Commercial Law Commons^™

Public Independent Fact-Finding: A Trust-Generating Institution For An Age Of Corporate Illegitimacy And Public Mistrust, R. William Ide Iii, Douglas H. Yarn

Vanderbilt Law Review

Public distrust in the wake of corporate scandals caused corporate legitimacy crises for the companies involved and for the marketplace as a whole. The loss of trust has contributed to an environment in which traditional responses to allegations of wrongdoing and incompetence are less effective. Alternatively, organizations engage in "Public independent fact-finding" ("PIFF") by hiring public figures with reputations for integrity to conduct internal investigations and to report their findings to the public. This Article describes the role played by trust, reputation, and social legitimacy in the health of organizations and examines corporate legitimacy crises and traditional responses. Identifying factors …

Electronic Impulses, Digital Signals, And Federal Jurisdiction: Congress's Commerce Clause Power In The Twenty-First Century, Ryan K. Stumphauzer

Vanderbilt Law Review

[W]e can think of no better example of the police power, which the Founders denied the National Government and reposed in the States, than the suppression of violent crime and vindication of its victims. Suppose that a Manhattan mafia boss contacts a hit man located in the Bronx and asks him to kill a police informant. Suppose further that the hit man commits the murder at the informant's apartment in Queens. Should the federal government care that the mafia boss contacted the hit man using a cellular telephone rather than a hand-delivered letter? Should it matter that the cellular signal …

The Right Results For All The Wrong Reasons: An Historical And Functional Analysis Of The Commerce Clause, Anna J. Cramer

Vanderbilt Law Review

Two football players rape an eighteen-year-old college student. A high-school senior carries a concealed handgun into a school building.' An arsonist burns down a trailer occupied by an interracial couple. An armed robber, after burglarizing the home of a couple and their handicapped child, speeds off in the family's Suburban.'

All of these crimes are local in nature. It seems obvious that each perpetrator would be hauled down to the local courthouse and indicted under applicable criminal law. One naturally assumes that the law would be a state statute. Yet, these perpetrators will not only face state criminal prosecution but …

Contracting For An Expanded Scope Of Judicial Review In Arbitration Agreements, Tom Cullinan

Vanderbilt Law Review

Arbitration is generally defined as a process in which parties voluntarily agree to submit a dispute to an impartial third person called an arbitrator,' who is often selected by the parties and is empowered to make a decision based on the evidence and the parties' arguments. Because of its contractual nature, arbitration claims a central role in settling today's commercial disputes. By structuring the agreement to fit their needs, parties can tailor the arbitration agreement to provide significant advantages over other forms of dispute resolution. For example, arbitration is generally faster, cheaper, and more private than litigation. The parties can …

Statutory Findings And Insider Trading Regulation, Steve Thel

Vanderbilt Law Review

Insider trading has presented some of the most unsettled and contentious issues of corporate law. These issues have been particularly difficult because often it has not even been clear whether the law forbids those who possess material nonpublic information to trade securities. Even as commentators have debated whether insider trading ought to be forbidden, the courts have disagreed on the more basic question of when and whether such trading is, in fact, forbidden.

The law governing insider trading has been unclear because the scope of the SEC's authority to regulate insider trading has been unclear. For a while, courts uniformly …

State User Fees And The Dormant Commerce Clause, Dan T. Coenen

Vanderbilt Law Review

The law takes shape as great principles collide in the context of concrete cases. In the field of constitutional law, the task of reconciling key precepts falls, of necessity, to the Supreme Court. Indeed, much of the Court's work involves delineating the borders of competing constitutional principles that the Court itself has created.

This Article considers the interplay of two central tenets of the Court's dormant commerce clause jurisprudence. The first of these principles exempts from the general proscription on discrimination against interstate commerce a state's actions as a "market participant," rather than as a "market regulator."' The second principle, …

Free Trade And The Regulatory State: A Gatts-Eye View Of The Dormant Commerce Clause, Daniel A. Farber, Robert E. Hudec

Vanderbilt Law Review

At one time, federalism may have seemed a peculiarly American institution. Today, however, we can see federalism as a special case of the more general problem of allocating power among geographic units. Problems of federalism arise in structures as large as the European Union' and the even larger global trade system under the General Agreement on Tariffs and Trade ("GATT").

Free trade increasingly is accepted as a value internationally, as it always has been for commerce within the United States. Yet, both internationally and domestically, free trade must accommodate the reality of the modern regulatory state-a state that shows little …

Consideration And The Commercial-Gift Dichotomy, James D. Gordon, Iii

Vanderbilt Law Review

The doctrine of consideration serves several functions. For example, it serves a cautionary function because it helps ensure deliberateness. Often, promises to make gifts are based on emotion, surges of gratitude, or impulses of display.' A donative promisor tends to look primarily to the promisee's interests rather than the promisor's own interests. The commercial-gift dichotomy satisfies the cautionary function better than the doctrine of consideration because it distinguishes between transactions based on self-interest, in which the promisor can be presumed to self-protect, and transactions based on altruism, in which the promisor is thinking more about the donee's interests than his …

Opportunism And Trust In The Negotiation Of Commercial Contracts: Toward A New Cause Of Action, G. Richard Shell

Vanderbilt Law Review

In a complex economy, many business transactions take place sequentially-one party performs in part or in full before the other side executes its side of the bargain. Sequencing has many advantages, but it creates an unfortunate incentive. Having received its benefit from the bargain, the party who is to perform last may be tempted to renege on its obligations. Law and economics scholars often describe the conduct of a reneging party in these situations as "opportunistic." The reneging party, perceiving an opportunity to increase its gain, yields to temptation and refuses to perform. The law of contract helps to diminish …

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 …

Substantive Consolidation In Bankruptcy: A Primer, J. Stephen Gilbert

Vanderbilt Law Review

Substantive consolidation is a powerful vehicle in bankruptcy by which the assets and liabilities of one or more entities are combined and treated for bankruptcy purposes as belonging to a single enterprise.Because substantive consolidation vitally affects the rights and interests of parties involved in bankruptcy proceedings, it is termed a matter"pregnant with consequence"' and should be used with caution. Substantive consolidation is not a common occurrence because it exacts strict requirements in order to protect the parties that it affects. Be-cause substantive consolidation lacks clear statutory guidance, however,courts examine the facts of each case closely to ascertain whether consolidation is …

Special Project: Lender Liability, Journal Staff

Vanderbilt Law Review

In recent years banks and other commercial lending institutions have faced a rapid increase in problem loans.' At the same time, the relatively new phenomenon in United States law known as "lender liability" has signaled an expansion of the legal theories under which courts may find lenders liable for damages incurred by borrowers. Perhaps most significantly, many courts now allow borrowers to recover against lenders based on various tort theories. Because of the broader remedies afforded under tort theories as compared to those remedies previously available in contract, some lenders recently have experienced large adverse verdicts. If courts continue to …

"Bad Faith Breach": A New And Growing Concern For Financial Institutions, Susan D. Gresham

Vanderbilt Law Review

A majority of courts have determined that all contracts impose on the parties to the contract an implied covenant of good faith and fair dealing in their actions with each other. This implied covenant prohibits a contracting party from injuring another party's right to receive the benefits of the agreement. Breach of this implied covenant usually creates a cause of action based on contract rights. Moreover, California courts maintain that breach of the implied covenant of good faith and fair dealing creates a tort action as well. The California courts initially limited these tort actions to claims against insurance companies. …

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 …

Continuation Of The Affiliated Group Subsequent To A Divisive Reorganization: A Patchwork Of Inconsistent Rules With Uncertain Application, Matthew B. Krasner

Vanderbilt Law Review

Corporations comprising an affiliated group may elect to file a consolidated tax return. However, once such an election is made, the affiliated group may not discontinue such filing in subsequent years with out the prior consent of the Commissioner of the Internal Revenue Service(IRS).' The continuous filing requirement is necessary to prevent the abuses that would occur if corporations within an affiliated group could choose whether to file separate returns or a consolidated return for a given year. A complex set of regulations specify under what circumstances the Commissioner will consider an affiliated group as continuing in existence so as …

Trends In First Amendment Protection Of Commercial Speech, Mary B. Nutt

Vanderbilt Law Review

Recent Development:

The first amendment guarantees that "Congress shall make no law... abridging the freedom of speech or of the press."' Over the past few decades, the Supreme Court has applied the first amendment to commercial speech only sporadically. The Court has vacillated between refusing to apply the first amendment, liberally extending first amendment guarantees,4 and applying limited first amendment protections to commercial speech.' This expansion and contraction of first amendment protection stems partly from three factors: (1) the Court's characterization of the speech at issue as commercial or noncommercial, (2) the Court's perception of the relevant regulation as content-based …

Bailor Beware: Limitations And Exclusions Of Liability In Commercial Bailments, A. Darby Dickerson

Vanderbilt Law Review

Although people enter into bailment agreements every day, the diversity and significance of bailments generally are unknown to lay persons and ignored by lawyers. This neglect stems in part from the antiquity of bailment and from its overlap with other branches of the law.' One commentator has stated that "bailment stands at the point at which contract, tort, and property law converge," representing a contractual conveyance of personal property that is enforceable in tort. Although bailment draws from other areas of the law, it retains a separate legal personality whose independent character has yet to be fully explored.The term "bailment," …

The Chaos Of The "Battle Of The Forms": Solutions, John E. Murray, Jr.

Vanderbilt Law Review

Whatever may be said of the lack of certainty, stability, and predictability in many areas of the law, chaos rarely is discovered. Unfortunately, we have now reached that point in matters involving attempts by innumerable buyers and sellers to make contracts through an exchange of printed forms. Because printed forms will continue to be the written evidence of the overwhelming majority of attempted contracts in America,' this chaos threatens the institution of contract in our society. There should be no doubt that"chaos" is an accurate characterization of the state of the law in the "battle of the forms" arena. Courts …

The Interaction Of Articles 6 And 9 Of The Uniform Commercial Code: A Study In Conveyancing,Priorities, And Code Interpretation, Steven L. Harris

Vanderbilt Law Review

By 1940, the National Conference of Commissioners on Uniform State Laws no longer was content to revise the then existing uniform acts that related to commercial transactions., Rather, the National Conference joined with the American Law Institute in an effort to promulgate proposed new legislation containing principles, policies, and definitions common to a number of separate aspects of mercantile commerce, including the sale and financing of goods and methods of payment. Like all human creations, the resulting product-the Uniform Commercial Codes--imperfectly achieved the goals of its sponsors. In particular, important questions have arisen about the proper interplay among various articles …

Constitutional Limitations On State Taxation Of Corporate Income From Multinational Corporations, Paul J. Hartman

Vanderbilt Law Review

This Article explores the Supreme Court's treatment, leading up to and including the Container decision, of state taxation of corporate income from multinational operations. Part II highlights the Court's development, prior to 1982, of the basic principles of federal limitations on the states' taxing powers that guided its decision in Container. Part III takes a more detailed look at two 1982 Supreme Court cases, ASARCO, Inc. v. Idaho State Tax Commission and F.W. Woolworth Co. v. Taxation and Revenue Department, in which the states suffered a setback in their efforts to extend the reach of their taxing powers over income …

Defensive Responses To Tender Offers And The Williams Act's Prohibition Against Manipulation, Elliott J. Weiss

Vanderbilt Law Review

This Article discusses whether arrangements designed to ensure the success of a favored bidder or simply to defeat an unwanted tender offer are "manipulative acts or practices" barred by section 14(e).' It argues that the critical issue is whether an arrangement significantly obstructs the operation of a fair auction market for a target company's shares. The Article maintains that recent Supreme Court decisions interpreting section 14(e) and other antifraud provisions of the federal securities laws provide substantial support for this approach to interpreting section 14(e). The Article first discusses the definition of section 14(e) manipulation. The recent Marathon decision provides …

Foreign Exchange Sales And The Law Of Contracts: A Case For Analogy To The Uniform Commercial Code, Michael L. Manire

Vanderbilt Law Review

The purpose of this Note is not only to benefit lawyers and judges who must confront these problems in litigation, but also to provide participants in the foreign exchange market with both an understanding of the legal significance of their procedures for making foreign exchange contracts and an appreciation of the possible legal consequences of the mistakes that inevitably result from fol-lowing these procedures.

The Economics Of Corporation Law And Securities Regulation, Larry E. Ribstein, C. Paul Rogers

Vanderbilt Law Review

To evaluate this book as a teaching tool one must consider several questions. First, of what value is an economic analysis of law? Second, should one consider economics in a corporations or securities law course? Third, does this book offer a worthwhile approach to bringing economics into the corporate law curriculum? Last, how well has this approach been executed in the book? It may be a bit late to ponder the value of an economic analysis of the law. Economic legal theorists are both extending and deepening the thinking about economics' role in facilitating an understanding of law. This new …

The Uniform Product Liability Act--A Brief Overview, Victor E. Schwartz

Vanderbilt Law Review

There are many important aspects of the Uniform Act that have not been discussed herein including provisions on assumption of risk, punitive damages," and contribution among joint tort feasors. Nevertheless, the examples that have been given show that it is a law that attempts to balance the interests of product users and sellers. It is the Department's hope that state legislatures will give it serious consideration and that it will help bring about uniformity in the key areas of product liability law. As long as courts can retroactively create new and unprecedented product liability law, the specter of future product …

"Doing Business": Defining State Control Over Foreign Corporations, William A. Holby

Vanderbilt Law Review

This Note will attempt to analyze the present status of the term "doing business" or the substitute terminology used to define that level of activity sufficient to subject a foreign corporation to state control in a particular context.' After defining the degree of activity necessary to permit the state to exercise control in each context, this Note will analyze the accuracy and utility of using terminology such as "doing business" in describing whether corporate activity within a state is sufficient to permit state exercise of legislative or judicial jurisdiction. This Note concludes by pro-posing that use of such ambiguous language …

Appealability Of District Court Orders Disapproving Proposed Settlements In Shareholder Derivative Suits, Harold N. Falls, Jr.

Vanderbilt Law Review

This Recent Development will trace briefly the history of the collateral order doctrine, focusing on recent treatment by the Supreme Court. After an examination of the elements of a district court's decision to approve or disapprove a derivative suit settlement, the Recent Development will analyze the conflicting results reached by the United States Court of Appeals for the Second and Ninth Circuits in light of the Supreme Court's apparent retrenchment. Although finding that the Second Circuit's decision to reject appeal ability is most consistent with recent Supreme Court pronouncements, this Recent Development submits that the Supreme Court has adopted an …

The Negative Commerce Clause And State Environmental Legislation-Externalities Suggest Application Of The Tax Standard To Environmental Regulations, Douglas K. Stewart

Vanderbilt Law Review

This Note advocates judicial application of this tax analysis not only to tax environmental legislation, but also to regulatory environmental legislation. The theoretical justification for this thesis is provided by the economic concept of externalities. Externalities are elements used in the production of a marketed item without cost to the producer, but at a cost to others. The term "externality"stems from the fact that the use of the element of production is not included in the market price of the item. Undesirable environmental impact has been recognized as an externality -- a cost to those people adversely affected by it …

Justice Stevens: The First Three Terms, George C. Lamb, Iii, Charles L. Schlumberger, D. J. Simonetti, James D. Spratt Jr., Joel R. Tew, Douglas W. Ey, Jr. Special Projects Editor

Vanderbilt Law Review

This Special Project undertakes an examination of Justice Stevens' Supreme Court opinions in an effort to identify his philosophical orientations, to evaluate the consistency of his views, and to determine the extent to which he has developed workable analytical methods. To achieve these goals, Justice Stevens' opinions are examined in three contexts: first, the area of federal-state relations,including commerce clause and supremacy clause questions; second, the individual rights area, emphasizing criminal constitutional and first amendment issues, and problems of fifth and fourteenth amendment analysis; and third, questions concerning the proper role of the Supreme Court in the constitutional scheme. Even …

Corporate Directors' Liability For Resisting A Tender Offer: Proposed Substantive And Procedural Modifications Of Existing State Fiduciary Standards, Oby T. Brewer, Iii

Vanderbilt Law Review

This Note will review recent decisions applying state law fiduciary standards and will propose procedural and substantive modifications to existing standards. The proposed modifications will compel target directors to recognize and fulfill fiduciary obligations when faced with a decision whether or not to resist a tender offer.

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 …