A New Caremark Era: Causes and Consequences

What role does corporate law play in holding directors accountable for compliance failures? Until recently, the answer has been “very little.” The prevalent standard for director oversight duties (Caremark duties) was set high, effectively demanding that plaintiffs show scienter without having access to discovery. As a result, derivative actions over directors’ failure of oversight were routinely dismissed at the pleading stage, and many commentators considered Caremark duties largely irrelevant. Yet starting in June 2019, a string of successful Caremark cases have signaled a new era of enhanced oversight duties. This Article contributes to our understanding of the new Caremark era along three dimensions. First, the Article delineates the contours of the shift in Delaware courts’ approach to oversight duties. The courts now increasingly apply the “mission critical compliance” exception to justify enhanced duties, and lower the threshold for receiving information in order to investigate potential failure-of-oversight claims. Second, the Article identifies the drivers of this “new Caremark era,” with special emphasis on the role of a seemingly disparate development in shareholders’ right to information from the company. Shareholders now enjoy much better pre-filing discovery powers, which they can utilize to plead with particularity facts about how the board never even discussed a critical compliance issue, or how they knew about critical problems but chose to ignore them. Armed with these newfound pre-filing investigatory tools, shareholders can overcome what once seemed insuperable pleading hurdles. Finally, the Article evaluates the desirability of the new Caremark era, spotlighting its likely positive effects on information flows inside companies and the ability of the market to discipline corporate misbehavior (better reputational discipline), as well as the ways in which it nicely compensates for the blind spots of other enforcement mechanisms

Law as Source: How the Legal System Facilitates Investigative Journalism

Legal scholars have long recognized that the media plays a key role in assuring the proper functioning of political and business markets Yet we have understudied the role of law in assuring effective media scrutiny. This Article develops a theory of law as source. The basic premise is that the law not only regulates what the media can or cannot say, but also facilitates media scrutiny by producing information

Reputation Through Litigation: How the Legal System Shapes Behavior by Producing Information

The law affects our behavior not only directly by imposing legal sanctions, but also indirectly, by providing information that shapes the reputations of individuals and organizations. This Article is the first to fully flesh out the reputation-shaping aspects of the law. The Article’s first major contribution is in explaining how reputation works. Legal scholars are increasingly recognizing that reputation matters: reputational concerns are touted as an important factor that shapes our behavior across a wide range of phenomena, from product safety to corporate governance to international relations. Yet so far the literature has stayed remarkably silent on how exactly reputation matters. This Article draws from a fast-growing multidisciplinary body of reputation research to examine why similar behaviors lead to different reputational outcomes. A key takeaway is that reputational sanctions are much noisier than was previously acknowledged: the market systematically under-reacts to certain types of misbehaviors and over-reacts to others. The Article’s second major contribution comes from mapping out the different ways in which the law affects reputational sanctions. Specifically, the Article focuses on the previously overlooked “second-opinion role” of the law. When bad news breaks about an adverse action by a company, market players react immediately by downgrading their beliefs about the company and their willingness to interact with it. But the same bad news may also get the legal system involved. Then, in the process of finding out whether to impose legal sanctions, the legal system produces as a byproduct information on the behavior of the parties to the dispute: what top managers knew and when they knew it, whether the adverse action was an isolated mistake or whether it is indicative of the company’s operational culture, and so forth. This information reaches third parties, and makes them reassess their beliefs about the company. Contrary to the common assumption among legal scholars, law and reputation are not independent of each other, but rather complement each other. A well-functioning legal system reduces noise and increases the accuracy of reputational sanctions. Acknowledging the informational role of the law generates important policy implications. First, the Article calls for a more cautious approach to scaling back legal intervention. If the law indeed complements non-legal sanctions, then any proposal to scale back legal intervention should also take into account the expected negative impact on non-legal deterrence. Second, the Article reassesses practical and timely debates such as the desirability of heightened pleading standards. If litigation indeed generates quality information on the behavior of market participants (a positive externality), then we should reevaluate key legal institutions according to how they contribute to information production

Endoscopic anterior fundoplication with the Medigus Ultrasonic Surgical Endostapler (MUSE™) for gastroesophageal reflux disease: 6-month results from a multi-center prospective trial

BACKGROUND: Both long-term proton pump inhibitor (PPI) use and surgical fundoplication have potential drawbacks as treatments for chronic gastroesophageal reflux disease (GERD). This multi-center, prospective study evaluated the clinical experiences of 69 patients who received an alternative treatment: endoscopic anterior fundoplication with a video- and ultrasound-guided transoral surgical stapler. METHODS: Patients with well-categorized GERD were enrolled at six international sites. Efficacy data was compared at baseline and at 6 months post-procedure. The primary endpoint was a ≥ 50 % improvement in GERD health-related quality of life (HRQL) score. Secondary endpoints were elimination or ≥ 50 % reduction in dose of PPI medication and reduction of total acid exposure on esophageal pH probe monitoring. A safety evaluation was performed at time 0 and weeks 1, 4, 12, and 6 months. RESULTS: 66 patients completed follow-up. Six months after the procedure, the GERD-HRQL score improved by >50 % off PPI in 73 % (48/66) of patients (95 % CI 60-83 %). Forty-two patients (64.6 %) were no longer using daily PPI medication. Of the 23 patients who continued to take PPI following the procedure, 13 (56.5 %) reported a ≥ 50 % reduction in dose. The mean percent of total time with esophageal pH <4.0 decreased from baseline to 6 months (P < 0.001). Common adverse events were peri-operative chest discomfort and sore throat. Two severe adverse events requiring intervention occurred in the first 24 subjects, no further esophageal injury or leaks were reported in the remaining 48 enrolled subjects. CONCLUSIONS: The initial 6-month data reported in this study demonstrate safety and efficacy of this endoscopic plication device. Early experience with the device necessitated procedure and device changes to improve safety, with improved results in the later portion of the study. Continued assessment of durability and safety are ongoing in a three-year follow-up study of this patient group

Influence of Neutron Enrichment on Disintegration Modes of Compound Nuclei

Cross sections, kinetic energy and angular distributions of fragments with charge 6$\le$Z$\le$28 emitted in 78,82Kr+40C at 5.5 MeV/A reactions were measured at the GANIL facility using the INDRA apparatus. This experiment aims to investigate the influence of the neutron enrichment on the decay mechanism of excited nuclei. Data are discussed in comparison with predictions of transition state and Hauser-Feshbach models.Comment: 8 pages, 1 figure, paper presented at the First Workshop on "State of the Art in Nuclear Cluster Physics" 13-16 May, 2008, at Strasbourg, France (SOTANCP2008) and accepted for publication at International Journal of Modern Physics E (Special Issue), Proceedings of SOTANCP2008 (to be published

Colossal Magnetoresistant Materials: The Key Role of Phase Separation

The study of the manganese oxides, widely known as manganites, that exhibit the ``Colossal'' Magnetoresistance (CMR) effect is among the main areas of research within the area of Strongly Correlated Electrons. After considerable theoretical effort in recent years, mainly guided by computational and mean-field studies of realistic models, considerable progress has been achieved in understanding the curious properties of these compounds. These recent studies suggest that the ground states of manganite models tend to be intrinsically inhomogeneous due to the presence of strong tendencies toward phase separation, typically involving ferromagnetic metallic and antiferromagnetic charge and orbital ordered insulating domains. Calculations of the resistivity versus temperature using mixed states lead to a good agreement with experiments. The mixed-phase tendencies have two origins: (i) electronic phase separation between phases with different densities that lead to nanometer scale coexisting clusters, and (ii) disorder-induced phase separation with percolative characteristics between equal-density phases, driven by disorder near first-order metal-insulator transitions. The coexisting clusters in the latter can be as large as a micrometer in size. It is argued that a large variety of experiments reviewed in detail here contain results compatible with the theoretical predictions. It is concluded that manganites reveal such a wide variety of interesting physical phenomena that their detailed study is quite important for progress in the field of Correlated Electrons.Comment: 76 pages, 21 PNG files with figures. To appear in Physics Report