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Articles 1 - 14 of 14
Full-Text Articles in Law
Bankruptcy Or Bailouts?, Kenneth M. Ayotte, David A. Skeel Jr.
Bankruptcy Or Bailouts?, Kenneth M. Ayotte, David A. Skeel Jr.
All Faculty Scholarship
The usual reaction if one mentions bankruptcy as a mechanism for addressing a financial institution’s default is incredulity. Those who favor the rescue of troubled financial institutions, and even those who prefer that their assets be promptly sold to a healthier institution, treat bankruptcy as anathema. Everyone seems to agree that nothing good can come from bankruptcy. Indeed, the Chapter 11 filing by Lehman Brothers has been singled out by many the primary cause of the severe economic and financial contraction that followed, and proof that bankruptcy is disorderly and ineffective. As a result, ad-hoc rescue lending to avoid bankruptcy …
The Case Against Exempting Smaller Reporting Companies From Sarbanes-Oxley Section 404: Why Market-Based Solutions Are Likely To Harm Ordinary Investors, John Orcutt
Law Faculty Scholarship
Section 404 is arguably the most controversial provision of Sarbanes-Oxley (“SOX”). The controversy focuses on whether Section 404’s substantial compliance costs exceed the statute’s benefits, with no consensus on Section 404’s cost-effectiveness. If Section 404 turns out to be cost-ineffective, the companies that are most threatened are smaller companies, as cost-ineffective regulations tend to disproportionately harm smaller companies. This Article considers whether Congress and the SEC should exempt smaller reporting companies from Section 404 compliance, as that would allow for a market-based resolution to the uncertain value of Section 404 for smaller reporting companies. Smaller reporting companies would be relieved …
Cause For Concern: Causation And Federal Securities Fraud, Jill E. Fisch
Cause For Concern: Causation And Federal Securities Fraud, Jill E. Fisch
All Faculty Scholarship
The Supreme Court’s decision in Dura Pharmaceuticals dramatically changed federal securities fraud litigation. The Dura decision itself said little, but counseled lower courts to fashion new requirements of causation and harm modeled upon common law tort principles. These instructions have led lower courts to craft a series of confusing and inconsistent decisions that incorporate little of the reasoning upon which the common law principles are based. This Article accepts the Dura challenge and examines both common law causation principles and their applicability to federal securities fraud. In so doing, the Article identifies the failure of the federal courts properly to …
Reinventing The Sec By Staring Into Its Past, James D. Cox
Reinventing The Sec By Staring Into Its Past, James D. Cox
Faculty Scholarship
No abstract provided.
Hedge Fund Activism In The Enforcement Of Bondholder Rights, Marcel Kahan, Edward B. Rock
Hedge Fund Activism In The Enforcement Of Bondholder Rights, Marcel Kahan, Edward B. Rock
All Faculty Scholarship
Activist hedge funds have transformed how bondholders respond to violations of their contractual rights. Insurance companies and mutual funds, the traditional investors in bonds, often slept on their rights and turned active only little and late. Hedge funds, by contrast, seek out opportunities for activism in order to make profits. In the wake of their activism, hedge funds have not only benefitted themselves, but their fellow bondholders as well. Alas, the remedy scheme for violations of bondholders rights – in particular, the centrality of the acceleration remedy – introduces its own set of imperfections. When treasury interest rates have increased …
Confronting The Circularity Problem In Private Securities Litigation, Jill E. Fisch
Confronting The Circularity Problem In Private Securities Litigation, Jill E. Fisch
All Faculty Scholarship
Many critics argue that private securities litigation fails effectively either to deter corporate misconduct or to compensate defrauded investors. In particular, commentators reason that damages reflect socially inefficient transfer payments—the so-called circularity problem. Fox and Mitchell address the circularity problem by identifying new reasons why private litigation is an effective deterrent, focusing on the role of disclosure in improving corporate governance. The corporate governance rationale for securities regulation is more powerful than the authors recognize. By collecting and using corporate information in their trading decisions, informed investors play a critical role in enhancing market efficiency. This efficiency, in turn, allows …
Strengthening Special Committees, Elizabeth Pollman
Strengthening Special Committees, Elizabeth Pollman
All Faculty Scholarship
Special committees make some of the most important decisions facing corporations. High-quality decision-making on these critical issues has become even more urgent in this time of economic volatility and outrage about corporate irresponsibility. Indeed, special committees may be increasingly in the spotlight as the current economic crisis will likely lead to a flood of shareholder litigation and, when credit markets thaw, a wave of strategic transactions. Sometimes a board will create a special committee of just one person to handle a crucial matter. This Article proposes that courts or legislatures firmly establish a preference or requirement that special committees consist …
How To Prevent Hard Cases From Making Bad Law: Bear Stearns, Delaware And The Strategic Use Of Comity, Marcel Kahan, Edward B. Rock
How To Prevent Hard Cases From Making Bad Law: Bear Stearns, Delaware And The Strategic Use Of Comity, Marcel Kahan, Edward B. Rock
All Faculty Scholarship
The Bear Stearns/JP Morgan Chase merger placed Delaware between a rock and a hard place. On the one hand, the deal’s unprecedented deal protection measures – especially the 39.5% share exchange agreement – were probably invalid under current Delaware doctrine because they rendered the Bear Stearns shareholders’ approval rights entirely illusory. On the other hand, if a Delaware court were to enjoin a deal pushed by the Federal Reserve and the Treasury and arguably necessary to prevent a collapse of the international financial system, it would invite just the sort of federal intervention that would undermine Delaware’s role as the …
Taxation And The Competitiveness Of Sovereign Wealth Funds: Do Taxes Encourage Sovereign Wealth Funds To Invest In The United States?, Michael S. Knoll
Taxation And The Competitiveness Of Sovereign Wealth Funds: Do Taxes Encourage Sovereign Wealth Funds To Invest In The United States?, Michael S. Knoll
All Faculty Scholarship
Sovereign wealth funds (SWFs) control vast amounts of capital and have made and are continuing to make numerous large, high-profile investments in the United States, especially in the financial services industry. Those investments in particular and SWFs in general are highly controversial. There is much discussion of the advantages and disadvantages to the United States of investments by SWFs and there is an intense and ongoing debate over what should be the United States’ policy towards investments by SWFs. In the course of that debate, some critics have called upon the US government to abandon its long-held public position of …
Top Cop Or Regulatory Flop? The Sec At 75, Jill E. Fisch
Top Cop Or Regulatory Flop? The Sec At 75, Jill E. Fisch
All Faculty Scholarship
In their forthcoming article, Redesigning the SEC: Does the Treasury Have a Better Idea?, Professors John C. Coffee, Jr., and Hillary Sale offer compelling reasons to rethink the SEC’s role. This article extends that analysis, evaluating the SEC’s responsibility for the current financial crisis and its potential future role in regulation of the capital markets. In particular, the article identifies critical failures in the SEC’s performance in its core competencies of enforcement, financial transparency, and investor protection. The article argues that these failures are not the result, as suggested by the Treasury Department Blueprint, of a balkanized regulatory system. Rather, …
Bankruptcy Boundary Games, David A. Skeel Jr.
Bankruptcy Boundary Games, David A. Skeel Jr.
All Faculty Scholarship
For the past several decades, Congress has steadily expanded the exclusion of securities market operations from core bankruptcy protections. This Article focuses on three of the most important of these issues: the exclusion of brokerage firms from Chapter 11; the protection of settlement payments from avoidance as preferences or fraudulent conveyances; and the exemption of derivatives from the automatic stay and other basic bankruptcy provisions. In Parts I, II and III of the Article, I consider each of the issues in turn, showing that each has had serious unintended consequences. Both Drexel Burnham and Lehman Brothers evaded the brokerage exclusion, …
Neoclassicism And The Separation Of Ownership And Control, Herbert J. Hovenkamp
Neoclassicism And The Separation Of Ownership And Control, Herbert J. Hovenkamp
All Faculty Scholarship
"Separation of ownership and control" is a phrase whose history will forever be associated with Adolf A. Berle and Gardiner C. Means' The Modern Corporation and Private Property (1932), as well as with Institutionalist economics, Legal Realism, and the New Deal. Within that milieu the large publicly held business corporation became identified with excessive managerial power at the expense of stockholders, social irresponsibility, and internal inefficiency. Neoclassical economists both then and ever since have generally been critical, both of the historical facts that Berle and Means purported to describe and of the conclusions that they drew. In fact, however, within …
Samuel Zell, The Chicago Tribune, And The Emergence Of The S Esop: Understanding The Tax Advantages And Disadvantages Of S Esops, Michael S. Knoll
Samuel Zell, The Chicago Tribune, And The Emergence Of The S Esop: Understanding The Tax Advantages And Disadvantages Of S Esops, Michael S. Knoll
All Faculty Scholarship
Samuel Zell’s acquisition of the Chicago Tribune Company (the Tribune) in December 2007 using a little-known type of Employee Stock Ownership Plan (ESOP) made headlines. In a complicated transaction, which took nearly a year to complete, the Tribune converted from a subchapter C corporation to a subchapter S corporation, established an ESOP that purchased 100 percent of the company’s equity, and sold Zell a call option giving him the right to purchase 40 percent of the company’s equity. Press reports claim that Zell’s novel structure enabled Zell to outbid other suitors. And financial commentators predict that many acquirers will employ …
Competing Narratives In Corporate Bankruptcy: Debtor In Control Vs. No Time To Spare, David A. Skeel Jr.
Competing Narratives In Corporate Bankruptcy: Debtor In Control Vs. No Time To Spare, David A. Skeel Jr.
All Faculty Scholarship
When a company like Chrysler or United Airlines files for bankruptcy, it offers narrative explaining the way out of its predicament. In support of its claim that the business is worth saving, the company may argue that it simply needs time to renegotiate its obligations with its creditors. Alternatively, it may say that asset values are deteriorating rapidly and it is imperative that the bankruptcy court immediately approve a sale of the company, or some other rapid disposition. These two possibilities correspond to the principal resolution narratives in current Chapter 11 bankruptcy practice, which I refer to as Debtor in …