A Response to a Pretend Solution

Henry E. Hildebrand

90 Texas L. Rev. See Also 1

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In this Response, Chapter 13 Trustee Henry Hildebrand addresses whether the results of Professor Katherine Porter’s study warrant the conclusion that Chapter 13 is merely a pretend solution.  According to Hildebrand, the fact that debtors who failed to complete their Chapter 13 plans did not achieve the goals that they sought to accomplish when they filed for Chapter 13 is not evidence of the systemic failure of either Chapter 13 or the consumer bankruptcy system. Hildebrand argues that Porter’s study is too myopic, focusing only on the experiences of “failed” Chapter 13 debtors while ignoring the positive results that Chapter 13 has achieved for debtors who were able to complete their plans. He also posits alternative explanations for Porter’s results, including the tendency of overconfident debtors to draft unrealistic repayment plans and the failure of Chapter 13 debtors to seeks post-confirmation judicial modification of their plans.  Although he acknowledges that Porter raises valid points about the complexity of the Chapter 13 system and participants’ unrealistic expectations of future financial stability, he argues that these issues apply equally to Chapter 7 debtors and concludes that, absent more probative evidence of systemic failure, they are better solved by providing debtors with increased judicial oversight and legal assistance than by conversion to a single-chapter bankruptcy system.

Small Ball

William C. Whitford

90 Texas L. Rev. See Also 9

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Professor William Whitford responds to Professor Porter’s article by concurring with Porter’s conclusion that the current consumer bankruptcy system should be converted into a single-chapter system in order to eliminate the complexity and choice that currently prevents filers from reaching discharge. Concerned, however, that legislative roadblocks might substantially delay the wholesale reform of the bankruptcy system, and conscious of the importance of making bankruptcy discharge more readily available, Whitford proposes a “small ball” solution that can begin mitigating Chapter 13’s potential for harm without the need to wait for an act of Congress. Citing evidence of geographic trends in Chapter 13 filing practices, in terms of both the percentage of consumer bankruptcy cases that are Chapter 13 cases as well as the nature of the Chapter 13 plans that are confirmed, Whitford argues that debtors’ bankruptcy decisions are largely influenced by the legal culture that exists in the judicial district in which they file their cases. Because the incentives created by this legal culture cause attorneys, judges, and bankruptcy trustees to steer debtors into certain bankruptcy plans regardless of needs and preferences of individual debtors, Whitford asserts that local legal culture is a contributing cause of many debtors’ inability to navigate the bankruptcy system to discharge. He concludes by outlining how local legal influences can be identified and eliminated, thereby ensuring that debtors will be steered to Chapter 13 and into certain payout plans only under appropriate circumstances—where the chosen path is that most likely to enable the debtor to obtain discharge.

On Regulatory Arbitrage

Jordan Barry

89 Texas L. Rev. See Also 69

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Professor Barry evaluates Professor Fleischer’s analytical framework developed in Regulatory Arbitrage, which addresses how actors respond generally to regulations, but also the related issue of what limits parties’ ability to avoid regulations.  Barry offers praise for the framework’s flexibility, ability to consider issues of regulatory arbitrage, and policy neutrality, but provides three comments regarding the framework.

First, Barry argues that “professional constraints” arising from being a member of the legal profession and a partner at a law firm are not as irrelevant as Fleischer claims with regard to their ability to restrain regulatory arbitrage.  Barry draws from his experience in professional practice in expressing his belief that while they are far from being a perfect prevention mechanism, such professional constraints offer some value.

Second, Barry expresses surprise at the lack of discussion in Fleischer’s article of the ability of family members to avoid regulations through collective action, since such discussion would support Fleischer’s arguments regarding the effect of anti-avoidance regimes on regulatory arbitrage.  Specifically, regardless of the fact that families are in the best position to circumvent regulations due to their relationships, avoidance by such families is not believed to be a major issue, according to Fleischer.  Rather, the archetypal regulatory avoider is the sophisticated repeat player in the financial markets.  Barry argues that the effectiveness of anti-avoidance legal rules reconciles this discrepancy, thereby strongly supporting one of the article’s main arguments.

Third, Barry conveys concern with Fleischer’s usage of financial arbitrage, a more established concept, as a model to analyze regulatory arbitrage.  Barry’s apprehension is limited to how using such a framework may distract the readers’ attention from a more pertinent definition of regulatory arbitrage.  More precisely, financial arbitrage occurs when there are multiple prices on economically identical assets, whereas regulatory arbitrage occurs when there is a mismatch between the economics of a transaction and its concomitant regulation, and using examples from the former situation to inform the latter may place one “on the wrong track.”

Taking It to the Streets

Stuart P. Green

89 Texas L. Rev. See Also 61

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Blackmail criminalizes the threat to do something that would not be criminal if one actually did it.  It is seemingly paradoxical that it should be a crime to make certain kinds of threats, even though the threatened acts are perfectly legal.  In Taking It to the Streets, Professor Green responds to Competing Theories of Blackmail: An Empirical Research Critique of Criminal Law Theory by Professor Paul Robinson et al.  Green finds that the authors ingeniously derive concrete scenarios from abstract theories, that they provide a concise summary of the various blackmail theories, and that their methodological techniques are exemplary.  Putting aside the authors’ achievement, Green focuses on the article’s shortcomings.  Green characterizes the authors’ article as attempting to solve the problem in a novel if unusual way: by asking a collection of laypersons what they think should count as blackmail.

Blackmail is not unique in criminal law.  Similar to fraud and false pretenses, blackmail is a form of theft in which the blackmailer attempts to obtain property from the victim without his valid consent, and uses a coercive, though otherwise lawful act, to do so.  However, blackmail is distinguished based on the subject matter of the threat.  Demands for money based on threats to do some kinds of acts (expose embarrassing information) but not others (file a lawsuit) are considered criminal.  Green asks, then, whether there is any principled way to distinguish between these two kinds of threats.

Robinson and his colleagues ask this question to ordinary people.  In doing so, they try to determine if the law is in harmony with the community’s sense of justice.  Green provides several contexts in which he thinks it is useful to have data concerning community views on particular offenses.  For example, “it is useful to know if people believe that a particular paradigmatic act is sufficiently blameworthy to justify criminal sanctions in the first place.”  He finds that the authors’ study offers valuable data as to these issues.

In addition to gathering data, the authors also wanted the scenarios to reflect a range of prominent theorists’ views about why the law is justified in treating blackmail as a crime.  Green considers this effort to translate abstract theory into concrete scenarios to be “the most impressive achievement of the article.”  Yet, he thinks the theorists cited were probably trying to formulate a critical theory to explain why the core cases of informational blackmail should be treated as a crime, and not to devise a theory that would accord with widely shared moral intuitions.  Nor is Green sure that this is a satisfactory way of testing which theory the public would favor.  Instead, he suggests it might be better to explain the leading theories and ask the public directly which they favor, rather than attempt to translate them into testable scenarios first.

Lastly, Green turns to the article’s taxonomy of state blackmail statutes.  He argues that one important factor the authors failed to include is the breadth of the range of threats criminalized.  That is, not only what the statutes require the blackmailer to demand but also what they require him to threaten.  Green finds it puzzling that the authors did not include this factor in their schema.

Resourceful Relators: The Rise of Qui Tam Suits Under the False Claims Act Based on Information Obtained in Civil Litigation

Chris S. Stewart

89 Texas L. Rev. See Also 169

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Mr. Stewart responds to the 2010 amendments to the False Claims Act (FCA) and identifies how these amendments equip potential relators “with the tools necessary to bring qui tam suits.”  In doing so, Stewart examines how perceived hurdles, including the heightened pleading standard of Rule 9(b) of the Federal Rules of Civil Procedure and the public disclosure bar, among other things, to qui tam suits are overstated.  Nonetheless, some hurdles remain, including those that defeat actions in which a relator does not uncover conduct apart from that which is detailed in the public domain.  Stewart concludes, “the overall effect of the recent amendments is what the drafters of the FCA have striven for over decades.  A new group of relators is now equipped to aid the Government in its pursuit of possible fraud with adequate hope of success and incentive to bring suit.”

The Establishment Clause: Political Metaphor or Guarantor of Rights?

Laura S. Underkuffler

89 Texas L. Rev. See Also 49

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In this piece, Professor Underkuffler responds to Professor Schragger’s The Relative Irrelevance of the Establishment Clause.  Schragger argues that the Establishment Clause as judicially enforced law is overrated by scholars, given that few of the Court’s doctrinal rules in this field are enforced.  Underkuffler thinks that if these doctrinal rules, such as nonendorsement or anti-entanglement, are mere political metaphors intended to influence the political branches and the constitutional debate, then this would be a much weakened role for the Establishment Clause as well as the Court.

Underkuffler agrees that a gap exists between rhetoric and reality in the Court’s jurisprudence in this field. However, she argues that, while some aspects of the doctrine do not provide a basis for realistic legal rules, others present eminently workable standards to protect rights.  In the latter case, these are real guarantors of rights.

Schragger identifies the secular-purpose doctrine, the nonendorsement doctrine, and the anti-entanglement doctrine as three core doctrines of the Establishment Clause that the Court has failed to enforce.  Underkuffler notes that this claim should be put into perspective.  While the Court might announce broad principles, it can only enforce these principles in cases that come before it.  Rather, the lower courts and other organs of government must enforce or distinguish the Court’s pronouncements in the vast majority of cases.  So, the Court’s role as an enforcer of constitutional doctrine is overstated.

Underkuffler next addresses Schragger’s arguments for each of the three core doctrines.  She notes that in the abstract, each can be extended too far, to the point of incoherence and unworkability.  In these cases, the doctrines are best viewed as hortatory reminders by the Court of areas of potential danger.  But, argues Underkuffler, it is important that we not go too far.  In many applications, the doctrines articulate rules that are as enforceable as those in any other constitutional context, and in such cases the Establishment Clause is more than a political metaphor—it is a guarantor of rights.

“Two Paths, One Result”: A (Heavily Qualified) Defense of Consensus Constitutionalism

Mark Tushnet

89 Texas L. Rev. See Also 157

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Professor Tushnet responds to Professor Driver’s skepticism toward consensus constitutionalism, or the view that the Supreme Court “inscribes into constitutional law the views of an undifferentiated American people.”  Tushnet argues that consensus constitutionalism is more defensible than Professor Driver’s argument allows, based on a “more generous” reading of their texts.

Tushnet reads the consensus constitutionalists as arguing that the Court’s decisions reflect a consensus and, to the extent there is a divergence from the consensus, the decisions are likely to be overlooked or ignored.  Driver, however, argues that no consensus has ever existed.

In response, Tushnet sketches the “same results claim,” by which the results of debates concerning constitutional values will be the same regardless of whether (1) the judiciary or  (2) the Legislative and Executive Branches, produce the result.  Tushnet qualifies this claim and notes its limitations, thereby offering a research agenda for consensus constitutionalists.

Tushnet also responds to Driver’s view that consensus constitutionalism saps the normativity from constitutional debate, arguing that normativity remains possible particularly in light of recent debates.  He notes that observations about today may be right or wrong but are subject to political change, with the result that any normative analysis is dangerous.  As a result, Tushnet argues that consensus constitutionalists can offer only limited normative guidance to resolve contemporary issues.  In any event, political leaders and judges are not required to find or occupy this normative field before making a decision.

Tushnet concludes by noting Driver’s limited reading of consensus constitutionalism and agreeing with Driver’s criticism of the overstatement of consensus in constitutional debates and Driver’s argument that any consensus does not foreclose normative arguments in court.

A Comprehensive Theory of Deal Structure: Understanding How Transactional Structure Creates Value

Michael S. Knoll & Daniel M. G. Raff

89 Texas L. Rev. See Also 35

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Professors Knoll and Raff argue that Professor Fleischer’s theory that transactional lawyers produce an optimal transactional structure by balancing Coasean transaction costs and regulatory costs is incomplete. Instead, they advance the reverse Modigliani-Miller theorem as a comprehensive theory of transactional structuring. According to this theorem, company managers cannot change the value of that company by altering its capital structure if three assumptions hold: efficient capital markets, no transactions costs, and no taxes. In the real world, however, these assumptions do not hold, providing transactional lawyers with an opportunity to create value. Specifically, by identifying situations where the Modigliani–Miller assumptions fail and by employing capital-structure techniques that reduce the cost from the violation of those assumptions, transactional lawyers produce an optimal transactional structure.

Give ‘Em Enough Rope: Optimal Design of Executive Pay and Rent Extraction

Simone M. Sepe

89 Texas L. Rev. See Also 143

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Due to recent debates concerning executive compensation, incentive structures are increasingly scrutinized.  Professor Sepe reponds to Professor Fried’s argument by (i) challenging the notion that efficiency necessarily results from preventing managers from capturing extra returns, as managers may use these returns effectively, and (ii) arguing that the social costs of overpriced equity offerings are unclear.  Indeed, Sepe concludes that payment of extra returns to managers may be “necessary to preserve incentives not to waste corporate assets.”