November 29, 2006
Moving Laterally, Out-House to In-House
Julie Goldberg, right, a recruiter from Korn/Ferry, has a post over at Law.com on what it takes for an in-house law department to recruit lawyers away from law firms, particularly given the escalation in salaries at big firms in large financial centers.
I agree with most of it - though there is a certain irony to reading about the attractiveness to lawyers of precisely the stock-based compensation that academic corporate lawyers are wont to debate - but one paragraph caught my eye as being wrong:
Although in-house lawyers put in long hours, their schedules have one big advantage over those of lawyers working in firms -- predictability. Do not underestimate the appeal of knowing that weekend and vacation plans will not be ruined. Work/life balance is now openly acknowledged as a factor in employment decisions, and top-notch lawyers demand time for life outside the office.
I don't know which corporation Ms. Goldberg is thinking about. I'm pretty sure that if you counted up all the hours I would have billed, had I been billing them, in the first year after I left the law firm to go in-house, it would have been somewhere in the 2,700 hour range (compared to my high water mark, as I recall, in the law firm, of about 1,950). That year also included something like eleven trips to Germany in ten months negotiating a joint venture, one of which was on about four hours' notice in the middle of a vacation - on a Tuesday morning, I was sitting by a beach in northern Michigan, and at 1:00 p.m. on Wednesday, I was in a conference room in Munich.
The great difference, to me at least, was the primacy of the result versus the primacy of the clock. I know there are lawyers who can generate passion around what they do for others in the big firm context, but I couldn't. The billable hour clock was always ticking in the background. The 2,700 hours were fulfilling in a way the law firm hours never managed to achieve, and became something like the sense of time when you are fully engrossed in something other than watching the clock.
Courts, Contracts, Entrepreneurship, and Cognition
Posted by Jeff Lipshaw
More to come somewhere somehow someday from me on this, but the subtitle of the piece "do courts matter?" evokes a fascinating (to me, at least) dialogue I had with a law and economics scholar in the last few days about the purpose of a written agreement. When sophisticated business people think about agreements, and send their lawyers off to scriven, are they writing the agreements for courts or for each other? Whether or not contracts are interpreted textually or contextually, it's probably fair to say that the lawyers, if you asked them, were doing their best to make the entire agreement textual, and not contextual. And the reason for textuality is that the writing will be read and interpreted by others. Or will it? Have you ever set aside a draft and re-read it a year later? Or re-read an old article that you wrote five or six years ago? Who wrote it?
So I think there is something far more nuanced going on than the rational model that we write contracts because we are addressing the hypothetical judge who will resolve our disputes, and in doing so, apply ex ante the rules that have been laid down legally or linguistically, as a way now of controlling the future. Hence, I've asked the question whether there is any real linkage between what the court ends up saying in a close case of interpretation and what the parties may have intended.
I am very interested in, yet remain to be convinced of, the Smith-Ueda working thesis that courts as common law developers of a more flexible, adaptable law, as compared with the civil law, have a material effect on the facilitation or hindrance of entrepreneurial activity. Here I return to my nascent meanderings about lawyerly styles of cognition from a few days ago as well as the post from November 20 on Schumpeter and entrepreneurship. I would suggest that the way common law judges process data and apply rules in adjudication bears little resemblance to the way a Schumpeterian entrepreneur would process data and apply rules, including the rules, where he or she aware of them, laid down by the common law judges. And if the response is, yes, but they have lawyers to make them aware of the rules, I ask, "Really? How do you know? And if they do have lawyers, do they listen to them?" (Without giving it nearly the due it deserves, let's just play with the title of Frederick Schauer's Playing by the Rules. What does playing by the rules mean to a court? What does playing by the rules mean to an entrepreneur? And what does playing by the rules mean to the entrepreneur's lawyer? This is a little bit of a tease, but one of the management books boxed up in my self-storage unit is entitled First, Break All the Rules. Here's more of a tease. One of the few books authored by a law professor about entrepreneurial problem-solving itself has a rule-contrarian title: Why Not? How to Use Everyday Ingenuity to Solve Problems Big and Small by Barry Nalebuff and Ian Ayres (Yale, left).)
My intuition is that the rule of law, or more precisely, a society that values the rule of law, is an element of a social environment that fosters entrepreneurship. No, it's more precise than that: a society that builds the rule of law from Lockeian assumptions about the primacy of property, and the freedom to own it and trade it, fosters entrepreneurship. There is a strong libertarian theme here - entrepreneurial communities are the wild west, wherein the notions of personal autonomy and freedom run deep, not just politically, but epistemologically and morally as well. Is there a relationship between that underlying libertarianism and the presence of a common, rather than civil, law? I'm not enough of a political theorist to know. Judges could put a crimp in the economic incentives to creative destruction, but so could legislatures and executives. But to me, that's like holding the tiller of a small boat on the crest of a tsunami, and thinking that because you can impede or enhance the progress of the boat, you control the tsunami. Do tiller-people matter? Yes, but not nearly as much as the tiller-people think. In this analogy, the entrepreneurs are the seismic causes of the tsunami.
So I await this work eagerly!
November 28, 2006
No Malpractice for Lawyer Properly Withdrawing, Says First Circuit
Over at the blog for Appellate Law & Practice, a recent post comments on and links a U.S. First Circuit decision affirming summary judgment in favor of a lawyer who properly withdrew and caused the client to get a new lawyer. This is not malpratice (under contract law), said the court, applying Connecticut law and its Model Rules-based standard on withdrawing, Rule 1.16 -- and if it was (possibly under tort law), then the statute of limitations ran out, as timed from the withdrawal. [Alan Childress]
Ethics of Mining for Metadata
by Mike Frisch
The Lawyers Manual on Professional Conduct (Nov. 15, 2006) has a description of ABA Ethics Opinion No. 06-442, holding that the Model Rules do not prohibit lawyers from reviewing and using metadata embedded in email and other electronic documents received from opposing counsel or adverse parties. Attorneys who trasmit such documents are cautioned to take appropriate steps (described in the opinion) to reduce the risk of "mining" the documents for information.
The ABA's summary is reproduced below:
Formal Opinion 06-442
August 5, 2006
Review and Use of Metadata order here
The Model Rules of Professional Conduct do not contain any specific prohibition against a lawyer’s reviewing and using embedded information in electronic documents, whether received from opposing counsel, an adverse party, or an agent of an adverse party. A lawyer who is concerned about the possibility of sending, producing, or providing to opposing counsel a document that contains or might contain metadata, or who wishes to take some action to reduce or remove the potentially harmful consequences of its dissemination, may be able to limit the likelihood of its transmission by “scrubbing” metadata from documents or by sending a different version of the document without the embedded information.
New Jersey Ethics Opinion on In-House Lawyers Signing Non-Competes Leaves Me Puzzled
David Hricik (Mercer, right, and I swear that's the picture on his bio page!) over at Legal Ethics Forum had a brief note on a recent New Jersey ethics opinion. The opinion (if not Professor Hricik's picture - one assumes it was taken in connection with "International Talk Like a Pirate Day") is worth at least a little bemused puzzlement.
The question is whether it is ethical for an employer to require an in-house lawyer to sign what looks to me like the fairly standard employment non-disclosure agreement, which in this case, also includes the fairly standard non-compete clause. (Let's assume the non-compete is otherwise enforceable in terms of geography and time.)
1. The question itself, it seems to me, is problematic: "whether an employer's request that its in-house counsel execute restrictive covenants. . .violates the Rules of Professional Conduct." I can see that if I were the general counsel and a member of the New Jersey bar, my request to another lawyer would fall within the ambit of the RPC. But if I am the general counsel, and the agreement is presented to me by the Senior Vice President of Human Resources (after approval by the CEO and the Board of Directors), how are the lawyers' professional rules in any way incumbent on these non-lawyers?
2. The opinion says "it is conceivable that an in-house lawyer could obtain confidential information and/or trade secrets which would not be protected by RPC 1.6 or the attorney-client privilege. Therefore, it may be reasonable for a corporation to request its lawyers to sign a non-disclosure or confidentiality agreement, provided that it does not restrict in any way the lawyer's ability to practice law or seek to expand the confidential nature of information obtained by the in-house lawyer in the course of performing legal functions beyond the scope of the RPCs." I do not understand this at all. I knew lots of stuff at Great Lakes that undoubtedly came to me other than in my capacity as a lawyer. It has to be reasonable to expand the definition of confidential information beyond that which I learn in the course of giving legal advice. If the impact is that I may not be able to be the general counsel for my direct competitor, why should I get a pass, as a lawyer, that other senior executives don't get?
3. The opinion says that the "assignment of inventions" clause does not impact any ethical considerations. That may be, but what if you design, on the company's time, a neat system for monitoring outside counsel? Or develop your own store of Sarbanes-Oxley flow charts that you use in explaining the requirements of the law to the board of directors? Are those "designs, processes or know-how" (patentable or not), and thus the sole property of the Employer?
ABA Email Makes It Sound Like Culture of Waiver Has Ended But Thompson Still Has a Memo
Posted by Alan Childress
An "ABAnet" email proclaims somewhat dramatically that Congress failed to overturn the U.S. Sentencing Commission's vote earlier this year to rescind its 2004 rule that had allowed waiver of privilege to be treated as cooperation under sentencing guidelines. That made the new policy effective November 1.
The ABA article from April 2006 that the email cites, linked here, is fine as far as it goes. The Sentencing Commission's movement in this direction is of course welcome, as far as it goes. But this does not put much of a dent in the "culture of waiver" and prosecutorial discretion that abounds today under the Thompson Memo (as we posted on here). That is because sentencing under the guidelines is only the tail end of many steps of discretion and negotiation that a client must go through. Long before that, in just the early steps, are prosecutorial decisions to be interested, to investigate, to expand the investigation, to indict, and the terms and limits of the charges (and many steps in between these). Long before sentencing is imposed, discretion begins. Until they are legally told otherwise, prosecutors are going to do what prosecutors will do (absent perhaps state bar ethics changes in this area, pushing back). They will encourage waiver. Even if they are told otherwise, by withdrawal of the DOJ policy or some state ethics rule, won't corporate counsel be eager to initiate the look of cooperation by offering to waive?
To the extent the 2004 commission policy had encouraged prosecutors to demand waiver, it makes a little sense that its demise led the ABA president to proclaim in April--sort of in Patrick Henry or Chevy Truck style--that the decision "is not only correct, it is good for America and its citizens, and our democracy." But the commission's reform is not a rescission of the Thompson Memo, which is DOJ policy not about sentencing as such--and should not be mistaken for one. I fear that the lingering and harmful effects of that policy (to privilege, and indeed to America and our democracy) will not only survive the end of the commission's policy but even the potential withdrawing of the memo and its overall prosecutorial policy as well. Further notes on the Holder Memo after the jump.
Further Notes on the So-Called Thompson Memo:
In its roundup of last week's "be thankfuls" (many funny), the White Collar Crime Prof Blog chose as #4: "Eric Holder can be thankful that Larry Thompson decided to redraft his memo so that when everyone criticizes the memo they call it the Thompson Memo."
The site also reports here an interesting November 30 Heritage Foundation conference in D.C. about the memo, the aftermath even if it goes, and the attorney-client relationship in white collar criminal practice generally. Thompson speaks. So does former AG Ed Meese.
That blog had also reported earlier, here, that other proposals within DOJ to answer the crticisms [of the ThompsonHolder Memo] are likely to be baby steps at best: "it sounds like they aren't ready to just plain ban this DOJ practice." It links several useful background posts from the site.
Caron on Blogging
Blogging entrepreneur, Grand Poobah Plenipotentiary of the Law Professor Blogs Network, and all-around good guy Paul Caron (Cincinnati, right) provides an empirical justification for the time spent blogging over at our sibling Tax Prof Blog.
Fortunately for me, the question posed by the piece is whether scholars are better bloggers, not whether bloggers are better scholars. Whether or not it has any societal value, I find blogging to be a better use of my time in airport departure lounges than, say, playing the Solitaire game I recently found Motorola was kind enough to install on my Q phone.
APRL February 2007 Meeting
The Association of Professional Responsibility Lawyers will meet in Miami Beach from February 8-10, 2007. Among the program highlights will be a panel discussion in conjunction with the National Organization of Bar Counsel on the impact of disciplinary processes on solo and small firm practicioners and another panel on the ethics of judicial elections. Panel discussions also will consider bar admission issues as well as ethics issues in the representation of Guantanamo detainees. (The APRL meeting and its overlap with NOBC were posted on here.)
The full APRL agenda is linked here. [Mike Frisch]
A New Marketplace for Legal Outsourcing
We previously posted here on the growing phenomenon of law firm outsourcing of discrete legal tasks. Robert Ambrogi's LawSites blog reports here that, starting today, a new website bidding and exchange process is up-and-running to allow licensed lawyers to outsource such work as "legal research and writing, due diligence and document reviews, Web site design, marketing or any other type of project." The new site, LawSourcing, promises that "[p]osting a project is quick, simple, and free, and exposes your project to hundreds of skilled professionals around the world eager to help," leaving the bidder "to focus on the 'big' cases." [Alan Childress]
November 27, 2006
IRS Names Names: Publishes Discipline of Attorneys and CPAs
Over at TaxProf Blog, Paul Caron (Cinn.) posts on and links this IRS announcement of public discipline cases involving attorneys, CPAs, and enrolled agents. Discipline includes disbarment, suspensions, resignations, and censures. Nearly 140 people (most of them lawyers) were named in this one publication. That's more than many states' disciplinary systems do, and certainly a higher average sanction. And the IRS will republish their names four more weeks in a row. [Alan Childress]
Don't Have to Go Anywhere to Do Great Things Except Maybe the ESPN Zone
Posted by Alan Childress
Imagine introducing 40+ teens in foster care to NFL and NBA lawyers, hip and happy law students, and participation in a "training camp holdout" negotiations simulation--all over massive burgers and buffalo wings at an ESPN Zone (the only restaurant that ought to have that warning label on it like videogames: May Cause Seizures--also one of the few featuring barcalounger service [no kidding]). Also prizes of laptops and iPods, $50 in arcade bucks by ESPN for everyone, along with presents donated by law students (traditional gift drives often skip teens--anyway, no Tat2 Makers, please).
That was "Law Exploration Day," holiday style, run by students at George Washington University Law School from BLSA and the SBA's minority affairs committee (all as reported here by Claire Duggan on the GW website with interesting detail and great photos). I bet the organizers thought the kids would be impressed by the fancy sports agents and sports talk, and I am sure they were. But I wonder if these students saw that they were the coolest part of this--the role models that such teens could most closely identify with and most immediately see themselves becoming. That would be plenty.
That is a real Thanksgiving, minus the tradition of serving cranberries and hypocrisy about Indians. I am also thankful that other TV networks besides ESPN have not started frenzied theme restaurants. My second worst nightmare is ducking out of the rain and suddenly finding myself ordering in the Lifetime Channel Zone (and they are out of wings). Doubtful barcaloungers there.
LPB has highlighted some notable pro bono work by California lawyers doing the "affirmative ethics of a profession"--as well as scores of law students traveling to New Orleans to make a difference, and they will (including some amazing GW participants in the Student Hurricane Network whom I have met). This story reveals that others can make a difference without going anywhere except into their own community and being themselves--showing the kids what a great thing that would be. Says GW 2L and organizer Rhonda Foxx, "You can pray for these kids, but you can also actually do something to help their situations." [Her photo here.] No less essential were corporate fundraising by 2L Asten Hall (unwittingly acquiring the entire skill set to be a Dean someday) and the help of dozens of volunteers.
I strongly suspect that the event's playbook can be emulated in your hometown too, with help from alumni doing cool things with law (or is it rad?). Maybe you could contact Ms. Foxx for her advice and program--but hey let her get through finals first. Kids get to see career options beyond the illusory playing of sports. And see the positive side of the profession. These GW students who offered their holiday for this event are right at the top of the most positive side, to physically contort the metaphor.
Imagine changing a kid's life in one day, by letting him or her see the possibilities and the power of the 22-year-old hero. Or better yet, don't imagine it.
More Misbehavior in Ohio
by Mike Frisch
This seems to be the season of unrestrained impulses for some Ohio lawyers. An attorney employed by the Speaker of the Ohio House of Representatives was suspended for an indefinite period of not less than two years for "appearing before [at least 30 women] completely naked and photographing their reactions." The local media bestowed on the lawyer the name "The Naked Photographer". He pled guilty to 53 misdemeanor offenses. The court considered but gave little weight to testimony from the lawyer's treating doctor, the associate director of the Ohio Bar's lawyer assistance program and his ex-wife. Of particular concern was testimony that one with the attorney's diagnosis "if unable to achieve satisfaction from one form of acting out, is likely to seek another outlet, even stalking and rape." Further, the court was concerned about the lack of remorse and the possibility that the condition was feigned. The story was reported by the Ohio Supreme Court here.
End of Story on Naked Prosecutor Arrested in Ohio
Posted by Alan Childress
The blog Legal Ethics Forum already uncovered the story of an Ohio prosecutor arrested when caught idly wandering through city offices without his legal briefs. Then LPB noted here the Seattle prosecutors caught having sex in the bathroom stalls during a Seahawks game (only the male prosecutor was arrested, for being in the ladies' room, because the female prosecutor was allowed to be there [answering the question other blogs have pondered]). LPB particularly worried that "Law & Order" would make this one of their "ripped from the headlines" episodes featuring Fred Dalton Thompson, accompanied by that donk-donk musical cue.
Now the end to the Ohio tale: today Law.Com (via AP) reported here that charges were dropped against defendant streaker, due to his being charged under the wrong law. (One can only hope this causes a one-year moratorium in that area of DAs complaining that defendants use technicalities.) The defendant's lawyer further noted that his client "was suffering from a bad reaction to medication prescribed for depression and to control seizures related to a 2005 traffic accident." (That defense is not quite Old School, but it does bring Will Ferrell eerily to mind.) LPB anticipates this sad but inevitable headline soon in a Columbus newspaper: "Homeland Security Raid Finds Buckeye Frat House Hording New Drug."
Career Profile: Clarence Otis, Jr.
Here's a lawyer's career profile, courtesy of today's USA Today:
Clarence Otis, Jr.
Undergrad: Williams College, Phi Beta Kappa
Law School: Stanford
Prior Employment: JP Morgan Securities
Current occupation: CEO, Darden Restaurants (owns Red Lobster, Olive Garden, etc.; $5.7 billion in annual sales).
A Little Help May Be Better Than None
by Mike Frisch
The Arizona State Bar's Ethics Committee opines that a lawyer may provide limited legal assistance to a client so long as the limited representation is otherwise consistent with all other rules of professional conduct. The exact nature and scope of the representation must be in writing, unless the attorney is doing the same work on a repeat basis, and even if the services are performed at no charge. The Committee surveys ethics opinions from a number of jurisdictions on the propriety of "ghost writing" pleadings for a limited-service client without disclosure to the court, finding that the practice is not prohibited by Arizona's ethics rules.
This Arizona opinion provides a useful guide to the diverse authorities on this question and strikes a fair balance to a middle ground between full service representation as opposed to no representation at all.
In a follow-up opinion linked here, the Committee addressed issues of disclosure to opposing parties of the limited-scope representation, of the possibility of providing such representation at a deposition, and of its propriety for simply "coaching" (approving it at least outside of court). This opinion emphasizes that limited representations have not yet been generally approved for courtroom "appearances" (except for an experimental program for specified matters in family law courts).
Even with that limitation, and in light of the pilot project in certain family law matters, Arizona must be included on the survey of states that allows some limited-scope representation and ghost writing of briefs--an issue on which Alan posted previously here and here [on "helping self-help" or "unbundling"] and that is of great interest to self-help organizations he noted such as SHLEP. According to a recent comment and link from the SHLEP site, Alaska also facilitates certain unbundlings, as detailed on the state bar's website here.
Lawyers as Cognitive Constitutivists: Reflections on the Sunday New York Times
Posted by Jeff Lipshaw
Two articles in the Sunday New York Times (Nov. 26, 2006), seemingly unrelated, made me think of Law in Everyday Life by Austin Sarat and Thomas Kearns (discussed in an earlier post), and, in particular, the particular world view, common among lawyers, that if I process sensory data in a cognitive way, so must everybody else. Indeed, I find it interesting how lawyers (or people who "think like lawyers") over and over and over again, either pose non-cognitive issues as cognitive, or propose cognitive solutions to non-cognitive problems.
Here's what provoked me in the Times this morning. (I will give a couple other examples below the fold.) Gretchen Morgenson (right, receiving her Pulitzer Prize) continues her Sunday Business section campaign on the subject of excessive executive pay. I don't seem to be able to work up the bile for Morgensen's work that you can find over at Larry Ribstein's Ideoblog or in Holman Jenkins' column in the Wall Street Journal (see Alan's previous post on this), but I have to say I scratch my head every time I read her reporting on the subject. I'm willing to accept as a given that the spread between top CEO pay and the lowest paid workers is increasing. But (a) I don't really know what that means in terms of general social welfare, (b) is it any different than pay scale spreads in other areas where the market seems to identify "superstars" (like sports)? and (c) assuming that CEOs make too much money by somebody's standard, what is the alternative proposal?
Morgenson's proposal appears to be more cure by the cognitive approach: we determine value by heuristics, including comparables, so let's put in the proxy statement an incredibly detailed description of the heuristics by which the board determined CEO pay, and that will somehow cause the spread to shrink. Hmm. I seem to recall throwing a line in the proxy statement every year that said shareholders should be aware that we paid a bunch of our executives compensation in amounts that would cause the corporation not to be able to deduct all of it for tax purposes, and I don't think it made one whit of difference on what we paid people, or on what our shareholders thought of the company. If the cognitive approach really worked, then we ought to be able to reduce housing prices in California by making every house buyer read a prospectus on the likelihood that the house is overpriced in relation to equivalent homes in Milwaukee or Des Moines, and in danger of destruction by tsunami, earthquake, or high force Santa Ana winds. (I do remember the cognitive approach working once: when Alene and I were doing Lamaze in her seventh month of pregnancy with our daughter, now 22, we saw the movie about all the things that can go wrong, and on the way home, she said, "okay, I've decided I don't want to be pregnant." I suggested she take a cleansing breath and she smacked me across the head.)
More below the fold.
If we turn, however, to the Week in Review section, "Here Come the Economic Populists," by the fine reporter Louis Uchitelle (I love his name, by the way; it is the Russian word for "teacher"), reflects something I have believed, and stated publicly, about the compensation debate. This is about politics and populism, not about some objective standard of value. Uchitelle compares the Rubinomics of the Clinton administration - allowing markets to operate unfettered and globally, and then dealing with the dislocations of Schumpeterian creative destruction after the fact, through social safety-net measures - with the "economic populists" - those to whom the spread between the wealthy and the less wealthy is the real issue.
I am yet to be convinced that most shareholders ever care about corporate governance as an end in itself. Most shareholders want a return. And therein lies the chicken versus the egg of this particular debate. If you care about class issues, like CEO pay versus the pay of the ordinary worker, then you are hell-bent for election to show that there is a consequential impact of the governance or the pay issue.
Is sunlight (the metaphor for disclosure of information) really the best disinfectant? How can anyone be against sunlight? But sunlight, whether you like it or not, doesn't disinfect if the germs don't care about sunlight. (I think about this every time my intelligent students take their cigarette breaks out in the courtyard. As one of them tells me every time I suggest he is not helping his long-term health, "no conclusive link yet proved!")
The sunlight model is certainly one that appeals to the lawyerly mind, particularly the one that sees the world as one constituted by law. (See Sarat & Kearns.) And the lawyerly solution is to propose cognitive solutions, as though the data will be processed in a lawyerly way, to problems that are, at their core, not cognitive, whether a matter of politics, addiction, or wishful thinking.
As an example of the latter, one academic proposal I have addressed in the past would require venture capitalists to provide something like an S-1 prospectus to the entrepreneur, designed to remedy the perceived inequalities between entrepreneurs and the supposedly more sophisticated venture capitalist. I have observed there something of an infinite regress inherent in a solution that is merely more information – particularly one that smacks of the typical disclaimers that go, for example, into an SEC registration statement for an initial public offering. In his very interesting Wisconsin Law Review article describing the strategic behavior that occurs between entrepreneurs and VCs, and proposing that particular solution, Manuel Utset (Utah, left) variously characterized the typical founding entrepreneur as “over-optimistic,” “over-confident,” (indeed to the point of “blindness to the need for more information”), better at innovating than running a company, having “poor management skills,” and lacking “business savvy,” and having “bounded rationality” (i.e., cannot predict the future very well). I commented on this in a DePaul Law Review article: "In sum, the starry-eyed, cocky, sheltered engineer or scientist lacking people skills and a crystal ball is probably already overwhelmed with information. The regress is in trying to find that conclusive piece of information or disclosure that gets through to this [supposed] knucklehead."
In Germany, even today, if you sell a piece of real estate, or if you sell a multi-billion dollar company that involves the transfer of real estate, the civil code requires that the transaction be undertaken in a notarial deed. This is hardly the notarial act of a U.S. common law jurisdiction. The notary undertakes (for a significant fee) to serve the function that legality and enforceability representations and lawyers' opinions serve here: the notary is putting the imprimatur of legality on the agreement. And if you have ever been party to one of these events, you know that the notary (or someone delegated by the notary) is required to read the entire document (even if a 400-page including exhibits Wall Street firm generated doorstop) out loud. This is an anachronism dating back to the Middle Ages, when the law prevented big city sharpies from cheating the peasants (who generally couldn't read) out of their land.
This, I assume, was the legal equivalent of taking the about-to-be-victim, shaking him (probably not her back then) physically about the head and shoulders, and saying "do you understand what a stupid thing you are about to do?"
I'm certainly not advocating the suppression of information either in the trading of securities or the sale of residential real estate. I like the fact that when I buy a house most state law requires the seller to provide a sworn disclosure of things like water damage or foundation problems. (And, if truth be known, I like the proxy statement compensation information for its heuristic value. When I was about to negotiate my pay package with Great Lakes Chemical, I was very interested in the compensation paid to general counsel who showed up in the proxy statement.) But there is a limit to the ability of additional information (apart from its cost effectiveness) to address some policy issues. I'm not sure that requiring the seller (or her realtor) to describe for me precisely how the asking price was determined is going to be a productive way of getting us to a price. And though the analogy is not exact, I think requiring board compensation committees to go through CEO pay heuristics is closer to the latter than the former.
Addendum: I am reading Robert Penn Warren's All the King's Men (part of my Louisiana acculturation, along with John Kennedy Toole's A Confederacy of Dunces, which I don't quite get). Willie Stark, the Huey Long equivalent, begins his political career as an honest idealist, duped into running in the Democratic primary as a way of splitting the vote. Willie has been giving a boring stump speech, and this is the exchange on the subject of the cognitive approach he has with the cynical reporter covering his campaign:
"You tell 'em too much. Just tell 'em you're gonna soak the fat boys, and forget the rest of the tax stuff."
"What we need is a balanced tax program. Right now the ratio between income tax and total income for the state gives an index that --"
"Yeah," I said, "I heard the speech. But they don't give a damn about that. Hell, make 'em cry, make 'em laugh, make 'em think you're their weak erring pal, or make 'em think you're God-Almighty. Or make 'em mad. Even mad at you. Just stir 'em up, it doesn't matter how or why, and they'll love you and come back for more. Pinch 'em in the soft place. They aren't alive, most of 'em, and haven't been alive in twenty years. . . . [I]t's up to you to give 'em something to stir 'em up and make 'em feel alive again. Just for half an hour. That's what they come for. Tell 'em anything. But for Sweet Jesus' sake don't try to improve their minds."
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