Banking and Finance Law Commons^™

Selective Flexibility: The Hidden Evolution Of Startup Corporate Law, Alvaro Pereira

Cardozo Law Review

This Article challenges the longstanding assumption that corporate law is largely irrelevant to non-listed companies and venture capital ( “VC”). Through a novel cross-country legal index covering twenty years and twelve jurisdictions, this Article shows that corporate laws have evolved through a process of “selective flexibility,” where certain legal barriers to VC deals are lifted, while others are stealthily preserved. For example, numerous reforms have enabled multiple-vote shares, but few have authorized the customization of board powers, limiting the universe of founder-investor agreements—and, ultimately, the development of startup ecosystems and VC markets.

Drawing on a comprehensive dataset of billion -dollar …

Hyperbole In The Capital Stack: Are We Misreading Lender Intent? Liability Management Transactions And The Implied Covenant Of Good Faith And Fair Dealing, Daniel R. Janel

Cardozo Law Review

The hasty characterization and overall sentiment surrounding Liability Management Transactions (“LMTs”) as “hostile” strategies that promote “lender-on-lender violence” attempt to misapply the implied covenant of good faith and fair dealing under New York law, which serves as a gap-filler rather than a “contract buster.” Although the covenant’s proper function is to protect parties’ reasonable expectations that they will receive the fruits of their bargain, it does not purport to rewrite or impose on carefully negotiated credit agreements. Sophisticated parties enter into meticulously crafted credit agreements with full awareness of the breadth and scope of their provisions. Only after finding themselves …

Corporate Evolution, Omari Scott Simmons

Cardozo Law Review

Political entrepreneurs have declared war on environmental, social, and governance policies ("ESG"), going so far as to attempt to criminalize ESG-influenced investing. They seek a return to some real or imagined past. They amplify and elevate their efforts into mainstream public discourse. They pursue extraordinary goals and tactics to disrupt and even dismantle institutional structures, norms, and established processes. The contemporary anti-ESG backlash is not simply a battle over corporate purpose and the dueling perspectives of shareholder primacy versus stakeholderism or disputes concerning sustainable investment and operational strategies. It reflects aggressive political entrepreneurship and the tension between competing narratives: stasis, …

Equity And Clarity: The Impact Of Tyler V. Hennepin County On Property Taxation And Homeowners’ Rights, Analy Feigel

Cardozo Law Review

This Note explores the implications ofthe U.S. Supreme Court's ruling in Tyler v. Hennepin County, which significantly impacts property taxation and foreclosure laws. The Court ruled that property owners are entitled to surplus proceeds following a tax foreclosure, setting a new precedent by deeming it unconstitutional for governments to retain surplus proceeds without just compensation. Tyler clarified property rights under the Fifth Amendment, affirming that owners have a constitutional right to the surplus value of their foreclosed properties, even if local statutes do not explicitly allow it.

Further, this Note also addresses unresolved issues following Tyler's ruling, including how the …

Locating Consumer Financial Regulation, Nikita Aggarwal

Cardozo Law Review

Recent advances in data-driven technology in consumer financial markets, commonly referred to as “fintech,” have resurfaced the question of whether and to what extent data, particularly consumers’ personal data, should be a locus for regulatory intervention in these markets. While innovation in fintech and the accompanying increase in the processing of personal data offer to improve the functioning of consumer financial markets, like all advances in technology, they also come with costs and risks. In 2024, in a move that favored the regulation of personal financial data per se and many of the traditional features of personal data protection regulation, …

The Art World Of Digital Assets: How Non-Fungible Tokens Create A Loophole In Anti-Money Laundering Regulations, Sofia Aizenman

Cardozo Law Review

No abstract provided.

Patent Law’S Externality Asymmetry, Peter Lee

Cardozo Law Review

Technologies such as social media, autonomous vehicles, and “big data” analytics generate enormous benefits for society, but they also create substantial harms. Many of these effects take the form of externalities—external benefits and harms that a decisionmaker (such as an inventor) imposes on third parties without charge or compensation. Considering negative externalities, for example, social media networks spread misinformation throughout the electorate, autonomous vehicles threaten the jobs of millions of professional drivers, and predictive policing based on big data can lead to unreasonable searches and seizures. Externalities can cause inefficient resource allocation, and the classic remedy is to “internalize” externalities …

Separating Governance Tokens From Securities: How The Utility Token May Fall Short Of The Investment Contract, Kyle Bersani

Cardozo Law Review

No abstract provided.

Section 546(E) Redux—The Proper Framework For The Construction Of The Terms Financial Institution And Financial Participant Contained In The Bankruptcy Code After The U.S. Supreme Court’S Holding In Merit, Peter V. Marchetti

Cardozo Law Review

This Article discusses and analyzes the proper framework for the construction of the terms “financial institution” and “financial participant” as defined in Sections 101(22)(A) and 101(22A) of the Bankruptcy Code (the Code), as they work in tandem with Section 546(e) of the Code. In 2018, the U.S. Supreme Court issued its long awaited decision in Merit, which held that the language regarding transfers “made by or to (or for the benefit of) . . . a financial institution” contained in Section 546(e) does not insulate the ultimate transferee of a constructive fraudulent action (a CFTA) simply because the company being …

Two Steps Forward, One Step Back: How New York’S Bail Reform Saga Tiptoes Around Addressing Economic Inequality, Daniel Chasin

Cardozo Law Review

No abstract provided.

Winning, Defined? Text-Mining Arbitration Decisions, Charlotte S. Alexander, Nicole G. Iannarone

Cardozo Law Review

Who wins in consumer arbitration? Historically, this question has been nearly impossible to answer, as most arbitration proceedings are a private black box, and arbitral forums release only limited summary statistics. One exception is the Financial Industry Regulatory Authority (FINRA), which arbitrates virtually all disputes between investors and stockbroker-dealers, and makes all of its nearly 60,000 written arbitration decisions publicly available in an online database. This Article is the first to use computational text analysis tools to study these decisions, and to construct a measure of the claimants’ win, loss, and settlement rates. It is the first installment in an …

Fintech: New Battle Lines In The Patent Wars?, Megan M. La Belle, Heidi Mandanis Schooner

Cardozo Law Review

Historically, financial institutions have relied on trade secrets and first-mover advantages, rather than patents, to protect their inventions. For the few financial patents that were issued, conventional wisdom was that they weren’t terribly interesting or important. In our 2014 study on financial patents, we showed that banks were breaking from past patterns and increasingly seeking patent protection. We explained that financial institutions were primarily building their patent portfolios as a defensive measure—i.e., to protect themselves from infringement suits. Indeed, the finance industry successfully lobbied Congress to include provisions in the America Invents Act of 2011 that made it easier to …

Buyer Beware: Variation And Opacity In Esg And Esg Index Funds, Dana Brakman Reiser, Anne Tucker

Cardozo Law Review

Evidence of the tremendous rise in the significance of environmental, social, and governance (ESG) investing is coming from all quarters. Fund flows into ESG investment vehicles are growing at a sustained and sometimes exponential pace. Fund complexes are rushing to design products, creating and rebranding scores of mutual funds and exchange traded funds (ETFs), including lower-cost indexed options. Industry leaders, critics, and commentators are all heralding the sea change as a shift in investing-and corporate governance-to more broadly consider environmental and social factors.

This Article provides vital context for this conversation. Its descriptive account of the ESG investment landscape drawn …

Patent Eligibility And Investment, David O. Taylor

Cardozo Law Review

Have the Supreme Court's recent patent eligibility cases changed the behavior of venture capital and private equity investment firms, and if so how? This Article provides empirical data about investors' answers to those important questions. Analyzing responses to a survey of475 investors at firms investing in various industries and at various stages of funding, this Article explores how the Court's recent cases have influenced these firms' decisions to invest in companies developing technology. The survey results reveal investors' overwhelming belief that patent eligibility is an important consideration in investment decision making, and that reduced patent eligibility makes it less likely …

The Efficacy Of Choice-Of-Law And Forum Selection Provisions In Third-Party Litigation Funding Contracts, Robert Glenn

Cardozo Law Review

No abstract provided.

Children's Equality Rights: Every Child's Right To Develop To Their Full Capacity, Nancy E. Dowd

Cardozo Law Review

Children are born equal. Yet as early as eighteen months, hierarchies emerge among children. These hierarchies are not random butfall into patterns by race, gender, and class. They are not caused nor voluntarily chosen by children or their parents. The hierarchies grow, persist, and are made worse by systems and policies created by the state, perpetuating the position of the privileged and continuing the disadvantage of the subordinated. Children's equal right to develop to their capacity is severely undermined by policies and structures that hamper and block the development of some by creating barriers and challenges or failing to support …

Modern Waste Law, Bankruptcy, And Residential Mortgages, Jill M. Fraley

Cardozo Law Review

Around the time of the subprime mortgage collapse, lenders began in earnest to sue borrowers by adapting the traditional law of waste. Today, these claims continue to rise in frequency and to expand to more jurisdictions. Lender waste claims provide a "work around" for state mortgage laws that prohibit personal deficiency judgments after foreclosure and are potentially non-dischargeable in bankruptcy.

While a recent wave of scholarship has addressed the problems of how the bankruptcy system handles mortgages, scholars have not yet explored the use of waste actions by lenders and how waste judgments intersect with bankruptcy and foreclosure. Using new …

The Dark Side Of Reputation, Emily Kadens

Cardozo Law Review

This Article seeks to contribute to the literature challenging the role of reputation in disciplining commerce. The historical disputes discussed here, which arose in the supposedly privately-ordered zone of the premodern merchant, add nuance to our understanding of how commerce works in the real world. Part I briefly reviews some of the problems the economic and network theory literature has identified with reputation. Part II turns to the history and demonstrates how trust could be cheaply manufactured due in part to potential partners' failure to look beyond superficial indicia of reputation. Part III then considers why reputation might have been …

The Sec's Part 205.3(D)(2) And Wadler V. Bio-Rad Labs. Should Be Revisited: The Sec Exceeded Authority In Creating A Reporting Out Provision For In-House Attorneys, Briana Sheridan

Cardozo Law Review

This Note proceeds in three parts. Part I introduces relevant statutory law. Part I discusses federal law, notably Section 307 of the Sarbanes-Oxley Act and the SEC's Part 205.3(d)(2), as well as the American Bar Association (ABA) Model Rules and conflicting state law. Part II first examines case law involving the preemption of state ethics laws, including Wadler v. Bio-Rad Laboratories, which concluded broadly that Part 205 preempts California law.23 Part II then examines the doctrine of federal preemption, which is followed by a preemption analysis of Part 205.3(d)(2). Part III recommends that Part 205.3(d)(2) should be revisited, as the …

A Flood-Not A Ripple-Of Harm: Proximate Cause Under The Fair Housing Act, Justin P. Steil, Daniel Traficonte

Cardozo Law Review

Over the past decade, several city governments across the country have filed suits against banks pursuant to the Fair Housing Act seeking redress for municipal damages caused by the banks' discriminatory lending practices. Following the ruling in Bank of America Corp. v. City of Miami, lower courts are now confronting the question of where to "draw the line" of proximate causation under the Fair Housing Act, and specifically whether the harms experienced by cities as a result of banks' discriminatory lending meet the requirements of proximate causation. In suggesting a direction for lower courts, the Court in City of …

Beyond Gifting: Harmonizing The Devolution Of Reorganization Plan Gifts And The Evolution Of Sale Gifts, Reuben E. Dizengoff

Cardozo Law Review

The ntoe critiques the rigidity of the Absolute Priority Rule (APR) under Chapter 11 of the Bankruptcy Code, arguing that its strict application hinders effective restructuring. It proposes Section 363 sales as a viable alternative to achieve Chapter 11 goals, particularly when plan confirmation is unattainable due to senior creditor objections. The analysis highlights how Section 363 sales can legally redirect assets to junior stakeholders, offering a workaround to APR limitations. The note concludes that harmonizing gifting in reorganization plans with Section 363 sales could provide a balanced approach to bankruptcy restructuring.

Bitcoin Versus Regulated Payment Systems: What Gives?, Lawrence J. Trautman, Alvin C. Harrell

Cardozo Law Review

The article explores the evolution and challenges of virtual currencies like Bitcoin, highlighting their potential to transform traditional payment systems while posing significant regulatory and jurisdictional difficulties. It argues that while virtual currencies offer benefits such as reduced transaction costs and financial inclusion, their decentralized nature and association with illicit activities necessitate a balanced approach to regulation. The article emphasizes the importance of adapting legal frameworks to accommodate innovation while addressing risks, ensuring a stable environment for virtual currencies to coexist with traditional monetary systems.

Destructive Collectivism: Dodd-Frank Coordination And Clearinghouses, Yuliya Guseva

Cardozo Law Review

The recent financial crises have generated strenuous academic debates on the fundamental premises of market regulation. The interaction between the state and the market is at the core of this discourse. A plethora of postcrisis reforms threaten to undermine the historical monopoly of centralized regulators through more coordinated, "collectivist" approaches to capital market regulation. The dangers of this new collectivism are not fully explored in the current scholarship.

This Article questions the Dodd-Frank coordination mechanisms by demonstrating that crucial benefits may result from the predictability of a linear market-regulator interaction in a cooperative environment. An example of such a successful …

The Enforcers & The Great Recession, Mark Totten

Cardozo Law Review

No one played a more vital role responding to the worst economic crisis since the Great Depression than a small band of state attorneys general (AGs). Yet this story has never been told nor its implications considered. For more than a decade these AGs brought enforcement actions across the residential mortgage lending industry, reaching the origination, servicing, and securitization processes. From roughly 2000 to 2008, they targeted several of the largest subprime lenders for predatory and discriminatory lending. And they moved in the face of federal inaction - at times, even opposition. With the economic crisis everywhere visible by early …

Crowdfunding Human Capital Contracts, Max Vogel

Cardozo Law Review

No abstract provided.

Harmonizing Third-Party Litigation Funding Regulation, Victoria A. Shannon

Cardozo Law Review

Third-party litigation funding is no longer a new phenomenon, but rather is a mainstay in global commerce and dispute resolution. Yet many observers still consider the third-party litigation funding industry as a "wild west" due to a lack of regulation in many countries. Some of the countries that have regulations suffer from a lack of uniformity and an array of conflicting laws at the sub-national level (i.e., the laws of states, provinces, territories, etc.). For example, the United States has a confusing patchwork of state laws on third-party litigation funding. This Article proposes harmonizing the regulatory framework for third-party litigation …

Coming Up Short: The United States' Second-Best Strategies For Corralling Purely Speculative Derivatives, Timothy E. Lynch

Cardozo Law Review

Purely speculative derivatives (PSDs) are derivatives in which neither counterparty is engaged in hedging. Unless they are used for entertainment purposes, PSDs are irrational, less-than-zero-sum transactions. Entities that engage in PSDs jeopardize their stakeholders and increase systemic risk. PSDs can also increase moral hazard, can be used for regulatory arbitrage, and can redirect resources away from the efficient allocation of market capital. PSDs should be unenforceable contracts, void for public policy reasons, except where they are expressly permitted to provide gambling entertainment, enhance price discovery, or increase liquidity for hedgers.

In the United States, however, PSDs are often legal and …

The Truth About Truth Commissions: Why They Do Not Function Optimally In Post-Conflict Societies, Matiangai V.S. Sirleaf

Cardozo Law Review

Almost forty years after the first truth commission convened and more than sixty-seven others have been employed, there is little clarity on how they contribute to their stated objectives and in which transitional contexts they succeed or fail. This Article uses data gathered from my field research in Ghana, Sierra Leone, and Liberia to develop a theoretical framework for understanding in which contexts truth commissions may be the most effective. Using insights from the legal transplant literature and applying it to the diffusion of truth commissions, this Article finds that truth commissions face greater challenges carrying out their mandates in …

Everybody Wins! Elimination Of The Absolute Priority Rule For Individuals Under Bapcpa: A Middle Ground, Liliya Gritsenko

Cardozo Law Review

No abstract provided.

The Twilight Of Equity Liquidity, Jeff Schwartz

Cardozo Law Review

This Article argues that U.S. equity markets fail to offer a satisfactory listing venue for emerging firms. I contend that this lacuna is a manifestation of a flawed structure of equity-market regulation and that this void undermines entrepreneurship, jeopardizes the future of U.S. equity markets, and weakens the broader U.S. economy. To close this gap and respond to these concerns, I recommend a new theoretical structure for regulating equity markets. Under the "lifecycle model" I propose, regulations would adapt to firms as they age. The key change would be to establish a market specifically for newly-public young firms, where they …