Category Archives: television

Laurel Lance’s Drug Problem

This guest post was written by Tracy Douglas, who is an attorney in the Illinois Governor’s Office. The opinions expressed in this article are solely those of the author and not those of the Governor’s Office.

Arrow season 2 includes a plot about Laurel Lance’s drug and alcohol addiction. This raises several legal issues about public employees and legal ethics.

 

1. Can Laurel be fired?

In “Blind Spot,” Laurel investigates Sebastian Blood. After finding drugs in her apartment, the cops arrest Laurel for drug possession (she’s been using her dad’s prescription drugs). When she’s released from police custody, she’s kidnapped, and it appears a cop was behind everything, not Blood. Assistant District Attorney Adam Donner tells her the drug charges were dropped, but she’s being fired because she has a drug problem. He tells her it’s not coming from District Attorney Spencer but from him because he hired her.   Whether her firing is proper depends on if Laurel had a right to notice and a hearing.

In certain situations, public employees have a right to notice of termination and a hearing before they are terminated. This is guaranteed by the 14th amendment’s due process clause, which protects government employees from being fired without notice and a hearing if they have a protected property interest and can only be dismissed for cause. Bd of Regents v. Roth, 408 U.S. 564, 577, 578 (1972); Perry v. Sindermann, 408 U.S. 593, 602-603 (1972). In this analysis, it must be determined if the public employment at issue is a protected property interest. Roth at 571. A property interest can be created by “existing rules or understandings that stem from an independent source such as state law.” Roth at 577. Further, where a person’s reputation is at stake, notice and an opportunity to be heard are important. Roth at 573. A public employee who can only be dismissed for cause is entitled to a limited pre-termination hearing to be followed by a more extensive post-termination hearing. Cleveland Bd. Of Ed. v. Loudermill, 470 U.S. 532, 545-546 (1985). Therefore, to be a proper firing, Laurel needs notice and a hearing if she has a property interest in her job. To have a property interest, reputation can be looked at, but state law must be examined.

Arrow is not clear where Starling City is located. The DC comics have shown it as a stand-in for San Francisco or Seattle. For this discussion, California, Washington and Illinois law will be used to see how public employment and legal ethics are treated by different states. In Washington and California, Laurel would have more job protections as a county employee than in Illinois.

In California and Washington, Laurel has a protected property interest established by county rules and possibly the collective bargaining agreements. This means she has a right to notice and an opportunity to be heard. County attorneys in San Francisco county and King County, Washington (Seattle) are represented by unions. The collective bargaining agreements might include more protections than the county rules. In the absence of the labor agreement, her employment is protected by county civil service rules. She would have notice of her termination and a right to a hearing before she is officially terminated. San Francisco County Civil Service Rule 122.1.3; 122.1.4; King County Code 3.12.270.   This satisfies the 14th amendment’s due process requirement. So, if Starling City is in a state with laws like California and Washington, then Donner could not fire Laurel without a written notice and a hearing.   His informing her may be an informal hearing under Loudermill, but she has a right to a fuller hearing. This is important because under Roth her reputation is at stake and she needs the chance to tell her side.

On the other hand, if Starling City is in a state like Illinois, Laurel may not have those protections. The state’s attorney has complete control over the office, including the ability to hire and fire employees. 55 Ill. Comp Stat. Ann. § 5/3-9006 (West 2014). Laurel may have an argument based on Roth and Sindermann that she has a protected property interest in her job. However, both Roth and Sindermann talk about public employees who are protected from being fired without cause. Without a union or contract, Illinois assistant state’s attorneys are at-will employees, and that means Laurel likely won’t have a right to notice and a hearing because firing is not limited to for cause. She could claim a right because her reputation is at stake, but the firing seems proper under Illinois law.

 

II. Would a state bar investigation make her unemployable?

In “Tremors,” Laurel refuses to seek help through counseling, and she finds out from her colleague, Joanna, that she’s under investigation by the state bar. It is looking in to her fitness to practice based on her arrest. It’s not clear how much time has passed from her firing, so it’s not clear if this is an initial investigation or if charges have been filed. Joanna’s partner sits on the disciplinary committee of the state bar, and he found out Laurel was under investigation when they thought about hiring her.   This is probably its own violation because if it is not public information yet, then he is revealing confidential information. Joanna says that while the investigation is out there, they can’t hire her. Usually, only the most egregious violations of legal ethics result in disbarment. For other cases, there are suspension and censure punishments. Laurel’s actions may have violated professional rules, but punishment depends on the severity of the violation. If the investigation is beyond the beginning stages, then Laurel will know about it. If she knows about it, then she should tell potential employers. While there is an ongoing investigation, she would likely be unemployable unless the person is a friend doing her a favor or doesn’t care about the bad optics of hiring someone under investigation.   State legal ethics are overseen by the courts, but the process varies.

In California, the state bar court oversees the rules of professional conduct and disciplinary matters. Cal Bus. & Prof. §§ 6076, 6077 (West 2014).   Under the California rules, lawyers face discipline if they “intentionally, recklessly, or repeatedly fail to perform legal services with competence” or commit an “act involving moral turpitude, dishonesty or corruption.” Cal. Rules of Professional Conduct, Rule 3-110; Cal. Bus. & Prof. § 6106. When a lawyer is charged with a crime, the bar must be notified, and it could start its own investigation even when the charges are dropped. Cal. Bus. & Prof. § 6101; California Rules of the State Bar, Title 5, Rule 2402. Any of these might cover what Laurel does in the show. What’s problematic about this situation is that Laurel seems to not know about the investigation. It’s possible that Laurel would not know about it if it’s at the preliminary stage, before she’s been notified. However, the lawyer who is being investigated would eventually be notified when charges are filed, and that would be public information. California Rules of the State Bar, Title 5, Rule 2403; Rule 2604. So, being investigated by the bar and being rendered unemployable rings true, but she would probably know about the investigation.

Washington and Illinois have similar Rules of Professional Conduct. Washington’s misconduct rule says that misconduct includes “commit[ing] a criminal act that reflects adversely on the lawyer’s honesty, trustworthiness or fitness as a lawyer in other respects.” Washington Rules of Professional Conduct Rule 8.4(b); Illinois Rules of Professional Conduct Rule 8.4(b) (2010). Washington statute provides grounds for disbarment, including “any act involving moral turpitude, dishonesty, or corruption” and “gross incompetency in the practice of the profession.” Wash. Rev. Code Ann. 2.48.220 (West 2014). A criminal conviction is not required to begin disciplinary action. Washington Rules of Professional Conduct Rule 8.4(i). Washington’s rules also have a catchall “engage in conduct demonstrating unfitness to practice law.” Washington Rules of Professional Conduct 8.4 (n). In Illinois, however, the rules drafters clarified that lawyers are “professionally answerable only for offenses that indicate lack of those characteristics relevant to law practice.” Illinois Rules of Professional Conduct Comment 2 (2010). Laurel could face an investigation for any of these, especially if her arrest was reported to the bar and an investigation began. It’s possible that her arrest, even though the charges were dropped, would reflect adversely on her fitness as an attorney. If she was reported, an investigation would begin.

Washington and Illinois have similar investigation practices. The Washington Disciplinary Counsel investigates complaints against lawyers, and Laurel would have an opportunity to respond during the investigation. Washington Rules for Enforcement of Lawyer Conduct (ELC) 5.3 (a)(b) (2014). In Illinois, it is the Attorney Registration and Disciplinary Commission, which investigates when it receives a complaint and may give the accused an opportunity to respond. IARDC Rule 53. If sent to a hearing, then the attorney would receive notice of the filing of charges. ELC 10.3 (a) (1)(2) (2014); IARDC Rule 55. Complaints are also published on the ARDC’s website, so a potential employer who searched the attorney’s name would be able to find the complaint Like California, the point about being unemployable seems correct, but not knowing seems wrong unless it’s in the very beginning.

Substance abuse is a real problem among lawyers. Most states have Lawyer Assistance Programs to help deal with these problems. The Washington State Bar Association has one, and Illinois law provides one ran by the Supreme Court. 705 Ill. Comp. Stat. Ann. § 235/1. California seems to have a unique program, the Attorney Diversion and Assistance Program. Cal. Bus. & Prof. §§ 6230, 6231. The State Bar can refer the attorney under investigation to this program, but the attorney will be on either inactive status or have practice restrictions, which will be lifted when his time in the program is over. Cal. Bus. & Prof. § 6232.

 

III. Can she get her job back?

In “Birds of Prey,” Donner invites Laurel to prosecute Frank Bertinelli. Laurel mentions the bar investigation is ongoing, but Donner says he has a friend on the committee who can fix it. By saying this, he commits his own ethics violation in Washington and Illinois by “stat[ing] or imply[ing] an ability to influence improperly a government agency or official.” Rule 8.4 (e) Given that he was willing to put one criminal on trial in the hopes of getting another criminal to appear, it’s not surprising that he would commit an ethics violation. This is questionable because there is usually more than one person on the committees that hear lawyer complaints. He would need to convince others to vote with him. However, it turns out to be a plot by Donner to catch the Huntress, Frank’s daughter. The Huntress comes, takes hostages in the courthouse, and is eventually captured. In the aftermath, DA Spencer tells Laurel that Donner wasn’t authorized to rehire her, but Laurel manages to keep her job by pointing out that Spencer wouldn’t want the fact that Donner was behind the hostage crisis to get out. Whether this is realistic depends on the rules governing rehiring.

If Starling City is in a state with laws like California and Washington, then this part of the plot would not be realistic unless Laurel had gone through a due process hearing to get her job back after her termination. In San Francisco county, a termination could affect the ability to be rehired. San Francisco County Civil Service Rule 122.1.4. If she were to reapply, she would have to go through the examination process after completing a year of service outside the county, and her appointment would have to be approved by the Human Resources Director. San Francisco County Civil Service Rule 122.3.   Donner would not have the ability to rehire her. If she was properly fired and didn’t challenge it, then she would not be able to be rehired quickly given these rules.

Similarly, in King County, Washington, prosecuting attorneys are subject to a competitive process because they are not career employees. KCC 3.12.090. Laurel would not be able to be rehired unless she either challenged her dismissal or went through the competitive process again. Since the episode shows Donner offering her the job without a competitive process and without a challenge of the dismissal, then getting the job back quickly is not realistic. Depending on who is the appointing authority within the King County prosecuting attorney’s office, Donner may have had the ability to rehire her. But the process wouldn’t be as easy as shown on the show.

On the other hand, if Starling City is in a state like Illinois, then she would be able to get her job back without going through a competitive process because state’s attorneys control their offices. The state’s attorney is in charge of the office and can hire and fire assistants. 55 Ill. Comp. Stat. Ann. § 5/3-9006. However, a bar investigation would be a hindrance because it would reflect poorly on the state’s attorney. Donner said he hired her in the first place, so Laurel might have an argument that he had apparent authority through agency principles to re-hire her. In a state like Illinois, getting rehired quickly is more believable even if unlikely given the investigation.

 

IV. Conclusion

Arrow season 2 looks at Laurel’s professional descent and drug addiction. It skips some steps that would be required if it took place in some states (notice and a hearing before being fired, notice of an investigation, rehiring steps). These could have been mentioned, but not shown, if they were required, depending on state law. The writers may have had to ignore some things and not show them because it is not the main plot. The beauty of not defining which state Arrow takes place in is that the law might not be wrong because state law differs on this topic. In the real world, though, she would probably not be able to get her job back that easily, assuming her firing was proper. If the state bar investigation is beyond the initial phase, Laurel would know about it and would not find out from a colleague. Unless the person hiring her is okay with hiring someone under investigation, then the investigation would render her unemployable. And Donner should not imply that he can fix it with a friend on the committee. As a device to show character growth and continuing corruption in Starling City, it works.

Law and the Multiverse Retcon #8: Orphan Black…Again

This is the eighth post in the Law and the Multiverse Retcons series, in which I discuss changes in the law (or corrections in my analysis) that affect older posts.  Or older retcon posts, since not longer after I wrote this Orphan Black Retcon I saw Season 2 Episode 5, which further complicated matters.  Soon after that I received an email asking about it, and I knew I would have to write the first Retcon Retcon.  Spoilers ahead!

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Marvel’s Agents of S.H.I.E.L.D.

For most of the first season of Agents of S.H.I.E.L.D. I wondered what on earth I could write about.  Comparatively little of the series raised any interesting legal questions, at least ones that could be answered in any kind of concrete way based on the information presented in the series and the Marvel Cinematic Universe.  For example, S.H.I.E.L.D.’s jurisdiction is still kind of an open question, with the agency operating freely in some countries but not others.  This suggests some kind of treaty, but there just aren’t enough details to do more than speculate.

And then, finally, near the end of the season I received an email from a reader asking some great questions.  Massive spoilers for Agents of S.H.I.E.L.D. below, so if you haven’t seen season one and don’t want to be spoiled, stop reading now.

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Law and the Multiverse Retcon #6: Orphan Black Redux

This is the sixth post in the Law and the Multiverse Retcons series, in which I discuss changes in the law (or corrections in my analysis) that affect older posts.  Or not so old posts in this case.  Barely a week ago I wrote this post about the TV series Orphan Black.  Today the US Court of Appeals for the Federal Circuit handed down a decision relevant to that post.  Spoilers ahead!

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Orphan Black

A few readers asked about the TV series Orphan Black a while back.  Now that the show is in its second season (and I finally got around to watching the first one and have caught up with the second one), I thought I’d address the central legal questions raised by the show.  Moderate spoilers below if you haven’t seen past the first episode or so, followed by big spoilers if you haven’t seen the season one finale.

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Elementary: “Child Predator”

I’m back after a brief hiatus! A whole bunch of reader questions have accumulated in the mailbag, and I’m going to try to work through the backlog. Today’s comes from Bob, a British reader who asked about the American show Elementary, specifically the first season episode “Child Predator” (spoiler alert!).  If you haven’t seen Elementary, I recommend it.  I actually prefer it to Sherlock.

Anyway, on to Bob’s questions (again, spoilers):

[In the episode,] a multiple child-killer initially tricked the police into believing he was an unwilling accomplice of the “real” killer. Believing this to be the truth the DA offered immunity from prosecution in return for his help in catching the “real” killer. Holmes subsequently discovered that the roles were really the other way round – he was the real killer and the man he claimed to be the accomplice of was, in fact, the unwilling accomplice. The deal is specifically immunity from any crimes committed in concert with the other man.
The deal is implied to still hold and he openly admits his crimes to Holmes, apparently certain that he is safe from prosecution.
One of the crimes is later discovered to be a solo endeavor as the other man was in hospital when it was committed.  [At the] end of the episode the police are about to arrest him for that one crime.

I’m British and pretty much everything I know about American law comes from your blog or the sources that inspired it, so I have three questions.

1. Would the DA really offer such an all-encompassing deal.
2. When it’s discovered that he really is the prime instigator would the deal still hold.
3. Would the “solo” murder be covered by the deal  or not.

I. Immunity in Exchange for Cooperation

As I told Bob when he sent in the question (way back at the end of 2012, embarrassingly enough), I don’t have enough criminal law experience to say whether the deal was realistic.  My gut says yes.  In theory the “accomplice” had a good defense (duress, since he was originally kidnapped by the actual accomplice), he was a minor for most of the crimes, and the police and prosecution needed his help to put away the person they thought was the actual mastermind.  Granting immunity in order to allow one member of a conspiracy to roll over on another is a common tactic, and I could see it being used here.

II. Just How Strong are Immunity Deals Anyway?

It has been recognized for some time that plea bargains can be enforced against the government. Santobello v. New York, 404 U.S. 257 (1971).  But what about deals in which the defendant is offering something else, such as agreeing to testify as a witness against other participants in the crime?  It turns out that such agreements are not always enforceable.

The Second Circuit (which includes New York) has held that “the government may in its discretion make agreements in which it exchanges various levels of immunity from prosecution for the defendant’s cooperation” and that such agreements are subject to ordinary contract law principles.  U.S. v. Aleman, 286 F.3d 86, 89 (2d Cir. 2002).  These principles include construing any such deal strictly against the government (because, after all, the government wrote the deal). Id. at 90.

However, all the strict-construing in the world won’t save a defendant who fails to uphold their end of the bargain.  A common feature of immunity deals is that the defendant-witness has to agree to testify truthfully.  As the Aleman case held, “truthful” can include a sincere but incorrect belief, but it doesn’t include lying. Id.  On the other hand, while the government has the discretion to decide if a defendant has adequately cooperated, “the government’s discretion does not grant it power to turn its back on its promises to the defendant under the cooperation agreement or to ignore a defendant’s cooperation efforts simply because the defendant is supplying information that the government does not want to hear.”  Id. at 91.

Aleman was a federal case, however, and the case in Elementary was a state case.  So what do the New York courts say about this?  It turns out that there’s a fairly similar New York case, People v. Curdgel, in which the defendant was given a reduced sentence in exchange for testifying against his accomplices.  83 N.Y.2d 862 (1994).  After he testified, however, the defendant went on television and said that he had lied to the grand jury.  The prosecution refused to honor the plea agreement, and the highest court in New York upheld that refusal.  The court held that the “defendant failed to uphold his end of the plea agreement and rendered the agreement valueless to the People…We cannot say that essential fairness compels enforcement of the original agreement.”  Id. at 864.

So the answer will almost certainly depend on how exactly the immunity deal was written.  If it included a requirement that the defendant testify truthfully, or if the deal itself included a statement of facts that the defendant swore to, then the prosecution would not be bound by the deal because the defendant breached it by lying.  But if the deal was sloppily written and simply gave the defendant immunity in exchange for agreeing to testify (regardless of the content of his testimony), then the government may not have much of a leg to stand on.

III. The Scope of Immunity

Whether or not the “solo” murder would be covered by the deal depends again on how exactly it was written.  The language we get from the episode is “in concert with.”  We know that the real accomplice was in the hospital recovering from a major surgery at the time of the solo crime, so he certainly wasn’t actively involved in the commission of the crime.  However, the defendant likely used the accomplice’s vehicle and other, indirect, forms of assistance.  It could be argued that the deal should be strictly construed against the government to include not just conspiracy but also accessory or accomplice conduct.

That all assumes that the deal holds at all, however.  As discussed above, it’s very likely that the deal would fall apart completely once it came out that the defendant was lying about his role in the murders.

 

Guest Blogging at the Volokh Conspiracy

This week we will be guest blogging at The Volokh Conspiracy, a fantastic legal blog co-founded by UCLA law professor Eugene Volokh and Emory law professor Alexander “Sasha” Volokh.  Over the years the Conspiracy has grown to include a number of contributors, most of whom are law professors.

We’ll be taking this opportunity to address some slightly more down to earth topics, particularly the show Elementary, which we’ve received a number of questions about.  Our first post is The Adventure of the Commandeered Snow Plow.

The Law and Psychiatry of The Walking Dead

Following our joint WonderCon panel (Not Guilty by Reason of Zombification? Law and Forensic Psychiatry After the Zombie Apocalypse“), the psychiatrists from Broadcast Thought, Ryan, and I co-wrote an article for Wired focusing on some of the legal and medical issues raised by The Walking Dead.  We think you’ll enjoy it.  Be aware: the article contains spoilers for the most recent season, including the finale.

Futurama: Future Stock

This guest post was written by Craig Messing, an attorney from New York, who contacted us with this excellent idea for a post.  If you are a legal professional (e.g. an attorney, judge, or law professor) or a comic book professional (e.g. an author, editor, or illustrator) and  you have an idea for a post that would be a good fit for Law and the Multiverse, feel free to contact us!  

Introduction

Future Stock is the 21st episode of the third season of Futurama.  While somewhat outside this blog’s normal purview of comic-related media (even if there are Futurama comics), the episode touches on some unique, obscure, and even speculative issues of corporate governance and probate law.  As most of the series takes place in “New New York,” we will assume New York law applies, albeit 1000 years into the future.  It should go without saying, but spoilers to follow.

I. Background

In the episode, a shareholder meeting of Planet Express leads to an “80’s guy” (referred to throughout the episode only as “That Guy”) being named chairman of the corporation.  This eventually leads to That Guy trying to sell the company and gut it for profit, and a shareholder vote over the sale.  That Guy wins the shareholder vote, but then dies (fairly gruesomely) before the transaction is concluded.  Control of his shares passes to Fry, as vice-chairman of Planet Express, who votes down the sale.  (This ignores the fact that the vote had already been cast and approved by both companies, and thus should be binding, even after That Guy’s death.)  The issues here are multiple, but we will look at two.  First, we will examine what recourse the other shareholders of Planet Express might have had to block the sale, and the likelihood of success of those efforts.  Second, we will look at whether control of That Guy’s shares should have passed to Fry, and the potential consequences if they had not.

II. Oppressed Shareholders

In the episode, That Guy purchases 51 percent of the voting rights from Zoidberg (“The shares were worthless, and he kept asking for toilet paper!”), and imposes his will on the other shareholders, all of whom vote against the sale.  The remaining shareholders are outraged, but are powerless to affect the situation.  At face value, this would seem to be textbook shareholder oppression, in which the majority shareholder(s) imposes his will, to the detriment of the other minority shareholders.  Oppression can be especially prevalent in close corporations, where there are only a limited number of shareholders – as appears to be the case with Planet Express.  (Note: after the sale is completed, all outstanding shares of Planet Express are said to be purchased “at the current market price.”  But as a close corporation, there would not be a “market” price.  This is likely an oversight of convenience by the writers, however.) 

Oppressed minority shareholders may sue to prevent the oppressive actions of majority shareholder(s).  However, New York courts have defined “oppression” as “conduct that substantially defeats the reasonable expectations held by minority shareholders in committing their capital to the particular enterprise,” and held that oppression exists “only when the majority conduct substantially defeats expectations that, objectively viewed, were both reasonable under the circumstances and were central to the petitioner’s decision to join the venture.”  In re Matter of Kemp & Beatley, Inc., 473 N.E.2d 1173, 1179 (N.Y. 1984) (internal quotations omitted).   In other words, shareholder oppression will be found only if a “reasonable person” in the shareholders’ situation would be unhappy.

In this case, a “reasonable” Planet Express shareholder would likely be ecstatic at the results of the sale.  In the initial shareholder meeting, where That Guy is named chairman of Planet Express, the company’s dismal financial state is firmly established: a pie chart is shown, illustrating the company’s revenues; a minority of the pie accounts for revenue from business operations, while the majority is made up by “an eight-dollar bank error in our favor.”  After the vote on the sale is finalized, however, the market (“purchase”) price of Planet Express is given as $107.  It would be very difficult to argue that a “reasonable” minority shareholder would disapprove of a transaction that so drastically increased shareholder value, and thus the oppression argument would likely fail.

III. Descendability, Intestacy, and Escheat

Almost immediately after the vote approving the sale, That Guy dies, Fry takes control of his voting shares as vice-chairman, and negates the sale.  However, the corporation could only assert control of these shares if there was some sort of repurchase agreement with Planet Express, under which it could buy back the shares upon That Guy’s death.  Further, even if such an agreement did exist, That Guy’s shares would be either retired or turned into treasury stock; in either case, the shares would no longer have any voting rights, and if the sale of Planet Express had not already been finalized, the minority shareholder votes against the deal would carry the day without Fry’s last-minute heroics.  However, there is no mention of such an agreement in the episode, and thus there is no reason why That Guy’s shares couldn’t pass under his will, or failing that, under the law of intestacy … except that, again, there is no mention of That Guy having a will, nor any heirs, – nor is there any indication of That Guy having a family in the 1980s that might have propagated and survived into the year 3000.

More importantly, New York law might not allow for such distant relations to inherit through intestacy, even if they did exist.  Article 4 of the New York Estates, Powers and Trusts Law (EPT) governs intestate estates, and section 4-1.1 of the EPT enumerates the various classes of individuals who can take under New York law, allowing only for the decedent’s spouse, issue, parents, “issue of parents” (i.e. brothers and sisters of the decedent), grandparents (as well as “the issue of grandparents,” i.e. aunts and uncles), and “great-grandchildren of grandparents” (i.e. nieces and nephews) to take.  There is no provision for an individual outside of that closed list to take under intestacy, and as such, even if an heir does exist, it would be a very distant relation, well outside the purview of the EPT.  Apparently, New York has yet to account for time-travel and cryogenics (both of which appear to be fairly common in the future) in its probate code.  Quite the oversight.

Presuming that New New York law has not yet corrected this oversight, then That Guy’s apparent lack of both a will and eligible intestate heirs would cause the doctrine of escheat to come into effect.  Under escheat, a state acts as a sort of heir of last resort, and may take property if no other heir can be ascertained, or if property is abandoned.  See, e.g. N.Y. ABP § 102 (“It is hereby declared to be the policy of the state … to utilize escheated lands and unclaimed property for the benefit of all the people of the state, and this chapter shall be liberally construed to accomplish such purpose”).  It is not unheard of for a state to take corporate stock under escheat; in fact, such an action was expressly upheld in Standard Oil Co. v. New Jersey, 341 U.S. 428 (1951).

Escheat in New York is governed by the New York Abandoned Property Law; escheat of securities is specifically addressed in Article 5.  However, for a security to be “abandoned” – which was an implicit requirement under the Standard Oil case –  payments due to the security holder have been unclaimed by, and no written communication received from, the rightful holder, for a period of three years.  N.Y. ABP § 501(2)(a).  Only after the security has been found to be abandoned is it to be delivered to the state.  N.Y. ABP § 502.  Therefore, for purposes of the sale of Planet Express, it would seem that the 51 percent shares owned by That Guy would be in limbo for a three year period, while eligible heirs were searched for (likely in vain).  During this time, as they could not be voted, the minority shareholders would have been able to defeat the merger of their own accord.

IV. Escheat of a Majority Stake, and the Public Policy of the Future

Unfortunately, even THIS is not the end of the matter, because if escheat is exercised in this case, it would effectively transfer a majority interest in a private corporation to the state of New New York, as That Guy controlled 51 percent of Planet Express’s stock.  While seizure and nationalization of private businesses by the federal government is not unheard of, seizure is usually predicated on great turmoil, such as a World War – though even war is not always sufficient cause for nationalization, see Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579 (1952), which held that President Truman’s attempted nationalization of the steel industry during the Korean War, by executive order, was authorized neither by the Constitution, nor by Congress, and was thus illegal – but no such circumstance is present here.  There is precedent of the nationalization of a private business due to severe financial hardship (most recently General Motors), and it is undisputed that there were severe hardships facing Planet Express; however, it would be very difficult to argue (despite the many dealings the company has had with the President of Earth), that Planet Express was such a vital cog in the economy as compared with GM.

For fairly obvious reasons – it is rare for any individual to die both intestate and without any heirs to take under intestacy, and it is borderline inconceivable that an individual who is intellectually capable of obtaining majority control of a company would also die intestate – there is no precedent for a state obtaining a majority share of a company via escheat.  As such, any analysis here will be speculative.  However, I believe that the guidance of the Supreme Court in Youngstown Sheet & Tube, and Standard Oil v. New Jersey, allows us a fairly clear indication as to the public policy rationale that might guide a New New York court in rendering a decision in this matter.  Youngstown provides that nationalization (or, in a more general sense, public takeover of a private business) can occur only when expressly provided for, either by the Constitution or under the law, and Standard Oil allows for corporate stock to be taken by the state under escheat, but provides only for the delivery of the securities, and for the payment of moneys due the holder of the securities.  Similarly, Article 5 of the ABP appears more concerned with obtaining payments due under the securities than with voting rights, and in fact no mention is made in the law of the state’s exercise of voting rights.  Moreover, much like the federal government under Youngstown, it would appear that a state can only take control of a private company under specific conditions provided for under the law, such as a state banking regulator taking control of a struggling bank.  Therefore, I believe that New New York would be able to take possession of That Guy’s 51 percent stake in Planet Express under escheat, but only for purposes of taking any dividends due (or, in the event the sale did go through, its share of the proceeds from the sale).  However, as no law expressly allows the exercise of voting control on securities taken under escheat, an attempt to do so would be illegal.

V. Conclusion

While “Future Stock” does not address the option of minority shareholders to enjoin a majority action, the episode does address the reasonableness standard fairly well.  When the minority shareholders realize how much their shares have appreciated due to the impending sale, each of them (except Fry) immediately voice happiness over their being overruled, thus acting “reasonably” and defeating any notion of an oppression suit.  The episode handles the issue of That Guy’s estate (namely his 51 percent stake in Planet Express) less well.  The episode ignores both the securities and estates law on point, instead assuming that control of the shares would pass from chairman to vice-chairman.  Even if the shares were repurchased by Planet Express, regardless of how the corporation chose to treat them, they would not be voting shares unless and until they were re-issued by the corporation.  And if they passed into That Guy’s estate … as discussed at length above, that opens up a considerable can of worms, to say the least.

That said, while this particular episode might not have handled the law exceptionally well, there are at least two instances from Futurama’s current run where the show has addressed novel legal implications of its futuristic setting, in a serious, thought-provoking manner.  And besides, Futurama is a spectacular show.  You should watch it.  The hypnotoad commands youAll glory to the hypnotoad.

Arrow: “Innocent Man”

Innocent Man” is the fourth episode of Arrow, and once again, Laurel Lance’s role as an attorney takes center stage. The plot this time centers on Peter Declan, a man convicted of the murder of his wife and daughter and scheduled for imminent execution. Oliver deduces that Declan is connected to one of the people on his list, so he does a little digging and figures out that Declan is probably innocent. So he goes to Laurel, hoping that she can intervene in Declan’s case. So we’re talking about post-conviction relief. Continue reading