Re: [Iasa20] Memo exploring options for IASA 2.0 models

[Brad Biddle <[e-mail]>]

>
> Are you saying that the degree of the ISOC's control in Option III is
> basically whatever they agree to in the operating agreement?  For example,
> the operating agreement could specify that the board of the LLC is selected
> by the IETF's process (cf. [1]), in which case ISOC would retain the right
> to control the board in extremis (by revoking/reissuing the operating
> agreement), but need not be involved in actual appointments under normal
> operation.  Does that sound like something that would work here?


Short answer: yes.

I could add some nuance/color commentary later, but you've got the core
idea here.

--Brad



On Fri, Feb 16, 2018 at 7:41 AM, Richard Barnes <[e-mail]> wrote:

>
>
> On Fri, Feb 16, 2018 at 8:18 AM, Brad Biddle <[e-mail]> wrote:
>
>> First, for those who don't know me: I'm the new general counsel for IETF,
>> stepping into Jorge's role. I'm not engaged on this matter, however (Morgan
>> Lewis is providing legal advice), but I thought I'd respond to one specific
>> point that Ted raised:
>>
>> From my reading, though,  I see no advantage to option (III); it seems
>>> mostly just to put ISOC into the role of validating the contributions.  If
>>> there were specific advantages of that one that were obvious to the design
>>> team, I'd appreciate your thoughts.
>>
>>
>> Not to speak for the design team (which I am not on), but FWIW I think
>> there is a strong case for Option 3 (the single-member LLC option). The
>> article linked at [1] below does a nice job of explaining some of the
>> general pros and cons of this framework. As applied to IETF, I think the
>> key advantages would be that (a) it would accomplish the goal of giving the
>> IETF independent legal existence, enabling independent contracting, bank
>> accounts, etc., (b) the existing IETF governance structures could simply be
>> imported wholesale into the LLC Operating Agreement
>>
>
> To explore this point a little...
>
> Are you saying that the degree of the ISOC's control in Option III is
> basically whatever they agree to in the operating agreement?  For example,
> the operating agreement could specify that the board of the LLC is selected
> by the IETF's process (cf. [1]), in which case ISOC would retain the right
> to control the board in extremis (by revoking/reissuing the operating
> agreement), but need not be involved in actual appointments under normal
> operation.  Does that sound like something that would work here?
>
> By contrast, it looks to me like in Option II, the relevant code [2]
> requires that ISOC has to actually appoint a majority of the board, even if
> that appointment is formal, based on the IETF's selections.
>
> --Richard
>
> [1] "A total of four (4) Trustees shall be appointed by the Internet
> Engineering Task Force following a process of their own choice"
> https://www.internetsociety.org/about-internet-society/
> governance-policies/by-laws/
> [2] https://www.law.cornell.edu/cfr/text/26/1.509%28a%29-4
>
>
>> (as and if desired), so the transition could be essentially invisible to
>> IETF participants, and (c) IETF could avoid the significant costs and risks
>> associated with pursuing and maintaining its own independent 501(c)(3)
>> status. Also, while Joe's original email characterized this option as
>> providing IETF with less independence than Option 2 (the Type 1 supporting
>> org option), I don't think this is accurate: i.e., for both Option 2 and
>> Option 3 ISOC would have to retain some formal control (to protect their
>> own non-profit status and otherwise comply with applicable law), but I
>> think both options could be structured to protect IETF's independence as a
>> practical matter, and I don't think Option 2 is necessarily better than
>> Option 3 on this front. Note the descriptions of operational independence
>> in [1] -- it's flagged as a potential bug from the perspective of the
>> parent org, but perhaps IETF would see this as a feature.
>>
>> Also, FYI, there are a couple of good examples of the single member LLC
>> model being used in the standards and open source context:
>>
>> 1. The Joint Development Foundation [2] creates independent single member
>> LLCs for each separate project; the project participants then manage the
>> projects independently under the LLC's operating agreement. (Disclosure:
>> I'm on the JDF Board and helped design this legal structure.)
>>
>> 2. The Linux Foundation just adopted this same legal structure in
>> connection with their recently-announced Linux Foundation Networking Fund.
>> See [2].
>>
>> Happy to discuss further, but FYI I'm traveling today and may not be
>> immediately responsive.
>>
>> --Brad
>>
>> [1] https://www.adlercolvin.com/wp-content/uploads/2017/12/U
>> sing-LLCs-in-Fiscal-Sponsorship-Update-on-Model-L-00647565xA3536.pdf
>> [2] http://www.jointdevelopment.org/
>> [3] https://www.linuxfoundation.org/projects/networking/governance/
>>
>>
>>
>> On Wed, Feb 14, 2018 at 9:35 PM, Ted Hardie <[e-mail]> wrote:
>>
>>> So, I can personally read it either way, which is why I asked for
>>> clarification; it sounds like that means getting the lawyers to specify.  I
>>> note that the text on the "Disregarded Entity" option says this: "Can have
>>> members that are not ISOC members, although for tax purposes their dues
>>> will be revenue to ISOC and ISOC will need to substantiate their
>>> contributions." which seems to contemplate a form of membership that the
>>> IETF has never had (we have contributions and participants, not dues and
>>> members).
>>>
>>> On Wed, Feb 14, 2018 at 8:49 PM, Richard Barnes <[e-mail]> wrote:
>>>
>>>> I actually have the opposite suspicion, members != participants.  For
>>>> those not familiar with the terminology, "participants" in the IETF sense
>>>> is basically "whoever joins a mailing list or comes to a meeting", or
>>>> similarly "whoever is subject to the Note Well / relevant IPR RFCs"
>>>> [0][1].  The IETF has very open participation.
>>>>
>>>> By contrast, given that this memo was written by lawyers, I expect that
>>>> they meant "members" in the legal sense, who are the parties that legally
>>>> control the entity (e.g., the shareholders in a for-profit corporation)
>>>> [2][3].  So saying that "ISOC must be the sole member" just means that ISOC
>>>> legally retains control of the entity, as one would expect with a
>>>> subsidiary entity.  That control is manifested, for example, in their right
>>>> to replace all or a majority of the board.
>>>>
>>>
>>> While I certainly can read the memo this way, that seems to me to mean
>>> that "Can have members that are not ISOC members" is not actually a
>>> property we care about, for the reasons Alissa pointed to in the minutes.
>>> The structures the hums support are those under the ISOC umbrella. I would
>>> expect us, should we choose this option (or the other options where this is
>>> feasible) to disallow members other than ISOC.  While ISOC's ability to
>>> appoint the majority of the board would always let us avoid capture by a
>>> different entity, there seems no good reason at hand to have other members
>>> and a good bit of risk that it could slowly change the IETF into a
>>> membership organization.
>>>
>>> Just my own point of view, of course.
>>>
>>>
>>>>
>>>> Note, however, that even if ISOC retains ultimate legal control, there
>>>> are still differences among options (II), (III), and (IV) (using the memo's
>>>> numbering).  In options (II) and (III), ISOC's control is attenuated
>>>> compared to option (IV), since basically the only right they have is to
>>>> appoint the board; they couldn't, say, direct specific contracting or
>>>> personnel decisions.
>>>>
>>>>
>>> I was honestly, expecting the pros and cons for these different
>>> structures to be laid out a bit more in terms of the IETF's situation, so I
>>> may well be missing something.  From my reading, though,  I see no
>>> advantage to option (III); it seems mostly just to put ISOC into the role
>>> of validating the contributions.  If there were specific advantages of that
>>> one that were obvious to the design team, I'd appreciate your thoughts.
>>>
>>> thanks,
>>>
>>> Ted
>>>
>>>
>>>> --Richard
>>>>
>>>> [0] https://www6.ietf.org/tao.html
>>>> [1] https://www.ietf.org/about/participate/
>>>> [2] http://info.legalzoom.com/definition-llc-member-4425.html
>>>> [3] https://www.legalzoom.com/knowledge/nonprofit/topic/non-prof
>>>> it-membership
>>>>
>>>> On Wed, Feb 14, 2018 at 11:09 PM, Joseph Lorenzo Hall <[e-mail]>
>>>> wrote:
>>>>
>>>>> I'm not sure, we should clarify. I believe the type 1 SO here is the
>>>>> same as that for PIR, so I suspect it's what we would call participants.
>>>>>
>>>>> On Wed, Feb 14, 2018 at 19:34 Ted Hardie <[e-mail]> wrote:
>>>>>
>>>>>> Hi Joe,
>>>>>>
>>>>>> Thanks for forwarding this.  I do have one clarifying question.  In
>>>>>> the section on the Type 1 supporting organization, it says "Can have
>>>>>> members that are not ISOC members." but also says "ISOC must serve as the
>>>>>> sole member of the corporation with the right to appoint at least a
>>>>>> majority of the directors."  ISOC is the sole member of PIR, and I
>>>>>> had made the assumption that it would be the sole member of a new Type 1
>>>>>> supporting organization, should that be the path selected.  This, however,
>>>>>> seems to contemplate members beyond ISOC, and I'm unsure who or what those
>>>>>> could be in our context.   Or does the first usage simply mean what we
>>>>>> would call participants in the IETF context, saying that the participants
>>>>>> in the supporting organization do not also need to be considered "members"
>>>>>> of ISOC?
>>>>>>
>>>>>> thanks,
>>>>>>
>>>>>> Ted
>>>>>>
>>>>>>
>>>>>>
>>>>>> On Wed, Feb 14, 2018 at 3:29 PM, Joseph Lorenzo Hall <[e-mail]>
>>>>>> wrote:
>>>>>>
>>>>>>> Greetings,
>>>>>>>
>>>>>>> I am writing on behalf of the IASA 2.0 Design Team to update you on
>>>>>>> progress since Singapore.
>>>>>>>
>>>>>>> The Design Team and Alissa, Sean Turner, and Richard Barnes (ISOC
>>>>>>> Board
>>>>>>> members) asked ISOC's tax law counsel at the law firm Morgan Lewis to
>>>>>>> examine the options we are considering in a new IASA 2.0 structure,
>>>>>>> in
>>>>>>> terms of governance, finances, and administrative complexity.
>>>>>>>
>>>>>>> The response memo is attached, covering the spectrum of options from
>>>>>>> the
>>>>>>> status quo to increasingly independent models. The memo covers four
>>>>>>> options:
>>>>>>>
>>>>>>> 1. Substantial independence: an independent 501(c)(3) org;
>>>>>>> 2. Significant independence: a 501(c)(3) Type 1 Supporting Org;
>>>>>>> 3. Weak independence: an LLC that is a "disregarded entity"; and,
>>>>>>> 4. Status quo: continuing as an activity of ISOC.
>>>>>>>
>>>>>>> Note that the design team has some additional questions that we hope
>>>>>>> to
>>>>>>> clarify including the implications of the public support test, board
>>>>>>> composition and control, and potential costs (sunk/ongoing) of a
>>>>>>> transition to each model. We'd like to hear from all of you as to
>>>>>>> your
>>>>>>> thoughts, either in terms of clarification or if this analysis
>>>>>>> affects
>>>>>>> which model you prefer.
>>>>>>>
>>>>>>> If questions emerge around particular themes we can work with ISOC on
>>>>>>> clarifications.
>>>>>>>
>>>>>>> thank you,
>>>>>>>
>>>>>>> Joe (writing on behalf of the DT)
>>>>>>>
>>>>>>> --
>>>>>>> Joseph Lorenzo Hall
>>>>>>> Chief Technologist, Center for Democracy & Technology [
>>>>>>> https://www.cdt.org]
>>>>>>> 1401 K ST NW STE 200, Washington DC 20005
>>>>>>> <https://maps.google.com/?q=1401+K+ST+NW+STE+200,+Washington+DC+20005&entry=gmail&source=g>
>>>>>>> -3497
>>>>>>> e: [e-mail], p: 202.407.8825, pgp: https://josephhall.org/gpg-key
>>>>>>> Fingerprint: 3CA2 8D7B 9F6D DBD3 4B10  1607 5F86 6987 40A9 A871
>>>>>>>
>>>>>>>
>>>>>>> _______________________________________________
>>>>>>> iasa20 mailing list
>>>>>>> [e-mail]
>>>>>>> https://www.ietf.org/mailman/listinfo/iasa20
>>>>>>>
>>>>>>> --
>>>>> Joseph Lorenzo Hall
>>>>> Chief Technologist, Center for Democracy & Technology [
>>>>> https://www.cdt.org]
>>>>> 1401 K ST NW STE 200, Washington DC 20005
>>>>> <https://maps.google.com/?q=1401+K+ST+NW+STE+200,+Washington+DC+20005&entry=gmail&source=g>
>>>>> -3497
>>>>> e: [e-mail], p: 202.407.8825 <(202)%20407-8825>, pgp:
>>>>> https://josephhall.org/gpg-key
>>>>> Fingerprint: 3CA2 8D7B 9F6D DBD3 4B10  1607 5F86 6987 40A9 A871
>>>>>
>>>>> _______________________________________________
>>>>> iasa20 mailing list
>>>>> [e-mail]
>>>>> https://www.ietf.org/mailman/listinfo/iasa20
>>>>>
>>>>>
>>>>
>>>
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>>>
>>>
>>
>>
>> --
>> Brad Biddle | [e-mail] | +1.503.502.1259 <(503)%20502-1259>
>> (mobile) | http://biddle.law
>>
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>


-- 
Brad Biddle | [e-mail] | +1.503.502.1259 (mobile) | http://biddle.law