Volume 158

Since the 1990s, The Economic Consequences of Legal Origins has become one of the most discussed research fields in corporate governance. Introduced in the landmark article by La Porta et al. (LLSV), this new method of empirically measuring the economic consequences of corporate governance rules promised to give completely new tools for research, investment, and rulemaking. As with all start-ups, conceptual difficulties, operational flaws, and stiff resistance by established players arose. In the meantime, however, much was improved, and the indices and metrics (leximetrics) that were developed on the basis of this empirical research gained enormous influence. Yet the criticism continued. Some criticism was inherently concerned with how to improve the methods; other criticism was fundamental and claimed either a schism between economists and lawyers or between America and the old continent. Of course, the latter schism must be (1) studied against the backdrop of fundamental methodological controversies (which are always the most bitter); (2) seen in light of the vast divide between this new world and the old dogmas still predominant in continental European law; and (3) understood as a reaction to the empirical results that placed Anglo-American law in a preeminent position while disadvantaging continental Europe (and particularly France and other Roman legal orders), which many considered not only wrong but unfair.

Against this backdrop, Bebchuk and Hamdani’s article is a great contribution that may help to bridge the gaps mentioned. The article may also open up a new legal and politics-of-law discourse between the disciplines as well as between the old and new worlds. This is true for two reasons. First, the authors reveal basic shortcomings of the leading American metrics—the corporate governance quotient, the anti-director rights index, and the anti–self dealing index—because they neglect to account for differences in shareholder structures—companies with (CS companies) and without (NCS companies) a controlling shareholder. Second, the attempt to empirically discover economic consequences of legal origin is not denigrated; rather Bebchuk and Hamdani emphasize improving the methodology and using more objective criteria for the comparative evaluation of corporations and countries. While comparative law has long sought to do this, its methodology has been inherently elective and subjective since standards of good corporate governance vary considerably among scholars, practitioners, and countries. If, however, a valid link back to empirical data of the enterprises and financial markets can be established, this is a great step forward for research and practice. Ultimately, it fosters competition, not only among enterprises but also among countries and their rulemakers and legislators. Such competition is the driver of progress. Insofar as competition is concerned, Bebchuk and Hamdani are right in saying that their analysis has “wide-ranging implications for corporate-governance research and practice.”

Bebchuk and Hamdani consider mainly American literature. Yet the index approach has had a considerable impact on the European discussion as well. Some papers have taken a primarily critical approach; others, however, have refined it by adjusting the methodology, taking into account European and worldwide experiences, or even developing new quantitative indices and methods on their own. Greater dialogue among American scholars in both economics and law could be fruitful for both disciplines. The following observations on the relevance of three basic principal-agent conflicts (1) under different shareholder structures and (2) to criteria of shareholder protection under different shareholder structures should therefore be understood as coming from a comparative European perspective and with full respect for the demanding work of the index community.

Over the last decade or so, a great deal of important scholarship has found positive associations between better corporate governance and firm market value, firm performance, stock market development, and economic growth. In light of these findings, it is not surprising that scholars have focused considerable attention on trying to develop methods of assessing whether a firm has good governance. However, developing governance standards that apply to all firms has not been easy, as there are important differences among firms (and countries) that tend to undermine such efforts. In The Elusive Quest for Global Governance Standards, Professors Bebchuk and Hamdani address this issue and provide an analytical framework that leads to the development of two standards for assessing good corporate governance that have applicability across many firms and countries.

In this response, I examine Bebchuk and Hamdani’s analysis and explore how one might implement parts of it. In the process, I rely on some of the experiences of other countries—especially emerging markets such as India, Korea, Russia and Brazil—to enrich the discussion and aid our understanding. Part I briefly summarizes Bebchuk and Hamdani’s analysis. Part II discusses their analysis and examines potential critiques. It concludes that these critiques do not weaken Bebchuk and Hamdani’s recommendations and discusses why their recommendations are both valuable and well-balanced. Finally, Part III concludes with some thoughts on how to begin to implement Bebchuk and Hamdani’s recommendations.

In Professor Kim’s determination to distinguish her findings, however, she needlessly and erroneously "reject[s]" a leading theory of circuit court panel effects—the now well-known Whistleblowing Theory (WT) of circuit panel decisionmaking set out by Frank Cross and Emerson Tiller over a decade ago in the Yale Law Journal. That theory applies equally to deliberative and strategic accounts of circuit panel decisionmaking. Unlike the strategic-alignment model tested by Professor Kim, WT’s key insight is that legal doctrine interacts with panel diversity to constrain political discretion. Mere alignment between the panel and a higher court (whether it be the circuit en banc or the Supreme Court)—the key feature of Professor Kim’s test of the alignment hypothesis—is not essential to the strategic prong of WT and not relevant to the deliberative prong. Professor Kim appears to misunderstand this central thesis of WT—that it is legal doctrine’s interaction with panel diversity (not merely the interactive effect of a diverse judicial panel with politically aligned or unaligned higher courts) that produces "panel effects"—and nothing in her findings justifies rejecting the theory. If anything, her results are consistent with WT.

Virtually all appellate courts are collegial (i.e., multimember) courts. Students of judicial behavior (both political scientists and members of the legal academy), particularly those who view judicial choice through the lens of strategic behavior, have paid quite a bit of attention to this characteristic of appellate courts, . Of interest recently have been the strategic implications of the panel decisionmaking mechanism relied on by the U.S. courts of appeals. The courts of appeals decide most cases with the use of rotating, three-judge panels, but the decision of a panel is subject to two kinds of review: review by the circuit en banc and review by the U.S. Supreme Court. Presumably, a strategic member of a panel could attempt to signal to the circuit en banc or to the Supreme Court when, contrary to her preferences, the panel decision is at odds with circuit law or Supreme Court precedent. The key, then, from a strategic perspective, is to understand how the ideological composition of a panel (relative to the circuit or relative to the Supreme Court) can induce strategic behavior on the part of an individual judge.

This is precisely the task to which Professor Kim sets herself in Deliberation and Strategy on the United States Courts of Appeals: An Empirical Exploration of Panel Effects. To do so, she uses the votes cast in Title VII sex discrimination cases decided with published opinions in the courts of appeals. Specifically, Professor Kim focuses on counter-ideological voting. The measurement strategy she takes is elegant; she defines counter-ideological voting as an instance in which a judge votes liberally when she is expected, based on her ideological preferences, to vote conservatively, or vice versa. The use of this dependent variable is advantageous in that strategic accounts of judicial vote choice are explicitly about whether a judge modifies her behavior systematically in response to the anticipated actions of other relevant actors (e.g., the Supreme Court). This dependent variable is explicitly about change in anticipated behavior. Moreover, Professor Kim’s empirical analyses are constructed to determine whether the likelihood of counter-ideological voting varies according to the alignment of a judge’s preferences with those of her panel mates and, ultimately, either those of the circuit en banc or the Supreme Court. She concludes that judges do not anticipate the likely reactions of the Supreme Court but do bear in mind the likely reactions of the circuit en banc.

It is remarkable that in the United States, with our legacy of legal slavery, the problem of racial discrimination that most troubles judges, policymakers, and political elites is the affirmative use of race by the state to promote equality for citizens of color. The Supreme Court of the United States has prohibited the City of Louisville, famous for its separate-but-unequal schools, from considering race in its efforts to prevent the voluntary segregation of its public schools. In Chief Justice Roberts’s world, to hold otherwise would violate the principal meaning of Brown v. Board of Education. Opponents of affirmative action have succeeded in eliminating the use of race by state officials in California, Washington, Michigan, and Nebraska.

Proponents of affirmative action, once beneficiaries of nondiscrimination doctrine, are now on the defensive. They are losing in the courts and in the political process. The Court seems determined to eliminate the use of race as a criterion for decisionmaking by state actors, notwithstanding the devastating impact that such action might have on citizens of color. With respect to the political process, judging by the relative success of state anti–affirmative action initiatives, that arena does not appear any more promising. Proponents of racial equality—those who care about reducing the often gaping and shocking disparities between blacks and Latinos on one side and whites on the other—are in need of fresh thinking and a new theoretical framework.

Stepping into the breach, Professor Kimberly West-Faulcon offers just that in her article The River Runs Dry: When Title VI Trumps State Anti–Affirmative Action Laws. The article takes racial inequality seriously and sees its amelioration as possible within the context of extant legal and jurisprudential frameworks. She focuses her analysis on public universities in states that have eliminated the use of race through initiatives and referenda. She shows empirically that admissions policies at public universities in California and Washington have had a statistically significant and disproportionately negative impact on the admissions prospects of black and Latino applicants. For example, in 2004, the University of California, Berkeley accepted 28.5% of white applicants for undergraduate admission; by contrast, only 15.4% of black applicants were granted admission.

Professor West-Faulcon argues that large disparities in admissions between black and white applicants (and between Latino and white applicants) could violate Title VI of the Civil Rights Act of 1964, which, inter alia, prohibits entities receiving public funds from adopting admissions policies that have the effect of discriminating on the basis of race. If Title VI were understood properly and given effect, she argues, it would prohibit the racial disparities in admissions that we have seen as a result of the elimination of affirmative action in many states. Universities would be forced to justify their reliance on standardized tests—the proximate cause of the racial disparities in admissions—or would be required to take race into account in order to comply with federal law, notwithstanding the state prohibition.

In this brief Response, I explore a reasonable assumption that underlies Professor West-Faulcon’s article, namely, that the failure to take seriously the problems of inequality that afflict communities of color—e.g., racial inequality in education—is a consequence of the absence of (or the failure to recognize) legal tools sufficient to the task. The assumption implies that we need more legal tools; if more legal tools were available, then we could begin to stem the tide of racial inequality. As Professor West-Faulcon shows in her article, however, legal tools are available. What, then, accounts for the failure of courts, specifically the Supreme Court, to take seriously the problem of racial inequality? I suggest that courts do not care enough about racial inequality and the dignity of people of color.

In The River Runs Dry: When Title VI Trumps State Anti–Affirmative Action Laws, Professor Kimberly West-Faulcon has identified a tension between state anti–affirmative action laws and the continued enrollment of minority students in public universities. The tension is not surprising, because the voter initiatives that led to those state anti–affirmative action laws were transparently motivated by white majoritarian desires to reduce minority student enrollment in public universities. What is surprising, however, is Professor West-Faulcon’s suggestion that state anti–affirmative action laws can themselves be read to permit precisely the type of race-conscious affirmative action that they might initially be thought to prohibit.

Capitalizing on the self-interested desires of states to avoid federal-funding cutoffs, Professor West-Faulcon constructs an argument that is both analytically sound and enticingly clever. However, that does not mean that the argument is free from a potentially fatal flaw. The problem is that doctrinal arguments alone cannot compel adherence to policies that are sufficiently unpopular to mobilize effective political opposition. Alternate doctrinal arguments can always be developed that are cogent enough to support the outcomes favored by socially powerful opponents, and the original argument can always be marginalized to the point where its analytical soundness ceases to appear particularly relevant.

This problem creates a dilemma for those of us who are tempted to formulate doctrinal arguments as a means of advancing our own racial-equality agendas. Participation in a syllogistic game that purports to be governed by doctrinal rules but actually uses those rules simply to mask the dispositive role of political preferences runs the risk of reinforcing the authenticity of the game itself. But declining participation in the game precludes the possibility of securing even those occasional victories that are permitted in order to convey the impression that the game is legitimate. It is difficult to see how the dilemma can ever be satisfactorily resolved. However, the loss of innocence entailed in recognizing this doctrinal dilemma may, at least, constitute a step in the right direction.

No aspect of civil law aggravates defendants more, it seems, than punitive damages. Straddling the civil and criminal law, punitive damages are awarded to a plaintiff in a private lawsuit, though they are widely viewed as noncompensatory and in the nature of a penal fine. Because such damages are assessed in civil lawsuits, the procedural safeguards of the criminal law—such as the “beyond a reasonable doubt” burden of proof, the privilege against self-incrimination, and the prohibitions against double jeopardy—generally do not apply. This strange mixture of criminal and civil law objectives and effects has always drawn controversy to this peculiar remedy, like a moth to flame.

The clash of views is colorfully portrayed by early state supreme court decisions. One court remarked, “The idea is wrong. It is a monstrous heresy. It is an unsightly and an unhealthy excrescence, deforming the symmetry of the body of law.” Yet, another court characterized punitive damages law as “an outgrowth of the English love of liberty regulated by law” that “restrains the strong, influential, and unscrupulous, vindicates the right of the weak, and encourages recourse to, and confidence in, the courts of law by those wronged or oppressed by acts or practices not cognizable in, or not sufficiently punished, by the criminal law.” Its grounding in essential justice, its drawing from diverse ancient legal cultures, and its deep roots in early English law all suggest that the punitive damages remedy is strong enough to endure the onslaught of recurring challenges to this hybrid creation of the law.

Yet, over the last two decades, the legitimacy, scope, and administration of punitive damages have been rigorously tested under the Constitution in a series of cases in the Supreme Court. These cases have formed a growing body of jurisprudence that has spawned a spate of scholarship on how punitive damages should be conceived and administered. Into this maelstrom of clashing views has plunged an important new commentator, Dan Markel, who offers novel insights and proposals in a remarkable body of scholarship still in progress: to date, this includes Retributive Damages: A Theory of Punitive Damages as Intermediate Sanction and How Should Punitive Damages Work?

This Response focuses on the latter work and critiques its premise, which was developed in the former, that public retribution should play a major role in punitive damages. I offer an alternative view—that private law should hold tight to the punitive damages remedy, a device that, through the institution of private retribution, offers victims of aggravated wrongdoing robust redress for the panoply of losses aggravated by the flagrancy of a wrong. In addition, I briefly examine a couple of Professor Markel’s treatments of how punitive damages should work, including the standard of proof and whether insurance against punitive damages should be allowed. Though we differ mightily on whether punitive damages should be directed principally to achieve public retribution or private justice, I applaud his focus on punitive damages’ inherent pluralism and his close analysis of the appropriate levels of procedural safeguards to keep this remedy from bursting its proper bounds. Finally, I conclude that Professor Markel’s extensive and creative scholarship on punitive damages helpfully pushes observers of this strange remedy to reconsider their most fundamental thoughts about how it should ideally be configured.

In “Retributive Damages” and the Death of Private Ordering, Professor Michael Krauss explores the implications of Markel's retributive damages for the private ordering/public ordering divide. Relying on Aristotle's conception of corrective justice and eighteenth‐century common law, Krauss makes the philosophical and historical case for the proper, limited role of punitive damages. He argues that punitive damages are only legitimate where used to close loopholes in conventional tort law remedies—e.g., as compensation for moral offenses. Accordingly, he contends that the retributive use of punitive damages is a pollution of tort law by public ordering principles. Finally, even for those who accept the theoretical premise of retributive damages, Krauss identifies several potential problems with Markel's scheme—theoretical, practical, and constitutional.

In Is Textualism Doomed?, Professor Ilya Somin counters Professor Siegel's argument that textualism is ultimately doomed to irrelevance because its “inexorable radicalization . . . will cause it to lose the interpretation wars.” Somin contends that Siegel's normative critique of textualism and positive prediction about its future are overdrawn. In Part I, Professor Somin shows that adherence to text does not inevitably lead to absurd and extreme results. In Part II, Somin claims that Siegel has understated the importance of textual ambiguity. He argues that when faced with an ambiguous text, resorting to extrinsic evidence of meaning is entirely consistent with textualist premises and may sometimes even be required by them. In Part III, Somin finds that textualism is here to stay, and will not “work itself pure” as Siegel has argued. Somin concludes by reasoning that because federal judges are not as interested in “grand theories of interpretation” and methodological consistency as academics are, they will not take textualism to its logical extreme.

In Opportunistic Textualism, Professor Lawrence Solan argues that while Professor Siegel expresses reasonable concern about the consequences of carrying textualism to its logical extreme, “it is virtually impossible to be a textualist on the ground.” Because judges are inclined to relax their embrace of formalism in favor of other values, the extreme results that Siegel fears cannot be consistently realized. Solan looks to the example of radical textualism that Siegel offers: a rigid dissent by Judge Bybee from a Ninth Circuit decision correcting a clear statutory drafting error. Solan points out that Judge Bybee has been willing to look to legislative history, intent, and statutory purpose in a variety of other areas, and that even the staunchest textualists speak of legislative intent when resolving ambiguous statutes. Solan closes by acknowledging that formalism, like other canons of construction, has been used opportunistically to reach results driven primarily by ideology. Though he shares Professor Siegel's concerns about some of the cases discussed in The Inexorable Radicalization of Textualism, he concludes that those results do not represent a radical or inevitable movement toward “law without mind.”

In Exploring Panel Effects, Professor Pauline Kim revisits the panel‐effects study she advanced in Deliberation and Strategy on the United States Courts of Appeals. Professor Kim reaffirms that despite its critical discussion of Frank Cross & Emerson Tiller's seminal piece on whistleblower theory, Deliberation and Strategy sought to focus solely on panel effects, and did not seek to “test” Cross & Tiller's hypothesis. Though Kim believes that Cross & Tiller's theory is in need of updating, she insists that it remains a seminal contribution to the literature and that she only sought to distinguish and clarify the terminology she uses in discussing panel effects. Kim finds that while the findings of her study were consistent with many elements of whistleblower theory, it did discredit the notion that appellate decisions are influenced by the presence of a minority panel member able to “blow the whistle” by dissenting.  Professor Kim then addresses the methodological concerns raised by Professors Lindquist & Martinek and Linkous &Tiller in their responses, and concludes that both sets of authors are correct when they find that more large‐scale, quantitative studies are needed before a comprehensive explanation of panel effects can be offered.

In Punitive Damages and Private Ordering Fetishism, Professor Dan Markel responds to Professor Krauss's and Professor Owen's critiques of his piece, How Should Punitive Damages Work?. Professor Markel seeks to clarify some misunderstandings regarding that piece, including how his proposal for reforming punitive damages schemes would work in practice. He begins by noting that while observers of tort law attempt to analyze reform proposals for punitive damages within the traditional framework, his prescriptions are largely forward‐looking and should be viewed in light of the pluralistic worldview Markel takes in How Should Punitive Damages Work?. Markel argues that punitive damages can be seen as advancing a number of separate goals—including cost internalization, victim vindication, and the public interest in retributive justice—without threatening its essential restitutionary attributes. With the right safeguards, says Markel, a system of extracompensatory damages can advance these purposes. He concludes by noting that Krauss's and Owen's fears regarding the economic and legal consequences of such a pluralistic punitive damages framework will not be realized, provided that the proper constraints are put in place.

In Testing the Master Tools, Professor Kimberly West‐Faulcon responds to Professors Guy‐Uriel Charles and Girardeau Spann, who critiqued West‐Faulcon's article The River Runs Dry. The River Runs Dry attacked the assumption that compliance with state anti–affirmative action law has led to plunging minority admissions. West‐Faulcon reaffirms her argument that race‐conscious admissions and hiring practices are not foreclosed by state anti–affirmative action law where those actions are taken in order to comply with the disparate impact provisions of Title VI. Professor West‐Faulcon accepts that ideology and politics will inevitably influence the discussion, but goes on to argue that factual assumptions undergirding current doctrine need to be revisited. First, she notes that Title VI disparate impact analysis is influenced greatly by inaccurate perceptions of the ability of standardized tests to identify merit, particularly among the most qualified applicants. West‐Faulcon argues that the Supreme Court's analysis in the Ricci firefighter case supports her argument that the strong‐basis‐in‐evidence standard for reviewing affirmative action policies is appropriate, and that many affirmative action policies are justifiable under such a standard. Professor West‐Faulcon concludes by noting that as long as ideology continues to influence legal decisionmaking, the discourse on affirmative action must take place in both the doctrinal and ideological realms.