Volume 36, Issue 1
Mihailis E. Diamantis, Successor Identity, 36 Yale J. on Reg. 1 (2019).[PDF]
The law of successor criminal liability is simple—corporate successors are liable for the crimes of their predecessors. Always. Any corporation that results from any merger, consolidation, spin-off, etc., is on the hook for all the crimes of all the corporations that went into the process. Such a coarse-grained, one track approach fails to recognize that not all reorganizations are cut from the same cloth. As a result, it skews corporate incentives against reorganizing in more socially beneficial ways. It also risks punishing corporate successors unjustly.This Article offers a more sophisticated approach to successor liability: successors should be liable for the crimes of their predecessors only when they inherit their predecessors’ compliance vulnerabilities. In the terms developed by this Article, these successors share a “criminal identity” with their predecessors. Such an approach would incentivize corporations to structure reorganizations in ways that improve compliance and minimize the likelihood of future offenses. At the same time, it would do a better job of ensuring that the criminal law punishes corporate successors only when they deserve it.
Gregory Klass, Empiricism and Privacy Policies in the Restatement of Consumer Contract Law, 36 Yale J. on Reg. 45 (2019). [PDF]
The Draft Restatement of the Law of Consumer Contracts includes a quantitative study of judicial decisions concerning businesses’ online privacy policies, which it cites in support of a claim that most courts treat privacy policies as contract terms. This Article reports an attempt to reproduce that study’s results. Using the Reporters’ data, this study was unable to reproduce their numerical findings. This study found in the data fewer relevant decisions, and a lower proportion of decisions supporting the Draft Restatement position. It also found little support for the Draft’s claim that there is a clear trend recognizing privacy policies as contracts, and none for the claim that those decisions have been more influential than decisions coming out the other way. A qualitative analysis of the decisions in the dataset reveals additional issues.
The analysis reveals that the Draft Restatement study’s numerical results obscure both the many judgment calls needed to code the decisions and their limited persuasive power. These results confirm the importance of transparency and replication in empirical case law studies. They also suggest that the closed nature of the Restatement process is perhaps ill-suited to producing reliable large-scale quantitative case law studies.
Kobi Kastiel & Adi Libson, Global Antitakeover Devices, 36 Yale J. on Reg. 117 (2019). [PDF]
This Article explores a “hidden” mechanism that insulates management from hostile takeovers and activist intervention: the global antitakeover device (“GAD”). A GAD is based on the ability of public firms to “mix and match” between different forms of regulation by cross-listing on multiple stock exchanges or incorporating in foreign jurisdictions. This action subjects any hostile engagement with these firms to multiple jurisdictions’ regulatory frameworks and creates regulatory barriers, complexity, and uncertainty. This Article provides a comprehensive analysis of these GADs, the costs they generate to potential bidders, and the unique features they possess relative to traditional antitakeover devices
GADs are not an isolated phenomenon. Their potential economic impact is significant, as one in seven firms traded on U.S. exchanges are incorporated or cross-listed in foreign jurisdictions. Moreover, the impact of these devices could extend beyond the market for corporate control, as foreign firms could also enjoy additional insulation from activist hedge funds. The Article also locates GADs in the wider theoretical literature on cross-listing and offers policy recommendations for overcoming GADs’ insulation effects.
Nicholas R. Parrillo, Federal Agency Guidance and the Power to Bind: An Empirical Study of Agencies and Industries, 36 Yale J. on Reg. 165 (2019). [PDF]
The typical federal agency issues a vast amount of guidance, advising the public on how it plans to exercise discretion and interpret law. Under the Administrative Procedure Act (APA), the agency must follow onerous procedures to issue full-blown regulations (including notice and comment) but can issue guidance far more easily. What justifies this difference, in the familiar telling, is that guidance is not binding in the way regulations are. Agencies are supposed to use guidance flexibly. But critics claim that agencies are not flexible—instead they follow guidance rigidly and thus pressure regulated parties to do the same. If true, this claim means agencies can issue de facto regulations simply by calling them guidance, threatening to make a dead letter of the APA’s constraints.
I evaluate this claim from a qualitative empirical perspective, drawing upon interviews I conducted with 135 individuals across government, industry, and NGOs in eight different regulatory fields. I make three findings. First, the critics have a genuine basis for their claim. Regulated parties often face overwhelming pressure to follow guidance, and agencies are sometimes inflexible. Second, pressure and inflexibility, though real, are not universal. One can identify regulated parties who feel little pressure and agencies who are open-minded. The degree of pressure and inflexibility can be predicted on the basis of certain organizational and legal factors that are present in some regulatory schemes but not others. Third, even when regulated parties are strongly pressured, or when officials are inflexible, this is normally not because agency officials are engaged in a bad-faith effort to coerce the public without lawful procedures. The sources of pressure on regulated parties are mostly hard wired into the structure of the regulatory schemes Congress has imposed and are beyond the control of agency officials who issue or administer guidance. And when agencies are inflexible in the face of a regulated party’s plea to depart from guidance, that is usually because (a) officials face competing pressures from other stakeholders to behave consistently and predictably— pressures that spring from rule-of-law values that agencies would be remiss to ignore; and (b) officials are trapped by organizational tendencies that cause rigidity, which the officials do not intend but cannot redress without costly reforms.
The problem with guidance, though real, is largely an institutional problem that calls for an institutional-reform response, not a problem of bureaucratic bad faith that calls for accusation and blame.
Roberta Romano, Does Agency Structure Affect Agency Decisionmaking? Implications of the CFPB’s Design for Administrative Governance 36 Yale J. on Reg. 273 (2019). [PDF]
An extensive literature has analyzed the accountability of administrative agencies, and in particular, their relationship to Congress. A well-established strand in the literature emphasizes that Congress retains control over agencies by their design, with a focus on the structure and process by which agency decisionmaking is undertaken. This Article examines the relationship between agency structure and decisionmaking across four agencies with similar statutory missions but different organizational structures: the Consumer Financial Protection Bureau (CFPB), with a uniquely independent and controversial structure, and the Commodity Futures Trading Commission (CFTC), Consumer Product Safety Commission (CPSC), and Securities and Exchange Commission (SEC), with more conventional independent commission structures. It presents data consistent with the contention that agency structure influences agency decisionmaking. More specifically, the statistical analysis is robustly consistent with an agency’s insulation from Congress being related to its choice of regulatory instrument, as the most independent agency in this study, the CFPB, uses significantly less frequently the most publicly accountable regulatory instrument: notice-and-comment rulemaking. The Article concludes with the analysis’s implications for the CFPB’s organization and more broadly for administrative reform proposals and the agency design and administrative law literature.
Robert F. Weber, The FSOC’s Designation Program as a Case Study of the New Administrative Law of Financial Supervision, 36 Yale J. on Reg. 359 (2019). [PDF]
When legal scholars specializing in financial regulation have examined the Financial Stability Oversight Council (FSOC), their lens has usually focused on matters outside of the core public law expertise they are best positioned to contribute. This curious state of affairs is the consequence of the historical mutual disinterest between administrative law scholars and financial regulatory scholars. This Article helps bridge this divide, conducting a comprehensive administrative law analysis of the FSOC’s Section 113 designation program, and using it as a case study of an emerging trend in U.S. public law: increased contestation concerning the legal legitimacy of financial supervisory programs that provide for extensive, open-ended discretion on the part of regulators.
Today, the FSOC’s designation program and other supervisory programs like it require financial supervisors to draw from an ever-deeper reservoir of administrative discretion to make hypothetical and conjectural assessments of future events. These programs have come to resemble so-called “risk regulatory” regimes—programs that require the exercise of significant regulatory discretion to counteract future harms subject to non-trivial uncertainty. In response, affected regulatory subjects have seized upon this discretionary power, calling into question the legality of its exercise. This Article analyzes the legal sufficiency of the procedural and substantive constraints on the FSOC’s discretion embedded in the FSOC’s designation statute and its own rulemakings.
It uncovers several structural problems with the FSOC framework. Whereas some of these problems are susceptible to amendatory fixes, others are not. These more trenchant problems are ubiquitous in risk regulatory regimes, but financial supervisory regimes have yet to develop the institutional and doctrinal forms needed to reconcile such open-ended discretion with the rule of administrative law. In presenting this analysis, the Article fires a warning shot in the direction of financial regulators, policymakers, and scholars, cautioning them that other programs are likely to be contested in the near future.
Peter Beck, Exemption Federalism: Regulatory Carve-Outs and the Protection of Local Farms, 36 Yale J. on Reg. __ (2019). [PDF]
When national regulatory programs exempt small-scale operators or producers from certain requirements, the result looks surprisingly like federalism. That is, many local (or intrastate) operators end up subject only to state or local regulations; most national (or interstate) operators end up subject to federal regulation. While small-scale businesses may rely on these exemptions in practice, the exemptions are understudied and undertheorized in the legal scholarship. This Note proposes a new way of looking at exemptions to large national programs: as “exemption federalism.” In an era when federal regulatory power is nearly limitless, exemption federalism may prove to be a significant source and style of contemporary federalism. To illustrate, this Note takes a close look at one particular statute—the 1957 Poultry Products Inspection Act—and its exemptions for small-scale poultry producers. By examining the historical context of the Act, the debates surrounding its passage, its expansion, its exemptions, and its practical effect today, this Note traces the contours of modern American federalism through an agricultural lens. It also zooms out further, asking where else we can find exemption federalism, where it comes from, its costs and benefits, and its implications for industries outside of agriculture, from finance, to healthcare, to housing.