Faculty Scholarship Digest
On a regular basis, Dean Michaels prepares a memorandum summarizing recent scholarship published by members of the Moritz faculty. The College boasts 50+ faculty members with national and international reputations. The range of influential and innovative legal scholarly works produced by our distinguished faculty reflects a variety of perspectives, interests, and areas of expertise. (See Archives)
October, 2009 Report
Dale A. Oesterle, Are Leveraged Buyouts a Form of Corporate Arbitrage, 3 BROOK. J. OF FINANCIAL & COMM. L. 53 (2008).
Dale’s starting point in this article is that the boom, following the passage of the Sarbanes-Oxley Act of 2002, in companies being “taken private” through purchase by buyout funds was driven in part by a superior rate of return that buyout funds were able to achieve with their acquisitions. The article suggests that much of that superiority is attributable to the freedom private groups have to tailor boards of directors to change the management structures and styles of the companies from methods that are virtually required, de jure or de facto, for public companies and thereby to maximize returns. Before turning to the specifics of those structures and styles, the article gives an overview of different kinds of private equity funds (buyout, venture capital, and hedge), the nature of leveraged buyouts, and the less than ideal evidence about the success of these ventures.
Turning to the advantages of private structuring, Dale points out that the reduced number of shareholders facilitates shareholder monitoring of managers, more closely aligns managerial and shareholder interests, and allows the new ownership to force rapid change in managerial strategies. The article identifies those strategies, particularly those that depart from the approaches of publicly traded companies. For example, buyout funds construct very different boards of directors. Rejecting the traditional placement of company managers on the board, or the current “good governance” approach of independent, outside directors, boards are largely populated with individuals from the buyout firm, people, in the parlance popularized by Warren Buffett, with “skin in the game.” Buyout firms also drive their acquisitions to use much more leverage than is considered acceptable in public companies, with the result that the need to pay down debt makes cash flow such firms’ top priority.
The article also describes the practice of buyout firms to have outside auditors report directly to the buyout fund, rather than to the (now private) company itself. This last difference results in auditors reporting to the actual owners of the company (rather than the managers hired by passive investors), thereby eliminating a critical conflict issue that plagues corporate governance in publicly traded companies. The article explores the effects of these differences, and discusses their implications for publicly traded companies, including adaptions that might be useful in the public company context.
Jeffrey S. Sutton, Why Teach—and Why Study—State Constitutional Law, 34 OKLA. CITY UNIV. L. REV. 165 (2009).
In this essay, which originated as the Brennan Lecture on State Constitutional Law, Jeff argues that, as a strategic matter, state constitutional law claims are badly underemployed by lawyers and identifies the inattention of law school curricula to state constitutional law as a key factor in that underutilization. The essay identifies “crowding out” by the power, historical significance, and ease of study of the national constitution, and prospects for professional advancement for law professors as partial explanations for state constitutional law’s appearance in the course listings of only a minority of law schools.
The essay then turns to a call-to-action for lawyers to bring state constitutional claims; the essay points to both strategic reasons for lawyers to do so and broader concerns suggesting it would be a positive development beyond individual client concerns. First, Jeff identifies state constitutions as a separate bite at the apple in attempting to invalidate a local law; two chances to win are better than one. Second, state courts may be more amenable to identifying “new” constitutional rights and remedies because they face less diversity of circumstances and are more capable of calibration with local history and conditions than the U.S. Supreme Court interpreting a constitution governing fifty states. Moreover, state constitutional decisions, the essay contends, are more easily reversed if erroneous, are more likely to risk innovation, and can sometimes rely on unusual provisions not found in the U.S. Constitution.
Finally, Jeff argues that more active development of state constitutional law will improve federal constitutional law by providing a “market of common law decisions” that, for example, were critical to the development of tort, property and contract law.
John Quigley, THE LAW OF CONSULAR ACCESS, A DOCUMENTARY GUIDE (Rutledge 2009) (with William C. Aceves & S. Adele Shank).
When foreign nationals are suspects in criminal investigations, they can be particularly vulnerable because of that status; language difficulties, discrimination, and other problems are particularly likely to arise. As a result, the international community has devised a system to “appoint representatives, called consuls, to protect their nationals and monitor local authorities.” International agreements require local authorities to allow consuls to do this work. Not surprisingly, problems often arise, and a whole field of litigation surrounding consular access has arisen in the past twenty years, with the authors of this book at the heart of it.
In this volume, John and his co-authors not only provide an overview of consular access law, but pull together otherwise disparate and sometimes-hard-to-find documents from around the world that are relevant to consular access litigation (the international coverage is particularly crucial in this international law context, since the practice in each nation is expressly relevant to the meaning of that law). The book annotates the documents, greatly enhancing their potential usefulness.
The documents are extraordinarily varied. Some examples: instructions to U.S. consuls regarding the service they should provide American nationals, taken from Volume VII of the State Department’s Foreign Affairs Manual; the Korean Ministry of Justice’s directive to Korean police about when to inform a foreign national of the right to consular access, taken from a Korean government document; a German Supreme Court decision concerning the effect in Germany of a decision of the International Court of Justice; an International Court of Justice decision regarding a claim by Guinea against the Democratic Republic of Congo for money damages on behalf of a Guinean national for a violation of his consular access rights.
This is just a tiny sampling of the documents contained in the book’s twenty-seven chapters and three hundred pages. As the many chapters suggest, the documents are usefully and meticulously organized by subject matter (e.g., statutory right to sending state protection; diplomatic protest by a sending state), and each chapter begins with a description of its subject matter and a description of the content and relevance of each of its documents. In short, this is anything but a traditional “forms” book and constitutes a remarkable and valuable compendium of law.
Larry T. Garvin, 2010 CUMULATIVE SUPPLEMENT TO FARNSWORTH ON CONTRACTS (Wolters Kluwer 2010).
In this latest update to the well-known leading contracts treatise, Larry adds many new cases and articles that were published in the past year. The text of the supplement now runs 451 pages.
Katherine Hunt Federle, Status Offenses, in Richard A. Shweder et al. eds. THE CHILD, AN ENCYCLOPEDIC COMPANION (Univ. of Chicago Press 2009).
In this substantial entry, Kate summarizes the history and current treatment of “status offenses”: noncriminal conduct prohibited by state law only when the offender is a juvenile. Typical modern status offenses include “truancy, running away . . . incorrigibility and curfew violations.” Although juvenile courts have had jurisdiction over status offenses since juvenile courts were created in the 20th century, the entry traces the offenses back to the “classist and gendered reform movements of the 19th century,” in which literally removing children (often of immigrants) from vice, corruption, and poverty was seen as a means of breaking a chain of immorality leading to poverty leading to criminality.
The entry describes how the “classist and racist approaches to status offenders . . . are still evident today,” by documenting the differential treatment endured by African-American children and by girls in the adjudication of status offenses. Although many Western countries use agencies other than courts to handle the problems of status offenders and U.N. guidelines specifically prohibit status offense legislation, their use, and the punitive approach to status offenders, remains widespread in the United States, though less so than in the 19th century. The entry also canvasses the constitutional challenges that have been brought against status offenses (and their limited success) and the role the federal government has played (by conditioning funding on compliance with mandates) in shaping contemporary state treatment of status offenders.
Peter M. Shane (lead drafter, w/Charlie Firestone and Michael Fancher), The Aspen Institute, Informing Communities, Sustaining Democracy in the Digital Age, The Report of the Knight Commission on the Information Needs of Communities in a Democracy (October 2009).
The Knight Commission was formed in 2008 to recommend policy reforms and other public initiatives to address the information needs of American communities in the 21st century. In the words of the book-length Report, “information is as vital to the healthy functioning of communities as clean air, safe streets, good schools and public health.” Indeed, in the Report’s view, access to and engagement with information is critical for both communities and individuals to create, maintain and put to use both these and other public goods.
The Report concludes that a combination of private enterprise and social investment strategies are necessary to building a vital information infrastructure and provides a detailed series of recommendations aimed at achieving this result. These recommendations emphasize ensuring government openness, universal information access and education directed at ensuring widespread engagement with the information that results. These recommendations concern government, educational institutions, journalistic entities, internet policy makers, libraries and others. The Report includes two particularly interesting appendices, one a short quiz of sorts to measure the “information health” of a particular community (see pp. 73-75), the second a substantial list of “action items” for everyone from Congress to individual citizens that could be a part of a vigorous effort to create informed communities (see pp. 77-84).
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