Confronting the Certainty Imperative in Corporate Finance Jurisprudence
67 Pages Posted: 27 Oct 2011 Last revised: 10 Jul 2012
Date Written: October 25, 2011
Turbulent economic periods leave many enduring legacies. This Article examines a jurisprudential vestige of the economic instability and dominant intellectual theories of the 1970s and 1980s: what I call the "Certainty Imperative." The Imperative is a judicial decision-making paradigm that infuses the specific goal of stability in financial markets into the broader and more deeply entrenched normative theme of legal certainty. As it has evolved across decades of case law and legislative enactments, the Imperative has profoundly altered judicial decision-making in finance and lending by encouraging strict interpretive norms and rejecting more expansive analyses. Over time, the Imperative's methodological constraints have become a paralyzing force upon the judiciary, preventing it from engaging in law reform. In essence, the state of finance and lending jurisprudence can be summarized thusly: deference, in the very broadest sense, is shown to the legal status quo.
The methodological constraints imposed by the Imperative must be overcome. As modern corporate financing arrangements grow more complex, moral hazards arise when contractual language vests substantive rights and remedies in a manner that does not align with evolving economic interests. This Article suggests several possibilities for expanding the scope of judicial inquiries in the corporate financing realm so that the judiciary may resolve disputes through an interpretive methodology that considers economic substance over contractual form.
Keywords: Corporate Finance, jurisprudence, law and economics
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