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Lewis & Clark Law Review

Volume 18 / Number 3 / 2014

 

ARTICLES

 

MARKET EFFICIENCY AND FRAUD ON THE MARKET: THE DANGER OF HALLIBURTON

Charlie Korsmo

18 Lewis & Clark L. Rev. 827 (2014)

The Supreme Court recently handed down its opinion in Halliburton v. Erica P. John Fund. The case marked the first time since Basic v. Levinson, a quarter century ago, that the Court was directly asked to consider the viability of the fraud-on-the-market doctrine, the doctrine that has made the modern securities-fraud class action possible. The majority of the Court ultimately declined to reconsider Basic, and instead issued a narrow ruling rendering an already convoluted area of the law even more muddled. More troublingly, the dissenters—while willing to confront Basic head-on—did so primarily by questioning the economic theory underlying the fraud-on-the-market doctrine. I argue that—contrary to the arguments of the parties and of the dissenting Justices—the doctrine does not depend on the efficient-capital-markets hypothesis. It is possible to accept market efficiency and reject the fraud-on the-market doctrine, or to reject market efficiency and accept the fraud-on-the-market doctrine. It is not only unnecessary, but also unwise for the Justices to wade into the debate over market efficiency. While market efficiency is of little relevance to the debate over the fraud-on-the-market doctrine, it is central to other contemporary legal debates of far more fundamental importance than the fraud-on-the-market doctrine. The dissenters’ pronouncements on market efficiency are certain to resurface in these debates in ways the authors do not intend.

CRIMINAL LAW MULTITASKING

Hadar Dancig-Rosenberg & Tali Gal

18 Lewis & Clark L. Rev. 893 (2014)

Criminal law pursues multiple goals: retribution, deterrence, expressive justice, rehabilitation, restoration, and reconciliation. Scholars tend to analyze these goals and their implementation in separation from each other, without accounting for their interplay and coordination. A theory of criminal law multitasking is overdue.

This Article sets up a conceptual framework for such a theory. We develop a taxonomy that captures the interplay between various procedures and substantive goals promoted by criminal law. Based on this taxonomy, we discuss five mechanisms of criminal law. We propose that policy makers and law enforcers select one or more of these mechanisms to implement the chosen mix of retribution, deterrence, expressive justice, rehabilitation, restoration, and reconciliation. We provide reasons guiding this selection, among them constructive community involvement, offenders’ responsiveness, and integration of victims’ rights. We illustrate the operation of our multitasking approach in real-world cases and illustrate its ability to facilitate the implementation of the deferred prosecution and adjudication mechanisms promulgated by the current draft of the Model Penal Code.

INTENT IN FAIR USE

Eva E. Subotnik

18 Lewis & Clark L. Rev. 935 (2014)

This Article explores the role of intent in the context of fair use. Specifically, it examines whether a claim of fair use of a copyrighted work should be assessed solely from an “objectively reasonable” vantage point or should, additionally, allow for evidence from the subjective perspective of the user. Courts and scholars have largely sided with the former view but have failed to explain fully why this should be the case or whether there might be countervailing benefits to considering evidence of subjective intent. Crucially overlooked is the possibility that taking the user’s perspective into account would serve copyright’s utilitarian structure by stimulating socially beneficial uses that would not otherwise occur. In addition, formal recognition of the role intent plays in fair use would bring needed transparency to judicial practices in this area. This Article first develops a framework for evaluating the degree to which courts, parties, and scholars have deemed a user’s conscious compliance with fair use principles relevant to the fair use analysis. It then argues for a limited role for evidence of subjective intent, proposing criteria for when such evidence should, and should not, be weighed in the fair use calculus.

PUTTING STORED-VALUE CARDS IN THEIR PLACE

Liran Haim & Ronald Mann

18 Lewis & Clark L. Rev. 989 (2014)

This Essay explores the effects of stored-value cards on social welfare. We argue that stored-value cards, in general, are socially beneficial payment devices. Their burgeoning use benefits society in three main plains. First, by replacing paper-based instruments in market segments previously inaccessible to card-based payments, stored-value cards lower the private and public costs of payment transactions. Second, by extending the use of card-based payment systems towards lower- and middle-income house-holds, stored-value cards foster inclusion of those households in the financial mainstream of our society. Third, by operating without an extension of credit, stored-value cards help to limit the uniquely American reutilization of credit transactions associated with the widespread use of credit-card borrowing.

We further identify several risks associated with the use of stored-value cards. First, as in many cases their issuers are not federal banks, stored-value cards expose consumers to the possibility of losing funds in the case of issuer’s insolvency. Second, as their mechanism is vulnerable to data breaches, they expose consumers to unauthorized uses of their funds—as opposed to other payment cards where consumers enjoy regulatory protection on this matter. Third, they raise the issue of the unused funds remaining on the card after most of it has been depleted.

We recommend policies that will foster the use of stored-value cards, while adopting several rules that will confine their associated risks. We therefore call for adequate supervision that will assure the availability of deposits insurance to most stored-value cards; an extension of the current unauthorized use rules to stored-value cards; and a mechanism that will allow cash out of small unused funds associated with those cards. We also emphasize the need to exempt from regulation small stored-value cards programs in order to foster their beneficial use in contexts where the risks of harm are slight.

TAKING THE INITIATIVE: HOW TO SAVE DIRECT DEMOCRACY

Jessica A. Levinson

18 Lewis & Clark L. Rev. 1019 (2014)

In Meyer v. Grant, a unanimous Supreme Court dealt a grievous blow to the most popular form of direct democracy—the ballot-initiative process. The ballot-initiative process allows average citizens to stand on the same footing as their lawmakers and directly enact legislation. It has failed to serve its purpose of guarding against the destructive influence of moneyed interests on lawmakers. Due to the Court’s decision in Meyer, moneyed interests are now free to buy access to the electoral ballot. The ballot-initiative process has been turned on its head.

This Article first focuses on the Court’s failings in Meyer, where the Court overturned a prohibition on the payment of petition circulators on First Amendment grounds. Next, this Article explains how a shift in the Court’s approach would allow the ballot initiative process to serve its original function. The Court should have applied its candidate-ballot-access jurisprudence, not its campaign-finance case law, to analyze the restriction at issue in Meyer. Once properly viewed through the correct analytical lens it is clear that the government has the power to regulate access to electoral ballots by prohibiting the payment of petition circulators. The practical ramifications of this analytical shift are far-reaching, namely wrestling the ballot-initiative process from the destructive influence of special-interest groups over legislatures and providing grassroots groups with lawmaking power.

 

NOTES & COMMENTS

 

BRANDED BUD OR GENERIC GANJA? TRADEMARKS FOR MARIJUANA IN WASHINGTON

Sean K. Clancy

18 Lewis & Clark L. Rev. 1063 (2014)

Marijuana is legal under Washington State law but illegal under United States federal law. This Paper assumes that marijuana will remain legal in Washington. Springing from that assumption, a crucial question is, what shall a merchant call her marijuana? This Paper explores that question first by describing the benefits and costs of allowing trademark protection for marijuana, concluding that trademark law should protect marijuana products. Second, this Paper identifies possible methods of seeking trademark protection for marijuana. Third, this Paper explains how the law should determine whether proposed marijuana trademarks are distinctive and protectable, or unprotectable for being descriptive or generic. Ultimately, this Paper argues that an understanding of marijuana’s various genetic strains and slang terms is necessary to properly assess marijuana trademark rights and to prevent unfair competition in the marijuana industry.

LIKE OIL AND WATER: EQUITY CROWDFUNDING AND SECURITIES REGULATION

Joseph Hogan

18 Lewis & Clark L. Rev. 1091 (2014)

The internet’s ability to gather large numbers of people with similar interests has enabled an explosion of interest in crowdfunding. Examples of funding sites include Kickstarter, Indiegogo, and Peerbacker. In exchange for individual “donations,” fundraisers offer rewards ranging from something as small as a thank-you note to a copy of the finished product or even more cachet items like the funder’s name in movie credits. These sites demonstrate the great potential for crowdfunding as a source of funding. However, up until recently, federal securities law has prevented crowdfunding from offering debt or equity interests in return for funding. The Jumpstart Our Business Startups Act changed this by providing an exemption for crowdfunded securities.

This Comment examines crowdfunding in the context of federal securities law to demonstrate fundamental inconsistencies. Securities law primarily seeks to control the market by requiring disclosure of material information and imposing liability for misstatements and material omissions. Some exemptions permit reduced disclosures when there are alternative means of investor protection. Unfortunately, any crowdfunding exemption would require heavily reduced disclosure requirements and the peculiarities of crowdfunding preclude traditional alternative means of investor protection. This Comment explores this fundamental incompatibility, uses the JOBS Act to demonstrate the problems with a crowdfunded security exemption, and offers some observations on what might be more successful.

 

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