Featured Print Articles
Volume 80, Issue 4 (more)
Article by Kenneth Ayotte & David A. Skeel Jr
Since the outset of the recent financial crisis, liquidity problems have been cited as the cause behind the bankruptcies and near bankruptcies of numerous firms, ranging from Bear Stearns and Lehman Brothers in 2008 to Kodak more recently. This Article expands the prevailing normative theory of corporate bankruptcy—the Creditors’ Bargain theory—to include a role for bankruptcy as a provider of liquidity. The Creditors’ Bargain theory argues that bankruptcy law should be limited to solving problems caused by multiple, uncoordinated creditors, but focuses almost exclusively on the problem of creditor runs. We argue that two well-known problems that cause illiquidity—debt overhang and adverse selection—are also caused by multiple-creditor-coordination problems. As such, bankruptcy law is justified in solving these problems in addition to creditor-run problems.
With this insight in hand, we argue that many of bankruptcy’s existing rules, including debtor-in-possession financing, sales free and clear of liens, and coerced loans, can be seen as liquidity-providing rules that target either debt-overhang problems, adverse-selection problems, or both. Using bankruptcy to solve liquidity problems can create costs, however, such as the risk of continuation bias. We suggest rules of thumb for judges to use in balancing the benefits and costs of these rules. We also connect our theory to the use of bankruptcy for financial institutions, where liquidity concerns loom large.
80 U Chi L Rev 1557 [Article PDF]
Article by Charles L. Barzun
This Article is about the nature and scope of legal argument. It considers the question of whether a court, when determining the precedential weight of one of its prior decisions, should consider historical evidence indicating that the decision was decided on the basis of improper motivations or as the result of political pressure. In a common law system in which courts pervasively rely on precedents as a source of law, that question is of obvious practical and theoretical importance. Yet courts and scholars have hardly even raised the question, let alone provided a satisfactory answer to it. Instead, they have assumed that such explanations are historical, not legal arguments—the kind of thing appropriate for law reviews, but not for courts of law.
This Article directly challenges that assumption. Drawing on a few rare examples when justices of the Supreme Court, or lawyers arguing before them, have sought to undermine court precedents by showing them to have been based on “extralegal” considerations, I argue that such efforts to historicize or—to use the term I prefer—impeach past decisions are a legitimate and potentially useful means of evaluating a decision’s precedential weight. Although various policy justifications may support excluding such arguments from judicial debate, I consider several such objections and explain why none is particularly persuasive. If the argument presented is sound, then not only should courts be more receptive to impeaching arguments, but—at least in the realm of constitutional law—both courts and scholars should perhaps broaden their understanding of how constitutional history bears on constitutional theory.
80 U Chi L Rev 1625 [Article PDF]
Article by Anthony J. Casey & Andres Sawicki
Dozens of people worked together to produce Casablanca. But a single person working alone wrote The Sound and the Fury. While almost all films are produced by large collaborations, no great novel ever resulted from the work of a team. Why does the frequency and success of collaborative creative production vary across art forms?
The answer lies in significant part at the intersection of intellectual property law and the theory of the firm. Existing analyses in this area often focus on patent law and look almost exclusively to a property-rights theory of the firm. The implications of organizational theory for collaborative creativity and its intersection with copyright law have been less examined. To fill this gap, we look to team production and moral-hazard theories to understand how copyright law can facilitate or impede collaborative creative production. While existing legal theories look only at how creative goods are integrated with complementary assets, we explore how the creative goods themselves are produced. This analysis sheds new light on poorly understood features of copyright law, including the derivative-works right, the ownership structure of a joint work, and the work-made-for-hire doctrine.
80 U Chi L Rev 1683 [Article PDF]
Article by Eric A. Posner & Adrian Vermeule
In a typical pattern in the literature on public law, the diagnostic sections of a paper draw upon political science, economics, or other disciplines to offer deeply pessimistic accounts of the motivations of relevant actors in the legal system. The prescriptive sections of the paper, however, then issue an optimistic proposal that the same actors should supply public-spirited solutions. Where the analyst makes inconsistent assumptions about the motivations of actors within the legal system, equivocating between external and internal perspectives, an inside/outside fallacy arises. We identify the fallacy, connect it to an economics literature on the “determinacy paradox,” and elicit its implications for the theory of public law.
80 U Chi L Rev 1743 [Article PDF]