Business Organizations Law Commons^™

Encouraging Litigation: Why Dodd-Frank Goes Too Far In Eliminating The Procedural Difficulties In Sarbanes-Oxley, Jessica Luhrs

UC Law Business Journal

This note reviews the whistleblower protections in the Dodd-Frank Wall Street Reform and Consumer Protection Act. These sweeping protections decrease the barriers and increase the incentives for corporate whistleblowers, in part by decreasing procedural hurdles and providing potentially staggering cash bounties. This note argues that these whistleblower protections go too far and are likely to increase the number of false and meritless claims filed with the Securities and Exchange Commission. This note concludes that the Securities and Exchange Commission should address these shortcomings and supplement its regulatory efforts by incentivizing corporate transparency, penalizing those who file false claims, and encouraging …

A Responsibility To Speak: Citizens United, Corporate Governance And Managing Risks, Roger Coffin

UC Law Business Journal

Contrary to prior assumptions, the right to corporate political speech established by Citizens United v. Federal Election Commission should not damage corporate stock prices or negatively affect firm value. A sampling of indexes and individual corporate stock prices provides empirical data demonstrating that corporate political spending does not harm shareholders. Special shareholder protections in the event of corporate political speech are therefore unnecessary and such corporate speech does not impinge a shareholder’s ability to exercise political beliefs. On the contrary, corporations require the ability to protect their own interest against regulation that may hamper economic success by engaging in political …

Scratch My Back, And I'Ll Scratch Yours: Scratching The Surface Of The Duty Of Care In Cross Sector Collaborations - Are For-Profits Obligated To Ensure The Sustainability Of Their Partner Non-Profits?, Christyne J. Vachon Esq.

UC Law Business Journal

Nonprofits and For-profit corporations increasingly interact with each other to gain the mutual benefits of cross sector Collaborations. Nonprofits gain access to resources, expertise, and new business avenues, among other benefits. For-profits gain good will, trust, and access to new markets. The Collaboration can lead to corporate governance issues that should not be overlooked during management decision making. The article evaluates a Continuum of engagement in the For-profit and Nonprofit Collaboration that informs the requisite duty of care for the entities’ boards of directors. Ultimately, the duty of care owed by the For-profit to the Nonprofit depends on where the …

Plus Ultra: Third-Party Preservation In A Cloud Computing Paradigm, Joseph A. Nicholson

UC Law Business Journal

This note analyzes problems of electronic document preservation in the context of cloud computing. Such document storage policies pose special problems when a litigant’s data is subject to discovery but stored on the network of a third-party vendor. Without contractual preservation obligations, these third parties are likely to escape sanctions even when crucial data is destroyed. The note proposes various electronic storage solutions that would preserve data for discovery during litigation while exposing current problems associated with current litigation tools that fail to compel document production. Finally, the author proposes using terms of service agreements that would ease tensions but …

Supplier Tactics For Dealing With Financially Distressed Corporate Customers, John A. Pearce Ii, Ilya A. Lipin

UC Law Business Journal

The 2007 recession led to thousands of corporate bankruptcies. When a corporation declares bankruptcy, suppliers are forced to recover payments that are legally owed to them, and thus suffer severe economic losses. Suppliers can benefit from being proactive in their use of legal tools to increase the probability of collecting receivables from their customers. This article explains how bankruptcy can affect suppliers' ability to obtain full payment for goods sold and details remedies available to suppliers under the Bankruptcy Abuse Prevention and Consumer Protection Act ("BAPCPA"). The author also provides tactics for how to improve the leverage of the supplier …

High-Frequency Trading And The Flash Crash: Structural Weaknesses In The Securities Markets And Proposed Regulatory Responses, Ian Poirier

UC Law Business Journal

This note will illuminate the relatively unknown highfrequency trading industry. First, it will examine the state of the industry, in context with the flash crash of May 6, 2010 when a single trader in Kansas City sent the U.S. securities markets into a tailspin. Next, it will explain why the hodgepodge of regulations struggling to control this industry is entirely inadequate to prevent another crash. Finally, the authors suggest a better solution-relatively noninvasive controls that could be put in place to prevent future flash crashes and restore investor confidence.

Debunking The Myth That Insurance Coverage Is Not Available Or Allowed For Intentional Torts Or Damages, Christopher C. French

UC Law Business Journal

A common misconception that insurance coverage is not available for intentional injuries or damage is, in fact, untrue. This myth is based in the “fortuity doctrine” that provides insurance should only cover losses by chance, and public policy that disfavors insurance for intentional harms. In reality, many types of liability insurance policies cover intentional torts ranging from trademark infringement to defamation and employment discrimination. These policies also cover punitive damage awards in most jurisdictions. Furthermore, public policy actually favors insurance recoveries for intentional torts because no empirical data exists to support the proposition that liability insurance increases policy holder misconduct. …

California License To Be Sued: A Critique Of Strict Liability Imposed On Business Owner Licensees From The Perspective Of The Smog Check Industry, Zachary Young

UC Law Business Journal

This article criticizes strict liability when used in disciplinary actions by regulatory agencies. The article examines the strict liability theory from the perspective of the automotive smog check industry, where the law is relatively new, to set forth principles that should be applied to a number of industries. The article also discusses the background of the smog check industry and its governing law and critiques the current state of the law by discussing the burdensome effect it places on business owners including smog station owners. The article proposes a bright line rule to limit strict liability and more effectively pursue …

The Creation And Destruction Of Price Cartels: An Evolutionary Theory, William Bradford

UC Law Business Journal

Why are gas stations able to charge price premiums above competitive price and how are companies arrive at identical supracompetitive price? The article describes the causes and effects of supracompetitive pricing, explains the inability of antitrust law to suppress some instances of supracompetitive pricing, establishes the importance of trust between firms as a necessary condition for supracompetitive pricing, and illustrates how the strategic exchange of information is crucial to the creation and destruction of trust and thus to the evolution and devolution of price cartels. The author develops a "positive theory" that explains and predicts the evolution and devolution of …

The Bonds That Tie: Will A Performance Bond Require That A Surety Deliver A Certified Green Building?, Darren A. Prum, Lorilee A. Medders

UC Law Business Journal

In 2006, the legislators of Washington, D.C. passed landmark legislation introducing green building requirements for various types of structures into the jurisdiction over a five-year period. A noteworthy aspect of the legislation is that it directed construction projects within the district to purchase green performance bonds up to $3 million to guard against a privately owned project’s failure to meet its green building aspirations. Outside of the regulatory requirements, lawsuits may also occur between the participants of a project if the finished structure fails to attain a third party certification. Given the need by project participants to address the risks …

What’S Good In Theory May Be Flawed In Practice: Potential Legal Consequences Of Poor Implementation Of A Theoretical Sample, A. Lynn Phillips, G. Michael Phillips, Melanie Stallings Williams

UC Law Business Journal

This article discusses the problems with the use of statistical sampling in litigation. Sample-based research is increasingly used in a diverse array of cases including products liability, antitrust, intellectual property, and criminal law. Sample-based research provides objective evidence upon which decisions, damages, and liability may rest. Despite its importance, however, statistical evidence is often misused and misunderstood by attorneys unfamiliar with the underlying form of analysis. This article explores common errors when using litigative samples, comments upon best practices for the use in law of sample-based research, and demonstrates the importance of sound statistical sampling and data collection in a …

The Jobs Act: Unintended Consequences Of The “Facebook Bill”, Tyler Adam

UC Law Business Journal

The Jumpstart Our Business Startups Act (“JOBS Act”), in part, amended § 12(g) of the Securities Exchange Act of 1934. Originally enacted to impose mandatory disclosure requirements on non-reporting companies with a significant volume of trading, § 12(g) became dysfunctional due to changes in the market landscape. The JOBS Act amended § 12(g), first, by raising the shareholders of record threshold, and second, by excluding from the threshold number persons who received securities pursuant to certain employee compensation plans. This note argues that the JOBS Act’s retooling of § 12(g) fails to adequately resolve fundamental problems with the rule. Specifically, …

The Case Against Statutory Menus In Corporate Law, Daniel M. Häusermann

UC Law Business Journal

The author challenges the view among corporate law scholars that state legislatures should enact menus of predefined statutory rules from which corporations may select the governance terms of their choice. The private sector has produced menus of contract terms, such as standard form contracts and model documents, long before the idea of statutory menus became fashionable. There is no evidence that the market for private menus has failed, and legislatures are unlikely to be efficient menu producers. Advocates of statutory menus have suggested a number of rationales, most notably considerations based on transaction costs, network and learning effects, bounded attention, …

Fair Copyright Litigation: The Reverse Class Action Lawsuit, Brian Noh

UC Law Business Journal

By some estimates, more than 40 billion songs were downloaded illegally in 2008. In recent years, some copyright holders seeking to curtail copyright infringement have filed thousands of claims against individual end-users and peer-to-peer network operators. The resulting scenario, in some instances, has required plaintiffs to prepare settlement strategies against thousands of individual defendants who are often ill equipped to deal with such suits. This note addresses the inability of the copyright law regime to resolve such scenario, one of the growing problems of the information age. Specifically, the author proposes that the solution to these problems is found in …

Do Vcs Use Inside Rounds To Dilute Founders? Some Evidence From Silicon Valley, Brian Broughman, Jesse Fried

Articles by Maurer Faculty

In the bank-borrower setting, a firm's existing lender may exploit its positional advantage to extract rents from the firm in subsequent financings. Analogously, a startup's existing venture capital investors (VCs) may dilute the founder through a follow-on financing from these same VCs (an “inside” round) at an artificially low valuation. Using a hand-collected dataset of Silicon Valley startup firms, we find little evidence that VCs use inside rounds to dilute founders. Instead, our findings suggest that inside rounds are generally used as “backstop financing” for startups that cannot attract new money, and these rounds are conducted at relatively high valuations …

Made In The U.S.A.: Corporate Responsibility And Collective Identity In The American Automotive Industry, Benjamin Levin

Scholarship@WashULaw

This Article seeks to challenge the corporate-constructed image of American business and American industry. By focusing on the automotive industry and particularly on the tenuous relationship between the rhetoric of automotive industry advertising and the realities of doctrinal corporate law, I hope to examine the ways that we as social actors, legal actors, and (perhaps above all) consumers understand what it means for a corporation or a corporation’s product to be American. In a global economy where labor, profits, and environmental effects are spread across national borders, what does it mean for a corporation to present the impression of national …

Further Considerations: Immigrant Entrepreneurs - Contributions And Challenges, Jayesh Rathod

Contributions to Books

An overview of the contributions made by immigrant entrepreneurs in the United States, and the challenges they face.

Introduction: Contains Cover, Table Of Contents, Letter From The Editor, And Masthead, Joel Hermsdorfer

Richmond Journal of Law & Technology

The Richmond Journal of Law and Technology is proud to present its Annual Survey issue of the 2011-2012 academic year.

Tribal Rituals Of The Mdl: A Comment On Williams, Lee, And Borden, Repeat Players In Multidistrict Litigation, Myriam E. Gilles

Articles

No abstract provided.

How Predatory Mortgage Lending Changed African American Communities And Families, Cheryl L. Wade

Faculty Publications

(Excerpt)

This symposium focuses on efforts to reform the secondary mortgage market in the aftermath of the most potent economic downturn in U.S. history since The Great Depression. One question posed at the symposium in several forms was whether low-income Americans should be encouraged to own a home. Implicit in this question is the idea that low­-income homebuyers were responsible for the losses that investors in mortgage-backed securities incurred. This question is part of a familiar narrative: investors in mortgage-backed securities suffered, and the economy suffered, because low-income homebuyers defaulted. My essay, however, looks beyond the alleged irresponsibility of homebuyers …

The Bizarre Law & Economics Of 'Business Roundtable V. Sec', Grant M. Hayden, Matthew T. Bodie

Faculty Journal Articles and Book Chapters

Corporations are legal entities designed to foster certain kinds of collective economic activity. The decisionmaking power within a corporation ultimately rests with a board of directors elected by shareholders. Shareholders, however, do not use anything like a conventional ballot in these elections; instead, they fill out a “proxy ballot,” delivered to them by the incumbent board. This proxy ballot lists only the incumbent board’s chosen nominees, very often the board members themselves. If a shareholder wants to run for director or propose another nominee for the board, she needs to provide all other shareholders with a separate proxy ballot — …

Tackling Shareholder Short-Termism And Managerial Myopia, Emeka Duruigbo

Kentucky Law Journal

No abstract provided.

Social Proposals Under Rule 14a-8: A Fall-Back Remedy In An Era Of Congressional Inaction, Margaret V. Sachs

Scholarly Works

More than a decade ago, institutional investors, notably labor unions and pension plans, began using shareholder proposals as a vehicle for advancing progressive social causes. These proposals have recently garnered heightened levels of shareholder support. While even majority support for a proposal does not insure its adoption by the board of directors, appreciable (even if not majority) support can nonetheless sometimes precipitate adoption, or at least negotiation (which can lead to adoption). This Essay argues, first, that with Congress now largely dysfunctional, social proposals have acquired a whole new role—that of a company-by-company, fall-back mechanism for solving social problems that …

Exit, Voice, And Reputation: The Evolution Of Spacs, Usha Rodrigues, Mike Stegemoller

Scholarly Works

This Article tells the story of a new type of business—the special purpose acquisition corporation ("SPAC"). The promoters of a SPAC begin by forming a shell corporation with no assets. They then take the company public on little more than a promise that they will strive to complete the acquisition of a target in the near future. We present the first empirical study of the SPAC contract design, and use a hand-collected dataset to trace its evolution over the past nine years.

While SPACs are a new form, their contract design borrows heavily from private equity's playbook. Private equity managers …

The Citizen Shareholder: Modernizing The Agency Paradigm To Reflect How And Why A Majority Of Americans Invest In The Market Berle Iii: Theory Of The Firm: The Third Annual Symposium Of The Adolf A. Berle, Jr. Center On Corporations, Law & Society, Anne M. Tucker

Scholarly Works

This Article examines corporate law from the perspective of personal investment and discusses the economic realities of modern investments in order to understand the role of shareholders within the agency paradigm. Corporate law, its scholars, and suggested reforms traditionally focus on the internal organization of the corporation. For example, agency principles inform corporate law by acknowledging a potential conflict of interest between the managers and shareholders of a corporation. Reforms such as increased shareholder voting rights and proxy access, which seek to give shareholders a more direct means to make their interests known to managers, illustrate corporate law’s focus on …

Agency And The Ontology Of The Corporation, Christopher M. Bruner

Scholarly Works

No abstract provided.

Conflicted Gatekeepers: The Volcker Rule And Goldman Sachs, Andrew F. Tuch

Scholarship@WashULaw

In many areas of regulation, rules require one person to act with loyalty to another person, or at least constrain one person’s pursuit of self-interest by restricting the extent to which that person may act in conflict with the interests of another person. These rules are typically justified on the basis of reducing (economic) agency costs. However, recently-adopted provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act, which include the so-called Volcker Rule, impose such conflict of interest rules on underwriters selling securities to investors, including sophisticated investors - a context in which agency costs do not arise. …

Kigyo No Shakai-Teki Sekinin: Challenges For Corporate Social Responsibility In Japan, Janis P. Sarra, Masafumi Nakahigashi

All Faculty Publications

Globally, there is increasing discussion about corporate social responsibility (CSR). Many large multinational enterprises, particularly in mining and other resource sectors, have voluntarily adopted CSR programs, having concluded that social, economic, and environmental sustainability measures are good for the "bottom line" and fro the communities in which they operate. Companies in Japan have yet to move in that direction, although there are a few notable exceptions. In part, this lack of adaptation to the growing interest in CSR internationally is due to cultural and social norms in Japan that suggest that many aspects of CSR properly belong to the domain …

Prospects For Scalability: Relationships And Uncertainty In Responsive Regulation, Cristie Ford

All Faculty Publications

Ian Ayres’s and John Braithwaite’s book Responsive Regulation: Transcending the Regulatory Debate (1992) gave us many significant insights. The book has transcended its own time. At the same time, on the 20th anniversary of its publication, two things about Responsive Regulation are striking. The first is the direct, personal relationship on which the regulatory interaction is premised. The second is the boundedness and manageability of the regulatory project. At least in prudential regulation of global financial institutions in the wake of the recent financial crisis (though surely elsewhere too), neither of these features can be taken for granted. This brief …

The Naked Fiduciary, Michelle M. Harner, Jamie Marincic

Faculty Scholarship

Business law is grounded in the common law of fiduciary duty. Courts and policymakers have been loath to abandon that principle. Yet, particularly in the contractual context of limited liability companies (LLCs), the fiduciary label is illusory and may undercut sound governance practices for those entities. This Article presents an in-depth empirical study about governance provisions included in LLC operating agreements and examines the implications of the data in the context of various types of businesses that might choose to organize as LLCs. The Article uses the data and related case studies to offer a new approach to LLC governance …