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Articles 1 - 17 of 17
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Bonding Limited Liability, Robert J. Rhee
Bonding Limited Liability, Robert J. Rhee
Robert Rhee
Limited liability is considered a “birthright” of corporations. The concept is entrenched in legal theory, and it is a fixed reality of the political economy. But it remains controversial. Scholarly debate has been engaged in absolute terms of defending the rule or advocating its abrogation. Though compelling, these polar positions, often expressed in abstract arguments, are associated with disquieting effects. Without limited liability, efficiency may be severely compromised. With it, involuntary tort creditors bear some of the cost of an enterprise. Most other proposals for reforming limited liability have been incremental, such as modifying veil piercing. However, neither absolutism nor …
Participation And Disintermediation In A Risk Society, Robert J. Rhee
Participation And Disintermediation In A Risk Society, Robert J. Rhee
Robert Rhee
The chapter argues that financing extreme catastrophic loss will become more problematic as catastrophes become more frequent and severe. An effective strategy must increase the level of participation in the spreading of risk and loss. Currently, risk spreading is done largely through insurers and government as they are the default aggregators of private and public capital. An enlargement of participation may mean the disintermediation of the traditional insurance and public compensation functions, thus allowing more direct and efficient participation between those are exposed to risk and those who are willing to bear it. This chapter also argues that tax policy …
A Production Theory Of Pure Economic Loss, Robert J. Rhee
A Production Theory Of Pure Economic Loss, Robert J. Rhee
Robert Rhee
Although the pure economic loss rule has been remarkably durable in the common law, it suffers from a theoretical deficit. The rule has not been properly framed within the broader context of Anglo-American political economy. Any theory must recognize that the rule fundamentally deals with business risk and economic organization. Two conceptions of risk are important: risk to economic assets essential to the production function (loss of a factor of production), and risk to outcomes (loss of production). This Article proposes a production theory of the pure economic loss rule, which is rooted in the neoclassical economic understanding of the …
The Application Of Finance Theory To Increased Risk Harms In Toxic Tort Litigation, Robert J. Rhee
The Application Of Finance Theory To Increased Risk Harms In Toxic Tort Litigation, Robert J. Rhee
Robert Rhee
In toxic tort litigation, a plaintiff has no cause of action for increased risk of harm unless that risk is proven by a preponderance of the evidence to lead to a future physical injury. This rule of law is based on an antiquated concept of uncertainty, and evinces the law’s detachment from the knowledge gained from other intellectual disciplines and the everyday workings of the world. This article argues that freedom from increased risk should be a legally cognizable interest, the violation of which gives rise to an independent cause of action. When analyzed under finance theory, increased risk harms …
Probability, Policy And The Problem Of Reference Class, Robert J. Rhee
Probability, Policy And The Problem Of Reference Class, Robert J. Rhee
Robert Rhee
This short paper focuses on the problem of reference class in evidentiary assessment as it relates to probability and weight of evidence. The reluctance to inject mathematical formalism into the factfinding function is justified. Objective probability requires a reference class from which a proportion is derived. Probability assessments change with the reference class. If a proposition is subject to proportional comparison against two or more different references, their selection is often an inductive process. The advantage of objectivity and methodological rigor is illusory. A legal dispute is the search for a plausible understanding of the truth, and an overtly mathematized …
Terrorism Risk In A Post-9/11 Economy: The Convergence Of Capital Markets, Insurance, And Government Action, Robert J. Rhee
Terrorism Risk In A Post-9/11 Economy: The Convergence Of Capital Markets, Insurance, And Government Action, Robert J. Rhee
Robert Rhee
September 11 changed the American economy and the global insurance market. The insurance industry no longer covers terrorism risk for "free." The traditional insurance mechanism alone cannot spread the risk of repeated catastrophic losses. Beyond the Terrorism Risk Insurance Act of 2002 lingers the questions of a longterm solution and government's role therein. Government can assume different roles: reinsurer, wealth (re)distributor, regulator, or a combination thereof. This article suggests that the government should foster a regulatory and tax environment in which the private sector can develop a capital market solution for terrorism risk. Securitization is an alternative to reinsurance and …
Insurance For Acts Of Terrorism, Robert J. Rhee
Insurance For Acts Of Terrorism, Robert J. Rhee
Robert Rhee
This chapter discusses insurance case law arising from acts of terrorism, including those arising from the September 11 attacks. It analyzes the Terrorism Risk Insurance Act of 2002 (TRIA), as amended by the Terrorism Risk Insurance Act of 2005 and the Terrorism Risk Insurance Program Reauthorization Act of 2007, as well as the administrative program created by the legislation. Examples are provided and NAIC Policyholder Disclosure Notice forms are included. Policy considerations surrounding TRIA are also discussed including insurance industry strategies, the difficulties of assessing terrorism risks, the effect of TRIA subsidized insurance on the market, and the benefits and …
Tort Arbitrage, Robert J. Rhee
Tort Arbitrage, Robert J. Rhee
Robert Rhee
The economic models of bargaining and tort law have not been integrated into a coherent theory that reflects the operational realities of the dispute resolution process and the negligence standard. Applying a theory of bargaining based on asset pricing principles of financial economics, this Article argues that there is systematic devaluation of tort claims in the civil litigation system. This results because in essence the parties value different tort transactions, even when they are tied together in a common dispute and view the facts and laws similarly. For the party that can mitigate the risk exposure, the discount to value …
Catastrophic Loss, Alternative Risk Transfer, And Terrorism Insurance, Robert J. Rhee
Catastrophic Loss, Alternative Risk Transfer, And Terrorism Insurance, Robert J. Rhee
Robert Rhee
This paper constitutes a compilation of summary entries on catastrophic loss, alternative risk transfer, and the Terrorism Risk Insurance Act of 2002 and the Terrorism Risk Insurance Extension Act of 2005, along with references and further reading.
The Effect Of Risk On Legal Valuation, Robert J. Rhee
The Effect Of Risk On Legal Valuation, Robert J. Rhee
Robert Rhee
From a financial economic perspective, the governing condition of a meritorious civil action is the uncertainty of outcome. Expectation and outcome deviate, and the spread is the measure of uncertainty (or variance). During litigation each party has an option to settle or select trial. The decision standard can be seen as an option strike price and a finding of liability as an “in-the-money” call option. This apparent optionality suggests the application of an option pricing model to legal valuation, and a small but growing body of scholarship endorses this concept. However, option theory is not the only concept. Under an …
The Madoff Scandal, Market Regulatory Failure And The Business Education Of Lawyers, Robert J. Rhee
The Madoff Scandal, Market Regulatory Failure And The Business Education Of Lawyers, Robert J. Rhee
Robert Rhee
This essay suggests that a deficiency in legal education is a contributing cause of the regulatory failure. The most scandalous malfeasance of this new era, the Madoff Ponzi scheme, evinces the failure of improperly trained lawyers and regulators. It also calls into question whether the prevailing regulatory philosophy of disclosure of disclosure is sufficient in a complex market. This essay answers an important question underlying these considerations: What can legal education do to better train business lawyers and regulators for a market that is becoming more complex? One answer, it suggests, is a simple one: law schools should teach a …
Catastrophic Risk And Governance After Hurricane Katrina: A Postscript To Terrorism Risk In A Post-9/11 Economy, Robert J. Rhee
Catastrophic Risk And Governance After Hurricane Katrina: A Postscript To Terrorism Risk In A Post-9/11 Economy, Robert J. Rhee
Robert Rhee
This essay inquires into the political economy and system of governance that have made catastrophes more frequent and severe. The system of governance that is designed to mitigate risk and respond to catastrophes can be ineffective, or worse, increase the risk of harm through unintended consequences. Human influence must be considered a source of collateral risk, the kind that leads to a systemic crisis or exacerbates one. This essay concludes with some brief proposals, discussion topics more than completed ideas, which may facilitate further academic and political dialogue on effective governance and public risk management. They include a catastrophe tax, …
Corporate Ethics, Agency, And The Theory Of The Firm, Robert J. Rhee
Corporate Ethics, Agency, And The Theory Of The Firm, Robert J. Rhee
Robert Rhee
This conference paper suggests that the problem of corporate ethics cannot be reduced to the autonomous person. Although the greatest influence on action and choice is one's moral constitution, it does not follow that the agent's behavior is the same within or without the firm. Ethics is a function of corporate form. The theory of agency cannot dismiss the firm as a fiction or metaphorical shorthand since that which does not exist should not be able to cause ethical breakdowns in corporate action. Thus, the theory of the firm, which emphasizes profit and wealth maximization, should incorporate a richer, more …
Toward Procedural Optionality: Private Ordering Of Public Adjudication, Robert J. Rhee
Toward Procedural Optionality: Private Ordering Of Public Adjudication, Robert J. Rhee
Robert Rhee
Private resolution and public adjudication of disputes are commonly seen as discrete, antipodal processes. There is a generally held understanding of the dispute resolution processes. The essence of private dispute resolution is that the parties can arrange the disputed rights and entitlements per agreement and without judicial intervention. In public adjudication, however, the sovereign mandates the substantive and procedural laws to be applied, many of which cannot be changed by either a party’s unilateral decision or both parties’ mutual consent. Neither approach allows a party an option to unilaterally alter important aspects of the process, such as the standards of …
The Socratic Method And The Mathematical Heuristic Of George Polya, Robert J. Rhee
The Socratic Method And The Mathematical Heuristic Of George Polya, Robert J. Rhee
Robert Rhee
A number of commentators have observed the decline of the Socratic method. This is unfortunate as the Socratic method can be an effective teaching tool. But this article recognizes that the Socratic method can be monochromatic. This article argues that the Socratic method should not be conceived simply as a method to teach analytic skills. Rather, once learned, it can be a concrete analytic tool for the students to use without the help of professors. In other words, it is an end to itself rather than a means. To do this, we can adopt George Polya's heuristic for teaching mathematical …
A Principled Solution For Negligent Infliction Of Emotional Distress Claims, Robert J. Rhee
A Principled Solution For Negligent Infliction Of Emotional Distress Claims, Robert J. Rhee
Robert Rhee
This article examines negligent infliction of emotional distress, one of the most controversial and least uniform fields of tort law. A review of the judicial and scholarly literature has shown that traditional tort analysis fails. In its stead, the common law has not found an alternative theory of liability that balances the competing interests. Rather, the approach has been to create rules of law based on probabilistic templates. Its dual purpose is to preclude individualized analysis and to limit aggregate liability. This article rejects the current doctrines as inherently arbitrary and proposes a complete overhaul of the law. To find …
Bonding Limited Liability, Robert J. Rhee
Bonding Limited Liability, Robert J. Rhee
Robert Rhee
Limited liability is considered a “birthright” of corporations. The concept is entrenched in legal theory, and it is a fixed reality of the political economy. But it remains controversial. Scholarly debate has been engaged in absolute terms of defending the rule or advocating its abrogation. Though compelling, these polar positions, often expressed in abstract arguments, are associated with disquieting effects. Without limited liability, efficiency may be severely compromised. With it, involuntary tort creditors bear some of the cost of an enterprise. Most other proposals for reforming limited liability have been incremental, such as modifying veil piercing. However, neither absolutism nor …