Business Organizations Law Commons^™

Price Adjustment In Long-Term Contracts, Victor P. Goldberg

Faculty Scholarship

After parties enter into a contract, changed circumstance might result in one of them being dissatisfied with the price. Anticipating this, the parties could include a price adjustment mechanism in the agreement. If the mechanism is imperfect, some dissatisfaction will remain. This dissatisfaction may result in litigation with the dissatisfied party asking the court either to excuse performance or revise the contract price. For example, large changes in fuel prices since 1973 generated considerable litigation.

In this paper, I suggest a framework for analyzing price adjustment in private contracts. Contrary to most economists and lawyers, I argue that price adjustment …

Sharing Among The Human Capitalists: An Economic Inquiry Into The Corporate Law Firm And How Partners Split Profits, Ronald J. Gilson, Robert H. Mnookin

Faculty Scholarship

Large corporate law firms seem to be in a state of extraordinary flux. Success and failure are both on the rise. Large firms appear to supply a substantial and growing proportion of the legal services consumed by American business enterprises and to hire a significant fraction of the graduating classes of elite American law schools. Moreover, the last twenty years have witnessed a remarkable expansion in both the number of large firms and the absolute size of the biggest. But accompanying this striking success, there are also signs of serious institutional instability. During the last few years, several previously successful …

The Unfaithful Champion: The Plaintiff As Monitor In Shareholder Litigation, John C. Coffee Jr.

Faculty Scholarship

When the legal history of the 1970's is written, it will note a significant shift in the way courts perceived shareholder litigation. Only a generation ago, the Supreme Court described the derivative action as "the chief regulator of corporate management." Even into the 1960's, those issues involving shareholder litigation that percolated up to the Supreme Court were typically resolved so as to extend the availability of a litigation remedy by removing arbitrary or overbroad barriers to the plaintiff.

Charting The Future Course For Corporate Management Of Health Risks, Michael S. Baram

Faculty Scholarship

Corporations engage in technological activities of benefit to society, but thereby also create new health risks for workers, consumers, and communities. Government regulatory agencies deal with this chronic problem by conducting risk analyses and imposing various duties on private firms. Despite agency efforts and corporate compliance, health risks continue to arise and take their toll. To what extent will private firms voluntarily assume greater responsibility for preventing these health risks? This question is of increasing social importance, because the limitations of regulatory efforts are now obvious, whereas health risks are now being identified at what appears to be an increasing …

The Right To Know And The Duty To Disclose Hazard Information, Michael S. Baram

Faculty Scholarship

In late 1983, the Occupational Safety and Health Administration (OSHA) promulgated its final rule on "hazard communication." This rule establishes for many workers the right to know certain health hazard information held by their employers. Concurrently, the rule imposes on these employers the duty to disclose such privately held information. ^I

The OSHA rule is limited and late, and joins a crowded field. It follows in the wake of several decades of legal developments which have established various rights to know and duties to disclose. Since the latter part of the nineteenth century, state common law for personal injuries has …

Value Creation By Business Lawyers: Legal Skills And Asset Pricing, Ronald J. Gilson

Faculty Scholarship

What do business lawyers really do? Embarrassingly enough, at a time when lawyers are criticized with increasing frequency as nonproductive actors in the economy, there seems to be no coherent answer. That is not, of course, to say that answers have not been offered; there are a number of familiar responses that we have all heard or, what is worse, that we have all offered at one time or another without really thinking very hard about them. The problem is that, for surprisingly similar reasons, none of them is very helpful.

The Business Judgement Rule, Tamar Frankel

Faculty Scholarship

Symposium: Current Issues in Corporate Governance: Conference Panel Discussion

Prof. Kozyris: Our discussion today will focus on the so-called "business judgment rule," a judicially developed law concept that the business decisions of corporate management should not be second-guessed by the courts. The courts will not interfere with such decisions as they are being made and carried out, nor will they impose liability on management if it turns out that the decisions were wrong.

Regulating The Market For Corporate Control: A Critical Assessment Of The Tender Offer's Role In Corporate Governance, John C. Coffee Jr.

Faculty Scholarship

Better answers often await better questions. In the wake of a recent series of provocative articles dealing with contested tender offers, several questions have been vigorously debated:

(1) Should management of the target company be allowed to resist a hostile tender offer in order to remain an independent company? Which, if any, of the various "shark repellent" measures by which a potential target can make itself unattractive to a bidder are justified?;

(2) If defensive tactics were generally forbidden, should the target company's management still be permitted to encourage competing bids thereby creating an auction?; and

(3) Do hostile takeovers …

The Power Struggle Between Shareholders And Directors: The Demand Requirement In Derivative Suits, Tamar S. Frankel, Wayne M. Barsky

Faculty Scholarship

This article examines the demand shareholders must make on a corporation's board of directors prior to bringing a derivative suit. ... Presented with the question of whether the court would give effect to a decision of a committee of disinterested directors to terminate a shareholder derivative suit alleging directors' breach of fiduciary duties, the court ruled that even if the special committee was truly disinterested and independent, "[t]he Court should determine, applying its own independent business judgment, whether the [corporation's] motion [to dismiss the derivative action] should be granted." ... A derivative suit is one of the means for conducting …

The Business Judgment Rule In The Context Of Termination Of Derivative Suits By Independent Committees, James D. Cox, Donald E. Schwartz

Faculty Scholarship

No abstract provided.

The Case Against Shark Repellent Amendments: Structural Limitations On The Enabling Concept, Ronald J. Gilson

Faculty Scholarship

The tactical history of the tender offer movement resembles an unrestrained arms race. Faced with offeror assaults in the form of Saturday night specials, various types of bear-hugs, godfather offers, and block purchases, target management responded with equally intriguing defensive tactics: the black book, reverse bear-hug, sandbag, show stopper, white knight, and, drawing directly on military jargon, the scorched earth. But however varied the labels given particular defensive strategies, they share the common characteristic of being responsive: They are available only after an offer is made and the battle for the target's independence joined. From the target's perspective, what was …

Resale Price Maintenance And The Ftc: The Magnavox Investigation, Victor P. Goldberg

Faculty Scholarship

Franchise agreements between a manufacturer and a distributor or retail dealer of the manufacturer's products often impose conditions on the dealer regarding items such as price, dealer location, service, and advertising. These vertical restrictions, whether price or nonprice, may violate the Sherman Act, which prohibits every contract, combination, or conspiracy in restraint of trade. Whereas vertical price restrictions historically have been held per se invalid, nonprice vertical restrictions have been permitted, subject to a rule of reason. In United States v. Arnold, Schwinn & Co., however, the Supreme Court articulated a per se rule of illegality for nonprice vertical restrictions, …

Seeking Competitive Bids Versus Pure Passivity In Tender Offer Defense, Ronald J. Gilson

Faculty Scholarship

Responding to my comments in the Stanford Law Review, and to those of Lucian Bebchuk in the Harvard Law Review, Professors Easterbrook and Fischel have reiterated their preference for a rule of pure passivity by target management in response to a tender offer. Unlike my more limited rule barring defensive tactics designed to prevent the offer but not barring the facilitation of competitive bids, Easterbrook and Fischel would prohibit both. Because their response to the points that Bebchuk and I raised goes beyond their initial treatment of the subject, it is appropriate that I respond here by extending …

Implied Rights Of Action, Tamar Frankel

Faculty Scholarship

In Transamerica Mortgage Advisors, Inc. (TAMA) v. Lewis,¹ the United States Supreme Court declined to imply a private right of action for damages under the Investment Advisers Act of 1940.² Transamerica is the most recent of a series of Supreme Court decisions limiting the availability and scope of implied private actions under the federal securities laws.³ It stands in sharp contrast to J.L Case Co. v. Borak,⁴ a 1964 decision in which the Court seemed to extend an open invitation to "private attorneys general" to supplement SEC enforcement with private damage actions.

The Court's withdrawal from …

Investment Company Advertising, Tamar Frankel

Faculty Scholarship

SEC Regulation has changed from specific guidelines for advertisers to a general antifraud provision. Despite greater latitude, conflicts may arise between the commission's regulation and first amendment protection of commercial speech.

A Structural Approach To Corporations: The Case Against Defensive Tactics In Tender Offers, Ronald J. Gilson

Faculty Scholarship

Tender offers present an obvious and inherent conflict of interest between management and shareholders. On the one hand, an offer provides shareholders with the opportunity to sell their shares for a substantial premium over market price. On the other hand, the tender offer is the principal mechanism by which management can be forcibly unseated from control. It should thus come as no surprise that management often resists outsiders' efforts to direct tender offers at its shareholders. The form of that resistance, however, is somewhat surprising. Because the tender offer is the only form of corporate acquisition addressed directly to the …

The Survival Of The Derivative Suit: An Evaluation And A Proposal For Legislative Reform, John C. Coffee Jr., Donald E. Schwartz

Faculty Scholarship

The shareholder derivative suit today faces extinction. Long considered the "chief regulator of corporate management," and a recognized form of litigation in American courts at least since 1855, it now confronts the second great challenge of its history. Thirty-odd years ago, commentators foresaw the derivative suit's demise when state legislatures began adopting security-for-expenses statutes to curb the abuses of "strike suit" litigation. These reports of its death proved exaggerated, however, as plaintiffs discovered various tactics by which to outflank these statutes. As a result, by the late 1960's, the crisis was past, and a revival in the action's popularity was …

Glass-Steagall: Some Critical Reflections, Roberta S. Karmel

Faculty Scholarship

No abstract provided.

An Identity Crisis For The Corporate Lawyer, Roberta S. Karmel

Faculty Scholarship

No abstract provided.

Rebuttal: The Individual Or The Firm? Focusing The Threat Of Criminal Liability, John C. Coffee Jr.

Faculty Scholarship

I cannot disagree with much of what Mr. Crane has said in his very articulate presentation. One must be careful about trying to prove too much. I have not argued against individual criminal liability, but I do not believe we can rely on it exclusively. Let me therefore confine my reply to this question and to Mr. Crane's criticisms of my equity fine proposal.

Making The Punishment Fit The Corporation: The Problem Of Finding An Optimal Corporation Criminal Sanction, John C. Coffee Jr.

Faculty Scholarship

To be "present at the creation," in Dean Acheson's felicitous phrase, is always an honor. In addition, to be present at the commencement of what I expect will be a sustained and fruitful tradition at this law school, namely, the Governor Thompson Lectureship, is a second honor. Finally, let me express my thanks to Dean Bainbridge for a third honor: the compliment implicit in the 2 to 1 odds he has arranged today. Both Norval Morris and Mark Crane are men with distinguished careers in quite different fields of the law. If I am confident of one thing today, it …

Cost-Benefit Analysis: An Inadequate Basis For Health, Safety, And Environmental Regulatory Decisionmaking, Michael S. Baram

Faculty Scholarship

The use of cost-benefit analysis in agency decisionmaking has been hailed as the cure for numerous dissatisfactions with governmental regulation. Using this form of economic analysis arguably promotes rational decisionmaking and prevents health, safety, and environmental regulations from having inflationary and other adverse economic impacts. Closer analysis, however, reveals that the cost-benefit approach to regulatory decisionmaking suffers from major methodological limitations and institutional abuses. In practice, regulatory uses of cost-benefit analysis stifle and obstruct the achievement of legislated health, safety, and environmental goals.

This Article critically reviews the methodological limitations of cost-benefit analysis, current agency uses of cost-benefit analysis under …

Double Jeopardy Of Corporate Profits, The , Constantine N. Katsoris

Faculty Scholarship

The more one reads about our economy, the more one is baffled and alarmed. Permanent solutions to economic problems are elusive. Treating one financial malaise often aggravates another sector of the economy, necessitating a delicate balancing of conflicting interests. Furthermore, the problems are complicated by the constant influence of foreign forces. Nevertheless, most economists agree that any solution will require enormous funding. Unfortunately, the public has little, if any, confidence in our tax system. Indeed, some tax laws and proposals have been referred to as "obscene" and a "disgrace to the human race." Few quarrel with the aptness of such …

Ambivalent Reflections On Regulation, Roberta S. Karmel

Faculty Scholarship

No abstract provided.

Insider Transactions Under The 1940 Act, Tamar Frankel

Faculty Scholarship

No abstract provided.

The California Statutory Close Corporation: Gateway To Flexibility Or Trap For The Unwary?, William K.S. Wang

Faculty Scholarship

No abstract provided.

Federal Corporate Law, Federalism, And The Federal Courts, Gordon G. Young

Faculty Scholarship

No abstract provided.

Beyond The Shut-Eyed Sentry: Toward A Theoretical View Of Corporate Misconduct And An Effective Legal Response, John C. Coffee Jr.

Faculty Scholarship

Like hard cases, festering scandals make bad law. As public perceptions shift so that conduct once tolerated becomes seen as illicit, political pressures develop that can result in hastily improvised responses by the legal system to fill the newly perceived vacuum. This generalization is advanced to question neither the inalienable right of the public to be scandalized, nor the need for corporate reform, but to approach a highly problematic dilemma: hurried, moralistic responses to a perceived evil often prove not only ineffective, but even counterproductive. The serious student of complex organizations may recognize this assertion as a slightly altered variant …

Liquidated Damages, Penalties And The Just Compensation Principle: Some Notes On An Enforcement Model And A Theory Of Efficient Breach, Charles J. Goetz, Robert E. Scott

Faculty Scholarship

For more than five centuries, strict judicial scrutiny has been applied to contractual provisions which specify an agreed amount of damages upon breach of a base obligation. Although the standards determining the enforceability of liquidated damage clauses have developed novel and labyrinthine permutations, their motivating principle has remained essentially immutable. For an executory agreement fixing damages in case of breach to be enforceable, it must constitute a reasonable forecast of the provable injury resulting from breach; otherwise, the clause will be unenforceable as a penalty and the non-breaching party will be limited to conventional damage measures.

The historical genesis of …

Pooling Agreements Under The New California General Corporation Law, William K.S. Wang

Faculty Scholarship

No abstract provided.