JournalTOCs

Washington University Law Review
Number of Followers: 2

This is an Open Access Journal

Open Access journal
ISSN (Print) 0043-0862
Published by Washington University in St. Louis

[4 journals]

A General Defense of Information Fiduciaries
- Authors: Andrew F. Tuch
  Abstract: Countless high-profile abuses of user data by leading technology companies have raised a basic question: should firms that traffic in user data be held legally responsible to their users as “information fiduciaries”' Privacy legislation to impose fiduciary-like duties on data collectors enjoys bipartisan support but faces strong opposition from scholars. First, critics argue that the information-fiduciary concept flies in the face of fundamental corporate law principles that require firms to prioritize shareholder interests over those of consumers. Second, it is said that the overwhelming self-interest of large technology companies makes fiduciary loyalty impossible as a practical matter from the outset.This Essay finds neither objection convincing. The first objection rests on a mischaracterization of corporate law, which in reality would require compliance with user-regarding fiduciary obligations—the opposite of what critics fear. The second objection fails to convince because fiduciary law has proven itself adaptable enough to survive such challenges in other settings, such as in the asset management industry. The second objection nevertheless reveals a need for greater specificity of the scope and intensity of fiduciary duties that would be imposed under the information fiduciary model. Even so, neither objection plausibly undermines the model.
  PubDate: Fri, 27 Aug 2021 19:28:10 PDT
A New Caremark Era: Causes and Consequences
- Authors: Roy Shapira
  Abstract: What role does corporate law play in holding directors accountable for compliance failures' Until recently, the answer has been “very little.” The prevalent standard for director oversight duties (Caremark duties) was set high, effectively demanding that plaintiffs show scienter without having access to discovery. As a result, derivative actions over directors’ failure of oversight were routinely dismissed at the pleading stage, and many commentators considered Caremark duties largely irrelevant. Yet starting in June 2019, a string of successful Caremark cases have signaled a new era of enhanced oversight duties. This Article contributes to our understanding of the new Caremark era along three dimensions. First, the Article delineates the contours of the shift in Delaware courts’ approach to oversight duties. The courts now increasingly apply the “mission critical compliance” exception to justify enhanced duties, and lower the threshold for receiving information in order to investigate potential failure-of-oversight claims. Second, the Article identifies the drivers of this “new Caremark era,” with special emphasis on the role of a seemingly disparate development in shareholders’ right to information from the company. Shareholders now enjoy much better pre-filing discovery powers, which they can utilize to plead with particularity facts about how the board never even discussed a critical compliance issue, or how they knew about critical problems but chose to ignore them. Armed with these newfound pre-filing investigatory tools, shareholders can overcome what once seemed insuperable pleading hurdles. Finally, the Article evaluates the desirability of the new Caremark era, spotlighting its likely positive effects on information flows inside companies and the ability of the market to discipline corporate misbehavior (better reputational discipline), as well as the ways in which it nicely compensates for the blind spots of other enforcement mechanisms.
  PubDate: Fri, 27 Aug 2021 19:28:05 PDT
A Response to Calls for SEC-Mandated ESG Disclosure
- Authors: Amanda M. Rose
  Abstract: This Article responds to recent proposals calling for the SEC to adopt a mandatory ESG-disclosure framework. It illustrates how the breadth and vagueness of these proposals obscures the important—and controversial—policy questions that would need to be addressed before the SEC could move forward on the proposals in a principled way. The questions raised include some of the most contested in the field of corporate and securities law, such as the value of interjurisdictional competition for corporate charters, the right way to conceptualize the purpose of the corporation, the proper allocation of managerial power as between the board and shareholders, and the social desirability of fraud-on-the-market class actions.
  PubDate: Fri, 27 Aug 2021 19:28:00 PDT
The Rise of International Corporate Law
- Authors: Mariana Pargendler
  Abstract: Comparative corporate governance has focused either on prevailing differences across legal systems or on spontaneous legal transplants of foreign institutions in response to global competition. This Essay argues that corporate law today is not only a product of the invisible hand of the market but also of the soft (and not-so-soft) hands of international organizations and standard setters. By tracing the emergence of international corporate law (ICL) since the Asian crisis of the late 1990s, it shows how the IMF, the OECD, the World Bank, and the United Nations, among several other international players, have helped shape legal reforms and corporate governance developments around the world. The observed influence of ICL ranges from the impulse for independent directors and the control of related-party transactions to the growth of ESG investment factors and human rights policies.The rise of ICL responds to interjurisdictional externalities and nationalist bias of domestic regimes that have been largely neglected by prevailing theories, which failed to predict and notice the strong push for international coordination and standard setting in the field. ICL has also gone beyond merely prescribing an Anglo-Saxon model of corporate governance to promote legal innovations that place the United States on the receiving end of international pressure. Legal implants from ICL, rather than legal transplants from a foreign jurisdiction, are an increasingly relevant force behind corporate governance change. While ICL has been influential, its efficacy and normative vision face challenges. The time has come to move beyond an exclusively comparative focus to also scrutinize the potential and limits of corporate lawmaking at the international level.
  PubDate: Fri, 27 Aug 2021 19:27:55 PDT
My Creditor’s Keeper: Escalation of Commitment and Custodial Fiduciary
Duties in the Vicinity of Insolvency
- Authors: Amir N. Licht
  Abstract: Fiduciary duties in the vicinity of insolvency form a notoriously murky area where legal space warps. Courts openly acknowledge that it is difficult to identify its boundaries, and the content of these duties is equally uncertain and inconsistent across jurisdictions. This Article expands the theoretical basis for a special legal regime in virtually or liminally insolvent firms. In addition to the conventional rationale of opportunistic risk shifting, lawmakers should be mindful of managers’ tendency to unjustifiably continue failing projects, known as escalation of commitment. Second, this Article addresses the substantive content of a duty to protect creditors, either as in the form of a duty to consider creditors’ interest or as the statutory rule against wrongful (or insolvent, or reckless) trading. Specifically, it argues that when these duties are enlivened at the very edge of the zone of insolvency, the mission of directors should transform from entrepreneurial to custodial and should include a trustee-like duty of caution.
  PubDate: Fri, 27 Aug 2021 19:27:50 PDT
Delaware’s Fiduciary Imagination: Going-Privates and Lord
Eldon’s Reprise
- Authors: David Kershaw
  Abstract: What does it mean to be a fiduciary and does it really matter whether the law labels a person a fiduciary or not' Until the late twentieth century Delaware corporate law could have given a singular, coherent answer to these questions. Today, to its detriment, it is no longer able to do so.Part I of this Article explores the different conceptions of fiduciary relations. It first explores the power/undertaking conception of fiduciary relations in relation to directors and majority shareholders and shows how statements in U.S. corporate law that appear inconsistent with it—because they suggest duties are owed outside of the corporation, such as directorial duties to stockholders or majority shareholder duties to minority shareholders—are often on closer inspection not inconsistent at all. Part I then turns to the nature and “fiduciarization” of the undue influence doctrine, its importation into Delaware law, and its implications for the nature and structure of fiduciary obligation. Part II of the Article considers the application of these fiduciary conceptions to controlling shareholders, first highlighting the initial dominance in U.S. law generally, and Delaware law in particular, of the power/undertaking conception, and second, documenting the rise and impact of the influence conception in Delaware going-private law. Part III provides another example of the effects of the infusion of the fiduciary influence conception in the context of whether director’s fiduciary duties are owed directly to creditors. The Conclusion concludes.
  PubDate: Fri, 27 Aug 2021 19:27:46 PDT
Whistleblowers: Implications for Corporate Governance
- Authors: Deborah A. DeMott
  Abstract: Focusing primarily on internal whistleblowing, this article argues that incorporating whistleblowers into formal governance structures could spur more proactive involvement by directors in monitoring compliance with law and regulation.The article opens by examining questions of definition, contingency, duty, and motivation that are associated with whistleblowing. The next portion of the article briefly surveys the patchwork that comprises whistleblowing law in the United States, stressing that highly salient scandals generally precede the adoption of whistleblowing regimes. Against this background, the article turns to corporate law and governance in the United States, arguing that both are more dynamic and less static than some academic accounts assume. Nothing inherent to either corporate law or governance bars the formal incorporation of mandated whistleblower protection into organic organizational law. Directors’ duties of loyalty under contemporary Delaware law encompass invigorated oversight of legal and regulatory compliance. The link between the information revealed by internal whistleblowing and directors’ duties of loyalty strengthens the argument for treating whistleblowing as a component of corporate governance that should be formalized via organizational law.
  PubDate: Fri, 27 Aug 2021 19:27:41 PDT
Stop Blaming Milton Friedman!
- Authors: Brian R. Cheffins
  Abstract: A 1970 New York Times essay on corporate social responsibility by Milton Friedman is often said to have launched a shareholder-focused reorientation of managerial priorities in corporate America. The essay correspondingly is a primary target of a rapidly growing group of critics of the present shareholder-centric approach to corporate governance. This article argues that it is erroneous to blame (or credit) Milton Friedman for the rise of shareholder primacy in American corporations. In order for Friedman’s views to be as influential as has been assumed, his essay should have constituted a fundamental break from prevailing thinking that changed minds with some alacrity. In fact, what Friedman said on corporate purpose was largely familiar to readers in 1970 and his essay did little to change managerial priorities at that point in time. The shareholder-first mentality that would come to dominate in corporate America would only take hold in the mid-1980s. This occurred due to an unprecedented wave of hostile takeovers rather than anything Friedman said and was sustained by a dramatic shift in favor of incentive-laden executive pay. Correspondingly, the time has come to stop blaming him for America’s shareholder-oriented capitalism.
  PubDate: Fri, 27 Aug 2021 19:27:31 PDT
Period Poverty in a Pandemic: Harnessing Law to Achieve Menstrual Equity
- Authors: Bridget J. Crawford et al.
  Abstract: Period poverty is not new, but it has become more visible during the COVID-19 crisis. Worldwide, menstruation has long caused marginalization and vulnerability for many. The pandemic has only amplified these conditions. This Article makes three claims. The first is descriptive, identifying four interrelated aspects of global period poverty that have gained new salience during the coronavirus pandemic: lack of access to affordable menstrual products; lack of access to other needed supplies and services for health and sanitation; lack of menstruation-related information and support from schools and health professionals; and menstrual stigma and shame. Using examples from multiple countries, the Article highlights the importance of being able to manage one’s menstruation in a safe and affordable way.The Article’s second claim is that law has a role to play in eliminating period poverty—both during a pandemic and beyond. By ensuring that menstruation-related concerns are taken into account when defining “essential businesses,” for example, governments can both address the material needs of approximately half the population and signal that those needs are important.Finally, the Article explores the heightened visibility of menstruation-related concerns during the COVID-19 crisis as suggestive of an emerging popular awareness of period poverty. This Article’s account has important implications for a larger worldwide menstrual equity movement that takes aim at menstruation-related obstacles standing in the way of full participation for all people in private and public life.
  PubDate: Thu, 26 Aug 2021 13:05:16 PDT
“Extraordinary and Compelling” Circumstances: Revisiting the Role of
Compassionate Release in the Federal Criminal Justice System in the Wake
of the First Step Act
- Authors: Siobhan A. O'Carroll
  Abstract: Lawmakers have recently revitalized compassionate release as part of a larger effort to address mass incarceration, through the First Step Act of 2018. Previously, the Bureau of Prisons (“BOP”) served a gatekeeping role for all compassionate release petitions. Now inmates may bring their petitions directly to sentencing courts after exhausting the administrative remedies available through the BOP. This change has increased the number of inmates who benefit from compassionate release. Notably, however, this change has also led to adversarial litigation of compassionate release petitions.This Note considers the constitutional implications and policy concerns arising from the updated compassionate release mechanism. Part I of this Note traces the statutory development of compassionate release in the federal prison system. Part II examines the place of compassionate release within the federal constitutional scheme. Part III turns to the policy concerns surrounding representation by appointed counsel of compassionate release petitioners. Finally, Part IV proposes expanding the guiding definitional boundaries of compassionate release and concludes by arguing for an independent body in the executive branch to handle administrative compassionate release petitions.
  PubDate: Thu, 26 Aug 2021 13:05:11 PDT
Back to Bankruptcy’s Equitable Roots: Recalibrate the Dischargeability
of Student Loans Through a Modified Eighth Circuit Approach
- Authors: Terry Ha
  Abstract: The relief available to student debtors under the United States Bankruptcy Code (Bankruptcy Code) is governed by § 523(a)(8). Under § 523(a)(8), a debtor may have their student loan debt discharged only if preventing the discharge of the student loan debt would impose an “undue hardship” on the debtor and the debtor’s dependents(Undue Hardship Exception). Because Congress has not provided a definition of “undue hardship,” the judiciary has been tasked with creating judicial standards to delineate the Undue Hardship Exception.This Note proceeds in three segments. Parts I and II provide the legislative histories of the Bankruptcy Code and of § 523(a)(8), respectively. The Note will contextualize the nature of § 523(a)(8) by the various amendments to the Bankruptcy Code and the general principles upon which bankruptcy law is founded.Part III opens by describing Congress’s failure to provide a definition for the Undue Hardship Exception. Then Part III discusses the various Undue Hardship Exception tests. The judiciary’s consequent attempt to construct an adequate standard for the Undue Hardship Exception begins chronologically with the misguided Johnson Test. The Bryant Poverty Test follows with its laudable, yet flawed, effort to inject an element of objectivity to help address the Johnson Test’s shortcomings. The current standard followed by a majority of the circuits, the Brunner Test, is then examined in depth. This section closes with the current Eighth Circuit’s minority approach of the Totality of the Circumstances Test.Part IV proposes a new standard for the federal judiciary to utilize in determining whether a student loan debtor has satisfied the Undue Hardship Exception. With an emphasis on bankruptcy’s equitable nature, this Note’s proposed test modifies the Totality of the Circumstances Test in three principal ways. Each modification is provided an explanation and analysis that helps demonstrate why the proposed test is superior to both the Brunner Test and the Totality of the Circumstances Test.Finally, the Note concludes with a brief summary of the inadequacies of the Brunner Test and the Totality of the Circumstances Test that this Note’s proposed approach attempts to remedy. As a result, this Note advocates for the uniform adoption of the proposed approach throughout the federal judiciary to provide the much-needed relief by American debtors.
  PubDate: Thu, 26 Aug 2021 13:05:05 PDT
Negative-Value Property
- Authors: Bruce R. Huber
  Abstract: Ownership is commonly regarded as a powerful tool for environmental protection and an essential solution to the tragedy of the commons. But conventional property analysis downplays the possibility of negative-value property, a category which includes contaminated, depleted, or derelict sites. Owners have little incentive to retain or restore negative-value property and much incentive to alienate it. Although the law formally prohibits the abandonment of real property, avenues remain by which owners may functionally abandon negative-value property, as demonstrated recently by busts in certain coal and oil & gas markets. When negative-value property is abandoned, whether formally or functionally, the rehabilitation of such property typically requires public expenditure—an externality which cuts against property’s general and salutary tendency to internalize spillovers at a low social cost. The existence of negative-value property, as well as its increasing abundance, reveals an underdeveloped aspect of property theory and a pressing need to fortify legal mechanisms that prevent abandonment and enforce owners’ financial responsibility for severely degraded property.
  PubDate: Thu, 26 Aug 2021 13:05:00 PDT
Drugs, Patents, and Well-Being
- Authors: Christopher Buccafusco et al.
  Abstract: The ultimate end of patent law should be to spur innovations that improve human welfare—innovations that make people better off. But firms will only invest resources in developing patentable inventions that will allow them to make money—that is, inventions that people will want to use and buy. This can gravely distort the types of incentives that firms face and the types of inventions they pursue. Nowhere is this truer than in the pharmaceutical field. There is by now substantial evidence that treatments for diseases that primarily afflict poorer people—including the citizens of developing nations—are dramatically underproduced, compared with drugs that treat diseases that afflict the wealthy. In addition, the pharmaceutical markets are rife with “me too” drugs—drugs that treat diseases or conditions for which successful medications already exist.This state of affairs is not inevitable. In recent years, medical and psychological research on well-being has created the capacity for policymakers to draw direct links between patents and human welfare. Armed with this information, policymakers have, for the first time, the power to use the patent system to directly incentivize welfare-enhancing innovations. In this Article, we propose a system of extended patent terms for drug inventions that have a significant impact on human welfare. We further propose that policymakers lift many of the legal protections for patents that have an insubstantial effect on human welfare—which we term “futility patents”—making those patents easier to challenge and invalidate. The result would be a reorientation of pharmaceutical firm incentives toward drugs that will have a significant impact on welfare, particularly for poorer and underserved populations, and away from drugs that are profitable but do little to improve human life.
  PubDate: Thu, 26 Aug 2021 13:04:55 PDT
Pleading the Fifth in Immigration Court: A Regulatory Proposal
- Authors: Tania N. Valdez
  Abstract: Protections of noncitizens’ rights in immigration removal proceedings have remained minimal even as immigration enforcement has exponentially increased. An overlooked, but commonplace, problem in immigration court is the treatment of the constitutional right against self-incrimination. Two routine scenarios occur where noncitizens are asked to sacrifice their right against self-incrimination in immigration court. One involves testimony regarding conduct related to immigration status that may lead to prosecution for federal immigration violations, such as illegal entry, illegal reentry, or alien smuggling. The other involves testimony regarding any other potentially criminal activity, including when the noncitizen currently has pending charges in criminal court yet is expected to testify about the underlying facts of the case during immigration court proceedings. In both of these circumstances, the immigration system puts noncitizens in the untenable position where they must either elect to waive the constitutional right not to self-incriminate and testify regardless of possible criminal consequences, or exercise their right to silence and risk the immigration judge drawing an adverse inference that could result in deportation.The skewed incorporation of criminal norms into the immigration arena—a supposedly civil system—without a simultaneous expansion of procedures designed to protect and enforce noncitizens’ rights leads to disastrous results. Moreover, the lack of procedural fairness in removal proceedings exaggerates the imbalance of power between the federal government, with its immense resources, and the individuals it seeks to deport. Considering the broad powers granted to the executive and legislative branches of government to regulate immigration, and the attendant limited oversight by Article III courts, the courts are not likely to provide the most efficient or far-reaching solution. Thus, this Article posits that, rather than utilizing the traditional judicial avenue for vindicating constitutional rights, federal agency regulatory rulemaking is the best way forward. The Article then offers proposed regulatory language that is intended to provide a meaningful procedural vehicle through which noncitizens’ right against self-incrimination may be enforced. The proposed regulations provide that immigration judges must advise noncitizens of their right to remain silent, prohibit judges from drawing an adverse inference where noncitizens have pending criminal charges, clarify the procedures that must be followed in order to compel speech, and limit the government’s use of evidence obtained as a result of statutory or regulatory violations.
  PubDate: Thu, 26 Aug 2021 13:04:50 PDT