Law Commons^™

Controlling Creditor Opportunism, Jonathan C. Lipson

Jonathan C. Lipson

This paper addresses problems of creditor opportunism. “Distress investors” such as hedge funds, private equity funds, and investment banks are opportunistic when they use debt to obtain control of a financially troubled firm and extract improper gains at the expense of the firm and its other stakeholders. Examples include the mis-use of private information to short-sell a borrower’s securities and creditor self-dealing.

Creditors can act opportunistically because legal doctrines that historically checked such behavior—e.g., “lender liability”—have not kept pace with fundamental changes in the market for control of distressed firms. The recent Dodd-Frank financial reform is not likely to change …

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.

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.

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.