Monthly Archives: March 2010

Saving Us From Ourselves: Reforming the Fiduciary Duty of Loyalty

Melanie B. Leslie, The Wisdom of Crowds?  Groupthink and Nonprofit GovernanceCardozo Legal Studies Research Paper No. 276  (2009). Available at SSRN.
Julia Belian

Julia Belian

In the wake of disaster, we as a species invariably reach out with untold generosity, donating vast amounts of cash and supplies to assist the victims.  And, just as invariably, at least some of the charitable organizations through which most of us funnel our compassion will drop the ball through some form of mismanagement.  In the past twenty years, the relief efforts following almost every major disaster – spring flooding in the Midwest, mudslides and wildfires on the West Coast, hurricanes throughout the Gulf of Mexico, tsunamis in the South Pacific, and, most famously, Katrina – have been plagued by reports of mismanagement ranging from lack of meaningful oversight to outright embezzlement.

Which should mean that right now, as the world struggles to come to the aid of a ravaged and overwhelmed Haiti, would be a prime time to consider meaningful reform of the standards by which such charities conduct their critical business.  For several years, Prof. Melanie B. Leslie of Cardozo School of Law has offered a clarion call for reform of the rules governing fiduciary conflicts of interest, especially within the nonprofit sector.  In the wake of the catastrophic earthquake January 12, the arguments and suggestions in her article The Wisdom of Crowds? Groupthink and Nonprofit Governance deserve serious attention. Continue reading "Saving Us From Ourselves: Reforming the Fiduciary Duty of Loyalty"

The 101 Biggest Estate Planning Mistakes

Gerry Beyer

Gerry Beyer

What fun!  That was my first reaction to this new book by Herbert Nass, the famous New York attorney who has worked on the estate plans of countless celebrities.  By using the wills of the rich, famous, and infamous as examples, Nass guides readers though the most common and significant mistakes individuals and their attorneys make during the estate planning process.

In the span of eleven chapters, Nass sets out his top 101 missteps which individuals and their attorneys are prone to take when planning an estate.  A good way to get a flavor of the scope of his coverage is to peruse the titles of his chapters: Continue reading "The 101 Biggest Estate Planning Mistakes"

Intrafamily Loans and Tangible Property

Joseph M. Dodge, Revisiting Dickman: Are Loans of Tangible Property Gifts? (FSU College of Law, Public Law Research Paper No.  405,  2009), available at SSRN.
Wendy Gerzog

Wendy Gerzog

The article Revisiting Dickman: Are Loans of Tangible Property Gifts? by Joseph M. Dodge, recently posted on SSRN, exhaustively covers this central question left unanswered by the Supreme Court in its 1984 Dickman decision. Dodge describes a common scenario in wealthy families: informally, parents allow their adult child to use their vacation home rent-free for an unspecified time. The piece then delves into the query about whether or not that familiar occurrence is a taxable gift. To answer that question, the article takes the reader into a wide-ranging discussion that includes property interests, imputed income, psychic benefits, Internal Revenue Code section 7872 (dealing with gift tax and income tax consequences of below-market interest loans of money), revocable transfers, and the estate tax consequences of the retained enjoyment of property.

Dodge argues against subjecting tangible personal use property to the gift tax. After all, he suggests, when you swim in a neighbor’s pool, that neighbor has not transferred a property interest to you. The permission to use property does not create a property interest in the user because it implicitly includes the power to revoke that permission.  Dodge analyzes Dickman, criticizing the court’s minimizing the real problem of cost-free loans of personal-use tangible property when it stated that the IRS was not interested in taxing such neighborly or familial gifts. The court too easily dismisses the issue by saying that, in any event, the annual exclusion and credit exemptions would shelter those transactions from any transfer tax. He critiques the court’s overgeneralizations and explains that the gift tax is not a tax on foregone economic opportunities but a tax on wealth transfers. Moreover, he states that the annual exclusion would not be available if a transaction was characterized as forming a tenancy at will plus a reversion, because there would be no ascertainable present value of the child’s interest.   After examining the case under different transfer tax principles, Dodge concludes that Dickman was doctrinally confused and wrongly decided. Continue reading "Intrafamily Loans and Tangible Property"

Policing Beyond the Framing Era

Wesley MacNeil Oliver, The Nineteenth and Early Twentieth Century Origins of Modern Criminal Procedure: A View from the New York City Police Department (2009); Wesley MacNeil Oliver, The Neglected History of Criminal Procedure, 1850-1940, 62 RUTGERS L. REV. (forthcoming 2010); Wesley MacNeil Oliver, Magistrates’ Examinations, Police Interrogations, and Miranda-Like Warnings in the Nineteenth Century, 81 TUL. L. REV. 777 (2007); Wesley MacNeil Oliver, The Rise and Fall of Material Witness Detention in Nineteenth Century New York, 1 NYU  J.L. & LIBERTY 727 (2005).
Andrew Taslitz

Andrew Taslitz

Most judicial opinions and scholarship concerning the history of criminal procedure relevant to constitutional interpretation stress colonial practices and the Framing Era response to them. A small number of scholars have addressed aspects of nineteenth century criminal procedure relevant to one criminal procedure constitutional provision or another. But no one has written a book-length treatment of the impact of the rise of professional policing from the mid-nineteenth century through modern times on the arc of constitutional law. Nor has anyone explored the theoretical implications of such history for constitutional interpretation. No one, that is, until now.

Wesley MacNeil Oliver, a newly-minted Associate Professor at Widener University School of Law, has just recently completed his dissertation – which he plans  to publish in book form in the next few years, and portions of which are currently available in the form of published articles – filling this important gap in the literature.  Oliver focuses his attention on the rise and evolution of the New York City Police Department. His emphasis is thus on state-level developments, but he places them in the context of broader national developments. Moreover, the N.Y.P.D.’s history is likely emblematic of the growth of police departments in major cities nationwide. Continue reading "Policing Beyond the Framing Era"

Might the Motivation for Agency Guidance Be the Public’s Need for Guidance?

Connor N. Raso, Strategic or Sincere?  Analyzing Agency Use of Guidance Documents,  119 Yale L. J. 782 (2010).

Ten years ago, Todd Rakoff observed that agencies seemed to be increasing their use of “guidance documents,” in possible preference to rulemaking or adjudication, as a newly preferred method of policy implementation.  Todd D. Rakoff, The Choice Between Formal and Informal Modes of Administrative Regulation, 52 Admin. L. Rev. 159, 167 (2000).  Others – including some casebook authors I know well – have since speculated that the trend might, at least in part, be a strategic reaction to the increased transaction costs associated with issuing substantive administrative rules – for example, having to deal with the Office of Information and Regulatory Affairs in negotiating an acceptable regulatory impact analysis.  See, e.g., Jerry L. Mashaw, Richard A. Merrill and Peter M. Shane, Administrative Law – The American Public Law System:  Cases and Materials 646-647 (6th ed. 2009).

In Strategic or Sincere?, Connor Raso, who will graduate this spring with both a J.D. from Yale and a Ph.D. in political science from Stanford, has written what protocol requires me to describe as a “Note” casting doubt on this hypothesis.  The Note begins with a section recounting how guidance documents are treated under the law, especially in comparison to substantive or “legislative” rules. Raso then recounts a number of recent studies that assume “that agencies use guidance documents in place of the notice and comment process, and then [debate] reforms to reduce this behavior.”  (798). A third analytic section catalogues potential institutional differences between legislative rules and guidance documents:  guidance documents may attract less political attention (which could be especially attractive if Congress and the President are generating different political signals); they may be harder to challenge in court because of ripeness and standing problems; they are exempt from APA procedural requirements; and their issuance is likely to consume fewer resources of time, personnel, and budget.  On the other hand, guidance documents may be more difficult to enforce (although Raso seems to waiver on this point) and less durable than legislative rules. Continue reading "Might the Motivation for Agency Guidance Be the Public’s Need for Guidance?"

The Nineteenth Century Administrative State

Jerry Mashaw, Recovering American Administrative Law: Federalist Foundations, 1787-1801, 115 Yale L.J. 1256 (2006); Jerry Mashaw, Reluctant Nationalists: Federal Administration and Administrative Law in the Republican Era, 1801-1829, 116 Yale L.J. 1636 (2007); Jerry Mashaw, Administration and “The Democracy”: Administrative Law from Jackson to Lincoln, 1829-1861, 117 Yale L.J. 1568 (2008); Jerry Mashaw, Federal Administration and Administrative Law in the Gilded Age, 1861-1901 (forthcoming in Yale L.J.) (SSRN Version).

Eminent historians, political scientists, and legal academics have long told us that the federal administrative state was almost non-existent until the twentieth century. They were wrong. In a series of four articles published in volumes 115 through 118 of the Yale Law Journal, Jerry Mashaw recounted the rich history of the federal administrative state in the nineteenth century.

The many scholars who believed that the federal administrative state did not exist in the nineteenth century were tricked by our tendency to rely primarily on judicial opinions to inform us of legal developments. There are very few court opinions involving judicial review of federal agency actions in the nineteenth century, but that lack of evidence of the administrative state was attributable to a characteristic of the administrative state at the time—federal agency actions rarely were reviewable in a federal court. The only way a citizen could obtain review of most federal agency actions in the nineteenth century was to sue the individual federal employee in a state court on the basis of some common law doctrine like trespass or conversion. The federal employee would defend his actions on the basis that he was performing duties authorized by federal law. A jury would then decide whether the employee was acting pursuant to law or had violated a common law right. Continue reading "The Nineteenth Century Administrative State"

Whose Trust is It?

John H. Langbein, Burn the Rembrandt?  Trust Law’s Limits on the Settlor’s Power to Direct Investments, 90 B.U. L. Rev. 375 (2010).
Tom Gallanis

Tom Gallanis

There is a central tension in the law of trusts between the rights of the settlor and of the beneficiaries.  On the one hand, the organizing principle of the law of donative transfers, as stated in Section 10.1 of the Restatement 3d of Property (Wills and Other Donative Transfers), is that the “donor’s intention is given effect to the maximum extent allowed by law.”  On the other hand, the Restatement 3d of Trusts emphasizes in Section 27(2) that “a private trust, its terms, and its administration must be for the benefit of its beneficiaries.”  A similar benefit-the-beneficiaries rule is codified in Section 404 of the Uniform Trust Code (UTC) and made mandatory in UTC Section 105.

This essay, Burn the Rembrandt?  Trust Law’s Limits on the Settlor’s Power to Direct Investments, by one of America’s leading scholars of trust law, Professor John Langbein of the Yale Law School, explores the limits that trust law places on the power of the settlor, as the author of the trust’s terms, to direct the trustee’s investment decisions.  The essay is a response to an earlier article in the Boston University Law Review by Professor Jeffrey Cooper, in which Professor Cooper criticized the benefit-the-beneficiaries rule, instead proposing greater deference to the intentions of the settlor, for example where the settlor “intentionally and thoughtfully impaired beneficiaries’ economic rights.” See Jeffrey A. Cooper, Empty Promises: Settlor’s Intent, the Uniform Trust Code, and the Future of Trust Investment Law, 88 B.U. L. Rev. 1165, 1166 (2008). Continue reading "Whose Trust is It?"

Politics at the Pulpit

Mayer, Lloyd H., Politics at the Pulpit: Tax Benefits, Substantial Burdens, and Institutional Free Exercise, 89 B.U. L. Rev. 1137 (2009), available at SSRN.

Although the next Presidential election is still a couple of years off, one controversy that is sure to return to center stage is the prohibition in section 501(c)(3) that  bans 501(c)(3) organizations from intervening in a political campaign for or against a candidate for public office.  The Alliance Defense Fund has set up a “pastor initiative” to create a test case regarding a religious leader’s right to endorse a candidate from the pulpit.  I, and others, have participated in a series of debates regarding this issue, and I have argued that the campaign ban is constitutional.  In preparing for one of the debates, I read Lloyd Mayer’s article, Politics and the Pulpit:  Tax Benefits, Substantial Burdens, and Institutional Free Exercise. Professor Mayer’s article puts a new twist on an old issue, and provides a pathway for the Supreme Court to follow when it confronts the issue.  I hope Mayer’s article is cited in the minority opinion, but the article is an important contribution for people thinking about campaign intervention and section 501(c)(3) organizations.

As a brief introduction, proponents of the campaign ban argue that it is constitutional for Congress to condition tax-exempt status on a set of restrictions that ensure that organizations are acting consistently with the purpose of the exemption.  In this context, Congress has determined that organizations that receive a subsidy from the government in the form of tax exemption should not be involved in endorsing candidates. (See Regan v. Taxation with Representation of Wash., 461 U.S. 540 (1983), upholding the limitation on lobbying contained in 501(c)(3)). In a sense, such actions are deemed by Congress to be not charitable.  (See Bob Jones University v. United States, 461 U.S. 574 (1983), denying tax-exempt status to Bob Jones University because it discriminated based on race and determined that such discrimination prevented an organization from being charitable).  Religious leaders have a right to endorse candidates, work for candidates, and run for office.  They simply cannot do so on behalf of 501(c)(3) organizations. Continue reading "Politics at the Pulpit"

“This Milk Doesn’t Taste Hormone-free”: Creating Trademark Liability when Companies Alter Credence Qualities

J. Shahar Dillbary, Trademarks as a Media for False Advertising, 31 Cardozo Law Review 327 (2009), available at ssrn and through Cardozo Law Review. 

What if you learned that those Niman Ranch steaks you’ve been purchasing for $40 per pound were no longer pasture-raised?  What if Aveda, without notifying you, decided to begin testing its products on animals?  Or if your Bridgestone tires were no longer union-made?  In each of these cases, it would be nearly impossible to detect the change merely by using the product.  For an increasing number and variety of products, consumers choose a particular brand or pay premium prices based on imputed qualities that they never experience.  Trademark and false advertising law exist to protect consumers from deceptive branding practices, but the situations described above are currently immune from liability.  Or at least they will be until more people read Shahar Dillbary’s new paper.

Since its origin in the tort of deceit, trademark law’s goal has been the prevention of passing-off, or as Dillbary refers to it, inter-brand fraud.  The typical case is one where the consumer, intending to purchase A’s goods is fraudulently induced to purchase B’s.  Trademark law exists to protect both producers and consumers and to minimize the substantial deadweight losses that would otherwise exist if consumers were forced to undertake extensive searches to obtain the appropriate products.  As Dillbary notes, however, trademark law is substantially less concerned with situations of intra-brand fraud where “the trademark owner uses its own mark to misrepresent its own goods.”  Dillbary, at 334.  According to Dillbary the unequal treatment of trademark misuse stems from the widely accepted premise that “the only legally relevant function of a trademark is to impart information as to the source or sponsorship of the product.” Id. at 332, quoting Smith v. Chanel, 402 F.2d 562 (9th Cir. 1968).  This premise ignores the substantial role that a mark play in providing information about the product itself, and it enables a particularly insidious class of consumer fraud. Continue reading "“This Milk Doesn’t Taste Hormone-free”: Creating Trademark Liability when Companies Alter Credence Qualities"

The CyberArt of Forgetting

Viktor Mayer-Schönberger, Delete: The Virtue of Forgetting in the Digital Age (2009).

“Since the beginning of time, for us humans, forgetting has been the norm and remembering the exception.”  (2)  Advances in information technology have been shifting this default, Viktor Mayer-Schönberger,  an Associate Professor of Public Policy and Director of the Information and Innovation Policy Research Centre at the Lee Kuan Yew School of Public Policy, National University of Singapore, argues. This shift may have grave consequences. Therefore, the default needs to be reset.  What these grave consequences are and how the reset can be managed are the core issues of his book.

At this stage it is my time for full disclosure: The author of Delete has been a long time friend. He is Austrian and I am German. We befriended at a time when the people in the field of information and law were all on a first name basis, and their numbers such that you could easily remember them without any technical support. Both our nationalities point to national memories, which, although different, keep haunting us and our countries, and Mayer-Schönberger does not leave them unmentioned. And finally, at about the time the book came out, the city archive building of my hometown Cologne, containing the city’s 2000 years of memory, collapsed into the excavation site of a subway tunnel.  All this did not make the reading of Delete the reading of just another treatise. Continue reading "The CyberArt of Forgetting"

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