Law Commons^™

Manipulating Court Doctrine For The Good Of The Common Law And Compusory Arbitration, Richard L. Barnes

richard l barnes

Manipulating Court Doctrine for the Good of the Common Law and Compulsory Arbitration By Richard L. Barnes Abstract: Preston v. Ferrer from the Supreme Court in 2008 shows that the Court is steadfastly committed to fostering arbitration. In the most sweeping terms so far the Court pushed the limits of interstate commerce and reached into the California state court system to override that state’s deference to administrative fact finding. In place of administrative and adjudicatory decision-making the Court again demanded arbitral dispute resolution. This Article covers, in a compact format of approximately 9800 words, the origins of the Federal Arbitration …

The Economics Of Deal Risk: Allocating Risk Through Mac Clauses In Business Combination Agreements, Robert T. Miller

Working Paper Series

In any large corporate acquisition, there is a delay between the time the parties enter into a merger agreement (the signing) and the time the merger is effected and the purchase price paid (the closing). During this period, the business of one of the parties may deteriorate. When this happens to a target company in a cash deal, or to either party in a stock-for-stock deal, the counterparty may no longer want to consummate the transaction. The primary contractual protection parties have in such situations is the merger agreement’s “material adverse change” (MAC) clause. Such clauses are heavily negotiated and …

Do Independent Boards Behave Differently? Examining The Voluntary Adoption Of Board Monitoring Mechanisms, Anita I. Anand

Anita I Anand

We ask whether firms with an independent board of directors are more likely than firms without an independent board to adopt recommended corporate governance practices designed to enhance the board's monitoring capabilities. Using hand-collected data from Canadian firms listed on both American and Canadian stock exchanges, we find that firms with both types of boards voluntarily adopt corporate governance practices and that independent boards are no more likely to adopt these practices than their non-independent counterparts. One exception to this statement is the formation of board committees. When boards are independent, the audit and compensation committees are far more likely …

Effects Of Strategic Tax Behaviors On Corporate Governance, Nicola Sartori

Nicola Sartori

This paper addresses agency tensions and conflicts that may emerge between managers (agents) and shareholders (principals) as a result of aggressive tax planning strategies adopted by publicly held corporations. The interactions between corporate governance and taxation are bilateral and biunique: in fact, on one side, the manner in which corporate governance rules are structured affects the way a corporation fulfills its tax obligations; on the other side, the way tax designs (from the government perspective) and related tax strategies (from the corporation perspective) are planned influences corporate governance dynamics. This article investigates such bilateral relationship limiting the analysis to the …

Identifying Fungible Goods Under The Ucc Through A Contextual Lens, Chunlin Leonhard, John M. Wunderlich

Chunlin Leonhard

Economic downturn causes warehouses to fill up with goods. Many of these goods are fungible products. Some have been purchased, some not. But how these fungible goods are identified in these warehouses – separated and segregated out – for particular customers is of vital importance in certain circumstances. This article seeks to clarify one of those elusive legal concepts under the Uniform Commercial Code (“UCC”) as it pertains to sales contracts: the identification of fungible goods. Under UCC Article 2, parties’ rights and obligations sometimes depend on whether the goods have been identified to the contract. A survey of the …

Promoting, Prescribing, And Pushing Pills: Understanding The Lessons Of Antipsychotic Drug Litigation, Douglas Mossman, Jill Louise Steinberg

Douglas Mossman

Ineffectiveness of prescription drugs, hidden drug hazards, and advertising violations have led to several drug recalls and numerous lawsuits against pharmaceutical companies in recent years. These suits have involved several varieties of medications, but psychoactive medications have figured especially prominently. A recent $1.4 billion settlement by Eli Lilly & Company related to improper promotion of its top-selling drug olanzapine included the largest individual corporate criminal fine in U.S. history. Improper promotion is far from the sole reason why olanzapine and other “second-generation” antipsychotic (SGA) drugs have become so successful. Rather, the widespread adoption of SGAs represents a collective judgment error …

Tainted Loans: Towards A Mass Torts Approach To Subprime Mortgage Litigation, Raymond H. Brescia

Raymond H Brescia

A poison has entered the financial bloodstream. The subprime mortgage crisis and the wider financial crisis it has spawned have caused the erosion of trillions of dollars in wealth, destroyed whole communities and the dislocation of millions of homeowners. Yet, unlike in other situations where toxic products have caused widespread harm, to date, we have not seen an avalanche of litigation, large jury awards, massive settlements compensating victims and financial ruin for the distributors of those products. Some of this is changing, however. Litigation arising out of the present financial crisis is hitting the courts, including suits alleging discrimination in …

Recent Private International Law Developments Before The Supreme Court Of Canada, Antonin I. Pribetic

Antonin I. Pribetic

A trilogy of interesting cases involving private international law recently wended their way to the Supreme Court of Canada: (1) King v. Drabinsky (an Ontario case addressing the applicability of the Charter in respect of the enforcement of a foreign judgment); (2) Teck Cominco Metals Ltd. v. Lloyd's Underwriters (a British Columbia case involving declaratory relief in the context of parallel proceedings and forum non conveniens); and (3) Yugraneft v. Rexx Management Corporation (an Alberta case which affirmed that the two-year limitation period under s.3 of Alberta's Limitations Act, governs when a party seeks the recognition and enforcement in Alberta …

Untapped Inventive Potential In U.S. Communities, Michael Meehan

Michael Meehan PhD

This paper combines the 2000 U.S. Census data and the National Bureau of Economic Research’s (NBER) Patent Citation Data File in order to analyze how certain community-level population and community factors correlate with overall patenting and relative rates of assigned and unassigned patenting. Among the interesting findings discussed are that, in addition to the fact that overall patenting increased with higher populations of employed people, higher populations of people with either terminal undergraduate or master’s degrees, and higher median income, the overall rates of patenting decreased, and did not merely remain the level, as the other sectors of a communities’ …

Rethinking Consideration In The Electronic Age, Robert A. Hillman, Maureen O'Rourke

Cornell Law Faculty Working Papers

Our fast-paced age of electronic agreements that ostensibly govern transactions as diverse as downloading software, ordering goods, and engaging in collaborative development projects raises questions regarding the suitability of contract law as the appropriate legal framework. While this question arises in many settings, we focus here on the free and open source software (FOSS) movement because of the maturity and success of its model and the ubiquity of its software. We explore in particular whether open source licenses are supported by consideration, and argue that they are, and that open source licenses are contracts. We further argue that a contractual …

Secret Liens And The Financial Crisis Of 2008, Michael N. Simkovic

Michael N Simkovic

This article explains the roots of financial crises in one of the oldest and most fundamental problems of commercial law: hidden leverage. Common law courts wrestled with this problem for centuries and developed a time-tested solution: the doctrine of secret liens. If the debtor becomes insolvent, the doctrine of secret liens punishes secret lien holders by subordinating their claims to those of other creditors. In other words, by overriding privately negotiated payment priorities, the doctrine of secret liens creates incentives for transparency. This article argues that legal changes over the last 80 years eroded the doctrine of secret liens, and …

Can More (Foreclosure) Be Less (Harmful)? A Closer Look At Exclusivity Agreements, Ittai Paldor

Ittai Paldor

Exclusive dealing agreements, agreements whereby a firm commits to purchasing exclusively from or selling exclusively to another firm, have both pro- and anti- competitive effects. Their legality is therefore determined on a case-by-case basis under the rule of reason. Within the framework of the rule of reason, the share of the market foreclosed by the agreements is a key (although in no way the sole) element of the analysis. The prevailing view is that, all else equal, the larger the market share foreclosed – the greater the competitive danger posed by exclusivity. In the following I suggest that a careful …

Certified Trouble Ahead For Activist Shareholders?: The Sec, Delaware Certification & Shareholder Bylaw Proposals After Ca, Inc. V. Afscme Employees Pension Plan, Matthew F. Sullivan

Matthew F Sullivan

The relationship between shareholders’ power to adopt bylaws and the board of director’s power to manage the business and affairs of the corporation has been an unsettled, and contentious, issue. The Supreme Court of Delaware, in CA, Inc. v. AFSCME Employees Pension Plan, directly addressed this issue and established a framework for examining proposed shareholder bylaws. The case arose through the first use of the newly amended certification procedure that permits the SEC to certify questions to the Supreme Court of Delaware for resolution. AFSCME submitted a bylaw for inclusion in CA’s 2008 proxy materials that would require CA to …

Protecting Against Plunder: The United States And The International Efforts Against Looting Of Antiquities, Asif Efrat

Cornell Law Faculty Working Papers

In 1970 UNESCO adopted a convention intended to stem the flow of looted antiquities from developing countries to collections in art-importing countries. The majority of art-importing countries, including Britain, Germany, and Japan, refused to join the Convention. Contrary to other art-importing countries, and reversing its own traditionally-liberal policy, the United States accepted the international regulation of antiquities and joined the UNESCO Convention. The article seeks to explain why the United States chose to establish controls on antiquities, to the benefit of foreign countries facing archaeological plunder and to the detriment of the US art market. I argue that the concern …

Hold-Ups And Highway Robberies: A Proposal To Return To The Pre-Bell Atlantic 12(B)(6) Pleading Standard While Subsidizing Defendants' Discovery Costs (Including Discovery-Related Attorney Fees) In Meritless Cases, Anthony C. Biagioli

Anthony C Biagioli

Antitrust pleading practice is plagued by a normative dilemma. Under a lenient pleading standard, plaintiffs may proceed to discovery on a showing of parallel conduct alone, leading undeserving plaintiffs to extort blameless defendants into settling meritless lawsuits through the threat of imposing on defendants prohibitive discovery costs. Under a more stringent pleading standard, plaintiffs might be required to plead more than parallel conduct, leading deserving plaintiffs to see their complaints dismissed at the pleading stage due to a lack of sufficient factual support for their claims. The latter is a function of blameworthy defendants’ asymmetric information advantage through which defendants …

The New Poor At Our Gates: Global Justice Implications For International Trade And Tax Law, Ilan Benshalom

Ilan Benshalom

The Article explains why international trade and tax arrangements should advance global wealth redistribution in a world of enhanced economic integration. Despite the indisputable importance of global poverty and inequality, contemporary political philosophy stagnates over the controversy of whether distributive justice obligations should extend beyond the political framework of the nation state. This stagnation results from the difficulty of reconciling liberal impartiality with notions of state sovereignty and accountability. The Article offers an alternative approach that bypasses the controversy of the current debate. It argues that international trade results in relational distributive duties when domestic parties engage in transactions with …

Book Review: Margaret L. Moses, The Principles And Practice Of International Commercial Arbitration (New York: Cambridge Univ. Press 2008), Paul G. Rozelle

Paul G Rozelle

International commercial arbitration is a field of contemporary significance. Enterprises the world over are conducting business on a dramatically more international scale, increasing the need to address disputes in an efficient, predictable, and fair manner. The Principles and Practice of International Commercial Arbitration makes a unique and important contribution to the literature. It is a scholarly treatment of the subject, yet it is accessible to those scholars and practitioners who are relatively new to this rapidly expanding field and in need of current and practical information. The recent increase in international arbitrations combined with the fast-changing norms and divergent cultural …

The Market For Securities And Its Regulation Through Gatekeepers, Carsten J. Gerner-Beuerle

Carsten J Gerner-Beuerle

The financial scandals of the last decade have called into question the effectiveness of the system of securities regulation in many countries. Articles that have examined the origins of the regulatory crisis have concluded that the classical tools of corporate governance for the supervision of management have lost their force in light of new incentive structures in the financial markets. They see as the solution to the regulatory lacunae the utilisation of financial intermediaries and other market participants as gatekeepers, i.e. as agents that ensure compliance of the primary market actor (the issuer) with applicable rules by reviewing its disclosures …

Poised On The Precipice: A Critical Examination Of Privacy Litigation, Andrew B. Serwin

Andrew B. Serwin

A collection of factors has caused the United States to be poised on the precipice of a new wave of litigation—litigation arising from the improper use or collection of information. Public concern over privacy is ever increasing while, and some would say because, information has become critical to our everyday existence. In what is now a self-reinforcing cycle, increased public concern has caused an exponential increase in regulations, and the new regulations have caused increased attention and public concern because many of the new laws require public disclosure of security breaches, which increases societal concerns over privacy. Security breach laws, …

Detrimental Legal Implications Of Off-Balance Sheet Special Purpose Vehicles In Light Of Implicit Guarantees, Tyson E. Taylor

Tyson E Taylor

In the face of financial institutions’ spiraling asset prices, large write-offs, and excessive risk exposure firms are being forced to guarantee their SPVs and VIEs. In light of current accounting standards, financial firms’ efforts to preserve their institutional reputation by maintaining implicit guarantees on off-balance sheet SPVs have rendered the SPV moot as a viable vehicle of off-balance sheet asset transfers. The fundamental problem with these implicit guarantees is that they appear to violate the “true sale” element of the ABS process under FAS 140 and cause the sponsor to be designated a “primary beneficiary” under FIN 46(R). Under FAS …

Jurisprudence: A Beginner’S Simple And Practical Guide To Advanced And Complex Legal Theory, Allen R. Kamp

Allen R. Kamp

My article gives an introduction to American jurisprudence, the part of legal studies that attempts to construct a theory of law: what it is, how it functions, and what it should be. Jurisprudence deals with the history, philosophy, and sociology of the law. Legal authorities—cases and statutes—are written and interpreted, consciously or unconsciously, with the use of jurisprudential concepts. Jurisprudence is a theoretical subject, but it can provide practical insights on how to read and understand these authorities.

Electronic Commerce And Legal Protection For Consumers In Spain, Juan-Antonio Mondejar-Jimenez, Mª Angeles Zurilla-Cariñana, Jose Mondejar-Jimenez

Juan-Antonio Mondejar-Jimenez

Electronic commerce is becoming increasingly common at international level. It is defined as “doing business electronically across the extended enterprise”, which includes all forms of business, administrative transactions and information exchanges in which any type of information or communication technology is used. It has also been defined as “the form of commerce that by using the services and links provided in electronic documents in the Internet, allows the customer to query, select and purchase a distributor's offer using a device that is connected to the Internet, in real time and at any time or place”. In Spain, the Information Society …

Will Benefits Of Communicating Face-To-Face Drive Widespread Adoption Of Telepresence For Use In Commercial Negotiation?, Brian D. Mckenzie

Brian D. McKenzie

People are famously egocentric, short-sighted, risk-averse, competitive, and insecure. All of these human characteristics are in play during a face-to-face negotiation, where a negotiator’s ability to control his own characteristics while observing those of his opponent can have a significant impact on the outcome of the negotiation. While highly effective, face-to-face negotiation suffers from the expense of drawing geographically disparate parties into close physical proximity. As a result, alternatives for business have been developed, such as telephone, and email, but this paper will demonstrate how each falls short of the “personal experience” of face-to-face negotiation, and how such a deficiency …

Faceting The Future: The Need For And Proposal Of The Adoption Of A Kimberley Process-Styled Legitimacy Certification System For The Global Gemstone Market, Alexandra R. Harrington

Alexandra R. Harrington

Abstract: Faceting the Future: The Need for and Proposal of the Adoption of a Kimberley Process-Styled Legitimacy Certification System for the Global Gemstone Market, Alexandra R. Harrington, Esq.

Diamonds, so the song goes, are a girl’s best friend. According to various advertisement campaigns, diamonds are also a unique symbol of emotion because they are “forever.” It is certainly difficult to challenge these assertions as to the beauty of a diamond. However, these societal perceptions often overshadow the importance and history of other gemstones. The Bible refers several times to the value of rubies. Throughout history, gemstones of all varieties have …

Credit Rating Agencies And The 'Worldwide Credit Crisis': The Limits Of Reputation, The Insufficiency Of Reform, And A Proposal For Improvement, John P. Hunt

John P Hunt

The “worldwide credit crisis” has thrust credit rating agencies into the spotlight, with attention focused on their ratings of novel structured finance products. Policymakers have undertaken a number of initiatives intended to address perceived problems with such ratings – enhancing competition, promoting transparency, reducing conflicts of interest, and reducing ratings-dependent regulation. These approaches are all broadly consistent with the dominant academic theory of rating agencies, the “reputational capital” model, which is taken to imply that under the right circumstances a well-functioning reputation mechanism will deter low-quality ratings. The policy initiatives currently under consideration can be seen as efforts to fix …

Is Three A Crowd?: Neutrality, Partiality And Partisanship In The Context Of Tripartite Arbitrations, Sean-Patrick Wilson, David J. Mclean

Sean-Patrick Wilson

Despite the widespread usage of party-appointed tripartite arbitration, for some time there has been confusion and concern among academics, courts, parties and arbitrators about the proper role of neutrality in tripartite structure. For example, is it legally permissible for party-appointed arbitrators to be partial? What difference, if any, exists between terms such as “partial,” “partisan” and “non-neutral”? How do we reconcile the Federal Arbitration Act’s ban on “evident partiality” with the concept of having non-neutral arbitrators? Unfortunately, neither Congress nor the Supreme Court has delineated fully the concept of neutrality of party-appointed arbitrators, and the case law among the circuit …

Hedge Funds’ Empty Voting In Mergers And Acquisitions: A Fiduciary Duties Perspective, Andrea Zanoni

Andrea Zanoni

Hedge funds have become lately active also in the market for corporate control. Their active involvement has been propelled by a tactic allowing them to decouple voting rights from economic ownership and labelled in the literature as “encumbered shares” or “empty voting”.

The aim of this Article is twofold. On the one hand, I address the impact of hedge funds’ activism on the financial markets and on the portfolio companies. In general terms, hedge funds’ activism should be seen as a neutral element. After a cost-benefit analysis, I show that the costs implied by hedge funds’ activism are at least …

The Shadow Bankruptcy System, Jonathan C. Lipson

Jonathan C. Lipson

This article exposes and explores a puzzle at the heart of the current economic crisis: The surprising under-use, and increasing misuse, of Chapter 11 of the United States Bankruptcy Code, the principal legal system for salvaging troubled businesses.

The answer offered here: The rise of the shadow bankruptcy system. “Shadow bankruptcy” describes the severely under-regulated non-bank financial institutions (e.g., hedge funds, private equity funds and investment banks) that increasingly dominate and manipulate Chapter 11 reorganizations.

Like the “shadow banking” system for which it is named, shadow bankruptcy thrives on and promotes opacity and undisclosed, possibly perverse, incentives. Shadow bankruptcy players …

L3cs: The Next Big Wave In Socially Responsible Investing Or Just Simply Too Good To Be True?, David J. Schwister

David J Schwister

This article pertains to the growing popularity of Low-Profit, Limited Liability Companies (L3Cs). It includes a discussion of the potential pitfalls involved in the adoption of this organizational structure. Part I of this Article introduces a timely example that illustrates how L3Cs are gaining steam across the U.S. Part II of this Article provides a history of the L3C movement. In addition, Part II offers a look at the current legal landscape of L3Cs on a federal and state level. Part III offers a glimpse into possible problems that L3Cs may run into including registration as well as disclosure requirements …

Innovative Destruction: Structured Finance & Credit Market Reform In The Bubble Era, Aaron J. Unterman

Aaron J. Unterman

The combination of unregulated financial innovation and human greed has, and will continue to have, dire effects on the international economy. The financial crisis which began in the American sub-prime housing market, and spread across the globe, has devastated the structured finance industry and cast doubts on the new era of credit risk transfer, which had come to represent the achievements of financial innovation. This paper explores the role structured finance played in the credit crisis, dissecting the complex instruments which drove the industry and allowed the American sub-prime housing market to infect the international economy. This paper argues that …