UC Irvine Law Review

The recent rise of shareholder engagement has revamped companies’ corporate governance structures so as to empower shareholder rights and to constrain managerial opportunism. The general trend notwithstanding, this Article uncovers corporate spin-off transactions—which divide a single company into two or more companies—as a unique mechanism that insulates the management from shareholder intervention. In a spin-off, the company’s managers can fundamentally change the governance arrangements of the new spun-off company without being subject to monitoring mechanisms, such as shareholder approval or market check. Furthermore, most spin-off transactions enjoy tax benefits. The potential agency problems associated with the managers’ unilateral governance changes can be further compounded when the managers adopt multiple classes of common stock with unequal voting rights (dual-class stock) in the new spun-off company without shareholder approval.

This is the first Article to systematically examine the problem from both corporate and tax law perspectives and to offer possible solutions. The Article argues that when the managers’ unilateral governance changes are substantial, certain adjustments to corporate and tax laws may be necessary to curb managerial opportunism. For instance, under corporate law, when spin-off transactions accompany a charter amendment, shareholder approval, either at the state law level or company charter level, can be mandated. In addition, tax law can revisit the “continuity of interest” requirement to evaluate whether material changes in shareholder voting rights can disqualify certain spin-offs from tax-free treatment. The Article will also present new insights into the long-standing debate on dual-class stock by showing how the perceived risk of dual-class stock can be magnified when combined with spin-off transactions.

This Article evaluates recent dramatic developments in Delaware law surrounding merger litigation and concludes that they have gone too far in limiting the ability to challenge managerial wrongdoing in the takeover context. The past three years have seen a sea change in merger litigation, brought on by the twin earthquakes of the Delaware Supreme Court’s decision in Corwin v. KKR and the Delaware Court of Chancery’s decision in In re Trulia. Both of these decisions were inspired by a perceived crisis in merger litigation. By 2015, the percentage of economically significant deals challenged by at least one lawsuit had been hovering at or above 90% for years. The vast bulk of these suits were resolved via “disclosure only” settlements that provided little or no value to stockholders, but secured broad releases from liability for defendants and significant fees for plaintiffs’ attorneys. Decades of academic debate over the merits of stockholder litigation had reached a rare degree of consensus: at least with regard to merger lawsuits, the merits were meaningless and litigation had devolved into absurdity.

The explosion of dubious merger litigation demanded a response. On the one hand, most prominently in In re Trulia, the Court of Chancery took direct and long-overdue measures to remove the incentives that drove the crisis by increasing scrutiny of low-value settlements and accompanying releases of liability. On the other hand, a series of ill-considered decisions culminating in Corwin allowed defendants to avoid judicial scrutiny altogether by adopting various procedural safeguards, despite the lack of evidence that these safeguards will be effective. These decisions will almost certainly reduce merger litigation but are likely to do so relatively indiscriminately, blocking frivolous and meritorious claims alike. This Article concludes that the procedural safe harbors created in Corwin and its brethren should be reconsidered as unjustified by the recent merger litigation crisis, and inconsistent with longstanding Delaware law and the realities of merger practice.

Central to understanding biometric privacy is the question of biometric privacy harms. How much do people value biometric privacy, and what evils should biometric privacy laws seek to avert? This Article addresses these questions by surveying two nationally representative samples to determine what does, and does not, worry people in the context of biometrics. The results show that many people are deeply concerned about biometric privacy in the consumer context, that they are willing to sacrifice real benefits to preserve biometric privacy, and that those who are concerned with biometric privacy attribute their concern to many factors that are not directly related to data security, particularly public tracking. Further, people’s level of comfort with biometric data collection differs sharply depending on the uses to which the data will be put and not just on the type of data collected. These nuanced attitudes about biometric privacy are in sharp conflict with a purely data security approach to biometric harms, and therefore have substantial implications both for future legislative consideration as well as current standing litigation.

Marriage settlements are back. Complex trusts intended to protect family fortunes were once the centerpiece of wedding planning and family negotiations. In more modern times, these trust-based settlements ceded their popularity to premarital contracting and the prenuptial agreement. But in recent years, new trust forms with unprecedented asset protection features have prompted a resurgence of trust usage in marriage planning. Playing on notions of family money and legacy building, these new trusts function much like their predecessors, except in one noteworthy respect. Conventional trusts have always provided asset protection based on the notion of third-party freedom of disposition. The new marriage trusts give asset protection to trusts created by a first-party to the marriage. Accordingly, one spouse can create an asset protection trust—for his or her exclusive benefit using what is potentially marital property— without the knowledge of the other spouse. That individual spouses are seeking new ways to protect wealth is not necessarily surprising. Nevertheless, the new powers being given to individual spouses to shelter assets within marriage are alarming. In practice, the new trusts are disconcerting because they allow for a significant amount of unilateral decision-making. In theory, the new trusts are troubling because they disrupt the precarious equilibrium that exists between two competing “value-spheres”: family wealth preservation and marital partnership. This Article proposes a distinctive framework, based on the notion of competing value-spheres, for assessing the growing phenomenon of asset protection trusts in marriage and concludes that these trusts represent an aggressive incursion of wealth preservation into the realm of modern marital partnership. That is to say, the new asset protection trusts undermine the values of personal trust and financial transparency within marriage.

Progressive property theory emerged a decade ago to challenge law and economics as the dominant theoretical mode of property law analysis. Offering a fresh look at the rights and obligations of ownership, progressive property theory argues, among other propositions, that property rules and institutions should further the ability of all people to obtain the basic resources necessary to engage in the social and political life of a community.

Meanwhile, housing justice campaigns being waged across the United States, promoting policies like inclusionary zoning and rent control, are frequently met by critics who make theoretical arguments about the fundamental nature of property. Housing advocates often cede the theoretical domain, and instead respond with pragmatic data-driven appeals or technical precedential arguments that, I argue here, would benefit from a more robust theoretical grounding of the sort progressive property theory could provide.

Progressive property theory, however, is yet to exert any measurable influence outside of legal academia. Scholars have offered a variety of critiques of the theory that may help to explain its limited impact. I argue that exogenous factors—those external to the theory itself—also hold significant explanatory force. I conclude that the law school clinic could serve as one “theory delivery mechanism” to infuse progressive property theory more broadly into U.S. law and legal institutions.