In Memory of Harvey J. Goldschmid

Joel Seligman

Corporate Law and the Limits of Private Ordering

James D. Cox
The Delaware legislature in 2015 amended the Delaware General Corporation Law to authorize forum-selection bylaws and to prohibit charter or bylaw provisions that would shift to the plaintiff defense costs incurred in connection with shareholder suits that were not successfully concluded. In so acting, the legislature gave managers something they wanted, a way to deal with the scourge of multi-forum litigation, while pacifying the local bar that feared lucrative shareholder…

Paving the Delaware Way: Legislative and Equitable Limits On Bylaws After ATP

Michael J. Kaufman and John M. Wunderlich
In ATP Tour, Inc. v. Deutscher Tennis Bund, the Delaware Supreme Court held that a private company’s fee-shifting bylaw was facially valid. And before that decision, Delaware courts similarly upheld companies’ use of forum-selection bylaws requiring that intra-corporate disputes be litigated in a single designated forum. Many interpreted these holdings as broad endoresements of bylaws that could regulate the litigation process itself and a move by the Delaware courts to…

Mandatory Disclosure and Individual Investors: Evidence From the Jobs Act

Yu-Ting Forester Wong, Colleen Honigsberg and Robert J. Jackson Jr.
One prominent justification for the mandatory disclosure rules that define modern securities law is that these rules encourage individual investors to participate in stock markets. Mandatory disclosure, the theory goes, gives individual investors access to information that puts them on a more equal playing field with sophisticated institutional shareholders. Although this reasoning has long been cited by regulators and commentators as a basis for mandating disclosure, recent work has questioned…

The Intersection of Fee-Shifting Bylaws and Securities Fraud Litigation

William K. Sjostrom Jr.
This Article examines the intersection of fee-shifting bylaws and federal private securities fraud suits. Specifically, this Article hypothesizes about the effects fee-shifting bylaws would have, if enforceable, on private securities fraud litigation. It then turns to the validity of fee-shifting bylaws under federal law and concludes that they are invalid as applied to securities fraud claims. In light of this conclusion, this Article considers whether Congress should pass legislation to…

Distortion Other Than Price Distortion

Urska Velikonja
The fraud-on-the-market doctrine adopted in Basic Inc. v. Levinson (“Basic”) allows the plaintiff suing under Rule 10b-5 to satisfy the reliance requirement by showing that the market in which the security was traded was efficient and that she purchased the security at the market price during the period of the misrepresentation. If she succeeds, the plaintiff is entitled to two presumptions: first, that the misrepresentation distorted the price of that…

Federal Securities Fraud Litigation as a Lawmaking Partnership

Jill E. Fisch
In its most recent Halliburton II decision, the Supreme Court rejected an effort to overrule its prior decision in Basic Inc. v. Levinson. The Court reasoned that adherence to Basic was warranted by principles of stare decisis that operate with “special force” in the context of statutory interpretation. This Article offers an alternative justification for adhering to Basic—the collaboration between the Court and Congress that has led to the development…

Market Intermediation, Publicness, and Securities Class Actions

Hillary A. Sale and Robert B. Thompson
Securities class actions play a crucial, if contested, role in the policing of securities fraud and the protection of securities markets. The theoretical understanding of these private enforcement claims needs to evolve to encompass the broader set of goals that underlie the securities regulatory impulse and the publicness of those goals. Further, a clear grasp of the modern securities class action also requires an updated understanding of how the role…

Price Impact, Materiality, and Halliburton II

Allen Ferrell and Andrew Roper
The Supreme Court decision in Halliburton Co. v. Erica P. John Fund, Inc., 134 S. Ct. 2398 (2014), reaffirmed the availability of the fraud-on-the-market presumption of “reliance” for purposes of a Rule 10b-5 class certification. At the same time, the Court held that defendants could rebut the presumption if they could provide “direct evidence” that the alleged misrepresentations did not in fact impact the price of the security (i.e., a…

Event Studies in Securities Litigation: Low Power, Confounding Effects, and Bias

Alon Brav and J. B. Heaton
An event study is a statistical method for determining whether some event—such as the announcement of earnings or the announcement of a proposed merger—is associated with a statistically significant change in the price of a company’s stock. The main inputs to an event study are historical stock returns for the companies under study, benchmark returns like the return to the broader stock market, and standard statistical tests like t-tests that…