Business Law Prof Blog

Win Some, Lose Some

"Win": My short piece arguing that the majority in Citizens United embraced a presumption in favor of the nexus-of-contracts theory of the firm has been posted by the Harvard Business Law Review Online.

"Lose": My documented prediction that SCOTUS would affirm the Third Circuit's conclusion that corporations have the ability to claim personal privacy rights under FOIA appears to be faring badly.

All of which reminds me of the story about how, when it comes to picking winners and losers, it is often too soon to tell.

SJP

 

Do Catholics Love Renewable Energy?

I'm not sure, but I can give you a definite maybe with some data to support it. 

In my recently published article (available here) in the William & Mary's Environmental Law & Policy Review, When Prayer Trumps Politics: The Politics and Demographics of Renewable Portfolio Standards, I analyzed a variety of data looking for trends in states with renewable energy mandates. Energy issues often are touted as highly political and/or resource specific, but there's more to it than that. Here's the abstract: 

This Article seeks to understand who supports renewable energy mandates (and why) by analyzing a variety trends found in political and socio-economic data by state, as well as by state renewable energy opportunities (or the lack of such opportunities). The review finds little shocking in the way of politics: Democratic states tend to favor mandates and Republican states tend not to have mandates.  Somewhat surprisingly, the correlations among states with wind and solar resources (as well as most of the demographic data) ranged from limited to inconclusive.  In religion, however, a strong trend developed.  The states with higher Catholic populations strongly favored renewable energy mandates, and the states with higher non-Catholic Christian populations almost uniformly shunned such mandates.

The idea behind the article was to seek and analyze statistical information about who supports renewable energy mandates, by considering trends found in political and socio-economic data by state. To that end, I first considered possible correlations between renewable energy mandates and state choices for president in 2000, 2004, and 2008.  Next, I reviewed possible links between renewable mandates and state renewable energy resources, such as wind and solar.  Finally, I looked for possible correlations between renewable energy mandates and a wide variety of demographic data, including race, poverty rate, religion, and level of education attained. 

I don't claim to have figured out who specifically likes (or hates) renewable energy mandates, nor do I claim to have found a method to pass (or kill) such mandates.  Quite simply, I analyzed a variety of state by state data looking for "especially compelling trends and consistencies, i.e., more than mere majorities or slight leanings, among the people of the RPS states. From an evidentiary perspective, [the] article seeks trends closer to 'beyond a reasonable doubt,' or at least 'clear andconvincing evidence,' rather than a 'preponderance of the evidence.'"

This is all at best correlative -- I have no evidence to prove causation.  What it does show, though, is that nothing is as easy as it seems. Okay, not a groundbreaking conclusion, in itself.  But I can show that some commonly held beliefs often aren't supported by the data.  I can also show that some data, such as a state's religious make up, are as good or better predictors of a state's renewable energy laws than the state's political make up.  

There may be two dominant political parties, but people have views far more nuanced than those represented by Republican or Democratic party platforms.  It's just that, in almost all elections, those are the only two choices, and the candidates representing those two choices tend to be all in with their party's platform.  And this matters, whether we're talking about renewable energy mandates, financial regulation, or health care reform.  At least, it should.    

--JPF

Common Cause Requests Justice Department to Investigate Whether Justices Thomas and Scalia Should Have Recused Themselves in Citizens United

The New York Times story is here.  Common Cause's statement is here.

SJP

Internal Conflicts: Using Saleschildren to Close the Deal

As the proud parent of a five-year-old (excuse me, five and a HALF), my wife and I are experiencing kindergarten as parents for the very first time.  Overall, it's been a great experience.  Our son has an engaged and energetic teacher, a beautiful facility, and a usually nurturing and challenging environment.  Last night, however, brought home a new experience.  

Our public elementary school often has fundraisers to help supplement the school's budget. This year we have been to Turkey Bingo and bought pizzas to support the PTO. Last night a new option came home: a company selling books and magazines.  The program apparently involved bringing a salesperson into the school promising opportunities to win prizes if the kids brought back, the next day, ten postcards filled out with addresses of family and friends asking these people to support the school through purchases. If the kids did bring the postcards back filled out, they would win a small prize and be in a drawing to win a big prize.  Other sales accomplishments even lead to a chance to win a "cheeseburger phone."

Apparently the salesperson was very energetic and had the kids quite excited.  When my son gave me the envelope (he noted that the salesperson "actually said ON-velope, but that's okay, I knew they meant "EN-velope"), he said we "HAD to fill out the postcards and bring them back tomorrow."  Being obstinate, as I tend to be, I said, "We don't HAVE to do anything."  Then came the waterworks.  

In talking to him, it became clear that he equated this sales program to other things he brings home from school that are required -- like his homework or an approval form that needs our signature. After some conversation, I got him to calm down, and I explained that this is a nice thing to try to raise money for the school (I was being generous here), but that it's not required.  In fact, some people can't afford to buy extra things or may not have family or friends they can ask to help. I told him that we can, and that I would do it this time, but that it's not a problem if we don't do it.  Just as important, I wanted him to know that if someone in his class could not return the postcards and/or make an order, it did not make them bad or sad.  They may not be able to do it, may not be comfortable doing it, or may even have forgotten, and that it was okay whatever the reason.  

To be clear, I'm not someone who is opposed to paying taxes for public education (ours are quite high and I'm okay with that), and I think education deserves significant financial support. As it is, I think most teachers are both under paid and under appreciated, and I am thankful to have good schools in my neighborhood.  I don't fault administrators for trying to do more, and I'm willing to do my part to help in that quest. 

I do, however, have a problem with tactics linking a child's perception of success to a child's level of sales. I have a problem with linking reading to sales. And I have a problem with the school's stamp of approval that essentially made magazine sales a part of the curriculum. Beyond that, I don't like the potential conflict the school creates between parent and teacher, especially for five and six year olds.

The conflict?  If the school tells a child that something is very important and the school needs their help and support (i.e., sales)  and a parent has to tell the child that they cannot or will not buy something or distribute the sales cards, the parent is now undermining the teacher.  It is teaching the child that there are times when it is okay to ignore the teacher or administrator, which (barring wildly inappropriate behavior) is contrary to what we are teaching our child.  Quite simply, the message is wrong, even if the goal is right.  

And the link between this and business law?  Well, I'd say it's somewhat analogous to teaching young associates that the number of hours billed is more important than the quality of work. Of course it's important to have a good work ethic and work hard for your clients and employer, but quality of work should be first, not quantity.  And in most places, the ideal is both high-quality and high-quantity work, which is okay. I think the quantity over quality message (in that firms tend to track and reward hours a lot more than quality work, especially for young lawyers) is tough on young lawyers.  But at least in that case, they are both adults and lawyers, which makes it bearable, if not ideal.

--JPF  

The President's Bold Old Policy

In an instant, our President added to his legacy today, albeit in unexpected fashion.  Specifically, a Wall Street Journal op-ed called for a broad review of counterproductive government regulations "placing unreasonable burdens on business" and making the U.S. less competitive.

These are indeed odd sentiments from a White House that just six months ago arm-wrestled an unfathomable array of financial regulations reforms through Congress.

And the directive was no doubt meant to steal thunder from a Congress sworn to scaling back (if not repealing) the 2010 health care legislation in the next feew weeks. 

But these words - which eerily echo the "we're losing business overseas" sentiments of the Fall 2007 - may first and foremost seek to buttress U.S. opposition to international banking standards coined "Basel III," the heightened net capital requirements of which are soon to be received poorly on our shores.

For a more scathing review of today's epic exhortation, see "Obama's Bogus Explanation For Troubles: Too Much Regulation" at The Huffington Post.

--JSC, 1/18/11 

Dr. King's Lessons on Law and Justice

In recognition of Dr. Martin Luther King, Jr., Day, I wanted to share some of Dr. King's views on laws, along with a few thoughts of my own. Dr. King often provided a unique and thoughtful analysis of the world he lived in, and though the world has changed significantly since the 1960s, many of his thoughts are as insightful and useful as ever.  

In his Letter from a Birmingham Jail (full text here), Dr. King explained the difference between "just and unjust" laws.  Beyond the value of the explanation itself, I think his words can help provide useful perspective as the 112th Congress convenes.  There is value in recognizing the difference between what is truly unjust and what is merely a bad, or perhaps even colossally stupid, law.  As political parties have moved to couching every law or policy decision as a matter of justice, the word itself has lost some of the power I think it once had.  

Dr. King made clear there was a time for action, and a proper way to take action.  As he explained, "In any nonviolent campaign there are four basic steps: collection of the facts to determine whether injustices exist; negotiation; self purification; and direct action."  The key is first determining whether injustices exist, which is very different than that determining whether you like or agree with a law.  

With that, I leave you with Dr. King to explain:   

[T]here are two types of laws: just and unjust. I would be the first to advocate obeying just laws. One has not only a legal but a moral responsibility to obey just laws. Conversely, one has a moral responsibility to disobey unjust laws. I would agree with St. Augustine that "an unjust law is no law at all."

Now, what is the difference between the two? How does one determine whether a law is just or unjust? A just law is a man made code that squares with the moral law or the law of God. An unjust law is a code that is out of harmony with the moral law. To put it in the terms of St. Thomas Aquinas: An unjust law is a human law that is not rooted in eternal law and natural law. Any law that uplifts human personality is just. Any law that degrades human personality is unjust. All segregation statutes are unjust because segregation distorts the soul and damages the personality. It gives the segregator a false sense of superiority and the segregated a false sense of inferiority. Segregation, to use the terminology of the Jewish philosopher Martin Buber, substitutes an "I it" relationship for an "I thou" relationship and ends up relegating persons to the status of things. Hence segregation is not only politically, economically and sociologically unsound, it is morally wrong and sinful. Paul Tillich has said that sin is separation. Is not segregation an existential expression of man's tragic separation, his awful estrangement, his terrible sinfulness? Thus it is that I can urge men to obey the 1954 decision of the Supreme Court, for it is morally right; and I can urge them to disobey segregation ordinances, for they are morally wrong.

Let us consider a more concrete example of just and unjust laws. An unjust law is a code that a numerical or power majority group compels a minority group to obey but does not make binding on itself. This is difference made legal. By the same token, a just law is a code that a majority compels a minority to follow and that it is willing to follow itself. This is sameness made legal. Let me give another explanation. A law is unjust if it is inflicted on a minority that, as a result of being denied the right to vote, had no part in enacting or devising the law. Who can say that the legislature of Alabama which set up that state's segregation laws was democratically elected? Throughout Alabama all sorts of devious methods are used to prevent Negroes from becoming registered voters, and there are some counties in which, even though Negroes constitute a majority of the population, not a single Negro is registered. Can any law enacted under such circumstances be considered democratically structured?

Sometimes a law is just on its face and unjust in its application. For instance, I have been arrested on a charge of parading without a permit. Now, there is nothing wrong in having an ordinance which requires a permit for a parade. But such an ordinance becomes unjust when it is used to maintain segregation and to deny citizens the First-Amendment privilege of peaceful assembly and protest.

Thank you, Dr. King, for recognizing the difference and doing something about it.

--JPF

Martin Luther King "I have a dream" Speech

Bill Black's Testimony Before the Financial Crisis Inquiry Commission

Bill Black has posted his testimony before the Financial Crisis Inquiry Commission on SSRN.  Here is the abstract:

"Control frauds" are seemingly legitimate entities controlled by persons that use them as a fraud "weapon." (The person that controls the firm is typically the CEO, so that term is used in this testimony.) A single control fraud can cause greater losses than all other forms of property crime combined. Neo-classical economic theory, methodology, and praxis combine to optimize criminogenic environments that hyper-inflate financial bubbles and produce recurrent, intensifying financial crises. A criminogenic environment is one that creates such perverse incentives that it leads to widespread crime. Financial control frauds’ "weapon of choice" is accounting. Neoclassical theory, which dominates law & economics, is criminogenic because it assumes that control fraud cannot exist while recommending legal policies that optimize an industry for control fraud. Its hostility to regulation, endorsement of opaque assets that lack readily verifiable market values, and support for executive compensation that creates perverse incentives to engage in accounting control fraud and optimizes fraudulent CEOs’ ability to convert firm assets to the CEO’s personal benefit have created a nearly perfect crime. Studies have shown that control fraud was invariably present at the typical large S&L failure. There is a consensus about the decisive role of control fraud in the Enron era frauds. The FBI began testifying publicly in September 2004 that there was an epidemic of mortgage fraud and predicting that it would cause an economic crisis if it were not contained. Similar widescale control frauds have driven financial crises in other nations. It is astounding, therefore, that neo-classical economists overwhelmingly ignore even the possibility of control fraud in the current crisis.

SJP