Law Commons^™

Iqbal, Twombly, And The Expected Cost Of False Positive Error, Max Huffman

Max Huffman

Iqbal and Twombly introduced a new standard for pleading federal claims, overruling the five-decades old language from Conley v. Gibson. Instead of plaintiffs being entitled to discovery unless the complaint affirmatively forecloses the possibility of recovery, Iqbal and Twombly require a more searching evaluation of the complaint under an ambiguous “plausibility” standard. The policy behind this increased burden on plaintiffs is to prevent the false positive error that burdensome discovery creates. How the plausibility standard from Iqbal and Twombly should operate in the real world is poorly understood. There is general acknowledgement that no clear guidance exists about how to …

Designing Bankruptcy Auctions: The Indubitable Value Of Credit Bidding, Vincent S. J. Buccola, Ashley C. Keller

Vincent S. J. Buccola

Now that most chapter 11 “reorganizations” are glorified asset sales in which the debtor uses bankruptcy to prepare itself for auction, the design of sale procedures has become a paramount concern to bankruptcy practitioners and courts. Among the choices they face is whether — and if so, how — to permit credit bidding, the practice of offsetting the value of a creditor’s claim against the purchase price of the debtor’s assets. This paper shows that credit bidding tends to augment, and cannot depress, total creditor recoveries, and we therefore conclude that it should be a mandatory feature of bankruptcy auctions. …

Interpretive Risk And Contract Interpretation: A Suggested Approach For Maximizing Value, Juliet P. Kostritsky

Juliet P Kostritsky

• The Article offers a theory of judicial intervention and interpretation in Contracts. It posits that the principal objective of courts interpreting, supplementing, or overriding terms is to ask whether such intervention can serve the broad objective of maximizing gains from trade while minimizing transaction costs and the costs of opportunism, collectively, an interpretive risk. It offers an economic rationale for a broad approach to interpretation and explores several examples from Contract law where courts depart from the parties’ textual choices and follow the theory suggested in this Article. These examples directly challenge the theory of the new formalists.

Corporate Risks, Risk Bearing Ability And Equity, Lukas C. Handschin

Lukas C Handschin

There is a relation between corporate risks, risk bearing ability and equity. In order to assess the risk bearing ability of a corporation, one reference figure is equity, understood as the sum of legal capital and reserves, free reserves and accrued profits. Equity shows the risk bearing ability related to the risk of asset reduction as well as the ability of the corporation to attract new liquidity by increasing debts, in case of a negative free cash flow. Equity is the risk reserve of the corporation. The relation between equity and risk bearing ability allows defining the necessary amount of …

Failures Of Cosean Irrelevance, Nicholas L. Georgakopoulos

Nicholas L Georgakopoulos

An exploration of the Coase theorem reveals more sources of failures than transaction costs, and that transaction costs are misunderstood. After a discussion of Coasean irrelevance, this essay examines a sequence of failures of irrelevance. (a) The shifting nature of transaction costs suggests that they may hide innovation incentives. (b) Negotiation holdouts may prevent agreements. (c) Systematic errors may bias incentives. (d) Risk-aversion may distort action but also enable innovation. (e) Distributional effects may argue for unstable allocations.

The Economics Of Railroad “Captive Shipper” Legislation, Russell W. Pittman

Russell W. Pittman

Recent rate increases by U.S. freight railroads have refocused attention on regulation, deregulation, and regulatory reforms in the railroad industry. Legislation introduced into Congress would render a variety of railroad behavior newly subject to the jurisdiction of the antitrust statutes, with potential enforcement by the Antitrust Division and the FTC and through lawsuits brought by state attorneys general or private parties. This paper considers the economic issues raised by legislation and the likely impacts on competition and welfare.

Quantifying The Cost Of Substandard Patents: Some Preliminary Evidence, George S. Ford, T. Randolph Beard, Thomas M. Koutsky, Lawrence J. Spiwak

GEORGE S FORD

The purpose of patent policy is to balance the incentive to invent against the ability of the economy to utilize and incorporate new inventions and innovations. Substandard patents that upset this balance impose deadweight losses and other costs on the economy. In this paper, we examine some of the deadweight losses that result from granting substandard patents in the United States. Under plausible assumptions, we find that the economic losses resulting from the grant of substandard patents can reach $21 billion per year by deterring valid research with an additional deadweight loss from litigation and administrative costs of $4.5 billion …

Why Do Judges Read Statutes?, Alexander Volokh

Alexander Volokh

The standard view that "statutory interpretation matters" -- that different methods can "lead to" different results -- is hard to square with the standard rational-choice account of judicial decisionmaking. Indeed, under the standard model, it is not obvious why a judge should bother to even read the statute.

I show, within the rational-choice account, how the judge can benefit from reading the statute when the preferences of legislators are uncertain. Doing so shows the judge what policy the legislators agreed to in the past, which gives him clues as to legislators' preferences today. Moreover, different assumptions about how the legislature …

Student Loans In Bankruptcy: The Undue Hardship Test Is An Unnecessary Burden, James M. Leiby

James M Leiby

No abstract provided.

Judging Cercla: An Empirical Analysis Of Circuit Court Decision-Making, Clifford Chad Henson

Clifford Chad Henson

Abstract: Political scientists, and increasingly legal scholars, have become skeptical of judges’ attempts to explain decisions based exclusively on applying fact to law, and have attempted to identify factors that influence judicial decision-making. This study isolates a set of cases dealing with the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 and identifies variable sets corresponding to factors one would expect to be significant under competing models of judicial decision-making. While both the legal and extra-legal model independently explain some judicial decision-making, the legal model has more explanatory power and adds significantly to the explanatory power of the extra-legal …

• The Credit Crisis And Subprime Litigation: How Fraud Without Motive ‘Makes Little Economic Sense’, Peter Hamner

Peter Hamner

The recent collapse of the financial markets spurred numerous lawsuits seeking a faulty party. Many plaintiffs argue that market participants committed securities fraud. They claim that deficient subprime loans caused the financial crisis. These risky loans were allegedly originated by banks to be sold off to third parties. The subprime loans were securitized and spread throughout the financial markets. The risk these loans presented was allegedly not disclosed to the buyers of the loans and securities on the loans. As these deficient loans and securities began to default the financial markets came to a halt. This article argues that securities …

The Impact Of General And Patent-Specific Judicial Experience On The Efficiency And Accuracy Of Patent Adjudication, Jay P. Kesan

Jay P. Kesan

The Impact of General and Patent-Specific Judicial Experience On the Efficiency and Accuracy of Patent Adjudication Jay P. Kesan and Gwendolyn G. Ball University of Illinois ABSTRACT The creation of the U.S. Court of Appeals for the Federal Circuit (CAFC) is generally regarded as an improvement in the system of patent adjudication in the United States. There is, however, considerable support for the creation of a specialized patent trial court based on the argument that we need to create specialized, judicial human capital at the trial level. Proponents favoring this change base their reasoning on the two-part argument that, because …

Malthus The Federal Judge: A Comprehensive Economic Defense Of Selective Publication Of Judicial Opinions, Shlomo Maza

Shlomo Maza

My article seeks to examine the system of limited publication using the tools of economic analysis. Non-publication and its accompanying non-citation rules are in force in all of our courts, yet subject to widespread academic criticism. By using the tools of economic analysis, particularly the Rule of Diminishing Marginal Returns as put forth by both Classical and more modern economists, I seek to provide an economic model that provides theoretical support for non-publication. This model demonstrates that because of the inherent nature of legal precedent and its role in our legal system non-publication is not merely the lesser of two …

Explaining Adversarial Boilerplate Language In The Battle Of The Forms: Are Consequential Damages In The U.C.C. Gap Fillers A Penalty Default Rule?, Ryan D. Griffee

Ryan D Griffee

In this article, game theory is applied to the battle of the forms and related scenarios to explain Daniel Keating’s observations, reported in the article "Exploring the Battle of the Forms in Action," 98 MICH. L. REV. 2678 (2000). The first of the two major findings in the paper is that drafters of boilerplate language should use adversarial, U.C.C. § 2-207(1) proviso-conforming language to ensure that clients receive terms that are no worse than the default U.C.C. gap fillers. This is done first by explaining how courts apply U.C.C. § 2-207 to the battle of the forms, and then applying …

Why Same-Sex Marriage Will Not Repeat The Errors Of No-Fault Divorce, Austin R. Caster

Austin R Caster

Because so many negative ramifications resulted from changing marriage laws through no-fault divorce legislation, it is understandable that those who rightfully feared no-fault divorce would also fear any additional changes to the definition of marriage. Those fears are unfounded as applied to same-sex marriage legislation, however, because the same consequences resulting from no-fault divorce do not apply to same-sex marriage. Whereas changing marriage exit rights through laws such as no-fault divorce legislation resulted in an increased divorced rate throughout the world, the opposite has happened in countries that have allowed same-sex marriage laws by changing marriage entrance rights. Society has …

Negligent Insider Trading: A Viable Theory Of Civil Liability?, Steven Brody

Steven Brody

A flurry of civil suits by the SEC and private parties has followed on the heels of the collapse of the subprime mortgage market. Many of these actions raise theories of liability that are still developing in the area of white collar crime and securities fraud. As the SEC and private parties seek to explore new theories under which to bring suit, this article briefly addresses one as-yet unexplored avenue that many academic authorities have alluded to as possible under Section 17 of the Securities Act of 1933: that of “negligent insider trading.” While such a theory has yet to …

Towards A New Moral Paradigm In Health Care Delivery: Accounting For Individuals, Meir Katz

Meir Katz

For years, commentators have debated how to most appropriately allocate scarce medical resources over large populations. In this paper, I abstract the major rationing schema into three general approaches: rationing by price, quantity, and prioritization. Each has both normative appeal and considerable weakness. After exploring them, I present what some commentators have termed the “moral paradigm” as an alternative to broader philosophies designed to encapsulate the universe of options available to allocators (often termed the market, professional, and political paradigms). While not itself an abstraction of any specific viable rationing scheme, it provides a strong basis for the development of …

Estimating Monopoly Power With Economic Profits, Michael A. Williams, Kevin Kreitzman, Melanie S. Williams, William M. Havens

Melanie S. Williams

Monopolization and attempted monopolization are prohibited by section 2 of the Sherman Act. Proving the existence of monopoly power, however, is problematic. While direct evidence is sometimes available, more often courts rely on indirect—and sometimes highly disputed—evidence that firms have obtained or attempted to obtain monopoly power. Courts have been reluctant to rely on direct evidence of supra-normal profits as proof of monopoly power because (1) accounting profits as recorded in firms’ financial statements differ from economic profits, which fundamentally determine whether a firm as monopoly power, and (2) short-term, supra-normal profits are not, by themselves, evidence that a firm …

Bridging The Divide? Theories For Integrating Competition Law And Consumer Protection, Max Huffman

Max Huffman

No abstract provided.

Leveraged Buyout Bankruptcies, The Problem Of Hindsight Bias, And The Credit Default Swap Solution, Michael N. Simkovic, Benjamin S. Kaminetzky

Michael N Simkovic

No abstract provided.

The Unconstitutionality Of Current Legal Barriers To Telemedicine In The United States: Analysis And Future Directions Of Its Relationship To National And International Health Care Reform, Deth Sao, Amar Gupta

Deth Sao

The current health care crisis in the United States compels a consideration of the crucial role that telemedicine could play towards deploying a pragmatic solution. The nation faces rising costs and difficulties in access to and quality of medical services. Telemedicine can potentially help to overcome these challenges, as it can provide new cost-effective and efficient methods of delivering health care across geographic distances. The full benefits and future potential of telemedicine, however, are constrained by overlapping and often inconsistent and inadequate regulatory frameworks, as well as the repertoire of standards imposed by state governments and professional organizations. Proponents of …

A Consequential Approach To Interpretation And Interpretive Risk: Rethinking Judicial Intervention From Contracts To The Chrysler Bankruptcy, Juliet P. Kostritsky

Juliet P Kostritsky

Abstract When contracts remain ambiguous or incomplete, courts and scholars must confront the inevitable question of when intervention in private contracts is justified. To deal with the unresolution or residual uncertainty, the Austrian economists and the new textualists suggest that any intervention would be a fool’s errand. Their position amounts to an unvarying posture that any party asking for an additional term or a broad interpretation will always lose. Recognizing that there is an interpretive risk in all contracts, the court should adopt an interpretive methodology that parties would be willing to adopt and that would enhance the willingness of …

Individualism Submerged: Climate Change And The Perils Of An Engineered Environment, Juliet P. Stumpf, Daniel J. Chepaitis, Andrea Panagakis

Juliet P Stumpf

Current approaches to addressing the negative impacts of climate change rely on collective capabilities. Welfare economics and contractualism, the two conventional perspectives that dominate the debate, support the pursuit of adaptive strategies such as large-scale geoengineering projects to reduce solar radiation or ameliorate sea-water inundation. In place of returning greenhouse gas emissions to natural levels, these approaches put the global climate system and compensation for losses resulting from climate change under the control of some group of fellow humans. In other words, they privilege mechanisms that increase each individual=s dependence on a collective decisionmaker and decrease the individual=s capacity to …