The University of Chicago Law School Faculty Blog

Laws We Can’t Afford

The New York Times reported Thursday that Wal-Mart has adopted a new policy of not prosecuting shoplifting if $25 or less is involved. Why has Wal-Mart gone soft? It costs too much to enforce the law, too much for Wal-Mart, and that is with Wal-Mart just focusing on its costs. The costs to the police of enforcing those laws are substantial; indeed, South Strabane Township in Pennsylvania (population 9,000) has one of its 16 officers tied up on Wal-Mart shoplifting duty. And Dan Filler notes how much of the local court docket is chewed up by shoplifting.

As Stephen Dubner points out, the change could give rise to some interesting empirical effects. He focuses on what the police will do now that they are not hanging out at Wal-Mart. I want to know how many more shoplifters well head to Wal-Mart and will they be careful to choose the $24.99 headphones rather than the really nice ones?

But my real interest here, raised before, is whether we would benefit by lowering the cost of enforcement, should we have such a technology available? If Wal-Mart and the police could drop the cost of enforcement 50% or more, is there any reason we shouldn’t want that?

CleanFlicks and Digital Rights Management

Last Thursday, a federal district court judge ruled that CleanFlicks violated U.S. copyright law when it edited movies for sex, violence and language. CleanFlicks sought to claim protection under “fair use” but the court rejected that claim. The case is interesting in the way that it ties into the issue of digital rights management (posts here and here) and the question of how we will allocate control between content creators and content users.

We should start with some background on CleanFlicks. CleanFlicks does exactly what the name suggests. It edits out the bad parts of movies (or are those the good parts, I always get confused) to make movies more family friendly. Clean movies. Nick Gillespie at Reason nominates Titanic as a natural candidate. Very little violence in the movie (well, other than the thing with the iceberg and everybody dying in the end) and very little sex, other than one key scene in which Leo DiCaprio sketches Kate Winslet in the nude (Kate, not Leo), and you do get something of a lingering look at Winslet’s breasts. Take out the breasts and now we have family friendly.

The Case Against (GM's) Bankruptcy

Barry Adler's post suggests that changes in conventional wisdom or laws might be needed to encourage efficient, earlier Chapter 11 bankruptcy petitions. With a few twists and turns the arguments for and against this idea might cause us to reassess or review the fundamentals of bankruptcy.  It is plausible that we would be better off moving in the opposite direction, welcoming the death of bankruptcy, at least for large organizations.  Perhaps GM (which is to say its creditors, executives, or shareholders) and other enterprises would be better off if forced to work out problems by contract (by which I mean arrangements that leave as little room as possible for surprise in court).

Ann Coulter, Plagiarist?

The Associated Press is reporting allegations that Ann Coulter plagiarized certain passages in her new, controversial book Godless (sorry, that was unforgivably redundant: anything that Coulter writes will be controversial; that is her particular niche after all).

 

I am no Coulter fan, but it is worth considering the allegations to help to orient ourselves in the world of copyright and plagiarism. At least in some cases, Coulter seems to have “borrowed” facts. Facts are in the public domain and are free to be repeated by all, and it is therefore important that we separate borrowing from fiction from repeating facts.

 

Disclosure of insider trading plans – a puzzle

I’m working on a paper with a professor at Stanford about firms’ decisions to adopt and disclose the existence of corporate insiders’ 10b5-1(c) trading plans.  In theory, these plans can decrease expected litigation risk for firms and executives, either through reducing the ability to trade on material, non-public information or providing an affirmative defense even for trades that might be of questionable legality.  The litigation prophylactic only works, however, if firms disclose the existence of these plans.  Based on data that we have collected, many firms that have adopted these plans made no disclosures about this fact.  This seems puzzling.

Cause for Debate

For those who are interested in more discussion of Hamdan, Cass Sunstein is guest-blogging and debating Marty Lederman and Sandy Levinson (so far) over at Balkinization. Enjoy!

As Goes General Motors

As of today, General Motors’ market capitalization (the combined value of its shares) is about $16.5 billion. In 2005 alone, GM lost $10.6 billion and by all accounts the losses continue. The positive value of the stock reflects a chance that the company will turn around not an indication that it has. Even so, the company can for some time continue to suffer losses at this or higher levels and still not default on any of its loans. All it need do is borrow from Peter to pay Paul, and GM is doing just that.

In late June, the automaker announced that it would refinance $5.6 billion in loans, a move it described as a "positive action toward additional financial flexibility." This action is "positive," no doubt, for GM managers, employees, and shareholders, each of whom would like to buy time for a reversal of fortune. But no such reversal is guaranteed, or even likely, and thus not every corporate constituent is pleased by the company’s new liquidity. The new loans are secured by collateral that gives the holders priority over GM’s unsecured bonds. Should the company continue its losses and default on its new obligations before it pays off the bonds, the bondholders will be left with little or nothing to collect. In anticipation of such an event, both Standard & Poor’s and Moody’s investor services cut the credit rating of GM bonds, which were already classified as junk. So while GM may consider the refinancing a positive step, the news is not necessarily good.

Hamdan, NSA, and the New York Times

The Bush administration and its allies continue their drumbeat attack on the First Amendment with repeated threats to prosecute the New York Times for disclosing the President’s secret surveillance programs. Attorney General Alberto Gonzales has suggested a criminal prosecution under the Espionage Act, Congressman Peter King and Senator Jim Bunning have accused the Times of treason, and Republicans in the House of Representatives have passed a resolution condemning the Times for putting “the lives of Americans in danger.”

All this is rank hypocrisy designed to intimidate the press and rally the party faithful, at no small cost to our democracy. The decision of the Times to reveal the secret NSA spy program may have embarrassed the President, but it was a great service to the nation. Any doubt there might have been about the illegality of the NSA program was effectively put to rest by the recent decision of the Supreme Court in the Hamdan case. The administration’s only plausible argument that the NSA surveillance program is lawful, even though it plainly violates the 1978 Foreign Intelligence Surveillance Act, is that FISA unconstitutionally limits the authority of the President as “commander in chief of the Army and Navy.” Even before Hamdan, this claim was weak, at best. After the Court’s five-to-three decision in Hamdan, that claim is frivolous. In declaring unlawful Bush’s military commissions, the Court in Hamdan reiterated what it said plainly two years ago in Hamdi – even a state of war does not grant the President a “blank check” to run roughshod over the law.

Guest Blogger: Barry Adler

Continuing our guest blogger program, we are delighted to welcome Barry Adler, currently Vice Dean and Charles Seligson Professor of Law at NYU. Barry works primarily in the areas of bankruptcy and commercial law. He graduated from the Law School in 1985.

Barry, welcome aboard.  We are very glad to have you back. (And if you happen to have any embarrassing stories about your classmate Randy Picker, ...)