Responses

Gregory Sidak and Daniel Spulber raise a series of important and controversial issues in their article, Deregulatory Takings and Breach of the Regulatory Contract. As the title of their article suggests, they interpret recent and prospective efforts to deregulate telecommunications and electric power networks as “takings” and recommend that regulated firms should be compensated for “stranded costs.” They further argue that the “efficient component- pricing rule” (ECPR) is the appropriate rule for pricing access to the network by entrants. Throughout, they adopt a contractual approach to regulation in which (implicitly) the managers of both regulated firms and regulatory agendas are assumed to behave in a stewardship fashion.

There is much in this approach with which I agree, but I also have a series of reservations.

Gregory Sidak and Daniel Spulber develop a comprehensive argument both justifying compensation of utilities for the adverse effects of various deregulatory developments and explaining how to do so. They read the Takings Clause as expressing a fundamental principle of political economy requiring compensation in order to prevent—or at least reduce the risks of—government action destructive of wealth. Compensation thus should be required in most instances where the action cannot be justified as preventing harm or where the “settlement costs” of providing compensation are not excessive. The last qualification rules out compensation, for example, for losses resulting from changes in monetary policy.

My central concern about the authors’ argument is the question of why the old utility may not be in a good position to compete with new entrants.

In his Essay, Bleeding Heart: Reflections on Using the Law to Make Social Change, Tom Stoddard set out to answer a question that challenges many of us who work to advance our view of social justice: “When and how, if ever, can the law change society for the better? … Is the law an effective tool for social change? (Or should I have become a social worker instead of a lawyer?)” Stoddard’s answer is that law can be an effective tool for social change, but only when it achieves the goal of “culture-shifting” and not simply “rule-shifting.” In Stoddard’s view, law has the capacity to achieve a number of rule-shifting goals: it can create new rights and remedies for victims, it can alter the conduct of the government, and it can alter the conduct of citizens and private entities. But law also has the potential to result in “culture-shifting”–it can express a new moral ideal or standard and can change cultural attitudes and patterns. However, I believe there are certain unique challenges posed in achieving the goal of equality for gay people that are not fully explored in Stoddard’s analysis.

My message is one of calm placidity: Not to worry; Ex parte Young is alive and well and living in the Supreme Court. By way of background let me say that I am that rara avis, a law professor who thinks Hans v. Louisiana was rightly decided. For the reasons given by Justice Bradley, I am quite convinced that the Federal Question Clause of Article III does not extend the judicial power to suits against nonconsenting states. That being so, it follows that the much lamented first half of the decision in Seminole Tribe v. Florida is also right, for a long series of decisions makes abundantly clear that Congress cannot give the federal courts jurisdiction over matters outside Article III.

Although Matsushita II can be read in a way that might lead to some difficulties, Professor Morrison insists that its result is plainly correct and its basic message—that federal courts should look with considerable skepticism on state court class action settlements that release federal claims which state courts are forbidden to adjudicate—is a sound one, properly applied to the facts of that case. Matsushita II is a narrow case that would not and should not, lead to the broad-scale collateral attack predicted by Professors Kahan and Silberman. Given the practicalities of litigation (including the statute of limitations for securities cases and the substantial risks of sideline sitting), the opportunities for collateral attack are quite limited and the possibility of abuses very small. At the same time, Kahan and Silberman undervalue adequacy of representation, which is an essential element of due process that must exist to bind persons not parties to a lawsuit. Their proposed solution would prevent meaningful federal review and create practical problems without effectively addressing the problems of forum shopping and plaintiff shopping. The holding of Matsushita II, in contrast would encourage settlement of such actions in a single proceeding in a federal court that finally resolves the dispute.

Professor Miller argues that there is a compelling case for a narrow, reading of the Ninth Circuit’s remand decision in Epstein v. MCA, Inc. (Matsushita II), such that the holding is neither as far-reaching nor as nefarious as Professors Kahan and Silberman suggest. In light of the extraordinary facts under which the litigation arose (and the court’s own limiting construction), Matsushita II should not be interpreted as opening up all class actions to collateral attack in a subsequent forum. Rather, the holding requires that, in order for collateral attack to be permissible. Class counsel in the initial forum must have been disabled from litigating the basis of the claim in the second forum and other indicia that class counsel did not fairly and adequately represent class members must be present. With this narrow interpretation, and existing procedures for avoiding interjurisdictional conflict, Matsushita II can be defended as a reasonable balance of tile costs of collateral attack and the benefits of deterring questionable settlements.

In this Response, Professor Allen contends that in arguing that plaintiffs in state court proceedings are unable to fairly and effectively bargain for the release of exclusively federal claims, the court in Matsushita II reached a judgment that is inconsistent with established concepts of finality of judgments, with design of an effective class action mechanism, and with the policies and precedents of full faith and credit. Although the centrality of the federalism idea has waxed and waned, the Supreme Court has generally encouraged respect by the lower federal courts of the processes and judgments of state courts. The existing system of decentralized state and federal courts allowed for the development of the Delaware Court of Chancery as a de facto specialized court of fiduciary and business law, which has been a positive force in the economy. The Matsushita II court, by contrast, does not accord respect to state court determinations of adequacy under Rule 23 and thus potentially reinvents the problem of inefficiency and second-guessing that is solved by the rule of finality and recognition of judgments. Commentators favoring Matsushita II‘s disregard for state court judgments erroneously believe that state court judges possess less integrity than their federal counterparts. A litigant is entitled to only a conscientious judicial determination of the issues according to law in a proceeding that meets constitutional minimums—a task that state courts are ably equipped to handle and that federal courts should not lightly disturb.

In The Commonplace Second Amendment, Professor Eugene Volokh argues that in interpreting the Second Amendment we should give primacy to the operative clause over the purpose clause: While the latter may refer to a “well-regulated militia,” the former baldly proclaims, “the right of the people [not the militia] to keep and bear arms shall not be infringed.”‘ As a result, we should read the provision to guarantee a right of all private individuals to arms. Despite my considerable admiration for Professor Volokh’s article, I wish to disagree on two points. First, even if we accord primacy to the operative clause, that clause itself implicitly refers to a semi-collective entity—the “Body of the People”—rather than to private individuals. Second, while I agree with Professor Volokh that we should not read the purpose clause to “trump” the operative language, we also should not read the operative language to depart from the purpose clause. Instead, the best interpretive strategy is to read the two clauses together to produce a single consistent meaning, with neither clause taking primacy. We should, in other words, read the amendment as a unitary provision.