Yearly Archives: 2017
Aug 18, 2017 Steve GoldEnvironmental Law
My very first law professor, Bob Ellickson, once said to my Torts class: “You know how law professors do empirical research? They sit in a room and think very hard.”
That was in 1984. A lot has changed since then, partly because of pioneering work by Ellickson himself. Since 2012, more than 500 law review articles have included the word “empirical” in their titles, and probably hundreds more – including every item in the most recent issue of the Journal of Empirical Legal Studies – report or analyze empirical data without titular advertisement. Many of these papers feature linear regressions or other complex statistical analyses aiming to tease out relationships between variables. Yet there remains much value in research that simply but rigorously informs us of what actually happens in the real world. Understanding environmental law, like understanding the environment, begins with observing. This Jot acknowledges the contributions of two recent articles that help us see.
Karen Bradshaw’s Settling for Natural Resource Damages explores a component of environmental law practice that, she persuasively argues, has received too little scholarly attention. Regardless of whether she correctly identifies the predominance of settlement as the reason for scholars’ indifference, she is unquestionably correct to observe that claims by governmental trustee agencies for natural resource damages (NRDs) – like most civil litigation – almost always settle. But how often? For what types of claims? For how much? These are the questions Bradshaw asks.
To find answers, Bradshaw takes the simplest approach imaginable. She asks the people who know. Through Freedom of Information Act requests, Bradshaw sets out to determine the number of NRD claims each federal trustee agency has settled under its particular legal authorities, the aggregate amount of damages those settlements recovered, and the distribution of recovery amounts. She acknowledges that the quality of her data is limited by the inconsistent and uncertain quality of agency responses to her information requests. Nevertheless, the data in Settling for Natural Resource Damages appear to paint a reasonably robust picture of most types of NRD settlements by federal agencies.
To her credit, Brashaw defines NRD claims broadly. She includes liability to federal land management agencies for damaging the resources they manage as well as the better-known NRD liability for hazardous substance and oil spills provided by the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) and the Oil Pollution Act (OPA, together with predecessor provisions of the Clean Water Act). As Bradshaw points out, the limited literature on NRD liability has focused almost entirely on CERCLA and OPA.
The results of Bradshaw’s inquiry, however, seem to vindicate earlier scholars’ emphasis. Federal agencies have settled more than 300 claims for damage to resources in national park units and national marine sanctuaries. These claims account for nearly half of the settlements in Bradshaw’s data set, but the reported combined value of those settlements is less than one percent of the total for all NRD settlements. The other ninety-nine percent came in settlements under CERCLA, OPA and the Clean Water Act.
Even excluding the outsize settlements of NRD claims related to the Deepwater Horizon blowout ($8.1 billion) and the Exxon Valdez grounding ($900 million), Bradshaw reports, the cumulative nominal value of federal NRD settlements under CERCLA, OPA and the Clean Water Act is nearly $1.4 billion. All that money is supposed to compensate the public for injury to, loss of, or destruction of natural resources, and is supposed to be used only to restore, replace, or acquire the equivalent of the resources harmed. How well have agencies’ settlement practices served the goal of obtaining appropriate levels of compensation? How successful have the federal trustees’ resource restoration efforts been? Should the tort-like NRD liability provisions of these statutes be emulated in addressing other environmental problems? How does the performance of non-federal trustees – which, as Bradshaw notes, includes some settlements that were subjected to withering criticism – compare to the performance of the federal trustees?
These are urgent questions. Settling for Natural Resource Damages makes no attempt to answer them, but invites efforts to do so. Bradshaw’s call for further research is well taken, in light of the scale of NRD settlements that she documents. That in itself is a significant contribution. In the world of NRD settlements, observing what’s going on out there is the first step in understanding what’s really going on out there.
James W. Coleman’s How Cheap Is Corporate Talk? observes a different aspect of environmental law practice. Coleman addresses the “regulator’s dilemma”: agencies must identify technically and economically feasible ways to meet statutory environmental goals, but their main source of information about technology and costs is the industry to be regulated – when the industry has obvious incentives to portray any regulation as infeasible and expensive. Coleman argues that one way to test the claims an industry makes to a regulator is by comparing them to what the industry tells its investors about the same regulatory risks – when the industry has obvious incentives to portray any potential regulation as no big deal. An industry’s “two-audience problem,” Coleman contends, can ease the regulator’s dilemma.
As Coleman acknowledges, it is hardly news that companies and trade associations facing potential environmental regulations (as well as many other actors in many contexts) talk out of both sides of their mouths depending on their audience. But Coleman strives to go beyond anecdote. He attempts a rigorous analysis to demonstrate this phenomenon in operation in a way that might be helpful to regulators, to investors, and to corporate counsel who give advice about statements made to both regulators and investors.
For his project, Coleman mines statements about a cleverly-selected instance of environmental regulation: EPA’s annual efforts to promulgate a Renewable Fuel Standard pursuant to the Energy Independence and Security Act of 2017. This rulemaking and statute, which underlie the notices at gas pumps that ethanol has been blended into the fuel, suit Coleman’s purpose for several reasons. The statute’s requirement for annual revisions to the Standard generates recurrent opportunities for affected industries to state clear views about the impact of proposed and final regulations in documents that are easily paired – comments submitted to EPA during the rulemaking process and Form 10-K disclosures released to investors. The number of affected companies is small enough for thorough review of the documents yet large enough to provide results amenable to statistical analysis. Perhaps most usefully, implementation of the Standard affects different industries differently. Increasing the market share of ethanol and other biofuels threatens the profits of petroleum refiners and allies but offers growth opportunities for agricultural producers and allies. Thus Coleman could observe, by reviewing more than 10,000 pages of documents, the way industries with opposing interests depicted the effects of the same rule in statements to both regulators and investors.
How, though, can the comparison be made? Simply counting contradictions will not do, for as Coleman understands, “[m]ost actors facing a two-audience problem are smart enough to avoid direct factual contradictions.” (P. 66). Instead, Coleman codes the substance of individual statements about the Standard’s impact. Essentially, he counts the number of arguments about the standard that each company made to each of its two audiences (in regulatory comments and Forms 10-K) about how the Standard would affect the company.
Coleman found that companies with dominant interests in petroleum predicted more negative impacts of the Standard, on average, in their regulatory comments than in their Forms 10-K (2.78 versus 0.78). By contrast, companies with dominant interests in biofuels predicted more positive impacts of the Standard, on average, in their Forms 10-K than in their regulatory comments (0.58 versus 0.21). Applying two straightforward statistical techniques, Coleman implicitly tested the null hypothesis that each of the two sets of comparable discussions were drawn from a population with the same mean number of negative or positive impacts. The observed differences were statistically significant (P < .004 by either test) for the companies with petroleum interests and barely not significant (.05 < P < .055 by either test) for the companies with biofuels interests. Thus Coleman demonstrates that with respect to the Renewable Fuel Standard, “oil companies warn regulators and reassure investors.” (P. 70.)
There are methodological issues. Despite Coleman’s efforts to ensure data quality, the taxonomy of distinct predictions of negative and positive impacts of the rule, and the assignment of individual statements to codes within that taxonomy, must to some degree be subjective. And it is not clear that counting arguments is the best way to detect the “exaggeration, ambiguity and omission” that Coleman correctly describes as the hallmark of assertions by intelligent actors facing a two-audience problem. Moreover, affected interests in environmental regulatory disputes surely make many statements about potential rules, targeted to both regulators and investors, outside of officially submitted comments and formal 10-K disclosures.
These quibbles do not denigrate the work’s contribution. By choosing a consistent and limited set of documents to compare, Coleman avoids any possible allegation of cherry-picking. Counting arguments may miss differences in tone and emphasis, but is unlikely to understate the contrast between a company’s pitches to regulators and investors. Coleman’s analysis confirms, in a systematic rather than anecdotal way, our intuition that regulated industry tells different stories to different audiences to suit different ends. His findings suggest that regulators and investors should keep saltshakers handy when hearing from an industry to be affected by a pending regulatory choice – including an industry that stands to benefit. The lesson bears demonstration, even during an Administration more likely to deregulate than to regulate.
Karen Bradshaw’s Settling for Natural Resource Damages and James W. Coleman’s How Cheap Is Corporate Talk? have relatively modest goals. These papers are not burdened with grand theory or elaborate statistics. Instead, they collect and present data to describe clearly phenomena that we know exist, but that we have comprehended only vaguely. They help us see.
Cite as: Steve Gold, The Real World, JOTWELL (August 18, 2017) (reviewing Karen Bradshaw, Settling for Natural Resource Damages, 40 Harv. Envtl. L. Rev. 211 (2016) and James W. Coleman, How Cheap Is Corporate Talk? Comparing Companies’ Comments on Regulations with Their Securities Disclosures, 40 Harv. Envtl. L. Rev. 48 (2016)), https://lex.jotwell.com/the-real-world/.
Aug 11, 2017 Wendy Anne BachPoverty Law
That Elizabeth Hinton’s From the War on Poverty to the War on Crime: The Making of Mass Incarceration in America is a must-read for those interested in the origins of the U.S. carceral state has been made clear in a stream of well-deserved and laudatory reviews.See e.g. James Forman, Jr., Fortress America, The Nation, Oct 17, 2016 at 35–37; Imani Perry, Book Review: ‘From the War on Poverty to the War on Crime’, by Elizabeth Hinton, N.Y. Times, May 29, 2016, at 15; Adam Hochschild, Our Awful Prisons: How They Can be Changed, 63 N.Y. Rev. Books 9, 30–32 (2016); Christine Canfield, Book Review: From the War on Poverty to the War on Crime; the Making of Mass Incarceration in America, ForeWord (Jan 23, 2017). Echoing and reinforcing Naomi Murakawa’s The First Civil Right: How Liberals Build Prison America, Hinton persuasively demonstrates that today’s racially-targeted carceral state did not originate in Ronald Reagan’s 1980s. Instead its roots are both older and disturbingly bipartisan.
The architectural foundations of today’s carceral policies were laid during the administrations of Kennedy and Johnson, in the moments when the federal dedication to Community Action, maximum feasible participation and the War on Poverty gave way to the pathologization of black youth. Hinton moves steadily forward from that moment, persuasively indicting along the way not only Kennedy and Johnson but Carter as well. As she reveals, “in full historical context, the policies of the Regan administration marked merely the fulfillment of federal crime control priorities that stemmed initially from one of the most idealistic enterprises in American history .” (P. 4.) But the book is not only relevant for those interested in carceral policies. For scholars of poverty law and social welfare history, and in particular for those who seek to understand the historical origins of what Kaaryn Gustafson termed the criminalization of poverty, Hinton’s book is equally important.Kaaryn Gustafson, Cheating Welfare: Public Assistance and The Criminalization of Poverty (2011).
When one wonders at the punitive and criminalizing nature of current U.S. social welfare policy, from federal housing policies that devastate families, to the over-policing of schools and the resulting school to prison pipeline, to the desperate turn to problem-solving courts to solve seemingly every social ill, Hinton’s book sheds disturbing light. Beginning in the late 1960s, federal policy-makers began not only radically disinvesting in community-based support, but they began integrating policing and surveillance of urban, African American youth into the very fabric of what remained of U.S. urban social welfare programs. Ever-focused on “potentially delinquent” black youth, 1960s Youth Bureaus integrated law enforcement into recreational, education and employment programs. “By the mid-1970s federal disinvestment from the public sector and the remnants of the War on Poverty programs meant that social welfare agencies in urban centers had little choice but to incorporate crime control measures in their basic programming in order to receive funding.” (P. 236.)
Over time, basic and vital social supports, like public housing, became the site for surveillance, policing and criminalization. Take for example the Carter-era Urban Initiatives Anti-Crime program, which “[established] stronger partnerships between social and law enforcement institutions and [devoted] the majority of funds to surveillance and security needs.” (P. 288.) In so doing it “vastly enhanced the scope and power of punitive authorities in the most deteriorated and segregated public housing sites in the country.” By that time, “. . . law enforcement and criminal justice institutions could involve themselves in virtually any community-based effort.” (P. 293.)
By the end of the Reagan era, the story was complete. As Hinton explains, “[w]hen Reagan took office, the rhetoric of community involvement vanished from the domestic policy arenas, never to return. Stemming from the punitive shift in urban social programs during the previous decade, over the course of the 1980s, law enforcement officers came to provide the primary (and in some areas the only) public social services to residents.” (P. 337-38.) No wonder then that today police fill our schools and policing dominates our welfare offices. No wonder that we criminalize addiction and poverty. No wonder too that problem-solving courts have emerged as a desperate attempt to address the deep social welfare needs of whole communities led inexorably into criminal systems. History, it seems, has led us to precisely this moment.
But Hinton’s book offers not only an origin story but also a way forward. For her, solutions lie in returning to ideas deeply embedded in the early War on Poverty. As she states, “[w]e must revisit the principles of community representation and grassroots empowerment that guided the early development of the Great Society in order to begin moving toward a more equitable and just nation.” (P. 336.) We would be wise both to learn the history she teaches and to heed her advice.
Jul 31, 2017 Jan PaulssonInternational Arbitration
Arbitral institutions like to be discreet, and would perhaps be content if it were generally assumed that they perform a merely clerical and administrative function. Such a posture would be untenable. The tasks necessarily allocated to such bodies are central to any assessment of the legitimacy of the arbitral process. Given that commentators those looking for a soapbox seem to find it easy to have categorical opinions about arbitration, with an intensity inversely proportional to their acquaintance with facts, this is a welcome book, dispassionate but critical, which should allows its readers to bring greater discipline to their analysis—whatever may be their ideological predispositions.
Behind a deceptively bland title, Rémy Gerbay provides a conceptual framework which should allow evaluation of the international arbitral mechanism to be conducted with greater seriousness. A French scholar who has particularly cosmopolitan credentials, he holds degrees not only from his native country but also Switzerland, the United States, and the United Kingdom; and practicing licenses in the US and England. Now a lecturer at the School of International Arbitration at Queen Mary University of London, he had previously distinguished himself as a young Deputy Registrar of the London Court of International Arbitration—an experience which allows him to write with authority and meaningful perspectives on this subject.
In the national sphere, consumer arbitration is a salient example of the controversies that arise. Arbitration clauses, some say, is the dark art of unscrupulous corporations seeking to evade responsibility for their products and services by making it nigh on impossible for consumers to seek effective redress. The only thing left to do, in this view, is to treat arbitration clauses as presumptively unconscionable. Yet the school is out on two important questions: is it not possible to police abuse of asymmetrical bargaining power in arbitration clauses, for example by powerful safety valves like the American Arbitration Association’s Due Process Protocol? And is it a foregone conclusion that there is no type of arbitration which actually benefits consumers, despite the contrary conclusion of a number of studies?
International arbitration is criticized as a way of neutralizing sovereignty, displacing public courts with private decision-makers who tend to disregard the public interest. In answer, its defenders point out that especially outside the cleanest and institutionally most mature states, it is very much open to doubt that the court do a better job of looking out for the interests of ordinary citizens. Moreover, they point out that countries must provide credible neutral adjudication of legal rights and obligations, lest suffer from having the cost of all their international dealings augmented by a legal risk premium.
Arbitration constitutes the delegation of decision-making authority to persons who do not hold public office. As Gerbay perceives quite clearly, delegation generally implies some measure of residual control, or the thing would not be the delegation of authority but its simple relinquishment. Contrary to a widely-held belief (see below), arbitrants in the international domain are anything but sanguine about the idea of giving arbitrators free reign in the way they run the arbitral process (as opposed to—and no doubt as a counterpart of—according finality to their decision on the merits, without which arbitration would lose its appeal).
So who exercises this control? Who decides if the tribunals will have three members or only one? Who appoints arbitrators when the parties fail to agree? Who decides whether a candidate nominated by a party is unfit? Who considers petitions to remove arbitrators for misconduct? Who decides what their fees should be? What about selecting the place of arbitration, consolidating claims, joining parties? It would be odd if this had to be national courts, given the asymmetry between international arbitration and national courts; when the arbitrants are of two different nationalities, the involvement of national courts can only be the product of the agreement or voluntary conduct of the parties, and is therefore functionally just a variant of delegation. Above all, each arbitrant is likely to be wary of its adversary’s home courts, and if the parties were attracted by third country courts they might as well have asked them to decide the case as a whole—as some courts in a few countries are willing to do even where they otherwise would not have jurisdiction.
That leaves arbitral institutions. Many of them insist that they fulfill nothing but an administrative function, and vaunt their “hands-off” approach. This is in a sense the fundamental and proper recognition that they have not been chosen by the parties to decide. On the other hand, the appointment and removal of arbitrators may be viewed as a critical function entailing controversial determinations. The modest labelling of the institutional role as “administrative” may seem somewhat like the practice of police detectives using unmarked vehicles in an attempt to blend in with the background, an unremarkable feature of daily routine. The car may be unmarked, but the conduct of the detective, when it affects rights of due process (e.g. the proper gathering of evidence) cannot be so dismissed.
Like it or not, the permanent institutions that administer arbitrations cannot hide behind the fiction that they are providing merely managerial functions; they are to some degree answerable for deficits in the legitimacy of the process. Have they done what they can? More than that one cannot ask, but that much yes.
Moreover, the seemingly unrecognized fact is that users want international arbitral institutions to be hands-on. Gerbay reports that a survey of in-house counsel in 2013 found that more than 70% of the respondents wanted a “hands-on” rather than “hands-off” approach to case management by institutions. Less than 5% wanted the opposite. (One quarter were undecided, perhaps because they would have said “that depends on the institution.”) More hands-on means more accountable. Gerbay quotes the Olympian personnage of Pierre Lalive, the Swiss maître-penseur of international arbitration whose seminal publications dominated the field in the 1970s and 1980s; he once wrote of the “legal schizophrenia” of arbitral institutions who claim to exercise “simultaneously a quasi-judicial mission” so as to justify their immunity and a “purely administrative mission” so as to avoid being held to the duty to ensure due process. (P. 191.)
Challenges to institutional decision-making have led to a number of judicial pronouncements, especially by the courts of France where the best-known international institute is located, namely the International Court of Arbitration of the International Chamber of Commerce. The very first in the digest provided by Gerbay is instructive. It is known by the name of the losing (and objecting) party, Appareils Dragon. It wound its way up to the Court of Cassation in 1983. The question was simple: given that the default rule of the French arbitration statute required awards to be rendered within six months, and that the ICC Rules provided that the institution could extend that deadline, was an award rendered by arbitrators following such an extension subject to annulment because the institution had not given reasons for its “administrative” decision? Surely a losing argument, we might immediately say—and the highest French Court agreed. But one can hardly be satisfied by the essential passage of its judgment (in Gerbay’s translation), referring to the ICC in the following terms: “lacking the quality of arbitrator, [it] was not bound to provide reasons for its decision of prolongation, which did not have a jurisdictional character.” (P. 127.)
The nature of a decision implying the exercise of a “jurisdictional” function is hardly self-defining. Imagine a case pending before an unknown arbitration institute in a country far down on the Transparency International corruption index. After the commencement of arbitration, the institute takes no steps to constitute the tribunal but periodically extends the limit for proceedings. Years pass. This may suit the respondent just fine, as arbitral litispendence on the face of it prevents alternative pursuits of remedies. Justice is denied to the claimant, who suspects collusion. Surely there comes a point when courts elsewhere will no longer accept that the institution is merely administering the case, but consider that conduct is equivalent to depriving the claimant of the right of legal redress.
Gerbay does not propose detailed prescriptions; nor could he produce a formula, given the infinite variety of situations in which the legitimacy of the process may be tested. His important conclusion is an overarching one: arbitral institutions are not mere managers; they are what he calls “ancillary participants in the adjudicative process.” (P.185.) Will this conception bring about a dangerous blurring of the line between the arbitral and institutional functions, and subject institutions to costly and endless disputation initiated by unscrupulous respondents? Gerbay’s study, admirably well-documented with respect both to practice and commentary, answers this question in the negative. The fact that some dispositions made by institutions are difficult to distinguish from substantive adjudication is no excuse for seeking to hide the fact that they may materially affect the outcome — and will ultimately fool no one. In the long run, institutions must attend to the fundamental and well-known criteria of institutional legitimacy: striving for transparency, and striving against capture, cronyism, and entrenchment. If they do so, and fully assimilate the importance of observable fairness as they make indispensable determinations on the periphery of the core decision-making function reserved to arbitrators, they need not fear accountability, but may comfortably embrace it.
Jul 3, 2017 Juliet StumpfImmigration
Jennifer M. Chacón,
Producing Liminal Legality, 92
Denver U. L. Rev. (forthcoming), available at
SSRN.
Jennifer Chacon’s Producing Liminal Legality is a must read, and not only because the title so aptly reflects the liminality of the article itself. The work is betwixt and between criminal and immigration law, between formal and functional analysis, pointing back in history and forward towards social change. It appears in a symposium issue, itself a liminal form of academic discourse, suspended between the immediacy of the academic blog post and the timeless stand-alone academic article. In light of the seemingly permanent status of liminal legality, this article promises to be both hot and timeless, with an illumination in every section.
Chacón draws from the cresting edge of the social science around liminal legal subjects, using it to uncover and critique the legal mechanisms that produce liminal legality. She describes the liminal legal statuses that are proliferating within immigration law and beyond it. Liminal legal categories function in two ways: “to effectuate administrative resource conservation through community-oriented risk management strategies” and to allow governmental actors to assert control over identified populations in ways that avoid the rights-protective schemes of the twentieth century.
The piece begins with a taxonomy of liminal legal status. Liminal status is rooted in the experiences of marginalized noncitizens and the ever-present threat of being plucked away from one’s settled life through a contemporary form of banishment. Central examples of liminal statuses are the administrative granting of immigration parole and “deferred action,” two feats of affirmative administrative inaction. A noncitizen granted parole or deferred action experiences “a reliance on administrative grace to effectuate freedom from banishment, an obligation to pay one’s way to prevent that banishment, experiences of heightened monitoring by governmental actors, and a related vulnerability to control, exclusion, and abuse by private actors.” (P. 709.) This is two moves in one: Chacón reveals how an official decision not to act serves to create a pseudo-status, or what Geoffrey Heeren calls “The Status of Nonstatus.” More, Chacón evokes in the reader a sense of what it’s like to exist in such a state of liminal grace, simultaneously suspended by mere inaction and locked in a Damoclean suspense.
Chacón’s next conceptual move is to expand the class of those living in liminal legality beyond the group on the edge of banishment. She reveals as liminal the groups of noncitizens who have seemingly more stable legal privileges, such as lawful permanent residents “who live in heavily policed, restrictionist jurisdictions and who have old criminal convictions that might appear to render them deportable” and who “may experience greater liminality and a greater likelihood of banishment than an unauthorized noncitizen who is a low priority for removal and lives in a more immigrant-friendly jurisdiction.” (P. 732.) Liminality, then, is less dependent on formal immigration status categories than on the functional elements of time, place, and social context.
Liminality then crosses the citizenship divide to include citizens embedded in immigrant communities as well as citizens who don’t, but who nonetheless have regular contact with law enforcement officials. This is an important move, because it expands the map of liminal status in several ways. First, it illuminates how the operation of liminal legality is not confined to noncitizens, but affects citizens as well. Second, it demonstrates how the commonality of contact with law enforcement is a more accurate predictor of legal liminality than which system of governance—immigration or criminal justice—is operating on an individual.
Chacón advocates for using liminal legality because its transubstantive nature offers advantages over topical frames like “crimmigration.” She would return crimmigration scholarship to its original grounding in membership theory, thereby “reinvigorating the discussion of the role that race, class, and place play in structuring governance strategies both at the border of criminal and immigration law and beyond it.” (P. 764.)
This is why I think Producing Liminal Legality is such an important work for the current moment. Returning to membership theory with a transubstantive legal analysis like liminality is one way to stem the tide of immigration exceptionalism that the Executive Branch is now relying on to maximize its ability to exclude groups like Muslims and refugees. Also, Chacón uses the notion of liminality to make a series of connections that immigration scholarship often struggles with: the tenuousness of distinctions among the authorized citizenship and immigration statuses, the governance functions played by the interlacing of criminal and immigration law, and the role of race, class, and place in that complex interlacing. Having erased the citizenship line as a significant analytical boundary, and exchanged it for the level of governance through law enforcement that an individual or community experiences, the presence of race and class come into focus like elephants in a room.
May 25, 2017 Caprice RobertsRemedies
Yonathan A. Arbel,
Contract Remedies in Action: Specific Performance, 118
W. Va. L. Rev. 100 (2015), available at
SSRN.
Parties that have a right to the very thing promised in a contract may opt not to have it delivered by the breaching party through specific performance. Even when the promised item is unique, the plaintiff may choose not to enforce the remedy. Why? Is it too difficult to execute the remedy? Are motivations mixed? Do lawyers advise clients to pursue money damages over specific performance? Will the breaching party behave in good faith when complying with the order? Professor Yonathan Arbel, former managing editor of the New Private Law Blog, offers a fascinating qualitative study of this underexamined issue. He explores why a contractual party that has established a right to the remedy of specific performance might opt out of the preferred remedy. Despite having a proven right to this coveted remedy, he shows why plaintiffs may choose not to force the breaching party to perform as promised. This, he claims, is true notwithstanding the “notoriously” under-compensatory nature of expectancy damages in comparison to specific performance.
Remedies and substance are intertwined. Professor Ariel Porat, in a Remedies chapter in the forthcoming Handbook of Law and Economics, declares that “[a]nalyzing the substantive law without its remedial part is almost meaningless.” Understanding remedial options and goals is essential. Professor Arbel’s work thoughtfully analyzes contract law’s pinnacle remedy of specific performance and the goals it serves. He then critically examines contract’s law primary competing theories—economic and rights-based conceptions—in light of parties’ actual behavior regarding specific performance. His treatment describes what parties actually do when confronted with the option of specific performance in the real world. His qualitative approach explores their practices “‘from the inside,’ tracking the internal view of litigants and their lawyers.”
The heart of Professor Arbel’s article centers on his findings from interviews with lawyers and their clients who were engaged in specific performance litigation. For the qualitative analysis, he uses a comparable legal system, but one where specific performance is the default remedy: Israel. The interesting findings are inconsistent with the two main contract theories: A utilitarian may view specific performance as a bargaining chip to extract more money from the breaching party, while a rights-based advocate may view the remedy as the ultimate vindication of the value of promise-keeping. In part, Professor Arbel opines that the growing empirical data to prove these theories relies upon faulty assumptions. For example, the theorists omit plaintiff’s remedial choices, assume parities will negotiate execution of the order, and fail to appreciate real-world motivations and implementation challenges.
The interviews reveal the complexity that lies beneath. Though not all plaintiffs opt out of this powerful remedy, significant numbers do abstain at various stages: (i) prejudgment, (ii) post-judgment renegotiation, and (iii) ultimate execution. Pursuing a remedy via the court system takes time. Reaching the desired judicial remedy via litigation suspends the parties in an adversarial posture, which may linger post-trial when it is time to execute the special performance decree. Attaining the promised performance may entail further negotiations, and plaintiff’s preference may alter over time. Such orders require good faith in implementation, despite lack of standards or court supervisory means to ensure high quality compliance. In the face of bad faith or even simply delay, plaintiff must choose whether to spend energy and money to demand compliance. Most interviewees reported real challenges enforcing specific performance. Contempt may be ineffective if defendant lacks funds. Plaintiff may be left to leverage defendant’s reputation or rely on social norms—both valuable tools but not full proof in operation.
Professor Arbel also seeks to bridge the binary nature of the two theoretical dialogues. He suggests the economics-minded align assumptions with actual practice—for example, a decree does not equate to receipt of actual performance as promised. For the rights-based theorists, he recommends they consider the strategic and utilitarian motivations plaintiffs demonstrate in the process. Per Arbel’s findings, a plaintiff may choose specific performance prejudgment to signal the strength of the case, minimize costs and delays, and leverage renegotiation after judgment. Both would be well served to enhance their exploration with the possibilities that these real-world findings signify.
Importantly, Professor Arbel maintains that to best protect nonbreaching parties, both theoretical schools should give plaintiff the option between specific performance and expectation damages. Ethical rules must guide lawyers to avoid self-serving advice. But even assuming sage advice, Professor Arbel warns that judges shouldn’t trust plaintiffs to choose wisely, which may necessitate judges exercising broad discretion to craft the remedial award. This harkens back to equitable cleanup jurisdiction in the United States in which the judge would render complete justice, including damages in lieu, should specific performance become unavailable or impossible. What about other possible remedies beyond compensation if specific performance is unattainable: for certain breaches of contract, should plaintiffs also be able to disgorge defendant’s unjust gains? See here, here, and here. Both the United States and Israel permit a disgorgement gain-based remedy for breaches of contract when appropriate. That is a topic for another day, but more research along the lines Professor Arbel conducts would go far in servicing the very goals that the substantive law of contract aims to attain.
Overall, Professor Arbel seeks to contextualize contract theory, break the stalemate between instrumental and deontological stances, and stimulate the collection of more data with larger samples. His article successfully contextualizes the debate, but only time will tell on the other two aims. It is my hope that he and the scholarly community will succeed on all three goals. Fine-tuning data to context and linking theory to practice will sharpen the theoretical debate and aid plaintiffs in achieving optimal results in the face of breach.
May the third generation of specific performance discourse begin.
