The Dark Knight Rises I: Corporate Shenanigans

The latest and presumably last installment in Christopher Nolan’s epic Dark Knight Trilogy, beginning with Batman Begins, continuing through The Dark Knight and now culminating in The Dark Knight Rises, came out on Friday. The reviews are generally positive, but as always, we’re more interested in how the film handles the legal side of things.

Unfortunately… there are some problems.  Major spoilers follow.

I. Wayne’s “Bankruptcy”

One of the major plot points involves Bane manipulating events such that Bruce Wayne goes bankrupt. He does this by breaking into the trading desk at a major stock exchange—the movie is delightfully schizophrenic about where it’s actually set, and there are shots from New York, Pittsburgh, Newark, London and Glasgow—and placing a bunch of trades which appear to have been authorized by Bruce Wayne himself. These trades were a series of unwise put options, though the movie never really explains what those are. To put it simply, a put option is a contract whereby two parties agree to sell something, called the “underlying,” at a fixed price at some point in the future. It’s actually a bit more complicated than that, as the “option” part suggests, but that’s about all we need to know for right now. The movie doesn’t explain whether Wayne is buying or selling with put options—you can do both—but it is entirely possible to lose a whole bunch of money in a hurry whether you’re buying or selling. All you need to do is be on the wrong end of an option that requires you to buy at a far higher price or sell at a far lower price than the market would otherwise make available.

There are, of course, some problems with this. One of the characters makes a passing suggestion that there might be something that could be done because the transactions were obviously fraudulent, but that it would take too much time. Why is never explained. Indeed, why trading did not instantly cease the second it became apparent that someone was actually storming the trading floor was never explained. The fact that someone had access to the trading desk explains how the put options could have been created in the first place, but it doesn’t explain why anyone thought for one second that they were real. An actual attack on the trading floor might well close the market for a day or two while damage is repaired and additional security installed.

Further, moving beyond securities fraud in particular and into contracts in general, there’s a strong argument that Wayne shouldn’t be held to the options he allegedly made. Mistake can be a defense to any contract. Mutual mistake arises when both parties were somehow confused about a key term of the contract, e.g., they showed up at identical addresses at different zip codes. If there was just an honest cock up, the deal’s off. Unilateral mistake, where only one party is screwing up, is harder to make stick and generally requires that the innocent party be aware of the mistake. Any time one side offers terms which are so wildly off base as to cause major financial damage or hardship, the other side might be vulnerable to a charge that they should have known something was up. The situation is very similar to that where a bunch of contractors submit a bid for a project and one of them is an order of magnitude less than the others. Odds are really, really good that he either made a math error or doesn’t understand the nature of the job, and the other side ought to be able to tell. Same for put options that are wildly off base, especially in the immediate aftermath of an attack on the trading floor. The fact that Wayne’s fingerprints are on it isn’t going to change this either. First of all, stock exchanges don’t use biometrics of that sort as far as we know. Second, Wayne has a plausible explanation for how his fingerprints were obtained (the break-in at his house by a known thief).

So really, there isn’t any obvious reason Wayne or his representatives couldn’t just refuse to honor the contracts and let the chips fall where they may. While one can potentially see how the plan to bankrupt Wayne is supposed to work, it doesn’t seem like it would.

II. Wayne and the Board of Directors

But that’s not all that happens. Bane wasn’t trying to just bankrupt Wayne personally. He was trying to take control of Wayne Enterprises. Exactly how isn’t clear, and this is where the other question comes up. Say Wayne goes bankrupt. That sucks for him, but it doesn’t necessarily mean that Wayne can be dismissed from the Board of Directors of Wayne Enterprises. Indeed, it’s not clear how his personal bankruptcy would or even could affect WE at all. Now it’s possible that the trades could have been made using Wayne’s authorization but in Wayne Enterprises’ name, but this doesn’t fix things. In that case, Wayne Enterprises might go bankrupt, but Bruce Wayne himself should be unaffected, other than the loss of whatever portion of his fortune comes from Wayne Enterprises. It’s also not clear why Wayne would be authorized to make those sorts of trades anyway. Lucius Fox is the CEO, and Wayne’s position at the company has never been adequately explained, but he’s not the CFO as far as anyone knows. Nor is he in accounting. Corporate financial transactions are usually handled by bean counters in the Finance and Accounting department, not the C-suite, and it’s not clear Wayne even has an office there.

Regardless, how all of this is supposed to add up to Wayne getting kicked off the board or Daggett being able to somehow take control of and/or buy Wayne Enterprises is simply unclear. We can see how the plan to bankrupt Wayne was supposed to work, but we don’t think it would. But we’re not even sure how this part of the plan was supposed to work.

III. Conclusion

So while a lot of the rest of the movie is pretty awesome, the parts dealing with the stock market and various corporate shenanigans isn’t merely implausible, it simply doesn’t make sense at all. It’s not as if the plan had problems but, if it worked the way it was supposed to, would achieve the desired result. Here we’re not even sure what the “plan” working the way it was supposed to would actually look like. This makes for a rather interesting reversal from The Dark Knight, in a way. In the previous movie, a character who is supposed to not be “a schemer” winds up with some of the most detailed and intricate plans in movie history. In this movie, characters who are supposed to plan for the really long game seem to basically be winging it.

Update: It looks like The Atlantic came to a similar conclusion.