Black Metropolis Research Consortium
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Insider Trading: Easterbrook and Fischel and Easterbrook vs. Fischel
Get PDFThis Article examines the perspective on insider trading in Frank Easterbrook and Daniel Fischel’s classic work, The Economic Structure of Corporate Law, comparing it with the perspectives the authors have taken in other work on the topic in which the Book’s authors did not coauthor with each other. While Easterbrook and Fischel have similar conceptions about the meaning of “fairness” in securities regulation and corporate law, their differing assumptions about the efficacy of the contracting process within the corporation explain their disagreements about what insider trading law should look like.
Both Easterbrook and Fischel correctly view material inside information as a form of property right. And they correctly identify the firm that generates or “invents” the information as the owner of that property right. Similarly, both Easterbrook and Fischel are consistently sympathetic to the concept that insider trading should be the subject of intra-firm contracting.
Unlike Easterbrook, Fischel predicts that intra-firm contracts regarding insider trading would be highly permissive if public companies were allowed to enter into such contracts. This seems unlikely. Companies go to great lengths to keep certain kinds of information secret, and they routinely fire employees who trade on material nonpublic information.
Finally, Easterbrook & Fischel’s contract-based analysis serves to elucidate the core problem in current insider trading litigation, which is how to deal with tippee liability, in which an insider intentionally “tips” or provides material nonpublic information to an outsider while knowing that the outsider either planned to trade on the information or was highly likely to trade on the information.
The Easterbrook and Fischel analysis forces those evaluating the legality of this tip to consider whether the tip provided any benefit to the corporation whose information was tipped. For example, it might be the case that, absent tipping, a company would be unable to attract coverage by stock market analysts, whose coverage can improve the liquidity and the value of the companies whose shares are being traded. In such cases it would be consistent with Easterbrook and Fischel’s contractual perspective for companies to permit the disclosure by insiders to tippees as a quid pro quo for those tippees’ willingness to provide a continuous two-sided market in the shares of the company
State Policy in Federal Courts: Stabilizing the Burford Abstention Doctrine
Get PDFThe federal abstention doctrines govern the narrow circumstances under which a district court can decline to hear a case even though it has proper jurisdiction. One of those doctrines—Burford abstention—has generated a morass of confusion over when it applies and what goals it is meant to achieve. To find a way out of the morass, this Comment looks at contemporaneous developments in doctrines of federal court review—and at the procedural history of Burford itself—to pinpoint the precise problem that Burford abstention was created to solve. It argues that the Burford Court was wary of federal courts exercising jurisdiction in cases like Burford where states had organized their systems of government in ways that did not neatly parallel the federal separation of powers. When state courts have been empowered to exercise complex administrative agency–style discretion, federal courts are not a comparable substitute. Judges in the federal system, who have life tenure, may not be able to adequately step into the policymaking shoes of state court judges, who are, for better or for worse, more democratically accountable.
This Comment proposes a straightforward test—the “Judicial Discretion Test”—that courts can use to determine whether Burford abstention is appropriate. The Test uses judicial discretion as a proxy for policymaking authority. Under the Judicial Discretion Test, if a state court judge hearing the case would have significantly more discretion under the state law at issue than a federal court judge would have when hearing a comparable case under federal law, the federal court should abstain in favor of state court. This Test is more administrable than the current framework under which courts perform ad hoc analyses, often cherry-picking particular facts from the original Burford case and looking at how closely those facts match the ones in the case at hand. As this Comment shows, it also better vindicates each of the concerns that motivated the original creation of the Burford abstention doctrine
Managerial Contracting: A Preliminary Study
Get PDFImportant types of contractual relationships — among them those between integrated product manufacturers and their suppliers — are neither fully transactional nor fully relational. The agreements that govern these relationships incorporate highly detailed written terms that focus not only on what is promised but also on the details of how it is to be achieved and how suppliers’ actions will be monitored and responded to over the life of the agreement. Together with the implicit relational contracts that support their operation, these provisions create an economic hybrid that lies between markets and hierarchies, a set of relatively standard institutional arrangements that give buyers the right (but not the obligation) to exercise a package of quasi-integration rights that enables them to obtain many of the most important benefits of vertical integration while simultaneously reaping most of the core benefits of outsourcing.The contract provisions used to govern these relationships are termed here “managerial provisions” because they employ the techniques of intra-firm hierarchy that managers use to organize relationships and increase productivity within firms. This article focuses on a subset of these provisions, namely those that are analogous to each of the 18 management practices that the World Management Survey (“WMS”) reveals are closely associated with persistent performance differences across similarly situated enterprises. After documenting the convergence between these practices and the terms of procurement contracts, the article suggests that the contract governance regime these practices create is well designed to support the creation and maintenance of cooperative relationships, strengthen the force of network governance, and scaffold the emergence of the type of inter-firm process-based trust that is associated with better supplier performance.More generally, the article concludes that in the modern economy, where the value of so many types of contracts — from research and development alliances to business process outsourcing agreements and beyond — depends on employees of the contracting entities working together much as if they worked for a single firm, lawyers would be well advised to look to the broad array of managerial techniques successfully used within firms (not only those based on WMS practices) to develop new ways to better govern transactions between firms
Democracy and Statehood
Get PDFThis Essay addresses the relationship between democracy and statehood. The two concepts have been linked since the 1990s, when new entities claiming statehood were expected to have constituted themselves on a democratic basis and to have put in place democratic government structures to be recognized by the international community. Yet, as Professor Tom Ginsburg’s book Democracies and International Law reveals, the rise of autocracies and a general backlash against democracy in the last three decades have led to changes in countries’ behavior. This Essay argues that today, the requirement of democratic process and institutions for international recognition is less stringent. Even more, it posits that if autocracies team up to recognize other similarly non-democratic entities, democracy might play no role in the formation of new states in the long run. In this regard, Democracies and International Law may signal an end to the 1990s European approach to recognition and be an indication of a new reality in the area of statehood
Tianxia, or another Grossraum? U.S.–China Competition and Paradigm Change in the International Legal Order
Get PDFIn this Essay, I try to provide some clarification on the concept of Tianxia from the perspectives of both classical Chinese philosophy and constitutional theory, which Tom Ginsburg nominated as the source of authoritarian international law. My observation is that a paradigm shift is occurring in the international legal order. Tianxia designates the ideal relationships between states in the Chinese classics. And in the new paradigm, Tianxia is expected to integrate the international society. In that sense, I take Tianxia as a regime-neutral ideotype between democratic/Western and authoritarian/non-Western legal order. However, Chinese engagement with international law has shown a tendency towards realism since 1949, and at the root of that realism is Western nationalism. In Carl Schmitt’s theory, the latter will finally bring about the plurality of spatial legal order (Grossraum), which gives birth to national and regional legal systems. Accordingly, it is still too early to tell whether China is willing take advantage of the transition to Tianxia
WIPO’s Proposed Treatment of Sacred Traditional Cultural Expressions as a Distinct Form of Intellectual Property
Get PDFFor the past twenty years, the United Nations’ World Intellectual Property Organization (WIPO) has been working on what could be a major shift in international intellectual property law. WIPO’s work has uniquely focused on intellectual property protection for “traditional cultural expressions” (TCEs), a term which roughly describes a broad conception of indigenous groups’ intellectual property. Most recently, WIPO published its latest proposed Draft Provisions/Articles for the Protection of Traditional Knowledge and Traditional Cultural Expressions, and IP & Genetic Resources. These Draft Provisions propose a tiered rights system in which the owners of sacred TCEs receive more protective rights than the owners of secular TCEs. While the instinct to protect the intellectual property of indigenous groups is admirable in light of indigenous groups’ exploitation and exclusion from Western intellectual property regimes, a protection system that all nations accept has been difficult to reach. Even more so, a system that differentiates among TCEs based on their sacredness will need to be justified to convince as many nations as possible (or at least a critical mass of nations that heavily influence international intellectual property policy) to adopt WIPO’s proposed system. Assuming that a novel system for TCEs protection is a generally good idea, this Comment explores potential justifications for the Draft Provisions’ sacred versus secular distinction.
Potential justifications can be divided into three categories: value-based, harm-based, and traditional IP justifications. Value-based justifications suggest that sacred TCEs should receive heightened protection because they are more valuable, either economically or intrinsically. Harmbased justifications suggest that sacred TCEs should receive heightened protection because of the harms that would come about if they did not receive this protection, such as devaluation, cultural extinction, offense, and desecration. Traditional IP justifications suggest that sacred TCEs should receive heightened protection for the same reasons that IP generally should be protected, such as: incentivizing creativity and distribution; rewarding labor; personality, autonomy, and personal development; and developing a just and attractive society. Of these justifications, the most convincing are economic value justifications and just and attractive society justifications. Framing potential justifications in terms of justifications already familiar to the IP field will increase the likelihood of a critical mass of nations adopting the Draft Provisions
What we ask of law
Get PDFA minimal, reasonably uncontroversial, demand of a legal system is that it should stabilize a polity against the chance hazards of ordinary violence and soften the blows of extraordinary, destabilizing misfortune. Law in the contemporary United States, however, has not abated the lethal toll of violent crime, the serial mass shootings of children, the endless flow of racialized police violence, or even the toll of insurrectionary violence that shadows democratic politics. The gap between law’s operation in practice and its ultimate aspirations toward social order offers a hint that something in our dominant working model of law, and its relation to an ideal of the rule of law, is awry.
This review essay reconsiders the presently dominant assumptions about a well-functioning legal system to in light of new evidence of how law operates across a wider historical and geographic panorama. This exercise in historically contextualization has implications for the choice of a sound working definition of law, a clear understanding of the latter’s relationship to the rule of law, and an accurate sense of whether law is likely to advance or retard emancipatory projects of social reform, especially pertaining to racial injustice. The occasion for this reconsideration is Professor Fernanda Pirie’s book The Rule of Laws: A 4,000-Year Quest to Order the World, an extraordinary and ambitious effort to fuse historical, anthropological, sociological, and legal learning across continents and eras into a single narrative arc. Starting with the historical materials eloquently marshalled by Pirie, I refine a new ‘polythetic’ definition of law that is distinct from the demotic definition of law commonly used in both popular and juristic discourse. To illuminate its distinctive form and implications, I bring this ‘polythetic’ definition into conversation with the leading jurisprudential theories of H.L.A. Hart and Lon Fuller. This sparks new ways of thinking about the relation of law to the state on the one hand, and about legalistic aspirations of the rule of law on the other. In concluding, I consider the implications of the polythetic definition of law for the pressing contemporary problem of how law relates to projects of racial hierarchy or reform
Procedural Losses and the Pyrrhic Victory of Abolishing Qualified Immunity
Get PDFWho decides? Failing to consider this simple question could turn attempts to abolish qualified immunity into a Pyrrhic victory. That is because removing qualified immunity does not change the answer to this question; the federal courts will always decide. For an outcome-neutral critic of qualified immunity who cares only about its doctrinal failures, this does not matter. But for the vast majority of critics who are outcome- sensitive, meaning they care about qualified immunity because of its role in police accountability, this is a troubling realization. Building on earlier work on the equilibration thesis, as well as on qualitative and quantitative analysis of both the entire federal judiciary and the recent spate of Trump appointees, this Article argues that absent qualified immunity, courts are likely to issue more merits decisions against the plaintiffs that outcome- sensitive critics care about. These merits decisions would not only be necessarily broader than a decision on qualified immunity’s “clearly established” prong but may be entrenched for decades because of the current liberal-led attempts to strengthen stare decisis.
From this specific discussion, the Article takes a general lesson. As the political economy around advocates changes, they must reevaluate the tools at their disposal. Old friends may become foes and former enemies may become saviors. This lesson underlies many of the current debates about the role of various institutions, such as those surrounding court reform and the distribution of federal-state and state-local power. This Article makes this lesson explicit and extends it to the realm of constitutional litigation. In that realm, advocates and policymakers should prefer procedural losses to merits or justiciability decisions because hostile procedural doctrines can be modified by the political branches, while substantive and justiciability doctrines are solely the province of the courts.
Finally, by combining the question “who decides?” with the nascent literature on power-shifting, this Article suggests a way for qualified immunity’s outcome-sensitive opponents to go beyond least-bad losses to actual wins. Such individuals should focus their considerable political will on encouraging legislation that raises the floor of substantive rights and empowers the communities most affected by police violence, thereby shifting the power to decide away from the federal judiciary