20 May 2016

A Friday Afternoon Distraction: What's A Bible?

Like all states, Illinois permits an individual debtor to keep certain property free from the claims of unpaid creditors. (See my five-part series of posts here, here, here, here, and here for some theological observations about biblical exemptions and my article The Missing Piece of the Puzzle: Perspectives on the Wage Priority in Bankruptcy (download here) about the impact of biblical exemptions on federal bankruptcy law since 1841.) And like most states, among the list of exempt property in Illinois is a "bible."

Some Bibles are, of course, more valuable than others and the Seventh Circuit issued an opinion in February about what to do with a particularly valuable one. Or at least a book that the parties conceded was a Bible.

The text in question was a first edition of the Book of Mormon. Anna Robinson, who owned multiple other copies of the Book of Mormon, filed for Chapter 7 bankruptcy but claimed as exempt only her first edition, appraised at $10,000. The bankruptcy court denied her exemption of this copy reasoning that the purpose of the exemption was merely to "protect a bible of ordinary value so as not to deprive a debtor of a worship aid." The Seventh Circuit in an opinion reported as In re Robinson, 811 F.3d 267 (2016) disagreed. The appellate court reasoned that the Illinois legislature hadn't placed a limit on the value of an exemptable bible so neither should the court--a conclusion with which I agree.

But the case got me to wondering: Is the Book of Mormon a "bible"? In Ms. Robinson's case the bankruptcy trustee stipulated that "bible" means simply "a religious text." Of course, orthodox Christians would differ believing that the canon of Scripture (and thus the Bible) closes with the book of Revelation. But disagreements exist among various Christian traditions with respect to what constitutes the text of "the bible," e.g., the intertestamental works known variously as the apocrypha or deutero-canonical.

And what of the Koran? Or the Vedas and other texts associated with what is known as Hinduism? Or Kahlil Gibran's The Prophet? Are they "bibles" too? The answer on the bankruptcy trustee's definition would be yes but is that what the text of the Illinois statute means? Or meant at the time of its enactment? And even if the answer to those two questions is no, would such a limitation be constitutional? And what should we make of the lack of capitalization of "bible" in the Illinois statue?

Oh well. Enough time wasted. I had better get back to something really important like the fate of home owners associations in bankruptcy.

11 May 2016

170,000 And Counting

Earlier today the blogspot.com counter passed 170,000 pageviews for Pryor Thoughts. Nothing particularly impressive about this number but I am intrigued by the geographical distribution of my audience.

According the free counter that comes with blogspot, the vast majority of my viewers (I'm not sure everyone who looks at a page ultimately reads it) come from the United States (119,617). No surprise there.

Coming in at #2, however, is Russia (5309) with Ukraine (3900) at #5. The reason for so many pageviews from countries that made up the former Soviet Union escapes me.

In any event, my reasons for keeping up this blog remain the same and I hope those reading my posts find them worthwhile.

Puerto Rico And A Coda on Municipal Bankruptcy

I posted often during the course of the chapter 9 bankruptcies of Stockton and Detroit. You can read one on each here and here. I have not posted about Puerto Rico's extraordinary financial distress for two reasons: Puerto Rico is not eligible for any bankruptcy relief and others have been writing seriously and posting frequently about what can be done.

Today, however, I am breaking my Puerto Rico silence because this piece at the New York Times DealBook is spot on: Puerto Rico is the canary in the mine shaft.

Across America, dozens of cities, counties and states may be heading down the same financial rabbit hole. Illinois, New Jersey, Philadelphia, St. Louis and Jacksonville, Florida., to name just a few, are all facing their own slowly unspooling financial disasters.
Generous pension promises made decades ago, without enough funding, are now coming due as baby boomers retire. Bonds issued in the distant past to build bridges, highways and other projects also must be paid — even as the projects themselves could by now use expensive makeovers.

Exactly right. As I described at length in Municipal Bankruptcy: When Doing Less Is Doing Best (download here), American cities (and States) have promised their public-sector employees pensions and health benefits in amounts that are actuarially unsustainable, especially given current demographic trends. In addition, to try to reduce such benefits, once accrued, would violate the U.S. Constitution. Only if Congress permits cities (and States) to seek bankruptcy relief can anything be done.

Currently exceptionally low interest rates and the "flight to safety" that causes international investors to buy American debt securities are masking this problem. In not so many years, however, perhaps during the next presidential administration and certainly, in my opinion, by 2024, the time bombs hiding in state and local balance sheets will begin exploding. Were it not for the dysfunction endemic to our current political system, one might expect our elected leaders to begin planning for the inevitable. Reality being what it is, however, we'll find ourselves hanging on for dear life hoping for some means of redress.

09 May 2016

More on Consumer Rights and Consumer Costs

A few days ago I posted here about the rule proposed by the Consumer Financial Products Bureau that would prohibit pre-dispute mandatory arbitration in financial contracts and permit aggrieved consumers to proceed via class action. In brief, I believe the first part of the rule is a good idea but the second, not so much.

Go here to read why I'm more convinced of at least half of my position. Omri Ben-Shahar, who teaches at the University of Chicago law school, is the real deal. He featured in a supporting role in a post a year ago here. He mentions in his post--almost in passing--the prohibition of mandatory arbitration but goes on to assail the class-action half of the CFPB solution. Why?
While the overall effect [of permitting class actions] on consumers depends on the balance between meritorious and frivolous class actions, one prediction can be made with confidence. Firms will now take greater care in drafting even longer fine print agreements, where everything is fully “disclosed.” Since many class actions allege violations that can often be corrected through more comprehensive legal disclosures and warnings, firms will lawyer up and write longer and even less readable boilerplate.
In other words, the threat of class actions to vindicate consumer rights will lead to ever-more boilerplate that no one reads and does no one any good. 

What Ben-Shahar does not mention, however, is my suggestion to permit consumers to proceed individually and to award attorneys' fees and expenses to those who prevail. Such a consumer would need to show actual injury but would not be deterred from proceeding if the injury was so small that no one would pay the cost of litigation. A few successful claims would both correct an actual injustice done to a consumer and deter further misbehavior, all without the externalities associated with many class actions.

07 May 2016

What CJ Roberts Lying?

In case you've missed one of the more arcane explanations for the rise of Donald Trump go here to read an article by by Ilya Shapiro that blames Chief Justice John Roberts and here to read a response by Orin Kerr who blames The Donald on people like Shapiro for blaming Roberts.

The gist of Shapiro's piece is that John Roberts lied in NFIB v. Sibelius, the Obamacare case. According to Shapiro and others, Roberts didn't really believe Obamacare was constitutional but helped form a majority upholding it for political reasons. In other words, Roberts was mistken, he was a liar. From there Shapiro goes on to conclude that Roberts's disingenuous Supreme Court opinion suddenly rendered right-leaning Americans utterly cynical, which explains why they now like Donald Trump, a cynic's cynic.

I response, Kerr accuses Shapiro and other conservatives of playing the cynic card so often that it's their fault "cynicized" Americans vote for Donald Trump.

My suggestion is to take another look at the basics and read erstwhile colleague Kenny Ching's article Roberts on Obamacare: Liar, Lunatic, or Legitimate about which I blogged four years ago here. Ching cogently argues that Roberts believed what he wrote. In other words, the Chief Justice may have been wrong but he wasn't a liar.

In any event, it goes to show the shallowness of passes for public intellectual discussion when anyone can believe that Roberts's opinion or conservatives' reaction to it can account for Donald Trump. We must look much closer to home to explain why someone as cynical as The Donald can garner the nomination of the Republican party and someone as venial as Hillary Clinton that of the Democrats. In other words, it is we Americans whose cynicism and venality explains why we find ourselves in this sad state.

06 May 2016

Consumer Rights, Consumer Costs, and Justice

The worlds of consumer protection and their powerful antagonists, self-characterized as the financial services industry, are abuzz with the rule proposed yesterday by the Consumer Financial Products Bureau. Read the CFPB press release here. If adopted, the proposed rule would block mandatory pre-dispute arbitration agreements and permit aggrieved consumers to proceed via class action.

As many do not know, virtually every financial contract (e.g., credit card agreements, rent-to-own contracts, payday loan contracts, etc.) into which American consumers enter prohibit the consumer from suing the other party for breach of contract. Instead, consumers who have been injured must proceed to arbitration before an arbitrator chosen by the bank or other sort of lender. The dollar amount of such claims is typically in the hundreds which, when coupled with the expense and low likelihood of success, means that virtually no one even tries. (As many also do not know, most other consumer contracts similarly prohibit litigation as a mean of seeking justice. Read about an example of such a mandatory arbitration agreement in the nursing home industry here.)

Not surprisingly, the sexual financial services industry does not like this. Not one bit. You can read an article expressing their "concerns" in their mouthpiece here. Just as unsurprisingly, the banks' running dogs in Congress are joining the outrage.

Two thoughts. First, routine deprivation of consumers from the system of public justice is simply wrong. Justice is important and a system of justice that is not beholden to one party is a feature of the modern world. (And by "modern" I include the West since the eleventh century. See some of my relevant posts here, here, and here.) Parties should be free to opt out of the public system and arbitration presents one legitimate alternative. Yet opt-out at the will of one party with the power to influence the outcome should not occur before breach in a non-negotiable contract. In other words, non-salient, one-sided terms violate commutative justice.

Second: class actions. Critics of the proposed rule are correct to observe that many--but not all--class action cases redound more to the benefit of the attorneys than the injured parties. A simple solution to this problem would be to provide for an award of reasonable attorneys fees to an individual consumer who prevails in a lawsuit against the financier. The long-standing Magnuson-Moss Warranty Act does so and there's no evidence that it's been abused.

In short, I would take the protestations of concern by the banks and Congressman beholden to them seriously if they showed any evidence that some notion of justice influenced their positions. Until then, I won't.

29 April 2016

The Never Ending Saga of Contract Law: The Efficient Breach

For scholars and students of contract law, the (in)famous "efficient breach" hypothesis has diverted more neurons than any other topic in the past half-century. Indeed, I discussed it in Principled Pluralism and Contract Remedies (download here). Briefly put, and quoting from (In)efficient Breach of Contract by Daniel Markovits and Alan Schwartz, proponents of the concept of the efficient breach explain it this way,
The expectation interest remedy [for breach of contract] requires the promisor to transfer a sum equal to the promisee’s expected gain from performance [or loss from nonperformance] if the promisor reallocates her resources to another use. The theory of efficient breach justifies the remedy because the promisor will either perform, when the promisee's [foregone] gain would exceed the [promisor's] gain from reallocation, or breach when the promissee’s [foregone] gain is below.
In other words, the law of contracts demonstrates that it doesn't care about the morality of breach of contract because it limits damages for breach to a promisee's loss rather than the breaching promisor's gain. If the promisor comes out ahead, even after covering the promisee's losses, everyone is (or at least should be) indifferent.

While many have decried the morally agnostic status of the efficient breach hypothesis, Markovits/Schwartz make a more intriguing argument: there is no such thing as an efficient breach. Ever.

How can this be?
Consider two contracts. Contract A lays out a single path to performance: The promisor must trade a specified good or service for a price. Contract B, which we call a dual performance contract, provides alternative paths to performance: The promisor must trade the good or service item or transfer a sum to the promisee that equals the gain the promisee would have realized from the trade. Let the promisor not trade the item, but transfer the sum instead. This would be a breach if the parties wrote contract A, but not if the parties wrote contract B. The promisor would breach even Contract B, however, if she failed both to trade and to transfer the sum. Neither the failure to trade nor the failure to transfer could be efficient breaches if the applicable contract terms were efficient. Hence, to ask whether a breach is efficient is to ask the wrong question.
Putting this another way (and with a HT to Oliver Wendell Holmes, Jr.), if parties enter into a dual performance contract they have agreed that the promisor has an option to perform or pay. Thus, non-performance coupled with reimbursement of the promisee's losses is not even a breach much less an efficient one.

Of course, most contracts are not explicitly of the dual performance variety; most specify that the promisor will do something and leave it at that. So what are we to do in such cases? Is it possible that courts should interpret contracts that specify only a single path as nonetheless permitting such dual performances? Markovits/Schwartz think so. In fact, they believe that most of the time most parties have already bargained for the dual performance. Perform or pay, in other words, is the presumptively correct way to interpret almost all contracts: "Contracts that are silent about remedies should be read to make dual performance promises."

Such a position doesn't strike most folks as immediately obvious. How do Markovits/Schwartz argue for it? In summary--and as amplified by me with respect to point (3)--as follows:

(1) The choice not to perform an agreed-upon exchange amounts to an invitation to renegotiate the original contract. (2) Renegotiations are expensive; thus, prudent parties should agree in the initial negotiation for a remedy should one of them choose not to perform. (2a) An agreement to permit one party not to perform in return for payment of the aggrieved's party's losses is a plausible remedy. (3) Nonetheless, commutative justice requires that the party who chooses not to perform pay something for the option of paying the other party's losses rather than giving up its gain. (4) The something paid for the option is a lower initial contract price.

There is nothing fundamentally invalid with this argument. As I argued in my Principled Pluralism piece, justice is served by a large range of remedies for breach of contract and the current expectation remedy fits comfortably within that range. Yet it remains the case, or so I believe, that the Markovits/Schwartz argument for the current state of affairs would leave most contract parties nonplussed. The fact that such an argument wouldn't occur to most contract parties and that judges have never deployed such an argument leads one to wonder if it isn't a "just so story" that seeks to explain a cause (expectation damages) solely in terms of an effect (putative lower prices).

The Markovits/Schwartz argument also fits uneasily in the widely-recognized doctrine of good faith in the performance of contracts. Even in its most narrow articulation. good faith is understood to limit a contract party's discretion otherwise permitted by the express terms of the contract. Yet on the Markovits/Schwartz hypothesis, a contract regime characterized by a rejection of good faith in performance would, like one limiting damages to a promisee's losses, generate lower initial prices. What on their view accounts for such inconsistent results?

Similarly, even if dual performance is presumptively efficient, why are there impediments to parties who wish to contract out of it? Default rules like expectation damages are understood to be efficient because they save parties the time and trouble of reinventing the wheel each time they enter into a bargain. Nonetheless, thoughtful parties to a particular contract (or with  awareness of a particular counter-party) might want to contract in advance for performance or payment of the other party's gain instead of its losses. Yet courts remain resistant to permitting parties to contract for supra-compensatory damages. Liquidated damages are fine but even they remain subject to a plausibly demonstrable relationship to the promisee's losses.

In sum, I am not persuaded by the Markovits/Schwartz dual performance hypothesis. It is more plausible than the efficient breach hypothesis. It may even be proven correct. But not quite yet.

28 April 2016

From Wagner to Dickens: Music and More Music

Wagnerian opera or English music hall comedy? Over the past several weeks we took in both. First came Wagner's early piece, The Flying Dutchman, performed at the Carpenter Theatre in Richmond. (Performances remain for April 23-24 in Fairfax.) It's hard to believe Wagner composed The Flying Dutchman in 1840 when age 26. A serious tragedy of pride, judgment, love, death, and apotheosis, the music for The Flying Dutchman had a modern feel.
While not atonal, there was nothing melodic about most of it. The performances, especially by Wayne Tigges (the Dutchman) and Wayne Volpe (Daland) were superb. The orchestra was excellent and the staging was very modern but without compromising the integrity of the performance. Quite a contrast with the melodic Italian La Traviata we saw at the same venue a year ago.

The Mystery of Edwin Drood
Then a week ago it was to Regent University for its end-of-season musical, The Mystery of Edwin Drood. A slap-stick song-and-dance musical in the style of a 19th century English musical hall performance (lots of asides and audience participation), The Mystery of Edwin Drood was written by Rupert Holmes (yes, the PiƱa Colada Rupert Holmes) based on an unfinished novel by Charles Dickens. The large cast had obviously spent a lot of time in rehearsal and was well trained in song and dance but the performance of William Cartwright as the music hall's impresario and filling in as mayor of the mythical village of Cloisterham stood out. Cartwright was exceptional in all respects--singing, dancing, vamping, and declaiming.

Performances of The Mystery of Edwin Drood remain so get your tickets now!

21 April 2016

Lucy and Ricky

Lucy  by Ellen Feldman

Comments on two books recently read. Second started but first finished was the historical novel Lucy: A President, A Marriage, A Love Affair by Ellen Feldman. Clearly the beneficiary of in-depth familiarity with the historical documents, Feldman tells the story of the intimate relationship between Lucy Mercer and Franklin Roosevelt. Beginning with the hiring of Lucy in 1915 by Eleanor Roosevelt as what today we would call an administrative assistant (when her husband was Assistant Secretary of the Navy in the Woodrow Wilson administration) Feldman creates a plausible first-person account of a deeply emotional and physically intimate affair that continued until its discovery by Eleanor three years later.

Forced to end the affair to maintain the possibility of becoming president, Franklin nonetheless remained in contact with Lucy even after her marriage to a widower some years her senior. The FDR-Lucy (now Rutherfurd) relationship resumed something of its earlier intimacy as World War II dragged on with the disabling stroke and eventual death of Lucy's husband. The connivance of Anna Roosevelt, Franklin and Eleanor's eldest daughter, in enabling the resumption of her father's relationship helps explain why Lucy--and not Eleanor--was at FDR's side when he died of a cerebral hemorrhage.

A superbly told story as much of manners as the heart, Lucy demonstrates, on the one hand, the reality of a social world that is not so different from as our own as we might wish to believe and, on the other, the long-lost days when a discrete hypocrisy helped maintain the veneer of virtue. In that respect, much has been lost.

Media of Richard III
In contrast to the rich texture added by the author to the story of Lucy, Richard III; A Ruler and His Reputation by English historian and litterateur David Horspool hews closely to the discoverable facts of the life, times, and death of England's king best known through Shakespeare's portrayal as a tragi-comic villain. Horspool is clearly at home with all the bits and pieces of the documentary record of this period in English history (as well as that of the interested players of France, Burgundy, Normandy, and Flanders) in addition to the conclusions drawn from the relatively recent discovery of the remains of Richard himself beneath a parking lot in Leicester.

Horspool's care doesn't prevent him from drawing reasonable inferences from the available data and thus he assigns to Richard culpability for the deaths of his two young nephews who had rightful claims to the throne Richard had seized on the sudden death of his brother.

As with most contemporary historians, Horspool is as interested in the "history of the history" of his subject as he is with the man himself. Thus, throughout the book Horspool interweaves the generations of re-tellings of the story of Richard III. To my surprise, the distinctive blackening of Richard's reputation did not begin with Henry Tudor but a full generation later with Thomas More. Of course, even during his reign Richard had to contend with those who thought he was a murderous usurper but portrayals as a physical (and thus moral) cripple began in the times of Henry VIII. Indeed, not long after the accounts of "Richard the Degenerate" there were pro-Ricardian voices and it is their current incarnation as the Richard III Society that led to the discovery of his remains in 2012.

While hardly a romance of manners, Richard III is an excellent and accessible history of an era of political life far different from our "enlightened" world of politics framed by the media. Yet, as Horspool demonstrates with his account of the 2015 interment of Richard's remains, even today something of the romance of a bygone era continues to affect the public political psyche.

11 April 2016

Dr. Jekyll and Mr. Hyde: Dramatic Augustinianism


We saw the North Carolina State student performance of an adaptation of Robert Louis Stevenson's "Strange Case of Dr. Jekyll and Mr. Hyde" Saturday night. NC State does not offer a major in drama so the student actors, from freshman to seniors, had majors in everything from anthropology to zoology. Literally.

Set design and staging were superb, perhaps because there were some engineering students behind the scenes. The  overall acting was good although not of the quality we are accustomed to see at Regent University performances. Of course, most of the performers at Regent are MFA students who have undergraduate degrees in drama so direct comparison would be unfair to the kids from State.

One source of some confusion was the need to have several students perform several roles. In particular, the need to have four different actors portray Edward Hyde proved disorienting. His primary actor, Matthew Tucker, along with Nico Peaks--the only Henry Jekyll--was very good.

It has been a long time since I've read Stevenson's novel so I came in recalling only the vague outline of the story. The dramatic adaptation by Jeffrey Hatcher didn't dwell on the "sci-fi" elements. Instead, he brought out the "Augustinian" perspective of the duality of the human will. Jekyll's "scientific" tincture-based solution to the problem of human evil proved ineffective if not destructive. Even more importantly, Jekyll's philosophical location of the problem of evil in the mind, which meant it could be overcome by the right-thinking human will, was proved fatally wrong. As St. Augustine observed in his Confessions long ago, the problem of depravity goes all all the way down to the depth of our being and cannot be resolved with drugs or even right knowledge, which should stand as a rebuke to big pharma and the educational-industrial complex.

We commend "Dr. Jekyll and Mr. Hyde" and it will continue to show through April 17 so you can go here to buy your tickets.

09 April 2016

"I Saw the Light"

Last week we went to the opening of the Hank Williams, Sr. biopic "I Saw the Light". Based on the biography of the short-lived country music star, "I Saw the Light" did a good job for a film in its genre. In other words, it was similar to "Walk the Line," the film based on the life of Johnny Cash.

There were two principal differences between "I Saw the Light" and "Walk the Line." First, "Walk the Line" starred well-know actor Joaquin Phoenix playing the title role with the support of actress Reese Witherspoon as June Carter Cash. By contrast, "I Saw the Light" starred folks of whom I hand't heard, Tom Hiddleston and Elizabeth Olsen as Hank and Audrey Williams.

Second, Cash lived a lot longer than Williams. Williams rose to stardom when he was 23 and died only six years later from complications of consuming large quantities alcohol and drugs. Williams died before I was born but I recall hearing many of his hits over the course of my childhood. And, while I knew he died at a young age, I didn't know how young he was and how short his professional career had been.

In any event, "I Saw the Light" was an enjoyable film. Hiddleson, an Englishman, did a credible job of sounding like Hank Williams and the story, while not profound, is a contemporary morality tale.

07 April 2016

Straining Toward Natural Law: Margaret Radin and Contract Degradation Part 1.5.2

This represents my third in a series of posts that began here with my initial comments on Margaret Radin's Access to Justice and Abuses of Contract. Yesterday saw my second post here in which I responded to the first of Dean Eric Enlow's critiques, which had to do with whether contract law was a public good. Based on his prodding, I have affirmed that indeed contract law is a public good.

Dean Enlow went on to raise a second point, this one about my use of the expression "commutative justice" in connection the social practice of contracting in place of the more common contemporary reference to corrective justice. Quoting my original contention,
Among the components of justice is "commutative," which entails a rough equality in exchange. In other words, when all is said and done, a contractual exchange of money (or information) for goods or services should be a fair one.
To which Dean Enlow responds:
Second, in your discussion of the type of justice relevant to contract law, you follow the later typology in distinguishing between commutative and distributive justice which emphasizes equality in the exchange, rather than the older tradition distinguishing between rectifying and distributive justice, which emphasizes reestablishing equality of position after a harm.
And in addition asks, 
If we consider contract law to be concerned with rectifying the distinct kinds of harms that arise out of the breaking of contracts, i.e., enforcing the obligations that arise to remedy harms caused by certain and only certain kinds of contracts, would this make the analysis above easier than when we focus on equality in bargains as the essence of contractual justice?
Two points should be made here. First, I believe the idea of equality of exchange--commutative justice--precedes rectifying justice. As I argued in Looking for Bedrock: Accounting for Human Rights in Classical Liberalism, Modern Secularism, and the Christian Tradition (download here), we should distinguish between primary rights, what we owe one another on account of our common humanity, and secondary rights of rectification, what is owed when a primary right has been denied. Restoring the status quo ante is often a vital aspect of what the law does to correct a wrong but only follows what the parties have already done.

In any event, the world of primary rights can be divided between commutative (e.g., equality of exchange) and distributive (those owed on account of account of status or dignity). Drawing on the work of Nicholas Wolterstorff, I state my argument about the nature and foundation of primary rights in three lengthy paragraphs of Looking for Bedrock. I won't tax my readers with reproducing them here but would direct anyone who is interested to pages 627-629 of the linked article for more detail. (Alternatively, look at some of my blog posts on Wolterstorff's book "Justice: Rights and Wrong" here, here, and here which, while they do not exactly make my point, have the advantage of easy accessibility.)

Second, I would appreciate anything that would make the task of identifying examples of Margaret Radin's "contract degradation" any easier. Yet I'm not sure how moving the initial focus from commutative justice to rectifying justice, as Dean Enlow wonders, would do so. If we leave aside the idea of equality in exchange, how do we identify when a particular contract causes harm? Or, how do we identify which "certain kinds of contracts" from which harm arise should not give rise to a legally enforceable claim? Perhaps there are simpler answers to these questions than there are to when a particular term of the underlying contract is so unfair as to have deprived a party of commutative justice but I'm not sure what they are.