Monthly Archives: March 2015

Human Rights for Corporate Persons?

Turkuler Isiksel, The Rights of Man and the Rights of the Man-Made: Corporations and Human Rights (January 7, 2015), available at SSRN.

The Citizens United and Hobby Lobby decisions have drawn heavy fire from critics of the Supreme Court’s ascription of constitutional and statutory rights to corporations. According to Professor Turkuler Isiksel, a political scientist at Columbia, things may be even worse than those critics appreciate. In the paper referenced above, Isiksel illuminates and offers a trenchant critique of disturbing developments in the transnational arena that may be unknown to specialists in U.S. corporate law. Multinational corporations are claiming that, as legal persons, they are entitled to the rights of human persons under international human rights law.

These assertions seek to shield corporations from domestic regulations imposed by host countries in which they do business. Isiksel’s primary focus is the international investment regime, consisting of a large web of bilateral investment treaties and regional free trade agreements. These are designed to promote foreign investment by guaranteeing protection from expropriation and excessively costly regulations for corporations that have invested in countries that are parties to these agreements. When disputes arise between a corporation and the host state, they are typically resolved through arbitration. Arbitral tribunals are supposed to apply the terms of the particular investment agreement but “they increasingly also make use of human rights law to assess state behavior toward foreign investors.” (P. 38.) Isiksel notes that “[i]nternational human rights law is congenial to firms looking to challenge state measures because it offers a framework for contesting the treatment of private actors by states.” (P. 40.) Continue reading "Human Rights for Corporate Persons?"

New Wine, Old Bottles, and a Do-Nothing Congress

Jody Freeman & David B. Spence, Old Statutes, New Problems, 163 U. Pa. L. Rev. 1 (2014).

The Rivers and Harbors Act of 1899 was adopted to protect against hazards to and interference with navigation. It prohibited “creation of any obstruction to the navigable capacity of any of the waters of the United States” or altering or filling navigable waters (§10) and also made it unlawful “to throw, discharge, or deposit . . . any refuse matter” into navigable waters “whereby navigation shall or may be impeded or obstructed,” although the Corps of Engineers could permit such a discharge if “anchorage and navigation will not be injured thereby” (§13). For two-thirds of a century, those provisions operated as one would expect. Then came the modern environmental movement, and in short order the courts and the executive branch turned these provisions about obstruction to navigation into a water-pollution control regime. As President Nixon drily put it in issuing an executive order that created a sweeping new pollution permit program under §13, the Act’s “potential for water pollution control has only recently been recognized.” Richard Nixon, Statement on Signing Executive Order Establishing a Water Quality Enforcement Program (Dec. 23, 1970).

This striking repurposing of a 19th century statute to solve 20th century problems is not unique. EPA’s current reliance on the Clean Air Act to regulate greenhouse gases can be seen as another example, this time using a 20th century statute to solve a 21st century problem (though the gap between the original conception of the statute and its repurposing is much less dramatic in this later instance). Jody Freeman and David Spence have now provided a valuable, and quite sympathetic, analysis of the technique of using “old statutes” to address “new problems.” Continue reading "New Wine, Old Bottles, and a Do-Nothing Congress"

The Constitution at Work: Everything Old is New Again

Sophia Z. Lee’s new book, The Workplace Constitution: From the New Deal to the New Right, traces a fifty-year history of the tumultuous battle over whether and when the Constitution should apply to employees working at private sector jobs. This is in part a story about the Supreme Court, but Lee also reveals a fascinating account of rapidly shifting alliances and tensions between and among civil rights groups, unions, employers, the right-to-work movement, and administrative agencies. With all of these players, Lee’s book could have easily gotten bogged down in details. Instead, it beautifully brings to life lawyers’ and activists’ deliberations over whether their interests would be well-served by the application of constitutional law in private workplaces, against the backdrop of changing constitutional jurisprudence and shifting legislative and regulatory priorities.

Of course, the end of the story will be familiar to many readers—after some hopeful starts for liberal and conservative supporters of the Workplace Constitution during the 1960s and early 1970s, it nearly disappeared after the Burger and Rehnquist Courts issued a series of narrow state action decisions. As Lee explains, this development was ultimately not unwelcome to many civil rights groups—this about-face was linked to the Court’s growing tendency to strike down governmental affirmative action plans on constitutional grounds, which meant voluntary affirmative action plans at private workplaces would also be threatened if the constitution applied there. But along the way, Lee opens a window on what might have been, describing administrative agencies’ creative uses of constitutional law to promote diversity within the entities they regulated. The FCC and the NLRB get the most airtime here, and the FCC’s efforts in particular were almost breathtaking: spurred on by activists, that agency concluded that it had the constitutional authority—or even the constitutional duty—to condition dozens of station’s licenses on the adoption of affirmative action programs, including educational programs designed to create a pipeline of qualified applicants. These programs yielded documented results; if they had been continued, today’s workforce diversity might be much improved, especially within highly regulated industries. Continue reading "The Constitution at Work: Everything Old is New Again"

The Impact of Federal Law on a Decedent’s Digital Assets

Naomi R. Cahn, Probate Law Meets the Digital Age, 67 Vand. L. Rev. 1697 (2014), available at SSRN.

Recently, estate planners and scholars have begun to grapple with the problem of transferring digital assets at death. In Probate Law Meets the Digital Age, Professor Naomi Cahn adds an interesting new dimension to this relatively new issue. She focuses on the effect of the Stored Communications Act (“SCA”) on estate administration. Although the SCA does not affect a fiduciary’s ability to distribute assets once they are discovered, it affects the fiduciary’s ability to examine on-line accounts to discover those assets.

The SCA, which was enacted nearly two decades before the development of Facebook, was passed in response to privacy concerns related to the internet. It was not aimed at transfers at death, but it certainly can impact probate administration in an era when most people have some sort of on-line presence. This has created a great deal of uncertainty for internet service providers as well as for fiduciaries, including personal representatives, agents, conservators, and trustees. As Professor Cahn points out in her piece, this uncertainty currently impacts anyone who dies with an e-mail account. Continue reading "The Impact of Federal Law on a Decedent’s Digital Assets"

In Praise of Accountability

Jeremy Waldron, Accountability: Fundamental to Democracy (April 2014), available at SSRN.

Accountability is a term that gets bandied about a great deal these days, sometimes as a criticism of regulatory government (agencies are not accountable to the people), sometimes as a justification for federalism (when government is closer to the people it is more accountable). It is also a term that has been widely disparaged by scholars as vague, fanciful and under-theorized. In Accountability: Fundamental to Democracy, Jeremy Waldron remedies this situation. By carefully parsing various meanings of the term, focusing on the essential meaning, explaining its importance, and responding to the concerns it raises, Waldron has convincingly demonstrated the way that accountability is, as his title asserts, fundamental to democracy.

To focus the discussion, Waldron distinguishes between three different ways in which the term “accountability” is used in political discourse. The first is forensic accountability, where the actions of a person with some sort of power or authority are assessed by a supervisory entity according to an established norm. The second is consumer accountability, where the power-holder acknowledges the importance of considering the views of the people whom its actions affect. Third is agent accountability, where the power-holder has been appointed by a principal, must report its actions to the principal, and can be sanctioned or dismissed if those actions are deemed unacceptable. Judicial review, where a court determines whether a statute or executive action violates the standards established by the Constitution, is an example of forensic accountability. Calls for “client-centered” administration, which figured prominently in Al Gore’s “Reinventing Government” initiative when he was Vice President, are based on consumer accountability. These may be important from a juridical or management perspective, Waldron argues, but the third type—agency accountability—is the one that is fundamental to democracy. Continue reading "In Praise of Accountability"

Not Business as Usual for In-House Counsel

One of the most interesting things written about professional responsibility in 2014 is not a book or a law review article, but the report of an internal investigation. Anton Valukas, a former United States Attorney, now chair of the Chicago law firm Jenner & Block, was retained by the board of directors of General Motors to investigate the company’s inadequate response to reports of a serious defect in some of its cars. As extensively reported, a faulty ignition switch used in several G.M. cars, including the Chevrolet Cobalt and Saturn Ion, would sometimes fail in a way that both shut off the engine and disabled the car’s airbags.1 The switch departed from its intended design in a crucial respect – the torque was less than specified, so that if a driver inadvertently bumped into it, or if the keys hanging from the ignition switch were too heavy, the electrical system might change from “run” to “accessory” mode. As early as 2005, G.M. started to receive reports of crashes in which the car’s airbags failed to deploy. At first they did not suspect a problem, as there were other factors that might have caused the airbags to fail to deploy. It was also hard to track down the problem because the engineer who had approved the original, faulty switch also approved a change to the switch design that solved the problem, but did so in a way that obscured the original problem.2 But by about 2007, it was becoming clear that there might be a defect in the electrical system of certain car lines. Finally, in early 2014, G.M. publicly disclosed the defect, began recalling as many as 2.6 cars, and established a compensation fund for the victims of switch-related accidents.

What happened between 2007 and 2014? The long and short of it is, evidence of a possible defect was fed into the machinery of a cumbersome, bureaucratic process that churned on and on without moving toward a resolution. G.M. did not set about to cover up the problem. It has a byzantine structure of review programs, tracking systems, and cross-disciplinary committees that exists precisely to detect and rectify issues like the ignition switch defect.3 Customer satisfaction issues, which comes to the attention of G.M. personnel involved in marketing, are supposed to get directed to engineers for improvement, coded for whether the problems are a mere annoyance or a possible safety concern.4 Managers from divisions of products, systems, and safety engineering periodically met with business managers to work on solutions to safety problems and overcome roadblocks.5 Additional committees dealt with problems manifesting themselves in the field, and had contact with representatives from engineering, marketing, business, and legal teams.6 Reading the description of these procedures and protocols, one comes away with the impression of a company that takes its obligations to customers quite seriously, but in reality the redundancy and ambiguity inherent in the structure sapped the energy from the company’s response. With multiple committees dealing with various aspects of the same problem, no person or centralized team had responsibility for making sure something got done. CEO Mary Barra memorably testified before Congress about the “G.M. nod,” when everyone in the room agrees with a proposed plan of action, but no one does anything to make it happen, and the “G.M. salute,” which consists of crossed arms with fingers pointing toward others, to whom responsibility is being punted.7 The human cost of this dithering can be measured in the injuries and deaths that would have been prevented if prompt corrective action had been taken. Continue reading "Not Business as Usual for In-House Counsel"

Big Data and Deterrence

Zenon Zabinski and Bernard Black, The Deterrent Effect of Tort Law: Evidence from Medical Malpractice Reform, available at SSRN.

In a provocative new piece, Zenon Zabinski and Bernard Black address one of the most stubborn questions within all of tort law: Does tort law deter? The idea of deterrence is so deeply embedded within tort law that it seems absurd that the answer isn’t clear cut. But alas, a full four decades after the law and economics movement propelled tort’s deterrent function onto center stage, the answer to the question has, so far, remained maddeningly inconclusive.

This is not for lack of effort or investigation. Indeed, over the past few decades, scholars have tried to assess tort’s deterrent function in a wide variety of contexts, using any number of methodologies, from interviews with organizational insiders, to targeted case studies, to experimental vignettes, to surveys to assess the behavior and motivations of everyone from physicians and corporate managers to in-house counsel and CEOs.

In addition, empirically-minded scholars have contributed to this sprawling literature, most notably by exploiting natural experiments. Thus, they’ve amassed data to evaluate external shocks to liability risk in “treated” environments to see whether accident rates go up when liability risk (for whatever reason) goes down. Continue reading "Big Data and Deterrence"

So Who, at the End of the Day, Owns Google (or Apple, or Microsoft, or Pfizer…)?

Chris William Sanchirico, As American as Apple Inc.: International Tax and Ownership Nationality, 68 Tax. L. Rev. __ (forthcoming), available at SSRN.

As I was sitting down to draft this review of Chris Sanchirico’s paper, I ran a simple search on Google News: “‘U.S. Companies’ and Tax”. Here are some of things I learned skimming through search results returned by major news outlets: “U.S. Companies” now stash over $2 trillion overseas in order to avoid taxes (NBCNews, Nov. 12, 2014); “U.S. Companies” use mergers to shift their legal address to low-tax jurisdictions in a strategy known as “inversion” in order to reduce their U.S. tax bill (Bloomberg, Oct. 28, 2014); and, one of Congress’ top priorities for 2015 is a tax reform aimed at “helping” “U.S. Companies” avoid the U.S.’s “highest-in-the-world corporate tax rates”, in order to grow the economy (CNBC, Nov. 17, 2014).

Clearly, the taxation of “U.S. Companies” plays a major role in public discourse. Roughly speaking, the two sides of the debate can be outlined as follows: U.S. multinational corporations either pay too much (because our tax system is not competitive compared with the rest of the world), or too little (because our tax system is riddled with loopholes). We need to reform our tax system so “U.S. Companies” are at par with their foreign competitors; or, we need to tighten our tax rules so as to make sure that “U.S. Companies” share the burden. While political views differ, the terms of the debate seem clear. Whichever side of the debate one takes, something must be done about how we tax “U.S. companies.”

Sanchirico, however, questions the core terms of the debate: “When we speak of ‘U.S. multinationals,’ what do we mean by ‘U.S.’? More specifically, to what extent are these ‘U.S.’ companies owned by non-U.S. investors?” Sanchirico’s ultimate answer is quite a shocker: we have no idea what we are talking about when we speak of “U.S. Companies,” at least in terms of who owns these companies. Continue reading "So Who, at the End of the Day, Owns Google (or Apple, or Microsoft, or Pfizer…)?"

The Law and Economics of the Civil Rights Revolution

Quantitative scholars too often seem intent on sucking the complexities and nuances out of history. Sometimes, however, throwing numbers at history can have the reverse effect. Historians get themselves into ruts, embracing assumptions and approaches that ultimately shorten the horizons of analysis. A certain predictability develops in the scholarship. New contributions add more bricks to a building whose dimensions have already been charted. What may be needed is a jolt to these assumptions and approaches, a compelling case for reconceiving the central issues. At its best quantitative analysis delves beneath the surface of the familiar, revealing unfamiliar patterns or connections. And in the unfamiliar may be the complexities, contradictions, and puzzles that suggest productive new directions for scholars of all methodological proclivities to explore.

While not a discipline-shaking work of scholarship, Gavin Wright’s Sharing the Prize: The Economics of the Civil Rights Revolution in the American South does use quantitative analysis to make a persuasive case for reconsidering several tenets that have become accepted wisdom among scholars of the civil rights movement. Wright, an economic historian, synthesizes an array of quantitative research—some his own, some the work of others—in support of a claim that is both striking and important: the landmark federal civil rights policies of the 1960s marked not just a revolution in legal rights for African Americans, but also a significant advancement in their economic wellbeing. Continue reading "The Law and Economics of the Civil Rights Revolution"