Duke Law Journal

Agents of Change: The Fiduciary Duties of Forwarding Market Professionals

Peter D. Isakoff — Mon, 16 Apr 2012 17:07:09 PDT

In the wake of the financial crisis of 2008, the legal system struggles to effectively regulate forwarding market professionals—brokerdealers and investment advisers who invest client funds with third parties. Defining the fiduciary duties these forwarding market professionals owe their clients when they invest funds with third parties raises complex issues concerning due diligence, postinvestment monitoring of investments, and disclosure of material facts. Weak regulatory standards, advances in technology in the financial-services industry, and changes in the scope of services provided by brokerdealers emphasize both the inadequacies of the system created by the Securities Exchange Act of 1934 (1934) Act and the Investment Advisers Act of 1940 (IAA) and the urgent need for a new regulatory standard. This Note contends that agency law provides a clear framework for defining the fiduciary duties that forwarding market professionals owe their clients for third-party investments. It then explains how the SEC is well situated to establish a fiduciary duty for forwarding market professionals based on agency principles under the Dodd-Frank Act.

When Money Grew on Trees: Lucy v. Zehmer and Contracting in a Boom Market

Barak D. Richman et al. — Mon, 16 Apr 2012 17:07:08 PDT

This Article revisits Lucy v. Zehmer, a 1950s Virginia Supreme Court ruling that has become a staple in most contracts courses in American law schools. The colorful facts are well known to nearly all law students: Lucy and Zehmer met one evening in December 1952 at a restaurant in Dinwiddie, Virginia, and, following several drinks and much verbal banter, Zehmer wrote a contract on a restaurant bill, in which he agreed to sell his farm to Lucy for $50,000. Zehmer later insisted that he had been intoxicated and had thought the entire matter was a joke. He testified that he had been "high as a Georgia pine" and merely bluffing to try to get Lucy to admit that he did not actually have $50,000. Upholding the contract, the court ruled that regardless of Zehmer’s intent, his outward behavior could reasonably be construed to suggest that he had been serious. The court thus invoked what is known as the "objective theory of contract formation."

Our findings suggest that the court misinterpreted the contractual setting surrounding that December evening in 1952. Our research uncovers several discoveries: (1) Lucy, acting as a middleman for southern Virginia’s burgeoning pulp-and-paper industry, sought the Ferguson farm for its rich timber reserves; (2) Lucy was one of scores of aggressive timber middlemen in the region who eagerly sought valuable timberland and prompted a chaotic landgrab, leaving a wake of shady transactions and colorful litigation; and (3) within eight years of winning injunctive relief from the Virginia Supreme Court and purchasing the Ferguson farm from Zehmer for $50,000, Lucy earned approximately $142,000 from selling the land and its natural resources. These findings call into question the court’s assertion that $50,000 was a fair price, its conclusion that Zehmer’s actions indicated contractual intent, and its confidence that the objective method captured the relevant background in which Lucy’s and Zehmer's exchange took place. More generally, these findings suggest that conclusions reached by the objective method are highly dependent on both the facts that are retold and the context in which those facts occurred, and that historical analysis can meaningfully illustrate the limits of legal doctrines.

Forum Choice for Terrorism Suspects

Aziz Z. Huq — Mon, 16 Apr 2012 17:07:07 PDT

What forum should be used to adjudicate the status of persons suspected of involvement in terrorism? Recent clashes between Congress and the president as to whether the status of terrorism suspects should be determined via Article III courts or military commissions have revived the debate about this venue question. The problem is typically framed as a matter of legal doctrine, with statutory and doctrinal rules invoked as dispositive guides for sorting suspects into either civilian or military venues. This Article takes issue with the utility of that framing of the problem. It argues that the forum question can more profitably be analyzed through an institutional design lens. A key institutional-design decision is whether and when to create jurisdictional redundancy. When, that is, should the existence of overlapping jurisdictions vest the government with a threshold choice of forums or an option to retry a suspect who has been acquitted in an initial process? Jurisdictional redundancy is pervasive. But conventional wisdom suggests that it is unwise. This Article demonstrates, however, that overlap among forums has complex direct and indirect effects on the accuracy and cost of terrorism related adjudication. The Article presents a comprehensive framework for analyzing redundancy by exploring how redundancy influences error rates, system-maintenance costs, externalities, information production, and incentives. Applying this framework, I contend that the conventional wisdom is flawed. Pervasive redundancy has surprising merit in contrast to two leading reform proposals that would eliminate most jurisdictional overlap.

The Intellectual Property Clause’s External Limitations

Jeanne C. Fromer — Mon, 16 Apr 2012 17:07:05 PDT

The text, structure, and history of the Intellectual Property Clause (IP Clause), as well as subsequent governmental activity, Supreme Court doctrine, and policy, show that the IP Clause limits Congress from using any of its other powers "To promote the Progress of Science and useful Arts" through laws that reach beyond the power conferred by the IP Clause to "secur[e] for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." That is, the evidence marshaled by this Article shows that the IP Clause externally limits Congress from seeking, via legislation, to promote the progress of science and useful arts, in any way other than by enacting laws that secure to authors and inventors exclusive rights in their writings and discoveries for limited times. Yet the story of Congress's power in this area has another side: Since the late twentieth century, Congress has increasingly reached beyond the IP Clause's means to promote the Clause’s ends, often asserting its expansive—and less limited—commerce and treaty powers. To some degree, this shift reflects the fact that laws regulating intellectual property often have multiple purposes, including trade and foreign relations interests, which sometimes point in more expansive directions than do those of the more limited IP Clause. This Article synthesizes these competing purposes and provides an analytical framework under which courts, legislators, and others can assess the constitutionality of federal legislation. This framework affords a presumption against the constitutionality of laws that promote the IP Clause's ends but subvert its means, a presumption that may be overcome only by clear and convincing evidence that Congress, pursuant to its other more permissive powers, intentionally chose to supersede the IP Clause's means because of paramount, legitimate interests. This framework suggests that a number of existing federal laws, such as federal trade-secrecy provisions and antibootlegging laws, might be unconstitutional. The framework also suggests how to assess the constitutionality of laws that would protect databases, laws passed pursuant to international agreements with other countries, and laws that establish federal funding for scientific and artistic works.

Patent Validity Across the Executive Branch: Ex Ante Foundations for Policy Development

Arti K. Rai — Thu, 15 Mar 2012 06:43:55 PDT

Among patent scholars who address institutional questions, many favor the courts over the PTO as the policymaker of choice. Even though courts have familiar limitations with respect to policymaking, scholars often argue that the PTO is more likely to be captured. This Essay argues that the capture story has significant limits, particularly in key cases where PTO decision making has been influenced by other executive-branch decision makers. Meanwhile, exclusive reliance on ex post judicial development can yield a one-way ratchet towards the expansion of patent protection. When courts expand patent rights, they generally do not have to worry about retroactive effect. By contrast, courts face legitimate concerns about retroactive effect when they are called upon to curtail such rights. More frequent ex ante intervention by the executive branch, facilitated by the recent grant of postgrant review authority in the America Invents Act, would avoid these problems without precluding ex post development and adaptation.

The Real Debate over the Senate’s Role in the Confirmation Process

William Grayson Lambert — Thu, 15 Mar 2012 06:43:55 PDT

The five Supreme Court nominations between 2005 and 2010 brought renewed attention to the Senate’s role in the confirmation process. This Note explores the debate over the Senate’s proper role in that process. First, this Note summarizes and clarifies the two traditional views of the Senate’s role, classifying them as the "assertive view" and the "deferential view," and offers a new framework for understanding these views. This Note then traces the traditional arguments made by proponents of these views. It first examines the historical arguments, both from original understanding and historical practice; it then turns to pragmatic arguments about which view better accomplishes the purposes of the Senate’s participation in the confirmation process. Neither the historical arguments nor the pragmatic arguments resolve the issue of which approach to the confirmation process is better.

By recounting these arguments, however, this Note reveals the underlying—and unspoken—difference between adherents of the assertive view and adherents of the deferential view: their conceptions of the relationship between law and politics differ widely. Adherents of the assertive view can fall on either end of a spectrum in understanding the relationship between law and politics. For some adherents of the assertive view, law is completely distinct from politics, so they believe senators should carefully ensure that judicial nominees understand this distinction and should vote only for those nominees who do and will respect it. For other adherents of the assertive view, law and politics are two sides of the same coin, so they think senators should aggressively inquire into the views of judicial nominees and should vote only for those nominees whose views comport with their own. Either way, the assertive view results in the same role for the Senate in the confirmation process. Adherents of the deferential view, by contrast, fall somewhere in the middle of the spectrum, believing that law is underdetermined and is shaped, but not totally controlled, by politics. Adherents of this view make certain that nominees have reasonable legal views, but they are more willing to vote to confirm nominees whose views differ from their own. This Note brings this important difference to the forefront in hopes of promoting more meaningful discussions about the Senate’s role in the confirmation process.

Executive Defense of Congressional Acts

Daniel J. Meltzer — Thu, 15 Mar 2012 06:43:54 PDT

This Article explores the appropriate role of the executive branch in enforcing and defending federal statutes that the president, or executive-branch officials, believe may well be unconstitutional, but for whose constitutional validity reasonable arguments can be advanced. The Article first locates the question of the scope of the executive branch’s responsibility to enforce and defend federal statutes in the larger debate about the extent to which political branches of government are authorized—or even obligated—to make determinations of constitutionality independently of the views of the judiciary. It then reviews the historical practice of the executive branch in defending federal statutes—both the very strong presumption that statutes will be enforced and in turn defended if challenged in court and the departures from that general practice. The Article then considers a range of institutional practices and norms that are significant in considering the question. A number of considerations—including the distinctive capacities of the executive branch, the relationship between career lawyers and political appointees in the executive branch, the virtues of institutional continuity within the executive branch, and the relationship between the executive branch and Congress—reinforce the wisdom of the conventional practice of defending even those statutes that an incumbent administration views as offensive and possibly invalid. Moreover, a regime in which each administration views itself as having significant latitude to refuse to enforce and defend acts of Congress would be considerably less attractive than particular decisions or theories, given that different administrations are likely to have sharply different views about the appropriate occasions for, and the appropriate theories underlying, a refusal to enforce or defend federal statutes. In a world featuring an extremely broad range of views about proper constitutional interpretation, partisan correlates to those views, a powerful temptation to equate what is misguided or immoral with what is unconstitutional, increased polarization of the political parties, and a lack of commitment to the idea of judicial restraint, decisions not to defend or enforce have the capacity to contribute significantly to the unraveling of the executive branch’s practice of defending federal statutes. This Article also examines the responsibility of the judiciary to provide the executive branch with the operating room that it needs to be able to defend, candidly and with integrity, statutes with whose premises the president and his administration strongly disagree. In the end, the question of the executive branch’s responsibility to enforce and defend statutes is not governed by a legal rule derivable from the Constitution itself, but is a matter of judgment, informed by a welter of historical and institutional concerns.

When Government Intrudes: Regulating Individual Behaviors That Harm the Environment

Katrina Fischer Kuh — Thu, 15 Mar 2012 06:43:53 PDT

Emerging environmental problems and technologies, coupled with the existence of mature regulatory regimes governing most industrial sources of pollution, reveal with new clarity the harms that individual behaviors can inflict on the environment. Changing how individuals impact the environment through their daily behaviors, however, requires a reorientation of environmental law and policy and a balancing of government prerogatives with individual liberty. A growing body of legal scholarship recognizes the environmental significance of individual behaviors, critiques the failure of law and policy to capture harms traceable to individuals, and suggests and evaluates strategies for capturing individual harms going forward. In this discussion, mandates on individuals have been largely dismissed as a policy tool for changing environmentally significant individual behaviors because of a widely shared view (1) that detection and enforcement of such mandates would pose insurmountable technical, administrative, and cost barriers and (2) that the application of mandates to individuals would trigger insurmountable objections to their intrusive effect, essentially so offending notions of liberty and privacy that they could not be adopted or enforced.

But there are reasons to believe that the cost and feasibility of imposing mandates on environmentally significant individual behaviors may be less daunting than widely imagined. Notably, intrusion objections have yet to be subjected to critical examination. A better understanding of whether, when, and why mandates on environmentally significant individual behaviors might trigger fatal intrusion objections would help to assess mandates as a policy tool for changing environmentally significant individual behaviors and would offer guidance about how mandates could be structured to avoid such objections.

This Article undertakes an initial effort to better define and understand the intrusion objection as it applies to the use of individual mandates to change environmentally significant behaviors. Part I surveys prior and existing laws aimed at individual behaviors and associated environmental harms to develop a rough sense of when such regulations have, and have not, triggered what could be characterized as intrusion objections. Part II then looks to substantive due process jurisprudence for further guidance about when and why government restrictions on individual freedom might give rise to intrusion objections. Part III builds on Parts I and II to offer a more nuanced understanding of the intrusion objection and suggests some principles to guide the consideration and development of mandates on environmentally significant individual behaviors going forward. Part III proposes as an example an energy-waste ordinance designed to avoid intrusion objections.

The Article concludes that the obstacle to direct regulation of environmentally significant individual behaviors posed by the intrusion objection is both narrower and broader than presently recognized. The obstacle posed by the intrusion objection is narrower because although the enforcement of mandates against some primarily in-home behaviors may occasion insurmountable privacy objections, other environmentally significant individual behaviors can be and are regulated without triggering these objections. The obstacle posed by the intrusion objection is broader because perceived government intrusion is just one of the costs—along with monetary costs and inconvenience—that regulation can impose on individuals. The more salient variable for purposes of understanding the objections to regulating environmentally significant individual behaviors is transparency: direct regulation, as opposed to indirect regulation, tends to make all of the costs of regulation more transparent, an effect that may invite public resistance.

When For Better Is For Worse: Immigration Law’s Gendered Impact on Foreign Polygamous Marriage

Sarah L. Eichenberger — Wed, 22 Feb 2012 12:24:18 PST

The United States has banned polygamous immigrants since the late nineteenth century. Enacted amid isolationist fears that an influx of polygamists would cause moral deterioration, the polygamy bar remains a resolute, if often overlooked, feature of modern immigration law. The current immigration scheme continues this tradition, rendering immigrants who intend to practice polygamy in the United States categorically ineligible for legal-permanent-resident status. As a result, the immigration bar allows polygamous men to immigrate with a wife of their choosing and the children from each of their marriages. Their other wives, however, are deemed inadmissible to the United States.

This Note explores the immigration bar’s disproportionate effect on the foreign wives of polygamous immigrants. In addition to precluding the other wives of polygamous immigrants from legal permanent-resident status, the current immigration bar also renders such women ineligible for humanitarian ingress. After offering a comparative analysis of how Canada and the United Kingdom reconcile their respective policies against polygamy with the burgeoning question of women’s rights, this Note proposes that Congress likewise treat foreign women in polygamous unions with a degree of equity.

The Obsolescence of San Antonio v. Rodriguez in the Wake of the Federal Government’s Quest To Leave No Child Behind

Sarah G. Boyce — Wed, 22 Feb 2012 12:24:15 PST

Since the mid-1950s, a sea change in public education has taken place. Public education—a policy concern traditionally reserved to the states—has become a core concern of the federal government. This Note surveys three of the federal government’s most significant appropriations of power: the enactment of the Elementary and Secondary Education Act (ESEA) in 1965; the creation of the Department of Education in 1980; and the passage of the No Child Left Behind Act of 2001 (NCLB), the most recent, and easily most expansive, iteration of the ESEA. This Note also considers the manner in which the Supreme Court has facilitated federal control over education, despite the Court’s refusal to recognize a formal right to education. Finally, this Note argues that the federal government’s incursion into the realm of public education has established an implicit right to education that has rendered San Antonio v. Rodriguez, the Supreme Court’s 1973 decision that denied the existence of a fundamental right to education, obsolete.

Stare Decisis and Foreign Affairs

Michael P. Van Alstine — Wed, 22 Feb 2012 12:24:13 PST

This Article examines whether the jurisprudential and institutional premises of the doctrine of stare decisis retain their validity in the field of foreign affairs. The proper role of the judicial branch in foreign affairs has provoked substantial scholarly debate—historical, institutional, and normative—since the founding of the Republic. Precisely because of the sensitivity of the subject, the Supreme Court has both warned about the judicial branch’s comparative lack of expertise in the field and established a web of deference doctrines designed to protect against improvident judicial action. Notwithstanding all of this discussion, however, neither the Supreme Court nor any scholar has ever examined the complicated relationship between stare decisis and foreign affairs.

This Article first contextualizes the discussion with an analysis of the foundations of stare decisis. After a review of the values that animate the doctrine, it explores the subtly important jurisdictional premises of stare decisis. Almost entirely overlooked by both courts and scholars, these inherent jurisdictional limitations on the force of precedent have direct implications for the proper role of stare decisis in foreign affairs law. The Article then examines the special constitutional arrangement of powers in the field, in particular the respective roles of Congress and the executive. Just as significant, the Article also canvasses the multiplicity of avenues by which the American legal system channels foreign affairs issues to the federal courts. This growing interbranch tension highlights the significance of reflexively cloaking the resultant judicial precedents with full stare decisis effect.

The analysis in this Article demonstrates that in fact a more nuanced and accommodating understanding of precedent is required with respect to certain fundamental aspects of foreign affairs law. For purely domestic statutes, fidelity to the value judgments first made by Congress within and for the domestic legal system should avoid both the fact and appearance of independent judicial agency. Moreover, when Congress takes it upon itself to define the entire content of the law—without importing international legal norms—the courts need look only to familiar domestic sources and materials in their interpretive inquiries. Matters are different, however, for the broad and expanding field of controversies that likewise fall within the Article III “judicial Power” but that involve the courts in the enforcement of rights or obligations grounded in international law. Within this field, the analysis in this Article demonstrates that the likelihood and consequences of judicial error are greater, that precedents are particularly susceptible to rapid erosion by exogenous forces of change, and that institutional considerations make judicial leadership that has been fortified by rigid precedent particularly problematic. It ultimately concludes that these distinct considerations should function as an additional “special justification” for reexamining international law precedents. Consistent with the systemic values of stare decisis, however, the reexamination power should exist only for the issuing court; lower courts in the hierarchically integrated judicial branch—courts that are subject to the vertical dimension of stare decisis—should remain bound by precedents to the full extent of existing law.

Functional Intimate Association Analysis: A Doctrinal Shift To Save the Roberts Framework

Joshua P. Roling — Tue, 17 Jan 2012 11:52:37 PST

In Roberts v. U.S. Jaycees, the Supreme Court recognized intimate association as one of the two distinct senses of the freedom of association. In doing so, the Court identified two essential functions that justify constitutional protection for the relationships that provide them: intimate relationships cultivate and transmit shared ideals and beliefs, and they provide opportunities for emotional enrichment and self-identification by facilitating the creation of close bonds among members. Then, recognizing that familial relationships often exemplify these functions, the Court identified four aspects of family relationships that would help distinguish intimate from nonintimate associations: size, purpose, selectivity, and seclusion from others. Despite the secondary role of these aspects, subsequent decisions have focused solely on these four characteristics without even mentioning the justifications that originally supported constitutional protection. This factor-based analysis has resulted in unpredictable and inconsistent decisions that threaten to undermine the legitimacy of the entire Roberts framework. Drawing from the original functional justifications, this Note argues that courts must abandon their sole reliance on the Roberts factors and instead adopt a functional analysis that properly appreciates the right’s underlying values and ensures that groups reflecting those values are consistently protected.

Friendly, J., Dissenting

Michael Boudin — Tue, 17 Jan 2012 11:52:35 PST

A New Generation of International Adjudication

Gary Born — Tue, 17 Jan 2012 11:52:34 PST

This Article challenges the conventional view of contemporary international adjudication. It identifies a new generation of international tribunals, which has been largely ignored by commentators, and argues that these tribunals offer a highly successful, alternative model to traditional public-international-law adjudicatory bodies. The proliferation of international tribunals is widely regarded as one of the most significant developments in international law over the past century. The subject has given rise to an extensive and robust body of academic commentary. Although commentators reach widely divergent conclusions about many aspects of international law and adjudication, they all agree that international tribunals differ fundamentally from national courts. In particular, according to the commentary, international tribunals such as the International Court of Justice lack the power to render enforceable decisions or to exercise compulsory jurisdiction. This Article argues that commentators have proceeded from a flawed and incomplete understanding of contemporary international adjudication. Virtually all commentary on the subject ignores the development of a second generation of international tribunals, best represented by international commercial and investment tribunals, World Trade Organization panels, and claims-settlement mechanisms. Contrary to the conventional wisdom about international adjudication, this new generation of international tribunals has the power to exercise what is effectively compulsory jurisdiction and to render enforceable decisions that can often be coercively executed against states and their commercial assets. These second-generation tribunals have been the most frequently used and, in many respects, the most successful form of international adjudication in recent decades. The caseloads of these tribunals have grown rapidly over the past forty years and now substantially exceed those of traditional public-international-law tribunals. Moreover, an analysis of state treatymaking practice over recent decades shows that states have virtually never concluded treaties accepting the jurisdiction of traditional first-generation tribunals—concluding less than one treaty per year—whereas they have frequently accepted the jurisdiction of second-generation tribunals capable of rendering enforceable decisions—accepting some fifty treaties per year. More fundamentally, second-generation tribunals have played an essential role in facilitating international trade, finance, and investment; have contributed to the development of important fields of international law; and have provided leading contemporary examples of international law working in practice. Although largely ignored by the commentary, the success and frequent use of second-generation tribunals have important implications for conventional analysis of international adjudication. The success of these tribunals flatly contradicts the claims, advanced by a number of academic commentators, that international adjudication is unimportant in contemporary international affairs and that states do not use international tribunals—particularly tribunals that would be effective. In reality, second-generation tribunals have been frequently and successfully used in vitally important fields, in part because they issue effective and enforceable decisions. At the same time, the success of second-generation tribunals also contradicts prescriptions, offered by a number of commentators, that future international tribunals be modeled on “independent” first-generation tribunals or, alternatively, on entirely “dependent” adjudicative mechanisms. Successful second-generation tribunals exhibit a blend of structural characteristics that defy blanket prescriptions for either “independence” or “dependence” and that counsel for more tailored, nuanced institutional designs.

DNA as Patentable Subject Matter and a Narrow Framework for Addressing the Perceived Problems Caused by Gene Patents

Stephen H. Schilling — Thu, 08 Dec 2011 09:42:22 PST

Concerns about the alleged harmful effects of gene patents— including hindered research and innovation and impeded patient access to high-quality genetic diagnostic tests—have resulted in overreactions from the public and throughout the legal profession. These overreactions are exemplified by Association for Molecular Pathology v. U.S. Patent and Trademark Office, a 2010 case in the Southern District of New York that held that isolated DNA is unpatentable subject matter under 35 U.S.C. § 101. The problem with these responses is that they fail to adequately consider the role that gene patents and patents on similar biomolecules play in facilitating investment in the costly and risky developmental processes required to transform the underlying inventions into marketable products. Accordingly, a more precisely refined solution is advisable. This Note proposes a narrowly tailored set of solutions to address the concerns about gene patents without destroying the incentives for companies to create and commercialize inventions derived from these and similar patents.

Reforming Attempt Liability Under 18 U.S.C. § 2422(b): An Insubstantial Step Back from United States v. Rothenberg

Korey J. Christensen — Thu, 08 Dec 2011 09:42:21 PST

The statute under which Internet sex predators are prosecuted for illicit online communications prohibits attempts to “knowingly persuade[], induce[], entice[], or coerce[]” minors to engage in “any sexual activity for which any person” can be criminally charged. This broad language has allowed courts to gradually expand the statute’s reach by reducing the level of conduct considered sufficient to constitute a substantial step toward commission of the crime. The Eleventh Circuit’s decision in United States v. Rothenberg is especially illustrative of this problematic expansion, as the court held that a conversation between consenting adults, without more, was sufficient to support a conviction. This Note critiques Rothenberg for its flawed analysis of precedent; its inconsistency with the statute’s legislative history and principles of federal attempt jurisprudence; and its potential to yield absurd results, whereby criminal liability attaches to behavior many would consider relatively innocuous. A suggested reform—imposing a higher conduct requirement when defendants have communicated solely with adults and implementing a defense for proximity of age—would have the narrow impact of rectifying these problems while not diminishing law enforcement’s ability to protect children from online predators.

Interpretive Freedom: A Necessary Component of Article III Judging

Jennifer M. Bandy — Thu, 08 Dec 2011 09:42:20 PST

As judges have debated the best method of constitutional and statutory interpretation, scholars have begun calling for increased constraints on the methodological freedoms of Article III judges. This Note rejects such proposals on constitutional grounds. Drawing upon the jurisprudence and scholarship on inherent powers, I argue that interpretive choice is an inherent judicial power. The drafting and ratification history of Article III demonstrates that the Framers expected federal judges to interpret the law. To accomplish this task, however, judges must have some methodological approach to help them prioritize interpretive evidence. Thus, imposition of a binding interpretive methodology upon federal judges would pose two constitutional problems. First, it would infringe the essential judicial function of interpretive deliberation. Second, it would prevent the judiciary as a whole from engaging in its most powerful constitutional check on the excesses of the political branches. Because interpretive freedom is necessary to the fulfillment of the Article III judicial function, that freedom must be considered an inherent power vested in all federal judges.

Turning Unambiguous Statutory Materials into Ambiguous Statutes: Ordering Principles, Avoidance, and Transparent Justification in Cases of Interpretive Choice

Carlos E. González — Thu, 08 Dec 2011 09:42:19 PST

How should courts handle interpretive choices, such as when statutory text strongly points to one statutory meaning but strong evidence of legislative intent suggests a contradictory statutory meaning? Courts have addressed this longstanding dilemma inconsistently. Sometimes courts follow statutory text over contradictory legislative intent; sometimes they do the exact opposite.

Though reaching contradictory conclusions, many courts facing interpretive choices have argued that the law of interpretation provides definitive solutions. This Article argues that the opposite is true: the law of interpretation generates, rather than resolves, interpretive choices. When this occurs, legally unconstrained judicial discretion and extralegal factors, rather than the law of interpretation, determine legal meaning. While other scholars have focused on the role of judicial discretion in shaping legal meaning, their analyses invariably have centered on inherently ambiguous legal texts or legislative histories. This Article, by contrast, demonstrates how, in cases of interpretive choice, unique features of the law of interpretation turn unambiguous legal texts and legislative histories into ambiguous statutes.

This Article also explores how courts facing interpretive choices misrepresent the nature and capacity of the law of interpretation. Rather than acknowledging the central role of judicial discretion and extralegal considerations, courts argue that the law of interpretation definitively resolves interpretive choices. Rule-of-law values and the consonant desire to preserve the legitimacy of judicial decisionmaking prompt courts to opt for this obfuscatory strategy. This Article, however, offers an alternative strategy—transparent justification—and explains why the case in favor of transparent justification is much stronger than most might imagine.

What Is Securities Fraud?

Samuel W. Buell — Thu, 08 Dec 2011 09:42:17 PST

As Rule 10b-5 approaches the age of seventy, deep familiarity with this supremely potent and consequential provision of American administrative law has obscured its lack of clear conceptual content. The rule, as written, interpreted, and enforced, is missing a fully developed connection to—of all things—fraud. Fraud is difficult to define. Several approaches are plausible. But the law of securities fraud, and much of the commentary about that body of law, has neither attempted such a definition nor acknowledged its necessity to the coherence and effectiveness of the doctrine.

Securities fraud’s lack of mooring in a fully developed concept of fraud produces at least three costs: public and private actions are not brought on behalf of clearly specified regulatory objectives; the line between civil and criminal liability has become unacceptably blurred; and the law has come to provide at best a weak means of resolving vital public questions about wrongdoing in financial markets. The agenda of this Article is threefold. First, this Article illuminates and clarifies the relationship between securities fraud and fraud and structures a discussion of legal reform that more explicitly connects securities fraud remedies with the purposes of a regime of securities regulation. Second, it clarifies the line between civil and criminal liability. And third, this Article seeks a better understanding of what is being asked when legal actors and the public wonder whether to label an important instance of market failure “fraud.

Truth, Lies, and Stolen Valor: A Case For Protecting False Statements of Fact Under the First Amendment

Julia K. Wood — Mon, 21 Nov 2011 13:48:20 PST

The Stolen Valor Act of 2005 (the Act) makes it a crime to lie about having received a medal authorized by Congress for the military. In 2010, in United States v. Alvarez, the Ninth Circuit found the Act unconstitutional under the First Amendment, holding that false statements of fact, like other content-based restrictions on speech, are subject to strict scrutiny. The Act failed this test because, according to the court, it was not narrowly tailored to serve a compelling government interest. The decision highlights the uncertainty of First Amendment protections for false speech. Though the Supreme Court has held that certain categories of false speech— such as fraud and defamation—are proscribable, it has not ruled directly on a case in which false speech had been barred without respect to context, intent, or harm. This Note argues that false speech should be presumptively protected by the First Amendment, with exceptions for certain classes of speech that result in concrete harm to individuals. Such protection would limit government control of speech, avoid chilling worthy speech, promote privacy and autonomy, and result in easier administration for courts.