Statutes in Common Law Courts

Jeffrey A. Pojanowski

91 Texas L. Rev. 479

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The Supreme Court teaches that federal courts, unlike their counterparts in the states, are not general common law courts.  Nevertheless, a perennial point of contention among federal law scholars is whether and how a court’s common law powers affect its treatment of statutes.  Textualists point to federal courts’ lack of common law powers to reject purposivist statutory interpretation.  Critics of textualism challenge this characterization of federal courts’ powers, leveraging a more robust notion of the judicial power to support purposivist or dynamic interpretation.  This disagreement has become more important in recent years with the emergence of a refreshing movement in the theory of statutory interpretation.  While debate about federal statutory interpretation has settled into a holding pattern, scholars have begun to consider whether state courts should interpret statutes differently than federal courts and, if so, the implications of that fact for federal and general interpretation.

This Article aspires to help theorize this emerging field as a whole while making progress on one of its most important parts, namely the question of the difference that common law powers make to statutory interpretation.  This inquiry takes us beyond the familiar moves in federal debates on interpretation.  In turn, it suggests an interpretive method that defies both orthodox textualism and purposivism in that it may permit courts to extend statutory rules and principles by analogy while prohibiting courts from narrowing the scope of statutes in the name of purpose or equity.  Such a model accounts for state court practice at the intersection of statutes and common law that recent work on state-court textualism neither confronts nor explains.  This model also informs federal theorization, both by challenging received wisdom about the relationship between common law and statutes and by offering guidance to federal courts at the intersection of statutes and pockets of federal common law.

The framework this Article constructs to approach the common law question can also help organize the fledgling field of state–federal comparison more generally.  With this framework, we can begin to sort out the conflicting and overlapping strands of argument already in the literature while also having a template for future inquiries.  At the same time, this framework can help us think about intersystemic interpretation with greater rigor—an advance that can aid state and federal jurisprudence alike.

The New General Common Law of Severability

Ryan Scoville

91 Texas L. Rev. 543

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The doctrine of “severability” permits a court to excise the unconstitutional portion of a partially unconstitutional statute in order to preserve the operation of any uncontested or valid remainder.  Severability figures centrally in a broad array of constitutional litigation, including recent litigation over the “individual mandate” provision of the Patient Protection and Affordable Care Act.  Nevertheless, the doctrine remains underexplored.  In particular, no commentator has thoroughly examined choice-of-law rules pertaining to its application.  This Article aims to fill that void.  The Article contends that in recent decisions the Supreme Court has quietly established the severability of state statutes in federal court to be a matter of general federal common law, and that this doctrine is not only inconsistent with dozens of cases decided since Erie Railroad Co. v. Tompkins, but also displaces a large body of diverse state law without constitutional authorization or a supporting federal interest.  The new doctrine thus challenges standard accounts of the limits of federal common law and calls into question the contemporary vitality of Erie’s principle of judicial federalism.  The Article closes by proposing an alternative that would harmonize the precedent, help to revitalize Erie, and honor the bounds of Article III judicial power.

When History Mattered

Alfred L. Brophy

91 Texas L. Rev. 601

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Brophy reviews David M. Rabban’s Law’s History: American Legal Thought and the Transatlantic Turn to History.

Arbitration Under Siege: Reforming Consumer and Employment Arbitration and Class Actions

George Padis

91 Texas L. Rev. 665

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In this Note, Mr. Padis argues that binding arbitration clauses in consumer and employment contracts should continue to be enforced because arbitration provides employees and consumers important advantages. At the same time, however, consumer and employment arbitration must be seriously reformed.  The Note concludes that the reform should be sensitive to the different concerns that arise from different types of disputes, instead of the blunderbuss approaches that have emerged out of Congress and the Supreme Court.

More Flies with Honey: Encouraging Formal Channel Remittances to Combat Money Laundering

Colin Watterson

91 Texas L. Rev. 711

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In this Note, Mr. Watterson seeks to address problems associated with regulating informal value transfer systems (IVTS), particularly in the remittance context, by proposing that policy makers focus on encouraging consumers to use formal, transparent money transfer channels.  Reducing legitimate demand for underground services would decrease the popularity of underground firms and thus the opportunity for criminals to exploit them.  Further, if consumers have viable alternative options to underground firms, vigorous enforcement becomes far less problematic.  Ultimately resolving the challenges that these channels present is only possible if formal channels can compete with underground firms; otherwise, the demand for underground services will continue to undermine the U.S. anti-money laundering scheme.  This Note argues that the best approach to money laundering is making compliance easier and cheaper.  This Note proposes simplifying our current regulatory regime through the enactment of a national regulatory scheme that is charged with enacting policies that will make formal channels more competitive.

Exchanging Information Without Intellectual Property

Michael J. Burstein

91 Texas L. Rev. 227

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Contracting over information is notoriously difficult.   Nearly fifty years ago, Kenneth Arrow articulated a “fundamental paradox” that arises when two parties try to exchange information.  To complete such a transaction, the buyer of information must be able to place a value on the information.   But once the seller discloses the information, the buyer can take it without paying.   The conventional solution to this disclosure paradox is intellectual property.  If the information is protected by a patent or a copyright, then the seller can disclose the information free in the knowledge that the buyer can be enjoined against making, using, or selling it without permission.  This account of information exchange forms the basis for an increasingly popular argument in favor of strong and broad intellectual property rights for the purpose of overcoming the disclosure paradox and thereby facilitating the development and commercialization of ideas.  That argument, however, rests on assumptions about the nature of information that are neither theoretically nor empirically justified.

In this article, Burstein explains that, contrary to the conventional account of the disclosure paradox, information is not always nonexcludable and is not always a homogeneous asset. Instead, information is complex and multifaceted, subject to some inherent limitations but also manipulable by its holders.   These characteristics give rise to a range of strategies for engaging in information exchange, of which intellectual property is only one.   Information holders can use the characteristics of information itself as well as contractual and norms-based mechanisms and other legal or business strategies to achieve exchange.   And examples drawn from fields as diverse and disparate as software and biotechnology show that entrepreneurs and inventors use these strategies alone or in combination to effectively link their ideas with capital and development skills, often without intellectual property appearing to play a significant role in the transaction.  Intellectual property is therefore not necessary to promote robust markets for information and is, in fact, just as contingent and context-specific a solution to the paradox as the alternatives described here.   At the very least, then, there is reason to doubt that commercialization theories founded upon information exchange provide a stand-alone justification for intellectual property.   Burstein urges caution in policy interventions that seek to respond to the disclosure paradox and sets the stage for future empirical research to better understand the dynamics of information-exchange strategies and the social welfare costs and benefits that may accompany them.

Solving the Patent Settlement Puzzle

Einer Elhauge & Alex Krueger

91 Texas L. Rev. 283

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Courts and commentators are sharply divided about how to assess reverse payment patent settlements under antitrust law.   The essential problem is that a PTO-issued patent provides only a probabilistic indication that courts would hold the patent is actually valid and infringed, and parties have incentives to structure reverse payment settlements to exclude entry for longer than this patent probability would merit.   Some favor comparing the settlement exclusion period to the expected litigation exclusion period, but this requires difficult case-by-case assessments of the probabilities of patent victory.   Others instead favor a formal scope of patent test that allows such settlements for non-sham patents if the settlement does not delay entry beyond the patent term, preclude non-infringing products, or delay non-settling entrants.   However, the formal scope of patent test excludes entry for longer than merited by the patent strength, and it provides no solution when there is either a significant dispute about infringement or a bottleneck issue delaying other entrants.   This paper provides a way out of this dilemma.  It proves that when the reverse payment amount exceeds the patent holder’s anticipated litigation costs, then under standard conditions the settlement will, according to the patent holder’s own probability estimate, exclude entry for longer than both the expected litigation exclusion period and the optimal patent exclusion period, which both harms consumer welfare and undermines optimal innovation incentives.   Further, whenever a reverse payment is necessary for settlement, it will also have those same anticompetitive effects according to the entrant’s probability estimate.  This proof thus provides an easily administrable way to determine when a reverse payment settlement is necessarily anticompetitive, without requiring any inquiry into the patent merits.  We also show that, contrary to conventional wisdom, patent settlements without any reverse payment usually (but not always) exceed both the expected litigation exclusion period and the optimal patent exclusion period, and we suggest a procedural solution to resolve such cases.