VOLUME 4, ISSUE 1
Published January 8, 2023
NOT SO FAST, SPACS: DISLOYALTY, EMERGING DELAWARE CORPORATE LAW, AND HOW TO PROTECT SPAC MANAGEMENT AND SHAREHOLDERS ALIKE
Special Purpose Acquisition Companies, or SPACs, have existed in one form or another for about forty years. Such companies have historically strived to protect public shareholders from the inherent conflicts of interest created by SPAC organizers and sponsors. Their current form incentivizes unfair dealings that can leave unsophisticated shareholders unprotected and their interests abandoned. Securities regulations have been the primary tool to address these issues, but SPAC boards, officers, and sponsors are increasingly adroit at complying with legal technicalities while benefitting themselves to their shareholders’ detriment. Thus, equitable principles embedded in Delaware fiduciary duties should take on increased importance. Moreover, as the Delaware Court of Chancery has recently issued its first ever SPAC ruling in a motion to dismiss, interested parties everywhere are eager to see how Delaware corporate law will shape the contours of fiduciary duties within the SPAC context. This Note reviews the Court’s ruling and draws on precedent to propose how SPAC management and sponsors might “cleanse” a transaction to protect themselves from shareholder litigation in a way that preserves the shareholders’ best interests.
LIEBECK V. FRIVOLITY: THE CONTEMPORARY INFLUENCE OF AN ICONIC CASE
Kaitlyn Filip & Kat Albrecht
In 1994, the Liebeck v. McDonald’s “hot coffee” case became a significant social, legal, and political touchstone. In many ways, it has been the defining case in contemporary consumer protection and a flashpoint of tort reform rhetoric. This article explores the ways in which this case has come to be an “iconic case,” a case that we define in terms of its ongoing collective importance and persuasive power. In this article, we conduct a survey experiment of 400 participants in order to understand the impact of an iconic case in defining frivolity. We position our survey participants as prospective jurors presented with the facts of a case analogous to those in Liebeck v. McDonald’s. We manipulate the definitions of “frivolity”—giving half of our survey participants a common language definition and half a legal language definition—and add facts to suggest frivolity to half of our participants. Overall, we found that participants with the common language definition of frivolity and no additional imputed facts were less likely to find the case frivolous. Furthermore, we measured participants’ recollection of Liebeck v. McDonald’s, finding that a substantial portion of them remember the case in great detail and that such recollections predict their contemporaneous perceptions of fairness and frivolity. We conclude with an argument that iconic cases have substantial impact on future analogous cases, but that the direction of that impact is nuanced and varied.
DOUBLE IRISH, DUTCH SANDWICH: OVERCOMING HYBRID MISMATCH ARRANGEMENTS
In 2013, the Organization for Economic Cooperation and Development (“OECD”) released its report on Base Erosion and Profits Shifting (BEPS) of international tax revenue. In this report, OECD outlined 15 Actions that had contributed to trillions of dollars being lost from the tax revenue due to active tax avoidance strategies. The Second Action addressed hybrid mismatch arrangements, where companies used residencies in different countries to take advantage of double tax deductions or report results of no income. The most classic and best understood example of such a tax avoidance scheme is the Double Irish, Dutch Sandwich, which allowed companies that owed billions of dollars in corporate taxes to get away with paying well under that amount—and sometimes no income tax at all—by taking up residence in “tax havens.” To combat this issue, OECD released recommendations for countries to follow that would reduce the likelihood of such tax avoidance schemes from being effective or possible. Following those recommendations, many countries, including Ireland and England, made efforts to prevent the use of such tax avoidance schemes. This paper serves three primary purposes. First, the paper analyses the recommendations made by OECD and determines whether they would be effective at preventing hybrid mismatching. Second, the paper analyses the Netherland’s response to the tax scheme as well as the Double Irish, Dutch Sandwich tax scheme to see whether the OECD report was instrumental in preventing hybrid mismatching. Lastly, the paper analyses the new aggressive tax avoidance schemes that have been presented since the OECD report and how to best stop such schemes from reappearing as well as which type of regulations would best curtail the rise of hybrid mismatches.
WEB OF INTEREST: REFRAMING THE CONVERSATION AROUND UNAFFORDABLE HOUSING
Hilary Silvia & Linda Christiansen
Property rights, often described as a bundle, may more accurately be characterized as a web of interests, considering the wider spectrum of stakeholders, including owners, tenants, neighbors, communities, and society. Ironically, research shows that government- imposed price ceilings on rent often produce the opposite result of their intended purpose by keeping housing prices low for those in the regulated area and raising prices in the surrounding areas. Additionally, the quality and quantity of housing declines in areas with rent regulations, negatively (albeit unintentionally) impacting the broader community. Ultimately, rent control is a flawed solution to affordable housing problems.2 Many argue rent control serves as a housing subsidy, but, whereas subsidies usually transfer financial support from the government directly to citizens, in the case of rent control, the subsidy flows from private landlords to their rent-controlled tenants. The result, ultimately, is that the “public pays indirectly through lower property values and higher, non-controlled rents that typically result from rent control.”3 This article explores the impact of price controls governing the landlord-tenant relationship on a diverse array of stakeholders within the web of interest.
BAD SERVICE: THE CASE FOR REMOVING THE § 501(C)(3) TAX EXEMPTION FOR NONPROFITS THAT DISCRIMINATE ON THE BASIS OF SEX
Stacey Lyn Hall
Nonprofit organizations in the United States typically qualify for a significant federal income tax exemption under Internal Revenue Code § 501(c)(3). While this exemption is beneficial in many instances, it also means that nonprofits that discriminate on the basis of sex or gender identity receive the same substantial tax benefits as non-discriminatory nonprofits. To remedy this issue, the United States should implement a system to disqualify nonprofits that discriminate on the basis of sex from receiving the § 501(c)(3) tax exemption. Other scholars have addressed different forms of discrimination in the context of § 501(c)(3) nonprofits, including discrimination on the basis of race and sexual orientation. However, there has to date been little discussion of discrimination on the basis of sex and gender identity in the nonprofit sector.
This article will examine the history, meaning, and dynamics of the § 501(c)(3) tax exemption and illustrate the need for action through the examples of nonprofits engaged in sex discrimination when hiring employees, particularly for leadership positions. It will also propose an amendment to the IRC and the formation of a committee to investigate complaints of sex discrimination. Finally, it will discuss public policy and First Amendment arguments surrounding the issue.