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United States v. Bond and Information-Forcing Defaults: The Work that Presumptions Do

31 Pages Posted: 13 Jan 2015 Last revised: 26 Jan 2015

Paul B. Stephan

University of Virginia School of Law

Date Written: January 12, 2015

Abstract

This article, written for a symposium on Bond v. United States, connects the law and economics of contract interpretation to the Supreme Court’s modern practice of creating statutory interpretive presumptions. The paper compares information-forcing defaults, both majoritarian and penal, to contract rules that allow parties to design mechanisms to deal with future contingencies about which no party has special knowledge. Delegation rules allow parties to specify a set of contingencies that, upon realization, entitle a selected third party to supplement the contract to incorporate post-contractual information. From a welfare perspective, information-forcing defaults and delegations are complements, each desirable under specified conditions. But, as to any particular issue, these strategies are contradictory. Choosing a delegate to resolve downstream problems reduces a party’s incentive to disclose relevant information at the time of contracting. The challenge thus becomes determining the conditions, both in theory and in practice, where each approach is likely to optimize the value of a contract.

The paper then looks at several informal models of how Congress and the federal judiciary operate, and in particular at how they interact dynamically with respect to statutory interpretation. It then identifies the circumstances under each model that would support a conclusion that Court’s current trend may contribute to the social good. It argues that none of the areas where presumptions have emerged satisfy the requirements for a delegation of downstream lawmaking to the courts based on unknown information. In contrast, statutory presumptions against encroachments into areas of core state competence (Bond), extraterritorial effect of regulation (Morrison and Kiobel), violations of international law (Charming Betsy), and constitutional confrontations (Catholic Bishop) reflect a plausible majoritarian default of avoiding conflicts with parallel legal regimes. The presumption against implied causes of action, by contrast, reflects a penal default based on the need to promote transparency and accountability in lawmaking.

Keywords: foreign relations law, statutory interpretation

Suggested Citation

Stephan, Paul B., United States v. Bond and Information-Forcing Defaults: The Work that Presumptions Do (January 12, 2015). Virginia Law and Economics Research Paper No. 4; Virginia Public Law and Legal Theory Research Paper No. 2. Available at SSRN: https://ssrn.com/abstract=2548680 or http://dx.doi.org/10.2139/ssrn.2548680

Paul B. Stephan (Contact Author)

University of Virginia School of Law ( email )

580 Massie Road
Charlottesville, VA 22903
United States
434-924-7098 (Phone)
434-924-7536 (Fax)

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