October 16, 2017

Oral Arguments in Jesner v. Arab Bank: Supreme Court May Favor Two Steps to Corporate Liability for Human Rights Violations

By William Dodge

[Cross-posted from Just Security]

Ed. note. This article is the latest in our series on the U.S. Supreme Court case Jesner. v. Arab Bank, a case that is slated to resolve the question of whether corporations can be sued under international law for human rights violations and terrorism.

On Wednesday, the U.S. Supreme Court heard oral arguments in Jesner v. Arab Bank, PLC, which presents the question whether corporations can be sued for human rights violations in U.S. courts under the Alien Tort Statute (ATS). The plaintiffs alleged that Arab Bank knowingly funneled millions of dollars through its New York branch to finance terrorist attacks in Israel, the West Bank, and Gaza. In a parallel suit brought by U.S. citizens under a separate federal statute, the Antiterrorism Act, Arab Bank was found liable for doing just that. The Second Circuit rejected the plaintiffs’ claims, however, on the ground that corporations can never be sued under the ATS. I previewed the arguments made in the briefs here. I also filed a brief on behalf of International Law Scholars in support of the plaintiffs.

At oral argument, the Justices seemed to be looking at the question in two steps: (1) whether customary international law permits corporate liability; and (2) assuming it does, whether the ATS cause of action should be interpreted to permit corporate liability. Arab Bank’s lawyer Paul Clement joked about Chevron, the Supreme Court’s doctrine for deference to administrative agencies, which famously has two steps (p. 53). And the Supreme Court has recently articulated a two-step framework for applying the presumption against extraterritoriality. So perhaps the ATS will be next.

Justice Kennedy suggested that “what parties are bound” by a norm of international law should be part of the question at “Sosa step 1, where we ask if there’s a specific universal norm” (p. 24). (Sosa is the 2004 case in which the Supreme Court recognized a cause of action for claims brought under the ATS.) Plaintiffs’ counsel Jeffrey Fisher responded that rules of corporate liability, like respondeat superior, are questions of domestic law (p. 25). While that is true, it may be useful to distinguish two different corporate liability questions. Whether a particular norm of international law applies to corporations is a question of international law to be addressed at step one, as Justice Kennedy suggested. And as the U.S. government argued in its amicus brief, the norms that are actionable under the ATS do not distinguish between natural persons and corporations. As a second-order question, precisely what form corporate liability should take (Justice Kennedy mentioned strict liability, vicarious liability, and respondeat superior as examples) is a matter of domestic law. Indeed, Arab Bank’s counsel seemed to concede in a later exchange with Justice Kagan that the particular form of corporate liability—whether joint and several liability is available, for example—“might get you closer to a remedial question” to be addressed at step two of the analysis (p. 55).

Justice Breyer spent some time discussing various treaties that impose liability on corporations with Mr. Clement, Arab Bank’s lawyer (pp. 43-45, 47, 50-51, 56-57). But the details of these treaties are really beside the point. This is not just because the treaties are designed to operate through domestic law, as Mr. Clement pointed out (p. 57). It is also because plaintiffs have not brought their claims under the treaties but rather under customary international law. To be sure, some of these treaties may be relevant as evidence of customary international law. But the key question at step one of the ATS analysis is whether the customary international law norms that are actionable under the ATS distinguish between natural persons and corporations. As the amicus brief for the Yale Law School Center for Global Legal Challenges shows in detail, none of these norms do.

At the second step in the analysis, some of the Justices expressed concern about the foreign relations implications of holding corporations liable for human rights violations. Chief Justice Roberts noted that the ATS was passed “to avoid foreign entanglements” but wondered “if extending it to corporate liability is, in fact, going to have the . . . problematic result of increasing our entanglements” (p. 7). Justice Alito suggested that at “step 2 of Sosa,” on “the question of whether we should recognize a federal common law claim under particular circumstances,” the Court might “balance the international repercussions” of allowing suits against corporations against the repercussions of not doing so (p. 10). Mr. Fisher, lawyer for the plaintiffs, agreed that ATS suits could have “international implications,” but responded that the Court could address those concerns with “other kinds of doctrines that more directly deal with those concerns” like extraterritoriality, forum non conveniens, and political question (p. 11). Justice Sotomayor also mentioned personal jurisdiction under Daimler as a limitation (pp. 5-6), and Justice Ginsburg added the possibility of an exhaustion requirement (pp. 23-24). Denying corporate liability, Fisher argued, was simply “a mismatch” with concerns about foreign relations (p. 13).

Arguing for the United States as amicus, Brian Fletcher agreed with plaintiffs that the Second Circuit’s “categorical rule” against corporate liability was “wrong” (p. 27). He pointed out that this case would not have produced “less friction if it had been brought against the high-ranking officers and employees of the bank rather than against the bank itself” (p. 28). Later in the argument, Justice Kagan described the question of corporate liability as “completely orthogonal” to the foreign relations concerns raised by Arab Bank (p. 64). Mr. Clement responded that corporate liability and foreign relations overlapped in practice because “the real impact of corporate liability” is on foreign corporations in which foreign governments have an interest, “like Arab Bank” (p. 65). In fact, the suit against Arab Bank is an unusual one; foreign corporate defendants are the exception not the rule today. The Supreme Court’s decision in Kiobel to limit the geographic scope of the ATS cause of action to cases that “touch and concern” the United States has resulted in a large number of dismissals, as Mr. Fisher pointed out (p. 5), including virtually all of the suits against foreign corporations.

Justice Gorsuch repeatedly asked whether the ATS cause of action should be limited to U.S. defendants (pp. 16, 34, 71-72). He invoked an argument by Professors Anthony Bellia and Bradford Clark that the First Congress was concerned that “some action by an American citizen . . . might be tagged to the United States itself and be cause for just war by a foreign power” (p. 16). Justice Gorsuch also suggested that “you need an American defendant in order to have diversity jurisdiction” under Article III (p. 16).

With respect to Bellia and Clark’s argument, both Mr. Fisher for the plaintiffs (p. 16) and Mr. Fletcher for the U.S. government (p. 34-37) noted that limiting the ATS to American defendants would fail to account for the 1784 Marbois incident, which the Supreme Court in Sosa recognized as one of the events that inspired the provision. Chief Justice Roberts and Justice Alito accepted in their own questions that the ATS was intended to reach cases like the Marbois incident (pp. 7, 14). Justice Sotomayor noted that the nationality of the defendant would also have been irrelevant in cases of piracy (pp. 37-38). And Mr. Fisher concluded by referring to the text of the ATS, which limits the citizenship of plaintiffs to aliens but places no limits on the citizenship of defendants (pp. 70-71).

There are other problems with the Bellia-Clark theory that were not mentioned at oral argument. Under their theory, the ATS was intended to address only situations where the United States would be in breach of international law if it did not provide redress to aliens injured by U.S. citizens. In such situations, the violation of the law of nations would occur not at the time of the tort but later, when the United States failed to provide redress. But this is hard to square with the text of the ATS, which refers to suits “by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.” The word “committed” suggests that the international law violation occurs at the time of the tort, rather than some time later. Another problem with the Bellia-Clark theory is that the United States’ obligation under international law to provide redress would have been fully satisfied by other statutes (including the 1790 law mentioned by Mr. Clement (p. 35)), which provided criminal liability for assaults on ambassadors and the like. The ATS was clearly designed to go beyond what was necessary to satisfy the United States’ obligations under international law. None of the other Justices seemed interested in the Bellia-Clark theory at oral argument, and it will be surprising if it garners more than one vote.

Justice Gorsuch’s concern over Article III is also misplaced. First, there is strong historical evidence that the phrase “Laws of the United States” in Article III’s arising-under grant was understood at ratification to include the law of nations. Among other things, the phrase in Article III is broader than the corresponding phrase in the Supremacy Clause of Article VI, which refers more narrowly to laws of the United States made in pursuance of the Constitution. But the Supreme Court would not have to adopt this interpretation to satisfy Article III, because ATS suits now arise under the federal-common-law cause of action that Sosa recognized. Both of the Supreme Court’s prior cases under the ATS have involved one alien suing another, as have most of the successful cases across the federal courts since the landmark ATS decision by the Second Circuit in Filartiga over 35 years ago.

If the Justices stick to the question of corporate liability, the Second Circuit may be reversed by a large margin. The concerns expressed at oral argument by the more conservative Justices have little to do with corporate liability. But if the vote is a close one, it is likely to be decided by Justice Kennedy, whose concurring opinion in Kiobel stressed the narrowness of that decision and aimed to keep the door open both for suits against corporations and for suits where some of the relevant conduct occurred abroad.

Justice Kennedy was surprisingly quiet at oral argument, asking just two questions about whether the identity of the party bound by the customary-international-law norm should be part of the analysis at step one. The question is a good one, and I believe the answer is yes—the particular norm of customary international law must apply to a corporation before a corporation may be sued under the ATS for violating that norm. And as the amicus brief for the United States explains, all of the norms actionable under the ATS do apply to corporations. Recognizing this fact should lead Justice Kennedy to adopt the position urged by the United States on the question of corporate liability and to reverse the Second Circuit.

January 20, 2017

Serving as Visiting Scholar at National Chiao-Tung University in Taiwan

I had the honor of serving as a visiting scholar at National Chiao-Tung University, Taiwan during the week of January 8th. My visit was coordinated by Professor Chien-Chung Lin, who has twice visited UC Davis School of Law to present papers at the American Society of Comparative Law (ASCL), Younger Comparativists Committee (YCC) Workshop on Comparative Business and Financial Law. Taiwanese corporate law scholars such as Professor Lin have been doing excellent work especially in the area of comparative corporate law, so I was very much looking forward to interacting with some of them.

I began my visit with a fabulous lunch organized by Professor Lin and our own UC Davis JD student, Oscar Yang (himself a 2016 graduate of our LLM program). Oscar and Professor Lin had graciously invited leading Taiwanese lawyers for the lunch, including Prosecutor Jawyang Huang, Taipei District Prosecutors Office. Mr. Huang has been a visiting scholar at Yale University School of Law and was Oscar's supervisor in the Office of Trade Negotiations, in charge of WTO dispute settlement cases. We were joined by two of Oscar's former colleagues who were both fabulous company, Ms. Jenny Van, Senior Legal Adviser in Office of Trade Negotiations and Mr. Jason Lai, Secretary to the Director-General of Bureau of Foreign Trade.  It was a terrific lunch at one of Taipei's most popular restaurants, Din Tai Fung. After the lunch Mr. Huang gave me a fascinating tour of the Taipei Judicial Building, where I was able to observe a few trials that were being conducted. The efficiency and order at the judicial building was quite impressive.

After the first day in Taipei, Professor Lin took me to Hsinchu, one of the educational centers of Taiwan. The city has several prestigious universities, including National Chiao Tung University and National Tsing Hua University. Hsinchu is also an economic and technology hub in Taiwan with an impressive science and technology industrial park. The science and technology park is home to hundreds of high technology companies including world-renowned firms in the semiconductor space such as TSMC and UMC. Professor Lin gave me a tour of the technology park and given my prior corporate practice experience in the semiconductor space I was quite excited to see the place!

In Hsnichu, I gave three lectures at the two law schools there.

  1. Redefining Corporate Purpose: An International Perspective, at the Institute of Law for Science & Technology, College of Technology Management, National Tsing Hua University in Hsinchu, Taiwan.
  2. Deal Structure and Minority Shareholders, at the School of Law at National Chiao-Tung University, Taiwan
  3. Legal Transplants in the Law of the Deal: M&A Agreements in India at the School of Law at National Chiao-Tung University, Taiwan


Lecturing at NTHU

My visit to National Tsing Hua University was coordinated by Professor Robert Tsai, who is trained as an attorney in both Taiwan and the U.S. The lectures were well-attended, and the audience of professors and law students asked excellent questions.

I also had the opportunity to visit the Taiwan Stock Exchange to learn more about the significant corporate governance initiatives undertaken in Taiwan. I had an informative meeting at the Taiwan Stock Exchange with Mr. Joe Tsun Cheng (Senior Vice President, Corporate Governance Department) and Ms. Tracy Chen (Associate, Corporate Governance), as well as meeting Mr. Lih Chung Chien, Senior Executive Vice President of the Taiwan Stock Exchange. At the meeting we exchanged views on corporate governance initiatives undertaken in Asia, and I detailed some of my scholarly work on the trajectory and possible outcomes of the corporate governance reforms undertaken in India over the last decade. I really enjoyed the intellectual engagement with the professors, lawyers and law students I had the privilege to meet.

Professor Lin had also kindly arranged many opportunities for me to experience the beauty and culture of Taiwan, including visits traditional tea houses, temples and the CKS Memorial Hall and Liberty Square, an afternoon at beautiful hot springs outside of Taipei, a culinary adventure with law students at one of Taipei's fabulous night markets, a tour of the National Palace Museum, several informative walks around the different districts in Taipei, and more delicious meals than I can count.  I could easily have spent weeks enjoying all that Taiwan has to offer from its vibrant coffee culture to its elegant tea houses and lush country side, all topped off by the generous hospitality and friendliness of its people.

If it is not already clear, the trip to Taiwan was truly inspiring, and I look forward to future visits!

November 9, 2015

Business Law Journal Symposium on Corporate Data Breaches

At UC Davis School of Law, students and faculty work together to organize some amazing events. 

Last Friday, I had the pleasurable opportunity to provide a welcome to this year's UC Davis's Business Law Journal symposium on "Corporate Data Breaches: What Companies Can Learn from Recent High Profile Attacks."  The symposium examined the new challenges in the increasing numbers of major corporate data breaches.  The Journal brought together a group of the nation's leading professors and lawyers, with diverse expertise, all of whom are well-versed on corporate data breaches.    

We are proud of our business law faculty curriculum at UC Davis School of Law and have had a tradition of excellence in the field.  Professors Anupam Chander and John Hunt participated in the event.  I would be remiss if I did not give a special thanks to Professor John Hunt and law students Lauren Woods, Michel Wigney, and James Swearingen for their hard work in planning this symposium. 

The keynote speaker was Justin Cain, the California Cybersecurity Coordinator for the California Governor's Office of Emergency Services.   Justin is part of the California Cybersecurity Task Force, a statewide partnership comprised of key stakeholders, subject matter experts, and cybersecurity professionals from the public sector, private industry, academia, and law enforcement who are all working to advance and strengthen California's cybersecurity.

September 25, 2015

Corporations, the Constitution, and the Rights of Others

Cross-posted from Columbia Law School's Blue Sky Blog.

The Supreme Court's protection of corporate political expenditures in Citizens United v. FEC and corporate religious exercise in Burwell v. Hobby Lobby has rekindled perennial fears about the influence of corporations in U.S. politics and policy. One popular response has been to argue for stripping corporations of constitutional rights. For example, the proposed "People's Rights Amendment" would exclude corporations from the categories of "people, person, or citizen as used in this Constitution,"[1] thus denying corporations the constitutional rights of human individuals.

Unfortunately, denying corporate constitutional rights is unlikely to have much effect. Insofar as the Supreme Court has protected corporations under the Constitution, that protection does not expressly rely on the notion that a corporation per se has constitutional rights. To the contrary, a central strategy of the Court's corporate constitutional jurisprudence has been to avoid deciding whether corporations are the holders of constitutional rights. Constitutional decisions protecting corporations have not been based on the rights of corporate "persons," but on the less controversial rights of human persons. That is, "corporate" constitutional rights are actually based on the rights of others.

The Court does this in two ways. First, it sometimes treats a corporation as no more, and no less, than an "aggregation" of human individuals whose rights are the real rights implicated in corporate constitutional questions. Hobby Lobby expressly states the Court's reasoning: the corporate "person" is merely "a familiar legal fiction" created to protect the rights of "the people (including shareholders, officers, and employees) who are associated with the corporation." Thus the Fourth Amendment prohibits unreasonable search and seizure of corporate papers because such papers implicate the property and privacy rights of individuals. By contrast, a corporate entity cannot invoke the Fifth Amendment's protection against self-incrimination, because no individual's rights are compromised when a corporation (in contrast to, say, a CEO) is compelled to incriminate itself.

In the First Amendment free speech context, the Court bases corporate protection on individuals' rights in a second, very different way. The so-called "listeners' rights" theory of the First Amendment protects the public's right to hear messages, and thus requires neither a corporate nor an individual "right" to speak. Thus in Citizens United (and earlier, in First National Bank v. Bellotti (1978)) the Court held that corporate political spending must be protected in order to protect voters' First Amendment rights to receive diverse sources of political information.

The Court, then, has avoided the mistake of equating corporations with human individuals for constitutional purposes. However, its "rights of others" approach suffers from a different error: a fundamental misunderstanding of the corporate decisionmaking process. In the "aggregation" cases, the Court purports to protect the individuals associated with the corporation, but this erroneously assumes that the corporation's acts are in effect the acts of those individuals. The Court makes a similar error with respect to corporate political spending. Even if listeners have an interest in hearing corporate messages, that may conflict with the rights of the corporation's constituent individuals if they disagree with those messages. Citizens United dismissed this concern on the ground that shareholders control a corporation's messages through "corporate democracy."

Small, family-run corporations, such as that involved in Hobby Lobby, may accurately represent the wishes of their constituents.  The same is not true of larger corporations, however.  Corporate law does not, and is not intended to, run corporations in a "democratic" way. Rather, in the interests of money-making efficiency, the law concentrates power in professional managers. They enjoy nearly unreviewable discretion to control the resources of the corporation with negligible input from shareholders.

As intended, this arrangement is likely to benefit shareholders financially. But it does not protect them from corporate political spending or other speech acts they disagree with. Shareholders can sue management only for deliberate malfeasance, and political spending has been treated as a proper matter for management discretion. Furthermore, the Court itself has stated that corporate rights are meant to protect not only shareholders, but also other corporate constituents, such as employees. Those individuals, however, have even less power than shareholders with respect to corporate decisionmaking. Employees cannot vote in corporate elections and can be fired for disagreeing with management.

The protection of corporate constituents may present a compelling state interest justifying the regulation of corporate speech. Corporate political spending in particular could compromise the speech and property interests of corporate constituents who may disagree with the political message. This argument questions the reasoning of Citizens United, and is consistent with the proposed "Democracy for All Amendment," which would expressly permit campaign finance law to regulate corporations and natural persons differently.[2]

ENDNOTES

[1] See S.J. Res. 18 & H.J. Res. 21, 113th Cong. (1st Sess. 2013). I should disclose that I am a member of the Legal Advisory Committee of Free Speech for People, an advocacy group that supports this amendment, as well as the "Democracy for All Amendment," discussed below. See Free Speech for People, www.freespeechforpeople.org.

[2] See S.J. Res. 19 & H.J. Res. 119, 113th Cong. (2nd Sess. 2014).

The post is adapted from the recent article, Corporations and the Rights of Others, 30 Const. Comment. 335 (2015), which is available here.

December 19, 2014

Faculty Scholarship: Legal Studies Research Paper Series, Vol. 16, No. 6

Faculty members at UC Davis School of Law publish truly unique scholarship that advances the legal profession. You can view their scholarly works via the Social Science Research Network (SSRN) Legal Scholarship Network. An archive can be found on this web page.

What follows here is the most recent collection of papers:

"Corporate Social Responsibility in India" 
The Conference Board Director Notes No. DN-V6N14 (August 2014)
UC Davis Legal Studies Research Paper No. 399

AFRA AFSHARIPOUR, University of California, Davis - School of Law
Email: aafsharipour@ucdavis.edu
SHRUTI RANA, University of Maryland
Email: shrutirana@yahoo.com

In an era of financial crises, widening income disparities, and environmental and other calamities linked to some corporations, calls around the world for greater corporate social responsibility (CSR) are increasing rapidly. Unlike the United States and other major players in the global arena, which have largely emphasized voluntary approaches to the adoption and spread of CSR, India has chosen to pursue a mandatory CSR approach. This report discusses India's emerging CSR regime and its potential strengths and weaknesses.

"The Advent of the LLP in India" 
Research Handbook on Partnerships, LLCs and Alternative Forms of Business Organizations (Robert W. Hillman and Mark J. Loewenstein eds.) (Edward Elgar Publishing, 2015, Forthcoming)
UC Davis Legal Studies Research Paper No. 408

AFRA AFSHARIPOUR, University of California, Davis - School of Law
Email: aafsharipour@ucdavis.edu

In 2008, India passed a ground-breaking law to introduce the Limited Liability Partnership form into Indian business law. The Indian LLP Act was the first major introduction of a new business form in India in over 50 years. While the partnership and corporate forms (i.e. companies under the Indian Companies Act) have long flourished in India, both forms have presented challenges for certain Indian businesses. The Indian government's impetus for the LLP Act was to develop a business association form that could better meet the needs of entrepreneurs and professionals with respect to liability exposure, regulatory compliance costs and growth. This chapter begins with a broad overview of the political and legislative process which led to the adoption of the LLP Act. It then addresses the critical aspects of the Indian LLP Act, and analyzes some of the challenges and uncertainties that may derail the success of the LLP form.

"Reed v. Town of Gilbert: Signs of (Dis)Content?" 
NYU Journal of Law & Liberty, Forthcoming
UC Davis Legal Studies Research Paper No. 403

ASHUTOSH AVINASH BHAGWAT, University of California, Davis - School of Law
Email: aabhagwat@ucdavis.edu

This essay provides a preview of the Reed v. Town of Gilbert, Arizona, a case currently (OT 2014) pending in the Supreme Court. The case concerns the regulation of signs by a town government, and requires the Supreme Court to resolve a three-way circuit split on the question of how to determine whether a law is content-based or content-neutral for First Amendment purposes. The basic question raised is whether courts should focus on the face of a statute, or on the legislative motivation behind a statute, in making that determination. I demonstrate that under extant Supreme Court doctrine, the focus should clearly be on the face of the statute, and that under this approach the Town of Gilbert's sign regulation is (contrary to the Ninth Circuit) clearly content-based.

That the Ninth Circuit erred here is, however, not the end of the matter. More interesting is why it erred. I argue that the Ninth Circuit's resistance to finding Gilbert's ordinance content-based was based on subterranean discontent with the most basic principle of modern free speech doctrine - that all content-based regulations are almost always invalid. At heart, what the Gilbert ordinance does is favor signs with political or ideological messages over other signs. Current doctrine says that this is problematic. I question whether that makes any sense. Given the broad consensus that the primary purpose of the First Amendment is to advance democratic self-government, why shouldn't legislators, and courts, favor speech that directly advances those purposes over other speech, especially when allocating a scarce resource such as a public right of way? Given the brevity of this essay, I only raise but do not seek to answer this question, but argue that it is worthy of further attention by the Court (and of course by scholars).

"Brand New World: Distinguishing Oneself in the Global Flow" 
UC Davis Law Review, Vol. 27, No. 2, December 2013
UC Davis Legal Studies Research Paper No. 410

MARIO BIAGIOLI, University of California, Davis - School of Law
Email: mbiagioli@ucdavis.edu
ANUPAM CHANDER, University of California, Davis - School of Law
Email: achander@ucdavis.edu
MADHAVI SUNDER, University of California, Davis - School of Law
Email: msunder@ucdavis.edu

Ancient physicians engaged in property disputes over the seals they impressed on the containers of their medications, making brand marks the oldest branch of intellectual property. The antiquity of brand marks, however, has not helped their proper understanding by the law. While the conceptual and historical foundations of copyrights and patents continue to be part and parcel of contemporary legal debates, the full history and theorizing on business marks is largely external to trademark doctrine. Furthermore, with only a few and by now outdated exceptions, whatever scholarship exists on these topics has been performed mostly not by legal scholars but by archaeologists, art historians, anthropologists, sociologists, and historians of material culture. Such a striking imbalance suggests that the law is more eager to assume and state what trademarks should be rather than understand how they actually work today. Nor does the law often acknowledge the many different ways in which marks have always been deployed to distinguish both goods and their makers. This is not just a scholarly problem: given the extraordinary importance of brands in the global economy, the growing disjuncture between the way brands function in different contexts and cultures and trademark law's simplified conceptualization of that function has become a problem with increasingly substantial policy implications.

"Justifying a Revised Voting Rights Act: The Guarantee Clause and the Problem of Minority Rule" 
Boston University Law Review, Vol. 94, No. 5, 2014
UC Davis Legal Studies Research Paper No. 411

GABRIEL J. CHIN, University of California, Davis - School of Law
Email: gjackchin@gmail.com

In Shelby County v. Holder, the Supreme Court invalidated Section 4 of the Voting Rights Act of 1965, which required certain jurisdictions with histories of discrimination to "preclear" changes to their voting practices under Section 5 before those changes could become effective. This Article proposes that Congress ground its responsive voting rights legislation in the Constitution's Guarantee Clause, in addition to the Fourteenth and Fifteenth Amendments. The Court has made clear that the Guarantee Clause is a power granted exclusively to Congress and that questions of its exercise are nonjusticiable. It is also clear from the Federalist Papers and from scholarly writing - as well as from what little the Court has said - that the purpose of the Guarantee Clause is to protect majority rule. That is precisely what was at issue after the Civil War when Congress first used the Guarantee Clause to protect African American votes. As an absolute majority in three states and over forty percent of the population in four others, African Americans possessed political control when allowed to vote; when disenfranchised, they were subjected to minority rule. African Americans are no longer the majority in any state. But in a closely divided political environment, whether African Americans and other minorities can vote freely may be decisive in many elections. For this reason, Congress could legitimately ground a revised Voting Rights Act in the Guarantee Clause, and the Court should treat its validity as a nonjusticiable political question committed by the Constitution to Congress.

"Wills Law on the Ground" 
UCLA Law Review, Vol. 62, 2015 Forthcoming
UC Davis Legal Studies Research Paper No. 404

DAVID HORTON, University of California, Davis - School of Law
Email: dohorton@ucdavis.edu

Traditional wills doctrine was notorious for its formalism. Courts insisted that testators strictly comply with the Wills Act and refused to consider extrinsic evidence to construe instruments. However, the 1990 Uniform Probate Code revisions and the Restatement (Third) of Property: Wills and Donative Transfers replaced these venerable bright-line rules with fact-sensitive standards in an effort to foster individualized justice. Although some judges, scholars, and lawmakers welcomed this seismic shift, others objected that inflexible principles provide clarity and deter litigation. But with little hard evidence about the operation of probate court, the frequency of disputes, and decedents' preferences, these factions have battled to a stalemate. This Article casts fresh light on this debate by reporting the results of a study of every probate matter stemming from deaths during the course of a year in a major California county. This original dataset of 571 estates reveals how wills law plays out on the ground. The Article uses these insights to analyze the issues that divide the formalists and the functionalists, such as the requirement that wills be witnessed, holographic wills, the harmless error rule, ademption by extinction, and anti-lapse.

"Can Human Embryonic Stem Cell Research Escape its Troubled History?" 
44 Hastings Center Report 7 (Nov.-Dec. 2014)
UC Davis Legal Studies Research Paper No. 409

LISA CHIYEMI IKEMOTO, University of California, Davis - School of Law
Email: lcikemoto@law.ucdavis.edu

In 2013 and 2014, three U.S.-based research teams each reported success at creating cell lines after somatic cell nuclear transfer with human eggs. This essay assesses the disclosures about how oocytes were obtained from women for each of the three projects. The three reports described the methods used to obtain eggs with varying degrees of specificity. One description, in particular, provided too little information to assess whether or not the research complied with law or other ethical norms. This essay then considers methodological transparency as an ethical principle. Situating the research within the ethical and moral controversies that surround it and the high-profile fraudulent claims that preceded it, the essay concludes that transparency about methodology, including the means of obtaining human cells and tissues, should be understood as an ethical minimum.

"Evidence of a Third Party's Guilt of the Crime that the Accused is Charged with: The Constitutionalization of the SODDI (Some Other Dude Did It) Defense 2.0" 
UC Davis Legal Studies Research Paper No. 401

EDWARD J. IMWINKELRIED, University of California, Davis - School of Law
Email: EJIMWINKELRIED@ucdavis.edu

Defense counsel have employed a version of the SODDI defense for decades. The late Johnny Cochran successfully employed the defense in the O.J. Simpson prosecution, and the legendary fictional defense attorney Perry Mason used the defense in all his cases.

However, in most jurisdictions there are significant limitations on the availability of the defense. In an 1891 decision, the United States Supreme Court announced that evidence of a third party's misconduct is admissible only if it has a "legitimate tendency" to establish the accused's innocence. Today most jurisdictions follow a version of the "direct link" test. Under this test, standing alone evidence of a third party's motive or opportunity to commit the charged offense is inadmissible unless it is accompanied by substantial evidence tying the third party to the commission of the charged crime. Moreover, the evidence that the accused proffers to support the defense must satisfy both the hearsay and character evidence rules. If the defense offers out-of-court statements describing the third party's conduct, the statements must fall within an exemption from or exception to the hearsay rule. If the defense attempts to introduce evidence of the third party's perpetration of offenses similar to the charged crime, the defense must demonstrate that the evidence is admissible on a noncharacter theory under Federal Rule of Evidence 404(b)(2).

However, a new version of the SODDI defense has emerged - SODDI 2.0. When the defense relies on this theory, the accused makes a more limited contention. The defense does not contend that reasonable doubt exists because there is admissible evidence of the third party's guilt. Rather, the defense argues that there is reasonable doubt because the police neglected to investigate the potential guilt of a third party who was a plausible person of interest in the case. Two 2014 decisions, one from the Court of Appeals for the Second Circuit and another from an intermediate Utah court, approved this version of the defense. Even more importantly, both courts ruled that the trial judge violated the accused's constitutional right to present a defense by curtailing the accused's efforts to develop the defense at trial.

The advent of this new version of the defense is both significant and controversial. The development is significant because the defense can often invoke this version of the defense when the restrictions on the traditional SODDI defense preclude the accused from relying on the traditional defense. As the two 2014 decisions point out, when the defense invokes the 2.0 version of the defense, the hearsay rule does not bar testimony about reports to the police about the third party's misconduct. Under the 2.0 version of the defense, those reports are admissible as nonhearsay to show the reports' effect on the state of mind of the police officers: putting them on notice of facts that should have motivated them to investigate the third party. Similarly, when the defense relies on the 2.0 version of the defense, the prosecution cannot invoke the character evidence prohibition to bar testimony that the third party has committed offenses similar to the charged crime. The prohibition applies only when the ultimate inference of the proponent's chain of reasoning is that the person engaged in conduct consistent with his or her character trait. In this setting, the prohibition is inapplicable because the ultimate inference is the state of mind of the investigating officers.

Since the restrictions on the new version of the SODDI defense are much laxer than those on the traditional defense, the advent of this defense is also controversial. Are the inferences from the 2.0 version of the defense so speculative that as a matter of law, the defense is incapable of generating reasonable doubt? Moreover, is it wrong-minded to recognize a version of the defense with such minimal requirements when the prevailing view is that traditional version is subject to much more rigorous requirements?

This article addresses those questions and concludes that it is legitimate to recognize the SODDI defense 2.0. In the past few decades, there has been a growing realization of the incidence of wrongful convictions. In the late Johnny Cochran's words, some of those convictions were a product of a "rush to judgment" by the police. The recognition of the SODDI defense 2.0 will provide a significant disincentive to such premature judgments by police investigators.

"Should Arrestee DNA Databases Extend to Misdemeanors?" 
Recent Advances in DNA & Gene Sequences, 2015, Forthcoming
UC Davis Legal Studies Research Paper No. 406

ELIZABETH E. JOH, U.C. Davis School of Law
Email: eejoh@ucdavis.edu

The collection of DNA samples from felony arrestees will likely be adopted by many more states after the Supreme Court's 2013 decision in Maryland v. King. At the time of the decision, 28 states and the federal government already had arrestee DNA collection statutes in places. Nevada became the 29th state to collect DNA from arrestees in May 2013, and several others have bills under consideration. The federal government also encourages those states without arrestee DNA collection laws to enact them with the aid of federal grants. Should states collect DNA from misdemeanor arrestees as well? This article considers the as yet largely unrealized but nevertheless important potential expansion of arrestee DNA databases.

"Racial Profiling in the 'War on Drugs' Meets the Immigration Removal Process: The Case of Moncrieffe v. Holder" 
University of Michigan Journal of Law Reform, Forthcoming
UC Davis Legal Studies Research Paper No. 402

KEVIN R. JOHNSON, University of California, Davis - School of Law
Email: krjohnson@ucdavis.edu

This paper is an invited contribution to an immigration symposium in the Michigan Journal of Law Reform.

In 2013, the Supreme Court in Moncrieffe v. Holder rejected a Board of Immigration Appeals order of removal from the United States of a long-term lawful permanent resident based on a single criminal conviction involving possession of a small amount of marijuana. In so doing, the Court answered a rather technical question concerning the definition of an "aggravated felony" under the U.S. immigration laws.

Because the arrest and drug conviction were not challenged in the federal removal proceedings, the Court in Moncrieffe v. Holder did not have before it the full set of facts surrounding the state criminal prosecution of Adrian Moncrieffe. However, examination of the facts surrounding the criminal case offers important lessons about how the criminal justice system works in combination with the modern immigration removal machinery to disparately impact communities of color. By all appearances, the traffic stop that led to Moncrieffe's arrest is a textbook example of racial profiling.

This Article considers the implications of the facts and circumstances surrounding the stop, arrest, and drug crimination of Adrian Moncrieffe for the racially disparate enforcement of the modern U.S. immigration laws. As we shall see, Latina/os, as well as other racial minorities, find themselves in the crosshairs of both the modern criminal justice and immigration removal systems.

Part II of the Article provides details from the police report of the stop and arrest that led to Adrian Moncrieffe's criminal conviction. The initial stop for a minor traffic infraction is highly suggestive of a pretextual traffic stop of two Black men on account of their race. Wholly ignoring the racial tinges to the criminal conviction, the U.S. Supreme Court only considered the conviction's immigration removal consequences - and specifically the Board of Immigration Appeals' interpretation of the federal immigration statute, not the lawfulness of the original traffic stop and subsequent search.

The police report describes what appears to be a routine traffic stop by a police officer who, while apparently trolling the interstate for drug arrests in the guise of "monitoring traffic." The officer stopped a vehicle with two Black men - "two B/M's," as the officer wrote - based on the tinting of the automobile windows. Even if the stop and subsequent search did not run afoul of the Fourth Amendment, Moncrieffe appears to have been the victim of racial profiling. A police officer, aided by a drug sniffing dog, in drug interdiction efforts relied on a minor vehicle infraction as the pretext to stop two Black men traveling on the interstate in a sports utility vehicle with tinted windows.

The Moncrieffe case exemplifies how a racially disparate criminal justice system exacerbates racially disparate removals in a time of record-setting deportations of noncitizens. Although he was fortunate enough to stave off deportation and separation from an entire life built in the United States, many lawful permanent residents are not nearly so lucky.

"Social Innovation" 
Washington University Law Review, Vol. 92, No. 1, 2014
UC Davis Legal Studies Research Paper No. 407

PETER LEE, University of California, Davis - School of Law
Email: ptrlee@ucdavis.edu

This Article provides the first legal examination of the immensely valuable but underappreciated phenomenon of social innovation. Innovations such as cognitive behavioral therapy, microfinance, and strategies to reduce hospital-based infections greatly enhance social welfare yet operate completely outside of the patent system, the primary legal mechanism for promoting innovation. This Article draws on empirical studies to elucidate this significant kind of innovation and explore its divergence from the classic model of technological innovation championed by the patent system. In so doing, it illustrates how patent law exhibits a rather crabbed, particularistic conception of innovation. Among other characteristics, innovation in the patent context is individualistic, arises from a discrete origin and history, and prioritizes novelty. Much social innovation, however, arises from communities rather than individual inventors, evolves from multiple histories, and entails expanding that which already exists from one context to another. These attributes, moreover, apply in large part to technological innovation as well, thus revealing how patent law relies upon and reinforces a rather distorted view of the innovative processes it seeks to promote. Moving from the descriptive to the prescriptive, this Article cautions against extending exclusive rights to social innovations and suggests several nonpatent mechanisms for accelerating this valuable activity. Finally, it examines the theoretical implications of social innovation for patent law, thus helping to contribute to a more holistic framework for innovation law and policy.

"Brief of Interested Law Professors as Amici Curiae Supporting Respondent in Direct Marketing Association v. Brohl" 
Stanford Public Law Working Paper No. 2516159
San Diego Legal Studies Paper No. 14-71
UC Davis Legal Studies Research Paper No. 400
UC Berkeley Public Law Research Paper No. 2516159
UCLA School of Law Research Paper No. 14-19

DARIEN SHANSKE, University of California, Davis - School of Law
Email: dshanske@ucdavis.edu
ALAN B. MORRISON, George Washington University - Law School
Email: abmorrison@law.gwu.edu
JOSEPH BANKMAN, Stanford Law School
Email: JBANKMAN@LELAND.STANFORD.EDU
JORDAN M. BARRY, University of San Diego School of Law
Email: jbarry@sandiego.edu
BARBARA H. FRIED, Stanford Law School
Email: bfried@stanford.edu
DAVID GAMAGE, University of California, Berkeley - Boalt Hall School of Law
Email: david.gamage@gmail.com
ANDREW J. HAILE, Elon University School of Law
Email: ahaile@brookspierce.com
KIRK J. STARK, University of California, Los Angeles (UCLA) - School of Law
Email: STARK@LAW.UCLA.EDU
JOHN A. SWAIN, University of Arizona - James E. Rogers College of Law
Email: john.swain@law.arizona.edu
DENNIS J. VENTRY, University of California, Davis - School of Law
Email: djventry@ucdavis.edu

The petitioner in this case has framed the question presented as follows: "Whether the Tax Injunction Act bars federal court jurisdiction over a suit brought by non-taxpayers to enjoin the informational notice and reporting requirements of a state law that neither imposes a tax, nor requires the collection of a tax, but serves only as a secondary aspect of state tax administration."

Amici agree with the respondent, the State of Colorado, that the Tax Injunction Act bars federal courts from enjoining the operation of the Colorado Statute at issue in this case because this lawsuit is intended to create the very kind of premature federal court interference with the operation of the Colorado use tax collection system that the TIA was designed to prevent. To assist the Court in understanding the application of the TIA to this case, amici (i) place the reporting requirements mandated by the Colorado Statute in the broader context of tax administration and (ii) explain the potential interaction between a decision on the TIA issue in this case and the underlying dispute concerning the dormant Commerce Clause.

Third-party reporting of tax information is a ubiquitous and longstanding feature of modern tax systems. When tax authorities rely on taxpayers to self-report their taxable activities, compliance rates for the collection of any tax is low. Like all states with a sales tax, Colorado faced - and faces - a voluntary compliance problem with the collection of its use tax. The use tax is a complement to the sales tax; in-state vendors collect and remit the sales tax, while in-state consumers are responsible for remitting the use tax on purchases made from out-of-state vendors that do not collect the sales tax. To this compliance challenge, Colorado turned to a third-party reporting solution. In broad strokes, the Colorado Statute imposes a modest requirement on one party to a taxable transaction - specifically on relatively large retailers who do not collect the use tax - to report information on their Colorado sales both to the consumer/taxpayer and to the taxing authorities.

Amici law professors contend that the centrality of third-party reporting to tax administration in general, and its aptness for this problem in particular, indicate that enjoining the operation of the Colorado Statute constitutes "restrain[ing] the assessment, levy or collection" of Colorado's use tax.

Amici also observe, however, that even a narrow ruling on the scope of the TIA in the Supreme Court could have an unexpected - and we would argue undesirable - impact on the federalism concerns that we think should decide this case. This is because any interpretation of the Colorado Statute for purposes of the TIA made by the Court might be erroneously construed as carrying over to interpreting the Statute for purposes of the dormant Commerce Clause.

We think it likely and reasonable for the courts below to look to the Supreme Court's decision on the TIA for guidance as to what test to apply under the dormant Commerce Clause. However, amici fear that a decision that held that Colorado's reporting requirement is integral to Colorado's "tax collection" for purposes of the TIA will exert a gravitational pull on the lower courts, encouraging them to apply the physical presence test from Quill Corp. v. North Dakota, 504 U.S. 298 (1992) to the Colorado Statute. The Quill test is an especially strict test under the dormant Commerce Clause, and one arguably meant only for "taxes." Thus, a victory for sensible state tax administration and federalism in this Court could be transmuted into a defeat for those principles below. Amici believe that NFIB v. Sebelius, 132 S. Ct. 2566 (2012), teaches that an answer on the TIA does not compel an answer concerning the dormant Commerce Clause. We call this issue to the Court's attention so that the Court is aware of how a decision on the TIA issue might be used - or misused - when the case reaches the merits, either in the state or federal court system.

"Non-Citizen Nationals: Neither Aliens Nor Citizens" 
UC Davis Legal Studies Research Paper No. 405

ROSE CUISON VILLAZOR, University of California, Davis
Email: rcvillazor@ucdavis.edu

The modern conception of the law of birthright citizenship operates along the citizen/noncitizen binary. Those born in the United States generally acquire automatic U.S. citizenship at birth. Those who do not are regarded as non-citizens. Unbeknownst to many, there is another form of birthright membership category: the non-citizen national. Judicially constructed in the 1900s and codified by Congress in 1940, non-citizen national was the status given to people who were born in U.S. territories acquired at the end of the Spanish-American War in 1898. Today, it is the status of people who are born in American Samoa, a current U.S. territory.

This Article explores the legal construction of non-citizen national status and its implications for our understanding of citizenship. On a narrow level, the Article recovers a forgotten part of U.S. racial history, revealing an interstitial form of birthright citizenship that emerged out of imperialism and racial restrictions to citizenship. On a broader scale, this Article calls into question the plenary authority of Congress over the territories and power to determine their people's membership status. Specifically, this Article contends that such plenary power over the citizenship status of those born in a U.S. possession conflicts with the common law principle of jus soli and the Fourteenth Amendment's Citizenship Clause. Accordingly, this Article offers a limiting principle to congressional power over birthright citizenship.

November 5, 2010

The Bigger They Come...

(cross-post from TheConglomerate forum: Legislative Agenda for the 112th Congress)

Agenda for the 112th: The Bigger They Come

Too Big to Fail.

Bailouts of megabanks preserved our financial system-for better and for worse. Next time around, Dodd-Frank allows winding down of big firms that cause systemic threats.  But as I far as I can tell, the Act doesn’t require any liquidations—it’s up to the Treasury Secretary to decide whether to appoint the FDIC as receiver, (and up to the FDIC to pass the actual rules ).  So it’s not clear whether there will be political courage to use this power in a future crisis; likely there will be bailouts again. 

The obvious solution to the too-big-to-fail problem is to start breaking up the too-big ones that almost failed last time, and to prevent any more from getting that big.  Then we can see a little creative destruction now and again.  [How to do it?  Luckily, I don’t have to bother with that part, since this forum is about the next two years and this is so not going to happen any time soon (if ever).]

Monetary policy: [Yes, I know this is mostly Fed policy, not legislative]

 One has to wonder: the economy almost self-destructed because of easy credit, and the solution is…to ease up on credit? 

I understand, and generally sympathize with, demand-side economics, and it may be the only way to mitigate the current pain of job losses.  And I find it hard to believe there’s currently a real danger of inflation in the near term (those who claim to be worried about these days are probably most concerned about bond prices).  But in the longer term, economic growth based entirely on expanding domestic demand seems like a snake eating its own tail.  Is it prudish--or radical--to suggest there’s something wrong with our culture of consumption?   If it needs fixing, punishing savings with low/negative interest rates ain’t the way to start.  I don’t profess to have a palatable alternative.  Maybe that’s the point—it’s time to take the nasty medicine….But I have tenure, so it’s too easy for me to say that. 

 Do nothing:

Looks like I'm not the only wishing I'd written Dave Hoffman’s post, but since he got there first, let me polish the apple a bit: Instead of passing new laws, how about actually enforcing the laws already on the books?    Oh, yeah, enforcement is the job of the executive branch.  Then how about Congress just refrains from obstructing the enforcement of the ones it just passed?  [Edit: Underbelly has more juicy stuff on this.] Just a thought.

February 22, 2010

United States v. Jeffrey Skilling

Next Monday, the Supreme Court hears oral arguments in U.S. v. Skilling (yes, the Enron guy).  This is like the Winter Olympics for white-collar crime, because it challenges the constitutionality of  an important and controversial prosecutorial tool.  The Court is clearly interested in this statute, as it's the subject of not one, but two other cases this term. 

The statute at issue, part of federal mail fraud law, is the so-called  “honest services” statute (18 USC 1346). Congress passed it in 1988 to overrule McNally v. U.S., a 1987 Supreme Court’s decision that the mail fraud statute (18 USC 1341) punished only frauds that deprived the victim of money or property.  Prior to that case, many lower federal courts had accepted prosecutors’ argument that mail fraud included the denial of “honest services.”    

By writing the statute, Congress didn’t really clarify much, however.  1346 only says mail fraud includes the theft of “honest services”--it doesn’t define “honest services.”  Unfortunately, the pre-1987 courts that accepted the “honest services” theory didn’t clearly define it either.

The law of theft has historically evolved from covering only violent takings of property to covering deceptive takings of property to covering deception that has intangible and abstract effects—this last category is of course hard to define.  On the one hand, that shows law has become more flexible and attuned to reality.  On the other, the government may be unfairly expanding its power to punish.

Of the three "honest services" cases this term, Skilling is the big one because a. he's the Enron guy; and b. the other two cases present more specific challenges to the statute. 

Kind of.

Actually, Skilling’s original petition to the Supreme Court also made a more narrowly focused challenge to the statute.  So if the Court uses Skilling to decide the broader question of whether the statute is unconstitutionally vague, it may come in for criticism of being --gasp!-- an “activist” Court—something it was accused of when it invalidated the corporate campaign finance statute in its recent Citizens United v. FEC decision (my thoughts on other matters in that case are here). 

 

February 2, 2010

Corporations and Campaign Finance

As you probably know by now, the U.S. Supreme Court recently invalidated certain restrictions on corporations’ participation in campaign finance in Citizens United v. Federal Election Commission. Because I focus on corporate law, a colleague told me I should write an article about this, to which I replied, I did—ten years ago.

I argued there that the Court’s campaign-finance jurisprudence has consistently failed to consider a large business corporation as a complex hierarchical entity.  A decade later, the Court continues to treat a corporation as the equivalent of an individual human speaker under the First Amendment. The Court imagines a corporation as an organization that reflects the will of its constituent individuals.

Citizen United, like past opinions, states in don't-blink-or-you'll-miss-it  fashion that shareholders control corporate speech through “corporate democracy."  But the Court has never tried to describe how “corporate democracy” works.  In fact, while shareholders can cast votes in director elections, directors typically run unopposed and it is very difficult for shareholders to nominate alternate candidates. Moreover, directors do not run corporations-CEOs do, and they are appointed by directors, not elected by shareholders.  While shareholders can express discontent with corporate political spending by selling their shares, this is only a kind of after-the-fact punishment, not a method of participation in making political spending choices.

There are certainly some arguments to be made in favor of the petitioners in Citizens United, but “corporate democracy” is not one of them.

If you are interested in hearing more about this issue, Professor Chris Elmendorf and I will participate in a panel discussion on Citizens United in [CORRECTION] King Hall ROOM 2008 at noon on Tuesday, February 9.