Legislation Commons^™

Reassessing Damages In Securities Fraud Class Actions, Elizabeth C. Burch

ExpressO

No coherent doctrinal statement exists for calculating open-market damages for securities fraud class actions. Instead, courts have tried in vain to fashion common-law deceit and misrepresentation remedies to fit open-market fraud. The result is a relatively ineffective system with a hallmark feature: unpredictable damage awards. This poses a significant fraud deterrence problem from both a practical and a theoretical standpoint.

In 2005, the Supreme Court had the opportunity to clarify open-market damage principles and to facilitate earlier dismissal of cases without compensable economic losses. Instead, in Dura Pharmaceuticals v. Broudo, it further confused the damage issue by (1) perpetuating the …

Bond Repudiation, Tax Codes, The Appropriations Process And Restitution Post-Eminent Domain Reform, John H. Ryskamp

ExpressO

This brief comment suggests where the anti-eminent domain movement might be heading next.

The Ineffectiveness Of Capped Damages In Cases Of Employment Discrimination: Solutions Toward Deterrence, Vanessa M. Ruggles

ExpressO

Although the Civil Rights Act of 1991 helped victims of employment discrimination in a variety of ways, including the authorization of jury trials and the accompanying possibility of compensatory and punitive damages, the caps Congress placed on damages do not serve the purpose of deterrence. Because the caps are based on the number of employees a defendant employer has, the goal of protecting small businesses from exorbitant damages is accomplished. However, because the top category of the caps is “500 or more” employees, giant corporations escape meaningful awards. This article identifies the problem citing specific examples, and proposes several solutions …

Good Faith, State Of Mind, And The Outer Boundaries Of Director Liability In Corporate Law, Christopher M. Bruner

ExpressO

The Delaware General Corporation Law was amended in 1986 to permit shareholder-approved exculpatory charter provisions shielding directors from monetary liability for certain types of fiduciary duty breaches, explicitly excepting breaches of the duty of loyalty and conduct not in "good faith" – evidently distinct concepts in the Delaware legislature’s view. This paper examines the development of corporate fiduciary duty doctrine in Delaware leading up to and following this statutory amendment, focusing particularly on the Delaware courts' evolving conception of the meaning and doctrinal status of good faith. Specifically, the paper argues that Delaware's statutory exculpation regime and good faith case …

Legislation And Legitimation: Congress And Insider Trading In The 1980s, Thomas W. Joo

ExpressO

Legislation and Legitimation:

Congress and Insider Trading in the 1980s

Abstract

Orthodox corporate law-and-economics holds that American corporate and securities regulation has evolved inexorably toward economic efficiency. That position is difficult to square with the fact that regulation is the product of government actors and institutions. Indeed, the rational behavior assumptions of law-and-economics suggest that those actors and institutions would tend to place their own self-interest ahead of economic efficiency. This article provides anecdotal evidence of such self-interest at work. Based on an analysis of legislative history—primarily Congressional hearings—this article argues that Congress had little interest in the economic policy …

The Irrational Auditor And Irrational Liability, Adam C. Pritchard

Articles

This Article argues that less liability for auditors in certain areas might encourage more accurate and useful financial statements, or at least equally accurate statements at a lower cost. Audit quality is promoted by three incentives: reputation, regulation, and litigation. When we take reputation and regulation into account, exposing auditors to potentially massive liability may undermine the effectiveness of reputation and regulation, thereby diminishing integrity of audited financial statements. The relation of litigation to the other incentives that promote audit quality has become more important in light of the sea change that occurred in the regulation of the auditing profession …

Prevention Of Double Deductions Of A Single Loss: Solutions In Search Of A Problem, Douglas A. Kahn, Jeffrey H. Kahn

Articles

In the current tax system, a corporation is treated as a separate taxable entity. This tax system is sometimes referred to as an entity tax or a double tax system. Since a corporation is a separate and distinct entity from its owners, the shareholders, the default rule is that transfers between them are treated as realization events. Without a specific Internal Revenue Code (Code) provision providing otherwise, such transactions will also require the parties to recognize the realized gain or loss. Congress has enacted several nonrecognition corporate provisions when forcing the recognition of income could prevent changes to the form …

Well-Known Seasoned Issuers In Canada, Adam C. Pritchard

Other Publications

The United States Securities and Exchange Commission (SEC) recently adopted a series of rules relaxing the restrictions imposed on public offerings. The largest public companies - defined as “well-known seasoned issuers” (WKSIs) - received the most extensive regulatory relief. Canada could adopt a version of WKSI status for the top tier of Toronto Stock Exchange (TSX) issuers as part of a streamlined POP system.

Careful consideration must be given, however, as to the appropriate standards for WKSI status in Canada. The standards adopted in the U.S. – US$700 million in market capitalization or US$1 billion in nonconvertible debt issued over …

Breaking The Bank: Revisiting Central Bank Of Denver After Enron And Sarbanes-Oxley, Celia Taylor

ExpressO

No abstract provided.

The Same Side Of Two Coins: The Peculiar Phenomenon Of Bet-Hedging In Campaign Finance, Jason Cohen

ExpressO

The paper addresses the propensity of large donors to give to competing candidates or competing party organizations during the same election cycle – for example, giving money to both Bush and Kerry during the 2004 presidential race – a practice here termed 'bet-hedging.' Bet-hedging is analyzed in strategic and game-theoretic terms. The paper explores the prevalence of bet-hedging, the possible motivations behind the practice, and the informational concerns surrounding it. The paper argues that bet-hedging, out of all donation practices, carries with it a uniquely strong implication of ex post favor-seeking: if a donor prefers one side over the other, …

Can The Sauvegarde Reform Save French Bankruptcy Law?: A Comparative Look At Chapter 11 And French Bankruptcy Law From An Agency Cost Perspective, Robert Weber

Michigan Journal of International Law

This Note will attempt to explain the intersection of agency costs and bankruptcy law, looking first to general agency problems involved when firms are insolvent and moving next to discussions of how U.S. Chapter 11 and French bankruptcy laws attempt to address these problems. First, I will attempt to articulate the relationship between agency costs and (1) debtor control over the firm during Chapter 11 reorganizations and (2) deviations from the absolute priority rule in Chapter 11. Specifically, I will argue that creditors voluntarily accede to plans proposed by management that impair the same creditors' legal entitlements, and that this …

The Silver Lining: The International Tax Provisions Of The American Jobs Creation Act - A Reconsideration, Reuven S. Avi-Yonah

Articles

The American Jobs Creation Act of 2004, passed by the US Congress on 12 October and signed into law by President Bush on 22 October 2004, has been greeted by general dismay by various critics. The Act has been described as overloaded with “pork” and giveaways to special interest groups like tobacco farmers. The critics contend that the only achievement of the Act, the repeal of the “extraterritorial income” (ETI) regime that was ruled by the WTO to be a prohibited export subsidy, is dwarfed by 633 pages of special interest legislation. Even the Bush Administration distanced itself from the …

The Pitfalls Of International Integration: A Comment On The Bush Proposal And Its Aftermath, Reuven S. Avi-Yonah

Articles

In January 2003, the Bush Administration proposed a new system for taxing corporate dividends, under which domestic shareholders in U.S. corporations would not be taxed on dividends they received, provided the corporation distributed these dividends out of after-tax earnings (the “Bush Proposal”). The Bush Proposal was introduced in Congress on February 27, 2003. Ultimately, however, Congress balked at enacting full-?edged dividend exemption. Instead, in the Jobs and Growth Tax Relief Reconciliation Act of 2003 (“JGTRRA”) as enacted on May 28, 2003, a lower rate of 15% was adopted for dividends paid by domestic and certain foreign corporations,1 and the capital …

Good Faith In The Cisg: Interpretation Problems In Article 7, Benedict C. Sheehy

ExpressO

ABSTRACT: This article examines the dispute concerning the meaning of Good Faith in the CISG. Although there are good reasons for arguing a more limited interpretation or more limited application of Good Faith, there are also good reasons for a broader approach. Regardless of the correct interpretation, however, practitioners and academics need to have a sense of where the actual jurisprudence is going. This article reviews every published case on Article 7 since its inception and concludes that while there is little to suggest a strong pattern is developing, a guided pattern while incorrect doctrinally is preferable to the current …

Litigator's Thumbnail Guide To The Warn Act, David A. Santacroce

Articles

When large companies choose to lay off workers or close down plants without prior notice, they can be subject to extensive liability under the federal Worker Adjustment and Retraining Notification Act (WARN), including 60 days backpay to all affected workers, daily fines to local government, and attorney fees generated during the suit. In the following article, the author presents the bare bones basics of WARN in order for employees and their advocates to understand how and when WARN applies.

Should Congress Repeal Securities Class Action Reform?, Adam C. Pritchard

Other Publications

The Private Securities Litigation Reform Act of 1995 was designed to curtail class action lawsuits by the plaintiffs’ bar. In particular, the high-technology industry, accountants, and investment bankers thought that they had been unjustly victimized by class action lawsuits based on little more than declines in a company’s stock price. Prior to 1995, the plaintiffs’ bar had free rein to use the discovery process to troll for evidence to support its claims. Moreover, the high costs of litigation were a powerful weapon with which to coerce companies to settle claims. The plaintiffs’ bar and its allies in Congress have called …

The U.S. Treasury's Subpart F Report: Plus Ça Change, Plus C'Est La Même Chose?, Reuven S. Avi-Yonah

Articles

On 29 December 2000, the U.S. Treasury Department released its long-awaited study of Subpart F, entitled “The Deferral of Income Earned through U.S. Controlled Foreign Corporations." This study was commenced in the aftermath of the controversy that ensued from the issuance and subsequent withdrawal of Notice 98-11. The study was originally expected to be issued in 1999 in response to the report published that year by the National Foreign Trade Council, which advocated significant changes in Subpart F. The Treasury Study’s delayed issuance at the end of the Clinton Administration means that it only has (at best) persuasive force for …

The New Cultural Diversity And Title Vii, Steven A. Ramirez

Michigan Journal of Race and Law

This Article will show that the most progressive diversity initiatives taking hold in the business community are facially neutral in their approach, merit-driven, and fundamentally culture-conscious (as opposed to race-conscious). These initiatives do not allow for any racial preference or gender preference and draw any such bias not from the inherent values of diversity but from the largely segregated pre-existing corporate tradition: hiring culturally aware minorities unleashes value because they bring insights previously unavailable to segregated businesses. In other words, White males can be and are hired in the name of cultural diversity when they bring cultural insights to the …

In Re Silicon Graphics Inc.: Shareholder Wealth Effects Resulting From The Interpretation Of The Private Securities Litigation Reform Act's Pleading Standard, Marilyn F. Johnson, Karen K. Nelson, Adam C. Pritchard

Articles

This Article presents an empirical study of changes in shareholder wealth resulting from the Ninth Circuit Court of Appeals decision in In re Silicon Graphics Inc. Securities Litigation, which interpreted the pleading provision established in the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). Congress passed the Reform Act as part of an ongoing effort to protect corporations from abusive suits alleging "fraud by hindsight." In such suits, plaintiffs claimed that a sudden drop in a company's stock price was evidence that the issuer and its management covered up the bad news that led to the price drop. …

The Securities Litigation Uniform Standards Act Of 1998: The Sun Sets On California's Blue Sky Laws, David M. Lavine, Adam C. Pritchard

Articles

It is often said that California sets the pace for changes in America's tastes. Trends established in California often find their way into the heartland, having a profound effect on our nation's cultural scene. Nouvelle cuisine, the dialect of the Valley Girl and rollerblading all have their genesis on the West Coast. The most recent trend to emerge from California, instead of catching on in the rest of the country, has been stopped dead in its tracks by a legislative rebuke from Washington, D.C. California's latest, albeit short-lived, contribution to the nation was a migration of securities fraud class actions …

Withdrawal And Expulsion In Germany: A Comparative Perspective On The "Close Corporation Problem", Hugh T. Scogin Jr.

Michigan Journal of International Law

This article will examine the German legal system's experience with fashioning remedies for the "close corporation problem" and the underlying concepts that have shaped these remedies. Part I will trace the growth of the doctrines of withdrawal and expulsion in the context of Germany's troubled history. Part II will compare German and U.S. approaches on both practical and conceptual levels. On one level, the focus of the article is narrow. It deals with specific, technical solutions to only the most extreme examples of the close corporation problem. Such cases are not frequently litigated. Their doctrines do, however, constitute default rules …

Turning Back The Tide Of Director And Officer Liability, Walter Effross

Scholarly Articles in Law Reviews & Journals

No abstract provided.

A Rule Unvanquished: The New Value Exception To The Absolute Priority Rule, Clifford S. Harris

Michigan Law Review

This Note examines whether the new value exception remains part of the revised Bankruptcy Code. Part I discusses the background of the new value exception. Part II traces the development of the conflict concerning the survival of the new value exception subsequent to the adoption of the Code. It then discusses the Supreme Court's opinions in Mid/antic National Bank v. New Jersey Department of Environmental Protection and its progeny, which established the methodology for determining the impact of the revised Bankruptcy Code on preexisting bankruptcy law. Based on an analysis of the Midlantic doctrine, Part II concludes that Congress did …

The European Alternative To Uniformity In Corporation Laws, Alfred F. Conard

Michigan Law Review

Although the European Communities chose many patterns of business law that were parallel to the American, they deliberately rejected the American freedom of each state to frame its corporation law to suit itself. They decided to impose not complete uniformity, but a degree of "coordination" of "equivalent safeguards" that they deemed appropriate to the existence of an economic union. Leading commentators have described the process as "harmonization."

The decision to coordinate stimulates reflection on the relative merits of the American system of giving states a free choice of corporation regimes, restricted only marginally by federal securities regulation, and the European …

Misreading The Williams Act, Lyman Johnson, David Millon

Michigan Law Review

This Article examines the emerging controversy over preemption of the most potent of recent antitakeover laws, the so-called business combination statutes recently passed by Delaware, New York, and other states, and Pennsylvania's director-approval statute. After examining the strategy employed by the states to shield these statutes from constitutional attack, we consider the issues raised by the preemption claim and the arguments currently being advanced by the SEC and others in favor of preemption. Resolving the preemption controversy requires inquiry into the original meaning and objectives of the Williams Act. We argue that this should involve attention not only to the …

Missing The Point About State Takeover Statutes, Lyman Johnson, David Millon

Michigan Law Review

In a recent article in this journal, Professor Richard Booth offers an extended appraisal of state legislation regulating hostile corporate takeovers. We think Booth's article requires comment for two reasons. The first reason is perhaps more obvious, though less interesting from our point of view. To be blunt, "unfairness" to shareholders due to coercion arising out of two-tier or partial offers simply does not occur with enough frequency to warrant a sixty-seven-page article in a major law review. According to recent congressional testimony by SEC Commissioner Cox, from 1982 to 1986 the number of two-tier offers declined from 18% of …

Labor Law's Alter Ego Doctrine: The Role Of Employer Motive In Corporate Transformations, Gary Alan Macdonald

Michigan Law Review

This Note examines the differing judicial approaches for reviewing NLRB alter ego findings, and concludes that a fundamental problem with all of the current approaches is the unwarranted consideration of motive in varying degrees. This Note proposes a modified "reasonably foreseeable benefit" standard which does not depend in any degree on the employer's motive for changing its corporate form. Part I discusses the origin and evolution of the alter ego doctrine, including its genesis in Southport Petroleum, the well-settled Crawford Door factors, and the related "successorship" doctrine. Part II analyzes the conflict among the federal courts of appeals over …

Generic Fraud And The Uniform Fraudulent Transfer Act, Peter A. Alces

Cardozo Law Review

No abstract provided.

Japanese-Style Worker Participation And United States Labor Law, William S. Rutchow

Michigan Journal of International Law

This note will evaluate the current legal status of Japanese-style worker participation programs under the NLRA. First, it analyzes relevant sections of the NLRA and their interpretation by the Board and the courts. Second, the note describes various types of Japanese worker participation programs, and suggests how these programs can be legally implemented under current American labor law. Third, the note considers standards the Supreme Court may adopt to test the legality of worker participation programs in the future. Finally, this note recommends that the Supreme Court uphold those participation programs which are freely chosen by employees.

Second Generation State Takeover Legislation: Maryland Takes A New Tack, Michigan Law Review

Michigan Law Review

This Note examines the approach recently adopted by the Maryland legislature in special session one year after the Supreme Court's decision in MITE. Maryland has departed radically from the regulatory approach of first generation statutes; however, this Note argues that the statute has failed to escape the constitutional infirmities of its predecessors. Part I outlines the various mechanisms that regulate acquisition of corporate control: the federal tender offer regulatory mechanism known as the Williams Act, state takeover legislation such as the Illinois statute invalidated in MITE, and the new Maryland statute. Part II analyzes the debate concerning the …