In the Bleak Midwinter

Snow had fallen snow on snow, snow on snow.

Call for Papers

On Friday, March 26, 2010, the Penn State Law Review will hold a symposium addressing the Supreme Court’s recent decision in Ashcroft v. Iqbal. The symposium is entitled Reflections on Iqbal—Discerning Its Rule, Grappling With Its Implications and will feature panels addressing the following topics:

• Iqbal’s implications for the role of the courts and judges in providing American society with both the opportunity for redress of harms and a common law-based approach to the development of law.
• The majority’s reference to purposeful discrimination and what it signals about contemporary understandings of race in America.
• Iqbal’s implications for constitutional tort litigation, including the decision’s potential impact on supervisory liability, qualified immunity, and the behavior of agency officials operating under adverse conditions.

Presenters currently include: Hon. Anthony Scirica (Chief Judge, Third Circuit), Hon. D. Brooks Smith (Third Circuit), Mark Brown (Capital), Ray Campbell (Penn State), Gary Gildin (Penn State), Ramzi Kassem (CUNY), Kit Kinports (Penn State), Jim Pfander (Northwestern), Jeff Rachlinski (Cornell), Victor Romero (Penn State), Jean Sternlight (UNLV), Shoba Wadhia (Penn State), and Nancy Welsh (Penn State). Presented papers will be published in a Symposium Issue of the Penn State Law Review. Brief abstracts of the papers are posted on Penn Statim.

The deadline for submissions in response to this Call is Friday, April 16, 2010. All submissions must be sent to iqbalsymposium@law.psu.edu. All submissions must be in English and comply with Bluebook formatting rules. If possible, please limit the submissions to five thousand words or less.

For more information, visit the Penn State Law Review web site: Penn Statim.

It Smells Like Stress

Perhaps I am imagining it, but upon entering the Law School this morning, there was a distinct smell that I can only attribute to one thing: stress. The smell was nothing too obvious, but coupled with the stillness in the building, it brought to mind my own final exam periods, which are – thankfully - over. Today is the first day of final exams for the fall semester, and the first exam for our 1Ls is torts. I can think of few exams more daunting than first-year torts. Even the bar exam didn’t compare, at least for me.

As the students march forward through these examinations, I encourage them to remember to take care of themselves. Good sleep, proper nutrition, and sticking to a schedule will all aid in the actual exam-taking itself. These next ten days will be over soon, and the festivities of the holidays will be fast upon all of us. For now, I wish all exam-takers peace in their studies, energy for the work ahead of them, and vision for their futures. There is a point to all of this madness, and diligence during these next few days will pay dividends down the road.

Good luck, everyone!

Foolishness in Akron

The University of Akron has reserved the right to require applicants for certain jobs to submit a DNA sample. It hasn't demanded DNA from anybody yet. But the policy has rankled some faculty. My colleague David Kaye, who follows legal doctine and fornesic genetics on DoubleHelixLaw, has commented on the new policy.

Thoughts on Academic Freedom and the Role of the University

“Never discuss religion or politics.” How many times has this admonishment been tossed around, yet how often do we heed it? Perhaps in the business context we are more careful to avoid such “touchy” subjects, but what about social settings? What about the academy? The ideals of academic freedom serve to foster and protect all opinions about potentially divisive issues, yet does this protection rooted in the penumbra of the First Amendment really achieve the results of open and honest dialogue?[1] Does it even matter?

In a recent address at Columbia University, University of Chicago President, Robert Zimmer discussed the purpose of academic freedom. He said the following:

“[I]t is universities’ openness to ideas, to analytic debate, to rigor, and to questioning, and the provision of an umbrella, and in fact a safe haven, for clashing thought and perspectives, that best illuminate societal, scientific, and humanistic issues. . . The greatest contributions universities can make to society over the long run are the ideas and discoveries of faculty and students that emanate from the resulting intellectual ferment [] . . . If this is the purpose of universities, the purpose of academic freedom is precisely to preserve this openness of inquiry and freedom of thought. In other words, academic freedom is designed to protect and preserve for the long run the unique capacity of universities to contribute to society.” (emphasis added)

President Zimmer’s thoughts are noble. My question is not about their veracity, for I sincerely believe he is absolutely correct. My question is whether the university environment is truly living up to the model as a “safe haven for clashing thought and perspectives”? I hesitate to say, but my feeling is that they do not.

I do not purport to speak for everyone, but only to relate my own experiences and perspective. In any context where I am under the authority of another, I am reticent to offer an ideological opinion which sharply diverges from my authority-figure. This is not always the case, but more often than not, it is. The reason is simple; ideology is the foundation upon which we construct our worldviews, and a professor’s worldviews –naturally – animate his conclusions about his subject matter. More to the point, if my opinions are perceived as flawed in their reasoning, which could easily be the case when my opinions are stemming from an ideology that deviates from the professor’s, what will the conclusion about my scholastic aptitude be? Whether science, law, business, etc., we are all subject to bias. Even in our modern enlightened era, there is cause for caution.

Maybe this caution is healthy. Maybe cautious and guarded opinions serve to encourage quiet reflection before speaking. This is a worthy end, is it not? Unfortunately, I do not think the bias within the academy is an even split down the ideological middle. If it were, then the opportunity for reflection would be given fairly consistently to students of all worldviews. However, in many areas of the academy, there is a perceived “politically correct” worldview which garners dominant support. This trend may foster open dialogue amongst those who find themselves in the majority, but is the minority voice likewise fostered? Is there anything that can be done to encourage a true safe haven?

Perhaps a benefit of such a reality is that individuals who seek to develop new ideas will find mentors with whom they share ideological views. Within this context, there can be a mutual sharpening of minds and arrival at ideas or innovations which will contribute to society. This begs the question, though, of what role the university should play. Is the university about benefitting the student-consumer, in which case the student comes to the university with his ideas and seeks guidance as to how to achieve his goals? Or, does the university primarily serve society, in which case the student should come to the university as tabula rasa for the purpose of forming ideas which will provide the best outcome to society? Of course, the answer could be a blend of these two ideas.

President Zimmer noted the German model of the university is the modern research institution we know today. This model comprises three principles: 1) the goal of education is to teach students how to think (not simply master a craft); 2) integration of research and teaching is central to teaching students how to think; and 3) the university must be independent from the state. These principles suggest, to me, that the primary purpose of a university is to serve the student as an individual. This educated student will be in the best position to benefit society as a critically-thinking-citizen. Society ultimately derives the benefit of the education experience, yet the party immediately served is the student, not society. If that is the case, my mentor-model makes sense. It does not result in a truly free and open forum for clashing ideas, but it does give the student as a consumer the product sought.

If the university is primarily serving the student-consumer as an individual, what happens to academic freedom? Does it lose some of its importance? I think the answer is a quiet “yes.” The principles of academic freedom are still of paramount importance in many contexts, but perhaps the principles merely provide the safe-guard wherein a member of the university community has recourse should he endeavor to challenge the status quo. This protective mechanism is, I believe, a far cry from an umbrella sheltering the exchange of differing perspectives.

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[1] See Griswold v. Conn., 381 U.S. 479, 482-83 (1965) (“[T]he state may not, consistently with the spirit of the First Amendment, contract the spectrum of available knowledge. The right of right of freedom of speech and press includes not only the right to utter or to print, but the right to distribute, the right to receive, the right to read . . . and freedom of inquiry, freedom of thought, and freedom to teach . . . indeed the freedom of the entire university community. Without those peripheral rights the specific rights would be less secure.”).

Law Students Ready for Work

York College of Pennsylvania conducted a national survey of human resources directors and business leaders who make hiring decisions. The study showed that the most important factor that people who hire considered in whether to make a job offer is the candidate's demeanor in five areas: 1) personal interaction including courtesy and respect; 2) communication skills; 3) work ethic; 4)professional appearance; 5) self-confidence. Responders were asked to rank on a scale of 1 (very rare) to 5 (very common) the appearance of these traits in recent college graduates. For all of the five traits the mean rank was below 4.

Recent college graduates appeared to survey responders to be concerned about opportunities for advancement. This trait garnered a mean of 4. Unfortunately for job seekers, those hiring rank this trait as among the least important in the hiring decision.

53% of responders believed that the level of professionalism among recent college grads looking for entry level work was stable over the last five years. 33% percent believed that professionalism had decreased. Those that saw a decline in professionalism identified the causes as a false sense of entitlement to the job, changes in culture and values, and erosion of work ethic. 61% of responders reported that a sense of entitlement to a job had increased among recent grads over the last five years. Responders frequently noted that recent grads had problems accepting personal responsibility for on the job decisions and behavior, difficulty acting independently, and appeared to have no clear sense of direction or purpose in office environments.

I wonder whether law students possess the essential professional traits most valued in the market for legal employment. How can a law school give its students the competitive edge?

Way up in a Balloon

To say that someone has gone up in a balloon, except when that person actually has gone up in a balloon, is to say that someone has gotten intellectually (defined here as the act of thinking, not the quality thereof) or emotionally carried away. So it was with Richard Heene, who was so up in a balloon about maintaining unworthy fame, or with the money that attends it, that he contrived the now-famous hoax that, perversely, references in the name given it by History his impressed son, and not the man. Heene the Younger, whatever he owes his father, certainly has cause to be sore about the use to which he was put, and about the fact that his name answers a Google search, and so always will, of "Balloon Boy". Such are the wages of a father's strange grasping, here to be paid by the son.

It is with some pride that I admit I missed Richard Heene's performance on the reality show Wife Swap, and also that I don't know on what station, or at what time, to find Wife Swap. People have told me he was a standout oddball on the show, which surely must be peopled with folks more odd than the average person in society. And that observation brings this brief essay to its point. It seems that "reality TV" has become a sort of Orwellian label. What the shows that answer that description really show are people acting as they would when they know people are watching, which tends to exaggerate in both directions what people do when they assume no one is watching.

In Heene's case, when he knew people were watching, he, according to the Wife Swap reviews, was an oddball but pedestrian control freak. When no one was watching, he exerted control over his family to follow along with his super oddball scheme, which counted among its foreseeable consequences co-opted helicopters, the expenditure of thousands of dollars, and the wasted good will of his fellow citizens. So it seems the reality show cameras exaggerate Mr. Heene in a flattering direction. Objects in your TV may appear less nuts than they actually are.

Justice Sotomayor on the Traditions in the High Court

I happened to catch C-Span's special on the Supreme Court, and was struck by the newest member of the Court's comments regarding tradition:

"[T]raditons anchor us in a process that's greater than ourselves; they remind us that the role that we are playing is not a personal role, not a role that should have a personal agenda, but one that has an institutional importance and that institutional importance is bigger than us."

There are so many aspects of life that this resonates with. Whether religious practice, national governance, school tradition, family ritual, or even corporate culture, traditions do anchor us and do remind us that we are but a part of something much larger than ourselves. This is not a revelation, but I did appreciate being reminded of it and I appreciated hearing Justice Sotomayor express it.

Just a Drunken Stoner?

A man charged with murder for beating his girlfriend's two year old daughter to death told his social network on MySpace that he was misunderstood and that society was to blame. While he was at it, he stated: "It's just a C felony. I can beat this."

After his conviction and sentence to life without parole, he appealed on grounds that the evidence of his character lifted from his MySpace page should have been excluded. The Indiana Supreme Court held that because he testified at trial that his actions were only reckless not intentional, he opened the door for evidence of his character.

The opinion is here. I don't think they'll have MySpace where this guy is going.

Federalism Strikes Again

For those looking for healthcare solutions, the benefits of Justice Louis Brandeis's "laboratory" federalism may be of assistance. The states provide microcosms of the larger macrocosm in which to test out political and, dare one say, social ideas.

As Massachusetts has been a laboratory for universal healthcare, Minnesota looks to become a laboratory for market-based reforms. Gov. Tim Pawlenty has suggested, among other things, that Minnesotans be able to purchase health care across state lines. It will be interesting to see what happens to health care costs in MN if the Governor has his way.

We now know from Tim O’Brien, senior vice president at Blue Cross Blue Shield’s headquarters in Boston that "[Mass.] health care reform . . . costs have been much higher than what were anticipated when health care reform went into effect in 2007." The Boston Globe's 9/16/09 headline reads "Health costs to rise again." The report continued: "[P]rompting many employers to reduce benefits and shift additional costs to workers."

Campaign Finance Status Quo May Not Hold

Marc Ambinder has written an excellent article in The Atlantic about the Supreme Court's rehearing of oral arguments in Citizens United v. FEC and the current landscape of campaign finance law. The article leaves its reader with a basic knowledge of an area of the law that does its best to deny that apprehension.

The relevant history of campaign finance law starts with the Supreme Court's 1976 Buckley v. Valeo decision, which found contribution limits of a certain amount placed on individuals constitutional but expenditure limitations of any magnitude on candidates or campaigns unconstitutional. Those versed in constitutional law know that placing a restriction on so fundamental a right as making a political contribution has to be justified by a compelling state interest; and one permissibly satisfied (I learned this again, incidentally, from the great and beloved Chemerinsky, who I watched via Bar Bri video this summer, and who therein appeared always in present need of shuffling off to the nearest bathroom). That interest in the Valeo case was asserted to be protecting the political process from the corrupting influence of too much money coming from a concentrated source. And too there was the related matter of our developed organizing and leveling ideology, where the pauper cannot be seen to be effectively disenfranchised by the disproportionate influence of the millionaire, or billionaire. So the static decree was handed down to a dynamic world.

One result has been the viability, recruitment, and election of billionaire politicians. Another result, which lends credibility to Freud's hydraulic model, has been 'soft money'. Soft money is the money that individuals, unions and corporations give to political organizations and entities, which is then used for issue advocacy. Such issue advocacy has been transparently used to influence elections, thus frustrating the intent of Valeo. Hence the McCain-Feingold legislation, which, among other things, prevents the use of such funds within 120 days of an election to directly influence that election. The FEC interpreted corporate contribution law pre-existing and consonant with McCain Feingold to forbid the showing on television of Citizens United's (unflattering) movie about Hillary Clinton during last year's Democratic primary season. Citizens United brought suit, and that is the matter currently before the Supreme Court.

I yield to the Ambinder article as the place to get the more complete story on this history. But Ambinder asks a question which is prompted by his article, and he leaves it purposefully and wisely unanswered. It is an important question: Is money inherently corrupting? Ambinder notes that if so, we should not want the Supreme Court to loosen any of the extant restrictions on political contributions. If no, then we should.

And maybe that's right. But if I were to bet on what McCain the man, for example, objected to about money in politics, it would be the unequal influence its unequal ownership affords to some individuals and entities relative to others. Less charitably, McCain might lament the unequal desire to spend money on political activity. I say less charitably because disparate desires in that regard is a reflection of priorities and an aspect of free association. Whatever the case, the unequal influence objection does not depend on the nature of money, but on the reality of its distribution. And it is that egalitarian impulse which animates every American heart to a greater or lesser degree. It is an impulse which may not find expression in a Supreme Court decision (depending on whether or not they have the empathy turned up that day), but may well in a Congressional response, or preemption.

Mac N Cheese Seeks Chocolate Egg

Reading the financial news today, I experienced an unexpected Pavlovian response. Cadbury, maker of the exquisite Cadbury egg, rejected Kraft Foods' $16.7 billion bid. Not sweet enough, said Cadbury management. News of the snub sent Cadbury stock up by almost half to 783 pence per share, easily topping Kraft's bid of 745 pence per share.

Market watchers think the deal will happen and provide a carbo blast to the dragging mergers and acquisitions market. I'm feeling better already.

Vive La Difference

Is She a He? Athlete Forced to Take Gender Test - International News News of the World Middle East News Europe News - FOXNews.com

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Here is an interesting story from the world of sport, where apparently one is free to suppose men and women differ in certain respects without being sued.

They say the complex gender test will take a few weeks to come back. This means they are doing something more sophisticated than looking to eyeball a full set of tackle, and also that they have to.

The story makes relatively clear that this woman, and the wider world that knows her, could believe in good faith that she is a woman. That is why the complex test is required. Here is a question (and I am seriously asking): If she appears, in terms of sexual organs (and I'm guessing this is the case), to be a woman, but is in some other respect a man, can she be a man completely? And if not, what would be her scientific designation? And if forced to compete as a man, would she be disadvantaged, at the very highest levels of competition, to the extent some quantum of her is female?

On S'engage; Et Puis, On Voit

That was a favorite saying of Napoleon’s. Later, Lenin adopted it as his own. Rendered in English it reads, “You commit yourself; and then, you see. It is a romantic notion, fitting for men of action. And it is revealing of each man’s monomania that it never gave them pause that they were committing everyone else.

Now the United States is on the verge of committing itself to nationalized health care, the results of which, should we go through with it . . . we will see. The debate on the business is just getting started, though tragicomically, the enabling legislation is well-advanced. The bumper sticker opposition to the idea writ large is that health care will be rationed. No one even casually acquainted with economics, and so with the notion that economics is the study of alternative uses of scarce resources, would find that news. Steven Singer could not abide the rationing chorus, and so wrote this pointing out that rationing is currently and of course afoot. Whatever his Logan’s Run enthusiasms (I have long thought that Singer’s best eventual exit will be to feed himself to hungry but otherwise healthy and sound young people), Singer is a serious intellectual force. He does a service to the extent he buries the ‘no because health care will be rationed’ opposition to government controlled heath care. The issue, of course, is who, or what, will do the rationing going forward.

Singer almost apologizes for the imperfections of his solution (grey souls in grey suits counting life years and handing out money to the potentially longer lived, all else being equal), but justifies it as the best we can do. He cites Churchill’s defense of democracy as ‘the worst possible form of government except for all the others’ as an analogous rallying cry for his proposal. Singer thinks Americans will accept such centralized rationing provided they can opt for supplementary private insurance and that the cost of care rationed the current way (e.g. by what you can afford) is brought home to us all. This ability to buy supplementary insurance is a big deal. An even bigger deal is the ability to simply pay through the nose for something if it comes to that. As Thomas Sowell has pointed out, the integrity of a government controlled system may depend on making some services and goods unavailable, regardless of an individual’s ability to pay. And don’t think such restrictions can’t be imposed. Again, as Sowell has pointed out, the FDA, although for other reasons, currently prevents us, even those of us with a very different risk profile owing to advanced disease, from buying drugs deemed safe enough for Europeans. As for Americans understanding the true cost of their health care, it seems the higher unemployment rate, coupled with our nation’s informal system of employer provided health care, has brought that cost home to many Americans who until recently were blissfully unaware.

There are two principal concerns I have with government run health care, exclusive of cost (the CBO covered that). First, Singer mentions the high costs of prescription drugs in this country as a source of rationing. He points to the reasonable costs of these drugs in other countries with nationalized systems, which will only pay a certain price for the drugs. The idea is that a nationalized system will bargain for lower-priced drugs, producing savings. But it seems clear that the cost of the development of the drugs will not go down by the act of a nationalized system demanding sale at a certain price. Rather, it seems currently that the American market is paying the loin’s share of the tab, which renders tolerable the risk that the R&D investment into new drugs will be profitable. If the United States institutes universal price controls on drugs (in addition to what goes on in the current government-run health care programs) we may well see R&D by major pharmaceutical companies go down. And we are likely to see more incremental progress via copy-cat drugs that simply tweak side effects, and less true innovation. Note that we see this even now because any industry will seek to minimize its risk and maximize its profit (see, e.g., the practice in both the publishing and motion picture industries to stay with winners, be it Doctor Phil’s fortieth book or Spiderman 20). Government-imposed (read lower) profit margins would surely make the pharmaceutical industry more risk adverse and less innovative.

Second, I am not confident that official rationing, once started, can be acceptably cabined. Singer goes into some detail in his essay about counting life years as the key to his rationing regime. That’s the practice of judging that this teenager should get the instant procedure or drug and that this senior citizen should not. The rationale is that the teenager will continue to live for many decades, whereas the senior…well, the end is nigh. But in practice, it seems unlikely that the teenager would be much featured in the analysis conducted by the grey suits. In practice it seems that what would be before the grey suit would be the senior and his need. And the grey suit would say no; not no as between the senior and a similarly situated teenager, but just plain no. That is to say, because young people are not often in need of expensive medical care, and in any case because identical needs by opposing class members will seldom be coincident in time, the rationing conducted would be in the form of a denial of a single need, not as between a need and a greater need. Or, put another way, the greater need referenced would be that hoary need that has been the benevolent altar baptized by so much human misery down the years. And it is insatiable.

Regarding the way forward, I find myself in agreement with Charles Krauthammer. He advocates radical tort reform and a stark move away from the employer-provided health insurance paradigm. But however you come down on the health care issue, it seems folks of good faith (i.e. not those ideologues who view government run health care as a tool for realigning the American people into dependency on the government, and so are for it regardless of content; nor again those who seem to be using the extant debate as an excuse to riot) can agree at least to this: that the legislators actually read and understand whatever final thing they end up voting on. They will be, after all, one way or the other, committing all of us. They should be charged with a better explanation than “we’ll see” when asked what they have done.

Marco? Polo?

The whites-only swim is over at the Valley Club in Huntington Valley, PA. After breaking its contract with a summer camp of predominantly black-skinned campers, the Club has changed its mind and invites all swimmers back into the water.

The social history of swimming pools tells a stark and true story of race in America. For those readers born too late to have experienced segregated and desegregated swimming in the 1960's, you can sit on the edge of the pool by reading Jeff Wiltse, Contested Waters: A Social History of Swimming Pools in America, or just the review on Legal History Blog.

Something about swimming together nearly naked in the crystal water of a pool reveals and perhaps proves our common humanity. Everyone into the deep end.

Stay No More

It's not news now but just to close the loop, the Supreme Court lifted the stay on the Chrysler-Fiat sale Tuesday. In a two page opinion, the Court per curiam held that the parties requesting the stay did not carry the burden of showing: 1) reasonable probability that four Justices will consider the issue sufficiently meritorious to grant certiorari or to note probable jurisdiction; 2) a fair prospect that the majority of the Court will conclude that the decision below was erroneous; and 3) a likelihood that irreparable harm will result from denial of the stay." My inner contracts professor notes that the petitioners can be compensated for their losses, if any, with damages-- hardly a strong case for irreparable harm.

The sentence that lingers in this perfunctory opinion is the last: "Our assessment of the stay factors here is based on the record and proceedings in this case alone."

And not in response to political pressure, or based on concern about how the outcome of this case might influence the bankruptcy proceeding now pending in In re GM.

The spin on SCOTUS blog is that the Court wrote this opinion with particular care. "By the time the full Court’s order emerged shortly after 7 p.m. Tuesday, it immediately was apparent that the Court had taken its time primarily to craft a legally precise order of four paragraphs. It very likely was composed largely in Justice Ginsburg’s chambers. She is noted for the highly refined, technical care with which she composed legal papers." (what a lovely thing to say about a person).

The Chrysler-Fiat deal closed today. Fiat Chief Executive Sergio Marchionne become CEO of Chrysler. Former Chrysler CEO, Bob Nardelli, packed up his desk and returned to Cerberus Capital Management, the former majority equity holder of Chrysler. Marchionne wrote to Chrysler employees: "There is no doubt in my mind that we will get the job done."

That may depend on how Americans (who are not obese or taller than 5'2") like the Fiat 500. You be the judge.

In re Chrysler Stayed

In a one sentence opinion, Justice Ginsberg stayed the order approving the sale of Chrysler assets brokered by the U.S. Treasury Department. The 2d Circuit affirmed the bankruptcy court order approving the sale Friday. It gave objecting creditors until 4:00 PM Monday to obtain a stay of the order from the Supreme Court. Justice Ginsburg, who is responsible for emergency matters from the 2d Circuit, entered the stay just before the last tick of the clock.

The objecting parties, Indiana State Pension Trusts holding Chrysler secured debt, have advanced two arguments for reversal of the bankruptcy court order approving the sale: 1) the sale to the Fiat SpA group is an improper and unfair sub rosa reorganization plan and the bankruptcy court exceeded its authority under 11 U.S.C. section 363 to order the sale; 2) the U.S. Treasury had no constitutional authority to use TARP funds allocated for the bailout of financial institutions to finance Chrysler-Fiat. On Sunday, a consumer group filed a brief in support of the pension trust investors. The consumers' group wants to stop the sale because its terms relieve Chrysler-Fiat of successor liability for old Chrysler consumers' product liability claims.

The U.S. government filed its brief with Justice Ginsburg today, arguing that the pension trust parties have no standing to complain about the sale. Chrysler is worth next to nothing without the Fiat deal and that the proposed sale yields a better return than the only other option, liquidation. As for the TARP money, the Solicitor General argues that the pension trust investors don't have standing to object to the government’s $8 billion injection of TARP money into the new Chrysler-Fiat. Whether Chrysler-Fiat is a "financial institution" eligible to receive TARP funds is not a question worthy of Supreme Court review. ("The relevant EESA [Emergency Economic Stabilization Act of 2008] provision was enacted only eight months ago and has not yet been construed by any federal court . . . .")

This could be one of those OK Corral moments in constitutional law. The pension trusts represented by Thomas Lauria of White & Case, are the last creditors standing alone against a barrage of pressure on senior lenders to get with the Chrysler-Fiat deal, or else. The Supreme Court may be the only law in town tough enough to stand up to President Obama, Treasury and auto industry czar Steven Rattner.

The gunfight at the OK Corral is said to have lasted about 30 seconds. The trial afterward took weeks. Whether the Earp brothers and Doc Holliday's actions were in self defense or murderous is still a good game for law students more than a century later. In the end, Judge Spicer ruled that "the tragic results accomplished in manner and form as they were, with all surrounding influences bearing upon resgestae of the affair, I cannot resist the conclusion that the defendants were fully justified in committing these homicides-that it is a necessary act, done in the discharge of an official duty."

Cosmic Contract Language

(Originally posted on October 29, 2009)
In Thursday's Wall Street Journal is an article about the trend of drafting contracts with cosmic language like that which was presented to a Bulgarian folk-singing group at a tryout for the TV show America's Got Talent. A clause in the contract warned that their actions that day could be "edited, in all media, throughout the universe, in perpetuity."

This sort of language, relevant mainly in the context of the arts (but see the full article for an example, complete with an allusion to the Big Bang, of its use re: pickles), is apparently motivated by a desire to account for the unknown, and perhaps is reflective too of a very high confidence in the national space program. The Journal article notes that the members of the folk-singing group "briefly contemplated whether they should give away the rights of hurtling their images and voices across the galaxies forever." Then they signed the contract.

Of course professional opinions vary as to the desirability of using such cosmic (the use of 'global' doesn't seem to do justice) language in contracts. Attorney and law school lecturer Ken Adams thinks the use of such language is "silly", and suggests its use could be a way of drumming up business for lawyers. How so? "It [cosmic language] adds an aura of magic- you're dabbling in the occult and you of course need a lawyer to guide you through the mysteries."

But associate professor of law Eric Goldman has a different view. He thinks the cosmic language "could be 'a stroke of brilliant foresight.'" Goldman says in the future, folks looking at contracts drafted without cosmic language might say, "What were they thinking? Why didn't they get the Mars rights?" That would be embarrassing.

Whatever the case, this article comes a few years too late for me. I could have turned it into an entirely novel law review note: Cosmic Language in Contracts and its Ramifications, Toward a Theory of Inter-Galactic Unconscionability.

Post GM America

At a hearing before the Senate Commerce Committee today, Fritz Henderson, GM's CEO, said that GM has no choice but to dump nearly 1600 dealers (and about 100,000 jobs) over the next eighteen months.

Committee Chair John Rockefeller responded : "Let me be very clear: I don't believe that companies should be allowed to take taxpayer funds for a bailout and then leave local dealers and their customers to fend for themselves with no real notice and no real help. That is just plain wrong."

Senator Rockefeller missed the memo. Dumping losing contracts without real notice and without real help is exactly what bankruptcy will permit GM to do.

Rockefeller's frustration touches a nerve. If the government can't expect to see a return on its investment, what exactly is the public purpose of the bailout?

In an op ed for Financial Times, Richard Reich wrote: "The only practical purpose I can imagine for the bail-out is to slow the decline of GM to create enough time for its workers, suppliers, dealers and communities to adjust to its eventual demise. Yet if this is the goal, surely there are better ways to allocate $60bn than to buy GM? The funds would be better spent helping the Midwest diversify away from cars. Cash could be used to retrain car workers, giving them extended unemployment insurance as they retrain."

Reich says that industrial adjustment is just too hard to discuss, much less accomplish politically. One group wants to save jobs and communities that depend on US automakers' survival, without regard to the public cost. An opposing group wants to keep government out of industrial collapse, let the chips fall where they may, and let market vultures clean up the mess. The bailout of GM and Chrysler temporarily placates both groups. The first group gets hope that their jobs and communities have a chance of surviving. The second group gets to imagine that the bailout is a restructuring made necessary because of a mysterious short term liquidity problem, and that with $50 billion in governmental lubrication, that new car smell will be back.

The divide between the groups seems to be more political than real. People whose jobs and mortgages depend on the US auto industry don't like wasting tax revenue. And ardent free marketeers who oppose the bailout of a "company" like GM accept the role of government in easing the pain for actual people who fall on hard times.

GM and Chrysler are short timers. The bailout and the restructurings are life support that at best will give the grieving middle class time to prepare for the end. We are left to wonder: what will post-GM America be like?

Fries With that Chevy?

Yesterday, President Obama described the US government as a "reluctant shareholder" in GM. Indeed.

How lean and mean will new GM have to be to make taxpayers' $50 billion investment pay off? GM's market capitalization will have to surpass that of McDonald's (MCD)—rising to nearly $69 billion just for taxpayers to break even. (Yesterday, McDonalds's market capitalization was $66.6 billion.) And that's likely to take awhile. As of May 29, GM's market capitalization was in the neighborhood of $500 million.

Under the proposed reorganization plan, of the $50 billion total investment, the US's equity stake will be $41.2 billion or about 60% of the New GM pie; another $8.8 billion will be debt. For a 60% stake to be worth $41.2 billion, the market capitalization of the reorganized company will have to rise to $68.7 billion.

Here's the visionary plan on which the return on this super-sized investment depends. New GM is going to make cars people want to buy at a profit.

Apologia Pro Vita Mia (in search of)

Warning: this thing is autobiographical; read it, if at all, with that understanding. And also with the understanding that my story is not very interesting or noble. It just happens to be the only one I am competent to write about. I have personal knowledge of former classmates who came from less, worked harder, and met with greater misfortune on the road to their JDs. I find their stories repay inspection in better currency than my own.

On May 9th I graduated from Dickinson. I now have a JD degree. I am the first in my family to earn a professional degree, and I am aware of only two cousins with four year degrees. If all goes well, in November I will be notified that I have passed the New Jersey and Pennsylvania bar exams. That notification will mark the end of a long and less than fully happy journey.

In August of 2002, and several years into my working life, it occurred to me (there is no more accurate way to say it) that I should perhaps go to college. And so I did. I had a full time job, so I attended the local community college in the evenings, including over the summer semesters. Two years later I transferred to a four year institution. I earned my BA from that school the month before entering law school full time.

I entered law school full time because I understood it to be a consuming thing, and I didn’t want to perform in a middling way in both law school and at my job. Better to dedicate myself to one thing. That choice was financially ramified, as it meant that I would take on loans and forego a salary for three years. Alas, I dedicated myself to law school and still performed well-nigh middlingly.

The three family dogs died during law school. Two we put to sleep after my first year’s spring exams and before I wrote for the law review competition. I don’t have much to say about their deaths, except that folks who put their dogs to sleep in the way I did should not see Marley and Me, however attracted to Jennifer Aniston they may be. The third was put down this past fall, and left the family home a cathedral of melancholy until the puggle Sammy was acquired (actually rescued from a breeder who somehow supposed a dog looking more like a beagle, and less like a pug, to be a liability). Now my parents dress the poor thing up and take her around as though she were the grandchild I have as yet failed to provide.

An aunt died this spring, and I am embarrassed to say I did not go to the viewing or funeral; she inconveniently died during the busiest week of my semester. She was my mother’s biggest fan (outside her sons), and a very fine woman. It is not a stern enough rebuke to say I should have known better. I did. I should have done better. The law is indeed a jealous mistress, but jealously should not be respected above love.

Now I am in the unfamiliar position of pleading my professional worth, a manifest thing if you ask me, to employers. I am also studying for the New Jersey and Pennsylvania bars. And that’s all good. At least it's what I signed up for. But it's a restless time.

I am not one of those folks who, if now hit by a bus, could lie on the roadside and say I have no regrets as I shuffle off the mortal coil. I regret many of the decisions I’ve made (not the least but nearly the latest of which is not attending my aunt's viewing and funeral), and I simply haven't done enough of consequence. The thing that most gets me up in the morning, that gets me through the next outline and the next cover letter, is the idea that soon some thing will happen, some opportunity will present itself, that but for the path I followed (but-for causation!) would have remained undiscovered; unavailable. Thus will all that came before be redeemed. And thus will I find the avenue and inspiration to contribute to my fellows on a scale and to a depth my happiness and sense of worth seem to depend upon. That thought keeps me looking ahead; to the day I can be a guy who says he has no regrets. Meantime I am careful around buses.

And folks who consider such looking ahead an unholy or chimerical striving, an unrequitable sacrifice of the here and now, should consider whether they have already arrived, unreflective, to the thing that redeemed their prior acts and omissions, and which leavens all subsequent failures with consolation. That glorifies the here and now.

Se Trata De Una Tendencia

President Obama is on a roll. On the same day he nominated Sonia Sotomayor to fill the vacancy on the Supreme Court, he announced his intention to appoint Miguel Diaz, a Roman Catholic theologian and associate professor at St. John's University and the College of St. Benedict in Minnesota, to serve as the next US ambassador to the Vatican. Diaz will be the first Hispanic appointed to the post since the US and the Holy See established full diplomatic ties in 1984. Diaz, who was an advisor to Obama's presidential campaign, was born in Havana. He is the son of a waiter and a data entry operator and the first person in his family to attend college.

The outgoing ambassador to the Vatican is Mary Ann Glendon, the Harvard law professor who declined an invitation to receive Notre Dame's top honor, the Laetere Medal, at graduation ceremonies earlier this month in protest of Notre Dame's decision to bestow an honorary degree on Obama notwithstanding his political position supporting abortion rights.

Prop 8 Fate

Read the California Supreme Court's opinion in Proposition 8 case.

The court upheld a California Constitutional amendment banning same sex marriage. The majority wrote that it was not the court's job to address whether the ban is wise public policy, but to decide whether it is constitutionally valid, while setting aside personal beliefs and values. (at 3).

Searching for an Honest Man

Leon Kass had plenty to say about the state of the humanities as the 2009 Jefferson Lecturer.

I particularly like this:

"Everyone has heard the story of Diogenes the Cynic who went around the sunlit streets of Athens, lantern in hand, looking for an honest man. This same Diogenes, when he heard Plato being praised for defining man as “an animal, biped and featherless,” threw a plucked chicken into the Academy, saying, “Here is Platonic man!” These tales display Diogenes’ cynicism as both ethical and philosophical: he is remembered for mocking the possibility of finding human virtue and for mocking the possibility of knowing human nature. In these respects, the legendary Diogenes would feel right at home today in many an American university, where a professed interest in human nature and human excellence—or, more generally, in truth and goodness—invites reactions ranging from mild ridicule for one’s naiveté to outright denunciation for one’s attraction to such discredited and dangerous notions.

Tracing the stories about Diogenes the Cynic to their source, in Diogenes Laertius’ Lives of Eminent Philosophers, one discovers that the apocryphal story is somewhat embroidered if not incorrect. Yes, Diogenes lit a lantern in broad daylight, but he did not say he was looking for an honest man. What he said was, “I am looking for [or ‘seeking’] human being”—anthrôpon zeto—either a human being or the human being, either an exemplar or the idea of humanity, or both. To be sure, purporting to seek the answer by means of candlepower affirms Diogenes’ badge as cynic. But the picture also suggests a man who refuses to be taken in by complacent popular beliefs that we already know human goodness from our daily experience or by confident professorial claims that we can capture the mystery of our humanity in definitions. But mocking or not, and perhaps speaking better than he knew, Diogenes gave elegantly simple expression to the humanist quest for self-knowledge: I seek the human being—my human being, your human being, our humanity. In fact, the embellished version of Diogenes’ question comes to the same thing: to seek an honest man is, at once, to seek a human being worthy of the name, an honest-to-goodness exemplar of the idea of humanity, a truthful and truth-speaking embodiment of the animal having the power of articulate speech."

Rule of Law RIP

Andrew Grossman, Heritage Foundation Senior Legal Analyst testified before the House Judiciary Committee yesterday at a hearing on Ramifications of Auto Industry Initiatives. Grossman made three points. 1. The Bush and Obama administrations have harmed the US auto industry by intervention meant to save it; 2. The Obama administration has abused its power to sidestep the rule of law, particularly bankruptcy law; and 3. These acts will prolong our current recession unless Congress reverses them.

Grossman's third point follows from the first two. If you mess with the stability of contract and property rights, nothing good can come of that.

Grossman said: "Lenders know how to deal with bankruptcy--it's a well understood risk of doing business. But the tough measures employed by the Obama Administration to cram down debt on behalf of the automakers were unprecedented and will naturally make lenders reluctant to do business with these companies, for fear they could suffer the same fate. . . . Impaired access to debt and capital will stymie future restructuring, investment, and growth, reducing the likelihood that either company will fully rebound and, beyond that, prosper."

And on and on in the downward spiral toward oblivion.

Chrysler Rejects 789 Dealers

As part of its bankruptcy case, Chrysler rejected one quarter of its dealership agreements under 11 U.S.C. sec. 365. Check to see if your hometown dealership is on the cut list. 2392 American Chrysler, Jeep and Dodge dealers will survive the sale to Fiat.

Here's what the axed dealerships heard in Chrysler's press release: “The unprecedented decline in the industry has had a significant impact on our sales and forced us to reduce production levels to better match the needs of the market. With the downsizing of operations after the sale and reduction of plants and production, similar reductions must be made to the size of the dealer body. We appreciate the support of our dealers and regret this painful action. We wish market conditions made it possible to keep everyone.”

In other words, "It's not you, it's me."

Song for Penn State Law Class of 2009

When it first opened, critics panned the musical Wicked (music and lyrics by Steven Schwartz and book by Winnie Holtzman). The musical is based on a novel by Gregory Maguire. The story starts before Dorothy arrived in the Land of Oz and explains how two girls became Elphaba, the Wicked Witch of the West, and Glinda the Good. Theatre critics called the plot "muddled" and the sound in New York's Gershwin Theater "smearing." No matter. Audiences loved it.

This song is the witches' farewell to each other after a long and sometimes difficult journey together. To the Dickinson School of Law Class of 2009 from me in thanksgiving for the blessing of each other:

For Good

I've heard it said
That people come into our lives for a reason
Bringing something we must learn
And we are led
To those who help us most to grow
If we let them
And we help them in return

Well, I don't know if I believe that's true
But I know I'm who I am today
Because I knew you:

Like a comet pulled from orbit
As it passes a sun
Like a stream that meets a boulder
Halfway through the wood
Who can say if I've been changed for the better?
But because I knew you
I have been changed for good

It well may be
That we will never meet again
In this lifetime
So let me say before we part
So much of me
Is made of what I learned from you
You'll be with me
Like a handprint on my heart
And now whatever way our stories end
I know you have re-written mine
By being my friend:

Like a ship blown from its mooring
By a wind off the sea
Like a seed dropped by a skybird
In a distant wood,
Who can say if I've been changed for the better?
But because I knew you:
Because I knew you:
I have been changed for good

And just to clear the air
I ask forgiveness
For the things I've done you blame me for
But then, I guess we know
There's blame to share
And none of it seems to matter anymore.

Like a comet pulled from orbit as it
Passes a sun, like
A stream that meets a boulder, half-way
Through the wood

Who can say if I've been changed for the better?
I do believe I have been changed for the better.

Because I knew you:
I have been changed for good.

A Tribute To The Enduring American Spirit

Today, Mine That Bird, a small horse with a big heart that cost $9,500 and was a 50-1 shot won the 135th running of the Kentucky Derby! He was trained by a former unknown in New Mexico who drove the hours 21 hours to Kentucky pulling his horse behind his pick-up all the way. When asked, trainer Bennie Woolley Jr. said, "They'll know who I am now."

Mine That Bird ran against million dollar horses and won with 6 and 3/4 lengths to spare, one of the largest margins of victory ever. I love this story and I love that stories like this happen in America every day, not just with horses but with people like you and me. Be encouraged and run like the wind!

In re Chrysler, LLC

Chrysler filed for relief under chaper 11 of the Bankruptcy Code on Thursday in the Bankruptcy Court of the Southern District of New York. Judge Arthur Gonzales is presiding. The filing became necessary after hedge fund creditors holding approximately 30 percent of Chrysler's total debt refused to sign on to the Treasury Department brokered workout by the April 30 deadline. Look at the the petition or go to the SDNY Bankruptcy Court and review the petition and first day motions. (You'll need a Pacer account for the second link). For readers who speak the language, Bankruptcy Litigation Blog has the word on the legal risks and rewards of a section 363 sale and links to affidavits filed with first day motions by Chrysler insiders and disgruntled creditors' experts.

Yes Alison, Jones Day represents Chrysler. The chapter 11 petition signed by Jones Day NY partner and bankruptcy mega celeb Corinne Ball explains that Chyrsler shut down its manufacturing facilities and will remain idle until the bankruptcy case concludes with a court-approved deal with Fiat and Chrysler creditors as outlined by Treasury. She warned that failure to move quickly through bankruptcy would mean liquidation for Chrysler and “the end of an iconic, 83-year-old American car company,” not to mention the loss of jobs for 38,500 people.

The first hearing in the case was this morning. Reuters reports that the courtroom was packed and very hot. Judge Gonzales halted the proceeding briefly when a Dewey & LeBoeuf associate standing with bankruptcy lawyer Martin Bienenstock (for Chrysler Financial) collapsed. Once the paramedics hauled her out, Judge Gonzales decided six motions in an hour.

A New York Story

In the New York Post of April 29th is the story, written by Laura Italiano, of the start of the defense’s presentation in the criminal fraud trial of Anthony Marshall, son of the late philanthropist and socialite Brooke Astor. Francis Morrissey is a co-defendant and was Mr. Marshall’s lawyer for the transaction under review. What follows is an adaptation of the Post story; quotations used were taken directly from the story.

Prosecutors claim that in 2004 Mr. Marshall and Mr. Morrissey manually transported Mrs. Astor, then 101 years of age and beset with Alzheimer’s disease, from the arms of her in-house nurse and down the hallway into the drawing room of her Park Avenue apartment (incidentally, it seems if you have a drawing room in your family, you are more likely to have experience with will contests than families without drawing rooms). Once there, she was, according to the Post story, confronted by a batch of… dark suited and gravely officious lawyers. And then she signed an apparently prepared codicil leaving 60 million worth of cash and bonds to Mr. Marshall. Mrs. Astor died a few years ago, at the great age of 104.

Fred Hafetz is Mr. Marshall’s defense attorney. Mr. Hafetz is a renowned criminal defense attorney, specializing in white collar crime. He successfully defended former Miss America Bess Meyerson, who was accused of bribing a judge in the competition that awarded her that title (perhaps the reigning Miss. California should have thought of that; e.g. Here's $50, ask me about world peace). I had occasion once to talk to Mr. Hafetz by telephone. He is grateful to my mother for a kindness done his family, and so agreed to counsel me on a career in the law. He is a nice man, and has a solid gold bar for a legal resume. Mr. Hafetz put up a slide during his opening remarks noting that Mrs. Astor, known to history as a philanthropist, gave nothing to charity between the years 1953 and 1993. In 1993, Mr. Marshall eloped with his current wife, Charlene. Mrs. Astor is recognized not to have been fond of Charlene, and the defense alleges she registered her disapproval by giving gobs of Mr. Marshall’s legacy to charity and by writing a series of wills, all of which kept Mr. Marshall from eventual possession of the 60 million, which before 1993 had been vouchsafed to him in each of a series of wills executed by Mrs. Astor (apparently, Mrs. Astor enjoyed executing and revising will instruments: Mr. Morrissey’s lawyer, noting her enthusiasm for the work, joked in his opening that “she probably could have taught trusts and estates at Harvard Law School”). Mr. Hafetz said in his opening statement that in 2004, nearing the end of her life, a lucid Mrs. Astor softened toward her son, if not also his wife, and signed the 2004 codicil that reinherited Mr. Marshall. Mr. Hafetz told the jury, “[s]omeone with dementia, someone with Alzheimer’s, is still a human being…[t]hey do not forfeit their human right…to make decisions.”

The prosecution seeks to prove its case by exclusively circumstantial evidence; testimony from household staff and famous friends of Mrs. Astor (among them Barbara Walters and Henry Kissinger) that the grande dame lacked the competence to meaningfully sign the codicil.

We’ll see who prevails, which is not necessarily the same thing as who is right. For what it’s worth, Andrea Peyser, writing a related opinion piece in the Post that is not a study in subtlety, thinks she knows where the merits lie: “Mrs. Astor, I fear, is rolling in her grave. Anthony Marshall should burn in hell.”

STOLI Hearing on the Hill Today

David J. Stertzer, CEO of the Association for Advanced Life Underwriting, sent out the following update this morning.

"U.S. Senate Special Committee on Aging Chairman Herb Kohl (D-WI) will hold a hearing today focused on the life settlement market and stranger originated life insurance ("STOLI"). The hearing will be at 2:00 pm EDT and can be accessed from the Committee webpage. For a complete witness list and announcement of the hearing, please click here.

AALU submitted this written testimony to the Committee focusing on our stong efforts in conjunction with the broader life insurance industry to enact state laws to prevent STOLI, while protecting legitimate uses of life insurance and life settlements.

We hope the hearing will further those efforts, because we cannot allow STOLI to detract from the critical role life insurance products play for 75 million American families.
We will be covering the hearing and will provide you with a report tomorrow."

While Cameras Are Away The Mice Will Play

Given that Justices Thomas and Breyer chatted together on the far end of the bench during the oral argument I attended (colleagues have reported the same on other occasions), it is only appropriate that they brief the public on whether the Justices are open to cameras in the SCOTUS court room. I think the public would be very amused to watch their little side show. Wink, wink.

For more on this head over to the Wall Street Journal Online.

Just to be clear, this does not mean that I endorse cameras in the courtroom. In fact, I do not, and I think it would lead to the kind of grandstanding we see on the floor of Congress most days, for those of us nerdy enough to watch C-SPAN.

Stick a Fork in Chrysler

The New York Times reported today that the U.S. Treasury Department is preparing a chapter 11 bankruptcy petition for the automaker Chrysler. The Times puts the filing date as early as next week.

The Treasury Department extended a $4 billion federal loan to Chrysler in January. Chrysler needs more cash but the Treasury tap is closed until it meets the governnment's terms. Chrysler has until April 30 to work out a deal with Fiat in which Fiat takes an equity position in Chrysler and Chrysler gets access to Fiat's small-car know how and distribution network.

Treasury and Chrysler are pushing Chrysler's lenders (most of whom have taken bailout money for their own balance sheets) to reduce the $6.9 billion in debt Chrysler owes them by 85%, or down to $1 billion. Recent but not up to the minute news reports note that creditors have counteroffered to take a 40% write down of debt and receive an equity position in the restructured company provided that Fiat puts up about $1 billion in new capital. Meanwhile, Chrysler is working on a deal with the UAW over the fate of union members' pensions and health benefits.

Why is Treasury so keen for a Chrysler bankruptcy? Chrysler's creditors hold security interests in the company's assets and Treasury currently stands behind them in the repayment line. Treasury wants any additional government loans to Chrysler to be first in line for repayment. In a chapter 11 case, the bankruptcy court can grant Treasury, as post-petition lender, first priority repayment rights over creditors' objection. That's a sweet deal for U.S. taxpayers.

Penn State Law Review - Symposium "Building A Civilization Of Arbitration"

I am pleased to announce that the Penn State Law Review will soon publish a symposium issue entitled "Building a Civilization of Arbitration." Below is a brief excerpt from the introduction written by Professor Thomas Carbonneau.

The U.S. Supreme Court’s “work product” has generated a large and growing arbitration bar. It also has finally begun to stimulate a greater volume of academic activity on the topic of arbitration. The work of legal practitioners and academics, along with the courts’ decisional law, are “Building a Civilization of Arbitration” that codifies advances and grapples with the controversial aspects of law-in-the-making. The Penn State Dickinson School of Law takes great pride in welcoming a distinguished group of lawyers and law teachers to the pages of its Law Review. They are the leaders in the field of arbitration. Their contributions identify the settled law and evaluate it from a variety of analytical, intellectual, and institutional perspectives.

The lead article addresses the concept of designing arbitrations from the perspective of two mainstays of the U.S. Supreme Court decisional law on arbitration: Volt Info. Sciences, Inc. and Mastrobuono. The article evaluates the use of contract freedom in the context of the judicial construction of party intent. Beyond this, the symposium investigates a wide variety of cutting-edge topics, ranging from recent landmark cases to investment arbitration and including the reform of the FAA, the concept of private ordering in international commercial arbitration (ICA), empirical developments in consumer arbitration, third-party interests in arbitration, various provocative comparative law developments—the role of courts in national arbitration laws, a lucid evaluation of the Russian Federation’s statist concept of arbitration, an equally insightful comparison of Canadian and United States consumer arbitration, and an evaluation of an important recent book on ICA. All self-respecting legal publications should include book reviews, and we are proud and delighted to have this one.

Silence as Price of TARP Bailout Funds

Organized labor has seized the bailout of financial services companies as a tool to silence them in the political process.

Last month, the House of Representatives passed two bills in reaction to the AIG executive compensation story: H.R. 1586 (imposing a 90 percent tax on income in the form of retention bonuses received by executives at firms that accepted more than $5 billion in bailout funds) and H.R. 1664 (requiring Treasury to curb "unreasonable or excessive" executive compensation at firms that accepted federal bailout money).

Last Tuesday, labor federation Change to Win asked Neil Barofsky, Inspector General of the Troubled Asset Relief Program (TARP), to audit Bank of America and other firms who received TARP money to determine whether Bank of America and other financial institutionsused TARP money to lobby against the two bills. Treasury officials responded with puzzlement. Money is fungible. Change to Win doesn't agree. In particular, it wants the TARP Inspector General to disclose how much TARP recipients paid in membership dues to the Financial Services Roundtable, a financial services industry group that spoke out against the House bills amid the AIG populist revenge fervor. The Roundtable wrote to lawmakers just after H.R. 1586 passed urging Congressmen to consider the likely effect of bill on the success of the TARP program.

The AFL-CIO's Executive Pay Watch Website unveiled an annual update on April 14 which includes a section on pay practices at companies that have received TARP money. The site also features a report on companies, including Bank of America, that are actively opposing the union-backed Employee Free Choice Act (H.R. 1409, S. 560), a bill that would allow workers to form unions through a majority "card check" process and not by secret ballot. The AFL-CIO has its eye on B of A and Citigroup, TARP recipients who likely oppose the bill.

How Do You Say AIG in Portugese?

Reuters reports that yesterday Portugal's Council of Ministers gave a preliminary nod to legislation that would lift bank customer's privacy rights and impose a special tax rate of 60% to "especially grave, unjustified enrichment" in a customer's account.

Under the proposed legislation, upon "well-grounded suspicions" of tax fraud and a "well-justified resolution by the General Tax Directorate," the government can access a taxpayer's banking information without court order. If the tax authority finds a difference of more than than 100,000 euros ($131,813) over previously reported income that the taxpayer cannot explain, the difference is subject to a 60% tax rate. If it exceeds 100,000 euros, the government gets direct access to the taxpayer's bank account.

The Portgugese Parliament has already approved a similar bill, introduced by the ruling Socialists together with the Left Block coalition party, the Portuguese Communist Party, and the Greens. The last opposition to encroachment of customers' bank privacy rights, President Anibal Cavaca Silva of the conservative Social Democrat party, apparently has folded. Yesterday, he reportedly endorsed the Council of Minister's plan to lift bank secrecy protection.

Lawyer Loses License for Failure to Pay Student Loans

The National Law Journal reported yesterday that a Texas lawyer lost his law license because he defaulted on his student loan. I'd heard of lawyers losing their licenses for failure to pay child support, but student loan debt-- that's hitting close to home. It turns out that there's a little more to this story than the NLJ reported.

Attorney Frank Santulli first ran into trouble with the Texas Bar in 2001. Five years earlier, in 1996, the Supreme Court of Texas adopted Rules for Suspension of Attorneys in Default of Guaranteed Student Loans under which the Texas Guaranteed Student Loan Corporation (TGSCL) can inform the State Bar that a lawyer is in default. The Bar then notifies the lawyer of the report and the lawyer has sixty days to obtain certification from the TGSLC that he has entered into a repayment agreement or that he is otherwise not in default. On the sixty-first day following the notice, if the lawyer cannot produce the requisite certificate, he is automatically suspended from the practice of law. (The New Jersey Bar has adopted a similar rule).

In 2001, after TGSLC informed the Bar of Santulli's default, he appealed his suspension before the Board of Law Examiners. Santulli was in a swamp of credit card and student loan debt. He had worked out a debt management plan with Consumer Credit Counseling Services (CCCS). The Board entered an agreed order granting Santulli a two-year probationary license. He agreed to make payments under the CCCS plan and provide proof of payments to the Board.

Santulli defaulted on the payments due under the plan and in December 2002, the Board held a hearing on revocation of his probationary license. Santulli explained that he had experienced financial setbacks and indeed had not made the agreed payments on his student loan since December 2001. The Board was concerned with the professional implications of his financial problems, in particular that Santulli could find himself "in so much debt and under so much pressure that there are opportunities and temptation either to short-shrift . . . clients, or . . .convert money [from clients] to take care of those debts."

The Board granted Santulli a six-month extension of his probationary license subject to conditions including one that required him to "make suitable arrangements for payment or discharge of all his past due debts." Moreover, the order stated that Santulli's failure to comply with this payment condition would conclusively indicate a lack of trustworthiness and support the inference that Santulli posed an unreasonable risk of harm to his clients. Santulli did not object to the order.

A year later, in December 2003, Mr. Santulli appeared again before the Board and admitted that he had not made any payments on his debt. He had made arrangements with a bankruptcy lawyer to swap family-law work for bankruptcy represenation. But, the bankruptcy lawyer didn't deliver. Santulli hired another bankruptcy lawyer in October, but still no bankruptcy petition. Santulli asked the Board for another month to file for bankruptcy.

The Board rejected Santulli's request for an extension and found him in violation of the condition of his probationary license -- that he make arrangements to pay or discharge his debts. Pursuant to the 2002 agreement, Santulli's failure indicated the lack of good moral character required for the privilege of practicing law. In particular, it found that his failure to make arrangements to pay or discharge his debt presented a clear likelihood that he would harm a client, obstruct justice or violate the lawyer disciplinary rules.

Santulli sought judicial review of the revocation of his license. The trial court affirmed the Board. Santulli appealed arguing that the trial court's order did not rest on substantial evidence, that the condition of his probationary license requiring him to pay or discharge his loans was arbitrary and capricious, and that the Board erred in concluding that his behavior justified a conclusion that he was unfit for the practice of law.

The Texas Court of Appeals (3d Dist.) noted that Santulli did not object to or appeal the Board's 2002 order that imposed the payment condition. The condition was not ambiguous or otherwise inappropriate, and Santulli fully understood it. Although Santulli had filed for bankrutpcy relief in 2004, after entry of the Board's 2003 order, his bankruptcy case and ultimate discharge was not before the Board in 2003. The court held that based on the record before the Board, its decision to revoke Santulli's law license was not erroneous. "[T]he evidence shows that two and one-half years after being given a probationary license conditioned in part on paying or discharging his debts to satisfy the Board's concerns, Santulli had not made any progress . . . other than to develop a more concrete intention to file for bankruptcy within a month."

As for the connection between Santulli's failure to pay his debts and his moral character, the court found that the Board's order was supported by reliable evidence "such that a reasonable man could find that there were substantial doubts about [Santulli's] 'honesty, fairness and respect for the rights of others and for the laws of the state and nation.'" (citing Koningsberg v. State Bar of Cal., 353 U.S. 252 (1957).

In re: Bob

In my counterterrorism seminar, we have come, perhaps inevitably, to the subject of torture. Torture is a thing, like pornography, that is hard to define at the margins but easily identified in its galloping variety. And torture, almost uniquely, is a thing beyond the law. Professor John Yoo gained unhappy fame not for offering the opinion that torture is legal, but by placing a great deal of conduct outside the rubric of torture by attempting to define torture narrowly in the law.

To be sure, there are those who feel torture (even the strident stuff) should be recognized in the law as available to cope with extraordinary circumstances. The quintessential example of such a circumstance is the ticking time bomb scenario, where you (yes, you) have custody of a terrorist who has planted a bomb somewhere (only he knows where) which will detonate in one hour and kill scores of people.

Would you, for example, shoot the terrorist in the leg to extract from him the location of the bomb? Whatever your answer, the idea that you should be able to do so legally (i.e. suffer no legal jeopardy after the fact) is not an exotic one. But whether one subscribes to that idea or rejects it, the basis for doing so cannot be found in the law. It has to be found outside the law, on the far side of a moral reckoning.

I won’t go into how folks in my class came down on the ticking time bomb scenario, because to do so would literally be talking out of school. But our discussion reminded me of a few other moral dilemmas, in my view more agonizing than the ticking time bomb scenario, that I was presented with in my undergraduate years. And it is with these that the rest of this post is concerned. Both came up, unsurprisingly, in philosophy classes.

The first dilemma puts you at the control of a railroad switch. Down one track, on which a runaway train presently travels, are five people who for some reason (you have to just accept the parameters of the scenario to get to the critical moral choice) cannot get off the track and will be killed if you take no action. Along the other track, to which it is in your power to redirect the train, is a single person likewise unable to vacate. The question, of course, is whether you pull the switch and save the five people by sacrificing one, or whether you stand by. You will notice that in addition to the raw number of lives calculus, there is the moral agency dimension to this dilemma: if you pull the switch, you act affirmatively to kill a person who otherwise was not in jeopardy.

Utilitarianism has an answer to this dilemma. Save the five by killing the one. But what if the five are members of the Manson family (they have escaped) and the one is a child who will grow to be the scientist who cures cancer. Utilitarianism then switches sides, even if it had to flip the switch to kill the five. What would you do?

Here’s my favorite: You are in a cave with five friends. For some reason, the cave begins to fill up with water. There is but one exit, and presently one of your five friends gets perfectly and emphatically lodged in the threshold (I’ll call him Bob). There is no way to dislodge Bob by pushing or pulling, and the water continues to rise. It is certain that the five of you yet in the cave will drown if Bob is not dislodged. Bob, incidentally, will live if left undisturbed because his face is directed out of the cave. Luckily for you and the others, and tragically for Bob, there is lying about a stick of dynamite and a means to light it. Using the dynamite on Bob (i.e. blowing him up) will free you and your four friends from the cave. Of course Bob will perish in the exercise. It has been some years since I was in the class in which we discussed this dilemma, and so I feel free, in the interest of writing a more interesting post, to go into some of the views expressed by the students.

The first consideration for the students was to decide whether to use the dynamite. Many of us quickly determined to do so. A few said no, and prepared to hypothetically die. And a few others remained for the time uncommitted. The first and last practical difficulty the Explode Bob caucus ran into was where to place the dynamite. This was a completely unnecessary inquiry, since it had been stipulated that the dynamite would dislodge Bob. Nevertheless, we dilated on the issue. At length, and to our great amusement, we determined that the dynamite would have to be used as a particularly unmarketable suppository. Then one of the uncommitted students asked to be heard. I remember him because he had to that point in the semester not said a single word in class. Accordingly, I had invested him with wisdom. He knitted his brow. He was, he said, in general if reluctant agreement that Bob had to go. But he had some nagging doubts and meant to soothe his conscience thus: couldn’t we, he said, ask Bob if it was ok to blow him up. He spoke, it turned out, too soon in that class.

If you are disposed to do so, change around the numbers involved and the moral character or utilitarian worth of the players and note when you switch from one determination to the other. You will reach decisions intuitively, easily. Then try to identify a consistent principle guiding your decisions. That is only easy if you are prepared to be categorical. And categorical approaches tend, at the limit, to produce absurd results.

Junk not joke email

I knew it even before I opened the email - the telltale signs were all over the subject line .... "Between us".... Now I've won the Irish sweepstakes more times than I can count, been invited to share in the plundered oil wealth of a nation (which one? the emails never say), secret accounts of deceased dictators can be mine, steal the inheritance of those bearing my name, yes, I've seen it all. I especially appreciated the offers that cynically pose as dying religious folk begging to donate huge sums for charity - sure, there's a sucker born every minute, these say - steal from a dying woman, go ahead, you deserve it. They all go into the delete box with a chuckle.

But this one goes too far:
"Between us.... I am an investigative consultant with Holocaust Victims Assets Litigation (Swiss Banks). Between July 1997- July 2008, the Swiss Banker's Association published a list of dormant accounts originally opened by non-Swiss citizens. These accounts had been dormant since the end of World War II (May 9,1945). The continuing efforts of the Claims Resolution Tribunal (CRT) have since resulted in the discovery of various accounts. The published lists contain all types of dormant accounts, including interest-bearing savings accounts,securities accounts,safe deposit boxes,custody accounts, and non-interest-bearing transaction accounts.Numbered accounts are also included. Interest is paid on accounts that were interest bearing when established.The Claims Resolution Tribunal (CRT)handles processing of all claims on accounts due non-Swiss citizens. A dormant account of Aronson Rudolf, with a credit balance of 25,000,000 US dollar plus accumulated interest was discovered by me. The beneficiary left no WILL and no possible records for trace of heirs.As a top executive officer, I have all secret details and necessary contacts for claim of the funds without any hitch. Please verify using this website: http://www.crt-ii.org/links.phtm All that is required from you is to indicate your interest to receive the funds into your norminated Bank account. Please Reach Me Through This email: paulwarren@tsamail.co.za Thanks Paul Warren"

Not funny. Indecent, in fact.

The Crisis of Credit Visualized

A refreshingly lucid explanation of the credit crisis.

The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

Finally

Premium, Natural, and Organic Supermarket shoppers, rejoice! Whole Foods has settled with the FTC. According to the FTC press release, "The consent order will restore competition in 17 geographic markets that were impacted by the acquisition. In addition to requiring the transfer or divestiture of all rights to 32 stores, Whole Foods also is required to divest related Wild Oats intellectual property, including unrestricted rights to the “Wild Oats” brand, which retains significant name recognition and loyalty among consumers." FTC Chairman Jon Leibowitz says, "As a result of this settlement, American consumers will see more choices and lower prices for organic foods." Sounds good to me, but is it true?

The settlement requires Whole Foods to divest itself of thirty-two stores, in seventeen geographic markets (In 2007, when the merger agreement was entered into, Whole Foods acquired seventy-four Wild Oats stores). Nineteen of these stores are already closed. Selling closed stores will not likely prove to be easy, and unlike the competition created by a Wild Oats-esque competitor, Whole Foods need not sell the designated stores to a single buyer. This means, the stores could potentially be sold to smaller-scale operations, which may not have the ability to effectively compete with the efficiencies of an operation the size of Whole Foods. A similar problem is seen with the IP rights. Whole Foods must sell its interest in the Wild Oats name, but if the buyer is not at least as big as Wild Oats, the value of the name could diminish greatly.

The settlement also means the Supreme Court won't have the chance to review the D.C. Circuit's opinion, issued last summer, which some have criticized as "a step backward" as it "runs counter to the strong trend in recent Supreme Court jurisprudence for economic rigor and clear standards to guide businesses and the agencies." Will this consent order truly "restore competition"? Only time will tell. All I can say for sure is that settlements are always a compromise.