posted by UCLA Law Review
Volume 61, Issue 1 (August 2013)
|Against Endowment Theory: Experimental Economics and Legal Scholarship||Gregory Klass & Kathryn Zeiler||2|
|Why Broccoli? Limiting Principles and Popular Constitutionalism in the Health Care Case||Mark D. Rosen & Christopher W. Schmidt||66|
December 6, 2013 at 6:59 pm Tags: 4th amendment, article iii, broccoli, Constitutional Law, critical race theory, Current Events, endowment effect, endowment theory, Fourth Amendment, health care, portable electronic devices, search, united states v. cotterman Posted in: Civil Rights, Constitutional Law, Economic Analysis of Law, Health Law, Law Rev (UCLA), Legal Theory, Race, Supreme Court Print This Post No Comments
posted by Suzanne Kim
I am so delighted to be guest blogging for Concurring Opinions this month and to be part of this exciting community. This month, I will be blogging on various intersections of law, social norms, gender, sexuality, family, and work. I have been researching some of these issues for my book project on Gender and Social Norms in Same-Sex and Different-Sex Marriage (contracted with NYU Press). Although today’s topic is not part of this book research, it takes up many of the concerns that animate my work.
Recently, a plastic surgery procedure that has gained popularity among South Koreans has gained some major media attention in the U.S. The procedure, technically called Valentine anguloplasty and sometimes colloquially called a “smile lipt,” is supposed to lift the outer corners of the lips into a smile, even when the putative smiler is not actually smiling. According to a South Korean plastic surgery center promoting its smile procedure, people of Korean descent like myself have shorter mouths and lower mouth corners than “Westerners,” which means that I and others similarly situated supposedly have a greater tendency to look like we’re frowning. “Perma-smile” to the rescue.
Considering the United States’ status as a world leader in the consumption of plastic surgery, one would think that Valentine anguloplasty would hold some appeal, even to the blessedly long-mouthed. But based on the American media reaction, what’s been dubbed “joker lips surgery” is not likely to catch on any time soon.
Smile surgery has actually been around for decades and isn’t just a recent invention of South Korean plastic surgeons. The response to this latest supposed craze, though, is what interests me more than the procedure itself. No, not many of us want to look like this. But while the origins of this photo are murky, the hypocrisy of the reaction to South Korean women wanting to look smiley is clear.
What strikes me is how narrow the chasm is between the perma-smile of Valentine anguloplasty and the social norms that compel those of us not in South Korea, particularly women, to smile – a lot. Psychologists Marianne LaFrance, Elizabeth Paluck, and Marvin Hecht found that women smile more than men, particularly when women and men think that they are being observed. This effect corresponds with numerous studies with which LaFrance, Paluck, and Hecht engage concerning social expectations for women to smile and penalties imposed on men for smiling too much. Others have written cleverly about the common form of street harassment consisting of ordering women to smile.
Women pay the price of not smiling (or of the much-memed “bitchy resting face”) on the street and in the workplace every day. People like nice women. And the smile is a proxy, although often a sloppy one, for that niceness.
For a woman to smile all the time, especially in the workplace, is — to borrow from Devon Carbado, Mitu Gulati, and Gowri Ramachandran – to perform “gender comfort,” easing the way for women’s presence. What’s already a treacherous climb for women up to leadership positions in firms and corporations is made even more difficult by the added load of having to be smiley and perky all the while. Sociologist Arlie Hochschild has identified the strains posed by such “emotional labor,” particularly for flight attendants expected to smile continuously to project concern, friendliness, and other emotions not necessarily felt all the time but considered necessary for the job.
We see the legal imperative and effect of the smiliness social norm historically and contemporaneously. I recently watched the excellent PBS documentary Makers: Women Who Make America (2013), which reminded me of the 1950s expectation for those women living the post-war American Dream to be cheerful, smiley, and content. Sixty years later, the norm persists. Social expectations for women’s comportment often influence their willingness to negotiate, to ask for more, to complain.
In the context of the workplace, the Lilly Ledbetter Fair Pay Act, setting the statute of limitations for a pay discrimination case from each new paycheck affected by the discriminatory action, is an important step in remedying discrimination of which a plaintiff may be unaware. But it also importantly accounts for the social dimension of that unawareness. When one is socialized to be nice, it is difficult to suspect wrongdoing, even if it occurs over years.
Despite advances like this, social science accounts of workplace dynamics, particularly in the context of negotiation continue to give pause. While women suffer opportunity- and pay-wise from failures to negotiate, they also suffer when they do negotiate. Hannah Riley Bowles, Linda Babcock, and Lei Lai demonstrate in their research that women are judged more harshly than men for initiating negotiations for higher compensation, with perceptions of “niceness” and “demandingness” explaining resistance to female negotiators. In recognition of the threat posed by women seeking higher pay, one approach is Sheryl Sandberg’s in Lean In, advising women negotiating pay to smile frequently.
This is all terribly depressing when I think of legal and social change. We teach young women to be assertive, but they will likely be judged for being “agentic women.” When we think about women in the workplace, perhaps then it makes sense that some would try to create through facial alteration what many “Westerners” are able to achieve more easily without going under the knife and paying $2000 – a permanent smile and all that comes with it. :)
September 7, 2013 at 9:03 am Tags: Current Events, discrimination, employment discrimination, fair pay, gender, negotiation, plastic surgery, smile surgery, social norms, women in leadership Posted in: Culture, Current Events, Technology, Uncategorized Print This Post One Comment
posted by Stanford Law Review
The Stanford Law Review Online has just published an Essay by Yale’s Stephen L. Carter entitled The Iraq War, the Next War, and the Future of the Fat Man. He provides a retrospective on the War in Iraq and discusses the ethical and legal implications of the War on Terror and “anticipatory self-defense” in the form of targeted killings going forward. He writes:
Iraq was war under the beta version of the Bush Doctrine. The newer model is represented by the slaying of Anwar al-Awlaki, an American citizen deemed a terror threat. The Obama Administration has ratcheted the use of remote drone attacks to unprecedented levels—the Bush Doctrine honed to rapier sharpness. The interesting question about the new model is one of ethics more than legality. Let us assume the principal ethical argument pressed in favor of drone warfare—to wit, that the reduction in civilian casualties and destruction of property means that the drone attack comports better than most other methods with the principle of discrimination. If this is so, then we might conclude that a just cause alone is sufficient to justify the attacks. . . . But is what we are doing truly self-defense?
Read the full article, The Iraq War, the Next War, and the Future of the Fat Man by Stephen L. Carter, at the Stanford Law Review Online.
January 16, 2012 at 1:13 pm Tags: anticipatory self-defense, Current Events, drones, iraq war, president bush, president obama, targeted killings, UAVs Posted in: International & Comparative Law, Law Rev (Stanford), Legal Ethics, Military Law, Technology Print This Post 5 Comments
posted by Stanford Law Review
In a Note just published by the Stanford Law Review Online, Daniel J. Hemel discusses a jurisdictional issue that might delay a ruling by the Supreme Court on the constitutionality of the Patient Protection and Affordable Care Act, and a novel way in which the Solicitor General could bypass that hurdle. In How to Reach the Constitutional Question in the Health Care Cases, he writes:
Although the Supreme Court has agreed to hear three suits challenging the 2010 health care reform legislation, it is not at all clear that the Court will resolve the constitutional questions at stake in those cases. Rather, the Justices may decide that a Reconstruction-era statute, the Tax Anti-Injunction Act (TA-IA), requires them to defer a ruling on the merits of the constitutional challenges until 2015 at the earliest. . . . Fortunately (at least for those who favor a quick resolution to the constitutional questions at stake in the health care litigation), there is a way for the Solicitor General to bypass the TA-IA bar—even if one agrees with the interpretation of the TA-IA adopted by the Fourth Circuit and Judge Kavanaugh. Specifically, the Solicitor General can initiate an action against one or more of the fourteen states that have announced their intention to resist enforcement of the health care law, and he can bring this action directly in the Supreme Court under the Court’s original jurisdiction. Such an action would be a suit for the purpose of facilitating—not restraining—the enforcement of the health care law. Thus, it would open up an avenue to an immediate adjudication of the constitutional challenges.
Read the full Note, How to Reach the Constitutional Question in the Health Care Cases by Daniel J. Hemel, at the Stanford Law Review Online.
January 9, 2012 at 12:52 pm Tags: academia, Constitutional Law, Current Events, health care law, jurisdiction, PPACA, Supreme Court, Tax Anti-Injunction Act Posted in: Constitutional Law, Courts, Current Events, Health Law, Law Rev (Stanford), Tax Print This Post One Comment
posted by Nicole Huberfeld
I had intended to address Douglas next, as it is a nice gateway for discussing Florida v. HHS, but a defense of the coercion argument just published in the New England Journal of Medicine Online inspired me to address the latter first. I will begin by discussing why I think the Court granted the petition for certiorari then turn to the Medicaid coercion question.
The Rehnquist Court excluded the Spending Clause from its federalism revolution inasmuch as that would have meant limiting the power to spend by the Tenth Amendment. When Chief Justice Rehnquist authored South Dakota v. Dole, the evidence is that he believed it was an easy and relatively inconsequential case. For those sane enough not to engage in the reading of tea leaves that is deciphering the spending power, a quick review. Dole articulates typical Rehnquist categories for evaluating the constitutionality of conditions placed on federal spending: the spending must be for the general welfare; the conditions must be clear and unambiguous (as modified by Arlington Central School District Board of Education v. Murphy); the conditions must have a nexus with the federal spending (“germaneness”); and the conditions cannot themselves be unconstitutional. After providing this test, Rehnquist noted that “in some circumstances the financial inducement offered by Congress might be so coercive as to pass the point at which ‘pressure turns into compulsion.’” No theory or constitutional provision was cited, but the opinion indicated that coercion would depend on the amount of money or percentage of money withheld if the state violates the conditions. It seems that the Court meant that coercion would be a Tenth Amendment, state sovereignty problem. But, Dole also explicitly stated that the Tenth Amendment was not implicated in the bar on unconstitutional conditions. So, while Dole provides the test for conditional spending, it is undertheorized and a bit self-contradictory. Nevertheless, the Rehnquist Court reiterated that the Spending Clause is not limited by the Tenth Amendment in New York v. U.S. and held to that position in subsequent cases, disappointing many who believed spending to be the next front in judicially-enforced federalism.
The Roberts Court has given hints now as to its approach to spending as well as federalism, and members of the Court have signaled interest in revisiting both topics. For example, Justice Kennedy’s concurrence in Comstock stated: “The limits upon the spending power have not been much discussed, but if the relevant standard is parallel to the Commerce Clause cases, then the limits and the analytic approach in those precedents should be respected.” Justice Kennedy also addressed broader federalism concerns in that concurrence, which were given free rein in his opinion for the Court in Bond v. U.S. as well. Likewise, Justice Alito’s opinion in Arlington was written as a spending power decision rather than a limited statutory interpretation, which I have written elsewhere resulted in a narrower clear statement rule for the second element of the Dole test.
Additionally, even though the Court seems to dislike hearing both spending and healthcare cases, it already has heard Douglas this term, so spending, federalism, and Medicaid are fresh in the justices’ minds. And, what could be a better vehicle for considering coercion than the largest grant-in-aid program that also constitutes the second largest portion of states’ budgets? (Education is first.) Further, numerous lower federal courts have attempted to construe coercion, but none have struck down federal legislation under the doctrine, making the issue ripe for the Court’s consideration.
Despite the idea of coercion arising repeatedly in federalism cases over the last thirty-ish years, its contours are unknown. At what point is the money being offered too much? And is the offer really the issue, or is the problem the amount or percent of money a state stands to lose if it does not comply with the conditions? (Dole indicated the latter, as South Dakota was not coerced because it would lose only 5% of its federal highway funding if it refused to comply with the minimum drinking age that the federal government sought to impose.) Can coercion only apply to an existing conditional spending program that a state could not leave because it has become dependent on the program? Or is there some federal program that would offer so much money that no state could turn it down, even at the outset, such that the new program would be coercive? If it is the former, then clear statement rules also need to be revisited, because they seem to assume some kind of regular restatement of the rules of the program to which a state actively agrees. That simply does not occur in a long-standing program like Medicaid, making me think that clear statement rules are almost meaningless in that context. Additionally, states inherently relinquish some sovereignty when they agree to the terms of a cooperative federalism program, highlighting tensions between dual sovereignty and cooperative federalism.
So, what is the upshot for the Medicaid expansion? [more after the jump]
posted by Nicole Huberfeld
My thanks to Angel, Dan, and the rest of the regulars at CoOp for the invitation and the introduction. I am delighted to be guest blogging, especially at a time when my fields of interest are overflowing with developments. Everyone has been talking about the Commerce Clause questions raised by the minimum coverage provision of the Patient Protection and Affordable Care Act (“PPACA”). I too have been avidly following this litigation, but because I study (among other things) Medicaid as a vehicle for constitutional change – and that phenomenon is happening right now. The Court will decide two high-profile Medicaid cases this term, each of which has the potential to facilitate major movement in structural constitutional law. Oral arguments were heard in the first case, Douglas v. Independent Living Center of Southern California, on October 3d. The second case, Florida v. HHS, will be heard in the spring.
I try not to assume that folks know a lot about federal healthcare programs with their layer cakes of complexity; to wit, a justice said during oral argument, “Suppose there were a provision in the Medicaid or Medicare Act… I get the two of them confused.” (Ahem.) So, I will begin with a bit of background that I hope will help to illuminate the two cases before the Court. Later posts will explore Douglas and Florida v. HHS and their implications for conditional spending jurisprudence, federalism, and Medicaid itself more directly.
Medicaid is a forty-six year old spending program that provides federal money to the states in exchange for states agreeing to provide particular medical services to the “deserving poor.” Medicaid has been described as a classic example of cooperative federalism, but the program is structured this way for historic rather than philosophical reasons (which I detail in Federalizing Medicaid). States were responsible for welfare programs since our founding, and when they could no longer afford to provide welfare medicine, they asked the federal government for money to help care for the deserving poor. The federal government responded with almost conditionless grants to the states through the Social Security Act of 1935. Over time, the states asked for more money, and the federal government provided it, but each amendment to the SSA included more and broader rules for the federal funds to ensure they were being used properly. Fast forward to 1965 and the passage of Medicare, with Medicaid in tow. While Medicare was grounded philosophically in social insurance (but only for people 65 and older), Medicaid continued the old patterns. Indeed, the elderly convinced Congress not to allow Medicare to be a joint program between the federal government and the states. So, Medicaid is a cooperative federalism partnership between the federal government and the states, but not because it was thoughtfully constructed that way. And, this partnership seems to have fostered more disagreement than cooperation between the federal government and the states.
Why does this matter? A number of reasons. PPACA’s expansion of Medicaid is a major philosophical change in the program because it eliminates the idea of the deserving poor for the first time in our history. But, the tensions between the federal government and the states are very much alive and on display before the Court. Douglas involves a challenge to California’s Medicaid reimbursement rate reductions under the Supremacy Clause, and it raises questions regarding the nature of spending legislation, access to federal courts, private rights of action against the states, and Medicaid’s very aspirations. Florida v. HHS challenges the institutional structure of Medicaid (the federal-state partnership) and thus raises major spending questions and federalism questions, including the ever-elusive idea of “coercion.” The kicker: it has been clear for some time that certain justices were eager to decide these questions.
posted by Taunya Banks
Harvard Professor Henry Louis, perhaps best known to most Americans for his run-in with a Cambridge Police Officer, than for his scholarly writings and academic entrepreneurship, is back on public television. His television series is entitled Black in Latin America. The name of the series is somewhat misleading since three of the countries he visits are on islands in the Caribbean, and a fourth, Mexico, also is not located on the Latin America continent. Nevertheless, the series promised to be eye opening. As one reviewer wrote, “When most U.S. citizens think of a Latino, they rarely picture someone black. This series broadens our understanding of the very complex identity of people from Spanish-speaking countries, an identity that is usually oversimplified into misleading racial stereotypes in the U.S. media.” But here again, characterizing the series as about Spanish-speaking “Latinos” also is misleading since the series includes Brazil where the national language is a form of Portuguese and Haiti whose national language is a form of French. So you are getting some idea of this subject’s complexity.
David Eltis and David Richardson in their wonderful book, Atlas of the Transatlantic Slave Trade (Yale Univ. Press 2010), map this trade in human chattel that lasted for 366 years “and resulted in the forced deportation of 12.5 million Africans to the New World.” Black in Latin American briefly looks at the status of these unfortunate humans and their descendants now scattered throughout the islands and the Americas. There is, however, no mention of Central America where the Atlantic slave trade also distributed West Africans. But this omission is not a criticism, the topic is simply huge.
The Atlantic region includes countries whose history of slavery pre-dates the U.S., and where slavery persisted in some places until the end of the nineteenth century. Race in the Americas, especially Brazil and Cuba, is a topic that has long excited a small group of anthropologists, historians and sociologists. Today, however, “Latin American” notions of race have more meaning to Americans because of our growing Hispanic, primarily Latino population, which on the surface celebrates its mestizaje (mixed racial culture) while papering over the racialized divisions within and among each community. Latin America is a region, like the U.S., that, as a result of the slave trade, is equally bedeviled by race.
Over the years I’ve visited and studied about the construction of race in Cuba, Brazil and Mexico. A few years back I even wrote an essay about Afro-Mexicans and Mexico’s hidden third root, its African heritage. By looking at laws in Mexico during the seventeen, eighteen and early nineteenth century, the presence of Africans and their descendants is apparent. Thus, I eagerly looked forward to this series. Read the rest of this post »
posted by Michelle Harner
I want to thank the permanent authors of Concurring Opinions for the opportunity to guest blog. I truly enjoyed the experience and the lively debate. Academia can be isolating in many respects—particularly compared to private practice—so it is nice to have this type of forum to exchange ideas and discuss timely and interesting topics.
For my last post, I want to highlight some trends in law firm practices and consider what they mean for the profession more generally. We are all aware of the difficult job market: law school graduates continue to receive deferred offers, summer associate classes continue to be smaller and many lawyers who lost their jobs are still unemployed. (Even lawyers who managed to keep their jobs may face challanges, see here.) These realities have translated into increased anxiety for law students (exactly what they do not need; law school is stressful enough when the market is good) and new challenges for law schools. But what do they mean for law firms? (For a thoughtful discussion of the challenges facing big law, see here.)
Many commentators have opined on the changing roles of law firms and lawyers, and they often paint a pretty bleak picture (see here, here and here). It is one where lawyers are marginalized and society protects its legal rights by purchasing commoditized legal products or interacting with a computer program or virtual lawyer. The profession also faces challenges from non-lawyers and non-U.S. lawyers. In fact, anecdotal evidence suggests that an increasing number of firms are—either voluntarily (to reduce overhead) or involuntarily (to meet client demands)—outsourcing certain legal services to lawyers in foreign countries (see here and here).
posted by Michelle Harner
I attended the Fifth Annual Law and Entrepreneurship Retreat this week, and it was an interesting, inter-disciplinary discussion of all things entrepreneurial. The papers and debate focused not only on how the law shapes entrepreneurial conduct, but also how entrepreneurial conduct and innovation might reshape the law. (As I noted in a previous post, whether lawyers have the entrepreneurial spirit that often facilitates innovation is a separate question that some debate.)
As part of the retreat, I had the pleasure of reading and discussing a paper entitled Entrepreneurial Litigation and Venture Capital Finance, by Doug Cumming, Bruce Haslem and April Knill. The paper focuses on a dilemma that I suspect many entrepreneurs face in the startup stage: whether to devote limited resources to litigation that might be necessary to protect and preserve key rights for the company (see, e.g., here). These rights might concern intellectual property, contracts, employees or other aspects of the entrepreneur’s nascent business. Initiating litigation may consume all of the company’s resources and make it less attractive to a venture capitalist; but losing the subject rights may force the company out of business. Entrepreneurial Litigation presents empirical data to guide entrepreneurs and venture capitalists in this decision-making process. (For an interesting study of the other side of this equation and how litigation impacts venture capitalist reputation, see here.)
Although not the focus of Entrepreneurial Litigation, the paper also highlights the significant risk and uncertainty inherent in any entrepreneurial venture. Having a big idea is not enough; a lot can happen as an entrepreneur tries to get that idea to market. Litigation is just one of these risks. But certainly instituting litigation to protect a patent or challenge the application of an existing law to the entrepreneur’s product or business model is not cheap. Litigation can easily consume a large portion of an entrepreneur’s working capital. (For some perspectives on entrepreneurs and litigation, see here and here.) And if the firm folds, a competitor may get the benefit of its innovation and proactive legal strategy—adding insult to injury.
I am not sure that most people appreciate this inherent risk. Certainly entrepreneurs and venture capitalists living this risk cycle do, but I suspect others associate entrepreneurship with Bill Gates, Mark Zuckerberg, Biz Stone and other success stories. It looks so easy in the movies. Given the importance of entrepreneurs and startups to our economy, I am excited that academics and industry organizations are devoting resources to the role that law plays in entrepreneurial ventures.
posted by Michelle Harner
Have you noticed the number of empty storefronts around? (For a list of recent store closings, see here.) Business failure unfortunately is part of an economic recession, but it also follows changes in consumer patterns and market demands. Although studies debate the advantages of online versus brick and mortar stores (see here, here and here), consumers are increasingly more comfortable shopping online. Increased security and user-friendly return policies (not to mention all of those free shipping deals) appear to be fostering that trend.
Online or virtual stores also have a very different business model and cost structure (see, e.g., here). A small workforce in one location can service all of a company’s online customers. Compare that model with the brick and mortar model where a company operating in more than one location needs, at a minimum, to own or lease property in each location, pay maintenance and taxes for each facility, retain employees at each facility and comply with the law of each jurisdiction. (For interesting comparisons, see here, here and here.) Accordingly, brick and mortar stores are relying to some extent on certain intangibles—e.g., consumers wanting to touch and see what they are buying, wanting personal service, etc.—to offset these additional costs.
So is it the economy, the changing market or (as is likely) some combination of factors causing companies like Blockbuster, Borders and Harry and David’s to struggle? (For my prior post related to Borders’ financial challenges, see here.) And if it is the latter, will traditional brick and mortar retail stores make a strong comeback when the economy recovers? I am not so sure. I think we may see more retail bankruptcies end like Circuit City’s case—i.e., Circuit City’s core business continues, as does the use of its name, but only in an online form (and under new ownership; see here). Although I appreciate the efficiencies of this model for both the company and the consumer, I do not think it is necessarily the best trend for us as communities and neighbors. As the commercial says, having a face-to-face conversation with a salesperson about your product questions: “priceless.”
posted by Michelle Harner
There currently is a lot of activity surrounding implementation of the Dodd-Frank Act. The various agencies are proposing rules, numerous organizations are filing responsive comments and many rules have become final. (For useful resources to help track rulemaking and developments, see here and here.) Major portions of the Act are taking shape (see, e.g., here, here and here); the new Consumer Financial Protection Bureau even has its website up and running.
But there are problems. Although progress is being made, agencies are behind schedule in meeting certain benchmarks, with the first anniversary of the Act quickly approaching. Opposition lobbies continue to form and are gaining strength (see, e.g., here and here), and funding for the Act’s initiatives remains in question (see here, here and here). I can’t help but wonder about the endgame. Can our already understaffed and underfunded agencies enforce these new rules? Are rules on the books without any meaningful enforcement mechanisms effective? If the answer to both of these questions is no, where exactly are we headed?
I am not the first, and certainly will not be the last, to raise these types of questions. Nevertheless, I raise them to consider the alternatives. If the risk management, corporate governance and consumer protection issues highlighted by the recent recession can’t be fixed effectively through the regulatory process, what might work? The obvious alternatives—market discipline and industry self-regulation—have their own problems, which might be as challenging to overcome as the resource issues facing the government. (For interesting perspectives on these alternatives, see, e.g., here and here.) But I think we should continue to try; we should consider innovative ways to enhance the efficiency of these and other monitoring/disciplining tools that could complement whatever comes out of the regulatory initiatives. The economic problems we face are too big for us to fail.
posted by Michelle Harner
Being a huge sports fan and a corporate law geek, I have truly enjoyed the attention garnered by the Green Bay Packers’ ownership structure in the build up to the Super Bowl (see, e.g., here). The success of the Packers’ non-profit, fan-owner structure raises several interesting questions (see here). That structure also is a refreshing departure from the commercialization of the sports industry generally.
Nevertheless, the Packers’ appearance in Super Bowl XLV also highlights opportunity for innovation and small business profit in the sports context. Indeed, the infamous cheesehead hats were created by a Wisconsin sports fan on his way to a Brewers’ game (see here). Talk about innovation—he apparently ripped the foam from his couch and painted it orange. Before he knew it, he owned and operated a small foam-manufacturing company that caters to Wisconsin sports fans’ every need.
Interestingly, the cheesehead hat entrepreneur is not alone. There is an entire cottage industry of sports entrepreneurs who seek to profit from the loyalty of sports fans everywhere (see, e.g., here and here). And these are not just the high-profile athletes turned entrepreneurs. These are ordinary people with unique or innovative ideas. Take those sports entrepreneurs who are operating online sports stock exchanges (see, e.g., here). I suspect that Aaron Rodgers’ stock price is at an all-time high at the moment.
posted by Michelle Harner
I heard an interview today with a representative of a nonprofit organization that matches volunteers with organizations in need—a sort of match-maker in the volunteer context. Interestingly, the representative reported an increase in the number of available volunteers during the recession (see also here and here). She attributed this trend to two things: people who had lost their jobs wanting to keep up their skills while searching for new employment and people generally wanting to help others in need.
The report piqued my interest regarding whether the recession was having a similar, positive effect on the provision of pro bono legal services. I suspected that more people were in greater need of legal assistance as a result of the recession, which in fact turns out to be the case (see here and here). I did not know, however, whether lawyers were meeting this increased demand. I like to think we are, but the profession’s record on this point is not necessarily encouraging (see, e.g., here).
The results appear mixed. Some reports suggest that the level of pro bono activity has remained the same or increased slightly in the past few years (but see here). (For interesting perspectives on the recession and the legal profession, including pro bono legal services, see here and here.) Nevertheless, even these increased activity levels fall woefully short of the reported need. So, given high lawyer unemployment rates and the desire to better train new lawyers, why does this gap exist?
posted by Michelle Harner
Activist investors have been very busy in recent months, both in the U.S. (see here, here and here) and elsewhere. Among other things, Bill Ackman, through Pershing Square Capital Management, obtained seats on the board of J.C. Penney and was named Chairman of Howard Hughes Corp.—the spinoff of General Growth Properties. Ackman invested in both the equity and debt of General Growth Properties shortly before its chapter 11 bankruptcy filing and, by many accounts, hit a home run on this particular investment. The governance structure of the resulting company, Howard Hughes Corp. (which is reportedly named for the former filmmaker/entrepreneur), also is very interesting. According to Ackman, “it’s a company you can buy stock in. You can throw out the board. The board is elected annually. You can call a shareholder meeting with 15 percent of the vote…so, you know, you can get me back.” So is this a sign of things to come?
Many predict a very active proxy season for activist shareholders and the companies they target. (For an explanation of this trend, see here.) Commentators also suggest the activist agenda likely will include “proliferation of majority voting for directors from the larger public companies to mid-size and smaller companies (which we believe will see the largest number of proposals), separation of the offices of Chairman of the Board and CEO, 10 percent or lower thresholds for shareholders to call special meetings and enabling shareholders to act by majority written consent.” This agenda includes governance features that are similar to those ascribed to Howard Hughes Corp., but Ackman was able to achieve that structure without a proxy fight. Ackman, like a growing number of activists, turned to the chapter 11 bankruptcy process to win control and implement a specific governance agenda. (For an explanation of this loan-to-own strategy, see here.)
Activist distressed debt investors recently acquired ownership and control of companies like Lear Corp., Philadelphia Newspapers, Reader’s Digest, Six Flags and Tropicana Casino & Resorts through chapter 11. Certainly, not all activist distressed debt investors are focused on governance changes, and the value added by their activism is subject to debate. And interestingly, much of their activism goes unnoticed, unlike their shareholder counterparts. So will these debtholder activists follow Howard Hughes Corp.’s lead and implement investor-friendly governance policies? Will these policies truly enhance enterprise value? These important questions—related to both shareholder and debtholder activism—will only be answered with time and performance results, but create many issues for corporate boards and governance scholars to consider in the interim.
posted by Michelle Harner
As I was preparing to fly home from a conference yesterday, I was watching msnbc’s Your Business, which was profiling a small business that uses comedy to create a positive corporate culture. The company, Peppercom (a public relations firm), employs a comedy coach to work with its employees not so much to help employees tell good jokes but to build confidence and communication skills. Although this approach may not work for every business, Peppercom apparently has landed several large accounts based on its approach to business and the personality of the firm and its employees. (For an example of using comedy to discuss corporate ethics with employees, see here.)
I have to admit that I initially thought the msnbc segment was entertaining but not really applicable to the larger business community. I then boarded my Southwest Airlines’ flight and, along with the other passengers, was serenaded by one of the flight attendants who actually got most of the people on the flight to join her in the chorus of “Rolling Down the Runway” (adapted from John Fogerty’s “Proud Mary”). This experience made me reflect further on the importance of corporate culture to the overall productivity of a firm (see here and here) and the tools available to cultivate that culture.
I have previously written about corporate culture and “tone at the top” in the context of enterprise risk management (see here and here), but certainly the benefits of a positive corporate culture do not end there. Employing a workforce that enjoys coming to work, is comfortable communicating throughout the firm and portrays that positive image to the outside world potentially holds real value. (For interesting discussions of corporate culture at AIG and Lehman Brothers prior to the crisis, see here, here, here and here.) I think the challenge in this broader context, as in the enterprise risk management context, is finding the right people to foster that culture. Policymakers can impose incentives and perhaps even a process designed to promote a positive, ethical and risk aware culture at any given company, but those regulations only go so far. The people leading the company must be committed to the endeavor and the implementation of that culture—checking the box or adopting an ethical code or employee handbook is not enough.
This notion of good corporate governance being tied to the individuals serving on boards of directors and management teams was one of the issues explored during the conference I was attending. That conference, hosted by the Adolf A. Berle, Jr. Center on Corporations, Law and Society at the Seattle University School of Law, was a wonderful collection of corporate scholars from various disciplines discussing the issues we continue to face in corporate governance generally and how Adolf Berle’s work informs that discussion. I am not sure we uncovered any definitive answers, but I certainly am encouraged by the discourse and energized to continue the pursuit.
posted by Michelle Harner
A Federal Reserve staffer suggested this week that the Fed will defer a key consumer decision to the newly-created Consumer Financial Protection Bureau (CFPB). That decision concerns homeowners’ rights of rescission. The rescission right gives a homeowner a certain period of time (in some cases up to three years) to challenge a mortgage on the grounds of misrepresentation or inadequate disclosure and requires the mortgagor to release its lien on the subject property. As you might guess, the rescission remedy has been invoked extensively in the recent economic downturn.
The mortgage industry has been encouraging the Federal Reserve to address the rescission issue with a sense of urgency, perhaps fearing what might happen to the rule after July 21, 2011—the date that authority on such issues is transferred to the CFPB. The Federal Reserve looked poised to make a move, having proposed a rule in September 2010 that would significantly restrict the circumstances under which a homeowner could seek to rescind a mortgage. The comment period for the proposed rule closed on December 23rd, and, despite opposition by consumer groups, many thought the Federal Reserve would continue to pursue the proposal.
A decision by the Federal Reserve to defer this particular issue to the CFPB would be consistent with the CFPB’s objective to consolidate the oversight and implementation of consumer protection regulations in a single agency. It may not, however, produce a result consistent with the intent of the Federal Reserve’s proposed rule and the desires of many in the mortgage industry. One of the CFPB’s charges is to oversee the mortgage and credit card industries, including the language and substance of consumer disclosures. Given the CFPB’s preemption provisions (which favor enforcing state consumer protection laws), the CFPB’s proposed partnership with state attorneys general and the robo-signing and related concerns swirling around the mortgage industry, I doubt that weakening consumers’ rescission rights is high on the priority list.
I look forward to seeing how this and other pressing consumer issues play out, particularly after July 21st. The CFPB is starting to take shape (see here and here), and it appears that it will hit the ground running. (For interesting Q&A with Elizabeth Warren on the CFPB, see here and here.) In any event, the agency certainly has its work cut out for it.
posted by Michelle Harner
The PR departments of the Big 3 automakers are working overtime. With the public opening of the North American International Auto Show just days away, Ford, General Motors and Chrysler released financial results showing a significant increase in sales in 2010 and promising outlooks for 2011. And the flurry of news coverage certainly has a different feel than the doom and gloom of the coverage just two years ago (see, e.g., here).
Why the difference? Is the economic recovery helping the Big 3? Is chapter 11 bankruptcy the reason for the apparent rebirth of General Motors and Chrysler? If so, what explains Ford’s current success (for some interesting perspectives on this, see here and here)?
Many commentators have analyzed the General Motors and Chrysler bankruptcy cases, and they thoughtfully dissect what was novel, not so novel and somewhat troubling about those cases (see, e.g., here, here and here). It is difficult to assess exactly what role chapter 11 played in General Motors’ and Chrysler’s recoveries, other than to state the obvious that both companies used the process to reduce overhead and balance sheet liabilities significantly. That certainly can provide new life to a company; the question then becomes what the company does with the opportunity.
posted by Michelle Harner
In my opening post, I referenced the slow pace of change and how it can be exceedingly painful for individual consumers. I want to follow up on that concept in the business context, where slow change—or the failure to change at all—can be fatal.
Consider, for example, Borders, which recently announced that it was suspending payments to vendors and trying to refinance its debt obligations (see here and here). Borders, like its competitor Barnes & Noble, is struggling to compete with big box retailers that offer steep discounts on traditional books and the growing popularity of e-Books (see here, here and here). Also like many retailers, Borders was hit hard by the economic recession (see here).
Some may say that Borders is a victim of the recession and creative destruction. And that may, in part, be accurate. (For interesting perspectives on the utility of recessions and creative destruction, see here and here.) But anyone who follows the retail industry or is an avid reader had some sense that this was coming (see here, here and here). So why didn’t Borders’ management? Or rather, why didn’t they react more quickly to the changing market and economy?
posted by Michelle Harner
I want to start by wishing everyone a very happy New Year and by thanking my colleague Danielle Citron and all of the permanent authors of Concurring Opinions for inviting me back to guest blog. I truly enjoyed my time as a guest blogger last January, and I look forward to participating on the blog during the next few weeks.
2010 certainly was an active year—we saw Congress pass landmark legislation (see here and here), voters overhaul the political landscape in the mid-term elections (see here and here) and everyone continue to focus on the economic recovery (see here, here and here). But as I reflect on the past year and look forward to 2011, I am not really sure that much has changed.
Yes, we were told that the economic recession officially ended, but people, businesses and countries are still feeling the pain. Domestic unemployment continues to hover around 9.8 percent, and some jobs lost during the recession may not be coming back (see here). The U.S. national debt exceeds $13 trillion, and we have no clear path for reducing it (see here and here). Several European countries continue to struggle with liquidity issues (see here and here) and banks continue to fail.
Nevertheless, some things do appear to be changing—albeit at a very slow pace. For academics, slow change can be good, in that it allows us to analyze critically the causes, developments and potential resolutions in (almost) real time. For others, the slow pace of change can be exceedingly painful. In any case, part of what I hope to do during the next few weeks is explore ongoing changes in the corporate and financial fields, as well as the challenges we continue to face in the legal profession generally. These areas are the primary focus of my teaching and scholarship, and I will endeavor to impart some of my passion, concern and optimism for each through my upcoming posts.
posted by Alan Chen
The Colorado Court of Appeals released its decision in Ward Churchill’s appeal in his First Amendment retaliation case against the University of Colorado last Wednesday (which must be one of the slowest news days of the year). A few years ago, the University terminated Churchill, a tenured professor in the University’s Department of Ethnic Studies, after concluding that he had engaged in several incidents of research misconduct, including evidentiary fabrication, plagiarism, and falsification. These conclusions were reached after several years of internal investigative and adjudicative proceedings to examine allegations of Churchill’s research misconduct. As most everyone is aware, the University did not launch its investigation until after a public outcry arose from controversial statements in an essay that Churchill wrote comparing the victims of the 9/11 terrorist attacks to “little Eichmanns,” in reference to the notorious Nazi war criminal. The perhaps forgotten larger point of the essay was an argument that the 9/11 attacks were provoked by American foreign policy actions.
Churchill sued the University, arguing that both the investigation and the termination violated his free speech rights under the First Amendment because they were undertaken in retaliation for his protected expression on matters of public concern. At trial, after the evidence was submitted, the University moved for a directed verdict on the claim that the investigation (as distinguished from the termination) was an adverse employment action that constituted unconstitutional retaliation, and the trial court agreed. The termination claim went to the jury, which held for Churchill, concluding that the University’s decision to fire him was substantially motivated by his protected speech. The jury also rejected the University’s defense under Mt. Healthy City Bd. of Educ. v. Doyle, 429 U.S. 274 (1977), finding that the University had not shown by a preponderance of the evidence that it would have fired Churchill for reasons other than his speech. The jury then awarded Churchill only $1 for his economic loss.
In an unusual move, the parties had agreed prior to trial that the University would waive its sovereign immunity defense in exchange for Churchill’s agreement that the University could assert any defenses that its officials or employees could have raised and that those defenses could be presented after the jury’s verdict. Pursuant to this agreement, the University submitted post-verdict motions asserting that despite the jury’s ruling, the University was entitled to quasi-judicial immunity for its officials’ actions. Churchill filed a motion asking that he be reinstated to his faculty position based on the jury’s finding of unconstitutional termination. The trial court ruled in favor of the University on both claims and entered judgment for the defense, from which Churchill appealed. Read the rest of this post »