Showing papers in "Washington Law Review in 2020"

Externalities and the Common Owner

Abstract: Due to the embrace of modern portfolio theory, most of the stock market is controlled by institutional investors holding broadly diversified economy-mirroring portfolios. Recent scholarship has revealed the anti-competitive incentives that arise when a firm’s largest shareholders own similarly sized stakes in the firm’s industry competitors. This Article expands the consideration of the effects of common ownership from the industry level to the market-portfolio level, and argues that diversified investors should rationally be motivated to internalize intra-portfolio negative externalities. This portfolio perspective can explain the increasing climate change related activism of institutional investors, who have applied coordinated shareholder power to pressure fossil fuel producers into substantially reducing greenhouse gas emissions. While institutional investors have protested their ability to influence firm-level supply and pricing decisions in the service of muting competition, they are more willing to advertise their role in seeking emissions reduction commitments, even admitting they are for the benefit of portfolio returns. These commitments, however, affect product supply and imply market power in much the same way, and provide further evidence that institutional investors are able to influence managerial decisions at the firm level for the benefit of their broader portfolio. This insight requires the amendment of the traditional view that diversified investors are “rationally reticent” and lack the incentive to engage in monitoring of firm behavior. It additionally challenges a fundamental norm of corporate governance law: the theory of shareholder primacy rests on the premise that shareholders homogeneously seek to maximize corporate profits and share value. This Article shows that in certain circumstances a majority of minority shareholders may direct the firm away from a profit-maximizing objective.

Privacy Dependencies

Abstract: This Article offers a comprehensive survey of privacy dependencies—the many ways that our privacy depends on the decisions and disclosures of other people. What we do and what we say can reveal as much about others as it does about ourselves, even when we don’t realize it or when we think we’re sharing information about ourselves alone. We identify three bases upon which our privacy can depend: our social ties, our similarities to others, and our differences from others. In a tie-based dependency, an observer learns about one person by virtue of her social relationships with others—family, friends, or other associates. In a similarity-based dependency, inferences about our unrevealed attributes are drawn from our similarities to others for whom that attribute is known. And in difference-based dependencies, revelations about ourselves demonstrate how we are different from others—by showing, for example, how we “break the mold” of normal behavior or establishing how we rank relative to others with respect to some desirable attribute. We elaborate how these dependencies operate, isolating the relevant mechanisms and providing concrete examples of each mechanism in practice, the values they implicate, and the legal and technical interventions that may be brought to bear on them. Our work adds to a growing chorus demonstrating that privacy is neither an individual choice nor an individual value— but it is the first to systematically demonstrate how different types of dependencies can raise very different normative concerns, implicate different areas of law, and create different challenges for regulation.

The Regulation of Lawyers in Compliance

Abstract: The field of compliance has exploded in interest, attention, and growth over recent years. It has emerged as a popular career path for those trained in the law, giving rise to an influx of job opportunities for new law school graduates and seasoned attorneys alike. Additionally, compliance has tightened the essential interplay between business and law. Numerous compliance officers hold J.D. degrees and many also serve simultaneously as both an organization’s chief compliance officer and general counsel, thereby muddying the lines between the circumstances in which such services constitute the “practice of law” requiring adherence to professional rules of responsibility or non-legal work where such rules would typically not be applicable. This Article will analyze these important distinctions, as well as the lack of regulatory guidance for lawyers in the compliance function, by viewing the discussion largely through the lens of an often-unnoticed ethical rule — the American Bar Association’s Model Rule 5.7 — which requires lawyers to comply with the full range of professional conduct rules even when they are providing a non-legal “law-related service.” This Article will argue that the compliance function is a near-precise fit for this rule and will propose reform to the current regulatory model to ensure that the interests of lawyers, as well as the recipients of their services, are protected to the most fruitful extent possible in today’s compliance-driven era. While placing this examination in the context of current scholarly debate that challenges traditional “zealous advocate” models of attorney representation, this Article will claim that, without adequate and clear regulatory reform to establish guidelines for behavior, lawyers in compliance functions risk heightened personal liability due to potential ethical violations from their respective jurisdictions of admission.

The Law of Blockchain

Abstract: Blockchain technology is a new general-purpose technology that poses significant challenges to the existing state of law, economy and society. Blockchain has one feature that makes it even more distinctive than other disruptive technologies: it is, by nature and design, global and transnational. Moreover, blockchain operates based on its own rules and principles that have a law-like quality. What we may call the lex cryptographia of blockchain has been designed based on a rational choice vision of human behavior. Blockchain adopts a framing derived from neoclassical economics, and instantiates it in a new machinery that implements rational choice paradigms using blockchain in a semi-automatic way, across all spheres of life, and without regard to borders. Accordingly, a global law and crypto-economics movement is now emerging owing to the spread of blockchain. This Article suggests that such a rational choice paradigm is an insufficient foundation for the future development of blockchain. It seeks to develop a new understanding of blockchain and its regulation through code according to the emerging “law and political economy” framework. Blockchain should be understood as much more than a machine that enables the automation of transactions according to a rational choice framework. Blockchain should instead be understood as a technological infrastructure. Acknowledging the infrastructural dimension of blockchain technology may help identify a new role for the law in its interaction with blockchain, as well as for government in its interaction with the new technology. More precisely, identifying blockchain as an “infrastructural commons” helps us recognize that law and regulation should not be relegated to the role of merely facilitating the operation of the invisible hand of the market by and within blockchain, but should rather acquire more active roles, such as safeguarding access on non-discriminatory terms to users, on a model with net neutrality and other public utility safeguards. The Article closes by proposing a “law and political economy” framework for blockchain that is based on principles of publicness, trust, and interoperability.

The Trauma of Trump's Family Separation and Child Detention Actions: A Children's Rights Perspective

Abstract: In April 2018, the Trump Administration publicly announced a new zero-tolerance policy for illegal entries at the U.S. border. This action kicked off a wave of family separations that made headlines and drew criticism from around the globe. Despite resounding condemnation of these actions, the Trump Administration defended its family separation policy as a “tough deterrent.” At least 2,600 families were torn apart in the ensuing months. And as of 2019, reports—from both government and others—have detailed widespread abuses of and substandard conditions for children held in detention centers. The consequences of these separations and the maltreatment of children in detention are pronounced. The trauma that children have endured has potentially lifelong ramifications. This Article provides an in-depth, children’s rights-based analysis of the Trump Administration’s family separation and child detention policies and actions. A children’s rights perspective has several critical insights. First, children’s rights are rooted in a legal mandate. Second, examining the Trump Administration’s actions from a children’s rights perspective reveals the breadth of rights violations occurring. This more nuanced understanding of the events can help in devising appropriate strategies to respond to such violations. Third, a children’s rights perspective helps place the Trump Administration’s actions in their historical context to better understand the gravity of these actions. Children’s rights law is as close to universally accepted as any human rights law, and thus any departures from such widely embraced standards are particularly revealing. Finally, the authors discuss the implications of this children’s rights assessment, urging action on several fronts to address this harm and prevent violations of children’s rights in the future.

Atoning for Dred Scott and Plessy While Substantially Abolishing the Death Penalty

Abstract: Has the Supreme Court adequately atoned for Dred Scott and Plessy? A Court majority has never confessed and apologized for the horrors associated with those decisions. And the horrors are so great that Dred Scott and Plessy have become the anti-canon of constitutional law. Given the extraordinary circumstances surrounding the Court’s historical complicity in the brutal campaign against African Americans, this Article contends that the Court could appropriately do more to atone. The Article asserts that the Court could profitably pursue atonement while abolishing capital punishment for aggravated murder. The Article shows why substantial abolition of the capital sanction would constitute a relevant response to the Court’s past complicity in the long, violent campaign for white supremacy. The Article also explains why substantial abolition, with a confession and apology, would involve little social cost and could send a valuable message. As for how our racial history could help justify substantial abolition in the language of the Constitution, the Article proposes an approach suggested by decisions in which the Court has combined two or more clauses to justify an outcome that neither clause would authorize on its own. In the death-penalty context, the Court could aggregate the prohibition on cruel and unusual punishments and the command of equal protection. Under that approach, the Court need not find a national consensus against death-penalty systems, nor must it find purposeful discrimination. The Court could rely, instead, on the inability to refute that those systems are remnants of the judicially authorized pursuit of white supremacy. The nature of that conclusion would also distinguish death from other punishments and thereby solve some problems that the Court has identified with abolition using a single-clause methodology. The arguments for vigorous Supreme Court atonement and for limiting the death penalty connect, although they stand apart. The Court could look for a better context than the death penalty to apologize for Dred Scott and Plessy, but a better context is hard to fathom. Likewise, the Court could justify, without apology, restricting the penalty based on our judicially sanctioned quest for white supremacy, but an apology for Dred Scott and Plessy would add a healing message. The actions are synergistic. The Court could achieve something special through the mutually-reinforcing symbolism that could come with simultaneous restriction of the death sanction and robust atonement for Dred Scott and Plessy. * Scott W. Howe. Frank L. Williams Professor of Criminal Law, Dale E. Fowler School of Law, Chapman University. I want to thank, without implicating, colleagues at the Chapman University Fowler School of Law who assisted and supported me in the preparation of this Article. Most importantly, I thank Jetty Maria Howe-Cascante, without whose assistance and support the article would not have come to fruition. 10 Howe.docx (Do Not Delete) 5/30/20 11:47 PM 738 WASHINGTON LAW REVIEW [Vol. 95:737 INTRODUCTION ....................................................................... 739 I. THE CASE FOR JUDICIAL ATONEMENT: SUPREME COURT COMPLICITY IN THE DEGRADATION OF BLACK PERSONS ...................... 746 A. The Antebellum Period: Dred Scott ............................. 747 B. The Postbellum Period: Plessy .................................. 754 II. THE SUPREME COURT’S FAILURE TO ATONE ....... 766 A. Brown and its Aftermath in the 1950s ....................... 767 B. The 1960s Through the Mid-1970s ........................... 769 C. The Late 1970s and Beyond ...................................... 771 III. OVERCOMING POSSIBLE OBJECTIONS TO ATONEMENT ............................................................ 773 A. The Argument that the Rulings in Dred Scott and Plessy Were Not Wrong When Rendered .................. 774 B. The Argument that Contrary Rulings in Dred Scott and Plessy Would Not Have Alleviated Black Oppression ....................................................... 778 C. The Argument that Confession and Apology Would Foster Unproductive Illusions of Redemption and Power .............................................. 781 D. The Argument that the Court Would Have to Act Arbitrarily or Be Drawn into Undermining its Own Credibility ......................................................... 784 IV. PURSUING ATONEMENT WHILE LIMITING THE DEATH PENALTY ......................................................... 786 A. Linkage Between the Death Penalty and the Color-Line .................................................................. 787 1. Racialized Use of the Modern Death Penalty ...... 788 2. Modern Executions and Jim Crow-Era Lynchings ..................................... 792 B. Dubious Utility of the Penalty Absent a Racialized Polity ........................................................ 794 C. The Potential Value of Abolition to Convey Sincerity ........................................................ 797 V. IMPLEMENTING THE PLAN AS CONSTITUTIONAL LAW .............................................. 799 A. Combining Clauses to Justify Substantial Abolition . 799 1. Precedents for Clause Aggregation ...................... 800 2. The Benefits of Clause Combination ................... 803 B. Incorporating Confession and Apology ..................... 805 CONCLUSION ............................................................................ 807 10 Howe.docx (Do Not Delete) 5/30/20 11:47 PM 2020] DRED SCOTT, PLESSY, AND THE DEATH PENALTY 739

Banking on Democracy

Abstract: The financial system is unequal and exclusionary even as it is supported, funded, and subsidized by public institutions. This is not just a flaw in the financial sector; it is a foundational problem for democracy. Across the financial industry, entrepreneurs, regulators, media, and scholars promote the goal of “financial inclusion” or “access to credit.” Facebook’s Libra, Bitcoin, and fintech providers like Square, PayPal, Venmo and thousands of other new products or startup companies are launched with the stated aim of increasing financial inclusion. These private companies are joined by the Congress, non-profits, and financial regulators with programs and laws promoting financial inclusion. In fact, financial inclusion and access to credit are among the increasingly rare issues that unite the political left and right. Yet despite consensus and years of effort, many individuals and communities continue to be excluded from the mainstream financial system, which forces them to resort to high cost payday lenders, check cashers or other fee-based financial transaction products. The financially disenfranchised pay the most for services that the wealthy and the middle class receive at a subsidized rate. This article proposes a new model of financial inclusion, which situates issues of access and inclusion as central to the legal design of the financial system. This article argues that these remedies have failed because the current model of financial inclusion is rooted in a mistaken and incomplete theory of the financial market. Inclusion and “access to credit” are viewed as ancillary product, gap-filling, or a subsidized add-on to credit markets for those who are left out. In contrast, “normal” and “mainstream” credit markets are conceived of simply, as “markets,” governed by market rules and market dynamics. This article argues that they are both part of the same financial market, which is itself a product of public policy. Instead of financial inclusion, this article proposes to reframe the problem as a matter of financial redesign. The design of credit markets is an a-priori choice embedded in law and policy that determines the contours and scope of the credit markets, including who is included. Reconceptualizing financial inclusion must thus proceed through democratic means because inclusion and access are a byproduct of institutional design rather than private market decision making.

All Bets Are Off: Preempting Major League Baseball’s Monopoly on Sports Betting Data

Abstract: Major League Baseball is in the process of collectivizing data used in sports betting. This could be exempt from antitrust scrutiny if the conduct falls within the business of baseball. Such an exemption raises the question of whether collecting official league data is sufficiently attenuated from the business of baseball to be subject to antitrust law, and if so, whether MLB violates the Sherman Act by excluding competitors from the league data market. This Comment makes a two-fold argument. First, it argues that the business of baseball should be constrained to cover activities directly linked to putting on baseball games. Second, this Comment argues that the collectivization of official league data for sports betting is not within the business of baseball, and that MLB is potentially violating the Sherman Act for excluding competitors through anticompetitive means. The unique business of baseball exemption has existed for almost one hundred years without limit, but that does not mean professional baseball can restrain trade in every industry it deals.

Incarcerated Parents and Child Welfare in Washington

Abstract: From 2006 to 2016, 32,000 incarcerated parents in the United States permanently lost their parental rights without ever being accused of child abuse.1 Of these, approximately 5,000 lost their parental rights solely because of their incarceration.2 This “family separation crisis”3 followed on the heels of the Adoption and Safe Families Act (ASFA), a federal law which directs states to initiate parental termination proceedings against parents when their children have been in foster care for fifteen of the last twenty-two months.4 Some states, including Washington, attempted to mitigate ASFA’s devastating impact on incarcerated parents by adding exceptions for incarceration.5 This Comment explores the disparate effect of ASFA on families with incarcerated parents, and examines the structure and impact of Washington State’s incarceration exception to the termination requirement. It argues that more states should adopt exceptions for incarcerated parents, that Washington’s exception should go further to protect these parents, and that, ultimately, a wide variety of non-legislative changes are necessary to protect families before and during incarceration.

Accounting for Environmental Standards

Abstract: A meaningful percentage of the regulation that companies in the United States must follow concerns two distinct topics: accounting and the environment. The values underlying the regulatory framework of securities and the environment are distinct, but they are not wholly opposite. This Comment responds to growing trends of private governance in the area of environmental regulation. Besides federal regulation, a significant portion of environmental regulation touching U.S. companies today remains sourced from and enforced by private standard-setters. Federal accounting regulations are now governed by the Financial Accounting Standards Board (FASB)––a private entity recognized by the Securities and Exchange Commission (SEC)––but almost all federal accounting regulations once found their authority solely in private sources. Mirroring accounting regulation’s history, the federal government may choose to outsource environmental standard-setting to one or more of these already-operating private standard-setters in exchange for their expertise, resources, and recognition. Drawing on parallels from the regulatory history of the accounting industry, this Comment cautions that the purposes of environmental regulation demand a more democratic process. Beginning with an overview of government-created and -outsourced corporations, and turning to a dissection of FASB’s structure under the federal government, this Comment concludes that private environmental standard-setters will face potential legal issues if the government adopts them in a manner similar to FASB’s delegation as the authoritative standard setter. The broad implications of environmental standards and regulations––and the prominent and diverse social values driving them––demand a process more deeply rooted in democracy before they become authoritative law at federal levels.