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Abstract: This paper ranks the high courts of the fifty states, based on their performance during the years 1998-2000, along three dimensions: opinion quality (or influence as measured by out-of-state citations), independence (or non-partisanship), and productivity (opinions written). We also discuss ways of aggregating these measures. California and Delaware had the most influential courts; Georgia and Mississippi had the most productive courts; and Rhode Island and New York had the most independent courts. If equal weight is given to each measure, then the top five states were: California, Arkansas, North Dakota, Montana, and Ohio. We compare our approach and results with those of other scholars and the U.S. Chamber of Commerce, whose influential rankings are based on surveys of lawyers at big corporations.
state courts, high courts, court performance
Abstract: Although federal judges are appointed with life tenure, most state judges are elected for short terms. Conventional wisdom holds that appointed judges are superior to elected judges because appointed judges are less vulnerable to political pressure. However, there is little empirical evidence for this view. Using a dataset of state high court opinions, we construct objective measures for three aspects of judicial performance: effort, skill and independence. The measures permit a test of the relationship between performance and the four primary methods of state high court judge selection: partisan election, non-partisan election, merit plan, and appointment. The empirical results do not show appointed judges performing at a higher level than their elected counterparts. Appointed judges write higher quality opinions than elected judges do, but elected judges write many more opinions, and the evidence suggests that the large quantity difference makes up for the small quality difference. In addition, elected judges do not appear less independent than appointed judges. The results suggest that elected judges are more focused on providing service to the voters (that is, they behave like politicians), whereas appointed judges are more focused on their long-term legacy as creators of precedent (that is, they behave like professionals).
judiciary, elected judges, appointed judges
Abstract: The judicial appointments process has grown increasingly frustrating in recent years. Both sides claim that their candidates are the "most meritorious" and yet there is seldom any discussion of what constitutes merit. Instead, the discussion moves immediately to the candidates' likely positions on hot-button political issues like abortion, gun control, and the death penalty. One side (these days, the Republicans) claims that it is proposing certain candidates based on merit, while the other (the Democrats) claims that the real reason for pushing those candidates is their ideology and, in particular, their likely votes on certain key hot-button issues. With one side arguing merit and the other side arguing ideology, the two sides talk past each other and the end result is often an impasse. To get past the impasse, we propose placing judges in a tournament based on relatively objective measures of judicial merit and productivity. A tournament allows the public to test the politicians' claims of merit. Being able to test those claims helps make transparent the occasions on which the real debate is over ideology. It is harder to disguise a purely ideological candidate as the best from a "merit" standpoint when the candidate performs poorly relative to many other judges based on objective factors. Once merit-based arguments have been isolated (or at least reduced in scope) to factors related to the tournament, it should be possible to have a transparent and meaningful debate over ideology. The Article runs such a tournament using data on opinions authored by active federal circuit court judges from one common time period: the beginning of 1998 to the end of 2000. The focus on a common time period helps put judges in the tournament on a level playing field. We then generate a series of measures of merit focusing on (a) productivity, (b) opinion quality, and (c) judicial independence. While not perfect, our measures interject a greater focus on merit in the current nomination process (thereby flushing out previously non-transparent motives based on ideology). With our data, we are able to test the claims of merit that the next President will inevitably make when he announces one or the other of his favorite circuit court judges as the nominee for the Supreme Court.
supreme court; judges; tournament
Abstract: We suggest a Tournament of Judges where the reward to the winner is elevation to the Supreme Court. Politics (and ideology) surely has a role to play in the selection of justices. However, the present level of partisan bickering has resulted in delays in judicial appointments as well as undermined the public's confidence in the objectivity of justices selected through such a partisan process. More significantly, much of the politicking is not transparent, often obscured with statements on a particular candidate's "merit" - casting a taint on all those who make their way through the judicial nomination process. We argue that the benefits from introducing more (and objective) competition among judges are potentially significant and the likely damage to judicial independence negligible. Among the criteria that could be used are opinion publication rates, citations of opinions by other courts, citations by the Supreme Court, citations by academics, dissent rates, speed of disposition of cases, reversal rates by en banc panels and the Court, and so on. Where political motivations drive the selection of an alternative candidate, our proposed system of objective criteria will make it more likely that such motivations are made transparent to the public. Just as important, a judicial tournament for selection to the Supreme Court will serve not only to select effective justices, but also to provide incentives to existing judges to exert effort.
judges, federal court system, judicial nomination process
Abstract: Common wisdom holds that many federal judges do not write their own opinions. While their degree of input into opinion writing varies, almost all rely to some extent on law clerks, typically recent law school graduates, to research and draft substantial sections of the opinion. Why should we care which judges write their opinions? We posit that determining the actual input of federal judges into the authorship of opinions provides useful information in a number of contexts, including judicial promotion decisions, the allocation of scarce judicial resources, and the judicial clerkship market for law students. We start with generic tests of authorship obtained from computational linguistics. To assess the effectiveness of these tests in the judicial context, we identify (based on an informal survey of several sitting federal judges), three judges reputed to write their own opinions. We then use a randomly selected set of opinions for active circuit judges from 1998 to 2000 to examine whether the generic tests succeed in ranking these three judges high in terms of authorship. The generic tests failed to distinguish authorship due in part to the subject matter specific nature of opinions. Whether an opinion is a criminal, administrative, or commercial law opinion matters. Comparing two judges based on their criminal law opinions may provide different results than comparing the same judges based on the criminal law opinions of one judge against the administrative law opinions of the other judge. Our generic tests did not control for subject matter of opinions. We provide a number of more customized tests for the judicial context that attempt to control for subject matter. Using these customized tests, we are able to distinguish the three test judges based on authorship.
judges, authorship, judicial performance, rankings, tournament
Abstract: Legal academics often perceive law and economics (L&E) and critical race theory (CRT) as oppositional discourses. Using a recently published collection of essays on CRT as a starting point, we argue that the understanding of workplace discrimination can be furthered through a collaboration between L&E and CRT. L&E's strength is in its attention to incentives and norms, specifically its concern with explicating how norms incentivize behavior. Its limitation is that it treats race as exogenous and static. Thus, the literature fails to consider how institutional norms affect, and are affected by, race. To put the point another way, L&E does not discuss how norms incentivize racial behavior, obscuring that how people present their race (or themselves as racial subjects) is a function of norms. The strength of CRT is its conception of race as a social construction. Under this view, race is neither biologically determined nor fixed. Instead, race is ever evolving as a function of social, political, legal, and economic pressures. A limitation of CRT is that much of its analysis of race as a social construction is macro-oriented. Thus, CRT has paid insufficient attention to the social construction of race within specific institutional settings, like the workplace. Further, CRT has virtually ignored the agency people of color exercise to shape how their racial identity is interpreted - that is say, constructed. Explicitly incorporating L&E's focus on incentives and norms into CRT provides CRT with a means by which to articulate the notion of race as a social construction at the level of individual "choice." The basic idea is that people of color construct (present racial impressions of) themselves in response to norms. Norms, in this sense, are racially productive, and individuals are part of the production apparatus. Having set out the basic elements of the collaborative enterprise, we deploy this collaboration to respond to a specific and important question about the workplace: How are modern employers and employees likely to "manage" workplace racial diversity? We raise this question because we assume that, for institutional legitimacy reasons, most workplaces will strive to achieve at least a modicum of racial diversity. The question, again, is: How will this diversity be managed? Part of the answer has to do with assimilation, an ideological technology for constructing race and a central theme in CRT; and part of the answer has to do with efficiency, an ideological technology for creating incentives and a central theme in L&E. Both ideas - assimilation and efficiency - combine to tell a story about workplace discrimination that derives from what we call "the homogeneity incentive." In sum, in order to increase efficiency, employers have incentives to screen prospective employees for homogeneity, and, in order to counter racial stereotypes, nonwhite employees have incentives to demonstrate a willingness and capacity to assimilate. In this sense, the modern workplace discrimination problem may be more about employers requiring people of color to demonstrate racial palatability than about employers totally excluding people of color for the workplace. We discuss whether and to what extent anti-discrimination law can ameliorate this problem.
Law and Economics, Critical Race Theory, Workplace discrimination
Abstract: Judge Richard Posner dominates on several easy-to-observe measures of judicial performance including citation counts and number of opinions published per year. Such easy-to-observe measures offer a useful first step in measuring the overall merit of a particular judge, particularly in the context of determining who would be the best candidate for nomination to the Supreme Court. We have argued elsewhere that even if one disagrees with the value of such easy-to-observe measures, they are still valuable in engendering a second step, more in-depth analysis behind the numbers. Why exactly does Posner receive more citations than others? Is Posner's tremendous productivity simply a product of existing norms on the Seventh Circuit, or is Posner himself related to a shift in the norm toward higher productivity on the Circuit? We provide such an analysis in this essay. Perhaps more important than our own unpacking of the statistics, placing Posner at the top of an objective judicial ranking gives other judges (and their advocates) incentives to reveal otherwise hidden information on exactly why their judges should be placed ahead of Posner for the next opening on the Supreme Court.
supreme court, judges, tournament
Abstract: Judicial opinions in securities fraud class actions frequently do not conform to standard theories of adjudication. Instead of the complex modes of legal reasoning predicted by standard models, decisions in this area commonly rely on rules of thumb-decisionmaking heuristics or shortcuts. To the extent prior literature has focused on the use of decisionmaking heuristics in adjudication, commentators have emphasized procedural shortcuts, such as the doctrine whereby courts refuse to address issues that have not been squarely argued. In contrast, the heuristics we identify are substantive law doctrinal rules of thumb enabling a judge to avoid analysis of a case's full complexities. This distinction is significant. Procedural shortcuts do not affect the evolution of substantive legal doctrines, except as to produce no doctrine. Substantive heuristics, however, not only become doctrine but can come to dominate the on-going evolution of substantive law. We suggest that the desire to avoid complexity is an important factor in explaining the emergence of a number of the newer doctrines in the securities area. Underlying all of these doctrines are assumptions about either, (a) investor responses to information or (b) managerial responses to incentives. The standard approaches used by commentators in the area would be to explain either why the assumptions are accurate or why they are not and how they should be corrected. What we suggest, however, is that the real puzzle thus is that federal judges are claiming-at least implicitly-both a level of expertise about the workings of markets and organizations that, in some areas, not even the most sophisticated researchers in financial economics and organizational theory have reached. Federal judges, however, are far from being experts in these areas. As a group, they have little expertise on the topics of markets and organizational behavior. Further, they are consistently faced with overwhelming caseloads where only a small fraction of cases are securities cases. As a result, there is little opportunity to develop expertise in the area. Finally, judges are known to delegate much of the work of drafting their decisions to their law clerks, who are typically recent law school graduates. Generalizing from the securities regulation context, we contend that standard theories of adjudication are flawed because they fail to adequately account for institutional constraints. Drawing on the tools of new institutional economics (bounded rationality, transaction costs, and agency costs), we tell a story about recent doctrinal developments in the lower federal courts in the area of securities class actions. The story highlights the link between doctrinal developments and the characteristics of the institutions that produce them. That story is then extended to the contexts of the Supreme Court and the Delaware state courts. Our claim is that the institutional perspective provides insights into the evolution of doctrine that today's dominant models fail to provide.
Abstract: The external debt of emerging market sovereign borrowers is now mainly in the form of bonds held by thousands of institutional and individual bondholders. Many of these bonds are governed by the law of the State of New York. As a matter of drafting convention, New York law-governed bonds for sovereign issuers prohibit amendments to the payment terms of the instruments (the amount and due dates of payments) without the consent of each affected bondholder. If a sovereign issuer finds it necessary to seek a restructuring of its bond indebtedness, it must therefore implement the restructuring by offering to exchange its old bonds for new debt instruments that reflect the new financial terms; a technique that inevitably risks leaving behind "holdout" creditors who may refuse to accept the proposed restructuring. Holdouts pose a litigation threat to the sovereign and may even jeopardize the sovereign's ability to service the new bonds it has issued to the other creditors participating in the exchange. A number of ideas - ranging from international bankruptcy codes to IMF-administered stays of creditor legal remedies - have been suggested as a means of dealing with the holdout creditor threat. This article suggests a less radical alternative: allowing the majority creditors to use the amendment clauses in their existing bonds to change certain non-payment terms contained in those bonds (such as financial covenants or waivers of sovereign immunity) as a means of encouraging prospective holdouts to participate in the exchange. Because the sovereign issuer solicits the consent of its creditors to amend the old bonds just as those lenders exchange their bonds for the sovereign's new debt instruments, this technique is referred to as an "exit" consent.
Abstract: In April 2002 the International Monetary Fund introduced a sovereign bankruptcy proposal only to be rebuffed by the United States Treasury. Where the IMF wanted a mandatory bankruptcy regime, the Treasury wanted to solve distress problems with contractual devices. Sovereign bondholders and sovereign issuers themselves flatly rejected both proposals, even though they were nominally the beneficiaries of both proponents. This Article addresses and explains this bondholder reaction. In so doing, it takes a highly skeptical view of the IMF's proposal even as it shows that the incentive structure surrounding sovereign lending renders untenable the Treasury's contractarian proposal. The Article's analysis follows from a review and restatement of the economic learning on sovereign debt relationships. The IMF and the Treasury share the objective facilitating restructuring by substituting a regime of collective action for the prevailing practice of requiring unanimous bondholder consent to significant amendments of bond contracts. In so doing they follow a conventional wisdom respecting bond contracts under which standard unanimity provisions are inefficient and irrational. The Article shows that this dismissal of the unanimity requirement comes too quickly. Under our analysis of the problem the debtor distress, bondholders rationally may prefer to make compositions harder to conclude. There is no first best equilibrium bond contract; instead bondholders select from a menu of second best forms, making trade offs between unanimous action and collective action provisions in an imperfect world. One factor leading lenders to favor unanimous action is the need to self protect. In a world without a good faith backstop, creditors motivated by side deals can take advantage of majority rule to impose suboptimal compositions. Holding out is the only weapon available to the minority creditor. The Article argues that, given such side deals, a stable majoritarian regime cannot be achieved as a matter of free contract. Mandate will be necessary. It follows that the Treasury's contractarian approach is implausible absent a backstop regime of intercreditor good faith duties. The Article draws on the history of corporate reorganization prior to the enactment of the section 77B of the Bankruptcy Act of 1934 to show that courts have grappled with these questions before, intervening aggressively on equitable principles.
Abstract: Nearly everyone thinks that judges are underpaid, but theory and evidence provide little support for this view. Theory suggests that increasing judicial salaries will improve judicial performance only if judges can be sanctioned for performing inadequately or if the appointments process reliably screens out low-ability candidates. However, federal judges and many state judges cannot be sanctioned, and the reliability of screening processes is open to question. An empirical study of the high court judges of the 50 states provides little evidence that raising salaries would improve judicial performance. The case for a pay raise has not been made.
Abstract: This Article proposes the metaphor "connected contracts" for understanding collaborative economic activity. Connected contracts refers to the interrelating agreements and relationships among the participants in a business venture. From the perspective offered by this metaphor, there are no firms, no predetermined hierarchies, no organizations with personalities of their own, and no a priori notions of ownership or control; there is no shareholder or managerial primacy and no centralizing "nexus." The view is from the bottom up rather than from the top down. Boundaries and governance are neither central issues, nor do they loom in the background. There are no boundaries and there is nothing to govern. The connected contracts perspective is applied to an important aspect of joint activity?the putative bargain over control. Looking at business activity as bargains among individuals who agree to undertake a specific project leads to the insight that control of the venture is not automatically allocated to equity. The concept of an "owner" has little value. The connected contracts perspective suggests, among other things, that, all else equal, different capital structures can be viewed as representing different bargains over control. Capital structure is not irrelevant, but reflects unique bargains over control in general and future decisions about projects in particular. The inquiry then broadens to encompass more participants and types of contributions and to speculate on how the connected contracts metaphor might affect thinking about a variety of topics in corporate and tax law, including piercing the corporate veil, insider trading, executive compensation, the taxation of corporations, and the differential taxation of debt and equity. Finally, and tentatively, the essay offers a list of criteria that might be used to judge the value of models and metaphors and, by offering the list, suggests that scholars should be more conscious of the risks and rewards of reliance on models and metaphors.
Abstract: Formalists contend that courts should apply strict textual analysis in interpreting contracts between sophisticated commercial parties. Sophisticated parties have the expertise and means to record their intentions in writing, reducing the litigation and uncertainty costs surrounding incomplete contracts. Moreover, to the extent courts misinterpret contracts, sophisticated parties may simply rewrite their contracts to clarify their true intent. We argue that the formalist approach imposes large costs on even sophisticated parties in the context of boilerplate contracts. Where courts make errors in interpreting boilerplate terms, parties face large collective action problems in rewriting existing boilerplate provisions. Any single party that attempts to change a boilerplate term will face a large market discount for deviating from the market standard. In such situations, a court erroneous interpretation that reduces overall contracting surplus may persist in an industry. We also contend that taking a more contextual approach, including evidence on course of conduct and industry custom, to contract interpretation will not ameliorate the difficulties inherent in the interpretation of boilerplate terms. The specific parties to a boilerplate contract often have no understanding of what the disputed boilerplate clause means. Where such parties attempt to supply their own ex post understandings, they may not represent the interests of the entire industry that relies on the particular boilerplate clause. We provide a new approach to the interpretation of boilerplate terms between sophisticated contracting parties. Courts should bypass an inquiry into the understanding of the parties to the current contract and instead go back to the point in the past when the disputed clause first became part of the boilerplate. Much like the enacting legislative body for a statute, the original drafting parties provide the best source of information on the original meaning of boilerplate contract terms. The original drafting parties will have spent the most time and resources in negotiating the contract term (and thus represent a true "meeting of the minds"). In a market populated with sophisticated parties on all sides, the drafting parties necessarily must balance the interests of all sides for a contract term to gain at least initial widespread acceptance in the industry. The drafters will also enjoy an expertise advantage over any court attempting to interpret a term. Taking a historical approach to the interpretation of boilerplate terms will create an incentive for standard setters to arise in industries comprised of sophisticated contracting parties to supply boilerplate terms and a detailed historical record of the meaning of the terms.
contract interpretation, formalism, contextualism, boilerplate, form contracts
Abstract: In securities-fraud cases, courts routinely admonish plaintiffs that they are not permitted to rely on allegations of "fraud by hindsight." In effect, courts disfavor plaintiffs' use of evidence of bad outcomes to support claims of securities fraud. Disfavoring hindsight evidence appears to tap into a well known, well-understood, and intuitively accessible problem of human judgment of "20/20 hindsight." Events come to seem predictable after unfolding, and hence, bad outcomes must have been predicted by people in a position to make forecasts. Psychologists call this phenomenon the hindsight bias. The popularity of this doctrine among judges deciding securities cases suggests that judges actively seek techniques that enable them to correct for psychological biases that might otherwise affect their decision-making. This paper assesses the hypothesis that judges have adopted the "fraud-by-hindsight" doctrine so as to avoid erroneous judgment infected with the hindsight bias. We find that although judges have identified a real problem in human judgment, they are not developing a doctrine to remedy the influence of hindsight on judgment. Rather, they are using this problem of human judgment as the justification for expanding their authority to manage the complex, high-stakes securities cases that come before them. The result provides judges with the greater case-management authority they seek, but leaves the securities litigation without a meaningful doctrine to ameliorate the influence of hindsight on judgment.
Abstract: A central question of law and economics is how complex productive activity is initiated, organized, and carried out successfully without central planning. What are some of the most important organizational devices and what is their function? The effort to respond to this type of inquiry has led, among other things, to the dichotomy between transactions within firms and transactions across markets - also referred to as the make-or-buy decision or the outsourcing decision. This dichotomy, leading to explanations of the functions of firms and markets, has proved to be a powerful tool in analysis of economic organization. As with most simple descriptions of complex reality, however, it emphasizes some aspects of reality at the expense of others and is not a good fit in certain settings. One such setting is construction, where the organization of the economic activity (the construction project) is mostly contractual (technically, across markets), but where vital organizational ingredients are networks of relationships as well as collaboration and teamwork, generated in large part by pride, commitment, and reputation. The present paper is a case study that examines those ingredients and others that play, at most, a minor role in traditional thinking about firms and markets. This study also illustrates the notion that bilateral contracts are part of a mosaic of such contracts, with the performance of each dependent on the performance of the others, and contractual relationships exist within an industry in which individual projects are of limited duration but the participants are in for the long haul. Perhaps an even more interesting and important observation is that in construction, and no doubt in other economic activities as well, it is not the firm that is the locus for production. Nor does the idea of market exchanges between firms properly describe the productive process. Instead, production is in the hands of teams of people who are associated with various firms but who operate autonomously with respect to their firms. The teams may perform the functions of firms but they lack the critical firm attribute of hierarchical control. Related to this and also important in at least some settings is the manner of selection of team members: the client/owner may contract with, say, an architectural firm but expects to be working with particular, identified individuals within that firm. This raises the question: when a person contracts for services, what is the role of the individual (e.g., an architect or a lawyer) and what is expected of the firm of which that individual is a member? And what does this tell us about the nature and the boundaries of firms? We also offer some observations about fixed fees versus hourly rates and other contingent compensation.
construction contracts, economic organizations
Abstract: This is a story about gender, makeup and the law. Darlene Jespersen, a bartender, was fired from her job of fifteen years at Harrah's Casino because she refused to wear makeup. Jespersen responded with a lawsuit that traveled to the Ninth Circuit, where she was represented by LAMBDA Legal, the preeminent gay rights litigation organization. Makeup, some will argue, is a trivial thing. Why would Darlene Jespersen (choose to) lose her job over makeup? More generally, how did favoring (as opposed to prohibiting) a practice that so many women (but not men) engage in become the basis for a sex discrimination suit? Why was LAMBDA involved? What is at stake? Isn't makeup a vehicle for women to express their autonomy and individuality? Finally, do we really want the federal government involved in policing employers' makeup policies? Because anti-discrimination law has been wedded to a biological conception of sex, it has not grappled well with sex discrimination cases that implicate makeup and grooming. This is particularly problematic in today's labor market because few contemporary employers are likely to exclude all women from their workplace; they are far more likely to engage in intra-gender screening based on whether a woman's self presentation is in accord with social scripts about gender normative behavior. Using Jespersen as a point of departure, we reveal how makeup is implicated in this screening process and explain why its regulation ought to be conceptualized as a form of discrimination on the basis of sex.
anti-discrimination laws, discrimination on the basis of sex
Abstract: Public international law requires that states and governments inherit ("succeed to") the debts incurred by their predecessors, however ill-advised those borrowings may have been. There are situations in which applying this rule of law strictly can lead to a morally reprehensible result. Example: forcing future generations of citizens to repay money borrowed in the state's name by, and then stolen by, a former dictator. Among the purported exceptions to the general rule of state succession are what have been labeled "odious debts", defined in the early twentieth century as debts incurred by a despotic regime that do not benefit the people bound to repay the loans. The absconding dictator is the classic example. The removal of Iraq's Saddam Hussein in 2003 sparked a resurgence of interest in this subject. By enshrining a doctrine of odious debts as a recognized exception to the rule of state succession, some modern commentators have argued, a successor government would be able legally to repudiate the loans incurred by a malodorous prior regime. This, they contend, would have two benefits: it would avoid the morally repugnant consequence of forcing an innocent population to repay debts incurred in their name but not for their benefit, and it would simultaneously force prospective lenders to an odious regime to rethink the wisdom of advancing funds on so fragile a legal foundation. The authors argue that in this recent debate the adjective "odious" has quietly migrated away from its traditional place as modifying the word "debts" (as in "odious debts"), so that it now modifies the word "regime" (as in "debts of an odious regime"). This is a major shift. If this new version of the odious debt doctrine is to be workable, someone must assume the task of painting a scarlet letter "O" on a great many regimes around the world. Who will make this assessment of odiousness and on what criteria? The stakes are high. An unworkable or vague doctrine could significantly reduce cross-border capital flows to sovereign borrowers generally. The authors are skeptical that this definitional challenge can be met. Rather than jettison the whole initiative as quixotic, however, the authors investigate how far principles of private (domestic) law could be used to shield a successor government from the legal enforcement of a debt incurred by a prior regime under irregular circumstances. A wholesale repudiation of all contracts signed by an infamous predecessor may be more emotionally and politically satisfying for a successor government, but establishing defenses to the legal enforcement of certain of those claims based on well-recognized principles of domestic law may be the more prudent path. The authors believe that such defenses exist under U.S. law (and presumably elsewhere) and could be used to address many, although admittedly not all, cases of allegedly odious debts.
Abstract: Sovereign Piracy lays bare the recent efforts of vulture investor Elliott Associates to holdup the Government of Peru. When Peru tried to restructure its Brady Bonds Elliott launched global litigation to tie up the money and force Peru into default. A Brussel's court brought Peru to its knees and forced it to settle with Elliott. Elliott's leverage was based on its novel interpretation of the so-called pari passu clause which requires a debtor's creditors to rank equally. The article first explains why, from an ex ante bargaining perspective, sovereign debtors would be loathe to agree to pari passu clauses with the interpretation given by the Brussels court. Next, the article looks to the literature and case law construing sovereign and corporate debt and demonstrates why the Brussels interpretation is wrong, results in a windfall to holdout creditors, and is harmful to the majority of other creditors. The article then discusses New York bond interpretation law and the need for the Brussels interpretation to be challenged. The article concludes with some important insights about market changes that will result if the Brussel's interpretation is allowed to stand.
Abstract: Network externalities may lead contracting parties to stay with a standardized term despite preferences for another term. Using a dataset of sovereign bond offerings from 1995 to early 2004, we test the importance of standardization for the modification provisions relating to payment terms. We provide evidence that (a) standardization may lead parties to adopt provisions not necessarily out of preference and (b) standards, nonetheless, may change. The process of change, however, is not necessarily quick or straightforward. In the sovereign bond context, change came by way of an interpretive shock. Contracts with modification provisions requiring the unanimous consent of bondholders (UACs) suddenly became vulnerable to change with less than unanimous approval through the unexpected use of exit consents. After the shock, sovereigns and investors did not initially react with a significant shift in contract terms. However, we provide evidence that after this initial lull (once investors and sovereign gained experience on the value of allowing modification of payment terms with less than unanimous consent), large shifts in contract terms followed, moving sovereign bond contracts even further away from UACs toward collective action clauses (CACs). We also report evidence that issuer's attorneys dealing with a high volume of sovereign offerings were the driving factor behind this delayed large shift in contract terms.
Abstract: The literature on worker cooperatives is dominated by explanations of why they do not work and why, accordingly, they are so rare. This paper presents a case study of a large worker cooperative in South India that has worked well for a long time. This cooperative illustrates, among other things, that worker control and worker democracy are not necessarily inconsistent with the degree of hierarchy and delegation that may be essential to effective operation. The cooperative has been able to compete despite paying wages and benefits that are dramatically higher than those paid by its competitors, while at the same time providing far better working conditions. How it has been able to do this is something of a puzzle. Part of the explanation is good fortune at its inception in attracting effective, honest, and dedicated managers and, subsequently, in avoiding government involvement and in being able to ignore cumbersome and unsuitable legal rules. Perhaps more important is the workplace culture and the ability to harness forms of mutual monitoring not available to competitors. At the end of the day it is unclear how much of the success of the cooperative is a function of its cooperative nature and how much is a product of its unique circumstances. Still, the story of this enterprise offers useful lessons in the organization of economic activity, particularly in the importance of nonlegal mechanisms for maximizing individual cooperative productivity.
Abstract: Judge Sonia Sotomayor’s assertion that female judges might be “better” than male judges has generated accusations of sexism and potential bias. An equally controversial claim is that male judges are better than female judges because the latter have benefited from affirmative action. These claims are susceptible to empirical analysis. Primarily using a dataset of all the state high court judges in 1998-2000, we estimate three measures of judicial output: opinion production, outside state citations, and co-partisan disagreements. We find that the male and female judges perform at about the same level. Roughly similar findings show up in data from the U.S. Court of Appeals and the federal district courts.
judicial performance, gender, citations, judges
Abstract: In many job settings, there will be some promotion criteria that are less amenable to measurement than others. Often, what is difficult to measure is more important. For example, possessing "good judgment" under pressure may be a better predictor of success as a law firm partner than the ability to bill a vast amount of hours. The first puzzle that this essay explores is why, in some promotion settings, organizations appear to focus on less important, but measurable, criteria such as hours billed. The answer lies in the relationship between the objectively measurable criteria, on the one hand, and the subjective and less visible (but more important) attributes on the other hand. Under certain circumstances, a competition over the measurable criteria, such as hours billed or number of deals accomplished, can force the revelation of information on hard-to-measure subjective attributes of the candidate such as judgment or collegiality. For example, it is easier to evaluate the judgment of an associate who has amassed a number of deals than one who has not. Some information about the associate's good and bad judgment is likely to be generated from the deals. So, while it makes little sense to promote associates based solely on billable hours, making billable hours the goal of the first round of a tournament, where the winners are awarded eligibility for consideration for partnership, can generate information more relevant to the second round partner selection decision. Explaining the first puzzle leads to a second puzzle. If promotion tournaments over measurable criteria can be effectively utilized in the private sector to force information about candidate traits, why do we not see revelation tournaments elsewhere, where competition may generate information useful in evaluating candidates for promotion? The answer, we suggest, has to do at least in part with agency problems. Promotion tournaments based on measurable criteria limit the discretion of agents making the promotion decisions. When decision-makers have less discretion, the return to currying favor with those decision-makers falls. As a result, decision-makers with less discretion earn less "rent." Decision-makers acting as agents also enjoy a reduced ability to make promotion decisions according to their own preferences separate from the goals of their principals.
Information forcing, law firms, tenure, judicial tournaments, US news, rankings, promotion
Abstract: One hundred years ago in the United States, confronted by the urgent need to find a debt workout procedure for large corporate and railroad bond issuers, the financial community looked at three options: amend the U.S. bankruptcy law to permit reorganizations (the predecessor of today's Chapter 11), not just liquidations of the debtor companies; include contractual provisions in the underlying bonds that would allow a restructuring of those instruments with the consent of a supermajority of the bondholders; or pursue a court-supervised debt restructuring by engaging the equitable powers of the civil courts to oversee such a process. A century later, confronted by the urgent need to find a debt workout procedure for sovereign bond issuers, the same three options are open for discussion. The International Monetary Fund is actively studying the possibility of constructing, at the supranational level, the equivalent of a "Chapter 11 for countries." The use of contractual provisions to facilitate sovereign debt workouts - an idea whose time had visibly not come even just a few years ago - is being reconsidered by both the sovereign borrowers and the institutional bondholder community in the light of Argentina's catastrophic debt default in December 2001. Resort to the equitable powers of the civil courts to oversee creditor-led sovereign debt workouts is, we believe, possible in appropriate circumstances. This article looks at the existing contractual provisions in sovereign bonds and the existing U.S. legal procedures in order to explore how far these may be enlisted to further the goal of orderly sovereign debt rearrangements. This article concludes that these existing contractual provisions and civil procedures - if used creatively and confidently - can go much further toward achieving this goal than conventional wisdom would suggest.
Abstract: This Article tests for the presence of bias in judicial citations within federal circuit court opinions. Our findings suggest bias along three dimensions. First, judges base outside circuit citation decisions in part on the political party of the cited judge. Judges tend to cite judges of the opposite political party less compared with the fraction of the total pool of opinions attributable to the opposite political party judges. Second, judges are more likely to engage in biased citation practices in certain high stakes situations. These high stakes situations include opinions dealing with certain subject matters (such as individual rights and campaign finance) as well as opinions in which another judge is in active opposition. Third, judges cite more to those judges that cite back to them frequently, suggesting the presence of "mutual" citation clubs.
Judges, judicial administration, judicial bias, empirical study of courts
Abstract: Racing to the top of the corporate hierarchy is difficult, no matter how qualified or capable the candidate. Producing more widgets than one's competitors is not enough. Negotiating the political landscape of the institution is also required. More specifically, individual corporate officers have to be appeased, powerful interest groups have to be co-opted and made allies, and competitors have to be undermined or eliminated. The more bureaucratic the organization and the more opaque the promotion process, the more important this institutional game to climbing the corporate ladder. This Article identifies the kind of racial minorities or racial types who are likely to play this game well and, consequently, race to the top of the corporation. Identifying these racial types is crucial to making corporations more welcoming to and comfortable for racial minorities. This is because the racial minorities at the top of the corporation (successful racial types) are in an institutional position to perform discrimination-ameliorative tasks for those on the bottom. Thus, many corporate governance and employment discrimination scholars rest some of their hope for the establishment of colorblind corporate cultures on the assumption that successful racial types will actively seek out and perform antidiscriminatory institutional work. However, there is reason to believe that the racial minorities at the top of the corporate hierarchy will neither racially reform the corporation, nor engage in door-opening activities, for the minorities on the bottom. Indeed, strong incentives exist for minorities to race to the top of the corporate hierarchy and pull the ladder up behind them when they get there. This Article sets forth the nature of these incentives, reveals how they help to produce particular racial types, and explains why these racial types might not have the racial commitment, or feel institutionally empowered, to lift as they climb.
Racial minorities, corporate hierarchy
Abstract: This article revisits a recent shift in standard form sovereign bond contracts to promote collective action among creditors. Major press outlets welcomed the shift as a milestone in fighting financial crises that threatened the global economy. Officials said it was a triumph of market forces. We turned to it for insights into contract change and crisis management. This article is based on our work in the sovereign debt community, including over 100 interviews with investors, lawyers, economists, and government officials. Despite the publicity surrounding contract reform, in private few participants described the substantive change as an effective response to financial crises; many said it was simply unimportant. They explained their own participation in the shift as a mix of symbolic gesture and political maneuver, designed to achieve goals apart from solving the technical problems for which the new contract terms offered a fix. Contract terms were adopted for what they said, instead of or in addition to what they did.
Contract, boilerplate, sovereign debt, development, emerging markets, financial crisis, IMF, sovereign bankruptcy, collective action clause
Abstract: Using a dataset of sovereign bond offering documents and underlying bond contracts for ten sovereign issuers from 1985 to 2005, we examine the securities disclosure practices of issuers and attorneys. The sovereign bond market is comprised of sophisticated issuers with highly paid attorney law firms. If anyone complies fully with federal securities disclosure requirements, we expect sovereign issuers and their attorneys to do so. On the other hand, network effects that determine what information issuers choose to disclose as well as the high cost of determining what information is required for disclosure may lead issuers to fail to meet their disclosure duties. We provide evidence that sovereign issuers in fact may not fully meet their disclosure duties in one context. Where shocks occur to how courts interpret language in existing boilerplate bond contracts, leading to material and idiosyncratic changes in the underlying allocation of substantive rights for the different issuers, we find zero disclosure to investors. Conversely, we find that where there is less of a legal requirement for disclosure, such as when the entire market shifts publicly to using explicit collective action clauses in the bond contracts, there is a high level of disclosure. Over time, long after such terms have become the market standard and thus part of the total mix of information, this heightened level of disclosure continues. In sum, we find heightened disclosure in the place where the legal obligations (and investor need) for disclosure are less significant and no disclosure in the place where legal obligations (and investor need) for disclosure are more significant.
Abstract: Scholarship on the subject of innovation in financial products is sparse. And research on innovation by lawyers writing financial contracts, particularly the boilerplate contracts that dominate many markets, is sparser still. The central theoretical debate in the literature on boilerplate contracts is over whether contract language responds immediately and effectively to external changes or whether nonlinearities in the form of network effects prevent these efficient transitions. Depending on the view one takes, there is a different role for official sector involvement. This debate over the responsiveness of contract language has taken center stage in recent discussions in the sovereign debt area. Recent occurrences in the world of sovereign debt contracts provide a ripe data set for the examination of the contract responsiveness question. Prior to 2000, all the N.Y. issued sovereign bond contracts were viewed as functionally identical in terms of being restructuring proof. Then, in 2000, Ecuador used an ambiguity in the contract language to argue that its contracts are indeed susceptible to restructuring. After Ecuador's successful restructuring, contracts that earlier looked to be homogenous, now differed in significant ways. Small differences in contract language that were previously viewed as unimportant, after Ecuador's restructuring, impacted the ease with which the Ecuador style restructuring technique can be used. So, all of a sudden, Argentina might find itself with contracts that are hard to restructure and Belize might have contracts that are easy to restructure. In February 2003, following the lead of Mexico, the contracts in this market begin to move to a new (and, once again, relatively homogenous) restructuring friendly standard. Our article examines what happened in between 1996 and 2004, with respect to the heterogeneity that the Ecuador shock in 2000 created. Did the sovereign issuers converge to a single new intermediate standard? Or did they move back to the old restructuring proof standard? Or did they do nothing? The answers to these questions shed light on the above mentioned debate over the ability of markets for boilerplate contracts to effectively respond to changes in their environment.
boilerplate terms, contract theory, sovereign debt
Abstract: Although extralegal enforcement is widely acknowledged, the conventional understanding of written contract provisions, such as the complex and detailed provisions in bond contracts, is that they are drafted to be enforced by law. This framing neglects the value of contracts in shaping extralegal forces, particularly where litigation is unlikely or not possible. Sovereign debt contracts provide an example in which lengthy and detailed contracts play a key role even though the debtor is largely litigation-proof. We examine how contract provisions in sovereign debt contracts improve the efficiency of creditor control outside the realm of legal enforcement.
Abstract: Presidential candidates compete on multiple fronts for votes. Who is more likeable? Who will more effectively negotiate with allies and adversaries? Who has the better vice presidential running mate? Who will make better appointments to the Supreme Court and the cabinet? This last question is often discussed long before the inauguration, for the impact of a Secretary of State or a Supreme Court Justice can be tremendous. The importance of such appointments notwithstanding, presidential candidates are not pushed to name their prospective appointees, pre-election: we do not expect candidates to compete on naming the better slates of nominees. For the candidates themselves, not having to compete over nominees in the pre-election context has personal benefits - in particular, enabling them to keep a variety of supporters working hard on the campaign in the hope of being chosen as nominees. But, from a social perspective, this norm has costs. We propose that candidates be induced out of the status quo. In the modern era of candidates responding to internet queries and a vocal public asking questions via YouTube, it is plausible that the question - "Whom would you nominate (as Secretary of State or for the Court)"? - can be asked in a public setting. And maybe, if one candidate is behind in the race, he can be pushed to answer the question.
Abstract: Conventional wisdom is that sovereigns will rarely, if ever, default on their external debts in circumstances where it is clear that they have the capacity to pay. The first line of defense against the errant sovereign is its concern about reputation. It may have to tap the external debt markets again in the future; and there is the fear that the markets will extract revenge. But reputational constraints do not always work because some governments heavily discount future costs in favor of current benefits. When reputational constraints fail, however, a second line of defense is supposed to come into play. That line of defense is comprised of contractual and legal remedies. Both lines of defense broke down in the case of Ecuador’s default in late 2008. The breakdown of the second line of defense is significant because this was the first time that the modern theory of supermajority creditor control of sovereign debt problems was tested in practice. This Article begins the coroner’s inquest into the reasons for this breakdown and how similar situations might be averted in the future.
sovereign debt, Ecuador, sovereign bond default, international bonds
Abstract: What forms of discrimination are likely to be salient in the coming decade? This Essay flags a cluster of problems that roughly fall under the rubric of inclusive exclusions or discrimination by inclusion. Much contemporary discrimination theory and empirical work is concerned not simply with mapping the forces that keep people out of the labor market but also with identifying the forces that push them into hierarchical structures within workplaces and labor markets. Underwriting this effort is the notion that, while determining precisely what happens before and during the moment in which a prospective employee is excluded from an employment opportunity remains crucial to anti-discrimination theory and practice, significant employment discrimination problems can occur after a person is hired and becomes an employee. These problems transcend racial and sexual harassment and include a range of subtle institutional practices and micro interpersonal dynamics that create systemic advantages for some employees and disadvantages for others. We predict that the next generation of race discrimination scholarship will engage these "after inclusion" workplace difficulties theoretically, empirically and doctrinally.
Abstract: Several studies report that judges on panels together with at least one judge of a different political party (a "mixed panel") tend to moderate their votes, particularly on politically charged subject matter cases. We examine whether this observed moderation in voting is the product of bargaining among mixed panel judges, where authoring judges, who might otherwise face a dissenting vote (or find themselves in dissent), trade their votes for the ability to craft a unanimous majority opinion closer to their own policy preferences and thereby affect the opinion's precedential value. Using judicial citation patterns within individual opinions as a proxy for how judges reason, we report that authoring judges on mixed panels are more likely to employ partisan reasoning for opinions relating to salient subject matter areas. Partisan reasoning in top salient areas is higher where the authoring judges have more bargaining leverage over opposite party judges on the same panel. Finally, partisanship in top salient areas is greater for authoring judges who have greater skill at writing influential opinions. The overall pattern is consistent with judges engaging in covering: moderating their voting when associated with an opposite party judge on the same panel, a highly visible activity, but adjusting the judicial reasoning in the opinion to tilt the decision back toward the authoring judge's own preferred ideological position, a less visible activity done under the cover of the more visible, moderated vote.
judges, courts
Abstract: The question of how to optimally design judicial institutions is one of central importance to the scholarship focused on courts. Basic questions such as whether there should be mandatory retirement for judges, whether judges should be expected to write their own opinions and whether greater racial or gender diversity on the courts improves decision making are optimal design questions. Given the vast variation in the types of judicial system designs used around the world (and even within the United States), it should be possible to conduct a comparative analysis of the relative efficacy of the different designs. These comparisons cannot be evaluated, however, without first tackling the matter of how to measure justice or judicial performance. Although within the legal academy and the judiciary there is considerable skepticism and hostility to the measurement project, we argue that the project is worth attempting for both judges and academics. That said, the simple measures often used today, while necessary, cannot be relied on exclusively. To achieve a more reliable and useful measurement, judges must be involved in the process of arriving at the right characteristics to measure and the right ways to measure them. If judges get involved in improving the quality of data collection and measurement, the inherent dangers in empirical analysis of the judiciary will both be recognized and more effectively navigated. At the same time, empirical analysis with judicial participation is more likely to assist judges and judicial policymakers.
Abstract: Few events in the life of a society are as heady as the ouster of a long-standing dictatorial or corrupt regime. In the euphoria that typically follows this kind of nation building, the new government will want to expunge all vestiges of the old regime - personnel, laws, decrees and offensive policies. But there is one souvenir of the ancien régime that may not be so easy to sweep away, the debts incurred by the former regime in the name of the state. Even when it can be shown that the proceeds of those borrowings were wasted or stolen, public international law demands that the new government recognize and accept a legal obligation to repay those debts. Many successor regimes, in many countries, have searched for a way to avoid this result; a result that they often regard as morally reprehensible. Ethical arguments alone rarely melt creditor hearts. Successor governments have therefore been strongly encouraged by campaigners for third world debt cancellation to shift their ground, particularly after the ouster of the Saddam regime in 2003, toward legal arguments. The front-runner in this regard is the argument that international law permits successor governments to repudiate "odious" debts. In practice, however, successor regimes like the Aquino administration in the Philippines, the Alfonsin regime in Argentina and the post-Saddam government in Iraq have not tried to justify their requests for debt relief based on a doctrine of odious debts. That said, the nature of the regime that incurred such debts, and the occasionally distasteful uses to which the proceeds of the loans were put, have formed part of the unspoken background - the atmospherics - of the ensuing negotiations with creditors. But it has remained principally a debate about finance, economics and debt sustainability, not morality, religion or law.
Abstract: The few years since the U.S. incursion into Iraq in 2003 have witnessed an explosion in the literature on odious debts - that is, debts incurred (a) without the consent of the people (e.g., by a despotic regime); (b) from which no benefits accrued to the people; and (c) when the creditors had knowledge of the foregoing. The key question in the literature is whether successors to the despotic regime are obligated to pay the debts of the despot. That is, whether the newly democratic nation of Iraq is obligated to pay the debts of Saddam Hussein. The starting point for almost every discussion - scholarly or popular - of this doctrine is an obscure legal scholar named Alexander Nahum Sack, variously described as the pre-eminent scholar on public debts of his time, a former minister to Tsar Nicholas II, and a Russian professor of law who penned the doctrine of odious debts while teaching in Paris. This Article excavates the background of Alexander Sack, separating the reality of his life from the myth perpetuated in the odious debts literature. Instead of the heroic and eminent Tsarist exile, the evidence reveals a peripatetic legal scholar who taught in five different universities on two continents, and after being fired from a tenured position, ended his life penniless. We are left then with these questions: What does the reality of Sack mean for the legal status of the odious debts doctrine? And how is it that he achieved this iconic status when even minimal inquiry would have revealed a far more murky reality?
Abstract: For over a decade, contracts literature has focused on standardization. Scholars asked how terms become standard, and why they change so rarely. This line of inquiry painted a world where a standard term persists until it is dislodged by another standard term, perhaps after a brief window of ferment before the second term takes hold. It also overshadowed the early insights of boilerplate theories, which described contracts as a mix of standard and customized terms, and asked why the mix might be suboptimal. This article brings the focus back to the mix. It examines the development of selected provisions in sovereign bond contracts after a widely publicized boilerplate shift in 2003. The adoption of collective action clauses in sovereign bonds five years ago moved the documentation standard in New York closer to the prevailing practice in London. However, contrary to expectations, the shift away from old boilerplate did not lead to convergence around new boilerplate. Issuers in London and, to a lesser extent, in New York, have been experimenting with diverse formulations and institutional arrangements, including trustees and creditor committees. The contracts we study, as well as our interviews with practitioners and officials, suggest that standardization may be a matter of degree, that the degree of standardization may vary across different markets, and that a shock of the sort that led the 2003 shift may dislodge a previously standard term without replacing it with a new standard - erstwhile boilerplate becomes a platform for customization.
Sovereign debt, collective action clause, sovereign bankruptcy, IMF, innovation, standardization, boilerplate
Abstract: This article argues that the cost of odious debt ought to be borne by the party who is best positioned to prevent the accumulation of such debt. Creditors should bear odious debt liability - be barred from recovering the debt - to the extent that they could have taken measures to reduce the risk of forfeiture or to monitor the use of the money. Such liability would induce better care in funding decisions. At the same time, the magnitude of creditors' liability should reflect only the true social harm of odious debt. Even despotic regimes direct some of the funds to benefit the populace. Accordingly, creditors' liability ought to extend only to the fraction of the debt that served odious purposes. Effectively, liability for odious debt would be shared by the creditors and populace, with the relative shares depending on comparative blameworthiness, assessed from an economic, incentive-oriented perspective. After developing this principle, the paper explores ways in which it can be implemented.
Abstract: In October 2000 a hedge fund holding an unpaid debt claim won an enormous victory against the debtor, the Republic of Peru, through an opportunistic interpretation of the common pari passu clause by a Brussels court. This development was met by charges from policy makers and practitioners that the court's decision (its novel interpretation of the pari passu clause) would lead to a dramatic increase in the risks of holdout litigation faced by sovereign debtors. Over the ensuing years, multiple reform solutions were proposed including the revision of certain contractual terms, the filing of amicus briefs in a key case, and the imposition of an international bankruptcy regime for sovereigns. The question, looking back, that this Article empirically investigates is whether the capital markets actually perceived a significant increase in risk at the time of the October 2000 Brussels court decision. Equally important is whether markets discriminate among competing versions of the pari passu clause based on their relative risks for holdouts. And, to the extent the markets did react to the increase in legal risk, did any of the antidotes that were implemented to reduce the supposed increased holdout risk work? We offer evidence that bond prices did respond to this legal shock, that markets do discriminate based on the relative holdout risk posed by differing forms of the pari passu clause, and provide surprising evidence regarding the efficacy of the government-sponsored antidote, the advent of collective action clauses.
Abstract: The explosion in the caseload of the federal judiciary has forced judges on the circuit courts of appeal increasingly to turn to shortcuts. These shortcuts include an expansion in the role of judicial assistants, disposing a large number of cases through short-form unpublished opinions (to which citation is restricted), and granting oral argument in fewer cases. The end result, as the papers in the 2005 Washington & Lee Law Review Symposium detail, is a two track system of justice - that is, a system of judicial triage - where one set of cases gets full consideration by an Article III panel and another set gets delegated to consideration by judicial assistants, with what appears to be minimal supervision by Article III judges. Our contribution to the Law Review Symposium seeks to point out three gaps in extant discussion. First, there is inadequate consideration of second order effects - that is, how lawyers alter their litigation strategies in response to the dual track system, and what rule of law consequences may attach to those strategic decisions. Second, there is the matter of disclosing the role played by judicial assistants. If judges are delegating substantial responsibility for resolving cases on the secondary track to their assistants, shouldn't the public know who these assistants are, which cases they have worked on, and what role they have played in the case's disposition? Third, there is the matter of structural reform. There has been resistance to proposals to expand the judiciary, especially from prominent members of the judiciary itself. As an alternative, consideration should be given to providing the circuit courts assistance from a set of non-Article III judges analogous to the magistrate judges on the district court. Surely that would be an improvement over the current system where circuit courts acknowledge that they have delegated responsibility for the secondary track cases to judicial assistants, but no one knows who these assistants are and what levels of expertise they bring to the process of resolving appellate cases.
Abstract: This essay highlights a phenomenon that has no place in the conventional theory of sophisticated business contracts: the term that makes no sense as an enforceable promise, one that defies functional explanation, one that drafters blush to rationalize in retrospect or chalk up to honest mistake. The subset of contract drafters and negotiators who stop and think about the term before the contract is signed know that it has little enforcement value. Even if a court were to enforce such a term, its interpretation would be extremely hard to predict at signing. Nevertheless, such clauses get included in contracts between sophisticated parties. Why? We speculate that some nonsense terms are in business contracts because the process of formalizing certain sentiments about the parties’ relationship in an official and routine manner characteristic of business contracting provides value to the parties. We suggest that such value is, at least in part, the satisfaction of expressing their sentiments publicly and formally.
Business contracts, sovereign debt, formalism
Abstract: "Odious debts" have been the subject of debate in academic, activist, and policy circles in recent years. The term refers to the debts of a nation that a despotic leader incurs against the interests of the populace. When the despot is overthrown, the new government-understandably-does not wish to repay creditors who helped prop up the despot. One argument has focused on whether customary international law supports a "doctrine" of odious debts that justifies non-payment of sovereign debts when three conditions are met: (1) the debts were incurred by a despotic ruler (without the consent of the populace); (2) the funds were used in ways that did not benefit the populace; and (3) the creditors were aware of the likely illegality of the loans. Advocates of this doctrine, which was synthesized by Alexander Sack in 1927, typically cite two examples of U.S. state practice for support: the negotiations between the United States and Spain following the Spanish-American War, in which the United States repudiated Cuba's colonial debt, and the Tinoco Arbitration, which repudiated certain debts of the deposed Costa Rican dictator, Frederico Tinoco. Those historical precedents do not support the first condition of Sack's doctrine of odious debts, but do support the second two requirements. In addition to these two instances, United States history is rich with examples of debt repudiation by states. Those examples suggest a doctrine of odious debts that is broader and more flexible than the one written by Sack. Indeed, it may be appropriate to speak of the doctrines (not just doctrine) of odious debts.
odious debts, international law, Alexander Sack
Abstract: The public debate over the need to raise judicial salaries has been one-sided. Sentiment appears to be that judges are underpaid. But neither theory nor evidence provides much support for this view. The primary argument being made in favor of a pay increase is that it will raise the quality of judging. Theory suggests that increasing judicial salaries will improve judicial performance only if judges can be sanctioned for performing inadequately or if the appointments process reliably screens out low-ability candidates. However, federal judges and many state judges cannot be sanctioned, and the reliability of screening processes is open to question. An empirical study of the high court judges of the fifty states provides little evidence that raising salaries would improve judicial performance.
judges, judicial salaries
Abstract: Conventional wisdom is that the academy and the judiciary have been growing farther apart in recent years. Judges complain that legal academic work has become increasingly theoretical and obscure. Gone are the days when a judge could pick up a leading law review and gain guidance on some important legal issue. Admittedly, fewer academics these days spend their time synthesizing cases. But while the divide between the two groups may have widened in certain respects, there are ways in which these two groups are (or should be) growing closer. The academy has increasing interest in studying the judiciary - using empirical tools to analyze: (1) patterns in judicial decisions; and (2) the effects of different forms of judicial organization and administration. Thus far, judges have not responded to the empirical scrutiny with great enthusiasm. If anything, they seem to view the modern turn to empirical research as further evidence of a misguided academy. That view, while perhaps understandable, given some of the rhetoric about "political judging" in the academic literature, may be worth changing. There is much that judges and academics could learn from each other. This new body of research if guided by judges holds promise for judges and academics alike. This Foreword describes an attempt, in collaboration with the Duke Law Journal, to encourage a conversation between judges and the academic empiricists who study them.
Abstract: There is a growing body of scholarship in the United States on the structure of elite law firms. Virtually all of this work, however, is written from the perspective of the firms themselves or the lawyers who work inside these institutions. Surprisingly little attention has been paid to the perspective of another group with an obvious interest in the structure and practice of large firms: law students. Consequently, we have almost no information about what law students know, or more accurately, think they know, about the practices of elite firms and how these practices are likely to affect their careers. This omission is important since perceptions are important both as a potential window on actual firm practices and as a significant influence on the strategic choices of students, firms, and law schools even if the perceptions prove to be incorrect. This paper begins to close this gap by reporting the preliminary results from a nationwide survey of third year law students at American law schools about hiring and promotion practices at elite law firms. The survey tests three hypothesis about elite firms: 1) that the hiring practices of these entities are more concerned with sorting prospective applicants on the basis of a few visible, rankable signals (such as law school status and grades) than on evaluating a candidate's substantive knowledge or skills, thereby leaving those with hiring authority substantial discretion to make decisions on the basis of subjective determinations about whether a given student will "fit in" to the institution's culture; 2) that succeeding at a large law firm is as much about whether one finds a mentor or is perceived as being a "star" or a "team player" as doing high quality work and playing by the rules; and 3) that perceptions about what it takes to be hired or promoted at a large law firm are likely to vary according to the respondent's gender, racial, and law school identity. Survey results suggests that third year law students subscribe to some version of each hypotheses. The paper concludes by discussing the implications of our findings for students, firms, and law schools.
Abstract: Every public offering of securities is necessarily made some time during a fiscal quarter. Companies are obliged to disclose fall quarter operating results, but their obligations regarding the as-yet-incomplete quarter remain unclear. In this Article, Professor Mitu Gulati tackles both the normative question of whether companies doing offerings should be required to disclose their unripe information concerning the current quarter and the doctrinal question of whether such an obligation already exists within the framework of disclosure duties. The Article concludes that, while market forces and regulatory requirements operate to solve the interim nondisclosure problem in the majority of cases, there exists a small subset of cases -- paradoxically, the subset of cases involving the largest, most well-established companies ?- that calls for regulation. The doc-trinal approach taken by the courts thus far, which has been to impose no more than a narrow disclosure obligation under Item 303 and reject any general obligations under Rule 10b-5, dovetails with the type of circumscribed disclosure obligation that the Article?s normative analysis suggests.
Abstract: This paper analyzes the effects of discrimination law on discrimination in allocating "high-level" jobs. These are jobs characterized by substantial periods of training, high skill levels, and discretion (low or moderate monitoring). The analysis considers the incentives that an employer's hiring and promotion discrimination would create job applicants and workers who choose various career "strategies," based on preferences, skills and perceived opportunities. Applicants or workers who face discrimination alter their career strategies in ways that support the rationality of continued firm discrimination and that lead to an under-investment in human capital. The current legal rules against discrimination are largely ineffective in dealing with discrimination of this type; the analysis suggests, therefore, that the legal regime as applied to "high-level" jobs should be abandoned or substantially modified.
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