Recent Corporate Law Scholarship of Interest
What I've been reading
From time to time, I like to highlight recent scholarship I found interesting. Note that by “interesting” I do not necessarily mean that I agree with their analyses. To the contrary, sometimes scholarship with which one disagrees is of greater interest.
Park, James J., Crypto Associations (May 14, 2025). UCLA L. Rev. (forthcoming), UCLA School of Law, Law-Econ Research Paper No. 25-03, Available at SSRN: https://ssrn.com/abstract=5254379 or http://dx.doi.org/10.2139/ssrn.5254379
My friend, coauthor, and UCLAW colleague James Park’s new article explores the legal status and regulatory implications of “crypto associations”—the decentralized groups that manage blockchain networks and issue crypto assets. Unlike traditional corporations or partnerships, these associations often reject formal legal structures and fiduciary duties, asserting instead that they owe no obligations to investors. However, courts and regulators increasingly disagree, finding that such arrangements often function as general or limited partnerships and may involve the sale of securities. Park critiques the strong contractualist argument advanced by crypto proponents, which suggests that investors willingly waive legal protections. He contends that this argument fails in light of crypto associations’ tendency to “shape-shift” governance structures midstream—creating significant risk to investors who cannot anticipate such changes.
The article dissects the architecture of crypto associations, focusing on the roles of Developers (who design the blockchain and often retain substantial control and crypto assets), Validators (who confirm transactions in exchange for crypto rewards), and Purchasers (who fund the project either as users or investors). These roles form an economically interdependent but legally ambiguous network. Park emphasizes how these structures mirror key features of partnerships and collective enterprises, particularly when Developers make promotional statements that create expectations of managerial effort and profit. Courts have begun applying the Howey test (from securities law) to determine whether these arrangements constitute “investment contracts,” even without explicit contracts, and are divided on whether secondary market sales also meet that standard.
Ultimately, Park argues that crypto associations expose a broader reason for the existence of legal entities: not just to lock in capital for long-term investment, but also to ensure capital is available for compliance with social obligations. Without an entity to bear legal duties, investor protections are undermined. He proposes that crypto regulation identify and hold “Controllers” (typically Developers) accountable as the de facto managers of these associations. These Controllers would be legally responsible for disclosures and liabilities, providing a substitute for the absent formal entity and aligning crypto governance with broader regulatory norms.
Kesten, Jay and Kraakman, Reinier H., The Story of Francis v. United Jersey Bank: When a Good Story Makes Bad Law (April 03, 2009). J. Mark Ramseyer, Ed., Corporate Law Stories (2009)., FSU College of Law, Public Law Research Paper Forthcoming, Available at SSRN: https://ssrn.com/abstract=5369412 or http://dx.doi.org/10.2139/ssrn.5369412
This article examines the landmark corporate law case Francis v. United Jersey Bank, which established an unusually strict standard for director oversight liability. The case arose from the collapse of Pritchard & Baird, a prestigious reinsurance brokerage founded in the 1940s that became one of America's premier firms under Charles Pritchard Sr. After his retirement in 1968, his sons Charles Jr. and William took control and began misappropriating over $10 million in client funds held in trust, using an unorthodox accounting system their father had established. When the fraud was discovered in 1975, the company went bankrupt. The subsequent lawsuit targeted Lillian Pritchard, the elderly widow who served as a figurehead director, holding her liable for the entire loss despite having no knowledge of or involvement in the business operations.
Kesten and Kraakman argue that Francis was wrongly decided and represents a dangerous departure from traditional corporate law doctrine. Unlike previous cases that recognized directors' monitoring duties but rarely imposed actual liability (due to difficult causation requirements), the New Jersey Supreme Court essentially eliminated the causation defense by creating an extreme "duty to sue" co-directors. While the case became a staple of corporate law casebooks, it has had limited practical influence and represents an outlier in judicial treatment of director oversight failures. The article concludes by examining how modern Delaware law has developed a loyalty-based model for director monitoring duties (through cases like Caremark and Stone v. Ritter) that addresses some weaknesses of the traditional tort-based approach while avoiding Francis's problematic expansion of liability, though the authors warn this new framework could be vulnerable to similar overreach if courts too readily infer "bad faith" from director inaction.
Biben, August, Back to the Future: Evaluating "Managerial Authority Over the Business and Affairs of the Corporation" (May 16, 2025). Available at SSRN: https://ssrn.com/abstract=5313666 or http://dx.doi.org/10.2139/ssrn.5313666
This article examines Delaware's 2025 Senate Bill 21 (SB21), which significantly reformed the state's corporate law by providing the first statutory definition of "controlling stockholder." The legislation was enacted amid concerns that recent judicial rulings had created uncertainty and upset the balance of power in corporate governance, potentially driving companies away from Delaware. SB21 establishes three criteria for controlling stockholder status: (1) owning a majority of voting power, (2) having contractual rights to cause election of a board majority, or (3) owning at least one-third of voting stock plus having "power to exercise managerial authority over the business and affairs of the corporation." This represents a deliberate departure from decades of Delaware case law that had increasingly characterized stockholders with far less than 50% ownership as controllers based on their actual exercise of control, with some courts finding control at ownership levels as low as 15-17%.
Biben argues that while SB21 constitutes a "course correction" responding to perceived judicial overreach, it should be interpreted within Delaware's historical, functional approach to corporate control that focuses on protecting minority shareholders from those who effectively control corporate decision-making. The article traces the evolution of controlling stockholder doctrine from its early 20th-century foundations through modern "de facto" control cases, emphasizing that the doctrine has always been grounded in functional realities rather than rigid ownership percentages. The author contends that SB21's new language requiring "power to exercise managerial authority" should encompass the same types of influence previously recognized by courts—including decision-making authority over boards, operational control, and certain contractual rights—while providing the predictability and clarity that the legislation sought to achieve. The analysis suggests this approach can honor Delaware's equity-based traditions while establishing clearer boundaries for determining controlling stockholder status.
Goodwin, Shane, Jurisdictional Competition and Corporate Law: The Rise of Delaware and the Fall of New Jersey (April 21, 2025). SMU Cox School of Business Research Paper No. 25-13, Available at SSRN: https://ssrn.com/abstract=5224784 or http://dx.doi.org/10.2139/ssrn.5224784
Shane Goodwin’s article traces the dramatic jurisdictional shift in corporate law from New Jersey to Delaware during the late 19th and early 20th centuries. Initially, New Jersey was the leading state for incorporations due to its liberal corporate statutes, including the legalization of holding companies and general incorporation laws that facilitated the rise of industrial trusts. However, New Jersey's dominance was undercut by Governor Woodrow Wilson’s 1913 “Seven Sisters” reforms, which imposed anti-trust restrictions and discouraged large corporations. This regulatory pivot, combined with growing perceptions of legal instability, drove companies to seek more business-friendly environments.
Delaware capitalized on this opportunity by offering a legal regime modeled on New Jersey’s earlier, permissive laws while also ensuring long-term predictability through its constitutionally protected corporate code and specialized Court of Chancery. Though some scholars argue that New Jersey’s decline began before 1913 due to increasing interstate competition, most agree that Wilson’s reforms catalyzed Delaware’s rise. Delaware’s expert judiciary, responsive legislature, and institutional infrastructure cemented its status as the preferred jurisdiction for incorporation—an advantage it maintains to this day. The article concludes that lasting corporate law dominance stems not just from permissive statutes but from durable legal institutions that foster business confidence.