ProfessorBainbridge.com

Save the iPod Classic

David Carnoy speculates that Apple is going to let the iPod Classic fade out, switiching emphasis to the iPhone and iPod Touch. 

As rumors continue to circulate that Apple will introduce new iPod models this fall (as it traditionally has), the big question is whether the iPod Classic becomes the odd iPod out. In a recent MP3 Insider podcast, CNET editor Donald Bell points out that orders for new Samsung hard drives that would go into an updated Classic appear to be nonexistent, according to Ars Technica and Apple Insider. And shortly after the earnings were posted, TechCrunch writer MG Seigler asked whether the iPod as we know it is dying.
The prevailing bet among iPod followers is that the Classic may stick around for a little while, but it probably won't be upgraded and will be quietly put out to pasture. The fact is that the iPod Touch offers a lot more functionality and, most importantly, it can run iPhone apps, which people find appealing, and they generate revenue for Apple.
Of course, there's a lot of folks out there who need a high-capacity iPod to store all their tunes and videos.

I'm one of them. I've got over 275 GB of audio, video, etc.... I can't fit it all onto my iPod Classic as things stand. I'd like to see Apple developing higher capacity models, instead of focusing on low capacity units like the Touch.

If Apple insists on letting the Classic die instead of growing it, Apple ought to include flash memory card slots for those of us who need extra capacity. 

Trial lawyers to benefit from Obamacare

Walter Olson:

Just before the House leadership's 794-page health care reform bill went to a Ways & Means markup last Thursday, a remarkable provision was slipped in that amounts to one of the more audacious and far-reaching trial lawyer power grabs seen on Capitol Hill in a while. Republicans managed to fend it off for the moment--but don't be surprised if it shows up again down the road in some form.

The provision would have drastically widened the scope of lawsuits against what are known as Medicare third-party defendants. In the simplest scenario, Medicare has paid the bills of someone injured in, say, a car accident, and then learns that the beneficiary has successfully sued and obtained damages from the other driver. Sometimes at this point Medicare (i.e., the government) demands that the beneficiary hand over some or all of the settlement toward the cost of the health care. Under some conditions, however, it is also free to file its own lawsuit to recover the medical outlays directly from the negligent driver (who in some circumstances might even wind up covering the same medical bills twice). It might file suit directly if, for example, it does not expect to get a collectible judgment from the beneficiary. ...

The language slipped into the health bill would ... allow freelance lawyers to file them on behalf of the government--without asking permission--and collect rich bounties if they manage thereby to extract money from the defendants. Lawyers will recognize this as a "qui tam" procedure, of the sort that has led to a growing body of litigation filed by freelance bounty hunters against universities, defense contractors and others alleged to have overcharged the government. ...

Freelance private lawyers could and often would sue everyone in sight and employ the most hardball tactics along the way. If the language about epidemiological and statistical evidence is indeed meant to pave the way for future suits against liquor, gun or cheeseburger purveyors, it represents a stealth attempt to restore (via fine print) a lawyerly dream that the courts have almost uniformly rejected over the past decade, as well as personally enrich lawyers with fees that could soar beyond even those of the scandalous tobacco-Medicaid litigation.

Full Justification and Long URLs

A while back, my friend and colleague Eugene Volokh noted a problem caused by long URLs for those of us whose written product typically requires full justification:

When I include a URL — or another long continuous chunks of text — in a footnote in Microsoft Word, the preceding line often ends up having lots of white space. The usual fix for that is to include an optional hyphen, but I don't want the URL to be hyphenated; I want it to break at a slash or a dot. At times, I've entered manual line breaks, but that's not optimal, because I don't want it to break at a fixed place; I want it to break at the place that yields the least internal white space, and that might change as the earlier lines in the footnote change, or as the article gets reformatted.

There is an obvious solution; namely, to shorten the URL to a manageable length using Tinyurl.com. Because a tinyurl is permanent, it does the same redirecting job as the full URL, while avoiding odd looking spacing problems. I've decided to start using the Tinyurl and let the law review editors fix it if they want.

DC: Unsafe at any speed?

According to Allstate, the District of Columbia is the riskiest city in which to drive from an accident perspective (although James Joyner quibbles with the methodology). I find that statistic quite interesting, given that DC also has more red light and speed cameras than almost any metro area in the country. Indeed, DC has nearly 10% of all the traffic cameras in the United States. (The Los Angeles / Riverside / Orange County Area has one more than DC, but our metro area has 4,850 sq. mi, while DC has 61, so the density of traffic cameras in DC is vastly greater than here in LA.)

Could it be that DC really is less concerned with safety than it is with revenue?

Speed cameras in Washington, DC are targeting drivers from Maryland. Only one out of every five photo tickets issued last month went to a resident with a say in local District elections. The bulk of the citations, 64 percent, were directed to drivers from Maryland. The remainder went to vehicles registered in Virginia and other states. ...

DC has for several years tried to impose a two percent income tax levy on workers who live in neighboring states. Congress blocked this "commuter tax" in 1973, but for the past thirty years, city officials have looked for new ways around the law. Last November, a federal appeals court panel considered a District government lawsuit designed to allow the tax. Judge John Roberts, now chief justice of the Supreme Court, joined in the unanimous ruling upholding the 1973 law.

Figures also show that mobile speed cameras were used primarily along major commuter routes including New York Avenue, Interstate 295 and along the border between DC and Maryland. Other cameras are set to trap Virginia commuters who must cross a limited number of bridges to enter the city. On the most popular route, the 14th Street Bridge, a red light camera lies in wait at the first intersection one comes to upon entering the city.

The simple fact is the speed and red light cameras are about revenue. So DC being the riskiest city (by at least one measure of accidents) and having the most traffic lights are perfectly consistent.

Indeed, according to some studies, there may be causation and not just correlation (admittedly, the evidence is very mixed).

Revising the Outer Space Treaty

My friend and official PB.com international law adviser Tony Arend asks if the time is ripe for a new Outer Space Treaty:

Forty years ago–on July 20, 1969, the Lunar Excursion Module, The Eagle, touched down on the moon. The following day, Neil Armstrong set foot on the lunar surface, uttering one of the most famous phrases in history– ““That’s one small step for [a] man, one giant leap for mankind”

As a 10-year old child, I watched this momentous event on our little black-and-white television set. And at some time during the coverage, I remember might have been the first reference to international law that I can recall. One of the commentators noted that when the American flag was placed on the moon that did not indicate that the United States was claiming sovereignty over the moon. Rather, the commentator noted, there was a treaty that prohibited states from making territorial claims to the moon.Indeed, there was- the 1967 Outer Space Treaty.

Forty years later, the Outer Space Treaty has generally served the international community well. No state has claimed sovereignty over the moon or other celestial bodies. States have not placed nuclear weapons or other weapons of mass destruction in orbit or on the moon or anywhere else in outer space as prohibited by Article IV.

Nonetheless, in the wake of a sea-change of events since 1967, one might argue that it is time for a revision to the Treaty. Steve Freeland and Donna Lawyer write in the July 20, 2009 Sydney Morning Herald:

The development of space-related technology has grown exponentially since those pioneering steps by Armstrong. Not only has the use of outer space become strategically vital for the major powers, but space-based technologies have become an essential part of daily life. All of us benefit from this when we watch direct satellite broadcasts of the Ashes, use GPS systems in our cars, listen to weather forecasts derived from remote sensing satellites and fly in aircraft that rely on satellite navigation.

Not surprisingly, the international law of outer space has struggled to keep up with this breathtaking advance in technology. This is a big challenge, more so in view of the strategic and military potential of outer space. While the UN is anxious to avoid a “weaponisation” of outer space, it is clear the conflicts of the 21st century are likely to involve extensive use of space technologies.

True enough. This then leads one to question whether efforts should be made to adapt the Outer Space Treaty in light of new technologies and military strategies. What do you think?

I think that human space exploration in the West increasingly will be privatized. Budget constraints in an era of burgeoning deficits likely mean that massively costly human space exploration will not be funded in the near term. Obama is already shifting NASA priorities from planetary to earth science and, moreover, has ordered a blue ribbon review of the whole agency's purpose and goals.

At the same time, we see a host of private space endeavors, including Virgin Galactic, XCOR, and the like.

It's not at all clear that the Outer Space Treaty as currently fashioned is adequate to deal with private exploitation of space. The ABA Journal explains that:

In viewing space as the province of mankind, the Outer Space Treaty borrows principles from customary maritime law, which guarantees peaceful passage through navigable waters by ships of all nations. But in application, the Outer Space Treaty is more similar to the Antarctic Treaty System, a series of international agreements that call for cooperative management of Antarctica as a nonmilitarized environment and put off claims of sovereignty for an indefinite period.

But as the prospects for commercial ventures in space increase, it will be necessary to address the issue of who will be allowed to profit from the fruits of those ventures, say lawyers in the field.

“The current system works if nations accept a détente in space and all the resources are only used for the benefit of all mankind,” Keefe says. “If that’s the case, then there will never be commercialization of space and there will be little benefit for mankind. I know that’s a cynical capitalist viewpoint, but I think if everyone is afraid to launch a venture because they might not be allowed to profit from it, then nothing will happen.”

Not that that's going to stop Richard Branson:

Branson and other space entrepreneurs plan to launch their space ventures whether the law is ready for them or not, says Heidi Keefe, a partner in the Palo Alto, Calif., office of White & Case who chairs the Special Committee on Space Law in the ABA Section of Science and Technology Law. “Branson’s approach has been that he’d rather beg for forgiveness later than ask for permission now, and that is what may be needed to give space law a kick,” she says.

The obvious risk is that space will become the next arena in which the tragedy of the commons plays out. Indeed, we are already getting there, as The Economist observed:

The tragedy of the commons meets the final frontier

THE Earth’s orbit is getting crowded. The past few years have witnessed huge growth in the number of satellites. Unfortunately, wherever civilization ventures it leaves a trail of rubbish. Of the 18,000 tracked objects travelling around the Earth that are larger than 10cm (4 inches), only about 900 are active satellites. The rest is debris—everything from fragments of paint to entire dead satellites and bits of old rockets. Smashed bits of space equipment orbit along with items dropped by astronauts, including tools and the odd glove.

As the pile of rubbish grows, so does the risk of collisions. In the 1970s one NASA scientist pointed out that debris from one collision could go on to create a second, which would create still more debris and more collisions, and so on. Eventually, an entire orbit would be rendered useless for generations.

The orbits around the Earth are too valuable to let this happen. Space is a public common and humanity needs to value it.

In order to encourage private exploration and exploitation of space and to address tragedy of the commons, I propose that a new Outer Space Treaty create a regime for creating and enforcing private property rights in space. After all, private property rights are a recognized solution both for providing incentives for commercial activity and for preventing the tragedy of the commons:

Why was the American buffalo nearly exterminated but not the Hereford, the Angus, or the Jersey cow? Why are salmon and trout habitually overfished in the nation's lakes, rivers, and streams, often to the point of endangering the species, while the same species thrive in fish farms and privately owned lakes and ponds? Why do cattle and sheep ranchers overgraze the public lands but maintain lush pastures on their own property? Why are rare birds and mammals taken from the wild in a manner that often harms them and depletes the population, but carefully raised and nurtured in aviaries, game ranches, and hunting preserves? Which would be picked at the optimum ripeness, blackberries along a roadside or blackberries in a farmer's garden? In all of these cases, it is clear that the problem of overexploitation or overharvesting is a result of the resource's being under public rather than private ownership. The difference in their management is a direct result of two totally different forms of property rights and ownership: public, communal, or common property vs. private property. Wherever we have public ownership we find overuse, waste, and extinction; but private ownership results in sustained-yield use and preservation. Although it may be philosophically or emotionally pleasing to environmentalists to persist in maintaining that wildlife, the oceans, and natural resources belong to mankind, the inevitable result of such thinking is the opposite of what they desire.  ...

Some experts recognize that "In order to facilitate commercialization and colonization, there needs to be a property rights regime established," but argue that a system of pseudo-property rights could be jerry-rigged under the current treaty. But wouldn't it make more sense to have a treaty that was designed from the ground up to promote private property rights? As that same expert observed:

If we do nothing, space will look a lot more like Antarctica than Alaska. Without property rights there will not be adequate investment and space resources will be underutilized. Establishing property rights in space will cost millions, not billions, and can be done decades ahead of any commercialization or colonization. It’s time to set the stage to break out of the exploration mode of Columbus and get on with establishing the regulatory regime to lay the foundation for the next Plymouth Rock.

Mark Cuban Wins a Big Round Against SEC Insider Trading Rap

Last year, I flagged the SEC insider trading case against Mark Cuban:

The Securities and Exchange Commission today charged Dallas entrepreneur Mark Cuban with insider trading for selling 600,000 shares of the stock of an Internet search engine company on the basis of material, non-public information concerning an impending stock offering.
The SEC today announced that:

The Commission's complaint, filed in the U.S. District Court for the Northern District of Texas, alleges that in June 2004, Mamma.com Inc. invited Cuban to participate in the stock offering after he agreed to keep the information confidential. The complaint further alleges that Cuban knew that the offering would be conducted at a discount to the prevailing market price and that it would be dilutive to existing shareholders.
Within hours of receiving this information, according to the complaint, Cuban called his broker and instructed him to sell Cuban's entire position in the company. When the offering was publicly announced, Mamma.com's stock price opened at $11.89, down $1.215 or 9.3 percent from the prior day's closing price of $13.105. According to the complaint, Cuban avoided losses in excess of $750,000 by selling his stock prior to the public announcement of the offering.

You can read the complaint here.

In doing so, I opined that:

My review of the complaint suggests that the SEC has a pretty weak case, even assuming they can prove out the facts alleged, in large part because they'll need to find a court willing to give the rules a liberal construction on one key point.

The court has now ruled. The opinion is available here.

US District Court Chief Judge Sidney Fitzwater was unwilling to give the SEC the liberal construction it needed:

The dispositive question presented by defendant Mark Cuban’s (“Cuban’s”) motion to dismiss is whether plaintiff Securities and Exchange Commission (“SEC”) has adequately alleged that Cuban undertook a duty of non-use of information required to establish liability under the misappropriation theory of insider trading. Concluding that it has not, the court grants Cuban’s motion to dismiss, but it also allows the SEC to replead.

Let me set up the background. Cuban was charged with insider trading pursuant to Section 10(b) and Rule 10b-5. Specifically, he was charged with misappropriating information from mamma.com. The misappropriation theory of insider trading liability is a recognzed basis for liability, under which the defendant need not owe a fiduciary duty to the investor with whom he trades. Likewise, he need not owe a fiduciary duty to the issuer of the securities that were traded. Instead, the misappropriation theory applies when the inside trader violates a fiduciary duty owed to the source of the information. As eventually refined, the misappropriation theory imposed liability on persons who (1) misappropriated material nonpublic information (2) thereby breaching a fiduciary duty or a duty arising out of a similar relationship of trust and confidence and (3) used that information in securities transaction, regardless of whether they owed any duties to the shareholders of the company in whose stock they traded.

The SEC will claim that the Mamma.com CEO was the source of the information and that Cuban owed him a duty of confidentiality arising not out of a traditional fiduciary relationship but rather out of a similar relationship of trust and confidence. The SEC will then rely on Rule 10b5-2, which provides "a nonexclusive list of three situations in which a person has a duty of trust or confidence for purposes of the 'misappropriation' theory...." Crucially, the Rule purports that such a duty exists whenever someone agrees to maintain information in confidence. Rule 10b5-2's imposition of liability whenever someone agrees to maintain information in confidence is inconsistent with the emphasis in Chiarella and its progeny on the need for a duty of disclosure that arises out of a relationship of trust and confidence. Whether the SEC has authority to create a rule imposing misappropriation liability on the basis of an arms-length contractual duty of confidentiality--as opposed to a fiduciary duty-based duty of confidentiality--had not been tested until this case. I have long thought the SEC lacked authority to adopt the rule. (See my book Securities Law: Insider Trading (Turning Point Series).

Alternatively, the SEC might have tried to show that the Mamma.com CEO and Cuban had a pattern or practice of sharing confidences such that the recipient of the information knows or reasonably should know that the speaker expects the recipient to maintain the information's confidentiality. This would also satisfy Rule 10b5-2. In addition, the Chestman case suggested that such a pattern could also give rise to fiduciary relationships, at least among family members.

Turning to the Cuban case, Judge Fitzwater correctly observed that:

Building on Chiarella, the Supreme Court concluded in O’Hagan that, like the classical theory, the misappropriation theory also involves deception within the meaning of § 10(b). O’Hagan teaches that the essence of the misappropriation theory is the trader’s undisclosed use of material, nonpublic information that is the property of the source, in breach of a duty owed to the source to keep the information confidential and not to use it for personal benefit.

I argued in that old blog post that:

Unfortunately for Cuban, there are some cases that suggest a mere contractual obligation of confidentiality suffices [to establish the requisite duty]. See, e.g., SEC v. Talbot, 430 F. Supp.2d 1029 (C.D. Cal. 2006) (holding that absent an express agreement to maintain the confidentiality of information, the mere reposing of confidential information in another does not give rise to the necessary fiduciary duty). I believe these cases were wrongly decided. Chiarella and Dirks clearly require something more than a mere contract. They require a fiduciary relationship. In turn, a fiduciary relationship requires more than just an arms-length contract.... 

Judge Fitzwater did not agree with that view, holding that:

Because under O’Hagan the deception that animates the misappropriation theory involves at its core the undisclosed breach of a duty not to use another’s information for personal benefit, there is no apparent reason why that duty cannot arise by agreement.

Yet, even though he got that wrong (IMHO), he got the next bit of the analysis right:

The agreement, however, must consist of more than an express or implied promise merely to keep information confidential. It must also impose on the party who receives the information the legal duty to refrain from trading on or otherwise using the information for personal gain. With respect to confidential information, nondisclosure6 and non-use are logically distinct. A person who receives material, nonpublic information may in fact preserve the confidentiality of that information while simultaneously using it for his own gain. Indeed, the nature of insider trading is such that one who trades on material, nonpublic information refrains from disclosing that information to the other party to the securities transaction. To do so would compromise his advantageous position.

Outstanding. The use/confidentiality distinction is something my insider trading scholarship has long emphasized, but which all too often courts have ignored. As I explained in my book on insider trading:

Although [the leading Supreme Court precedent in Dirks v. SEC] clearly requires that the recipient of the information in some way agree to keep it confidential, courts have sometimes overlooked that requirement. In SEC v. Lund, for example, Lund and another businessman discussed a proposed joint venture between their respective companies. In those discussions, Lund received confidential information about the other's firm. Lund thereafter bought stock in the other's company. The court determined that by virtue of their close personal and professional relationship, and because of the business context of the discussion, Lund was a constructive insider of the issuer. In doing so, however, the court focused almost solely on the issuer's expectation of confidentiality. It failed to inquire into whether Lund had agreed to keep the information confidential.

Lund is usefully contrasted with Walton v. Morgan Stanley & Co. Morgan Stanley represented a company considering acquiring Olinkraft Corporation in a friendly merger. During exploratory negotiations Olinkraft gave Morgan confidential information. Morgan's client ultimately decided not to pursue the merger, but Morgan allegedly later passed the acquired information to another client planning a tender offer for Olinkraft. In addition, Morgan's arbitrage department made purchases of Olinkraft stock for its own account. The Second Circuit held that Morgan was not a fiduciary of Olinkraft: "Put bluntly, although, according to the complaint, Olinkraft's management placed its confidence in Morgan Stanley not to disclose the information, Morgan owed no duty to observe that confidence." Although Walton was decided under state law, it has been cited approvingly in a number of federal insider trading opinions and is generally regarded as a more accurate statement of the law than Lund. Indeed, a subsequent case from the same district court as Lund essentially acknowledged that it had been wrongly decided:

What the Court seems to be saying in Lund is that anytime a person is given information by an issuer with an expectation of confidentiality or limited use, he becomes an insider of the issuer. But under Dirks, that is not enough; the individual must have expressly or impliedly entered into a fiduciary relationship with the issuer.

Even this statement does not go far enough, however, because it does not acknowledge the additional requirement of an affirmative assumption of the duty of confidentiality.

In contrast, Judge Fitzwater in the Cuban case correctly observed that an agreement could give rise to misappropriation liability only if it includes both a duty of confidentiality and a duty of non-use. 

Judge Fitzwater then went on to determine that, to the extent SEC Rule 10b5-2 purports to permit the imposition of liability solely where there was a duty of confidentiality, the SEC lacked authority to adopt it:

Because Rule 10b5-2(b)(1) attempts to predicate misappropriation theory liability on a mere confidentiality agreement lacking a non-use component, the SEC cannot rely on it to establish Cuban’s liability under the misappropriation theory. To permit liability based on Rule 10b5-2(b)(1) would exceed the SEC’s § 10(b) authority to proscribe conduct that is deceptive. This is because, as the court has explained, under the misappropriation theory of liability, it is the undisclosed use of confidential information for personal benefit, in breach of a duty not to do so, that constitutes the deception.

Because the SEC only pled that Cuban's agreement was one of confidentiality, the complaint had to be dismissed. He allowed them leave to replead, alleging the requisite agreement, but there are no public facts to support a claim that Cuban agreed both to keep the information confidential and to refrain from using it for personal gain.

FYI: I was one of five amici curiae who filed a brief in support of Cuban:

In a brief filed Monday, law professors from Harvard University, Yale University, the University of Chicago, the University of California at Los Angeles and Southern Methodist University argue that the U.S. Securities and Exchange Commission made a legalistic land grab when it sued Cuban for insider trading involving a Canadian company, Mamma.com.

The professors argue that the SEC's case rests on a regulation that is "an invalid exercise of the agency's rule-making authority" and exceeds the scope of case law established by the U.S. Supreme Court. ... 
The law professors who signed Monday's brief are SMU's Alan Bromberg, Harvard's Allen Ferrell, Yale's Jonathan Macey, Chicago's Todd Henderson and UCLA's Stephen Bainbridge. ... 
"In the context of a business relationship, a confidentiality agreement alone is insufficient to create a fiduciary or similar relationship of trust and confidence between the parties," the five professors wrote in their brief, echoing earlier filings by Cuban's team.

The WSJ's Law Blog calls us "five big-wig law professors." Heh.

I want to use my Apple tablet for Kindling

Reports are that Apple is planning a netbook/tablet computer that would priced around $800:

Is Apple looking to build the best of both words, and combine the two? ... According to CEO Jobs, Apple doesn't know how to build a $500 notebook that wouldn't be a glorified paperweight. Jobs' netbook opposition, however, has led to speculation that if Apple isn't churning out a netbook, then it is likely to spit out a touch-screen tablet -- think a giant iPod Touch -- sometime this year, a theory that would make more sens
But news sites like the China Times contend that an Apple netbook is happening, and it will happen as soon as October of this year. China Times also indicates that a touch-screen tablet is on the way. Wait a second. Does that mean Apple is doing a touch-screen tablet that's also a netbook? That's essentially what China Times is saying.
Leave it to Apple to take two widely popular form-factors, combine them and make them their own hybrid as a touch-screen tablet netbook. Of course, as Apple does with everything, it's changing the rules a little bit. China Times indicates that Apple's touch-screen tablet netbook will measure about 9.7 inches, a departure from the standard 10.1-inch netbook size. Additionally, Apple's netbook, or tablet, or tab-book, or whatever the heck it'll be called, will scrap the traditional clamshell format of netbooks for a tablet format.

This might be the coolest Apple product yet, provided it can run both Mac and iPhone apps. Email would be easier than on the iphone. But the possibilities are even more impressive. Imagine, for example, being able to use the Kindle application on a 9.7 tablet. Who would need a Kindle DX? Tetris could definitely benefit from extra real estate. Ditto Youtube and iPod video.

For serious business trips, I suppose I'd still want to pac my MacBook. For short pleasure trips or even just hanging out around town, however, the netbook would be very cool.

Having it on the market in time for Christmas would be very, very cool.

Smith on Health Care Reform

One reason Tom Smith is one of my favorite bloggers is the way he always pulls his punches:

I expected the House to come up with a really stupid way to finance medical "reform" and they did not disappoint.  ... If health care does pass in anything like the House form, it will be really, really bad.  In addition to my prospects of a comfortable, pain free old age with all the drugs I need to keep those important parts running being much diminished, it will be a budget buster.  The talk of Save Money By Health Care Reform! is utter rubbish that no one believes, cheaper than cheap talk.  Indeed, it would be so bad, I just don't believe our Senate, philandering, ignoble squids though they may be, would do something so irresponsible. I expect the House to behave like rabble and they have done so.  So my cautious hopes lay with the Senate.

Ditto. Go read the whole thing, for a great smackdown of "our young President."

PS: I really liked this comment someone left on his post:

Nonsense. The best 30-year-old minds in the country are working around the clock on this problem. What could go wrong?

The best trend ever

Mt cousin Hannah Wallace is a food and travel journalist, who occasionally flags items for me. Here's her latest, a blog post by Scott Gold, which describes an item that must be seen to be be believed (He has a picture):

I recently took a long vacation with my family to Portland, Oregon, foremost to celebrate my brother’s college graduation, but perhaps more importantly — we being a family of New Orleanians — to do as much Pacific Northwest eating as we could manage. ...At the diminutive, elegant Le Pigeon, listed nonchalantly among the other appetizers, was this:

Foie gras jelly donut, $16

No way…could it really be? I spoke the words aloud, just to make sure something in my cranium wasn’t all tangled up like an Oliver Sacks patient, causing me to see things that weren’t actually there. ”Foie. Gras. Jelly. Donut,” I said. And then, “Holy shit.” Now, I normally try not to swear in front of my parents, but some things just have to be said. I needed to order it - the decision was made as soon as I saw the words. I wasn’t really even in the mood for it, but when confronted with something so outrageous, all will power is lost. It’s as though the menu had performed the Jedi mind-trick on me: “You will have the foie gras jelly donut.” ”I will have the foie gras jelly donut.” When the server came to take our orders, I pointed at the menu and asked, simply, “Seriously?” ”Oh, yes,” he said. Oh well, I thought. I guess we’re going to do this.

When my appetizer arrived, it was both exactly and absolutely nothing like I’d expected. The fatty liver wasn’t incorporated into the donut — it wasn’t a foie-filled pastry — nor was it some sort of mousse cleverly disguised as chocolate frosting. There was no subtlety about the dish at all, which made it that much more brazen. It was, quite literally, a house made jelly donut topped with a generous lobe of seared foie gras, with yet another lobe of foie on the side. It was fried fat topped with seared fat, plain as can be. ... When I’ve told people about this, once their incredulity subsides, they always ask, “Did you like it?” Well, yes, of course I liked it. Animal fat — particularly of the engorged liver variety — has a way of injecting itself directly into the pleasure centers of your brain, not unlike a marvelous drug. Which is pretty much the reaction I had after consuming the thing, an intense wave of pleasure followed not long thereafter by a sudden crash, and feelings of embarrassment and guilt. As I sat there, dazed and sweating, I felt hung-over, bordering on ashamed. ”Dear Lord,” I whispered, “what have I done to myself? I still have an entree coming! Will I survive?”

Which is not to say that it wasn’t a uniquely wonderful experience. Le Pigeon’s executive chef, Gabriel Rucker — a 2007 Food and Wine Best New Chef — clearly knew what he was doing. He’s become part of a new breed of cook, the kind that brashly gives the middle finger salute to all conventional wisdom regarding food, health and nutrition. ... This trend is obviously a backlash, a thumbing of collective noses against years of picky eaters, sauce-on-siders, vegans and other dietary malcontents so frequently bemoaned by fine-dining chefs, as well as a celebration of that delightful category of ingredients that will likely send you — both literally and figuratively — to heaven. Moderation and good common dietary sense have no place here. Foie gras jelly donuts, on the other hand…

To tell you the truth, I welcome this change.

Me too. Fight the power!

Congress and the auto dealers

No real surprise here:

General Motors may have emerged from bankruptcy-court protection, but its headaches are far from over.

Next up, its dealers. Or should we say its soon-to-be-former dealers.

More than a hundred dealers from that category are to gather on Capitol Hill today, pushing Congress to pass the Automobile Dealer Economic Rights Restoration Act, which was spurred by the plans of GM and Chrysler to close more than a combined 3,300 of their dealers. ...

“All we ask for is to run our business. If we fail, we fail because of our poor business performance. But we refuse to be forcefully closed down,” said Jack Fitzgerald, one of the initiators of the bill and a longtime auto dealer in Maryland. “Letting the market decide is a simple solution to this complex problem and the reason why the bill is getting massive support.”

It will be interesting to see how that argument plays out amid concerns about the federal government’s role in the new GM. An early indication might have come in a House Appropriation Committee vote last week, 60-0, to approve an amendment to the appropriation bill funding the White House and the Treasury Department. That amendment asked for restoration of the dealers’ economic rights prior to GM’s bankruptcy filing. “Even if it were necessary for auto makers to shrink their dealer body to be financially healthier, they need to choose carefully who to close down because tens of thousands jobs will be lost because of that,” says Rep. Roscoe Bartlett, a co-sponsor of the dealers bill in the House.

This is the problem with the government owning new GM--it's 99.99% certain that the government will not let GM make economically rational decisions that negatively impact politically powerful constituencies. Once that dam breaks, moreover, it will be harder and harder to prevent future political interference. If this bill passes, for example, it becomes all the more likely that Congress will interfere with GM plans to shutter factories. Likewise, we can expect Congress to do things like objecting to Bob Lutz's plan to keep importing the Australian-built Pontiac G8, rebadged as a Chevy Caprice. Congress will want jobs in the US, not the USA Australia.

The Dutch Right of Inquiry

The Defining Tension blog posts on "the right of inquiry," which we learn "is a very popular and important avenue for corporate litigation in the Netherlands; the framework as such does not exist in other countries." Certainly, I'm not aware of any US corporate law equivalent. The post by Bastiaan Assink relates that:

The right of inquiry entitles shareholders - and trade unions, as well as some others, including holders of depository receipts - who own either 10% of the outstanding stock or shares with a nominal value of at least Euro 225.000 (or less if provided by the corporation's articles of association), to request the Enterprise Chamber of the Amsterdam Court of Appeal to review the course of action followed by/the affairs of certain legal entities, including corporations. ...

In the so-called 'first phase' of inquiry proceedings, one of the central questions is whether there are 'well founded reasons to doubt the correctness of the course of action followed by the corporation' (section 2:350(1) DCC). If the answer is yes, the court may order an inquiry - after having balanced all the interests involved, including that of the corporation - and appoint one or more investigators. Other important questions are (a) whether the plaintiff is authorized to make the request (typically: does he meet the shareholding threshold?) and (b) whether the plaintiff (i) has informed the management board and supervisory board in writing of his complaints first and (ii) has given the corporation a reasonable period to investigate the complaints and take the necessary measures. The first phase ends when the investigators file their report with the court. This first phase is an independent proceeding: if the plaintiff wants to proceed with the inquiry proceeding, he will have to file a new request, which starts the so-called 'second phase'.

In the second phase of inquiry proceedings, the court determines upon request, based on the investigators' report, whether the corporation has followed an 'obvious incorrect course of action' (section 2:355 DCC). This can be framed as clear mismanagement. Upon request, and if such mismanagement is established, the court can take one or more measures to put an end to this mismanagement. The court can for example nullify decisions taken by organs of the corporation, fire directors, or even order the dissolution of the corporation. The list of possible measures is limited....

... the right of inquiry does not center around liability related questions, as it is not a proceeding primarily designed to establish liability of actors in the corporation for damage suffered by the corporation. If litigants want to initiate liability proceedings, they will have to address a different court in different proceedings. Sometimes inquiry proceedings are used as a stepping stone for liability proceedings, as it may be easier for a plaintiff to make his case in liability proceedings with the investigators' report in hand. Although a determination of mismanagement in inquiry proceedings does not automatically result in director liability, such a determination will generally give a plaintiff in liability proceedings a head-start, as the conduct reviewed by the Enterprise Chamber will typically be more or less the same as the conduct complained of in liability proceedings and the Enterprise Chamber is generally seen as a court specialized in business matters.

I suppose the closest analogy in US law is the provision in Model Business Corporation Act section 8.09(a) for judicial removal of directors, but that provision requires much more serious misconduct than mere mismanagement:

The ... court of the county where a corporation’s principal office (or, if none in this state, its registered office) is located may remove a director of the corporation from office in a proceeding commenced by or in the right of the corporation if the court finds that (1) the director engaged in fraudulent conduct with respect to the corporation or its shareholders, grossly abused the position of director, or intentionally inflicted harm on the corporation; and (2) considering the director’s course of conduct and the inadequacy of other available remedies, removal would be in the best interest of the corporation.

The commentary to that section further indicates that policy disputes and business judgment arguments should be left to the shareholders usual corporate governance powers such as voting and suing for damages. In addition, this provision hardly could be described as "popular" or "important." To the contrary, judicial removal of directors is rare. After all, why should we think that judges (or shareholders, for that matter) are well-positioned to evaluate the merits of board actions? To the contrary, the logic of the business judgment rule is that, as I argued in The Business Judgment Rule as Abstention Doctrine, Justice Jackson famously observed of the Supreme Court: “We are not final because we are infallible, but we are infallible only because we are final.” Neither courts nor boards are infallible, but someone must be final. Otherwise we end up with a never ending process of appellate review. The question then is simply who is better suited to be vested with the mantle of infallibility that comes by virtue of being final—directors or judges?

Corporate directors operate within a pervasive web of accountability mechanisms. A very important set of constraints are provided by a competition in a number of markets. The capital and product markets, the internal and external employment markets, and the market for corporate control all constrain shirking by directors and managers. Granted, only the most naïve would assume that these markets perfectly constrain director decisionmaking. It would be equally naïve, however, to ignore the lack of comparable market constraints on judicial decisionmaking. Market forces work an imperfect Darwinian selection on corporate decisionmakers, but no such forces constrain erring judges. As such, rational shareholders will prefer the risk of director error to that of judicial error. Hence, shareholders will want judges to abstain from reviewing board decisions.

Not all decisions, of course. Self-dealing and the like are appropriately subject to judicial review. Yet, mere allegations of mismanagement would not rise to that level.

Eugene Volokh Spanks Ann Bartow

Here

Slow Food in Slovenia

My cousin Hannah Wallace is a food and travel journalist and blogger. She had a really interesting article on food tourism in Slovenia in the NY Times recently:

Agricultural tourism is not new in Slovenia, which is about the size of New Jersey and just east of Italy and south of Austria. As early as the 19th century, residents of Trieste would spend summer weekends on farms in the Karst.

Farm holidays became popular again after World War II, said Renata Kosi, Slovenia’s advisor for development of rural tourism, and have recently taken off, with the number of kmetije doubling to more than 600 in the past decade , as farmers looked to supplement their incomes. The average Slovenian farm is six hectares, less than 15 acres, Ms. Kosi said, and without some extra source of funds, “you can’t survive if you only have six hectares.”

The tourist farms offer activities like horseback riding and swimming (the Skerlj farm has an inviting swimming pool and lets guests use its bicycles), and guests who are of a mind to sample the country life in earnest can sometimes pitch in baling hay or picking cherries.

Typical rooms recall those in a Swiss hut: spare but immaculate, with lots of unfinished wood. Prices are a fraction of those at a tourist hotel.

But the outstanding attraction is the food.

Why ObamaCare May Well Go the Way of HillaryCare

Mickey Kaus:

Obama is running into political difficulty because he's selling the middle class a pain sandwich--more taxes in exchange for more health care cuts.

I think that's exactly right. Those of us in the middle class with health insurance and doctors we like see nothing in ObamaCare that would improve our situation and only the serious risk of ever-increasing taxes and rationing.

The Ultimate Kindle Accessory: Smell of Books

Does your Kindle leave you feeling like there’s something missing from your reading experience?
Have you been avoiding e-books because they just don’t smell right?
If you’ve been hesitant to jump on the e-book bandwagon, you’re not alone. Book lovers everywhere have resisted digital books because they still don’t compare to the experience of reading a good old fashioned paper book.
But all of that is changing thanks to Smell of Books™, a revolutionary new aerosol e-book enhancer.
Now you can finally enjoy reading e-books without giving up the smell you love so much. With Smell of Books™ you can have the best of both worlds, the convenience of an e-book and the smell of your favorite paper book.

I went with Classic Musky Scent.