[CCWG-ACCT] Need for clarity on enforcement mechanisms for Dublin

Tue Oct 13 18:17:03 UTC 2015

Sorry I previously replied to the wrong chain with this comment so am reposting:

Regarding the question below about delegating a Community rejection of a budget to binding arbitration, I also note an excerpt from one of the recent Sidley memos which opines that in the absence of a statutory right (e.g. that conferred by a CA membership corporation which relieves the directors of fiduciary duties with respect to powers reserved to the members), DIRECTORS MAY NOT DELEGATE DECISIONS REQUIRING EXERCISE OF THEIR CORE FIDUCIARY DUTIES TO AN ARBITRATION PANEL.  HERE IS THE EXCERPT FROM THE LEGAL MEMO MATHIEU DISTRIBUTED EARLIER TODAY AND IS ATTACHED AGAIN – see page A-2

A board may not submit exercise of “core” fiduciary duties to arbitration.
As noted above, California law requires “[e]ach corporation [to] have a board of
directors” that exercises the powers of the corporation and each director acts as a fiduciary of the
corporation. Cal. Corp. Code § 5210. “The board may delegate the management of the activities
of the corporation to any person or persons, management company, or committee however
composed, provided that the activities and affairs of the corporation shall be managed and all
corporate powers shall be exercised under the ultimate direction of the board.” Id. (emphasis
added). The California courts have not determined the precise limits of the italicized text, but
with respect to for-profit corporations, the California Supreme Court has held in Wells Fargo
Bank v. Superior Court, 811 P.2d 1025, 1033 (Cal. 1991) (en banc), that “a board of directors
has no power to delegate the performance of its basic powers and functions, particularly its
statutory prerogatives, in the absence of express statutory authority.”

So it would be good to know if Jones Days believes the Board can submit authority over the budget and authority over the strategic and operating plans (as required by the CWG-Stewardship) to binding arbitration as is suggested by the MEM proposal and by Fadi’s chart.

PLEASE NOTE I PERSONALLY BELIEVE IT IS HIGHLY UNLIKELY THAT AN ARBITRATION ORDER FOUNDED ON A PROCESS THAT VIOLATES STATUTORY LAW PROHIBITING DELEGATION OF FIDUCIARY DUTY WOULD BE ENFORCEABLE IN COURT.  (This is not a legal opinion.)

Anne

[cid:image001.gif at 01D105A8.AD599970]

Anne E. Aikman-Scalese, Of Counsel

Lewis Roca Rothgerber LLP

One South Church Avenue Suite 700 | Tucson, Arizona 85701-1611

(T) 520.629.4428 | (F) 520.879.4725

AAikman at lrrlaw.com<mailto:AAikman at lrrlaw.com> | www.LRRLaw.com<http://www.lrrlaw.com/>

From: Aikman-Scalese, Anne
Sent: Tuesday, October 13, 2015 10:07 AM
To: 'Ron Baione'; Nigel Roberts; paul.rosenzweig at redbranchconsulting.com; accountability-cross-community at icann.org
Subject: RE: [CCWG-ACCT] Need for clarity on enforcement mechanisms for Dublin

Ron,
I personally think there is still a great deal of confusion about how some of the competing proposals for structure would operate in practice.  I think that Steve’s idea about comparison of the enforceability aspect of the  proposals for each model is a great idea whether or not we follow “Plan B”.

I also think we need a visual representation of the timelines associated with each of the three enforcement mechanisms, as stated on the call.  For example, it is very unclear to me how the Community exercises budget authority as required by the CWG-Stewardship in the context of binding arbitration.  Here is why:

1.       Alan brought up the MEM does not specify a level of consensus.  I read the proposal from the Board as requiring full consensus of all SOs and ACs.  I brought this up as a question – that is, what is the Board’s definition of consensus in the MEM proposal from the very beginning.  Of course as Alan points out, we have the same question as to defining consensus depending on how many SOs and ACs participate – in the CMSM proposal.

2.       Assuming for the moment that consensus is reached on a budget rejection by the Community, it is not at all clear to me how that process evolves in the context of binding arbitration. Under the MEM,  are we saying the Community sends the question of whether it is entitled to reject a budget to a panel of arbitrators to determine?  Are we saying that under the CMSM, the budget is at that point rejected by the Community on notice to the Board and the Board has to go “back to the drawing Board” to submit another budget.  What budget applies during the long process of binding arbitration?

This all points out that there are numerous questions raised by the Board’s proposal that we will have to take the time to carefully sort out – but it certainly would be appropriate to identify various timelines associated with the three models shown in Steve DelBianco’s chart and to create a visual representation of those timelines in relation to the questions Steve has asked for the six points.  This is partly a legal question regarding how soon enforcement action takes effect.  It is also a Community question regarding the commencement of deliberations on whether or not to take action, convening Community Forum, convening designators, etc.

Sidley memo says we already have a designator model, although not a sole designator model.   WE DO NEED THEIR ANALYSIS, HOWEVER, OF THE TIMING TO IMPLEMENT AN ENFORCEMENT ACTION ONCE THE COMMUNITY HAS DETERMINED VIA CONSENSUS (HOWEVER THAT IS ULTIMATELY DEFINED) THAT IT WILL INDEED TAKE ACTION TO ENFORCE THE POWER.

It is tough to have new ideas when you are not even able to correctly evaluate those that have already been proposed.  I volunteer to help work on timelines if others think this is appropriate.
Anne

[cid:image001.gif at 01D105A8.AD599970]

Anne E. Aikman-Scalese, Of Counsel

Lewis Roca Rothgerber LLP

One South Church Avenue Suite 700 | Tucson, Arizona 85701-1611

(T) 520.629.4428 | (F) 520.879.4725

AAikman at lrrlaw.com<mailto:AAikman at lrrlaw.com> | www.LRRLaw.com<http://www.lrrlaw.com/>

From: accountability-cross-community-bounces at icann.org<mailto:accountability-cross-community-bounces at icann.org> [mailto:accountability-cross-community-bounces at icann.org] On Behalf Of Ron Baione
Sent: Tuesday, October 13, 2015 9:26 AM
To: Nigel Roberts; paul.rosenzweig at redbranchconsulting.com<mailto:paul.rosenzweig at redbranchconsulting.com>; accountability-cross-community at icann.org<mailto:accountability-cross-community at icann.org>
Subject: Re: [CCWG-ACCT] Need for clarity on enforcement mechanisms for Dublin

This is a general question to the group, in your view, what percentage of responses to this email list contain new ideas for real progress and what percentage of responses are clarifications and confusion on what ICANN's situation currently is? Is it that we are so far along in the process that the only thing to do is wait on the ideas already proposed? I expected people on the list to be saying, "lets try it this way" or "what about this idea", I haven't seen that said once.

Ron

________________________________
From: Nigel Roberts <nigel at channelisles.net<mailto:nigel at channelisles.net>>;
To: Paul Rosenzweig <paul.rosenzweig at redbranchconsulting.com<mailto:paul.rosenzweig at redbranchconsulting.com>>; <accountability-cross-community at icann.org<mailto:accountability-cross-community at icann.org>>;
Subject: Re: [CCWG-ACCT] Need for clarity on enforcement mechanisms for Dublin
Sent: Tue, Oct 13, 2015 7:32:05 AM

It's not for me to interpret the Joint Statement as I was no part of its
drafting.

The statement was prepared jointly by the HLIG and CENTR and it was
offered to the joint meeting as a draft. It was then adopted without
even minor typographical or stylistic changes.

Statements published public authorities, or together involving public
authorities are necessarily guarded, in general.

So I would hesitate to give you an answer to your question with 100.1%
certainty.

However, personally speaking, I did indeed find the proposed statement
"powerful" (as you put it), and my comments upon seeing it for the first
time, expressed in the meeting at the time, were that it needed no changes.

I trust this helps?

Nigel

PS: Personally I am mildly less than enamoured of the CCWG-A proposal
myself (the "single member idea"), but I remain terribly disturbed that
the Board appears to think -- to paraphrase myself -- that it is
entitled to yap subsequent to canine purchase.

On 13/10/15 02:18, Paul Rosenzweig wrote:
> Nigel
>
> Help us who weren't there read between the lines -- is this the HLIG saying that the CCWG-A proposal is more to be respected than th
e Boards MEM revision.  That is how I read it, which would be powerful,
but I don't want to overstate it if that is an inaccurate interpretation
>
> Paul
>
> Paul Rosenzweig
> paul.rosenzweig at redbranchconsulting.com<javascript:return>
> O: +1 (202) 547-0660
> M: +1 (202) 329-9650
> VOIP: +1 (202) 738-1739
> Skype: paul.rosenzweig1066
> Link to my PGP Key
>
>
> -----Original Message-----
> From: Nigel Roberts [mailto:nigel at channelisles.net<javascript:return>]
> Sent: Sunday, October 11, 2015 4:21 AM
> To: accountability-cross-community at icann.org<javascript:return>
> Subject: Re: [CCWG-ACCT] Need for clarity on enforcement mechanisms for Dublin
>
> Enforceability was a key theme I heard at the European's Commission's HLIG at the CENTR meeting in Brussels.
>
> They also said:
>> We wish to reiterate our support to the Cross-Community Working Group on the IANA Stewardship Transition (CWG) and to the work of the IANA Stewardship Transition Coordination Group (ICG).
>
> and that
>
>> The outcome will only have the necessary legitimacy if the bottom-up, consensus-driven process continues to be fully respected.
>
>
> http://www.domainpulp.com/icann/centr-and-commission-meet-and-discuss-icann-accountability/
>
>
>
> On 11/10/15 08:56, Matthew Shears wrote:
>> Thanks for circulating this Grace.
>>
>> I would certainly support - _and believe it should be a priority for
>> Dublin_ - having a very clear understanding (in chart form or other)
>> of the enforcement mechanisms for each of the powers under the SMM,
>> Designator and MEM models as noted in the second bullet in the Action
>> for lawyers section below.  Hopefully much of this has analysis been
>> done and won't take to much additional work.
>>
>> Thanks.
>>
>> Matthew
>>
>> On 08/10/2015 18:14, Grace Abuhamad wrote:
>>> Dear all,
>>>
>>> The notes, recordings and transcripts for the Briefing with Counsel
>>> for Plan B Proposal Meeting  - Thursday 8 October 2015 @ 21:00 UTC
>>>
>>>  will be available here: https://community.icann.org/x/BahYAw
>>>
>>> A copy of the notes may be found below.
>>>
>>> AC room recording:
>>> <https://icann.adobeconnect.com/p46pejy7tf3/>https://icann.adobeconne
>>> ct.com/p46pejy7tf3/
>>>
>>>
>>> *Briefing with Counsel for Plan B Proposal Meeting  - Thursday 8
>>> October 2015 @ 21:00 UTC*
>>>
>>>
>>> *Attendees in AC room: *
>>>
>>> CCWG: Steve DelBianco; Jonathan Zuck; Kavouss Arasteh
>>>
>>> Counsel: Ingrid Mittermaier; Michael Clark; Rosemary Fei (and Ed
>>> McNicholas and Holly Gregory on the phone line only)
>>>
>>>
>>> *Notes:*
>>>
>>>
>>> Today's discussion revolves around the text here:
>>> <http://mm.icann.org/pipermail/accountability-cross-community/2015-Oc
>>> tober/006125.html>http://mm.icann.org/pipermail/accountability-cross-
>>> community/2015-October/006125.html
>>>
>>>
>>>
>>> Kavouss added an edit (underlined here):
>>>
>>> 1. Power to block a proposed Operating Plan/Strat Plan/Budget with
>>> limitation on rejection/ Veto ( maximum 3 times )
>>>
>>> 2. Power to approve changes to Fundamental Bylaws and Articles of
>>> Incorporation.
>>>
>>> 3. Power to block changes to  standard Blaws.
>>>
>>> 4. Power to appoint and remove individual board Directors possibly
>>> with the approval of the entire community
>>>
>>> 5. Power to recall the entire board of Directors
>>>
>>> 6. Mechanism for binding IRP where a panel decision is enforceable in
>>> any court recognizing international arbitration results — even if
>>> ICCANNs Board refused to participate in the binding arbitration.
>>> (assuming  CCWG lawyers verify this works without activating a
>>> Membership model)
>>>
>>> All decision taken on the above would require consensus , without
>>> more than two Advice against that ( non-voting of ACs)
>>>
>>> I think we are close enough to get consensus around the above powers
>>> before we leave Dublin.  And based on what weâ€™ve heard recently,
>>> the board will support the powers described above.
>>>
>>>
>>> *Action for Steve/Jonathan: *revise chart per call discussions (MEM /
>>> Single Designator / Single Member) and send to lawyers before they
>>> can proceed with their work.
>>>
>>>
>>> *Actions for lawyers*:
>>>
>>>    * Assess level of effort to do 2-part project as follows:
>>>    * Part 1: completing the chart shown in AC. The chart shows the 6
>>>      Powers and their enforcement in Board's MEM (within Bylaws),
>>>      Designator, Sole Member. For first pass, only do each of the  3 as
>>>      described. (If there is extra time, the lawyers can study options
>>>      for personhood for SO/ACs in the models).
>>>    * Part 2: Plan B design and lockdown
>>>
>>>
>>> Lawyers would like for this to be a priority if this needs to be
>>> ready by Dublin.
>>>
>>>
>>> The more the documents can look simpler, the better. Minimal change
>>> is preferred.
>>>
>>>
>>>
>>>
>>> _______________________________________________
>>> Accountability-Cross-Community mailing list
>>> Accountability-Cross-Community at icann.org<javascript:return>
>>> https://mm.icann.org/mailman/listinfo/accountability-cross-community
>>
>> --
>>
>> Matthew Shears
>> Director - Global Internet Policy and Human Rights Center for
>> Democracy & Technology mshears at cdt.org<javascript:return>
>> + 44 771 247 2987
>>
>>
>>
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>>
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