Richard Booth

Richard Booth
Villanova University | Nova · School of Law

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39
Publications
3,056
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138
Citations

Publications

Publications (39)
Article
To make out a claim for securities fraud under federal law, a plaintiff must plead and prove the misrepresentation of a material fact. The Supreme Court has repeatedly defined a material fact as one that would be important to a reasonable investor in deciding how to act in that it would change the total mix of information – although it need not nec...
Article
The big question currently pending before the Supreme Court is whether the individual mandate in the Patient Protection and Affordable Care Act of 2010 (PPACA) – better known as ObamaCare – is unconstitutional because Congress has no power under the commerce clause to compel individuals to buy health insurance. In this short essay, I offer a severa...
Article
Most legal scholars agree that securities fraud class actions do little to compensate investors. Most investors are well diversified and thus are just as likely to sell an overpriced stock as to buy one. Moreover, since the defendant company ultimately pays in a successful class action, holders effectively pay buyers. Although this circularity is w...
Article
The Supreme Court has held that a single business entity (such as a parent and its wholly owned subsidiary) cannot conspire with each other to restrain trade in violation of the antitrust laws. But this single entity defense raises two closely related questions. First, can conspirators escape liability by the simple expedient of forming a corporati...
Article
In this short and informal essay, I address two recent developments in insurance law that may appear at first to be unrelated: (1) the ruling by the European Court of Justice that gender-based rates for life insurance products violate EU anti-discrimination law, and (2) the decision of the New York Court of Appeals that the law does not prohibit an...
Article
Although securities fraud class actions are a well-established legal institution, few (if any) such actions in fact meet the requirements of Rule 23 of the Federal Rules of Civil Procedure for certification as a class action. Among other things, Rule 23 requires the court to find that the representative plaintiff will fairly and adequately protect...
Article
Stock options are the primary form of compensation for CEOs because they align the interests of CEOs with those of diversified stockholders. Nevertheless, critics argue that the use of options leads to excessive pay because there is no effective bargaining between the CEO and the board of directors about the number of options to award. This article...
Article
Stock options are the primary form of compensation for CEOs because they are the best way to align the interests of CEOs with those of diversified stockholders. Nevertheless, critics argue that the use of stock options leads to excessive pay because there is no effective bargaining between the CEO and the board of directors about the number of opti...
Article
In this essay, I consider various theories about the cause the 2008 credit crisis and by implication what should be done to prevent future such events. These theories include the use or overuse of securitization, the misuse of commercial paper, deregulation of the banking business and the futures markets, and compensation practices that operated as...
Article
In the typical securities fraud class action under Rule 10b-5, the plaintiff class consists of buyers who seek damages equal to the difference between the price paid for the stock during the fraud period and the lower price that prevails after corrective disclosure. The argument here is that this claim is really an amalgam of direct and derivative...
Article
In this article, I analyze the implications of the Supreme Court's 2008 decision in Stoneridge Investment Partners v. Scientific-Atlanta. The case arose as a result of a scheme to increase reported advertising earnings of a struggling cable television company involving two suppliers who agreed to sell set-top boxes to the cable company at inflated...
Article
This brief essay recounts developments in corporation law over the last fifty years. It begins with the rise of finance capitalism and the conglomerate corporation which was followed by the emergence of hostile takeovers in the late 1970s and 1980s. One of the key events in this saga was the February 1, 1983 decision by the Delaware Supreme Court i...
Article
Hedge funds – unregistered investment companies – were identified as one of many possible contributing causes of the 2008 financial crisis. Some critics worried that hedge funds had garnered too much market power, while others worried that sponsorship of hedge funds by commercial banks may have induced the assumption of too much risk. The fact that...
Article
This short essay considers the findings and recommendations of the Paulson Report relating to securities fraud class actions under the 1934 Act and Rule 10b-5. While the report exposes numerous problems with securities litigation in the United States, it understates the problems inherent in stock-drop actions. As a result, the report fails to propo...
Article
Criminal prosecution has been used with increasing frequency recently in connection with a variety of business failures and other financial offenses. Indeed, it appears that there are few such offenses that cannot be prosecuted criminally even though they also give rise to civil remedies. While some such offenses seem to be quite serious frauds, ot...
Article
Securities fraud class actions (SFCAs) arising under Rule 10b-5 are well established as a feature of the legal landscape, but they are a vestige of a largely outdated view of investor behavior and preferences. In the 1960s, most investors were undiversified stock pickers. Today, most investors hold stock through well diversified institutions. As a...
Article
It is a well known anomaly of corporation finance that initial public offerings (IPOs) tend to be underpriced. That is, it appears that shares tend to be offered at a price that is below what the market would bear. Scholars have offered several explanations, most of which focus on various sorts of underwriter opportunism (and insider acquiescence t...
Article
In a recent article, I argued that diversified investors - the vast majority of investors - would prefer that securities fraud class actions under the 1934 Act and Rule 10b-5 be dismissed in the absence of insider trading or similar offenses during the fraud period. See Richard A. Booth, The End of the Securities Fraud Class Action as We Know It, 4...
Article
In this essay, I argue that the preeminence of Silicon Valley as an incubator of technology companies is attributable to equity compensation. Ronald Gilson, relying on the work of AnnaLee Saxenian and others who have noted the tendency of Silicon Valley employees to job hop, has suggested that California law prohibiting the enforcement of non-compe...
Article
The most fundamental question of corporation law is to whom does the board of directors of a corporation owe its fiduciary duty. Recently, the question has tended to be whether and under what circumstances the board of directors has the duty to maximize stockholder wealth. But if a corporation is insolvent (or close to it), business decisions desig...
Article
Suitability is one of the most common issues that arises in securities arbitrations. Yet it is also one of the most difficult issues to resolve. Up to now there has been no easy and reliable way to compare the risk of one stock or portfolio with another stock or portfolio measured as of the time the investment decision in question was made. As I ar...
Article
This article focuses on the mutual fund trading scandals that came to light in late 2003 and in particular on the remedy that should be available to injured mutual fund investors. First, I describe mutual fund structure and the trading process for mutual fund shares. Second, I show how late trading and market timing can extract value from a fund an...
Article
Full-text available
This paper focuses on corporation law in the United States as it relates to capital contributions and capital maintenance. In other words, the paper addresses the provisions of corporation law relating to (1) the obligation of investors to contribute to the corporation a specified amount of capital and (2) the obligation of the corporation to maint...
Article
In this article, I argue that securities fraud class actions (SFCAs) should not be treated as class actions but rather should be treated as derivative actions. In addition, I argue that such actions should be dismissed unless it appears that insiders (including the company itself) have enjoyed gains from trading during the fraud period. Both of the...
Article
In the debate over executive compensation, the assumption seems to be that the CEO of a publicly traded corporation is ultimately an employee of the corporation. According to the conventional view, the business belongs to the stockholders. Executive compensation is an expense like any other business expense that must be subtracted from income in re...
Article
In this article, I address a serious problem with the approach to damages embodied in the Private Securities Litigation Reform Act (PSLRA) that artificially increases awards in securities fraud actions in down markets. Congress enacted PSLRA to limit frivolous lawsuits under the federal securities laws. Among the many changes wrought by PSLRA was t...
Article
In this piece, I argue that the recent proliferation of forms of business organizations in addition to the traditional partnership and corporation may have arisen from the implicit recognition that various organizations may serve needs of business people in different types of businesses, and that traditional theory of the firm explanations are too...
Article
In this piece, I take issue with one of the fundamental tenets of law and economics as it has been used to justify gender discrimination in the pricing of life insurance and annuities, namely, that individuals should bear their own identifiable costs so as to avoid misallocation of society's resources. Most scholars of the law and economics persuas...
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Full-text available
in a merger, a stockholder often has a statutory right of dissent and appraisal under which the stockholder may demand to be paid fair value exclusive of any gain or loss that may arise from the merger itself. Most courts and commentators agree that a dissenting stockholder should ordinarily receive a pro rata share of the fair value of the corpora...
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This article reviews the state of the law regarding actions against broker-dealers based on the NASD suitability rule and similar theories, summarizes the theory and practice of investor diversification, explains the motivations that may lead a broker to recommend excessively risky securities and investment strategies, and discusses the various met...
Article
The traditional wisdom is that management should serve the interests of the corporation and the stockholders who own it by maximizing stockholder wealth. But a significant number of legal scholars argue that management duty should be more broadly construed to include other constituencies ("stakeholders"), such as employees, creditors, customers, su...
Article
Among the controversies swirling around the promulgations of new uniform statutes governing partnerships and LLCs is the question whether and to what extend fiduciary duties should be made mandatory or waivable. Although courts and commentators have not traditionally focused on the costs of fiduciary duties, the costs are significant in that such d...
Article
Two major theories attempt to explain why companies are often undervalued by the stock market and thus ripe for takeover attempts: the market hypothesis, which postulates that the market tends to price stocks below asset value, and the misinvestment hypothesis, which postulates that investors bid down share prices because they cannot trust managers...
Article
The purpose of securities law is to protect reasonable investors. Reasonable investors diversify. A diversified investor is protected against simple securities fraud by being diversified and needs no remedy at law. Moreover, the cost of litigating a securities fraud class action is a deadweight loss. Thus, diversified investors are not merely indif...
Article
MR. BALOTTI: Good afternoon. My name is Frank Balotti and I've been asked to be the moderator for this afternoon's program. And one of the privileges that I get is to introduce the panel and to call them up to speak in some kind of order, I hope. And I hope that you and the audience will participate by asking questions towards the end of our panel...
Article
Despite the potential loss in tax revenue, the Internal Revenue Service (IRS) is making it easier and easier to avoid corporate taxes. Witness the advent of limited liability companies and the proposed "check-the-box" regulations. This article takes a look at the real distinctions between -- and policy supporting -- pass-through and entity level ta...

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