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Mom Approval In A World Of Active Shareholders, Edward Rock 2018 NYU School of Law

Mom Approval In A World Of Active Shareholders, Edward Rock

New York University Law and Economics Working Papers

Majority of Minority (MOM) approval is a common mechanism used in many jurisdictions to control conflicts of interest in related party transactions. Recently, in M & F Worldwide, the Delaware Supreme Court held that MOM approval in a controlling shareholder freezeout shifted the standard of review from Entire Fairness to Business Judgement Rule. In this article, I investigate how MOM approval functions in the presence of active shareholders (both hedge funds and actively managed mutual funds).

After reviewing the potential benefits and problems with MOM approval, I review the use of MOM provisions in controlling shareholder freezeouts in the U.S. between 2010 and 2017. I combine this with three case studies involving MOM approval: the Dell MBO; the Oracle/NetSuite merger; and the unsuccessful effort by the Dolan family to take Cablevision private in 2007. I then briefly consider a quite different sort of MOM approval: the EU Takeover Directive’s requirement that conditions mandatory freezeouts on achieving a very high level of ownership (90-95%), typically through a tender offer.

The principal lessons of this investigation are ambiguous. First, I do not find significant evidence that the use of MOM conditions in ...


The Right Tax At The Right Time, Edward D. Kleinbard 2018 University of Southern California

The Right Tax At The Right Time, Edward D. Kleinbard

University of Southern California Legal Studies Working Paper Series

The companion paper to this (Capital Taxation in an Age of Inequality) argues that a moderate flat-rate (proportional) income tax on capital imposed and collected annually has attractive theoretical and political economy properties that can be harnessed in actual tax instrument design. This paper continues the analysis by specifying in detail how such a tax might be designed.

The idea of the Dual Business Enterprise Income Tax, or Dual BEIT, is to offer business enterprises a neutral profits tax environment in which to operate, in which normal returns to capital are exempt from tax by means of an annual capital ...


The Elephant Always Forgets: Us Tax Reform And The Wto, Reuven S. Avi-Yonah, Martin G. Vallespinos 2018 University of Michigan Law School

The Elephant Always Forgets: Us Tax Reform And The Wto, Reuven S. Avi-Yonah, Martin G. Vallespinos

Law & Economics Working Papers

The “Tax Cuts and Jobs Act” (TCJA) enacted on December 22, 2017 includes several provisions that raise WTO compliance issues. At least one such provision, the Foreign-Derived Intangible Income (FDII) rule, is almost certain to draw a challenge in the WTO and is likely to lead to another US loss and resulting sanctions. This outcome would be another addition to the repeated losses suffered by the US for export subsidies from the 1970s to 2004, which led to the imposition of sanctions and the ultimate repeal of the offending regime. The important question for 2018 and beyond is whether the ...


Economic Protectionism: Irrationally Constitutional, Joshua Park 2018 Pepperdine University

Economic Protectionism: Irrationally Constitutional, Joshua Park

Pepperdine Law Review

The Constitution is built on the principle that all citizens are created equal. Naturally, we believe that no law should be passed solely for the sake of benefiting one group over another. Yet, governments continue to pass economic regulations that have no purpose other than maintaining wealth within a specific group, and the judiciary continues to uphold such regulations. While the judiciary purports to uphold challenged legislation only if it passes “rational basis review,” the term “review” is a misnomer because the analysis has essentially become automatic deference. Under the judiciary’s modern treatment of the Equal Protection Clause, successfully ...


Fostering Innovation And Entrepreneurship: Shark Tank Shouldn't Be The Model, Brian Kingsley Krumm 2018 University of Tennessee

Fostering Innovation And Entrepreneurship: Shark Tank Shouldn't Be The Model, Brian Kingsley Krumm

Arkansas Law Review

For the past half century, innovation has driven the economic growth that has made the American economy the envy of the world. For most of this period, venture capitalists provided not only the capital that new innovative companies needed, but also the management expertise.


Macroeconomic Modeling Of Tax Policy: A Comparison Of Current Methodologies, Itai Grinberg, Alan J. Auerbach, Thomas A. Barthold, Nicholas Bull, W. Gavin Elkins, Pamela J. Moomau, Rachel Moore, Benjamin Page, Brandon Pecoraro, Kyle Pomerleau 2018 Georgetown University Law Center

Macroeconomic Modeling Of Tax Policy: A Comparison Of Current Methodologies, Itai Grinberg, Alan J. Auerbach, Thomas A. Barthold, Nicholas Bull, W. Gavin Elkins, Pamela J. Moomau, Rachel Moore, Benjamin Page, Brandon Pecoraro, Kyle Pomerleau

Alan J. Auerbach

The macroeconomic effects of tax reform are a subject of significant discussion and controversy. In 2015, the House of Representatives adopted a new “dynamic scoring” rule requiring a point estimate within the budget window of the deficit effect due to the macroeconomic response to certain proposed tax legislation. The revenue estimates provided by the staff of the Joint Committee on Taxation (JCT) for major tax bills often play a critical role in Congressional deliberations and public discussion of those bills. The JCT has long had macroeconomic analytic capability, and in recent years, responding to Congress’ interest in macrodynamic estimates for ...


Dual Residents: A Sur-Reply To Zelinsky, Michael S. Knoll, Ruth Mason 2018 University of Pennsylvania Law School

Dual Residents: A Sur-Reply To Zelinsky, Michael S. Knoll, Ruth Mason

Faculty Scholarship

In this article, we respond to Professor Zelinsky’s criticism of our arguments regarding the constitutionality of New York’s tax residence rule. We argue that the Supreme Court’s decision in Wynne requires reconsideration of the New York Court of Appeal’s decision in Tamagni.


Beat It: Tax Reform And Tax Treaties, Reuven S. Avi-Yonah 2018 University of Michigan Law School

Beat It: Tax Reform And Tax Treaties, Reuven S. Avi-Yonah

Law & Economics Working Papers

The Tax Cuts and Jobs Act (TCJA) includes several provisions that may be viewed as potential violations of US tax treaties. However, most of those potential violations, such as new IRC section 951A and to a large extent new IRC section 59A, are covered by the Savings Clause (US model article 1(4)). The only remaining question is whether IRC section 59A (the “Base Erosion Anti-Abuse Tax”, or BEAT) violates the non-discrimination provision (article 24), which is exempted from the Savings Clause. The answer is no, because foreign related parties are not comparable to US related parties receiving interest or ...


Sb 219 - Autonomous Vehicles, W. Perry Hicks, Alan J. Ponce 2018 Georgia State University College of Law

Sb 219 - Autonomous Vehicles, W. Perry Hicks, Alan J. Ponce

Georgia State University Law Review

The Act amends Georgia’s Motor Vehicles and Traffic Code to create a legal framework for autonomous vehicles to operate in Georgia. Persons responsible for operating fully autonomous vehicles are exempted from holding a driver’s license. In the event of an accident involving an autonomous vehicle, the vehicle must remain at the scene and the operator of the autonomous vehicle must provide necessary information to law enforcement. Minimum liability insurance requirements for autonomous vehicles will be the same as minimum coverages required for the taxi and limousine industry after January 1, 2020. Minimum coverages are set at 250 percent ...


Localism, Labels, And Animal Welfare, Samuel R. Wiseman 2018 Florida State University

Localism, Labels, And Animal Welfare, Samuel R. Wiseman

Northwestern Journal of Law & Social Policy

The law does relatively little to improve the welfare of animals raised for food. In the short term, at least, market-based solutions appear to have more promise as a means of promoting farm animal welfare, as consumers increasingly seek out local and humanely-raised meat and eggs. To aid consumers in identifying these products, certification systems of varying degrees of rigor exist, but even these are of little use to consumers in the restaurant context, which accounts for a large percentage of meat consumption. Patrons see only finished meals, making fraud difficult to detect, and a recent newspaper investigation suggests that ...


How Terrible Is The New Tax Law? Reflections On Tra17, Reuven S. Avi-Yonah 2018 University of Michigan Law School

How Terrible Is The New Tax Law? Reflections On Tra17, Reuven S. Avi-Yonah

Law & Economics Working Papers

Overall, TRA17 is not much worse than TRA86 or TRA14. It increases the deficit, but not by an impossible amount; it is distributionally skewed, but less so than is usually assumed; and its details are not terrible (on the international side they are a big improvement over prior law). There is one big problem, the pass through provisions, and we can only hope that as its horrible implications unfold it will be a prime candidate for repeal.


The Rule Of Reason, Herbert J. Hovenkamp 2018 University of Pennsylvania Law School

The Rule Of Reason, Herbert J. Hovenkamp

Faculty Scholarship

Antitrust’s rule of reason was born out of a thirty-year (1897-1927) division among Supreme Court Justices about the proper way to assess multi-firm restraints on competition. By the late 1920s the basic contours of the rule for restraints among competitors was roughly established. Antitrust policy toward vertical restraints remained much more unstable, however, largely because their effects were so poorly understood.

This article provides a litigation field guide for antitrust claims under the rule of reason – or more precisely, for situations when application of the rule of reason is likely. At the time pleadings are drafted and even up ...


If We Pay Football Players, Why Not Kidney Donors, Philip J. Cook, Kimberly D. Krawiec 2018 Duke Law School

If We Pay Football Players, Why Not Kidney Donors, Philip J. Cook, Kimberly D. Krawiec

Faculty Scholarship

Ethicists who oppose compensating kidney donors claim they do so because kidney donation is risky for the donor’s health, donors may not appreciate the risks and may be cognitively biased in other ways, and donors may come from disadvantaged groups and thus could be exploited. However, few ethical qualms are raised about professional football players, who face much greater health risks than kidney donors, have much less counseling and screening concerning that risk, and who often come from racial and economic groups deemed disadvantaged. It thus seems that either ethicists—and the law—should ban both professional football and ...


Defining The Economic Pie, Not Dividing Or Maximizing It, Martha T. McCluskey 2018 University at Buffalo School of Law

Defining The Economic Pie, Not Dividing Or Maximizing It, Martha T. Mccluskey

Journal Articles

This essay challenges the question that drives much of legal analysis: whether to maximize or divide the “economic pie.” Regardless of the answer, this question skews legal analysis and rests on dubious economics. This framing binary inherently presents economic maximizing as the presumptive norm, represented as superior to socioeconomic distribution in both spatial and temporal dimensions. By definition, economic “maximizing” stands larger in scope and first in order. The essay first critiques the idea that legal analysis can aim to make the economy bigger without engaging contested questions of value and politics, showing how this misleading separation of quantity from ...


Governance By Contract: The Implications For Corporate Bylaws, Jill E. Fisch 2018 University of Pennsylvania Law School

Governance By Contract: The Implications For Corporate Bylaws, Jill E. Fisch

Faculty Scholarship

Boards and shareholders are increasing using charter and bylaw provisions to customize their corporate governance. Recent examples include forum selection bylaws, majority voting bylaws and advance notice bylaws. Relying on the contractual conception of the corporation, Delaware courts have accorded substantial deference to board-adopted bylaw provisions, even those that limit shareholder rights.

This Article challenges the rationale for deference under the contractual approach. With respect to corporate bylaws, the Article demonstrates that shareholder power to adopt and amend the bylaws is, under Delaware law, more limited than the board’s power to do so. As a result, shareholders cannot effectively ...


Regulating Robo Advice Across The Financial Services Industry, Tom Baker, Benedict G. C. Dellaert 2018 University of Pennsylvania Law School

Regulating Robo Advice Across The Financial Services Industry, Tom Baker, Benedict G. C. Dellaert

Faculty Scholarship

Automated financial product advisors – “robo advisors” – are emerging across the financial services industry, helping consumers choose investments, banking products, and insurance policies. Robo advisors have the potential to lower the cost and increase the quality and transparency of financial advice for consumers. But they also pose significant new challenges for regulators who are accustomed to assessing human intermediaries. A well-designed robo advisor will be honest and competent, and it will recommend only suitable products. Because humans design and implement robo advisors, however, honesty, competence, and suitability cannot simply be assumed. Moreover, robo advisors pose new scale risks that are different ...


The Elephant Always Forgets: Tax Reform And The Wto, Reuven S. Avi-Yonah 2018 University of Michigan Law School

The Elephant Always Forgets: Tax Reform And The Wto, Reuven S. Avi-Yonah

Law & Economics Working Papers

The “Tax Cuts and Jobs ACT” (TCJA) enacted on December 22, 2017, includes several provisions that raise WTO compliance issues. At least one such provision, the Foreign-Derived Intangible Income (FDII) rule, is almost certain to draw a challenge in the WTO and is likely to lead to another US loss and resulting sanctions. This outcome would be another addition to the repeated losses suffered by the US for export subsidies from the 1970s to 2004, which led to the imposition of sanctions and the ultimate repeal of the offending regime. The important question for 2018 and beyond is whether the ...


Horizontal Mergers, Market Structure, And Burdens Of Proof, Herbert J. Hovenkamp, Carl Shapiro 2018 University of Pennsylvania Law School

Horizontal Mergers, Market Structure, And Burdens Of Proof, Herbert J. Hovenkamp, Carl Shapiro

Faculty Scholarship

Since the Supreme Court’s landmark 1963 decision in Philadelphia National Bank, antitrust challengers have mounted prima facie cases against horizontal mergers that rested on the level and increase in market concentration caused by the merger, with proponents of the merger then permitted to rebut by providing evidence that the merger will not have the feared anticompetitive effects. Although the way that concentration is measured and the triggering levels have changed over the last half century, the basic approach has remained intact. This longstanding structural presumption, which is well supported by economic theory and evidence, has been critical to effective ...


Horizontal Shareholding And Antitrust Policy, Fiona M. Scott Morton, Herbert J. Hovenkamp 2018 Yale University

Horizontal Shareholding And Antitrust Policy, Fiona M. Scott Morton, Herbert J. Hovenkamp

Faculty Scholarship

“Horizontal shareholding” occurs when one or more equity funds own shares of competitors operating in a concentrated product market. For example, the four largest mutual fund companies might be large shareholders of all the major United States air carriers. A growing body of empirical literature concludes that under these conditions market output in the product market is lower and prices higher than they would otherwise be.

Here we consider how the antitrust laws might be applied to this practice, identifying the issues that courts are likely to encounter and attempting to anticipate litigation problems. We assume that neither the mutual ...


The Shifting Tides Of Merger Litigation, Matthew D. Cain, Jill E. Fisch, Steven Davidoff Solomon, Randall S. Thomas 2018 U.S. Securities and Exchange Commission

The Shifting Tides Of Merger Litigation, Matthew D. Cain, Jill E. Fisch, Steven Davidoff Solomon, Randall S. Thomas

Faculty Scholarship

In 2015, Delaware made several important changes to its laws concerning merger litigation. These changes, which were made in response to a perception that levels of merger litigation were too high and that a substantial proportion of merger cases were not providing value, raised the bar, making it more difficult for plaintiffs to win a lawsuit challenging a merger and more difficult for plaintiffs’ counsel to collect a fee award.

We study what has happened in the courts in response to these changes. We find that the initial effect of the changes has been to decrease the volume of merger ...


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