In New Law Review Article, Prof. Guttentag Urges Supreme Court to Update Insider Trading Law

Loyola Law School, Los Angeles Professor Michael Guttentag’s newest law review article, “Selective Disclosure and Insider Trading: Tipper Wrongdoing in the 21st Century” discusses the first Supreme Court insider trading case in almost twenty years. In Salman v. United States, which is scheduled for oral argument on October 5th, the Supreme Court will consider when an insider’s tip to a friend or relative can trigger insider trading liability. Professor Guttentag, a securities law expert, provides background and context about what is at stake in this Supreme Court consideration of when tips can violate federal securities statutes. The article will be published in the Florida Law Review.

“I am hoping the Supreme Court will be bold enough to admit that the old rules about what counts as an illegal tip, developed in the era of the fax machine, are pretty much obsolete now,” said Guttentag, John T. Gurash Fellow in Corporate Law & Business. “In 2016, company policies and securities regulations strictly prohibit leaking confidential information. Insider trading law needs to reflect this new reality.”

Abstract:

The Supreme Court in deciding Salman v. United States should update a confused and increasingly obsolete aspect of insider trading doctrine: the rule that the selective disclosure of material nonpublic information can only trigger insider trading liability if “the insider personally will benefit, directly or indirectly, from his disclosure.”

When it was introduced in Dirks v. SEC in 1983 this “personal benefit” test represented an imperfect effort to balance four competing rationales for determining when providing a tip should trigger insider trading liability. Two developments since Dirks was decided have made problems with this personal benefit test insurmountable. First, the SEC’s enactment of Regulation Fair Disclosure in 2000 supplanted federal common law regulation of selective disclosures by public companies and, more pointedly, prohibited public companies from making precisely the types of selective disclosures to Wall Street analysts that the Dirks personal benefit test was designed to protect. Second, the adoption of the misappropriation theory of insider trading in United States v. O’Hagan greatly expanded the types of deceptive conduct that might lead to insider trading liability with important ramifications for how to identify tipper wrongdoing.

After Regulation FD and O’Hagan, the best approach going forward for identifying tipper wrongdoing would be to go back to the underlying statutory prohibition against deceptive conduct. Receipt of a personal benefit should be a sufficient, but not necessary, condition for finding that a selective disclosure is sufficiently deceptive to trigger insider trading liability. Based on this updated standard, the Salman conviction should be upheld.

Prof. Zimmerman Publishes Inside the Agency Class Action in Yale Law Journal

Loyola Law School, Los Angeles Professor Adam Zimmerman’s newest law review article, Inside the Agency Class Action, sheds light on an often-overlooked bottleneck in ordinary citizens’ access to justice: the thousands of cases stuck in administrative courts. Cases brought in this system of shadow litigation often languish for years without remedy – delaying justice for plaintiffs ranging from veterans seeking compensation for medical care and children harmed by vaccines to students duped by fraudulent private universities and others in dire financial straits. Zimmerman and co-author Michael Sant’Ambrogio’s solution of using techniques developed for mass litigation has been met with enthusiasm by the federal government, which adopted recommendations permitting class actions in administrative hearings.

• Read “Inside the Agency Class Action,” to be published by the Yale Law Journal
• Read the adopted recommendations. 

ABSTRACT:
Federal agencies in the United States hear almost twice as many cases each year as all the federal courts. But agencies routinely avoid using tools that courts rely on to efficiently resolve large groups of claims: class actions and other complex litigation procedures. As a result, across the administrative state, the number of claims languishing on agency dockets has produced crippling backlogs, arbitrary outcomes and new barriers to justice.

A handful of federal administrative programs, however, have quietly bucked this trend. The Equal Employment Opportunity Commission has created an administrative class action procedure, modeled after Rule 23 of the Federal Rules of Civil Procedure, to resolve “pattern and practice” claims of discrimination by federal employees before administrative judges. Similarly, the National Vaccine Injury Compensation Program has used “Omnibus Proceedings” resembling federal multidistrict litigation to pool common claims regarding vaccine injuries. And facing a backlog of hundreds of thousands of claims, the Office of Medicare Hearings and Appeals recently instituted a new “Statistical Sampling Initiative,” which will resolve hundreds of common medical claims at a time by statistically extrapolating the results of a few hearing outcomes.

This Article is the first to map agencies’ nascent efforts to use class actions and other complex procedures in their own hearings. Relying on unusual access to many agencies — including agency polticymakers, staff and adjudicators — we take a unique look “inside” administrative tribunals that use mass adjudication in areas as diverse as employment discrimination, mass torts, and health care. In so doing, we unearth broader lessons about what aggregation procedures mean for policymaking, enforcement and adjudication. Even as some fear that collective procedures may stretch the limits of adjudication, our study supports a very different conclusion: group procedures can form an integral part of public regulation and the adjudicatory process itself.

Scrutinizing the Candidates' Tax Policy Proposals

Professor Katherine Pratt, who teaches Tax Policy and related subjects, scrutinizes the tax policies of the Democratic and Republican presidential candidates:

Hillary Clinton’s Tax Plan
Hillary Clinton’s tax plan would increase federal revenue by over $1 trillion in the next 10 years, by increasing taxes on very high-income Americans, but not on middle-class and poor Americans. Her tax proposals, which are detailed and complex, combine a new surtax (an income tax rate increase) on the top 1 percent of earners, a new minimum 30% effective tax on taxpayers earning $1 million or more per year, limitations on the tax benefits of itemized deductions, and estate and gift tax increases. She also proposes an “exit tax” on U.S. corporations that try to avoid U.S. taxes by moving to low-tax jurisdictions overseas.

Follow-up questions for Hillary Clinton:
What do you propose to do with the additional $1+ trillion of revenue your tax plan would raise in the next decade? For example, would you prioritize federal deficit reduction, funding the infrastructure improvements or new child care programs you’ve proposed already, or funding new proposals for tax cuts for middle-class or poor Americans?

Donald Trump’s Tax Plan
Donald Trump has scaled back an earlier tax plan that would have dramatically reduced income taxes, but also would have reduced federal revenue by many trillions of dollars and risked serious, negative macroeconomic effects. His revised tax plan proposes tax rate cuts for taxpayers at all income levels, but disproportionately benefits high-income Americans, through individual income tax rate cuts, corporate tax and business tax rate cuts, repeal of the estate tax and alternative minimum tax, and the conversion of certain tax credits into tax deductions. The revised tax plan is difficult for economists to model because it quite vague and lacks details. In light of the extensive tax cuts in the revised plan, it probably would reduce federal revenue and increase deficits and interest costs over the next 10 years, which ultimately would undermine the intended pro-growth effects of the Trump tax plan unless Trump proposes enormous new spending cuts.

Follow-up questions for Donald Trump:

• How would you pay for your tax cut proposals? Both liberal and conservative economists agree that “pro-growth” tax cuts don’t pay for themselves. Your proposals are intended to promote economic growth, but that assumes that your tax cuts are not deficit-financed. If you plan to fund tax cuts through spending cuts, what spending programs would you cut? “Discretionary” federal spending already has been slashed. Would you propose spending cuts in any of the mandatory spending programs (such as Medicare and Social Security) that comprise over half of federal spending? 
• How and when will you fill in the details of your revised tax plan, so that economists can model the revenue effects of your plan?
• Are you being vague about your tax plan to deflect attention away from federal taxes and your refusal to disclose your tax returns? 
• Why do you propose converting tax credits (such as the child tax credit), which benefit all taxpayers, into deductions, which do not benefit non-itemizers at all and disproportionately benefit Americans in the highest tax brackets? Respected scholars in economics and law (Lily Batchelder, Fred Goldberg, and Peter Orszag) recommend the opposite of what you are proposing; they suggest that we convert tax deductions and exclusions into tax credits, to contain the runaway costs of unlimited tax benefits and to eliminate upside-down tax subsidies that disproportionately benefit high-income Americans. Why are you proposing the conversion of tax credits into deductions?

Prof. Lapp Publishes 'Taking Back Juvenile Confessions'

Professor Kevin Lapp's law review article, "Taking Back Juvenile Confessions," addresses some of the key issues that undermined the confession and subsequent conviction of Brendan Dassey. A federal magistrate judge recently overturned the conviction of Dassey, whose story was featured in the Netflix series "Making a Murderer," on grounds that his confession was unconstitutional.

Prof. Levinson Re-elected as President of LA Ethics Commission

The Los Angeles Ethics Commission re-elected Professor Jessica Levinson as its president when it met on Tuesday, August 9.

From the LA Ethics Commission's official statement:

At its meeting today, the Ethics Commission re-elected Jessica Levinson as president and Serena Oberstein as vice president. Levinson and Oberstein will serve in these capacities for Fiscal Year 2016-2017.

Levinson is a clinical professor at Loyola Law School, where she teaches courses covering election law and campaign financing. She has also lectured on election law issues for various educational institutions and civic organizations. Previously, Levinson was the Director of Political Reform at the Center for Governmental Studies, where she researched and wrote reports on election laws, campaign finance laws, ballot initiatives, term limits, primary elections systems, and redistricting. She also authored an amicus curiae brief for the United States Supreme Court regarding the constitutionality of public campaign financing. Levinson was appointed by City Controller Ron Galperin to a five-year term ending June 30, 2018.

Oberstein is the Chief Operating Officer for Vision To Learn, which provides free eye exams and eyeglasses to students in low-income communities. She previously worked on policy issues in former Mayor Antonio Villaraigosa’s office, as well as for Partnership for Los Angeles Schools, New York City Small Business Services, and J Street. Oberstein also has experience working on campaigns for candidates running for City office. She holds a Bachelor of Arts degree in political science from the University of California, San Diego and a Master’s in Public Administration degree from New York University. Oberstein was appointed by City Council President Pro Tempore Mitchell Englander to a five-year term ending June 30, 2019.

The Ethics Commission is comprised of five individuals who serve staggered five-year terms. The Mayor, the City Attorney, the Controller, the City Council President, and the City Council President Pro Tem each have one appointment to the commission. The commissioners elect their own president and vice president each year. In addition to Levinson and Oberstein, [Loyola alumna] Ana Dahan, Melinda Murray, and Andrea Ordin also serve as commissioners.