Despite the alleged triumph of legal realism and the empirical turn of closely related fields such as judicial behavior, a startling number of constitutional theorists continue to approach their work as a purely conceptual enterprise. This is particularly true of originalists, but it is true of many others as well. Indeed, much of normative constitutional theory as it is presently practiced resembles a recreational debating society more than a serious effort to improve the functioning of a massively complex modern society. If constitutional theory is to live up to its aspirations, a new reality-based approach is urgently needed. This brief Article makes the case for such an approach and offers practical suggestions for getting it off the ground.
Category: 89:1
Bringing RICO to the Ring: Can the Anti-Mafia Weapon Target Dogfighters?
Missouri’s Health Care Battle and Differential Judicial Review of Popular Lawmaking
Activist Distressed Debtholders: The New Barbarians at the Gate?
The term “corporate raiders” previously struck fear in the hearts of corporate boards and management teams. It generally refers to investors who target undervalued, cash-flush or mismanaged companies and initiate a hostile takeover of the company. Corporate raiders earned their name in part because of their focus on value extraction, which could entail dismantling a company and selling off its crown jewels. Today, the term often conjures up images of Michael Milken, Henry Kravis, or the movie character Gordon Gekko, but the alleged threat posed to companies by corporate raiders is less prevalent—at least with respect to the traditional use of equity to facilitate a hostile takeover. The growing use of debt rather than equity to cause a change of control at target companies raises new concerns for corporate boards and management teams and new policy considerations for commentators and legislators. Are activist debtholders who employ this investment strategy akin to the corporate raiders of the past? This Article explores these issues by, among other things, presenting in-depth case studies and critically evaluating the value implications of traditional takeover activity and regulation. It compares and contrasts the use of equity and debt in control contests and identifies similarities that suggest some regulation of strategic debt acquisitions is warranted. The Article proposes a proactive approach that better equips corporate boards and management teams to negotiate with activist debtholders while preserving investment opportunities for debtholders and the governance efficiencies that often flow from activism for the corporate target‟s other stakeholders.
In Defense of the Substance-Procedure Dichotomy
John Hart famously observed, “We were all brought up on sophisticated talk about the fluidity of the line between substance and procedure,” but for most of Erie’s history, the Supreme Court has answered the question “Does this state law govern in federal court?” with a “yes” or a “no.” Beginning, however, with Gasperini v. Center for Humanities, and continuing with Semtek v. Lockheed Martin and the dissenting opinion in Shady Grove v. Allstate, a shifting coalition of justices has pursued a third path. Instead of declaring state law applicable or inapplicable, they have claimed for themselves the prerogative to fashion law that purportedly accommodates the interests of both sovereigns. With the cover of an intellectual critique of the substance–procedure dichotomy, the Court has thus embarked on a new phase of Erie doctrine, a phase that replaces “yes” or “no” with “Let’s see what we can work out.”
This Article adds a new level of critique to the chorus of criticism that has already been directed at these opinions. It argues that the new enterprise and its blurring of the substance–procedure dichotomy are based on a misguided aspiration to accommodate state substantive policies at the expense of federal procedure.
Descriptively, in order to have a dichotomy, it is necessary to have two poles. This Article therefore demonstrates that the distinction between substance and procedure is appropriately represented by a single-dimensional spectrum. Part of what the Court has done wrong is to ignore this linear relationship by insisting, for example, in Semtekthat res judicata is “too substantive” to be addressed in the Federal Rules yet procedural enough to be governed by federal common law under the Rules of Decision Act. In addition, given the linearity of substance and procedure, one could imagine the distinction either as a dichotomy of black and white, with every legal rule falling into one category or the other, or as a spectrum of gray, with many or even most legal rules falling in the mushy middle. Descriptively, of course, the latter view is more accurate. This Article argues, however, that the Court should nevertheless classify each legal rule as black or white, rather than try to accommodate both its procedural and its substantive aspects.
This Article offers two reasons for preferring the black–white approach. First, the governing statutes contemplate a dichotomy between substance and procedure, and the Court is not authorized to use the ambiguity in that distinction to replace the statutory scheme with its own discretionary treatment of state law. Second, returning to the black–white approach would promote democratic transparency in the states. Specifically, in addition to traditional Erie concerns about judicial lawmaking, Congress has set a policy of establishing a uniform body of transsubstantive procedural law. State legislators know this, and there is nothing wrong with federal courts expecting them to act accordingly. If they, as Representative Dingell famously offered, prefer to manipulate procedure in order to undermine the substantive rights they purport to have created, the threat of fixed procedures in diversity could and should restrain them. Too often, the Supreme Court treats legislative enactments as fixed, so that the game begins when the litigants start their forum shopping. The game begins earlier, in the legislature, and the nascent effort to accommodate state law through Erie doctrine creates the wrong incentives for that game.
Offsetting and the Consumption of Social Responsibility
This Article examines the relationship between individual consumption and consumption-based harms by focusing on the rise in consumption offsetting. Carbon offsets are but the leading edge of a rise in consumer options for offsetting externalities associated with consumption. Moving from examples of quasi offsetting to environmental offsetting and the possibility of poverty offset institutions, I argue that offsetting provides a valuable mechanism for individuals to correct for the harms associated with consumption. This Article makes two major contributions to how we understand the relationship between consumption and social responsibility. First, it identifies an emerging offsetting phenomenon in seemingly discrete market practices and gives suggestions for improving upon them. Second, it suggests that by taking seriously both consumption and externalities, progress can be made on everything from the environment to global poverty. Offsetting, while not getting at all moral or societal obligations, does root such obligations in the shared activity, and perhaps belief, of Americans: consumption.
Key Implications of the Dodd-Frank Act for Independent Regulatory Agencies
The enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act both transcends and transforms financial regulation. The immediate setting of the law is by now a familiar one. By 2008, there was an urgent need for a fundamental restructuring of federal financial regulation, primarily based on three overlapping causes. First, an ongoing economic emergency initially rooted in our housing and credit markets, which has been succeeded by the collapse of several leading investment and commercial banks and insurance companies, dramatic deterioration of our stock market indices, and a rapidly deepening recession. Second, serious breakdowns in the enforcement and fraud deterrence missions of federal financial regulation, as illustrated by matters involving Bear Stearns and the other four then independent investment banks subject to the SEC’s former Consolidated Supervised Entities program, led to the government creation of conservatorships for Fannie Mae and Freddie Mac and the Bernard Madoff case. Third, a misalignment between federal financial regulation firms and intermediaries. The structure of financial regulation that was developed during the 1930s did not keep pace with fundamental changes in finance.
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