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Dunbar and Heller on the Future of Securities Class Actions

For those who want background on why Judge Alito’s strong recent re-affirmation the efficient capital markets hypothesis matters, there is a new article on SSRN for you.

Frederick Dunbar and Dana Heller (both of National Economic Research Associates) have posted “Fraud on the Market Meets Behavioral Finance,” forthcoming in the Delaware Journal of Corporate Law. From the abstract:

The efficient market hypothesis, in its current form, dates academically from 1970 and it was first accepted by a Federal Court in a shareholder class action in 1975, providing plaintiffs with a rebuttable presumption of reliance based on the fraud-on-the-market theory. By 1988, the fraud-on-the-market theory was the law in most Circuits and was affirmed by the Supreme Court in Basic v. Levinson. Since then, the efficient market hypothesis has not been rebutted in any case involving actively traded securities, and its impact on securities litigation and regulation extends well beyond class certification to materiality, causation and damages. Somewhat ironically, over the same time period, financial economics was, first, finding anomalies in securities markets that were not consistent with the Supreme Court’s version of the efficient market hypothesis and, second, using concepts borrowed from behavioral economics to develop theories of securities price formation to explain, among other things, the stock price bubble of the late 1990s. In fact, even proponents of the efficient market hypothesis have claimed that securities were mispriced during this episode. If courts were to adopt behavioral finance explanations of securities market behavior, then prior precedent would not be appropriate in a number of areas of securities fraud including reliance, materiality, causation and damages. We explore the implications of how analysis of these issues would be changed by application of behavioral finance.

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Goodbye and Thanks!

Thanks so much to Dan, Kaimi, Nate and Dave for inviting me to participate on this wonderful blog. I couldn’t have asked for a better introduction to the world of blogging, or a friendlier or more supportive group of (virtual) colleagues. I had hoped to end with a flurry of posts, but my plans were side-tracked by both the aftermath of the appointments conference and a nasty cold (hard to say which was worse). But never fear – I’ll continue to be a regular reader and make my presence felt in the comments. Bye, and thanks again!

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Of Names, Auctions, and Contests

lemonysnicket.jpgLemony Snicket auctioned the naming right to a character in a forthomcing novel. (Sold for a lot–something like $6000.) So why shouldn’t Professor Eric Muller solicit help in naming his new book on the administration of the internment of Japanese-Americans during World War II? Looks like a great book, btw, judging by his introductory chapter. And, of course, the contest has the virtue of getting lots of folks reading the introduction and driving traffic to his blog. This may catch on–at least I hope it does, because I enjoy hearing about new scholarship and it’s sort of a fun contest.

Alas, I have no good idea about the name for the book–I’d probably go for something dull like Administering Injustice. But it’ll be an important addition to the literature on the history of administrative state in the twentieth century, which has been drawing attention from really strong scholars, like Reuel Schiller.

One more thing: I was a coerced watcher of Snicket’s Series of Unfortunate Events last January on a flight out to Seatle. And, after the first couple of minutes when I couldn’t quite figure out what the was going on, I enjoyed the movie. Plus, I dig the role of a trust in shaping the plot.

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Stove Top Stuffing Obit

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Ruth M. Siems, lead inventor of stove top stuffing, died last week. Her obit in the Times was, sadly, patronizing and somewhat nasty. Margalit Fox writes that Siems’ invention will make its appearance in homes tomorrow, “welcome or otherwise”, that it is “[c]omforting or campy,” and it is an “enduring emblem of postwar convenience culture.”

Look. I’m not a huge fan of this stuff, but – like other parts of the “postwar convenience culture” – it has made it possible for Americans to spend less time at the stove, and at pursuits that they apparently find more rewarding. Like working. Or spending time with children. And, it seems that snarking at the product misses an interesting life story. The obit gives us a few facts:

Ruth Miriam Siems was born in Evansville, Ind., on Feb. 20, 1931. She earned an undergraduate degree in home economics from Purdue University in 1953, and after graduation took a job at the General Foods plant in Evansville, where she worked on flours and cake mixes. She moved to the company’s technical center in Tarrytown, N.Y., not long afterward. Ms. Siems retired in 1985.

Besides Ms. Porter, of Copley, Ohio, Ms. Siems is survived by another sister, Rosemary Snyder, of Chicago; and a brother, David, of Milford, Mich.

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There’s Gold In Them Pixels

A picture is worth a thousand words. But pixels might be worth a million bucks. From the Wall St. Journal (free content):

It was just a few months ago that 21-year-old Alex Tew of Great Britain was stumped about how to pay for college. He’d filled a notebook with ideas before jotting down this simple, if rather audacious, query to himself: How Can I Become a Millionaire? . . .

Instead of selling banner ads, text links or splashy videolike ads that fill a screen, Mr. Tew opted to hawk the simplest graphical denominator of a computer screen: the pixel. A pixel is a tiny dot of light and color, and each screen has tens of thousands of them.

Mr. Tew created a home page, www.milliondollarhomepage.com, where he divided the screen into 10,000 small squares of 100 pixels each. His plan: to sell the pixels for $1 a piece, with a minimum order of 100 pixels. In each space, buyers could put a graphical ad of their choosing that links to their own site when clicked on. The end result is a cluttered collage of ads in various shapes and colors all amassed on a single digital billboard. (Mr. Tew doesn’t charge his advertisers anything when a visitor clicks on the ads.)

Here’s what his website, www.milliondollarhomepage.com, looks like:

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Tew aimed to keep up his site until he reached a million bucks. You’d think it wouldn’t work. But it has been working:

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Private Accrediting: If you can’t beat ‘em, join ‘em

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US News’ rankings are exerting powerful influences over law school practices, in areas like admissions (and presumably hiring and promotion of faculty, to enhance reputation scores). They’re beginning to look like an accrediting agency that operates parallel to the ABA. US News arguably sets benchmarks for such areas as admissions, faculty-student ratios, and library size.

(Jeffery Stake’s article “The Interplay Between Law School Rankings, Reputations, and Resource Allocation” and posts like this one by Brian Leiter explore how US News is affecting (or might affect) class size and other admissions decisions. My (admittedly impressionistic) sense is that a great many law schools are bending their behavior to US News factors.)

In the spirit of “If you can’t beat them, join them,” maybe what we should be doing is lobbying US News to change the factors that count in their rankings. Perhaps, for example, we should encourage US News to take diversity of student body into account. If US News gave (even small credit) for diversity, perhaps it would cause (major) shifts in law schools’ admissions decisions. I wonder if US News is already poised to do this? In 2005 they began publishing a diversity index, but it doesn’t yet count towards a school’s overall rank.

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VisitorVille 3D: Site Meter Heroin

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I hope, pray, plead to the heavens that I will not use VisitorVille 3D. VisitorVille 3D is a visitor tracking software, akin to Site Meter, but that displays web traffic as a three dimensional city:

What makes VisitorVille unique is immediately clear: VisitorVille does not represent website visitors simply as numbers or graphs, but as real people in a real environment. You can watch your site traffic as if you were people-watching in a big city.

As a blogger, I understand the obsession over visitor stats. But VisitorVille 3D is just taking things too far. It strikes me as too addictive to be legal.

More pictures and information about it can be found at Google Blogoscoped, where Philipp Lenssen writes:

The Google bus arrives whenever a visitor searched Google and found this blog. The search terms will be announced to you by a female voice (like “Search term: Google Base”). In VisitorVille, you can listen to your traffic – every event has its own sound.

Definitely too addictive to be legal.

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FBI Virus

fbi1.bmpI just got a humorous virus email. It’s from admin@fbi.gov with this message:

Dear Sir/Madam,

we have logged your IP-address on more than 30 illegal Websites.

Important:

Please answer our questions!

The list of questions are attached.

Yours faithfully,

Steven Allison
Federal Bureau of Investigation -FBI-
935 Pennsylvania Avenue, NW, Room 3220
Washington, DC 20535
phone: (202) 324-3000

Of course, the list of questions attached is a file containing a virus. I’m dying to see the questions, but alas . . . my email program stripped out the virus-laden file.

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More on Pseudonymous Litigation

redact1.jpgHoward Bashman offers these further thoughts about the issue of pseudonymous litigation and the sex tape case I blogged about earlier today:

In terms of assessing blame, however, in my view it is the attorney for the pseudonymous party who bears the responsibility to ensure that the appellate briefs posted online — and surely the Seventh Circuit’s practice of posting briefs online comes as a surprise to no one — does not reveal the actual identity of the lawyer’s pseudonymous client. . . .

There is no way that an appellate court’s clerk’s office can review filings for the purpose of making appropriate redactions; that is the job of counsel for the parties.

While I don’t believe that the court should be held blameless, I definitely agree with Bashman that the lawyers are also to blame in this case.

Lawyers often are not devoting adequate attention to the issue of client privacy interests in the course of litigation. One reason why many privacy cases involve the real names of plaintiffs is because many lawyers don’t even think of raising the issue of the plaintiff proceeding pseudonymously. Courts often will deny plaintiffs the right to proceed under a pseudonym, but this doesn’t mean it isn’t worth trying. You rarely get anything without at least asking.

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Of Sex Tapes, Pseudonymous Litigation, and Judicial Bungling

videocamera1a.jpgLior Strahilevitz (law, Chicago) has a wonderful post over at the Chicago Law Faculty Blog about a very problematic Seventh Circuit opinion — and blunder. The case, Doe v. Smith, involves a teenage girl whose boyfriend secretly videotaped them having sex and then emailed the video to his friends. The issue is whether the plaintiff could proceed on federal Wiretap Act claims. The court said yes. But then the court stated:

On remand, the district judge must revisit the question whether the plaintiff should be allowed to proceed anonymously. The judge granted her application to do so without discussing this circuit’s decisions, which disfavor anonymous litigation. The public has an interest in knowing what the judicial system is doing, an interest frustrated when any part of litigation is conducted in secret. Plaintiff was a minor when the recording occurred but is an adult today. She has denied Smith the shelter of anonymity – yet it is Smith, and not the plaintiff, who faces disgrace if the complaint’s allegations can be substantiated. And if the complaint’s allegation’s are false, then anonymity provides a shield behind which defamatory charges may be launched without shame or liability.

Lior Strahilevitz persuasively attacks the court’s reasoning:

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