Benjamin Johnson, ‘A Theory of Corporate Fiduciary Duties’

Corporate law lacks a general theory of a board’s power as fiduciary, and consequently, the law governing corporate fiduciary duties is notably unstable. This Article offers a novel theory that grounds corporate fiduciary duties in stronger microeconomic and legal foundations. The theory, coined the Judicial Monitoring Model (JMM), shows that even imperfect judicial monitoring makes shareholders and boards better off, even when there is no claim of a breach of the duties of loyalty or care as currently understood. The JMM synthesizes the law governing corporate fiduciary duties and other doctrines that protect principals, beneficiaries, and creditors from the risk of agent misconduct due to moral hazard. And it explains why courts evaluate corporate fiduciary conduct in some situations and defer to the board’s business judgment in others.

The JMM also generates surprising empirical predictions. It predicts that, in some cases, courts can and do provide substantive review of corporate transactions even if boards are informed, disinterested, and appear to be acting in good faith. The Article finds evidence of such review in old and recent cases, including a startling number of overlooked cases involving corporate waste.

Benjamin Johnson, A Theory of Corporate Fiduciary Duties, 49 BYU Law Review 1013 (2024).

Hannes, Libson and Parchomovsky, ‘The ESG Gap’

The corporate world is undergoing a transformation: there has been a dramatic influx in demand for companies to promote environmental, social, and governance (ESG) values. Yet these preferences do not necessarily translate into effective corporate actions. In this Article, we underscore the structural problems that prevent such preferences from steering the corporate ship full steam ahead toward ESG goals. We analyze the central actors in the corporate sphere that can potentially bring about such change on the ground: managers, institutional investors, and activist hedge funds. We demonstrate that none of these actors have the two central elements required for promoting ESG goals: motivation and competence. We refer to this problem as the ESG gap. We then suggest bridging the gap by forming a new entity, the Activist ESG Fund (AEF). The AEF would be an exchange-traded, closed-end mutual fund, uniquely designed for targeted activist investment. The closed-end traded fund structure would enable the fund management to focus on the long run by attracting patient money while permitting impatient investors to sell their shares on the highly liquid stock exchange. The establishment of AEFs can be a turning point in corporations’ and society’s effective promotion of ESG goals.

Sharon Hannes, Adi Libson, and Gideon Parchomovsky, The ESG Gap, 49 BYU Law Review 1137 (2024).

Noam Kolt, ‘Governing AI Agents’

While language models and generative AI have taken the world by storm, a more transformative technology is already being developed: ‘AI agents’ – AI systems that can autonomously plan and execute complex tasks with only limited human oversight. Companies that pioneered the production of tools for generating synthetic content are now building AI agents that can independently navigate the internet, perform a wide range of online tasks, and increasingly serve as automated personal assistants. The opportunities presented by this new technology are tremendous, as are the associated risks. Fortunately, there exist robust analytic frameworks for confronting many of these challenges, namely the economic theory of principal-agent problems and the common law doctrine of agency relationships. Drawing on these frameworks, this Article makes three contributions. First, it uses agency law and theory to identify and characterize problems arising from AI agents, including issues of information asymmetry, discretionary authority, and loyalty. Second, it illustrates the limitations of conventional solutions to agency problems: incentive design, monitoring, and enforcement might not be effective for governing AI agents that make uninterpretable decisions and operate at unprecedented speed and scale. Third, the Article explores the implications of agency law and theory for designing and regulating AI agents, arguing that new technical and legal infrastructure is needed to support governance principles of inclusivity, visibility, and liability.

Kolt, Noam, Governing AI Agents (April 2, 2024).

Layne Keele, ‘To Err is Human, to Restore is (Usually) the Law: Present Entitlement in Restitution’s Discharge-For-Value Rule’

This Article argues that the Second Circuit’s present-entitlement holding and the concurrence’s setoff argument in Citibank v Brigade Capital do not reflect the state of the law and risk introducing confusion into an already convoluted area of law. First, I will briefly review the district court’s decision in Citibank and its reception among scholars and the marketplace. Next, I will examine the Second Circuit’s opinion, as well as the concurrence and the addendum to the opinion. Finally, I will critique the ‘present entitlement’ requirement that the court grafted onto the discharge-for-value defense. In this critique, I will argue that the requirement lacks a historical basis, cannot be justified on the grounds proffered by the concurrence, contravenes existing case law, and risks undercutting the rationale for the rule. Consequently, I will argue that the court’s ‘present entitlement’ requirement should be rejected.

Layne S Keele, To Err is Human, to Restore is (Usually) the Law: Present Entitlement in Restitution’s Discharge-For-Value Rule, 77 Arkansas Law Review (2024).

Benjamin Sobel, ‘Elements of Style: Copyright, Similarity, and Generative AI’

‘You can’t copyright style’ is a shibboleth in today’s debate over generative AI. This slogan is, at best, meaningless. More likely, it’s wrong. Sometimes, what we call ‘style’ is copyrightable. ‘Substantial similarity’ is the doctrine that assesses when stylistic copying becomes infringement, but it is notoriously erratic, and judges find it especially hard to apply to images. Current law obfuscates artists’ rights to control their works and the public’s rights to use generative AI.

Part I explains how image-generating AI works and debunks the prominent metaphor that it is a ‘collage machine’. The metaphor erroneously posits that it is possible to differentiate ‘mechanical’ reproductions of works of visual art from ‘intellectual’ reproductions, and it erroneously implies that the distinction has legal significance. Generative AI is clearly learning to reproduce something from its training data: what matters is what that something is.

Part II defines style as a holistic attribute of a work, or a group of works, that comprises a constellation of expressive choices. These expressive choices might be unprotectable individually, but in combination, they may constitute protectable expression. Part II documents courts’ struggles to assess similarity in visual art and attributes these struggles to the substantial similarity test’s near-irreconcilable demands: courts must simultaneously dissect images into their constituent elements – a task judges claim they are unable to do – while also assessing works’ aesthetic appeal holistically and intuitively. Style has always been a challenge for substantial similarity because it is the form of expression least susceptible to analytical dissection and most likely to elicit inarticulate aesthetic intuitions. Generative AI models’ replication of style is a hard problem for copyright law because the models are purpose-built to identify and reproduce precisely the forms of similarity that are hardest to analyze legally.

Sobel, Benjamin, Elements of Style: Copyright, Similarity, and Generative AI (May 18, 2024), Harvard Journal of Law & Technology, Forthcoming volume 38; Cornell Legal Studies Research Paper Forthcoming.

Amy Dunphy, ‘Ensuring Location Data Privacy in Connected and Automated Vehicles (CAVs)’

New privacy challenges will arise from the introduction of Connected and Automated Vehicle (‘CAV’) technology. CAVs are expected to ‘drive’ by a system that receives and shares data from sensorised infrastructure. CAV data will be constantly communicated wirelessly and bi-directionally, including with other CAVs which are operating within a vehicular network. Consequently, there will be a significant increase in the volume of data that will be generated by both CAVs and the operational infrastructure. This increase raises significant legal questions about whether CAV data is personal or sensitive information under the Privacy Act 1988 (Cth). This is a threshold legal question because if CAV-related data does not fall into either of these categories, it may not be regulated by the Privacy Act 1988 (Cth).

One specific type of data that raises significant privacy concerns is CAV location data. This article examines the different jurisdictional approaches to classifying personal information in Australia, the European Union (‘EU’) and the United States (‘US’). CAV-generated location data is used as a case study to examine potentially different framings of personal information in the CAV context. It applies the different jurisdictional notions of personal information under the Privacy Act 1988 (Cth), the General Data Protection Regulation and the Californian Consumer Privacy Act to specified types of CAV-generated location data that are essential for operational purposes. Relevant jurisdictional case law, explanatory memoranda and policy guidance are used to formulate how different definitions would legally apply to the Australian CAV context. Following the application of different jurisdictional approaches, the article evaluates the additional protections that could be gained from an updated definition of personal information in the Privacy Act 1988 (Cth) and undertakes a comparative analysis of the benefits of regulating CAV data (in particular, CAV location data) under a comprehensive framework or by adopting industry-specific law reform. In conclusion, the paper considers which law reform framework would best ensure that Australia remains at the forefront of regulating CAVs and addressing the privacy challenges they will create.

Dunphy, Amy, Ensuring Location Data Privacy in Connected and Automated Vehicles (CAVs), (2024) 4 ANU Journal of Law and Technology (29 May 2024).

Jamilya Kamalova, ‘Exploring Blockchain-Based Alternative Dispute Resolution: Limitations of Traditional Methods and Prospects for Further ResearcH’

The paper explores the potential advantages of blockchain technology in facilitating dispute settlement, building upon previous studies of alternative dispute resolution (ADR) and online dispute resolution (ODR). The theoretical framework attempts to combine the ideals of liberal theory with the reality of legal pluralism encountered in many states. Through an overview of the limitations posed by ODR systems, the paper uses the Kleros platform as a case study to provide an example of blockchain technology application in dispute resolution. The paper emphasizes the complementarity of blockchain-powered tools with traditional methods of dispute settlement, presenting both points of criticism and questions for further research.

Kamalova, Jamilya, Exploring Blockchain-Based Alternative Dispute Resolution: Limitations of Traditional Methods and Prospects for Further Research (November 1, 2022), Harvard Negotiation Law Review, Forthcoming.

Vaithulla Kamal Ahamed, ‘Navigating Social Media Defamation: Exploring Liability for Third-Party Publications in the Digital Age’

The recent ruling by the High Court of Australia (HCA) in Fairfax Media Publications Pty Ltd v Voller [2021] HCA 27 has significant implications for defamation in digital platforms. The case involved an appeal by three media outlets (defendant-appellants) against a decision from the New South Wales (NSW) Court of Appeal (Fairfax Media Publications Pty Ltd v Voller (2020) 380 ALR 700) focusing on media liability for third-party comments on public Facebook pages. The HCA rejected the appellants’ argument that they are not liable for defamatory posts on their controlled pages due to lack of intent.

This analysis aims to explore the significance of the HCA’s decision, particularly its impacts on defamation law in the digital age, especially concerning social media. It also aims to guide future research on Australian defamation law, akin to English common law, and Australia’s judicial stance on social media defamation. Through examining this case, we aim to reveal its broader implications and its role in shaping digital defamation jurisprudence.

Kamal Ahamed, Vaithulla, Navigating Social Media Defamation: Exploring Liability for Third-Party Publications in the Digital Age (the Case of Fairfax Media Publications Pty Ltd v Voller) (April 24, 2024), (2024) 1 Sri Lanka Journal of Information and Communications Technology 103.

Sanjukta Paul, ‘Labor Law, Ownership and the Firm’

Labor law has its own working theory of the business firm – not derivable from another area of law – which is more explicit than other areas of law in positing a basic hierarchy of intrafirm governance, which the affirmative provisions of labor law are then taken to (partially) modify. This is true across the main functional domains of labor law: union formation; collective expressive and associational rights; and the scope of collective bargaining. The second part of this Essay briefly revisits the ur-text of corporate governance, by New Deal liberals Adolf Berle and Gardiner Means. The extremely influential framework they originated revolves around an imagined prehistory of the modern corporation that involves an implicit extending-back of the hierarchical conception of the firm found in modern labor law.

Paul, Sanjukta, Labor Law, Ownership and the Firm (May 28, 2024), Chicago-Kent Law Review, 2024.

Antill, Celik, Tian and Whited, ‘The Efficiency of Patent Litigation’

How efficient is the US patent litigation system? We quantify the extent to which the litigation system shapes innovation using a novel dynamic model, in which heterogeneous firms innovate and face potential patent lawsuits. We show that the impact of a litigation reform depends on how heterogeneous firms endogenously select into lawsuits. Calibrating the model, we find that weakening plaintiff rights through fewer defendant injunctions increases firm innovation and output growth, improving social welfare by 3.32%. Raising plaintiff pleading requirements, which heightens barriers to filing lawsuits, likewise promotes innovation, boosts output growth, and enhances social welfare.

Antill, Samuel and Celik, Murat Alp and Tian, Xu and Whited, Toni M, The Efficiency of Patent Litigation (November 18, 2023).