Business Organizations Law Commons^™

Participation As A Theory Of Employment, Matthew T. Bodie

All Faculty Scholarship

The concept of employment is an important legal category, not only for labor and employment law, but also for intellectual property law, torts, criminal law, and tax. The right-to-control test has dominated the debate over the definition of “employee” since its origins in the master-servant doctrine. However, the test no longer represents our modern notion of what it means to be an employee. This change has played itself out in research on the theory of the firm, which has shifted from a model of control to a model of participation in a team production process. This Article uses the theory …

Social Enterprise: Who Needs It?, Brian Galle

Georgetown Law Faculty Publications and Other Works

State statutes authorizing firms to pursue mixtures of profitable and socially-beneficial goals have proliferated in the past five years. In this invited response essay, I argue that for one large class of charitable goals the so-called “social enterprise” firm is often privately wasteful. While the hybrid form is a bit more sensible for firms that combine profit with simple, easily monitored social benefits, existing laws fail to protect stakeholders against opportunistic conversion of the firm to pure profit-seeking. Given these failings, I suggest that social enterprise’s legislative popularity can best be traced to a race to the bottom among states …

A Precedent Built On Sand: Norcon V. Niagra Mohawk, Victor P. Goldberg

Faculty Scholarship

Under the common law, a contracting party could only demand assurance of performance if the other party was insolvent. If a party had reasonable grounds for insecurity, the UCC Section 2-609 allowed it to demand adequate assurance even if the counterparty were solvent. The Restatement (Second) adopted the same rule for non-goods. In NorCon v. Niagara Mohawk the New York court extended the adequate assurance doctrine for some non-goods contracts. Although the decision seems to imply that there is some relation between the NorCon facts and its conclusion as to the law, there is none. Relying primarily on material available …

The Role Of Unfair Competition In The Common Law, Shyamkrishna Balganesh, Gideon Parchomovsky

Faculty Scholarship

Does the idea of “unfair competition” present the law with a viable alternative to thinking about the regulation of information and informational resources, independent of the traditional categories of the common law (e.g., property/tort) and the assumptions that these categories entail? In this chapter, we argue that, although the answer to that question is no, unfair competition nevertheless plays an important role in complementing the categories of property and torts as they apply to competitive settings. Specifically, unfair competition allows courts to both broaden and narrow the traditional notions of property and torts – especially as they apply to the …

Mapping The Future Of Insider Trading Law: Of Boundaries, Gaps, And Strategies, John C. Coffee Jr.

Faculty Scholarship

The current law on insider trading is remarkably unrationalized because it contains gaps and loopholes the size of the Washington Square Arch. For example, if a thief breaks into your office, opens your files, learns material nonpublic information, and trades on that information, he has not breached a fiduciary duty and is presumably exempt from insider trading liability. But drawing a line that can convict only the fiduciary and not the thief seems morally incoherent. Nor is it doctrinally necessary.

The basic methodology handed down by the Supreme Court in SEC v. Dirks and United States v. O'Hagan dictates (i) …

Deferred Prosecution And Non-Prosecution Agreements And The Erosion Of Corporate Criminal Liability, David M. Uhlmann

Articles

On April 5, 2010, a massive explosion killed twenty-nine miners at Massey Energy's Upper Big Branch mine near Montcoal, West Virginia. Following the explosion, President Barack Obama vowed that the U.S. Department of Labor would conduct "the most thorough and comprehensive investigation possible" and work with the U.S. Department of Justice ("Justice Department" or the "Department") to address any criminal violations. Later in the month, the President and Vice President flew to West Virginia to eulogize the victims and comfort their families. It was the nation's worst coal mining disaster in forty years. The tragic loss of life at the …

Benefit Corporations: A Challenge In Corporate Governance, Mark J. Loewenstein

Publications

Benefit corporations are a new form of business entity that is rapidly being adopted around the country. Though the legislation varies from jurisdiction to jurisdiction, most statutes are based on a model proposed and promoted by B Lab, itself a nonprofit corporation. The essence of these statutes is that, in making business judgments, the directors of a benefit corporation must consider the impact of their decisions on the environment and society. The model legislation, though, may create serious governance issues for the directors of benefit corporations that operate under these laws. This article analyzes the model legislation and identifies its …

Crowdfunding Securities, Andrew A. Schwartz

Publications

A new federal statute authorizes the online "crowdfunding" of securities, a new idea based on the concept of "reward" crowdfunding practiced on Kickstarter and other websites. This method of selling securities had previously been banned by federal securities law but the new CROWDFUND Act overturns that prohibition.

This Article introduces the CROWDFUND Act and explains that it can be expected to have two primary effects on securities law and capital markets. First, it will liberate startup companies to use peer networks and the Internet to obtain modest amounts of capital at low cost. Second, it will help democratize the market …

Economics Of Bankruptcy – Introduction, Edward R. Morrison

Faculty Scholarship

This essay surveys important contributions to the economics of bankruptcy. It is an introductory chapter for a forthcoming volume (from Edward Elgar Press) that compiles the work of legal scholars as well as economists working in the field of corporate finance. The essay begins with the foundational theories of Baird, Jackson, and Rea and then collects scholarly work extending, testing, or revising those theories. At various points I identify questions that merit further study, particularly empirical testing.

Dancing With The Derivatives Devil: Mutual Funds' Dangerous Liaison With Complex Investment Contracts And The Forgotten Lessons Of 1940, Kelly S. Kibbie

UC Law Business Journal

This Article examines the implications of the drastic increase in the use of complex derivative instruments by mutual funds and the inadequacy of the current statutory and regulatory framework to protect investors. With a series of derivatives disasters and with ninety-four percent of individual mutual fund investors saving for retirementemphasize the need for prompt reform. The 1940 Act was not designed to address complex derivative instruments utilized today and actually prohibits most derivative transactions by mutual funds. Further, the SEC has never engaged in any rulemaking with respect to derivatives transactions by mutual funds. Thus, reforms must be enacted to …

To Tax Or Not To Tax, That Is The Question: A Critique Of The United States’ Policy On Taxation Of Servers, Christopher Trester

UC Law Business Journal

The international tax authorities are struggling to create an effective scheme to generate revenue from electronic commerce (“e-commerce”). Currently, the United Stateshas no clear policy on the taxation of these transactions, which deters international companies from locating their servers within the United States based on the fear of high tax rates and uncertain results. The United States should adopt a domestic and international policy that focuses on a consumption-based approach to taxing e-commerce. However, the Organization for Economic Co-operation and Development (“OECD”) and several member countries recommend using source-based concept of permanent establishment to tax the transactions based on the …

Occupy Information: The Case For Freedom Of Corporate Information, Roy Peled

UC Law Business Journal

Demands for oversight over government operations and the desire for citizens to become more engaged in the democratic process had helped usher in the Freedom of Information Act. This Article argues for extending a similar general duty of disclosure requirement to corporations, because corporations hold pertinent information required for democratic participation. This Article examines the justifications for this general duty of disclosure and reviews existing disclosure mechanisms employ by various countries.

Cloud Computing And State Sales Tax, Tuan Q. Ngo

UC Law Business Journal

Once a significant source of states’ revenue, the state sales tax systems in state public finance now face formidable challenges. Cloud computing brings to light the inherent flaw in a tax system. While some states have extended their sales taxes to apply to cloud computing services, others have explicitly determined that such services are not taxable. Drawing the distinction between tangible property versus service as the basis for imposing sales tax is no longer a workable framework for cloud computing services. Addressing the systemic problem of the sales tax system requires shedding this outdated paradigm. This Note examines the piecemeal …

Six Years On And Still Counting: Sifting Through The Mortgage Mess, Robert Hockett

UC Law Business Journal

U.S. primary and secondary real estate and mortgage markets reman one of the principal drags upon economic recovery. Upwards of 12 million new mortgages face foreclosure in the coming six years. The reason for this self-perpetuating slump is exceedingly complex, thanks to the large number of causal factors in play. After identifying the principal interests at stake and the constituencies that hold these interests, this article identifies the impediments thatprevent economic recovery and proposes a solution to remove them. The conclusion reached is that municipalities exercising their eminent domain powers in partnership with investors are best situated to move the …

Burning Man: A Case Study Of Altruism Thriving In A For-Profit Organizational Form And The Rationales For Llc-To-Nonprofit Conversion, Yuan Ji

UC Law Business Journal

Burning Man is a temporary city of over 50,000 citizens that exists for one week every year in Nevada’s Black Rock Desert. It is best known in popular culture for its celebration of interactive art, gift economy, and ritualistic burning of a large wooden structure in the shape of a man. The case study of Burning Man illustrates that an altruistic, not profit driven, organization can thrive in a for-profit legal form without abandoning its mission. Nevertheless, this article discusses the theories on nonprofit formation and suggests rationales for Burning Man’s conversion to a nonprofit structure. This articlealso makes specific …

Avic International A Success: How Regulatory Changes To Cfius Has Limited Political Interference And Empowered Chinese Investors To Obtain A Successful Review, Amrietha Nellan

UC Law Business Journal

Chinese businesses are wary of merging or acquiring United States companies due to a perceived hostile environment. The Committee on Foreign Investment in the United States (“CFIUS”) may deny the transaction or make recommendations to the President to divest a completed deal if a risk is found. After a string of highly public failed CFIUS reviews against Chinese acquirers, the process seemed insurmountable for Chinese investors.The recent success of a Chinese aviation firm, AVIC International, in acquiring a U.S. based aviation companyindicates that the United States is not an impenetrablemarket for Chinese investors. In particular, AVIC International’s use of the …

Defending Patagonia: Mergers Andacquisitions With Benefit Corporations, J. Haskell Murray

UC Law Business Journal

The timeliness of financial reporting has been an important topic in the accounting literature for decades. There is a trade-off between the timeliness of reporting and the value of the information being reported. Prior to the advent of the internet, reporting had to be done using print media. However, now that many companies post their annual and quarterly reports on the internet, it is possible to report in a more timely fashion than has previously been possible. The problem is that companies in some countries do not make full use of this disclosure tool. They sometimes take many months to …

Gatekeeping Post-Uniloc: Expert Testimony In Multi-Component Patent Litigation, Erika Mayo

UC Law Business Journal

In recent years, the Federal Circuit has made an effort to rein in excessive or unfounded patent damages awards. In Uniloc v. Microsoft, the Federal Circuit granted a motion for retrial on the issue of damages, rejecting the validity of plaintiff’s damages expert testimony. This note advocates a broad reading of Uniloc and encourages trial courts to take a greater role in providing juries with sound methodology for assessing damages. Specifically, this article encourages the use of court-appointed damages experts to restore predictability in the U.S. patent system.

Franchise Goodwill: Take A Sad Song And Make It Better, Robert W. Emerson

University of Michigan Journal of Law Reform

The end of a franchisor-franchisee relationship is often like a divorce, with the parties engaged in a heated battle over the ownership of the franchise goodwill. In this debate, the same franchisors or franchisees often change their positions on goodwill ownership depending on current needs. This Article analyzes cases in many areas of franchise law to determine why franchisors and franchisees engage in such inconsistent reasoning, what the consequences are for franchising, and if there are ways to produce a more logical and efficient form of analysis and debate. In addressing the most contentious issues of franchising, adherence by litigants …

Hunting Stag With Fly Paper: A Hybrid Financial Instrument For Social Enterprise, Dana Brakman Reiser, Steven A. Dean

Faculty Scholarship

Social entrepreneurs and socially motivated investors share a belief in the power of social enterprise: ventures that pursue a "double bottom line" of profit and social good. Unfortunately, they also share a deep mutual suspicion. Recognizing that social ventures-just like traditional for-profit and nonprofit enterprises-need capital to flourish, this Article offers a financing tool to transform that skepticism into commitment. Unlike the array of new entities that have emerged in recent years-including L3Cs, benefit corporations, and flexible purpose corporations-the hybrid financial instrument this Article describes provides a robust and transparent solution to the puzzle that lies at the heart of …