Volume 37, Number 4


David Hasen

Many of the consequences of issuing and purchasing options on publicly traded property have been well understood since Black and Scholes developed a model for option pricing. No model of options, however, provides an accurate economic analysis of the actual transactions that issuers and purchasers engage in when options are bought and sold. One consequence of this gap in understanding is that the rules for taxing options remain poorly developed. This Article provides a transactional analysis of option sales for the first time. The focus is on covered options, but the analysis also has implications for options in which the underlying property serves merely as a reference obligation and is owned by neither party to the transaction. The analysis demonstrates that while all options have as one component a swap of variable risks or returns on the underlying property for a fixed payment, “in the money” options involve, in addition, a forward transfer of the benefits and correlative burdens of a part of the underlying property that is equivalent to a forward sale of that part. Commentators have not identified this embedded forward sale because the payment arrangement between the parties to the option transaction obscures it; however, a comparison of option prices derived under the Black-Scholes model with the theoretical prices of such forwards demonstrates that the transactions are identical. The analysis also illuminates the relationships between options and other common financial transactions, such as collars, and it permits a clear assessment of the advantages and disadvantages of possible tax rules for financial options.
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Deborah Ahrens

The story of criminal sanctions in modern America is a familiar—and depressing—narrative. According to the narrative, we live in an era where the dynamics of popular politics, the practices of the media, and the (often racialized) anxieties of modern life combine to create a one-way ratchet, in which we identify perceived new threats to public order and respond unthinkingly with harsh new criminal sanctions. On the surface, the wave of concern over methamphetamine that swept the nation in the middle part of this decade followed this script, as a media panic led to substantial popular concern and significant new legislation. When one digs a little deeper, however, the story is more complicated: Instead of a singular focus on increased criminal penalties and mass incarceration, we see a multifaceted strategy focused on educating the public, limiting access to ingredients, and remediating environmental concerns raised by the manufacture of the drug.
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Goutam U. Jois

In its most recent term, the Supreme Court of the United States decided Pearson v. Callahan and Ashcroft v. Iqbal, two cases that, even at this early date, can safely be called “game changers.” What is fairly well known is that Iqbal and Pearson, on their own terms, will hurt civil rights plaintiffs. A point that has not been explored is how the interaction between Iqbal and Pearson will also hurt civil rights plaintiffs. First, the cases threaten to catch plaintiffs on the horns of a dilemma. Iqbal says, in effect, that greater detail is required to get allegations past the motion to dismiss stage. But a plaintiff who says too much at the pleading stage risks getting kicked out by Pearson; if the allegations are very specific, a court (deciding qualified immunity) will conclude that the constitutional right, if any, is so specific as not to be clearly established. If the litigant pleads at a level of generality to avoid the “clearly established” problem, he will get tripped up by Iqbal because the allegations will be deemed “conclusory” or too general to be “plausible.”
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Erik S. Knutsen

This Article explores the tensions between the perceived public and private aspects of the litigation system by using the debate surrounding whether or not the public civil justice system can and should tolerate secret settlements in standard, nonaggregate private law disputes. By evaluating the arguments against secret settlements in this context, the Article argues that the public and private aspects are not exclusory, oppositional perspectives but instead lie on a nonlinear continuum in which both may inform the other. The proper place on the continuum on which a certain procedural solution may lie often depends upon what type of dispute is at the center of the debate. When reforming and designing the civil justice system, either in whole or in part—like whether or not to allow secret settlements—one can expect a fuller, more balanced normative dialogue by thinking of the private and public views of civil litigation as operating on a nonexclusive and nonlinear continuum. This Article delves behind the seemingly oppositional perspectives of the public and private conceptions of civil litigation to reveal the utility of thinking about the two not as exclusive but cohesive. A decidedly private view of secret settlements does not, in all instances, negate the concerns of a view closer toward the public side of the continuum. In the end, the private view of litigation often has far more “public” to the “private” than one might expect.
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Alvan Balent

The Internet is now a staple of modern society, and as a result, there is great interest in finding ways to further develop the Internet and expand its services. Recent literature has begun to focus on one particular aspect of the Internet that needs improvement: its energy usage. Accordingly, this Note examines the potential benefits of an energy-efficient Internet and explains how taxation based on energy usage can provide a constant impetus to improve not only the Internet’s energy efficiency but also that of other industries. Thus far, commentators have not published many works with regard to an Internet energy tax despite the longstanding debate over Internet taxation itself, which has largely centered upon the concept of a sales tax. This Note offers new insights into the Internet tax policy debate and provides a rudimentary framework for structuring an Internet energy tax.
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Amy R. Willis

We live in an intangible world—a world where computers dominate business operations at a level that would have been unheard of twenty years ago. Vital ingredients of a business, such as customer and proprietary information, product design data, and accounting information, are now stored on computers. This intangible information often constitutes a large portion of a company’s assets. If this information is lost or computers malfunction during some fortuitous event, the affected businesses may suffer devastating losses, and operations may be interrupted for an extended period of time. When this occurs, businesses will turn to their insurance companies for coverage.
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