Law Commons^™

Moral Diversity And Efficient Breach, Matthew A. Seligman

Michigan Law Review

Most people think it is morally wrong to breach a contract. But sophisticated commercial parties, like large corporations, have no objection to breaching contracts and paying the price in damages when doing so is in their self-interest. The literature has ignored the profound legal, economic, and normative implications of that asymmetry between individuals’ and firms’ approaches to breach. To individuals, a contract is a promise that cannot be broken regardless of the financial stakes. For example, millions of homeowners refused to breach their mortgage contracts in the aftermath of the housing crisis even though doing so could have saved them …

Regulating Black-Box Medicine, W. Nicholson Price Ii

Michigan Law Review

Data drive modern medicine. And our tools to analyze those data are growing ever more powerful. As health data are collected in greater and greater amounts, sophisticated algorithms based on those data can drive medical innovation, improve the process of care, and increase efficiency. Those algorithms, however, vary widely in quality. Some are accurate and powerful, while others may be riddled with errors or based on faulty science. When an opaque algorithm recommends an insulin dose to a diabetic patient, how do we know that dose is correct? Patients, providers, and insurers face substantial difficulties in identifying high-quality algorithms; they …

Complexity's Shadow: American Indian Property, Sovereignty, And The Future, Jessica A. Shoemaker

Michigan Law Review

This Article offers a new perspective on the challenges of the modern American Indian land tenure system. While some property theorists have renewed focus on isolated aspects of Indian land tenure, including the historic inequities of colonial takings of Indian lands, this Article argues that the complexity of today’s federally imposed reservation property system does much of the same colonizing work that historic Indian land policies—from allotment to removal to termination—did overtly. But now, these inequities are largely overshadowed by the daunting complexity of the whole land tenure structure. This Article introduces a new taxonomy of complexity in American Indian …

Forcing Patent Claims, Tun-Jen Chiang

Michigan Law Review

An enormous literature has criticized patent claims for being ambiguous. In this Article, I explain that this literature misunderstands the real problem: the fundamental concern is not that patent claims are ambiguous but that they are drafted by patentees with self-serving incentives to write claims in an overbroad manner. No one has asked why the patent system gives self-interested patentees the leading role in delineating the scope of their own patents. This Article makes two contributions to the literature. First, it explicitly frames the problem with patent claims as one of patentee self-interest rather than the intrinsic ambiguity of claim …

Comparative Effectiveness Research As Choice Architecture: The Behavioral Law And Economics Solution To The Health Care Cost Crisis, Russell Korobkin

Michigan Law Review

With the Patient Protection and Affordable Care Act (“ACA”) set to dramatically increase access to medical care, the problem of rising costs will move center stage in health law and policy discussions. “Consumer directed health care” proposals, which provide patients with financial incentives to equate marginal costs and benefits of care at the point of treatment, demand more decisionmaking ability from consumers than is plausible due to bounded rationality. Proposals that seek to change the incentives of health care providers threaten to create conflicts of interest between doctors and patients. New approaches are desperately needed. This Article proposes a government-facilitated …

A Financial Economic Theory Of Punitive Damages, Robert J. Rhee

Michigan Law Review

This Article provides a financial economic theory of punitive damages. The core problem, as the Supreme Court acknowledged in Exxon Shipping Co. v. Baker, is not the systemic amount of punitive damages in the tort system; rather it is the risk of outlier outcomes. Low frequency, high severity awards are unpredictable, cause financial distress, and beget social cost. By focusing only on offsetting escaped liability, the standard law and economics theory fails to account for the core problem of variance. This Article provides a risk arbitrage analysis of the relationship between variance, litigation valuation, and optimal deterrence. Starting with settlement …

Efficient Breach Of International Law: Optimal Remedies, 'Legalized Noncompliance,' And Related Issues, Eric A. Posner, Alan O. Sykes

Michigan Law Review

In much of the scholarly literature on international law, there is a tendency to condemn violations of the law and to leave it at that. If all violations of international law were indeed undesirable, this tendency would be unobjectionable. We argue in this Article, however that a variety of circumstances arise under which violations of international law are desirable from an economic standpoint. The reasons why are much the same as the reasons why nonperformance of private contracts is sometimes desirable- the concept of "efficient breach," familiar to modern students of contract law, has direct applicability to international law. As …

Private Production Of Public Goods: Liability For Unrequested Benefits, Ariel Porat

Michigan Law Review

This Article explores why the law treats negative externalities (harms) and positive externalities (benefits) differently. Ideally, from an economic perspective, both negative and positive externalities should be internalized by those who produce them, for with full internalization, injurers and benefactors alike would behave efficiently. In actuality, however, whereas the law requires that injurers bear the harms they create (or wrongfully create), benefactors are seldom entitled to recover for benefits they voluntarily confer on recipients without the latter's consent ( "unrequested benefits"). One aim of this Article is to explore the puzzle of the law's differing treatment of negative and positive …

Understanding Pleading Doctrine, A. Benjamin Spencer

Michigan Law Review

Where does pleading doctrine, at the federal level, stand today? The Supreme Court's revision of general pleading standards in Bell Atlantic Corp. v. Twombly has not left courts and litigants with a clear or precise understanding of what it takes to state a claim that can survive a motion to dismiss. Claimants are required to show "plausible entitlement to relief' by offering enough facts "to raise a right to relief above the speculative level." Translating those admonitions into predictable and consistent guidelines has proven illusory. This Article proposes a descriptive theory that explains the fundaments of contemporary pleading doctrine in …

A Comparative Fault Defense In Contract Law, Ariel Porat

Michigan Law Review

This Article calls for the recognition of a comparative fault defense in contract law. Part I sets the framework for this defense and suggests the situations in which it should apply. These situations are sorted under two headings: cases of noncooperation and cases of overreliance. Part II unfolds the main argument for recognizing the defense and recommends applying the defense only in cases where cooperation or avoidance of overreliance is low cost.

The Role Of Fault In Contract Law: Unconscionability, Unexpected Circumstances, Interpretation, Mistake, And Nonperformance, Melvin Aron Eisenberg

Michigan Law Review

It is often asserted that contract law is based on strict liability, not fault. This assertion is incorrect. Fault is a basic building block of contract law, and pervades the field. Some areas of contract law, such as unconscionability, are largely fault based. Other areas, such as interpretation, include sectors that are fault based in significant part. Still other areas, such as liability for nonperformance, superficially appear to rest on strict liability, but actually rest in significant part on the fault of breaking a promise without sufficient excuse. Contract law discriminates between two types of fault: the violation of strong …

When Is A Willful Breach "Willful"? The Link Between Definitions And Damages, Richard Craswell

Michigan Law Review

The existing literature on willful breach has not been able to define what should count as "willful." I argue here that any definition we adopt has implications for just how high damages should be raised in those cases where a breach qualifies as willful. As a result, both of these issues-the definition of "willful," and the measure of damages for willful breach-need to be considered simultaneously. Specifically, if a definition of "willful" excludes all breachers who behaved efficiently, then in theory we can raise the penalty on the remaining inefficient breachers to any arbitrarily high level ("throw the book at …

Unity And Pluralism In Contract Law, Nathan Oman

Michigan Law Review

It is a cliché of contemporary legal scholarship that, in the last few decades, the study of law has witnessed a vast proliferation of competing theoretical approaches. The old faith in the careful honing of doctrinal concepts and the essential usefulness of legal analysis has given way to a cacophony of competing theoretical sects. Economists, moral philosophers, sociologists, historians, and others have stepped forward to offer the insights of this or that discipline as a new and superior path to legal enlightenment. Perhaps nowhere has this cliché been truer than in the realm of contracts scholarship, where, for a generation, …

The Indulgence Of Reasonable Presumptions: Federal Court Contractual Civil Jury Trial Waivers, Joel Andersen

Michigan Law Review

Large institutions such as banks, franchisers, international companies, and lessors distrust juries' ability to properly resolve disputes and award reasonable damages. As a result, these and other actors have attempted to limit juries' potential influence on the contracts to which they are parties. They have done so through contractual jury trial waiver clauses in these agreements. The Seventh Amendment to the Constitution guarantees the jury trial right. Whether the right is determined to exist in an individual instance is a matter of federal common law, which merely preserves the jury trial right as it existed when the Amendment was adopted …

Pragmatism Regained, Christopher Kutz

Michigan Law Review

Jules Coleman's The Practice of Principle serves as a focal point for current, newly intensified debates in legal theory, and provides some of the deepest, most sustained reflections on methodology that legal theory has seen. Coleman is one of the leading legal philosophers in the Anglo-American world, and his writings on tort theory, contract theory, the normative foundations of law and economics, social choice theory, and analytical jurisprudence have been the point of departure for much of the most interesting activity in the field for the last three decades. Indeed, the origin of this book lies in Oxford University's invitation …

The Anticompetitive Effect Of Passive Investment, David Gilo

Michigan Law Review

There are many cases in which a firm passively invests in its competitor. For example, Microsoft passively invested in $150 million worth of the nonvoting stock of Apple, its historic rival in the operating systems market. Also, in November 1998, Northwest Airlines, the nation's fourth-largest airline, purchased 14% of the common stock of Continental Airlines Inc., the nation's fifth-largest (and fastest growing) airline. Northwest competes with Continental on seven routes, serving 3.6 million passengers per year. In another example, TCI, the nation's largest cable operator, became a passive investor with a 9% stake (which can be increased, under the terms …

Takings, Efficiency, And Distributive Justice: A Response To Professor Dagan, Glynn S. Lunney Jr.

Michigan Law Review

In A Critical Reexamination of the Takings Jurisprudence, I addressed an efficiency problem that arises when the government attempts to change property rights in a manner that burdens a very few for the benefit of the very many. Specifically, in the absence of compensation, the collective action advantage of the few in organizing to oppose the proposed measure will often give them a decided edge against the many. As a result of that advantage, the few will too often be able to persuade the legislature not to act, even when an objective evaluation of the proposal's costs and benefits would …

Resolving Transnational Insolvencies Through Private Ordering, Robert K. Rasmussen

Michigan Law Review

There is no international bankruptcy law. No question, there are international insolvencies. Transnational firms, just like domestic ones, often cannot generate sufficient revenue to satisfy their debt obligations. Their financial distress creates a situation where assets and claimants are scattered across more than one country. But there is no international law that provides a set of rules for resolving the financial distress of these firms. The absence of any significant free-standing international bankruptcy treaty means that a domestic court confronted with the domestic part of a transnational enterprise has to decide which nation's domestic bankruptcy law will apply to which …

Zen And The Art Of Jursiprudence, Matthew K. Roskoski

Michigan Law Review

Lawyer bashing is by no means a remarkable phenomenon. It was not remarkable when Shakespeare wrote, "[t]he first thing we do, let's kill all the lawyers," and it's not remarkable today. Paul Campos, however, has written a particularly readable example, blending venerable Western lawyer-bashing and pop psychology with unsystematic invocations of Eastern religion. Jurismania is named after Campos's theory that the American legal system has a lot in common with a person suffering from an obsessive-compulsive disorder, an addiction to law that does neither the patient nor those around him much good. In Jurismania, Campos criticizes our insistence on regulating …

The Origin, Development, And Regulation Of Norms, Richard H. Mcadams

Michigan Law Review

For decades, sociologists have employed the concept of social norms to explain how society shapes individual behavior. In recent years, economists and rational choice theorists in philosophy and political science have started to use individual behavior to explain the origin and function of norms. For many in this group, the focus of study is the interaction of law and norms, of formal and informal rules. Exemplified by Robert Ellickson's Order Without Law, this literature uses norms to develop more robust explanations of behavior and to predict more accurately the effect of legal rules. Norms turn out to matter in legal …

Can Ignorance Be Bliss? Imperfect Information As A Positive Influence In Political Institutions, Michael A. Fitts

Michigan Law Review

In Parts I and II, I shall summarize the law-and-economics and civic virtue perspectives on the value of political information and their proposals for reforms in the political process that would stimulate greater political information. These two literatures are often viewed as distinct in their objectives: one seeking to improve means/ends rationality; the other seeking to improve goal formation - a function that I loosely describe as normative, ethical, or value-based. Nevertheless, they share some common practical approaches where information is concerned. In Part Ill, I shall discuss the instrumental advantages to limiting political information, focusing particularly on the role …

The Unimportance Of Being Efficient: An Economic Analysis Of Stock Market Pricing And Securities Regulation, Lynn A. Stout

Michigan Law Review

Part I of this article describes how perceptions that market efficiency is an important regulatory objective have influenced the development of securities law. For illustration, Part I examines the role of market efficiency goals in recent debates on the scope of insider trading liability, on trading in stock index futures, and on mandatory disclosure of merger negotiations. Part II then evaluates the notion that more efficient stock markets necessarily produce more optimal resource allocation. A closer look at the economic consequences of stock prices suggests that the principal function of stock prices is not resource allocation but rather the redistribution …

The Bigness Complex: Industry, Labor, And Government In The American Economy, James R. Steffen

Michigan Law Review

A Review of The Bigness Complex: Industry, Labor, and Government in the American Economy by Walter Adams and James W. Brock

Antitrust Policy After Chicago, Herbert Hovenkamp

Michigan Law Review

This article begins with the premise that nothing - not even an intellectual structure as imposing as the Chicago School - lasts forever. In fact, a certain amount of stagnation is already apparent. Most of the creative intellectual work of the Chicago School has already been done - done very well, to be sure. The new work too often reveals the signs of excessive self-acceptance, particularly of quiet acquiescence in premises that ought to be controversial.

Today the cutting edge of antitrust scholarship is coming, not from protagonists of the Chicago School, but rather from its critics. The critics began …

The Efficiency Of Specific Performance: Toward A Unified Theory Of Contract Remedies, Thomas S. Ulen

Michigan Law Review

The purpose of this essay is to begin the development of an integrated theory of contract remedies by delineating the circumstances under which courts should simply enforce a stipulated remedy clause or grant relief to the innocent party in the form of damages or specific performance. The conclusion, in brief, is that in the absence of stipulated remedies in the contract that survive scrutiny on the usual formation defenses, specific performance is more likely than any form of money damages to achieve efficiency in the exchange and breach of reciprocal promises. If specific performance is the routine remedy for breach, …

Competition, Integration And Economic Efficiency In The Eec From The Point Of View Of The Private Firm, Michel Waelbroeck

Michigan Law Review

As early as 1956, experts appointed by the six original Member State governments to investigate measures to pursue integration after the failure of the European Defence Community clearly established this link between the abolition of barriers to trade and an increase in the intensity of competition. In what has come to be known as the "Spaak Report," the experts noted the technology gap then separating Europe from the United States and proposed, as a remedial measure, the creation of a ''vast zone of common economic policy, constituting a powerful production unit, and allowing a continued expansion, and increased stability, an …

The Effect Of Insider Trading Rules On The Internal Efficiency Of The Large Corporation, Robert J. Haft

Michigan Law Review

Academics have hotly debated these justifications for years, and none of the three has achieved universal acclaim. This Article suggests another perspective: Prohibiting insider trading may enhance business decision-making in large corporations. With the exception of proponents of the Business Property view, analysts have focused on how an insider trading rule affects the national securities markets and traders in those markets. The internal governance of the large corporation is a different matter, one deserving separate consideration.

Joint Trials Of Defendants In Criminal Cases: An Analysis Of Efficiencies And Prejudices, Robert O. Dawson

Michigan Law Review

Legislatures and courts, in weighing the relative advantages of joint and separate trials, have unreasonably struck a balance in favor of joint trials. The strongest justification traditionally offered for joint trials is efficiency. This Article shows that courts have greatly exaggerated the supposed efficiencies of joint trials while grossly underestimating the impediments joint trials pose to fair and accurate determinations of individual guilt or innocence. The propriety of joint trials is more than a question of efficiencies. Joint trials usually, although not always, help the prosecutor to get convictions, and thereby modify the balance of advantage in criminal trials. Disputes …

Banks And Banking-National Banks Subject To State Statute Providing Reward For Finders Of Lost Goods

Michigan Law Review

Plaintiff found $105,000 hidden in a roadside junk heap. The money had been stolen from defendant national bank in an early morning hold-up, and cached by the robbers in the rubbish pile, With the police, plaintiff returned the money to the bank. Plaintiff then sued the bank for a ten per cent reward provided by an Iowa statute for the return of "lost goods." The Supreme Court of Iowa reversed a decision that the statute did not apply to stolen money. In a rehearing, defendant put in an amended plea that the statute could not impose any liability on national …

The Initiation Of Criminal Prosecutions By Indictment Or Information, Raymond Moley

Michigan Law Review

One of the most pronounced changes in criminal procedure proposed by the new criminal code prepared under the direction of and approved by the American Law Institute is that which proposes "all offenses heretofore required to be prosecuted by indictment may be prosecuted either by indictment or information.'' This would radically affect the present criminal procedure of one-half of the states. In twenty-four states prosecution of practically all cases may now be by information. The reform thus officially proposed by the Institute has been widely recommended by commissions and committees interested in the reform of criminal procedure. In many of …