Legal Theory Blog

New Papers on the Net
Here is today’s roundup:

Jean Lanjouw (Yale) and Joshua Lerner (Harvard, Finance Unit) post Preliminary Injunctive Relief: Theory and Evidence from Patent Litigation. Here is the abstract:
This paper examines the suggestion that established plaintiffs request preliminary injunctions to engage in predation against less financially healthy firms. We first present a model in which differences in litigation costs drive the use of preliminary injunctions in civil litigation. The hypothesis is tested using a sample of 252 patent suits, which allows us to characterize the litigating parties while controlling for the nature of the dispute. The evidence is consistent with the predation hypothesis. We then explore various implications of the model and the impact of policy reforms.

David Evans (NERA Economic Consulting – Cambridge Office), Atilano Padilla Blanco (National Economic Research Associates Inc. (NERA) – Cambridge Office ) and Christian Ahlborn (Linklaters & Alliance) upload The Antitrust Economics of Tying: A Farewell to Per Se Illegality, forthcoming in the Antitrust Bulletin. From the abstract:

We describe the main features of U.S. and E.C. tying law and consider their recent evolution. We then review the economic literature on tying and summarize its main implications for the analysis of tying cases: First, recent advances in economic theory unambiguously endorse a rule-of-reason approach to tying such as that adopted by the D.C. Circuit Court of Appeals in Microsoft III. Second, there is no economic basis for a per se prohibition of tying. And third, the modified per se rule adopted by the U.S. Supreme Court in Jefferson Parish does not accurately screen pro-competitive from anticompetitive tying. Drawing on the findings of the economic models developed by the Chicago and post-Chicago Schools, we conclude by proposing a three-step test to implement rigorously a rule-of-reason analysis to tying cases.

William Carney (Emory) and Mark Heimendinger (Milbank, Tweed, Hadley & McCloy) offer Appraising the Non-Existent: The Delaware Courts’ Struggle with Control Premiums, forthcoming in the University of Pennsylvania Law Review. From the abstract:

This paper examines the holdings of the Delaware courts that a control premium must be added to the market value of shares in freeze-out transactions. It finds this result is not required by prior Delaware law. We argue that there is no control premium absent a current transaction in control, and that assumptions of control premia in freeze-outs are simply speculation. Awarding control premia provides a windfall gain for public shareholders, and is contrary to the treatment of public shareholders who receive publicly traded shares in other mergers.

Peter Henning (Wayne State) presents Misguided Federalism, forthcoming in the Missouri Law Review. From the abstract:

The article considers the effect of the Supreme Court’s recent federalism decisions – specifically Lopez and Morrison – on the scope of federal criminal law. The Court in Morrison expressed concern that the extension of federal authority through the Violence Against Women Act to rape, a common law felony prosecuted in every state, went beyond Congress’s legislative power because “we can think of no better example of the police power, which the Founders denied the National Government and reposed in the States, than the suppression of violent crime and vindication of its victims.” Invoking federalism as an independent principle to limit the federal government’s authority to prosecute crimes that state and local authorities ordinarily handle certainly has a superficial appeal. Lopez and Morrison both refer to a seemingly inviolable realm of state authority that appears to include state and local control – perhaps to the exclusion of the federal government – over the prosecution of “local” crimes. The Court’s federalism analysis gives the impression of separate spheres of authority over the criminal law that relegates Congress to legislating only in those areas that are obviously “national” in scope. The notion of mutually exclusive spheres hinted at in Lopez and Morrison – at least with respect to criminal statutes – overstates the role of federalism in demarcating the authority of the national and state governments.
The article argues that it is a misguided view of federalism that the federal government somehow invades the sovereignty of the states by pursuing criminal prosecutions for certain types of conduct already subject to prosecution by state and local authorities. The source of that misunderstanding is the Supreme Court’s broad language in Lopez and Morrison asserting that matters traditionally viewed as “local” – including the prosecution of violent crimes normally brought in state and local courts – are reserved in some way from regulation by the national government. Under this approach, federalism becomes not just an aspect of constitutional analysis, but also a new type of defense in federal prosecutions. The article analyzes decisions of the lower courts imposing an independent federalism limit on prosecutions that are not, according to the judges, of sufficient national interest. This misuse of federalism is, in reality, a new form of supervisory power to control prosecutors through a flawed application of federalism.

Andrew Guzman (UC Berkeley) posts The Case for International Antitrust. From the abstract:

Competition policy is made at the national level. A great deal of the business activity that it seeks to regulate takes place at the international level. It is universally accepted that some level of international cooperation is necessary to make regulation effective under these conditions. There is, however, a considerable diversity of views on the question of how much cooperation is appropriate.
The presence of international activity distorts competition policy in at least two ways. First, it causes the preferred domestic policies of states to diverge from what they would be in the absence of such activity. States that are net exporters of goods sold in imperfectly competitive markets have an incentive to weaken their antitrust rules and states that are net importers of such goods have reason to tighten theirs. Second, the choice of law rules adopted to establish the jurisdictional reach of domestic law create an additional divergence between the substantive laws actually chosen and those that would be chosen by a closed economy. States that choose to limit their laws to activities that take place within their territory are better off if they also weaken their substantive laws. States that extend the reach of their laws generate overlapping jurisdiction and force firms to run a gauntlet of legal rules that includes the strictest elements of each state’s laws, leading to a de facto regulatory standard that is stricter than that of any single state.

This chapter explains why these problems cannot be resolved through the sort of low levels of cooperation that dominate current international antitrust efforts. Information sharing in particular cannot address the distortions to competition policy generated by cross-border business. Choice of law strategies can improve the regulatory framework, but can only partially address the problem and even this would require a dramatic change to existing policies. What is required, then, is a deeper form of cooperation on the subject of substantive laws or international standards. Though cooperation of this sort is difficult to achieve, there is no other way to address the policy distortions created when national authorities try to regulate international competition.

Robert Schapiro and William Buzbee (Emory) upload Unidimensional Federalism: Power and Perspective in Commerce Clause Adjudication, forthcoming in the Cornell Law Review. From the abstract:

Since 1995, the United States Supreme Court has applied a new form of rigorous judicial scrutiny in assessing the constitutional limits of the Commerce Clause, a provision that long has functioned as the central authorization of congressional power. As critics on and off the bench have noted, the Court has advanced its conception of federalism by requiring that the regulated activity itself be economic or commercial in nature. A crucial aspect of the Court’s approach that has received less attention is the prior step of selecting the relevant activity for constitutional analysis. Legislation can be viewed from a variety of different perspectives, and the choice of vantage points can be critical in determining the requisite commercial nexus. In the wake of the New Deal, the Court upheld legislation if it had a commercial connection when viewed from any perspective. This Article argues that in a break from a half century of settled jurisprudence, the Court recently has insisted on selecting a single perspective as determinative. This approach, which we term “unidimensional,” relocates substantial discretion from Congress to the judiciary. Drawing on the insights of recent scholarship on statutory interpretation, we illuminate the flaws in the Court’s unidimensional approach. Legislation implicates multiple motives, targets, beneficiaries, and effects. For the Court to pick out a single element as dispositive constitutes a groundless form of reductionism. Here, as in other aspects of its recent jurisprudence, the Court focuses on the common-law rights holder as the fulcrum of analysis. This framework tilts the doctrine against regulation, as it inevitably casts the state as a suspect interloper. Lower court cases evidence the confusion that the Court’s narrow commercial activity analysis has generated. In place of this flawed, unidimensional approach, we offer a “legislativist” framework for Commerce Clause cases. Under the legislativist method, the text of the legislation guides the judicial identification of the relevant activities for purposes of Commerce Clause scrutiny. This approach retains meaningful judicial oversight, while avoiding the arbitrary usurpation of congressional authority inherent in the Court’s current jurisprudence.

A. Mitchell Polinsky (Stanford) posts Principal-Agent Liability, forthcoming as a chapter in AN INTRODUCTION TO LAW AND ECONOMICS (3d ed. 2003). From the abstract:

This essay is a new chapter in An Introduction to Law and Economics (Third Edition, forthcoming 2003). It reexamines some of the principles of liability from earlier chapters when harm is caused by an agent who is under the supervision of a principal. The primary questions addressed are: Is the optimal level of liability different when harm is caused by an agent of a principal rather than by a single actor? Should liability be imposed on the principal, the agent, or both? If on both, what is the optimal mix of liability between the principal and the agent?