Showing papers on "Principal (commercial law) published in 1997"

Formal and Substantive Conceptions of the Rule of Law: An Analytical Framework

Abstract: The central theme of the article is the distinction between formal and substantive meanings of the rule of law. Formal conceptions of the rule of law do not however seek to pass judgment upon the actual content of the law itself. Dicey's conception of the rule of law is well known and it has been subjected to analysis from all of the diverse directions. Dicey's formulation is concerned primarily with forma] access to the courts, riot with the nature of the rules which individuals will find when they get there. Unger's contention is that this legitimating function performed by the rule of law was always really a sham. It is not fortuitous or surprising that one of the principal advocates of the formal conception of the rule of law, Raz, is also a leading exponent of legal positivism. Trevor Allan also adopts an explicitly substantive conception of the rule of law.

Limited Liability and Bonus Contracts

Abstract: This paper studies the nature of incentive contracts between a risk-neutral principal and a risk-neutral agent under the constraint that the agent's liability is limited. A necessary and sufficient condition is derived for the existence of a first-best contract under this constraint, and a bonus-based contract is shown to be the most efficient contractual form. Implications of bonus contracts are also discussed.

Hostile Takeovers, Corporate Law, and the Theory of the Firm

Abstract: The legal treatment of hostile takeovers1 is a central issue in the contemporary debate on corporate governance. In the 1980s, hostile takeovers came to be regarded a mechanism both for raising shareholder value and for enhancing the efficiency of the corporate system as a whole. Two main effects were imputed to hostile bids. First, the threat of an unwelcome bid served to improve the performance of incumbent managers and to align their interests more completely with those of shareholders. Secondly, hostile bids, even where they were not successful, tended to induce corporate restructurings which in turn freed up productive resources to be reallocated to more efficient uses elsewhere in the economy. In order to realize these ends, the fostering of an active market for corporate control was seen as one of the principal goals of company law. More recently, this view has been challenged by the 'stakeholder' model which sees hostile takeovers as occasions for the redistribution, rather than the generation, of wealth. The gains made by shareholders are said to accrue not from greater efficiency in the management of assets, but from income transfers made at the expense of the long-term employees, suppliers, and customers of the firm. The threat of such expropriation undermines cooperation within the productive process and thereby threatens long-run competitiveness. Views of this kind informed the adoption of 'stakeholder' or 'constituency statutes' in many United States jurisdictions in the late 1980s and early 1990s but, as yet, have had little impact on the British debate. The legal framework of corporate law broadly conceived to include not just company law but also elements of labour law, commercial law, and the law of taxation is more immediately concerned with the definition of the property rights and income streams of those with interests in or against the business enterprise, than with considerations of economic efficiency. Economic

Saints and Sinners: How Does Delaware Corporate Law Work?

Abstract: The paper provides a detailed examination of the evolution of Delaware corporate law in the regulation of management buyouts as a case study for understanding, more generally, how Delaware corporate law uses fiduciary duties to influence managers to act in the interests of shareholders. The goal of the paper is to understand better how corporate law works, that is, the mechanism by which corporate law constrains managers. The paper argues that the Delaware cases can best be understood as attempts to create social norms for senior managers, directors and the lawyers who advise them. The paper then sketches out (preliminarily) how these norms are transmitted to the principal actors (managers, directors and lawyers), drawing on the "A Memorandum to our Clients" genre, extrajudicial judicial utterances, and popular and trade press accounts. I then consider the implications of this reconceptualization for a variety of issues in corporate law, including: the consistency of the relative unpredictability of Delaware corporate law and its (presumed) superiority; the difference that the reconceptualization makes in how lawyers advise clients; and the role and value of shareholder litigation.

New Perspectives on State Socialism in China

Abstract: The Latvian-born legal theorist P.I. Stuchka (1865-1932), generally recognized as one of the principal architects of modern Soviet legal theory and the Soviet legal system itself, was a prodigious author and editor. Twenty essays by Stuchka written between 1917 and 1931 were selected for translation

Enforcement by Hearing: An Integrated Model of Evidence Production

Abstract: [This paper was published in two parts as: 1) Relying on the Information of Interested - and Potentially Dishonest-Parties, 3 Am. L. & Econ. Rev. 320 (2001), and 2) Games, Information and Evidence Production: With Application to English Legal History, 2 Am. L. & Econ. Rev. 342 (2000). It also appeared as a working paper under the title: "Enforcement by Hearing: How the Civil Law Sets Incentives."]The paper is a theoretical analysis of incentive setting via civil litigation, with a focus on incentives for care in activities that may be harmful to others (torts). It makes two main contributions: one directly policy-relevant, one conceptual.In most existing law and economics research, litigation is modeled in reduced form, as a sort of costly audit, without explicit specification of the fact-finding process. In such models it is always more costly to implement higher levels of care, implying that the second best level of care is lower than the first. Here we explicitly consider the court's information problem (in a single agent model; Sanchirico (1997) considers multiple parties). We find that implementation costs tend to decline in care level and the second best tends to exceed the first. This result in hand, we suggest that the familiar claim that current tort systems overdeter may in fact be no indictment.A second contribution of the paper is its integrated conception of evidence production, endogenous cost evidence. Evidence production in court is modeled as costly signaling, where signal costs are endogenous to unobserved choices made outside the court room. Care is inspired to the extent that it reduces signaling costs and so increases payoffs at the subsequent proceeding. These signaling/evidence costs are in turn costs of incentive setting via evidence production. In contrast to existing models and conventional wisdom, this view has the ironic implication that perfect (non-falsifiable) evidence may not be good enough: less perfect evidence which is sufficiently-but not infinitely-more costly for disobedient actions is likely to be cheaper all around and thus a more efficient means of setting incentives.While the paper's focus is on tort law, the model it introduces may be useful in analyzing general situations in which a principal attempts to influence the hidden behavior of an agent based on information that the agent herself supplies.

Mutual Monitoring and Best Agency Contracts

Abstract: We consider the design of contracts in a principal-agent setting with two agents where each agent privately observes and reports to the principal a signal regarding the actions taken. We consider two cases: one where the agents observe the same signal and one where the agents observe different signals. For each case we show that, under certain conditions, truthful reporting and desired actions can be implemented at no or nearly no additional compensation cost above that incurred when the agents' signals are contractible public information.

Organizational Incentives to Care About the Law

Abstract: The moral personality of the corporation, like that of other organizations, has long posed a number of theoretical and practical challenges. Many of the legal questions raised by organizations are complex but resolvable by careful technical analysis. Such questions—for example, how to incorporate a business or a nonprofit endeavor, what are the perils of the general partnership, what are the consequences of acquisition via merger—are answerable within the ambit of legal rules specific to organizations. In contrast, it is often difficult to explain how duties and rights, created outside the sphere of organizational law itself, might intelligibly be applied to a person that is purely the invented creature of compliance with legal form. Many crimes, for example, require a particular mental state, which presupposes a sentient actor. Such challenges aside, organizations frustrate the strategies of law enforcement in ways that natural persons do not. As H.L.A. Hart observed in 1954, “it is not the legal personality but the ‘moral’ personality of organised groups that perplexes most: these exist apart from legal rules . . . .” In this essay I explore the fit between agency doctrine and the propensity of organizations to obey or disregard the law. Organizational culture and practice, I argue, often reflect how the organization as a principal has shaped its

The Principle of the Principal: An Examination of Hotel-Management Agreements and the Laws of Agency

Abstract: Three court cases have clarified the relationship between a hotel owner and its management firm. Those cases are Woolley v. Embassy Suites,Pacific Landmark v. Marriott, and Government Guarantee Fund of Finlandv. Hyatt. In each case, the owner charged that the manager had in some way defaulted on the terms of the contract and summarily terminated the manager-even though the contract provided for no such termination. Without examining the competing claims of default, the courts held that operating firms are agents of owners. As a point of common law (and statute), agency agreements may be terminated by either party. The open issue is what damages the owner must pay the operator for terminating the agreement. The courts suggested, however, that an agency with interest would be irrevocable. Two of the essential points of such an arrangement are an investment in the property by the management firm itself (not a subsidiary) and a contract provision stating that the agency truly protects some right of the agent ...

Corporate Compliance and the Antitrust Agencies’ Bi-Modal Penalties

Abstract: Mine is a singularly daunting assignment: to discuss individual compared with entity penalties as tools for encouraging corporate law compliance, to comment on the relationship between monetary payments as compensation and deterrence, and to reflect on the role of the private attorney general in the year 2000. In Part II, I briefly discuss some of the principal issues debated by corporate compliance authorities, including some of the issues relevant to the Federal Trade Commission ("FTC") and the Justice Department's Antitrust Division. In Parts III and IV, respectively, I reflect on the deterrence provided by those agencies, and on their approach to corporate compliance issues. In Part V, I consider the role of private litigation as a supplement or complement to federal enforcement of competition and consumer-protection laws. Finally, in Part VI, and again focusing on competition and consumer protection, I discuss some modest ways in which our system for deterring corporate wrongdoing could be improved. The antitrust agencies employ penalties that are at once of increasing severity and strikingly bi-modal. Defendants in some actions by either agency may face extremely unpleasant consequences for their wrongdoing, while defendants in other actions may pay little, if any, price. One of the special roles of private litigation is to supplement agency enforcement, especially where otherwise there would be no significantly adverse consequences. Other roles are to identify cases of wrongdoing, to compensate victims, to help legal doctrine evolve, to provide an institutional safety-valve, and to preserve the integrity of an increasingly regulatory system of enforcement. That system could be improved, I suggest in Part VI, were the agencies to recognize the "externality benefits" of litigation, to develop "middle ground" civil deterrence, to continue

International Law and Education in a Minority Language

Abstract: The Statute of the International Court of Justice sets out three principal (and two subsidiary) sources of international law. They are treaties, customary international law as evidenced by the practice of countries accepted as law, general principles of law recognised by all countries, and as subsidiary sources, judicial decisions and the writing of “highly qualified publicists”. The literature on the international law of minority language education is thus not a primary source of the law, but it serves as both a subsidiary source and as a record of discussion of the primary sources. This chapter discusses the international law concerning the right to an education in a language that is not the majority language of the state providing the education. The definition of “minority language” used in this chapter is the language spoken by a group numerically inferior to the rest of the population of a State, in a non-dominant position, whose members — being nationals of the State — possess ethnic, religious or linguistic characteristics differing from those of the rest of the population and show, if only implicitly, a sense of solidarity, directed towards preserving their culture, traditions, religion, or language (Capotorti 1979).

The economics of organized crime and optimal law enforcement

Abstract: This paper extends the optimal law enforcement literature to organized crime. We model the criminal organization as a vertical structure where the principal extracts some rents from the agents through extortion. Depending on the principal's information set, threats may or may not be credible. As long as threats are credible, the principal is able to fully extract rents. In that case, the results obtained by applying standard theory of optimal law enforcement are robust: we argue for a tougher policy. However, when threats are not credible, the principal is not able to fully extract rents and there is violence. Moreover, we show that it is not necessarily true that a tougher law enforcement policy should be chosen when in presence of organized crime.

Exceeding the Limits of Territorial Bounds: The Helms-Burton Act

Abstract: The author argues that the Helms-Burton Act violates general principles of international law. The analysis begins with a brief discussion of the extraterritorial purposes, structure, and operation of the act, followed by a survey of international responses to Helms-Burton by the principal trading partners of the United States: diplomatic protest, formalized dispute settlement under international trade agreements, retaliatory blocking leghlation, and multi-hteral scrutiny in and by international institutions. The author then turns to principles of jurisdiction with a view to demonstrating that Helms-Burton does not meet the applicable thresholds to support either the private right to sue for trafficking in confiscated property under Title III of the act or the governmental exclusion of designated aliens from admission to the United States under Title IV. In this regard, substantive international law arguments in relation to extraterritoriality and nationality, remoteness, the effects doctrine, human rights, and the reasonable expectations of other nations are also considered.

The maze of mega-coverage litigation

Abstract: Over the last two decades, the rise of mass tort liability and the enactment of CERCLA1 have transformed both tort and insurance litigation. Class and multidistrict tort actions involving thousands of personal injury claimants, and disputes over environmental cleanup liability involving hundreds of millions of dollars, are now commonplace. With this new civil liability, however, has come a less noticed but also very significant development: massive insurance coverage litigation between the companies that are subject to the new civil liability and their liability insurers. Judge Jack Weinstein, whom this issue of the Columbia Law Review honors, has rendered important decisions in both fields.2 The new civil liability has received much scholarly attention, including an entire book emphasizing Judge Weinstein's role in the Agent Orange case.3 But the megainsurance coverage disputes that typically accompany mass tort and CERCLA litigation have not been studied as extensively. In this Essay, I step back from the doctrinal details of this liability insurance litigation in order to sketch its principal characteristics and generate some insights about the way it has worked in practice.4 This

Antitrust and intellectual property: landing on patent avenue in the game of monopoly

Abstract: * Mr. Gould is a Partner in the law firm of Morgan & Finnegan specializing in patent litigation and related antitrust issues. Dr. Langenfeld is an economist and a Principal of Law & Economics Consulting Group, Inc. The authors wish to thank Alan Frankel for his comments and to acknowledge the help of Greg Pelnar of Lexecon, Inc. in the preparing and writing of this article. Because of the authors' different backgrounds, this article cites both case law and economic literature. The case law prevails in litigation, although the decisions in many cases are heavily influenced by the economic literature and economic experts.

Chasing Down the Devil: Standardsof Prudent Investment Under theRestatement (Third) of Trusts

Abstract: Table of Contents I. Introduction 336 II. The Evolution of Fiduciary Investment Standards 337 A. Foundations of the Prudent Man Standard 337 B. Shortcomings of the Prudent Person Standard 342 C. An Introduction to the Prudent Investor Rule 345 III. An Overview of Modern Portfolio Theory 348 IV. Advancements Made Under the Restatement (Third) of Trusts 353 A. The Duty to Balance Risks Against Total Returns 353 B. The Duty to Diversify 355 C. The Duty of Impartiality 358 D. The Authority to Delegate 361 E. Expanding Liability for Trustees 364 V. The Practical Effects of the Prudent Investor Rule 366 A. A Current Perspective on Past Cases 366 1. Estate of Knipp 366 2. First Alabama Bank v. Martin 370 3. In re Bank of New York (Spitzer) ... 372 B. The Response Among the States 375 VI. Conclusion 381 I. Introduction Be sober, be vigilant; because your adversary the devil, as a roaring lion, walketh about seeking whom he may devour. - 1 Peter 5:81 For more than one hundred years, protecting trust principal while generating the highest income possible marked the fundamental purpose of fiduciary investment standards.2 In keeping with this purpose, trust doctrine evolved throughout the nineteenth and twentieth centuries to forbid speculative fiduciary investments.3 Because traditional trust doctrine caused ultimate liability for losses to the trust to sit like a devil on the shoulder of every trustee, the threat of losses encouraged investments in low-risk ventures only.4 Today, however, it is the corrosive effects of inflation that create the greatest threat for trustees.5 Increasingly, low-risk, interest-bearing securities fail to keep pace with inflation, and thus, inflation becomes the roaring lion, walking about, seeking to devour the trust.6 Unfortunately, the traditional restrictions on fiduciary investment largely remain in place.' Such restrictions now hamper a trustee's ability to be vigilant against this new adversary - the devil of inflation.8 The Restatement (Third) of Trusts emerges in response to this challenge. Drawing heavily from current investment techniques, it seeks to reformulate trust doctrine so that trustees may be flexible enough to avoid the effects of inflation.9 This effort takes shape in the form of the Restatement (Third)'s "prudent investor rule.'o Given the importance of the investment function to fiduciary administration, an understanding of this new standard for prudent investing is essential. In Part II, this Note provides a brief overview of the historical evolution of fiduciary investment standards." Part III provides an introduction for laypersons to the central features of modern portfolio theory- the conceptual foundation of the prudent investor rule.l2 Part IV demonstrates the recent progression of trust doctrine by reviewing the fundamental changes made by the Restatement (Third).13 Part V.A considers the practical application of the prudent investor rule by using it to revisit three prominent fiduciary investment cases.14 Part V.B assesses the effect of the new standard by reviewing the statutory response to the Restatement Third) among the states.l5 Part VI concludes by discussing recent demographic trends that make the use of trusts more important than ever. Part VI then recommends that state legislatures quickly move to adopt legislation reflecting the standards of the prudent investor rule so that trustees have the flexibility needed to respond effectively to those trends.l6 II. The Evolution of Fiduciary Investment Standards A. Foundations of the Prudent Man Standard England greatly influenced the development of "prudent" trustee investment practices in nineteenth-century America."7 The English fiduciary investment standard was the product of financial disaster, and it worked primarily to protect beneficiaries from losses caused by speculative trust investments. …

Campaign Financing: Highlights and Chronology of Current Federal Law

Abstract: Current law governing financial activity of campaigns for federal office is based on two principal statutes: the Federal Election Campaign Act (FECA) of 1971, as amended in 1974, 1976, and 1979, and the Revenue Act of 1971. These laws were enacted to remedy widely perceived shortcomings of existing law, the Corrupt Practices Act of 1925, and in response to reports of campaign finance abuses over the years, culminating in the 1972-1974 Watergate scandal. This report provides a summary of major provisions of federal law and a chronology of key legislative and judicial actions.

Contract Renegotiation in Agency Problems

Abstract: This paper studies the ability of an agent and a principal to achieve the first-best outcome when the agent invests in an asset that has greater value if owned by the principal than by the agent. When contracts can be renegotiated, a well-known danger is that the principal can hold up the agent, undermining the agent's investment incentives. We begin by identifying a countervailing effect: Investment by the agent can increase his value for the asset, thus improving his bargaining position in renegotiation. We show that option contracts will achieve the first best whenever this threat-point effect dominates the holdup effect. Otherwise, achieving the first best is difficult and, in many cases, impossible. In such cases, we show that if parties have an appropriate signal available, then the first best is still attainable for a wide class of bargaining procedures. A noisy signal, however, means that the optimal contract will involve terms that courts might view as punitive and so refuse to enforce.

Give and Take: Public Use as Due Compensation in PruneYard

Abstract: I embrace Professor Epstein's notion that it is sensible in approaching takings questions to remain firmly tethered to common law baselines. And it is useful to think of common law rights in property as having originated in individual acts of acquisition, and, at least as a first cut, to think of the state's principal role as being a supplier of legal rules and enforcement mechanisms that protect, maximize the value of, and facilitate private transactions in these bottom-up rights. Indeed, rekindling our awareness of the benign social outcomes that adherence to these common law baselines tends to generate (as well as awakening us to the pervasively malignant consequences of permitting their promiscuous redefinition by the state) is one of Professor Epstein's more important contributions to contemporary debate. But to acknowledge that "common law baselines" are a good starting point for the resolution of takings cases only tells us approximately where to begin, for it is a mistake to speak of "common law baselines" as if there were a readily discoverable, uncontested "there" there. One of the least noted features of the PruneYard' decision is that it permits state lawmakers to eliminate shopping center owners' rights to exclude political leafleteers but it does not require them to do so. The Court did not necessarily reject Professor Epstein's "common law baselines" approach to takings questions. Instead, it located the baseline slightly to the left of where Epstein thinks it belongs. Considered strictly on its own terms, the case stands for the not very extravagant proposition that the private property rights of shopping center owners do not include an unqualified right to exclude political protesters. Put another way, PruneYard simply holds that it is constitutionally permissible but not constitutionally required for state lawmakers2 to de-

Agency, Partnership, and the LLC in a Nutshell

Abstract: Rights and Duties Between Principal and Agent, Partners, and Members of an LLC; Vicarious Tort Liability; Express, Implied and Apparent Authority; Inherent Agency Power; Undisclosed Principal; Ratification; Notice, Notification, Imputed Knowledge; Termination of Authority; Partnership Formation, Operation and Termination; Fiduciary Duties Among Partners; Right to an Accounting; Creditors' Rights Against Partners and the Partnership; Dissociation and Dissolution; Winding-Up; Liquidation. Limited Partnership and the LLC: Creation, Operation and Dissolution.

To Extend Fair and Impartial Justice to the Indian: Native Americans and the Additional Court of Michigan Territory, 1823-1836

Abstract: The history of Indian-white relations in the United States is generally a tragic one. Whites sought to dispossess Native peoples and establish political hegemony by imposing Anglo-American concepts of land tenure, culture, and law upon them One of the principal institutions that Americans used to accomplish these goals was the court system Given the eventual dispossession of Indians in the United States, one might expect the historical record to confirm that Native Americans were the victims of a ruthless, efficient judicial system. However, legal documents often reveal something quite different. In the last ten to fifteen years, there has been a dramatic shift in Native American legal studies. Previously, works by scholars such as Felix S. Cohen tended to concentrate heavily upon federal law and Indian treaties.2 These

Legal opinions in international transactions : Report of the Subcommittee on Legal Opinions of the Committee on Banking Law of the Section on Business Law of the International Bar Association

Abstract: Role of legal opinions interrelation of the laws of several countries inappropriate opinion request and responses purpose of the study the concept of the sample opinion the sample opinion overview of the analysis of the legal opinion analysis of the legal opinion sample opinion addendum analysis of sample opinion addendum the ABA opinion accord and opinions in internatioonal transactions opinions by non-US counsel acting as principal counsel and by US counsel acting as foreign counsel counsel on obligations of a branch or agency of a foreign bank selected opinion literature.

Intellectual property for the engineer, purchaser and seller: what is it? Are you sure you own it...or are you giving it away? Why is it important to you?

Abstract: The principal types of intellectual property legal protection are defined in the paper: patents, copyright, trade secrets, and trademarks and trade names. The paper then turns to some practical issues that arise in business with frequency and involve intellectual property law.

Recourse and the Principle of Non Lex Sed Corruptio Legis

Abstract: In his discussion of the nature of law St Thomas Aquinas cites St Augustine's principle that an unjust law ceases by that very fact to be a truly binding one, and this remark provides us with a useful springboard for a discussion of how different institutions have dealt with the occurrence of such a problem within their own systems. There are two principal factispecies envisaged when we deal with such a scenario within the Christian community; when a law has been interpreted erroneously by its officers and when the law is applied by the administration with a rigidity that exceeds the intention of the legislator. In these circumstances, it is arguable that we are dealing not with true law as such but with the corruption of law, non lex seil corruptio legis. The expression corruptio legis is here understood not in a subjective but in an objective sense, i.e. it is not to be understood to refer to the administration or the officials that apply the law but to the legal norm itself. The issues raised by the principle, non lex sed corruptio legis, are not simply ethical but also legal, and the important resolution in Augustine and Aquinas offers a useful window into one of the central problems of comparative administrative law.

The Organization of Capital Against Labor

Abstract: Between 1880 and 1915 the United States manufacturing economy witnessed the ominous rise of organized labor, its heroic efforts to organize the American work force, and the equally heroic efforts of manufacturers to resist. The result was a dramatic change in the common law of labor combinations, as well as major statutory reforms culminating in the federal Clayton Act of 1914. This balanced and well-written book considers these developments from the perspective of manufacturers, the organization that raised the sword in their behalf, and above all the lawyers who represented them. In the process Ernst's book combats and successfully undermines a commonly accepted premise that the labor union through these years acted mainly outside the law until federal legislation rescued it. In fact, as the many failures of the organized legal effort to combat the unions illustrate, the unions often turned out to be acting lawfully. At least the courts deemed this to be true after the fact, as the common law necessarily makes such determinations. After an introduction somewhat excessively devoted to the competing ideologies of legal and labor historians, Ernst develops the story of the American Anti-Boycott Association (AABA), the principal antilabor interest group association during this period. He does so in a manner that is largely free of the explicit ideology that has overwhelmed and often ruined so many legal histories of American labor. Organized in 1902 by employers involved in manufacturing, the AABA was intended to be a lobbying and litigating organization to meet the threat of organized litigation by labor unions. Although Ernst makes only a brief footnote comparison, the AABA pursued a legal strategy not unlike that of the NAACP, founded nearly a generation later. Indeed, the AABA strategy could have served as a model for NAACP planning.' The theoretical basis of the strategy, as of most interest group strategies, is that legal rules are "public goods" that benefit (or burden) many parties other than the immediate litigants involved in a lawsuit. For example, an employer seeking a legal right