14 September 2018

The Market, Religion, and Contract Law

During another hurricane-enforced sabbatical six years ago I wrote here about an article by Nate Oman published a few weeks earlier. Oman had argued (in my words) that "rather than wedding neo-classical economics to the vagaries of John Rawls, Oman now cabins efficiency within a more concrete social practice, that of the market. Contract law is about supporting the market and not (directly, anyway) about creating an optimal distribution of resources or about vindicating personal autonomy."

Moving away from the hyper-individualistic autonomy and efficiency accounts of contract law, Oman argued that making possible the flourishing of the market as a whole rather than any particular participant was the goal of contract law. In turn, widespread adoption of the social virtues demanded by the market (a measure of fairness, some degree of honesty, promissory fidelity, and the like) would make its individual participants at least somewhat more virtuous.

Correct as I took Oman's overall argument to be, I expressed concern that there would be a "seepage" of the limited virtues of the market into the remainder of social life. In other words, "other forms of social order including the family and at least some voluntary social and religious institutions are equally critical to the maintenance of political liberalism. And at best the market exists in an uneasy relationship with these spheres of human life." And I don't think I was wrong. (For example read my positive observations about Adeline Allen's article Surrogacy and Limitations to Freedom of Contract: Toward Being More Fully Human here and here.)

Late in 2017 Oman took another swing at justifying the value (and virtues) of the market, underwritten by contract law. In Commerce, Religion, and the Rule of Law (download here), Oman seeks to limit the impersonal market-oriented virtues from the effects of the more intense personal virtues inculcated by religion: "The rule of law allows for trade among strangers, fostering peaceful pluralism. However, law breeds what Montesquieu called 'a certain feeling for exact justice' that crowds out deeper forms of relation. Religious commerce fosters precisely such communities." In other words, "religious networks provide a high-trust social context in which commerce can thrive." Sounds great but ...

When it comes to contemporary religiously plural states high levels of intra-religious trust can actually inhibit inter-religious commerce. A flourishing market needs to develop social virtues that are a only a facsimile of what a common commitment to God can achieve; thus "the state must use law to flatten and simplify social reality." Such a thinned-out version of the virtues is great for the state which, after all, wants a prosperous and reasonably docile populace to pay taxes and acquiesce in the state's asserted monopoly of coercive force. On the other hand, a growing sphere of "stranger" virtues can crowd out the higher order of virtues prized by a religious community. What is a religious community to do? 

Given enough size, such a religious community might try to opt out of the larger inter-religious market economy. Can the state allow that? In other words, what happens when religious communities practice "the kind of opaque social arrangements that are likely to draw the suspicions of states wishing to create a legible social reality"? The violence associated with the western migration of America's Mormons is an example to which Oman points.

Oman leaves this conundrum unresolved. Indeed, I think it is unresolvable, which points to the fragility of the liberal political and economic order. In any event, I appreciate Oman's continuing quest to articulate a truly moral basis for my field of contract law.

13 September 2018

Contract and Property in Bankruptcy

(Way inside bankruptcy baseball.)

It's been awhile since I've posted on the fundamental categories of property and contract through the lens of bankruptcy law. (Go here for one from 2012.)  But until today I've never achieved the trifecta of property, contract, and Article 9 of the Uniform Commercial Code. Actually, I haven't achieved such a trifecta but the spousal team of Jeanne Schroeder and David Gray Carlson have in an articled titled Three Against Two: On the Difference between Property and Contract and the Example of Deposit Accounts in Bankruptcy (download here). Here's the abstract:
In Citizen's Bank v. Strumpf (1995), Justice Scalia announced that deposit accounts are not "property". Five years later, the Uniform Commercial Code was amended to make deposit accounts collateral for the depository bank maintaining the account, thereby crowding the field previously occupied by the common law right of setoff. Security interests attach to personal "property." Security interests attach to deposit accounts. Deposit accounts, by syllogistic logic, are property. Does this mean that the UCC has overruled the Supreme Court? We argue not. A deposit account is a mere contract in the two-person universe that contract law presupposes. A deposit account is property in a universe of three or more persons. We argue that Justice Scalia can be vindicated by the text of the Uniform Commercial Code and that the 2000 amendments do not overrule the Supreme Court. The investigation reveals the proper vector spaces that contract and property logically inhabit.
In other words, from one perspective deposit accounts are contracts but from another they are property. Such a perspectival approach to a single (but complex) phenomenon is not (at least not necessarily) a lack of analytic rigor. See, for example, some long-ago articles that I wrote using such a multi-perspectival approach: Consideration in the Common Law of Contracts (download here or here) and Mission Possible: A Paradigm for Analysis of Contractual Impossibility (here or here).

In addition to directing folks to this fine piece, I should admit that it reveals an oversight in my 2001 article How Article 9 Will Turn the Trustee's Strong Arm into a Weak Finger: A Potpourri of Cases (download here or here). I tried to pick up on how the drafters of Revised Article 9 tried (and largely succeeded) in using the process of drafting uniform laws to reverse a variety of cases decided under the earlier version of the statute. While the Schroeder-Carlson team concluded that the drafters did not try to reverse SCOTUS, I should have mentioned this issue.

(If you want to kill some more time by reading another of my other post on the topic of property and contracts, try here.)

11 September 2018

Purposeful Corporate Thoughts

Back in the day I posted some of my thoughts about corporate purpose here. Not too long later I elaborated here when commenting on another piece on the same topic by the Roman Catholic Brian McCall. Suffice it to say that we agreed that the Good of a business corporation should not be reduced to maximizing shareholder wealth.

Not that increasing shareholder wealth is a "bad" but only that, like human persons, there's more to corporate life than barns full of wealth. Indeed, the cases regularly cited in support of the broad principle of shareholder-wealth-maximization (Dodge v. Ford and eBay Domestic Holdings, Inc. v. Newmark) can be read more narrowly to forbid only oppression of some shareholders by others.

And McCall and I also agreed that the competency of the chartering State to evaluate the relative Goodness of corporate purposes is minimal. In other words, directors who seek shareholder wealth above all should not be sanctioned. After all, there's no (human) law against maximizing personal wealth.

On the other hand, neither should corporations seeking to advance a broader notion of the Good find themselves mulcted. In fact, such independence of director judgment about a particular good to be pursued by a corporation is largely protected by the business judgment rule, which allows directors great latitude in valorizing a perceived long-term Good over short-term profitability.

So what, you ask? As a teacher at a school that self-identifies with the Christian tradition, I believe that our law students, in preparation for their roles as public citizens, should enjoy a full-orbed legal education.

All agree (or at least I hope they do) that the "is" (whatever it may be when it comes to the law) does not always equal the "ought." "Separate but equal" was once the law but now it's not. Even in more mundane legal matters, calibrated moral judgments are frequently as important as legal ones. Yet, without some nudges from their teachers, many law graduates will simply default to the lowest pragmatic level of ethical analysis when it comes to advising their clients. We can hope for more. We should strive for more. But it starts with us, their teachers.

05 September 2018

The Maw of the Market

You can go here to read an excellent piece by Alastair Roberts: Social Justice: Seeking Integrity in a Society of Co-Opted Principle. Roberts examines the socially-enforced duty of expressive patriotism that we see especially in reaction to players kneeling during the national anthem at NFL football games. He then looks at Colin Kaepernick who began the kneeling protest for principle but has recently (Labor Day 2018) lent his expression of that principle to the profit-making behemoth of Nike Apparel: "Believe in something. Even if it means sacrificing everything."

Is there nothing of a principled nature--political (or religious, for that matter)--that cannot be reduced to a quantifiable value?

I've previously alluded to the irresistible pull of the market here and here but Roberts elaborates. With respect to co-option of the principled by the commercial he writes:

While they are seldom as inept in execution as Pepsi was with its protest ad of a year or so ago, big businesses have proved remarkably eager to associate themselves with the culturally ascendant values of various social justice movements. However, what the Pepsi ad does reveal is how essentially unprincipled such associations can be, as the attractive and youthful aesthetics of protest and social justice movements—with their foregrounding of the individual consumer and celebration of their unfettered self-expression—are often more appealing than the specific things for which they stand. In some this co-option of social justice by corporations will produce cynicism; in many others, however, it will merely reinforce the cult of consumerism and the debilitated selfhood that it sells its subjects. (Emphasis added.)
If the reworking of principle for profit isn't bad enough, with respect to several contemporary varieties of Christianity Roberts observes that:
Much of evangelicalism, for instance, is built around the reality of the self-expressive, individualistic, and autonomous religious consumer. [Moral. TherapeuticDeism, anyone?] And this is hardly exclusive to evangelicalism: a great many people who are in high church traditions are no less committed to a sort of self-expressive religious consumerism, albeit driven by a different set of aesthetic values and cultural and social affiliations.
So, what's the solution? Whatever it may be, it won't be simple. For the Christian, it may require a greater awareness that the "now" of the world of market-driven late-consumer capitalism is not the "not-yet" of the consummate Kingdom of God (here). Christians should be more content with a less-than-"professional" style of worship. (Some earlier comments here.) But it's not that easy to get out of our consumer skins even when we know it's leading us astray so I'll let Roberts have the final word:
We would be foolish to think that we can straightforwardly extricate ourselves from this religious consumerism. It is the water that we swim in, much as virtue-signalling is something that we are all inescapably involved in online.
Worldliness has always plagued the Church so in one sense there's nothing new in what we see today. Yet, the pervasive failure to see that a problem exists suggests that contemporary Evangelicalism's capitulation to the maw of the market will be with us for some time.

31 August 2018

Christianity and Private Property

You can go here to download a good survey piece by David Opderbeck, Christian Thought and Property Law. Opderbeck surveys the Biblical record (Old and New Testament) about the notion of private property including its legitimate uses and risks. He also covers the views of the Patristics (including Augustine), Thomas Aquinas, Protestants from the Reformation era (Magisterial and Anabaptist), as well as the broad strokes of contemporary Catholic thought. His take-away: "there is no single 'Christian view' of private property. The Biblical witness and the historic reflection of various Christian traditions on the subject are vast and sometimes inconsistent."

In short, a fine introduction that does not requires extensive historical or theological skills to use profitably for individual (including law student) or small group purposes.

22 August 2018

Natural Rights, Natural Law, and the Mashup of Human Rights

A recent editorial in the Wall Street Journal here titled "What Went Wrong With Human Rights" is unhelpfully subtitled "The conflation of ‘natural law’ with ‘positive law’ handed communism a philosophical victory after the end of the Cold War." has been making the social-media rounds. With more than enough truth to warrant reading it, the essay by James Taranto (drawing on a book by Aaron Rhodes) conflates enough error with the truth to warrant a comment.

First, the truth. Taranto is correct to observe that the contemporary world of human rights documents is little more than a cornucopia of aspirations for this, that, or the other perceived good. In other words, many (but certainly not all) of the putative human rights found in instruments such as the International Covenant on Civil and Political Rights, the International Covenant on Economic, Social and Cultural Rights, the Convention on the Rights of Persons With Disabilities (observations here and here), the Convention on the Rights of the Child, etc. are in no meaningful sense of the word, "rights." Instead they are "goods."

Human rights, by contrast, have traditionally been understood as trump cards or immunities from unauthorized private or state action. (For a few of my many posts on the nature (and future) of rights go here, here, and here. If you're really interested, you can read my article Looking for Bedrock: Accounting for Human Rights in Classical Liberalism, Modern Secularism, and the Christian Tradition (download here or here.). For yet another take on the nature and limits of human rights, read my brief review of an especially fine piece by former colleague Craig Stern here.)

So, what's my beef with Taranto's piece if, as it turns out, I agree with the bulk of his conclusions? Principally this: like many of today's classical liberals and libertarians, Taranto errs in seeming to conflate the political-philosophical category of "natural rights" with that of "natural law." Natural rights philosophy finds its origins in the political thought of Thomas Hobbes and John Locke and is the illegitimate stepchild of the long-standing Classical and Christian commitment to natural law.

Responding to the crisis occasioned by the English Civil War in the middle of the 17th century, Hobbes and then Locke proposed accounts of the justification for political authority that attempted to ground it not on the humanly-mediated authority of God but on the practical needs of a society to keep folks from killing each other. Both believed in a few "natural" rights and that protection of those rights warranted collective action in the form of a modern state that alone had the power of the sword. But nothing more. In other words, if not for Locke then for many of his subsequent American followers, the state existed only to protect and vindicate those few natural rights. Other social goods were outside the jurisdiction of the state. By contrast, the long tradition of natural law worked out by Christian theologians beginning with Augustine (and continuing through the Reformers and beyond) combined rights, duties, and goods in a web of social relations that found a place for state action not only to protect rights but also to achieve social goods.

Giving Locke (and even Hobbes) his due, they had lived through years of civil war, the execution of a king, and a subsequent commonwealth under Oliver Cromwell that regressed to little more than a dictatorship. Much of the turmoil they witnessed was due to a strand of some Puritan thought that had itself rejected the notion of social goods, at least those that did not have specific biblical warrant. Turning from the meliorating wisdom of Richard Hooker, these Puritans helped clear the way for the secularizing reaction less than a half-century later.

But back to now: just what social goods a state should undertake to provide is a question of history and practical wisdom. Whatever goods a state pursues (in addition, of course, to vidicating the natural rights of its populace) must evaluated in terms of (1) the history of the polity, (2) its current resources, and (3) what is actually good. But, pace John Finnis, these goods are not human rights.

Back again, this time to Taranto: a view of natural rights without a metaphysically-grounded natural law is vulnerable to the "sez who?" objection. As I wrote some years ago here,
Natural rights amount to little more than dogmatic assertions when decoupled from a world of theistic or at least metaphysical substance. Nor can a pure natural rights philosophy deal effectively with the "so what?" objection. Even if there are "things" such as natural rights, who says why anyone should care about them except out of personal prudence? There would be no moral obligation to rectify violations of them.
Much--but not all!--of what pases for human rights today represents a bloated Western elite wish list that may do more to doom real human rights than achieve any long-lasting good.  Standing on the natural rights platform alone and shouting "Stop!", however, is not enough. Belief in natural rights without more will do little to staunch the burgeoning human-rights bonanza.

20 August 2018

"Aquinas Among the Protestants"















What looks to be a very good book positively reviewed by the highly respected Carl Trueman here.

For my thoughts on one aspect of the continuity between medievals like Thomas Aquinas and a leading Reformer like John Calvin you can read my articles, God's Bridle: John Calvin's Application of Natural Law (download here or here) and Natural Law and the Two Kingdoms: A Study in the Development of Reformed Social Thought by David Vandrunen (here).


As far as I'm concerned, anything that will equip Confessional Protestants and Evangelicals to develop a coherent theology of culture and to recognize their deep debt to their small-c catholic heritage is a good thing.










15 August 2018

Ever Closer to Midnight: The Market Boom and State Pensions

For some of my earlier posts about the timebomb of unfunded pension liabilities go here, here or here. For my published article, Municipal Bankruptcy: When Doing Less Is Doing Best, go here or here.

One might think that the nearly decade-long runup in the stock market has closed the funding gap for state employee pensions. But one would be wrong. Go here to read an excellent piece "Pension Tick-Tock" where Steven Malanga explains that even though since 2009 the stock market has produced an annual compounded return of nearly 15%, state pensions are in more parlous condition that they were before the Great Recession:
 A recent Wilshire Consulting report estimates that at the end of fiscal 2017, state government pensions nationwide were only 70 percent funded, down from 87 percent in 2007. Since the recovery began in 2009, $100 placed in a broad market-index fund would have yielded an investor about $365 today—an average compound annual gain of some 15 percent. No matter for pensions, though: thanks to a host of problems, most state and local government funds have spent a good part of the nine-year recovery heading in the wrong direction. (Emphasis added.)
The large group of Baby-Boomers approaching retirement is a big part of the problem. Coupled with declining birth rates, many states have fewer high-income taxpayers to support a growing number of retirees. Moreover, "pension plans have also miscalculated the impact that volatile swings in the market have on their ability to recover." In other words, large draws at the bottom of the market have reduced the effect of subsequent market gains. Thus, even increased state contributions (up 90% since 2009) have failed to keep pace with faster-increasing unfunded liabilities.

What will happen with the next recession? I'd rather not say so I'll quote Malanga:
Only massive infusions of cash from taxpayers could help then, but state and local governments—already having upped their contributions to pensions—will be in no position to bail out funds with taxpayer dollars when the next recession hits.
Of course, the unwillingness of states to raise taxes sufficiently doesn't mean they can escape liability for retiree benefits. But, without recourse to state-level bankruptcy it remains to be seen what will happen when retiree class-action lawsuits hit the fan.

09 August 2018

The Death of American Common Law

(Warning: Inside common-law baseball.)

In his worthwhile post here, Anthony Gaughan observes that for many decades none of the jurists among the fifty states has had the luster of the great Benjamin Cardozo (1870-1938). And this state of affairs has certainly been true for many decades. Consider: how many state-court justices are on the shortlists for SCOTUS of President Trump? Or for President Obama?


Gaughan argues that Cardozo himself bears some of the blame. After all, while on SCOTUS he granted the initial stay in Erie v. Tompkins that eventually lead the Court some months later to announce the Erie Doctrine that ended the common law-making powers of the federal courts:

The effort to ascertain a universally-applicable, general common law came to an end in the famous 1938 case of Erie Railroad Company v. Tompkins, decided just a few weeks before Cardozo’s death. In Erie, the U.S. Supreme Court held that federal courts sitting in diversity jurisdiction should apply the state common law as articulated by the state supreme court.
How could this have contributed to the death of the common law?
Erie brought to an end the idea that, in applying the common law, judges across the country were engaged in a common endeavor. The logic of Erie was that the common law can and should develop differently in the 50 statesState judges thus had no need to look beyond their own borders for guidance in ascertaining the common law. discover 
While I agree that the American common law is slowly dying, I do not agree that Erie had much if anything at all to do with it. The roots of the decline of the common law were already apparent even in the heyday of Cardozo. First, as Gaughan suggests, legal positivism had turned the quest into the common-law solution to a legal problem from a consideration of practical reason informed by history and first principles into a pragmatic "scientific" quest directed by either autonomy or efficiency. O.W. Holmes, Jr., Roscoe Pound, etc.

Second, the inexorable growth of the modern (especially federal) administrative (and security) state meant that the answers to more and more legal problems weren't to be found in the common law at all. Statutory construction and not common law adjudication became the skill required of judges at all levels.

Third, I attribute the decline in American common law to the enormous caseloads of most state-level appellate judges. The need to generate opinions in as many as three cases a week (and most of them appeals of criminal convictions or administrative actions) makes it virtually impossible for an appellate judge to give the thoughtful consideration necessary to discover the common law's solution.

In other words, American common law has suffered the fate afflicting American higher education: we have substituted technological algorithms for wisdom.

01 August 2018

Job Posting: Campbell Law Hopes to Hire Two

Following is the posting by Campbell University Law School for two faculty openings. Please feel free to circulate this post to others who might be interested.

CAMPBELL UNIVERSITY SCHOOL OF LAW invites applications from entry-level and lateral candidates for two full-time tenure-track faculty positions to begin in Fall 2019. We are particularly seeking applicants interested in teaching business associations and related upper-level courses, or civil procedure and related upper-level courses.

Applicants should have at least two years of full-time practice experience in their area of teaching interest, excellent academic credentials, demonstrated skill to teach and mentor students, and demonstrated ability to be a productive scholar or a proven a track record of productive scholarship. We welcome applications from candidates whose background will contribute to excellence through institutional diversity.

Campbell can only accept applications online, and all applications must include each of the following: (1) cover letter of interest specifically addressing the applicant’s unique qualifications for the position and how the applicant can further each of the law school’s five distinctives listed below; (2) a current curriculum vitae; (3) an unofficial law school transcript; (4) a representative example of scholarship and/or a research agenda; and (5) course evaluations for any prior teaching engagements, if applicable.

Campbell University School of Law is a highly demanding, purposely small community of faculty and students whose aim, guided by transcendent values, is to develop lawyers who possess moral conviction, social compassion and professional competence, and who view the practice of law as a calling to serve others and to create a more just society. To that end, the law school has adopted the following distinctives: (1) we offer an academic program that is highly demanding; (2) we bring together the theoretical and practical to produce thoughtful and talented lawyers; (3) we utilize the talents of a faculty that is profoundly committed to students and teaching; (4) we view the practice of law as a calling to serve others; and (5) we offer a Christian perspective on law and justice. More information about the law school can be found on our website: http://www.law.campbell.edu/.

We are located in downtown Raleigh, North Carolina, close to the Research Triangle. Both areas are repeatedly cited in national surveys as among the best for starting a new career or business, excellence in education (from public schools to post-graduate studies), and enjoyable quality of life. 

Direct questions to Professor Tuneen Chisolm at tchisolm@campbell.edu.

Apply here.

Campbell University Inc. complies with all Federal and State employment laws - EEO/AA/Minorities/Females/Disabled/Protected Veterans.

23 July 2018

"Grant"

Ron Chernow's "Grant" was another Christmas gift. Coming in at 959 pages of text plus 53 pages of notes and an extensive bibliography, it's little wonder it took me about four months to read it. Chernow could have loped off a couple of hundred pages without sacrificing the comprehensive nature of this biography. Frequently Chernow provided a second or third description of a situation or action when a single one would have sufficed. I suspect Chernow was especially concerned to support his conclusions when they departed from received folklore.

Several points stood out. No biographer of Ulysses Grant can overlook his struggles with alcohol. It seems that Chernow has done a fair job of separating the facts of Grant's abuse of strong drink (of which there are plenty) from the exaggerations of his professional and political enemies. It's not surprising, given the political appointments of most general officers for the Union, that Grant suffered from jealous gossip. Yet Chernow doesn't sugar-coat the abuse of alcohol that led to Grant's resignation of his initial military commission in 1854 and his intermittent bouts with drunkenness even after his return to active service in 1861. It is, however, Chernow's settled conviction that Grant's elevation to Lieutenant General in 1864 and his two terms as president did not suffer from from the abuses that characterized his earlier life. The close proximity of his wife Julia had much to do with Grant's ability eventually to keep his vows of abstinence.

Grant, like Lincoln, was initially motivated to fight for the Federal side to maintain the Union in face of what he believed was unconstitutional secession by the states of the Confederacy. Indeed, Grant was unable to comprehend how Confederate military officers, many of whom had been classmates at West Point and sworn to defend the Constitution, could abandon their oaths. But, like Lincoln, Grant came to see the War Between the States as a mission to root out the institution of race-based slavery. And, after Lincoln's death, Grant came to the conviction that the Federal government should prohibit not only slavery but race-based discrimination against Blacks. I had not known of Grant's extraordinary commitment to enacting, preserving, and defending the civil rights of of African-Americans even in the face of persistent Northern racism. 

Third, Chernow describes in painstaking detail Grant's astonishing credulity when it came the venality and corruption of family, friends, political appointees, and, at the end, business partners. Grant was certainly not above accepting personal gifts from businessmen who had something to gain from a connection with him but there there seems to be no evidence that Grant made decisions based on such largess. His political  appointees, however, actively traded their power for cash but Grant stuck by them until the bitter end (and beyond). Grant himself could have done much more to avoid or at least limit the persistent corruption that plagued his two administrations but seemed incapable of believing that friends or subordinates could act as they did. Grant certainly bears personal culpability for failing to pay attention to the details of his administration and later his business partnership and for failing to act promptly when circumstances demanded.

When finally reaching the end of "Grant," Chernow leaves the reader with a detailed picture of flawed man who largely rose to the demands of the extraordinary positions in which he found himself. In his military leadership, Grant effected the goal of maintaining the Union of the United States. Chernow satisfied me that, with the exception of Cold Harbor, Grant deployed his soldiers in superb tactical fashion given the technology and communications of the day. And it was Grant's strategic vision deployed after being given command of all Federal forces, unmatched by anyone in the Confederacy, that ultimately forced the capitulation of the southern armies. And in Grant's presidency, he led the process of Reconstruction and did more to advance the rights of the new Black citizens than any president until the mid-twentieth century.

All in all, a gift that I greatly appreciate.

18 July 2018

Five Years Ago Today ...

... Detroit filed for Chapter 9 bankruptcy. I blogged about the case nearly interminable (go here for one of the last) and wrote an article about it, Who Bears the Burden? The Place of Municipal Residents in Chapter 9 (download here or here). 

All seems to be going reasonably well in Motown nowadays which is due in part to the successful adjustment of its debts in Chapter 9. A formal, legal mechanism by which debts can be adjusted (or reorganized, in the case of Chapter 11) is crucial for entities in a market economy. The whole of an enterprise is often worth more than its parts but the value of that whole cannot be realized without a means of forcing holdouts to participate and binding each for the sake of all.