Selective Judicial Activism

Geoffrey R. Stone

89 Texas L. Rev. 1423

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In this review of Justice Brennan: Liberal Champion, Professor Stone examines Brennan’s jurisprudence and asks whether “the pejorative ‘judicial activist” [is] warranted.”  Stone first looks at the Court’s economic substantive due process decisions before Brennan joined the Court.  These decisions, writes Stone, “represented a highly controversial form of conservative judicial activism.”  Critics of this type of jurisprudence learned different lessons.  On the one hand, some, like Justice Frankfurter, decided that judicial activism was illegitimate and unwarranted.  Others, like Brennan, thought that judicial activism was not necessarily wrong. But Lochner v. New York was not an appropriate case for judicial activism.

So, it was this concept of selective judicial activism that shaped Brennan’s jurisprudence.  This view, argues Stone, “is deeply rooted in the original understanding of the purpose of judicial review in our system of constitutional governance.”  In light of this, Stone discusses the Framers and the contested inclusion of the Bill of Rights in the Constitution.  And it was an “originalist” conception of judicial review, Stone writes, that informed Brennan’s selective judicial activism.  Given that anti-majoritarian decisions of the kind Brennan famously wrote tend to not sit well with the majority, it is unsurprising that his jurisprudence thus received harsh criticism, especially from the political arena.

Stone next examines the shift in the judicial makeup of the Court.  The Court had become just as conservative by 1993 as it was liberal in 1968.  But the meaning of “conservative” had also shifted in the modern era.  Previously, it meant a justice committed to judicial restraint.  In the modern era, it came to mean a form of selective judicial activism.  Stone writes that the jurisprudence behind modern conservative decisions to, for example, hold unconstitutional affirmative action programs and gun control regulations “has about it the distinctive air of Platonic guardianship,” exhibiting no judicial restraint.  Stone argues that while there is a discernable conception of judicial review beneath Brennan’s use of judicial activism, there is no similar explanation for the jurisprudence of contemporary conservative judicial activists.

What would constitutional law look like today had justices with the same vision as Brennan remained a majority on the Supreme Court?  According to Stone, such a counterfactual Court might have held, for example, “not that corporations have a constitutional right to spend millions to buy the elected representatives of their choice, but that public officials cannot constitutionally use partisan gerrymandering to ensure their perpetuation in power.”  Stone concludes that interpreting the Constitution is not a mechanical, value-free enterprise.  Instead, as Brennan insisted, the Court’s responsibility in this regard is to “keep the community true to its own fundamental principles.”

Worth Another Look: Net-Worth Discovery Standards in Texas

Anthony F. Arguijo

89 Texas L. Rev. 1433

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A defendant’s net worth is discoverable under Texas law for purposes of exemplary damages.  However, as to what constitutes net worth, the law provides little additional guidance.  In this Note, Arguijo addresses the net-worth debate and proposes a solution to some of the problems.

The author first presents the evolution of Texas law in this area, looking at cases such as Lunsford v. Morrisand Sears, Roebuck & Co. v. Ramirez.  Initially, courts allowed broad discovery, but they have begun to limit the amount of discoverable information.  Indeed, many courts have formulated their own tests regarding net worth.  The most common of these relies upon Generally Accepted Accounting Principles (GAAP).

Arguijo next analyzes the GAAP approach to net-worth discovery.  GAAP has a number of advantages, including the clarity and consistency of its rules.  While at first glance the GAAP approach appears to offer the best solution to the inconsistency in this area of the law, Arguijo finds this approach has shortcomings in light of the policy justifications for net-worth discovery in exemplary-damage cases.

Arguijo then examines the policy justifications and concerns regarding net-worth discovery.  It is intrusive, he writes, but concerns about privacy cannot end the discussion.  These privacy concerns must instead be balanced against the policy justification for such damages, which is punishment.

Thus, Arguijo offers a solution for the proper standard for net-worth discovery.  He argues that in exemplary-damages cases, courts should allow the discovery necessary to give an accurate representation of the defendant’s current net worth.  This standard addresses concerns over both timing and materials.  Arguijo notes that this is not the only solution to the problem, and the Texas Supreme Court has a number of options to choose from.  The important thing, writes Arguijo, is that clarity exists.

Something Like the Sun: Why Even “Isolated and Purified” Genes Are Still Products of Nature

Jonah D. Jackson

89 Texas L. Rev. 1453

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In this Note, Mr. Jackson argues that the “product of nature” and “isolation and purification” doctrines of patent law require the exclusion of gene patents encompassing functional genetic information.  Under the product of nature doctrine, there can be no patents for laws of nature, physical phenomena, and abstract ideas.  But under the isolation and purification doctrine, genetic material, despite being a naturally occurring substance, is patentable when separate from its naturally occurring environment.  According to a 2005 estimate, 20% of the human genome was already subject to issued patents.

Jackson first introduces the basic science of genes and argues that they are best conceived of as carriers of information with unique properties significant to the question of patentability.  He then explains both the product of nature and isolation and purification doctrines and identifies the rationales behind them.  These doctrines currently permit the patenting of genes.  Jackson argues that gene patents encompassing functional genetic information should be excluded from patentability under the product of nature doctrine.  This doctrine is concerned with excluding subject matter with a broad scope and of a fundamentally essential nature both because of economic consequences of patenting such subject matter and the broader implications to a democratic society.

Next, Jackson breaks down the economic and moral arguments against gene patents before tying them to both the characteristics of genetic information and the doctrines previously described.  Lastly, he discusses the prospects for exclusion of genetic information from patentable subject matter and takes up some objections.  For example, some defenders of gene patents argue that thirty years of jurisprudence should not be overturned when the research on the negative consequences of gene patents is still equivocal.  Jackson writes that this assumes gene patents were justified in the first place, but he thinks the evidence demonstrates this protection was never truly necessary.

Jackson concludes that opponents of gene patents face an uphill battle.  He hopes that this Note can help combat the inertia of current law and lead to an understanding that, like the heat of the sun, genes are unpatentable products of nature.

Reverse Erie and Texas Rule 202: The Federal Implications of Texas Pre-suit Discovery

Jeffrey Liang

89 Texas L. Rev. 1491

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Under current federal pleading standards for civil actions, Mr. Liang writes that “plaintiffs face a catch-22: they need information to reach discovery, but they need discovery to access information.”  He argues that Texas Rule of Civil Procedure 202 (Rule 202) may offer a solution.  Rule 202 allows plaintiffs to conduct pre-suit depositions in order to investigate potential claims.  Subsequently, the plaintiff could file suit in federal or state court, better positioned to meet pleading standards.

Only Texas grants broad pre-suit discovery for the investigation of potential claims, notes Liang.  This encourages forum shopping, which undermines the uniformity of federal pleading standards. But plaintiffs face two hurdles when using Rule 202 to investigate potential federal claims.  On the one hand, they must keep proceedings out of federal court, where such a proceeding will likely be dismissed.  On the other, they must prevent preemption in state court.

In discussing Rule 202 and its federal implications, Liang first provides an overview of its scope and role in Texas courts.  He discusses the goals of Rule 202, the mechanics of Rule 202 proceedings, and the role of pre-suit depositions in the federal system.  Next, Liang examines the obstacles presented by federal courts and the removability of Rule 202 proceedings.

He then assesses whether Rule 202 will be preempted in state court.  Even though generally not removable, a Rule 202 proceeding might be preempted through the Reverse Erie Doctrine.  This is a federal common law doctrine that applies when state courts adjudicate federal claims, and determines whether federal or state procedure applies in such instances.  Liang argues that this Doctrine will generally not preempt Rule 202, but preemption may result when Rule 202 petitions explicitly rely on federal claims to justify the burdens of pre-suit depositions.  Even though it is a state procedure, Rule 202 can have an outcome-determinative effect on cases in federal court.  Rule 202, concludes Liang, offers plaintiffs a powerful tool, and it presents courts with interesting questions of federalism, jurisdiction, and preemption.

Amicus Briefs and the Sherman Act: Why Antitrust Needs a New Deal

Rebecca Haw

89 Texas L. Rev. 1247

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Currently, the courts sort out the details of what practices and pricing schemes amount to unreasonably anticompetitive behavior, and the Supreme Court has the final word on the Sherman Act’s meaning.  Yet, the Sherman Act is so vague and broad that developing specific rules under it is more like constitutional interpretation than statutory interpretation.  However, Sherman Act interpretation is different from typical common law questions.  It requires economic evidence, which the Court cannot gather on its own, and technical economic savvy, which the Court similarly lacks.  Instead, the Court looks to amicus briefs for assistance, which have considerable influence over its opinions.  So, by relying heavily on arguments from nonparties, the Court acts more like an administrative agency soliciting third-party input.

In this Article, Haw argues that instead of requiring the Court to approximate agency decision-making in this way, an antitrust agency should be created and given the authority to make Sherman Act rules.  Such an agency would have the advantage of economic expertise and would be accountable according to judicial review.

Haw first summarizes the history of amicus participation and the justifications for it in technical areas of the law.  She then shows that in relying on amici, the Court acts similar to an agency.  Next, she details the similarities and important differences between the Court and a proper rulemaking agency.

In light of this contrast, Haw argues that the Court’s hybrid solution loses some of the benefits of Article III’s cases and controversies requirement, while failing to fully realize the benefits of APA rulemaking.  She then provides a recent pair of examples of the Court’s rulemaking in antitrust cases.  In these, the Court made mistakes partially attributable to reliance on amicus briefs for economics.

With this background, Haw proposes that an agency should instead be endowed with norm-creation authority over antitrust policy.  Where amicus briefs fail, she argues, administrative procedures are more likely to succeed.

When the Government Is the Controlling Shareholder

Marcel Kahan & Edward B. Rock

89 Texas L. Rev. 1293

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After the recent bailouts, the U.S. government has become the controlling shareholder of some major U.S. corporations.  Corporate law provides rules to protect non-controlling shareholders from controlling shareholders who have goals other than maximizing firm value.  In this Article, the authors address how corporate law applies when the government is the controlling shareholder, including the extent to which federal “public law” structures substitute displaced state “private law” norms.

The authors first review recent events during which the U.S. Treasury invested in private firms.  Next, the authors examine the challenges posed to the existing structure of legal regulation of controlling shareholders when the U.S. Treasury is the controlling shareholder.  This requires an examination of sovereign immunity and its exceptions, as developed in the FTCA, the Tucker Act, and the APA.  Then, the authors address ex ante governance structures that have been used to control challenges.

The authors argue that Delaware restrictions on controlling shareholders are displaced by federal law, but not sufficiently replaced, and that the existing accountability structures do not provide sufficient protection to minority shareholders.  So, the authors look at ways in which government ownership has been structured in order to minimize political interference at the expense of non-controlling shareholders.  Examples include nonvoting stock, independent directors, dedicated trusts, and separate managements companies.  The authors find that ex ante legal structures and ex post judicial review do not hold much promise for controlling political interference.  Instead, the authors write that what remains is a choice between developing new structures of accountability and bringing this anomalous era of government control to a swift conclusion.  The authors notes that as the U.S. Treasury gets closer to taking some of these companies public again, understanding the law related to the government as controlling shareholder is important in deciding whether to buy shares in an IPO.  They conclude that it is clear we do not currently have adequate legal tools to address the problems posed when the government is the controlling shareholder.

Patentable Subject Matter and Institutional Choice

John M. Golden

89 Texas L. Rev. 1041

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In this Article, Professor Golden argues that Congress should expand the USPTO’s rulemaking authority so that it encompasses substantive questions of subject-matter eligibility.  This proposal would explicitly split “interpretive authority over substantive patent law between the USPTO and the federal judiciary,” which would “further hybridize patent law’s legal regime and break from a common paradigm under which primary interpretive authority of the substance of a statutory regime lies either wholly with the courts or wholly with an administrative agency.”

Golden first describes the already hybrid nature of U.S. patent law’s legal regime.  Next, he presents the case for giving the USPTO binding interpretive authority over subject-matter eligibility as a means toward patent law’s commonly accepted utilitarian ends.  He does this by describing the nature of subject-matter inquiries and developing mathematical models that help justify their continued use as patentability filters.

Golden then argues that the generally categorical nature of questions of subject-matter eligibility suggests that they are especially appropriate for agency rulemaking, an argument which is bolstered by an analysis of comparative institutional competence.  Golden finds a lack of judicial facility for resolving such problems.  Moreover, Congress lacks the sustained interest, time, and knowledge to resolve subject-matter eligibility’s bounds.  The USPTO thus appears to be the best potential institutional candidate, having both the expertise and the incentive to deal with the issue.

However, as an administrative agency the USPTO is also vulnerable to concerns of capture and bias.  But Golden argues that such concerns are not as great as is often contended and they can be further diluted through additional institutional reforms.  Indeed, Golden points out that the USPTO already has an established record of developing nonbinding but influential interpretive rules on matters of substance.  Granting the USPTO primary interpretive authority over subject-matter eligibility issues might allow it to clear doctrinal tangles generated by the courts.  The recent U.S. Supreme Court decision in Bilski v. Kappos, writes Golden,does not indicate otherwise.

Share Repurchases, Equity Issuances, and the Optimal Design of Executive Pay

Jesse M. Fried

89 Texas L. Rev. 1113

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Executives of public companies receive most of their pay in equity compensation, which is intended to better align their interests with those of the firm’s shareholders.  However, most equity compensation is tied to the short-term stock price, which may shift the executives’ focus from long-term value.  Professor Fried identifies a different problem, which arises when the executive is free to sell stock in the short-term or must hold it for the long-term. Tying payoffs to the stock price, argues Fried, fails to align executives’ interests with the maximization of aggregate shareholder value, which is the amount of value flowing to all the firm’s shareholders over time.  Fried shows that tying payoffs to the future stock price can even encourage executives to take steps to destroy aggregate shareholder value.

Two distortions result from tying executives’ payoffs to the future stock price.  When the current price is below its actual value, executives whose pay is tied to the future stock price are rewarded for funding bargain-price share repurchases rather than making productive investments in the firm.  When the stock price is higher than its actual value, these executives are rewarded for issuing new shares even if the firm cannot productively use the consideration received in exchange. Fried calls these “costly contractions” and “costly expansions.”

These distortions arise because the executives’ interests are aligned only with investors who do not buy or sell shares until the executive cashes out her equity.  Executive interests are not aligned with those shareholders that either sell or purchase shares before the executive cashes out.

Fried proposes a mechanism that would perfectly tie executive pay to aggregate shareholder value, which he calls the “constant-share” approach.  Accordingly, executives must adjust their equity holdings in the firm whenever it purchases or sells its own shares to keep them constant through the transaction, selling shares whenever the firms repurchases its own stock and buying whenever it issues new equity.

Fried acknowledges that problems with this approach exist.  It will make it more difficult for executives to personally benefit, so they can be expected to resist its adoption.  Also, it may lead to a lower stock price, which could in turn increase the likelihood of a takeover attempt or proxy fight.  So, directors may also be against adopting it.

But I Thought the Earth Belonged to the Living

Mark L. Ascher

89 Texas L. Rev. 1149

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As a result of intense lobbying, problematic legislative trends have developed over the last several decades in the law of the dead (as Professor Ascher refers to the law of wills and trusts). Here Professor Ascher reviews Dead Hands: A Social History of Wills, Trusts, and Inheritance Law by Lawrence M. Friedman, which explores the reach and longevity of the Dead Hand.

Ascher outlines and discusses four important changes in the law of the dead included in Friedman’s book.  These involve changes in family structure, record keeping, demographics and culture, and societal attitudes toward wealth and the wealthy.  One important change in family structure, for example, is a shift from focusing on the bloodline family to the family of affection and dependence.  Another example is that the surviving spouse once only received limited inheritance, while today the surviving spouse is usually the primary if not exclusive taker. Although Friedman thinks this reflects a change in the family structure, Ascher argues that it is “attributable to and emblematic of the ever-increasing stature of women in American society.”

Ascher also examines the development of dynastic trusts and how such trusts concern societal attitudes toward wealth, in particular of the dynastic kind.  Friedman thinks that in the beginning, Americans were initially skeptical of such wealth, but the end of the nineteenth century saw much more acceptance for it.  Ascher, however, argues that the Progressive Movement was yet to come, which embodied a continued skepticism of dynastic wealth.  Ascher then discusses other aspects of trusts and the changes thereto, some of which are troubling.  But Friedman’s book, according to Ascher, lacks a sense of outrage over these developments, even though Friedman is critical of other issues, which is Ascher’s biggest criticism.

Ascher then looks at Friedman’s treatment of charitable gifts and foundations, and later, “death” taxes.  He also returns to Friedman’s argument that our collective attitude toward wealth has changed, which Ascher does not believe to be the case. Ascher notes that we have strayed far from Thomas Jefferson’s warnings against establishing an aristocracy. Both the estate tax and the rule against perpetuities have been the primary means of preventing the accumulation and propagation of dynastic wealth.  It is troubling then that both have recently been curtailed.  Yet, Ascher concludes, it would not be difficult to get back on the right path, with a few sensible changes to the rules.

A Proposed Wealth Redistribution System Based on the Underlying Premise of Revenue Sharing in American Pro Sports

F. Gibbons Addison

89 Texas L. Rev. 1179

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In this Note, the author addresses the U.S. system of wealth redistribution.  According to Addison, the present wealth inequality between the rich and the poor is due to unequal opportunity, meaning an individual’s ability to pursue her objectives without interference from arbitrary obstacles.

Addison finds a solution to this problem in the revenue sharing system of professional sports leagues.  Sports leagues employ such a system to increase the competitive balance of the league, which increases profits in the long run, even for high-revenue teams that contribute a portion of their revenues for distribution to low-revenue teams.  Similarly, Addison argues that the U.S. should address wealth inequality by substituting the goals of equality and fairness for competition.

Addison begins with an overview of wealth redistribution in the U.S., starting in the colonial period with the influence of Adam Smith and continuing through the New Deal and the civil rights movement until arriving at the present system.  Addison turns to an overview of revenue sharing in American professional sports, discussing the importance of cooperation in order to increase competition, ticket-sale sharing, and the potential problem of teams’ ability to exploit sources of local revenue.

Next, the author analyzes wealth redistribution in sports leagues.  Addison notes some possible imperfections to the systems but argues that the leagues need low-revenue teams to be successful.  The goal of revenue sharing, writes Addison, is not perfect competition but competitive balance.