Business Organizations Law Commons^™

A History Of Corporate Law Federalism In The Twentieth Century, William W. Bratton

Seattle University Law Review

This Article describes the emergence of corporate law federalism across a long twentieth century. The period begins with New Jersey’s successful initiation of charter competition in 1888 and ends with the enactment of the Sarbanes-Oxley Act in 2002. The federalism in question describes the interrelation of state and federal regulation of corporate internal affairs. This Article takes a positive approach, pursuing no normative bottom line. It makes six observations: (1) the federalism describes a division of subject matter, with internal affairs regulated by the states and securities issuance and trading regulated by the federal government; (2) the federalism is an …

The Theories Of Corporate Pershonhood And Their Three False Choices: Developing A Framework For Corporate Rights, Katharine Jackson

Faculty Articles and Other Publications

Scholars often use the theories of corporate personhood—aggregation theory, concession theory, and real entity theory—to justify corporate rights through analogy. That is, theories of corporate personhood attempt to explain what rights corporations ought to have based on what kind of person the corporation is like. If corporations are like individual human beings, then corporations should enjoy all the same rights that human beings do. If corporations are like states, then corporations should owe the same obligations that a state owes its citizens. Of course, many scholars have addressed the weaknesses of this kind of analogical reasoning. As Dewey argued long …

The Harm In The Fiduciary Myth, Kelli Alces Williams

Scholarly Publications

Fiduciary law has become the doctrine of choice in scholarship aiming to protect vulnerable parties from powerful decisionmakers. But fiduciary law cannot fill all the gaps in those impersonal, public relationships because the beneficiary class is large, disparate, and widely dispersed. Public leaders and decision makers cannot zealously pursue the interests of all parties vulnerable to their decision making and they are often driven by various personal interests in choosing which set of beneficiary interests to prioritize. The persistent myth that leaders of large groups are fiduciaries and that fiduciary obligation is the answer to all power imbalance problems harms …

Key Developments At The World Bank Inspection Panel (2013-2024), Dilek Barlas

Perspectives

Through the lens of important cases, this essay reflects on major developments that occurred at the Panel during the tenure of the author as the Executive Secretary of the World Bank Inspection Panel and shows how the Panel has evolved to improve accessibility, has influenced overall development policies, and has become a catalyst for institutional change. The essay observes that the Panel’s success has largely been due to its structural and operational independence, reporting as it does directly to the Bank’s Board of Executive Directors. However, there are challenges facing the Panel on certain issues, including most importantly its independence, …

Ending 30 Years Of Imf Exceptionalism: A Call For An Accountability Mechanism At The International Monetary Fund, Luiz Vieria

Perspectives

This year marks the 30^th anniversary of the World Bank’s Inspection Panel (WBIP or Panel), created as the result of grass-roots and international pressure on the Bank to address the well-documented negative impacts on marginalised communities of the Bank-financed Narmada dam and similar projects.

The establishment of the world’s first independent accountability mechanism (IAM) at the World Bank led to the creation of similar mechanisms at nearly all international financial institutions (IFIs), with the IMF an important exception. The establishment of the WBIP and other IAMs was a step-change in accountability, as previously IFIs were only accountable to shareholders …

Imf Human Rights Accountability: A Pragmatic Way To Break The Deadlock, Aldo Caliari

Perspectives

In the three decades since the 1993 establishment of the World Bank Inspection Panel, almost all development finance institutions (DFIs) have established analogous panels, ombudsperson offices or other independent accountability mechanisms (IAMs) to allow people who believe they have been harmed by the DFI’s activities to directly trigger processes of fact-finding, dispute resolution, and, if applicable, redress. The primary exception has been the International Monetary Fund.

World Bank's Roadmap And The Inspection Panel's Human Rights Responsibilities, Juan Pablo Bohoslavsky, C.P. Chandrasekhar

Perspectives

The World Bank has been under pressure to devise a process for “evolving” its mission, operations, and resources, acknowledging that decades of engagement with low- and middle-income countries has resulted, paradoxically and contrary to its official mission, in a “crisis of development.” The Bank bluntly notes in the opening to its paper “Evolving the World Bank Group’s Mission, Operations, and Resources: A Roadmap,” issued in December 2022, “after decades of progress, growth and poverty reduction have stalled.” Indeed, this “crisis of development” threatens to unleash political instability around the world.

Algorithmic Financial Regulation: Limits Of Computing Complex Adaptive Systems, Shuping Li

American University Business Law Review

This article examines the potential of and limits to the use of machine learning for financial regulation. Ideally, if we could fully understand the financial system and agree on long- and short-term regulatory goals, we would be able to write code that carries out the computation that extracts proper representations from the data and makes correct regulatory decisions. We cannot do this yet because of limited sources of data, the bias brought by human beings and algorithmic models, and the difficulty of improving uninterpretable models. Furthermore, since law is a combination of merits and facts, there are difficulties in establishing …

The Secret's Out: The Role Of Restrictive Covenants In Trade Secret Law, Magdalene Eallonardo

American University Business Law Review

Trade secrets derive economic value from their classified nature, which leads companies to implement legal measures to prevent the spread of their confidential company information to the public. Restrictive covenants within employment agreements are a common form of these legal measures. However, because of employers’ restrictive terms, states are placing regulations on the scope of these agreements. With limited ability to contract their employees away from sharing their confidential information with direct competitors, companies utilize alternate methods to protect their trade secrets.

Charter Schools And Emos: Who's In Charge, Brendan Glynn

American University Business Law Review

Charter schools are a popular sight in the educational field today. For the IRS to consider a charter school a 501(c)(3) organization, nonprofit charter schools must be organized and operated exclusively for educational purposes, meaning purposes relating to the instruction of individuals to improve their capabilities. To be organized for educational purposes, the articles of the organization must limit the entity to educational purposes while also preventing the organization from engaging in substantial noneducational activities. To operate exclusively for educational purposes, an organization’s activities must be substantially in furtherance of educational purposes while also not substantially benefitting a private individual. …

Constructing Solutions: Addressing Liability And Ownership Risks Associated With Business Information Modeling, Connor Sheehy

American University Business Law Review

This Comment will first discuss the background of BIM, including its technological characteristics and implementation into a complex construction project, as well as the potential benefits that incentivize parties to utilize BIM in a project. Next, this Comment will discuss the legal risks and uncertainty associated with BIM, particularly regarding ownership and liability. Specifically, this Comment will focus on ownership of the intellectual property and designs within an overall model and will contrast liability in traditional construction projects with liability in a construction project utilizing BIM. Lastly, this Comment will discuss potential solutions to these risks and uncertainties. The analysis …

Finding Rights In The Fine Print: How Terms Of Services Agreements Can Turn Consumer Search History Into Digital Property, Dalia Wrocherinsky

American University Business Law Review

On October 16, 2023, the Colorado Supreme Court handed down the country’s first court opinion on the constitutionality of reverse keyword warrants. It found that Google’s Terms of Service created a Fourth Amendment property interest in a user’s search history such that police copying this data constituted a seizure. This was a completely novel contention that implicates basic, yet increasingly relevant and unsettled principles of property, contracts, and Fourth Amendment law.

This Comment will argue that fundamental principles of property, contracts, and Fourth Amendment law support the Colorado Supreme Court’s theory. It will explore how property rights are created and …

Are The Mdbs Accountable? Reflecting On The Independent Accountability Mechanisms Of The Multilateral Development Banks, Susan Park

Perspectives

The International Accountability Mechanisms of the Multilateral Development Banks provide important insights into how to hold intergovernmental organizations to account for their environmental and social impacts. This perspective identifies how the IAMs hold the Banks to account according to the six standard questions of accountability: who is accountable, to whom, for what are they accountable, and what are the standards, processes, and sanctions employed to demonstrate that the MDBs are accountable. This highlights what the IAMs can and cannot hold the MDBs to account for, and how this might shape further international grievance mechanisms for people seeking to defend their …

The River Of Accountability Mechanisms: Then And Now, Suresh Nanwani

Perspectives

In 1993, the river of international accountability mechanisms (IAMs) commenced from its source – the World Bank Inspection Panel (The Panel). In its journey the river was fed by the tributaries of similar accountability mechanisms from other development institutions, including four regional development banks – the Inter-American Development Bank in 1994, the Asian Development Bank in 1995, the European Bank for Reconstruction and Development in 2003, and the African Development Bank in 2006. It also welcomed other entities – bilateral institutions like Japan Bank for International Cooperation (2003) and Proparco (2018), United Nations Development Program (2014) and other organizations like …

Unacceptable Means: The Inspection Panel Actions On World Bank Forcible Resettlement, Lori Udall

Perspectives

This essay reviews the World Bank’s Inspection Panel’s work on cases involving involuntary resettlement. Since its Inception, the Panel has received 89 requests involving resettlement (over half of all cases) and has investigated 32. It traces Panel cases, lessons learned, and advisory reports on resettlement and livelihood restoration. Despite the growing evidence through the years of resettlement failures, the World Bank continues to violate its own safeguard policies and repeat the same omissions and mistakes in projects. The essay concludes with recommendations for empowering the Inspection Panel and for the Bank to move towards bottom-up community development that better addresses …

Thirty Years Of Accountability In International Development: Insights From The General Counsel Of The World Bank Group, Christopher H. Stephens

Perspectives

The creation of the World Bank’s Inspection Panel in 1993 was a groundbreaking moment in international development. The first accountability mechanism of its kind, it established a precedent for accountability in development that has been followed by multiple development banks and international financial institutions over the last decades. Today, the credibility of international financial institutions rests significantly on the mechanisms that they put in place to check their own behavior and the avenues they offer for affected communities and individuals to raise questions of harm related to the projects financed by these institutions. This essay is a reflection on the …

Stakeholder Capitalism’S Greatest Challenge: Reshaping A Public Consensus To Govern A Global Economy, Leo E. Strine Jr., Michael Klain

Seattle University Law Review

The Berle XIV: Developing a 21st Century Corporate Governance Model Conference asks whether there is a viable 21st Century Stakeholder Governance model. In our conference keynote article, we argue that to answer that question yes requires restoring—to use Berle’s term—a “public consensus” throughout the global economy in favor of the balanced model of New Deal capitalism, within which corporations could operate in a way good for all their stakeholders and society, that Berle himself supported.

The world now faces problems caused in large part by the enormous international power of corporations and the institutional investors who dominate their governance. These …

Henderson And The Objective Observer Standard: The Future Of Race-Conscious Standards Post-Students For Fair Admissions, Gabriela Dionisio

Seattle University Law Review

On June 29, 2023, the Supreme Court of the United States decided Students for Fair Admissions v. President & Fellows of Harvard College, which struck down race-conscious admissions policies. Within just a year after its ruling, Students for Fair Admissions has already had a sweeping impact, reaching beyond higher education. Although the Supreme Court did not indicate whether Students for Fair Admissions applies to sectors beyond higher education, law firms, and other employers have already modified their diversity policies and initiatives, erasing race and company diversity considerations. Given those dramatic changes, there is growing fear that Students for Fair Admissions …

Same Crime, Different Time: Sentencing Disparities In The Deep South & A Path Forward Under The Fourteenth Amendment, Hailey M. Donovan

Seattle University Law Review

The United States has the highest incarceration rate of any country in the world. The American obsession with crime and punishment can be tracked over the last half-century, as the nation’s incarceration rate has risen astronomically. Since 1970, the number of incarcerated people in the United States has increased more than sevenfold to over 2.3 million, outpacing both crime and population growth considerably. While the rise itself is undoubtedly bleak, a more troubling truth lies just below the surface. Not all states contribute equally to American mass incarceration. Rather, states have vastly different incarceration rates. Unlike at the federal level, …

Socially Acceptable Securities Fraud, Christine Hurt

Faculty Journal Articles and Book Chapters

What is a lie? Moreover, where is it a lie? Lies are bad. Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934 create liability for issuer firms and individuals who make “an untrue statement of a material fact” or omit “a material fact required to be stated therein or necessary to make the statements therein not misleading.” In the ninety years since the passage of the Securities Exchange Act, however, the number of ways in which market participants may publicly disseminate statements that will be consumed by investors has exploded; does 10b-5 really apply to all these …

Law’S Detrimental Reliance On Intermediaries, Carla L. Reyes

Faculty Journal Articles and Book Chapters

Emerging technology is law’s magic mirror. Even as law seeks to cabin the effects of emerging technology in society, when we hold emerging technology up to law, emerging technology often reflects flaws or gaps in legal constructs. Of course, rather than recognizing those flaws or gaps, law retorts back “mirror, mirror, on the wall, who is the fairest of them all?,” demanding that all other disciplines and constructs bow before law’s mighty, near-perfect reach. Often, no matter how strongly emerging technology demands that law bend, legal evolution only occurs after regulatory failures harm individuals on a massive scale. One emerging …

Non-State Actors For Profit: Revisiting Transnational Corporations' Personhood And Responsibility Under International Law, Katayoon Beshkardana, Faraz Shahlaei

Northwestern Journal of International Law & Business

The growing impact of Transnational Corporations (TCs) on international trade, investment, and human rights raises the question of international corporate responsibility. For international responsibility, TCs must be recognized as subjects of international law with legal personality. Apart from states as the primary subjects of international law, such status has been granted to inter-governmental organizations (IGOs). The factors that contributed to the IGOs’ recognition as international law subjects seem to be present for TCs today. While the International Court of Justice granted such legal status to IGOs, for TCs, the best path to recognition would be to establish a global authority …

Disclosure, Greenwashing, And The Future Of Esg Litigation, Jason J. Czarnezki, Barbara Ballan

Elisabeth Haub School of Law Faculty Publications

The Environmental, Social, and Governance (“ESG”) disclosure movement is expanding both voluntarily, as businesses choose to disclose this information, and mandatorily, as government agencies impose disclosure requirements. As ESG disclosure expands, so do the litigation risks. “Greenwashing” refers to presenting false or misleading environmental or sustainability (i.e., “green”) qualities of products, services, or practices. Businesses may greenwash consumers as well as investors with false and misleading ESG disclosures in advertising, securities filings, or other public statements activating greenwashing litigation from investors and consumers. This Article addresses (1) the laws and regulations that cover consumer and securities greenwashing litigation, (2) how …

Decentralized Autonomous Organizations And Regulatory Competition: A Race Without A Cause, Matt Blaszczyk

Fellow, Adjunct, Lecturer, and Research Scholar Works

Several states have enacted specialized limited liability company legislation in an attempt to attract decentralized autonomous organizations. In this way, the regulatory competition debate surrounding states such as Wyoming, Tennessee, and Vermont, attempting to dethrone Delaware, has found a new battleground. According to Professor Lynn LoPucki, this will entail a regulatory race to the bottom, that is, a race to “laxity.” I disagree. In fact, deregulation has already been achieved in the traditional limited liability company form. The decentralized autonomous organization limited liability company is no laxer or more attractive to investors, who will likely prefer the traditional limited liability …

An Llc By Any Other Name Is Still Not A Corporation, Samantha J. Prince, Joshua P. Fershee

Faculty Scholarly Works

Business entities have their own unique characteristics. Entrepreneurs and lawyers who represent them select an entity structure based on the business’s current and projected needs. The different needs of each business span myriad topics such as capital requirements, taxation, employee benefits, and personal liability protection. These choices present advantages and disadvantages, many of which are built into the type of entity chosen. It is critically important that people, especially lawyers, recognize the difference between entities such as corporations and limited liability companies (LLCs). It is an egregious, nearly unforgivable, error to call an LLC a “limited liability corporation.” This is …

Restructuring Undefined Assets: Valuation Of Stablecoins And Their Impact On The Bankruptcy Process, Olivia Woodmansee

American University Business Law Review

Difficulties with defining cryptocurrency have plagued federal agencies and courts since crypto’s creation. With the emergence of “crypto winter” in 2022 that saw many crypto-related ventures fail, bankruptcy courts have been challenged to address numerous novel legal issues surrounding crypto-assets. When looking to the Bankruptcy Code fails to provide answers, courts must look to definitions, agency regulations, and an analysis of cryptocurrency’s position in the market to determine its classification. This can quickly become muddled with the voluminous and seemingly conflicting sources that exist. One such issue emerges when courts attempt to determine how to classify a particular cryptocurrency: is …

Plausible To Proper: Clarifying Federal Circuit Jurisdiction Over Walker Process Appeals, Peter James Rozewicz

American University Business Law Review

This Comment will describe what the Walker Process Doctrine is and explain the jurisdictional state of the Federal Circuit. Next, this Comment will examine the impact Gunn v. Minton has had on the scope of the Federal Circuit’s jurisdiction, the support and criticisms of Federal Circuit jurisdiction over Walker Process appeals, and how the Grable test plays into this issue. To do this, it will focus on how the jurisdictional analysis changed after Gunn and will discuss where each court’s argument for and against jurisdiction has merit and where it falters. To advance a solution, this Comment will recommend a …

Defining "Use In Commerce": The Supreme Court's Evolving Extraterritorial Application Of The Lanham Act, Hannah Lief

American University Business Law Review

On June 29, 2023, the Supreme Court redefined the scope of the extraterritorial impact of the Trademark Act of 1946, also known as the Lanham Act (the “Act”). Overturning the ruling by the Tenth Circuit, the Court narrowed the focus of the Act to solely domestic uses in commerce. While the Court acknowledged that it had interpreted the statute in a manner that granted Congress expansive power over foreign conduct, it stated that the broad language of the Lanham Act does not indicate international application. By instituting newfound principles on congressional authority under the Lanham Act, U.S. trademark registrants can …

Addressing Base Erosion: Impact Of The No Tax Breaks For Outsourcing Act On Tax Inversions And Profit Shifting, T. Scott Shogren

American University Business Law Review

The modern landscape of international taxation presents complex challenges arising from cross-border transactions and diverse tax regimes. This Comment delves into the intricate world of tax inversions, a process whereby U.S. firms shift their corporate headquarters abroad, thereby exploiting different tax jurisdictions. The implications of tax inversions are significant, and some scholars estimate there are substantial global tax revenue losses.

This Comment examines the mechanics of tax inversions, analyzing the tools employed by multinational corporations to reduce their tax liabilities, such as debt concentration and earnings stripping. This Comment also explores legislative responses, including the No Tax Breaks for Outsourcing …

“Show Me The Money”: The Sec’S Use Of Distribution As A Tool For Investor Protection, Coleman Gilkey Newton

American University Business Law Review

In Section II, this Comment will present a background on the relevant law of securities regulations by focusing on the SEC’s enforcement remedies, through various statutes, cases, and regulations. Section II further discusses the disgorgement and fair funds provisions that are crucial to the Commission’s distribution practices. Then, Section III shows how this background impacts SEC operations and presents a framework for the relationship between disgorgement and distribution. Finally, Section IV offers recommendations that would allow the SEC to continue to utilize disgorgement to ensure maximum distribution for harmed investors.