“Mergers frequently force target CEOs to retire early, and CEOs’ private merger costs are the forgone benefits of staying employed until the planned retirement date. Using retirement age as an instrument for CEOs’ private merger costs, we find strong evidence that target CEO preferences affect merger patterns. [...]]]> As Joan Hemingway nicely illustrated, firms ought to disclose facts about their managers which are likely to influence stock purchasing decisions, even if those facts are otherwise private and personal.  Now, from a different direction, comes further evidence of the point that managers’ self-interested goals can influence their firm’s disposition.  In CEO Preferences & Acquisitions, Jenter and Lewellen take a look at the relationship between CEO retirement and “the incidence, the pricing, and the outcomes of takeover bids.”

“Mergers frequently force target CEOs to retire early, and CEOs’ private merger costs are the forgone benefits of staying employed until the planned retirement date. Using retirement age as an instrument for CEOs’ private merger costs, we find strong evidence that target CEO preferences affect merger patterns. The likelihood of receiving a takeover bid increases sharply when target CEOs reach age 65. The probability of a bid is close to 4% per year for target CEOs below age 65 but increases to 6% for the retirement-age group, a 50% increase in the odds of receiving a bid. This increase in takeover activity appears discretely at the age-65 threshold, with no gradual increase as CEOs approach retirement age. Moreover, observed takeover premiums and target announcement returns are significantly lower when target CEOs are older than 65, reinforcing the conclusion that retirement-age CEOs are more willing to accept takeover offers. These results suggest that the preferences of target CEOs have first-order effects on both bidder and target behavior.”

A few thoughts.

1.  As Brian Quinn noted, this is exactly what seemed to be going on in Smith v. Van Gorkom.

2.  The paper includes a nice set of confounding controls, but it’d be useful to have compared founding- with non-founding-CEOS.  At least anecdotally, one hears often of the founding CEO seeking cash out his sweat in a swan-song merger – and that kind of behavior seems less pernicious than a caretaker selling the company to pad her nest.  In the authors’ defense, I’d imagine thatin this fortune 500 dataset there weren’t many such originating great leaders.

3.  It’d be surprising if this common-sense result wasn’t already priced into the acquiring company’s shares, which might make it difficult to truly control for a recent rise in company performance against the market basket.

4.  But if #3 isn’t right, I have a strong sense that I know what my new investment strategy would like.  Someone want to start a corporate-executive retirement watch list with me?  There are models available.

‘The Supreme Court shall permit television coverage of all open sessions of the Court unless the Court decides, by a vote of the majority of justices, that allowing such coverage in a particular case would constitute a violation of the due process rights of 1 or more of the parties before the Court.”

Two questions.

(1) This seems badly drafted to me. What does “television coverage” mean for the purposes of this bill? Does it mean that the camera gets to swivel between Justices and the attorney?  That it can face the wall?  But more interestingly,

(2) What ifthe [...]]]> It’s been widely reported that SB.1945, if passed, would compel the Supreme Court to televise its proceedings. Here’s the relevant bill text:

‘The Supreme Court shall permit television coverage of all open sessions of the Court unless the Court decides, by a vote of the majority of justices, that allowing such coverage in a particular case would constitute a violation of the due process rights of 1 or more of the parties before the Court.”

Two questions.

(1) This seems badly drafted to me. What does “television coverage” mean for the purposes of this bill? Does it mean that the camera gets to swivel between Justices and the attorney?  That it can face the wall?  But more interestingly,

(2) What ifthe Supreme Court just says no?  The Marshall of the court reports to the Chief, not to the President or the Congress. What is the Coult were simply to decide, as a body, that it didn’t feel bound by another branch’s wishes on how to conduct its proceedings? Obviously, this would never actually happen. But imagine a different case, where the Congress prescribed wig-wearing?  Or how long arguments would last?  Or brief length or content? I recall a Larry Tribe con law exam in which the Congress wrote a law the required the court to decide its constitutionality in a matter of days.  That struck me as unlikely to survive scrutiny.  Similarly here, there’s a plausible separation of powers argument that the Congress doesn’t have the right to tell the Court how to run its house.  That’s precisely what Mike Dorf argued in this column, and it’s surprising to me that so few mainstream journalists have picked up the objection. (But see this Scotusblog discussion.)  Basically, if I were the Court and I didn’t want to be on TV, I’d consider telling Congress to go pound sand.  They don’t have an army either.

“This research tests the intuition that parties to a contract approach each other differently before the contract is formed than they do once it is finalized. We argue that one of the most important determinants of self-protective behavior is whether the promisee considers herself to be in negotiations or already in an ongoing contract relationship. That shift affects precaution-taking even when it has no practical bearing on the costs and benefits of self-protection: the moment of contracting is a reference point that frames the costs and benefits of taking precautions. We present the results of three questionnaire studies in which respondents indicate that [...]]]> Tess Wilkinson-Ryan (Penn) and I have a new draft paper up on SSRN: The Psychology of Contract Precautions.  From the abstract:

“This research tests the intuition that parties to a contract approach each other differently before the contract is formed than they do once it is finalized. We argue that one of the most important determinants of self-protective behavior is whether the promisee considers herself to be in negotiations or already in an ongoing contract relationship. That shift affects precaution-taking even when it has no practical bearing on the costs and benefits of self-protection: the moment of contracting is a reference point that frames the costs and benefits of taking precautions. We present the results of three questionnaire studies in which respondents indicate that they would be more likely to protect their own interests—by requesting a liquidated damages clause, by purchasing a warranty, or by shopping around to ensure the best deal—when the contract is not yet finalized than they would when they understand the agreement to be finalized. We discuss competing explanations for this phenomenon, including both prospect theory and cognitive dissonance. Finally, we explore some doctrinal implications for work on disclosure, modification, and promissory estoppel.”

The paper is a part of a new literature on the moral psychology of contracting — see, e.g., Suckers, Obligations, Liquidated Damages.  That said, it’s been quite a long time in production — I think we first started working on it in 2008 — and I’m thrilled to finally get it out in the open.  It’s in draft form, so any comments you might have would be most welcome.

Brishen joined Temple’s faculty in 2010, and teaches torts, employment discrimination, and a seminar on current issues in labor law. Prior to joining the Temple faculty, Brishen was a Climenko Fellow and Lecturer on Law at Harvard Law School.

Brishen’s scholarship draws on the social sciences and liberal political theory to better understand the role of law in constituting and regulating paid work relationships, with a particular focus on issues of concern to low-wage workers.  One current project explores the role of law and social norms in shaping workers’ preferences towards unionization; another explores the proper role for minimum workplace entitlements in an egalitarian liberal state.  His work has been published in the Harvard [...]]]> I’m pleased to welcome my colleague Brishen Rogers as a guest for the next month.

Brishen joined Temple’s faculty in 2010, and teaches torts, employment discrimination, and a seminar on current issues in labor law. Prior to joining the Temple faculty, Brishen was a Climenko Fellow and Lecturer on Law at Harvard Law School.

Brishen’s scholarship draws on the social sciences and liberal political theory to better understand the role of law in constituting and regulating paid work relationships, with a particular focus on issues of concern to low-wage workers.  One current project explores the role of law and social norms in shaping workers’ preferences towards unionization; another explores the proper role for minimum workplace entitlements in an egalitarian liberal state.  His work has been published in the Harvard Law Review Forum, and the Berkeley Journal of Employment and Labor Law, among others.

Brishen received his J.D., cum laude, from Harvard Law School and his B.A., with high distinction from the University of Virginia.  Prior to law school, he worked as a community organizer promoting living wage policies and affordable housing, and spent several years organizing workers as part of SEIU’s “Justice for Janitors” campaign.

Welcome!

“Of course, it’s not enough for us to increase student aid. We can’t just keep subsidizing skyrocketing tuition; we’ll run out of money. States also need to do their part, by making higher education a higher priority in their budgets. And colleges and universities have to do their part by working to keep costs down. Recently, I spoke with a group of college presidents who’ve done just that. Some schools re-design courses to help students finish more quickly. Some use better technology. The point is, it’s possible. So let me put colleges and universities on notice: If you can’t stop tuition from [...]]]> President Obama’s State of the Union glossed on a topic that’s quite relevant to the recent debates about legal education:

“Of course, it’s not enough for us to increase student aid. We can’t just keep subsidizing skyrocketing tuition; we’ll run out of money. States also need to do their part, by making higher education a higher priority in their budgets. And colleges and universities have to do their part by working to keep costs down. Recently, I spoke with a group of college presidents who’ve done just that. Some schools re-design courses to help students finish more quickly. Some use better technology. The point is, it’s possible. So let me put colleges and universities on notice: If you can’t stop tuition from going up, the funding you get from taxpayers will go down. Higher education can’t be a luxury— it’s an economic imperative that every family in America should be able to afford.”

As political pap goes, this is as good as any.  But I’d go a step further to ask how the government could help keep down costs, apart from threatening to take away subsidies.  Costs have many drivers, including rising student demand for particular kinds of campus amenities, legacy benefit costs that plague all large-scale employers, and rising health costs.  But the biggest factor is faculty salaries. Given tenure (which affects law schools disproportionately because of our accreditor’s monopoly) it might seem like this is a wicked problem.  Maybe it is, but the President could have called for the Congress to make a small change in law that might make a real difference: repeal that portion of the ADEA which prohibits mandatory retirement ages for university professors.

As is well-known, the federal government prohibits mandatory retirement policies except when age is a bona fide occapational requirement or when the person is a qualifying executive.  29 U.S.C. §§623(f), 631(c).  An exception for tenured employees, including professors, was phased out in 1993.  (The law phasing out the exception passed in 1986).  As this study predicted, the impact on research universities in particular is severe, as an increasingly high percentage of workers stay on the job after age 70. Why does this matter?   If teaching and/or scholarship decreases after many years on the job – and there is some evidence that they do – universities have few remedies given tenurial job protections for under performing employees.  In today’s economy, with an increasingly volatile stock market, and unpalatable health insurance choices, we’d probably also expect that fewer faculty will retire voluntarily in the future than they used to.  Thus, many institutions will find it hard to reduce costs by reducing faculty sizes (or paying less per person by replacing older, more expensive, employees with younger, cheaper, ones.)  We will deliver fewer educational goods, at higher costs.

Now there are good reasons for prohibiting mandatory retirement in general. But I’ve never understood why those reasons translate when you’ve got a tenured faculty who often exercise more self-government than law firm partners.  In any event, given the economic realities of the moment, lumping faculty in with other workers feels like a luxury students can no longer afford.

Anyway, it’s a useful expression for someone who feels trapped by a bad situation.  I thought I’d pass it along.  It’s an illustration, incidentally, of [...]]]> I can across this saying recently in a post about the perils of blogging by Todd Henderson.  It allegedly is a Yiddish proverb, made popular in a speech by Malcolm Gladwell.  I’m actually not so sure it’s a real piece of Yiddishkeit.  None of my (Hungarian) Yiddish-speaking relatives have heard of it, and I can’t find the real Yiddish version anywhere.  Rather, I think the expression is best sourced to Isaac Bashevis Singer, who wrote an English short story with the expression in the title, and who used variants in several other pieces. (If anyone knows different, please feel free to comment.)

Anyway, it’s a useful expression for someone who feels trapped by a bad situation.  I thought I’d pass it along.  It’s an illustration, incidentally, of how bizarre associations can make writing more vivid.  (What’s the worm doing in horseradish?  Why horseradish?  Are worms kosher for Passover?)  It’s also a useful reminder, in this new year, that it’s pretty bad to be a worm in horseradish.

As others have commented, Larry always told you when he thought you were being an idiot.  When I presented one of my early empirical papers at an otherwise warm-and-friendly Canadian Law and Economics conference, Larry provided comments from the audience that had me wanting to go back to running fire drills at Cravath.  My god, how he schooled me!  But he was basically right, and it was business, not personal.  Some years later, he provided crucial encouragement on a new (better?) empirical paper.  Praise felt twice as good coming from him.  What [...]]]> Larry Ribstein, who died earlier this week, was a galvanic force as a scholar and blogger.  I join those who’ve expressed sadness and loss at his untimely passing.  I figured I’d add two comments.

As others have commented, Larry always told you when he thought you were being an idiot.  When I presented one of my early empirical papers at an otherwise warm-and-friendly Canadian Law and Economics conference, Larry provided comments from the audience that had me wanting to go back to running fire drills at Cravath.  My god, how he schooled me!  But he was basically right, and it was business, not personal.  Some years later, he provided crucial encouragement on a new (better?) empirical paper.  Praise felt twice as good coming from him.  What a teacher he must have been!

Second, I’ve recently read his book (coauthored with Erin O’Hara) The Law Market.  I think it’s simply amazing – provocative, and in some ways as mind-opening as Stuntz’s Collapse of American Criminal Justice.  Law and economics has lost a great and unique voice.

However, there are transactional opportunities – at law firms (though these are hard to secure for 1Ls); in general counsel’s offices (same objection); in government; and, in particular, in tax and estate planning small practices.  I thought I’d open up [...]]]> A number of students have recently asked me about opportunities to work in transactional practice in the summer after their 1L year.   That kind of job search is challenging, as the typical kind of 1L practice revolves around planning for or resolving litigation (i.e., government agency litigation interns, judicial interns, public service interns).  Indeed, I imagine that a large plurality of law students who obtain a legal internship this summer (paid or not) will end up writing some kind of multi- or 50-state survey litigation memorandum.

However, there are transactional opportunities – at law firms (though these are hard to secure for 1Ls); in general counsel’s offices (same objection); in government; and, in particular, in tax and estate planning small practices.  I thought I’d open up a thread for folks to share ideas/experiences with transactional practice in the first summer.  If you had a great job, please tell us about it and what you did. If you’ve ideas for networking of job search, let’s make a public good of them.

“Robert Lee visited a dentist, Stacy Makhnevich, because he was suffering from a severe toothache, caused by a painful infected cavity.  She refused to treat him until he signed a so-called “privacy” contract, which included a clause preventing him from posting negative reviews of her online.  [The clause read: "Patient will not denigrate, defame, disparage, or cast aspersions upon the Physician; and (ii) will use all reasonable efforts to prevent any member of their immediate family or acquaintance from engaging in any such activity."]

More specifically, the contract stated that Lee would not publish adverse comments about Makhnevich’s performance online, and [...]]]> In light of some of my previous posts on nondisclosure clauses and their enforceability, I thought readers might enjoy the following story:

“Robert Lee visited a dentist, Stacy Makhnevich, because he was suffering from a severe toothache, caused by a painful infected cavity.  She refused to treat him until he signed a so-called “privacy” contract, which included a clause preventing him from posting negative reviews of her online.  [The clause read: "Patient will not denigrate, defame, disparage, or cast aspersions upon the Physician; and (ii) will use all reasonable efforts to prevent any member of their immediate family or acquaintance from engaging in any such activity."]

More specifically, the contract stated that Lee would not publish adverse comments about Makhnevich’s performance online, and that he would assign the copyright of any online commentary that he did make to her (presumably so that she could have such commentary quickly and directly taken down if she found it objectionable).

Lee signed the contract.  But later—after receiving a hefty bill for service that he viewed as problematic—he posted negative reviews of the dentist on Yelp.com and DoctorBase.com, despite the contract’s ban on such postings.

The Yelp.com review said:  “Avoid at all cost! Scamming their customers!”  The DoctorBase.com review was similar.

Lee claims that Makhnevich then– in an attempt to enforce the contract—tried to get Lee’s negative reviews taken down from the review sites.  He alleges that she also started billing him $100, as a fine, for every day the reviews remained on the Internet.  Moreover, Lee alleges, she refused to send copies of his billing records to him so that he could seek reimbursement from his insurer.  Makhnevich also sent Lee a notice threatening a lawsuit.  In response, Lee filed a lawsuit of his own.

Lee’s lawsuit calls the contract he signed invalid under state law as an unconscionable contract.  The lawsuit also alleges that posting one’s own commentary on a website such as Yelp.com or DoctorBase.com constitutes “fair use” under the copyright laws.

In the suit, Lee asks that the agreement that he and other patients signed with his dentist be declared void and unenforceable, and that she be barred from requiring assent to these agreements by future patients.”

So many great issues here — the penalty/liquidated clause damage term; the privacy/nondisclosure nexus; the unenforceability argument coupled with a lurking first amendment claim.  The story claims there’s even a consideration defense, though I can’t see how that’s really present on these facts.

As I’ve expressed before, I think these kinds of nondisclosure agreements are more difficult to enforce and obtain damages from than most conventional accounts would have it, and that they often function, like liquidated damages in general, to compel parties to engage in behavior that a court would not actually order.  This case seems like a good test of my theory.  I’m very glad that the Center for Democracy and Technology has taken up the battle.

(H/T: Reader T.G.)

“James E. Katz, director of the Center for Mobile Communication Studies at Rutgers, said people who use their voices to control their phones are creating an inconvenience for others — noise — rather than coping with an inconvenience for themselves — the discomfort of having to type slowly on a cramped cellphone keyboard. Mr. Katz compared the behavior with that of someone who leaves a car’s engine running while parked, creating noise and fumes for people surrounding [...]]]> The NYT isn’t entirely worthless.  There’s a cute technology piece up on how irritated the reporter and his friends-on-the-street are by people who talk to their iPhone’s Siri when they could just as easily text.  As the Times puts it, this is a problem of unfelt externalities:

“James E. Katz, director of the Center for Mobile Communication Studies at Rutgers, said people who use their voices to control their phones are creating an inconvenience for others — noise — rather than coping with an inconvenience for themselves — the discomfort of having to type slowly on a cramped cellphone keyboard. Mr. Katz compared the behavior with that of someone who leaves a car’s engine running while parked, creating noise and fumes for people surrounding them.”

The piece goes onto claim that eventually, we’re get used to this noise pollution.  Perhaps we will!  But if we don’t, there are options other than anti-nuisance regulation.  After all, there are competing rights here: the right to speak so you don’t have to confront your inability to text without typos and the right not to hear what the person next to you on the subway wants for dinner.  Now, we could ban Siri-like Apps in public places.  But, as all good Coasians know, there’s another option.  We could decide that the Siri-ans should have the right to speak wherever they are: irritated hearers can simply pay the offending speaker not to talk into their iPhone in public.  In fact, I wonder if Apple could perhaps make an App for that.  Call it the “Shut Down Nearby Siris For Five Minutes Auction App.”  People could list the price at which they’d agree to be paid to be silenced; irritated listeners could either pay that price or bid at a lower rate.  If hearers and speakers matched, we’d achieve (in the Article’s words) the socially efficient outcome: back to the “old days when people just texted in public.”

We had a job candidate come through at some point this Fall who generally is interested in the field of commercial law.  That person mentioned in passing that although they were more than willing to teach the traditional secured transactions course, in their opinion it wasn’t well structured.  Why? Not, as the navel-gazer might imagine, because the field of commercial law is supposedly intellectually dead.  Rather because the traditional secured transaction course is too narrowly conceived — it usually is limited in coverage to personal property security interests under Article 9.  But many security interests that matter to lawyers aren’t held on movable property.  Since secured [...]]]> I’ve never taught Secured Transactions, so I’ll start by saying that the following is purely speculative and subject to correction.

We had a job candidate come through at some point this Fall who generally is interested in the field of commercial law.  That person mentioned in passing that although they were more than willing to teach the traditional secured transactions course, in their opinion it wasn’t well structured.  Why? Not, as the navel-gazer might imagine, because the field of commercial law is supposedly intellectually dead.  Rather because the traditional secured transaction course is too narrowly conceived — it usually is limited in coverage to personal property security interests under Article 9.  But many security interests that matter to lawyers aren’t held on movable property.  Since secured is ordinarily the foundational course for the commercial curriculum, students are left starting on too narrow a footing in understanding bankruptcy and bank regulation.  It’s even worse than having a corporations course that excludes LLCs.  Because of its technicality, ST is traditionally so difficult to teach that many students are turned off to the idea of commercial law practice at all.

Again, I don’t know much about this area of law.  I never took ST in law school, I haven’t taught it, and (worse) I haven’t even read a ST syllabus at my current institution.  But it struck me as an interesting thought, at least worth airing.  It’s related to concerns I have about the general corporate curriculum — is “corporations” really a subject that ought to be taught in a single course, or is it really a merger of too many (or too few) legal principles that have glommed together over time.  It’s also related to concerns that one might have about continuing to use the increasingly outdated, purportedly uniform, UCC to teach when States’ adopted versions are moving ever-further-away from that ideal.

“I’ve been asked to be part of an NAS working group that will develop a proposal on how science should figure in the training of lawyers. I’m going to put together a memo that outlines my own initial views and distribute it shortly before the first meeting (in mid January). Below is a condensed account of the points and themes that my memo will stress. But my ideas are provisional & formative; indeed, I share them to invite your reactions, which I expect to stimulate and educate my own thinking.

I welcome feedback not only on the substance but also on what to include in an annotated bibliography, the germ of which [...]]]> At the Cultural Cognition Blog, Dan Kahan introduces a new project:

“I’ve been asked to be part of an NAS working group that will develop a proposal on how science should figure in the training of lawyers. I’m going to put together a memo that outlines my own initial views and distribute it shortly before the first meeting (in mid January). Below is a condensed account of the points and themes that my memo will stress. But my ideas are provisional & formative; indeed, I share them to invite your reactions, which I expect to stimulate and educate my own thinking.

I welcome feedback not only on the substance but also on what to include in an annotated bibliography, the germ of which appears after the narrative section. The bibliography is not meant as a syllabus for a course; some of the items would no doubt be assigned in the sort of “forensic science literacy” course I am describing, but mainly I am trying to compile sources that help make the spirit & philosophy of such an offering more vivid for memo readers.”

The remainder of the post, which talks about the components of science training for lawyers, is both provocative (in the best sense) and illuminating.  I figured it’d be of interest to our readers, especially in light of the recent discussion on this blog regarding the relationship between legal scholarship, legal education, and the practice of law. (And in light of the responses in the HLR Forum to Dan’s forward, one of which claimed to hear in Dan’s work “the sounds of an earlier era, the era when Progressives believed that scientific expertise could be called upon to resolve normative questions that divided the nation …”)  In the blog post, Dan argues that the key task of law schools in here is to teach students to “recognize what constitutes sound forensic science and what doesn’t. A model course should instruct students in the general concepts and procedures that one must understand in order to perform this recognition task reliably, including principles of validity; elements of probability; and methods of inquiry (more on these below).”  This conception of scientific legal education is, I think, linked with Dan’s famous speech on the core role that judgment and recognition generally plays in legal education.

In any event, check it out and contribute to the project!

“If the big bond insurers like MBIA and Ambac get downgraded because of the subprime mess, there could be a big ripple effect throughout the markets. A lot of investment-grade securities get their rating [...]]]> The last question in tonight’s Republican debate was, essentially, “what important threat to national security aren’t we talking about enough.”  This was a useful question — and it produced surprisingly illuminating answers.  (I’m with Newt– EMP!)   It reminded me of an occasional tradition here at Co-Op, the Gorilla Award.  As I explained in 2005, the award is named for this famous video demonstrating the phenomenon of “inattentional blindness.”  The gist was to recognize corporate law crises on the horizon.  2007′s lone entrant, Ben Barros, won by default and by retrospective acclimation:

“If the big bond insurers like MBIA and Ambac get downgraded because of the subprime mess, there could be a big ripple effect throughout the markets. A lot of investment-grade securities get their rating from the insurance policy (or “wrap”) that the bond insurers place on the issue. If the insurers get downgraded, a lot of debt instruments might also get downgraded. Among other things, entities that can only hold investment-grade instruments might be forced to sell lots of this stuff at the same time.”

The floor is open for nominations.  The criterion: what stuff is happening now that is likely to cause an important set of problems for corporate/financial regulatory law in the next 12-18 months, and which is not being talked about enough.  So, in my view, that excludes the European debt crisis, corporate political contributions, anything to do with credit swaps or mortgages, and (of course) the continued regulatory overhang from Dodd-Frank.  Basically, anything that comes to first to mind.  You can see why the Award is so prestigious — it requires out-of-the-box thinking!

What do you think?

Today in Contracts, I taught Vokes v. Arthur Murray, 212 So. 2d 906 (1968).  In Vokes, a “widow of 51 years”1 sought to be relieved from her obligation to pay for dance lessons purchased from an Arthur Murray franchise.  She claimed that the defendant had lied to her about her abilities as a dancer – and, significantly, exaggerated her improvement.  She had an account with almost 2,000 hours of unused lessons outstanding, and she owed more than $200,000 (in 2010 dollars). Surprisingly, the court permitted that argument to go to a jury, reasoning that the studio’s superior knowledge, coupled with the defendant’s bad faith as illustrated by the facts, made this [...]]]>

In law school teaching, as in dance competitions, it's important to know when to spin on a dime.

Today in Contracts, I taught Vokes v. Arthur Murray, 212 So. 2d 906 (1968).  In Vokes, a “widow of 51 years”¹ sought to be relieved from her obligation to pay for dance lessons purchased from an Arthur Murray franchise.  She claimed that the defendant had lied to her about her abilities as a dancer – and, significantly, exaggerated her improvement.  She had an account with almost 2,000 hours of unused lessons outstanding, and she owed more than $200,000 (in 2010 dollars). Surprisingly, the court permitted that argument to go to a jury, reasoning that the studio’s superior knowledge, coupled with the defendant’s bad faith as illustrated by the facts, made this the kind of exceptional misleading “opinion” which might be actionable.

It’s a good teaching case.  But it got me to wondering about an issue tangentially raised by David Segal’s embarrassingly error-ridden and ideologically charged series in the Times about legal education, and more forcefully by the equally thoughtful Paul Campos. Both argue (ironically) that law schools are contributing to the problems of the legal profession by not raising higher barriers to entry.  Those barriers might be incidentally related to other worthy goals — experiential education, a single tenure system, and a more rigorous disclosure regime are all popular reforms that are very, very expensive.²  But sometimes reformers make a more direct claim: like the Texas lawyers of the 1930s, they claim that “Our bar, already overcrowded, is held out as an asylum for the lame, and the halt, and the blind from the law schools of this country.”  Law schools are failing students by encouraging them to apply (it’s a “scam”), taking their money (it’s really a “scam!”), not preparing them to practice (“scam! scam! scam!”), and then not supporting them in getting jobs (“SCAM!”)

But how far, I mused outloud in class, does this argument run?  Let’s say a student comes to your office hours early in the Fall semester.  They are lost.  Really, desperately, lost.  They are working all the time, but they can’t see the forest, the trees, the continent, the planet.  Law’s greek to them. What to do?  One view – let’s call this the Segal/Campos view – is that the morally right thing to do at that very moment is to 1) recognize that my livelihood depends on the students; 2) this puts me, like every provider of services, in a slightly compromised position when talking to a student about whether they ought to be in school; 3) realizing this, decide pretty quickly if I think that the student is a candidate for Bar passage and employment; 4) if not, tell the student that they’d be better off leaving school and pursuing other opportunities in today’s job market, or to take the Ayes-refund offer if it comes.

I have had this discussion with a handful of students over the last seven years, though always after the first semester and usually after a pretty lengthy exploration of  their goals, resources and capabilities. But, to be honest, I am never sure if the talk is a good idea, let alone morally compelled.  Putting aside Bar passage – and at Temple, I have that luxury as almost every student passes on their first try – I know that I have very little information early in a student’s career that will meaningfully predict if they can earn a living as a lawyer.  I will know something after the first semester about if they’ll get a job at a large law firm. But that’s a narrow slice of jobs for all law school graduates outside of all but 10-15 schools (or, more precisely 5-10% of law school graduates).  What I don’t know about students is their motivation; their people skills; their social connections; their ability to bounce back.  In short, I know almost nothing about their human capital.  And nothing in my training or teaching has made me particularly good at making snap judgments about that really hard to measure set of attributes. In fact, I know that I tend to overvalue a certain set of skills – intellectual, verbal, etc. – and discount social ones.  This problem of mis-prediction is particularly acute early in the first semester. Many confused students turn it around.  Some don’t.  I have never been able to predict which will be which.3

So I encourage most students to persevere, to stick to it, to work super hard, to postpone good times and return again to the books. I tell them that the Law School’s most successful graduates got bad grades.  (True, if success means money earned.)  I tell them that I felt confused in my first semester.  (True, and it’s also true that Contracts was my least favorite, and least understood, class.)  I sometimes tell them they are improving though they aren’t – but only if they seem to me to desperately need some solace.  (I never tell them that about their practice exams, in case my current students are reading this – you’ll get only criticism from me in the service of better final performance.)  I often tell people that hard work and caring more than other lawyers is the path to success, though I know that in life, social connections, being good looking/tall, and luck probably play just as much if not a larger role.  In short, I try to be a supportive mentor as much as I can, though I know, in grim probabilistic terms, that some students would be better off cutting their losses.

Should I feel bad that I encourage people who may not succeed?  Should I start every conversation with a Vokesian disclaimer that is brutally frank about their current level of skill?  I just don’t see it.  That’s not, I think, what an educational institution is supposed to be about.  We’re selling the possibility of self-improvement, and economic and social momentum.  People need to believe in that possibility if they are to realize it: optimism actually makes people better, more competent, and more satisfied with their lives.  There’s a corrosive cynicism in the “scamblogs” which would, I think, turn that idea on its head.⁴  We owe our students more.

Notes:

1.  Is she a 51 year old widow?  Or was she 51 years a widow?  It’s not just Cardozo who can write lyrical sentences that are hard to parse.

2.  That something is expensive doesn’t mean it’s a bad idea.  But I fear that too often reformers in legal education (and elsewhere, of course) don’t think clearly or well about trade-offs.  Making law school more expensive would be good for current incumbent lawyers.  It would be bad for prospective lawyers and current clients.   I’d prefer that law schools be regulated less, and for them to compete on price, disclosure, internal governance, and educational program.  For those that say “why don’t they do so now,” the answer is “because the ABA doesn’t let them.”

3. Not knowing whether someone is going to succeed as a lawyer isn’t the same as not knowing how they are doing as a student, or the claim – obviously silly – that we can’t evaluate relative merit at some kinds of lawyer-relevant tasks.  Law school sorts students by grades, and I’m committed to making grades pretty good reflections of how well students exercise legal judgment.  The point is merely this: we ought to be humble in our predictions of how well our students will do once let loose in the world.  We provide a knowledge base. The Bar Exam licenses.  Neither guarantees success, happiness or wisdom.  Even lawyers with fantastic legal judgment might not rake in cash.

4.  Nothing in the above discussion at all approves lying about data.  Or increasing tuition above inflation yearly.  Or teaching the same thing as we did last year simply because …well…because we did it.  Or being a nitwit, a bore, an ideologue, a lazybones, or a sociopath, unable to see the pain of students who can’t find jobs.  I’m against being bad at your job, and I think that being good at your job means realizing that we are teaching people to be lawyers, and our students rightly expect that we set them up to succeed.

“The Journal is edited by David Klein, of the University of Virginia’s Department of Politics, and published by the University of Chicago Press. The JLC is a double-blind peer-reviewed, single-submission journal, indexed by Lexis-Nexis, Westlaw, EBSCO, JSTOR, and others. While formally an APSA section journal, the JLC aims to be the premier outlet for the publication of work on law, courts, and things judicial from a wide range of perspectives.  More information about the journal and instructions for authors can be found here.

Submissions are being accepted now, via the journal’s Editorial Managerpage. We anticipate publication of the inaugural issue in spring 2013.”

Seems like a great forum!

As promised, I’m filing a report from the Sixth Annual Empirical Studies Conference, held 11/4-11/5 at Northwestern Law School.  Several of the attendees at the Conference approached me and remarked on my posts from CELS V, IV, and III. That added pressure, coupled with missing half of the conference due to an unavoidable conflict, has delayed this post substantially.  Apologies!  Next time, I promise to attend from the opening ceremonies until they burn the natural law figure in effigy.  Next year’s conference is at Stanford.  I’ll make a similar offer to the one I’ve made in the past: if the organizing committee pays my way, I promise not only to blog [...]]]>

Northwestern's Stained Glass Windows Made Me Wonder Whether Some Kind of Regression Was Being Proposed

As promised, I’m filing a report from the Sixth Annual Empirical Studies Conference, held 11/4-11/5 at Northwestern Law School.  Several of the attendees at the Conference approached me and remarked on my posts from CELS V, IV, and III. That added pressure, coupled with missing half of the conference due to an unavoidable conflict, has delayed this post substantially.  Apologies!  Next time, I promise to attend from the opening ceremonies until they burn the natural law figure in effigy.  Next year’s conference is at Stanford.  I’ll make a similar offer to the one I’ve made in the past: if the organizing committee pays my way, I promise not only to blog the whole thing, but to praise you unstintingly.  Here’s an example: I didn’t observe a single technical or organization snafu at Northwestern this year.  Kudos to the organizing committee: Bernie Black, Shari Diamond, and Emerson Tiller.

What I saw

I arrived Friday night in time for the poster session.  A few impressions.  Yun-chien Chang’s Tenancy in ‘Anticommons’? A Theoretical and Empirical Analysis of Co-Ownership won “best poster,” but I was drawn to David Lovis-McMahon & N.J. Schweitzer’s Substantive Justice: How the Substantive Law Shapes Perceived Fairness.  Overall, the trend toward professionalization in poster display continues unabated.  Even Ted Eisenberg’s poster was glossy & evidenced some post-production work — Ted’s posters at past sessions were, famously, not as civilized. Gone are the days where you could throw some powerpoint slides onto a board and talk about them over a glass of wine!  That said, I’m skeptical about poster sessions generally.  I would love to hear differently from folks who were there.

On Saturday, bright eyed and caffeinated, I went to a Juries panel, where I got to see three pretty cool papers.  The first, by Mercer/Kadous, was about how juries are likely to react to precise/imprecise legal standards.  (For a previous version, see here.) Though the work was nominally about auditing standards, it seemed generalizable to other kinds of legal rules.  The basic conclusion was that imprecise standards increase the likelihood of plaintiff verdicts, but only when the underlying conduct is conservative but deviates from industry norms.  By contrast, if the underlying conduct is aggressive, jurors return fewer pro-plaintiff verdicts.  Unlike most such projects, the authors permitted a large number of mock juries to deliberate, which added a degree of external validity.  Similarly worth reading was Lee/Waters’ work on jury verdict reporters (bottom line: reporters aren’t systematically pro-plaintiff, as the CW suggests, but they are awfully noise measures of what juries are actually doing).  Finally, Hans/Reyna presented some very interesting work on the “gist” model of jury decisionmaking.

At 11:00, I had to skip a great paper by Daniel Klerman whose title was worth the price of admission alone – the Selection of Thirteenth-Century Disputes for Litigation.  Instead, I went to Law and Psychology III.  There, Kenworthey Bilz presented Crime, Tort, Anger, and Insult, a paper which studies how attribution & perceptions of dignitary loss mark a psychological boundary between crime and tort cases.  Bilz presented several neat experiments in service of her thesis, among them a priming survey- – people primed to think about crimes complete the word “ins-” as “insult,” while people primed to think about torts complete it as “insurance.”  (I think I’ve got that right – - the paper isn’t available online, and I’m drawing on two week old memories.)

At noon, Andrew Gelman gave a fantastic presentation on the visualization of empirical data.  The bottom line: wordles are silly and convey no important information.  Actually, Andrew didn’t say that.  I just thought that coming in.  What Andrew said was something more like “can’t people who produce visually interesting graphs and people who produce graphs that convey information get along?”

Finally, I was the discussant at an Experimental Panel, responding to Brooks/Stremitzer/Tontrup’s Framing Contracts:Why Loss Framing Increases Effort.  Attendees witnessed my ill-fated attempt to reverse the order of my presentation on the fly, leading me to neglect the bread in the praise sandwich.  This was a good teaching moment about academic norms. My substantive reaction to Framing Contracts is that it was hard to know how much the paper connected to real-world contracting behavior, since the kinds of decision tasks that the experimental subjects were asked to perform were stripped of the relational & reciprocal norms that characterize actual deals.

CELS: What I missed

The entire first day!  One of my papers with the cultural cognition project, They Saw a Protest, apparently came off well.  Of course, there was also tons of great stuff not written from within the expanding cultural cognition empire.  Here’s a selection: on lawyer optimism; on public housing, enforcement and race; on probable cause and hindsight judging; and several papers on Iqbal, none of which appear to be online.

What did you see & like?

Let’s pretend for a moment that Herman Cain had a legitimate chance of becoming the Republican nominee for President.  Now imagine that he actually engaged in unlawful behavior toward at least one female employee of the National Restaurant Association.  That employee would like to talk about what happened, but she is worried that she’ll breach a 1998 severance and nondisclosure agreement if she talks to the press.

Now, let our imagination run wild. The accuser – angered by Cain’s denials of bad conduct- decides to throw caution to the wind and go public.  Her allegations are salacious & they portray Cain in [...]]]>

Five Percent Chance of Being the Nominee. Zero Percent Chance of Recovering Damages in a Breach of Contract Lawsuit for Violation of an NDA.

Let’s pretend for a moment that Herman Cain had a legitimate chance of becoming the Republican nominee for President.  Now imagine that he actually engaged in unlawful behavior toward at least one female employee of the National Restaurant Association.  That employee would like to talk about what happened, but she is worried that she’ll breach a 1998 severance and nondisclosure agreement if she talks to the press.

Now, let our imagination run wild. The accuser – angered by Cain’s denials of bad conduct- decides to throw caution to the wind and go public.  Her allegations are salacious & they portray Cain in the worst possible light.  Notwithstanding her claims, Herman Cain actually gets a bump in the polling and becomes the nominee.  During the general election campaign, other women come forward – sparked by the original accuser’s courage.  Nevertheless, given the dominance of deterministic macro-economic factors over political strategy and common sense, Cain wins a tight election to become the next President of the United States.  At that point, emboldened, he decides to sue the woman who released the information about him for breach of contract, on a theory that he was a third-party beneficiary of the nondisclosure agreement.  (Let’s pretend that this is a doctrinal possibility.)

Last year, in a discussion with Larry Cunningham and Dan Solove, I argued that it’s exceedingly unlikely that any state court in the Union would award damages for breach of a nondisclosure agreement under circumstances like these, where (i) the information to be protected relates to sexual misconduct; (ii) the information is of immense value to the public at large; and (iii) it’s basically impossible for the promisee to prove damages with any certainty.  I am still convinced this is true, and that the media too uncritically reports that parties are “bound” by NDAs that would have almost no effect if tested in Court.

This line of thinking makes me doubt that fear of a breach of contract lawsuit is playing any role at all in the refusal of Cain’s accuser to come forward.  Rather, as her lawyer said today, she is afraid of the reputational damage that disclosure would bring, even if she’s entirely in the right.