Ideoblog

Lawyer licensing: the elephant in the Bartlett bedroom

Judge Sotomayor is facing criticisms for her decisions (sitting by designation) in Bartlett v. New York State Bd. of Law Examiners, 2001 WL 930792 (S.D.N.Y. 2001), and 970 F.Supp. 1094 (S.D.N.Y. 1997), forcing NY to let a learning-impaired applicant sit for the bar exam. Judge Sotomayor said:

There is no insinuation, and I cannot find, that Dr. Bartlett is incapable of performing the functions of a practicing lawyer. * * * Therefore, while it is undoubtedly true that not every person is physically able to be a Yankees first baseman, it is likewise true that it would be grossly unfair to impede whole classes of individuals like plaintiff, with plaintiff's automaticity and reading rate disabilities, from participating in entire classes of customary professions such as the practice of law because they can not read a professional examination like average law school (or other professional school) graduates.

So Judge Sotomayor seemingly gave short-shrift to arguments that the need to read and understand quickly and accurately was an important test of bar admission.

Now I realize that to some this will sound to some like the case of the one-legged Tarzan. But the missing issue here concerns the general usefulness of bar exam.

In my Lawyers as Lawmakers: A Theory of Lawyer Licensing, 69 Mo. L. Rev. 299 (2004) I criticized lawyer licensing in general, and bar examinations in particular, on the basis that they did not, in fact, protect the public from bad lawyers. The only function of lawyer licensing, I argued, was simply to reduce the supply of lawyers. (I then proposed a modest defense on those grounds – i.e., to encourage lawyers to assist in lawmaking by giving them property rights in their state laws.)

With respect to the bar exam, I said:

Perhaps the most important barrier to entry to law practice in a state is the requirement to take a bar exam. The bar exam usually requires months of study and the risk of embarrassing failure. That states pass a very high percentage of applicants if they take the exam enough times suggests that the bar exam is more a price of admission than an effective screen. On the other hand, the bar exam probably deters some people from attempting to obtain a license. Only four jurisdictions pass fewer than sixty percent of those taking a particular test. These include Louisiana, where the low rate may reflect the state’s idiosyncratic civil law system; the District of Columbia, which is unique in admitting lawyers on motion without prior experience elsewhere; and California, which uses its bar exam to screen graduates of unaccredited California schools. The fourth state is Delaware, whose low passage rate may be particularly significant for present purposes. Since Delaware is the most prominent example of a state where lawyers have played an important role in maintaining the state’s law, this provides some anecdotal evidence of the role of state licensing in encouraging lawyers’ participation in lawmaking.

For other criticisms of bar examinations as a licensing requirement, see Benjamin Hoorn Barton, Why Do We Regulate Lawyers?: An Economic Analysis of the Justifications for Entry and Conduct Regulation, 33 ARIZ. ST. L.J. 429, 434 n.16 (2001); Daniel R. Hansen, Note, Do We Need the Bar Examination? A Critical Evaluation of the Justifications for the Bar Examination and Proposed Alternatives, 45 CASE W. RES. L. REV. 1191 (1995); Andrea A. Curcio, A Better Bar: Why and How the Existing Bar Exam Should Change, 81 NEB. L. REV. 363 (2002); Kristin Booth Glen, When and Where We Enter: Rethinking Admission to the Legal Profession, 102 COLUM. L. REV. 1696 (2002).

I’m not an ADA expert so can’t generally critique Sotomayor’s opinions on this issue. But it’s worth noting that at least some of those criticizing her decisions in this case might be sympathetic with the implications of these decisions for lawyer licensing standards in general, and bar exams in particular, which I for one find indefensible as a means of determining fitness to practice law.

Additional point:  I am not arguing that Judge Sotomayor is taking a Friedmanian position on professional licensing.  As I said, this is only an "implication" of her decision.  Perhaps it would be more accurate to call it a possible effect of watering down the purported screening function of the bar exam.  

Sotomayor, business and preemption

A key Sotomayor ruling in Dabit v. Merrill Lynch may become an issue in her confirmation. It’s worth discussing because the implications aren’t obvious.

Dabit involved the Securities Litigation Uniform Standards Act, in which Congress tried to close a state law end run around limits on securities class actions by preempting state actions based on "an untrue statement or omission of a material fact in connection with the purchase or sale of a covered security." The language leaves it open whether the action had to be in connection with any purchase or sale, or the plaintiff’s purchase or sale – that is, does it apply to holders of securities?

The Act says “the,” not his or her. So Judge Sotomayor interpreted it, finding that the state law survived SLUSA, and taking a cautious and narrow approach to preemption of state law. The Supreme Court reversed, based primarily on policy considerations relating to constraining abusive litigation.

In my article Dabit, Preemption, and Choice of Law, I questioned the Supreme Court’s result. I noted, among other things, that there were other relevant policy considerations, notably including federalism concerns and constraining fraud. Moreover, the class action abuse problem was not clear in this fact setting. The Second Circuit opinion sensibly allowed a class action only for those who were induced to hold, rather than letting the holders carry along the purchasers and sellers. And unlike the most problematic non-purchaser/seller cases, the plaintiffs in Dabit had clearly bought their shares, so the ruling did not pose a risk of open-ended liability. Although we can’t be sure plaintiffs were harmed by defendant’s fraud, similar concerns arise in every “fraud on the market” case.

My main problem with the Supreme Court’s decision is that it precludes a potentially large swath of state remedies, and sets the stage for more federalization of corporate law. As I said in my article:

Reduced to its essence, Dabit rests on the primacy of federal over state securities law. As Justice Stevens emphasized at the beginning of his opinion, ‘‘[t]he magnitude of the federal interest in protecting the integrity and efficient operation of the market for nationally traded securities cannot be overstated.’ Thus, Dabit gives Congress a green light to regulate under the securities laws. This power may extend even to matters like those covered in Sarbanes-Oxley that arguably relate closely to internal corporate governance. * * * In short, Dabit gives momentum to the federalization of corporate law.

To be sure, business interests will like the Supreme Court’s result in Dabit, given the counterproductive nature of securities class action remedies and because, as Fortune's Roger Parloff notes (HT PoL), “businesses usually find it cheaper to comply with one federal regulatory regimen rather than with 50 state regulatory schemes.”

But there is a broader principle of federalism, particularly as applied to corporate law, which business can ill afford to sacrifice. Competing states have advantages over a single, inflexible, federal regulator.  And as discussed in The Law Market, various constraints often keep state law from getting out of hand.

Since the Court decides securities cases only rarely, the general principles of these cases tend to outlast their specific holdings. I would rather have the case-by-case narrow-preemption principle of Sotomayor’s opinion than the Supreme Court’s policy-based result.  Parloff notes research that Sotomayor “has been a moderate in preemption cases, finding preemption in about half the cases in which she was asked to do so.” I'm ok with that.

Update: A reader points out an ambiguity in the third paragraph above.  To clarify, Judge Sotomayor effectively interpreted SLUSA to apply to "his or her" transaction and therefore did not preempt the holding claim.  

Why states?

Reflecting on the coming Supreme Court term, the NYT’s Liptak says:

Perhaps the most significant cases of the term involve pre-emption, a doctrine that can bar state-court lawsuits over products that met federal safety standards and one that has repeatedly occupied the Roberts court. The doctrine is in some tension with the Rehnquist court’s attentiveness to state’s rights, which had been known for a time as the “federalism revolution.”

"Corporate America has discovered that they would much rather be regulated by one government in Washington than by 50 state governments, or by the most aggressive of them,” said Kathleen M. Sullivan, a law professor at Stanford and a Supreme Court advocate.

If corporations lose their preemption arguments this term, they’ll just go to Congress to finish the job. In other words, the states are poised to lose their relevance.

At first glance, this isn’t surprising. After all, why should states (or even countries for that matter) regulate international companies operating in a world economy? What, if anything, is the continued relevance of states?

Erin O’Hara and I provide an answer in our forthcoming book, The Law Market: move toward replacing the outmoded territorial approach to regulation with contractual choice of law. Indeed, we show that parties increasingly are using contracts to choose the jurisdiction or private dispute resolution device that will adjudicate their claims. Consider the dispute involving international banking firms based in NC, California, NY discussed here.

Large firms are understandably suspicious of states. But with state litigation and regulation, at least the federal government is available as a backstop. The feds might look like firms' saviors now, but things might start looking different when the federal government is the only game in town. (Well, not the only game – the next step is international competition.)

O’Hara and I offer a way to preserve the viability of our federal system through federally-backed state contractual choice of law. Henry Butler and I suggest a comparable approach to insurance regulation.

These aren't perfect solutions: as compromises they are vulnerable to both race-to-the-bottom and over-regulation arguments.  But they offer the best available way to avoid an outcome in which business must contend with one giant monopoly regulator.

The effect of Heller

I haven’t read Heller, but I did read the WSJ Law Blog, and found out that while there is now no law against owning or buying a gun in DC, there’s a problem: There are no gun stores in DC, new ones are likely to be kept out by zoning, and DC residents can’t buy guns in other states. But if you now live in a state that allows guns, like VA, you can buy it there and, post-Heller, bring it into the District without disassembling it.

Of course most people aren’t going to move to DC just because this would allow them to bring a gun in. Unless, of course, you really want to bring a gun in. I can just see defenseless Washingtonians hiding out from all those gun-slinging Virginians.  Sort of gives new meaning to the expression: if guns are outlawed, only outlaws will have guns. Then again, I guess outlaws don’t usually have legal guns anyway.

Or maybe outlaws will be less likely to rob people who just moved to DC.  Or maybe they will be more likely to in order to find a gun.

Ok, back to work. . . .

Business and the Supreme Court

Jeffrey Rosen has an interesting article in the NYT magazine about the Supreme Court's pro-business tilt. Gordon Smith gives some highlights, noting the interesting agreement on business issues between liberal and conservative justices:

With their pro-business jurisprudence, the justices may be capturing an emerging spirit of agreement among liberal and conservative elites about the value of free markets. Among the professional classes, many Democrats and Republicans, whatever their other disagreements, have come to share a relatively laissez-faire, technocratic vision of the economy and are suspicious of excessive regulation and reflexive efforts to vilify big business. Judges, lawyers and law professors (such as myself) drilled in cost-benefit analysis over the past three decades, are no exception. It should come as little surprise that John Roberts and Stephen Breyer, both of whom studied the economic analysis of law at Harvard, have similar instincts in business cases.

Rosen notes the influence of Lewis Powell, Rex Lee and the litigation coordinating efforts of the Chamber of Commerce. I wonder how much of this development can be attributed to Henry Manne, whose writings and judicial and law professor seminars had a profound influence on US law and policy, as I have recently written.

For me the most interesting part of Rosen's article was about the clash of two strains of conservatism:

Ever since the Reagan administration, there had been a divide on the right wing of the court between pragmatic free-market conservatives, who tended to favor business interests, and ideological states-rights conservatives. In some business cases, these two strands of conservatism diverged, leading the most staunch states-rights conservatives on the court, Antonin Scalia and Clarence Thomas, to rule against business interests. Scalia and Thomas were reluctant to second-guess large punitive-damage verdicts by state juries, for example, or to hold that federally regulated cigarette manufacturers could not be sued in state court. As a result . . . the chamber began a vigorous campaign to urge the Bush administration to appoint pro-business conservatives.

When it came time to replace Chief Justice William Rehnquist and Justice Sandra Day O’Connor, the candidate most enthusiastically supported by states-rights conservatives, Judge Michael Luttig, had a record on the Court of Appeals for the Fourth Circuit that some corporate interests feared might make him unpredictable in business cases. (“One of my constant refrains is that being conservative doesn’t necessarily mean being pro-business,” Conrad [of the Chamber of Commerce] told me.) The chamber and other business groups enthusiastically supported John Roberts, who had been hired by the chamber to write briefs in two Supreme Court cases in 2001 and 2002. . . . . The business community was also enthusiastic about Samuel Alito, whose 15-year record as an appellate judge showed a consistent skepticism of claims against large corporations. Ted Frank of the American Enterprise Institute predicted at the time of the nomination that if Alito replaced O’Connor, he and Roberts would bring about a rise in business cases before the Supreme Court. Frank’s prediction was soon vindicated.

I certainly sympathize with the Court's pro-business move. [With respect to Alito, I take some credit for being among the first to highlight his business record when he was nominated –see here, and the follow-up Forbes column.]  But while I don't consider myself a "conservative," I think the Court's rejection of what Rosen calls "state's rights" [in NYT-speak] in favor of a broad view of federal power is not entirely a good thing, even for a pro-business type. See, for example, my article on preemption in the securities law area (which got some push-back when I presented it at Cato).

Yes, the states have overreached, particularly in empowering the trial bar, and we've seen, particularly recently, the corruption underlying this overreaching. But we must remember that federal law is not without its flaws, and its flaws are compounded by the high costs of exiting a federal regime.

As I've often argued, including in the article noted above, there is a way out of this dilemma, a business-friendly alternative to broad federal preemption: enhancing parties' power to contract for the applicable state law. Erin O'Hara and I have a forthcoming book on that, The Law Market, which I'll be writing about in coming months. You can get tastes of the analysis in, among other places, our Corporations and the Market for Law, just out in the Illinois Law Review, and our recent paper on European and American choice of law.

The market for law offers a way to get competition and evolution of legal rules while enabling firms to avoid the Mississippi swamps and duplicative and costly state regulation.  I think business will come to see the attractions of this approach, particularly when it realizes in coming years that Congress may not be entirely pro-business.

The Court (and Alito) decide Cuno

The Court has decided the Cuno case, which raised the issue of the constitutionality under the Commerce Clause of a state tax credit for new investments in Ohio. Although the Court avoided the main Commerce Clause issue and went off on standing, the opinion remains interesting for what it says about the states' role, and its hint about Justice Alito's jurisprudence.

The anti-Alito strategy, from a Lions fan

I haven't been doing general Alito-blogging, other than the business angle, but I couldn't resist this reader email to the Chicago Tribune:

I recognize the anti-Alito strategy I really do. That's because I'm a Lions fan. I've sat there. Middle of the 4th quarter, thinking (with no hint of delusion) that "All they need is a touchdown...and an onside kick...and another touchdown. Then a field-goal. Maybe a make-up call from that bad interference call 3 minutes ago...Joey is driving...I have a good feeling about this." . . . Fight on, Ralph. Give 'em hell. All you need is a brilliant ad campaign, some compelling speeches, and a way to make "Stare Decisis" sound relevant to your average Joe. Senator Kennedy is driving...I have a good feeling about this.

My Forbes column on Alito. . .

. . . is up. The bottom line, as others have been saying (e.g., Jonathan Adler in today’s WSJ) is to debunk the idea some politicians and journalists seem to have of Alito coming up with simplistic knee-jerk result-oriented decisions.

Alito & Antitrust

From The Legal Intelligencer comes Carl Hittinger's essay, Alito's Conservative Views on Antitrust, summarizing Judge Alito's antitrust track record in the hopes of discerning his views on substantive antitrust question (the American Antitrust Institute also summarizes Alito's antitrust record here).  Hittinger focuses on the two Third Circuit decisions authored by Judge Alito, Miller v. Indiana Hospital and Barton & Pittinos v. SmithKline, and the dissent he joined in LePage's v. 3M authored by Judge Greenberg.  Hittinger's primary conclusion is that:

Alito interprets precedent strictly and narrowly applies the reaches of the antitrust laws.  He does not appear to give private antitrust plaintiffs the benefit of the doubt, particularly as to issues of standing or injury, even in the context of summary judgment . . .. [H]e often appears to be saying that the plaintiff was not the proper plaintiff to bring the case, not that there were no antitrust violations at play.  Based on his joining of the Brader, it appears he is willing to give a plaintiff the chance to develop a discovery record if the essential elements are plead.

This is all to the good.  Earlier in the essay, however, Hittinger makes a statement that I find to be more troublesome:

"in many [of Alito's cases], the antitrust claims were dismissed on a motion for summary judgment despite what seemed to be disputed factual and related expert issues concerning antitrust market and injury questions."

My suspicion is that this passage is largely in reference to Alito's opinion in SmithKline, which Hittinger goes on to discuss, and describes (correctly, in my view) as the best available example of Alito's antitrust jurisprudence.  The opinion is worth a closer look.

The plaintiff (B&P) marketed SmithKline's Hepatitis-B vaccine to nursing homes until terminated.  The termination appeared to be brought on by complaints by pharmacists who had traditionally supplied nursing homes with vaccines and pharmaceutical products.  The Third Circuit unanimously affirmed the district court's ruling that no Section 1 violation of the Sherman Act had taken place on the grounds that the plaintiff was lacking antitrust standing.  Specifically, the district court noted that the plaintiff's alleged injury was not "the type for which the antitrust laws were designed to protect."

Affirming the district court, Judge Alito points out that B&P clearly fails the antitrust standing requirement on the basis of their complaint alone, which alleges that competition has been injured in the markets to sell and distribute the vaccine while B&P readily admits that it does not participate in either of these activities (and in fact, is prohibited from doing so by law).  Judge Alito also considered B&P's modified claim, raised at oral argument and in their briefs, that the relevant market was the competition between B&P and the pharmacists.  Judge Alito carefully rejected this argument by considering the cross-elasticity of demand between the services offered B&P and the pharmacists.  Because B&P's role was limited to marketing the vaccine, nursing homes were not choosing between B&P and the pharmacists because the former would be worthless without the entire package offered by SmithKline, a licensed seller, and B&P.  Namely, B&P would me missing the vaccine! Judge Alito concludes that:

"[c]onsequently, there was no elasticity of demand as between the pharmacists' offerings and B&P's offerings; no matter how much the pharmacists raised the price of the package of the goods and services offered, the nursing homes would not have switched to B&P."

Judge Alito also notes that B&P's president described his own company as an advertising and marketing agency which did not compete with wholesalers and pharmacists.  While I do not have the benefit of the entire record, nothing in this opinion strikes me as justifying any concern that Judge Alito cavalierly dismissed the motion for summary judgment despite genuine factual disputes.  To the contrary, the facts underlying the analysis were plainly undisputed.

While I share Hittinger's view that Judge Alito will strictly apply the antitrust standing precedent, I do not share his concern that he may eschew careful legal and factual analysis in order to limit opportunities for private antitrust plaintiffs.  On this point, my sense of Judge Alito's antitrust opinions is quite the opposite.  I find that what little Judge Alito has written on antitrust issues is properly described as fastidious analysis complemented by strict application of doctrine.

The Yale position on Alito

There have been several blog posts (e.g. Kerr with links to others), on the NYT article today on Yale’s view of Alito. The most remarkable line in the story, but one that hasn't gotten much comment, belonged to Owen Fiss on Clarence Thomas: “The one lesson for the law school was that we didn't work hard enough to oppose him."

Who is this “we”?  Is Fiss saying that Yale should have an official position on a political issue?  If so, is anyone else bothered by the notion that an educational institution should have and enforce a particular orthodox view?  Or by the possibility that one of its most senior and respected faculty members thinks it should? 

As I said about the idea of “dean’s letters”: “ I thought law schools were supposed to be places of inquiry and debate, not “official” positions.”