Removing Revlon

This Article advocates the abolition of the Revlon doctrine— the junior partner in Delaware’s corporate takeover jurisprudence, which governs certain contests involving auctions and sales of control. Revlon arose in the twilight zone created by the overlap between defenses to hostile tender offers and efforts by directors to avoid or coerce a shareholder vote on corporate mergers and sales (shotgun corporate marriages). The narrow holding of the case stands for the common sense proposition that if directors decide to sell their corporation by choosing between two bids, both of which will pay all of the shareholders cash for all of their shares, the directors should pick the bid that pays the most cash. The problems arose when Delaware courts assumed that the case had something to say about situations in which the directors were not choosing between two all-cash all-shares bids. Specifically, it has been difficult sensibly to decide in which other cases Revlon has something relevant to say and to figure out what this something is. These problems in applying Revlon are not the typical results one must inevitably expect when courts apply any legal doctrine to the multitude of grey areas that determine a rule’s scope and impact. Instead, they reflect a more fundamental difficulty: The doctrine arising from Revlon has no sensible underlying policy rationale to guide courts in its application. This is not simply because courts and commentators have not articulated a sensible policy. Rather, this is because there is no sensible policy that one can articulate for Revlon beyond the narrow confines of the original decision

Determining Extraterritoriality

This Article addresses an underexplored but critical aspect of the presumption against extraterritoriality. The presumption against extraterritoriality-which the United States Supreme Court has increasingly invoked in recent years-calls for courts to presume that Congress does not intend U.S. statutes to govern events outside the United States. The most difficult issue presented by the presumption arises when relevant events occur both inside and outside the United States, as in the classic example, if a shooter on one side of the border kills a victim on the other, or if, as in the leading case, false statements originating inside the United States impact the price paid in purchasing stock outside the United States. How should a court decide whether such cases involve extraterritoriality and trigger the presumption? In a world in which both the performance and impact of regulated activities increasingly occur within more than one nation, the need for courts to resolve this sort of question is likely to arise with increasing frequency. In Morrison v. National Australia Bank Ltd., the United States Supreme Court established the Court\u27s test for resolving this question: determining extraterritoriality based upon the location of the event that constitutes the \u27\u27focus of the statute at issue. Yet, if the focus of the statute determines extraterritoriality, what is the test for determining the focus of the statute? The Court\u27s answer was to evaluate the language and purpose of the statute in order to see whether Congress intended it to reach the events in question when they take place outside the United States. The result is entirely circular because it required the Court to determine whether Congress intended the statute to reach the situation in order to invoke the presumption to determine whether Congress intended the statute to reach the situation. This Article argues that a better approach determines extraterritoriality in light of the purposes for the presumption against extraterritoriality: specifically whether applying the statute to the situation before the court will trigger international relations concerns. I explore the parameters and implications of this approach. This includes considering approaches to determine when applying U.S. law to situations involving events both inside and outside the United States triggers international relations concerns, and noting some of the unusual implications of this approach-for example, that international relations concerns may sometimes call for a presumption in favor of applying U.S. law to a situation involving events both inside and outside the United States

The Road Not Taken: A Comparison of the E.U. and U.S. Insider Trading Prohibitions

This article, by Professor Franklin A. Gevurtz of the University of the Pacific’s McGeorge School of Law, explores the divergent approaches between the United States and the European Union with respect to the reach of insider trading laws. Finding that the current scope of E.U. law on insider trading is substantially similar to pre-1980 U.S. Law, Gevurtz compares the outcomes of similar high-profile U.S. and E.U. insider trading cases to illustrate just how different the outcomes are and where the U.S. would be had the Supreme Court kept a broad view on the law’s reach. Gevurtz then contrasts the jurisdictional reach of U.S. and E.U. laws and highlights issues involved in jurisdictional overlap. Finally, Gevurtz compares the normative discussions around insider trading prohibitions on the topics of market effects, fairness, and where to draw the line on who should be subject to the law’s reach

The Historical and Political Origins of the Corporate Board of Directors

Prompted by the litany of complaints about corporate boards – as once again highlighted by recent corporate scandals – this paper seeks to add to the literature on why corporation laws in the United States (and, indeed, around the world) generally call for corporate governance by or under a board of directors. Moreover, this paper takes a very different approach in searching for an answer. Instead of theorizing, this paper examines historical sources in order to look at how and why an elected board of directors came to be the accepted mode of corporate governance. This will entail a reverse chronological tour all the way back to the antecedents of today’s corporate board in fourteenth through sixteenth century companies of English merchants engaged in foreign trade. The central insight of this chronology is that the corporate board of directors did not develop as an institution to manage the business corporation. Rather, it is an institution the business corporation inherited when the business corporation evolved out of societies of independent merchants. This paper also shows how these merchant societies based their adoption of the antecedents of today’s corporate board on widespread political theories and practices in medieval Europe that, although hardly democratic, often called for the use of collective governance by a body of representatives. The discovery of the historical and political origins of the corporate board, besides being interesting in its own right, suggests that the current frustration with corporate boards may arise from confusing an institution designed to achieve political legitimacy through consent of the governed, with the goal of assuring efficient management of a business on behalf of passive investors