Business Organizations Law Commons^™

A Critical Look At Corporate Governance, Lawrence E. Mitchell

Vanderbilt Law Review

The internal law of corporations is built upon the problem of competition-not competition with the world outside the corporate entity, which, according to liberal economic theory, is essential to the increase of wealth and well-being in society, but competition among the various groups of individuals that animate the corporation. The problem is (to extend the implicit metaphor) as if a human being's internal organs were constantly battling to capture all of the body's energy, rather than working together to contribute to the well-being of the whole. Like the human body, the corporation's "energy" (its assets) is, at any given point …

Trade And Business Opportunities In Poland, Marek Kulczycki

Vanderbilt Journal of Transnational Law

Economic policies of the Polish Government are aimed at achieving two fundamental objectives. In the short run, the objective is rapid deceleration of high inflation and general stabilization of the Polish economy. In the long run, the objective is an irreversible transformation of the Polish economic system into a free market economy. Implementation of both policy objectives has been taking place simultaneously since January 1, 1990.

In the short term, the most important problem for us is the stabilization of the economy. Fighting inflation is perhaps the most urgent problem for us. If we cannot manage with this, it will …

Book Review, Richard Gruner

Vanderbilt Journal of Transnational Law

Large corporations are important, yet enigmatic, participants in world commerce. International corporate behavior is morally and legally significant because of its immense scope and societal impact. That behavior, however, is often so complex as to defy characterization under the simple moral or legal standards applicable to individuals. Furthermore, the ability of traditional moral or legal systems to shape multinational corporate conduct is also unclear given that large corporate bureaucracies lack the motivations and fears normally used to enforce moral or legal accountability. As one frustrated court noted, the problem is that corporations have "no soul to damn, and no body …

Franchising And The Collective Rights Of Franchisees, Robert W. Emerson

Vanderbilt Law Review

Assume that you are the franchisee of a nationwide restaurant chain. Your franchisor has acted contrary to what you believe to be in your best interest. For the franchisor, bigger is better: more outlets and discount programs mean higher sales volume and consequently additional franchise fees and royalties, with royalties typically being based on gross sales-not franchisee net profits. You are concerned that the franchisor is oriented more toward expansion than the well-being of existing franchisees. Franchisor assistance is less than you expected, but royalties and other charges seem steep.Facing a strong franchisor that appears not to worry about an …

The Defense Case For Rico Reform, Terrance G. Reed

Vanderbilt Law Review

Frequent use of the Racketeer Influenced and Corrupt Organizations Act of 1970 (RICO)' by government and private litigants has prompted a chorus of criticism during the last five years. This criticism has not been restricted to the narrow confines of the legal profession;many respectable newspapers recently have issued calls for the outright repeal of RICO. Attorneys who regularly defend against criminal or civil RICO allegations cannot take credit for the increasing dissatisfaction with RICO. Rather, it is the successes, and indeed the excesses, of RICO's proponents that have tarnished the statute's image. RICO's revolutionary application to increasingly broad areas of …

An Analysis Of The Myths That Bolster Efforts To Rewrite Rico And The Various Proposals For Reform:"Mother Of God-Is This The End Of Rico?", G. Robert Blakey, Thomas A. Perry

Vanderbilt Law Review

In 1970 Congress enacted the Organized Crime Control Act, Title IX of which is known as the Racketeer Influenced and Corrupt Organizations Act, or RICO. Congress enacted the 1970 Act to "strengthen[]the legal tools in the evidence-gathering process, [to] establish[] new penal prohibitions, and [to] provid[e] enhanced sanctions and new remedies .,, RICO covers violence, the provision of illegal goods and services, corruption in labor or management relations, corruption in government, and commercial fraud. Congress found in 1970 that the sanctions and remedies available to combat these crimes under the law then in force were unnecessarily limited in scope and …

Civil Rico Reform: The Gatekeeper Concept, Michael Goldsmith, Mark J. Linderman

Vanderbilt Law Review

Since coming into vogue in the mid-1980s, civil RICO has often been criticized and targeted for reform. Critics claim that civil RICO is too broad because it potentially applies to all commercial transactions.More specifically, opponents claim that RICO's inclusion of mail and wire fraud as predicate acts unjustly subjects all "legitimate businesses" to liability.For example, Representative Rick Boucher, sponsor of the 1989 RICO reform legislation, has stated:

"Fraud allegations are commonly made in contract situations, and all that is needed to convert a simple contract dispute into a civil RICO case is the allegation that there was a contract and …

A Conceptual, Practical, And Political Guide To Rico Reform, Gerard E. Lynch

Vanderbilt Law Review

RICO is nearing its twentieth birthday,' but it may not be a happy one. In fact, 'tis the season for critics of RICO to be, if not jolly, at least highly active. A House subcommittee and the Senate Judiciary Committee have held hearings on RICO reform, the popular and business press has published numerous debates and criticisms involving fairly arcane points of civil and criminal law, scholars and lawyers have filled law reviews and legal newspapers with articles often critical of the statute, and the pressure has been building for statutory changes.

As the pressure for change has intensified, and …

Introductory Remarks And A Comment On Civil Rico's Remedial Provisions, Robert K. Rasmussen

Vanderbilt Law Review

This Symposium comes at a very opportune time. RICO seems to be on everyone's mind. The attention that RICO has garnered in the last few years in the courts, the press, and the legal academy has in-creased steadily, and the cries for change, at least from some quarters,have become deafening. Judge David Sentelle of the D.C. Circuit Courtof Appeals recently labeled RICO "The Monster That Ate Jurisprudence;" Chief Justice William Rehnquist has repeatedly called for a defederalization of RICO; and groups as diverse as the Wall Street Journal, the Washington Post, and the American Civil Liberties Union have argued vociferously …

Reforming Rico: If, Why, And How, Rene Augustine

Vanderbilt Law Review

With its increased use both by prosecutors and private plaintiffs,the RICO statute has prompted a host of criticisms. For instance, some critics argue that Congress intended RICO to battle mafia crimes of the Al Capone genre, but that it has been applied in situations far beyond those Congress originally envisioned. Some seek RICO reform because of concerns that the statute may threaten civil liberties and chill free speech. Unhappiness with RICO has led to some uncommon alliances between diverse groups who wish to reform or repeal the statute. In fact, RICO itself has been applied to a wide variety of …

The Constitutionality Of An Off-Dutysmoking Ban For Public Employees:Should The State Butt Out?, Elizabeth B. Thompson

Vanderbilt Law Review

During the past several years, restrictions imposed by states, cities,and municipalities on smoking in public areas have survived court challenges and become almost commonplace.' Likewise, both public and private employers have limited smoking in the workplace. A further restriction that seems to be emerging, however, is a refusal by both the state and a growing number of private employers to hire or to continue to employ smokers. These restrictions limit the employee's freedom to smoke not only in the workplace, but also after working hours and within the privacy of the worker's home.

This Note will address the constitutionality of …

Indeterminacy: The Final Ingredient In An Interest Group Analysis Of Corporate Law, Douglas M. Branson

Vanderbilt Law Review

Legal realists emphasized the contradictory norms of law. Contradictory norms permitted judges to reach conclusions about what basic equities and broadly accepted social interests required in particular cases. Judges then used whatever norm of law suited them to reason in support of their a priori conclusions about what these equities or broad social interests required.

Critical Legal Studies (CLS) has inherited and enhanced the legacy of questioning the value of legal rules. CLS thinkers maintain that law is indeterminate, drawing heavily upon linguists who have explored the indeterminacy of language.' CLS scholars go beyond realists, however,both in positing contradictory norms …

The European Economic Interest Group (Eeig): A New European Business Entity, Daniel T. Murphy

Vanderbilt Journal of Transnational Law

This Article analyzes the European Communities Regulation establishing the European Economic Interest Group (EEIG), a commercial entity whose purpose is to facilitate the economic interests of its members. Dean Murphy emphasizes that the Regulation establishes the EEIG as a Community-wide legal entity but leaves regulation of many aspects of the EEIG's status and operation to the laws of the Member States. The Regulation institutionalizes and encourages cross-border business cooperation while allowing flexibility. Dean Murphy analyzes the Regulation's provisions for formation, operation, and termination of the EEIG. He concludes that the EEIG will likely prove to be a convenient and popular …

Shareholder Rights Plans: Shields Or Gavels?, Patrick J. Thompson

Vanderbilt Law Review

Since 1980 corporate takeover transactions have increased dramatically in size and volume.' Along with the rise in acquisition activity has come a marked increase in the number of contested or hostile take-overs. The proliferation of hostile bids for corporate control' has brought about the development of new offensive and defensive take-over tactics. One of the newest defensive devices is known as a "poison pill," or shareholder rights plan. This device is designed to make the target corporation (target) prohibitively expensive to an acquiring corporation (acquiror) in the event of a hostile takeover or tender offer.'Since the 1985 decision in Moran …

The Corporate Governance Debate And The Ali Proposals: Reform Or Restatement?, Kathryn N. Fine

Vanderbilt Law Review

Much of the debate concerning corporate governance centers on the American Law Institute's proposed Principles of Corporate Governance [hereinafter ALI Proposals or ALI Principles].' The "restate" the law of corporate governance without departing from the primary goal stated in the ALI's charter: "to promote the clarification and simplification of the law and its better adaptation to social needs."' The ALI Proposals, however, have evolved into a"new art form"' and, unlike a restatement, have proposed reforms in addition to codifying the common law. Because of the predominance of statutory corporation law, the ALI Proposals have focused selectively on those areas that …

An Historical Perspective On The Duty Of Care, The Duty Of Loyalty, And The Business Judgment Rule, Marcia M. Mcmurray

Vanderbilt Law Review

For more than two hundred years courts have attempted to define the status and character of corporate directors and officers in an effort to establish and delineate their responsibilities and liabilities. In Charitable Corp. v. Sutton,' an eighteenth century English case, the Lord Chancellor described corporate directors as both agents and trustees. This mixed characterization was adopted and subsequently persisted in later American cases until courts finally determined that directors and officers are fiduciaries"who have a "distinct legal relationship" with the corporation. As fiduciaries, directors and officers must conform to the duty of care'and the duty of loyalty, duties that …

The Duty Of Care And The Duty Of Loyalty In The Revised Model Business Corporation Act, Thomas A. D'Ambrosio

Vanderbilt Law Review

In 1950 the Committee on Corporate Laws of the Section of Corporation, Banking and Business Law of the American Bar Association (the Committee) adopted the Model Business Corporation Act (Model Act or MBCA). The Committee drafted the Model Act in order to provide a dynamic model for keeping state corporation laws updated and responsive to the current demands of the business and legal communities.' Because of this goal, the Model Act was in a constant state of revision. This constant state of revision provided an impetus for the Committee to adopt, in 1984, the Revised Model Business Corporation Act (Revised …

Recent Developments Concerning The Duty Of Care, The Duty Of Loyalty, And The Business Judgment Rule, Patricia A. Daniel

Vanderbilt Law Review

The judiciary faces a difficult task in attempting to define the proper standards of conduct for corporate directors and officers. Although courts have enunciated various standards, the prevailing theme has been that corporate directors and officers are fiduciaries who have a "distinct legal relationship" with the corporation and its shareholders. As fiduciaries, directors and officers must con-form to the duty of care and the duty of loyalty. The business judgment rule, which creates a presumption of propriety for directors' and officers' substantive business decisions, developed concurrently with these duties. Several recent court decisions concerning corporate director and officer liability appear …

Conclusion, Christopher C. Whitson, Thomas A. D'Ambrosio, Patricia A. Daniel, Kathryn N. Fine, Robert P. Mckinney, Marcia M. Mcmurray, Bennet L. Ross

Vanderbilt Law Review

Despite recent responses designed to combat the increased liability exposure of directors and officers, the personal risks for corporate insiders remain significant. With corporations operating in an ever-complex regulatory maze, there has been an increased focus on corporate accountability. The difficulty in resolving director and officer liability issues, however, arises in balancing the need to punish misguided fiduciaries with the need to protect aggressive managers who take good faith risks to produce increased corporate profits. While long-range solutions to this balancing problem are essential, directors and officers should pursue short-term tactics to reduce their risk of personal liability.

Because it …

Books Received, Law Review Staff

Vanderbilt Journal of Transnational Law

Quaderni Di Scienze Criminali: The Penal Protection of Works of Art. Edited by the International Institute of Higher Studies in Criminal Sciences. Siracusa, Italy: The International Institute of Higher Studies in Criminal Sciences, 1983. Pp. 447.

Japanese Business Law and the Legal System. By Elliott J. Hahn. Westport, Connecticut and London, England: Quorum Books, 1984. Pp. vii, 168. $35.00.

The Exchange Rate System: Lessons of the Past and Options for the Future. Edited by Ellas H. Wright. Washington, D.C.: International Monetary Fund, 1984. Pp. vii, 55. $7.50.

The International Maritime Organization. Edited by Samie Mandrabody. London: Croom Helm Ltd., 1984. …

Cable Franchising And The First Amendment, William E. Lee

Vanderbilt Law Review

In awarding and regulating cable franchises, cities often extract from cable operators promises and conditions such as access channels in exchange for exclusive use of public rights-of-way. Professor William Lee in this Article argues that this cable franchising process violates the first amendment rights of cable operators. Professor Lee rejects the two rationales for municipal cable regulation by contending that cable is not a natural monopoly in every market and that cable's use of public rights-of-way requires content neutral regulation. The exacting of conditions such as access channels, however, is not content neutral regulation. Furthermore, censorship decisions that municipalities require …

Business Judgment Dismissal Of Shareholder Derivative Suits By Board Litigation Committees: An Expanded Role For The Courts, David A. Beyer

Vanderbilt Law Review

This Recent Development examines the legal background of the shareholder derivative suit and the business judgment rule and then traces the evolution of the offensive use of the business judgment rule in board of director terminations of stockholder derivative actions. After examining other derivative suit dismissal decisions, the Recent Development analyzes whether Zapata adequately balances the competing interests of the shareholder and the corporate board. Finally, the Recent Development discusses the potential effect of Zapata on future litigation.

Conflicting Standards For Applying The Corporate Attorney-Client Privilege, Kay E. Stephenson

Vanderbilt Law Review

The attorney-client privilege protects confidential communications between client and attorney from forced disclosure.' Dating back to at least 1577, the privilege arose from the belief that it was a point of honor for the attorney to keep his client's confidences.'The modern rationale for the privilege, however, is the perceived need to encourage full and frank discussion between attorney and client by removing the fear of forced disclosure.' Thus, the privilege rests on the premise that the social benefits derived from uninhibited communication and from the attorney's access to all the facts outweigh the detrimental effects of concealing information during trial.' …

Limited Partners' Derivative Suits Under The Revised Uniform Limited Partnership Act, Edwin W. Hecker, Jr.

Vanderbilt Law Review

The purpose of this Article is to examine the provisions of the 1976 Act that authorize limited partners' derivative suits. This examination necessarily must begin by tracing the development of derivative suits under the 1916 Act. With this background established the Article will proceed to analyze the relevant provisions of the 1976 Act.

The Fiduciary Responsibilities Of A Surviving Partner Acting As Executor Of The Deceased Partner's Estate, Sandra L. Randleman

Vanderbilt Law Review

This Note examines the nature of the fiduciary duty in the situation in which an executor/surviving partner must decide whether to consent to a continuation of the partnership business after dissolution and in the situation in which the surviving partner has an option to purchase the deceased partner's interest in the partnership under the terms of a partnership agreement. After separately considering the nature of the fiduciary duties of an executor and a surviving partner, the Note discusses the degree to which the fiduciary loyalty that an executor/surviving partner owes the deceased partner's estate governs his decision on whether to …

Book Reviews: Two Cheers For Capitalism / Does Freedom Work?, Henry Aaron

Vanderbilt Law Review

Although Kristol's book is vastly better than Devine's--both in style and in content--the two books suffer from a common short-coming. Kristol sees a central institution of modern capitalism--the corporation-under aggressive attack, and seeks to defend it. One may disagree with his appraisal of the risks, and resent his tendency to tar all critics with the inanities of the most extreme, but he has a strong case to make-that the rise of modern American capitalism has been a magnificent success story. This success has required an uneasy cooperation between free-market institutions and collective restraints and modifications of market outcomes. By seeing …

Department Of Justice Opinion Letter, Patricia M. Wald

Vanderbilt Journal of Transnational Law

The Department of Justice supports the main purpose of these bills, that is, expeditious exposure of, and effective opposition to, secret cartel arrangements supported by foreign governments that cause direct injury in U. S. commerce. The Department of Justice also welcomes support for accelerated efforts toward international resolution of restrictive anticompetitive business practices. However, the Department, for the reasons stated above, recommends against enactment of H.R. 13921 and H.R. 13922 in their present forms.

We do believe the continued exploration and discussion of the need for enactment of a reporting requirement for foreign, governmentally-involved, cartels would be worthwhile. We have …

Proposed Legislative Solutions To Tax Shelter Partnership Abuses - The End Of The Aggregate Concept?, Thomas E. Settles

Vanderbilt Law Review

This Note first will set forth the Treasury Department's perception of the present abuses of tax shelter partnerships and will analyze existing procedural rules, the Treasury Department's proposed amendments, and the House of Representatives' proposed amendments in light of these abuses. Next, the Note will examine the substantive law of Subchapter K and will attempt to point out the probable effects of the proposed amendments on the aggregate concept of partnerships, on substantive partnership tax law, and on the viability of the partnership form of business. Finally, this Note will propose a solution to the problem of tax shelter partnership …

Post-Dissolution Liabilities Of Shareholders And Directors For Claims Against Dissolved Corporations, D. Gilbert Friedlander, P. Anthony Lannie

Vanderbilt Law Review

This Article initially will explore the nature and extent of shareholders' and directors' liabilities for contingent claims against the dissolved corporation by examining section 105 of the Model Business Corporation Act and the case law of those states that have adopted the Model Act.' Two purposes underlying the Model Act are uniformity and progressive resolution of issues inadequately resolved by the common law or earlier statutes. An exhaustive analysis of the case law under section 105 of the Model Act, however,reveals that both purposes have been frustrated, if not defeated. First, uniformity among jurisdictions, as well as within each Model …

Competing Merger Offers - Disclosure And Related Problems, Law Review Staff

Vanderbilt Law Review

An attractive company that makes known its desire to find a merger partner or announces an agreement in principle to merge with another corporation is likely to receive multiple inquiries or multiple offers from acquisition-minded corporations. This Note examines various problems and duties confronting a publicly held company' that receives multiple merger inquiries and offers. The starting point for this analysis is one court's directive that a proxy statement soliciting shareholder approval of a merger recommended by management must disclose competing merger offers from third parties if such offers are "definitive" and "may" be more advantageous to the shareholders than …