Law Commons^™

The In Rem/In Personam Distinction And Partitioning For Persistence, Shyamkrishna Balganesh, Leo Katz

Faculty Scholarship

In the second of his two famous articles, Hohfeld seeks to do for the in rem/in personam distinction what he did so persuasively in his first for the terminology of rights, claims, duties, privileges, powers, immunities, and disabilities, which was to identify their essence, and to thereby describe the “natural kind” (in more modern parlance) lurking beneath the thicket of confused juristic rhetoric. The thesis in this second article, however, is a simpler and in some way more beguiling one than in his first. He claims that what the distinction between in rem and in personam jural relations comes down …

The Compensation Constraint And The Scope Of The Takings Clause, Thomas W. Merrill

Faculty Scholarship

The idea I wish to explore in this Essay is whether the established methods for determining just compensation can shed light on the meaning of other issues that arise in litigation under the Takings Clause. Specifically, is it possible to “reverse engineer” the Takings Clause by reasoning from settled understandings about how to determine just compensation in order to reach certain conclusions about when the Clause applies, what interests in private property are covered by the Clause, and what does it mean to take such property?

The proposed exercise is positive or descriptive in nature rather than normative. The hypothesis …

Classical Liberal Property And The Question Of Institutional Choice, Thomas W. Merrill

Faculty Scholarship

Richard Epstein’s property scholarship tracks his classical liberal theory of government. The classical liberal would permit state intervention to overcome collective-action problems but not to engage in redistribution of wealth. With respect to private law, Epstein harbors no clear preference for either the legislature or the courts as a source of limits on owners’ autonomy to overcome collective-action problems. With regard to public law, in contrast, Epstein would elevate the courts to a superior status relative to legislatures and would have courts enforce the classical liberal ideal as a matter of constitutional law. This article questions whether giving such power …

Do Legal Origins Predict Legal Substance?, Anu Bradford, Yun-Chien Chang, Adam S. Chilton, Nuno Garoupa

Faculty Scholarship

There is a large body of research in economics and law suggesting that the legal origin of a country – that is, whether its legal regime is based on English common law or French, German, or Nordic civil law – profoundly impacts a range of outcomes. However, the exact relationship between legal origin and legal substance has been disputed in the literature and not fully explored with nuanced legal coding. We revisit this debate while leveraging novel cross-country data sets that provide detailed coding of two areas of laws: property and antitrust. We find that having shared legal origins strongly …

Property Transitions, Michael A. Heller

Faculty Scholarship

Time plays a key role in this book. The last two chapters discussed two reasons why time matters to the life of property: over time, owners effect voluntary changes to property in order to carry out their life plans and the state imposes involuntary changes (from the individual owner’s perspective) in response to changing circumstances, shifting needs and wants, and revised public goals. For the state to function – and to remain justified on liberal principles – the government must have this ability to adjust ownership. However, state-initiated transitions to ownership – implemented through governments’ police and takings powers – …

The Eagle Theory, Thomas W. Merrill

Faculty Scholarship

This Article evaluates three interpretations of the Takings Clause capable of generating a regulatory takings doctrine. The first, the Epstein interpretation, puts primary emphasis on what it means to provide “just compensation” for takings; the second, the Penn Central interpretation, centers on what it means to “take” property; the third, which I call the Eagle theory, in honor of Steven Eagle, this year’s Brigham-Kanner prize recipient, focuses on when the government has taken “private property.” The Article argues that the Eagle theory has the most plausible basis in the original understanding of the Takings Clause, rests on a theory about …

I Promise To Pay, Joshua Mitts

Faculty Scholarship

Consumers are more likely to keep a repayment promise they make themselves. When a scheduling conflict prevents a borrower from attending a mortgage closing, a power of attorney (POA) empowers a third party to promise that the borrower will repay the loan. On a matched sample of POA and non-POA loans, and comparing within borrower and within property, I link POAs to greater delinquency and foreclosure. Although POAs are uncorrelated with cash flow shocks, they reflect reduced promise keeping when borrowers undergo financial distress. This association vanishes for originator-servicers’ loans, which suggests that financial intermediation plays a role in consumer …

The Architecture Of Property, Thomas W. Merrill, Henry E. Smith

Faculty Scholarship

Avoiding the reduction of property to a bundle or rights or to the working out of a single master principle, the architectural theory of property sees property as an integrated system or structure anchored in certain unifying principles. Because our world is neither chaotic nor additiviely simple, property law and institutions must achieve their plural ends in a fashion that manages the inherent complexity of the interaction of valued resource attributes and human actions. In managing complexity, some of the law’s structures receive functional explanations and justifications, which can be different from the explanations and justifications that apply to the …

Divergence And Convergence At The Intersection Of Property And Contract, Giuseppe Dari-Mattiacci, Carmine Guerriero

Faculty Scholarship

In this Article, we study rules that solve the conflict between the original owner and an innocent buyer of a stolen or embezzled good. These rules balance the protection of the original owner’s property and the buyer’s reliance on contractual exchange, thereby addressing a fundamental legal and economic trade-off. Our analysis is based on a unique, hand-collected dataset on the rules in force in 126 countries. Using this data, we document and explain two conflicting trends. There is a large amount of first-order divergence: both rules that apply to stolen goods and those that apply to embezzled goods vary widely …

Choice Of Law In Takings Cases, Thomas W. Merrill

Faculty Scholarship

This Article considers what law should apply in resolving subsidiary questions that arise in the course of deciding takings cases under federal constitutional law. It argues that there are three choices: federal constitutional law, state law, or a federal-patterning definition that lays down certain general parameters as a matter of federal constitutional law but otherwise follows state law if it is consistent with these parameters. The article illustrates these choices by considering a recent Supreme Court decision, Murr v. Wisconsin, which held that the horizontal dimensions of a “parcel of land” should be determined, for takings purposes, as a …

Stock Market Futurism, Merritt B. Fox, Gabriel Rauterberg

Faculty Scholarship

The U.S. stock market is undergoing extraordinary upheaval. The approval of the application of the Investors Exchange (IEX) to become the nation’s newest stock exchange, including its famous “speed bump,” was one of the SEC’s most controversial decisions in decades. Other exchanges have proposed a raft of new innovations in its wake. This evolving equity market is a critical piece of national infrastructure, but the regulatory scheme for its institutions is increasingly frayed. In particular, current regulation draws sharp distinctions among different kinds of markets for trading stocks, treating stock exchanges as self-regulatory organizations immune from private civil litigation, while …

Formalization, Possession, And Ownership, Thomas W. Merrill

Faculty Scholarship

This paper is a comment on the work of Hernando de Soto, who has done so much to highlight the importance of property rights, especially in the context of what I will call migrant communities within developing countries. These are the shantytowns of Peru, the favelas of Brazil, and the bidonvilles of Haiti. De Soto characterizes these communities as “extralegal zones.” They consist, in his words, of “modest homes cramped together on city perimeters, a myriad of workshops in their midst, armies of vendors hawking their wares on the streets, and countless crisscrossing minibus lines.” I am interested in de …

Property And Sovereignty, Information And Audience, Thomas W. Merrill

Faculty Scholarship

Morris Cohen’s classic essay, Property and Sovereignty, correctly discerned that political sovereignty and private property are alternative forms of government. Where it failed was in suggesting that the choice between these modes of governance is a matter of dialing one up and the other down. The relationship between political sovereignty and property is complex, and varies depending on the audience of property we have in view. With respect to some audiences – strangers and transactors – those who favor a strong system of property will want to enlist a generous measure of assistance from the political sovereign. With respect to …

Ownership And Possession, Thomas W. Merrill

Faculty Scholarship

One of the enduring mysteries about property is why the law protects both ownership and possession. In a pre-modern world, with low rates of literacy and no formal method of registering titles, one can understand why the law would protect possession. In such a world, there may be no concept of property beyond the understanding that persons should respect possessory rights established by others. It is less clear why possession should be protected once property comes to be understood as ownership. Ownership and possession will commonly overlap, and protecting ownership will protect possession. Nevertheless, even in the most sophisticated legal …

Introduction: Toward Voice And Reflexivity, Olivier De Schutter, Katharina Pistor

Faculty Scholarship

In their introductory chapter, De Schutter and Pistor argue that in light of increasing absolute and relative scarcity of land and fresh water there is urgent need to improve the governance of these and other essential resources. Emphasizing “essentiality” shifts the debate from allocative efficiency to normative concerns of equity and dignity. Essential resources are indispensable for survival and/or for meaningful participation in a given community. Their allocation therefore cannot be left to the pricing mechanism alone. It requires new parameters for governance. The authors propose Voice and Reflexivity as the key parameters of such a regime. Voice is …

Posession As A Natural Right, Thomas W. Merrill

Faculty Scholarship

What follows is, I hope, a tribute both to Friedrich Hayek, for whom this lecture series is named, and Richard Epstein, who was kind enough to invite me to give the lecture. Hayek has long been an inspiration for his insights about the advantages of decentralized decision making and the importance of information in understanding design of institutions. Both are recurring themes in my own work. Richard was my teacher at the University of Chicago Law School and has been a guiding light ever since. His works on nuisance law, takings, and the public trust doctrine, among others, have had …

Anticipatory Remedies For Takings, Thomas W. Merrill

Faculty Scholarship

The Supreme Court has rendered two lines of decisions about the remedies available for a violation of the Takings Clause. One line holds that courts have no authority to enter anticipatory decrees in takings cases if the claimant can obtain compensation elsewhere. The other line, which includes three of the Court's most recent takings cases, results in the entry of an anticipatory decree about takings liability. This Essay argues that the second line is the correct one. Courts should be allowed to enter declaratory or other anticipatory judgments about takings liability, as long as they respect the limited nature of …

Why Restate The Bundle? The Disintegration Of The Restatement Of Property, Thomas W. Merrill, Henry E. Smith

Faculty Scholarship

The American Law Institute (ALI) has devoted a great deal of time and energy to restating the law of property. To date, the ALI has produced 17 volumes that bear the name First, Second, or Third Restatement of Property. There is unquestionably much that is valuable in these materials. On the whole, however, the effort has been a disappointment. Some volumes seek faithfully to restate the consensus view of the law; others are transparently devoted to law reform. The ratio of reform to restatement has increased over time, to the point where significant portions of the Third Restatement …

Mortgage Modification And Strategic Behavior: Evidence From A Legal Settlement With Countrywide, Christopher Mayer, Edward R. Morrison, Tomasz Piskorski, Arpit Gupta

Faculty Scholarship

We investigate whether homeowners respond strategically to news of mortgage modification programs. We exploit plausibly exogenous variation in modification policy induced by settlement of U.S. state government lawsuits against Countrywide Financial Corporation, which agreed to offer modifications to seriously delinquent borrowers. Using a difference-in-difference framework, we find that Countrywide's monthly delinquency rate increased more than 0.54 percentage points – ten percent relative increase – immediately after the settlement's announcement. The estimated increase in default rates is largest among borrowers least likely to default otherwise. These results suggest that strategic behavior should be an important consideration in designing mortgage modification programs.

Coasean Bargaining In Consumer Bankruptcy, Edward R. Morrison

Faculty Scholarship

During my first weeks as a graduate student in economics, a professor described the Coase Theorem as “nearly a tautology:” Assume a world in which bargaining is costless. If there are gains from trade, the Theorem tells us, the parties will trade. The initial assignment of property rights will not affect the final allocation because the parties will bargain (costlessly) to an efficient outcome. “How can that be a theorem?,” I remember thinking at the time.

Property And The Right To Exclude Ii, Thomas W. Merrill

Faculty Scholarship

In 1998 I published a short essay entitled Property and the Right to Exclude. It appeared in an issue of the Nebraska Law Review honoring Lawrence Berger, a long-time property professor at Nebraska. The essay has been rather widely cited, but I have my doubts as to whether it has been widely read. A review of citations in Westlaw suggests that the essay is commonly identified as arguing that the right to exclude is the "sine qua non" of property, a statement that appears in the opening paragraph. The typical citing author takes this to mean that …

Contested Shore: Property Rights In Reclaimed Land And The Battle For Streeterville, Joseph D. Kearney, Thomas W. Merrill

Faculty Scholarship

Land reclaimed from navigable waters is a resource uniquely susceptible to conflict. The multiple reasons for this include traditional hostility to interference with navigable waterways and the weakness of rights in submerged land. In Illinois, title to land reclaimed from Lake Michigan was further clouded by a shift in judicial understanding in the late nineteenth century about who owned the submerged land, starting with an assumption of private ownership but eventually embracing state ownership. The potential for such legal uncertainty to produce conflict is vividly illustrated by the history of the area of Chicago known as Streeterville, the area of …

Some Pluralism About Pluralism: A Comment On Hanoch Dagan's "Pluralism And Perfectionism In Private Law", Jedediah S. Purdy

Faculty Scholarship

Hanoch Dagan is among “those who think it advantageous to get as much ethics into the law as they can,” in the phrase of Oliver Wendell Holmes, Jr. His pluralism is a perfectionism for polytheists: There are many human goods, and each has its domain, including some portion of the law of property. Depending on where we stand on the property landscape at any time, we may be community-minded sharers, devoted romantics in marriage, or coolly rational market actors, and the local property law will smooth each of these paths for us. Property law is built on the design of …

The Character Of The Governmental Action, Thomas W. Merrill

Faculty Scholarship

Penn Central Transportation Co. v. New York City holds a secure position in the architecture of the regulatory takings doctrine. That doctrine is at bottom a tool for distinguishing between different governmental powers; in particular, between the power of eminent domain and the police power. Because eminent domain requires that compensation be paid, whereas the police power does not, it is necessary to draw a line between these powers. Conceivably we could simply take the legislature at its word as to which power it is exercising. But at least since Pennsylvania Coal Co. v. Mahon, the Supreme Court has insisted …

The Property Strategy, Thomas W. Merrill

Faculty Scholarship

My objective in this Article is to offer a description of property as an institution for organizing the use of resources in society. There are several strategies for deciding how valued things will be used, and by whom. “Might makes right” is one approach: we can let a strongman decide these questions. Bureaucratic governance is another: we can create a hierarchical organization and adopt rules and procedures for allocating resources. Group consensus is a third: questions about resource use can be resolved through meetings and discussion among those most closely involved. The claim advanced here is that property is a …

Property As Modularity, Thomas W. Merrill

Faculty Scholarship

Professor Henry Smith’s Property as the Law of Things urges a return to an older conception of property as rights with respect to things – and justifies this in terms of a very new conception of property based on modularity. Throughout, he highlights the importance of information costs in determining the structure of property law, starting with a baseline of in rem rights of exclusion supplemented by governance rules to deal with exceptional situations. I fully agree with his emphasis on the centrality of things in the law of property, the in rem nature of property, the primacy of exclusion …

Contesting Property Rights: Towards An Integrated Theory Of Institutional And System Change, Katharina Pistor

Faculty Scholarship

It is widely recognized that institutions are embedded in social systems and that institutions as well as social systems change over time. Several implications follow: First, institutions cannot be described and analyzed without referring to the system in which they operate; conversely, a system cannot be described without reference to its core institutions. Second, systems foster institutional change and can breed new institutions. Third, institutional change can have systemic implications and may even engender the formation of new systems. In short, the relation between institutions and systems is characterized by complex interactions. A better understanding of the dynamics of institutional …

Making Coasean Property More Coasean, Thomas W. Merrill, Henry E. Smith

Faculty Scholarship

In his pioneering work on transaction costs, Ronald Coase presupposed a picture of property as a bundle of government-prescribed use rights. Not only is this picture not essential to Coase’s purpose, but its limitations emerge when we apply Coase’s central insights to analyze the structure of property itself. This leads to the Coase corollary: in a world of zero transaction costs, the nature of property does not matter to allocative efficiency. However, as with the Coase theorem, the real implication is for our world of positive transaction costs: we need to subject the notion of property to a comparative institutional …

Melms V. Pabst Brewing Co. And The Doctrine Of Waste In American Property Law, Thomas W. Merrill

Faculty Scholarship

Melms v. Pabst Brewing Co. may be the most important decision ever rendered by an American court concerning the law of waste. Unless your specialty is property law, that might not be enough to stir your interest. The doctrine of waste, after all, does not loom very large in public consciousness these days.

Nevertheless, waste has held a peculiar fascination for property theorists. The reason, I think, is that it touches directly on an important line of division in how we think about property. Does property exist primarily to protect the subjective expectations that particular owners have in particular things? …

Gridlock Economy: How Too Much Ownership Wrecks Markets, Stops Innovation, And Costs Lives (Introduction), Michael A. Heller

Faculty Scholarship

Twenty-five new runways would eliminate most air travel delays in America; fifty patent owners are blocking a major drug company from creating a cancer cure; 90 percent of our broadcast spectrum sits idle while American cell phone service suffers. These problems have solutions that can jump-start innovation and help save our troubled economy. So, what's holding us back?