June 28, 2006
Junior Scholars Workshop: Adam J. Levitin, Finding Nemo: Rediscovering the Virtues of Negotiability in the Wake of Enron, and Eric Goldman, A Coasean Analysis of Marketing
Posted by Christine Hurt

In anticipation of our fourth and final week of the Second Annual Conglomerate Junior Scholars Workshop, here are our last two authors and papers.  Adam J. Levitin is currently clerking on the Third Circuit and will be presenting Finding Nemo: Rediscovering the Virtues of Negotiability in the Wake of Enron.  Our expert commentators for this paper will be Bob Lawless and Todd Zywicki.  The abstract is here:

Creditors have long understood that any claims they submit for repayment in a bankruptcy might be valid, but subject to subordination in the order of payment of the bankruptcy estate's limited funds if the creditor behaved inequitably as the debtor failed. A groundbreaking opinion in Enron's on-going bankruptcy has expanded the practice of equitable subordination far beyond its traditional reach. According to the court, buyers of bankruptcy claims are now subject to subordination, not just for their own conduct, but also for conduct of previous owners of the claims, regardless of whether the conduct related to the claims. In a world of active bankruptcy claims trading, Enron raises powerful policy questions about the legal rules governing property transfers that affect the doctrinal development of bankruptcy law and the survival of a secondary market that provides important liquidity to other capital markets. This article shows how Enron was erroneous from both doctrinal and policy perspectives and examines the problems Enron has created for several distinct markets. Enron is a reminder of the continuing value of negotiability in commercial contexts, for if the claims involved had been negotiable, they could not have been subordinated. Thus, this article considers what factors have traditionally determined when the law adopts a negotiability regime for property transfers and whether these factors make sense in today's financial markets. The article argues that in the bankruptcy claims context, the liquidity benefits of negotiability outweigh its costs. Accordingly, the article proposes a federal law of negotiability for bankruptcy claims to protect the liquidity of this vital market.

Our final presenter will be Eric Goldman, who is transitioning from Marquette to take a new position as Assistant Professor at Santa Clara University School of Law and Director of the High Technology Law Institute there. Eric writes and teaches in the areas of cyberlaw, copyright, intellectual property, contracts and licensing and is the author of two blogs: Goldman's Observations and Technology & Marketing Blog.  Eric will be presenting A Coasean Analysis of Marketing.  Our expert commentators for this paper will be Peter Huang and Frank Pasquale.  The abstract is here:

Consumers claim to hate marketing—mostly, because they get too much unwanted marketing. In response, regulators develop medium-by-medium marketing suppression regulations. Unfortunately, these ad hoc solutions do little to satisfy consumers, and dynamic technologies and business practices quickly render them moot. Instead of continuing this cycle, there would be some benefit to developing a cross-media marketing regulatory scheme. However, any holistic solution must be predicated on a clear rationale for regulating marketing. The most common justification is that marketing imposes a negative externality on consumers, but this argument ignores the private and social welfare created by marketing and can lead to cost overinternalization and marketing undersupply. The Coase Theorem also suggests that social welfare improves by reducing the costs of matching marketers with interested consumers. To achieve this, consumers need a low cost but accurate mechanism to manifest their preferences. This Article shows that typical regulatory and marketplace solutions do not provide effective mechanisms. Instead, marketer-consumer matchmaking will improve from technology that will automatically infer consumer preferences and use these inferences to filter incoming marketing and seek out wanted content. This technology does not yet exist, but it is being rapidly developed. However, regulation of surreptitious monitoring devices (like adware and spyware) may inadvertently block the development of this socially-beneficial technology. As a result, current regulatory overreactions to developing technology may counterproductively foreclose social welfare improvements.

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