Winter 2012, Vol. 107, No. 1
This Article examines the unprecedented and deeply underestimated global power that the European Union is exercising through its legal institutions and standards, and how it successfully exports that influence to the rest of the world. Without the need to use international institutions or seek other nations’ cooperation, the EU has a strong and growing ability to promulgate regulations that become entrenched in the legal frameworks of developed and developing markets alike, leading to a notable “Europeanization” of many important aspects of global commerce. The Article identifies the precise conditions for and the specific mechanism through which this externalization of EU’s standards unfolds. Enhanced understanding of these conditions and this mechanism helps explain why the EU is currently the only jurisdiction that can wield unilateral influence across a number of areas of law—ranging from antitrust and privacy to health and environmental regulation—and why the markets, other states, and international institutions can do little to constrain Europe’s global regulatory power.
For too long, state interests have dominated public jurisdiction and private choice of law analyses regarding the reach and application of a state’s law, or prescriptive jurisdiction. Individual rights— whether of criminal defendants or private litigants—have been marginalized. Yet states are projecting regulatory power over actors abroad with unprecedented frequency and aggression. State interest analyses proceed from the perennially critiqued but remarkably sticky concept of sovereignty. Now more than ever, legal thinkers, courts, and litigants need a bedrock concept from which to build individual rights arguments against jurisdictional overreach. And it should be one that holds not only theoretical cogency but also the promise of real-world traction in cases. This Article introduces the concept of spatial legality. It recasts the familiar and deeply rooted notion of legality—that is, the idea of fair notice of the law—along spatial as well as temporal dimensions. Operating in time, legality vindicates individual rights, for example by prohibiting ex post facto laws. Spatial legality focuses on law’s reach in space rather than its existence in time, but the problem is essentially the same: someone is being subjected to a law he could not reasonably have expected would govern his conduct when he engaged in it. The Article begins by taking extant rules of jurisdiction in multistate systems and transforming them through the concept of spatial legality into a right to fair notice of the law applicable at the time of conduct. It then shows how a jurisdictional mix-up metastasizing in both U.S. and international law is presently aggravating spatial legality problems: namely, the use of personal jurisdiction over parties to bootstrap application of substantive law to their extraterritorial conduct. The mix-up occurs (1) on the criminal side, by using a defendant’s postconduct presence in the forum to justify applying substantive law to prior conduct outside the forum, and (2) on the civil side, by using “general” personal jurisdiction over parties to justify applying forum law to activity outside the forum. Reorienting jurisdictional doctrine around the rights of parties instead of states generates important doctrinal and litigation payoffs: it clarifies and straightens out the law for courts and, where courts do err, supplies parties with rights-based arguments to challenge such errors as opposed to state-based arguments about sovereignty and comity. In this connection, the Article proposes a typology that weaves together public jurisdiction and private choice of law doctrines to identify how and when spatial legality claims will have the most traction on the current state of the law. It concludes by indicating the limits of a spatial legality concept based only on notice and suggests other rule of law criteria like feasibility of compliance, avoidance of contradictory laws, and consistency that, going forward, may further inform analysis of the demands multistate systems with overlapping laws place on fundamental fairness.
Settling the Confusion: Applying Federal Common Law in Settlement Enforcement Proceedings Arising From Federal Claims
Today, many federal court cases are resolved by means of a settlement agreement. When a dispute arises regarding the formation, interpretation, and enforcement of those settlement agreements, a federal judge must resolve whether state or federal law governs the enforcement proceeding. Given the current lack of clarity in this area, this Article advocates for uniform federal choice of law principles in settlement enforcement proceedings where a federal question is involved. The federal courts have an institutional interest in creating uniform rules to govern the behavior in the courts. Uniformity in settlement enforcement proceedings would be consistent with the independent and self-regulating nature of the courts. Additionally, there is a strong federal interest in promoting the settlement of federal lawsuits and enforcing valid settlements. There may also be some federal statute-specific policies that require the use of federal common law when the underlying claims in a settlement are based on that statute. Part I of the Article discusses relevant Supreme Court case law and illustrates the confusion amongst the circuits. Part II argues that the federal courts have an institutional interest in governing their own affairs sufficient to support the application of federal common law of settlements. Part II describes the identifiable federal policy in favor of settlements. The Article ultimately proposes that the development of a uniform federal common law on settlement enforcement would address the current situation.
For the last forty years, the Supreme Court has insisted that the standing doctrine’s requirements of imminent injury-in-fact, causation, and redressability are mandated by Article III of the Constitution. During that same time, however, the federal courts have consistently permitted Congress to relax or altogether eliminate those requirements in many “procedural rights” cases—ones in which a federal statute creates a right to have government follow a particular procedure, including to provide judicial review of agency decisions. This Article asks how best to rationalize this contradiction. After examining several possibilities, we conclude that the best course is to recognize openly that the Case or Controversy Clause of Article III means different things in different types of litigation. In one “tier”—cases where Congress has made it clear that it has created procedural rights that may be vindicated in court without meeting the usual injury, causation, and redressability requirements—the plaintiff should merely be required to show that he or she falls within the “zone of interests” the statute aims to protect. In all other cases—the other “tier”—existing Article III standing requirements would apply.
Under the standard interpretation of 28 U.S.C. § 1331, the socalled Holmes test, pleading a federal cause of action is sufficient for finding federal question jurisdiction. In January 2012, the Supreme Court, in Mims v. Arrow Financial Services, LLC, recharacterized this standard test for § 1331 jurisdiction as one that considers whether “federal law creates [both] a private right of action and furnishes the substantive rules of decision.” In this first piece to address the Mims Court’s significant change to the § 1331 canon, I applaud its rights-inclusive holding. I contend that this rights-inclusive view rests upon a firmer jurisprudential framework than does the Holmes test, as the latter is intertwined with an anachronistic pairing of causes of action and rights with Justice Holmes’s overall “bad man” approach to the law. I argue further that Mims’s rights-inclusive approach more accurately describes § 1331 doctrine as a whole, helping to illuminate that—contrary to the Holmes test—merely pleading a federal cause of action is neither necessary nor sufficient for taking statutory federal question jurisdiction. I also demonstrate that this rights-inclusive view is more solicitous of the intent of the 1875 Congress, which passed § 1331, and of the intentions of later-in-time Congresses, which passed legislation against the presumption that federal rights provide grounds for taking federal question jurisdiction, than is the Holmes test.
Notes & Comments
In the wake of the financial crisis of 2008, there has been substantial debate about the wisdom of offering exemptions from federal securities laws for investment products sold solely to wealthy institutions and individuals, such as the accredited investor provisions of Regulation D of the Securities Act of 1933. Following an examination of case studies dealing with the derivatives craze of the mid-1990s and the aftermath of the 2008 housing market meltdown, this Comment concludes that the nowantiquated wealth-based benchmarks in such exemptions have resulted in the chronic underprotection of larger public and private investors. Accordingly, this Comment argues that several revisions to the existing benchmarks and related regulations should be considered. First, the numerical benchmarks in such exemptions should be inflation-adjusted and inflation-indexed from now on. Second, a series of graduated caps on the purchase of exempt investment products as a percentage of net worth should be introduced. Finally, the standard of care imposed on brokerdealers who market and sell investment products to accredited and unaccredited investors alike should be raised to the equivalent of the fiduciary duty imposed on registered investment advisers.
Estate and gift taxes may be a topic of national discussion, but few Americans are familiar with the methods taxpayers utilize to minimize these taxes. For decades, the Internal Revenue Code (the Code) has rewarded taxpayers who employ complex transfer tax strategies that take advantage of “estate freeze” techniques, which can reduce or even eliminate the taxes imposed on large wealth transfers. One particularly popular technique, the grantor retained annuity trust (GRAT), facilitates tax savings for individuals who plan in advance of significant asset appreciation. Regrettably, such tax savings fail to conform to the widely held belief that taxpayers of comparable income or wealth should pay similar taxes. Aiming to tighten the rules on GRATs, President Obama has repeatedly introduced reform proposals, but each time, he has neglected to address the technique’s biggest vulnerability to abuse: that it allows ultra-wealthy individuals to shield unlimited amounts—potentially billions of dollars—from the transfer taxes that other Americans must pay. This susceptibility to aggressive planning undermines the spirit of the Code and deprives the government of much-needed tax revenue. Recognizing that GRATs fit snugly within a larger body of interrelated tax provisions, this Comment advocates for the imposition of a lifetime limit on tax-free GRAT transfers, a solution that hampers the technique’s more dubious uses while preserving, to the greatest extent possible, its creation of an incentive to invest in entrepreneurial activity.
Presidential recess appointments have strained relations between Congress and the Executive Branch since the Administration of George Washington. But in 2007, Congress began using a procedure to prevent such appointments from happening at all. By sending one member to stand in front of an empty chamber while the rest of the Senate took vacation, Congress claimed it was in “pro forma” session, not at recess, and that the President could therefore not make recess appointments. While Presidents Bush and Obama acquiesced to this tactic and declined to make appointments during such pro forma sessions, Obama changed course in early 2012. In so doing, this Comment argues, Obama’s appointments were on solid constitutional footing. Not only did the pro forma sessions deactivate an enumerated power of the President, but they did so by explicitly involving the House of Representatives in the appointments process, an event the Framers specifically sought to guard against. Indeed, by putting an end to recesses (and thus recess appointments), Congress defied a procedural assumption of the Framers written into the Constitution and practiced by legislatures for millennia. From a policy standpoint, blocking presidential appointments perpetuated a harmful glut of unfilled offices, but was in some cases self-defeating. The President, through the Appointments Act, has the power to fill certain positions with acting heads who carry out his policy goals.
In The Anti-Corruption Principle, an article in the Cornell Law Review, Professor Zephyr Teachout argues that the Constitution contains a freestanding structural anti-corruption principle (ACP). Evidence for this principle can be gleaned from both Founding Era materials, illustrating that the Framers and their contemporaries were obsessed with corruption, and in several of the Constitution’s key structural provisions. The ACP has independent constitutional bite: the ACP (like separation of powers and federalism) can compete against other constitutional doctrines and provisions, even those expressly embodied in the Constitution’s text. For example, Teachout posits that just as Congress—under the Foreign Emoluments Clause—may proscribe government officials from accepting gifts from foreign governments, Congress may also have a concomitant power to prevent corruption—under the ACP—by proscribing corporate election campaign contributions and spending. This Essay argues that Teachout’s ACP goes too far. On the historical point, Teachout is incorrect: the Framers were not obsessed with corruption. Moreover, she also misconstrues the constitutional text that purportedly gives rise to the freestanding ACP. Even if one concedes the existence of the ACP as a background or interpretive principle, its scope is modest: it does not reach the whole gamut of federal and state government positions; rather, it is limited to federal appointed offices. Why? Teachout’s ACP relies primarily upon three constitutional provisions: the Foreign Emoluments Clause, the Incompatibility Clause, and the Ineligibility Clause. The Foreign Emoluments Clause’s scope does not extend to elected positions, state or federal; it only extends to federal appointed officers. Likewise, the office-related language in the latter two clauses is similarly restricted. Because the scope of these provisions does not extend to elected positions, the ACP cannot reach elected positions. In other words, the ACP cannot have a wider scope than the constitutional provisions upon which it is based. It follows that the ACP cannot inform any historically accurate and textually faithful First Amendment analysis of congressional power over state or federal election processes. Still, Teachout’s ACP, even one of limited scope, can teach us much. The Anti-Corruption Principle is a natural extension of prior scholarship tying our public law to contemporaneous eighteenth-century private law concepts and doctrine— fiduciary duties, equity jurisprudence, trust law, and corporate law. In conclusion, the ACP provides fertile ground for new thinking and new research, but ultimately, it can teach us very little about election law or the scope of First Amendment protections in relation to the political process.
The Supreme Court’s latest pronouncements on patentable subject matter in Mayo v. Prometheus have already created a firestorm of controversy. The Court found that various limitations did not add enough to the law of nature that lies at the heart of Prometheus’ medical diagnostic patents to render the claims patent eligible. Because the Supreme Court never explained what “enough” is, critics have been quick to deride Mayo and warn that it would radically limit patent eligibility in a wide-ranging number of industries. Although I agree with the ultimate result reached by the Supreme Court, I am also concerned that its reasoning unnecessarily jeopardizes too many deserving patents. But the decision does not have to create the havoc that so many fear. There is room for a more restrained understanding of Mayo. This Essay offers a moderate interpretation of Mayo by building on recent efforts to revive the out-of-favor “point-of- novelty” analysis. For years, patent law has refused to consider an invention’s point of novelty in its decisionmaking. In other words, the law does not attribute any special significance to a subset of claim limitations regardless of how important those limitations are to the invention; patent law treats all the limitations as equally important. However, it makes no sense for patent law to take such a formalistic approach and ignore the fundamental idea underlying a patent’s invention. Fortunately, the Mayo decision implicitly adopts some point-ofnovelty thinking. This Essay builds on these ideas to develop a fuller pointof-novelty framework that explains when a claim has added enough to an unpatentable concept to make it patent eligible. By applying this approach to both Prometheus’ claims and a hypothetical claim that Prometheus could have drafted, this Essay explains how Mayo can be interpreted as only a modest rejection of a particular type of abstract claim.