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In Trust We Trust — Yonathan Arbel

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Post by Yonathan Arbel

The recent leak of the Panama Papers exposed the public to the magnitude of assets held in offshore accounts. These accounts are often associated with motives such as tax evasion and asset shielding from creditors, although they may be more legitimate motives to locating one’s assets offshore, such as privacy or preference for the rules of a specific legal system.  The estimates of how much is stowed offshore vary significantly, from one to five trillion dollars, an interval so large that it mostly reveals our ignorance. We simply know too little about these accounts, their motives, structures, and value—which, from the viewpoint of those who designed these trusts, is a feature, not a bug.  The most comprehensive work to date on the topic is that of Professors Sitkoff and Schanzenbach, who studied U.S. institutional trustees. However, these trustees are not likely representative of offshore trusts, and so, our understanding of offshore trusts is still foggy.

In a new intriguing paper, forthcoming in the Hastings Law Journal, Adam Hofri-Winogradow is providing us with a glimpse into the clandestine world of onshore and offshore trusts.  Hofri used a combined qualitative methodology of surveying and interviewing providers of trust services. Overall, he surveyed 409 providers of trust services and interviewed 25. Of his many findings, I will highlight just a few.

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Apologies as Tort Reform — Yonathan Arbel

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Post by Yonathan Arbel

When we wrong others, there is often an expectation—perhaps a moral duty—that we apologize. By apologizing, the wrongdoer asserts ownership of the wrong and acknowledges the wrongness of the act and the moral standing of the victim. It is also said that apologies can help restore the social order disrupted by the wrong.

In recent decades, many scholars have suggested that there should be a place in the law for apologies. And so the idea of ‘apology laws’ – laws that promote and protect the use of apologies – was born. These laws, now found in 36 states, are meant to encourage wrongdoers to apologize without fear of legal repercussions, and they typically apply in private law settings, such as torts and medical malpractice. A paradigmatic example is a doctor who makes a mistake during surgery but, in the absence of a ‘safe harbor’, would be reluctant to apologize for fear that admitting the mistake would foster litigation and count as an admission of liability.  An apology law that makes apologies inadmissible as evidence of fault at trial, as most do, promises to overcome this barrier.

In a new paper, Tort Reform Through the Backdoor: A Critique of Law & Apologies, (Forthcoming S. Cal. L. Rev., 2017), Yotam Kaplan and I are challenging the predominant scholarly disposition favoring laws that create safe harbors for apologies. We argue that in commercial settings—involving insurance companies, large firms, hospitals, etc.—using the law to encourage apologies may undermine tort liability and undercut deterrence. This effect is not necessarily negative—many people believe that the tort system is out of control—but it does mean apology laws are de-facto tort reform. That many states that normally oppose tort reform adopted apology laws was the result of clever marketing and concentrated lobbying efforts by tort reformers who co-opted the legal discourse on apologies to their own ends. Perhaps most notably, Barack Obama and Hillary Clinton—neither of whom is a card-carrying tort reformer—advocated actively for apology laws in an article in The New England Journal of Medicine.

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Private Law and Asset Shielding — Yonathan Arbel

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Post by Yonathan Arbel,  postdoctoral fellow in private law, Harvard Law School (job market candidate)

One of the central questions in the New Private Law is how ‘down-to-earth’ should legal analysis be? Regardless of one’s substantive view on this debate, there is one area in which we have been insufficiently realistic: private law enforcement. There is a real gap in our understanding of how legal norms are executed by sheriffs, bailiffs, and private ordering. Understanding the limits of doctrine and law could be informative for both economic and justice-based views of the law, as well as to views that look at the law from the internal point of view.

My scholarship focuses on questions concerning the enforcement of private legal norms. In Shielding of Assets and Lending Contracts (Forthcoming, Int’l Rev. L. Econ.) I consider the problem of asset shielding. Most judgments, if not voluntarily implemented, depend on enforcement through the seizure of the judgment-debtor’s assets. The problem is that ownership is too malleable and enforcement is too constrained, so there are many ways in which people can hide, shield, or protect their assets (transfer of money to an exotic offshore trust, bankruptcy planning, sham transfer to one’s relatives, hiding money under the mattress, etc.). Some of these techniques are more complicated than others, and some people will have moral reservations about deploying certain kinds of shielding techniques, or self-interested concerns about the effects of shielding on their credit scores, but overall, there is a real temptation here – especially since criminal enforcement against those who shield is quite rare. Given this temptation, it is puzzling why people do not shield assets more often. More generally, because avoiding judgments through asset shielding undermines many private legal obligations, it is important to have an account of when people would choose to meet their obligations and, if they decide to shield, the magnitude of assets that would be shielded.

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Faulty Facades and Product Liability — Samuel Beswick

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Post by Samuel Beswick, Frank Knox Memorial Fellow, SJD candidate, Harvard Law School

* At the outset I should disclose that I had a hand in drafting the plaintiffs’ claim as a solicitor at Meredith Connell, New Zealand, in 2012/13.

Although the paradigm case of a tort suit against a product manufacturer involves a claim of personal injury caused by the manufacturer’s allegedly defective product, there is a wealth of litigation concerning products whose defects do not pose a risk of personal injury. For example, currently progressing through the District Court of Minnesota is a class-action product liability lawsuit, which consolidates claims arising in eight states against James Hardie Building Products Inc. in respect of its allegedly defective Hardiplank cladding product. The plaintiffs contend that Hardiplank fails prematurely by allowing moisture ingress, which causes damage to underlying building structures and adjoining property. Their claims sound in negligence, breach of express and implied warranties, and breach of consumer protection legislation. The plaintiffs might find some reassurance in last Friday’s decision of the Supreme Court of New Zealand: Carter Holt Harvey Limited v. Minister of Education [2016] NZSC 95. 

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Bagchi, Dagan, and Hesselink at “Contract Law in a Liberal Society” Summer School in June — John Golden

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Post by John Golden

From June 29 to July 1, the University of Amsterdam hosted a “summer school” on “Contract Law in a Liberal Society.”  The gathering featured extended presentations by Aditi Bagchi of the Fordham University School of Law, Hanoch Dagan of Tel Aviv University’s Buchmann Faculty of Law, and Martijn Hesselink of the University of Amsterdam, as well as additional short presentations of completed works or works in progress by more junior scholars.  This post describes aspects of the presentations by Bagchi, Dagan, and Hesselink as I perceived them.

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Yale Law School’s Seminar in Private Law: Dispute Resolution in Universities — Sadie Blanchard

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Post by Sadie Blanchard, Research Fellow Yale Law School

At the last session of this spring’s Seminar in Private Law, we considered dispute resolution in universities. The speakers were Jonathan Holloway, Dean of Yale College and Professor of African American Studies, History, and American Studies, and Mary Rowe, who teaches at MIT’s Sloan School of Management and was MIT’s Ombuds for over 40 years. In view of the tumult on campuses over the past year, it seemed apt to consider universities as part of our survey of dispute resolution beyond the state. What is distinctive about conflicts in this setting? What processes are best suited to resolve or manage them? Are protests evidence of a failure of dispute resolution, or are they a desirable or inevitable form of complaint?

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Communal Property and Two Legal Cultures — Henry Smith

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Post by Henry Smith

Last week I took part in some events at the Intensive Doctoral Week at Sciences Po in Paris.  This is a conference for Ph.D. students in law from all over France, organized by Mikhail Xifaras of Sciences Po Law School, and it features panels devoted to a wide range of topics.  One of two on property focused on the future of communal property, with panelists Bob Ellickson, Séverine  Dusollier, Maria Rosaria Marella, and myself (with my name spelled “Henri” no less!).  The notion of common property has a long pedigree and is very important in the work of legal scholars such as Bob Ellickson and Carol Rose and economists such as Gary Libecap and Elinor Ostrom.  The Europeans have a renewed interest in communal property for two reasons. First, they believe that it is a way of breaking down the supposedly hyper-individualist notion of property enshrined in the civil code.  Second, communal property can be used to solve cutting-edge problems like providing new forms of low-income housing. 

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Who is Entitled to a Fair Price? — Aditi Bagchi

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Post by Aditi Bagchi

Making waves recently was a ruling by the Delaware Court of Chancery that Michael Dell and the private equity firm Silver Lake paid too little for Dell when they bought the company in 2013 in a leveraged buyout. See http://courts.delaware.gov/Opinions/Download.aspx?id=241590. Vice Chancellor J. Travis Laster concluded in an appraisal proceeding that shares were worth about $17.62 rather than the $13.75 that shareholders were paid.

The court arrived at this result without finding that Mr. Dell and management breached their fiduciary duties. To the contrary, they appear to have taken many “praiseworthy” steps in the sales process. No one else came forward with a clearly better offer. The court found, however, that there were structural problems with the accuracy of the market valuation of the company, including some inherent conflicts of interest but, more importantly, limitations in the valuations by potential classes of buyers, including shareholders (short-termism), private equity (high return expectations), and strategic acquirers (integration risk). The result is that the company was found to be worth more than anyone was willing to pay for it.

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More on Fraud in the Performance, this time from the Supreme Court — Greg Klass

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Post by Greg Klass

A few weeks ago I posted on the Second Circuit’s decision in US ex rel. O’Donnell v. Countrywide Home Loans, which held that Countrywide’s knowing delivery of effectively worthless loans to Fannie Mae and Freddie Mac, without disclosing that fact, was not fraudulent. One way to read the decision is as affirming the well established, and to some baffling, rule that a party to a contract has no duty to disclose its breach of the contract, no matter how knowing or material. (For more evidence of bafflement on this count, see Brandon Garrett’s fine post on the case.)

I mentioned in my post that the result might have been different had the Countrywide plaintiffs’ False Claims Act claim not been dismissed. Those who are interested in that road not taken in Countrywide might take a look at the Supreme Court’s decision last Thursday in Universal Health Services v. United States ex rel. Escobar, which addressed the implied certification doctrine under the FCA. In its most robust form (and oversimplifying a bit), the implied certification rule says that the mere act of submitting a claim for payment on a covered contract represents compliance with the contracts material terms, as well as with other governing laws and regulations. Or what is functionally equivalent: If the contract, a law or a regulation requires compliance, there is a duty to disclose any material noncompliance when requesting payment. Had this rule applied, Countrywide would have almost certainly been subject to the FCA’s treble damages and per-claim fines.

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SIOE 2016 — Dan Kelly

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Post by Dan Kelly

 

The Society for Institutional and Organizational Economics (SIOE) (formerly, the International Society for New Institutional Economics (ISNIE)) is hosting its 20th Annual Conference this week, June 15-17, at Sciences Po in Paris, France.  The conference website includes details on this year’s program and links to abstracts and papers.

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Is Equitable Contract Law a Pipe Dream? — Henry Smith

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Post by Henry Smith

At last month’s American Law and Economics Annual Meeting, I attended a very interesting session on Commercial Law and Contracts, at which the first two papers were in tension with each, as were their authors – in a polite way!  The first was “The Common Law of Contract and the Default Rule Project,” by Alan Schwartz and Bob Scott.  They argue that the program over the last century by academics, codifiers, and Restaters (“drafters”) to supply transcontextual defaults rules that apply in a wide variety of contracts was doomed to fail. Common law contract supplied a limited number of defaults that do have this feature, such as expectations damages for breach of contract.  Going beyond these traditional rules faced the drafters with a dilemma.  They did not have knowledge enough to supply defaults that would make sense for particular industries.  So they chose the transcontextual route, but to create additional defaults here required them to fudge the content, opting for fuzzy or underspecified standards based on custom and reasonableness, and commercial parties have not been receptive to these efforts, often opting out of them. 

Source: http://firstyearcontracts.blogspot.com/2010/03/estate-of-mr-george-edward-kent-man-who.html

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Samuelson on Merger in Copyright Law and Questions of Redundancy in Legal Design — John M. Golden

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Post by John Golden

In the forthcoming article Reconceptualizing Copyright’s Merger Doctrine, Pamela Samuelson of Berkeley Law provides an extended review of copyright law’s merger doctrine.  Courts have periodically invoked this doctrine in restricting the extent to which copyright protections apply to the expression of an idea when, as Samuelson puts it, “that idea is incapable of being expressed, as a practical matter, in more than one or a small number of ways.”  Samuelson’s article seeks to quash a number of “myths” about the doctrine, touching on aspects of its substantive scope, the frequency of the doctrine’s applicability, and its history as a creature of “common law adjudication.”  Samuelson concludes, among other things, that (1) the doctrine serves as an important “limiting principle of U.S. copyright law”; (2) the doctrine can affect copyrightability as well as copyright scope; and (3) courts should avoid an overly narrow view of the doctrine, thereby helping it realize its potential as a means for “mediating conflicts between and among the interests of first and second-generation authors, of third parties affected by those disputes, and of the public.”

This blog post focuses on another aspect of Samuelson’s article, its discussion of how the merger doctrine relates to other limiting doctrines in copyright.  These other doctrines include the following: (1) the scènes à faire doctrine, which limits the extent to which copyright covers standard or indispensable elements of expression (such as conventional poses in portraits, see William W. Fisher III et al., Reflections on the Hope Poster Case, 25 Harv. J.L. & Tech. 243, 259 (2012)); (2) copyright law’s originality requirement; (3) exclusions of facts, ideas, and other functional subject matter from copyright protection.  At one point, Samuelson suggests that courts’ relative lack of confidence in their mastery of copyright law’s content or justifications might explain some of the apparent proliferation of doctrinal overlaps.  She writes, “Courts sometimes perceive the other doctrines as overlapping with merger, but in some cases, courts invoke multiple doctrines when seemingly unsure which doctrine would provide the soundest grounding for the court’s decision.”

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The Second Circuit Polices the Contract-Tort Boundary — Greg Klass

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Post by Greg Klass

On Monday the Second Circuit released its decision in US ex rel. O’Donnell v. Countrywide Home Loans. This is a major case—in terms of dollar amounts (the trial court had assessed a $1.27 billion penalty against Countrywide), for understanding the law’s ability to deal with the wrongs that caused the subprime mortgage crisis, and with respect to the legal question of where to draw the line between contracts and torts. There’s much more going on in the case than I can summarize here. But here are some initial thoughts on it. Some of them also appear in Dan Fisher’s excellent piece in Forbes.

The legal framework is a little complex, but the basic thrust of the decision is that there was no evidence that Countrywide ever made a false representation to Freddie Mac and Fannie Mae about the quality of the mortgages it was selling. The initial contract of sale promised to deliver “investment quality mortgages,” but that was just a promise. There was no evidence that at the time Countrywide made it the company intended to do anything else—that it committed promissory fraud. It is clear that Countrywide subsequently intentionally breached that promise by delivering lots and lots mortgages that it knew were crap. (If you haven’t seen or read The Big Short, you might be shocked by Judge Rakoff’s post-verdict summary of the bullshit Countrywide trafficked in.) But, according to the Second Circuit, there was no evidence that it ever made any additional representations—after the initial contract to sell—as to the quality of those mortgages. No lie, no fraud.

A few observations:

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Party Autonomy to Choose a Forum: Philosophical and Historical Justification — Milana Karayanidi

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Student post: Milana Karayanidi

On March 18-19, the Young Comparativists Committee (YCC) of the American Society of Comparative Law (ASCL) hosted its fifth annual global conference at Tulane University Law School. Many scholars presented their papers relating to teaching and writing in comparative law, and more than 100 scholars from 80 countries attended. At the conference, I presented my work on Normative View of Party Autonomy to Choose a Forum in a Comparative Perspective. My paper emphasized the unprecedented rate of recognition of forum selection clauses in international civil and commercial transactions. I discussed theoretical justifications of the principle of party autonomy in choosing jurisdiction, drawing upon Kantian ideas of individual autonomy, non-instrumentalist private law theory accounts, and the increasing dominance of contractual principles within the modern law of civil procedure. In addition, I examined the reasons for limiting party autonomy in view of considerations of equality and certain public interests. Furthermore, I examined the evolution of party autonomy to choose a forum within the national systems of the U.S., Germany and Russia. I argued that some of the rationales behind the historical developments that led to party autonomy recognition in these national systems can be used to justify party autonomy in international dispute resolution.

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The Iran Nuclear Deal and Negotiations Between Enemies — Sadie Blanchard

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Post by Sadie Blanchard, Research Fellow Yale Law School

In its penultimate session of the spring, the Seminar in Private Law at Yale Law School considered the negotiations toward the Iran nuclear deal. Catherine Ashton, former European Union foreign minister who was a key participant in the negotiations, spoke together with Philip Bobbitt of Columbia Law School.

Ashton discussed the dynamics of the negotiations and the decisions about structuring them that were, in her view, critical to their success. Among them was a “noises off” policy instituted early by the delegates: they mapped out the issues that had to be part of a deal and excluded other considerations from being raised in the negotiations. That policy served to prevent future derailment of the critical negotiating points.

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Hohfeld Returns to the Supreme Court — Ted Sichelman

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Post by Ted Sichelman After more than a 25-year hiatus, Wesley Hohfeld—one of the preeminent private law theorists of the 20th century—has been cited by Justice Thomas in dissent earlier this week in Heffernan v. City of Paterson (thanks to Shyam Balganesh for the heads up), a case involving the alleged deprivation of free speech … Read more

Property and “The Right to Include” — Dan Kelly

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Post by Dan Kelly

Donald Kochan (Chapman) recently published an essay, “Property as a Vehicle of Inclusion To Promote Human Sociability,” in JOTWELL—The Journal of Things We Like (Lots).  The essay reviews my article on The Right to Include.  In that article, I attempt to highlight the fact that private property allows owners not only to exclude but also to include others.  Inclusion may occur informally, contractually, or through a range of property forms, from easements and leases to common-interest communities and trusts.  While there are benefits from including others in property (think of Airbnb), there are also costs and potential pitfalls of inclusion—coordination difficulties, strategic behavior, and conflicts over use.  For this reason, I argue, the law enables owners to select from a variety of forms that provide different types of anti-opportunism devices, including mandatory rules, fiduciary duties, and supracompensatory remedies.  Ultimately, I contend that “ownership can be inclusive, rather than exclusive; it can facilitate cooperation, not just result in conflict; and it frequently promotes human sociability, not atomistic individualism.”

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Yale Law School’s Seminar in Private Law: Online Dispute Resolution

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Post by Sadie Blanchard, Research Fellow Yale Law School

Last week, Yale Law School’s Seminar in Private Law took up online dispute resolution (ODR). Colin Rule, who created eBay’s and PayPal’s dispute resolution systems and now runs a startup that builds ODR platforms, spoke together with Tom Tyler, a social psychologist who studies how judgments about the justice of procedures impact legitimacy and cooperation.

Rule began by demonstrating an ODR platform he created in cooperation with the Dutch government, and which he presented as a prototype for the future of justice and access to justice. The platform, Rechtwijzer, is for couples contemplating or going through divorce. It provides information about legal options as well as a platform on which couples can collaborate to solve problems, negotiate, and, if necessary, mediate issues such as child custody, alimony, child support, and the division of property.

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Defences in Unjust Enrichment, Book Review — Yotam Kaplan

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Post by Yotam Kaplan, Private Law Fellow, Harvard Law School

Defences in Unjust Enrichment, edited by Andrew Dyson, James Goudkamp and Frederick Wilmot-Smith, is the recently published second volume in an ongoing series, Hart Studies in Private Law: Essays on Defences. The first volume covered defenses in tort law, and the remaining two volumes will treat defenses in contract law and equity. The current volume offers essays by some of the world’s leading scholars, and a memorable note by Lord Reed of the Supreme Court of the United Kingdom. This is a welcome addition to unjust enrichment scholarship, as the study of defenses (and the change of position defense in particular) has been central to the development of this area of law in recent years. 

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Summer School Announcment: “Contract Law in a Liberal Society” — Yonathan Arbel

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Post by Yonathan Arbel Dr. Lyn Tjon Soei Len, of the University of Amsterdam,  asked to bring this invitation for their very interesting summer-school to the attention of our readers: From June 29- July 1 the Summer School “Contract Law in a Liberal Society” will take place in Amsterdam. Junior scholars and advanced students will have … Read more

Yale Law School’s Seminar in Private Law: Non-Hierarchical Enforcement in International Relations

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Post by Sadie Blanchard, Research Fellow Yale Law School

Last week, Yale Law School’s Seminar in Private Law considered non-hierarchical enforcement. Oona Hathaway and Scott Shapiro discussed their work on outcasting as a method of law enforcement, and Leif Wenar discussed his new book Blood Oil: Tyrants, Violence, and the Rules that Run the World.

Hathaway and Shapiro describe outcasting as a type of law enforcement that does not rely on physical coercion by official actors within a legal regime. Instead, outcasting relies on “denying the disobedient the benefits of social cooperation and membership.” They find outcasting in orders that are clearly legal orders, such as classic canon law, medieval Icelandic law, and contemporary United States public law. It therefore follows that international law’s heavy reliance on outcasting for enforcement does not render it “not law.”

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Specific Performance in Action – Yonathan Arbel

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Post by Yonathan Arbel

Greg Klass’ recent post (as well as recent essay) raised the issue of efficient breach. Deeply embedded in the debate on efficient breach is the choice of remedies between specific performance and expectation damages. If courts award money damages, then this—in the view of opponents of the efficient breach theory—enables promisors to “buy” their way out of promises. Instead, the argument goes, awarding specific performance would give promisees “what they were promised”.  Contrary to their approach, specific performance is reserved under U.S. law only to (arguably) exceptional circumstances involving unique goods and land.

In my work, I try to show that enforcement matters. Parties do not negotiate or behave in the shadow of the law, I argue, but in the shadow of the sheriff. And conventional theory has tended to downplay and sometimes completely overlook the role of enforcement. Thinking through the lens of enforcement on private law provides new insight on old questions and the question of choice of remedies is no exception.

Looking from this perspective, I conducted a qualitative empirical analysis looking into the motivations of people suing for specific performance and the real-life outcomes of these lawsuits: are judgments implemented? Do people negotiate around them? To what extent do the motivations of litigants differ from their lawyers?

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Yale Law School’s Seminar in Private Law: Disputing Ends and Means in the Field of Human Rights

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Post by Sadie Blanchard, Research Fellow Yale Law School

Last week in Yale Law School’s Seminar in Private Law, Iain Levine, Deputy Executive Director at Human Rights Watch, and Sam Moyn, Professor at Harvard Law School, began a discussion of practical and theoretical perspectives on the legitimation of human rights. A preliminary point might help to orient readers, who would not be alone if they wondered what human rights have to do with private law or with the Seminar’s theme of how dispute resolution processes that exist outside of established legal or political structures can generate authority. Most nations, after all, have agreed to several multilateral human rights treaties negotiated within the United Nations. Human rights are monitored and enforced by international tribunals and other bodies created and controlled by states through the United Nations and other political assemblies of states. The international human rights regime seems to be precisely a political and legal structure designed and built by states.

Nonetheless, relevant questions remain. For example, how did this state of affairs come to be? The history of the global ascent of human rights is short. What is the content of human rights, and how should they be protected? What do they imply for sovereignty and public authority? Those issues remain contested not only within the state-centric human rights architecture but also outside of it. Such questions make human rights an appropriate object of study by those who wish to better understand conflict resolution outside of established structures.

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