The Business Lawyer as Terrorist Transaction Cost Engineer

Lawyers have garnered a reputation for being unreasonable and excessively contentious. This popular sentiment is embedded in our culture. If lawyers cannot change that perception, a second-best outcome (from the perspective of lawyers) would be the formation of an understanding that there is a reason why they appear to act unreasonably, that it can be desirable for lawyers to act in a way that initially appears to be unreasonable. This Article attempts to build a basis for that understanding in the context of lawyers participating in large commercial transactions

An Economic Analysis of the Potential for Coercion in Consent Solicitations for Bonds

This Article examines why issuers frequently cannot present bondholders with an offer that draws on collective action problems to force the acceptance of the offer by the bondholders. The analysis is restricted to publicly offered bonds. For a number of reasons, privately placed debt presents fewer opportunities for coercion. A prior business relationship among various purchasers, which facilitates cooperation, may be more likely with respect to privately placed debt. Privately placed debt often has more significant protection for the bondholders than public debt with the same level of seniorit

Platelet-collagen adhesion: evidence for participation of antigenically distinct entities.

Univalent antibody fragments prepared from a rabbit antiserum raised against whole human platelets completely inhibited adhesion of platelets to immobilized trimeric collagen in a defined, Mg2+-dependent, adhesion assay. An octylglucoside extract of whole platelets completely neutralized this antibody, and all neutralizing activity bound to immobilized wheat germ agglutinin. Further fractionation on concanavalin A gave rise to subfractions that each neutralized only partially at saturation, when tested against antibody concentrations that inhibit 50% of platelet-collagen adhesion. When tested against higher antibody concentrations that completely inhibited adhesion, each subfraction had no detectable neutralizing effect, although the combined subfractions neutralized completely. This and other evidence suggests that more than one platelet entity participates in platelet-collagen adhesion. Although distinct, they appear to play interdependent roles in a single adhesion process

Localization of an endogenous lectin in chicken liver, intestine, and pancreas.

Extracts of adult chicken liver, pancreas, and intestine contain high levels of a lectin which appears to be identical to one previously purified from embryonic chick muscle. This lectin is virtually absent from adult muscle, but is highly concentrated in cells lining liver sinusoids, intestinal goblet cells, and the extracellular spaces surrounding pancreatic acini. These findings suggest that the lectin may play different roles in different tissues and at different times in the life of a chicken

Endogenous mammalian lectin localized extracellularly in lung elastic fibers.

An affinity-purified antibody preparation raised against a beta-galactoside-binding lectin from bovine lung was used to localize a similar lectin in rat lung by immunofluorescence and by electron microscopy after on-grid staining visualized with colloidal gold conjugated second antibody. The endogenous mammalian lectin was found in smooth muscle cells and squamous alveolar epithelial (type I) cells and was concentrated extracellularly in elastic fibers of pulmonary parenchyma and blood vessels. The extracellular localization of this lectin suggests that it, like others, functions by interaction with extracellular glycoconjugates

Exxon Valdez: Human Error, Plain and Simple

Much has been made of the Exxon Valdez going aground on Bligh Reef in Prince William Sound in 1989 — and rightfully so. The effects of the disaster continue to this day. Why the Exxon Valdez went aground is straightforward, although not widely well understood. As can be expected, various interests seized upon the catastrophe to support their causes or improve their lots. Whereas it is now clear that the ship went aground purely as a consequence of human errors — there were no mechanical or electrical failures — the event has been used to justify changes that, while desirable, would not have prevented the Exxon Valdez from going aground, or the subsequent oil spill. Those changes include, inter alia, a variety of improved navigational aids, expanded Coast Guard monitoring capabilities, increased requirements for harbor pilots and required crew rest. In looking back, one might be led to believe that the ship went aground in a sea of red herrings. This article reviews what really happened on that night and incontrovertible evidence that supports human errors — onboard the Exxon Valdez and thousands of miles away at the Exxon Shipping Company — in a failed safety culture as solely responsible for the disaster

Services as Capital Contributions: Understanding Kovacik v. Reed

This essay examines the capital accounting of Kovacik v. Reed, leading authority addressing allocation of losses between a partner who contributed only property and another who contributed only services. Kovacik posits that such parties having agreed to share profits equally have implicitly agreed their contributions were of equal value. This essay shows that such an agreement would not produce the result Kovacik reaches. The Kovacik result is instead produced by the following implausible implicit agreement between the parties: The value of the services provided by the services partner to be treated as a capital contribution equals the amount the partnership loses on a cash basis. The more the firm ultimately loses, the more those services are agreed to be worth. Prior work by Bainbridge identifies a manifestation in this context of a problem referenced as overinvestment in the financial economics literature. This essay further demonstrates the Kovacik result can create a complementary underinvestment problem

Fiduciary Duties in Distressed Corporations: Second Generation Issues

This paper examines variations in corporate fiduciary duties arising from financial distress. This paper argues whether there is an affirmatively enforceable duty under the principles of Credit Lyonnais is not moot, because, inter alia, the availability of aiding and abetting liability for breach of fiduciary duty will give rise to a greater set of potentially liable defendants (aiding and abetting a fraudulent transfer typically not separately giving rise to liability), allowing a court to reverse some outcomes that would otherwise obtain under the in pari delicto doctrine and the Wagoner rule, and will expand the remedies available. This paper argues application of the business judgment rule to directors\u27 operation of a distressed firm should be, if anything, stronger than the corresponding provision applied to a solvent firm. The rationale is that a contrary right would create an anomalous option for creditors having expressly negotiated approval rights - one that would be difficult to value and that would create greater costs of investigation in order to avoid being a winner in a contest presenting a winner\u27s curse. This paper also examines the interplay of distress with approval of conflict of interest and final period transactions. It concludes that during distress short of insolvency, fiduciary duties to maximize firm value on a sale should continue to be owed to stockholders, and that approval of conflict-of-interest transactions by disinterested stockholders should continue to shift the burden of proof as to transaction fairness. Lastly, this paper argues for an increase in the duty of candor, following Malone v. Brincat, during distress appertaining to communications to creditors. Financial creditors will consider information a debtor provides in deciding whether to exercise contractually negotiated control rights. Creditors should be entitled to rely on truthfulness even if the debtor is unaware of a particular action the creditor may take in reliance. As proposed, a creditor would not need to prove a distressed debtor made a statement for purposes of influencing the creditor\u27s conduct because financial creditors may be presumed to be deciding whether to exercise remedies on an ongoing basis. Other elements of a cause of action, e.g., whether a defendant failed to exercise the appropriate care in assuring the accuracy of the statement, would remain unchanged. This paper was presented on November 4, 2005, at the conference Twilight in the Zone of Insolvency: Fiduciary Duty and Creditors of Troubled Companies hosted by the University of Maryland School of Law