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Citizens United and the Nexus-Of-Contracts Presumption

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Stefan J. Padfield

Citizens United v. Federal Election Commission has been described as “one of the most important business decisions in a generation.” In Citizens United, the Supreme Court of the United States invalidated section 441(b) of the Federal Election Campaign Act of 1971 as unconstitutional. That section prohibited corporations (and unions) from financing “electioneering communications” (speech that expressly advocates the election or defeat of a candidate) within 30 days of a primary election. The five Justices in the majority rested their holding on the assertion that “Government may not suppress political speech on the basis of the speaker’s corporate identity.” In reaching this conclusion, the majority relied on a view of the corporation fundamentally as an “association of citizens.”

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The Coconundrum

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Frederick Ryan Castillo

Digging deeper into their analytical toolbox, policymakers, academics, and regulators are increasingly exploring whether, and to what extent, a system of contingent capital can strengthen the resilience of the banking sector. The global financial crisis unearthed fragile and troubled banks, riddled with excessive leverage, poor quality capital buffers, and liquidity problems. Because these institutions were deemed “too big to fail,” governments were forced to intervene and prop them up by way of costly, taxpayer-funded bailouts. With the benefit of hindsight, regulators are now looking at contingent capital as a potentially speedy and less costly alternative for recapitalizing banks in periods of financial distress.

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One Way That Dodd-Frank’s Liquidation Authority Could Achieve Parity With The Bankruptcy Code

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Harvey R. Miller and Maurice Horwitz

On October 19, 2010, the FDIC published a proposed rule governing the implementation of Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). Title II of Dodd-Frank creates an orderly liquidation authority for the resolution of systemically important financial institutions. According to the FDIC’s Notice of Proposed Rulemaking Implementing Certain Orderly Liquidation Authority Provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, “[t]he liquidation rules of Title II are designed to create parity in the treatment of creditors with the Bankruptcy Code and other normally applicable insolvency laws.”

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FINRA Proposed Rule Change Would Give Customers Option of All-Public Arbitration Panels

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Barbara Black

Brokerage firms customarily include in their customers’ agreements a predispute arbitration agreement requiring that investors arbitrate their disputes before an arbitration panel of the Financial Industry Regulatory Authority (FINRA). Current rules governing customers’ claims over $100,000 require each three-person panel to include one non-public, or industry, arbitrator in addition to one public arbitrator and one chair-qualified public arbitrator. Investor advocates long have argued that the mandatory inclusion of an arbitrator with ties to the securities industry was unfair to investors and gave the securities industry one decision-maker who would be sympathetic to its position.

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Normalizing Match Rights: Comment on In re Cogent, Inc. Shareholder Litigation

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Brian JM Quinn

Early in October of this year the Chancery Court handed down its opinion in In re Cogent, Inc. Shareholder Litigation. In many respects, the ruling was pedestrian. Shareholders of Cogent, a Delaware corporation in the business of providing automated fingerprint identification systems, challenged management’s decision to sell the corporation to the 3M Company for $10.50/share in cash. The essence of the shareholders’ challenge focused on supposed inadequacies in the sales process that, according to the plaintiffs, resulted in a breach of the directors’ Revlon obligations. The shareholders further alleged that deal protections and other provisions in the merger agreement were preclusive, arguing that such provisions made it unlikely that a potential bidder lurking on the edges of the transaction might come forward.

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Is the “Tax Poison Pill” the Last Stand for Protecting NOLs After Health Care Reform?

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Michael R. Patrone

The Delaware Court of Chancery’s recent Selectica opinion garnered substantial attention, but the court’s decision upholding the tax poison pill may be of even greater importance with the passage of the Health Care and Education Reconciliation Act of 2010 (H.R. 4872)—less than a month after Vice-Chancellor Noble issued his opinion. During the global economic recession, many companies accrued substantial tax losses that can be carried forward for up to twenty years and used to offset future income for federal tax purposes, called net operating loss carryforwards (“NOLs”). These valuable tax assets will provide substantial financial benefits for companies down the road but are vulnerable to spoilage from significant changes in company ownership.

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