Volume 162, Issue 6 
May 2014
Articles

Standing Outside of Article III

Tara Leigh Grove

The U.S. Supreme Court has insisted that standing doctrine is a “bedrock” requirement only of Article III. Accordingly, both jurists and scholars have assumed that the standing of the executive branch and the legislature, like that of other parties, depends solely on Article III. But I argue that these commentators have overlooked a basic constitutional principle: federal institutions must have affirmative authority for their actions, including the power to bring suit or appeal in federal court. Article III defines the federal “judicial Power” and does not purport to confer any authority on the executive branch or the legislature. Executive and legislative standing instead depend in large part on the provisions conferring power on those institutions—principally, Article II and Article I. This basic insight has important implications. I argue that the Take Care Clause of Article II helps both to explain the breadth and to define the limits of executive standing. The executive branch has standing only insofar as it has an Article II power and duty to enforce and defend federal law on behalf of the federal government. The Take Care Clause does not, however, confer standing when the executive no longer asserts that law-enforcement interest—when it declines to defend a federal law. Article I, for its part, does not confer any power on Congress to enforce or defend federal laws in court. Accordingly, contrary to the assumption of many scholars, Congress lacks standing to represent the United States in place of the executive. The Supreme Court has entirely overlooked these questions of institutional power in considering issues of executive or legislative standing, including, most recently, in the litigation over the Defense of Marriage Act. Article III cannot confer power on the executive or the legislature that Article II or Article I denies.


Litigating Article III Standing: A Proposed Solution to the Serious (But Unrecognized) Separation of Powers Problem

Martin H. Redish & Sopan Joshi

At one point or another, every law student likely encounters Lujan v. Defenders of Wildlife, in which the Supreme Court succinctly restated the elements of Article III standing before deciding that the plaintiffs lacked it. But what likely escapes notice, even of students fresh out of a Civil Procedure course, is that the Lujan Court decided the issue of standing on a motion for summary judgment, rather than on a motion to dismiss for lack of subject matter jurisdiction pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure. The Court did so even though a challenge to standing unquestionably involves a challenge to subject matter jurisdiction. Moreover, its decision to reject standing came several years after the Eighth Circuit had decided that the plaintiffs had adequately alleged standing to survive a motion to dismiss. In a manner identical to standard treatment of issues on the merits, the Lujan Court confirmed that the plaintiff’s burden to produce evidence supporting Article III standing progressively increases as litigation proceeds from the motion to dismiss stage to the summary judgment stage and, eventually, to trial. As a result, the parties and courts endured years of litigation only to discover that there was no valid case or controversy in the first place. This outcome was strange because a court’s exercise of its coercive power over litigants absent a case or controversy violates funda- mental separation of powers principles.

To understand the problem, it is helpful to review the role of standing in implementing Article III’s case-or-controversy requirement. The case-or- controversy requirement is arguably the most important limitation on federal courts’ jurisdiction. It prevents the unelected judiciary from exercising executive or legislative powers, the exclusive province of the politically accountable branches of government, and restricts federal courts to their traditional adjudicatory role. As the Supreme Court recognized in Marbury v. Madison, this traditional adjudicatory role was limited to the resolution of real private disputes. In our constitutional democracy, then, the judiciary may make law only as an incident to the resolution of live disputes. Accordingly, the Court has required any plaintiff seeking an Article III federal forum to demonstrate standing by satisfying three criteria: (1) a concrete injury in fact, (2) that is fairly traceable to the defendant’s conduct, and (3) that can be redressed by a favorable decision. A generalized injury or a mere desire to see that the law is enforced does not suffice. Under this private-rights model, the plaintiff must establish Article III standing to satisfy the case-or-controversy requirement, thus preserving the delicate balance of separation of powers.

If a federal court exercised its coercive power over a litigant in a proceeding that did not satisfy the case-or-controversy requirement, it would upset this careful balance. True, as a formal matter, a court exercises its coercive power only upon entry of a final judgment. Some might therefore argue that it makes no difference whether a federal court determines standing at the outset of a suit on a Rule 12(b)(1) motion to dismiss or at the close of the far more extended process of pleading, discovery, and summary judgment. But the practical realities of modern litigation suggest that a court exercises coercive power well before final judgment. As the Supreme Court has recognized in nonjurisdictional contexts, even allowing a plaintiff to obtain discovery can coerce a defendant into an in terrorem settlement— effectively causing litigants to modify their primary conduct absent a formally coercive court order. The costs and burdens of litigation are likely to influence or even coerce litigant behavior long before the formal resolution of a suit.

When this inescapable reality combines with the foundational separation of powers concerns motivating Article III’s case-or-controversy requirement, Lujan’s method for determining constitutional standing becomes extremely problematic. By declining to demand the requisite showing of injury in fact, traceability, and redressability at the very outset of a suit, the Lujan approach pressures defendants to settle—even in the absence of a genuine case or controversy. For this reason, it is critical to resolve disputes over subject matter jurisdiction (both legal and factual) at the very outset of litigation. It is especially important to do so if the existence of a case or controversy is in doubt, because a court risks straying beyond its judicial role and thus threatening the separation of powers.


Structural Corporate Degradation Due to Too-Big-to-Fail Finance

Mark J. Roe

Corporate governance incentives at too-big-to-fail financial firms deserve systematic examination. For industrial conglomerates that have grown too large to be efficient, internal and external corporate structural pressures push to resize the firm. External activists press the firm to restructure to raise its stock market value. Inside the firm, boards and managers see that the too-big firm can be more efficient and more profitable if restructured via spinoffs and sales. But a major corrective for industrial firm overexpansion fails to constrain large, too-big-to-fail financial firms when (1) the funding boost that the firm captures by being too-big-to-fail sufficiently lowers the firm’s financing costs and (2) a resized firm or the spun-off entities would lose that funding benefit. Propositions (1) and (2) have both been true and, consequently, a major retardant to industrial firm overexpansion has gone missing for large financial firms. The effect resembles that of a corporate poison pill, but one that disrupts the actions of both outsiders and insiders.


Comments

May Contain: Allergen Labeling Regulations

Sarah Besnoff

Nausea; hives; swelling of eyes, nose, and throat; lung failure; and possibly death—these are the symptoms food allergy sufferers can endure if they consume their respective food allergen. Food allergies affect between 2%-9% of the U.S. population. Each year, roughly 30,000 individuals require emergency room treatment, and roughly 150 individuals die from allergic reactions to food.

Even minimal exposure to an allergen can cause an allergic reaction in some individuals. Currently, there is no known cure. Despite some recent successes in medical trials of alternative treatments, the primary option for those suffering from food allergies is still complete avoidance of the allergens themselves.

To avoid allergens successfully, food allergy sufferers must be able to trust information provided by food producers and manufacturers. The average individual does not produce his or her own food; instead, nearly everyone purchases food from grocery stores, farmers’ markets, and other commercial suppliers and rely on food labels to determine whether a product is safe for consumption. For food allergy sufferers, the ingredient labels on these packaged foods are lifelines to ensure their safety.

In an effort to protect food allergy sufferers, Congress passed the Food Allergen Labeling and Consumer Protection Act (FALCPA) in 2004. The Act required, for the first time, producers of commercial food products to indicate on a label whether the product contained any of the eight major allergens.

The food allergy community heralded the creation of this legislation. However, the Act left one important concern for food allergy sufferers untouched: advisory label warnings. An advisory label warning is an addition to a food product’s ingredient label that alerts consumers to the possibility of contamination, or “cross-contact,” with an allergen. Some food allergy sufferers can have allergic reactions to very small amounts of allergens, including food products that were only in cross-contact with allergens.


You Can't Sell Your Firm and Own It Too: Disallowing Dual-Class Stock Companies from Listing on the Securities Exchanges

Tian Wen

In 2004, Google’s initial public offering (IPO) revealed that the company would go public with a dual-class capitalization structure. A dual-class stock company has a capital structure whereby insiders hold common stock with multiple votes per share (typically ten), while the public holds common stock with just one vote per share. This structure was popular in the 1980s as a defensive measure to ensure that a company was protected against hostile takeovers, management would adopt and keep high vote share classes. The NASDAQ Stock Market (NASDAQ) and NYSE MKT LLC have consistently allowed corporations with such structures to list on their exchanges, while the New York Stock Exchange (NYSE) has had different rules over time. In 1988, the Securities and Exchange Commission (SEC) came into the picture and attempted to regulate companies with dual-class stock (and other structures with shareholder voting restrictions) by prohibiting such companies from listing on the stock exchange. However, the Court of Appeals for the District of Columbia subsequently vacated this SEC rule. Today, corporations can list on the NYSE, NASDAQ, or AMEX as long as the dual-class structure was in place at the time of the initial public offering.

Since Google’s 2004 IPO, an increasing number of companies have begun to go public with similar capitalization structures. In light of dual-class stock’s resurgence, Congress and the stock exchanges should revisit the use of such capitalization structures in the United States. In this Comment, I argue that decoupling voting rights from economic ownership is detrimental to shareholders because it allows companies to avoid the threat of market mechanisms that have traditionally served to keep management in check. In the long term, this decoupling is incompatible with principles of corporate governance, and thus stock exchanges should reevaluate their policy of accepting companies with dual-class stock structures. Part I discusses how the dual-class structure allows management to entrench itself and effectively prevent shareholders from exercising any sort of control over a company they technically own. Part II explains how dual-class stock companies have led to both stock unifications that are detrimental to the general public and controllers extracting benefits for themselves in acquisitions. Finally, Part III discusses how such reforms can be achieved.


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