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Soft Law, Risk Cultures, and Law Abidingness: The Caremark Connection
Get PDFAs Vice Chancellor, Chancellor, Chief Justice, and recidivist law review author, Leo Strine has had much to say about the often-frustrating effort at corporate behavior modification. One point he makes very insistently is that pursuant to their state-granted charters, corporations are authorized to take part only in lawful business, not any profitable business. Respect for life-giving law is thus a necessary corollary of good corporate citizenship. But good citizenship is so hard to instill, which irks him. An angry display of this is Strine’s Delaware Supreme Court dissenting opinion in City of Birmingham Retirement System v. Good, involving Duke Energy’s shameless toxic chemical dumping, which led to large penalties. In contrast to the usual Caremark claim that the board unwittingly facilitated legal wrongdoing by not putting into place a monitoring system to stop it, here plaintiff charged knowing complicity by the board with efforts to conceal and continue the wrong, in cahoots with allegedly corrupt state regulators. Defendants sought dismissal for failure of the plaintiff to make demand on the board, which as the case law had developed, required particularized facts giving rise to a doubt that most of the board members had reason to fear unexculpated liability. The majority read the factual allegations as falling short of bad faith or willing acquiescence and dismissed the case under the demand-required rubric. Believing instead that there was enough evidence for this stage of the proceeding, Chief Justice Strine made his feelings amply known: It may be that after the daylight of discovery shines for some time, the rancid whiff that arises from the pled facts dissipates and turns into the bracing freshness of a new Carolina day. But, without that, the off-putting odor will linger and so too will rational suspicions that the defendants caused the smell.
My contribution to this festschrift focuses on the cultural dimension to both the commission and prevention of corporate crime and the judicial response in Caremarktype cases, inspired by some of Strine’s recent post- judicial writings. Corporate case law in Delaware exhibits something of an acoustic separation between holding and dicta, so that judicial opinions frequently chastise the officers and directors charged with wrongdoing even as they make amply clear that no punishment will be handed out. Mel Eisenberg offered up this observation long ago, and Ed Rock famously elaborated on how the shaming function of this judicial rhetoric works, via morality tales in the cases before it that call out the greedy and the disloyal. The assumption is that lawyers gather, interpret, and then impart these narratives to their clients, which generates normative improvement in corporate governance. This is a form of “soft law.”
I have never been quite convinced that soft law works as neatly or as frequently as just described. But I do believe that judges who take advantage of this separation want to be in a cultural conversation with the lawyers reading the cases as to their own spheres of influence, taking advantage of the distinctive norms of the legal profession and (crucially) lawyers’ realization that the indeterminate nature of Delaware corporate law found in both holdings and dicta is an immense and profitable privilege. They listen, carefully, even to dissents. Judges with the right reputational capital can stay settled in this role even after retirement. This is one source from which soft corporate law emerges—aspirational demands not legally enforceable (or above and beyond the legally enforced).
My essay takes as a start Strine’s insistent attitude toward law- abidingness in corporate law and corporate governance as expressed in two recent law review articles. The first (written with two junior co-authors) is Caremark and ESG, Perfect Together, which sends a very clear-sounding message on the connections among law, ethics, and social responsibility. In the second, Strine has collaborated with my colleague Chris Brummer on Duty and Diversity, to address the fraught subjects of diversity, equity and inclusion in corporations. Both articles draw from a mutually reinforcing mix of hard and soft law. Both also invoke “culture” as playing a key explanatory role but stop well short of explaining how or when. So, my contribution here is to move the study of corporate culture a few steps forward by showing its ability to frustrate messages of law-abidingness in many corporate settings.
The expressive power of soft law is open to question for many possible reasons. Judges, scholars, and others interested in corporate crime have offered many explanations, most tending toward conventional agency costs, which implies some kind of in personam greed or corruption that sneers at voluntary compliance. An alternative of increasing academic and practical interest is a cultural explanation: the presence of a deeply-rooted belief system that somehow deflects or distorts compliance messages to weaken internal legal controls and restraints. While that seems to be a difference of opinion between economists and sociologists, that methodological distinction has all but collapsed. As put in a recent paper on corporate cultures by economists Gary Gorton, Jillian Grennan, and Alexander Zentefis, the agency cost paradigm “ignore[s] the possibility that managers are essentially well-intentioned people operating in a complex and uncertain environment.” While cultural accounts are notoriously hard to test rigorously, economists like Gorton et al. have made fascinating progress in that direction. To focus in, this essay addresses what we are learning about the nature and source of so-called “risk cultures,” i.e., those with norms celebrating aggressive risk-taking and denigrating the appearance of excessive caution. Shifting from greed to risk perception as a way of understanding some kinds of corporate cultures require different ways of structuring and communicating legal messages, which will bring us right back to Strine and his soft law messaging
From Experiencing Abuse to Seeking Protection: Examining the Shame of Intimate Partner Violence
Get PDFShame permeates the experience of intimate partner violence (IPV). People who perpetrate IPV commonly use tactics designed to cause shame in their partners, including denigrating their dignity, undermining their autonomy, or harming their reputation. Many IPV survivors report an abiding sense of shame as a result of their victimization—from a lost sense of self, to self-blame, to fear of (or actual) social judgment. When seeking help for abuse, many survivors are directed to, or otherwise encounter, persons or institutions that reinforce rather than mitigate their shame. Survivors with marginalized social identities often must contend not only with the shame of IPV victimization, but also with the shame that follows being stigmatized or otherwise assigned inaccurate or incomplete “identities.”
Understanding how these layers of shame can shape a survivor’s experience matters. Shame can be a destructive harm that devastates a person’s sense of self-worth. It can lead to long-term psychological injury and can be both a source and outcome of trauma. A desire to reduce shame’s damaging impact can cause survivors to utilize coping behaviors that may be self-protective, but profoundly misunderstood by the people and institutions to whom they turn for help. Included among those institutions is the civil legal system. Protection orders are the most common legal intervention for IPV and can be critical tools for responding to it. Yet, to obtain a protection order, survivors must enter a process that often deprives them of their privacy and ability to control their self-image—experiences anchored in shame. Without understanding shame’s behavioral and psychological effects, survivors risk having their claims of victimization discredited, harming their ability to obtain safety and relief.
This Article explores these individual, social, and institutional dimensions of shame. It examines how those who work or interact with survivors can better understand the shame that results from traumatic experiences, and the trauma that results from shame-intensive ones. This Article further explores strategies to reduce the shame that can pervade civil litigation. These strategies include prioritizing survivor dignity and narrative control—critical antidotes to the injury of shame
Mass Arbitration
Get PDFFor decades, the class action has been in the crosshairs of defense-side procedural warfare. Repeated attacks on the class action by the defense bar, the U.S. Chamber of Commerce, and other defense-side interest groups have been overwhelmingly successful. None proved more successful than the “arbitration revolution”—a forty- year campaign to eliminate class actions through forced arbitration provisions in private contracts. The effects for civil justice have been profound. Scores of claims vanished from the civil justice landscape—claims concerning civil rights, wage theft, sexual harassment, and consumer fraud. The effects for social justice, racial justice, gender justice, and economic justice were especially profound, as the legal claims of minorities, women, wage-and- hour workers, and the working poor were systematically and disproportionately foreclosed.
Yet now, just when one would expect the defense bar to be taking a victory lap, prominent defendants are abandoning the hard-fought right to disable the class action through arbitration and instead seeking refuge in class actions in court. Why the about face? A surprising counter-offensive to use individual arbitration to plaintiffs’ advantage—Mass Arbitration. This Article presents a foundational analysis of the subject.
This Article develops the first and only case study of Mass Arbitration and provides a taxonomy of the results. What emerges is not a variation on old themes but, instead, a new and distinct model of dispute resolution. The investigation reveals significant ways in which the Mass Arbitration model challenges conventional litigation theory wisdom about the economics of individual claiming, uncovers important differences between the Mass Arbitration model and existing forms of aggregate dispute resolution, recasts long-standing debates in litigation theory and jurisprudence, and provides new perspectives on the relationships among private procedural ordering, public procedural reform, and civil justice. Mass Arbitration, in other words, is a phenomenon in its own right. More importantly, it offers a window into the future of civil justice
Financing the future of WHO
Get PDFWHO\u27s resources have consistently lagged behind its constitutional mandate. There is a deep misalignment between what governments and the public expect WHO to do and what the organisation is resourced to do. WHO is challenged by low levels of political will to increase its financing, strained government treasuries, and a battle over control of priorities. WHO\u27s Executive Board has charged the Working Group on Sustainable Financing with identifying a viable plan for sustainable financing before the World Health Assembly in May. There is no time to lose. WHO\u27s resourcing strategy must match its mission with assured financial support from member states buttressed by proven, innovative financing methods. By defining its priorities, delivering on them, and being transparent and accountable, WHO can more boldly pursue its public health mission
The Romantic Author as Compelled Speaker
Get PDFThe romantic author trope has been extensively criticized in the copyright context, yet it threatens to emerge as a new pillar of First Amendment compelled speech jurisprudence. Justice Thomas’s concurring opinion in Masterpiece Cakeshop v. Colorado Civil Rights Commission exemplifies the trope’s rhetorical power, and the costs of that approach. Casting the baker as an artist, Justice Thomas finds that creating custom wedding cakes was speech, and that applying a public accommodations law to require service to a same-sex couple triggered strict scrutiny review. This is an extraordinary result. Although the Court never adjudicated the compelled speech claim, it will take up the issue in 303 Creative LLC v. Elenis, where the artist owns a website design business.
This Article historically contextualizes the romantic author construct, charts its emergence in First Amendment law, and deconstructs the over-heightened autonomy interest it imports into Justice Thomas’s concurring opinion in Masterpiece. This idealized speaker lens does substantial work in suggesting a presumptive constitutional violation arising from a law prohibiting discrimination in public facing businesses. The trope privileges speaker autonomy and subjectivity to a degree that legitimizes the erasure of customers—and disavows the state’s authority in assuring equal access to goods and services. The high stakes conflict of rights in Masterpiece and similar wedding vendor cases demand context-sensitive analysis, which the transcendent, self-regarding lens of authorship obscures. The central claim of this Article is that the romantic ideal is misapplied in wedding vendor cases, exalting subjectivity and expressive autonomy while swallowing the conflicting rights animated by customer interactions
Random Justice
Get PDFAs recent Senate confirmation practices suggest, the Supreme Court is best understood as the head of a political branch of government, whose Justices are chosen in a process that makes their ideological views dispositive. Throughout the nation’s history, the Supreme Court has exercised its governing political ideology in ways that sacrifice the interests of nonwhites in order to advance the interests of Whites. In the present moment of heightened cultural sensitivity to structural discrimination and implicit bias, it would make sense to use affirmative action to help remedy the racially disparate distribution of societal resources that has been produced by a long history of covert discrimination. But the Supreme Court has held that such efforts to promote racial balance are patently unconstitutional, because the Constitution recognizes only intentional discrimination, and not racially disparate impact, as a form of inequality that can be addressed through affirmative action. However, there is a way in which efforts to both promote racial balance and remedy disparate impact would be permissible, even under the racial jurisprudence of the new six-to-three conservative Supreme Court. Affirmative action plans that used randomized lotteries to allocate resources, such as university admissions, among qualified applicants would constitute race neutral ways of approximating the allocation of resources that would exist in a truly nondiscriminatory culture. By using statistical randomness as a safeguard against structural discrimination and implicit bias, U.S. culture might be able to secure a level of racial justice that it has been unable to achieve through its antidiscrimination laws. The only significant cost of such lottery-based admissions would be the potential loss of some prestige by our elite educational institutions. But certainly, that is a price worth paying to secure a more meaningful level of racial equality
Life After the COVID-19 Pandemic
Get PDFAfter 2 years of a seemingly relentless pandemic that has upended work, education, and social interactions, the questions many are asking are when will we get back to normal and what will life be like after the COVID-19 pandemic? In truth, science cannot fully predict what SARS-CoV-2 variants will arise and the trajectory of the pandemic. Yet, history and informed scientific observations provide a guide to how—and when—society will return to pre-pandemic patterns of behavior. There will not be a single moment when social life suddenly goes back to normal. Instead, gradually, over time, most people will view COVID-19 as a background risk and abandon the trappings of pandemic caution
Tailoring \u3ci\u3eex Machina\u3c/i\u3e: Perspectives on \u3ci\u3ePersonalized Law\u3c/i\u3e
Get PDFIn their book Personalized Law: Different Rules for Different People, Omri Ben-Shahar and Ariel Porat propose a radical approach to lawmaking: using of big data and artificial intelligence to tailor legal dictates to the individual histories and characteristics of persons they affect. This essay critically discusses that proposal.
It first examines normative differences among the Ben-Shahar and Porat’s proposals for personalizing laws. There are important differences, for example, between using big data and artificial intelligence to tailor how a private legal power can be exercised to the capacities and interests of the power-holder and imposing different speed limits on different drivers depending on their personal histories. The desirability of personalization depends both on the type of legal rule (duty, power, privilege, etc.) and on the type of traits personalization attends to (abilities, propensities, preferences, etc.).
The essay then identifies a few reasons to worry about using big data and artificial intelligence to tailor legal dictates to the individuals they affect. This approach to lawmaking would make it more difficult to detect misfeasance and malfeasance in the legislative processes. And lawmaking that issues individualized commands rather than general rules and that provides no explanation for why different people receive different treatment poses a threat to the rule of law.
Lastly, the essay argues that Ben-Shahar and Porat’s proposal relies on a false picture of practical reasoning. On their proposal, legislators would need to specify in advance both a law’s goals and the relative weights of those goals, after which they would turn matters over to computer scientists, data managers, and statisticians. This assumes a degree of practical omniscience lawmakers are unlikely to have. Successful practical reasoning requires iterative and reflective inquiry into both ends and means together. Successful lawmaking involves revising, supplementing, and sometimes abandoning preliminary goals as lawmakers reason through the possible means of achieving them. Algorithmic lawmaking is not compatible with such practical reasoning about ends
Rebuilding Platform Antitrust: Moving on from \u3ci\u3eOhio v. American Express\u3c/i\u3e
Get PDFNow that the immediate fallout from the Supreme Court’s blockbuster Amex decision has cooled, this Article aims to give a first draft of its place in antitrust history and to offer a roadmap for the next stage of the evolution of platform antitrust analysis. We focus on several issues that have not been fully analyzed in the literature. First, we argue that, rather than mangling the law of market definition, the Court should have explicitly permitted multi-market balancing of effects across the separate markets in which the platform was active. Second, we propose standards to implement such balancing in cases involving multisided platforms in a principled manner, and we illustrate those standards by application to the facts of Amex itself. Third, we highlight three significant omissions in the Court’s analysis that confounded its assessment of the case and threaten to mislead future courts. In particular, we show that the Court failed to take into account that: (1) all three major card networks had parallel anti-steering rules during the period of alleged anticompetitive conduct and harm, which increased the anticompetitive harms by (a) increasing the incentives for fee increases for each network, (b) reducing the incentives for fee decreases by each network, and (c) leading the Amex restraints to harm holders of other credit cards as well as consumers who pay with debit, cash and checks; (2) higher merchant fees caused by these parallel antisteering rules placed consumers into a prisoners’ dilemma game, which led inevitably to increased use of credit cards above the efficient, competitive level, making the volume of card transactions a poor proxy for welfare effects; and; (3) American Express’ cardholder rewards were not necessarily evidence of procompetitive consumer benefits, as some rewards may have represented rents from anticompetitive conduct. Finally, we suggest several options for the courts and Congress to remedy the problems caused by the Court’s faulty approach and place platform antitrust back on track
A Free Press Without Democracy
Get PDFFor several decades, the American press has been fighting for its economic survival. But while it has been consumed with this effort, the political threat to a free press has grown perhaps greater than the economic one. Democracy is eroding globally, including in the United States. Given the importance of a free press to democracy, the press needs to more urgently consider how it maintains its freedom as erosion persists.
This Article sets out a framework for American press priorities in this pivotal moment. It suggests that to resist and weather a turn to autocracy, the press must endeavor to overcome three defining pathologies: American press exceptionalism (a hubris about American press freedom); Darwinian in-group competition (a need for one’s news organization to always be first and fastest); and an addiction to audience desire (the proclivity to prioritize audiences’ reflexive wants).
The Article also describes corresponding practices of press freedom designed to remedy these pathologies. These practices are not plucked from a nostalgic vision of America’s press heyday. Rather, they are rooted in an examination of autocracy and journalistic experience under it. They are intended to be concrete and doable. And they are aimed at building the resilience of the American press so that it might be a stronger bulwark against an autocratic regime