352 research outputs found
Reorganization Realities, Methodological Realities, and the Paradigm Dominance Game
The comments I present here pertain to two subjects. The first is the Warren and Westbrook attack on arm chair theorists\u27 and the response of the Conferees to this attack. The second is the problem of sample selection and its relationship to regularized data gathering
Virtual Judgment Proofing: A Rejoinder
This is a rejoinder by the author of The Death of Liability, 106 Yale L.J. 1 (1996). The rejoinder is to a reply by Professor James J. White to the original article. Corporate Judgment Proofing: A Response to Lynn LoPucki\u27s The Death of Liability, 107 Yale L.J. 1363 (1998). In response to specific points made by White, LoPucki argues that the judgment proofing of large companies would not be visible in Compustat data because it is not accomplished through secured debt or leasing and because Compustat data is aggregated by corporate group. Contracting parties will permit debtors to judgment proof themselves because by doing so the contracting parties and debtors can externalize liability and split the profits between them. LoPucki also responds to arguments that corporate veil piercing, fraudulent conveyance law, government and consumer reaction, and mandatory insurance will prevent judgment proofing by large companies. The rejoinder concludes that computerization will lead to the proliferation of virtual companies that are born judgment proof
Algorithmic Entities
In a 2014 article, Professor Shawn Bayern demonstrated that anyone can confer legal personhood on an autonomous computer algorithm by putting it in control of a limited liability company. Bayern’s demonstration coincided with the development of “autonomous” online businesses that operate independently of their human owners—accepting payments in online currencies and contracting with human agents to perform the off-line aspects of their businesses. About the same time, leading technologists Elon Musk, Bill Gates, and Stephen Hawking said that they regard human-level artificial intelligence as an existential threat to the human race. This Article argues that algorithmic entities—legal entities that have no human controllers—greatly exacerbate the threat of artificial intelligence. Algorithmic entities are likely to prosper first and most in criminal, terrorist, and other anti-social activities because that is where they have their greatest comparative advantage over human-controlled entities. Control of legal entities will contribute to the threat algorithms pose by providing them with identities. Those identities will enable them to conceal their algorithmic natures while they participate in commerce, accumulate wealth, and carry out anti-social activities. Four aspects of corporate law make the human race vulnerable to the threat of algorithmic entities. First, algorithms can lawfully have exclusive control of not just American LLC’s but also a large majority of the entity forms in most countries. Second, entities can change regulatory regimes quickly and easily through migration. Third, governments— particularly in the United States—lack the ability to determine who controls the entities they charter and so cannot determine which have non-human controllers. Lastly, corporate charter competition, combined with ease of entity migration, makes it virtually impossible for any government to regulate algorithmic control of entities
Court-System Transparency
This article applies systems analysis to two ends. First, it identifies simple changes that would make the court system transparent. Second, it projects transparency\u27s consequences. Transparency means that both the patterns across, and details of, case files are revealed to policymakers, litigants, and the public in easily understood forms. Government must make two changes to achieve court system transparency. The first is to remove the existing restrictions on the electronic release of court documents, including the requirements for registration, separate requests for each document, and monetary payment. The second - already being implemented in the federal courts - is to require the use of data-enabled forms. Once these changes are in place, institutions and private parties will process the available data at the parties\u27 own expense. That processing will generate millions of real-time views of court system operation using automatically-updated regression analyses and both textual and graphical data displays. The effect would be a renaissance. Corruption, incompetence, inefficiency, prejudice and favoritism would be exposed and wither. Litigation would be cheap and easy because parties could see all court files in the system and copy the work of others. Policy makers could see the human consequences of the laws they enact and adjust accordingly. Lawyers could predict the outcomes of their cases, making litigation less necessary. Citizens would for the first time be able to derive and see the real rules by which they are governed. Transparency would have a minimal effect on privacy. The data processed are already public record and adequate privacy protections are already provided through sealing orders and redaction requirements. Transparency would generate pressures on judges and court administrators, but the effects of those pressures would be generally positive. Limitations on the public enforcement of private arbitration awards might be necessary to prevent parties from opting out of the transparent system
The Myth of the Residual Owner: An Empirical Study
Most bankruptcy scholars who have considered the residual owner approach have come away with a healthy skepticism. But despite its theoretical difficulties, the residual owner approach persists. I attribute this persistence to an empirical assumption that usually remains implicit. In spite of the theoretical difficulties in identifying the single residual owners of bankrupt firms, the scholars who employ residual owner approaches believe that in reality, residual owners exist and can be easily identified inmost cases. Parties may bluster about the uncertainty of firm value and other parties may be compelled to compromise with them in order to avoid an expensive, burdensome valuation process. But at bottom, those scholars assume that the parties all know who is in the money, who is out of it, and who—the residual owner—is in between.
This Article reports the results of an empirical study designed to test that implicit assumption. The study concludes that no identifiable, single residual owner class exists in most reorganizing large public companies. Even by the end of the case, the parties have not been able to identify such a class. Part I describes the theoretical debate over the existence and utility of single residual owner classes in big bankruptcy cases. Part II presents the empirical study, beginning with a description of the universe of cases studied, the sources of the data, and the limitations of those sources. Subpart A reports and discusses the study’s findings with respect to the numbers of investors having different levels of priority in the reorganizing firm. The typical reorganizing firm has about four investor priority levels that are subordinate to secured and bankruptcy priority creditors. The existence of so many investor priority levels makes it likely that investors at more than one level will share residual owner status. Subpart B reports and discusses the study’s findings with respect to the numbers of residual owners actually identified by the reorganization process. The principal finding is that in 62% of the firms studied, the reorganization plan recognized that investors at more than one priority level shared residual owner status in a manner that left them with a substantial conflict with respect to investment policy. (That figure is a demonstrated minimum level of sharing; the actual level may be much higher.) Part III concludes that theories depending upon the existence of a single residual owner are unworkable. The problem is not merely that single residual owners are difficult to identify. The problem is that they rarely exist
Legal Culture, Legal Strategy, and the Law in Lawyers\u27 Heads
Legal activity invariably takes place within some structure, however lax. No matter how often the impossibility of such structure is announced by academics, murmurs of disbelief are heard in the trenches below. Legal formalism is the effort to make sense of the lawyer\u27s perception of an intelligible order. This is why in the last two centuries formalism has been killed again and again, but has always refused to stay dead. Weinrib claims to find the structure that explains Formalism\u27s refusal to stay dead in natural law. This Article argues for an entirely different explanation. Law exists in the minds of lawyers in a form separate and critically different from its form on the books. The law in lawyers\u27 heads is largely formalistic and the process by which it is applied is largely deductive. The Formalists are correctly reporting on their own experience. The Realists, who consider only the written law, are at least largely correct in their conclusion that it is overwhelmingly indeterminate. The problem is that neither the Formalists nor the Realists have yet recognized the existence and importance of the separate realm of law in lawyers\u27 heads and its power to drive legal outcomes. Part I of this Article begins by presenting evidence of persistent, systematic differences in legal outcomes between communities governed by the same written law. It then explains how mental models shared within legal communities could produce those differences. Part II argues that the determinate nature of shared mental models renders them vulnerable to manipulation through legal strategy. It explores that vulnerability and the models\u27 defenses to it. Part III then presents two partial theories about how law evolves. The first holds that lawyers are socially constrained in the number of challenges they can make to the shared mental model; how they exercise their limited challenges determines the direction of change. The second holds change to emanate from a dialectic in which legal strategy first achieves results thought unattainable. That leads to a new set of expectations and, finally, to the collapse of the old rules into a new set of rules that explain the new expectations directly. Part IV first explores the explanatory implications of the law in lawyers\u27 heads. Law is psychological phenomena; systematic differences in legal outcomes from community to community are not only possible but inevitable; and any attempt to alter the situation will render legal communities less efficient. Part IV then turns to the normative implications. It argues that strategic analysis has important advantages over economic analysis as a means of understanding law; that the legal system should strive for a level of simplicity at which it is understandable by the governed; and that lawyers and judges should attempt to write the unwritten law that governs their various communities. Part V summarizes the argument and conclusions
The Death of Liability
Based on systems/strategic analysis, this paper predicts the complete failure of legal liability system. Liability is the system by which injured persons recover money damages from those who injure them. The system operates through the entry and enforcement of judgments by the courts. The paper argues that the system is vulnerable to defeat by a variety of judgment proofing techniques which can be categorized as secured debt strategies, ownership strategies, exemption strategies, and foreign haven strategies. Computerization has recently brought about dramatic reductions in the costs of pursuing these strategies, making them cost effective for more potential defendants. As use spreads, the cultural and political barriers to judgment proofing will decline, leading to wider use of the techniques and ultimately to system failure. The paper examines a variety of strategies by which the system might respond, including shareholder unlimited liability, involuntary creditor priority, asset provider liability, enterprise liability, mandatory insurance, and financial responsibility laws. The paper concludes that judgment- proofing strategists will be able to overcome all of them
The Death of Liability
Based on systems/strategic analysis, this paper predicts the complete failure of legal liability system. Liability is the system by which injured persons recover money damages from those who injure them. The system operates through the entry and enforcement of judgments by the courts. The paper argues that the system is vulnerable to defeat by a variety of judgment proofing techniques which can be categorized as secured debt strategies, ownership strategies, exemption strategies, and foreign haven strategies. Computerization has recently brought about dramatic reductions in the costs of pursuing these strategies, making them cost effective for more potential defendants. As use spreads, the cultural and political barriers to judgment proofing will decline, leading to wider use of the techniques and ultimately to system failure. The paper examines a variety of strategies by which the system might respond, including shareholder unlimited liability, involuntary creditor priority, asset provider liability, enterprise liability, mandatory insurance, and financial responsibility laws. The paper concludes that judgment- proofing strategists will be able to overcome all of them
The Trouble with Chapter 11
The length of time companies remain in bankruptcy reorganization is critically important. During that time, the business is at risk because management incentives are inappropriate, professional fees accrue at a rapid rate, and business uncertainties increase. Creditors may be injured because the reorganizing debtor does not make payments during the case and because some creditors are not entitled to accrue interest during the pendency of the case. In this Article, Professor LoPucki presents data from several studies showing approximately a 150% increase from 1964 to 1987 in the median time companies spend in Chapter 11. Using data from other studies, he shows that the median time large, publicly held companies spend in Chapter 11 did not increase during that same period. He argues that the increase in the time ordinary companies remain in Chapter 11 resulted from the adoption in 1978 of a reorganization procedure appropriate only to the largest bankruptcy reorganization cases. He advocates a number of procedural changes to remedy the problem; the most important is the adoption of a separate procedure, applicable to the large majority of bankruptcy cases, that is more appropriate to their size. Professor LoPucki discusses current efforts to enact such a procedure and documents resistance to the effort by prominent members of the bankruptcy bar
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