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UCLA LLM Program for Deferred Grads

UCLA School of Law announces that:

In response to the changing employment situation for graduates of U.S. law schools, UCLA School of Law announced today that it is reopening its LL.M. program application process for the 2009-10 academic year, and will accept up to 20 additional students who are graduates of U.S. law schools, including deferred hires. [Application information here.]

The newly admitted LL.M.s will have the option of participating in the new Transition to Practice program, which will focus on enhancing the practical skills and development of the new lawyer. The program will replicate significant parts of the learning that comes in the first year of practice, but in a controlled learning environment. 

"These challenging economic times have affected young lawyers in surprising ways. In response to the current economic climate, UCLA School of Law is reaching out to recent law school graduates, whether from our law school or not, to help them in their transition from law school to practice," Dean Michael H. Schill said. "Through the new Transition to Practice program, which will focus on experiential learning and skills, law school graduates and deferred hires will be able to expand on their legal education and develop additional legal skills during this transition period."

A core component of the Transition to Practice program will be capstone courses that will draw heavily on practice-oriented projects in addition to substantial research and written work. Capstone courses will include part-time externships within corporate legal departments, as well as clinical simulations, where students work with real legal problems in a controlled environment that permits reflection and generalization of lessons learned. The Transition to Practice program will also include a required workshop series designed to introduce students to the practical issues that confront new lawyers, ranging from how to define a work-product to understanding a client's business and goals, and handling practical problems of ethics and confidentiality.   Capstone classes will be taught both by the core faculty of the law school and prominent practicing lawyers.  The law school expects to develop curriculum in conjunction with leading law firms and corporate legal departments and to draw on the expertise of the Los Angeles legal community. 

The ABA Journal notes that "law firms that have already offered to provide a hefty stipend for volunteer work intended to help deferred first-years develop practice skills presumably might also agree to ante up for the UCLA practice skills program."

ATL observes:

We don't know if UCLA's program will qualify for the deferral stipend from firms that have tied the money to a public interest job. But it should. At this point, anything law schools can to do to relieve law firms of their promise to actually hire the people they offered jobs to is in the best interest of all involved.

The NLJ opines:

Law firms increasingly have come under fire for teaching students to think like lawyers but providing little training on the professional side. Moreover, some clients have begun to bristle at the billing rates firms charge for work performed by untrained associates straight out of law school, Schill said. The new LL.M program will better prepare students to work in the law firm environment, he said.

Schill said the response to the new program in the legal community has been overwhelmingly positive. The school has been in contact with alumni and Los Angeles-area corporations that will host participants in the program.

"This unique training will replicate much of the experience of a new associate, which will allow recent graduates to hit the ground running when they start their jobs. Employers also gain new lawyers with practical legal training under their belt," said James D.C. Barrall, head of Latham & Watkin's global benefits compensation group.

Of course, not every deferred associate will want to take on the cost of yet another year of law school. Tuition for UCLA's program is $41,500 plus living expenses. Schill said students will need to do their own cost/benefit analysis to determine if the transition to practice program is right for them. Though financial aid is available to the school's LL.M. students, it is typically not as much as J.D. students receive. However, some deferred incoming associates are receiving stipends from their firms, and may be apply to apply that money to the cost of an L.L.M, Schill said.

Reflections on Two Decades in this Business

My essay Reflections on Twenty Years of Law Teaching is now up on the UCLA Law Review website. The abstract follows:

On April 16, 2008, the author received the UCLA School of Law?s Rutter Award for Excellence in Teaching. This Essay consists of a revised and extended version of the remarks he gave on that occasion. In it, he addresses both his progression from frustrated Socratic teacher to happy lecturer and his aspirations for incorporating new technologies into his teaching. He also reflects on the subject of his teaching--the American corporation--and argues that being a business lawyer is a very real form of public interest lawyering.

Revlon Problems

Problem: C Corporation, Inc., a public corporation incorporated in Delaware, is in dire financial condition, operating at a loss and about to run out of cash. P Corporation, Inc., a privately held corporation in the same line of business as C Corp., presents an unsolicited offer to invest enough money to give C Corp. a reasonable chance of recovery. In return for the investment, P Corp. would receive 35 percent of the equity in C Corp., the right to fill three seats on the nine-member board, and the right to demand the replacement of the current CEO plus a veto power in the selection of her successor. (a) Does this offer trigger Revlon duties? (b) What if P Corp.'s offer had been, again, for 35 percent of the equity but in the form of a new class of common shares with the right to elect five members of the nine-member board? (c) Would your answer to (a) or (b) change if P were publicly held? (d) What if, before receiving the offer from F Corp., C Corp. had sought equity investments from a couple of private-equity funds (that is, funds that invest on behalf of their wealthy clients)?

Answer: Revlon duties are triggered "(1) when a corporation initiates an active bidding process seeking to sell itself or to effect a business reorganization involving a clear break-up of the company; (2) where, in response to a bidder's offer, a target abandons its long term strategy and seeks an alternative transaction involving a break-up of the company, or (3) when approval of a transaction results in a sale or change of control." Arnold v. Society for Sav. Bancorp, Inc., 650 A.2d 1270 (Del. 1994).

(a) The key question here is whether P Corp. will control C Corp. following the transaction. Under Delaware law, a shareholder is deemed to have control if the shareholder either owns a majority of the voting stock or exercises control over corporate decision making. See, e.g., Ivanhoe Partners v. Newmont Mining Corp., 535 A.2d 1334, 1344 (Del. 1987) ("a shareholder owes a fiduciary duty only if it owns a majority interest in or exercises control over the business affairs of the corporation"); Solomon v. Armstrong, 747 A.2d 1098, 1116 n.53 (Del. Ch. 1999) ("Under Delaware law, the notion of a 'controlling' stockholder includes both de jure control and de facto control."). If the shareholder owns less than 50 percent of the voting stock, plaintiff must show evidence of actual control of corporate conduct. See, e.g., Emerald Partners v. Berlin, 726 A.2d 1215, 1221 n.8 (Del. 1999); Citron v. Fairchild Camera & Instrument Corp., 569 A.2d 53, 70 (Del. 1989). Consequently, for example, in Kahn v. Lynch Communication Systems, Inc., 638 A.2d 1110 (Del. 1994), the Delaware Supreme Court held that a 43.3 percent shareholder exercised control, not based on the number of shares it owned, but because the board of directors deferred to the shareholder's wishes.

(b) The power to nominate and elect a majority of the board will be strong evidence of ability to control the affairs of the corporation and, arguably, amounts to a de facto "majority interest."

(c) Revlon is not triggered where control of the combined entity remains in the hands not of an identifiable control person or group but rather "in a large, fluid, changeable and changing market." Paramount Communications Inc. v. Time Inc., 1989 WL 79880 (Del. Ch. 1989), aff'd on other grounds, Paramount Communications, Inc. v. Time Inc., 571 A.2d 1140 (Del. 1989). Where one public corporation is acquired by another public corporation, that condition is satisfied. Arnold v. Soc. For Savings Bancorp., Inc., 650 A.2d 1270, 1290 & n. 45 (Del. 1994).

(d) The relevant prong of the Arnold triad here is # 1; namely, "when a corporation initiates an active bidding process seeking to sell itself or to effect a business reorganization involving a clear break-up of the company." The key interpretative question is whether "break up" modifies both halves of that prong or merely the latter. The Delaware Supreme Court observed in Santa Fe Pacific Corp. Shareholder Litigation, 669 A.2d 59 (Del. 1995), that:

Plaintiffs appear to rest their claim of a duty to seek the best value reasonably available on allegations that the Board initiated an active bidding process. Plaintiffs do not consider, however, that this method of invoking the duty requires that the Board also seek to sell control of the company or take other actions which would result in a break-up of the company.

Id. at 70-71. Unless the sale to P Corp. would result in a change of control, accordingly, it would seem that the bidding process must result in a break-up of the company in order for Revlon to be triggered.

 

"New Corporate Governance" Reviewed

My book, The New Corporate Governance in Theory and Practice, recently was reviewed by Delaware lawyer Robert A. Forsten. Download the review here.

 

Selected quotes:

In his new book, The New Corporate Governance in Theory and Practice, Professor Bainbridge argues that directors do have “primacy” in corporate governance, and that not only does current law reflect this fact (despite how others may interpret it), but the law should recognize director primacy as the best overall model for corporate governance. Along the way, Professor Bainbridge does a nice job of explaining and lauding Delaware corporate law as supportive of director primacy. ...

 

Bainbridge provides a wonderful overview of the various theories of corporate governance, a history of the changing and increased role of the board over the last forty years and an explanation of the various corporate law doctrines, such as the business judgment rule, that fit so well with the director primacy theory. ...

 

Bainbridge’s book is not, strictly speaking, a dry legal or theoretical analysis. Nor, is it a history of corporate law. Rather, it is a combination of economic and legal theory which attempts to describe the best model for a corporation. Bainbridge believes that director primacy represents not only the best model of current corporate law and governance, but also the best approach to corporate law.

This article originally appeared in the April 2009 issue of IN RE: The Journal of the Delaware State Bar Association, a publication of the Delaware State Bar Association. Copyright © Delaware State Bar Association 2009. All rights reserved. Reprinted with permission.

(H/T: Francis Pileggi)

SEC Proposes to Reregulate Short Selling: It’s a Bad Idea

The SEC has announced 2 possible approaches to regulating short selling, each of which has sub-possibilities, on which the SEC is soliciting public comment. From the press release:

Market-Wide, Permanent Approach

• Proposed Modified Uptick Rule: A market-wide short sale price test based on the national best bid (a proposed modified uptick rule).
• Proposed Uptick Rule: A market-wide short sale price test based on the last sale price or tick (a proposed uptick rule).

Security-Specific, Temporary Approach

• Circuit Breaker: A circuit breaker that would either:
  • Ban short selling in a particular security for the remainder of the day if there is a severe decline in price in that security (a proposed circuit breaker halt rule).
  • Impose a short sale price test based on the national best bid in a particular security for the remainder of the day if there is a severe decline in price in that security (a proposed circuit breaker modified uptick rule).
  • Impose a short sale price test based on the last sale price in a particular security for the remainder of the day if there is a severe decline in price in that security (a proposed circuit breaker uptick rule).

From SEC Chairman Mary Shapiro's opening statement:

In my short tenure as Chairman, the issue of short selling has undoubtedly resulted in more letters from investors, brokerage firms and exchanges, more inquiries from members of Congress, and more questions from reporters than any other topic. Even before I arrived at the SEC, I heard from hundreds of investors concerned about short selling. Clearly, the practice of short selling has both strong supporters and detractors. Today, we begin what will be a thoughtful, deliberative process to determine what is in the best interests of investors.

The problem is that the detractors are idiots. Shapiro's statement continues:

The Commission has long held the view that short selling provides the market with important benefits, including market liquidity and pricing efficiency. But, short selling may also be used to illegally manipulate stock prices. One example is the "bear raid" where an equity security is sold short in an effort to drive down the price of the security by creating an imbalance of sell-side interest. In addition, unrestricted short selling can exacerbate a declining market in a security by increasing pressure from the sell-side, eliminating bids, and causing a further reduction in the price of a security by creating an appearance that the security price is falling for fundamental reasons, when the decline, or the speed of the decline, is in fact being driven by other factors.

She's right that short selling has benefits, but utterly wrong about the supposed costs. First, even if short selling is sometimes used by manipulators, so what? Manipulation is already illegal! There is nothing to prevent the SEC from using the existing statutes and rules banning stock manipulation to go after perpetrators of a bear raid. We don't need a prophylactic ban on short selling to punish and deter market manipulators.

The Third Circuit thus has observed that:

The Supreme Court has indicated that market manipulation "generally refers to practices, such as wash sales, matched orders, or rigged prices, that are intended to mislead investors by artificially affecting market activity." Santa Fe Indus. v. Green, 430 U.S. 462, 476, 97 S.Ct. 1292, 1302, 51 L.Ed.2d 480 (1977). "The gravamen of manipulation is deception of investors into believing that prices at which they purchase and sell securities are determined by the natural interplay of supply and demand, not rigged by manipulators." Gurary v. Winehouse, 190 F.3d 37, 45 (2d Cir.1999). In that vein, courts must distinguish between legitimate trading strategies intended to anticipate and respond to prevailing market forces and those designed to manipulate prices and deceive purchasers and sellers. …

Requiring a Section 10(b) plaintiff to establish that the alleged manipulator injected "inaccurate information" into the market or created a false impression of market activity cures this problem. Such a construction permits courts to differentiate between legitimate trading activities that permissibly may influence prices, such as short sales, and "ingenious devices that might be used to manipulate securities prices," Santa Fe Indus., 430 U.S. at 477, 97 S.Ct. at 1303, such as wash sales and matched orders. As the court in Olympia Brewing, 613 F.Supp. at 1292, stated, "[r]egardless of whether market manipulation is achieved through deceptive trading activities or deceptive statements as to the issuing corporation's value, it is clear that the essential element of the claim is that inaccurate information is being injected into the marketplace."

GFL Advantage Fund, Ltd. v. Colkitt, 272 F.3d 189, 208 (3d Cir. 2001).

Short selling standing alone thus is not manipulative, because it does not – by itself – inject inaccurate information into the market place.

Second, you need not be a die-hard proponent of efficient capital markets theory to recognize that "a further reduction in the price of a security by creating an appearance that the security price is falling for fundamental reasons, when the decline, or the speed of the decline, is in fact being driven by other factors" creates a buying opportunity. Even if the market is swept by herd behavior for a brief period, such that the market price of the stock being sold short falls below its economic value, the market will correct soon enough as rational investors start buying.

Accordingly, a ban on short selling of any type is likely to reduce market efficiency without offering any competing benefits. As Professors Gilson and Kraakman have observed:

In a short sale, the arbitrageur sells a security she does not own. To accomplish this, she must first find an existing owner of the overpriced security who is willing to lend the security to the arbitrageur. The borrowed stock is then sold, the arbitrageur betting that the price of the security will fall before the security must be purchased to repay the loan.

Securities Exchange Act Rules 10a-1 and 10a-2 provide the basic regulatory framework. Rule 10a-1, the "uptick test," generally prohibits a short sale at a price below the security's last reported price, and Rule 10a-2 restricts activities by broker-dealers that could facilitate a violation of the uptick rule. The idea behind the prohibitions, dating to aftermath of the stock market crash of 1929, is to prevent "speculators" from driving down the price of a stock by continuing to sell stock below the market price. The difficulty with the rule is simply the obverse of its asserted benefit. Short-selling, through its information revealing properties, pushes stock prices to a lower, more efficient level; to the extent that the uptick rule actually succeeds in restricting arbitrage, the level of market efficiency suffers.

Ronald J. Gilson & Renier Kraakman, The Mechanisms of Market Efficiency Twenty Years Later: The Hindsight Bias, 28 J. Corp. L. 715, 727 (2003).

There is NOTHING wrong with short selling. The SEC should not adopt any of the 5 alternatives. Each would reduce market efficiency and liquidity, with no compensatory benefits.

Update: You can add the following to the list of idiots: Edward E. Kaufman (D-Del.), Jon Tester (D-Mont.), Carl M. Levin (D-Mich.), Johnny Isakson (R-Ga.), Saxby B. Chambliss (R-Ga.), and Arlen Specter (R-Pa.). According to BNA, they co-authored a joint letter to the SEC demanding "'an unambiguous commitment to promulgate and enforce regulations that put an end to naked short selling.' At a minimum, the senators contended, the new regulations should provide an uptick rule—that is, a price test to restrict short selling—and a pre-borrow requirement to curtail the abusive potential of naked short selling."

Souped-up Store Bought Risotto

Real home-made risotto is a lot of work. Making the stock. Stirring. Adding the stock in small lots. Stirring. It's worth it, but not all the time. Sometimes you just want some comfort food without all the work. When that time comes, here's a recipe to try.

I start by reconstituting 1 oz. of dried porcini mushrooms as per the package directions (30 minutes in 1 cup of warm water). I then strain them, reserving the liquid. I then run the liquid through an unbleached coffee filter and set it aside. I rinse the porcinis and then chop them very fine.

Next I mix the mushroom liquid with 1/2 cup white wine and enough low sodium chicken stock to make a total of 2.5 cups of cooking liquid. I bring the liquid to a boil in a 2.5 quart pan.

When the liquid comes to a boil, I add 1 tablespoon unsalted butter and one package of Alessi Imported Risotto con Funghi Porcini. (I've tried a bunch of risotto brands and I like this one the best. Here in Los Angeles, I can even find it at Ralphs.) Stir well, bring back to the simmer, cover and reduce the heat to low. Simmer for 15 minutes. Add the reconstituted porcini mushrooms. If it looks likely to run dry, add 1/4 cup chicken stock. Stir well. Recover and cook 3 more minutes. Remove from heat and allow to sit covered for 5 minutes.

Stir in 1/2 teaspoon truffle paste, 1/4 teaspoon white truffle oil, and 1/2 tablespoon unsalted butter. Serve out (2 portions as a main course, 4 as an appetizer). Top with freshly shaved Italian Parmesan and freshly chopped Italian parsley.

The extra porcinis and the additions specified in the preceding paragraph provide a depth and complexity of flavor that effectively disguise the store bought basis. It'll taste like you slaved over it for the hours risotto from scratch requires.

Pan-Seared Scallops over Truffled Shrimp Risotto

• 2 cups fish stock
  
• 1 cup water
  
• ½ cup white wine
  
• 1-½ tablespoons olive oil
  
• 1 tablespoon butter
  
• 1 shallot, minced
  
• 2 garlic cloves, minced
  
• 3 white mushrooms, minced
  
• 1 cup arborio rice
  
• ½ cup white wine
  
• 1 tablespoon cognac
  
• 6 medium peeled and deveined shrimp, diced
  
• 1 tablespoon black truffle tapenade
  
• 2 tablespoon finely chopped chives
  
• 1 tablespoon finely chopped Italian parsley
  
• truffle oil to taste

Combine fish stock, water, and first portion of wine in a sauce pan and bring to a boil. Reduce heat to a low simmer. In a large saute pan, heat olive oil and butter over medium-high heat. Add shallot and garlic. Cook 1 minute, stirring frequently. Add mushrooms. Cook 1 minute, stirring frequently. Season with salt and white pepper. Add rice. Cook 1 minute, stirring frequently. Add second portion of white wine. Bring to a boil and reduce heat to a simmer. When the wine is almost completely incorporated, add cognac. Start timing from here. Begin adding stock, water, and wine mixture about ¾ cup at a time. Cook until liquid is almost completely incorporated, stirring often, then add another ¾ cup. At about the 16 minute mark, add shrimp and tapenade. Stir well and continue adding liquid as before. At the 18 minute mark, start checking for doneness. I like it a just ever so slightly al dente, which should take around 20 to 22 minutes.

Meanwhile. At about the 15 minute mark, put a griddle or skillet over high heat (I use about 8.5 out of 10).

• 1 tablespoon peanut oil
  
• 10 jumbo scallops, preferably "dry," with the little "side" muscle removed, rinsed, and thoroughly dried in paper towels
  
• 1 tablespoon instant flour
  
• ¼ teaspoon ground white pepper
  
• ¼ teaspoon fine sea salt

Spread flour on a large cutting board or sheet pan, mixing in salt and pepper. Lightly dredge scallops in seasoned flour, being sure to shake off as much excess as possible. You want a very, very thin layer of flour or it'll be gloppy.

Add oil to pan at about the 16 minute mark. At 17 or 18 minute mark, add scallopps to pan. make sure that you've got at least an inch of clearance around each scallop. If the pan is crowded, they'll stew instead of searing. Timing is critical. Pay very close attention. You want a rich golden sear on both sides, which should take about 60 to 90 seconds per side. Remember that scallop sushi is just fine, so err on the side of under cooking the scallops. Over cooked scallops are not much fun to eat. The scallops will be done when they are just firm to the touch. Make an OK symbol with your left hand. Tap the muscle between your thumb and forefinger. That's about what the scallops should feel like.

Just before serving, add chives, parsley, and truddle oil to risotto. (If you're not on a diet, add a tablespoon of unsalted butter too.) Mix well. Dish up in large pasta bowls and nestle ½ of the scallops on each plate.

Do Nexuses of Contracts Have Constitutional Rights?

A friend emails:

I understand that -- ignoring the nuances for a moment -- you believe that the best model for a corporation's res (such as it is) is as a nexus of contracts. This leads to another question, though: Does the corporation per se, if it is only a nexus of contracts, qualify as a First Amendment "person" for purposes of having free speech rights _independent of its officers and directors_? The current National Association of Manufacturers controversy does not directly confront this question, but directly confronting it would be the simplest way to resolve it.

I come down slightly against the nexus-as-First-Amendment-person view, but only slightly. I'm more than willing to be convinced... but I'm not willing to assume, either way.

The best treatment of this issue is The Corporation and the Constitution by Henry N. Butler and Larry E. Ribstein.

In his article, Corporate Political Speech, 49 Wash. & Lee L. Rev. 109 (1992), Ribstein explained:

The corporation, as a nexus of contracts, obviously cannot be ?speaking.? Accordingly, corporate speech should be constitutionally protected only to the extent necessary to protect the rights of individuals connected with the corporation. In closely held corporations with decentralized management, the owner-managers usually are speaking for the corporation. In publicly held corporations, however, there is some question as to who the speakers are, and therefore who, if anyone, should be protected by the First Amendment. Before considering the extent of constitutional protection that should be accorded corporate speech, it is necessary first to consider precisely whose First Amendment interests are at stake, particularly in publicly traded corporations. ...

In a publicly held corporation with centralized management, corporate speech, like other corporate conduct, originates from the managers rather than the shareholders. If the managers speak as agents of the shareholders or others in the corporation, the relevant protected interest belongs to the shareholders the managers represent. If managers speak on their own behalf, their own speech interest should be constitutionally protected. This is clearest when managers' speech is supported by their compensation paid directly in money or indirectly by the corporation's authorization of the authorizing managers' use of corporate funds for ?personal? speech. Moreover, managers' speech should be protected even if they are spending shareholders' money without authority. First Amendment protection does not depend on the legitimacy of the source of the funds used to support the speech. Such a distinction would be impossible to make, because even direct compensation may be ?excessive? in the sense that it results from managers' abuse of their power to fix their own pay. In any event, this is strictly a matter of contracting within the firm. Perhaps, to aid contracting between shareholders and managers, the state should be able to regulate this activity notwithstanding the First Amendment. But that relates to government interests justifying the regulation, and not to determining whether there is any constitutionally protected interest. ...

Thus, in light of both the attenuated shareholder responsibility for corporate speech and the managers' emerging responsibilities to ?stakeholders,? corporate speech may represent the views primarily of managers rather than of any particular nonmanagerial participants in the corporate enterprise.

However, it does not follow from shareholders' attenuated role as corporate speakers that corporate speech deserves only weak First Amendment protection. Such a result could be based only on a strong regulatory theory of the corporation under which agency problems merit mandatory rules. Instead, any such agency problems should be analyzed from the standpoint of justifying state interference with a constitutionally protected interest, rather than negating the existence of that interest.

I would argue that, as a nexus of contracts, corporations are a collection of people and, as such, possess the same rights as their various constituencies. One of which is free speech. Not speech by the fictional entity, but rather speech by the managers of the corporation who can use corporate assets to finance their own speech just as they use corporate funds for any other purpose (up to and including financing their own reelection bid when faced with a proxy contest). To be sure, as in any other managerial action, using corporate funds to finance managerial speech creates a principal-agent problem, but campaign finance laws strike me as a bad way of regulating that problem.

Yoo and Other Bush Lawyers Investigated by Spanish Judge

My friend (and resident international law guru) Tony Arend notes a Harper's report that President Bush's so-called torture lawyers -- University of California law professor John Yoo, former Department of Defense general counsel William J. Haynes II (now a lawyer working for Chevron), former vice presidential chief-of-staff David Addington, former attorney general and White House counsel Alberto Gonzales, former Assistant Attorney General Jay Bybee, now a judge of the United States Court of Appeals for the Ninth Circuit, and former Undersecretary of Defense Doug Feith -- are being investigated by crusading Spanish judge Baltasar Garzón, who gained international notice for his efforts to bring former Chilean dictator Augusto Pinochet to justice before a Spanish court.

Some prominent bloggers have praised the investigation. Andrew Sullivan writes, for example, that:

The case may well be strengthened by the DOJ's own internal review of the Yoo and Bybee and Bradbury "legal" opinions, which were transparently abuses of the law to allow Cheney to get on with torturing. Britain is also investigating allegations of torture against Binyam Mohammed, as Greenwald explains here. The Brits seem to have some kind of idea that the West is governned by something called the rule of law - a state of affairs suspended for seven years under Bush and Cheney. The US can hardly complain. Washington invoked the same right to prosecute foreign leaders for torture last year …

The lawyers are the beginning. Bush and Cheney are - and must be - the ultimate targets. They belong in jail. And there are no statutes of limitations on war crimes.

Even though I strongly and frequently criticized the Bush torture policies, I think the investigation of Yoo et al. is problematic.

In the first place, we have to be very careful about allowing lawyers to be held liable for advice given clients.

The rules of legal ethics demand that counsel represent the client zealously. They also mandate that lawyers make their services available to unpopular causes. A lawyer with skin in the game is inevitably compromised in his ability to carry out these obligations.

If Andrew were on trial for murder, he would want his lawyer to be concerned with Andrew's best interests. He would not want his lawyer worrying about personal liability for the tactics or recommendations he makes. An advocate worried about his own skin cannot be a zealous advocate for his client.

To be sure, there are limits. The Harpers report, for example, cites a Nuremburg precedent that "established the concept of liability of the authors of bureaucratic policies that breach basic rules of the Hague and Geneva Conventions for the consequences that predictably flow therefrom. Moreover, it establishes a particularly perilous standard of liability for government attorneys who adopt a dismissive attitude towards international humanitarian law."

As Tony Arend notes, however, applying that standard to these facts will be most difficult:

It would, of course, be necessary to take each of the individual memos (and other sources of legal advice) and review the specific legal assertions contained in them. Based on my knowledge of some of the memos, I think there would be a spectrum of legal claims, ranging from unproblematic legal conclusions to arguable proposition to conclusions that seem nearly bogus on their face. Would some of those propositions in that later category be egregious enough to justify criminal (or civil, for that matter) liability? We shall see.

A useful analogy here may be the Lynne Stewart case, in which the government was obliged to prove that "Stewart knew she was providing resources to carry out a specific violent crime." Only if the evidence shows an intent to facilitate specific illegal conduct should a lawyer face liability for how he/she represents a client.

In the second place, I have concerns about the use of universal jurisdiction here. Spain is claiming jurisdiction to investigate and, if warranted, try US nationals for conduct committed in the US and which impacted, as far as I can tell, on 5 Spanish nationals for conduct they allegedly committed outside Spain. Because Spain's ties to the conduct are so tenuous, Garzon is relying on the legal principle of universal jurisdiction:

Universal jurisdiction or universality principle is a principle in international law whereby states claim criminal jurisdiction over persons whose alleged crimes were committed outside the boundaries of the prosecuting state, regardless of nationality, country of residence, or any other relation with the prosecuting country. The state backs its claim on the grounds that the crime committed is considered a crime against all, which any state is authorized to punish, as it is too serious to tolerate jurisdictional arbitrage. The concept of universal jurisdiction is therefore closely linked to the idea that certain international norms are erga omnes, or owed to the entire world community, as well as the concept of jus cogens - that certain international law obligations are binding on all states and cannot be modified by treaty.

Universal jurisdiction raises several concerns when extended to these kinds of cases, as opposed to piracy and the similar crimes it was originally developed to deal with. Piracy and terrorism often involve non-state actors whose conduct occurs at sea or in failed states or with the aid of state sponsors. Absent some form of universal jurisdiction, there is no chance of punishing and deterring such crimes.

In contrast, here we are dealing with state actors. Applying universal jurisdiction here raises a number of concerns.

First, do we really want a lone national judge in one state interfering with issues of global diplomacy? Suppose the UN worked out a deal for Sudanese President Omar al-Bashir to step down and be replaced by a democratically chosen civilian. As part of the deal, the UN and the ICC agreed to drop al-Bashir's indictment for war crimes and crimes against humanity. Just as al-Bashir is about to leave Sudan, however, Garzón indicts him in Spain for the same charges. The diplomatic apple cart all too easily could be upset by a rogue jurist.

Second, there is a serious risk of politicization of claims premised on universal jurisdiction. Do you want a far left judge backed by an anti-American regime being able to pursue a political agenda against US state actors? Conversely, do you want a neo-fascist judge backed by a far right regime going after Israeli officials who conduct West Bank settlement policy (which, after all, is arguably at least as egregious a violation of international law as anything John Yoo did)?

I think a case can be made for restricting invocation of universal jurisdiction by individual states to cases like piracy, while restricting its use in cases like this one to multi-state international courts, such as the ICC, that are subject to checks and balances so obviously absent in Spain.

It is always tempted to grasp a tool that lies readily at hand and offers short term results. Yet, expediency is all too often the opposite of prudence. The Bush policy on terror was a bad policy. But allowing Garzon to go forward is also a bad policy.

It may not be socialism, but it’s at least industrial policy

The LA Times (of all places) today reports that:

President Obama's plan to save failing U.S. automakers -- and make them the instruments for creating a cleaner, greener transportation system -- marked a major step across the line that traditionally separates government from private industry.

His announcement Monday of a new position on bailing out Detroit went beyond a desire to be sure tax dollars were not wasted in bailing out struggling companies. It put the Obama administration squarely in the position of adopting a so-called industrial policy, in which government officials, not business executives or the free market, decided what kinds of products a company would make and how it would chart its future. …

"When did the president become an expert in strategic corporate management?" said Rep. Tom Price (R-Ga.), chairman of the conservative Republican Study Committee. "The federal government is famous for its mismanagement, yet this administration continues to demonstrate its certainty that Washington always knows best."

Sen. Bob Corker, a Tennessee Republican, called it a "power grab" that "should send a chill through those who believe in free enterprise."

Industrial policy is bad policy. By putting managerial decisions in the hands of bureaucrats, many of whom have never run a for profit business of any sort, it invites politicization of the process. Take, for example, the way in which the Nirvana fallacy seems to be driving the Obama task force's views on preferable product lines:

Some participants in the deliberations, speaking on the condition of anonymity because of White House restrictions on allowing people to speak freely, said the task force operated from an underlying belief that consumers would ultimately be attracted to more fuel-efficient cars despite current data showing many such cars languishing on dealer lots.

"Philosophically they blame these companies for not having produced enough responsible small vehicles," said Dan Luria, research director at the Michigan Manufacturing Technology Center, a consulting firm for automaker suppliers. "But they don't deal with the fact that the companies would have been insolvent years earlier if they had done that."

(BTW, when the Bush administration forced people to speak "on the condition of anonymity because of White House restrictions on allowing people to speak freely," people howled. How long will Obama continue to get a free ride?)

This sort of thing is not surprising, considering how badly out of step the members of the task force are with the typical American consumer:

Among the eight members named Friday to the Presidential Task Force on the Auto Industry and the 10 senior policy aides who will assist them in their work, two own American models. Add the Treasury Department's special adviser to the task force and the total jumps to three. … At least two task force members don't own a car ….

Worse yet, the cars they drive are not just mostly foreign, they're also mostly old and boring:

• Larry Summers: 1995 Mazda Protégé
• Peter Orszag: 2008 Honda Odyssey and 2004 Volvo S60
• Jared Bernstein: Honda Odyssey
• Austan Goolsbee: 2004 Toyota Highlander
• Gene Sperling: 2003 Lincoln LS

Gearheads don't own minivans and they either own collectibles or buy new cars every couple of years.

The only conclusion is that these are people who know nothing about cars and care less. (Especially the enviro wonks who don't even own cars!)

Of course, the real problem is that the task force and its senior aides are comprised almost exclusively of career Washington policy wonks, with very few career businessmen in the mix. It's a recipe for trouble.

"No industrial policy is the best industrial policy."