Vol. 103 Issue 5

In 1985, corporate law underwent a sea-change as the Delaware Supreme Court in Smith v. Van Gorkom found that the directors of Trans Union violated their duty of care when they sold the company to takeover specialist Jay Pritzker for $55 per share—a $17 premium over the prevailing market share price. The next year, Delaware’s legislature swiftly responded to the business community’s newfound anxiety over the threat of personal liability for breaches of the duty of care by passing section 102(b)(7) of Delaware’s General Corporation Law. The new law allows a corporation to insert a provision into its charter exculpating directors for monetary damages in connection with a breach of their fiduciary duty of care. Boards, fearing another Van Gorkom, leapt into action, almost uniformly ensuring their charters had an exculpation provision. The legislature’s enactment of section 102(b)(7) alarmed many academics. One scholar, for instance, has argued that the passage of section 102(b)(7) shows that Delaware’s duty of care is dead and that, more broadly, legislatures have been willing to emasculate corporate law in order to appease powerful directors. Another has similarly asserted that Delaware’s action began the “evisceration” of the duty of care.

This Note probes the truth of such claims. It finds that Delaware’s duty of care continues to live on to this day and, in certain respects, is of greater legal consequence than before Van Gorkom. Part I will discuss the duty of care in Delaware through 1986 and show that section 102(b)(7) merely gave legislative sanction to long-standing judicial reluctance to award monetary damages for breaches of the duty of care. Part II will provide a brief overview of the theory that, since passage of section 102(b)(7), the duty of care has become a dead letter in Delaware corporate law. Part III will rebut those theories by pointing to four strands of Delaware corporate law in which the duty of care is of continued significance.

On July 18, 2013, Detroit, Michigan became the largest municipality in United States history to file for bankruptcy. Since the days of Henry Ford, Americans have been investing in Detroit by buying its most famous product—automobiles. They have also been investing directly in Detroit itself, buying a financial product called municipal bonds. Detroit, along with many other cities, sells municipal bonds to raise money for city projects. Holders of those municipal bonds were major creditors in the city’s bankruptcy case.

Many municipal bonds are held by retail investors because bonds have long been considered a relatively safe investment on the theory that cities are not likely to default or go bankrupt. The bankruptcy of a city as large as Detroit, coming on the heels of other Chapter 9 municipal bankruptcies, has made investors question the bonds’ stability. Although Detroit’s bankruptcy has not undermined bonds’ overall safety, the treatment of municipal bond debt in Detroit could affect the future of the $3.7 trillion municipal bond market and the savings of many people outside the Motor City. The ability of cities to finance their projects could also be affected—the riskier municipal bonds are seen to be, the more difficult it will be for cities to sell them at high prices, leaving them stuck in a cycle of municipal poverty. . . .

Can voluntary disclosure be used to enhance insiders’ insider-trading profits while providing legal cover? We investigate this question in the context of Rule 10b5-1 trading plans. Prior literature suggests that insiders reduce opportunities to profit from trades if their planned trades are disclosed. But disclosure might increase such opportunities because of an unappreciated characteristic of how rules of judicial procedure interact with SEC trading rules. Courts can only consider publicly available evidence from defendants at the motion-to-dismiss phase of litigation, and this practice can enhance legal protection for firms that disclose planned trades, especially those disclosing detailed information. This suggests that voluntary disclosure, which is conventionally thought to reduce information asymmetries, can create legal cover for opportunistic insider trading.

Under the federal judicial recusal rules, judges and justices who directly own stock in companies must recuse themselves in cases involving those companies. However, there has been little effort to measure the impact of these recusals on the pool of judges and justices that hear cases involving publicly traded corporations. Our empirical analysis finds that a surprisingly high rate of direct stock ownership partly shapes the group of judges and justices that decide these cases, resulting in judges that are more likely to be male, African-American, younger, with fewer personal assets, appointed by a Republican president, and more likely to be a former law professor. Since these corporations are important repeat-player litigants, this phenomenon raises important concerns about the federal judicial process. We propose and discuss several policies that might address this issue including requiring divestment, the use of financial derivatives to perfectly hedge the judge’s equity position, the use of blind trusts, changing the recusal rules, equalizing the treatment of mutual funds and individual shares, and increasing transparency.

This Note considers a judicial practice that identifies jus cogens as the law of nations by evaluating Alien Tort Statute jurisprudence. While it is generally accepted that a norm belonging to jus cogens is sufficient to fall within the jurisdictional scope of the Alien Tort Statute, this Note examines the stronger claim that jus cogens constitutes an external restriction on the application of the Alien Tort Statute by undertaking a comprehensive analysis of the treatment of jus cogens in Alien Tort Statute jurisprudence. After considering historical, constitutional, and doctrinal implications of such a relation—and the absence of clear guidance by the Supreme Court or Congress—this Note ultimately endorses a practice that identifies jus cogens as the law of nations. This Note is intended to provide scholars and practitioners with a resource to better understand and apply a coherent strand in an otherwise winding U.S. jurisprudence under the Alien Tort Statute.

As in other circuses, where clowns sometimes cry poignant tears, humor in the U.S. Congress can be tinged with a certain sadness. Under the actual Big Top the irony is deliberate.

To wit, it appears to have occurred to a number of lobbyists, Hill staffers, Members, and other drafters of legislation that there is something to be gained rhetorically in our American institution of “popular” statute names. Those of us outside the Beltway have only begun to notice, as not many of us are in the habit of reading the Popular Names Table for fun, but the gimmick is to specify a short name in a given bill whose initials spell out some clever acronym. Though one might have expected less levity from Congress at a time when it is less popular than cockroaches, root canals, colonoscopies, Communism, Richard Nixon, and gonorrhea, they have started doing this a lot, and they’re doing it despite failure to accomplish much else. There appear to have been only three of these things in the entire history of the United States prior to 1988. In the twenty-seven years since then, there have been nearly one hundred. . . .

Across the country, executions have become increasingly problematic as states have found it more and more difficult to procure the drugs they need for lethal injection. At first blush, the drug shortage appears to be the result of pharmaceutical industry norms; companies that make drugs for healing (mostly in Europe) have refused to be merchants of death. But closer inspection reveals that European governments are the true change agents here. For decades, those governments have tried—and failed—to promote abolition of the death penalty through traditional instruments of international law. Turns out that the best way to export their abolitionist norms was to stop exporting their drugs.

At least three lessons follow. First, while the Supreme Court heatedly debates the use of international norms in Eighth Amendment jurisprudence, that debate has become a largely academic sideshow; in the death penalty context, the market has replaced the positive law as the primary means by which international norms constrain domestic death penalty practice. Second, international norms may have entered the United States through the moral marketplace, but from there they have seeped into the zeitgeist, impacting the domestic death penalty discourse in significant and lasting ways. Finally, international norms have had such a pervasive effect on the death penalty in practice that they are now poised to influence even seemingly domestic Eighth Amendment doctrine. In the death penalty context, international norms are having an impact—through the market, through culture, and ultimately through doctrine—whether we formally recognize their influence or not.