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Symposium: The Mystery of the Success of Delaware Law
This Article challenges the widely held view that Delaware corpo-rate law is dominant because it possesses superior traits, such as a well-understood statute, many judicial decisions interpreting the law, and wise and experienced judges administering that law. The authors evaluate su-periority by the measure first identified by Romano as the relevant one for jurisdictional choice—reducing transactions costs in major transac-tions. The authors show that since the 1980s Delaware law has become increasingly complex and uncertain, due largely to judicial decisions that appear to tailor doctrines to produce fairness in individual cases, at the expense of certainty in planning and executing transactions. The result has been a variety of mini-rules that require firms and their lawyers to structure transactions formalistically to avoid the most intrusive forms of judicial review. These rules have led to a litigation explosion in Dela-ware, with concomitant high litigation costs. The authors also demon-strate the weaknesses of the Delaware General Corporation Law as com-pared to the Model Business Corporation Act. Finally, the authors ex-amine and reject a series of apologies for Delaware law by commentators who concede at least some of these problems.
Manufacturing Mystery: A Response to Professors Carney and Shepherd's "The Mystery of Delaware Law's Continuing Success"
William B. Chandler III & Anthony A. Rickey | 2009 U. Ill. L. Rev. 95
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In this Article, Chandler and Rickey respond to Professors Carney and Shepherd’s The Mystery of Delaware Law’s Continuing Success. While Carney and Shepherd argue that the indeterminacy and instability of Delaware corporate law compares unfavorably with the Model Business Corporation Act, Chandler and Rickey show that the comparison made by Carney and Shepherd is an unfair one. Instead of comparing Delaware law with the Model Act as it is practiced in other jurisdictions, Carney and Shepherd compare Delaware law with the bare text of the Model Act.
Chandler and Rickey examine the data provided by Carney and Shepherd and conclude that Delaware’s success is not such a mystery. First, they compare appeal and reversal rates of other jurisdictions with those of Delaware. Their findings do not support Carney and Shepherd’s conclusion that Delaware’s reversal rate is “relatively” high. Next, they consider several of Carney and Shepherd’s qualitative claims of the Model Act’s doctrinal superiority and demonstrate that the Model Act becomes much less certain when applied in real-world cases. Finally, they address Carney and Shepherd’s assertion that Delaware law leads to unnecessary cost and delay in litigation and show that this conclusion is based upon unreliable and incomplete data.
Based on their analysis, Chandler and Rickey are able to explore several weaknesses in Carney and Shepherd’s conclusions. Although Chandler and Rickey do not claim that Delaware law is superior to that of other states, this Article provides a sound basis for understanding Delaware law’s continuing success.
William Carney and George Shepherd argue that Delaware’s suc-cess in corporate law is a “mystery” when one considers the high trans-action costs engendered by the indeterminacy and instability of Delaware law. In this Article, Larry Ribstein shows that the mystery is clarified by analyzing Delaware law in “uncorporate” cases—that is, limited part-nerships and limited liability companies. In this setting, parties can rely on specific contractual incentive and disciplinary devices rather than on open-ended fiduciary duties. Delaware lawmakers provide substantial coherence by focusing on the parties’ contracts. It follows that the prob-lems of Delaware law are mainly a function of the corporation rather than of Delaware lawmakers.
Delaware's Disclosure: Moving the Line of Federal-State Corporate Regulation
Robert B. Thompson | 2009 U. Ill. L. Rev. 167
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Delaware’s dominance of the market for incorporations provokes recurring academic examination of how such a small state could be so successful. The symposium in this issue offers differing views as to whether indeterminacy poses a risk to Delaware in its competition with other states. This Article develops in Part I how the indeterminacy gap between Delaware and competing states disappears as to the core fiduci-ary duty questions that provoke most corporate law litigation. Part II moves beyond the indeterminacy theme to posit that Delaware’s competi-tion with the other forty-nine states is of secondary importance to the main event of corporate governance: the shrinking role of all states vis-à-vis the federal government. Within this frame, the Article develops a sur-prising growth area for Delaware law in its use of disclosure, along the primary domain of the federal regulators. Recent Delaware cases have effectively linked disclosure obligations (borrowed extensively from fed-eral law) with substantive protection of the space for shareholder deci-sions free of director domination. Although federal regulators have sometimes attempted a similar linkage, absent new federal statutes, only Delaware can effectively combine both methods of protection. This link-age means that Delaware courts will remain at the front line of contested corporate governance contests.
Initially, it might seem an affront to the history of slavery in this country to suggest that similar concerns are raised by an expectation that debtors pay their debts. Nevertheless, certain aspects of the Bankruptcy Code present genuine constitutional difficulties under the Thirteenth Amend-ment. These difficulties have been recognized for several decades, albeit as a matter of speculation. Now, however, under the 2005 Amendments to the Bankruptcy Code, this issue is no longer speculative. Under the 2005 Amendments, an individual debtor may be put into a chapter 11 proceeding involuntarily, and required to make payments under a plan proposed by creditors out of future income.
This Article examines the history of the Thirteenth Amendment, focusing on its application in the context of involuntary servitude and peonage, and assesses the merits of the constitutional case. The Article demon-strates why bankruptcy courts may be statutorily empowered to enter or-ders that they cannot constitutionally enforce. It then examines the pro-hibitions on imprisonment for debt that may also be implicated by the use of coercive orders.
This Article illustrates how, in effect, the Bankruptcy Code has created a system of rights for creditors that are unenforceable. As the Thirteenth Amendment prohibits courts from enforcing confirmation orders against uncooperative debtors by issuing coercive orders, the only remedies available to a bankruptcy court facing a recalcitrant debtor are dismissal and conversion. Congress may not have expected this when it passed the 2005 Amendments, but only because it did not bother to do the necessary constitutional analysis.
Unconscious Bias and the Limits of Director Independence
Antony Page | 2009 U. Ill. L. Rev. 237
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Corporate directors make difficult decisions: How much should we pay our CEO? Should we permit a lawsuit against a fellow director? Should we sell the company? Directors are legally obligated to decide in good faith based on the business merits of the issue rather than extrane-ous considerations and influences. Naturally, some directors may have preferences, or even biases: Our CEO, my colleague and friend, deserves a lot; The company should not sue my fellow board member; We should not sell, because after all, I would like to remain a board member. But the courts presume that independent directors either do not have these preferences or can make decisions without being affected by them. Simi-larly, independent directors acting in good faith are likely to believe that they are either unbiased or have overcome their biases. Based on a syn-thesis of more than two decades of social psychology research, this arti-cle argues that frequently the courts’ presumption and the directors’ be-lief will be wrong. First, directors are likely to have preferences, even though they sometimes will not be consciously aware of them. Second, regardless of directors’ good faith, unconscious and, to a significant ex-tent, uncontrollable cognitive processes will prevent the directors’ deci-sions from being unaffected by their preferences. Given this serious flaw in the conception of independent directors’ decision-making ability, the Article briefly evaluates several legal and procedural solutions, including heightened judicial scrutiny, expanded roles for other decision makers, and changed decision-making processes.
Standing Out: A Commonsense Approach to Standing for False Advertising Suits under Lanham Act Section 43(A)
Gerald P. Meyer | 2009 U. Ill. L. Rev. 295
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This Note analyzes the benefits and shortcomings of the varying ap-proaches federal circuit courts have taken when determining which plain-tiffs have standing to sue for false advertising under section 43(a) of the Lanham Act. Some circuits have adopted a categorical approach, focus-ing on the relationship of the parties, and requiring the plaintiff to be a direct competitor of the defendant that has suffered a competitive injury to have standing. Other circuits implement a quasi-categorical approach that requires the plaintiff to have a reasonable interest in being protected by the Act and a reasonable belief that the alleged false advertising was damaging in order to have standing. Finally, other circuits have used a somewhat overlapping five-factor balancing test to determine whether the plaintiff has standing.
After conducting a thorough analysis of each approach, the author rea-sons that each one has significant flaws, ultimately causing uncertainty for plaintiffs contemplating litigation under the Lanham Act. As a recent example, in Phoenix of Broward, Inc. v. McDonald’s Corp., the Eleventh Circuit reached a puzzling result that would seemingly vanquish a plaintiff’s right to sue for false advertising under the Lanham Act in any market with several competitors. The author determines that none of the approaches is satisfactory and explores an innovative three-prong bright-line test designed to reconcile the legislative intent of the Lanham Act with the realities of the marketplace. The author concludes that this new test would be easier to apply than each approach currently in operation and would provide consistent and predictable results, which would also allow litigants to settle and relieve the burden on the federal court system.
This Article offers an original theory of contract law that draws from recent work in the philosophy of action and legal theory. Human beings are essentially planning creatures. Making plans and following through with them is crucial to everyday practical reasoning, both for individuals acting alone and individuals acting together. This somewhat intuitive point was not fully appreciated in the philosophy of action as recently as twenty years ago, when Michael Bratman began to point out the inadequacies of the then-dominant view of rationality. Recently, Scott Shapiro has been applying Bratman’s insights on practical reasoning to debates in legal theory to great effect, developing what he calls the planning theory of law. According to the planning theory, laws are plans for citizens, developed and applied by legal institutions to solve coordination problems that result from individuals living together in otherwise unplanned communities.
In this Article, the author proposes a new theory of contract law informed by these insights. First, the author surveys the current leading theories of contract and explains why a new theory is needed. Then, he argues that viewing contracts as plans designed to solve a particular coordination problem better accounts for how we are able to make exchanges over time, even in situations where the parties involved might otherwise not be able to trust one another. A planning theory of contract law takes the view that whatever ends a society might want to achieve, those ends are more likely to be achieved if the parties have the ability to create contracts, that is, to adopt legally obligatory plans to make exchanges. The theory does not seek to justify a particular body of contract law. Rather, as the author argues, it explains the fundamental doctrines of our current law better than the presently available theories.
By viewing contracts as plans, it becomes clear that a better understanding of planning brings a better understanding of contract law. It follows that advances in the philosophy of practical reasoning as it treats plans also bring insight into contract law. In the final Part of the Article, the author shows how these insights go beyond an accurate description of the established central doctrines of contract law and can lead to a better resolution of more controversial issues. The author also gives a few indicative examples that offer suggestions for further study. At the very least, the author hopes to establish that contract scholars should pay attention to scholarship on practical reasoning just as they have long studied moral philosophy and economics.
Testing the Substitution Hypothesis: Would Credit Card Regulations Force Low-Income Borrowers into Less Desirable Lending Alternatives?
Angela Littwin | 2009 U. Ill. L. Rev. 403
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One of the strongest arguments against regulating credit cards is the substitution hypothesis, which states that if a restriction on one form of credit limits access to credit, borrowers will respond by using other, less desirable forms of credit. For low-income consumers, the argument is more powerful still, because their other options are high-cost lenders such as pawn shops and rent-to-own stores. But the substitution hypothesis is more frequently assumed than investigated, and prior empirical research does not support the theory as strongly as has been supposed. The theory is based on a naïve presumption about the constancy of demand for consumer credit and fails to account for a more nuanced view of the role of credit supply. This Article presents original data from a study of low-income women. The findings suggest that lenders, such as pawn shops and rent-to-own stores, may function as complements more than substitutes. In addition, the research uncovered another form of credit that low-income families routinely use and participants evaluated favorably, but that has never been discussed in the academic literature. These findings suggest a more nuanced formulation of the hypothesis that better predicts the consequences of credit card regulation.
A Concise Guide to the Records of the State Ratifying Conventions as a Source of the Original Meaning of the U.S. Constitution
Gregory E. Maggs | 2009 U. Ill. L. Rev. 457
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On September 17, 1787, the delegates to the Federal Constitutional Con-vention finished drafting the Constitution. Yet the Constitution could not go into effect until it was ratified in the states, as specified in Article VII. Starting in the fall of 1787, legislatures in the original thirteen states called for conventions for the purpose of deciding whether to ratify the Constitution. Many of the records of these state ratifying conventions have survived. The records reveal some of what the delegates at the state conventions said during their debates and discussions about the proposed Constitution. Accordingly, writers often cite these records as evidence of the original meaning of the Constitution.
Thousands of articles and hundreds of cases have cited the records of the state ratifying conventions to support claims about the original meaning of the Constitution. This Article offers a concise guide to these records, providing the basic information that lawyers, judges, law clerks, and le-gal scholars ought to have before advancing, contesting, or evaluating claims about the original meaning of the Constitution based on the rec-ords of the state ratifying conventions. It explains theories of how the records might help to prove the original intent of the Framers, the origi-nal understanding of the ratifiers, and the original objective meaning of the Constitution’s text. The Article also considers eight possible grounds for impeaching assertions made about the original meaning, recommend-ing that anyone making or evaluating a claim about the original meaning take these eight arguments into account and that anyone using these arguments to impeach claims about the original meaning consider the possible counterarguments.
In the past few years, courts and the Department of Justice have cit-ed approvingly the Supreme Court’s dicta in Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, LLP. This Article analyzes why the economic thinking in Trinko is wrong, and how the Court ignores its precedent involving the Sherman Act’s concerns regarding monopolies’ political, social, and ethical implications. It responds to the Court’s claim that cartel behavior is easier to identify and remedy than monopo-listic behavior and proposes an improvement to the Court’s current rule of reason standard to reduce the risk of false positives, while enabling the antitrust agencies and courts to remedy certain monopolistic conduct more quickly.
The Ethics of Heat: Fundamentals and Challenges in Allocating the Global Commons
Anthony Russomanno | 2009 U. Ill. L. Rev. 551
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The global warming dilemma provides an opportunity for the global community to ask fundamental questions about the Earth’s potential to serve human needs. This Note examines whether a community ethic that promotes prudence and longevity exists. The author begins by outlining the global warming process and its anticipated consequences. To provide the international context of global warming, the author explains how developed countries have used, and continue to use, the international commons. The author also identifies a well-developed first-come-first-served method of resource allocation, prior appropriation. An analysis of this current resource allocation reveals that today’s multiple, developing sovereigns further compound the allocation’s practice and ethical problems. In response, the author proposes that a different allocation ethos is needed. The author further recommends two models more in tune with international and natural demands: correlative rights allocation and the notion of accommodation.
Thirsting for Change: How the Growth of the Biofuel Industry Can Stimulate Advancements in Water Law
Jacqueline M. Wilkosz | 2009 U. Ill. L. Rev. 583
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Biofuels, which have the potential to decrease domestic dependence on for-eign oil, are not a problem-free solution. One substantial yet little-discussed problem that increased biofuel production presents is a related increase in water consumption. Given that many local water sources across the United States are already stressed by overconsumption, and many more will likely become stressed in the future, increased biofuel production poses a substantial threat to small-scale local water users in prime biofuel states, particularly in the Midwest. This Note examines current state and federal water laws and the ways in which they are inadequate to resolve the con-flicts over water use that will arise between the biofuel industry and small-scale local water users.
This Note begins by explaining the process of producing biofuel, focusing on ethanol, and highlighting the crucial role water plays within this pro-cess. Next, the author provides an overview of the fundamental principles of water law, including the rules that determine the amount of water that can be used, where and how the water can be used, and the extent to which pollutants can be discharged into water sources. The author also evaluates the current state of water use in the U.S., highlighting mounting water shortages due to overconsumption.
Increased production of biofuels implicates water laws because biorefin-eries will be diverting or pumping large amounts of surface water or groundwater while industrial biofuel-crop farmers will be using greater amounts of water to produce larger yields. These increased uses will in-evitably clash with existing small-scale local water users. The reasona-ble use rule, used by most Midwestern states, will be inadequate to re-solve these conflicts. Similarly, the Federal Clean Water Act is limited in its ability to resolve conflicts over water quality. To address these inadequacies in current water law, the author proposes a three-fold ap-proach. State and federal legislatures need to reform the theoretical underpinnings of water law to emphasize sustainability. Legislatures and courts should begin this lengthy process immediately by modifying the reasonable use rule and the Federal Clean Water Act as they are applied. Lastly, there is a need for societal change; communities need to demand effective water management and must shift their focus to conservation of existing water sources. Ultimately, the push to increase biofuel production could be the impetus for much-needed reform of federal and state water laws.
This Article presents a legal theory of legal justification. It examines the elements of offense definitions and justification defenses—or, more accu-rately, the conjunctions and disjunctions between these elements—to re-solve a longstanding issue in the theory of legal punishment. The unjus-tified actor who believes she is justified seems to deserve an acquittal, while the justified actor who does not know he is justified seems to de-serve conviction. But we face a dilemma: we seem to have to acquit both or convict both. This Article shows a principled way to rule the mistak-enly unjustified actor within, and the mistakenly justified actor out of, the class of justified actors, thus matching our legal judgments to our moral judgments concerning these cases.
The route to this conclusion is as important as the conclusion itself. Much of the argument employs tables of elements and the conjunctions and disjunctions between them. These tables are illuminating—surprisingly so for such a simple device. This elements analysis serves to demonstrate some elementary points, such as the existence of a genuine difference between offenses and justification defenses. And it can demon-strate more complex and surprising points, such as the unavailability—on any view of wrongdoing and justification—of attempt liability as a se-cond best solution to the dilemma presented by mistakes in justification.
The Article also uses Aristotelian punishment theory as a complement to elements analysis. The use of virtue ethics is not simply a matter of equating solutions to moral issues with solutions to legal issues. That would not be the legal analysis of a legal problem that is promised here. Instead, the justification defenses are portrayed as the product of the specification of competing ends—a distinctively Aristotelian model of de-liberations on ends—making the case that the justification defenses, even taken as permissions that cancel the prohibition for reasons that conflict with the prohibition, are continuous with criminal offenses.
Tax Shelters and Statutory Interpretation: A Much Needed Purposive Approach
Shannon Weeks McCormack | 2009 U. Ill. L. Rev. 697
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Few are unaware that the federal Tax Code and the accompanying Treasury Regulations provide a detailed, complex (and lengthy) set of rules. It is hardly surprising (or new) that taxpayers attempt to avoid these rules to lower their taxes. Courts and lawmakers have long grap-pled to identify abusive transactions and strip taxpayers of the associated tax savings. The transactions have, however, changed dramatically over the last decade, making the task much more challenging. The rapid pro-liferation of aggressive and diverse tax shelters has created what many refer to as a “tax shelter war.” In general, tax shelters refer to transac-tions carefully designed to fit within the letter of the law to derive benefits unintended by those sections. Courts, however, do not inquire directly into purpose when analyzing tax shelters. They instead rely on traditional anti-abuse tests. These tests are outdated and insufficient to curb current tax shelters. Even those that defend these tests admit that they supply neither a necessary nor sufficient basis for denying tax benefits. Scholars defend the usage of these tests believing a viable alternative to be lacking. This Article attempts to fill this gap and develops an alternative test, which inquires directly into the purposes of the tax laws to address abuse directly. After developing this test along with an extensive set of guidelines for analyzing tax provisions, the test is applied to three recent tax shelters to illustrate its advantages. Such a test is an essential weapon to compete in current and future tax shelter wars.
This Article mediates a scholarly debate regarding the existence and desirability of a “trademark use” doctrine. It argues that trademark use is a predicate of liability under the Lanham Act, but those who advocate treating trademark use as a threshold question put much more weight on that concept than it can bear. Courts cannot consistently apply trademark use as a distinct element of the plaintiff’s prima facie case be-cause trademark use can be determined only from the perspective of con-sumers. Specifically, courts can determine whether a defendant has made trademark use of a plaintiff’s mark only by asking whether consumers are likely to view the defendant’s use as one that indicates the source of the defendant’s products or services. Because such an inquiry is, by its na-ture, highly context-sensitive, trademark use is not a concept capable of serving the limiting function advocates hope. The trademark use debate, however, reveals a fundamental problem in modern trademark law and theory. Consumer understanding, and particularly consumer understand-ing of “source,” defines virtually all of modern trademark law’s bounda-ries. But these boundaries are never fixed because consumer understand-ing is inherently unstable, particularly with respect to an ill-defined term like “source.”
"Streamlining" the Rule of Law: How the Department of Justice Is Undermining Judicial Review of Agency Action
Shruti Rana | 2009 U. Ill. L. Rev. 829
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Judicial review of administrative decision making is an essential institutional check on agency power. Recently, however, the Department of Justice dramatically revised its regulations, greatly insulating its decision making in the immigration arena from public and federal court scrutiny. These “streamlining” rules, carried out in the name of national security and immigration reform, have led to a breakdown in the rule of law in our system of immigration review.
While much attention has been focused on the Department of Justice’s recent attempts to shield executive power from the reach of Congress, its efforts to undermine judicial review have so far escaped such scrutiny. Yet the streamlining rules have had far-reaching doctrinal and practical consequences. They have led to chaos at the agency, where the emphasis in immigration adjudication has explicitly shifted away from reliance on standards and precedents towards increased reliance on discretionary, and often arbitrary, decision making. Immigration appeals have flooded the federal courts, nearly doubling the size of some circuit caseloads, while trapping the courts in a doctrinal quandary between competing du-ties of judicial review and agency deference.
This Article argues that, if left unchecked, the Department of Justice’s streamlining reforms will undermine judicial review, turning it in some cases into an illusory exercise incapable of restraining agency action. This weakening of judicial review is unwarranted and unwise. To help stem this erosion, this Article proposes more nuanced interpretations of deference and judicial review principles that can resolve the dilemmas facing the federal courts and help preserve the vitality of judicial review over agency decisions.
Book Review Essay
An Administrative Approach to the Resolution of Mass Torts?
Douglas G. Smith | 2009 U. Ill. L. Rev. 895
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Mass Torts in a World of Settlement advances a proposal for potential mechanisms to resolve mass tort claims. Richard Nagareda contends that mass tort litigation is often “dysfunctional” and that parties in mass tort disputes have moved away from litigation and toward administrative pro-cedures to settle their claims. Nagareda ultimately concludes that the government should facilitate this move toward administrative procedures by putting into place a formal structure to provide an administrative or regulatory solution.
In this Book Review Essay, the author shows that Nagareda overlooks the positive effects litigation has on mass tort claims. He notes that litigation creates a global resolution of many mass tort claims by precluding claims, and even where litigation does not completely preclude a claim, it will often narrow the claim. Additionally, the author argues that there are significant barriers to implementing an administrative solution as proposed by Nagareda. For instance, conflicts amongst the plaintiffs’ bar will make it difficult for the bar to reach an agreement on an administrative solution. Additionally, Nagareda’s administrative system would preserve plaintiffs’ lawyers’ incentive to cheat the system and receive immediate compensation for dubious claims. Perhaps most significantly, the author illustrates that Nagareda’s proposal would significantly interfere with private contracting and with claimants’ abilities to make individual decisions about their own claims. Ultimately, the author concludes that the tools to rationalize mass tort claim resolution exist in the traditional litigation system and that the traditional litigation-based paradigm should be fortified, not abandoned.
Mass Torts in a World of Settlement, by Richard A. Nagareda. The University of Chicago Press, 2007.
Is the Living Wage Dead in Detroit? The Role of Stare Decisis, Home Rule, and Policy Preferences in the Michigan Supreme Court
Michael W. Halpin | 2009 U. Ill. L. Rev. 911
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Does a municipality have the authority to enact and enforce a min-imum wage law for employers contracting with the city? This question, rather than being a simple policy question to be decided by local authorities, can implicate state constitutional law and stare decisis concerns. Living wage ordinances establish compensation for employees that enables them to earn at or above the poverty line. A recent trial court case in Michigan struck down the implementation of a living wage ordinance in Detroit. The trial court struck down the ordinance based on a case decided by the Michigan Supreme Court in 1923, during a time when state and federal authorities could not regulate wage rates or the number of hours an employee worked. In this Note, the author analyzes whether the Michigan Supreme Court should uphold the trial court’s decision. He begins by providing a brief overview of the living wage movement, including arguments both in support of and in opposition to such ordinances. The propriety of enacting a living wage ordinance is a contested and politicized issue, which may play an important role in the Michigan Supreme Court’s decision.
The author next examines the impact of a state’s constitution on whether municipalities even have the ability to pass such ordinances. Many state constitutions give municipalities some form of home rule power, which permits a municipality to implement unique ordinances based on their policy preferences. There are two types of home rule power: imperio and legislative. If a municipality has imperio home rule power, it is capable of enacting ordinances governing matters of local concern, and these or-dinances are immune from state legislation. In an imperio system, municipalities are unable to ascertain the extent of their control over matters that are not clearly matters of local concern. Legislative home rule provides municipalities the authority to regulate all matters, unless the state legislature has taken that power away. The legislative system provides municipalities confidence in their ability to regulate in the absence of the state’s veto of such power. There is not a clear dichotomy between the two systems; instead, they fall along a spectrum. Over the years, the Michigan legislature has increased the authority given to municipalities, and it is with this evolution that the author argues Detroit’s ability to enact a living wage ordinance.
Despite the authority that the Michigan legislature has given to munici-palities, the Michigan trial court struck down the living wage ordinance based on precedent and the principle of stare decisis. Nonetheless, the author argues that the Michigan Supreme Court should not follow prece-dent based on its own standard for when it is appropriate to overrule pri-or cases. When presented with the argument that a case should be over-turned, the Michigan Supreme Court will consider four factors: whether the earlier case was wrongly decided, whether the decision defies practi-cal workability, whether changes in the law or facts no longer justify the earlier case, and whether reliance interests would create an undue hard-ship. Finding that all of these factors are present, the author concludes that the principle of stare decisis and the earlier Michigan Supreme Court case should not preclude a municipality’s initiative of enacting a living wage ordinance.
In conclusion, the author finds that the intersection of policy considera-tions, home rule power, and stare decisis does not necessarily lead to the affirmation of the trial court’s ruling. The Supreme Court of the United States has upheld the power of the federal legislature to regulate wage levels and working conditions and the Michigan legislature has amended the state constitution, two important factors in the author’s analysis. In addition to recommending that the Michigan Supreme Court uphold the ability of municipalities to enact living wage ordinances, the author pro-vides advice on how to overcome the obstacles supporters of living wage ordinances face.
Unmasking "Anon12345": Applying an Appropriate Standard When Private Citizens Seek the Identity of Anonymous Internet Defamation Defendant
Erik P. Lewis | 2009 U. Ill. L. Rev. 947
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To any individual who wishes to make defamatory statements, the Internet provides not only a forum and an audience, but also a cloak of anonymity. It can be difficult for a plaintiff in an Internet defamation case to obtain redress from an anonymous defendant. The obstacles to relief that exist under current law are particularly troubling when the vic-tims of defamation are private individuals, because defamation has the potential to be most harmful to them. When defamation against public figures or business associations is posted online and memorialized in an Internet cache, it can instantly be lost in long lists of search results, but an Internet search for a name that is not well-known or common will like-ly return a short list of results so that even one negative comment stands out.
After providing background information about Internet defamation claims and First Amendment protections in the context of defamatory speech, the author presents three standards that courts have used to determine when it is appropriate to unmask an anonymous Internet defamation defendant. Next, the author analyzes the reasoning behind the Communications Decency Act, which shields Internet service providers from liability as publishers or speakers of a third party’s defamatory statement and generally leaves victims of Internet defamation with no cause of action against anyone but the individual poster. The author also examines the manner in which each approach to unmasking anonymous Internet defamation defendants strikes a balance between the First Amendment’s protection of anonymous speech and laws that prohibit defamation. The author then recommends that the standards for unmasking anonymous Internet defendants should be tiered according to whether the plaintiff is a public figure, a corporate entity, or a private individual.
No Match? No Thanks: How the Department of Homeland Security's No-Match Rule Puts the Jobs of Legal Immigrants in Jeopardy
Katherine M. O'Brien | 2009 U. Ill. L. Rev. 975
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This Note analyzes the potential harms to authorized, legal, foreign-born workers from the Department of Homeland Security’s regulation, Safe-Harbor Procedures for Employers Who Receive a No-Match Letter. No-match letters inform employers of discrepancies between the employ-er’s records and the Social Security Administration’s records. Although no-match letters were previously considered benign, the No-Match Rule would give the once innocuous letters the power to trigger criminal and civil liability under the Immigration and Nationality Act. The No-Match Rule would give the letters this power by amending the regulatory defini-tion of constructive knowledge and by establishing safe-harbor proce-dures for employers who receive such letters.
This Note addresses the landscape of immigration law and the role that the various regulatory agencies play in the process. After conducting a thorough analysis of the effects that the No-Match Rule would have on employers and authorized, legal foreign-born workers, the author con-cludes that the No-Match Rule does not pass muster under the Adminis-trative Procedure Act. The author argues that the rule violates the APA because DHS acted in an arbitrary and capricious manner by failing to provide a rational explanation for the No-Match Rule, and by failing to consider the No-Match Rule’s effect on aspects of sanctioning employers to curb illegal immigration that Congress deemed important. In addition, the No-Match Rule violates the APA because DHS, in carrying out the proposed No-Match Rule, would act outside the scope of its statutory authority. The author concludes by recommending that DHS should not implement the No-Match Rule.
The Trouble with Twombly: A Proposed Pleading Standard for Employment Discrimination Cases
Joseph A. Seiner | 2009 U. Ill. L. Rev. 1011
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Amorphous. This is how the Supreme Court’s recent pleading paradigm has been appropriately described. In Bell Atlantic Corp. v. Twombly, the Supreme Court abandoned the well-known pleading standard it had adopted fifty years earlier in Conley v. Gibson that a complaint should be dismissed only where there is no set of facts that could entitle the plaintiff to relief. In its place, the Court adopted a new rule that the pleadings must set forth sufficient facts to state a plausible claim. Though Twombly arose in the context of an antitrust case, its holding has already been extended by the lower courts to other areas of the law. The extent to which Twombly creates a new pleading standard for employment discrimination plaintiffs is unclear, and there is already disagreement among the judiciary over this question. If applied rigidly, Twombly threatens to raise the bar for civil rights litigants seeking to plead their claims.
This Article attempts to determine how strictly the courts have been applying Twombly to employment discrimination plaintiffs by examining the dismissal rates of employment discrimination cases in the year before and the year following Twombly. The results revealed a higher percentage of decisions that granted a motion to dismiss in the employment context when the courts cited the new Supreme Court decision. Through individual examination of these cases, this Article argues that the courts should be more cautious when using the plausibility standard to dismiss discrimination claims early in the proceedings.
To help resolve the current confusion in this area of the law, this Article proposes a new pleading framework for all employment discrimination cases, which complies with the recent plausibility standard set forth by the Supreme Court. The unified model proposed by this Article would bring more certainty to the pleading process and assist the courts and litigants in assessing the sufficiency of employment claims. This Article concludes by explaining how the proposed pleading framework comports with the legal scholarship following the Twombly decision.
Invisible Businessman: Undermining Black Enterprise with Land Use Rules
Stephen Clowney | 2009 U. Ill. L. Rev. 1061
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Rates of self-employment in African-American neighborhoods remain feeble. Although the reasons behind the failure of black businesses are complex, zoning regulations play a largely unexamined role in constraining the development of African-American enterprises. Land use fees, municipal zoning board decisions, and the general insistence on separating residential from commercial uses all impress unique and disproportionate harms on African-American merchants, making it difficult to find affordable business space in suitable locations.
Moreover, current attempts to reorganize the land use system are inadequate to solve the problems facing black businesspeople. A complete rolling back of zoning laws is impractical and unnecessary, while attempts to promote street vending or home-based business run aground on the objections of local homeowners. Instead of pursuing these failed strategies, municipal governments should create programs that transfer abandoned buildings to fledgling merchants of the inner city. This new land use policy could spark a revival of urban entrepreneurship and help restore crumbling neighborhoods to their former glory. Unlike other proposals to reform zoning laws, transferring vacant government-owned land unites the interests of businesspeople, homeowners, and local governments. Inner-city merchants receive the space they need to foster new business ideas. Local homeowners rid themselves of the scourge of empty buildings. Finally, municipalities generate new revenue by returning unproductive buildings to the tax rolls.
Disclosure, Endorsement, and Identity in Social Marketing
William McGeveran | 2009 U. Ill. L. Rev. 1105
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Social marketing is among the newest advertising trends now emerging on the internet. Using online social networks such as Face-book or MySpace, marketers could send personalized promotional messages featuring an ordinary customer to that customer’s friends. Because they reveal a customer’s browsing and buying patterns, and because they feature implied endorsements, the messages raise significant concerns about disclosure of personal matters, information quality, and individuals’ ability to control the commercial exploitation of their identity. Yet social marketing falls through the cracks between several different legal paradigms that might allow its regulation—spanning from privacy to trademark and unfair competition to consumer protection to the appropriation tort and rights of publicity. This Article examines potential concerns with social marketing and the various legal responses available. It demonstrates that none of the existing legal paradigms, which all evolved in response to particular problems, addresses the unique new challenges posed by social marketing. Even though policymakers ultimately may choose not to regulate social marketing at all, that decision cannot be made intelligently without first contemplating possible problems and solutions. The Article concludes by suggesting a legal response that draws from existing law and requires only small changes. In doing so, it provides an example for adapting existing law to new technology, and it argues that law should play a more active role in establishing best practices for emerging online trends.
If at the end of your life you were told you had fulfilled all your moral duties, you would be proud. If you were told you had only fulfilled your moral duties, you would be less proud. We all aim to do more than fulfill our duties. We wish to have been more generous than obligatory, more patient, more wise—in short, we wish to be virtuous.
The insight that there is more to moral well-being than either our moral duties or good consequences is central to modern virtue ethics. In its important neo-Aristotelian strain, virtue ethics advocates that success in life is also determined by living an ethically rich life, showing sound practical reasoning and exhibiting the human virtues.
Virtue ethics is also importantly influencing jurisprudence. Understanding the role virtue plays in law reveals the way in which our criminal punishment regimes are based on a view of underlying poor character. When these insights are embedded in law, however, things go horribly awry. Because virtue theories premise blame, in part, on a failing of character within the offender, they alter our view of the offender and create a permanent criminal caste. With our compassion for the offender blunted, our ugliest prejudices flourish, and we fail to notice that our criminal law has become a powerful tool of racial and class suppression. Equally disturbing, even the most sophisticated character theories cannot be reconciled with our commitment to liberalism, particularly with the central place of autonomy within liberal-ism.
This Article argues that only by returning to Kantian and Hegelian Act theories of punishment can we dissolve the view of offenders as permanently tainted and stay true to our liberal commitments.
Let’s Give Them Something to Talk About: An Empirical Evaluation of Predeliberation Discussions
Jessica L. Bregant | 2009 U. Ill. L. Rev. 1213
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Every American citizen is qualified to be an elector, a juror, and is eligi-ble to office. The system of the jury, as it is understood in America, ap-pears to me to be as direct and as extreme a consequence of the sover-eignty of the people as universal suffrage. These institutions are two instruments of equal power, which contribute to the supremacy of the majority. —Alexis de Tocqueville
Jurors are chosen from every conceivable walk in life. The butcher, the baker, the merchant, the taxi driver, the day laborer, the farmer, the mechanic, the accountant, the barber, the hotel clerk, the cobbler, and the gas station attendant may make up the jury in a criminal case, but however it be composed it must be borne in mind that the jurors are unschooled and inexperienced as to their duties in a criminal case, and they are not instructed as to those duties until all the evidence has been received . . . . —Winebrenner v. United States
In the overwhelming majority of American courts, jurors are strictly forbidden from discussing the case before them until the time designated for deliberations, after the parties have presented all of the evidence. Since 1995, however, a few states have authorized jurors to discuss the case during recesses from trial. This innovation has sparked debate over the merits of permitting such predeliberation discussions.
After explaining the traditional view of jury deliberations, and in-troducing the few studies on predeliberation discussions that have been conducted, the author evaluates the arguments on both sides of the de-bate, not only on their own merits, but also in light of social and cognitive psychology. Ultimately, the author recommends a change in the existing majority rules, so that courts can reap the vast benefits of predeliberation discussions.
Mind the Gap: A Legal and Economic Analysis of Stockbroker Overtime Eligibility Under the Fair Labor Standards Act
Craig A. Cunningham | 2009 U. Ill. L. Rev. 1243
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As the United States focuses on maintaining a strong middle class, determining which employees receive overtime pay under the Fair Labor Standards Act constitutes a task with substantial implications. Although the concept of a stockbroker receiving overtime pay may initially appear unusual, such an idea is no longer an absurd notion. In response to the changing notion of overtime pay, stockbrokers have recently brought class action lawsuits against the brokerage firms that employ them. This Note examines whether the letter of the law, as well as sensible policy, supports the conclusion that stockbrokers qualify for overtime pay under the Fair Labor Standards Act.
The author begins by discussing the overarching purpose of the Fair La-bor Standards Act and its newly promulgated regulations, as well as the criteria of the “administrative exception” for overtime pay. The author outlines how the courts and the Department of Labor have addressed the issue of overtime pay under the Fair Labor Standards Act. To determine the validity of stockbroker wage-and-hour claims, the author explores the benefits and pitfalls of various Fair Labor Standards Act interpretations and focuses on how each interpretation affects stockbrokers and broker-age firms. To remedy the differing interpretations and promote sound economic policy, the author recommends that under the current regula-tions, the Fair Labor Standards Act excludes stockbrokers from its ad-ministrative exception. In addition, the author suggests alternative pay structures for brokerage firms to curtail future litigation. Finally, the author offers a number of possible solutions for the Department of Labor, including an amendment to the current regulations.
In response to the surge of financial accounting scandals in the late 1990s and early 2000s, Congress passed the Sarbanes-Oxley Act. The implementation of this Act caused several changes in the financial audit industry in an effort to prevent further financial fraud. This Note begins by explaining the process of creating company financial statements and highlights the incentives auditors have to falsify these statements. Finan-cial statements are vital to a capital market because they provide infor-mation to investors about the prospective return and risk involved when deciding to invest in a company. Given the importance of financial statements and the risk that they will be falsified, Congress enacted the Sarbanes-Oxley Act in part to place a check on the accuracy of financial statements by requiring auditor independence.
After reviewing the Act’s provisions regarding auditor independence, the author argues that these provisions are not sufficient. He identifies three elements of the free-market audit industry that place substantial limits on auditor independence. First, audit firms are compensated by the compa-nies they are auditing, which makes the auditors dependent on the com-pany’s management. This problem is compounded by the fact that alt-hough the independent audits are required, they are only nominally beneficial to a company and one audit firm’s product cannot be differen-tiated from another firm’s product. Second, the relationship between a company and an audit firm is at will and can be terminated without much, if any, detriment to a company. The instability of this relationship allows companies to exercise substantial control over audit firms who have to compete for the business. Finally, a problem that coincides with the previous two issues is the high level of competition between audit firms. The author argues that the belief that free-market competition produces the best product at the lowest price does not apply to audit firms because they cannot effectively differentiate their products. Therefore, audit firms rely on the amount of their fees and their personal relationships with management to capture business. The author concludes that auditor independence cannot be achieved in a free-market audit system.
In response to the conclusion that auditor independence cannot be ac-complished under the current free-market scheme, the author recommends that the government transfer responsibility for financial audits to a governmental agency. Under this proposal, all public companies would contribute to a fund used to compensate the government auditor. A com-pany’s contribution to the fund would be determined by the expected complexity of the company’s audit. The government agency would be re-sponsible for auditing only publicly traded companies, preventing a man-datory tax on all businesses. The author concludes that creating a gov-ernment audit agency would remove the shortfalls of the free-market audit scheme by reducing auditor dependence on the client company.
The idea of authority is a fabrication. Claims of moral right to be obeyed owe their historic salience to the self-interest of claimants. When Enlightenment scholars demolished the divine right of kings, they should have disabused us of the right, not just of the notions that it came from the divine and belonged to kings. Their effort to salvage the idea of right to rule and to press it into serving as support for their favored governments was understandable but unjustified.
Contrary to widespread belief, the idea of moral right to be obeyed does not help to explain the nature of law. This Article argues that human communications become law simply by participating in a self-recognizing system that successfully signals what people are likely to do and to expect.
Claims of moral right to be obeyed have their origins in creationist accounts of law and govern-ment. This Article presents an evolutionary account of law and government. The law of a human community is a self-generating, self-recognizing system of human communications that signals likely action within that community. Law is a signaling system that uniquely serves and symbiotically defines a human community.
Understanding law as a self-fulfilling signaling system frees us to discard the idea of authority. This Article articulates a fresh and more accurate conception of law that builds on Oliver Wendell Holmes’s celebrated insights concerning law’s predictive potential. The Article then considers important implications of this new understanding for how we individually make moral choices, for how we read law, and for some of the many other ways that law affects our lives.
Collateralized Explosive Devices: Why Securities Regulation Failed to Prevent the CDO Meltdown, and How to Fix It
Richard E. Mendales | 2009 U. Ill. L. Rev. 1359
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In 2007 and 2008, financial markets around the world exploded. In this Article, the author analyzes this meltdown and discusses proposals for preventing similar crises. First, the author investigates the failure of the credit rating agencies to deal with collateralized debt obliga-tions (CDOs). Second, the author explores the current economic crisis by looking to past finan-cial downturns and the failure of regulations to achieve sufficient transparency. Third, the author discusses proposals to remedy the crisis. Fourth, the author proposes his own solution, which would subject CDOs to stricter requirements under the aegis of securities regulation. This proposal includes (i) an extension of antifraud provisions of the securities laws to CDOs, (ii) increased regulation of and mandated standards for the rating agencies, and (iii) an assignment of rights and liabilities to the rating agencies in order to effectively enforce the new regulations. Finally, the author looks to the future and proposes that the government require extensive disclosure for new types of securities.
Nothing in society poses as grave a threat to privacy as the Internet Service Provider (ISP). ISPs carry their users’ conversations, secrets, relationships, acts, and omissions. Until the very recent past, they had left most of these alone because they had lacked the tools to spy invasively, but with recent advances in eavesdropping technology, they can now spy on people in unprecedented ways. Meanwhile, advertis-ers and copyright owners have been tempting ISPs to put their users’ secrets up for sale, and judging from a recent flurry of reports, ISPs are giving in and experimenting with new forms of spying. This is only the leading edge of a coming storm of unprecedented and invasive ISP surveillance.
This Article seeks to help policymakers strike the proper balance between user privacy and ISP need. Policymakers cannot simply ban aggressive monitoring, because ISPs have legitimate reasons for scrutinizing communications on an Internet teeming with threats, so instead policymakers must learn to distinguish between an ISP’s legitimate needs and mere desires.
In addition, this Article injects privacy into the network neutrality debate—a debate about who gets to control innovation on the Internet. Despite the thousands of pages that have already been written about the topic, nobody has recognized that we already enjoy mandatory network neutrality in the form of expansive wiretapping laws. The recognition of this idea will flip the status quo and reinvigorate a stagnant debate by introducing privacy and personal autonomy into a discussion that has only ever been about economics and innovation.
The Rest Is Silence: Chevron Deference, Agency Jurisdiction, and Statutory Silences
Nathan Alexander Sales & Jonathan H. Adler | 2009 U. Ill. L. Rev. 1497
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Should agencies receive Chevron deference when interpreting the reach of their own jurisdiction? This Article argues that, in general, they should not. The authors begin by identifying and detailing the various different types of “jurisdictional questions” that may arise in statutory interpretation. The Article then surveys how courts have analyzed these different aspects of the jurisdiction problem, with a particular attention directed to statutory silences. The Court’s Chevron jurisprudence strongly suggests that deference to agency determinations of their own jurisdiction should be disfavored, particularly where a statute is silent (and not merely ambiguous) about the existence of agency jurisdiction. In particular, the authors argue that courts should deny Chevron deference regardless of whether an agency is asserting or disclaiming jurisdiction. This no-deference rule should apply in both existence-of-power and scope-of-power cases, but courts should show deference where agencies assert the existence of a factual predicate that triggers jurisdiction. The authors support their proposal with arguments drawing on both traditional administrative law norms and public choice analyses of the incentives faced by agencies and other relevant actors. While there are strong counter-arguments to their proposal—particularly the potential difficulty in distinguishing between jurisdictional and nonjurisdictional questions—this Article maintains that denying deference in the jurisdictional context is desirable and consistent with Chevron principles.
David C. Baum Memorial Lecture
The Courage of Innocence: Children as Heroes in the Struggle for Justice
Barbara Bennett Woodhouse | 2009 U. Ill. L. Rev. 1567
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The growing field of childhood studies has begun to gain traction among legal scholars, many of whom are giving new thought and voice to rights of children. The author, a pioneer in advocating for children’s legal and political rights, explores the significance of children in social movements from the American Revolution to the civil rights movement, arguing that history is too quick to forget the lasting impact children have had on societal change. The author also mounts the case for increased legal recognition of children as people in their own right, rather than merely as “pre-adults,” discussing the current status of children in legal systems. Looking primarily at foster care and child welfare systems, she points out the problems with the secondary role to which children are often relegated in proceedings that purport to have their best interests at heart. Finally, the author argues that contemporary children and young adults around the world have earned the right to increased political participation by demonstrating valuable social and political insight and judgment.
Patents on Tax Strategies: Just Another Harmless Subject
Christopher C. Anderson | 2009 U. Ill. L. Rev. 1591
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This Note analyzes the subject matter eligi-bility of patents on tax strategies. In 2003, the United States Patent and Trademark Office issued the first patent explicitly covering a tax strategy. Since this decision, many other tax practitioners have attempted to patent tax strat-egies. The requirements to have a patentable tax strategy are not entirely clear, and commentators have voiced strong opinions on both sides of the patentability argument. Indeed, some feel that patents covering tax strategies are not constitu-tional or might otherwise not fit under the policy rationales upon which the patent system was built.
The Note first addresses the statutory re-quirements that all patent applications must sat-isfy before receiving patent allowance. Next, the Note analyzes the policy rationales implicit in the patent system. Considering this background, the author explains how patents covering tax strategies fall within the constitutional requirements of patent-eligible subject matter and how tax strategy patents would be in line with the various policies and purposes underlying the patent system. After considering the practical implications of allowing tax strategy patents, the author concludes that recognizing tax strategy patents would be appropriate, so long as Congress took action to limit the remedies available to a holder of a tax strategy patent.
MySpace, YourSpace, OurSpace: Student Cyberspeech, Bullying, and Their Impact on School Discipline
Emily K. Kerkhof | 2009 U. Ill. L. Rev. 1623
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When a student engages in bullying, tensions tend to arise between that student’s freedom of speech—guaranteed in the First Amendment—and the school’s duty to provide its students with an environment that is safe and conducive to learning. Bullying on the Internet is no exception. Although several Supreme Court decisions address students’ free speech rights, none have dealt with student speech on the Internet. Thus, lower courts have struggled to apply the Supreme Court’s standards to cases involving student online speech. When called upon to determine the extent of school administrators’ authority to discipline students for inappropriate online speech, lower courts do not reach consistent results. The author recognizes the interests in conflict—the interest in speaking freely, without government interference, as well as the interest in educating and protecting students—and recommends that courts apply the “material and substantial disruption” standard to best balance these interests. The author argues that it would not be suitable for courts to look to other factors—including the location of the speech and whether the student-speaker intended to bring the speech onto campus—in the context of student speech on the Internet.
Live and Let Drive: The Struggle for Unauthorized Drivers of Rental Cars in Attaining Standing to Challenge Fourth Amendment Searches
Lisa J. Zigterman | 2009 U. Ill. L. Rev. 1655
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This Note analyzes the current circuit split regarding standing for unauthorized drivers of rental vehicles to challenge Fourth Amendment searches. Courts have adopted three different approaches to determine such standing. Some cir-cuits apply a bright-line rule that denies standing to any unauthorized driver. Other circuits utilize a modified bright-line approach that focuses on whether the renter granted the unauthorized driver permission to drive the vehicle. Finally, other circuits implement a totality-of-the-circumstances approach, considering a variety of factors regarding the driver’s relationship with the renter and the rental company.
This Note addresses the increasing relevance and use of rental vehicles in today’s society, as well as the law relating to Fourth Amendment standing. After conducting a thorough analysis of each approach to standing for unauthorized rental vehicle drivers, the author critiques each approach, examining the merits and shortcomings of each rule. Finally, the author advocates for a new approach that will provide more consistent results and afford an unauthorized driver the opportunity to demonstrate a legitimate expectation of privacy in the vehicle.