Black Metropolis Research Consortium
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Jurisdiction as Power
Get PDFFor centuries, courts and legal commentators defined “jurisdiction” by reference to a court’s “power.” A court that lacked jurisdiction, under this conception, simply lacked the ability to bind the parties, and its resulting rulings could therefore be regarded by both litigants and later courts as void and of no legal effect. But in the middle decades of the twentieth century, the Supreme Court and other U.S. courts strongly embraced the so-called bootstrap doctrine—a distinctive branch of preclusion law that severely limits the ability to collaterally attack a judgment based on a claimed lack of jurisdiction. Because the bootstrap doctrine effectively allows courts to establish their own jurisdiction simply by concluding that they possess it, critics of the power-based conception contend that the definition no longer provides a descriptively plausible or conceptually coherent account of jurisdiction’s identity.
This Article defends the traditional power-based conception of jurisdiction’s identity as both conceptually coherent and normatively desirable. The key to reconciling jurisdiction-as-power with the bootstrap doctrine is to recognize that different criteria may be appropriate for different decision makers at different stages of the adjudicatory process. From the perspective of the rendering court, the applicable jurisdictional rules supply the sole criteria of legal validity. A conscientious judge seeking to work within the confines of her own authority has no discretion to ignore jurisdictional limits or to proceed to a final judgment unless she determines that jurisdiction actually exists. But from the perspective of a later court called upon to recognize an earlier court’s judgment, the criteria of validity are supplied instead by the bootstrap doctrine. That doctrine would sometimes require a later court to act as if jurisdiction were present in the original proceeding even if it was not. But such “as if” exceptions are a familiar part of our law and are not generally understood to supplant or displace the underlying legal rules.
The power-based conception of jurisdiction is not only descriptively plausible and conceptually coherent; it also facilitates jurisdiction’s distinctive role in structuring and allocating decision-making authority between different actors and institutions. Understanding jurisdiction as power can also lead to a deeper understanding of jurisdiction’s necessary effects and illustrate why several of the effects often associated with jurisdiction—such as nonwaivability and insusceptibility to equitable exceptions—are not, in fact, essential to jurisdiction’s identity. Finally, a clearer understanding of jurisdiction’s identity as the “power” of a rendering court can also help inform and clarify various jurisdictional doctrines and lead to a better understanding of the federal judiciary’s role in the constitutional structure
The New Corporate Governance
Get PDFIn the last few years, there has been a dramatic increase in shareholder engagement on environmental and social issues. In some cases shareholders are pushing companies to take actions that may reduce market value. It is hard to understand this behavior using the dominant corporate governance paradigm based on shareholder value maximization. We explain how jurisprudence has sustained this criterion in spite of its economic weaknesses. To overcome these weaknesses we propose the criterion of shareholder welfare maximization and argue that it can better explain observed behavior. Finally, we outline how shareholder welfare maximization can be implemented in practice
Who Can Tax Telecommuters?: A Case for an Economic Presence Regime
Get PDFShould telecommuters who work across states be taxed by the state that they are physically working in? By the state their office is located in? By both? This issue was raised in New Hampshire v. Massachusetts. There, New Hampshire challenged the taxing authority of a Massachusetts rule that taxed New Hampshire residents who had worked within a Massachusetts office prior to COVID-19 related restrictions but were telecommuting from New Hampshire. New Hampshire argued that the Massachusetts rule violated both the Due Process Clause and Commerce Clause. Since the Supreme Court had denied certiorari for this case, the constitutionality of the Massachusetts rule is in question and states continue to have their own tax treatment for interstate telecommuters.
After the 2018 case of South Dakota v. Wayfair, physical presence is no longer necessary for a state to subject an out-of-state business to state sales taxation. Yet there is no consensus regarding the extent of Wayfair’s holding to other taxes or how much physical presence should be relied upon as a basis for taxation. Without a principle to ground taxation, multiple states may exercise taxing authority over the same income, exposing taxpayers to burdensome double taxation. The issue of interstate telecommuting introduces a more fundamental issue for state taxation: should tax authority be based on physical presence or some form of economic presence?
This Comment will argue that the Massachusetts tax rule should be upheld under an economic presence analysis. The Comment will then argue that because of the taxing jurisdiction granted to the state where the telecommuter has an economic presence, the state of the telecommuters’ physical presence should generally not have taxing jurisdiction. Finally, this Comment will argue that an economic presence regime should be adopted to replace the outdated physical presence regime, ensuring that state tax regimes are grounded on principle rather than a desire for revenue
Strategic Rulemaking Disclosure
Get PDFCongressional enactments and executive orders instruct agencies to publish their anticipated rules in what is known as the Unified Agenda. The Agenda’s stated purpose is to ensure that political actors can monitor regulatory development. Agencies have come under fire in recent years, however, for conspicuous omissions and irregularities. Critics allege that agencies hide their regulations from the public strategically, that is, to thwart potential political opposition. Others contend that such behavior is benign, perhaps the inevitable result of changing internal priorities or unforeseen events.
To examine these competing hypotheses, this Article uses a new dataset spanning over thirty years of rulemaking (1983–2014). Uniquely, the dataset is drawn directly from the Federal Register. The resulting findings reveal that agencies substantially underreport their rulemaking activities—about 70 percent of their proposed rules do not appear on the Unified Agenda before publication. Importantly, agencies also appear to disclose strategically with respect to Congress, though not with respect to the president. The Unified Agenda is thus not a successful tool for Congress to monitor and influence regulatory development. The results suggest that legislative, not executive, innovations may help to augment public participation and democratic oversight, though the net effects of more transparency remain uncertain. The findings also raise further inquiries, such as why Congress does not render disclosure requirements judicially enforceable
The Legal Envelope Theorem
Get PDFNontax legal rules regulating the workplace, the financial sector, real property, and many other areas affect the ability of governments to collect revenues and provide public goods. Yet tax-collection considerations rarely enter into economic analyses of nontax legal rules. Usually, tax-collection concerns are shunted aside to separate studies (and separate law school courses) rather than integrated into debates in nontax spheres. This separation between nontax legal rules and tax-collection considerations bears significant negative consequences for the ability of law and economics to generate descriptively accurate and normatively attractive accounts of important nontax legal questions.
This Article takes a step toward remedying that oversight. We present an analytic framework for understanding the interaction between nontax legal rules and tax collection. This framework—which we call the Legal Envelope Theorem—demonstrates that legal rules should systematically deviate from simple notions of efficiency to take stock of tax effects. We then provide a series of examples applying the Legal Envelope Theorem, illustrating how the nontax legal system ought to be (and, on occasion, actually is) designed with tax effects in mind. These examples range from parental leave mandates to bank capital requirements to centuries-old property and contract rules regularly taught in introductory law school courses. We illustrate how a framework that is attentive to tax-collection considerations can enhance the government’s capacity to redistribute resources and address wealth inequality
Checks, Not Balances
Get PDFCritics of the administrative state who would revive the nondelegation doctrine and embrace the unitary theory of executive power often assume that each branch’s powers are capable of precise definition, functionally distinct from the others, and that the formal boundaries between each branch are sacrosanct. This Article situates these critiques in Founding Era and nineteenth century debates about the structure of the Constitution. In the 1780s, the AntiFederalists objected to the Constitution for failing to enumerate a precise taxonomy of each branch’s powers, for failing to specify that each branch’s powers were exclusive, and for failing to make government officials sufficiently accountable to the voting public. The drafters responded that the Anti-Federalist approach would neither support effective government nor prevent the branches from acting tyrannically. Rather than develop a scheme of discrete and precisely divided powers, as the Anti-Federalists proposed, the drafters preferred precise rules of inter-branch coordination to ensure that no one branch dominates the others. This debate continued throughout the nineteenth and early twentieth centuries, with influential legal minds such as Daniel Webster and Joseph Story rejecting the Anti-Federalist theory of separation of powers.
We call this a theory of separation of powers based on a principle of anti-domination. On this view, the separation of powers is breached only if one branch deprives another of its procedural capacity to check the others. We further argue that this theory (a) provides a plausible account of the Framers’ understanding; (b) has had significant purchase in the development of interbranch relations since the Founding and thus can serve as a kind of rational reconstruction of historical practice; and (c) is consistent with the relevant constitutional text and the overall constitutional structure
The Bankruptcy Tribunal
Get PDFThe United States Bankruptcy Code (the Code)1 and the Federal Arbitration Act (FAA)2 are powerful statutory schemes. Each one demands a broad scope of influence and preempts many other fields of law, state and federal. The capacious nature of these statutes creates a challenging tension when they come into conflict. On the one hand, bankruptcy law is in its very essence a collective multiparty dispute resolution procedure that cannot be waived or altered by private contract. On the other hand, the FAA embodies a general federal policy in favor of allowing parties to contract into private dispute resolution procedures.
This Symposium focuses on resolving that tension. Doing so requires an examination of important questions about the scope and operation of bankruptcy law.3 In our view, the interaction between the FAA and the Code is a version of a familiar and fundamental bankruptcy problem: When, and under what circumstances, should parties be allowed to opt in or out of the “bankruptcy tribunal” for the resolution of bankruptcy and bankruptcy-related matters?
This Article develops a general principle for thinking about that bankruptcy tribunal problem in the corporate bankruptcy context. As a definitional matter, we use “bankruptcy tribunal” to mean a federal court applying the Code and following the procedures commonly associated with bankruptcy cases as opposed to courts in other jurisdictions or in federal courts presiding over cases not brought under the Code. A more formal way to say the same thing is that, in the United States,4 a bankruptcy tribunal is a court exercising jurisdiction under 28 U.S.C. § 1334.5
We consciously avoid the term “bankruptcy court,” which creates a false distinction between a bankruptcy proceeding in a United States Bankruptcy Court and a bankruptcy proceeding in a United States District Court. For our purposes here, the District Court and the Bankruptcy Court are constituent parts of the same bankruptcy tribunal and function in the same role when presiding over bankruptcy matters.6
Our general principle is that the bankruptcy tribunal should be the exclusive tribunal to resolve a dispute if sending that dispute elsewhere would thwart the Code’s purpose of providing a collective forum where parties can coordinate to resolve multiparty disputes that involve distressed firms.7 When a case is brought into the bankruptcy tribunal, bankruptcy rules displace a substantial portion of non-bankruptcy law and private ordering. Because bankruptcy law’s essential function is coordinating a collective muti-party resolution, the displacement of private ordering is predominantly procedural and requires coordination even when that coordination conflicts with the procedures that would exist under non-bankruptcy law.8 To bring the parties toward one global resolution, bankruptcy law brings their substantive claims into the bankruptcy tribunal and subjects them to one set of mandatory procedural rules.
The FAA, on the other hand, has no similarly broad unifying purpose. It embodies a preference for private ordering of procedure. It reflects the view that parties should be able to choose for themselves whether future disputes should be resolved through arbitration. But that is the same private ordering of procedure that bankruptcy law must displace to achieve its collective coordinating purpose. This creates an inherent conflict.9 Subordinating the Code to the FAA allows a two-party option to avoid the bankruptcy tribunal. The purpose of bankruptcy law is to address the collective action problems that arise when a firm is in financial distress. Any two parties could use a private arbitration provision to remove from the bankruptcy tribunal a dispute that affects the rights of other parties. Such a removal would be the equivalent of allowing those two parties to force all other claimants to waive their right to have their claims collectively resolved in the bankruptcy tribunal. That is fundamentally inconsistent with the Code’s purpose of coordinating multilateral behavior. As a result, our analysis suggests that the Code must generally trump the FAA in order to remain effective. An alternative rule would gut the Code of its essential function. But the opposite is not true. The FAA still has effect and covers a large and important sphere of contractual disputes even when subordinated to the Code,
As we move beyond arbitration and look at bankruptcy law more broadly, we suggest that all questions about whether parties can keep certain disputes out of the bankruptcy tribunal—not just those involving arbitration—can and should be resolved by looking to bankruptcy’s essential purpose of providing a forum in to coordinate the resolution of multiparty disputes. This Article examines the bankruptcy tribunal question in its various forms to show the broad relevance of our principle. For example, tribunal choice is at the heart of questions about arbitration,10 forum selection, third-party releases,11 and the use of entity partitions and voting structures (golden shares and director seats). For each of these examples, the question of whether a proceeding should be inside or outside the bankruptcy system is really a question about governing law and procedure and whether certain parties should be able to opt out of the bankruptcy’s mandatory collective procedures. The questions should be resolved by asking how enforcing a contractual agreement to opt out of bankruptcy affects the collective proceedings. If enforcement would implicate only the interests of the parties to the contract, the contractual opt-out should be respected. On the other hand, if enforcement could prevent third parties from availing themselves of the collective proceeding bankruptcy provides, bankruptcy considerations should prevail and the opt-out should be denied.
An additional implication of our framework is that in some situations the law should not only prohibit opt-out but should reach out coercively and bring additional disputes into the bankruptcy tribunal. For example, bankruptcy courts might need the authority to order third-party releases when doing so reduces the opportunism that arises among stakeholder entangled in a distressed debtor’s web of relationships.
This Article proceeds in four parts. Part I presents the debate about bankruptcy law’s purpose and how it relates to questions about the bankruptcy tribunal and identifies areas of general agreement about bankruptcy’s essential collective nature, particularly with regard to coordinating behavior among those with claims against the bankruptcy estate. Part II describes the bankruptcy-tribunal problem in the arbitration context. Part III outlines our general principle and applies it to various other bankruptcy tribunal contexts. Part IV considers the more difficult question of when the bankruptcy purpose test justifies expanding the bankruptcy tribunal’s authority to reach disputes that do not directly involve the debtor
Militant Democracy Comes to the Metaverse
Get PDFSocial media platforms such as Facebook, Twitter, Instagram, and Parlor are an increasingly central part of the democratic public sphere in the United States. But the prevailing view of this platform-based public sphere has of late become increasingly dour and pessimistic. What were once seen as technologies of liberation have come to be viewed with skepticism as channels and amplifiers of “antisystemic” forces, damaging the quality and feasibility of democracies. If correct, this skepticism yields an interesting tension: How can the state protect its democratic character against unravelling pressure from actors who are necessary components of democratic practice in the first place? What happens, that is, when the private infrastructure of democracy is turned against the project of collective self-rule?
Of course, this is not the first time that a private actor understood to be a necessary component of the democratic system has turned out to be a threat to the quality of democracy itself. The paradox of regulating private actors qua threats to democracy, indeed, has been both recognized and theorized in relation to parties of the extreme left and extreme right in postwar Europe. The principal theoretical lens through which those earlier challenges were analyzed traveled under the label of “militant democracy,” a term coined by the émigré German political scientist Karl Loewenstein. The midcentury militant democracy debate, I suggest in this essay, offers an alternative way of evaluating the problem of digital platforms—now Facebook, tomorrow the Metaverse—and democracy. Because this debate unfolded outside the scope of the First Amendment, it starts from different premises and provides an opportunity for considering digital platforms’ role in a democracy from a novel perspective. Of course, it’s not possible to generate in some mechanical way a laundry list of effectual interventions today from yesterday’s experience with anti-systemic parties. But I suggest that the midcentury debate on militant democracy can illuminate by suggesting questions and issues that are marginal or ignored within First Amendment discourse. I conclude the essay with five ‘lessons’ from that earlier debate
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 sub-set of these provisions, namely those that are analogous to the eighteen 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 con-tracts, 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, this 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
The Law and Economics of Animus
Get PDFPeople sometimes want to harm other people. This truism points to a blind spot in law and economics scholarship, which generally assumes that people are indifferent to the effects of their actions on other people. Diverse areas of the law, such as hate-crime legislation and constitutional equal protection doctrine, reside in this blind spot because they are premised on the existence of animus. I argue that the assumption of indifference unnecessarily limits law and economics analysis and that it is both possible and fruitful to incorporate animus into law and economics. I show that doing so leads to new insights on criminal deterrence, including the underappreciated benefits of damages as a deterrent for hate crimes and the promise of community-based “solidarity” deterrence schemes. I also show that incorporating animus can extend law and economics into areas of constitutional law that it has neglected. I argue for an economic approach to equal protection analysis that is grounded in the motivations of government actors but that addresses some of the longstanding concerns with intent-based tests. The examples of criminal deterrence and equal protection analysis are illustrative of an agenda for law and economics analysis that more incorporates other-regarding motives more generally