Law Commons^™

The Sec’S Climate Disclosure Rule: Critiquing The Critics, George S. Georgiev

Faculty Articles

Climate change is an existential phenomenon, which entails a wide variety of physical risks as well as sizeable but underappreciated economic risks. In March 2022, the U.S. Securities and Exchange Commission (SEC) moved to address some of the information gaps related to the effects of climate change on firms by proposing a rule that requires public companies to report detailed and standardized information about important climate-related matters for the benefit of investors and markets. Though the rule proposal was welcomed by many market participants, it was also met with a level of opposition that was unusual in both its intensity …

Law, Growth, And The Identity Hurdle: A Theory Of Legal Reform, Martin W. Sybblis

Faculty Articles

This Article offers a new theoretical approach to understanding resistance to legal change in the corporate and commercial context by introducing the sociological concept of "community economic identity" (CEI) into legal scholarship. I argue that community leaders (typically, but not exclusively, from the political, legal, and business spheres) generate public and recognizable identities-e.g., "Coal Country" or "Motor City"-with respect to some commercial activities. These identities influence how law reform is conceived and deployed within jurisdictional boundaries (i.e., country, state, town, region, etc.). CEI complicates the prevailing public choice narrative regarding the influence of special interests in the law reform process. …

Regulatory Competition And State Capacity, Martin W. Sybblis

Faculty Articles

This Article explores an underlying tension in the regulatory competition literature regarding why some jurisdictions are more attractive to firms than others. It pays special attention to offshore financial centers (OFCs). OFCs court the business of nonresidents, offer business friendly regulatory environments, and provide for minimal, if any, taxation on their customers. On the one extreme, OFCs are theorized as merely products of legislative capture— thereby lacking any meaningful agency of their own. On the other hand, OFCs are conceptualized as well-governed jurisdictions that attract investment because of the high quality of their laws and legal institutions—indicating some ability to …

Securities Disclosure As Soundbite: The Case Of Ceo Pay Ratios, Steven A. Bank, George S. Georgiev

Faculty Articles

This Article analyzes the history, design, and effectiveness of the highly controversial CEO pay ratio disclosure rule, which went into effect in 2018. Based on a regulatory mandate contained in the Dodd-Frank Act of 2010, the rule requires public companies to disclose the ratio between CEO pay and median worker pay as part of their annual filings with the Securities and Exchange Commission (SEC). The seven-year rulemaking process was politically contentious and generated a level of public engagement that was virtually unprecedented in the long history of the SEC disclosure regime. The SEC sought to minimize compliance costs by providing …

Aligning Incentives And Cost Allocation In Discovery, Jonathan R. Nash, Joanna M. Shepherd

Faculty Articles

Recent proposals to revise Federal Rule of Civil Procedure 26 to incorporate cost allocation of discovery have sparked considerable controversy. Advocates for reform argue that replacing the long-standing “producer-pays” presumption with something more akin to a “requester-pays” rule would better align economic incentives and reduce litigants’ ability to wield discovery as an instrument to force settlement. Opponents argue that such a reform would limit access to justice by saddling requesters with an ex ante burden of funding the opposition’s discovery.

In this Article, we explain that either a rule requiring both parties to share the costs of discovery (“cost-sharing rule”) …

Precarious Existence And Capitalism: A Permanent State Of Exception, Tayyab Mahmud

Faculty Articles

The contemporary neoliberal era is marked by an exponential expansion of contingent and precarious labor markets. In this context, the construct of precarity emerged to signify labor conditions of permanent insecurity and precariousness. Coming at the heels of the era of Keynesian welfare, precarity is mostly seen as an exception to the normal trajectory of capitalist formations. The basic argument of this paper is that under capitalism, for the working classes precarious existence is the norm rather than the exception. Precarity is the outcome not only of insecurities of labor markets but also of capital’s capture and colonization of life …

The Possible Advantages Of Islamic Financial Jurisprudence: An Empirical Study Of The Dow Jones Islamic Market Index, Russell Powell, Arthur Delong

Faculty Articles

The Islamic financial system experienced a disproportionately smaller economic hardship in 2008 and 2009 because adherence to Shariʿa tends to encourage conservative investment approaches. Islamic mutual funds were prohibited from investing in the non-Islamic financial sector, highly leveraged companies, and various derivative instruments. Ultimately, this conservative investment approach may have been an effective strategy for mitigating downside risk. The article analyzes the fundamental classical legal requirements that pertain to modern Islamic finance, compares the modern view of Islamic equity investing and its secular capitalist counterpart, explores whether adherence to Shariʿa principles, as defined by the Dow Jones Islamic Market Index, …

The Irs Tea Party Controversy And Administrative Discretion, Lily Kahng

Faculty Articles

The IRS Tea Party controversy erupted when the Treasury Inspector General issued a report finding that IRS employees in the Cincinnati office had targeted certain organizations’ applications for tax exempt status for heightened scrutiny, in particular singling out groups with “Tea Party” or “Patriot” in their names. A media firestorm ensued, with fevered speculation about a hidden political agenda extending all the way to the White House. A complete picture of the controversy has yet to emerge, but as of the writing of this Essay, it appears that the worst suspicions about political bias are unfounded. Nonetheless, the IRS has …

Debt And Discipline: Neoliberal Political Economy And The Working Classes, Tayyab Mahmud

Faculty Articles

Over the last three decades, neoliberal restructuring of the economy created a symbiosis of debt and discipline. New legal regimes and strategic use of monetary policy displaced Keynesian welfare, facilitated financialization of the economy, broke the power of organized labor, and expanded debt to sustain aggregate demand. Public laws and policies created a field of possibility within which financial markets extended their reach and brought ever-increasing sections of the working classes and the marginalized within the ambit of the credit economy. Reordered public policies and new norms of personal responsibility demarcated the horizon within which the economically vulnerable pursued strategies …

Economic Efficiency Versus Public Choice: The Case Of Property Rights In Road Traffic Management, Jonathan R. Nash

Faculty Articles

This Article argues, using the case of responses to traffic con­gestion, that public choice theory provides a greater explanation for the emergence of property rights than does economic efficiency. The tradi­tional solution to traffic congestion is to provide new roadway capacity, but that is not an efficient response in that it does not lead to internaliza­tion of costs and may actually exacerbate congestion problems by induc­ing travel that would not have taken place but for the new construction. By contrast, congestion charges, which impose tolls designed to internal­ize the costs of driving, offer an efficient way to address the problem …

Controlling Above-Cost Predation: An Alternative To Weyerhaeuser And Brooke Group, Jack Kirkwood

Faculty Articles

This article proposes a new legal standard for predatory pricing, predatory bidding, and possibly other forms of exclusionary pricing - the welfare/economic sense standard. Under this standard, the plaintiff would have to show that the challenged conduct was not only profitable to the defendant but harmful to the long-run welfare of consumers or suppliers. Moreover, even if the plaintiff made that showing, the defendant would escape liability if it proved that its conduct made economic sense without regard to its anticompetitive effects. The article argues that the new standard is superior to the below-cost/recoupment standard of Brooke Group and Weyerhaeuser …

Beyond Abstraction: The Law And Economics Of Copyright Scope And Doctrinal Efficiency, Matthew Sag

Faculty Articles

Uncertainty as to the optimum extent of protection generally limits the capacity of law and economics to translate economic theory into coherent doctrinal recommendations in the realm of copyright. This Article explores the relationship between copyright scope, doctrinal efficiency, and welfare from a theoretical perspective to develop a framework for evaluating specific doctrinal recommendations in copyright law.

The usefulness of applying this framework in either rejecting or improving doctrinal recommendations is illustrated with reference to the predominant law and economics theories of fair use. The metric-driven analysis adopted in this Article demonstrates the general robustness of the market-failure approach to …

The Entrepreneur And The Theory Of The Modern Corporation, Charles O'Kelley

Faculty Articles

The foremost description of the classic entrepreneur, immediately prior to the Great Depression and now, was presented by Frank Knight in his seminal work, Risk, Uncertainty, and Profit. In this Article, I will explicate Knight's theory of the entrepreneur and show how it relates to both the Berle-Means Paradigm and the nexus-of-contracts theory of the corporation. My effort here is in part intellectual history and in part the tentative beginnings of a new positive account of the corporation. In the latter regard, this Article takes only the first step in what may prove a quite exhaustive effort to re-plow the …

The H’Aint In The (School) House: The Interest Convergence Paradigm In State Legislatures And School Finance Reform, Bryan Adamson

Faculty Articles

The purpose of this essay is to examine recent school funding litigation to illuminate the interest convergence paradigm, using the school finance reform controversy in Ohio as an example. Part I describes how the school finance reform debate is an extension of our nation's desegregation history. Part II looks at the school funding controversy in Ohio, highlighting legislator and citizen attitudes toward school finance litigation and public school funding along racial and geographic lines. Part III identifies six interests which emerge in the school funding dispute, arguing that these interests must be taken into account by legislators in crafting school …

Foreword: The Many Passions Of Teaching Corporations, Charles O'Kelley

Faculty Articles

Teachers of Corporations share a passion for their subject and consider this first course in the business law curriculum to have fundamental importance for all law-trained professionals. Seemingly, however, we agree on little else, including the substantive focus of the course, the nature of the course materials, and the insights that teachers should convey. In fact, Corporations differs dramatically from school to school. Some teachers focus substantial attention on unincorporated business associations, while others cover only corporation law. Some who teach exclusively about the corporation emphasize closely held firms, while others highlight the law related to publicly traded entities. Likewise, …

Appendix: The Sleeves From Our Vest: Naming A Perpetuities Non-Event, Mark Reutlinger, John Weaver

Faculty Articles

Professors Mark Reutlinger and John Weaver examine the conceptual dilemma that Professor Reutlinger encountered in the course of developing the series of diagrams to illustrate the Rule Against Perpetuities described in the accompanying article. To describe it briefly (if not simply), the perpetuities period for a special or testamentary power of appointment begins when the power is created (not exercised), and it ends when the appointed interest vests. Applying the "relation back" doctrine, the appointment is treated, for perpetuities purposes, as if it were a gift by the donor, rather than the donee. Under the "second look" doctrine, however, one …

Sex Stories: A Review Of Sex And Reason, Margaret Chon

Faculty Articles

In this review of Sex Stories-A Review Of Sex And Reason by Richard A. Posner, Professor Chon explores the implications of Posner’s exuberant faith in bioeconomic reasoning, unalloyed by any of the late modernist or postmodernist challenges to the nature and limits of science and its transformative potential. In doing so, Professor Chon attempts three things. First, she discusses some of his sociobiological assertions in order to demonstrate that evolutionary biology consists of a much richer and more contradictory set of assertions than Posner would have us believe. Even within the empiricist framework, therefore, Posner leaves out many stories that …

Economics And The Environment: Trading Debt And Technology For Nature, Catherine O'Neill, Cass R. Sunstein

Faculty Articles

In this article, Professor O’Neill and Professor Sunstein first explore and suggest improvements in current debt-for-nature swaps, with the ultimate aim of defending the use of economic incentives and Paretian principles in the context of international environmental policy. Second, they examine some of the limitations of the exchange of debt for nature, and thus suggest an alternative exchange that overcomes those limitations. The exchange they envision is quite simple. Developed nations would transfer to developing nations environmentally advanced technologies, particularly technologies designed to increase efficient energy use or to replace non-renewable sources with renewable sources of energy. In return, developing …

Opting In And Out Of Fiduciary Duties In Cooperative Ventures: Refining The So-Called Coasean Contract Theory, Charles O'Kelley

Faculty Articles

Professor O’Kelley comments on a familiar problem in the law of closely held business associations - the alleged exploitation of weaker or minority investors by stronger or majority participants. The fact pattern is simple. At the outset of the cooperative venture, a stronger participant assumes the role of proprietor, partner, or majority shareholder, while the weaker participant assumes the role of agent, partner, or minority shareholder. For whatever reason, the venturers do not explicitly guarantee or protect the weaker participant’s right to income or continued participation in the venture. Consequently, at some later date the stronger participant reduces or eliminates …

A Modern Proposal, Sidney Delong

Faculty Articles

This article humorously explains Jonathan Swift’s intention when he wrote “A Modest Proposal for Preventing the Children of Ireland from Being a Burden to Their Parents or Country.” Swift was not writing satirically, his analysis was purely written from an economic standpoint as was Landes and Posner’s modern proposal. Landes and Posner recognized the allocative efficiencies and wealth gains that can be realized when property rights are created in noncommodities, such as people, as did Jonathan Swift.

The Efficiency Of A Disgorgement As A Remedy For Breach Of Contract, Sidney Delong

Faculty Articles

Economic analysis suggests that to give a contract promise a general remedy that would require a breaching promisor to disgorge any benefit of breach would hinder the efficient post-contractual reallocation of performance resources. This article explores certain situations in which disgorgement appears to be an efficient remedy for breach of contract, including cases in which the breaching party refuses to pay contract damages at the time of breach. A rule permitting promisees to recover as "prejudgment interest" the breacher's benefit from withholding payment of damages would, in theory, be efficient in allocating the risk of the breacher's credit worthiness to …

North Carolina's Medicaid Program: The Effects Of The Reagan-Era Budget Reductions, Ken Wing

Faculty Articles

This article is principally a description of the current program and the legislative and administrative changes made in response to the recent federal budget cuts, an assessment of the state's current cost containment strategy, and an analysis of the options facing North Carolina in the years to come.

Fear And Loathing In Perpetuities, John Weaver

Faculty Articles

Professor Weaver explains how we need to look at how the Rule Against Perpetuities is taught and how it may be taught more successfully. The Rule presents its greatest challenge to those who should know it best-law professors. If law professors can teach the Rule to the future judges, lawyers, and legislators who deal daily with the Rule, then mistakes will not be made and reform will succeed. In this essay, Professor Weaver presents a method that he has developed for teaching the Rule. While some of it is no more than a general application of normal law school methods, …

Cash Deposits - Burdens And Barriers In Access To Utility Services, John B. Kirkwood

Faculty Articles

The utilities are free from statutory limitations on their deposit rules, practices differ, but most utilities use very broad criteria of income and net worth to select those consumers from whom they will demand a deposit. Under these broad deposit rules it is not surprising that the poor pay virtually all deposits, or that often high income residential areas are exempted altogether from the impact of cash deposits. Such rules impose severe burdens on depositors without proportionately benefitting the utilities, for deposits usually save utilities insignificant amounts of money. For example, estimations of the California Public Utilities Commission in 1967 …