Monthly Archives: August 2011

What Actually Happens in a Rulemaking?

Wendy Wagner, Katherine Barnes & Lisa Peters, Rulemaking in the Shade: An Empirical Study of EPA’s Air Toxic Emission Standards, 63 Admin. L. Rev. 99 (2011), available at SSRN.

Wendy Wagner, Katherine Barnes, and Lisa Peters provide a wealth of data and insights with respect to the rulemaking process in this well-researched and well-written article. They engaged in intensive empirical analysis of the ninety rulemakings in which EPA issued air toxic emission standards. For each of the rulemakings they studied three stages of the decision making process—pre-NPRM, notice and comment period, and period after issuance of a final rule.

I cannot do justice to the authors’ excellent discussion of their methodology and the implications of their findings. I will instead simply recite some of their most important findings in the hope that my summary of some of their findings will induce everyone to read this important article with care. Continue reading "What Actually Happens in a Rulemaking?"

Disclaimers and Family Settlement Agreements as Possible Solutions to Election Out and Document Construction Problems

S. Alan Medlin, F. Ladson Boyle, and Howard M. Zaritsky, 2010: It Was A Very Good Year . . . To Die—Or Was It?, 45 Real Prop. Tr. & Est. L.J. 589 (2011).

In this comprehensive article, the authors address the effects of Congress’ reinstatement, on December 17, 2010, of the estate tax and the generation skipping transfer tax. The authors first analyze how the reinstatement presents certain election out and document construction problems, and then they propose disclaimers and family settlement agreements as possible solutions.

The authors have two election out problems: First, tax-sensitive language in documents may be difficult to interpret because estate or GST taxes may not have been applicable on the date of the decedent’s death in 2010–possibly even without regard to any retroactivity. (P. 592.) Second, the personal representative of the estate of a decedent who died in 2010 must decide whether to elect out of the estate tax regime (and therefore into the carryover basis regime for income tax purposes) or to allow the default estate tax regime to apply. (P. 592.) The tax results under both scenarios must be compared, including reviewing the “calculation of the net appreciation in each asset, the character of the gain on the sale of each asset, the tax rate applicable to the gain on the sale of each asset, when each asset is likely to be sold and whether tax benefits exist that might reduce the tax on such sales, and how the modified carryover basis rules will apply to these assets” as well as related factors such as passive losses and partnership interests. (P. 595.) Continue reading "Disclaimers and Family Settlement Agreements as Possible Solutions to Election Out and Document Construction Problems"

How To Regulate the Legal Services Market? Starting From First Principles.

Christopher Decker & George Yarrow, Understanding the Economic Rationale for Legal Services Regulation, A Report for the Legal Services Board (Regulatory Policy Institute, 2010).

Dr. Christopher Decker and Professor George Yarrow are economists at the Regulatory Policy Institute, Oxford, who were commissioned to consider the “case for regulation” and the role of professions in the legal services market in the UK. Their report appears at a time when the professions in England and Wales are in the midst of a quiet revolution, precipitated by the Legal Services Act 2007 (LSA). The Act places a range of professional groups, from the mainstream solicitors and barristers to the more esoteric trade marks and patent agents, under the purview of the Legal Services Board (LSB), an “oversight regulator.” This means that the professions retain a large measure of regulatory control, over ethics and education for example, but that they, and the LSB, must pursue statutory objectives.

While much of the theory that Decker and Yarrow refer to is familiar to scholars of the legal professions, in Rick Abel’s work for example, it is valuable for scholars of professions and legal services to see the argument through the prism of another discipline. The report is accessible to those without an economics background and might therefore provide a better foundation for dialogue between lawyers, economists and others than presently exists. This potential to stimulate debate is not purely parochial. Although the report uses examples of the practices of the English professions, the general approach is an “in principle” analysis of the rationale for regulation. Such a study might undermine the basis of legal professionalism, but it might also doubt the rationale for regulation per se, even public regulation by an oversight regulator. Decker and Yarrow do not disappoint in this regard, but also point to the limits of economic analysis in answering the questions they were posed. Continue reading "How To Regulate the Legal Services Market? Starting From First Principles."

Regulating Cyberspace: Can Online Ever Equal Offline?

Chris Reed, Online and Offline Equivalence: Aspiration and Achievement, 18 Int’l J. L. Law & Info. Tech. 248.

Works of pure theory in Anglophone European internet law scholarship are fairly rare, and those that exist often come from scholars whose background is in a field other than traditional law, e.g. sociology, politics or criminology. While some of this work is excellent, it may lack a full understanding both of the nuances of legal analysis and the realities of commercial legal culture. For all these reasons, it is to be warmly welcomed that in what one might call the second stage of his distinguished career, Chris Reed, one of Europe’s leading researchers into the more commercial and practical aspects of internet law, has decided to turn his years of experience in helping both draft and critique European internet and e-commerce laws towards theorising how to regulate for the on-line world, in the form of a series of pieces which so far include Taking Sides on Net Neutrality, The Law of Unintended Consequences–embedded models in IT regulation and more recently, How to Make Bad Law: Lessons from Cyberspace. The latest of these pieces (which are destined eventually to form a book on regulation, I believe)1 appeared in late 2010 and takes on the near cliché of internet law that “what is legal offline should also be legal online,” or more formally, the principle of equivalence. While it is something of a kneejerk assumption in many domains, notably freedom of speech, that this approach is axiomatically mandatory, Reed dissects the desirability, applicability and most interestingly perhaps, the failures of the principle in the context of the history of (mainly European) internet regulation.

Reed defines equivalence as a starting point as “an approach in which all laws and regulations should, so far as possible, be equivalent online and offline. In other words, the same legal principles should regulate an online technology activity as those which applied to the equivalent offline technology activity.” Reed’s first point is that this should not be confused with the similarly-popular notion of technology neutrality. “Technology neutrality addresses the choice between the available substantive rules which could be used to implement … legal principles,” while equivalence, in his view, is about choosing those legal principles for regulating the online world in the first place. Equivalence therefore takes precedence in the regulatory toolkit and is arguably the more important issue to get right. Reed also muses as to whether a distinction is needed between “technology indifference”–which is an “attempt … to define a rule in such a way that it applies equally well to the activity whatever technology is used to undertake it” and a concept he does not name but  I will call technology non-discrimination which is “a legislative aim that the rules should not discriminate between technologies and should continue to apply effectively even if new technologies are developed.” A good example of problematic regulation which might have been elucidated by applying these concepts lies in the recent controversial redrafting of the part of the EU Privacy and Electronic Communications Directive dealing with cookies (art 5(3)), where despite frequent claims to technology-neutrality the results have been nothing of the kind either initially or after reform. Continue reading "Regulating Cyberspace: Can Online Ever Equal Offline?"

A New Solution to an Old Problem: Section 1447(d) and Appellate Review of Remand Orders

It may not be the most headline-grabbing issue on the Supreme Court’s docket. But it has occupied more of the Court’s attention during the past half-decade than abortion, affirmative action, the Commerce Clause, or the Second Amendment. It is 28 U.S.C § 1447(d)’s command that “[a]n order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise.” This apparent ban on appellate review has generated an awkward line of cases, beginning with Thermtron Products v. Hermansdorfer in the 1970s, which struggle to determine when § 1447(d) “means what it says.” In the Court’s most recent decisions on the issue, several Justices have penned separate opinions voicing their frustration with current doctrine. Enter Jim Pfander and his recent article Collateral Review of Remand Orders: Reasserting the Supervisory Role of the Supreme Court. Pfander expertly diagnoses what is wrong with the jurisprudence surrounding § 1447(d) and, more importantly, offers a new solution to this long-standing puzzle.

Here is the crux of the dilemma: the text of § 1447(d) forbids appellate review of a district court order remanding a case to state court. Period. Full stop. No exceptions. In Thermtron, however, the Court circumvented this ban on review by reading § 1447(d) as applying only to remands based on grounds specified in § 1447(c). The Thermtron exception is hard to justify as an interpretive matter given the text of § 1447(d). Perhaps more troublingly, it is functionally misguided. It means that § 1447(d) does forbid an appeal if the remand is based on a lack of federal subject-matter jurisdiction—a ground that is specified in § 1447(c)—even though the scope of federal subject-matter jurisdiction can be a very significant issue, both for the parties to a particular case and for our judicial system as a whole. Yet Thermtron permits review for issues of far less significance and impact—such as a district court’s discretionary decision whether to remand state law claims after all federal claims have been resolved—because such remands are not governed by § 1447(c). The problem has been compounded, as Pfander points out, by the Supreme Court’s holding in Quackenbush v. Allstate that a remand order was a “final decision” for purposes of 28 U.S.C. § 1291. While Thermtron contemplated that remand orders qualifying for its judicially-created exception to § 1447(d) would still have to meet the heightened showing required for a writ of mandamus, Quackenbush has been read to make such orders appealable as of right. Continue reading "A New Solution to an Old Problem: Section 1447(d) and Appellate Review of Remand Orders"

Stock Issuances and Managerial Agency Costs

Mira Ganor, The Power to Issue Stock (2011), available at SSRN.

Every state corporation statute authorizes the board of directors to issue stock. While one could imagine arguments for allocating this authority to the shareholders, the board of directors is better positioned to respond quickly to financing needs or to provide stock as a motivation for employees. Nevertheless, whenever the board of directors is given an important power, we must be attentive to the potential for abuse. In her new article, The Power to Issue Stock, Mira Ganor reveals various ways in which directors may pursue their own interests at the expense of a majority of the shareholders or thwart the veto power of minority shareholders through the issuance of stock.

Stock issuances are important in Ganor’s account of corporate governance because of the possibility of voting dilution, which occurs when an existing shareholder owns a smaller ownership interest after a new stock issuance. For example, assume that an investor owned one million shares of common stock in Company A, equal to a 25% ownership interest (i.e., the investor owned one million of four million shares outstanding). If Company A subsequently proposed to sell another one million shares to a new investor, the existing investor would see her ownership interest decline from 25% to 20% (she would own one million of five million shares outstanding). Continue reading "Stock Issuances and Managerial Agency Costs"

Playing by the Rules

Mitchell N. Berman, Let ‘em Play:” A Study in the Jurisprudence of Sport, 99 Geo L.J. (forthcoming 2011).

What does sport have to do with jurisprudence?  Not a great deal, one might think. To be sure, particular sports, like legal systems, are rule-governed practices. This commonality and the relative simplicity of sports makes them useful as a source of examples that might be deployed to explain more complex legal-theoretical ideas.

Philosophers of law and legal theorists commonly use sports examples in just this way. Most famously, H.L.A. Hart used examples from games and sport both in criticizing other views about the nature of law and in clarifying his own distinctive view. In his critique of Austin’s command theory of law, for example, Hart invoked the scoring rules of a game as he explained why nullification under the power-conferring rules common to modern legal systems cannot be assimilated to sanctions under duty-imposing rules. (H. L. A. Hart, The Concept of Law). And he adverted to chess and cricket to explain one of his most distinctive theses—that rules, and so law, have an “internal aspect.” Chess players, he observed, do not merely have “habits of moving the Queen in the same way,” which an external observer might record. In addition, “they have a reflective critical attitude to this pattern of behavior: they regard it as a standard for all who play the game.” Continue reading "Playing by the Rules"