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Volume 73, Issue 6 (March 2023)

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Articles

Neglected Discovery

Jenia I. Turner, Ronald F. Wright & Michael Braun | PDF

In recent decades, many states have expanded discovery in criminal cases. These reforms were designed to make the criminal process fairer and more efficient. The success of these changes, however, depends on whether defense attorneys actually use the new discovery opportunities to represent their clients more effectively. Records from digital evidence platforms reveal that defense attorneys sometimes fail to carry out their professional duty to review discovery.

Analyzing a novel dataset we obtained from digital evidence platforms used in Texas, we found that defense attorneys never accessed any available electronic discovery in a substantial number of felony cases between 2018 and 2020. We also found that the access rate varied by county, year, offense type, attorney category, attorney experience, and file type.

To better understand when and why attorneys neglect the available discovery, we supplemented the analysis of digital platform data with interviews of more than three dozen Texas criminal defense attorneys. We learned that defense attorneys were aware that many of their peers fail to review discovery in felony criminal cases. Our interviewees identified several explanations for the failure to access evidence. These include a lack of technological skills and support; the overwhelming volume of digital discovery; the client’s desire for fast resolution of the case; the lesser gravity of some cases; high caseloads; low compensation; and, in some cases, simple lack of diligence. We consider the implications of these attorney practices for ineffective assistance of counsel litigation, effective supervision of defense attorneys, and criminal law reform.

ESG and Securities Litigation: A Basic Contradiction

Aneil Kovvali | PDF

Companies are increasingly expected to publicly report on not only their traditional financial results, but also environmental, social, and governance (“ESG”) issues. Trillions of dollars are being invested with ESG considerations in mind, and boosters urge that ESG investing can address environmental and social impacts that are normally ignored by managers focused on share prices. This raises the question of how companies should be punished if they lie about ESG matters. How should the traditional elements of securities fraud map onto the novel ESG context? Commentators have vigorously debated ESG’s relationship to the materiality element of securities fraud. But the literature has largely overlooked the reliance element. Securities class action plaintiffs normally show reliance using the presumption introduced by the Supreme Court’s decision in Basic Inc. v. Levinson. If a plaintiff can show that a company’s shares trade in an efficient market, share prices are presumed to reflect all publicly available material information about the company. As a result, a material misstatement operates as a “fraud on the market,” and anyone who traded the company’s shares at the market price is presumed to have relied on the misstatement. This presumption makes securities class actions possible by dispensing with the need to prove that every individual plaintiff actually relied on the false information. As ESG disclosures expand, a new wave of litigation powered by Basic is developing.

This Article explores the reliance element of securities fraud and identifies a deep tension between the premises of the ESG movement and the premises of Basic. The advocates who urge corporations to do better on environmental and social matters largely—and justifiably—believe that share prices do not properly reflect corporate performance on those fronts. That belief is difficult to reconcile with Basic’s assumption that material information about a company is reflected in its share price. The Basic presumption could also chill valuable experimentation and voluntary disclosures by companies, and it could absolve institutional investors of the need to actually review and act on ESG disclosures. Counterintuitively, requiring plaintiffs who attack an ESG disclosure to show reliance without using Basic may help advance the goals of the ESG movement, particularly if other enforcers such as the Securities and Exchange Commission step up. These points suggest the need to proactively consider how the Basic presumption should work for ESG misstatements, along with the development of new and creative approaches. By shifting the conversation on ESG disclosures from its current emphasis on materiality to a proper focus on investor reliance and enforcement, this analysis generates fresh and actionable insights.

Notes

“We’re Not Selling Ice Cream Here”: PLCAA, the Predicate Exception, and Providing Relief for Plaintiffs

Emma Kilroy | PDF

In 2005, the Protection of Lawful Commerce in Arms Act (“PLCAA”) put a stop to most civil litigation against the firearms industry. In the nineteen years since, victims of gun violence have attempted to bring claims against members of the firearms industry, with varying degrees of success, using an exception to PLCAA known as the predicate exception. Recently, states have begun to pass legislation creating a right of action for plaintiffs to take advantage of the predicate exception. Whether the new legislation will be successful, however, remains to be seen.

This Note examines all of the available cases considering the predicate exception, revealing areas where the current regulatory framework fails plaintiffs and the distinguishing characteristics of successful cases. In light of this analysis, Part III discusses recent state legislation, identifies gaps in the legislation, identifies areas for improvement, and forecasts challenges to the legislation. The Appendix contains a chart organizing the cases that consider the predicate exception by whether they were successful and the predicate statute considered by the court in each case.

Show Me the Green: The Battle for Investor Trust in ESG Funds

Benjamin R. Lukas | PDF

Environmental, social, and governance (“ESG”) funds enable earnest investors to align their money with their values. Some believe that ESG funds can promote a more sustainable and just economy by encouraging companies to adopt better practices and by divesting from those that do not. Others expect that funds with limited carbon exposure will outperform as climate change imposes regulatory and financial risks on carbon-intensive industries. Research suggests that younger investors overwhelmingly support the idea behind ESG investing; one-third even report a willingness to forgo 10 percent or more of their retirement savings to protect the environment.

Unfortunately, ESG products also stoke cynicism. While some funds may live up to their name, others may co-opt trendy labels as a marketing ploy to charge higher fees—a tactic now commonly referred to as “greenwashing.” In addition to misleading investors, greenwashing has the power to erode faith in the ESG movement. Legitimate offerings can quickly become contaminated by those seeking to make a quick buck. To address this harm, in May 2022, the Securities and Exchange Commission (“SEC”) set forth two proposals to enhance transparency in registered funds using ESG-like branding: an enhanced disclosure rule and an amendment to the “Names Rule.” The latter proposal, adopted in September 2023, requires ESG funds to invest 80 percent of their assets “in accordance with the investment focus that the fund’s name suggests.” This Note takes the position that the Names Rule amendment furthers the SEC’s mission of investor protection but requires additional guardrails to adapt adequately to the complexities of ESG funds.