Equitable Remedies and Inequitable Deductions: Constructive Dividends and Disgorgement After Liu
Disgorgement has been a powerful tool for the SEC to recover billions in ill-gotten gains from securities fraud defendants. In Liu v. SEC, the Supreme Court affirmed the SEC’s ability to pursue disgorgement but limited the remedy to a defendant’s net profits. Confusingly, the Court also mentioned a potential exception to the net profit limitation for “wholly fraudulent” schemes. in which deductions are denied for expenses connected entirely to the perpetration of the fraud. This Note proposes using tax law’s constructive dividend rule to clarify the “wholly fraudulent” scheme exception. A constructive dividend is when a claimed business expense is legally recognized as a taxable distribution of income, on the grounds that the expenditure only conferred a benefit to the recipient, not the business. Both constructive dividend and disgorgement cases require a focus on substance over form to determine who benefitted from a given transaction.
Higher Education’s Great Divide: Tuition Discrimination and the Dormant Commerce Clause
A decrease in government spending on public schooling over the last sixty years has led colleges and universities to make up financial ground through raising the cost of tuition. Yet no group has been expected to bear the burden of decreased school funding more than out-of-state students at public universities. This discriminatory behavior not only impermissibly favors in-state residents but also creates an incentive for universities to admit out-of-state students from high-income families over their equally achieving, low-income peers. To hold universities accountable, courts should examine out-of-state tuition practices under the Dormant Commerce Clause doctrine to force Congress’s hand to act to protect the free flow of knowledge as well as address an education system that increasingly accommodates the wealthy at the expense of the disadvantaged.
The Judicial Administrative Power
Article III of the Constitution confines the “judicial Power of the United States” to the adjudication of “cases” and “controversies.” In practice, however, federal judges exercise control over, and spend their scarce time on, a wide range of activities that traverse far beyond any individual adjudication. Typically classified as a form of “judicial administration,” these activities span everything from promulgating the rules of the various federal courts to overseeing federal pretrial detention services or choosing federal public defenders. This Article describes how judges became involved in these nonadjudicatory Article III activities, clarifies the activities’ relationship to Article III adjudication, and considers the role the activities play for the modern federal judiciary. We argue that the judicial administrative power has profound consequences that carry us far beyond baseline questions of whether or to what extent judicial administration facilitates or improves federal adjudication. We conclude with a set of proposed reforms that would respond to these challenges by treating the judicial administrative power as administrative first and judicial second—and not the other way around.
The Distinction Between Direct and Derivative Shareholder Claims
One of the primary methods for shareholders to seek redress for corporate misconduct is the shareholder suit, in which shareholders may assert either “direct” or “derivative” claims. Although the distinction between direct and derivative claims is often outcome-determinative, the specific rules governing that distinction have long been flawed, with courts and commentators calling those rules “subjective,” “opaque,” and “muddled.” Moreover, the predominant Tooley test prevents courts from addressing numerous management misdeeds, thus harming shareholders and impairing justice. This Article explains how the Tooley test is fundamentally intractable and leads to gaming by transactional planners. This Article proposes another test based on (1) the availability of alternative governance solutions, and (2) relative judicial competency.
“I Am Free but Without a Cent”: Economic Justice as Equal Citizenship
The Fourteenth Amendment is one of the most-studied parts of the Constitution, but one of its central concerns has been long ignored by courts and scholars: economic justice. The rights of the poor and powerless to enjoy fundamental freedoms and meaningful equality lie at the very core of the Fourteenth Amendment’s text and history. The Supreme Court has failed to give these fundamental promises their due, producing a jurisprudence that turns a blind eye to the rights of poor people and reads the constitutional promise of economic justice out of our national charter. Recovering the true meaning of the Thirteenth and Fourteenth Amendments, as reflected in their text and history, would open the door to meaningful doctrinal changes that would help protect the rights of poor people and advance the effort to redress economic inequality.