Copyright (c) 2009 Villanova University School of Law All rights reserved. http://works.bepress.com/villanovalaw Recent documents in Villanova University School of Law en-us Mon, 23 Nov 2009 06:01:50 PST 3600 http://works.bepress.com/robert_miller/28 http://works.bepress.com/robert_miller/28 Fri, 02 Oct 2009 13:45:13 PDT In any large corporate acquisition, there is a delay between the time the parties enter into a merger agreement (the signing) and the time the merger is effected and the purchase price paid (the closing). During this period, the business of one of the parties may deteriorate. When this happens to a target company in a cash deal or to either party in a stock deal, the counterparty may no longer want to consummate the transaction. Merger agreements typically protect counterparties against this risk through "material adverse change" (MAC) clauses, which permit the counterparty to cancel the deal if the party suffers a MAC between signing and closing.Despite the complexity of typical MAC clauses, such clauses almost always rely on an undefined concept of materiality, and virtually all of the important reported cases arising from MAC clauses have required the court to decide whether a particular adverse change in a party's business was "material" within the meaning the agreement. In attempting to give content to this term, courts have generally inquired whether the earnings capacity of the company has been substantially impaired. This inquiry, which I call the Earnings Potential Model, proceeds by comparing the actual or expected earnings of the company across various of its fiscal periods.This article reviews all the important reported MAC cases and argues that the Earnings Potential Model has failed to provide courts with a judiciable standard by which to decide MAC cases. In particular, the model cannot explain (a) which fiscal periods of the company ought to be compared with which, and (b) what percent diminution in earnings between such periods is sufficient to cause a MAC.The article then proposes an efficiency interpretation of materiality as used in MAC clauses: assuming the allocation of risk in MAC clauses is efficient, an adverse change is material if, but only if, it is sufficiently large to make the transaction unprofitable for the counterparty. Based on this interpretation, the article explains and defends a new model of MAC clauses, which I call the Continuing Profitability Model. Under this model, a court would apply a simplified discounted cash-flow analysis based on publicly-available data to determine whether, at the time the counterparty declared a MAC, the transaction was still profitable for it. If so, there was no MAC, and the counterparty should have to close the deal or be in breach. If not, then the party was MAC'd and the counterparty should be permitted to cancel the deal. The article concludes by applying the model to the facts in Hexion v. Huntsman, the most recent MAC case in the Delaware Court of Chancery, and argues that the court, misled by the Earnings Potential Model, was clearly mistaken in holding that Huntsman had not been MAC'd. Robert T. Miller Articles http://works.bepress.com/mitchell_nathanson/25 http://works.bepress.com/mitchell_nathanson/25 Fri, 02 Oct 2009 11:18:19 PDT Is there an American who has advanced beyond the sixth grade unfamiliar with that most affirming morality tale in American history - the story of Branch Rickey, Jackie Robinson and the integration of Major League Baseball in 1947? As symbolic and ingrained in the national fabric as the game is, it was seen, and has been recalled, as an American tipping point. Because baseball in America had mirrored the nation's racial practices for decades, the event was perceived as momentous and precipitous because here, baseball foreshadowed nationwide, federally-imposed and endorsed desegregation, coming as it did seven years before the Supreme Court's landmark decision in Brown v. Board of Education. As the story goes, once Major League Baseball rejected the "separate but equal" fiction of the Court's 1896 Plessy v. Ferguson decision, it was inevitable that the case was on its last legs. It is not the only story that can be told, however. The same facts and information that lead to the popular tale can also lead to a different one; one which is equally illuminating in that it shows men in a powerful institution doing all they could to beat back a rising tide against them - the tide of integration - that threatened their status and way of life. One which is not so much a story of equality but one where these powerful men fought to maintain control over the process of integration such that the resulting "story" was one about equality only in its most superficial sense, with true equality having been delayed and denied to the majority of African Americans despite the success of Jackie Robinson. For in the end, although the powerful men may not have been able to alter history itself to the extent they desired, they could, however, greatly affect how that history was recounted and remembered. The popular story of the integration of Major League Baseball is perhaps one of the most resonant and powerful in our culture. But, at its core, it is simply that: a story. One that, like most stories, is complete with gaps and inconvenient facts left on the cutting room floor. What follows is another story - one that sweeps up these facts and picks them out of the dustbin of history in order to tell a far different tale of the integration of "America's game." It is likely that the powerful men would be far less pleased with this story, exposing as it does their flaws, fears and misperceptions. But that is precisely why they have chosen not to tell it. Mitchell J. Nathanson Sports Law Baseball and Society http://works.bepress.com/louis_sirico/67 http://works.bepress.com/louis_sirico/67 Mon, 07 Sep 2009 11:34:06 PDT Louis J. Sirico Legal History Constitutional Law http://works.bepress.com/donald_bersoff/6 http://works.bepress.com/donald_bersoff/6 Thu, 06 Aug 2009 11:18:33 PDT Donald N. Bersoff http://works.bepress.com/donald_bersoff/5 http://works.bepress.com/donald_bersoff/5 Thu, 06 Aug 2009 11:15:52 PDT Donald N. Bersoff http://works.bepress.com/donald_bersoff/4 http://works.bepress.com/donald_bersoff/4 Thu, 06 Aug 2009 11:13:15 PDT Donald N. Bersoff http://works.bepress.com/donald_bersoff/3 http://works.bepress.com/donald_bersoff/3 Thu, 06 Aug 2009 11:06:48 PDT Donald N. Bersoff http://works.bepress.com/donald_bersoff/2 http://works.bepress.com/donald_bersoff/2 Thu, 06 Aug 2009 11:05:43 PDT Donald N. Bersoff http://works.bepress.com/donald_bersoff/1 http://works.bepress.com/donald_bersoff/1 Thu, 06 Aug 2009 11:02:47 PDT Donald N. Bersoff http://works.bepress.com/gotanda/29 http://works.bepress.com/gotanda/29 Wed, 22 Jul 2009 07:41:39 PDT John Y. Gotanda Dispute Resolution