Papers That Make You Think

A collection of papers that I found to be literally thought-provoking: making you think new thoughts. To be sure: Making you think is decidedly not the same as an agreement with the substance, and sometimes the correlation goes the other way.

Alexandra D. Lahav, The Knowledge Remedy, 98 Texas L. Rev. 1361 (2020)

John Goldberg just wrote a fantastic JOTWELL, so I won’t recap. I’ll just note that I wish the term discovery wouldn’t have already been taken. The knowledge remedy means making the D fund research to discover if they are responsible for the P’s harm.

There is something counterintuitive about it, but Lahav makes good arguments and she has really nice historical examples. I will also add that the remedy has a res ipsa logic, so it is more grounded than initially appears.

Spencer Williams, Contracts as Systems, Forthcoming Delaware J. Corp. L. (2020)

Sure, contracts are complicated. Williams argues that they are also complex.

Complexity here has a specific meaning and this paper looks at contracts from the perspective of a combination of network and complex system theory. The key point is easy to understand, but its implications are interesting and sometimes unexpected.

The paper offers a crash course on the basics of complex system theory. The foil here is the reductive approach that thinks of contracts on a term-by-term basis. Complex systems are all about how terms interact.

What you get is what transactional lawyers feel in their bones: the meaning of a contract term requires a view of the transaction as a whole. Marginal changes–like redlining a specific term–can have profound effects on the transaction.

Complex systems are fairly resistant to change, which makes sense given the difficulty of estimating the effects of small changes. This is maybe why boilerplate remains stable over time, even when market conditions change.

If true, it means that reasoning from terms to preferences is risky: some research argues that if all sophisticated parties choose x then x must be efficient. Well, it may well be that x is part of a complex system and it serves some invisible ancillary role.

To be sure, there’s something frustrating about concluding ‘it’s complicated,’ but one nice thing is that there are ways to quantify complexity. A really interesting paper!

Scott and Triantis, What Do Lawyers Contribute to Law and Economics?, Forthcoming 38 Yale J. on Reg. (2021)

There’s a joke that says that when a lawyer has a paper idea in L&E he invites an economist to be his co-author. When the economist has an idea, she invites a lawyer to lunch.

“[A]re lawyers more than a resource for economists studying the law?” Scott & Triantis somehow answer this without engaging in standard academic turf warfare. Their response is actually more general and relevant to many L& projects: sociology, history, lit &c.

This question really asks what makes legal methodology special. They say it’s analogical reasoning.

In common law, you don’t just feed the judge facts. Nor would knowing the facts uniquely predict the outcome. You also have to argue that this case is like a different one. A car with faulty brakes is like an unexpected flood (your client is not responsible) or like a goring ox (client is responsible).

Formal econ is about deduction, and sometimes induction–but not this kind of sideways thinking. [Maybe a way of thinking about it is that lawyering is about finding the right reference class (a problem discussed extensively by Pardo and Allen)?]

The paper actually goes beyond this answer. It also argues for what I would call (non pejoratively) hand waving. The point is that neither formal models nor quantitative empirical will get us the insight we get from Lisa Bernstein or Ellickson. Accuracy can obfuscate meaning.

In a way, I think what they point out to is the value of the project I see myself being a part of: LES–Law, Economics, and Sociology. A dynamic of learning what is in the world, whether to intervene, how to do so, and how would that affect the world.

They don’t quite say whether analogical reasoning lends itself to formal modeling and if so, whether lawyers are in a god-of-the-gaps situation, but the entire piece is highly thought-provoking.

Thomas Merrill, Economics of Leasing, J. Legal Analysis (2020)

Some folks, I’m told, don’t think that leases are cool. Merrill’s paper makes us realize we have been overlooking this great, pervasive legal institution and the implications are exciting.

The first thing to note that leases are really everywhere. Homes, cars, farm machinery, shopping stores–even goats. These transactions rarely studied together, making it hard to see all the connections.

A lease is a mix of contractual and property rights. The K side smooths out some of the sharp edges of property, although Merrill thinks we should bolster the property side of leases more.

Tenant sneaks in clause in lease about birthday cake | WKRC

Why do people lease? Finance is one answer, especially when the seller has better access to capital. Another is risk allocation: I think I might like living on this street, but I want to protect myself from the risk they build yet-another Starbucks nearby. Another risk is demand surge: my family mostly needs one car, so it is more efficient for me to rely on the occasional lease even if the owner charges a premium.

A 3rd reason is specialization: Alice is good at owning office spaces and fixing cracks in the concrete, Bob is good at using the office for his tarot-reading business. Pure ownership, by either Alice or Bob, doesn’t make sense. Splitting up ownership and use makes sense.

How to identify a true lease? A question that tortures students in my secured transaction class. Merrill emphasizes duration and installment payments. I’d urge a pure economic focus–what I call the upside/downside test. Ask who benefits from appreciation in the value of the asset and who suffers from deprecation. This test avoids all the lawyerly cleverness of disguising substance through form. It is a lease when the answer is the original possessor, a secured sale when the new possessor.

To demonstrate the utility of thinking of leases as a unified topic, Merrill offers a few interesting (and provocative) implications. In his view, leases help the poor, and to the law should adopt a lease-friendly disposition (which can be overridden). OTOH, rent control is suspect and can sour the lessor-lesee relationship. Leases should be made more property like, at least by default, thus limiting tenant’s eviction when the bank forecloses on the property.

The most exciting part is that there is just so much we don’t know about leases and their regulation. When is it efficient? How does it affect investments? Does it promote or stifle competition? How does it interact with credit rationing/red-lining?

Givati and Kaplan, Harm Displacement and Tort Doctrine, 49 Journal of Legal Studies 73 (2020)

I found the image below a few years ago and thought it was an effective illustration of the idea of crime displacement.

Givati and Kaplan now bring this powerful intuition to tort law. When I install a hidden GPS tracker on my car, I make car theft riskier, as thieves don’t know which car has it. But why should I?

I can, instead, just put a sticker on my car “protected by GPS” and get thieves going for my neighbor’s car. In this case, car theft levels remain roughly the same, but I saved my own car.

In tort law, we talk a lot about how damages can cause people to take preventive action, installing the proverbial smoke scrubber. But damages can also get people to displace harm unto their neighbors.

So, suppose there’s a factory that must dispose of some polluting chemicals, and the factory can choose whether to dispose to the lot of neighbor A or B. With negligence, if closing the factory isn’t viable, the factory pollutes.

Neighbor A then hires a contractor to build a ramp that will block the factory, and Neighbor B puts signs around his property “Neighbor A is a jerk, pollute his land”. Not terribly appealing.

With strict liability*, the factory at least pays the neighbor, so neither one will invest much in displacing harm. This suggests an advantage of SL>negligence, and also the importance of tortfeasors having choice b/w victims when we design liability rules.
(*courts may still mess up strict liability determinations)

Shahar Dillbary, The Case Against Collective Liability, B.C. L. Rev. (Forthcoming, 2021)

One memory from Bootcamp is having to hold a metal target up at all times– until the one who spoke during drill admits to his wrongdoing.

Anybody could say that this collective punishment is unfair. It takes a Dillbary to say it’s inefficient.

In torts, we sometimes assign collective liability, and the key example is cases where someone in the surgery room left a sponge inside the patient, but the patient has no evidence of who it was. A more exotic case is when one of two identical twins father a child, but there’s no way of knowing who.

Should the nurse be held liable for the sponge? only the head surgeon? No one? The efficiency case for collective liability, made by Posner, Levmore, Porat &c, is that it creates good incentives to reveal evidence, monitor team members, and deter bad behavior.

My implausibly sharp colleague disagrees. Collective liability creates an incentive to produce evidence, sure, but also to fabricate it. It can people to monitor too much or too little. Worse, it just dilutes liability and if you have a group of 10 who share liability of $1,000 they might just not care about safety.

Wait, so-called Mr. Contracts, aren’t you forgetting something? Why wouldn’t everybody just contract for efficient monitoring & precaution? And don’t start transaction-costing us, you sensibly argue, team sizes are quite small and stakes are high!

Well, Dillbary explains that even if parties want to contract, the legal system is going to be in the way. It just won’t enforce such contracts.

There are several ways to fix this problem and get collective liability to work, and Dillbary notes some. But the coolest one is the frankpledge:

Felipe Jiménez, Rethinking Contract Remedies, Unpublished Manuscript (9.2020)

Today, a poll: You ordered 200 bushels of corn that you intended to sell for a profit of $200, but the seller didn’t deliver. If you sue the seller, what should you get?

Trick question. Jiménez thinks this the wrong way to even talk about these things. The K duty to sell corn \ineq any specific remedy. There is only a weak (pro-tanto) reason to think that you should get something in the zipcode of $200.

Beyond this, everything else must come “from the outside” of k law. In a specific case, the economist may come with a big calculator and persuade the judge to give less, and the moralist may give a homily on specific performance. Whatever.

This is a really impressive paper, both in writing and argumentation, and it has this golden ratio b/w things you find interesting and things you disagree with. The most provocative part is the two functions of K law.

  1. Protect parties. If you have K law that tells people that they have a legal duty to sell corn bushels contracting parties are going to expect, well, corn bushels. The legal system has a duty to protect the expectations it creates, so you have a pro tanto reason to make the seller pay $200.

    Wait, you say, what if the parties opt for free cancellation or $400 in compensation? Once the state is implicated in the enforcement of anything, it’s not obvious that the parties’ wishes control. You need a reason that’s external to the parties.
  2. Protect itself. K law should incentivize people to make contracts, which means that (promisee’s) expectations should be protected. If people don’t trust that their expectations will be met, they won’t contract.

Concluding: expectation damages are under-compensatory relative to primary rights. Less appreciated is that specific performance also tends to be under compensatory. We don’t really live in a world where K rights and remedies match, and this paper helps us think about whether we should be worried about it.

Lauren Scholz, Fiduciary Boilerplate, J. Corp. L. Forthcoming
This time Lauren Scholz. What are we going to do with all the fine print that consumers don’t read?

So there is this messy fact of life that consumers don’t read the fine print, which a lot of folks find troubling (setting aside my own views on its significance). We tried capitalizing text to get them to read, but this DOESN’T WORK

She notes that the market competition for consumer terms can’t work if consumers don’t read, and that consumer consent is too thin. (nudniks, we remember, can offer a partial solution ex-post)

Scholz makes a very bold argument here. She says: firms should be held to be fiduciaries for the consumer. For non consumer law folks, this is like saying the opposing basketball team shouldn’t run so fast.

Scholz says: courts must stop looking at the contract as the sole source of mutual obligations. They should roll up their sleeves and see if the firm exercised discretion in a way consistent with the consumer’s interests given its fiduciary duties in the transaction

She highlights a number of reasons. One is that in the digital economy, consumers don’t know a whole lot about cyber-security for example. Another is that companies invite a “relationship” (as recently analyzed by Dadush&Becher) through branding and “comforting language” e.g., “We care about your privacy”

Putting skin in the game, she offers a substantive example. Consumer data should often be held in trust, even when the contract excludes that, if “the economic realities of the transactions required that the consumer rely on the company to make decisions”

One spin on Scholz is that, like the duty of good faith, fiduciary duties can serve as a flexible ex-post stopgap, and may be justified under the Henry-Smithian view, which is based on efficiency.

Kaiponanea T. Matsumura, Breaking Down Status, Wash. U. L. Rev. (forthcoming, 2021)

Remember the old ‘from status to contract’ slogan? Matsumura thinks the rumors of status’ death were exaggerated.

Matsumura takes a legal view of status: a bundle of rights&duties that apply to whoever “has” a certain status. Think being married vs. single, employee vs. gig worker, child v. adult, and to some extent physio-typical v. disabled. All come with a legal-rights-preset

We constantly argue about who is an employee, who is married, etc. The debates and the shifting social norms might get you to despair and say: let’s leave everything to contract law. A noble instinct! But Matsumura says not so fast.

Status is a powerful regulatory tool and contract law sort-of recognizes status through a number of mandatory rules.* He believes that status is an inevitable category. So let’s squeeze this lemon! How should we design status? (One is reminded of Ayres on K Menus)

He presents some of the big questions in designing status. What status entails? Who counts as in/out? and, how many statuses to have? (stati? what’s the faux-Latin norm?) If we have: single, engaged, married, super-married, etc., at some point, you run into issues

In my Payday paper, I was puzzling over why the law would attach the status of a salaried employee to people who receive non-daily pay. Doesn’t that encourage employers to pay less frequently? Why do we want that? But status may offer a partial answer.

You can’t have status w/o such side-effects. That’s a necessary consequence of lumping rights/duties together. Thinking along the margin–wouldn’t it be better to erase this rule or that distinction–might erode the status itself.

So, many things to think about, especially pertinent to work law, gig economy, and family law, but also to bigger Qs of legal design.

Emily J. Stolzenberg, Properties of Intimacy, 80 Maryland L. Rev. (forthcoming 2021)

How should family law solve the problem of property allocation between cohabitants? Stolzenberg says that family law has a binary disposition, either you are spouses and you get to share the title in the property, or you aren’t (modulo nuance).

Family law “feels” that any deviation from this standard is a redistribution that requires some strong justification. It proves hard to think about allocation within this paradigm, and she argues that family law is captive to a rigid form of title.

Here’s the nice part. She observes that private law has a softer model for thinking about entitlements when people are not at arm’s length, what she calls “intimacy.” Key example: neighbors.

(Bonus: she cites Sartre’s No Exit for the proposition that intimacy, even forced, may create some duties of civility)

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