A Rent Extraction Theory of Right of First Refusal

When a seller gives a buyer a right of first refusal, although it reduces the competing buyers' profits and creates an inefficiency, it always increases the joint profit of the seller and the right holder. Right of first refusal with a consideration (e.g., a payment from the right holder to the seller) allows the seller and the right holder to extract more surplus from the competing buyersRight of first refusal, bargaining, auctions

Optimal Successor Liability

In case of a merger or an acquisition, a tort liability that arises from the seller's conduct is often imposed on the buyer through the doctrine of successor liability. If the buyer has as much information about the potential liability as the seller, the first best is achieved: all gains from acquisition are realized and the seller takes the efficient amount of precaution. However, when the seller has more information about the potential liability than the buyer, there could be too little acquisition, too little incentive on the seller, or both. The court can increase the successor liability to improve welfare. We show that imposing a higher damages against the surviving seller is better than increasing the liability against the buyerSuccessor Liability, Tort, Products Liability

Contractarian Theory and Unilateral Bylaw Amendments

Corporate directors have been utilizing a potent mechanism in dealing with shareholder activism and shareholder litigation: the right to unilaterally amend corporate bylaws. Directors have exercised this right, for instance, to impose various requirements on who can nominate a director or call a special shareholder meeting, or to designate an exclusive forum where the shareholders can bring suit. Based on the theory that corporate charters and bylaws constitute a "contract" between the shareholders and the corporation, courts have blessed many of the bylaws that directors have unilaterally adopted. This Article examines the contractarian theory by drawing a parallel between amending charters and bylaws on the one hand and amending contracts on the other; and by comparing the right to unilaterally amend corporate bylaws with the right to unilaterally modify contracts. The Article shows how contract law imposes various limitations on the modifying party's discretion. The Article also compares the standard contractual relationship with that of the shareholders and the corporation more generally and uncovers several important differences that could make shareholders (particularly, minority shareholders) more vulnerable to counterparty (directors' and controlling shareholder's) opportunism. For example, unlike contracting parties who have the right to terminate the contractual relationship or opt out of undesirable modifications, shareholders lack the right of termination or opt-out. As a possible solution, the Article considers various mechanisms, including giving the shareholders the right of optional redemption, more robust disclosure, the right to vote (including the right to elect or replace directors), and subjecting bylaw amendments to more active judicial oversight

NDLS Communicator: Week of 02.17.20

The Latest News Judy Fox interviewed in Wallet Hub Ed Edmonds quoted in The Score ND Law students launch Journal on Emerging Technologies ND Law wins Saul Lefkowitz Moot Court Regional Competition in Chicago State of the Law School--Dean Cole addressed the student body on February 5 Faculty News Marcus Cole, along with Rick Garnett and Jeff Pojanowski, participated in a discussion on Feb. 14 at St. John\u27s University School of Law about Catholic legal education. Emily Bremer presented at and helped organize the 50th Annual Administrative Law Symposium on Feb. 14 at Duke Law. This Week\u27s Events Tuesday, February 18: Faculty Colloquium, Albert Choi, University of Michigan General Counsel of Summa Health System, Rob Gerberry Statutory Federalism and Criminal Law with Marah McLeod and Josh Divine, Deputy Council to U.S. Senator Josh Hawley Wednesday, February 19: IP Lecture Series: Melinda Henneberger Associate General Counsel at Verizon, Laura Stolpman CASA Information Session Thursday, February 20: Author Dean Reuter, The Hidden Nazi: The Untold Story of America\u27s Deal with the Devil New Norms or the New Normal? A Perspective from Former White House Counsel Neil Eggleston Professor Series: Bruce Huber Friday, February 21: 2020 Journal of International and Comparative Law Symposium IP Lecture Series: Bruce Boyden, Marquette University Law School 70th Annual Moot Court Showcase Oral Argument Around the Watercooler Welcome baby Kozel! Congratulations to Randy and Abi Kozel on the birth of their daughter, Elizabeth Rae Kozel, born on February 8. HGTV\u27s Hot Properties ND Law connection: Chris O\u27Byrne\u27s brother Seth\u27s HGTV show Hot Properties: San Diego is back on TV

NDLS Communicator: Week of 02.17.20

The Latest News Judy Fox interviewed in Wallet Hub Ed Edmonds quoted in The Score ND Law students launch Journal on Emerging Technologies ND Law wins Saul Lefkowitz Moot Court Regional Competition in Chicago State of the Law School--Dean Cole addressed the student body on February 5 Faculty News Marcus Cole, along with Rick Garnett and Jeff Pojanowski, participated in a discussion on Feb. 14 at St. John\u27s University School of Law about Catholic legal education. Emily Bremer presented at and helped organize the 50th Annual Administrative Law Symposium on Feb. 14 at Duke Law. This Week\u27s Events Tuesday, February 18: Faculty Colloquium, Albert Choi, University of Michigan General Counsel of Summa Health System, Rob Gerberry Statutory Federalism and Criminal Law with Marah McLeod and Josh Divine, Deputy Council to U.S. Senator Josh Hawley Wednesday, February 19: IP Lecture Series: Melinda Henneberger Associate General Counsel at Verizon, Laura Stolpman CASA Information Session Thursday, February 20: Author Dean Reuter, The Hidden Nazi: The Untold Story of America\u27s Deal with the Devil New Norms or the New Normal? A Perspective from Former White House Counsel Neil Eggleston Professor Series: Bruce Huber Friday, February 21: 2020 Journal of International and Comparative Law Symposium IP Lecture Series: Bruce Boyden, Marquette University Law School 70th Annual Moot Court Showcase Oral Argument Around the Watercooler Welcome baby Kozel! Congratulations to Randy and Abi Kozel on the birth of their daughter, Elizabeth Rae Kozel, born on February 8. HGTV\u27s Hot Properties ND Law connection: Chris O\u27Byrne\u27s brother Seth\u27s HGTV show Hot Properties: San Diego is back on TV

Law Firm Selection and the Value of Transactional Lawyering

Following the contraction in demand for law firms’ services during the Great Recession, “Big Law” was widely diagnosed as suffering from several maladies that would spell its ultimate demise, including excessive fees, excessive size, increased competition from in-house counsel, the commoditization of legal work, and the decline in demand for “relationship firms.” While each of these market pressures is only too real for certain segments of the law-firm population, their threat to the most elite U.S. law firms has been largely misunderstood. Even as many firms reduce their fees and contract in size, we should expect certain firms to continue to charge more and grow bigger. The current prescriptions for fixing Big Law fail to recognize that the top-tier firms within the group serve a unique market function. Focusing on a particular type of legal work – major corporate transactions – this Article proposes a novel theory of the value created by elite law firms: their private information about “market” deal terms, acquired through repeated exposure to the same types of transactions, provides clients with a significant bargaining advantage in deal negotiations. By aggregating expertise in the ever-changing and ever-increasing set of deal terms for certain transactions, law firms help their clients price such terms more accurately and thereby maximize their surplus from the deal. This pricing function – traditionally thought to be limited to investment banks – is one that cannot be replicated or subsumed by in-house counsel, other service providers, or commoditized contracts

Market Information and the Elite law Firm

As a subcategory of contract negotiations, corporate transactions present information problems that have not been fully analyzed. In particular, the literature does not address the possibility that parties may simply be unaware of value-increasing transaction terms or their outside option. Such unawareness can arise even for transactions that attract many competing parties, if the bargaining process is such that (1) the price terms are negotiated and fixed prior to the non-price terms, contrary to the standard assumption; and (2) some of the non-price terms remain private for some period of time. A simple bargaining model shows that, when such unawareness is reasonably probable, each transaction party will maximize its expected payoff by acquiring current market information about non-price transaction terms. Because they have unique access to it, law firms with a significant share of transactional advisory work play an important role in aggregating and selling such market information. The implication is that, absent shocks to transactional practice, the volume advantage of high-market-share law firms should be self-perpetuating. This result is consistent with the observation that the legal advisory market for major corporate transactions is highly concentrated, and that the top firms earn substantial and persistent rents