Business Law, Public Responsibility, and Ethics Commons^™

The Reverse Agency Problem In The Age Of Compliance, Asaf Eckstein, Gideon Parchomovsky

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The agency problem, the idea that corporate directors and officers are motivated to prioritize their self-interest over the interest of their corporation, has had long-lasting impact on corporate law theory and practice. In recent years, however, as federal agencies have stepped up enforcement efforts against corporations, a new problem that is the mirror image of the agency problem has surfaced—the reverse agency problem. The surge in criminal investigations against corporations, combined with the rising popularity of settlement mechanisms including Pretrial Diversion Agreements (PDAs), and corporate plea agreements, has led corporations to sacrifice directors and officers in order to reach settlements …

The Shifting Tides Of Merger Litigation, Matthew D. Cain, Jill E. Fisch, Steven Davidoff Solomon, Randall S. Thomas

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In 2015, Delaware made several important changes to its laws concerning merger litigation. These changes, which were made in response to a perception that levels of merger litigation were too high and that a substantial proportion of merger cases were not providing value, raised the bar, making it more difficult for plaintiffs to win a lawsuit challenging a merger and more difficult for plaintiffs’ counsel to collect a fee award.

We study what has happened in the courts in response to these changes. We find that the initial effect of the changes has been to decrease the volume of merger …

The Rule Of Reason, Herbert J. Hovenkamp

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Antitrust’s rule of reason was born out of a thirty-year (1897-1927) division among Supreme Court Justices about the proper way to assess multi-firm restraints on competition. By the late 1920s the basic contours of the rule for restraints among competitors was roughly established. Antitrust policy toward vertical restraints remained much more unstable, however, largely because their effects were so poorly understood.

This article provides a litigation field guide for antitrust claims under the rule of reason – or more precisely, for situations when application of the rule of reason is likely. At the time pleadings are drafted and even up …

Bankruptcy’S Uneasy Shift To A Contract Paradigm, David A. Skeel Jr., George Triantis

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The most dramatic development in twenty-first century bankruptcy practice has been the increasing use of contracts to shape the bankruptcy process. To explain the new contract paradigm—our principal objective in this Article-- we begin by examining the structure of current bankruptcy law. Although the Bankruptcy Code of 1978 has long been viewed as mandatory, its voting and cramdown rules, among others, invite considerable contracting. The emerging paradigm is asymmetric, however. While the Code and bankruptcy practice allow for ex post contracting, ex ante contracts are viewed with suspicion.

We next use contract theory to assess the two modes of contracting. …

Antitrust Balancing, Herbert J. Hovenkamp

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Antitrust litigation often confronts situations where effects point in both directions. Judges sometimes describe the process of evaluating these factors as “balancing.” In its e-Books decision the Second Circuit believed that the need to balance is what justifies application of the rule of reason. In Microsoft the D.C. Circuit stated that “courts routinely apply a…balancing approach” under which “the plaintiff must demonstrate that the anticompetitive harm…outweighs the procompetitive benefit.” But then it decided the case without balancing anything.

The term “balancing” is a very poor label for what courts actually do in these cases. Balancing requires that two offsetting effects …

The Role Of Private Litigation, Benedict Heil, Benjamin Lee

Comparative Corporate Governance and Financial Regulation

No abstract provided.

The New Governance And The Challenge Of Litigation Bylaws, Jill E. Fisch

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Corporate governance mechanisms designed to ensure that managers act in shareholders’ interest have evolved dramatically over the past forty years. “Old governance” mechanisms such as independent directors and performance-based executive compensation have been supplemented by innovations that give shareholders greater input into both the selection of directors and ongoing operational decisions. Issuer boards have responded with tools to limit the exercise of shareholder power both procedurally and substantively. This article terms the adoption and use of these tools, which generally take the form of structural provisions in the corporate charter or bylaws, the “new governance.”

Delaware law has largely taken …

The Importance Of Being Dismissive: The Efficiency Role Of Pleading Stage Evaluation Of Shareholder Litigation, Lawrence A. Hamermesh, Michael L. Wachter

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It has been claimed that the risk/reward dynamics of shareholder litigation have encouraged quick settlements with substantial attorneys’ fee awards but no payment to shareholders, regardless of the merits of the case. Fee-shifting charter and bylaw provisions may be too blunt a tool to control agency costs associated with excessive shareholder litigation, and are in any event now prohibited by Delaware statute. We claim, however, that active judicial supervision of public company shareholder litigation at an early stage reduces the costs of frivolous litigation to shareholders by separating meritorious from unmeritorious litigation before the full costs of discovery are incurred. …

Federal Securities Fraud Litigation As A Lawmaking Partnership, Jill E. Fisch

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In its most recent Halliburton II decision, the Supreme Court rejected an effort to overrule its prior decision in Basic Inc. v. Levinson. The Court reasoned that adherence to Basic was warranted by principles of stare decisis that operate with “special force” in the context of statutory interpretation. This Article offers an alternative justification for adhering to Basic—the collaboration between the Court and Congress that has led to the development of the private class action for federal securities fraud. The Article characterizes this collaboration as a lawmaking partnership and argues that such a partnership offers distinctive lawmaking advantages. …

Sue On Pay: Say On Pay’S Impact On Directors’ Fiduciary Duties, Lisa Fairfax

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This Article advances a normative case for using say on pay litigation to enhance the state courts’ role in policing directors’ compensation decisions. Outrage over what many perceive to be excessive executive compensation has escalated dramatically in recent years. In 2010, such outrage prompted Congress to mandate say on pay—a nonbinding shareholder vote on executive compensation. In the wake of say on pay votes, some shareholders have brought suit against directors alleging that a negative vote indicates a breach of directors’ fiduciary duties. To date, the vast majority of courts have rejected these suits. This Article insists that such rejection …

Transparency Through Insurance: Mandates Dominate Discretion, Tom Baker

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This chapter describes how liability insurance has contributed to the transparency of the civil justice system. The chapter makes three main points. First, much of what we know about the empirics of the civil justice system comes from access to liability insurance data and personnel. Second, as long as access to liability insurance data and personnel depends on the discretion of liability insurance organizations, this knowledge will be incomplete and, most likely, biased in favor of the public policy agenda of the organizations providing discretionary access to the data. Third, although mandatory disclosure of liability insurance data would improve transparency, …

The Political Economy Of Fraud On The Market, William W. Bratton, Michael L. Wachter

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No abstract provided.

On Beyond Calpers: Survey Evidence On The Developing Role Of Public Pension Funds In Corporate Governance, Stephen Choi, Jill E. Fisch

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No abstract provided.

Reasonable Emissions Of Greenhouse Gases: Efficient Abatement For A Stock Pollutant, Howard F. Chang

All Faculty Scholarship

No abstract provided.

Criminalization Of Corporate Law: The Impact On Shareholders And Other Constituents, Jill E. Fisch

All Faculty Scholarship

No abstract provided.

Aggregation On The Couch: The Strategic Uses Of Ambiguity And Hypocrisy, Stephen B. Burbank

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In this Essay, Professor Burbank comments on the essays by Professors Nagareda and Issacharoff. Welcoming the opportunity to revisit the interplay between procedure and substantive law and the question of democratic accountability that Professor Nagareda’s essay presents, Professor Burbank concludes that the parts of that essay are greater than the whole. He finds that Professor Nagareda’s pursuit of unifying themes and a general normative theory leads to inconsistencies in classification between procedure and substance and to an impoverished vision of institutional legitimacy. Professor Burbank voices concern that this quest, which is also evident in the current draft of the American …

Do Institutions Matter? The Impact Of The Lead Plaintiff Provision Of The Private Securities Litigation Reform Act, Stephen Choi, Jill E. Fisch, A. C. Pritchard

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When Congress enacted the Private Securities Litigation Reform Act in 1995 (“PSLRA”), the Act’s “lead plaintiff” provision was the centerpiece of its efforts to increase investor control over securities fraud class actions. The lead plaintiff provision alters the balance of power between investors and class counsel by creating a presumption that the investor with the largest financial stake in the case will serve as lead plaintiff. The lead plaintiff then chooses class counsel and, at least in theory, negotiates the terms of counsel’s compensation.

Congress’s stated purpose in enacting the lead plaintiff provision was to encourage institutional investors—pension funds, mutual …

Vultures Or Vanguards?: The Role Of Litigation In Sovereign Debt Restructuring, Jill E. Fisch, Caroline M. Gentile

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The market for sovereign debt differs from the market for corporate debt in several important ways including the risk of opportunistic default by sovereign debtors, the importance of political pressures, and the presence of international development organizations. Moreover, countries are subject to neither liquidation nor standardized processes of debt reorganization. Instead, negotiations between a sovereign debtor and its creditors lead to a voluntary restructuring of the sovereign's debt. One of the greatest difficulties in restructuring claims against sovereign debtors is balancing the interests of the majority of the creditors with those of minority creditors. Holdout creditors serve as a check …

Is There A Role For Lawyers In Preventing Future Enrons?, Jill E. Fisch, Kenneth M. Rosen

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Following the collapse of the Enron Corporation, the ethical obligations of corporate attorneys have received increased scrutiny. The Sarbanes-Oxley Act of 2002, enacted in response to calls for corporate reform, specifically requires the Securities and Exchange Commission to address the lawyer’s role by requiring covered attorneys to “report up” evidence of corporate wrongdoing to key corporate officers, and, in some circumstances, to the board of directors. Failure to “report up” subjects a lawyer to liability under federal law.

This Article argues that the reporting up requirement reflects a second-best approach to corporate governance reform. Rather than focusing on the actors …

Aggregation, Auctions, And Other Developments In The Selection Of Lead Counsel Under The Pslra, Jill E. Fisch

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No abstract provided.

Two Observations On Holocaust Claims, William W. Bratton

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No abstract provided.

Class Action Reform, Qui Tam, And The Role Of The Plaintiff, Jill E. Fisch

All Faculty Scholarship

No abstract provided.

Class Action Reform: Lessons From Securities Litigation, Jill E. Fisch

All Faculty Scholarship

No abstract provided.

Start Making Sense: An Analysis And Proposal For Insider Trading Regulation, Jill E. Fisch

All Faculty Scholarship

No abstract provided.

Developments In Law - Toxic Waste Litigation, Howard F. Chang

All Faculty Scholarship

No abstract provided.