Law Commons^™

A History Of Corporate Law Federalism In The Twentieth Century, William W. Bratton

Seattle University Law Review

This Article describes the emergence of corporate law federalism across a long twentieth century. The period begins with New Jersey’s successful initiation of charter competition in 1888 and ends with the enactment of the Sarbanes-Oxley Act in 2002. The federalism in question describes the interrelation of state and federal regulation of corporate internal affairs. This Article takes a positive approach, pursuing no normative bottom line. It makes six observations: (1) the federalism describes a division of subject matter, with internal affairs regulated by the states and securities issuance and trading regulated by the federal government; (2) the federalism is an …

Bibb Balancing: Regulatory Mismatches Under The Dormant Commerce Clause, Michael S. Knoll

All Faculty Scholarship

Courts and commentators have long understood dormant Commerce Clause doctrine to contain two types of cases: discrimination and undue burdens. This Article argues for a more nuanced understanding that divides undue burdens into single-state burdens—which arise from the application of a single state’s law alone—and mismatch burdens, which arise from legal diversity. Although the Supreme Court purports to apply Pike balancing in all undue-burden cases, we show that the Court’s approach in mismatch cases differs substantially. Specifically, unlike in single-state cases, balancing in mismatch cases involves an implicit and potentially problematic comparison by the Court between the challenged state’s regulation …

Free Market State (Of Mind): Antitrust Federalism, John J. Flynn And The Utah Constitution’S Free Market Clause, Jorge L. Contreras

Utah Law Review

The Utah Constitution states that “[i]t is the policy of the state of Utah that a free market system shall govern trade and commerce in this state to promote the dispersion of economic and political power and the general welfare of all the people.” Utah’s so-called Free Market Clause, adopted in 1992, is unique among the constitutions of the fifty states. Through an excavation of the historical record and contemporary literature, this Article shows that the Free Market Clause owes its existence to the influence of Professor John J. Flynn of the University of Utah, whose pioneering work on antitrust …

Federalism, Free Competition, And Sherman Act Preemption Of State Restraints, Alan J. Meese

Faculty Publications

The Sherman Act establishes free competition as the rule governing interstate trade. Banning private restraints cannot ensure that competitive markets allocate the nation's resources. State laws can pose identical threats to free markets, posing an obstacle to achieving Congress's goal to protect free competition.

The Sherman Act would thus override anticompetitive state laws under ordinary preemption standards. Nonetheless, the Supreme Court rejected such preemption in Parker v. Brown, creating the "state action doctrine." Parker and its progeny hold that state-imposed restraints are immune from Sherman Act preemption, even if they impose significant harm on out-of-state consumers. Parker's progeny …

Reconsidering Federalism And The Farm: Toward Including Local, State And Regional Voices In America's Food System, Margaret Sova Mccabe

Journal of Food Law & Policy

Why is the relationship between our food system and federalism important to American law and health? It is important simply because federal law controls the American food system. This essay considers how federal law came to structure our food system, and suggests that though food is an essential part of our national economy, the dominating role of the federal government alienates citizens from their food system. It does so by characterizing food as a primarily economic issue, rather than one that has ethical, health, and cultural components. However, state and local governments have much to offer in terms of broadening …

Antitrust Regulation And The Federal-State Balance: Restoring The Original Design, Alan J. Meese

Faculty Publications

The U.S. Constitution divides authority over commerce between states and the national government. Passed in 1890, the Sherman Act (“the Act”) reflects this allocation of power, reaching only those harmful agreements that are “in restraint of... commerce among the several States.” This Article contends that the Supreme Court erred when it radically altered the balance between state and national power over trade restraints in 1948, abruptly abandoning decades of precedent recognizing exclusive state authority over most intrastate restraints. This revised construction of the Act contravened the statute’s apparent meaning, unduly expanded the reach of federal antitrust regulation, and undermined the …

The Race To The Middle, William Magnuson

Faculty Scholarship

How does federalism affect the quality of law? It is one of the fundamental questions of our constitutional system. Scholars of federalism generally fall into one of two camps on the question. One camp argues that regulatory competition between states leads to a “race to the bottom,” in which states adopt progressively worse laws in order to pander to powerful constituencies. The other camp, conversely, argues that regulatory competition leads to a “race to the top,” incentivizing states to adopt progressively better laws in the search for more desirable outcomes for their constituencies. Despite their apparent differences, however, both the …

The Ncaa On Notice: How Utilizing Principles Of Federalism Could Relieve Antitrust Pressure, Grant Newton

Vanderbilt Journal of Entertainment & Technology Law

The National Collegiate Athletic Association (NCAA) was founded to protect athletes from injury and to provide an avenue for the pursuit of sport alongside the pursuit of education. The NCAA maintains that accomplishing each of those goals requires the preservation of amateurism through a cap on the amount of funds universities may disburse to athletes. Historically, value judgments saved the NCAA from antitrust challenges because courts found that the NCAA's rules furthered the organization's purpose. As antitrust law has developed over the past fifty years, however, courts have become increasingly determined to avoid value judgments in antitrust challenges. Thus, it …

Trapped In A Metaphor: The Limited Implications Of Federalism For Corporate Governance, Robert B. Ahdieh

Robert B. Ahdieh

Trapped in a metaphor articulated at the founding of modern corporate law, the study of corporate governance has - for some thirty years - been asking the wrong questions. Rather than a singular race among states, whether to the bottom or the top, the synthesis of William Cary and Ralph Winter’s famous exchange is better understood as two competitions, each serving distinct normative ends. Managerial competition advances the project that has motivated corporate law since Adolf Berle and Gardiner Means - effective regulation of the separation of ownership and control. State competition, by contrast, does not promote a race to …

From "Federalization" To "Mixed Governance" In Corporate Law: A Defense Of Sarbanes-Oxley, Robert B. Ahdieh

Robert B. Ahdieh

Since the very moment of its adoption, the Sarbanes-Oxley Act of 2002 has been subject to a litany of critiques, many of them seemingly well-placed. The almost universal condemnation of the Act for its asserted 'federalization' of corporate law, by contrast, deserves short shrift. Though widely invoked - and blithely accepted - dissection of this argument against the legislation shows it to rely either on flawed assumptions or on normative preferences not ordinarily acknowledged (or perhaps even accepted) by those who criticize Sarbanes-Oxley for its federalization of state corporate law.

Once we appreciate as much, we can begin by replacing …

Patent Exhaustion And Federalism: A Historical Note, Herbert J. Hovenkamp

All Faculty Scholarship

This essay, written as a response to John F. Duffy and Richard Hynes, Statutory Domain and the Commercial Law of Intellectual Property, 102 VA. L. REV. 1 (2016), argues that the patent exhaustion (first sale) doctrine developed as a creature of federalism, intended to divide the line between the law of patents, which by that time had become exclusively federal, and the law of patented things, which were governed by the states. Late nineteenth and early twentieth century courts were explicit on the point, in decisions stretching from the 1850s well into the twentieth century.

By the second half of …

North Carolina State Board Of Dental Examiners V. Ftc: Aligning Antitrust Law With Commerce Clause Jurisprudence Through A Natural Shift Of State-Federal Balance Of Power, Marie Forney

Indiana Law Journal

The Supreme Court’s holding in North Carolina State Board of Dental Examiners v. FTC (NC Dental)1 in February 2015 demonstrates a natural shift in the balance of power from the states to the national government. As the country’s interstate and international economy has become more integrated, federal authority has likewise expanded.2 And although the federalism dichotomy has undergone periodic back-and-forth “swings” since the nation’s founding, the end result has been a net increase in federal power. NC Dental exemplifies this trend toward increasing national au-thority through the organic development of interstate commerce.

Rediscovering Capture: Antitrust Federalism And The North Carolina Dental Case, Herbert J. Hovenkamp

All Faculty Scholarship

This brief essay analyzes the Supreme Court's 2015 decision in the North Carolina Dental case, assessing its implications for federalism. The decision promises to re-open old divisions that had once made the antitrust "state action" doctrine a controversial lightning rod for debate about state economic sovereignty.

One provocative issue that neither the majority nor the dissenters considered is indicated by the fact that nearly all the cartel customers in the Dental case were located within the state. By contrast, the cartel in Parker v. Brown, which the dissent held up as the correct exemplar of the doctrine, benefited California growers …

Federalism, First Amendment & Patents: The Fraud Fallacy, Robin C. Feldman

Robin C Feldman

Interactive Antitrust Federalism: Antitrust Enforcement In Tennessee Then And Now, Clark L. Hildabrand

Transactions: The Tennessee Journal of Business Law

In light of the recent debates surrounding the proper relationship between federal and state antitrust enforcement, this Paper explores the early years of state antitrust enforcement to see how the Sherman Act impacted state antitrust law. Since Tennessee was the location of the first federal case brought under the Sherman Act and has been involved in recent indirect purchaser action against Microsoft Corporation, this Paper particularly focuses on the development of antitrust law within Tennessee. Before the Sherman Act, Tennessee antitrust enforcement was limited to the narrow confines of common law restraint of trade, but the implementation of the Sherman …

Trademark Law's Faux Federalism, Mark Mckenna

Mark P. McKenna

Federal and state trademark laws regulate concurrently: The Lanham Act does not preempt state law, and in fact many states have statutorily and/or judicially developed trademark or unfair competition laws of their own. This state of affairs, which is now well-accepted even if it has not always been uncontroversial, distinguishes trademark law from patent and copyright law, since federal patent and copyright statutes preempt state law much more broadly. The Patent Act entirely preempts state law with respect to non-secret inventions and the 1976 Copyright Act preempts state copyright law with respect to all works fixed in a tangible medium …

Antitrust And The 'Filed Rate' Doctrine: Deregulation And State Action, Herbert J. Hovenkamp

All Faculty Scholarship

In its Keogh decision the Supreme Court held that although the Interstate Commerce Act did not exempt railroads from antitrust liability, a private plaintiff may not recover treble damages based on an allegedly monopolistic tariff rate filed with a federal agency. Keogh very likely grew out of Justice Brandeis's own zeal for regulation and his concern for the protection of small business — in this case, mainly shippers whom he felt were protected from discrimination by filed rates. The Supreme Court's Square D decision later conceded that Keogh may have been “unwise as a matter of policy,” but reaffirmed it …

Comparative Antitrust Federalism: Review Of Cengiz, Antitrust Federalism In The Eu And The Us, Herbert J. Hovenkamp

All Faculty Scholarship

This brief essay reviews Firat Cengiz’s book Antitrust Federalism in the EU and the US (2012), which compares the role of federalism in the competition law of the European Union and the United States. Both of these systems are “federal,” of course, because both have individual nation-states (Europe) or states (US) with their own individual competition provisions, but also an overarching competition law that applies to the entire group. This requires a certain amount of cooperation with respect to both territorial reach and substantive coverage.

Cengiz distinguishes among “markets,” “hierarchies,” and “networks” as forms of federalism. Markets are the least …

Antitrust’S State Action Doctrine And The Ordinary Powers Of Corporations, Herbert J. Hovenkamp

All Faculty Scholarship

The Supreme Court has now agreed to review the Eleventh Circuit's decision in Phoebe-Putney, which held that a state statute permitting a hospital authority to acquire hospitals implicitly authorized such acquisitions when they were anticompetitive – in this particular case very likely facilitating a merger to monopoly. Under antitrust law’s “state action” doctrine a state may in fact authorize such an acquisition, provided that it “clearly articulates” its desire to approve an action that would otherwise constitute an antitrust violation and also “actively supervises” any private conduct that might fall under the state’s regulatory scheme.

“Authorization” in the context of …

Federalism And Concurrent Jurisdiction In Global Markets: Why A Combination Of National And State Antitrust Enforcement Is A Model For Effective Economic Regulation, Katherine M. Jones

Katherine M. Jones

The focus of the article is on the proper role of U.S. state governments in regulating international business. The specific issue analyzed is the desirability of having state attorneys general enforce federal antitrust laws in global markets concurrently with federal antitrust regulators. Congress granted state officials this power in 1976. In 2009, however, a large proportion of the world’s commerce is now conducted in international, rather than national markets. This development has led Judge Richard A. Posner and others to advocate that the states be stripped of their statutory power to enforce federal antitrust laws on behalf of their residents …

Trapped In A Metaphor: The Limited Implications Of Federalism For Corporate Governance, Robert B. Ahdieh

Faculty Scholarship

Trapped in a metaphor articulated at the founding of modern corporate law, the study of corporate governance has - for some thirty years - been asking the wrong questions. Rather than a singular race among states, whether to the bottom or the top, the synthesis of William Cary and Ralph Winter’s famous exchange is better understood as two competitions, each serving distinct normative ends. Managerial competition advances the project that has motivated corporate law since Adolf Berle and Gardiner Means - effective regulation of the separation of ownership and control. State competition, by contrast, does not promote a race to …

A Single-License Approach To Regulating Insurance, Henry N. Butler, Larry E. Ribstein

Faculty Working Papers

State regulation of insurance companies has been criticized for many years because of the burden imposed on insurers by having to comply with the laws of many jurisdictions. These higher costs are passed on to consumers. The problems with the current regulatory structure are prompting calls for increased federal regulation of insurance. However, all proposals to federalize insurance regulation create opportunities for abuse at the hands of the federal government and fail to utilize the benefits of a federal system. This article shows how many of the problems of the current system can be addressed without resorting to a large …

The Telecommunications Economy And Regulation As Coevolving Complex Adaptive Systems: Implications For Federalism, Barbara A. Cherry

Federal Communications Law Journal

Satisfying the constraints for sustainable regulatory telecommunications policies is more challenging for regulatory regimes based on competition than monopoly. In an earlier paper, Johannes Bauer and I used complexity theory to improve our understanding of the requirements for sustainable telecommunications policies, showing that regulation has a diminishing capacity to achieve specifically desired outcomes and greater attention must be paid to the adaptability of policies and policymaking processes themselves. The present Article examines the implications of the complexity theory perspective for federalism. Federalism is a distinctive (patching) algorithm that confers system advantages for adaptability through diversity and coupling of policymaking jurisdictions-mechanisms …

Antitrust Process And Vertical Deference: Judicial Review Of State Regulatory Inaction, Jim Rossi

ExpressO

Courts struggle with the tension between national competition laws, on the one hand, and state and local regulation, on the other – especially as traditional governmental functions are privatized and as economic regulation advances beyond its traditional role to address market monitoring. This Article defends a process-based account of the state action antitrust exception against alternative interpretations, such as the substantive efficiency preemption approach recently advanced by Richard Squire, and elaborates on what such a process-based account would entail for courts addressing the role of state economic regulation as a defense in antitrust cases. It recasts the debate as focused …

Sherman's March (In)To The Sea, Andrew S. Oldham

ExpressO

This Article argues that the Sherman Act is unconstitutional. At the very least, scholars and jurists must not take for granted Congress's ability to statutorily deputize the federal courts with common-lawmaking powers. The federal antitrust statute—which has been described as the Magna Carta of free enterprise—raises serious constitutional questions that have heretofore gone unexplored and unanswered. Specifically, it is difficult (if not impossible) to reconcile the Sherman Act with the separation of powers, the nondelegation doctrine, and the Supremacy Clause.

Federalism And Antitrust Reform, Herbert J. Hovenkamp

All Faculty Scholarship

Currently the Antitrust Modernization Commission is considering numerous proposals for adjusting the relationship between federal antitrust authority and state regulation. This essay examines two areas that have produced a significant amount of state-federal conflict: state regulation of insurance and the state action immunity for general state regulation. It argues that no principle of efficiency, regulatory theory, or federalism justifies the McCarran-Ferguson Act, which creates an antitrust immunity for state regulation of insurance. What few benefits the Act confers could be fully realized by an appropriate interpretation of the state action doctrine. Second, the current formulation of the antitrust state action …

From "Federalization" To "Mixed Governance" In Corporate Law: A Defense Of Sarbanes-Oxley, Robert B. Ahdieh

Faculty Scholarship

Since the very moment of its adoption, the Sarbanes-Oxley Act of 2002 has been subject to a litany of critiques, many of them seemingly well-placed. The almost universal condemnation of the Act for its asserted 'federalization' of corporate law, by contrast, deserves short shrift. Though widely invoked - and blithely accepted - dissection of this argument against the legislation shows it to rely either on flawed assumptions or on normative preferences not ordinarily acknowledged (or perhaps even accepted) by those who criticize Sarbanes-Oxley for its federalization of state corporate law.

Once we appreciate as much, we can begin by replacing …

Political Bargaining And Judicial Intervention In Constitutional And Antitrust Federalism, Jim Rossi

Vanderbilt Law School Faculty Publications

Federal judicial deference to state and local regulation is at the center of contentious debates regarding the implementation of competition policy. This Article invokes a political process bargaining framework to develop a principled approach for addressing the appropriate level of judicial intervention under the dormant commerce clause and state action immunity from antitrust enforcement. Using illustrations from network industries, it is argued that, at core, these two independent doctrines share a common concern with political (not only market) failure by focusing on the incentives faced by powerful stakeholders in state and local lawmaking. More important, they share the common purpose …

Moving Public Law Out Of The Deference Trap In Regulated Industries, Jim Rossi

Vanderbilt Law School Faculty Publications

This Article argues that public law has fallen into what I call a deference trap in addressing conflicts in deregulated industries, such as telecommunications and electric power. The deference trap describes a judicial reluctance to intervene in disputes involving political institutions, such as regulatory agencies and states. By reassessing the deference trap across the legal doctrines that are effecting emerging telecommunications and electric power markets, public law can deliver much more for deregulated markets. The deference trap poses a particular cost as markets are deregulated, one that may not have been present during previous regulatory eras in which public and …