Business Organizations Law Commons^™

Confusing Bundling With Tying Under Article 82 Ec: Batteries Included Or It Only Comes With Fries, Robert M. Schwartz

UC Law Business Journal

"Bundling" and "tying" are terms commonly used to describe business practices engaged in by undertakings at every level of economic power. In nine separate instances the Court of First Instance in its Microsoft Decision held that the Commission had established Microsoft Corporation's practice of "abusive bundling"(the first time a Community Court had used the term). The CFI also upheld the Commission's findings by indiscriminately referring to them as either "tying" or "bundling" and justifying the result because it "can be deduced both from the very concept of bundling and from the case-law...". Shortly after the Commission issued its Guidance on …

Four Key Elements To Successful Financial Regulatory Reform, Reza Dibadj

UC Law Business Journal

The most recent crisis on Wall Street presents our nation with an extraordinary opportunity to begin a conversation about the economic and social policies that have led to the financial meltdown we have witnessed over the past few years. In keeping with the timely and crucial theme of the Hastings Business Journal's 2009 Symposium, this Article does not chronicle the crisis, but rather focuses on the lessons it might hold in getting "beyond the bailout." To mitigate, or perhaps even avoid, future disasters I argue that policymakers should focus on remedying four pernicious facilitators to scandal: dissemination of untruthful or …

The Financial Sector Upheaval Of 2008: Sociological Antecedents And Their Implications For Investment Company Regulation, Larry D. Barnett

UC Law Business Journal

In 2008, the United States experienced a severe contraction in the availability of credit, a marked reduction in the price of common stocks, and an appreciable increase in interest rates on debt instruments issued by business entities and by state and local governments. The premise of this Article is that, although this upheaval was economic in form and sudden in occurrence, it stemmed from change that was sociological in character and that started in prior decades. Specifically, the 2008 upheaval in finance is traced to a shift in social values among Americans-namely, an increased prevalence of hedonism and materialism in …

Pirating The Runway: The Potential Impact Of The Design Piracy Prohibition Act On Fashion Retail, H. Shayne Adler

UC Law Business Journal

Historically, the fashion industry has followed a clear trickle-down business model, relying on the free flow of creative ideas from high fashion and couture houses to more affordable, mass-produced clothing lines that interpret these concepts. However, recent technological developments have altered the structure and modus operandi of this multi-billion dollar sector of the economy, resulting in a rise in production imitation and knockoff items. This Note analyzes the effects of such a shift in the industry paradigm, both positive and negative, for both designers and consumers. In addition, this Note examines the potential impact of the proposed legislation known as …

Innovative Destruction - Structured Finance And Credit Market Reform In The Bubble Era, Aaron Unterman

UC Law Business Journal

The combination of unregulated financial innovation and rampant greed had, and continues to have, dire effects on the global economy. The financial crisis, which began in the U.S. subprime housing market, has spread across the globe, decimating the structured finance industry and brought about an unprecedented collapse in the world financial markets. This paper explores the role that structured finance played in the credit crisis, by dissecting the complex instruments which drove the industry and allowed the U.S. subprime housing market meltdown to infect the entire global economy. The author argues that the finance industry is in need of thorough …

Hiding Behind The Corporate Veil: A Guide For Non-Profit Corporations With For-Profit Subsidiaries, Seong J. Kim

UC Law Business Journal

The non-profit sector is ripe for abuse due to non-profit organizations' unique regulatory positions, favorable tax treatment, and potential to earn large profits. For example, private foundations have become large repositories of untaxed wealth that accumulate great economic power. Additionally, dozens of non-profit directors and executives are also officers of outside companies that engage in business activities with non-profit organizations. This article addresses an emerging and complex problem surrounding non-profit corporations: whether or not a party should be able to pierce the corporate veil of a non-profit corporation for actions of their for-profit subsidiary. It also looks at the underlying …

Leaving Money On The Table And Providing An Incentive Not To Pay - The Story Of A Flawed Collection Device, T. Keith Fogg

UC Law Business Journal

The "tax gap" represents the difference between the amount of tax owed by taxpayers and the amount that is actually voluntarily and timely paid. As of September 30, 2007, the IRS had $282 billion of unpaid assessments on its books of which 20 percent represented the unpaid payroll taxes due from employers. IRC Section 6672 gives the government a powerful tool to mitigate the tax gap, as it gives it the right to pierce the corporate veil in pursuit of the collection of unpaid payroll taxes. However, 6672 suffers from a near fatal flaw which results in failure to incentivize …

Money As Simulacrum: The Legal Nature And Reality Of Money, John J. Chung

UC Law Business Journal

The title of this paper is a nod to Simulacra and Simulation by post-modernist philosopher Jean Baudrillard. This paper explores the meaning and nature of money, and the form in which money exists today. The author begins by asking such basic questions as "what is money" and explores the history and development of money. We live in a world of increasingly transient and stunning wealth, a world where billionaires are as common as millionaires once were, where fortunes are gained and lost overnight, and of inexplicable wealth inequality. The author contends that the current state exists because money is a …

Will China Prevail Over The Current Wto, Angela Wang

UC Law Business Journal

Since its admission to the WTO in 2001, China has been in the process of complying with the commitments required by its accession agreement. This article addresses the following question: "As China and other developing countries come to play a more prominent role in today's global economy, will western industrialized countries adapt to this change or will they use the WTO to suppress China's ascension to power?" This article makes three different claims regarding the existing tension in the WTO between China and developed democratic countries like the United States. The arguments are as follow: 1) China's legal system is …

How Far Should The Pto Regulate Business Relationships Of Patent Practitioners, Kenneth R. Shurtz

UC Law Business Journal

The PTO Code of Professional Responsibility regulates the conduct of patent practitioners to ensure the integrity of the practice and protect client's interests. While patent agents and patent attorneys must both abide by the PTO Code, patent attorneys must also adhere to the Rules of Professional Conduct of the state in which they practice. Periodically, conflicts between the PTO Code and state ethics rules or uncertainties within the PTO Code have an adverse affect on the business practices of patent attorneys. These business practices include client engagement, disclosures to the client, partnerships and fee arrangements. This article examines the practical …

Working Through A Workout: A Practitioner's Guide From The Perspective Of Private Equity Sponsors, Venture Capital Funds And Other Significant Equity Investors, Christopher W. Kirkham, Jennifer M. Taylor

UC Law Business Journal

These troubled economic times present numerous concerns to the ongoing business. However, the dreaded "workout" scenario that arises when a corporation breaches its debt covenants should not be so feared. This Practitioner's Guide will address the workout scenario and provide insight on how to negotiate with a lender and how to address the most common negotiating points in a workout with particular focus on the perspective of sponsors and other significant investors. Part I will discuss how a workout scenario arises and the positions and goals of the respective parties involved-the borrower, the lender and the sponsor. Part II lays …

Beware Of Risk Everywhere: An Important Lesson From The Current Credit Crisis, Michael C. Macchiarola

UC Law Business Journal

Our current credit crisis is a result of the misunderstanding and mismanagement of risk. Exploring the tradeoff between risk and reward has been at the heart of the modem financial theories that have come to dominate our markets. As the capital markets introduced more and more complexity and innovation, most expected that the study of risk management and risk allocation was keeping pace, ensuring our ability to control and limit risk while maximizing reward.

In this Article, the author addresses some of the fundamental misunderstandings of risk that have become deeply ingrained in our markets and have brought about the …

The Political Economy Of The Rule Of Law In China, George Steven Swan

UC Law Business Journal

The following Article studies China as a possible test case for a country that has attempted to win economically developed nation status without an advanced rule of law. While China has managed to grow rapidly over the past thirty years, the author warns of the risk to an economy that rests on an unstable rule of law. In Part I, the author presents an introduction and then proceeds in Part II to explain the concept of "political economy" as a field informing the study of institutions, and of norms, which constitute the background to economic development. Part III chronicles the …

Should Courts Hang On Every Word Of Congress's Hanging Paragraph - A Solution To Judicial Controversy Over Chapter 13 Surrendered Vehicles, Netta Grutman

UC Law Business Journal

As part of the Bankruptcy Abuse Prevention Consumer Protection Act of 2005, Congress added a paragraph to the Bankruptcy Code governing the confirmation of Chapter 13 plans. The paragraph was added in an effort to eliminate "cram down." Prior to 2005, cram down allowed the debtor to retain his/her vehicle as part of a bankruptcy plan and only repay the secured debt on the vehicle. After Congress's amendment, a debt on a vehicle retained as part of a Chapter 13 plan can no longer be bifurcated. Thus, a debtor must repay both the secured and unsecured debt in order to …

Bringing It All Back Home: Boulware And The Unfortunate Demise Of The Miller Rule, Gurpreet Bal

UC Law Business Journal

In this Note, the author addresses the underlying tension between criminal intent and the complexity of the tax code in criminal tax prosecution in light of the recent Supreme Court opinion in U.S. v. Boulware. The author takes a look at the facts and circumstances of Boulware, the body of precedent supporting the Ninth Circuit's opinion, and the reasoning of the Supreme Court in its subsequent reversal of that opinion. He revisits the oft cited opinion of Judge Learned Hand in Helvering v Gregory, and asks whether the courts have taken Judge Hand's famous approval of tax planning so far …

Weyerhauser's Implications For Punitive Damages Litigation, Nickolai G. Levin

UC Law Business Journal

In Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co., 127 U.S. 1069 (2007), the Supreme Court addressed the antitrust claim of "predatory bidding"-i.e., that a manufacturer paid too much for an "input." Although the Ninth Circuit allowed predatory-bidding liability to be based on the jury's subjective estimation that the defendant paid more than "necessary" for an input, the Supreme Court reversed, holding that the objective, two-part "predatory pricing" test from Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993), should govern predatory-bidding claims instead. Otherwise, the Court explained, there would be a serious risk of chilling procompetitive …

O'Hagan, 10b-5-2, Relationships And Duties, Thomas M. Madden

UC Law Business Journal

In the past ten years, the principal events in the law concerning insider trading have been the Supreme Court's adoption of the fraud on the source misappropriation theory in O'Hagan and the Commission's promulgation of Rules 10b5-1 and 10b5-2. While this article provides a solid grounding in the O'Hagan decision and the case law informing it, its commentary addresses the role that Rule 10b5-2, speaking to relationships giving rise to duties of trust or confidence, together with O 'Hagan, has had on recent securities litigation. Asking whether this post O'Hagan rulemaking and case law indicates a policy directive from the …

Patent Incentives In The Semiconductor Industry, Dan Callaway

UC Law Business Journal

The semiconductor industry comprises organizations of all sizes, from single engineers contracting their work to companies as large and powerful as have ever existed. The rapid advancement of technology in the semiconductor field makes it a crucible for theories about the patent system as a whole. It is arguably desirable that as new technologies come to market, patents should be issued with appropriate scope so that other inventors retain incentive to innovate. But it is not only the Patent Office which can offer or hinder incentives for inventors. The semiconductor industry is subjected to various incentives, both negative and positive, …

Issues Concerning The Admissibility In Federal Courts Of Business Records Containing Opinions Or Diagnoses Under Federal Rule Of Evidence 803(6), Erik C. Olson

UC Law Business Journal

Federal Rule of Evidence 803(6) explicitly provides for the admissibility in the federal courts of business records containing opinions or diagnoses. Despite that, over the years, the courts have routinely excluded business records containing opinions and diagnoses for a variety of reasons. In 1979, for example, the Court of Claims fashioned a rule preventing the admission of expert appraisals unless the preparer of the appraisal were present to testify to his qualifications as an expert pursuant to Rules 702 and 705. Many courts continue to follow this rule. This note discusses and critiques that rationale for exclusion (and others), in …

Exporting Risk: Global Implications Of The Securitization Of U.S. Housing Debt, Aaron Unterman

UC Law Business Journal

The process of securitization has revolutionized the global debt market creating vast investment opportunities while fundamentally altering the dynamics of lending risk. Asset securitization allows risks to be transferred from, mortgage lenders to investors through the sale of mortgage-backed securities. This detachment of risk has led to a lack of accountability within the industry and the creation of the infamous U.S. sub prime mortgage market. This piece examines the effect of securitization on the international capital market focusing on the legal and economic implications of the rise and fall of the U.S. housing market. It argues that this failure is …

What Your Lender And Mortgage Broker Didn't Tell You: A Call For Disclosure Of Loss Of The Section 580b Anti-Deficiency Protection Upon Refinancing, George W. Kuney

UC Law Business Journal

California Civil Code of Procedure section 580b protects a California homeowner from a deficiency judgment when the homeowner's purchase money lender forecloses on the house. The protection of section 580b applies only to purchase money mortgages - not to cash out refinance mortgages and probably not to any refinancing mortgage loan under existing law. The California Civil Code requires an initial disclosure of this protection to purchase money mortgage borrowers, but it does not specifically require disclosure of its loss upon refinance. Moreover, lenders that are subject to the Federal Truth in Lending Act or the Homeowners Equity Protection Act …

Fraud Not On The Market: Rebutting The Presumption Of Classwide Reliance Twenty Years After Basic Inc. V. Levinson, Matthew L. Mustokoff

UC Law Business Journal

This article explores a wave of recent federal court decisions addressing the applicability of the "fraud-on-the-market" presumption of reliance in securities fraud cases at the class certification stage. In the two decades since the US Supreme Court first recognized the fraud-on-the-market doctrine in Basic, Inc. v. Levinson, the district and circuit courts have taken somewhat divergent approaches to the question of classwide reliance. The most recent decisions, however, mark an emerging trend, one which signifies heightened judicial scrutiny - in many cases, going beyond the pleadings and involving extensive fact-finding and expert analysis. Among the decisions discussed are the Second …

Defining Substantial Activity: Helping Tax-Exempt Hospitals Keep Their Tax-Exempt Status, Kevin Leo

UC Law Business Journal

Joint ventures between tax-exempt hospitals and for-profit organizations have become a common mechanism for hospitals to acquire new sources of revenue and expand their health care services without completely relying on more traditional sources of funding. Joint ventures between tax-exempt organizations and for-profit entities can lead to unfavorable tax consequences for the exempt organization if the venture is not structured in accordance with the rules and regulations provided by the Internal Revenue Service. IRS Revenue Ruling 2004-51 held that an exempt organization would maintain its exempt status as long as it only contributed an insubstantial amount of its assets or …

The Discrete, The Relational, The Selfish, And The Societal: Elements Present In All Transactions, Christine Liyanto

UC Law Business Journal

In the discourse of contract theory, we associate discrete contracts with a goal of self-interest, while associating relational contracts with community-based objectives. This article examines the characteristics of the discrete paradigm, the relational paradigm, and the way in which all transactions reflect the goals associated with both of those models.

Trade Or Business Within The United States As An Interpretive Problem Under The Internal Revenue Code: Five Propositions, Anthony P. Polito

UC Law Business Journal

Whether a particular set of activities constitute the conduct of a trade or business within the United States is an ongoing interpretive question affecting many foreign taxpayers. It controls what form of U.S. taxation, if any, applies to them. In the domestic context, a trade or business entails profit-oriented non-investment activity that is regular, continuous and considerable. It is tempting, in the transition to the international context, to conclude that the conduct of a trade or business within the U.S. requires that the taxpayer's U.S. activities must be regular, continuous, and considerable, and the standard is often articulated in this …

Understanding Hedge Fund Adviser Regulation, Thierry Olivier Desmet

UC Law Business Journal

The hedge fund industry has grown tremendously and gained much influence on our nation's capital markets in the past decade. Helping fuel this growth in size and influence has been the fact that many hedge funds have sought investments from less affluent and sophisticated investors than in the past. In addition, the number of securities enforcement cases filed against hedge funds has increased. As a result, many have called for some form of regulatory oversight to protect the investing public and reduce market risks. This article focuses on the regulations imposed on hedge fund advisers as well as the controversial …

The Tax Burden And The Propensity Of Small-Business Entrepreneurs To File For Bankruptcy, Rafael Efrat

UC Law Business Journal

Despite the success of many entrepreneurs, a sizable number of small businesses fail every year. Tax problems have been found to be a small but an important contributor to business closure. The extent of the tax problems experienced by small business owners is alarming but not surprising given the disproportionate tax burden small business owners face in operating their businesses. The research undertaken in this study aims to explore the extent to which individual small business owners, who have filed for bankruptcy, attribute their financial distress to tax problems. Further, this study intends to examine the demographics and financial characteristics …

Is Silence Really Golden - Assumption And Assignment Of Intellectual Property Licenses In Bankruptcy, Neil S. Hirshman, Michael G. Fatall, Peter M. Spingola

UC Law Business Journal

A debtor-licensee often desires to assume or assume and assign intellectual property licenses to which it is a party-an action to which the non-debtor licensor may object. This article examines a debtor-licensee's ability to assume and assign such licenses in the context of bankruptcy. Courts that have considered the issue have held that, notwithstanding the general authority granted under 11 U.S.C. § 365, consent is likely required before a debtor-licensee can assume and assign a non-exclusive patent license, copyright license, or a trademark license if any such license contains an express restriction on assignment or is silent on the issue. …

Questioning The Per Se Standard In Cases Of Concerted Monopsony, Alan Devlin

UC Law Business Journal

Instances in which purchasers collude to depress price raise complex enforcement issues if one adheres literally to the widely accepted consumer welfare standard in antitrust analysis. One might imagine that reduced input costs above will translate into lower prices below. However, in-depth economic analysis reveals a counter-intuitive insight: the reduction in price upstream may lead to an inefficient supply-side substitution in production, resulting in higher levels of marginal cost and, hence, downstream prices. Whether downstream harm to consumers ultimately transpires depends on a host of variables including the price elasticity of demand facing sellers in the downstream market, the upstream …

Securing Derivatives Obligations With California Real Estate - Selected Enforcement Issues, William L. Harvey

UC Law Business Journal

California's complex real estate security laws have long presented challenges to real estate-secured creditors, which have resulted in a deep and rich body of case law. Nevertheless, derivatives creditors wishing to use California real estate as collateral must face, without the benefit of definitive case law guidance, a variety of unique and novel legal issues. It is anticipated that such case law guidance, when it arrives, will give due consideration to the special documentation and policy issues surrounding derivatives and, having done so, conclude that close-out netting does not contravene section 726's security-first rule, and that section 2924c does not …