Category Archives: Corporate Law

New Article: Scaling Commercial Law in Indian Country

New Article: Marc Lane Roark, Scaling Commercial Law in Indian Country, 8 Tex. A&M L. Rev. 89 (2020). Abstract below:

How do you drive economic enterprise in a financial desert? Indian tribes, academics, economists, and policy makers have considered the means and methods for energizing economic growth for forty years. Efforts such as the creation and promotion of the Model Tribal Secured Transactions Act (“MTSTA”) promise much toward creating conditions that would gather financial opportunity to tribal regions that experience poverty at a strikingly higher rate than any other place in the United States. And yet, while the law has been available for more than ten years, tribes have been reticent to adopt it. This Article fills the vacuum in the literature around the promise of uniform laws in Indian Country by describing the inherent tension that exists between downscaling uniform laws into tribal contexts and the localism that seeks to preserve localized values. This Article argues that tribal choices to accept uniformity or reject uniformity in these areas are built around a combination of formal associations and organic relationships designed to create “institutional thickness” in the face of other scarce resources.

New Article: Corporate Finance for Social Good

New Article: Dorothy S. Lund, Corporate Finance for Social Good, 121 Colum. L. Rev. 1617 (2021). Abstract below:

Corporations are under pressure to use their outsized power to benefit society, but this advocacy is unlikely to result in meaningful change because corporate law’s incentive structure rewards fiduciaries who maximize shareholder wealth. Therefore, this Essay proposes a way forward that works within the wealth-maximization framework and yet could result in dramatic social change. The idea is simple: Use private debt markets to provide incentives for public-interested corporate action. Specifically, individuals who value prosocial corporate decisions could finance them by contributing to corporate social responsibility (CSR) bonds that would offset the corporation’s implementation costs. To provide an incentive to depart from wealth maximization, the bond would stipulate that the contribution would be forgiven when the decision is implemented by the corporation—a key difference from existing pro­social financial instruments.

More broadly, the insight that the individuals with the strongest interest in seeing corporations act responsibly are not always the company’s shareholders has consequences for corporate law and corporate governance. In particular, it cautions that we should recognize the limits of shareholder activism to achieve socially optimal levels of corporate responsibility. The more difficult questions are whether and how to reorient our corporate law system away from shareholders and toward other constituencies. As that project forges on, this Essay describes a tool that would enable stakeholders to influence corporate behavior without any delay.

News Coverage of Labor: Democrats want to ban mandatory arbitration at work. Senate Republicans are listening

arb at work.jpgNews Coverage of Labor: Alexia Fernández Campbell, Democrats want to ban mandatory arbitration at work. Senate Republicans are listening, Vox.com, Apr. 3, 2019.

Millions of workers can’t sue their employers, and they probably don’t know it. About 60 million American workers have given up their right to go to court just to earn a paycheck.

New Article: Regulating Wage Theft

New Article: Jennifer J. Lee & Annie Smith, Regulating Wage Theft, 94 Wash. L. Rev. (forthcoming) (2019). Abstract below:

Wage theft costs workers billions of dollars each year. At a time when the federal government is rolling back workers’ rights, it is essential to consider how state and local laws can address the problem. As this Article explains, these pernicious practices seemingly continue unabated, despite a recent wave of state and local laws to curtail wage theft.

This Article provides the first comprehensive analysis of state and local anti-wage theft laws. We compiled 130 state and local anti-wage theft laws enacted over the past decade and offer an original typology of the most common anti-wage theft regulatory strategies. Our evaluation of these laws shows that they are unlikely to meaningfully reduce wage theft. Specifically, our typology reveals that many of the most popular anti-wage theft strategies involve authorizing worker complaints, creating or enhancing penalties, or mandating employers to disclose information to workers about their wage-related rights. Lessons learned about these conventional regulatory strategies from other contexts raise serious questions about whether these state and local laws can be successful.

Rather than concede defeat, this Article contends that there are useful insights to be drawn from the typology and analysis. It concludes by recognizing promising regulatory innovations, identifying new collaborative approaches to enhance agency enforcement, and looking beyond regulation to nongovernmental strategies.

New Article: The Perils of Philanthrocapitalism

New Article: Eric Franklin Amarante, The Perils of Philanthrocapitalism, Md. L. Rev. (2018).  Abstract below:

For over a century, philosophers, politicians, and sociologists have bemoaned philanthropy’s inherent antidemocratic, paternalistic, and amateuristic aspects. The antidemocratic nature of philanthropy is self-evident: When a wealthy person determines the best way to address a societal problem without the input of either society at large or the intended beneficiaries of the philanthropy, the result is a deficit of democracy. Philanthropy’s amateurism stems from the illogical belief that wealthy individuals ought to address some of the world’s most complex and intransigent problems simply because they successfully amassed a fortune in the private sector. The paternalism critique focuses on the assumption that many of society’s problems are born out of the personality faults of charity beneficiaries.

Because most philanthropists formed private foundations to conduct their charitable work, the regime that regulates private foundations evolved to mitigate the three aforementioned negatives: antidemocracy, paternalism, and amateurism. More specifically, the law requires private foundations to avoid political activity, spend a certain percentage of funds in a charitable manner, and submit extensive annual reports. In this manner, the legal regime struck a palatable balance between philanthropy’s inherent negative aspects and philanthropy’s obvious positives.

However, the recent trend of philanthropists conducting charity through for-profit vehicles, such as limited liability companies (“LLCs”), effectively bypasses the restrictions placed upon private foundations. This Article will discuss each of the traditional critiques of philanthropy and explore how they are exacerbated when philanthropic efforts are shifted to LLCs. Ultimately, this Article will argue that philanthropy conducted through LLCs will undoubtedly be less democratic, more amateuristic, and more paternalistic than philanthropy conducted through private foundations. This Article will conclude with some thoughts concerning several potential solutions to the problem, including the adjustment of incentives for private foundations and LLCs, imposing a regulatory regime over philanthropic activity, extending existing licensing regimes to apply to certain philanthropic activity, and the potential of a social license to conduct philanthropy.

New Article: Balancing Public and Private Interests in Pay for Success Programs: Should We Care About the Private Benefit Doctrine?

New Article: Sean Delany & Jeremy Steckel, Balancing Public and Private Interests in Pay for Success Programs: Should We Care About the Private Benefit Doctrine? 14 N.Y. Univ. J. of L. & Bus. Vol. 2 (2018). Abstract below:

In the rapidly expanding world of social impact finance, “pay for success” or “PFS” programs are increasingly popular vehicles for attracting private resources to address historically intractable social problems. Also known as “social impact bonds,” these programs are designed to encourage private investors to advance capital to fund social services and receive a return from the government only if predetermined “success metrics” for the target populations are met. As well as private investors and government agencies, participants include social service providers, technical advisors, and other entities that have been recognized as tax-exempt under section 501(c)(3) of the Internal Revenue Code.

This paper is an effort to understand how the private benefit doctrine might affect the structures of PFS programs, and might limit or encourage their expansion in the future.

The doctrine prohibits charitable entities from being operated more than incidentally for the benefit of private interests. The boundaries that tax-exempt organizations must observe when engaging with profit-making entities – whether through transactional relationships or joint ventures – to achieve their charitable missions are far from clear, because the private benefit doctrine has evolved in piecemeal fashion without a coherent conceptual framework. As PFS programs evolve and relationships between participating exempt organizations and profit-making investors are designed, how will the exempt organizations ensure they are not violating the private benefit doctrine?

Despite the inconsistent jurisprudence surrounding the private benefit doctrine, applying it to PFS programs demonstrates that it protects against valid concerns not addressed elsewhere in the Code; and offers a useful cost-benefit framework which we use to draw conclusions about the desirability of funding social services through PFS programs.

New Report: The New Math on School Finance: Adding Up the First-Ever Disclosure of Corporate Tax Abatements’ Cost to Public Education

New Report: The New Math on School Finance: Adding Up the First-Ever Disclosure of Corporate Tax Abatements’ Cost to Public Education, December 2018, GoodJobsFirst.org.

News Coverage: How Corporate Tax Incentives Rob Public School Budgets

News Coverage: Sarah Holder, How Corporate Tax Incentives Rob Public School Budgets, CityLab.com, Dec. 11, 2018.

A new Good Jobs First study shows that corporate tax incentives—like those given for Amazon HQ2—have diverted at least $1.8 billion from public schools.

New Article: Workers in the “Gig” Economy: The Case for Extending the Antitrust Labor Exemption

New article: Marina Lao, Workers in the “Gig” Economy: The Case for Extending the Antitrust Labor Exemption, 51 Univ. Cal. Davis 1543 (2018). Abstract below:

Consumers are the clear winners in the fast-growing sharing economy (and, more specifically, the “gig” economy), as are the technology companies that conceived and developed the digital platform models and that serve as the intermediaries. Though workers on the platforms have also benefited, particularly those who value flexibility, there is a sense that they are not receiving an appropriate share of the joint surplus that their “partnership” with the platforms produces. For those troubled by this disparity, the challenge is to find a principled solution that would allow the benefits to be distributed more equitably, but would not upend the innovative business model and thereby lose the associated efficiencies and other benefits.

In this Article, I argue for the extension of the antitrust labor exemption, currently limited to labor activities of employees, to encompass gig economy workers. That would allow them to negotiate collectively with the platform/intermediary over compensation and benefits issues without exposure to antitrust liability. Gig economy workers straddle the line between employee and independent contractor and do not currently receive
the benefits and protections that are tied to employment. I explain why it would be consistent with the philosophies underlying the antitrust law and the exemption to extend the exemption to gig economy workers, and why that can be reconciled with more recent refusals to apply the exemption to non-employee professionals — mostly independent physicians.

The Article additionally addresses the drawbacks of different solutions proposed by others also concerned about the precarious circumstances of gig economy workers, focusing in particular on a proposal to legislatively redefine “employment” broadly to cover gig economy workers. My concern with this proposal is that it risks jeopardizing the very business model that has facilitated online intermediated work, and could also have the unintended effect of diminishing platform competition, which is troubling from a competition policy perspective. Given the uncertainties and risks, the simpler approach of extending the antitrust labor exemption to permit collective action by gig economy workers, proposed in this Article, seems to be the better path.

The exemption is not a perfect solution, and I address its weaknesses. But it is a means to advance the workers’ interests in securing an appropriate share of the surplus that has been jointly created by the platform and the workers, without as much risk of dismantling the business model in the process.

New Article: Why Flexibility Matters: Inequality and Contract Pluralism

New Article: Jeremiah A. Ho, Why Flexibility Matters: Inequality and Contract Pluralism, U.C. Davis Business Law Journal, Forthcoming, 2017. Abstract below:

In the decade since the Great Recession, various contract scholars have observed that one reason the financial crisis was so “great” was due in part to contract law—or, more precisely, the failures of contract law for not curbing the risky lending practices in the American housing market. However, there is another reason why contracts made that recession so great: contracts furthered inequality. In recent years, when economic inequality has become a dominant national conversation topic, we can see development of that inequality in the Great Recession. And indeed, contract law was complicit. While contractual flexibility and innovation were available to soften the blow of large commercial deals gone wrong during the crisis, residential mortgage defaults across the U.S. were subject to strict contractual formalism that led to severe consequences for those pursuing one of the hallmark prizes of the American Dream, homeownership. Specifically, cases during the Great Recession featured commercial parties relying on the gravity of the Great Recession as the reason why their contract breaches ought to be excused through doctrines such as impracticability. Although impracticability defenses premised on economic changes are usually unconvincing, commercial claimants during the Great Recession had some surprising successes and advantages in taking such positions. Meanwhile, hundreds of thousands of homeowners, whose abilities to honor their mortgage agreements were also hindered by the economic downturn, could not predicate their defaults on the crisis and get away with it. Instead, they were subject to rigid contract formalism. The entitlement to flexible and innovative excuse arguments seemed particularly exclusive to commercial claimants during the Great Recession. And contract law helped sustain that exclusivity. Therein lies the inequality.

This Article’s ultimate goal is not to argue, like others already have, for the efficacy of expanding contract excuse doctrines in significant times of crisis. Instead, the heart of this Article’s investigation examines, using the example of impracticability arguments during the Great Recession, why commercial parties had more access to flexibility in contracts than others in order to point out how it resonates societally for contracts. Modern contract law furthered inequality when it could have been more instrumental in advancing social mobility and economic opportunity. Thus, this Article’s observations ultimately support the idea that rather than formalism, contract pluralism ought to be adopted in order to give contracts a more meaningful role in furthering a fair and just society.