Contract Renegotiation, Mechanism Design, and the Liquidated Damages Rule

The common law practice of refusing to enforce contractual penalties has long mystified law and economics scholars. After critiquing the prevailing law and economics analyses of the common law rule, Eric L. Talley reevaluates the penalty doctrine using the game theoretic technique of mechanism design, which facilitates the analysis of multiparty bargaining situations under various assumptions. Using this technique to model the allocational consequences of various enforcement regimes that courts might adopt with respect to stipulated damages clauses, Mr. Talley finds that penalty nonenforcement can increase economic efficiency by discouraging strategic behavior by the parties, thereby inducing more efficient contract renegotiation

Triumphs of Commission

Willis L.M. Reese Prize commencement address to the Columbia Law School class of 2017

The Berkeley Transactional Practice Project Competencies/Skills Survey

This set of slides, presented by UC Berkeley Professor Eric Talley to the California State Bar Task Force on Admissions Regulation Reform, summarizes the findings of a survey of transaction-focused attorneys and faculty regarding necessary skills and competencies. The survey documents several areas that are highly valued by transaction-oriented attorneys, but which tend not to be the focus of many proposed competencies-based reforms that focus more exclusively on litigation oriented areas

The analysis of eclipsing binary systems

Thesis (M.A.)--University of Kansas, Physics and Astronomy, 1956

Cataclysmic Liability Risk Among Big Four Auditors

Since Arthur Andersen\u27s implosion in 2002, policymakers have been encouraged with ever increasing urgency to insulate the auditing industry from legal liability. Advocates of such insulation cite many arguments, but the gravamen of their case is that the profession faces such significant risk of cataclysmic liability that its long term viability is imperiled. In this Essay, I explore the nature of these claims as a legal, theoretical, and empirical matter. Legally, it is clear that authority exists (within both state and federal law) to impose liability on auditing firms for financial fraud, and courts have been doing so sporadically for years. Theoretically, it is certainly conceivable that, under certain conditions, cataclysmic liability risk could lead to widespread industry breakdown, excessive centralization, and the absence of third-party insurance. Whether such conditions exist empirically, however, is a somewhat more opaque question. On one hand, the pattern of liability exposure during the last decade does not appear to be the type that would, at least on first blush, imperil the entire profession. On the other hand, if one predicts historical liability exposure patterns into the future, the risk of another firm exiting due to liability concerns appears to be more than trivial. Whether this risk is large enough to justify liability limitations or other significant legal reforms, however, turns on a number of factors that have thus far gone unexamined by either advocates or opponents, including the presence of market mechanisms of deterrence, the effectiveness of current regulation, the likely welfare effects of further contraction of the industry, and the likelihood of new entry after a contraction

Corporate Inversions and the Unbundling of Regulatory Competition

Several prominent public corporations have recently embraced a noteworthy (and newsworthy) type of transaction known as a tax inversion. In a typical inversion, a U.S. multinational corporation ( MNC ) merges with a foreign company. The entity that ultimately emerges from this transactional cocoon is invariably incorporated abroad, yet typically remains listed in U.S. securities markets under the erstwhile domestic issuer\u27s name. When structured to satisfy applicable tax requirements, corporate inversions permit domestic MNCs eventually to replace U.S. with foreign tax treatment of their extraterritorial earnings – ostensibly at far lower effective rates. Most regulators and politicians have reacted to the inversion invasion with alarm and indignation, no doubt fearing the trend is but a harbinger of an immense offshore exodus by U.S. multinationals. This reaction, in turn, has catalyzed myriad calls for tax reform from a variety of quarters, ranging from the targeted tightening of tax eligibility criteria, to moving the United States to a territorial tax system, to declaring (yet another) tax holiday for corporate repatriations, to reducing significantly (if not entirely) American corporate tax rates. Like many debates in tax policy, there remains little consensus about what to do (or whether to do anything at all). This Article analyzes the current inversion wave (and reactions to it) from both practical and theoretical perspectives. From a practical vantage point, I will argue that while the inversion invasion is certainly a cause for concern, aspiring inverters already face several constraints that may decelerate the trend naturally, without significant regulatory intervention. For example, inversions are but one of several alternative tax avoidance strategies available to MNCs – strategies whose relative merits differ widely by firm and by industry. Inversions, moreover, are invariably dilutive and usually taxable to the inverter\u27s U.S. shareholders, auguring potential resistance to the deals. They virtually require strategic (as opposed to financial) mergers between comparably sized companies, making for increasingly slim pickings when searching for a dancing partner, and a danger of overpaying simply to meet the comparable size requirements. They involve regulatory risk from competition authorities, foreign-direct-investment boards and takeover panels (not to mention from tax regulators themselves). They frequently provide only partial relief from extraterritorial application of U.S. taxes, especially for well-established U.S. multinationals. And finally, tax inversions can introduce material downstream legal risk, since they move the locus of corporate internal affairs out of conventional jurisprudential terrain and into the domain of a foreign jurisdiction whose law is – by comparison – recondite and unfamiliar

Understanding the Management Factors that Contribute to Successful Electronic Tolling Systems

As states awaken to the realization that large, expensive surface transportation projects can no longer be undertaken given the constraints of current funding mechanisms, policy makers are beginning to rely more heavily on tolling as an alternate means of funding desperately needed infrastructure projects. Tolling technology has evolved considerably from the traditional cash collection that was prevalent fifty years ago to all electronic, high speed, open road tolling that allows vehicles to maintain highway speeds as they traverse tolling points. This relatively new technology has substantial benefits, but has inherent risks that left unaddressed could result in failure to collect toll revenues in a fair, efficient, effective manner. For states moving toward tolling as a means of project funding, the ability of toll authorities to collect tolls accurately and efficiently is paramount. If toll authorities implementing electronic tolling fail to operate to their fullest potential, states risk not being able to fully satisfy the debt service requirements of bond holders that provide the capital needed to move forward with infrastructure construction. This endangers the ability of the state to finance future road and bridge projects. As toll authorities implement all electronic tolling (AET) systems, they may look to other states for guidance where such technology has been successfully utilized in the past. However, this is an incomplete analysis. Different toll authorities experience unique circumstances and challenges that limit the ability to apply lessons learned by examining one authority to operations of another authority. This paper systematically examines nine tolling authorities over a ten year period using statistical analysis to identify factors under management control that are consistently associated with successful tolling. The findings indicate that there are two important actions that managers can take to contribute to the success of electronic tolling. The first is to set the toll rate sufficiently high such that it is “worthwhile” for the authority to collect a toll. Toll rates that are too low, while potentially attractive to motorists, reduce the efficiency of the authority in collecting revenues. Secondly, large toll authorities should take steps to increase the number of vehicles that pay tolls through electronic means and minimize those that pay through cash or video invoicing. Small toll authorities should pool their operations with other authorities in order to make investments in electronic tolling cost effective. While the analysis is subject to some limitations, it provides additional guidance and comfort to toll authority managers initiating new toll systems. When combined with case study analysis, managers should be able to use this paper to inform decisions about how to structure their tolling systems to ensure efficiency is optimized and the likelihood of collecting revenues sufficient to repay financial obligations is maximized

\u3ci\u3eLeft, Right, and Center\u3c/i\u3e: Strategic Information Acquisition and Diversity in Judicial Panels

This paper develops and analyzes a hierarchical model of judicial review in multimember appellate courts. In our model, judicial panels acquire information endogenously, through the efforts of individual panelists, acting strategically. The resulting equilibria strongly resemble the empirical phenomena collectively known as panel effects – and in particular the observed regularity with which ideological diversity on a panel predicts greater moderation in voting behavior (even after controlling for the median voter\u27s preferences). In our model, non-pivotal panel members with ideologies far from the median have the greatest incentive to acquire additional policy-relevant information where no one on a unified panel would be willing to do so. The resulting information structure pushes deliberation and observed voting patterns towards apparent moderation. We illustrate the plausibility of our model by calibrating it to empirical data, and explore various normative implications of our theory