Law Commons^™

Oversight Liability For Risk Management Failures At Financial Firms, Robert T. Miller

Robert T Miller

Many people believe that excessive risk-taking at large financial firms was an important cause of the financial crisis in 2007-2008 and thus that preventing another crisis requires improving risk-management systems at such institutions. One way to do this would be to use board oversight liability to hold directors personally liable for failing properly to monitor the risks that their firms are running. The purpose of this Article is to determine what role director oversight liability can efficiently play in improving risk-management practices at large financial firms.

A key contention of the Article is that previous treatments of this problem have …

Waiting For St. Vladimir, Robert T. Miller

Robert T Miller

Alasdair MacIntyre believes that the Aristotelian, virtue-theoretic morality he supports is incompatible with the economic arrangements of capitalism. In this brief article, I show that MacIntyre's main arguments for this thesis are based on discredited theories from Marx, not Aristotle, and that the arguments MacIntyre that gives that really are based on Aristotelian, virtue-theoretic notions all fail.

Nol Pill Reloaded: Selectica, Inc. V. Versata, Inc., Robert T. Miller

Robert T Miller

This short article discusses the Chancery Court opinion in Selectica, Inc. v. Versata Enterprises, Inc., in which Vice Chancellor Noble upheld the implementation and re-loading of an NOL poison pill. I argue that, although the case is for the most part relevant only to the limited sphere of NOL pills, the court's upholding of the reloading of the pill is likely of broader significance in Delaware takeover law.

Lyondell Chemical Co. V. Ryan: Good Faith Comes To Revlon-Land, Robert T. Miller

Robert T Miller

No abstract provided.

The Board's Duty To Monitor Risk After Citigroup, Robert T. Miller

Robert T Miller

When Citigroup suffered billions of dollars in losses on subprime securities, some of its shareholders sued the bank’s directors alleging that the losses resulted from breaches by the directors of their duty to properly monitor the risks that the bank was running by holding and dealing in such securities. After the Delaware Court of Chancery dismissed the complaint on the pleadings, many academic commentators argued that the court should have taken the opportunity to articulate more stringent legal standards governing director oversight. This contribution to a symposium at the University of Pennsylvania Law School argues that any significant expansion of …

The Law Of Vertical Integration And The Business Firm, 1880-1960, Herbert Hovenkamp

Herbert Hovenkamp

ABSTRACT

Vertical integration occurs when a firm does something for itself that it could otherwise procure on the market. For example, a manufacturer that opens its own stores is said to be vertically integrated into distribution. Both classical political economy and marginalist economics saw vertical integration and vertical contractual arrangements as much less threatening to competition than cartels or other horizontal arrangements. Nevertheless, vertical integration produced by far the greater amount of legislation at both federal and state levels and motivated many more political action groups. Two things explain this phenomenon. First, while economists prior to the 1930s rarely saw …

Copyright Harm And The First Amendment, Christina Bohannan

Christina Bohannan

Abstract Copyright law is a glaring and unjustified exception to the general rule that the government may not prohibit speech without a showing that the speech causes harm. While the First Amendment sometimes protects even harmful speech, it virtually never allows the prohibition of harmless speech. Yet, while other speech-burdening laws, such as defamation and right of publicity laws, require demonstrable evidence that the defendant’s speech causes actual harm, copyright law does not make harm a requirement of infringement. Although copyright law considers harm to the market for the copyrighted work as a factor in fair use analysis, harm is …

The Coase Theorem And Arthur Cecil Pigou, Herbert Hovenkamp

Herbert Hovenkamp

In “The Problem of Social Cost” Ronald Coase was highly critical of the work of Cambridge University Economics Professor Arthur Cecil Pigou, presenting him as a radical government interventionist. In later work Coase’s critique of Pigou became even more strident. In fact, however, Pigou’s Economics of Welfare created the basic model and many of the tools that Coase’s later work employed. Much of what we today characterize as the “Coase Theorem” was either stated or anticipated in Pigou’s work. Further, Coase’s extreme faith in private bargaining led him to fail to see problems that Pigou saw quite clearly and that …

Complex Bundled Discounts And Antitrust Policy, Herbert Hovenkamp

Herbert Hovenkamp

COMPLEX BUNDLED DISCOUNTS AND ANTITRUST POLICY

ABSTRACT

A bundled discount occurs when a seller conditions a discount or rebate on the buyer’s purchaser or two or more different products. Firms that produce fewer than all the good in the bundle find it difficult to compete because they must amortize the discount across a smaller range of goods. For example, if the dominant firm offers a 10% discount for purchase of both good A and good B, but the rival makes only good B, it will have to offer a discount that is large enough to match the dominant firm’s B …

United States Competition Policy In Crisis, 1890-1955, Herbert Hovenkamp

Herbert Hovenkamp

UNITED STATES COMPETITION POLICY IN CRISIS,1890-1955 Herbert Hovenkamp ABSTRACT The development of marginalist, or neoclassical, economics led to a fifty-year long crisis in competition theory. Given an industrial structure with sufficient fixed costs, competition always became "ruinous," forcing firms to cut prices to marginal cost without sufficient revenue remaining to pay off investment. Early neoclassicists such as Alfred Marshall were not able to solve this problem, and as a result many economists were hostile toward the antitrust laws in the early decades of the twentieth century. The ruinous competition debate came to an abrupt end in the early 1930's, when …

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

Robert T Miller

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 …

Canceling The Deal: Two Models Of Material Adverse Change Clauses In Business Combination Agreements, Robert T. Miller

Robert T Miller

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 deal, the counterparty may no longer want to consummate the transaction. Merger agreements typically protect counterparties against this risk through “material adverse change” (MAC) clauses, which permit the counterparty to cancel the deal if the …

Morals In A Market Bubble, Robert T. Miller

Robert T Miller

In this short piece, I respond to the idea that the financial crisis of 2007-2008 was caused by a frenzy of immoral practices in the real estate and financial markets. I argue that such a theory is fundamentally misguided. In reality, the Federal Reserve’s unduly accommodating monetary policy in 2002-2006 and certain structural features of the relevant financial markets (especially subprime loans) combined to produce the bubble in the residential real estate market in the United States. This happened not because of moral wrongdoing by market participants but as a result of individuals rationally pursuing their economic self-interest (a) in …

Hexion V. Huntsman: Elaborating The Delaware Mac Standard, Robert T. Miller

Robert T Miller

No abstract provided.

Copyright Harm And The First Amendment, Christina Bohannan

Christina Bohannan

Abstract Copyright law is a glaring and unjustified exception to the general rule that the government may not prohibit speech without a showing that the speech causes harm. While the First Amendment sometimes protects even harmful speech, it virtually never allows the prohibition of harmless speech. Yet, while other speech-burdening laws, such as defamation and right of publicity laws, require demonstrable evidence that the defendant’s speech causes actual harm, copyright law does not make harm a requirement of infringement. Although copyright law considers harm to the market for the copyrighted work as a factor in fair use analysis, harm is …

Governance And Accountability: The Regional Development Banks, Enrique R. Carrasco, Heejin Lee, Wesley Carrington

Enrique R Carrasco

Good governance has become a mantra of the movement seeking to make multilateral financial institutions more accountable to their stakeholders while improving institutional governance. Although much of the visible criticism has been directed at the World Bank and International Monetary Fund, the “regional” development banks share many of the same governance and accountability problems. Important issues relating to governance and accountability include the banks’ heavily unequal voting power based on capital contributions, limited transparency and disclosure requirements, questionable efficacy of monitoring programs on the impact of the banks’ projects, and limited scope of the banks’ private complaint mechanisms. This Article …

The Viability Of Antitrust Price Squeeze Claims, Herbert Hovenkamp

Herbert Hovenkamp

ABSTRACT A price squeeze occurs when a vertically integrated firm “squeezes’ a rival’s margins between a high wholesale price for an essential input sold to the rival, and a low output price to consumers for whom the two firms compete. Price squeezes have been a recognized but controversial antitrust violation for two-thirds of a century. We examine the law and economics of the price squeeze, beginning with Judge Hand’s famous discussion in the Alcoa case in 1945. While Alcoa has been widely portrayed as creating a “fairness” or “fair profit” test for unlawful price squeezes, Judge Hand actually adopted a …

The End Of The Road For Dr. Miles: Leegin Creative Leather Products, Inc. V. Psks, Inc., Robert T. Miller

Robert T Miller

No abstract provided.

Business Strategists And Election Commissioners: How The Meaning Of Loyalty Varies With The Board’S Distinct Fiduciary Roles, Ethan G. Stone

Ethan G. Stone

For twenty years, Delaware courts have been developing special standards to review board decisions that interfere with hostile bids for control or the exercise of the shareholder franchise. These “Unocal” and “Blasius” doctrines seem to fit uneasily with theories of the board’s role in corporate governance, constraining board discretion too little for shareholder primacy theories and too much for board autonomy theories. Nor have the Delaware courts succeeded in fitting Unocal and Blasius comfortably with their treatment of board decisions in other contexts. In this article, I propose that these special doctrines reflect the difference between two separate functions of …

Servants Of One Sovereign Master, 134 First Things 51 (June/July 2003) (Reviewing Jeremy Waldron's God, Locke And Equality (2002)), Robert T. Miller

Robert T Miller

No abstract provided.

An Equal Division Of Property, 110 First Things 49 (February 2001) (Reviewing Ronald Dworkin, Sovereign Virtue (2000)), Robert T. Miller

Robert T Miller

No abstract provided.

Good Intentions, 112 First Things 41 (April 2001) (Reviewing John E. Coons And Patrick M. Brennan, By Nature Equal (1999)), Robert T. Miller

Robert T Miller

No abstract provided.

Posner's Laws Of Pragmatism, 118 First Things 54 (December 2001) (Reviewing Richard Posner, Frontiers Of Legal Theory (2001)), Robert T. Miller

Robert T Miller

No abstract provided.

Must We Teach Abstinence? Pensions' Relationship Investments And The Lessons Of Fiduciary Duty, Ethan G. Stone

Ethan G. Stone

Commentators have speculated that pension funds do not act as activist investors because of the constraints of fiduciary duties under ERISA. This note examines the case law under ERISA and the common law of trusts on which it is based and concludes that there are no legal constraints. The institutional incentives of the people who manage pension funds seem a better explanation for their inactivity (assuming that activism is, in fact, cost-justified).