Digital Behavioral Advertising – Why Worry?

Ryan Calo, Digital Market Manipulation, 82 Geo. Wash. L. Rev. 995 (2014).

Alongside the explosive growth of the internet, digital marketing is also growing aggressively. According to some projections, it might even surpass TV-based advertising in the coming decades. One of its most prominent and controversial features is commonly referred to as “behavioral advertising”; the tailoring of advertisements to specific users at a specific time, on the basis of previously collected personal information about those users’ online activities.

Behavioral advertising is creating a substantial buzz in the press. It is therefore no surprise that this issue is also generating a vibrant discussion in the legal and policy realm. Addressing it properly is a serious intellectual challenge. Behavioral advertising generates an uneasy feeling (some might find it “creepy“). Yet it is not necessarily simple to figure out why. Consumers have dealt with marketers—some of them quite aggressive—since the dawn of time. Existing mechanisms, which incorporate a delicate mix of market forces, reputation concerns and in extreme cases regulatory action, have produced an acceptable status quo. Recently, this status quo has apparently been breached. The challenge academics and policy makers face is explaining why and how. In his recent Article, Ryan Calo tackles this challenge directly, and sets forth important answers. His insights will enhance the policy debates about the regulation of behavioral marketing, and push them in the right direction. Continue reading "Digital Behavioral Advertising – Why Worry?"

 
 

Dignity, too

The police killing of Michael Brown this summer in Ferguson, Missouri, sparked a nationwide wave of outrage at heavy-handed police behavior generally and toward young men of color in particular. But scores of young black men are killed every year by the police, many in even more suspicious circumstances; what made Ferguson different? One significant element was the fact that police left Michael Brown’s body exposed to public view and the hot sun for some four hours. Perhaps even more than the shooting of Michael Brown (which might yet be given an explanation), the exposure of his body for such a prolonged period, conveyed to millions through social media, constituted a striking violation of social norms of respect which appeared to have no possible explanation. Leaving his body to deteriorate in the view of his family and neighbors seemed to reflect the fact that police did not view Michael Brown as a human being, or his neighbors as citizens worthy of respect. The police shooting may in fact have been justified, but their treatment of Michael Brown’s body defiled human dignity

The growing sense that the carceral state (both police and prisons) has become a threat to the human dignity of Americans is an important new dimension of political and legal opposition to the supersized role that it now plays in our lives. Objections to NSA digital snooping, outrage at mistreatment of mentally ill prisoners, and protests against the routinized degradation of “stop and frisk” policing are growing. And these arguments are working not just in the street but in courts, where in Brown v. Plata in May 2011, the Supreme Court reminded American states that prisoners “retain the essence of human dignity inherent in all person[s].” So far, however, the force of dignity has had little influence on challenges to police using their arrest and related powers under the Fourth Amendment. Continue reading "Dignity, too"

 
 

Surmounting the Control Paradigm

Colin Mayer’s Firm Commitment is not exactly a book about corporate law, but it’s still best corporate law book I have encountered in a long while. Here a leading academic in business and finance challenges the status quo, bringing financial economics, agency theory, and corporate law to bear to persuade us that something has gone very wrong with corporate organizations in English-speaking economies.

Unlike many critics of corporate institutions, Mayer approves of large corporate entities. He points out that they allow us to partition assets off from individuals and create stable productive environments conducive to group participation. They are ubiquitous for very good reasons and do great things. But there’s also a dark side. In describing it, Mayer pulls together a number of things that we all know are out there and builds them into a binary theory. On one side of the description there’s a long list of phenomena, bundled up and characterized as the “control” paradigm. The market for corporate control sits at the top of the list, followed by environmental degradation, reductions in workforces, the shareholder value maximization norm, the trend to shareholder empowerment, short termism, leveraged restructuring, asset substitution, and leveraged speculation. All these work together with and within corporate entities to lead to disastrous results for society and the economy, manifested in the form of both externalities and opportunity costs. As society tries to cope with this onslaught of injury, there result layers and layers of choking regulation. Continue reading "Surmounting the Control Paradigm"

 
 

Judicial Fact-Making

Allison Orr Larsen, Factual Precedents, 162 U. Pa. L. Rev. 59 (2013)

Two judicial and scholarly heavyweights squared off recently in a case challenging the constitutionality of Wisconsin’s voter ID law. Writing for the Seventh Circuit panel, Judge Easterbrook reasoned that “whether a photo ID requirement promotes public confidence in the electoral system is a ‘legislative fact’—a proposition about the state of the world, as opposed to a proposition about these litigants or about a single state.” The Seventh Circuit was bound to accept that a photo ID requirement did promote public confidence in elections because “[o]n matters of legislative fact, courts accept the findings of legislatures and judges of lower courts must accept findings by the Supreme Court.” Dissenting from the denial of rehearing en banc, Judge Posner responded that Easterbrook’s approach “conjures up a fact-free cocoon.” Posner asked: “If the Supreme Court once thought that requiring photo identification increases public confidence in elections, and experience and academic study since shows that the Court was mistaken, do we do a favor to the Court … by making the mistake a premise of our decision?”

This disagreement between Easterbrook and Posner—in the language of Allison Orr Larsen’s excellent article—is about Factual Precedents: whether the Supreme Court’s statements about legislative facts should receive “separate precedential force, distinct from the precedential force of whatever legal conclusions they contributed to originally.” (P. 63.) As Larsen explains, such “facts” are everywhere in judicial opinions—facts like “partial birth abortions are never medically necessary, fleeing from the police in a car leads to fatalities, and violent video games affect the neurological development of a child’s brain.” (P. 71.) To support such claims, Supreme Court Justices regularly invoke authorities that have never been made part of the evidentiary record or subjected to adversarial challenge by the parties to the case. Yet—as the Easterbrook opinion suggests—lower-court judges often treat factual propositions as precedent that they are bound to accept as a matter of stare decisis. Larsen convincingly argues that this is a mistake. Rather, “generalized factual claims from the Supreme Court should not receive any precedential value separate and apart from the legal rules they helped to create.” (P. 99.) Continue reading "Judicial Fact-Making"

 
 

Safe at Any Speed: Robert Ahdieh’s Take on Cost-Benefit Analysis in Financial Markets

When I saw the title of Robert Ahdieh’s recent article, Reanalyzing Cost-Benefit Analysis: Toward a Framework of Function(s) and Form(s), I thought, “oh no, not another article about CBA.” Knowing Professor Adhieh’s work, I took a flyer and read it anyway, and boy was I happy with my decision. This is a great article which should be of interest to anyone involved in administrative law, securities regulation and policy analysis more generally. Cost-benefit analysis has become an important regulatory tool, and Professor Adhieh’s article makes a valuable contribution to the literature on the special analysis required under Section 106 of the National Securities Market Improvement Act of 1996, 15 U.S.C. § 77b (2012) and to the literature on cost-benefit analysis more generally.

Ahdieh’s jumping-off point, section 106 of the National Securities Market Improvement Act of 1996, requires the Securities and Exchange Commission (SEC) to consider, in all of its actions, including rulemaking, “in addition to the protection of investors, whether [an] action will promote efficiency, competition, and capital formation.” As Ahdieh observes, on its face, this provision has little bite—it requires only consideration of the effect on markets and it does not impose any substantive standard such as the efficiency requirement imposed by Congress in other regulatory contexts. Despite the moderate nature of Congress’s language, as Ahdieh reports, when the SEC promulgated a regulation expanding shareholder access to corporate proxies to nominate corporate directors, “[c]onsidering SEC rulemaking unsafe at any speed, . . . the Business Roundtable and the Chamber of Commerce challenged the new rule . . . invoking the language of Section 106 . . . [arguing] that the SEC’s assessment of the costs and benefits of mandatory proxy access had not met the requirements of Section 106.” Continue reading "Safe at Any Speed: Robert Ahdieh’s Take on Cost-Benefit Analysis in Financial Markets"

 
 

Putting Union Security Clause First Amendment Law in a Broader Context: Charlotte Garden’s Meta Rights

Charlotte Garden, Meta Rights, 83 Fordham L. Rev. 855 (2014).

Meta Rights is a thought-provoking article that addresses concerns about labor law rules governing agency fee payments in public-sector employment by comparing these rules to doctrines in analogous situations in other areas of law. Specifically, after the Supreme Court decided Knox v. SEIU Local 100 in 2012, 132 S.Ct. 2277 (2012), many felt that the Supreme Court was primed to change the default rule for agency payers from “opt-out” (an employee covered by a union security agreement would have to affirmatively state a preference not to pay dues for activities deemed “not related to collective bargaining”) to an “opt-in” system (unions could not require such dues absent specific, individual consent). Many in the field also noted that Harris v. Quinn, 134 S.Ct. 2618 (2014), looming but not yet decided when this article was written, could result in the Supreme Court mandating the “opt-in” system (I thought that was the most likely result in Harris). This is a very important issue in labor law and policy and for the labor movement as a whole. Although these cases explicitly covered only public-sector unions, such unions make up about half the total membership of all unions in the U.S.

Professor Garden could have written an article solely about whether “opt-in” rules were good or bad labor policy, or the extent to which constitutionally mandating such a system would be consistent with previous precedent (e.g., Abood v. City of Detroit, 431 U.S. 209 (1977)). Instead, she wrote a more interesting article by casting her net much more widely, describing when, in other contexts, courts have required Party A to give notice to Party B that Party B has certain constitutional rights. This takes her well beyond labor and employment law, and indeed beyond civil law (e.g., by discussing Miranda rights). Showing that such “meta rights” are relatively rare (e.g., public schools need not give notice to students that they have a First Amendment right to abstain from reciting the Pledge of Allegiance), Professor Garden provides a strong, principled, and broad-based critique of “opt in” rules. Continue reading "Putting Union Security Clause First Amendment Law in a Broader Context: Charlotte Garden’s Meta Rights"

 
 

Transmitting Retirement Accounts: Getting It Right

Stewart E. Sterk & Melanie B. Leslie, Accidental Inheritance: Retirement Accounts and the Hidden Law of Succession, 89 N.Y.U.L. Rev. 165 (2014).

Articles routinely appear that serve up a simple, everyday scenario that has potential to morph into a terribly complex legal situation and in the process, twist legal doctrines pretzel-like to reach the preferred result. We read them, digest them for the nugget to divulge in class, and file them away to cite in a later article. Rare is the article that serves up a simple everyday scenario that could have a disastrous effect that causes us to actually do something to avert the potential disaster. Stewart E. Sterk and Melanie B. Leslie have done just that in their masterful, co-authored piece, Accidental Inheritance: Retirement Accounts and the Hidden Law of Succession.

Starting with the fairy tale beginning of “once upon a time,” the authors bring us back to the days when wills controlled the disposition of property at death. Judges were in control of the probate process, much, if not most, property was probate, and rules had developed to ameliorate the routine mistakes and missteps that occur between the signing of the will and the date of death. Marriage, birth of a child, divorce, and the death of a beneficiary no longer have to upset the decedent’s presumed intent for his heirs, as we had developed rules for the probate process to reach the preferred result. As the non-probate revolution has settled into mainstream life, the issue has become how many of those presumed-intent rules apply. So far pretty standard fare, but consider $9 trillion in retirement accounts (a most significant non-probate asset), a changing American family, and the impending demise of the baby boomer generation, and the consequences have the potential to be dramatic and, in the view of the authors, intolerable. Continue reading "Transmitting Retirement Accounts: Getting It Right"

 
 

When is Sexual Abuse Within the Scope of Employment?

Martha Chamallas, Vicarious Liability in Torts: The Sex Exception, 48 Val. U. L. Rev. 133 (2013), available at SSRN.

Martha Chamallas’s Monsanto Lecture, Vicarious Liability in Torts: The Sex Exception, is timely and important, inviting renewed scholarly attention to the oft-neglected topic of vicarious liability.

Since the 1990s, courts have faced a steady stream of suits brought against schools, hospitals, religious institutions, and other entities for sexual abuse committed by employees. In addressing these suits, Chamallas argues, courts have adopted an unjustifiably narrow approach to vicarious liability.

Modern doctrine maintains that an employee’s on-the-job wrong will be imputed to her employer when the wrong is foreseeable, or involves the realization of risks characteristic of the employer’s enterprise. Under these tests, vicarious liability has at times extended to employees’ intentional acts of physical violence, as well as to negligence perpetrated by drunken, off-duty employees.

It is thus surprising, Chamallas argues, to find prominent cases in which courts decline to impose vicarious liability for sexual abuse. For example, the California Supreme Court refused to hold a hospital liable for its medical technician’s molestation of a young woman during the performance of an ultrasound, and also declined to hold a school district liable for a teacher’s abuse of a student during a school-sanctioned extra-curricular activity. According to Chamallas, modern legal tests for “scope of employment” are capacious enough to permit liability in cases such as these. Moreover, standard instrumental rationales for respondeat superior (“let the master answer”)—that it incentivizes appropriate precaution-taking by employers, better ensures compensation of victims, and fairly comports with the risks characteristic of the employer’s enterprise—arguably also favor liability. So why would courts decline to hold employers liable under the circumstances? Continue reading "When is Sexual Abuse Within the Scope of Employment?"

 
 

Keeping Us Honest about the Timing Flaws in the Income Tax

Daniel I. Halperin & Alvin C. Warren Jr., Understanding Income Tax Deferral, Tax L. Rev. (forthcoming), available at SSRN.

We all do it once in a while. In the haste of trying to make a point in class, or in a hurried comment to the press, we overstate the effect of the failure of a tax law rule to take into account the time value of money. “The effect of deferral of income,” we may boldly assert, “is the exemption of the earnings on the amount deferred.” A recent short essay by Dan Halperin and Al Warren entitled Understanding Income Tax Deferral should help us all stay a bit more accurate when we make these claims. As Halperin and Warren point out, although in some limited circumstances the benefit of deferral can be the exemption of the earnings on the amount deferred, often the effect of an apparent deferral is more limited and more nuanced. In some cases, timing flaws produce only reduced taxation, not full exemption, while in other cases rules that seem to involve timing flaws merely shift income to other taxpayers or to other taxing jurisdictions. Halperin and Warren remind us that it can be very important to be able to distinguish between these results. This paper will displace Halperin’s 1986 classic in my must-read recommendations for beginning teachers of tax.

There is little that is actually new in the essay. However, it is a much-needed and succinct guide to the principles involved when considering the effect of timing in the rules defining the income tax base. Thirty years ago, when interest rates were high, correcting the timing mistakes embedded in the income tax law was a high policy priority. For example, the original issue discount rules were tightened and applied to many more transactions (in sections 1271, 1274 and 7872) and the possibility of accruing costs before payment were substantially curtailed (through various changes in the taxation of retirement savings and in sections 461(h)). In this era, the principles Halperin and Warren newly examine here became a mainstay of tax policy analysis. No one participating in policy discussions could afford not to understand them. Continue reading "Keeping Us Honest about the Timing Flaws in the Income Tax"

 
 

There’s No Time Like the Present for Some Optimism about the Future

“When did the future switch from being a promise to a threat?”
    -Chuck Palahniuk, Invisible Monsters: A Novel

The legal profession is often criticized as disinterested, if not fearful, of innovation in the delivery of legal services. As Benjamin Barton observes in the introductory chapter of his forthcoming book, Glass Half Full: The Decline and Rebirth of the Legal Profession: “Law may have changed less than any other area of the economy between 1850 and today. The same basic product is being sold and the same basic service is being performed.” But, as Barton quickly notes, “[n]o one dodges the reaper forever.” Through the next thirteen chapters, Barton proceeds to provide an insightful parsing of the past, present and potential future course of the American legal profession.

In homage to Larry Ribstein’s influential article, “The Death of Big Law”, Barton discusses current challenges faced by American lawyers through four different lens: “death from above”, “death from below”, “death from the state”, and “death from the side”. Although space constraints preclude a full exploration of the detailed analysis presented in the book, a brief summary of each of these four “deaths” follows: Continue reading "There’s No Time Like the Present for Some Optimism about the Future"

 
 

Citizenship for the Worthy Children

Immigrant children are the subjects of varying narratives. To some, immigrant children fleeing Central America are invaders, while others view these children as innocent bystanders who are reaching out to the United States for protection from unimaginable violence. The narrative matters and it influences public perception. In Defining American: The DREAM Act, Immigration Reform and Citizenship, Elizabeth Keyes takes a close look at the narratives pursued in support of the DREAM Act and identifies danger posed by a narrative that promotes legal status and eventual citizenship for worthy and blameless immigrants. Keyes takes a narrative that seems unobjectionable and uncovers a major negative consequence.  Creating the worthy category necessarily creates a category of individuals undeserving under the law.

The Development, Relief, and Education for Minors Act, or DREAM Act, has been on the congressional agenda for almost 15 years, but has yet to make its way to the President for signature. The DREAM Act would put certain individuals who currently lack legal immigration status on a path to legal status, with the potential of eventual US citizenship. The criteria generally include entrance to the United States before the age of 16, achievement of certain educational milestones or military service, continuous residence in the United States, and possession of “good moral character.” In the face of legislative defeat of the DREAM Act, the Obama administration used similar criteria to implement the Deferred Action for Childhood Arrivals (DACA) program, which does not provide legal immigration status but does provide work authorization and a promise that the US government will not pursue deportation for two years. Continue reading "Citizenship for the Worthy Children"