September 2018: Jean Macchiaroli Eggen (82’) Alumna of the Month

It was 9 o’clock in the morning, and demolition on the old football stadium had begun just a few feet away from the Law School. The site would become the Carrier Dome. First-year law student, Jean Macchiaroli was sitting in Torts, and Professor Peter Bell was sitting cross-legged on the desk, giving the class a hypothetical to discuss. She was taking it all in that morning, but little did she know just how much this class would impact her career in the legal profession. As a student who was previously ready to pursue a career in art history, Jean found herself instead in the world of torts and civil procedure.

After receiving her bachelor’s degree in French literature from Connecticut College, Jean received her M.A. in art history from Michigan State University. She ended up developing a love for art history and was ready to dive deeper into that world, so she set off as a Ph.D. candidate at the University of Michigan, focusing on the iconography of 15th Century Northern Renaissance painting. At both Michigan and Michigan State, she held positions as a teaching assistant – lecturing, leading discussion sections, and writing and grading exams. While working on her Ph.D. dissertation, she found herself wanting to do something current that would “change people’s lives.” While considering law school, Jean traveled once to visit a friend at Syracuse Law – another former Michigan art history Ph.D. student. She was pleasantly surprised by the welcoming and diverse campus. She noted that the students ranged in age, race, and gender, and it was then that she knew Syracuse Law was where she wanted to be. Soon, Jean was packing her bags and headed for New York to pursue a career in the law.

When entering Syracuse Law, Jean knew that her academic background would make her a good fit for the Law Review. She loved being a part of this organization and working with her fellow members, particularly Managing Editor and sidekick Steve Shaw. Jean ended up taking her love of the Law Review to become the Editor in Chief of Volume 33. Her Law Review note on criminal procedure and evidence was selected for publication. Amidst her work on Law Review, Jean also participated in the Moot Court Society’s annual Lionel O. Grossman Trial Competition. Despite being a 2L, who had not yet taken the Evidence course, Jean and her partner were determined to “soldier on.” With dreams of one day becoming a trial attorney, and the will to win, the 2L duo made it all the way to the finals, before placing runner-up.

Grossman was only the beginning for Jean. One of her favorite classes was Trial Practice with Professor Travis Lewin. Jean loved the controversial cases and the sensitive topics that Professor Lewin chose, mostly dealing with Criminal Law and product liability. She appreciated his broad focus on all aspects of litigation, not just the trial itself. She remembers practicing a particularly challenging voir dire with undergrad students as the jurors. Jean used her experience from this class to pursue her interest in becoming a trial attorney. After graduating magna cum lade, Jean went on to work in the litigation department at Bond, Schoeneck, & King, PLLC in Syracuse.

Jean’s role as Editor in Chief gave her the confidence level and writing skills needed for the legal profession. She recalls a judge ruling against her on a summary judgment motion, but taking time in open court to compliment her on the excellence of her brief. She remembers thinking that maybe that judge would give her brief extra attention in the next case and be persuaded by her argument. Eventually, Jean’s professional goals shifted, however. She longed to reach a larger group of people through teaching and scholarly writing. She had loved law school and the exchange of ideas in a dynamic environment. Becoming a law professor was the next logical step; her job search resulted in being hired by Delaware Law School.

Jean’s arrival at Delaware Law School brought some significant challenges. She taught her first class as a law professor while seven months pregnant and became the first professor at the law school to give birth during the academic year. There was no precedent, and she was on her own to manage her classes and her writing and service responsibilities. Although much has changed since then, some of the old attitudes have remained in the profession, as her former students have reported. For women entering the legal profession, she emphasizes “the need for strong support systems, both inside and outside the workplace. Trusted mentors and sponsors – female or male – can help navigate any choppy professional waters.”

In her first year of teaching, Jean taught Civil Procedure and Environmental Law. The next year she developed a new course, a Toxic Torts course. The field was brand new, with no casebooks, so she put together a large set of reading materials for the students. She also reached out to Professor Bell for advisement; she says he was very generous with the materials he had on the subject. But toxic torts was a new, up-and-coming educational topic, one that was taught at few law schools in the nation at the time, so there was little to build upon. Jean says that, upon developing the course, there were very few decisions that related to toxic torts in her first years of teaching. The groundwater pollution case that inspired both the book and movie, A Civil Action, had recently settled during trial, but unfortunately was under a “gag agreement” at the time. Consequently, Jean had her students read the few briefs and decisions available, most having to deal with “Agent Orange.” The experience of developing the reading materials was galvanizing, and Jean felt that she knew every aspect of the subject after researching the new cases each year. Over time, toxic torts would become a major subject of litigation, with an explosion of judicial decisions, and a key subject of legal education around the country.

Jean’s scholarly writings demonstrate her expertise and interest in a broad diversity of topics. Some of her scholarly pieces have been on such subjects as neuroscience and tort law, mass torts, scientific evidence, nanotechnology, federal preemption in product liability actions, reproductive and genetic hazards in the workplace, toxic torts at Ground Zero, and various procedural issues in medical malpractice and toxic tort litigation. Her book, West’s Toxic Torts in a Nutshell, has a 6th edition being released in October. While Jean served as one of the trailblazers who helped to create a path for legal curriculum in the field of toxic torts, Jean also taught a variety of other classes. In 2002, she began teaching first-year Torts, and has also taught upper-level Civil Procedure, Environmental Law, Tobacco and the Law, Science and the Law, and New York Civil Practice. Jean’s law school service included five years as chair of the Tenure Committee, membership on the elected Faculty Executive Committee, and membership on the Strategic Planning Committee. And yes, she spent several years as advisor to the law review.

Jean continues to highly value the arts as important to our culture and our humanity, and moving on from art history did not diminish her interest or participation in the arts. She has had a long affiliation with the Wilmington Drama League, a community theater, where she served on the board and as VP of Artistic Development. In addition, she has directed several mainstage productions at WDL, as well as plays in the one-act play festival. She writes plays, and one of her original plays won the WDL one-act festival.

Recently, Jean retired from Delaware Law School (now officially Widener University Delaware Law School) and is now a Distinguished Emerita Professor. In what proved to be a storied career, Jean was a two-time recipient of the Douglas E. Ray Excellence in Faculty Scholarship Award and received a writing award from the ABA Section of Environment, Energy, and Resources. She is still engaged in scholarly writing and consulting.

Looking back, Jean says one of the most rewarding experiences she had as a professor was seeing her students “go out and shine.” Just as she formed a bond with her former professor, Peter Bell, Jean says she loves when her former students reach out to her and fill her in on their progress. She says, “Teaching allows us to touch the future, and I can think of nothing more satisfying and inspiring than seeing my law students succeed in the legal profession and pass along their knowledge to the next generation.”

The Power of the First Amendment: District Judge Declares California’s Restrictions on Gun Advertisements Unconstitutional

Written by Collin M. Carr

 

The California Penal Code states that “[n]o handgun or imitation handgun, or placard advertising the sale or transfer” of handguns “shall be displayed in any part of the premises where it can readily be seen from the outside.” On September 11, 2018, a federal district judge for the Eastern District of California found this statute constitutionally problematic under the First Amendment and prohibited California from enforcing it in a decision that underscores how the law prioritizes freedom of expression over other policy-based concerns.

Background

Between 2010 and 2015, the California Department of Justice issued citations to various gun shop owners for violating § 26820 of the California Penal Code by displaying images depicting firearms on the exterior of their businesses. Aside from issuing citations, the state officials also instructed the owners to remove the prohibited content. These materials included a metal sign outlined as a revolver, a logo shaped as a pistol, and vinyl window decals depicting rifles. While the nature of the materials differed, they all shared one common, prohibited feature: they communicated to the public that the store sold firearms.

The First Amendment Battle

Arguing that the state law infringed on their freedom of speech under the First Amendment, the gun shop owners filed a lawsuit in federal court seeking a court order prohibiting the state from enforcing the law. To determine whether the law in fact infringed on the owners’ First Amendment rights, Judge Troy Nunley conducted the four-part test used to evaluate restrictions on commercial speech.

This test first required the court to determine whether the images involved misleading speech, or speech advertising some form of “unlawful activity.” The court easily found that the images did not constitute a problematic form of commercial speech because the licensed selling and purchasing of firearms constitutes lawful activity, and the images did not create any misleading impression about the business conducted by the gun shops. Second, the court ascertained whether the government possessed a “substantial” interest in regulating the commercial speech. Again, the court easily found that the government imposed the law to serve the weighty interests of reducing gun-related crime and suicide.

The third prong, however, created the biggest area of disagreement and is where the court focused most of its attention. This prong requires the regulation to “directly” or “materially” further the government’s substantial interest. California reasoned that individuals who commit crime and suicide are more likely to possess “impulsive personality traits.” As such, the large images of firearms target people with impulsive personality traits by inducing them into purchasing weapons. The regulation, California asserted, therefore furthered its substantial interest in reducing crime and suicide rates by preventing such individuals from seeing these images and acting on such impulses.

This argument failed to persuade the court. It pointed to the argument’s false assumption that people who are at risk of impulsively purchasing items are also at risk of impulsively committing suicide or crime. The court held that, absent evidence establishing a direct link between the two forms of impulsive behavior, the regulation failed to materially further the government’s interests.

Although the regulation failed to satisfy the third prong of the test, the court proceeded to conduct the legal analysis for the final element, which requires the regulation to impose the least intrusive restrictions “necessary to serve” the government’s interests. The court held that § 26820 failed here as well, since California possesses various other regulations and methods for reducing crime and suicide without infringing on commercial speech. Given these considerations, the court held that § 26820 violated the First Amendment and granted the gun owners the injunctive relief they sought.

The Unwavering Influence of the First Amendment

While the precise boundaries of the First Amendment’s free speech protections remain unclear and are always subject to change, this case makes clear that the principles underlying the amendment remain a potent force against legislation that interferes with the free exercise of speech. Judge Nunley’s characterization of the regulation as a “highly paternalistic” piece of legislation is a testament to the power the First Amendment wields across legal and political ideologies, even in an era where the broad scope of the freedom of expression is increasingly questioned.


Sources

Bob Egelko, Federal Judge Nominee Troy Nunley Works His Way Up, SFGate (Jan. 2, 2013).

Cal. Penal Code § 26820 (Deering 2018).

Christopher Hsu, Federal Judge Rule Against Gun Ad Law, Jurist (Sept. 13, 2018).

Tracy Rifle & Pistol LLC v. Harris, 2018 U.S. Dist. LEXIS 154926 (E.D. Cal. Sept. 11, 2018).

Veronica Stracqualursi, Obama Calls for ‘Common Sense Gun Safety Laws’ after Florida Shooting, CNN (Feb. 15, 2018).

Photo courtesy of KPCC.

 

The Law Responds: How North Carolina Law Protects Consumers After Hurricane Florence

Written by Tyler Sankes

 

As Hurricane Florence continues its path along the eastern United States, a temporary law is in effect in North Carolina that aims to clean up the hurricane’s destruction. Although the statute cannot remove debris or fix powerlines, it has succeeded in affording hundreds of consumers an avenue to voice their concerns in a time of need.

The law, North Carolina General Statutes Chapter 75 Article 38, prohibits producers of goods and services to charge unreasonably excessive prices and requires violators to refund the consumer and pay up to $5,000 per violation. But before your inner curiosity questions the generality of the statute and/or its market interventionist nature, there are constraints and language that act as guideposts to insure the law is used as intended.

Timing

The statue can only be in effect for 45 days from the triggering event and cannot continue beyond the threshold unless renewed by the Governor. In North Carolina, the triggering event was not Florence’s landfall, but rather occurred when the state declared a State of Emergency on September 7th, 2018. Therefore, the law is currently projected to be in place until at least October 22, 2018.

Triggering Event

An event must take place that causes the statute to come into effect. In addition, the event is only ‘triggering’ when North Carolina declares a State of Emergency or when it causes a significant market disruption. Market disruptions, whether actual or imminent, are considered significant when goods or services that are needed by consumers as a direct result of an emergency or are used to protect one’s self or property. Some examples include natural disasters, strikes, civil disorders, war, and terrorist attacks.

Intent

The characteristic and price of the good or service, by itself, cannot show that the price gouging law was violated; consumers are required to show intent. Not only must the goods be consumed as a direct result of the emergency, but the producer must possess knowledge and intent to charge unreasonably excessive prices.

Excessive

To help determine if a producer is charging excessive prices, the law provides several characteristics that should be considered. Increases in supply cost, price compared to previous sales or local competition, greater macroeconomic forces (such as inflation or interest rates), and increased business risks are factors that may be analyzed to help determine whether a price is excessive.

Results So Far

Over 500 complaints have been received by Attorney General Josh Stein’s office. Although these are only complaints and have not been proven in a court of law, the resounding response by North Carolina citizens show that there is a need and the law is responding.


 

Sources

Christina Maxouris, There have been more than 500 reports of price gouging in North Carolina after Florence, CNN (Sep. 17, 2018).

N.C. Gen. Stat. § 75-38

Photo courtesy of AP Photo.

Understanding Securities Laws: Why Elon Musk Might Be in Hot Water after Tweeting About Taking Tesla Private

Written By Nolan Kokkoris

 

Background

On September 6, 2018, prominent short-seller Andrew Left filed a class action complaint against Tesla, Inc. and its Chief Executive Officer Elon Musk for alleged violations of Rule 10b-5 of the Securities Exchange Act of 1934 (SEA). Left claims that Musk “artificially manipulated the price of Tesla securities to damage [Tesla’s] short-sellers . . . by issuing materially false and misleading information.” Short-sellers are those who sell stocks they believe will go down in price, in order to later purchase them back at the lower price to gain a net profit. This lawsuit is the most recent development following an August 7, 2018 tweet, in which Musk announced that he was “considering taking Tesla private” once shares reached $420, and that funding to do so had been secured. Musk’s tweet caught investors off guard and led to a surge in Tesla share prices, which saw an increase of more than 13 percent by the end of the day. Ultimately, Tesla’s board of directors concluded that it would not turn Tesla into a privately-owned company. As Musk discussed in a blog post on August 24, despite his belief that there is more than enough funding to take Tesla private, the board determined, and investors agreed, that Tesla is better suited as a public company. Despite this reversal by Tesla, the company, which was already under investigation by the S.E.C., could be on the hook for the losses suffered by short-sellers in the wake of Musk’s tweet. Left estimates that Musk’s tweet cost short-sellers upwards of $1.3 billion in one day.

The Legal Standard

Rule 10b-5 creates two bases for liability in connection with the purchase or sale of any security: (1) making any untrue statement, or (2) omitting any material fact necessary to keep a statement from becoming misleading. Actions under either of these avenues of liability require plaintiffs to establish that the defendant made the false or misleading statement either consciously or recklessly. In applying Rule 10b-5, courts have held that companies may be liable for statements of opinion by top corporate officials, but only if they are made without a reasonable basis.

However, the law differentiates between different types of statements. Where liability arises out of a forward-looking statement, courts look at whether there was actual knowledge that the statement was false or misleading. Under certain circumstances, section 230.175 of the SEA gives “safe harbor” to forward-looking statements and protects issuers of such statements from incurring liability. As defined by statute, forward-looking statements may include statements of management’s plans and objectives for future operations, as well projections of capital structure. Capital structure is most frequently understood as “the mix of debt and equity by which a business finances its operations” and includes both short-term and long-term debts, as well as capital stocks. Under these circumstances, plaintiffs bear a greater burden of proof and can only prevail by showing that the forward-looking statement “was made or reaffirmed without a reasonable basis or was disclosed other than in good faith.”

Finally, if a defendant makes a statement that was reasonable at the time it was made, but the statement is later proven to be misleading after new factual developments, the defendant can still avoid 10b-5 liability by correcting the previous statement. Under these circumstances, the defendant has a duty to correct their previous statement in a timely manner, preferably through the same medium through which the initial error was disseminated.

What Happens Next

A major focus of the class action suit against Tesla will likely be whether Elon Musk knew his statements were false or made such statements with a highly reckless disregard for the potential that they were untrue or misleading. Because this determination requires more than mere conclusions of law, Left must include a detailed factual record which indicates Musk’s statement of opinion was made without a reasonable basis or in bad faith. The complaint provides detailed allegations that Musk knew that he did not have the funds to take Tesla private, as well as his possible bad faith intentions for making such an announcement. Although Musk has clashed with short-sellers in the past, and in one instance sent a hedge fund manager shorts as a consolation for the firm’s losses in betting against Tesla, Left is still likely to face an evidentiary hurdle in demonstrating that this particular tweet by Musk was motivated by bad faith.

The safe harbor protection given to forward-looking statements will likely provide another challenge for Left’s case. The complaint makes alternate arguments on the issue of safe harbor—both that the “funding secured” portion of Musk’s tweet was not a forward-looking statement, and that even if it is a forward-looking statement, safe harbor does not apply because Musk knew that it was false. Since the statutory definition of a forward-looking statement includes future plans and projections regarding capital structure, Left faces an uphill battle on his first argument. In the event that the district court treats Musk’s tweet as a forward-looking statement, Left will have the added burden of establishing that the safe harbor does not apply.

Finally, even if Left succeeds in demonstrating that Musk’s announcement was misleading, that does not guarantee a slam dunk for his class action suit. Tesla may still be able to sidestep liability by arguing that Musk’s statement on August 24 of Tesla’s decision to remain public constituted a timely correction of Musk’s initial error.

Conclusion

From the outset, neither side has a clear path to victory in this lawsuit. Though federal law provides protections for issuers of forward-looking statements, it only does so on the conditions that such statements are made on a rational basis and in good faith. Depending upon how the facts are presented, Left could offer a compelling incentive for Tesla to swiftly settle, even given Musk’s public history of disdain towards Tesla’s short-sellers. Although this case is not likely to reach the trial stage, it remains an important lesson in thinking before tweeting.


Sources

17 CFR 230.175 (2018).

17 CFR § 240.10b-5 (2018).

Brittany De Lea, Elon Musk taunts Tesla short seller David Einhorn, sends shorts, Fox Business (Aug. 10, 2018).

Capital Structure, Black’s Law Dictionary (10th ed. 2014).

Complaint, Left v. Tesla, Inc. et al, No. 3:18-cv-05463 (N.D. Cal. Sept 06, 2018).

Elon Musk, Staying Public, Tesla Blog (Aug. 24, 2018).

Ernst & Ernst v. Hochfelder, 425 U.S. 185 (1976).

In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410 (3d Cir. 1997).

Jonathan Stempel & Sweta Singh, Tesla, Musk sought to ‘burn’ Citron, other short-sellers – lawsuit, Reuters (Sept. 6, 2018, 1:42 PM).

Neal E. Boudette, Tesla Will Not Go Private, Elon Musk Says, Capping Month of Turmoil, N.Y. Times, (Aug. 24, 2018).

Neal E. Boudette & Matt Phillips, Elon Musk Says Tesla May Go Private, and Its Stock Soars, N.Y. Times, (Aug. 7, 2018).

Peter J. Henning, How the S.E.C. May Pursue a Case Against Elon Musk and Tesla, N.Y. Times, (Aug. 24, 2018).

United States v. Schiff, 602 F.3d 152 (3d Cir. 2010).

Photo courtesy of YouTube.