I've selected a song.
I also learned a valuable lesson about reheating egg-drop soup: It doesn't really work. Apparently, it maintains its gelatinous refrigerated form, having emulsified from the egg proteins. Which means that heating it up in the microwave will only over-cook the egg and make it gross. I ate it anyway.
In other news, I have more sympathy for the wall street protesters now that I've thought about it a little more. Wall Street really did get a pretty sweet deal with that bailout. Democrats look like hypocrites when they criticize trickle-down economic theory from one side of their mouth and yell "too big to fail!" from the other. I'm sure the two situations are distinguishable, but there's at least a superficial irony. Maybe society does depend on a clear income delineation between winners and losers.
If that's so, then we should stop worrying about creating jobs and instead invest everything into education, because it seems like that only thing that ever improves society is an increase in resources, which only comes about through research, discovery, development, and innovation. Then again, the countries with the best test scores from their students aren't exactly setting the world on fire (What does scandinavia produce, anyway?).
Friday, October 7, 2011
Sunday, September 25, 2011
Response to Douthat on the Death Penalty
In today's New York Times, Ross Douthat argues that we should focus controversy over Troy Davis on the broken mechanics of the justice system, rather than simply giving up on the death penalty and its underlying problems. According to Douthat, the problem with the death penalty is not that it is immoral, but that it is imperfectly implemented, and our response to its imperfections should be to tweak. Non-death penalty offenders would benefit from reforms as well, in amounts that far exceed the harm caused by a few erroneous executions.
The argument is not novel, and it has an intuitive appeal. Wouldn't it be nice if we could have a justice system we trusted with "life and death," rather than resign ourselves to failure? It would indeed be nice, but its not realistic and its not worth the cost.
In 1972, the Supreme Court in Furman v. Georgia struck down the death penalty based on fears it was applied inconsistently, with racial bias, and was inhumane. These concerns are the same as those raised today by the Troy Davis execution. In response to this death penalty moratorium, many states took Douthat's advice and enacted reforms to their death penalty systems to try to make them less arbitrary and inconsistent. In particular, Georgia enacted a series of objective guidelines for enhancing a sentence to the death penalty. The Supreme Court four years later, in Gregg v. Georgia, decided it would give Douthat's approach a try.
Since 1976, the Supreme Court has engaged in the business of setting guidelines and limitations on what sorts of death penalty systems could pass muster. The Court has prohibited application of the death penalty to minors, the mentally retarded, or non-homicide offenders. However, despite the best intentions (sometimes) of lawmakers, jurors, and judges, the Court's experiment in regulating and reforming the death penalty has failed. Its application continues to be tainted by racial prejudice, inadequate assistance of underpaid court-appointed counsel, politically-motivated elected judges, and congressional emasculation of the federal appellate process. These problems cannot be fixed merely by writing op-eds about the problem.
The death penalty was re-instated in 1976 out of a naive hope that the death penalty could be reformed. Since then, its problems have only amplified. 35 years is long enough to recognize that our underfunded justice system will not be reformed by placing faith in the majority's compassion for its least popular citizens. If Douthat wants to pass laws reforming the justice system into one worthy of meting out capital punishment, then I might be persuaded to vote for it. But until then, let's put down the shovel.
The argument is not novel, and it has an intuitive appeal. Wouldn't it be nice if we could have a justice system we trusted with "life and death," rather than resign ourselves to failure? It would indeed be nice, but its not realistic and its not worth the cost.
In 1972, the Supreme Court in Furman v. Georgia struck down the death penalty based on fears it was applied inconsistently, with racial bias, and was inhumane. These concerns are the same as those raised today by the Troy Davis execution. In response to this death penalty moratorium, many states took Douthat's advice and enacted reforms to their death penalty systems to try to make them less arbitrary and inconsistent. In particular, Georgia enacted a series of objective guidelines for enhancing a sentence to the death penalty. The Supreme Court four years later, in Gregg v. Georgia, decided it would give Douthat's approach a try.
Since 1976, the Supreme Court has engaged in the business of setting guidelines and limitations on what sorts of death penalty systems could pass muster. The Court has prohibited application of the death penalty to minors, the mentally retarded, or non-homicide offenders. However, despite the best intentions (sometimes) of lawmakers, jurors, and judges, the Court's experiment in regulating and reforming the death penalty has failed. Its application continues to be tainted by racial prejudice, inadequate assistance of underpaid court-appointed counsel, politically-motivated elected judges, and congressional emasculation of the federal appellate process. These problems cannot be fixed merely by writing op-eds about the problem.
The death penalty was re-instated in 1976 out of a naive hope that the death penalty could be reformed. Since then, its problems have only amplified. 35 years is long enough to recognize that our underfunded justice system will not be reformed by placing faith in the majority's compassion for its least popular citizens. If Douthat wants to pass laws reforming the justice system into one worthy of meting out capital punishment, then I might be persuaded to vote for it. But until then, let's put down the shovel.
Saturday, September 24, 2011
US Savings Ass'n v. Timbers of Inwood Forest Associates
Preliminarily, I find it interesting that Scalia uses legislative history at one point to justify claiming that "value of such creditor's interest" in § 506(a) means the "value of the collateral." Scalia is one of the most ardent opponents of legislative history that one could find. Within the same opinion, in fact, he says, "If it is at all relevant, the legislative history tends to subvert rather than support petitioner's thesis." The only explanation I can offer for this rare instance of hypocrisy is that it is qualified by "if at all relevant," and it is 1988, perhaps before Scalia has fully embraced his "death to legislative history" schtick.
As for the case, the issue presented is whether the Bankruptcy Code's protections for secured creditors include post-petition interest. The justification for post-petition interest is that, but for the automatic stay against foreclosure actions, the secured creditor would have been able to invest foreclosure proceeds. By denying the right to foreclosure, the automatic stay deprives the secured creditor of its interest in the investment value of its collateral. On the other hand, there are textual problems with interpreting the Code in this manner. The phrase "interest in property" ordinarily means a property interest, which is not the same as a right to foreclose. There are numerous other instances in the Code where the property interest is described as a prepetition claim, and interest payments are discussed in other contexts, implying that Congress knew how to provide interest payments in this situation if it wanted to be explicit in its intent.
I am reminded of the Rash case, where, once again, Scalia writes about valuation of collateral. In Rash, the Court valued collateral based on its retail replacement costs, not on the price it would fetch in a foreclosure sale. Perhaps this outcome is required for the sake of consistency with Timbers. Interesting that the professor did not bring up Timbers in our discussion of Rash, though perhaps he did and I just wasn't paying attention. Anyway, this significance of both Timbers and Rash appears to be that the Court views a secured creditor's interest in collateral as if it were already in the creditor's possession, and adequate protection of this possessory interest only requires protection of its prepetition market retail value.
Its easy to see why this approach rankles so many commentators and provides controversy for the classroom. The ability to sell property in the market is only one of the rights that accompany property interest. What about the right to use the property? To invest it? By depriving secured creditors of this aspect of their property rights, the Court puts secured creditors in a worse position than they would be in if there had been no automatic stay, which is supposedly one of the fundamental principles behind absolute priority in a Chapter 11 reorganization. (This does not take into account price reductions inherent in foreclosure sales.)
Textual support in the Code for Scalia's interpretation:
Preliminarily, I find it interesting that Scalia uses legislative history at one point to justify claiming that "value of such creditor's interest" in § 506(a) means the "value of the collateral." Scalia is one of the most ardent opponents of legislative history that one could find. Within the same opinion, in fact, he says, "If it is at all relevant, the legislative history tends to subvert rather than support petitioner's thesis." The only explanation I can offer for this rare instance of hypocrisy is that it is qualified by "if at all relevant," and it is 1988, perhaps before Scalia has fully embraced his "death to legislative history" schtick.
As for the case, the issue presented is whether the Bankruptcy Code's protections for secured creditors include post-petition interest. The justification for post-petition interest is that, but for the automatic stay against foreclosure actions, the secured creditor would have been able to invest foreclosure proceeds. By denying the right to foreclosure, the automatic stay deprives the secured creditor of its interest in the investment value of its collateral. On the other hand, there are textual problems with interpreting the Code in this manner. The phrase "interest in property" ordinarily means a property interest, which is not the same as a right to foreclose. There are numerous other instances in the Code where the property interest is described as a prepetition claim, and interest payments are discussed in other contexts, implying that Congress knew how to provide interest payments in this situation if it wanted to be explicit in its intent.
I am reminded of the Rash case, where, once again, Scalia writes about valuation of collateral. In Rash, the Court valued collateral based on its retail replacement costs, not on the price it would fetch in a foreclosure sale. Perhaps this outcome is required for the sake of consistency with Timbers. Interesting that the professor did not bring up Timbers in our discussion of Rash, though perhaps he did and I just wasn't paying attention. Anyway, this significance of both Timbers and Rash appears to be that the Court views a secured creditor's interest in collateral as if it were already in the creditor's possession, and adequate protection of this possessory interest only requires protection of its prepetition market retail value.
Its easy to see why this approach rankles so many commentators and provides controversy for the classroom. The ability to sell property in the market is only one of the rights that accompany property interest. What about the right to use the property? To invest it? By depriving secured creditors of this aspect of their property rights, the Court puts secured creditors in a worse position than they would be in if there had been no automatic stay, which is supposedly one of the fundamental principles behind absolute priority in a Chapter 11 reorganization. (This does not take into account price reductions inherent in foreclosure sales.)
Textual support in the Code for Scalia's interpretation:
- §506(b) provides postpetition interest only for an oversecured creditor. Thus, adequate protection in §361 would conflict with §506(b) if it required interest payments for undersecured creditors. Further, 506a provides creditors only with security in the value of the estate's interest in the collateral. I think (Scalia doesn't discuss this) the estate's interest is not in a foreclosure value, nor could the estate's interest referred to here include the investment proceeds of the collateral, because the estate's use of the collateral is "products of the property of the estate," which is property of the estate specifically reserved for distribution among the creditors. An undersecured deficiency claim must be shared pro-rata with the other general creditors of the estate.
- §552(a) says that a prepetition security interest does not reach property of the estate acquired postpetition. But there is an exception only if the security agreement specifically calls for "proceeds, product, offspring, rents, or profits" of the collateral. Thus, 552a seems only to grant postpetition interest if the interest comes in a form anticipated by the parties prepetition in the security agreement.
- 362d1 and d2 would be inconsistent with one another if postpetition interest were allowed, because an undersecured creditor would technically never have adequate protection, so why would it matter, in 362d2, that the collateral was not necessary for the reorganization? (I'm a little shaky on this argument.)
Friday, September 23, 2011
Liquidated damages and sharing the pain
It is sometimes fruitful to peel an onion. It is also sometimes vegetate-able. With this aphorismic pun in mind, let's peel the onion of penalties.
One thing I learned two years ago and have been reminded of recently is that liquidated damages clauses are unenforceable unless they are an approximation of actual damages in a setting in which precise damage determinations are difficult to determine. So, for example, if I contract to sell you my apple for $1, a court will not enforce a provision in the contract that says I must pay you $5,000,000 if I do not have an apple to give you in exchange for your $1. Intuitively, this seems like a reasonable doctrine--I've only caused the harm of inconveniencing you in having to find another apple dealer, so its unfair that I should have to overcompensate you for this inconvenience.
But this doctrine has troubling implications. Does my promise to pay super-high damages count for nothing? We were both free to enter into this unfair contract; isn't this just the free market at work? Don't we have the fundamental freedom, as Americans, to enter into whatever contract we want? One could argue that the $5,000,000 apple example is an unfair contract, so we shouldn't be able to enter into such blatantly unfair agreements. But what's unfair about it? Both parties are aware of the consequences and are under no duress or fraudulent influence when they agree to the contract. If someone wants to promise to do something stupid, who are we to stop him/her or judge it as unfair?
The real value of liquidated damages comes in when performance under the contract has idiosyncratic value to one of the parties, above and beyond the market value of such performance. For example, if I want to recreate a special meal for an anniversary celebration, then the damage caused by the fishmonger selling the last lobster, which i had reserved and paid for in advance, thereby ruining my special dinner, will be much greater than a refund of the lobster. In fact, I would accept nothing less than $100,000 in exchange for that special lobster dinner on that one special night. So why shouldn't I be free to make a contract with the fishmonger that he has to pay me $100k if he doesn't provide the lobster on time? Or would this fall under the category of approximating a difficult-to-determine set of damages? What's interesting to me about this topic is how it pertains to credit card penalties and debit card overdraft fees. Financial institutions make money, in part, by charging higher interest and imposing fees on those who are just one day late in making a payment or who go $1 under the account balance. This is not a damages remedy; rather, it is a business model. To be continued...
One thing I learned two years ago and have been reminded of recently is that liquidated damages clauses are unenforceable unless they are an approximation of actual damages in a setting in which precise damage determinations are difficult to determine. So, for example, if I contract to sell you my apple for $1, a court will not enforce a provision in the contract that says I must pay you $5,000,000 if I do not have an apple to give you in exchange for your $1. Intuitively, this seems like a reasonable doctrine--I've only caused the harm of inconveniencing you in having to find another apple dealer, so its unfair that I should have to overcompensate you for this inconvenience.
But this doctrine has troubling implications. Does my promise to pay super-high damages count for nothing? We were both free to enter into this unfair contract; isn't this just the free market at work? Don't we have the fundamental freedom, as Americans, to enter into whatever contract we want? One could argue that the $5,000,000 apple example is an unfair contract, so we shouldn't be able to enter into such blatantly unfair agreements. But what's unfair about it? Both parties are aware of the consequences and are under no duress or fraudulent influence when they agree to the contract. If someone wants to promise to do something stupid, who are we to stop him/her or judge it as unfair?
The real value of liquidated damages comes in when performance under the contract has idiosyncratic value to one of the parties, above and beyond the market value of such performance. For example, if I want to recreate a special meal for an anniversary celebration, then the damage caused by the fishmonger selling the last lobster, which i had reserved and paid for in advance, thereby ruining my special dinner, will be much greater than a refund of the lobster. In fact, I would accept nothing less than $100,000 in exchange for that special lobster dinner on that one special night. So why shouldn't I be free to make a contract with the fishmonger that he has to pay me $100k if he doesn't provide the lobster on time? Or would this fall under the category of approximating a difficult-to-determine set of damages? What's interesting to me about this topic is how it pertains to credit card penalties and debit card overdraft fees. Financial institutions make money, in part, by charging higher interest and imposing fees on those who are just one day late in making a payment or who go $1 under the account balance. This is not a damages remedy; rather, it is a business model. To be continued...
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