Law Commons^™

Retaining Mandatory Securities Disclosure: Why Issuer Choice Is Not Investor Empowerment, Merritt B. Fox

Faculty Scholarship

This Article advances the reopened debate over mandatory disclosure in two ways. First, it demonstrates that the proponents of issuer choice have not effectively countered the arguments that have formed the basis of the prevailing consensus for retaining mandatory disclosure. While this consensus was formed when the alternative to mandatory disclosure was total abandonment of regulation, the proponents of issuer choice have not shown how the arguments that form the basis of this consensus have any less force when applied to the new alternative of issuer choice. Nor have the proponents offered persuasive, more general rebuttals to these arguments. Second, …

Introduction: Reconnecting Labor And Civil Rights Advocacy, Susan P. Sturm

Faculty Scholarship

Labor and civil rights movements in the United States share the aspiration of empowering workers to attain economic and social justice in the workplace. From their inception, both movements have articulated goals that link individual dignity and group empowerment, economic access and fair treatment, legal entitlements and political mobilization. They proceed on the premise that the workplace is a site where vital economic interests and possibilities for self-development come together. Put otherwise, both forms of advocacy strive for a regime that links these concerns to do justice to the workplace as a site for the expression of democratic citizenship.

Secured Credit And Software Financing, Ronald J. Mann

Faculty Scholarship

Software is a relatively new type of business asset, but already has taken on a central role in all sectors of the economy; when any asset brings such a crucial value to businesses, the desire for lending based on that asset cannot be far behind. Unfortunately, the existing academic literature contains no sustained examination of software-related lending.

Because the software industry is in its infancy, the existing empirical evidence is inadequate to support any understanding of it. Accordingly, I undertook a series of twenty-nine informal interviews with industry participants, including lenders in both the Massachusetts Route 128 corridor and Silicon …

The Legal And The Ethical In Legal Ethics: A Brief Rejoinder To Comments On The Practice Of Justice, William H. Simon

Faculty Scholarship

We have here, not the clash of opposites, but a series of family quarrels within what you might call the Party of Aspiration in legal ethics. My seven allies and I all favor lawyers' ethic of more complex judgment, and more responsibility to nonclients than the currently dominant one. The differences among us are not large from the broadest perspective, but they involve issues that are quite important to the elaboration of the sort of alternative ethic we would like to see.

I am enormously grateful for the care and attention the commentators have taken. They have frequently stated my …

Issue Advocacy: Redrawing The Elections/Politics Line, Richard Briffault

Faculty Scholarship

In the closing weeks of the 1996 election, Montana's airwaves were flooded with the following television advertisement:

Who is Bill Yellowtail? He preaches family values, but he took a swing at his wife. Yellowtail's explanation? He 'only slapped her,' but her nose was broken. He talks law and order, but is himself a convicted criminal. And though he talks about protecting children, Yellowtail failed to make his own child support payments, then voted against child support enforcement. Call Bill Yellowtail and tell him we don't approve of his wrongful behavior. Call (406) 443-3620.

The anti-Yellowtail ad, financed by an organization …

Why Start-Ups?, Joseph Bankman, Ronald J. Gilson

Faculty Scholarship

The prototypical start-up involves an employee leaving her job with an idea and selling a portion of that idea to a venture capitalist. In many respects, however, the idea should be worth more to the former employer. The former employer can be expected to have better information concerning the employee-entrepreneur and the technology, have opportunities to capture economies of scale and scope not available to a venture capital-backed start-up, and will receive more favorable tax treatment than the start-up should the innovation fail. In connection with an auction of the idea, the former employer should have both a more accurate …

Siegecraft And Surrender: The Law And Strategy Of Cities And Targets, Matthew C. Waxman

Faculty Scholarship

The razing of Jericho; the sack of Magdeburg; the siege of Leningrad; the fire-bombing of Dresden. Ever since civilizations began organizing permanent economic settlements, cities and towns have occupied a central role in warfare and in our images of war." On almost every page of historical writings," remarked Grotius, "you may find accounts of the destruction of whole cities, or the leveling of walls to the ground, the devastation of fields, and conflagrations." A driving force behind the evolution and development of cities has been defense and security. As a result, how-ever, cities have become a primary target or object …

An Economic Analysis Of The Guaranty Contract, Avery W. Katz

Faculty Scholarship

Guaranty arrangements, in which one person stands as surety for a second person's obligation to a third, are ubiquitous in commercial transactions and in commercial law. In recent years, however, scholarly attention to the topic has been scant; and no one has systematically analyzed this body of law and practice from an economic policy perspective. Accordingly, this Article attempts to outline the basic economic logic underlying the guaranty relationship, and applies the results to a variety of specific issues in government policy and private planning. It poses and answers three main questions: First, why would a creditor prefer to make …

Making Something Out Of Nothing: The Law Of Takings And Phillips V. Washington Legal Foundation, Michael A. Heller, James E. Krier

Faculty Scholarship

Phillips v. Washington Legal Foundation held that interest on principal amounts deposited into IOLTA accounts is the property of the various clients who handed over the money but expressed no view as to whether the Texas IOLTA program worked a taking, or, if it did, whether any compensation was due. The debates among the justices about the meaning of private property, argued in terms of contextual and conceptual severance, are unlikely to prove fruitful. We elaborate a better approach in terms of the underlying purposes of just compensation. We conclude that efficiency and justice are best served by uncoupling matters …

The Benefits And Risks Of Going It Alone, Michael B. Gerrard

Faculty Scholarship

Brownfield projects are essentially real estate developments with a twist, and the old real estate adage certainly applies: "Location, location, location." But if time is the fourth dimension, then time is also the fourth element in a successful brownfield project – preferably, spending as little of it as possible.

The timing of standard governmental cleanup processes is simply incompatible with many kinds of real estate projects. Forget about cleanups of National Priorities List (NPL) sites under the U.S. Environmental Protection Agency's National Contingency Plan (NCP); those take on average almost twenty years to complete. But even many state voluntary cleanup …

A Government For Our Time? Business Improvement Districts And Urban Governance, Richard Briffault

Faculty Scholarship

The emergence and rapid spread of business improvement districts ("BIDs") is one of the most important recent developments in American cities. BIDs have been controversial, with both supporters and proponents viewing the districts as part of a trend toward the privatization of the public sector. By examining the legal and political structures that determine BID formation, functions, finances and governance, this Article determines that BIDs are not private entities but are, instead, a distinctive hybrid of public and private elements. Moreover, although the particular fusion of public and private institutions, values and concerns embodied in the BID is unique, Professor …

Copyright Legislation For The "Digital Millennium", Jane C. Ginsburg

Faculty Scholarship

In October 1998, Congress passed two major copyright bills, the "Digital Millennium Copyright Act" [DMCA], and the "Sonny Bono Copyright Term Extension Act." Moreover, the Senate ratified U.S. accession to the WIPO Copyright and Performances and Phonograms Treaties. The DMCA implements the obligations set forth in articles 11 and 12 of the WIPO Copyright Treaty [WCT] (and articles 18 and 19 of the WIPO Performances and Phonograms Treaty [WPPTI) to protect technological measures against circumvention, and to protect "copyright management information" against removal or alteration that facilitates infringement. The DMCA also includes a chapter on the liability of online service …

Randolph W. Thrower Lecture: Your Tax Dollars At Work: Why U.S. Tax Law Needs To Be Changed, Michael J. Graetz

Faculty Scholarship

I focus here on prospects for tax reform. Things are quiet, politically, on the tax reform front. The Republicans in 1999 are talking about an across-theboard tax cut less extensive than Ronald Reagan's tax cut of 1981. On February 1, 1999, President Clinton, in his budget proposals, offered thirty-eight "targeted" tax reduction proposals and seventy-four tax increase proposals. It took the Treasury Department 197 closely typed, single-spaced pages to describe the proposals. We do not appear to be on the verge of major tax simplification.

Verification Institutions In Financing Transactions, Ronald J. Mann

Faculty Scholarship

One of the most common problems in commercial transactions is the resolution of information asymmetries, situations in which one party to the transaction knows more about a relevant fact than the other party. The natural response of the disadvantaged party is to attempt to investigate the transaction for itself – to investigate the matter with "due diligence" – but often such an investigation will be expensive and, however diligently undertaken, leave the truth of the matter uncertain. A law-centered approach to the problem would call for the development of warranties and covenants that the party with superior information would give …

Deterrence And Distribution In The Law Of Takings, Michael A. Heller, James E. Krier

Faculty Scholarship

Supreme Court decisions over the last three-quarters of a century have turned the words of the Takings Clause into a secret code that only a momentary majority of the Court is able to understand. The Justices faithfully moor their opinions to the particular terms of the Fifth Amendment, but only by stretching the text beyond recognition. A better approach is to consider the purposes of the Takings Clause, efficiency and justice, and go anew from there. Such a method reveals that in some cases there are good reasons to require payment by the government when it regulates property, but not …

In God's Image: The Religious Imperative Of Equality Under Law, George P. Fletcher

Faculty Scholarship

This Essay argues that the principle of equality under law is best grounded in a holistic view of human dignity. Rejecting modem attempts to justify equality by reducing humanity to a particular actual characteristic, it articulates a religious imperative to treat people equally by drawing on biblical as well as modern philosophical sources. The principle "all men are created equal," as celebrated in the Declaration of Independence and Gettysburg Address, draws on this holistic understanding of humanity. This admittedly romantic approach to equality generates a critique of contemporary Supreme Court doctrine, including the prevailing approaches to strict scrutiny, affirmative action, …

Foreword, Elizabeth S. Scott

Faculty Scholarship

In November 1998, the interdisciplinary Center for Children, families and the Law at the University of Virginia sponsored a conference on Youth Violence and Juvenile Justice Reform. The conference brought together an extraordinary group of experts from the academic disciplines of law, criminology and psychology. Before an audience made up of researchers, students, policymakers, and practitioners in the field of juvenile justice, these experts analyzed legal policy toward juvenile crime from a variety of disciplinary and methodological perspectives. The articles in this important symposium issue of the Virginia Journal of Social Policy & the Law are based on the papers …

Grand Jury Secrecy: Plugging The Leaks In An Empty Bucket, Daniel Richman

Faculty Scholarship

Although people can quarrel about the significance or reliability of Independent Counsel Kenneth Starr's investigative findings, no one can deny that his investigation produced new law. We now know that the attorney-client privilege survives the death of the client, that government lawyers may not rely on that privilege to shield communications from their "client" relating to criminal misconduct, and that there is no "protective function privilege" (at least not yet), While bringing some clarity to certain areas, the Independent Counsel's investigation also highlighted the confused state of the law relating to Rule 6(e)'s grand jury secrecy provisions.

Virtuous Lying: A Critique Of Quasi-Categorical Moralism, William H. Simon

Faculty Scholarship

Popular and professional moralists have a tendency to over-condemn lying. This Article is a critique of that tendency and the more general outlook it exemplifies, which I call Quasi-Categorical Moralism. I begin with an illustration from my own experience of morally appropriate lying that is condemned by the legal profession's ethics norms. I proceed to a critical examination of the arguments against lying in what is perhaps the best known contemporary work on professional ethics – Sissela Bok's Lying. I then explore the more sympathetic treatment of lying in a broad range of literary and philosophical works typically ignored …

Rethinking The Uniformity Norm In Commercial Law: Optimal Institutional Design For Regulating Incomplete Contracts, Robert E. Scott

Faculty Scholarship

This paper begins with the claim that the state's primary role in uniformly enforcing commercial contracts is to regulate incomplete contracts efficiently. This role requires the state to perform two interdependent but conceptually distinct functions. The first is an interpretive function – the task of correctly (and uniformly) interpreting the meaning of the contract terms chosen by parties to allocate contract risk. The second is a standardizing function – the task of creating broadly suitable default rules or assigning standard meanings to widely used contract terms. Correct interpretation argues for a "textualist" or plain meaning interpretation of the express terms …

In Defense Of The Incorporation Strategy, Jody S. Kraus, Steven D. Walt

Faculty Scholarship

Contract law must provide rules for interpreting the meaning of express terms and default rules for filling contractual gaps. Article 2 of the Uniform Commercial Code provides the same response to both demands: It incorporates the norms of commercial practice. This "incorporation strategy" has recently come under attack. Although the incorporation strategy for gap-filling seems to have survived criticism, the incorporation strategy for interpretation remains heavily criticized. Critics charge that the expected rate of interpretive error under an incorporationist interpretive regime is so excessive that almost any plain meaning regime would be preferable.

The attack on the incorporation strategy for …

Privatization And Corporate Governance: The Lessons From Securities Market Failure, John C. Coffee Jr.

Faculty Scholarship

Should privatization be "fast" or "slow"? Should policymakers adopt a "Damn the torpedoes, full speed ahead" approach that accepts the inevitability of some overreaching by controlling shareholders, but justifies this cost as necessary to realize and expedite the efficiency gains incident to privatization? Or should privatization proceed more cautiously because of the risks of market failure and political corruption that may result when control seekers are tempted to bribe and seduce the judicial and regulatory systems to achieve the private benefit of control? These tempting private benefits arise, of course, precisely to the extent that privatization preceded the creation of …

A Note On Presumptions With Sequential Litigation, Antonio E. Bernardo, Eric L. Talley

Faculty Scholarship

This note extends the Bernardo, Talley & Welch (1999) model of legal presumptions to study situations where litigation efforts are spent sequentially rather than simultaneously. The equilibria of the litigation stage are presented as functions of the underlying presumption. The equilibria and comparative statics are shown to be qualitatively similar to those of the simultaneous version. However, sequentiality allows the principal to pre commit to a litigation strategy, and thus possibly preempt any litigation effort whatsoever by the agent.

Lessons From Fiascos In Russian Corporate Governance, Merritt B. Fox, Michael Heller

Faculty Scholarship

Bad corporate governance is often invoked to explain poor enterprise performance, but the catch phrase is never precisely defined. Neither its consequences for the real economy, nor its causes in particular countries has been adequately explained. This paper uses Russian enterprise examples to address these open questions in corporate governance theory. We define corporate governance by looking to the economic functions of the firm rather than to any particular set of national corporate laws. Firms exhibit good corporate governance when their managers maximize residuals and, in the case of investor-owned firms, make pro rata distributions to shareholders.

Using this definition, …

The Limits Of Discipline: Ownership And Hard Budget Constraints In The Transition Economies, Roman Frydman, Cheryl W. Gray, Marek P. Hessel, Andrzej Rapaczynski

Faculty Scholarship

This paper, based on a large sample of mid-sized manufacturing firms in the Czech Republic, Hungary and Poland, argues that the imposition of financial discipline is not sufficient to remedy ownership and governance-related deficiencies of corporate performance. The study offers three main conclusions. First, we find that state enterprises represent a higher credit risk both because of their inferior economic performance and because of their lesser willingness or propensity to meet their payment obligations. Second, the brunt of the state firms' lower creditworthiness is borne by their state creditors, as state enterprises deflect the higher risk away from private creditors. …

Does Venture Capital Require An Active Stock Market?, Ronald J. Gilson, Bernard S. Black

Faculty Scholarship

The United States has both an active venture capital industry and well-developed stock markets. Japan and Germany have neither. We argue here that this is no accident – that venture capital can flourish especially – and perhaps only – if the venture capitalist can exit from a successful portfolio company through an initial public offering (IPO), which requires an active stock market. Understanding the link between the stock market and the venture capital market requires understanding the contractual arrangements between entrepreneurs and venture capital providers especially the importance of exit by venture capitalists and the opportunity, present only if IPO …

Lifetime Employment: Labor Peace And The Evolution Of Japanese Corporate Governance, Ronald J. Gilson, Mark J. Roe

Faculty Scholarship

In Japan, large firms' relationships with their employees differ from those prevailing in large American firms. Large Japanese firms guarantee many employees lifetime employment, and the firms' boards consist of insider employees. Neither relationship is common in the United States.

Japanese lifetime employment is said to encourage firms and employees to invest in human capital. We examine the reported benefits of the firm's promise of lifetime employment, but conclude that it is no more than peripheral to human capital investments. Rather, the "dark" side of Japanese labor practice – constricting the external labor market – likely yielded the human capital …

The Place Of Victims In The Theory Of Retribution, George P. Fletcher

Faculty Scholarship

Remarkably, the theory of criminal law has developed without paying much attention to the place of victims in the analysis of responsibility or in the rationale for punishment. You can read a first-rate book like Michael Moore's recent Placing Blame and not find a single reference to the relevance of victims in imposing liability and punishment. In the last several decades we have witnessed notable strides toward attending to the rights and interests of crime victims, but these concerns have yet to intrude upon the discussion of the central issues of wrongdoing, blame, and punishment.

Admittedly, victims and their sentiments …

Disenfranchisement As Punishment: Reflections On The Racial Uses Of Infamia, George P. Fletcher

Faculty Scholarship

The practice of disenfranchising felons, though decreasing, is still widespread. In this Article, Professor George Fletcher reflects on the use of disenfranchisement as punishment, the lack of a convincing theoretical justification for it, and its disproportionate impact on the African.American community. Fletcher presents a number of powerful arguments against the constitutionality of the practice, but he emphasizes that there is a deeper problem with disenfranchisement as punishment: It reinforces the branding of felons as an "untouchable" class and thus helps to prevent their effective reintegration into our society.

Application-Centered Internet Analysis, Tim Wu

Faculty Scholarship

There is a now-standard debate about law and the Internet. One side asserts that the Internet is so new and different that it calls for new legal approaches, even its own sovereign law. The other side argues that, although it is a new technology, the Internet nonetheless presents familiar legal problems. It is a battle of analogies: One side refers to Cyberspace as a place, while the other essentially equates the Internet and the telephone.

In my view, these two positions are both wrong and right: wrong in their characterization of the Internet as a whole, yet potentially right about …