The Janus Face of Reorganization Law By: Vincent S.J. Buccola
The Supreme Court’s judgment in Czyzewski v. Jevic Holding Corporation exposes a curious fact about modern reorganization law. In large measure, two distinctive paradigms now color interpretation of the Bankruptcy Code. One paradigm governs during the early stages of a case and is oriented toward the importance of debtor and judicial discretion to use estate assets for the general welfare. The other paradigm governs a bankruptcy’s conclusion and is oriented toward the sanctity of creditors’ bargained-for distributional entitlements. In combination, they produce practical uncertainty as well as what appears to be policy incoherence. After identifying the Janus faces of reorganization law, this essay explores their significance for modern bankruptcy practice and theory. Most strikingly, it argues that, under the conditions of modern corporate finance, the two paradigms might actually cohere in service of a more general norm of investor wealth maximization. What appears on one level of analysis to be contradictory postures may prove, upon reflection, to be but two faces of a single god.
From Block Lords to Blockchain: How Securities Dealers Make Markets By: David C. Donald
Technology is currently bringing a decisive wave of innovation and disruption to the financial industry. There are many promises and predictions of where this will go, but the best source of information for projecting the future’s trajectory is history. History shows us that markets began decentralized, centralized from the 18th century around trading venues, and then gravitated again toward decentralization thanks to data transmission. The “gravity” that has shaped this process is broker-dealer choice. The medium in which the process has occurred is technology. Law has occasionally—but not always—played an important role.
Merchant firms of varying size and specialization have traded securities largely through private networks at least from 1200, and then since about 1800 in clubs and quasi-public organizations called “exchanges.” Around 2000, major broker-dealers began to re-internalize trading into proprietary matching platforms, a return to private networks. The move to decentralization accelerated around 2015 with an intense interest in blockchain or other forms of distributed ledger technology.
Securities trading has thus migrated from private networks to public forums and appears to be returning to private networks again. This evolution has been shaped by law and technology, but is driven by the interests of the broker-dealers that both design and operate the markets. As trading concentrated in exchange venues slips into history, it is important to understand what is happening. The disintegration of securities trading, commonly understood as stimulating innovation and lowering trading costs through competition among matching platforms, is arguably reducing market quality for all other constituents, such as issuers, investors, regulators and the taxpayers who support them, while increasing control of the largest institutions over access to the market.
The Impact of Insider Trading on Market Price of Securities: Some Evidence of Recent Cases of Unlawful Trading By: David Rosenfeld
The government’s recent crackdown on insider trading has revived an old debate about the wisdom of insider trading prohibitions. Opponents of insider trading laws often argue that insider trading contributes to market efficiency because it brings information to the market which gets incorporated into the price of the security, leading to more accurate pricing in a more timely fashion. Although this argument is intuitively appealing and has some empirical support, a look at some recent cases of known insider trading reveals situations where the market fails to detect the presence of informed traders, and even instances where the stock price moves in the contrary direction. This indicates that insider trading does not always bring information to the market, which undermines what is perhaps the most cogent argument for ending insider trading prohibitions.
How to Enhance Directors' Independence At Controlled Companies By: Giovanni Strampelli
Directors’ independence at controlled companies is an intriguing corporate governance conundrum. Recently, Bebchuk and Hamdani have shed new light on it by providing an analytical framework which seeks to make independent directors more effective in performing their oversight role. They convincingly argue that some independent directors should be accountable to public investors who, in order to achieve this aim, should have the power to influence the election or retention of several “enhanced-independence” directors. Starting from this persuasive outcome, and adopting a comparative and functional analysis, this Article will further extend the Bebchuk and Hamdani framework in several directions, with the aim of rendering it more effective and adaptable to different jurisdictions around the world. First, reliance only on the initiative of activist hedge funds might raise some concerns with regard to the effectiveness of enhanced-independence directors as monitors as well as to the cohesiveness of the board. This Article will therefore argue that the involvement of non-activist institutional investors in the selection and election of enhanced-independence directors should be enhanced. It will further argue that the refinement of the election and retention process for independent directors might not be enough in order to tangibly enhance their independence, as the “human nature” of corporate boards must be taken into consideration as well. Pursuing this line of thought, it will develop an in-depth analysis of strategies available in order to limit the distorting effects of the board’s relational dimension and to induce enhanced-independence directors to perform their oversight role in a truly independent way.
The Great Divide: ERISA Integrity Versus State Desire To Hold Pharmacy Benefit Managers Accountable For Pharmaceutical Drug Pricing By: Alexandra M. Stecker
This Note comments on a split circuit ruling that stems from an Iowa Court of Appeals case, Pharmaceutical Care Management Ass’n v. Gerhart, that focuses on the question, “Are state laws forcing pharmacy benefit managers (PBM) to disclose pricing data preempted by the Employee Retirement Income Security Act of 1974 (ERISA)?”1 The Eighth Circuit, as well as the D.C. Circuit, ruled that ERISA does preempt these reporting requirements. However other circuits, like the First Circuit, have upheld the state law reporting requirements. This recent striking down of Iowa pharmaceutical law is troubling as the ruling embraces a lack of transparency and accountability as to how PBMs and insurance companies decide their drug prices. On one side, a state’s law requiring reporting disclosure to state agencies (in addition to ERISA’s national reporting requirements) is argued to put an economic burden on health insurance companies. On the other side, it is argued that state law forcing health insurers to report pricing data increases accountability and does not actually affect ERISA. This Note discusses the precedent leading up to this circuit split, the sides and rationales of the split, the circuit split’s implications in health insurance law, why ERISA should not preempt states’ laws requiring PBMs to report their pricing methodology for certain drugs, and recommends various solutions to avoid ERISA preemption, yet hold PBMs accountable for their drug pricing methods.
Patent Owners Versus the Supreme Court: Changing the Law Underlying Patent Eligible Subject Matter By: Brett Winborn
Patent-eligible subject matter, as stated in 35 U.S.C. 101, includes “any new and useful process, machine, manufacture, or composition of matter.” Courts excepted laws of nature, natural phenomena, and abstract ideas from the patent-eligible subject matter and recent Supreme court decisions have created uncertainty and controversy as to what is and should be eligible for patenting. This Note discusses proposals to clarify patent-eligible subject matter through legislation by three intellectual property advocacy organizations, the Intellectual Property Owners Association (IPO), American Intellectual Property Law Association (AIPLA), and American Bar Association Section of Intellectual Property Law (ABA). This Note compares and contrasts two proposals to amend 35 U.S.C. Section 101, one a joint proposal from the IPO and AIPLA and the other from the ABA. The proposals are substantively similar but take different approaches. The IPO-AIPLA proposal replaces the above three judicial exceptions with two new but similar ones, while the ABA proposal retains the exceptions but restricts only patent claims that would preempt the use of an excepted type of subject matter. This Note recommends that patent owners, inventors, and other interested parties advocate for the ABA proposal because it more closely follows the Supreme Court’s stated concern of preemption of the patenting of laws of nature, natural phenomena, and abstract ideas.
Contextualizing Bring Your Own Device Policies By: Lindsey Blair
Bring Your Own Device (BYOD) policies allow employees to use their devices for workplace functions such as accessing company applications and information. These policies were rapidly adopted in the 2000s, yet time has exposed legal issues for both employers and employees. This Note explores the development of BYOD policies, the risks and benefits for both employers and employees, and advocates for written policy as the primary method to successfully implement a BYOD system. Case law reveals that the three largest issues surrounding BYOD are e-discovery, privacy rights, and compensation: all of which can be mitigated or avoided by a strongly written policy. The Note concludes by providing recommendations for a written policy that outlines both employer and employee responsibilities in the management of personal devices.