Volume 159

Essays

The Uniform Trade Secrets Act (UTSA) has been adopted in forty‐six states over its thirty year existence. Uniform laws like the UTSA serve at least two important purposes. First, they provide a consistent set of rules to provide settled expectations for interstate activities. The Uniform Commercial Code and Uniform Child Custody Jurisdiction Act are good examples of this purpose. Buyers, sellers, and parents cannot avoid important legal rules by changing states, therefore helping to reduce forum shopping. Second, uniform laws allow state legislators to adopt sister‐state statutory interpretations when they enact the law. The UTSA illustrates this purpose. Each state's UTSA case law should theoretically apply in every other state adopting it—an important benefit for small states that do not have enough litigation activity to generate substantial trade secret case law of their own.

Testing how well the UTSA serves as a source of extraterritorial precedent is difficult, however. First, many states had their own trade secret common law to draw on prior to passage of the UTSA. Second, even if a court uses persuasive authority from another state, the court might then further shape the law to its liking. Third, measuring the impact of extraterritorial precedent is difficult because judicial opinions might import law on some issues and not on others.

West Virginia's UTSA experience provides an answer to these measurement difficulties. An examination of West Virginia law reveals a curious fact: a complete absence of state court trade secret case law, both before and after passage of the UTSA. This characteristic makes West Virginia the perfect test case of a small state with insufficient litigation activity to generate its own trade secret law.

In his Essay Original Citizenship, Josh Blackman asks what the Constitution means when it refers to “citizen[s] of the United States.” Acknowledging the lack of guidance on the topic, Blackman looks to contemporary notions of citizenship, including the theories of birthright citizenship and “citizenship by election,” for help. In concluding that one could only become a citizen of the United States as of the Declaration of Independence, Blackman tracks early case law at critical points in the nation's early history. He looks to treason cases, contested elections, and interpretations of Jay's Treaty to determine that the only logical starting point for “original” citizenship must be the Declaration. Blackman's piece is a much‐needed contribution to a sparse area of scholarship and helps to lay the groundwork for future work on the implications of his findings.

In Astrue v. Ratliff and the Death of Strong Purposivism, Frederick Liu argues that the Supreme Court's recent decision interpreting the Equal Access to Justice Act has conclusively demonstrated the victory of textualists over purposivists in the war of statutory interpretation. In Astrue v. Ratliff, decided last Term, Justice Thomas's opinion for a unanimous Court looked to the plain meaning of the terms “prevailing party” and “award” in holding that when a winning litigant owes a preexisting debt to the government, any fee award to that litigant may not be given to the attorney in lieu of satisfying that debt. To Mr. Liu, both the Court's reasoning and Justice Sotomayor's concurrence in Ratliff demonstrate a consensus that in spite of any evident congressional purpose to the contrary, the clear text of the statute must govern its interpretation. Liu acknowledges that conflicts remain over the proper approach to an ambiguous text, but that Ratliff signals the death knell of “strong” purposivism and that for now, the text rules.

In September 2010, the Supreme Court granted certiorari in the controversial Baycol litigation. The central question will be whether, subsequent to a denial of class certification, preclusion can prevent an absentee from seeking to certify another class action on a similar claim. Professor Kevin Clermont's Essay answers that question in the affirmative, while warning that the preclusion is very limited in scope. It arrives at this answer by analogizing to the more established doctrine of jurisdiction to determine no jurisdiction: if a court's finding of no jurisdiction over the subject matter or the person can preclude, then a finding of no authority to proceed as a class action should be preclusive—but only on that precise issue of no authority.

This year, the Supreme Court is expected to review multiple cert petitions involving Nazi‐looted‐art litigation. Jennifer Anglim Kreder writes that courts should carefully consider the unique context of this litigation before applying procedural bars to the claims advocated by the museums who have now come into ownership of the art. She begins by describing the historical background of these claims, as well as the federal government's response, arguing that the executive's consistent policy has been to return the art to the original owners or heirs whenever possible. Nonetheless, Professor Kreder contends that in recent litigation—primarily in the form of museums seeking to quiet title in a declaratory action—lower courts have not recognized this policy, finding the claims time‐barred or the sales voluntary, and holding the heirs responsible for failing to conduct a more timely investigation of these claims. Instead, she concludes, courts should defer to the Executive's model of justice.

Responses

In The Partner‐Manager, Professor Mitchell praises their suggested executive compensation reforms and seeks to place those reforms in the larger context of the evolution of corporate management. He argues that excessive compensation is a recent phenomenon, and, as such, arguments that view it as “inevitable” must be viewed skeptically. He argues that the rise of the independent monitoring board of directors has created informational asymmetries and a power vacuum between the board and management, resulting in the rise of the “partner‐manager” whose significant equity stake created the agency problems we see today. While Mitchell accepts that the Bebchuk‐Fried reforms will help temper those incentives, he wonders whether they go to the heart of the problem, which he sees as corporate governance.

In Weak Solutions to an Illusory Problem, Professor Steven Kaplan argues that the Bebchuk-Fried analysis is fundamentally flawed because it rests on incorrect assumptions about executive compensation. Kaplan points to empirical work by himself and others that suggests there may be no compensation problem at all. The studies he points to show that compensation tends to rise and fall with the market and that managers are, in fact, rewarded for good performance and punished for poor performance. Kaplan argues that, if anything, the Bebchuk-Fried proposals will add only marginal protections at a high cost: he suggests that their reforms will discourage top talent from serving as executives because it will become significantly riskier to serve at public companies, particularly when lucrative alternatives are available with private-equity-funded firms.

In Attorneys' Fees and the Social Legitimacy of Class Actions, Professor David Marcus responds to Brian Fitzpatrick's proposals in Do Class Action Lawyers Make Too Little? Professor Marcus contends that while Fitzpatrick's proposal—that in certain class actions, attorneys should be permitted to take 100% of the class recovery—is intriguing and may be beneficial, it runs afoul of current law and may otherwise not be a prudent policy. First, Marcus argues that Civil Rule 23(h) cannot be construed to allow these payments within the terms of the Rules Enabling Act, as claim assignment law is substantive and not procedural. Next, Marcus doubts that the doctrine of unjust enrichment could be stretched to permit such fee awards. Marcus then turns to Fitzpatrick's utilitarian arguments justifying higher fee awards, and finds that merely adjusting the substantive law would not be likely to ensure optimal deterrence of bad actors, as Fitzpatrick suggests. As a result, Marcus argues, an explosion in fee awards would upset a careful substantive and procedural balance struck by current law. Finally, Marcus notes that “a spate of clientless cases” might undermine the legitimacy of class actions themselves. He concludes by acknowledging the attractiveness of Fitzpatrick's proposals but positing that to the extent that aggregate litigation is intended to preserve fundamental “day in court” ideals, current fee awards may be entirely appropriate.

In Financial Industry Self‐Regulation: Aspiration and Reality, Professor Schwarcz responds to Professor Omarova's recent article by applying the framework he has developed to analyze the financial services industry's systemic risk.  Two of the four elements of this model, he argues, inform Professor Omarova's article.  First, Schwarcz writes that Omarova's self‐insurance is a conceptually accurate response to the tragedy of the commons, by forcing the financial services industry to internalize systemic risk rather than leaving it to the government.  However, Omarova's model, he suggests, should be international in scope and not a “blanket substitute” for a public safety net.  Second, Schwarcz argues that Omarova's suggestion of a ban, or threat to ban, certain financial products reflects a concern for the problem of complexity.  While agreeing that complexity of the financial services industry is a serious concern, Schwarcz suggests it might be better addressed through standardizing financial products, and that there are too many unknowns to be certain about the outcome of Omarova's recommendation.  Ultimately, Schwarcz concludes that at the very least Omarova raises important questions, which may have been her primary intention. 

In Fateful Bankers, Professor Zaring describes the strengths of Professor Omarova's article, that it does not overly rely on heavy‐handed outside regulation of the financial industry but could still appeal to those who believe the industry needs “stringent oversight.” Zaring also notes the benefit of relying on regulation by those with the most up‐to‐date information about the industry—industry itself. Zaring then offers five critiques of Omarova's position. First, Zaring worries this model could lead to greater barriers to entry for the industry and have anticompetitive effects. Second, he suggests that unlike an industry where the community is based on concern that public condemnation of one firm leads to condemnation of the entire industry, here insolvency at one firm leads to insolvency at others—a real difference from the nuclear or chemical industries Omarova uses as examples. Third, Zaring is skeptical that a threat from government regulators will really create cohesion when in past crises the government has been perceived as unwilling to act on the threat. Fourth, Zaring criticizes Omarova's precondition of dividing the financial industry between wholesale and resale, and fifth, Zaring questions whether insurance will really deter behavior or be written off as a cost of doing business.

Debates

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