Thursday, March 20, 2008

Fennell on Slices and Lumps

Lee Fennell (Chicago) has posted Slices and Lumps on SSRN.  Here's the abstract:

This brief essay, delivered in slightly different form as the 2008 Coase Lecture at the University of Chicago Law School, addresses problems involving the aggregation and division of entitlements. Fragments held by multiple parties - such as parcels of land, effort, or segments of a bridge - often must be assembled together to be worth much. Conversely, a presently unified entitlement may be more valuable if it can be split into separate pieces held by different parties. The essay examines these lumping and slicing problems (which turn out to be two sides of the same coin), shows how they turn up in both interpersonal and intrapersonal contexts, and discusses some tools for responding to them.

Ben Barros

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March 20, 2008 in Property Theory, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Wednesday, March 19, 2008

Is "Intangible" a Property Category?

I think not. I was happy to get a comment on my last post, and the commenter suggested that the category "intangible" will disappear with respect to "virtual" money. I had two thoughts when I read the comment: first, "hmm, isn't all money virtual?" and second, "oh gosh, I need to write another post!"

The question I posed in that last post was "what can virtual property do for property?" and I hope to suggest some answers to that question in this and future posts. One thing that virtual property might do for property is to lure people away from thinking of "intangibles" as a property category. There are many different types of intangible assets, and lumping them together into a single category can impede the development of the law. I explain this point in more detail in my article, "False Categories in Commercial Law: The (Ir)Relevance of (In)Tangibility." Joshua Fairfield took a big step in the right direction when he defined "virtual property" as an asset class in his article, "Virtual Property." In that article, he describes "virtual property" as property that is "persistent, rivalrous and interconnected."

A well-known conversion decision illustrates the problem of viewing tangibility as the defining characteristic of an asset. That decision is the Ninth Circuit's decision in Kremen v. Cohen, 337 F.3d 1024 (2003), the " case."  In that case, the domain name registrar, Network Solutions, had followed bogus instructions to transfer (then the most valuable name on the Internet) from its original registrant, Kremen, to Cohen, who had no rights in the name.  Under the applicable California law, an intangible asset can only be converted if it is merged in a document. Therefore, a share of stock evidenced by a paper certificate can be converted, as can a negotiable instrument such as a promissory note. 

Network Solutions had behaved outrageously, and the Ninth Circuit did the right thing in saying that it had converted the domain name. The process by which Judge Kozinski reached that conclusion, however, doesn't do much for the development of property law. To find Network Solutions liable, the court had to find that the name WAS merged in a document. The problem with that approach is that there's no tangible document involved in domain name registration. Registration is completely electronic, and once the name is registered, it goes into the Domain Name System, which is also not only completely electronic, but is also distributed among a number of places. Nevertheless, the court found that was merged in a document, the domain name system!

Why is the decision in Kremen a problem? Because it focuses on the wrong characteristic of a domain name, its intangibility. By doing so, the court engaged in strange mental gymnastics to find that an electronic, distributed system is a "document" for the purpose of a conversion action. But why is a document so important to conversion anyway? Take a promissory note as an example. A promissory note is a reified right to payment, and that right is commonly transferred by negotiation, which involves physical delivery. If a person takes a note from its rightful owner, that person can exercise control over the payment right, to the exclusion of the rightful owner. In other words, a promissory note is rivalrous.

Likewise, a domain name is rivalrous. When Network Solutions tranferred to Steven Cohen, Gary Kremen, the rightful owner, could not use it. There can only be one domain name. The court in Kremen v. Cohen declined to extend the tort of conversion to all intangible assets, which was the right conclusion. But extending it to domain names only because they are "merged in a document" is also wrong. By focusing on intangibility rather then on rivalrousness, the Ninth Circuit missed a great chance to modernize the law to account for emerging electronic rights.

But what do virtual worlds have to do with this? Everything in a virtual world is intangible, but the rights embodied in these intangible assets are as different as the rights embodied in assets in the real, or tangible, world. The two disputes I discussed in my initial post, Bragg and Eros, illustrate this point in a way that a domain name dispute cannot. Bragg, a dispute involving intangible assets, is a conversion case. Linden interfered with Marc Bragg's use and enjoyment of his virtual world assets in the same way that a bicycle thief might interfere with my use and enjoyment of my bicycle. Eros, another dispute involving intangible assets, is an intellectual property case. In that case, Thomas Simon didn't interfere with anyone's use of a sex bed (and no, I will not post about how a sex bed works. Google it); he instead interfered with the right of Eros to make copies of and distribute the sex bed. So virtual worlds, by giving us the opportunity to resolve myraid property disputes, ALL of which involve intangible assets, might help us to clarify our thinking about intangible assets.

Juliet Moringiello

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March 19, 2008 in Intellectual Property | Permalink | Comments (2) | TrackBack (0)

Epstein at Prawfs

Richard Epstein is blogging at Prawfsblawg about his new book on takings.  Looks to be a very interesting conversation.  Check it out!

Ben Barros

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March 19, 2008 in Takings | Permalink | Comments (0) | TrackBack (0)

Tuesday, March 18, 2008

Lefcoe on Kelo and Blight

George Lefcoe (USC) has posted Redevelopment Takings after Kelo: What's Blight Got to Do with it? on SSRN.  Here's the abstract:

Cities large and small across the country are utilizing redevelopment powers to become land developers, transforming underutilized areas into desirable commercial and mixed use enclaves, improving the appearance of the city and shoring up sagging tax bases. In using their eminent domain powers to assist private redevelopers, local governments open themselves to Fifth Amendment claims that these projects aren't for public uses. After the U.S. Supreme Court opinion in Kelo v. City of New London, state and local government officials need not worry about federal courts declaring anytime soon that their economic redevelopment projects aren't a sufficient "public use" to justify condemning one person's property for another unless the taking can be proved nothing but a sham, a naked pretext for wresting land from one private owner for the exclusive benefit of another. For the usual run of redevelopment projects, the requisite public use can be found either because the taking eliminates blight or proceeds from a comprehensive plan for redevelopment.

This paper begins with a recap of the Kelo Court's attenuated endorsement of comprehensive planning as a way of determining whether a taking of unblighted property qualifies as a public use. Then, the paper sketches the varying ways that states have defined blight to limit the use of eminent domain for redevelopment. Blight prevention was a rationale invoked by supporters of the federal urban renewal program to secure judicial approval in the 1930s and 1940s. Those projects were quite different from most redevelopment projects undertaken after the abolition of the federal program in 1974 and the paper describes the main differences. The blight standard makes less sense under most current types of redevelopment than it did under the early federal renewal programs because blight eradication is rarely what today's redevelopment projects aim to achieve.

In the final section, the paper compares planned efforts at improving the quality of life in the community with "spot" redevelopment aimed solely at pumping up local tax receipts. Objectionable redevelopment enables a favored private firm (often a big retailer) to expand by acquiring land from unwilling neighboring owners. Kelo and some of the Kelo-inspired, state-enacted reforms, would lead courts to prohibit such takings. They don't serve a public use because they are meant simply to assist a particular private firm with its expansion plans in order to enhance the local tax base. The concluding section of the paper suggests how redevelopment agencies could reformulate their narrowly focused tax-motivated projects to comply with the new emphasis on redevelopment planning articulated in Kelo.

Ben Barros

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March 18, 2008 in Recent Scholarship, Takings | Permalink | Comments (0) | TrackBack (0)

A Primer on the Subprime Mess

In cartoon form (click through to the power point - be warned that the investment bankers speak in the language they use in real life, which is high on four-letter content).

UPDATE:  It is also available here (click on the "subprime-made-easy" link 1/2 way down).

Ben Barros

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March 18, 2008 in Real Estate Transactions | Permalink | Comments (0) | TrackBack (0)

Monday, March 17, 2008

Real Estate Transactions Section Call for Papers

Here is the call for papers for the Real Estate Transactions Section panel for next year's AALS conference.  The Property Section call will come out in the next few weeks.

Call for Papers—Real Estate Transactions in Troubled Times
Joint Extended Program of the AALS Section on Real Estate Transactions and the AALS Section on Creditors’ and Debtors’ Rights

The Section on Real Estate Transactions and the Section on Creditors’ and Debtors’ Rights have proposed a three-hour extended program on “Real Estate Transactions in Troubled Times” at the AALS annual meeting in San Diego on Saturday,  January 10, 2009.  See the program description below.  We are seeking six speakers for this program, with selection to be based on submission of papers.   We are looking for a range of approaches and subjects within the topic. The papers may be in any stage of development, from near final to early works in progress (the minimum is a three-page description of the topic and thesis).   The degree of completion may be taken into account in selection.  We do not plan a law review symposium around the papers, so you are free to submit your papers to any publication.  The deadline for paper submission is April 10, 2008, and selections of speakers will be made by April 24.  Commentators will also be included in the program.  Please submit your paper by e-mail to Jean Braucher at  The selection committee members are Professors Daniel B. Bogart of Chapman University, Jean Braucher of the University of Arizona, R. Wilson Freyermuth of the University of Missouri-Columbia, and Katherine Porter of the University of Iowa.   As is always the case with AALS annual meeting programs, presenters must pay their own travel and accommodation expenses, typically with the support of their home institutions.

Program Description:  The national mortgage meltdown and general recessionary pressures have changed the dynamics between buyers and sellers, borrowers and lenders, landlords and tenants, and others involved in real estate transactions.  This program will examine recent developments in both home and commercial real estate transactions.  Although much of the focus to date has been placed on residential mortgages, uncertainties in the market also significantly affect commercial real estate transactions.  For example, commercial property is often now securitized, just as home mortgages are.  When securitized transactions go into default, how can workouts be arranged?  To what extent are statutory changes needed, such as reinstatement and redemption rights, anti-deficiency protection and modification under the Bankruptcy Code?  How can foreclosed properties quickly be recycled to productive uses?  During difficult financial periods, real estate lawyers and debtor-creditor lawyers often find themselves plowing the same fields, with insolvency and bankruptcy planning important to each. 

Ben Barros

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March 17, 2008 in Conferences, Real Estate Transactions | Permalink | Comments (0) | TrackBack (0)

Subprime Lawsuits by Cleveland and Baltimore

I've been thinking about the nuisance lawsuit that Cleveland filed against a series of subprime lenders and the Baltimore lawsuit filed about Wells Fargo, based on the Fair Housing Act.  Wall Street Journal Blog talks about them here, as have a bunch of other bloggers.

Both complaints are heavy on narratives about how subprime lending works.  The Baltimore complaint hypothesizes Wells Fargo targeted African American borrowers for subprime loans (what some call "reverse redlining"), with exorbitant origination fees and unrealistic promises of refinancing on favorable terms later.  The complaint has a series of maps, detailing residential segregation and foreclosure.  The results are pretty stark, but we're still a ways from showing that the disproportionate impact is the result of discrimination.  I'm most interested in seeing how this plays out.

Alfred Brophy

March 17, 2008 | Permalink | TrackBack (0)