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

Rebecca Haw

89 Texas L. Rev. 1247

PDF Document

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

PDF Document

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

PDF Document

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

PDF Document

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

PDF Document

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

PDF Document

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.

Third-Party Assistance in Determining Obviousness

Gregory R. Baden

89 Texas L. Rev. 1203

PDF Document

This Note proposes a third-party obviousness specialist in patent litigation in response to the challenge of practically determining this requirement in a technically and legally consistent manner.

Making consistent determinations of obviousness is a challenge at all levels of the patent system, from patent examiners to the U.S. Supreme Court.  An erroneous determination can be costly, due to the cost of the disputes.  The root of the challenge of determining obviousness is its doctrinal positioning as a mixed question of fact and law, according to Baden.  One problem with this positioning is whether a judge, jury, or some combination of the two should be responsible for making the determination.

In response to the challenges of the obviousness determination, Baden proposes a third-party obviousness specialist, and situates the role of this specialist within the concepts of patent law.  Rather than supplanting the judge or jury, the “obviousness master” would assist the court in establishing the boundaries of the obviousness factual inquiries.  Baden notes that there is support for such a master in both academic commentary and existing legal doctrine, which he discusses.

He then addresses the options for practical implementation of the obviousness master.  He provides two possible forms.  First, the obviousness master could be implemented in a manner similar to that employed for a traditionally titled special master in claim construction or interpretation hearings.  Second, the role could be developed via a specialized incarnation of an expert witness, which would include the use of a double-blind selection method for choosing the individual.  Baden addresses each form in detail.

Lastly, Baden presents the benefits and challenges of, and arguments for and against, implementing an obviousness specialist.  Baden concludes that an obviousness specialist would allow the parties, the court, and, importantly, the jury to focus on the primary task of navigating the defined waters of the invention without venturing into the unmapped sea of innovation.

The Effect of the Parliamentary Voting System Act on the British Constitution

Joshua H. Packman

89 Texas L. Rev. 1229

PDF Document

In this note, Packman discusses the pending Parliamentary Voting Systems and Constituencies Bill (PVS Bill), which is aimed at British electoral reform in response to the 2010 hung parliamentary election.  The PVS Bill provides for a referendum on switching from the first-past-the-post electoral system to the alternative vote and would also reduce the size of Parliament to 600 members.

Packman first examines the effect of the PVS Bill on the British Constitution by virtue of the referendum.  One important part of the British Constitution, according to Packman, is the doctrine of the sovereignty of Parliament.  Packman discusses different aspects of this doctrine, and notes that he is taking a simplistic view for the purposes of the Note that Parliament is the supreme legislative authority and its sovereignty is the core principle of the British Constitution.

Packman then introduces Bruce Ackerman’s thoughts on an alternative source of constitutional legitimacy: the referendum.  This would potentially vitiate parliamentary sovereignty, but Packman argues that this outcome is not preordained.  Packman finds that the PVS Bill as a referendum only partly diminishes the sovereignty of Parliament.

Packman then analyzes the constitutional effects of switching the electoral system to the alternative vote, which he argues represents a major reform of the British Constitution and a threat to parliamentary sovereignty.  He first provides an overview of the system and theory of government that exists under the current British Constitution.  He then looks at how the PVS Bill would change this system.  As such, Packman writes that the PVS Bill, by substantially reducing the number of seats won by the majority party, would effectively transform Parliament from a government of “front benchers” into a government of “backbenchers” by increasing the relative power of each member of the majority party vis-à-vis the Prime Minister and the Cabinet.

This is not the first time that Parliament has attempted to change the voting system, concludes Packman. And if it fails, it will surely not be the last.  Such alterations reflect underlying changes in the values embodied in the British Constitution, and the alternative votes represent a change from government based on parliamentary sovereignty to government based on popular sovereignty.

Quality Care for Queer Nursing Home Residents: The Prospect of Reforming the Nursing Home Reform Act

Michael J. Ritter

89 Texas L. Rev. 999

PDF Document

In this Note, Ritter examines legal protections for queer elders residing in nursing homes, specifically under the Nursing Home Reform Act (NHRA).  As the U.S. population steadily ages, so does the portion of queer elders increase—what Ritter refers to as “the hidden population.”  What’s more, this segment of the elder population often lacks immediate family members that they can live with when unable to live alone and, unlike opposite-sex couples, same-sex partners are often ineligible for tax and other benefits.  As a result, a relatively greater number of queer elders will be more likely to move into nursing homes.

Ritter first provides an overview of the problems elderly individuals face when transitioning from independent living to a nursing home.  He highlights the distinctive problems queer elders face in this transition, specifically discrimination in the form of abuse, neglect, and stigmatization.  These problems, Ritter notes, along with a perceived need to conceal their sexual orientation, contributes to the deterioration of their health.

Ritter next reviews pertinent provisions of the NHRA.  This legislation regulates nursing homes that receive federal funds by establishing a residents’ bill of rights and requiring nursing home to maximize the welfare of each patient.  Ritter argues the NHRA should be reformed to add a statutory right of nondiscrimination based on sexual orientation and gender identity, to require nursing aides to undergo sensitivity training, and to diminish the discretion of the Secretary to decide whether to issue penalties to nursing homes that violate the NHRA’s proscriptions.  Doing so would not only improve the relationships between queer elders and their nursing aides, but also improve the quality of care these residents receive.

Two Problems with the Value of Participation in Democratic Theory and Copyright

David A. Snyder

89 Texas L. Rev. 1019

PDF Document

According to democratic theory, copyright should be used to bring society, individuals, or both closer to some ideal.  Democratic theorists thus value the active making of works of expression by individuals, that is, participation, because they believe it can help to achieve this ideal.

In this Note, Snyder explores two problems with the value of participation.  First, the content of the value of participation is vague, with room for greater specification.  Second, the value of participation seemingly violates the neutrality thesis by mandating government action on the basis of a conception of the good. Neutralists, by contrast, argue that coercive government action designed to promote a view of the good is inappropriate.

Snyder argues that understanding the relationship between the value of autonomy and that of participation helps to give further specification of the latter.  Moreover, Snyder argues that this modified concept of participation does not violate the neutrality thesis.  On the one hand, it does not qualify as a concept of the good.  On the other, its implementation does not involve coercion.