Law Commons^™

Front Matter

Michigan Business & Entrepreneurial Law Review

No abstract provided.

Finance And Growth: The Legal And Regulatory Implications Of The Role Of The Public Equity Market In The United States, Ezra Wasserman Mitchell

Michigan Business & Entrepreneurial Law Review

The important study of the relationship between finance and economic growth has exploded over the past two decades. One of the most significant open questions is the role of the public equity market in stimulating growth and the channels it follows if it does. This paper examines that question from an economic, legal, and historical perspective, especially with regard to its regulatory and corporate governance implications. The US market is my focus.

In contrast to most studies, I follow both economic history and the actual flow of funds in addition to empirics and theory to conclude that the public equity …

The Limits Of Performance-Based Regulation, Cary Coglianese

University of Michigan Journal of Law Reform

Performance-based regulation is widely heralded as a superior approach to regulation. Rather than specifying the actions regulated entities must take, performance-based regulation instead requires the attainment of outcomes and gives flexibility in how to meet them. Despite nearly universal acclaim for performance-based regulation, the reasons supporting its use remain largely theoretical and conjectural. Owing in part to a lack of a clear conceptual taxonomy, researchers have yet to produce much empirical research documenting the strengths and weaknesses of performance-based regulation. In this Article, I provide a much-needed conceptual framework for understanding and assessing performance-based regulation. After defining performance-based regulation and …

Enterprise Without Entities, Andrew Verstein

Michigan Law Review

Scholars and practicing lawyers alike consider legal entities to be essential. Who can imagine running a large business without using a business organization, such as a corporation or partnership? This Article challenges conventional wisdom by showing that vast enterprises—with millions of customers paying trillions of dollars—often operate without any meaningful use of entities.

This Article introduces the reciprocal exchange, a type of insurance company that operates without any meaningful use of a legal entity. Instead of obtaining insurance from a common nexus of contract, customers directly insure one another through a dense web of bilateral agreements. While often overlooked or …

Who Speaks The Culture Of The Corporation?, Gwendolyn Gordon

Michigan Business & Entrepreneurial Law Review

Recent cases – Burwell v Hobby Lobby Stores and Citizens United chief among them – evince a new understanding of the nature of the corporation and its place in society. Whether a corporation has rights – such as those of religious exercise – is not, however, just a question of legal interpretation. To answer this question requires a theory of group or cultural identity, that is, a theory of how a group may have “culture” separate and apart from those of the individuals that comprise it. And such a theory must address how to understand the meaning of culture when …

Using Proactive Legal Strategies For Corporate Environmental Sustainability, Gerlinde Berger-Walliser, Paul Shrivastava, Adam Sulkowski

Michigan Journal of Environmental & Administrative Law

We argue that proactive law can help organizations be more sustainable. Toward that end, this Article first summarizes proactive law literature as it pertains to corporate sustainability. Next, it examines a series of cases on the pivotal nexus between proactive law and corporate sustainability. It then advances novel propositions that connect proactive law to central organizational design elements. The discussion traces further implications and suggests fruitful avenues for research and ways of using proactive law for firms to become more sustainable.

Front Matter

Michigan Business & Entrepreneurial Law Review

No abstract provided.

What We Talk About When We Talk About Tax Complexity, Andrea Monroe

Michigan Business & Entrepreneurial Law Review

I learned most of what I know about being a lawyer, a teacher, and a scholar from Professor Douglas Kahn. For four months in the spring of 1997, Doug mesmerized and terrified me in the class that I feared would be my academic downfall—Partnership Taxation. In the years that followed, Doug has been a mentor and friend, encouraging and supporting me at every stage of my professional career. And my experience is not unique: Doug has inspired generations of law students in just the same way. There is no adequate way to thank Doug for everything he has given to …

Proposed Regulatory Change Of Treatment Of A Guaranteed Payment From A Partnership To A Partner, Douglas A. Kahn

Michigan Business & Entrepreneurial Law Review

A partnership pays no federal income tax. Instead, its income, deductions, and credits are allocated among its partners at the end of its taxable year. A partnership’s distribution of cash or property in kind to a partner will be characterized as one of three distinct transactions, each of which has its own tax consequences.

Hanging Together: A Multilateral Approach To Taxing Multinationals, Reuven S. Avi-Yonah

Michigan Business & Entrepreneurial Law Review

The recent revelation that many multinational enterprises (MNEs) pay very little tax to the countries they operate in has led to various proposals to change the ways they are taxed. Most of these proposals, however, do not address the fundamental flaws in the international tax regime that allow companies like Apple or Starbucks to legally avoid taxation. In particular, the Organization for Economic Co-operation and Development (OECD) has been working on a Base Erosion and Profit Shifting (BEPS) project and is supposed to make recommendations to the G20, but it is not clear yet whether this will result in a …

Taxing Sales Of Depreciable Assets, James R. Hines Jr.

Michigan Business & Entrepreneurial Law Review

Investors in depreciable assets used in a trade or business claim depreciation deductions following investment, and upon sale or other disposition of their assets are taxed on gain or loss equal to differences between amounts realized and adjusted basis. The taxation of these realized gains and losses is asymmetric: losses are deductible against ordinary income, whereas a portion of the gain on sales of personal property, and virtually all gains on sales of real property, are taxed at more favorable capital gain tax rates. Evidence from U.S. tax returns in 2012 indicates that the aggregate annual magnitude of the tax …

Front Matter

Michigan Business & Entrepreneurial Law Review

No abstract provided.

Three Problems (And Two Solutions) In The Law Of Partnership Formation, Shawn Bayern

University of Michigan Journal of Law Reform

This Article considers several foundational questions concerning the formation of general partnerships, a topic that has received little modern attention and that is governed largely by classical axioms rather than adaptive modern considerations. Its three main topics concern (1) the timing of partnership formation, (2) the aggregation of multiple distinct questions under the single heading of “partnership formation,” and (3) the rarely challenged proposition that general partners ought to be liable for partnership obligations, a doctrine that is surprisingly at odds with the rest of modern business-entity law.

Too Vast To Succeed, Miriam H. Baer

Michigan Law Review

If sunlight is, in Justice Brandeis’s words, “the best of disinfectants,” then Brandon Garrett’s latest book, Too Big to Jail: How Prosecutors Compromise with Corporations might best be conceptualized as a heroic attempt to apply judicious amounts of Lysol to the murky world of federal corporate prosecutions. “How Prosecutors Compromise with Corporations” is the book’s neutral- sounding secondary title, but even casual readers will quickly realize that Garrett means that prosecutors compromise too much with corporations, in part because they fear the collateral consequences of a corporation’s criminal indictment. Through an innovation known as the Deferred Prosecution Agreement, or DPA, …

3(A)(10) Financing: New Predatory Financing Using The Securities Act, Thomas S. Glassman

Michigan Business & Entrepreneurial Law Review

The Section 3(a)(10) exemption of the Securities Act of 1933 is meant to exempt securities transactions where a fairness hearing by a judge or government agency’s ruling replaces the usual SEC registration requirements. Recently, there has been a rise in 3(a)(10) financing schemes, where a third party investor, what I call a “3(a)(10) financier,” will offer to purchase the outstanding debts of a company from its creditors in exchange for discounted, and unregistered, shares of stock. In many cases these exchanges are done with no notification to current shareholders whose value falls precipitously when the 3(a)(10) financier begins not only …

Amenities, Amenities, Amenities? How Policy Makers Can Swot Their Way To Better Entrepreneurial Facility Options, Darren A. Prum

Michigan Business & Entrepreneurial Law Review

Across the country, policymakers from both the public and private sector, regardless of their level of responsibility, turn to entrepreneurial ventures as an opportunity to drive economic activity within their sphere of influence. They develop and implement strategies that encourage new business ventures but fail to consider a fundamental aspect of the organizing process of a business, which is finding a suitable facility. As such, this article seeks to consider and evaluate the various forms and types of facilities available to entrepreneurs in order to provide policymakers with an insight as to the best methods to assist in facilitating their …

Dual-Class Capital Structures: A Legal, Theoretical & Empirical Buy-Side Analysis, Christopher C. Mckinnon

Michigan Business & Entrepreneurial Law Review

“The advantage of a dual-class share structure is that it protects entrepreneurial management from the demands of ordinary shareholders. The disadvantage of a dual-class share structure is that it protects entrepreneurial management from the demands of shareholders.” Issuing dual classes of stock has become hotly debated since two major events transpired in 2014: (1) Facebook acquired WhatsApp for $19 billion and (2) Alibaba chose to list its shares on the New York Stock Exchange (NYSE) instead of the Hong Kong Exchange. Because dual-class managers, like those at Facebook and Alibaba, retain a controlling voting block, their decisions are immune from …

Charitable Choices: The Need For A Uniform Nonprofit Limited Liability Company Act (Unllca), Kenya J. H. Smith

University of Michigan Journal of Law Reform

Uniform laws serve an important role in our society, balancing state autonomy and the need to provide consistent solutions to common problems among the states. The Uniform Law Commission (ULC) is the preeminent authority that promulgates uniform laws. To date, the ULC has promulgated over 150 uniform and model acts. ULC tackles a wide array of issues, including child custody and protection, probate, electronic records, and commercial law. The ULC aims to “provide[ ] states with non-partisan, well-conceived and well-drafted legislation that brings clarity and stability to critical areas of state statutory law.”

The Corporation’S Place In Society, Gabriel Rauterberg

Michigan Law Review

The vast majority of economic activity is now organized through corporations. The public corporation is usurping the state’s role as the most important institution of wealthy capitalist societies. Across the developed world, there is increasing convergence on the shareholder-owned corporation as the primary vehicle for creating wealth. Yet nothing like this degree of convergence has occurred in answering the fundamental questions of corporate capitalism: What role do corporations serve? What is the goal of corporate law? What should corporate managers do? Discussion of these questions is as old as the institutions involved.

The New Road To Serfdom: The Curse Of Bigness And The Failure Of Antitrust, Carl T. Bogus

University of Michigan Journal of Law Reform

This Article argues for a paradigm shift in modern antitrust policy. Rather than being concerned exclusively with consumer welfare, antitrust law should also be concerned with consolidated corporate power. Regulators and courts should consider the social and political, as well as the economic, consequences of corporate mergers. The vision that antitrust must be a key tool for limiting consolidated corporate power has a venerable legacy, extending back to the origins of antitrust law in early seventeenth century England, running throughout American history, and influencing the enactment of U.S. antitrust laws. However, the Chicago School’s view that antitrust law should be …

Dialogic Labor Regulation In The Global Supply Chain, Kevin Kolben

Michigan Journal of International Law

In May 2006, the government of Jordan was facing a crisis. A small U.S. labor-rights activist group had just released a damning report documenting extensive labor abuses in Jordan’s fledgling garment industry. Adding fuel to the fire, the New York Times published a front-page story about the report with its own field work that corroborated some of the allegations, such as long and abusive working hours, the confiscation of passports of foreign workers, horrendous living conditions, and sexual harassment. Although garment manufacturing was new to Jordan, after just several years of existence it already constituted an important part of Jordan’s …

Medicine As A Public Calling, Nicholas Bagley

Michigan Law Review

The debate over how to tame private medical spending tends to pit advocates of government-provided insurance—a single-payer scheme—against those who would prefer to harness market forces to hold down costs. When it is mentioned at all, the possibility of regulating the medical industry as a public utility is brusquely dismissed as anathema to the American regulatory tradition. This dismissiveness, however, rests on a failure to appreciate just how deeply the public utility model shaped health law in the twentieth century— and how it continues to shape health law today. Closer economic regulation of the medical industry may or may not …

Lessons From Institutional Shareholder Services: Governing Benefit Corporations' Third-Party Standard, Tammi S. Etheridge

Michigan Business & Entrepreneurial Law Review

Almost one hundred years ago, Henry Ford, as CEO of the Ford Motor Company, announced a plan to cease payment of special dividends to shareholders. Instead, the company would reinvest its profits to employ more workers and build more factories. Investing in new workers and factories would cut the cost of cars and make them affordable to more people. Ford publicly declared that his “ambition [was] to employ still more men, to spread the benefits of this industrial system to the greatest possible number, to help them build up their lives and their homes. To do this we are putting …

Front Matter

Michigan Business & Entrepreneurial Law Review

No abstract provided.

Front Matter

Michigan Business & Entrepreneurial Law Review

No abstract provided.

Fighting Foreign-Corporate Political Access: Applying Corporate Veil-Piercing Doctrine To Domestic-Subsidiary Contributions, Ryan Rott

Michigan Law Review

Campaign finance regulations limit speech. The laws preclude foreign nationals, including foreign corporations, from participating in U.S. politics via campaign contributions. The unusual characteristics of corporations, however, may allow foreign corporations to exploit a loophole in the regulatory regime. A foreign corporation may contribute to political campaigns by acquiring a domestic subsidiary and dominating it. This Note addresses how these unusual corporate behaviors enable foreign corporations to illegally corrupt the political process. This Note concludes that to close the loophole without violating the free speech rights of domestic subsidiaries, Congress should enact legislation which would apply corporate veil-piercing theory to …

Enforceability Of Mandatory Arbitration Clauses For Shareholder-Corporation Disputes, Garry D. Hartlieb

Michigan Business & Entrepreneurial Law Review

Investor litigation is an increasingly vexatious field of law. Nearly every time a significant change of control or corporate ownership occurs, plaintiffs’ attorneys file standardized complaints to set in motion class action suits. Ultimately, the settlements shareholders receive fail to achieve the practical effects that parties on both sides desire. Shareholders may receive pennies on the dollar of what they allege was lost by corporate wrongdoing, and, in some cases, shareholders may not receive monetary recovery as the settlement requires only that the corporation to make changes to its governing documents. These suits distract directors and management from the core …

The Compliance Case For Social Enterprise, Joseph W. Yockey

Michigan Business & Entrepreneurial Law Review

Social enterprises generate revenue to solve social, humanitarian, and ecological problems. Their products are not a means to the end of profits, but rather profits are a means to the end of their production. This dynamic presents many of the same corporate governance issues facing other forprofit firms, including legal compliance. The author contends, however, that traditional strategies for corporate compliance are incongruent to the social enterprise’s unique normative framework. Specifically, traditional compliance theory, with its prioritization of shareholder interests, stands at odds with the social enterprise’s mission-driven purpose. Attention to this distinction is essential for developing effective compliance and …

A Blended Approach To Reducing The Costs Of Shareholder Litigation, Valian A. Afshar

Michigan Law Review

Multiforum litigation and federal securities law class actions impose heavy costs on corporations and their shareholders without producing proportionate benefits. Both are largely the result of the agency problem between shareholders and their attorneys, driven more by the attorneys’ interests in generating fees than by the interests of their clients. In response to each of these problems, commentators have recommended a number of solutions. Chief among them are forum selection and mandatory arbitration provisions in a corporation’s charter or bylaws. This Note recommends that corporations unilaterally adopt both forum selection and mandatory arbitration bylaws to address shareholder lawsuits under state …

Protecting Whistleblower Protections In The Dodd-Frank Act, Samuel C. Leifer

Michigan Law Review

In 2008, the United States fell into its worst economic recession in over seventy years. In response, Congress enacted the near-comprehensive Dodd–Frank Wall Street Reform and Consumer Protection Act. Section 922 of Dodd–Frank, in particular, includes specific provisions designed to incentivize and protect corporate whistleblowers. These provisions demonstrated Congress’s belief that a comprehensive and robust whistleblower protection scheme was essential to preventing many of the abuses that caused the financial crisis. Unfortunately, this section’s inconsistent language has produced conflicting decisions within the federal judiciary. In accordance with the Securities and Exchange Commission (“SEC”)’s own reading of Section 922, several district …