What Injures a Corporation? Toward Better Understanding Corporate Personality
J.B. Heaton, 73(4) 1031-1050 (Fall 2018)
Understanding what injures a corporation can help us better understand corporate personality. Traditional corporate injury is injury to corporate assets or profits. This makes sense, because without defining impairment to corporate assets and profits as corporate injury, most of what we think of as “essential” about a corporation—locking assets into a protected partition—would be impossible: (1) protecting the going concern value of the corporation; (2) maintaining creditor priority; and (3) contracting through the corporate form. More recent expansions of what constitutes corporate injury, including injuries to a corporation’s right to political speech (Citizens United) and religious freedom (Hobby Lobby), seem at first to fit poorly with existing corporate theory. But corporations can “lock in” and “partition” more than assets; they can partition beliefs and virtues as well. Viewed this way, existing corporate theory (and the idea of corporate injury as harm to whatever is partitioned by the corporate form) may provide more help in understanding corporate constitutional rights than previously recognized.
Loss Causation and the Materialization of Risk Doctrine in Securities Fraud Class Actions
Richard A. Booth; 75(2): 1791-1814 (Spring 2020)
In the context of a claim for securities fraud under SEC Rule 10b-5, most federal circuit courts have ruled or recognized that loss causation can be proven by an event that demonstrates an earlier statement by a defendant company to be false. In other words, corrective disclosure need not take the form of speech. Rather, a statement can be shown to be false by the materialization of a risk that was concealed by the company, and investors can be compensated for any losses they suffer as a result. Although this doctrine is well established, its ultimate effect is to overcompensate investors, thus encouraging excessive securities litigation and chilling voluntary disclosure.