Cases – Corporations & Society

Louis K. Liggett Co. v.  Lee, 288 U.S. 517 (1933) (Brandeis dissenting).  Brandeis’s classic statement (in a losing cause) of the state’s power to regulate corporations and their behaviors.

Cases - Duty of Loyalty (US)

Estate of Mark Rothko, 441 N.Y.S. 2d 444, 98 Misc. 2d 718 (N.Y. Sur., 1979).  The Surrogate’s decisions is one of the most compelling, well-written trial court opinions.  It is a case study of how trustees can get themselves into trouble.

Cases – Prudent Investor Rule (US)

Harvard College v. Amory, 9 Pick. (26 Mass.) 446, 461 (1831).  The original statement of “the prudent man rule” and a brilliant case with fascinating facts and issues.  Well worth the reading.  Compare Uniform Prudent Investor Act, q.v.

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Cases – Selective Purchasing (US)

National Foreign Trade Council v. Baker, 26 F. Supp. 2d 287 (D. Mass. 1998).  Declared unconstitutional Massachusetts’ statutory ban on state purchases of goods or services from companies doing business with the government of Myanmar.

Cases – Social Investing (Non-US)

Harries v. Church Commissioners for England,  [1991] Ch. 1990; [1992] 1 W.L.R. 1241.  A superb discussion of trustees' fiduciary obligations with regard to non-financial investment criteria.  British case but the principles apply here.
Martin v. City of Edinburgh D.C. [1988] SLT 329.  Scots Court of Session held on the facts that the Council’s decision to divest companies in South Africa violated the principles enunciated in Cowan v. Scargill, infra.

Cowan v. Scargill [1985] Ch. 270; [1984] 3 W.L.R. 501; [1985] 2 All E.R.. 750.  When trustees of a pension fund may apply non-financial criteria.  British case but the principles may apply here in the ERISA arena.  Takes a very narrow view of the trustees' powers.

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Cases – Social Investing (US)

Bd. of Trustees v. Mayor of Baltimore City, 317 Md. 72, 562 A.2d 720 (1989), cert. den. sub nom. Lubman v. Baltimore City, 493 U.S. 1093, 107 L.Ed. 2d 1069, 110 S.Ct. 1167 (1990).  Affirmed power of municipality to legislate a South Africa screen on portfolio without violating contract with pension's retirees.  Deals specifically with SRI and Prudent Person Rule and trustee’s duty of loyalty.  The only such case in an English-speaking jurisdiction to be decided by a court of last resort.

Regents of the Univ. of Michigan v. State, 164 Mich. App. 314, 419 N.W. 2d 723 (1988).  Divestment challenge.  Court decided only standing.  Did not reach merits.

Associated Students of the University of Oregon v. Oregon Investment Council, 82 Or. App. 145, 728 P.2d 30 (1986).  Divestment challenge.  Court decided only standing.  Did not reach merits.

Regulations – Charities & SRI (Non-US)

Charity Commission for England & Wales, “Useful Guidelines – Charities & Social Investment (March 25, 2004).  Compare with Restatement (Third) Trusts on charities’ ability to lose as much on a social investment as it could give to achieve the same purpose.  Very sophisticated guidance, of practical use to those not subject to Commission’s jurisdiction. http://www.charity-commission.gov.uk/supportingcharities/pdfs/casi.pdf

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Regulations – Pensions & SRI

“Calvert Letter”, US Dept. Of Labor PWBA Advisory Opinion 98-04A (May 28, 1998) http://www.dol.gov/ebsa/programs/ori/advisory98/98-04a.htm ERISA does not preclude social option in 401k or 403b plan.

Regulations – Proxy Voting

US Dept. of Labor, “Avon Letter” (1988):  Under ERISA, “In general, the fiduciary act of managing plan assets which are shares of corporate stock would include the voting of proxies appurtenant to those shares of stock.”   http://www.lens-library.com/info/dolavon.html

Securities & Exchange Commission, “Disclosure of Proxy Voting Policies and Proxy Voting Records by Registered Management Investment Companies” (Jan. 31, 2003), 17 CFR Parts 239, 249, 270, and 274 [Release Nos. 33-8188, 34-47304, IC-25922; File No. S7-36-02], RIN 3235-AI64 http://www.sec.gov/rules/final/33-8188.htm

Securities & Exchange Commission, “Proxy Voting by Investment Advisers” (Jan. 31, 2003), 17 CFR Part 275 [Release No. IA-2106; File No. S7-38-02], RIN 3235-AI65 http://www.sec.gov/rules/final/ia-2106.htm

John J. Brennan & Edward C. Johnson 3d, “No Disclosure: The Feeling is Mutual”, Wall Street Journal, January 14, 2003.  Surprising negative op-ed piece by heads of Vanguard and Fidelity. http://online.wsj.com/article/0,,SB1042509880551133904,00.html

KLD Newsline, April 2003.  Special issue on the SEC regulations, with detailed analysis of the regs and their context.  http://www.kld.com/newsletter/    

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Uniform Laws – Fiduciary Duties

Uniform Management of Institutional Funds Act § 4.  Grants governing board of an eleemosynary institution broad powers of investment while exempting board from limitations on investments to which fiduciaries are subject.  Adopted in 47 states.  http://www.law.upenn.edu/bll/ulc/fnact99/1970s/umifa72.htm   Cf.  New York Not-for-Profit Corporation Law § 513 which provides for the administration of assets according to the principles of corporation law rather than trust law.

Uniform Management of Public Employee Retirement Systems Act § 8(a)(5).  Sets ERISA as standard of fiduciary duties for state and local retirement systems.   Not adopted in any state as yet.  http://www.law.upenn.edu/bll/ulc/fnact99/1990s/umpers97.htm

Uniform Prudent Investor Act § 5 (1994).  Comment on duty of loyalty states, “No form of so-called ‘social investing’ is consistent with the duty of loyalty if the investment activity entails sacrificing the interests of trust beneficiaries....”  Reporter was John H. Langbein, q.v., and the comment cites and relies on his article with Richard Posner, supra.  Adopted in 42 states. http://www.law.upenn.edu/bll/ulc/fnact99/1990s/upia94.htm

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