As Michael explained, IP and business law often intersects in three key areas: (1) Law & Entrepreneurship; (2) Markets for Technology; and (3) Innovation and Corporate Performance. Each of these areas has been growing at tremendous rates both in terms of academic study and real-world deals.
As an IP law professor and former founder of a .com-era software company, it’s greatly refreshing to see this newfound interest in IP & business law in the legal academy and practice. Yet, both domains still often suffer from what I term the IP transaction “gap”—namely, the lack of a deep understanding on the part of academics and lawyers of both the “IP of Business” and the “Business of IP.”
In simple terms, business lawyers often fail to appreciate the important details of IP and IP lawyers often fail to understand the business of their clients. As a client, my difficulties stemmed in finding business-savvy lawyers who had a sufficient grasp of IP—particularly the business aspects of IP—to ink the kinds of nuanced licensing, assignment, and acquisition agreements that would suitably account for the structure and risks unique to IP deals. The same sorts of “gaps” between IP and business law pervade law review articles that attempt to tackle this thorny intersection.
Of course, there are notable exceptions among scholars and practitioners alike. For instance—in addition to Michael Burstein—Ashish Arora, Stuart Graham, Richard Gruner, Bronwyn Hall, Jay Kesan, Josh Lerner, and David Teece represent an abbreviated list of some of the scholars with deep knowledge in both fields. Similarly, there are well-known (and lesser-known) attorneys with the same sort of cross-disciplinary aptitude. How do scholars—and practitioners and students—acquire this kind of knowledge? I have a few suggestions.
First, law schools should offer more cross-over courses in IP and business law. For example, at the University of San Diego School of Law, David McGowan and I have focused on expanding our cross-disciplinary IP offerings, which now include IP & Business, IP Strategies, Technology Transfer, and a Technology Entrepreneurship Law Clinic. Based on a survey of IP courses performed by William Mitchell Law School, fewer than 20 law schools offer any IP transactional courses other than IP licensing. Relatedly, law schools should provide certificates or concentrations in IP Transactional Law, as well as more opportunities for joint MBA/JD programs, with a special emphasis on technology-focused business and law.
Second, legal academics writing in IP & business should more frequently read and cite literature from outside the law review canon. In my view, often the best law review articles in IP draw upon scholarly works from business, economics, management, marketing, and related journals. One excellent way to quickly learn about the latest thinking in these fields is to attend conferences in these disciplines, such as the Academy of Management or American Economic Association annual meetings.
In this vein, academics and practitioners alike should cease the frequent practice of pigeon-holing certain issues as “legal” and others as “business,” relegating the latter to the expertise of non-lawyers. At my software company, we eventually fired every lawyer who made such hidebound distinctions. In their place, we hired transactional lawyers who understood our business well—not only our goals in a specific deal, but also overall—and who thus could provide integrated business and legal advice. In order to have this deep level of knowledge, transactional lawyers—especially those who practice in the tech space—need to immerse themselves in the business of their clients. In many situations, this might mean self-educating by reading a client’s business plan and fundraising slides, as well as general business magazines, books, blogs, and journals.
Last, and perhaps most importantly, we in legal academia—in addition to training students to “think like lawyers”—should give today’s transactional law students a head-start on “thinking like businesspeople.” By doing so we can help ensure clients receive the kinds of lawyering they increasingly demand (and need).
Letter received today from The Association of American Law Schools:
I am pleased to inform you that the AALS Executive Committee has approved your petition for full status as the AALS Section on Transactional Law and Skills.
Tina Stark got this section started in 2010. The initial officers of the provisional section were Tina, Joan Heminway, Eric Gouvin, and Afra Asharipour, and the executive committee was Lyman Johnson, Therese Maynard, and Gordon Smith.
Many others have participated in building the Section since that time. Thanks all around for the hard work required to make this happen.
This is a reminder from Sue Payne, Executive Director of the Center for Transactional Law and Practice at Emory Law:
If you haven’t yet registered for Emory Law’s Fourth Biennial Conference on Teaching Transactional Law and Skills, entitled “Educating the Transactional Lawyer of Tomorrow,” you should do so now. The Conference is June 6th and 7th.
Tina L. Stark will return to Emory to kick off the Conference by updating the fantasy curriculum that she proposed in her speech at the inaugural conference in 2008. On Day Two, the keynote panel will address the topic, “Skills is Not a Dirty Word: Identifying and Teaching Transactional Law Competencies.”
You won’t want to miss these or the many other terrific sessions we have planned. Please see the attached Conference Schedule for more details. You can register for the Conference by clicking here. If you have any questions about registration, please contact the Conference Coordinator, Edna Patterson, at email@example.com.
We write to ask two small (but important) favors of you that are directly related to law schools' pedagogical mission as well as the rapidly changing future of legal education.
As you may know, an ABA task force has recently proposed to establish minimum requirements within ABA-accredited law schools for "experiential" learning related to building practical skills and competencies. (Similar proposals are percolating up from state bar association task forces as well.) We believe this endeavor to be an intriguing and important invitation for law schools to re-imagine how they deliver legal education, and on this basis we are generally supportive. At the same time, a challenging question that the ABA and other task forces face is the question of what topics constitute "skills and competencies." Within business law, this challenge is perhaps greatest for attorneys whose practice is principally "transactional" in nature (in contrast to work that is oriented around litigation). It is unclear how much input transactionally-oriented business law practitioners (attorneys, other professionals, educators) have had on the process of drafting the proposed guidelines, or whether there has been much systematic analysis of what topics constitute important "skills" for entering transactional attorneys.
To address these gaps, we have developed an on-line survey instrument to help gauge what sorts of core competencies established professionals in transactional practice areas consider important. We hope the results of the survey will help both practitioners and legal educators assess (and if necessary, work to amend) the current proposed guidelines. Although largely directed to practicing attorneys, the survey is also open to other professionals who work closely with practicing attorneys in transactional practices (such as bankers, accountants, financial advisers, etc.).
Here are the two favors we ask of you:
(1) Please take a few moments yourself to fill out the survey. It will not take longer than 5-10 minutes of your time.
(2) Please ask your colleagues, partners, associates, co-workers, and other professional contacts to consider filling out the survey.
The survey is available on-line, at
When complete, results of the survey will be made available on the website for the Berkeley Center for Law, Business and the Economy (BCLBE), at http://www.law.berkeley.edu/bclbe.htm.
Just before Christmas the Washington Law Review published a symposium issue honoring Larry Cunningham's new book, Contracts in the Real World. The issue is a good read for Contracts teachers. You can read my contribution, "Contracts as Pattern Language" here. The abstract for this essay is below:
Christopher Alexander’s architectural theory of a "pattern language" influenced the development of object-oriented computer programming. This pattern language framework also explains the design of legal contracts. Moreover, the pattern language rubric explains how legal agreements interlock to create complex transactions and how transactions interconnect to create markets. This pattern language framework helps account for evidence, including from the global financial crisis, of failures in modern contract design.
A pattern represents an encapsulated conceptual solution to a recurring design problem. Patterns save architects and designers from having to reinvent the wheel; they can use solutions that evolved over time to address similar problems. Contract patterns represent encapsulated solutions within a legal agreement (or set of agreements) to a specific legal problem. This problem might consist of a need to match the particular objectives of counterparties in a discrete part of a bargain or to address certain legal rules. A contract pattern interlocks, nests, and works together with other contract patterns to solve more complex problems and create more elaborate bargains. Interlocking patterns enable scalability. Just as Alexander’s architectural patterns for rooms create patterns for buildings, which create patterns for neighborhoods and cities, patterns of individual contract provisions form legal agreement patterns, which interlock to create patterns for transactions, which, mesh to create patterns for markets. For example, contract patterns help lawyers draft real estate contracts. These contracts interlock in sophisticated real estate transactions, which mesh with other contract patterns to form securitization transactions. Securitization patterns create markets for asset-backed securities, which, form part of the larger shadow banking system.
This scalability differentiates contract patterns from boilerplate. However, legal scholarship on boilerplate – including Henry Smith’s work on the modularity of contract boilerplate – patterns allow certain debt contracts to become what Gary Gorton calls "informationally insensitive" and to enjoy many of the economic features of money.
The pattern language framework explains not only how sophisticated contracts function, but also how they fail. The pattern language framework provides a lens for examining recent contracts law scholarship on the failures of sophisticated contract design, including "sticky" contract provisions in sovereign bond agreements, "Frankenstein" contracts in mortgage-backed securitizations, and the "flash crash." If modularity and contract design patterns foster the development of new financial instruments and markets, then their features can also contribute to the unraveling of these markets. For example, by restricting the information content of contracts, patterns and modularity not only midwifed the creation of liquid markets for those contracts, they also played a role in "shadow bank runs" and the catastrophic freezing of these markets. The failure of contracts can have systemic effects for entire markets when a particular contract enjoys widespread use or when it is so connected to other critical contracts that cascading failures occur.
This essay was a contribution to a symposium for Larry Cunningham’s book, Contracts in the Real World.
The Section on Transactional Law and Skills is still emerging, but we have another great program this year ...
Researching and Teaching Transactional Law and Skills in an Increasingly Global World
Moderator: Brian JM Quinn, Boston College Law School
Deborah Burand, The University of Michigan Law School
John C. Coates, IV, Harvard Law School
Claire M. Dickerson, Tulane University School of Law
Juliet M. Moringiello, Widener University School of Law
Marco Ventoruzzo, Pennsylvania State University, The Dickinson School of Law
Stephen Zamora, University of Houston Law Center
The business world is facing continuing challenges related to globalism and cross-border open electronic access through the Internet. Many transactions cross national borders and almost all – including traditional goods and services purchase orders and real property transactions – have international significance. Some legal structures have begun to encompass international business supervision and enforcement efforts, while others remain grounded in traditional nation-state-based regulatory systems. As a result of these changes in the market for business transactions, international and comparative law scholarship has broadened to include a robust and growing business transactional element. All of these changes have increased our challenge as legal scholars and instructors in educating our students in the theory, policy, doctrine, and skills that they will need as participants in the transactional business law setting.
This two-part panel features (1) two academic paper presentations on international, comparative, or cross-border transactional law topics culled from a Call for Papers, and (2) an expert panel of law teachers commenting on the program theme, implemented in a roundtable discussion format with a moderator, focusing on transactional law scholarship and teaching in this current, dynamic business transactional environment.
A note from Joan Heminway, chair of the Section on Transactional Law and Skills:
Cynthia Adams, Patricia Lee, and Afra Afsharipour are working on our second section newsletter. We would like to include in the newsletter transactional law news and a list of recent transactional law or skills books, book chapters, and articles. Accordingly, please send us any information you may have about, e.g.:
(i) new developments at your law school in transactional law or skills, such as the establishment of a new transactional law curriculum or the hiring of new scholars in the field;
(ii) highlights from 2012 transactional law events or conferences or announcements about upcoming 2013 transactional law events or conferences; and/or
(iii) a list of recent papers or other publications (theoretical, empirical, doctrinal, pedagogical, etc.) that, defined broadly, relate to transactional law or skills.
Thanks, in advance, for your submissions. I look forward to seeing many of you in New Orleans in January.
As in a bad horror movie (or a great Rolling Stones song), observers of the current crisis may have been disquieted that one of the central characters in this disaster also played a central role in the Enron era. Is it coincidence that special purpose entities (SPEs) were at the core of both the Enron transactions and many of the structured finance deals that fell part in the Panic of 2007-2008?
Bill Bratton (Penn) and Adam Levitin (Georgetown) think not. Bratton and Levin have a really fine new paper out, A Transactional Genealogy of Scandal, that not only draws deep connections between these two episodes, but also traces back the lineage of collateralized debt obligations (CDOs) back to Michael Millken. The paper provides a masterful guided tour of the history of CDOs from the S&L/junk bond era to the innovations of J.P. Morgan through to the Goldman ABACUS deals and the freeze of the asset-backed commercial paper market .
Their account argues that the development of the SPE is the apotheosis of the firm as “nexus of contracts.” These shell companies, after all, are nothing but contracts. This feature, according to Bratton & Levin, allows SPEs to become ideal tools either for deceiving investors or arbitraging financial regulations.
Here is their abstract:
Three scandals have fundamentally reshaped business regulation over the past thirty years: the securities fraud prosecution of Michael Milken in 1988, the Enron implosion of 2001, and the Goldman Sachs “Abacus” enforcement action of 2010. The scandals have always been seen as unrelated. This Article highlights a previously unnoticed transactional affinity tying these scandals together — a deal structure known as the synthetic collateralized debt obligation (“CDO”) involving the use of a special purpose entity (“SPE”). The SPE is a new and widely used form of corporate alter ego designed to undertake transactions for its creator’s accounting and regulatory benefit.
The SPE remains mysterious and poorly understood, despite its use in framing transactions involving trillions of dollars and its prominence in foundational scandals. The traditional corporate alter ego was a subsidiary or affiliate with equity control. The SPE eschews equity control in favor of control through pre-set instructions emanating from transactional documents. In theory, these instructions are complete or very close thereto, making SPEs a real world manifestation of the “nexus of contracts” firm of economic and legal theory. In practice, however, formal designations of separateness do not always stand up under the strain of economic reality.
When coupled with financial disaster, the use of an SPE alter ego can turn even a minor compliance problem into scandal because of the mismatch between the traditional legal model of the firm and the SPE’s economic reality. The standard legal model looks to equity ownership to determine the boundaries of the firm: equity is inside the firm, while contract is outside. Regulatory regimes make inter-firm connections by tracking equity ownership. SPEs escape regulation by funneling inter-firm connections through contracts, rather than equity ownership.
The integration of SPEs into regulatory systems requires a ground-up rethinking of traditional legal models of the firm. A theory is emerging, not from corporate law or financial economics but from accounting principles. Accounting has responded to these scandals by abandoning the equity touchstone in favor of an analysis in which contractual allocations of risk, reward, and control operate as functional equivalents of equity ownership, and approach that redraws the boundaries of the firm. Transaction engineers need to come to terms with this new functional model as it could herald unexpected liability, as Goldman Sachs learned with its Abacus CDO.
The paper should be on the reading list of scholars in securities and financial institution regulation. The historical account also provides a rich source of material for corporate law scholars engaged in the Theory of the Firm literature.
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The AALS Section on Transactional Law and Skills will meet during the AALS Annual Meeting in New Orleans, Louisiana, from 1:30 pm – 3:15 pm on Saturday, January 5, 2013. Please note this program in your calendar. We hope to see you there.
We are soliciting papers for presentation at the Annual Meeting. The topic for this year’s session is: Researching and Teaching Transactional Law and Skills in an Increasingly Global World.
Two presenters will be chosen on the basis of paper summaries submitted in response to this Call for Papers. The topic encompasses the scholarship and teaching of international and comparative transactional law and cross-border transactions. The Executive Committee encourages submissions on a broad range of transactional law and skills issues related to this year’s topic. Paper proposals focused on the teaching of international and comparative transactional law and skills are welcomed, but the Executive Committee is especially interested in papers that explore international and cross-border transactions from an empirical, doctrinal, or theoretical perspective. The Executive Committee specifically encourages submissions from junior scholars.
If you are interested in presenting a paper, please submit a summary of no more than three double-spaced pages, by e-mail, on or before Monday, July 30, 2012. You also may submit a complete draft of your paper. Send your submission to Joan Heminway at The University of Tennessee College of Law (firstname.lastname@example.org). Papers will be reviewed and selected for presentation at the program by members of the Executive Committee of the Section on Transactional Law and Skills:
Afra Afsharipour, Treasurer (U.C. Davis)
Eric Gouvin, Chair-Elect (Western New England)
Joan Heminway, Chair (Tennessee)
Lyman Johnson (Washington and Lee/St. Thomas)
Therese Maynard (Loyola Los Angeles)
Gordon Smith, Secretary (BYU)
Tina Stark, Past Chair (Boston University)
Authors of accepted papers will be notified by August 31, 2012. Please pass this Call for Papers along to any colleagues who may be interested.
Here is a highly productive way for business law professors to procrastinate from grading exams:
The National Bureau of Economic Research just circulated a new version of a paper that provides a medieval complement to the law & finance literature and to Gilson's lawyer as transaction cost engineer idea. The paper by Davide Cantoni and Noam Yuchtman presents evidence that the training of commercial lawyers by new universities contributed to the expansion of economic activity in medieval Germany. Here is the abstract:
We present new data documenting medieval Europe's "Commercial Revolution'' using information on the establishment of markets in Germany. We use these data to test whether medieval universities played a causal role in expanding economic activity, examining the foundation of Germany's first universities after 1386 following the Papal Schism. We find that the trend rate of market establishment breaks upward in 1386 and that this break is greatest where the distance to a university shrank most. There is no differential pre-1386 trend associated with the reduction in distance to a university, and there is no break in trend in 1386 where university proximity did not change. These results are not affected by excluding cities close to universities or cities belonging to territories that included universities. Universities provided training in newly-rediscovered Roman and Canon law; students with legal training served in positions that reduced the uncertainty of trade in medieval Europe. We argue that training in the law, and the consequent development of legal and administrative institutions, was an important channel linking universities and greater economic activity.
A very interesting read.
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Some of you may have been planning to attend the Boston University Transactional Conference, which was scheduled for November 2nd and 3rd of this year. Please note that the conference has been cancelled, and a new date is not anticipated.
This semester, Afra Afsharipour (UC Davis) and I are organizing a virtual workshop featuring transactional law scholarship. Unlike the many workshops on law and economics or other topics that are housed in particular law schools, this workshop is independent of any particular law school. We meet online every other week, and scholars present working papers to a group of ten core faculty via video conference technology. It's an experiment in low-cost scholarly community building, and while the technology is not perfect, I was encouraged by our first session on January 13.
In that session, Brian Quinn (BC) presented his working paper, Putting Your Money Where Your Mouth Is: The Performance of Earnouts in Corporate Acquisitions. Brian tests the claim that earnouts are a contractual response to adverse selection in corporate acquisitions. The empirical data in the paper is available because of the disclosure of fair value accounting data now required by the Financial Accounting Standards Board. Brian concludes, "Rather than resolve the problem of adverse selection, earnouts are probably better explained by an alternative hypothesis: that they resolve the problem of uncertainty present in corporate acquisitions."
If you are interested in transactional scholarship, this paper is worth a read.