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Abstract:
The law of agency is one of the basic building blocks of business. Agents facilitate transactions between firms and structure governance relations within firms. Agency law regulates both types of activity. Yet agency law's main focus has always been on the transactional side. The key feature of transactional--traditional--agency law is the tripartitite relationship among the principal, agent, and third party. Law and economics scholars, however, have mostly focused on the role of agency within organizations. More traditional business law scholars have also paid little attention to agency law in recent years.

This paper develops an economic theory of transactional agency law. I argue that what makes the three-party structure of agency law different from two-party structures is the potential for collusive behavior between any two of the three parties against the other. My thesis is that transactional agency law can largely be understood as attempting to facilitate transactions by deterring collusion between principals and agents, between agents and third parties, and between principals and third parties. Agency law does this by providing guidelines for determining when collusion of various types should be presumed. I develop a theory of collusive behavior and then apply this theory to various doctrines in agency law that have long troubled scholars and courts, including contractual authority, undisclosed principal, and ratification. Throughout, I compare the collusion theory with an alternative economic theory that explains agency rules under the least cost avoider principle.

Abstract:
Multiple lawyer situations are becoming more important in the practice of law and the law of lawyering, but have not been adequately studied in a comprehensive and systematic way. The simple dichotomy of sole practitioner and law firm are no longer adequate. In this essay, I examine the "multi-lawyered" problems arising out of these ubiquitous and complex situations. By multi-lawyered problems I mean problems arising from two or more lawyers, who have some relationship to each other and/or to the same client in a particular matter, and who each owe ethical and legal obligations to that client arising from that matter. I offer three different, but related, approaches to multi-lawyered problems. First, I present a taxonomy based on the variety of structural and legal relationships between the lawyers and between the lawyers and the client. Second, I examine how the presence of multiple lawyers affects the professional responsibilities of these lawyers, focusing on the core concerns of the law of lawyering: competence, confidentiality, and conflicts of interest. The presence of multiple lawyers can help ameliorate all of these core concerns, but can also exacerbate them. In particular, the addition of a second lawyer to a matter may increase the costs of monitoring competence, preventing unwanted disclosures, and preserving loyalty. Third, I apply an approach I previously developed based on the potential for collusive behavior in tripartite agency relationships (involving a principal, agent, and third party) to show how the presence of multiple lawyers complicates these problems. Specifically, the second lawyer may act with the first lawyer against the interests of the client or third parties, may act with the client against the interests of the first lawyer, or may act with third parties against the interests of the client or the first lawyer. I argue that thinking about where the greatest collusive risks lie may help resolve multi-lawyer problems. Finally, I discuss briefly how the Ethics 2000 revisions to the Model Rules of Professional Conduct deal with (and ignore) multi-lawyered problems.

Abstract:
This essay will appear as an entry in the forthcoming Encyclopedia of Law and Economics (2d ed.), published by Edward Elgar. The essay surveys the law and economics literature on interpretation and implied terms in contract law, focusing on recent literature. In particular, the essay examines the economic arguments for textualism and contextualism, the two primary methodologies used by courts to determine the intentions of contracting parties with respect to their performance obligations. Topics discussed include complete and incomplete contracts; negotiating, drafting, and litigation costs; superior risk bearer and opportunism approaches; joint fault and multiple contingencies; contracting party characteristics; court competence and error; and agency costs and third party interests.

contracts, complete contracts, incomplete contracts, interpretation, implied terms, textualism, contextualism, superior risk bearer, opportunism, default rules, court competence, court error, litigation costs

Abstract:
This essay is a comment on an article by Professor Chris Wonnell entitled "Expectation, Reliance, and the Two Contractual Wrongs." Both Wonnell's article and this comment will appear in a forthcoming symposium on the Reliance Interest to be published in the San Diego Law Review. Wonnell's thesis is that the concepts of expectation and reliance are not simply two different ways of conceiving compensation; rather, they are two different ways of conceiving contractual wrongs. Expectation damages remedy the wrong of breaching a contractual promise that should have been performed. Wonnell also suggests that courts should choose between expectation and reliance remedies depending on the reason for the breach, but with a strong presumption in favor of expectation.

I agree with much of Wonnell's thesis, which draws on and is broadly consistent with my prior article, The Fault Lines in Contract Damages, 80 Va. L. Rev. 1225 (1994). In my comment, I expand on my view that an economic approach to contract damages supports a fault-based system in which courts adjust the damage measure depending on the reason for the breach, and that this is the system we actually have. The expectation remedy is superior to reliance for deterring opportunistic breaches. The reliance remedy is not sufficient to deter opportunistic breach once one considers the gains to the promisor from the opportunistic behavior beyond the immediate contract. On the other hand, the reliance remedy is superior to expectation for deterring nonopportunistic breaches. Although Wonnell accepts the argument of some economic scholars that the expectation remedy serves a cost-minimizing "pricing" function in nonopportunistic breach cases, in my view the pricing advantage of the expectation remedy is overstated. My conclusion is that our theoretical energies should now be directed away from the abstract superiority of expectation or reliance in general and toward the development of better presumptions of opportunistic and nonopportunistic breach.

Abstract:
This essay will appear as a chapter in a forthcoming book entitled Fault in American Contract Law, to be published by Cambridge University Press and edited by Omri Ben-Shahar and Ariel Porat. In the essay, I describe three defects in the strict liability paradigm of American contract law, and use these to demonstrate how fault in fact significantly shapes contract law. First, the justifications for strict liability frame the issue as one of implementing contractual intent, when the main problem of contract law is interpreting contractual intent. Fault helps interpret contractual intent. Second, the strict liability paradigm focuses too much on a single fault variable – the superior ability of the promisor to control his own performance – and downplays other relevant fault variables. In particular, the strict liability paradigm ignores the potential for opportunistic behavior by the promisee. A broader conception of fault recognizes and emphasizes the potential for fault by both parties as well as the need to make relative fault assessments. Third, the strict liability paradigm overlooks doctrinal avenues in contract law that incorporate or accommodate fault. I discuss one important set of such doctrines: the law of contract damages. Fault helps explain contract damages doctrine and fill doctrinal gaps.

contract law, fault, strict liability, opportunism, damages

Abstract:
This article examines the Supreme Court's decision in Ortiz v. Fibreboard Corporation, which struck down a massive asbestos class action settlement as inconsistent with the requirements of Rule 23, in particular the requirements for a mandatory class action based on a limited fund under Rule 23(b)(1)(B). Although agreeing with the Court's decision, the article criticizes the Court for relying too much on abstract principle rather than directly responding to the pragmatic concerns raised by the dissent. The article considers the incentives of Fibreboard, its insurers, the claimants and their lawyers in the negotiations leading up to the settlement and argues that Fibreboard could not settle its coverage dispute with its insurers without also resolving the asbestos claims themselves. The article then examines the group settlements that Fibreboard entered into before negotiating the class settlement and shows how these settlements could have facilitated a collusive class settlement. With respect to the Court's limited fund analysis, the article shows how a more detailed appreciation of the background could have improved the Court's reasoning. First, the article shows why there could not have been a limited fund. Second, the article argues that the Court's analysis of "extraclass" conflict was too narrow, while its analysis of "intraclass" conflicts was too broad. Third, the article examines the failure of the class settlement to exhaust Fibreboard's assets and relates that failure to Fibreboard's obligations to the asbestos claimants. Fourth, the article explains why the Court should have paid more attention to a companion class action settlement to Ortiz. The article concludes by arguing that courts should continue the task set by Ortiz of developing a meaningful law of class action settlements and in doing so should pay more attention to the details of the deals they oversee.

Abstract:
Lawyer abuse in class action settlements is a widely recognized problem. One approach to lawyer abuse in class actions has received insufficient attention: suing the lawyers. Lawyers involved in class actions may engage in conduct that constitutes a civil or criminal wrong under state or federal law. The difference between these lawyers and other lawyers is that judges approve class action settlements after making findings on the adequacy of class counsel, the lack of collusion between class counsel and defendants, and the fairness of the settlement terms, including lawyers' fees. We argue that this judicial approval does not, and should not, immunize lawyer misconduct from the reach of state tort law, consumer protection law, criminal law, or state or federal antitrust law. Class action lawyers seem to assume that judicial approval cloaks their settlements in protection from these actions. We argue that this assumption is erroneous. First, collateral estoppel does not apply to bar suits aimed at lawyer misconduct because there is no full and fair opportunity to litigate these issues in the fairness hearing. Second, the doctrines that exempt state action, federal regulatory activity, and petitioning the government from the antitrust laws do not apply to the conduct of class action lawyers in negotiating a settlement or to the terms of the settlement approved by the court. We provide case examples to demonstrate the types of actions that could be brought against class action lawyers.