Monday, June 23, 2014
This past week, I joined a group of our business law prof colleagues at the National Business Law Scholars Conference out at Loyola Law School in Los Angeles. Headlined by a keynote presentation on "the audience" for business law scholarship from Frank Partnoy and an author-meets-reader session on Michael Dorff's new book, Indispensable and Other Myths: The True Story of CEO Pay, the conference featured a staggeringly interesting array of panels on everything from standard corporate governance to financial regulation. Kudos to the planning committee.
Steve Bainbridge presented Must Salmon Love Meinhard? Agape and Partnership Fiduciary Duties in an opening concurrent panel. If you haven't read it yet, I recommend it. Admittedly (as I told Steve), I have an especial interest in the Meinhard case and in the expressive function of decisional law. But most of us in the business law professor group teach the case in one course or another, and his paper is relevant to many in that context.
Steve's essay concludes as follows (spoiler alert!):
Should Salmon love Meinhard? Yes and vice versa, because an analysis of Cardozo’s rhetoric and the intent behind it suggests that agape has great instrumental value. Partners who love one another can trust one another. In turn, partners who trust one another will expend considerably less time and effort – and thus incur much lower costs – monitoring one another. Agape thus should not be the law, but the law should promote agape as best practice.
Steve's paper and presentation made clear that the value of Judge Cardozo's prose in Meinhard is horatory. It exhorts partners to effectual partnership governance, relations, and operations by (as the quote indicates) encouraging trust among co-venturers in a partnership. Great stuff.
In the Q&A, I asked Steve (in part) if it matters whether a court couples liability with its exhortations (as in the Meinhard case) when exercising an expressive function, noting that the Disney opinion (among others) also encourages best-practice behaviors but does so without imposing liability on the defendants. I wondered whether that difference (liability/no liability) between Meinhard and Disney even cast doubt on Steve's conclusion that Judge Cardozo was intending to encourage best practices (as opposed to his words merely having that effect).
Steve's response was thoughtful. Noting that Judge Cardozo could have merely found Salmon liable for a failure to disclose the questioned transaction (but did not, in fact, take that simple path), Steve offered his view that a liability determination is not essential to the expressive role of judicial opinions. But he also contended that horatry rhetoric accompanied by a liability determination may introduce or enforce norms in a deeper way than rhetoric in pure dicta.
Moreover, he pointed back to the nature of Judge Cardozo's statements as suggesting an expressive intent. Specifically, in the essay, he asserts that Judge Cardozo's lofty, indeterminate rhetoric has several different, but related, functions: teaching, deterring cheating through vagueness, and expressing an aspitrational ideal (with heavy emhasis on the last of the three). In this regard, he concisely observes as follows:
[I]f we understand Cardozo’s rhetoric as having a teaching function, we see that what he is really teaching is not the law but morals. To be sure, despite Cardozo’s rhetoric, “punctilio of an honor the most sensitive” is not in fact the legal standard. Instead, Meinhard is best understood as an example of how courts influence best practice.
I find Steve's analysis (on paper and in person) persuasive and helpful. His ideas empower me to teach the lessons of the Meinhard case in a more meaningful (and, I hope, compelling) way to students who may tend to see the case as a legal artifact (in light of current legal rules on the duty of loyalty of partners under the Revised Uniform Partnership Act, which do not reflect the rule articulated in Meinhard). In addition, Steve's observations about the Meinhard case allow me to effectively introduce the expressive role of judicial opinions in business associations law early on in the course. As a result, the Delaware Supreme Court's Disney opinion, among others, can be more easily contextualized when it comes up--which is much later in the semester, in my course.
In a word: priceless!