The University of Chicago Law School Faculty Blog

Government’s Promise: Taking Away Property?

On this day of new opportunities, it seems almost churlish to point out how large the gaps are sometimes between political viewpoints. The lead editorial in the New York Times today is, appropriately enough, on government’s promise. The Times focuses on a possible amendment to the bankruptcy code to allow mortgage modifications on primary residences in Chapter 13. With house prices dropping, many mortgages are underwater. Chapter 13 currently precludes the reduction of those mortgages to now-current market prices. The Times favors an amendment that would allow just that. As the Times puts it: “The bankruptcy amendment cannot stop all foreclosures. But it is the starting point. And it would be a prime example of government doing for individuals what they cannot do for themselves—opening a courthouse door that is closed to them by law.”

Now reframe this from a different political perspective. What individuals lack is the right to take property from others. Individuals facing foreclosure lack the ability to grab shares of New York Times stock from the Sulzbergers so that they can sell those shares to pay off their debts. Government indeed makes it impossible for individuals to do that on their own.

I am not sure whether I think mortgage stripdown should be generally permitted on a going forward basis for new mortgages. I have never thought through the question fully. But it is important to recognize the important difference between a going-forward regime and one that applies to pre-existing mortgages. Of course all the bite is in the latter—and indeed versions of the mortgage stripdown bill would apply only to past mortgages.

But the central question is whether the rights of the mortgage holder are sufficiently property like that they are entitled to constitutional protection from after-the-fact taking, just like presumably the stock held by the Sulzbergers in the New York Times. I don’t know that I know the answer to that question either, but in 1982, the Supreme Court regarded it as sufficiently difficult that it avoided it in U.S. v. Security Industrial Bank, 459 U.S. 70 (1982) (“no bankruptcy law shall be construed to eliminate property rights which existed before the law was enacted in the absence of an explicit command from Congress”).

What I think I can say with greater confidence is that it is hard to give much credence to a view of government’s promise that operates off of such an incomplete understanding of what property rights are and when they are contested.

Student Blogger - "Glocalization" - a Third Way for Regulating Global Services?

France sues Yahoo for permitting Nazi memorabilia to be sold on its auctions accessible in France. Strict libel law in the UK gives a forum for suits against foreign parties - either chilling speech or vindicating important interests, depending on your point of view. The US Congress tries to block access to offshore gambling sites. China builds a new, digital Great Firewall.

These examples of the challenges of regulation in a global, networked economy are familiar to even the most casual observers. A lot has been written about them, in the mass media, in blogs, and in law reviews. But nobody has figured out a solution, or really even clearly identified the problem. Many think the Internet (the main vehicle for this global services trade) should be mostly if not fully free of regulation, others think regulation is necessary but harmonization is needed, and most everybody opposes the Chinese approach (though Australia has recently made moves toward creating its own barriers to net traffic).

Professor Anupam Chander offered a partial solution to these problems at this week's Works in Progress (WiP) talk at the Law School, presenting parts of a forthcoming book (The Electronic Silk Road, Yale University Press) on the subject. More on his proposal and responses to it below the fold.

Herring and the Exclusionary Rule

On Wednesday, the Supreme Court announced the decision in Herring v. United States, a case I discussed on the blog in October. The 5-4 majority opinion (you can guess the votes) expands the good faith exception to the Fourth Amendment exclusionary rule in precisely the way that I said may prove transformative.

The facts involve a record-keeping error. A police officer arrested Herring after a police warrant clerk told the officer that there was an outstanding warrant for Herring’s arrest. In a search incident to the arrest, the officer found an illegal handgun and drugs. Unfortunately, the clerk was mistaken. The court that issued the warrant (for a failure to appear) had recalled it five months earlier, but no one had bothered to update the warrant database. There being no warrant and no probable cause for Herring’s arrest, the lower courts find it plainly illegal. But those courts avoid excluding the illegally obtained evidence by extending an earlier Supreme Court decision, Arizona v. Evans, that allowed the good faith exception when clerical personnel of a court made a similar data entry mistake.

In October, I noted that this seemingly narrow distinction in the source of the error – court clerk vs. police clerk – could be significant. Every other good faith exception to the exclusionary rule has involved an error made by judicial or legislative personnel. If the exception also applies to mistakes the police made themselves, then there will be a potential good faith issue in every case of a Fourth Amendment violation.

Student Blogger - Chicago’s Best Ideas: Daniel Abebe and Jonathan Masur, "The Two Chinas and the Problem of Global Warming"

Update: Audio of this talk is now available, and video is embedded after the jump.

Preventing global warming requires lowering carbon production, and China produces a high level of carbon emissions. China gains a significant advantage to its economic growth from its continued use of fossil fuels, but the harms from global warming will fall disproportionately on other countries. Thus, some writers advocate giving side payments to China as part of an international agreement to reduce global warming. Their analysis treats China as a "black box"; the input is money, the output is reduced carbon emissions. But when we open the box, the situation is not so simple. The box really has two Chinas inside.

In the most recent edition of Chicago's Best Ideas on January 14, Professors Daniel Abebe and Jonathan Masur presented "The Two Chinas and the Problem of Global Warming," based on their paper "Climate Change and Internal Heterogeneity." The first China is Eastern China. Eastern China is prosperous, having experienced a blistering growth rate around 10 percent annually over the past couple decades. Most of China's major cities dot the Eastern coast, and the cities are hubs for finance and manufacturing. The second China is Western China. Western China resembles a developing country and is still mostly agrarian. Per capita GDP is half what it is in the East (9,967 yuan versus 19,813 yuan). The interplay between the two gives the Chinese Communist Party (CCP) incentives to not accept a climate-change treaty.

Student Blogger - Securities Class Actions: How the Merits Matter

Professor Tom Baker recently presented his paper (co-author Sean Griffith), "How the Merits Matter: Directors' and Officers' Insurance and Securities Settlements," at the Law and Economics Workshop. This is a forum where academic working papers are presented and discussed among interested faculty and students.

Professor Baker's paper attempts to answer a popular question: Do the merits affect the settlement amounts in securities class actions? He takes a new approach, applying qualitative research to the question instead of the usual empirical research. Professor Baker interviewed a range of people involved in the settlement process, including plaintiffs' lawyers, defense lawyers, D&O insurance claims managers, and mediators. These suits involve insurers because almost all companies purchase directors' and officers' (D&O) insurance to indemnify the corporation. Through these interviews, he sought to understand "how" the merits matter in the settlement process. How do the parties reach a settlement?

Bailouts

I am doing a seminar on bailouts this quarter with Professors Baird and Henderson. The syllabus is evolving but is here if you are interested. I put together some introductory material on the 1930s for class last week; the newspaper headlines from the time of Roosevelt’s first inauguration are really quite striking. The powerpoint slides also include links to many of the statutes enacted during Roosevelt’s first 100 days, plus key bailout statutes such as both versions of the Frazier-Lemke Act.

And for those interested in reading more blogging, students will be blogging about the readings each week. Posts will go up Monday and Wednesday of each week. Today’s posts on the 1979 bailout of Chrysler are available here. 

Student Blogger - Douglas Laycock: “Religious Liberty as Liberty”

The Law and Philosophy Workshop started out winter quarter with Douglas Laycock’s presentation of his paper “Religious Liberty as Liberty.” As Laycock explained at the workshop, this paper was, in a way, a response to John Garvey’s statement that it is possible to imagine a society of skeptics having a guarantee of liberty similar to the one embodied in our Free Exercise Clause, but that this is far-fetched. Laycock’s project was to explain why a society of skeptics should have a Free Exercise Clause, and an Establishment Clause to boot. This is closely tied to his argument for the best interpretation of these clauses: The proper governmental role is to minimize incentives pushing people towards, or away from, religion. This paper is also a response to theorists on both sides of the “culture wars.” Laycock insists that those who argue that the Constitution is either pro- or anti-religion are making a mistake. We are no more a Christian nation than we are a nation that has rejected religion. The Religion Clauses represent the determination that our government should not take a stand either way. Religious questions should be answered privately and the government should interfere as little as possible into the search for these answers. There is one clear exception here that should be noted. The government must take a stand on whether or not the government should be an agent of the church. And it has; the Establishment Clause requires that the government not take on this role.

Audio: Richard McAdams on the Fourth Amendment

You may have noticed that it's been awfully quiet around here; It's the calm before the storm at the Law School as we prepare for classes to start on Monday. If you're looking to fill the hours between now and then, have a listen to the first Faculty Podcast of the new year. Recorded on October 6 of last year as part of the Law School's annual First Monday series, Bernard D. Meltzer Professor of Law Richard McAdams gave a talk entitled "The Fourth Amendment in Transition?"