Law Commons^™

Inertia And Preference In Contract Negotiation: The Psychological Power Of Default Rules And Form Terms, Russell Korobkin

Vanderbilt Law Review

In The Problem of Social Cost,' the foundational article of the law and economics movement, Ronald Coase suggested that when transaction costs are zero, the initial allocation of a legal entitlement is irrelevant to its eventual ownership. Assuming no transaction costs, the Coase Theorem predicts that if party A values an entitlement more than does party B, A will keep the entitlement if it is initially allocated to him, and he will buy it if it is originally allocated to B. This powerful insight depends on the behavioral assumption that an individual's valuation of entitlements does not depend on ownership; …

The Growing Pains Of Behavioral Law And Economics, Thomas S. Ulen

Vanderbilt Law Review

We are at the beginning of behavioral law and economics. We now see only dimly the outlines of the elaborate theory of decision making that is to come. We are like the independent scholars who examined the various parts of a very large animal and then tried to put together their reports to describe that animal; we each have bits and pieces of the elephant but no clear image of the entire beast. But we should not despair. We must remember that this behavioralist discipline is, as scholarly developments go, young. Indeed, the conventional law and economics model, to which …

Behavioral Economics, The Economic Analysis Of Bankruptcy Law And The Pricing Of Credit, Robert K. Rasmussen

Vanderbilt Law Review

Bankruptcy has been a fertile ground for the economic analysis of law. A significant portion of bankruptcy scholarship during the past fifteen years applies the basic assumptions of standard economic theory to the problems caused by financial distress. This scholarship begins with the premise that people make choices in a rational manner in order to maximize their individual utility. It applies this axiom to questions ranging from when do individuals file for bankruptcy to how bankruptcy laws affect firms' investment decisions. As it has in most other areas of law (especially private law), law and economics has both reshaped our …

Putting Rational Actors In Their Place: Economics And Phenomenology, Edward L. Rubin

Vanderbilt Law Review

The model of human behavior that is used in microeconomics is both normative and descriptive. As a normative model, it is an historical successor to the medieval concept of grace and the Renaissance concept of virtue. As a descriptive model, it is a theory of human psychology. Economists tend to deemphasize this point be- cause psychology is a notoriously "soft" science, and economists aspire to the "hard" sciences' precision. Nonetheless, any model that states the way human beings behave under specified circumstances is necessarily a theory of the way the human mind functions, and thus be- longs in the category …

Remedies And The Psychology Of Ownership, Jeffrey J. Rachlinski, Forest Jourden

Vanderbilt Law Review

It is surprising that there are cases like Boomer v. Atlantic Cement Co.I The plaintiffs in Boomer were eight homeowners seeking injunctive relief against the dust and noise produced by a neighboring cement plant, the Atlantic Cement Company. The trial court declared Atlantic Cement a nuisance, but refused to enjoin the plant's operations. Instead, the court awarded monetary damages to the plaintiffs for the loss in value to their property attributable to the defendant's activities. The dissatisfied plaintiffs appealed, but ultimately New York's highest court declared that they were not entitled to injunctive relief. That the plaintiffs sued the plant …

The Legal Implications Of Psychology: Human Behavior, Behavioral Economics, And The Law Symposium: The Legal Implications Of Psychology Human Behavior, Behavioral Economics, And The Law, Stephen D. Hurd

Vanderbilt Law Review

Nearly all interesting legal issues require accurate predictions about human behavior to be resolved satisfactorily. Judges, policy- makers, and academics invoke mental models of individual and social behavior whenever they estimate the desirability of alternative rules, policies, or procedures. Contemporary legal scholarship has come to recognize that if these predictions are naive and intuitive, without any strong empirical grounding, they are susceptible to error and ideological bias. Something more rigorous is thus expected when normative claims are advanced, and the place of the social sciences has expanded in legal discourse to satisfy this expectation.'

Three branches of the social sciences-economics, …

Can There Be A Behavioral Law And Economics?, Samuel Issacharoff

Vanderbilt Law Review

The emergence of the modern law and economics analysis generally is dated to the early 1960s with the publication of seminal work by Ronald Coase' and subsequently by Guido Calabresi and Douglas Melamed. These articles laid the foundation for the relation between legal rules, wealth maximization, and transaction costs, which provided the pivotal application of economic analysis to legal problems. However, the current sweep of law and economics would have been inconceivable without Gary Becker's insight into the application of neoclassical comparisons of marginal utility to the stuff of everyday life. Becker's analysis of routine decision making in terms of …

Behavioral Theories Of Judgment And Decision Making In Legal Scholarship: A Literature Review, Donald C. Langevoort

Vanderbilt Law Review

Nearly all interesting legal issues require accurate predictions about human behavior to be resolved satisfactorily. Judges, policy- makers, and academics invoke mental models of individual and social behavior whenever they estimate the desirability of alternative rules, policies, or procedures. Contemporary legal scholarship has come to recognize that if these predictions are naive and intuitive, without any strong empirical grounding, they are susceptible to error and ideological bias. Something more rigorous is thus expected when normative claims are advanced, and the place of the social sciences has expanded in legal discourse to satisfy this expectation.'

Three branches of the social sciences-economics, …

Comment: The Future Of Behavioral Economic Analysis Of Law, Jennifer Arlen

Vanderbilt Law Review

Behavioral economic analysis of law presents an important challenge to conventional law and economics, strengthened in part by the fact that conventional law and economics is itself a behavioral approach to law. Indeed, conventional law and economics can be viewed as the first widely-adopted behavioral approach to law. A central contribution of Ronald Coase's pathbreaking article was the claim that one cannot determine the effect of a law by simply looking at the law itself--at the conduct the law requires. Instead, one must determine how people will respond to the law.' Legal rules, he argued, do not dictate behavior-they simply …

Re-Reading Reading: "Fairness To All Persons" In The Context Of Administrative Expense Priority For Postpetition Punitive Fines In Bankruptcy, Stephen D. Hurd

Vanderbilt Law Review

Who gets the money when there isn't enough to go around? This is the practical question that the bankruptcy system seeks to answer every day.' In answering this question, the Bankruptcy Code draws a particularly bright line at the filing of a bankruptcy petition. The filing of a petition creates the bankruptcy estate, which is a distinct legal entity from the debtor. Creditors with claims against the debtor arising before filing ("prepetition) receive payment of their claim, if at all, through bankruptcy's collective distribution scheme. In contrast, persons whose claims arose after filing ("postpetition"), but before completion of the bankruptcy …

The Shifting Preemption Paradigm: Conceptual And Interpretive Issues, Karen A. Jordan

Vanderbilt Law Review

Recent decisions have signaled a subtle shift away from the Supreme Court's categorical approach to the issue of federal preemption of state law, and toward a preemption continuum in which the implied preemption theories may inform an express preemption analysis. Yet, the Court as a whole has avoided addressing the issues arising from the integration of the doctrines. In this Article, Professor Jordan explores some of these difficult issues. The conceptual issues concern when and how the implied theories should be used in an analysis involving an express preemption clause. She analyzes the Court's recent use of the implied theories …

The Nexus Of Federal And State Law In Railroad Abandonments, Marc A. Sennewald

Vanderbilt Law Review

The United States Congress embarked on a new era in the regulation of interstate commerce when it created the Interstate Commerce Commission ("ICC") in 1887 to regulate railroad traffic.' A major purpose of the ICC regulatory framework, as amended by the Transportation Act of 1920, was to preempt actions by state and local authorities that prevented railroads from abandoning unprofitable lines. When Congress passed the Transportation Act, 252,588 miles of track criss-crossed the United States; by 1990 the number of rail- way miles had decreased by almost half.

Although the relative ease with which railroads abandoned unprofitable lines augmented their …

A Theory Of Relativity: Kinship Foster Care May Be The Key To Stopping The Pendulum Of Terminations Vs. Reunification, Megan M. O'Laughlin

Vanderbilt Law Review

The foster care system in the United States is universally regarded as a disaster: too many children languishing for too many years, bouncing from foster home to foster home, or worse yet, returning to the abusive or neglectful home only to face more danger. The failures of the federal foster care system have spurred members of Congress to advocate reform.

Answering the call for reform, Congress overwhelmingly passed and, on November 19, 1997, President Clinton signed into law the Adoption and Safe Families Act of 1997 ("ASFA"). One of the primary purposes of the ASFA is to correct many of …

An Evolutionary Theory Of Corporate Law And Corporate Bankruptcy, David A. Skeel, Jr.

Vanderbilt Law Review

In this Article, Professor Skeel argues that the important recent literature exploring historical and political influences on American corporate law has neglected a crucial component of corporate governance: corporate bankruptcy. Only by appreciating the complementary relationship between corporate law and corporate bankruptcy can we understand how corporate governance operates in any given nation.

To show this, the Article contrasts American corporate governance with that of Japan and Germany. America's market-driven corporate governance can only function effectively if the bankruptcy framework includes a manager-driven reorganization option. The relational shareholding that characterizes Japanese and German corporate governance, by contrast, requires a much …

The Common Law "Duty To Serve" And Protection Of Consumers In An Age Of Competitive Retail Public Utility Restructuring, Jim Rossi

Vanderbilt Law Review

People like young Montray Cadet and his family will increasingly face the possibility of shut-off and limited access to utility services, such as telecommunications, natural gas, and electricity, as these industries-traditionally subject to obligations to serve customers-are deregulated. Already, the natural gas industry's introduction of retail competition in states like New York has been alleged to adversely affect the quality of and access to gas, essential to many New Yorkers for heating, and has led to the filing of a lawsuit against the state by consumer advocates.

Can vigorous retail competition of the type public utility deregulation envisions coexist with …

The Globalizing State, Alfred C. Aman, Jr.

Vanderbilt Journal of Transnational Law

he primary purpose of this Article is to consider the relationship of globalization to domestic law, a topic that, for the most part, has been neglected by the legal literature to date. In so doing, this Article shall develop the concept of the globalizing state, a theory of the state based on states' new roles in furthering global competitiveness, as well as the transformative effects of these new roles on the state itself. This Article refers to globalization as an interpretive approach to issues no longer classifiable--or even understandable--in terms of classic dichotomies of domestic and global, public and private, …

The European Union's Common Foreign And Security Policy: It Is Not Far From Maastricht To Amsterdam, Daniel T. Murphy

Vanderbilt Journal of Transnational Law

The radical shift in and expansion of the concepts of European law wrought by the now more than five-year-old Treaty on European Union (TEU) are not fully appreciated in the United States. Until the TEU of 1992, European law was bounded by the reasonably well-defined and understood contours of the Treaty of Rome and its amendments. The expressly political TEU added new dimensions to European law, the relationships among the Member States, and the scope of activities to be pursued by the European Union. This expansion was accomplished through, among other provisions, (1) the TEU's monetary union provisions; (2) its …

Lest We Forget: Buchanan V. Warley And Constitutional Jurisprudence Of The "Progressive Era", Richard A. Epstein

Vanderbilt Law Review

The two principal papers in this collection are devoted to an analysis of one of the Supreme Court's landmark decisions of the Progressive era, Buchanan v. Warley.' Both David Bernstein and Michael Klarman reveal ambitions that go beyond a single case, as each discusses in detail a large part of the Progressive era jurisprudence on race relations that set the stage for Buchanan v. Warley. A short introduction is hardly the place to quibble with these papers on points of detail. But it is the place to raise one neglected theme that requires fresh emphasis. The constitutional jurisprudence that led …

Progressive Era Race Relations Cases In Their "Traditional" Context, Mark V. Tushnet

Vanderbilt Law Review

The pioneering African-American historian Rayford Logan called the early years of the Progressive era the "nadir" of race relations in the United States. Historians and political scientists who study the Supreme Court generally agree that Supreme Court decisions are rarely substantially out of line with the kind of sustained national consensus regarding race relations that Logan described. Professors Bernstein and Karman point to popular culture, including the roaring success of D.W. Griffith's epic Birth of a Nation attacking Reconstruction and defending the Ku Klux Klan, and elite opinion such as the flourishing of scientific racism to demonstrate that there was …

Race And The Court In The Progressive Era, Michael J. Klarman

Vanderbilt Law Review

In the second decade of the twentieth century, the Supreme Court decided four prominent (groups of) cases involving race. On each occasion, the civil rights claim won in some significant sense. One set of cases involved so-called peonage legislation-laws that coerced (primarily) black labor. In Bailey v. Alabama, the Court invalidated under the federal Peonage Act of 18672 and the Thirteenth Amendment an Alabama law making it a crime to enter, with fraudulent intent, into a labor contract that provided for advance payment of wages; the law made breach of the contract prima facie evidence of fraudulent intent, and Alabama …

Securities Fraud Or Mere Puffery: Refinement Of The Corporate Puffery Defense, R. Gregory Roussel

Vanderbilt Law Review

A corporation's use of forward-looking corporate statements' is a common, arguably essential, element of the landscape of modern financial markets. Unfortunately, the failure to meet the expectations created by forward-looking statements often serves as the basis for a potentially devastating private action for securities fraud. Before Congress responded to frivolous private securities fraud class actions with the Private Securities Litigation Reform Act of 1995, ("Reform Act") the judiciary took it upon itself to provide relief to burdened corporations. In doing so, the courts focused on the materiality of the corporation's statements, an essential building block in the plaintiffs construction of …

Philip Sober Controlling Philip Drunk: "Buchanan V. Warley" In Historical Perspective, David E. Bernstein

Vanderbilt Law Review

In Buchanan v. Warley the Supreme Court found that a Louisville, Kentucky, residential segregation ordinance was unconstitutional because it interfered with the Fourteenth Amendment right to own and dispose of property and could not be justified as a police power measure.' The Buchanan decision came at a crucial juncture in the history of American race relations. Several cities in the southern and border states had recently passed residential segregation ordinances, and other cities were poised to follow suit if the Supreme Court ruled that such ordinances were constitutional. Several northern cities were considering adopting residential segregation laws as well,' and …

Why Judicial Reversal Of Apartheid Made A Difference, William A. Fischel

Vanderbilt Law Review

Did Buchanan v. Warley' have any practical effect on the economic well-being of black Americans? Michael Klarman argues that it did not, since the enforcement of racial segregation proceeded along other lines, such as regular zoning, racial covenants, informal discrimination, and unofficial violence. David Bernstein disagrees in part with Kiarman's conclusion. He argues that Buchanan v. Warley effectively made more housing available to blacks in urban areas, even if it did not promote racial integration.

I second Bernstein's conclusion by putting Buchanan in the context of the urban-economics theory of housing segregation. Because Buchanan helped blacks gain a foothold, albeit …

Reflections On "Buchanan V. Warlcy," Property Rights, And Race, James W. Ely, Jr.

Vanderbilt Law Review

The landmark decision of Buchanan v. Warley' has long deserved greater attention from scholars. Decided during the so-called Progressive Era, when segregationist attitudes were at full tide, Buchanan combined judicial protection of individual property rights with solicitude for racial minorities. Indeed, Buchanan represents both the resolute defense of property owners' rights against regulation and the most significant judicial victory for civil rights during the early decades of the twentieth century.

One can only speculate about the lack of scholarly interest in Buchanan. Possibly, the dual nature of Buchanan has made it difficult for scholars to assess. Perhaps the property-centered focus …

Speech, Service And Sex: The Limits Of First Amendment Protection Of Sexual Expression In The Military, Ross G. Shank

Vanderbilt Law Review

Since the close of the Gulf War, the United States's military organs have endured the exposure of a rash of sex-related scandals. These embarrassments have run the gamut from alarming charges of abuse of power in integrated training environments to the sensationalized, adultery-related discharge of the Air Force's first female bomber pilot. In response, Congress has reconsidered the vexing issues presented by recently adopted policies that have changed the roles of gender and sexual preference in the military. Lawmakers have entertained a wide variety of suggested remedies. At one extreme, Representative Barney Frank proposed lifting entirely the existing ban on …

Equitable Estoppel And The Outer Boundaries Of Federal Arbitration Law: The Alabama Supreme Court's Retrenchment Of An Expansive Federal Policy Favoring Arbitration, David F. Sawrie

Vanderbilt Law Review

A consumer purchases a manufactured home from a commercial vendor.' As part of the commercial transaction, the consumer and vendor execute a sales agreement containing the following arbitration clause: "All disputes, claims, or controversies arising from or relating to this Contract or the relationships which result from this Contract... shall be resolved by binding arbitration .... ,, The manufacturer of the home is not a party to the sales contract. Rather, the manufacturer issues a separate warranty agreement in connection with the consumer's purchase.

When the consumer discovers defects in the home, the consumer sues both the commercial vendor and …

Coping With "Loss": A Re-Examination Of Sentencing Federal Economic Crimes Under The Guidelines, Frank O. Bowman, Iii

Vanderbilt Law Review

The primary determinant of sentence length for federal economic criminals is the amount of "loss" resulting from an offender's conduct.' The idea of basing sentences for economic crimes primarily on "loss" has become the source of ongoing, complex, and proliferating disputes about what the term "loss" really means and how it should be interpreted in particular cases. The "loss" calculation is one of the most frequently litigated issues in federal sentencing law. There are at present splits of opinion between the federal circuits on at least eleven analytically distinct issues concerning the meaning and application of the "loss" concept. Even …

Introduction: Current Issues In Arbitration, Shannon E. Pinkston

Vanderbilt Law Review

"[An incompetent attorney can delay a case for years, while a competent attorney can delay it for even longer."'

This oft-repeated joke illustrates the public perception of the delays and expense that accompany courtroom litigation. Indeed, growing frustration with crowded courts and exorbitant legal costs fuels the widespread Alternative Dispute Resolution ("ADR") movement. Notwithstanding the dramatic increase in its use, ADR, defined as "procedures for settling disputes by means other than litigation," is not a novel idea. In fact, ADR was present in America as early as the seventeenth century. In certain parts of colonial America, voluntary arbitration was a …

Restrictions On Forum-Selection Clauses In Franchise Agreements And The Federal Arbitration Act: Is State Law Preempted?, James Zimmerman

Vanderbilt Law Review

The use of forum-selection clauses in contracts continues to increase. Emboldened by the Supreme Court's endorsement of forum- selection clauses, large companies now frequently use these clauses in a variety of contracts. Contracting parties use these clauses in part to ensure that the parties can resolve any dispute in a convenient forum. Often, however, a party inserts a forum-selection clause to limit liability by increasing the barriers to litigation or arbitration. Typically, the party inserting the forum-selection clause has superior bargaining power and inserts into the contract a clause designating a forum remote to the other party, where any dispute …

Compulsory Arbitration Agreements In Employment Contracts From Gardner-Denver To Austin: The Legal Uncertainty And Why Employers Should Choose Not To Use Preemployment Arbitration Agreements, John-Paul Motley

Vanderbilt Law Review

In Gilmer v. Interstate/Johnson Lane Corp. the Supreme Court enforced a mandatory arbitration clause in a securities registration application and barred the employee from seeking relief in federal court for his Age Discrimination in Employment Act ("ADEA") claim.' Since the Court's decision compelling arbitration of an employee's statutory claim, labor and employment lawyers have encouraged employers to include binding arbitration clauses covering all potential employer-employee claims in employment applications, handbooks, and collective bargaining agreements ("CBAs"). As one commentator wrote after the Gilmer decision, "[t]he only thing remaining is for employers to begin writing compulsory arbitration clauses into their employment contracts." …