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The Securities Law Disclosure Conundrum for Publicly Traded Litigation Finance Companies
Get PDFThe Article examines a peculiar legal dilemma—implicating securities law, legal ethics, and evidence law—that arises when litigation finance companies (LFCs) become public companies. LFCs provide funding to litigants and law firms for prosecuting lawsuits in exchange for a share of the lawsuit recoveries. In recent years, LFCs have significantly altered the landscape of the civil justice system in common law jurisdictions. But their assets, which are just rights to proceeds from lawsuits, are notoriously opaque— who really can predict what a jury will do when it comes to liability and damages? When LFCs go public, this opacity frustrates public investors’ legitimate expectations to be able to understand the company’s accounts and operations. The problem is exacerbated by the applicable accounting rules, which outsource the task of valuing the assets to the LFCs themselves, vesting them with significant discretion to build their own financial statements. The resulting lack of clarity about basic valuation matters undermines the two main objectives of securities law: investor protection and market integrity.
From a securities law perspective, the normal solution to an opacity problem is more and better disclosure. However, concerns over the possible waiver of evidentiary protections flowing from the attorney-client privilege and the work-product doctrine complicate matters for LFCs. To avoid the possibility of waiver of privileged, confidential information (which would, in most cases, undermine the cases underlying their assets), LFCs are circumspect when it comes to disclosing any details of the valuation models for their assets, much less relevant details about specific cases. The shadow of privilege waiver thus chills the entirety of LFC disclosure practice, foreclosing it as an effective corrective to the intrinsic opacity of LFC accounts.
After detailing the sources and extent of this opacity problem, the Article explores two case studies. The first, involving the 2015 failure of Juridica Investments, illustrates how opaque LFC accounts can undermine the investor protection objective of securities law. The second, involving the 2019 “short attack” by hedge fund Muddy Waters on litigation funder Burford Capital, shows how the opacity problem can also undermine the market integrity objective. The Article concludes by laying out a framework for reform
Why Do Corporations Merge and Why Should Law Care?
Get PDFMergers and acquisitions are extraordinarily prevalent in the United States, generating massive expenditures every year. However, a serious empirical puzzle lies at the heart of all that activity. That empirical phenomenon’s most remarkable feature by far is that even though it is well established in an extensive literature and implies far-reaching policy consequences, American law ignores it entirely.
Generations of researchers have failed to find evidence that merger and acquisition activity generates any lasting benefits for the combining firms’ owners or anyone else. No one seriously doubts that efficiencies of scale or technological integration are real or that acquisitions sometimes achieve them. Still, the evidence strongly implies that they are mostly available in small deals among small firms. While the results are no longer very seriously contested, no one has any conclusive explanation for the several puzzles they pose.
This paper comprehensively reviews the empirical literature and works through the policy implications for the major bodies of law it affects. The most important insights are two. First, the evidence should undermine the confidence among scholars of corporation law in the regulatory self-sufficiency of market institutions, on which corporation theory depends so heavily. In particular, a major hope for controlling managerial agency cost—one of the theory’s chief preoccupations—remains the hope that the so-called “market for corporate control” governing hostile takeovers will discipline underperforming managers. The evidence discussed here suggests that the market produces no meaningful benefits at all. The second lesson is simpler. The other major legal regime governing mergers and acquisitions—antitrust—should return to the simpler, pro-enforcement presumptions by which it once more effectively limited market concentration. The fear of jeopardizing pro-competitive gains, on which antitrust merger law has been rendered largely inert, is no longer very defensible. The balance between false positive and false negative should be reset
Sisters Gonna Work It Out: Black Women as Reformers and Radicals in the Criminal Legal System
Get PDFA Review of Becoming Abolitionists: Police, Protests, and the Pursuit of Freedom. By Derecka Purnell and a review of Progressive Prosecution: Race and Reform in Criminal Justice. Edited by Kim Taylor-Thompson and Anthony C. Thompson
Repugnant Precedents and the Court of History
Get PDFAged Supreme Court precedents continue to tolerate many practices that would shock modern sensibilities. Yet the Court lacks standard tools for phasing out decisions that offend our national character. The very cultural shifts that have reoriented our normative universe have also insulated most repugnant precedents from direct attack. And the familiar stare decisis factors cannot genuinely explain what ails societally outmoded decisions. Even for justices inclined to condemn these embarrassments in less clinical terms, it is unclear what qualifies courts to make universalist claims about contemporary American values.
The Court recently sidestepped these difficulties by insisting that one of its most reviled decisions had been “overruled in the court of history.” In substituting rhetorical flair for analytical precision, however, the court-of-history trope threatens to destabilize the Court’s doctrines of horizontal and vertical precedent. This Article urges greater normality in implementing perceptions of national ethos. It first defends the inquiry’s legitimacy by recovering a longstanding judicial tradition of pronouncing specific practices abhorrent to modern cultural norms. It then underscores the project’s stakes by identifying an assortment of precedents that trudge along as ethical outcasts. After highlighting several tangible and expressive harms that these decisions can still inflict, I propose that the Court integrate its ethical judgments into the existing stare decisis framework. And I challenge the Court’s presumed incapacity to dislodge vestigial precedents. These relics may be difficult to pry loose, but we are not stuck with them forever
The Home of the Dispossessed
Get PDFThe objects that people interact with on a daily basis speak to and of these people who acquire, display, and handle them—the relationship is one of exchange. People living among household objects come to care for their things, identify with them, and think of them as a constituent part of themselves. A meaningful problem arises, however, when people who have deep connections to the objects that populate their lived spaces are not those who possess the legal rights of ownership. These individuals and groups—usually excluded from the realm of property ownership along lines of gender, race, and ethnicity—live on an axis of property precarity, persistently subject to the anxieties as well as the realities of dispossession. This Article’s launching point to explore these dispossessions is Henry James’ novel, The Spoils of Poynton, which involves a dispute about the settlement of a father’s estate and describes the battle between mother and son over the furnishings of the family home, Poynton. On a descriptive level, The Spoils of Poynton is a novel about a wife’s dispossession and the gendered nature of inheritance. The novel is also, however, about the exclusions built into property theories of labor and personhood. Accordingly, this Article explicates tactics of dispossession inherent in traditional theories of property ownership, explores the legal claims made to property ownership by those who have been dispossessed, and analyzes the ways in which the meaning of property for these individuals and communities is reconstituted within the political imaginary. The novel therefore tells the story not only of a property conflict between mother and son but also of how individuals who straddle the fragile boundary between personhood and objecthood both experience property as liminal fragments of the rightsholder they could have been and perform their property ownership as a political declaration. In this way, the novel tells the story of what it is like to live in the home of the dispossessed
Protecting the Sovereign\u27s Money Monopoly
Get PDFSovereign states have had a monopoly over the production of circulating currencies for well over a century. Governments, not private entities, issue circulating currencies. Indeed, in 1986, Milton Friedman and Anna Schwartz declared that “[t]he question of government monopoly of hand-to-hand currency is likely to remain a largely dead issue.” The advent of stablecoins—privately issued digital money that are pegged to fiat currencies like the U.S. dollar or the Euro—raises the question of the money monopoly from the grave.
Why did sovereign money monopolies come into existence in the 19th and 20th centuries? Should circulating private money coexist once again with sovereign money in the 21st century? This essay explores these fundamental questions of legal and financial architecture by revisiting the original legislative debates that led to the sovereign’s money monopoly in England, the United States, Canada, and Sweden. In every case, privately issued monies first circulated because of a limited money supply—a shortage of specie (i.e., metallic coins)—and then were ultimately banned to improve financial stability, gain greater control over monetary policy, or strengthen the sovereign’s fiscal position.
Today, lawmakers and regulators assume that coexistence between privately issued (digital) money and sovereign (digital) money is the optimal path forward and are crafting legal guardrails under that assumption. It is a very strong assumption—one that should be challenged since the upside is unclear and the costs remain similar. We argue that, if anything, the sovereign’s monopoly on circulating currencies should be protected
Enduring Exclusion
Get PDFEconomic justice has long been a part of the civil rights agenda, and minimum labor standards statutes play a crucial role in eradicating the exploitation and subordination of historically marginalized workers. While statutes establishing labor standards are characterized as “universal,” their effect has been anything but universal. Racial and ethnic minorities, women, and those at the intersection experience disproportionate violations of labor standards laws concerning minimum wage, overtime, and occupational safety and health. Through legislative maneuvering dating back to the New Deal era, Congress carved out many female workers and workers of color from core protections of minimum labor standards legislation. Due to the vigorous advocacy of civil rights groups, amendments to these statutes expanded coverage, making these statutes more inclusive of marginalized workers. Nevertheless, the exclusionary legacy of these New Deal era-laws lingers today. Black, Latinx, and female workers are more likely to be retaliated against for asserting rights or reporting employer misconduct pursuant to these statutes. Tracing the racial and gendered origins of exemptions to labor standards statutes from the early twentieth century to the present, this Article argues that, despite expanded coverage, female workers and workers of color remain largely excluded from “universal” workplace protections. Although antiworker forces previously sought to thwart creation of legal rights for marginalized workers, contemporary antiworker campaigns seek to gut marginalized workers’ protections through actual and threatened retaliation. Examination of the traditional rationales for employer retaliation reveals that the retaliation disparity is incongruent with these conventional motivations. This Article argues that securing compliance with both minimum labor standards and antiretaliation reform should be integral parts of the civil rights agenda