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Two Chapters in the GIGO Mess Epic

There are two problems with cost-benefit models for environmental policymaking: the model inputs and the model outputs. This is not exactly news. Researchers and reporters have documented honest overestimates of regulatory costs, honest undercounts of regulatory benefits, and dishonest attempts to cook the cost-benefit books.1 The authors of the articles reviewed here avoid such easy targets. Instead, they strike at the heart of the welfarist policymaking preference that promotes and privileges cost-benefit analysis.

Richard Revesz challenges the orthodoxy that distributional effects should not motivate regulatory choices. Bernard Harcourt assails the myth that cost-benefit analysis offers an objective motivation for regulatory choices.

Revesz has long argued that proponents of environmental regulation must learn to love, or at least to live with, cost-benefit analysis. He readily concedes that “all other things being equal,” regulations should be designed to maximize net benefits, that is, to be economically efficient. (Revesz, P. 1490.) But in Regulation and Distribution, Revesz reminds us that inequity prevents all other things from being equal—and that profoundly unequal distributive effects demand corrective action.

Regulation and Distribution does not bother with the simplistic claim that inequity can be ignored because welfare maximization trumps all other social goals. Instead, Revesz grapples with the more nuanced argument of Louis Kaplow and Steven Shavell: that redress for distributional effects of regulatory action should occur only through the tax code rather than through regulatory decisions themselves.2

Revesz replies that using the tax code, however attractive in theory, is impossible in practice. Redistribution through provisions of tax law requires legislative action, but such legislation seems exceedingly unlikely in today’s extended period of hyper-partisan legislative gridlock.

Even if redistributive legislation were possible, a system of taxation and money transfers is ill-suited to address many types of environmental injustice. In one of the most persuasive parts of Regulation and Distribution, Revesz analyzes the deficiencies of using a tax-and-transfer approach to respond to the unequal distribution of exposure to toxic pollutants. With higher exposures come a people who confront a greater risk of becoming sick, more eventual cases of disease, and more premature deaths. Revesz shows that any attempt to respond to this inequity through the income tax system will inevitably result in undercompensation. Some aspects of the harm are too difficult to attribute to individual taxpayers. Others are too difficult to quantify and monetize. Therefore, Revesz concludes, regulatory agencies, and not the Internal Revenue Service, should figure out and adopt measures to counter the harmful distributive effects of their regulations.

How should they do this? Revesz’s proposed solutions are interesting and thought-provoking, though they also raise questions.

Before presenting his recommendations, Revesz is careful to argue that only “unusuallylarge inequities” justify intervention, lest the welfare benefits of cost-benefit analysis be overwhelmed by the routine distributional effects of regulation. (Revesz, P. 1571.) Individual regulatory agencies cannot be trusted to make the call, Revesz seems to imply, so he suggests that the Office of Information and Regulatory Affairs (OIRA) define the trigger in a guidance document. Those who are already skeptical of OIRA’s outsized power might question this idea, although Revesz would doubtless answer that OIRA’s central role in regulation is simply a fact of life. Unfortunately, Regulation and Distribution offers no advice about how large an inequity is unusually large, or even about how to begin to make that decision. This would be a nice follow-up project.

Next, Revesz proposes creation of a standing interagency working group that would craft an appropriate redistributive response to any regulation satisfying OIRA’s triggering criterion. Revesz considers two types of possible responses: directly making the rule more equitable, or indirectly mitigating the rule’s inequitable effects.

Of the two, Revesz pays much more attention to the indirect mitigation option. Having argued that the tax code cannot be used for this purpose because of legislative gridlock, Revesz advocates executive branch action under existing statutory authorities. Citing efforts by the Obama Administration to help dislocated coal industry workers, he argues that Presidents have a host of options for ameliorating the focused economic harm that sometimes results from regulations that benefit society as a whole. Many of these options involve the targeted award of federal grants or the redeployment of contingency funds such as those set aside for national emergencies. The breadth of the possibilities supports Revesz’s proposal for an interagency working group.

Revesz’s mitigation goal is laudable. As he acknowledges, however, achieving it would require concerted action centrally controlled from the White House. Revesz argues that Presidential administration is, like OIRA, a fact of life; it may as well be deployed in support of beneficial environmental regulation. On the other hand, if a President may use emergency funds to help coal miners weather the effect of greenhouse gas emission limitations, what is to stop a President from using emergency funds to build a border wall? At this moment in history, the scope of Presidential authority inherent in Revesz’s proposal is arresting.

Mitigation approaches, notwithstanding the Presidential power they invoke, still amount to money transfers. Effectively, they use tax revenues (or federal borrowing) to achieve distributive goals, without requiring amendment of the tax code. Therefore, Revesz notes, these approaches are not the best way to address non-monetary harms, such as the environmental injustice of disproportionate exposures to toxic pollutants. To address inequitable non-monetary consequences of proposed rules, Revesz recommends that the interagency working group should consider directly changing the rule.

Regulation and Distribution discusses this option only briefly, leaving some interesting questions unaddressed. For example, could an agency ever justifiably reject a rule that maximizes net benefits in favor of a rule that is less efficient but more equitable? Might we be willing to accept a slightly smaller pie in exchange for keeping more people alive and healthy enough to enjoy partaking? Revesz very nearly implies an affirmative answer, but never quite says so. The follow-up question, “under what circumstances should an agency do this,” would surely lead to a very interesting conversation.

Bernard Harcourt, it seems, would eagerly join such a conversation. For if Regulation and Distribution challenges one pillar of cost-benefit orthodoxy without quite trying to bring down the whole edifice, Harcourt’s The Systems Fallacy has no such compunctions.

The Systems Fallacy argues persuasively that the claim that cost-benefit analysis provides policymakers with neutral, scientific, or objective guidance, is false. Harcourt contends that any cost-benefit analysis necessarily embodies normative political values and then, by guiding policymaking, in turn reshapes normative political values.

Harcourt traces the origins of cost-benefit analysis not to welfare economics but to military operations research and systems analysis. Systems analysis approaches worked well enough, he says, for military or engineering problems addressing the performance of tangible objects. But social policy problems do not define themselves. Before even confronting the problem of determining the values and functions to use in a policy analysis, Harcourt explains, an analyst must make a series of decisions about the scope of the analysis.

Harcourt identifies and illustrates five critical choice-of-scope decisions: conceptualizing the metaphorical social system to be analyzed, defining the system’s boundaries, determining the system’s objectives, selecting policy alternatives to be analyzed within the system, and choosing criteria to evaluate system performance under the various policy alternatives. With hypotheticals and real-world examples, Harcourt shows that each of these decisions “entail[s] normative choices about political values.” (Harcourt, P. 421.)

Although Harcourt concedes that systems analysis and cost-benefit analysis are not identical, it is easy to see – and Harcourt demonstrates—that cost-benefit analysis requires the same set of value-laden choice-of-scope decisions. Moreover, he contends, once those decisions produce a policy outcome, a feedback loop engages: cost-benefit analysis determines policies; the policies dictate allocations of social resources; the allocations of social resources affect people’s lived reality, altering the society’s balance of political values. This is what Harcourt finds most offensive about allowing cost-benefit analysis to set social policy: a supposedly objective analytical tool, often entrusted to technocrats, “silently impose[s] political values on society.” (Harcourt, P. 422.)

Harcourt acknowledges that smart welfare economists, again exemplified by Kaplow and Shavell, among others, have a response. If welfare is defined broadly enough to include people’s desires to implement political values such as fairness, then cost-benefit analysis can maximize welfare while including society’s political preferences, rather than privileging only some political values through choice-of-scope decisions. But Harcourt responds, devastatingly, that this catholic vision of welfare and welfare maximization exists only in theory. A real cost-benefit analysis inevitably addresses a particular, selected social problem. Therefore, a real cost-benefit analysis inevitably makes the normative choice-of-scope calls Harcourt describes. And, Harcourt notes, maximizing net benefits within the arbitrarily-defined metaphorical system being analyzed may not actually maximize overall social welfare, broadly defined to include political values.

The Systems Fallacy is not an article about environmental law. Harcourt’s arguments are general; his illustrations concern policies aimed at crime reduction. But any environmental lawyer will recognize at once that Harcourt’s argument applies strongly to environmental policy. Pollution control regulations, which so often promise benefits that are broadly dispersed and hard to quantify in exchange for costs that are concentrated and monetary, seem to face particularly stringent cost-benefit scrutiny from all three branches of government. And the problem Harcourt identifies goes beyond pollution regulation to pervade all environmental policy. The choice-of-scope decisions Harcourt describes, for example, are awfully familiar to anyone who has ever been involved with an environmental impact statement under the National Environmental Policy Act.

If there is a weak spot in The Systems Fallacy, it is the discussion of what to do about the problem the article identifies. Harcourt quite properly insists that he is not opposed to analytical rigor or to quantifying what can be quantified. But, he asserts, policy analysis should be limited to a single dimension, thereby evading the systems fallacy by avoiding the normative choices embedded in the construction of metaphorical systems to analyze. That solution seems unconvincing and unrealistic. Choosing the dimension for analysis would also be fraught with political value judgments, and the functional relationships between variables usually would turn a unidimensional metric into a multidimensional system.

Alternatively, Harcourt argues, the solution is to politicize cost-benefit analysis and policymaking, wresting back normative power from the technocrats. It is hard to argue with Harcourt’s objective; assuring political accountability for inherently political judgments is a good idea. But at this moment in history, when alternative facts are spun to serve political agendas, overbearing technocrats may not be society’s biggest problem.

Late in 2018, law professor and former OIRA administrator Cass Sunstein, in a keynote address at a conference of Revesz’s Institute for Policy Integrity, said: “We often think that the issues that divide us are issues of values. But the fundamental divisions involve issues of fact, not values.”3 No doubt that is true, sometimes. Not always, though. Sometimes, different people really do hold different values. Sometimes, even agreed-upon facts produce different policy positions in different people. Sometimes, different values even drive different perceptions of facts.

In distinct ways, both Regulation and Distribution and The Systems Fallacy teach us to be vigilant for those possibilities. Richard Revesz and Bernard Harcourt offer new reasons to be skeptical of cost-benefit policy prescriptions. They show us that cost-benefit analysis has limits that cannot be overcome by attacking the “garbage in” problem, by collecting more data, by refining functional models. Their work should inspire us to think outside the cost-benefit box. If we pay heed, we may be able to use cost-benefit analysis more wisely and to avoid the problem of policy “garbage out.”

  1. See, e.g., Lisa Friedman, E.P.A.’s Reckoning Is a Rosier View of Air Pollution, N.Y. Times, May 21, 2019, at A1.
  2. Louis Kaplow & Steven Shavell, Fairness versus Welfare (2002).
  3. News Release, N.Y.U. Inst. for Pol’y Integrity, The Institute for Policy Integrity Brings Economic Sense to Regulatory Debates (Nov. 30, 2018).
Cite as: Steve Gold, Two Chapters in the GIGO Mess Epic, JOTWELL (July 9, 2019) (reviewing Bernard E. Harcourt, The Systems Fallacy: A Genealogy and Critique of Public Policy and Cost-Benefit Analysis, 47 J. Legal Stud. 419 (2018); Richard L. Revesz, Regulation and Distribution, 93 N.Y.U. L. Rev. 1489 (2018)), https://lex.jotwell.com/?p=904.

Calibrating the Disgorgement Remedy for Design Patent Law

Pamela Samuelson & Mark P. Gergen, The Disgorgement Remedy of Design Patent Law, 108 Calif. L. Rev. __ (forthcoming, 2020), available at SSRN.

The law of design patents continues to evolve in dramatic ways. The law of remedies must also adapt to serve the underlying goals of design patent law and restitution. In creating and interpreting the disgorgement remedy, Congress and the Supreme Court have caused a crisis with unintended consequences. They have provided insufficient guidance on how to construe the remedy. Congress added this remedy to cure a perceived remedy deficit, but Congress crafted it too bluntly—authorizing disgorgement of “total profit” from one who sells, without a license from the owner, articles of manufacture that apply a patented design or colorable imitation. Meanwhile, the Court splintered the design patent right into smaller fragments without suggesting how to align the remedy.

In a thought-provoking critique, Professors Pamela Samuelson and Mark Gergen present a compelling, detailed argument for applying causation and apportionment to limit restitutionary disgorgement awards in partial design patent cases. This narrowing is essential to maintaining the utility of restitution in design patent law. The authors’ proposed solution also advances the normative purposes of restitution and its disgorgement remedy in design patent cases.

As Samuelson and Gergen demonstrate, a total-profits remedy risks overserving patent purposes and failing to adhere to restitution’s boundaries. The fragmentation of design patent rights calls for more precisely tailored remedies. The modern trend, as examined by Sarah Burstein, is to issue design patents on small parts of complex products and also on functionality more than ornamental designs. Samuelson and Gergen offer a thoughtful method of interpretation of the total-profits disgorgement remedy of § 289 of U.S. patent law.

But first they explore the flaws of recent judicial interpretation. They focus on the Apple v. Samsung case to reexamine the history and use of the disgorgement of total-profits remedy in design patent law. The Samsung Court construed “article of manufacture” for determining § 289’s disgorgement remedy so that it could be a component of the marketplace product rather than simply the end product. In other words, the infringement and remedy may be key to an element such as the Apple-inspired shape of the flat face of the smartphone rather than the Samsung phone itself. In so ruling, the Court vacated the lower court’s $399 million award that was intended to constitute Samsung’s total profit from sales of its phones that included infringing elements. The lower court judge had already remitted the jury verdict that exceeded $1 billion, which was the jury’s assessment of Samsung’s total profits. The Court vacated the award as remitted, but either award would be problematic under the Court’s new interpretation. It remanded for determination of the proper disgorgement amount in light of its narrowing of the right to the infringed elements (even if not separately salable) rather than the end product.

But as Samuelson and Gergen note, the Court fails to guide adjudicators on how to evaluate the relevant article of manufacture if not sold on the market and on how to determine the profits to disgorge where the infringement is partial rather than whole. On remand, the jury awarded $533 million in disgorgement of profits for Samsung’s infringement of Apple’s design patents. The parties settled after this verdict. Another case, Columbia Sportswear, raises similar concerns about a $3 million total-profits jury award for sales of gloves that infringed on a design patent on the lining material. The law remains unsettled and is also inconsistent with a Federal Circuit ruling.

The various awards during the Apple v. Samsung litigation process demonstrate the lack of precision in assessing the proper amount for disgorgement of profits under the Court’s new frame. Samuelson and Gergen forcefully critique the Court’s decision as “historically ill-informed and normatively unpersuasive.” (P. 3.) They lament that these flaws will lead to unsatisfying inquiries in complex technology cases. Further, the elusiveness of the examination will cause unpredictable, inconsistent, and occasionally grossly excessive awards. Instead, they advocate a more complete and detailed method for honoring the normative goals of restitution law that underlie the disgorgement remedy for design patent infringements.

Courts and scholars would be wise to incorporate restitution concepts to better protect the rights at stake. Restitution is not compensatory, but instead seeks to undo unjust benefits and deter wrongful behavior without punishing the infringer. A restitutionary disgorgement remedy like the one adopted by Congress for design patents alleviates proof problems for design patent owners who cannot prove actual damages with reasonable certainty and might otherwise be left with nominal recoveries. As Samuelson and Gergen’s article details, the legislative history confirms that Congress desired a meaningful remedy for design patent owners, but Congress did not intend the total profit remedy to be punitive.

It is key that a gain-based remedy of disgorgement of profits conform to restitution’s purposes—preventing unjust enrichment by stripping profits from wrongful infringement but not by punishing. The lack of guidance coupled with the greater fragmentation of the right is likely to result in inflated disgorgement awards. As the authors aptly state, disgorgement’s function is not compensatory but rather to erase the incentive to act wrongfully by stripping “from a wrongdoer profit that is causally attributable to his wrong, but not more than this (and sometimes less if apportionment is warranted).” (P. 3.) Accordingly, under a restitution frame using a counterfactual analysis, “wrongdoers are allowed to retain costs of committing the wrong and profits they would have made had they chosen to behave lawfully.” (P. 3.)

Proper calibration of disgorgement requires careful causation and apportionment analysis. Samuelson and Gergen acknowledge that determining causation and apportionment with precision will be challenging and inherently discretionary. For the interested reader, the authors meticulously explore the Solicitor General’s suggested test and VW Beetle design-patent hypothetical, and they compare various scenarios through a thought experiment with the famous restitution case of The Great Onyx Cave. This exploration demonstrates the distinction between causation and apportionment, the importance of alternative framing, and the correlation of these doctrines to goals such as fairness, efficiency, and desert. The legislative history does not foreclose this analysis, and if it does, Congress should amend this section to allow this inquiry especially for partial design infringement cases.

Who should conduct this remedial inquiry? The authors maintain that judges are better suited to make these assessments and attain more reasonable approximations than juries. Further, they show historical markers that support characterizing the remedy as equitable in this context. Despite the practice of using juries in determining design patent disgorgement awards, Samuelson and Gergen are convinced that a jury is not constitutionally required. The wise exercise of equitable discretion will go far in maintaining disgorgement as a powerful, yet restrained remedy to deter taking without asking, while preventing only the enrichment that is truly unjust.

Cite as: Caprice Roberts, Calibrating the Disgorgement Remedy for Design Patent Law, JOTWELL (June 25, 2019) (reviewing Pamela Samuelson & Mark P. Gergen, The Disgorgement Remedy of Design Patent Law, 108 Calif. L. Rev. __ (forthcoming, 2020), available at SSRN), https://lex.jotwell.com/calibrating-the-disgorgement-remedy-for-design-patent-law/.

William’s World: An Essay About the History of Just Price

Reading Professor William Boyd’s fine piece, Just Price, Public Utility, and the Long History of Economic Regulation in America, I couldn’t help but think of Jostein Gaardner’s international bestselling novel Sophie’s World. To be clear, there’s no teenage girl in Boyd’s essay receiving letters from a mysterious stranger that enlighten her on the history of philosophy (or, in Boyd’s case, economic regulation). But, like Gaardner, Boyd does an outstanding job of bringing to life and making accessible what many might otherwise consider a dense, perhaps even tedious subject matter—the history of price regulation. And unlike Gaardner, Boyd manages to do so with remarkably little sacrifice in breadth and depth of coverage.

Professor Boyd’s essay takes readers on an intriguing journey through time, tracing the doctrine of “just price” all the way back to the Aristotelian concept of corrective justice, devoted to preserving equality in exchange, commonly understood as an arithmetic proportion around a mean. From ancient Greece, readers are guided to medieval Italy where Thomas Aquinas and other Scholastics expanded Aristotle’s framing into the notion of commutative justice, a construct intended to encompass the full range of voluntary and involuntary interpersonal relationships, including but not limited to economic exchange.

Drawing on the work of Max Weber and Joseph Schumpeter, among others, Boyd relates cost-of-service pricing—a staple of modern-day regulation of public utilities—back to medieval markets and their notion that just price reflected the “common estimation” as the market clearing price under free competition. Another worthwhile stop is at the grain markets of France’s ancien régime where the police des grains enforced trading prices as the product of customary practices and formal rules of exchange to ensure a just price for life’s basic necessities, evidence of the emerging concept of a moral economy. At the dawn of industrialization, Boyd reminds us, price regulation, was widely accepted as a necessary means for maintaining social stability.

With this historic tour de force, professor Boyd sets the stage beautifully for his discussion of public utility regulation in the United States. From Munn v. Illinois over Smyth v. Ames to FPC v. Hope Natural Gas, his essay traces the defining moments in the evolution of the modern concept of public utility. Along the way, Boyd makes a persuasive argument that, Munn’s famous image of private enterprises “clothed with a public interest” notwithstanding, expanding government regulation of (previously) private economic activity was motivated primarily by growing concerns over deviations from the elusive ideal of just price. To drive this point home, Boyd reminds readers that the concept of just price had long been more than a mere numbers game, as the arithmetic mean promoted by Aristotelian corrective justice might suggest. The prevailing view among economists suggests that the just price doctrine was, at its core, about preventing coercion in economic exchange, especially in the context of essential services and other necessities.

With the doctrine of just price properly understood as a safeguard against the coercive exercise of market power, Boyd makes it easy to follow along on the final stage of his essay’s time travel through recent and ongoing efforts to complement, if not altogether replace, traditional regulation of public utility with competitive markets.  Pointing to agency capture and other pathologies of the regulatory process, Boyd persuasively reframes the move from cost-of-service regulation to greater reliance on competitive markets as a mere resurrection of the historically prevailing notion of just price as facilitating economic exchange free from coercive forces. Today, the Federal Energy Regulatory Commission and other regulators are retreating from the actual setting of prices, instead focusing on creating and monitoring markets with sufficient competition to realize the ideal of just price—whatever the exact number—properly conceived of as the product of economic exchange free from structural inequities.

Professor Boyd closes by musing that the experiment of just price may have run its course. It is this, the very last sentence that prompts my only gripe with his excellent essay. It is undoubtedly a tribute to Boyd’s refreshing intellectual humility that the author understates the importance of his own work. In doing so, however, an opportunity is missed to emphasize the critical role that the doctrine of just price, in its various iterations over time, has yet to play as we decide the future of public utility in the United States and beyond.

Two examples of the need for continued guidance from Aristotle and his intellectual progeny quickly come to mind: first, the ongoing debate over the “fairness” of policies that seek to promote the transition to a low-carbon future by enabling better-to-do homeowners to put solar panels on their rooftops and thereby reduce their electric utility bills. The doctrine of just price so ably unpacked and brought to life by professor Boyd has a lot to teach us in the assessment, and ultimately, design of policy incentives and electricity rates, among others. The second example builds on Boyd’s discussion of competitive wholesale power markets. With their (current) inability to internalize the social costs of carbon and other externalities, these markets remind us of the Scholastics’ insight that only fully competitive markets operating free from market failures, should be trusted to realize the ideal of just pricing.

With Just Price, Public Utility, and the Long History of Economic Regulation in America, William Boyd adds important historic perspective and a much needed voice of reason to the increasingly polarized debate over the future of public utility regulation. Boyd himself describes his fine essay as part of a larger project. I for one cannot wait to see the sequel. If it is as captivating and compelling a read as Just Price, we are all in for another treat.

Cite as: Felix Mormann, William’s World: An Essay About the History of Just Price, JOTWELL (May 16, 2019) (reviewing William Boyd, Just Price, Public Utility, and the Long History of Economic Regulation in America, 35 Yale J. Reg. 721 (2018)), https://lex.jotwell.com/williams-world-an-essay-about-the-history-of-just-price/.

Rightless Remedies

Stephen A. Smith, Rights-Threats, Wrongs and Injustices: The Common Law Causes of Action, 27 N.Z.U.L. Rev. 1033 (2017), available at SSRN.

It is a familiar quip that a right without a remedy is no right at all. A recent article by Stephen A. Smith shows, however, that there is such a thing as a remedy with no right—something I might call a “rightless remedy.” In Rights-Threats, Wrongs and Injustices: The Common Law Causes of Action, Smith explicates a category of judicial orders (i.e., remedies) that are not tied to any underlying legal right or wrong. In doing so, Smith tells us something important about both rights and remedies.

To appreciate Smith’s insights, it is first important to understand his taxonomy. The phrase “cause of action” can mean many things, but to Smith and other scholars writing in this area, a “cause of action” is a set of facts that justify a judicially-administered remedy. Understood as such, a cause of action is not necessarily co-extensive with substantive law. The substantive law contains instructions for citizens (e.g., “do not hit others,”) but cause-of-action law (sometimes called “remedial law”) contains instructions for courts (e.g. “if a person proves to you that she has been hit, order the hitter to pay her damages”). Causes of action will usually track the substantive law closely, and for that reason we often take it for granted that, where a wrong has been committed, a court will issue a remedy. But there are certainly situations in which remedial law does not authorize judicial intervention, even when a wrong has been committed (such as, for example, when a court declines to issue an injunction because it will impose an undue hardship on the defendant). Far less common (or even ignored until Smith showed otherwise) are situations in which a remedy issues where no wrong has been committed—but that is an issue we will get to in a bit.

Smith’s project is to explain, as a categorical matter, the circumstances in which courts will issue a remedy. Two of these—rights-threats and wrongs—are easily recognizable to legal scholars and practitioners. When your neighbor threatens to cut down your tree (i.e., threatens to infringe one of your rights), a court will put down this threat by ordering your neighbor not to do so. Relatedly, if your neighbor cuts down your tree before you can make it to court (i.e., commits a legal wrong), a court will order the neighbor to pay you damages. Neither of these grounds for relief upsets our common understanding of remedial law. But Smith’s third ground—injustice—introduces a new variation of remedial law.

An injustice, in Smith’s telling, is a judicially administered remedy that is not based on a rights-threat or a wrong. Smith offers several examples, but a useful one for our purposes is restitution in the case of defectively transferred funds. If I mistakenly transfer money to your account, a court will order you to return the money—even though you have done nothing wrong. One might counter that retaining money mistakenly transferred to you is wrongful, but Smith convincingly shows why that is false. There is no underlying duty to return such money because people who receive such money often have no knowledge of it, or even if they do, have no way to determine with any certainty—short of judicial intervention—to whom to return the money. Thus, in the case of mistakenly transferred funds, the traditional role of the court is not to enforce an underlying duty through a remedy, but simply to correct the injustice by ordering the money be returned.

Having shown that a remedy in injustice cases is, to use my term, a “rightless remedy,” Smith turns to the question of why such a phenomenon should exist in private law. Part of the reason is contained in the point above: people frequently cannot be expected to have sufficient knowledge to comply with such a duty. Thus, if society wishes the money to be returned (to continue with the example from above), it can only accomplish this by a judicial order.

Perhaps. Or perhaps not. Instead of an order, we could accomplish the same result with a judicial declaration that a certain sum of money was mistakenly transferred. The declaration would thus trigger a substantive duty to return the funds—but only if we recognize a substantive duty to correct injustices. So the real nub of the issue is: why we don’t recognize an underlying duty to correct an injustice?

Smith’s answer, which I find the most interesting part of his paper, is as follows:

To say that someone has a duty to do X is to say, roughly, that regardless of how costly or inconvenient X is, X must be done. Duties are correlative to rights, and rights, to borrow Ronald Dworkin’s terminology, are trumps. Thus we say (and the law confirms) that we have rights to physical integrity—and correlative duties to respect physical integrity—because we believe that, with rare exceptions, non-consensual interferences with another’s physical integrity are never permissible.

“Correcting injustices” is different than “not injuring”: it is a valuable thing to do, but it is not, or at least should not be, a duty. Private law duties are basically duties not to interfere with others’ persons, property, or liberty, and duties to keep contractual promises. The actions that are required to correct injustices have a different orientation. A failure to compensate a loss or to reverse an enrichment is not an interference with the beneficiary’s personal property or liberty; nor is it breaking a promise. It is simply a failure to correct an injustice. Correcting an injustice is valuable but failing to do so is not a wrong in the sense that stealing or lying or breaking promises is wrong. As a society, we regularly trade off the value of correcting injustices against other values. The courts clearly play a crucial role in correcting injustices….Yet it is clear that criminals are often not brought to court (or not pursued at all) because courts and prosecutors are in short supply.…[I]f our goal was to ensure that every injustice was corrected, there would be almost no limit to the number of courts, judges, lawyers, police officers and so on that the State ought to provide.” (P. 29.)

Summing up his point, Smith puts it thus: “Private law duties correlate to individual rights, but no one has a right that justice be done, and certainly not a right that another private individual ensure that justice be done.” (P. 30) This is not to say that the state may not concern itself with injustices, or that it may not refer them to the courts for resolution when it finds them. The fact that restitution cases are resolved by courts is enough to prove this point. But such adjudication is not, in a fundamental sense, the adjudication of rights. Instead, it is something that Smith calls the provision of “justice services”—the correction of an unjust circumstance that has arisen without any wrong being committed.

Smith’s article is both enlightening and thought-provoking. In explaining the phenomenon of rightless remedies—i.e., court orders untethered to underlying substantive rights—Smith shows us something important about both rights and remedies. In particular, he shows us how substantive rights are correlated with wrongs but always correlated with remedies. In doing so, Smith deepens our understanding of the complex relationship between the common law itself and institutions that both create and maintain it (i.e., the courts).

Cite as: Jack Preis, Rightless Remedies, JOTWELL (May 6, 2019) (reviewing Stephen A. Smith, Rights-Threats, Wrongs and Injustices: The Common Law Causes of Action, 27 N.Z.U.L. Rev. 1033 (2017), available at SSRN), https://lex.jotwell.com/rightless-remedies/.

Is it a “Good” Case? Can You Rely on BCite, KeyCite, and Shepard’s to Tell You?

Every law student is told repeatedly to check that the cases they are relying on are still “good” law. They may even be told that not using a citator such as Shepard’s, KeyCite, or BCite could be malpractice and multiple ethics cases would support that claim. But how reliable are the results returned by these systems?

Paul Hellyer has published the surprising results of an important study investigating this question. Hellyer looked at 357 citing relationships that one or more of these three citators labeled as negative. “Out of these, all three citators agree that there was negative treatment only 53 times. This means that in 85% of these citing relationships, the three citators do not agree on whether there was negative treatment.” (P. 464.) Some of the differentiation between systems could be attributed to one system incorrectly marking a relationship as negative when it is not. This might be considered a less egregious mistake if one presumes that the researcher would review the flagged case and find no negative treatment, although it is a costly mistake in a field where time matters. However, Hellyer accounts for the false positive (or negative, in this case) problem and the results of his study are distressing.

We are told that the citators are reliable. I, along with numerous law professors and judges, have told students and attorneys that failure to use a citator could lead to anything from a judicial tongue lashing to disciplinary action to malpractice charges. As Hellyer points out (P. 450), the marketing for citators assures us that the systems produce reliable results. For example, KeyCite is marketed as “the industry’s most complete and accurate citator” and that you can be “confident you’re relying on valid law.” Similarly, the Shepard’s product page proclaims, “Is it good law? Shepardize® and be sure.” Bloomberg BNA is less boastful in its promotion of BCite stating, “Easy to use indicators…allow you to immediately (emphasis added) see how other cases have treated your case.”

Let’s look at some more data from Hellyer’s study, which he believes is “the largest statistical comparison study of citator performance for case validation” and the first to include BCite. (P. 450.) In addition to just looking at how the citators labeled the relationships, Hellyer assesses the case opinions to determine the nature of the citing relationship and whether it was correctly labeled by the citator. He differentiates between negative relationships that were not identified in any way and those that misidentified the relationship. An example of this would be if a case was in fact overturned but the citator labeled it as something else, such as “distinguished by.” When Hellyer examined whether the citators agreed on the subset of negative treatment, all three systems agreed on about only 11% of references.

Hellyer’s article is an important read for anyone who relies on a citator for case validation or, determining whether a case is still “good” law. The results are fascinating and his methodology is thorough and detailed. Before delving into his findings, Hellyer reviews previous studies and explains his process in detail. His dataset is available upon request. The article has additional value because Hellyer shared his results with the three vendors prior to publication and describes and responds to some of their criticisms in his article, allowing the reader to make their own assessment of the critique.

Even more interesting than the broader statistics, are Hellyer’s details of specific errors. He acknowledges that omission errors, as opposed to misidentification errors, were unpublished cases that might present less of a problem for attorneys. However, Hellyer goes on to examine the misidentification errors and concludes that all three citators exhibit the greatest issues not in identifying the cases but in the editorial analysis of what the citing relationship means. For example, in Hellyer’s dataset there were four cases later overruled by the United States Supreme Court. All three citators misidentified at least one citing relationship and one of them misidentified three of the four cases as something other than being overruled. Hellyer’s examination of these cases revealed how these misidentification errors can filter through to other citing relationships and create further errors. (Pp. 467-471.)

Analysis of citing relationships, and whether those relationships are positive and negative, is essential to the legal system and reliance on “good” law, or case validation, is the critical first step. Hellyer states that the results of his analysis mean “that when you citate a case that has negative treatment, the results you get depend mainly on which citator you happen to be using.” (P. 465.) This is a stunning assessment of a vital resource that is so widely and heavily relied upon by the legal community.

Cite as: Kristina Niedringhaus, Is it a “Good” Case? Can You Rely on BCite, KeyCite, and Shepard’s to Tell You?, JOTWELL (April 22, 2019) (reviewing Paul Hellyer, Evaluating Shepard’s, KeyCite, and BCite for Case Validation Accuracy, 110 Law Libr. J. 449 (2018)), https://lex.jotwell.com/is-it-a-good-case-can-you-rely-on-bcite-keycite-and-shepards-to-tell-you/.

Out of the Mouths of Babes

International and domestic laws aimed at protecting children involved in human smuggling generally operate under the assumption that these children are vulnerable and defenseless prey to dangerous and violent criminals, for whom they work against their will. In her recent article, “Circuit Children”: The Experiences and Perspectives of Children Engaged in Migrant Smuggling Facilitation on the US-Mexico Border, sociologist Gabriella Sanchez uses original qualitative fieldwork to upend or at least nuance this claim that sits at the heart of current anti-smuggling laws. The children whose stories she tells offer a much more complex picture of their role in helping others navigate the U.S.-Mexico border.

While many scholars have decried the carceral turn in human smuggling laws, Sanchez offers a key piece of evidence demonstrating the fundamental problems with this move to criminalization. It is, as has been far too obvious of late, easy for politicians and governments to demonize actors in the migratory process, both migrants and those who help them to move. But the carceral approach masks the structural forces that render migration both necessary and nearly impossible to undertake lawfully for individuals who do not win the birthplace lottery. Sanchez’s body of work highlights the humanity and dignity of the individuals who facilitate migrant journeys—who might, from a different perspective, be viewed as part of a modern-day Underground Railroad. Though she refrains from hitting the reader over the head, the unmistakable take-away from her work is that these individuals are not the source of the problem; they are doing the best they can in the face of structural and geopolitical forces beyond their control.

Sanchez’s empirical research fills a crucial gap in the literature. Undocumented migration is by its very nature challenging to study; people moving outside the bounds of the law are not easy to track let alone interview. Sanchez engages with this challenge head-on to gather insights into the realities of human movement across borders that are often at odds with the assumptions animating laws that criminalize human smuggling. Her previous scholarship challenges popular depictions of migrant smugglers as ruthless criminals, using empirical work to demonstrate the symbiotic relationships and social networks that often connect migrants and those who facilitate their journeys. If migrants’ perceptions of smugglers rarely enter the legal or even scholarly discourse, it is rarer still to hear from children who participate in facilitating human movement across borders.

The voices of these children tell a story that, in Sanchez’s words, defies “the state-centric notion that the facilitation of informal, clandestine mobility strategies inherently constitutes a crime” as well as the assumption that “smuggling is the exclusive domain of organized crime.” Her interviews with 18 children aged 14 to 17 in Ciudad Juárez reveal conscious decisions to engage in smuggling that enabled them to support their families financially. These children empathized with the migrants, and appreciated the personal, social, and economic capital they gained through their smuggling work. Sanchez recognizes the risks faced by these children, but notes that they viewed law enforcement, especially U.S. Border Patrol, as the most fearsome danger.

Sanchez’s interviews raise the voices of a small group of children in one specific location. The story they tell cannot possibly be universal, but it raises important questions about the criminalization of migrant smuggling. Sanchez emphasizes that children involved in smuggling face serious risks, but refutes essentializing claims that all of these children are forced against their will to work for transnational organized crime. Their perspectives beg for further study, and starkly highlight the need for a reassessment of law’s carceral approach to migrant smuggling.

Cite as: Jaya Ramji-Nogales, Out of the Mouths of Babes, JOTWELL (March 19, 2019) (reviewing Gabriella Sanchez, "Circuit Children": The Experiences and Perspectives of Children Engaged in Migrant Smuggling Facilitation on the US-Mexico Border, 11 Anti-Trafficking Review 103 (2018)), https://lex.jotwell.com/out-of-the-mouths-of-babes/.

Should We Use the Market to Address Climate Change?

Alice Kaswan, Energy, Governance, and Market Mechanisms, 72 U. Miami L. Rev. 476 (2018).

The recent report from the Intergovernmental Panel on Climate Change this fall has made clear the urgent need to address climate change. What should be the primary policy tool that we use to address the problem? Economists have vociferously advocated for the use of carbon taxes or cap-and-trade permit systems, on the grounds that they provide the most efficient way to decarbonize global economies. Yet carbon taxes have had little success in the political arena. Many of the existing policies that countries and states have used to address carbon emissions have been regulations or subsidies, not market-based approaches. Is this a fundamental misstep on the part of policymakers?

In her recent article, Energy, Governance, and Market Mechanisms, Alice Kaswan argues that this is not a misstep, and that in fact there are good reasons—political, democratic, even economic—to prefer non-market-based instruments to advance decarbonization. Her article is ambitious in its scope but effective in raising important questions about what approach is best.

Kaswan raises a couple of key points about why non-market-based mechanisms may be superior to address the transition to a decarbonized economy. First, she argues that government coordination of climate policies can allow the achievement of multiple goals in addition to reducing carbon emissions at the least cost (which is what market-based tools excel at). For instance, we might be concerned about the distributional impacts of a transition to a decarbonized economy and adding on social equity measures to market-based tools may not be as effective as a fully integrated approach. Similarly, there are a lot of additional issues we are concerned about in energy production than simply carbon emissions (e.g., bird mortality from wind turbines, or long-term waste disposal from nuclear power), and a price on carbon alone cannot help us resolve those tradeoffs.

Second, Kaswan argues that long-term planning is an essential component of a transition to a carbon-free energy system, given the interconnectedness of a wide range of elements of our energy systems and the long timeframes for many investments in those systems. According to Kaswan, market-based tools may not be the most effective in managing these kinds of planned transitions—particularly if carbon prices are low, and so far we have only observed relatively low carbon prices in practice.

Third, Kaswan argues that public participation would be more robust for non-market-based regulatory measures, and that this public participation will result in a more equitable and more accountable approach to carbon reductions. And finally, Kaswan argues that non-market-based mechanisms appear to be more politically realistic than stringent market-based tools—something that has been quite apparent this fall as the French protest against a new gas tax and Washington state voters turned down a carbon tax proposal.

One law review article will not be able to conclusively answer any of these difficult questions about the role of market-based mechanisms in climate policy—the challenge spans the entirety of the modern economy, across countries with very different political and cultural settings, and an incredible range of technical problems. But Kaswan’s piece is a vital starting point for the now-vibrant debate about which policy approaches will be more successful, and an important counterpoint to a policy discourse that has mostly been dominated by advocates of carbon pricing. Even if you don’t agree with her arguments, Kaswan’s analysis should give you important points to consider.

Cite as: Eric Biber, Should We Use the Market to Address Climate Change?, JOTWELL (February 14, 2019) (reviewing Alice Kaswan, Energy, Governance, and Market Mechanisms, 72 U. Miami L. Rev. 476 (2018)), https://lex.jotwell.com/should-we-use-the-market-to-address-climate-change/.

Federal Courts and the Poor: Lack of Standards and Uniformity in Civil In Forma Pauperis Pleadings

Andrew Hammond, Pleading Poverty in Federal Court, Yale L. J. (forthcoming). Available at SSRN.

In United States v. Kras, the Court rejected the argument that a poor person petitioning for protection from creditors should not have to pay a filing fee in order to access the bankruptcy system. The majority held that an able-bodied person could make the payment because the $50 fee was only $1.92 per week if spread over six months and $1.28 if spread over nine months. Justice Blackburn noted that such a fee at the time was “less than the price of a movie and little more than the cost of a pack or two of cigarettes.” Justice Thurgood Marshall’s dissented, observing:

It may be easy for some people to think that weekly savings of less than $2 are no burden. But no one who has had close contact with poor people can fail to understand how close to the margin of survival many of them are….A pack or two of cigarettes may be, for them, not a routine purchase but a luxury indulged in only rarely. The desperately poor almost never go to see a movie, which the majority seems to believe is an almost weekly activity. They have more important things to do with what little money they have….

For the poor, fees, even supposedly “nominal” fees, matter. In the civil law context, Congress has established a $350 filing fee to access the federal courts and the Judicial Conference tagged an additional $50 administrative fee onto that. (P. 12.) While the non-poor may be able to treat the combined $400 fee as a mere inconvenience, such an amount can serve to bar poor civil litigants from the federal courts.

Andrew Hammond’s article, Pleading Poverty in Federal Court, shows that there is considerable variation in how federal courts consider requests by the poor for fee waivers in civil litigation. Courts not only use different forms to collect ability-to-pay information but they also apply different standards when determining whether fees should be waived. By focusing attention on federal court in forma pauperis motion practices, Hammond’s article sheds light on how the poor can be negatively impacted by routine court practices that might ordinarily be treated as merely administrative. Hammond makes a convincing argument that federal courts should have uniform standards for what information is collected and for the level of need that is associated with a fee waiver. Blending empirical work—a significant contribution of the article is that it catalogues the in forma pauperis forms used by all 94 federal district courts—with an appreciation for the struggles faced by poor litigants, Pleading Poverty in Federal Court is a well-written, targeted intervention that hopefully will improve the ability of the poor to access the federal courts.

The article includes a number of eye-opening details. The Southern District of Alabama asks litigants to provide the makes and models for their “automobiles, boats, [and] motorhomes.” (P. 18.) Puerto Rico’s district court asks movants if they have income from horse racing and gambling. (P. 21.) These variations are arguably less striking than the fact that different judges in the same federal district court can have different standards and practices when it comes to their review of in forma pauperis motions. As Hammond notes, “Some judges might use 100% of the federal poverty guidelines (FPL) as their threshold. Others will use 200%. Some will simply have their law clerk review the form and make a determination based on the information provided.” (P. 27.) Even putting aside the problem of variation across districts, there are many problems with leaving in forma pauperis discretion to each judge in the same district court. It can make the question of whether a poor litigant can get into the courtroom wholly arbitrary, tied to whether the assigned judge is someone who gives waivers easily or someone who rarely gives a waiver. Moreover, review of in forma pauperis motions forces judges to “make complicated, arcane poverty determinations—often reconciling a dozen categories of income with a dozen categories of expenses,” which Hammond argues is not a good use of the scarce time of an Article III judge. (P. 28.) (While I appreciate Hammond’s point, part of me is glad that this process forces judges to confront the poverty of some of the litigants, to look at the details of their lives. Such examinations may often be technically irrelevant to the proceeding but they may nevertheless help judges see both trends and the full person before them.)

In addition to the complications for federal judges associated with variation in the standards used by district courts when it comes to in forma pauperis motions, Pleading Poverty in Federal Court highlights the impact overly detailed information collection can have on poor litigants. Though Hammond’s article focuses on federal court practices, it includes a similarly impressive catalogue and overview of how state courts consider in forma pauperis motions. Just as in the federal courts, variation abounds across state courts. But Hammond also observes that states have adopted a number of practices that simplify the process of applying for a fee waiver, including establishing presumptive eligibility for fees to be waived based on: (a) a pre-determined multiple of the federal poverty line, (b) receipt of particular means-tested welfare benefits, or (c) representation by legal aid attorneys. (P. 40.) Moving away from overly intrusive information collection towards a system that partly piggybacks on the means-testing work of other entities, supplemented by a simpler form, would help judges and poor litigants. Khiara Bridges shows in The Poverty of Privacy Rights that the law strips the poor (but not the middle and upper class) of their privacy—often as a condition of receiving means-tested benefits—in ways that use information as a means of control. Although looking at a particular area of civil procedure as it relates to the poor and not the entire legal landscape, Hammond’s argument that “a streamlined, shorter form makes the process more sophisticated and more accurate, while preserving the dignity of poor people” (P. 57) fits nicely alongside Bridges’ work.

Some of the best poverty law articles—for example, Lucie E. White’s Subordination, Rhetorical Survival Skills, and Sunday Shoes: Notes on the Hearing of Mrs. G. and Barbara Bezdek’s Silence in the Court: Participation and Subordination of Poor Tenants’ Voices in Legal Process—get their strength from qualitative observations of the courtroom experiences of the poor. Pleading Poverty in Federal Court adds an empirical dimension to such participant-centered works. By pulling back the curtain on federal court practice and the high level of variation in what courts require of poor litigants, as well as their different standards for granting fee waivers, the article provides a valuable contribution to the literature on how the poor experience the law. Hammond shows how reforming a single element of civil procedure, standardizing federal in forma pauperis practice, can help open federal courthouse doors to the poor a bit more.

Cite as: Ezra Rosser, Federal Courts and the Poor: Lack of Standards and Uniformity in Civil In Forma Pauperis Pleadings, JOTWELL (February 1, 2019) (reviewing Andrew Hammond, Pleading Poverty in Federal Court, Yale L. J. (forthcoming). Available at SSRN), https://lex.jotwell.com/federal-courts-and-the-poor-lack-of-standards-and-uniformity-in-civil-in-forma-pauperis-pleadings/.

Translating Economics for Immigration Policy

Howard F. Chang, The Economics of Immigration Reform, 52 U.C. Davis L. Rev. 111 (2018).

Scholarship that translates and connects one discipline to another is a special treasure. The need for this type of scholarship is especially great in immigration law. Immigration law is interwoven with many other disciplines, but immigration law scholars often are so occupied with the extreme complexity and immediacy of the legal discipline that it can be difficult to branch out. I’m selfishly fond of The Economics of Immigration Reform by Howard Chang because it does a great service to those of us who needed a lucid and approachable explanation of the economics behind immigration law reform. Professor Chang explains in detail why immigration restrictionists are wrong when they argue that less immigration makes economic sense. If less immigration is desirable, it is not for economic reasons.

Professor Chang uses economic theory to evaluate recent legislation proposed to restrict legal immigration. Along the way, Professor Chang examines two major economic studies that both concluded that immigration produces a positive fiscal impact, one from 1997 and one from 2017. In the process of using the studies to evaluate proposed limits on immigration, Professor Chang teaches us that the assumptions underlying any economic study affect outcomes.

The 1997 study by the National Research Council (NRC) adopted a baseline, “most reasonable” scenario using one set of assumptions and concluded that an average immigrant had a positive fiscal impact of $80,000 in net present value in 1996 dollars. The 2017 study by the National Academies of Sciences, Engineering and Medicine updated the NRC study. While both studies produced a range of estimates of fiscal impact based on various assumptions, the 1997 NRC study more definitively adopted a set of assumptions as “most reasonable.” The 2017 study did not do that. Even so, the 2017 study still concluded that immigrants have a positive fiscal impact. Using the same set of assumptions recommended by the 1997 study leads to a positive fiscal impact of $279,000 in net present value in 2012 dollars.

Why did the 2017 study take a more “agnostic” (P. 7) approach about adopting one set of assumptions as most reasonable? Professor Chang states that it “may be a response to the objections raised by the economist George Borjas,” (P. 7) who objects to the NRC’s “most reasonable” assumptions. Professor Chang is not a fan of the agnostic stance. He believes some of the assumptions allowed by the National Academies study are not appropriate, and he supports the NRC adopted baseline.

The treatment of public goods is one example Professor Chang uses to highlight the importance of examining the assumptions that underlie economic analyses of immigration. The cost of a public good does not rise with the size of the population and use of a public good does not prevent another person from using it. National defense is an example. All government services are not public goods. Services that are congestible, like roads, police services, and libraries, are not public goods. Professor Chang criticizes the National Academies study for presenting estimates of immigrant fiscal impact that treat public goods as congestible services. Professor Chang is not impressed with the National Academies’s justification for its presentation of public goods as congestible goods; the justification seems to undercut the concept of a public good, suggesting that public goods could be affected by population size. Even under the National Academies’s more conservative assumptions that treat public goods as congestible, however, immigration still produces a net fiscal benefit. (P. 10.)

What about the effect of immigration on the wages of native workers? The more conservative National Academies study concluded that the least skilled native workers (high school dropouts) may feel more negative effects of immigration compared to others, but that the negative effects tend to fade after 10 years. (P. 20.) As Professor Chang explains, the demand for labor fluctuates. Therefore, immigrants do not arrive and compete for a fixed pot of jobs. Also, native born and immigrants are “imperfect substitutes.” (P. 21.) They often do not compete for the same jobs and complement each other instead. Therefore, immigration does not significantly lower the wages of native workers.

Professor Chang concludes that, based on economic analysis, our immigration laws are unduly restrictive. Adoption of reasonable assumptions shows that immigrants contribute a positive fiscal impact and that immigration restrictions do not significantly lower the wages of native workers. Therefore, if fiscal impact were the only consideration, higher levels of immigration would be the natural policy result.

The reality, however, is that immigration policy is not formulated based on economic considerations alone, and immigration policy often diverges from the rational path. Professor Chang shows us a prime example of this by examining the RAISE Act, an immigration reform bill supported by President Trump. The RAISE Act aims to cut immigration across the board, which would work against economic interest. It also would eliminate pathways for younger immigrants, which is counterintuitive based on evidence that younger immigrants contribute more over the course of their longer lives in America. (P. 17.)

Professor Chang asks a very important question. If immigration is an economic win, “why not liberalize our immigration laws?” As far as economics is concerned, our immigration policies should be liberalized. Professor Chang’s article is helpful in allowing non-economists to understand why that is so and why immigration restrictionists should not be allowed to hide behind economic arguments.

Cite as: Jill Family, Translating Economics for Immigration Policy, JOTWELL (January 17, 2019) (reviewing Howard F. Chang, The Economics of Immigration Reform, 52 U.C. Davis L. Rev. 111 (2018)), https://lex.jotwell.com/translating-economics-for-immigration-policy/.

Better Environmental Law from an Unlikely Source

For ‘tis the sport to have the engineer / Hoist with his own petard.
William Shakespeare, Hamlet, Act III Scene iv.

Happy is the litigator who successfully turns an argument against the adversary who propounded it. The joy is no less delicious for an academic. Professor Sanne Knudsen tries to turn the trick against the conservative majority of the current Supreme Court in her tidy article, The Flip Side of Michigan v. EPA: Are Cumulative Impacts Centrally Relevant?

Knudsen has gone to war against the narrow, atomistic thinking that, in times of both regulatory advance and retrenchment, has characterized much of environmental policy. Flip Side seeks to infiltrate comprehensive analysis across a broad front of agency decision-making, strengthening environmental regulation under cover of a court decision that struck down a major pollution-control rule.

Flip Side begins by analyzing the Michigan v. EPA opinion, in which the Supreme Court, per Justice Scalia, ruled 5-4 that the Clean Air Act requires EPA to consider industry’s costs of compliance when deciding whether it is “appropriate and necessary” to regulate mercury emissions from power plants. Knudsen avoids, or rather just dips a toe into, several scholarly debates the opinion generated. Did EPA lose at Chevron step one, because the statutory term “appropriate” unambiguously includes cost considerations, or at Chevron step two, because it is unreasonable to exclude cost considerations when construing ambiguous statutory language? How strongly did the Court endorse cost-benefit analysis as a mandatory component of environmental regulation? How broadly will the mandate to consider costs be applied in other statutory contexts?

For Knudsen’s project, the resolutions of those debates are not terribly important. What matters, she argues, are three salient features of Michigan v. EPA: First, that the Court held that a statute required EPA to consider a factor not explicitly mentioned in the statute’s grant of regulatory authority. Second, that the Court conflated review of EPA’s statutory construction with review of the rationality of EPA’s decision. And third, that the Court expressed this conflation broadly rather than through a tight focus on the specific statutory words at issue. That Knudsen draws support for her reading from both Cass Sunstein and Lisa Heinzerling suggests she is on to something.

From these features, Knudsen crucially infers that the method of Michigan v. EPA need not be limited to cost considerations, need not hinge on details of statutory language, and need not be limited to the Clean Air Act. As she puts it, Michigan v. EPA stands for the proposition “that factors which are presumptively indispensable to nonarbitrary decisionmaking must be considered.” (P. 20.) And that frees Knudsen to ask her central question: what other factors, in addition to cost, fit that description?

To answer, Knudsen turns to science to argue that cumulative impacts, no less than compliance costs, are so centrally relevant to environmental policy decisions that they must be considered in any rational regulatory process. For someone with Knudsen’s background in environmental engineering—or with any background at all in ecology or environmental science—this part of Flip Side’s argument takes little effort. Citing examples of climate change, chemical exposure, water quality and supply, and introduced species, Knudsen shows convincingly that interconnectedness and interaction pervade the subjects that environmental statutes address.

Failing to regard these relations when making environmental policy, Knudsen argues, systematically understates the risks presented by environmental contamination, undervalues the public health benefits of regulation, and underestimates the environmental impact of government activity. To view each regulatory or resource management decision in isolation, ignoring the cumulative impact of that decision combined with other relevant governmental or non-governmental actions, Knudsen argues, is to ignore a critically important aspect of the problem. And that, she concludes, is arbitrary and capricious under Michigan v. EPA.

Flip Side concludes with a brief consideration of how environmental policy could improve if agencies knew that their decisions must take account of cumulative impacts in order to survive judicial review. Such a requirement, for instance, could help defend EPA’s practice of including co-benefits (those caused by, but incidental to, meeting the intended regulatory target) in regulatory impact analyses. Knudsen further gives examples of a Minnesota statute that requires consideration of cumulative impacts when issuing air pollution permits, of the potential of evaluating cumulative toxicity risks in chemicals regulation, and of an EPA Region 9 effort to consider cumulative impacts on surface water quality when issuing pollutant discharge permits. In each of these media-specific regulatory programs, Knudsen shows, requiring cumulative impact assessment would bring agency decisions into better alignment with the public health and environmental protection goals of the statutes being implemented.

For litigants that may wish to challenge future agencies that deregulate or decline to regulate without considering cumulative impacts, Flip Side provides a generalized strategy. The strategy is not without its risks. As Knudsen acknowledges only in passing, rigorous evaluation of cumulative impacts is in many contexts difficult to nearly impossible. Even where information exists that would permit some cumulative impact analysis, the exercise presents difficult line-drawing problems: if it is arbitrary and capricious to act without considering cumulative impacts, how far must the analysis extend to survive judicial review? Of course the Supreme Court, in interpreting environmental statutes including the National Environmental Policy Act, the Endangered Species Act, and the Comprehensive Environmental Response, Compensation and Liability Act, has asserted that it is easy to answer such questions by importing concepts such as proximate cause from the common law of torts. Nevertheless, the possibility that courts might misuse Knudsen’s clever argument gives one pause.

On the other hand, Knudsen’s idea may have even more potential than she presents in Flip Side. Her fundamental point, that interactions in complex systems must be considered in formulating rational environmental policy, could be applied also to the cost side of the cost-benefit computation. Experience shows that initial predictions of compliance costs are usually exaggerated. This is not surprising, given the incentives that face a regulated industry before and after a new requirement is promulgated. If Michigan v. EPA means agencies must always consider costs before deciding to regulate, Flip Side implies that courts should welcome, even demand, agency approaches that treat costs in a more dynamic, systems-oriented way.

A petard was a primitive type of grenade, an explosive charge that was intended to breach defensive walls but that often blew up the person planting it. In The Flip Side of Michigan v. EPA, Sanne Knudsen has lobbed a grenade that should explode the walls that constrain environmental regulation into a series of individual decisions analyzed as if ceteris paribus were a description of reality instead of an analytical convenience. It should open a frame for policy-making that will more fully account for regulatory benefits and for the environmental impact of proposed actions while correcting the exaggeration of regulatory and opportunity costs.

With a deeply anti-regulatory ideology currently gripping all three branches of the federal government and many of the states, Flip Side’s thesis is unlikely to be enshrined in the administrative law canon anytime soon. In the fullness of time, however, Knudsen’s argument may—to end with a different metaphor—make some lemonade out of the environmental lemon that is Michigan v. EPA.

Cite as: Steve Gold, Better Environmental Law from an Unlikely Source, JOTWELL (December 7, 2018) (reviewing Sanne H. Knudsen, The Flip Side of Michigan v. EPA: Are Cumulative Impacts Centrally Relevant?, 1 Utah L. Rev. 1 (2018)), https://lex.jotwell.com/better-environmental-law-from-an-unlikely-source/.