Insider Trading via the Corporation
A U.S. firm buying and selling its own shares in the open market can trade on inside information more easily than its own insiders because it is subject to less stringent trade-disclosure rules. Not surprisingly, insiders exploit these relatively lax rules to engage in indirect insider trading: they have the firm buy and sell shares at favorable prices to boost the value of their own equity. Such indirect insider trading imposes substantial costs on public investors in two ways: by systematically diverting value to insiders and by inducing insiders to take steps that destroy economic value. To reduce these costs, I put forward a simple proposal: subject firms to the same trade-disclosure rules that are imposed on their insiders.
Twenty Years of Shareholder Proposals After Cracker Barrel: An Effective Tool for Implementing LGBT Employment Protections
“This employee is being terminated due to violation of company policy. The employee is gay.”
This was the reason Cracker Barrel stated for dismissing Cheryl Summerville, a cook for the restaurant chain, on her official separation notice. Cracker Barrel fired as many as sixteen employees pursuant to a company policy, promulgated in January 1991, stating that it was “inconsistent with [Cracker Barrel’s] concept and values and . . . with those of [its] customer base, to continue to employ individuals . . . whose sexual preferences fail to demonstrate normal heterosexual values which have been the foundation of families in our society.” In the face of criticism and a boycott by various groups, namely, the Atlanta chapter of Queer Nation, the Company rescinded its policy; however, at the time of the statement, the fired employees had not been rehired. Concerned about the impact of the adverse public reaction on Cracker Barrel’s sales, the New York City Comptroller’s and Finance Commissioner’s offices, as trustees of several of the city’s pension funds that collectively owned about $3 million of Cracker Barrel stock, submitted a shareholder proposal on behalf of the New York City Employees’ Retirement System, requesting that the company formally prohibit discrimination based on sexual orientation. In a no-action letter, “the [SEC] not only agreed that the proposal could be excluded” from the company’s proxy materials but also outlined a new standard—the “Cracker Barrel Standard”—which dictated that employment-based shareholder proposals would “always be excludable by corporations,” even if they implicated “significant social policy issues.” The 1992 Cracker Barrel shareholder proposal was the first of its kind to raise the issue of LGBT employment protections —after the SEC’s no-action letter, it could have been the last. However, almost twenty years after the SEC’s decision, the use of shareholder proposals to garner workplace protections for LGBT individuals has been extraordinarily successful.
Off-Label Drug Promotion and the First Amendment
Off-label promotion—pharmaceutical manufacturers’ marketing of FDA-approved drugs for unapproved uses—is considered a First Amendment right by some, a threat to the safety and effectiveness of pharmaceutical drugs by others. Although off-label prescription is legal and often beneficial, the Federal Food, Drug, and Cosmetic Act (FDCA) and corresponding FDA regulations effectively prohibit off-label promotion. The FDA can look to statements by pharmaceutical representatives as evidence of a drug’s intended use, thereby placing manufacturers that promote off-label in a Catch-22: the drug will be subject to the FDCA’s misbranding provisions if manufacturers add labeling instructions for that intended use, but also if they fail to add those instructions. To legally promote a new intended use, pharmaceutical companies must satisfy the FDA’s rigorous approval process. In United States v. Caronia, the Second Circuit Court of Appeals ruled that the FDCA could not be interpreted to prohibit truthful, off-label promotion.
Professors Stephanie Greene and Lars Noah debate the constitutionality of the FDA’s prohibitions in light of Caronia and the Supreme Court’s increased deference to commercial speakers’ First Amendment rights. Professor Greene argues that Caronia was wrongly decided because the court failed to scrutinize the nature of off-label promotion. Greene contends that the truthfulness of off-label information is “speculative, unknown, or inaccessible,” and that the FDA’s restrictions on off-label promotion serve two substantial interests: ensuring that both doctors and consumers receive accurate, scientifically based information, and assuring that drugs have been proven safe and effective. Professor Noah questions Greene’s assumption that promotion of off-label drug uses is presumptively untruthful or misleading. He argues that Supreme Court precedent cuts against Greene’s position, and that the FDA’s restrictions on off-label promotion are unconstitutionally broad because they prevent drug manufacturers from disseminating even truthful and nonmisleading information, and because the FDA could accomplish its goals through less-speech-restrictive means.
Applause for the Plausible
Why has the word “plausible” come to define federal civil litigation? In recent years, the U.S. Supreme Court supplemented longstanding pleading standards under the Federal Rules of Civil Procedure, which require a “short and plain statement of the claim,” to additionally require that all civil pleadings state a claim that is “plausible.” In Bell Atlantic Corp. v. Twombly, the Court rejected other possible words that might describe the newly tightened pleading standard, such as “reasonable” or “probable.” To the dismay of many judges, lawyers, and other observers, the Court did not define “plausible,” except to add that “plausible” pleadings “nudge their claims across the line from conceivable to plausible.” In Ashcroft v. Iqbal, the Court again did not define “plausible,” except to assert that a “plausible” claim must not be “conclusory” in nature. This Essay explores the complex and contradictory meanings of the word “plausible.”
Furthermore, this Essay applauds the Supreme Court’s selection of such an equivocal and conflicted word as the gateway to federal civil litigation. As I describe, “plausible” means “fair” or “reasonable,” but perhaps only in a superficial sense; what is “plausible” might in fact be “specious” or used as a “pretext.” The word is immune to careful definition. Because of its ambiguity, it was well selected to expand judicial discretion to dismiss civil cases. In specific areas of federal civil litigation, the Court has recently broadened judges’ discretion to dismiss a wide range of civil petitions: civil rights claims, habeas petitions, class action certification petitions, and more. In those contexts, the Court uses words like “reasonable” in ways that bend their meaning, suggest more objectivity than warranted, and create genuine confusion between doctrines by using the same word in different ways.
Despite substantial confusion over the choice of the word “plausible” to govern pleading in federal civil litigation, at least one can say that the word itself captures the essence of the problem rather than disguising it. Whether the resulting discretion conferred on district judges is itself warranted or desirable is a very different question, and a matter of real concern. Because “plausibility” pleading enhances judicial discretion, the meaning of “plausible” may increasingly depend on judicial practice and the litigation contexts where the word is used. Nonetheless, rather than viewing the word selection as an accident or a misplaced reference, I suggest that the word was deliberately chosen to be deeply . . . plausible.
Retroactivity, Strickland, and Alien Criminal Defendants: How the Chaidez Decision Raised More Questions Than It Answered
When the United States Supreme Court decides to hear a case, it does not grant certiorari simply on the case itself—it chooses to answer a “question presented” by that case. So in Chaidez v. United States, the Court granted certiorari on the question “whether the principle articulated in Padilla [v. Kentucky] applies to persons whose convictions became final before its announcement.” But in answering that question, Chaidez left unanswered—and raised—even more questions.
In the 2010 landmark case Padilla v. Kentucky, the Court declared that defense lawyers must inform noncitizen criminal defendants of the removal consequences of pleading guilty. In the years that followed, federal and state courts grappled with—and ultimately split over—whether Padilla applied only to defendants whose cases were still on direct appeal, or also to those whose convictions were final before Padilla. The Supreme Court granted certiorari in Chaidez, and, in an opinion authored by Justice Kagan, upheld the Seventh Circuit’s ruling that Padilla established a “new rule” not available retroactively.
But the Court’s ruling did not address several of the difficult questions that come up in retroactivity analysis, particularly for any rule premised on Strickland v. Washington. It also left many questions open for alien petitioners who seek relief from their convictions. Part I of this Note discusses how the Court has traditionally handled the retroactive application of rules to habeas petitioners and how the issue arose after Padilla. It summarizes the Teague rule for retroactivity and the problem the Padilla decision posed for lower courts determining its retroactive application. Part II discusses the Chaidez decision and notes the various policy and practical concerns implicated (and ignored) in its retroactivity analysis. Part III notes the open questions that persist after Chaidez—particularly for petitioners whose lawyers affirmatively gave them wrong information at the time they pleaded guilty—and examines where the Court may be heading with its recent plea jurisprudence. Finally, Part III also questions how long Teague and Strickland can function together, as new norms in criminal procedure evolve, become prevailing, and ultimately gain recognition from courts.
Whose Conception of Insurance?
Professor Abraham’s new Article, Four Conceptions of Insurance, offers an invaluable overview and critique of four modern conceptions of insurance. He cautions that “the particular lens through which we view insurance law cannot tell us what principles should govern or what policy choices to make.” But who is the “we” in that statement? This Response focuses on three overlooked groups with an important interest in such governing principles and policy choices. First, Abraham mentions insurance brokers only briefly, describing how large insurance brokers can negotiate policy terms. But brokers, large and small, play an important role in deciding which available insurance a policyholder purchases. Second, any discussion of homeowners insurance should include mortgage holders, who require mortgagors to purchase insurance and whose interest in the scope of coverage is equal to or greater than the homeowner’s. Third, within the construction industry, general contractors seek to transfer risk to their subcontractors, who must purchase liability policies naming general contractors as “additional insureds.” The contract model, which looks to the intent of the insurer and the subcontractor, as expressed in the policy language, preserves the expectations of the parties to the contract. In examining each of these three overlooked groups’ interests in an insurance transaction, we may discover that the contract model, so frequently maligned in the academic literature, is not so bad after all.