Lecturer and Other Affiliate Scholarship Series

Bad Policy For Good Policies: Article 9's Insurance Exclusion

Andrew Verstein — Wed, 01 May 2013 13:46:18 PDT

Article 9 of the Uniform Commercial Code excludes from its scope any transfer of an interest in a life insurance policy. Thus, any lender whose security is a life insurance policy may not look to the UCC to determine her rights. This Article argues that the exclusion should be eliminated because it leaves insurance governed by antiquated and problematic law. Three specific problems are considered:non-UCC law does not have a satisfactory alternative to UCC perfection; non-UCC law is insufficient to prevent lenders from abusively taking more than their share of value from defaulted policies; and non-UCC law allows insurance companies to hinder securitization through the reservation problem.‖ The result is that Americans borrow $121 billion worth of policy loans, almost all of which comes without serious competition. Eliminating the life insurance exclusion will rationalize the law of lending in this area, and improve prospects for a secondary market.

Misregulation Of Person To Person Lending

Andrew Verstein — Tue, 30 Apr 2013 07:46:50 PDT

Amid a financial crisis and credit crunch, retail investors are lending a billion dollars over the Internet, on an unsecured basis, to total strangers. Technological and financial innovation allows person-to-person (“P2P”) lending to connect lenders and borrowers in inspiring ways never before imagined. However, all is not well with P2P lending. The SEC threatens the entire industry by asserting jurisdiction with a fundamental misunderstanding of P2P lending. This Article illustrates how the SEC has transformed this industry, making P2P lending less safe and more costly, threatening its very existence. The SEC’s misregulation of P2P lending provides an opportunity to theorize about regulation in a rapidly disintermediating world. The Article then proposes a preferable regulatory scheme designed to preserve and discipline P2P lending's innovative mix of social finance, micro lending, and disintermediation. This proposal consists of regulation by the new Consumer Financial Protection Bureau.

Index Theory: The Law, Promise, And Failure Of Financial Indices

Andrew Verstein — Tue, 23 Apr 2013 13:38:33 PDT

Financial indices, like the S&P 500 or the Consumer Price Index, have become a ubiquitous feature of our financial markets. One index, the London InterBank Offered Rate ("Libor"), may be the world’s most important number, an interest rate benchmark upon which hundreds of trillions of dollars depend. Yet, almost every day new revelations emerge that Libor was tampered with during the height of the financial crisis by one or many of the world's most prominent banks, with billions of dollars potentially misappropriated. This index disruption has attracted tremendous interest from regulators, private litigants, and market observers. Despite their importance, however, financial indices are poorly understood, and almost completely unstudied. In this Article, we explain why and how people use financial indices as well as how they are created. We show human discretion and value judgment to be essential ingredients in even the most "objective" indices. We then develop a taxonomy of financial indices, illustrating how the risks indices can pose, and the solutions applicable to those risks, are intimately related to the motivation that drives the index's creation. We show that the manipulation of indices is unsurprising given the precarious state of intellectual property rights in indices. While many call for prosecuting or regulating the Libor banks, our novel solution is to strengthen property rights for those who create financial indices.

Revolution In Manipulation Law: The New CFTC Rules And The Urgent Need For Economic And Empirical Analyses

Andrew Verstein — Tue, 23 Apr 2013 13:38:32 PDT

Three major banks have now admitted that their employees manipulated worldwide interest rates through the London Interbank Offered Rate (Libor), the most widely used interest rate index. Libor is the interest rate term for trillions of dollars of swaps and loans, and its manipulation may have been used to extract billions of dollars. These allegations come just as commodities manipulation law has been dramatically reformed and the Commodity Futures Trading Commission (CFTC) given vast new regulatory powers. This article provides the first extended, scholarly analysis of the CFTC’s new anti-manipulation rules. We consider the difficulty the rules address: Commodities manipulation claims have traditionally faced nearly insuperable obstacles to success in prosecuting manipulations like that of Libor. We then analyze the new rules, including their extension of the CFTC's powers to cover the swap market. The new rules appropriately lower the standards of pleading and proof, and yet the breadth of the new rules invites abuse. Both to implement the new rules and to prevent overuse, we argue for more elaborate, sophisticated, and creative economic analysis than ever before. We provide a wide-ranging overview of empirical tools for assessing manipulation claims, while re-engaging a decades-old debate on the place of empiricism in the laws of evidence and intent. We provide detailed examples of how manipulation screens are necessary to complete the Dodd-Frank Wall Street Reform and Consumer Protection Act's (Dodd Frank)'s revolution in manipulation law.

Risky Mail: Concerns in Confidential Attorney-Client Email

Rebecca Bolin — Sun, 04 Mar 2012 10:39:21 PST

Early in the days of attorney-client email, David Hricik wrote a soothing law review article, Lawyers Worry Too Much About Transmitting Client Confidences By Internet E-mail, arguing that email had risks but could be assumed private for the purpose of professional ethics. The ABA agreed in 1999, issuing a formal opinion that encrypting email was not required by ethical standards, and most jurisdictions followed suit. The 1999 ABA opinion persists today, despite being dangerously technology-specific, focused on almost obsolete technology, and over ten years later its legal foundation remains unsettled.

I present three reasons why attorneys should be concerned about the risks to confidentiality in attorney-client email: legal uncertainty about general privacy expectations for email, broad waivers of email privacy through provider policies, and unrelated disclosure by third parties. Case-specific issues ¬¬have become more important to determine ethical duties in confidential emails: manifold local privacy laws, local ethical standards, and provider policies.

At least one type of email, employer-provided email, is no longer considered confidential in this context, a known ethical hazard for attorneys. In the context of Fourth Amendment law, email privacy remains unsettled, even after the landmark Sixth Circuit decision in Warshak. Legal, authorized third-party access now poses a serious risk to confidentiality in attorney-client email.

Attorneys and clients need to understand these risks before informed consent is possible. Technology-based solutions may be part of broader best practices to protect confidentiality. Attorneys and clients must understand the technology at issue, rather than blindly risking clients’ confidences and their ethical duties on technologies they do not understand.

Democratizing the Economic Sphere: A Case for the Political Boycott

Theresa J. Lee — Sun, 04 Mar 2012 10:27:28 PST

The political boycott, though recently under attack through litigation aimed at compelled disclosure regimes, is a critical tool in constructing American democracy. Defining political boycotts as those refusals by consumers to buy goods or patronize business in order to effect political or social change, this Article is the first paper to place the political boycott at home in all three classic theories underlying the First Amendment: the marketplace of ideas, democracy and self-governance, and self-expression and autonomy. It also places the boycott alongside current campaign finance doctrine via Citizens United v. FEC. Just as money amassed by corporations in the economic marketplace can be used to influence the political, the boycott allows those whose main economic resource is their participation in the market as consumers to aggregate that resource, with other like-minded consumers, to influence the political marketplace. The paper also explores the doctrinal implications of these arguments for ongoing lawsuits challenging compelled disclosure regimes. As-applied challenges to such laws can be granted upon a sufficient evidentiary showing of “threats, harassment, or reprisals.” This Article argues that the boycott cannot be categorized in this way. Especially in the case of initiatives and referenda, the political boycott is a critical tool of petition and should not be considered in this as-applied harassment analysis.

When Machines Are Watching: How Warrantless Use of GPS Surveillance Technology Terminates The Fourth Amendment Right Against Unreasonable Search

Priscilla Smith et al. — Sun, 06 Feb 2011 10:19:30 PST

The use of GPS surveillance technology for prolonged automated surveillance of American citizens is proliferating, and a direct split between the Ninth and D.C. Circuits on whether warrants are required under the Fourth Amendment for such use of GPS technology is bringing the issue to a head in the Supreme Court. A Petition for Certiorari is pending in the Ninth Circuit case which held that warrants are not required, and a second Petition is likely from the Government in the D.C. Circuit case holding that warrants are required. In this paper, we argue first, that where a technology enables invasion of interests at the heart of the Fourth Amendment’s concern -- protection of citizens from arbitrary government intrusions into their private lives -- the Court’s precedents require warrants to prevent abuse, and second, that the type and scope of information collected by prolonged automated GPS surveillance enables governments to monitor a person’s political associations, their medical conditions and their amorous interests, in a way that invades their privacy and chills expression of other fundamental rights.

Our argument differs significantly from previous scholarship by tracing a continuous emphasis in Fourth Amendment jurisprudence on review of the potential for abuse of surveillance methods. Moreover, we are the first to argue that in protecting against abuse the Court has drawn a firm line between technology that simply enhances the natural senses of law enforcement officials, and technology that creates novel, non-biological “senses.”

In Part I of this paper, we trace the origins of the Fourth Amendment’s protections against law enforcement abuse, present evidence that GPS surveillance technology is in fact being abused, and discuss the impact unfettered abuse of the technology will have on the individual rights of citizens. In Part II, we explain the Court’s historic approach to new surveillance technologies, noting that the Court has carefully examined new technologies to prevent any end-runs around legal doctrine from eroding personal privacy, and showing that the Court has always required warrants where technology goes beyond enhancement of senses to the creation of new non-biological “senses.” In Part III, we explain why the Supreme Court’s ruling on the use of beeper technology to enhance visual surveillance in United States v. Knotts, 460 U.S. 276 (1983), does not apply to the use of GPS technology as a replacement for visual surveillance. Finally, in Part IV, we explain how prolonged automated GPS surveillance invades a reasonable expectation of privacy and chills the exercise of core constitutional rights.

Ambivalence and Activism: Employment Discrimination in China

Timothy J. Webster — Wed, 18 Aug 2010 12:21:46 PDT

Chinese courts have not vigorously enforced many human rights, but a recent string of employment discrimination lawsuits suggests that, given the appropriate conditions, advocacy strategies, and rights at issue, victims can vindicate constitutional and statutory rights to equality in court. Specifically, carriers of the hepatitis B virus (HBV) have used the 2007 Employment Promotion Law to bring legal challenges against employers who have discriminated against them in hiring. Plaintiffs’ relatively high success rate suggests official support for making one prevalent form of discrimination illegal. Central to these lawsuits is a broad network of lawyers, activists and scholars who actively support plaintiffs, suggesting a limited role for civil society in the world of Chinese law. While many problems remain with employment discrimination, China has made concrete steps toward repealing a legal edifice of discrimination stretching back decades, and reshaping both policies and attitudes to eradicate discrimination in the workplace.