Law Commons^™

Is There A Delaware Effect For Controlled Firms?, Edward Fox

Articles

The impact of Delaware incorporation on firm value remains a central question in corporate law. Despite the difficulty scholars have had in agreeing on an answer to this question, there is a consensus that Delaware has long enjoyed stable and important advantages in the expertise of its judiciary and its extensive case law. These advantages are believed to be particularly important for firms with a controlling shareholder. This Article attempts to empirically measure the effect of Delaware incorporation on these controlled firms and thus helps us understand the market value of Delaware’s judiciary and case law. It finds, surprisingly, that …

Informed Trading And Its Regulation, Merritt B. Fox, Lawrence R. Glosten, Gabriel V. Rauterberg

Articles

Informed trading--trading on information not yet reflected in a stock's price-- drives the stock market. Such informational advantages can arise from astute analysis of varied pieces of public news, from just released public information, or from confidential information from inside a firm. We argue that these disparate types of trading are all better regulated as part of the broader phenomenon of informed trading. Informed trading makes share prices more accurate, enhancing the allocation of capital, but also makes markets less liquid, which is costly to the efficiency of trade. Informed trading thus poses a fundamental trade-off in how it affects …

Economic Crisis And The Integration Of Law And Finance: The Impact Of Volatility Spikes, Edward G. Fox, Merritt B. Fox, Ronald J. Gilson

Articles

The 2008 financial crisis raised puzzles important for understanding how the capital market prices common stocks and in turn, for the intersection between law and finance. During the crisis, there was a dramatic five-fold spike, across all industries, in “idiosyncratic risk”—the volatility of individual-firm share prices after adjustment for movements in the market as a whole.

This phenomenon is not limited to the most recent financial crisis. This Article uses an empirical review to show that a dramatic spike in idiosyncratic risk has occurred with every major downturn from the 1920s through the recent financial crisis. It canvasses three possible …

Contribution Of A Built-In Loss To A Partnership, Douglas A. Kahn

Articles

Before 2004, it was possible to use the partnership tax provisions of the code to shift the benefit ofa loss deduction for a decline in property valuefrom the person who incurred it to another person.One method of accomplishing that goal involvedthe contribution of depreciated property to a partnership.

Cute Prickly Critter With Presbyopia, Don Herzog

Reviews

Ronald Dworkin's' latest, long-awaited, and most ambitious book is a puzzle. Truth in advertising first: despite the title, this isn't centrally a book about justice. It's a book about the realm of value-all of that realm. Dworkin is most interested here in morality, but really touches on all of it, as a matter of the application of the abstract argument and sometimes in black and white right on the page, from aesthetics to prudence to morality to politics to law to . . . . It's fun to read, also frustrating. It stretches out lazily in handling some issues but …

Bankruptcy Noir, James J. White

Articles

In Bankruptcy Fire Sales, Professor LoPucki and Dr. Doherty do two things. First, they present provocative data about the relative payoff to be had in Chapter 11 by a full reorganization compared with the payoff from a section 363 sale without a full reorganization. Second, they give a yet more provocative explanation for their data. Taking a page from Professor LoPucki's recent book, they blame the meager return that they observe on 363 sales on the unprincipled behavior of the lawyers, managers, creditors, investment bankers, and even judges involved in the sales. Messrs. LoPucki and Doherty's data appear to …

Is A Gift Forever?, William I. Miller

Articles

What are the rules regarding gifts you receive? Can you give them away? If so, must you conceal that you have done so from the original giver? Or is there a statute of limitations, after which any right the original giver has to feel wronged or to burden you with guilt for undervaluing it by giving it away rightly expires? Even an heirloom might exhaust its sacredness. Sometimes the sacred has a half-life, as might be the case, for instance, with your grandmother’s dining set. Can the giver ask for his gifts back if you try to give them away? …

The Irrational Auditor And Irrational Liability, Adam C. Pritchard

Articles

This Article argues that less liability for auditors in certain areas might encourage more accurate and useful financial statements, or at least equally accurate statements at a lower cost. Audit quality is promoted by three incentives: reputation, regulation, and litigation. When we take reputation and regulation into account, exposing auditors to potentially massive liability may undermine the effectiveness of reputation and regulation, thereby diminishing integrity of audited financial statements. The relation of litigation to the other incentives that promote audit quality has become more important in light of the sea change that occurred in the regulation of the auditing profession …

Public Ruses, James E. Krier, Christopher Serkin

Articles

The public use requirement of eminent domain law may be working its way back into the United States Constitution. To be sure, the words "public use" appear in the document-and in many state constitutions as well, but the federal provision applies to the states in any event-as one of the Fifth Amendment's limitations on the government's inherent power to take private property against the will of its owners. (The other limitation is that "just compensation" must be paid, of which more later.) Any taking of private property, the text suggests, must be for public use. Those words, however, have amounted …

How To Be A Moorean, Donald H. Regan

Articles

G. E. Moore’s position in the moral philosophy canon is paradoxical. On the one hand, he is widely regarded as the most influential moral philosopher of the twentieth century. On the other hand, his most characteristic doctrines are now more often ridiculed than defended or even discussed seriously. I shall discuss briefly a number of Moorean topics—the nonnaturalness of “good,” the open question argument, the relation of the right and the good, whether fundamental value is intrinsic, and the role of beauty—hoping to explain how a philosophically informed person could actually be a Moorean even today.1

The Value Of Rational Nature, Donald H. Regan

Articles

Kant tells us in the Groundwork of the Metaphysics of Morals that rational nature is an end in itself; that it is the only thing which is unconditionally valuable; and that it is the ultimate condition of all value.1 A striking trend in recent Kant scholarship is to regard these value claims, rather than the formalism of universalizability, as the ultimate foundation of Kant’s theory.2 But does rational nature as Kant conceives it deserve such veneration? Can it really carry the world of value on its shoulders? I think not. As will become clear, I do not doubt the value …

Corporate Governance Lessons From Russian Enterprise Fiascos, Merritt B. Fox, Michael A. Heller

Articles

This Article draws on a rich array of deviant behavior in Russian enterprises to craft lessons for corporate governance theory. First, Professors Fox and Heller define corporate governance by looking to the economic functions of the firm. Based on this definition, they develop a typology that comprehensively shows all the channels through which bad corporate governance can inflict damage on a country's real economy. Second, they explain the causes of Russian enterprise fiascoes by looking to the particular initial conditions prevailing at privatization-untenable firm boundaries and insider allocation of firm shares-and the bargaining dynamics that have followed. This focus offers …

The Secrecy Interest In Contract Law, Omri Ben-Shahar, Lisa Bernstein

Articles

A long and distinguished line of law-and-economics articles has established that in many circumstances fully compensatory expectation damages are a desirable remedy for breach of contract because they induce both efficient performance and efficient breach. The expectation measure, which seeks to put the breached-against party in the position she would have been in had the contract been performed, has, therefore, rightly been chosen as the dominant contract default rule. It does a far better job of regulating breach-or-perform incentives than its leading competitors-the restitution measure, the reliance measure, and specific performance. This Essay does not directly take issue with the …

Revaluing Restitution: From The Talmud To Postsocialism, Michael A. Heller, Christopher Serkin

Reviews

Whatever happened to the study of restitution? Once a core private law subject along with property, torts, and contracts, restitution has receded from American legal scholarship. Few law professors teach the material, fewer still write in the area, and no one even agrees what the field comprises anymore. Hanoch Dagan's Unjust Enrichment: A Study of Private Law and Public Values threatens to reverse the tide and make restitution interesting again. The book takes commonplace words such as "value" and "gain" and shows how they embody a society's underlying normative principles. Variations across cultures in the law of unjust enrichment reflect …

Gewirth On Necessary Goods: What Is The Agent Committed To Valuing?, Donald H. Regan

Book Chapters

In this chapter I shall be concerned with stage I of Gewirth's argument, in which he argues that the agent must value her freedom and well-being as necessary goods. Stage I has attracted less criticism over the years than stages II and III, but even so, a good deal has been written about it. I do not claim to have found any brand new objection to Gewirth's argument. The core of my objection occurred to me during my first reading of Reason and Morality, and it obviously occurred to a number of other people as well. 3 But it is …

Corporations, Criminal Law And The Color Of Money, Joseph Vining

Articles

This part of From Newton's Sleep, published by Princeton University Press in 1995 and in a paperback edition in early 1997, is reprinted by permission of the publisher. From Newton's Sleep is a book on the legal form of thought and its meaning for science and religion. It consists of some two hundred and fifty self-contained pieces arranged in eight sections. In its form, the book is much like and is meant to be much like the material with which lawyers routinely deal. Here, Law Quadrangle Notes excerpts a piece that touches on a subject of lively debate today, among …

Getting To No: A Study Of Settlement Negotiations And The Selection Of Cases For Trial, Samuel R. Gross, Kent D. Syverud

Articles

A trial is a failure. Although we celebrate it as the centerpiece of our system of justice, we know that trial is not only an uncommon method of resolving disputes, but a disfavored one. With some notable exceptions, lawyers, judges, and commentators agree that pretrial settlement is almost always cheaper, faster, and better than trial. Much of our civil procedure is justified by the desire to promote settlement and avoid trial. More important, the nature of our civil process drives parties to settle so as to avoid the costs, delays, and uncertainties of trial, and, in many cases, to agree …

Proprietary Rights And The Norms Of Science In Biotechnology Research, Rebecca S. Eisenberg

Articles

As basic research in biotechnology yields increasing commercial applications, scientists and their research sponsors have become more eager to protect the commercial value of research discoveries through intellectual property law. Some scientists fear that these commercial incentives will weaken or even undermine the norms that have traditionally governed scientific research. In this Article, Professor Eisenberg examines the interaction of proprietary rights in inventions with these traditional scientific norms. Trade secrecy, she argues, is an undesirable strategy for protection of basic research discoveries because it impedes dissemination of new knowledge to the scientific community. She finds that patent law is in …

Duties Of Preservation, Donald H. Regan

Book Chapters

The central philosophical problem concerning our duties with regard to nature is this: We are strongly inclined to think we have certain duties which are not fully accounted for by instrumental arguments. We are also strongly inclined to hold a view about value that seems to make it impossible to account for these duties by any noninstrumental arguments. Hence our perplexity. It seems that we have duties to respect living creatures; to avoid causing the extinction of species; even to preserve complex parts of the environment s uch as a tropical rain forest or the Grand Canyon. If we ask …

Public Utility Valuation, Edwin C. Goddard

Articles

It has been so often remarked that the "valuation" of public utilities is determined by no rule of thumb, that there are no fixed rules or formulas to guide courts or commissions, that determination of value as a rate base is matter of judgment and discretion in each case, Minnesota Rate Cares, 230 U. S. 352, 434, that the statement has come to be believed by reason in part of its much repetition. It is usually accepted as axiomatic. The glorious uncertainty resulting from such an admission will continue so long as judgments of one man or set of men …

Public Utility Valuation - Cost Of Reproduction Theory And The World War, Edwin C. Goddard

Articles

The very grave objections to the cost-of-reproduction theory of valuation of public utilities was pointed out at large in 15 MICH. L. REV. 205. The violent price changes following the World War have greatly increased the weight of these objections to calling anything a base which rests on such uncertainties and fluctuations as cost-of-reproduction. A base should be stable, but this has the stability Of a flying machine. There had been a rising curve of costs from 1893 to 1916, but since that date the rise has been almost vertical. The public utilities by- the thousands desire to take advantage …

Public Utility Valuation - Going-Concern Value In Rate Making, Edwin C. Goddard

Articles

What is the effect of a city ordinance which proposes to a public utility company the terms on which it may dispose of its product to the users, but which is rejected by the company? As to a company not yet doing business it is clear that the ordinance when rejected becomes a mere legal nullity. It never was more than an offer that might ripen into a binding contract by acceptance. That it is by no means a nullity as to a utility actually operating in the city after the expiration of its franchise and as a mere tenant …

Public Utility Valuation, Edwin C. Goddard

Articles

EVERY consideration of valuation of a public utility, whether for the purpose of condemnation for purchase or as a basis for fixing rates or permitting the issue of stock or bonds, must start from Sinyth v. Ames, and the rule therein laid down by HARLAN, J., at page 546: "We hold, however, that the basis of all calculations as to the reasonableness of rates to be charged by a corporation maintaining a highway under legislative sanction must be the fair value of the property being used by it for the convenience of the public. And in order to ascertain that …

The Effect Of The Carmack Amendment To The Hepburn Act Upon Limitation By Common Carriers Of The Amount Of Their Liability, Edwin C. Goddard

Articles

Two cases, decided by the Supreme Court of the United States on March 1O, 1913, may be considered together. They are developments of the cases reviewed in 11 MICH. L. Rev. 460. Plaintiff shipped two boxes and a barrel of "household goods" under an agreement that the goods, in case of loss, should be valued at $5 per hundred-weight. One box, weighing not over 200 pounds and actually worth $75, was lost. The Supreme Court of Arkansas affirmed a judgment against the carrier for the full value. 91 Ark. 97, 121 S. W. 932, 134 A. S. R. 56. On …

Valuing Property And Franchises Of Public Service Corporations For Fixing Rates, Horace Lafayette Wilgus

Articles

The Supreme Court of the United States has recently decided two important cases relating to the proper valuation of the property of public service corporations for the purpose of fixing rates to be charged for their services. These are Knoxille v. Knoxville Water Company, 211 U. S.--. 29 S. C. 148, and Willcox Y. Consolidated Gas Co.. -- U. S. --. 29 S. C. 192,a both decided January 4, 1909.

Remedies Of Illegal Taxation, Thomas M. Cooley

Articles

Taxation is to a nation what the circulation of the blood is to he individual; absolutely essential to life. In ordinary times it is the chief burden which government imposes upon the people, and is likely, therefore, to be the greatest source of discontent. This renders it of the utmost importance that taxation should as nearly as possible be just, and also that it should appear to those who pay it to be just. Absolute justice, however, is unattainable.

Principles That Should Govern In The Framing Of Tax Laws, Thomas M. Cooley

Articles

The problem of suitable and justtaxation is one which is forever demanding solution, butnever solved. Adam Smith gave to the world certain rules which should governin taxation, the first of which was that "The subjects of every state ought to contribute towards the support of the government as nearly as possible in proportion to their respective abilities - that is, in proportion to the revenue which they respectively enjoy under the protection of the state." While most writers on political economy have been disposed to accept this as a sound and just rule, some have objected to it that it …