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

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

The Implications of the Wagner group in Africa and the Middle East

On February 16, 2023, Royce de Melo, an independent security and defense consultant, presented The Implications of the Wagner group in Africa and the Middle East. The key issues discussed were the history of Wagner group operations, current activities in Africa and the Middle East, and the relationship between the group and the Russian state. Received: 2023-05-15 Revised: 2023-18-0

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

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

Correcting the Empirical Foundations of IPO-Pricing Regulation

Recent events are replete with stories of fraudulent or opportunistic behavior in the initial public offering (IPO) process - behavior that extended to the highest-reputation investment banks. Curiously, notwithstanding this evidence, recent financial economics literature asserts investment bank conflicts of interest certify IPO issuers. This Article develops new empirical evidence that casts doubt on this certification hypothesis by examining the pre-IPO price adjustment of IPOs involving qualified independent underwriters (QIUs), particularly IPOs in which more than ten percent of the net proceeds are being directed to participating investment banks (e.g., to repay a prior extension of credit). These offerings have similar pre-IPO pricing patterns to those others interpret as involving certification. Investment bank exit, however, cannot comfortably be categorized as certification. These results, together with other recent results in the legal literature, support the view that factors other than certification account for IPO pricing phenomena in IPOs involving investment bank conflicts of interest. The SEC has finally come to consider important proposals, put forward by the NASD and the NYSE, to reform IPO marketing, albeit five years after the internet bubble in IPOs and other securities transactions burst. These results support increased disclosure-focused regulation of the IPO process

Conditioning Exercise of Firearms Rights on Unlimited Terry Stops

The tenth anniversary of Heller and the fiftieth anniversary of Terry are in June 2018. On this occasion, it is timely to reflect on the interaction between these two seminal decisions. Most questions concerning the Second Amendment, including the interplay between Terry and Heller, are currently without definitive answers. The Supreme Court has addressed the application of Heller in only two cases over the last ten years. One issue developing in the lower courts is whether merely exercising in public the civil right recognized in Heller (i.e., that alone, with nothing else) may require submission to unfettered Terry frisks not restricted to a limited set of times or locations but virtually anywhere in public. The risk of injury to the innocent in a Terry frisk is substantially heightened when the detainee is armed. It\u27s no small matter to have a loaded firearm pointed at one for engaging in innocent, protected activity. But this can happen where mere firearms possession is a basis for initiating a Terry stop. The risk of death or serious bodily injury, coupled with perceptions that lawfully being armed results in other unwarranted law enforcement attention/ is sufficiently severe that evidently some would forego exercise of what lower courts typically reference as a protected right. It is somewhat peculiar even to need to discuss the possibility that merely for exercising a constitutionally secured right one may be subject to having a firearm pointed at oneself. Now, the Supreme Court has not yet determined whether the rights recognized in Heller extend to firearms possession outside the home. How­ever, lower courts generally have either concluded that they do, or assumed that they do

New York\u27s Requirements for Contractual Definiteness with Application to the Formation of Investment Vehicles

A review of 82 modern New York cases reveals an unexpected frequency of authority requiring contractual definiteness as to what may reasonably appear to be minor terms.Illustrative are cases holding inadequately definite ordinary ways preliminary agreements may express compensation on a percentage of net basis. Other unexpected authority (i) is less willing than expected to allow subsequent actions to provide sufficient definiteness to initially indefinite agreements and (ii) denies the enforceability of confidentiality provisions and a right of first refusal.The survey includes some unexpected support for contracts specifying a plausibly material portion of the consideration with inadequate definiteness as also precluding recovery in restitution. That includes not giving effect to thoughtful drafting choices apparently designed to avoid that outcome.The survey gives rise to unease whether a court will find fatally indefinite an LLC operating agreement that grants one partner unfettered discretion in choice of section 704(c) method, if built-in-gain property is to be contributed. There is not authority directly addressing this issue. But the pattern of requiring excess specificity, coupled with authority addressing discretionary choices addressing circumstances that are not comparable, creates concern for this author