Articles

This Article identifies property law’s special protection for existing uses, explores possible justifications for this protection, and argues that none can support the strong protection that existing uses currently enjoy. Various land use doctrines— from zoning to the vested rights doctrine to amortization rules for prior nonconforming uses—assume that the government cannot eliminate existing uses without paying compensation. The Article asks whether this result is compelled either by constitutional rules or by normative considerations. Neither the Takings Clause nor the Due Process Clause requires this level of protection for existing uses. Normatively, many obvious-seeming justifications dissolve on closer inspection. Objections grounded in underlying principles of fairness and reliance are not conceptually different for regulations prohibiting future uses than for regulations of existing uses. Nor is the extent of economic loss necessarily greater for one than for the other, even though regulations of existing uses create out-of-pocket costs whereas regulations of future uses only implicate forgone profits. In fact, none of the possible explanations for the special treatment of existing uses actually justifies their protection. This Article ultimately concludes that existing uses should not be entitled to any special judicial protection but instead should be subject to the same takings and due process analyses that apply to all regulation and governmental action.

Corporate law largely addresses three basic relationships: shareholder versus manager, shareholder versus non-equity investor, and majority shareholder versus minority shareholder. Ever since the pioneering work of Adolf Berle and Gardiner Means, a great deal of scholarly attention has been directed toward the first relationship. The second relationship earned its share of the limelight with the leveraged buyout trend of the 1980s. It is only in this decade, however, that the third relationship has taken center stage—in the wake of several incongruous Delaware cases and a flood of post-Sarbanes-Oxley freezeout mergers.

This scrutiny is certainly warranted, as the tension between majority and minority shareholders presents thorny concerns and has the potential to erode considerable social welfare. In essence, lawmakers must walk a tightrope between two alternative hazards. On the one hand, assigning too much power to minority shareholders can lead to a holdout problem where recalcitrant dissenters demand private tribute before blessing a decision (such as a merger). On the other hand, granting the majority untrammeled discretion to freeze out minority owners can promote tunneling or other abuses of power that will depress the ex ante value of a firm. Thus far, the law has addressed these concerns with disclosure obligations, special committees, judicial review of fiduciary duties, and appraisal rights. But the results are far from satisfying.

This Article offers a novel idea for governing the tension between majority and minority shareholders: an “internal poison pill.” Borrowing conceptually from the famous shareholder rights plans created in the 1980s to address bullying external bidders, I show how an analogous (though economically distinct) financial instrument might be used by shareholders to navigate the twin internal governance tensions of holdout and expropriation. Two key features of this proposal distinguish it from alternative reforms: (1) It focuses on a privately enacted solution with room for contextual customization; and (2) it uses embedded option theory to construct an intermediate legal entitlement (as opposed to an extreme property or liability rule) for both majority and minority shareholders. If successfully scoped and swallowed, these internal poison pills could facilitate efficient freezeouts, chill coercive ones, supplant the awkward remedy of appraisal, and, ultimately, increase the ex ante value of firms by mitigating agency problems between majority and minority shareholders.

Modern contract law is governed by a two-stage adjudicative regime—an inheritance of the centuries-old conflict between law and equity. Under this regime, formal contract terms are treated as prima facie provisions that courts can override by invoking equitable doctrines so as to substantially “correct” the parties’ contract by realigning it with their contractual intent. This ex post judicial determination of the contractual obligation serves as a fallback mechanism for vindicating the parties’ contractual intent whenever the formal contract terms fall short of achieving the parties’ purposes. Honoring the contractual intent of the parties is thus the central objective of contract law. Yet little scholarly attention has been given to the structure of contractual intent. Courts naturally equate contractual intent with the parties’ contractual objectives, which we call the “contractual ends” of their collaboration. But reaching agreement on a shared objective is only the first step to designing an enforceable contract. Thereafter, the parties must create the particular rights and duties that will serve as their “contractual means” for achieving their shared ends. The thesis of this Article argues that the current regime of contract adjudication conflates the parties’ contractual means with their contractual ends. In so doing, it reduces the range of contractual arrangements to which contract law gives effect, thereby potentially depriving commercially sophisticated parties of essential tools for contract design. Sophisticated actors engage in ex ante determinations of their means of enforcement, choosing whether enforcement is to be either legal or relational and whether legal enforcement should rely on either rules or standards. Both theory and available evidence suggest that such parties would prefer a default rule that strictly enforces formal contract doctrine unless they have expressly indicated their intent to delegate hindsight authority to a court. By eliminating the risk that courts will erroneously infer the parties’ preference for ex post judicial intervention, such a regime increases the reliability of formal contract terms and enhances the parties’ control over the content of their contract.

At the core of the economic analysis of law lies the concept of expected sanctions, which are calculated by multiplying the severity of the sanction that is applied to wrongdoers by the probability that it will be applied. This probability is the product of several sequential probabilities involving the different actors responsible for sanctioning wrongdoers (e.g., police, prosecutors, judges, jurors, etc.). Generally, legal economists treat different legal probabilities as fungible, simply multiplying them much like any other sequential probabilistic situation. This Article challenges this assumption, demonstrating that people perceive and are affected by different types of legal probabilities in distinct ways. More specifically, it shows that uncertainty associated with the substance of the law and uncertainty associated with imperfect enforcement should not be treated equivalently.

To demonstrate this point, this Article presents a series of between-subjects experimental surveys that measure and compare participants’ attitudes toward compliance in conditions of uncertainty. Study participants—several hundred students from Israel and the United States—answered questions in the context of one of several variations on the same hypothetical scenario. While the expected sanction was the same in each variation, the source of uncertainty differed. These studies confirmed that people are less likely to comply when uncertainty stems from the imprecision of law’s substance than when uncertainty stems from the imperfect enforcement of clear law.

The Eighth Amendment prohibits cruel and unusual punishment, but its normative force derives chiefly from its use of the word cruel. For this prohibition to be meaningful in a society where incarceration is the primary mode of criminal punishment, it is necessary to determine when prison conditions are cruel. Yet the Supreme Court has thus far avoided this question, instead holding in Farmer v. Brennan that unless some prison official actually knew of and disregarded a substantial risk of serious harm to prisoners, prison conditions are not “punishment” within the meaning of the Eighth Amendment. Farmer’s reasoning, however, does not withstand scrutiny. As this Article shows, all state-created prison conditions should be understood to constitute punishment for Eighth Amendment purposes. With this in mind, this Article first addresses the question of when prison conditions are cruel, by considering as a normative matter what the state is doing when it incarcerates convicted offenders as punishment and what obligations it thereby incurs toward its prisoners. This Article then turns to the question of constitutional implementation and considers what doctrinal standards would best capture this understanding of cruel conditions.

At the heart of the argument is the recognition that the state, when it puts people in prison, places them in potentially dangerous conditions while depriving them of the capacity to provide for their own care and protection. For this reason, the state has an affirmative obligation to protect prisoners from serious physical and psychological harm. This obligation, which amounts to an ongoing duty to provide for prisoners’ basic human needs, may be understood as the state’s carceral burden. This, at its core, is the problem with Farmer’s recklessness standard: It holds officers liable only for those risks they happen to notice—and thereby creates incentives for officers not to notice—despite the fact that when prison officials do not pay attention, prisoners may be exposed to the worst forms of suffering and abuse. As this Article shows, either a heightened negligence standard on which a lesser burden would attach to those claims alleging macro-level failures of care or a modified strict liability approach would be far more consistent with the possibility of meaningful Eighth Amendment enforcement. Unfortunately, by encouraging judges to deny the existence of cruel treatment in the prisons, the prevailing doctrinal regime instead makes the judiciary into yet another cruel institution vis-a`-vis society’s prisoners.

Choice of law is a mess—or so it is said. According to conventional wisdom, choice-of-law doctrine does not significantly influence judges’ choice-of-law decisions. Instead, these decisions are primarily motivated by biases in favor of domestic over foreign law, domestic over foreign litigants, and plaintiffs over defendants. They are also highly unpredictable.

This Article argues that these “mess” claims do not accurately describe at least one domain of choice of law—international choice of law—and it demonstrates what is at stake in this debate for global governance. Part I provides a brief overview of choice-of-law doctrine in the United States. Part II documents the mess claims. Part III then shows how the mess claims, if correct, would be bad news for global governance. Choice-of-law doctrine can increase or decrease global economic welfare, enhance or undermine transnational rule of law, and facilitate or hinder transnational bargaining. The extent of these effects, and whether they are beneficial or harmful, depends largely on the degree to which choice-of-law doctrine actually influences judges’ international choice-of-law decisions and the extent to which those decisions are biased and unpredictable. The mess claims thus imply that if choice of law has any systematic effects on global governance they are likely to be harmful.

Part IV uses statistical analysis of an original dataset of published international choice-of-law decisions by U.S. district courts in tort cases to present evidence that choice-of-law doctrine indeed influences these decisions; that these decisions are not biased in favor of domestic law, domestic litigants, or plaintiffs; and that they are actually quite predictable. The mess claims, it turns out, may be myths—at least in transnational tort cases.

Part V explores the broader implications of my analysis. In particular, it explains why these findings are encouraging from a global-governance perspective and why they might plausibly extend to unpublished international choice-of-law decisions and domestic choice-of-law decisions. Overall, the Article’s findings suggest that the conventional wisdom exaggerates what is wrong with choice of law and implicitly underestimates its contributions to global governance.

Private resolution and public adjudication of disputes are commonly seen as discrete, antipodal processes. The essence of private dispute resolution is that the parties can arrange the disputed rights and entitlements per agreement and without judicial intervention. In public adjudication, however, the sovereign mandates the substantive and procedural laws to be applied, many of which cannot be changed by either a party’s unilateral decision or both parties’ mutual consent. Neither approach allows a party an option to unilaterally alter important aspects of the process, such as the attorney fee rules and standards of proof. This understanding is commonly accepted and rarely challenged, but it is curious nonetheless.

This Article proposes that we move toward procedural optionality, the idea that each party should have options to choose certain procedural laws in public adjudication. To show the potential efficacy of this concept, this Article proposes a scheme in which parties can unilaterally shift fees as long as they contractually bond their good faith by assuming a higher standard of proof. Allowing private choice to alter these rules can better address the problems of frivolous suits and nonprosecution of low value claims—two problematic bookends in the spectrum of litigation. By properly structuring party options, the law can create greater convergence of private incentives and social interest. More efficient dispute resolution results, as measured by increased enforcement of and compliance with the substantive laws, at lower cost. Lastly, this Article concludes by examining more broadly some policy implications of procedural optionality for substantive and procedural laws.

Sovereign wealth funds enjoy an exemption from tax under § 892 of the tax code. This anachronistic provision offers an unconditional tax exemption when a foreign sovereign earns income from noncommercial activities in the United States. The Treasury regulations accompanying § 892 define noncommercial activity broadly, encompassing both traditional portfolio investing and more aggressive, strategic equity investments. The tax exemption, which was first enacted in 1917, reflects an expansive view of the international law doctrine of sovereign immunity that the United States (and other countries) discarded fifty years ago in other contexts. Because § 892 was not written with sovereign wealth funds in mind, the policy rationale for this generous tax treatment has not been closely examined in the aca- demic literature.

This Article provides a framework for analyzing the taxation of sovereign wealth. I start from a baseline norm of “sovereign tax neutrality,” which departs from the current regime under § 892 by treating the investment income of foreign sovereigns no better and no worse than foreign private investors’ income and by favoring no one nation over another. Whether we should depart from this norm depends on several factors, including what external costs and benefits are created by sovereign wealth investment, whether tax or other regulatory instruments are superior methods of attracting investment or addressing harms, and which domestic political institutions are best suited to implement foreign policy. I then consider whether we should impose an excise tax that would discourage sovereign wealth fund investments in U.S. companies. This tax might be designed to complement nontax economic and foreign policy goals by discouraging investments by funds that fail to comply with best practices for transparency and accountability.

The case for repealing the existing tax subsidy is strong. We should tax sovereign wealth funds as if they were private foreign corporations; there is no compelling reason to subsidize sovereign wealth. At the same time, my analysis suggests that policymakers should be cautious about going any further: An excise tax may not be the optimal regulatory instrument for managing the special risks posed by sovereign wealth funds.

The least discussed element of District of Columbia v. Heller might ultimately be the most important: the battle between the majority and dissent over the use of categoricalism and balancing in the construction of constitutional doctrine. In Heller, Justice Scalia’s categoricalism essentially prevailed over Justice Breyer’s balancing approach. But as the opinion itself demonstrates, Second Amendment categoricalism raises extremely difficult and still-unanswered questions about how to draw and justify the lines between protected and unprotected “Arms,” people, and arms-bearing purposes. At least until balancing tests appear in Second Amendment doctrine—as they almost inevitably will—the future of the Amendment will depend almost entirely on the placement and clarity of these categories. And unless the Court better identifies the core values of the Second Amendment, it will be difficult to give the categories any principled justification.

Heller is not the first time the Court has debated the merits of categorization and balancing, nor are Justices Scalia and Breyer the tests’ most famous champions. Decades ago, Justices Black and Frankfurter waged a similar battle in the First Amendment context, and the echoes of their struggle continue to reverberate in free speech doctrine. But whereas the categorical view triumphed in Heller, Justice Frankfurter and the First Amendment balancers won most of their battles. As a result, modern First Amendment doctrine is a patchwork of categorical and balancing tests, with a tendency toward the latter. The First and Second Amendments are often presumed to be close cousins, and courts, litigants, and scholars will almost certainly continue to turn to the First Amendment for guidance in developing a Second Amendment standard of review. But while free speech doctrine may be instructive, it also tells a cautionary tale: Above all, it suggests that unless the Court better identifies the core values of the Second Amendment, the Second Amendment’s future will be even murkier than the First Amendment’s past.

This Article draws the Amendments together, using the development of categoricalism and balancing tests in First Amendment doctrine to describe and predict what Heller’s categoricalism means for the present and future of Second Amendment doctrine. It argues that the Court’s categorical line drawing in Heller creates intractable difficulties for Second Amendment doctrine and theory and that the majority’s categoricalism neither reflects nor enables a clear view of the Amendment’s core values, whatever they may be.

The proper duration of legislation has become highly controversial as a result of the enactment of many temporary tax laws during the George W. Bush administration. The prevailing view is that inclusion of an expiration date or “sunset” feature in legislation permits the cost of the legislation to be misrepresented and allows its proponents to escape the discipline intended by the congressional budget process. Under this view, fiscal discipline is preserved through enactment of so-called permanent legislation.

This Article challenges that view and shows that, barring estimation error, the legislative process accounts completely for the costs of “temporary-effect” legislation but not permanent legislation. Consequently, enactment of temporary-effect rather than permanent legislation would promote more political accountability and may result in greater fiscal restraint. In addition, when temporary-effect legislation expires, the legislative process fully takes into account the cost of any extension. Extension of such legislation, therefore, competes with, and potentially displaces, adoption of other legislation. By contrast, the cost of continuing permanent programs largely disappears in the legislative process, and therefore continuation of such programs produces little or no crowding-out effect. This Article also addresses whether other features of the legislative process could overcome the problems associated with the budget accounting of permanent legislation and responds to criticisms of temporary-effect legislation.