NewYorkUniversity
LawReview
Current Issue

Volume 72, Number 5

November 1997
Articles

Givings, Takings, and the Fallacy of Forward-Looking Costs

J. Gregory Sidak, Daniel F. Spulber

Mr. Sidak and Professor Spulber extend here the analysis in Deregulatory Takings and Breach of the Regulatory Contract, published last year in this Review. They respond to comments and criticisms raised not only by Professors Baumol and Merrill, but also by Judge Williams and Professor Williamson in their Comments published last year. Sidak and Spulber begin by exploring the constitutional limitations on the government’s ability to redefine the public purpose to which a regulated utility has dedicated its private property. Then, the authors examine whether the government has made “givings” that implicitly compensate the regulated firm for its diminution in value owing to the imposition of policies mandating network unbundling at regulated prices. Sidak and Spulber refine the limiting principles for the recovery of stranded costs that they articulated in their earlier article and show how those principles reconcile with the actual treatment of losses from deregulation in disparate industries. Next, they expose the economic fallacies in the notion of “forward-looking costs” as that term has been used by the Federal Communications Commission and state public utility commissions to set prices for mandatory network access under the Telecommunications Act of 1996. The authors analyze the Supreme Court’s 1996 decision in United States v. Winstar Corp. and argue that the reasoning employed by seven Justices in that case comports not only with earlier decisions of the Court construing the regulatory contract with public utilities, but also with the contemporary economic analysis of why the regulatory contract is essential and efficient. Sidak and Spulber explain how “transition bonds” may solve the stranded cost conundrum in the telecommunications and electric power industries by permitting the securitization of stranded costs in a manner that restores investors’ faith in the state’s ability to make credible commitments. Finally, the authors examine the significance of the Eighth Circuit’s 1997 decision in Iowa Utilities Board v. FCC for the debate over deregulatory takings and breach of the regulatory contract.

Deregulatory Takings, Breach of the Regulatory Contract, and the Telecommunications Act of 1996

William J. Baumol, Thomas W. Merrill

Professors Baumol and Merrill reply to Deregulatory Takings and Breach of the Regulatory Contract, published last year in this Review, which argued that the price incumbents may charge potential competitors for bottleneck facilities under the Telecommunications Act of 1996 should be based not on forward-looking costs but on historical costs. Professors Baumol and Merrill contend that pricing with reference to historical costs would depart from the principles called for by economic analysis for efficient pricing, and they further argue that neither the Takings Clause nor the regulatory contract precludes the use of forward-looking costs in setting prices. If a taking or regulatory breach does occur, they suggest that the proper remedy is not to interfere with the pricing decisions readied by regulators but to make the appropriate compensation, if any, after those decisions have been put into effect. Support for these legal observations is reinforced with the economic contentions that the competition introduced by the Act will have minimal effect upon incumbents which will generally receive a very valuable quid pro quo for any damage to their legitimate interests. Finally, they argue that compensating any firm for the loss of monopolistic prices threatens to undermine the most basic purpose of the Act, which is to bring the benefits of competition and competitive pricing to all electronic communications markets.

Essays

Bleeding Heart: Reflections on Using the Law To Make Social Change

Thomas B. Stoddard

“When and how, if ever, can the law change a society for the better? Are there more successful and less successful ways to make social change? Is the law an effective tool for social change? (Or should I have become a social worker instead of a lawyer?) Are there any lessons to be learned from the attempt by so many lawyers of my own generation to make social and cultural change through the formal rulemaking mechanisms of the law?”

This Essay is Professor Stoddard’s last work, which he was writing at the time he became ill. The Essay addresses the themes that ran through Professor Stoddard’s entire career as a public interest lawyer, focusing specifically on the ways in which litigation can make social change, and its limitations in that regard.

Lawyering for Social Justice

Nan D. Hunter

Not many of us are pioneers, but Tom Stoddard was. He fought for equality for lesbian and gay Americans before it was respectable; he was proudly out as a gay man before it was professionally safe to be out; and he taught one of the first courses centering on the rights of lesbians and gay men in any American law school. He lived to see the lesbian and gay civil rights struggle take its place with others as a campaign for human dignity and justice. Tom’s final Essay, Bleeding Heart Reflections on Using the Law to Make Social Change, is a reflection on the relationship between litigation, legislation, and the possibilities for law to operate as “culture-shifting” rather than merely “rule-shifting.” I argue that the litigation-legislative dynamic is more structurally complicated than the description in Bleeding Heart suggests, and highly contingent on the historical moment. I comment on what I think is one of the most significant aspects of the Bleeding Heart argument: the implicit assumption that lesbian and gay rights advocates have the potential to regularly win in the legislative arena. Lastly, I offer some thoughts on how one can more consciously seek a culture-shifting practice of law.

Memorial Essays

The Personal Is the Pedagogical: A Very Brief Life of Professor Stoddard

Robert Murphy

Tom Stoddard–though more famous as a civil libertarian and gay rights advocate–was first and last a teacher. His brother John Stoddard remembers Tom, as a small child in the early 1950s, making John “learn all the capitals of all the states and of every country in the world. He knew them, and he wanted me to know them, too.” And only days before Professor Stoddard, at 48, succumbed to HIV disease, he submitted grades for his “Legislation” course. Despite the sudden physical decline that forced him to cancel class sessions before the end of the semester, he marked papers and exams at the hospital and then from his sickbed at home.

Tom Stoddard: Civil Libertarian

Norman Dorsen

The Greeks had a saying, “The good die young.” Rarely has this been as true as with Tom Stoddard, who in the short years given to him made an indelible mark as a hero in the struggle for the rights of lesbians and gay men. He did it all–courtroom advocate, legislative counsel for the New York Civil Liberties Union, head of Lambda Legal Defense Fund, and a colleague who taught (at New York University) one of the first courses given in any American law school centering on legal issues surrounding homosexuality. Tom will be remembered for many things, but mainly for his success, as the New York Times recognized when he died, in “bring[ing] issues affecting gay men and lesbians into the mainstream of legal and political debate.”

Tom Stoddard, Public Health, and Civil Liberties: A Remembrance

Ronald Bayer

It has become something of a conventional wisdom over the past decade to assert that there is no necessary tension between the aims of civil liberties and public health. Like all such wisdoms, although often true, there are occasions when bitterly contested battles make it clear that the picture is far more complex than the world as defined by mantras. Too often lost in the debate over claims about the salutary or baleful impact of the civil libertarian perspective on public health is some understanding of how that outlook emerged, took hold, and then achieved some currency. It is a history that can teach us much. And it is there that Tom Stoddard played a central role, for he helped to shape a rights-sensitive conception of public health.

Notes

Equal Access or Free Speech: The Constitutionality of Public Accomodations Laws

Lauren J. Rosenblum

This Note proposes that a claim that freedom of speech or expressive association is infringed by operation of a public accommodations law should be subjected to the tests developed by the Supreme Court for the analysis of content-neutral restrictions on those rights. A public accommodations statute is a content-neutral regulation: the government’s purpose in enacting and enforcing the statute is not related to the suppression of free expression. Because the Court has decided that content-neutral regulations present less of a threat to the values underlying the First Amendment than do content-based restrictions, a content-neutral regulation is not presumptively invalid. Such a regulation is constitutional if justified on the basis of a sufficiently strong governmental interest which is not related to its effect on individual freedoms.

“Useful Life” Has Outlived Its Useful Life: Tax Depreciation After Simon and Liddle

Alton A. Murakami

By eliminating the useful life requirement for depreciability, Simon and Liddle opened the door to allowing depreciation of assets previously considered nondepreciable. Although the amounts at issue in the two cases were not significant, applying their holding to other assets could significantly reduce the tax revenues collected by the government. This Note analyzes the tax court’s decisions in Simon and Liddle and applies their holding to assets previously considered nondepreciable. This Note concludes that the Simon and Liddle decisions are contrary to the legislative history of ACRS depreciation, but argues that eliminating the useful life requirement for tangible assets is nevertheless fundamentally sound, as it better promotes the basic policies and practical considerations underlying modem tax depreciation.

The Role of Apology in Mediation

Deborah L. Levi

This Note draws on socio-psychological sources, conversations with experienced mediators, and dispute resolution literature to articulate a measured theory of when, where, and how apologies may play a role in dispute resolution. Avoiding both conclusory idealization and complete dismissal of apology, this Note argues that, in some disputes, apology is a powerful means of moving parties closer to settlement. Though apology is probably not the direct substitute for monetary compensation depicted by the casebook employment scenario, it may facilitate agreements on compensation by alleviating the psychic injury that makes parties unable to settle. Because apology may improve the dispute resolution experience for both parties, lawyers concerned about client satisfaction should consider attending more carefully to demands for apology. Indeed, lawyers skilled in crafting language may aid parties to exchange sincere regrets without making specific admissions of liability and thus pave the way for more fruitful dialogue.

Responses

The Moral Rhetoric of Legislation

Chai R. Feldblum

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.