November 2, 2007
Suja Thomas of University of Cincinatti College of Law recently posted Why the Motion to Dismiss is Now Unconstitutional, which is forthcoming in Minnesota Law Review. In her article, Thomas argues that the Supreme Court’s decisions last term in Bell Atlantic Corp. v. Twombly and Tellabs, Inc. v. Makor Issues & Rights impermissibly impose on a plaintiff’s constititional rights to a jury trial. Here is the abstract:
This Article is the first to address the issue of the constitutionality of the motion to dismiss. Until now, motions to dismiss have not been the subject of much academic commentary, in part because courts have rarely dismissed cases upon motions to dismiss. However, decisions by the Court this past term in Bell Atlantic Corp. v. Twombly and Tellabs, Inc. v. Makor Issues & Rights, Ltd. changed the civil procedure landscape tremendously. In these decisions, the Court “retire[d]” the fifty-year-old rule of Conley v. Gibson under which a complaint could not be dismissed unless there was “no set of facts” upon which relief could be granted. The Court cast this rule away in favor of a standard under which courts critically assess whether the claim is plausible and at times, examine inferences that favor both the plaintiff and the defendant. In setting up this new standard, the Court emphasized the concern that companies should not be subject to discovery and forced settlements in unmeritorious cases and also stressed that Congress and the rule-makers possessed the authority to establish pleading procedures. Under the new standards, courts will dismiss cases much more often using the motion to dismiss. This impending phenomenon of increased dismissals by judges before the fact-finder hears any evidence is noteworthy. It will compound a significant decline in the number of jury trials due to dismissals upon summary judgment, and this will occur in the presence of the Seventh Amendment that, by its text and history, strongly protects the right to a jury trial. Under established Supreme Court case law interpreting the Seventh Amendment, the “common law” governs the power of constitutional actors such as the courts and Congress to interfere with the jury trial. Under this case law, a modern procedure must satisfy the substance of the English common law jury trial in 1791 to be constitutional under the Seventh Amendment. This Article argues that Twombly and Tellabs did not adequately follow the Supreme Court jurisprudence on the Seventh Amendment. In Twombly, albeit not raised, the Court failed to recognize the Seventh Amendment issue that overlay its decision despite the significant effect of the decision on the right to a jury trial. In Tellabs, where it did recognize a Seventh Amendment question, the Court ignored the governing common law. These cases open up a new constitutional discussion that tests the limits of the Seventh Amendment. The Article shows that the new motion to dismiss standards do not adequately comport with the substance of the common law jury trial and thus are unconstitutional. Contrary to the common law, these standards permit courts to improperly assess the plausibility of facts and corresponding inferences pled by plaintiffs and weigh those inferences against inferences that favor defendants. The Article concludes that while Twombly and Tellabs were in the limited areas of antitrust and securities fraud, the standards set forth in those cases will be used to dismiss a variety of fact-intensive cases including those frequently dismissed upon summary judgment such as employment discrimination and other civil rights cases.
May 7, 2007
Jonathan Macey of Yale Law School recently published, Executive Branch Usurpation of Power: Corporations and Capital Markets, 115 Yale L.J. 2416 (2006). Here is the Abstract:
Agencies in the executive branch are better situated than other political institutions to take advantage of opportunities to expand their power base by responding quickly and decisively to real or imagined crises. The executive has structural advantages over the other branches because it can respond faster to perceived emergencies. Congress is hampered more than the executive by gridlock caused by special-interest group pressures when it tries to act quickly. The legislative process is also inherently slower than the executive process because the executive can launch into unilateral action, as by filing a lawsuit. The executive’s structural advantage over the judiciary is even more complete than its advantage over Congress because the judiciary has no power to initiate action. Executive action, particularly that of agencies, determines the course of law. This Essay argues that the ascendancy of the executive branch in policymaking is an unintended consequence of the modern administrative state. The emergence of the executive as the fulcrum of power within the administrative state upsets the traditional balance of powers among the three branches of government. This imbalance can be counteracted only by a concerted effort by the federal judiciary to rein in executive power that improperly usurps Congress’s authority to make law.
May 3, 2007
A thoughtful reader suggested that I comment on how Mary Bilder’s article The Corporate Origins of Judicial Review (posted below) relates to the themes of this Blog. This seemed like a good idea as corporate scholars might wonder how an article on the “origins of judicial review” might be relevant to understanding modern corporate law. So here goes:
Corporate scholars have long debated the extent to which the internal governance structure of corporations should reflect modern democratic ideals. This debate focuses mainly on the extent corporate shareholders should enjoy meaningful voting rights or exert control over major corporate decisions. For examples of the current instantiation of this debate see Lucian Bebchuk, The Myth of the Shareholder Franchise and Lynn Stout, Democracy by Proxy – WSJ.com.
Professor Bilder’s article shows that in many ways the modern debate has it backward. Bilder shows that rather than corporate governance structures simply mirroring (to a greater or lesser extent) political democracies, some of the core features of our constitutional structure emerged from practices related to corporate law.
Bilder argues that the tradition of judicial review originated in the early English practice of reviewing corporate bylaws for “repugnancy,” or conflict, with the law of the land. The rule that corporate bylaws not be repugnant to the law of England also applied to the laws of the American colonies. With the adoption of the Constitution the practice of review of legislation for “repugnancy” continued, with the Constitution substitituted for the law of England as the “law of the land.”
Bilder’s original analysis thus shows that we can look to the history of corporate law to better understand modern democracies, and not simply draw on modern democratic practices as a template for improving corporate governance.
May 1, 2007
The aim of fostering interdisciplinary discussion about corporations and democracy could not be better served than by introducing the recent article by my colleague Mary Sarah Bilder, The Corporate Origins of Judicial Review, 116 Yale Law Review 502 (2006). Here is the abstract:
This Article argues that the origins of judicial review lie in corporate law. Diverging from standard historical accounts that locate the origins in theories of fundamental law or in the American structure of government, the Article argues that judicial review was the continuation of a longstanding English practice of constraining corporate ordinances by requiring that they be not repugnant to the laws of the nation. This practice of limiting legislation under the standard of repugnancy to the laws of England became applicable to American colonial law. The history of this repugnancy practice explains why the Framers of the Constitution presumed that judges would void legislation repugnant to the Constitution – what is now referred to as judicial review. This history helps to resolve certain debates over the origins of judicial review and also explains why the answer to other controversies over judicial review may not be easily found in the history of the Founding era. The assumption that legislation could not be repugnant to the Constitution produced judicial review, but it did not resolve issues such as departmentalism or judicial supremacy that arose with the continuation of this repugnancy practice after the Constitution.