IMPROVING LEGAL DOCUMENTS IN CROWDFUNDING:  NEW RISK FACTOR FOR SUPREME COURT RULING

It appears the Supreme Court is about to strike down Roe v. Wade, allowing states to regulate or outlaw abortion. Many states are poised to do so with varying degrees of severity. 

In his draft opinion in Dobbs v. Jackson Women’s Health Organization, Justice Alito states that the decision would not affect other rights, like the right to gay marriage (Obergefell v. Hodges), the right to engage in homosexual relationships (Lawrence v. Texas), or the right to contraception (Griswold v. Connecticut). In my opinion, you should take Justice Alito’s assurance with a large spoonful of salt.. Theoretically, all these cases rest on a constitutional right to privacy. If you knock that pillar down for one right it falls for all of them. On a practical level, Justice Alito himself voted against gay marriage and I have little doubt that there are at least five votes to overturn all these precedents.

Some states are already considering bans on contraception and surely challenges to gay marriage are close on the horizon.

When the COVID-19 pandemic swept the country, companies raising capital had to add one or more risk factors to their offering materials, describing how the pandemic could harm their businesses. I believe the Supreme Court’s opinion in Dobbs v. Jackson Women’s Health Organization calls for the same thing.

Imagine a SAAS company in Austin, Texas, looking to recruit talented young engineers. Imagine the company’s ideal candidate:  a woman who just graduated from Stanford with a specialty in AI. If she has one job offer from the company in Austin and another from a company in Oregon it isn’t hard to see why the Texas company would have a competitive disadvantage, all other things being equal.

Companies are already trying to mitigate the risk. For example, Starbucks has announced free travel to employees to states where abortion is legal. But even that might not eliminate the risk. Do women want to travel out of state for medical care? And, in any case, many states where abortion is or will be illegal are trying to make it illegal to travel out of state for an abortion

Whatever the realities of the marketplace, our job as securities lawyers is to make investors aware of risks so our clients can’t be sued afterward. I suggest the following or something like it in the offering materials of any company where recruitment is important

State Laws Might impair the Company’s Ability to Recruit: The U.S. Supreme Court [seems poised to overturn] [has recently overturned] women’s privacy rights in health care decisions set forth in Roe v. Wade. Moreover, the reasoning used by the Court in overturning Roe v. Wade suggests that other constitutional rights could also become subject to restriction by the states, including the right to gay marriage and use of contraception. Texas, where the Company’s headquarters are located, has enacted strict laws regulating abortion and its political climate is such that it might seek to limit or take away other rights as well. These state laws could impair the Company’s ability to recruit and retain personnel and could put the Company at a competitive disadvantage with companies in other states.

2 thoughts on “IMPROVING LEGAL DOCUMENTS IN CROWDFUNDING:  NEW RISK FACTOR FOR SUPREME COURT RULING

  1. Wow, seems like quite the stretch given a decision is not even made. Certainly wouldn’t make disclosures on an illegally leaked draft. And even if as predicted, can’t see this as potential to impair recruiting. Would you list excessively high taxes in NYC, SF, PDX, as potential to impair recruiting in a disclosure. 34 yrs ago when first out of law school turned down NYC legal position in favor of Miami, because even though almost 2x the salary, the net was higher in FL, and the cost of living substantially lower, so I know high taxes and poor services are impairment to recruitment. So do you recommend listing those, or every other political stance that may differ by state?

    1. crowdfundattny

      First, thanks for reading.

      Yes, this is definitely a disclosure item, just as the pandemic was a disclosure item. The purpose of risk disclosures isn’t to predict the future but to identify factors that could impact the issuer. Certainly the decision of that female graduate of Stanford could be impacted, which is why Starbucks and other companies are already trying to reassure employees.

      Unlike high taxes in NYC, this is brand new, just as the pandemic was in March 2020. And it doesn’t matter how the opinion became known — it’s known. We write disclosures to protect issuers, not to take positions on social issues.

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