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Latest Faculty Scholarship: SSRN Legal Studies Research Paper Series Vol. 18, No. 1

For the latest scholarship from the Iowa Law faculty, see the following articles or book chapters circulated as part of the University of Iowa College of Law Legal Studies Research Paper Series on SSRN.

Thomas P. Gallanis: Will Substitutes: A U.S. Perspective
A. Braun and A. Röthel, eds. Passing Wealth on Death: Will-Substitutes in Comparative Perspective, Oxford: Hart Publishing, 2016, Forthcoming
U Iowa Legal Studies Research Paper No. 16-01

This chapter aims to introduce the phenomenon of will substitutes in the United States to a transnational readership. The chapter consists of six principal parts. After this brief introduction, Part I lays a foundation by defining the terms of art ‘will substitute’ and ‘nonprobate transfer’, by locating the law(s) governing will substitutes within the federal-state structure of the United States, and by explaining the reasons why in the U.S. will substitutes are often used. Part II surveys the principal types of will substitutes used in the United States: revocable trust instruments, life insurance beneficiary designations, pension and retirement account beneficiary designations, multiple-party and pay-on-death bank account registrations, transfer-on-death registrations of securities or automobiles, deeds creating joint tenancies and tenancies by the entirety in land, and transfer-on-death deeds of land. Part II also briefly discusses gifts causa mortis. Part III explains the distinction between ‘pure’ and ‘imperfect’ will substitutes. The former fully replicate the essential features of a will; the latter do not. Part III also explains why will substitutes are valid under U.S. law even though they need not comply with the formalities required for a testamentary transfer. Part IV explores the rights of third parties in assets transferred at death by a will substitute. These third parties include taxing authorities, the decedent’s creditors, and the decedent’s surviving spouse and children. Part V explores a dominant trend in U.S. succession law: the harmonization of the default rules governing wills and will substitutes. Part VI then explores a counter-trend: the federal preemption of state succession law, particularly relating to pension plans and life insurance. A brief conclusion follows.

Herbert J. Hovenkamp: Antitrust and Efficient Mergers
U Iowa Legal Studies Research Paper No. 16-02

Mergers of business firms violate the antitrust laws when they threaten to lessen competition, which generally refers to a price increase resulting from a reduction in output. However, a merger that threatens competition may also enable the post-merger firm to reduce its costs or improve its product. Attitudes toward mergers are heavily driven by assumptions about efficiency gains. If mergers of competitors never produced efficiency gains but simply reduced the number of competitors, a strong presumption against them would be warranted. We tolerate most mergers because of a background, highly generalized belief that most or at least many produce cost savings or improvements in products or service. This article considers the current approach of merger enforcement policy to merger-induced efficiencies.

Merger analysis today takes efficiencies into account in two ways. First, it makes assumptions about efficiencies in determining where the line for prima facie illegality should be drawn. Second, it recognizes an efficiencies "defense" once prima facie illegality has been established, with the burden of proof on the defendant.

The rapidly growing empirical literature on post-merger performance suggests that merger policy today is more likely to permit an anticompetitive merger than to prohibit a harmless one. At the same time, however, the fault appears not to lie with the efficiencies defense. The defense has almost never successfully defended a merger after the government has made out a prima facie case of illegality. In that case the under deterrence problem must lie in the prima facie case itself.

Welfare tradeoff models attempt to assess the welfare effects of mergers by comparing consumer harms and producer gains. One problem with the well known welfare tradeoff model developed by Oliver E. Williamson is that the efficiencies it contemplates occur at output levels that are lower than they were prior to the merger. While efficiencies at lower output levels are possible, they properly require additional proof. Of course, efficiencies might be so substantial that post-merger output is higher, and prices lower, than at premerger levels. But in that case there is nothing to trade off -- both producers and consumers would benefit from the merger.

Williamson's model also assumed a market that was perfectly competitive prior to the merger but monopolized thereafter. Virtually no challenged mergers today fall into that territory. Most mergers occur in moderately concentrated markets where pre-merger prices are already substantially above marginal cost. In that case consumer welfare losses are much larger and efficiency gains must be spread over a much smaller output.

The 2010 Horizontal Merger Guidelines also require that efficiencies be "merger specific" -- that is, that they could not reasonably be brought about except by the merger. Under a general welfare test that trades actual consumer losses against producer gains that approach makes sense, but under the consumer welfare test that the Merger Guidelines apply it is perplexing. First, if the efficiencies are not of sufficient magnitude to offset fully any propensity toward a price increase, then the efficiency defense will be rejected whether or not the claimed efficiencies are merger specific. However, if the efficiencies are in fact of sufficient magnitude to predict that the post-merger price will be no higher than the pre-merger price, then why do we care? Such a merger does not harm consumers, and as a result is not anticompetitive.

Lea S. VanderVelde: The Dred Scott Case in Context
Journal of Supreme Court History, Vol. 40, No. 3, pp. 263-81, 2015
U Iowa Legal Studies Research Paper No. 16-03

This essay concisely summarizes several new discoveries about the Dred Scott case. It argues that only by examining three broader contexts does the case make sense and can its significance be seen. Contextual examination is necessary because the stipulated facts taken at face value make little sense. For example, how could aged slave bring a lawsuit in the first place and sustain it for eleven years against a master who lived in far-away New York? This seeming irrationality has led to speculation about motives which is, in fact, wrong.

The case can only be explained by resort to three contexts in which the case is embedded. They are: 1) the national geography of westward migration, 2) local Missouri law, and 3) the parties’ intimate relationships to persons, who were not named in the case. Theoretically, this essay argues that these contexts are useful, if not essential, to understanding most high-profile, high-significance lawsuits, like Dred Scott v. Sanford.

The first context highlights the larger role that slaves played in the nation’s expansion. There was a steady stream of slave petitioners who satisfied the criteria for freedom by having lived on free soil (freedom-by-residence) before arriving at the St. Louis courts in a slave state. The second context, local law, demonstrates certain aspects of the Missouri statute authorizing freedom suits. In many circumstances, Missouri law provided petitioning slaves with lawyers and a series of successful suits under that law created local expectations that slaves could sue for freedom and win. These two contexts demonstrate that the Scotts should have won the case easily, under Missouri law in the Missouri courts, until the Missouri Supreme Court changed course.

The third context highlights other people who had a stake in the outcome. On the plaintiffs’ side, changing the incentives, were Mrs. Dred Scott (Harriet) and the Scotts’ daughters. Harriet Scott’s status as a mother rendered her more legally relevant to the family’s stability because the daughters’ legal status hinged on the determination of their mother’s status. So recognizing Mrs. Scott and the children’s stake in the case helps explain the litigants’ tenacity. Behind the defendant, John F. A. Sanford was his extended family, the slave-holding Chouteaus, who favored litigating to the end. Recognizing these hidden persons changes the incentives. These persons could exercise influence on whether the case settled.

Steven J. Burton: Collapsing Illusions: Standards for Setting Efficient Contract and Other Defaults
Indiana Law Journal, Vol. 91, No. 3, 2016
U Iowa Legal Studies Research Paper No. 16-04

In this Essay, Professor Burton analyzes and evaluates four commonly used standards for setting efficient default rules and standards. Based on two theoretical insights, he shows that three of them collapse upon analysis into the fourth, a Coasian standard that turns out to be a dead end. The theoretical upshot is that the Coase Theorem often is a good reason to use defaults rather than mandatory rules or standards. But neither the theorem nor reference to a transaction-costless world sustains particular defaults. To set an efficient default, the law should guide courts toward supplying terms that parties should have adopted to generate a surplus from the term or a cluster of related clauses.

Maya Steinitz: Back to Basics: Public Adjudication of Corporate Atrocities Torts
Harvard Journal of International Law, Forthcoming
U Iowa Legal Studies Research Paper No. 16-05

The editors of this symposium invited me to contribute on the subject of an argument I have recently advanced that the world needs a permanent International Court of Civil Justice (ICCJ) to adjudicate cross-border mass torts. A common reaction to this proposal has been to suggest that the function of such an international court be assumed by one of the existing arbitration institutions or filled by a new one. I’d like to take this opportunity to argue against that idea.

Joseph W. Yockey: Using Form to Counter Corruption: The Promise of the Public Benefit Corporation
49 U.C. Davis L. Rev. 623 (2015)
U Iowa Legal Studies Research Paper No. 16-06

Many observers argue that part of the blame for foreign corrupt practices should be placed on legal form. Their claim is that traditional corporate norms of shareholder wealth maximization help explain why corporate corruption is so prevalent. This essay shifts that argument to examine whether there are characteristics among corporate forms that can boost the efficacy of internal compliance strategies. In doing so, the paper’s primary recommendation is for founders to focus greater attention on an emerging new corporate association — the public benefit corporation — as a promising option for blueprinting sustainable anti-corruption compliance.

Herbert J. Hovenkamp: Re-Imagining Antitrust: The Revisionist Work of Richard S. Markovits
U Iowa Legal Studies Research Paper No. 16-07

This review discusses Richard Markovits’ two volume book "Economics and the Interpretation" and "Application of U.S. and E.U. Antitrust Law" (2014), focusing mainly on Markovits’ approaches to antitrust tests of illegality, pricing offenses, market definition and the assessment of market power, and his important work anticipating unilateral effects theory in merger cases. Markovits argues forcefully that the Sherman and Clayton Acts were intended to employ different tests of illegality. As a result, even when they cover the same practices, such as mergers, exclusive dealing, or tying, they address them under different tests. He then shows how he would analyze various practices under the two statutes, discussing virtually every practice that has been the subject of significant antitrust litigation. He also discusses, more briefly, the competition law of the European Union.

Among Markovits’ most influential contributions to antitrust policy is his critique of traditional antitrust approaches to market power and market definition. His work was highly influential in the development of modern "unilateral effects" theories of merger analysis. A provocative question that Markovits’ work invites is whether the unilateral effects approach can or should be extended beyond merger cases. The Supreme Court has insisted that relevant markets be defined in Sherman Act §2 cases, as well as for §1 cases under the rule of reason. No lower court today would be likely to find traditional market definition unnecessary in those areas without new Supreme Court guidance. The same thing is very likely true for tying or exclusive dealing cases requiring assessment of market foreclosure.

One fact seems inescapable: if the logic of unilateral effects analysis applies to mergers, then it should apply equally to other antitrust practices that serve to eliminate or blunt competition between reasonably adjacent firms in differentiated markets. For example, a firm that predates its closest rival into bankruptcy may be able to induce a unilateral price increase, just as much as a merger between these same two firms. Indeed, the industrial organization literature often treats merger and predation as alternative ways of eliminating a rival. The same thing could also be true of tying or exclusive dealing intended to deny a relatively close rival access to a market, as well as loyalty discounts. All of these could be used in differentiated markets to exclude reasonably proximate rivals, with the result that prices increase.

Ironically, giving legal recognition to the problem of eliminating competition in unilateral effects mergers, while denying recognition in nonmerger cases arising in the same market settings, gives firms the incentive to employ the pricing or contractual exclusion strategies rather than merger. One perverse result may be that the elimination of competition will occur, but without the offsetting efficiencies that at least some mergers can provide.

Andy Grewal: King v. Burwell: Where Were the Tax Professor?
Pepp. L. Rev. 48 (2015)
U Iowa Legal Studies Research Paper No. 16-08

King v. Burwell drew unusually wide attention for a tax case. Members of the public, the mainstream media, health care professionals, Washington think tanks, and constitutional, administrative, and health law professors, to name a few groups, all debated the merits of the challengers’ arguments. Everyone, it seems, had something to say about the case — except tax professors.

This short contribution to Pepperdine Law Review’s Tax Law Symposium explores three potential reasons for the tax professoriate's reticence. It concludes that none of those reasons withstand scrutiny and going forward, tax professors should play a more active role in cases like this.

Jason Rantanen and Lee Petherbridge: Inequitable Conduct and Patent Misuse
Research Handbook on the Economics of Intellectual Property Law, P. Menell, D. Schwartz & B. Depoorter (eds), Edward Elgar Publishing, Forthcoming
U Iowa Legal Studies Research Paper No. 16-09

Most conceptions of the patent law envision a system of rules that seek to balance private rights against public interests that include promoting innovation, removing impediments to competition, and making new and useful information broadly available. Here, we review recent insights into two patent doctrines that are deeply infused with this tension: inequitable conduct and patent misuse.

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