Yearly Archives: 2013

Punishing Taxpayers for Erroneous Convictions

Andrew Chongseh Kim, Beyond Finality: How Making Criminal Judgments Less Final Can Further the Interests of Finality, 2014 Utah L. Rev. (forthcoming), available at SSRN.

Appellate courts often adjudicate as if prison is free. While no doubt many judges and justices are concerned with the accuracy and fairness of the convictions they review, at least to a degree, they also make economic judgments as if the costs at issue were principally borne by the judiciary. Criminal defendants can lose appeals not because their claims are meritless, but because the issue was not timely or sufficiently raised below; courts affirm in the face of error on considerations of judicial economy or avoidance of further proceedings which would not have been necessary had the issue been raised in a timely manner.1

A court-focused analysis of costs might have been reasonable in an era when prison populations were much smaller and probationary sentences were available for almost every offense. Today, however, at issue in almost every criminal appeal is whether to affirm the issuance of a six- or even seven-figure check, paid not by the judiciary but by the taxpapers. Professor Andrew Chongseh Kim’s paper suggests that courts have been looking at the economics through the wrong end of the telescope. Continue reading "Punishing Taxpayers for Erroneous Convictions"

Managing Global Supply Chains: Coca Cola and Sugar in Brazil

Salo V. Coslovsky & Richard M. Locke, Parallel Paths to Enforcement: Private Compliance, Public Regulation, and Labor Standards in the Brazilian Sugar Sector, 41 Pol & Soc 496 (2013), available at SSRN.

An article in the Wall Street Journal in June 2013 described supply chain management as “The Hot New M.B.A.” The Whitman School of Management at Syracuse University says it has been focusing on supply chain issues since 1919, and says that now “[s]upply chain managers very often hold the key to corporate profitability.” But as well as managing supply chains from the perspective of efficiency, corporations also need to manage their legal and reputation risks, especially when their supply chains are global. Transnational corporations manage these risks by developing and monitoring compliance with their own codes of conduct. At the same time the states where producers and manufacturers operate have, and are developing, their own regulatory regimes.

In a special issue of Politics & Society on regulation in Latin America, Salo Coslovsky and Richard Locke examine interactions between private codes and public regulation focusing on Coca-Cola’s management of working conditions in its sugar supply chain in Brazil. As the authors point out, working conditions in the sugar production industry have generally not been good: sugar production inherently involves hard work in hot climates, and large and politically connected family firms are involved in sugar production in Brazil. Recent events illustrate that focusing on working conditions does not tell the whole story: in October 2013 Oxfam published a report which argued that increasing demand for sugar was encouraging large companies to displace poor sugar farmers. Coca-Cola promptly promised to take action to protect land rights of farmers in sugar-producing areas. Nevertheless, Coslovsky and Locke describe an interaction between private and public regulatory regimes that improves working conditions for sugar producers. And it is the interaction that matters: public regulation and Coca-Cola’s efforts combine to help workers. Continue reading "Managing Global Supply Chains: Coca Cola and Sugar in Brazil"

Can “Semi-Procedural Review” Help Solve the Problems of Constitutional Theory?

Ittai Bar-Siman-Tov, Semi-Procedural Review, 6 Legisprudence 271 (Dec. 2012), available at SSRN.

The most famous problem in American constitutional law is the counter-majoritarian dilemma, which asserts that it’s troubling for an unelected U.S. Supreme Court to invalidate duly enacted laws. In a journal article, Semiprocedural Judicial Review, Israeli legal scholar Ittai Bar-Simon-Tov makes an important contribution to the scholarly debate over this dilemma, drawing partly on the jurisprudence of several national and trans-national courts. This global focus distinguishes his article from some similar earlier work by American law professor Dan Coenen. Tov’s theory preserves judicial review but also promotes deliberative democracy.

The article starts with evidence that various courts have found laws unconstitutional, or illegal, because the laws were adopted without sufficient deliberation, public consultation, legislative findings, notice, or other procedural protections. The author himself does not reject substantive review, but he argues that examining a law’s procedural context should also determine legality, especially when courts are engaged in proportionality analysis (e.g. the balancing of the state’s interest versus the individual’s burden). This addition of procedural to substantive review minimizes the counter-majoritarian dilemma by fostering thicker democratic processes. Continue reading "Can “Semi-Procedural Review” Help Solve the Problems of Constitutional Theory?"

Soft Institutional Design

Margo Schlanger, Offices of Goodness: Influence Without Authority in Federal Agencies, U. Mich. Pub. L. Res. Paper No. 353 (September 9, 2013), available at SSRN.

Margo Schlanger is a law professor at Michigan well-known for her work on prisons, structural reform litigation, and civil liberties, but not (yet) on administrative law as such. Perhaps for precisely that reason, she has given us here a novel, plausible and important account of a new species of administrative institution, one that administrative lawyers have heretofore failed to describe in general terms. A “new” species not in the sense that the species is new to the world, of course, but in the sense that it is newly identified by theory. Field zoologists discover species or traits of species that complicate or overturn established theoretical taxonomies; W.H. Caldwell famously proved that the platypus is a mammal that nonetheless lays eggs (“monotremes oviparous, ovum meroblastic”—so ran the immortal telegram). Likewise, field research on institutional design in the wild often does more for the progress of knowledge than a dozen nth-decimal refinements on whiteboard models of administrative interaction.

The novel institutional form here is the “Office of Goodness,” an office embedded within a larger agency and tasked with promoting or enforcing an extrinsic value that is orthogonal to the agency’s mission, or even one that constrains the agency’s mission. Schlanger headed the Office of Civil Rights and Civil Liberties embedded within the Department of Homeland Security from 2010 to 2012, and she draws upon her personal experiences with the effort to temper the imperatives of security by a measure of attention to liberty and security. But there are no war stories here, only informed illustrations of the larger theme. And Schlanger identifies similar offices from elsewhere in the government. Continue reading "Soft Institutional Design"

I’m Shocked, Shocked To Find that Politics Is Going on in Here

Charles J. Morris, How the National Labor Relations Act Was Stolen and How it Can Be Recovered: Taft-Hartey Revisionism and the National Labor Relations Board’s Appointment Process, 33 Berkeley J. Emp. & Lab. L. 1 (2012), available at SSRN.

Charles J. Morris, Professor Emeritus at Southern Methodist University Dedman School of Law, is a giant in the field of labor law. After graduating from Columbia Law School in 1948, he practiced in Dallas, Texas, for just shy of 20 years before receiving an academic appointment at SMU, where he taught for about a quarter-century, from 1967 until his retirement in 1991. During his first year in teaching, Professor Morris began service as a labor arbitrator. In 1978 President Carter appointed Morris to serve on the Federal Services Impasse Panel (FSIP), a post he held until 1983. Despite his retirement, Morris has remained an active scholar. Indeed, Cornell University Press published his magnum opus, The Blue Eagle at Work: Reclaiming Democratic Rights in the American Workplace in 2005, a book that earned him a place on the Right-to-Work’s Ten Most Wanted list.

In other words, Professor Morris is an active 90-year-old with a plethora of institutional knowledge about the Act. He started law school when the National Labor Relations Act (NLRA) was the Wagner Act. He graduated from law school after the passage of Taft-Hartley. He practiced law for two decades before teaching labor law for another quarter-century. He has been involved in labor-dispute resolution as an arbitrator and as a member of the FSIP. His labor law scholarship spans five decades. He has lived through almost the entire history of modern labor law. So when he writes about the subject that puzzles all labor scholars—why is union density so low—those in his field should at least consider his thoughts. Continue reading "I’m Shocked, Shocked To Find that Politics Is Going on in Here"

A Decedent’s Digital After-Life

Jamie Patrick Hopkins, Afterlife in the Cloud: Managing a Digital Estate, 5 Hastings Sci. & Tech. L.J. 210 (2013), available at SSRN.

A decedent might have gone to join his digital property in the clouds, but for the estate lawyer here on earth, these digital assets may require more novel and not (as of yet) widely embraced estate planning techniques.

In his recent article, Professor Jamie P. Hopkins identifies the digital assets that increasingly are property interests of a decedent’s estate. The mechanics for establishing joint ownership of digital assets is less than clear; the importance of including digital assets in the estate plan for their post-death transfer is highlighted. Continue reading "A Decedent’s Digital After-Life"

Does My Digital Estate Belong to Me? Estate Planning for Digital Assets

Jamie Patrick Hopkins, Afterlife in the Cloud: Managing a Digital Estate, 5 Hastings Sci. & Tech. L.J. 210 (2013), available at SSRN.

In the article, Afterlife in the Cloud: Managing a Digital Estate, Professor Jamie Hopkins steps into the tangled web of estate planning for digital assets. Professor Hopkins’s article is timely and allows us to begin a much needed discussion about a new and important area of estate planning. He begins to answer the question of what happens to digital assets when an individual dies. Can an individual dispose of his or her digital assets in a will or trust? How should issues of security and privacy be addressed? Hopkins reminds us that digital assets are vast and complex and traditional estate planning tools do not adequately address the issues that are involved with transferring such assets at an individual’s death. He suggests a combination of federal legislation and better service agreements between service providers and users as a solution to the digital dilemma.

Although, I am not convinced that federal legislation is the appropriate mechanism, I agree that uniformity is in order. Since only a handful of states have addressed the issue, many individuals are not aware of whether they may transfer certain assets when they die. For example, in my will, I devise my real and personal property to my designated beneficiaries. When I executed my will several years ago, I used a 35mm camera to take pictures. I used a day planner to keep my schedule, I kept paper copies of bank statements and other financial documents, and I used a Rolodex to store information from professional contacts. Today, my digital photographs are stored on a hard drive or in a cloud. I use an online scheduler to keep my appointments, I use online banking for most of my investments, I share photographs and videos via Facebook, I download my music and books from ITunes, and I use Twitter for professional connections. I have numerous passwords to these accounts, and I have checked “I agree” to several online service agreements. Will my beneficiaries have access to my digital assets? Professor Hopkins’s article is a wake-up call for people like me. Continue reading "Does My Digital Estate Belong to Me? Estate Planning for Digital Assets"

Tort as Backstop to Regulation in the Face of Uncertainty

Thomas Merrill & David Schizer, The Shale Oil and Gas Revolution, Hydraulic Fracturing, and Water Contamination: A Regulatory Strategy, Columbia Law and Economics Working Paper No. 440 (2013).

Thomas Merril and David Schizer—a property law theorist and tax law expert— deliver an ostensibly new framework for analyzing tort liability-regulation tradeoffs, standing on the shoulders of the pioneer in this area in the 1980s, Steven Shavell.  In The Shale Oil and Gas Revolution, Hydraulic Fracturing, and Water Contamination: A Regulatory Strategy,  Merrill and Schizer offer a fairly modest strategy for regulating water contamination from hydraulic fracturing (also commonly known as “fracking”), a practice that is “transforming the energy landscape of the United States.”  But their proposals lay the groundwork for a more ambitious project: to reassess the balance between tort liability and regulation in areas that pose emerging, and incompletely understood, health and safety risks.  Fracking exemplifies the widespread trend of new, controversial practices with highly uncertain risks.  Tort law emerges as a backstop to best practices regulation: tort liability rules provide “a form of protection for those injured by technological innovations, while information gradually accumulates that may eventually lead to more protective ex ante regulation.”

Hydraulic fracturing is a controversial process whereby energy companies pump fluid into shale formations at high pressure to crack the rock and release the gas and oil trapped inside.  Merrill and Schizer are not shy about their overall support for the “fracturing boom,” which holds the potential to “increase the competiveness of the United States in the global economy, reduce our reliance on energy imports and enhance our energy security.”  At the same time, they acknowledge the potentially high price of fracking: increased air pollution, traffic and congestion (all risks associated with conventional oil and gas drilling) and, most significantly, potential contamination of groundwater (a unique risk associated with fracturing). Continue reading "Tort as Backstop to Regulation in the Face of Uncertainty"

Once a U.S. Corporation, Always a U.S. Corporation…

Omri Marian, Jurisdiction to Tax Corporations, 54 B.C. L. Rev. 1613 (2013).

Imagine a 19 year old college student in Texas stumbles upon a new business idea to sell built-to-order computers shipped directly to customers out of his dorm room.  The idea proves revolutionary, and the student is inundated with orders.  To grow the business the student forms a corporation, naturally in Texas.  Eventually the corporation grows into the largest personal computer maker in the world, with over 90% of its sales outside the United States.

Absent some significant tax planning, however, the company would pay US tax on all of its worldwide income, including the income from foreign sales.  This is because the United States taxes the worldwide income of all U.S. taxpayers regardless of the source of the income. On the other hand, an identical “foreign” company with identical sales would only be subject to U.S. tax on the income from sales made inside the United States..  The reason for this disparity is that, under U.S. law, a corporation is treated as a U.S. taxpayer if it is legally organized under the laws of the United States, any State thereof or the District of Columbia and foreign if it is not, regardless of business model or source of income. Continue reading "Once a U.S. Corporation, Always a U.S. Corporation…"

It’s the System, Stupid?

Mitu Gulati and Robert E. Scott’s new book, The Three and a Half Minute Transaction: Boilerplate and the Limits of Contract Design examines the pari passu clause, a clause designed to ensure a debtor’s creditors rank against each other equally. It asks why a standard clause in cross-border financial contracts remained in sovereign debt contracts after a well-known but minor judgment in a Belgian court suggested that the clause should be amended or removed. The book reveals that the majority of practitioners designing and drafting these contracts did not have a coherent and consistent explanation of the origin, purpose, or meaning of the term in sovereign debt contracts. How can it be that sophisticated legal practitioners can put forward contracts, worth millions or even billions of dollars, where they do not understand a term common to, and prominent in, the contract? And once a court decision, albeit an ‘unreliable’ ex parte Belgian decision, threatens to undermine received wisdom on the overall effect of those sovereign debt contracts, posing not insignificant risk that the clauses will be litigated, how is it that these terms remain largely unaltered? Moreover, why is the clause not removed if, as many seem to think, it performs no discernible and certainly no predictable function in the sovereign debt arrangements?

These are some of the fascinating questions explored in Gulati and Scott’s excellent book, The Three and a Half Minute Transaction. Part empirical project, part theoretical exposition of securities law, and part detective novel reaching back to Bolivia in 1870, it is a highly readable and nuanced account of how elite lawyers approach the drafting of sovereign debt contracts. The account is theoretically and empirically rich. Its conclusion is that modern legal practice poses significant challenges to the evolution of professional practice. It also raises questions about whether and how systemisation works. Systemisation is the idea that legal practice can be disaggregated into component parts and automated through processes (checklists, software and the like). As a favourite theme of innovators keen on developing legal practice beyond the inefficient artisan model— the book serves as a reminder as to how systemisation needs to cope with the complexity and stickiness of clients and markets. Continue reading "It’s the System, Stupid?"