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Showing papers in "Washington and Lee Law Review in 1994"



Journal Article
TL;DR: For close to a decade, the authors have been engaged in research on the ways that gender and race structure the sentencing process in the New Haven felony court, and they have been particularly interested in how gender structured the court's response to those accused.
Abstract: For close to a decade I have been engaged in research on the ways that gender and race structure the sentencing process in the New Haven felony court.' In the early phase of the research, I was particularly interested in how gender structured the court's response to those accused. In time, that question evolved to one that asked how the court's response to accused men and women, most of whom lived at society's margins, varied by race and ethnicity. Today it is difficult for me to think about race without also having in mind black, white, and latino masculinities. It is also difficult to write a sentence about race differences without recalling gender differences within racial and ethnic groups. As we discuss race and class in the criminal justice system, let us not forget that both have a gendered face

18 citations





Journal Article
TL;DR: The idea of "efficient market theory" was introduced by Beajamin Graham as discussed by the authors, who argued that the stock market is crudely efficient: markets set the minute-to-minute value of stocks, the spreads between bid and asked prices are very small, and commissions are as little as two cents a share.
Abstract: You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right.(1) Beajamin GrahamIn the 1980s some things went right on Wall Street but much went wrong. The fallout is still being felt today. Prudential Securities, which for years boasted that "the most important thing we earn is your trust," now apologizes for having systematically duped many of the hundreds of thousands of investors who bought its limited partnership deals. Carl Icahn boasted of having bought TWA, but leaving none of his own money there, he succeeded only in leaving the flying public with twenty year-old aircraft and poor service. Banks and insurance companies bankrolled so many new buildings that we will not work off the excess until the end of the century, if then. As we close the books on the worst era in modern U.S. financial history, Prudential at least has the resources to make amends. Those victimized by others must often grasp at straws.This is a good time for a post-mortem. It is not widely recognized, but scholars played an important role in the debacle, providing ingenious free-market theories to justify some of the worst excesses. One such concept, efficient market theory, contributed to the damage then and, in its various mutations, continues to do so today.Even if you are not a student of financial economics, the phrase "efficient market theory" sounds right. After all, the stock market is crudely efficient: markets set the minute-to-minute value of stocks, the spreads between bid and asked prices are very small, and commissions are as little as two cents a share.Efficient Market Theory (EMT), however, posits something more radical. The principal version, and the one on which this indictment will focus, states that we can trust the pricing of stocks. Supposedly, competition among sophisticated investors enables the stock market to price stocks "accurately "--that is, in accordance with our best expectations of companies' long-term prospects. (The trading by nonprofessionals is said to be random and of no net effect.) Supposedly, too, all relevant publicly available information is analyzed by investors, and new data, such as releases, are quickly noted, digested, and then reflected in the share prices.In short, stock prices, while not perfect, are as perfect as,can be. There are no better estimates of the fundamental value of a company and no systems for beating the market. A corollary is that the wisest of us can do no better than to buy the market as a whole; the rest of us can do far worse.EMT rests on several quite controversial assumptions, the most striking of which is the terribly convenient but circular assumption that mispriced stocks cannot long exist because if they did, "smart money" investors/arbitrageurs would already have eliminated them. This when-all-else-fails assumption, so central to the theory, is also the source of the well-worn joke about two economists walking across the campus who spy what seems to be a twenty dollar bill. As the younger economist leans forward to examine it, her older colleague restrains her. "If it really were a twenty dollar bill," he says, "someone would already have picked it up."(2)Given the assumption that patience and intelligence are of no consequence, even a super-investor like Warren Buffett should not be able, certainly not with any consistency, to find loose money lying on the table. In fact, it would be a waste of his time to look.As one of the high priests of EMT recently wrote, with visible pride, the testing of the theory has itself become so voluminous as to be a "research industry," and a mature one at that.(3) I do not intend to go over that voluminous, often dreary body of data. Much of it focuses on such trivialities as the January effect--small company stocks are said to do better in January--or how quickly the market responds to news of, say, a stock split or dividend increase. …

5 citations




Journal Article
TL;DR: In this paper, the authors show that the use of the ECMH in debate concerning mandatory disclosure ignores the importance of other determinants of price in public capital markets, such as market transparency and price discovery.
Abstract: I. INTRODUCTIONThe once-venerable "efficient capital market hypothesis" (ECMH) crashed along with world capital markets in October 1987, but its resilience has nearly matched the resilience of those markets. Despite another market break in 1989, for example, the ECMH has continued to be reflexively heralded by numerous corporate and securities law scholars as an accurate account of public capita! market behavior. Together with overwhelming evidence of excessive market volatility, however, these catastrophic market breaks revealed instinct infirmities in the ECMH that could hardly be shrugged off as mere anomalies.In response to the ECMH's eroding descriptive and prescriptive power, capital market theorists found in noise theory an auxiliary explanation for these otherwise inexplicable catastrophes. Noise theory introduced a behavioral and psychological component to the stoical account of capital market behavior that the ECMH offered. Noise theorists attribute market breaks and excess volatility to irrational investors who overreact to the flow of information. By introducing this human dimension to capital market theory, noise theory marks a refreshing and important step toward a more realistic understanding of public capital market behavior. Yet noise theory ultimately constitutes only incremental tinkering with a model of capital market behavior that is fundamentally flawed. The ECMH, as modified by noise theory, is a reductive model-based on linear mathematics and reasoning--that attempts to oversimplify complex dynamics.Chaos theory has of late assumed an original and pivotal role in the discussion and analysis of capital market behavior. By understanding markets as nonlinear systems, chaos theory introduces an entirely fresh perspective on capital market behavior, one which the linear perspectives of the ECMH and noise theory deeply obscure. This new perspective is important because while capital market ideas rooted in the ECMH and noise theory tell only part of the story of capital market behavior, they nevertheless have dominated academic discourse on state corporate and federal securities law, particularly in the perennial debate over the system of mandatory disclosure under the Securities Exchange Act of 1934 (1934 Act).The disclosure debate centers on the broad and important question of whether the benefits of the disclosure system justify its costs. Although it has been notably inconclusive, the disclosure debate is particularly interesting in the way that its terms have been shaped by the methodology underlying the ECMH. That methodology relies on investigating the impact of discrete bits of firm-oriented information on securities prices through linear regression analyses. Both opponents and supporters of the 1934 Act's disclosure system have seemed content to fix the terms of the debate in this way, which implies that the central question is the swiftness and accuracy with which information covered by the mandatory disclosure system is reflected in stock prices. Thus, discussion at this level elevates the role of firm-oriented information in capital market price formation to nearly exclusive importance. Such a discussion obscures the importance of information in the microstructure of capital markets--market transparency and price discovery--that chaos theory subjects to close scrutiny.This Article builds on the premise that the ECMH's linear methodology is primitive and advances the following thesis: Obsession with the ECMH, even by its detractors, has left overlooked a key connection between the process of price discovery and the role of the mandatory disclosure system. To this end, Part II first reviews a series of recent events, including the 1987 and 1989 market breaks and the emergence of noise theory, that have revealed the ECMH to be an inadequate account of public capital market behavior. This review also shows that the use of the ECMH in debate concerning mandatory disclosure ignores the importance of other determinants of price in public capital markets. …

4 citations


Journal Article
TL;DR: In the case of as discussed by the authors, the Smith decision was followed by the decision of the United States Supreme Court in Employment Division v. Smith, which concluded that a law that indirectly affects a religious practice would not be examined under the lowest level of scrutiny, that is to say, virtually none at all.
Abstract: Congress adopted the Religious Freedom Restoration Act of 1993(1) (RFRA) to overturn the decision of the United States Supreme Court in Employment Division v. Smith.(2) In Smith, the Court declined to mandate a constitutional exemption from the State of Oregon's drug laws for two members of the Native American Church who had ingested peyote as part of a religious ceremony.(3) More generally, the Court held that the Free Exercise Clause provided religiously motivated actors no special exemption from the reach of laws of general applicability.(4) Although religious beliefs were absolutely protected by the First Amendment, religiously motivated conduct was not. Laws of general applicability that adversely affected such conduct were subject to neither more nor less judicial scrutiny than laws that adversely affected conduct of a nonreligious nature.As a consequence of Smith, a law that indirectly, although perhaps substantially, affected a religious practice would be examined under the lowest level of scrutiny, that is to say, virtually none at all. More intense judicial review was reserved for those rare instances in which a law regulated conduct because of, and not merely in spite of, that conduct's religious nature.(5) Smith did not, however, announce the complete demise of religious exemptions from otherwise neutral laws. The Smith Court made clear that its holding did not preclude a legislature from creating an exemption for a religious practice; the Court did hold, however, that such exemptions were not constitutionally required.(6)The response to the Smith decision was intense and highly negative.(7) And although some of that intensity may have been attributable to what was perceived as the Court's insensitivity to a minority religion, the critique of Smith transcended the specific facts of the case. The trouble with Smith, according to its critics, was the doctrine it created, or, perhaps more to the point, the doctrine it destroyed. Prior to Smith, and most notably in Sherbert v. Verner(8) and Wisconsin v. Yoder,(9) the Court had, at least under some circumstances, applied a compelling state interest test to laws of general applicability that either indirectly affected or more directly burdened religiously motivated conduct.Thus in Sherbert, a Sabbatarian was entitled to receive unemployment benefits even though her unemployment resulted only from her refusal to work on Saturdays as required of all other citizens; the otherwise neutral unemployment law substantially and unlawfully burdened the practice of her chosen religion.(10) Similarly, in Yoder, Amish parents were granted a special privilege to withdraw their children from school after the completion of the eighth grade since, according to the Amish, further education would undermine the religious values and salvation of the Amish community.(11) Although the Smith opinion rather inartfully fudged the point, in essence, the Smith Court jettisoned the reasoning and doctrine of Sherbert and Yoder. No longer would courts use the compelling state interest test to examine the constitutionality of a law of general applicability under the Free Exercise Clause, regardless of that law's impact on religious practices.(12)The RFRA was expressly designed to return free exercise claims to their perceived legal status prior to Smith,(13) that is, to affirm the doctrinal legitimacy of Sherbert and Yoder, and, as RFRA's proponents would have it, to return religious liberty to the United States.(14) To this end, section 3 of the RFRA provides that the government--broadly defined to cover all agencies of federal, state and local government--"shall not substantially burden a person's exercise of religion even if the burden results from a rule of general applicability."(15) In short, the RFRA creates a blanket, generic religious exemption. The only exception, which parallels the doctrinal jurisprudence of Sherbert and Yoder, states: "[government may substantially burden a person's exercise of religion only if it demonstrates that application of the burden to the person--(l) is in furtherance of a compelling governmental interest; and (2) is the least restrictive means of furthering that compelling governmental interest. …

3 citations




Journal Article
TL;DR: In this paper, the authors present a more detailed analysis of the form-over-substance theory underlying the general partnership cases and conclude that LLC interests, like partnership interests, should be at least strongly presumed not to be "securities."
Abstract: I. INTRODUCTIONThe federal securities laws apply to any investment described by the broad statutory definition of a "security"(1) unless an exemption applies. This suggests that the type of business association and other aspects of the investment's external form should not matter, and that the securities laws should apply whenever appropriate for the protection of investors. Indeed, the Supreme Court often has expressed this view.(2)Yet this "substance-over-form" approach presents serious problems. At its full extension, the approach would require the courts to analyze each investment in the light of the function of the securities laws. Neither investors nor issuers could ever know without litigation or an administrative hearing whether the securities laws apply. This would not only increase litigation, but also would make it difficult for the parties to make and price their contracts with regard to the applicable level of regulation. These problems will become more serious as investment markets develop new types of business associations and "derivative" and other securities.(3)So "form" must matter. The only question is, how much? Courts have, in fact, emphasized form over substance by holding that a general partnership interest is presumptively a nonsecurity, and that corporate stock is per se a security.(4) Thus, current law essentially lets the parties to closely held firms choose whether the securities laws will apply by selecting their business form.The rapid acceptance of a relatively new form of business enterprise--the limited liability company (LLC)--raises new questions about the application of this form-over-substance approach to closely held firms. Like partnerships, LLCs are noncorporate firms whose members commonly participate directly in management and so arguably have less need than public corporation shareholders for mandatory disclosure rules. Yet, unlike partners, LLC members have limited liability and sometimes do not participate directly in management unless the agreement provides otherwise. It is not clear, therefore, whether the general-partnership-as--"security" analysis should be applied to LLC interests. While prominent securities law commentators have discussed the application of the securities laws to LLCs,(5) none have addressed the critical underlying form-over-substance issue.This Article concludes that LLC interests, like partnership interests, should be at least strongly presumed not to be "securities:"(6) This conclusion is based on an analysis of the extent to which courts should rely on investment form rather than substance--that is, "economic reality"--in defining a security.Part I of this Article reviews the reasons for treating general partnership interests as presumptively nonsecurities. Part II discusses potential distinctions between partnerships and LLCs that might justify a different result in the latter situation. Part III undertakes a more detailed analysis of the form-over-substance theory underlying the general partnership cases in order to determine whether the courts should extend the general partnership rule to LLCs. Part III shows why, in the light of this broader form-over-substance theory, LLCs should be treated substantially like general partnerships. Part IV discusses specific issues in applying the theory, while Part V discusses possible qualifications of the analysis. Part VI contains concluding remarks.II. THE BASIC THEORY: GENERAL PARTNERSHIPS AS NONSECURITIESThis Part reviews the starting point for analysis of LLC interests under the securities laws--the law and policy of general partnerships as non-"securities."A. ECONOMIC REALITY VS. PRIVATE ORDERINGThe Supreme Court has stated that "in searching for the meaning and scope of the word 'security' . . . form should be disregarded for substance and the emphasis should be on economic reality."(7) This means that in each case the courts must apply the general test for "investment contracts" articulated in SEC v. …

Journal Article
TL;DR: The United States Court of Appeals for the Eighth Circuit recently held in NoDak Bancorporation v Clarke that a merger in which the majority shareholders forced the minority shareholders of an acquired bank to accept only cash in exchange for their shares was permissible under the National Bank Act as mentioned in this paper.
Abstract: I IntroductionThe United States Court of Appeals for the Eighth Circuit recently held in NoDak Bancorporation v Clarke(1) that a merger in which the majority shareholders forced the minority shareholders of an acquired bank to accept only cash in exchange for their shares was permissible under the National Bank Act(2) The Eighth Circuit's NoDak opinion directly conflicts with the decision of the United States Court of Appeals for the Eleventh Circuit in Lewis v Clark(3) In Lewis, the Eleventh Circuit held that without express statutory authority, the Comptroller of the Currency (Comptroller) had no authority to approve a merger that required shareholders holding stock of equal standing to take different forms of consideration(4) At present, the Eighth and Eleventh Circuits are the only courts that have addressed whether the National Bank Act grants the Comptroller authority to approve these "squeeze-out" mergers involving national banks(5) The Office of the Comptroller of the Currency has indicated that the Comptroller will continue to approve squeeze-out mergers outside the Eleventh Circuit(6) Consequently, the issue of squeeze-out mergers under the National Bank Act may confront other courts in the futureThe Lewis and NoDak courts approached the question of whether squeeze-out mergers(7) are permissible as a matter of statutory interpretation of the National Bank Act(8) By framing the issue as a question of the Comptroller's authority under the statute to approve such a merger, the courts avoided the significant policy issues underlying the question of whether the government should permit such mergers in the context of national banks This Note analyzes the policy considerations behind allowing majority shareholders in national banks to employ squeeze-out mergers to divest minority shareholders of their equity The Note begins with a review of the treatment of squeeze-out mergers in the general corporate context under state law, with a focus on the different New York and Delaware approaches(9) The Note then discusses current and traditional justifications and criticisms regarding squeeze-out mergers involving nonbank corporations(10)After exploring these general issues, the Note turns to squeeze-out mergers that involve national banks, beginning with an analysis of the reasoning in the NoDak and Lewis opinions(11) A review of the conflict between the Eighth and Eleventh Circuits follows(12) The Note then analyzes the scope of the National Bank Act, focusing on the legislative history and the legal context in which Congress originally enacted and subsequently amended the provisions governing national bank consolidations(13) The Note concludes that the legislative history and the prevailing legal assumptions concerning the rights of minority shareholders indicate that Congress did not intend to authorize squeeze-out mergers under the National Bank Act(14) In addition, the Note argues that the Comptroller's endorsement of squeeze-out mergers is not only inconsistent with the National Bank Act, but also fails to promote the federal policy of encouraging beneficial consolidations in the banking industry(15) Finally, the Note recommends that if Congress does decide to authorize squeeze-out mergers under the National Bank Act, Congress should require that such transactions satisfy a business purpose test defined by the regulatory objectives that the consolidation policy seeks to promote(16)II Squeeze-Out Mergers in the General Corporate ContextState courts have long struggled with the propriety of squeeze-out mergers(17) Because of the significance of Delaware's corporate law, many state courts and legislatures have followed Delaware's example in the development of their laws governing squeeze-out mergers(18) A notable exception to this pattern is New York, which takes a very different approach to squeeze-out mergers(19)A Squeeze-Out Mergers Under Delaware Corporate LawThe treatment of squeeze-out mergers under Delaware law has varied over time …



Journal Article
TL;DR: The Uniform Commercial Code as discussed by the authors was designed to clarify business law rather than to improve business practices by identifying the conclusion that the business community gives to a particular transaction "apart from statute and as matter of fact".
Abstract: IntroductionIn Professor Grant Gilmore's view, the purpose of "general commercial legislation" is to clarify business law rather than to improve business practices.(1) The legislation is designed to "state as matter of law the conclusion which the business community apart from statute and as matter of fact gives to the transaction in any case."(2) Thus, the transaction's legal consequences will match the parties' expectations.The Uniform Commercial Code meets Gilmore's description; its "underlying purposes and policies" are facilitative rather than regulatory.(3) The obvious question for its drafters, therefore, is how to identify the conclusion that the business community gives to a particular transaction "apart from statute and as matter of fact."(4)Professor Lawrence Friedman points out that the original drafters of the Code did not base their work on studies of business practices:Devotion to business practice was deeply felt; nonetheless, it was window dressing at bottom. The Code did not start out with empirical studies of what business wanted, or with a theory of what the economy needed. Some Wall Street lawyers and businessmen were asked their opinions; but there were no real explorations of what was wrong (if anything) with the way law intersected the business world.(5)Friedman found the resulting Code "curiously old-fashioned," focused on problems of "disorder in doctrine, clashing case law, and what seemed to be unlovely and unsympathetic arrangements of statutes."(6) In the major revision of the Code that is now under way,(7) Reporters and Drafting Committees are again proceeding without empirical studies.(8) As a result, the product of their efforts may well be as academic(9) as the original version.Professor Karl Llewellyn, the "principal drafter"(10) of Article 2 of the Code, employed a drafting style that is, in theory, responsive to Friedman's criticism.(11) Llewellyn believed that the solution to any problem of commercial law is "immanent" in the commercial setting that gave rise to the problem.(12) Article 2 directs courts to discover and implement immanent solutions, deciding each case on the basis of a focused empirical inquiry.(13) The inquiry will produce information not only about the events that led directly to the transaction in dispute, but also about any relevant aspects of the parties' past dealings with each other and the practices of their industry. Thus, the lack of empirical studies at the Code drafting stage becomes irrelevant when the parties give the court a comprehensive education in the business realities that bear on their dispute.(14) Indeed, the resulting Code is far more flexible than, and therefore preferable to, any attempted codification of practices revealed in empirical studies.(15)The centerpiece of Llewellyn's methodology is the notion of agreement; the court's initial inquiry is into the bargain, if any, that the parties have made.(16) The Code definition of the term "agreement" makes clear that the parties' actual agreement, rather than any deemed agreement, is the focus of the inquiry.(17) And by incorporating implied terms and meanings, the definition also makes clear that the parties are to provide any relevant information about their past dealings and industry practices.(18)An Article 2 Study Group, whose recommendation led to the revision of the Article, echoes(19) the widely held view that Llewellyn's drafting style has stood the test of time,(20) and the draft revisions to date indicate that the Drafting Committee concurs.(21) Thus, all indications are that revised Article 2 will maintain Llewellyn's response to Friedman: a commercial code need not be based on ex ante empirical studies if it directs courts to discover commercial reality in the cases before them.At least one tenet of Llewellyn's thought is at odds with this approach, however. In thinking about contract formation by means of standard form documents, he conceived of the notion of "blanket assent. …

Journal Article
TL;DR: In this paper, the authors examine three ways in which sexual harassment victims can seek relief through Title VII sexual harassment law and concludes that that body of law occasionally may be useful to them.
Abstract: I. IntroductionTitle VII of the 1964 Civil Rights Act forbids employment discrimination against any individual "because of such individual's...sex."(1) This prohibition of sex discrimination was hurriedly added to Title VII not long before its passage; as a result, little legislative history exists to aid courts in its interpretation.(2) Perhaps for this reason, the prohibition has been a judicial battleground, in which some expansive readings of its language eventually have found favor,(3) whereas others have failed to command support.(4) Today, Title VII recovery for sexual favoritism is one such battleground.(5)In the typical sexual favoritism (or "paramour") claim,(6) a the plaintiff alleges that her employer has violated Title VII by favoring another employee (the paramour) due to a sexual or romantic relationship between a supervisor and the paramour. Perhaps the most common case involves a male supervisor who assertedly favors a female subordinate over another female subordinate.(7) Sometimes, however, the injured party is male.(8) In most, if not all, of the relevant cases, the sexual or romantic relationship between supervisor and paramour appears to have been consensual. Few, if any, assert that the relationship was coerced by the supervisor's sexual harassment of the subordinate.(9) At the other end of the spectrum, few cases appear to involve paramours willing to trade sex for personal advancement.(10)A majority of the courts that have considered Title VII sexual favoritism claims have recognized the possibility of recovery for sexual favoritism under one theory or another.(11) The relatively sparse scholarly work on sexual favoritism also tends to favor such claims.(12) This Article, however, departs from the scholarly consensus on sexual favoritism. After the next Part describes Title VII sexual harassment law and Title VII sexual favoritism litigation, the Article concludes that Title VII's prohibition of sex discrimination in employment does not include sexual favoritism as such.(13) Then, the Article examines three ways in which victims of sexual favoritism might seek relief through Title VII sexual harassment law and concludes that that body of law occasionally may be useful to them.(14)II. Preliminary MattersSexual harassment law and sexual favoritism law interact in ways that are described at various points in this Article. In addition, certain common themes pervade both bodies of law. For these reasons, the Article opens by briefly describing the law of sexual harassment under Title VII. Then, it surveys the extant case law on Title VII sexual favoritism claims.A. Sexual Harassment Under Title VIICoincident with increased popular attention to the subject,(15) Title VII sexual harassment claims began to appear during the ]ate 1970s.(16) At first, some courts rejected these claims. Among their reasons was the belief that sexual harassment, while no doubt morally objectionable, is not sex discrimination. According to one district court, for example:The substance of plaintiffs complaint is that she was discriminated against, not because she was a woman, but because she refused to engage in a sexual affair with her supervisor....Regardless of how inexcusable the conduct of plaintiffs supervisor might have been, it does not evidence an arbitrary barrier to continued employment based on plaintiff's sex.(17)One might argue that if a woman suffers a job-related disadvantage because she refused to have sexual relations with a male supervisor, that disadvantage surely had something to do with her gender. The reply is that while this may be true in a particular case, both sexual harassment's perpetrators and its victims can be of either gender. As the district court asserted in Tomkins v. Public Service Electric & Gas Co.:(18)In this instance the supervisor was male and the employee was female. But no immutable principle of psychology compels this alignment of parties. …

Journal Article
TL;DR: In this article, the authors argue that RICO should be interpreted narrowly in some cases and broadly in others, depending on the nature of the issue before the court, and support the use of a dual construction doctrine to resolve statutory ambiguity and answer Judge Mikva's question.
Abstract: This is an article about RICO and about a larger problem in statutory construction. Judge Mikva of the D.C. Circuit captured the essence of the problem when, questioning his colleagues' attempt to narrow RICO's scope he asked "Why is one element of the statute properly deemed broad while another read narrowly?" This Article tries to answer that question. This Article develops a rationale for the seminal Supreme Court decision in Reves v. Ernst & Young, 507 U.S. 170 (1993) that may help resolve other issues that arise because of the interplay between conflicting provisions in RICO and in other statutes. My thesis is that RICO should be interpreted narrowly in some cases and broadly in others, depending on the nature of the issue before the court. The suggested method of interpretation does no more than recognize and apply the fact that RICO has both a remedial and punitive purpose to it. These dual purposes support the use of a dual construction doctrine to resolve statutory ambiguity and answer Judge Mikva's question. The thesis is supported by logic, policy, legislative history...and over 100 years of state and federal court precedent.