Preface |
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xxi | |
Acknowledgments |
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xxv | |
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Introduction to the Law of Enterprise Organization |
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1 | (14) |
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Efficiency and the Social Significance of Enterprise Organization |
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2 | (3) |
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Wealth Creation and the Corporate Form of Organization |
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3 | (1) |
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What Do We Mean by Efficiency? |
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3 | (1) |
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4 | (1) |
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5 | (1) |
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Law from Inside and Out: Shared Meanings and Skepticism |
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5 | (3) |
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The Outside and the Inside |
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6 | (1) |
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7 | (1) |
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Development of the Modern Theory of the Firm |
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8 | (7) |
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Ronald Coase's 1937 Insight |
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9 | (1) |
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9 | (1) |
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10 | (5) |
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Acting Through Others: The Law of Agency |
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15 | (26) |
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15 | (1) |
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Agency Formation, Agency Termination, and Principal's Liability |
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16 | (18) |
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16 | (1) |
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17 | (1) |
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Parties' Conception Does Not Control |
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17 | (1) |
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Jenson Farms Co. v. Cargill, Inc. |
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18 | (3) |
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21 | (1) |
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Actual and Apparent Authority |
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21 | (1) |
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22 | (3) |
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25 | (1) |
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Gallant Ins. Co. v. Isaac |
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26 | (4) |
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30 | (1) |
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Humble Oil & Refining Co. v. Martin |
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30 | (2) |
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32 | (2) |
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The Governance of Agency (The Agent's Duties) |
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34 | (7) |
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The Nature of the Agent's Fiduciary Relationship |
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34 | (1) |
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The Agent's Duty of Loyalty to the Principal |
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35 | (1) |
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36 | (2) |
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The Trustee's Duty to Trust Beneficiaries |
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38 | (1) |
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38 | (3) |
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The Problem of Joint Ownership: The Law of Partnership |
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41 | (44) |
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Introduction to Partnership |
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41 | (11) |
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Why Have Joint Ownership? |
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42 | (1) |
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Klein & Coffee, The Need to Assemble At-Risk Capital |
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43 | (2) |
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Hansmann, Kraakman & Squire, Law and the Rise of the Firm |
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45 | (2) |
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The Agency Conflict Among Co-Owners |
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47 | (1) |
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47 | (5) |
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52 | (3) |
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52 | (3) |
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Relations with Third Parties |
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55 | (6) |
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55 | (1) |
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Third-Party Claims Against Departing Partners |
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56 | (1) |
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Third-Party Claims Against Partnership Property |
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57 | (1) |
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Claims of Partnership Creditors to Partner's Individual Property |
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58 | (3) |
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Partnership Governance and Issues of Authority |
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61 | (2) |
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National Biscuit Co. v. Stroud |
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61 | (2) |
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Termination (Dissolution and Dissociation) |
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63 | (12) |
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Accounting for Partnership's Financial Status and Performance |
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63 | (2) |
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65 | (4) |
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69 | (4) |
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73 | (2) |
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Limited Liability Modifications of the Partnership Form |
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75 | (10) |
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76 | (2) |
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Limited Liability Partnerships and Companies |
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78 | (1) |
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The Limited Liability Partnership |
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78 | (1) |
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The Limited Liability Company |
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79 | (6) |
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85 | (30) |
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Introduction to the Corporate Form |
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85 | (2) |
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Creation of a Fictional Legal Entity |
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87 | (9) |
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A Note on the History of Corporate Formation |
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88 | (4) |
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The Process of Incorporating Today |
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92 | (1) |
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The Articles of Incorporation, or ``Charter'' |
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93 | (1) |
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94 | (1) |
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95 | (1) |
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96 | (3) |
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Easterbrook & Fischel, Limited Liability and the Corporation |
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97 | (2) |
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99 | (2) |
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101 | (14) |
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Legal Construction of the Board |
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102 | (1) |
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The Holder of Primary Management Power |
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102 | (1) |
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Automatic Self-Cleansing Filter Syndicate Co., Ltd. v. Cunninghame |
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103 | (3) |
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106 | (1) |
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Formality in Board Operation |
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107 | (1) |
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108 | (2) |
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Corporate Officers: Agents of the Corporation |
|
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110 | (1) |
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Jennings v. Pittsburgh Mercantile Co. |
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110 | (5) |
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Debt, Equity, and Economic Value |
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115 | (16) |
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115 | (4) |
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116 | (2) |
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Legal Character of Equity |
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118 | (1) |
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Basic Concepts of Valuation |
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119 | (8) |
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119 | (3) |
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122 | (3) |
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Diversification and Systematic Risk |
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125 | (2) |
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127 | (4) |
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The Discount Cash Flow (DCF) Approach |
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127 | (2) |
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The Relevance of Prices in the Securities Market |
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129 | (2) |
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The Protection of Creditors |
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131 | (38) |
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132 | (1) |
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133 | (7) |
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133 | (4) |
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137 | (2) |
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Minimum Capital and Capital Maintenance Requirements |
|
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139 | (1) |
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140 | (21) |
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141 | (2) |
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Creditor Protection: Fraudulent Transfers |
|
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143 | (2) |
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145 | (1) |
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|
145 | (1) |
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145 | (6) |
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Piercing the Corporate Veil |
|
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151 | (1) |
|
Sea-Land Services, Inc. v. The Pepper Source |
|
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152 | (5) |
|
Kinney Shoe Corp. v. Polan |
|
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157 | (4) |
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Veil Piercing on Behalf of Involuntary Creditors |
|
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161 | (8) |
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161 | (8) |
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Normal Governance: The Voting System |
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169 | (70) |
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The Role and Limits of Shareholder Voting |
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169 | (3) |
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Electing and Removing Directors |
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172 | (4) |
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172 | (1) |
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173 | (3) |
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Shareholder Meetings and Alternatives |
|
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176 | (1) |
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Proxy Voting and Its Costs |
|
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177 | (4) |
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Rosenfeld v. Fairchild Engine & Airplane Corp. |
|
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179 | (2) |
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181 | (2) |
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Shareholder Information Rights |
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183 | (1) |
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Techniques for Separating Control from Cash Flow Rights |
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184 | (20) |
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Circular Control Structures |
|
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185 | (1) |
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186 | (6) |
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192 | (1) |
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Easterbrook & Fischel, Voting in Corporate Law |
|
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192 | (1) |
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193 | (7) |
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Controlling Minority Structures |
|
|
200 | (1) |
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Bebchuk, Kraakman & Triantis, Stock Pyramids, Cross-Ownership, and Dual Class Equity |
|
|
200 | (4) |
|
The Collective Action Problem |
|
|
204 | (5) |
|
Easterbrook & Fischel, Voting in Corporate Law |
|
|
205 | (1) |
|
Black, Next Steps in Proxy Reform |
|
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205 | (2) |
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Pozen, Institutional Investors: The Reluctant Activists |
|
|
207 | (1) |
|
Kahan & Rock, Hedge Funds in Corporate Governance and Corporate Control |
|
|
208 | (1) |
|
|
209 | (27) |
|
Rules 14a-1 Through 14a-7: Disclosure and Shareholder Communication |
|
|
209 | (4) |
|
Rule 14a-8: Shareholder Proposals |
|
|
213 | (7) |
|
CA, Inc. v. AFSCME Employees Pension Plan |
|
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220 | (8) |
|
Rule 14a-9: The Antifraud Rule |
|
|
228 | (2) |
|
Virginia Bankshares, Inc. v. Sandberg |
|
|
230 | (6) |
|
State Disclosure Law: Fiduciary Duty of Candor |
|
|
236 | (3) |
|
Normal Governance: The Duty of Care |
|
|
239 | (56) |
|
Introduction to the Duty of Care |
|
|
239 | (1) |
|
The Duty of Care and the Need to Mitigate Director Risk Aversion |
|
|
240 | (3) |
|
Gagliardi v. TriFoods International, Inc. |
|
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241 | (2) |
|
Statutory Techniques for Limiting Director and Officer Risk Exposure |
|
|
243 | (7) |
|
|
243 | (2) |
|
Waltuch v. Conticommodity Services, Inc. |
|
|
245 | (4) |
|
Directors and Officers Insurance |
|
|
249 | (1) |
|
Judicial Protection: The Business Judgment Rule |
|
|
250 | (8) |
|
Kamin v. American Express Co. |
|
|
250 | (3) |
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Understanding the Business Judgment Rule |
|
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253 | (2) |
|
The Duty of Care in Takeover Cases: A Note on Smith v. Van Gorkom |
|
|
255 | (1) |
|
Additional Statutory Protection: Authorization for Charter Provisions Waiving Liability for Due Care Violations |
|
|
256 | (2) |
|
Delaware's Unique Approach to Adjudicating Due Care Claims Against Corporate Directors: From Technicolor to Emerald Partners |
|
|
258 | (3) |
|
The Board's Duty to Monitor: Losses ``Caused'' by Board Passivity |
|
|
261 | (30) |
|
Francis v. United Jersey Bank |
|
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263 | (5) |
|
Graham v. Allis-Chalmers Manufacturing Co. |
|
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268 | (4) |
|
In the Matter of Michael Marchese |
|
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272 | (6) |
|
In re Caremark International Inc. Derivative Litigation |
|
|
278 | (7) |
|
In re Citigroup Inc. Shareholder Derivative Litigation |
|
|
285 | (6) |
|
``Knowing'' Violations of Law |
|
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291 | (4) |
|
|
291 | (4) |
|
Conflict Transactions: The Duty of Loyalty |
|
|
295 | (68) |
|
|
296 | (6) |
|
The Shareholder Primacy Norm |
|
|
296 | (3) |
|
A.P. Smith Manufacturing Co. v. Barlow |
|
|
299 | (2) |
|
|
301 | (1) |
|
Self-Dealing Transactions |
|
|
302 | (12) |
|
Early Regulation of Fiduciary Self-Dealing |
|
|
303 | (1) |
|
The Disclosure Requirement |
|
|
304 | (1) |
|
State ex rel. Hayes Oyster Co. v. Keypoint Oyster Co. |
|
|
304 | (5) |
|
Controlling Shareholders and the Fairness Standard |
|
|
309 | (1) |
|
Sinclair Oil Corp. v. Levien |
|
|
310 | (4) |
|
The Effect of Approval by a Disinterested Party |
|
|
314 | (16) |
|
|
314 | (1) |
|
Cookies Food Products v. Lakes Warehouse |
|
|
315 | (5) |
|
Approval by Disinterested Members of the Board |
|
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320 | (1) |
|
Eisenberg, Self-Interested Transactions in Corporate Law |
|
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320 | (2) |
|
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322 | (3) |
|
Approval by a Special Committee of Independent Directors |
|
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325 | (1) |
|
Shareholder Ratification of Conflict Transactions |
|
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326 | (1) |
|
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327 | (1) |
|
In re Wheelabrator Technologies, Inc. |
|
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328 | (2) |
|
Director and Management Compensation |
|
|
330 | (18) |
|
Perceived Excessive Compensation |
|
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331 | (1) |
|
Option Grants and the Law of Director and Officer Compensation |
|
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332 | (1) |
|
|
332 | (3) |
|
Regulatory Responses to Executive Compensation |
|
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335 | (3) |
|
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338 | (3) |
|
In re The Walt Disney Company Derivative Litigation |
|
|
341 | (7) |
|
Corporate Opportunity Doctrine |
|
|
348 | (3) |
|
Determining Which Opportunities ``Belong'' to the Corporation |
|
|
348 | (1) |
|
When May a Fiduciary Take a Corporate Opportunity? |
|
|
349 | (2) |
|
The Duty of Loyalty in Close Corporations |
|
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351 | (12) |
|
Donahue v. Rodd Electrotype Co. |
|
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351 | (6) |
|
Easterbrook & Fischel, Close Corporations and Agency Costs |
|
|
357 | (2) |
|
Smith v. Atlantic Properties, Inc. |
|
|
359 | (4) |
|
|
363 | (50) |
|
Distinguishing Between Direct and Derivative Claims |
|
|
363 | (3) |
|
Solving a Collective Action Problem: Attorneys' Fees and the Incentive to Sue |
|
|
366 | (7) |
|
Fletcher v. A.J. Industries, Inc. |
|
|
367 | (6) |
|
|
373 | (2) |
|
Balancing the Rights of Boards to Manage the Corporation and Shareholders' Rights to Obtain Judicial Review |
|
|
375 | (32) |
|
The Demand Requirement of Rule 23 |
|
|
376 | (1) |
|
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376 | (5) |
|
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381 | (7) |
|
Special Litigation Committees |
|
|
388 | (1) |
|
Zapata Corp. v. Maldonado |
|
|
389 | (6) |
|
In re Oracle Corp. Derivative Litigation |
|
|
395 | (8) |
|
|
403 | (4) |
|
Settlement and Indemnification |
|
|
407 | (4) |
|
Settlement by Class Representatives |
|
|
407 | (1) |
|
Settlement by Special Committee |
|
|
408 | (1) |
|
Carlton Investments v. TLC Beatrice International Holdings, Inc. |
|
|
409 | (2) |
|
When Are Derivative Suits in Shareholders' Interests? |
|
|
411 | (2) |
|
|
413 | (30) |
|
Sales of Control Blocks: The Seller's Duties |
|
|
415 | (13) |
|
The Regulation of Control Premia |
|
|
416 | (1) |
|
Zetlin v. Hanson Holdings, Inc. |
|
|
416 | (1) |
|
|
417 | (6) |
|
A Defense of the Market Rule in Sales of Control |
|
|
423 | (1) |
|
Easterbrook & Fischel, Corporate Control Transactions |
|
|
423 | (5) |
|
|
428 | (1) |
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429 | (4) |
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|
429 | (4) |
|
Tender Offers: The Buyer's Duties |
|
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433 | (6) |
|
Brascan Ltd. v. Edper Equities Ltd. |
|
|
435 | (4) |
|
The Hart-Scott-Rodino Act Waiting Period |
|
|
439 | (4) |
|
Fundamental Transactions: Mergers and Acquisitions |
|
|
443 | (68) |
|
|
443 | (1) |
|
Economic Motives for Mergers |
|
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444 | (4) |
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Integration as a Source of Value |
|
|
444 | (1) |
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Other Sources of Value in Acquisitions: Tax, Agency Costs, and Diversification |
|
|
445 | (1) |
|
Suspect Motives for Mergers |
|
|
446 | (1) |
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|
447 | (1) |
|
The Evolution of the U.S. Corporate Law of Mergers |
|
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448 | (2) |
|
|
448 | (1) |
|
|
449 | (1) |
|
The Allocation of Power in Fundamental Transactions |
|
|
450 | (2) |
|
Overview of Transactional Form |
|
|
452 | (10) |
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|
453 | (1) |
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|
453 | (5) |
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458 | (1) |
|
|
459 | (2) |
|
|
461 | (1) |
|
Structuring the M&A Transaction |
|
|
462 | (9) |
|
|
462 | (1) |
|
Regulatory Approvals, Consents, and Title Transfers |
|
|
463 | (1) |
|
Planning Around Voting and Appraisal Rights |
|
|
463 | (1) |
|
Due Diligence, Representations and Warranties, Covenants, and Indemnification |
|
|
464 | (1) |
|
Deal Protections and Termination Fees |
|
|
465 | (1) |
|
|
465 | (1) |
|
A Case Study: Excerpt from Timberjack Agreement and Plan of Merger |
|
|
466 | (5) |
|
Taxation of Corporate Combinations |
|
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471 | (3) |
|
|
471 | (1) |
|
Tax-Free Corporate Reorganizations |
|
|
472 | (2) |
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474 | (5) |
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|
474 | (2) |
|
The Appraisal Alternative in Interested Mergers |
|
|
476 | (2) |
|
|
478 | (1) |
|
The Nature of ``Fair Value'' |
|
|
478 | (1) |
|
The De Facto Merger Doctrine |
|
|
479 | (4) |
|
Hariton v. Arco Electronics, Inc. |
|
|
481 | (2) |
|
The Duty of Loyalty in Controlled Mergers |
|
|
483 | (28) |
|
Cash Mergers or Freeze-Outs |
|
|
484 | (2) |
|
|
486 | (11) |
|
What Constitutes Control and Exercise of Control |
|
|
497 | (1) |
|
Kahn v. Lynch Communication Systems, Inc. |
|
|
497 | (5) |
|
Special Committees of Independent Directors in Controlled Mergers |
|
|
502 | (2) |
|
Controlling Shareholder Fiduciary Duty on the First Step of a Two-Step Tender Offer |
|
|
504 | (1) |
|
In re Pure Resources, Inc., Shareholders Litigation |
|
|
504 | (7) |
|
Public Contests for Corporate Control |
|
|
511 | (104) |
|
|
511 | (4) |
|
Defending Against Hostile Tender Offers |
|
|
515 | (7) |
|
Unocal Corp. v. Mesa Petroleum Co. |
|
|
515 | (7) |
|
Private Law Innovation: The Poison Pill |
|
|
522 | (11) |
|
Moran v. Household International, Inc. |
|
|
525 | (8) |
|
Choosing a Merger or Buyout Partner: Revlon, Its Sequels, and Its Prequels |
|
|
533 | (13) |
|
|
533 | (8) |
|
Revlon, Inc. v. MacAndrews and Forbes Holdings, Inc. |
|
|
541 | (5) |
|
Pulling Together Unocal and Revlon |
|
|
546 | (29) |
|
Paramount Communications, Inc. v. Time, Inc. |
|
|
547 | (7) |
|
Paramount Communications, Inc. v. QVC Network, Inc. |
|
|
554 | (14) |
|
Lyondell Chemical Co. v. Ryan |
|
|
568 | (7) |
|
|
575 | (13) |
|
``No Shops/No Talks'' and ``Fiduciary Outs'' |
|
|
578 | (1) |
|
|
579 | (1) |
|
Omnicare, Inc. v. NCS Healthcare, Inc. |
|
|
579 | (9) |
|
State Antitakeover Statutes |
|
|
588 | (9) |
|
First- and Second-Generation Antitakeover Statutes (1968-1987) |
|
|
588 | (1) |
|
CTS Corp. v. Dynamics Corp. of America |
|
|
589 | (4) |
|
Third-Generation Antitakeover Statutes (1987-2000) |
|
|
593 | (4) |
|
Proxy Contests for Corporate Control |
|
|
597 | (9) |
|
Schnell v. Chris-Craft Industries, Inc. |
|
|
598 | (1) |
|
Blasius Industries, Inc. v. Atlas Corp. |
|
|
599 | (7) |
|
The Takeover Arms Race Continues |
|
|
606 | (9) |
|
|
606 | (2) |
|
Mandatory Pill Redemption Bylaws |
|
|
608 | (2) |
|
|
610 | (5) |
|
Trading in the Corporation's Securities |
|
|
615 | (82) |
|
Common Law of Directors' Duties When Trading in the Corporation's Stock |
|
|
615 | (5) |
|
|
616 | (4) |
|
The Corporate Law of Fiduciary Disclosure Today |
|
|
620 | (6) |
|
Corporate Recovery of Profit from ``Insider'' Trading |
|
|
621 | (1) |
|
|
622 | (3) |
|
Board Disclosure Obligations Under State Law |
|
|
625 | (1) |
|
Exchange Act § 16(b) and Rule 16 |
|
|
626 | (3) |
|
Exchange Act § 10(b) and Rule 10b-5 |
|
|
629 | (68) |
|
Evolution of Private Right of Action Under § 10 |
|
|
630 | (1) |
|
Elements of a 10b-5 Claim |
|
|
631 | (1) |
|
Elements of a 10b-5 Claim: False or Misleading Statement or Omission |
|
|
632 | (1) |
|
SEC v. Texas Gulf Sulphur Co. |
|
|
633 | (6) |
|
Santa Fe Industries Inc. v. Green |
|
|
639 | (7) |
|
Elements of 10b-5 Liability: The Equal Access Theory |
|
|
646 | (1) |
|
Elements of 10b-5 Liability: The Fiduciary Duty Theory |
|
|
647 | (2) |
|
Chiarella v. United States |
|
|
649 | (4) |
|
|
653 | (9) |
|
United States v. Chestman |
|
|
662 | (5) |
|
|
667 | (5) |
|
Elements of 10b-5 Liability: Materiality |
|
|
672 | (1) |
|
|
672 | (4) |
|
Elements of 10b-5 Liability: Scienter |
|
|
676 | (2) |
|
Elements of 10b-5 Liability: Standing, in Connection with the Purchase or Sale of Securities |
|
|
678 | (1) |
|
Elements of 10b-5 Liability: Reliance |
|
|
679 | (1) |
|
|
679 | (6) |
|
Elements of 10b-5 Recovery: Causation |
|
|
685 | (1) |
|
Remedies for 10b-5 Violations |
|
|
686 | (1) |
|
Elkind v. Liggett & Myers, Inc. |
|
|
686 | (4) |
|
|
690 | (1) |
|
Insider Trading and Informed Prices |
|
|
691 | (2) |
|
Insider Trading as a Compensation Device |
|
|
693 | (2) |
|
Are Deal Makers on Wall Street Leaking Secrets? |
|
|
695 | (2) |
Table of Cases |
|
697 | (6) |
Index |
|
703 | |