Showing papers in "Virginia Law Review in 2001"

Control Rights, Priority Rights, and the Conceptual Foundations of Corporate Reorganizations

Abstract: THE modern approach to corporate reorganizations begins in a curious place. Everywhere else in corporate law, we focus on those who control the firm and on when others should be able to go to court and reverse their decisions.' With respect to corporate reorganizations, however, we ignore these questions and instead focus on priority rights.2 Our lodestar is the real estate foreclosure. A real estate foreclosure is an actual sale of a physical asset, and the proceeds of the sale are distributed to old creditors and shareholders according to nonbankruptcy priorities. A reorganization is

Understanding the constitutional revolution

Abstract: E live in extraordinary times. In the past year the Supreme Court of the United States has decided an election and installed a president. In the past ten years it has produced fundamental changes in American constitutional law. These two phenomena are related. Understanding the constitutional revolution that we are living through means understanding their connections. The new occupant of the White House—we will call him “President” after he has successfully prevailed in an election conducted according to acceptable constitutional norms—has taken the oath of office and has begun to govern. But his claim to the presidency is deeply illegitimate. He and the political party that he leads seized power through the confluence of two important events that would have caused widespread outrage and produced vigorous objections from neutral observers if they had occurred in a third world country. The first is the disenfranchisement of black voters in Florida in violation of the Voting Rights Act of 1965. Concerned about alleged

Naturalized Epistemology and the Law of Evidence

Abstract: This paper important developments in epistemology, and defends a theoretical framework for evidence scholarship from the perspective of naturalized epistemology. It demonstrates that naturalized epistemology provides a firm conceptual foundation for much research into law of evidence. These developments in epistemology have not been much noted in legal scholarship, despite their importance in philosophy and their coincidence with some widely shared approaches to evidence scholarship. This article is a partial antidote for the unproductive fascination in some quarters of the legal academy with "postmodern" conceptions of knowledge and truth and to the even more common search by the legal professoriat for algorithms that provide answers to important legal questions. In the field of evidence, there is some interest in post-modern epistemology, and much searching for the appropriate algorithm, such as Bayesian decision theory or micro-economics, or simply the complete neglect of epistemological matters. The article argues that the naturalistic turn in epistemology of the past thirty years (especially that branch of naturalized epistemology known as social epistemology) provides the appropriate theoretical framework for the study of evidence, as it does for virtually any enterprise concerned with the empirical adequacy of its theories and the truth-generating capacity of its methodologies. Evidence scholarship and law are concerned with both, and thus naturalized epistemology provides a fruitful way of understanding the limitations of some of the existing efforts to provide theoretical and philosophical foundations to evidence law. It also provides a way to conceptualize and evaluate specific rules of evidence, and concomitantly explains what most evidence scholars do, regardless of their explicit philosophical commitments. For the great bulk of evidentiary scholars, this article should solidify the ground beneath their feet.

Constructing a Hierarchy of Crimes in International Criminal Law Sentencing

Abstract: This Article looks at sentencing in international criminal law. Based primarily on the statutes and decisions of the current International Tribunals for the former Yugoslavia (ICTY) and Rwanda (ICTR) (collectively, the Tribunals), the Article focuses on one critical aspect of sentencing-how judges should assess the harm caused by the perpetration of international crimes. The Tribunals' judges have great discretion in imposing sentences. All crimes within their jurisdiction may be punished with terms ranging from one day to life imprisonment. There are few precedents for the Tribunals' work, and this structure has resulted in a lack of uniformity in sentencing decisions, both in sentence length and in methodology. This article proposes a framework for evaluating the harm associated with the different kinds of crimes within the jurisdiction of the Tribunals. The crimes within the jurisdiction of these Tribunals have two sets of elements: the chapeau, which confers international jurisdiction over the offense, and the enumerated acts, which resemble domestic crimes. The ICTY currently considers only the harm associated with the enumerated act when imposing an appropriate sentence. This Article argues that it is critical that the Tribunals should consider the chapeau elements in their harm determinations for two reasons. First, these international elements encode important information about the secondary harms caused by the offenses. Second, they reflect the norms underlying the internationalization of the crime and reinforce the distinction between international and domestic offenses. This approach yields two results important for international criminal law. It provides a relatively rule-like sentencing methodology that will increase the consistency and ultimately the legitimacy of international criminal law. Furthermore, by examining the differences between international and domestic crimes, it illuminates the purpose of international criminalization and advances a meaningful distinction between the two enforcement regimes.

A New Approach to Takeover Law and Regulatory Competition

Abstract: The development of U.S. state takeover law in the past three decades has produced considerable and quite possibly excessive protection for incumbent managers from hostile takeovers. Although the shortcomings of state takeover law have been widely recognized, there has been little support for federal intervention because of the concern that such intervention might produce even worse takeover arrangements. This paper puts forward a novel form of federal intervention in the regulation of takeovers that would address these shortcomings without raising such a concern. Rather than mandating particular substantive takeover arrangements, this form of federal intervention would focus on increasing shareholder choice. Choice-enhancing' federal intervention would consist of two elements: (i) an optional body of substantive federal takeover law which shareholders would be able to opt into (or out of) and (ii) a mandatory process rule that would provide shareholders the right to initiate and adopt, regardless of managers' wishes, proposals for opting into (or out of) the federal takeover law. We argue that such a federal role in takeover law cannot harm and would likely improve the regulation of takeovers. Moreover, by showing how federal law can be used to improve regulatory competition in the provision of takeover law rather than preempt it, our analysis lays the groundwork for a more general reconsideration of regulatory competition in the corporate law area.

Scripting Expertise: The History of Handwriting Identification Evidence and the Judicial Construction of Reliability

Abstract: Expert evidence in handwriting identification - the claim to be able to identify an author from an examination of written documents - has, after a century of use, once again become highly controversial. As critics attack the so-called expertise as insufficiently proven and perhaps nonexistent, numerous judges have begun to rein in this form of expert testimony, and several have recently decided to exclude it altogether. This paper takes the current controversy over the admissibility of handwriting identification evidence as an opportunity to examine how handwriting identification evidence first became established as a legitimate and credible form of proof. Handwriting identification is an unusual form of expert evidence because it was the first kind of expertise that was primarily forensic, invented specifically for use in the legal arena. This paper is the first article-length examination of the history of this form of expertise, and offers a detailed examination of how handwriting experts convinced judges that their new form of knowledge was legitimate and worth permitting as legal evidence. It investigates the doctrinal and institutional context surrounding handwriting identification evidence, and examines both how expert evidence in document examination came to be admissible and how it came to be understood as persuasive. In addition, this historical study has two more general purposes. First, it seeks to shed new light on a dominant issue in the expert evidence literature, the tension between whether fact finders should defer to experts or be educated by them. Second, it challenges a bedrock assumption of most commentators on expert evidence: that reliability is exogenous to law, or, more specifically, that when judges make determinations about the validity and reliability of expert evidence, they are ratifying something that either exists or does not exist out in the world. This analysis suggests instead that, at least in some circumstances, judicial determinations can play a significant role in constructing broader cultural perceptions of reliability. At least in the case of handwriting identification evidence, judges did not simply import reliable evidence; rather, they helped to create it. Finally, this paper uses this history of handwriting evidence and the contemporary challenges to handwriting to offer some speculative musings on some of the problems implicit in Daubert's approach to expert evidence.

How Great Were the "Great" Marshall Court Decisions?

Abstract: This article commemorates the two hundredth anniversary of the ascension of John Marshall to the Chief Justiceship of the United States Supreme Court by taking a revisionist look at some of the landmark decisions of the Court that he presided over for thirty-four years. Political scientists and legal scholars have written a great deal in recent years questioning conventional assumptions about the importance of Supreme Court decisions such as Brown v. Board of Education, Roe v. Wade, and Engel v. Vitale. Yet almost nothing has been written about the consequences of the "great" Marshall Court decisions. Scholars continue, almost universally, to assume that the old Marshall Court chestnuts - decisions such as Marbury v. Madison, McCulloch v. Maryland, and Dartmouth College v. Woodward - were of enormous significance to the history of the early republic. A closer look at these rulings in their historical context, however, suggests that such assumptions are in need of serious revision. This Article reconsiders the consequences of three categories of Marshall Court decisions. Part I looks at the most famous Marshall opinion of all, Marbury v. Madison, and questions the importance of its proclamation of the judicial review power. Part II reevaluates the importance of McCulloch v. Maryland and Gibbons v. Ogden - decisions that approved extremely broad conceptions of national legislative power. Part III turns to some of the famous Contract Clause decisions of the Marshall Court - specifically, Dartmouth College v. Woodward, Sturges v. Crowninshield, and Green v. Biddle - and challenges the widespread assumption that they were instrumental to American economic development during the first half of the nineteenth century. Finally, Part IV considers one way in which the Marshall Court did make a vital contribution to American history: It helped establish the Supreme Court as a significant, if not quite co-equal, branch of the national government. This final Part assesses the extent to which Marshall and his colleagues were responsible for the Court's growing institutional stature and the extent to which this development was fortuitous.

Human Behavior and the Law of Work

Abstract: The most fundamental issues in labor and employment law involve the choice among three alternatives: waivable employers’ rights, waivable employees’ rights, and nonwaivable employees’ rights. By combining standard contract analysis with a perspective informed by behavioral economics, it is possible to obtain a much better understanding of the underlying issues. Contrary to the conventional view: workers are especially averse to losses, and not so much concerned with obtaining gains; workers often do not know about legal rules, including key rules denying them rights; workers may well suffer from excessive optimism; workers care a great deal about fairness, and are willing to punish employers who have treated them unfairly, even at workers’ own expense; many workers greatly discount the future; and workers often care about relative economic position, not absolute economic position. These points suggest the advantages, in many cases, of relying on waivable employees’ rights, an approach designed to inform workers without providing the rigidity and inefficiency associated with nonwaivable terms. At the same time, these points suggest, though more ambiguously, the hazards of allowing workers to waive their rights in accordance with standard contract principles. Procedural constraints (e.g., cooling off periods) and substantive constraints (e.g., “floors”) on waiver may be appropriate. Norm change and preference change are also discussed. Applications include job security; parental leave; vacation time; health care; unionization; occupational safety and health; discrimination on the basis of age, race, and sex; waivers by unions; and workers’ compensation. The basic conclusion is that waivable employees’ rights are a promising and insufficiently explored option in many areas of labor and employment law.

Naturalized Epistemology and the Critique of Evidence Theory

Abstract: In this article I give a mixed review Allen and Leiter’s naturalized epistemology theory of evidence. I applaud their focus on naturalized epistemology, but I question the claims that they argue follow from it. In some ways, my reaction is that they have not gone far enough in pressing its implications, and I attempt to suggest how further progress might be made along this path. On the whole, I conclude that the antipathy toward algorithms expressed by Allen and Leiter is misplaced.

Ultra Vires Lives! A Stakeholder Analysis of Corporate Illegality (with Notes on How Corporate Law Could Reinforce International Law Norms)

Abstract: This paper argues that a remaining vestige of the ultra vires doctrine sets off illegal activities as "beyond the power" of corporations. Though largely unnoticed and unexamined until now, this part of the doctrine has been retained because none of the important corporate stakeholders has an interest in authorizing the corporation and its managers to commit illegal acts. From an ex ante perspective, the principal stakeholders in the corporate contract would want the corporation and its management to forego illegalities as a way to increase the value of the firm. Any of the stakeholders would be a potential victim of the corporation's lawbreaking and would want to receive assurances that they would not be harmed by such conduct. Even for the shareholders, the difficulties inherent in distinguishing in the corporate contract between profitable and unprofitable unlawful acts would either be insurmountable or quite costly to resolve. On the whole, the risks of corporate or managerial illegalities would be too great, and the potential rewards too tenuous, to expect anything other than a corporate contract that would prohibit such acts. As evidence that this stakeholder analysis reflects positive law, the paper points to state incorporation statutes and individual companies' articles of incorporation, which almost invariably charter corporations only for "lawful" purposes. The continuing (though limited) existence of the ultra vires doctrine has important implications. First, because unlawful acts are ultra vires, such activities become subject to the enforcement powers of corporate law, in addition to the enforcement powers of whatever governmental or private entity is charged with enforcing the underlying, substantive legal requirement. Corporate law thus provides shareholders the right to sue to enjoin corporations' continuing unlawful activities. Because the ultra vires doctrine is alive in a form that makes general law compliance an enforceable obligation within corporate law its continuing life also has implications for the duty of corporations and their managers to maximize profits. If corporations must obey the law, then such obedience must come at times when it is not profitable to do so. This notion is in contrast to the views of those scholars who have written that corporations should, with only some small exceptions, seek to maximize profits even when it requires the firm to break the law. Finally, that the obligation to obey the law is at the heart of the corporate contract means that corporate law cannot be thought of as concerned only with the internal governance of the firm. The remaining vestige of the ultra vires doctrine imports into corporate law a concern about general law compliance, and the "lawfulness" that matters is not merely the laws of the incorporating jurisdiction. In this view, a corporation is required under its charter to act lawfully wherever it does business, whether in Delaware, California, or in a foreign jurisdiction. State corporate law would thus have something to say about a shoe company's compliance with minimum wage laws in Vietnam or an oil company's use of slave labor in Burma.

Choice and Federal Intervention in Corporate Law

Abstract: CORPORATIONS within the United States have long enjoyed the right to choose the corporate law regime that governs their internal affairs.1 A corporation based in Texas may select the corporate law of Texas, or the same corporation may instead select the corporate law of Delaware. Many corporations, regardless of where they operate, choose Delaware corporate law.2 The choice available to corporations has generated competition among states for incorporations. From this competition has emerged one of the fiercest debates within the corporate law literature: does state competition for incorporations result in a beneficial race-to-the-top or a harmful race-to-the-bottom? The race-to-the-top argument is straightforward.' Where a corporation selects corporate law rules that maximize the interests of

The Dynamics of Daubert: Methodology, Conclusions, and Fit in Statistical and Econometric Studies

Abstract: This paper reviews the development of the law governing the admissibility of statistical studies. It analyzes the leading cases on scientific evidence and suggests that both the "reliability" and the "general acceptance" standards raise two major difficulties - the "boundary problem" of identifying the type of evidence that warrants careful screening and the "usurpation problem" of keeping the trial judge from closing the gate on evidence that should be left for the jury to assess.The paper proposes partial solutions to these problems, and it applies them to statistical and econometric proof, particularly in the context of a recent antitrust case. It concludes that Daubert-like screening of complex statistical analyses is a salutary development, but that the task requires the elaboration of standards that attend to the distinction between a general methodology and a specific conclusion. Screening statistical proof demands some sophistication in evaluating the choice of a research design or statistical model, the variables included in a particular model, the procedures taken to verify the usefulness of the model for the data at hand, and the inferences or estimates that follow from the statistical analysis. The factors enumerated in Daubert work reasonably well with some of these aspects of the expert's work, but these factors are less well adapted to others. If the "intellectual rigor" standard of Kumho Tire is used to fill the gap, it must be applied with some caution lest it become a subterfuge for excluding expert testimony that is less than ideal but still within the range of reasonable scientific debate.

Grand Perspectives on Evidence Law

Abstract: IN his evidence article, Judge Richard Posner uses a thick version of rational choice theory,2 coupled with a relentless belief in the ex ante effects of evidence rules. This combination entails implicit assumptions about the pervasive knowledge of the rules among the general population, and about the friction-free willingness of actors to change customary ways of doing things in order to obtain an advantage, that are sometimes rather unrealistic.3 As might be expected, Judge Posner also brings to his study of evidence law a sensitivity to costs, trade-offs, and substitutions. I question whether Posner's rational choice, ex ante perspective is the best starting point when drawing inferences about the issues

Inside the Black Box: Comment on Diamond and Vidmar

Abstract: It is an honor to be invited to comment on the first publication of the Arizona Jury Project, a study of Arizona juries that includes videotaping and analysis of jury room discussions and deliberations. It is a remarkable and unique project, made possible by an unusual confluence of people, places, and events. In an insightful opinion some years ago, United States Supreme Court Justice Louis Brandeis observed that "[i]t is one of the happy incidents of the federal system that a single courageous State may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country." The state of Arizona has taken just such a bold path in experimenting with its jury system. Guided by the leadership of its judiciary and enabled by the openness of its legal practitioners, Arizona has been at the fore-front of jury reform. An Arizona Supreme Court committee headed by Judge B. Michael Dann published an influential report in 1994, Jurors: The Power of 12, proposing a host of changes to the state's jury system. Most of these recommended changes were adopted. What is more, the judiciary and state bar have welcomed social scientific research on how these changes affect the jury system, providing the country with a living laboratory for jury reform. The scientific merit of the Arizona Jury Project was enhanced by the readiness of two of the nation's top sociolegal scholars, Professors Shari Seidman Diamond and Neil Vidmar, to serve as research directors. These two scholars have long inspired me with their zest for social science study of the law. This enthusiasm, coupled with the high quality of their research and writing, has led to many impressive research contributions. The Arizona Jury Project promises to be another major achievement for both of these scholars and a significant milestone in the study of the American jury. Many benefits are sure to come from looking inside the black box of jury decisionmaking. By examining what goes on in the jury room in a systematic way, Diamond and Vidmar will help us to assess whether current theories and empirical conclusions about juror and jury decisionmaking, based on indirect research methods, apply to actual jury decisions. They can help us determine whether legal rules, such as the evidence rules they examine in their paper in this symposium, adequately guide the jury process. They can assess how jury reform works in Arizona and thus provide significant information to policymakers contemplating change. In this article, I will explore the potential contributions of the Arizona Jury Project. After a discussion of the project's design and the unique methodological challenges faced by the researchers, I will assess their observations about how jurors deal with the forbidden topic of insurance. I will then consider their suggested reform, and the collaborative instructional approach they advocate.

Federal Intervention to Enhance Shareholder Choice

Abstract: In a recent article, we have put forward a new approach to takeover law and regulatory competition. We proposed a “choice-enhancing” federal intervention that would provide: (i) an optional body of substantive federal takeover law which shareholders would be able to opt into (or out of) and which would be more hospitable than existing state takeover law, and (ii) a mandatory process rule that would provide shareholders the right to initiate and adopt, regardless of managers’ wishes, proposals for option into (or out of) the federal takeover law. In this paper, we respond to a critique of our proposal by Professors Stephen Choi and Andrew Guzman, and we further develop the case for choice-enhancing intervention. JEL Class: G30, H70, K22. 2001 Lucian Bebchuk and Allen Ferrell. All rights reserved. * William J. Friedman & Alicia Townsend Friedman Professor of Law, Economics and Finance, Harvard Law School; Research Associate, National Bureau of Economic R esearch. ** Assistant Professor of Law, Harvard Law School. We would like to thank the Harvard Law School John M. Olin Center for Law, Economics and Business for its financial support. Future revisions of this paper will be available for downloading from http://www.law.harvard.edu/faculty/bebchuk.

Daubert and Litigation-Driven Econometrics

Abstract: PROFESSOR D.H. Kaye's paper raises interesting and important questions.1 The central issue that his paper tackles is when expert testimony employing statistics, particularly econometrics, should get to the jury. Based on the case study he discusses, his answer appears to be "not if it's not up to snuff." Kaye nonetheless emphasizes that the answer also must not exclude too much. In other words, we should admit studies that are less than ideal but still "within the range of reasonable debate by experts."2 Kaye argues that the admissibility of evidence based on a statistical theory or technique should turn on whether the statistical method "has been subjected to sufficient study to establish its validity as applied to a class of problems that includes the one being investigated in the litigation"3 (i.e., the "major premise," or overarching scientific theory4). The question "[w]hether such a method is being applied properly to the problem at hand"5 (the "minor premise," or case-specific claims6) would generally be left to the jury. While as a conceptual matter this approach is appealing, we are less optimistic than Kaye is about its prospects for providing trial courts with principled guidance about the admissibility of statistical evidence. He concedes that the line between method and specific application can sometimes be difficult to fix,7 but we are afraid that in the case of econometric evidence and social science statistics, drawing that line will usually be problematic. Of course, there will be extreme cases in which the expert cannot justify the use of one model rather than an apparently reasonable alternative, or where