Vanderbilt University Law School: Scholarship@Vanderbilt Law

    Stock in a Closely Held Corporation:Is It a Security for Uniform Commercial Code Purposes?

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    The term security has many applications. No application, however,is more important than when an interest owned or traded is determined to be within the legal definition of security. Security is defined by statutes and applied by many courts for the purposes of federal securities laws and for state blue sky laws. When interpreting the term security for federal securities laws, courts have emphasized the underlying congressional purpose of protecting investors. State courts also have interpreted the term liberally in an effort to protect the public under blue sky laws.\u27 The definition of security in the Uniform Commercial Code(U.C.C.), however, has no such purpose. The U.C.C. chapter on securities is intended to establish a system of rules for those entities or persons dealing in securities. As a result, the definition of security is one of function, rather than formality. This definition is the foundation to approaching a multitude of U.C.C. issues, including transfers of security interests.\u27 While the definition of security appears to be simple and straightforward, applying the definition to stock in a closely held corporation (close corporation) has caused problems for a significant number of courts. Divergent results have created an anomalous situation among the jurisdictions having the same statutory language. A uniform definition of a close corporation does not exist. In some cases, the term is used to distinguish corporations with only a few shareholders from publicly held corporations. In other cases, close corporations are defined as those corporations whose shares are not traded regularly on a recognized securities market. Another frequently used definition provides that a close corporation is one in which the stock is held in a few hands, or by a few families, and wherein it is not at all, or only rarely, dealt in by buying or selling. Many other definitions also exist. Consequently, the emergence of a uniform definition of a close corporation is improbable

    Other Disciplines, Methodologies, and Countries: Studying Courts and Crisis

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    How do governments and their citizens respond to fear and risk in times of crisis? Dr. Lee Epstein and Professor Christina Wells, in papers presented on the final symposium panel focus in particular on the Supreme Court\u27s response to government encroachment on individual liberties during a national emergency. Their work is made particularly timely by three Supreme Court decisions this past term. In this essay, I begin by framing the issue very briefly. I then argue that understanding this issue requires scholars to follow Epstein and Wells by looking to other disciplines, methodologies, and countries

    Male-Female Differences in Hourly Wages: The Role of Human Capital, Working Conditions, and Housework

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    This study uses a new data set from a 1986 survey of workers to examine simultaneously the wage effects of human capital, household responsibilities, working conditions, and on-the-job training. The analysis suggests that household responsibilities had a negative effect on women\u27s earnings, but the unexplained difference between the earnings of men and women is not greatly reduced by inclusion in the explanatory model of information on either housework or working conditions. The presence of children appears to have had a positive effect on the wages of both men and women

    The Myth of the Generalist Judge

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    Conventional judicial wisdom assumes and indeed celebrates the ideal of the generalist judge, but do judges really believe in it? This Article empirically tests this question by examining opinion assignments in the federal courts of appeals from 1995-2005. It reveals that opinion specialization is a regular part of circuit court practice, and that a significant number of judges specialize in specific subject areas. The Article then assesses the desirability of opinion specialization. Far from being a mere loophole, opinion specialization turns out to be an important development in judicial practice that promises to increase judicial expertise without incurring many of the costs commonly associated with specialized courts

    Insider Information and the Limits of Insider Trading

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    This essay offers brief observations on the internal coherence of the rationales underlying the prohibition against insider trading, taking the opportunity offered by Newman and Salman to reflect on its central policy aims. I do not discuss these cases specifically, or what a resolution by the Supreme Court might mean for the future of insider trading. Scholars and commentators have thoughtfully critiqued Newman alongside the doctrinal whiplash that has followed in its wake. Rather, I take this opportunity to look under the hood of securities trading to examine information flows within the mechanisms by which securities are bought and sold. I argue that the design of modem markets-and the allocation of informational access it institutionalizes-entrenches the place of a cohort of actors that systematically enjoy first sight of information coming from exchanges and the ability to react to and change prices before others on the outside can get a look. I have termed this select group of traders structural insiders

    A Former Treasury Adviser On How to Really Fix Wall Street

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    Any serious program for Wall Street reform should start with two words: “term out.” “Terming out” is a financial term of art, but its meaning is easily grasped. It simply means funding your business with long-term financing instead of short-term IOUs. To a far greater extent than is commonly understood, our financial sector funds its operations with extremely short-term borrowings. These IOUs must be paid back in a day, a week, or a month. By contrast, termed-out financial firms shun borrowings that come due in less than a year. A terming-out requirement would be costly for Wall Street, but the reward would be a safer and more resilient financial system. That’s a trade we should be willing to make

    A Simpler Approach to Financial Reform

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    There is a growing consensus that new financial reform legislation may be in order. The Dodd-Frank Act of 2010, while well-intended, is now widely viewed to be at best insufficient, at worst a costly misfire. Members of Congress are considering new and different measures. Some have proposed substantially higher capital requirements for the largest financial firms; others favor an updated version of the old Glass-Steagall regime. This paper offers up a simpler approach, one that centers around the financial sector’s short-term funding. The simpler approach would be compatible with other financial stability reforms, but it is better understood as a substitute for Dodd-Frank and other measures

    Economic Structure and Constitutional Structure

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    In the last four decades, the American middle class has been hollowed out, and fears are growing that economic inequality is leading to political inequality. These trends raise a troubling question: Can our constitutional system survive the collapse of the middle class? This question might seem tangential-if not unrelated-to contemporary constitutional theory. But for most of the history ofpolitical thought, one of the central problems of constitutional design was the relationship between the distribution of wealth in society and the structure of government. Two traditions emerged from thinking about this relationship. The first tradition assumed that society would be divided into rich and poor, and it designed class-warfare constitutions that incorporated economic classes directly into the structure of government. The second tradition was based on the assumption that society was relatively equal economically; as a result, it was not necessary to incorporate economic class into these middle-class constitutions. This Essay identifies these two traditions and traces their intellectual history from Aristotle through the eighteenth century. It then shows that the intellectual tradition of the middle-class constitution was alive and flourishing during the time of the American founding-suggesting that the collapse of the American middle class today has consequences of constitutional significance

    Schechter Poultry at the Millennium: A Delegation Doctrine for the Administrative State

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    The new delegation doctrine might seem perplexing to both sides of the current delegation debate. Either it is too intrusive on administrative prerogatives or it is not nearly intrusive enough. The new delegation doctrine is difficult to comprehend only because it evinces a different focus. While the debate concentrates primarily on the legitimacy of lawmaking by administrative agencies, the new doctrine speaks more to the goal of promoting the legitimacy of law made by administrative agencies. It might even be fair to say that, in this regard, the new doctrine moves beyond the academic debate. Moreover, the new doctrine neither abandons democracy nor interferes with it in an arbitrary fashion. It attempts to reinforce a certain conception of democracy in precisely those cases that suggest a classic democracy problem. And it does so at the administrative level, preserving the significant advantages of agency policymaking. Thus, it offers a mechanism that mediates between the extremes of the delegation debate and that fits comfortably within the administrative state. The new delegation doctrine also recognizes and remedies the inherent limitation of interpretive norms as an alternative tool for constraining broad delegations

    Risky Business? The Trump Administration and the State-Licensed Marijuana Industry

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    While it is clear that the new attorney general opposes state marijuana reforms, it is less clear what he will or even could do to block those reforms or to curb the industry that has flourished under them. The popularity of reforms, limits on federal resources, and legal doctrines like the anticommandeering rule all limit the DOJ’s ability to shut down the state-licensed marijuana industry. While Jeff Sessions may never embrace reforms, he may choose to pursue other tactics, like anti-marijuana media campaigns, to curb the use of marijuana and the harms caused thereby. Only time will tell, of course, but if history is any guide, the state marijuana industry will survive the Trump administration intact
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