Volume 164, Issue 3 
February 2016

An Economic Understanding of Search and Seizure Law

Orin S. Kerr

This Article uses economic concepts to understand search and seizure law, the law governing government investigations that is most often associated with the Fourth Amendment. It explains search and seizure law as a way to increase the efficiency of law enforcement by accounting for external costs of investigations. The police often discount negative externalities caused by their work. Search and seizure law responds by prohibiting investigative steps when external costs are excessive and not likely to be justified by corresponding public benefits. The result channels government resources into welfare-enhancing investigative paths instead of welfare-reducing steps that would occur absent legal regulation. This perspective on search and seizure law is descriptively helpful, it provides a useful analytical language to describe the role of different Fourth Amendment doctrines, and it facilitates fresh normative insights about recurring debates in Fourth Amendment law.

How Corporate Governance Is Made: The Case of the Golden Leash

Matthew D. Cain, Jill E. Fisch, Sean J. Griffith, and Steven Davidoff Solomon

This Article presents a case study of a corporate governance innovation: the incentive compensation arrangement for activist‐nominated director candidates colloquially known as the “golden leash.” Golden leash compensation arrangements are a potentially valuable tool for activist shareholders in election contests. In response to their use, a number of issuers adopted bylaw provisions banning incentive compensation arrangements. Investors, in turn, viewed director adoption of golden leash bylaws as problematic and successfully pressured issuers to repeal them.

This study demonstrates how corporate governance provisions are developed and deployed, the sequential responses of issuers and investors, and the central role played by governance intermediaries—activist investors, institutional advisors, and corporate law firms.

The golden leash also presents an opportunity to test the response of share prices to governance innovation. We conducted two cross‐sectional event studies around key dates that affected the availability of the golden leash. Our core finding is that share prices of firms facing activist intervention reacted positively to events that make golden leashes more available and negatively to events that make golden leashes less available. Moreover, we found that this governance innovation did not affect every firm in an identical manner. Only the share prices of those firms most likely to be subject to activist attention experienced statistically significant share price reactions.

Our research contributes to the debate over how corporate governance is made and its economic significance. Although we found that corporate governance provisions may be priced, at least in some circumstances, our study also suggests that corporate governance is a complex story involving the actions and reactions not merely of the firm and its shareholders but of a variety of intermediaries and interest groups that have agendas of their own.

The Gravitational Force of Federal Law

Scott Dodson

In the American system of dual sovereignty, states have primary authority over matters of state law. In nonpreemptive areas in which state and federal regimes are parallel—such as matters of court procedure, certain statutory law, and even some constitutional law—states have full authority to legislate and interpret state law in ways that diverge from analogous federal law. But, in large measure, they do not. It is as if federal law exerts a gravitational force that draws states to mimic federal law even when federal law does not require state conformity. This Article explores the widespread phenomenon of federal law's gravitational pull. The Article begins by identifying the existence of a gravitational force throughout a range of procedural and substantive law felt by a host of state actors, including state rulemakers, legislators, judges, and even the people themselves. It then excavates some explanatory vectors to help understand and appreciate why federal law exerts a gravitational force. Finally, the Article considers some normative concerns with state acquiescence to the federal gravitational pull.


What to Do When Main Street Is Legal Again: Regional Land Value Taxation as a New Urbanist Tool

Nathan Farris

For most of the twentieth century, Americans left urban centers for suburban landscapes.

[O]ver the last one hundred years, American land use policy [was] designed to segregate uses of land, reduce population density, and facilitate the use of automobiles . . . . [S]uburban sprawl has come to represent the American dream, where citizens can own a home, two‐car garage, both back and front yards, and if you are truly lucky, a pool.

Indeed, an antiurban attitude is ingrained in the American psyche. Americans' deeply rooted desire for independence coupled with an abundant supply of low‐priced land created a low‐density land use pattern. The growth of affordable automobiles in the twentieth century allowed for satisfaction of the deeply ingrained American desire to spread out. Consequently, Americans fled urban areas for the suburbs. The proliferation of low‐density development typified by post–World War II suburbs is called sprawl. Unfortunately, this low‐density development is inefficient and causes a host of social and environmental problems.

City planners, environmentalists, and academics alike widely criticize the proliferation of suburban sprawl. These critics argue that sprawl is fundamentally problematic because it is unsustainable and destroys vibrant neighborhoods and communities. “Evidence of sprawl surrounds us . . . . [S]prawl consume[d] nearly six million acres of farmland annually [from 1954 to 1974] . . . .” Sprawl makes us overly dependent on automobiles, “which imposes enormous costs and degrades our quality of life . . . [by] impos[ing] burdensome infrastructure costs” and creating a society stratified by “income, education, race, and ethnicity.”

This Comment assumes suburban sprawl is inimical to the common good and ought to be slowed and, if possible, reversed. My purpose is not to prove that there is a problem, but to explore a potential solution: Land Value Taxation (LVT). Finding a solution, however, begins with identifying the causes of the problem. Accordingly, Part I briefly examines single‐use zoning's contribution to the problem of sprawl, and concludes that New Urbanists are making tremendous progress toward reforming single‐use zoning. I suggest that our current property tax system is another cause of sprawl and, given the success of zoning reform, ought to be the target of New Urbanist policy advocacy. Part II posits LVT as an alternative to our current single‐rate tax system and explores LVT's dual ability to incentivize denser development and disincentive land speculation at the suburban fringe. Part III concludes that LVT can be most effectively implemented at the regional level.

Unconscionability as a Coherent Legal Concept

Colleen McCullough

“Contracts of adhesion” are those long, complicated, boring contracts that no one reads and everyone signs. For a long time, courts enforced them just like they would a regular contract that both parties negotiated. But in the past fifteen years, courts have begun to recognize that contracts of adhesion pose serious problems: because they create obligations that the consumer may be unaware of, these contracts may not actually be increasing social value. Instead, it is possible that the benefits consumers are getting in these contracts are not worth the rights they are giving up.

In stepping in, courts have had to fashion new tools to use. The most common new tool is the doctrine of unconscionability, an old, nebulous doctrine that had been almost indistinguishable from courts' arguments from public policy. This Comment argues that courts' use of unconscionability in the context of contracts of adhesion is giving the unconscionability doctrine shape and content, and separating it out from the amorphous arguments from public policy. This new shape requires courts to analyze whether the business (the “offeror”) had reason to know that a reasonable consumer (the “offeree”) would not have read or understood the contract. If the court finds that the business did have reason to know this, then it will not impose on the consumer terms that the consumer would not have expected, or terms that impose costs on third parties.

This new meaning is derived by considering recent state court decisions, as well as by looking at the comprehensive web of contract law doctrines and considering where, and how, a new concept can fit in.

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