Corporations: Law and Policy, Materials and Problems

by Bauman, Jeffrey D.; Weiss, Elliott J.; Palmiter, Alan R.

• ISBN13: 9780314259660
• ISBN10: 031425966X
• Edition: 5th
• Format: Hardcover
• Copyright: 2003-07-01
• Publisher: West Academic

Summary

Updated to reflect changing trends and new judicial developments, Corporations: Law and Policy, Materials and Problems exposes students to the richness and complexity of corporate law, with carefully crafted and painstakingly edited cases. The book?s organization reflects the growing importance, doctrinally and structurally, of the business judgment rule. Each chapter includes a problem for class discussion, many of which place students in the role of corporate planners and allow instructors to highlight the real-world impact of doctrinal uncertainty concerning the scope of the director's duty of care. The fifth edition includes updated emphasis on the corporation as a set of rules meant to resolve intra-corporate conflicts and protect investor/creditor expectations. The book also provides expanded treatment of the role of institutional shareholders and outside directors in corporate governance; the debate surrounding state-chartering competition and the prominence of Delaware in U.S. corporate law; the duties of controlling shareholders; and SEC rules and Sarbanes-Oxley provisions affecting corporate disclosures and insider-trading duties.

Table of Contents

PREFACE	v
ACKNOWLEDGMENTS	xi
TABLE OF CASES	xxxvii
Chapter 1. Introduction	1	(12)
A. History of Business Corporations in the United States	2	(3)
1. English Antecedents	2	(1)
2. Development of U.S. Corporate Law	3	(1)
3. Federal Regulation of Corporations	4	(1)
B. Corporate Governance in the Modern Corporation	5	(4)
C. Architecture of This Casebook	9	(4)
1. Accountability in the Modern Corporation	9	(1)
2. Components of the Modern Corporation	10	(3)
Chapter 2. Introduction to the Economics of the Firm	13	(17)
A. Business Risks	15	(4)
1. Non-Controllable Risks	16	(1)
2. Risk Preference	17	(1)
3. Controllable Risks	18	(1)
B. Allocating Business Risks Within the Firm	19	(7)
1. Allocating Risks to the Principal	19	(2)
2. Allocating Risks to the Agent	21	(2)
3. Searching for a Middle Ground	23	(3)
C. The Role of Law in Allocating Business Risks	26	(4)
1. Mandatory and Default Rules	26	(1)
2. Types of Default Rules	27	(3)
Chapter 3. An Introduction to the Law of Corporations	30	(37)
A. Some Basic Terms and Concepts	30	(18)
1. Corporate Statutes	31	(1)
2. Judge-Made Corporate Law	31	(1)
3. Corporate Choice of Law	32	(1)
4. Organic Documents	32	(1)
5. The Corporate Actors	33	(1)
6. Corporate Securities	33	(1)
7. Fiduciary Principles	34	(1)
8. Litigation by Shareholders	34	(17)
Bayer v. Beran	37	(5)
Note: The Business Judgment Rule	42	(1)
Note on the Evolution of Fiduciary Duties	42	(2)
Gamble v. Queens County Water Co.	44	(4)
B. Equitable Limitations Corporate Actions	48	(3)
Schnell v. Chris - Craft Industries, Inc.	47	(2)
Note: Independent Legal Significance	49	(2)
Notes and Questions	51	(1)
C. Choice of the State of Incorporation: An Introduction	51	(16)
1. The Internal Affairs Doctrine	51	(2)
2. The History for History of States' Competition for Corporate Charters	53	(8)
Liggett Co. v. Lee	54	(3)
Ralph K. Winter Jr., STATE LAW, SHAREHOLDER PROTECTION, AND THE THEORY OF THE CORPORATION	57	(4)
3. The Preeminence of Delaware	61	(2)
4. The Future Shape of State Corporate Law	63	(24)
Ernest L. Folk, III, SOME REFLECTIONS OF A CORPORATION LAW DRAFTSMAN	63	(4)
Chapter 4. The Constitution, Federalism and the Corporation.	67	(36)
A. Introduction	67	(2)
B. The First Amendment	69	(1)
Note: Regulation of Political Speech	70	(2)
First National Bank of Boston v. Bellotti	72	(8)
Austin v. Michigan Chamber of Commerce	80	(7)
Note: Bellotti and Austin	87	(1)
Note: Financing of Federal Election Campaigns Corporate	87	(2)
C. Regulating Corporations' Internal Affairs	89	(14)
1. The Internal Affairs Doctrine as a Constitutional Principle	90	(2)
2. Antitakeover Statutes: CTS Corp. v. Dynamics Corp. of America	92	(2)
CTS Corp. v. Dynamics Corp. of America	94	(4)
Note: Developments Following CTS	98	(2)
Amanda Acquisition Corp. v. Universal Foods Corp.	100	(3)
Chapter 5. The Corporation and Society	103	(45)
A. Introduction	103	(4)
1. The Berle-Dodd Debate	105	(4)
Milton Friedman, CAPITALISM & FREEDOM	106	(1)
B. Corporate Social Responsibility Trends	107	(18)
1. Judicial Approaches	109	(6)
Dodge v. Ford Motor Co.	109	(4)
Note: Dodge v. Ford	113	(2)
2. ALI Principles of Corporate Governance	115	(1)
3. State Constituency Statutes	116	(2)
4. The Role of Counsel	118	(7)
Hon. Potter Stewart PROFESSIONAL ETHICS FOR THE BUSINESS LAWYER: THE MORALS OF THE MARKETPLACE	118	(1)
Richard W. Painter, THE MORAL OF INTERDEPENDENCE OF CORPORATE LAWYERS AND THEIR CLIENTS	119	(4)
American Bar Association, Model Rules of Professional Conduct (2002)	123	(2)
C. Corporate Charitable Contributions and Social Responsibility	125	(23)
Theodora Holding Corp. v. Henderson	125	(3)
Kahn v. Sullivan	128	(8)
Note: Kahn v. Sullivan	136	(1)
Victor Brudney & Allen Ferrell, CORPORATE CHARITABLE GIVING	137	(6)
Note: Corporate Charitable Contributions	143	(5)
Chapter 6. The Choice of Organizational Form	148	(21)
A. Introduction	150	(2)
B. Non-Tax Aspects	152	(6)
1. Formation	152	(1)
2. Limited Liability	153	(1)
3. Management and Control	154	(1)
4. Continuity of Existence	155	(1)
5. Transferability of Interests	156	(2)
6. Financing Matters	158	(1)
C. Planning Considerations	158	(5)
1. Balancing Ownership Interests	158	(2)
2. The Economics of the Choice	160	(3)
Richard A. Posner, ECONOMIC ANALYSIS OF LAW	161	(2)
D. The Tax Consequences of the Choice: A Brief Examination	163	(6)
1. Partnership vs. Corporation	163	(4)
2. S Corporations	167	(4)
a. Operation of an S Corporation	167	(1)
b. Termination of a Subchapter S Election	167	(2)
Chapter 7. Forming the Corporation	169	(26)
A. Lawyers' Professional Responsibilities: Who Is the Client?	169	(18)
American Bar Association Model Rules of Professional Conduct (2002)	171	(14)
1. Entity Theory of Representation	177	(6)
Jesse By Reinecke v. Danforth	177	(4)
State Bar of Arizona, Opinion No. 02-06	181	(2)
2. The Reasonable Expectations Test	183	(2)
Geoffrey C. Hazard, Jr., ETHICS IN THE PRACTICE OF LAW	185	(2)
B. The Process of Incorporation	187	(3)
Note: Choice of the State of Incorporation	189	(1)
C. Ultra Vires	190	(1)
D. Defective Incorporation	190	(1)
E. Pre-Incorporation Activities of Promoters	191	(4)
Chapter 8. An Introduction to Financial Accounting and Valuation	195	(42)
A. Financial Accounting Demystified	199	(19)
1. Introduction to Accounting Principles	202	(2)
2. The Fundamental Equation	204	(3)
3. Financial Statement Terms and Concepts	207	(7)
a. How Different Financial Statements Relate	207	(1)
b. Balance Sheet Terms and Concepts	208	(6)
4. Introduction to Financial Analysis	214	(4)
a. Liquidity Analysis	214	(1)
b. Debt Coverage Analysis	215	(1)
c. Equity Analysis	215	(2)
d. Cash Flow Analysis	217	(1)
B. Valuing the Enterprise	218	(19)
l. The Old Man and the Tree: A Parable of Valuation	218	(7)
2. Thoughts on Valuing a Business	225	(7)
a. Context Matters	225	(13)
b. Beware of Buying	238	(89)
c. Valuable Thoughts From Chairman Warren	327
3. Irrational Exuberance	232	(7)
Robert J. Shiller, IRRATIONAL EXUBERANCE	232	(5)
Chapter 9. Financial Structure of the Corporation	237	(58)
A. Corporate Securities	239	(18)
1. Introduction	239	(1)
2. Equity Securities	240	(104)
a. Common Stock	240	(2)
b. Preferred Stock	242	(102)
3. Debt Securities	344
4. Designing a Corporation's Capital Structure	246	(12)
a. In General	246	(1)
b. Tax Considerations	246	(1)
c. Leverage and the Allocation of Risk	247	(102)
Equity-Linked Investors, L.P. v. Adams	349
d. Other Risks of Excessive Debt	251	(1)
i. Tax Risks	251	(3)
ii. Bankruptcy Risks	254	(3)
B. Authorization and Issuance of Equity Securities	257	(4)
1. The Significance of Authorizing Stock	258	(1)
Note: Blank Check Preferred Stock and Poison Pill	258	(1)
2. Preemptive Rights and Other Duties in the Issuance of Shares	259	(2)
C. Regulation of Legal Capital	261	(17)
1. A Concise History of Legal Capital and Par Value	263	(25)
Bayless Manning with James J. Hanks, Jr., LEGAL CAPITAL	288
2. The Issuance of Stock and Stockholders' Liability	287
a. Legal Capital Under a Traditional Regime	267	(2)
b. Legal Capital Under the Revised Model Act	269	(2)
3. Dividends and Other Distributions	271	(7)
a. The Rationale for Distributions to Share-holders Regulating	272	(1)
b. The Traditional Approach to Regulating Distributions to Shareholders	272	(1)
Klang v. Smith's Food & Drug Centers, Inc.	273	(5)
c. Protection Against Excessive Distributions Under the Model Act	278
d. Stock Dividends	277	(1)
e. Liability for Unlawful Distribution	277	(1)
D. Corporate Dividend Policy: Legal and Economic Issues	278	(17)
1. Close Corporations	278	(1)
Dodge v.Ford Motor Co.	278	(2)
Note: Dividend Decisions in Close Corporations	280	(4)
2. Public Corporations	284	(1)
Kamin v. American Express Co	284	(1)
Note: Accounting Versus Economic Results	285	(3)
Warren Buffett, LETTER TO SHAREHOLDERS, BERKSHIRE HATHAWAY INC.	288	(1)
Note: Financing Choices	288	(2)
Michael Jensen, ECLIPSE OF THE PUBLIC CORPORATION	290	(3)
James Surowiecki, THE TAMING OF THE BARBARIANS: HOW A RAPACIOUS LEVERAGED-BUYOUT FIRM BECAME A POSITIVE FORCE IN THE CORPORATE ECONOMY	293	(2)
Chapter 10. The Regulation of Securities Issuance	295	(23)
A. Federal Regulation of Securities Offerings	297	(19)
1. Overview of the 1933 Act	297	(1)
Securities and Exchange Commission, THE LAWS THAT GOVERN THE SECURITIES INDUSTRY	297	(1)
2. The Registration Process	298	(1)
Securities and Exchange Commission, Exchange Q & A: SMALL BUSINESS AND THE SEC	298	(2)
Carl W. Schneider, Joseph M. Manko & Robert S. Kant, GOING PUBLIC-PRACTICE, PROCEDURES AND CONSEQUENCES	300	(1)
3. Exemptions From Registration	301	(7)
a. Intrastate Offering Exemption	301	(1)
b. Private Placement Exemption	302	(1)
Doran v. Petroleum Management Corp	302	(4)
c. Regulation D Offerings	306	(2)
d. Regulation A Offerings	308	(1)
e. Fraud Liability in Exempt Offerings	308	(1)
4. Definition of "Security"	308	(1)
Securities and Commission v. SG Ltd.	309	(7)
B. State Blue Sky Laws	316	(2)
Chapter 11. Protection of Creditors: Limitations on Limited Liability	318	(48)
A. Overview	318	(11)
1. Doctrinal Confusion	318	(1)
Franklin A. Gevurtz, Piercing Piercing: AN ATTEMPT TO LIFT THE VEIL OF CONFUSION SURROUNDING THE DOCTRINE OF PIERCING THE CORPORATE VEIL	319	(2)
2. Should the Setting Control When the Veil Is Pierced?	321	(1)
Frank H. Easterbrook and Daniel R. Fischel, THE ECONOMIC STRUCTURE OF CORPORATE LAW	322	(3)
Richard A. Posner, AN ECONOMIC ANALYSIS OF LAW	325	(2)
3. Tort vs. Contract Creditors	327	(2)
B. Tort Creditors	329	(12)
Walkovszky v. Carlton	329	(6)
Radaszewski v. Telecom Corp.	335	(4)
Note: Piercing to Benefit Tort Creditors	339	(2)
C. Contract Creditors	341	(11)
Freeman v. Complex Computing Co., Inc	341	(7)
Kinney Shoe Corp. v. Polan	348	(3)
Note: Piercing to Benefit Contract Creditors	351	(1)
D. Parent-Subsidiary Corporations	352	(8)
Gardemal v. Westin Hotel Co.	353	(3)
Note: Texas Piercing Law	356	(1)
OTR Associates v. IBC Services, Inc.	357	(3)
E. Piercing the Veil of Other Limited Liability Entities	360	(1)
F. Alternatives to Limited Liability	361	(5)
1. Imposing Shareholder Liability Under Federal Law	361	(2)
2. Fraudulent Conveyance and Equitable Subordination Concepts	363	(3)
Chapter 12. Actions Binding the Corporation	366	(26)
A. Delegation of Board to Corporate Executives	367	(13)
1. Introduction: Some Basic Agency Concepts	367	(2)
2. Agency In Corporations: The Authority of Officers	369	(4)
Menard, Inc. v. Dage-MTI, Inc.	373	(5)
3. Ascertaining Corporate Authority	378	(2)
B. Formalities of Board Action	380	(6)
1. Board Action at a Meeting	381	(3)
2. Notice and Quorum	384	(1)
3. Committees of the Board	385	(1)
C. Third-Party Legal Opinions	386	(6)
Report of the Legal Opinion Committee of the Business Law Section of the North Carolina Bar Association	388	(1)
Thomas L. Ambro & J. Truman Bidwell, Jr., RETHINKING LEGAL OPINION LETTERS: SOME THOUGHTS ON THE ECONOMICS OF LEGAL OPINIONS	389	(3)
Chapter 13. Governance Role of Shareholders	392	(64)
A. Basics of Shareholder Voting	393	(4)
Note: Financing of Shareholder Voting	394	(3)
B. Shareholder Veto and Exit Rights in Fundamental Transactions	397	(26)
1. Shareholder Rights in Fundamental Transactions	399	(1)
2. The Mechanics of Corporate Combinations	400	(1)
Note: Statutory Variations	401	(8)
a. Statutory Merger	403	(2)
b. Triangular Merger	405	(3)
c. Exchange of Shares	408
d. Purchase of Assets	407	(1)
e. Tender Offers	408	(1)
f. Summary	408	(1)
3. De Facto Merger Doctrine	409	(2)
Hariton v. Arco Electronics, Inc.	411	(3)
Note: De Facto Merger Approaches	414	(3)
Sale of "Substantially All" Assets	417	(2)
Gimbel v. Signal Companies, Inc.	419	(3)
Note: Board Power to Structure Fundamental Transactions	422	(1)
C. Shareholders' Power to Initiate Action	423	(24)
1. Procedures for Shareholder Meetings	424	(2)
a. Calling the Meeting	425	(1)
b. Notice	425	(1)
c. Quorum	425	(1)
d. Action by Written Consent	426	(1)
2. What Actions Can Shareholders Initiate?	426	(1)
a. Shareholder Recommendations	426	(1)
Auer v. Dressel	426	(3)
b. Amendment of Bylaws	429	(1)
International Brotherhood of Teamsters General Fund v. Fleming Cos	429	(2)
Note: Vidality of Bylaw Amendments Under Delaware Law	431	(2)
c. Removal and Replacement of Directors	433	(1)
Campbell v. Loew's, Inc	433
3. Board Responses to Shareholder Initiatives	427	(10)
Blasius Industries, Inc. v. Atlas Corp.	437	(11)
Quickturn Design Systems, Inc. v. Shapiro	448
D. Shareholders' Right of Inspection	447	(9)
1. Proper Purpose	448	(1)
State Ex Rel. Pillsbury v. Honeywell, Inc.	449	(3)
2. What Comprises a "Stockholder List"?	452	(4)
Chapter 14. The Role of the Shareholder in the Governance of the Public Corporation	456	(57)
A. Theories of the Firm	457	(11)
1. The Berle-Means Corporation	457	(2)
2. The Contractarian Theory of the Corporation	459	(3)
3. Beyond Contractarian Theory	462	(1)
Mark J. Roe, CHAOS AND EVOLUTION IN LAW AND ECONOMICS	463	(2)
4. Shareholder Primacy	465	(3)
B. The Dynamics of Shareholder Voting	468	(12)
1. Introduction	471	(7)
2. How the Proxy Process Works: Law and Practice	478
a. The Annual Meeting	473	(1)
b. Shareholder Voting	473	(1)
c. Filing Proxy Material	474	(1)
d. Identifying the Shareholders: Street Names	474	(1)
e. Control of the Machinery	475	(1)
f. Counting the Proxies	475	(1)
3. The Collective Action Problem	476	(1)
Robert Charles Clark, CORPORATE LAW (1986)	477	(3)
C. Federal Regulation of Proxy Solicitations	480	(7)
1. The Proxy Rules as They Apply to Management 481
2. Communications Reasonably Calculated to Procure A Proxy	482	(2)
Long Island Lighting Company v. Barbash	484	(4)
3. Solicitations by Shareholders and Others	488	(7)
a. Exempt Solicitations	488
b. Shareholder of Voting Decisions Announcements	487	(1)
c. Regulated Solicitations	487	(1)
D. Institutional Investors	487	(6)
E. Shareholder Proposal	493	(20)
1. Evolution of the Shareholder Proposal Rule	495	(1)
2. The Rule in Operation	496	(31)
a. The Interpretative Process	497	(1)
b. Substantive Grounds for Omission	498	(2)
Lovenheim v. Iroquois Brands, Ltd.	500	(2)
Note: Ordinary Business, Public Policy and Management Accountability	502	(3)
Note: Measuring the Success of Shareholder Proposals	505	(4)
Note: The Cracker Barrel Story	509	(1)
Historic Cracker Barrel Vote Prompts New Policy	509	(4)
Chapter 15. Disclosure Duties to Shareholders	513	(62)
A. Implied Federal Private Action for Proxy Fraud	515	(8)
J.I. Case Co. v. Borak	517	(4)
Note: Implied Private Rights of Action	521	(2)
B. Materiality in Federal Proxy Fraud Action	523	(6)
TSC Industries,Inc. Northway, Inc.	523	(4)
Note: Materiality Under Federal Law	527	(2)
C. Reliance and Causation in Federal Proxy Fraud Action	529	(24)
1. "Essential Link" in the Transaction	529	(1)
Mills v. Electric Auto-Lite Co.	529	(6)
Note: Damages and Attorney Fees	535	(1)
2. Causation When Solicitation Not Required	536	(1)
Virginia Bankshares, Inc. v. Sandberg	536	(11)
Note: Impact of Virginia Bankshares	547	(2)
3. Lost State Remedies	549	(1)
Wilson v. Great American Industries, Inc.	549	(4)
D. Culpability in Federal Proxy Fraud Action	553	(1)
E. Constructive Fraud: Unfairness as Deceit	554	(8)
Santa Fe Industries, Inc. v. Green	555	(5)
Note: Unfairness as "Fraud on the Corporation"	560	(2)
F. State Law Duties of Disclosure	562	(13)
1. Duty of Disclosure When Corporate Fiduciaries Seek Shareholder Action	563	(2)
2. Duty of Disclosure When Corporation Communicates to Shareholders	565	(1)
Malone v. Brincat	565	(6)
Note: Implications of Malone v. Brincat	571	(1)
3. Materiality Under State Disclosure Duty	571	(2)
4. "Voluntary" Disclosures and State Remedies	573	(2)
Chapter 16. Outside Directors' Role in the Public Corporation	575	(32)
A. Introduction	576	(2)
B. How Boards of Directors Operate	578	(2)
C. Key Board Committees	580	(5)
1. The Audit Committee	581	(2)
2. The Compensation Committee	583	(1)
3. The Nominating Committee	584	(1)
D. Do Independent Directors Matter?	585	(22)
1. Who the Outside Directors Are	585	(1)
2. How "Independent" Is Defined	586	(1)
3. Do Boards Dominated by Independent Directors Enhance Corporate Performance?	587	(1)
Laura Lin, THE EFFECTIVENESS OF OUTSIDE DIRECTORS AS A CORPORATE GOVERNANCE MECHANISM: THEORIES AND EVIDENCE	587	(3)
4. Concerns Precipitated By The "Fall of Enron"	590	(1)
William W. Bratton, ENRON AND THE DARK SIDE OF SHAREHOLDER VALUE	591	(22)
a. Objective vs. Subjective Independence	592	(2)
Michael J. Halloran, THE BOARD OF DIRECTORS IN THE POST-ENRON ERA	594	(3)
b. When Should Courts Defer to "Independent" Directors' Judgments?	597	(1)
Leo E. String, Jr., DERIVATIVE IMPACT? SOME EARLY REFLECTIONS ON THE CORPORATION LAW IMPLICATIONS OF THE ENRON DEBACLE	598	(9)
Chapter 17. The Duty of Care of Corporate Directors	607	(111)
A. Standards of Care	608	(4)
B. Duty of Oversight	612	(26)
1. Supervision of Ongoing Business	613	(1)
Francis v. United Jersey Bank	613	(5)
Note: A Unitary Standard of Oversight?	618	(2)
2. Monitoring of Legal Compliance	620	(3)
In Re Caremark International Inc. Derivative Litigation	623	(7)
Note: Duty of Inquiry After Caremark	630	(3)
Note: Internal Controls Under Sarbanes-Oxley	633	(2)
3. Director's Criminal Liability	635	(3)
C. Business Judgment Rule	638	(14)
1. Scope of the Business Judgment Rule	638	(1)
Shlensky v. Wrigley	638	(4)
Note: Corporate Best Interests	642	(1)
2. Business Judgment Rule and Directorial Negligence	643	(3)
Note: Codification of Business Judgment Rule	646	(2)
Note: Business Judgment Rule and Waste	648	(1)
3. Business and Judgment Rule and Illegal Conduct	649	(1)
Miller v. American Telephone & Telegraph Co.	649	(3)
D. Duty to Become Informed	652	(35)
1. The Trans Union Case	652	(1)
Smith v. Van Gorkom	652	(17)
Note: Van Gorkom and Its Aftermath	669	(4)
Note: The Board as Individuals or Collective Body	673	(1)
2. Due Care and the Business Judgment Rule	674	(2)
3. Reliance	676	(3)
4. Lack of Objectivity	679	(1)
5. Causation	680	(5)
6. Rebutting the Presumption of the Business Judgment Rule	685	(2)
E. Avoidance of Liability	687	(31)
1. Protections Against Directorial Liability	688	(2)
2. Statutory Exculpation of Directors	690	(2)
James J. Hanks, Jr., EVALUATING RECENT STATE LEGISLATION ON DIRECTOR AND OFFICER LIABILITY LIMITATION AND INDEMNIFICATION	692	(1)
Note: Standards and Burdens of Proof in Exculpation Cases	693	(5)
3. Indemnification	698	(1)
American Bar Association Committee on Corporate Laws, CHANGES IN THE MODEL BUSINESS CORPORATION ACT-AMENDMENTS PERTAINING TO INDEMNIFICATION AND ADVANCE FOR EXPENSES	698	(2)
E. Norman Veasey, Jesse A. Finkeistein & C. Stephen Bigler, DELAWARE SUPPORTS DIRECTORS WITH A THREE-LEGGED STOOL OF LIMITED LIABILITY, INDEMNIFICATION AND INSURANCE	700	(2)
Waltuch v. Conticommodity Services, Inc.	702	(8)
Note: Interpreting Indemnification Statues	710	(4)
Note: Charter, By-Law and Contract Indemnification	714	(1)
4. Directors' and Officers' Insurance	715	(3)
Chapter 18. Duty of Loyalty	718	(86)
A. Introduction: On Conflicts of Interest and the Duty of Loyalty	718	(4)
B. An Overview of the Issues
Melvin Aron Eisenberg, THE DIVERGENCE OF STANDARDS OF CONDUCT AND STANDARDS OF REVIEW IN CORPORATE LAW	722	(5)
C. The Common Law Standard	727	(3)
D. Contemporary Statutory Approaches	730	(10)
1. Common Law Statutory Analysis	730	(1)
Remillard Brick Co. v. Remillard-Dandini Co.	730	(3)
Note: Interpreting an Interested Director Statute	733	(1)
Note: The Delaware Approach	734	(2)
2. MBCA Subchapter F	736	(4)
E. Entire Fairness: Fair and Fair Price	740	(31)
1. Procedural Fairness (Fair Dealing)	741	(19)
a. Who Is an Interested Director	741	(1)
Orman v. Culiman	741	(10)
In re the Walt Disney Company Derivative Litigation	751	(4)
Note: The Attorney as Director	755	(2)
Note: Can Directors Be Truly Independent?	757	(1)
b. Disclosure	758	(2)
2. Substantive Fairness (Fair Price)	760	(1)
3. Shareholder Approval	761	(1)
Lewis v. Vogelstein	762	(4)
Harbor Finance Partners v. Huizenga	766	(5)
F. Executive Compensation	771	(10)
Note: The American Tobacco Litigation	771	(4)
Lewis v. Vogelstein	775	(4)
Note: Stock Options	779	(2)
G. Corporate Opportunity	781	(23)
1. Traditional Corporate Opportunity Doctrine	782	(1)
Farber v. Servan Land, Inc	782	(6)
2. What Is a Corporate Opportunity Doctrine?	788	(7)
a. Interest or Expectancy	788	(1)
b. Line of Business	789	(2)
Note: A Statutory Approach	791	(1)
c. Fairness: Alone or in Combination With Other Standards	792	(1)
d. Financial or Economic Capacity	793	(2)
3. When May a Corporate Manager Take an Opportunity for Herself?	795	(1)
Burg v. Horn	795	(2)
4. The Importance of Disclosure	797	(1)
ALI Principles of Corporate Governance	797	(5)
5. Remedies for Usurping a Corporate Opportunity	802	(2)
Chapter 19. Duty of Controlling Shareholders	804	(100)
A. Transactions Between the Controlling Shareholder and the Controlled Corporation	807	(5)
Sinclair Oil Corp. v. Levien	807	(5)
Note: Sinclair v. Levien	812	(1)
B. Cash Out Mergers	812	(57)
1. Introduction	812	(3)
2. The Analytic Framework	815	(1)
Weinberger v. UOP, Inc.	816	(15)
Note: The Business Purpose Test After Weinberger	831	(2)
Note: Exclusivity of Appraisal After Weinberger	833	(5)
Note: Short Form Mergers	838	(1)
3. Fair Dealing and Fair Price	839	(1)
William T. Allen, INDEPENDENT DIRECTORS IN MBO TRANSACTIONS: ARE THEY FACT OR FANTASY?	840	(3)
Kahn v. Lynch Communication Sys., Inc.	843	(9)
Kahn v. Lynch Communication Sys., Inc.	852	(6)
In re Pure Resources, Inc., Shareholders Litigation	858	(11)
C. Sale of a Controlling Interest	869	(35)
1. Introduction	869	(5)
2. Duty of Care	874	(1)
Harris v. Carter	874	(9)
3. Duty of Loyalty	883	(1)
Perlman v. Feldmann	883	(4)
Note: Perlman v. Feldmann	887	(2)
Jones v. H.F. Ahmanson & Co	889	(7)
4. Sale of Office	896	(1)
Essex Universal Corp. v. Yates	896	(6)
Note: Selling Corporate Office	902	(2)
Chapter 20. Shareholder Litigation	904	(68)
A. Introduction	904	(8)
B. Direct and Derivative Actions	912	(5)
Note: Features of Shareholder Litigation	916	(1)
C. Who Qualifies as a Plaintiff?	917	(9)
1. Adequacy	917	(1)
In Re Fuqua Industries, Inc. Shareholder Litigation	918	(3)
2. Standing	921	(3)
a. Contemporaneous Ownership	921	(1)
b. Continuing Interest	922	(1)
c. Security Ownership	923	(1)
3. Choosing Lead Plaintiff/Lead Counsel	924	(2)
D. Internal Corporate Procedures	926	(34)
1. The Traditional (Delaware) Approach	926	(27)
a. Demand	926	(1)
Aronson v. Lewis	927	(8)
Post-Aronson Developments	935	(5)
b. Termination Where Demand Is Excused	940	(1)
Zapata Corp. v. Maldonado	940	(7)
Note: Special Litigation Committees	947	(6)
2. The MBCA and ALI Approaches	953	(2)
Einhorn v. Culea	955	(5)
E. Settlement and Attorneys' Fees	960	(12)
1. Introduction	960	(1)
2. Judicial Review of Settlements	961	(5)
3. Attorneys' Fees	966	(6)
Chapter 21. Regulation of Securities Trading	972	(125)
A. Securities Trading: Markets and Theory	972	(17)
1. Overview of Securities Trading	972	(2)
2. Information and Securities Markets	974	(15)
3. Economic Theory: Insider Trading and Corporate Disclosure
B. Insider Trading: State Corporate Law	989	(16)
1. Duty to Shareholders and Investors	989	(1)
Goodwin v. Agassiz	989	(3)
Note: Common Law of Insider Trading	992	(1)
Note: Common Law of Deceit	993	(1)
2. Duty to the Corporation	994	(1)
Diamond v. Oreamuno	994	(5)
Freeman v. Decio	999	(5)
Note: Current Status of State Law on Insider Trading	1004	(1)
C. Insider Trading: Rule 10b-5	1005	(59)
1. Early History	1005	(3)
2. Scope of Rule 10b-5	1008	(1)
Securities and Exchange Commission v. Texas Gulf Sulphur Co.	1008	(18)
3. Duty to "Disclose or Abstain"	1026	(1)
Chiarella v. United States	1026	(6)
4. Tipping Liability (or when 15% Is Not Enough)	1032	(1)
Dirks v. Securities and Exchange Commission	1033	(11)
5. Misappropriation Liability	1044	(1)
United States v. O'Hagan	1045	(10)
Note: Life After Chiarella, Dirks and O'Hagan	1055	(6)
Securities and Exchange Commission, SELECTIVE DISCLOSURE AND INSIDER TRADING	1061	(2)
Note: Remedies for Insider Trading Violations	1063	(1)
D. Disclosure Duties of Corporations: Rule 10b-5	1064	(27)
1. Duty to Disclose	1064	(1)
Alan R. Palmiter, CORPORATIONS: EXAMPLES AND EXPLANATIONS	1064	(2)
New York Stock Exchange Listed Company Manual SECTION 2: DISCLOSURE AND REPORTING MATERIAL INFORMATION	1066	(2)
State Teachers Retirement Board v. Fluor Corp.	1068	(2)
2. Materiality	1070	(1)
Basic Inc. v. Levinson	1070	(7)
Note: Forward-Looking Information	1077	(3)
3. Elements of Securities Fraud Under Rule 10b-5	1080	(13)
a. Standing	1082	(1)
b. Scienter	1083	(3)
c. Reliance and Causation	1086	(1)
Basic, Inc. v. Levinson	1087	(4)
Note: Federalization of Corporate Governance?	1091	(1)
E. Disgorgement Liability: Section 16	1091	(6)
Note: Interpretative Questions Under Section 16	1093	(4)
Chapter 22. Protecting and Selling Control	1097	(99)
A. Introduction	1097	(1)
B. The Regulatory Framework	1098	(9)
1. Federal Regulation	1098	(4)
a. Proxy Contests	1098	(1)
b. Tender Offers	1099	(3)
2. State Regulation	1102	(5)
C. Case Law Developments	1107	(70)
1. The Delaware Courts' Approach	1109	(63)
a. The Analytic Framework: From Unocal to Time	1110	(7)
b. The Contemporary Framework	1117	(1)
Paramount Communications Inc. v. QVC Network Inc.	1117	(15)
Unitrin, Inc. v. American General Corp	1132	(10)
c. Post-Unitrin Developments	1142	(1)
Chesapeake Corporation v. Shore	1143	(8)
Note: Reconciling Blasius With Unocal and Unitrin	1151	(1)
MM Companies, Inc. v. Liquid Audio, Inc.	1152	(5)
Omnicare, Inc. v. NCS Healthcare, Inc.	1157	(13)
Note: Directors' Duties in a Sale of Control	1170	(2)
2. Other States' Approaches	1172	(5)
D. The Policy Debate	1177	(19)
Michael L. Wachter, TAKEOVER DEFENSE WHEN FINANCIAL MARKETS ARE (ONLY) RELATIVELY EFFICIENT	1177	(6)
Andrei Shleifer & Robert Vishny, STOCK MARKET DRIVEN ACQUISITIONS	1183	(13)
Chapter 23. Closely Held Corporations	1196
A. Close Corporation Dilemma	1196	(6)
Note: Close Corporation as Incorporated Partnership
B. Realignments of Shareholder Control
1. Cumulative Voting	1202	(6)
2. Class	1208
3. Shareholder Voting Arrangements	1204	(3)
J. G. Deutsch, THE TEACHING OF CORPORATE LAW: A SOCRATIC INVESTIGATION OF LAW AND BUREAUCRACY	1207	(6)
C. Restrictions on Board Discretion	1213	(18)
1. Shareholder Agreements	1214	(4)
Triggs v. Triggs	1218	(6)
Note: Statutory Authorization of Restraints on Board Discretion Statutory Authorization	1224	(2)
2. High Voting Requirements	1226	(1)
3. Fiduciary Duties in Exercising Veto Rights	1227	(1)
Smith v. Atlantic Properties,Inc.	1228	(3)
D. Contractual Transfer Provisions	1231	(12)
1. Purposes and Legality of Transfer Provisions	1232	(1)
2. Types of Transfer Provisions	1233	(4)
3. Valuation of Restricted Shares
4. Judicial Interpretation of Transfer Provisions	1237	(1)
Concord Auto Auction, Inc. v. Rustin	1237	(5)
Note: Strict Interpretation of Transfer Provisions	1242	(1)
E. Oppression: Liquidity Rights and Dispute Resolution	1243	(42)
1. Dissension and Oppression in the Close Corporation	1244	(3)
2. Fiduciary Protection of Minority Interests	1247	(1)
Wilkes v. Springside Nursing Home, Inc.	1247	(5)
Note: Equality Versus Majority Control	1252	(3)
Nixon v. Blackwell	1255	(3)
Note: Contractual Approaches to Oppression	1258	(1)
Note: Tort Approach to Oppression	1258	(1)
Note: Choice of Law in Close	1259	(1)
3. Statutory Remedies for Oppression	1260	(2)
Matter of Kemp & Beatley, Inc.	1262	(5)
Note: Oppression of Shareholder-Employee	1267	(1)
Bonavita v. Corbo	1267	(7)
Notes: Perspectives on Oppression	1274	(5)
Note:Non-Dissolution Remedies in Oppression Cases	1279	(6)
INDEX	1285