The Implausibility of Secrecy

Mark Fenster

Volume 65, Issue 2, 309-63

Government secrecy frequently fails. Despite the executive branch’s obsessive hoarding of certain kinds of documents and its constitutional authority to do so, recent high-profile events—among them the WikiLeaks episode, the Obama administration’s infamous leak prosecutions, and the widespread disclosure by high-level officials of flattering confidential information to sympathetic reporters—undercut the image of a state that can classify and control its information. The effort to control government information requires human, bureaucratic, technological, and textual mechanisms that regularly founder or collapse in an administrative state, sometimes immediately and sometimes after an interval. Leaks, mistakes, and open sources all constitute paths out of the government’s informational clutches. As a result, permanent, long-lasting secrecy of any sort and to any degree is costly and difficult to accomplish.This Article argues that information control is an implausible goal. It critiques some of the foundational assumptions of constitutional and statutory laws that seek to regulate information flows, while complicating and countering the extensive literature on secrecy, transparency, and leaks that rest on those assumptions. By focusing on the functional issues relating to government information and broadening its study beyond the much-examined phenomenon of leaks, the Article catalogs and then illustrates the formal and informal means by which information flows out of the state in a series of case studies. These informal means play an especially important role in limiting both the ability of state actors to keep secrets and the extent to which formal legal doctrines can control the flow of government information. The same bureaucracy and legal regime that keep open government laws from creating a transparent state also keep the executive branch from creating a perfect informational dam. The Article draws several implications from this descriptive, functional argument for legal reform and for the study of administrative and constitutional law.

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Due Process and Temporal Limits on Mandatory Immigration Detention

Farrin R. Anello

Volume 65, Issue 2, 363-405

Since 1996, the Immigration and Nationality Act has required the government to take into custody individuals in removal proceedings who have past convictions for any of a wide range of criminal offenses. This provision has led to more than a five-fold increase in the number of people detained each day, with harsh consequences for these individuals, their families, and communities across the country.Such a sweeping, categorical detention is not easily reconciled with the Supreme Court’s 2001 decision in Zadvydas v. Davis, which extended to immigration detention the due process limits that the Court has recognized on other forms of civil detention. In Demore v. Kim, decided just two years later, the Court rejected an as-applied due process challenge to the mandatory immigration detention statute. Throughout the past decade, lower courts have sought to reconcile Demore with Zadvydas. As of this writing, three circuit courts have avoided a constitutional problem with the mandatory detention statute by construing its ambiguous language to impose temporal limits on mandatory detention. However, they have not reached consensus on how to define these limits. One circuit has adopted a bright-line rule that detention beyond six months requires a bond hearing, while two others have adopted a reasonableness standard for determining when a hearing is required.This Article argues that the mandatory detention statute should be construed to govern detention for no longer than six months, after which time a bond hearing should be required. It reaches this conclusion by analyzing Supreme Court due process doctrine, surveying decisions that have implemented the rule and standard discussed above, and considering key institutional features of the administrative removal system, including the dearth of legal representation for people in detention.

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The Real Problem with Carried Interests

Heather M. Field

Volume 65, Issue 2, 405-440

The recent proposals to reform the tax treatment of private equity, venture capital, and hedge fund managers are misguided. Policymakers and commentators often take industry-focused, results-oriented approaches to the “carried interest” debate, thereby obscuring the real source of the policy objection to carried interests. Instead of starting with a result that is objectionable and trying to find a way to change the law to avoid the objectionable result, this Article begins with the law and facts relevant to carried interests and systematically unpacks the tax rules that combine to produce the current tax treatment of carried interests. As a consequence, this Article provides structure to the voluminous discourse about carried interests, identifies the key features of the tax law that are most likely to cause hostility toward carried interests, and analyzes how to design reform proposals that are most responsive to each objection. More generally, this Article redirects attention away from the narrow carried interest issue and toward the more fundamental aspects of the tax system that need reform.Ultimately, the appropriate response to the carried interest controversy (assuming a response is warranted) depends on whether the crux of the problem is the use of equity compensation, one or more technical aspects of the partnership tax rules, revenue needs, distributive justice considerations, disapproval of the fund industry, or something else entirely. But the recent legislative proposals fail to respond effectively to any of these issues, and should be therefore abandoned. Instead, policymakers should uncover and fix their fundamental problem with carried interests.

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The Mandatory Law Puzzle: Redefining American Exceptionalism in Corporate Law

Jens Dammann

Volume 65, Issue 2, 441-500

American corporate law stands out when compared to other legal systems. At no time is this more apparent than with regard to the use of mandatory law. Corporate law in the United States is largely enabling, whereas most other countries around the globe rely heavily on mandatory corporate law.The traditional view seeks to explain this American exceptionalism by pointing to the phenomenon of regulatory competition. According to this view, regulatory competition has eroded mandatory corporate law norms in the United States, whereas the absence of such competition has allowed mandatory norms to persist in other countries. This narrative, however, confuses cause and effect. Regulatory competition exists where it is allowed to exist; the decisive question is why so many countries have chosen to protect their mandatory corporate law norms by suppressing regulatory competition while the United States has done the opposite.This Article argues that efficiency considerations are key to understanding this mandatory law puzzle. The efficiency of enabling versus mandatory corporate law is not uniform across countries; instead, it depends on numerous social and institutional factors, particularly the efficiency of stock markets, ownership patterns, judicial infrastructure, and labor market flexibility. As a result, enabling corporate law is substantially more efficient in the United States than it is in many European countries. In other words, the U.S. commitment to private ordering in corporate law might not be a simple political choice that other countries can copy at will, but rather the reflection of various deep- seated institutional and social characteristics.

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Antitrust, Regulation and the “New” Rules of Sports Telecasts

Babette Boliek

Volume 65, Issue 2, 501-551

Open almost any news source, or simply turn on the program guide of any television, and the explosive proliferation of sports telecasts is quickly evident. The amount that exhibitors pay to sports leagues has reached dizzying heights, due in large part to high demand and the unique, unrecorded nature of sports telecasts. These desirable characteristics arguably make sports telecast contracts essential to the economic viability and competitiveness of leagues and telecasters alike. Although these contracts provide many benefits to corporations and leagues, embedded within them are weighty restrictions such as “black out” rules and exclusive distributorships. These restrictions raise questions as to the ultimate effect that such contracts have on competition and overall consumer welfare. The two legal mechanisms that traditionally protect industry- wide competition and consumer welfare are antitrust law and regulation. This is no less true in the professional sports and telecast industries. The collision of these two industries has resulted in a labyrinth of regulation and uneven antitrust enforcement that diminishes consumer choice, program diversity, and competition.This Article presents a novel quantitative analysis of sports league antitrust jurisprudence to counter cries for increased regulatory scrutiny of these joint ventures. The results demonstrate that antitrust is not only capable of policing joint ventures, but that the Supreme Court revitalized such review in American Needle v. NFL. Based on empirical review of past case law, current antitrust exemptions, and relevant regulatory policy, this Article presents several recommendations to both (1) rationalize regulatory rules that currently create disparate treatment among leagues and telecasters, and (2) clear the field for pro-consumer competition in sports telecasts.

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Note – Peasants Revolt: Why Congress Should Eliminate the Tax Benefits on Dead Peasant Insurance

Patrick Burns

Volume 65, Issue 2, 551-579

Corporate-owned life insurance (“COLI”) is a form of insurance in which an employer takes out a life insurance policy on the life of one of its employees. COLI is legal under state insurable interest statutes because employers have a financial incentive in the continuation of certain “key employees.” However, in the past two decades, use of COLI has increased as large corporations have begun to insure larger percentages of their workers, even low-wage employees. This widespread practice presents many public policy concerns: corporations profit by reaping the death benefits when an employee dies and federal tax law permits the corporations to exclude the proceeds from gross income. Congress attempted to curb COLI by limiting a corporation from insuring certain types of employees, but corporations continue to insure large percentages of their employees.This Note argues that Congress should go further in eliminating COLI due to the dangerous incentives that it provides to employers in the event of an employee’s death. In the modern employment context, all employees are replaceable and private businesses should not reap federal tax benefits from the death of its employees. This Note proposes changes to state insurable interest laws as well as the elimination of federal tax benefits for corporations.

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Note – Reflections on Riverisland: Reconsideration of the Fraud Exception to the Parol Evidence Rule

Michelle P. LaRocca

Volume 65, Issue 2, 581-615

The California Supreme Court recently and unanimously overruled a longstanding precedent regarding the fraud exception to the Parol Evidence Rule in Riverisland Cold Storage, Inc. v. Fresno-Madera Production Credit Association. Prior to Riverisland, the Parol Evidence Rule did not allow evidence of promissory fraud. Now, evidence of promissory fraud at variance with the terms of the writing is admissible. Riverisland discourages fraudulent practices and creates a clear rule that is consistent with the language of California’s Parol Evidence Rule. It also recognizes the reality that many people do not read or understand the contracts that they sign and the psychological biases that play a role in perception and decisionmaking. The new precedent, however, exposes drafting parties to both intentionally and unintentionally fabricated claims from non- drafting parties. Drafting parties are also at risk of unpredictable outcomes from juries who might be swayed by testimony of alleged fraudulent promises. Because the new standard favors non-drafting parties, the cost of contracting has shifted from non-drafting parties to drafting parties.This Note suggests that, to balance the costs of contracting between drafting and non- drafting parties, meaningful assent to the specific terms at issue should be required for a party to be able to exclude evidence of alleged promissory fraud. Meaningful assent could be accomplished by having a one-page summary and disclaimer as to the key terms of the contract. If this summary/disclaimer page succeeds in being short, simple, and specific, then California courts should find mutual assent as to a contract’s terms and specific disclaimers, and preclude evidence of promissory fraud that is at variance with those terms.

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