Source: https://www.pennlawreview.com/print/index.php?vid=11
Timestamp: 2019-04-20 19:11:17+00:00

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"I imagine that many law students who arrive here at this famous law school in Philadelphia, the city that hosted our nation�s Constitutional Convention, dream of litigating epic constitutional cases before the United States Supreme Court. For the students here, perhaps learning the Federal Rules of Civil Procedure may not be very high on your priority list, but you will find out�as I found out�that command of procedure is essential to a litigator�s prowess.
"More broadly, the way we fashion procedure is pivotal to the quality of justice our system provides. Supreme Court Justice Abe Fortas said it well when he wrote that, �Procedure is the bone structure of a democratic society.�1 I�m going to ask you to remember two things from this speech. That�s the first one: '[p]rocedure is the bone structure of a democratic society.' In short, procedure is power."
Keynote Address: "The Just, Speedy, and Inexpensive Determination of Every Action?"
I have puzzled over this phrase during more than thirty years of teaching procedure: I spent twenty representing human rights plaintiffs, ten years in the U.S. Government, usually representing defendants or amici in international and foreign relations disputes, and five years as a law school dean, considering how the legal academy should teach both procedure and globalization.
This anniversary raises three questions: First, after seventy-five years of these Rules, have the Rules satisfied their own standard? Second, if they have not, why not? And third, what does the future hold for the Rules, particularly as they face the challenge of globalization?
This Article is part of an ongoing study of the behavior of American political institutions, including courts, with respect to federal civil litigation. We are particularly interested in litigation that involves statutory private enforcement regimes and other legal provisions that predictably affect incentives and opportunities for access to federal court to enforce federal rights. We believe that, in order to understand the modern history of federal law that affects private enforcement and access to court with respect to federal rights (collectively, �private enforcement�), it is necessary to view the salient events in their institutional context, recognizing that the institutions involved are competing to regulate social and economic life in the United States. As part of our inquiry into how interactions and competition among institutions have produced the contemporary state of federal civil litigation�and in recognition of the seventy-fifth anniversary of the Federal Rules of Civil Procedure�we consider ways in which the federal judiciary has affected private enforcement through control of procedure.
Attorneys� fees fuel litigation, yet little is known about fees. Fee data are rarely available in the United States or in English rule, loser-pays jurisdictions. This Article analyzes fee awards in Israel, which vests judges with discretion to award fees, with loser pays operating as a norm. The 2641 cases studied constitute nearly all cases terminated by judgment in district courts in 2005, 2006, 2011, and 2012. Given many fee denials and fees that are well below client payments to attorneys when awarded, the Israeli fee system could reasonably be characterized as being more American than English. Moreover, judges use their discretion in a manner that reflects redistributive sensitivity. Fees were awarded to prevailing parties in 72.8% of cases. Judges often exercised their discretion to protect losing litigants, especially individuals, from having to pay fees. In tort cases won by individuals against corporate defendants, corporations paid their own fees plus plaintiffs� fees in 99% of the cases; corporate defendants that prevailed in such cases paid their own fees 48% of the time. Asymmetry between plaintiffs and defendants existed. In cases with fee awards, the mean and median fee paid to prevailing plaintiffs was 110,000 shekels (NIS) and 31,000 NIS, respectively; the mean and median fee paid to prevailing defendants was 49,000 NIS and 25,000 NIS, respectively. Plaintiffs prevailed in 54.8% of cases between individuals but received 90% of the fees. Expected award amounts varied by case category and party status. Fees were significantly correlated with damages recoveries in plaintiff victories and with time on the docket. In contract and property cases, but not in tort cases, fees declined as a percent of recovery as the recovery increased.
It hardly needs saying that summary judgment has been a controversial topic. The device was, by many accounts, long a sleepy backwater of the procedural countryside.
In one telling of this story, the Court paved paradise and put up a parking lot of pretrial disposition that unfairly and unreasonably burdens plaintiffs�perhaps even violating the right to a civil jury trial guaranteed by the Seventh Amendment.
As litigation has more than one side, there is, of course, an opposing view�namely that invigorated summary judgment practice simply and efficiently substitutes an early dispositive motion for the substantial and pointless costs of going through the trial motions in a meritless suit. But even this positive position concerning efficiency has been contested. As Samuel Issacharoff and George Loewenstein have suggested, liberalized summary judgment practice might affect the parties� returns from settlement in cases that otherwise would settle early in the litigation process. If liberalized summary judgment eliminates enough early settlements, then it might actually increase the net costs of administering the federal civil justice system: even if fewer cases get past summary judgment, perhaps more cases get to summary judgment. One scholar has even asserted that, as a practical matter, the costs of civil litigation would fall if we abolished summary judgment altogether.
It is a pleasure to contribute to this celebration of the seventy-fifth anniversary of the Federal Rules. As one who has been something of a rulemaking insider for over twenty percent of the seventy-five years since the Federal Rules came into effect, I suppose I incline towards being an apologist�at least regarding recent developments.
I intend to focus mainly on the introduction and evolution of broad discovery. In part, that�s because discovery has been an almost constant focus of rulemaking for forty years and also is the most acute pressure point in the acidic relations the United States has had with the rest of the world due to distinct procedural arrangements. In addition, our broad discovery can serve as an avatar for the most aggressive visions of the peculiar American institution of private litigation as a force for good or evil. Not surprisingly, my general view is that the rulemakers have sought (fairly successfully) to steer a middle course between the most aggressive supporters and critics. Today, though, it may be that Silicon Valley is the source of greater challenges for discovery rules than either camp of critics.
With the possible exception of John Marshall, the Justice most frequently quoted by legal scholars is almost certainly Oliver Wendell Holmes, Jr. Following that practice, I begin with an appropriate Holmesian injunction: our �business as thinkers is to make plainer the way from some thing to the whole of things.�1 Accordingly, the purpose of this Article is to suggest that recent Supreme Court decisions construing three Federal Rules of Civil Procedure �make plainer� some salient aspects of a particularly important �whole��namely, the jurisprudence of the Rehnquist and Roberts Courts.
To preview my argument briefly, plausibility pleading formally asks judges�for the first time since the advent of the Federal Rules�to engage in a merits-based analysis at the pleading stage based on their �judicial experience and common sense.� Judges are expected to engage in this inquiry with only the factual allegations in the complaint at their disposal. Putting aside the difficulty of conducting this analysis under the best of circumstances, our federal judges have extremely limited judicial experience to apply to merits-based decisions. The number of trials, the ultimate arbiter of merit, has fallen precipitously in the past fifty years. Trials have been replaced by settlements (the terms of which are often secret, even to the judge handling the case), alternative dispute resolution (with outcomes that judges may review only for arbitrariness, if they review them at all), and summary judgment (a poor substitute for trial). With these gaps in judicial experience, a judge is left to compensate with �common sense,� relying on heuristics that may interfere with accurate decisionmaking.
The normative goals of the 1938 Federal Rules facilitated a reconceptualization of federal adjudication by welcoming into court a diverse array of persons who, as the century unfolded and equality mandates expanded, became rights-holders. As a consequence, courts came to serve as venues for democratic debates about rights and remedies. Seventy-five years later, that egalitarian project has contracted, and the Federal Rules have been refocused on management and judge-based settlement efforts.
That privatizing of process inside courts, as well as the devolution to agencies and outsourcing to private providers, is promoted by official voices within the federal judiciary. These new procedural forms close off public access by siting dispute resolution outside the public sphere. Not only are potential claimants losing knowledge of alleged injuries and the modes of redress, but these privatizing procedures undermine rationales for public and private investments in the lower federal courts. In 1995, the federal judiciary�s Long Range Plan worried about the nightmare of ever-expanding filings and vanishing trials. By 2014, data on filings and investments showed flattening rates of filing, reductions in courthouse space, and tightening budgets. While the Long Range Plan�s aspirations to control growth may be coming to fruition, the planners� hopes of preserving the federal courts as lively venues, hospitable to diverse claimants trying cases, are not being fulfilled. Absent changes in rules, doctrines, and practices, the federal courts�like the 1938 Federal Rules�are moving into a decline and, with them, opportunities for public debates about the contours of legal norms.
Every contemporary American lawyer who has engaged in litigation is familiar with the now fifty-four-volume treatise, Federal Practice and Procedure. Both of that treatise�s named authors, Charles Alan Wright and Arthur Miller, have mourned the death of a Federal Rules regime that they spent much of their professional lives explaining and often celebrating. Wright shared a sense of gloom about federal procedure that he compared to the setting before World War I. Miller has also published a series of articles that chronicled his grief.
We agree that something has fundamentally changed. In fact, we believe that we are in the midst of what should be labeled a new era�the fourth in the history of American civil procedure. The first three eras are rather conventional: the first era began with the country�s founding; the second era began in the middle of the nineteenth century with the introduction of code pleading; and the third era commenced in 1938 with the Federal Rules of Civil Procedure.
A district court has broad discretion in deciding whether a suit may be maintained as a class action. Variations on this phrase populate the class action jurisprudence of the federal courts. The sentiment reflects the equity roots of the representative class proceeding�a history that has been thoroughly investigated by leading scholars in the field of civil procedure, structured the work of the committee that drafted modern Rule 23, and has repeatedly been embraced by the Supreme Court as a necessary starting point when interpreting and applying the Rule in modern practice. The power of the federal courts to exercise discretion when deciding whether to permit a suit to proceed as a class action has long been treated as an elemental component of a representative proceeding. It is therefore cause for surprise that there is no broad consensus regarding the nature and definition of this judicial discretion in the certification process. The federal courts have not coalesced around a clear or thorough exposition of the question, and the scholarly literature has not provided a sustained analytical treatment.
The U.S. Supreme Court has insisted that standing doctrine is a �bedrock� requirement only of Article III. Accordingly, both jurists and scholars have assumed that the standing of the executive branch and the legislature, like that of other parties, depends solely on Article III. But I argue that these commentators have overlooked a basic constitutional principle: federal institutions must have affirmative authority for their actions, including the power to bring suit or appeal in federal court. Article III defines the federal �judicial Power� and does not purport to confer any authority on the executive branch or the legislature. Executive and legislative standing instead depend in large part on the provisions conferring power on those institutions�principally, Article II and Article I. This basic insight has important implications. I argue that the Take Care Clause of Article II helps both to explain the breadth and to define the limits of executive standing. The executive branch has standing only insofar as it has an Article II power and duty to enforce and defend federal law on behalf of the federal government. The Take Care Clause does not, however, confer standing when the executive no longer asserts that law-enforcement interest�when it declines to defend a federal law. Article I, for its part, does not confer any power on Congress to enforce or defend federal laws in court. Accordingly, contrary to the assumption of many scholars, Congress lacks standing to represent the United States in place of the executive. The Supreme Court has entirely overlooked these questions of institutional power in considering issues of executive or legislative standing, including, most recently, in the litigation over the Defense of Marriage Act. Article III cannot confer power on the executive or the legislature that Article II or Article I denies.
At one point or another, every law student likely encounters Lujan v. Defenders of Wildlife, in which the Supreme Court succinctly restated the elements of Article III standing before deciding that the plaintiffs lacked it. But what likely escapes notice, even of students fresh out of a Civil Procedure course, is that the Lujan Court decided the issue of standing on a motion for summary judgment, rather than on a motion to dismiss for lack of subject matter jurisdiction pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure. The Court did so even though a challenge to standing unquestionably involves a challenge to subject matter jurisdiction. Moreover, its decision to reject standing came several years after the Eighth Circuit had decided that the plaintiffs had adequately alleged standing to survive a motion to dismiss. In a manner identical to standard treatment of issues on the merits, the Lujan Court confirmed that the plaintiff�s burden to produce evidence supporting Article III standing progressively increases as litigation proceeds from the motion to dismiss stage to the summary judgment stage and, eventually, to trial. As a result, the parties and courts endured years of litigation only to discover that there was no valid case or controversy in the first place. This outcome was strange because a court�s exercise of its coercive power over litigants absent a case or controversy violates funda- mental separation of powers principles.
To understand the problem, it is helpful to review the role of standing in implementing Article III�s case-or-controversy requirement. The case-or- controversy requirement is arguably the most important limitation on federal courts� jurisdiction. It prevents the unelected judiciary from exercising executive or legislative powers, the exclusive province of the politically accountable branches of government, and restricts federal courts to their traditional adjudicatory role. As the Supreme Court recognized in Marbury v. Madison, this traditional adjudicatory role was limited to the resolution of real private disputes. In our constitutional democracy, then, the judiciary may make law only as an incident to the resolution of live disputes. Accordingly, the Court has required any plaintiff seeking an Article III federal forum to demonstrate standing by satisfying three criteria: (1) a concrete injury in fact, (2) that is fairly traceable to the defendant�s conduct, and (3) that can be redressed by a favorable decision. A generalized injury or a mere desire to see that the law is enforced does not suffice. Under this private-rights model, the plaintiff must establish Article III standing to satisfy the case-or-controversy requirement, thus preserving the delicate balance of separation of powers.
If a federal court exercised its coercive power over a litigant in a proceeding that did not satisfy the case-or-controversy requirement, it would upset this careful balance. True, as a formal matter, a court exercises its coercive power only upon entry of a final judgment. Some might therefore argue that it makes no difference whether a federal court determines standing at the outset of a suit on a Rule 12(b)(1) motion to dismiss or at the close of the far more extended process of pleading, discovery, and summary judgment. But the practical realities of modern litigation suggest that a court exercises coercive power well before final judgment. As the Supreme Court has recognized in nonjurisdictional contexts, even allowing a plaintiff to obtain discovery can coerce a defendant into an in terrorem settlement� effectively causing litigants to modify their primary conduct absent a formally coercive court order. The costs and burdens of litigation are likely to influence or even coerce litigant behavior long before the formal resolution of a suit.
When this inescapable reality combines with the foundational separation of powers concerns motivating Article III�s case-or-controversy requirement, Lujan�s method for determining constitutional standing becomes extremely problematic. By declining to demand the requisite showing of injury in fact, traceability, and redressability at the very outset of a suit, the Lujan approach pressures defendants to settle�even in the absence of a genuine case or controversy. For this reason, it is critical to resolve disputes over subject matter jurisdiction (both legal and factual) at the very outset of litigation. It is especially important to do so if the existence of a case or controversy is in doubt, because a court risks straying beyond its judicial role and thus threatening the separation of powers.
Corporate governance incentives at too-big-to-fail financial firms deserve systematic examination. For industrial conglomerates that have grown too large to be efficient, internal and external corporate structural pressures push to resize the firm. External activists press the firm to restructure to raise its stock market value. Inside the firm, boards and managers see that the too-big firm can be more efficient and more profitable if restructured via spinoffs and sales. But a major corrective for industrial firm overexpansion fails to constrain large, too-big-to-fail financial firms when (1) the funding boost that the firm captures by being too-big-to-fail sufficiently lowers the firm�s financing costs and (2) a resized firm or the spun-off entities would lose that funding benefit. Propositions (1) and (2) have both been true and, consequently, a major retardant to industrial firm overexpansion has gone missing for large financial firms. The effect resembles that of a corporate poison pill, but one that disrupts the actions of both outsiders and insiders.
Nausea; hives; swelling of eyes, nose, and throat; lung failure; and possibly death�these are the symptoms food allergy sufferers can endure if they consume their respective food allergen. Food allergies affect between 2%-9% of the U.S. population. Each year, roughly 30,000 individuals require emergency room treatment, and roughly 150 individuals die from allergic reactions to food.
Even minimal exposure to an allergen can cause an allergic reaction in some individuals. Currently, there is no known cure. Despite some recent successes in medical trials of alternative treatments, the primary option for those suffering from food allergies is still complete avoidance of the allergens themselves.
To avoid allergens successfully, food allergy sufferers must be able to trust information provided by food producers and manufacturers. The average individual does not produce his or her own food; instead, nearly everyone purchases food from grocery stores, farmers� markets, and other commercial suppliers and rely on food labels to determine whether a product is safe for consumption. For food allergy sufferers, the ingredient labels on these packaged foods are lifelines to ensure their safety.
In an effort to protect food allergy sufferers, Congress passed the Food Allergen Labeling and Consumer Protection Act (FALCPA) in 2004. The Act required, for the first time, producers of commercial food products to indicate on a label whether the product contained any of the eight major allergens.
The food allergy community heralded the creation of this legislation. However, the Act left one important concern for food allergy sufferers untouched: advisory label warnings. An advisory label warning is an addition to a food product�s ingredient label that alerts consumers to the possibility of contamination, or �cross-contact,� with an allergen. Some food allergy sufferers can have allergic reactions to very small amounts of allergens, including food products that were only in cross-contact with allergens.
In 2004, Google�s initial public offering (IPO) revealed that the company would go public with a dual-class capitalization structure. A dual-class stock company has a capital structure whereby insiders hold common stock with multiple votes per share (typically ten), while the public holds common stock with just one vote per share. This structure was popular in the 1980s as a defensive measure to ensure that a company was protected against hostile takeovers, management would adopt and keep high vote share classes. The NASDAQ Stock Market (NASDAQ) and NYSE MKT LLC have consistently allowed corporations with such structures to list on their exchanges, while the New York Stock Exchange (NYSE) has had different rules over time. In 1988, the Securities and Exchange Commission (SEC) came into the picture and attempted to regulate companies with dual-class stock (and other structures with shareholder voting restrictions) by prohibiting such companies from listing on the stock exchange. However, the Court of Appeals for the District of Columbia subsequently vacated this SEC rule. Today, corporations can list on the NYSE, NASDAQ, or AMEX as long as the dual-class structure was in place at the time of the initial public offering.
Since Google�s 2004 IPO, an increasing number of companies have begun to go public with similar capitalization structures. In light of dual-class stock�s resurgence, Congress and the stock exchanges should revisit the use of such capitalization structures in the United States. In this Comment, I argue that decoupling voting rights from economic ownership is detrimental to shareholders because it allows companies to avoid the threat of market mechanisms that have traditionally served to keep management in check. In the long term, this decoupling is incompatible with principles of corporate governance, and thus stock exchanges should reevaluate their policy of accepting companies with dual-class stock structures. Part I discusses how the dual-class structure allows management to entrench itself and effectively prevent shareholders from exercising any sort of control over a company they technically own. Part II explains how dual-class stock companies have led to both stock unifications that are detrimental to the general public and controllers extracting benefits for themselves in acquisitions. Finally, Part III discusses how such reforms can be achieved.
Cyberattacks are inevitable and widespread. Existing scholarship on cyberespionage and cyberwar is undermined by its futile obsession with preventing attacks. This Article draws on research in normal accident theory and complex system design to argue that successful attacks are unavoidable. Cybersecurity must focus on mitigating breaches rather than preventing them. First, this Article analyzes cybersecurity�s market failures and information asymmetries. It argues that these economic and structural factors necessitate greater regulation, particularly given the abject failures of alternative approaches. Second, this Article divides cyberthreats into two categories: known and unknown. To reduce the impact of known threats with identified fixes, the federal government should combine funding and legal mandates to push firms to redesign their computer systems. Redesign should follow two principles: disaggregation�dispersing data across many locations�and heterogeneity�running those disaggregated components on variegated software and hardware. For unknown threats��zero-day attacks��regulation should seek to increase the government�s access to markets for these exploits. Regulation cannot exorcise the ghost in the network, but it can contain the damage it causes.
It has been over a hundred years since George Bernard Shaw wrote that �[a]ll professions are a conspiracy against the laity.� Since then, the number of occupations and the percentage of workers subject to occupational licensing have exploded; nearly one-third of the U.S. workforce is now licensed, up from five percent in the 1950s. Through occupational licensing boards, states endow cosmetologists, veterinary doctors, medical doctors, and florists with the authority to decide who may practice their art. It cannot surprise when licensing boards comprised of competitors regulate in ways designed to raise their profits. The result for consumers is higher prices and less choice, as licensing raises wages by eighteen percent and bars competition from unlicensed workers. For African-style hair braiders, the result is either an illicit business or thousands of hours of irrelevant training imposed by a cosmetology board. For lawyers, the result is less competition from tax accountants, paralegals, and out-of-state lawyers.
The Sherman Act�s great accomplishment has been to make cartels per se illegal and relatively scarce�unless the cartel is managed by a professional licensing board. Most jurisdictions consider such boards, as state creations, exempt from antitrust scrutiny by the state action doctrine, leaving would-be competitors and consumers no recourse against their cartel-like activity.
We contend that the state action doctrine should not prevent antitrust suits against state licensing boards that are comprised of private competitors deputized to regulate and to outright exclude their own competition, often with the threat of criminal sanction. At most, state action should immunize licensing boards from the per se rule and require plaintiffs to prove their cases under the rule of reason. We argue that the Fourth Circuit�s recent decision, soon to be reviewed by the Supreme Court, to uphold a Federal Trade Commission (FTC) antitrust suit against a licensing board�denying state action immunity to a licensing board and thereby creating a circuit split�was a step in the right direction but did not go far enough. The Supreme Court should take the split as an opportunity to clarify that when competitors hold the reins to their own competition, they must answer to Senator Sherman.
What good is Article V? The Constitution�s amendment rule renders the text inflexible, countermajoritarian, and insensitive to important contemporary constituencies. Comparative empirical studies, moreover, show that textual rigidity is not only rare in other countries� organic documents, but also highly correlated with constitutional failure. To promote our Constitution�s survival and to counteract Article V�s �dead hand� effect, commentators argue, Americans have turned to informal amendment through the courts or �super� statutes. Article V, the conventional wisdom goes, is a dead letter.
Against this pervasive skepticism, I propose instead that Article V may have played an important but hitherto unrecognized function in the early Republic. I hypothesize that Article V may have mitigated a �hold-up� dilemma that could have precluded the Constitution�s ratification and undermined its stability in the early Republic era. By hindering strategic deployment of textual amendment, Article V�induced rigidity fostered a virtuous circle of investment in new institutions, such as political parties and financial infrastructure. Identification of Article V�s potential role in the early Republic leads to a more nuanced view of the Constitution�s amendatory regime. In effect, it raises the possibility that we have a two-speed Constitution�with Article V�induced rigidity at the inception, supplemented gradually over time by informal judicial or statutory amendment protocols.
Nevertheless, business professionals value these almost-binding agreements. When two companies sign an LOI, the parties often view it as a reason to celebrate. An LOI is considered a major milestone in the lifecycle of many transactions.
If parties cannot predict the legal effect of LOIs, why are they used so frequently? Many explanations have been proposed, yet none adequately addresses the element of legal unpredictability that inheres in LOIs. In fact, the leading explanations do not identify a meaningful relationship between LOIs and contract law. This Comment identifies how legal unpredictability affects the operation of LOIs as a negotiating tool and ultimately concludes that LOIs manipulate legal unpredictability to the parties� mutual advantage. Specifically, this Comment argues that signing an LOI facilitates an economic hostage exchange that aligns counterparties� incentives, decreases both parties� abilities to act strategically, and makes completion of the transaction more likely.
Towards a Unified Theory of "Reverse-Erie"
A �reverse-Erie� problem arises when a state court is hearing a federal cause of action and confronts a situation in which a state law and a federal law conflict. The term finds its etymological origin in Erie Railroad Co. v. Tompkins, which dealt with the opposite problem of a federal court sitting in diversity confronting a situation where a state law and a federal law conflict.
Although reverse-Erie problems are regularly dealt with at the state court level, they are rarely dealt with at the federal level. Since a reverse-Erie problem, by definition, can arise only in state court, the only federal court that can consider a reverse-Erie problem is the U.S. Supreme Court on a writ of certiorari from a state court of last resort�an infrequent occurrence. Indeed, commentators consider only four reverse-Erie cases to be seminal in the development of the current doctrine.
Given that these four cases were decided decades apart from each other and do not use a consistent methodology, state courts facing reverse-Erie problems are left to resolve the Supreme Court�s ambiguity in this area. The result has been virtual chaos, with state courts approaching reverse-Erie problems with different methodologies that lead to divergent results. This Comment attempts to develop an analytically cogent framework for the treatment of reverse-Erie problems.
As most of us are aware, noncompliance with the tax law can lead to tax penalties, which almost always take the form of monetary sanctions. But noncompliance with the tax law can have other consequences as well. Collateral sanctions for tax noncompliance�which apply on top of traditional tax penalties to revoke or deny government-provided benefits�increasingly apply to individuals who have failed to obey the tax law. They range from denial of hunting permits to suspension of driver�s licenses to revocation of passports. Further, as the recent Supreme Court case Kawashima v. Holder demonstrates, some individuals who are subject to tax penalties for committing tax offenses involving �fraud or deceit� may even face deportation from the United States.
When analyzing sanctions as incentives for tax compliance, tax scholars have focused almost exclusively on the design and implementation of monetary penalties. This Article, in contrast, introduces the collateral tax sanction as a new form of tax penalty that does not require noncompliant taxpayers to pay the government money and that does not require a taxing authority to implement it. Drawing on behavioral research and experiments in the tax context and other areas, I argue that collateral tax sanctions can promote voluntary tax compliance more effectively than the threat of additional monetary tax penalties, especially if governments increase public awareness of these sanctions. Governments should therefore embrace collateral tax sanctions as a means of tax enforcement, and taxing authorities should publicize them affirmatively.
After considering the effects of collateral tax sanctions under the predominant theories of voluntary compliance, I propose principles that governments should consider when designing collateral tax sanctions. These principles suggest, for example, that initiatives to revoke driver�s licenses or professional licenses from individuals who fail to file tax returns or pay outstanding taxes would likely promote tax compliance. However, whether the sanction of deportation for tax offenses involving fraud or deceit will have positive compliance effects is far less certain. Finally, I suggest how taxing authorities should publicize these sanctions to foster voluntary compliance.
A U.S. firm buying and selling its own shares in the open market can trade on inside information more easily than its own insiders because it is subject to less stringent trade-disclosure rules. Not surprisingly, insiders exploit these relatively lax rules to engage in indirect insider trading: they have the firm buy and sell shares at favorable prices to boost the value of their own equity. Such indirect insider trading imposes substantial costs on public investors in two ways: by systematically diverting value to insiders and by inducing insiders to take steps that destroy economic value. To reduce these costs, I put forward a simple proposal: subject firms to the same trade-disclosure rules that are imposed on their insiders.
The traditional view of the federal administrative state imagines a bureaucracy consisting entirely of executive agencies under the control of the President as well as regulatory commissions and boards that are more independent of the White House. Administrative law clings to this image, focusing almost entirely on these conventional agency forms. The classic image, however, is inaccurate. The reality of the administrative state is more complex.
Contrary to the traditional view, a considerable bureaucracy exists outside of executive agencies and independent regulatory commissions: the largest employer of nonmilitary government employees, the U.S. Postal Service; the only major operator of passenger trains in the country, Amtrak; the organization that ended the career of cyclist Lance Armstrong, the U.S. Anti-Doping Agency; the primary responder to domestic emergencies, the National Guard; the major international lender to developing countries, the International Bank for Reconstruction and Development, a part of the World Bank group; and the federal government�s primary oversight agency, the Government Accountability Office, are a few examples.
This bureaucracy lives largely at the boundaries. There are organizations at the border between the federal government and the private sector. There are organizations at the border between the federal government and other governments, including those of states, foreign countries, and Native American tribes. And there are organizations entirely within the federal government that do not fit squarely within the Executive Branch, including but encompassing far more than independent regulatory commissions and boards. The variety, number, and importance of these organizations greatly complicate the structure of the federal bureaucracy as widely perceived.
To widen the lens on the administrative state, while trying to retain some tractability, this Article locates and classifies the missing federal bureaucracy along the borders of more conventional categories and other important boundaries. In addition to placing these missing parts on the bureaucratic map, it also considers movement to and from the center of these categories. The heart of this Article theorizes about these missing components, specifically why political actors would create bureaucracy at the boundary. Under the theory advanced here�and seemingly in reality�these entities are actually the ordinary outcome of the agency design process. This Article also considers whether their creation serves social welfare or democratic legitimacy objectives, suggesting that efficiency may not always trump accountability in these alternative agency structures. Finally, this Article examines important legal issues surrounding these other bureaucracies and how these entities might shape established law and governance of federal agencies.
This was the reason Cracker Barrel stated for dismissing Cheryl Summerville, a cook for the restaurant chain, on her official separation notice. Cracker Barrel fired as many as sixteen employees pursuant to a company policy, promulgated in January 1991, stating that it was �inconsistent with [Cracker Barrel�s] concept and values and . . . with those of [its] customer base, to continue to employ individuals . . . whose sexual preferences fail to demonstrate normal heterosexual values which have been the foundation of families in our society.� In the face of criticism and a boycott by various groups, namely, the Atlanta chapter of Queer Nation, the Company rescinded its policy; however, at the time of the statement, the fired employees had not been rehired. Concerned about the impact of the adverse public reaction on Cracker Barrel�s sales, the New York City Comptroller�s and Finance Commissioner�s offices, as trustees of several of the city�s pension funds that collectively owned about $3 million of Cracker Barrel stock, submitted a shareholder proposal on behalf of the New York City Employees� Retirement System, requesting that the company formally prohibit discrimination based on sexual orientation. In a no-action letter, �the [SEC] not only agreed that the proposal could be excluded� from the company�s proxy materials but also outlined a new standard�the �Cracker Barrel Standard��which dictated that employment-based shareholder proposals would �always be excludable by corporations,� even if they implicated �significant social policy issues.� The 1992 Cracker Barrel shareholder proposal was the first of its kind to raise the issue of LGBT employment protections �after the SEC�s no-action letter, it could have been the last. However, almost twenty years after the SEC�s decision, the use of shareholder proposals to garner workplace protections for LGBT individuals has been extraordinarily successful.
Since 2000, forty-one states have passed appeal bond reform statutes, a tort reform measure that, in some shape or form, caps the amount of a supersedeas bond a defendant must secure in order to stay the execution of a judgment while pursuing an appeal. The state statutes vary widely in their operation, but their underlying goal is to protect a defendant�s right to appeal massive damages awards without putting himself in dire financial straits just to secure a sufficient supersedeas bond. Prior to the wave of reform beginning in 2000, state courts often required a bond in the amount of the full judgment plus costs and interest, which could be prohibitively expensive if the verdict was for hundreds of millions�or billions�of dollars. This Comment addresses whether state statutes capping supersedeas bond amounts are applicable in federal courts exercising diversity jurisdiction, or whether such statutes conflict with Federal Rule of Civil Procedure (FRCP) 62(d)�the rule governing postjudgment stays pursuant to supersedeas bonds.
The events of September 11, 2001, forever changed the political and legal responses to terrorism. After more than ten years, two wars, numerous targeted military strikes, and significantly increased surveil-lance, we have not stopped the growth of al-Qaeda and other terrorist organizations. The War on Terror has involved more than military operations. To stop terrorism, it is imperative to cut off its funding stream. To this end, a number of nations have created financial laws that prohibit the formation of anonymous companies and monitor suspicious bank transfers. Though these laws have been touted as evidence that we are winning the War on Terror, this Article questions their efficacy. In particular, this Article demonstrates how easy it is to form a terrorist finance network and to exploit the impotence of these international and domestic financial regulations. The Article presents findings from the largest global, randomized controlled trial on this issue to date. In our experiment, we acted as customers seeking to form anonymous shell companies in a variety of scenarios resulting in either greater risk or greater reward. On the whole, forming an anonymous shell company is as easy as ever, despite increased regulations follow-ing September 11. The results are disconcerting and demonstrate that we are far from a world that is safe from terror.
Family law has escaped the colorblindness revolution. During the same time frame that the Supreme Court has adopted increasingly stringent constitutional standards for even �benign� uses of race (including, most notably, affirmative action), the lower courts have continued to take a loose and permissive approach to many government uses of race in the family law context. Thus, courts have continued to regularly affirm (and to apply minimal constitutional scrutiny to) the use of race to determine foster care and adoptive placements, as well as the use of race as a factor in custody disputes between interracial parents.
This Article, drawing on heretofore unexplored historical sources, examines the Supreme Court�s role in the development of these divergent approaches to the use of race in the affirmative action and family law contexts. As those sources demonstrate, the Court has�over the last forty years�had numerous opportunities to address the growing divide. Nevertheless, the Court (and particularly some of its most ardent affirmative action detractors) has historically been reluctant to do so, at least in part because of a normative endorsement of the race-based practices at issue in the family law context. Thus, the Court has avoided cases involving the use of race in family law�and taken other steps to limit the reach of its doctrine in the family law arena�based on a perception that remaining uses of race in the family are fundamentally different, and at least in some contexts, benign.
This history has profound implications for the Court�s broader race law jurisprudence. The Supreme Court has�at least facially�rejected the possibility of a role for contextual or normative factors in its application of equal protection doctrine to race. Instead, the Court has demanded that race-based classifications�no matter what their intent or effects�be subjected to strict scrutiny. But the history of the Court�s approach to family law strongly suggests that the Court itself does in fact weigh such considerations in its approach to taking up and adjudicating race law claims. This Article suggests that there are serious process, legitimacy, and substantive concerns raised by such a divergence between the Court�s formal doctrine and its practice, and discusses alternatives for aligning the two more fully.
Congress has recently acknowledged the need for a better understanding of investor behavior. In the Dodd�Frank Act, Congress instructed the SEC to conduct a study of investor financial literacy. The SEC�s study was conducted at the most superficial level, however, and provided limited insight into developing future regulatory policy. Although the SEC found investor mistakes and misconceptions, it did not seek to identify the reasons for these mistakes or to understand the underlying mechanisms driving investor choices.
This Article takes up where the SEC study left off. We report the results of an experiment designed to explore how investors use the information provided to them, and why they often ignore it. Using a simulated investment game in which participants were asked to allocate funds in a retirement account among ten mutual fund alternatives, we offer some insights into how individuals seek and assimilate information about a fund�s characteristics. In particular, our experiment offers a novel addition to the body of experimental evidence on investor decisionmaking by incorporating a technology that allows us to collect data on the specific information that investors choose to view.
From the marginalization of Native Americans to the bitter rivalry between the North and the South, discrimination within the United States is not a new phenomenon. For centuries, Americans have discriminated against one another because they come from different parts of the country. Northerners have been derogatorily referred to as �Yankees,� Southerners as �rednecks,� Appalachians as �hillbillies,� Californians as �hippies� and �Valley girls,� and Native Americans as �red skins.� Such discrimination has had particularly adverse consequences in the employment context due to the assumptions employers draw from these regional identities.
Despite the prevalence of regional animus in the United States, employment discrimination based on regional origin is currently not actionable under Title VII�s national origin provision. Rather, most courts have interpreted Title VII�s national origin provision narrowly, requiring employees to point to a sovereign country of origin in order to make out a national origin discrimination claim. The problem with this country-focused conception of national origin is that it presupposes that nations are homogeneous when, in reality, nations�especially large ones like the United States�are composed of divergent subgroups.
This Comment critiques the assumption underlying Title VII�s national origin provision�that nations are homogenous�by detailing the various forms of employment discrimination that occur within the United States. It then analyzes existing case law and notes that although courts have gradually begun to expand the scope of national origin to encompass some forms sub-national discrimination, they have only recognized such claims where employees can trace their national origin to sub-national groups in foreign countries, such as Acadians, Creoles, and Serbians as part of the former Yugoslavia. However, courts have refused to allow employees to trace their national origin to sub-national groups within the United States.
This Comment concludes by arguing that Title VII�s national origin provision should be taken one step further to include regional discrimination within the United States. This interpretation would permit Title VII to protect against the employment discrimination that occurs among individuals sharing the same American origin, while keeping national origin within geographically circumscribed limits. This Comment invites further discussion regarding the policy implications of this approach.
More than a decade ago, Rolando Stockton rejected a plea bargain that came with a ten-year prison sentence, opting instead to take his chances at trial. The trial went badly. After being found guilty on several drug and firearm charges, Stockton received a forty-year prison sentence. From an objective point of view, Stockton should have taken the deal; rejecting it cost him thirty years of freedom. In postconviction proceedings, Stockton proffered a reason for his poor judgment: his lawyer failed to disclose to him the maximum sentence he faced at trial and the advantages of the ten-year deal. In spite of his admittedly hazy memory of the events, the lawyer disagreed, claiming he told Stockton that the plea deal was a �good offer.� Without clear evidence, the reviewing court sided with Stockton�s lawyer. On that finding, Stockton lost his claim, and he is still serving his initial sentence today.
Under the recent Supreme Court decisions in Lafler v. Cooper and Missouri v. Frye, defense counsel has a duty to inform and reasonably advise clients about plea offers from the prosecution, so that defendants do not forego favorable plea bargains due to the ineffective assistance of their counsel. Yet the story above demonstrates a fundamental problem with these new duties: the lack of a record of the plea bargaining process makes them unenforceable. Without such a record, the defendants, who bear the burden of proof in Sixth Amendment ineffective assistance of counsel claims, have no evidence to support claims of defective advice. Their hopes thus rest on the cooperation of the very lawyers they accuse of being ineffective. When combined with the other difficulties inherent in establish-ing an ineffective assistance of counsel claim, this problem renders the new right toothless.
In this Comment, I propose that the criminal defense bar adopt a practice of recording the plea bargaining process in order to better protect defendants� Sixth Amendment rights. I begin in Part I with a brief background of Sixth Amendment right-to-counsel jurisprudence, the plea bargaining process, and the evolution of the Supreme Court�s views on these topics.
The relationship between state sovereignty and state territory in the United States is more complex, interesting, and unstable than the reassuring familiarity of an American map might suggest. State borders move as a result of wandering rivers, interstate border compacts, and even newly discovered surveying errors. States and the federal government also buy and sell proprietary interests in vast tracts of public land, while effectively leasing their sovereign functions to private parties. This Article argues that those threads�mobile state borders and active markets for public land and sovereign functions�can and should be woven together to create an interstate market for sovereign territory.
The absence of a market for state borders is puzzling for many reasons: the market has a historical pedigree, would not face insurmountable legal barriers, and could help solve a variety of pressing problems. Among other things, such a market might facilitate the resolution of interstate border disputes, which remain surprisingly common. North and South Carolina, for example, are currently adjusting their border southward to correct a two hundred-year-old surveying error. This change will be costly for the thirty affected households, whose residents will have to pay new taxes, change car insurance and schools, and might well find it harder to dance the shag with tar on their heels.8 Simple Coasean bargaining suggests that if such costs outweigh the benefits of correcting the surveying error, then the Old North State should simply sell the equivalent of a quitclaim, thus leaving the border where it has always been in practice.
Other utility-enhancing deals are not hard to imagine. States facing bankruptcy could raise revenue by selling territory to wealthier neighbors� an idea that has already been floated at the international level�while others might capture gains in metropolitan areas that straddle state borders but could be more efficiently administered by a single state. One scholar has suggested that Camden and Philadelphia be joined; a side payment to or from New Jersey could help bring that about. Even holding aside the financial gains, an active interstate market for sovereign territory could encourage useful competition between states by allowing the �laboratories� to come to the people, rather than requiring the people to go to the laboratories. The next time Killington, Vermont, votes to join New Hampshire because it prefers the latter�s tax system, or Martha�s Vineyard votes overwhelmingly to leave Massachusetts in response to unfavorable redistricting in the state legislature, compensation could facilitate the moves (or forestall them, depending on which state is willing to pay). Sales of state borders could even strengthen state identity in areas where residents� identities are more closely tied to a state other than the one in which they live. If, for example, wealthy residents of Greenwich, Connecticut�many of whom earned their fortunes in Manhattan�would prefer to be New Yorkers, why not let them buy their way out?
From the other side of the spectrum, the invocation of history is equally strident. For example, Americans United for Separation of Church and State has battled against the claim that the government has undermined church autonomy. From this group�s perspective, strict separation of church and state is �good for America� and �good for religion� because it prohibits government involvement with religious organizations. American history, they argue, demonstrates that Presidents and right-thinking Americans alike have always supported their interpretation of disestablishment.
This back-and-forth highlights the sharply differing views among activists, scholars, and politicians regarding the tradition of special deference (or lack thereof) given to religious organizations. The Hobby Lobby case, set for argument at the Supreme Court in early spring 2014, is just the latest incarnation of these battles. The question is as old as the nation, however. The rights of individuals versus organizational rights have been essential to the development of the law of religion in America. The place of religious organizations was keenly debated as a key component of disestablishment. Yet we know almost nothing about the experience of such organizations in our nation�s history.
In 1986, Congress enacted the Electronic Communications Privacy Act (ECPA) to regulate government access to Internet communications and records. ECPA is widely regarded as outdated, and ECPA reform is now on the Congressional agenda. At the same time, existing reform proposals retain the structure of the 1986 Act and merely tinker with a few small aspects of the statute. This Article offers a thought experiment about what might happen if Congress were to repeal ECPA and enact a new privacy statute to replace it.
The new statute would look quite different from ECPA because overlooked changes in Internet technology have dramatically altered the assumptions on which the 1986 Act was based. ECPA was designed for a network world with high storage costs and only local network access. Its design reflects the privacy threats of such a network, including high privacy protection for real-time wiretapping, little protection for noncontent records, and no attention to particularity or jurisdiction. Today�s Internet reverses all of these assumptions. Storage costs have plummeted, leading to a reality of almost total storage. Even U.S.-based services now serve a predominantly foreign customer base. A new statute would need to account for these changes.
This Article contends that a next generation privacy act should contain four features. First, it should impose the same requirement on access to all contents. Second, it should impose particularity requirements on the scope of disclosed metadata. Third, it should impose minimization rules on all accessed content. And fourth, it should impose a two-part territoriality regime with a mandatory rule structure for U.S.-based users and a permissive regime for users located abroad.
Consent orders are used to resolve government enforcement actions through a court-approved settlement. Although consent orders often include detailed factual and legal findings, defendants typically deny or neither admit nor deny those findings. Nevertheless, some private plaintiffs have relied extensively on findings from consent orders to plead claims that piggyback off of enforcement actions. Whether private plaintiffs may properly rely on consent orders in their pleadings is the subject of this Comment.
Many district courts cite a Second Circuit opinion from 1976, Lipsky v. Commonwealth United Corp., for the proposition that allegations derived from consent orders must be struck as �immaterial� under Rule 12(f) of the Federal Rules of Civil Procedure. Other courts have also held that plaintiffs cannot satisfy the duty of independent investigation under Rule 11(b)(3) if they rely on only consent orders as sources of information. More recently, however, some courts have challenged the reasoning of Lipsky and permitted plaintiffs to derive allegations from consent orders.
This Comment clarifies existing law governing reliance on consent orders. It argues that Rules 11(b)(3) and 12(f)�and even the Lipsky decision if properly construed�permit plaintiffs to rely on consent orders as sources of factual information. By relying on consent orders to allege facts, plaintiffs appropriately signal that they believe the allegations are true and that admissible evidence in support of the allegations will likely be found after further investigation or discovery.
The rule proposed in this Comment, however, may unsettle regulatory policy that favors negotiated settlements of enforcement actions. If courts uniformly permit private plaintiffs to rely on consent orders, then defendants may have fewer incentives to settle enforcement actions. This Comment invites further discussion regarding the policy implications of that rule.
The U.S. Supreme Court has consistently and adamantly held that patents do not require patentees to use or commercialize their inventions. Rather, patents simply grant inventors the right to exclude others from using or producing their inventions. That exclusive right, once granted, cannot be taken away because of a right holder�s failure to work the patent. Great societal harm results, however, when patentees fail to commercialize their patents or deliberately and strategically suppress technologies purely for financial gain.
This Comment argues that utilizing compulsory licensing to combat patent nonuse and technology suppression can help to better achieve the primary goal of the Intellectual Property Clause of the U.S. Constitution. Compulsory licensing that compensates inventors through reasonable and marketplace-based royalty rates will ensure that inventors continue to develop and disclose their research and discoveries to the public. Furthermore, by weakening intellectual property rights on a limited scale, Congress can ensure that patents are made available to the highest-value users who can best use these patents to achieve efficient societal innovation and progress. This Comment therefore questions why patentees are not required to at least make good faith efforts to practice their patents.
Impersonal default rules, chosen by private or public institutions, establish settings and starting points for countless goods and activities�cell phones, rental car agreements, computers, savings plans, health insurance, websites, privacy, and much more. Some of these rules do a great deal of good, but others might be poorly chosen, perhaps because the choice architects who select them are insufficiently informed, perhaps because they are self-interested, perhaps because one size does not fit all. The existence of heterogeneity argues against impersonal default rules. The obvious alternative to impersonal default rules, of particular interest when individual situations are diverse, is active choosing, by which people are asked or required to make decisions on their own. The choice between impersonal default rules and active choosing depends largely on the costs of decisions and the costs of errors. If active choosing were required in all contexts, people would quickly be overwhelmed; default rules save a great deal of time, making it possible to make other choices and in that sense promoting autonomy. Especially in complex and unfamiliar areas, impersonal default rules have significant advantages. But where people prefer to choose, and where learning is both feasible and important, active choosing may be best, especially if people�s situations are relevantly dissimilar. At the same time, it is increasingly possible for private and public institutions to produce highly personalized default rules, which reduce the problems with one-size-fits-all defaults. In principle, personalized default rules could be designed for every individual in the relevant population. Collection of the information that would allow accurate personalization might be burdensome and expensive, and might also raise serious questions about privacy. But at least when choice architects can be trusted, personalized default rules offer most (not all) of the advantages of active choosing without the disadvantages.
Lawyers and judges speak to each other in a language of precedents � decisions from cases that have come before. The most persuasive precedent to cite, of course, is an on-point decision of the U.S. Supreme Court. But Supreme Court opinions are changing. They contain more factual claims about the world than ever before, and those claims are now rich with empirical data. This Supreme Court factfinding is also highly accessible; fast digital research leads directly to factual language in old cases that is perfect for arguments in new ones. An unacknowledged consequence of all this is the rise of what I call �factual precedents�: the tendency of lower courts to cite Supreme Court cases as authorities on factual subjects, as evidence that the factual claims are indeed true. Rather than citing, for example, evidence from the record to establish that carpal tunnel syndrome regularly resolves without surgery, lower courts instead cite language from a Supreme Court opinion for that point.
This Article carefully describes how lower courts are using Supreme Court facts today and then argues that these factual precedents are unwise. The Supreme Court is not a factfinding institution. Facts change over time. And, unlike legal precedents, one cannot be certain that factual statements from the Supreme Court are carefully deliberated and carry the force of law. I argue that Supreme Court statements of fact should not receive any authoritative force separate from the force that attaches to whatever legal conclusions they contributed to originally. If a fact is so central to the legal holding that the two meld together, then the Supreme Court is free to so state and thus insulate the factual conclusion from future challenges by making it part of the legal rule. But the presumption, I suggest, should be no precedential value for generalized factual claims � even if they are facts found in the U.S. Reports.
Scholars engaged in empirical legal research have long struggled to balance the methodological demands of social science with the normative aspirations of legal scholarship. In recent years, empirical legal scholarship has increased dramatically in methodological sophistication, but in the process has lost some of its relevance to the normative goals that animate legal scholarship. In many empirical studies, the phenomena that are readily measured have a complex relationship with the values that are relevant to legal reform, yet empirical scholars often neglect to explain how their positive findings relate to normative claims. Although some empirical studies offer prescriptions, they often rely on normative premises that are clearly untenable or simply fail to explain how they purport to derive an �ought� from an �is.� Other empirical studies avoid prescription altogether, reporting results without clarifying how they are relevant to meaningful questions about law or legal institutions.
Using as examples three types of measures commonly used to evaluate judges and institutions�citation counts, reversal rates, and inter-judge disparities�this Article describes widespread flaws in efforts to connect the �is� and the �ought� in empirical legal scholarship. The Article argues that normative implications should not be an afterthought in empirical research, but rather should inform research design. Empirical scholars should focus on quantities that can guide policy, and not merely on phenomena that are conveniently measured. They should be explicit about how they propose to measure the goodness of outcomes, disclose what assumptions are necessary to justify their proposed metrics, and explain how these metrics relate to the observable data. When values are difficult to quantify, legal empiricists will need to develop theoretical frameworks and empirical methods that can credibly connect empirical findings to policy-relevant conclusions.
Over the last fifteen years, unpaid internships have become a part of our generation's psyche. You try to get into the best college; then you try to get the best unpaid internship; and finally you try to get the best full-time job. This pattern, however, has raised four primary problems. First, it disadvantages students from the middle and lower class because they can't afford to take unpaid internships, which increases and perpetuates socioeconomic and often racial inequality. Second, when interns are not paid, various federal sexual harassment and discrimination legal protections do not apply, since courts have held that such interns are not classified as employees. Third, the emphasis on having work experience in today's employment market necessitates that already debt-burdened students take unpaid internships, putting themselves into further financial trouble. And fourth, employers are firing full-time employees and replacing them with teams of unpaid interns.
Despite these concerns, unpaid internships persist, and as of today, there is little to no case law about them�mainly because interns fear the whistle-blower stigma that would arise from bringing a lawsuit. Recently, however, two class action suits were launched against prominent media and entertainment companies. My Comment seeks to shape the law for these cases of first impression. Using a Supreme Court case from the 1940s, the Fair Labor Standards Act, and the Department of Labor�s Fact Sheet #71, I propose a simple test to determine the legality of unpaid internships: if a for-profit employer, ex ante, expects to derive a benefit from the internship, then the intern is an "employee" (not a "volunteer") who deserves at least the minimum wage and also protection from sexual harassment and discrimination.
Existing project financing structures utilizing the Investment Tax Credit (ITC) and depreciation benefits have helped spur growth in the solar industry but are insufficient on their own to enable the residential solar sector to scale up and become a mainstream energy source. In the span of only a few years, the solar market has grown from a fledgling niche industry to an important global player. Solar installations in the United States grew at an annual rate of 70% between 2005 and 2012. Federal tax incentives and state-level subsidies have largely driven this growth. However, for reasons I explore in this Comment, these tax incentives and subsidies will be unable to sustain such rapid growth in the coming years, especially in the residential sector. If the solar industry is to continue to grow and become competitive with other energy sources, innovative private financing mechanisms are needed to allow residential solar developers to tap into capital markets and access new classes of investors (e.g., mutual funds, pension funds, and other institutional investors).
The securitization of solar leases presents a promising solution to this problem, but a variety of barriers currently prevent solar companies from securitizing these assets successfully. This Comment identifies and assesses these barriers and recommends strategies to promote low-cost securitization of residential solar leases while minimizing the potential risks that such securitization poses.
In Part I, I introduce the solar market, emphasizing in particular the current mechanisms to finance solar systems, the existing policies promoting solar energy, and the residential solar leasing model. In Part II, I present an overview of the asset-backed securitization process, outline how it might apply to solar leasing, and assess the risks and benefits of solar lease securitization. Finally, in Part III, I recommend strategies to reduce the risks posed by solar lease securitization and offer some predictions for the sector going forward. This Comment focuses primarily on residential solar systems but will also address some concepts common to commercial and utility-scale solar systems. Ultimately, I argue that while securitization is not a quick fix, it is a valid option for increasing liquidity and attracting new sources of capital to the solar leasing market.

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