After spending a great few days in Boston, I decided to broaden my reading list. (Law & Society seems to attract about 10x the number of hipsters as AALS). A few samples:
He loves to take the punch bowl away: Ben Bernanke questions meritocracy (among other things), at, of all places, Princeton's commencement.
Too close to home: Does Colorado have a republican form of government? Or did a anti-tax amendment to the state constitution deprive us of one?
Stride la vampa!
I go to see a lot of presentations, job talks, workshops, roundtables, symposia, colloquia and named lectures. Today, I was in the audience as Professor Lawrence Lessig delivered the David C. Baum Memorial Lecture on Civil Rights and Civil Liberties, and I walked away thinking how much I felt sorry for everyone that missed it. The title was The Other Side of Madison's Dilemma: When the Problem of Civil Rights Becomes the Problem of Minority Factions. The gist was that because .25% of "the people" finance 100% of congressional and presidential elections, would-be candidates have to bend themselves to those .25% ("the funders"). Not only do politicians heed the funders to get elected, but also while elected to secure post-politics employment. Though James Madison believed that the problem of minority factions would be outnumbered in a large society of the people, this theory doesn't hold true in a society of the funders.
I'm sure I'm not doing it justice, but I found a video of a version of this presentation here. Not only was the lecture substantively interesting, the presentation was amazing. At one point, I was convinced that Prof. Lessig was controlling the video with either his retinas or his brainwaves.
Prof. Lessig's novel solution would be "one person, one voucher," rebating $50 of federal tax (income, payroll, gasoline, etc.) to each citizen, which can be used to give to a campaign. Candidates would have to pledge to only use vouchers to receive any.
I did steal a response that I hope to use at my next paper presentation. When asked a question that was basically "how does your solution solve this other, vaguely related problem," Prof. Lessig replied, "First, let's talk about what the structure of a solution is."
Now that Elena Kagan has been nominated to the Supreme Court, the preparations for the hearings begins. Expect some version of the following exchange:
[Ed. Note: Much of the usual Senatorial flourishes (aka the blah-blah) edited out]:
GOP Senator: Ms. Kagan [Ed Note: or will she be called "General Kagan"?] could you walk through your analysis of whether [health care legislation][insert other statute or past Obama Administration action] is constitutional?
SG Kagan: With all due respect, Senator, as I mentioned before, it would be inappropriate for me to comment on matters on which I might be called to later judge should I be confirmed to the Court.
GOP Senator: But you would obviously have to recuse yourself on matters on which you have worked on as SG, and you have worked on this [issue du jour] and advised the President on this haven't you? Wouldn't that mean that you would have to recuse yourself? So there is no risk of prejudging a case, is there? So, you can go ahead and answer the question, so that we may see how you analyze complex constitutional questions. [Ed Note: I know the question is long, but have you ever heard any Senator ask a snappy question?]
SG Kagan: Senator, without knowing the full facts of a case, I cannot say for sure whether I would recuse myself. I also anticipate that even if I would recuse myself on litigations that are pending before the court, that the same issue may arise in a later case. Again, I do not want to prejudge any case and any case ruling would turn on the facts before me at that point. [Ed Note: this could lead to an interesting volley about the recusal standard.]
GOP Senator: Let's assume you are arguing [issue du jour] before the Court as solicitor general, tell me your opinion as SG to whether [statute][action] is constutitional.
SG Kagan: Without a clear question presented and all the facts of a particular case, I cannot outline the arguments I would make as solicitor general. [If Kagan argues that there is some client confidentiality, expect a series of questions on "who is the client of the SG?"]
GOP Senator: But you would clearly argue that the [statute] is constitutional? The President did [sign the statute][take the action]. It is your role to argue for the United States.
SG Kagan: I should underscore that my role as solicitor general is quite different than my role would be as an associate justice should I be confirmed.
GOP Senator: But would you defend [statute] as an advocate?
Ok - timeout - enough playwriting. I'm obviously no Samuel Beckett. (Or maybe my characters are not behaving as I planned and I need to get all post-modern on you, by stepping out of the narrative).
Where is this play going? The "John Yoo Trap" is basically to try to box Elena Kagan to admitting that if she has defended in the past or would defend a the constitutionality of a particular statute/administration decision as solicitor general, she must be implicitly saying she would rule the same way as judge -- that the action is constitutional. Because -- the argument goes -- doesn't she agree with the criticisms of John Yoo (and the US Attorney firing scandal and various other DoJ episodes during the George W. Bush Administration) that a senior DoJ official is in a unique role? That is, she doesn't merely enact the wishes of the President, but must provide counsel and dissuade the President from a course of action she believes to be unconstitutional?
Don't get me wrong, this "trap" is not inescapable. I'd be stunned if Kagan is not confirmed and doesn't perform very well at her hearings. The overally point is that when Solicitor General Kagan talks about the different role she plays as Solicitor General as from a justice, a Republican (or even a Democratic) Senator will likely ask about the arguments levelled against Yoo and other DoJ officials for failing to provide independent counsel that might check the Administration. How much do DoJ attorneys need to make independent decisions on the constitutionality of actions -- particularly on executive power -- versus accept the decision of the President who was elected and empowered under Article II?
The argument that Kagan is different than Yoo because Yoo went far beyond the pale, invites classic questions of line drawing, how do we know when an Administration lawyer is over the line, and who gets to make the call. All of this would be a discussion well worth having. Heaven forbid, we might actually learn something about "the Law" in a confirmation hearing.
[Note to colleagues: don't worry! I am not interested in switching to constitutional law. Financial regulation is plenty fun.]
As I mentioned earlier several tobacco companies, including Commonwealth Brands, Lorillard and RJ Reynolds, brought a lawsuit in the Western District of Kentucky challenging the constitutionality of many aspects of the Family Smoking Prevention and Tobacco Control Act of 2009 which brought the regulation of tobacco under the aegis of the FDA. Plaintiffs had a veritable cornucopia of claims about the ways in which the Act violated their rights under the First Amendment (my favorite might be that the prohibition on free samples was a First Amendment issue).
The district court issued an opinion in January of 2010, granting in part and denying in part the plaintiff companies' motion for summary judgment. Opinion. Most of the First Amendment arguments the plaintiffs raised were rejected except for two: the ban on color and graphics in advertising and the ban on implying that a tobacco product is safer because of FDA regulation. [The last issue illustrates one of the thorny problems with giving over the regulation of tobacco to the FDA because there does not appear to be any safe use of tobacco and this is in some tension with the FDA's consumer safety mission.] This latter involved concerns about vagueness and overbreadth and since it is possible the Act could be amended to overcome this problem, it is the first issue, involving the use of color and brand symbols, that I think is the more interesting one.
The district court wrote "[The plaintiffs] are clearly right when they say that images of packages of their products, simple brand symbols, and some uses of color communicate important commercial information about their products, i.e., what the product is and who makes it. The government's contrary suggestion -- that all uses of images in tobacco labels and advertising create noninformative associations of the sort likely to encourage minors to use a tobacco product -- is plainly wrong." (Opinion at 14).
The court may have felt that the attempt to link these associations to the use by minors was the "plainly wrong" part. And it could be the weakness in the argument. But consider that the "important commercial information" is the brand information and that branding is inextricably linked with all of the advertising and marketing efforts which attempt to make emotional associations with the brand. Doesn't this argument raise questions about what it means for something to be "informational"?
In any event, I think what we are really talking about here are the property interests in the brand, not the informational aspects of the brand; which is part of why the First Amendment is not a good fit (in my view) for the interests which plaintiffs seek to protect. And it is worth walking their claims in this case back a bit to consider the interests which led the Supreme Court to create the commercial speech doctrine in the first place and whether the tobacco companies' arguments further those interests or obstruct them. Virginia Pharmacy created a new category of protected speech labeled "commercial speech" on the grounds that commercial speech was important to listeners. It was the interests of the consumers that both justified the protection and which dictated that protection be reserved for truthful speech. The case did not focus on the speakers' right to engage in promotional speech. This makes sense if you are concerned about regulating false or misleading commercial speech. Nevertheless, the Virginia Pharmacy Court apparently thought that truthful commercial speech might be subject to regulation given a governmental interest that was sufficiently compelling to outweigh the speech interests involved.
If we look at the marketing of cigarettes it seems like there are at least three interests that might be called speech interests: (1) the interest of the speaker (here the tobacco companies) in marketing a legal product; (2) the interest of consumers in receiving truthful information about the health consequences of smoking (and perhaps even their interest in being shielded from attempts to manipulate their interest in smoking); and (3) consumer interest in receiving brand information about the product.
The consumers' interest in receiving the promotional information really looks like the least compelling of the possible speech interests. And when weighed against the legitimate governmental interest in promoting public health, it seems particularly puny; especially when you consider that the government's interest in public health converges with the consumers' purported First Amendment interest in receiving truthful information about the health consequences and dangers of smoking. The interest in consumers receiving the "information" involves in the brand associations seems to me to be far less about the consumers' interests and more about the property interests of the manufacturers.
Of course, at the end of the day these interests can't be neatly or clearly unraveled. But I think protecting branding as a First Amendment issue in this context is not really about speech but about protecting the economic value in the brand. And that does look a lot like Lochner all over again.
Only time will tell whether the courts will continue down this path of converting property interests into speech interests. For the time being I suspect they will. But I predict that at some point this movement will begin to reverse. In terms of tobacco the First Amendment argument seems to be the last best hope for keeping the industry on life support, given that public acceptance of smoking appears to continue to decline.
I mentioned last week that there were more interesting arguments raised in connection with the cert. petition in the Philip Morris case which bear on on my claim that Citizens United will be used to bolster arguments for more protection for commercial speech. As I observed, The Washington Legal Foundation and the National Association of Manufacturers asserted in an amicus brief that Citizens United supported their argument about commercial speech. Here it is:
(1) Because the health consequences of tobacco use is a matter of public concern; and
(2) Because much of the communication on which liability was predicated took place in the form of newspaper articles, op-eds, congressional testimony, press releases, and television appearances and was in response to public criticism the speech in question was speech on "a matter of public concern."
(3) Because it was speech on a matter of public concern it should have been fully protected.
[Notice that the same thing that makes something a matter of public concern is also was makes it a legitimate object of governmental regulatory efforts. So it can't be enough to say that full protection follows from the observation that something involves a matter of public concern.]
The trial appellate courts apparently failed to give this speech the protection to which, in the Foundation's view, it was entitled "because the speakers had an economic motive for their communications." (Brief at 6). The brief go on to say, "But economic motive is insufficient to transform fully protected speech into commercial speech. See Citizens United v. Federal Election Comm'n, 130 S.C. 876, 899 (2010) ('First Amendment protection extends to corporations.')." (Id.)
It seems to me that the connection between the reference to economic motive and the observation about the rights of corporations is a non sequitur unless the Foundation is making the following assumptions: (1) "corporations" in this sentences = for-profit corporations; and (2) all speech by for profit-corporations has an economic motive. I make these same assumptions; so I think they are fairly reasonable and I understand why the authors believe Citizens United supports their cause. I think it does too, even though I disagree that commercial speech ought to be fully protected. However, I've often encountered objections to these same assumptions when I make them (i.e., "But not all corporations are for-profit!"; or "Not everything a for-profit corporation says is commercial speech!"). But as you can see; these arguments aren't original to me. I got them from the proponents of full First Amendment protection for commercial speech.
I've also argued that many of these proponents are essentially arguing for a constitutional right to lie. See Grounding Nike: Exposing Nike's Quest for a Constitutional Right to Lie. Some think this overstates it. But the Washington Legal Foundation's brief seems to corroborate it. In footnote 2 the Foundation argues that although the Court of Appeals did not "explicitly label" the speech in question "commercial" that must have been the standard the Court was applying because it rejected the First Amendment defenses "solely on the grounds that the speech was (in the court's view) fraudulent" and that only commercial speech could be "punish[ed]" (?!) on that ground; fully protected speech "even if false - is entitled to 'breathing space'...."
Res ipsa loquitur.
A dear former colleague used to argue with me that the First Amendment didn't protect fraud and that there was no "right to lie" even under the strict protection offered in N.Y. Times v. Sullivan. There may not be an right in the abstract to lie. But that can be the practical effect of a high evidentiary standard. As any litigator can tell you (and I have been one), there is a difference between an abstract principle and how it plays out "on the ground." I will have more on that later. Suffice it to say that the "breathing space" the Foundation argues for here would cover an awful lot of fraud.
And that brings me to the next point. How do you prove that a corporation has the specific intent necessary for fraud?
The Foundation claims that the judgment below was flawed because the government did not show sufficient evidence of specific intent to prove fraud because the government relied on a collective intent theory. (Id. at 8). It argues that the court should have looked to the state of mind of the individual officer and employees because "a company - as opposed to an individual - can never entirely know what information it possesses." Just so. Sounds awfully close to an argument that the company, qua company, can never commit a fraud because it can never have specific intent.That certainly turned out to be the Achilles heel of the prosecution of the Arthur Andersen accounting firm in the wake of the Enron scandal.
I actually think there may be something to this argument and it is part (not all) of the problem I see with imposing criminal liability on entities like corporations. Without revisiting the whole issue of corporate criminal law though it is sufficient for my purposes here to note that this argument too would increase the difficulty in restraining fraud. I'm not sure that we should be too sanguine about throwing up additional legal obstacles to prosecuting fraud.
In any event, the record, all 1700 or so pages of findings of fact and conclusions of law, offers what seems to me to be ample evidence of specific intent and plenty of false statements (including that by now notorious false testimony before Congress. See some of it in this clip from 1994 here). For a summary of some of Judge Kessler's findings in this case, as well as a summary of tobacco company marketing efforts to children and the addictive properties of nicotine from the Campaign for Tobacco Free Kids see this.
Is it really a matter of constitutional significance that tobacco companies be able to advertise in Rolling Stone or market their products in pink packages or other specific trade dress?
This was a civil RICO case filed by the United States in 1999 against several tobacco companies and two of their non-profit organizations, the Council for Tobacco Research and the Tobacco Institute. The lawsuit accused these entities of engaging in a conspiracy, taking place over a period of approximately 50 years, to mislead the public about a number of issues related to smoking including: the potential health consequences of smoking; the dangers of environmental smoke (second-hand smoke); whether nicotine was an addictive substance; whether the tobacco companies were manipulating nicotine content; whether the tobacco companies were intentionally targeting youth in their advertising and promotional efforts; whether they were intentionally marketing cigarettes as "light" or "low tar" to imply health benefits (or less detriment) the companies knew did not exist because of a phenomenon known as "compensation," and other claims.
The case went to trial in 2004 and lasted for about 9 months. In 2006 D.C. District Court Judge Kessler, issued an opinion with findings of fact and conclusions of law that ran about 1700 pages. The evidence buried in these pages is unequivocally damning.
Several years later, in 2009 the D.C. Circuit Court affirmed most of these findings in the per curiam opinion above. The defendants (and the government) filed petitions for cert. The petitions of the parties are available here. Whether the Supreme Court will agree to hear the case is unknown, but with the government seeking review as well it may do so. And issues of commercial speech and the First Amendment are raised through out the case. Indeed, the amicus brief filed by the Washington Legal Foundation and the National Association of Manufacturers explicitly says this case offers the Court the opportunity to answer the question that it left open in Nike v. Kasky, writing "This Court has recently reaffirmed that the speech of corporate actors may be entitled to full First Amendment Protection" (Page 19 of the brief which you can view here citing yes, Citizens United).
The 5th case down in the Table of Authorities is Citizens United and it is cited twice in the argument. The brief argues the lower court ignored that much of the misleading speech took place in the form of editorials, op-eds, press releases and the like and involved issues of "public concern" and thus was fully protected speech. Mind you these press releases, so-called informational pamphlets (some sent to school children purporting to educate them about the "debate"), came from a group of defendants who the record amply demonstrates did meet together with their public relations and law firms to come up with a strategy to manufacture a debate that really didn't exists since their problem was that there was scientific consensus on the basic facts about the health risks of smoking and that these facts would be very damaging to future business. Their strategy is succinctly captured in the phrase found in some internal documents and widely reported on since, "Doubt is our product." It is important to be clear on what they are asking for; they are asking for constitutional protection for the manufacture of a phony debate, to obfuscate rather than to clarify information about a product for which there is no safe level of use.
This seems an appropriate juncture to raise Justice Jackson's admonition that "the Constitution is not a suicide pact." It seems like the government ought to be able to regulate a potentially lethal product, and that regulation of advertising and marketing is a necessary part of such appropriate regulation in the public interest. Such a regulation has recently been passed in the form of the Family Smoking Prevention and Tobacco Control Act, Pub. L. 111-31, 123 Stat. 1776 (2009). The Act permits the FDA to regulate tobacco products and includes very strict limitations on permissible forms of advertising and promotion.
But a group of tobacco companies is attacking this statute in a District Court in Western Kentucky (much forum shopping there?) on the grounds (among others) that it violates the First Amendment. The companies even wanted to claim First Amendment protection for marketing practices like giving out free samples! The district court denied most these claims, but nevertheless found that some of the statute's regulation of color and trade dress did violate the First Amendment. The opinion is here It was issued before Citizens United came down. But taken together with the arguments raised by the Washington Legal Foundation in the Philip Morris RICO case, I think we can expect Citizens United may well be used in the future in this case as well. Only time will tell. I would worry about giving them ideas, but the connection between Citizens United and commercial speech protection claims is clearly already out there amongst firms litigating these issues.
Later I will post some other aspects of the Philip Morris case which may be of interest to Glom readers, in particular whether a corporations can commit conspiracies or have specific intent.
Much of the outcry about Citizens United has focused on its anticipated impact on elections, see here and here, as well it might since the decision was, after all, one about the proper interpretation of the Bipartisan Campaign Reform Act, aka McCain-Feingold. However, for my money (no pun intended), its most pernicious impact is likely to be not on elections (there was already a lot of corporate money in elections), but rather its influence on the future interpretation of the commercial speech doctrine. The commercial speech doctrine permits the regulation of commercial speech for its truth.
What has this got to do with political speech you might say? Nothing, unless one considers why for-profit corporations get into campaign finance or lobbying in the first place. They do so for the same reasons they engage in commercial speech; to further the economic interests of the corporation (and/or the shareholders if you prefer). Even though the Supreme Court did not hold in Citizens United that a corporation enjoys the same First Amendment rights as a human being, the rhetoric in the opinion, what I call the "anti-discrimination rhetoric," is likely to be used as if the Court had said just that and in support of an argument that the Court should not "discriminate" against commercial speech and relegate it to the category of an intermediate scrutiny test but rather should apply to it a strict scrutiny test, a New York Times v. Sullivan test. Suffice it to say that this permits regulation in theory, but little in practice.
There is evidence that Citizens United will be used this way if you look at how at how Bellotti was used. Bellotti was another corporate election law case. It was decided in 1978, only two years after Virginia Pharmacy, the case in which the commercial speech doctrine was first announced. It has been repeatedly used to argue for expanded protection for commercial speech. Most recently in the Supreme court in 2003 in the Nike v. Kaksy case. See here, here and here.
Theoretically Bellotti was a case that had nothing to do with commercial speech. Nevertheless, it has regularly showed up, as it did in Nike, in arguments in favor of more protection for commercial speech, supposedly for the proposition that speech is not less valuable because a corporation utters it. May be. But consider this, if we (or the Court) gets this argument tangled up with some notion that First Amendment protection is offered on the basis of some anti-discrimination principle we may be in very deep waters indeed, because for a business corporation its political expression is surely tangential to its main organizing purpose. It's core expressive activity is commercial speech. If we are protecting the speaker then it would seem that its core expressive activity ought to be protected. However, going that way would seemingly wreak havoc on any sort of regulation of commerce. How can you regulate commerce if you can't regulate commercial speech? If the Court goes the way of offering strict scrutiny protection to a lot of commercial speech it may make debate about reform of the financial sector moot. Not to mention the idea that corporations need protection against discrimination is a fairly difficult one to swallow. (It makes for some good editorial cartoons though! This month's Vanity Fair has a great one which you can only see if you buy the magazine; but you can find in the table of contents here under the Vanities section. A similar cartoon showed up earlier in the Boston Phoenix and that one you can view here .)
This is not just a theoretical proposition. There is a case now pending before the Supreme Court which (arguably) involves commercial speech and at least one amicus brief suggests that this is the case in which the Court can resolve the status of commercial speech (in favor of more protection, natch) and answer the question raised but not answered in Nike v. Kasky. Guess which case is included in its list of authorities? Yep. Citizens United. I will save for another post which case this is and where else Citizens United is popping up. But this is one of those First Amendment cases that could have very widespread impacts on all sorts of regulation of business. That may be a happy thing if you think less is more in the regulatory arena for business. May be not so happy if you think the government should have more of a hand in the regulation of the safety of food, drugs or... financial services.
Permalink | Business Ethics| Business Organizations| Constitutional Law| Corporate Governance| Corporate Law| Crime and Criminal Law| Current Affairs| Financial Crisis| Law & Society| Social Responsibility| White Collar Crime | Comments (0) | TrackBack (0) | Bookmark
While on Spring Break, I missed the$7500 settlement of the case challenging Wisconsin's practice of licensing U. of Wisconsin and Marquette University law school graduates without their having to take that pesky bar. (Law Blog blurb here.) The case involved graduates of out-of-state law schools who claimed discrimination under the dormant Commerce Clause in having to take the bar when the in-staters didn't have to sit for the bar.
Here is Gordon's post on why the diploma privilege isn't entirely irrational. Here is my post after the Seventh Circuit reversed the district court's dismissal of the case and sent it back for trial. As regular readers know, Gordon and I taught at Wisconsin and Marquette, respectively.
So, why did the case settle? Vaguely reminiscent of many cases in my Con Law book so many years ago, the case was destined to fail for mundane procedural reasons. First, the case kept losing its "ripeness." First, Christopher Wiesmueller, a graduate of Oklahoma City University School of Law, was representing himself and a class of others similarly situated pro se. However, once he passed the Wisconsin bar, his case was moot. So, he substituted as the name plaintiffs Heather Devan and his wife, Corinne Wiesmueller. However, during the course of case, Devan passed the Wisconsin bar, leaving only Ms. Wiesmueller. But then it gets even more complicated.
The case was first certified as a class for injunctive relief in 2008 by District Judge Barbara Crabb. However, after the Seventh Circuit remanded, Weismueller moved for summary judgment for plaintiffs. In denying that fairly aggressive motion on October 30, 2009, Judge Crabb orders a hearing to reexamine the certification of the class, noting that Rule 23 requires a judge to consider whether class counsel has the experience and resources to effectively serve the interests of the class. I will spare you the gory details of Judge Crabb's analysis of Wiesmueller's experience and resources, but suffice it to say that she believed he was "over his head." (Wiesmueller v. Kosobucki, 667 F.Supp.2d 1001 (W.D. Wis. Oct. 30, 2009 -- maybe good scare material for legal writing/appellate procedure professors). She encouraged him, in preparation for the hearing, to associate himself with others with more federal practice experiences and resources to undertake what she felt would be an involved discovery process.
Perhaps proving Judge Crabb right, Wiesmueller then moved for the judge to recuse herself on the basis of herself being a 1962 Wisconsin graduate, having received an award from an alumni association, for having interns from the two Wisconsin school, for berating him unfairly, and for irrationally requesting Wiesmueller "sua sponte" to remove former Supreme Court Justice Louis Butler as a defendant in that capacity because he was no longer a member of that court. Not unsurprisingly, Judge Crabb denied that motion on December 2, 2009 (Westlaw citation: 2009 WL 4667576), held a hearing as to whether Wiesmueller had the experience to lead the class on December 3, 2009, and ruled he did not on December 4 and so de-certified the class (Westlaw citation: 2009 WL 4722197). Judge Crabb reminded Wiesmueller that he could represent individual plaintiffs in the case, but not the class. The remaining individual plaintiff was his wife, Ms. Wiesmueller, who is scheduled to take the bar in July.
So, the case ends with a whimper (although a fairly interesting and complex one), not a bang. Wiesmueller says he was tired of the case and his only plaintiff was about to lose standing.
So how do rules like the Diploma Privilege go away? I can't see a lot of Wisconsin legislators wanting to be the ones to repeal that rule, and it didn't look like a lot of Wisconsin attorneys were lining up to be co-counsel with Wiesmueller, either. Standing will always be an issue as few law school graduates are going to move to Wisconsin, declare an interest in taking the bar and then wait multiple years for the court case to end without getting on with their lives.
And I do think it would be better for both law schools and the state to do away with the rule. There are few positives to the rule that I can see. If the diploma privilege attracts students to those schools, then those students by definition are looking for a way to practice law without any unnecessary work. Not the driven Type A students that make a name for themselves and the school. It may also encourage graduates to stay in-state, but again those on the margins that stay because of the privilege may be the least ambitious. Of course, many, many of the students who go to those law schools do not do so because of the privilege, but because they like the schools. And, a lot of graduates stay in Wisconsin not because of the privilege but because they want to live in Wisconsin. So, the positive aspects of the privilege seem small. And I do think there are negatives. Law schools gain national reputations by having their graduates fly away to other places and spread the good name of their institution far and wide. To the extent that the privilege disincentivizes graduates to do that, then it is a negative thing. My impression was that Milwaukee and the other smaller legal markets in Wisconsin could not absorb all the good attorneys coming out of the two law schools.
But, there won't be any changes for awhile!
I couldn’t agree with Rachel more. The discussion on the role of corporations in society is not over, in fact two seemingly separate stories from last week – the standoff between Google and China and the landmark Supreme Court decision in Citizens United –together signal that we are a watershed moment in this question. I don’t claim to have done the type of deep thinking that Rachel or Gordon or Lisa or other corporate scholars who have written on corporate social responsibility have. But at the risk of interloping into territory others know and think about far deeper and better than I, consider a few quick thoughts on how contrasting Google/China with Citizens United suggests we are returning to some very old questions about the twin risks of not having corporations separated from government power and not having governments separated enough from corporate power.
I would argue that Google’s threat to leave China because of government intrusion into its operations can be seen as a victory for those who advocate for corporate social responsibility. And the Citizens United decision obviously represents a victory for those who want to see corporations as not being creatures of the state, but rather as persons that can check government action. But these two victories pose thorny intellectual problems for the victors. These problems, in turn, reveal something about the horrible tangle we find ourselves in after the financial crisis as we cut our way between the risks of government being captured by corporate interests and corporations becoming the playthings of the state. Bear with me, because I think these two stories also have something to tell us about New Governance and the need for even greater cross pollination between public and private law in scholarship and the classroom.
Google v China: Do we know corporate social responsibility when we see it?
Many (I won’t even attempt to embed links) have applauded Google’s threat to pull out of China on account of state censorship and cyberattacks on Google’s servers as a victory for corporate social responsibility. Some scholars, like Ribstein, complicate this interpretation, in part, because Google’s actions may stem more from pure economic self interest. Given Google’s business model -- particularly their need to reassure users of the sanctity of personal information -- it may be impossible to disentangle definitively whether this resistance to China is an example of self-interest or social responsibility.
Let me ask a more basic question. How do we define what corporate social responsibility is? And who gets to define it? When we discuss corporate social responsibility at the end of my Business Associations class, there inevitably seems to be widespread consensus in the classroom about what responsible behavior means. Everyone seems to agree that dumping mercury in the Rio Grande or employing child laborers is irresponsible. But then I ask students what if social activists were pushing a corporation either to include abortion coverage in their health plans or to exclude same sex partners from employee health benefits. Consensus evaporates.
Do we define corporate social responsibility through the public law process? There are real dangers with treating corporate social responsibility as a matter of positive law and state determination. Consider that Google may not be a good corporate citizen if you look through the lens of the Chinese government. They are violating Chinese law. That of course is an extreme, rhetorical example. But there is a deep concern though that by implicating public law or government intervention – however light and well-intentioned -- in the core purposes of corporations we are slouching towards treating corporations as a plaything of the state rather than as a potential check on government power. Which is the role many lauded Google for playing.
So the Google victory poses several questions for advocates of corporate social responsibility, including how do we know what is corporate social responsibility, who decides, and are we comfortable that we can draw principled distinctions that will ensure the public does not subsume the private? Are corporate social responsibility advocates putting great faith in the political process to check abuses?
Citizens United: spheres unseparated
Meanwhile, Google and all other corporations received a huge boost to their political power and their ability to check and shape government regulation by virtue of the Supreme Court’s landmark decision in Citizens United. I won’t pretend to be a public law scholar, but the sweeping aside of restrictions on corporate political speech clearly represents the culmination of a centuries long evolution of case law -- running from Dartmouth College to Bellotti – that has given corporations more and more of the constitutional rights of natural persons. If last week’s Supreme Court decision means anything, it is a clear refutation of the ancient idea that corporations are creatures of the state.
But in this victory too lies a deep intellectual challenge for the victors. In the precursor of the current debate on social responsibility, Berle espoused a view of corporations and government as existing in “separate spheres” a view that echoed 19th century political thought and was in turned echoed later by Milton Friedman and others who later argued against corporate social responsibility. To render a fine idea into a quick sausage: governments should set the rules of the game for corporations then stay out, and corporations play by the rules.
From a pure descriptive standpoint, after the Citizens United decision, it seems impossible to argue that these spheres can be neatly separated. Corporations are not just playing by the rules, they have the right to participate in setting them. Moreover, they may be the 800 lb gorilla in the room. One interesting morsel in reading through the dissent was to see Justice Stevens grappling, even briefly, with corporate law scholarship questioning whether shareholders have the realistic ability to control corporate speech through corporate governance.
More deeply, do we now need to worry more that corporate law rules are not merely the product of competition and economic efficiency but set through management’s use of the political process. (For an interesting comparative study of the intersection of politics and corporate governance, see Peter A. Gourevitch & James Shinn, Political Power & Corporate Control (Princeton 2005). There seems to be a danger of management using the political process to hardwire not only management entrenchment but the political preferences of those in control of corporations. Aren't those who laud Citizens United placing great faith in the capacity of markets and the competition for corporate control to prevent agglomerations of political power? If the Google/China standoff lays bare for the need for the separation of corporations from state control, Citizens United raises the question of how we ensure that governments can retain sufficient independence from corporate control.
Strange constellations: the alignment of corporate law scholars after the financial crisis
I don’t think these concerns about corporations capturing the government or the government overreaching into the private sector are just dystopian constructs. The bailouts during the financial crisis reveal that these concerns are festering. There is plenty in the bailout for people across the political spectrum to lament. Progressives lament that bailing out AIG and other firms represents government capture and the socialization of loss and the privatization of profit. Conservatives lament the government interference in the discipline of the marketplace and now government using its leverage from the bailouts to justify interventions such as in executive compensation.
In the wake of the financial crisis, is government becoming the plaything of corporations? Are corporations becoming the playthings of government? Or is the reality some complex and perverted mix of both? Forgive the metaphor, but we seem to be stuck in bad remake of some scene from Eyes Wide Shut. It’s not clear from the tangle and the masks who is in control, but it’s clear it is not G-rated.
Problems of power and the dangers of a lack of clarity between public and private power point to a reason to ask tough questions of New Governance – which I admit to being only at the beginning of understanding. Cindy Williams politely told me that there are different versions of New Governance. At its core, New Governance seems to look to public/private partnership in regulation. But blurring the lines between public and private, even in experiments, has dangers. Progressives should fear regulatory capture. Libertarians should fear government co-opting the private sector.
Further afield, experimentation to insulate government decision-making from the political process has again become a constitutional issue as revealed by the Supreme Court taking up the challenge to the Public Company Accounting Oversight Board. This case – about an obscure and odd agency duckling created in the wake of the Enron scandal to insulate the regulation of the accounting profession from the political influence of the accounting profession – brought together strange constellations of law professors to support and oppose the constitutionality of the agency. If you look at the professors who filed briefs as amici, you might seem some striking lineups. I don’t presume to place scholars in political pigeonholes, but their previous scholarship suggests we have seen truly strange alliances of professors with very different political beliefs. And within the various alliances, the professors likely have very different opinions on the relative risks of state versus corporate power. I am sorry I missed the AALS Hot Topic Panel on the case, because I hear it cast a sharp spotlight on the strangeness of these political constellations.
Is this a one-off phenomenon, or are we seeing an ideological realignments in the legal academy? If you are outside the academy, you might ask: who care what we eggheads think on this technical topic? It sounds trite, but ideas matter and will spill over into the political arena -- perhaps after years of gestation. Perhaps the gestation period will be much shorter; the political arena seems ripe for a tectonic shift. We already see stark examples of strange political bedfellows – the Kuciniches of the left and the Pauls of the right -- in Congressional opposition to bailouts and to the political independence of the Federal Reserve itself.
Unchecked Power – Public and Private
So in debating the risks of concentrated corporate power versus concentrated government power, we are likely revisiting the same debates we had at the turn of the last century. History didn’t end. Nor does it repeat. It rhymes and samples. Indeed, to sample from my favorite poem, “All the new thinking is about concentrated power. In this it resembles all the old thinking…”
We are also likely to hear some familiar motifs in the political noise – such as calls to break apart corporate conglomerates to reduce perceived threats to democratic values. Is this perhaps an unspoken aim of the Volcker plan to limit the size of financial institutions. Will we return to trust busting?
If we are concerned about democratic values, we need to pay attention to agglomerations of control in the media. Without a critical and independent media, we will have no way of gauging how corporate and state powers are intersecting. But we may come to find a genie let out of the bottle during the Clinton presidency when few were watching closely. If few really understood what the repeal of Glass Steagall would mean for the consolidation of power in the financial sector, are we considering enough what the Telecommunications Act of 1996 means for the consolidation of power in the media industry? Do we understand how competition and consolidation among broadcast, cable, phone, internet, newspaper, radio corporations will play out in terms of concentrations of political power? I certainly don’t because communications law and the economics of those industries lie far outside my understanding.
When historians look back to the Clinton era, they will likely see the most radical shifting in economic and political control since FDR – all the more radical because its magnitude was obscured by its technicality and by the fact that the President who squired it cast himself as part of some “Third Wave” in politics. Beware those selling easy ways to transcend and triangulate across political divides. Here is a third example of a statute passed during the Clinton years that will have far reaching consequences for concentrations of political power: cyberlaw scholars have been trying to get us for years to pay attention to what the Digital Millenium Copyright Act of 1996 means for who holds the power over the intellectual commons.
Looking for checks
Cyberlaw scholars first made their mark by alerting us to the subtle and far-reaching consequences of seemingly technical questions on how both the state and corporations could use the internet as a means of social control. So we are now full circle to the conflict between Google and China. One of those scholars, Larry Lessig advocated making the “code” of the internet “open” to allow civil society to check these subtle forms of control. This last fall, Lessig notably balked at a broadbrush application of these same open source ideas to making politics more transparent.
Indeed, citizens would have trouble making sense of raw government transparency – in terms of the volume of information and the complexity of issues. This is not because people are stupid, but no individually has time to master complex issue and process reems of raw data. We need to rely on experts to edit and filter information for us. The forms of political, economic, and technological control are subtler and potential threats to democratic value harder to grasp.
But how do we trust those experts? Trust throughout society has long been thought to have been declining for decades, and perhaps accelerating in an age of political polarization. Moreover, we also decry how the digital age has left us with shorter attention spans. We also live famously in an age of irony. It is often remarked now that some of our most intelligent commentators on public affairs are fake newscasters. This irony may lead to a particularly unfunny kind of political paralysis (“Ha ha – that’s really funny what Colbert said about our country going to hell. LOL ;-).”)
It’s not easy to make sense of the new dangers of concentrations of political power. Bolshevism and trusts were simple compared to understanding interconnections between complex corporate ownership structures, telecommunications regulations, and how the technology of the internet functions.
Understanding this landscape requires the involvement of scholars who are independent of corporate and government power. Which is why sources of university financing during an age of budget cuts looms as so large an issue.
All the New Thinking: cross pollination in legal scholarship and public law in the business law curriculum
If legal scholars must play a valuable role in sorting through the risks of concentrating political power, it suggests that faculties need to foster greater dialogue among private and public law scholars. Understanding new constellations of power might require minds in corporate law, constitutional law, cyberlaw, communications law …
Integrating scholarship in corporate law with public law is not a new idea. In fact, this essay has clearly trampled all over ground covered by many scholars who’ve looked at the intersection of public law and corporate law -- Kent Greenfield, Larry Mitchell, Lyman Johnson, Lynn Stout, Cindy Williams, Margaret Blair, Lynn Dallas. Not to mention our own Lisa and Gordon and our guest Rachel. I’m likely making enemies galore by the dozens of scholars I am leaving out including scholars -- like Bainbridge -- critical of corporate social responsibility.
There is also a question of whether we corporate law scholars need to build a bigger public law component into basic business law courses. This is also not a novel idea. I admit being resistant to doing this; law students need to learn the nuts and bolts in order to get a job and have the intellectual tools to practice as effective lawyers. But I am reconsidering, because law students also need a set of intellectual tools to exercise their duties as citizens.
Permalink | Administrative Law| Antitrust| China| Constitutional Law| Corporate Governance| Corporate Law| Financial Crisis| Google| Internet| Law & Society| Legal Scholarship| Politics| Social Responsibility| Supreme Court| Teaching| Web/Tech | Comments (0) | TrackBack (0) | Bookmark
Gordon pointed you to Donna Nagy's brief (and Larry Ribstein's) yesterday for the Free Enterprise Fund v. PCOAB case, in which she and a number of other eminent law professors point out the constitutional problems with the Board, which, they argue, is inconsistent with constitutional separation of powers principles.
I wanted to follow up a bit here, because the Board is a strange entity indeed - a pretty independent creature of the SEC, which is itself pretty independent from presidential control. There are not many (or even any) agencies set up like it. How did Congress think it up? I think the Nagy brief has an interesting point here:
So in other words, PCAOB is set up like an SRO, which is constitutional, but SROs are private entities, while PCAOB is a public entity. It is the public-private distinction which she thinks has tripped up the government - and it wouldn't be the first time. While I don't know if this is a dealbreaker, it is an interesting exercise in how laws get made by looking to the old models ... something that would be rationalizers of our financial regulatory system are realizing to their chagrin.
UPDATE: And yes again.
In APCC Services, the Supreme Court today held that assignees of claims had standing to pursue those claims in federal court, even if they have promised to remit the proceeds of the litigation to the assignors. It is interesting because it a. was a 5-4, b. was a case where Kennedy swung "liberal," and c. marks a new round in the important fight to broaden standing requirements.
Such requirements often turn on injury, and the question was whether the assignee of a claim could really be said to suffer injury if any proceeds on the claim would go to the assignor. In answering the question in the affirmative, the majority may have been (indeed in some cases explicitly was) thinking about all the cases where the driving party behind litigation is not the injured plaintiff, but the incentivized lawyer: qui tam, contingency fee, patent assignees, guardians ad litem and so on.
When you read a lot of standing cases, you start looking for markers for future fights over the doctrine, because those fights take up ever larger amounts of the time of the federal courts. There are two markers of particular note in this opinion. First: "We have often said that history and tradition offer a meaningful guide to the types of cases that Article III empowers federal courts to consider." So plaintiffs seeking standing are invited to look to past practice, rather than the strictures of the standing test, to make their case for plaintiffhood.
Second, there's some disdain for ticky-tack and technical denials of standing - much needed disdain in my view, but I could see future litigants argue "why should we have to jump through a silly and easy to jump through hoop? Just award us standing." See if you agree: "Were we to agree with petitioners that the aggregators lack standing, our holding could easily be overcome. For example, the agreement could be rewritten to give the aggregator a tiny portion of the assigned claim itself, perhaps only a dollar or two. Or the payphone operators might assign all of their claims to a “Dial-Around Compensation Trust” and then pay a trustee (perhaps the aggregator) to bring suit on behalf of the trust."
Since writing a law review comment on the free speech rights of public employees, I have shied away from scholarly engagement with the First Amendment, preferring more circumscribed fields of inquiry ... like fiduciary duty! Anyway, I was interested to read about the so-called media shield law in the NYT, partly because the topic is intrinsically interesting and partly because my future colleague, RonNell Andersen Jones, is working in the area. Indeed, RonNell is cited in the story:
Federal judges began offering leeway to reporters as well in civil litigation and criminal trials, so long as the information sought was not critical to the government's or plaintiff's case and was available elsewhere. At times, they protected journalists from having to disclose unpublished, nonconfidential material.
''By a stroke of genius, media attorneys were able to turn what was actually a loss for the press in 1972 into a qualified privilege for 30-plus years,'' said University of Arizona law professor RonNell Andersen Jones. ''There is now an unsettled feeling among members of the press about whether this carefully constructed house of cards is going to be blown down.''
Jones has come up with figures in a soon-to-be-released survey that indicate a rise in federal subpoenas following highly publicized media losses in recent years. Those defeats, she says, have emboldened more lawyers to subpoena journalists.
Her survey, which got responses from 761 news organizations, found 21 federal subpoenas seeking names of confidential sources in 2006 and an additional 13 seeking material other than a source's name that was received on condition of anonymity.
Those numbers are substantially higher than the 19 subpoenas since 1992 cited by the Justice Department when arguing that a federal shield bill is unnecessary. That count includes only subpoenas by department prosecutors who want reporters to disclose sources' identities to grand juries. The tally does not include civil lawsuits, cases involving special prosecutors or trial subpoenas by federal prosecutors seeking confirmation of material already published in news stories.
If this subject interests you, keep an eye out for that "soon-to-be-released survey," which RonNell tells me is nearly complete.
I am reading some old Karl Llewellyn articles, including one from the Harvard Law Review entitled "Across Sales on Horseback." Here is the first paragraph:
It is possible that there are fields of our law more fascinating than that of Sales, but I find the possibility difficult to credit. For packed into this small sector of the law is the course of our history over a century and a half, reflected with a range which the narrowness of the subject matter would seem offhand to make impossible, reflected with a precision which rivals even that of the constitutional law field. And because the work is the work of a multitude of courts, inexpert, busy chiefly on other things, average shrewd and more than average honest, but with no supreme authority over them, the picture yielded is a picture of the democratic process in law-making which the constitutional law field can never rival.
Does this resonate with you? Or do you read Llewellyn and think, "Surely he must be kidding!"? When I read the first sentence, I thought he was joking, but this passage resonates with me. I feel the same way about studying contracts and fiduciary law. During law school, I was a Con Law junkie, so I can see the attraction, but now I much prefer to read about private ordering.
Former guest blogger Geoff Manne and Randy Barnett of the Volokh Conspiracy have organized a paper symposium on Raich v. Gonzales, the medical marijuana case decided in the Supreme Court's last term. The papers comprise the fourth issue of the Lewis & Clark Law Review, and the cover appears below. All of the papers are available online. You will notice contributions by bloggers Ann Althouse and Glenn Reynolds, among others. Well done, Geoff and Randy.