Kaplow and Shavell and the Priority of Income Taxation and Transfer

David Blankfein-Tabachnick & Kevin A. Kordana

Volume 69, Issue 1, 1-44

This Article rejects a central claim of taxation and private law theory, namely, Kaplow and Shavell’s prominent thesis that egalitarian social goals are most efficiently achieved through income taxation and transfer, as opposed to egalitarian alterations in private law rules. Kaplow and Shavell compare the efficiency of rules of tort to rules of tax and transfer in meeting egalitarian goals, concluding that taxation and transfer is always more efficient than other private law legal rules. We argue that Kaplow and Shavell reach this conclusion only through inattention to the body of private law that informs the very basis of their discussion: underlying property entitlements. This Article contends that Kaplow and Shavell’s comparison of rules of taxation to rules of tort fails to take proper account of the powerful role that (re)assigning underlying property entitlements plays in achieving egalitarian goals, even at the level of formal theory. We conclude that, contrary to Kaplow and Shavell’s prominent claim, as a matter of efficiency, the rules of income taxation and transfer are not always preferable to alterations in the initial assignment of property entitlements in achieving distributive or egalitarian goals.

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“The Big Chill”: Personal Liability and the Targeting of Financial Sector Compliance Officers

Court E. Golumbic

Volume 69, Issue 1, 45-94

Financial sector compliance officers have been referred to by prominent law enforcement and regulatory officials as “essential partners” in ensuring compliance with relevant laws and regulations. Yet a series of recent enforcement actions in which individual compliance officers have been sanctioned personally have placed strains on the partnership, fueling concern among these professionals that they are being unfairly targeted.

Law enforcement and regulatory officials have responded with assurances that the partnership remains intact. In the rare instances in which financial sector compliance officers have been held personally responsible for program failures, they have stressed, the actions were undertaken only after careful consideration, where the facts demonstrated that the compliance officers “crossed a clear line.”

Efforts to justify regulators’ charging practices have been ineffective, however, for the perception of targeting has endured. Indeed, it has coincided with increased attrition within the ranks of senior compliance officers in the industry. The Author offers several possible explanations for this “chilling effect.”

Regardless of the cause, regulators are confronted with a fundamental policy question: whether the benefits of current charging practices justify the continued exodus of senior compliance professional from their firms or the industry entirely. The Author advances two proposals to reverse the perception of compliance officer targeting and its attendant chilling effect, including the adoption in the United States of a supervisory structure akin to the United Kingdom’s “Senior Managers Regime”

These proposals reflect a clear message. Actions must be taken to reverse the perception of compliance officer targeting before the “big chill” sets in, and the industry finds that this critical function has been robbed of its best and brightest.

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Amputating Rights-Making

Anthony Michael Kreis

Volume 69, Issue 1, 95-118

In a majority of states, it remains legal to deny people housing, employment, or services because of their sexual orientation or gender identity. The LGBT community has taken great strides to push back against the harms of discrimination, successfully securing municipal antidiscrimination laws in a number of discrete (and typically liberal) cities. While an individual’s right to enjoy full, equal citizenship should not depend on their zip code, hard-wrought municipal protections are a crucial step toward achieving more robust civil rights protections.

Hostile state legislators in Arkansas, North Carolina, and Tennessee crafted laws to prohibit localities from protecting classes of people beyond state law with the aim to block LGBT civil rights ordinances. Legislators in a handful of other states have offered similar bills. How should courts treat neutral laws adopted by states that amputate municipal civil rights-making powers? This Article argues that courts should use political restructuring doctrine, evolving LGBT rights jurisprudence, and the landmark decision Arlington Heights v. Metropolitan Housing Development Corporation, to void municipal civil rights preemption laws as constitutionally deficient.

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Race Politics, O’Hare Airport Expansion, and Promissory Estoppel: The More Things Change, the More They Stay the Same

Judith L. Maute

Volume 69, Issue 1, 119-178

Quake Construction v. American Airlines, Inc. is featured in some prominent American casebooks on contract formation or precontractual liability, where scholars and authorities debate when liability should properly attach. The case is widely cited by courts and secondary authorities, both on precontractual liability based on a letter of intent and the more unwieldy doctrine of promissory estoppel.

Quake is a 1990 Illinois Supreme Court decision which, on its face, appears to present the garden variety contracts issue of what to do when parties have reached a written preliminary agreement anticipating a formal writing that never occurs. Besides the fascinating doctrinal issues presented, the backstory reveals sensitive racial issues in Chicago’s political context at the time.

The dispute arose shortly after Mayor Washington was elected the City’s first black mayor and he sought to open up public projects to minority groups that had been previously excluded from the public trough. Much pressure was exerted upon American Airlines and Jones Brothers, its construction management company, which awarded the small,
$1 million project to Quake as part of the larger O’Hare Airport expansion. This Minority Business Set Aside (“MBE”) award was done without the due diligence prudent for major jobs. Eight days later, when Quake’s president appeared at a preconstruction meeting as the only person of color, without any of the named MBE’s listed on its bid, American’s representatives summarily terminated the relationship.

Nearly nine years of litigation focused only on whether the trial court correctly granted defense motions to dismiss. The Illinois Supreme Court reversed and remanded, finding the letter sufficiently ambiguous that plaintiff should have an opportunity to present parol evidence on the parties’ intent on the contract claim. In four short paragraphs the majority opinion recognized the possibility of plaintiff recovering under a standalone claim for promissory estoppel, based on claimed reliance occurring during the short time between the notice of award and termination for this small construction contract.

The lack of clarity in drafting and implementation of the letter of intent should give pause to commercial actors about the risks of sloppiness in the bargaining process, especially when dealing with parties who may be perceived as somewhat unsophisticated. This Article’s doctrinal treatment and backstory are a cautionary tale to lawyers embarking on commercial relations using letters of intent.

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A Constitutional Jurisprudence of Children’s Vulnerability

Lois A. Weithorn

Volume 69, Issue 1, 179-274

The Unites States Supreme Court identified “the peculiar vulnerability of children” as one of the “three reasons” for differentiating the treatment of children under the Constitution from that of adults. Yet, although explicit and implicit characterizations of children as vulnerable abound in the Court’s opinions and scholarly commentary, there has been little analysis of how the construct of vulnerability mediates children’s relationship to the Constitution.

This Article examines the Court’s analytic uses of constructions of children’s vulnerability. Informed by legal scholarship and empirical findings on human vulnerability emerging from the field of bioethics, philosophy, psychology, and developmental neuroscience, the Article deconstructs the concept of children’s vulnerability and proposes five categories derived from the Court’s constitutional jurisprudence and interdisciplinary scholarship: harm-based vulnerability; influence-based vulnerability; capacity-based vulnerability; status-based vulnerability; and dependency-based vulnerability. It applies the classification to representative cases from among the approximately one hundred relevant cases decided by the U.S. Supreme Court. The Article contextualizes the analyses of constitutional jurisprudence and children’s vulnerability with discussions of relevant social history and developmental science. It then critically examines the Court’s use of vulnerability constructs in a narrower subset of cases, exploring the relationship between these constructs and relevant empirical knowledge.

In conclusion, the Article critiques the often-tenuous relationship between the state of scientific knowledge and the Court’s characterizations of children’s vulnerability. The Court frequently relies upon these constructs when determining constitutional questions. This Article contends that when the Court makes “factual” assertions about children’s characteristics of functioningassertions that are the subject matter of developmental sciencethese assertions should rest on the best available evidence. The Article recommends continued scholarly attention to, and scrutiny of, judicial reliance on notions of children’s vulnerability in constitutional analysis.

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Government Lawyers in the Trump Administration

W. Bradley Wendel

Volume 69, Issue 1, 275-352

The words and actions of candidate, President-Elect, and now President Donald Trump indicate that this administration will aggressively seek to use state power with little regard for the rule of law. A great deal has been written about the constitutional and administrative law regulating inter and intra branch separation of powers. However, there is no comprehensive legal and theoretical analysis of government lawyers as lawyers.

This Article engages with numerous contested issues in the law of lawyering, the history of unethical behavior by government attorneys, and jurisprudence to provide a constructive legal and ethical conception of government legal advisors. In practical terms, it may serve as a source of guidance for lawyers in the new administration, or as a roadmap for discipline by lawyer regulators. More theoretically, it defends a conception of the rule of law as a practice of reason-giving, not dependent upon legal objectivity or determinacy. The Executive Order banning travel to the United States from several Muslim-majority countries, and the subsequent firing of Acting Attorney General Sally Yates, are case studies illustrating the ethical analysis in this Article.

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Executive Foreign Affairs Power and Immigration Relief

Mitchell R. VanLandingham

Volume 69, Issue 1, 353-386

This Note addresses whether the president may take action on immigration as an exercise of foreign affairs power. In particular, it focuses on DACA and DAPA, two Obama-era policies of deferred action for certain classes of undocumented immigrants. Exactly how much authority a president and his executive departments should have over immigration without running afoul of Congress’s Article I power “to create a uniform Rule of Naturalization” is still unsettled. Furthermore, it is shaded in public debate by partisan views on immigration and how much power a given party thinks its own president should have.

As immigrants still formally owe their allegiance to a foreign sovereign, might the executive branch perform lenient or ameliorative actions over them via executive foreign affairs power? Would that only add to the trend of creating a more monarchical presidency? What would the boundaries of this power look like? This Note posits that presidential foreign affairs authority, based on past practice, supports the president’s power to offer limited forms of immigration relief, at least in the absence of clear congressional prohibition, if the president judges that denying such relief might have foreign affairs consequences.

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The Devil in the Details: How the Complexity, Costs, and Uncertainty of Treasury Regulations Encourage Corporate Inversion

Jessica Wilson

Volume 69, Issue 1, 387-429

Politicians and scholars have discussed reforming the corporate tax system for many years, especially with the emergence of certain tax avoidance practices like inversion and earnings stripping. While debate in this area has focused primarily on making changes to the high corporate tax rate and the taxation of worldwide income in the United States as ways to reverse the inversion problem, less discussion has focused on how the Treasury’s punitive approach via tax regulations can have the effect of encouraging, rather than discouraging, firms to relocate and shift profits overseas. Even considering the recent developments in international tax law under the Organisation for Economic Co-operation (“OECD”) Base Erosion and Profit Shifting (“BEPS”) project and recent rulings by the European Commission, which focus on corporate tax avoidance, a corporation can greatly reduce its tax and compliance burden by relocating to a foreign jurisdiction.

This Note examines the added burden of the U.S. Treasury’s approach to dealing with corporate inversion, with a detailed discussion of the Treasury’s 2016 anti-inversion regulations. Furthermore, this Note examines the costs and burdens associated with remaining a U.S. company for tax purposes, as compared to some of the costs and benefits associated with inversion. It argues that for many companies, the complexity and costs under corporate tax regulations in the U.S. provide an incentive for inversion separate from that of the high corporate tax rate and taxation of worldwide income.

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Why Some Religious Accommodations for Mandatory Vaccinations Violate the Establishment Clause

Hillel Y. Levin

Volume 68, Issue 6, 1193-1242

All states require parents to inoculate their children against deadly diseases prior to enrolling them in public schools, but the vast majority of states also allow parents to opt out on religious grounds. This religious accommodation imposes potentially grave costs on the children of non-vaccinating parents and on those who cannot be immunized. The Establishment Clause prohibits religious accommodations that impose such costs on third parties in some cases, but not in all. This presents a difficult line-drawing problem. The Supreme Court has offered little guidance, and scholars are divided.

This Article addresses the problem of religious accommodations that impose third party harms in the context of states’ mandatory vaccination programs and proposes one approach to the line-drawing problem. This approach is consistent with the cases, offers predictable results in many situations, and accounts for relative judicial and legislative competencies. It suggests that in most cases, laws that offer religious exceptions, exemptions, or accommodations that impose third party harms are only unconstitutional if the law offers no comparable nonreligious exceptions

Under this approach, most states’ religious accommodations in the vaccination context violate the Establishment Clause. The Article also considers the relevant political dynamics and important implications of this conclusion.

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Bad Reliance in Public Law

Michal Saliternik

Volume 68, Issue 6, 1243-1290

When and how should courts protect individual reliance upon unlawful governmental acts? This question arises in various situations in all fields of public law. However, despite its pervasiveness, the problem of “bad reliance” has hardly drawn any scholarly attention. This Article sets out to fill this gap. The Article adopts a cross-public law perspective and makes two main normative claims. First, the Article argues that given their duty to promote the rule of law, courts should usually invalidate unlawful governmental acts even if they have induced extensive reliance. However, in cases where reliance upon an unlawful governmental act was essential for the exercise of personal autonomy-understood as the ability of people to control their destiny by pursuing their own life plans-courts should nevertheless consider giving effect to unlawful acts.

Second, the Article argues that when a court decides to protect reliance upon an unlawful governmental act, it should attempt to mitigate the adverse effects that such protection may have on the ex ante incentives of governmental authorities to comply with the law. The Article presents a two-tier strategy that courts can use to achieve this goal. Under this strategy, courts should explicitly acknowledge and condemn unlawful governmental behavior. Thereafter, they should exercise broad discretion with respect to the remedial measures that should be taken to protect reliance upon it. This strategy ensures that governmental authorities will know what the law requires of them and that they will pay a reputational price for violating it. At the same time, it renders the benefits that governmental authorities can gain from such violations uncertain.

Following the normative analysis, the Article turns to examining several doctrines and devices that courts have used to protect bad reliance. This examination shows that some of the rationales and considerations discussed in the Article already find expression in judicial practice, while others offer critical insights into this practice. At the same time, the case law analysis illustrates the problems and risks associated with the protection of bad reliance along the lines prescribed by this Article. The Article argues that while these difficulties should not dissuade courts from protecting bad reliance, they should affect their choice among alternative remedial solutions.

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Improving Services for Those Who Served: Practical Recommendations for the Department of Veterans Affairs’ Disability Benefits Model

Scott W. Taylor

Volume 68, Issue 6, 1291-1318

The mission of the U.S. Department of Veterans Affairs (“VA”) is “[t]o care for him who shall have borne the battle, and for his widow, and his orphan” by providing services and benefits to America’s veterans. As part of its mission, the VA administers a complex disability benefits program intended to compensate those veterans whose service-related impairments prevent them from fully engaging in the workforce. But the current VA disability benefits model constrains both its capacity to provide required services and its ability to adapt to the changing needs of the constituency it serves. So too does the VA’s outmoded disability assessment model, which amounts to a “one-size-fits-all” evaluation that determines the severity of a veteran’s disability based solely on symptomatology, and not the veteran’s actual ability to function in the workplace.

This Article suggests that the VA should instead employ a more holistic, individualized approach to assisting veterans disabled by their service by accounting for both economic and quality of life factors when assessing disability, considering both finite and ongoing payment options when providing disability benefits, and emphasizing rehabilitation and recovery in addition to compensation when providing services to those who have served.

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Sex, Drones & Videotape: Rethinking Copyright’s Authorship-Fixation Conflation in the Age of Performance

John Tehranian

Volume 68, Issue 6, 1319-1370

For more than two centuries, the Copyright Act has eschewed the task of defining authorship. However, with the decoupling of the act of creation from the act of fixation and the dramatic advance of technology, the issue of authorship has gained renewed relevance in recent years, as questions of authorship have permeated numerous high-profile legal controversies. To cite a few examples, the metaphysics of authorship lay at the heart of copyright squabbles involving Naruto (the crested macaque who famously took a selfie), Cindy Lee Garcia (the actress who received death threats for her appearance in the controversial movie The Innocence of Muslims, and, less obviously, Terry Bollea (the wrestler professionally known as Hulk Hogan who bankrupted Gawker Media with a sex-tape lawsuit).

With its exegesis of the Garcia v. Google decisions (both Judge Kozinski’s original opinion and the Ninth Circuit’s resounding reversal en banc), its reconsideration of the Supreme Court’s seminal decision in Burrow-Giles Lithographic Co. v. Sarony, and its analysis of authorial inquiries raised by interviews, drone and surveillance footage, bootleg recordings, paparazzi photographs and classroom note-taking, this Article identifies and critiques the problematic juridical conflation of copyright’s authorship and fixation requirements. As the Article argues, copyright’s authorship-as-fixation regime rests on a faulty premise, betrays copyright law’s role in recognizing and rewarding creativity and denies copyright interests to the very individuals who have provided significant, if not the most important, original contributions to works within copyright’s traditional subject matter. As a result, the Article calls for a fundamental reconsideration of the concept of authorship, including the issue of performer copyrights, in order to better align copyright law with its utilitarian goals, the realities of the creative process and broader public policy.

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