Volume 70, Issue 1


Volume 70, Fall 2017, Issue 1


Tort Luck and Liability Insurance

Kenneth S. Abraham

Important features of both the incidence and magnitude of tort liability depend heavily, and therefore arbitrarily, on luck. One of a number of examples is the eggshell-plaintiff rule, which imposes liability for all the physical injury a defendant causes, even if the amount of that injury was unforeseeable. In each instance, tort liability hinges on chance in a way that bears only an attenuated relationship, or no relationship, to the degree of responsibility that can fairly be attributed to the party in question. Despite the arguable injustices that tort luck reflects, it remains in the background, largely uncontroversial. Tort luck would be surprising, intolerable, or both, if it were not enmeshed in a system that relies so heavily on liability insurance to cushion its impact. Liability insurance reconciles, ameliorates, or eliminates many of the anomalies and contradictions in tort doctrines that might have otherwise disappeared long ago. This Article analyzes the ways that liability insurance interacts with tort luck, identifying the pervasive presence of insurance in tort liability, from both qualitative and quantitative perspectives. It then examines the tort doctrines and practices that make liability hinge, arguably arbitrarily, on luck, and the ways in which insurance ameliorates this tort luck. Finally, the Article develops a counter-history of tort law, exploring the shape that tort law might have taken if liability insurance had not been available to play a role in ameliorating tort luck.

One Size Does Not Fit All: A Contextual Approach to Fiduciary Duties Owed to Preferred Stockholders From Venture Capital to Public Preferred to Family Business

Juliet P. Kostritsky

This Article examines whether corporations should owe fiduciary duties to their preferred stockholders as preferred stockholders across all settings of preferred stock holding. In one context, sophisticated venture capitalists (“VCs”) purchase preferred stock after carefully negotiating the stock price, control over the corporate governance, and other key stipulations by contract. Additionally, because the initial preferred stockholder could protect its interests through staged financing or board control, the preferred stockholder might not discount the stock even if it lacked protection, since the other protective devices made the lack of such protections inconsequential, so the initial holders will not pay for these added fiduciary protections. In such settings it does not make sense for the corporation to owe fiduciary duties to the preferred stockholders as preferred. In fact, doing so rearranges the basis on which the initial stockholders purchased the stock, and implying a fiduciary term constitutes a hit to the common stockholders and thus ignores the terms of the claimants and the risk and targeted return for each of them. However, while it makes sense for sophisticated venture capitalists to rely only on bargained-for contractual protections, this Article identifies two specific contexts where a limited fiduciary obligation should be extended to preferred stockholders who lack bargaining power. The first is when non-working children are given preferred stock in a family business. The second is when a corporation takes on a new, unfamiliar product line, allowing common stockholders to wipe out the value of publicly traded preferred stock. When the preferred stock is purchased in the public marketplace, the preferred stockholders will not have any bargaining power in the preferred stock’s contractual arrangement. Moreover, the additional terms routine in shareholder agreements between VCs and founders are almost never found in the charter documents, so those provisions will not be transferable. To the subsequent purchaser of preferred stock, the lack of such protections might call for a limited fiduciary duty if the markets for preferred stock are not as efficient as for common stock or if there are chinks in the efficient capital market hypothesis. Where the disciplining effects of the market are weaker, subsequent buyers of the preferred stock may not price the stock accurately to reflect the lack of transferable protections, providing a justification for a limited fiduciary duty in that context if implying the term would add value.

Dangerous Liaisons: A Domestic Violence Typology in Custody Litigation

Joan S. Meier

This article examines the use of a widely acclaimed social science typology of domestic violence in child custody litigation. Review of the case law suggests that courts and court-based evaluators frequently apply the typology so as to minimize or ignore a parent’s domestic violence. Moreover, although the typology has been widely touted as empirically based, review of the latest empirical research suggests that it contains significant contradictions and gaps, and does not consistently support the key proposed distinctions between the “types” which matter to custody decisions, such as future dangerousness and post-separation risks to children. This case study of the intersection of social science and law suggests that the nuances, complexities and indeterminacy of social science research do not transfer neatly to legal cases, inevitably resulting in a simplistic use of labels, which can create harmful outcomes for children. Both family law and domestic violence professionals in family courts, where the typology has gained traction, and social science researchers developing and exploring such theories, are urged to employ greater caution in employing or advocating for employment of such social science constructs in family court decision-making.

Loss Causation on Trial in Rule 10B-5 Litigation A Decade After Dura

Matthew L. Mustokoff & Margaret E. Mazzeo

In the decade since the U.S. Supreme Court handed down its decision in Dura Pharmaceuticals, Inc. v. Broudo, outlining the pleading standard for loss causation in securities fraud class actions, only seven such cases have been tried to verdict. Thus, while the case law addressing the loss causation requirement at the pleading stage abounds, there is a paucity of decisions that address the burden of proof at the trial stage. This Article explores the small constellation of post-trial decisions that set forth the basic contours of establishing loss causation and damages at trial. We examine the courts’ treatment of some of the more prominent loss causation theories litigated through trial and appeal since Dura’s issuance. First, we trace the “price maintenance” theory, premised on the idea that a material misrepresentation can artificially inflate a security’s price by propping up, or “maintaining,” the existing stock price without increasing it, and look at how the theory was litigated in three Rule 10b-5 trials. Next, we survey how courts have wrestled with the question of what constitutes a “corrective disclosure” for purposes of proving loss causation at trial. Finally, we examine the ‘7eakage” theory which posits that often times the details and consequences of a fraud do not come to light all at once but rather trickle out over time, and that damages can derive from stock price declines other than strictly those associated with patent corrective disclosures


Business Is Business: Ground Rents and Ejectments in Baltimore

Edward A. Corma

Property law is full of old, poorly understood doctrines that fascinate some and give others headaches. Some forms of property ownership trace back to feudalism and are still in force to this day. One example is the ground rent, little known outside of Maryland and concentrated principally in Baltimore City. A ground rent is a type of lease in which the lessor retains ownership of the land and the lessee may build and occupy a house on that land. The leases are typically for a term of ninety-nine years, automatically renewable forever. A homeowner subject to a Maryland ground rent is technically the owner of personal property but possesses the practical rights and duties of an owner of real property.

Catalyzing Innovation with Regulation: Income Share Agreements and the Student Debt Crisis

Timothy Machat

The use of Income Sharing Agreements to fund higher education is an innovative idea that can provide benefits for those facing the pervasive student debt crisis in the United States. Income Share Agreements allow investors to purchase a share of an individual’s future earning prospects in exchange for advancing the student the funds needed to finance his or her education. The student recipient in turn agrees to pay the lender a specified fraction of his or her future earnings. The problem, however, is that without regulatory certainty, investors have been and will continue to be hesitant about participating in such arrangements, and Income Sharing Agreement programs will struggle to gain traction and grow. Legislators must work towards establishing a regulatory framework for this novel educational funding vehicle using select proposals from failed legislation and Purdue University’s nascent “Back a Boiler” program as guidance. The prescribed action would facilitate increased exposure of a novel solution to the higher education funding quandary facing the nation’s students and their families.

Female-Only Platforms in the Ride-Sharing Economy: Discriminatory or Necessary?

Pauline M. Tarife

The safety and privacy of female passengers have dogged ride-sharing companies, Uber and Lyft, throughout the country, underscored by the media’s relentless news stories of male drivers raping, sexually assaulting, and harassing women during their rides. Concerned that Uber and Lyft have failed to adequately address the issue of sexual violence against female passengers, consumers have chosen to tackle it themselves by removing what they believe to be the aggravating factor: men. Companies like SheRides and Safr pair female drivers with female passengers in efforts to protect riders’ safety and afford women the opportunity to. experience the same perception of privacy as men who use Uber and Lyft. While SheRides and Safr may address these concerns, critics suggest that womenonly taxis’ exclusion of male drivers is illegal. In light of this tension, this Note analyzes female-taxi services’ same-sex hiring policies under Title VII of the Civil Rights Act of 1964, and ultimately concludes that SheRides and Safr’s employment practices are legal because gender is a bona fide occupational qualification for employment-justified by business, privacy, and safety interests, and necessitated by current events.

Video Game Gambling: Too Big a Bet for New Jersey

Matthew R. Yost

“All the kids are doing it.”‘ Fourteen-year-old Elijah Ballard sold his iPad on eBay for $200 to pay for it. But that was not enough.  He added some money that he had earned working at a Hebrew school.  But that still was not enough. The rest he billed to his father’s credit card. After his parents found out, Elijah’s mom opened a joint checking account with him, which he then paired with a PayPal account. That was not enough either, and the account was overdrafted several times over the next few months. Elijah soon began sneaking into his parents’ wallets while they slept and took photos of their credit cards to support his habit. The charges continued. Elijah’s mother eventually called PayPal to address the overdraft charges.’ The service representative did not remove the charges, but he was sympathetic, noting that “all the kids are doing it.” What is “it”? Well, “it” is buying and wagering video game “skins” in unregulated online casinos.