Yglesias on “Legal Funnybusiness”
I’m not sure if Matt Yglesias is serious or just having a little schaden-fest here with his proposal that Cato engage in Coasean bargaining with the Kochs. Either way, however appealing I might find the idea of Cato buying its way out of the crackbrained shareholders’ agreement that’s led to the current unpleasantness, that decision’s above my pay grade in more than one sense of the phrase.
But I’m a little bit puzzled about the way Yglesias closes his post. If the Cato brand is more valuable in the hands of independent leadership, then, he says: “the sensible solution is to buy it from the Kochs rather than trying to engage in legal funnybusiness to steal it from them.”
“Engag[ing] in legal funnybusiness”? Last time I checked, we were just sitting here getting sued.
“Steal it from them”? Now, see, this is why I’m a lousy blogger. It says “punditry by the pound” up there, but it’s really more like “punditry by the pellet.”
Because, sometimes, haunted by the fear that I don’t know what I’m talking about, I hesitate to parachute into the fray, wowing all and sundry with categorical pronouncements about various controversies I’ve barely had time to review.
But, having read and absorbed the shareholders’ agreement and the Institute’s bylaws (Art. VII, Sec. 3, of which envisions ownership transfer via “proper evidence of succession”), Yglesias has concluded that the alleged prohibition in Section 3 of the SA is clear enough to overcome the general presumption against restrictions on testamentary transfers. (Per Trevor Burrus: “Courts generally will not apply restrictions on the transfer of shares to testamentary dispositions [transfers through a will] in the absence of express terms that refer to such transfers.” Fletcher Cyclopedia on the Law of Corporations, Chapter 58, Section XX.) And Yglesias has decided that upon her husband’s death, Kathryn Washburn had an immediate duty to offer up the shares to the corporation. (And hey look, the Media Research Center’s L. Brent Bozell just became an expert too!)
Now, I’m just a recovering lawyer with two soul-crushingly dull years in private practice, none of it before Kansas courts. And I’m biased, of course, but it’s not all that clear to me—or to people who know a lot more about Kansas corporate law than I do—that Yglesias and the Kochs are right about the letter of the agreement—or its spirit. If the point of the original agreement was to preserve the original shareholders’ intent, given the power the agreement gave them over the board of directors, they had little to worry about testamentary transfers frustrating their aims—which may explain why they didn’t adopt language specifically prohibiting such transfers.
I can understand why some folks grasp at a narrative that says “look at the libertarians trying to dodge their contractual obligations!” It makes for good lefty snark, it’s fun for the sort of conservative who finds libertarians annoying, and it’s surely useful for the Kochs, who’ve insisted that this dispute boils down to “respecting the rule of law.” Interesting, if true! But not true.