Commercial Law Commons^™

Public, Private, Acquired, Alexander I. Platt, Matthew T. Wansley

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For the last quarter-century, IPOs have been declining. SEC officials usually attribute the decline to startups’ choices to stay private. But that explanation is incomplete. As startups grow, they face a three-way choice between going public, staying private, and being acquired, and they have increasingly chosen the third option. In this Essay, we show how securities regulation pushes startups towards acquisitions by increasing the cost of raising capital and accessing liquidity in both public and private markets. We consider how the trend towards acquisitions could reduce competition, innovation, opportunities for diversification, and transparency. And we offer suggestions for how the …

Merger Remedies Unbound, Dhruv Aggarwal, Albert H. Choi, Geeyoung Min

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How should foundational contract law doctrines apply to corporate mergers? This Article argues that recent changes in Delaware law grant parties expansive contractual freedom to define their preferred remedies in merger agreements, untethered from the limits imposed by traditional contract law. A new provision in the Delaware corporate code, or the Delaware General Corporation Law (DGCL), permits penalty clauses in merger agreements, notwithstanding the traditional “anti-penalty doctrine” that forbids punitive liquidated damages in contracts. Delaware courts have also shown deference to specific performance provisions, treating them as presumptively enforceable commitments instead of retaining their traditional judicial discretion over the choice …

Designing Contract Modification, Albert H. Choi, George G. Triantis

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For long-term commercial contracts, modification tends to be the norm rather than the exception. While modification often takes place in response to an arrival of new information, contracting parties frequently modify the terms in response to a shift in bargaining power. In this Article, we explain how the flexibility to renegotiate in response to a shift in bargaining power can facilitate long-term contracting and thereby beneficial reliance investments and risk allocation. The prospect of modification can induce contracting parties who expect their bargaining power to improve, such as from the emergence of outside opportunities, to enter into contracts earlier and …

The Safe Harbor For Leveraged Buyouts In Bankruptcy, David G. Carlson

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No abstract provided.

Unbecoming Public Benefit Corporations, Brett H. Mcdonnell

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Becoming a Public Benefit Corporation by Michael B. Dorff1 is a strong, useful book, clear and well-written. Addressed in good part to entrepreneurs and investors, its sub-title encapsulates much of its core message to them: "Express Your Values, Energize Stakeholders, Make the World a Better Place." I see the book as making two core points. First, benefit corporations are a reasonable legal form for entrepreneurs and investors to adopt. Second, this new legal form may help companies do a better job of behaving in a socially responsible way, though this point is less certain than the first, and benefit corporations …

Towards The Faa's Next Century: Clarifying Disclosure Requirements In Arbitration, Andrea K. Schneider, Brian Farkas

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This essay provides a roadmap to the current landscape of neutrality and disclosure. It then suggests three possible reforms to the FAA that would provide better guidance to arbitrators, parties, and courts. Moreover, this essay argues that if the FAA cannot be sufficiently amended, states should take the lead. States can continue to more clearly outline disclosure requirements and enforce clearer standards than the current version of the FAA.

Modular Bankruptcy: Toward A Consumer Scheme Of Arrangement, John A.E. Pottow

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In the world of cross-border corporate insolvency, those in the know are familiar with the increasingly popular scheme of arrangement, the British quasi-reorganization procedure that allows a company to restructure some, but not all, of its debt. The typical scheme effects a corporate balance sheet reshuffling by supermajoritarian approval (and judicial "sanction") but often leaves other debt, such as the trade, untouched. A key conceptual component of the scheme mechanism is its intentional modularity, called by some its "selectivity." It does not require a comprehensive reckoning of all claims against a given debtor, only some. The scheme has proved popular-so …

Amazon's Pricing Paradox, Rory Van Loo, Nikita Aggarwal

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Antitrust scholars have widely debated the paradox of Amazon seemingly wielding monopoly power while charging low prices to consumers. A single company's behavior thereby helped spark a vibrant intellectual conversation as scholars debated why Amazon's prices were so low, whether enforcers should intervene, and, eventually, how the field of antitrust should be reformed. One of the main sources of agreement in these and other scholarly conversations has long been that Amazon charges low prices. This Article challenges that assumption by demonstrating that Amazon customers may pay significantly higher prices than is commonly understood due to strategies that do not necessarily …

Exit Engineering, Rachel Landy

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How do business lawyers create value? For nearly forty years, scholars have conceptualized the business lawyer as a “transaction cost engineer” who helps contracting parties efficiently break negotiation stalemates to create more valuable deals. This theory provides meaningful insights about sophisticated corporate law practice, where outside lawyers parachute in to make one-off deals happen. However, it fails to explain the behavior of startup lawyers, who develop long-term relationships with their clients and counsel them on seemingly routine matters, well before a major transaction materializes. These lawyers are not just transaction cost engineers, they are exit engineers. This Article offers a …

Commercially Reasonable Sales In The 21st Century, David G. Carlson

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It has been over 20 years since the 2000 amendments profoundly amended the foreclosure procedures in Article 9 of the UCC. This article reviews how the amendments have fared in the case law since then.

Article 9 Foreclosures: When Is A Sale Not A Sale?, David G. Carlson

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Article 9 of the Uniform Commercial Code empowers a secured creditor to sell collateral. This power is circumscribed. A secured party may not sell before default. A secured party cannot self-deal in a private sale. A pledgee of securities can sell to itself in a private sale if the securities are of a kind that is customarily sold on a recognized market, but the law is unclear what formalities the pledgee must meet to memorialize the sale. A secured party may not sell in a commercially reasonable manner to a buyer with notice of the commercial unreason. This article explores …

The Meld Model: The Holy Grail Of Indian Corporate Jurisprudence, Rahul Singh

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Is a model of a theory of Indian corporate jurisprudence effable? This paper posits that jurisprudence of Indian corporate law is desirable and possible. Given the relative nascence of the Companies Act 2013, Insolvency and Bankruptcy Code 2016 and the Competition Act 2002, this paper undergirds the possibility of jurisprudence through modelling-the meld model-which is, jurisprudentially speaking, a synthesis between 'exclusive legal positivism' and 'law and economics'. The paper instantiates the utility and desirability of the meld model through test suites - i.e. select case laws in the context of company, competition and insolvency laws. With the help of test …

Contract Design When Relationship-Specific Investment Produces Asymmetric Information, Albert H. Choi, George Triantis

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Under conventional contract theory, contracts may be efficient by protecting relationship specific investment from holdup in subsequent (re)negotiation over terms of trade. This paper demonstrates a different problem when specific investment also provides significant private information to the investing party. This is fairly common: for example, a manufacturer invests to learn about its buyer's idiosyncratic needs or a collaborator invests to learn about a joint venture. We show how such private information can lead to subsequent bargaining failure and suboptimal ex ante relationship-specific investment. We also show that this inefficiency is worse if the parties enter into a binding and …

Fraudulent Transfer As A Tort, David G. Carlson

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Fraudulent transfer law has historically been an in rem right of a creditor to property fraudulently received by a third party. In a minority of states, courts have treated fraudulent transfers as creating an in personam liability of the transferring debtor, the recipient, and any other third party who "conspired" with the transferor to achieve the transfer. This Article examines the wisdom of this modern trend and finds it wanting. The United States Supreme Court in 1861 was correct: fraudulent transfers are not wrongs. They merely create in rem rights.

Fraudulent Transfers: Void And Voidable, David G. Carlson

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This Article explores the civil procedure attendant to private fraudulent transfer litigation (primarily outside the context of bankruptcy). In such litigation, courts ponder whether fraudulent transfers are void or voidable. In fact, they are both simultaneously! According to the theory "at law," a fraudulent transfer is "void." That is, a creditor with a judgment could simply levy the property from a fraudulent grantee as if the grantee had no property rights. This Article questions the constitutional viability of this ancient attitude. Meanwhile, "equity" viewed the transfer as voidable. The grantee gets title, but the title might be set aside. The …

Tuition As A Fraudulent Transfer, David G. Carlson

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Bankruptcy trustees are suing universities because the insolvent parent of an adult student has written a tuition check while insolvent. The theory is that the university is the initial transferee of a fraudulent transfer that has provided benefit to the student but not to the parent debtor. This article claims that the university is never the initial transferee of tuition dollars. Rather, the student is. Where the university has no knowledge of parent insolvency, the university can count educating the student as a good faith transfer for value, thus immunizing the university from liability. The unpleasant side effect is that …

Ecosystem Competition And The Antitrust Laws, Daniel A. Crane

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Conventional antitrust norms analyze market power—as a stepping stone to anticompetitive effects and, hence, prohibited conduct—from the perspective of product substitutability. Two goods or services are said to compete with one another when they are reasonably interchangeable from the perspective of consumers, or to put it in more formal economic terms, when there is cross-elasticity of demand between them. Conversely, when two goods or services are not reasonably interchangeable, they are not horizontally related and are said not to compete with one another. Since a concern over horizontal agreements and horizontal effects dominate antitrust—courts even analyze vertical agreement or merger …

Social Justice And Deposit Return Calculations: A Study Of Success And Failure In Commercial Law Reform, William H. Widen

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No abstract provided.

Commercial Speech Protection As Consumer Protection, Felix T. Wu

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The Supreme Court has long said that “the extension of First Amendment protection to commercial speech is justified principally by the value to consumers of the information such speech provides.” In other words, consumers—the recipients or listeners of commercial speech—are the ones the doctrine is meant to protect. In previous work, I explored the implications of taking this view seriously in three contexts: compelled speech, speech among commercial entities, and unwanted marketing. In each of those contexts, adopting a listener-oriented approach leads to the conclusion that many forms of commercial speech regulation should receive far less First Amendment scrutiny than …

Comparing Wayfair And Wynne: Lessons For The Future Of The Dormant Commerce Clause, Edward A. Zelinsky

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A comparison of South Dakota v. Wayfair with Comptroller of the Treasury of Maryland v. Wynne indicates that the prospect of the Supreme Court jettisoning the dormant Commerce Clause altogether is unlikely. However, the justices who would abandon the dormant Commerce Clause can exercise decisive influence in particular cases as they did in Wayfair. The current Court’s dormant Commerce Clause skeptics – Justices Thomas and Gorsuch –provided the crucial fourth and fifth votes in Wayfair to overturn Quill.

It will continue to be rare for the Court to reverse its own dormant Commerce Clause decisions. Far from opening …

The International Implications Of Wayfair, Reuven Avi-Yonah

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In this article, Avi-Yonah argues that the Court’s recent decision in Wayfair has implications for the EU’s struggle with taxing the digital economy, as well as for the broader international effort to update international tax rules for the 21st century — that is, it bolsters the argument for dispensing with the 19th-century permanent establishment concept.

The Commercial Difference, Felix T. Wu

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When it comes to the First Amendment, commerciality does, and should, matter. This Article develops the view that the key distinguishing characteristic of corporate or commercial speech is that the interest at stake is “derivative,” in the sense that we care about the speech interest for reasons other than caring about the rights of the entity directly asserting a claim under the First Amendment. To say that the interest is derivative is not to say that it is unimportant, and one could find corporate and commercial speech interests to be both derivative and strong enough to apply heightened scrutiny to …

The Political Process Argument For Overruling Quill, Edward A. Zelinsky

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Should the U.S. Supreme Court overrule Quill Corporation v. North Dakota? In Quill, the Court held that, under the dormant Commerce Clause of the U.S. Constitution, the states cannot impose the obligation to collect sales taxes on out-of-state vendors which lack physical presence in the taxing state. As internet commerce has grown, Quill’s physical presence test has severely hampered the states’ ability to enforce their sales taxes.

Much of the Supreme Court’s case law suggests that, under the banner of stare decisis, the Court should not overturn Quill. This case law indicates that it is Congress’s …

Bitcoin And The Uniform Commercial Code, Jeanne L. Schroeder

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Much of the discussion of bitcoin in the popular press has concentrated on its status as a currency. Putting aside a vocal minority of radical libertarians and anarchists, however, many bitcoin enthusiasts are concentrating on how its underlying technology – the blockchain – can be put to use for wide variety of uses. For example, economists at the Fed and other central banks have suggested that they should encourage the evolution of bitcoin’s blockchain protocol which might allow financial transactions to clear much efficiently than under our current systems. As such, it also holds out the possibility of becoming that …

Tesla, Dealer Franchise Laws, And The Politics Of Crony Capitalism, Daniel A. Crane

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Public choice theory has long proclaimed that business interests can capture regulatory processes to generate economic rents at the expense of consumers. Such political exploitation may go unnoticed and unchallenged for long time periods because, though the rents are captured by a relatively small number of individuals or firms, the costs are widely diffused over a large number of consumers. The triggering event to expose and mobilize opposition to the regulatory capture may not arise until a new technology seeks to challenge the incumbent technology, thus creating a motivated champion to expose and oppose the regulatory capture and advocate for …

Can Law Students Disrupt The Market For High-Priced Textbooks?, Jane K. Winn

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The Center for Computer-Assisted Legal Instruction (CALI) is a non-profit organization whose mission is to advance legal education through technological innovation and collaboration. With its eLangdell Press project, CALI publishes American law school textbooks in open access, royalty-free form, offering faculty authors compensation equivalent to what most law school textbook authors would earn in royalties from a traditional full-price publisher.

I am writing a new sales textbook and “agreements supplement” based on contemporary business practice that I will publish in open access form with CALI’s eLangdell Press. Relatively few other American legal academics publish in open access form, however, suggesting …

Tesla And The Car Dealers' Lobby, Daniel A. Crane

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Tesla Motors, the offspring of entrepreneur Elon Musk (who brought us Pay-Pal and SpaceX), is the most exciting automotive development in many decades and a marquee story of American technological dynamism and innovation. The company’s luxury electric cars have caused a sensation in the auto industry, including a review by Consumer Reports calling Tesla’s Model S the best car it ever tested. Despite the acclaim, Tesla faces enormous challenges Despite the acclaim, Tesla faces enormous challenges in penetrating an automotive market that has been dominated for a century by internal combustion engines. Not only must it build cars that customers …

The Unrelenting Libertarian Challenge To Public Accommodations Law, Samuel R. Bagenstos

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There seems to be a broad consensus that Title II of the Civil Rights Act of 1964, which prohibits race discrimination in “place[s] of public accommodation,” was a remarkable success. But the consensus is illusory. Laws prohibiting discrimination by public accommodations currently exist under a significant legal threat. And this threat is merely the latest iteration in the controversy over public accommodations laws that began as early as Reconstruction. This Article begins by discussing the controversy in the Reconstruction and Civil Rights Eras over the penetration of antidiscrimination principles into the realm of private businesses’ choice of customers. Although the …

Duty In The Litigation-Investment Agreement: The Choice Between Tort And Contract Norms When The Deal Breaks Down, Anthony J. Sebok, W. Bradley Wendel

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The article proposes a framework for regulating commercial litigation investment by drawing analogies to existing legal norms in similar economic activities. It argues that contract law, rather than tort law, is better suited to address the risks and challenges inherent in this growing market. The analysis emphasizes the importance of aligning legal norms with the economic realities of litigation investment, particularly in the commercial sector, where the stakes and dynamics differ significantly from consumer litigation. The authors advocate for a regulatory approach that balances protection against opportunism with the need to maintain efficient outcomes.

Can Consumers Control Health-Care Costs?, Mark A. Hall, Carl E. Schneider

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The ultimate aim of health care policy is good care at good prices. Managed care failed to achieve this goal through influencing providers, so health policy has turned to the only market-based option left: treating patients like consumers. Health insurance and tax policy now pressure patients to spend their own money when they select health plans, providers, and treatments. Expecting patients to choose what they need at the price they want, consumerists believe that market competition will constrain costs while optimizing quality. This classic form of consumerism is today’s health policy watchword. This article evaluates consumerism and the regulatory mechanism …