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Deconstructing Shareholder Climate Activism: Why Institutional Investors Are Bullying Carbon Majors

Madison Condon, Externalities and the Common Owner, 95 Wash. L. Rev. 1 (2020), available at SSRN.

At Chevron’s 2020 annual meeting, a majority of voting shareholders approved a resolution urging the oil giant to bring its lobbying efforts in line with the Paris Climate Agreement’s goal of limiting global warming to two degrees Celsius. What seemed like a pipe dream not long ago has become a fixture on Wall Street. Climate activism has emerged as a dominant theme at shareholder meetings in the energy sector and beyond, with some resolutions receiving nearly sixty percent of votes. In her excellent article, Externalities and the Common Owner, Professor Madison Condon draws on modern portfolio theory to offer an intriguing explanation for the changing tide in shareholder climate activism.

In recent years, concerned shareholders have garnered majority approval for resolutions calling for corporate emission reduction targets, better disclosure of climate risk, and suspension of lobbying against carbon regulation, among other climate action – often against the vocal opposition of the company’s own board. This surge in shareholder support for climate-related proposals is likely the product of a multitude of factors, including the growing sense of urgency surrounding global climate change. Professor Condon makes a compelling case that a key driver of shareholders’ newfound love for climate activism may be a paradigm shift in the approach of institutional investors to corporate governance.

Along the way, Professor Condon incisively slaughters not one, but two sacred cows of the corporate governance literature. First up, the general assumption that rational shareholders will exercise their governance rights to maximize the firm’s value. Condon persuasively lays out the inherent conflict (at least in the near term) between the corporate objective of profit maximization and a shareholder-driven commitment to voluntary emission reductions, even more so when such a commitment is to be adopted by carbon majors like Shell, Total, or Chevron. The second bovine casualty of the article’s sharp analysis is the widely held belief that broadly diversified institutional investors are “rationally reticent” to invest their time and effort in corporate governance. After all, portfolio diversification tends to produce relatively small stakes in individual companies so the significant costs of shareholder engagement would translate to only small returns to the diversified investors’ portion of ownership. And yet, recent proxy seasons offer ample evidence of climate activism by pension funds, insurance companies, mutual funds, and other institutional investors bullying big oil and other carbon majors into climate action. So what gives?

The answer flows indirectly from Einer Elhauge’s observation that the proliferation of institutional investment has reduced market competition as key companies are increasingly owned by the same large shareholders. Since 1950, the share of institutional ownership in U.S. equities has grown from little over 5% to nearly 80%. Today, there is a more than 90% chance that any two competing firms in a given industry share at least one large shareholder that holds a stake of five percent or more in both companies – a more than fivefold increase compared to 1994. As Elhauge and others hone in on the anti-competitive effects of such “horizontal shareholding,” Professor Condon adds a novel climate dimension to the discourse.

Externalities and the Common Owner crafts a compelling argument that BlackRock, CalPers, Vanguard, and other “universal owners” have a strong financial incentive to advance corporate governance that will “mitigate climate change risks and damages to their economy-mirroring portfolios.” These broadly diversified institutional investors are willing to accept the negative short-term impacts of climate activism on the bottom line of individual firms if their engagement helps reduce systemic climate risk sufficiently to avert, or at least mitigate, damage to their other portfolio holdings. To illustrate this paradigm shift from the traditionally firm-centric to a portfolio-maximizing shareholder governance strategy, Professor Condon cites to several investor declarations revealing a growing emphasis on portfolio returns. She also offers an intuitive back-of-the-envelope calculation comparing costs and benefits using William Nordhaus’s acclaimed Dynamic Integrated Climate Economy Model. Based on Condon’s math, a broadly diversified investor like BlackRock with significant stakes in Exxon and Chevron might lose over $6 billion by supporting shareholder resolutions that force a 40% reduction in the two companies’ greenhouse gas emissions. But these losses would be more than compensated by the nearly $10 billion in damages from climate change that the emission reductions would avert from the rest of BlackRock’s portfolio.

Having laid out the economics of institutional investors’ externality-internalizing strategy of portfolio maximization, Professor Condon surveys the various avenues for influencing corporate officers, from shareholder proposals and board elections to informal communication and compensation. Next, she explores how sacrificing individual firm profits and value in the interest of portfolio returns may violate fiduciary duties owed by both firm managers and investment managers. Against this background, Professor Condon translates her observations and argument into a convincing amendment of the traditional narrative of institutional investors’ rational reticence to exercise their corporate governance rights.

The final section of Externalities and the Common Owner explores some of the broader normative issues presented by the portfolio-maximizing strategy of diversified institutional investors. Professor Condon ponders whether the net welfare gains from climate and other pollution reduction benefits will be enough to outweigh the negative welfare impacts from reduced competition and monopsony pricing in labor markets. A separate line of inquiry explores challenges related to the democratic legitimacy and accountability of a small group of heavyweight investors privatizing the kind of environmental governance choices traditionally left to governments and their elected officials. The author concludes that “[t]he net welfare effects of common ownership require further study, but intuition suggests this behavior is not aligned with aggregate social welfare.” (P. 79.)

Whether your scholarly interests lie in corporate governance, climate policy, or anywhere in between, Externalities and the Common Owner is a must-read. Professor Condon provides a deeply thought-provoking account of the evolving role of institutional investors in the war on carbon, while charting an intriguing agenda for future research on the benefits and drawbacks of portfolio maximization approaches to shareholder engagement.

Cite as: Felix Mormann, Deconstructing Shareholder Climate Activism: Why Institutional Investors Are Bullying Carbon Majors, JOTWELL (August 20, 2021) (reviewing Madison Condon, Externalities and the Common Owner, 95 Wash. L. Rev. 1 (2020), available at SSRN),

Reinforcing Autonomy and Displacing Guardianships with SDMs

Nina A. Kohn, Legislating Supported Decision-Making, 58 Harv. J. on Legislation 313 (2021).

In Legislating Supported Decision-Making, Professor Nina Kohn tackles the deficiencies of the supported decision-making paradigm, beginning with its definition, which varies tremendously depending on who you ask. She defines it as “an umbrella term for processes by which an individual who might otherwise be unable to make his or her own decisions becomes able to do so through support from other people.” (P. 4.) Supported decision-making (or SDM) represents a fundamental shift in the fields of elder law and disability rights. It is an extension of the people-centered approach. SDM promoters claim that it enhances the dignity of individuals with cognitive limitations by permitting decisions to be made with them—rather than for them.

States can and should use SDM in many contexts. Individuals under a guardianship ought to be empowered to participate in decisions about their lives, their healthcare, their financial affairs, and so on. SDM can thereby permit more limited guardianships. Moreover, for higher functioning individuals, SDM can provide an alternative to a guardianship proceeding altogether. Because SDM is less restrictive alternative, it should be preferred to a guardianship whenever feasible.

However, Kohn argues, SDM has fallen short of its aim of providing an alternative to guardianship in several respects. Indeed, SDM agreements may even erode autonomy by limiting the rights of individuals with cognitive limitations to revoke the agreements. In addition, SDM legislation typically treats SDM supporters as non-fiduciaries while providing few if any remedies or rights for the supported individual—while creating “new legal rights for the supporters” (P. 21) (emphasis in original) and third parties.

Kohn’s indictment of SDM implementation is compelling. She notes the convergence of political interests underlying the widespread support for SDM legislation – legislation which, by authorizing SDM agreements, gives them an official imprimatur. She then proceeds to critique the existing ’ shortcomings. Finally, she frames five coherent and straightforward proposals to remedy those failings. I’ll highlight three of them.

First, Kohn proposes, state guardianship statutes ought to “be amended to explicitly prohibit the use of guardianship where supported decision-making would meet the individual’s needs.”(P. 39.) This approach is embedded in the Uniform Guardianship, Conservatorship, and Other Protective Arrangements Act (or UGCOPAA) approved by the Uniform Laws Commission in 2017, but so far, is enacted in only two states.

Second, Kohn explains: “Despite the common rhetoric used to promote them, [most existing guardianship] statutes do not provide individuals with a right to use supported decision-making.” (P. 18.) Kohn’s point rests on a reality of the legal landscape: The majority of individuals under a guardianship retain a host of rights, including the right to contract. Thus, no enabling statute is required to permit the exercise of this right. Formal legal status (i.e., legislation) is redundant. SDM-enabling legislation can suggest that individuals with cognitive limitations lack the power to make decisions for themselves unless a formal SDM contract appointing a supporter is in place. As a result, legislation which expressly authorizes individuals under guardianships to utilize SDM can actually have the effect of diminishing their autonomy and authority over their own lives.

Thus, Kohn’s second proposal is to promote SDM agreements through the dissemination of forms without any enabling legislation. Stakeholders, state agencies, and non-governmental advocates can simply encourage SDM agreements. A useful form, for example, would identify the parties (the supported party and his or her supporter), address compensation, impose duties, describe the decisions with which the supporter will assist, identify the type of assistance to be provided (e.g., with identifying different options; with evaluating them, etc.), and clarify the overlap between multiple supporters. The form should also – contrary to some examples of SDM legislation – permit the supported person to revoke the agreement at will.

Third, Kohn advances the idea of constructing a public system for supporters, designed along the lines of public guardianship programs. Supporters could be trained and any individuals with disabilities who lack a network of trusted family members could use staff from publicly funded programs for their SDM agreements. Indeed, Kohn suggests, doing so might already be required by federal law pursuant to the mandates of Title II of the Americans with Disabilities Act (ADA). She notes, “Arguably, when a public entity provides decision-making support to individuals with disabilities only if those individuals are subject to guardianship, the entity violates the ADA by not offering a less restrictive alternative.” (P. 45-46.)

Kohn’s article is a rousing call to action accompanied by a comprehensive battle plan. It should be required reading for disability rights advocates, elder law attorneys, and state legislators everywhere. It is practical, meaningful, and important scholarship.

Cite as: Tom Simmons, Reinforcing Autonomy and Displacing Guardianships with SDMs, JOTWELL (August 16, 2021) (reviewing Nina A. Kohn, Legislating Supported Decision-Making, 58 Harv. J. on Legislation 313 (2021)),

Follow the Money: Capital Controls as Migrant Control

Shayak Sarkar, Capital Controls as Migrant Controls, 109 Cal. L. R. 799 (2021).

When I picture immigration enforcement, my mind’s eye sees walls bisecting dusty hills, “POLICE” slashed across ICE uniforms, sheriffs with immigrant detainers, and the bright painted bricks and silvery wire of detention facilities. I don’t see money.

At least, I didn’t. Then I read Shayak Sarkar’s Capital Controls as Migrant Controls. Now, like a Sixth Sense, when I picture immigration control, I see money. I see it everywhere, walking around. Capital Controls will shift your perspective on the relationship between how we control capital and how capital is a tool of immigration control.

I am a sucker for legal history, and Capital Controls delivers. The article narrates the arc of financial regulation theory—from “financial liberalization,” advocating for the removal of capital controls to expand development, to a 180-degree-Keynesian turn toward stronger financial borders to prevent flows of foreign capital from exacerbating domestic financial problems. Financial borders were also promoted as a way to address national security concerns. The narrative arc alights on the current state of affairs in which capital controls have largely fallen to the wayside over the last few decades. Now, scholars of finance, political science, and law critique the asymmetry between human and capital movement, as with Nobel Laureate Gary Becker advocating for lifting border controls to match more closely the movements of goods, services, and capital.

Immigration scholars have expended many pixels examining how the law of immigration admissions and welfare have drawn lines between citizen haves and noncitizen have-nots. Sarkar adds a wholly new dimension, exploring “the law’s disparate treatment of migrant wealth and the institutions responsible for creating and enforcing such laws.” As he points out, “ordinary people crossing borders …. accumulate capital, whether that crossing occurs lawfully or unlawfully.” That is, noncitizens are no different from citizens in moving money from one place to another in order to live, provide for family, work, and operate in a society organized around capital. Much of that money flows across borders.

Controlling the particular ways that migrants move money, says Sarkar, constitutes a form of migration control. Capital controls distinguish migrants from citizens “by regulating a migrant’s access to their own money.” The article examines three forms of capital controls acting as migrant controls. The first is the popcorning of federal and state proposals to tax remittances that noncitizens use to transfer money earned in the United States to their country of origin. Oklahoma is the only state thus far to have passed actual legislation; other proposals would base taxation on either the cross-border destination of the capital or the immigration status of the sender, or both. Most seek to constrict or prevent the cross-border entry of undocumented noncitizens.

Second, the U.S. government conditions an undocumented immigrant’s receipt of earned Social Security benefits on leaving the United States. As Sarkar points out, these provisions press for expelling migrants themselves. They “create a Faustian bargain: relinquish your adopted homeland or relinquish your capital.” This condition operates as a form of migrant control, but also imposes a collateral consequence on the United States of expelling the capital from the country.

Last, post-9-11 legislation compels banks and similar institutions (also known as “insured depository institutions”) to “identify” their customers, but without saying much about how. Inspired by the employment eligibility requirements of the Immigration Reform and Control Act, the law largely leaves it to banks to figure out how to comply with the identity verification requirements. The law provides few guidelines and no determinative list of acceptable documentation of the sort that is a feature of the employment verification system (itself a flawed and much-critiqued enforcement system). These identity requirements have resulted in suspended accounts due to uncertainty about a noncitizen customer’s identification. They have also created a division based on citizenship status between those with access to the relative security of a bank and those who cannot access such services or perceive them as a part of the immigration enforcement infrastructure.

These financial controls act to regulate both migrants and migration. They screen out those whom governmental or private institutions deem undesirable, burdening movement into or within the United States and pushing outward migration of those deemed undesirable. By drawing distinctions based on citizenship status, they also communicate that noncitizens occupy a less favored tier on the membership scale in the community to which they have moved.

What I like (lots) about this article, beyond pulling the scales from my eyes about the significance of capital regulation as a means of migration control, is that it applies a seemingly orthogonal area—the law and policy of finance—to immigration law. It also contributes in a new way to the substantial literature on the private and subfederal enforcement of immigration law. The collage in my mind’s eye of immigration enforcement was mostly composed of images of federal agencies employing brute-force methodologies for controlling the movement of people through a crimmigration and securitization framework. Sarkar takes us into the liminal world of financial controls populated not with ICE and the Customs and Border Patrol but rather with private institutions such as banks, state and local regulators, and financial and welfare agencies like the Social Security Administration and the IRS.

Cite as: Juliet Stumpf, Follow the Money: Capital Controls as Migrant Control, JOTWELL (August 5, 2021) (reviewing Shayak Sarkar, Capital Controls as Migrant Controls, 109 Cal. L. R. 799 (2021)),

A Positive Immigration Agenda for Racial Justice

Kevin Johnson, Bringing Racial Justice to Immigration Law, 116 Nw. U.L. Rev. 1 (2021).

Since the summer of 2020, Americans have been having more explicit discussions about racial hierarchy in the United States and the role of law enforcement in maintaining such hierarchy. Kevin Johnson’s forthcoming essay, Bringing Racial Justice to Immigration Law, brings that conversation to immigration law. Johnson argues that Congress, but ultimately the Supreme Court, needs to explicitly address the racial animus that has motivated the structure of immigration law in the United States. Through an examination of immigration history, the emergence of a robust immigrant rights movement, and the significant backlash from the Trump Administration, Johnson demonstrates that a positive agenda for immigration reform is required in order for the country to move towards a more just immigration system, rather than simply reverting to the pre-Trump immigration system, which was not a model for justice.

Johnson’s essay begins by mapping the racially discriminatory foundations of immigration law and the minimal role that courts have played in acknowledging and remedying such discrimination. The essay then discusses the emergence of the robust immigrant rights movement despite the fact that non-citizens are not eligible to vote. A response to the growth of the immigrant rights movement was a backlash by the Trump Administration. The next section of the essay explores the efforts undertaken by the Trump Administration to “maintain and reinforce the racial caste quality of the immigration system.” (P. 3.) The essay ends with an appreciation for the immigrant rights movement, and the claim that the goals sought by the movement will only be “meaningful, lasting, and truly transformative” if the Supreme Court jurisprudence shifts to require robust constitutional review of immigration laws and “allows the courts to serve as a check on racial animus.” (P. 3.)

Bringing Racial Justice to Immigration Law is a timely and important piece because it draws attention to the role of racial animus in the structure of U.S. immigration law. Scholars often recount the xenophobic concerns that have motivated the country’s immigration law, but it is rarely referred to as feature of the system. Rather it is examined as a bug. Johnson’s piece requires readers to rethink that analysis.

Acknowledging the structural challenges within U.S. immigration law leads Johnson to highlight two important features of a positive immigrant rights agenda. The first is legislative reform because at present it is “likely the only way to attempt to bring greater racial justice for immigrants.” (P. 11.) Congress could enact the DREAM Act, comprehensive immigration reform, and reform the immigration bureaucracy. These would bring about important changes that would positively impact the lives of millions of individuals. However, Johnson explains that these types of reforms will be vulnerable to the goals and perspectives of the next political majority because courts exercise such minimal review of substantive immigration law.

Therefore the second claim is that the Supreme Court must require “constitutional review of the immigration laws and allow[] the courts to serve as a check on racial animus.” (P. 3.) As Johnson details in his essay, the Supreme Court established an extremely deferential standard of review for immigration cases in the 1800s that limits the courts from reviewing substantive challenges to immigration laws, particularly in the area of Equal Protection challenges. Therefore the political branches can, and have, enacted immigration restrictions rooted in racial animus and the courts have failed to acknowledge the racial animus or strike down the laws or policies. As Johnson explains, “[t]he immigration laws’ immunity from constitutional review encourage Congress to act on its worst instincts and prevent a dialogue between the judicial, legislative, and executive branches about the constitutional constraints on immigration law and policy.” (Pp. 12-13.) Meaningful change within immigration law will require substantive changes to the law, but also significant changes in the role of the courts as a check on the political branches.

As Congress considers the various immigration bills before it, it is important to remember that “[w]ithout constitutional constraints, the nation can expect repeated episodes of anti-immigrant sentiment fueled by racial animus, with the Trump presidency simply making the most recent and extreme one.” (P. 13.)

Cite as: Angela Banks, A Positive Immigration Agenda for Racial Justice, JOTWELL (July 7, 2021) (reviewing Kevin Johnson, Bringing Racial Justice to Immigration Law, 116 Nw. U.L. Rev. 1 (2021)),

Update of Jotwell Mailing Lists

Many Jotwell readers choose to subscribe to Jotwell either by RSS or by email.

For a long time Jotwell has run two parallel sets of email mailing lists, one of which serves only long-time subscribers. The provider of that legacy service is closing its email portal next week, so we are going to merge the lists. We hope and intend that this will be a seamless process, but if you find you are not receiving the Jotwell email updates you expect from the Lex section, then you may need to resubscribe via the subscribe to Jotwell portal. This change to email delivery should not affect subscribers to the RSS feed.

The links at the subscription portal already point to the new email delivery system. It is open to all readers whether or not they previously subscribed for email delivery. From there you can choose to subscribe to all Jotwell content, or only the sections that most interest you.

Is an “Arbitral Court” an Oxymoron?

Pamela K. Bookman, Arbitral Courts, 62 Va. J. Int’l L. 161 (2021).

Once upon a time, litigators faced a clear choice among competing dispute resolution procedures. You could litigate. You could arbitrate. Or you could mediate. Early generations of dispute resolution scholars imagined these processes as being wholly distinct. Frank Sander, during the famed 1976 Pound Conference, envisioned a “multi-door courthouse” where disputes could be neatly grouped—with the ease of a Harry Potter-esque sorting hat—into the most appropriate resolution mechanism.

Over the past couple decades, these once-discrete processes have become more muddled. This is particularly true for complex commercial and international disputes. Processes converge and exist parallel to one another across jurisdictions. Parties may litigate the scope of an arbitration clause or the enforceability of an award. They may mediate one branch of a dispute while arbitrating another. They may also mix and match aspects of each procedure with blended processes like “med-arb” or “arb-med.”

Domestic and international court systems have both responded to, and shaped, this complicated reality. Pamela Bookman is among the clearest analysts of these trends in judicial innovation. Her new piece, Arbitral Courts, analyzes exactly what its title suggests: public courts that adopt many of the features of private arbitration. Oxymoron? Maybe. New reality? Definitely.

Bookman begins by observing that arbitration is traditionally considered to be a private dispute resolution mechanism meant to replace courts for disputing parties. The conventional wisdom has been that “courts and arbitration stay in their lanes.” But that thinking has shifted. Specialized domestic and international courts have begun to adopt qualities of private arbitration, responding to parties’ desire for confidentiality, speed, procedural flexibility, and subject matter expertise. Arbitral courts “shift and blur traditional boundaries between public and private adjudication [and] reveal the power of procedural innovation and forum shopping as forces of institutional change[.]”

Bookman offers numerous examples of these arbitral courts, ranging from Delaware, to Singapore, to Dubai. Consider the Cayman Islands Financial Services Division of the Grand Court (“FSD”), created in 2009, which has jurisdiction for business-related disputes where the amount in controversy exceeds $1.2 million. The FSD’s judges include four full-time judges with some specific background in business law, and three part-time judges, including attorneys for international law firms. Its procedural rules are designed by “an elite group of lawyers” who understand the needs of the transnational companies that choose to incorporate in the Cayman Islands. The FSD also has a fairly liberal policy on sealing its dockets (generally between one-third and half of all cases), meaning that disputes can be largely adjudicated in private.

Or consider the Netherlands Commercial Court, which opened its doors in January 2019. That court hears “trials” in panels of three judges (plus a law clerk) using procedural rules substantially similar to the International Bar Association Rules on the Taking of Evidence in International Arbitration. These Rules permit party-driven customization of evidence and process, as well as confidentiality—features associated with private arbitration rather than public adjudication. Moreover, the Netherlands Commercial Court charges significant fees compared to a normal litigation (€ 15,000), essentially creating a specialized court for clients able to pay top-dollar.

Or finally, consider an attempt at innovation in Delaware. Delaware’s Court of Chancery is the most significant court in the United States for corporate disputes. The Court’s judges, known as chancellors, are widely considered to be the leading experts in this area of law. In 2009, Delaware’s legislature enacted a program whereby parties could pay heightened fees to arbitrate, rather than litigate, their disputes before a chancellor. The proceeding and award would be confidential, even though the arbitrator was a sitting judicial officer. (While it’s common for retired judges to serve as arbitrators for-hire, such conduct is typically prohibited of sitting judges under ethics rules). The Delaware scheme was challenged by an open government group, and in 2013, the U.S. Court of Appeals for the Third Circuit held that it violated the right of qualified public access guaranteed by the First Amendment. But nevertheless, the program attracted the attention of court systems designers around the country.

What do these various examples share? A mixing and matching of attributes associated with public litigation and private arbitration. Publicly-funded judicial officers, rendering decisions in confidential proceedings, using rules designed by corporate attorneys, with procedures that can be tailored to individual cases based on the parties’ consent.

Bookman goes beyond describing these various courts, offering potential opportunities and areas for concern. One of the article’s central observations—and warnings—is the complicated nature of arbitral courts’ legitimacy. Normally, courts get their legitimacy from the state, while arbitrators get their legitimacy from the parties’ bilateral contract. Arbitral courts are a hybrid; their legitimacy comes from both the parties’ consent to their jurisdiction, and the state’s establishment of their structure. Bookman warns that this duality carries an inherent tension. Parties’ desire for arbitration-like confidentiality, for example, hampers the ability of these courts to develop public and predictable precedent. Over time, such secrecy could lessen the arbitral courts’ legitimacy in the eyes of litigants and taxpayers.

Arbitral Courts fits nicely into a sub-genre of procedure scholarship that examines not just the workings of discrete dispute resolution mechanisms, but their confluence. For example, it pairs nicely with Hiro Aragaki’s The Metaphysics of Arbitration, Thomas Stipanowich’s Arbitration: The ‘New Litigation’, or Jackie Nolan-Haley’s Mediation: The ‘New Arbitration.’ These scholars recognize that ADR procedures are becoming harder to differentiate from “regular” civil procedure, especially for transnational disputes.

“Alternative” dispute resolution is often relegated to the elective corners of law school curricula. But the reality on the ground, from the perspective of international litigators, is that ADR is inextricably interwoven into civil procedure. From the moment a client’s dispute arises—or even earlier, when a contract is drafted—lawyers must understand the potential mechanisms for resolution. For several years, Bookman’s scholarship has explored how court systems, far from remaining static, have responded to competition from private ADR. In this way, she is an intellectual heir to Frank Sander himself, albeit with a more international flair. Undoubtedly, court systems at home and abroad will continue to mix, match, and muddle dispute resolution processes in the years ahead. This article will provide these innovators with ideas and models—as well as some nagging notes of caution.

Cite as: Brian Farkas, Is an “Arbitral Court” an Oxymoron?, JOTWELL (June 4, 2021) (reviewing Pamela K. Bookman, Arbitral Courts, 62 Va. J. Int’l L. 161 (2021)),

Private State Actions to Disgorge the Wrongful Gains of Insider Trading

Jeanne L. Schroeder, Taking Misappropriation Seriously: State Common Law Disgorgement Actions for Insider Trading (Feb. 11, 2021) Cardozo Legal Stud. Rsch. Paper No. 625, available at SSRN.

The disgorgement remedy strips a defendant of unjust profits. Disgorgement is gaining prominence as a civil remedy across a varied body of substantive laws, including intellectual property, contracts, fiduciary duties, as well as in government enforcement litigation to battle fraud and corruption. Disgorgement’s provenance ties to restitution and the equitable accounting for profits remedy. Even as memory of its equitable history fades, modern and novel applications of disgorgement flourish. Disgorgement relies on restitutionary principles because its primary goal is to undo unjust gain. It also deters opportunism and disincentivizes misconduct.

But if not applied properly, the danger is that disgorgement may punish, which is explicitly not a goal of the law of unjust enrichment and restitution. The Securities and Exchange Commission (SEC) has faced, and continues to face, an array of criticisms for aggressive uses of its disgorgement remedy pursuant to statutory authorization. Such concerns led to several Supreme Court rulings requiring adjustments to the SEC’s approach to disgorgement—most recently in Kokesh v. SEC, 137 S. Ct. 1635 (2017) and Liu v. SEC, 140 S. Ct. 1936 (2020). Congress subsequently amended the remedy to solidify the SEC’s authority to seek disgorgement, though the clarification oddly appears to classify the statutory disgorgement remedy as legal rather than equitable. This congressional revision is housed in a massive piece of unrelated legislation, the 2021 National Defense Authorization Act (“NDAA”), which Congress passed over a presidential veto. A parallel expansion of disgorgement remedies by the Federal Trade Commission (FTC) faced increased judicial scrutiny and ultimately a rebuff by the Supreme Court in AMG v. FTC, No. 19-508 (April 22, 2021) (narrowly interpreting the statute’s injunction power as not encompassing FTC authority to seek equitable disgorgement), with congressional restoration of full disgorgement power anticipated.

Much is changing rapidly, and it is unclear how successful the SEC will be at navigating new strictures while advancing enforcement goals. To be clear, the landscape is complex. In a forthcoming article, Taking Misappropriation Seriously: State Common Law Disgorgement Actions for Insider Trading, Professor Jeanne Schroeder seeks a solution to the complexities. She advances private state common law actions for disgorgement as a cleaner way to remedy insider trading violations. The potential advantages of private state-based litigation with application of the disgorgement remedy are worth serious consideration. And the notion of parallel pursuit of state common law remedies may well be a wise approach for other governmental enforcement regimes.

To lend credence to this proposal, Professor Schroeder argues that a state common law disgorgement action would align with the Supreme Court’s “largely property-based theory of insider trading.” Regardless of the asserted narrative fit, Professor Schroeder offers six compelling reasons why an action at common law for restitution would avoid many of the complexities of federal insider trading enforcement actions. For example, the Supreme Court’s insider trading jurisprudence requires fraud, violation of a fiduciary duty, as well as misappropriation of information. Under state law, each of those elements provides an independent ground for private redress.

The common law of restitution therefore streamlines the inquiry to “the person to whom the duty is owed or the owner of the information who should have a cause of action.” In highlighting such improvements, Professor Schroeder provides a useful, thorough overview of federal and state insider trading jurisprudence. According to Professor Schroeder, state common law of restitution would simplify remedying insider trading wrongs. Specifically, a state disgorgement approach would eliminate the Supreme Court’s multi-factor standard for insider trading and provide much greater flexibility in proof thresholds. For restitution and disgorgement, state common law standards are less onerous than federal statutory requirements and the Supreme Court’s strictures. Still, federal law leaves space for concurrent jurisdiction and the continuation of common law efforts to disgorge improper gains.

Of course, to suggest that this alternative approach could replace the SEC’s enforcement regime would be extreme. Professor Schroeder wisely notes that her solution of private disgorgement actions should supplement SEC enforcement, not supplant it entirely. The SEC would remain responsible for a host of remedial efforts including injunctions, bars, suspensions, penalties, and more. Meanwhile, state courts could continue to develop the contours of the common law of restitution and the important remedy of disgorgement.

The force of Professor Schroeder’s approach is that it offers viable alternatives with much simpler proof requirements. Additional benefits may flow from a state common law restitution approach. Such benefits are not the focal point of the article but include the potential avoidance of Liu constraints. For example, a state law approach would obviate the mandate to present evidence of concerted wrongdoing in order to obtain joint and several disgorgement liability as well as the Supreme Court’s directive to return funds to victims, both of which present unique challenges in insider trading cases.

Still, it is worth considering whether the Supreme Court’s commands are wise policy. Though not bound by those strictures, state common law decisions would be free to engage in parallel tightening. But any such efforts can vary by state and would tie to the goals of restitution and unjust enrichment rather than the language of federal statutes. No matter what the underlying frame of the cause of action and remedy sought, courts must balance the law’s mission against concerns about overreach, plaintiff windfalls, and punitive results.

Professor Schroeder emphasizes a core restitution principle: that her approach will restore the private claimant to the status quo ante. In some of these cases though, courts should conduct more refined analysis to evaluate whether the application of restitution works if the property—material nonpublic information—is of less value when it is not traded than when it is. In some cases, the inside trader’s proceeds may not be “the fungible equivalent of personal property previously transferred to the other party,” because material nonpublic information that has not been traded upon does not (yet) have monetary value to the issuer. Still, as Professor Schroeder’s work demonstrates, meaningful and powerful remedies for wrongdoing such as insider trading are worthy state law aims. Thus, Professor Schroeder’s work will still resonate as the state common law continues to honor the goals of restitution while working in the shadows of federal statutes.

Professor Schroeder’s scholarship is vital in that it reminds readers to consider forgotten remedies and lesser worn paths. Federal enforcement should not be the sole vehicle to strip gain, deter wrongdoing, and benefit victims. If private litigants can effectively pursue remedies on the state level, the SEC may be able to direct its resources to more challenging or important targets. Not only might those paths be easier in the pursuit, but the seeker may also more likely reach the ultimate goal of disgorging the improper gain from insider trading.

Cite as: Caprice Roberts, Private State Actions to Disgorge the Wrongful Gains of Insider Trading, JOTWELL (May 6, 2021) (reviewing Jeanne L. Schroeder, Taking Misappropriation Seriously: State Common Law Disgorgement Actions for Insider Trading (Feb. 11, 2021) Cardozo Legal Stud. Rsch. Paper No. 625, available at SSRN),

From the Ivory Tower to the Judicial Trenches: Are We Bridging the Divide?

Most in legal academia would consider citation of their law review article in a judicial opinion an honor. However, most probably also remember Chief Justice Roberts’ 2011 comment that an article about “the influence of Immanuel Kant on evidentiary approaches in Eighteenth Century Bulgaria or something…isn’t of much help to the bar.” The Chief Justice’s comment may leave you wondering how often judicial opinions have cited law review articles and what factors might make your article into a rare unicorn. Mr. Detweiler answers these questions and more in May It Please the Court: A Longitudinal Study of Judicial Citation to Academic Legal Periodicals.

Mr. Detweiler has compiled a list of state and federal court citations to legal academic journals from 1945-2018 and mapped them as a proportion of all reported opinions and by total number annually. He tracks the ebb and flow of citations through the years and makes interesting observations about what may influence increases and decreases in citation frequency. But he doesn’t stop there. His research then compares citation frequency from 1970-2018 of articles in Harvard Law Review and Yale Law Journal with flagship journals from sample schools in each tier of the U.S. News rankings. The article also includes a scan of the history of academic law journals, the first citations of journals, and the explosive growth of journals starting in the 1970s.

The article begins with a brief history of student-edited law reviews and their relatively slow acceptance by the judiciary. Mr. Detweiler notes Chief Justice Taft’s complaint about his colleagues “‘undignified’ use of law review material in their dissents.” But change was already underway. The next Chief Justice, Chief Justice Hughes, labeled law reviews as the “fourth estate of the law.” Mr. Detweiler then moves on to examine all citations of academic law journals from 1945-2018 in reported state and federal cases. Graphs included in the article illustrate changes over time. The percentage of cases citing law reviews shows a rise from 1.8% in 1945 to almost 5% in the mid-1960s/1970s with a dip mid-decade of about 0.5%. Mr. Detweiler notes that the peak of 4.9% is a 172% increase in citing cases over the rate in 1945. After the peak in the mid-1970s, the percentage of opinions citing articles declines over the next two decades. Since the mid-1990s, the percentage has leveled out some, fluctuating between 1.5% and nearly 2%, reaching 1.8% in 2018. A similar graph models the growth in absolute numbers of opinions citing law review articles with a similar increase and then decline. Mr. Detweiler attributes a portion of the percentage decrease in the early 1980s to the number of reported opinions increasing more quickly than the number of citing cases.

Mr. Detweiler posits several possible causes for the decrease in the percentage of cases citing law reviews from its heyday in the mid-1960s/1970s to its current level. Two of the most compelling are technological advances and changes in the content of academic legal scholarship. Both Lexis and Westlaw launched in the mid-1970s leading to easier access to case law, which was also growing in breadth. Academic law reviews were incorporated more slowly into the legal research systems and didn’t have more expansive coverage until the mid-1990s. Judges and their clerks could easily access case law (especially binding precedent) directly instead of relying on scholarly works.

Mr. Detweiler also highlights a shift, beginning in the 1970s, at higher-ranked law schools away from more traditionally doctrinal scholarship toward interdisciplinary work and new areas of scholarship that were not as directly applicable to the everyday work of attorneys and judges. This point becomes important when we view differences in citation rates between flagship law journals at higher-ranked and lower-ranked law schools.

Part II of the article examines how the percentage of citations varies from elite law schools (represented by Harvard and Yale), top 14 schools, Tier I, Tier II, Tier III, and Tier IV schools. (Mr. Detweiler explains the selection of the exemplar schools in the methodology.) The data shows, unsurprisingly, a strong prestige factor in the law journals cited in cases. Harvard Law Review was the clear leader with a significantly higher percentage of citations than the next highest, Yale Law Journal. Although the prestige factor is still apparent, the rate of opinions that cited Harvard Law Review or Yale Law Journal has steadily declined from about 34% in 1970 to approximately 14% in 2018. Similarly, the percentage of opinions citing top 14 law schools fell from 1970 to 2018. During the same period, the percentage of opinions citing Tier 1 law journals stayed relatively stable. The rates of opinions citing Tier II and Tier III schools had more extreme variations from year to year, but the trend has been a gradual increase. Similarly, opinions citing Tier IV flagship law journals have seen a gradual increase over time while still the smallest percentage. The elite advantage is still present but is not as great as it once was.

Why has the gap narrowed? Mr. Detweiler points to some of the same factors highlighted in the decline of the percentage of reported opinions citing academic law journals. One of these is the rise of computer-assisted legal research (CALR) and the ease with which researchers can search and retrieve articles from a pantheon of academic law journals, not just the elite journals. A related point is the explosion in the number of academic law journals. Mr. Detweiler points out that 132 journals were indexed by the Current Index to Legal Periodicals in 1970, but today Lexis and Westlaw have approximately 1000 titles in their law journal databases. He hypothesizes that the increase in the number of journals is diluting the percentage of citing cases that any one journal is capturing.

While discussing judicial citation of academic legal journals, Mr. Detweiler contextualizes changes in citation patterns within changes in the legal academy and the court system. He explains in detail his well-reasoned methodology for each stage of his research, including documenting Lexis search strings longer than most of us have ever contemplated. His article is an interesting foray into academic legal scholarship and its influence, or lack of influence, over judicial precedent.

Author’s Note: Mr. Detweiler provides supplemental tables along with the article. Available tables are 1) Citations to all law reviews ; 2) Top 14 Law Reviews; 3) Citations to Tier I and Tier II law reviews; and 4) Citations to Tier III and Tier IV law reviews.

Cite as: Kristina Niedringhaus, From the Ivory Tower to the Judicial Trenches: Are We Bridging the Divide?, JOTWELL (April 6, 2021) (reviewing Brian T. Detweiler, May It Please the Court: A Longitudinal Study of Judicial Citation to Academic Legal Periodicals, 39 Legal Ref. Servs. Q. 87 (2020)),

We Need to Work Together: Understanding Federal Agency Collaboration

The federal government manages tens of millions of acres of land across the United States. That land includes some of the most iconic landscapes in the country – such as Yosemite, Yellowstone, and Everglades National Parks. It also is land that provides habitat for endangered species, ecosystems that support communities and wildlife, resources such as timber and minerals for economic development, and more. Forests on federal lands have been at the center of the wildfire crisis enveloping California and the Western United States. Given these overlapping demands and their importance, these lands are a fertile source for conflict, and much litigation and political rancor.

Yet there are other ways to resolve that conflict – engagement between various interests (“stakeholders”), and federal, state, local, and tribal governments about how to manage the lands and achieve these conflicting goals. This kind of stakeholder collaboration has received relatively little treatment in the legal literature – and Karen Bradshaw’s article is a vital contribution simply because of its efforts to cover that gap. Supported by the Administrative Conference of the United States, Professor Bradshaw undertook an impressive assessment of how a wide range of federal agencies – focusing on, but not limited to, the public lands – use collaboration among different stakeholders to help manage conflicts over public resources.

One reason stakeholder collaboration has received so little attention historically is that it does not lend itself easily to research, especially research based on statutes, regulations, and caselaw. While Professor Bradshaw identifies many statutes that mandate or authorize collaboration, they often each have their own unique processes. Many collaborations are not embodied in statutory or regulatory provisions. Understanding them is time-consuming, requiring reviewing copious agency files and attending many meetings. And understanding how they work – how they really work – requires getting the trust of participants to explain why they are part of the collaborations, what they hope to accomplish, and how they see the process working. To gain even a basic understanding of this process required all of Professor Bradshaw’s hard work on this article and the broader research project – and again, that alone warrants recognition.

The article is mostly descriptive – Professor Bradshaw attempts to create a clear and consistent definition of stakeholder collaboration, to articulate how it differs from other processes by which a federal government agency engages with other entities, and to tentatively assess its strengths and weaknesses. Again, given the wide range of possible forms and the difficulty of collecting data, these achievements alone are noteworthy.

Professor Bradshaw’s assessments of the strengths and weaknesses of the tool are also very helpful. She notes that collaborations can be beneficial in terms of helping agencies gather information they might not otherwise receive, and of building political support for difficult decisions that agencies might make. She also notes real issues around equity: Because participants are not paid by the federal government for their participation, only a limited number of people have the ability and inclination to spend hours during a weekday on a regular basis talking in a conference room. Thus, many participants are necessarily representatives of larger organizations, with their participation part of their employment responsibilities. As Bradshaw notes, this will generally mean that lower socio-economic status communities and diffuse interests will be underrepresented in these processes. And even where there are established groups that could afford to participate, many will not because of suspicions of how the process will unfold – emphasizing the importance of trust in making these collaborations function.

Another issue that Professor Bradshaw notes is the uneasy fit of these collaborations with existing law and regulations. Many are specifically structured to avoid the requirements of the Federal Advisory Committee Act (FACA). Professor Bradshaw quotes a government official stating that the collaboration requires bending agency regulations and policies, but that the official supports doing so.

Professor Bradshaw concludes with a thoughtful framework to help agencies assess when they might want to take advantage of stakeholder collaborations – drawing on her rich expertise from her research.

Public land management agencies are a key user of stakeholder collaboration, but as Professor Bradshaw notes, they are not the only ones who use them, and they are far from the only agencies faced with difficult, localized conflicts over government decisions. As the United States’ political system has polarized politically, these tools may be important to help manage that polarization. As Professor Bradshaw notes, they can provide important forums for stakeholders to listen to each other, and to help bridge deep disagreements. Her research can provide an important foundation for policymakers and academics to explore whether and how to draw more on the tool in a wide range of fields.

But Professor Bradshaw’s work also highlights a key limitation of the tool, and one that Congress might well want to consider if it continues to rely so heavily on it. The differential ability of stakeholders to participate in collaborations may interact in problematic ways with the willingness of agencies to bend laws and regulations to facilitate collaborations – the result may be agencies bending the law to benefit those who have more ability to participate. In some ways, this pattern may replicate age-old concerns about the capture of agencies by key interest groups. If collaborations simply replicate that outcome, then their promise will have been lost.

There is much to consider in Professor Bradshaw’s work – and much more to build from. She has already developed a companion piece on the topic, and I look forward to more writing from her on this important topic.

Cite as: Eric Biber, We Need to Work Together: Understanding Federal Agency Collaboration, JOTWELL (February 9, 2021) (reviewing Karen Bradshaw, Agency Engagement with Stakeholder Collaborations, in Wildfire Policy and Beyond, 51 Arizona St. L.J. 437 (2019)),

The Multiple Faces of Textualism

Tara Leigh Grove, Which Textualism?, 134 Harv. L. Rev. 265 (2020).

In her wonderfully-titled article, Which Textualism?, Tara Leigh Grove uses the recently decided Bostock v. Clayton County case to highlight a truth about statutory interpretation theory that scholars have largely ignored: Textualism is not a monolithic interpretive approach, but one that contains multiple competing strands. This observation is long overdue, and Bostock is an excellent vehicle for exploring its implications, given that the three separate opinions issued by the Court all claimed to employ a textualist interpretive approach—while reaching different outcomes.

Which Textualism? begins by differentiating between what Grove calls “formalistic textualism,” on the one hand, and “flexible textualism,” on the other—and uses this frame to discuss “some real, but underappreciated, disputes among textualists” regarding the universe of interpretive tools and resources courts should avail themselves of when interpreting statutes. Specifically, Grove argues that “formalistic textualism” authorizes interpreters to apply only a “closed set” of normative canons, whereas “flexible textualism” allows interpreters to consult a much wider range of canons, such as the absurdity doctrine, that invite considerable judicial discretion.

In Bostock, Grove contends that Justice Gorsuch’s majority opinion exemplified “formalistic textualism” because it focused intently on the statutory term “because of sex” and what that term means in the context of sexual orientation-based discrimination. By contrast, Grove characterizes both Bostock dissenting opinions as engaging in “flexible textualism”—because the dissents relied on atextual considerations including public views about homosexuality in 1964, other statutes enacted after Title VII, and the “far-reaching” consequences of construing Title VII to cover discrimination based on sexual orientation.

After elaborating the differences between “formalistic” versus “flexible” textualism, Grove provides some historical context for the Bostock case, tracking both the rise of textualism as a response to purposivism and the early judicial treatment of Title VII and sexual orientation claims based on a purposivist approach. Her point is that purposivism does not always tend toward “progressive” outcomes, and textualism does not always favor “conservative” ones. It is a point that others have made, but that bears repeating because it often gets lost in the focus on the U.S. Supreme Court, where the conservative Justices also tend to be the biggest proponents of textualism.

In the end, Grove endorses “formalistic,” as opposed to “flexible,” textualism—arguing that “formalistic textualism” is better at constraining judicial discretion and producing a predictable result, both rule of law values to which textualism aspires. But consistency with textualism’s own avowed interpretive goals is not Grove’s primary reason for championing “formalistic textualism;” rather, she has in mind her own unique normative goal for textualism: Grove argues that textualism can and should function in a manner that protects the legitimacy of the judiciary, by mitigating the ideological pressure judges naturally feel to rule consistently with their political preferences. Grove situates this new normative goal for textualism in Article III of the Constitution, which she reads to call for judicial independence and apolitical decisionmaking. Conversely, she notes that Article II injects politics into judicial appointments, by giving the appointment power to the President and Senate—and urges that a more cabined form of textualism could serve to alleviate the tension that inevitably exists between judges’ Article II-ensured political leanings and their Article III obligation to be independent.

Grove’s analysis of Bostock’s multiple textualisms is insightful and provocative. And her efforts to promote judicial independence and greater predictability in statutory interpretation are admirable. I am less enamored of her push for courts to adopt a more formalistic approach to textualism. (As I have explained elsewhere, I have doubts about whether a “formalistic” textualism can truly constrain judges in the manner Grove envisions and favor a more pluralistic approach to statutory construction, at least as a check on judges’ inevitable personal biases). That said, Grove’s recommended formalistic textualism approach—and particularly her Article III legitimacy rationale—is highly original and well-reasoned, and is worthy of attention from statutory interpretation scholars. Grove’s Article III arguments appear to be part of a larger project to promote judicial legitimacy, but that does not detract from the utter novelty of her normative take on textualism, or the incisiveness of her exposition of the multiple textualisms at work on the modern Supreme Court.

In short, Which Textualism? is a thought-provoking article and a highly enjoyable read, and it should be on the to-read list of anyone interested in Bostock, textualism, or questions about the judicial role and/or legitimacy of the Court.

Cite as: Anita Krishnakumar, The Multiple Faces of Textualism, JOTWELL (January 15, 2021) (reviewing Tara Leigh Grove, Which Textualism?, 134 Harv. L. Rev. 265 (2020)),