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Articles 1 - 30 of 87
Full-Text Articles in Law
Autonomous Corporate Personhood, Carla L. Reyes
Autonomous Corporate Personhood, Carla L. Reyes
Washington Law Review
Several states have recently changed their business organization law to accommodate autonomous businesses—businesses operated entirely through computer code. A variety of international civil society groups are also actively developing new frameworks— and a model law—for enabling decentralized, autonomous businesses to achieve a corporate or corporate-like status that bestows legal personhood. Meanwhile, various jurisdictions, including the European Union, have considered whether and to what extent artificial intelligence (AI) more broadly should be endowed with personhood to respond to AI’s increasing presence in society. Despite the fairly obvious overlap between the two sets of inquiries, the legal and policy discussions between the …
The Federal Option: Delaware As A De Facto Agency, Omari Scott Simmons
The Federal Option: Delaware As A De Facto Agency, Omari Scott Simmons
Washington Law Review
Despite over 200 years of deliberation and debate, the United States has not adopted a federal corporate chartering law. Instead, Delaware is the “Federal Option” for corporate law and adjudication. The contemporary federal corporate chartering debate is, in part, a referendum on its role. Although the federal government has regulated other aspects of interstate commerce and has the power to charter corporations and preempt Delaware pursuant to its Commerce Clause power, it has not done so. Despite the rich and robust scholarly discussion of Delaware’s jurisdictional dominance, its role as a de facto national regulator remains underdeveloped. This Article addresses …
Externalities And The Common Owner, Madison Condon
Externalities And The Common Owner, Madison Condon
Washington Law Review
Due to the embrace of modern portfolio theory, most of the stock market is controlled by institutional investors holding broadly diversified economy-mirroring portfolios. Recent scholarship has revealed the anti-competitive incentives that arise when a firm’s largest shareholders own similarly sized stakes in the firm’s industry competitors. This Article expands the consideration of the effects of common ownership from the industry level to the market portfolio level and argues that diversified investors should rationally be motivated to internalize intra-portfolio negative externalities. This portfolio perspective can explain the increasing climate change related activism of institutional investors, who have applied coordinated shareholder power …
Public Or Private Venture Capital?, Darian M. Ibrahim
Public Or Private Venture Capital?, Darian M. Ibrahim
Washington Law Review
The United States has an unparalled entrepreneurial ecosystem. Silicon Valley startups commercialize cutting-edge science, create plentiful jobs, and spur economic growth. Without angel investors and venture capital funds (VCs) willing to gamble on these high-risk, high-tech companies, none of this would be possible. From a law-and-economics perspective, startup investing is incredibly risky. Information asymmetry and agency costs abound. In the United States, angels and VCs successfully mitigate these problems through private ordering and informal means. Countries without the robust private venture capital system that exists in the United States have attempted to fund startups publicly by creating junior stock exchanges …
Effective Corporate Compliance: A Holistic Approach For The Sec And The Doj, Serena Hamann
Effective Corporate Compliance: A Holistic Approach For The Sec And The Doj, Serena Hamann
Washington Law Review
Today, most global corporations claim to have effective compliance programs that ensure and monitor their compliance with all state, federal, and even international requirements. A growing body of literature and regulatory activity indicates that truly effective compliance programs must incorporate all of the “Seven Elements of an Effective Compliance Program” contained in the Federal Sentencing Guidelines. Despite these Guidelines and growing industry and regulatory interest in effective compliance, noncompliance continues, and many companies run into trouble when noncompliance brings their actions to the attention of the SEC and the DOJ. In turn, the SEC and the DOJ struggle to encourage …
Taxing Selling Partners, Emily Cauble
Taxing Selling Partners, Emily Cauble
Washington Law Review
When a partner sells a partnership interest, the resulting gain or loss is treated as capital gain or loss, except to the extent that the partnership holds certain items whose sale would result in gain or loss that was not capital. Seemingly, the purpose of this regime is to prevent taxpayers from obtaining more favorable treatment by selling an interest in a partnership than what would result if the partnership were to sell its underlying assets. But given this legislative aim, the existing tax provisions produce results for taxpayers that are both unduly favorable (in that sale of a partnership …
Veil Piercing And The Untapped Power Of State Courts, Catherine A. Hardee
Veil Piercing And The Untapped Power Of State Courts, Catherine A. Hardee
Washington Law Review
The U.S. Supreme Court in recent years has embraced an anti-majoritarian trend toward providing constitutional protections for the elite who own or control corporations. This trend is especially troubling as it threatens to undermine the balance found in state corporate law between private ordering for internal corporate matters and government regulation to police the negative externalities of the corporate form. The Court’s interventions also have the potential to leave vulnerable groups without the protection of religiously-neutral laws designed to prevent discrimination, protect workers, or provide essential services such as health care. While the U.S. Supreme Court has not yet explicitly …
The Secret Life Of Priority: Corporate Reorganization After Jevic, Jonathan C. Lipson
The Secret Life Of Priority: Corporate Reorganization After Jevic, Jonathan C. Lipson
Washington Law Review
Academics have long debated whether the order of bankruptcy distributions should be “absolute” or “relative.” Should courts have the flexibility to scramble priority to serve some greater good? The Supreme Court’s recent decision in Czyzewski v. Jevic Holding Corp. holds that the answer is “no”: priority is absolute absent the consent of affected creditors. “Consent” is not self-defining, however, and is largely ignored in debates about priority. This is a problem because consent is hard to pinpoint in corporate reorganizations, a type of aggregate proceeding that can involve hundreds or thousands of creditors and shareholders. Although the Jevic majority …
Forum-Selection Provisions In Corporate "Contracts", Helen Hershkoff, Marcel Kahan
Forum-Selection Provisions In Corporate "Contracts", Helen Hershkoff, Marcel Kahan
Washington Law Review
We consider the emergent practice of including clauses in corporate certificates of incorporation or bylaws that specify an exclusive judicial forum for lawsuits. According to their proponents and most courts that have considered the question, such forum-terms are, and should be, enforceable as contractual choice-of-forum provisions. We argue that treating corporate charter and bylaw forum-terms as a matter of ordinary contract doctrine is neither logical nor justified. Because charters and bylaws involve the state in ways that are at odds with private-ordering principles and because they entail only a limited form of “consent,” an analysis of enforceability must account for …
Anything But Common: New York's "Pending Or Anticipated Litigation" Limitation To The Common Interest Doctrine Creates More Problems Than It Solves, Eric A. Franz
Washington Law Review
New York’s highest court recently handed down Ambac v. Countrywide, a decision that has major ramifications in the mergers and acquisitions (M&A) world. Once parties sign a merger or acquisition agreement, they share a common interest in ensuring that both parties comply with applicable laws, a process that requires legal communications with each other’s attorneys. Under the common interest doctrine, Delaware and the majority of federal circuits apply the attorney-client privilege to shield many of these communications from discovery. However, Ambac upset M&A attorneys’ reliance on the common interest doctrine by holding that parties to a merger waive their …
Home-Country Effects Of Corporate Inversions, Omri Marian
Home-Country Effects Of Corporate Inversions, Omri Marian
Washington Law Review
This Article develops a framework for the study of the unique effects of corporate inversions (meaning, a change in corporate residence for tax purposes) in the jurisdictions from which corporations invert (“home jurisdictions”). Currently, empirical literature on corporate inversions overstates its policy implications. It is frequently argued that in response to an uncompetitive tax environment, corporations may relocate their headquarters for tax purposes, which, in turn, may result in the loss of positive economic attributes in the home jurisdiction (such as capital expenditures, research and development activity, and high-quality jobs). The association of tax-residence relocation with the dislocation of meaningful …
Outsourcing Corporate Accountability, Kishanthi Parella
Outsourcing Corporate Accountability, Kishanthi Parella
Washington Law Review
This Article addresses the problem of preventing human rights violations abroad that result from the globalization of business. It specifically explores the challenge of improving labor standards in global value chains. The modern business has changed dramatically and has “gone global” in order to court foreign markets and secure resources, including labor. Familiar household names, such as Nike and Apple, have “outsourced” many of their functions to suppliers overseas. As multinational buyers, they dominate one end of the global value chain. At the opposite end of the value chain are the local managers and owners of the factories and workhouses …
The Globalization Of Corporate Law: The End Of History Or A Never-Ending Story?, Franklin A. Gevurtz
The Globalization Of Corporate Law: The End Of History Or A Never-Ending Story?, Franklin A. Gevurtz
Washington Law Review
Considerable scholarship during the last few decades addresses the question of whether corporate laws are becoming global by converging on commonly accepted approaches. Some scholars have asserted that such convergence is occurring around the most efficient laws and institutions, thereby marking the “End of History” for corporate law. This Article responds to such assertions by developing three claims not previously given due attention in the convergence literature. First, it demonstrates that the history of corporations and corporate law has been one of seemingly constant movement toward global convergence, yet the resulting convergence is always incomplete or transitory. Next, it points …
Transitioning The Family Business, Dwight Drake
Transitioning The Family Business, Dwight Drake
Washington Law Review
By any measure, family-dominated businesses are the backbone of the American economy. Although a large majority of family businesses are managed by senior family members who are older than age 55 and more than 80 percent of such senior family members claim that they want the business to remain in the family, less than 30 percent of such businesses have tackled the challenge of developing a plan for transitioning the business to the next generation. For over 90 percent of such families, this planning challenge is aggravated by the fact that they have no diversified wealth: the family’s wealth is …
Strengthening Auditor Independence: Reestablishing Audits As Control And Premium Signaling Mechanisms, Sean M. O'Connor
Strengthening Auditor Independence: Reestablishing Audits As Control And Premium Signaling Mechanisms, Sean M. O'Connor
Washington Law Review
As recent scandals have demonstrated, ensuring the independence of auditors from the publicly traded clients whose books they inspect is one of the most vexing problems in the financial world today. Arguably, the imposition of a mandatory audit system through the 1930s federal securities laws created the modem problem of auditor independence. The core issue is that the statutory audit is simply a commodified cost of doing business for issuers that imposes an impossible obligation to serve an unspecified "investing public" on the auditors. Yet, this investing public neither hires, fires, nor controls the auditors. Instead, the audit relationship is …
Risky Business: Directors Making Business Judgments In Washington State, Adam J. Richins
Risky Business: Directors Making Business Judgments In Washington State, Adam J. Richins
Washington Law Review
Section 23B.08.300 of the Revised Code of Washington (RCW) defines the general standards of conduct for directors in discharging corporate duties. The Washington State Legislature developed these standards to govern the manner in which directors perform their duties, rather than to impose liability on directors for negligent business decisions under the business judgment rule. Indeed, the business judgment rule, as defined by leading corporate-law jurisdictions and the American Bar Association, generally protects directors from liability associated with negligent business decisions so long as the director makes decisions in good faith, on an informed basis, without self-interest, and in accordance with …
Does Delaware's Section 102(B)(7) Protect Reckless Directors From Personal Liability? Only If Delaware Courts Act In Good Faith, Matthew R. Berry
Does Delaware's Section 102(B)(7) Protect Reckless Directors From Personal Liability? Only If Delaware Courts Act In Good Faith, Matthew R. Berry
Washington Law Review
Section 102(b)(7) of the Delaware Corporate Code allows a corporation to amend its certificate of incorporation to exculpate directors from all duty of due care violations. The Delaware General Assembly enacted this law in response to the shrinking pool of qualified directors, which was caused by the Delaware State Supreme Court's decision in Smith v. Van Gorkom that imposed personal liability on directors for gross negligence. Delaware courts have unequivocally stated that section 102(b)(7) protects directors against personal liability arising from gross negligence, but not against liability arising from a lack of good faith. However, Delaware courts have not provided …
E-Proxies For Sale? Corporate Vote-Buying In The Internet Age, Douglas R. Cole
E-Proxies For Sale? Corporate Vote-Buying In The Internet Age, Douglas R. Cole
Washington Law Review
Advances in electronic communications technology promise to invigorate shareholder voting as a viable tool for corporate governance, for example by decreasing the cost, and thereby increasing the frequency and effectiveness, of proxy fights. Increased use of shareholder voting, though, forces renewed focus on issues related to the shareholder voting process. One such issue is vote-buying. Traditionally, courts have treated vote-buying in the corporate context as per se illegal. More recently, however, courts have relaxed their attitude toward such transactions, a move generally applauded by commentators. This article argues that the newfound judicial acceptance of vote-buying is problematic, at least for …
Conversion And Mergers Of Disparate Business Entities, Robert C. Art
Conversion And Mergers Of Disparate Business Entities, Robert C. Art
Washington Law Review
Legislation permitting a business organized in one form, such as a corporation, to merge with a business of a different form, such as a limited liability company, is relatively recent, but reasonable and beneficial. A logical extension of this legislation is to permit a single business entity to convert its organizational form without involving a second entity. Recognition of these cross-entity transactions flows naturally from the expansion of organizational options in recent years, particularly the introduction of limited liability companies and limited liability partnerships. Conversion and merger of disparate entities are already available in a few states, with varying degrees …
Clearly Defining Preclusive Corporate Lock-Ups: A Bright-Line Test For Lock-Up Provisions In Delaware, Michael G. Hatch
Clearly Defining Preclusive Corporate Lock-Ups: A Bright-Line Test For Lock-Up Provisions In Delaware, Michael G. Hatch
Washington Law Review
Merger mania currently grips the United States as corporations scramble to find merger partners to achieve strategic goals. In their quest for a competitive advantage, large corporations are increasingly willing to use hostile takeovers to deny competitors the benefits of a strategic mergers. In response, merging corporations have granted record-breaking lockup. provisions in an attempt to protect their deals. Delaware's current framework for evaluating the validity of lock-up provisions requires courts to apply different levels of scrutiny depending on the form of the transaction. However, Delaware courts have inconsistently applied the correct standard and have failed to identify preclusive lock-ups. …
Toward Transaction-Specific Standards Of Directorial Fiduciary Duty In The Tracking-Stock Context, Jeffrey J. Schick
Toward Transaction-Specific Standards Of Directorial Fiduciary Duty In The Tracking-Stock Context, Jeffrey J. Schick
Washington Law Review
In recent years, diversified corporations have increasingly turned to tracking stocks to uncouple high-growth businesses, especially Internet-related operations, from more static business entities. Tracking stock is a unique type of common stock that represents an interest in the financial performance of particular business groups within a diversified parent corporation. However, the tracked business groups are not independent of the parent corporation, and the parent's board of directors still governs the affairs of each business group. This creates unique conflicts for directors who must please multiple groups of stockholders whose interests are not always consistent. Delaware courts have not announced a …
The Doctrine Of Piercing The Veil In An Era Of Multiple Limited Liability Entities: An Opportunity To Codify The Test For Waiving Owners' Limited-Liability Protection, John H. Matheson, Raymond B. Eby
The Doctrine Of Piercing The Veil In An Era Of Multiple Limited Liability Entities: An Opportunity To Codify The Test For Waiving Owners' Limited-Liability Protection, John H. Matheson, Raymond B. Eby
Washington Law Review
The use of the corporate form of business organization has always provided a firm's owners/shareholders with a presumptive shield from personal liability for the debts of the business. Case-by-case exceptions to this limited-liability shield have developed in each state under the general rubric of "piercing the veil." Courts and commentators alike have noted the vagueness of the piercing analysis and have questioned the appropriateness of some of the factors employed in that analysis. In addition, new forms of business entities, such as limited liability companies and limited liability partnerships, have been legislatively created over the past several decades, raising the …
Capitalizing The Target's Transaction Costs In Hostile Takeovers, David J. Roberts
Capitalizing The Target's Transaction Costs In Hostile Takeovers, David J. Roberts
Washington Law Review
In A.E. Staley Manufacturing Co. v. Commissioner, the Court of Appeals for the Seventh Circuit held that costs a corporation incurred to resist a hostile takeover were analogous to costs incurred to defend a business against attack and thus qualified as ordinary and necessary business expenses deductible under Internal Revenue Code section 162. Alternatively, the court held that those costs associated with abandoned capital transactions qualified for loss deductions under section 165. This Note argues that although the court reached approximately the right result in this case, its primary reliance on a defense of business rationale for deductibility under …
Revising Washington's Corporate Practice Of Medicine Doctrine, Lisa Rediger Hayward
Revising Washington's Corporate Practice Of Medicine Doctrine, Lisa Rediger Hayward
Washington Law Review
Current Washington law prohibits the corporate practice of medicine. The courts have interpreted this doctrine to prohibit the employment of physicians by any entity, other than a professional corporation or health maintenance organization, even if the corporation only performs business functions. This Comment discusses the corporate practice of medicine doctrine in Washington and its usefulness in the modem health care environment. It argues that two of the doctrine's underlying justifications are effectuated more sensibly by current regulatory provisions and that the doctrine should be retained only to prevent lay interference with physician autonomy in medical decisions. This Comment recommends that …
Causation And Injury In Corporate Control Transactions: Cede & Co. V. Technicolor, Inc., Jacqueline M. Veneziani
Causation And Injury In Corporate Control Transactions: Cede & Co. V. Technicolor, Inc., Jacqueline M. Veneziani
Washington Law Review
In Cede & Co. v. Technicolor, Inc., the Delaware Supreme Court held that shareholders are not required to prove injury from corporate directors' failure to exercise due care in approving a merger transaction. Tort principles, the court stated, have no role in a business judgment rule analysis. Therefore, once shareholders prove a violation of the directors' duty of care, the burden is shifted to the directors to prove the entire fairness of the transaction despite the absence of a breach of the duty of loyalty. This Note argues that the entire fairness review of a disinterested board transaction is unworkable. …
Director Conflict Of Interest Under The Model Business Corporation Act: A Model For All States?, Peter E. Kay
Director Conflict Of Interest Under The Model Business Corporation Act: A Model For All States?, Peter E. Kay
Washington Law Review
The American Bar Association has adopted a new model director conflict of interest statute based on bright-line definitions and a rigid preclusion of judicial review. This Comment examines the statute and provides revisions that are necessary for the statute to operate as the drafters intended. The Comment also challenges the merits of the statute by arguing that its reliance on disinterested director approval procedures is an inadequate safeguard for shareholders and its emphasis on large corporations renders the statute unsuitable for the majority of corporations.
Corporate Governane—The Role Of Special Litigation Committees, Charles W. Murdock
Corporate Governane—The Role Of Special Litigation Committees, Charles W. Murdock
Washington Law Review
In reviewing decisions of a special litigation committee, courts have generally applied the business judgment rule to the "second-tier" decision by the committee when it moves to dismiss litigation challenging alleged "first-tier" wrongdoing. While all courts inquire into the independence and good faith of the committee, and the adequacy of its procedures, a judicial split exists as to whether the court can inquire into the substantive reasons why the committee believes the litigation should be dismissed. This Article analyzes the nature of structural bias and contrasts the procedural rights which a plaintiff possesses in a judicial proceeding with the lack …
Strange Bedfellows: Corporate Fiduciaries And The General Law Compliance Obligation In Section 2.01(A) Of The American Law Institute's Principles Of Corporate Governance, Patrick J. Ryan
Washington Law Review
Business and corporate crime is a controversial social problem. Less well known is the extent to which corporate legal doctrine permits derivative litigation against corporate officials arising from deviance episodes. In this Article, Professor Ryan examines both the traditional applications of fiduciary obligation to corporate deviance and the American Law Institute's revised formulations in the still-unfinished Principles of Corporate Governance. His findings reveal the difficulties encountered in trying to enforce general legal obligations by means of corporate governance mechanisms. He predicts that the ex ante effects of the ALI provisions will be two in nature. First, fiduciary obligation and its …
Opting Out Of Fiduciary Duties: A Response To The Anti-Contractarians, Henry N. Butler, Larry E. Ribstein
Opting Out Of Fiduciary Duties: A Response To The Anti-Contractarians, Henry N. Butler, Larry E. Ribstein
Washington Law Review
Professors Butler and Ribstein present an extensive analysis of opting out of fiduciary duties, based on the contractual theory of the corporation and a substantial body of economic literature, as well as a comprehensive response to prominent corporate law commentators who have argued that private ordering of corporate manager duties should be restricted by mandatory legal rules.
Stock Subscription Law For Practitioners, Richard O. Kummert
Stock Subscription Law For Practitioners, Richard O. Kummert
Washington Law Review
Law review analysis of stock subscription law—the law related to promises to pay to a corporation a stated sum for a specified number of unissued shares—has been noticeably lacking in recent years. I suspect the most prominent reasons for the void center on the feeling in the academic community that subscriptions are used infrequently and that in any event the law related to them is settled. The material that follows demonstrates that both these propositions are false: subscriptions appear to be used with some frequency in the formation of small corporations, and the law related to them remains complex and …