Law Commons^™

Designing And Enforcing Preliminary Agreements, Albert H. Choi, George Triantis

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Preliminary agreements—variously labeled as memoranda of understanding, letters of intent, term sheets, commitment letters, or agreements in principle—are common in complex business transactions. They document an incomplete set of terms that the parties have agreed upon, while anticipating further negotiation of the remaining provisions. They often create legal obligations, particularly a duty to negotiate in good faith. This duty has been the subject of a substantial number of judicial opinions over the past few decades and yet continues to be regarded as a confusing and unpredictable issue in contract law. Legal scholarship is hamstrung in its analysis of the case …

Texas Gulf Sulphur And The Genesis Of Corporate Liability Under Rule 10b-5, Adam C. Pritchard, Robert B. Thompson

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This Essay explores the seminal role played by SEC v. Texas Gulf Sulphur Co. in establishing Rule 10b-5’s use to create a remedy against corporations for misstatements made by their officers. The question of the corporation’s liability for private damages loomed large for the Second Circuit judges in Texas Gulf Sulphur, even though that question was not directly at issue in an SEC action for injunctive relief. The judges considered both, construing narrowly “in connection with the purchase or sale of any security,” and the requisite state of mind required for violating Rule 10b-5. We explore the choices of the …

Piling On? An Empirical Study Of Parallel Derivative Suits, Stephen J. Choi, Jessica Erickson, Adam C. Pritchard

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Using a sample of all companies named as defendants in securities class actions between July 1, 2005 and December 31, 2008, we study parallel suits relying on state corporate law arising out of the same allegations as the securities class actions. We test several ways that parallel suits may add value to a securities class action. Most parallel suits target cases involving obvious indicia of wrongdoing. Moreover, we find that although a modest percentage of parallel suits are filed first, over 80 percent are filed after a securities class action (termed “follow-on” parallel suits). We find that parallel suits and, …

In Defense Of The Restatement Of Liability Insurance Law, Tom Baker, Kyle D. Logue

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The importance of liability law to the American system of justice, and to the US economy in general, are well known. Somewhat less well known, at least among non-lawyers, is the corresponding centrality of liability insurance. For most non-contractual legal claims for damages that are brought against individuals or firms, there is some form of liability insurance coverage. Such coverage, provided by state-regulated insurance companies, ranges from auto and homeowners’ policies (sold to consumers throughout the country) to commercial general liability policies (sold to businesses of all sizes) to professional liability policies of various sorts (including Directors and Officers coverage …

Class Action Myopia, Maureen Carroll

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Over the past two decades, courts and commentators have often treated the class action as though it were a monolith, limiting their analysis to the particular class form that joins together a large number of claims for monetary relief This Article argues that the myopic focus on the aggregated-damages class action has led to undertheorization of the other class-action subtypes, which serve far different purposes and have far different effects, and has allowed the ongoing backlash against the aggregated-damages class action to affect the other subtypes in an undifferentiated manner. The failure to confine this backlash to its intended target …

Halliburton Ii: A Loser's History, Adam C. Pritchard

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The Supreme Court was presented with an opportunity to bring fundamental reform to securities class actions last term in Halliburton Co. v. Erica P John Fund, Inc.. The Court ducked that opportunity, passing the buck to Congress to undo the mess that the Court had created a quarter century prior in Basic Inc. v. Levinson. Congress's history in dealing with securities class actions suggests that reform is unlikely to come from the legislature anytime soon. The Securities and Exchange Commission appears to be satisfied with the status quo as well. With these institutional actors resisting reform, corporations and …

Pay For Play: The Compensated Leisure Flaw Of Contract Damages, Mitchell L. Engler

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Contract damages aim to leave the injured party in as good a position as if the contract had been fulfilled. But discharged laborers often obtain a much better result due to the lack of a reduction for their excused work effort on breach. After first exposing the problematic ramifications of this unjustified deviation, this Article then provides two workable corrections.

Is Tort Law A Form Of Institutionalized Revenge, Gabriel S. Mendlow

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Viewed in a certain light, tort law serves primarily to give injury victims a means of imposing onerous burdens on their injurers. Through the remedy of injunction, tort law enables victims to restrict their injurers' freedom of action, and through the remedies of damages and restitution, tort law enables victims to deprive their injurers of money and other things of value. Moreover, tort law distinctively grants victims themselves the power to impose these burdens, rather than reserving prosecutorial discretion to the state. These features of tort law invite the charge that tort law is essentially a form of institutionalized revenge. …

What Does Tort Law Do? What Can It Do?, Scott Hershovitz

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It’s not hard to describe what tort law does. As a first approximation, we might say that tort empowers those who suffer certain sorts of injuries or invasions to seek remedies from those who brought about those injuries or invasions. The challenge is to explain why tort does that, or to explain what tort is trying to do when it does that. After all, it is not obvious that we should have an institution specially concerned with the injuries and invasions that count as torts.

After Philip Morris V. Williams: What Is Left Of The "Single-Digit" Ratio?, Anthony J. Sebok

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This short essay was written for a symposium on The Future of Punitive Damages held at the Charleston School of Law in 2007. I argue that the ratio rule (that punitive damages that exceed a single digit ratio presumptively violate the Due Process Clause), introduced by the Supreme Court in Campbell, is unlikely to survive. I argue this for three reasons. First, many lower courts have found ways to conceal punitive damages awards that impose, in reality, ratios in the double-digits. Second, the refusal of the Court to reverse the plaintiffs punitive damages award in Williams under the ratio rule …

Operationalizing Deterrence Claims Management (In Hopsitals, A Large Retailer, And Jails And Prisons), Margo Schlanger

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The theory that the prospect of liability for damages deters risky behavior has been developed in countless articles and books. The literature is far sparser, however, on how deterrence is operationalized. And prior work slights an equally important effect of damage actions, to incentivize claims management in addition to harm-reduction responses that are cost- rather than liabilityminimizing. This article works in the intersection of these two understudied areas, focusing on claims management steps taken by frequently sued organizations, and opening a window into the black box of deterrence to see how those steps may end up serving harm-reduction purposes as …

Mandatory Arbitration: Why It's Better Than It Looks, Theodore J. St. Antoine

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"Mandatory arbitration" as used here means that employees must agree as a condition of employment to arbitrate all legal disputes with their employer, including statutory claims, rather than take them to court. The Supreme Court has upheld the validity of such agreements on the grounds that they merely provide for a change of forum and not a loss of substantive rights. Opponents contend this wrongfully deprives employees of the right to a jury trial and other statutory procedural benefits. Various empirical studies indicate, however, that employees similarly situated do about as well in arbitration as in court actions, or even …

Requiem For Section 1983, Paul D. Reingold

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Section 1983 no longer serves as a remedial statute for the people most in need of its protection. Those who have suffered a violation of their civil rights at the hands of state authorities, but who cannot afford a lawyer because they have only modest damages or seek only equitable remedies, are foreclosed from relief because lawyers shun their cases. Today civil rights plaintiffs are treated the same as ordinary tort plaintiffs by the private bar: without high damages, civil rights plaintiffs are denied access to the courts because no one will represent them. Congress understood that civil rights laws …

Stoneridge Investment Partners V. Scientific-Atlanta: The Political Economy Of Securities Class Action Reform, Adam C. Pritchard

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I begin in Part II by explaining the wrong turn that the Court took in Basic. The Basic Court misunderstood the function of the reliance element and its relation to the question of damages. As a result, the securities class action regime established in Basic threatens draconian sanctions with limited deterrent benefit. Part III then summarizes the cases leading up to Stoneridge and analyzes the Court's reasoning in that case. In Stoneridge, like the decisions interpreting the reliance requirement of Rule 10b-5 that came before it, the Court emphasized policy implications. Sometimes policy implications are invoked to broaden the reach …

Zapata Retold: Attorneys' Fees Are (Still) Not Governed By The Cisg, Harry Flechtner, Joseph Lookofsky

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In this work, the authors reiterate and expand on their conclusion that the question of reimbursement for attorney fees incurred in the course of litigating a claim under the United Nations Sales Convention (CISG) is beyond the scope of the CISG, and is governed by domestic law. As discussed in the paper, this conclusion is in line with a recent CISG Advisory Council Opinion (Advisory Council Opinion No. 6) dealing with the calculation of damages under Article 74 of the CISG. We argue that relegating to domestic law the question of recovering attorney fees incurred during litigation over a CISG …

Hedonic Damages, Hedonic Adaptation, And Disability, Samuel R. Bagenstos, Margo Schlanger

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A number of states recognize hedonic damages as a separate category of recovery in tort and tort-like actions. Others consider lost enjoyment of life as an aspect of what are sometimes termed "disability" damages-damages for physical or mental impairment. Many other states permit juries to take account of lost enjoyment of life in setting compensation for pain and suffering or other forms of general damages. In all these jurisdictions, disability has loomed large. And the (explicit or implicit) view of disability is often one of tragic dependency and helplessness. As we show in Part I below, lawyers seeking hedonic damages …

Second Best Damage Action Deterrence, Margo Schlanger

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Potential defendants faced with the prospect of tort or tort-like damage actions can reduce their liability exposure in a number of ways. Prior scholarship has dwelled primarily on the possibility that they may respond to the threat of liability by augmenting the amount of care they take.1 Defendants (I limit myself to defendants for simplicity) will increase their expenditures on care, so the theory goes, when those expenditures yield sufficient liability-reducing dividends; more care decreases liability exposure by simultaneously making it less likely that the actors will be found to have behaved tortiously in the event of an accident and …

Buyers' Remedies In General And Buyers' Performance-Oriented Remedies (25th Anniversary Of The United Nations Convention On Contracts For The International Sale Of Goods), Harry Flechtner

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This paper focuses on Articles 45, 46 and 28 of the CISG - provisions that, despite their importance in the substantive scheme of the Convention, have not generated a great deal of case law or controversy. Article 45, the lead provision of Section III ("Remedies for Breach of Contract by the seller") of Part III, Chapter II of the CISG, provides an overview or catalogue of an aggrieved buyer's remedies (Article 45(1)), along with a rule that coordinates buyers' remedies (Article 45(2)) and a rule of general applicability for all of the buyers' remedies (Article 45(3)). Article 46 provides for …

Contracts Without Consent: Exploring A New Basis For Contractual Liability, Omri Ben-Shahar

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This Essay explores an alternative to one of the pillars of contract law, that obligations arise only when there is "mutual assent "--when the parties reach consensus over the terms of the transaction. It explores a principle of "no-retraction," under which each party is obligated to terms it manifested and can retract only with some liability. In contrast to the all-or-nothing nature of the mutual assent regime, where preliminary forms of consent are either full-blown contracts or create no obligation, under the no-retraction regime, obligations emerge gradually, as the positions of the negotiating parties draw closer. Further, the no-retraction liability …

Indemnity, Liability, Insolvency, David G. Carlson

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Suppose A has a claim against B. B has a claim over against C. B, however, is insolvent and has not actually paid A. B's only asset is, in fact, B v C. To what extent can C claim that B v C is valueless - that B was not damaged because B was too broke to pay A?

This paper argues that the fundamental legal distinction between indemnity and liability is beginning to dissolve, because B can always pay A (and thereby give value to B v C) by borrowing the amount B owes and using B v C …

A Taxing Settlement, Hanoch Dagan, James J. White

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The following essay is based on the talk "Government, Citizens, and Injurious Industries: A Case Study of the Tobacco Litigation," delivered by Hanoch Dagan last May to the Detroit Chapter of the International Association of Jewish Lawyers and Jurists, and on the article "Governments, Citizens, and Injurious Industries," by Dagan and James J. White, '62, which appeared in 75.2 New York University Law Review 254-428 (May 2000). The authors hold conflicting view on the underlying issue of this topic: tobacco company product liability. Professor Dagan holds the position that tobacco companies are liable for harm done by their products; Professor …

Inmate Litigation, Margo Schlanger

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In 1995, prison and jail inmates brought about 40,000 new lawsuits in federal court nearly a fifth of the federal civil docket. Court records evidence a success rate for inmate plaintiffs under fifteen percent. These statistics highlight two qualities long associated with the inmate docket: its volume and the low rate of plaintiffs' success. Then, in 1996, Congress enacted the Prison Litigation Reform Act (PLRA), which dramatically altered the litigation landscape, restricting inmates' access to federal court in a variety of ways. This Article examines inmate litigation before and after the PLRA. Looking first at the litigation process itself, it …

What Did Punitive Damages Do? Why Misunderstanding The History Of Punitive Damages Matters Today, Anthony J. Sebok

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In 2001 the Supreme Court, in Cooper Industries, Inc. v. Leatherman Tool Group, Inc. suggested that, although modern punitive damages punish, in earlier times they almost exclusively compensated for noneconomic damages that were ignored by a less progressive legal system. This article demonstrates that the historical foundation upon which the Supreme Court bases its argument is groundless. In the Eighteenth and Nineteenth Centuries punitive damages served a number of functions, but none of them were to provide the noneconomic damages identified by the court. Instead, as the article shows, the sort of injuries for which punitive damages were once demanded …

Reverberations From The Collision Of Tort And Warranty (Products Liability Law Symposium In Memory Of Professor Gary T. Schwartz), James J. White

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In his famous Stanford Law Review article, When Worlds Collide,' Professor Marc Franklin foretold the troubles for American law in the impending collision of the tort of strict liability with the warranty of merchantability.2 We daily suffer the reverberations from that collision as courts struggle with the proper application of strict tort liability and breach of warranty in products liability cases. Lawyers who have not studied Article 2 of the Uniform Commercial Code (U.C.C.) are surprised to learn that virtually every buyer who has a strict tort claim for an injury caused by a defective product also has a potential …

Who Cares?, Adam C. Pritchard

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Jim Cox and Randall Thomas have identified an interesting phenomenon in their contribution to this symposium: institutional investors seem to be systematically "leaving money on the table" in securities fraud class actions. For someone who approaches legal questions from an economic perspective, the initial response to this claim is disbelief. As the joke goes, economists do not bend over to pick up twenty-dollar bills on the street. The economist knows that the twenty dollars must be an illusion. In a world of rational actors, someone else already would have picked up that twenty-dollar bill, so the effort spent bending over …

Patent Infringement Damages In Japan And The United States: Will Increased Patent Infringement Damage Awards Revive The Japanese Economy?, Toshiko Takenaka

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This Article will look at the impact of the new Japanese legislation on patent infringement damages and will discuss whether the increase in damage awards contributes to the creation of breakthrough technology. To understand this impact, Part I will discuss pre-1998 legislation damages and highlight the difference between damages awarded by United States courts and those awarded by Japanese courts, by comparing United States and Japanese case examples. In examining the general tort and patent law theories, Part I will also try to identify the source of the difference and discuss how this difference is reflected in current United States …

Governments, Citizens, And Injurious Industries, Hanoch Dagan, James J. White

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In this Article, Professors Hanoch Dagan and James White study the most recent challenge raised by mass torts litigation: the interference of governments with the bilateral relationship between citizens and injurious industries. Using the tobacco settlement as their case study, Dagan and White explore the important benefits and the grave dangers of recognizing governments' entitlement to reimbursement for costs they have incurred in preventing or ameliorating their citizens' injuries. They further demonstrate that the current law can help capture these benefits and guard against the entailing risks, showing how subrogation law can serve as the legal foundation of the governments' …

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

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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 …

An Essay On Texas V. Lesage, Christina B. Whitman

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When I was invited to participate in this symposium, I was asked to discuss whether the causation defense developed in Mt. Healthy City School District Board of Education v. Doyle applied to cases challenging state action under the Equal Protection Clause of the Fourteenth Amendment. As I argue below, it seems clear that Mt. Healthy does apply to equal protection cases. The Supreme Court explicitly so held last November in Texas v. Lesage. But the implications of Lesage go beyond questions of causation. The opinion suggests that the Court may be rethinking (or ignoring) its promise in Carey v. Piphus …

Markets As Monitors: A Proposal To Replace Class Actions With Exchanges As Securities Fraud Enforcers, Adam C. Pritchard

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Fraud in the securities markets has been a focus of legislative reform in recent years. Corporations-especially those in the high-technology industry-have complained that they are being unfairly targeted by plaintiffs' lawyers in class action securities fraud lawsuits. The corporations' complaints led to the Private Securities Litigation Reform Act of 1995 ("Reform Act"). The Reform Act attempted to reduce meritless litigation against corporate issuers by erecting a series of procedural barriers to the filing of securities class actions. Plaintiffs' attorneys warned that the Reform Act and the resulting decrease in securities class actions would leave corporate fraud unchecked and deprive defrauded …