Volume 87, Number 6


Articles

Corporate Shams

Joshua D. Blank & Nancy Staudt

Many people—perhaps most—want to make money and lower their taxes, but few want to unabashedly break the law. These twin desires have led to a range of strategies, such as the use of “paper corporations” and offshore tax havens, that produce sizable profits with minimal costs. The most successful and ingenious plans do not involve shady deals with corrupt third parties, but strictly adhere to the letter of the law. Yet the technically legal nature of the schemes has not deterred government lawyers from challenging them in court as “nothing more than good old-fashioned fraud.”

In this Article, we focus on government challenges to corporate financial plans—often labeled “corporate shams”—in an effort to understand how and why courts draw the line between legal and fraudulent behavior. The scholars and commentators who have investigated this question nearly all agree: Judicial decision making in this area of the law is erratic and unpredictable. We build on the extant literature with the help of a new, large dataset, and uncover important and heretofore unobserved trends. We find that courts have not produced a confusing morass of outcomes (as some have argued), but instead have generated more than a century of opinions that collectively highlight the point at which ostensibly legal planning shades into abuse and fraud. We then show how both government and corporate attorneys can exploit our empirical results and explore how these results bolster many of the normative views set forth by the scholarly and policymaking communities.

The Federal Rules of Civil Settlement

J. Maria Glover

The Federal Rules of Civil Procedure were originally based upon a straightforward model of adjudication: Resolve the merits of cases at trial and use pretrial procedures to facilitate accurate trial outcomes. Though appealing in principle, this model has little relevance today. As is now well known, the endpoint around which the Federal Rules were structured—trial—virtually never occurs. Today, the vast majority of civil cases terminate in settlement. This Article is the first to argue that the current litigation process needs a new regime of civil procedure for the world of settlement.

This Article begins by providing a systemic analysis of why the Federal Rules inadequately prevent settlement outcomes from being distorted relative to the underlying merits—as defined by reference to substantive law—of a given dispute. It then explains how the Federal Rules can actually amplify these distortions. Indeed, notwithstanding the well-worn adage that settlement occurs in the “shadow of the law,” scholars have shown that non-merits factors exert significant influence on settlement outcomes. However, these insights have not been considered together and combined with a systemic focus on the ways in which the influence of these factors on settlement outcomes is actually a product of the basic structural features of the Federal Rules. This Article takes these next steps to explain that the “shadow of the law” that is cast on settlements is fading. Further, this Article discusses a new phenomenon in the current litigation environment—namely, that litigants’ increased reliance on prior settlements as “precedent” for future settlement decisions may move settlement even further out of the “shadow of the law” and into the “shadow of settlement” itself.

This Article then traces these problems to three foundational assumptions underlying the Federal Rules of Civil Procedure, all of which have become outmoded in a world of settlement. In rethinking these assumptions, it provides a new conceptual account that contextualizes previously isolated procedural reform proposals as challenges to these foundational assumptions. It also explains how these reformefforts ought to be refined and extended with a specific view toward systematically redesigning the basic model and operation of the Federal Rules for a world of settlement. Lastly, it sets forth new proposals that seek to reorient current rules expressly toward the goal of aligning settlement outcomes with the merits of underlying claims.

What emerges is a new vision of procedure—one in which the application of pretrial procedural rules do not merely facilitate trial but are designed to provide litigants with guidance regarding the merits of claims and are used to align settlement outcomes more meaningfully with the dictates of the substantive law. In describing this vision, this Article lays the groundwork for the design of a new Federal Rules of Civil Settlement.

 

Intentional Blindness

Ian Haney-López

Since the early 1970s, the Fourteenth Amendment’s emancipatory potential has dramatically eroded, with rapid plunges followed by ever-lower plateaus. In 2007, we entered another cycle of precipitous devolution. Today, this latest drop seems to be accelerating along two supposedly distinct tracks: intent doctrine and colorblindness.

Ostensibly, the search for discriminatory intent provides a means of ferreting out unconstitutional racial discrimination. In contrast, colorblindness subjects race-conscious laws to strict scrutiny whether their impetus is benign or invidious, rendering intent irrelevant. On and off the Supreme Court, supporters and critics spar over whether these doctrines fulfill the Fourteenth Amendment’s guarantee of equal protection. Nevertheless, both sides accept the seemingly fundamental division in racial jurisprudence between intent and colorblindness.

This Article challenges the notion of a divided equal protection. First, it shows that before the advent of colorblindness, intent doctrine formed the undivided—and reasonably efficacious—heart of equal protection. Intent doctrine once worked tolerably well for detecting the mistreatment of non-Whites, and also in distinguishing benign from invidious discrimination—the two tasks at which current equal protection grievously fails. Second, it demonstrates that colorblindness developed in response to intent doctrine, and in turn led to a disastrous reworking of that approach. Intent and colorblindness are not separate, but inextricably intertwined. Rather than seeing equal protection today as bifurcated, we should understand it as again unified, though under what might best be termed “intentional blindness.”
Combining the names of the two doctrines, this portmanteau captures the marrow of the Court’s racial jurisprudence—which seems intentionally blind to the persistence of racial discrimination against non-Whites. It is this resistance that connects the current assaults on antidiscrimination statutes to the impending demise of affirmative action. It also links both of these to a larger history of reversals in equality law spanning four decades.

Notes

Reconciling the PROTECT Act with the First Amendment

Rosalind E. Bell

This Note explores the recent expansion of child pornography law and its impact on socially valuable art and film. It focuses on how the federal government regulates “virtual child pornography”—both computer-generated materials that are produced without real children and authentic images made with seemingly young adult actors. First, I trace the history of child pornography doctrine from the Supreme Court’s foundational case, New York v. Ferber, to its recent discussion of virtual child pornography in Ashcroft v. Free Speech Coalition. I argue that modern laws and court decisions have become increasingly untethered from Ferber’s limiting interest in protecting children from physical and emotional harm. In Free Speech Coalition, the Supreme Court added a key limitation to child pornography doctrine, categorically protecting non-obscene virtual child pornography. As with all sexually themed materials, the obscenity test established in Miller v. California applies as a backstop, allowing the government to regulate material that violates community standards of decency and that lacks serious literary, artistic, political, or scientific value. Yet Congress’s post-Free Speech Coalition statute, the Prosecutorial Remedies and Other Tools Against the Exploitation of Children Today (PROTECT) Act, threatens to undermine the First Amendment by once again shifting focus from punishing crimes against children to preventing disturbing but nevertheless protected private thoughts. Despite United States v. Williams, a recent, narrow Supreme Court decision upholding the PROTECT Act’s pandering provision, I argue that Congress should reexamine the PROTECT Act as a whole. Looking for guidance in the Supreme Court’s foundational child pornography cases, as well as recent decisions in other First Amendment contexts, I conclude that Congress should amend the Act to comport with established doctrine.

Entrenching Privacy: A Critique of Civil Remedies for Gender-Motivated Violence

Lauren M. Gambier

In 2000, the Supreme Court in United States v. Morrison struck down a provision of the Violence Against Women Act (VAWA) that enabled victims of gender-motivated violence to bring civil suits against their attackers in federal court. In the wake of that decision, several states and localities have created similar remedies, and there has been a great deal of scholarly discussion of ways to craft a federal civil rights remedy that comports with the Constitution. The decision to create the federal provision stemmed from Congress’s recognition that violent crimes against women are systematically under-enforced or unenforced: presumably, the comparable state remedies were also intended to address this problem. Such remedies have received considerable scholarly support. In this Note, I argue that this continued
emphasis on civil remedies for victims of gender violence is both pragmatically and normatively problematic. I argue that reliance on private civil remedies to address law enforcement failure reinforces the traditional separation of women from civil society and their relegation to the private sphere. This same relegation of women to the private sphere, I posit, also underlies the continued failure of the state to protect women from violent crime. As such, any serious efforts to address the continued prevalence of gender-motivated violence must focus not on private alternatives to inadequate law enforcement, but on changing the understanding of the relationship between women and the state that underlies the state’s continued failure to protect them.

Overly Intimate Surveillance: Why Emergent Public Health Surveillance Programs Deserve Strict Scrutiny Under the Fourteenth Amendment

Margaret B. Hoppin

New York City’s A1C Registry is a paradigm of “emergent” public health surveillance: It subjects a population with a non-communicable, non-exposure-related health condition to individualized, ongoing, and intimate government surveillance. In so doing, it employs a surveillance model that was developed in the context of serious contagious disease and was justified in part by the efficacy of government interventions to prevent contagious disease from spreading. This justification for the surveillance model does not apply to the principal present-day threats to public health: obesity and other chronic conditions like diabetes. In addition, emergent public health surveillance mimics three features of law enforcement and national security surveillance that courts and commentators have found both troubling and relevant to the scope of privacy protections afforded under the Fourth Amendment. Like security programs, emergent public health surveillance involves comprehensive, intimate and individualized surveillance, employs electronic data collection systems which have a low marginal cost and to which data mining techniques are easily applied, and scrutinizes politically vulnerable domestic populations. Building in part on Fourth Amendment challenges to, and critical commentary about, security surveillance programs, this Note argues that emergent public health surveillance programs intrude upon a fundamental privacy interest. Accordingly, they should receive strict scrutiny under the Fourteenth Amendment. The constitutional inquiry should turn in part upon the efficacy of the public health intervention enabled by the challenged surveillance program.

The Framing of Fat: Narratives of Health and Disability in Fat Discrimination Litigation

Lauren E. Jones

Fat discrimination is rampant in education, health care, and employment. Antiobesity activists claim that it is not only acceptable, but actually desirable to stigmatize fat bodies because this stigmatization shames fat people into better health. In response, the fat acceptance movement turned to science to show that fat bodies can be healthy. As part of this movement, legislative advocacy and litigation strategies have utilized the argument that fat discrimination should not be permitted because fat people can be healthy. I argue that this move undermines the true justice that the fat acceptance community seeks. In the quest towards the fat acceptance movement’s ultimate goal of acceptance for all fat bodies, the movement must demand dignity and respect for all bodies, including fat bodies that are unhealthy. In this Note, I will discuss the theoretical problems inherent in the two most frequent arguments employed by fat able-bodied plaintiffs: that they are healthy in comparison with unhealthy or disabled people, and, alternatively, that they are disabled. In addition to being theoretically problematic, as a practical matter, fat discrimination challenges using claims based on the good health and able bodies of fat persons have been mostly unsuccessful. On the other hand, some contemporaneous fat plaintiffs have won cases in which they claimed that fatness is a disability. I argue that fat plaintiffs who use disability claims must work in solidarity with the disability rights movement, which demands respect, self-determination, and access for disabled people. If they do not, fat plaintiffs risk creating precedent that will make it harder for disabled people to prove their own discrimination claims and perpetuating stereotypes about disabled people. In all cases, as an anti-oppression movement within a broader social justice framework, the fat acceptance movement must work in solidarity with the disability justice movement rather than undermining the legal protections disabled people have won.

Reforming Judicial Review of Bioequivalence Determinations

Christopher J. Kochevar

This Note discusses the regulatory regime developed by the Food and Drug Administration (FDA) to ensure generic drug quality through premarket approval. The Hatch-Waxman Act effectively created the contemporary generic drug industry in 1984, and today, this industry saves the United States billions of dollars in medical costs. The legal-scientific concept of “bioequivalence” is central to the Hatch-Waxman regime, and its meaning has developed through statutory, regulatory, an advisory pathways in Congress and at the FDA. In this Note, I argue that the FDA’s current approach to promulgating standards for bioequivalence—largely based on guidance documents—threatens the agency’s ability to sustain comprehensive and authoritative regulation in the future. Guidance documents and petition responses are not subject to public input according to the standards of the Administrative Procedure Act (APA), and may create confusion among regulated entities and trouble for consumers. Nevertheless, courts repeatedly have deferred to the FDA’s choice of policymaking form and have found challenges under the APA to be nonjusticiable for lack of standing and ripeness. I argue that this deference should be attenuated and justiciability should be restored, not because generic drugs approved under the current regime are demonstrably dangerous to patients, but because systematic foreclosure of public input and judicial oversight is an unsustainable regulatory approach.

Method in Comparative Constitutional Law: A Comment on Law and Versteeg

Sujit Choudhry

Of the many questions raised by David Law and Mila Versteeg’s important article, I want to focus on two. First, as a methodological matter, do they measure constitutional convergence and divergence in the right way? Second, what is the relationship between quantitative, large-n work of the genre represented by Law and Versteeg’s article and small-n, qualitative work that has hitherto been the favored methodological approach in comparative constitutional law and politics?

Comments on Law and Versteeg’s The Declining Influence of the United States Constitution

Zachary Elkins, Tom Ginsburg & James Melton

It was with great interest that we read David Law and Mila Versteeg’s thoughtful article on the influence of the U.S. Constitution. Their piece contributes some very useful and clearly-drawn empirical benchmarks, which will undoubtedly advance the conversation about the historical role of the U.S. Constitution in interesting and even provocative ways. Law and Versteeg provide many empirical nuggets to consider.

Comment on Law and Versteeg

Vicki C. Jackson

David Law and Mila Versteeg have used their considerable legal and empirical skills to identify what they provocatively describe as the “declining influence of the U.S. Constitution,” or of what they sometimes call “American constitutionalism.” This claim has been headline-grabbing in important part because of the larger sociolegal context, in which the question of American hegemony in the world of global politics and economics is deeply unsettled. Declining influence in the design of constitutions thus resonates with a larger set of anxieties about the role of the United States in the world.

Debating the Declining Influence of the United States Constitution: A Response to Professors Choudhry, Jackson, and Melkinsburg

David S. Law & Mila Versteeg

This brief essay responds to the commentaries by Professor Choudhry, Professor Jackson, and Professors Elkins, Ginsburg, and Melton (“Melkinsburg”) on our article, The Declining Influence of the United States Constitution. We agree with much of the substance of their thoughtful commentaries, especially their calls for methodological pluralism and broader-ranging empirical research. Some of our differences, meanwhile, are matters of emphasis and framing. For example, their point that the U.S. Constitution remains influential upon constitution writing at a high level of abstraction is one that we make ourselves. We also emphasize, however, that highly abstract similarities are no indication that constitutional drafters in other countries find the U.S. Constitution a useful or attractive model to emulate as a practical matter.

Our most significant disagreement lies with two of Melkinsburg’s arguments. First, they contend that we have misinterpreted our empirical findings of declining similarity to the U.S. Constitution as evidence of declining influence. We reject their suggestion, however, that the U.S. Constitution can only be said to have lost influence to the extent that its “essential elements” have been repudiated. No definition of a concept such as influence can be proclaimed exclusively correct by fiat. Moreover, their definition comports neither with intuition nor with our goal of identifying where constitutional drafters today look for inspiration.

Second, they argue that the trends we identify as belonging to the late twentieth century are merely continuations of trends that actually began in the mid-nineteenth century. In our view, their analysis gives insufficient consideration to two dynamics that render post–World War II constitutional trends qualitatively distinct from nineteenth-century trends. Those two dynamics are constitutional proliferation, meaning an explosion in the sheer number of constitutions, and constitutional standardization, or the increasing use of increasingly standard constitutional models that bear limited resemblance to the U.S. Constitution. Constitutional drafting today reflects the emergence of pockets of consensus in a densely populated constitutional environment that simply did not exist in the mid-nineteenth century or even the early twentieth century. Any conclusions that Melkinsburg draw from ostensibly global nineteenth-century data are likely to be disproportionately influenced by the atypical experience of Latin American constitutionalism. Our focus, by contrast, is upon a late twentieth-century process of constitutional standardization that ultimately bypassed the U.S. Constitution in favor of a more genuinely global synthesis.