Parties’ choice of a seat of arbitration has especially important ramifications with respect to the law to be applied in disputes that may arise.  As the New York Convention reflects,² the jurisdiction in which the seat of arbitration lies determines the lex arbitri to be applied, meaning that the chosen jurisdiction’s courts will determine the existence, validity, and scope of the parties’ arbitration agreement.  Thus, the choice of a seat of arbitration, in addition to determining the choice of substantive law and the law to be applied to the arbitration agreement, will determine the tools available to a party to enforce an arbitration agreement and the costs associated with dispute resolution.

When used to enforce an arbitration agreement, an antisuit injunction usually arises under the following scenario: Parties A and B enter into a contract that includes an agreement to settle any disputes in arbitration to be held in Country 1, which is often a neutral country.  Party B, either ignoring the arbitration agreement or contesting its validity, brings or threatens to bring a parallel proceeding in Country 2, which is likely to be Party B’s home jurisdiction.  In response, Party A petitions a court of Country 1 to enjoin Party B from continuing with its action in Country 2 on the basis of their arbitration agreement.  Country 1’s court may issue an antisuit injunction against Party B, meaning that the court will hold Party B in contempt if Party B continues its Country 2 action.  If Party B ignores the injunction, it puts any assets or future business prospects that it may have in Country 1 at risk.

Technically, a court does not direct an antisuit injunction to a foreign court.  The effect of an antisuit injunction to enforce an arbitration agreement is to encourage the party that brings a parallel action in violation of the arbitration agreement to submit to arbitration and to save the party seeking the injunction the costs of litigating that parallel action.  The availability of an antisuit injunction can reassure parties whose agreement contains an arbitration clause that their disputes will likely stay in arbitration and not devolve into a multijurisdictional litigation nightmare.  If a party can bring a parallel action in violation of an arbitration agreement with impunity, the most frequently cited advantages of arbitration—namely confidentiality, neutrality of the arbitral tribunal, choice of procedure, and the ability to enforce an arbitral award worldwide—suddenly evaporate.

Civil-law jurisdictions have historically viewed antisuit injunctions as a violation of international comity and interference with a foreign court’s jurisdiction.  Common-law jurisdictions typically consider antisuit injunctions to be acceptable if certain criteria are met.  Following the common-law tradition, U.S. federal courts are willing, to varying degrees depending on the circuit, to issue antisuit injunctions to enforce arbitration agreements.  In this Editorial, after a brief discussion of West Tankers, I point to recent U.S. case law that demonstrates the lamentable lack of clear criteria by which a court can determine whether to grant such an injunction.  I then argue that it may be wise for a discernable group of parties, in light of the West Tankers decision, to choose a U.S. location as the seat of arbitration in the event of a dispute.

I.
West Tankers

A.     The House of Lords’ Defense of Antisuit Relief to Enforce Arbitration Agreements

Confronting the question of the compatibility of antisuit injunctions to enforce arbitration agreements with the Brussels Regulation,³ the House of Lords, rather than deciding the issue itself, referred the question to the ECJ.  In the House of Lords’ opinion, after acknowledging the ECJ’s demonstrated scorn for any measure taken by a court of a member state that has the effect of limiting the jurisdiction of another member state, Lord Leonard Hoffmann attempted to use the ECJ’s own jurisprudence to carve out an exception for antisuit injunctions to enforce arbitration agreements.  He drew upon the doctrine of Kompetenz-Kompetenz, arguing that member states should trust arbitrators and the court exercising supervisory jurisdiction to determine whether an arbitration agreement is binding and, if so, whether a given dispute falls under that arbitration agreement.  He also noted that the Brussels Regulation specifically excludes arbitration from its sphere of application.

Perhaps more interesting than the legal aspects of his argument, however, was Lord Hoffmann’s practical appeal regarding the utility of antisuit relief in the realm of arbitration.  In his view, such injunctions serve “as an important and valuable weapon . . .[,] promot[ing] legal certainty and reduc[ing] the possibility of conflict between the arbitration award and the judgment of a national court.”⁴ London—and by extension, Europe—could lose its attractiveness as a seat for international commercial arbitration if the ECJ lost sight of the fact that “[t]he courts are there to serve the business community rather than the other way round.”⁵ Specifically, Lord Hoffmann pointed to New York, Bermuda, and Singapore as jurisdictions willing to issue antisuit injunctions in support of arbitration agreements and worried that Europe would “handicap itself by denying its courts the right to exercise the same jurisdiction.”⁶

B.     The ECJ Decision

As is typical of ECJ jurisprudence, the Advocate General’s opinion, although it does not have the force of law, provides a clearer picture of the ECJ’s rationale than the ECJ decision itself.  The Advocate General stressed the importance of the concept of mutual trust among the courts of EU member states and insisted that member states’ courts be entitled to determine for themselves whether the Brussels Regulation’s arbitration exclusion is applicable.  This is in line with the civilian view that the fundamental subject matter of a dispute, rather than the existence of an arbitration agreement, determines the competence of a court.

In the final portion of the Advocate General’s opinion, she dismissed in a single sentence Lord Hoffmann’s concerns that Europe could lose a competitive edge if the ECJ were to prohibit antisuit injunctions to enforce arbitration agreements: “To begin with it must be stated that aims of a purely economic nature cannot justify infringements of Community law.”⁷ Attempting to lessen the harshness of the opinion, the Advocate General insisted that parallel litigation in a forum other than the seat of arbitration would only ensue if the parties disagreed as to the validity and scope of their arbitration agreement.  This makes light of the very real possibility that a party with superior resources to pay for a protracted legal battle in multiple forums might be inclined to bring parallel litigation simply to delay arbitration proceedings or obstruct a future enforcement attempt by the other party.  In the end, mutual trust and effet utile (effective judicial protection) won out over such worries.  The Advocate General did leave some consoling words for parties considering arbitration in an EU member state who now find themselves without recourse to an antisuit injunction to enforce an arbitration agreement: “If an arbitration clause is clearly formulated and not open to any doubt as to its validity, the national courts have no reason not to refer the parties to the arbitral body appointed in accordance with the New York Convention.”⁸ As any student of international commercial arbitration knows, this is easier said than done.

II.
The Availability of Antisuit Relief to Enforce Arbitration Agreements in U.S. Courts

In 2004, the Second Circuit decided the most recent significant appellate cases influencing the availability of antisuit injunctions to enforce arbitration agreements.  Judge Dennis Jacobs penned the opinions of both Paramedics Electromedicina Comercial, Ltda. v. GE Medical Systems Information Technologies, Inc.⁹ and LAIF X SPRL v. Axtel, S.A. de C.V.¹⁰ At first glance, the court appears to have employed differing standards in determining whether to issue an antisuit injunction to enforce an arbitration agreement.  In Paramedics, the Second Circuit, relying heavily on the federal policy in favor of arbitration, enjoined a party from continuing its parallel action in a Brazilian court.  In LAIF X, the same court gave much greater deference to comity concerns and rejected a party’s request for an antisuit injunction to stop a Mexican action from proceeding.  An examination of these cases and their progeny reveals that antisuit injunctions are certainly available as a remedy to enforce an arbitration agreement.  Unfortunately, parties interested in ensuring the availability of such relief may have trouble deciphering the formula required to do so.

Identifying some common threads in recent case law, however, creates a clearer picture of the current availability of antisuit relief to enforce an arbitration agreement.  The first is the vexatiousness of the parallel litigation that a party seeks to enjoin.  U.S. courts have shown little tolerance for parties that bring a parallel proceeding in violation of an arbitration agreement with the aim of delaying adjudication of a dispute or seeking preferential treatment in their home jurisdiction.  Another factor that enters into U.S. courts’ calculus in determining whether to issue an antisuit injunction to enforce an arbitration agreement is the substantive law of the parties’ agreement.  For example, if parties choose the law of New York State to govern their agreement and New York City as their seat of arbitration, a U.S. court is less likely to hesitate before issuing an antisuit injunction against a party that brings a parallel action in a foreign jurisdiction.  Comity concerns in this scenario are minimal, as the foreign court could hardly complain that a U.S. court was improperly applying U.S. law.

III.
Potential Beneficiaries of Antisuit Relief from U.S. Courts and How Parties Can Ensure Its Availability

A.     Potentially Interested Parties

As a result of the ECJ’s decision in West Tankers, a discernable class of parties would benefit from choosing a U.S. location rather than a European location as a seat of arbitration.  As a threshold matter, the contract in question must be commercial in nature and must not implicate any serious public policy.  Additionally, the parties must be in a financial position to participate in arbitration and litigation in either the United States or Europe.  Quite obviously, regional European parties with little or no experience in the United States will be loath to participate in arbitration or seek enforcement of an arbitral award in a U.S. city because options such as Geneva, London, or Paris are far more convenient.  The cost of participating in arbitration in the United States may well be prohibitive for such parties.  For multinational corporations with greater resources and experience hiring counsel on both sides of the Atlantic, such a problem would not be present.

For an antisuit injunction to have its intended effect, both parties must also have somewhat substantial and nonfungible assets in both the United States and Europe.  An antisuit injunction from a U.S. court will not necessarily persuade a party with no assets in the United States and no interest in developing business there to cease a parallel action in an EU member state.  Again, multinational corporations with significant operations in the United States and Europe will easily fulfill this requirement.

Parties that satisfy these threshold criteria would do well to consider the United States as a seat for arbitration largely for the same reasons that parties choose arbitration over public litigation in the first place.  Parties see the neutrality of arbitral tribunals as one of the main advantages of arbitration as compared to public litigation.  If parallel proceedings are brought in violation of an arbitration agreement in one party’s home jurisdiction, suddenly the other party faces exactly the risk that it sought to avoid by agreeing to arbitrate: the risk of bias.  A U.S. party engaged in arbitration with a non-U.S. party might conceivably benefit from such bias in seeking an antisuit injunction from a U.S. court, but this concern evaporates if neither of the parties involved is American.  In that situation, both the arbitral tribunal and the U.S. court entertaining a petition for antisuit relief would presumably be neutral.

B.     Maximizing the Availability of Antisuit Relief

After parties have determined that the availability of antisuit relief is important enough a factor to choose a U.S. city as the seat of their potential arbitration, what can they do to increase the likelihood that, should a dispute arise, a U.S. court will enjoin any attempt to bring parallel proceedings in violation of the arbitration agreement?  Unfortunately, as described in Part II, given the current state of the law regarding antisuit injunctions to enforce arbitration agreements, there is no guaranteed way to have access to antisuit injunctions.  Taking a lesson from the recent antisuit-relief jurisprudence in U.S. courts, however, parties are able to take some steps to increase the likelihood of access to antisuit relief.

Drafting an arbitration agreement is no simple task.  To ensure that arbitration takes place as the parties envision, parties must give serious consideration to drafting as airtight a clause as possible.  Under the New York Convention, the law of the seat of arbitration serves as the lex arbitri and partially governs the enforceability of an arbitral award.  Thus, if parties are explicit in choosing a location within the United States as their seat of arbitration, U.S. courts will not hesitate to apply U.S. lex arbitri and will entertain the possibility of antisuit relief.

Parties desiring the availability of antisuit injunctions from U.S. courts may also want to specify that U.S. law governs the arbitration agreement itself.  This precision will lessen the likelihood that U.S. courts will defer to other jurisdictions in determining the validity of an arbitration clause.  If parties choose another country’s law to govern their contract and choose a seat of arbitration within the United States without specifying that U.S. law shall govern the arbitration agreement, a court will likely apply the law governing the container contract to decide whether the arbitration clause is valid.  Moreover, a clause identifying the law governing the arbitration agreement will permit a court to regard an arbitration agreement purely as a contractual term and potentially reduce comity concerns.  Parties could go even further and specify in their arbitration agreement that any proceedings contesting the existence, validity, or scope of the arbitration agreement shall be held in the courts of the chosen seat of arbitration.  This language would render courts of other forums incapable of complaining that their jurisdiction had been usurped, unless a significant public policy issue was at stake.

Finally, if parties choose the law of a U.S. jurisdiction as the substantive law governing their contract, a U.S. court will be less likely to tolerate parallel proceedings brought in violation of an arbitration agreement.  With the law of a U.S. jurisdiction governing the agreement, the diminished relevance of a foreign jurisdiction’s input lessens comity concerns.  Obviously, many considerations enter into the fray when parties choose the substantive law that will govern performance of a contract.  However, parties identified in Part III.A with commercial contracts that do not implicate a specialized domain of law in which the United States is not as highly developed as another jurisdiction may not hesitate to choose, for example, New York law over the commercial law of a European jurisdiction.

Conclusion

Considering the attention that West Tankers has received, the bark of the ECJ decision may end up having more impact than its bite.  It is possible that the reputational costs that London may suffer as an arbitration venue will be larger than they should be.  Paradoxically, Lord Hoffmann’s plea to the ECJ to preserve the availability of antisuit injunctions to enforce arbitration agreements could actually do more harm than good to London’s status as an arbitration venue.  Lord Hoffman’s opinion gives arbitration counsel who argue that such equitable relief is important for parties wishing to avoid parallel litigation ammunition to convince their clients that the result of West Tankers makes London a less arbitration-friendly venue.  Thus, in the manner of a self-fulfilling prophecy, parties may choose jurisdictions that do offer antisuit relief not for substantive reasons, but simply because of Lord Hoffmann’s prediction that parties would do so if the ECJ disallowed such relief.

Despite the lack of a clear standard in U.S. courts for the issuance of an antisuit injunction to enforce an arbitration agreement, parties can expend the resources necessary at the outset of their contractual relationship to ensure that antisuit relief will be available by drafting their arbitration agreements carefully.  Presumably, if more parties choose to seat their arbitration in the United States as a result of West Tankers, U.S. courts will consider more petitions for antisuit relief.  Perhaps this will push courts, in the interest of judicial expediency, to adopt a clearer standard to which parties can refer when crafting their arbitration agreements.

Acknowledgments:

Copyright © 2010 Cornell Law Review.

Daniel Rainer is a 2011 J.D. candidate at Cornell Law School and a 2011 Master en Droit candidate at Université Paris 1 Panthéon-Sorbonne.

This Legal Workshop Editorial is based on the following Student Note: Daniel Rainer, The Impact of West Tankers on Parties’ Choice of a Seat of Arbitration, 95 CORNELL L. REV. 431 (2010).

The role habeas corpus is to play in redressing ineligibility violations remains a conspicuously open question.  That question, in turn, implicates some of the most fundamental disagreements over the Supreme Court’s authority over the writ’s function, as well as over the related “actual innocence” laws that often determine the outcome of federal habeas litigation.  Existing ineligibility rules derive largely from actual innocence law applicable to the more familiar concept of “crime innocence”—the idea that, colloquially speaking, the petitioner “wasn’t there, and didn’t do it.”  A death ineligibility challenge, by contrast, does not dispute that the offender committed the murder for which he was convicted; it disputes only the constitutionality of the capital sentence.

The contemporary habeas model’s arc is familiar to habeas scholars.  Modern habeas restrictions are largely responses to three developments during the Warren era: new Fourth, Fifth, and Sixth Amendment procedural rights; their application against states through the Fourteenth Amendment; and the vesting in state prisoners of a federal habeas remedy.  Habeas activity swelled as offenders went to federal court to relitigate procedural claims that they had lost in state proceedings.  Many of the newly cognizable claims had no bearing on the guilt or innocence of the defendant.  These developments provoked landmark critiques by Professor Paul Bator and Judge Henry Friendly, which argued that courts should curtail such litigation dramatically.  Both the Supreme Court and Congress gradually incorporated the ideas appearing in those critiques into habeas law.

Death ineligibility claims disrupt this established model of habeas adjudication.  They are not purely procedural challenges, but they are not challenges to a conviction’s validity.  The number of offenders in which a death ineligibility claim vests has increased dramatically and will only grow as the Court declares new categories of prisoners—probably those exhibiting some sort of diminished capacity—exempt from capital punishment.  In light of important distinctions between death ineligibility challenges and the claims upon which existing law is premised, the Supreme Court should reformulate habeas relief available to categories of offenders that may not be executed under the Eighth Amendment.

 
I.
Innocence in Habeas Law

The writ of habeas corpus is a civil, post-conviction remedy with roots dating back to fourteenth century English common law.  The United States Constitution forbids Congress from suspending the writ except during periods of invasion or rebellion.  Congress statutorily authorized federal courts to issue habeas relief to federal prisoners in 1789, and it made the writ available to state prisoners at the inception of Reconstruction.  Modern habeas rules are a creature of common, statutory, and constitutional law.  The most recent legislation is the Antiterrorism and Effective Death Penalty Act (“AEDPA”), which altered or enacted several key features of current habeas law.  Capital prisoners may use federal habeas proceedings to attack either a conviction or a sentence.

After Brown v. Allen (1953) established definitively that federal habeas jurisdiction included authority to hear challenges to procedurally sound state trials, Professor Paul Bator and Judge Henry Friendly produced landmark scholarship that has shaped the conservative position on habeas for a half-century.  Professor Bator emphasized the epistemic limits of human inquiry and argued that the criminal justice system ensures correctness by proxy of reliable procedure.  Judge Friendly’s central thesis was that innocence should be the touchstone of any decision to disrupt state criminal process.

“Actual innocence” claims appear in two analytic variants.  The first is as a “gateway claim,” which is asserted to overcome a procedural defect in a habeas petition.  Emboldened by theories that habeas relief should be reoriented towards innocence (Judge Friendly) and circumscribed by the epistemic limits of human inquiry (Professor Bator), the Court and Congress began to impose procedural obstacles to relief.  Restrictions apply to claims not properly presented to state courts (“defaulted claims”), claims presented in prior federal petitions (“successive claims”), claims that were not (but could have been) presented in prior federal petitions (“abusive claims”), and claims that do not comply with the federal statute of limitations (“untimely claims”).

Concurrently, the Court developed “gateways”—showings that overcome the procedural restrictions.  Although the gateways’ contents have largely converged, they originally derived from different authority and exhibited different formulations.  All of the gateway formulations, before they were narrowed, would have encompassed death ineligibility claims had such claims been cognizable at that time.

A freestanding innocence claim, the second analytic variant of an actual innocence challenge, alleges a prisoner’s innocence, but not an accompanying constitutional violation.  Whether a freestanding innocence claim is even cognizable on federal habeas review remains an open question.

Under the habeas statute, prisoners may obtain habeas relief only for constitutional violations, and the Court has wrestled with the question of which constitutional provision a freestanding crime innocence claim invokes.  If a freestanding innocence claim states a constitutional violation, then it is cognizable under the habeas statute.  The habeas statute, however, unambiguously imposes all sorts of remedial limits on meritorious claims.  The question of whether a federal court must grant relief naturally arises whenever a routine restriction on the remedy (such as the statute of limitations) is applied to a potentially meritorious innocence claim.

The Court has been unable to resolve whether freestanding crime innocence challenges assert claims that may be characterized as constitutional, having avoided the question in Herrera v. Collins (1993) and on at least three occasions in the last five years.  By contrast, ineligibility claims are anchored uncontroversially in the Eighth Amendment, and courts need not decide the issue of whether habeas review may be used to redress arguably non-constitutional claims.

 
II.
Death Ineligibility

Furman v. Georgia (1972) effectively invalidated almost all existing state capital sentencing schemes.  In the four years after Furman, at least thirty-five states passed new capital sentencing statutes, many of them bifurcating capital trials into guilt and punishment phases.  Every state that retains the death penalty now conducts a separate punishment phase.

Under post-Furman statutes, states will not impose death without proof of statutorily defined aggravating circumstances, and the first death ineligibility litigation grew out of these sentencing requirements.  In Sawyer v. Whitley (1992), the Supreme Court held that evidence offered to disprove the existence of statutory aggravators could satisfy the innocence gateway applicable to procedurally defaulted claims.

I refer to instances where an offender argues that he would not satisfy any statutory aggravators as “paradigm” ineligibility claims for two reasons: First, because Sawyer challenges were, until recently, the most common type of ineligibility claim.  Second, because they invite re-litigation of fact questions resolved by a jury and subject to evidentiary decay, they fit neatly within the familiar critiques of the Warren Court’s habeas jurisprudence.  Because a paradigm ineligibility inquiry is in many respects similar to that conducted for more familiar procedural and crime innocence claims, the controlling ineligibility law became a feature of actual innocence jurisprudence uneventfully.

For my purposes, the most important non-paradigm ineligibility claims are the following: a claim under Atkins v. Virginia (2002) that an offender may not be executed because he is mentally retarded, a claim under Ford v. Wainwright (1986) and Panetti v. Quarterman (2007) that he is not competent to be executed, and a claim under Roper v. Simmons (2005) that he may not be executed because he was a minor when he committed the offense.  Entertaining ineligibility claims does not compromise the traditional interests promoted by post-Bator/Friendly habeas law.

Professor Bator and Judge Friendly both questioned the prudence of allocating scarce institutional resources to redundant federal habeas inquiries.  Non-paradigm ineligibility claims are not well suited to these resource-based critiques.  First, many such challenges cannot be litigated at trial or on direct review.  Second, when the Court recognizes an ineligibility category, many qualifying offenders will already be on death row.  Third, there are structural reasons to believe a crucial assumption of Judge Friendly and Professor Bator—that state process is effective—simply does not hold in the death ineligibility context.  Fourth, most empirical data suggests that procedural bars do not diminish the amount of habeas litigation; all that happens is that courts divert resources to procedural questions.  Finally, choking off habeas review of ineligibility claims could require the Supreme Court to expend valuable resources avoiding unconstitutional executions by scrutinizing claims on its direct review of state collateral proceedings.

Both Professor Bator and Judge Friendly emphasize an interest in the offender’s rehabilitation.  Setting aside the powerful argument that incarceration does not promote rehabilitation generally, rehabilitation cannot logically be a penal objective of a death sentence because that sentence necessarily means the capital offender will not ever return to society.

Judge Friendly and Professor Bator both express concerns about evidence becoming stale over time.  The argument also makes sense for paradigm ineligibility claims, which usually require a court to consider the impact of lay witness testimony on statutory aggravators.  Non-paradigm ineligibility challenges, however, do not generally involve such decaying evidence.  Roper challenges allege that the offender was a juvenile, and the evidence does not degrade.  Atkins challenges assert mental retardation, a clinical diagnosis (perhaps more) easily made at the time of the habeas challenge.  Ford competency challenges seek relief that cannot be adjudicated at trial at all.  Moreover, in all of these contexts, relief does not require a new trial; it only requires a reduction to a life sentence.

 
III.
Failures of State Process

One of the central conceits of modern habeas law is the sufficiency of state process.  If state trials, post-conviction review, and clemency can ensure that states do not execute ineligible offenders, then one might argue that there is no need to worry about how federal habeas law affects these claimants.  Unfortunately, state process is unlikely to adequately protect such offenders’ rights.

First, trials are inherently incapable of protecting the rights of offenders with premature ineligibility claims, such as those involving an offender’s competence to be executed.  Second, the Supreme Court may not have yet recognized the relevant constitutional claim when the state court sentences an offender.  Third, the tests certain states apply to ineligibility claims deviate significantly from the clinical standards used in federal court.  Finally, there are local political pressures in state capital trials that are absent in a federal forum: state judges are generally either appointed by elected governors or are elected themselves, and, in many death penalty jurisdictions, rules against executing certain categories of offenders may be very unpopular.

After a defendant’s conviction becomes final, state prisoners must pursue state post-conviction remedies before seeking federal habeas relief.  Death ineligible offenders are often subject to systemic or idiosyncratic state procedural bars.  There is no federal right to a lawyer during state post-conviction review, which is notoriously complex.  Even if a prisoner does secure counsel, there is no mechanism to ensure that such representation is constitutionally adequate.  The federal statute of limitations is not tolled during the preparation of state post-conviction applications.  Moreover, familiar political pressures undermine post-conviction adjudication.

The most frequently invoked argument for the sufficiency of state corrective process involves the availability of clemency.  Clemency authority includes the power to commute sentences, which is roughly the relief sought by ineligibility claimants.  The power usually vests in a governor, although in some states the governor shares this power with an executive-appointed administrative board.  Unlike judicial process, clemency lacks both formalized procedure and substantive standards.  The absence of red tape means that there are no procedural safeguards, and the lack of substantive standards means that clemency may be denied for any reason.  There is no judicial review of a clemency decision.  There are serious problems with the argument that clemency is a safety valve for failures in ineligibility adjudication.  Because clemency power vests either in a governor or in a board appointed thereby, the decision occurs in the most political climate imaginable.  The calculus necessarily involves a number of factors other than the merit of the constitutional claim: the lawyers’ political affiliations and ambitions, the status of the victim’s family, the proximity to a gubernatorial election, and the perception that a governor is too soft on crime.  Mentally ill and mentally retarded offenders fare particularly poorly in clemency proceedings.

 
IV.
Configuring Ineligibility Doctrine

The salient ineligibility question involves how courts and Congress may limit habeas as a remedy for state violations.  Habeas law is, after all, replete with rules that frustrate relief for meritorious claims.  I submit that the Court is unlikely to actually constitutionalize entitlement to the habeas remedy for a variety of reasons beyond the scope of this shortened Editorial, but that it may nonetheless avoid unconstitutional executions by interpreting habeas rules in favor of ineligible claimants whose challenges appear in procedurally defective petitions.  The license to engage in such interpretation is well established, as the Court has historically ignored restrictive statutory wording and has emphasized its common law authority to shape the writ’s function.

Section 2244(b)(1) states that all successive claims shall be dismissed.  Section 2244(b)(2) provides for roughly similar treatment of abusive claims, but with an exception for clear and convincing proof that an offender is not guilty.  On first blush, AEDPA therefore appears to have eliminated relief for any successive claim and winnowed the abusive claim gateway down to a pure crime innocence inquiry.  In order to avoid the Suspension Clause and procedural due process issues, however, courts may nonetheless construe AEDPA to allow merits consideration of ineligibility claims in successive petitions.

The Supreme Court has a rich history of ignoring potentially restrictive wording when interpreting the habeas statute’s limits on abusive and successive claims.  For example, in 1966 Congress eliminated any statutory reference in § 2244(b) to “the ends of justice,” but Kuhlmann v. Wilson (1986) continued to apply that exception to successive claims.  Nor have federal courts been bashful about interpreting AEDPA’s facially severe limits in favor of petitioners.  Even the Supreme Court has highlighted the absurdity of applying § 2244(b) to a Ford claim in a prior petition that was dismissed as premature.

Section 2244(d)(1) specifies the “trigger dates” for the one-year limitations period on filing federal habeas petitions.  Section 2244(d)(2) tolls the limitations period during state post-conviction proceedings.  Whereas § 2244(b)’s successive petition limits have common law antecedents, the statute of limitations does not.  There is no statutory exception either for crime innocence or for death ineligibility.  Because Atkins has forced the issue, the ineligibility question is only now percolating in appeals courts.

Although the Supreme Court has never formally affirmed the idea, every appeals court to consider the issue has recognized that events not specified in the statute may equitably toll the statute of limitations—usually upon a showing of due diligence and extraordinary circumstances.  The circuits divide on the question of whether a showing of crime innocence equitably tolls the statute of limitations, with several suggesting that the rule applies in order to avert Suspension Clause problems.

In the death ineligibility context, questions of equitable tolling most frequently arise in connection with Atkins and Ford claims.  Several circuits equitably toll the statute of limitations once a prisoner shows that he is not competent to be executed, and others toll the statute only once the petitioner shows a causal connection between his mental condition and his failure to file a timely petition.  The result of such confused treatment in the appeals courts, and of particularly harsh treatment in the Fifth Circuit (which includes the Texas capital docket), is that many offenders with legitimate ineligibility challenges will not have the merits of their claims entertained in federal court.  Future litigants may persuade courts to apply equitable tolling to avoid Suspension Clause issues—perhaps automatically upon a colorable showing of ineligibility.  In Suspension Clause and equitable tolling jurisprudence, courts have the two concepts they would need to undertake constitutional avoidance: a constitutional provision that undermines a literalist statutory interpretation and a plausible alternative construction.

Our existing habeas corpus regime is largely informed by critiques of Warren era litigation, which are not well suited to ineligibility adjudication.  Under the prevailing habeas model, offenders with meritorious ineligibility claims may be executed because the petition containing their claim is procedurally defective.  By invoking the Suspension Clause, equitable principles, and the canon of constitutional avoidance, federal courts may nonetheless be able to avert state executions that the Eighth Amendment categorically forbids.

Acknowledgments:

Copyright © 2010 Cornell Law Review.

I would like to thank Susan Bandes, John Blevins, David Dow, Brandon Garrett, Jim Marcus, Stephen Schulhofer, David Shapiro, Jordan Steiker, Jared Tyler, and Larry Yackle for various forms of input during the drafting process. I would also like to thank participants in the NYU School of Law Lawyering Colloquium for their feedback on several versions of this manuscript. Finally, I am grateful to Mary Kathryn Martin and Kirstin O’Connor for their research assistance. In fairness to the reader, I should disclose that I represent or represented several of the mentally retarded claimants involved in eligibility cases discussed herein.

Lee Kovarsky is Acting Assistant Professor at New York University School of Law.

This Legal Workshop Editorial is based on the following Law Review Article: Lee Kovarsky, Death Ineligibility and Habeas Corpus, 95 CORNELL L. REV. 329 (2010).

Nina Olson, the National Taxpayer Advocate, recently noted the lack of guidance in this area and has suggested that “economic activities associated with virtual worlds may present an emerging area of [tax] noncompliance.”¹ Concerned with the lack of guidance afforded IRS agents and taxpayers alike and concerned that non-compliance in this context could lead to non-compliance elsewhere, she has urged the IRS to “help taxpayers comply with their tax obligations by quickly issuing guidance addressing how taxpayers should report economic activities in virtual worlds.”²

This Editorial examines one of the issues that must be addressed, and soon.  Regardless of what decision is ultimately made regarding the tax consequences of in-world transactions, tax authorities must deal with the question of basis and how to trace it through virtual spaces.  The walls between virtual worlds and the real world are crumbling, and people can now cash out either licitly or illicitly with little difficulty.  Without a basis tracking system, someone who sells a virtual item for cash, an act that is undisputedly subject to tax, will not be able to determine gain or loss and therefore will be unable to comply with his tax obligations.  If the authorities move to tax in-world transactions, the need to determine basis becomes even more important as a substantially larger number of transactions involving virtual items will have real-world tax consequences.

It may be tempting to think that this issue is just a tempest in a teapot and not something on which the IRS should spend its limited resources.  However, the real-world market for virtual goods is large and growing as existing worlds expand and new virtual worlds come on-line.  By one recent estimate, the Gross Domestic Product of all virtual worlds is somewhere between $7 and $12 billion dollars, with annual real-world sales of virtual goods (e.g., taxable sales of virtual goods for real-world currency) estimated to be around $1.8 billion.  While once the domain of gamers, virtual worlds now attract wide variety of participants.  Numerous real-world businesses have established presences in virtual worlds, including Nike, Nissan, and IBM.  Politicians have also set up shop on-line.  If the past is any guide, more and more real-world activity will take place in these fora.  Given the increasing popularity and variety of virtual worlds, the need to clarify how the tax laws apply to virtual worlds will only increase.  It seems better to address these issues now, and in an administrative setting, than to wait until conflicts arise and the law is left to develop in the courts in the context of specific fact patterns that may not reflect or highlight larger issues at play.

In addition to solving a problem faced by those who cash out their virtual wealth, addressing basis in this new context affords us the opportunity to think broadly about basis, the role it plays in our tax system, and the myriad and often inconsistent ways we account for it in our tax laws.  In particular, the opportunity to develop rules for this new context may shed light on the propriety of our existing rules and inspire us to undertake the effort to rationalize those rules.

Any basis recovery system must do two things.  First, it must track previously taxed dollars such that any tax gain or loss matches economic gain or loss.  Second, it must take into account administrative difficulties, such as determining basis ab initio, keeping track of fungible assets with different bases, and accounting for the possibility of numerous tax-free exchanges.  These two concerns provide significant leeway to those who design the rules as can be seen by considering the variety of different basis tracking methods found in the Internal Revenue Code (Code or I.R.C.).  Indeed, the Code and Treasury regulations contain a number of different basis recovery rules that could be models for the recovery of basis in virtual goods.

Generally, the basis recovery models found in the Code follow one of two approaches.  The first, which I will call the tracing approach, grants each item its own basis and determines gain or loss property by property.  In the event of tax-free exchanges, basis is simply transferred from one asset to the next to preserve gain or loss until a taxable transaction occurs.  The key issue under this approach is whether taxpayers may designate which assets are sold or exchanged for other assets or whether some forced ordering rule applies.  Examples of this approach include the rules governing stock sales, tax-free reorganizations under I.R.C. § 368, and inventory accounting.  A simple example may help illustrate.  Assume a taxpayer owns 1 share of stock in Intel and 1 share of stock in Sun Microsystems, each worth $500.  He has a $300 built-in gain in the Intel stock and a $200 built-in loss in the Sun stock.  The taxpayer’s net economic position is a $100 gain.  However, under the tracing approach, each share must be considered separately.  The taxpayer may select which share to sell or hold, causing his tax gains or losses to deviate from his economic gains or losses.  If he exchanges the Intel stock for a share of equal value in some other company in a tax-free exchange, his basis in the Intel share will transfer to the new share, preserving his gain for taxation at a later date.

The second approach, which I will call the pooling approach, pools basis in a number of assets and allocates it back across those assets based on their relative fair market value.  Examples of this approach include the rules that apply to partnership interests, mutual fund shares, if the taxpayer so elects, and corporate formations under I.R.C. § 351.  Thus, a taxpayer who purchases interests in a partnership at different times and for different prices must average his basis.  For instance, if a taxpayer purchases a 1% interest for $100 and second 1% interest for $200, his total basis is $300.  If he later sells one of his interests, regardless of which one he sells, he must allocate to it half of his basis, or $150.  As a result, he will recognize gain or loss for tax purposes in proportion to his total economic gain or loss on the investment.

From a theoretical perspective, the tracing approach makes sense for non-fungible property.  Each item of property is separate and should therefore retain its own basis.  Transferring basis from one asset to another seems wrong as do rules that would force taxpayers to hold or sell certain assets such that their economic and tax gains and losses more closely align.  Taxpayers should have the liberty to decide what to sell and what to retain.  In contrast, the pooling approach makes sense for fungible assets.  A taxpayer who sells half his interest in a business has reduced his position by half.  It should not matter which specific shares or partnership interests he has sold.  Affording each identical interest a different basis amount seems artificial, and it provides taxpayers with significant opportunities to manipulate their tax liabilities so that they deviate from their economic position.

Nonetheless, a review of the different models found in the Code and the circumstances in which they apply reveals that the models employed are not driven by theory.  For instance, the tracing approach is applied to fungible assets, such as a single class of stock in a company, while the pooling approach is applied to non-fungible assets, such as general and limited partnership interests.  Taxpayers are given an election for mutual funds.  In the corporate tax context, pooling is required for transactions covered under I.R.C. § 351 regardless of fungibility of the assets contributed to a corporation, while tracing is the norm for corporate reorganizations under I.R.C. § 368.  The different rules are organized around the different types of assets and transactions, as opposed to the nature of the assets.

Digging a little deeper, one sees that the rules are often a function of historical circumstance or accident.  For instance, the different treatment of stock and partnership interests, both of which represent ownership of a business, likely reflects the fact that stock has been historically represented by separately identifiable certificates, thus highlighting the separate nature of individual shares, while partnership interests were typically spelled out in contracts, obscuring the fact that such interests could readily be divided and separately identified.  In the case of fungible mutual funds shares, where taxpayers are permitted to choose whether to trace or average basis, the impetus for allowing averaging came not from any conclusion about the fungible nature of such shares, but rather from the perceived difficulties mutual fund companies would have in reporting basis under a tracing approach.

This review not only reveals the incoherent nature of the rules from a theoretical perspective and set of rules, but it also highlights the instrumental nature of those rules.  That is, they are not foreordained by some internal tax logic, but rather they are merely a tool that can be designed in any number of ways to carry out their purpose, i.e., avoiding double taxation of income or the receipt of a double benefit.  This affords a significant degree of freedom to policymakers designing a basis recovery system for the virtual context.

This freedom is a good thing because none of the models found in the Code will work very well when applied to virtual worlds.  First, consider a tracing approach.  If in-world transactions are tax-free, as is de facto currently the case, virtual world participants may engage in countless tax-free exchanges before ultimately cashing out.  Thus, under a tracing approach, it is necessary to track basis through these exchanges.  This could be quite difficult, depending on the number of exchanges at issue.  While tracing basis might also be difficult for a taxpayer who engaged in a number of real-world I.R.C. § 1031 exchanges before ultimately selling his property for cash, important differences exist between such a person and a virtual world participant.  The real-world taxpayer must be engaged in a trade or business or profit seeking activity to take advantage of I.R.C. § 1031.  He is likely dealing with items of significant value (necessary to justify the cost of § 1031 transaction), and he is also likely to be advised by professionals who can help him pay close attention to basis as he goes.  In contrast, a virtual-world participant will usually be dealing with items of small value and will likely not be advised by tax experts as he goes along.  In addition, he may solely be participating for entertainment.  Accordingly, his attention to tax attributes will likely not rise to the level of his real-world counterpart.

A second problem with the tracing approach arises with the use of virtual currency.  While virtual currency functions as a currency within a virtual world, for real-world tax purposes, it is property.  This means that different batches of currency may have different bases and different holding periods.  Such currency is generally pooled together in a participant’s account.  If a virtual world participant purchases a virtual item with such currency in a tax-free exchange, a tracing approach would require him to determine which currency was used so that the basis and holding period of the currency could be transferred to the item purchased.  It is not clear whether virtual worlds provide mechanisms for doing this.  Thus, participants would need to keep a separate set of records reflecting their contemporaneous decisions.  As many participants are there for entertainment and the dollar amounts are small, it is not at all clear that this will happen.  Put simply, the administrative difficulties associated with the tracing approach make it an unattractive model for virtual worlds.

Even if tracing were possible, it is unclear that the tracing approach is appropriate.  Currency is fungible, and permitting participants to designate which currency they use in-world to purchase items gives them significant opportunities to manipulate the rules, causing their tax results to deviate from their overall economic results.  For instance, a clever participant will purchase items he intends to use in-world with low-basis currency.  He will purchase items he intends to sell for money with high-basis currency, thus minimizing the amount of gain he will have to realize.  Requiring pooling here would avoid this possibility and likely be less complicated from an administrative perspective than allowing or requiring tracing.

Unfortunately, a pure pooling approach would not work particularly well in the virtual context either.  While virtual currency is fungible, virtual items are not.³ For a pooling regime to work, it must be possible to allocate back to each item some portion of the pooled basis.  This is easy where goods are fungible because each good has the same value and therefore gets the same amount of basis.  However, when goods have different values, they should receive different amounts of basis based on their relative fair market value to prevent creating artificial gains and losses.  For instance, if one were to pool the $90,000 basis of a house worth $90,000 with the $10,000 basis of a car worth $10,000, absent a rule requiring allocation proportional to fair market value, the house would get half the basis ($50,000), creating a huge gain, while the car would get the same amount of basis, creating a huge loss, even though the taxpayer has suffered neither gain nor loss.  Instead, the house should get 9/10 of the basis ($90,000), as it reflects 9/10 of the value.  The car should get 1/10, or $10,000.

Setting aside our predisposition to treat non-fungible assets separately, the pooling approach could work with non-fungible assets where liquid markets exist and it is possible to easily value a taxpayer’s property.  However, in virtual worlds, where value is sometimes difficult to determine, pooling presents as much of an administrative nightmare as does the tracing approach.

Given the wide variety of basis accounting rules found in the tax code, and the instrumental nature of such rules, I argue that policymakers should not feel constrained to follow any of the models used to date nor limit themselves to one of the two basic approaches.  As has been done in the case of tax-free corporate transactions, the tax writers should feel free to create a hybrid system, where some types of transactions require tracing and others require pooling.  However, unlike the corporate tax context, where the decision regarding when to use what approach is based on the type of transaction (contribution under § 351 or reorganization under § 368), I would propose that the choice of regime be made based on the nature of the items involved, i.e., whether the items are fungible.

To reflect the non-fungible nature of most virtual goods, I propose that their basis should be separately tracked and treated, as occurs in the real world.  If a taxpayer has a sword and a shield with different bases because they were purchased for different amounts, he should be allowed to decide which to hold and which to sell.  Gain or loss for each item should be determined separately.  If in-world exchanges are tax free, basis should transfer from one item to the next to preserve gain or loss.  Thus, someone who buys a sword for $50, trades it for a shield in-world in a tax-free exchange, and then sells the shield for $60 must report a $10 gain, as the sword’s basis is traced to the shield.  If in-world exchanges are taxed, the basis in any item received in an exchange should be its fair market value, consistent with the rule that applies to real-world barter exchanges.

In contrast, a taxpayer’s basis in virtual currency should be pooled and averaged, reflecting the fungible nature of such goods and the administrative difficulties associated with tracing basis from a commingled pool of currency to any item acquired with such currency.  An example might help.  Assume a taxpayer has 200 gold coins.  He purchased the first 100 for $100, giving him a $100 basis in the lot, or a $1 basis in each coin.  He earned the second 100 in-world and has paid no tax on them.  Accordingly, he has no basis in those coins.  His total basis remains $100.  If he purchases a sword for 50 gold coins and then sells it for $50, he must pay tax on his gains.  Under a tracing approach, he would be allowed to decide which coins he used to purchase the sword, and their basis would be allocated to the sword.  If he chose to uses coins with a $1 basis, he would report no gain or loss on the sale.  Under a pooling approach, the taxpayer has used ¼ of his coins.  Accordingly, ¼ of his basis in the coins ($25) transfers to the sword.  Thus, when he sells the sword, he must report a $25 gain.  Pooling the basis in currency will prevent taxpayers from unduly manipulating their tax liabilities and having tax results that differ significantly from their economic position.

 
Conclusion

The rise of virtual worlds and the basis issues they engender present tax policymakers with both challenges and opportunities.  The challenge is to create a basis accounting system that ensures the appropriate amount of tax is collected at the appropriate time while being administrable.  In this regard, tax writers must consider both the nature of the transactions involved and the attitudes of those engaged in them.  Virtual worlds are relatively new and not well established.  Onerous tax rules are likely to curtail their use just when they should probably be nurtured.  While no set of rules will be perfect, given the growth of these worlds, remaining silent is no longer an option.

The opportunities are many.  First, tax writers are not burdened by a legacy approach to basis recovery and are therefore free to write on a clean slate.  Second, virtual reality differs from reality in some very important respects that may alleviate some real-world administrative constraints.  For instance, all transactions in-world are electronic, meaning they are already recorded.  It may be possible to add a basis-tracking feature to automate the process.  Similarly, virtual items could be encoded with a basis counter, allowing basis to be tracked within the items themselves and possibly transferred automatically in tax-free exchanges.  Authorities should consider carefully the nature of virtual worlds when designing the rules, as they may have greater liberty in this regard as well.

Finally, this exercise affords us the opportunity to re-examine the basis rules found elsewhere in the Code and regulations.  Those rules currently reflect historical accident and are therefore somewhat incoherent.  Focusing on basis in this new context may give us the impetus to re-examine the different treatment of stock, mutual funds, and partnership interests, among others, and perhaps attempt to rationalize and harmonize those rules around some central theory.

Acknowledgments:

Copyright © 2010 Cornell Law Review.

Adam Chodorow is a Professor of Law at the Sandra Day O’Connor College of Law at Arizona State University, Tempe, Arizona.

This Legal Workshop Editorial is based on the following Law Review Article: Adam Chodorow, Tracing Basis Through Virtual Spaces, 95 CORNELL L. REV. 283 (2010).

There are no easy solutions to these conflicting interests, and courts have disagreed over whether employer and housing sanctions are valid.  The federal statutory provision that preempts local ordinances regulating employment of unauthorized workers creates an exemption for “licensing and similar laws” in a savings clause.  To define “licensing and similar laws,” courts have nothing to turn to but an ambiguous legislative history.  In addition to disputing the proper scope of the savings clause, courts and litigants have disputed the ways in which a local ordinance might conflict with federal immigration laws and policies.  Courts (so far) have responded by using the preemption doctrine to reach a desired result rather than conducting a principle-based analysis of the validity of local laws that impose a licensing penalty on employers of unauthorized workers.

In this Editorial, I argue that courts should adopt a uniform framework for analyzing local employer sanctions and housing laws that focuses on whether the laws conflict with or would undermine federal immigration policy.  Courts should resist the temptation to announce an overly broad preemption doctrine that would undermine local governments’ ability to legislate in areas where they have strong interests.  Rather, courts should determine whether local ordinances upset the policies central to the 1986 legislation: enforcing immigration laws uniformly, preventing discrimination, and imposing only reasonable costs on businesses.

 
I.
Recent Municipal Ordinances

Several municipalities recently enacted ordinances that penalize employers who employ unauthorized workers and landlords who lease property to undocumented noncitizens.  Hazleton, Pennsylvania enacted one such ordinance, which contains provisions typical of most employer sanctions ordinances.  It provides that upon receipt of a written and signed complaint, a city agency will request identity information from an employer and suspend the license of any business that does not comply within three business days.  The city will then submit the documentation to the federal government to verify the worker’s immigration status.  A safe harbor provision provides immunity for businesses that verify a worker’s status using the Basic Pilot Program (now called E-Verify).

Municipalities have also enacted ordinances that penalize landlords for leasing a dwelling unit to undocumented immigrants.  Hazleton’s procedures regarding a landlord suspected of leasing property to an undocumented immigrant are similar to the employer sanctions procedures: any person may file a written complaint, a city agency will verify the tenant’s immigration status with the federal government, and the landlord will have five days to evict a tenant after notification of a violation.  If the landlord does not comply, the landlord faces a license suspension during which she may not collect rent from any tenants.

 
II.
Challenges to Local Employer Sanctions Laws

Congress may expressly forbid states from regulating a specified area of law.  Through federal immigration legislation, Congress has used this power to expressly preempt states and localities from imposing criminal and civil penalties on employers of unauthorized workers.  Congress can also impliedly preempt states and localities from legislating in a particular area.  The federal government’s intention to occupy an entire field of law can preempt any local legislation in that field, and a conflict between local and federal law and policy will also preempt local legislation.

 
A.     Express Preemption

When litigants challenge a local law as preempted by federal law, a court will look to see whether Congress has enacted a specific preemption provision and determine whether the local law falls within the area proscribed by that provision.   On this ground, a district court in the Middle District of Pennsylvania recently struck down a Hazleton, Pennsylvania ordinance barring the employment of unauthorized workers as unconstitutional in Lozano v.  City of Hazleton.² Hazleton’s Illegal Immigration Relief Act (“IIRA”) mandated license suspensions for businesses that employ “unlawful worker[s].”

The court held that Congress expressly preempted the Hazleton ordinance by enacting 8 U.S.C.  § 1324a(h)(2).  Hazleton unsuccessfully argued that it complied with federal requirements by sanctioning employers with a license suspension rather than a criminal or civil penalty.  The court rejected that argument because “[i]t would not make sense for Congress in limiting the state’s authority to allow states and municipalities the opportunity to provide the ultimate sanction, but no lesser penalty.”[3. Id. at 519.] The court relied on legislative history to establish the scope of the savings clause in § 1324a(h)(2): The savings clause permits states and municipalities to suspend business licenses only for violations of the Immigration Relief and Control Act (“IRCA”), not local regulations.

Less then a year after the Lozano decision, a district court in the Eastern District of Missouri considered a challenge to a Valley Park, Missouri ordinance similar to the Hazleton ordinance in Gray v.  City of Valley Park.³ The court considered whether the ordinance fell under the savings clause as a “licensing or similar law.”  The court found that the ordinance, on its face, looked like a licensing law: it provided for the issuance or denial of business permits.

In September 2008, the Ninth Circuit Court of Appeals became the first federal appellate court to weigh in on the issue of state and local regulations of the employment of unauthorized workers in Chicanos Por La Causa, Inc.  v.  Napolitano.⁴ In Chicanos Por La Causa, plaintiffs brought a facial challenge to the Legal Arizona Workers Act (“LAWA”), which—like the Hazleton and Valley Park ordinances—revoked the licenses of employers that hired unauthorized workers.  The appeal focused primarily on whether LAWA was a “licensing [or] similar law[]” under 8 U.S.C.  § 1324a(h)(2).  The Ninth Circuit held that LAWA was a “licensing law” under § 1324a(h)(2) and was therefore not expressly preempted.  The court reasoned that language in the legislative history—recognizing the states’ ability to “condition an employer’s ‘fitness to do business’ on hiring documented workers”—contradicted the plaintiffs’ reading requiring a federally adjudicated violation of IRCA to revoke a license.

 
B.     Field Preemption

A court may also strike down a local law if the subject matter inherently leaves no room for local regulation.  Using this field-preemption theory, the Lozano court held that the Hazleton IIRA was invalid.   Two factors controlled this outcome: (1) a strong federal interest in the field of immigration, and (2) the pervasiveness of federal regulations in the field of immigration.

The Gray court also considered whether field preemption barred an ordinance.  The court found that Congress did not intend to occupy completely the field of regulating employment of unauthorized workers.  The preemption provision in IRCA supported this finding because § 1324a(h)(2) permits local licensing regulations.

 
C.     Conflict Preemption

The Lozano court also held that the Hazleton IIRA was invalid under a conflict preemption theory.  The court noted that although IRCA and the Hazleton IIRA have a similar purpose—penalizing employers of unauthorized workers—they use different means to achieve that purpose.  While federal law requires employers to review a worker’s documents and use an I-9 Employment Eligibility Verification Form to establish worker eligibility, the Hazleton IIRA also requires the employer to present the worker’s documents to the local Code Enforcement Office, which determines the status of the worker by contacting the federal government.  The Hazleton IIRA also conflicts with IRCA by failing to contain an exception for casual domestic workers and independent contractors.  Moreover, the Hazleton IIRA mandates use of the Basic Pilot Program, while federal law makes use of the Program optional.  Finally, the timeframe for employers to respond to alleged violations also varied under the Hazleton IIRA and IRCA.   The court also found a conflict in how the United States and Hazleton balance the interests of preventing illegal employment and protecting the rights of businesses and workers.  The Hazleton IIRA places greater burdens on employers, in the interest of preventing illegal employment, than does IRCA.

The Gray court also considered a conflict preemption claim, but found no conflicts between the Valley Park ordinance and IRCA.  The court stated there was no conflict because Congress did not express an intention to forbid states from regulating the employment of domestic workers and independent contractors.  Further, the court rejected an argument that the procedures of the Valley Park ordinance and IRCA conflict.  A “tentative nonconfirmation” from the Basic Pilot program tolls the procedures of the ordinance and allows for the federal procedures to run their course.  Finally, the court found no conflict between the ordinance and IRCA concerning the use of the Basic Pilot program.  The court noted that although the federal government chose not to make participation mandatory, a locality may still provide for greater enforcement than the federal government.

The Ninth Circuit considered whether federal law impliedly preempted a requirement that employers use E-Verify.  The court held that this requirement “for which there is no substitute under development in either the state, federal, or private sectors, is not expressly or impliedly preempted by federal policy.”⁵ The court reasoned that Congress knew how to explicitly preempt state laws mandating use of E-Verify; however, it did not do so.  Moreover, Congress envisioned broader use of E-Verify and showed no intention to restrict its use.

 
III.
Challenges to Local Housing Sanctions Laws

Ordinances penalizing property owners who provide housing to undocumented immigrants have had less success in federal courts than the employer sanctions ordinances.  Federal courts in Pennsylvania and Texas have struck down housing sanctions ordinances as preempted by federal law.  Other communities have repealed housing ordinances when faced with expensive lawsuits and limited chances of success.

The Lozano court held that Hazleton’s ordinances penalizing landowners for leasing property to undocumented immigrants conflicted with federal law and were void.  First, the court found a conflict because although the federal government will allow certain categories of undocumented immigrants to remain in the United States, Hazleton’s ordinance would deny them access to housing.  Next, the court noted that changing immigration status is a complex procedure.  For example, an individual with a bona fide application for adjustment of status will often have no documents establishing a valid claim to remain in the country until the application is approved—perhaps years later.  The ordinances assume that the federal government seeks the removal of all undocumented migrants; however, federal immigration rules are much more complex and the use of E-Verify is insufficient to determine whether an alien should be removed.

A federal court in Texas has also invalidated a housing ordinance on preemption grounds in Villas at Parkside Partners v. City of Farmers Branch.⁶ Instead of resting its decision on conflict preemption, like Lozano, Villas at Parkside Partners held that federal law preempted the Farmers Branch ordinance because it was a regulation of immigration.  The Farmers Branch ordinance did not adopt federal immigration requirements, but rather used federal housing regulations to determine which noncitizens could rent housing.  Further, the court noted that the Farmers Branch ordinance required owners and property managers to determine the immigration status of potential tenants, an unlawful regulation of immigration.

 
IV.
Local Employer Sanctions Laws and Federal Immigration Policy

The federal government—with the enactment of IRCA—has signaled that the employment of unauthorized workers is a matter of national concern.  However, courts should be careful not to strike down every law touching on the subject of immigration because an overly expansive view of field preemption could result in localities losing the ability to regulate in areas where they have a strong interest.  In fact, Congress expressly allowed some room for local regulation, leaving it to the courts to define the boundaries of permissible regulation.  Courts should make clear that any employer licensing penalties should closely track federal law so as not to conflict with federal immigration policy by imposing broader liability or excessive burdens on businesses.

 
A.     Express Preemption Under IRCA

The express language of IRCA exempts local licensing regulations from the preemption provision without making clear the scope of this exemption.  Courts should interpret § 1324a(h)(2) to require a federally adjudicated violation of IRCA before a state or municipality may impose a licensing penalty.  The language of the statute and the legislative history have led to varying interpretations of what process IRCA requires before a state may revoke a business license.  The legislative history is vague and merely states that a locality may revoke licenses of a “person who has been found to have violated the sanctions provisions in this legislation,” making clear that there must be a violation of IRCA, as opposed to a local regulation, without defining what entity must find the violation.⁷ However, a court must interpret the savings clause in light of the entire regulatory scheme.  Allowing a local determination of whether an employer hired an unauthorized worker would be contrary to Congress’s creation of a uniform standard, in IRCA, for regulating the employment of unauthorized workers.  Further, businesses would have difficulties adjusting to the approach suggested in Gray: complying with thousands of potentially conflicting procedures for determining whether a worker is authorized.  Adjudication by a federal entity would comply with Congress’s goals of uniform enforcement and not overburdening businesses.

Courts should also interpret the savings clause of § 1324a(h)(2) to include fitness-to-do-business laws in addition to regular licensing laws.  Interpreting the savings clause using the plain meaning approach does not define the scope of the “similar laws” language.  After discussing Congress’s intent not to interfere with local licensing processes, the legislative history also states that the statute is also not intended to preempt fitness-to-do-business laws.  Furthermore, Congress has consistently expressed a policy preference against preempting state or local laws licensing businesses that supply labor.  Thus, because fitness-to-do-business and licensing laws are the only laws that Congress explicitly mentioned in the legislative history, courts should interpret the phrase “similar laws” to include the fitness-to-do-business laws.

 
B.     Field Preemption

Courts should not rely on field preemption to invalidate local employer sanctions laws.  The express language of IRCA’s preemption provision and its legislative history permit some room for states and municipalities to impose licensing penalties on employers who violate IRCA.  That is why the Lozano court had to go to great lengths to ignore the savings clause of § 1324a(h)(2), which permits some local regulation, in order to find that the Hazleton ordinance was invalid on the basis of field preemption.  In Gray, the court correctly dismissed the field preemption claim quickly by looking at Congress’s intent to permit some level of local regulation.

 
C.     Conflict Preemption

Courts should focus their preemption analysis on whether a challenged local employer sanctions law conflicts with the law and policies of the federal government.  The areas on which I propose courts focus their analysis have the potential to “‘stand[] as an obstacle to the accomplishment . . .  of the full purposes’” of federal immigration policy by preventing uniform enforcement of federal immigration law, overburdening businesses, and encouraging discrimination.⁸ If local governments draft a regulation that punishes businesses with a licensing penalty for employing illegal workers in a manner consistent with federal law, as outlined below, then courts should allow the local regulation to stand.

First, courts should consider whether the local law mandates use of an employment verification system that is inconsistent with federal law.  Federal law forbids the government from requiring most employers to participate in E-Verify.  Congress’s decision to continue to make participation in E-Verify voluntary reflects important and carefully considered policy decisions.  Most importantly, work-authorized employees still frequently receive tentative non-confirmations from E-Verify resulting in substantial costs.  Allowing states and localities to impose their own employee-status-verification procedures would impose a burden on businesses substantially exceeding Congress’s intentions.  Moreover, a patchwork system of potentially hundreds of different regulatory schemes would defeat Congress’s goal of uniform enforcement.  Given local governments’ limited resources, the federal government is in a better position than local governments to monitor the effectiveness of the E-Verify program and determine when to make it mandatory on a nationwide basis.

Second, courts should consider whether a local law applies to the same employment activities that Congress intended to regulate.  Regulations promulgated pursuant to IRCA exclude independent contractors and casual domestic workers from the definition of employee.  A local regulation that penalizes employers of independent contractors and casual domestic workers would impose a heavier burden on employers than Congress expressly intended to impose.

Third, courts should consider whether the procedures of a local regulation are compatible with the procedures of federal employer sanctions provisions.  Local regulations requiring an employer to discharge an employee before the required eight-day period has elapsed place employers in the precarious position of deciding which law to follow.  Local laws should make clear that employers relying on an E-Verify system may not terminate an employee until after a cure period pursuant to federal law, and courts should find that federal law preempts a local ordinance that does not explicitly follow federal procedures.

Fourth, courts should consider whether a local law upsets IRCA’s balance of employer sanctions and anti-discrimination provisions.  Congress, when enacting employer sanctions provisions, expressed concern about the potential for discrimination and stated that anti-discrimination provisions were essential to IRCA.  Municipal ordinances must provide proportionate safeguards against discrimination to avoid conflicting with federal law prohibiting discrimination.  If municipalities choose to impose licensing penalties following the procedures of § 1324a, they should also provide protections to minority employees comparable to those in § 1324b.

 
V.
Local Housing Sanctions Laws and Federal Immigration Policy

A court’s analysis of housing sanctions, like its analysis of employer sanctions, should focus on conflicts with federal law and policy.  As discussed above, courts should not rely on a field preemption theory to strike down local immigration ordinances: courts could only accomplish this with an overly expansive field definition that would result in localities losing the ability to regulate in a wide variety of areas in which they have a strong interest.

Courts should not rely on a regulation-of-immigration theory to preempt local housing laws.  This is a narrow test and an immigration regulation “is essentially a determination of who should or should not be admitted into the country, and the conditions under which a legal entrant may remain.”⁹ An overly expansive view of what constitutes immigration regulation could lead to the federal immigration power preempting a wide variety of local legislation.

Courts should rely on conflicts with federal law and policy to strike down local housing regulations.  First, courts should analyze whether a local housing ordinance would deny access to housing to immigrants who are lawfully in the United States.  Housing provisions that deny legal immigrants access to housing conflict with federal law because they place a “discriminatory burden[] upon the . . . residence of aliens lawfully within the United States.”¹⁰ Second, courts should analyze whether a housing ordinance conflicts with federal law by requiring state or local officials to determine a housing applicant’s immigration status.  Third, housing provisions conflict with federal law when they attempt to deny shelter to undocumented immigrants as a proxy for deportation—an exclusively federal power.  The effect of such an ordinance is to exclude undocumented immigrants from a community.

 
Conclusion

Courts have seen extensive litigation on the subject of local ordinances regulating the employment of unauthorized workers and reached contradictory results.  Courts should recognize that Congress expressed an intention to allow states and municipalities to enact licensing regulations and fitness-to-do-business laws that penalize employers found, by a federal adjudication, to have employed unauthorized workers.  Courts should not rely on the field preemption theory because Congress has explicitly left some room for local regulation.  Rather, courts should carefully inspect an ordinance and focus on whether it undermines federal immigration policy.  If states and localities craft legislation that conforms to federal laws and procedures, they may then choose to impose a licensing penalty in addition to the civil and criminal penalties imposed by IRCA.  Further, courts should strike down housing ordinances that conflict with the federal government’s exclusive authority to order deportation.

Acknowledgments:

I would like to thank the staff of the Cornell Law Review for their thoughtful suggestions, Professor Stephen Yale-Loehr for his comments on an earlier draft of this paper, and my family and friends for their constant support.

Copyright © 2010 Cornell Law Review.

Mark S. Grube is a 2010 J.D. Candidate at Cornell Law School.

This Legal Workshop Editorial is based on the following Student Note: Mark S. Grube, Note, Preemption of Local Regulations Beyond Lozano v. City of Hazleton: Reconciling Local Enforcement with Federal Immigration Policy, 95 CORNELL L. REV. 391 (2010).

Legal theory and, in particular, neoclassical law and economics will not be the same after the worst market collapse since the Great Depression, and the political engagement that resulted in the election of the nation’s first African-American President.  A quiet revolution is underway in the legal academy.  Indeed, one way of looking at a vast amount of seemingly unrelated scholarship over the past twenty years is to see that, in one way or another, it has sought to challenge the unrealistic assumptions of the neoclassical law and economics model.  We survey this scholarship under the mantle of a “new legal realism” and argue that much of it is a direct or indirect response to the “new formalism” of neoclassical law and economics.  New legal realists are not anti-economics (many of them are economists themselves), but they are challenging the new formalism’s assumptions about the individual, the state, and judging, as well as its approach to legal scholarship.

On the surface, neoclassical theory may appear to be the opposite of the old formalism, which advocated a “science” of doctrine based on common-law principles.  Neoclassical efficiency theory has touted instrumentalism rather than doctrinalism.  Oddly, however, the new formalism turns out, upon examination, to parallel the old in its form of deductive reasoning from axioms and the substantive policy prescriptions derived from it.  Neoclassical theory may talk about efficiency, but it ends up celebrating the common law.  It may claim to be a new science, but, like the old nineteenth century science of laissez-faire, it denigrates politics as the realm of special interests.

Perhaps it is not surprising then that, over the past eight years, new movements have arisen that characterize themselves as representative of a new legal realism.  Earlier articles have elaborated distinct versions of new legal realism in isolation.  We provide a taxonomy and overview of this literature in order to evaluate its commonalities and differences, facilitate mutual engagement among scholars, and build our own version of a “dynamic new legal realism.”

 
I.
Mapping New Legal Realism: Three Approaches

We categorize the new legal realism into three broad types.  First, there are behavioral approaches: studies that borrow from behavioral economics and political science to reach conclusions about law-as-behavior.  Second, there are contextual approaches: empirical work that includes studies using mixed methods involving bottom-up forms of empirical inquiry.  Third, there are institutional approaches: studies focusing on the power of institutions and institutional choices to determine our policies and shape our very ideas of self, society, and the state.

 
A.     The Behaviorists

There are two forms of what we call the “behavioral wing” of new legal realism.  One takes its inspiration from behavioral economics and the other, the attitudinal model in political science.  In 2001, Daniel Farber reviewed Cass Sunstein’s work on behavioral economics and proclaimed that studies challenging the rational-actor model were the new legal realism.² Farber argued that behavioral economists had successfully attacked the rational-choice models underlying neoclassical law-and-economics and public-choice theory by presenting a more realistic depiction of human behavior.

In a 1997 article, Frank Cross urged that a “new legal realism” take account of the “attitudinal model” of political scientists, which, in its more extreme variant, holds that legal reasons are irrelevant and that judicial decisions can be predicted based on ideological variables and political affiliations.³ This work, which forms part of the new empirical-legal-studies movement, has spurred a flurry of studies that find ideological bias across subject areas of judicial decision making.⁴ By 2008, Thomas Miles and Cass Sunstein dubbed such studies the cutting edge of new legal realism.⁵

 
B.     The Contextualists

Stewart Macaulay has deployed the term “law in action” to capture Wisconsin’s variety of new legal realism.⁶ Statistical studies are not enough for this version of new legal realism and are often complemented or replaced by sociological and anthropological approaches to law.  Macaulay’s canonical study of how businesspersons make bargains (largely in complete disregard of the law) is the starting but not the ending point of this model.  We call this work, for purposes of distinguishing it from other forms of empirical research, “action studies,” reflecting the subject of study—the law in action.

There are variations within the contextualist approach that reflect the variations in the law-and-society movement from which this version of new legal realism builds.⁷ Each of these variants uses different empirical tools to investigate behavior in social context.  Economists working in a contextualist vein, such as Ian Ayres, John Donohue, and Steven Levitt, deploy quantitative large-N studies and multivariate regressions.  Sociologists, such as Robert Nelson and Laura Beth Nielsen at the American Bar Foundation, use mixed qualitative and quantitative methods.  Legal historians, like Lawrence Friedman, Robert Gordon, and William Novak use qualitative and quantitative methods, as well as critical reflection.

 
C.     The Institutionalists

Building from different traditions in economics and sociology, a number of scholars have claimed that new legal realism should focus on institutional forces.  Neil Komesar has taken an important institutional turn for new legal realists, showing how social-goal choice alone is insufficient to inform law and policy decisions because the pursuit of all goals will be shaped and determined by institutional processes.⁸ Working in this vein, Ed Rubin advocates a microanalysis of institutions,⁹ an approach that is not limited to public institutions, but includes studies of private organizations, building on neo-institutional insights from sociology.¹⁰

“New governance” theory of law, coming out of Columbia Law School in particular, focuses on efforts to move beyond a court-centric and rights-focused basis of law and toward new forms of problem solving involving pragmatic institutional experimentation.¹¹ New-governance theory emphasizes the importance of innovation, learning, and flexible adaptation in light of experience.  Finally, other new legal realists have attacked the root image of the autonomous individual, not on the grounds of potential irrationality, but on the grounds of interdependence.  This approach has its roots in critical theory and feminism.  For scholars such as Martha Fineman, institutions must respond to universal human vulnerability, and thus institutional responsibility becomes central to policy analysis.¹²

 
II.
Responses to the New Formalism in Neoclassical Law and Economics

One can understand neoclassical law and economics as a new version of formalism if by formalism we mean a theory of law based on rationally organized first principles deductively applied.  It sets forth coherent principles (efficiency and wealth maximization) that it attempts to apply descriptively and prescriptively to all areas of law.  Judge Posner recognized this formalist argumentative structure when he wrote that “[e]conomic analysis of law is a formalist edifice erected on a realist [i.e., instrumentalist] base.”¹³

Some have claimed that law and economics is a “realist” enterprise since it rejects formal, self-contained doctrinalism.  New realists, however, argue that neoclassical theory turns realism on its head.  They contend that neoclassical theory seeks hypothetical end-states-of-affairs (wealth or welfare maximization) deduced from simplified assumptions rather than real-life facts and institutional processes.  New realists acknowledge that the new formalism differs from the old because of its instrumentalist base, but they contend that the new formalism arrives at conclusions remarkably like the old doctrinal formalism of the late nineteenth century—an idealization of common law and market processes, and a distrust of political institutions and state regulation.

In our article, we go into much greater detail regarding the new legal realist challenge to law and economics theories of judging, the individual, politics, and the state, as well as its general approach to scholarship.  For our purposes here, we note that each of the varieties of new legal realism directly or indirectly challenges aspects of neoclassical law and economics’ reasoning.  Behavioral economists challenge neoclassical law and economics’ rational-actor model.  Attitudinalists challenge the neoclassical law-and-economics notion of the efficiency of judging in the name of wealth-maximization.  Contextualists and institutionalists challenge an economics that does not compare institutional alternatives and their relative imperfections, and that fails to recognize that individuals’ situations vary so that some are in privileged or dominant positions in relation to others.  Like the old legal realists, new legal realists take aim at the “status quo bias” of formalist reasoning, a bias once entrenched in Herbert Spencer’s “laissez-faire” philosophy and its libertarian ideal and, subsequently, Chicago-school neoclassical law and economics’ recast exposition of that same ideal.

 
III.
Conclusion: A Dynamic New Legal Realism for a New World Order

As an alternative to existing forms of new realism, we begin the effort to outline a “dynamic new realism,” building from what we consider to be the best of the new realism.  Our form of dynamic realism focuses on “mediating” theory, which aims self-consciously to theorize the bridge between the world and legal institutions.  Unlike the old realism, such a dynamic new realism stresses that law is important within its sphere, in part because legal institutions exert power—the power both of violence and of reason.  Theories that simply ignore law leave the field open to those who would manipulate the law to achieve not only bad ends, but also literally terrifying ones (even torture).  In this sense, realisms that tend to explain law in terms of other disciplines are profoundly “unrealistic” to the extent that they leave law no place to exert its influence for ill or good.  Law cannot be reduced simply to economics, political science, sociology, or anthropology.  Neither the attitudinal model nor behavioral economics, neither large-N quantitative studies nor fieldwork, is enough.  Why?  Because legal institutions have power, and that power may transform knowledge and preferences in ways that may make them completely unrecognizable to its authors.

We suggest five conceptual moves that should be associated with a new realism and that offer scholars tools to bring particular analytics to bear on existing problems.  The first notion is recursivity.  Borrowing from Terence Halliday, we stress that legal-reform efforts are dynamic and involve the recursive interaction between law and society.¹⁴ The second notion is the simultaneity of law and politics.  One of the great (and unfortunate) habits of an age in which everyone is a “realist” has been to tend to reduce law to politics.  Yet law and politics involve different institutional processes that interact simultaneously in real life.  Dynamic new realism attempts to capture this dualism by telling “double stories” of law and politics or “triple stories” of law, markets, and politics, rather than stories that reduce one to the others.  The third notion is emergent analytics, which is the idea that a dynamic realism takes its concepts from evidence-based empirical engagement with the world and not from disembodied theory.

Fourth, functionalism is no longer enough.  We cannot simply posit values and expect them to be realized, just as legal scholarship cannot be reduced to other disciplines’ methods.  Unlike the old realists’ functionalism, dynamic new realism looks for concepts of “mediation” and “participation”—concepts that describe the ways in which law’s purposes are thwarted, amplified, condensed, or switched once translated into the world.  We should examine functions and ends in terms of how participatory structures of human interaction divert them.  Thus, the concepts of participation and accountability become central.  Fifth, and perhaps most importantly, borrowing from Dean Hanoch Dagan, we believe that law’s constitutive tensions between “power and reason, science and craft, tradition and progress” must be embraced not as a cause of a fundamental essentialist contradiction or defeat, but as productive and positive contradictions, reflecting a progressive struggle and dialogue about our deepest value commitments (as against value relativism, skepticism, and nihilism).¹⁵

New legal movements do not arise in the abstract.  They resonate if they fit a particular political moment in light of their confrontation with a dominant theory and practice.  Old legal realists played this role in the 1930s.  So, in our view, will the new-legal-realist movement today.  Dynamic new realism seeks an understanding of how law, like other institutions, reciprocally responds to and shapes individual preferences and political behavior.  If this dynamic new realism is taken seriously, we anticipate that new forms of analysis will emerge that will reconstruct law’s concepts to focus less on the individual preferences and more on how institutions shape and redirect those preferences, less on functional ideas and more on participatory institutional forms, less on idealized end-states of affairs or values and more on recursive interactions between ends and institutions, less on an imagined state in which we live, alone, on islands counting our preferences, and more on our shared human vulnerability.

Acknowledgments:

Copyright © 2010 Cornell Law Review.

Victoria Nourse is the Burrus-Bascom Professor of Law at UW Madison Law School and is currently a Visiting Professor of Law at Georgetown University Law Center.
Gregory Shaffer is the Melvin C. Steen Professor of Law at the University of Minnesota Law School.

This Legal Workshop Editorial is based on the following Article: Victoria Nourse & Gregory Shaffer, Varieties of New Legal Realism: Can a New World Order Prompt a New Legal Theory?, 95 CORNELL L. REV. 61 (2010).

Addressing such questions, whether in environmental law or in some other area, is not just academic rumination.  Classification is inherent and fundamental to the operation of law.  Justice requires consistency, and legal classifications enable consistency by designating categories of similar situations to which a common set of principles apply.  The category into which one assigns a situation thus may determine how the law applies to the situation.  The law works through categories, and one of the more important types of categories employed in the law is the legal field.  We designate legal fields—environmental law, labor law, criminal law—on the premise that those designations identify something important about how the law operates.

Thinking about what it means to designate a field of law and what is required for an area of law to be a legal field therefore carries the promise of improving our understanding of how the law functions.  When we understand how the law functions, we are better able to identify situations in which the law does not promote our desired objectives and to posit alternative approaches that may be more effective.  Constructing an analytical framework that brings together an area of law as varied and complex as environmental law will not itself resolve the recurring conflicts and difficulties that stymie environmental lawmaking, but it may well expose those conflicts and difficulties in a new light and help to frame the decisions facing legislatures, agencies, and courts, thereby facilitating more effective lawmaking.

I.
What Makes an Area of Law a Legal Field?

A.     Legal Taxonomy and Legal Fields

We organize the law into distinct fields as a form of legal taxonomy, on the premise that such classification will facilitate an improved understanding of the law by identifying a pattern of characteristics associated with the field.  An organizational framework does the work of identifying such a pattern or patterns for a particular field.  The usefulness of the field varies depending on how well its pattern explains the various situations that the field encompasses.  This explanatory power, in turn, depends on several factors: (1) the extent to which situations that arise within the field exhibit a recognizable pattern; (2) the simplicity of the pattern; (3) the extent to which the pattern predominates within the field—that is, the extent to which characteristics exhibiting the pattern predominate over other characteristics that do not; (4) the extent to which a single pattern explains the various issues that arise within the field; and (5) the breadth of the field.

B.     The Allure, and Hazard, of Coherence

Taxonomy inevitably and inherently is, to some degree, a quest for coherence.  We employ taxonomy to identify a pattern that functionally coheres the field of study by adding some amount of logical order, consistency, and clarity.  An area of law’s coherence depends on, among other things, the extent to which it exhibits strong, recognizable patterns.  Several factors may influence the existence of such patterns: (1) an area of law is more likely to exhibit consistency if its factual patterns have a great deal of commonality; (2) areas of law in which a single value or interest has an influence are more likely to follow strong, recognizable patterns; and (3) centralized and well-coordinated lawmaking processes are more likely to produce law that follows a strong pattern, and thus areas in which law is created by such processes are more likely to exhibit strong, recognizable patterns.

Despite its benefits, coherence also has its disadvantages.  First and most important, seeking coherence can lead to imposing a framework that creates an appearance of coherence where coherence does not in fact exist.  An organizational framework that prioritizes coherence may do so at the cost of imprecisely and inaccurately characterizing the field by ignoring complexity and variation.  Second, chasing coherence discourages experimentation in lawmaking.  Coherent accounts of the law can become deterministic, helping to perpetuate the patterns they identify by obscuring and discouraging opportunities to depart from those identified patterns.  Third, attempting to create coherence through internal logic in the law may well be ineffectual.  Incoherence arises from a lack of consensus about how to approach a legal problem.  As long as a consensus is lacking, lawmaking institutions are unlikely to be able to force coherence, but instead may merely push incoherence into other areas.

The drawbacks of allowing some incoherence in a field, moreover, can easily be overstated.  Indeed, incoherence is itself worthy of study, and it is only by grouping materials together in a field that incoherence becomes identifiable and susceptible to studied examination.

C.     Dimensions of the Field

It is useful to conceptualize a legal field as the interaction among four underlying constitutive dimensions of the field: factual context, policy tradeoffs, values and interests, and legal doctrine.  Every area of the law operates within a factual context—a set of factual characteristics shared by situations that arise within the field.  These factual characteristics create certain policy tradeoffs, which dictate the range of options available to lawmaking institutions such as courts, legislatures, executive branch agencies, or the public.  The lawmaking institutions apply values and interests to choose among the available options dictated by the tradeoffs.  Legal doctrine—the law of the field—arises as the product of the lawmaking institutions’ choices among available options; that is, the application of values and interests to policy tradeoffs.  The following figure illustrates the relationship among the underlying constitutive dimensions—factual context, policy tradeoffs, values and interests, and legal doctrine:

Figure 1:  Conceptual Diagram of Generic Legal Field

Because the interplay among the underlying constitutive dimensions produces law, one can characterize an area of law by any or all of its underlying dimensions.  An ideal, complete analytical model of a legal field would identify interrelated patterns across all of the dimensions of the field.  Depending on the features of the area of law, however, this ideal may not be possible, and we may be limited to an incomplete model that addresses only those dimensions that exhibit recognizable patterns.

D.     Minimum Requirements

At a minimum, a legal field must exhibit two characteristics—commonality and distinctiveness—that may arise within any of the different underlying constitutive dimensions of the field: the factual context, the policy tradeoffs, the values and interests, or the legal doctrine.

A field of law must exhibit some degree of commonality, a characteristic or set of characteristics shared by the situations that arise within the area of law the field encompasses.  Commonalities establish patterns that cohere the field.

However useful in some respects it may be to conceptualize the law in terms of fields or categories, dividing the law generally into discrete fields risks obscuring larger principles or features that transcend the particular field.  For a legal field to be legitimate, therefore, the organizing features (patterns) common to the field must be distinct to the field.  Distinctiveness can arise directly from unique features of the field or from the unique interplay of otherwise non-unique features.

II.
Why Is Environmental Law a Legal Field?

Having set forth an approach to thinking about legal fields generally, we can apply that approach to explicate my proposed use-conflict framework for understanding environmental law.

A.     Factual Context

Environmental problems exhibit two core factual characteristics that, in combination, are both common and distinct to environmental law.

First, environmental problems involve a physical resource that is in important senses publicly rather than privately valued, owned, and/or controlled: for example, public lands, air, water, and wildlife.  The interrelationship among uses of these physical public resources, and the special difficulties with attempting to regulate conflicts among uses in the environmental context, lie at the heart of all problems that arise in environmental law.  Some of the difficulties with addressing use conflicts in environmental law are not distinct to the environmental context, but rather arise in many common-resource situations that require collective management.  But several characteristics of environmental public resources make them particularly difficult to manage or to regulate collectively.  The environment, in its many forms, is traditionally an unregulated public resource, often associated with long traditions and customs of relatively uninhibited exploitation and open access.  Environmental public resources often have extremely numerous, valuable, and varied uses, which increases the probability and intractability of conflicts among users and decreases the likelihood of effective collective action.  The numerousness of users and the often complex lines of causation that create interrelationships among uses mean that, when conflicts among uses arise, it can be exceedingly difficult or impossible for any user harmed by the conflict to trace her harm to any particular other user or beneficiary.  The same factors—numerous users and complex causation—make it relatively easy for users to ignore, or not to recognize, their causal role in affecting another use.  The objectives of regulating the environment are often difficult to evaluate because they are not valued either economically as the subject of traditional market transactions or politically as the subject of traditional individual rights.

Second, everything in the environment, including humans, is part of a pervasively interrelated ecological system.  Scholars sometimes refer to this pervasive interrelatedness as the First Law of Ecology.  The pervasive interrelatedness among elements of the environment makes the environment a highly complex system that often is exceedingly difficult to manage.  The complexity and pervasive interrelatedness of the environment, however, make it extremely difficult to decide which activities need regulation to what extent to achieve a desired balance.  Any particular impact on a use of a resource may arise from numerous, difficult-to-identify causal events.  Conversely, every event may contribute to numerous, difficult-to-identify impacts.  Pervasive interrelatedness thus contributes to the extraordinarily complex lines of causation that often characterize environmental problems.  It may be difficult or impossible to determine with any precision a particular action’s innumerable causes and effects that ripple throughout the environment.  Not surprisingly, unintended consequences are a recurring phenomenon in environmental law.

B.     Policy Tradeoffs

The factual context in which environmental law operates—physical public resources subject to numerous uses connected by an intricate web of pervasive interrelationships—creates certain key policy tradeoffs that frame lawmaking choices.  Thinking in terms of the various competing uses that one can make of environmental resources provides a promising analytical framework for studying environmental lawmaking that carries several advantages over alternative frameworks.

First, thinking of environmental lawmaking in terms of use conflicts helpfully highlights the fundamental difficulties of the environmental context.  For example, environmental lawmaking requires lawmaking institutions to resolve tradeoffs among conflicting uses (or combinations of uses), but the immense complexity of the interrelationships in the environment renders our understanding of the environment incomplete and makes the precise nature of those tradeoffs difficult to ascertain.

Second, unlike many frameworks that scholars have proposed for thinking about environmental law, a use-conflict framework does not assume any particular baseline by which to judge alternative legal arrangements.  Nor does a use-conflict framework favor any particular use of the environment as normatively superior.  Instead, a use-conflict framework provides a relatively value-neutral approach that facilitates a full comparison of alternatives.  As suits its objective as a descriptive framework, it does not favor any particular alternative, but rather provides a useful basis for evaluating alternatives by applying a normative framework, or even for evaluating alternative normative frameworks.

C.     Values and Interests

Tradeoffs are only part of lawmaking; equally important are the values and interests that lawmaking institutions bring to bear on the relevant tradeoffs to make decisions that produce law.  Although we could frame our description of the values and interests in environmental lawmaking in terms of abstract, general principles or goals such as environmental protection or distributional equity, a descriptive analysis framed with abstract, generalized values and interests illuminates little about how environmental lawmaking functions.  A descriptive analysis of the values and interests in environmental lawmaking begins to yield meaningful insights only when we frame values and interests specifically enough to tie them to conflicting use demands on environmental resources.

D.     Legal Doctrine

Commenters and scholars have bemoaned the incoherence of environmental law as a body of legal doctrine.  I agree with their observation that environmental law appears to lack a set of fundamental, unifying substantive principles that explain environmental law, but not necessarily their concern that this incoherence is a serious blemish on the field.

First, the incoherence of environmental law provides fertile material for investigation and analysis.  We have much to learn from environmental law’s incoherence, and incoherence can play a constructive role in the development of environmental law.  Incoherence reflects the ongoing struggles of environmental law—with differences over values, extreme scientific uncertainty, and a scale and complexity that severely taxes, and may even surpass, the abilities of human understanding; incoherence is a functional and productive reaction to the extreme difficulties environmental law confronts.

Second, although we cannot reduce the substance of environmental law doctrine to a few fundamental principles, this does not mean that environmental law lacks a conceptual core.  Organizational frameworks such as the one proposed in this Editorial, which focus on patterns in dimensions of environmental law other than legal doctrine, can provide a coherent understanding of environmental lawmaking.  We can represent the relationship among these patterns with a conceptual diagram of environmental law, just as we earlier represented a conceptual diagram of a generic legal field:

Figure 2:  Conceptual Diagram of Environmental Law

Conclusion

It is impossible to reduce environmental law to a set of fundamental unifying legal principles.  Rather, the dominant characteristic of environmental lawmaking has been ad hoc muddling through, and this is reflected in the complexity and diversity of environmental law doctrine.  But this apparent doctrinal incoherence does not mean that environmental law lacks a conceptual core or that it is not a legal field.  An area of law is a legal field if it exhibits patterns associated with common and distinctive features that predominate within the area to an extent that justifies studying the area as a distinct category of legal situations.  We can cohere an area of law into a field by employing an organizational framework to highlight the distinctive patterns associated with the field.

Applying this methodology to environmental law, environmental law as a legal field is best understood conceptually as a category of situations that involve physical public resources subject to numerous, pervasively interrelated uses.  Conflicts among these uses are inevitable and create tradeoffs.  These use-conflict tradeoffs define the choices facing environmental lawmaking institutions.

This use-conflict framework for environmental law is superior to other explanations of environmental law because it focuses on features that are common and distinctive to environmental law and that explain the fundamental difficulties of lawmaking in the environmental context.  It does so, moreover, with a relatively value-neutral approach.  Unlike explanations of environmental law that are tethered to environmentalism, market capitalism, or other ideological commitments, the use-conflict framework does not assume any particular baseline by which to judge alternative options and does not favor any particular use of the environment as normatively superior.  By thus adopting a relatively value-neutral approach, the use-conflict framework facilitates critical analysis of a full range of alternatives.

Acknowledgments:

Copyright © 2009 Cornell Law Review.

Todd S. Aagaard is Assistant Professor of Law at Villanova University School of Law.

This Legal Workshop Editorial is based on the following Law Review Article: Todd S. Aagaard, Environmental Law as a Legal Field: An Inquiry in Legal Taxonomy, 95 CORNELL L. REV. 221 (2010).

The precedential effect of Santos is unclear, but what is clear is that the law regarding money laundering is now in disarray.  Justice Scalia and Justice Stevens openly disagree about the precedent that the case sets down.  Justice Stevens’s holding rests on the narrowest ground and, under the rule of Marks v. United States, is therefore controlling.  He writes that he believes the meaning of the terms “proceeds” can vary based on the underlying predicate offense.  As Justice Scalia points out, however, Justice Stevens’s conclusion is inconsistent with the Court’s holding in Clark v. Martinez—that the meaning of a term in a statute cannot change with the statute’s application.  Even the dissenting opinion authored by Justice Alito voices discomfort with Justice Stevens’s view that the meaning of the term “proceeds” can alter based on the predicate offense.

The precedential effect of Santos is more complicated where the predicate offense for the money-laundering prosecution relates to drugs and organized crime.  Justice Stevens and the four dissenting justices all indicate that when the predicate offense for money laundering relates to drug trafficking or the operation of organized crime syndicates related to those sales, they would read “proceeds” as indicating receipts rather than profits.  Both Justice Stevens and Justice Alito agree that the legislative history of § 1956 clearly indicates that Congress intended a receipts definition for the term “proceeds” when the predicate offense relates to either drug trafficking or the activities of organized crime related to the sale of drugs.  Justice Alito points out that five justices agree on the stare decisis effect of the case.

The Money Laundering Control Act began as an integral portion of the Regan administration’s War on Drugs.  Money laundering is often referred to as the “life blood” of organized crime and drug trafficking.  These activities generate income largely in the form of cash, and to carry on these enterprises, criminals must find a way to convert their funds into legitimate sources of currency.  Criminal organizations have proved adept at creating a nearly infinite spectrum of complicated schemes designed to conceal the fruits of their illegal transactions.  The Bank Secrecy Act of 1970 (“BSA”) was the original legislation designed to deal with money laundering, and it established reporting requirements for certain transactions that amounted to more than $10,000.  Criminal organizations proved more than adept at evading the BSA’s requirements.  Congress designed the Money Laundering Control Act to stem the tide of money laundering by drug traffickers and organized crime and to be a powerful charge for federal prosecutors.  However, prosecutors implemented the Act and the Sentencing Guidelines for money laundering without a great deal of study or experience, and problems such as the “merger” issue and sentencing disparities discussed in Santos soon emerged.

Three disparate approaches to the Santos case appear to be emerging in the lower courts.  The first adopts Justice Scalia’s approach.  Several courts have read Santos to require “proceeds” to mean profits regardless of the predicate offense.  The second approach adopts  Justice Stevens’ reasoning and allows the meaning of  “proceeds” to vary with the underlying offense.  This approach has proved less popular as it is difficult to resolve its conflict with Martinez.  The third approach simply limits Santos’s holding to money-laundering offenses where the predicate offense is illegal gambling.  No approach has yet become dominant, and due to the number of predicate offenses for money laundering and the disparate approaches emerging among the lower courts, troubling fairness issues are likely to arise.

This Editorial argues that the best solution for the problem would be for Congress to rewrite the money-laundering statute to define explicitly the meaning of the term “proceeds,” to adopt explicitly a “receipts” definition, and to revise the Sentencing Guidelines for money laundering to correct the “merger” issue.  This approach would provide a single definition and therefore greater uniformity among the lower courts.  It also preserves much of the power of the charge for federal prosecutors, and it remains true to what five justices believe to be Congress’s overriding concern about money-laundering activity by drug traffickers and organized crime related to the sale of drugs.  An adjustment to the Sentencing Guidelines would also address the very real fairness concerns raised by Justice Scalia and Justice Stevens.

Acknowledgments:

Copyright © 2009 Cornell Law Review.

Evan Ennis Is a J.D. Candidate at Cornell Law School, Class of 2010.

This Legal Workshop Editorial is based on Mr. Ennis’s Student Note: Evan Ennis, Note, An Uncertain Precedent: United States v. Santos and the Possibility of a Legislative Remedy, 95 CORNELL L. REV. ___ (2009).

The Constitution establishes a hierarchical judicial system and thereby suggests that the Court has a “supreme” role in defining the content of federal law for the judiciary.  But the Court today is limited in its capacity to perform that function because it can review only a fraction of the lower federal and state court cases involving federal law.  I argue that the Court should therefore make the most of the cases it does hear by issuing broad decisions that govern a wide range of cases in the lower courts.  I call this approach “vertical maximalism.”  I use the term vertical maximalism to make clear that such broad decisions need not interfere with democratic processes; they could direct all lower courts to defer to the political branches (such as when the Supreme Court declares that economic regulations are subject only to rational basis scrutiny).  But the decisions should be broad and should provide guidance to lower courts.  When the Supreme Court instead issues a more narrow (“minimalist”) opinion, it leaves a great deal to be decided by lower courts in future cases, and thereby delegates its “supreme” law declaration function to its judicial inferiors.

Before I go into more depth about this structural argument, I should explain what I mean by “minimalism” and “vertical maximalism.”  Baze v. Rees¹—the recent lethal injection case—nicely illustrates Chief Justice Roberts’s preference for minimalism.  Baze involved a challenge to Kentucky’s lethal injection protocol.  The Chief Justice’s plurality opinion noted that thirty-six states currently use lethal injection as a method of execution, and that thirty of those states use the same basic three-drug combination as Kentucky.  But the plurality limited both its analysis and its holding to Kentucky.  The Baze decision upheld Kentucky’s protocol but failed to advise lower courts on how to adjudicate any other lethal injection challenge.  By contrast, the Court issued a far more maximal opinion in Kennedy v. Louisiana,² when it held that the death penalty may not be used to punish child rape.  The Court in that case articulated a broad doctrine prohibiting the death penalty for any crime against an individual whenever the victim’s life was spared.

Of course, the distinction between minimalism and vertical maximalism is a matter of degree, not of kind.  Neither method of opinion writing can be reduced to a single formula or precise definition.  Instead, each constitutes a general disposition toward issuing relatively narrow or relatively broad opinions.  Furthermore, these approaches to opinion writing do not commit the Court to specific rulings on the merits.  In a constitutional case, for example, a minimalist or a vertically maximal opinion might either uphold or invalidate government action.

But there is a fundamental distinction between these forms of opinion writing: the way in which they allocate decision-making responsibility among courts.  As Fred Schauer has explained, a broad judicial precedent tends to constrain future courts and thereby concentrate decision-making authority in the precedent-setting court.³ For example, the Court’s decision in Kennedy v. Louisiana governs any lower court case involving a crime against an individual; lower courts know that, in such cases, if the defendant spared the victim’s life, the death penalty is invalid.  By contrast, the plurality’s minimalist decision in Baze largely leaves it up to lower courts to determine the validity of lethal injection protocols in states other than Kentucky.  The Baze decision thus delegates considerable decision-making authority to lower courts.

Why should we be concerned about the allocation of decision-making responsibility between the Supreme Court and the lower federal and state courts?  The concern, in my view, stems from the structure of the Constitution.  Drawing upon Article III and the Supremacy Clause, I assert that the Constitution creates a hierarchical judiciary and gives the Court a “supreme” role in defining the content of federal law for the judiciary.  Although this definition of the Court’s role is contestable, this notion seems to have considerable support in our constitutional tradition.⁴ Indeed, the Court itself has declared that it has a “responsibility to say what a [federal] statute means” and that lower courts have a corresponding “duty . . . to respect [the Supreme Court's] understanding of the governing rule of law.”⁵

Notably, although many scholars appear to have accepted this hierarchical vision of the judiciary,⁶ they have not realized all of its implications.  A number of scholars have argued that the Court’s “supreme” status in the judicial hierarchy places limits on Congress’s power to regulate Supreme Court jurisdiction.  Scholars have also focused on what this hierarchical structure means for the lower courts, generally concluding that inferior federal and state courts have a constitutional duty to abide by Supreme Court precedents.

Scholars have not, however, considered that the Supreme Court may itself need to take action to preserve its “supreme” position in the judicial hierarchy.  That is the focus of my inquiry.  In our judicial system, the Court has few mechanisms at its disposal to communicate its views on federal law to the “subordinate” federal and state courts.  The Supreme Court has no authority to select, promote, or dismiss its judicial subordinates.  Inferior federal court judges enjoy the same life tenure and salary protections as Supreme Court Justices, and state court judges are subject to (and, thus, protected by) the selection and removal processes established by their respective states.

The constitutional structure appears to offer the Court only one mechanism to perform its “supreme” role in the judicial hierarchy: appellate review.  The Court can ensure its supremacy over the content of federal law by examining the legal determinations of subordinate courts.  Congress may, of course, make “exceptions” to the Supreme Court’s appellate jurisdiction.  But I bracket that issue for now.  For present purposes, I am interested in how the Court can use its appellate review authority to preserve its hierarchical status in those areas over which it has jurisdiction (as it currently has over most federal law).

The Supreme Court can exercise its appellate review power in essentially two ways.  First, it can engage in what I call “error correction”: reversing specific lower court decisions with which it disagrees.  Second, the Court can employ “precedent setting”: articulating legal rules in written opinions that will serve as precedents for lower courts in that case and future cases.  The Court may of course perform both functions in the same case.  But, for purposes of this analysis, it is useful to distinguish between these two basic forms of appellate review because they roughly correspond to minimalism and vertical maximalism.  When the Court issues a minimalist opinion, it engages in a kind of error correction.  Indeed, a minimalist opinion is designed to resolve only “the case at hand,”⁷ and thus to have little precedential impact in future cases.  By contrast, when the Court issues a vertically maximal opinion, it necessarily establishes a precedent for inferior courts to apply in future cases.

I do not claim that the constitutional structure, in the abstract, favors either error correction or precedent setting as a mode of appellate review.  I thus also do not claim that the Constitution inherently prefers either minimalism or vertical maximalism.  Instead, I assert that the Supreme Court should use the mode of appellate review that will most effectively preserve its hierarchical status, given the practical constraints on the judiciary in a given historical period.

At the Founding, error correction may have been the Court’s only effective means of performing its “supreme” constitutional role.  Although the Court held its first session in 1790, its opinions were not widely distributed until at least the 1830s.  As a result, the early Court could not simply issue written decisions and expect its precedents to be obeyed.

The early Court also had mandatory appellate jurisdiction and had the capacity to resolve every case that came before it on appeal.  During its first few decades, the Court never had more than a few hundred cases on its docket.  Indeed, one illustration of the Court’s low workload was its rule allowing unlimited time for oral argument; in Gibbons v. Ogden (1824),⁸ for example, the Court heard argument for twenty hours over five days.⁹ In that kind of an environment, the Court could effectively supervise the inferior federal and state courts by (at least in part) issuing narrow decisions that corrected errors in specific lower court rulings.

But the workload of the Supreme Court and that of the lower federal and state courts increased dramatically beginning in the late nineteenth and early twentieth centuries.  The docket pressures grew to the point that the Court no longer had the capacity to review every lower court decision that came before it on appeal.  As a result, in the early 1920s, Chief Justice William Howard Taft asked Congress for legislation to ease the burden on the Court.  Congress responded with the Judiciary Act of 1925, which substantially reduced the Court’s mandatory appellate docket and replaced it with discretionary review via writs of certiorari.  In 1988 (again, in response to requests from the Court), Congress further expanded the Court’s certiorari jurisdiction, so that it today encompasses virtually every case that the Court hears on appeal.

The 1925 and 1988 Judiciary Acts signaled a transformation in the Supreme Court’s role in the judicial hierarchy.  Both pieces of legislation were premised upon a view of the Court as “the head of the Judiciary of the Nation,”¹⁰ which should concentrate its limited resources not on correcting errors in specific lower court rulings, but instead on developing legal principles that would have a broader impact.  Thus, Chief Justice Taft (and others) insisted that the Court should hear a case only when “the principle involved is such that it is important to have a general exposition of it for the benefit of the lawyers, for the benefit of the inferior courts, and for the benefit of the public at large[.]“¹¹

The Supreme Court’s challenges in overseeing the lower federal and state courts have only increased in the two decades since the 1988 Judiciary Act.  The workload of the federal courts of appeals has doubled during that period from 30,000 cases per year to 60,000.  The number of requests for Supreme Court review has likewise risen dramatically.  The Court’s docket has grown from approximately 5000 cases in the 1980s to around 9000 today (while the Court grants review in fewer than 90 of those cases).  There have been calls in recent years for the Supreme Court to issue more opinions, and I endorse such proposals.  But, even if the Court decided 150 or 200 cases per year (as some have suggested), it could dispose of only a fraction of its 9000-case docket and could not possibly correct every error in lower court interpretations of federal law.

Chief Justice Roberts’s call for minimalism thus comes at a rather surprising time in the Supreme Court’s institutional history.  Minimalist decisions like Baze resolve only the case at hand and thus provide little guidance to lower courts in future cases.  And, unlike its predecessor in the early nineteenth century, the current Supreme Court lacks the capacity to provide the needed guidance on subsequent review.  Accordingly, when the current Court issues a minimalist opinion, it leaves much to be decided by the lower courts and thereby delegates its “supreme” law declaration function to its judicial inferiors.

For these reasons, I argue that minimalism is the wrong approach for the current Supreme Court.  The Court should instead aim to issue broad precedents that help clarify the law and provide guidance to lower courts in the many cases that it lacks the capacity to review.  In other words, to serve its constitutional role in this judicial hierarchy, the Court should adopt a presumption in favor of vertical maximalism.

Acknowledgments:

Copyright © 2009 Cornell Law Review.

Tara Leigh Grove is an Assistant Professor at Florida State University College of Law.

This Legal Workshop Editorial is based on the following full-length Article: Tara Leigh Grove, The Structural Case for Vertical Maximalism, 95 CORNELL L. REV. 1 (2009).

The identification of intense preferences is clearly crucial when a market for the relevant entitlement does not exist or when there is a significant risk of market failure.  In such cases, we cannot rest assured that voluntary transactions would eventually transfer goods to those who desire them most.  Identification is important, however, also in circumstances where functioning markets exist.  Rules directly addressing the needs of individuals with strong preferences can economize on transaction costs and increase the resultant efficiency gains, while simultaneously avoiding the market’s inherent bias against those unable to pay.

The detection of intense preferences is a difficult task.  For example, people asked to verbally state the strength of their preferences may lie in order to improve their position.  The Law-and-Economics literature has largely focused on a narrow, though important, aspect of this identification issue.  Much attention has been devoted to the case of owners’ subjectively high valuation of land, primarily in the context of compensation for takings.  It was proposed, for instance, that compensation be determined according to owners’ self-valuations (declared either in advance, before any conflict has arisen, or after the government considers expropriation of the property).  Such devices as basing property taxes on self-assessments and requiring future sale prices to at least equal self-declared values would achieve truthfulness.  Alternatively, owners selling their property below their former evaluation would have to pay the difference to the government or to their favored charity.  This literature can be characterized by three features: It requires case-by-case inquires, involves monetary payments, and employs sanctions to ensure people’s truthfulness.

This Article argues that the land-valuation problem is but a specific manifestation of a much broader concern.  The need to identify intense preferences may arise in all fields of law and with respect to all types of entitlement.  More importantly, additional and fundamentally different methods can be used to discover strong preferences.  For example, identifiers can be generalized rather than case-specific, thus dispensing with the need for ad-hoc examination of individual cases.  That is to say, we can generalize about circumstances in which intense preferences are likely to exist and incorporate the relevant proxies—such as use value, possession, or declining marginal utility—into the legal rules themselves.  Furthermore, identifiers may entail burdens in-kind rather than monetary costs, thereby reducing a bias in favor of the rich.  Thus, instead of detecting strong preferences via individuals’ willingness to pay, we may reveal them through their readiness to sacrifice time, effort, or honor.  Finally, identifiers may adopt non-penalizing—instead of penalizing—approaches.  Detection of intense preferences can sometimes be achieved without taxing the subjective, unique utility that people obtain from entitlements.  Individuals need not hand over some (or all) of this special value as proof that strong preferences indeed exist.

The goal of the Article is twofold.  First, it demonstrates how legal rules can, and do, employ generalized and non-penalizing (“GNP”) devices to identify intense preferences.  Second, it argues for the superiority of GNP identifiers over other identification methods.

The major feature of GNP identifiers is that they do not tax, neither in money nor in kind, the exceptional utility that some individuals derive from entitlements.  GNP devices are based on observations, experience, or studies of human nature and behavior.  They represent judgments about what most people would feel or prefer in certain scenarios.  This type of identifier has not received systematic theoretical treatment and has not been sufficiently utilized in practice.  Prime examples of non-penalizing proxies for strong preferences are the following:

• Use value vs. exchange value: Preferences regarding property are likely to be more intense when an individual holds the property for her own (and continuous) use than when she holds it for exchange or when she subsequently chooses to part with it, for instance, by sale. It is possible to locate circumstances in which use value exists and to protect owners against involuntary injury to this value.
• Possession: Possession is often a good proxy for intense preferences. Therefore, by limiting the exercise of certain rights to possessors, one assures that only people with strong preferences are entitled to use them.
• Declining marginal utility: According to this well-known economic rule, the amount of extra utility enjoyed from every additional unit of a good usually declines as a person consumes more of the good. Thus, when allocating goods between individuals, we may sometimes reasonably assume that the incremental utility from having the good would be larger for persons with fewer units of the good.
• Redemption: Rights of redemption detect strong preferences because they are rights that only, or mostly, people with intense preferences would use. The actual redemption of an asset both identifies the strong preference and fulfills it.
• Reasons: Requiring individuals to provide reasons for their preferences may help assess both the intensity and authenticity of the preferences.

The above identifiers of intense preferences can be found in diverse legal fields and contexts.  They constitute a hidden common denominator of such dissimilar rules as those governing rights of first refusal, takings compensation, damages in contract law, self-help remedies, adoption, bankruptcy exemptions, secured transactions, and conscientious objection.  Current law has not exhausted the potential for crafting GNP identifiers, and additional rules of this kind can be adopted.  The full-length article in the Cornell Law Review offers various examples of such desirable new rules.

This Article further argues that GNP identifiers have various advantages that other techniques for detecting strong preferences lack, either wholly or in part.  The Article compares GNP devices with four alternative methods, all of which are used in practice:

• “Mouth“: Preference-intensity is revealed through people’s verbal statements alone, as in public opinion polls, contingent valuation questionnaires, and quality-adjusted life year surveys.
• “Mouth & Purse“: Strong preferences are identified through verbal statements backed up by monetary sanctions, as employed in self-assessment mechanisms for land valuation.
• “Generalized and Penalizing“: Generalizations regarding cases of strong preferences that utilize people’s readiness to bear in-kind sanctions. For instance, a strong preference for receiving welfare benefits can be conditioned on willingness to go through a grueling and humiliating bureaucratic process.
• “Case-Specific and Penalizing“: Case-by-case detection of intense preferences through individuals’ willingness to incur non-monetary burdens. A prime example is logrolling or vote trading, which identifies strong preferences on a certain issue by readiness to bear the cost of not realizing a weaker preference on another issue.

The Article demonstrates that the GNP technique is, overall, the superior identification method since it is the only one that scores highly on all six parameters of evaluation.  GNP identifiers treat people with dignity and respect and are in no way insulting or humiliating.  They afford equal treatment to individuals’ preferences by not imposing heavier burdens on people with intense preferences (vertical equity) and by treating all individuals with strong preferences equally (horizontal equity).  Furthermore, GNP identifiers are not biased in favor of more affluent people and also reduce the risk of lies.  Finally, the GNP method entails relatively low administrative costs and is capable of dealing with objectionable preference-intensities (such as excessively high intensities of preferences).  The other four methods fail on more than one of these grounds.

For all these reasons, the role played by GNP identifiers should be expanded by the law and rules utilizing them should be adopted whenever possible.  Generalized and Non-Penalizing identifiers are feasible, for example, whenever one can generalize that a certain proxy-such as use value, possession, declining marginal utility or redemption—succeeds in capturing cases in which systematically high preference—intensities are likely to exit.  GNP devices are especially suitable when all one needs is an affirmation that an intense preference exists, or a relatively “rough” comparison between stronger and weaker preferences, rather than an exact quantification of the preferences’ strength.  This may explain why “Mouth & Purse” techniques have been suggested in the literature with respect to compensation for takings of land.  In compensation scenarios, we ideally seek the “magic number,” which represents the individual’s true valuation of an asset or the precise extent of her losses.  Nevertheless, GNP identifiers—which compensate landowners with high subjective valuation by granting them some fixed percentage (e.g., 50%) above market price—may be superior even in this context.  The relative crudeness of such a compensation formula is offset by the many advantages of GNP devices.  Moreover, the significant shortcomings of penalizing identifiers have been ignored or downplayed, while the impressive advantages of GNP identifiers have been overlooked in the theoretical literature.  We should therefore create additional rules that utilize GNP techniques.  In closing, the Article demonstrates that the GNP method’s value is not limited to the detection of high intensity preferences, but can also apply to low intensity preferences.  Proxies for exceptionally low valuation of entitlements can also be incorporated into legal rules.  A good example is the proxy of “non-use,” which is a reliable identifier of weak preferences with respect to trademarks, rent-controlled housing, and servitudes.

Acknowledgments:

Copyright © 2009 Cornel Law Review.

Daphna Lewinsohn-Zamir is Louis Marshall Professor of Environmental Law at Hebrew University of Jerusalem.

Special thanks to Greg Alexander, Hanoch Dagan, Lee Fennell, Robert Ellickson, Amnon Lehavi, Barak Medina, Gideon Parchomovsky, Ariel Porat, Stephanie Stern, Joseph Singer, Doron Teichman, Eyal Zamir and participants in the Property Works in Progress Conference, University of Colorado Law School, and Faculty Workshops at Cornell Law School, Interdisciplinary Center (IDC) Herzliya, and Tel-Aviv University, for very helpful comments and suggestions. Thanks to Yehoyada Mande’el for excellent research assistance.

This Legal Workshop Editorial is based on the following full-length Article:   Daphna Lewinsohn-Zamir, Identifying Intense Preferences, 94 CORNELL L. REV. ___ (2009).

In this Editorial, I want to consider a different (and surprising) fact that emerges from the data: juries do not appear to count prior convictions as “evidence” supporting the likelihood of a defendant’s guilt.  That is, although juries are more likely to convict a defendant with a prior record, they nonetheless suggest (in rating the strength of the evidence) that the proof against the defendant is apparently no stronger in such cases than in prior-record-excluded cases in which juries acquit.  That juries would not count a prior conviction as evidence of a defendant’s guilt of the crime charged is important (and surprising) in two respects.

First, a major reason that prior convictions are ordinarily thought to pose a risk of unfair prejudice against a criminal defendant is the fear that, regardless of instructions to the contrary, a jury is likely to draw the following inference: the defendant committed crimes in the past and is therefore more likely to have committed the crime for which he is currently being prosecuted.  If Hans and Eisenberg are correctly interpreting the data (and my review of their article suggests that they are), then this fear is not well founded: juries apparently do not fall into the trap of considering prior bad acts in deciding the likelihood of a particular bad act.  Juries understand, in other words, that a person’s apparent inclination to commit robbery does not tell us very much about whether it was he or some third party who robbed a particular bank three months ago.  This suggests a level of sophistication on the part of the jury about which the evidence law has often been quite dubious.

On the other hand, the second important (and surprising) aspect of juries” ability to discern the relatively low relevance of prior convictions to guilt and innocence in a particular case is that we are left to conclude that the jury is unable (or unwilling) to apply the standard of “guilt beyond a reasonable doubt” to defendants who have a prior record.  The jury, in other words, is not confused by the evidence; it is instead repelled—in the case of prior felons—by the demanding standard of proof.  If this is true, then juries appear far more willing than we might have thought to take the law into their own hands.  For an ordinary criminal defendant, it is acceptable to allow ten (or a hundred or a thousand . . . ) guilty people go free rather than incarcerate (or execute) one innocent person.  But for a habitual criminal, perhaps, this permissive approach to what we might call “wrongful acquittals” is harder for juries to swallow.  The stakes may simply feel too great.  To put this differently, the downside of a wrongful acquittal, in the case of a defendant with a record, is that a habitual offender is free to offend again, while the downside of a wrongful conviction is that a habitual offender who happens not to have committed the particular crime charged spends time behind bars.

If this is the cost/benefit analysis in play, then the jury is rejecting the fundamental structure of a criminal trial as an assessment of guilt or innocence of a specified act (rather than the suitability of a particular person for preventive detention).  This brings to mind the “war on terror” theory of detention with which we have lately become very familiar and which may pose a far greater threat to criminal justice than the comparatively benign (but apparently not-so-tempting) inference that a prior offense sheds light on the odds of a presently charged crime.

Acknowledgments:

Copyright © 2009 Cornell Law Review.

Sherry F. Colb is Professor of Law and Charles Evans Hughes Scholar at Cornell University Law School.

This Legal Workshop Editorial is a response to the following Legal Workshop Post:   Theodore Eisenberg & Valerie P. Hans, Taking a Stand on Taking the Stand: The Effect of a Prior Criminal Record on the Decision to Testify and on Trial Outcomes, LEGAL WORKSHOP (Sept. 14, 2009), based on 94 CORNELL L. REV. __ (forthcoming 2009).