The Technology of Creditor Protection
Contract is the primary means through which creditors control a firm’s debt– equity conflict. There is an irony here, however. Actions that may render a debtor insolvent are the events against which creditors contract. Yet when a breach of contract yields a debtor’s insolvency, the debtor cannot fully satisfy its creditors. Thus, a general creditor’s contractual remedy against a debtor cannot be fully effective, and anticipation of this shortcoming may increase a debtor’s cost of capital. A solution to this conundrum, proposed here, would permit creditors and debtors to contract for creditor remedies against third parties—other creditors, shareholders, and corporate affiliates—who may have benefitted from a debtor’s breach, provided that the creditor gave actual or constructive notice of its right to seek such remedies. This solution would offer creditors protection akin to that now afforded contractually through secured credit and now afforded by legal rule through the laws of voidable preference and fraudulent conveyance. Because the proposed protection would be contractually based, it could be tailored to the needs of individual firms and could thus improve, and to some extent obviate the need for, the protections now provided by law.
Note: Marcel Kahan would like to thank the Milton and Miriam Handler Foundation for financial support.
A Theory of Preferred Stock
Should preferred stock be treated under corporate law as an equity interest in the issuing corporation or under contract law as a senior security? Should a preferred certificate of designation be subsumed in the corporate charter and treated as an incomplete contract filled out by fiduciary duty, or should it be treated as a complete contract with the drafting burden on the party asserting the right, as would occur with a bond contract? Is preferred stock equity or debt? This Article shows that preferred stock is both corporate and contractual—neither all one nor all the other. It sits on a fault line between two great private law paradigms, corporate and contract law, and draws on both. The overlap brings two competing grundnorms to bear when interests of preferred and common stockholders come into conflict: on the one hand, managing to the common stock as residual interest holder maximizes value; on the other hand, holding parties to contractual risk allocations maximizes value. When questions arise concerning the relative rights of preferred and common stock, the norms hold out conflicting answers. Delaware courts have taken the lead in confronting these questions by seeking to synchronize the law of preferred stock with the rest of corporate law—a project that has led to both innovation and stress.
This Article examines recent cases about preferred stock to show two facets of Delaware law coming to bear as the synchronization process proceeds: first, reliance on independent directors for dispute resolution, and second, the common stock– value maximization norm. These trends cause the law to tilt toward corporate norms, thereby disrupting allocated risks in heavily negotiated transactions, particularly in the venture capital sector. The Article makes three recommendations that would promote the goal of restoring balance between the corporate and contract paradigms. First, the meaning and scope of preferred contract rights should be determined by courts, rather than by issuer boards of directors. Second, conflicts between preferred and common should not be decided by reference to a norm of common stock–value maximization. Instead, the goal should be the maximization of the value of the equity as a whole. Third, independent-director determinations of conflicts between preferred and common should not be accorded ordinary business judgment review. Instead, a door should be left open for good faith review tailored to the context. This review would require a showing of bad faith treatment of the preferred where the integrity of a deal has been undermined, with the burden of proof on the board.
Adapting to the New Shareholder-Centric Reality
After more than eighty years of sustained attention, the master problem of U.S. corporate law—the separation of ownership and control—has mostly been brought under control. This resolution has occurred more through changes in market and corporate practices than through changes in the law. This Article explores how corporate law and practice are adapting to the new shareholder-centric reality that has emerged.
Because solving the shareholder–manager agency cost problem aggravates shareholder–creditor agency costs, I focus on implications for creditors. After considering how debt contracts, compensation arrangements, and governance structures can work together to limit shareholder–creditor agency costs, I turn to available legal doctrines that can respond to opportunistic behavior that slips through the cracks: fraudulent conveyance law, restrictions on distributions to shareholders, and fiduciary duties. To sharpen the analysis, I analyze two controversies that pit shareholders against creditors: a hypothetical failed LBO, and the attempts by shareholders of Dynegy Inc. to divert value from creditors through the manipulation of a complex group structure. I then consider some legal implications of a share- holder-centric system, including the importance of comparative corporate law, the challenges to the development of fiduciary duties posed by the awkward divided architecture of U.S. corporate law, the challenges for Delaware in adjudicating shareholder–creditor disputes, and the potential value of reinvigorating the tradi- tional “entity” conception of the corporation in orienting managers and directors.
How to Avoid Implementing Today's Wrong Policies to Solve Yesterday's Corporate Governance Problems
The Toxic Side Effects of Shareholder Primacy
The past two decades have seen a dramatic shift in the U.S. corporate landscape. Many and possibly most public companies now embrace a shareholder-centered vision of good corporate governance that emphasizes “maximizing shareholder value” over all other corporate goals. Recent Articles, one by Edward Rock and one by Marcel Kahan and Barry Adler, point out that increasing shareholders’ power and influence in public companies can lead managers to operate firms in ways that benefit shareholders by harming the interests of corporate creditors. This Response argues that the problems associated with changing corporate law and practice to encourage managers to focus on “maximizing shareholder value” may be much larger. There is reason to suspect that the modern embrace of shareholder value as the sole corporate objective may be threatening the health of public companies and harming not only creditors but also employees, consumers, taxpayers, and shareholders themselves.
Poor Pitiful or Potently Powerful Preferred
Exploring the Limits of Contract Design in Debt Financing
The alignment of shareholder and manager interests over the past several decades, along with increases in the financial leverage in U.S. corporations, has shifted scholarly attention to the agency conflict between shareholders and debtholders. This Response reviews the distinctive contractual means by which this conflict is addressed: notably, through covenants, acceleration rights, and collateral. Recent empirical studies indicate that debt investors believe that these protections mitigate agency costs, leaving an open question as to whether improvements in design might further reduce these costs and lower capital costs. In their contributions to this Symposium Issue, Professor Rock and Professors Adler and Kahan propose changes in corporate, bankruptcy and contract law that would enable such improvements. Rock suggests expanding the scope of duties imposed by regulation, while Adler and Kahan propose that firms be able to impose liability on third parties who facilitate or benefit from breach, including future creditors. In this Response, I raise doubts as to the magnitude of the incremental gain from these proposals over existing contract tools, particularly the broad potential of termination rights and security interests. I also illuminate some of the offsetting costs the proposals would impose in capital markets. Before concluding, I explore the possibility that the constraints preventing further mitigation of agency costs are not in the underlying legal rules or contracting technology, but in the incentives of borrowers to work at the frontier of contract design.
Protecting Search Terms as Opinion Work Product: Applying the Work Product Doctrine to Electronic Discovery
Music Piracy and Diminishing Revenues: How Compulsory Licensing for Interactive Webcasters Can Lead the Recording Industry Back to Prominence
This Comment suggests that Congress should amend the Copyright Act to ensure that promising new music-based technologies are able to survive. The establishment of a compulsory license for interactive webcasters will help ensure that sound recording copyright owners are properly compensated for their recordings and performances, while also guaranteeing that the public will be able to utilize these copyrighted works to their greatest benefit. As a result of the recording industry’s failed efforts to combat music piracy over the past two decades, Congress must concern itself with the interests and future viability of the entire music industry. By expanding compulsory licensing to cover both noninteractive and interactive webcasters, the dual purposes of copyright law envisioned in the Constitution can best be achieved.
Part I of this Comment provides a discussion of the severe problems music piracy has generated for the recording industry over the past two decades and the many ways in which the recording industry has failed to combat the piracy epidemic. Part II outlines the advancement of music in the digital age, with a particular focus on the importance of streaming technology in the future. Part III chronicles the history of copyright protection for sound recordings, from the initial structure of the digital performance right to the current tripartite framework of the public performance right in sound recordings. Part IV provides further details of the noninteractive webcasting royalty proceedings, detailing the key shortcomings of the current rate structure and the issues that industry participants have been grappling with for the past two decades. Part V argues that compulsory licensing should be congressionally established for interactive webcasters and outlines the general structure that should be adopted. Lastly, Part VI provides a detailed discussion of the economic benefits an interactive webcasting compulsory license rate will have for the recording industry so long as Congress and the major record labels fully embrace streaming technology and interactive webcasting.
Algorithms and Speech
One of the central questions in free speech jurisprudence is what activities the First Amendment encompasses. This Article considers that question in the context of an area of increasing importance—algorithm-based decisions. I begin by looking to broadly accepted legal sources, which for the First Amendment means primarily Supreme Court jurisprudence. That jurisprudence provides for very broad First Amendment coverage, and the Court has reinforced that breadth in recent cases. Under the Court’s jurisprudence the First Amendment (and the heightened scrutiny it entails) would apply to many algorithm-based decisions, specifically those entailing substantive communications. We could of course adopt a limiting conception of the First Amendment, but any nonarbitrary exclusion of algorithm-based decisions would require major changes in the Court’s jurisprudence. I believe that First Amendment coverage of algorithm-based decisions is too small a step to justify such changes. But insofar as we are concerned about the expansiveness of First Amendment coverage, we may want to limit it in two areas of genuine uncertainty: editorial decisions that are neither obvious nor communicated to the reader, and laws that single out speakers but do not regulate their speech. Even with those limitations, however, an enormous and growing amount of activity will be subject to heightened scrutiny absent a fundamental reorientation of First Amendment jurisprudence.
Computers are making an increasing number of important decisions in our lives. They fly airplanes, navigate traffic, and even recommend books. In the process, computers reason through automated algorithms and constantly send and receive information, sometimes in ways that mimic human expression. When can such communications, called here “algorithmic outputs,” claim First Amendment protection?
Owning E-Sports: Proprietary Rights in Professional Computer Gaming
One of the most astounding and largely underappreciated developments accompanying the recent proliferation of mass-market computer technology has been the rise of video gaming. From arcade to console and computer desktop to interactive multiplayer network, the explosion in computer video games has been spurred by Internet accessibility, whether for downloading and updating software, tendering payment, or finding and interacting with other players. The result has been a flourishing new entertainment sector, with revenues that now consistently rival or exceed that of the established music and movie industries.
In this Article, I consider a fundamental set of legal issues, integral to e-sports, that concern the ownership and control of rights in player perfor- mances. The nature of such competitions presents a new and fairly complex practical configuration for legal analysis. Analogous questions regarding the ownership of physical performances have certainly arisen in the past, but the nature of e-sports generates certain novelties in the analysis. Unlike physical sports, where player activity is observed and recorded directly for broadcast and similar dissemination, e-sports competitions are by definition mediated by computer game software that is itself the subject of various intellectual property rights. This characteristic of e-sports adds to the legal discussion an additional layer of complexity, implicating the interests of additional rights-holding entities not found in negotiations over competitive performances in physical sports.
Trust and Online Interaction
This Article considers one of the challenges of this evolution: the role of intermediaries’ liability for the harm they cause to users. All online interactions are conducted through intermediaries—the routers, servers, applications, services, and switches that make up the Internet’s “core.” In the era of the trust-based Internet, intermediaries were largely passive participants in the technological ecosystem. This limited both the harm they could cause and the basis for liability against them. In today’s Internet, intermediaries are increasingly active; they make real-time decisions about how to handle user data, and they have the ability to store or share that data for private purposes. In the post-trust Internet, intermediaries can cause real harm. Without trust, it remains unclear which institutions, if any, safeguard users from such harm.
This Article proceeds in four parts. Part I considers the role of trust in the early Internet, how the evolving Internet is moving away from this trust-based model, and how the loss of trust affects and limits online institutions. Part II looks to how other institutions function absent trust. Part III considers the limitations and lessons from these standard approaches and synthesizes them into a set of principles for establishing intermediaries’ liability.
Information Privacy in the Cloud
Cloud computing is the locating of computing resources on the Internet in a fashion that makes them highly dynamic and scalable. This kind of distributed computing environment can quickly expand to handle a greater system load or take on new tasks. Cloud computing thereby permits dramatic flexibility in processing decisions—on a global basis. The rise of the cloud has also significantly challenged established legal paradigms. This Article analyzes current shortcomings of information privacy law in the context of the cloud. It also develops normative proposals to allow the cloud to become a central part of the evolving Internet. These proposals rest on strong and effective protections for information privacy that are also sensitive to technological changes.
This Article examines three areas of change in personal data processing due to the cloud. In doing so, it draws on an empirical study in which I analyzed the data processing of six major international companies.5 The first area of change concerns the nature of information processing at companies. A second legal issue concerns the multidirectional nature of modern data flows, which occur today as a networked series of processes made to deliver a business result. A final change relates to the shift toward a process-oriented manage- ment approach. Users no longer need to own technology, whether software or hardware, that is placed in the cloud. Rather, different parties in the cloud can contribute inputs and outputs and execute other kinds of actions. Thus, this Article’s focus is a comparative one from which it explores significant changes in data processing due to the cloud and the resulting tension with contemporary information privacy law.
Information, Innovation, and Competition Policy for the Internet
Antitrust agencies around the world are increasingly focusing on digital indus- tries. Critics have justifiably questioned the ability of competition agencies to make beneficial enforcement decisions given the complexity and rapid pace of change in online markets. This Article discusses those criticisms and addresses the argument that, because the error costs of overenforcement of antitrust laws in digital markets would be much higher than the error costs of underenforcement, courts and antitrust agencies should presume against antitrust intervention in digital industries. While acknowledging that there is often good reason for such modesty in enforcement, this Article discusses several ways in which competition policy can adjust to better account for potential costs and benefits of enforcement in digital platform markets. It argues that nonprice effects related to information and innovation are particularly important to the performance of online platforms, and may hold the key to a better understanding of the costs of antitrust underenforcement and the assessment of the competitive effects of conduct and transactions in digital industries.
Protocol Layering and Internet Policy
An architectural principle known as protocol layering is widely recognized as one of the foundations of the Internet’s success. In addition, some scholars and industry participants have urged using the layers model as a central organizing principle for regulatory policy. Despite its importance as a concept, a comprehensive analysis of protocol layering and its implications for Internet policy has yet to appear in the literature. This Article attempts to correct this omission. It begins with a detailed description of the way the five-layer model developed, introducing protocol layering’s central features, such as the division of functions across layers, infor- mation hiding, peer communication, and encapsulation. It then discusses the model’s implications for whether particular functions are performed at the edge or in the core of the network, contrasts the model with the way that layering has been depicted in the legal commentary, and analyzes attempts to use layering as a basis for competition policy. Next the Article identifies certain emerging features of the Internet that are placing pressure on the layered model, including WiFi routers, network-based security, modern routing protocols, and wireless broadband. These developments illustrate how every architecture inevitably limits functionality as well as the architecture’s ability to evolve over time in response to changes in the technological and economic environment. Together these considerations support adopting a more dynamic perspective on layering and caution against using layers as a basis for a regulatory mandate for fear of cementing the existing technology into place in a way that prevents the network from innovating and evolving in response to shifts in the underlying technology and consumer demand.
The Geography of the Battlefield: A Framework for Detention and Targeting Outside the “Hot” Conflict Zone
The U.S. conflict with al Qaeda raises a number of complicated and contested questions regarding the geographic scope of the battlefield and the related limits on the state’s authority to use lethal force and to detain without charge. To date, the legal and policy discussions on this issue have resulted in a heated and intractable debate. On the one hand, the United States and its supporters argue that the conflict—and broad detention and targeting authorities—extend to wherever the alleged enemy is found, subject to a series of malleable policy constraints. On the other hand, European allies, human rights groups, and other scholars, fearing the creep of war, counter that the conflict and related authorities are geographically limited to Afghanistan and possibly northwest Pakistan. Based on this view, state action outside these areas is governed exclusively by civilian law enforcement, tempered by international human rights norms.
This Article breaks through the impasse. It offers a new and comprehensive law- of-war framework that mediates the multifaceted security, liberty, and foreign policy interests at stake. Specifically, the Article recognizes the state’s need to respond to the enemy threat wherever it is located, but argues that the rules for doing so ought to distinguish between the so-called “hot battlefield” and elsewhere. It proposes a set of binding standards that would limit and legitimize the use of targeted killings and law-of-war detention outside zones of active hostilities—subjecting their use to an individualized threat assessment, a least-harmful-means test, and significant procedural safeguards. The Article concludes by describing how and why this approach should be incorporated into U.S. and international law and applied to what are likely to be increasingly common threats posed by transnational non–state actors in the future.
Exorcising McCulloch: The Conflict-Ridden History of American Banking Nationalism and Dodd-Frank Preemption
Conventional wisdom holds that federal laws conferring banking powers on national banks presumptively preempt state laws seeking to control the exercise of those powers. This conventional wisdom originates with McCulloch v. Maryland, which established that nationally chartered banks are federal instrumentalities entitled to regulate themselves free from state law—even when national law fails to address the risks that state law seeks to regulate. Incorporated into the National Bank Act of 1864 by nineteenth-century precedents but then abandoned by the New Deal Court, McCulloch’s theory of preemption is being revived today by the Office of the Comptroller of the Currency (OCC) to preempt broad swaths of state law.
This Article maintains that it is time to exorcise McCulloch’s theory from our preemption jurisprudence. Far from historically sanctioned, McCulloch’s theory that national banks are federal instrumentalities offends a deeply rooted tradition in American political culture and law that I call the “anti-banker nondelegation doctrine.” This principle has been manifest in campaigns against national banks’ immunities from political oversight, ranging from Andrew Jackson’s 1832 veto of the charter of the Second Bank of the United States to Louis Brandeis’s 1912 campaign against the “House of Morgan” as a “financial oligarchy.” In contrast to McCulloch’s view of banks as impartial instruments of the federal government, the American political system and the post–New Deal federal courts have adopted the view that federal law should not delegate unsupervised power to private banks to regulate their own operations. Accordingly, if federal regulators displace state laws regulating banking practices, then those federal regulators must explain how federal law addresses the risks that those state laws were attempting to control.
The most recent effort to eliminate McCulloch’s theory of preemption is section 1044(a) of the Dodd-Frank Act. Section 1044(a) provides detailed standards governing the OCC’s power to preempt state law. This Article argues that the OCC’s 2011 rules mistakenly revive McCulloch’s theory of preemption. This revival contradicts not only section 1044(a); it also contravenes the general tradition of distrusting grants to national banks of immunity from state law. Like McCulloch, the OCC’s rules draw irrational distinctions between states’ general common law doctrines and states’ rules specifically directed toward banking practices, and subject the latter to a sort of field preemption. This Article contends that such preemption is unprincipled and mistaken. Instead, it urges courts to follow the ordinary principles of conflict preemption—that is, to find state law preempted only where the OCC has specifically approved the banking practice forbidden by state law.
An Empirical Study of Patent Litigation Timing: Could a Patent Term Reduction Decimate Trolls Without Harming Innovators?
This Article conducts an empirical analysis of the relative ages of patents litigated by practicing and nonpracticing entities (NPEs). By studying all infringement claims for a sample of recently expired patents, I find considerable differences in litigation practices between these groups. Product-producing companies usually enforce their patents soon after issuance and complete their enforcement activities well before their patent rights expire. NPEs, by contrast, begin asserting their patents relatively late in the patent term and frequently continue to litigate until expiration. This variance in litigation timing is so dramatic that all claims assert- ing the average product-company patent are resolved before the average NPE patent is asserted for the first time. Further, I find that NPEs are the dominant source of patent enforcement in the final few years of the patent term. NPEs, enforcers of just twenty percent of all studied patents, are responsible for more than two-thirds of all suits and over eighty percent of all infringement claims litigated in the final three years of the patent term. These findings cast serious doubt on the utility of the last few years of the patent term and suggest that Congress should, at a minimum, consider increasing the frequency and magnitude of maintenance fee payments in the latter half of the term.
Confusing the Means for the Ends: How a Pro-Settlement Policy Risks Undermining the Aims of Title VII
When analyzing cases arising from disputes over Title VII settlements, courts often begin with the proposition that Congress intended to encourage voluntary settlement of employment discrimination claims. As a result, courts resolve many issues attendant to the settlement process with the aim of furthering this policy but without proper consideration of the policy’s effect on the underlying goals of the statute. Although Title VII suits are not settled significantly more than are other claims, approximately seventy percent of all employment discrimination claims end in settlement, creating a potential for the settlement scheme to undermine or, if properly executed, enhance Title VII’s substantive aims. In addition, even before employees bring their claims to court, a significant number of Title VII complaints lodged with the Equal Employment Opportunity Commission (EEOC) are resolved through the EEOC’s mandatory “conciliation” process. In this respect, the pro-settlement policy has yielded its intended result. However, simply counting the number of settlements masks the more complicated (and meaningful) question of whether the pro-settlement policy is truly facilitating compliance with the substantive goals of Title VII.
The frequency of employment discrimination settlements has spawned a growing and scattered body of case law on the enforcement of settlement agreements. Courts have long split on whether to apply federal or state law when considering the validity of a settlement, but their analyses tend to address the issue of a settlement’s validity somewhat narrowly. Courts rarely acknowledge the systemic impact of the push to settle. Similarly, their analyses frequently fail to take account of the considerable substantive and procedural obstacles facing employees who seek to enforce or, in some cases, avoid allegedly invalid settlements.
This Comment attempts to connect these two distinct but related problems—the frequency of settlements on the one hand, and the failure of the law governing settlements to account for Title VII’s policy aims on the other—and argues that the adoption of federal common law would provide a mechanism for mitigating the current flaws in the administration of Title VII and connected settlements.
Suboptimal Social Science and Judicial Precedent
The social sciences have developed dramatically over the last century in both breadth and sophistication. These disciplines offer systematic data collection and an analytic methodology to test our empirical intuitions about individual behavior and social institutions. Prior to the development of the social sciences and their application to the legal system, judges could rely only on their personal experiences and untested empirical intuitions when faced with complex questions of social fact. A court’s exclusive reliance on personal experience, however, “could continue only so long as its ‘best guesses’ about [empirical] facts were as good as . . . everyone else’s.” Today, social science research exists on a wide range of legal issues, and courts are faced with the challenge of resolving controversial questions of empirical fact on the basis of complex and sometimes conflicting scientific literatures. Courts have, for example, reviewed social science evidence on racial segregation, maximum work hours, First Amendment rights, jury size, the exclusionary rule, eyewitness identification, and child custody. Yet, despite efforts to encourage the integration of social science into the judicial process, and despite a modest increase in judicial reliance on social science evidence in recent decades, courts remain reluctant to incorporate social science into their decisionmaking.
In this Comment, I explore the role of social science in the development of common law precedent. I begin with the assumption that most judges and legal scholars today would support the use of social science in particular judicial decisions where the research findings are valid, replicated, consistent across studies, and directly applicable to the legal question at hand. I focus instead on the problem of suboptimal social science. In the vast majority of cases only suboptimal evidence is available—that is, evidence that is valuable but not completely valid, consistent, or directly appli¬cable. Judges and legal scholars have long debated the benefits and disadvantages of using this kind of limited empirical research in judicial decisionmaking. And litigants frequently argue that courts should not rely upon specific social science evidence because of limitations in the literature. Yet courts are given relatively little guidance on how to address suboptimal social science in the development of precedent.
Localist Statutory Interpretation
The average citizen’s point of contact with the judicial system as a litigant is, most likely, in the nation’s municipal, county, or local courts. Whether she is contesting a traffic infraction, being charged with a misdemeanor, being cited for a violation of a local ordinance, or in a dispute with a neighbor or landlord, the average citizen is probably more likely to find herself in what might be called a “local court” than in a federal or high-level state court. Setting aside the controversy surrounding staffing village and town courts (which too often have nonlawyers with almost no legal training or knowledge serving as adjudicators), legal scholars have almost universally ignored the law in local courts, favoring the study of federal courts and state appellate courts. Much like the drunk man who looks under the lamppost for his lost keys at night because it is the only place he has the light to see, so too the legal scholar often studies published cases because they are available from databases at her fingertips. It is also likely that the sheer diversity of local courts, the limitations on their subject matter jurisdiction, and the complexity of their organization nationwide render it hard to study these courts as a unitary class. The diversity and the lack of easily accessible decisions, however, cannot justify the lack of attention to how local judges should behave when faced with statutory questions, a task that comprises the day-to-day work of our local courts. These public officials are the face of law and justice to citizens in our democracy. What they do in their courtrooms when applying statutes is probably more relevant to citizens’ sense of the legitimacy of our legal system and the rule of law than the vast majority of the Supreme Court’s business at One First Street.
. . .
Part I of this Article defines the category of local courts for analysis, as well as the types of cases those courts typically hear. Part II then explores what it could mean for such local courts to pursue a “localist” agenda and analyzes its desirability under certain conditions. This analysis considers the kinds of elections that routinely place local judges into their offices and the manner in which local courts are embedded within state and local institutional structures. I conclude by asserting that the (concededly modest) accountability available for local judicial performance, combined with the possibility for careful state supervision of “localist” judicial action, supports giving local courts more discretion in interpreting both local ordinances and state statutes. On the whole, the argument aims to reveal the benefits of a type of “intrastate judicial federalism” that promotes dialogue and experimentation in the development of statewide policy. My conclusion draws from the perspectives of both “pro-localism” views as well as those more enamored of state power, highlighting some ways to settle that debate in at least this one understudied context.
Neighborhood Empowerment and the Future of the City
In any given metropolitan region, scores of municipalities are locked in a zero-sum struggle for mobile sources of jobs and tax revenue. This competition appears to benefit small, homogeneous suburbs that can directly enact the uniform will of the electorate over large, diverse cities that are often ensnarled in conflict between competing interest groups. Cities can level the playing field with suburbs, however, by devolving municipal power to smaller, more homogeneous subgroups, such as neighborhoods. Indeed, many commentators have identified one such effort at neighborhood empowerment, the “business improvement district” (BID), as a key factor in the recent revitalization of many cities. The BID and the related “special assessment district” devolve the financing of infrastructure and services to landowners within a territorially designated area. Courts have widely upheld BIDs and special assessment districts against constitutional challenges.
Cities remain hamstrung in competing with suburbs, however, because courts prohibit cities from delegating what is perhaps the most coveted power of all to neighborhood groups: zoning. Since an unusual series of Supreme Court cases in the early twentieth century, it has been largely settled that cities may not constitutionally delegate the zoning power to sub-municipal groups, at least where the power is delegated specifically to landowners within a certain distance from a proposed land use change (a scheme I designate a “neighborhood zoning district”).
This Article argues that the judicial prohibition on neighborhood zoning districts is inconsistent with the judiciary’s permissive attitude toward BIDs and special assessment districts. As I demonstrate, the neighborhood zoning district is conceptually identical to the special assessment district/BID. Both devices are designed to enable large, diverse cities to capture some of the governance advantages of small, homogeneous suburbs by providing landowners with the direct ability to manage local externalities. This Article attempts to make sense of the disparate treatment accorded these devices by examining several grounds upon which they could potentially be, and have been, distinguished. I find, however, that the only meaningful distinction between these mechanisms is that special assessment districts/BIDs actually raise far more troubling public policy concerns than neighborhood zoning districts, thus calling into question why the judiciary has been so much more deferential toward the former than the latter. I conclude that courts should broadly defer to municipal delegations of power to sub-local groups, so that cities can work out their own strategies for surviving in an era of intense interlocal competition.
The Conditions of Pretrial Detention
The Supreme Court has set forth in detail the standards that govern convicted prisoners' Eighth Amendment claims concerning their conditions of confinement, but has left undefined the standards for comparable claims by pretrial detainees. The law articulated by the lower courts is unclear and inconsistent, but on the whole shows a trend toward assimilating pretrial detainees' claims to those of convicted prisoners. Based on a review of Supreme Court case law concerning related questions, this Article argues that, for claims arising after a judicial determination of probable cause, the tests now prevailing in the lower courts should be replaced by a substantive due process framework that requires a plaintiff to show, at most, either punitive intent or objective deliberate indifference by the defendant. For claims arising after a warrantless arrest and before a judicial determination of probable cause, the Fourth Amendment's objective reasonableness standard should govern. The Article further notes a strong argument that this objective reasonableness standard should govern prior to arraignment, even when the arrest took place upon a warrant.
The State and the “Psycho Ex-Wife”: Parents’ Rights, Children’s Interests, and the First Amendment
On June 6, 2011, a judge in a small Pennsylvania county courthouse issued a custody order and started a firestorm. The order, citing the children’s best interests, required a father embroiled in a custody battle to take down his critical blog “The Psycho Ex-Wife” and refrain from mentioning either his wife or his children “on any public media.” It immediately garnered national media attention, outraged divorced-parent Internet support groups around the country, and was even deemed blog-worthy by a renowned constitutional expert. All of these observers posed the same question: how could this restriction on speech be consistent with the demands of the First Amendment? Expressing concern about the judge’s order, Professor Eugene Volokh mused, “That strikes me as a pretty clear First Amendment violation; whatever the scope of family courts’ authority to protect children’s best interests might be, it can’t extend to criminalizing one adult’s public speech about another adult.”
These types of orders, however, are actually quite common in family court proceedings. Under the amorphous “best interests of the child” standard, judges have ordered parents to bring their children to church, avoid criticizing ex-spouses or their religious beliefs, refrain from bringing intimate partners near the children, and even communicate feelings of love toward their ex-spouses. Although some scholarship has addressed judges’ consideration of parents’ religious beliefs or sexual preferences in granting custody, the constitutionality of family court orders structuring family interaction and crafting rules of parental behavior, like the custody order issued by Judge Diane Gibbons in Bucks County, “has largely escaped the notice of all but a few First Amendment scholars” and “survives partly because of the little attention paid to family law proceedings.” Thus, family law courtrooms have the potential to become constitutional “twilight zones” in which judges adjudicating the responsibilities and obligations of the most basic unit of American society illegitimately violate parents’ constitutional rights in the name of children’s best interests. In this framework, are children’s best interests compelling enough to override parental claims to free speech? Is it time for a radical normative rethinking of the role and function of the family law judge to more accurately correspond to reality? Or is there another legal standard that could be imported for use in this context?
This Comment examines the role that the First Amendment currently plays in family court proceedings and highlights the constitutional tensions inherent in speech restrictions issued under the best interests standard. As the adage goes, marriage is a “contract between three parties—the husband, the wife, and the State.” Yet it is unclear how the State is or should be constrained in adjudicating the parties’ responsibilities once the marital relationship is dissolved, particularly when there are children involved whose interests must be weighed against parental rights. Cases such as Pierce v. Society of Sisters and Yoder v. Wisconsin have affirmed a parent’s fundamental right to control the upbringing of his or her children, but when families dissolve during divorce and parents fundamentally disagree about how to raise their children, judges—governed only by the vague and easily manipulated best interests standard—inject themselves into the proceedings and suddenly wield immense power over parental decisionmaking, relationships, and essential liberties. Due to the weight of the liberties at stake, greater attention to this area of law is vital to ensure both that parental rights are not trampled and that children’s interests are protected. This Comment provides such attention by examining contemporary court practices in issuing custody orders restricting speech, analyzing the advantages and shortcomings of three potential jurisprudential frameworks, and identifying the best standard of analysis that better protect both parents’ rights and children’s interests.
The Property Matrix: An Analytical Tool to Answer the Question, “Is This Property?”
While it is easy for us to recognize a tangible object as property, we are less comfortable recognizing an intangible thing, such as trade secrets, news, advanced degrees, or our time, as property. The same goes for objects that, though tangible, lie too close to the boundaries of ethics and bodily autonomy when identified as property. We find it unconscionable to think of organs, limbs, sperm, DNA, or bone marrow as property, for instance. We also experience discomfort when asked to determine whether what I call “semitangibles” enjoy property-law protection. These semitangibles might include an email server or information traveling between computers and Internet service providers.
Because of these ambiguities, I propose an analytical tool (which I call the “property matrix”) to aid scholars, legislators, and lawyers in tackling the question, “Is this property?” I argue that we can create guidelines to answer this question even before we have academic consensus on a comprehensive definition of property, so that we may respond to pressing concerns about whether a given thing should be so labeled. Instead of defining what property is, my aim with the property matrix is more impressionistic; it is, to borrow a concept from Justice Stewart, an “I know it when I see it” understanding of property.
In Part I, I provide an overview of our current understanding of property. I then describe a two-part test—the property matrix—to determine whether a given thing should be considered property. In Part II, I identify six contexts in which courts have struggled with defining and applying principles of property. I then compare these six “case studies” against the property matrix. In my conclusion, I posit that there may be varying degrees of property rights—weak, medium, and strong—and I suggest that each level gives rise to different groupings of obligations and privileges.
Four Conceptions of Insurance
This Article identifies four conceptions of insurance that have operated in the debates about insurance law in recent decades, analyzes these conceptions, and examines the normative agendas that drive them. These are the contract, public utility/regulated industry, product, and governance conceptions. Although these conceptions adopt very different perspectives, each is a way of struggling with the two fundamental questions that modern insurance law has continually faced. The first question involves the extent to which the language of an insurance policy should determine its legal effect. This is the insurance law version of the age-old question concerning the validity of one-sided provisions in contracts of adhesion. Because virtually all insurance policies, including high-end corporate insurance policies, are standard-forms, it is a question at the core, not the periphery, of insurance law. The second question involves the proper influence of what are sometimes called “public law” values on the scope of private insurance coverage. This is a question with which much of modern private law struggles. To what extent should private law be about doing justice between two contracting parties, and to what extent should it also be concerned with other, more nearly public law matters? Public law matters such as the impact of litigation outcomes on the future behavior of other parties or the equal treatment of similarly situated policyholders. Ultimately, the Article argues, adopting a particular conception of insurance is no substitute for making or rejecting the normative choices that each conception entails. It is not our concepts, but our political, economic, and social values that underlie and underwrite legal doctrines and practices. Nonetheless, sometimes we do not see through our conceptual structures but instead are led around by them. This is part of what is taking place in the contests among different conceptions of insurance. In such circumstances, the kind of critical analysis this Article undertakes is required to expose the normative agendas that are doing the actual work within each conceptual structure.
Reducing Crime by Shaping the Built Environment with Zoning: An Empirical Study of Los Angeles
The idea of using law to change the built environment in ways that reduce opportunities to commit crimes has a long history. Unfortunately, this idea has received relatively little attention in the legal academy and only limited rigorous empirical scrutiny. In this Article, we review the considerable literature on the relationship between zoning, the built environment, and crime. We then report the results of two empirical studies on these relationships. First, we conducted a study of the effect of zoning on crime using 205 blocks selected in eight different relatively high crime neighborhoods in Los Angeles that have similar demographic characteristics but different forms of zoned land use. We find that mixed commercial- and residential-zoned areas are associated with lower crime than are commercial-only zoned areas. Second, we matched neighborhoods undergoing zoning changes between 2006 and 2010 with neighborhoods that underwent no zoning changes during this period but had similar preexisting crime trajectories between 1994 and 2005. The primary zoning change in these neighborhoods was to convert parcels to residential uses. We find that neighborhoods in which there was a zoning change experienced a significant decline in crime. Our results suggest that mixing residential-only zoning into commercial blocks may be a promising means of reducing crime.
Soul of A Woman: The Sex Stereotyping Prohibition at Work
In 1989, the Supreme Court in Price Waterhouse v. Hopkins declared that sex stereotyping was a prohibited form of sex discrimination at work. This seemingly simple declaration has been the most important development in sex discrimination jurisprudence since the passage of Title VII. It has been used to extend Title VII’s coverage and to protect groups that were previously excluded. Astonishingly, however, the contours, dimensions, and requirements of the prohibition have never been clearly articulated by courts or scholars. In this paper I evaluate and reject the interpretations most often offered by scholars—namely that the prohibition requires either freedom of gender expression or sex-blind neutrality. I argue that the prohibition reflects not a coherent antidiscrimination principle but a pragmatic burden-shifting framework that turns on the compliance costs for the worker. I conclude by arguing that the sex stereotyping prohibition has not lived up to its rhetorical promise. Indeed, the implications of the prohibition are both dangerous and ironic in ways that scholars have yet to recognize. While the prohibition has extended Title VII’s protection to new classes of workers, it has done so by relying on and reinforcing traditional gender categories. The result is that the prohibition protects some individuals at the expense of the class whose subordination— stemming from socially salient gender norms—remains intact.
Up for Grabs: A Workable System for the Unilateral Acquisition of Chattels
This paper is about the everyday occurrence of coming across an object in the world and evaluating whether or not it is up for grabs. My project explores the shared space at the precipice of the laws of finders, abandonment, destruction, and conversion: a space we often inhabit, but wherein our rights in relation to an object are indiscernible ex ante under current law. I propose a system by which actors and courts may evaluate the reasonableness of a person’s actions from the moment he or she chooses to acquire a chattel unilaterally. My system derives from the signals chattels convey to us—signals that have everything to do with context and little or nothing to do with value.
Delay in Considering the Constitutionality of Inordinate Delay: The Death Row Phenomenon and the Eighth Amendment
The Supreme Court has repeatedly declined to address the validity of the unconstitutional delay claim raised by Valle and other death row inmates before him. The issue first came to the Court’s attention over fifteen years ago, in Lackey v. Texas. Justice Stevens issued a memorandum respecting the Court’s denial of certiorari in which he acknowledged that although “the importance and novelty of the question . . . are sufficient to warrant review by this Court, those factors also provide a principled basis for postponing consideration of the issue until after it has been addressed by other courts.” Justice Stevens emphasized that denial of certiorari provided an important opportunity for state and lower federal courts to “serve as laboratories in which the issue receives further study before it is addressed by this Court.” Since Lackey, the Supreme Court has denied certiorari to every petitioner asserting this argument (hereinafter referred to as a “Lackey claim”), including Manuel Valle, and thus has not ruled on whether—or when—executions after inordinate delays on death row constitute cruel and unusual punishment.
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Notwithstanding the benefits of the highest court’s resolution of the issue, the Supreme Court is unlikely to take a Lackey case in the near future. Since Justice Stevens issued the Lackey memorandum over fifteen years ago, procedural roadblocks have emerged that have prevented lower courts from addressing the merits of Lackey claims. I argue that in certain circumstances, execution after lengthy confinement on death row does violate the Eighth Amendment and the “evolving standards of decency” by which the Amendment is measured. Therefore, states must implement workable solutions that are carefully calibrated to address both the Lackey claim and the countervailing policy considerations.
Part I of this paper summarizes the bedrock principles that guide the Court in analyzing capital sentences challenged on Eighth Amendment grounds. Part II describes the substance of the Lackey claim and focuses on the causes of delay on death row and the psychological effect of this delay, known as the “death row phenomenon.” Part III traces the ongoing debate over the Lackey claim among the Justices of the United States Supreme Court. Then, Part IV assesses the experiment taking place in the “laboratories” of lower state and federal courts, and concludes that it has been lackluster, mostly because of the procedural issues that have limited courts’ opportunities to address the merits of Lackey claims. Finally, in recognition that the Court is unlikely to grant certiorari and rule on the validity of Lackey claims, Part V focuses on alternative solutions to the problem of inordinate death row delays.
Escaping Battered Credit: A Proposal for Repairing Credit Reports Damaged by Domestic Violence
Debt and domestic violence are connected in ways not previously imagined. A new type of debt—which I have labeled “coerced debt”—is emerging from abusive relationships. Coerced debt occurs when the abuser in a violent relationship obtains credit in the victim’s name via fraud or coercion. It ranges from secretly taking out credit cards in victims’ names to coercing victims into signing loan documents to tricking victims into relinquishing their rights to the family home. As wide ranging as these tactics can be, one consequence consistently emerges: ruined credit ratings.
Coerced debt wreaks havoc on credit scores, which is particularly problematic because the use of credit reports is no longer confined to traditional lenders. Employers, landlords, and utility companies all make extensive use of credit scores when screening potential customers. Thus, a credit score that has been damaged by coerced debt can make it prohibitively difficult for victims to obtain employment, housing, or basic utilities—all of which are requirements for establishing an independent household.
In this Article, I propose amending the Fair Credit Reporting Act to allow victims of coerced debt to repair their credit reports. My proposal would enable family courts to rule on whether alleged coerced debt is, in fact, coerced. The victim could then submit the court’s certification to the credit reporting agencies, which would block the coerced debt from her credit report to the extent that the block did not unduly harm her creditors. My proposal would build a bridge between the deci-sionmakers already determining issues related to coerced debt and the credit reports that victims need to have reformed in order to move beyond the abuse.
Federalism, Regulatory Lags, and the Political Economy of Energy Production
The production of natural gas from formerly inaccessible shale formations through the use of hydraulic fracturing has expanded domestic energy supplies and lowered prices and is stimulating the replacement of dirtier fossil fuels with cleaner natural gas. At the same time, shale gas production has proven controversial, triggering intense opposition in some parts of the United States. State and local regulators have scrambled to adapt to the boom in natural gas production, raising the question of whether federal regulators should step in to supplant or supplement state regulation. This Article takes a policy-neutral approach to the federalism questions at the center of that inquiry, asking which level of government ought to resolve these policy questions, rather than which level of government is likely to produce a particular favored policy outcome. Consequently, this analysis begins with four economic and political rationales typically used to justify federal regulation. Federal regulation is necessary (1) to address spillover effects that cross state boundaries, (2) to prevent economic forces at the state level from initiating a “race to the bottom” in environmental regulation, (3) to promote business efficiencies through uniform national standards, and (4) to respond to national interests in the development of natural resources through a federal licensing system. Applying these rationales to the regulation of fracking yields several important conclusions. First, while a few of the externalities of shale gas production cross state boundaries, most are experienced locally. Second, existing federal regulatory regimes offer ample authority to address those few interstate externalities. Third, the race-to-the-bottom rationale does not justify federal regulation of shale gas production because shale gas states are not competing for quantity- or time-limited capital investment. Fourth, given that the impacts of fracking are still under study and the subject of considerable ongoing debate, there is currently no overriding national interest supporting the creation of a comprehensive federal licensing or regulatory regime for shale gas production.
State Law, the Westfall Act, and the Nature of the Bivens Question
In the past few years, four courts of appeals have applied a presumption against recognition of a Bivens cause of action in dismissing damages suits alleging constitutional violations arising out of federal officials’ pursuit of various national security and counterterrorism policies. In each of these cases, the court’s approach was based on the belief that allowing such suits to proceed would threaten undue interference with the executive branch’s conduct of military and national security affairs—interference that should be tolerated, if ever, only where Congress has expressly so provided. As Fourth Circuit Judge J. Harvie Wilkinson III explained in declining to recognize a Bivens claim that would have allowed José Padilla to seek compensation for his allegedly unconstitutional detention and treatment as an “enemy combatant,” “To stay the judiciary’s hand in fashioning the requested Bivens action, it suffices to observe that Padilla’s enemy com-batant classification and military detention raise fundamental questions incident to the conduct of armed conflict, and that Congress . . . has not provided a damages remedy.”
The Second Circuit, sitting en banc, used similar reasoning in declining to recognize the right of Maher Arar to seek compensation for the allegedly unconstitutional injuries he received at the hands of government officers arising out of his extraordinary rendition to Syria. Other courts have sounded variations on this theme to preclude relief for claims by, for example, former Guantánamo detainees and U.S. citizens who were detained and allegedly abused by U.S. military personnel while working as military contractors in Iraq. In the view of each of these courts, concerns about judicial interference with national security justified their refusal to recognize a federal damages remedy for the injuries caused by the defendants’ allegedly unconstitutional conduct.
We argue that the analysis employed by these courts of appeals to deter-mine whether to recognize a Bivens action improperly combines two problematic features. The first is the courts’ conceptualization of the Bivens question as a choice between recognizing a Bivens action and leaving the plaintiff with no damages remedy at all. Because the reasons that led the courts to decline to recognize a Bivens action are reasons to preclude all judicial involvement in the cases, these courts clearly understood the choice before them as “Bivens or nothing.” The second problematic feature is the courts’ application of what the Arar court described as a “remarkably low” standard for declining to recognize a Bivens action. In the words of the Arar court, all that is necessary to justify a decision not to recognize a Bivens claim is that the court have reason to “pause.” Considered separately, these two features of the courts’ analysis are both highly problematic. When combined, they produce a wholly insupportable approach to the Bivens question.
Rethinking the Cooperation Clause in Standard Liability Insurance Contracts
Liability insurance literature has identified three central duties owed by the insurer to the policyholder that grow from the standard personal liability contract: the duty to defend covered claims against the policyholder, the duty to indemnify the insured against liability within policy limits stemming from covered claims, and the duty to settle those claims for a reasonable amount when feasible. The duty to cooperate stands opposite these as the central duty owed by the policyholder to the insurer. But while scholars have extensively examined, analyzed, and critiqued the insurer’s duties of defense, indemnification, and settlement, the insured’s duty to cooperate has not been adequately scrutinized. This Comment seeks to begin the scholarly discussion of the duty to cooperate by examining its impact on policyholder and insurer incentives, as well as on the resulting allocation of the costs of accidents. It goes on to propose several adjustments aimed at bringing the duty to cooperate back in line with its stated goals, as well as those of liability insurance in general.
Importantly, much of the harm this Comment seeks to eradicate arises when policyholders refuse to cooperate with their insurance companies when sued on a covered claim. While there are many breeds of non-cooperation, there is no indication—nor does this Comment suggest—that noncooperation is the prevalent policyholder reaction to being sued. Presumably, many policyholders comply with the requests of their insurers for reasons having little to do with their net worth: what the insurer requests may not present a burden, the policyholder may know the victim and affirmatively want to speed up the claims process, or the policyholder may simply believe that cooperating is the right thing to do. All of which prompts the question of whether this Comment ventures to fix that which, according to the old cautionary maxim, “ain’t broke.” But a system of liability insurance should not entrust its efficacy to the goodwill of its policyholders without an effective backstop of enforcement. If, as Professor Kenneth Abraham suggests, insurers can be “understood as the intermediary through which individuals motivated by concern for themselves become part of an enterprise that transforms selfish concern into altruism,” a structural defect in the policy that allows (indeed encourages) both the insurer and the policyholder to subvert that goal should not be forced to hang its remedial hopes upon an economically irrational goodwill. To be sure, voluntary policyholder cooperation serves liability insurance in many ways: it speeds up what is often a drawn out process, reduces costs to insurers who are not forced to track down the policyholder and coerce cooperation, and promotes the truth about the circumstances surrounding accidents. Relying on such voluntary cooperation, however, not merely to improve the delivery of insurance, but to hold the system together, is to beg divergent outcomes. This Comment proposes a duty to cooperate that instead relies on structural guarantees to serve the compensatory ends of the liability insurance system.
Preserving Judicial Supremacy Come Heller High Water
Minimalism does not only facilitate doctrinal innovation in a given area of the law. On my account, the Court sometimes issues minimalist rulings in order to preserve its ability to develop doctrine at all. The Court’s ability to “say what the law is” depends entirely on its institutional credibility—credibility that is risked when the Court rules on controversial topics. Thus, in certain “hot-button” cases, when the Court is required to make a controversial legal determination, it does so on narrow grounds in order to preserve its institutional power. I call this approach “power-preserving minimalism.” Unpopular decisions can harm the Court’s authority when they result in resistance—that is, when the Court’s mandate goes unfollowed. Minimalist decisions avoid this pitfall: they state a legal principle in a way that requires fairly little (or no) action by the population at large.
This Comment argues that Heller and McDonald were decided in just such a way. They were the subject of intense public debate and were quite significant jurisprudentially, but their innovative legal holdings were tempered by judicial tolerance of most existing gun laws. Thus, whether they agreed or not, it was dificult for citizens or political actors (federal, state, or local) to resist or defy the decisions in any way. By demanding fairly little, the decisions preserved the Supreme Court’s power.
In displaying power-preservation tactics, Heller and McDonald are two in a line of cases that includes Marbury v. Madison, Brown v. Board of Education, and, most recently, National Federation of Independent Business v. Sebelius, the Court’s decision resolving the constitutionality of the Affordable Care Act. In all of these cases, the Court set new legal precedent but demanded very little in practical effect. And in all of these cases, a chief factor motivating the Court was the preservation of its own institutional power.
Leaving the Bench, 1970–2009: The Choices Federal Judges Make, What Influences Those Choices, and Their Consequences
This article explores the decisions that, over four decades, lower federal court judges have made when considering leaving the bench, the influences on those decisions, and their potential consequences for the federal judiciary and society. A multi-method research strategy enabled the authors to describe more precisely than previous scholarship such matters of interest as the role that judges in senior status play in the contemporary federal judiciary, the rate at which federal judges are retiring from the bench (rather than assuming, or after assuming, senior status), and the reasons why some federal judges remain in regular active service instead of assuming senior status or retiring.
Can the States Keep Secrets from the Federal Government?
States amass troves of information detailing the regulated activities of their citizens, including activities that violate federal law. Not surprisingly, the federal government is keenly interested in this information. It has ordered reluctant state officials to turn over their confidential files concerning medical marijuana, juvenile criminal history, immigration status, tax payments, and employment discrimination, among many other matters, to help enforce federal laws against private citizens. Many states have objected to these demands, citing opposition to federal policies and concerns about the costs of breaching confidences, but lower courts have uniformly upheld the federal government’s power to commandeer information from the states. This Article provides the first in-depth analysis of the commandeering of states’ secrets. It identifies the distinct ways in which the federal government demands information from the states, illuminates the harms such demands cause, and challenges the prevailing wisdom that states may not keep secrets from the federal government. Perhaps most importantly, the Article argues that courts should consider federal demands for information to be prohibited commandeering. It suggests that the commandeering of state information-gathering services is indistinguishable in all relevant respects from the commandeering of other state executive services. The Article discusses the implications such a ruling would have in our federal system, including its potential to bolster the states’ roles as sources of autonomous political power and vehicles of passive resistance to federal authority.
Information Issues on Wall Street 2.0
Billions of dollars have flooded new online marketplaces for trading private company stock. These marketplaces stand poised to become important, lasting features of the private company world as they provide a central meeting place for buyers and sellers and potentially increase the liquidity of private company stock. Increased liquidity is particularly important to investors in start-up companies, as these companies have faced longer periods of time before going public or being acquired. The new marketplaces also raise significant information issues, however, that threaten their legitimacy and efficiency. This Article is the first to examine these information issues—lack of information, asymmetric information, conflicts of interest, and insider trading—as well as possible solutions that would allow the markets to continue to evolve while promoting their integrity and investor protection goals. Specifically, the Article proposes establishing a minimum information requirement for secondary trading in private company stock and reexamining the thresholds for accredited investor status in order to ensure that market participants can fend for themselves without additional protections. The Article also examines potential responses to insider trading in these markets, arguing that a case exists for the SEC to take action in the private market context, since harm may be cognizable and the arguments for regulating insider trading are as strong in the private market arena as in the public.
Tailoring Discovery: Using Nontranssubstantive Rules to Reduce Waste and Abuse
The current system of discovery in the federal courts can produce enormous costs for both litigants and the court system. These costs stem from the overuse of both discovery in general and costly mandatory discovery procedures that are relevant in only a small subset of litigation. The alleged costs of discovery have spawned a number of articles and studies in recent years condemning the federal system of broad discovery.
In a pair of recent cases, the Supreme Court responded to the criticism of rising discovery costs by instituting a heightened pleading standard meant to prevent meritless litigation from reaching the discovery stage. Unfortunately, this crude attempt to rein in unnecessary discovery also threatens to kick much meritorious litigation out of the courts by preventing under-resourced plaintiffs from invoking the authority of the courts to gather basic information crucial to their cases. Better solutions to the problem of discovery costs would address the system of discovery itself.
The primary problem with the current rules of discovery is that they sweep too broadly. Because the Federal Rules of Civil Procedure are transsubstantive—meaning that the same rules apply in every type of case— the discovery rules are not narrowly tailored to the requirements of any particular case. Transsubstantivity was one of the guiding tenets in the creation of the original Federal Rules of Civil Procedure, but the principle has come under attack more recently.
The creation of substance-specific (nontranssubstantive) rules, especially in the area of discovery, holds promise for reducing costs by replacing broad rules with rules that are narrowly tailored to particular types of litigation. Narrowly tailored rules will help reduce waste and abuse in the discovery process. A system of nontranssubstantive rules will also allow rulemakers to make deliberate choices about how discovery can be used as a tool to promote goals of substantive and procedural fairness, thereby allowing rulemakers to decide when costly discovery would or would not be appropriate.
Take Care That the Laws Be Faithfully Litigated
In this Comment, I argue that the framework Presidents use to decide whether to defend arguably unconstitutional statutes should be elaborated for statutes that the President believes violate the Constitution’s guarantee of equal protection--specifically where he believes that the courts should apply heightened scrutiny where they currently do not. After surveying the constitutional authority and arguments for presidential nonenforcement and nondefense, I discuss the nonenforcement decisionmaking framework established in 1994 by Walter Dellinger, then–Assistant Attorney General at the DOJ's Office of Legal Counsel. But, I argue, in equal protection cases where the President believes the statute should be struck down under heightened scrutiny, he has a weightier duty not only to decline to defend the constitutionality of the statute, but further to instruct the Department of Justice to attack it in litigation. His effort should focus as much on influencing the Supreme Court as predicting its eventual decision. To this end, I offer my own modified framework for presidential nondefense decisionmaking, elaborated for the equal protection context. Finally, I apply this model to evaluate President Obama’s decision not to defend the Defense of Marriage Act.