(From Legal Scholarship Network: Legal Studies Research Paper Series, University of North Carolina
Interpreting Forum Selection Clauses
John F. Coyle
When a court adopts an idiosyncratic interpretation of a forum selection clause, it inflicts costs on third parties whose agreements contain similar language. Sophisticated third parties must thereafter incur the cost of redrafting their agreements to contract around this interpretation. Unsophisticated third parties, unaware of the court’s decision, must thereafter incur the cost of litigating against the backdrop of an interpretive default rule that is inconsistent with their baseline expectations. This Article argues that these costs may be substantially reduced by providing judges with better information as to the interpretive preferences of the contract drafters. Drawing upon conversations with eighty-six corporate lawyers, the Article provides a detailed account of how attorneys generally want the courts to construe forum selection clauses in business contracts. In so doing, the Article seeks to help future judges avoid idiosyncratic interpretations of these clauses. Along the way, the Article demonstrates the utility of looking to surveys and interviews to assist in the interpretation of ambiguous contract boilerplate more generally.
-October 19, 2017
Tracing Equity: Realizing and Allocating Value in Chapter 11
Melissa B. Jacoby and Edward J. Janger
Law and economics scholars have long argued that efficiency is best served when a firm’s capital structure is arranged as a hierarchical value waterfall: the senior-most investors are made whole before the next-junior stakeholders receive anything. The mechanism chosen to implement this single waterfall approach—a blanket lien on all of a firm’s assets—is property-based. Senior investors are deemed to “own” a priority claim to the value of the firm. Since the comprehensive revision to Article 9 of the Uniform Commercial Code in 2000 lawyers, scholars, and judges have largely accepted at face value the assumption that a secured lender can write contracts that enable it to capture all of a distressed company’s going-concern value. Lynn LoPucki, Elizabeth Warren, Lucian Bebchuk and Jesse Fried—and, before them, Grant Gilmore—questioned the wisdom of this view. In this article, we join and amplify the views of these skeptics as a normative matter, but more importantly, we question the assumption the single waterfall has been achieved. We show that, as a positive matter, both Article 9 and the Bankruptcy Code retain the distinction between (1) lien-based priority over specific assets and their identifiable proceeds, and (2) unsecured claims against the residual value of the firm. We then explore the implications and reasons for taking such an approach.
Our positive account explicates how the term “equity” is used in both Chapter 11 of the Bankruptcy Code and Article 9 of the UCC to implement the principle of equality of treatment over time. “Equity,” as that term is used in the two statutes, reflects a core principle of collateral tracing that manages questions of value allocation over the course of a Chapter 11 case that we call “Equitable Realization.” While the term is ours, we derive it from the statutory terms “equitable principles” in Article 9 and “the equities of the case” in Chapter 11. Both refer to equitable tracing principles, that, in turn, inform the “fair and equitable baseline entitlement for secured creditors in a Chapter 11 plan.
We show that Chapter 11 treats realization of value as a two-step process—first, fixing the relative positions of secured and unsecured claims when a bankruptcy petition is filed, and second, delaying the fixing of the value of secured claims until collateral is sold or a Chapter 11 plan is confirmed. Equitable Realization uses tracing principles to allocate a firm’s value between asset-based and firm-based claimants and to preserve that allocation over time. Assets may appreciate, but once they are disposed of, their value is fixed. As a result, increases in going-concern value, and other bankruptcy-created value are not identifiable proceeds traceable to a lender’s pre-bankruptcy collateral. The secured creditor’s entitlement to any bankruptcy-created value extends only to “identifiable proceeds”—value that can be traced to assets encumbered on the petition date.
Our positive analysis, of course, raises the question of whether Article 9 and the Bankruptcy Code get it right. We explain not only why Equitable Realization is normatively superior to the single waterfall approach, but how it is baked into corporate and commercial law more generally, and is part of a large family of rules that guard against undercapitalization and judgment proofing. Indeed, these rules are implemented through property as well as liability rules. Thus, Equitable Realization not only implements the Bankruptcy Code’s core goal of equitable treatment of creditors, but, by properly identifying firms’ residual claimants, limits a firm’s ability to externalize risk and increases the prospect of reorganizing troubled companies. Our analysis reveals the infirmities of recent value-allocation proposals in the academic literature as well as in the Final Report of the American Bankruptcy Institute Commission to Study the Reform of Chapter 11.
-October 18, 2017
Corpus Linguistics and the Criminal Law
Carissa Byrne Hessick
This brief response to Ordinary Meaning and Corpus Linguistics, an essay by Stefan Gries and Brian Slocum, explains why corpus linguistics represents a radical break from current statutory interpretation practice, and it argues that corpus linguistics ought not be adopted as an interpretive methodology, especially for interpreting criminal laws. Corpus linguistics has superficial appeal because it promises to increase predictability and to decrease the role of judges’ personal preferences in statutory interpretation. But there are reasons to doubt that corpus linguistics can achieve these goals. More importantly, corpus linguistics sacrifices other, more important values, including notice and accountability.
-October 2, 2017
Marriage Equality and Family Diversity: Comparative Perspectives from the United States and South Africa
This Article explores the topic of family diversity through a comparative analysis of law in the United States and South Africa. Juxtaposing these countries sheds light on shortcomings of the United States’s jurisprudence on family diversity. The comparative analysis also helps illuminate the path ahead for reforming both countries’ laws to better respect family diversity.
The Article proceeds in two parts. Part I examines the United States’s and South Africa’s competing approaches to same-sex marriage. Both countries’ highest courts ruled that excluding same-sex couples from marriage is unconstitutional, but they took divergent paths to reach that conclusion. This Article contends that the Constitutional Court of South Africa paved a better road for other countries to follow because it developed a superior conceptualization of the right to marry. Part II looks beyond same-sex marriage to explore new frontiers for reforming laws to address family diversity both in the United States and in South Africa. Specifically, Part II examines proposals to extend rights and responsibilities to couples who choose not to marry.
-September 6, 2017
Assessing the Tongzhi Label: Self-Identification and Public Opinion
Holning Lau, Geoffrey Yeung, Rebecca L. Stotzer, Charles Lau and K. A. Loper
Tongzhi is one of several Chinese terms that refer to individuals who are attracted to the same sex. Using data from two different surveys in Hong Kong, this research note examines how the term tongzhi coexists with other terms. We investigate the prevalence of self-identification as tongzhi, and we explore the extent to which using the term tongzhi influences public attitudes toward gay people and gay rights. Activists began popularizing the term tongzhi in the late 1980s, but less than one third of the participants in our 2008 survey of sexual orientation minorities (n=728) described themselves as tongzhi. Using a split-ballot experiment in a 2013 public opinion poll (n=831), we found that attitudes toward gay people and gay rights were not significantly impacted by whether questions were phrased in terms of tongzhi or the main alternative term tongxinglianzhe. We discuss how our findings can enrich understandings of earlier research and illuminate avenues for future study.
The Version of Record of this manuscript has been published and is freely available in Journal of Homosexuality, 18 May 2016.
-October 13, 2017
Criminal Quarantine and the Burden of Proof
Michael Louis Corrado
In previous papers I have argued for these two points: first, that the free will realist who would justify punishment has the burden of establishing to a high level – perhaps beyond a reasonable doubt, but certainly at least by clear and convincing evidence – that any person to be punished acted freely in breaking the law; and, second, that that level of evidence is simply not there. In this paper I argue for two parallel points: first, that the free will skeptic who would justify universal criminal quarantine is also faced with a burden of proof, the burden to establish to a similarly high level that no human being ever acts freely; and, second, that sufficient evidence for that conclusion is not there either. If we must choose between punishment and quarantine, the methods that constitute punishment are preferable to those that constitute quarantine, and so it may be that if there is not sufficient evidence to support either punishment or quarantine, the better course for the state is to choose to punish, as some have argued. If we are not to accept that conclusion, I believe, we must find an institution that, unlike both punishment and quarantine, can be justified on the evidence, but an institution which employs not the methods of quarantine but those of punishment. I suggest the “takings” doctrine as a basis for carving out such an institution. I solicit your comments.
-October 8, 2017