Constitutional Law and the Regulatory State Case Briefs PDF

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Course Introduction From the Common-Law Regime to the Regulatory State Assignment for 1/9/17: Supp. 1 (How to Brief a Case); p. 1-42 (skim monopolies p. 19-22 and airbags on p. 30-34) Statutes and regulations ("government regulation") trump common law (contract and tort law) Limitations of Tort Law:  Privity of contract o Ex: Winterbottom v. Wright where Winterbottom did not have a K directly with Postmaster-General or Wright so couldn't recover for injury o Made sense in the olden days, but now people don't buy products directly from the manufacturer; often it is through a middle-man like a store MacPherson v. Buick Motor Co. Citation: 111 N.E. 1050 (N.Y. 1916) - N.Y. Court of Appeals Parties: π: MacPherson (injured in car accident); ∆: Buick (manufacturer of automobiles) Procedural History:  MacPherson sued Buick for negligence.  Trial court ruled in favor of MacPherson. Buick appeals.  Narrow construction of the rule  Thomas v. Winchester: even though there was a middleman (druggist) and thus, no privity of K, the seller owed duty of care to customer who bought it from druggist  Loop v. Litchfield: assumption of the risk  Broad construction of the rule  Delvin v. Smith & Statler v. Ray Mfg. Co.: what was the purpose that the product was designed for and if not designed properly, would it cause harm to others? (regardless of privity of K) Facts:    

Buick --> Retailer --> MacPherson Car collapsed --> injuries One wheel was made out of wood and crumbled Buick didn't make the defective wheel; they bought from a manufacturer

Issue: Do car manufacturers owe a duty of care to someone other than the immediate purchaser? / Will the new rule announced in MacPherson cause car manufacturers to inspect component parts? Procedural Decision/Judgment: Yes. Judgment affirmed (in favor of MacPherson). Substantive Decision/Holding (Rule):

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If there is knowledge it would be used by people other than the purchaser without new tests, there is a duty regardless of privity (must be probable danger, not just possible) Def. of dangerous thing: if made negligently it would "place life and limb in peril"

Reasoning:  If wheels weren't sound, injury was foreseeable  ∆ knew car would be used by someone other than the buyer (someone would buy it from the dealership)  Buick was responsible for the finished product and needed to put it through inspection tests Rotche v. Buick Motor Co. Citation: 193 N.E. 529 (Ill. 1934) - Supreme Court of Illinois Parties: π: Nathan Rotche; ∆: Buick Procedural History:  Π sued ∆ to recover for personal injuries  Original case: Cierco Buick Sales Co. was also a ∆  Trial court ruled in favor of π who was awarded $20,000 in damages Facts:        

Π bought a Buick car from Cierco Sales Co. 26 days after buying it he got into a car accident driving at a speed of 30 mph Car was damaged and Π suffered injuries requiring surgery on his left leg and foot Car examination 1: clevis and 2 cotter pins missing Car examination 2: loose cable, clevis missing, cotter pins on right side properly cinched but some free ends on left side were not separated Buick presented testimony that the company has a very thorough inspection process and the car did not have a defect because the car would have been rejected Π argues unspread cotter pin in the brake mechanism led to accident ∆ argues that even if there was a defect, it was an obvious one that could have been easily corrected and they can't be held liable for every accident that occurs

Issue: Did the π produce enough evidence to show that ∆ negligently manufactured or assembled the car? Procedural Decision/Judgment: No. Substantive Decision/Holding (Rule): π has the burden of showing evidence, direct or circumstantial, that ∆ negligently manufactured or assembled the automobile in question. Reasoning:  Testimony (weeks later after the accident occurred) regarding the cotter pins, which didn't prove that the condition of the pins remained unchanged, should have been excluded

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Π drove the car about 600 mi and prior to the accident, said the brakes were fine, and could stop the car at a speed of 25 mph within 6-8 ft. Tire marks before π hit the concrete culvert shows that brakes were applied and operated effectively Car went through several inspections before in possession of π and if there was a defect, wouldn't have passed the inspection Π did not produce enough evidence regarding the condition of the cotter pins BEFORE in possession of π

Notes/Reactions: What does Rotche suggest about whether manufacturers changed their behavior in response to MacPherson?  Notes and Questions 1 states that automakers had begun inspecting all wheels using multiple tests by 1920, just 4 years after MacPherson was decided.  Increased and improved their inspection process Why might tort law still be inadequate as the sole regulatory regime? List all the reasons you can identify.  Tort law may provide too little too late?  Plaintiffs (like MacPherson) can recover even if he provided little evidence regarding negligence because he had a sympathetic jury (so perhaps too much recovery)  Limited for regulating future conduct and preventing future harms: such as latent injuries (don't develop until later) Limitations of common law (generally)  Retrospective vs. Prospective o Retrospective: creates rules based on conduct that has already happened o Prospective: statutes apply to conduct that happens after it has been passed  Reactive vs. Proactive o Reactive: rules are only created after parties bring a lawsuit o Proactive: legislatures can act whenever they want so are in the capacity to prevent injuries  Uncertainty o Difficult to know whether courts are actually changing the law which makes things confusing for the parties o Individual states may have different rules (only need to follow precedent of own jurisdiction) o Cases are resolved based on its particular facts  Institutional Competence o Judges are generalists, not experts on topics, and they rely on the information presented by the parties. Legislatures and agencies conduct their own fact-finding investigations, however. o Legislatures and agencies are able to have contact with more people.  Political Accountability o Judges don't have to worry about their termination so they don't need to worry about listening to the public as much.

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Therefore, sometimes elected officials or their agents are better suited to make some decisions. Parties vs. Interested Participants o Adjudication in court is limited in who can participate o Legislative process is more open. Collective Action Problems

Economic Justifications for Government Regulations: Read the excerpts of the works by Justice Breyer and Professor Sunstein and identify the various justifications for regulation to supplant or supplement the market. Justice Steven Breyer: Regulation and Its Reform: Ability to pay Information Asymmetry: competitors have an advantage to provide info in areas where their product has a market advantage Cognitive Biases  People are limited in their information processing capacity by internal forces (definition)  People undervalue or overvalue certain risks (undervalue things within their control; overvalue things beyond their control) Collective Action Problems  Adjudication before a court is done by private individuals. A person won't file a lawsuit if cost of litigation would likely exceed value of recovery  Methods such as class action lawsuits helps to spread the costs Classic Market Failure Monopoly Destructive competition Public goods (p. 29)   

Nonrivalrous consumption: consumption of a public good by one person does not leave less for any other consumer; encourages "free riders" Nonexcludability: costs of excluding nonpaying beneficiaries who consume the good are so high that no private profit-maximizing firm is willing to supply the good Solution: a) government can subsidize through the tax system or b) government can provide the public good and pay for it through the revenues by the compulsory taxation Externalities

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Monopolies The control of monopoly power: "natural monopoly" is defined as sometimes an industry cannot handle more than one firm The traditional economic rationale for regulation:

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Monopolist will cut back on production so they can increase their price, even though this will result in less demand. Consumers will seek out other alternatives due to these high prices even though they like the monopolist's product better and it is more efficient to produce more of it rather than the alternative No competitors so no real incentive to lower price. Additional bases for regulation Income transfer Fairness: lack of customer alternatives and firms' alternatives for recourse against monopolies Power: those who worry about one firm controlling an essential product favor regulation Rent control or "excessive profits" Economic rent: if firm controls a source of supply that's cheaper than the current market price and that source couldn't supply the entire market Does not mean there is "inefficiency" or "allocative waste." The rationale for regulation Regulation of rents can be problematic. Those who want it desire fairer income distribution. Compensating for spillovers (externalities) Spillover costs/benefits (externalities) are differences between true social costs and unregulated price Classical Rationale for Regulation

Regulating spillover costs is to avoid economic waste. Sometimes something may appear cheaper but in reality there are social costs that make Option B a more desirable one because people are willing to spend a little more (pollution example) Objections to the Classical Rationale Some people argue the solution for spillover costs is not government intervention, but merely the rearrangement of private property rights. Let people bargain privately to for example, get rid of the pollution…problem is there are transaction costs to the bargaining process (sounds like the Coase Theorem??). Due to these costs (like difficulty of banning together), the problem may continue to exist even if people are willing to pay more. Textbook notes that there are still costs to government intervention, as well. Inadequate Information A competitive market requires consumers to have sufficient information about products to make a decision, so in a well functioning market, the amount of information should match what consumers are willing to spend in order to help with their decisionmaking.

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The Classical Rationale for Regulation Why markets for information may not always function well Incentives to produce and disseminate info may be skewed. o Some info is expensive to produce initially but cheap to make available once produced (like word of mouth) so it can benefit people who never pay the original producer o Thus, producers might be hesitant to give that info for fear it will not benefit itself, but only other people. o Some firms have more of an incentive to provide information to help consumers realize the benefit of their product. In addition, this information does not lead to a demand for regulation, but merely government's support to produce and disseminate this info. o Sometimes, however, lead to a demand for regulation. Drug manufacturers are required to provide a label of the generic and brand name, but this informs customers of other competing sellers, which makes them look for lower cost from others. One party may deliberately mislead the other by conveying false info or omitting key facts o Although court remedies exist, the high costs generally are not a large deterrent, nor is reputation. Even after locating potential competing sellers, the buyer might not be able to evaluate the characteristics of the products or services they offer. o Such as a lack of knowledge o Sometimes regulations can help with ensuring this info is provided along with help on how to evaluate that info. The market on the supply side may be insufficiently competitive to provide all the info consumers would willingly pay for.

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Unequal bargaining power Regulation may be justified to achieve a better balance. Rationalization o May be justified in that without it, firms in an industry would remain too small or would lack the organization to produce their product efficiently. Moral hazard o Someone other than a buyer pays for the buyer's purchase o Ex: medical care costs paid for by government or large insurance companies (so paid for by someone else); makes up a lot of our GNP but people don't realize this means less of something else can be produced so may unnecessarily use the system Patternalism

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Pure patternalism: The view that even with full and adequate info, government intervention is needed because people make irrational decisions (government knows better than individuals what's best) Scarcity o Shortages or scarcity can usually be fixed through raising prices, but sometimes one might opt for government intervention instead for reasons such as "public interest" objectives or sudden supply failures

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Airbags (skim)  Sometimes more information is not always better. Consumers need to be able to make sense of that information and this could be complicated.  Car buyers must research air bags now. There's many different locations of them, different availability (some are standard, some are optional, some don't exist at all) Social Justifications for Regulation: Professor Sunstein   

Collective Desires and Aspirations

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Those of citizens and representatives rather than privately held preferences. The choices people make as political participants are different from those they make as consumers. Sometimes consumer behavior is a better or more realistic reflection of actual preferences than political behavior. Political behavior is not the same thing as politics. o Citizens may seek to fulfill individual and collective aspirations in political behavior, not in private consumption o As political actors, people may attempt to satisfy altruistic or other desires which diverge from the self-interested preferences characteristic of markets o Political decisions might vindicate what might be meta-preferences or second-order preferences o People may pre-commit themselves, with regulation, to a course of action they consider to be in the general interest People might not want to engage in specific preferences unless they know others will be contributing as well. Due to social and cultural norms, people may demonstrate goals in political behavior but not markets Government action can respond to these deliberate aspects of politics

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Social Subordination

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Some regulatory statutes attempt not to simply redistribute resources, but to eliminate or reduce the social subordination of various social groups. Some people say statutory intervention is not necessary because it will work itself out. For example, employers that don't discriminate will be advantaged and those that do will be disadvantaged and thus, will face economic pressure. This might not always work.

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Third parties may impose serious costs on those who agree to deal with members of disadvantaged groups.  Employers who hire blacks, gays, etc. customers and others prevent the elimination of discriminatory practices o Discriminatory behavior is sometimes a response to generalizations or stereotypes that may provide a rational basis for market decisions.  An employer might engage in discriminatory behavior not because he is racially prejudice, but because it effects the market o Private preferences of both beneficiaries and victims of discrimination tend to adapt to existing injustice in a way that makes significant change hard to undertake.  People often have a "taste" for discrimination, which antidiscrimination law seeks to prevent  Members of disadvantaged groups may have less incentive to invest in individual and group productivity because the market sends a signal that it is less worthwhile to do so o Markets incorporate the practices and norms of the advantaged group.  One solution is to not put the disadvantage on the same playing field as the advantaged groups, but instead, to change the criteria itself

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Irreversibility, Future Generations, Animals, and Nature

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Irreversibility: if a certain course of conduct is continued, it will lead to a result that current and future generations will be able to recover not at all or if so, at a very high cost Many social and economic regulations focus on future generations. Protection of animals and nature are viewed as either protecting the value to humans or protecting the value of the nature itself (even natural objects deserve respect, irrespective of its interactions with humans).

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Article I  Section 1: Congress (Senate + House of Representatives) has the power to make laws  Section 2 (1) Every two years, voters choose representatives for House of Representatives (2) To be a representative, you must be at least 25 yrs. old, be a US citizen for at least 7 years, and live in the state you wish to represent. (3) The number of representatives is based on state's population. (4) If there is a vacancy, the state's governor has an election to fill it. (5) First, the House chooses its own leader (majority party chooses Speaker of the House). Second, only the House has the power to impeach.  Section 3 (1) Each state has 2 senators who serve for 6 years (2) ??? (3) To be a senator, you must be at least 30 years old, be a US citizen for at least 9 years, and be a resident of the state you wish to represent (4) The President of the Senate is the VP (but only role is to vote when there's a tie) (5) Senate president's pro tempore fills in when the VP is not present

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(6) Senate convicts if the House decides to impeach. (7) With impeachments, the Senate can only remove him from office and ban from future government service Section 4 (1) States organize elections for Senators and House of Representatives, but Congress can make new or alter these regulations. (2) Congress must meet at least 1 time per year. This should be the first Monday in Dec. unless they decide otherwise. Section 5 (1) House and Senate have the power to judge the qualifications of its members. In addition, must have quorum to do business (majority of members present). (2) House and Senate can adopt their own rules of doing business. They can also kick out a member with 2/3 vote. (3) House and Senate must publish an official record of their proceedings (4) The House nor Senate can decide to adjourn for more than 3 days without the consent of the other Section 6 (1) Members of Senate and House are paid by the government. They also can't be arrested or questioned for actions they said in Congress. (2) You can't be a member of Congress and executive/judicial branch Section 7 (1) Tax/tariff legislation must originate in House, but as usual, the Senate can amend bills (2) How a bill becomes a law by president: signed (becomes law); vetoes (sent back to Congress with reasons why where 2/3 vote can override); does nothing (becomes law after no signature 10 days later); if Congress adjourns less than 10 days after sending president the bill it's a pocket veto if he refuses to sign (3) ???

Amendments I-X (Bill of Rights): I: freedom of religion, freedom of speech, freedom of the press, freedom of assembly, right to petition the government II: right to bear arms III: In times of peace, soldiers may not be quarted in one's home without his perm...