June 1, 2020

“Let the People Everywhere Take Heart of Hope. . . “

I really don’t know how to lead things off today. It just doesn’t seem appropriate to jump into my usual spiel without acknowledging the events of the past several days. It’s been an awful weekend, at the end of terrible week, which wrapped up another dreadful month in an abominable year. I want to say something hopeful, and that’s hard right now, but I’m going to give it a shot.

I’m mindful that the epicenter of the latest crisis is Minneapolis, the beautiful city that my colleagues Liz and Lynn call home. But I’m from Cleveland, and when I saw a peaceful protest turn violent on the streets of my own city, I was struck by the fact that the unrest began just a couple of blocks from the old federal courthouse in downtown Cleveland. As I watched the news coverage, I thought about something that happened in that courthouse one day in 1918, and it reminded me that, no matter how bad things get, we seem to have been blessed throughout our history with more than our share of men and women who – to paraphrase Edward Kennedy’s eulogy for his brother Robert – “see things that never were, and say why not?”

It may surprise you to learn that a corporate tool like me thinks that the old lefty Eugene Debs was one of those people. Although I don’t agree with his politics, I still think he’s one of American history’s most interesting figures. He was a socialist, yet received over 6% of the popular vote in the 1912 presidential election. Debs also managed to get nearly 1 million votes in the 1920 presidential election – despite running from a prison cell. He was sent to that cell by a federal judge in that old federal courthouse in Cleveland.

To make a long story short, during the First World War, Debs gave an anti-war speech in Canton, Ohio and was convicted of violating the Espionage Act. He asked to address the court at his sentencing, and his speech that day has gone down in history. In the words of the journalist Heywood Broun, “he was for that one afternoon touched with inspiration. If anyone told me that tongues of fire danced upon his shoulders as he spoke, I would believe it.”

Debs stood up in the Cleveland courtroom, and began: “Your Honor, years ago I recognized my kinship with all living beings, and I made up my mind that I was not one bit better than the meanest on earth. I said then, and I say now, that while there is a lower class, I am in it, and while there is a criminal element I am of it, and while there is a soul in prison, I am not free.”

He went on to deliver a harsh critique of the American economic system, but also pledged his faith in the idea that the nation would change for the better, through non-violent means. He saved his best – and most poetic – rhetorical flourish for last:

“When the mariner, sailing over tropic seas, looks for relief from his weary watch, he turns his eyes toward the southern cross, burning luridly above the tempest-vexed ocean. As the midnight approaches, the southern cross begins to bend, the whirling worlds change their places, and with starry fingerpoints the Almighty marks the passage of time upon the dial of the universe, and though no bell may beat the glad tidings, the lookout knows that the midnight is passing and that relief and rest are close at hand. Let the people everywhere take heart of hope, for the cross is bending, the midnight is passing, and joy cometh with the morning.”

The judge was apparently unmoved by Debs’ eloquence, and sentenced him to 10 years in prison. President Harding commuted his sentence to time served in 1921. Please don’t misunderstand me – this isn’t meant to be a political statement. I don’t have a lot in common with Gene Debs when it comes to politics. But I don’t find that to be an impediment to admiring his fearlessness, idealism, and defiant belief that better days were ahead for the nation.

Those are qualities that Americans have always admired in our greatest leaders, regardless of their political affiliation. In trying times like these, I find hope in the knowledge that we can usually count on people with these qualities to step up, appeal to the better angels of our nature, and remind us of who we are supposed to be. If you take the time to look, you’ll see that lots of people like this are with us even now.

SPACs: Will More IPOs Mean More Lawsuits?

Last month, I blogged about the recent prominence of SPAC IPOs.  While many traditional IPO candidates have put their deals on hold during the Covid-19 crisis, SPACs have prospered.  But this recent Woodruff Sawyer blog cautions that the rise in SPAC IPOs may be followed by a rise in post-deal litigation.  The blog says that it isn’t the IPO that SPACs have to worry about – it’s the M&A deals that come next that often trigger litigation.  Here’s an excerpt addressing a recent SPAC-related M&A lawsuit:

Consider the 2019 case of Welch v. Meaux. The plaintiffs in this case brought both Section 11 and Section 10(b) claims against officers and directors of the publicly traded company in connection with a de-SPAC transaction. The case also included a claim concerning the subsequent follow-on offering. The SPAC in question, Landcadia, had raised $250 million in its 2016 IPO. Landcadia had 24 months to complete its business combination before being forced to return the proceeds to its investors. With two weeks to go before the deadline, Landcadia agreed to buy a mobile food ordering and delivery company.

Things did not go well with the target company after it became publicly traded. Plaintiffs ultimately brought suit, alleging material deficiencies in the proxy statement and subsequent registration statement. Their allegations included the charge that when the target company began publicly trading, investors were not told of all the risks being foisted onto them. Moreover, the plaintiffs alleged that they were deceived as to the company’s prospects for profitability. This case is still pending.

The blog also addresses securities class actions targeting SPAC-funded operating companies, and reviews some of the difficult issues that D&Os may face in bankruptcy proceedings due to the structure of SPAC transactions.

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John Jenkins