Law Commons^™

Compensation Representatives: A Prudent Solution To Excessive Ceo Pay, Lawton W. Hawkins

ExpressO

Currently, CEO pay is determined by a company’s board of directors, subject to limited shareholder approval in certain circumstances. However, as Lucian Bebchuk and Jesse Fried have demonstrated, boards of directors and CEOs do not necessarily engage in real arms length bargaining over CEO pay. Instead, CEOs may exert managerial power to extract economic rents above and beyond what they could have obtained in an arms length negotiation. To address the problem, Bebchuk and Fried have proposed that large shareholders be allowed to nominate candidates for the board, and that companies be required to pay the expenses for any proxy …

Why Do We Know What We Know? Reevaluating The Economic Case Against Pre-Contractual Disclosure Duties And For Break-Up Fees, Barak Medina, Ofer Grosskopf

ExpressO

The economic analysis of contract law offers influential arguments against pre-contractual disclosure duties and for break-up fees, based on the presumption that pre-contractual duties are (or should be) set to provide sufficient incentives to optimally invest in acquiring information at the negotiation stage. We suggest, however, that the existing analysis is flawed, since it overlooks an important incentive for investing in information gathering.

According to the conventional wisdom, a negotiating party will be motivated to invest resources in information gathering only on the basis of its expectation to extract the contractual surplus that the investment may generate. As a result, …

Revitalizing Our Urban Core Without Marginalizing Our Core People: Closing Tax Credit Loopholes For The Wealthy While Generating Ethnic Entrepreneurial Self Help Alternatives To Subsidized Gentrification, Roger M. Groves

ExpressO

This article provides the most comprehensive analysis to date of the New Markets Tax Credits program established by Congress. The purpose of the NMTCs is to use tax credits as incentives for investors to provide equity funds into low income areas. The article reveals that over $2 billion of federal tax subsidies that have been allocated to gentrified projects for the wealthy, rather than the intended beneficiaries – low income residents in the urban core – as Congress intended. The article proposes amendments to the statute and regulations to close unintended loopholes.

The article also creates a model for a …

Law And The Science Of Networks: An Overview And An Application To The "Patent Explosion", Katherine J. Strandburg

ExpressO

The network may be the metaphor of the present era. A network, consisting of “nodes” and “links,” may be a group of individuals linked by friendship; a group of computers linked by network cables; a system of roads or airline flights -- or another of a virtually limitless variety of systems of connected “things.” The past few years have seen an explosion of interest in “network science,” which seeks to move beyond metaphor to analysis in fields from physics to sociology. Network science highlights the role of relationship patterns in determining collective behavior. It underscores and begins to address the …

The Law, Marketing And Behavioral Economics Of Consumer Rebates, Matthew A. Edwards

ExpressO

This paper deals with mail-in consumer rebates — a significant, yet controversial marketing practices that has generated thousands of consumer complaints, inspired countless articles in major periodicals, and begun to attract the interest of state and federal legislators. The paper first aims to provide an understanding of the purposes of consumer rebate offerings. It then surveys the main categories of consumer rebate complaints, including that firms impose onerous rebate redemption requirements and that they fail to pay rebate rewards in a timely manner. The paper draws on recent marketing, psychological and behavioral economics research to address the potent claim that …

Recent Defined Benefit Pension Reform: Reasons And Results, Daniel B. Klaff

ExpressO

In the face of corporate bankruptcies, the Pension Benefit Guaranty Corporation (“PBGC”) assures workers that their defined benefit pensions will be protected. It is this fact which has motivated recent reform of the PBGC and the overarching defined benefit plan system by Congress. This paper explores those reforms by addressing the reasons for and results of the most recent reform which had as its primary aim restoring the fiscal solvency of the PBGC. The paper challenges popular accounts of the reform process while examining the results of such reform for important stakeholders without resorting to an overly technical discussion of …

The "Benefits" Of Non-Delegation: Using The Non-Delegation Doctrine To Bring More Rigor To Benefit-Cost Analysis, Victor B. Flatt

ExpressO

This article examines the problems of benefit-cost (or cost-benefit) analysis in our regulatory system and posits that a more nuanced version of the “non-delegation” doctrine (made famous in Schechter Poultry) could improve many of the problems associated with the use of benefit-cost analysis. In particular this article notes that many of the problems with benefit-cost analysis are its use by agencies to make large policy decisions, which could be characterized as legislative. The article also notes that though the “non-delegation” doctrine may appear to be dead or dormant, that a form of it, in separation of powers doctrine, exists in …

Patent Reform And Differential Impact, Matthew J. Sag, Kurt Rohde

ExpressO

This article presents a new method of analyzing patent reform proposals through the use of differential impact analysis.

Congressional efforts to address the crisis of confidence in the U.S. patent system have failed up to the present day. If Congress is to have any hope of passing much needed legislative reform to the Patent Act, the supporters of patent reform will have to unite behind a streamlined set of proposals that directly address the most pressing and unambiguous defects of the current patent system. To that end, we have proposed applying a test of differential impact to enable Congress to …

Reassessing Damages In Securities Fraud Class Actions, Elizabeth C. Burch

ExpressO

No coherent doctrinal statement exists for calculating open-market damages for securities fraud class actions. Instead, courts have tried in vain to fashion common-law deceit and misrepresentation remedies to fit open-market fraud. The result is a relatively ineffective system with a hallmark feature: unpredictable damage awards. This poses a significant fraud deterrence problem from both a practical and a theoretical standpoint.

In 2005, the Supreme Court had the opportunity to clarify open-market damage principles and to facilitate earlier dismissal of cases without compensable economic losses. Instead, in Dura Pharmaceuticals v. Broudo, it further confused the damage issue by (1) perpetuating the …

Commercial Law In The Cracks Of Judicial Federalism, Donald J. Smythe

ExpressO

Almost seventy years after the Supreme Court sought to rationalize the American system of judicial federalism in Erie, sales law remains trapped in a pattern more reminiscent of the Swift v. Tyson era. The extraordinarily wide separation of powers in the NCCUSL-ALI uniform law-making process has entrenched Article 2 of the UCC in the status quo. Concurrently, an imbalance between the federal and state courts in the American system of judicial federalism has conferred an unusually wide range of discretion over state commercial law on the federal courts. Ironically, therefore, state sales statutes are being reinterpreted and revised by the …

The Capabilities Approach As A Solution To The Need For A More Encompassing Definition Of Poverty, Sarah L. Harrington

ExpressO

This Comment addresses the historical and present manifestations that result from the lack of values reflected in the federal poverty line. An alternative to this measure may be based on the capabilities approach. This approach looks further than simply the means to equality, and instead focuses on the ends--that is achieving well-being, and the freedom to pursue well-being. The capabilities approach is further described through an example of an effort to operationalize the theory by the United National Development Programme. Ultimately, this Comment proposes that renewed attention be focused on reforming the federal poverty line in light of the philosophical …

Prediction Markets For Corporate Governance, Michael Abramowicz, Todd Henderson

ExpressO

Building on the success of prediction markets at forecasting political elections and other matters of public interest, firms have made increasing use of prediction markets to help make business decisions. This Article explores the implications of prediction markets for corporate governance. Prediction markets can increase the flow of information, encourage truth telling by internal and external firm monitors, and create incentives for agents to act in the interest of their principals. The markets can thus serve as potentially efficient alternatives to other approaches to providing information, such as the Sarbanes-Oxley Act’s internal controls provisions. Prediction markets can also produce an …

Revitalizing Our Urban Core Without Marginalizing Our Core People: Closing Tax Credit Loopholes For The Wealthy While Generating Ethnic Entrepreneurial Self Help Alternatives To Subsidized Gentrification, Roger M. Groves

ExpressO

This article provides the most comprehensive analysis to date of the New Markets Tax Credits program established by Congress. The purpose of the NMTCs is to use tax credits as incentives for investors to provide equity funds into low income areas. The article reveals that over $2 billion of federal tax subsidies that have been allocated to gentrified projects for the wealthy, rather than the intended beneficiaries – low income residents in the urban core – as Congress intended. The article proposes amendments to the statute and regulations to close unintended loopholes.

The article also creates a model for a …

Financial Accounting And Corporate Behavior, David I. Walker

ExpressO

The power of financial accounting to shape corporate behavior is underappreciated. Positive accounting theory teaches that even cosmetic changes in reported earnings can affect share value, not because market participants are unable to see through such changes to the underlying fundamentals, but because of implicit or explicit contracts that are based on reported earnings and transaction costs. However, agency theory suggests that accounting choices and corporate responses to accounting standard changes will not necessarily be those that maximize share value. For a number of reasons, including the fact that executive compensation often is tied to reported earnings, managerial preferences for …

The Missing Theory Of Variable Selection In The Economic Analysis Of Tort Law, James M. Anderson

ExpressO

The Article argues that the economic analysis of tort law has yet to satisfactorily answer a critical threshold question: which of the many inputs that lead to an accident should be included in a court’s liability analysis? As a result of this missing theory, the economic analysis of tort law provides indeterminate prescriptions. The Article shows how three separate areas of the literature can be seen as being about the general problem of which variables to include in the liability test and the tension between short- and long-run optima. The Article proposes an analytical framework—a continuum from short to long …

The Purpose Of Child Support, Ira M. Ellman

ExpressO

What is the appropriate amount of child support to require in particular cases? How should we take account, if at all, of subsequent events such as either parent’s remarriage? It seems obvious that the answers to such questions ought to turn on our purpose in requiring support payments in the first place. But while fixing the amount of child support can be politically contentious, and has attracted the attention of partisans on both sides of the gender gap, the literature contains no systematic examination of support rules in light of their underlying policy purpose. This article fills that gap. It …

Shareholders, Creditors, And Directors’ Fiduciary Duties: A Law And Finance Approach, Moin A. Yahya, Remus D. Valsan

ExpressO

The debate surrounding fiduciary duties owed to creditors by directors, especially in the vicinity of insolvency, has resurfaced in light of two court decisions in Canada and the United States. In this paper, we contribute to the discussion by looking at the issue from a corporate finance perspective, where we utilize well-established theorems and results. We show that creditors are able to protect themselves by the use of covenants. While this idea has been reported extensively in previous discussions about fiduciary duties, we focus on studies that show the extent to which creditors use covenants to protect themselves against opportunistic …

Risk Aversion And Rights Accretion In Intellectual Property Law, James Gibson

ExpressO

Intellectual property’s road to hell is paved with good intentions. Because liability is difficult to predict, intellectual property users often seek licenses even when proceeding without one might be permissible. Yet because the existence (vel non) of licensing markets plays a key role in determining the breadth of rights, these seemingly sensible licensing decisions eventually feed back into doctrine; the licensing itself becomes proof that the entitlement covers the use. Over time, then, public privilege recedes and rights expand, moving intellectual property’s ubiquitous gray areas into what used to be virgin territory--where risk aversion again creates licensing markets, which cause …

Public Services Meet Private Law, Michael I. Krauss

ExpressO

Public services are provided at various levels, and for various reasons, by governments to corporate and private citizens. Recently, an important movement in tort theory has sought to allow governments to recoup the cost of public services as tort damages from wrongdoers, especially from wrongdoers of the corporate variety. Much of the latest thrust in tort law, which consists of attorneys-general's suits against corporations, relies implicitly on a challenge to the common law's "free public services doctrine."

Recently, scholarship emanating largely from plaintiff-oriented sources has sought to appeal to free-market and law-and-economics scholars (who are often defense-oriented) by emphasizing the …

Why It Is Time To Eliminate Genomic Patents, Together With Natural Extracts Doctrine That Have Supported Such Patents, Allen K. Yu

ExpressO

The constitutional purpose of intellectual property is to “promote the progress of science and useful arts.” Given the utilitarian basis of patents, it is critical that policies and laws must be continually adjusted to reflect the needs of new technologies. When the law tries to shield itself from rather than confront the realities of underlying technologies, patents end up actually subverting rather than promote technological progress. This paper explores why the natural extracts doctrine belongs to the class of doctrines that subvert progress. The doctrine, established over a century ago to enable the patenting of purified compounds for use as …

Are Patented Research Tools Still Valuable? Use, Intent, And A Rebuttable Presumption: A Proposed Modification For Analyzing The Exemption From Patent Infringement Under 35 Usc 271 (E) (1), Vihar R. Patel

ExpressO

Briefly, the article proposes to have courts focus on the nature of an individual's use and apply the "UART" (Use As a Research Tool) factors to determine if a patented invention is being used as a research tool. If a patented invention is being used as a research tool, then the court is to presume that the activities are not covered by the FDA exemption. However, this presumption can be rebutted by a researcher's demonstration of the research tool owner using his patent to block efforts to develop a competing product. If the presumption is rebutted, then the court applies …

Ringing The Bell On The Nyse: Might A Nonprofit Stock Exchange Have Been Efficient?, Stephen F. Diamond

ExpressO

Abstract

This spring the New York Stock Exchange, Inc. (Exchange or NYSE) completed an historic restructuring. On March 7, 2006, the NYSE completed its merger with Archipelago Holdings Inc. (Archipelago), a publicly traded electronic trading platform. As a result, the old NYSE itself became the New York Stock Exchange LLC, a wholly owned subsidiary of NYSE Group, Inc. (NYSE Group). The former members, or seat holders, of the NYSE received one of three forms of consideration: all cash, all stock in NYSE Group, or a package of cash and stock. The NYSE Group then allowed those former members to offer …

Developing Development Theory: Law & Development Orthodoxies And The Northeast Asian Experience, John K.M. Ohnesorge

ExpressO

None of the orthodox theories about law and economic development produced in recent decades has been based on a study of the "miracle" economies of Northeast Asia, nor have any of these orthodoxies seriously been tested against the Northeast Asian experience of law and development. This article conducts such a test, finding that none of these orthodoxies fares well when its claims are tested against the Northeast Asian experience. Rather than using Northeast Asia's experience to produce yet another orthodoxy, however, this article instead proposes rethinking how we understand the task of legal technical assistance, a rethinking which is based …

The Optimal Law Enforcement With Mandatory Defendant Class Actions, Nelson Rodrigues Netto

ExpressO

In this article we argue that the optimal law enforcement system is based on an ideal mechanism to prevent and redress harms in the mass information society. This goal is achieved by means of mandatory defendant class actions.

The idea of mass society has evolved in time since the beginning of the industrialization in the 18th century. At that time, the transformation of the means of production from artisanal craftwork to large scale machinery work, forged the concept of mass production. Nowadays, massive and expeditious relationships are created by sophisticated communications links, especially the Internet, furnishing services and goods, which …

The Optimal Law Enforcement With Mandatory Defendant Class Action, Nelson Rodrigues Netto

ExpressO

In this article we argue that the optimal law enforcement system is based on an ideal mechanism to prevent and redress harms in the mass information society. This goal is achieved by means of mandatory defendant class actions.

The idea of mass society has evolved in time since the beginning of the industrialization in the 18th century. At that time, the transformation of the means of production from artisanal craftwork to large scale machinery work, forged the concept of mass production. Nowadays, massive and expeditious relationships are created by sophisticated communications links, especially the Internet, furnishing services and goods, which …

Bond Repudiation, Tax Codes, The Appropriations Process And Restitution Post-Eminent Domain Reform, John H. Ryskamp

ExpressO

This brief comment suggests where the anti-eminent domain movement might be heading next.

Women Fighting Poverty In Cameroon: A Legal Perspective!, Geraldine Chin C K G Chin

ExpressO

Poverty in Sub Saharan Africa has many causes, which range from the impact of the Structural Adjustment Programs, the huge foreign debt and policies that encourage mismanagement of state resources. This growing poverty and underdevelopment has attracted the attention of the international community to pursue programs aimed at attaining the UN Millennium Development Goals, foreign debt relief and increased development aid. During the introduction of policies that brought about economic hardship, African women were not consulted and their voices were not heard. Yet it is these women who feel most of the impact of these policies. During the period of …

The (Intellectual Property Law &) Economics Of Innocent Fraud: The Ip & Development Debate, Peter Matthew Beattie

ExpressO

This note/essay examines the evidence on the effect of stronger IP laws introduced during the process of international IP law harmonization initiated by the TRIPS agreement, on the economic development of developing countries. It has been argued by proponents of harmonization that stronger IP laws will provide a needed boost to the economic development of developing (and even least-developed) countries. Critics of harmonization have argued that stronger IP laws will have the opposite effect. What has been largely overlooked in this debate is the strength of the evidentiary foundation upon which the arguments of both sides depend. Many of the …

Priority As Pathology: The Pari Passu Myth, Riz Mokal

ExpressO

This paper aims to analyse the pari passu principle of insolvency law (which provides that the creditors of a company in liquidation are to be paid rateably), and to ask how it relates to other principles available for the treatment of claims in corporate liquidation. The discussion reveals that the principle has rather limited effect in governing distributions of the insolvent's estate. Not only do various types of secured claim fall beyond its ambit, even unsecured claims are often exempt from its application. Nevertheless, the principle thrives both in judicial rhetoric and in academic arguments. For example, many a challenge …

The Search For Someone To Save: A Defensive Case For The Priority Of Secured Credit, Riz Mokal

ExpressO

The priority of secured credit has repeatedly and famously been attacked for allowing the exploitation of certain types of unsecured creditor. It has also been blamed for creating inefficiencies. This paper examines these arguments specifically as applied to this jurisdiction, and using both theoretical analysis and recent empirical data, suggests none of them can be sustained. It is argued that security is unlikely to lead to the exploitation of involuntary, ‘uninformed’, or ‘unsophisticated’ creditors, since the perverse incentives it allegedly creates for the debtor’s management are likely to be outweighed by the managers’ liquidation-related costs. It is then pointed out …