Law Commons^™

The Banker Removal Power, Da Lin, Lev Menand

Faculty Scholarship

The Federal Reserve (“the Fed”) can remove bankers from office if they violate the law, engage in unsafe or unsound practices, or breach their fiduciary duties. The Fed, however, has used this power so rarely that few even realize it exists. Although major U.S. banks have admitted to repeated and flagrant lawbreaking in recent years, the Fed has never removed a senior executive from one of these institutions.

This Article offers the first comprehensive account of the banker removal power. It makes four contributions. First, drawing on a range of primary sources, it recovers the power’s statutory foundations, showing that …

Judicial Minimalism In Lower Courts, Thomas P. Schmidt

Faculty Scholarship

Debate about the virtues and vices of “judicial minimalism” is evergreen. But as is often the case in public law, that debate so far has centered on the Supreme Court. Minimalism arose and has been defended as a theory about how Justices should judge. This Article considers judicial minimalism as an approach for lower courts, which have become conspicuous and powerful actors on the public law scene. It begins by offering a framework that disentangles the three basic meanings of the term “judicial minimalism”: decisional minimalism, which counsels judges to decide cases on narrow and shallow grounds; prudential minimalism, which …

Information Gaps And Shadow Banking, Kathryn Judge

Faculty Scholarship

This Article argues that information gaps – pockets of information that are pertinent and knowable but not currently known – are a byproduct of shadow banking and a meaningful source of systemic risk. It lays the foundation for this claim by juxtaposing the regulatory regime governing the shadow banking system with the incentives of the market participants who populate that system. Like banks, shadow banks rely heavily on short-term debt claims designed to obviate the need for the holder to engage in any meaningful information gathering or analysis. The securities laws that prevail in the capital markets, however, both presume …

The Common Law Of Contract And The Default Rule Project, Alan Schwartz, Robert E. Scott

Faculty Scholarship

The common law developed over centuries a small set of default rules that courts have used to fill gaps in otherwise incomplete contracts between commercial parties. These rules can be applied almost independently of context: the market damages rule, for example, requires a court only to know the difference between market and contract prices. When parties in various sectors of the economy write sales contracts but leave terms blank, courts fill in the blanks with their own rules. As a consequence, a judicial rule that many parties accept must be "transcontextual": parties in varied commercial contexts accept the courts' rule …

Executive Federalism Comes To America, Jessica Bulman-Pozen

Faculty Scholarship

This Article proposes a different way of thinking about contemporary American governance, looking to an established foreign practice. Executive federalism – “processes of intergovernmental negotiation that are dominated by the executives of the different governments within the federal system” – is pervasive in parliamentary federations, such as Canada, Australia, and the European Union. Given the American separation of powers arrangement, executive federalism has been thought absent, even “impossible,” in the United States. But the partisan dynamics that have gridlocked Congress and empowered both federal and state executives have generated a distinctive American variant.

Viewing American law and politics through the …

Corporate Inversions And The Unbundling Of Regulatory Competition, Eric L. Talley

Faculty Scholarship

Several prominent public corporations have recently embraced a noteworthy (and newsworthy) type of transaction known as a "tax inversion." In a typical inversion, a U.S. multinational corporation ("MNC") merges with a foreign company. The entity that ultimately emerges from this transactional cocoon is invariably incorporated abroad, yet typically remains listed in U.S. securities markets under the erstwhile domestic issuer's name. When structured to satisfy applicable tax requirements, corporate inversions permit domestic MNCs eventually to replace U.S. with foreign tax treatment of their extraterritorial earnings – ostensibly at far lower effective rates.

Most regulators and politicians have reacted to the inversion …

Market Efficiency After The Financial Crisis: It's Still A Matter Of Information Costs, Ronald J. Gilson, Reinier Kraakman

Faculty Scholarship

Contrary to the views of many commentators, the Efficient Capital Market Hypothesis ("ECMH"), as originally framed in financial economics, was not "disproven" by the Subprime Crisis of 2007-2008, nor has it been shown to be irrelevant to the project of regulatory reform of financial markets. To the contrary, the ECMH points to commonsense reforms in the wake of the Crisis, some of which have already been adopted. The Crisis created a lot of losers – from individual investors to pension funds and German Landesbanken – who purchased mortgage-backed securities that they did not, and perhaps could not, understand, and it …

Unplanned Coauthorship, Shyamkrishna Balganesh

Faculty Scholarship

Unplanned coauthorship refers to the process by which contributors to a creative work are treated by copyright law as coauthors of the work based entirely on their observable behavior during its creation. The process entails a court imputing the status of coauthors to the parties ex post, usually during a claim for copyright infringement. For years now, courts and scholars have struggled to identify a coherent rationale for unplanned coauthorship and situate it within copyright’s set of goals and objectives. This Article offers a novel framework for understanding the rules of unplanned coauthorship using insights from theories of shared intentionality. …

Surprisingly Punitive Damages, Bert I. Huang

Faculty Scholarship

Damages can add up to super-punitive amounts in unintended ways. To take a textbook example: The Defendant has caused an industrial accident or other mass tort. Plaintiff 1 sues, winning punitive damages based on the reprehensibility of that original act. Plaintiff 2 also sues – and also wins punitive damages on the same grounds. So do Plaintiff 3, Plaintiff 4, and so forth. If each of these punitive awards is directed at the same general badness of that original act, then these punishments are redundant. When such redundancy occurs, even damages that are meant to be punitive can reach surprisingly …

Concurrent Damages, Bert I. Huang

Faculty Scholarship

Imagine that a hacker is working for a university official secretly spying on faculty members – say, to find out who has been leaking information to the press about internal disciplinary matters. The injuries to a given victim of the hacking might follow a classic learning curve: The first few intrusions into her e-mail account reveal a storehouse of personal secrets, but further break-ins yield less and less new information. One might say there is diminishing marginal harm.

There is no such leveling off, however, in the compensation that would be awarded to that victim. The electronic privacy law …

Unconstitutional Conditions: The Irrelevance Of Consent, Philip A. Hamburger

Faculty Scholarship

Unconstitutional conditions are a conundrum. On the one hand, if government can spend, why can't it place whatever conditions it wants on its spending? On the other hand, if it can place any conditions on spending, won't it be able to impose restrictions that evade much of the Constitution, including most constitutional rights? This enigma is notoriously complex, and unconstitutional conditions therefore are considered a sort of Gordian knot.

The standard solution is to slice through the knot with consent to conclude that consent excuses otherwise unconstitutional restrictions. This solution, however, is problematic, for it concedes that the government can …

Democratic Participation And The Freedom Of Speech: A Response To Post And Weinstein Responses, Vincent A. Blasi

Faculty Scholarship

I think it is useful to search for a theory that has as one of its justifications its superior fit with either the case law or the fundamental commitments and shared understandings of the political community, preferably with both. So even if someone were to convince me that she has in hand a normatively superior theory of free speech, whether grounded in the commitment to democracy or otherwise, I would still be interested in what Professors Post and Weinstein are trying to do.

Chevron'S Two Steps, Kenneth A. Bamberger, Peter L. Strauss

Faculty Scholarship

The framework for judicial review of administrative interpretations of regulatory statutes set forth in the landmark Chevron U.S.A. v. Natural Resources Defense Council decision prescribes two analytic inquiries, and for good reason. The familiar two-step analysis is best understood as a framework for allocating interpretive authority in the administrative state; it separates questions of statutory implementation assigned to independent judicial judgment (Step One) from questions regarding which the courts role is limited to oversight of agency decisionmaking (Step Two).

The boundary between a reviewing court's decision and oversight roles rests squarely on the question of statutory ambiguity. For while courts, …

Redesigning The Sec: Does The Treasury Have A Better Idea?, John C. Coffee Jr., Hillary A. Sale

Faculty Scholarship

Symposiums supply a snapshot in time. By observing the common assumptions and shared frameworks of a collection of scholars writing contemporaneously, one gains both insight into the intellectual world of a past era and the ability to measure its distance from our own. Twenty-five years ago the Virginia Law Review organized a noted symposium (the "1984 Symposium") to celebrate the 50th anniversary of the SEC. A number of prominent scholars participated, and its articles have been much cited.

From Langdell To Law And Economics: Two Conceptions Of Stare Decisis In Contract Law And Theory, Jody S. Kraus

Faculty Scholarship

In his classic monograph, The Death of Contract, Grant Gilmore argued that Christopher Columbus Langdell, Oliver Wendell Holmes, and Samuel Williston trumped up the legal credentials for their classical bargain theory of contract law. Gilmore's analysis has been subjected to extensive criticism, but its specific, sustained, and fundamental charge that the bargain theory was based on a fraudulent misrepresentation of precedential authority has never been questioned. In this Essay, I argue that Gilmore's case against the classical theorists rests on the suppressed premise that the precedential authority of cases resides in the express judicial reasoning used to decide them. In …

Treaties' Domains, Tim Wu

Faculty Scholarship

When and why do American judges enforce treaties? The question, always important, has become pressing in an age where the United States is party to over 12,000 international agreements. Article VI of the United States Constitution declares "all treaties" the "supreme Law of the Land," and American judges have long had the potential power, under the Constitution, to enforce treaties as they do statutes. But over the history of the United States, judges have not enforced treaties that way. Instead, judicial treaty enforcement is widely seen as unpredictable, erratic, and confusing. As a result, the question of treaty enforcement has …

Transparency And Determinacy In Common Law Adjudication: A Philosophical Defense Of Explanatory Economic Analysis, Jody S. Kraus

Faculty Scholarship

Explanatory economic analysis of the common law has long been subject to deep philosophical skepticism for two reasons. First, common law decisions appear to be cast in the language of deontic morality, not the consequentialist language of efficiency. For this reason, philosophers have claimed that explanatory economic analysis cannot satisfy the transparency criterion, which holds that a legal theory's explanation must provide a plausible account of the relationship between the reasoning it claims judges actually use to decide cases and the express reasoning judges provide in their opinions. Philosophers have doubted that the economic analysis has a plausible account of …

Intellectual Property, Innovation, And Decentralized Decisions, Tim Wu

Faculty Scholarship

In 1945, Fredrick Hayek described the problem of economic development as "a problem of the utilization of knowledge not given to anyone in its totality." Hayek's insight has unexpected relevance for what has emerged as the central question in modern intellectual property and related fields: When might the assignment of property rights have anti-competitive consequences? The traditional, yet central, economic answer to this question emphasizes a tradeoff between incentives created by property grants and resulting higher prices and deadweight losses. Under this model intellectual property grants are desirable to the extent that they encourage new product development at a reasonable …

Information Costs In Patent And Copyright, Clarisa Long

Faculty Scholarship

Why do we have more than one form of intellectual property rights? Why are the structures of the patent and copyright forms so different? What determines the optimal structure of each form? The conventional theory of intellectual property rights posits that such rights exist to stimulate the creation and distribution of intellectual goods.1 Alternatively, theories of personhood justify intellectual property rights on the grounds that they protect objects through which authors and inventors have expressed their “wills,” which is central to self-definition and personhood, or that they create social conditions supportive of creative intellectual activity, which in turn is conducive …

More Is Less, Philip A. Hamburger

Faculty Scholarship

Is the First Amendment's right of free exercise of religion conditional upon government interests? Many eighteenth-century Americans said it was utterly unconditional. For example, James Madison and numerous contemporaries declared in 1785 that "the right of every man to exercise ['Religion'] ... is in its nature an unalienable right" and "therefore that in matters of Religion, no mans right is abridged by the institution of Civil Society." In contrast, during the past forty years, the United States Supreme Court has repeatedly conditioned the right of free exercise on compelling government interests. The Court not merely qualifies the practice of the …

The Option Element In Contracting, Avery W. Katz

Faculty Scholarship

Most contractual arrangements are either structured as options or include options as important elements. As a result, many of the major doctrines of contract law effectively operate to create or to set the terms of such options. For instance, it has long been recognized that a contract that is enforceable only through monetary liability operates in practice as an option, because as a legal matter the promisor retains the power either to perform or to breach and pay damages. Similarly, the doctrine of promissory estoppel, which attaches liability to precontractual statements in cases where they are reasonably relied upon, effectively …

When Code Isn't Law, Tim Wu

Faculty Scholarship

When the Supreme Court upheld extended copyright terms in Eldred v. Ascroft, many Internet activists called for renewed political action in the form of appeals to Congress or even a campaign to amend the Constitution. But others suggested a very different course: They argued that it would be wiser to forgo institutions controlled by the powers of the past, and to return instead to the keyboard to write the next generation of "lawbusting" code. In the words of one observer, "tech people are probably better off spending their energy writing code than being part of the political process" because …

On Insider Trading, Markets, And Negative Property Rights In Information, Zohar Goshen, Gideon Parchomovsky

Faculty Scholarship

Few issues have sparked as much debate and disagreement among Law and Economics scholars as the prohibition on insider trading. Ironically, the Supreme Court's attempts in Chiarella v. United States, Dirks v. Securities and Exchange Commission, and, most recently, in United States v. O'Hagan to clarify the scope and content of the ban on insider trading, and the subsequent reaction of the Securities and Exchange Commission ("SEC"), have only added fuel to the fire of the academic debate already raging on the issue.

The most intriguing feature of the debate on insider trading is that all contributors seek to promote …

Twenty-Five Years Through The Virginia Law Review (With Gun And Camera), Robert E. Scott

Faculty Scholarship

It is a great honor to be asked to offer a few remarks to such an august gathering. But I must confess to having had a certain puzzlement when the invitation to speak to the Law Review banquet first came. I asked one of my colleagues, "Why would they have asked me?" "It's obvious," he replied. "Their first three choices turned them down."

With that in mind, I asked my secretary, "What do they want me to talk about?" "The Future of Legal Education," she replied (somewhat portentously). This suggestion didn't ring quite true to me. I have been to …

The Landscape Of Constitutional Property, Thomas W. Merrill

Faculty Scholarship

The Constitution contains two clauses that protect persons against governmental interference with their property. The Due Process Clause provides that "No person shall ... be deprived of life, liberty, or property, without due process of law." The Takings Clause adds, "nor shall private property be taken for public use, without just compensation." Both provisions appear to impose a threshold condition that a claimant have some "property" at stake before the protections associated with the Clause apply. Thus, under the Due Process Clause, it would seem that a claimant must have an interest in "property" (or in "life" or "liberty") before …

The Limits Of Behavioral Theories Of Law And Social Norms, Robert E. Scott

Faculty Scholarship

The law influences the behavior of its citizens in various ways. Well understood are the direct effects of legal rules. By imposing sanctions or granting subsidies, the law either expands or contracts the horizon of opportunities within which individuals can satisfy their preferences. In this way, society can give incentives for desirable behavior. The direct effects of legal rules on individual behavior have been a fruitful source of inquiry for analysts using the techniques of law and economics. Modeling the incentive effects of legal rules provides a useful predictive tool for positive theory and normative critique. Indeed, the tools of …

Social Norms And The Legal Regulation Of Marriage, Elizabeth S. Scott

Faculty Scholarship

Americans have interesting and somewhat puzzling attitudes about the state's role in defining and enforcing family obligations. Most people view lasting marriage as an important part of their life plans and take the commitment of marriage very seriously. Yet any legal initiative designed to reinforce that commitment generates controversy and is viewed with suspicion in many quarters. For example, covenant marriage statutes, which offer couples entering marriage the option of undertaking a modest marital commitment, are seen by many observers as coercive and regressive measures rather than ameliorating reforms.

The law tends to reflect – and perhaps contributes to – …

Retaining Mandatory Securities Disclosure: Why Issuer Choice Is Not Investor Empowerment, Merritt B. Fox

Faculty Scholarship

This Article advances the reopened debate over mandatory disclosure in two ways. First, it demonstrates that the proponents of issuer choice have not effectively countered the arguments that have formed the basis of the prevailing consensus for retaining mandatory disclosure. While this consensus was formed when the alternative to mandatory disclosure was total abandonment of regulation, the proponents of issuer choice have not shown how the arguments that form the basis of this consensus have any less force when applied to the new alternative of issuer choice. Nor have the proponents offered persuasive, more general rebuttals to these arguments. Second, …

Conflicts Consent And Allocation After Amchem Products – Or Why Attorneys Still Need Consent To Give Away Their Clients' Money, John C. Coffee Jr.

Faculty Scholarship

If it was the goal of Silver and Baker to write a provocative article, they have succeeded. They ask probing questions; they are appropriately scornful of superficial answers; and they seek to relate their view of legal ethics to what they perceive to be the prevailing standards in the legal marketplace. All this is good. They also usefully focus on an underappreciated dichotomy: the ethical rules governing aggregated settlements in consensual litigation versus the rules applicable in aggregated nonconsensual litigation (i.e., class actions). Essentially, they argue that the rules in both contexts should be the same or very similar, the …

Marriage As Relational Contract, Elizabeth S. Scott, Robert E. Scott

Faculty Scholarship

The evolution of marriage from a relationship based on status to one that is regulated by contractual norms achieved a milestone of sorts recently with the enactment of the Louisiana Covenant Marriage Act. Under this statute, couples entering marriage can choose to have the termination of their relationship regulated under conventional no-fault divorce rules, or they can voluntarily undertake a greater commitment to their marriage. For couples who select covenant marriage, either party can terminate the relationship on fault grounds, but unilateral termination of the marriage is available only after a substantial waiting period. The principal impact of the statute …