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Indiana 

Law 
Review 


Periodical 
Collection 


Volume  36  No.  1  2003 


TRIBUTES 

Norman  Lefstein — Splendid  Dean,  Legitimate  Hoosier 
Randall  T.  Shepard 

Prescription  for  Leadership 
Gerald  L.  Bepko 


Lefstein  to  the  Defense 
Barbara  Allen  Babcock 

ARTICLES 

Cahfornia  Death  Trip 

Lawrence  M.  Friedman 

Paul  W.  Davies 


Enforcing  Settlements  in  Federal  Civil  Actions 
Jejfrey  A.  Parness 
Matthew  R.  Walker 

An  Interpretation  and  (Partial)  Defense  of  Legal  Formalism 

Paul  N.  Cox 

Abundant  Media,  Viewer  Scarcity:  A  Marketplace  Alternative  to 
First  Amendment  Broadcast  Rights  and  the  Regulation  of  Televised 

Presidential  Debates 
Paul  B.  Matey 

NOTES 

Creating  an  Uncomfortable  Fit  in  Applying  the  ADA  to  Professional  Sports 

Jeffrey  Michael  Cromer 

Permitted  Use  of  Patented  Inventions  in  the  United  States:  Why  Prescription 

Drugs  Do  Not  Merit  Compulsory  Licensing 

Kirby  W.  Lee 

"Duel"  Banking  System?  State  Bank  Parity  Laws:  An  Examination  of 
Regulatory  Practice,  Constitutional  Issues,  and  Philosophical  Questions 

John  J.  Schroeder 


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Indiana  Law  Review 


Volume  36 


2002-2003 


Editor-in-Chief 

Kirby  W.  Lee 


Executive  Managing  Editor 

Brian  K.  Groemminger 

Senior  Executive  Editor 

Katherine  E.  McCanna 

Synqtosium  Editor 

Kellye  M.  Gordon 

Articles  Editors 

David  R.  Brimm 

Gregory  A.  Cox 

Jennifer  L.  Dolak 

Elaine  L.  Guidroz 

Brett  J.  Henry 
Julianna  M.  Plawecki 

Kevin  S.  Price 

John  J.  Schroeder 

Terry  Thomson 


Executive  Notes  Editor 

Bonnie  B.  Phillips 

Executive  Articles  Editors 

Homer  W.  Faucett,  III 
Janet  A.  Gongola 


Note  Development  Editors 

Amy  S.  Ford 
Scott  J.  Linneweber 
Joseph  E.  Parrish 
David  E.  Roberts 
Shannon  M.  Shaw 
Laura  E.  Trulock 


Dawn  M.  Adams 

Jeffrey  M.  Cromer 

Polly  J.  Dobbs 

Monica  S.  Doerr 

Adam  Asad  Gaha 


Associate  Editors 


Lucy  A.  Khairy 

Michael  P.  O'Bryan 

Amy  L.  Schoettle 

Andrij  B.  Susla 


E.  Renee  Backmeyer 

Jeffrey  S.  Beck 

Michael  A.  Benefield 

J.  Michael  Bowman 

Jessica  L.  Burks 

Jamie  B.  Dameron 

Paula  K.  Davis 

Shelley  S.  Eraser 

Kevin  J.  Gfell 
Cassandra  A.  Giles 
Anthony  H.  Green 


Members 

J.  Matt  Hamish 

Barbara  L.  Hendrickson 

Heidi  K.  Hughes 

Hannah  Kaufman 

Adam  J.  Krupp 

Melissa  Lindley 

Kevin  L.  McLaren,  Ph.D. 

Alexander  L.  Mounts 

Michael  J.  Natal i 

Kathryn  E.  Ours 

Sarah  L.  Pierce 


Jeffrey  D.  Preston 

Peter  J.  Prettyman 

C.W.  Raines,  111 

Julie  D.  Reed 

Nathaniel  Saylor 

Jared  A.  Simmons 

Christopher  G.  Stevenson 

Allan  A.  Wasson 

Michael  D.  Wilhelm 

Stephen  M.  Worth 

John  C.  Wright 


Editorial  Specialist 

Chris  Paynter 

Faculty  Advisors 

Andrew  R,  Klein 
George  Wright 


Digitized  by  the  Internet  Archive 

in  2011  with  funding  from 

LYRASIS  IVIembers  and  Sloan  Foundation 


http://www.archive.org/details/indianalawreview36103unse 


Indiana  Law  Review 

Volume  36  2003 Number  1 

Copyright  ©  2003  by  the  Trustees  of  Indiana  University 

TABLE  OF  CONTENTS 

TRIBUTES 

Norman  Lefstein — Splendid  Dean, 

Legitimate  Hoosier Randall  T.  Shepard      1 

Prescription  for  Leadership  Gerald  L  Bepko      7 

Lefstein  to  the  Defense    Barbara  Allen  Babcock    13 

ARTICLES 

California  Death  Trip Lawrence  M.  Friedman     17 

Paul  W.  Davies 

Enforcing  Settlements  in  Federal  Civil  Actions Jeffrey  A.  Parness    33 

Matthew  R.  Walker 

An  Interpretation  and  (Partial)  Defense  of 

Legal  Formalism  Paul  N.  Cox    57 

Abundant  Media,  Viewer  Scarcity:  A  Marketplace  Alternative 
to  First  Amendment  Broadcast  Rights  and  the 
Regulation  of  Televised  Presidential  Debates  ....  Paul  B.  Matey  101 

NOTES 

Creating  an  Uncomfortable  Fit  in  Applying  the  ADA 

to  Professional  Sports   Jeffrey  Michael  Cromer  149 

Permitted  Use  of  Patented  Inventions  in  the  United  States: 
Why  Prescription  Drugs  Do  Not  Merit 
Compulsory  Licensing Kirby  W.  Lee  1 75 

"Duel"  Banking  System?  State  Bank  Parity  Laws:  An  Examination 
of  Regulatory  Practice,  Constitutional  Issues,  and 
Philosophical  Questions John  J.  Schroeder  1 97 


Volume  36  Number  1 


Indiana  Law  Review 

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Indiana  University  School  of  Law — Indianapolis 
2002-2003  ADMINISTRATIVE  OFFICERS  AND  FACULTY 

Administrative  Officers 

Gerald  L.  BEPKO,  Interim  President,  Indiana  University  and  Professor  of  Law.  B.S.,  Northern 

Illinois  University;  J.D.,  ITT/Chicago-Kent  College  of  Law;  LL.M.,  Yale  University. 
WtlliamM.Plater, Interim  Chancellor,  Indiana  University-Purdue  University— Indianapolis. 

B.A.,  M.A.,  Ph.D.,  University  of  Illinois. 
Anthony  A.  Tarr,  Dean  and  Professor  of  Law.   B.A.,  LL.B.,  University  of  Natal;  LL.M., 

Cambridge   University;   Ph.D.,   University   of  Canterbury;   Ph.D.,   Cambridge 

University. 
Thomas  B.  Allington,  Associate  Dean  for  Technology  and  Professor  of  Law.  B.S.,  J.D., 

University  of  Nebraska;  LL.M.,  New  York  University. 
Jeffrey  W.  Grove,  Associate  Dean  for  Graduate  Studies,  Professor  of  Law,  and  Director, 

China  Summer  Program.  A.B.,  Juniata  College;  J.D.,  George  Washington  University. 
SUSANAH  M.  Mead,  Associate  Dean  for  Academic  Affairs  and  Professor  of  Law.  B.A.,  Smith 

College;  J.D.,  Indiana  University — Indianapolis. 
Cynthia  Baker,  Director,  Program  on  Law  and  State  Government.  B.A.,  J.D.,  Valparaiso 

University. 
Elizabeth  L.  DeCoux,  Assistant  Dean  for  Student  Affairs.  J.D.,  Mississippi  College  School 

of  Law. 
Angela  M.  Espada,  Assistant  Dean  for  Admissions.  J.D.,  Indiana  University — Bloomington. 
Jonna  Kane  MacDOUGALL,  Assistant  Dean  for  External  Affairs.  J.D.,  Indiana  University — 

Indianapolis. 
Carol  B.  Neary,  Director  of  Development.  B.A.,  Indiana  University — Indianapolis. 
Shannon  L.  Williams,  Director  of  Professional  Development.  B.S.,  Indiana  University — 

Indianapolis. 

Faculty 

Cynthia  M.  Adams,  Clinical  Associate  Professor  of  Law.  B.A.,  Kentucky  Wesleyan  College; 

J.D.,  Indiana  University — Indianapolis. 
Thomas  B.  Allington,  Associate  Dean  for  Technology  and  Professor  of  Law.  B.S.,  J.D., 

University  of  Nebraska;  LL.M.,  New  York  University. 
James  F.  Bailey,  III,  Professor  of  Law  and  Director  of  Law  Library.  A.B.,  J.D.,  M.A.L.S., 

University  of  Michigan. 
GeraldL.Bepko,  Interim  President,  Indiana  University  and  Professor  of  Law.  B.S.,  Northern 

Illinois  University;  J.D.,  ITT/Chicago-Kent  College  of  Law;  LL.M.,  Yale  University. 
Frank  Bowman,  Associate  Professor  of  Law.  B.A.,  Colorado  College;  J.D.,  Harvard  Law 

School. 
William  C.  Bradford,  Assistant  Professor  of  Law.  B.  A.,  M.A.,  University  of  Miami;  Ph.D., 

Northwestern  University;  J.D.,  University  of  Miami  School  of  Law;  LL.M.,  Harvard 

Law  School. 
Robert  Brookins,  Professor  of  Law.  B.S.,  University  of  South  Florida;  J.D.,  Ph.D.,  Cornell 

University. 
Daniel  H.  Cole,  M.  Dale  Palmer  Professor  of  Law.  A.B.,  Occidental  College;  A.M., 

University  of  Chicago;  J.D.,  Lewis  and  Clark  College;  J.S.M.,  J.S.D.,  Stanford  Law 

School. 
Jeffrey  O.  Cooper,  Associate  Professor  of  Law.  A.B.,  Harvard  University;  J.D.,  University  of 

Pennsylvania. 
Paul  N.  Cox,  Centennial  Professor  of  Law.  B.S.,  Utah  State  University;  J.D.,  University  of 

Utah;  LL.M.,  University  of  Virginia. 
Robin  Kundis  Craig,  Associate  Professor  of  Law.  B.A.,  Pomona  College;  M.A.,  The  Johns 

Hopkins  University;  Ph.D.,  University  of  California;  J.D.,  Lewis  and  Clark  School 

of  Law. 
Kenneth  D.  CREWS.Associate  Dean  of  the  Faculties  for  Copyright  Management  and  Professor 

of  Law  and  Library  and  Information  Science.  B.A.,  Northwestern  University;  J.D., 

Washington  University;  M.L.S.,  University  of  California,  Los  Angeles;  Ph.D., 

University  of  California,  Los  Angeles. 
James  D.  Dimitri,  Clinical  Associate  Professor  of  Law.  B.S.,  Indiana  University;  J.D., 

Valparaiso  University  School  of  Law. 


Jennifer  Ann  Drobac,  Associate  Professor  of  Law.  B.A.,  M.A.,  Stanford  University;  J.D., 

J.S.D.,  Stanford  Law  School. 
George  E.  Edwards,  Associate  Professor  of  Law  and  Director,  Program  in  International 

Human  Rights  Law.  B.A.,  North  Carolina  State  University;  J.D.,  Harvard  Law 

School. 
Nicholas  Georgakopoulos,  Professor  of  Law.  Ptyhion  Nomikis,  Athens  University  School 

of  Law;  LL.M.,  S.J.D.,  Harvard  Law  School. 
Jeffrey  W.  Grove,  Associate  Dean,  Professor  of  Law,  and  Director,  China  Summer  Program. 

A.B.,  Juniata  College;  J.D.,  George  Washington  University. 
Frances  Watson  Hardy,  Clinical  Associate  Professor  of  Law.  B.S.,  Ball  State  University; 

J.D.,  Indiana  University — Indianapolis. 
Lawrence  A.  Jegen,  III,  Thomas  F.  Sheehan  Professor  of  Tax  Law  and  Policy.  A.B.,  Beloit 

College;  J.D.,  M.B.A.,  The  University  of  Michigan;  LL.M.,  New  York  University. 
Henry  C.  Karlson,  Professor  of  Law.  A.B.,  J.D.,  LL.M.,  University  of  Illinois. 
Robert  A.  Katz,  Associate  Professor  of  Law.  A.B.,  Harvard  College;  J.D.,  University  of 

Chicago  Law  School. 
Linda  Kelly-Hill,  Professor  of  Law.  B.A.,  J.D.,  University  of  Virginia. 
Eleanor  D.  Kinney,  Samuel  R.  Rosen  Professor  of  Law  and  Co-Director  of  the  Center  for 

Law  and  Health.  B.A.,  Duke  University;  M.A.,  University  of  Chicago;  J.D.,  Duke 

University;  M.P.H.,  University  of  North  Carolina. 
Andrew  R.  Klein,  Professor  of  Law.  B.A.,  University  of  Wisconsin;  J.D.,  Emory  University 

School  of  Law. 
Robert  E.  Lancaster,  Clinical  Associate  Professor  of  Law.  B.A.,  Millsaps  College;  J.D., 

Tulane  Law  School. 
Norman  Lefstein,  Professor  of  Law  and  Dean  Emeritus.  LL.B.,  University  of  Illinois;  LL.M., 

Georgetown  University. 
Maria  Pabon  Lopez,  Assistant  Professor  of  Law.  B.  A.,  Princeton  University;  J.D.,  University 

of  Pennsylvania  Law  School. 
GerardN.  Magliocca,  Assistant  Professor  of  Law.  B.A.,  Stanford  University;  J.D.,  Yale  Law 

School. 
Deborah  McGregor,  Lecturer  in  Law  and  Assistant  Director  of  Legal  Analysis,  Research  and 

Communication.  B.A.,  University  of  Evansville;  J.D.,  Georgetown  University. 
SUSANAH  M.  Mead,  Associate  Dean  and  Professor  of  Law.  B.A.,  Smith  College;  J.D.,  Indiana 

University — Indianapolis. 
Mary  H.  Mitchell,  Professor  of  Law.  A.B.,  Butler  University;  J.D.,  Cornell  Law  School. 
James  P.  Nehf,  Cleon  H.  Foust  Fellow,  Professor  of  Law,  and  Director,  European  Law 

Program.  B.A.,  Knox  College;  J.D.,  University  of  North  Carolina. 
David  Orentlicher,  Samuel  R.  Rosen  Professor  of  Law  and  Co-Director  of  the  Center  for 

Law  and  Health.  A.B.,  Brandeis  University;  J.D.,  M.D.,  Harvard  College. 
Joanne  Orr,  Clinical  Associate  Professor  of  Law.  B.S.,  Indiana  State  University;  J.D., 

California  Western. 
H.  Kathleen  Patchel,  Associate  Professor  of  Law.  A.B.,  Huntington  College;  J.D., 

University  of  North  Carolina;  LL.M.,  Yale  University. 
Florence  Wagman  Roisman,  Paul  Beam  Fellow  and  Professor  of  Law.  B.A.,  University  of 

Connecticut;  LL.B.,  Harvard  Law  School. 
Joan  M.  RuhtenberG,  Clinical  Professor  of  Law  and  Director  of  Legal  Analysis,  Research 

and  Communication.   B.A.,  Mississippi  University  for  Women;  J.D.,  Indiana 

University — Indianapolis. 
Joel  M.  Schumm,  Clinical  Assistant  Professor  of  Law.  B.A.,  Ohio  Wesleyan  University;  M.A., 

University  of  Cincinnati;  J.D.,  Indiana  University  School  of  Law — Indianapolis. 
Anthony  A.  Tarr,  Dean  and  Professor  of  Law.   B.A.,  LL.B.,  University  of  Natal;  LL.M., 

Cambridge   University;   Ph.D.,   University   of  Canterbury;   Ph.D.,   Cambridge 

University. 
James  W.  Torke,  Carl  M.  Gray  Professor  of  Law.  B.S.,  J.D.,  University  of  Wisconsin. 
Lawrence  P.  Wilkins,  Professor  of  Law.  B.A.,  The  Ohio  State  University;  J.D.,  Capital 

University  Law  School;  LL.M.,  University  of  Texas. 
Lloyd  T.  Wilson,  Jr.,  Associate  Professor  of  Law.  B.A.,  Wabash  College;  M.A.,  Duke 

University;  J.D,,  Indiana  University — Bloomington. 
Mary  T.  Wolf,  Clinical  Professor  of  Law  and  Director  of  Clinical  Programs.  B.A.,  Saint 

Xavier  College;  J.D.,  University  of  Iowa. 
R.  George  Wright,  Professor  of  Law.  A.B.,  University  of  Virginia;  Ph.D.,  Indiana  University; 

J.D.,  Indiana  University  School  of  Law — Indianapolis. 


Emeriti 

Edward  P.  Archer,  Professor  of  Law  Emeritus.  B.M.E.,  Renesselaer  Polytechnic  Institute; 

J.D.,  LL.M.,  Georgetown  University. 
Agnes  P.  Barrett,  Associate  Professor  of  Law  Emerita.  B.S.,  J.D.,  Indiana  University. 
Clyde  Harrison  Crockett,  Professor  of  Law  Emeritus.  A.B.,  J.D.,  University  of  Texas; 

LL.M.,  University  of  London  (The  London  School  of  Economics  and  Political 

Science). 
Debra  a.  Falender,  Professor  of  Law  Emerita.  A.B.,  Mount  Holyoke  College;  J.D.,  Indiana 

University — Indianapolis. 
Cleon  H.  Foust,  Professor  of  Law  Emeritus.  A.B,,  Wabash  College;  J.D.,  University  of 

Arizona. 
David  A.  Funk,  Professor  of  Law  Emeritus.  A.B.,  College  of  Wooster;  J.D.,  Case  Western 

Reserve  University;  M.A.,  The  Ohio  State  University;  LL.M.,  Case  Western  Reserve 

University;  LL.M.,  Columbia  University. 
Paul  J.  Galanti,  Professor  of  Law  Emeritus.  A.B.,  Bowdoin  College;  J.D.,  University  of 

Chicago. 
Helen  P.  Garfield,  Professor  of  Law  Emerita.  B.S.J.,  Northwestern  University;  J.D., 

University  of  Colorado. 
Harold  Greenberg,  Professor  of  Law  Emeritus.  A.B.,  Temple  University;  J.D.,  University 

of  Pennsylvania. 
William  F.  Harvey,  Car!  M.  Gray  Professor  of  Law  &  Advocacy  Emeritus.  A.B.,  University 

of  Missouri;  J.D.,  LL.M.,  Georgetown  University. 
W.  William  HODESjPro/e^^or  of  Law  Emeritus,  A.B.,  Harvard  College;  J.D.,  Rutgers,  Newark. 
William  Andrew  Kerr,  Professor  of  Law  Emeritus.  A.B.,  West  University;  J.D.,  LL.M., 

Harvard  University;  B.S.,  Duke  University. 
William  E.  Marsh,  Professor  of  Law  Emeritus.  B.S.,  J.D.,  University  of  Nebraska. 
Ronald  W.  Polston,  Professor  of  Law  Emeritus.  B.S.,  Eastern  Illinois  University;  LL.B., 

University  of  Illinois. 
Kenneth  M.  Stroud,  Professor  of  Law  Emeritus.   A.B.,  J.D.,  Indiana  University — 

Bloomington. 
James  Patrick  White,  Professor  of  Law  Emeritus.  A.B.,  University  of  Iowa;  J.D.,  LL.M., 

George  Washington  University. 


Law  Library  Faculty 

James  F.  Bailey,  III,  Professor  and  Director  of  Law  Library.  A.B.,  J.D.,  M.A.L.S.,  University 

of  Michigan. 
Mary  Hudson,  Reference/Circulation  Librarian.  B.A.,  Ball  State;  M.L.S.,  Indiana  University. 
Richard  Humphrey,  Reference  Librarian.  A.A.,  Brewton-Parker  Junior  College;  B.A., 

Georgia  Southwestern  College;  M.L.S.,  University  of  Kentucky. 
Wendell  E.  Johnting,  Assistant  Director  for  Technical  Services.  A.B.,  Taylor  University; 

M.L.S.,  Indiana  University. 
ChrisE.Long,  Catalog  Librarian.  B.A.,  Indiana  University;  M.A,,  Indiana  University;  M.L.S., 

Indiana  University. 
MahnazK.  MosmEGH,  Acquisition/Serials  Librarian.  B.A.,  National  University  of  Iran;  M.S., 

Tehran  University;  M.A.,  Ball  State  University;  M.L.S.,  Ph.D.,  Indiana  University. 
Mimf^MK.MxjRPWY,  Associate  Director  of  Law  Library.  B.A.,  Purdue  University;  J.D.,  M.L.S., 

Indiana  University — Bloomington. 
KiYOSHi  Otsu,  Computer  System  Specialist.  A.A.,  Parkland  College;  A.B.,  M.S.,  C.A.S., 

University  of  Illinois. 


Indiana  Law  Review 


Volume  36  2003  Number  1 


TRIBUTES 


Norman  Lefstein — Splendid  Dean, 
Legitimate  Hoosier 


Randall  T.  Shepard* 

Few  practitioners  fully  appreciate  the  challenge  of  being  an  effective  modem 
law  dean.  The  dean  is  surrounded  by  substantial  forces  only  partially  amenable 
to  his  or  her  will.  The  dean  sits  as  the  first  among  equals  in  a  tenured  faculty 
whose  individual  interests  do  not  always  mesh  neatly  with  the  overall  goals  of  the 
school.  Hundreds  of  students  pass  by  the  dean's  office  each  day,  many  of  them 
ready  at  the  drop  of  a  hat  to  spring  into  action  proving  that  they  will  be  superb 
advocates  by  doing  combat  on  some  matter  of  student  interest.  The  alumni  watch 
at  greater  distance,  wishing  for  the  school  to  burnish  their  own  credentials  but 
understanding  only  in  part  the  trends  in  legal  education.  It  is  no  wonder  that 
most  law  deans  last  four  or  five  years. 

Still,  success  stories  appear  before  our  very  eyes.  Norman  Lefstein's 
leadership  of  the  school  at  Indianapolis  has  been  such  a  story.  I  record  here  just 
a  few  of  the  ways  in  which  Dean  Lefstein  has  exceeded  himself. 

I.  Reaching  Beyond  THE  Academy 

American  law  schools  have  reformed  their  education  approach  at  a 
tremendous  pace  in  the  years  since  the  American  Bar  Association  issued  the 
MacCrate  Report  in  1 992.^  Yet,  complaints  persist  that  the  academy  is  too  inward 
looking.  Some  of  these  criticisms  come  from  within  the  academic  community 
itself.^  Others  come  from  close  by,  such  as  a  famous  complaint  by  Judge  Harry 


*  Chief  Justice  of  Indiana.  A.B.,  1969,  Princeton  University;  J.D.,  1972,  Yale  Law 
School;  LL.M.,  1995,  University  of  Virginia. 

1 .  Robert  MacCrate,  Legal  Education  and  Professional  Development — An  Educational 
Continuum  (July  1992).  The  "MacCrate  Report,"  headed  by  former  ABA  President  Robert 
MacCrate  and  presented  by  the  Task  Force  in  Law  Schools  and  the  Profession,  is  a  comprehensive 
examination  of  multidisciplinary  practice  in  the  United  States. 

2.  See  Donald  J.  Weidner,  A  Dean 's  Letter  to  New  Law  Faculty  About  Scholarship,  44  J. 
Legal  Educ.  440  (1994);  Donald  J.  Weidner,  Law  School  Engagement  in  Professionalism  and 
Improved  Bar  Relations,  72  Fla.  B.J.  40  (1998);  Donald  J.  Weidner,  The  Crises  of  Legal 
Education:  A  Wake-Up  Call  for  Faculty,  47  J.  LEGAL  Educ.  92  (1997);  Donald  J.  Weidner,  The 
Florida  Supreme  Court  Commission  on  Professionalism  and  the  Crises  of  Legal  Education,  1 1  FLA. 
B.J.  64  ( 1 997).  Don  Weidner  served  as  Dean  of  Florida  State  University  College  of  Law  from  1 99 1 
to  1997,  as  Interim  Dean  from  1998  to  2000,  and  as  Dean  from  2000  to  present. 


INDIANA  LAW  REVIEW  [Vol.  36: 1 


Edwards,  formerly  of  the  law  faculty  at  Michigan:  "For  some  time  now,  I  have 
been  deeply  concerned  about  the  growing  disjunction  between  legal  education 
and  the  legal  profession."^ 

To  earn  a  reputation  as  someone  who  looks  beyond  the  boundaries  of  the 
faculty  meeting,  a  law  dean  must  commit  to  some  heavy  lifting:  time  spent  at  bar 
association  receptions,  travel  to  relatively  small  groups  of  alumni  in  distant  cities, 
meetings  with  judges  of  various  stripes,  and  so  on.  Norm  Lefstein  has  dedicated 
a  substantial  part  of  his  personal  energy  to  building  such  links  during  his 
stewardship  of  the  school. 

And  he  has  always  given  the  impression  that  he  thirsts  to  do  more.  On 
integrating  the  bench  and  bar  into  the  work  of  the  school,  he  once  said:  "We 
seek  to  use  the  practicing  bar  as  mentors  to  our  students,  as  speakers  at  a  variety 
of  programs,  as  judges  for  a  wide  variety  of  competitions,  and  yet  I  always  have 
the  sense  that  the  demand  by  members  of  the  private  bar  to  be  involved  in  our 
legal  education  program  exceeds  our  opportunities  to  involve  them."* 

Dean  Lefstein's  efforts  along  these  lines  has  paid  dividends  for  the  school 
and  the  profession  in  a  host  of  ways.  His  approach  has  assisted  in  recruiting  both 
faculty  and  students,  made  it  easier  to  integrate  adjunct  faculty  into  the  teaching 
of  the  school,  and  resulted  in  broader  support  for  the  school's  financial  needs.^ 

II.  Collaboration  on  Legal  Education  Reform 

While  outreach  requires  substantial  exertion,  it  is  not  a  particularly  risky 
venture.  The  same  cannot  be  said  of  working  on  alternative  methods  of  legal 
education.  Here,  the  academy's  interests  are  at  a  high  point,  making  any  decanal 


3.  Harry  T.  Edwards,  The  Growing  Disjunction  Between  Legal  Education  and  the  Legal 
Profession,  91  MiCH.  L.  REV.  34,  34  (1992): 

For  some  time  now,  I  have  been  deeply  concerned  about  the  growing 
disjunction  between  legal  education  and  the  legal  profession.  I  fear  that  our 
law  schools  and  law  firms  are  moving  in  opposite  directions.  The  schools 
should  be  training  ethical  practitioners  and  producing  scholarship  that  judges, 
legislators,  and  practitioners  can  use.  The  firms  should  be  ensuring  that 
associates  and  partners  practice  law  in  an  ethical  manner.  But  many  law 
schools — especially  the  so-called  "elite"  ones — have  abandoned  their  proper 
place,  by  emphasizing  abstract  theory  at  the  expense  of  practical  scholarship 
and  pedagogy.  Many  law  firms  have  also  abandoned  their  place,  by  pursuing 
profit  above  all  else.  While  the  schools  are  moving  toward  pure  theory,  the 
firms  are  moving  toward  pure  commerce,  and  the  middle  ground — ethical 
practice — has  been  deserted  by  both.  This  disjunction  calls  into  question  our 
status  as  an  honorable  profession. 

4.  John  E.  Connor  &  Assocs.,  1  Conclave  on  Legal  Education  in  Indiana  64  (Feb.  28, 1 997) 
(transcript  of  Conclave  on  Legal  Education  in  Indiana). 

5.  Total  gifts  to  the  law  school  during  the  decade  of  the  1 990s  rose  from  roughly  $250,000 
a  year  to  about  $3  million  a  year.  Dean's  Report  2000-2001,  Indiana  University  School  of 
Law — Indianapolis,  at  20. 


2003]  TRIBUTE  TO  NORMAN  LEFSTEIN 


leadership  a  high-risk  endeavor.  It  has  been  the  characteristic  of  the  Lefstein 
reign. 

When  Indiana  became  one  of  the  early  states  to  stage  a  "conclave  on  legal 
education,"  Dean  Lefstein  appeared  not  to  hesitate  about  co-chairing  the  project, 
along  with  the  president-elect  of  the  Indiana  State  Bar  Association,  Chic  Bom.^ 
When  seventy-five  leaders  of  the  bench,  the  bar,  and  the  academy  gathered  for 
nearly  two  days  of  discussions  about  reforming  lawyer  and  law  student  legal 
education,  it  was  plain  that  some  of  the  academics  in  the  hall  mostly  wanted  to 
get  out  of  town  in  one  piece.    It  was  not  Norm's  approach.    He  said: 

[T]here  are  two  final  questions  that  are  sure  to  be  before  us  during  this 
conclave.  The  first  relates  to  whether  or  not  we  are  teaching  our 
students  what  we  want  them  to  learn,  whether  we  are  effective  in  doing 
that.  And  the  second  concerns  whether  there  are  ways  in  which  legal 
education  should  change  in  order  to  enhance  the  confidence  of  today's 
law  graduates.^ 

One  can  sort  through  the  leadership  ranks  in  American  institutions  of  all  sorts 
and  conclude  that  we  face  a  shortage  of  people  willing  to  engage  publicly  with 
others  about  the  adequacy  of  the  work  their  organizations  perform.  Norm 
Lefstein  has  provided  us  all  with  a  model  of  forthright,  collaborative  leadership. 

III.  Lefstein  and  Indiana's  Criminal  Law  Progress 

Barbara  Allen  Babcock  will  write  more  fully  about  Dean  Lefstein' s 
contributions  to  the  national  effort  at  improving  defense  of  the  indigent  in 
criminal  cases.^  The  story  of  his  contributions  to  Indiana  reform,  however,  should 


6.  See,  e.g.,  William  R.  Rakes,  Conclaves  on  Legal  Education:  Catalyst  for  Improvement 
of  the  Profession,  72  NOTRE  Dame  L.  Rev.  1 1 19,  11 24  (1997): 

[T]oday's  law  school  graduates  are  less  prepared  for  the  practice  of  law  than  those  of 
two  or  three  decades  ago,  Lilly  agrees  the  trend  toward  this  theory  has  created  an 
imbalance  in  the  law  schools.  He  claims  that  the  situation  is  deteriorating,  particularly 
with  regard  to  the  relationship  between  law  faculties  and  the  practicing  bar. 

Rakes  continues, 

I  will  suggest  that  beneath  this  seemingly  placid  surface  lie  currents  of  a  major 
realignment,  not  between  students  and  faculty,  or  even  between  students  and 
practitioners,  but  rather  between  the  faculties  of  major  law  schools  and  the  bench  and 
bar. 

Id.  (citing  Richard  Posner,  The  Deprofessionalization  of  Legal  Teaching  and  Scholarship, 9\  MICH, 

L.  REV.  1921  (1993)). 

7.  Connor  &  Assocs.,  supra  note  4,  at  70-71 . 

8.  Dean  Lefstein's  prominence  in  this  effort  is  of  long  standing.  See,  e.g.,  Dudley 
Clendinen,  Budget  Ills  Crippling  Defense  of  Poor.  Lawyers  Say,  N.Y.  TIMES,  Nov.  14,  1982,  §  1 , 
at  28  (Whatever  the  precise  measure,  it  is  the  apparent  inequity,  and  the  erratic  nature  of  indigent 
defense,  that  worries  Professor  Lefstein.  "People  being  arrested  are  not  having  their  cases 
challenged  in  any  rational,  systematic  kind  of  way,"  he  said,  "and  the  result  is,  innocent  people  get 


INDIANA  LAW  REVIEW  [Vol.  36: 1 


be  separately  documented. 

Larry  Landis  of  the  Indiana  Public  Defender  Council  led  a  dogged  effort  to 
improve  our  public  defender  services,  and  finally  persuaded  the  General 
Assembly  to  adopt  a  framework  for  far-reaching  reforms  in  1989.^  Governor 
Evan  Bayh  appointed  Norm  as  first  chair  of  the  new  Public  Defender 
Commission  of  Indiana,  and  the  project  has  never  looked  back. 

For  more  than  a  hundred  years,  Indiana  has  held  to  the  ideal  that  in  a  decent 
society  a  person  should  not  go  to  trial  without  a  lawyer  just  because  he  or  she  is 
too  poor.'^  It  thus  befit  our  heritage  that  Indiana  became  the  second  state  in  the 
union  to  adopt  mandatory  standards  for  the  appointment  of  counsel  in  capital 
cases  (something  that  still  does  not  exist  in  federal  courts)  when  the  Indiana 
Supreme  Court  and  the  Indiana  Public  Defender  Commission  collaborated  on 
court  rules  and  commission  standards  in  1989.^'  Norm  Lefstein  captured  the 
enormous  effect  of  these  standards  in  a  comprehensive  published  study.  ^^ 

Perhaps  more  telling  is  the  effect  of  the  Public  Defender  Commission's  work 
on  the  hundreds  of  thousands  of  non-capital  cases.  We  have  striven  to  assure 
indigent  criminal  defendants  that  their  legal  counsel  is  not  doing  his  or  her  on- 
the-job  training  on  them.'^  By  today,  more  than  fifty  counties  are  participating 
in  a  program  to  upgrade  local  public  defender  services. 

This  sea  change  is  consistent  with  what  the  Indiana  Supreme  Court  said  when 
it  first  established  a  right  to  counsel  for  indigent  defendants.  In  deciding  Webb 
V.  Baird  moxQ  than  a  century  before  Gideon  v.  Wainwright,^^  Justice  Stuart  of 
our  court  said: 

It  is  not  to  be  thought  of,  in  a  civilized  community,  for  a  moment,  that 
any  citizen  put  in  jeopardy  of  life  or  liberty,  should  be  debarred  of 
counsel  because  he  was  too  poor  to  employ  such  aid.  No  Court  could  be 
respected,  or  respect  itself,  to  sit  and  hear  such  a  trial.  The  defense  of 
the  poor,  in  such  cases,  is  a  duty  resting  somewhere,  which  will  be  at 
once  conceded  as  essential  to  the  accused,  to  the  Court,  and  to  the 
public.*^ 

Norm  Lefstein  has  played  a  central  role  in  building  upon  this  foundation  by 


convicted."). 

9.   The  General  Assembly  created  the  Indiana  Public  Defender  Commission  in  1 989  by  P.L. 
284-1989. 

10.  Chief  Justice  Randall  T.   Shepard,   State  of  the  Judiciary,  Counsel,   Computers, 
Compensation,  and  a  Few  Words  About  Dimpled  Chads  (Jan.  2001 ). 

1 1.  Norman  Lefstein,  Reform  of  Defense  Representation  in  Capital  Cases:    The  Indiana 
Experience  and  its  Implications  for  the  Nation,  29  IND.  L.  REV.  495,  503-04  (1996). 

12.  Id 

13.  Chief  Justice  Randall  T.  Shepard,  State  of  the  Judiciary,  1995  is  Bound  To  Be  A  Better 
Year  (Jan.  1995). 

14.  372  U.S.  335  (1963). 

15.  6  Ind.  13,  18  (1954).    See  also  Randall  T.  Shepard,  Indiana  Law  and  the  Idea  of 
Progress,  25  iND.  L.  REV.  943,  947  (1992). 


2003]  TRIBUTE  TO  NORMAN  LEFSTEIN  5 

developing  the  self-respect  of  these  institutions, 

IV.  The  School  Is  a  Larger  Place 

Everyone  I  know  recognizes  that  there  would  not  be  a  fine  new  law  building 
had  it  not  been  for  Norm  Lefstein.  More  important  yet  is  the  stronger  school  that 
rests  beneath  its  roof. 

American  law  schools  at  the  turn  of  the  century  were  obliged  to  seek  out  their 
own  niches  in  the  world  of  legal  education  in  order  to  thrive  in  a  market  that 
turned  down  for  most  of  the  decade  of  the  1990s.  Dean  Lefstein*s  vision  of  the 
mission  of  the  school  has  been  simultaneously  lofty  and  practical:  "To  give  our 
students  a  first-class  legal  education,  to  have  a  faculty  that  engages  in  scholarship 
and  research  that  not  only  is  geared  to  Indiana  but  to  the  nation  and  the 
international  community  as  well,  and  to  serve  both  the  academic  and  legal 
communities."'^ 

Under  Dean  Lefstein 's  tutelage,  the  law  school  has  developed  along  the  lines 
of  the  business/environmental  adage  "Think  globally,  act  locally."  It  has 
promoted  student  involvement  at  the  local  level,  built  national  relationships,  and 
strengthened  international  awareness  in  the  legal  community.  The  dean  was 
instrumental  in  creating  the  International  and  Comparative  Law  Review  and 
launching  Summer  Study  Abroad  programs  in  places  like  Lille,  France,  and 
Beijing,  China.  The  Program  in  International  Human  Rights  Law  soared  as 
students  have  represented  the  school  on  six  continents  since  its  inception.  Most 
recently,  the  school  became  home  to  an  LL.M.  program  in  American  law  for 
foreign  lawyers.  The  national  and  international  work  of  the  faculty  have  meant 
such  change  in  the  school's  work  that  it  was  hardly  a  surprise  that  Dean 
Lefstein 's  successor  came  from  overseas. 

The  Center  for  Law  and  Health  program  blossomed  to  national  recognition, 
the  faculty  has  grown  steadily  stronger  and  diverse,  and  the  professional  lecture 
series  has  attracted  notable  speakers  from  U.S.  Supreme  Court  Justices  to  civil 
rights  activists  and  dignitaries  from  other  countries.  Dean  Lefstein  has 
dramatically  expanded  student  opportunities  for  clinics,  internships,  and 
externships. 

And,  of  course,  if  you  build  it,  they  will  come.  The  school's  applications 
have  nearly  doubled  during  the  Lefstein  years.  The  grade  point  average  of  the 
entering  class  has  risen.  Minority  enrollment  has  risen  from  0.36%  to  22%.  And 
there  are  more  women  than  men  for  the  first  time  in  history.  Moreover,  the 
national  and  international  work  of  the  faculty  have  expanded  the  school's 
reputation  so  broadly  that  attracting  a  successor  dean  from  overseas  seemed  part 
of  a  natural  progression 

Norm  Lefstein  has  left  us  an  institution  of  legal  education  stronger  than  it  has 
ever  been.  It  is  one  that  makes  good  of  its  connections  to  Indiana,  and  one  that 
makes  noteworthy  contributions  to  the  national  and  international  legal  scenes. 


16.   Connor  &  Assocs.,  supra  note  4,  at  60-6 L 


INDIANA  LAW  REVIEW  [Vol.  36: 1 


V.  Long  Live  Norm! 

I  learned  a  new  word  some  weeks  back  that  befits  today's  occasion: 
festschrift.  A  festschrift  is  a  collection  of  writings  from  several  hands  for 
celebration;  especially  one  of  learned  essays  contributed  by  students,  colleagues 
and  admirers  to  honor  a  scholar  on  a  special  anniversary.'^  Dean  Norman 
Lefstein  is  worth  celebrating.  He  was  not  born  in  Indiana,  but  I  think  he  came  as 
soon  as  he  heard  about  it.  He  has  given  us  more  than  we  could  ever  have  hoped 
for.  Many  thanks,  dean,  for  what  you  have  done  and  who  you  are. 


17.  Webster's  Third  New  International  Dictionary  841  (Philip  Babcock  Grove  ed., 
1993). 


The  Lefstein  Years 
A  Prescription  for  Leadership 


Gerald  L.  Bepko* 

A  leader  has  the  focus,  passion,  courage,  and  wisdom  to  create  an 
atmosphere  that  allows  others  to  create. 

A  leader  empowers  others,  giving  them  the  tools  they  need  and  the 
"room  to  let  them  run. " 

A  leader  offers  compassion  and  caring  to  those  with  whom  one 's  life 
intersects. 

These  are  the  qualities  of  leadership  that  promote  success,  according  to  Lee 
Bolman,  coauthor  of  Leading  With  Soul:  An  Uncommon  Journey  of  the  Spirit. 
They  also  help  to  explain  the  wonderful  success  of  Norman  Lefstein' s  deanship 
at  the  Indiana  University  School  of  Law — Indianapolis,  1988-2002. 

I.  Fostering  Creativity 

Norm's  particular  focus  as  dean  has  been  obtaining  the  resources  needed  to 
enhance  the  local,  regional,  and  national  reputation  of  the  school.  It  can  almost 
go  without  saying,  although  it  shouldn't,  that  his  crowning  achievement  will  be 
Inlow  Hall,  the  $35  million  facility  with  state-of-the  art  classroom  technologies 
and  research  resources.  Norm  was  involved  from  the  very  earliest  moment  of 
planning,  including  a  crucial  meeting  in  which  Norm,  then  Indiana  University 
(lU)  President  Tom  Ehrlich,  and  I  laid  the  initial  plans  for  a  combined 
Herron/Law  project.  Norm  was  a  key  factor  in  securing  state  funding  for  the 
project  (to  the  tune  of  $21  million),  after  which  he  successfully  led  a  capital 
campaign  that  raised  $14  million  in  private  donations  from  alumni  and  other 
supporters,  including  the  Inlow  naming  gift.  His  passion  and  talent  for 
fundraising  also  resulted  in  a  steadily  increasing  annual  ftind,  many  privately 
funded  professorships  and  scholarships,  and  a  new  honorary  lecture  series. 

Inlow  Hall  has  not  only  served  the  law  school  community  well,  it  has  also 
become  a  landmark  for  the  campus.  The  lUPUI  campus  has  been  preparing  itself 
as  a  great  university  community  for  more  than  thirty  years,  behind  a  veil  of 
parking  lots.  Now,  Inlow  Hall,  the  new  home  of  the  lU  School  of 
Law — Indianapolis,  along  with  the  Informatics  Complex  just  to  its  north,  shows 
a  new  face  to  the  adjacent  downtown  area  and  serves  as  a  new  gateway  to  the 
campus.  The  gateway  was  well  conceived  by  the  architects  most  involved.  The 
Smith  Group  of  Washington,  D.C.,  designed  the  law  school;  Robert  A.  M.  Stem 
of  New  York  designed  the  Informatics  Complex;  and  Jon  Belle,  of  Buyer, 
Blinder,  and  Belle,  New  York,  provided  the  master  planning  for  this  entire 


*  Interim  President,  Indiana  University,  and  former  Chancellor,  Indiana  University-Purdue 
University — Indianapolis  (lUPUI).  The  author  acknowledges,  with  gratitude,  the  research,  writing, 
and  editing  that  Sylvia  M.  Payne,  Special  Assistant  to  the  Interim  President  of  lU,  contributed  to 
this  article. 


8  INDIANA  LAW  REVIEW  [Vol.  36:7 


segment  of  the  campus. 

Beyond  Inlow  Hall,  one  of  Norm's  great  legacies  will  be  his  unwavering  and 
unrelenting  support  for  the  creative  and  scholarly  effort  of  the  faculty.  Norm 
conceived  and  initiated  the  Program  on  Law  and  State  Government  and 
supported  the  continuing  development  of  the  Center  on  Law  and  Health,  which 
now  ranks  eighth  in  the  nation'  and  which  has  become  an  increasingly  important 
component  of  lUPUI's  status  as  a  home  for  premiere  health-related 
interdisciplinary  research  and  teaching.  He  dramatically  enhanced  the  caliber  of 
the  faculty  through  judicious  recruitment  and  retention  of  the  most  highly 
qualified  and  productive  scholars,  the  creation  of  endowed  professorships,  and 
an  emphasis  on  continuing  professional  development,  thus  creating  the 
expectation  for,  and  a  working  environment  conducive  to,  scholarly  productivity. 
Along  with  the  continuing  development  of  our  student  body,  and  the 
extraordinary  accomplishments  of  our  alumni,  this  advance  in  scholarship  has 
increased  the  recognition  that  the  lU  School  of  Law — Indianapolis  is  one  of  the 
nation's  truly  fine  law  schools. 

The  1996  law  school  accreditation  team  praised  the  significant  increase  in 
the  quantity  of  faculty  scholarship  addressed  to  national  audiences,  the  high  rate 
of  students'  passing  the  Indiana  Bar  examination,  and  the  expansion  of  student 
services  (especially  career  placement  services).  The  external  consultants  to  the 
Administrative  Review  Committees  that  have  twice  examined  Norm 's  leadership 
of  the  school  over  the  past  nearly  fourteen  years  praised  the  leadership  and 
enthusiasm  he  exhibits  in  promoting  matters  of  interest  to  the  legal  community 
and  to  the  overall  enhancement  of  the  profession.  The  present  strength  of  the 
school's  clinical  programs  is  directly  attributed  to  him,  as  is  an  increased 
capacity  for  judicial  and  governmental  internships  bearing  academic  credit. 

No  review  of  Norm's  extraordinary  accomplishments  would  be  complete 
without  mentioning  his  efforts  to  diversify  the  student  body.  When  Norm  first 
began  as  dean,  the  school  was  struggling  to  recruit  minority  students.  Today  it 
has  139,  reflecting  an  increase  in  the  student  diversity  ratio  from  three  percent 
of  the  school's  population  in  1988  to  nearly  twenty  percent  in  2002.  The  number 
of  applications  overall  has  increased  as  well,  thus  yielding  a  student  body  better 
prepared  for  success  in  law  school. 

It  is  clear  that  the  faculty,  curriculum,  and  student  body  are  better  in  every 
way;  that  Norm's  successor  has  inherited  a  stronger  school  as  a  result  of  his 
tireless  and  passionate  leadership;  and  that  our  graduates  can  take  ever  greater 
pride  in  having  earned  their  degree  at  the  lU  School  of  Law — Indianapolis.  The 
school  has  always  attracted  many  of  our  best  and  brightest  college  graduates  and 
provided  a  capstone  education  for  these  students  right  here  at  the  crossroads  of 
Indiana  in  the  state's  seat  of  government  and  largest  population  center.  The 
school's  value  is  enhanced  by  the  fact  that  those  who  study  here  are  much  more 
likely  to  end  up  making  their  careers  and  their  lifelong  contributions  right  here 
in  Indiana,  whether  in  law  practice  or  the  many  other  roles  they  play  because  of 
the  special  blend  of  theoretical  and  practical  education  provided  by  our  law 


1.  U.S.  News  &  World  Rep. 


2003  ]  TRIBUTE  TO  NORMAN  LEFSTEIN  9 

school.  All  these  qualities  have  matured  during  the  Lefstein  years. 

II.  Empowering  Others 

No  one  who  was  there  can  ever  forget  the  august  presence  of  U.S.  Supreme 
Court  Justice  Anthony  Kennedy  during  the  September  21,  2001,  dedication  of 
Inlow  Hall.  It  was  indicative  both  of  the  stature  Norm  has  among  his  peers  in  the 
legal  profession  and  of  the  caliber  of  graduates  who  have  served  our  state  and 
nation  as  lawyers,  judges,  and  lawmakers.  On  that  occasion.  Justice  Kennedy 
reminded  us:  "Our  understanding  of  the  law  is  that  it  is  empowering.  It  gives 
you  freedom.  It  gives  you  the  capacity  to  think,  to  dream,  to  hope,  to  dare." 

Norm  has  this  same  understanding  of  the  law  and  has  applied  it  to  his 
leadership  of  the  school.  As  one  faculty  member  succinctly  put  it,  "He  lets  us  do 
our  jobs."  But  Norm's  notion  of  empowerment  was  not  as  passive  as  all  that.  It 
was  more  on  the  model  of  Ralph  Waldo  Emerson  whose  goal  as  a  teacher  and 
mentor  was  not  "to  bring  men  to  me,  but  to  themselves."  Although  the 
conventional  assumption  once  was  that  one  generation  stands  on  the  shoulders 
of  the  last  in  its  acquisition  of  knowledge,  we  have  Emerson  to  thank  for  the 
more  interactive  model  of  mentorship  and  motivational  guidance  that  empowers 
rather  than  controls.  This  is  the  style  of  leadership  that  Norm  brought  into  play 
to  such  good  effect  by  giving  faculty  the  tools  and  freedom  they  need  to  be 
creative  and  productive  in  their  work. 

Early  in  his  deanship,  Norm  established  incentives  to  attract  talented  scholars 
and  to  seize  opportunities  when  they  arose.  He  expanded  the  size  and  influence 
of  the  law  school's  Board  of  Visitors  to  increase  connections  between  the  needs 
of  the  community  and  the  work  of  the  faculty.  At  the  same  time,  he  sought  to 
increase  the  school's  influence  in  the  community  by  supporting  the  expansion  of 
clinical  programs,  with  particular  emphasis  on  criminal  defense  and  civil 
practice.  Norm's  special  commitment  to  the  law  school's  pro  bono  program, 
which  was  established  in  1993,  has  resulted  in  students'  providing  more  than 
26,000  hours  of  service  to  the  community,  gaining  valuable  practical  experience 
in  the  process. 

Norm  encouraged  and  supported  partnerships  with  law  schools  in  Beijing, 
China;  Lille,  France;  La  Plata,  Argentina;  and  Queensland,  Australia.  In  addition, 
he  encouraged  the  creation  of  the  Program  in  International  and  Human  Rights 
Law,  which  has  sent  student  interns  to  more  than  thirty-five  countries  during  the 
past  five  years.  One  of  the  school's  most  ambitious  international  ventures,  for 
which  Norm  advocated  ardently,  is  the  new  LL.M.  Program  in  American  Law  for 
Foreign  Lawyers  which,  beginning  this  year,  will  bring  international  lawyers  to 
Indianapolis  for  a  master's  level  program  while  also  providing  opportunities  for 
our  J.D.  candidates  to  interact  with  attorneys  from  around  the  world. 

The  backdrop  for  all  these  achievements  has  been  the  broad  base  of  support 
he  has  earned  and  enjoyed  because  of  his  excellent  rapport  with  the  legal 
community.  The  respect  Norm  has  among  his  peers  smoothed  the  way  for  the 
resources  to  be  gathered  for  many  tools  of  empowerment. 


1 0  INDIANA  LAW  REVIEW  [Vol.  36:7 


III.  Showing  Compassion 

At  a  recent  Symposium  on  Indigent  Criminal  Defense  in  Texas,  Norm  said 
to  the  assembled  gathering: 

How  we  treat  the  poorest  and  least  powerful  members  of  our  society  says 
a  whole  lot  about  what  kind  of  society  we  are.  It  has  always  seemed  to 
me,  that  for  lawyers  and  the  justice  system,  there  is  nothing  more 
important  than  what  we  do  in  the  treatment  of  our  citizens  and  the 
protection  of  their  liberties. 

Norm's  passion  for  the  betterment  of  the  law  school  was  matched  only  by  his 
compassion  for  the  indigent  and  his  quiet  but  steady  crusade  of  advocacy  for 
better  programs  of  criminal  defense  on  their  behalf  A  nationally  recognized 
expert  on  legal  ethics,  Norm  has  argued  eloquently  for  standards  to  ensure  that 
effective  public  defenders  are  assigned  to  indigent  cases  and  that  continuing  legal 
education  be  mandatory  for  those  providing  representation  to  defendants  unable 
to  afford  private  attorneys. 

As  both  a  former  prosecutor  and  defense  attorney,  Norm  shrewdly  cultivated 
high-profile  leadership  among  members  of  the  bar  arguing  for  a  better  indigent 
defense  system  in  Indiana.  He  was  instrumental  in  achieving  reforms  in  Indiana 
because  he  proposed  a  carrot-and-stick  approach  to  the  problem  in  which  the 
state  reimburses  cash-strapped  counties  for  forty  percent  of  their  cost  of 
providing  public  defenders  if  they  adhere  to  standards  for  providing  counsel  to 
poor  defendants.  To  get  the  reimbursements,  counties  that  appoint  lawyers  must 
make  sure  the  lawyers  have  specific  credentials. 

In  the  belief  that  both  the  prosecution  and  defense  need  to  be  well 
represented  in  the  criminal  courtroom.  Norm,  as  chair  of  the  Indiana  Public 
Defender  Commission  from  its  inception  in  1990,  worked  to  secure  the 
independence  of  the  indigent  defense  function  from  undue  judicial  influence  in 
criminal  cases  and  post-conviction  death  penalty  proceedings.  Norm  has  long 
served  as  a  member  of  the  American  Bar  Association's  standing  committee  on 
indigent  defense  and  once  served  on  the  national  Committee  on  Criminal  Justice 
in  a  Free  Society  with,  among  others,  former  U.S.  Attorney  General  Janet  Reno, 
who  was  then  Dade  County  State's  Attorney  in  Florida.  Norm  chronicled  the 
result  of  these  experiences  in  his  1996  publication  oi  Reform  of  Defense 
Representation  in  Capital  Cases:  the  Indiana  Experience  and  its  Implications  for 
the  Nation? 

To  convey  some  idea  of  how  delicately  Norm  balanced  his  passion  for  the 
success  of  the  law  school  with  his  compassion  for  those  in  need  of  legal  services, 
but  unable  to  pay  for  them,  I  offer  a  remark  that  Dean  Frank  Newton  of  the  Texas 
Tech  Law  School  made  about  Norm  after  he  described  his  efforts  to  change 
Indiana's  indigent  defense  system  during  a  symposium  on  the  subject  focusing 
on  proposed  reforms  in  Texas: 

He 's  talked  to  you  about  the  hard  part,  which  is  where  you  come  up  with 


2.    29  IND.L.  Rev.  495(1996). 


2003]  TRIBUTE  TO  NORMAN  LEFSTEIN  1 1 


the  money  to  change  the  system.  All  of  us  understand  that  that 
sometimes  adversely  affects  your  relationship  politically  with  counties 
and  state  government.  The  dean  lives  in  the  most  populous  county  in 
Indiana.  He  has  been  an  advocate  for  reform  in  the  state  of  Indiana,  yet 
the  legislature  recently  gave  him  the  money  to  help  build  a  brand  new 
law  school  building.  So,  there  really  is  life  after  doing  the  right  thing! 

Norm's  wry  rejoinder  to  this  comment  was,  "And  I  had  to  raise  a  lot  of  private 
money,  too." 

IV.  What  True  Leaders  Give  TO  Us 

Lee  Bolman  concluded  his  thoughts  on  the  characteristics  of  a  true  leader 
with  the  story  of  three  stonemasons.  When  asked  what  they  were  doing,  the  first 
one  said,  "I'm  cutting  stone."  The  second  said,  "I'm  building  a  cathedral."  The 
third  said,  "I'm  serving  God."  A  true  leader,  Bolman  said,  is  the  one  whose 
colleagues  confidently  give  the  second  and  third  answers  to  that  question  because 
they  have  been  made  to  feel  that  their  work  is  meaningful,  significant,  and 
enduring. 

Norm  has  created  the  context  in  which  all  those  involved  in  the  success  of 
our  law  school  know  that  their  work  is  meaningful,  significant,  and  enduring. 
What  better  legacy  could  we  have?  Thank  you.  Norm,  for  leading  us  so 
effectively  and  "leading  with  soul." 


Lefstein  to  the  Defense 


Barbara  Allen  Babcock* 

Somewhere  along  the  line,  administration  has  gotten  a  bad  name — 
synonymous  with  bureaucracy,  red  tape  and  preoccupation  with  petty  concerns. 
Call  someone  a  great  administrator,  and  your  praise  is  considered  faint,  or 
perhaps  slightly  ironic.  But  I  will  risk  it  because  Norman  Lefstein  is  a  truly  great 
administrator,  and  the  story  of  how  he  used  his  skills  to  build  a  struggling  little 
agency  into  a  model  of  criminal  defense  is  an  emblematic  one  that  belongs  in  any 
summary  of  his  professional  achievements. 

It  is  also  a  story  about  the  uses  of  administrative  excellence — which  like  due 
process  of  law,  does  more  than  merely  keep  things  running  along.  The  story 
starts  in  the  early  1960s  in  Washington,  D.C.  Norman  Lefstein,  fresh  (perhaps 
fleeing)  from  several  years  of  civil  litigation  in  Elgin,  Illinois,  arrived  to  take  a 
Master's  Degree  in  Trial  Advocacy  at  Georgetown  (The  Prettyman  Program). 

Gideon  v.  Wainwright,^  assuring  a  state-paid  lawyer  to  indigent  criminal 
defendants,  was  still  brand  new,  and  the  program  Norm  came  to  join  was  one 
effort  to  train  effective  lawyers  for  the  new  day  coming.  Like  many  other  places, 
the  District  had  no  regular  public  defender  agency,  but  relied  instead  on  lawyers 
appointed  to  serve  pro  bono. 

Soon  after  Gideon  came  down.  Congress  created  a  small  experimental 
outfit — ^we  used  to  call  them  pilot  programs — for  providing  indigent  defense  in 
the  Nation's  Capital.  It  was  named  the  Legal  Aid  Agency,  ("the  agency"  to  its 
first  members).  Five  or  six  high-spirited  young  lawyers  dedicated  themselves  to 
realizing  the  dream  of  Gideon:  of  "a  vast,  diverse  country  in  which  every 
[person]  charged  with  crime  will  be  capably  defended,  no  matter  what  his 
economic  circumstances,  and  in  which  the  lawyer  representing  him  will  do  so 
proudly,  without  resentment . . .  ."^ 

The  agency's  problem  at  its  creation  (and  still)  was  that  the  public,  and  its 
representatives,  do  not  embrace  the  dream  of  Gideon  for  every  defendant. 
Instead,  they  want  their  public  defenders  to  represent  only  the  deserving  few  in 
court,  and  to  plead  the  rest  guilty.  Thus,  sooner  or  later  in  the  life  of  every  public 
defender  agency,  its  caseload  starts  to  outstrip  its  resources,  and  it  comes  under 
tremendous  pressure  to  process  cases  rather  than  defend  them. 

This  happened  to  the  Legal  Aid  Agency  within  a  few  years  of  its  founding. 
But  the  Agency  got  a  second  life  and  grew  into  the  major  channel  for  defense 
services  in  the  District  of  Columbia:  the  Public  Defender  Service  (PDS).  Much 
of  the  credit  goes  to  Norman  Lefstein's  administrative  brilliance;  he  became 
Deputy  Director  a  few  months  after  I  took  over  as  Director  in  1968.  We  worked 
as  a  team  for  four  years,  and  then  he  headed  the  PDS  for  three  more  years. 

First  on  our  agenda  was  to  put  the  agency  on  a  sound  statutory  and  budgetary 
footing.  Norm  wrote  a  model  public  defender  statute,  and  led  the  effort  to  lobby 
it  through  a  Congress  notably  unsympathetic  to  the  needs  of  local  citizens.  Yet 


*     Judge  John  Crown  Professor  of  Law,  Stanford  Law  School. 

\.   372  U.S.  335  (1963). 

2.  Anthony  Lewis,  Gideon's  Trumpet  205  ( 1 989). 


1 4  INDIANA  LAW  REVIEW  [Vol.  36:13 


in  his  guise  of  careful  administrator  rather  than  crusading  defender.  Norm  talked 
to  them,  not  about  civil  rights,  but  about  cost  efficiency;  not  in  abstractions  but 
in  the  details  of  charts  and  projections.  And  Congress  responded;  the  agency 
grew  and  prospered.  Once  more  it  attracted  top  legal  talent,  once  more  there  was 
a  true  adversary  system  at  work,  and  once  more  poor  people  had  a  defender  when 
they  faced  the  state  in  court. 

To  keep  all  this  going,  Norm  needed  data;  data  for  his  reports,  and  his  regular 
treks  to  Congress.  We  decided  that  the  lawyers  must  keep  records  of  their  work. 
Now  anyone  who  thinks  this  was  easy  does  not  know  public  defenders.  As  I  look 
back  on  it,  herding  cats  is  the  right  analogy.  Defenders  consider  themselves 
lawyer-outlaws,  iconoclasts,  working  to  preserve  precious  liberty,  instead  of 
fighting  over  money  and  keeping  records  in  order  to  get  paid.  Freedom  from  the 
time  clock  was  the  only  perquisite  of  a  job  short  on  compensation  and  prestige. 
I  can  still  hear  the  outraged  cries,  thirty  years  later.  Yet  our  lawyers  kept 
records — and  even  submitted  to  their  review — on  forms  that  Norm  designed. 
They  did  it  because  they  knew  his  alchemy — how  he  could  turn  these  facts  into 
a  stable  future  for  PDS. 

Many  of  Norm's  ideas  were  novel  for  the  time;  today  they  are  the  hallmarks 
of  excellence  in  a  defender  program.  An  intensive  training  program — for 
instance — to  prepare  lawyers  for  the  courtroom,  for  plea  bargaining,  for 
counseling,  for  all  the  grave  responsibilities  of  defenders.  Systematic  training 
using  the  techniques  now  familiar  from  clinical  programs,  quite  new  at  the  time, 
required  considerable  resources  and  planning.  Norm  Lefstein  took  it  on  himself 
to  demonstrate  that  good  training  saved  time  in  the  long  run — on  cases  reversed 
for  ineffective  assistance,  on  the  ability  of  lawyers  to  handle  a  number  of  cases 
efficiently. 

In  the  statute  he  drafted,  Norm  named  the  new  organization  The  Public 
Defender  Service.  It  may  have  been  the  first  to  bear  the  "Service"  title,  reflecting 
the  insight  that  for  public  defenders,  the  strictly  legal  work  is  only  part  of  the 
picture.  Public  defenders  need  social  workers  to  help  in  the  representation  of 
many  clients:  to  locate  treatment  and  employment  opportunities,  to  counsel  on 
personal  issues.  Social  workers  enable  the  lawyers  to  present  a  coherent  life 
picture  and  plan  at  sentencing  time  (an  inevitable  day  for  many  clients).  Norm 
built  an  Offender  Rehabilitation  Program  into  the  PDS  statute,  along  with  a 
provision  for  trained  investigators. 

In  1974  the  Public  Defender  Service  was  named  an  "Exemplary  Projecf  by 
the  Law  Enforcement  Assistance  Administration  of  the  U.S.  Department  of 
Justice;  the  agency  was  the  only  public  defender  program  in  the  nation  to  have 
been  recognized  in  this  fashion.  Norm  still  lists  this  recognition  on  his  official 
resume;  I  am  here  to  say  it  was  in  large  measure  his  personal  accomplishment. 

Others  are  writing  about  his  long  service  as  Dean,  but  in  these  years  he  has 
not  abandoned  his  old  Defender  commitments  (once  a  Defender,  always  a 
Defender).  Again,  his  successes  have  the  cast  of  administration:  building 
institutions;  writing  standards  and  statutes;  guiding  and  directing  programs. 
Norm  Lefstein's  resume  is  a  roll  call  of  the  important  bar  and  governmental 
groups  working  to  improve  indigent  defense  services  everywhere.  For  all  those 
who  wish  to  see  fully  the  beauty  of  the  administrative  approach  to  social 


2003]  TRIBUTE  TO  NORMAN  LEFSTEIN  1 5 


injustice,  I  commend  Norm's  description  of  the  work  of  tiie  Indiana  Public 
Defender  Commission,  a  group  he  continues  to  chair,  in  his  article.  Reform  of 
Defense  Representation  in  Capital  Cases:    The  Indiana  Experience  and  Its 
Implications  for  the  Nation} 

I  will  close  with  one  of  my  last,  and  fondest  memories  of  the  public  defender 
days  that  Norm  Lefstein  and  I  shared.  It  was  May  Day,  1971;  anti-war 
demonstrators  threatened  to  close  down  the  Capital,  and  marched  at  rush  hour  on 
the  various  government  buildings.  Hundreds  of  people  were  arrested  throughout 
the  morning,  and  we  defense  lawyers  prepared  to  represent  them.  But  hours 
passed,  the  smell  of  tear  gas  faded  from  the  streets,  and  still  no  one  was  brought 
to  court  for  arraignment.  Nor  could  we  find  our  potential  clients  in  the  usual 
places — the  jails,  the  houses  of  detention. 

Public  defenders  on  motorcycles  fanned  out  over  the  city,  and  finally  located 
a  thousand  people,  locked  up  in  the  football  stadium,  without  medical,  sanitary 
or  other  provisions.  Night  was  drawing  near  and  there  was  a  chill  in  the  Spring 
air.  Speedily,  Norm  drafted  up  a  petition  for  habeas  corpus;  without  hesitation 
he  called  a  judge  at  home  to  come  back  to  town  and  hear  it.  Moonlight  was 
streaming  through  the  courtroom  windows  as  we  examined  police  officers  and 
Justice  Department  officials  and  made  our  case  for  immediate  release.  It  felt  like 
a  great  battle  over  the  next  few  days,  as  we  deployed  the  defense  resources  of  the 
city  to  represent  those  caught  up  in  the  system  and  unable  to  help  themselves. 
We  were  able  to  do  a  fine  job  because  we  were  well-trained  and  well-organized. 
And  that  is  due,  in  great  measure,  to  Norman  Lefstein. 

Perhaps  the  reader  is  wondering  about  my  role  as  Director  of  the  Agency. 
I  too  am  an  administrator  at  heart  and  one  who  follows  the  first  rule  of 
leadership:  get  a  great  deputy.  I  hired  Norm  Lefstein.  And  I  did  it  at  a  time 
when  the  Legal  Aid  Agency  statute  set  the  top  salary,  that  of  the  Director,  at 
$16,000  per  annum.  Norm  had  a  young  family,  and  could  not  live  on  that 
amount.  "But  Norm,"  I  said  in  persuading  him  to  come,  "the  statute  says  nothing 
about  the  salary  of  the  Deputy." 


3.   29Ind.L.Rev.495(1996). 


Indiana  Law  Review 

Volume  36  2003  Number  1 


ARTICLES 


California  Death  Trip 


Lawrence  M.  Friedman* 
Paul  W.  Davies" 

There  is  basically  only  one  way  for  a  person  to  enter  the  world;  but  there  are 
many,  many  ways  to  leave  it.  In  some  sense,  all  men  and  women  are  bom  equal, 
or  almost  so;  and  all  normal  children  follow  more  or  less  the  same  trajectory  of 
development.  But  people  die  in  most  unequal  ways — some  old,  some  young, 
some  violently,  some  peacefully,  some  by  accident  or  disease  or  otherwise,  some 
in  bed,  some  in  hospitals,  some  alone,  some  surrounded  by  family  and  friends. 
Death,  of  course,  is  the  common  fate  of  humanity.  No  one  gets  out  of  here  alive. 

The  title  of  this  article  contains  a  reference  to  Michael  Lesy's  odd  and 
disturbing  book,  Wisconsin  Death  Trip,  published  in  1973.'  Lesy  reprinted 
photographs  from  around  the  turn  of  the  century  made  by  a  photographer  in  rural 
Wisconsin  named  Charles  Van  Schaick.  Interspersed  with  the  photographs  are 
newspaper  accounts  of  suicides,  murders,  insanity,  and  other  bizarre  forms  of 
behavior,  from  the  same  general  locale.  We  read,  for  example,  for  1 899,  that 
Christ  Wold,  a  farmer,  "committed  suicide  by  deliberately  blowing  off  his  head 
with  dynamite";  and  that  "John  Pabelowsky,  a  [sixteen]  year  old  boy  of  Stevens 
Point,  was  made  idiotic  by  the  use  of  tobacco."^  Lesy's  general  thesis  is  this:  by 
the  turn  of  the  century,  "country  towns  had  become  chamel  houses  and  the 
counties  that  surrounded  them  had  become  places  of  dry  bones."^  The 
countryside  was,  in  short,  a  place  of  violence  and  madness;  perhaps  out  of 
boredom,  isolation,  and  the  terrors  of  social  uncertainty.  This  is  one  reason,  Lesy 
thinks,  for  the  flight  to  the  cities.  Whether  Lesy  is  right  or  not,  the  local 
newspapers  he  read  do  record  an  extraordinary  amount  of  pathological  behavior. 
Much  of  this  behavior  ended  in  sudden  or  violent  death.  And  sudden  or  violent 
death  is  the  realm,  par  excellence,  of  the  coroner. 

There  are,  as  we  said,  deaths  and  deaths.  Each  society  has  its  own  way  of 
classifying  deaths.  Each  society  considers  some  kinds  of  deaths  as  "normal,"  and 
others  as  unnatural,  or  even  supernatural.  In  modem  society,  "normal"  death  is 
the  death  of  old,  worn  out  bodies,  of  people  who  die  in  bed  or  in  a  hospital. 
Young  people  sometimes  die,  too,  and  at  one  time  death  in  childbirth  or  infancy 


*  Marion  Rice  Kirkwood  Professor  of  Law,  Stanford  Law  School. 

*♦  J.D.,  2001,  Stanford  Law  School;  Ph.D.,  2001,  University  of  California,  Berkeley. 

1 .  Michael  Lesy,  Wisconsin  Death  Trip  ( 1 973). 

2.  Id. 

3.  Id. 


1 8  INDIANA  LAW  REVIEW  [Vol.  36: 1 7 


or  childhood,  from  cholera,  smallpox,  diphtheria,  and  other  calamities,  were 
almost  if  not  quite  normal;  adults  too,  even  in  the  prime  of  life,  fell  victim  to  such 
diseases.  This  became  less  and  less  the  case  as  medicine  improved  its  power,  and 
began  actually  curing  people.  In  any  event,  there  has  been  and  still  is  a  category 
of  deaths  that  are  socially  defined  as  non-normal:  murders,  suicides,  weird 
accidents,  among  others.  These  were  grist  for  the  coroner's  mill. 

The  office  of  the  coroner  is  ancient.  It  is  part  of  the  medieval  inheritance  of 
the  common  law.  Shakespeare  has  a  reference  to  the  coroner's  inquest 
("crowner's  quest  law")  in  Hamlet."*  The  American  states  took  over  the 
institution  from  England,  just  as  they  took  over  the  sheriff  and  the  jury  system. 
It  seems  to  have  always  operated,  however,  in  a  kind  of  obscurity.  John  G.  Lee 
published,  in  1 881,  a  handbook  on  the  work  of  the  coroner  in  the  various  states;^ 
even  then  the  literature  was  described  as  "scanty"  and  "scattered." 

The  coroner  is  still  very  much  a  living  office  in  some  of  the  states.  It  is  also, 
in  the  opinion  of  many,  something  of  an  anomaly.  Massachusetts  abolished  the 
position  in  1877,  and  created  the  post  of  "medical  examiner;"  the  examiner  had 
to  be  a  medical  doctor.  New  York  took  this  step  in  1915.  Rhode  Island  tried 
having  both  a  medical  examiner  and  a  coroner.  By  the  1990s,  most  states  had 
either  gotten  rid  of  the  coroner  altogether,  and  replaced  this  office  with  a  medical 
examiner,  or  with  a  mixed  system  of  some  sort — both  a  medical  examiner  and  a 
coroner;  or  a  system  in  which  some  counties  had  coroners,  and  others  had 
medical  examiners.^  California  retains  the  office  of  coroner,  pure  and  simple,  in 
many  of  its  counties.  But  not  in  all  of  them.  A  law  of  1969  empowered  the 
Board  of  Supervisors  of  the  counties  to  abolish  the  office  "by  ordinance"  and 
provide  instead  for  "the  office  of  medical  examiner,  to  be  appointed  by  the  said 
board."  The  medical  examiner  was  to  be  a  "licensed  physician  and  surgeon  duly 
qualified  as  a  specialist  in  pathology";  and  he  would  "exercise  the  power  and 
perform  the  duties  of  the  coroner."^  At  the  beginning  of  the  Twentieth  Century, 
however,  the  coroner,  anomaly  or  not,  was  an  important  official  in  California's 
local  government.  Each  county  had  a  coroner.  It  was,  in  most  counties,  an 
elective  office.^  From  1 893  on,  the  term  of  office  of  the  coroner  was  four  years.^ 

The  literature  on  the  coroner  and  his  work,  more  than  a  hundred  years  after 
Lee,  can  still  be  described  as  "scanty."  Historians  have  made  surprisingly  little 


4.  William  Shakespeare,  Hamlet  act  5,  sc.  1 . 

5 .  John  G.  Lee,  Hand-Book  for  Coroners:  Containing  a  Digest  of  All  Laws  in  the 
Thirty- Eight  States  of  the  Union,  Together  with  a  Historical  Resume,  from  the  Earliest 
Period  to  the  Present  Time  ( 1 88 1 ). 

6.  See  Randy  Hanzlick  &  Debra  Combs,  Medical  Examiner  and  Coroner  Systems:  History 
and  Trends,  279  JAMA  870  (1998). 

7.  Cal.Gov'tCode§  24010  (1969). 

8.  In  Los  Angeles  County,  from  1956  on,  the  coroner's  office  was,  by  law,  to  be  led  by  a 
forensic  pathologist,  whose  title  was  to  be  "chief  medical  examiner-coroner."  Tony  Blanche  & 
Brad  Schreiber,  Death  in  Paradise:  an  Illustrated  History  of  the  Los  Angeles  County 
Department  of  Coroner  39  ( 1 998). 

9.  1893Cal.  Stat.  367. 


2003]  CALIFORNIA  DEATH  TRIP  19 


use  of  the  files  of  coroners.  Yet  these  files  are  of  great  legal,  and  social  interest. 
Hence  this  study.  The  basic  data  of  this  preliminary  report  consists  of  the 
contents  of  the  files  of  the  coroners'  inquests  in  Marin  County,  California, 
supplemented  by  data  from  two  other  counties,  San  Diego  and  Yolo  counties,  all 
from  the  year  1904.  Some  data  will  also  be  presented  from  later  years  in  Marin 
County  ( 1 904,  1 9 1 4,  1 924,  and  1 934).  The  number  of  inquests  was  never  great. 
In  Marin,  there  were  twenty-eight  inquests  in  1904,  forty-two  in  1914,  fifty-four 
in  1924,  and  twenty  in  1934.  Yolo  and  San  Diego  were  also  small  counties,  with 
relatively  few  inquests.  By  way  of  contrast,  the  Coroner  of  Cook  County 
(Chicago),  conducted  3,821  inquests  in  1904.'° 

I.  Marin:  The  Setting 

Marin  County  lies  just  across  the  Golden  Gate  from  San  Francisco.  It  is 
linked  to  San  Francisco  by  a  long,  narrow,  and  elegant  bridge.  The  land  mass  of 
the  county  amounts  to  something  more  than  500  square  miles.  Its  western  border 
is  the  fog-bound  shore  of  the  Pacific  Ocean.  The  eastern  portion  is  separated 
from  the  ocean  by  a  chain  of  high  hills,  or  low  mountains,  as  you  please.  Most 
of  the  population  is  concentrated  in  the  towns  and  cities  in  the  lowlands,  along 
the  rim  of  the  north  end  of  San  Francisco  Bay.  Today,  the  county  is  booming, 
and  the  population  is  growing  fast.  The  bay  is  dotted  with  yachts,  house-boats, 
and  pleasure-craft;  and  new  developments  crawl  up  the  steep  sides  of  the  wooded 
hills.  The  coastal  towns  are  bustling  centers  of  the  tourist  trade;  and  so  too  of  the 
cities  that  rim  the  Bay,  very  notably  Sausalito,  whose  shops  and  restaurants  on 
the  water  provide  views  of  San  Francisco,  gleaming  in  the  distance.  The 
population  of  the  county,  as  of  2000,  was  247,289. 

Marin  at  the  turn  of  the  century  was  a  much  quieter  place.''  There  were  no 
bridges  linking  Marin  to  San  Francisco.  The  1 890  census  counted  a  mere  1 3,072 
people.  Marin  at  that  time  had  a  very  high  percentage  of  the  foreign-bom — men 
(52.6%)  and  women  (about  30%).  Men  outnumbered  women — 69%  of  the 
inhabitants  were  males.  Consequently,  there  were  relatively  few  families.  Yolo 
County  was  also  small  (12,684);  but  mostly  native-bom.  By  1900,  Marin's 
population  had  risen  to  15,702;  and  the  gender  imbalance  had  dropped 
noticeably — ^the  county  was  now  about  61%  male.  By  1910,  the  population  had 
risen  to  25,000,  and  the  gender  gap  had  continued  to  narrow.  Yolo  County's 
population  hardly  rose  at  all — it  was  13,618  in  1900.  San  Diego  County  in  1900 
had  a  population  of  35,090;  about  half  of  these  people  lived  in  the  city  of  San 
Diego  itself. 

In  1900,  both  Marin  and  Yolo  counties  were  mostly  rural.  Marin  had  a  rural 


1 0.  Administration  of  the  Office  of  Coroner  of  Cook  County  Illinois:  Report  Prepared  for 
the  Judges  of  the  Circuit  Court  by  the  Chicago  Bureau  of  Public  Efficiency,  at  29  (1911) 
[hereinafter  Cook  County  Coroner's  Report]. 

1 1 .  The  source  of  the  information  for  Marin  and  Yolo  counties  is  Inter-university 
Consortium  for  Political  and  Social  Research  United  States  Historical  Census 
Browser,  available  at  http://fisher.lib.virginia.edu/census. 


20  rNDIANA  LAW  REVIEW  [Vol.  36: 1 7 


population  of  11,823,  and  an  urban  population  of  3,879  (if  you  can  call  this 
urban).  In  Yolo,  the  rural  population  was  10,732,  the  urban  population  2,886. 
In  1900,  Marin  had  eighty  manufacturing  establishments,  Yolo  ninety. 

No  place  is  "typical,"  and  Marin  has  its  own  special  character.  Many  of  the 
deaths  in  Marin  were  deaths  by  drowning;  the  county  is  bounded  on  three  sides 
by  water — ocean  and  bay.  It  is  hard  to  drown  in  landlocked  Yolo.  Marin  was 
also  the  home  of  San  Quentin  prison,  an  old  and  famous  establishment,  and  the 
habitation  of  many  violent  men.  The  prison  sits  on  a  spit  of  land,  overlooking  the 
northern  end  of  San  Francisco  Bay. 

The  coroner's  office,  like  other  offices  of  the  county  government,  is  housed 
today  in  the  Marin  County  Civic  Center,  a  stunning  building  from  Frank  Lloyd 
Wright's  last  years,  constructed  with  great  swooping  semi-circles  on  a  hilly  site 
on  the  edge  of  San  Rafael,  the  county  seat.  The  coroner's  office  has  maintained, 
virtually  intact,  all  the  inquest  files  from  1 852  to  the  present.  From  1 904  on,  the 
inquest  files  usually  contain  a  typed  transcript  of  the  proceedings.  The  Yolo 
County  records  contain  some  typed  transcripts,  but  more  often  simply  a  record 
of  the  statements  of  witnesses.  The  San  Diego  records  (housed  in  the  Research 
Archives  of  the  San  Diego  Historical  Society)  are  much  skimpier,  at  least  for 
1 904;  they  are  usually  only  one  page  long,  and  give  only  the  barest  essentials  of 
the  inquest;  transcripts  of  testimony  are  rare. 

II.  Crowners'  Quest  Law:  the  Statutes 

At  the  beginning  of  the  Twentieth  Century,  as  we  said,  laws  establishing  the 
office  of  coroner  were  still  in  force  in  most  states.  In  some  of  the  states,  the  role 
of  the  coroner  was  quite  restricted.  In  Wisconsin,  the  coroner  was  to  hold  an 
inquest  if  the  district  attorney  ordered  him  to  do  so,  and  only  if  the  district 
attorney  had  "good  reason  to  believe  that  murder  or  manslaughter  has  been 
committed."'^  In  Utah,  inquests  were  to  be  held  on  the  deaths  of  "persons  as  are 
supposed  to  have  died  by  unlawful  means;"'^  and  in  Tennessee,  only  when  there 
was  probable  cause  to  suspect  homicide."* 

The  statutes  usually  set  out  the  basic  procedures  for  coroners  to  follow.  In 
Illinois,  for  example,  the  coroner,  "as  soon  as  he  knows  or  is  informed  that  the 
dead  body  of  any  person  is  found,  or  lying  within  the  county,  supposed  to  have 
come  to  his  or  her  death  by  violence,  casualty,  or  any  undue  means,"  must 
"repair"  to  the  place  where  the  dead  body  is  located,  summon  a  "jury  of  six  good 
and  lawful  men  of  the  neighborhood,"  and,  "upon  view  of  the  body  . .  .  inquire 


1 2.  Wis.  Stat.  Stat  §  4865  (1906). 

13.  1 907  Utah  Laws,  tit.  37,  §  1 22 1 .  But  in  Utah,  it  was  the  "justice  of  the  peace"  who  had 
the  duty  to  hold  inquests. 

14.  In  Tennessee,  under  Tenn.  CODE  Ann.  §  7274  ( 1 896),  no  inquest  was  to  be  held  without 
an  "affidavit,  in  writing . . .  signed  by  two  or  more  reliable  persons,  averring  . . .  that  there  is  good 
reason  to  believe"  that  the  dead  person  came  to  "his,  her,  or  their  death  by  unlawful  violence  at  the 
hands  of  some  other  person  or  persons." 


2003]  CALIFORNIA  DEATH  TRIP  21 


into  the  cause  and  manner  of  the  death. "'^  This  notion  of  viewing  the  body  was 
an  essential  element  of  the  historic  role  of  coroner's  juries;  in  England,  according 
to  Lee,  the  inquisition  was  "void,"  except  ''super  visum  corporis.''^^ 

The  California  statute  in  force  in  1904'^  was  somewhat  ambiguous  on  the 
question  of  exactly  what  deaths  fell  under  the  coroner's  jurisdiction.  The 
statutory  trigger  read  as  follows:  the  coroner  steps  in  when  he  is  "informed"  that 
"a  person  has  been  killed,  or  has  committed  suicide,  or  has  suddenly  died  under 
such  circumstances  as  to  afford  a  reasonable  ground  to  suspect  that  his  death  has 
been  occasioned  by  the  act  of  another  by  criminal  means."'^  We  will  later 
discuss  exactly  what  this  language  means.  At  any  rate,  once  informed  of  a  death 
which  triggers  use  the  coroner,  the  coroner  was  supposed  to  pick  a  jury.  The 
minimum  number  of  jurors  was  six,  and  the  number  of  jurors  varied  from  case 
to  case,  for  reasons  not  very  obvious.  In  Yolo  county,  six  was  the  normal 
number;  but  in  San  Diego  and  Marin,  there  was  much  more  variation.  Sometimes 
there  were  seven,  or  even  nine  or  ten  jurors.  In  one  case,  in  1904  in  Marin,  a  jury 
of  eleven  was  convened. 

The  jury  was,  as  we  said,  required  to  look  at  the  dead  body  (many  of  the 
inquests  were  held  in  funeral  parlors),  and  they  could  summon  and  hear 
witnesses.  The  jury  would  pick  a  foreman,  and  listen  to  the  testimony  of  doctors, 
eye-witnesses,  and  others.  Witnesses  were  a  normal  part  of  the  coroner's 
inquest.  In  some  cases,  there  were  as  many  as  ten  witnesses. 

It  is  not  clear  how  the  jury  was  selected — exactly  what  the  process  was.  No 
challenges  were  allowed  to  the  coroner's  jury,  but  a  juror  who  was  biased  was 
not  supposed  to  serve  on  the  jury.  It  does  not  seem  that  there  was  any  mechanism 
for  enforcing  this  rule.  What  is  clear  is  that  many  jurors  in  Marin  and  Yolo 
served  more  than  once.  Once  in  a  while,  the  exact  same  jury  would  sit  on  two 
different  inquests  (if  they  were  held,  for  example,  on  the  same  day).  In  1 904,  the 
Coroner  of  Marin  County  held  multiple  inquests  on  three  different  occasions, 
involving  seven  of  the  twenty-eight  inquests.  On  one  noteworthy  day,  there  were 
three  inquests.'^  Often,  one  or  two  jurors  would  hold  over  from  inquest  to 
inquest.  A  Chicago  report  on  the  Cook  County  Coroner's  office  (1911)  reported 
a  problem  of  "professional  jurors."  The  report  claimed  that  some  fourteen  jurors 
served  on  the  vast  majority  of  the  coroners'  inquests  in  Cook  County;  and  that 
this  was  one  of  the  "worst  abuses"  of  the  system.  The  jurors  were  paid  for  their 
labors,  and  there  was  a  concern  that  these  professional  jurors  would  not  exercise 
independent  judgment,  but  simply  do  what  the  coroner  wanted.^° 


15.  1907111.  Laws  213. 

1 6.  Lee,  supra  note  5,  at  20-2 1 . 

17.  Cal.  Penal  Code  §1510(1 904). 

18.  Cal.  Penal  Code  §  1510(1906).  The  coroner  could — and  indeed  had  to — exhume  dead 
bodies  if  the  deaths  arose  under  suspicious  circumstances,  and  the  body  had  already  been  buried. 
There  were  no  examples  of  this  in  any  of  the  files  we  examined. 

19.  This  problem — if  it  was  a  problem — seemed  to  get  worse  over  time.  In  1934,  it  was 
common  for  the  coroner  to  hold  multiple  inquests;  one  day,  he  held  six  of  them! 

20.  Cook  County  Coroner's  Report,  supra  note  10,  at  8-9,  41-45. 


22  INDIANA  LAW  REVIEW  [Vol.  36:17 


Who  were  the  coroners?  The  San  Diego  coroner,  Addison  Morgan,  was  in 
fact  a  medical  doctor.^'  The  Marin  County  coroner,  in  1904,  F.  E.  Sawyer,  was 
a  funeral  director  and  embalmer  who  advertised  in  the  local  papers.^^  Perhaps  he 
was  a  doctor  as  well  (he  was  referred  to  as  "Doctor  Sawyer"  at  least  once  in  the 
newspapers),  but  if  so,  he  did  not  practice.  A  doctor  was  nearly  always  needed 
at  the  inquest,  and  Sawyer  nearly  always  had  a  doctor  available  to  testify.  It 
appears  that  undertakers  and  owners  of  funeral  parlors  were,  in  many  states, 
popular  selections  or  elections  as  coroners.^^  This  continued  to  be  the  case.  In 
the  early  1950s,  in  Kentucky,  a  survey  of  eighty-two  counties  found  eleven 
doctors  and  thirty-one  undertakers  in  the  ranks  of  the  coroners  (there  were  also 
"farmers,  farm  laborers,  taxi  drivers,  and  persons  with  no  occupation");  in 
Minnesota,  however,  there  were  forty-seven  doctors,  and  only  twenty-six 
undertakers  (along  with  a  scattering  of  others — ^three  osteopaths,  one  dentist,  two 
insurance  salesmen,  among  others).^"* 

In  Marin  and  the  other  counties  too,  the  coroner  tended  to  dominate  the 
proceedings,  as  far  as  we  can  tell.  The  coroner,  or  a  deputy,  sometimes  did  some 
investigative  work.  In  one  case,  concerning  Frederick  M.  Walsh,  who  drowned 
in  the  Bay,  the  Coroner  testified  that  he  tracked  down  the  person  from  whom  the 
deceased  had  rented  a  room  in  San  Francisco,  in  order  to  ask  him  questions^^;  in 
another  case,  when  an  unknown  body  was  found  at  Angel  Island,  the  coroner  put 
ads  in  local  papers,  trying  to  find  out  who  the  man  was  (with  no  success). 

The  inquest  was,  if  the  records  can  be  trusted,  rather  informal,  compared  to 
a  trial.  The  jurors  were,  however,  sworn  in.  Lawyers  were  not  normally  present; 
and  the  strict  rules  of  evidence  were  not  followed.  Jurors  could  and  did  ask 
questions,  and  some  of  them  seemed  to  take  a  more  active  part  in  the  goings-on 
than  trial  jurors  would.  But  the  coroner  asked  most  of  the  questions.  He  took  the 
leading  role  in  extracting  information  out  of  witnesses.  Sometimes  his 
statements  and  questions  had  a  decided  slant;  and  he  commented  freely  on  the 
evidence.  Of  an  Italian  man,  struck  and  killed  by  a  train,  the  coroner  remarked, 
"As  far  as  I  can  ascertain,  he  liked  his  'vino.'"^^  At  an  inquest  into  the  death  of 
Mrs.  Mattie  Jackson,  hit  by  a  train  at  Larkspur,  the  coroner  remarked  that  he  had 


21.  Morgan  died  on  his  seventy-eighth  birthday;  his  obituary  appeared  in  the  San  Diego 
Union,  January  10,  1937. 

22.  See,  e.g.,  MARIN  JOURNAL,  Jan.  14,  1904,  at  4. 

23.  Since  the  coroner  has  control  of  the  dead  body,  an  undertaker-coroner  would  be  in  a 
terrific  position  to  get  the  right  to  do  the  funeral  for  the  deceased,  hence  the  office  of  coroner  could 
become  a  "feeder"  for  the  undertaker's  business.  At  least  this  was  suggested  by  some  observers. 
See  Pete  Martin,  How  Murderers  Beat  the  Law,  SATURDAY  EVENING  POST,  Dec.  1 0, 1 949  (the  piece 
is  a  general  attack  on  the  amateurishness  of  coroners). 

24.  National  Municipal  League,  CORONERS  IN  1953:  A  Symposium  of  Legal  Bases  and 
Actual  Practices  (3d  ed.,  May  1955)  (unpublished  typescript  on  file  with  the  Stanford  Law 
Library).  Funeral  directors  were  also  frequent  coroners  in  New  Jersey.  In  Ohio,  after  1945,  the 
coroner  was  required  to  be  a  licensed  physician. 

25.  Marin  County  Coroner's  Inquest  (MCCI)  752  (Sept.  27,  1 904). 

26.  MCCI  1648  (Dec.  10,  1924). 


2003]  CALIFORNIA  DEATH  TRIP  23 


visited  the  site  with  the  witness  and  a  representative  from  the  railroad  and  "I 
found  that  his  statement,  that  is,  as  far  as  that  part  of  it  as  to  the  station  was 
concerned,  was  absolutely  correct."^^  In  the  case  of  Michal  Grandi,  who  died  in 
a  bakery  after  eating  some  meat,  the  coroner  poured  cold  water  on  the  idea  that 
Grandi  had  choked  to  death:  "I  am  positive  .  .  .  that  he  died  from  chronic 
alcoholism,  and  that  he  was  troubled  with  cirrhosis  of  the  liver  and  fatty 
degeneration  of  the  heart.  Of  course,  that  could  only  be  determined  by  an 
autopsy.  Under  the  circumstances,  if  you  think  it  unnecessary  to  have  an 
autopsy,  we  will  render  a  verdict."  A  dutiful  jury  took  the  hint,  and  returned  a 
verdict  of  "acute  alcoholism"  as  the  cause  of  death.^*  At  the  end  of  the  inquest, 
the  coroner  instructed  the  jury,  although  these  instructions  were  much  less  formal 
than  in  a  regular  jury  trial.  As  we  have  seen,  he  sometimes  almost  put  words  in 
the  mouth  of  the  jurors.  In  one  case,  for  example,  where  a  woman  had  died  of 
tuberculosis,  the  coroner  said  to  the  jury:  "I  think.  Gentlemen,  it  is  a  clear  case 
of  a  natural  cause  of  death."^^  However,  the  jurors  were  not  forced  to  take  the 
hint;  and  they  did  retire  outside  the  presence  of  the  coroner,  to  deliberate,  reach 
a  decision  and  render  a  verdict. 

The  statute,  as  we  saw,  was  fairly  vague  on  one  crucial  point — which  deaths 
call  for  a  coroner's  inquest?  Murder  and  suicide  seem  clear  enough;  but  what 
does  "killed"  mean?  The  answer  is  hardly  obvious,  and  apparently  the  language 
gave  the  coroner  considerable  leeway.  The  inquest  records  show  that  the  coroner 
interpreted  his  powers  pretty  broadly;  he  conducted  an  inquest  in  all  sorts  of 
situations  where  it  was  not  clear  whether  anybody  had  been  "killed"  in  the 
statutory  sense.  Many  inquests  were  of  sudden  deaths  that,  on  inquiry,  turned 
out  to  be  from  "natural  causes."  The  coroner  also  investigated  quite  a  few 
accident  cases.  Presumably,  these  were  incidents  where  there  was  some  vague 
chance  that  a  crime  had  been  committed:  if  not  murder,  then  perhaps  recklessness 
or  manslaughter  or  the  like. 

By  rare  good  fortune,  a  reported  California  case  sheds  light  on  the  question 
of  the  coroner's  jurisdiction — and  also  on  the  way  the  coroner  actually  worked. 
In  1906,  Addison  Morgan,  the  San  Diego  County  coroner — a  medical  doctor  in 
private  practice — sued  the  county  to  recover  "compensation  for  his  services  in 
some  fourteen  inquests."^^  The  county,  apparently,  felt  it  was  under  no 
obligation  to  pay.  Its  excuse  was  that  the  inquests  were  unnecessary.  The 
coroner  described  the  fourteen  cases — in  each  one  there  was  a  sudden  death,  and 
the  coroner  argued  that  in  each  one  there  was  at  least  some  hint  or  possibility  of 
gross  neglect,  or  suicide,  or  foul  play.  The  court  agreed  with  the  coroner,  and 
ordered  the  fees  to  be  paid.  It  seems  very  clear,  from  the  records,  that  the  coroner 
in  Marin  County  took  the  same  point  of  view  as  Addison  Morgan.  Because  of 
the  fee  structure,  it  was  clearly  in  the  coroner's  interests  to  stretch  a  point  and 
look  at  as  many  dead  bodies  as  possible. 


27.  MCCI  762  (Dec.  2,  1904). 

28.  MCCI  1212  (July  8,  1914). 

29.  MCCI  750  (Aug.  1 1,  1904)  (death  of  Clara  Amelia  Ross). 

30.  The  case  is  Morgan  v.  San  Diego  County,  86  P.  720  (Cal.  Dist.  Ct.  App.  1906). 


24  INDIANA  LAW  REVIEW  [Vol.  36:17 


This  was  not  exclusively  a  California  problem.  The  Illinois  statute  defined 
the  coroner's  domain  as  deaths  which  came  about  "by  violence,  casualty,  or  any 
undue  means,"  which  is  certainly  even  more  ambiguous  and  opens  the  door  even 
wider  to  discretion.  Under  the  Arkansas  statute,  if  the  "dead  body  of  any  person" 
was  found  and  the  "circumstances  of  the  death"  were  "unknown,"  or  "if  any 
person  die  and  the  circumstances  of  his  death  indicate  that  he  has  been  foully 
dealt  with,"  the  coroner  was  to  become  involved.  An  Arkansas  case  turned  on 
the  same  point,  more  or  less,  as  the  San  Diego  case.  A  man  was  sawing  wood, 
"took  a  fit,"  fell  down  and  died.  The  coroner  held  an  inquest,  and  then  sued  the 
county  for  his  fees.  In  this  case,  the  coroner  lost.  The  court  held  for  the  county: 
"It  is  not  the  duty  of  the  Coroner  to  inquire  of  sudden  deaths,  unless  there  is 
reasonable  ground  to  believe  that  they  are  the  result  of  violence  or  unnatural 
means. "^' 

Other  statutes  differed  in  small  or  large  details  from  the  text  of  the  California 
law.  Some  were  broader,  some  were  narrower.  In  Pennsylvania,  the  coroner 
came  in  when  the  cause  of  death  was  "of  a  suspicious  nature  and  character."  In 
Oregon,  there  had  to  be  suspicion  of  criminal  means;  or  of  suicide. 

III.  Why  Did  They  Die? 

The  basic  question  for  the  coroner's  jury  was:  how  did  this  person  meet  his 
or  her  death.  The  inquest  ends  with  a  verdict.  Here  is  the  breakdown  of  the 
results  (verdicts)  of  coroners'  inquests,  in  the  four  sample  years  in  Marin  County: 


"Natural  causes" 

27 

Suicides 

32 

Railroad  accidents 

15 

Automobile  accidents 

12 

Drowning 

21 

"Accidents" 

20 

Homicides 

2 

"Other" 

15 

Total: 

144 

Of  course,  we  cannot  assume  that  the  inquest  results  were  entirely  accurate; 
the  jury  could  make  mistakes,  or,  in  some  cases,  simply  lack  enough  information 
to  come  to  the  right  conclusion.  Some  of  the  "accidents"  could  have  been 
suicides;  some  of  the  "drowning"  entries  might  have  been  suicides  as  well. 
Many  in  the  "other"  category  could  have  been  differently  classified.  But  on  the 
whole,  we  may  assume  some  sort  of  rough  and  ready  accuracy. 

IV.  Women  AND  Men 

What  do  we  learn  from  the  inquest  files?  Unusual  death,  at  least  as  far  as 
the  coroner  was  concerned,  was  a  macho  business.  In  the  four  sample  years  in 
Marin  County,  there  were  144  inquests.  All  except  eighteen  of  the  dead  bodies 
were  male.  This  despite  the  fact  that  in  the  entire  sample,  there  were  only  two 


31.    Clark  v.  Calloway,  52  Ark.  361  (1889). 


2003]  CALIFORNIA  DEATH  TRIP  25 


homicides — a  category  that  would  be  expected  to  be  heavily  male.  Scattered  data 
from  other  places  also  show,  quite  uniformly,  a  preponderance  of  men.  In 
Baltimore,  in  the  Nineteenth  Century,  75%  of  the  inquests  were  of  men.^^  A 
study  of  the  City  of  Westminster,  England,  in  the  Eighteenth  and  Nineteenth 
Centuries  found  that  men  outnumbered  women  two  to  one,  in  almost  every 
category  of  death.^^    Both  in  Yolo  and  San  Diego,  most  of  the  victims  were 

34 

men. 

The  Marin  County  data  are  not  discordant  with  other  data.  The  suicide  rates 
for  men  were  consistently  higher  than  those  for  women,  throughout  this  period. 
In  1904,  men  committed  suicide  at  a  rate  more  than  three  times  that  of  women; 
the  national  rate  was  12.2  per  100,000.  In  1914,  the  national  rate  had  risen  to 
1 6. 1 ;  in  1 924,  it  had  dropped  to  1 1 .9;  in  1 934  it  was  again  higher,  to  1 4.9.  Most 
suicides  continued  to  be  men,  and  by  more  than  a  three-to-one  ratio.  For  1934, 
there  were  recorded  18,828  suicides  in  the  United  States;  14,564  were  men,  and 
4,254  were  women. ^^ 

Men  killed  themselves  under  various  circumstances  and  used  all  sorts  of 
methods.  John  C.  Tait,  age  forty-three,  a  native  of  England,  committed  suicide, 
by  "self-administered"  chloroform,  on  March  17,  1904.  Tait  was  despondent 
because  he  could  not  find  work;  he  had  tried  to  commit  suicide  three  times 
before.  He  wanted  to  be  "buried  in  a  plain  wooden  box  in  the  common  burying 
ground  ....  I  am  wholly  and  solely  to  blame  in  this  matter'V^  Mathias  Enos,  a 
native  of  the  Azores,  hanged  himself  on  July  17,  1904,  "while  suffering  from 
mental  trouble'V^  an  "unknown  white  man,"  who  drowned  in  San  Francisco  Bay 
in  February,  1914,  left  a  note  that  said,  "Too  much  rheumatism;  not  enough 
money ";^^  two  men  and  a  woman  committed  suicide  that  year  "while  temporarily 
insane,"  two  by  shooting  themselves,  one  by  drowning;^^  Christensen  Bungaard, 
a  native  of  Denmark,  thirty-one  years  of  age,  was  despondent  over  a  girl  who 
rejected  him;'*°  eighty-two-year-old  Rudolph  Huber,  who  was  going  blind,  took 
strychnine  in  August  1914.**'    In  1924,  Pedro  Cano,  a  twenty-four-year-old 


32.  Suspicious  Deaths  in  Mid- 19th  Century  Baltimore:  A  Name  Index  to  Coroner  Index 
Reports  (Baltimore  City  Archives)  [hereinafter  Suspicious  Deaths]. 

33.  Maria  White  Green  wald  &  Gary  I.  Greenwald,  Coroner's  Inquests:  A  Source  of  Vital 
Statistics:  Westminster,  1761-1866,  J.  LEGAL  Med.  51,  60  (1983). 

34.  Coroner's  inquests  did,  however,  play  a  role,  at  some  points  of  time,  and  in  some  places, 
in  investigating  the  deaths  of  women  who  had  had  illegal  abortions.  On  this  point,  see  LESLIE  J. 
Reagan,  When  Abortion  Was  a  Crime:  Women,  Medicine,  and  Law  in  the  United  States, 
1867-1973,  at  1 18-29  (1997),  reporting  Chicago  data  in  the  period  after  the  Second  World  War. 
There  were  no  examples  of  abortion  deaths  in  our  sample. 

35.  2  Historical  Statistics  of  the  United  States  414  (1975). 

36.  MCCI  740  (Mar.  3,  1904). 

37.  MCCI  748  (July  17,  1904). 

38.  MCCI  1191  (Feb.  26,  1914). 

39.  MCCIs  1 199,  1200,  1201  (respectively,  May  9,  1914,  Apr.  23,  1914,  Apr.  18,  1914). 

40.  MCCI  1207  (June  25,  1914). 

41.  MCCI  1218  (Aug.  11,  1914). 


26  INDIANA  LAW  REVIEW  [Vol.  36:17 


Mexican,  an  inmate  at  San  Quentin,  fractured  his  skull  "by  jumping  off  [third] 
tier  in  new  prison  with  suicidal  intent";"^  Albert  W.  Lane,  fifty-three,  who  had 
"trouble  in  the  head,"  severed  his  jugular  vein  with  a  razor,  in  August  1924;"*^ 
Alex  M.  Olsen,  age  forty,  inhaled  gas  from  a  gas  stove,  and  left  a  note  to  his  wife 
(who  was  divorcing  him)  saying  "Now  I  hope  you  are  satisfied.'"'''  The  only 
suicide  in  the  1934  group  was  Robert  Grimes,  who  threw  himself  "under  an 
oncoming  truck  with  suicidal  intent.'"'^  These  Marin  suicides,  with  three 
exceptions,  were  men.  Catherine  Dubrow,  thirty-five,  who  died  on  April  25, 
1904,  was  despondent  over  the  death  of  a  child;''^  and  Florence  Duddy,  twenty- 
two  years  old,  who  ingested  lysol  "with  suicidal  intent  while  temporarily  insane" 
and  suffering  from  "melancholia";  her  father  testified  that  she  was  despondent 
over  anemia."*^ 

By  way  of  comparison,  in  San  Diego  County  (1904),  there  were  about 
thirteen  suicides,  out  of  thirty-six  coroners'  inquests.  Possibly  one  or  two  others 
could  be  included  in  this  category.  The  inquest  papers  are  often  extremely 
laconic,  and  in  some  cases,  the  cause  of  death  was  listed  as  "unknown."  All  of 
the  suicides  labeled  as  such  were  men.  Like  the  men  in  Marin  County,  they 
chose  all  sorts  of  ways  to  kill  themselves:  Rupert  Reisinger  took  arsenic;  Joe 
Clemens  cut  his  throat  with  a  razor;  James  Holohan,  arrested  for  drunkenness, 
hanged  himself  in  jail;  W.  J.  Smith  used  "illuminating  gas";  August  Hourteinne 
took  "carbonic  acid";  while  Filberto  Castillo  poisoned  himself  by  taking  a 
product  called  "Rough  on  Rats."  Shooting  oneself  with  a  gun  was,  however,  the 
most  popular  way  out  of  this  earth  for  these  despondent  men.''^ 

Why  is  it  that  men  were  so  much  more  at  risk  of  killing  themselves,  or 
getting  themselves  killed,  than  women?  The  coroners'  inquests  tended  to  blame 
mental  illness,  "brain  trouble,"  and  the  like  for  the  suicides — in  fact,  almost 
universally.  But  it  is  difficult  to  understand  why  men  should  be  so  much  more 
prone  to  mental  illness  than  women.  Part  of  the  answer  to  the  gender  issue  might 
lie  in  another  feature  of  the  inquest  records.  The  men  who  died  were 
disproportionately  immigrants,  disproportionately  loners,  men  who  lived  by 
themselves,  men  without  obvious  family  attachments.  The  1904  San  Diego 
records  included  natives  of  New  Brunswick,  England,  Germany,  Norway,  the 
Azores,  Switzerland,  Wales,  Ireland,  and  China.  Eleven  of  the  twenty-eight  were 
foreign  born.  Most  of  the  Americans  were  not  Californians,  but  came  from 
somewhere  else.  Locals  tended  not  to  end  up  in  the  coroner's  files.  People  with 
families,  homes,  connections,  jobs,  settled  routines  were  less  prone  to  the  kinds 
of  sudden  or  mysterious  death  that  led  to  the  coroner's  inquest.  And  women. 


42.  MCCI  1608  (Feb.  12,  1924). 

43.  MCCI  1629  (Aug.  30,  1924). 

44.  MCCI1652(Dec.  10,  1924). 

45.  MCCI  2016  (May  29,  1934). 

46.  MCCI  743  (May  2,  1904). 

47.  MCCI  1223  (Oct.  19,1914). 

48.  These  files  are  found  in  the  San  Diego  Historical  Society  archives,  Collection  R.  2.69, 
Box  22. 


2003]  CALIFORNIA  DEATH  TRIP  27 


more  than  men,  had  these  characteristics.  The  lonely  people,  far  from  home,  in 
boarding-house  rooms,  were  men,  not  women. 

V.  ACCIDENTAL  Death 

The  information  on  accidents  is,  so  far,  fairly  fragmentary.  But  the  issue  of 
accidental  death  was,  apparently,  of  some  importance  to  the  work  of  the  coroner. 
The  coroner's  job  was  to  decide  whether  somebody  was  responsible  (criminally 
or  otherwise)  for  an  accidental  death.  The  goal  was  to  explain,  to  blame,  or 
exonerate.  In  one  of  the  1904  inquests,  John  Frederick  Hansen,  who  worked  on 
a  ship,  was  struck  by  a  train  of  the  North  Shore  Railroad.  The  accident  was  fatal. 
The  train  engineer  testified  that  he  saw  Hansen  on  the  track,  and  blew  the 
whistle,  but  did  not  have  time  to  stop  the  train.  The  verdict:  an  accident,  "and  we 
hereby  exonerate  the  engineer  and  crew  from  all  blame. "''^  In  the  same  year, 
Alfred  Iten,  a  native  of  Switzerland,  stepped  in  front  of  the  "gravity  car  on  Mt. 
Tamalpais  Scenic  Rr."  But  the  jury  said,  "we  believe  his  death  was  due  to  his 
own  carelessness."^^  Lillien  Keefe,  nineteen  years  old,  was  hit  by  a  train  as  she 
walked  over  a  foot  crossing.  In  this  case,  there  was  considerable  testimony  about 
how  the  accident  happened,  and  whether  it  could  have  been  avoided;  the  general 
thrust  of  the  questions,  however,  went  toward  absolving  the  engineer  of  the  train, 
and  pinning  the  blame  on  Lillien.  The  verdict:  "Being  struck  by  Electric  Train 
at  foot  crossing  .  .  .  and  believe  no  responsibility  rests  with  N.S.R.R.Co  for 
accident."^'  In  general,  the  coroners'  juries  seemed  quite  anxious  to  absolve 
railroads  and  other  companies  from  liability.  In  a  rare  exception,  an  inquest  in 
San  Diego,  in  1904,  found  that  a  minister  had  drowned  accidentally,  by  "falling 
from  a  Sale  Boat  in  the  Bay  of  Sandiego."  The  jury  went  on  to  say:  "We  hereby 
Recommend  that  the  Harbor  Commissioners  or  those  who  have  Authority  to  not 
allow  Pleasure  Boats  or  Public  Boats  carrying  Passengers  to  go  out  on  the  Bay 
or  the  Ocean  without  Life  presservers."^^  This,  of  course,  did  not  actually  place 
any  legal  responsibility  on  anybody  in  particular.  In  a  Marin  case,  where  an 
inmate  of  San  Quentin,  William  Stanley,  killed  himself  with  a  knife,  the 
coroner's  jury  recommended  that  prisoners  in  "Crazy  Alley"  not  be  given 


49.  MCCI  747  (June  21,1 904). 

50.  MCCI  751  (Aug.  30,  1904). 

51.  MCCI  756  (June  2,  1904);  the  very  next  inquest,  into  the  death  of  Elmo  M.  Dempsey, 
twenty-one,  concluded  that  the  cause  was  "[cjarelessness  in  attempting  to  board  a  train  at  Larkspur 
station  on  the  Northshore  Electric  Rail  Road,  while  the  train  was  in  motion."  MCCI  757,  June  29, 
1904.  The  railroad  was  exonerated  in  all  four  cases  of  railroad  accidents  that  led  to  inquests  in 
Marin  in  1904. 

52.  And  of  course  there  was  the  occasional  coroner's  inquest  that  did  find  someone  culpable; 
for  example,  an  inquest  in  Jackson  County,  Illinois,  in  1905,  on  the  death  of  James  Bostic,  shot  to 
death  by  a  "night  policeman,  Fred  Jacquot  ....  We  find  that  shooting  not  justifiable  and 
recommend  that  Fred  Jacquot  be  held  to  await  the  action  of  the  Grand  Jury."  Coroner's  Inquests, 
Jackson  County,  Illinois,  available  at  http://www.iltrails.org/jackson/coronerl  .htm  (last  visited  July 
22,  2001). 


28  INDIANA  LAW  REVIEW  [Vol.  36: 1 7 


knives." 

The  coroner's  inquests  do  thus  shed  some  light  on  norms  of  responsibility  (or 
non-responsibility);  and  they  have  some  relationship  to  developments  in  the  law 
of  torts.  Over  time,  the  meaning  of  the  plain  English  word  "accident"  seems  to 
have  shifted.  In  the  famous  Farwell  case,^"*  for  example,  the  leading  case  on  the 
fellow  servant  rule  in  the  United  States,  Lemuel  Shaw  uses  the  word  "accident" 
or  "pure  accident"  to  mean  an  event  that  was  nobody's  fault — and  for  which 
nobody  was  really  accountable.  The  United  States,  particularly  in  the  first  half 
of  the  Nineteenth  Century,  could  be  described  as  a  legal  culture  of  low 
accountability.  All  sorts  of  rules  developed,  whose  thrust  was  to  limit  liability 
for  personal  injuries — perhaps  in  order  to  encourage  enterprise;  but  in  any  event, 
sustained  by  a  view  that  "accidents"  simply  happened,  as  bad  luck,  fate,  or  the 
victim's  own  fault.  Overtime,  a  legal  culture  of  high  accountability  replaced  the 
culture  of  low  accountability.  The  era  of  the  "liability  explosion"  (the  Twentieth 
Century)  reflects  a  frame  of  mine  that  does  not  really  believe,  for  the  most  part, 
in  "accidents,"  to  the  same  degree  and  with  the  same  meaning  as  the  earlier 
period.  An  "accident"  in  the  Twentieth  Century  is  usually  an  event  that  has  a 
cause;  and  that  cause  comes  to  rest  on  the  an  organization  (or  an  insurance 
company)  which  bears  some  responsibility  for  the  accident;  and  will  therefore 
have  to  pay. 

In  1904,  this  shift  was  underway  but  incomplete.  For  the  coroner, 
"accidental"  apparently  did  not  mean  mysterious  or  random  or  without  a  cause. 
But  it  still  implied  a  lack  of  legal  responsibility.  The  coroner's  work  in  general 
assumes  that  any  death,  of  course,  has  some  sort  of  cause:  death  is  either 
"natural,"  or  it  calls  for  some  explanation,  but  the  explanation  is  always  in 
rational,  scientific  terms. 

In  the  Nineteenth  Century,  there  were  many  rules  of  tort  liability,  but  they 
did  not  open  wide  the  doors  to  compensation,  in  civil  cases.  Criminal 
responsibility  was  at  least  sometimes  a  substitute  for  tort  liability  in  the 
Nineteenth  Century.  That  is,  when  the  incident  was  not  a  pure  "accident,"  there 
was  a  tendency  to  find  some  individual  to  blame  for  the  occurrence  (criminally), 
or  sometimes  as  an  alternative  to  a  civil  suit  for  damages.  The  very  strong  trend 
in  the  coroners'  reports  is  to  blame  the  victim  himself  for  carelessness,  or  in  any 
event  to  excuse  a  company  or  corporation.^^  Another  example  of  exoneration, 
of  another  sort,  is  found  in  a  file  from  Yolo.  The  dead  man  is  a  suspected 
prowler,  shot  by  a  constable.  The  prowler,  who  was  sixty-nine  years  old, 
apparently  fired  at  the  constable,  who  fired  back  (he  said).  The  coroner's  jury 
found  that  the  constable  "was  entirely  justified  in  said  act." 


53.  MCCI755(Oct.  19,1904). 

54.  Farwell  v.  Boston  Worcester  R.R.,  45  Mass.  49  (1842). 

55.  See  WILLIAM  Graebner,  Coal-Mining  Safety  in  the  Progressive  Period:  The 
Political  Economy  of  Reform  98  (1976),  on  the  tendency  of  coroner's  juries  in  West  Virginia 
to  exonerate  in  mine  accident  cases. 


2003]  CALIFORNIA  DEATH  TRIP  29 


VI.  Inquest  Findings  as  Evidence 

When  the  coroner's  inquest  makes  a  finding  of  accident,  or  suicide,  or 
excuses  or  blames  someone  for  a  death,  what  weight  does  this  verdict  have  in  a 
court  of  law?  For  example,  take  the  case  where  a  coroner's  jury  brings  in  a 
verdict  of  suicide.  What  impact  does  this  have  in  a  lawsuit  brought  by  the  dead 
man's  family  against  his  insurance  company?  Many  insurance  policies  provided 
that  the  company  would  not  have  to  pay  if  the  insured  killed  himself.  The  formal 
question  was  whether  the  coroner's  inquest  was  "judicial"  or  "ministerial."  If 
"judicial,"  the  inquest  material  could  be  admitted  in  court.  This  would  not  be 
true  if  the  finding  were  merely  "ministerial."  A  few  cases  held  the  inquest  to  be 
"judicial,"  and  hence  admissible.  United  States  Life  Insurance  v.  Volcke^^  was 
an  Illinois  case  from  1 889;  the  insured  allegedly  committed  suicide.  At  least  so 
the  coroner's  jury  found.  The  court  held  that  the  inquest  material  was  admissible 
as  evidence  that  the  dead  man  killed  himself.  In  1919,  Illinois  amended  its 
statute  to  read  that  in  any  negligence  case,  and  in  any  lawsuit  "for  the  collection 
of  a  policy  of  insurance,"  the  coroner's  verdict  was  not  admissible  "as  evidence 
to  prove  or  establish  any  of  the  facts  in  controversy."  And,  indeed,  in  most  states 
(though  not  California),  the  coroner's  inquest  was  «o/ acceptable,  in  cases  of  this 
sort. 

Aetna  Life  Insurance  Co.  v.  Milward,  a  Kentucky  case  from  1904,^^  was 
another  instance  of  alleged  suicide.  Here  the  court  refused  to  allow  inquest 
evidence  to  be  used  in  an  action  against  an  insurance  company.  If  courts 
admitted  evidence  from  inquests,  the  court  said,  there  would  be  a  "race  and 
scramble  to  secure  a  favorable  coroner's  verdict,"  in  order  to  influence  a  later  tort 
case,  or  a  claim  against  an  insurance  company.  Inquests,  said  the  court,  are  often 
conducted  with  "carelessness"  and  to  allow  them  to  be  used  in  a  later  case  would 
"introduce  an  element  of  uncertainty  into  the  practice  which  would  be  contrary 
to  public  policy,  and  pernicious  in  the  extreme."  This  was  the  prevailing  view; 
it  reflects,  no  doubt,  some  of  the  more  general  suspicion  courts  had  about 
insurance  companies,  and  their  propensity  to  refuse  to  pay  off  claims.^^ 

VII.  Natural  Causes 

In  quite  a  few  cases,  the  coroner's  inquest  in  Marin  found  that  the  death  was 
due  to  natural  causes.  It  is  not  always  clear,  in  some  of  these  cases,  why  the 
coroner  was  called  in  at  all;  we  do  know  (as  we  mentioned)  that  it  was  often  to 
his  benefit  to  investigate,  since  his  income  depended  on  fees.  But  how  often  this 
was  a  factor  is  impossible  to  tell. 

Many  of  these  "natural"  deaths  were,  however,  rather  sudden  and  therefore 


56.  129111.557(1889). 

57.  1 18  Ky.  716(1904). 

58.  InreL  f*.  5/y,  9  Idaho  779  (1904),  was  a  murder  case.  Sly  was  accused  of  murdering  one 
John  Hays.  After  a  preliminary  examination,  he  was  held  without  bail  on  the  charge  of  murder. 
He  filed  a  writ  of  habeas  corpus,  arguing  that  the  proceedings  were  improper,  because  no  coroner's 
inquest  had  ever  been  held.  The  Supreme  Court  of  Idaho  rejected  this  argument. 


30  INDIANA  LAW  REVIEW  [Vol.  36: 1 7 


at  least  vaguely  suspicious.  In  mid-Nineteenth  Century  Baltimore,  29%  of  the 
inquests  resulted  in  a  finding  of  natural  causes.  The  Baltimore  coroners 
investigated,  apparently,  not  just  suspicious  deaths,  but  also  sudden  ones;  perhaps 
another  way  of  putting  it,  is  that  a  sudden  death  seemed  presumptively 
suspicious.^^  Typically,  an  autopsy  was  held  in  such  cases.  In  Marin,  this 
happened,  for  example,  in  the  case  of  Michael  White,  an  Irishman,  whose 
roommate  found  him  dead  in  bed.  The  autopsy  doctor  decided  White  had  had 
"hypertrophy  of  the  heart,"  and  a  serious  kidney  problem,  caused  by  drinking; 
these  were  what  brought  on  his  death.  Again,  these  cases  of  sudden  but  natural 
death  were  mostly  unattached  men,  who  died  alone,  or  in  a  boarding  house.  Men 
with  families,  attended  by  doctors,  were  much  less  likely  to  evoke  the  interest  of 
the  coroner,  and  their  deaths  would  appear  "natural"  even  without  an  inquest. 

VIII.  Deaths  from  Mobility 

What  the  coroners'  records  reveal  is  the  seamy  side  of  American  mobility. 
It  was  a  loose,  transient  society  (for  men).  It  was  easy  to  go  off  to  "seek  your 
fortune";  but  lots  of  men  never  found  this  fortune.  Just  as  there  were  no  formal 
barriers  to  going  up  in  the  world,  there  were  no  formal  barriers  to  going  all  the 
way  down — down  as  far  as  it  was  possible  to  go.  One  of  the  Marin  suicides  of 
1904,  John  Holtz,  a  native  of  Germany,  drowned  in  San  Francisco  Bay.  He  was 
described  as  a  man  who  once  had  been  wealthy,  but  had  lost  his  fortune.  At  the 
time  of  his  death,  he  was  living  in  a  hotel  in  San  Francisco.  He  was  seventy- 
four — an  old,  broken  man;  and  alone.^^  Some  men  died  unmourned  and 
unknown.  There  were  dead  bodies  that  were  apparently  never  identified,  like  the 
middle  aged  man  hauled  out  of  the  water  by  a  fisherman,  in  November  1904.*^' 
Men  without  family  or  connections  had  no  way  to  cushion  themselves  against 
disaster,  depression,  and  failure.  Even  when  the  death  itself  turned  out  not  to  be 
abnormal,  it  was  hard  to  be  sure,  when  a  man  died  alone,  without  family  around 
him.  Alexander  Paulsen,  a  laborer,  working  on  a  tunnel,  got  sick  and  died:  the 
cause  of  death  was  supposed  to  be  "Conjestion  [sic]  of  the  lungs."  An  autopsy 
was  performed;  and  then  "Coroner  Sawyer  took  charge  of  the  remains."  Paulsen 
"was  a  stranger  and  no  one  seems  to  know  anything  about  him."^^ 

There  were,  during  this  period,  thousands  of  men  (and  mostly  men),  who 
wandered  about  in  the  United  States,  from  place  to  place.  They  were  looking  for 
work,  or  a  new  start,  or  were  simply  seized  with  wanderlust.  If  they  fell  toward 
the  bottom  rungs  of  the  ladder,  they  were  classified  as  "tramps"  or  "hobos"  or 
drifters,"  and  became  objects  of  suspicion  and  worse."  In  most  states,  there  were 


59.  See  Suspicious  Deaths,  supra  note  32,  at  iv. 

60.  MCCI760(Nov.  1,1904). 

61.  MCCI759(Nov.  1,1904). 

62.  The  Marin  Journal,  Jan.  2 1 , 1 904. 

63.  See  PAUL  T.  RiNGENBACH,  TRAMPS  AND  REFORMERS,  1873-1916:  THE  DISCOVERY  OF 

Unemployment  in  New  York  (1973);  Roger  A.  Bruns,  Knights  of  the  Road:  A  Hobo 
History  (1980). 


2003]  CALIFORNIA  DEATH  TRIP  3 1 


rather  stringent  vagrancy  statutes;  these  covered  a  variety  of  sins,^"*  but  were 
excellent  weapons  in  the  police  war  against  tramps.  New  York  passed  a  specific 
anti-tramp  statute  in  1880.^^  Interestingly,  the  Pennsylvania  statute  on  vagrants 
and  tramps  stated  specifically  that  the  act  was  not  to  apply  to  any  "female."^^ 
The  West  in  particular  was  full  of  "unattached  young  men"  who  were  looking  for 
work,  and  "formed  a  new  American  underclass,"  in  the  late  Nineteenth  Century  .^^ 

The  California  death  trip  reflects  a  wider  malaise  than  Lesy  found  in 
Wisconsin.  Lesy  thought  the  pathologies  he  found  were  pathologies  of  an 
isolated,  rural  life.  But  the  same,  or  worse,  pathologies  could  be  found  in  the 
cities — and  in  counties  like  Marin.  Lesy's  rural  areas,  in  a  way,  were  pockets  of 
immobility;  but  the  California  death  trip  is  much  more  a  tribute  to  American 
mobility.  Or,  if  you  will,  American  rootlessness,  which  is  an  aspect  of  the  same 
thing. 

Mobility  was  a  central  fact  of  American  life — geographic  mobility,  and  also 
social  mobility.  From  the  start,  this  was  a  society  with  its  share  of  risk-takers, 
entrepreneurs,  men  (and  mostly  men)  who  were  trying  to  climb  the  greasy  pole 
of  success.  Sometimes  this  meant  starting  a  business  in  one's  home  town;  but 
often  it  meant  picking  up  and  going  somewhere  else,  to  start  over,  or  simply  to 
start.  It  meant  leaving  family  behind  and  going  to  hunt  for  gold  in  California. 
It  was  a  restless  society,  although  it  was  mostly  males  who  were  restless — or  who 
were  allowed  to  be  restless.  Society  encouraged  seeking  one's  fortune.  Even  the 
middle  class  joined  in  the  California  gold  rush — men  who  wanted  adventure, 
money,  and  an  escape  from  the  strictures  of  bourgeois  life.^* 

Mobility  had  an  impact  on  every  aspect  of  society.  Among  other  things,  it 
meant  that  the  population — or  a  significant  part  of  it — was  constantly  on  the 
move.  Whole  communities  were  made  up  of  strangers;  and  even  in  older,  settled 
communities,  there  were  always  new  people  coming  in — either  from  abroad,  or 
from  elsewhere  in  this  very  big  country.  Mobility  spawned  new  forms  of 
criminality — forms  that  depended  on  a  shifting,  restless  population.^^  Bigamy 
was  one  of  these  crimes — a  crime  that  depended  on  the  ability  of  men  to  leave 
a  family  behind,  and  start  a  new  life  in  some  distant  community.  The  strangers 
in  town  could  include  confidence  men,  sly,  cheating  men  who  pretended  to  be 
what  they  were  not.  Blackmail  was  another  crime  that  thrived  on  mobility:  it 
was,  in  some  cases,  the  crime  of  threatening  to  reveal  a  man's  past,  in  a  place 
where  he  had  started  life  over  again,  and  thought  he  had  buried  that  past. 


64.  In  the  southern  states,  vagrancy  laws  were  used  to  control  black  labor  and  keep  it  tied  to 
white  landholdings,  see,  for  example,  3  ALA.  CODE  §§  6849-50  (1907);  the  statutes  of  course  did 
not  specifically  mention  the  race  issue.  See  William  Cohen,  Negro  Involuntary  Servitude  in  the 
South.  1865-1940:  A  Preliminary  Analysis,  42  J.  SOUTHERN  HISTORY  31  (1976). 

65.  RiNGENBACH,  supra  note  63,  at  23. 

66.  Pa.  Stat.  Ann.  tit.  19290,  §  21432. 

67.  Walter  Nugent,  Into  the  West:  The  Story  of  Its  People  1 1 3  (2000). 

68.  On  this,  see  Brian  Roberts,  American  Alchemy:  The  California  Gold  Rush  and 
Middle-Class  Culture  (2000). 

69.  See  Lawrence  M.  Friedman,  Crimes  of  Mobility,  43  Stan.  L.  Rev.  637  (1991). 


32  FNDIANA  LAW  REVIEW  [Vol.  36:17 


The  coroner's  bodies  represent  another  aspect  of  the  same  mobility.  Some 
at  least  of  the  men  whose  corpses  went  under  the  knife,  some  of  the  dead  bodies 
that  lay  in  the  parlors  of  undertakers,  to  be  gawked  at  by  the  jury — were  victims 
of  mobility.  In  many  cases,  this  was  literally  true:  they  were  killed  by  railroads, 
and,  later  on,  automobiles — society's  prime  instruments  of  mobility.  But  in  a 
deeper  sense  mobility  had  victimized  these  men.  They  were  the  failures,  the 
losers,  the  hopeless:  men  who  went  off  to  seek  their  fortunes,  or  came  to  a  far- 
off  place  to  make  a  start  or  a  fresh  start  in  life;  and  discovered  only  sickness, 
despair,  and  a  lonely  death.  Their  voyage  ended  in  a  California  death  trip. 


Enforcing  Settlements  in  Federal  Civil  Actions 


Jeffrey  A.  Parness* 
Matthew  R.  Walker' 


Introduction 

Settlements  in  civil  actions  in  federal  district  courts  may  be  subject  to  later 
judicial  enforcement.  However,  as  noted  in  the  1994  U.S.  Supreme  Court 
decision  in  Kokkonen  v.  Guardian  Life  Insurance  Co.  of  America,  any 
enforcement  "requires  its  own  basis  for  jurisdiction."'  Such  jurisdiction 
seemingly  can  arise  under  one  of  two  different  heads  of  ancillary  jurisdiction  in 
the  absence  of  an  "independent  basis  for  federal  jurisdiction."^  One  head  allows 
enforcement  where  the  settlement  is  "in  varying  respects  and  degrees,  factually 
interdependent"^  with  a  claim  that  had  been  presented  for  adjudication.  The 
other  permits  enforcement  when  necessary  for  the  district  court  "to  function 
successfully,  that  is,  to  manage  its  proceedings,  vindicate  its  authority,  and 
effectuate  its  decrees.""* 

In  Kokkonen,  there  was  not  a  basis  for  independent  jurisdiction  and  neither 
head  of  ancillary  jurisdiction  supported  the  enforcement  of  a  settlement  that 
earlier  prompted  a  voluntary  dismissal.^  Any  claim  for  settlement  breach  had 
"nothing  to  do"  with  any  claim  earlier  presented  for  resolution,  making  it  neither 
"necessary  nor  even  particularly  efficient  that  they  be  adjudicated  together."^ 
Further,  the  settlement  was  not  "made  part  of  the  order  of  dismissal";^  thus,  any 
breach  would  not  be  "a  violation"^  of  a  court  order  implicating  the  "court's 
power  to  protect  its  proceedings  and  vindicate  its  authority."^ 

Since  Kokkonen,  the  lower  federal  courts  have  struggled  with  requests  for  the 
exercise  of  ancillary  settlement  enforcement  jurisdiction.  Troubling  issues 
include  when  and  how  ancillary  enforcement  jurisdiction  should  be  retained, 
when  such  jurisdiction  should  later  be  exercised,  and  what  substantive  laws  and 
procedures  should  be  employed  in  settlement  enforcement  proceedings.  Neither 


*  Professor  of  Law,  Northern  Illinois  University  College  of  Law.  B.A.,  Colby  College; 
J.D.,  University  of  Chicago. 

**     B.A.,  Northern  Illinois  University;  J.D.,  Northern  University  College  of  Law. 

1.  511  U.S.  375,378(1994). 

2.  Id.  at  382. 

3.  Id.  at  319. 

4.  Id.  at  380.  Herein,  we  employ  the  term  "ancillary  jurisdiction"  as  it  was  used  in 
Kokkonen,  recognizing  that,  at  times,  other  terms  are  used,  including  pendent,  supplemental, 
residual,  derivative,  essential,  and  inherent  jurisdiction,  as  well  as  jurisdiction  of  necessity. 

5.  While  the  dismissal  occurred  under  Fed.  R.  Civ.  P.  41(a)(l)(ii),  id.  at  378,  the  analysis 
would  have  been  the  same  with  a  dismissal  under  Fed.  R.  Civ.  P.  41(a)(2),  id.  at  381;  in  both 
settings,  a  court  order  recognizing  the  settlement  was  required  for  any  ancillary  jurisdiction. 

6.  Kokkonen,  511  U.S.  at  380. 

7.  /c/.  at  381. 

8.  Id 

9.  Mat  380. 


34  INDIANA  LAW  REVIEW  [Vol.  36:33 


the  Supreme  Court  in  its  common  law  decisions  or  court  rules,  nor  Congress  in 
statutes,  has  provided  significant  guidance.  Troubles  will  likely  continue  as  civil 
case  settlements  are  being  promoted  more  than  ever.  The  federal  district  courts 
recently  were  expressly  directed  to  facilitate  civil  settlements  and,  in  order  to  do 
so,  were  authorized  to  require  both  party  and  attorney  participation  in  settlement 
conferences.'^  After  reviewing  Kokkonen  and  some  contemporary  difficulties, 
we  will  suggest  both  lawmaking  mechanisms  and  legal  standards  for  improving 
settlement  enforcement. 

I.  Settlement  Enforcement  Under  Kokkonen 

Federal  district  courts  are  courts  of  limited  subject  matter  jurisdiction, 
generally  possessing  only  powers  allowed  by  the  federal  constitution  and 
authorized  by  federal  statutes. '^  To  date,  there  have  been  no  statutes  or  court 
rules  governing  the  retention  and  exercise  of  jurisdiction  over  settlements 
reached  in  pending  federal  civil  actions.'^  Given  the  lack  of  written  laws,  some 
federal  courts  before  1 994  had  liberally  employed  an  "inherent  powers"  doctrine, 
or  similar  devices,  to  enforce  settlement  agreements  reached  in  civil  litigation.'^ 
Other  federal  courts  were  more  reticent,  leaving  most  enforcement  to  the  state 
courts.  Some  guidance  was  provided  by  the  U.S.  Supreme  Court  in  1994  in 
Kokkonen.  Unfortunately,  the  ruling  in  Kokkonen  addressed  only  some  issues, 
leaving  many  questions  on  settlement  enforcement  unanswered,  and  prompting 
continuing  uncertainties  and  confusion. 

The  Kokkonen  case  initially  involved  a  dispute  over  the  termination  of  Matt 
T.  Kokkonen 's  general  agency  with  Guardian  Life  Insurance  Company."'  His 
state  court  lawsuit  was  subject  to  a  removal  to  a  federal  district  court  based  upon 


1 0.  Fed.  R.  Civ.  P.  16(c).  For  our  thoughts  on  needed  amendments  to  the  rule  on  settlement 
conferences  in  federal  civil  actions,  see  Jeffrey  A.  Pamess  &  Matthew  R.  Walker,  Thinking  Outside 
the  Civil  Case  Box:  Reformulating  Pretrial  Conference  Laws,  50  Kan.  L.  Rev.  347  (2002). 

1 1 .  Kokkonen,  5 11  U.S.  at  377, 380  (indicating  that  authorization  need  not  be  express,  with 
nonexpress  authority  sometimes  characterized  as  inherent,  ancillary,  or  essential).  There  may  be 
small  realms  of  authority  beyond  congressional  control.  See,  e.g.,  Eash  v.  Riggins  Trucking  Inc., 
757  F.2d  557,  562-63  (3d  Cir,  1985)  (describing  "irreducible  inherent  authority").  But  see 
Chambers  v.  NASCO,  Inc.,  501  U.S.  32,  48  n.l2  (1991)  (noting  the  absence  of  Supreme  Court 
precedents  recognizing  such  judicial  authority). 

12.  Congress  has  delegated  to  the  Article  III  federal  courts  certain  rulemaking  responsibilities 
regarding  their  own  powers.  See,  e.g.,  28  U.S.C.  §  2071(a)  (2000)  (permitting  courts  to  prescribe 
"rules  for  the  conduct  of  their  business"). 

13.  See,  e.g.,  Lee  V.  Hunt,631  F.2d  1171, 1 173  (5th  Cir.  1980)  ("inherent  power  to  enforce"); 
Kukla  V.  Nat'l  Distillers  Prods.  Co.,  483  F.2d  619,  621  (6th  Cir.  1973)  ("inherent  power"). 

14.  Kokkonen,  511  U.S.  at  376.  Consider:  "The  complaint,  as  amended,  stated  causes  of 
action  for  wrongful  termination,  breach  of  fiduciary  duty,  interference  with  prospective  business 
advantage,  fraud,  breach  of  lease,  wrongful  denial  of  lease,  and  prayed  for  damages,  including 
exemplary  damages."  Petitioner's  Brief  at  *4  n.2,  Kokkonen  (No.  93-263). 


2003]  ENFORCING  SETTLEMENTS  35 


diversity  jurisdiction  where  a  jury  trial  was  commenced.'^  During  trial,  the 
parties  reached  an  oral  agreement  settling  all  claims  and  counterclaims.  The  key 
terms  of  the  agreement  were  recited  on  the  record  before  the  district  judge  in 
chambers.'^  "[T]he  parties  executed  a  Stipulation  and  Order  of  Dismissal  with 
Prejudice"'^  which  the  district  judge  signed  "under  the  notation  'It  is  so 
ordered.'"'^  The  stipulation  and  order  mentioned  neither  the  settlement  nor  any 
retention  of  jurisdiction.  When  a  dispute  involving  Kokkonen's  "obligation  to 
return  certain  files"'^  under  the  settlement  later  arose,  Guardian  Life  moved  in 
the  same  civil  action  for  enforcement.  Kokkonen  opposed  the  motion  on  the 
ground  that  the  court  lacked  subject  matter  jurisdiction.  The  district  court  found 
it  could  enforce  because  it  had  "an  'inherent  power'  to  do  so."^^  The  court  of 
appeals  affirmed,  relying  on  an  "inherent  supervisory  power."^' 

After  noting  that  the  federal  courts  were  "courts  of  limited  jurisdiction,"^^ 
Justice  Scalia,  writing  for  the  majority,  emphasized  that  Guardian  Life  had 
sought  the  enforcement  of  the  settlement  agreement,  not  the  reopening  of  the 
case.     He  observed  that  some,  but  not  all,  courts  of  appeals  had  held  that 


15.  Kokkonen,  5 1 1  U.S.  at  376. 

1 6.  Id.  (indicating  that  "the  substance"  of  the  agreement  was  recited).  Guardian  Life  argued 
that  because  of  this  in  camera  recitation,  the  judge  "plainly  anticipated  that  any  proceeding  to 
enforce  the  settlement  agreement  would  require  an  appearance  before  him  and  not  in  state  court." 
Respondent's  Brief  at  ^4,  Kokkonen  (  No.  93-263).  The  court  of  appeals  wrote  that  the  "oral 
agreement  .  .  .  was  stated  in  its  entirety  on  the  record  before  the  district  court  in  chambers." 
Kokkonen  V.  Guardian  Life  Ins.  Co.  ofAm.,  No.  93-263, 1993  WL  164884,  at  *1  (9thCir.May  18, 
1993). 

1 7.  Kokkonen,  5 1 1  U.S.  at  376-77. 

18.  Id  3X311. 

19.  Id.  Guardian  also  claimed  Kokkonen  breached  the  settlement  by  communicating  to 
Guardian  on  behalf  of  a  client  who  was  a  Guardian  policyholder.  Petitioner's  Brief  at  *6  n.8, 
Kokkonen  (No.  93-263). 

20.  Kokkonen,  5 1 1  U.S.  at  377. 

21.  Id 

22.  Id.  Kokkonen  framed  the  issue  before  the  Supreme  Court  by  asking, 

does  a  federal  district  court  have  subject  matter  jurisdiction  to  enforce  a  settlement 

agreement  entered  into  between  the  parties  when:  1)  the  case  is  no  longer  pending 

before  the  court  at  the  time  the  court  issued  the  order,  having  been  dismissed  with 

prejudice  prior  to  the  application  for  enforcement  of  the  settlement  agreement,  2)  the 

settlement  agreement  has  never  been  incorporated  into  an  order  or  judgment  of  the  court 

disposing  of  the  action,  3)  the  court  has  not  expressly  retained  jurisdiction  over  the 

action,  and  4)  no  other  independent  grounds  for  federal  court  jurisdiction  to  enforce  the 

agreement  exist? 

Petitioner's  Brief  at  *i,  Kokkonen  (No.  93-263).  Guardian  Life  framed  the  issue  by  asking:  "Does 

a  district  court  have  jurisdiction  to  exercise  its  discretion  to  enforce  a  settlement  agreement  after 

dismissal  of  the  case  where  the  settlement  was  entered  into  on  the  record,  at  trial,  with  the  Court's 

active  participation,  and  where  the  Court  anticipated  its  involvement  in  any  enforcement  of  the 

agreement?"  Respondent's  Brief  at  *i,  Kokkonen  (No.  93-263). 


36  INDIANA  LAW  REVIEW  [Vol.  36:33 


reopening  the  case  in  such  circumstances  was  available.^^  In  contrast  to 
reopening,  Justice  Scalia  explained  that  enforcement,  "whether  through  award 
of  damages  or  decree  of  specific  performance,  is  more  than  just  a  continuation 
or  renewal  of  a  dismissed  suit,  and  hence  requires  its  own  basis  for 
jurisdiction. "^''  In  denying  that  there  was  any  enforcement  power,  Justice  Scalia 
cited  the  absence  of  an  independent  basis  for  subject  matter  jurisdiction  or  any 
ancillary  jurisdiction.^^  Yet,  Justice  Scalia  recognized  that  there  were  two  types 
of  ancillary  jurisdiction  that  might  have  been  available.  Ancillary  jurisdiction 
can  be  exercised  "(1)  to  permit  disposition  by  a  single  court  of  claims  that  are, 
in  varying  respects  and  degrees,  factually  interdependent . . .  and  (2)  to  enable  a 
court  to  function  successfully,  that  is,  to  manage  its  proceedings,  vindicate  its 
authority,  and  effectuate  its  decrees."^^  Justice  Scalia  found  that  any  earlier- 
presented  claims  and  the  settlement  claim  presented  by  Guardian  were  not 
factually  interdependent  as  they  had  "nothing  to  do  with  each  other."^^  In  the 
case,  he  also  found  that  any  power  to  enforce  the  settlement  unaccompanied  by 
a  retention  of  jurisdiction  was  "quite  remote  from  what  courts  require  in  order 
to  perform  their  functions."^^  He  observed  that  "the  only  order  here  was  that  the 
suit  be  dismissed,  a  disposition  that  is  in  no  way  flouted  or  imperiled  by  the 
alleged  breach  of  the  settlement  agreement."^^  He  noted  that 


23.  /i:o/bfco«ert,  511  U.S.  at 378  (citing FED.  R. Civ. P.  60(b)(6)).  Theideaofreopeningacase 
was  discussed  at  some  length  during  the  oral  arguments  in  Kokkonen.  Transcript  of  Oral 
Arguments,  Kokkonen  (No.  93-263). 

24.  Kokkonen,  511  U.S.  at  378.  Of  course,  where  a  federal  civil  action,  once  dismissed,  is 
continued  or  renewed,  there  must  also  be  subject  matter  jurisdiction.  Yet,  such  jurisdiction  differs 
significantly  from  enforcement  jurisdiction  in  that  only  with  the  former  is  there  a  return  to  the 
claims  that  prompted  the  civil  action,  and  thus  in  effect,  a  resumption  of  jurisdiction.  Of  course, 
where  a  state  law  claim  in  a  federal  civil  action  remains  under  supplemental  jurisdiction  after  the 
federal  law  claims,  providing  the  independent  jurisdictional  basis  is  dismissed,  there  are  continuing 
inquiries  into  jurisdictional  basis.  28U.S.C.  §  1367(c)  (2000)  (granting  courts  discretion  to  decline 
to  continue  exercising  supplemental  jurisdiction). 

25.  Kokkonen,  511  U.S.  at  380. 

26.  Wat  379-80. 

27.  Id.  at  380  (concluding  "it  would  neither  be  necessary  nor  even  particularly  efficient  that 
[the  claims]  be  adjudicated  together").  Evidently,  the  claims  and  counterclaims  on  which  the  jury 
trial  was  commenced  had  little  or  nothing  to  do  with  the  postjudgment  dispute  over  the  return  of 
certain  files  by  Kokkonen.  As  well,  seemingly  efficiency  would  not  be  promoted  by  district  court 
settlement  enforcement  as  there  was  no  indication  that  the  district  judge  was  in  a  unique  position 
to  interpret  the  settlement  terms  involving  the  return  of  the  files.  But  cf.  Neuberg  v.  Michael  Reese 
Hosp.  Found.,  123  F.3d  951,  955  (7th  Cir.  1997)  (indicating  that  the  judge  who  presided  over  the 
lawsuit  was  in  the  "best  position  to  evaluate  the  settlement  agreement");  Scelsa  v.  City  Univ.  of 
New  York,  76  F.3d  37, 42  (2d  Cir.  1996)  ("there  are  few  persons  in  a  better  position  to  understand 
the  meaning  of  an  order  of  dismissal  than  the  district  judge  who  ordered  it"). 

28.  Kokkonen,  51 1  U.S.  at  380. 

29.  Id. 


2003]  ENFORCING  SETTLEMENTS  37 


[t]he  situation  would  be  quite  different  if  the  parties'  obligation  to 
comply  with  the  terms  of  the  settlement  agreement  had  been  made  part 
of  the  order  of  dismissal — either  by  separate  provision  (such  as  a 
provision  'retaining  jurisdiction'  over  the  settlement  agreement)  or  by 
incorporating  the  terms  of  the  settlement  agreement  in  the  order.^^ 

"In  that  event,  a  breach  of  the  agreement  would  be  a  violation  of  the  order,  and 
ancillary  jurisdiction  to  enforce  the  agreement  would  therefore  exist."^' 
Although  the  district  court  "is  authorized  to  embody  the  settlement  contract  in  its 
dismissal  order  (or,  what  has  the  same  effect,  retain  jurisdiction  over  the 
settlement  contract)  if  the  parties  agree,"^^  Justice  Scalia  further  wrote  that  a 
failure  to  do  so  means  "enforcement  of  the  settlement  agreement  is  for  state 
courts.""  The  "judge's  mere  awareness  and  approval  of  the  terms  of  the 
settlement  agreement"^"*  were  insufficient  to  make  those  terms  a  part  of  the  court 
order,  and  thus  to  prompt  ancillary  jurisdiction.^^ 

So,  the  Supreme  Court  recognized  two  ways  in  which  a  federal  district  court 
could  enforce  a  civil  case  settlement  for  a  case  that  had  been  dismissed.^^  One 
way  involved  settlement  claims  that  were  factually  interdependent  with  the 


30.  A/,  at  38 1 .  The  import  of  this  difference  was  not  said  to  be  reflected  in  any  written  federal 
law.  Cf.  750  III.  Comp.  Stat.  5/502(d)  (2001)  (stating  that  either  the  terms  of  a  marriage 
dissolution  agreement  may  be  "set  forth"  in  a  judgment  or  that  the  marriage  dissolution  case 
judgment  "shall  identify  the  agreement  and  state  that  the  court  has  approved  its  terms,"  in  a  setting 
where  such  an  agreement  often  is  subject  to  later  judicial  modification,  as  where  the  agreement 
covers  support,  custody  or  visitation  of  children).  This  difference  has  also  been  deemed  important 
outside  the  settlement  enforcement  arena.  Smyth  v.  Rivero,  282  F.3d  268  (4th  Cir.  2002)  (noting 
importance  to  prevailing  party  status  when  attorney  fee  recovery  may  be  available  under  42  U.S.C. 
§  1988(1994&Supp. V  1999)).  Compare Roberson v. Giuliani, 2002 WL 253950 (S.D.N. Y.Feb. 
21,  2002)  (noting  that  not  all  retentions  of  settlement  enforcement  jurisdiction  prompt  prevailing 
party  status  under  42  U.S.C.  §  1988  (1994  &  Supp.  V  1999)). 

31.  AToiUfeoweAz,  SnU.S.  at381. 

32.  /c^.  at  381-82. 

33.  /c^.  at  382. 

34.  Mat 381. 

35.  In  contrast  to  federal  district  courts,  when  civil  actions  are  settled  in  the  courts  of  appeal, 
there  is  no  discretion  available  to  retain  jurisdiction  over  possible  settlement  breaches.  See,  e.g., 
Hermreiter  v.  C.H.A.,  281  F.3d  634,  637  (7th  Cir.  2002)  ("a  court  of  appeals  lacks  factfinding 
apparatus"). 

36.  Of  course,  in  the  absence  of  a  dismissal  and  a  judgment  thereon,  enforcement  could  also 
occur  where  a  pleading  weis  amended  to  reflect  the  settlement.  See,  e.g.,  Bd.  of  Managers  of  the 
Alexandria  Condo.  v.  Broadway/72nd  Assocs.,  729  N.Y.S.2d  16  (App.  Div.  2001).  Yet  here  too 
a  federal  court  would  need  subject  matter  jurisdiction,  often  arising  under  the  supplemental 
jurisdiction  statute,  28  U.S.C.  §  1367  (2000),  because  of  factual  relatedness.  But  see  Sadighi  v. 
Daghighfekr,  66  F.  Supp.  2d  752, 758  (D.S.C.  1999)  (quoting  Wilson  v.  Wilson,  46  F.3d  660, 664 
(7th  Cir.  1994)  ("a  district  court  possesses  the  inherent  or  equitable  power  summarily  to  enforce 
an  agreement  to  settle  a  case  pending  before  //")  (alteration  in  original)). 


38  INDIANA  LAW  REVIEW  [Vol.  36:33 


claims  presented  for  court  resolution,  making  adjudication  before  one  trial  court 
"efficient."^^  The  other  way  involved  settlement  enforcement  that  promoted 
successful  court  functioning.  While  some  found  that  the  analysis  in  Kokkonen 
led  to  simple  rules,^*  applications  of  its  principles  have  proven  to  be  difficult. 
Troubles  have  already  arisen  regarding  such  matters  as  how  to  incorporate 
settlement  terms  into  court  orders;  how  otherwise  to  retain  jurisdiction;  whether 
settlement  disputes  may  prompt  the  reopening  of  judgments;  and  what 
substantive  contract  laws  and  what  procedures  should  apply  when  federal  case 
settlements  are  enforced.  We  find  further  difficulties  in  the  application  of 
Kokkonen  which,  to  date,  have  gone  largely  unrecognized.  These  difficulties 
include  whether  there  is  judicial  discretion  to  refuse  party  requests  that  future 
enforcement  jurisdiction  be  retained,  and  whether  and  when  any  settlement 
disputes  can  prompt  discretionary  refusals  to  exercise  available  enforcement 
jurisdiction. 

II.  DIFFICULTIES  IN  SETTLEMENT  ENFORCEMENT  AFTER  KOKKONEN 

A.  Incorporating  Settlement  Terms  into  Court  Orders 

Under  Kokkonen,  a  federal  district  court  may  enforce  a  civil  case  settlement 
order  after  "incorporating  the  terms  of  the  settlement  agreement  in  the  order. "^^ 
Questions  have  arisen  on  how  settlement  terms  are  properly  incorporated.  Must 
all  key  "terms"  be  included?  If  not,  which,  if  any,  absent  terms  are  subject  to 
ancillary  enforcement  jurisdiction?  And,  what  conduct  constitutes 
"incorporation"?  The  lower  courts  seem  unsure. 

The  Eighth  Circuit  has  found  that  a  "dismissal  order's  mere  reference  to  the 
fact  of  settlement  does  not  incorporate  the  settlement  agreement. ""^^  The 
dismissal  order  did  acknowledge  that  all  matters  were  settled,  but  did  not 
otherwise  mention  the  agreement  or  any  of  its  terms.*'  The  appeals  court  noted 
that  "although  Kokkonen  does  not  state  how  a  district  court  may  incorporate  a 
settlement  agreement  in  a  dismissal  order,  the  case  does  not  suggest  the 


37.  Kokkonen,  5\  I  U.S.  at  380. 

38.  One  commentator  suggested  that  Kokkonen  "supplies  clear  guidelines  for  seeking" 
supervision  of  settlement  agreements.  Charles  K.  Bloeser,  Notes  and  Comments,  Kokkonen  v. 
Guardian  Life:  Limiting  the  Power  of  Federal  District  Courts  to  Enforce  Settlement  Agreements 
in  Dismissed  Cases,  30  TuLSA  L.J.  671,  691  (1995).  Another  said:  "For  those  seeking  to  ensure 
federal  jurisdiction  over  agreements  settling  cases  pending  in  federal  court,  Kokkonen  provides  a 
simple  answer."  Bradley  S.  Clanton,  Note,  Inherent  Powers  and  Settlement  Agreements:  Limiting 
Federal  Enforcement  Jurisdiction,  15  MiSS.  C.  L.  REV.  453,  475  (1995).  The  petitioner  in 
Kokkonen  had  called  "for  a  'bright  line'  rule  that  will  guide  district  courts  in  the  future." 
Petitioner's  Brief  at  *  1 7,  Kokkonen  (No.  93-263). 

39.  Kokkonen,  5\\V.S.3S\. 

40.  Miener  v.  Mo.  Dep't  of  Mental  Health,  62  F.3d  1 1 26,  1 1 28  (8th  Cir.  1 995). 

41.  /cT.  at  1127-28. 


2003]  ENFORCING  SETTLEMENTS  39 


agreement  must  be  'embodied'  in  the  dismissal  order.'"*^  Therefore,  the  court 
found  that  reference  to,  or  even  approval  of,  the  settlement  agreement  was,  by 
itself,  insufficient  to  prompt  later  enforcement  jurisdiction/^  It  did  not  explain 
relevant  differences  between  varying  nonembodied  agreements. 

The  Ninth  Circuit  ruled  that  an  order  based  on  a  settlement,  without  more, 
did  not  place  the  agreement  within  the  order.^*  The  court  stated  that  the 
"settlement  terms  must  be  part  of  the  dismissal  in  order  for  violation  of  the 
settlement  agreement  to  amount  to  a  violation  of  the  court's  order.'"*^  Thus,  the 
court  concluded  that  "[wjithout  a  violation  of  the  court's  order,  there  is  no 
jurisdiction.'"*^ 

The  Sixth  Circuit  ruled  that  the  "phrase  'pursuant  to  the  terms  of  the 
Settlement'  fails  to  incorporate  the  terms  of  the  Settlement  agreement  into  the 
order.'"*^  The  lower  court  had  specifically  stated:  "In  the  presence  of  and  with 
the  assistance  of  counsel,  the  parties  placed  a  settlement  agreement  on  the  record 
before  the  Hon.  Bernard  Friedman  on  October  1 ,  1991 .  Pursuant  to  the  terms  of 
the  parties'  October  1 , 1 99 1  settlement  agreement,  the  Court  hereby  DISMISSES 
this  case.'"* 

Some  appellate  courts  have  determined  that  when  some,  but  not  all  the 
provisions,  of  a  civil  case  settlement  are  placed  in  a  dismissal  order,  only  the 
incorporated  terms  are  subject  to  later  enforcement  proceedings.  The  Seventh 
Circuit  explained  that  "[hjaving  put  some  but  not  all  of  the  terms  in  the 
judgment,  the  district  court  has  identified  which  it  will  enforce  and  which  it  will 
not."  It  further  stated  that  any  violation  of  settlement  terms  not  in  a  judgment  do 
not  "flout  the  court's  order  or  imperil  the  court's  authority"  and  thus  "do  not 
activate  the  ancillary  jurisdiction  of  the  court."*^  The  Tenth  Circuit  held 
similarly,  stating  "[a]lthough  the  district  court  specified  in  its  order  that  it 
retained  jurisdiction,  and  although  it  set  forth  some  provisions  of  the  parties' 
settlement  agreement,  it  did  not  expressly  set  forth  the  provision  prohibiting 
communications  to  the  media."^^  Yet,  not  all  judges  may  now  deny  enforcement 


42.  /^.  at  1128. 

43.  Id. 

44.  O'Connor  v.  Colvin,  70  F.3d  530,  532  (9th  Cir.  1995). 

45.  Id. 

46.  id 

47.  Caudill  v.  N.  Am.  Media  Corp.,  200  F.3d  914,  917  (6th  Cir.  2000).  The  court  cited  In 
Re  Phar-Mor,  Inc.  Securities  Litigation,  172  F.3d  270,  274  (3d  Cir.  1999)  (citing  Miener  v.  Mo. 
Dep't  of  Mental  Health,  62  F.3d  1 126,  1 128  (8th  Cir.  1995)  ("The  phrase  'pursuant  to  the  terms 
of  the  Settlement'  fails  to  incorporate  the  terms  of  the  Settlement  agreement  into  the  order.")).  See 
also  McAlpin  v.  Lexington  76  Auto  Truck  Stop,  Inc.,  229  F.3d  491  (6th  Cir.  2000). 

48.  CflMt//7/,200F.3dat915. 

49.  Lucille  v.  City  of  Chicago,  31  F.3d  546,  548  (7th  Cir.  1994). 

50.  Consumers  Gas  &  Oil,  Inc.  v.  Farmland  Ind.,  84  F.3d  367,  371  (10th  Cir.  1996). 
Interestingly,  the  lower  court's  order  of  dismissal  stated: 

Without  affecting  the  finality  of  this  Judgment  in  any  way,  the  Court  reserves  continuing 
jurisdiction  over  the  implementation  and  enforcement  of  the  terms  of  the  Stipulation  of 


40  INDIANA  LAW  REVIEW  [Vol.  36:33 


of  unincorporated  settlement  term s,^^  especially  where  breaches  of  incorporated 
and  unincorporated  terms  are  alleged  simultaneously  and  where  all  issues  are 
factually  interdependent  so  that  their  joint  resolution  promotes  efficiency."  We 
favor  a  bright  line  test  whereby  only  settlement  terms  incorporated  into  court 
orders  (or  otherwise  referenced  particularly)  are  subject  to  possible  enforcement 
jurisdiction.  Where  necessary,  efficiency  in  hearing  incorporated  and 
unincorporated  pacts  together  usually  can  be  achieved  by  a  federal  court  refusal 
to  exercise  jurisdiction  over  the  referenced  terms,  leaving  all  related  matters  for 
a  new  state  court  lawsuit." 

Under  Kokkonen,  incorporation  of  settlement  terms  into  a  court  order  is  one 
way  to  anticipate  enforcement  jurisdiction.  Another  way  is  through  a  provision 
retaining  jurisdiction  over  the  settlement  agreement.^"* 

B.  Retaining  Settlement  Enforcement  Jurisdiction 

Under  Kokkonen,  sl  federal  district  court  can  also  enforce  if  it  retains 
jurisdiction  over  the  settlement  agreement.^^  Questions  have  arisen.  Can 
jurisdiction  be  retained  even  though  the  phrase,  'retaining  jurisdiction,'  or 
something  like  it,  is  not  used?  If  so,  what  other  terms  or  actions  suffice?  At 
times,  are  the  intentions  of  the  parties  and  the  judge  sufficient  regardless  of  the 
words  used?  And,  can  enforcement  ever  occur  after  a  dismissal  where  there  is 
no  incorporation,  no  expressly  retained  jurisdiction,  and  no  subjective  intent,  but 
where  the  exercise  of  jurisdiction  makes  sense  at  the  time  when  enforcement  is 


Settlement  and  any  issues  relating  to  Subclass  membership,  notice  to  Class  Members, 

distributions  to  Class  Members,  allocation  of  expenses  among  the  class,  disposition  of 

unclaimed  payment  amounts,  and  all  other  aspects  of  this  action,  until  all  acts  agreed  to 

be  performed  under  the  Stipulation  of  Settlement  shall  have  been  performed  and  the 

final  order  of  dismissal  referenced  above  has  become  effective  or  until  October  1 ,  1996, 

whichever  occurs  latest. 

Id  at  369.  It  is  not  clear  to  us  the  district  judge  did  not  intend  to  enforce  the  agreement  on  media 

communications,  or  that  its  absence  is  significant  given  the  order's  coverage  of  "all  other  aspects 

of  this  action." 

51.  See,  e.g..  Brewer  v.Nat'lR.R.  Passenger  Corp.,  649  N.E.2d  1331  (111.  1995)  (stating  the 
court  could  enforce  a  term  in  the  settlement  agreement  (employee  would  quit  his  job)  not 
incorporated  into  the  dismissal  order  though  other  terms  were  included  in  the  order  (pursuant  to 
Illinois  Code  of  Civ.  Pro.  2-1203,  a  trial  court  retains  jurisdiction  thirty  days  after  entry  of 
judgment)). 

52.  Of  course,  in  this  situation  already  bootstrapped  claims  would  themselves  prompt  even 
more  bootstrapping  with  the  unincorporated  terms  possibly  very  far  removed  from  the  original  civil 
action  and  perhaps  even  unknown  to  the  district  court  until  enforcement  was  sought. 

53.  Refusals  are  permitted  even  when  some  ancillary  enforcement  jurisdiction  was  earlier 
retained  since  all  ancillary  jurisdiction  is  discretionary.  See  Part  III.G,  infra. 

54.  Kokkonen  v.  Guardian  Life  Ins.  Co.  of  Am.,  511  U.S.  375,  381  (1994). 

55.  Id.  See,  e.g.,  Columbus-America  Discovery  Group  v.  Atl.  Mut.  Ins.  Co.,  203  F.3d  291, 
299  (4th  Cir.  2000)  (stating  "court  retains  jurisdiction  to  enforce  the  settlement  of  the  parties"). 


2003]  ENFORCING  SETTLEMENTS  41 


sought? 

The  Second  Circuit  has  held  that  "[o]nce  the  District  Court  'so  ordered'  the 
settlement  agreement,  which  included  a  provision  for  sealing  the  case  file,  it  was 
required  to  enforce  the  terms  of  the  agreement,"^^  unless  "limited  circumstances" 
permit  modification  of  the  "so  ordered"  stipulation.  It  reasoned  that  when  a  court 
orders  a  stipulated  and  sealed  settlement,  it  accepts  certain  responsibilities, 
including  a  duty  to  enforce  even  where  there  is  no  court  order  retaining 
jurisdiction  or  incorporating  any  settlement  terms.^^ 

In  another  case,  a  district  judge  issued  an  order  stating  that  any  "subsequent 
order  setting  forth  different  terms  and  conditions  relative  to  the  settlement  and 
dismissal  of  the  within  action  shall  supersede  the  within  order."^*  The  appellate 
court  stated  that  "[o]f  course,  the  court  may  only  enter  subsequent  orders 
involving  the  settlement  agreement  if  it  has  retained  jurisdiction."^^  It  found  that 
Kokkonen  "only  requires  a  reasonable  indication  that  the  court  has  retained 
jurisdiction,"  as  the  Kokkonen  court  used  the  term  "such  as"  when  speaking  of 
a  separate  provision  retaining  jurisdiction.^^  The  court  held  that  the  language 
employed  by  the  district  court  contemplated  a  continuing  judicial  role  sufficient 
to  constitute  a  "separate  provision"  retaining  jurisdiction.^' 

The  Eighth  Circuit  found  enforcement  jurisdiction  was  not  retained  where 
a  d  ism  issal  order  only  stated  that  the  court  was  "*  reserving  jurisdiction '  to  perm  it 
any  party  to  reopen  the  [civil]  action.""  It  said  that  reopening  due  to  a  settlement 
breach  was  different  from  enforcing  a  settlement.^^ 

Yet  another  appeals  court  ruled  that  the  trial  court  "need  only  manifest  its 
intent  to  retain  jurisdiction."^  The  court  found  this  intent  in  a  district  court  order 
that  declared  dismissal  was  "pursuant  to  a  confidential  settlement  agreemenf  and 
expressly  authorized  each  party  to  enforce  the  agreement  in  the  event  of  breach.^^ 
The  court  reasoned  "that  a  district  court  need  not  use  explicit  language  or  'any 
magic  form  of  words. '"^^ 

In  contrast,  a  different  appeals  court  held  that  the  mere  intent  to  retain 
jurisdiction  is  insufficient.^^  It  stated: 

At  the  time  the  civil  case  was  settled,  it  is  clear  that  the  district  court 


56.  Geller  v.  Branic  Int'l  Realty  Corp.,  2 1 2  F.3d  734,  737  (2d  Cir.  2000). 

57.  Id. 

58.  Re/Max  Int'l,  Inc.  v.  Realty  One,  Inc.,  271  F.3d  633,  645  (6th  Cir.  2001). 

59.  Id. 

60.  Mat 643. 

61.  y^.  at  645. 

62.  Sheng  v.  Starkey  Lab.,  Inc.,  53  F.3d  192,  195  (8th  Cir.  1995). 

63.  Id 

64.  Schaefer  Fan  Co.  v.  J&D  Mfg.,  265  F.  3d  1282,  1287  (Fed  Cir.  2001)  (quoting  McCall- 
Bcy  V.  Franzen,  777  F.2d  1 178,  1 188  (7th  Cir.  1985)). 

65.  Id 

66.  Id 

67.  Hagestad  v.  Tragesser,  49  F.3d  1430  (9th  Cir.  1995)  (footnote  omitted). 


42  INDIANA  LAW  REVIEW  [Vol.  36:33 


intended  Xo  retain  jurisdiction.  It  stated  at  the  settlement  conference: 

I  will  act  as  a  czar  with  regard  to  the  drafting  of  the  settlement  papers 
and  the  construction  of  this  settlement  and  the  execution  of  this 
settlement.  And  that  means  that  if  there  is  any  dispute  that  is  brought  to 
me  by  counsel,  I  will  decide  the  matter  according  to  proceedings  which 
I  designate  in  the  manner  that  I  designate,  and  that  decision  will  be  final 
without  any  opportunity  to  appeal. 

That  it  believed  it  had  continuing  jurisdiction  to  enforce  the  agreement 
is  also  clear  from  its  order  of  January  28,  1993: 

As  part  of  the  settlement  agreement,  plaintiff  agreed  not  to  provide 
evidence  to  prosecute  the  Oregon  State  Bar  complaint  filed  against 
defendant  and  to  take  any  and  all  reasonable  actions  to  prevent  that 
matter  from  proceeding.  The  parties  also  agreed  that  the  terms  and 
conditions  of  the  settlement  agreement  were  to  remain  confidential  and 
not  disclosed  to  anyone.  The  parties  further  agreed  that  all  questions 
relating  to  their  rights  and  duties  under  the  agreement  would  be 
determined  exclusively  by  the  undersigned. 

It  is  equally  clear,  however,  that  the  district  court  did  not  retain 
jurisdiction  over  the  settlement.  As  noted,  the  Dismissal  neither 
expressly  reserves  jurisdiction  nor  incorporates  the  terms  of  the 
settlement  agreement.^^ 

This  holding  was  later  reaffirmed  when  the  same  court  held  that  "even  a  district 
court's  expressed  intention  to  retain  jurisdiction  is  insufficient  to  confer 
jurisdiction  if  that  intention  is  not  expressed  in  the  order  of  dismissal."^^ 

In  the  absence  of  incorporation,  jurisdiction  retention,  or  intent,  judicial 
enforcement  of  settlements  still  seems  appropriate  in  certain  settings.  Parties  to 
a  federal  civil  action  ending  in  a  judgment  upon  a  settlement  are  unable  to  return 
to  the  district  court  with  an  agreement  indicating  a  new-found  intent  that 
jurisdiction  over  an  earlier  settlement  be  retained.^^  Yet,  so  long  as  a  federal  civil 


68.  /c^.  at  1433. 

69.  O'Connor  v.  Calvin,  70  F.3d  530,  532  (9th  Cir.  1995). 

70.  See,  e.g..  Lane  v.  Bimbaum,  910  F.  Supp.  123  (S.D.N.Y.  1995).  The  court  stated: 
In  this  case,  the  Order  of  Dismissal  preceded  the  Stipulation  by  almost  two  months.  It 
is  therefore  apparent  that  compliance  with  the  agreement  was  not  an  operative  part  of 
the  dismissal.  That  the  parties  subsequently  felt  the  need  to  have  the  terms  of  their 
agreement  embodied  in  a  stipulation  on  file  with  the  Court,  cannot  serve  to  vest  the 
Court  with  jurisdiction  over  the  agreement.  . .  .  Clearly,  the  Court's  dismissal  of  the 
action  was  in  no  way  conditioned  upon  the  parties'  compliance  with  the  terms  of  the 
agreement.  Nor  did  the  Court  retain  jurisdiction  over  the  parties'  agreement.  Therefore, 
enforcement  of  the  settlement  agreement  is  a  matter  of  contract  between  the  parties,  for 


2003]  ENFORCING  SETTLEMENTS  43 


action  remains  open  because  there  is  no  final  judgment,  a  district  court  seem  ingly 
may  enforce  a  settlement  therein  even  though  the  judge  never  earlier  considered 
enforcement.^'  Thus,  in  dismissing  a  civil  action  upon  a  settlement,  a  trial  judge 
may  reserve  rendering  a  judgment  as  by  granting  a  conditional  dismissal,  thereby 
allowing  a  party  to  return  to  court  for  any  reason,  including  settlement 
enforcement,  before  a  fmal  judgment  is  entered^^ 

C  Discretionary  Refusals  of  Later  Settlement  Enforcement  Jurisdiction 

Where  any  later  settlement  enforcement  would  not  have  "its  own  basis  for 
jurisdiction,"^^  thus  requiring  some  form  of  ancillary  power,  can  a  federal  district 
judge  refuse  to  incorporate  the  settlement  terms  into  a  court  order  or  otherwise 
to  retain  enforcement  jurisdiction  though  requested  by  all  parties?  The  Supreme 
Court  in  Kokkonen  said  that  with  any  dismissal  of  a  pending  civil  action  based 
on  a  settlement,^"*  potential  enforcement  is  "in  the  court's  discretion. "^^  This 
comports  with  the  longstanding  principle  that  ancillary  jurisdiction  is 
discretionary.  What  factors  should  guide  such  exercises  of  discretion? 

One  appeals  court  has  urged  caution  when  a  federal  district  judge  decides 


the  state  courts  to  address. 
Id.  at  1 28  (footnote  omitted). 

71 .  See,  e.g.,  Sadighi  v.  Daghighfeker,  66  F.  Supp.  2d  752  (D.S.C.  1999).  The  court  stated: 
[A]fter  the  court  was  infonned  that  settlement  had  been  reached,  there  was  a  delay  when 

no  formal  settlement  documents  were  executed  and  no  order  of  dismissal  was  issued. 
Consequently,  when  Defendants  decided  that  the  settlement  agreement  reached  earlier 
was  no  longer  to  their  satisfaction,  the  case  was  still  on  [the]  court's  active 
docket ....  In  short,  nothing  had  been  done  to  divest  [the]  court  of  jurisdiction. 
Id.  at  758. 

72.  See,  e.g..  Bell  v.  Schexnayder,  36  F.  3d  447,  450  n.2  (5th  Cir.  1994)  (stating  that 
Kokkonen  is  "distinguishable  from  our  case,  since  here  the  district  court's  order  of  dismissal 
expressly  provided  that  the  parties  could,  within  60  days,  move  to  reopen  the  case  to  enforce  the 
settlement.  Defendants  so  moved  within  the  60  days  of  the  dismissal  order.").  Similar  trial  court 
initiatives  can  be  addressed  in  court  rules.  See,  e.g..  Form  7-345  of  Florida  Small  Claims  Rules 
("Stipulation  for  Installment  Settlement,  Order  Approving  Stipulation,  and  Dismissal,"  under  which 
proceedings  are  stayed  by  agreement  while  settlement  monies  are  paid  over  time,  with  an  expressly 
recognized  enforcement  power).  Yet,  conditional  dismissal  orders,  without  judgments,  may  permit 
later  settlement  enforcement  proceedings.  See,  e.g.,  Pratt  v.  Philbrook,  38  F.  Supp.  2d  63,  66  (D. 
Mass.  1 999)  (stating  conditional  dismissal  grounded  on  settlement  where  parties  have  sixty  days 
to  return  "to  reopen  the  action  if  settlement  is  not  consummated  by  the  parties''')',  see  also  Pratt  v. 
Philbrook,  109  F.3d  18,  21  n.5  (1st  Cir.  1997)  (stating  that  the  sixty-day  procedure  developed  as 
a  mechanism  to  close  cases  "while  retaining  jurisdiction  to  enforce  a  settlement  for  a  period  of  time 
after  closure  is  announced"). 

73.  Kokkonen  v.  Guardian  Life  Ins.  Co.  of  Am.,  511  U.S.  375,  378  (1994). 

74.  See,  e.g.,  FED.  R.  Civ.  P.  41(a)(l)(ii)  ("stipulation  of  dismissal  signed  by  all  parties")  and 
Fed.  R.  Civ.  P.  41(a)(2)  (dismissal  "upon  order  of  the  court"). 

75.  Kokkonen,  511  U.S.  at  381. 


44  INDIANA  LAW  REVIEW  [Vol.  36:33 


whether  to  enter  a  consent  decree.  The  Fifth  Circuit  stated  that  "[t]he  court, 
however,  must  not  merely  sign  on  the  line  provided  by  the  parties."'^  The  court 
opined  that  though  a  proposed  decree  has  the  consent  of  the  parties,  the  judge 
should  not  give  perfunctory  approval  because  the  court's  duty  is  akin,  but  not 
identical  to  its  responsibility  in  approving  settlements  of  class  actions, 
stockholders'  derivative  suits,  and  proposed  compromises  of  claims  in 
bankruptcy. "^^  The  appeals  court  declared  that  the  trial  court  must  ascertain 
whether  the  settlement  is  fair,  adeqaate,  and  reasonable.^^  Where  a  proposed 
consent  decree,  "by  virtue  of  its  injunctive  provisions,  reaches  into  the  future  and 
has  continuing  effect,"  the  terms  require  careftil  scrutiny,^^  presumedly  because 
a  trial  court  is  "a  judicial  body,  not  a  recorder  of  contracts."*^ 

Another  appeals  court  ruled  a  trial  court  must  "ensure  that  its  orders  are  fair 
and  lawful,"  meaning  that  an  agreement  that  is  made  part  of  an  order  necessarily 
has  judicial  imprimatur  and  contemplates  judicial  "oversight."*' 

For  settlements  that  are  not  incorporated  into  court  orders,  but  over  which 
enforcement  jurisdiction  may  be  retained,  does  discretion  operate  differently? 
If  so,  should  trial  judges  scrutinize  such  terms  more  or  less  carefully?  While 
these  settlements  are  not  consent  decrees,  they  are  also  not  wholly  private 
agreements.*^  For  us,  it  seems  that  in  all  settings  district  judges  should  exercise 
at  least  some  discretion  before  agreeing  to  enforce  a  civil  case  settlement 
agreement  if  a  dispute  arises  later.*^  Thus,  where  enforcement  jurisdiction  is 
retained  but  the  settlement  is  not  formally  filed  (as  a  record  available  to  the 
public),*"*  a  copy  of  the  settlement  should  not  only  be  provided  to  the  court,  but 
the  court  should  also  determine  it  is  an  appropriate  subject  for  possible  court 
enforcement  and  oversight,  though  its  terms  normally  do  not  need  to  receive  full 
judicial  approval.*^ 


76.  United  States  v.  City  of  Miami,  664  F.2d  435,  440  (5th  Cir.  1981)  (footnotes  omitted). 

77.  Mat 440-41. 

78.  Id.  at  44 1  n.  1 3  (requiring  further  that  the  agreement  must  also  have  the  valid  consent  of 
the  concerned  parties  and  be  "appropriate  under  the  particular  facts,"  meaning  "a  reasonable  factual 
and  legal  determination  based  on  the  facts  of  record"). 

79.  Id.  at  44 1  (stating  further  that  the  agreement  cannot  violate  the  "Constitution,  statute,  or 
jurisprudence"). 

80.  Ho  V.  Martin  Marietta  Corp.,  845  F.2d  545,  548  n.4  (5th  Cir.  1988). 

81 .  Smyth  v.  Rivero,  282  F.3d  268,  282  (4th  Cir.  2002). 

82.  See,  e.g.,  id.  at  280  ("a  private  settlement,  although  it  may  resolve  a  dispute  before  a 
court,  ordinarily  does  not  receive  the  approval  of  the  court"). 

83.  For  example,  enforcement  jurisdiction  should  not  be  retained  where  later  disputes 
inevitably  would  involve  novel  or  complex  issues  of  state  law,  or  where  there  are  "compelling 
reasons  for  declining  jurisdiction.  28  U.S.C.  §  1367(c)(1)  &  (4)  (2000). 

84.  Jessup  V.  Luther,  277  F.3d  926  (7th  Cir.  2002)  (intervener  granted  access  to  civil  rights 
settlement  agreement  that  had  been  submitted  for  court  "approval"  and  maintained  under  seal  in 
court's  file  even  though  jurisdiction  to  enforce  it  was  not  retained). 

85.  See,  e.g.,  Roberson  v.  Giuliani,  2002  WL  253950,  at  *1  (S.D.N. Y.  Feb.  21,  2002) 
(contract  "provided"  to  court,  but  not  filed  or  subject  to  "so  ordered"  judgment).  Certainly,  judges 


2003]  ENFORCING  SETTLEMENTS  45 


D.  Reopening  Federal  Civil  Actions 

Under  Kokkonen,  a  district  court  is  enabled,  in  ruling  on  a  Rule  60(b)  motion 
to  set  aside  a  judgment,  to  influence,  if  not  exercise  jurisdiction  over,  a  breached 
settlement  that  had  previously  ended  a  civil  action.*^  If  a  breach  of  a  settlement 
can  prompt  post  judgment  relief  overturning  the  settlement  by  reinstating  the 
claims,  even  though  the  settlement  was  never  incorporated  into  the  judgment  and 
enforcement  jurisdiction  was  not  otherwise  retained,  in  most  instances  a  new 
settlement  will  simply  follow.*^ 

Prior  to  Kokkonen,  the  appellate  courts  were  split  on  whether  such  a 
settlement  breach  provided  sufficient  reason  to  grant  a  motion  for  judgment 
modification.*^  In  Kokkonen,  the  court  did  not  address  the  issue,  finding  "that 


should  never  agree  to  enforce  illegal  or  procedurally  unconscionable  settlement  agreements.  And 
at  times,  in  order  to  ensure  fairness  to  certain  parties,  as  with  class  actions  and  claims  by  minors, 
judicial  approval  of  the  substance  of  settlements  is  required. 

86.  Federal  Rule  of  Civil  Procedure  60  is  entitled  "Relief  from  Judgment  or  Order"and  reads 
in  part: 

(b)  Mistakes;  Inadvertence;  Excusable  Neglect;  Newly  Discovered  Evidence;  Fraud, 
Etc.  On  motion  and  upon  such  terms  as  are  just,  the  court  may  relieve  a  party  or  a 
party's  legal  representative  from  a  final  judgment,  order,  or  proceeding  for  the  following 
reasons:  (1)  mistake,  inadvertence,  surprise,  or  excusable  neglect;  (2)  newly  discovered 
evidence  which  by  due  diligence  could  not  have  been  discovered  in  time  to  move  for  a 
new  trial  under  Rule  59(b);  (3)  fraud  (whether  heretofore  denominated  intrinsic  or 
extrinsic),  misrepresentation,  or  other  misconduct  of  an  adverse  party;  (4)  the  judgment 
is  void;  (5)  the  judgment  has  been  satisfied,  released,  or  discharged,  or  a  prior  judgment 
upon  which  it  is  based  has  been  reversed  or  otherwise  vacated,  or  it  is  no  longer 
equitable  that  the  judgment  should  have  prospective  application;  or  (6)  any  other  reason 
j  ustifying  relief  from  the  operation  of  the  judgment. 

87.  We  think  such  reopened  cases  have  final  settlement  rates  at  least  comparable  to  those  for 
other  civil  cases.  In  any  event,  it  seems  clear  that  most  reopened  cases  will  eventually  settle,  if  they 
do  not  otherwise  end  without  trial. 

88.  Compare  Fairfax  County  wide  Citizens  v.  County  of  Fairfax,  57 1  F.2d  1 299, 1 302-03  (4th 
Cir.  1 978)  (footnote  omitted)  (holding  that  "upon  repudiation  of  a  settlement  agreement  which  had 
terminated  litigation  pending  before  it,  a  district  court  has  the  authority  under  Rule  60(b)(6)  to 
vacate  its  prior  dismissal  order  and  restore  the  case  to  its  docket"),  with  Sawka  v.  Healtheast  Inc., 
989  F.2d  138,  140  (3d  Cir.  1993)  ("Assuming  arguendo  that  Healtheast  breached  the  terms  of  the 
settlement  agreement,  that  is  no  reason  to  set  the  judgment  of  dismissal  aside,  although  it  may  give 
rise  to  a  cause  of  action  to  enforce  the  agreement.  Relief  under  Rule  60(b)(6)  may  only  be  granted 
under  extraordinary  circumstances  where,  without  such  relief,  an  extreme  and  unexpected  hardship 
would  occur.")  See  also  Keeling  v.  Sheet  Metal  Workers  Int'l  Ass'n,  937  F.2d  408, 410  (9th  Cir. 
1991)  ("Repudiation  of  a  settlement  agreement  that  terminated  litigation  pending  before  a  court 
constitutes  an  extraordinary  circumstance,  and  it  justifies  vacating  the  court's  prior  dismissal 
order.");  Harman  v.  Pauley,  678  F.2d  479, 481-82  (4th  Cir.  1982)  (in  this  case  "interests  of  justice 
do  not  require  vacation  of  dismissal  order");  Aro  Corp.  v.  Allied  Witan  Co.,  531  F.2d  1368,  1371 


46  INDIANA  LAW  REVIEW  [Vol.  36:33 


what  respondent  seeks  in  this  case  is  enforcement  of  the  settlement  agreement, 
and  not  merely  reopening  of  the  dismissed  suit  by  reason  of  breach  of  the 
agreement  that  was  the  basis  for  dismissal."*'  The  court  noted  that  settlement 
enforcement,  "whether  through  award  of  damages  or  decree  of  specific 
performance,"  was  different^  because  it  was  "more  than  just  a  continuation  or 
renewal  of  the  dismissed  suit"''  and  thus  required  its  own  basis  for  jurisdiction.'^ 

After  Kokkonen,  the  Sixth  Circuit  foreclosed  a  Rule  60(b)  motion  founded 
on  an  alleged  settlement  breach.  The  court  said  that  the  rule  could  not  support 
enforcement  of  a  settlement  agreement  not  expressly  incorporated  in  a  court 
order  because  relief  from  a  final  judgment  was  an  extraordinary  remedy  available 
only  in  exceptional  circumstances.'^  The  request  for  a  contempt  finding  was 
deemed  "clearly  'more  thanjust  a  continuation  or  renewal  of  the  dismissed  suit'" 
and  any  use  of  the  judgment  modification  rule  would  "create  an  exception  to  the 
holding  in  Kokkonen  that  would  swallow  the  rule."'^ 

The  Seventh  Circuit  has  held  that  "[n]othing  in  Kokkonen  purports  to  change 
the  stringent  standards  that  govern  the  availability  of  relief  under  Rule 
60(b)(6),"'^  so  that  a  movant  could  not,  in  the  guise  of  attempting  to  set  aside  an 
order,  seek  judicial  interpretation  of  a  settlement  that  was  not  incorporated  in  a 
court  order  and  over  which  there  was  no  retained  jurisdiction.'^ 

However,  like  the  pre-Kokkonen  split,  there  may  now  be  a  post-Kokkonen 
split.  One  federal  district  court,  after  referencing  Kokkonen,  found  "that  federal 
courts  are  empowered  to  reopen  suits  dismissed  by  reason  of  breach  of  a 
settlement  agreement  by  virtue  of  Rule  60(b)(6)."'^  Another  court  allowed  a 


(6th  Cir.  1 976)  (court  had  full  power  to  vacate  its  order  of  dismissal  when  one  party  "attempted 
repudiation  of  the  agreement  on  which  the  dismissal  rested"). 

89.  Kokkonen  v.  Guardian  Life  Ins.  Co.  of  Am.,  51 1  U.S.  375,  378  (1994). 

90.  Id.  Of  course,  there  must  also  be  some  jurisdictional  basis  for  a  Rule  60(b)  motion, 
though  such  a  basis  was  not  discussed  in  Kokkonen.  Authority  over  judgment  modification  motions 
is  rarely  questioned  on  jurisdictional  grounds. 

91.  Id. 

92.  Id.  Judgment  modification  was  discussed  during  the  oral  arguments  in  Kokkonen.  See 
Transcript  of  Oral  Arguments,  Kokkonen  (No.  93-263). 

How  about  any  other  60(b)(6),  the  catch  all,  and  the  judge  saying  well,  it  sounds  like  a 
pretty  good  60(b)  motion  to  me;  I  was  listening  to  these  two  people  debate  what  their 
settlement  was  going  to  be,  and  they  made  certain  representations,  and  one  of  them  is 
trying  to  get  out  of  it.  So  I  think  that  fits  the  60(b)(6)  catchall.  It  justifies  relief  to  tell 
me  one  thing  and  the  [sic]  go  do  another  thing. 
Id 

93.  McAlpin  v.  Lexington  76  Auto  Truck  Stop,  229  F.3d  491,  502-03  (6th  Cir.  2000). 

94.  Mat  503. 

95.  Neuberg  v.  Michael  Reese  Hosp.  Found.,  123  F.3d  951,  955  (7th  Cir.  1997). 

96.  Id 

97.  Trade  Arbed  Inc.  v.  African  Express  941  F.  Supp.  68,  70  (E.D.  La.  1996)  (emphasis 
omitted).  5eea/5-oRovirav.  Fairmont  Hotel,  1997  WL  707 11 5,  at  ^2  (E.D.  La.  Nov.  12, 1997)  ("In 
Kokkonen,  the  Supreme  Court  ruled  that  federal  courts  do  not  have  the  power  to  enforce  settlement 


2003]  ENFORCING  SETTLEMENTS  47 


Rule  60  motion  in  a  more  unusual  setting;  the  case  involved  a  settlement  that  had 
been  reached  between  the  parties  before  the  court  entered  a  judgment  based  upon 
a  pending  motion.  The  judge  explained  that  as  the  "parties'  settlement  agreement 
preceded  the  entry  of  judgment  [upon  the  grant  of  the  motion],  by  the  clerk  of 
this  court  the  plaintiff  is  entitled  to  postjudgment  relief  pursuant  to  Fed.  R.  Civ. 
P.  60(b)(1) ...  on  the  grounds  of  mistake."^*  The  court  further  explained  "[i]t 
would  be  this  court's  mistake  of  fact,  i.e.,  that  the  parties  had  not  settled  the 
claims  at  bar  before  entry  of  judgment  .  .  .  that  justifies  relief."^  Instead  of 
reopening  the  case,  the  district  judge  withdrew  its  ruling  and  gave  the  defendant 
"thirty-five  (35)  days  ...  to  comply  with  the  terms  of  the  settlement 
agreement."'^°  The  court  stated  that  if  the  defendant  failed  to  comply,  "the 
plaintiff  may  return  ...  for  whatever  relief  is  appropriate."'^^ 

E.  Choosing  the  Applicable  Contract  Laws 

When  Kokkonen  permits  settlement  enforcement,  questions  have  arisen  about 
which  contract  laws  apply.  The  Seventh  Circuit  recently  ruled  that  "[t]he 
uncertainty  . . .  over  whether  state  or  federal  law  would  govern  a  suit  to  enforce 
a  settlement  of  a  federal  suit,  has  been  dispelled;  it  is  state  law."'°^  This  ruling 
applies  to  settlements  involving  both  federal  and  state  law  claims. '°^  Yet,  most 
rules  have  exceptions  and  therein  lies  the  rub.  Helpful  guidelines  on  any 
exceptions  to  state  law  applicability  are  hard  to  find.  A  second  appeals  court  has 
simply  declared  that  state  contract  law  operates  "unless  it  presents  a  significant 
conflict  with  federal  policy,"'^'*  with  such  conflicts  "few  and  restricted. "'^^ 
Another  appeals  court  was  more  specific,  holding  that  local  law  applies  unless 
the  settlement  is  sought  to  be  "enforced  against  the  United  States"  or  there  was 


agreements  that  produce  stipulations  of  dismissal.  .  .  .  This  ruling,  however,  does  not  prevent 
federal  courts  from  reopening  dismissed  suits  when  the  interests  of  justice  justify  such  relief"); 
Hernandez  v.  Compania  Transatlantica,  1998  WL  241 530,  at  *2  (E.D.  La.  May  7,  1998)  ("Federal 
Rule  of  Civil  Procedure  60(b)(6)  empowers  a  federal  district  court  to  reopen  a  dismissed  suit  due 
to  a  party's  breach  of  a  settlement  agreement."). 

98.  Davis  v.  Magnolia  Lady  Inc.,  178  F.R.D.  473,  474  (N.D.  Miss.  1998). 

99.  Id.  at  474-75  (also  relying  on  Rule  60(b)(6))  (emphasis  omitted). 

100.  /^.  at  476. 

101.  Id. 

1 02.  Lynch  v.  Samatamason,  279  F.3d  487,  490  (7th  Cir.  2002). 

103.  ^ee,^.^..  United  Statesv.McCall,  235  F.3d  1211, 121 5 (lOth Cir.  2000) (federal question 
claim  involving  issue  of  whether  a  settlement  offer  extended  by  the  Assistant  U.S.  Attorney  was 
accepted  by  appellee);  Carr  v.  Runyan,  89  F.3d  327,  331  (7th  Cir.  1996)  (diversity  claim  where 
issue  on  appeal  was  whether  daughter  had  the  authority  to  bind  mother  to  settlement  agreement 
reached  in  mediation). 

104.  Ciramella  v.  Reader's  Digest  Ass'n,  Inc.,  131  F.3d  320,  323  (2d  Cir.  1997)  (citing 
Atherton  v.  FDIC,  1 17  S.  Ct.  666,  670  (1977)). 

105.  Id  (quoting  O'Melveny  &  Myers  v.  FDIC,  512  U.S.  79,  87  (1994). 


48  INDIANA  LAW  REVIEW  [Vol.  36:33 


"a  statute  conferring  lawmaking  power  on  federal  courts."'^^ 

The  exceptional  conditions  under  which  federal  laws  apply  to  settlements  of 
federal  civil  actions  are  difficult  to  discern  from  Supreme  Court  precedents.  In 
one  case,  federal  decisional  contract  law  on  the  validity  of  a  written  prelawsuit 
release  of  a  federal  statutory  claim,  allegedly  procured  by  fraud,  was  applied  to 
the  settlement  of  a  case  filed  in  a  state  court  because  otherwise  "federal 
rights  . .  .  could  be  defeated,"  because  settlements  of  claims  under  that  federal 
law  "play  an  important  part"  in  the  "administration"  of  the  relevant  federal  act, 
and  because  if  "federal  law  controls,"  there  would  be  "uniform  application 
throughout  the  country  essential  to  effectuate"  the  purposes  underlying  the 
federal  statutory  right  to  sue.'°^  And,  in  another  case  involving  a  different  federal 
statutory  claim  presented  in  a  state  tribunal,  the  high  court  simply  said  that 
"waiver"  of  the  "right  to  sue"  was  governed  by  federal  law  because  "the  policies 
underlying  [the  federal  statute  may]  in  some  circumstances  render  that  waiver 
unenforceable."'*** 

Based  on  such  precedents,  there  are  times  when  federal  district  courts  should 
employ  federal  contract  law  principles  in  reading  federal  case  settlement 
agreements.  One  district  court  nicely  summarized  the  relevant  factors. '°^  They 
include:  1 )  whether  Congress  has  expressed  a  policy  of  encouraging  voluntary 
settlement  of  the  relevant  federal  statutory  claims;  2)  whether  "the  Supreme 
Court  has  already  articulated  certain  prerequisites  to  the  validity  of  settlement 
agreement"  of  any  relevant  federal  claims;  3)  whether  any  settled  federal  claims 
are  within  exclusive  federal  court  subject  matter  jurisdiction;  4)  whether  state 
laws  in  the  relevant  area  of  law  are  preempted  "through  a  comprehensive 
statutory  scheme";  5)  whether  there  is  an  expressed  federal  governmental  interest 
"in  remedying  unequal  bargaining  power"  between  the  settling  parties;  6) 
whether  the  United  States  is  a  party  to  the  settlements;  and  7)  whether  Congress 
empowered  the  federal  courts  "to  create  governing  rules  of  law."' '° 

When  state  contract  laws  are  employed  to  sustain  and  interpret  settlement 
agreements  reached  in  federal  civil  actions,  difficulties  can  arise  because  the 
sources  of  state  law  extend  far  beyond  the  "substantive"  matters  demanded  by  the 
Erie  doctrine.  Specifically,  some  state  written  civil  procedure  laws,  seemingly 
operative  only  in  the  state  trial  courts,  are  used  in  the  federal  district  courts.  For 
example,  federal  courts  have  utilized  a  Texas  Rule  of  Civil  Procedure  which 


106.  Makins  v.  District  of  Columbia,  277  F.3d  544,  547-48  (D.C.  Cir.  2002). 

1 07.  Dice  V.  Akron,  Canton  &  Youngstown  R.  Co.,  342  U.S.  359, 361-62  ( 1 952)  (claim  under 
the  Federal  Employers'  Liability  Act).  The  decision  seemingly  was  not  followed  in  Good  v. 
Pennsylvania  Railroad  Co.,  384  F.2d  989  (3d  Cir.  1967)  (state  law  governs  lawyer's  authority  to 
settle  client's  FELA  case)  and  Pulcinello  v.  Consolidated  Rail  Corp.,  784  A.2d  1 22  (Pa.  Super.  Ct. 
2001)  (FELA  case  settlement  governed  by  state  law  on  validity  of  oral  agreements). 

1 08.  Town  of  Newton  v.  Rumery,  480  U.S.  386, 392  ( 1 982)  (civil  rights  claim  under  42  U.S.C. 
§  1983).  The  decision  was  criticized  in  Michael  E.  Solimine,  Enforcement  and  Interpretation  of 
Settlements  of  Federal  Civil  Rights  Actions,  19  RUTGERS  L.J.  295  (1988). 

109.  Sears,  Roebuck  &  Co.  v.  Sears  Realty  Co.,  Inc.,  932  F.  Supp.  392  (N.D.N.  Y.  1996). 

110.  /rf.  at  398-401. 


2003]  ENFORCING  SETTLEMENTS  49 


states  "no  agreement  between  attorneys  or  parties  touching  any  suit  pending  will 
be  enforced  unless  it  be  in  writing,  signed  and  filed  with  the  papers  as  part  of  the 
record,  or  unless  it  be  made  in  open  court  and  entered  of  record."'"  And  at 
times,  but  not  always,  federal  courts  employ  state  professional  conduct  and  civil 
procedure  law  standards  to  determine  the  authority  of  a  person  other  than  the 
party  to  settle  pending  civil  actions  on  behalf  of  that  party.  "^ 

F.  Choosing  the  Applicable  Procedures 

When  a  district  court  exercises  jurisdiction  over  an  alleged  breach  of  a  civil 
case  settlement  there  are  a  variety  of  procedures  that  may  be  used.  Possible 
procedures  appear  in  the  Federal  Rules  of  Civil  Procedure  as  well  as  in  common 
law  decisions  and  statutes."^  Some,  but  not  all,  procedures  are  geared  toward 
enforcement  and  remedies  on  behalf  of  the  party  harmed  by  the  settlement 
breach. 

For  some  settlement  breaches,  the  court  may  proceed  in  contempt. ''"*  There 
are  two  forms  of  contempt,  civil  and  criminal,"^  and  either  form  may  be  direct 
or  indirect.  The  major  goals  of  criminal  contempt  are  less  connected  to 
enforcement,  as  they  chiefly  involve  punishment  and  vindication."^  On  the  civil 


111.  In  re  Omni,  60  F.3d  230,  232  (5th  Cir.  1995)  (quoting  Tex.  R.  Civ.  P.  1 1).  The  Texas 
rules  are  said  to  "govern  the  procedure  in  the  justice,  county,  and  district  courts  of  the  State  of 
Texas  in  all  actions  of  a  civil  nature,  with  such  exceptions  as  may  be  hereinafter  stated."  Tex.  R. 
Civ.  P.  2.  A  similar  New  York  provision,  CPLR  §  2014,  has  prompted  "disagreement"  over  its 
applicability  to  federal  civil  actions  in  the  Court  of  Appeals  for  the  Second  Circuit.  Turk  v.  Chase 
Manhattan  Bank  USA,NA,No.  00CIV1573CMGAY,  2001  WL  736814,  at  *2  n.l  (S.D.N.  Y.  June 
11,2001). 

1 1 2.  Compare  United  States  v.  Int'l  Bhd.  of  Teamsters,  986  F.2d  1 5, 20  (2d  Cir.  1 993)  (federal 
precedent  regarding  attorney  settlement  authority  used);  Reo  v,  U.S.  Postal  Serv.,  98  F.3d  73,  77 
(3d  Cir.  1 996)  (under  Federal  Tort  Claims  Act,  state  law  used  to  determine  settlement  authority  of 
representative  of  a  child);  Neilson  v.  Colgate-Palmolive  Co.,  993  F.  Supp.  225, 226-27  (S.D.N.  Y. 
1998)  (pursuant  to  local  federal  rule,  court  dispenses  with  certain  state  law  requirements  governing 
Guardian  Ad  Litem's  power  to  settle  a  civil  case  on  behalf  of  adult  incompetent  to  pursue  her  own 
claims  as  technical  compliance  with  state  law  would  prompt  "extended  and  prejudicial  delay"). 

113.  See\%  U.S.C.  §  401  (2000)  (criminal  contempt);  Fed.  R.  Civ.  P.  65  (injunctions);  Fed. 
R.  Civ.  P.  69  (writs  of  executions);  Fed.  R.  Civ.  P.  70  (judgments  for  specific  acts);  Feiock  v. 
Feiock,  485  U.S.  624  (1988)  (reviewing  civil  and  criminal  contempt  precedents). 

1 1 4.  Available  procedures  for  certain  civil  case  settlement  breaches  include  criminal  contempt, 
1 8  U.S.C.  §  40 1  (3)  (2000)  (disobedience  to  lawful  court  order),  and  compensatory  or  coercive  civil 
contempt.  D.  Patrick,  Inc.  v.  Ford  Motor  Co.,  8  F.3d  455, 460  (7th  Cir.  1993)  (contempt  may  be 
used  only  where  breaches  involve  alleged  violations  of  express  and  unequivocal  commands  of  court 
orders).  For  a  review  of  the  forms  contempt  and  suggestions  on  their  use,  see  Margit  Livingston, 
Disobedience  and  Contempt,  75  WASH.  L.  REV.  345  (2000). 

115.  See.  e.g.,  Gompers  v.  Bucks  Stove  &  Range  Co.,  221  U.S.  418,  441  (1911). 

1 16.  Id.  See  also  18  U.S.C.  §  401(3)  (criminal  contempt  includes  disobedience  to  a  lawful 
court  order). 


50  INDIANA  LAW  REVIEW  [Vol.  36:33 


side,  there  may  be  either  coercive  civil  contempt  or  compensatory  civil 
contempt."^  Before  there  is  a  contempt  proceeding  in  the  settlement  breach 
setting,  there  usually  must  be  a  failure  of  compliance  with  an  express  and 
unequivocal  command  within  a  lawful  court  order."*  Thus,  contempt  may  only 
be  available  for  a  settlement  breach  where  the  agreement  was  incorporated  into 
a  court  order.  If  the  settlement  terms  were  sealed  or  otherwise  outside  a  court 
order,  but  jurisdiction  over  the  settlement  was  retained,  contempt  may  not  be 
immediately  available,  though  other  procedures  may  be  used. '  '^  Where  contempt 
is  available,  both  civil  and  criminal  proceedings  may  arise  from  a  single  act, 
though  because  different  procedures  apply,  they  frequently  will  be  presented 
separately. '^° 

A  trial  court  may  also  proceed  on  settlement  breaches  by  way  of  contract 
dispute  resolution.  Here,  settlement  enforcement  often  follows  the  routine 
contract  dispute  resolution  procedures  employed  to  resolve  any  factual  and  legal 
disputes.  Yet,  the  applicable  procedures  may  not  always  be  the  same  as  they 
would  for  ordinary  contract  disputes  involving  such  matters  as  defective  widgets; 
for  example,  more  "summary"  procedures  may  be  appropriate  for  settlement 
enforcement.'^' 


1 17.  Int'l  Union  v.  Bagwell,  512  U.S.  821,  827-29  (1994). 

118.  D.  Patrick,  Inc.,  8  F.3d  at  460.  In  rare  settings,  perhaps,  breach  of  an  unincorporated 
settlement  agreement  may  also  be  misbehavior  in  the  vicinity  of  the  court  that  obstructs  the 
administration  of  justice  and  triggers  possible  contempt.  18  U.S.C.  §  401(1). 

119.  See,  e.g.,  D.  Patrick,  Inc.,  8  F.3d  at  457-58,  462  (suggesting  that  while  contempt 
procedures  were  unavailable  to  enforce  an  earlier  settlement  that  was  not  incorporated  into  a  court 
order,  breach  of  contract  procedures  could  be  used  because  the  trial  court  expressly  retained 
jurisdiction  "for  the  purposes  of  the  enforcement");  Central  States  S.E.  &  S.W.  Pension  Fund  v. 
Richardson  Trucking,  Inc.,  45 1  F.  Supp.  349, 350  (E.D.  Wis.  1 978)  ("Here  the  orders  in  both  cases 
are  in  substance  injunctive.  However,  the  orders  did  not  themselves  set  forth  what  payments  the 
defendants  were  required  to  make,  but  instead  did  nothing  more  than  incorporate  the  terms  of  the 
parties'  agreements  with  respect  to  payment  schedules.  The  orders  thus  fail  to  meet  the  directive 
of  Rule  65(d),  and  even  if  they  are  disobeyed,  they  may  not  be  made  the  subject  of  civil  contempt 
proceedings."). 

1 20.  See.  e.g.,  F.J.  Hanshaw  Enter.,  Inc.  v.  Emerald  River  Dev.,  Inc.,  244  F.3d  1 128  (9th  Cir. 
200 1 )  (civil  contempt  finding  affirmed,  but  criminal  contempt  finding  reversed  because  procedural 
protections  were  not  present). 

121.  Often,  in  settlement  enforcement  settings,  "summary"  procedures  involve  resolution 
without  evidentiary  hearings.  Where  necessary  procedures  entail  evidentiary  hearings  following 
formal  discovery  because  of  disputes  over  material  issues  of  fact,  jury  trials  may  be  needed. 
Com/7argMillnerv.  Norfolk  &W.Ry.  Co.,  643  F.2d  1005,  1009  (4th  Cir.  1 98 1 )  (when  a  material 
dispute  arises  regarding  a  settlement  agreement,  the  "trial  court  must  .  .  .  conduct  a  plenary 
evidentiary  hearing");  Quint  v.  A.E.  Staley  Mfg.  Co.,  No.  Civ.96-7 1  -B,  1 999  WL  33 1 1 7 1 90,  at  *  1 
(D.  Me.  Dec.  23,  1999)  (usually  no  jury  trial  right  in  settlement  enforcement  proceedings,  with 
FELA  claims  possibly  excepted);  Ford  v.  Cotozems  &  S.  Bank,  928  F.2d  1 1 1 8, 1 1 2 1  -22  ( 1 1  th  Cir. 
1991)  (no  jury  trial  right).  Summary  settlement  enforcement  and  ordinary  contract  enforcement 
procedures  both  differ  from  contempt  procedures  that  may  be  employed  when  settlement  orders  are 


2003]  ENFORCING  SETTLEMENTS  51 


Certain  breaches  of  settlement  pacts  incorporated  into  judgments  and 
involving  only  "the  payment  of  money"  seemingly  may  also  be  processed 
through  writs  of  execution  under  Federal  Rule  of  Civil  Procedure  69(a),  "unless 
the  court  directs  otherwise."'^^  Here,  the  procedures  follow  the  practices  of  "the 
state  in  which  the  district  court  is  held."  These  writs  can  involve  such  remedies 
as  attachment,  garnishment,  and  sequestration.'^^  Unlike  written  federal  laws, 
some  written  state  laws  expressly  recognize  the  opportunity  for  a  judgment 
creditor  to  choose  between  different  enforcement  procedures.  For  example,  the 
Illinois  Marriage  and  Dissolution  of  Marriage  Act  says  that  terms  of  a  dissolution 
agreement  "set  forth  in  [a]  judgment  are  enforceable  by  all  remedies  available  for 
enforcement  of  a  judgment,  including  contempt,  and  are  enforceable  as  contract 
terms."'^* 

Choices  of  applicable  procedures  are  constrained  in  some  settings.  Consider, 
for  example,  cases  where  settling  parties  wish  to  keep  their  agreement  secret,  but 
nevertheless  have  the  district  court  retain  at  least  some  enforcement  jurisdiction. 
In  one  recent  case,  a  newspaper  sought  to  intervene  in  a  civil  action  in  order  to 
obtain  a  copy  of  such  a  settlement  agreement. '^^  The  magistrate  judge  had 
approved  the  agreement,  but  "did  not  embody  his  approval  in  a  judicial  order  that 
would  have  made  the  agreement  enforceable  by  contempt  proceedings."'^^  The 
appeals  court  ruled  that  such  an  approval  had  "no  legal  significance"  to 
enforcement  unless  it  was  "embodied  in  a  judicial  order  retaining  jurisdiction  of 
the  case  in  order  to  be  able  to  enforce  the  settlement  without  a  new  lawsuit." '^^ 
As  to  the  wish  to  keep  the  settlement  secret,  the  appeals  court  said,  "the  general 
rule  is  that  the  record  of  a  judicial  proceeding  is  public"  and  that  concealing 
records  disserves  the  values  protected  by  the  First  Amendment  and  bars  the 
public  from  monitoring  judicial  performance  adequately.'^*  The  appeals  court 
found  there  was  "a  strong  presumption,"  rather  than  an  absolute  rule,  of 


disobeyed.  See,  e.g.,  D.  Patrick,  Inc.,  8  F.3d  at  459  ("because  the  contempt  proceeding  is 
concerned  solely  with  whether  or  not  the  respondent's  conduct  violates  a  prior  court  order,  the 
parties  cannot  reasonably  expect  to  litigate  to  the  same  extent  that  they  might  in  a  new  and 
independent  civil  action'*);  FJ.  Hanshaw,  244  F.3d  at  1 143  n.ll  (need  fmding  of  bad  faith  in  civil 
contempt  proceeding,  perhaps  based  on  clear  and  convincing  evidence). 

1 22.  Fed.  R.  Civ.  P.  60(a).  In  "extraordinary  circumstances"  Fed.  R.  Civ.  P.  70  may  be  used. 
See,  e.g.,  Spain  v.  Mountanos,  690  F.2d  742,  744-45  (9th  Cir.  1982)  ("under  the  extraordinary 
circumstances  here  where  the  [money]  Judgment  is  against  a  state  which  refuses  to  appropriate 
funds  through  the  normal  process  . . .  any  remedy  provided  in  Rule  69  or  Rule  70  to  enforce  the 
award"  is  appropriate). 

123.  In  re  Merrill  Lynch  Relocation  Mgmt.,  Inc.  v.  Merrill  Lynch  Relocation  Mgmt.,  Inc.,  8 1 2 
F.2d  1 116,  1 120  (9th  Cir.  1987)  (Rule  69(a)  has  been  applied  "to  garnishment,  mandamus,  arrest, 
contempt  of  a  party,  and  appointment  of  receivers"). 

1 24.  750  III.  Comp.  Stat.  Ann.  5/502(e)  (2002). 

1 25.  Jessup  V.  Luther,  277  F.3d  926,  927  (7th  Cir.  2002). 

126.  Id. 

127.  Mat 929. 

128.  /rf.  at  927-28. 


52  INDIANA  LAW  REVIEW  [Vol.  36:33 


openness. *^^  So  upon  "a  compelling  interest  in  secrecy,"  the  record  of  an 
enforceable  settlement  could  be  sealed. '^^  The  court  noted  most  "settlement 
agreements,  like  most  arbitration  awards  and  discovery  materials,  are  private 
documents. . .  not  judicial  records,"  and  thus  the  issue  of  balancing  the  interest 
in  promoting  settlements  by  preserving  secrecy  versus  the  interest  in  making 
public  materials  upon  which  Judicial  decisions  are  based  does  not  arise. '^'  The 
issue  does  not  arise  because  there  is  "no  judicial  decision"  where  there  is  "a 
stipulation  of  dismissal  .  .  .  without  further  ado  or  court  action,"  leaving  the 
settlement  with  "the  identical  status  as  any  other  private  contract."'^^  Since  the 
trial  judge  in  the  case  had  participated  in  "the  making  of  the  settlement,"  the 
appeals  court  found  the  "fact  and  consequence  of  his  participation  are  public 
acts."'"  So,  future  ancillary  enforcement  jurisdiction  may  be  unavailable  to 
many  parties  who  wish  secrecy  for  their  settlements. 

Choices  of  applicable  procedures  are  also  constrained  in  certain  settings 
where  settling  parties  or  their  attorneys  may  later  wish  to  pursue  an  award  of 
attorney's  fees.  For  example,  fees  may  be  awarded  to  "the  prevailing  party"  in 
certain  civil  rights  actions.'^'*  The  U.S.  Supreme  Court  has  ruled  that  a 
determination  of  "legal  merit"  is  a  condition  for  such  an  award  and  that  a  consent 
decree  may  meet  this  condition  if  it  involves  judicial  approval  and  oversight  of 
"court-ordered  change  in  the  legal  relationship"  between  the  settling  parties. '^^ 
One  federal  court  has  ruled  that  such  a  consent  decree  arises  when  a  trial  court 
incorporates  a  settlement  into  an  order,  making  the  contractual  obligations 
enforceable  as  an  order  of  court,  but  may  not  arise  when  a  trial  court  retains 
enforcement  jurisdiction  over  a  settlement  which  has  not  been  incorporated.'^^ 

G.  Discretionary  Refusals  of  Settlement  Enforcement  Requests 

Where  a  federal  district  court  has  incorporated  terms  of  a  settlement 
agreement  into  an  order  or  has  retained  jurisdiction  to  enforce  a  settlement 
agreement,  can  it  later  decline  to  enforce  the  settlement  even  though  requested, 
leaving  the  matter  to  other  courts?  If  so,  under  what  circumstances?  Or,  is  such 


129.  Mat 928. 

130.  Id. 

131.  Id.  (citation  omitted). 

132.  Id 

133.  Id  2X929. 

134.  See,  e.g.,  28  U.S.C.  §  1988(b)  (1994  &  Supp.  1999). 

135.  Buckhannon  Bd.  &  Care  Home  v.  W.  Va.  Dep't  of  Health  &  Human  Res.,  532  U.S.  598, 
604  (2001)  (quoting  Tex.  State  Teachers  Ass'n  v.  Garland  Indep.  Sch.  Dist.,  489  U.S.  782,  792 
(1989)).  The  same  "prevailing  party"  standard  seemingly  operates  in  other  civil  rights  settings 
where  fee  awards  are  allowed.  See  Race  v.  Toledo-Davita,  291  F.3d  857  (1  st  Cir.  2002)  (America 
with  Disabilities  Act  claims);  Oil,  Chem.  &  Atomic  Workers  Int'l  Union  v.  Dep't  of  Energy,  288 
F.  3d  452  (D.C.  Cir.  2002)  (using  standard  in  fee  requests  under  Freedom  of  Information  Act). 

136.  See  Roberson  v.  Giuliani,  2002  WL  253950,  at  *6  (S.D.N. Y.  Feb.  21,  2002);  Smyth  v. 
Rivero,  282  F.3d  268,  285  (4th  Cir.  2002). 


2003]  ENFORCING  SETTLEMENTS  53 


enforcement  exclusively  within  the  subject  matter  jurisdiction  of  that  district 
court,  so  that  no  other  court  (federal  or  state)  may  enforce?  To  date  there  has 
been  little  attention  to  these  questions. 

We  reject  the  notion  of  exclusive  subject  matter  jurisdiction  in  the  trial  court 
where  the  settlement  was  reached,  even  where  there  is  an  incorporation  of  the 
agreement  or  a  retention  of  jurisdiction.  Where  enforcement  jurisdiction  is 
ancillary,  judicial  discretion  about  its  exercise  should  remain  available  as  it  does 
in  similar  settings,  such  as  when  federal  district  courts  are  asked  to  exercise 
"supplemental"  jurisdiction."^  When  a  settlement  dispute  involves  "a  novel  or 
complex  issue  of  [s]tate  law,"'^^  federal  enforcement  jurisdiction  often  should  be 
declined.  Yet,  employment  of  the  same  standards  in  enforcement  settings  that 
are  used  in  other  ancillary  jurisdiction  settings  would  be  inappropriate.  Thus, 
enforcement  should  not  be  declined  simply  because  all  claims  over  which  there 
was  original  jurisdiction  have  been  dismissed. '^^  If  the  discretion  to  decline  to 
exercise  ancillary  enforcement  power  is  used  too  liberally  where  the  settlement 
was  incorporated  into  a  court  order  or  where  jurisdiction  was  expressly  retained, 
the  future  settlements  will  be  deterred  and  certain  judicial  efficiencies  will  be 
undermined.  Therefore,  there  should  be  very  little  discretion  to  refuse 
enforcement  requests  where  earlier  court  orders  expressly  provided  for 
"exclusive"  jurisdiction  over  later  disputes. ''*° 

In  addition  to  at  least  some  of  the  standards  used  with  statutory  supplemental 
jurisdiction,  we  posit  additional  general  guidelines  on  discretionary  refusals  of 
settlement  enforcement  requests.  First,  refusals  should  be  more  difficult  where 
federal  law  claims  were  settled  because  there  is  a  greater  likelihood  that  federal 
laws  will  govern  legal  issues  arising  during  enforcement  proceedings.  Second, 


137.  28  U.S.C.  §  1367(c)  (2000).  The  extent  to  which  enforcement  jurisdiction  may  be 
exercised  under  the  supplemental  jurisdiction  statute  remains  somewhat  unclear.  To  us,  at  least 
some  exercise  is  appropriate  under  28  U.S.C.  §  1367(a)  (allowing  supplemental  jurisdiction  over 
"claims  that  are  so  related  to  claims  in  the  action  within . . .  original  jurisdiction  that  they  form  part 
of  the  same  case  or  controversy").  See  Kokkonen  v.  Guardian  Life  Ins.  Co.  of  Am.,  511  U.S.  375, 
379  (1994)  (recognizing  that  in  some  instances  settlement  enforcement  claims  and  claims  earlier 
presented  for  judicial  resolution  may  have  something  to  do  with  each  other  in  that  they  are  all  "in 
varying  respects  and  degrees  factually  interdependent"). 

138.  28  U.S.C.  §  1367(c)(1)  (granting  court  discretion  to  decline  supplemental  jurisdiction 
when  "claim  raises  a  novel  or  complex  issue  of  State  law"). 

139.  But  see  28  U.S.C.  §  1367(c)(3)  (granting  court  discretion  to  decline  supplemental 
jurisdiction  when  "court  has  dismissed  all  claims  over  which  it  has  original  jurisdiction"). 

1 40.  While  parties  cannot  establish  federal  district  court  subject  matter  jurisdiction  by  contract, 
the  incorporation  of  an  exclusive  venue  provision  in  a  court  order  in  a  pending  civil  action  signifies 
a  judicial  recognition  that  there  will  be  ancillary  jurisdiction  in  certain  events,  in  addition  to 
providing  a  judicial  promise  that,  in  the  absence  of  exceptional  circumstances,  it  will  be  exercised. 
See,  e.g..  Manges  v.  McCamish,  Martin,  Brown  &  Loeffler,  37  F.3d  221, 224  (5th  Cir.  1994).  But 
see  Housing  Group  v.  United  Nat'l  Ins.  Co.,  109  Cal.  Rptr.  2d  497  (Ct.  App.  2001)  (persons 
involved  in  settlement  talks  outside  of  any  civil  lawsuit  cannot  agree  to  place  settlement  before  a 
trial  court  in  order  to  secure  possible  court  enforcement  because  there  is  no  justiciable  controversy). 


54  INDIANA  LAW  REVIEW  [Vol.  36:33 


refusals  should  be  more  difficult  where  the  same  district  judge  will  preside  over 
the  settlement  enforcement  proceedings  as  presided  over  the  settlement  talks 
because  desired  efficiencies  are  more  likely  to  occur.''*'  Third,  refusals  should 
be  easier  when  federal  governmental  interests  are  diminished  due  to  settlement 
agreements  which  expressly  require  that  state  laws  govern  any  future  disputes. 
Fourth,  refusals  should  be  more  difficult  where  enforcement  proceedings  will 
involve  settlement  breaches  that  violate  court  orders  because  they  more  readily 
implicate  the  power  of  the  courts  to  "protect"  their  proceedings  and  to 
"vindicate"  their  authority.  ^*^  Fifth,  refusals  should  be  easier  where  enforcement 
proceedings  will  not  involve  extensive  inquiries  into  court  records,  such  as 
hearing  transcripts  and  filed  papers.  Sixth,  refusals  should  be  more  difficult 
where  earlier  and  related  settlement  enforcement  proceedings  have  already 
occurred  in  the  federal  district  court. 

III.  Improving  Settlement  Enforcement  in  the 
Federal  District  Courts 

Many  of  the  difficulties  with  federal  settlement  enforcement  proceedings  can 
be  reduced  by  new  written  federal  laws.  We  posit  that  such  new  laws  are  needed 
both  from  the  U.S.  Supreme  Court,  as  the  federal  civil  procedure  rulemaker,  and 
from  the  Congress.  As  rulemaker,  the  Court  should  consider  both  amendments 
to  existing  civil  procedure  rules  and  entirely  new  rules.  We  urge  Congress  at  this 
time  to  focus  only  on  changes  to  the  supplemental  jurisdiction  statute. 

Difficulties  regarding  the  incorporation  of  settlement  terms  into  court  orders 
and  the  retention  of  jurisdiction  for  later  enforcement  could  be  reduced  through 
amendments  to  Federal  Rule  of  Civil  Procedure  58.  The  rule  already  speaks  to 
judgments  upon  jury  verdicts  or  other  decisions  by  juries,  as  well  as  to  judgments 
upon  decisions  by  courts  without  juries.''*^  An  amended  rule  could  be 
accompanied  by  new  forms,  which  would  reduce  confusion,  as  they  would  be 
"sufficient"  if  used.  "^  An  amended  rule  could  be  modeled  on  some  existing  state 
civil  procedure  laws.  For  example,  a  Texas  statute  says: 

(a)  If  the  parties  reach  a  settlement  and  execute  a  written  agreement 
disposing  of  the  dispute,  the  agreement  is  enforceable  in  the  same 
manner  as  any  other  written  contract. 

(b)  The  court  in  its  discretion  may  incorporate  the  terms  of  the 
agreement  in  the  court's  final  decree  disposing  of  the  case. 

(c)  A  settlement  agreement  does  not  affect  an  outstanding  court  order 
unless  the  terms  of  the  agreement  are  incorporated  into  a  subsequent 
decree.''*^ 


141.  Kokkonen,  511  U.S.  at  380  ("efficient"  to  adjudicate  settlement  breach  with  claim 
prompting  the  settlement  where  facts  underlying  both  have  much  "to  do  with  each  other"). 

142.  Mat  380-81. 

143.  FED.  R.  Civ.  P.  58. 

144.  Fed.  R.  Civ.  P.  84  (forms  in  Appendix  of  Forms  are  sufficient). 

1 45.  Tex.  Civ.  Prac.  &  Rem.  §  1 54.07 1 . 


2003]  ENFORCING  SETTLEMENTS  55 


And,  a  California  Code  of  Civil  Procedure  says: 

If  parties  to  pending  litigation  stipulate,  in  a  writing  signed  by  the  parties 
outside  the  presence  of  the  court  or  orally  before  the  court,  for  settlement 
of  the  case,  or  part  thereof,  the  court,  upon  motion,  may  enter  judgment 
pursuant  to  the  terms  of  the  settlement.  If  requested  by  the  parties,  the 
court  may  retain  jurisdiction  over  the  parties  to  enforce  the  settlement 
until  performance  in  full  of  the  terms  of  the  settlement. '"^^ 

Difficulties  regarding  discretionary  refusals  of  future  or  present  settlement 
enforcement  requests  could  be  reduced  through  amendments  to  the  supplemental 
jurisdiction  statute.  '"^^  That  statute  is  applied  today,  for  the  most  part,  to  the  initial 
adjudicatory  authority  over  civil  claims  pleaded  or  otherwise  presented  before 
or  during  so-called  trials  on  the  merits,  typically  encompassing  "factually 
interdependent"  claims  under  Kokkonen.^*^ 

Further  difficulties  with  settlement  enforcement  procedures  can  be 
diminished  with  amendments  to  Federal  Civil  Procedure  Rules  65  and  69. 
Amendments  to  Federal  Rule  of  Civil  Procedure  65(d)  could  address 
enforcement  issues  arising  from  settlements  involving  equitable  remedies. 
Amendments  to  Federal  Rules  of  Civil  Procedure  69(a)  could  address 
enforcement  issues  arising  from  settlements  involving  monetary  payments. 
Should  codification  of  civil  contempt  procedures  be  found  necessary,  a  new 
federal  civil  procedure  rule  seems  the  best  vehicle  to  do  so'''^  using  several  local 
court  rules  and  written  state  laws  as  models. '^° 

Conclusion 

Settlements  of  federal  civil  actions  may,  but  need  not,  be  subject  to  later 
judicial  enforcement.  As  recognized  by  the  U.S.  Supreme  Court  in  Kokkonen  v. 
Guardian  Life  Insurance  Co.,  one  significant  limitation  on  enforcement 
proceedings  is  subject  matter  jurisdiction  because  federal  district  courts  are 
"courts  of  limited  jurisdiction."  Under  Kokkonen,  enforcement  jurisdiction  may 
be  "independent,"  but  usually  is  "ancillary"  because  state  law  claims  typical  ly  are 


146.  Cal.  Civ.  Pro.  Code  §664.6  (1987  &  Supp.  2002).  Prior  to  its  enactment,  "California 
appellate  decisions  were  in  conflict  as  to  the  appropriate  procedure  for  enforcement  of  an  agreement 
to  settle  pending  litigation."  Assemi  v.  Assemi,  872  P.2d  1 190, 1 194-95  (Cal.  1994).  But  see  La. 
Civ.  Code  Ann.  art.  3071  (1994)  (settlement  recited  in  open  court  "confers"  upon  each  party  "the 
right  of  judicially  enforcing  its  performance"). 

147.  28U.S.C.  §  1367(2000). 

1 48.  A  review  and  critique  of  the  supplemental  jurisdiction  statute  appears  in  Jeffrey  A. 
Parness  &  Daniel  J.  Sennott,  Expanded  Recognition  in  Written  Laws  of  Ancillary  Federal  Court 
Powers:  Supplementing  the  SupplementalJurisdiction  Statute, U.  PiTT.  L.  Rev. (2002). 

1 49.  Acts  constituting  criminal  contempt  are  already  expressly  addressed  in  1 8  U.S.C.  §  40 1 
(2000).  These  statutory  standards  have  traditionally  been  used  to  help  define  acts  constituting  civil 
contempt. 

1 50.  See,  e.g. ,  ILL.  CiR.  Ct.  R.  FOR  FIFTEENTH  CIR.  11.1  (2000);  CONN.  Sup.  R.  §  1  - 1 4  ( 1 999). 


56  INDIANA  LAW  REVIEW  [Vol.  36:33 


involved  where  there  is  no  diversity  of  citizenship.  Ancillary  enforcement 
powers  may  be  exercised  by  district  courts  either  where  claims  were  initially 
presented  for  adjudication  and  disputes  arising  from  later  settlements  are 
"factually  interdependent,"  or  where  recognition  of  enforcement  authority 
enables  courts  "to  function  successfully,"  such  as  where  courts  need  to  insure 
that  their  orders  are  not  "flouted  or  imperiled."  Typically,  enforcement  authority 
is  exercised  so  that  the  courts  function  successfully. 

Difficulties  have  surfaced  regarding  this  ancillary  settlement  enforcement 
jurisdiction.  They  concern  how  to  incorporate  settlement  terms  into  court  orders 
and  how  otherwise  to  retain  jurisdiction,  whether  settlement  disputes  may  prompt 
the  reopening  of  judgments,  and  what  contract  laws  and  what  procedures  should 
apply  when  federal  case  settlements  are  enforced.  There  are  additional  troubles 
which  have  yet  to  surface  significantly,  including  whether  there  is  judicial 
discretion  to  refuse  requests  that  future  enforcement  jurisdiction  be  retained  and 
whether  certain  settlement  disputes  can  prompt  discretionary  refusals  of  available 
enforcement  jurisdiction. 

We  believe  new  written  federal  laws  are  needed  now  to  address  many  of 
these  difficulties.  Relevant  lawmakers  include  both  the  U.S.  Supreme  Court,  as 
promulgator  of  the  federal  rules  of  civil  procedure,  and  the  Congress.  We 
suggest  amendments  to  the  Federal  Rules  of  Civil  Procedure  on  judgment  entry, 
on  judgments  involving  money  and  on  permanent  injunctions,  as  well  as  changes 
to  the  supplemental  jurisdiction  statute. 


An  Interpretation  and  (Partial)  Defense 
OF  Legal  Formalism 


Paul  N.  Cox* 


Introduction 

The  origin  of  this  lecture  lies  in  an  observation.  Specifically,  I  was  struck  by 
a  substantia]  similarity  in  the  views  of  Grant  Gilmore  and  of  Friedrich  Hayek. 
What  is  striking  in  this  observation  is  that  Gilmore  was  a  kind  of  legal  realist. 
As  a  realist  his  skepticism  about  law  was  expressed  as  an  attack  upon  legal 
formalism.'  Hayek,  by  contrast,  is  at  least  generally  characterized  as  a  legal 
formalist.^  And  what  I  view  as  Hayek's  very  similar  skepticism  about  law  was 
expressed  as  advocacy  of  legal  formalism. 

What  is  the  nature  of  the  skepticism  that  I,  at  least,  view  as  common  to  both 
of  these  eminent  legal  thinkers?  At  bottom,  it  is,  both  distrust  of  and  distaste  for 
centralized,  all  encompassing  legal  direction.  Gilmore  put  it  this  way: 

As  lawyers  we  will  do  well  to  be  on  our  guard  against  any  suggestion 
that,  through  law,  our  society  can  be  reformed,  purified,  or  saved.  The 
function  of  law,  in  a  society  like  our  own,  is  altogether  more  modest  and 
less  apocalyptic.  It  is  to  provide  a  mechanism  for  the  settlement  of 
disputes  in  the  light  of  broadly  conceived  principles  on  whose 
soundness,  it  must  be  assumed,  there  is  a  general  consensus  among  us.^ 

Repeatedly  in  his  work,  Hayek  makes  what  I  believe  is  a  substantially  similar 
point:  "constructivist  rationalism,"  the  belief  that,  by  means  of  a  "scientific"  law, 
society  may  be  purposefully  reconstructed,  and  human  activity  directed  to  serve 
collectively  determined  goals,  is  a  tragically  false,  dangerous  and  destructive 
myth.''  Gilmore  identifies  formalism  with  that  myth.  Hayek  offers  formalism  as 


♦  Centennial  Professor  of  Law,  Indiana  University  School  of  Law — Indianapolis.  This 
inaugural  lecture  was  delivered  on  March  7,  2002,  at  the  Indiana  University  School  of 
Law — Indianapolis. 

1 .  See  Grant  Gilmore,  The  Ages  of  American  Law  4 1  -67  ( 1 977). 

2.  E.g.,  Morton  J.  Horwitz,  The  Transformation  of  American  Law,  1 870-1960,  at 

228-30  (1992);  RICHARD  A.  POSNER,  THE  PROBLEMS  OF  JURISPRUDENCE  57,  60  (1990). 

3.  Gilmore,  supra  note  1,  at  109. 

4.  See  1  F.  A.  HAYEK,  Law,  Legislation  and  Liberty:  Rules  and  Order  8-34  (1973) 
[hereinafter  Hayek,  Law,  Legislation  and  Liberty];  1 F.  A.  Hayek,  Traditional  Morals  Fail  to 
Meet  Rational  Requirements,  in  THE  FATAL  CONCEIT:  THE  ERRORS  OF  SOCIALISM  66-88  (W.  W. 
Hartley,  III  ed.,  1988);  Friedrich  A.  Hayek,  The  Constitution  of  Liberty  234-49  (1960) 
[hereinafter  Hayek,  Constitution  of  Liberty].  Whether  Hayek  is  properly  characterized  as  a 
formalist  is  debatable.  His  views  on  law  changed  from  the  time  of  the  more  clearly  formalist 
Constitution  of  Liberty,  HAYEK,  CONSTITUTION  OF  LIBERTY,  supra,  to  the  time  of  Law.  Legislation 
and  Liberty,  HAYEK,  LAW  LEGISLATION  AND  LIBERTY,  supra.  The  change  is  attributable  to  the 
influence  on  Hayek  of  Leoni.  See  Bruno  Leoni,  Freedom  and  the  Law  (3d  ed.,  Liberty  Fund, 
Inc.  1991). 


58  INDIANA  LAW  REVIEW  [Vol.  36:57 


an  alternative  to  and  defense  against  the  myth. 

Who  was  right?  For  me,  the  question  is  particularly  interesting  because  I  was 
brought  up  in  the  law  to  believe  that  formalism  is  a  sin.  This  is  not  an  experience 
unique  only  to  me.  It  is,  I  venture  to  guess,  an  article  of  faith  among  most  legal 
academics  that  formalism  is  a  sin — which  is  not  to  say  that  formalism  is  absent 
from  contemporary  law,  or  even  from  contemporary  academic  commentary. 
Indeed,  judging  from  that  commentary,  there  is  far  too  much  formalism  going  on. 
For  formalism,  as  a  sin,  is  the  label  the  commentators  often  attach  to  the  targets 
of  their  critique.^  A  difficulty  with  this  attaching  of  that  label  is  that  the  precise 
content  of  the  sin  supposed  to  have  been  committed  is  often  unclear. 

What  is  legal  formalism? 

As  formalism  is  most  often  defined  by  its  critics,^  and  as  the  critics  often 
have  arguably  distinct  targets  in  mind,  the  question  is  perhaps  better  framed  as 
"what  are  legal  formalisms?"  At  least  this  is  so  unless  there  is  some  underlying 
foundational  belief  at  the  bottom  of  the  variety  of  formalisms,  one  that  implies 
or  necessitates  each. 

In  surveying  the  various  legal  formalisms,  I  will  rely  in  part  upon  positions 
taken  or  said  to  have  been  taken  by  the  "classical  formalists" — legal  academics 
writing  at  the  end  of  the  Nineteenth  Century  and  beginning  of  the  Twentieth 
Century,  who  were  principally  associated  with  the  Harvard  Law  School,  and  with 
the  then  dean  of  that  school,  Christopher  Columbus  Langdell.^  However,  I  am 
not  engaged  in  an  exercise  of  legal  history,  and  I  am  not,  therefore,  seeking  to 
recapture  the  particulars  of  the  thought  of  these  academics.  Rather,  I  am  both 
outlining  contemporary  beliefs  about  what  formalism  is  or  was,  whether  or  not 
these  contemporary  beliefs  accurately  portray  the  long  lost  era  of  classical 
formalism,  and  constructing  an  interpretation  of  the  formalist  impulse,  one  only 
partially  related  to  the  specifics  of  classical  formalism. 

Similarly,  I  will  refer  to  formalism's  critics  as  legal  realists,  post-realists  or 


5.  See,  e.g.,  RICHARD  A.  POSNER,  OVERCOMING  LAW  19-20,  75-76  (1995)  [hereinafter 
PosNER,  Overcoming  Law];  Posner,  supra  note  2,  at  IIA-IS;  Cass  R.  Sunstein,  Legal 
Reasoning  and  Political  Conflict  24-26  (1996). 

6.  See  Frederick  Schauer,  Formalism,  97  YALE  L.J.  509  ( 1 988)  (making  this  point  in  context 
of  a  defense  of  formalism).  However,  there  has  been  a  recent  renewal  of  interest  in  formalism,  and 
there  are  contemporary  defenders  of  various  varieties  of  formalism.  See,  e.g.,  Ernest  J.  Weinrib, 
The  Idea  of  Private  Law  (1 995);  Michael  Corrado,  The  Place  of  Formalism  in  Legal  Theory,  70 
N.C.  L.  Rev.  1545  (1992);  Schauer,  supra;  Alan  Schwartz,  Incomplete  Contracts,  2  New 
Palgrove  Dictionary  of  Economics  and  Law  277  ( 1 997);  Ernest  J.  Weinrib,  Legal  Formalism: 
On  The  Immanent  Rationality  of  Law,  97  YALE  L.  J.  949  (1988);  James  G.  Wilson,  The  Morality 
of  Formalism,  33  UCLA  L.  REV.  43 1  ( 1 985);  see  also  Symposium,  Formalism  Revisited,  66  U.  Chi. 
L.  Rev.  527  (1999)  (exploring  contemporary  relevance  of  varieties  of  formalism). 

7.  For  contemporary  depictions  of  the  classical  formalists,  see,  e.g.,  NEIL  DUXBURY, 
Patterns  of  American  Jurisprudence  9-64  (1995);  Gary  Minda,  Postmodern  Legal 
Movements  13-33  (1995);  RobertSamuel  Summers,  Instrumentalism  and  American  Legal 
Theory  136-59(1982). 


2003]  LEGAL  FORMALISM  59 


pragmatic  instrumentalists.*  I  am  aware  that  legal  realism  was  less  a  coherent 
school  of  thought  than  a  set  of  somewhat  diverse  impulses,  but  I  am  not  presently 
interested  in  the  details  of  legal  realism,  the  differences  between  particular  legal 
realists  or  the  differences  between  legal  realism  and  the  post-realist  schools  that 
incorporate  realist  insights.  Realism,  post-realism,  and  pragmatic 
instrumentalism  are  largely  employed  here  merely  as  labels  for  anti-formalist 
arguments  and  positions.  Nevertheless,  it  will  become  apparent  that  I  offer  an 
interpretation  of  the  "realist"  impulse,  just  as  I  do  of  the  formalist  impulse. 

My  objective  is  a  reconstruction  of  formalism  on  grounds  of  skepticism 
about  legal  competence.  This  will  strike  many  as  a  peculiar,  even  perverse 
thesis.  A  common  theme  in  anti-formalist  thought  is  precisely  that  formalism 
entails  an  exaggerated,  and  erroneous,  belief  in  legal  competence,  it  is  a  belief 
that  the  formalist  legal  method  is  adequate  to  the  task  of  properly  resolving 
problems  confronted  in  law.^  I  do  not  deny  that  formalist  rhetoric  often  appears 
imperious,  but  I  offer  an  interpretation  of  formalism  that  depicts  it  as  devoted  to 
a  constrained  ambition  for  law.  In  the  course  of  my  survey  of  legal  formalisms, 
I  will  also  identify  what  I  take  to  be  the  principal  objections  to  the  formalism  in 
question,  and  I  will  suggest  at  least  partial  rebuttals.  I  proceed  initially  in  three 
parts,  addressing,  in  turn,  formalism  as  autonomous  conceptual  ism,  formalism 
as  rules,  and  formalism  as  empty  spaces.  I  then  seek  to  address  the  merits  of 
formalism  and  its  chiefly  consequential ist  competitors. 

I.  FORMALISM  AS  Autonomous  CoNCEPTUALiSM 

What  is  "autonomous  conceptual  ism"?  By  "autonomous"  I  mean  that  at  least 
classical  formalists  believed  that  answers  to  legal  questions  could  and  should  be 
based  upon  distinctly  legal  materials,  without  reference  to  sources  external  to 


8.  I  therefore  employ  the  term  "legal  realist"  in  a  very  broad  sense  in  this  essay  to  include 
not  merely  the  legal  realists  of  the  1930s,  but  proto-realists,  such  as  the  early  Roscoe  Pound,  and 
post-realists.  Post-realists  include  all  who  would  agree  with  the  claim  that  "we  are  all  realists  now" 
in  the  sense  that  they  are  committed  to  what  Professor  Summers  calls  "pragmatic  instrumentalism." 
See  Robert  S.  Summers,  Pragmatic  Instrumentalism  in  Twentieth  Century  American  Legal 
Thought — A  Synthesis  and  Critique  of  Our  Dominant  General  Theory  About  Law  and  Its  Use,  66 
Cornell  L.  Rev.  861  (1981).  I  exclude  from  "legal  realism"  as  I  employ  the  phrase,  that  branch 
of  legal  realism  devoted  to  extreme  skepticism  or  nihilism.  So  "realism"  in  my  usage  refers  to  the 
pragmatic,  social  science  branch  of  the  phenomenon. 

9.  This  is  obviously  apparent  in  Gilmore,  but  it  was  also  a  common  theme  in  legal  realist 
literature  and  is  a  theme  in  Judge  Posner's  critique  of  contemporary  legal  practice.  See,  e.g., 
POSNER,  Overcoming  Law,  supra  note  5;  Felix  S.  Cohen,  Transcendental  Nonsense  and  the 
Functional  Approach,  35  COLUM.  L.  Rev.  809  (1935);  Duncan  Kennedy,  The  Structure  of 
Blackstone's  Commentaries,  28  BUFF.  L.  REV.  205  (1979);  David  Lyons,  Legal  Formalism  and 
Instrumentalism— A  Pathological  Study,  66  CORNELL  L.  REV.  949  (1981);  Gary  Peller,  The 
Metaphysics  of  American  Law,  73  Cal.  L.  Rev.  1151  (1985).  On  the  other  hand,  some  recent 
"formalist"  proposals  are  predicated  on  the  idea  that  formalism  may  be  the  best  that  can  be  done 
given  the  incapacities  of  legal  actors.  E.g.,  Eric  Posner,  A  Theory  of  Contract  Law  Under 
Conditions  of  RadicalJudicial  Error,  94  N.W.  U.  L.  REV.  749  (2000). 


60  INDIANA  LAW  REVIEW  [Vol.  36:57 


law,  most  obviously  without  reference  to  the  social  sciences. '°  By 
"conceptualism,"  I  mean  that  at  least  classical  formalists  believed  three  things." 
First,  legal  concepts,  such  as  the  concept  of  consideration  in  contract  or  the 
concept  of  ownership  in  property,  could  be  identified  through  induction,  though 
that  is  a  review  of  the  evidence  of  case  law.  Second,  they  believed  that  more 
particular  rules  could  then  be  derived  "logically"  from  the  concepts  induced  from 
the  caselaw.  Third,  they  believed  that  the  result  would  be  a  self-contained, 
internally  consistent,  systemized  anc  rationalized  law,  rather  like  geometry,  and, 
therefore,  that  correct  legal  answers  could  be  given  to  any  question  by  reference 
to  the  logic  of  this  system. 

This,  at  least,  is  the  standard  account,  the  account  attacked  by  Holmes'^  and 
later  by  legal  realists.'^  What,  then,  is  wrong  with  autonomous  conceptualism? 
I  will  not  review  all  of  the  criticisms,  but  I  will  attempt  a  summary  of  the  main 
lines  of  attack.  First,  the  concepts  employed  by  the  classical  formalists  were  far 
too  general.  The  radical  version  of  this  criticism  was  a  nominalist  belief  that 
concepts  do  not  have  real  world  referents,  or  that  real  world  referents  are 
insufficiently  identical  to  be  captured  by  any  concept.^'*  A  more  moderate 
version  of  the  criticism  is  that  only  narrow  concepts  drawn  at  lower  levels  of 
abstraction  can  be  serviceable  for  formalist  law.'^  Thus,  for  example,  abstract 
concepts  like  "ownership"  or  "property  righf  or  "liberty"  cannot  yield  particular 
uncontroversial  legal  conclusions  because  various  possible  conclusions  may 
follow  from  them.  In  Hohfeldian  terms,  abstract  concepts  such  as  property  must 
be  disaggregated  before  they  become  descriptive  of  the  actual  variety  of  possible 
legal  relationships.'^  An  implication  of  this  view  is  that  judges  are  not  in  fact 


10.  See  Thomas  C.  Grey,  Langdell's  Orthodoxy,  45  U.  PiTT.  L.  REV.  1,  16-20  (1983). 
"Formalism"  would  therefore  seem  to  entail  one  of  the  central  claims  of  legal  positivism:  that  law 
is  distinct  from  morality.  At  least  this  would  seem  to  be  the  case  if  morality  means  "everything 
else."  Frederick  Schauer  &  Virginia  Wise,  Legal  Positivism  As  Legal  Information,  82  CORNELL 
L.  Rev.  1080(1997). 

1 1 .  See  Stanley  Fish,  The  Law  Wishes  to  Have  a  Formal  Existence,  in  THE  FATE  OF  LAW  1 59 
(Austin  Sarat  &  Thomas  Kerns  eds.,  1 99 1 )  (offering  a  somewhat  parallel  account  of  formalism,  but 
attributing  it  to  contemporary  legal  practice);  Grey,  supra  note  10. 

12.  See  Oliver  Wendell  Holmes,  The  Path  of  the  Law,  in  Collected  Legal  Papers  1 67 
(Peter  Smith  ed.,  1952)  (1920).  Gilmore  nevertheless  attacked  Holmes  as  a  formalist.  See 
GiLMORE,  supra  note  1,  at  48-56.  In  terms  of  this  essay.  Holmes  is  best  viewed  as  a  proto-realist 
in  his  (moderate)  attack  on  formalism  as  autonomous  conceptualism  and  as  a  formalist  in  his 
preference  both  for  rules  and  for  empty  spaces.  See  generally  DuxBURY,  supra  note  7,  at  37-47; 
Grey,  supra  note  10,  at  44. 

13.  E.g.,  Jerome  Frank,  Law  and  the  Modern  Mind  (Peter  Smith  ed..  Anchor  Books 
1 970)  ( 1 930);  Cohen,  supra  note  9;  John  Dewey,  Logical  Method  and  Law,  1 0  CORNELL  L.  Q.  1 7 
(1924);  Roscoe  Pound,  MechanicalJurisprudence,  8  COLUM.  L.  REV.  605  (1908). 

14.  See  AMERICAN  LEGAL  REALISM  166  (William  W.  Fisher,  III  et  al.  eds.,  1993). 

1 5.  Cass  Sunstein,  Legal  Reasoning  and  Political  Conflict  24-26  ( 1 996). 

1 6.  Id. ;  see  Wesley  Hohfeld,  Some  Fundamental  Legal  Conceptions  as  Applied  in  Judicial 
Reasoning,  23  YALE  L.J.  16(1913). 


2003]  LEGAL  FORMALISM  61 


bound  by  concepts,  as  these  may  be  manipulated.'^  If  particular  rules  or  rights 
are  not  in  fact  compelled  by  the  high  level  abstractions  relied  upon  by  formalists, 
judges  are  not  in  fact  engaged  in  finding  the  law  and  following  it.  Rather,  they 
are  engaged  in  willing  the  results  they  reach  in  the  particular  cases  they  decide. 

Second,  and  perhaps  more  importantly,  formalism's  geometrical  aspirations 
are  normatively  suspect.  What  is  needed  instead,  said  Holmes,  the  realists,  the 
pragmatists,  and  most  recently  Judge  Posner,  is  a  concrete  focus  upon 
considerations  of  social  advantage  and  disadvantage.'^  Legal  decision  should  not 
proceed  then  from  fidelity  to  the  heaven  of  legal  concepts,  but  rather  from 
consideration  of  the  consequences  of  alternative  decisions.  Law,  in  this  anti- 
formalist  depiction,  is  an  instrument  of  social  policy  to  be  used  for  socially 
desirable  ends.  An  implication  of  this  normative  critique  of  formalism  is  denial 
of  law's  autonomy:  if  law  is  an  instrument  to  be  purposively  applied,  it  requires 
the  tools  and  information  supplied  by  "science"  of  one  sort  or  another. 

These,  I  think,  summarize  the  main  lines  of  attack,  but  there  is  a  third  line, 
distinct  from  and  arguably  antagonistic  to  the  second,  a  line  most  obviously 
associated  with  Karl  Llewellyn:  abstract  formalist  concepts  should  be  replaced 
with  context  dependent  sensitivity  to  social  practice.'^  Law  should  be  specific 
to  situation  types  or  categories  and  should  incorporate  the  norms  of  real  people 
in  the  real  world.  It  should  be  noticed  that  this  reference  to  social  practice  as  a 
source  of  law  has  much  in  common  with  Hayek's  Humean  theory  of  spontaneous 
order  and  with,  at  least  at  some  points  in  Hayek's  intellectual  journey,  his 
recommendations  for  law.^^  It  may  also  be  a  point  of  partial  commonality 
between  Hayek  and  Gilmore.  However,  there  is  a  tension  between  the  second 
and  this  third  critique  of  autonomous  conceptualism  in  at  least  one  respect:  the 
preferred  source  of  law  in  the  second  is  science;  the  preferred  source  in  the  third 
is  practice. 

What  might  be  said  of  formalism  given  these  critiques?  I  cannot  defend 
formalism  in  its  pristine,  classical  sense  for  two  reasons.  First,  it  is  simply  not 
an  accurate  depiction  of  law  as  it  now  is,  even  if,  which  is  doubtful,  it  once  was 
such  a  depiction.  I  would  be  guilty  of  malpractice  if  I  described  our  law  in 
classically  formalistic  terms  and  if  I  taught  it  in  these  terms.  Second,  I  think  the 
critique  of  generalized  abstraction  partially  correct:  legal  particulars  cannot  be 


17.  Cf.  John  Harrison,  The  Power  of  Congress  to  Limit  the  Jurisdiction  of  the  Federal  Courts 
and  the  Text  of  Article  III,  64  U.  CHI.  L.  Rev.  203, 253  (1997)  (explaining  that  principles  compete 
with  each  other  and  any  given  principle  can  be  implemented  in  a  variety  of  ways). 

18.  See  generally  supra  notes  9,  13.  For  one  of  Judge  Posner's  recent  statements,  see 
PosNER,  Overcoming  Law,  supra  note  5,  at  399. 

19.  See  Karl  N.  Llewellyn,  The  Common  Law  Tradition,  Deciding  Appeals  1 27  ( 1 960); 
William  Twining,  Karl  Llewellyn  and  the  Realist  Movement  chs.  11-12(1973). 

20.  See  HAYEK,  LAW,  LEGISLATION  AND  LIBERTY,  supra  note  4,  at  35-54,  74-91,  100-01; 
Symposium,  Decentralized  Law  for  a  Complex  Economy,  23  SW  U.  L.  REV.  443  (1994); 
Symposium,  Public  and  Private  Ordering  and  the  Production  of  Legitimate  and  Illegitimate  Rules, 
82  Cornell  L.  Rev.  1 123  (1997).  Indeed,  Hayek  in  his  later  work  attacks  Langdellian  versions  of 
autonomous  conceptualism.  See  Hayek,  Law,  Legislation  and  Liberty,  supra  note  4,  at  1 05-06. 


62  INDIANA  LAW  REVIEW  [Vol.  36:57 


uncontroversially  derived  from  abstract  concepts,  and  the  law  is  unlikely  ever  to 
achieve  a  state  of  internal  consistency. 

Nevertheless,  I  wish  to  offer  a  partial  defense  of  autonomous  conceptual  ism. 
My  initial  point  is  that  a  substantial  degree  of  conceptualism  is  inescapable  in 
law,  and  a  substantial  degree  of  conceptual istic  argument  is  evident  in  law. 
Conceptualism  is  inescapable  because  one  does  not,  contrary  to  the  view  of  some 
realists,  approach  facts  without  reference  to  concepts  and  expect  to  do  anything 
intelligible.^'  Concepts  are  essential  to  thought  about  and  evaluation  of  facts; 
recognition  of  this  fact  should  lead  to  a  preference  for  making  one's  concepts 
explicit.  Moreover,  conceptualism  is  normatively  essential.  The  nominalist's 
rejection  of  conceptual  ordering  generates  radical  case  specific  decision:  if  no 
two  cases  are  sufficiently  alike  to  justify  a  concept  or  rule  encompassing  them, 
there  can  be  no  such  concept  or  rule.  This  is  a  formula  for  rule  by  arbitrary 
prejudice,  not  law. 

That  there  is  a  substantial  degree  of  conceptual  istic  argument  in  law  is 
evident  not  only  in  any  casual  reading  of  appellate  opinions,  but  also  in 
contemporary  legal  theory.  Dworkin,  in  substituting  "equality"  for  "liberty," 
"fit"  for  "deduction"  and  "moral  philosophy"  for  "existing  case  law"  may  be 
demonstrating  a  more  sophisticated  technique  than  Langdell,  but  his  remains  a 
species  of  conceptualism.^^  Neoclassical  economic  analysis  of  law  is  obviously 
a  formalist  enterprise  in  its  technique:  through  deduction  from  the  rationality  and 
scarcity  postulates  it  generates  hypotheses,  which  hypotheses  are  then  formulated 
as  legal  rules.  True,  the  object  of  this  enterprise  is  consequential  ist:  it  is  not,  or 
is  not  supposed  to  be,  undertaken  as  an  act  of  fidelity  to  rationality  and  scarcity, 
but  as  an  instrument  for  identifying  social  advantage  understood  as  efficiency  .^^ 
On  the  other  hand,  to  the  extent  that  its  hypotheses  are  unverified  or  unverifiable, 
it  operates  as  formalism  in  precisely  the  sense  that  it  exhibits  a  strict  fidelity  to 
rationality  and  scarcity.^"*  What,  of  course,  distinguishes  these  examples  from 
classical  autonomous  conceptualism  is  that  neither  adopt  purely  legal  materials 
as  bases  for  their  conceptualism. 

A  second  point  I  wish  to  make  in  defense  of  autonomous  conceptualism  is 
that  the  debate  between  formalists  and  realists  entails,  at  bottom,  a  striking 
difference  in  perspective  over  the  role  of  law  and  the  competence  of  law  givers 
and  appliers.  Consider  in  particular  the  formalist  claim  that  legal  particulars  are 
derived  from  and  bound  by  preexisting  concepts  and  the  realist  claim  that  law  is 
an  instrument  for  achieving  social  purposes. 


21.  See  L.L.  Fuller,  American  Legal  Realism,  82  U.  PA.  L.  REV.  429, 443-47  (1934). 

22.  E.g.,  Ronald  Dworkin,  A  Matter  of  Principle  (1985);  Ronald  Dworkin,  Law's 
Empire  ( 1 986);  Ronald  Dworkin,  In  Praise  of  Theory,  29  ARIZ.  ST.  L.J.  353  (1 997).  See  Richard 
Posner,  The  Problematics  of  Moral  and  Legal  Theory  92- 1 20  ( 1 999)  (criticizing  Dworkin 's 
moral  conceptualism). 

23 .  Posner,  Overcoming  Law,  supra  note  5,  at  1 7- 1 9. 

24.  A  common  complaint  leveled  at  economic  analysis  is  that  it  is  insufficiently  supported 
by  empirical  evidence.  I  would  argue  that,  even  where  supported,  the  support  is  often  ambivalent, 
subject  to  challenge  or  otherwise  inconclusive.  See  infra  notes  130-37  and  accompanying  text. 


2003]  LEGAL  FORMALISM  63 


I  will  approach  these  claims  through  an  example.  1  think  it  fair  to  say  that  a 
limited,  bargain  view  of  contract,  a  view  requiring  exchange  of  consideration  to 
achieve  legal  enforceability,  was  a  formalist  notion.^^  The  effect  of  the  notion, 
consistently  applied,  was  to  deny  enforcement  to  many  promises  and,  in 
particular,  to  largely  deny  legal  protection  to  reliance  interests.  These 
consequences  followed  from  a  derivation  of  particular  rules  from  the  concept  of 
bargain.^^  By  contrast,  realist  and  post-realist  contract  law  either  rejects  or 
extends  the  bargain  principle  so  as  both  to  enforce  more  promises  and  to  provide 
a  measure  of  protection  to  reliance  interests.^^  It  does  so,  in  realist  fashion,  by 
contending  that  the  purposes  of  the  bargain  principle  are  better  served  by 
expanding  or  ignoring  it,  or  by  contending  that  the  harms  generated  by  inducing 
reliance  are  worthy  of  legal  protection^^ 

At  one  level  of  analysis  this  example  illustrates  the  distinction  between  a 
rigid  deduction  of  legal  result  from  abstract  concept  in  formalist  law  and  the 
treatment  of  law  as  a  purposive  instrument  for  achieving  ends  (for  example,  the 
end  of  encouraging  exchange)  in  realist  and  post-realist  law.  Consider,  however, 
a  further  level:  the  formalist's  adherence  to  the  bargain  principle  served  the  end 
of  freedom  ^o/w  legal  enforcement  of  promises,  that  is,  freedom  from  contract. 
The  realist's  position  serves  the  end  of  freedom  to  contract  in  the  sense  that  it 
facilitates  the  practice  of  effective  promise  making.  The  costs  of  the  realist's 
position,  however,  are  that  it  requires  a  substantially  greater  role  for  the 
governmental  functionary  known  as  the  judge  and  relies  upon  a  questionable 
assumption  about  the  competence  of  that  judge,  for  enforcement  of  promises 
beyond  the  original  limits  of  the  bargain  principle  requires  either  a  difficult 
empirical  inquiry  into  the  seriousness  of  an  often  ambiguous  promise  or  the 
imposition  of  a  tort-like  obligation  on  the  basis  of  the  court's  perception  of 
proper  behavior.^^  Gilmore,  recognizing  this,  declared  "The  Death  of 
Contract."^^  My  difficulty,  not  Gilmore's,  with  the  expansion  of  enforceable 
promise  is  that  it  assumes  a  greater  competence  in  the  judge,  or  judge  and  jury, 
than  I  think  warranted.^'  To  the  extent  that  what  is  in  issue  is  what  was  meant  or 


25.  W.  David  Slawson,  Binding  Promises,  The  Late  20th  Century  Reformation  of 
Contract  Law,  ch.  1  (1996);  Melvin  Aron  Eisenberg,  The  Principles  of  Consideration,  67 
Cornell  L.  Rev.  640  (1982). 

26.  Eisenberg,  supra  note  25,  at  641-56. 

27.  E.g.,  Lon  Fuller  &  William  Perdue,  Jr.,  The  Reliance  Interest  in  Contract  Damages:  2, 
46  Yale  L.J.  373,  418-20  (1937). 

28.  Eisenberg,  supra  note  25,  at  641-56.  See  Richard  Posner,  Gratuitous  Promises  in  Law 
and  Economics.  65  J.  LEGAL  STUD.  41 1  (1977). 

29.  Jay  Feinman,  Promisory  Estoppel  and  Judicial  Method,  97  Harv.  L.  Rev.  678,  712-16 
(1984). 

30.  Grant  Gilmore,  The  Death  of  Contract  ( 1 974). 

31.  Cf.  id.  at  52-54  (explaining  contradiction  between  bargain  theory  of  contract  and  absolute 
liability  potentially  as  effort  to  limit  litigation);  Richard  Craswell,  Offer,  Acceptance  and  Efficient 
Reliance,  48  Stan.  L.  Rev.  48 1 ,  544-53  ( 1 996)  (recognizing  problems  of  unpredictable  results  from 
case  by  case  assessments  of  efficient  reliance,  but  ultimately  rejecting  bright  line  rule  alternative). 


64  INDIANA  LAW  REVIEW  [Vol.  36:57 


reasonably  understood,  the  highly  stylized,  long  after  the  fact  and  frankly  largely 
bizarre  performance  art  we  call  the  trial  is  an  implausible  procedure  for 
determining  that  question.  To  the  extent  that  the  issue  is  one  of  the  relative  costs 
and  benefits,  the  notion  that  these  can  be  quantified  and  compared  "objectively" 
after  the  fact  strikes  me  as  absurd.^^ 

My  point  is  this:  formalist  conceptualism  served  the  end  of  limiting  the 
scope  of  law  in  the  sense  that  it  limited  occasions  on  which  legal  functionaries 
would  assess  conduct  and  therefore  occasions  on  which  persons  would  be  called 
upon  to  justify  their  actions  before  such  functionaries.  The  realist  and  post- 
realist  ambition,  by  contrast,  is  the  expansion  of  these  occasions.  This  should  not 
be  surprising;  it  is  inherent  in  the  anti-formalist's  treatment  of  law  as  an 
instrument  for  achieving  social  purposes.  That  treatment  postulates  a  collective 
purpose  or  collectively  determined  end  state  as  an  objective,  an  organic 
beneficiary  of  this  end-state  and  someone,  presumably  the  legal  functionary,  as 
the  formulator  and  implementor  of  the  objective."  The  obvious  questions,  ones 
I  will  return  to  at  the  end  of  this  essay,  are  whether  there  is  an  adequate  means 
of  establishing  any  such  objective  and  whether  any  such  legal  functionary  can 
claim  sufficient  competence  in  implementation. 

Before  leaving  the  matter  of  autonomous  conceptualism,  I  want  to  return  to 
the  third  objection  to  it,  the  notion  that  social  practice,  rather  than  abstract 
formalist  concepts  should  govern  law.  I  wish  to  make  two  points  about  this 
claim:  First,  it  is  not  apparent,  or,  at  least,  as  apparent  as  realists  in  Llewellyn's 
camp  believed  it  to  be,  that  formalist  concepts  are  divorced  from  social  practice. 
Second,  direct  resort  to  social  practice  is  itself  fraught  with  difficulties. 

I  begin  by  asking  where  formalist  concepts  come  from.  In  Langdellian 
classical  formalism  they  came  from  existing  case  law:  the  formalist  induced  them 
from  the  practices  of  the  courts.^"*  Where,  however,  did  the  practices  of  the 
courts  come  from?  Langellians  apparently  didn't  ask  themselves  this  question, 
but  let  me  ask  it.  One  possibility  is  that  it  came  from  some  well  worked  out 
ideology  or  moral  theory,  so  the  courts  were  following  the  precepts  of  a 


32.  The  chief  problem  with  such  an  objective  comparison  is  the  subjectivity  of  cost.  James 
Buchanan,  Cost  and  Choice:  An  Inquiry  in  Economic  Theory  (1969);  F.  A.  Hayek, 
Economics  and  Knowledge,  in  F.  A.  HAYEK,  INDIVIDUALISM  AND  ECONOMIC  ORDER  33(1 948).  For 
discussions  of  the  implications  of  subjectivity,  see,  e.g.,  Gary  Lawson,  Efficiency  and  Individualism, 
42  Duke  L.J.  53  (1992);  Gregory  Keating,  Reasonableness  and  Rationality  in  Negligence  Theory, 
48  Stan.  L.  Rev.  311,  337-41,  367-73  (1996).  For  further  discussion  of  this  point,  see  infra  note 
132  and  accompanying  text. 

33.  The  contrasts  between  classical,  perhaps  formalist  law  and  the  post-New  Deal 
administrative  state  are  well  depicted  in  the  following:  Norman  Barry,  The  Classical  Theory  of 
Law,  73  Cornell  L.  Rev.  283  (1 988);  Donald  Gjerdingen,  The  Politics  of  the  Coase  Theorem  and 
Its  Relationship  to  Modern  Legal  Thought,  35  BUFF.  L.  REV.  871  (1986);  and  Jerry  Mashaw, 
"Rights"  in  the  Federal  Administrative  State,  92  YALE  L.J.  1 129  (1983);  cf  BRUCE  ACKERMAN, 
Private  Property  and  the  Constitution  ( 1 977)  (discussing  ordinary  observer  versus  scientific 
policymaker). 

34.  Grey,  supra  note  10,  at  24-27. 


2003]  LEGAL  FORMALISM  65 


Nineteenth  Century  Ronald  Dworkin.  Herbert  Spencer  is,  I  suppose,  a 
candidate.^^ 

That  is  a  possibility,  but  let  me  postulate  a  second  one:  "intuition."  By 
intuition  I  mean  a  set  of  often  tacit  commitments,  a  moral  sense,  grounded  in  the 
"shared  morality  of  a  particular  society."^^  I  think  this  a  possibility  for  the 
obvious  reason  that  common  law  judges  of  the  formalist  era  were  the  products 
of  the  American  society  in  which  they  worked.  It  would  be  surprising  in  the 
extreme  if  they  came  up  with  conclusions,  including  conclusions  consistent  with 
the  principles  formalists  then  induced  from  these  conclusions,  alien  to  the 
conventional  understandings  and  traditions  of  that  society. 

This  does  not  mean  that  formalist  adjudications  enjoyed  or  could  enjoy 
universal  support  from  the  members  of  American  society,  even  in  the  formalist 
era.  It  means  only  that  the  concepts  had  some  substantial  relation  to  practice. 
For  example,  the  concept  of  bargain  could  be  inferred  from  the  actual  practice  of 
exchange,  and,  as  a  further  example,  the  distinction  between  act  and  omission, 
surely  a  part  of  common  moral  ity,^^  would,  in  contrast  to  strictly  consequential  ist 
recommendations,  be  reflected  in  law.  Nor  does  it  mean  that  formalist  concepts 
or  the  rules  derived  from  them  tracked  in  detail  actual  norms  or  practices.  They 
would  not  do  so  for  the  reason  that  norms  are  inevitably  and  necessarily  distorted 
if  incorporated  in  law.  This  is  because  the  addition  of  legal  enforcement  to  non- 
legal  means  of  norm  enforcement  will  alter  the  cost/benefit  calculation  of  the 
actors  subject  to  the  norms,  because  the  mere  fact  of  legal  enforcement  alters  the 
meaning  of  norms  and  because  considerations  of  judicial  capacity  and 
administrative  cost  will  often  dictate  alterations  of  norms.^* 


35.  Professor  Grey  rejects  this  possibility.  Id.  at  33-35.  Compare  HERBERT  Hovenkamp, 
Enterprise  and  American  Law  1 836-3  7, 1 74-75  ( 1 98 1 )  (rejecting  connection  between  classical 
formalists  and  Lochner),  with  MORTON  HORWITZ,  THE  TRANSFORMATION  OF  AMERICAN  LAW  1 870- 
1960  (1992)  (generally  making  this  connection).  See  NEIL  DuxBURY,  Patterns  of  American 
Jurisprudence  25-32  (1995)  (treating  Spencer  as  source  of  judicial  formalism). 

36.  Professor  Grey  raises  but  rejects  this  possibility.  Grey,  supra  note  10,  at  23-24. 
Nevertheless,  it  seems  to  me  both  that  the  classical  formalist's  effort  to  systemize  the  common  law 
would  necessarily  incorporate  social  custom  given  an  assumption  that  common  law  rests  upon 
custom  or  convention.  E.g.,  Melvin  Aron  EiSENBERG,  The  Nature  of  the  Common  Law,  Ch. 
4  (1988);  A.W.B.  SIMPSON,  The  Common  Law  and  Legal  Theory,  in  OXFORD  ESSAYS  IN 
Jurisprudence  77-79  (A.W.B.  Simpson  ed.  1973).  Cf.  Grey,  supra  note  10,  at  30  (evolutionary 
views  of  classical  formalists  rested  in  part  on  historical  school  and  therefore  upon  evolving  custom). 
Moreover,  formalism  more  generally  understood  entails  claims  to  roots  in  the  historical  experience 
of  a  people  or  nation.  M.  H.  Hoeflich,  Law  and  Geometry:  Legal  Science  from  Leibniz  to  Langdell, 
30  Am.  J.  Legal  Hist.  95  ( 1 986).  To  the  extent  that  the  Hayek  of  Rules  and  Order,  supra  note 
4,  can  be  said  to  have  adopted  the  common  law  preferences  of  Leoni,  perhaps  his  "formalism" 
entailed  an  exercise  of  "finding  law"  in  "existing  social-institutional  arrangements."  See  James 
Buchanan,  Good  Economics,  Bad  Law,  60  Va.  L.  Rev.  483,  488-89  (1974). 

37.  Leo  Katz,  III  Gotten  Gains:  Evasion,  Blackmail,  Fraud  and  Kindred  Puzzles  of 
the  Law  (1996). 

38.  E.g. ,  Randy  E.  Bamett,  The  Sounds  of  Silence:  Default  Rules  and  Contractual  Consent, 


66  INDIANA  LAW  REVIEW  [Vol.  36:57 


Notice  that  these  points  raise  a  question  about  the  desirability  of  Llewellyn's 
program,  the  program  of  a  more  direct  and  concrete  incorporation  of  norms  in 
law,  than  is  suggested  by  my  intuitionist  account  of  formalist  principle.  A 
substantial  reason  for  such  incorporation  is  that  promises  greater  degrees  of 
predictability — surely  a  formalist  value.^^  But,  if  incorporation  is  inevitably  also 
distortion,  the  incorporation  strategy  is  problematic.  Indeed,  it  may  be  that  a 
legal  takeover  of  the  norms  and  understandings  of  social  practice  is  not  what 
rational  persons  would  prefer.  Professor  Bernstein  has  produced  at  least 
evidence  that  they  prefer  that  a  rigid,  formal  and  even  inequitable  law  stand 
outside  these  understandings  as  a  last  resort,  leaving  adjustment,  interpretation 
and  enforcement  to  non-legal  mechanisms  of  interaction. '*^  This  is  in  part 
because  legal  enforcement  is  more  costly  than  its  alternative,  in  part  because 
legal  enforcement  undermines  the  alternatives  and  in  part  because  even  the  best 
judges  are  not  competent  discoverers  of  the  complexities  and  often  tacit 
dimensions  of  social  practice.  Alternatively,  it  is  because  norms  are  often  local 
affairs  and  therefore  differ  between  local  communities."*'  Inter-local  interactions 
therefore  require  resolutions  that  supplant  competing  local  norms. 

Llewellyn's  critique  of  formalism  may  be  understood  as  the  claim  that 
formalism  divorces  law  from  life,  rendering  law  an  alien,  unpredictable,  and,  by 
reference  to  the  baseline  of  social  practice,  arbitrary  force.'*^  Perhaps,  but  there 
is  another  way  of  looking  at  this  matter.  The  question  is  what  version  of  law,  the 
formalist  version  or  the  anti-formalist,  instrumental  version,  poses  the  greatest 
threat  to  life  outside  it?  Llewellyn's  attempt  to  protect  life  from  law  through 
incorporation  of  life's  norms  into  law  can  be  seen  as  in  fact  a  threat  to  life  if  the 


78  Va.  L.  Rev.  821,  908  n.231  (1992);  Charles  Goetz  &  Robert  Scott,  The  Limits  of  Expanded 
Choice:  An  Analysis  of  the  Interactions  Between  Express  and  Implied  Contract  Terms,  73  Cal.  L. 
Rev.  26 1 ,  275-76  ( 1 985);  Richard  Pildcs,  The  Destruction  of  Social  Capital  Through  Law,  1 44  U . 
Pa.  L.  Rev.  2055  (1996);  Alan  Schwartz,  Relational  Contracts  in  the  Courts:  An  Analysis  of 
Incomplete  Agreements  and  Judicial  Strategies,  2 1  J.  LEGAL  STUD.  27 1  ( 1 992);  Alan  Schwartz,  The 
Default  Rule  Paradigm  and  the  Limits  of  Contract  Law,  3  S.  Cal.  Interdisc.  L.J.  389,  404-06 
(1993). 

39.  Fuller,  supra  note  2 1 ,  at  43 1  -38  (describing  Llewellyn's  views). 

40.  See,  e.g.,  Lisa  Bernstein,  Merchant  Law  in  a  Merchant  Court:  Rethinking  the  Code 's 
Search  for  Immanent  Business  Norms,  144  U.  PA.  L.  Rev.  1765  (1996);  Lisa  Bernstein,  The 
Questionable  Empirical  Basis  of  Article  2's  Incorporation  Strategy:  A  Preliminary  Study,  66  U. 
Chl  L.  Rev.  710  (1999)  [hereinafter  Bernstein,  Questionable  Empirical  Basis];  David  Charny, 
Non-Legal  Sanctions  in  Commercial  Relationships,  104  Harv.  L.  REV.  373  (1990);  Edward  Rock 
&  Michael  Wachter,  The  Enforceability  of  Norms  and  the  Employment  Relationship,  144  U.  Pa. 
L.  REV.  1913(1 996);  Robert  E.  Scott,  The  Case  for  Formalism  in  Relational  Contract,  94  Nw.  U. 
L.  REV.  847  (2000). 

41.  Bernstein,  Questionable  Empirical  Basis,  supra  note  40;  David  Charny,  The  New 
Formalism  in  Contract,  66  U.  Chl  L.  Rev.  842  (1999);  Richard  A.  Epstein,  Confusion  About 
Custom:  Disentangling  Informal  Customs  from  Standard  Contractual  Provisions,  66  U.  Chi.  L. 
Rev.  821(1999). 

42.  Charny,  supra  note  4 1 ,  at  843-44. 


2003]  LEGAL  FORMALISM  67 


distorting  effects  of  legal  enforcement  are  emphasized.  Perhaps  ironically, 
autonomous  conceptualism,  divorced  from  life  but  not  wholly  alien  to  it  if  my 
conjectures  about  its  intuitionist  base  are  entertained,  is  a  better  candidate  for 
protecting  life  from  law.  At  least  this  may  be  so  if  formalist  law  is  limited  in 
ways  that  leave  empty  spaces  for  life.  I  postpone  the  question  whether  this  is 
possible  for  a  moment. 

Let  me  address,  briefly,  one  last  criticism  of  autonomous  conceptualism  not 
yet  noted.  It  is  that  formalism  is  impractical  in  a  complex,  heterogeneous  and 
dynamic  society.  This  claim  is  typically  made  with  respect  to  the  United  States 
and  is  therefore  typically  accompanied  by  a  concession  that  formalism  operates, 
perhaps  successfully,  elsewhere.^^  I  have  three  responses  to  these  lines  of 
argument.*"* 

First,  while  it  is  surely  the  case  that  change  occurs  and  may  require  change 
in  law,  the  issue  of  change  is  far  more  important  in  an  anti-formalist,  purposive 
and  instrumentalist  conception  of  law  than  within  a  formalist  conception.  Law, 
in  the  former,  is  an  instrument  of  planning  on  the  assumption  that  law 
pervasively  directs  activity.  Law,  conceived  as  having  this  degree  of 
responsibility  for  society  is  easily  viewed  as  necessarily  dynamic  in  a  dynamic 
society.  This,  however,  is  not  the  role  of  law  in  the  formalist  conception,  or,  at 
least,  in  the  formalist  conception  I  wish  to  defend.  If  society  operates,  if  not 
quite  independently  of  law,  at  least  independently  of  particularized  direction  by 
law,  social  change  does  not  imply  an  urgent  need  for  legal  change. 

Second,  what  is  often  meant  by  change  is  not  change  in  fundamental  social 
conditions  or  in  technology,  but  change  in  intellectual  fashion.  Thus,  the  move 
from  a  formalist  common  law  to  social  engineering  in  the  progressive  and  New 
Deal  eras  was  predicated  in  part  on  the  idea  that  social  conditions  had  changed, 
requiring  new  and  different  law.  Yet  it  has  become  apparent  that  large  aspects 
of  this  new  and  different  law  were  substantial  mistakes,  requiring  the  dismantling 
of  much  of  the  legislation  generated  in  these  eras."*^ 

Finally,  when  anti-formalists  invoke  the  facts  of  complexity  against 
formalism  they  assume  that  the  proper  response  to  these  phenomena  is  to  manage 
them.  This  is  not  surprising,  it  reflects  a  rationalist  bias  to  the  effect  that  greater 
complexity  requires  greater  measures  of  control  in  service  of  articulated 
objectives.  There  is,  however,  an  alternative  response  to  complexity.  It  is  that 
complexity  requires  less,  not  more  managerial  direction.  Passivity  in  the  form 
of  complexity  is  counterintuitive  to  the  rationalist,  but  it  is  obviously  supportable 


43 .  E.g. ,  POSNER,  supra  note  22,  at  264-65. 

44.  I  rely  in  what  follows  largely  on  Richard  Epstein,  The  Static  Conception  of  the  Common 
Law,  9  J.  Legal  Stud.  253  (1980). 

45 .  E.g.,  Pos^4ER,  Overcoming  Law, supra  note  5  at  220-2 1 .  Cf.  Cass  R.  Sunstein,  After 
THE  Rights  Revolution,  Re-conceiving  the  Regulatory  State  ch.  3  (1990)  (recounting 
regulatory  failure  from  pro-regulatory  perspective).  Critiques  of  Progressive  Era,  New  Deal  and 
Post-New  Deal  regulation  are  of  course  legion.  See  The  Regulated  Economy:  An  Historical 
Approach  to  Political  Economy  (Claudia  Goldin  &  Gary  Libecap  eds.,  1 994);  George  Stigler, 
The  Theory  of  Economic  Regulation,  2  BELL  J.  ECONOMICS  3  (1971). 


68  INDIANA  LAW  REVIEW  [Vol.  36:57 


both  by  reference  to  theories  of  spontaneous  order  and  by  evidence  in  experience 
that  attempted  management  of  complexity  fails/^ 

II.  Formalism  AS  Rules 

Another  understanding  of  formalism  is  that  the  law  consists,  or  should 
consist  of  rules.'*^  The  standard  argument  favoring  rules  rests  upon  an  appeal  to 
rule  of  law  values:  Rules  enable  those  subject  to  them  to  predict  the  legal  effect 
of  their  behavior  and  therefore  enable  coordination;  rules  preclude  discretion  and 
enable  a  claim  that  we  are  governed  by  law,  not  men;  rules  ensure  that  law  is 
prospective,  not  retroactive.'*^ 

Rules  should  be  distinguished  from  principles,  standards,  or  rules  of  thumb 
in  that  rules  direct  particular  legal  conclusions  or  are  more  determinate  than  these 
alternatives.  This  implies  strict  application:  the  judge  or  other  legal  actor 
committed  to  rules  is  not  free  to  make  a  decision  on  the  basis  of  what  seems  best 
under  the  circumstances,  nor  is  she  free  to  ignore  the  rule  where  following  the 
rule  would  produce  a  result  she  deems  absurd,  nor  is  she  free  to  base  her  decision 
on  the  rule's  purpose  where  the  rule's  directive  in  the  circumstances  of  the  case 
seems  to  her  inconsistent  with  that  purpose."*^ 

Recall  that  formalism,  understood  as  an  autonomy  claim,  is  non-  or  anti- 
instrumental,  so  it  may  be  understood  as  rejecting  the  idea  that  law  should  be 
applied  so  as  to  achieve  its  purposes.  This  may  seem  odd.  Most,  if  not  all  legal 
rules  can  be  assigned  plausible,  functional  purposes,  and  many  can  be  plausibly 
said  to  serve  such  purposes.  It  is  nevertheless  obviously  possible  to  seek  to  apply 
such  rules  in  particular  cases  without  reference  to  such  purposes.  A  strong 
version  of  a  rule  utilitarian  perspective  and  rejection  of  an  act  utilitarian 
perspective  suggests  as  much.^° 

An  implication  of  devotion  to  rules  is  that  a  rule's  addressee  may  with 
impunity  circumvent  the  rule  though  strict  compliance  with  it,  as  by  engaging  in 
the  evil,  or  a  substantially  similar  evil,  targeted  by  a  rule  while  nevertheless 
simultaneously  adhering  to  the  rule.^^  Formalism  may  be  understood  as  a  theory 
of  law  that  tolerates  this  activity.  Thus,  the  form  behavior  takes,  not  the 
substantive  nature  of  the  behavior  or  the  consequences  of  the  behavior,  is,  for  the 
formalist,  controlling.^^  Indeed,  a  prominent  feature  of  classical  formalism  was 
that  its  adherents  openly  advocated  adherence  to  principle  and  rule  even  where 


46.  E.g. ,  Hayek,  supra  note  32,  at  1 1 9-208;  Michael  Oakeshott,  Rationalism  In  Politics 
5-42(1962). 

47.  E.g.,  Larry  Alexander,  "With  Me,  It 's  All  er  Nuthin  ":  Formalism  in  Law  and  Morality, 
66  U.  Chi.  L.  Rev.  530  (1999);  Schauer,  supra  note  6. 

48.  Eg ,  Antonin  Scalia,  The  Rule  of  Law  as  a  Law  of  Rules,  56  U.  Chi.  L.  Rev.  1 1 75  ( 1 989). 

49.  see  frederick  schauer,  playing  by  the  rul-es,  a  philosophical  examination  of 
Rule-Based  Decision-Making  in  Law  and  in  Life  96-100  (1991). 

50.  See  John  Rawls,  Two  Concepts  of  Rules,  64  PHIL.  Rev.  3  (1955). 

5 1 .  The  doctrine  of  independent  legal  significance  in  corporate  law  is  an  example.   See 
Hariton  v.  Arco  Electronics,  Inc.,  182  A.2d  22  (Del.  Ch.  1962),  affd,  188  A.2d  123  (Del.  1963). 

52.  See  Katz,  supra  note  37. 


2003]  LEGAL  FORMALISM  69 


they  conceded  that  the  result  would  be  unjust,  unfair  or  absurd."  This  harsh 
notion  is  traceable  to  the  very  nature  of  the  idea  that  the  law  consists  of  rules  and 
compliance  with  law  consists  of  following  rules.  If  rules  are  suspended  when 
they  generate  absurd  results,  they  are  no  longer  rules.^"* 

Formalist  rule  worship  may  also  be  understood  as  entailing  a  theory  of 
adjudication,  specifically,  "mechanical  adjudication.""  The  theory  is  that  rules 
may  be  applied  to  facts  mechanically:  rules  reference  sets  of  facts,  so  when  the 
relevant  set  appears,  the  rule  is  applied  and  when  it  does  not  the  rule  is  not 
applied.  This  conception  is  of  course  often  attributed  to  lay  persons  and  to 
entering  law  students,  and  when  so  attributed  is  always  accompanied  by  the  view 
that  is  hopelessly  naive.  It  is,  of  course,  often  also  attributed  by  judges  to 
themselves;  judges  often  justify  their  decisions  on  the  basis  that  rules  compel 
those  decisions. 

The  formalist  adjudicative  theory  thus  depicted  entails  a  deductive 
procedure.  It  is  deductive  in  the  sense  that  a  rule  as  a  major  premise  and  a  set  of 
facts  as  a  minor  premise  generates  a  right  answer.  A  formalist  legal  opinion  is 
one,  then,  that  justifies  the  result  reached  by  employing  a  syllogism  of  this  type. 

The  standard  critiques  of  formalist  rule  worship  may  be  divided  into  two 
basic  categories.  First,  rules  have  substantial  defects.^^  As  they  are  inevitably 
over-  and  under-  inclusive,  they  fail  to  achieve  their  purposes  where  these 
purposes  would  be  furthered  by  applying  the  rule  to  circumstances  that  the  rule's 
language  does  not  reach  or  would  be  furthered  by  not  applying  the  rule  in 
circumstances  the  rule's  language  does  reach.  Rules  can  produce  absurd  results 
in  some  circumstances.  Absurd,  that  is,  in  that  some  value  or  norm  would  be 
violated  by  application  of  the  rule,  or  some  desired  result  would  not  be  reached 
if  the  rule  were  applied.  Rules  suppress  facts  by  rendering  only  some  facts 
relevant  to  the  rule,  while  facts  left  out  by  the  rule  are,  by  virtue  of  values, 
objectives  or  expectations,  important.  Anti-formalists  will  therefore  think  it 
desirable  that  judges  refuse  to  apply  rules  or  to  stretch  rules  to  serve  their 
purposes,  that  they  decline  to  apply  rules  where  application  produces  absurd 
results,  and  that  they  formulate  standards,  rather  than  rules.  Standards  enable 
contextual ized  assessment  and  judgment,  taking  into  account  more  facts  and 
cirpumstances,  and  permit  direct  application  of  purpose  and  principle  without  the 
mediation  of  a  rule.^^ 


53.  Christopher  Columbus  Langdell,  Summary  of  the  Law  of  Contracts  20-21 
( 1 880),  quoted  in  Grey,  supra  note  10  at  3,  15. 

54.  E.g.,  Alexander;  supra  note  47,  at  53 1,  547,  553-55;  SCHAUER,  supra  note  49,  at  1 1 6. 

55 .  Cf.  Roscoe  Pound,  Mechanical  Jurisprudence,  8  COLUM.  L.  REV.  605  ( 1 908)  (objecting 
to  what  I  have  here  termed  autonomous  conceptualism). 

56.  See.  e.g. ,  POSNER,  supra  note  2,  at  44-49;  SCHAUER,  supra  note  49,  at  1 00-02;  SUNSTEIN, 
supra  note  5,  at  121-35. 

57.  PoSNER,  supra  note  2,  at  44-49;  cf.,  SUNSTEIN,  supra  note  5,  at  136-47  (balancing 
"factors"  as  alternative  to  rules).  On  the  rules  versus  standards  debate  generally,  see,  for  example, 
Alexander  Alienikoff,  Constitutional  Law  in  the  Age  of  Balancing,  96  YALE  L.  J.  943  ( 1 987);  John 
Calfee  &  Richard  Craswell,  Some  Effects  of  Uncertainty  on  Compliance  With  Legal  Standards,  70 


70  INDIANA  LAW  REVIEW  [Vol.  36:57 


The  second  basic  critique  is  that  adjudication  by  reference  to  rule — the 
mechanical  adjudication  generally  attributed  to  classical  formalism — is  highly 
implausible.^*  Adjudication  as  syllogism,  with  the  rule  as  major  premise  and 
facts  as  minor  premise  may  be  that  which  is  expressed  in  a  formalist  decision,  but 
this  expression  covers  up  the  hard  and  problematic  work  that  goes  into  generating 
these  premises.  Rules  cannot  themselves  be  identified  through  deduction,  for 
there  can  be  multiple  and  conflicting  rules  plausibly  invocable.  A  choice  of  rule 
is  therefore  necessary,  and  the  formalist  who  relies  simply  on  syllogism  has 
failed  to  justify  his  choice.  There  are  gaps  among  and  between  rules,  so  the 
formalist  who  pretends  to  apply  a  prior  rule  to  the  gap  has  failed  to  justify  what 
is  in  effect  a  new  rule.  Rules,  particularly  the  legislature's  rules  we  call  statutes, 
often  employ  words  with  no  clear  referents,  so  the  formalist  who  insists,  for 
example,  that  the  words  "manufactured  goods"  apply,  by  virtue  of  the  meaning 
of  these  words,  to  the  fact  of  an  "eviscerated  chicken"^^  has  again  failed  to 
justify  his  decision.^^ 

These  failures  of  justification  are  failures  of  formalist  adjudication:  the 
constrained,  mechanical,  or  deductive  technique  attributed  to  formalism  cannot 
work.  We  may  add  to  these  problems  the  questionable  character  of  facts  and  of 
factual  findings.^'  Our  means  of  resolving  factual  disputes  are  weak  and  often 
distorted  both  by  our  processes  and  by  human  frailties.  The  facts  we  find,  even 
absent  dispute,  are  at  best  partial  under  a  rule  regime;  much  that  is  arguably 
relevant  is  left  out.  The  anecdotal  facts  of  particular  disputes  are  not  the 
systematic  facts  necessary  to  formulating  social  policy,  even  if  expressed  in 
rules. 


Va.  L.  Rev.  965  (1984);  Richard  Epstein,  The  Risks  of  Risk/Utility,  48  Ohio  St.  L.J.  469  (1987); 
Jason  Scott  Johnston,  Uncertainty,  Chaos,  and  The  Torts  Process:  An  Economic  Analysis  of  Legal 
Form,  76  CORNELL  L.  REV.  341  (1991);  Louis  Kaplow,  Rules  Versus  Standards:  An  Economic 
Analysis,  42  DUKE  L.J.  557  (1992);  Duncan  Kennedy,  Form  and  Substance  in  Private  Law 
Adjudication,  89  Harv.  L.  Rev.  1685  (1976);  Pierre  Schlag,  Rules  and  Standards,  33  UCLA  L. 
Rev.  379(1985);. 

58.  Benjamin  Cardozo,  The  Nature  of  the  Judicial  Process  1 1 2- 1 5  ( 1 92 1 );  Posnter, 
supra  note  2,  at  42-61 ;  Felix  Cohen,  The  Ethical  Basis  of  Legal  Criticism,  4 1  Yale  L.J.  201 , 2 1 5- 
19  (1931);  Duncan  Kennedy,  Legal  Formality,  2  J.  LEGAL  STUD.  351  (1973);  Joseph  Singer,  The 
Player  in  the  Cards:  Nihilism  and  Legal  Theory,  94  YALE  L.J.  509  ( 1 988). 

59.  Cf  Interstate  Commerce  Comm'n  v.  Krobin,  1 1 3  F.  Supp.  599  (N.D.  Iowa  1 953),  afd, 
212  F.2d  553  (8th  Cir.  1954)  (presenting  these  facts  and  issue,  but  not  necessarily  displaying  this 
reasoning). 

60.  Michael  Moore,  The  Semantics  of  Judging,  54  S.  Cal.  L.  Rev.  151  (1981).   Another 
argument  is  that  words  have  no  core,  linguistic  meanings.   E.g.,  James  Boyle,  The  Politics  of 
Reason:   Critical  Legal  Theory  and  Local  Social  Thought,  133  U.  Pa.  L.  Rev.  685  (1985);  Lon 
Fuller,  Positivism  and  Fidelity  to  Law— A  Reply  to  Professor  Hart,  7 1  Harv.  L.  Rev.  630  ( 1 958);. 
The  argument  has  been  demolished  by  Professor  Schauer.  Schauer,  supra  note  49,  at  55-61. 

6 1 .  Jerome  Frank,  Courts  on  Trial  316-21(1 949). 


2003]  LEGAL  FORMALISM  71 


A.  Formalist  Adjudication 

What  may  be  said  in  response  to  these  critiques?  Let  me  begin  in  reverse 
order  by  addressing  the  problem  of  formalist  adjudication,  understood  as  the 
unproblematic  application  of  rules  to  facts.  It  will  turn  out  that  problems  of 
adjudication  are  related  to  the  critique  of  rules,  as  such,  so  my  discussion  of 
adjudication  will  lead  to  discussion  of  that  critique. 

A  typical  and,  I  think,  persuasive  response  to  the  critique  from  the 
impossibility  of  unproblematic  application  is  some  version  of  a  hard  case/easy 
case  dichotomy.^^  The  defense  focuses  upon  the  easy  case  and  observes  that  in 
fact  rules,  including  legal  rules,  are  unproblematically  applied  to  facts  all  the 
time.  Without  contending  that  meaning  resides  in  language  or  that  facts  are 
easily  identified,  most  cases  are  resolved  before  they  ever  enter  the  realm  of 
formal  adjudication  because  in  most  cases  there  is  agreement  about  the  meaning 
of  the  rule,  the  facts  and  the  application  of  rule  to  facts.  It  is  the  hard  case  that 
is  adjudicated,  or  it  is  the  hard  case  that  attracts  an  appeal  and  is  the  subject  of 
interest.  It  is,  therefore,  only  the  hard  case  that  displays  the  problems 
emphasized  by  the  critiques. 

On  this  account,  formalist  "adjudication"  works  most  of  the  time.  In 
particular,  it  works  in  the  hands  of  layman  and  lawyers  outside  of  court  when 
engaged  in  the  activity  of  law  compliance  or  of  Holmesian  prediction  of  what 
judges  will  do  "in  fact."  Realist  critiques  of  formalist  adjudication  thus  betray 
legal  realism's  peculiar  focus  upon,  indeed  fixation  with  the  judge. 

What,  however,  of  the  hard  case?  It  seems  apparent  to  me  that  the  critique 
of  formalist  adjudication  clearly  works  in  some  hard  cases.  In  particular,  it  works 
where  there  is  no  plausibly  applicable  rule  available  to  resolve  a  case,  where  two 
plausibly  applicable  rules  conflict,  and  where  the  rule  in  question  has  no  clear 
referents.^^  Adjudication  in  these  cases  is  indeed  problematic.  A  "grab  bag"  of 
techniques,  perhaps  best  described  in  terms  of  "practical  reason"  must  be  invoked 
to  resolve  the  hard  case,  and  the  formalist  description  of  adjudication  is  an 
inaccurate  depiction  of  the  grab  bag.^  But  this  assumes  that  it  is  formalist 
adjudication,  in  the  sense  of  unproblematic  application  of  rule  to  fact,  that  is 
being  assessed.  What  of  a  formalist  recommendation  that  hard  cases  be  resolved 
so  as  to  become  easy  cases  in  the  future? 

There  is  nothing  in  the  critique  of  formalist  adjudication  that  would  preclude 
such  a  recommendation.  Thus,  the  formalist  confronted  with  a  hard  case  of  the 
type  indicated  may  resolve  it  by  establishing  a  rule  (not  a  standard),  by  seeking 
to  employ  words  with  clear  referents  in  stating  the  rule,  and  by  minimizing  the 


62.  E.g. ,  H.L.A.  Hart,  The  Concept  OF  Law  1 22-32  ( 1 96 1  );Duncan  Kennedy,  A  Critique 
OF  Adjudication  159, 275  (1997);  Schauer,  supra  note  49,  at  192-59;  Sunstein,  supra  note  5, 
at  128-29;  H.L.A.  Hart,  Positivism  and  the  Separation  of  Law  and  Morals,  71  Harv.  L.  Rev.  593 
(1958);  Frederick  Schauer,  Easy  Cases,  58  S.  Cal.  L.  Rev.  399  (1985). 

63.  In  my  view,  "plausibly  applicable"  means  most  locally  applicable.  See  Schauer,  supra 
note  49,  at  188-91.  Thus,  the  case  contemplated  is  one  of  conflicting  local  rules,  not  one  of 
arguable  "conflict"  between  a  local  rule  and  a  more  abstract  or  distant  one. 

64.  POSNER,  supra  note  2,  at  73. 


72  INDIANA  LAW  REVIEW  [Vol.  36:57 


set  of  facts  that  will  be  deemed  relevant  under  the  rule.  The  primary  criterion  for 
resolving  the  hard  case  therefore  becomes  "formulate  that  resolution  that  will 
best  enable  formalist  adjudication  in  the  future."^^  There  are,  of  course, 
institutional  constraints  on  the  ability  of  the  formalist  to  do  these  things.  A 
common  law  judge  is  no  doubt  less  able  to  do  so  than  a  positivist's  sovereign. 
But  it  remains  the  case  that  formalist  adjudication  can  be  understood  as 
prospective  and  programmatic  as  a  conscious  effort  to  turn  today's  hard  case  into 
tomorrow's  easy  case.^ 

There  is  another  category  of  case  said  to  be  "hard"  that  formalists  will  not 
regard  as  hard  in  the  same  sense.  This  is  the  category  of  the  absurd  result  or  of 
application  of  the  rule  not  serving  its  purpose  or  of  the  inapplicability  of  the 
terms  of  the  rule  permitting  the  evil  targeted  by  the  rule.  What  is  hard  about  such 
cases  is  not  a  matter  of  the  rule's  apparent  meaning.  It  is  perfectly  clear  that  the 
rule  means  what  it  says  in  the  context  of  the  facts  presented.  It  is  perfectly  clear 
precisely  because  it  would  otherwise  make  no  sense  to  claim  that  this  meaning 
produces  an  absurd  result  or  fails  to  serve  its  purpose.^^  These  cases  are  hard  not 
because  of  a  question  of  meaning,  but  because  of  a  normative  issue:  should  the 
decision  maker  tolerate  absurd  results  or  results  inconsistent  with  purpose? 

I  think  most  law  professors  and  many  judges  would  answer  "no"  to  this 
question.  Indeed,  one  is  warranted  in  saying  that  contemporary  law  generally 
reflects  this  answer.  I  also  think,  however,  that  there  are  very  good  reasons  for 
an  affirmative  answer.  These  reasons  have  largely  been  supplied  by  others,^^  so 
I  will  merely  summarize  some  of  their  points  and  add  a  word. 

The  basic  thrust  of  the  defense  of  formalist  adjudication  in  hard  moral  cases 
is  that  departures  from  the  known  meaning  of  a  rule  in  such  a  case  undermine, 
or  destroy  the  reasons  for  rules.  These  reasons,  interestingly,  are 
consequentialist  reasons;  they  supply  good  utilitarian  (in  a  broad  sense)  grounds 
for  preferring  rules  over  standards  or  good  instrumental  reasons  for  "ruleness." 
Notice  then,  that  a  defense  of  what  I  have  been  calling  formalist  adjudication 
leads  to  a  defense  of  rules. 

B.  Rules* Function 

Consider  in  particular  the  following,  highly  simplified  summary  of  Professor 
Larry  Alexander's  consequentialist  defense  of  rules:^^  (1)  people  face 
coordination  problems  (they  need  to  know  how  others  will  act  and  what  to  do  in 
the  case  of  disagreement),  (2)  rules  solve  this  coordination  problem  by  supplying 
"authoritative  settlements"  and  do  so  in  ways  superior  to  particularized 
authoritative  direction  in  each  case  of  questioning  what  to  do  because  (3)  the 


65.  See  Scalia,  supra  note  48,  at  1 183-87. 

66.  This,  indeed,  was  Justice  Holmes'  program.  See  Grey,  supra  note  10,  at  44. 

67.  SCHAUER,  supra  note  48,  at  55-62,  213-15. 

68.  See  id.  at  1 58-66;  Alexander,  supra  note  47. 

69.  Alexander,  supra  note  47. 


2003]  LEGAL  FORMALISM  73 


costs  of  more  particularized  modes  of  authoritative  settlement  are  prohibitive.^^ 
There  are,  of  course,  some  necessary  caveats.  Rules,  to  serve  their  function  must 
be  determinate  in  meaning  (indeed  Professor  Alexander  defines  "rule"  by 
reference  to  this  quality)  and  must  be  knowable.^'  They  should  therefore  usually 
be  general  and  few  rather  than  specific  and  many  (as  complexity  undermines 
knowability).^^  Notice  that  rules  are  not  in  Alexander's  (and  for  that  matter,  F. 
A.  Hayek's  similar)  depiction  a  solution  to  the  problem  of  "bad  men,"  persons 
not  motivated  to  do  the  right  thing.  Rather,  they  are  solutions  to  the  problem  of 
ignorance  knowing  what  the  right  thing  to  do  is.^^ 

One  alternative  to  rules,  and  a  form  of  particularized  authoritative  settlement, 
is  "standards."  The  usual  example  of  a  standard,  although  there  are  reasons  to 
think  it  a  bad  example,  is  negligence  failing  to  exercise  the  care  a  reasonable 
person  would  exercise  under  the  circumstances.^'*  Standards  may  be 
distinguished  from  rules  on  the  basis  that  rules  are  determinate  and  standards  are 
not.  The  difficulty  with  standards,  in  Professor  Alexander's  analysis,  is  that  they 
duplicate  the  problems  rules  are  supposed  to  solve.  That  is,  as  standards  are 
indeterminate,  there  will  be  disagreement  about  their  meaning  in  particular  cases; 
they  will  fail  to  inform  us  of  what  to  do.  This  is  not  always  so.  A  reasonable 
person  standard  is  determinate  (and  therefore  a  rule)  if  everyone  or  nearly 
everyone  in  a  community  agrees  about  what  a  reasonable  person  should  do.  But 
the  uncertainty  and  disagreement  that  the  law  is  to  minimalize  are  usually  merely 
duplicated  in  standards. 

If  this  is  so,  it  should  be  clear  why  application  by  reference  to  the  underlying 
"purpose"  of  a  rule  or  refusal  to  apply  a  rule  where  doing  so  produces  absurd 
results  is  "wrong"  and  strict  adherence  to  rules  is  "correct"  from  the  formalist 
perspective:  these  non-  or  anti-formalist  actions  turn  rules  into  standards.^^ 
Adjudication  by  reference  to  purpose  in  preference  to  known  plain  meaning 
resurrects  controversy  over  purpose,  particularly  given  the  possibility  of 
ascending  abstraction  in  characterizing  purpose.^^  Avoidance  of  absurd  result 
assumes  agreement  about  absurdity,  but  there  is  very  often  no  such  agreement. 

Perhaps,  however,  this  equating  of  purpose-oriented  interpretation  and 
absurd  result  avoidance  with  substituting  standards  for  rules  is  too  extreme.  If 
a  standard  can  be  a  rule  where  everyone  agrees  about  its  meaning  in  context,  then 


70.  /ti.  at  531-40. 

71.  /^.  at  542-45. 

72.  W.  at  545. 

73.  Id.  at  549.   Hayek's  positions  were  derived  from  a  general  interest  in  the  problem  of 
ignorance;  he,  unlike  most  economists,  largely  ignored  problems  of  self-interest.    See  Marina 
Bianchi,  Hayek's  Spontaneous  Order,  The  "Correct"  Versus  the  "Corrigible"  Society,  in  F.A. 
Hayek,  Coordination  and  Evolution  232-51  (Jack  Bimer  &  Rudy  Van  Zijp  eds.,  1994). 

74.  E.g.,  POSNER,  supra  note  2,  at  44.  For  the  argument  that  it  is  a  bad  example,  see  infra 
note  128. 

75.  Alexander,  supra  note  47,  at  547. 

76.  On  problems  with  purpose,  see  Frank  Easterbrook,  Statutes  Domains,  50  U.  Chi.  L.  Rev. 
533  (1983);  Max  Radin,  Statutory  Interpretation,  43  Harv.  L.  Rev.  863, 876-77  (1930). 


74  INDIANA  LAW  REVIEW  [Vol.  36:57 


it  ought  to  be  possible  for  a  similar  agreement  to  occur  with  respect  to  purpose 
and  absurdity.  Perhaps,  but  the  problem  is  that  of  the  slippery  slope.'^  A  legal 
practice  in  which  purpose  and  absurdity  permit  departures  from  plain  meaning 
in  cases  of  such  agreement  will  lead  to  one  in  which  such  departures  are  routinely 
made  in  cases  of  substantial  and  widespread  disagreement.  This,  indeed,  happens 
often  in  our  contemporary  practice.^^ 

I  wish  to  add  to  this  summary  of  a  defense  of  rules  an  observation  about  the 
function  of  law  it  assumes.  I  do  so  because  this  function  may  tell  us  something 
about  formalism  apart  from  its  preference  for  hard  rules.  The  function 
contemplated  is  coordination  of  action  in  the  face  of  uncertainty.  That  is  a 
sufficiently  broad  statement  to  encompass  numerous  versions  of  "coordination," 
but  1  wish  to  narrow  the  notion  of  coordination  in  a  way  that  renders  it  close  to 
the  assumptions  and  understandings  of  the  classical  formalists.  The  picture  I 
wish  to  invoke  is  one  in  which  persons  are  acting  in  service  of  their  own  ends  and 
require  law  only  for  the  purpose  of  not  bumping  into  each  other  while  doing  so, 
or  for  the  purpose  of  ensuring  efficacy  of  exchange. ^^  Once  a  rule  is  provided, 
compliance  follows  and  the  law  is  left  behind.  An  interesting  feature  of  this 
picture  is  that  it  further  explains  hostility  to  standards  (and  to  other  ad  hoc  modes 
of  "authoritative  settlement").  Specifically,  the  trouble  with  standards  is  that 
their  uncertainties  compel  persons  who  otherwise  would  prefer  to  get  on  with 
their  lives  and  leave  the  law  behind  them  to  engage  in  argument  and  participate 
in  a  process  of  public  justification.  This,  of  course,  is  why  left-communitarians 
tend  to  be  critical  of  rules  and  favor  standards.  It  is,  of  course,  also  why 
libertarians  tend  to  favor  rules. 

I  should  nevertheless  make  it  clear  that  rules,  even  general  rules,  will  not 
themselves  implement  a  libertarian  program.  Hayek,  at  least  at  one  point  in  his 
intellectual  odyssey,  thought  that  such  rules  would  do  the  trick,*°  but  he  was,  I 
think,  wrong.  The  reason  is  that  the  substantive  content,  number  and  complexity 
of  rules  must  be  taken  into  account.  It  is  quite  possible  for  rules  satisfying  formal 
requisites  to  nevertheless  so  constrain  the  "negative  liberty"  Hayek  advocated  as 
to  defeat  his  political  program.^*  Consider,  for  example,  that  much  of  the  law  of 
the  "administrative  state"  is  comprised  of  inflexible  command  and  control 
directives  issued  by  administrative  agencies  in  the  form  of  regulations.  These 
often  produce  absurd  results,^^  and  formalism  as  mindless  rule  worship  is  surely 


77.  See  Frederick  Schauer,  Slippery  Slopes,  99  Harv.  L.  Rev.  361  (1985). 

78.  My  candidate  for  a  prime  example  of  this  phenomenon  is  United  Steelw  or  kers  v.  Weber, 
443  U.S.  193(1979). 

79.  The  latter  purpose  may  address  problems  of  "cooperation"  as  well  as  problems  of 
"coordination,"  but  formalism's  non-facilitative  implications,  supra  note  10,  may  often  result  in 
non-cooperation. 

80.  Hayek,  Constitution  of  Liberty,  supra  note  4,  at  205- 1 9. 

81 .  See  SUNSTEIN,  supra  note  5,  at  1 56-61  (comparing  mandatory,  end-state  directive  rules 
versus  privately  adaptable  rules). 

82.  £.g.,  Cass  SuNSTEiN,  Free  Markets  AND  Social  Justice  27 1-97  (1997).  Seesupranote 
45. 


2003]  LEGAL  FORMALISM  75 


a  standard  characterization  of  the  law  generated  by  bureaucracy. 

Does  this  mean  that  I  have  given  up  on  a  defense  of  formalism — that  I  have 
conceded  that  it  is  the  substance,  not  the  form  of  the  law's  authoritative 
settlement  that  is  important?  I  do  not  believe  so.  To  say  that  substance  matters 
is  not  to  say  that  form  does  not.  Rules  have  the  tendencies  depicted  in  the  picture 
of  persons  leaving  law  behind  and  standards  have  the  tendencies  depicted  in  the 
picture  of  persons  forced  to  engage  in  public  justification.  If  the  leaving  law 
behind  picture  is  attractive,  as  it  is  to  me,  rule  preference  is  an  aspect  of  the  legal 
program  that  serves  this  picture. 

C  Rules  and  Facts 

Before  leaving  the  matter  of  rules,  I  want  to  briefly  pick  up  a  theme  about 
facts  that  I  have  thus  far  largely  ignored.  I  suggested  above  that  formalism  may 
also  be  criticized  for  its  uncritical  reliance  upon  the  "facts"  found  in  legal 
proceedings. 

It  is  not,  however,  clear  that  difficulties  in  establishing  facts  present  a  threat 
to  formalism  as  "mechanical  adjudication."  There  may  well  be  factual 
uncertainty,  but  the  formalist  syllogism  treats  the  minor  premise  as  an 
assumption  or  stipulation.  However  messy  factual  determinations  might  be,  the 
logical  exercise  proceeds  after  these  determinations  are  made.  It  may,  therefore, 
be  possible  to  be  both  a  formalist  and  a  fact  skeptic. 

It  has  been  said  that  classical  formalists  preferred  "readily  ascertainable 
facts."*^  They  may  be  said,  then,  to  have  been  indeed  fact  skeptics  in  the  sense 
that  they  distrusted  discretion  in  fact  finding:  The  fewer  the  factual  assumptions 
necessary  to  form  minor  premises  the  better.  So,  for  example,  objective  rules 
were  preferred  to  vague  standards,  as  standards  require  or  permit  assessment  of 
more  facts.  It  might,  therefore,  be  said  that  formalists  ignore  or  de-emphasize 
facts  in  service  of  conceptual  order.  The  complexities  of  human  behavior  and  the 
multiple  potential  considerations  arising  from  these  complexities  are  threats  to 
rules,  so  formalists  suppress  these  complexities  and  considerations  by  giving 
primacy  to  rules. 

Moreover,  formalists  are  thought  to  prefer  abstract  and  general  rules  over 
particularized  or  specialized  rules.  They  prefer,  for  example,  one  law  of  contract, 
not  multiple  laws  for  distinct  types  of  contracts  or  distinct  contractual  settings.^"^ 
This  entails  suppression  of  factual  difference  through  an  assumption  of  greater 
homogeneity  than  may  exist  in  fact.  This  suppression  of  factual  difference  also 
facilitates,  however,  the  formalist  aspiration  to  a  complete,  coherent  system  from 
which  correct  answers  may  be  derived.  It  enhances  the  prospects  for  consistency 
where  consistency  is  to  be  obtained  at  the  levels  of  conceptual  principle  and  rule 
rather  than  through  particularized  factual  distinctions. 

An  insistence  upon  expanding  the  scope  of  factual  inquiry  goes  hand  in  hand 


83.  Grey,  supra  note  10,  at  1 1 .  Cf.  Andrew  KruU,  The  Simplification  of  Private  Law,  5 1  J. 
Legal  Educ.  284  (2001 )  (contending  that  there  is  a  contemporary  tendency  to  simplify  private  law 
by  rejecting  fact-sensitive  equitable  inquiries). 

84.  GiLMORE,  5Mpra  note  1,  at  82-83. 


76  INDIANA  LAW  REVIEW  [Vol.  36:57 


with  standards,  balancing  tests  and  factor  analysis,  for  the  underlying  notion  is 
that  judgment  is  to  be  made  all  things  considered.^^  This,  however,  is  precisely 
what  formalism's  emphasis  upon  rules  condemns,  for  the  reasons  noticed 
above.^^  By  contrast,  formalism's  suppression  of  facts  goes  hand  in  hand  with 
formalism's  distance  from  life  and  facilitates  that  distance.  Notice  that  this  is  not 
a  criticism  of  formalism;  formalism's  defense  of  its  distance  from  life  is 
consistent  with  its  hostility  to  particularized  decisions  under  standards  and, 
therefore,  its  suppression  of  facts,  i  act  suppression  limits  law's  intrusion  into 
life,  rendering  the  facts  it  suppresses  nevertheless  available  for  human  judgment 
within  the  framework  supplied  by  formalist  rules.^^ 

This,  I  think,  is  an  answer  to  the  common  claim  that  the  rigidity  of  rules  and 
the  suppression  of  facts  by  rules  are  alien  to  human  judgment,  or,  at  least,  to 
preferred  conceptions  of  human  judgment.  If  the  sociologists  and  institutional  ists 
are  correct,  human  behavior  is  largely  scripted,  a  matter  of  rule  following  even 
outside  law.  Nevertheless,  a  more  flattering  picture  of  human  choice,  or,  at  least, 
of  wise  human  choice,  entails  "all  things  considered"  judgment.  So,  from  the 
perspective  of  this  picture,  judicial  (or  other  governmental)  decision  by  inflexible 
reference  to  rules  is  denigrated,  as  by  claiming  that  judges  are  not  or  should  not 
be  mere  rule  followers.^*  I,  too,  prefer  the  picture  of  wise  judgment,  all  things 
considered,  but  it  is  not  necessary  to  this  ideal  that  it  be  the  judge  or  other 
governmental  functionary  who  exhibits  wise  judgment.  The  point  of  a  rule  (or, 
more  accurately,  of  rules  with  a  particular  substantive  orientation)  is  that  it 
provides  a  framework  within  which  such  judgment  may  be  exercised  by  persons 
other  than  governmental  functionaries.  It  confers,  in  effect,  the  jurisdiction  to  be 
wise.^^ 

Another  criticism  of  formalist  facts  is  that  they  are  anecdotal — they  fail  to 
provide  adequate  data  about  systematic  human  tendencies.  This,  of  course,  is  a 
pragmatic  instrumentalist  complaint:  If  law  is  conceived  to  be  an  instrument  of 
comprehensive  planning  to  service  collectively  determined  ends,  "legislative 
facts"  are  needed.  It  is,  of  course,  also  a  complaint  about  common  law 
adjudication  generally,  not  just  formalist  adjudication  (unless  formalism  is 


85.  E.g.,  POSNER,  supra  note  2,  at  44-49;  SUNSTEIN,  supra  note  5,  at  1 36-47. 

86.  See  supra  notes  70-81  and  accompanying  text. 

87.  See  supra  notes  42-43  and  accompanying  text,  infra  notes  1 07- 1 9  and  accompanying  text. 

88.  PosNER,  Overcoming  Law,  supra  note  5,  at  489-92. 

89.  Cf.  SCHAUER,  supra  note  49,  at  1 58-66  (stating  that  primary  function  of  rule  is  allocation 
of  decision  making  authority).  Notice,  however,  that  this  is  potentially  so  in  two  senses.  A  rule  can 
be  viewed,  as  Schauer  largely  does,  as  retaining  the  authority  to  be  wise  (or  foolish)  in  the  original 
rule  maker.  It  might  also  he  thought,  however,  to  confer  the  authority  to  be  wise  (or  foolish)  on 
persons  subject  to  the  rule.  This  latter  sense  may  seem  doubtful  if  one  contemplates  a  directive  rule. 
Consider,  however,  a  rule  requiring  consideration  for  the  legal  enforceability  of  a  promise.  The 
maker  of  a  promise  has,  under  such  a  rule,  the  "discretion"  to  obtain  legal  enforceability  through 
a  demand  for  consideration  and  the  discretion  to  perform,  or  not,  if  he  fails  to  make  this  demand. 
Consider,  also,  a  prohibition  of  theft.  The  prohibition  withdraws  the  discretion  of  those  subject  to 
it  to  steal,  but  also  confers  the  discretion  (and  possibility)  of  contracting  for  property  transfer. 


2003]  LEGAL  FORMALISM  77 


defined  as  common  law  adjudication).  The  complaint  serves,  for  example,  to 
justify  displacement  of  common  law  adjudication  by  regulation  through  the 
supposed  expertise  of  administrative  agencies.^  Whether  or  not  administrative 
regulation  in  fact  exhibits  expertise  in  either  the  identification  of  systematic  facts 
or  in  their  assessment,  the  important  point  for  present  purposes  is  to  recognize 
that  the  function  of  law  is  quite  distinct  in  the  "administrative  state"  from  that 
proposed  above  as  an  explanation  of  formalist  rules  and  of  formalist  suppression 
of  fact.^'  The  function  envisioned  for  formalist  law,  recall,  was  a  matter  of 
limited  coordination.  The  function  envisioned  by  the  administrative  state  is 
comprehensive,  top-down  planning  in  service  of  collectively  determined  ends. 
There  is  obviously  a  greater  need  for  facts  in  the  latter  than  the  former. 

in.  Formalism  AS  Empty  Spaces 

A  prominent  feature  of  legal  realism,  and,  later,  of  critical  legal  studies,  is  a 
rejection  of  the  idea  of  the  empty  space — an  area  in  which  persons  are  free  from 
law.  Actually,  there  appear  to  be  two  distinct  but  related  realist  ideas  here.  First, 
there  is  the  Hohfeldian  idea  that  liberty  (in  Hohfeld's  terminology  "privilege") 
is  distinct  from  legal  right.^^  Thus,  the  law  does  not  in  many  instances  preclude 
interference  by  others  with  liberty;  persons  in  those  instances  may  harm  others 
with  legal  impunity.  When  the  law  does  intervene,  when  it  recognizes  a  right,  it 
simultaneously  imposes  a  duty,  so  one  person's  right  is  merely  the  legal 
enforcement,  or  threat  of  enforcement,  of  another  person's  duty.  One  upshot  of 
Hohfeldian  analysis  is  the  recognition  that  legal  rights  are  constraints  on  liberty. 
Another  is  that  concepts  like  property  refer  to  bundles  of  legal  relationships,  not 
to  real  things  in  the  world.  Still  another  is  that  one  cannot  suppose,  as  classical 
formalists  are  said  to  have  done,  that,  because  the  law  recognizes  a  liberty  to  do 
X,  in  the  sense  that  the  law  permits  X,  that  there  is  a  right  to  do  X,  in  the  sense 
that  the  law  will  impose  a  duty  not  to  interfere  with  one's  doing  of  X  ^^ 

An  implication  of  this  last  point  is  that  classical  formalists  were  wrong  in 
supposing  that  rights  could  be  logically  derived  from  privileges.^"*  Another  is  that 
the  Millian  concept  of  liberty  as  the  freedom  to  pursue  one's  own  ends  so  long 
as  one  does  not  harm  others  is  not  a  viable  explanation  of  the  legal  system  given 
the  extent  to  which  that  system  privileges  the  infliction  of  harm.^^  This,  in  turn, 
implied  that  no  single  principle  could  explain  when  the  law  would  and  would  not 
intervene  to  prevent  harm,  a  substantial  threat  to  classical  formalism's 
conceptualistic,  deductive  system. ^^ 


90.  See  SUNSTEIN,  supra  note  45. 

9L  See  Gjerdingen,  supra  note  33;  Mashaw,  supra  note  33. 

92.  Hohfeld,^M/7ranote  16. 

93.  See  generally  Joseph  W  Singer,  The  Legal  Rights  Debate  in  Analytical  Jurisprudence 
from  Bentham  to  Hohfeld,  1982  Wis.  L.  Rev.  975. 

94.  /c^.  at  997-98. 

95.  Mat  1022. 

96.  Some  legal  economists  believe,  of  course,  that  the  principle  of  efficiency,  here  in  the 


78  INDIANA  LAW  REVIEW  [Vol.  36:57 


Nevertheless,  Hohfeldian  privilege  or  liberty  seems  clearly  to  recognize 
empty  spaces  in  the  law:  areas  of  freedom  from  law,  or,  in  effect,  states  of 
nature.^^  How,  then,  can  I  claim  that  realism  rejected  the  idea  of  an  empty  space? 
The  answer  lies  in  a  further  aspect  of  Hohfeld's  thought,  one  emphasized,  in 
particular,  by  the  legal  realist  Robert  Hale. 

A  response  to  Hohfeld  was  that  the  realm  of  liberty  (privilege)  was  outside 
law,  not  a  part  of  it.  If  the  law  recognizes  no  duties  within  the  empty  space  of 
privilege,  then  that  space  is  empty  of  law.'*  To  this  Hohfeld  replied  that  "[a]  rule 
of  law  that  permits  is  just  as  real  as  a  rule  of  law  that  forbids  .  .  . ."''  Thus,  a 
judge  who  finds  for  a  defendant  on  the  basis  that  the  defendant  had  no  duty  of 
noninterference  has  made  a  legal  decision.  How  far  might  this  characterization 
be  pushed?  Hale  pushed  it  to  rather  extreme  lengths:  Not  only  is  the  decision  to 
deny  a  legal  duty  a  legal  decision,  it  is  a  delegation  of  state  power  to  the 
defendant  holder  of  Hohfeldian  privilege. '°°  Since  liberty  is  recognized  by  law, 
the  acts  undertaken  within  it  are  state  acts.  Indeed,  Hale  saw  state-based 
coercion  everywhere:  A  voluntary  contractual  exchange  was,  for  Hale, 
"coerced"  by  the  fact  that  both  parties  are  legally  entitled  to  withhold  consent.'^' 
Hale's  thought  is  evident  in  the  oft-repeated  contemporary  view  that  any  given 
"private"  preference,  realm  or  decision  is  in  fact  legally  constructed  by  virtue  of 
a  background  of  state  determined  entitlements  and  is  therefore  "really"  a  "public" 
preference,  realm  or  decision.'"^ 

So  realism,  and  much  contemporary  thought,  rejects  the  empty  space  idea, 
not  in  the  sense  that  it  fails  to  recognize  liberty  to  harm  others  in  the  law,  but, 
rather,  in  the  sense  that  it  denies  that  this  liberty  is  apart  from  law.  The  realist 
claims  are,  then,  that  law  permeates  liberty,  that  there  is  no  private  realm,  and 
that  the  private  is  publicly  constructed. 

What  has  all  this  to  do  with  formalism?  If  formalism  is  that  which  its  critics' 


guise  of  pecuniary  versus  non-pecuniary  externality,  explains  at  least  the  common  law. 

97.  Duncan  Kennedy  &  Frank  Michaelman,  Are  Contract  and  Property  Efficient?,  8 
HOFSTRA  L.  Rev.  711,715,  727-28,  754  (1980).  While  states  of  nature  (or  pockets  thereof)  are 
extreme  examples  of  empty  spaces,  it  should  be  noted  that  I  have  a  broader  idea  in  mind.  See  infra 
note  111.  Thus,  in  my  scheme,  there  can  be  an  "empty  space"  generated  by  legally  enforced 
property  entitlements  and  contract  rules  even  though  these  entitlements  and  rules  obviously 
presuppose  a  state.  So  a  "state  of  nature"  in  the  pristine  sense  is  not  the  intended  meaning  of  my 
invocation  of  the  phrase.  A  "state  of  nature"  is,  rather,  a  way  of  understanding  Hohfeldian 
privilege,  and  such  privileges  may  exist  within  a  background  set  of  entitlements  and  rules  entailing 
Hohfeldian  rights  and  duties. 

98.  J.  Austin,  The  Providence  of  Jurisprudence  Determined  290  n.*  (1832). 

99.  Hohfeld,  supra  note  16,  at  42  n.59. 

100.  E.g.,  Robert  Hale,  Coercion  and  Distribution  in  a  Supposedly  Non-Coercive  State,  38 
Pol.  Sci.  Q.  470  (1923);  Robert  Hale,  Force  and  the  State:  A  Comparison  of  Political  and 
Economic  Compulsion,  35  COL.  L.  REV.  149  (1935). 

101.  Robert  Hale,  Bargaining.  Duress,  and  Economic  Liberty,  43  COLUM.  L.  Rev.  603  ( 1 943 ). 

1 02.  E.g. ,  HoRWiTZ,  supra  note  2,  at  1 93-2 1 2;  Cass  SuNSTEiN,  The  Partial  Constitution, 
68-92,  162-94(1993). 


2003]  LEGAL  FORMALISM  79 


attack,'^^  the  realist  view  is  that  formalists  both  fail  to  recognize  that  the  law 
permits  the  infliction  of  harm  and  erroneously  insist  upon  the  existence  of  a 
realm  of  "liberty"  apart  from  and  ungovemed  by  law.  Is  this  so?  There  is  an 
obvious  affinity  between  the  empty  space  as  liberty  notion  and  my  earlier  claims 
that  formalism  seeks  to  leave  law  behind  and  to  protect  VifQ from  law.  Moreover, 
the  empty  space  idea  fits,  rather  neatly,  other  features  of  formalism.  The  point, 
recall,  of  both  an  autonomous,  conceptual istic  basis  for  law  and  of  rigid  rules  as 
expressions  of  law  is  to  confine  judicial  discretion  and  to  enhance  stability  and 
predictability.  These  objectives,  if  realized,  would  generate  an  undirected  order 
within  which  individuals  would  pursue  their  individual  projects.'^  Classical 
formalist  commitments  to  "liberty"  would  then  seem  to  follow  from  classical 
formalist  conceptions  of  law.  The  realists  attacked  not  merely  the  formalist 
commitment,  but  the  very  idea  of  liberty  as  a  realm  untouched  by  law. 

Can  the  empty  space  idea  be  defended?  One  defense,  ironically,  is  that 
critics  of  the  empty  space  idea  are  themselves  formalists. '^^  To  say  that  private 
action  is  "really"  public  action,  or  that  the  private  is  legally  constructed  and 
therefore  "political"  is  to  engage  in  absolutist  conceptual  ism,  for  it  is  both  true 
and  not  true  that  the  private  is  private  and  that  the  private  is  public.  It  is  true  that 
persons  are  empowered  to  act  within  the  private  realm  by  virtue  of  a  "baseline" 
set  of  background  entitlements  recognized  in  the  traditional  common  law.'^  It 
is  not  true  that  this  baseline  either  directs  particular  actions  within  this  realm  or, 
indeed,  even  addresses  what  particular  actions  will  be  undertaken  within  this 
realm. '^^  More  importantly,  the  fact  of  a  baseline  does  not  imply  that  it  is  itself 
consciously  planned  or  constructed.  Nor  does  recognition  of  the  baseline  justify 


1 03.  I  recognize  that  formalism  cannot  simply  be  that  which  realists  attack.  I  mean,  instead, 
that  which  realists  (etc.)  attack  as  formalism,  and  I  think  it  apparent  that  "empty  spaces"  are 
conceived  by  many  critics  of  formalism  as  part  and  parcel  of  formalism.  E.g.,  Duxbury,  supra 
note  7,  at  106-1 1;  HORWITZ,  s-wpra  note  2,  at  155.  See  GiLMORE,  supra  note  1,  at  55  (Holmes' 
formalism  greatly  limited  liability);  SuNSTElN,5Mjp/"anote  102,  at  40-67, 1 12-19  (linking  formalism 
as  mechanical  legal  interpretation  with  substantive  commitment  to  status  quo  distributions,  and 
latter  to  Lochner).  But  see,  e.g.,  HOVENKAMP,  supra  note  35,  at  174-75  (denying  link  between 
formalism  and  effort,  as  in  Lochner,  to  constitutionalize  common  law  version  of  liberty);  SUNSTEIN, 
supra  note  5,  at  1 18-20  (denying  association  of  Rule  of  Law  with  free  markets).  It  is  possible  to 
separate  formalist  method  from  formalist  normative  commitment,  but,  as  I  suggest  immediately 
below  and  infra,  text  and  notes  1 67-71 , 1  believe  that  there  are  in  fact  functional  linkages  between 
the  two. 

1 04.  This,  at  least,  was  Hayek's  vision.  Hayek,  Law,  Legislation  and  Liberty,  supra  note 
4,  at  106-10,  118-22. 

105.  Posner,  Overcoming  Law,  supra  note  5,  at  281-84.  Cf  Larry  Alexander,  The 
Public/Private  Distinction  and  Constitutional  Limits  on  Private  Power,  10  CONST.  COMMENT.  361 
(1993)  (claiming  that  legal  and  conceptual  breakdowns  of  public/private  distinction  have  little 
normative  force). 

1 06.  SUNSTEIN,  supra  note  1 02,  at  40-92. 

107.  This  is  Hayek's  reply  to  Hale.  2  F.A.  HAYEK,  Law  Legislation  and  Liberty:  The 
Mirage  of  Social  Justice  37-38  (1976). 


80  INDIANA  LAW  REVIEW  [Vol.  36:57 


a  program  of  conscious  reconstruction.  This  charge,  that  the  critics  turn  out  to 
be  formalists,  is  a  highly  attractive  rhetorical  point.  Unfortunately,  it  is 
obviously  not  one  upon  which  I  can  rely  given  a  project  of  defending  formalism. 

So  allow  me  to  offer  three  defenses  of  the  empty  space  idea  distinct  from 
defense  through  the  charge  of  hypocrisy.  The  first  may  be  termed  a  semantic 
defense.  To  say,  with  the  realists,  that  withholding  consent  to  a  contract  is 
"coercion"  or  that  there  is  no  "private"  realm  is  to  attempt  the  destruction  of 
perfectly  useful  terms  on  the  highly  doubtful  premise  that  persons  who  employ 
such  terms  are  unaware  of  the  legal  nature  of  the  institutional  structure  within 
which  such  perfectly  useful  terms  are  employed.'*^*  The  formalist  who  denies 
that  there  is  an  implicit  allocation  of  entitlement  in  the  law's  refusal  to  assess 
behavior  would  of  course  be  mistaken,  but  no  sophisticated  formalist  would  deny 
this.  Hayek  certainly  did  not.'°'  The  empty  space  idea  is  precisely  that  the  law's 
refusal  to  recognize  an  obligation  confers  power  on  persons  and  frees  such 
persons  from  justifying  their  actions  in  terms  of  public  ends.  That  the  law,  even 
contemporary  law,  in  fact  contains  such  empty  spaces  requires  that  the  realist 
bent  on  denying  the  private  and  insisting  on  the  ubiquity  of  state  coercion  must 
invent  new,  and  often  more  obscure  terms  to  describe  these  phenomena. 

Second,  the  phenomena  do  in  fact  exist  in  the  law;  there  are  empty  spaces. 
Consider  two  examples:  (1)  The  business  judgment  rule  generally  precludes 
judicial  assessment  of  corporate  director  decisions  absent  conflicts  of  interest  and 
therefore  leaves  managerial  decision  making  "unregulated,"  even  though  the 
corporation  and  the  position  of  power  of  the  board  of  directors  within  it  are  in 
important  senses  creatures  of  law."°  (2)  The  employment  at  will  doctrine 
precludes  judicial  assessment  of  an  employer's  decision  to  discharge  an 
employee  (and,  for  that  matter,  an  employee's  decision  to  resign)  even  though  the 
very  identification  of  who  is  an  employer  and  who  is  an  employee  is  a  function 
of  a  set  of  background  entitlements  recognized  and  enforceable  by  law."' 


1 08.  Richard  Epstein,  The  Assault  That  Failed:  The  Progressive  Critique  ofLaissez  Faire,  97 
Mich.  L.  Rev.  1 697, 1 700,  1 704  ( 1 997). 

109.  See,  e.g.,  HAYEK,  supra  note  32,  at  1 12-16. 

1 10.  See,  e.g.,  Aronson  v.  Lewis,  473  A.2d  805  (Del.  1984);  Shlensky  v.  Wrigley,  237N.E.2d 
776  (III.  App.  Ct.  1968);  Charles  Hansen,  The  ALI  Corporate  Governance  Project:  Of  The  Duty 
of  Due  Care  and  the  Business  Judgment  Rule,  a  Commentary,  41  BUS.  LAW.  1237  (1986). 

HI.  See  generally  Andrew  P.  Morriss,  Bad  Data,  Bad  Economics  and  Bad  Policy:  Time  to 
Fire  Wrongful  Discharge  Law,  74  lEX.  L.  REV.  1901  (1996);  Edward  B.  Rock  &  Michael  L. 
Wachter,  The  Enforceability  of  Norms  and  the  Employment  Relationship,  1 44  U.  PA.  L.  REV.  1913 
(1996). 

Let  me  clarify  the  notion  of  an  empty  space.  There  are,  in  my  conception  varieties  and  degrees 
of  empty  spaces;  some  spaces  are  more  empty  of  law  than  others.  For  example,  one  device  by 
which  empty  space  may  be  created  or  expanded  is  that  of  constricting  the  realm  of  tort  and 
expanding  the  realm  of  contract.  The  realm  of  contract  is  not  an  empty  space  in  the  same  sense  that 
a  state  of  nature  is  an  empty  space;  there  are  rights  and  duties  within  the  space  generated  by 
contract.  Nevertheless,  the  contractual  space  is  *Mess  full"  of  law  than  space  governed  by  tort  in  the 
obvious  senses  that  the  rights  and  duties  generated  by  contract  fmd  their  source  in  the  parties* 


2003]  LEGAL  FORMALISM  81 


Third,  it  is  a  very  good  thing  that  there  are  empty  spaces  and  it  would  be  a 
significantly  better  thing  if  there  were  more  and  wider  empty  spaces.  Leaving 
aside  the  many  persuasive  instrumental  and  consequential ist  reasons  for  such 
empty  spaces  as  those  created  by  the  business  judgment  rule  and  the  employment 
at  will  rule,  let  me  offer  a  reason  for  the  goodness  of  empty  spaces  more  in 
keeping  with  what  I  am  characterizing  as  a  formalist  stance.  I  said  above  that  the 
point  of  the  empty  space  was  freedom  from  public  justification.    It  may  be 


agreement  to  these,  not  in  an  externally  imposed  direction.  I  am  aware  that  the  realm  of  contract 
can  be  characterized  as  full  of  directive  law.  E.g.,  Jean  Braucher,  Contract  Versus 
Contractarianism:  The  Regulatory  Role  of  Contract  Law,  47  WASH.  &  LEE  L.  REV.  697  (1990). 
I  do  not  share  that  vie\y.  See  Barnett,  supra  note  38.  Within  the  realm  of  contract,  a  further  means 
of  expanding  empty  space  is  that  of  expanding  the  realm  of  default  terms  and  limiting,  or 
eliminating,  the  realm  of  mandatory  terms.  Within  the  realm  of  remedies,  the  device  is  that  of 
favoring  those  that  force  market  transactions,  such  as  specific  performance  and  injunction,  and 
disfavoring  those  that  entail  judicial  assessments,  such  as  damages. 

Now,  one  theme  that  runs  through  these  examples  is  a  program  of  withdrawal  from  mandatory 
and  directive  law,  so  an  empty  space  is  by  reference  to  this  theme  freedom  from  and  freedom  to 
contract.  Another  theme,  however,  is  limiting  occasions  for  judicial  assessment,  and  this  theme  will 
not  only  entail  a  withdrawal  from  directive  law,  it  will  entail  a  withdrawal  from  facilitative  law. 
It  will  entail,  for  example,  limitations  on  freedom  to  contract,  because  it  implies  a  reluctance  to 
engage  in  problematic  factual  assessments.  See,  e.g.,  Alan  Schwartz,  The  Default  Rule  Paradigm 
and  the  Limits  of  Contract  Law,  3  S  Cal.  Interdisc.  L.  Rev.  389  (1993);  cf  GiLMORE,  ^wpra  note 
30,  at  52-54  (contradiction  between  bargain  theory  and  absolute  liability  potentially  resolved  by 
desire  to  limit  litigation). 

An  example  is  the  strict  bargain  principle  of  contract,  a  principle  that  excludes  firm  offers  from 
enforcement  and  therefore  fails  to  facilitate  exchange.  See  supra  notes  25-32  and  accompanying 
text.  Another  example  entails  rejecting  the  notion  that  courts  are  capable  of  identifying  the 
"reasonable  expectations"  of  shareholders  in  closely  held  corporations,  e.g.,  Robert  B.  Thompson, 
Corporate  Dissolution  and  Share-Holders'  Reasonable  Expectations,  66  WASH.  U.  L.Q.  193 
(1988).  That  notion  seems  to  me,  highly  doubtful  if  the  inquiry  is  understood  as  empirical.  If, 
instead,  the  inquiry  is  understood  as  imposing  tort-like  mandatory  terms,  it  is  directive  and  therefore 
suspect  from  the  perspective  suggested  here.  But  it  is  at  least  arguable  that  withdrawing  from 
reasonable  expectations  inquiries  will  deter  initial  investments.  A  final  example:  At  one  point  in 
the  history  of  corporate  law  an  interested  director  contract  was  simply  voidable;  later,  such  a 
contract  became  enforceable  if  "fair."  The  earlier  rule  is  a  formalist  rule  if  formalist  rules  are,  as 
I  advocate,  designed  to  limit  judicial  assessment.  The  later  rule  requires  inquiring  into  the  open- 
ended  matter  of  fairness,  and  risks  the  imposition  of  conception  of  fairness  alien  to  the 
understandings  of  parlies  to  the  corporate  "contract."  Nevertheless  it  enables  mutually  beneficial 
deals  precluded  under  the  earlier  rule. 

The  point  is  that  formalist  non-direction  and  formalist  non-assessment  will  necessarily  entail 
the  withdrawal  of  law  from  the  enterprise  of  facilitating  exchange  and  therefore  relegating  that 
project  to  aspects  of  society  outside  law.  In  law  and  economics  lingo,  the  formalist  project  of 
expanding  empty  spaces  operates,  in  effect,  as  a  counterfactual  but  strong  presumption  of  zero 
transaction  costs  and  as  a  more  factually  supportable  assumption  of  extremely  high  administrative 
costs. 


82  INDIANA  LAW  REVIEW  [Vol.  36:57 


true — and  certainly  would  be  under  a  pragmatic  instrumentalist  regime — that  the 
empty  space  as  a  class  or  category  of  conduct  may  be  assigned  a  "public 
justification,"  the  justification,  for  example,  of  maximizing  social  wealth.  But 
it  remains  the  case  that,  once  recognized,  the  empty  space  is  a  hawen  from  public 
justification — an  area  within  which  one  may  leave  law  behind.  It  seems  to  me 
that  the  goodness  of  this  notion,  from  the  point  of  view  of  an  individualist 
tradition,  is  self  evident.  It  is  reflected,  in  highly  imperfect  forms,  in  post-New 
Deal  constitutional  law,"^  albeit  not  within  so-called  economic  realms.  And  it 
is  reflected,  again  imperfectly,  within  these  realms  in  the  doctrinal  examples  I 
have  given.  I  will  not  seek  to  defend  an  individualist  tradition  here,  but  I  do  wish 
to  make  clear  what  I  take  to  be  the  nature  of  the  goodness  of  the  empty  space 
claimed  by  that  tradition.  It  is  precisely  that  articulate  justification  for  (formally 
private)  choice  is  not  asked,  let  alone  required. 

My  final  defense  of  empty  spaces  rests  on  the  agenda  of  the  critics  of  those 
spaces.  The  agenda,  I  claim,  is  precisely  a  denial  of  the  goodness  of  the  empty 
space  postulated  by  the  individualist  tradition.  The  critics,  it  must  be  recognized, 
come  from  both  ends  of  the  political  spectrum,  but  allow  me  to  concentrate  upon 
what  I  take  to  be  the  legal  realist  tradition.  Realism's  denial  of  the  empty  space 
is  premised,  I  submit,  upon  a  pervasive,  indeed  organic  conception  of  law  in  both 
descriptive  and  normative  senses.  The  descriptive  prong  of  this  conception,  we 
have  already  encountered:  there  is  no  such  thing  as  a  private  realm  because  each 
choice  within  the  realm  is  traceable  to  a  legal  allocation  of  power.  The 
normative  prong  goes  like  this:  as  the  private  realm  does  not  exist,  it  is  not  an 
obstacle  to  a  centralized,  instrumental  and  purposive  collective  assessment, 
which  assessment  is  itself  a  good  thing."^  The  goodness  of  such  an  assessment, 
from  this  realist  perspective,  is  precisely  that  articulate  justification  of  formerly 
private  choice  is  to  be  required.^''* 

It  might  be  thought  that  I  exaggerate,  but  I  think  1  do  not.  When  it  is  said,  as 
it  sometimes  is  currently  said,  that  we  have  too  much  law,  when,  for  example, 
Professor  Gilmore's  notion  that  "[i]n  hell  there  will  be  nothing  but  law""^  is 
quoted,  the  speaker  is  recognizing,  in  my  terminology,  the  contraction  of  empty 
spaces.  This  phenomenon  of  contraction  is  evident,  for  example,  in 
contemporary  threats  to  the  continued  viability  of  my  examples  of  empty  spaces, 
the  business  judgment  rule  and  the  employment  at  will  rule.  It  is  a  phenomenon, 
however,  I  think  pervasive.  I  suspect  that  for  every  example  of  a  common  law 
empty  space,  particularly  where  the  space  is  generated  by  a  hard  looking  legal 
rule,  one  may  find  either  progressive  retreat  from  the  rule  or  the  parallel 
development  of  an  altemative  body  of  law  that  undermines  the  empty  space 


1 1 2.  Louis  Michael  Seidman,  Public  Principle  and  Private  Choice:  The  Uneasy  Case  for  a 
Boundary  Maintenance  Theory  of  Constitutional  Law,  96  Yale  LJ.  1006  (1987). 

113.  See,  e.g.,  SUNSTEIN,  supra  note  45,  at  160-92;  Sunstein,  supra  note  102,  at  40-92. 

114.  Cf  Louis  Michael  Seidman,  The  State  Action  Paradox,  10  CONST.  Comment.  379(1993) 
(noting  incoherence  of  state  action  doctrine  due  to  dismantling  public/private  distinction  in  post- 
1937  era  combined  with  a  contradictory  continued  commitment  to  notion  of  individual  rights.) 

115.  GlLMORE,  supra  note  1 ,  at  1 1 1 . 


2003]  LEGAL  FORMALISM  83 


conferred  by  its  competitor."^  Of  course,  the  reverse  phenomenon  is  present  as 
well.  We  observe  in  the  law  repeated  efforts  to  generate  empty  spaces,  often  by 
means  of  replacing  the  indeterminacy  generated  by  standards  with  the  greater 
certainty  generated  by  rules  (such  as  safe-harbor  rules).  "^  But  the  very 
prominence  of  these  efforts,  and  of  the  oscillation  between  standards  and  rules, 
illustrates  the  point  of  contraction  as  a  pervasive  phenomenon. 

Contraction  does  not,  of  course,  always  proceed  from  a  self-consciously 
"scientific"  construction.  Some  contraction  may  be  traced  to  conservative 
traditionalism  of  a  self-consciously  "moral"  variety.  Much  can  be  traced  to 
egalitarian  commitments:  the  conferral  of  "power"  by  background  entitlement 
tends  strongly  to  render  egalitarians  hostile  to  empty  spaces."*  All,  however, 
may  be  traced  to  an  insistence  upon  articulate  justification  and  a  claim  to 
authority  in  assessment  of  justification. 

If  this  is  so,  how  does  it  serve  as  a  defense  of  empty  spaces?  It  does  so  in 
two  senses.  First,  as  a  descriptive  matter,  it  undermines  the  realist  claim  that 
there  are  no  empty  spaces,  for  it  makes  no  sense  to  deny  the  existence  of  the 
private  while  simultaneously  substituting  for  some  status  quo  an  insistence  upon 
justification  and  authoritative  assessment.  One  does  not  substitute  a  proffered 
reality  for  a  non-existent  alternative  reality.  Second,  it  makes  clear  that  the 
debate  over  empty  spaces  is  normative.  The  anti-formalist  has  a  normative 
agenda  that  cannot  be  defended  in  merely  descriptive  terms.  So,  too,  of  course, 
does  the  formalist,  if  commitment  to  empty  spaces  is  accepted  as  a  formalist 
precept. 

IV.  The  NORMATIVE  Debate 

What  is  the  nature  of  this  normative  debate?  The  nature  of  the  normative 
debate  may  be  found  in  the  following  general  criticism  of  formalism:  by  refusing 
to  address  consequences,  formalism  constitutes  an  abstract  theology  divorced 
from  social  need."'  It  seems  to  me  that  within  this  criticism  are  the  roots  of  the 
fundamental  disagreement.  That  disagreement  entails  two  interrelated  issues: 
competence  and  ambition. 


1  16.    See,  e.g.,  CAROL  M.  ROSE,  PROPERTY  AND  PERSUASION,  ESSAYS  ON  THE  HISTORY, 

Theory  AND  Rhetoric  OF  Ownership  199-225(1994);  Jason  Scott  Johnston,  Uncertainty,  Chaos, 
and  the  Torts  Process:  An  Economic  Analysis  of  Legal  Form,  76  CORNELL  L.  REV.  34 1  ( 1 99 1 ).  An 
example  of  the  latter  phenomenon  is  the  simultaneous  presence  of  an  individualistic  disparate 
treatment  theory  and  collectivist  disparate  impact  theory  in  the  law  of  Title  VII.  See  Paul  N.  Cox, 
Employment  Discrimination,  ch.  6  (3d  ed.  1999). 

1 17.  See,  e.g.,  S.E.C.  Rule  506,  17  C.F.R.  §  230.506  (amended  1989);  Rev.  Model  Bus. 
Corp.  Act  §§  8.60-8.63  (1984);  Unif.  Limited  Partnership  Act  §  303  (1976). 

118.  See,  e.g.,  SUNSTEIN,  supra  note  102,  at  40-92  (status  quo  neutrality  reflected  in  Lochner 
era  non-neutral  and  unjust);  Gerald  E.  Frug,  The  Ideology  of  Bureaucracy  in  American  Law,  97 
Harv.  L.  Rev.  1276  (1984)  (unjust  power,  for  example,  of  corporate  management). 

1 1 9.  Posner,  Overcoming  Law,  supra  note  5,  at  398-99. 


84  INDIANA  LAW  REVIEW  [Vol.  36:57 


A.  Competence 

The  notion  that  formalism  is  an  abstract  theology  that  refuses  to  address 
consequences  obviously  implies  that  there  are  better  alternatives.  It  seems  to  me 
that  formalism  can  be  understood  as  a  denial  of  this  implication,  and  in  particular 
a  denial  of  the  competence  of  legal  actors  either  to  resolve  fundamental  moral, 
political  or  social  issues  or  to  adequately  predict  and  control  social  consequences. 
Its  competitors,  by  contrast,  affirm  the  capacity  of  law,  of  moral  reasoning,  or  of 
scientific  method  to  do  just  these  things. 

Recall  that  the  formalist  seeks  his  guidance  from  the  concepts,  rules, 
principles,  etcetera  he  finds  in  the  past  practices  of  law,  practices  I  earlier 
claimed  nevertheless  must  inevitably  have  had  some  substantial  relation  to  social 
practice  even  while  not  duplicating  social  practice.  This  source  of  legal  decision 
is,  by  reference  to  the  alternatives  offered  by  anti-formalists,  a  quite  modest  one. 
It  does  not  seek  answers  through  the  highfaluting  techniques  of  analytical  moral 
philosophy;  it  does  not  place  its  faith  in  the  supposed  expertise  of  administrative 
agencies;  it  does  not  suppose  that  social  science  is  capable  of  achieving  with  the 
social  what  natural  science  has  achieved  with  the  natural.  I  submit  that  the 
claims  to  truth  finding,  prediction,  control,  and  moral  imperative  one  finds  in 
these  alternatives  are  far  more  extravagant  than  a  simple  claim  to  adherence  to 
principles  embedded  in  past  practice.  The  alternatives  display  both  high 
ambition — ^the  ambition  of  improving  society  by  reference  to  some  philosophical, 
political,  moral  or  economic  precept — and  a  deep  faith  in  the  capacity  of  elites 
to  employ  rationality  in  service  of  this  ambition. 

Nevertheless,  I  do  not  wish  to  be  understood  as  wholly  rejecting  criticism  of 
formalist  conceptual  ism.  In  particular,  I  do  not  believe  that  legal  decision  in  hard 
cases  can  be  thought  of  as  compelled  by  past  practice,  even  though  that  practice 
will  substantially  limit  the  alternatives.  Indeed,  I  do  not  even  believe  that 
"reason"  determines  the  choice  between  the  alternatives  thrown  up  by  past 
practice.  The  skeptical  realists  and  post-realists  are,  in  my  view,  correct  at  least 
to  this  extent.  The  pretense  of  decision  compelled  by  reference  to  principle  may 
be  a  necessary  pretense  in  such  cases,  but  it  is,  I  think,  absurd  to  believe,  as  our 
legal  culture  asserts  and  purports  to  believe,  that  there  are  correct  answers  in  hard 
cases,  discoverable  through  reason. '^^  This  is  particularly  obvious  when  the  hard 
case  entails  clashes  between  deeply  felt  political  or  moral  commitments.  There 
is  simply  no  possibility  of  a  rationally  justified  right  answer  in  such  cases. '^' 
This  means,  however,  not  only  that  right  answers  won't  be  found  in  legal 
principles.  It  also  means  they  also  won't  be  found  in  moral  philosophy, 
economics  or  any  other  discipline  or  body  of  knowledge  outside  law, 

I  also  do  not  wish  to  be  understood  as  thinking  consequences  do  not  matter 
to  what  law  is  or  should  be;  they  obviously  do  matter.  My  points  about  the 
matter  of  consequences  are  that  both  formalists  and  anti-formalists  exaggerate  the 
degree  to  which  formalist  law  ignores  consequences  in  favor  of  principles  and 
that  ambitious  consequentialist  programs,  like  ambitious  moral  ones,  should  be 


1 20.  See  generally  PAUL  F.  CaMPOS,  JURISMANIA:  The  MADNESS  OF  AMERICAN  LAW  ( 1 998). 

121.  Id. 


2003]  LEGAL  FORMALISM  85 


greeted  with  a  great  deal  of  skepticism. 

That  formalist  principle  may  be  understood  as  utilitarian  in  character  is 
suggested  by  the  proposition  that  at  least  some  common  law  doctrines  were 
"efficient." '^^  It  is  suggested  by  a  Humean  understanding  of  the  "utility"  of  rules 
yielded  by  social  practice  to  the  extent  these  are  incorporated  in  law.'^^  It  is 
suggested  by  a  rule  utilitarian,  rather  than  act  utilitarian  version  of  proper 
consequentialist  approach  and  by  recognition  that  administrative  cost, 
particularly  the  "cost"  of  irremediable  official  ignorance,  is  very  high.  ^^^  I  do  not 
here  offer  a  utilitarian  account  of  the  common  law,  the  form  of  law  conceived  by 
classical  formalists,  as  the  law.  Others  have  done  so.'^^  I  claim  merely  that 
formalist  conceptualism  and  rule  worship  may  have  masked  an  underlying 
consequentialism,  albeit  one  of  limited  ambition. 

I  greet  more  ambitious  consequentialism  with  skepticism  not  because  it  lacks 
appeal.  Economic  analysis  of  law,  a  sophisticated  form  of  consequentialism, 
seems  to  me  the  most  intellectually  appealing  of  extant  alternatives.  It  is 
particularly  attractive  because  it  takes  seriously,  rather  than  merely  paying  lip- 
service,  to  the  idea  that  there  are  two  sides  to  every  story:  every  benefit  has  a 
cost.  Moreover,  elements  of  that  analysis  have  had  the  salutary  effect  of 
defeating  naive  consequentialism:  the  unfortunate  belief  that,  by  prohibiting 
some  bad  or  requiring  some  good,  the  bad  will  be  banished  and  the  good  will 
displace  the  status  quo.'^^  Nevertheless,  we  should  also  be  skeptical  of 
sophisticated  consequentialism  for  the  simple  reason  that  we  lack,  and  are  likely 
to  continue  to  lack,  information  necessary  to  it.  Let  me  briefly  explain  this 
skepticism. 

There  are  two  distinct  levels  at  which  consequentialist  prediction  and 
weighing  exercises  might  occur,  although  the  distinction  will  be  fuzzy  in 
practice.  One  level  may  be  labeled  institutional.  It  entails  assessment  of  the 
predicted  costs  and  benefits  of  alternative  institutional  arrangements,  particularly 
the  alternatives  of  markets  and  governmental  and  non-governmental 
hierarchies.'^^  The  other  may  be  labeled  infra-institutional.  It  entails  the 
adoption  and  use  of  the  prediction  of  consequences  and  the  weighing  of  costs  and 
benefits  as  a  method  of  decision  within  a  given  institution.'^* 


1 22.  E.g. ,  Richard  A.  Posner,  Economic  Analysis  of  Law  27 1  -8 1  (5th  ed.  1 998). 

123.  David  Hume,  Enquiry  Concerning  The  Principles  OF  MoRALS,§  III,  pt.  II  (3d  Selby- 
Biggs  ed.  1 975)  [1 777];  see  HAYEK,  Law,  Legislation  and  Liberty,  supra  note  4,  at  II 3. 

1 24.  Hayek,  Law,  Legislation  and  Liberty,  supra  note  4,  at  11 3 . 

125.  See  RICHARD  ALLEN  EPSTEIN,  SIMPLE  RULES  FOR  A  COMPLEX  WORLD  ( 1 995  ). 

126.  E.g.,  Richard  Craswell,  Passing  On  The  Costs  of  Legal  Rules:  Efficiency  and 
Distribution  In  Buyer-Seller  Relationships,  43  STAN.  L.  REV.  361  (1991). 

127.  E.g.,  Neil  K.  Komesar,  Imperfect  Alternatives:  Choosing  Institutions  in  Law, 
Economics,  and  Public  Policy  (1994);  Oliver  E.  Williamson,  The  Economic  Institutions 
of  Capitalism  (1985);  R.H.  Coase,  The  Nature  of  the  Firm,  4  Economica  386  (1937);  R.H.  Coase, 
The  Problem  of  Social  Cost,  3  J.  L.  &  ECON.  1  (1960). 

128.  Thus,  for  example,  judicial  decision  under  "reasonableness"  or  "under  all  facts  and 
circumstances"  tests,  where  given  a  balancing  of  costs  and  benefits  gloss,  entails  infra  institutional 


86  ITMDIANA  LAW  REVIEW  [Vol.  36:57 


Consider,  first,  infra-institutional  predicting  and  weighing.  Hard  formalist 
rules,  at  least  those  whose  content  creates  or  facilitates  what  I  have  called  empty 
spaces,  tend  to  allocate  decision  making  authority  to  "private"  or  "market" 
institutions.  If  rationalist  depictions  of  human  behavior  are  correct,  persons 
within  these  empty  spaces  then  engage  in  prediction  and  weighing  exercises.  The 
hard  rules  that  surround  and  support  these  empty  spaces  may  often  serve,  or,  at 
least,  be  explained  as  serving  the  function  of  compelling  persons  to  consider,  in 
their  weighings,  the  goods  and  the  bads  inflicted  by  their  actions  on  others. 
However,  it  remains  the  case  that  persons  operating  within  such  empty  spaces 
have  jurisdiction  over  prediction  and  weighing.*^^  By  contrast,  anti-formalist 
"soft  rules"  or  "standards"  allocate  this  jurisdiction  to  governmental 
functionaries,  to  the  extent  that  these  personages  have  authority  to  make  "all 
things  considered"  judgment.  They  will  ultimately  engage  or  threaten  to  engage 
in  predicting  and  weighing.  This  is  true,  as  well,  however,  of  hard  rules  that 
direct  particular  outcomes  and  means  of  achieving  those  outcomes,  for  such  rules 
deny  or  destroy  empty  spaces.  The  governmental  functionaries  who  create  such 
directive  rules  have  engaged  in  an  ex  ante  predicting  and  weighing  in  either  naive 
or  sophisticated  versions.  Prediction  and  weighing  occurs,  then,  within  distinct 
institutions  and  is  therefore  engaged  in  by  distinct  classes  of  persons. 

Consider,  now,  prediction  and  weighing  in  the  choice  of  institution.   The 


prediction  and  weighing.  The  economic  interpretation  of  negligence  is  an  obvious  example.  E.g., 
William  M.  Landes  &  Richard  A.  Posner,  The  Economic  Structlfre  of  Tort  Law  ( 1 987). 
On  the  other  hand,  strict  liability  is  not  an  alternative  to  prediction  and  weighing  if  this  method  is 
employed  in  identifying  the  party  who  will  be  strictly  liable,  as  in  analysis  of  the  "least  cost 
avoider."  And  negligence  need  not  entail  a  regime  of  ongoing  prediction  and  weighing  if  it  is 
dominated  in  fact  by  rules.  OLIVER  Wendell  Holmes,  The  Common  Law  98-99  (M.  De Wolfe 
Howe  ed.,  1963).  See  Stephen  G.  Gilles,  Negligence,  Strict  Liability,  and  the  Cheapest  Cost- 
Avoider,  78  Va.  L.  Rev.  1291  (1992);  Stephen  G.  Gilles,  Rule-Based  Negligence  and  the 
Regulation  of  Activity  Levels,  21  J.  LEGAL  STUD.  319  (1992). 

1 29.  A  complication,  however,  is  the  matter  of  remedy.  In  the  standard  analysis,  "property 
rule"  remedies  (such  as  injunctions  and,  perhaps,  specific  performance  orders)  force  questions  of 
allocation  into  market  or  contracting  institutions  and,  therefore,  would  be  favored  in  the  "formalist" 
scheme  I  am  depicting.  Guido  Calabresi  &  A.  Douglas  Melamed,  Property  Rules,  Liability  Rules, 
and  Inalienability:  One  View  of  the  Cathedral,  85  Harv.  L.  Rev.  1089  (1972).  (This  would  also 
be  true  of  contractions  of  liability,  the  expansion  of  the  realm  of  damnum  absque  injuria,  because 
a  dismissal  order  is  the  partial  analogue,  for  the  complaining  party,  to  an  injunction  against  the 
responding  party).  Also  in  the  standard  analysis,  liability  rule  remedies  (damages)  are  employed 
where  contracting  is  obviated  by  transaction  costs,  and  damages  are  prices.  The  difficulties  with 
damages  are  that  they  "substitute"  govemmentally  determined  objective  estimates  of  cost  for  a 
fundamentally  subjective  experience  of  cost,  rendering  them  prone  to  error  and  unpredictable. 
Governmental  pricing  of  behavior  may  be  said  to  leave  choice  jurisdiction  in  the  hands  of  "private 
actors,"  as,  for  example,  in  the  notion  that  "efficient  breach"  justifies  expectation  damages.  But  it 
also  is  governmental  pricing,  so  there  can  be  no  assurance  that  the  prices  set  reflect  those  that  would 
be  subjectively  demanded.  Perhaps  more  importantly,  I  submit  that  these  prices  are  not  predictable 
ex  ante,  so  the  incentive  function  justifying  these  prices  is  in  doubt. 


2003]  LEGAL  FORMALISM  87 


allocation  of  jurisdiction  might  be  decided  on  the  basis  of  predicting  and 
weighing.  One  might  say,  for  example,  that  transaction  costs  in  a  particular 
context  preclude  appropriate  private  decision  within  an  empty  space  and  that  the 
distortions  of  interest  group  politics  are  unlikely  to  be  present  in  this  context,  so, 
on  balance,  jurisdiction  should  be  allocated  to  a  judicial,  "political,"  "public,"  or 
"administrative"  institution.  Alternatively,  one  might  predict  that  transaction 
costs  in  a  particular  context  are  low  and  governmental  information  costs  high,  so, 
on  balance,  jurisdiction  to  engage  in  infra-institutional  predicting  and  weighing 
should  be  allocated  to  the  empty  space. 

With  these  preliminaries  out  of  the  way,  let  me  return  to  the  matter  of 
skepticism  about  competence  as  a  justification  for  formalism,  addressing,  first, 
sophisticated  prediction  and  weighing  as  a  means  of  doing  law  and,  second,  such 
prediction  and  weighing  as  a  basis  for  allocating  decision-making  jurisdiction. 

By  "sophisticated  prediction  and  weighing  as  a  means  of  doing  law,"  I  mean 
the  use  of  these  methods  by  legal  authorities  in  making  particular  decisions,  and, 
therefore,  assume  allocation  of  choice  making  jurisdiction  to  governmental 
authority.  I  also  again  mean,  however,  the  use  of  these  methods  in  formulating 
hard  rules  of  a  command  and  control  variety:  rules,  formalist  in  their  hard  form, 
but  anti-formalist  in  their  rejection  of  empty  spaces.  A  rule  that  directs  ends  and 
means  is  functionally  equivalent  to  an  "all  things  considered"  decision  by  a 
governmental  functionary,  for,  in  both  instances,  it  is  a  governmental  institution 
that  determines  particulars.  The  phenomena  differ  only  in  time  (ex  ante  or  ex 
post)  of  governmental  decision. 

The  reasons  for  skepticism  are  many  and  have  been  repeatedly  offered  by 
others.  Let  me,  however,  briefly  rehearse  some  of  these  reasons:  (1)  The, 
ironically,  formalist  method  of  prediction  employed  by  sophisticated  prediction 
and  weighing,  which  is  rigorous  deduction  from  the  rationality  and  scarcity 
postulates,  misspecifies  the  complex  character  of  human  behavior. '^°  (2)  The 
specification  of  particular  motivations  as  the  ends  sought  through  means-ends 
rationality  too  often  misspecifies  the  complexity  of  human  motivation.  '^'  (3)  The 
objective  prices  necessarily  postulated  in  weighing  exercises  either  ignore  or  are 
poor  proxies  for  the  reality  of  the  subjectivity  of  cost. '^^  (4)  The  commitments 
of  the  analyst  therefore  necessarily  color  objective  price  estimates. '^^    (5) 


1 30.  E.g. ,  Howard  Margolis,  Selfishness,  Altruism  and  Rationality  ( 1 982);  Richard 
H.  Thaler,  The  Winner's  Curse:  Paradoxes  and  Anomalies  of  Economic  Life  (1992); 
Christine  Jolls  et  al.,  A  Behavioral  Approach  to  Law  and  Economics .>  50  STAN.  L.  REV.  1471 
(1998). 

131.  E.g.,  Amartya  Sen,  Rational  Fools:    A  Critique  of  the  Behavioral  Foundations  of 
Economic  Theory,  6  Phil.  &  PUB.  Aff.  314  (1977). 

132.  E.g.,  James  M.  Buchanan,  Cost  and  Choice  (1969);  Friedrich  A.  Von  Hayek, 
Economics  And  Knowledge,  in  FRIEDRICH  A.  VON  HAYEK,  INDIVIDUALISM  AND  ECONOMIC  ORDER 
33  (1948).  For  interesting  arguments  regarding  the  implications  of  subjectivism,  see  Gregory 
Keating,  Reasonableness  and  Rationality  in  Negligence  Theory,  48  STAN.  L.  REV.  31 1,  337-41, 
367-73  (1996);  Gary  Lawson,  Efficiency  and  Individualism,  42  DUKE  L.J.  53  (1992). 

133.  Duncan  Kennedy,  Distributive  and  Paternalist  Motives  in  Contract  and  Tort  Law,  with 


88  INDIANA  LAW  REVIEW  [Vol.  36:57 


Empirical  evaluation  of  the  hypotheses  generated  by  the  exercise  most  often  does 
not  occur. '^"^  (6)  When  empirical  testing  does  occur,  the  tests  employed  are 
insufficiently  sensitive;  so,  while  they  may  produce  results  consistent  with  a 
tendency  with  which  the  hypothesis  is  also  consistent,  they  cannot  satisfy  a 
falsifiability  criterion. '^^  (7)  When  empirical  testing  occurs  and  generates 
suggestive  results,  it  is  always  subject  to  methodological  and  interpretive 
challenge,  and,  most  often,  these  challenges  are  sufficiently  weighty  to  preclude 
reliance.  Therefore,  there  is  typically  an  unsurprising  positive  correlation 
between  prior  political  or  moral  commitment  and  interpretation  of  empirical 
findings. '^^  (8)  Finally,  the  analytical  apparatus  is  so  "rich,"  or  perhaps  porous, 
that  it  permits  competing  and  inconsistent  plausible  hypotheses  about  behavior,'" 
again  often  correlated  with  prior  commitment,  and  choice  between  these 


Special  Reference  to  Compulsory  Terms  and  Unequal  Bargaining  Power,  4 1  Md.  L.  Rev.563,  597- 
604  (1982);  Duncan  Kennedy,  Freedom  and  Constraint  in  Adjudication:  A  Critical 
Phenomenology,  36  J.  LEGAL  Educ.  518(1 986). 

1 34.  The  best  evidence  of  this  phenomenon  are  the  pleas  of  advocates  for  more  empirical 
research.  E.g.,  POSNER,  supra  note  22,  at  164,  217. 

135.  For  example,  empirical  evidence  supports  the  proposition  that  "incentives  matter."  E.g. , 
PoSNER,  supra  note  122,  at  220-24  (providing  evidence  indicating  that  tort  liability  reduces 
accidents).  The  more  difficult  issue,  however,  is  whether  a  particular  form  of  incentive  matters, 
and,  more  specifically,  whether  attempts  at  precision  in  formulating  legal  incentives  matter.  This 
may  be  doubted.  See  Gary  T.  Schwartz,  Reality  in  the  Economic  Analysis  of  Tort  Law:  Does  Tort 
Law  Really  Deter?,  42  UCLA  L.  REV.  377  (1994). 

1 36.  There  are,  of  course,  numerous  examples;  I  offer  the  following  as  representative: 
Compare  William  G.  Bowen  &  Derek  Bok,  The  Shape  of  the  River:  Long  Term  Consequences  of 
Considering  Race  in  College  and  University  Admissions  (1998),  with  Stephen  Thernstrom  & 
Abigail  Thernstrom,  Reflections  on  the  Shape  of  the  River,  46  UCLA  L.  Rev.  1583  (1999). 
Compare  Terrrance  Sandalow,  Minority  Preferences  Reconsidered,  97  MiCH.  L.  REV.  1 874  ( 1 999) 
and  Terrance  Sandalow,  Rejoinder,  97  MiCH.  L.  REV.  1923  (1999),  with  William  G.  Bowen  & 
Derek  Bok,  Response  to  Review  by  Terrance  Sandalow,  97  MiCH.  L.  REV.  1917  (1999). 
Additionally,  compare  Roberta  Romano,  The  State  Competition  Debate  in  Corporate  Law,  8 
Cardozo  L.  Rev.  709  (1987),  with  Elliott  J.  Weiss  &  Laurence  J.  White,  Of  Econometrics  and 
Indeterminacy:  A  Study  in  Investors '  Reactions  to  "Changes  "  in  Corporate  Law,  75  Cal.  L.  Rev. 
551(1 987);  cf  Adrian  Vermeule,  Interpretation,  Empiricism,  and  the  Closure  Problem,  66  U.  CHI. 
L.  Rev.  698  (1999)  (maintaining  empirical  inquiry  often  unable  to  answer  questions  it  addresses 
at  reasonable  cost  and  within  useful  period  of  time). 

137.  PoSNER,  supra  note  2,  at  363-67.  See  Henry  N.  Butler,  The  Contractual  Theory  of  the 
Corporation,  1 1  GEO.  MASON  L.  REV.  99  (1989)  (criticizing  "misapplications"  of  theory).  For 
example,  consider  the  matter  of  insider  trading  prohibition  and  the  many  ingenuous  efforts  at 
justifying  it  in  economic  terms  in  face  of  the  standard  economic  critiques  of  the  prohibition.  For 
an  overview  of  this  debate  from  a  critical  viewpoint,  see  Stephen  M.  Bainbridge,  Securities 
Law:  Insider  Trading  125-73  (1999).  For  an  example  of  ingenuous  effort,  see  the  work  of  my 
colleague,  Nicholas  Georgakopoulos.  Insider  Trading  as  a  Transactional  Cost:  A  Market 
Microstructure  Justification  and  Optimization  of  Insider  Trading  Regulation,  26  CONN.  L.  REV. 

1  (1993). 


2003]  LEGAL  FORMALISM  89 


hypotheses  cannot  be  made  within  the  spirit  of  "scientific"  inquiry  absent  more 
powerful  empirical  mechanisms  than  we  possess  or  are  likely  in  the  future  to 
possess. 

What  of  prediction  and  weighing  as  a  method  of  allocating  decision-making 
authority?  The  issue  here  is  who  should  decide,  in  particular,  which  institution 
should  decide.  It  may  seem  that  I  have  already  loaded  the  argument  in  favor  of 
"private"  realms  or  market  institutions  by  expressing  skepticism  about  the 
prediction  and  weighing  capacities  of  governmental  actors,  but  this  is  not  yet 
quite  the  case.  If  governmental  actors  are  poor  predictors  and  weighers,  so,  too, 
may  be  private  actors.  So  the  question  of  institutional  allocation  is  distinct  from 
the  question  of  method  assuming  an  allocation.  The  question  of  prediction  and 
weighing  as  a  method  of  determining  an  appropriate  allocation  is,  likewise, 
distinct  from  the  question  of  this  method  employed  as  a  device  for  reaching 
particular  decisions. 

The  issue  with  respect  to  allocation  is,  presumably,  that  of  relative 
institutional  competence:  which  institution  is  most  likely  to  make  the  best 
decisions?  Unfortunately,  however,  this  question  assumes  an  answer  to  a  further 
underlying  question:  what  is  meant  by  "best"?  A  prediction  and  weighing 
method  of  answering  the  allocation  question  would  seem  to  assume  a  welfarist 
criterion  as  an  answer  to  this  underlying  question,  quite  possibly  an  efficiency 
criterion.  On  this  assumption,  the  allocation  question  becomes:  which  institution 
is  most  likely  to  generate  "efficienf  outcomes?'^* 

Persons  who  approach  legal  issues  from  the  perspective  of  this  allocation 
question  tend  to  do  so  by  identifying  various  defects  in  the  institutions  in 
question,  usually  defects  that  serve  as  obstacles  to  efficiency. '^^  Markets  or 
private  contracting  institutions  are  afflicted  with  "transaction  costs."  Political 
institutions  and  administrative  agencies  are  affected  with  the  rent-seeking  evils 
of  interest  group  politics.  Courts  and  juries  are  afflicted  with  an  inability  to 
initiate  action,  costly  processes,  and  substantial  questions  of  competence.  The 
method  of  prediction  and  weighing  in  assessing  the  allocation  question  is 
therefore  one  of  predicting  relative  institutional  performance  and  weighing  the 
force  of  these  defects  in  particular  contexts. 

The  method,  when  applied  to  the  question  of  allocation,  potentially  suffers 
from  the  problems  recounted  above  when  applied  to  actual  decisions  given  an 
allocation.  In  particular,  it  would  suffer  from  these  problems  if  it  purported  to 
identify  with  precision  the  monetary  or  other  values  to  be  assigned  the  costs  and 
benefits  of  alternative  institutions.  This,  however,  is  rare.  The  more  typical 
exercise  in  this  form  of  analysis  is  unquantified  description.  The  analysis 
therefore   tends    to    rely    upon    what    I    term    "knowable    tendencies"    or 


138.  This  again,  however,  is  not  the  only  possible  criterion.  One  might  seek  to  make 
predictions  about  which  institution  is  best  able  to  effect  egalitarian  outcomes.  KOMESAR,  supra 
note  127,  at  34-49. 

139.  Id.  at  53-152;  Daniel  H.  Cole,  The  Importance  of  Being  Comparative,  33  iND.  L.  REV. 
921  (2000). 


90  INDIANA  LAW  REVIEW  [Vol.  36:57 


generalizations  about  human  behavior  and  not  upon  unknowable  particulars.  "'^ 
Moreover,  analysis  of  comparative  institutional  competence  is  Hayekian  in  spirit, 
for  it  recognizes  that  institutional  capacity  is  the  central  question. 

Nevertheless,  there  are  reasons  to  be  skeptical  of  the  method  of  prediction 
and  weighing  when  applied  to  the  question  of  allocation  of  jurisdiction,  even 
when  the  method  relies  upon  general  tendencies  and  eschews  quantification  of 
particulars.  One  reason  is  that  the  historical,  perhaps  even  systematic,  tendency 
has  been  one  of  identifying  defects  in  one  institution  while  assuming  that  its 
alternatives  are  free  of  defects. '"*'  This  is  a  problem  that  may  be  overcome  in 
theory;  good  comparative  analysis  can  be  substituted  for  bad  comparative 
analysis."*^  The  tendency  to  bad  analysis  is  nevertheless  a  tip-off  to  a  second 
problem.  In  the  absence  of  an  adequate  mechanism  for  quantifying  cost  and 
benefits,  a  mechanism  I  have  been  suggesting  is  not  in  the  cards,  prediction  and 
weighing  will  reflect  prior  commitments  to  a  degree  that  the  exercise  will  merely 
confirm  these  priors.  If  my  prediction  is  incorrect,  if  there  are  at  least  some  cases 
in  which  unquantified  reliance  upon  general  tendencies  can  yield  predictions  free 
of  the  taint  of  prior  commitment,  there  is  a  third  problem.  We  will  most  often 
discover  both  that  the  defects  of  alternative  institutions  are  highly  correlated  and 
that  their  values,  while  unquantified,  are  probably  high.  The  result  is  that  we  are 
left,  or,  most  often  will  be  left,  with  no  clear  answer  to  the  question  of  relative 
institutional  competence.''*^  In  the  absence  of  an  objective  answer,  we  will  again 
fall  back  on  our  priors,  appearing  now  as  presumptions  left  unrebutted  by  the 
exercise. 

My  final  reason  for  skepticism  is  that  exercises  of  this  sort  purport  to  proceed 
from  outside  the  institutions  examined,  as  if  the  analyst,  from  this  outside  stance, 
were  in  a  position  to  allocate  jurisdiction  free  from  the  defects  she  detects  in 
these  institutions.  This,  of  course,  is  pure  fiction.  There  is  no  single,  conscious, 
impartial,  and  adequately  knowledgeable  entity  standing  outside  the  subject 
matter  and  possessing  authority  to  allocate.  The  fiction  is  useful  as  thought 
experiment.  But  it  is  pernicious  if  we  lose  track  of  the  fact  that  the  choosers  of 
institutions  are  our  existing  highly  imperfect  institutions  -the  institutions  subject 
to  the  failures  neoinstitutionalists  identify. 

B.  Ambition 

Although  I  have  mentioned  the  matter  of  ambition,  I  have  not  yet  directly 
addressed  it.  I  said  above  that  ambition  is  one  of  the  two  interrelated  sources  of 
normative  disagreement  about  formalism.  I  derive  this  from  the  claim  that 
formalism  fails  to  respond  to  "social  need."  The  implied  ambition  is  that  of 
satisfying  or  resolving  social  need.  Just  what  might  be  meant  by  "social  need"? 


140.  These,  at  least,  are  my  impressions.  Cf.  POSNER,  OVERCOMING  Law,  supra  note  5,  at 
426-37  (describing  neoinstitutional  theory's  rejection  of  economic  formalism). 

141.  Coase,  supra  note  1 27. 

1 42.  Cole,  supra  note  1 39. 

1 43 .  James  E.  Krier  &  Stewart  J.  Schwab,  Property  Rules  and  Liability  Rules:  The  Cathedral 
in  Another  Light,  70  N.Y.U.  L.  REV.  440  (1995). 


2003]  LEGAL  FORMALISM  91 


There  are  distinct  conceptions  of  the  function  of  law  and  of  the  "social  need" 
functionally  served  by  law. 

Classical  formalists  conceived  of  law  as  the  common  law."*"*  Important 
features  of  the  common  law,  as  it  was  addressed  by  the  classical  formalists,  were 
that  it  was  decentralized,  transactional,  corrective,  historical,  derivative,  status 
neutral,  and  in  an  important  sense  purposeless."*^  By  "decentralized,"  I  mean  that 
the  common  law  is  the  product  of  a  series  of  decisions  in  concrete  cases  by 
distinct  judges.  It  has  no  identifiable,  central  author,  and  therefore  resists  both 
positivism's  demand  for  a  sovereign  source  and  legal  realism's  positivist  fixation 
on  the  judge  as  a  declarer,  rather  than  a  follower,  of  law. '''^  By  "transactional," 
I  mean  that  its  focus  and  subject  matter  is  upon  particular  transactions,  whether 
voluntary  or  involuntary,  between  individuals.  By  "corrective,"  I  mean  that  it  is 
concerned  about  the  making,  or  not,  of  "wrong  moves"  by  individuals  within 
such  transactions.  Indeed,  it  assumes  and  preserves  a  status  quo  by  addressing 
wrong  moves  that  have  disturbed  the  status  quo.  By  "historical,"  I  mean  that  it 
addresses  past  transactions.  While  it  thereby  establishes  guidance  (or  rules)  for 
future  transactions,  it  does  not  in  a  broad  legislative  sense  purport  to 
prospectively  legislate  the  future  in  service  of  a  defined  collective  objective.  By 
"derivative,"  I  mean  that  it  is  derived  from  social  practice  or  common  morality, 
in  the  way  indicated  by  my  earlier  discussion  of  intuitionism.''*^  It  is  not,  then, 
directive  of  social  practice  in  the  way  that  a  command  originating  from  a  source 
alien  to  social  practice  is  directive.  By  "status  neutral,"  I  mean  that  it  is 
individualistic  in  the  sense  that  the  actions  of  individuals,  not  their  status  or 
group  membership,  count.  It  is  therefore  "general,"  in  the  sense  that  it  is 
formally  neutral.  By  "purposeless,"  I  mean  that  it  does  not,  at  least  directly,  seek 
to  achieve  some  consciously  articulated  collective  objective  or  end-state. 

If  this  is  correct  as  a  depiction  of  the  common  law,  classically  conceived,  it 
is  decidedly  non-functional  when  function  is  understood  as  service  to  consciously 
articulated  social  end-states,  and  it  decidedly  fails  to  serve  social  need  when  this 
need  is  defined  in  terms  of  such  end-states.  But  this  does  not  preclude  it  from 
being  functional  in  the  sense  of  enabling  persons  to  identify  with  whom  and  by 
what  means  they  may  transact  with  others  in  service  of  their  individual 


1 44.  E.g. ,  Grey,  supra  note  1 0,  at  34-35. 

145.  I  rely,  in  what  follows  in  the  text,  upon:  Barry,  supra  note  33;  Gjerdingen,  supra  note 
33,  at  876-83;  and  Mashaw,  supra  note  33,  at  11 53-59. 

1 46.  See  JOHN  Chipman  Gray,  The  Nature  and  Sources  of  the  Law  82, 9 1  (1916).  But 
see  id.  at  1 16.  I  deem  that  strand  of  legal  realism  that  emphasizes  the  judge  as  a  source  of  law 
"positivist"  in  that  positivists  are  supposed  to  be  committed  to  a  sovereign  source  of  law.  Realists 
could,  of  course,  either  favor  the  judge  as  a  sovereign  (Llewellyn)  or  disfavor  that  source  (as  in 
those  realists  who  preferred  rule  by  expert  administrative  agencies).  William  W.  Bratton,  Berk  and 
Means  Reconsidered  at  the  Century 's  Turn,  26  J.  CORP.  L.  737,  741-50  (2001). 

147.  See  supra  notes  35-42  and  accompanying  text.  Cf.  Donald  H.  Gjerdingen,  The  Coase 
Theorem  and  the  Psychology  of  Common-Law  Thought,  56  S.  Cal.  L.  REV.  71 1  (1983)  (indicating 
classical  common  law  thought  appeals  to  normative  intuitions  of  lay  persons). 


92  INDIANA  LAW  REVIEW  [Vol.  36:57 


preferences.''** 

The  obvious  objection  to  equating  formalism  with  this  depiction  of  the 
classical  common  law  is  that  classical  formalism's  alleged  "top-down" 
autonomous  conceptual  ism — its  commitment  to  deriving  legal  answers  from 
legal  principal — ^appears  inconsistent  with  a  decentralized,  "bottom-up"  common 
law,  a  common  law  buih  up  from  resolution  of  particular  actual  cases. '"^^  The 
"scientific"  aspirations  of  classical  formalism  -  its  attempt  to  select  the  one 
correct  rule  from  what  Langdell  thought  was  the  "useless"  jumble  of  the  common 
law'^° — may  be  viewed  as  one  well  within  a  centralized,  directive,  and 
prospectively  legislative  tradition  incompatible  with  this  depiction  of  the  features 
of  classical  common  law.'^'  Indeed,  Grant  Gilmore's  conception  and  critique  of 
formalism  may  perhaps  best  be  read  as  hostility  to  this  ambitious,  directive 
depiction.  Gilmore's  apparent  understanding  of  his  anti-formalism  was  one  of 
favoring  fact  sensitive,  almost  ad  hoc  judgment,  or,  at  least,  judgment  tied  only 
loosely  to  principle,  and  one,  following  Llewellyn,  relying  heavily  on  social 
practice. '^^  Nevertheless,  I  think  a  formalist  label  warranted.  Let  me  supply  four 
reasons  for  this  view. 

First,  it  is  important  to  again  recognize  that  the  classical  formalists  were 
engaged  in  an  inductive  project  of  identifying  principles  that  would  reconcile, 
systemize,  and  render  coherent  the  common  law.  The  source  of  their  principles 
was  common  law  precedent. '^^  To  systemize  and  rationalize  is  to  centralize  in  a 
sense,  but,  to  the  extent  that  the  formalist  project  rested  upon  the  products  of  a 
decentralized  process,  and  sought  to  be  true  to  these  products, '^^  it  remained 
decentralized  in  its  origin.  In  short,  the  classical  formalists  sought  to  restate,  in 
coherent  form,  the  traditions  of  the  common  law.  Now  it  is  true  that  they  are  also 
typically  understood  as  rigidifying  the  common  law,  as  exaggerating  its 


148.  That  is,  the  law  of  property,  contract  and  tort  may  be  understood  as  concerned  with 
enabling  exclusion  of  others  (private  property),  enforcement  of  promised  exchanges  (contract)  and 
establishing  a  knowable  line  between  permissible  and  impermissible  external ization  (tort),  all  on 
the  assumption  of  a  classically  liberal  (or,  if  one  wishes,  "atomized")  order.  See  Hayek,  Law, 
Legislation  and  Liberty,  supra  note  4,  at  112-1 5. 

1 49.  PosNER,  Overcoming  Law,  supra  note  5,  at  1 72-73 .  See  Melvin  Aron  Eisenberg,  The 
Nature  of  the  Common  Law  1 46-6 1  ( 1 988);  Antonin  Scalia,  A  Matter  of  Interpretation 
3-14  (1997);  SCHAUER,  supra  note  49,  at  174-81. 

1 50.  Christopher  Columbus  Langdell,  A  Selection  of  Cases  on  the  Law  of  Contracts 

V-VII  (1 871 ),  quoted  in  STEPHEN  B.  PRESSER  &  JAMIL  S.  ZAINALDIN,  LAW  AND  JURISPRUDENCE  IN 

American  History  734-36  (4th  ed.  2000).  See  Grey,  supra  note  10,  at  1 1  n.35,  24-27. 

151.  Indeed,  Hayek  at  one  point  so  viewed  it.  Hayek,  Law,  Legislation  and  Liberty,  supra 
note  4,  at  106. 

1 52.  Gilmore,  supra  note  1 ,  at  1 08- 11 . 

153.  Grey,  supra  note  10,  at  24-32. 

1 54.  This,  in  the  case  of  the  classical  formalists  was  a  condition  arguably  not  met.  A  standard 
objection  to  their  efforts  was  their  selective  treatment  of  caselaw  and  failure,  therefore,  to  recognize 
what  was  "really"  going  on.  E.g.,  Walter  Wheeler  Cook,  Williston  on  Contracts,  33  ILL.  L.  Rev. 
OF  NW.  U.  497  (1939)  (reviewing  the  Williston  treatise). 


2003]  LEGAL  FORMALISM  93 


coherence,  as  falsely  supposing  its  completeness,  and  as  misidentifying  the 
mechanism  of  decision  as  deduction  from  principle  rather  than  "utility," 
"situation  sense,"  or  "felt  need."'^^  If  it  is  true,  however,  that  utility,  situation 
sense  and  felt  need  were  the  true  mechanisms  that  brought  about  the  precedents 
from  which  the  classical  formalists  derived  their  principles,  it  is  difficult  to 
believe  that  these  principles  were  independent  of  the  mechanisms.  They  more 
plausibly  reflected  the  mechanisms. 

Second,  the  noted  features  of  common  law  are,  rather  precisely,  the  opposites 
of  the  features  of  law  advocated  by  many  critics  of  classical  formalism — legal 
realists,  post-realists,  and  pragmatic  instrumentalists.  For  many  of  the  critics, 
proper  law  is  centralized,  patterned,  distributive,  forward  looking,  directive, 
status  conscious,  and  purposive.'^^  It  is  "centralized"  in  that  realists  were 
obsessed  with  the  judge  as  an  author  or  maker  of  law  (as  opposed  to  applier  or 
interpreter  of  law)  and,  at  least  in  post-realist  practice,  favored  legislative 
direction  and  the  supposed  expertise  of  administrative  agencies,  particularly  at 
the  federal  level.  It  is  "patterned,"  "distributive,"  and  "forward  looking"  in  that 
it  is  viewed  as  an  instrument  for  conforming  classes  of  conduct  to  articulated 
collective  objectives  and  therefore  for  reform  of  the  status  quo.  It  is  "directive" 
in  that  law  is  an  instrument  for  reforming  social  practice  on  the  basis  of 
principles  or  policies  derived  independently  of  that  practice.  It  is  "status 
conscious"  in  that  it  focuses  upon  groups  and  deems  these  important.  It  is 
therefore  not  general  in  that  the  legal  rights  and  obligations  it  recognizes  are 
dependent  upon  status  or  context.  It  is  "purposive"  in  that  realist  and  post-realist 
law  is  an  instrument  for  achieving  collectively  articulated  "social"  ends. 

These  features  of  realist  aspiration  have,  of  course,  at  least  partially  become 
features  of  current  law — ^the  law  of  the  "administrative  state."'^^  This  is  true  not 
merely  in  the  law  as  interpreted  and  enforced  by  administrative  agencies,  but  also 
within  the  common  law  itself.  The  law  of  torts,  of  contract,  of  property  are  now 
largely  conceptualized  in  these  instrumental  terms  both  within  academia  and 


155.  See  Holmes,  supra  note  1 28  (felt  necessities  of  the  time);  Hume,  supra  note  1 23  (utility); 
Llewellyn,  supra  note  19,  at  268  (situation  sense);. 

1 56.  I  here  again  rely  upon  Gjerdingen,  Mashaw,  and  Barry,  supra  note  33. 

1 57.  See  G.  EDWARD  WHITE,  PATTERNS  OF  AMERICAN  LEGAL  THOUGHT  99  ( 1 978)  (realism  as 
intellectual  analog  to  the  New  Deal).  Professor  Duxbury  argues  that  the  New  Deal  (and,  by 
implication,  post-New  Deal  administrative  state)  were  not  reflections  of  legal  realist  jurisprudence 
on  the  ground  that  the  legal  realists,  as  academics,  failed  to  develope  a  theory  of  administrative  law. 
DuXBURY,  supra  note  7,  at  1 53-58  (nevertheless  citing  Roscoe  Pound  and  Jerome  Frank  for  the 
proposition  that  legal  realism  and  the  New  Deal  were  linked).  While  it  is  true  that  the  legal  realists, 
as  academics,  focused  on  "private  law,"  and  so  offered  a  perspective  on  the  common  law  opposed 
to  the  classical  characterization,  it  is  precisely,  I  submit,  the  realist  perspective  that  was  later 
reflected  in  New  Deal  and  post-New  Deal  regulatory  programs.  See  id.  at  7,  78  (realism  in  part  a 
response  to  laissez  faire);  id.  at  79-82  (realism  as  resort  to  social  sciences  with  object  of  social 
control);  id.  at  97-1 1 1  (realism  as  reflecting  institutional  economics,  particularly  its  egalitarian 
themes). 


94  INDIANA  LAW  REVIEW  [Vol.  36:57 


within  the  profession.'^*  Similarly,  contemporary  depictions  of  the  common  law, 
in  contrast  to  the  rigid  traditionalism  of  classically  formalist  depictions,  tend  to 
treat  rules  as  mere  guideposts  to  decision  by  a  governmental  fianctionary  in 
instrumental  service  of  socially  desirable  ends.'^^  In  short,  formalism's 
antagonist  was  and  remains  a  set  of  beliefs  at  the  core  of  which  is  the  conviction 
that  human  societies  can  and  should  be  consciously  planned  or  constructed.  It 
is  in  this  set  of  beliefs  that  another,  more  ambitious  understanding  of  function 
and  of  social  need  are  evident  and  to  which  formalism  is  "blind"  or  antagonistic. 

Third,  classical  formalism's  scientific  pretensions  were,  as  Professor  Grey 
has  demonstrated,  quite  unlike  the  scientism  of  pragmatic  instrumental ism.'^'^ 
Science,  for  classical  formalists,  entailed  the  paradigm  of  a  closed  logical  system. 
The  objective  was  to  render  law  on  the  model  of  geometry.  The  scientism  of 
formalism's  antagonist  is  closer  to  more  current  understandings  of  science,  with 
its  emphasis  upon  hypothesis  and  empirical  verification,  fondness  for 
experimentation,  and  objective  of  human  control  over  natural  phenomena. 
Langdell's  science  of  law  was  a  science  of  conceptual  consistency.  Realism's 
science  of  law  was  a  science  of  conscious,  purposeful  social  control.  There  is, 
then,  a  distinct  lack  of  ambition  in  formalist  science,  at  least  when  compared  to 
its  competitor. 

Finally,  it  is  not  necessary  to  a  contemporary  formalism  that  even  classical 
formalism's  ambitions  be  duplicated.  Given  my  concessions  that  law  as 
geometry  is  implausible  and  that  right  answers  in  hard  cases  cannot  be 
uncontroversially  resolved  through  reason,'^'  classical  formalism's  pretensions 
to  science  should  be  abandoned.  What  might  then  remain,  however,  could  very 
much  be  in  the  spirit  of  the  classical  common  law.  For  example,  dominant 
contemporary  views  of  the  common  law  as  a  fluid  process  might  give  way  to 
more  rigid  views,  views  in  which  stare  decisis  would  be  taken  more  seriously, 
attempts  at  distinguishing  precedent  would  be  looked  upon  with  more  skepticism, 
and  arguments  from  social  or  economic  change  would  be  viewed  with  suspicion. 

It  is  this  comparative  lack  of  ambition  I  wish  to  equate  with  formalism  as  a 
more  contemporary  project  and  with  a  contemporary  formalist  rejection  of 
"social  need"  more  ambitiously  defmed.  It  should  be  apparent  that  comparative 
lack  of  ambition  is  related  to  skepticism  about  methodological  capacity.  I  think 
skepticism  about  ambitious  method  leads  to  skepticism  about,  indeed  antagonism 
toward,  the  idea  of  a  collectively  specified  social  end-state  as  objective,  and  law 
as  means  to  this  objective.  The  reasons  may  be  found  in  the  tradition  of  Burkean 
conservatism,  summarized  in  the  law  of  unintended,  but  unquantifiable 
consequences  and  partially  justified  by  our  recent  historical  experience  with  the 
grotesque  evils,  grounded  in  ambition,  that  enjoyed  too  often  and  for  too  long  the 


158.  Thomas  C.  Grey,  Hear  The  Other  Side:  Wallace  Stevens  and  Pragmatist  Legal  Theory, 
63  S.  Cal.  L.  Rev.  1569,  1590  (1990);  Summers,  supra  note  8. 

159.  E.g.,  EiSENBERG,  supra  note  1 49;  SCALI A,  supra  note  1 49,  at  3- 1 4;  Schauer,  supra  note 
49,  at  174-81. 

1 60.  Grey,  supra  note  10  at  16-20. 

161.  See  supra  notes  20-2 1 ,  1 20-2 1  and  accompanying  text. 


2003]  LEGAL  FORMALISM  95 

support  of  an  intelligentsia  confident  of  its  capacities.'" 

C  Formalism  and  Politics 

Let  me  conclude  my  account  of  the  debate  between  formalists  and  anti- 
formalists  by  addressing  an  obvious  question:  Is  formalism  a  political  program? 
I  have  been  defending  formalism  as  contract  dominated,  common  law  permeated, 
with  empty  spaces.  Is  my  version  of  formalism  simply,  then,  a  species  of 
libertarian  or  classically  liberal  political  commitment? 

It  is  surely  the  case  that  critics  of  formalism  have  depicted  it  as  substantive, 
as  a  species  of  conservative  or  reactionary  ideology.  ^^^  Lochner  v.  New  York,^^ 
in  keeping  with  this  depiction,  is,  for  example,  often  deemed  an  example  of 
formalism.  It  seems  also  reasonably  clear  that  American  legal  formalism  is 
historically  associated  with  free  market,  laizze  faire  or  libertarian  positions. '^^ 
On  the  other  hand,  Lochner  is  not  in  fact  an  example  of  a  formalist  mode  of 
adjudication;  it  is  an  example  of  the  use  of  a  balancing  test,  albeit  one  employed 
in  service  of  a  laissez  faire  agenda.'^^    Perhaps  formalist  methods,  like  anti- 


1 62.  I  am  not  equating  legal  realism  or  pragmatic  instrumentalism  with  National  Socialism  or 
Communism.  Nor  am  I  suggesting  that  realism  or  pragmatism  inevitably  result  in  such  evils.  I  am, 
however,  suggesting  that  excessive  ambition  in  law  can  be  dangerous.  Cf.  Posner,  Overcoming 
Law,  supra  note  5,  at  1 53-59  (recognizing,  on  the  basis  of  INGO  MuLLER,  Hitler's  Justice:  The 
Courts  of  the  Third  Reich  (Deborah  Schneider  trans.,  1 990),  that  it  was  not  legal  positivism,  but 
a  rejection  of  positivism,  that  explains  the  behavior  of  German  judges  in  the  Nazi  era);  Cass  R. 
Sunstein,  Must  Formalism  Be  Defended  Empirically?,  66  U.  Chi.  L.  Rev.  636,  636-37  (1999) 
(same). 

1 63.  Horowitz,  supra  note  2;  cf.  Sunstein,  supra  note  102,  at  46-92  (critique  of  status  quo 
neutrality);  but  see  SUNSTElN,  ^wpra  note  5,  at  1 18-20  (rejecting  link  between  rule  of  law  and  free 
markets). 

164.  198  U.S.  45(1905). 

165.  DUXBURY,  supra  note  7,  at  25-32;  HOROWITZ,  supra  note  2,  at  33-39,  142,  193,  200. 

1 66.  PosNER,  Overcoming  Law,  supra  note  5,  at  284;  cf  Herbert  Hovenkamp,  Enterprise 
AND  American  Law  1836-1937,  at  172-75  (1991)  (generally  rejecting  formalism  as  explanation 
of  substantive  due  process).  Perhaps  the  best  argument  for  deeming  Lochner  a  formalist  decision 
is  the  claim  that  the  constitutional  concept  of  "liberty"  does  not  compel  freedom  of  contract,  so  the 
justices  in  Lochner  were  "dishonest"  in  not  justifying  their  claim  that  this  freedom  was 
constitutionally  protected.  See  SUNSTEIN,  supra  note  1 02,  at  45-67;  Schauer,  supra  note  6,  at  5 1 4. 

There  are  a  number  of  difficulties  with  this  contention.  First,  it  does  not  explain  why  the  non- 
economic  "freedoms"  recognized  by  post-New  Deal  constitutional  law  as  derivable  from  "liberty" 
or  other  constitutional  generalizations  are  not  subject  to  the  same  claim.  Granting  that  much  ink 
has  been  spilled  in  attempted  justification,  no  uncontroversial,  ironclad  argument  supports  these 
freedoms.  Second,  whether  any  given  freedom  is  necessarily  entailed  by  "liberty"  depends  upon 
whether  the  community  believes  it  is  so  entailed.  In  a  heterogenous  community,  consensus  is 
unlikely.  This  implies  that  (1)  Lochner  did  not  unjustifiably  derive  contractual  freedom  from 
constitutional  liberty  given  the  beliefs  of  a  community;  it  merely  failed  to  recognize  heterogeneity 
of  belief  and  (2)  this  justification  and  failure  support  and  infect  currently  recognized  constitutional 


96  INDIANA  LAW  REVIEW  [Vol.  36:57 


formalist  methods,  may  be  employed  to  serve  multiple  political  masters. 

It  seems  to  me,  in  fact,  both  that  the  various  interpretations  I  have  given 
formalism  can  operate  independently  of  each  other  and  that  at  least  the  law  as 
rules  and  law  as  conceptualism  interpretations  of  formalism  can  be  independent 
of  substantive  political  commitment.  It  is  quite  possible  to  formulate  rigid  rules 
on  quite  instrumentalist  grounds  and  it  is  quite  possible  to  deem  rigid  rules  the 
most  pragmatic  means  of  achieving  "social  objectives."  It  seems  to  me, 
moreover,  that  much  "left-wing"  or  "progressive"  legal  analysis  warrants  a 
formalism  as  conceptualism  label.  Substituting  egalitarian  conceptions  of 
equality  for  libertarian  conceptions  of  liberty  is  not  an  escape  from 
conceptualism.'^'  A  good  portion  of  consequentialist  analysis  is  employed  as 
"right-wing"  or  "conservative"  rebuttal  of  "left  wing"  or  "progressive" 
conceptualism.  '^*  The  association  of  formalism  with  the  right  and  anti-formalism 
with  the  left  may  therefore  rest  on  historical  contingency.  So  formalism  and  anti- 
formalism  may  simply  be  tools  or  weapons  of  convenience,  with  no  necessary 
connection  to  any  substantive  political  commitment. 

Nevertheless,  there  is  a  case  for  thinking  those  critics  of  formalism  who 
associate  it  with  conservative  or  libertarian  political  commitments  are  largely 
correct.  It  is  a  case  of  affinity,  and,  perhaps,  a  case  for  the  proposition  that 
formalist  form  may  be  a  necessary,  though  not  sufficient,  condition  for 
implementing  these  commitments. 


freedom.  Therefore,  (3),  either  the  claim  of  dishonesty  must  fail  or  it  must  be  applied  to  all 
controversial  constitutional  adjudication. 

The  claim  that  Lochner  was  "dishonest"  is  not,  in  my  view,  aided  by  the  claim  that  it  relied 
upon  a  "legally  constructed"  baseline  as  (falsely)  neutral.  This  is  my  view  for  two  reasons.  First, 
it  does  not  follow  from  the  contention  that  the  court  relied  upon  a  common  law  baseline  (or  that  it 
sought  to  elevate  the  common  law  to  constitutional  status)  that  this  baseline  was  consciously 
planned.  It  therefore  does  not  follow  that  conscious  planning  of  a  new  baseline,  even  given  that 
some  baseline  is  required,  is  justified.  The  common  law  and  conscious,  purposive  planning  entail 
distinct  processes  with  distinct  assumptions  about  human  capacity.  Second,  if  the  alternative  to  a 
common  law  baseline  is  "deliberative  democracy,"  it  should  be  apparent  by  now  that  "deliberative 
democracy,"  as  practiced,  is  perverse,  or,  at  least,  that  it  would  not  be  unreasonable  for  a 
contemporary  community  to  believe  that  it  is  perverse,  given  what  we  know  from  the  "public 
choice"  literature  and  given  what  we  know  of  the  electorate's  ignorance.  Compare  Daniel  A. 
Farber  &  Philip  P.  Frickey,  The  Jurisprudence  of  Public  Choice,  65  TEX.  L.  REV.  873  (1987) 
(moderate  criticism  of  public  choice  theory)  with  Michael  DeBow  &  Dwight  Lee,  Understanding 
ane  Misunderstanding  Public  Choice:  A  Response  to  Farber  &  Frickey,  66  TEX.  L.  REV.  993 
(1988)  (defense  of  public  choice  theory).  See,  e.g.,  Samuel  DeCanio,  Beyond  Marxist  State  Theory: 
State  Autonomy  in  Democratic  Societies,  14  CRITICAL  Rev.  215  (2002);  Reihan  Salam,  The 
Confounding  State:  Public  Ignorance  and  the  Politics  of  Identity,  14  CRITICAL  REV.  299  (2002). 

Of  course  these  musings  suggest  that  Lochner  was  a  formalist  decision  in  precisely  the  sense 
that  it  relied  upon  a  common  law  baseline  and,  if  my  earlier  contentions  are  correct,  that  this 
baseline  is  a  fundamental  assumption  of  formalism. 

1 67.  PosNER,  Overcoming  Law,  supra  note  5,  at  27 1  -86. 

168.  Kg,  PosNfER,  supra  note  122,  at  361-75,  514-18. 


2003]  LEGAL  FORMALISM  97 


If  we  begin  with  skepticism  about  conscious,  purposive  governmental 
direction,  it  should  be  apparent  that  the  various  features  of  formalism  1  have 
postulated  "fit"  that  skepticism  at  least  in  the  sense  that  they  are  partial  strategies 
for  implementing  it.  The  autonomy  of  law,  in  the  form  of  traditionalist 
conceptualism,  protects  law  from  the  ambitions  of  science  (as  science  is  now 
understood),  and,  therefore,  society  from  law  as  constructivist  social  science. 
This  autonomy  serves  also  to  protect  law  and  society  from  the  threat  posed  by 
anti-  formalist,  pseudo-scientific  ideologies,  ideologies  illustrated  by  the 
decidedly  anti-formalist  examples  of  National  Socialism  and  fascism  in  the  last 
century. '^^  This  protection  assumes  that  the  concepts  employed  are  "liberal,"  in 
the  old,  non-socialist,  sense  of  the  term,  so  the  protection  afforded  may  be 
historically  contingent,  but  conceptualism,  once  this  contingency  is  met,  is  a 
vehicle  for  avoiding  a  managed  society. 

Rigid  rules  provide  determinate  guidance,  enabling  coordination.  If 
employed  for  purposes  of  coordinating  individual  behavior  assumed  to  have  been 
undertaken  pursuant  to  diverse  private  ends,  such  rules  enable  empty  spaces. 
This  "if  is  another  contingency,  for  rigid  rules  may  be  employed  to  frustrate  or 
preclude  such  a  pursuit  and  to  direct  behavior  in  service  of  collectively 
formulated  public  ends.  The  Code  of  Federal  Regulations  is,  after  all,  full  of 
rigid-looking  rules.  Again,  however,  if  this  contingency  is  met,  a  rigid  rule 
preference  is  a  means  by  which  the  empty  space  becomes  viable. 

Perhaps,  however,  I  have  mischaracterized  the  political  sides  in  this  story. 
Consider  the  possibility  that  the  debate  is  between  authoritarians  and  anti- 
authoritarians.  Given  this  way  of  looking  at  matters,  my  contention  that 
skepticism  about  law  justifies  formalism  will  seem  particularly  ironic.  On  more 
standard  accounts,  formalism  is  grounded  upon  and  expresses  authoritarian 
certainty.  This,  recall,  was  Gilmore's  perception:  Formalism's  conceptual istic 
abstractions,  grounded  in  the  dead  hand  of  the  past,  ignore  the  particularized 
realities,  the  situation-specific  needs  and  expectations  of  real  people. '^°  Classical 
formalists  like  Langdell  ignored  the  operative  facts  of  real  cases  in  favor  of  their 
preferred  principles,  so  formalism  resembles  the  centralized  directives  of  a 
distant  commissar.  One  might  respond  that  it  is  the  administrative  state,  the 
culmination  of  legal  realist  thought,  that  better  fits  this  commissar  charge,  but 
this  rejoinder  won't  work  against  Gilmore;  he  had,  or  said  he  had,  no  sympathy 
for  the  administrative  state  and  claimed  that  formalists  and  legal  realists  had  in 
common  both  scientism  and  a  lamentable  belief  in  implementable  truth. '^' 

This  brings  me  to  the  original  question  posed  in  this  essay.  I,  largely 
following  Hayek,  have  depicted  formalism,  or  at  least  a  version  of  formalism,  as 
a  strategy  for  minimizing  law  for  anti-authoritarian  reasons.  Gilmore  attacks 
formalism  on  the  basis  that  it  is  an  authoritarian  conception  of  law. '^^  How  might 


1 69.  See  supra  note  1 62;  see  also  Guido  Calabresi,  Two  Functions  of  Formalism,  67  U.  CHI. 
L.  REV.  479  (2000). 

1 70.  Gilmore,  supra  note  1 ,  at  4 1  -56. 

171.  /df.  at  100-01. 

172.  Id. 


98  INDIANA  LAW  REVIEW  [Vol.  36:57 


this  conflict  be  explained?  One  clear  possibility  is  that  one  of  us  is  wrong  in  our 
understanding  of  formalism,  or,  perhaps  more  plausibly,  that  we  have  distinct 
interpretations  of  an  amorphous  concept.  Another  possibility  is  that  this  conflict 
reflects  a  deeper  and  more  fundamental  conflict  between  conceptions  of  what  it 
means  to  be  anti-authoritarian. 

I  think  this  second  possibility  is,  in  fact,  a  probability.  There  is  a  deep, 
fundamental  conflict  in  perception.  But  I  do  not  here  attempt  to  diagnose  its 
origins.  Instead,  I  will  attempt  to  point  out  some  of  its  manifestations.  One  such 
manifestation  is  the  distinction  between  an  ex  ante  and  ex  post  conception  of 
law.'^^  Formalism,  as  I  have  depicted  it,  is  very  much  within  the  ex  ante 
conception.  Its  anti-authoritarian  strategy  is  that  of  providing  a  set  of  knowable 
rules  in  service  of  empty  spaces  human  interaction.'^"*  "Freedom"  falls  out  of  the 
ability  to  know  what  to  do  to  achieve  one's  ends  through  compliance  with  these 
knowable  rules.  Rules  are  therefore  ex  ante  guides  to  behavior.  Gilmore's 
dispute-centered  version  of  law  is,  by  contrast,  one  within  the  ex  post  conception. 
As  I  read  him,  he  was  concerned  about  what  to  do  after  the  fact,  and  he  answered 
with  a  version  of  all  things  considered,  contextual  ized  judgment.  I  take  it  that  he 
wished  to  tie  this  judgment,  through  fact  sensitivity,  or  "situation  sense"  to  some 
version  of  cultural  expectation.  If  so,  it  would  not  be  rules  or  even  common  law 
precedents,  but  the  capture  of  contextual  ized  expectations  that  would  generate, 
almost  as  an  afterthought,  any  ex  ante  predictability. 

Consider,  in  particular,  Gilmore's  anti-formalist  rhetoric — ^the  claim  that 
formalism's  abstractions  impose  themselves  on  real  world,  situation  specific 
needs  and  expectations.  This  view  makes  perfect  sense  to  anyone  who  places 
himself  in  the  position  of  the  judge,  for  example,  in  the  imaginings  of  the  legal 
academic.  It  makes  sense  because  anyone  with  decent  instincts  will  want  a 
resolution  of  a  dispute  that  seems  to  him  just,  all  things  considered.  Hard 
formalist  rule  worship  will  therefore  seem  indecent.  But  this  is  the  view  of 
authority,  of  the  person  who  has  or  wishes  to  have  responsibility  for  decision. 
The  point  of  "indecent"  formalism  is  that  it  allocates  jurisdiction  for  decision 
elsewhere. 

Gilmore  might  respond  by  citing  rule  skepticism.  If  it  is  true  that  rules 
cannot  themselves  constrain,  if  all  things  considered  judgment  is  inevitable  and 


173.  See  Robert  E.  Scott,  Chaos  Theory  and  the  Justice  Paradox,  35  Wm.  &  Mary  L.  Rev. 
329  (1993)  (discussing  the  Justice  paradox  as  tension  between  doing  justice  in  particular  case  and 
regulation  of  future). 

174.  Can  this  assertion  be  reconciled  with  my  transactional/historical  depiction  of  classical 
common  law,  supra  text  and  notes  144-48.  It  can,  on  the  following  grounds:  For  the  law  to  be 
historical  and  transactional  does  not  mean  that  it  must  be  concerned  with  justice  between  the  parties 
to  a  particular  past  transactional  event  on  an  all  things  considered  basis.  In  the  formalist  version 
of  historical  and  transactional  justice,  it  means  instead  that  law  is  concerned  with  identifying  wrong 
moves  as  these  are  defined  by  knowable  rules.  Similarly,  an  ex  ante  perspective,  one  that  seeks  to 
establish  guidance  for  the  future,  need  not  entail  an  effort  to  plan  means  of  achieving  a  collectively 
determined  end-state.  In  the  formalist  depiction,  ex  ante  means  simply  the  establishing  of  knowable 
rules  for  engaging  in  future  transactions  between  individuals. 


2003]  LEGAL  FORMALISM  99 


merely  pushed  underground  by  a  norm  of  justification  by  reference  to  rule, 
formalist  hopes  are  obviously  at  risk.  And  if  the  real  constraint  is 
attitudinal — the  formalist  judge's  good  faith  effort  to  be  a  formalist  and 
Gilmore's  judge's  good  faith  effort  to  be  a  wise  interpreter  of  cultural 
expectation — ^the  formalist  cannot  viably  claim  he  has  a  better  means  of 
constraining  ambition. 

Perhaps  this  is  correct,  but  I  do  not  believe  that  it  is  to  a  degree  that  would 
obviate  the  claim  that  formalism's  constraints  on  ambitious  law  are  superior  to 
Gilmore's  reliance  on  official  wisdom.  If  I  am  correct  in  believing  extreme  rule 
skepticism  unjustified,  formalism's  constraints  provide  a  basis  for  disciplining 
decision  and  a  benchmark  for  critique.  An  appeal  to  open-ended  wisdom  does 
not. 

Conclusion:  Is  Formalism  Likely? 

I  have  thus  far  argued  that  formalism  is  both  viable  and,  at  least  to  me  and 
perhaps  a  few  others,  attractive.  I  will  close  by  addressing  the  question  whether 
it  is  likely — ^whether,  that  is,  there  is  a  reasonable  prospect  that  it  will  triumph.  '^^ 
My  answer  is  no.  I  do  not  mean  by  this  answer  either  that  formalism  is  wholly 
absent  from  American  law  or  that  it  will  disappear  from  American  law.  It  is  both 
present  and  enjoying  in  some  contexts  a  resurgence.  Nevertheless,  I  think  the 
prospects  for  its  triumph  unlikely  for  two  sets  of  reasons. 

First,  underlying  formalism  are  a  set  of  values,  or,  perhaps,  personality  traits, 
that  are  largely  absent  in  contemporary  America,  particularly  within  the 
intelligentsia.  Formalism  requires  restraint  in  the  form  of  a  tolerance  of  apparent 
injustice,  apparent  absurdity,  even  apparent  evil.  I  say  "apparent"  because 
injustice,  absurdity  and  evil  are  more  often  than  not  controversial 
characterizations  rather  than  reflections  of  consensus,  because  the  benefits  of 
correcting  these  bads,  even  where  there  is  consensus  that  they  are  bads,  are 
always  accompanied  by  costs  to  legitimate  interests  and  values,  because  these 
costs  are  often  ignored  and  often  thoughtlessly  denigrated,  and  because  the  terms 


1 75.  A  fair  question  is  what  would  such  a  triumph  entail?  It  should  be  apparent  at  this  point 
that  formalism  as  I  interpret  it  is  not  merely  a  conception  of  the  common  law  or  one  of  the  proper 
role  of  the  judge  or  of  adjudication.  Rather,  it  is  a  comprehensive  program  for  law.  It  would 
therefore  entail,  if  implemented,  either  that  the  restrained  sense  of  ambition  and  competence  I 
advocate  be  internalized  both  by  judges  and  by  legislators  or  that  it  be  internalized  by  judges  and 
(arrogantly!)  employed  by  them  to  constrain  legislators.  If  it  is  too  late  to  return  to  Lochner,  narrow 
interpretive  strategies  might  be  adopted. 

It  should  be  noticed  that,  while  textualism  is  sometimes  deemed  a  formalist  strategy,  it  is  not 
in  fact  clear  whether  it  would  enable  or  prevent  a  judiciary  bent  on  constraining  legislative  excess. 
Compare  SCALIA,  supra  note  149,  at  29  (rejecting  strict  construction  as  anti-democratic  and 
denying  that  textualism  is  anti-democratic),  with  Price  Marshall,  No  Political  Truth:  The  Federalist 
and  Justice  Scalia  on  the  Separation  of  Powers,  12  U.  ARK.  LITTLE  RoCK  L.  Rev.  245,  253-54 
(1989)  (Scalia  seeks  to  restrain  legislature);  David  Schultz,  Judicial  Review  and  Legislative 
Deference:  The  Political  Process  of  Antonio  Scalia,  16  NOVA  L.  REV.  1249,  1265-71  (1992) 
(Scalia  distrusts  legislative  process). 


100  INDIANA  LAW  REVIEW  [Vol.  36:57 


"absurdity"  and  "evil"  are  often  employed  without  a  sense  of  proportion  and  in 
service  of  Utopian  visions. 

These  "oftens"  to  one  side,  it  remains  the  case  that  formalism  demands 
tolerance  of  bad  things,  and  under  circumstances  in  which  there  is  apparent 
power  to  correct  them.  This  is  not  a  tolerance  much  evident  in  contemporary 
value  systems.  The  formalist's  failure  to  correct  apparent  injustice  has  been 
denigrated  as  an  escape  from  responsibility,  evidence  of  adolescence,  and  as 
rendering  the  formalist  himself  the  author  of  the  evil  he  tolerates. '^^  I  think  these 
characterizations  unjustified,  but  they  must  be  conceded  to  be  popular. 

Lest  I  be  misunderstood,  let  me  make  it  clear  that  I  do  not  deny  that  great 
evils  have  been  furthered  by  the  law;  although  I  think  more  great  evils  are 
associated  with  anti-formalism  than  with  formalism.  My  points,  rather,  are  that 
the  distinction  between  great  evils  and  unfortunate  bads  is  not  one  much  admired 
in  contemporary  America,  that  the  resulting  intolerance  of  unfortunate  bads 
threatens  formalism's  empty  spaces,  and  that  this  intolerance  appears  currently 
rampant. 

Second,  formalism  isn't  much  fun,  particularly  from  an  intellectual  point  of 
view.  I  do  not  think  formalism  "easy"  or  unchallenging.  Nor  do  I  think  the 
formalist  in  fact  a  mere  automaton,  applying  without  difficulty  rule  to  fact.  Both 
formalist  rhetoric  and  anti-formalist  rhetoric  exaggerate  formalism  when  they 
depict  it  as  unproblematic  rule  following.  Nevertheless,  formalism  is  not 
unbridled  moral  philosophy,  applied  price  theory  or  the  ingenuous  remaking  of 
American  society  through  the  working  out  of  a  set  of  allegedly  "preferred" 
values.  It  cannot,  therefore,  be  attractive  to  persons  with  large  intellectual 
ambitions.  Law  schools  and  the  legal  profession  have  for  many  years  now 
attracted  precisely  such  persons.  The  result  is  no  doubt  a  vast  improvement  in 
the  academic  quality  of  the  schools,  and,  perhaps,  the  intellectual  power  of  the 
profession.  I  cannot  help  thinking  that  society  would  have  been  better  off  if  this 
talent  had  applied  itself  within  more  socially  productive  fields,  but  this  is  not  my 
point.  My  point  is  that  formalism  is  not  a  likely  candidate  for  fulfilling  these 
ambitions. 

In  short,  formalism,  like  other  "isms,"  requires  for  its  triumph  compatibility 
with  the  self  interest  of  the  elites  in  a  position  to  implement  it.  That  condition 
is  not  satisfied. 


1 76.   Frank,  supra  note  14.  Cf.  Alexander,  supra  note  47,  at  562-64  (formalism  as  morally 
implausible). 


Abundant  Media,  Viewer  Scarcity:  A  Marketplace 

Alternative  to  First  Amendment  Broadcast 

Rights  and  the  Regulation  of 

Televised  Presidential  Debates 


Paul  B.  Matey* 


Introduction 

The  dramatic  conclusion  to  the  2000  presidential  election  revealed  a  deeply 
divided  nation.  Voters  split  their  choices  throughout  the  country,  sweeping  out 
a  host  of  Republican  incumbents,  while  ending  eight  years  of  Democratic  control 
in  the  White  House.  If  the  message  sent  to  Washington  was  far  from  clear,  so  too 
was  the  motivation  for  the  voters'  choices.  Although  the  candidates  poured 
millions  into  commercials,  Internet  sites,  and  bus  tours,'  an  undecided  public 
focused  on  one  campaign  event:  the  debates.  Despite  the  alternatives,  and  even 
with  the  inherent  flaws,  the  live  presidential  debates  became  a  singularly 
important  source  of  information  for  American  voters.  Indeed,  more  than  forty-six 
million  households  tuned  in  for  the  first  debate,  a  number  exceeding  the  first 
face-off  between  the  candidates  in  1996.^ 

The  continued  importance  of  the  presidential  debates,  however,  might  soon 
prove  insufficient  to  surmount  the  economics  of  network  broadcasting.  In  the 
past  decade,  broadcast  networks  have  watched  viewers  depart  in  record  numbers, 
lured  away  by  new  technology  and  an  ever- increasing  array  of  media  alternatives. 
With  cable,  satellite,  and  the  Internet  all  vying  for  consumer  attention,  television 
networks  continue  to  face  slumping  ratings  and  sagging  profits. 

Television  networks  have  long  questioned  their  role  as  guardians  of  the 
public  interest.  Today,  with  low-cost  media  alternatives  eroding  the  television 
audience,  the  networks  have  launched  a  renewed  attack  on  the  Federal 
Communication  Commission's  policies  on  civic  programming  through  court 
challenges,  lobbying,  and  news  editorials.  In  the  2000  election  two  networks,  the 
National  Broadcasting  Company  (NBC)  and  the  FOX  Network  (FOX),  stepped 
up  their  protests  by  simply  refusing  to  air  the  first  of  the  general  election 
presidential  debates.  While  sharp  criticism  rained  down  from  the 
Commissioners,  the  ratings  suggest  that  the  American  public  welcomed  the 
content  choice.   With  no  end  to  network  troubles  in  sight,  the  2004  elections 


*  Law  Clerk  to  the  Honorable  Robert  E.  Cowen,  United  States  Court  of  Appeals  for  the 
Third  Circuit,  2002-03.  J.D.,  Seton  Hall  University  School  of  Law.  I  thank  Mark  Alexander,  Matt 
Caudill,  Joy  Lindo,  Scott  Matey,  and  Dale  Matey  for  their  thoughtful  suggestions  and  revisions. 
Comments  may  be  directed  to  paul_matey@alum.shu.edu. 

1 .  According  to  the  Federal  Election  Committee,  of  the  candidates  who  remained  in  the  race 
through  the  election,  Democratic  presidential  hopefuls  spent  $53,708,403,  Republicans 
$94,466,341,  and  other  parties  a  combined  total  of  $14,428,180.  Receipts  of  1999-2000 
Presidential  Campaigns  Through  July  31,  2000,  available  at  http://www.fec.gov/finance/precm8. 
htm  (last  visited  Feb.  18, 2002).  Candidates  who  withdrew  before  the  election  spent  a  combined 
total  of  $342,963,864.  Id. 

2.  See  infra  note  213  and  accompanying  text. 


102  INDIANA  LAW  REVIEW  [Vol.  36:101 


could  lack  any  unified  television  coverage. 

Preserving  the  historic  importance  of  the  televised  presidential  debates  will 
require  the  Federal  Communications  Commission  (FCC)  and  the  Supreme  Court 
to  confront  the  foundation  of  broadcast  regulation  in  the  United  States. 
Historically,  the  Court  has  supported  the  FCC's  duty  to  protect  the  public 
interest,  relaxing  the  protections  of  the  First  Amendment  to  permit  content-based 
restrictions  on  broadcasters.  The  basis  for  this  public  interest  role,  however,  rests 
firmly  on  the  doctrine  of  spectrum  scarcity  to  justify  the  governmental  grant  of 
broadcast  monopoly  power.  Scarcity  theories,  long  criticized  as  economically 
inefficient,  have  now  been  attacked  as  scientifically  flawed  and  incompatible 
with  the  new  digital  world.  Today,  many  argue  that  increased  competition  in 
broadcast  media  provides  a  better  guarantee  of  the  public  interest  than  intrusive 
government  oversight.  Trusting  the  market,  however,  might  ignore  the  unequal 
access  to  new  broadcast  technologies  and  trap  large  numbers  of  the  American 
electorate  behind  the  digital  divide. 

A  legislative  solution  is  an  attractive  but  unlikely  answer.  The  FCC's  public 
interest  power,  which  includes  authority  to  regulate  broadcast  indecency,  is 
difficult  for  politicians  to  attack  directly  without  loss  of  political  capital. 
Moreover,  the  2000  presidential  elections  highlighted  more  pressing  deficiencies 
in  the  voting  process,  problems  that  remain  in  the  national  spotlight.^ 
Administrative  options  within  the  FCC  are  equally  unlikely,  given  its  size, 
structure,  and  partisan  composition. 

Judicial  intervention,  sometimes  criticized  in  other  areas  of  national  debate, 
is  the  best  solution.  The  Supreme  Court  holds  the  unique  responsibility  of 
defining  the  First  Amendment  rights  of  broadcasters.  The  Court  is  both  the 
historic  arbiter  of  the  Constitution  and  the  modem  source  of  the  FCC's  sweeping 
regulatory  authority.  A  solution  to  the  chaos  of  the  First  Amendment  rights  of 
broadcasters  is  necessary  and  available  in  the  same  economic  analysis  that 
supports  the  criticism  of  the  current  state  of  the  law.  This  Article  suggests  that 
the  First  Amendment  rights  of  broadcasters  should  be  evaluated  using  the  market 
power  of  the  broadcast  content  to  determine  the  degree  of  constitutional 
protection.  This  Article  then  applies  this  new  standard  of  review  to  a  model 
broadcast  debate  regulation,  which  compels  the  major  television  networks  to 
provide  live  coverage  of  the  general  presidential  debates. 

Part  I  of  this  Article  recounts  the  history  of  American  broadcast  regulation. 
Tracing  the  development  of  the  FCC  through  statute  and  commentary.  Part  I 
outlines  the  doctrines  of  scarcity  that  underlie  the  FCC's  public  interest  mission. 
Noting  the  economic  irrationality  of  the  scarcity  theory  and  its  conflict  with  First 
Amendment  values,  Part  I  concludes  that  scarcity  does  not  justify  continued 
federal  oversight.  Part  II  continues  with  a  discussion  of  the  past  and  present 
importance  of  live  televised  debates  in  the  general  presidential  election."*  This 


3.  Edward  Walsh  &  Dan  Balz,  One  Year  Later,  Election  Reform  Remains  Elusive,  WASH. 
Post,  Nov.  13,  2001,  at  A3. 

4.  Broadcast  coverage  of  political  debates  has  raised  concerns  outside  the  general 
presidential  elections.     Commentators  have  addressed  problems  regarding  coverage  of  the 


2003]  REGULATION  OF  PRESIDENTIAL  DEBATES  1 03 


section  also  explains  the  2000  presidential  debates  and  the  decision  of  NBC  and 
FOX  to  decline  live  coverage. 

With  this  background  in  mind,  Part  III  offers  a  fresh  solution  based  on  the 
reasoning  of  the  Supreme  Court's  two  most  recent  First  Amendment  broadcasting 
decisions,  Reno  v.  ACLlP  and  Turner  Broadcasting  System,  Inc.  v.  FCC  (Turner 
7).^  After  an  overview  of  the  Court's  content  approach  to  speech.  Part  III 
explains  the  Court's  forum-spec ific  approach  to  the  First  Amendment  in 
broadcasting.  The  Court's  attention  to  the  converging  markets  for  broadcast 
speech  suggests  a  finite  future  for  the  scarcity  doctrine  and  a  new  technology- 
specific  approach  to  the  First  Amendment  in  broadcasting.  Part  III  then  explains 
an  alternative  market-based  approach  to  the  First  Amendment  rights  of 
broadcasters  using  the  product  and  geographic  market  standards  developed  in 
antitrust  economics.  Market  power.  Part  III  argues,  provides  a  dividing  line 
between  the  scarce  media  of  broadcast  television  and  radio  and  the  plentiful 
resources  of  the  digital  spectrum.  Full  First  Amendment  protections  for  only 
converged^  broadcast  media.  Part  III  concludes,  will  retain  administrative 
regulation  over  lagging  technologies  while  inducing  broadcasters  to  speed  the 
development  of  broadband. 

Part  IV  constructs  a  model  regulation  compelling  the  coverage  of  the  general 
presidential  debates.  After  outlining  the  suggested  goals  of  a  debate  rule.  Part  IV 
tests  the  model  against  the  market-based  First  Amendment  review.  Despite  the 
emerging  alternatives  to  broadcast  television  and  the  competing  sources  of 
campaign  information.  Part  IV  concludes  that  national  televised  coverage  of  the 
general  presidential  debates  comprises  a  single,  powerftil  content  market. 
Technological  advancements  and  a  national  spirit  of  campaign  reform  could  soon 
transform  our  understanding  of  broadcast  political  coverage.   Until  then,  this 


presidential  primaries,  and  contests  for  seats  in  both  houses  of  Congress.  See,  e.g.,  Jamin  B. 
Raskin,  The  Debate  Gerrymander,  77  TEX.  L.  REV.  1943  (1999).  Others  have  noted  the  problems 
posed  by  the  Supreme  Court's  decision  in  Arkansas  Education  Television  Commission  v.  Forbes, 
523  U.S.  666  (1998),  which  held  that  states  may  exclude  so-called  "third-party  candidates"  on 
neutral  criteria  such  as  the  "public  interest"  in  the  candidate.  See,  e.g.,  Kyu  Ho  Youm,  Editorial 
Rights  of  Public  Broadcasting  Stations  vs.  Access  for  Minor  Political  Candidates  to  Television 
Debates,  52  Fed.  Comm.  L.J.  687  (2000);  Keith  Darren  Eisner,  Comment,  N on- Major- Party 
Candidates  and  Televised  Presidential  Debates:  The  Merits  of  Legislative  Inclusion,  141  U.  Pa. 
L.  Rev.  973  (1993).  The  general  presidential  election  debates,  however,  "occur  in  the  one  campaign 
that  commands  considerable  voter  attention."  Daniel  H.  Lowenstein,  Commentary,  Election  Law 
Miscellany:  Enforcement,  Access  to  Debates,  Qualification  of  Initiatives,  11  TEX.  L.  REV.  2001, 
2010  (1999).  Accordingly,  there  might  be  "no  basis  in  evidence  or  in  common  sense  for 
extrapolating  from  the  importance  of  presidential  general  election  debates  a  similar  significance" 
to  other  debates.  Id.  Without  addressing  the  merits  of  the  comparison,  this  Article  assumes  that 
the  general  presidential  election  debates  are  indeed  "major  events,"  different  in  scope  and  meaning 
from  other  debates.  Id.  The  analysis  of  this  Article  is  limited  accordingly. 

5.  521  U.S.  844  (1997). 

6.  512  U.S.  622  (1994). 

7.  See  infra  notes  247-48  and  accompanying  text. 


104  INDIANA  LAW  REVIEW  [Vol.  36:101 


Article  suggests  that  federal  oversight  of  the  televised  presidential  debates  is  an 
appropriate  and  necessary  limitation  on  the  First  Amendment  rights  of  networks. 

I.  FEDERAL  Regulation  of  the  Airwaves:  A  Brief  Historical 
Overview  of  Duty  and  Theory 

Broadcast  regulation  emerged  from  a  combination  of  military  pressure, 
international  tragedy,  and  a  limited  understanding  of  technology.  Given  a  broad 
statutory  mandate  by  Congress,  federal  broadcast  regulation  sought  to  order  the 
multitude  of  speakers  rushing  to  the  newly  discovered  airwaves.*  Throughout  the 
Twentieth  Century,  the  modest  regulatory  goal  initially  conceived  by  Congress 
developed  a  wide  social  mission  through  federal  regulations  aimed  at  improving 
the  quality  of  public  debate.^  During  the  same  period,  the  analytic  foundations 
for  these  concededly  laudatory  goals  have  been  continually  questioned  and 
repeatedly  marginalized.  An  examination  of  these  foundations,  based  on  the 
doctrine  of  scarcity,  illustrates  that  additional  control  over  broadcasting  could 
strain  First  Amendment  precedents  despite  the  importance  of  preserving  an 
informed  electorate. 

A.   The  Early  History:  Ships,  Radios,  and  Secretary  Hoover 

Federal  control  of  the  American  broadcast  airwaves  emanated  from  the 
tragedy  of  the  Titanic ^°  In  the  early  1900s,  broadcast  radio  emerged  as  a 
commercial  force  in  naval  communications,  primarily  in  the  business  of  private 
shipping."  The  Titanic  disaster  highlighted  the  growing  concerns  of  the  U.S. 
Navy  that  autonomous,  unregulated  radio  broadcasters  impeded  the  safe  passage 
of  military  and  commercial  vessels,  creating  a  state  of  chaos  on  the  seas.'^ 


8.  See  Marc  Sophos,  Comment,  The  Public  Interest.  Convenience,  or  Necessity:  A  Dead 
Standard  in  the  Era  of  Broadcast  Deregulation?,  10  PACE  L.  Rev.  661, 666  (1990). 

9.  See  Lee  C.  Bollinger,  Images  of  a  Free  Press  65  ( 1 99 1 ). 

10.  See  Thomas  G.  Kjrattenmaker  &  Lucas  A.  Powe,  Jr.,  Regulating  Broadcast 
Programming  5  (1994).  Although  the  Titanic  sent  several  distress  calls  in  the  hours  before  the 
ship  disappeared,  "amateur  radio  operators  along  the  East  Coast  filled  the  air  with  questions, 
rumors,  and,  most  of  all,  interference."  Id. 

1 1 .  See  R.H.  Coase,  The  Federal  Communications  Commission,  2  J.L.  &  ECON.  1,1-2(1 959). 
The  growth  of  maritime  commerce  led  to  the  passage  of  the  Wireless  Ship  Act  of  1910,  which 
required  ships  leaving  a  United  States  port  with  more  than  fifty  passengers  to  be  equipped  with 
radio  transmitters.  Wireless  Ship  Act  of  June  24,  1910,  ch.  379,  36  Stat.  629. 

1 2.  See  S.  REP.  No.  659, 6 1  st  Cong.  §3(1912),  reprinted  in  Coase,  supra  note  1 1 ,  at  2.  The 
Navy  further  claimed  that  "[clalls  of  distress  from  vessels  in  peril  on  the  sea  go  unheeded  or  are 

drowned  out "  Coase,  supra  note  1 1,  at  2.  In  addition,  the  ratification  of  the  first  international 

radio  treaty  in  1912  required  the  United  States  to  develop  uniform  policies  of  broadcasting  that 
were  compatible  with  international  use.  See  Robert  L.  Milliard,  The  FEDERAL  Communications 
Commission:  A  Primer  61  (1991).  The  combination  of  military  pressure  and  international 
obligation  moved  Congress  to  action.  See  Mike  Harrington,  A-B-C,  See  You  Real  Soon:  Broadcast 
Media  Mergers  and  Ensuring  a  "Diversity  of  Voices;'  38  B.C.  L.  REV.  497,  503  (1997). 


2003]  REGULATION  OF  PRESIDENTIAL  DEBATES  1 05 


Congress  responded  by  seizing  the  radio  airwaves  and  requiring  radio  operators 
to  seek  licenses  from  the  Department  of  Commerce.  Spurred  by  the  Navy,  the 
Radio  Act  of  1912'^  created  a  regulatory  system  that  favored  large-scale 
commerce,'"*  and  not  surprisingly,  military  defense.'^ 

The  1912  Act,  however,  proved  insufficient  to  control  the  rapid  growth  of  the 
radio  industry  in  the  1920s'^  as  private  operators  rushed  to  develop  the  new 
market.'^  Seeking  uniformity,  then  Secretary  of  Commerce  Herbert  Hoover 
began  denying  new  commercial  radio  licenses.'^  Soon  after,  Hoover's  power  to 
condition  licenses  under  the  1 9 1 2  Act  was  removed  by  court  challenge,  '^  leaving 
the  radio  industry  without  effective  federal  oversight.  As  the  Supreme  Court 
later  observed,  the  result  was  again  "chaos."^**  Following  a  showdown  between 
Secretary  Hoover  and  the  broadcasting  industry,^'  Congress  passed  the  Radio  Act 


13.  The  Radio  Act  of  1912,  Pub.  L.  No.  62-264,  37  Stat.  302. 

1 4.  See  KRATTENMAKER&  POWE,  supra  note  1 0,  at  6.  The  authors  note  that  while  ships  were 
granted  an  exclusive  portion  of  the  broadcast  spectrum,  amateur  operators  were  "relegated  to 
oblivion."  Id.  See  also  Coase,  supra  note  1 1,  at  3  (noting  that  under  the  1912  Act,  amateur 
broadcasters  were  limited  to  wavelengths  less  than  two  hundred  meters). 

15.  See  Krattenmaker  &  PowE,  supra  note  10,  at  6.  In  particular,  the  1912  Act  allowed 
the  military  to  seize  all  radio  signals  and  equipment  in  wartime.  Id. 

16.  Thomas  W.  Hazlett,  The  Rationality  of  U.S.  Regulation  of  the  Broadcast  Spectrum,  33 
J.L.  &  ECON.  133,  139  (1990)  (reporting  that  by  1922  more  than  576  broadcast  stations  were 
transmitting  in  the  United  States). 

1 7.  Karen  Beth  Gray,  Note,  Fairness  Doctrine  Termination:  Extinction  of  an  Unenforceable 
Theory,  22  SUFFOLK  U.  L.  Rev.  1057,  1058-59  (1988). 

18.  See  Krattenmaker  &  Powe,  supra  note  10,  at  9.  Secretary  Hoover  had  originally 
sought  to  broker  wider  industry  regulation  through  a  series  of  meetings  between  government 
agencies  and  commercial  broadcasters  called  the  National  Radio  Conferences.  See  Coase,  supra 
note  1 1 ,  at  4.  Although  the  meetings  produced  a  series  of  legislative  recommendations.  Congress 
adopted  none  of  the  proposals.  See  id. 

1 9.  Hoover  v.  Intercity  Radio,  Inc.,  286  F.  1003  (D.C.  Cir.  1923).  Secretary  Hoover  sought 
to  limit  the  number  of  successful  licensees  by  drafting  detailed  conditions  into  the  applications.  See 
Coase,  supra  note  1 1 ,  at  4.  In  1 923,  Secretary  Hoover  convened  another  meeting  of  the  National 
Radio  Conference,  which  concluded  that  the  191 2  Act  permitted  the  Secretary  to  regulate  both  the 
frequencies  of  radio  broadcasts,  and  the  hours  of  operation  for  radio  licensees.  See  Red  Lion 
Broad.  Co.  v.  FCC,  395  U.S.  367,  375  n.4  (1969).  Soon  after,  however,  the  Court  of  Appeals  for 
the  District  of  Columbia  held  that  the  Secretary's  role  in  the  licensing  process  under  the  191 2  Act 
was  limited  to  the  selection  of  the  wavelength  for  the  applicant.  See  Intercity  Radio,  286  F.  at  1 007. 
Accordingly,  the  Act  of  19 12  reposed  "no  discretion  whatever  in  the  Secretary  of  Commerce,"  and 
made  the  issuance  of  a  license  "mandatory."  Id. 

20.  /?e£/L/o«,  395U.S.at375. 

2 1 .  See  Hazlett,  supra  note  1 6,  at  1 4 1 .  Although  the  Intercity  Radio  decision  had  limited  the 
regulatory  power  of  the  Commerce  Department,  Secretary  Hoover  began  reftising  to  process  new 
applications  in  defiance  of  the  court's  order.  See  id.  Hoover's  actions  were  again  disapproved  by 
court  decision,  and  his  powers  limited  once  more  to  only  "the  regulations  in  the  Act  itself."  Coase, 
supra  note  1 1,  at  5  (discussing  United  States  v.  Zenith  Radio  Corp.,  12  F.2d  614  (N.D.  111.  1926)); 


106  INDIANA  LAW  REVIEW  [Vol.  36:101 


of  1927^^  and  created  a  new  agency,  the  Federal  Radio  Commission  (FRC).^^ 
The  1927  Act  marked  the  beginning  of  serious  federal  communications 
overs  ight.^"* 

In  1934,  Congress  tightened  the  regulation  of  broadcasting  by  replacing  the 
FRC  with  the  FCC.^^  Congress  gave  the  new  seven-member  commission^^  wide 
regulatory  power  over  all  broadcast  media,  including  radio,  telegraph,  and 
telephone.^^  Congress  also  carried  over  the  FRC's  basic  mandate  into  the  1934 
Act,  empowering  the  FCC  to  issue  broadcast  licenses^*  for  the  "public  interest, 
convenience,  or  necessity."^' 

B.  The  Public  Interest  Standard  Explained  and  Applied 

The  public  interest  standards  of  the  Acts  of  1 927  and  1 934  provided  the  FCC 
with  general  authority  to  protect  the  public  interest.^"  The  public  interest 
doctrine  was  not  an  entirely  new  concept;  it  had  been  used  elsewhere  in  federal 
legislation  governing  state-created  monopolies^'  and  private  control  of  public 


see  also  Fed.  Regulation  of  Radio  Broad.,  35  Op.  Att'y  Gen.  No.  126,  129  (1926)  (agreeing  with 
the  Zenith  court's  interpretation  of  the  1912  Act,  and  concluding  that  "[tjhe  power  to  make  general 
regulations  is  nowhere  granted  by  specific  language  to  the  Secretary"). 

Rather  than  continuing  to  challenge  the  regulatory  limits  imposed  by  the  1912  Act,  Secretary 
Hoover  "issued  a  statement  abandoning  all  his  efforts  to  regulate  radio  and  urging  that  the  stations 
undertake  self-regulation."  NBC  v.  United  States,  3 1 9  U.S.  1 90, 2 1 2  ( 1 943).  With  federal  oversight 
removed,  a  flood  of  new  broadcasters  swarmed  the  airwaves,  and  "[mjore  than  two  hundred  stations 
were  established  in  the  next  nine  months."  Coase,  supra  note  1 1,  at  5. 

22.  Radio  Act  of  1927,  ch.  169,  44  Stat.  1 162. 

23.  /<^.  §3,atll62. 

24.  See  Timothy  B.  Dyk  &  Ralph  E.  Goldberg,  The  First  Amendment  and  Congressional 
Investigations  of  Broadcast  Programming,  3  J.L.  &  POL.  625,  628  (1987). 

25.  See  Communications  Act  of  1934,  ch.  652,  48  Stat.  1064. 

26.  Id.  §  4(a),  at  1066.  In  1986,  Congress  reduced  the  FCC's  membership  to  five.  Pub.  L. 
No.  99-334,  100  Stat.  513,  47  U.S.C.  §  154(a). 

27.  See  DONALD  J.  JUNG,  THE  FEDERAL  COMMLJNICATIONS  COMMISSION,  THE  BROADCAST 

Industry,  AND  THE  Fairness  Doctrine:  1981-1987,at8(1996).  The  1934  Act,  however,  retained 
substantially  all  of  the  regulatory  framework  of  the  1927  Act.  See  FCC  v.  Pottsville  Broad.  Co., 
309  U.S.  134, 1 37  (1940).  The  FCC  was  permitted  to  issue  licenses  for  three-year  periods,  where 
the  license  would  benefit  the  public  interest.  Communications  Act  of  1934,  ch.  652,  §  307, 48  Stat. 
1064,  at  1083-84. 

28.  For  an  overview  of  the  modem  broadcast  licensing  process,  see  Timothy  B.  Dyk,  Full 
First  Amendment  Freedom  for  Broadcasters:  The  Industry  as  Eliza  on  the  Ice  and  Congress  as  the 
Friendly  Overseer,  5  YALE  J.  ON  REG.  299, 301-02  (1988). 

29.  Communications  Act  of  1934,  ch.  652,  §  602(a),  48  Stat.  1064. 

30.  See  BOLLINGER,  supra  note  9,  at  63  (describing  the  public  interest  doctrine  in 
broadcasting  as  "the  most  general  mandate  imaginable"). 

3 1 .  See,  e.g..  United  Shoe  Mach.  Corp.  v.  United  States,  258  U.S.  45 1, 464  (1922)  (holding 
that  Section  Three  of  the  Clayton  Act  is  not  an  unconstitutional  restriction  on  the  rights  of  patent 


2003]  REGULATION  OF  PRESIDENTIAL  DEBATES  1 07 


resources.^^  The  Supreme  Court  first  explained  the  public  interest  standard  of  the 
Communications  Acts  in  NBC  v.  United  States,  stating  that  the  public  interest 
doctrine  assumes  that  broadcast  regulation  should  "secure  the  maximum  benefits 
...  to  all  the  people  of  the  United  States.""  Recounting  the  chaotic  results  that 
followed  the  narrow  interpretations  of  the  1912  Act,^"*  the  Court  concluded  that 
Congress  had  premised  the  Act  of  1927  on  the  belief  that  federal  regulation  was 
essential  to  avoid  wasting  the  broadcast  airwaves.^^  The  1927  Act  thus 
established  a  "unified  and  comprehensive  regulatory  system"  to  manage 
broadcast  traffic.^^ 

The  Court  added,  however,  that  the  1927  Act  "does  not  restrict  the 
Commission  merely  to  supervision  of  the  traffic."^^  The  Court  noted  that  the 
"dynamic"  nature  of  radio  necessitated  broad  legislative  language  capable  of 
evolving  with  new  developments  in  the  broadcast  medium.^^  The  1927  Act, 
according  to  the  Court,  delegated  to  the  FCC  the  task  of  determining  the  "larger 
and  more  effective  use  of  radio."^^  The  Court  supported  this  broad  interpretation 
by  citing  the  physical  limits  of  the  broadcast  spectrum,  reasoning  that  because 
"[t]he  facilities  of  radio  are  not  large  enough  to  accommodate  all  who  wish  to  use 
them,"  the  FCC  is  authorized  to  determine  "the  composition  of  [the]  traffic.""*" 
The  Court  thus  used  the  chaos  of  unregulated  broadcast ing"*'  to  justify  both 
procedural  and  substantive  regulation  of  the  airwaves."*^ 


holders,  as  Congress  may  prohibit  "in  the  public  interest  the  making  of  agreements  which  may 
lessen  competition  and  build  up  monopoly"). 

32.  See,  e.g. ,  Transportation  Act  of  1 920,  Pub.  L.  No.  66- 1 52, 4 1  Stat.  456, 477-78  (requiring 
the  Interstate  Commerce  Commission  to  determine  whether  a  proposed  extension  to  a  railroad  is 
required  for  the  "present  or  future  public  convenience  and  necessity");  Bd.  of  Trade  of  Chicago  v. 
Olsen,  262  U.S.  1,  41  (1923)  (holding  that  because  the  Chicago  grain  exchange  is  a  business 
"affected  with  a  public  national  interest"  it  is  "subject  to  national  regulation  as  such");  Munn  v. 
Illinois,  94  U.S.  11 3, 1 26  ( 1 876)  (holding  that  when  private  property  is  devoted  to  a  public  interest, 
the  owner  "must  submit  to  be  controlled  by  the  public  for  the  common  good,  to  the  extent  of  the 
interest . . .  created"). 

33.  NBC  V.  United  States,  319  U.S.  190,  217  (1943). 

34.  See  supra  notes  13-21  and  accompanying  text. 

35.  A^^C,  319U.S.  at213. 

36.  Id.  at  214.  The  Court  specifically  noted  that  "[r]egulation  of  radio  was ...  as  vital  to  its 
development  as  traffic  control  was  to  the  development  of  the  automobile."  /c/.  at  213. 

37.  /^.  at  215-16. 

38.  /^.  at  219-20. 

39.  Id.  at  216.  The  Court  viewed  the  1927  Act  as  an  unremarkable  exercise  of  legislative 
delegation,  defining  "broad  areas  for  regulation"  and  general  "standards  for  judgment."  Id.  at  2 1 9- 
20. 

40.  /£/.  at  215-16. 

41.  See  FCC  v.  Sanders  Bros.  Radio  Station,  309  U.S.  470,  475  (1940). 

42.  In  NBC,  the  Court  stated  that  the  1 934  Act  is  not  solely  concerned  with  the  regulation  of 
broadcast  traffic,  but  also  "puts  upon  the  Commission  the  burden  of  determining  the  composition 
of  that  traffic."  //BC,  319  U.S.  at  215-16.  InCBSv.  Democratic  National  Committee,  ^\2  M.S. 


108  INDIANA  LAW  REVIEW  [Vol.  36:101 


One  proposition,  however,  does  not  necessarily  lead  to  the  next/^  Congress 
had  passed  the  1927  Act  to  correct  the  market  failures  in  broadcasting  and  had 
incorporated  the  public  interest  standard  to  avoid  the  restrictive  judicial 
interpretations  that  led  to  the  chaos  of  the  early  1 900s/'*  Neither  goal  necessarily 
required  the  FCC  to  become  the  public  guardian  of  broadcast  content.  Despite 
this  potential  flaw,  broader  applications  of  the  public  interest  doctrine"*^  have 
continued  to  rely  on  the  Court's  reasoning  in  NBC  and  the  Court's  expanded 
discussion  of  the  doctrine  in  Red  Lion  Broadcasting  v.  FCC.^^  This  reasoning, 
described  under  the  catchphrase  "scarcity,"  remains  the  foundation  for  federal 
broadcast  oversight"*^  and  thus  must  be  considered  as  a  likely  source  of  authority 
for  regulation  of  the  presidential  debates. 

C.  The  Many  Faces  of  Scarcity 

More  than  fifty  years  ago  the  Supreme  Court  held  that  broadcasting  enjoyed 
the  protections  of  the  First  Amendment."*^  Despite  this  fact,  Americans  have 
comfortably  accepted  pervasive  regulation  of  broadcasting,  regulations  that 


94,  117(1 973),  the  Court  further  noted  that  although  broadcast  regulation  had  developed  slowly, 
the  FCC  now  acts  as  an  "'overseer'  and  ultimate  arbiter  and  guardian  of  the  public  interest."  The 
Court  has  therefore  interpreted  the  public  interest  doctrine  as  a  "supple  instrument  for  the  exercise 
of  discretion  by  the  expert  body."  FCC  v.  Pottsville  Broad.  Co.,  309  U.S.  134,  138  (1940). 
Ensuring  that  broadcasting  serves  the  public  interest,  moreover,  might  allow  the  Commission  to  rest 
on  "judgment  and  prediction"  rather  than  pure  factual  determinations.  FCC  v.  NatM  Citizens 
Comm.  for  Broad.,  436  U.S.  775,  814  (1978).  Decisions  of  the  FCC  "regarding  how  the  public 
interest  is  best  served  [are]  entitled  to  substantial  judicial  deference."  FCC  v.  WIMCN  Listeners 
Guild,  450  U.S.  582,  596  (1981). 

43 .  See,  e.g. ,  Louis  L.  Jaffe,  The  Illusion  of  the  Ideal  Administration,  86  Harv.  L.  Rev.  1 1 83, 
1 191-92  (1973).  Professor  Jaffe  argued  that  the  1927  Act  sought  only  to  address  the  judicial 
decisions  prohibiting  the  Secretary  of  Commerce  from  limiting  licenses  in  order  to  manage  airwave 
traffic:  "[T]he  use  of  'public  interest'  in  the  statute  did  not  manifest  a  congressional  intent  to  give 
the  Commission  general  powers  to  'regulate'  the  industry  or  to  solve  2iny  'problem'  other  than  the 
problem  of  interference  . . . ."  Id. 

44.  See  Erwin  G.  Krasnow  &  Jack  N.  Goodman,  The  "Public  Interest"  Standard:  The 
Search  for  the  Holy  Grail,  50  FED.  COMM.  L.J.  605, 609- 10(1 998).  See  also  supra  notes  1 9-2 1  and 
accompanying  text. 

45.  See  Stephen  F.  Varholy,  Preserving  the  Public  Interest:  A  Topical  Analysis  of 
Cable/DBS  Crossownership  in  the  Rulemaking  for  the  Direct  Broadcast  Satellite  Service,  7  COMM. 
L.  Conspectus  173,  175-76  (1999)  (describing  the  FCC's  public  interest  duties  as  diversity  of 
content  and  competition  among  broadcasters);  see  also  William  T.  Mayton,  The  Illegitimacy  of  the 
Public  Interest  Standard  at  the  FCC,  38  EmoryL.J.  71 5, 716(1 989).  Professor  Mayton  argues  that 
the  FCC  developed  its  broad  public  interest  mission  not  from  statute,  but  from  an  internal  agency 
belief  that  "progressive  social  change  is  best  accomplished  through  government  regulation  . .  .  ." 
/^.  at  717. 

46.  395  U.S.  367(1969). 

47.  Turner  Broad.  Sys.,  Inc.  v.  FCC,  512  U.S.  622, 638-39  (1994). 

48.  See  United  States  v.  Paramount  Pictures,  Inc.,  334  U.S.  131,  166  (1948). 


2003]  REGULATION  OF  PRESIDENTIAL  DEBATES  1 09 


would  seem  inappropriate  in  newsprint,  books,  or  sidewalk  speech.'*^  The  Court 
has  upheld  these  regulations  by  creating  a  two-tiered  system  of  First  Amendment 
analysis.  First,  the  Court  differentiates  between  the  protection  afforded  to 
broadcasting  and  physical  media,  and  second,  it  varies  the  protection  afforded 
within  the  broadcast  media,  including  radio,  network  television,  cable  television, 
and  the  Internet.  The  Supreme  Court's  decisions  rely  heavily  on  assumptions 
regarding  the  physical  aspects  of  broadcasting  and  the  scarcity  of  electromagnetic 
space. 

The  scarcity  doctrine  is  a  seemingly  simple  concept,  with  origins  in  common 
sense,  if  not  science.  The  chaos  of  early  radio  broadcasting  stemmed  from  too 
many  users  and  too  few  frequencies.  Order  was  imposed  by  the  1 927  Act,  which 
allocated  the  broadcast  spectrum  through  a  licensing  system  that  explicitly 
reserved  the  ownership  of  the  airwaves  for  the  public.^^  Broadcasters  would  have 
a  mere  right  of  access  based  on  their  willingness  or  ability  to  serve  the  public 
interest.^'  At  the  same  time,  however,  broadcasting  was  and  is  speech  protected 
by  the  First  Amendment."  Limiting  broadcast  speech  for  orderly  use  or  social 
gain  would  thus  seem  to  conflict  with  constitutional  protections.^^  Scarcity, 
therefore,  became  the  necessary  analytical  "problem"  to  justify  broadcast 
restraints.^'* 

The  scarcity  doctrine  originated  in  NBC,  where  Justice  Frankfurter  described 
"certain  basic  facts"  about  radio  broadcasting:  "its  facilities  are  limited,"  and 
"the  radio  spectrum  simply  is  not  large  enough  to  accommodate  everybody. 
There  is  a  fixed  natural  limitation  upon  the  number  of  stations  that  can  operate 
.  .  .  ."^^  The  Court  viewed  this  natural  limitation  as  "unique,"  distinguishing 
broadcasting  from  other  forms  of  speech. ^^  Accordingly,  government  regulation 
was  necessary  to  select  which  of  the  many  speakers  seeking  access  to  the 


49.  See  BOLLINGER,  supra  note  9,  at  62. 

50.  47  U.S.C.  §304(1988).  The  statute  states  that 

No  station  license  shall  be  granted  by  the  Commission  until  the  applicant  therefor  shall 
have  waived  any  claim  to  the  use  of  any  particular  frequency  or  of  the  electromagnetic 
spectrum  as  against  the  regulatory  power  of  the  United  States  because  of  the  previous 
use  of  the  same,  whether  by  license  or  otherwise. 


Id. 


51.  See  Reed  E.  Hundt,  A  New  Paradigm  for  Broadcast  Regulation,  1 5  J.L.  &  COM.  527, 528- 
29(1996). 

52.  Paramount  Pictures,  334  U.S.  at  1 66  (holding  there  is  "no  doubt  that . . .  newspapers  and 
radio  ...  are  included  in  the  press  whose  freedom  is  guaranteed  by  the  First  Amendment"). 

53.  See  Joseph  Burstyn,  Inc.  v.  Wilson,  343  U.S.  495,  502-03  (1952).  Although  the  Court 
has  not  held  that  every  method  of  communication  is  "necessarily  subject  to  the  precise  rules 
governing  zmy  other  particular  method  of  expression,"  it  has  also  noted  "the  basic  principles  of 
freedom  of  speech  and  the  press,  like  the  First  Amendment's  command,  do  not  vary."  Id. 

54.  Id.  at  503  ("Each  method  [of  speech]  tends  to  present  its  own  peculiar  problems."). 

55.  NBC  V.  United  States,  319  U.S.  190,  213  (1943). 

56.  /t/.  at  226. 


1 1 0  INDIANA  LAW  REVIEW  [Vol.  36:101 

airwaves  should  be  admitted.^^ 

The  Supreme  Court  reiterated  its  position  on  scarcity  in  Red  Lion^^  and 
increased  its  reliance  on  government  oversight  as  the  only  means  of  regulating 
broadcasters.  Again  citing  the  limits  of  the  broadcast  spectrum,^'  the  Court  found 
it  "essential"  that  regulation  allocate  the  airwaves  among  competing  speakers.^^ 
Moreover,  the  Court  held  that  only  control  by  the  federal  government  was 
sufficient.^'  Whereas  NBC  concluded  that  some  sort  of  regulation  of  the 
airwaves  was  necessary"  and  that  federal  regulation  of  the  airwaves  was 
constitutional,  Red  Lion  stated  that  no  alternatives  to  governmental  control  were 
possible." 

Courts^'^  and  commentators"  have  criticized  the  scarcity  doctrines^^ 
articulated  in  NBC  and  Red  Lion  as  inconsistent  with  basic  principles  of  a  free- 
market  economy.  First,  as  Professor  Coase  observed  in  1959,  the  mere  scarcity 
of  an  important  resource  does  not  normally  justify  government  regulation.^^  The 


57.  See  id.  at  216  (holding  that  because  the  ''facilities  of  radio  are  not  large  enough  to 
accommodate  all  who  wish  to  use  them  . . .  [m]ethods  must  be  devised  for  choosing  from  among 
the  many  who  apply"). 

58.  RedLionBroad.Co.v.  FCC,  395  U.S.  367,  375(1969). 

59.  Seeid.dA'i^^. 

60.  Id. 

61.  Seeid.?iX^16. 

62.  5eeA^5C,319U.S.  at213. 

63.  See  Red  Lion,  395  U.S.  at  376  ("Without  government  control,  the  medium  would  be  of 
little  use  because  of  the  cacophony  of  competing  voices,  none  of  which  could  be  clearly  and 
predictably  heard."). 

64.  See,  e.g.,  Action  for  Children's  Television  v.  FCC,  58  F.3d  654, 673-76  (D.C.  Cir.  1995) 
(en  banc)  (Edwards,  C.J.,  dissenting);  Telecomm.  Research  &  Action  Ctr.  v.  FCC,  801  F.2d  501, 
508  (D.C.  Cir.  1986). 

65.  See,  e.g.,  Coase,  supra  note  11;  Krattenmaker  &  POWE,  supra  note  10;  Charles  W. 
Logan,  Jr.,  Getting  Beyond  Scarcity:  A  New  Paradigm  for  Assessing  the  Constitutionality  of 
Broadcast  Regulation,  85  Cal.  L.  Rev.  1687  (1997);  Murray  J.  Rossini,  The  Spectrum  Scarcity 
Doctrine:  A  Constitutional  Anachronism,  39  Sw.  L.J.  827(1985). 

66.  For  a  comprehensive  discussion  of  the  various  forms  of  the  scarcity  rationale,  see 
Krattenmaker  &  Powe,  supra  note  10,  at  204-19,  and  Matthew  L.  Spitzer,  Controlling  the 
Content  of  Print  and  Broadcast,  58  S.  Cal.  L.  Rev.  1351,1 358-64  ( 1 985). 

67.  Coase,  supra  note  1 1 ,  at  1 4.  Professor  Coase  summarized  the  economic  criticism  of  the 
scarcity  doctrine: 

[I]t  is  a  commonplace  of  economics  that  almost  all  resources  used  in  the  economic 
system  (and  not  simply  radio  and  television  frequencies)  are  limited  in  amount  and 
scarce,  in  that  people  would  like  to  use  more  than  exists.  Land,  labor,  and  capital  are 
all  scarce,  but  this,  of  itself,  does  not  call  for  government  regulation.  It  is  true  that  some 
mechanism  has  to  be  employed  to  decide  who,  out  of  the  many  claimants,  should  be 
allowed  to  use  the  scarce  resource.  But  the  way  this  is  usually  done  in  the  American 
economic  system  is  to  employ  the  price  mechanism,  and  this  allocates  resources  to  users 
without  the  need  for  government  regulation. 


2003  ]  REGULATION  OF  PRESIDENTIAL  DEBATES  1 1 1 


"chaos"  throughout  broadcasting  prior  to  1927  occurred  because  of  an  absence 
of  property  rights  in  the  broadcast  spectrum.^*  The  marketplace,  in  turn,  can 
allocate  property  rights  without  the  government  oversight  condoned  under  NBC 
or  thought  mandatory  under  Red  Lion!"^ 

Second,  the  entry  barriers  to  broadcasting  caused  by  the  limits  to  the 
electromagnetic  spectrum  are  present  in  analogous  media,  such  as  newsprint7° 
The  Court  seemingly  agreed  with  this  conclusion  in  Miami  Herald  Publishing 
Co.  V.  Tornillo?^  Tornillo  involved  a  state  statute  requiring  newspapers  to  print 
editorial  replies  from  candidates  personally  or  professionally  assailed  in  the  same 
paper. ^^  The  Court  observed  that  the  scarcity  of  newspapers  and  the  costs  of 
starting  an  independent  publication  created  an  entry  barrier  sufficient  to  silence 
the  speech  of  persons  denied  access  to  established  papers/^  Nonetheless,  the 
scarcity  of  newspapers  did  not  sway  the  Court's  conclusion  that  the  First 
Amendment  prevents  governmental  regulation  of  publishers^"*  and  forbids 
restrictions  designed  to  foster  a  "responsible  press."^^  The  Court's 
acknowledgment  of  the  limited  resources  intrinsic  to  both  newspapers  and 
broadcasting  makes  scarcity  a  tenuous  ground  for  limiting  the  First  Amendment 
rights  of  broadcasters.^^ 

Third,  the  physical  limitations  on  the  broadcast  airwaves  cited  in  both  NBC 
and  Red  Lion  might  no  longer  exist.^^  Throughout  the  Twentieth  Century, 
communications  technologies  began  to  travel  beyond  the  electromagnetic 
spectrum.  In  1950,  cable  reached  only  14,000  televisions  in  America,^*  a  figure 
that  would  rise  to  more  than  sixty-five  million  by  1998.^^    Direct  broadcast 


Id. 

68.  Krattenmaker  &  POWE,  supra  note  1 0,  at  207. 

69.  Spitzer,  supra  note  66,  at  1360-61. 

70.  See,  e.g. ,  WILLIAM  W.  VAN  ALSTYNE,  FIRST  AMENDMENT:  CASES  AND  MATERIALS  546- 
47(1995). 

71.  418  U.S.  241(1974). 

72.  /^.  at  244. 

73.  Mat 251. 

74.  /i/.  at  258. 

75.  Id.  at  256  (concluding  that  while  a  "responsible  press  is  an  undoubtedly  desirable  goal" 
it  is  "not  mandated  by  the  Constitution  and  like  many  other  virtues  it  cannot  be  legislated"). 

76.  See  Telecomm.  Research  &  Action  Ctr.  v.  FCC,  801  F.2d  501,  508-09  (D.C.  Cir.  1986) 
(discussing  the  scarcity  of  physical  media  such  as  "newsprint,  ink,  delivery  trucks,  computers,  and 
other  resources  that  go  into  the  production  . . .  of  print  journalism"). 

77.  Indeed,  as  Professor  Thomas  Hazlett  has  documented,  physical  spectrum  scarcity  may 
never  have  existed.  See  Thomas  W.  Hazlett,  Physical  Scarcity,  Rent  Seeking,  and  the  First 
Amendment,  97  COLUM.  L.  REV.  905,  926-31  (1997).  Professor  Hazlett  noted  that  radio 
programming  was  delivered  via  cable  by  1923,  suggesting  that  technological  alternatives  to  the 
electromagnetic  spectrum  existed  concurrently  with  the  emergence  of  broadcasting.  Id.  at  928-29. 

78.  FCC,  Fact  Sheet:  General  Information,  Cable  TV  and  its  Regulation  (June  2000), 
available  at  http://www.fcc.gov/mb/facts. 

79.  Id. 


112  INDIANA  LAW  REVIEW  [Vol.  36:101 


satellites  (DBS)  are  now  installed  in  more  than  eighteen  million  homes,  an 
increase  of  approximately  two  million  subscribers  since  2001  .*°  Satellites  offer 
radio  listeners  a  similar  array  of  programming  choices  without  the  regional 
limitations  inherent  in  traditional  radio  broadcasting.*'  Internet  access  now 
reaches  an  estimated  fifty-four  million  American  subscribers*^  with  143  million 
people,  or  more  than  fifty-three  percent  of  the  population,  using  the  Internet.*^ 
Formerly  distinct  industries  such  as  telephony  have  converged*'*  with 
broadcasting  to  offer  new  forms  of  digital  programming.  Convergence  is  leading 
to  the  growth  of  interactive  television  services*^  such  as  video-on-demand,  email, 
gaming,  and  electronic  commerce.*^  In  addition,  several  cable  and  satellite 
providers*^  offer  broadband  technologies**  capable  of  transmitting  graphics. 


80.  In  re  Annual  Assessment  of  the  Status  of  Competition  in  the  Market  for  the  Delivery  of 
Video  Programming,  FCC  02-338  (2002),  2002  WL  3 1 8902 1 0  para.  58  [hereinafter  In  re  Annual 
Assessment]. 

81.  Amanda  Barnett,  Radio  About  to  Go  Higher  Tech,  at  http://www.cnn.com  (May  23, 
2001).  Satellite  radio  networks  offer  more  than  one  hundred  channels  of  programming,  including 
news  from  companies  such  as  FOX,  National  Public  Radio,  AP  Radio,  the  BBC,  and  C-Span.  Id. 
The  first  entrant  into  the  market,  XM  Satellite  Radio,  has  sold  more  than  25,000  subscriptions  since 
its  debut  in  November  2001 ,  a  record  among  new  audio  products  in  recent  years.  Laurie  J.  Flynn, 
Satellite  Radio  Shows  Growth,  N.  Y.  TIMES,  Jan.  7.  2002,  at  C7.  Industry  analysts  estimate  that  as 
many  as  twenty-five  million  people  will  subscribe  to  satellite  radio  by  2009.  David  Becker,  A 
Satellite  Radio  Field  of  Dreams,  CNET  News  (June  8, 2002),  at  http://news.com.eom/2 1 00- 1 033- 
803900.html. 

82.  In  re  Annual  Assessment,  supra  note  80,  para.  89. 

83 .  Economics  and  Statistics  Administration  &  National  Telecommunications  and 
Information  Administration,  A  Nation  Online:  How  Americans  are  Expanding  Their  Use 
OF  THE  Internet  10  (2002)  [hereinafter  ESA,  Nation  Online],  available  at  http://www.ntia.doc. 
gov/ntiahome/dn/index.html. 

84.  As  commonly  understood,  convergence  "refers  to  the  coming  together  of  several  formerly 
distinct  services  and  industries  .  .  .  into  a  single,  digital  marketplace."  William  T.  Lake  et  al.. 
Telecommunications  Convergence,  in  TELECOMMUNICATIONS  CONVERGENCE:  IMPLICATIONS  FOR 
THE  INDUSTRY  AND  FOR  THE  PRACTICING  LAWYER  1 1  (2000).  The  Supreme  Court  discussed  the 
importance  of  convergence  in  Turner  Broadcasting  Systems,  Inc.  v.  FCC,  512  U.S.  622,  627 
( 1 994),  noting  "convergence  between  cable  and  other  electronic  media  .  .  .  [places]  the  cable 
industry  ...  at  the  center  of  an  ongoing  telecommunications  revolution  . . . ." 

85.  In  re  Annual  Assessment,  supra  note  80,  para.  170.  The  FCC  defines  interactive 
television  as  "a  service  that  supports  subscriber-initiated  choices  or  actions  that  are  related  to  one 
or  more  video  programming  streams."  In  re  Nondiscrimination  in  the  Distribution  of  Interactive 
Television  Services  Over  Cable,  16  F.C.C.R.  1321,  1323  (2001)  [hereinafter  In  re  Interactive 
Television]. 

86.  In  re  Annual  Assessment,  supra  note  80,  para.  1 70;  see  also  In  re  Interactive  Television, 
supra  note  85,  at  1323-28. 

87.  Id.  (describing  interactive  programming,  including  high-speed  Internet  access  and 
interactive  television). 

88.  Karen  Kombluh,  Editorial,  The  Broadband  Economy,  N.  Y.  TIMES,  Dec.  1 0, 200 1 ,  at  A2 1 


2003]  REGULATION  OF  PRESIDENTIAL  DEBATES  1 1 3 


video,  and  data  at  more  than  four  times  the  speed  of  dial-up  telephone  modems.^^ 
Convergence  is  now  more  than  technological  theory,  with  pundits  and  executives 
united  in  praising  the  economic  and  social  promise  of  a  single  media  pipeline.^^ 

Finally,  local  broadcasters  have  demonstrated  new  uses  for  the  existing 
electromagnetic  spectrum.  Low-power  radio  frequencies  capable  of  reaching  one 
to  two  miles  are  now  up  for  auction,^'  and  low- power  television  offers  local 
access  outside  of  metropolitan  areas.^^ 

These  rival  technologies  challenge  the  basis  of  the  scarcity  doctrine.^^   If 


(defining  broadband  as  "the  generic  term  for  high-speed,  high-capacity,  always-on  data  networks"). 

89.  In  re  Inquiry  Concerning  the  Deployment  of  Advanced  Telecomm.  Capability  to  All 
Americans  in  a  Reasonable  and  Timely  Fashion,  and  Possible  Steps  to  Accelerate  Such 
Development  Pursuant  to  Section  706  ofthe  Telecommunications  Act  of  1996, 15  F.C.C.R.  20,913, 
20,920  (2000)  [hereinafter  In  re  Deployment].  The  FCC  defines  high-speed  Internet  access  as  the 
"capability  of  supporting,  in  both  the  provider-to-customer  (downstream)  and  the  customer-to- 
provider  (upstream)  directions,  a  speed  ...  in  excess  of  200  kilobits  per  second  (kbps)  in  the  last 
mile."  Id.  However,  high-speed  Internet  access  remains  limited  with  just  over  fourteen  million 
broadband  subscribers  as  of  June  2002.  In  re  Annual  Assessment,  supra  note  80,  para.  88. 

90.  See,  e.g.,  Seth  Sch\QSQ\,  AOL  Plans  the  Digital  Smorgasbord,^. Y. TIMES,  iunc  1 1, 2001, 
at  CI.  Steve  Case,  then  chairman  of  AOL  Time  Warner,  predicted  that  convergence  will  knit 
together  "the  PC,  the  TV,  the  telephone  and  the  stereo  to  allow  people  to  be  entertained  in  better 
ways,  to  be  educated  in  better  ways,  to  communicate  in  better  ways,  to  change  people's  lives."  Id.; 

see  also  PETER  HUBER,  LAW  AND  DISORDER  IN  CYBERSPACE:  ABOLISH  THE  FCC  AND  LET  COMMON 

Law  Rule  the  Telecosm  23  (1997)  ("The  telecosm  is  being  transformed  into  a  network  of 
networks,  an  intricately  interconnected  matrix  of  wireless,  [and]  satellite  .  .  .  with  multiple 
overlapping  and  complementary  providers,  and  no  single  dominant  center.").  Nonetheless, 
convergence  is  still  in  its  infancy  and  vulnerable  to  continuing  setbacks  in  the  marketplace.  Susan 
Stellin,  A  Device  to  Link  Old  Media  to  the  Web  Struggles  to  Make  Good  on  the  Promise  of  an 
Internet  Revolution,  N.Y.  TIMES,  Jan.  15,  2001,  at  C4  (noting  that  "one  ofthe  biggest  challenges 
that  has  always  stood  in  the  way  of  convergence  is  the  need  to  persuade  so  many  different 
participants  to  mold  their  behavior  or  business  strategy  to  an  unknown  technology"). 

Moreover,  the  American  media  consumer  has  shown  a  marked  disinterest  in  some  of  the 
earliest,  and  most  promoted,  forms  of  convergence.  Microsoft's  highly  touted  WebTV,  which 
permits  television  viewers  to  navigate  the  Internet  over  television  screens,  proved  a  commercial 
disappointment.  Saul  Hansell,  Clicking  Outside  the  Box,  N.Y.  Times,  Sept.  20,  2000,  at  HI .  One 
industry  executive,  Michael  Willner,  then  president  of  Insight  Communications,  blamed  the  failure 
on  the  users,  lamenting  that  "[p]eople  want  their  information  spoon-fed  to  them,"  and  will  therefore 
not  embrace  technologies  requiring  an  active  television  viewer.  Id.  Others  have  suggested  that  the 
problem  rests  not  with  the  audience,  but  with  the  programmers,  arguing  that  "[c]onsumer[s]  are 
slow  to  adopt  broadband  because,  while  there  may  be  an  infinite  number  of  channels,  there  is  still 
nothing  on."  Lawrence  Lessig,  Who 's  Holding  Back  Broadband?,  N.Y.  Times,  Jan.  8,  2002,  at 
A17. 

91 .  FCC,  Major  Initiatives,  at  http://www.fcc.gov/major.html  (last  visited  Mar.  30,  2002). 

92.  Practicing  Law  Institute,  New  Program  Opportunities  in  the  Electronic  Media 
(George  H.  Shapiro  ed.,  1983). 

93 .  An  alternative  to  the  scarcity  doctrine — sometimes  known  as  the  prior  grant  theory — has 


114  INDIANA  LAW  REVIEW  [Vol.  36:101 


wired  or  wireless  signals  can  circumvent  any  limitations  in  the  electromagnetic 
spectrum,^"*  broadcasting  may  shed  its  unique  status  within  the  First  Amendment. 
Despite  the  modem  advances  to  date,  however,  the  scarcity  doctrine  has  proven 
surprisingly  resilient  in  the  Supreme  Court.'^  The  Court  has  consistently  held 
that  the  physical  scarcity  of  the  broadcast  airwaves  underlies  the  Radio  Act  of 
1927  and  the  Communications  Act  of  1934^^  and  justifies  a  less  rigorous  degree 
of  scrutiny  than  otherwise  demanded  by  the  First  Amendment.^^  Specifically, 


been  equally  criticized.  This  theory,  first  articulated  by  the  Supreme  Court  in  Red  Lion,  holds  that 
broadcasters  enjoy  their  market  position  through  "a  preferred  position  conferred  by  the 
Government,"  or  a  governmental ly  created  monopoly.  Red  Lion  Broad.  Co.  v.  FCC,  395  U.S.  367, 
400  ( 1 969).  The  prior  grant  theory  assumes  that  subjecting  broadcasters  to  regulatory  oversight  is 
a  suitable  trade-off  for  the  benefits  of  their  dominant  market  position.  Id.  at  391.  The  prior  grant 
theory,  however,  fails  to  explain  the  continuing  role  of  federal  oversight  over  broadcast  industries 
that  now  enjoy  vigorous  competition.  Mark  S.  Fowler  &  Daniel  L.  Brenner,  A  Marketplace 
Approach  to  Broadcast  Regulation,  60  TEX.  L.  REV.  207,  226-27  (1982).  Moreover,  as  noted  by 
Professors  Krattenmaker  and  Powe,  the  prior  grant  doctrine  "proves  too  much,"  seemingly 
justifying  a  suspension  of  constitutional  protections  on  any  public  forum  in  which  the  government 
claims  ownership.  Krattenmaker  &  Powe,  supra  note  10,  at  228. 

94.  Hazlett,  supra  note  77,  at  929.  Professor  Hazlett  notes  bluntly: 

The  ability  to  substitute  wired  frequencies  for  wireless  spectrum  space  should  be  self- 
evident  today,  when  consumers  and  businesses  choose  daily  between  the  rival  forms  of 
communications  transmissions — for  example,  when  deciding  whether  to  use  a  TV 
antenna  or  satellite  dish  versus  a  cable  TV  hook-up,  or  placing  a  telephone  call  via  a 
landline  versus  a  cellphone  (or  cordless  phone). 
Id.  Professor  Hazlett's  observation  is  supported  by  recent  developments  in  the  telecommunications 
industry,  where  the  increased  demand  for  spectrum  space  caused  by  wireless  technologies  has  led 
to  new  ways  to  "increase  the  capacity  and  the  efficiency  of  the  available  spectrum."  Editorial, 
Space  Invaders,  WALL  ST.  J.,  June  5,  2001,  at  A26. 

95.  Krattenmaker  &  Powe,  supra  note  10,  at  218  (concluding  that  "only  the  Supreme 
Court  had  anything  good  to  say  about  scarcity"  in  the  1970s  (quoting  Daniel  Polsby,  Candidate 
Access  to  the  Air,  198 1  SUP.  Ct.  REV.  223)).  In  League  of  Women  Voters,  the  Court  acknowledged 
the  prevalent  criticism  of  the  scarcity  doctrine  and  stated  that  reevaluation  would  require  "some 
signal  from  Congress  or  the  FCC  that  technological  developments  have  advanced  so  far  that  some 
revision  of  the  system  of  broadcast  regulation  may  be  required."  FCC  v.  League  of  Women  Voters 
of  Cal.,  468  U.S.  364,  376  n.l  1  (1984).  The  Court  reiterated  this  position  in  Turner  I.  Fox 
Television  Stations,  Inc.  v.  FCC,  280F.3d  1027, 1046(D.C.  Cir.  2002)  (stating  that  "[tjhe  Supreme 
Court  has  already  heard  the  empirical  case  against"  the  scarcity  doctrine,  and  still  "declined  to 
question  its  continuing  validity"  (quoting  Turner  Broad.  Sys.,  Inc.  v.  FCC,  512  U.S.  622,  638 
(1994))). 

Professor  Hazlett  has  suggested  that  the  scarcity  doctrine's  inherent  ambiguity  is  itself  the 
reason  for  its  durability.  Hazlett,  supra  note  77,  at  929.  By  characterizing  scarcity  as  an  "objective 
fact,"  without  addressing  competing  technologies,  the  Red  Lion  opinion  makes  "empirical 
falsification"  impossible.  Id. 

96.  See  FCC  v.  Nat'l  Citizens  Comm.  for  Broad.,  436  U.S.  775,  795  (1978). 

97.  See  League  of  Women  Voters,  468  U.S.  at  374-75. 


2003]  REGULATION  OF  PRESIDENTIAL  DEBATES  1 1 5 


three  decisions  from  the  1990s  summarize  the  Court's  current  position  on 
broadcast  scarcity. 

In  Metro  Broadcasting,  Inc.  v.  FCC,  the  Court  considered  FCC  regulations 
enhancing  licensing  opportunities  for  minority  owners.^*  In  upholding  the 
regulations,  the  Court  acknowledged  that  scarcity  justifies  governmental 
restraints  on  licensees  that  favor  both  viewpoints  and  speakers.^^  The  Court 
viewed  the  need  for  government  selection  of  broadcasters  as  "axiomatic,"  citing 
and  echoing  the  scarcity  arguments  made  in  NBC  and  Red  Lion.  ^^  Nearly  fifty 
years  after  its  birth,  the  scarcity  doctrine  received  strong  affirmation  in  Metro 
Broadcasting. 

Limits  to  the  scarcity  theory,  however,  emerged  in  two  later  decisions.  In 
Turner  Broadcasting  System,  Inc.  v.  FCC  (Turner  I),  the  Court  analyzed  a  statute 
requiring  cable  television  providers  to  transmit  local  broadcast  television 
channels  to  subscribers  without  charge. '°'  The  Court,  in  dicta,  stated  that  the 
"less  rigorous"  First  Amendment  scrutiny  applied  to  broadcast  regulations  is 
premised  on  "the  unique  physical  limitations  of  the  broadcast  medium."'°^  The 
Court  then  distinguished  electromagnetic  broadcasting  from  cable  television 
stating,  "cable  television  does  not  suffer  from  the  inherent  limitations  that 
characterize  the  broadcast  medium."'®'  Any  possible  physical  limitations  in 
cable  broadcasting,  therefore,  are  insufficient  to  alter  the  normal  protections  of 
the  First  Amendment.'^ 

Three  years  later,  in  Reno  v.  ACLU,  the  Court  used  the  reasoning  of  Turner 
I  to  distinguish  the  Internet  from  broadcast  television. '*^^  The  Court  found  that 
the  Internet  could  not  be  considered  a  scarce  resource,  given  its  ability  to  provide 
a  "relatively  unlimited,  low-cost  capacity  for  communication  of  all  kinds."'°^ 
The  Internet,  the  Court  illustrated,  can  transform  any  speaker  into  a  "town  crier" 
and  any  user  into  "a  pamphleteer."'®^  Relaxed  First  Amendment  scrutiny  was 
therefore  unnecessary.'®* 

Conclusions  about  the  current  state  of  the  scarcity  doctrine  are  difficult.  The 
decisions  in  Metro  Broadcasting  and  Turner  I  affirming  the  vitality  of  the 
doctrine  have  aged  rapidly  during  the  explosive  growth  of  new  media  at  the  close 
of  the  last  century.  Moreover,  the  Court's  piecemeal  exclusion  of  cable  and 
Internet  broadcasting  appears  to  be  on  a  collision  course  with  science.  Finally, 


98.  497  U.S.  547,552(1990). 

99.  /^.  at  566-67. 

100.  Id.  at  567. 

101.  Turner  Broad.  Sys.,  Inc.  v.  FCC,  5 1 2  U.S.  622,  63 1  -32  ( 1 994). 

102.  Id.  at  637.  The  Court  noted,  however,  that  the  broadcast  cases  "are  inapposite"  to  the 
cable  television  context.  Id.  at  638-39. 

103.  Mat 639. 

104.  Id 

105.  521  U.S.  844,869-70(1997). 

106.  /c/.  at  870. 

107.  Id. 

108.  Id. 


116  INDIANA  LAW  REVIEW  [Vol.  36:101 


the  acknowledgment  in  Turner  I  thait  convergence  has  removed  old  distinctions 
within  the  various  broadcast  media'^^  would  appear  to  undermine  whatever 
remaining  analytic  force  scarcity  once  held.  Taken  together,  these  decisions 
suggest  that  the  physical  scarcity  doctrine  will  not  satisfy  future  regulations  on 
broadcast  speech. "° 

D.  Fairness  and  Equal  Time:  The  Regulation  of  Broadcast  Politics 

Scarcity  theories  are  important  to  a  discussion  of  the  broadcasting  of 
presidential  debates  because  the  regulation  of  broadcast  media  has  developed 
through  interaction  between  the  FCC  and  the  Supreme  Court.'"  The  deferential 
scrutiny  applied  to  the  FCC's  broadcast  policies  has  permitted  a  wide  range  of 
regulations  addressing  social  issues  such  as  indecency"^  and  diversity."^ 
Likewise,  the  FCC  has  promulgated  a  series  of  regulations  designed  to  increase 
public  involvement  in  the  democratic  process  and  political  elections.""* 

Section  3 15(b)(1)  of  the  Communications  Act  of  1972,  for  instance,  allows 
candidates  for  political  office  to  purchase  broadcast  airtime  at  the  "lowest  unit 
charge"  offered  to  other  purchasers  for  the  same  time  and  period."^  The  lowest 
unit  charge  rule  was  intended  to  prevent  broadcasters  from  exercising  their 
market  power  to  extract  additional  profits  from  candidates  and  to  maintain  the 
availability  of  the  broadcast  forum. "^ 

A  second  doctrine  required  broadcasters  to  give  candidates  for  federal  office 


109.  Id.  2X621. 

1 1 0.  Then  Commissioner,  now  Chairman  of  the  FCC,  Michael  K.  Powell  voiced  similar  doubts 
on  the  modern  (as  well  as  historical)  values  of  the  scarcity  rationale,  commenting  "that  if  scarcity 
was  ever  a  defensible  explanation  it  is  certainly  farcical  in  the  modern  digital  era,  which  is  marked 
by  abundance."  Michael  K.  Powell,  Remarks  Before  the  Media  Institute,  Accepting  Freedom  of 
Speech  Award  (Oct.  20, 1999),  available  at  http://www.fcc.gov/Speeches/Powell/  spmkp905.html 
(last  visited  Mar.  17,  2002). 

111.  5ee Bollinger, swprfl note 9, at 66. 

1 12.  See  generally  FCC  v.  Pacifica  Found.,  438  U.S.  726  (1978). 

113.  Federal  Communications  Commission,  Public  Service  Responsibility  of 
Broadcast  Licensees  1 5  (1946)("[I]t  has  long  been  an  established  policy  of . . .  the  Commission 
that  the  American  system  of  broadcasting  must  serve  significant  minorities  among  our  population, 
and  the  less  dominant  needs  and  tastes  . . .  ."). 

1 1 4.  Steven  J.  Simmons,  The  Fairness  Doctrine  and  the  Media  72-80  ( 1 978). 

115.  47  U.S.C.§  315(b)(1)  (1994). 

116.  See  Angela  J.  Campbell,  Political  Campaigning  in  the  Information  Age:  A  Proposal  for 
Protecting  Political  Candidates'  Use  ofOn-Line  Computer  Services,  38  ViLL.  L.  REV.  517,  550 
(1993).  Former  Chairman  of  the  FCC  Reed  Hundt  has  argued  that  the  rule  "fails  in  practice" 
because  broadcasters  steer  candidates  to  higher-priced  time  periods.  Press  Release,  FCC,  FCC 
Chairman  Reed  Hundt  Calls  on  FCC  to  Launch  Major  Free  Time  Initiative  (Sept.  12,  1997), 
available  at  http://www.fcc.gOv/Bureaus/Miscellaneous/News_Releases/l 997/nrmc7065.html 
(advocating  the  use  of  "low,  even  zero"  cost  rates  for  candidates  with  a  cap  on  the  amount  of 
airtime  that  could  be  purchased). 


2003]  REGULATION  OF  PRESIDENTIAL  DEBATES  1 1 7 


"reasonable  access"  to  broadcast  time  to  advocate  their  candidacy."^  The 
reasonable  access  doctrine  sought  to  increase  voter  education  through  broadcast 
appearances''^  and  alleviate  concerns  over  insufficient  broadcast  coverage."^ 
Despite  the  intrusion  into  the  broadcasters'  editorial  decisions,  the  Supreme 
Court  upheld  the  reasonable  access  rules  as  a  permissible  licensing  condition. '^° 
In  addition,  the  FCC  has  long  required  broadcasters  to  provide  equal  access 
to  the  airwaves  to  all  "legally  qualified"'^'  political  candidates,  when  any  one  of 
them  is  granted  broadcast  time.  The  equal  time  provision  was  first  adopted  in  the 
Radio  Act  of  1 927'^^  and  carried  over  into  the  1 934  Act'^^  to  prevent  the  potential 
bias  of  a  broadcast  station  providing  exclusive  coverage  to  a  single  candidate.'^"* 
In  1 959,  Congress  amended  the  statute  to  exempt  news  coverage  of  candidates, '^^ 
swiftly  rejecting  the  FCC's  narrower  interpretation  of  the  statute. '^^  In  1960, 
Congress  temporarily  suspended  the  equal  time  rule'^^  to  permit  the  first  televised 


117.  47  U.S.C.§  312(a)(7)  (1990). 

118.  S.  Rep. No.  92-96, at 20(1971), reprm/ef/m  1972  U.S.C.C.A.N.  1773, 1774(noting that 
Congress  intended  "to  give  candidates  for  public  offxcQ greater  access  to  the  media  so  that  they  may 
better  explain  their  stand  on  the  issues,  and  thereby  more  fully  and  completely  inform  the  voters") 
(emphasis  in  original).  But  see  infra  notes  175-76  and  accompanying  text. 

1 19.  See  Kennedy  for  President  Comm.  v.  FCC,  636  F.2d  432,  442  (D.C.  Cir.  1980). 

120.  CBSv.  FCC,  453  U.S.  367(1981). 

121.  47U.S.C.  §  315(a)(1994).  The  1934  Act  does  not  define  which  candidates  are  "legally 
qualified,"  and  thus  the  applicability  of  §  3 1 5(a)  depends  on  state,  federal,  or  local  law  requirements 
for  candidacy.  FCC,  Rules  Applicable  to  All  Broadcast  Stations,  47  C.F.R.  §  73. 1940  (2001 );  see 
also  Lili  Levi,  Professionalism,  Oversight,  and  Institution-Balancing:  The  Supreme  Court 's 
"Second  Best "  Plan  for  Political  Debate  on  Television,  1 8  YALE  J.  ON  REG.  3 1 5, 3  76  n.  1 93  (200 1 ). 

122.  Radio  Act  of  1927,  Pub.  L.  No.  69-632,  44  Stat.  1 162,  1 170. 

123.  47  U.S.C.  §315(1982). 

124.  Thomas  Blaisdell  Smith,  Note,  Reexamining  the  Reasonable  Access  and  Equal  Time 
Provisions  of  the  Federal  Communications  Act:  Can  These  Provisions  Stand  if  the  Fairness 
Doctrine  Falls?,  74  GEO.  L.J.  1491,  1497  (1986). 

125.  The  amendment  was  prompted  by  the  FCC's  decision  that  network  coverage  of  routine 
news  events  involving  one  candidate  for  office  triggered  equal  time  obligations  for  all  other 
qualified  candidates.  Simmons,  supra  note  114,  at  46-47  (discussing  the  FCC's  decision  in  In  re 
Petitions  of  CBS  and  NBC  for  Reconsideration  and  Motions  for  Declaratory  Rulings  or  Orders 
Relating  to  the  Applicability  of  §  315  of  the  Communications  Act  of  1934,  as  amended,  to 
Newscasts  by  Broadcast  Licensees,  Interpretive  Op.,  26  F.C.C.  715  (1959)). 

1 26.  Krattenmaker  &  Powe,  supra  note  1 0,  at  67. 

127.  Act  of  Aug.  24,  1960,  Pub.  L.  No.  86-677,  74  Stat.  554.  Broadcasters  lobbied  for  the 
suspension  of  the  equal  time  regulation  in  part  because  the  amendments  to  the  equal  access  doctrine 
in  1959  failed  to  clarify  broadcasters'  duties  under  the  statute.  See  Erik  Barnouw,  The  Image 
Empire:  A  History  of  Broadcasting  in  the  United  States  Vol.  Ill  161-62  (1970).  The 
lobbying  effort  was  also  launched  because  of  lingering  network  hostility  to  the  duties  imposed  by 
the  equal  time  rule.  In  particular,  the  networks  were  "unwilling  to  give  time  away  to  the  major 
parties'  presidential  candidates  under  circumstances  that  would  force  them  to  give  equal 
opportunities  to  numerous  minor-party  candidates."    David  M.  Rice,  Network  Television  as  a 


1 1 8  INDIANA  LAW  REVIEW  [Vol.  36:101 


presidential  debates. '^^  Finally,  in  1975,  the  Commission  dismantled  the  equal 
time  rule  by  classifying  political  campaign  debates  as  "bona  fide  news  events" 
within  the  1 934  Act's  exception, '^^  paving  the  way  for  modern  television  election 

130 

coverage. 

However,  the  fairness  doctrine,  the  most  sweeping  restriction  designed  by  the 
FCC,  still  impeded  full  media  coverage  of  election  politics.  The  fairness 
doctrine,  in  the  words  of  the  Supreme  Court,  "imposed  on  radio  and  television 
broadcasters  the  requirement  that  discussion  of  public  issues  be  presented  on 
broadcast  stations,  and  that  each  side  of  those  issues  must  be  given  fair 
coverage."'^'  Less  a  doctrine  than  a  direction,  the  fairness  concept  grew  from  the 
earliest  days  of  the  FRC  through  a  series  of  individual  complaints  and  rulings. '^^ 
Congress  formally,  but  perhaps  unintentionally,  adopted  the  doctrine  in  the  1 957 
amendments  to  the  equal  time  provisions. '^^  As  codified,  the  fairness  doctrine 
required  broadcasters  to  air  all  sides  of  controversial  public  issues,  irrespective 
of  the  broadcasters'  own  interest  in  covering  such  material.*^"*  Again  citing  the 
scarcity  theory,  the  Supreme  Court  upheld  the  fairness  doctrine  as  constitutional 
and  extended  the  government  unique  latitude  to  regulate  broadcasting.  '^^  Despite 
swift  and  sustained  criticism, '^^  the  fairness  doctrine  remained  in  force  until  the 


Medium  of  Communication,  in  NETWORK  TELEVISION  AND  THE  PUBLIC  INTEREST  198  (Michael 
Botein  &  David  M.  Rice  eds.,  1980). 

128.  See  infra  notes  160-71  and  accompanying  text. 

129.  47  U.S.C.  §  315(a)(4)  (1994).  The  bona  fide  news  event  rule  exempted  four  types  of 
political  broadcasts  from  the  reasonable  use  rule,  including  any  "bona  fide  newscast,"  "bona  fide 
news  interview,"  "bona  fide  news  documentary,"  or  "on  the  spot  coverage  of  bona  fide  news 
events"  such  as  political  conventions.  Id.  §  315(a)(l)-(4).  Following  the  1960  debates,  the 
Commission  ruled  that  political  debates  sponsored  by  "nonbroadcast  entities"  or  independent  third 
parties,  covered  live,  were  bona  fide  news  events  within  the  statutory  exemption.  In  re  Petitions 
of  the  Aspen  Inst.  Program  on  Communications  and  Soc'y  &  CBS,  Inc.  for  Revision  or 
Clarification  of  Comm'n  Rulings  Under  Section  315(a)(2)  &  315(a)(4),  55  F.C.C.2d  697  (1975), 
affd  sub  nom.,  Chisholm  v.  FCC,  538  F.2d  349  (D.C.  Cir.  1976).  The  "nonbroadcast  entity" 
requirement  was  abandoned  in  1983.  In  re  Petitions  of  Henry  Geller  &  Nat'l  Assoc,  of  Broads.  & 
the  Radio-Television  News  Dirs.  Assoc,  to  Change  Comm'n  Interpretation  of  Subsections  3 1 5(a)(3) 
and  (4)  of  the  Communications  Act,  95  F.C.C.2d  1236  (1983),  affd  sub  nom..  League  of  Women 
Voters  Educ.  Fund  v.FCC,  731  F.2d  995  (D.C.  Cir.  1984). 

1 30.  See  Youm,  supra  note  4,  at  695. 

131.  Red  Lion  Broad.  Co.  v.  FCC,  395  U.S.  367,  369  (1969).  The  extensive  scholarly 
attention  devoted  to  the  fairness  doctrine  is  outside  the  scope  of  this  Article. 

132.  Thomas  G.  Krattenmaker  &  L.A.  Powe,  Jr.,  The  Fairness  Doctrine  Today:  A 
Constitutional  Curiosity  and  an  Impossible  Dream,  1985  DukeL.J.  151,  152  n.7. 

133.  Red  Lion,  395  U.S.  at  380  (concluding  "the  amendment  vindicated  the  FCC's  general 
view  that  the  fairness  doctrine  inhered  in  the  public  interest  standard"  of  §  315). 

134.  Bruce  M.  Owen,  Economics  and  Freedom  of  Expression:  Media  Structure  and 
THE  First  Amendment  116(1 975). 

135.  Red  Lion,  395  U.S.  at  375. 

136.  Not  surprisingly,  much  of  the  criticism  was  generated  by  the  broadcast  industry  itself 


2003]  REGULATION  OF  PRESIDENTIAL  DEBATES  1 1 9 


m id- 1 980s,  when  the  FCC  agreed  to  revisit  the  analytical  foundation  for  the  rule. 

In  1985,  the  FCC  responded  to  criticism  of  the  fairness  doctrine,  issuing  a 
report  on  its  continuing  viability J^^  The  Commission  found  that  the  fairness 
doctrine  worked  to  limit  broadcast  coverage  of  controversial  issues  in  order  to 
minimize  the  amount  of  reply  time  devoted  to  opposing  sides  of  a  public 
concern. '^^  The  FCC  further  concluded  that  the  theory  of  spectrum  scarcity  that 
supported  the  Red  Lion  decision  no  longer  justified  "per  se"  regulation  of 
broadcasters,  "particularly  rules  which  affect  the  constitutionally  sensitive  area 
of  content  .  .  .  ."'^^  The  FCC  conceded  that  the  fairness  doctrine  was  an 
"unnecessary  and  detrimental  regulatory  mechanism,"  given  the  growth  of  new 
information  sources,  the  intrusion  into  broadcast  editorial  privileges,  and  the  lack 
of  a  demonstrated  public  benefit. "*°  The  FCC  soon  formally  abandoned  the 
fairness  doctrine,'"*'  with  the  last  two  small  public  interest  duties,  the  personal 
attack"*^  and  political  editorial  rules,'"*^  repealed  by  writ  of  mandamus  in  2000.''*'' 

The  philosophical  bases  for  broadcast  regulations  thus  reveal  both  historical 
misconceptions  and  modem  inconsistencies.  The  scarcity  rationale,  questioned 
as  scientifically  flawed  from  its  inception, '"^^  is  now  clearly  minimized  by  the 


See  Ben  H.  Bagdikian,  The  Media  Monopoly  247  (6th  ed.  2000). 

1 37.  General  Fairness  Doctrine  Obligations  of  Broadcast  Licensees,  50  Fed.  Reg.  35,41 8  (Aug. 
30,  1985). 

138.  fd.  at  35,423.  The  Commission  further  noted  that  broadcasters  faced  heavy  economic 
burdens  in  complying  with  the  fairness  doctrine  including  costs  of  defending  against  administrative 
challenges.  Id.  at  35,435.  While  the  costs  alone  were  not  sufficient  to  justify  eliminating  the 
doctrine,  no  "counterveiling  justifications"  offset  the  hardships,  as  no  additional  public  interest 
programming  was  produced,  fd. 

139.  Id.  at  35,422.  The  Commission  described  the  constitutional  concerns  as  contravening 
"fundamental  constitutional  principles"  and  according  a  "dangerous  opportunity  for  governmental 
abuse  . . . ."  Id.  at  35,446. 

140.  /^.  at  35,445-46. 

141.  Meredith  Corp.  v.  FCC,  809  F.2d  863  (D.C.  Cir.  1987),  on  remand,  In  re  Compl.  of 
Syracuse  Peace  Council  Against  Television  Station  WTVH  Syracuse,  New  York,  2  F.C.C.R.  5043 
(1987). 

1 42.  The  personal  attack  rule  stated  that  "if  an  attack  is  made  on  someone's  integrity  during 
a  presentation  of  views  on  a  controversial  issue  of  public  importance,  the  licensee  must  inform  that 
person  . . .  and  provide  a  reasonable  opportunity  to  respond."  In  re  Repeal  or  Modification  of  the 
Personal  Attack  and  Political  Editorial  Rules,  15  F.C.C.R.  19,973,  19,973  n.2  (2000)  (citing  47 
C.F.R§  73.1920  (2000)). 

143.  The  political  editorial  rule  stated  that  if  a  broadcast  station  airs  an  editorial  supporting 
a  "legally  qualified  candidate,"  the  broadcaster  must  provide  a  "reasonable  opportunity"  for 
opposing  candidates  to  respond.  Id.  (citing  47  C.F.R.  §  73.1930  (2000)). 

144.  Radio-Television  News  Dirs.  Ass'n  v.  FCC,  229  F.3d  269  (D.C.  Cir.  2000).  The  nearly 
two-decade  struggle  over  the  fate  of  the  fairness  doctrine  is  beyond  the  scope  of  this  Article.  A 
helpful  summary  of  the  battle  is  presented  in  Ian  Heath  Gershengorn,  The  Fall  of  the  FCC's 
Personal  Attack  and  Political  Editorial  Rules,  1 9  COMM.  LAW  7  (2001 ). 

145.  Hazlett,5M/?/'a  note  77,  at  926-31. 


1 20  INDIANA  LAW  REVIEW  [Vol.  36:101 


development  of  broadband,  cable  television,  satellite,  the  Internet,  and 
proprietary  on-line  networks.  ^^^  As  competition  grows  in  the  media  marketplace, 
consumers  will  find  substitutes  to  the  network  monopolies  that  satisfy  their  once 
ignored  niche  tastes.  Competition,  therefore,  will  produce  the  diverse  array  of 
speakers  promised  by  regulation  but  never  achieved. 

In  the  narrow  context  of  political  campaigns,  however,  the  public  interest 
principle  retains  more  viability.  The  growth  of  broadcast  network  alternatives 
has  stimulated  content  competition,  and  the  entry  of  new  competitors  has 
decreased  the  marginal  costs  of  programming.  But  broadcast  technology  remains 
costly,  '^^  and  new  consolidation  within  the  broadcast  markets  threatens  to  restrict 
market  entry  anew.'"*^  One  premise  of  the  1927  Act  thus  remains  relevant,  as 
unequal  access  to  broadcast  technology  could  unfairly  advantage  a  single 
candidate.''*^  Particularly  in  the  general  presidential  elections,  wide  access  to 


146.  See  supra  notes  77-89  and  accompanying  text. 

147.  See  Debora  L.  Osgood,  Note,  Expanding  the  Scarcity  Rationale:  The  Constitutionality 
of  Public  Access  Requirements  in  Cable  Franchise  Agreements,  20  U.  MiCH.  J.L.  REFORM  305, 327- 
32  (1986)  (advocating  the  application  of  the  scarcity  doctrine  to  cable  television  by  analyzing 
scarcity  in  an  economic,  rather  than  physical  context). 

148.  See,  e.g..  Time  Warner  Entm't  Co.  v.  FCC,  240  F.3d  1 126  (D.C.  Cir.  2001).  In  Time 
Warner,  the  D.C.  Circuit  found  that  FCC  rules  capping  the  number  of  subscribers  serviced  by  a 
cable  television  company  and  limiting  the  amount  of  programming  produced  by  the  cable  company 
that  may  be  shown  on  its  own  networks  violate  the  cable  companies'  First  Amendment  rights.  Id. 
The  decision  allows  major  cable  providers  such  as  AOL  Time  Warner  to  expand  their  national 
markets,  possibly  at  the  expense  of  independent  producers.  Stephen  Labaton  &  Geraldine 
Fabrikant,  U.S.  Court  Ruling  Lets  Cable  Giants  Widen  Their  Reach,  N.Y.  TIMES,  Mar.  3, 2001,  at 
Al .  Similarly,  the  FCC  modified  broadcast  regulations  to  allow  the  four  major  broadcast  networks 
to  own  or  operate  emerging  networks  such  as  UPN  or  the  WB.  Press  Release,  FCC,  FCC 
Eliminates  the  Major  Network/Emerging  Network  Merger  Prohibition  from  Dual  Network  Rule 
(Apr.  19,  2001)  (on  file  with  author). 

149.  Commentators  have  noted  that  the  Supreme  Court's  decision  in  NBC,  and  the 
development  of  the  scarcity  doctrine  itself,  may  have  been  motivated  by  this  concern.  P.M. 
Schenkkan,  Comment,  Power  in  the  Marketplace  of  Ideas:  The  Fairness  Doctrine  and  the  First 
Amendment,  52  Tex.  L.  Rev.  727, 742  (1974).  Schenkkan  argues  that  the  Court  used  scarcity  as  a 
means  of  explaining  its  true  concern,  a  monopolization  of  the  broadcast  medium  by  a  few,  favored 
speakers.  Id.  In  support,  he  notes  Justice  Murphy's  dissent  in  NBC  centered  not  on  spectrum 
scarcity  alone,  but  on  the  danger  of  allowing  the  scarce  spectrum  to  become  "a  weapon  of  authority 
and  misrepresentation."  Id.  at  742-43  (quoting  NBC  v.  United  States,  319  U.S.  190,  228  (1943) 
(Murphy,  J.,  dissenting)). 

Scholars,  however,  have  also  noted  that  any  perceived  concentration  of  power  in  the  hands  of 
a  few  network  broadcasters  "has  been  broken  by  deregulation  and  technology."  Krattenmaker 
&  POWE,  supra  note  1 0,  at  222.  Moreover,  concentrating  broadcast  regulation  in  the  hands  of  a 
single  administrative  monopoly  is  not  necessarily  a  more  satisfying  protection  against  possible 
abuse.  See  HUBER,  supra  note  90,  at  xiv  ("[I]n  1934  ...  the  United  States  folded  all  federal 
authority  over  both  wireline  and  wireless  communication  into  a  new,  superpowerful 
communications  commission Germany  got  an  FCC  too,  even  bigger  and  more  effective  than 


2003]  REGULATION  OF  PRESIDENTIAL  DEBATES  121 


information  on  the  candidates  remains  essential  to  our  system  of  participatory, 
indirect  democracy. 

II.  Debates  in  the  Modern  Presidential  Election 

Within  the  hierarchy  of  speech  values  J^°  the  Supreme  Court  has  singled  out 
campaigns  for  public  office  as  a  core  value  protected  by  the  First  Amendment. ^^' 
Candidates  for  public  office  engage  in  a  wide  variety  of  direct  and  indirect 
speech,  including  rallies,  fundraisers,  and  orchestrated  news  events. '^^  Elevated 
above  all  these  events,  however,  the  candidate  debates  occupy  a  central  place  in 
American  politics. '^^ 

A.  Presidential  Debates,  Before  and  After  Television 

Candidate  debates  date  back  to  at  least  1788,  when  James  Madison 
campaigned  for  election  to  the  House  of  Representatives.'^'*  History  records  the 
epic  confrontations  between  Stephen  A.  Douglas  and  Abraham  Lincoln,  when  a 
captivated  nation  listened  to  the  candidates  duel  on  the  future  of  slavery, 
unification,  and  federal  governance. '^^  As  answers  to  contemporary  social 
questions  developed  into  political  party  allegiance,  the  public  debates  provided 
a  peaceful  forum  for  airing  disputes  within  government. '^^ 


ours. . . .  Our  own  commission  never  got  that  bad,  but  it  got  bad  enough ").  Huber's  allusion, 

however  melodramatic,  does  point  to  the  problem:  "[HJistory  teaches  that  the  fear  said  to  justify 
regulation  of  speech  exists  all  too  often  only  in  the  minds  of  the  regulators."  Krattenmaker  & 
POWE,  supra  note  10,  at  224. 

1 50.  Although  the  Court  has  never  formally  established  a  hierarchy  of  First  Amendment 
values,  it  has  acknowledged  a  tiered  value  system  on  numerous  occasions.  E.g.,  Connick  v.  Myers, 
461  U.S.  138,  145  (1983)  (noting  that  "speech  on  public  issues  occupies  the  'highest  rung  of  the 
hierarchy  of  First  Amendment  values,  and  is  entitled  to  special  protection"  (quoting  Carey  v. 
Brown,  447  U.S.  455,  467  (1980))). 

151.  Monitor  Patriot  Co.  v.  Roy,  401  U.S.  265,  271-72  (1971)  ("[l]t  can  hardly  be  doubted 
that  the  constitutional  guarantee  has  its  fullest  and  most  urgent  application  precisely  to  the  conduct 
of  campaigns  for  political  office.").  The  Court  has  reiterated  this  position  in  Mclntyre  v.  Ohio 
Elections Commission,5U\J.S.ZZA,Ul{\99SlanA Buckley V.  J^a/eo, 424 U.S.  1,  14-15(1976). 

1 52.  Mark  C.  Alexander,  Don 't  Blame  the  Butterfly  Ballot:  Voter  Confusion  in  Presidential 
Politics,  13  Stan.  L.&POL'Y  Rev.  121  (2002). 

1 53 .  The  Supreme  Court  has  stated  that  "[djeliberation  on  the  positions  and  qualifications  of 
candidates  is  integral  to  our  system  of  government,  and  electoral  speech  may  have  its  most  profound 
and  widespread  impact  when  it  is  disseminated  through  televised  debates."  Ark.  Educ.  Television 
Comm'n  v.  Forbes,  523  U.S.  666,  676  (1998);  see  also  Raskin,  supra  note  4,  at  1944. 

154.  Kathleen  Hall  Jamieson  &  David  S.  Birdsell,  Presidential  Debates:  The 
Challenge  of  Creating  an  Informed  Electorate  34  (1 988). 

155.  See  generally  THE  LiNCOLN-DoUGLAS  DEBATES  (Harold  Holzer  ed.,  1 993). 

1 56.  Jamieson  &  Birdsell,  supra  note  1 54,  at  40  ("[D]ebate[s]  became  a  release  valve  for  the 

pressures  of  constituency  and  faction [T]he  cycle  of  debate  offered  clash  without  disaster  and 

simultaneously  affirmed  the  value  and  legitimacy  of  the  political  structure  that  made  debate 


122  INDIANA  LAW  REVIEW  [Vol.  36:101 


Although  political  debates  had  long  been  printed  and  distributed  along  the 
campaign  trail, '^^  broadcasting  promised  a  new  era  of  open  democracy.  Herbert 
Hoover's  insistence  on  radio  regulations  designed  for  public  benefit  drew  upon 
his  belief  that  broadcasting  would  revolutionize  political  debates.'^*  Until  the 
emergence  of  broadcasting,  the  candidates  often  viewed  presidential  debates  as 
dangerous.  Broadcasting  changed  this  pattern,  allowing  candidates  to  speak  to 
a  national  audience. '^^ 

The  arrival  of  television  transformed  the  presidential  debates  into  the  seminal 
event  in  election  politics. '^^  Television  seemed  to  hold  the  power  to  electrify 
American  politics,  reuniting  citizens  with  Washington  by  providing  live  access 
to  the  candidates.  '^'  Although  televised  political  coverage  was  common  by  1 960, 
presidential  candidates  were  still  wary  of  violating  the  age-old  maxim  against 
appearing  alongside  a  rival. '^^  Broadcasters,  however,  saw  an  important  public 
service  opportunity  in  providing  free  airtime  to  the  candidates. '^^  In  1 960,  eager 


possible."). 

1 57.  Id.  at  5 1  (explaining  that  candidates  such  as  Lincoln  and  Daniel  Webster  published  debate 
speeches  in  pamphlets  and  newspaper  editorials). 

158.  Id.  at  84  ("Hoover  believed  that  radio  would  revolutionize  'the  political  debates  that 
underlie  political  action  [by  making]  us  literally  one  people  upon  all  occasions  of  general  public 
interest. '").  See  also  Krasnow  &  Goodman,  supra  note  44,  at  608  (quoting  Hoover's  belief  that  the 
"ether  is  a  public  medium,  and  its  use  must  be  for  public  benefit"). 

1 59.  In  the  early  years  of  radio,  presidential  candidates  largely  ignored  the  possibilities  offered 
by  the  new  broadcast  format.  See  CNN,  The  Debates  '96,  Presidential  Debate  History,  How 
We  Got  Them,  antd  What  They  Mean,  at  http://cgi.cnn.com/ALLPOLITICS/  1996/debates/ 
history  [hereinafter  CNN,  The  Debates  '96]  (last  visited  Apr.  19,  2002).  Prior  to  the  debates  of 
1960,  only  one  presidential  election  debate  was  broadcast  over  radio,  a  single  Republican  primary 
contest  in  Oregon  between  Thomas  Dewey  and  Harold  Stassen.  Id.\  see  also  Commission  on 
Presidential  Debates,  Debate  History:  1948  Debates,  at  http://www.debates.  org/pages/ 
debhis48.html  (last  visited  Apr.  12,  2002)  (estimating  forty  to  eighty  million  listeners  tuned  in  to 
the  one  hour  debate  on  outlawing  the  Communist  Party  in  the  United  States). 

1 60.  Keith  Darren  Eisner,  Comment,  Non-Major  Party  Candidates  and  Televised  Presidential 
Debates:  The  Merits  of  Legislative  Inclusion,  141  U.  Pa.  L.  Rev.  973,  974-75  (1993).  The  first 
televised  presidential  debate  occurred  during  the  1956  Democratic  primary  in  Florida  between 
candidates  Adlai  Stevenson  and  Estes  Kefauver.  Commission  on  Presidential  Debates,  Debate 
History:  1956  Debates,  at  http://www.debates.org/pages/debhis56.html  (last  visited  Apr.  12, 
2002).  For  a  detailed  account  of  the  debate,  see  Jamieson  &  BiRDSELL,  supra  note  1 54,  at  92-93. 

161.  Angus  Campbell,  Has  Television  Reshaped  Politics?,  at  http://www.mbcnet.org/ 
debateweb/html  (last  visited  Apr.  5,  2002)  (quoting  former  CBS  president  Dr.  Frank  Stanton  as 
remarking  "[t]elevision,  with  its  penetration,  its  wide  geographic  distribution  and  impact,  provides 
a  new,  direct  and  sensitive  link  between  Washington  and  the  people"). 

1 62.  Earl  Mazzo,  The  Great  Debates,  at  http://www.mbcnet.org/debateweb/html  (last  visited 
Apr.  6,  2002);  see  also  CNN,  THE  DEBATES  '96,  supra  note  159  (noting  that  prior  to  1960  the 
"most  vocal  group  advocating  debates  were  political  underdogs  wanting  to  share  the  stage  with 
incumbents"). 

1 63.  CNN,  The  Debates  '96,  supra  note  1 59. 


2003]  REGULATION  OF  PRESIDENTIAL  DEBATES  1 23 


to  convince  Congress  to  eliminate  the  equal-time  provision  of  the  1 934  Act,'^  the 
major  networks  volunteered  dozens  of  free  hours  to  each  candidate  in  the  weeks 
preceding  the  general  election.  '^^  After  private  negotiations,  the  networks  agreed 
to  a  live  unified  broadcast  without  sponsorship  or  commercial  interruption.'^^ 
United  by  the  possible  permanent  repeal  of  the  equal-time  rule,'^^  the  level  of 
cooperation  among  the  networks  to  air  the  unprecedented  event  was  unusually 
high.  As  a  result,  when  Kennedy  and  Nixon  took  to  the  stage,  nearly  every 
television  station  in  the  country  carried  the  event. '^* 

The  national  reaction  to  the  first  Kennedy-Nixon  debate  was  enormous '^^ — a 
record  audience  of  over  sixty-six  million  households. '^^  Richard  Nixon 
proclaimed  that  "debates  between  the  presidential  candidates  are  a  fixture,"  and 
predicted  that  "in  all  the  elections  in  the  future  we  are  going  to  have  debates."'^' 
Yet  televised  presidential  debates  nearly  disappeared  from  the  political  landscape 
in  subsequent  years. '^^  No  presidential  debates  were  held  between  1960  and 
1976,'^^  and  the  televised  debate  re-emerged  only  after  painstaking  negotiations 
between  the  candidates.'^"*  Equally  disappointing  was  the  impact  of  the  televised 


164.  See  supra  notes  1 22-30  and  accompanying  text. 

165.  Editorial,  Senate  Suspends  §  315,   Now   it's  up  to  the  House  to  Follow  Suit, 
Broadcasting,  July  4, 1960,  available  at  http://www.mbcnet.org/debateweb/html/  history/ 1 960/ 
sections  15.htm  [hereinafter  Editorial,  Senate  Suspends]  (last  visited  Apr.  2,  2002). 

166.  Editorial,  Sponsorship  of  TV  Debates?,  BROADCASTING,  Aug.  8,  1960,  available  at 
http://www.mbcnet.org/debateweb/html/history/1960/sponsorship.htm  (last  visited  Apr.  2, 2002). 
Although  prominent  advertisers  lined  up  to  provide  exclusive  sponsorship,  CBS  seized  the  public 
relations  opportunity  to  decline  the  revenue,  proclaiming  "we  .  .  .  want  to  make  this  our  own 
contribution  because  we  believe  there  is  no  single  act  of  self-government  that  is  more  important 
than  the  quadrennial  choice  of  our  national  leadership."  Id.  The  other  networks  quickly  followed. 

1 67.  See  Editorial,  Senate  Suspends,  supra  note  1 65  (stating  that  the  suspension  of  the  equal- 
time  provision  required  the  FCC  to  report  on  the  results  of  the  suspension  during  the  1 960  election 
and  to  "recommend  any  legislation  it  thinks  necessary"  to  repeal  the  rule  permanently). 

168.  Mazzo,  supra  note  162  ("Almost  every  station  carried  the  debates  simultaneously,  and 
in  most  places  there  were  no  alternative  programs."). 

1 69.  Special  Report,  "Great  Debate  "  Rightly  Named,  Nixon,  Kennedy  Set  a  Precedent  That 
Will  Be  Hard  to  Abandon,  BROADCASTING,  Oct.  3, 1960,  at  88,  ova/Va^/e  or  http://www.mbcnet.org/ 
debateweb/html/history/1 960/rightlynamed.htm  (last  visited  Apr.  5, 2002)  (proclaiming  the  "whole 
course  of  political  campaigning  has  been  changed  by  a  single  broadcast"). 

170.  Commission  on  Presidential  Debates,  Debate  History:  1960  Debates,  at 
http://www.debates.org/pages/debhis60.html  (last  visited  Mar.  20,  2002). 

171.  Stephen  Bates,  The  Future  of  Presidential  Debates  (1993),  at 
http://www.annenberg.nwu.edu/pubs/debate  (last  visited  Apr.  1 ,  2002).  But  see  infra  note  1 79. 

1 72.  Susan  E.  Spotts,  The  Presidential  Debates  Act  of  1992,  29  Harv.  J.  ON  Legis.  56 1 ,  563 
(1992). 

1 73.  CNN,  The  Debates  '96,  supra  note  1 59. 

1 74.  Bates,  supra  note  1 7 1  (noting  that  the  1 976  debates  between  Jimmy  Carter  and  Gerald 
Ford  required  "haggling  over  timing,  format,  questioners,  camera  angles,  risers,  notes,  stools,  props, 
and  a  host  of  other  issues"). 


124  INDIANA  LAW  REVIEW  [Vol.  36:101 


debates  on  political  involvement.  The  televised  debates,  as  well  as  television 
coverage  of  politics  and  campaigns  in  general,  did  not  increase  voter  turnout'^^ 
or  voter  interest  in  the  elections. '^^  The  much-anticipated  revolution  in  American 
democracy,  it  appeared,  would  not  be  televised.  The  seeming  failure  of  televised 
debates  to  invigorate  the  electorate  defies  a  single  explanation.  Instead,  the 
problems  of  the  televised  debates  are  political,  technological,  and  historical. 

First,  presidential  candidates  may  have  no  political  incentive  to  debate  their 
opponents.  The  great  debates  of  1960  occurred  only  because  the  broadcast 
networks  lobbied  the  candidates,  Congress,  and  the  FCC  intensively.  Vice 
President  Nixon  enjoyed  the  advantages  of  national  recognition  and  understood 
that  Senator  Kennedy  would  benefit  from  merely  sharing  the  stage. '^^  Then,  as 
now,  a  presidential  underdog  could  win  valuable  momentum  by  merely  "holding 
his  own"  in  the  debates  and  avoiding  "visibly  serious  blunders."'^^  In  many 
contests,  therefore,  the  leading  candidate  has  more  to  lose  in  the  debates  and  a 
strong  motivation  to  decline  a  televised  confrontation.''^ 

Second,  candidates  tend  to  narrow  their  messages  during  televised  debates 


1 75.  Campbell,  supra  note  161 .  Campbell  reported  on  research  concerning  voter  turnout  in 
the  era  of  televised  politics.  Noting  that  the  "most  commonly  accepted  indicator  of  public 
involvement  in  politics  is  the  turnout  in  national  elections,"  Campbell  found  that: 

In  fact,  there  has  been  only  a  slight  rise  in  the  turnout  figures  during  the  last  ten  years. 
In  the  presidential  elections  of  1952,  1956,  and  1960  the  turnouts — that  is,  the 
proportions  of  adult  citizens  who  voted — were  considerably  higher  than  in  the  elections 
of  1 944  and  1 948,  but  if  we  drop  back  to  the  period  just  before  the  war  we  find  that  the 
turnouts  in  1936  and  1940  were  almost  as  Ijigh  as  they  have  been  in  the  most  recent 
elections.  There  has  been  a  small  proportionate  increase  in  the  presidential  vote  during 
the  television  era,  although  it  has  fluctuated  and  at  its  lowest  point  in  1956  (60.4 
percent)  exceeded  by  only  a  percentage  point  the  high  of  the  pre-television  period. 
Id. 

1 76.  Id.  Campbell  presented  the  findings  of  an  ongoing  study  investigating  voter  interest 
between  1952  and  1960.  The  sampling  found  a  large  fluctuation  of  voter  interest,  but  also  noted 
a  "tremendous  increase  in  television  coverage"  during  these  same  years.  The  findings,  Campbell 
explains,  are  important  because  if  "television  had  demonstrated  a  unique  capacity  to  activate 
political  interest  among  its  viewers  we  should  find  a  substantial  increase  in  the  number  expressing 
high  interest  over  the  1952  to  1960  period.  This  we  do  not  find."  Id. 

177.  Mazzo,  supra  note  162  (noting  then  Vice  President  Nixon  was  acutely  aware  of  his 
advantage  over  the  relatively  unknown  Senator  Kennedy,  and  thus  reluctant  to  provide  prestige  to 
a  lesser-known  opponent). 

178.  Id.  (discussing  Senator  Kennedy's  advantage  in  the  1960  debates).  Forty  years  later. 
Republican  candidate  George  W.  Bush  enjoyed  the  same  advantage  against  his  more  seasoned  rival 
Vice  President  Albert  Gore,  Jr.  Richard  L.  Berke,  Debates  Put  in  Focus  Images  and  Reality^  N.Y. 
Times,  Oct.  1 9, 2000,  at  A29  (quoting  democratic  strategist  David  Axelrod  who  noted  "I  think  Bush 
gained  the  most  of  [the  debates]  just  by  surviving"). 

179.  Bates,  supra  note  171.  Thus,  despite  his  enthusiasm  for  televised  debates  in  1962, 
Richard  Nixon  refused  to  debate  his  challengers  in  1968  and  1972,  concluding  "[i]t's  poor  tactics 
when  you're  running  so  far  ahead."  Id.  (quoting  Spiro  Agnew). 


2003]  REGULATION  OF  PRESIDENTIAL  DEBATES  1 25 


to  appeal  to  a  national  audience.  Traditionally,  non-televised  debates  have  been 
"free- flowing,"  without  pre-set  questions  and  intrusive  moderation. '^°  This 
unstructured,  adversarial  format  was  a  product  of  the  limited  audience.  Like 
most  political  rallies,  a  close-knit  network  of  insiders  usually  attended  the  live 
debates.  '^'  Broadcasting,  in  contrast,  cuts  across  the  social  spectrum  reaching  all 
levels  of  income,  education,  and  political  involvement.'^^  Candidates  gained 
access  to  a  national  audience,  but  could  no  longer  assume  they  spoke  only  to  the 
faithful.  The  candidates  responded  by  modifying  their  message  for  the  broadcast 
medium.  The  adversarial  format  of  the  traditional  debate  was  merged  with 
question-and-answer  sessions^*^  and  press  conferences'**  to  create  an  often  stale 
mix  of  substance  and  showmanship.  Not  surprisingly,  viewers  frequently  found 
programming  alternatives  more  appealing.'*^ 

Third,  the  televised  debates  are  burdened  by  the  inherent  limits  of  television. 
Television  viewing  is  a  largely  passive  activity.'*^  Its  importance  in  the  political 
process  is  often  "the  ease  with  which  television  news  falls  into  its  audience's 
laps.  .  .  ."'^^  Candidates  are  forced  into  the  difficult  position  of  finding  the 
highest  plane  of  dialogue  consistent  with  the  education  and  interest  of  the 
audience.'**  Unable  to  easily  define  this  target,  candidates  concluded  that 
winning  the  televised  debates  requires  satisfying  the  media  instead  of  the 
viewers.'*^    In  turn,  television  journalism,  predisposed  to  "drama  and  visual 


1 80.    Jamieson  &  BiRDSELL,  supra  note  1 54,  at  87. 

18  L  See  PAUL  TAYLOR,  SEE  HOW  THEY  RUN,  ELECTING  THE  PRESIDENT  IN  AN  AGE  OF 
Mediaocracy  245  ( 1 990);  see  also  Alexander,  supra  note  1 52,  at  1 25  (noting  campaign  rallies  are 
"packed  with  supporters"  and  "designed  to  motivate  the  faithful"). 

1 82 .  Taylor,  supra  note  1 8 1 ,  at  244. 

1 83 .  JAMIESON  &  BiRDSELL,  supra  note  1 54,  at  1 02. 

184.  /6?.  at  118. 

1 85.  The  problem  of  viewer  attrition  is  not  new.  Researchers  noted  that  even  viewership  of 
the  great  debates  of  1 960  waned  in  areas  where  alternatives  were  broadcast.  See  Mazzo,  supra  note 
1 62  (estimating  viewership  of  the  debates  dropped  between  fifteen  and  twenty  percent  in  areas 
where  local  affiliates  carried  alternatives  to  the  first  Nixon/Kennedy  debate). 

186.  Taylor,  supra  note  181,  at  244.  Taylor  notes  that  "[w]atching  television  is  a  passive, 
low-intensity  activity — 'chewing  gum  for  the  eyes' — which  requires  less  concentration  than  reading 
a  book  or  newspaper."  Id. 

187.  Id. 

1 88.  Jamieson  &  Birdsell,  supra  note  1 54,  at  1 5  ("The  audience  for  presidential  debating  is 
far  less  directed  and  accountable ....  The  audience  probably  employs  some  set  of  standards,  but 
these  are  informal  and  inexplicit.  .  .  .").  Taylor  thus  concludes  that  the  television  audience  "is 
broader,  less  educated,  less  sophisticated  and  less  interested  in  public  affairs  than  the  readership  of 
newspapers."  Taylor,  supra  note  181,  at  244. 

189.  See  Bob  Davis  &  Jackie  Caimes,  Debaters  Decoded:  A  Viewer 's  Guide  to  Tomorrow 's 
Words,  Wall  St.  J.,  Oct.  2,  2000,  at  Al.  The  authors  summarize  the  goals  of  the  modern 
presidential  candidate  in  each  televised  debate:  "to  introduce  themselves  to  Americans  who  have 
been  too  bored  to  pay  attention  to  the  presidential  race,  avoid  embarrassing  missteps,  and  make 
each  other  look  bad."  Id. 


126  INDIANA  LAW  REVIEW  [Vol.  36:101 


imagery,'"^  tends  to  focus  on  which  candidate  "won"  the  contest  rather  than  the 
substance  of  the  issues  discussed.'^'  Candidates  fearing  the  stigma  that 
accompanies  a  perceived  "loss"  are  forced  to  spend  countless  hours  preparing  for 
each  debate  in  an  effort  to  appear  "poised  and  confident." '^^  The  viewers  are 
then  treated  to  endless  predictions  and  post-debate  opinion  polls,'^^  little  of 
which  assists  an  informed  debate  on  the  candidates'  ability  to  govern. ^^"^ 

Finally,  televised  debates  often  offer  nothing  new.  Commentators  have  noted 
that  the  "essential  problem  of  all  political  communication  is  the  character  of  the 
public  demand  for  it."'^^  Television,  like  all  media,  has  the  capacity  to  reach  a 
demographically  diverse  audience  and  thus  augment  the  education  of  all  voters.  '^^ 
Researchers  observe,  however,  that  the  primary  consumers  of  political  television, 
including  the  presidential  debates,  are  usually  the  most  informed  segments  of 
society. '^^  Social  scientists  agree,  noting  that  televised  debates  largely  reinforce 
voter  preference.'^*  The  debate  audience,  therefore,  is  frequently  comprised  of 
the  same  group  that  follows  the  election  most  closely  in  other  media  such  as 
newspapers  and  radio. '^^ 


1 90.  Lynda  Lee  Kaid,  Political  Process  &  Television,  Museum  of  Broadcasting  and 
Communications,  Encyclopedia  of  Television,  available  at  http://www.mbcnet.org/ 
debateweb/html  (last  visited  Apr.  5,  2002). 

1 9  L  See,  e.g. ,  Editorial,  Winner  of  Debate  is  American  Public,  CHI .  SUN-TlMES,  Oct.  4, 2000, 
at  55  (concluding  the  first  2000  presidential  debate  failed  to  "settle  the  presidential  election" 
because  neither  "candidate  scored  a  knockout,  and  neither  committed  acandidacy-killing  mistake"). 

192.  PBS,  Debating  Our  Destiny:  Preparing  for  the  Debates,  available  at 
http://www,pbs.org/newshour/debatingourdestiny/debate-prepping.htm  (last  visited  Apr.  1 0, 2002) 
(on  file  with  author);  see  also  Alexander,  supra  note  152,  at  127  (noting  that  preparing  for  the 
debates  "is  one  of  the  most  intense  exercises  that  a  campaign  endures"). 

1 93 .  See  Jackie  Calmes  &  Jeanne  Cummings,  Bush  Tries  to  Score  a  Few  Points  After  the  Bell; 
Polls  Give  Gore  Debate  Edge,  but  Rival  Pouru:es  on  Exaggerations,  WALL  ST.  J.,  Oct.  5, 2000,  at 
A28  (discussing  the  results  of  "[s]nap  opinion  polls"  favoring  the  Vice-President's  performance  in 
the  first  televised  debate). 

194.  See  Richard  L.  Berke  &  Kevin  Sack,  In  Debate  2,  Microscope  Focuses  on  Gore,  N.Y. 
Times,  Oct.  11,2000,  at  Al. 

1 95 .  Campbell,  supra  note  161. 

196.  Id. 

197.  Id 

198.  See  Peter  R.  Schorott,  Electoral  Consequences  of  "Winning"  Televised  Campaign 
Debates,  54  PuB.  Op.  Q.  567, 568  (1990)  (citing  research  indicating  that  "voters  adopted  the  issue 
position  taken  by  their  preferred  candidate"  following  broadcast  debates).  Social  scientists  have 
labeled  this  process  as  "'group  polarization*  in  which  like-minded  people  in  an  isolated  group 
reinforce  one  another's  views,  which  then  harden  into  more  extreme  positions."  Alexander  Stille, 
Adding  Up  the  Costs  of  Cyber  democracy,  N.Y.  TIMES,  June  2, 2001 ,  at  B9.  Televised  debates  help 
overcome  these  "selective  attention  barriers"  by  exposing  the  partisan  audience  to  the  views  of  the 
opposing  candidate.  James  B.  Lemertetal.,News  Verdicts,  the  Debates,  and  Presidential 
Campaigns  199(1991). 

1 99.  Campbell,  supra  note  161 .  Campbell  cites  this  overlap  in  viewership  to  explain  the  small 


2003]  REGULATION  OF  PRESIDENTIAL  DEBATES  1 27 


Each  of  these  problems  has  contributed  to  a  steady  decline  in  presidential 
debate  viewership.^°°  By  1 992,  the  presidential  debates  were  no  longer  "must  see 
television"  as  viewership  dropped  to  under  thirty-seven  million  households, 
fewer  than  half  the  homes  of  just  sixteen  years  earlier.^*^'  While  the  presidential 
debates  still  serve  an  important  function,^^^  they  have  not  revolutionized  the 
substance  or  structure  of  the  presidential  election.^^^ 

B.   The  2000  General  Election  Debates 

During  the  2000  elections,  the  networks  finally  lost  interest.  Faced  with 
declining  ratings  and  vigorous  competition  from  cable  television,  satellite,  and 
the  Internet,  NBC  and  FOX  decided  not  to  broadcast  the  first  of  three  scheduled 
presidential  debates.  NBC  cited  a  legal  obligation,  claiming  its  broadcast 
contract  with  Major  League  Baseball  required  it  to  preempt  the  debate  to  cover 
the  playoffs.^^"*    FOX  offered  simple  economics,  choosing  to  offer  a  highly 


increase  in  voting  following  the  1960  televised  debates.  Voter  turnout,  Campbell  notes,  increased 
sharply  between  the  1932  and  1936  presidential  elections,  the  same  period  when  broadcast  radio 
began  its  rapid  national  expansion.  Id.  By  the  1960  elections,  however,  "90  percent  of  the 
population  reported  listening  to  radio  and  80  percent  read  a  daily  newspaper."  Id.  Televised 
debates,  therefore,  merely  complimented  the  existing  political  reporting,  increasing  the  depth,  but 
not  the  scope,  of  voter  education. 

200.  The  average  national  viewership  for  the  presidential  elections  remained  above  sixty 
million  households  between  1960  and  1992.  Commission  on  Presidential  Debates,  Debate 
History:  1976  Debates,  at  http://www.debates.org/pages/debhis76.html  (last  visited  Mar.  20, 
2002)  (reporting  69.7  million  viewers  in  1 976);  Commission  ON  Presidential  Debates,  Debate 
History:  1980  Debates,  at  http://www.debates.org/pages/debhis80.html  (last  visited  Mar.  20, 
2002)  (reporting  80.6  million  viewers);  COMMISSION  ON  PRESIDENTIAL  Debates,  DEBATE  HISTORY: 
1984  Debates,  at  http://www.debates.org/pages/debhis84.html  (last  visited  Mar.  20,  2002) 
(reporting  65.1  million  viewers);  COMMISSIONON  PRESIDENTIAL  Debates,  DEBATE  History:  1992 
Debates,  at  http://www.debates.org/pages/debhis92.html  (last  visited  Mar.  20,  2002)  (reporting 
62.4  million  viewers). 

201.  Commission  on  Presidential  Debates,  Debate  History:  1996  Debates,  at 
http://www.debates.org/pages/debhis96.html  (last  visited  Mar.  20,  2002)  [hereinafter  1996 
Debates]. 

202.  Scholars  have  noted  that  televised  presidential  debates  have  "become  a  beacon  of  sanity 
in  the  electoral  process,"  in  comparison  to  campaign  commercials.  Ed  Bark,  Defining  Moments: 
Audience  Will  Be  Watching  Debates  Carefully,  Pros  Say,  DALLAS  MORNING  NEWS,  Oct.  2,  2000, 
at  lA  (quoting  Professor  Marc  Landy);  see  also  Editorial,  Debates  Give  Voters  Insight  Into 
Election,  San  ANTONIO  Express-News,  Oct.  3,  2000,  at  6B  ("The  debates  are  vital  because  they 
give  the  candidates  a  chance  to  deliver  their  message  without  being  filtered  by  the  media."). 

203.  Johnson  v.  FCC,  829  F.2d  157,  164  (D.C.  Cir.  1987)  (stating  that  televised  debates  are 
"only  one  of  the  great  number  of  avenues  for  candidates  to  gain  publicity  and  credibility  with  the 
citizenry");  Alexander,  supra  note  1 52,  at  127;  Spotts,  supra  note  172,  at  563. 

204.  Howard  Kurtz,  NBC  Tosses  Debate  Choice  to  Affiliates;  Stations  Can  Pick  Between 
Politics  and  Playoffs,  WASH.  POST,  Sept.  30,  2000,  at  CI. 


128  INDIANA  LAW  REVIEW  [Vol.  36:101 


publicized  action  adventure  premiere.^^^  FCC  Chairman  William  E.  Kennard 
quickly  issued  a  scathing  condemnation  of  the  networks'  decisions,^*'^  and 
Commissioner  Susan  Ness  echoed  his  sentiment.^^^  Public  criticism  ranged  from 
outrage  to  satire,^^*  but  industry  executives  defended  the  move  as  a  simple 
business  decision  consistent  with  the  demonstrated  interests  of  the 
marketplace.^^^  More  tellingly,  the  viewers  tuned  out  the  debates  and  turned  on 
the  alternatives.  While  the  baseball  game  failed  to  draw  solid  ratings,  FOX's 
Dark  Angel  premiere  packed  in  more  than  seventeen  million  households,  easily 
beating  CBS's  debate  coverage  and  nearly  topping  ABC's  debate  coverage  as 
well.^'°  Although  the  combined  network  and  cable  viewership  ultimately 
demonstrated  a  significant  national  interest  in  the  elections,^^'  the  week-end 
ratings  showed  that  America's  political  appetite  was  largely  confined  to  The  West 
Wing}''' 

The  2000  presidential  debates  reveal  two  important  dimensions  to  the 
modern  American  voter.  First,  as  industry  pundits  have  recognized,  viewers  seek 
programming  alternatives.  Given  the  option  to  choose  professional  sports, 
Hollywood  hype,  or  presidential  candidates,  many  network  viewers  opted  out  of 
the  debates.  Second,  despite  the  poor  network  showing,  the  first  debate  reached 
more  homes  than  either  of  the  presidential  debates  held  during  the  1996  general 
elections.^'^  The  low  network  viewership  masked  a  larger  audience  watching  the 
debates  on  cable  television  channels  and  premium  satellite  stations.^'"^  Viewers, 


205.  Don  Kaplan,  Sexy  Angel  Sinks  Debate:  Titanic  Creator  Launches  Ratings  Winner,  N.Y. 
Post,  Oct.  5, 2000,  at  94. 

206.  William  E.  Kennard,  Editorial,  Fox  and  NBC  Renege  on  a  Debt,  N.Y.  Times,  Oct.  3, 
2000,  at  A27. 

207.  Press  Release,  FCC  Commissioner  Susan  Ness  Decries  Decisions  of  NBC  and  FOX 
Networks  not  to  Air  the  First  Presidential  Debate  (Sept.  29,  2000)  (on  file  with  author). 

208.  Stephen  Hess,  Reschedule  This  Pesky  Election,  USA  Today,  Oct.  2, 2000,  at  8A  (arguing 
that  the  presidential  elections  should  be  held  in  February,  "between  the  Super  Bowl  and  the  NCAA 
[basketball]  tournament"). 

209.  See,  e.g.,  Kaplan,  supra  note  205  (quoting  television  analyst  Marc  Berman,  who  stated 
"[ajnytime  you  have  political  programming — even  the  presidential  debates — ...  the  other  networks 
will  benefit ....  It  happens  every  time,  and  it  made  very  good  sense  for  Fox  . . . ."). 

210.  Id. 

211.  Lisa  de  Moraes,  The  Real  Loser  on  Debate  Night:  NBC 's  Baseball  Strikes  Out,  WASH. 
Post,  Oct.  5, 2000,  at  C7.  The  first  debate  reached  approximately  46.6  million  viewers,  exceeding 
the  total  for  the  first  presidential  debate  in  the  1996  general  election.  Id. 

212.  The  Week's  TV  Ratings,  S.F.  Chron.,  Oct.  1 1,  2000,  at  C4  (reporting  NBC's  fictional 
series  The  West  Wing  ranked  first  in  viewership  for  the  week  of  the  first  presidential  debate). 

213.  de  Moraes,  supra  note  211  (reporting  that  viewership  for  the  first  debate  of  the  2000 
general  election  averaged  46.6  million  households);  1996  Debates,  supra  note  201  (reporting  that 
viewership  for  the  first  debate  of  the  1996  general  election  averaged  46. 1  million  households,  and 
36.3  million  households  for  the  second  debate). 

214.  Compare  Kaplan,  supra  note  205  (using  network  totals  to  predict  that  total  debate 
viewership  would  be  less  than  35  million),  with  de  Moraes,  supra  note  211  (reporting  actual 


2003]  REGULATION  OF  PRESIDENTIAL  DEBATES  1 29 


therefore,  demonstrated  a  preference  for  both  debate  alternatives  (content)  and 
network  alternatives  (forum)  for  the  candidates'  speech.^'^  These  conclusions 
suggest  that  any  regulation  compelling  the  live  unified  broadcast  of  the  debates 
must  carefully  consider  the  relevant  market  for  debate  coverage,  an  analysis 
addressed  in  Part  III. 

III.  Out  of  the  Chaos:  A  Market  Approach  to  the 
Constitutional  Analysis  of  Broadcast  Regulations 

The  Supreme  Court's  decisions  in  NBC,  Red  Lion,  and  Tornillo,  and  the 
economic  criticism  of  the  scarcity  rationale  are  debates  about  content.  Red 
Lion's  deferential  review  and  Tornillo's  intense  scrutiny  are  both  sufficient  to 
manage  broadcast  traffic.  Criticism  of  the  public  interest  doctrine  in 
broadcasting  arises  from  the  Supreme  Court's  First  Amendment  non-broadcast 
jurisprudence,  which  has  long  assumed  that  the  First  Amendment's  core  values 
are  most  prohibitive  of  government  regulations  based  on  content.^'^  Although 
criticism  of  broadcast  regulation  often  reaches  the  system  of  federal  licensing 
itself,  it  is  the  content-based  restrictions  permitted  in  broadcasting,  premised  on 
the  scarcity  theory,  that  draw  the  greatest  fire. 

A.  A  "Quick-Look"  :^'^  The  Determinative  Role  of  Content  in 
First  Amendment  Analysis 

The  concern  over  content-based  restrictions  is  deeply  rooted  in  the  decisions 
of  the  Supreme  Court.  Content-based  restrictions,  the  Court  has  explained,  seek 
to  differentiate  speakers  solely  on  the  basis  of  their  perspectives,  views,  or 
beliefs.^'^  Content-based  restraints  raise  numerous  conflicts  with  First 
Amendment  values,  distorting  public  debate  toward  a  government- favored 
position  and  fostering  a  paternalistic  intolerance  for  speech  not  sanctioned  by  the 


viewership  of  46.6  million). 

215.  Thomas  W.  Hazlett,  Digitizing  "Must-Carry  "  Under  Turner  Broadcasting  v .  FCC,  8  Sup. 
Ct.  Econ.  Rev.  1 41 , 1 86  (2000).  Professor  Hazlett  notes  that  during  the  2000  election,  all  but  one 
of  the  eighteen  debates  held  during  the  presidential  primaries  and  general  election  were  carried  live 
on  national  cable  television  networks.  Id.  at  186-87. 

216.  See,  e.g.  Police  Dep't  of  Chi.  v.  Mosley,  408  U.S.  92, 95-96  (1972);  see  also  R.A.V.  v. 
City  of  St.  Paul,  505  U.S.  377,  382  (1992)  (holding  that  content-based  restrictions  are 
"presumptively  invalid"). 

217.  The  determinative  role  of  content  in  the  speech  cases  is  analogous  to  the  "quick-look" 
doctrine  in  antitrust  law.  The  Supreme  Court  has  recognized  that  an  abbreviated  economic  analysis, 
known  as  a  "quick  look"  is  appropriate  in  cases  where  "an  observer  with  even  a  rudimentary 
understanding  of  economics  could  conclude  that  the  arrangements  in  question  would  have  an 
anticompetitive  effect . . . ."  Cal.  Dental  Ass'n  v.  FTC,  526  U.S.  756,  770  (1999);  see  also  Jay  P. 
Yancey,  Comment,  Is  the  Quick  Look  Too  Quick?:  Potential  Problems  with  the  Quick  Look 
Analysis  of  Antitrust  Litigation,  44  U.  KAN.  L.  REV.  671  (1996). 

218.  Helgi  Walker,  Communications  Media  and  the  First  Amendment:  A  Viewpoint-Neutral 
FCC  is  Not  Too  Much  to  Ask  For,  53  FED.  COMM.  L.J.  5,  6  (2000). 


130  INDIANA  LAW  REVIEW  [Vol.  36:101 


state.^'^  The  specter  of  government  controlled  speech  taints  the  First 
Amendment's  role  in  the  "search  for  political  truth"^^^  by  encouraging  one  public 
viewpoint  at  the  expense  of  all  others.^^'  Therefore,  assuming  the  type  of  content 
restrained  is  of  sufficient  value,^^^  the  First  Amendment  provides  a  near-absolute 
shield  against  government  regulation  outside  the  broadcast  industry.^^^ 

In  contrast,  content-neutral  restraints  may  be  upheld  where  the  government 
demonstrates  that  the  regulation  effectively  promotes  a  substantial  interest 
unrelated  to  viewpoint  suppression.^^'*  Some  commentators  still  view  content- 
neutral  restraints  as  potential  threats  to  public  debate  capable  of  limiting  access 
to  sources  of  information  and  thereby  skewing  the  discourse  towards  a  single 
result.^^^ 

Not  all  commentators  have  accepted  the  Court's  corollary  content  doctrines, 
which  allow  for  reduced  judicial  scrutiny  where  the  government  regulates  in  a 
neutral  manner  without  regard  to  the  speaker's  viewpoint.^^^    Moreover,  by 


2 1 9.  Geoffrey  R.  Stone,  Content-Neutral  Restrictions,  54  U.  CHI.  L.  REV.  46,  55-57  ( 1 987). 

220.  Consol.  Edison  Co.  of  N.Y.,  Inc.  v.  Pub.  Serv.  Comm'n  of  N.Y.,  447  U.S.  530,  538 
(1980)  ("To  allow  a  government  the  choice  of  permissible  subjects  for  public  debate  would  be  to 
allow  that  government  control  over  the  search  for  political  truth."). 

221.  Buckley  v.  Valeo,  424  U.S.  1,  48-49  (1976). 

222.  Geoffrey  R.  Stone,  Content  Regulation  and  the  First  Amendment,  25  Wm.  &  Mary  L. 
Rev.  189,  194-95  (1983)  (discussing  Chaplinsky  v.  New  Hampshire,  315  U.S.  568  (1942)).  In 
Chaplinsky,  the  Court  held  that  certain  types  of  speech  are  considered  to  have  low  social  value,  and 
thus  are  only  provided  minimal  constitutional  protection.  Chaplinsky,  315  U.S.  at  571-72. 

223.  Police  Dep't  of  Chi.  v.  Mosley,  408  U.S.  92,  95  (1972). 

224.  Schad  v.  Borough  of  Mount  Ephraim,  452  U.S.  61, 70  (1981);  United  States  v.  O'Brien, 
391  U.S.  367,  377  (1968).  Although  content-neutral  restraints  must  limit  their  incidental 
restrictions  on  speech,  the  regulation  need  not  be  the  least  restrictive  method  of  achieving  the 
government's  goal.  Ward  v.  Rock  Against  Racism,  491  U.S.  781,  799  (1989). 

225 .  Stone,  supra  note  2 1 9,  at  5  5 . 

226.  Critics  have  noted  that  the  Court's  stated  reasons  for  strictly  scrutinizing  content-based 
restrictions  are  logically  applicable  to  content-neutral  restraints.  Professor  Martin  Redish  has 
argued  that  while  content-based  restrictions  can  undermine  the  democratic  process  by  impeding 
voter  education,  content-neutral  regulations  will  likely  have  the  same  effect.  Martin  H.  Redish,  The 
Content  Restriction  in  First  Amendment  Analysis,  34  Stan.  L.  Rev.  1 13,  1 28  (1981 ).  In  addition, 
he  notes  that  requiring  speech  restraints  to  target  all  information  without  regard  to  content 
ultimately  "reduces  the  sum  total  of  information  or  opinion  disseminated."  Id.  Similarly,  Professor 
Erwin  Chemerinsky  argued  that  the  Court  has  used  the  content-neutral  exception  to  uphold 
restrictions  on  speech  that  adopt  a  favored  viewpoint,  even  if  neutrally  applied.  Erwin 
Chemerinsky,  Content  Neutrality  as  a  Central  Problem  of  Freedom  of  Speech:  Problems  in  the 
Supreme  Court 's  Application,  74  S.  Cal.  L.  REV.  49  (2000).  Professor  Chemerinsky  discussed,  for 
example,  the  Court's  decision  in  Forbes  holding  that  minor  party  candidates  for  political  office  may 
be  excluded  from  broadcast  debates.  Id.  at  56-57.  The  Court  found  that  the  exclusion  of  minor 
party  candidates  was  a  content-neutral  restriction,  based  on  the  likely  success  of  the  candidate,  and 
not  the  candidate's  views.  Arkansas  Educ.  Television  Comm'n  v.  Forbes,  523  U.S.  666,  682 
(1998).  Professor  Chemerinsky  argues  that  the  distinction  between  major  and  minor  candidates. 


2003]      .        REGULATION  OF  PRESIDENTIAL  DEBATES  1 3 1 


removing  certain  classes  of  speech  such  as  "fighting  words"^^^  or  obscenity ^^* 
from  First  Amendment  protection,  the  Court  itself  engages  in  an  explicit  content 
analysis.^^^  Despite  the  criticism,  however,  the  content  doctrine  has  been 
consistently  reaffirmed  by  the  Court  and  is  unlikely  to  be  abandoned. 

The  broadcast  cases  depart  from  the  content  model  of  the  First  Amendment, 
causing  the  doctrinal  tension  between  print  and  electronic  media.^^^  Content- 
based  restrictions,  the  Court  reasoned  in  NBC,  are  essential  for  broadcast 
regulation  because  the  selection  of  broadcasters  on  anything  other  than  a  lottery 
system  requires  a  content  choice.^^'  While  a  lottery  system  managed  through 
property  rights  and  capital  was  possible,  the  Red  Lion  Court  feared  the  threat  of 
private  information  monopoly  .^^^  If  content-based  decisions  were  essential,  the 
Metro  Broadcasting  Court  concluded,  the  choice  should  at  least  serve  the 
socially  beneficial  purposes  of  "public  interest,  convenience,  or  necessity."^^^ 
Forged  in  the  era  of  national  socialism,^^^  the  Court's  content-based  broadcast 
doctrine  was  thus  bom. 

B.  A  Reasonable  Rule  for  the  Future  of  Broadcasting  Analysis 

Identifying  content-based  restraints  as  the  problem  with  the  broadcast  cases 
does  not,  however,  help  select  among  the  proposals  for  reconciling  NBC,  Red 
Lion,  and  Tornillo.  Critics  of  the  scarcity  theory  have  called  for  a  direct 
overruling  of  Red  Lion,  leading  to  a  single  broadcast  standard  under  the  holding 
of  TornilloP^  This  proposal,  however,  ignores  the  Supreme  Court's  concern 


however,  only  existed  because  of  the  government-imposed  evaluation  of  the  public  interest  in  each 
candidate's  views.  Chemerinsky,  supra,  at  59-60. 

227.  E.g.,  R.A.V.  V.  City  of  St.  Paul,  505  U.S.  377  (1992). 

228.  E.g.,  Miller  v.  California,  413  U.S.  15  (1973). 

229.  See,  e.g..  Young  v.  Am.  Mini  Theatres,  427  U.S.  50, 66  (1976)  (plurality  opinion  stating 
that  the  First  Amendment's  protection  "often  depends  on  the  content  of  the  speech"). 

230.  It  should  be  noted  that  this  departure  applies  to  regulations  of  the  broadcast  industry 
structure,  and  not  to  regulations  aimed  directly  at  broadcast  content.  See  Fox  Television  Stations, 
Inc.  V.  FCC,  280  F.3d  1027,  1046  (D.C.  Cir.  2002). 

231.  NBC  V.  United  States,  319  U.S.  190,216-17(1943).  The  ^^C  Court  reasoned  that 
If  the  criterion  of  "public  interest"  were  limited  to  such  matters,  how  could  the 
Commission  choose  between  two  applicants  for  the  same  facilities,  each  of  whom  is 
fmancially  and  technically  qualified  to  operate  a  station?  Since  the  very  inception  of 
federal  regulation  by  radio,  comparative  considerations  as  to  the  services  to  be  rendered 
have  governed  the  application  of  the  standard  of  "public  interest,  convenience,  or 
necessity." 

Id. 

232.  Red  Lion  Broad.  Co.  v.  FCC,  395  U.S.  367,  391,  400-01  (1969). 

233.  Metro  Broad.,  Inc.  v.  FCC,  497  U.S.  547,  567  (1990). 

234.  HUBER,  supra  note  90,  at  5. 

235.  5ee.e.g.,Telecomm.Research&ActionCtr.  v.FCC,801  F.2d 501, 509 (D.C.  Cir.  1986) 
(predicting  that  "the  Supreme  Court  will  one  day  revisit  this  area  of  the  law  and  . . .  eliminate  the 


132  INDIANA  LAW  REVIEW  [Vol.  36:101 


with  administrative  flexibility.  Broadcast  technologies  are  dynamic  and 
changing,  ill-suited  to  inflexible  judicial  standards.^^^  The  Court  has  implicitly 
acknowledged  that  Congress  has  passed  the  issue  of  broadcast  management  to  the 
FCC  and  the  courts  with  practically  no  guidance.^^^  The  Court  has  thus 
expressed  that  both  the  fact-finding  powers  of  Congress  and  the  daily 
involvement  of  administrative  agencies  in  media  management  are  important 
resources  that  should  be  consulted  in  defining  the  accepted  doctrinal  limits  of 
broadcast  speech. ^^* 

Each  of  these  aspects  of  the  current  system  of  broadcast  regulation  provides 
limits  on  proposals  for  reform.  Outright  abolishment  of  the  FCC  might  be 
consistent  with  normal  free-market  economics^^^  but  is  highly  unlikely  in  the  near 
future.^"*^  The  modem  FCC  is  a  massive  bureaucracy,  comprised  of  more  than 
2000  full-time  employees  serving  in  twenty-nine  divisions.^"*'  The  agency's  maze 
of  administrative,  technical,  and  support  responsibilities  requires  an  annual 
budget  of  more  than  $200  million.^'*^  Although  preserving  a  bureaucracy 
because  of  its  size  is  hardly  laudable,  the  Court  is  unlikely  to  dismantle  an  agency 
of  this  scope  by  removing  the  scarcity  underpinning  in  one  ruling.  Congress  is 
similarly  unlikely  to  abolish  the  FCC  because  the  agency's  regulation  of 
indecency  and  obscenity  is  too  easily  exploited  during  elections.^'*^  Finally,  the 
growth  of  new  media  itself  argues  for  at  least  a  limited  federal  regulatory 
presence  if  only  to  order  and  direct  the  growing  amounts  of  communication 
traffic.'^'* 


distinction  between  print  and  broadcast  media,  surely  by  pronouncing  Tornillo  applicable  to  both 
.  . ."). 

236.  CBS  V.  Democratic  Nat'I  Comm.,  412  U.S.  94,  102  (1973)  ("[Sjolutions  adequate  a 
decade  ago  are  not  necessarily  so  now,  and  those  acceptable  today  may  well  be  outmoded  10  years 
hence."). 

237.  Id.  at  103  ("[Wjhen  we  face  a  complex  problem  with  many  hard  questions  and  few  easy 
answers  we  do  well  to  pay  careful  attention  to  how  the  other  branches  of  Government  have 
addressed  the  same  problem."). 

238.  Turner  Broad.  Sys.,  Inc.  v.  FCC,  512  U.S.  622,  665-66  (1994)  ("Congress  is  far  better 
equipped  than  the  judiciary  to  'amass  and  evaluate  the  vast  amounts  of  data'  bearing  upon  an  issue 
as  complex  and  dynamic"  as  cable  broadcasting  (quoting  Walters  v.  Nat'I  Assoc,  of  Radiation 
Survivors,  473  U.S.  305,  331  n.l2  (1985))). 

239.  Lawrence  Lessig,  Code  and  Other  Laws  of  Cyberspace  1 82-85  ( 1 999). 

240.  Joseph  D.  Kearney,  Will  the  FCC  Go  the  Way  of  the  ICC?,  7 1  U.  COLO.  L.  Rev.  1 1 53 
(2000)  (discussing  alternatives  to  abolishing  the  FCC,  including  a  congressional  reduction  of  the 
agency's  authority,  or  self-reduction  by  the  FCC  itself). 

241.  Id. 

242.  Huber,  supra  note  90,  at  5. 

243.  Henry  Goldberg  &  Michael  Couzens,  "Peculiar  Characteristics":  An  Analysis  of  the 
First  Amendment  Implications  of  Broadcast  Regulation,  31  Fed.  Comm.  L.J.  1,  42  (1978). 
Goldberg  and  Couzens  stated  the  question  bluntly,  arguing  that  the  role  of  the  First  Amendment  in 
broadcasting  is  "not  a  question  of  constitutional  law,  and  probably  never  has  been."  Id. 

244.  Self-directed  reorganization  by  the  FCC  itself,  of  course,  remains  possible.  See  Roger 


2003]  REGULATION  OF  PRESIDENTIAL  DEBATES  133 


A  possible  solution,  however,  is  presented  by  the  Court's  holdings  in  Turner 
I  and  Reno.  In  both  cases,  the  Court  revealed  that  the  scarcity  doctrine  is  not 
applicable  to  all  media.^'*^  The  decisions  suggest  that  similarly  plentiful 
communications  media,  such  as  wireless,  30,^"^^  and  DBS,  should  also  be  subject 
to  traditional  First  Amendment  scrutiny.  Having  cited  the  virtues  of 
convergence,^"*^  the  Court's  broadcast  doctrine  may  now  be  on  a  technological 
timetable  that  will  use  the  arrival  of  broadband  services  to  mark  the  close  of  the 
scarcity  era. 


248 


C  Moving  Broadcasting  Back  to  the  Marketplace  of  Ideas: 
Using  Broadcast  Market  Power  to  Determine  First  Amendment  Scrutiny 

Although  convergence  theory  should  ultimately  underlie  the  Supreme 
Court's  review  of  broadcast  regulation,  the  scarcity  doctrine  remains  the  current 
standard  of  constitutional  analysis.  While  the  broadcast  networks  will  continue 
to  question  their  public  interest  duties,  some  issues  of  public  concern  are  likely 
to  trigger  new  regulatory  efforts.  Network  broadcast  coverage  of  the  general 
presidential  debates,  for  instance,  is  an  important  social  interest  and  a  potentially 
popular  political  target.  The  2000  presidential  race  prompted  immediate  calls  for 
reform  of  all  aspects  of  the  election  process.^"*^  Television  received  particular 
attention,  largely  due  to  the  broadcast  networks'  practice  of  projecting  the  winner 
of  each  state.^^°    Overhauling  the  American  voting  system,  however,  is  a 


M.  Golden,  Gauging  Michael  Powell,  LEGAL  T1N4ES,  May  30,  2001,  available  at 
http://www.law.com  (last  visited  April  1, 2002)  (quoting  FCC  Chairman  Michael  Powell's  desire 
for  reform:  "[W]e  are  in  the  process  of  systematically  reviewing  and  thinking  through  what  is  the 
optimal,  organizational  model  for  the  commission"). 

245.  See  supra  notes  101-08  and  accompanying  text. 

246.  See  FCC,  THIRD  GENERATION  ("30")  WIRELESS,  available  at  http://www.fcc.gov/3G  (last 
visited  Apr.  1 5, 2002).  3G  systems  use  radio  frequencies  to  provide  Internet,  multimedia,  and  voice 
communications  to  wireless  and  mobile  receivers.  Id. 

247.  See  supra  note  84. 

248.  Nicholas  Negroponte  summarized  the  past  and  future  of  a  converged  broadcast  media: 
In  analog  days,  the  spectrum  allocation  part  of  the  FCC's  job  was  much  easier.  It  could 
point  to  different  parts  of  the  spectrum  and  say:  this  is  television,  that  is  radio,  this  is 
cellular  telephony,  etc.  Each  chunk  of  spectrum  was  a  specific  communications  or 
broadcast  medium  with  its  own  transmission  characteristics  and  anomalies,  and  with  a 
very  specific  purpose  in  mind.  But  in  a  digital  world,  these  differences  blur  or,  in  some 
case,  vanish:  they  are  all  bits.  They  may  be  radio  bits,  TV  bits,  or  marine 
communication  bits,  but  they  are  all  bits  nonetheless,  subject  to  the  same  commingling 

and  multi-use  that  define  multimedia. 
Nicholas  NEGROPONTE,  Being  Digital  54  (1995). 

249.  Katherine  Q.  Seelye,  Nation  Awash  in  Ideas  for  Changing  Voting,  N.Y.  TIMES,  Jan.  28, 
2001,  at  112. 

250.  Katharine  Q,  Seelye,  Congress  Plans  Study  of  Voting  Processes  and  TV  Coverage,  N.Y. 
Times,  Feb.  9, 2001,  at  A20. 


134  INDIANA  LAW  REVIEW  [Vol.  36:101 


complicated  and  politically  treacherous  task.^^'  As  swift  reform  appears 
unlikely,^^^  FCC  action  involving  the  broadcast  network  debates  presents  an 
attractive  alternative. 

A  regulation  of  presidential  debate  coverage  on  the  broadcast  networks 
would  force  the  Supreme  Court  to  confront  the  scarcity  doctrine  directly. 
Although  the  majority  opinion  in  Turner  I  suggests  that  the  Court  is  open  to 
reform,^"  long-standing  decisions  such  as  NBC  and  Red  Lion  are  particularly 
likely  to  command  adherence  from  the  proponents  oi  stare  decisis.  Moving 
beyond  scarcity  before  the  arrival  of  convergence  thus  requires  an  approach  that 
combines  the  administrative  deference  of  Red  Lion  with  the  recognition  of 
emerging  market  alternatives  to  broadcasting  noted  in  Turner  I  and  Reno. 

A  suitable  alternative  may  exist  in  the  Supreme  Court's  antitrust  decisions. 
In  the  area  of  antitrust  law,  the  Court  has  recognized  that  the  once  strict 
categorical  analysis  of  potentially  anti-competitive  actions  has  been  replaced  by 
a  more  searching  inquiry  into  the  harms  resulting  from  the  restraint.^^"*  Similarly, 
under  the  First  Amendment,  avoiding  the  strict  scrutiny  applied  to  content-based 
restraints  does  not  guarantee  constitutionality,  but  merely  subjects  the  regulation 
to  something  less  than  the  "most  exacting  level  of  First  Amendment  scrutiny."^^^ 
Evaluating  broadcast  speech  likewise  requires  "an  enquiry  meet  for  the  case, 
looking  to  the  circumstances,  details,  and  logic  of  a  restraint."^^^  As  the  Court 
reiterated  in  Tumeric  the  special  interests  permitting  broadcast  regulation  do  not 


25 1 .  Editorial,  Election  Reform  Stalls,  N. Y.  TIMES,  Apr.  30,  200 1 ,  at  A 1 8. 

252.  Katharine  Q.  Seelye,  Voting  System  Changes  Lag,  Experts  on  Elections  Warn,  N.Y. 
Times,  Apr.  4,  2001,  at  A 18;  Katharine  Q.  Seelye,  Little  Change  Forecast  for  Election  Process, 
N.Y.  Times,  Apr.  26, 2001,  at  A14. 

253.  S'ee  Turner  Broad.  Sys.,  Inc.  v.  FCC,  512  U.S.  622, 638  &  n.5  (1994)  (noting  that  "courts 
and  commentators  have  criticized  the  scarcity  rationale  since  its  inception").  A  more  direct  assault 
on  scarcity  is  found  in  Justice  Blackmun's  concurrence  in  CBSv.  Democratic  National  Committee, 
412  U.S.  94, 1 58  n.8  (1973).  Justice  Blackmun  noted  that  scarcity  "may  soon  be  a  constraint  of  the 
past,  thus  obviating  the  concerns  expressed  in  Red  Lion.''  Id.  (Blackmun,  J.,  concurring). 

254.  See  Cal.  Dental  Ass'n  v.  FTC,  526  U.S.  756,  779  (1999). 

255.  See  Turner  Broad.  Sys.,  Inc.,  512  U.S.  at  661.  This  lesser  or  intermediate  standard 
derives  from  the  oft-quoted  Supreme  Court  decision  in  United  States  v.  O  'Brien,  which  permits 
content-neutral  restraints  furthering  an  important  government  interest  unrelated  to  speech 
suppression,  narrowly  tailored  to  limit  incidental  speech  restraints.  391  U.S.  367, 377  (1968).  See 
also  Ward  v.  Rock  Against  Racism,  491  U.S.  781,  799-800  (1989)  (explaining  the  application  of 
narrowly  tailored  restraints). 

256.  Cal.  Dental,  526  U.S.  at  781.  Justice  Souter's  explanation  of  this  standard  in  antitrust 
law  appears  readily  applicable  to  broadcast  speech  restrictions: 

The  object  is  to  see  whether  the  experience  of  the  market  has  been  so  clear,  or 
necessarily  will  be,  that  a  confident  conclusion  about  the  principal  tendency  of  a 
restriction  will  follow  from  a  quick  (or  at  least  quicker)  look,  in  place  of  a  more 
sedulous  one.  And  of  course  what  we  see  may  vary  over  time,  if . . .  analyses  in  case 
after  case  reach  identical  conclusions. 
Id 


2003]  REGULATION  OF  PRESIDENTIAL  DEBATES  135 


"readily  translate"  into  other  communication  markets.^^^  A  narrower  focus  on  the 
specific  broadcast  markets  restrained  by  a  regulation  would  provide  the 
flexibility  to  accommodate  new  technical  innovations  without  deregulating  the 
entire  broadcast  industry  in  a  single  step.^^* 

Accordingly,  the  Supreme  Court  should  adopt  the  market  analysis  that  guides 
the  evaluation  of  monopolization  cases  under  the  Sherman  Antitrust  Act^^^  as  the 
standard  for  reviewing  speech  restrictions  on  broadcast  television  networks. 
Speech  restraints  in  markets  regarded  by  First  Amendment  precedent  as  scarce, 
such  as  broadcast  network  television  and  broadcast  radio,  would  be  evaluated 
under  the  reduced  First  Amendment  scrutiny  articulated  in  NBC  and  Red  Lion. 
In  contrast,  restraints  in  markets  that  are  regarded  by  precedent  as  abundant,  such 
as  cable  television  and  the  Internet,  would  be  evaluated  under  strict  or 
intermediate  scrutiny,  depending  on  whether  the  regulation  is  content-based. ^^° 
Where  the  regulated  content  is  found  in  scarce  and  abundant  media,  the  level  of 
constitutional  protection,  and  thus  the  level  of  scrutiny,  will  depend  on  which 
market  carries  the  majority  of  the  speech  at  issue.  Courts  would  determine  the 
"primary  market"  for  the  content  by  using  the  market  power  tests  employed  in 
antitrust  cases.^^' 

A  market  power^"  approach  to  broadcast  regulation  has  significant 
advantages  over  the  current  First  Amendment  tests.  A  market  approach  adds  the 
full  protection  of  the  First  Amendment  to  speech  primarily  carried  in  media  that 
lack  the  distinctive  characteristics  of  the  electromagnetic  spectrum.^^^ 
Regulations  on  speech  found  primarily  in  media  with  the  distinct  characteristic 
of  spectrum  scarcity^^  can  still  be  deferentially  reviewed  to  allow  narrow  federal 


257.  See  Turner  Broad.  Sys.,  Inc.,  512  U.S.  at  639  (quoting  Bolger  v.  Youngs  Drug  Prods. 
Corp.,  463  U.S.  60,74(1983)). 

258.  Flexible  regulations  are  critical  in  this  area,  as  "technological  advances  have  a  habit  of 
moving  more  rapidly  than  government  policy."  R.  Michael  Senkowski  et  al..  Broadband:  Flying 
Blind,  Legal  Times,  May  14,  2001,  at  33  (noting  the  "Internet  has  emerged  as  a  center  of 
commerce,  news,  and  entertainment  in  the  relatively  brief  span  since  enactment  of  the 
Telecommunications  Act  of  1996"). 

259.  15  U.S.C.  §2(1994). 

260.  See  supra  notes  2 1 8-25  and  accompanying  text. 

261.  See,  e.g.,  U.S.  DEP'T  OF  JUSTICEANDTHE  FTC,  HORIZONTAL  MERGER  GUIDELINES  (1992) 
(establishing  definitions  for  determining  the  amount  of  market  power  a  firm  possesses  for  a  specific 
product)  [hereinafter  DOJ  GUIDELINES]. 

262.  Lawrence  A.  Sullivan  &  Warren  S.  Grimes,  The  Law  of  Antitrust:  An 
Integrated  Handbook  22  (2000).  In  antitrust  economics,  market  power  is  defined  as  "the  seller's 
ability  to  raise  and  sustain  a  price  increase  without  losing  so  many  sales  that  it  must  rescind  the 
increase."  Id. 

263 .  FCC  v.  League  of  Women  Voters  of  Cal.,  468  U.S.  364, 376  ( 1 984)  (noting  broadcasting 
regulations  "involve  unique  considerations,"  justifying  a  departure  from  the  First  Amendment 
protections  provided  to  other  forums). 

264.  Id.  at  377  ("The  fundamental  distinguishing  characteristic  of  the  new  medium  of 
broadcasting  that,  in  our  view,  has  required  some  adjustment  in  First  Amendment  analysis  is  that 


136  INDIANA  LAW  REVIEW  [Vol.  36:101 


intervention  for  social  programs.^"  A  market-based  standard  for  determining  the 
scrutiny  of  broadcast  restraints  begins  to  realign  the  First  Amendment  protections 
of  broadcasters  with  all  other  media  and  gradually  removes  the  government's  role 
in  content  choice.^^  Most  importantly,  a  market-based  analysis  provides 
broadcasters  with  maximum  First  Amendment  protection  over  content  distributed 
through  multiple  media  outlets.  Broadcasters  are  thus  given  a  clear  incentive  to 
speed  the  convergence  of  media  through  broadband  technologies,^^^  a  goal 
already  mandated  by  Congress  in  the  Telecommunications  Act  of  1996.^^* 
Ample  guidelines  for  this  analysis  already  exist  because  the  principles  of 


'broadcast  frequencies  are  a  scarce  resource  [that]  must  be  portioned  out  among  applicants'." 
(quoting  CBS  v.  Democratic  Nat'l  Comm.,  412  U.S.  94,  101  (1973))). 

265.  CBS,  4 1 2  U.S.  at  1 57-58  (Blackmun,  J.,  concurring).  Justice  Blackmun  argued  that  the 
"Commission  has  a  duty  to  encourage  a  multitude  of  voices  but  only  in  a  limited  way,  viz.:  by 
preventing  monopolistic  practices  and  by  promoting  technological  developments  that  will  open  up 
new  channels."  Id. 

266.  The  Supreme  Court  has  stated  that  eliminating  content-based  restrictions  is  the  central 
purpose  of  the  First  Amendment.  Consol.  Edison  Co.  of  N.Y.,  inc.  v.  Pub.  Serv.  Comm'n  of  N.Y., 
447U.S.  530,  538(1980). 

267.  Although  deployment  of  broadband  has  moved  slowly,  Kombluh,  supra  note  88,  United 
States  Internet  users  are  showing  new  interest  in  high-speed  Internet  capacity,  as  "consumers  are 
switching  from  dial-up  to  broadband  faster  than  new  households  are  getting  dial-up."  Saul  Hansell, 
Can  AOL  Keep  Its  Subscribers  in  a  New  World  of  Broadband? ,  N.  Y.  TIMES,  July  29, 2002,  at  C 1 ; 
see  also  Jim  Hu,  More  Consumers  Hooked  on  Broadband,  CNET  News  (Jan.  15,  2003),  at 
http://news.com.eom/2 1 00- 1 033-980737.html  (reporting  a  fifty-nine  percent  increase  in  broadband 
use  in  the  United  States  in  2002). 

268.  In  re  Deployment,  supra  note  89,  at  20,9 1 5  (discussing  Telecommunications  Act  of  1 996, 
Pub.  L.  No.  104,  §  706,  1 10  Stat  56  (1996)).  In  2001,  broadband  deployment  received  fresh 
legislative  attention  in  a  host  of  bills  in  the  House  and  Senate.  The  bills  shared  a  common  format, 
hoping  to  entice  regional  telecommunications  carriers  to  hasten  broadband  implementation  by 
exempting  high-speed  services  from  the  provisions  of  the  1 934  Act.  See  Broadband  Internet  Access 
Act  of  200 1 ,  H.R.  267, 1 07th  Cong.  (200 1 );  Internet  Freedom-Broadband  Deployment  Act  of  200 1 , 
H.R.  1542,  107th  Cong.  (2001);  Broadband  Competition  and  Incentives  Act  of  2001,  H.R.  1697, 
107th  Cong.  (2001);  American  Broadband  Competition  Act  of  2001,  H.R.  1698,  107th  Cong. 
(2001);  Broadband  Internet  Access  Act  of  2001,  S.  88,  107th  Cong.  (2001);  Broadband 
Deployment  and  Competition  Enhancement  Act  of  2001,  S.  1 126,  107th  Cong.  (2001).  In  2002, 
the  House  approved  a  measure  aimed  at  speeding  broadband  development,  by  lifting  restrictions 
that  prohibit  phone  companies  from  offering  high-speed  Internet  access  "without  first  opening  their 
local  markets  and  permitting  smaller  rivals  to  lease  their  equipment."  Stephan  Labaton,  Broadband 
Bill  Advances,  But  Its  Survival  is  Doubtful,  N.Y.  Times,  Feb.  28,  2002,  at  C4  (discussing  the 
Internet  Freedom-Broadband  Deployment  Act  of  2001,  H.R.  1542,  107th  Cong.  (2001)).  FCC 
Commissioner  Kevin  Martin  has  similarly  signaled  that  the  FCC  intends  to  move  quickly  in  the 
coming  years  to  accelerate  broadband  deployment.  Stephen  Lawson,  FCC  Commissioner  Calls  for 
Quick  Decisions,  available  at  http://www.itworld.com/Man/2697/  lDG020124fccsupernet  (last 
visited  Jan.  24,  2002). 


2003]  REGULATION  OF  PRESIDENTIAL  DEBATES  1 37 


market  power  are  well  developed  in  antitrust  law.^^^  Market  power  is  measured 
by  determining  the  relevant  geographic  and  product  markets  for  a  particular  good 
or  service.^^^  The  geographic  market  is  the  region  in  which  consumers  can 
reasonably  seek  alternatives  to  the  product  or  service  in  question.^^'  The  product 
market  includes  all  goods  or  services  that  are  reasonably  interchangeable  with  the 
product  in  question.^^^  Although  elasticity  will  normally  locate  substitute 
products  or  regions  of  com  petit  ion,^^^  the  Supreme  Court  has  held  that  in  some 
instances  a  single  product  brand  can  comprise  the  entire  relevant  market.^^"* 
Therefore,  market  analysis  seeks  to  find  whether  a  seller  possesses  sufficient 
power  over  a  marketplace  to  reduce  the  output  of  supply  and  trigger  price 
increases  above  the  normal  competitive  level.  If  consumers  can  readily  shift  their 
consumption  to  competing  markets  without  great  additional  expense,^^^  the  two 
markets  are  considered  the  relevant  area  of  competition. ^^^ 

These  basic  parameters  can  be  applied  to  determine  the  First  Amendment 
scrutiny  of  a  broadcast  regulation  restraining  speech  in  both  scarce  and  abundant 
markets.^^^  In  step  one,  the  geographic  market  for  the  regulation  is  determined 
by  evaluating  the  "area"  in  which  consumers  can  reasonably  access  alternatives 
to  the  broadcast  medium  restrained.  For  instance,  a  decision  by  the  FCC  denying 
the  application  of  a  licensee  to  erect  a  radio  tower^^^  is  largely  limited  to  the 
surrounding  few  miles  around  the  proposed  transmitter.  As  consumers  are 
unlikely  to  travel  to  distant  communities  for  a  similar  radio  broadcast,  the 
geographic  market  would  likely  be  drawn  narrowly.  In  contrast,  a  regulation 


269.  The  foundations  of  market  power  measurement  date  back  at  least  to  Judge  Learned 
Hand's  opinion  in  United  States  v.  Aluminum  Co.  of  America,  148  F.2d  416  (2d  Cir.  1945). 

270.  Tampa  Elec.  Co.  v.  Nashville  Coal  Co.,  365  U.S.  320,  327-29  (1961)  (defining  the 
relevant  market  as  the  "area  of  effective  competition"). 

271 .  United  States  v.  Grinnell  Corp.,  384  U.S.  563,  574  (1966). 

272.  United  States  v.  E.  I.  du  Pont  de  Nemours  &  Co.,  351  U.S.  377,  395  (1956). 

273.  Elasticity  measures  a  seller's  market  power  as  the  percentage  of  decline  in  demand  for 
the  seller's  product  in  response  to  an  increase  in  the  price  of  the  product.  Sullivan  &  Grimes, 
supra  note  262,  at  22-23.  Where  a  seller  lacks  market  power,  an  increase  in  price  will  cause  buyers 
to  stop  purchasing  the  seller's  product,  denoting  an  elastic  market.  Id.  Where  the  seller  holds 
significant  market  power,  buyer  demand  will  not  significantly  decline  in  response  to  price  increases, 
signaling  an  inelastic  market.  Id.  For  a  discussion  of  the  economic  models  of  elasticity,  see 
Gregory  J.  Werden,  Demand  Elasticities  in  Antitrust  Analysis,  66  ANTITRUST  L.J.  363  (1998). 

274.  Eastman  Kodak  Co.  v.  Image  Technical  Servs.,  Inc.,  504  U.S.  451,  481-82  (1992). 

275.  Id. 

276.  DO  J  Guidelines,  supra  note  26 1 ,  at  65. 

277.  It  is  crucial  to  note  that  the  following  examples  are  based  on  presumptions  concerning 
consumer  behavior  in  situations  arising  in  several  First  Amendment  broadcast  decisions.  In 
antitrust  cases,  the  definition  of  the  relevant  market  is  an  issue  of  expert  economic  opinion  and 
cannot  normally  be  determined  by  laypersons.  See  id.  (discussing  the  modeling  of  a  hypothetical 
marketplace). 

278.  See  FCC  v.  Pottsville  Broad.  Co.,  309  U.S.  134,  139-40  (1940);  FCC  v.  Sanders  Bros. 
Radio  Station,  309  U.S.  470,  471  (1940). 


138  INDIANA  LAW  REVIEW  [Vol.  36:101 


excluding  certain  candidates  for  political  office  from  participating  in  a  debate 
held  on  a  state  public  television  channeP^^  impacts  a  broader  market.  As 
consumers  here  may  access  the  broadcast  debate  throughout  the  state,  the 
geographic  market  would  extend  to  at  least  the  state  borders. 

In  other  cases,  the  geographic  broadcast  market  might  be  national. 
Regulations  specifying  the  type  of  programming  that  may  be  broadcast  among 
affiliated  radio  stations^^^  or  a  generalized  public  service  requirement  such  as  the 
fairness  doctrine^^'  affect  consumers  throughout  the  United  States.^^^  Finally,  a 
regulation  similar  to  the  Communications  Decency  Act,  which  prohibited 
offensive  transmissions  over  the  Internet,^"  controls  a  virtually  unlimited 
geographic  market. 

Step  two  of  the  analysis  determines  the  marketplace  for  the  broadcast  product 
regulated.  Selecting  the  relevant  product  requires  determining  the  content 
subject  to  the  restriction,  a  more  complicated  problem  than  geography.  As  in 
antitrust  analysis,  a  court  must  consider  both  the  content  that  is  directly  regulated 
and  any  competing  content  that  is  "reasonably  interchangeable." 

For  instance  the  regulation  requiring  cable  providers  to  carry  local  broadcast 
television  addressed  in  TwrAi^r/ assumed  that  local  television  broadcasters  were 
essential  sources  of  information  and  entertainment.^*'*  The  majority,  however, 
found  insufficient  evidence  that  local  broadcasters  would  be  harmed  without 
access  to  the  cable  television  subscribers.^*^  From  a  market  perspective,  the 
Court  concluded  that  the  relevant  product  market  for  broadcast  information  and 
entertainment  might  not  be  limited  to  local  television.^*^  It  is  important  to  recall 
that  products  need  not  be  identical  "or  even  perfect  substitutes"  to  occupy  the 
same  product  market.^*^  Dissimilarities  between  traditional  broadcast  content 
and  new  media  alternatives  should  not  necessarily  preclude  the  use  of  a  broadcast 
product  market  that  encompasses  both.  While  some  broadcast  products  might 
consist  of  a  single  outlet,  others  might  span  the  spectrum  of  modem 
communications. 

At  step  three,  the  market  power  of  the  relevant  product  in  the  relevant 
geographical  area  is  quantified.  Precise  indicators  of  market  power  will  vary  by 


279.  See  Ark.  Educ.  Television  Comm'n  v.  Forbes,  523  U.S.  666,  671-72  (1998). 

280.  See  NBC  v.  United  States,  319  U.S.  190,  194  n.l  (1943). 

28 1 .  See  supra  notes  1 3 1  -44  and  accompanying  text. 

282.  A  narrower  geographic  market  might  be  present  where  the  broadcast  entity  operated  in 
only  a  specific  number  of  cities.  See.  e.g.,  FCC  v.  League  of  Women  Voters  of  Cal.,  468  U.S.  364, 
370  (1984)  (examining  claims  brought  by  the  Pacifica  Foundation,  a  nonprofit  radio  corporation 
broadcasting  in  five  metropolitan  markets). 

283.  See  Reno  v.  ACLU,  521  U.S.  844,  850  (1997). 

284.  Turner  Broad.  Sys.,  Inc.  v.  FCC,  512  U.S.  622,  663-64  (1994). 

285.  /^.  at  664-68. 

286.  Id.  at  663  ("[C]able  and  other  technologies  have  ushered  in  alternatives  to  broadcast 
television."). 

287.  Roger  D.  Blair  &  David  L.  Kaserman,  Antitrust  Economics  1 08  ( 1 985). 


2003]  REGULATION  OF  PRESIDENTIAL  DEBATES  1 39 


context,  but  some  guidelines  are  possible.^^*  Control  of  only  thirty-three  percent 
of  a  broadcast  market  should  likely  be  insufficient  to  show  market  power,  as  the 
majority  of  consumers  are  able  to  access  alternative  content.^*^  Control  of  ninety 
percent  of  a  market,  in  contrast,  demonstrates  a  lack  of  content  alternatives  and 
market  dominance.^^  Control  of  a  slight  majority  of  the  market  estimated  at 
sixty-four  percent  might  suggest  a  decline  in  broadcast  diversity,  and  depending 
on  the  context,  market  power.^^'  In  a  First  Amendment  context,  however,  the 
ultimate  question  to  be  resolved  is  whether  the  majority  of  broadcast  market 
power  resides  in  an  electromagnetic  spectrum.  Only  regulations  primarily 
restraining  broadcasting  in  the  scarce  media  are  evaluated  under  the  relaxed  First 
Amendment  standards  of  NBC  and  Red  Lion.  Market  power  residing  in  all  other 
media  markets  demonstrates  consumer  alternatives  outside  the  electromagnetic 
spectrum  and  forecloses  any  application  of  the  scarcity  doctrine.  These 
economically  abundant  media  retain  full  First  Amendment  protection  and  are 
considered  under  the  traditional  content-based  distinction  discussed  above.^^^ 

This  basic  sketch  of  a  First  Amendment  market  analysis  demonstrates  that 
the  law  of  antitrust  economics  provides  a  sound  foundation  for  evaluating 
broadcast  restraints.  Indeed,  scholars  have  previously  demonstrated  that  there  is 
nothing  logically  inconsistent  between  antitrust  and  free  speech  rationales  in  the 
area  of  broadcast  restraints  on  program  content,^^^  and  market  power  concerns 
underscore  the  speech  issues  confronted  in  Turner  I}'^^  Although  application  of 
this  model  will  undoubtedly  vary  with  facts  and  context,  the  basic  reasoning  is 
simple  enough  to  be  codified  by  the  FCC  and  manageable  enough  for  routine 
judicial  application.  In  Section  IV,  this  market  model  is  tested  against  a  new 
regulation,  which  compels  broadcast  television  networks  to  provide  live  coverage 
of  the  general  presidential  election  debates. 


288.  Although  United  States  v.  Aluminum  Co.  of  America,  148  F.2d  416  (2d  Cir.  1945),  is 
regarded  as  the  leading  judicial  opinion  on  market  power,  most  courts  now  rely  on  the  more 
detailed  economic  balancing  of  the  DOJ  Merger  Guidelines.  The  Alcoa  formula,  using  market 
shares  of  ninety  percent,  sixty-four  percent,  and  thirty-three  percent,  is  thus  included  only  as  one 
possible  standard. 

289.  /^.  at  424. 

290.  /fl^.at425. 

291.  Id.  SLl  424. 

292.  See  supra  notes  21 8-25  and  accompanying  text. 

293.  Owen  M.  Fiss,  The  Censorship  of  Television,  93  Nw.  U.  L.  REV.  1215,  1228  (1999). 
Professor  Fiss  states  that  in  general,  "a  highly  competitive  industry  is  a  step  toward  freedom  insofar 
as  it  proliferates  sources  of  information."  Id. 

294.  Id.  at  1228-29.  Professor  Fiss  notes  that  on  one  level,  the  must-carry  provisions  at  issue 
in  Turner  I  and  a  subsequent  case.  Turner  Broadcasting  System,  Inc  v.  FCC,  520  U.S.  1 80  ( 1 997) 
(Turner  IP),  attempted  to  preserve  competition  in  the  television  industry  by  ensuring  that  broadcast 
television  could  access  the  cable  television  market,  and  thus  the  cable  television  audience.  Fiss, 
supra  note  293,  at  1228-29. 


140  INDIANA  LAW  REVIEW  [Vol.  36:101 


IV.  Regulating  the  Debate  Market:  Evaluating  the 

Constitutionality  of  Compelled  Network  Debate  Coverage 

USING  A  Market-Based  First  Amendment  Theory 

A  regulation  compelling  broadcast  television  networks  to  cover  the  general 
presidential  election  debates  is  a  useful  example  for  applying  a  market-based 
First  Amendment  analysis.  The  presidential  debates  combine  the  two  concepts 
cited  by  the  Supreme  Court  in  Turner  I  sis  most  likely  to  warrant  restriction  of 
broadcast  speech.  First,  the  presidential  debates  have  historically  aired  on 
network  television,  the  medium  the  Court  described  as  a  "principal  source  of 
information  ...  for  a  great  part  of  the  Nation's  population."^^^  Second,  the 
debates  serve  to  educate  the  voting  public,  a  goal  that  Turner  I  implied  was  "a 
governmental  purpose  of  the  highest  order."^^^  A  regulation  designed  around 
these  considerations  would  force  the  Court  to  consider  a  speech  restriction  on 
content  that  served  a  concededly  important  public  interest,  partially  aired  in  the 
forum  that  is  still  firmly  controlled  by  caselaw  decided  on  the  basis  of  spectrum 
scarcity. 

A.  Some  Suggested  Goals  for  a  Broadcast  Debate  Regulation 

It  is  difficult  and  unnecessary  to  speculate  on  the  precise  language  of  a 
possible  debate  regulation.  Certain  provisions,  however,  are  likely  to  be 
essential.  These  provisions  are  not  an  exhaustive  list  or  a  minimum  set  of 
requirements.^^^  Instead,  these  guidelines  reflect  the  current  format  of  the 
presidential  debates  and  some  recurring  problems  in  their  coverage: 

1 .  Unified  Coverage:  Traditionally,  all  four  of  the  major  television  networks 
have  aired  the  general  presidential  debates.  This  unified  coverage  is 
necessary  to  reduce  viewer  attrition,^^^  which  appears  to  occur  when  even 
minor  programming  alternatives  are  offered.^'^  Technological  alternatives, 
such  as  offering  only  "split-screen"  coverage  of  the  debates,  would  be 
similarly  prohibited. 

2.  Live  Coverage:  Political  commentary  has  become  a  media  staple.  Within 
minutes  of  the  final  question,  analysts  descend  on  the  airwaves  with 
evaluations,  criticisms,  and  of  course,  the  announcement  of  the  victor.  While 
commentary  can  serve  a  legitimate  journalistic  function,  viewing  the  recap 


295.  Turner  Broad.  Sys.,  Inc.  v.  FCC,  512  U.S.  622,  663  (1994). 

296.  See  id.  (discussing  public  affairs  and  educational  programming  in  general). 

297.  Further,  these  recommendations  do  not  address  more  substantive  matters,  such  as 
question  selection,  choice  of  moderator,  or  format. 

298.  See  CNN,  Fourteen  Million  Opt  for  "Dark  Angel"  Over  Debate,  Oct.  5,  2000,  at 
http://asia.cnn.com/2000/ALLPOLITICS/stories/10/04/debate.tv.ap  (last  visited  Apr.  7,  2002) 
(quoting  Dan  Rather's  characterization  of  the  first  2000  presidential  debate  as  "pedantic,  dull, 
unimaginative,  lackluster,  humdrum — ^you  pick  the  words"). 

299.  See  supra  note  185  and  accompanying  text;  see  also  NEWTON  N.  MiNOW  ET  AL., 
Presidential  Television  8  ( 1 973 )  (explaining  the  impact  of  a  politician  "appearing  simultaneously 
on  most  major  television  channels,  so  that  alternative  viewing  choices  are  sharply  limited  . . ."). 


2003]  REGULATION  OF  PRESIDENTIAL  DEBATES  1 4 1 


before  viewing  the  candidates  risks  alienating  the  audience.    Airing  the 
debates  as  they  occur  thus  ensures  that  substance  precedes  spin.^°^ 

3.  Full  Length  Coverage:  The  value  of  the  debates  is  the  opportunity  to  examine 
a  candidate's  responses  to  a  wide  range  of  issues.  Airing  only  a  portion  of 
the  presidential  debate  necessarily  involves  selecting  which  of  the  topics 
covered  is  sufficiently  trivial  for  preemption. 

4.  Running  Time:  More  debate  is  not  necessarily  better  debate.  The 
presidential  debates  have  generally  run  between  one  and  one  and  one  half 
hours.^^'  The  one-hour  running  length  is  a  reasonable  standard  that  avoids 
losing  viewers  as  the  debate  progresses. 

5.  Free  Television:  Although  declining  in  recent  years,  broadcast  television 
continues  to  account  for  more  than  fifty  percent  of  prime  time  viewing.^"^  In 
order  to  reach  this  majority  of  viewers,  network  debate  coverage  would  be 
limited  to  the  free  television  spectrum  rather  than  a  network-owned  cable 
channel. 

6.  Commercial  Sponsorship:  Although  network  sponsorship  of  the  debates  is 
little  more  than  a  historic  accident,^^^  declining  outside  sponsors  avoids  the 
intrusive  interruption  of  commercials.  While  sponsorship  could  be  arranged 
without  commercial  pause,  the  unseemly  sight  of  a  corporate  icon  hovering 
over  the  nation's  next  leader  is  inconsistent  with  the  importance  of  the 
election.   If  necessary  at  all,^^  advertisements  should  be  limited  to  short 


300.  The  concept  of  live  television  itself,  however,  may  soon  become  antiquated  with  the  rise 
of  personal  video  recorders,  or  "PVRs."  PVRs  operate  like  traditional  videocassette  recorders, 
using  high-capacity  hard  disk  drives  for  storage  in  place  of  magnetic  tape.  David  Pogue,  State  of 
the  Art;  Recorders  to  let  you  Tame  TV,  N.Y.  TIMES,  Apr.  5,  2001,  at  Gl.  PVRs  provide  a  digital 
"buffer"  between  the  broadcast  signal  and  the  viewer  by  storing  up  to  thirty  minutes  of 
programming  as  it  airs.  See  http://www.tivo.com  (last  visited  Jan.  1,  2002).  PVRs  are  thus  able 
to  customize  even  live  television,  allowing  viewers  to  skip  or  re-watch  segments  as  desired. 

More  importantly,  PVRs,  in  conjunction  with  digital  cable  or  satellite  television  services,  allow 
viewers  to  choose  programs  weeks  before  they  are  broadcast.  Pogue,  supra.  While  home  recorders 
are  not  new,  PVRs  add  the  element  of  "time-shifting,"  as  owners  pre-select  their  viewing  by 
content,  and  not  broadcast  time.  As  one  commentator  writes,  "[y]ou'll  never  know  or  care  when 
a  particular  program  was  on,  or  on  what  channel;  you  will  just  know  that  when  the  little  light  on 
the  front  of  the  PVR  is  on,  something  you  requested  is  ready  to  play."  Id.  As  the  popularity  of 
PVRs  grows,  the  preemptive  power  of  unified  broadcasting  will  vanish,  as  viewers  will  be  able  to 
watch  a  disk  full  of  their  favorite  programming  rather  than  the  live  offerings  scheduled  for  a  given 
timeslot.  PVRs  are  now  installed  in  an  estimated  one  million  homes,  with  future  sales  expected  to 
reach  fifteen  million  within  five  years.  In  re  Annual  Assessment,  supra  note  80,  para.  94. 

301.  See  generally  COMMISSION  ON  PRESIDENTIAL  DEBATES:  DEBATE  HISTORY,  available  at 
www.debates.org  (last  visited  Apr.  30,  2002)  (listing  running  times  for  all  televised  presidential 
debates). 

302.  In  re  Annual  Assessment,  supra  note  80,  para.  80. 

303.  5eg5Mpra  note  166  and  accompanying  text. 

304.  Prohibiting  advertising  might  not  be  unreasonable  given  that  broadcasters  still  "profit 
immensely  from  election  campaigns."  THOMAS  E.  Patterson,TheVanishing  Voter  175  (2002). 


142  INDIANA  LAW  REVIEW  [Vol.  36: 1 01 


segments  no  more  than  a  few  minutes  at  the  beginning  and  close  of  each 
debate.'"' 
7.  Preemption  of  Sports:  Perhaps  most  importantly,  the  model  regulation  must 
address  the  numerous  network  contracts  with  professional  sports  franchises. 
Sporting  events  are  typically  broadcast  under  long-term  and  highly  profitable 
exclusive  contracts.  A  model  regulation  must  therefore  supersede  the 
networks'  obligations  under  these  contracts  by  exempting  performance.'"^ 

Each  suggestion  seeks  to  minimize  the  networks'  fmancial  hardships  during  the 
broadcasts,  while  preserving  the  educational  benefits  of  minimal  programming 
alternatives. 

B.  The  Test  Applied:  Determining  the  Relevant  Broadcast  Market 
for  the  General  Presidential  Debates 

Predicting  market  competition  without  careful  economic  analysis  risks  public 
policy  choices  that  stifle  market  growth  and  yield  inefficient  regulation.'"^ 
Abstract  broadcast  market  scrutiny  is  equally  difficult  given  the  constant  changes 
in  technology.  The  First  Amendment  scrutiny  applied  to  a  broadcast  debate 
regulation  will  thus  depend  largely  on  the  circumstances  surrounding  its 
enactment.  Where  are  the  viewers?  What  are  people  watching?  How  do 
televisions,  computers,  and  even  radios  receive  information?  Each  answer 
depends  entirely  on  how  we  divide  the  broadcast  spectrum  in  the  future.'"* 


In  2000,  for  instance,  candidates  for  public  office  spent  more  than  one  billion  dollars  on  television 
advertising.  Id. 

305.  John  Ellis,  Nine  Sundays:  A  Proposal  for  Better  Presidential  Campaign 
Coverage  26  (Joan  Shorenstein  Barone  Center  on  the  Press,  Politics  and  Public  Policy,  John  F. 
Kennedy  School  of  Government,  Harvard  University  1991).  This  innovative  proposal  suggested 
a  system  of  ninety-minute  prime-time  debates  each  Sunday  for  nine  weeks,  rotating  among  the 
major  networks  and  independent  news  stations.  Id.  at  4.  The  proposal  recognized  the  need  to 
induce  networks  to  sponsor  the  debates  by  permitting  limited  advertising  sales:  "if  handled 
correctly,  commercials  should  not  diminish  the  value  of  the  broadcast.  Viewers  and  voters  are 
sophisticated  enough  to  understand  the  need  for  commercial  sponsorship."  Id.  at  26.  But  see 
Patterson,  supra  note  304,  at  174.  Professor  Patterson  argues  that  the  "Nine  Sundays"  plan  is 
unduly  burdensome,  and  proposes  a  less  ambitious  alternative  requiring  the  networks  to  devote  a 
single  prime-time  hour  to  each  candidate  for  an  interview  hosted  by  the  network's  news  anchor. 
/^.  at  173-74. 

306.  The  proposal  would  also  require  restrictions  preventing  minor  networks  from  offering 
substitute  coverage.  One  possibility  is  to  require  sports  franchises  to  agree  that  any  preempted 
event  would  be  aired  on  a  substitute  channel  of  the  network's  choosing,  allowing  for  subcontracting 
to  a  rival  network,  or  more  likely,  an  in-house  cable  station. 

307.  See  generally  ROBERT  H.  BORK,  THE  ANTITRUST  PARADOX:  A  POLICY  AT  WAR  WITH 
Itself  (1978). 

308.  See  Hazlett,  supra  note  77,  at  927  (noting  that  any  definition  of  broadcast  technology  can 
be  altered  by  "further  subdivision  of  time,  power,  or  bandwidth  coordinates");  see  also  Lessig, 


2003]  REGULATION  OF  PRESIDENTIAL  DEBATES  1 43 


For  the  present,  therefore,  we  are  limited  to  the  model  of  a  broadcast 
television  debate  designed  in  1960.  This  model,  discussed  above  in  the 
guidelines  for  a  suggested  regulation,^^^  allows  a  short  inquiry  into  the  First 
Amendment  restrictions  that  may  govern  actual  promulgation. 

The  market-based  approach  begins  by  defming  the  market  for  the  general 
presidential  debates  geographically  and  as  a  product.  Defming  the  relevant 
geographic  market  is  a  straightforward  task,  as  the  proposed  regulation  addresses 
only  the  presidential  election,  rather  than  contests  for  state-specific  offices. 
Accordingly,  a  national  geographic  market  is  appropriate.  Next,  the  possible 
product  market  is  defined,  beginning  narrowly^ '°  and  assuming  that  broadcast 
network  television  is  the  relevant  medium.  A  market  limited  to  only  broadcast 
television  could  be  too  narrow,  avoiding  television's  overlap  with  other  media. 
Excerpted  transcripts  of  the  debates,  for  instance,  are  commonly  published  in 
national  newspapers^"  and  Internet  databases.^ '^  Viewers  may  also  watch  the 
debates  on  the  Intemet,^'^  cable  television,^ ''^  or  premium  DBS  services.^'^  Non- 
broadcast  resources,  however,  lag  behind  as  widely  used  alternatives  for  debate 
audiences.^ '^  While  access  to  Internet  and  cable  has  exploded,  studies  evidence 
a  digital  divide  that  limits  the  spread  of  information  technologies  in  low-income 


supra  note  239,  at  184  (describing  broadcast  technologies  modeled  on  computer  networks  that 
avoid  overlapping  signals  and  allow  endless  amounts  of  content);  Lee  Gomes,  Boomtown: 
Visionaries  See  a  Day  When  Radio  Spectrum  Isn  't  Scarce  Commodity,  WALL  St.  J.,  Sep.  30, 2002, 
at  B 1  (discussing  "open  spectrum"  technologies). 

309.  See  supra  notes  297-306  and  accompanying  text. 

3 1 0.  DOJ  Guidelines,  supra  note  26 1  (explaining  that  the  relevant  market  model  begins  with 
"the  smallest  group  of  products"  that  might  satisfy  consumer  demand). 

311.  See,  e.g..  The  2000  Campaign:  Exchanges  Between  the  Candidates  in  the  Third 
Presidential  Debate,N.Y.TlMES,Oct.  18,2000,atA26;  The  2000  Campaign:  Second  Presidential 
Debate  Between  Gov.  Bush  and  Vice  President  Gore,  N.  Y.  TIMES,  Oct.  1 2, 2000,  at  A22;  The  2000 
Campaign:  Transcript  of  Debate  Between  Vice  President  Gore  and  Governor  Bush,  N.  Y.  TIMES, 
Oct.  4,  2000,  at  A30. 

312.  See,  e.g.,  C-Span.org,  Presidential  Debates  2000,  at  http://www.c-span.org/ 
campaign2000/presdebates.asp  (last  visited  Apr.  27,  2002)  (archiving  all  of  the  presidential  and 
vice-presidential  debates  from  the  2000  election,  along  with  commentary,  discussion  boards,  and 
general  election  statistics). 

313.  See  1996  DEBATES,  supra  note  201  (containing  downloadable  video  of  the  1996 
presidential  debates).  IBM  and  Sony  Electronics  plan  to  convert  1 1 5,000  hours  of  video  produced 
by  CNN  since  1980  into  a  computerized  database.  Susan  Stellin,  CNN  Video  Archives  to  Become 
Digital  Database,  N.Y.  TIMES,  Apr.  23, 2001 ,  at  C8.  The  system  will  allow  "the  sale  of  news  video 
material  to  the  public  on  a  pay-per-view  basis  on  the  Internet  or  through  high-speed  interactive 
cable  systems."  Id. 

3 1 4.  See  supra  note  2 1 4  and  accompanying  text. 

315.  Press  Release,  EchoStar  Communications  Corp.,  EchoStar's  DISH  Satellite  Television 
Offers  504  Hours  of  Free  Air  Time  to  U.S.  Presidential  Candidates  (Oct.  2,  2000)  (on  file  with 
author). 

3 1 6.  See  supra  note  2 1 4  and  accompanying  text. 


144  INDIANA  LAW  REVIEW  [Vol.  36:101 


and  rural  regions.^ '^  Broadcast  television,  at  present,^'*  remains  the  most 
prevalent  medium  for  debate  access  throughout  the  nation.^''  Without  evidence 
of  more  widespread  consumer  use  of  new  media,  the  initial  product  market  is 
limited  to  broadcast  television. 

The  market-based  approach  must  also  consider  the  general  presidential 
debates  as  a  product.  The  market  again  begins  narrowly,  including  only  the  live 
debates  before  considering  reasonably  interchangeable  debate  alternatives. 
Considering  the  presidential  debates  a  separate  product  market  might  ignore 
consumer  habits.  Media  studies  suggest  that  the  debate  audience  is  largely 
comprised  of  viewers  who  closely  follow  all  developments  in  the  election.^^^  The 
debates  may  also  be  interchangeable  with  campaign  advertisements,  live  rallies, 
stump  speech  coverage,  or  the  candidates'  web  sites.^^'  Yet  the  presidential 
debates — however  marginalized  by  appeals  to  showmanship — remain  unique  in 
their  ability  to  convey  both  the  style  and  substance  of  the  candidates. ^^^  Viewers 
watching  the  debates  merely  to  reinforce  their  initial  candidate  choice  are  still 
held  captive  in  front  of  competing  viewpoints  easily  skimmed  over  in  print.^^^ 
And  image  does  matter.  The  visual  presentation  of  the  candidates  without 
protection  from  staff  members  or  the  safety  of  ateleprompter,  offers  insight  into 
a  candidate's  ability  to  think  clearly  and  respond  decisively.^^"*    Even  with 


317.  See  William  E.  Kennard,  The  Digital  Divide,  at  www.fcc.gov/commissioners/kennard/ 
coI051298.html  (last  visited  Apr.  15,  2002);  ESA,  Nation  Online,  supra  note  83,  at  11-29 
(outlining  demographic  factors  in  computer  and  Internet  usage  in  the  United  States).  Economic 
barriers  to  new  technology  are  referred  to  as  "switching  costs"  and  are  recognized  as  a  limitation 
on  consumer  alternatives  sufficient  to  narrow  the  relevant  market  to  a  single  product  or  area. 
Eastman  Kodak  Co.  v.  Image  Technical  Servs.,  Inc.,  504  U.S.  451,  481-82  (1992). 

318.  One  legislative  initiative  in  2001  sought  to  encourage  broadband  development  in  rural 
areas.  Rural  Broadband  Deployment  Act  of  2001,  S.  1127,  107th  Cong.  (2001).  The  Rural 
Broadband  Deployment  Act  would  exempt  carriers  providing  advanced  telecommunications 
services  in  areas  with  a  "population  less  than  50,000  located  outside  of  a  metropolitan  statistical 
areei,"  from  the  Communications  Act  of  1934.  Id.  The  bill  defined  advanced  telecommunications 
services  as  the  "capability  to  transmit  information  at  no  less  than  384  kilobits  per  second  in  at  least 
one  direction."  Id. 

3 1 9.  Patterson,  supra  note  304,  at  1 75.  Professor  Patterson  notes  that  the  flood  of  viewing 
options  offered  by  new  media  might  increase  the  relative  importance  of  the  networks  because  "[a]s 
the  number  of  channels  grows,  viewers  stop  surfing  and  limit  their  search  to  selected  ones."  Id. 

320.  See  Campbell,  supra  note  161. 

321.  Both  presidential  candidates  maintained  their  own  campaign  web  sites  during  the  election. 
Archived  copies  are  available  at  http://www.georgewbush.com  and  http://www.algore2000.com. 

322.  Alexander,  supra  note  152,  at  125-26. 

323 .  Lemert  ET  AL.,  supra  note  1 98. 

324.  Jamieson  &  BiRDSELL,  supra  note  154,  at  15  (discussing  the  "often  maligned  but 
nonetheless  important  characteristic  of . . .  image");  see  also  MiNOW  ET  AL.,  supra  note  299,  at  4 
("Not  speeches  on  the  stump,  not  speeches  from  the  rear  platform  of  trains,  not  courthouse  square 
handshaking,  not  newspapers,  not  magazines,  not  books,  and  not  even  radio  can  confront  so  many 
people  with  the  president's  face  and  with  his  words  at  the  moment  he  utters  them."). 


2003]  REGULATION  OF  PRESIDENTIAL  DEBATES  1 45 


advances  in  technology,  therefore,  the  live  presidential  debate  should  remain  its 
own  product  market.-'^^ 

Using  this  market-based  analysis,  a  model  presidential  debate  regulation 
should  be  viewed  as  limited  to  the  live  candidate  debates  broadcast  nationally  on 
network  television.  The  First  Amendment  scrutiny  applied  to  the  regulation  then 
depends  on  the  amount  of  content  regulated  in  this  relevant  market.  Using  the 
total  viewership  for  the  first  general  presidential  debate  of  the  2000  campaign  as 
a  benchmark,  approximately  thirty-five  million  households  of  the  46.6  million 
households  watching  relied  on  broadcast  television  coverage.^^^  Broadcast 
television  thus  carried  more  than  seventy-five  percent  of  the  presidential  debate 
audience,  a  market  share  strongly  suggesting  market  power  within  the  scarce 
broadcast  medium.^^^  With  viewership  concentrated  within  the  traditional 
television  spectrum,  the  relaxed  First  Amendment  standards  of  NBC  and  Red 
Lion  should  be  applied  to  review  any  regulation  of  the  presidential  debates. 

These  relaxed  standards  triggered  by  the  market-based  First  Amendment 
analysis  suggest  that  the  FCC  could  compel  the  major  broadcast  television 
networks  to  cover  the  general  presidential  debates.  In  turn,  the  public  interest 
goals  of  voter  education  and  informed  election  discourse  are  likely  sufficient 
regulatory  concerns  to  pass  the  deferential  First  Amendment  review  required 
under  precedent. 

A  broadcast  debate  regulation  would  not,  of  course,  survive  constitutional 
challenges  indefinitely.  As  noted,  cable  television  accounted  for  roughly  twenty- 
five  percent  of  the  households  tuning  in  for  the  first  presidential  debate  of  2000. 
If  convergence  keeps  pace,  the  major  broadcast  networks  will  offer  but  one  of  the 
many  options  for  viewing  campaign  debates.  In  the  meantime,  the  relaxed  First 
Amendment  scrutiny  applied  to  a  current  debate  regulation  ensures  continued 
network  television  coverage  and  preserves  a  national  voter  audience  for  emerging 
media  alternatives. 

Conclusion 

As  government  control  of  broadcast  speech  approaches  its  seventy-fifth  year, 
two  pressing  problems  have  emerged.  Broadcast  networks  face  mounting 
competition  from  communications  media,  decreasing  their  willingness  to  perform 
public  interest  duties  assigned  by  the  FCC.  What  network  television  invented  in 
1 960,  the  presidential  debate,  it  may  dismantle  by  means  of  defection  before 


325 .  See  PATTERSON,  supra  note  304,  at  1 64.  Professor  Patterson  argues  that  the  drama  of  the 
live  debates  uniquely  satisfies  the  political  interests  of  the  average  voter,  because  "[v]oters  are  not 
like  students  in  a  classroom,"  but  "more  like  the  crowd  at  a  ball  geime."  Id.  at  1 64-65.  Accordingly, 
"[t]he  more  exciting  the  game,  the  more  attention  spectators  pay.  And  the  more  attention  they  pay, 
the  more  they  understand  what's  happening  on  the  field."  Id.  at  165. 

3 26.  Supra  note  211. 

327.  See  supra  notes  288-9 1  and  accompanying  text  (assuming  that  a  m.arket  share  greater  than 
sixty-four  percent  likely  demonstrates  market  power). 


146  INDIANA  LAW  REVIEW  [Vol.  36:101 


2004.^^*  The  presidential  debates  are  neither  perfect  nor  essential  to  American 
democracy.  But  they  are  an  important  part  of  our  political  tradition,  adding  a 
symbolic,  and  sometimes  substantive,  focus  to  the  selection  of  our  highest  office. 
^^^  Simultaneously,  the  same  technologies  that  have  triggered  competition  in  the 
communications  industry  are  quickly  eroding  the  already  doubtful  scientific  basis 
of  the  FCC's  most  powerful  regulatory  schemes.  Today,  if  not  in  1927, 
broadcast  media  are  not  scarce. 

Politics  makes  legislative  solutions  difficult  to  craft:  no  member  of  Congress 
is  eager  to  voice  support  for  an  end  to  regulation  of  broadcast  obscenity  and 
media  indecency.  Administrative  solutions  are  promised,"^  but  the  sheer  size 
and  power  of  the  FCC  make  change  difficult.^^'  While  the  courts  remain  hesitant 
to  intrude,  reform  is  possible  within  the  normal  confines  of  judicial  review. 

A  market-based  approach  to  the  First  Amendment  rights  of  broadcasters  is 
a  sensible,  familiar  alternative  to  the  current  two-tiered  system  of  constitutional 
review.  A  market-based  approach  to  the  First  Amendment  adds  a  sophisticated 
set  of  guidelines  suitable  for  agencies,  broadcasters,  and  courts.  Market-based 
First  Amendment  rights  preserve  the  traditional  deference  to  agency  regulation 
in  broadcast  television  and  radio.  At  the  same  time,  emerging  technologies  are 
accorded  the  robust  speech  protection  of  the  common  law  First  Amendment. 
New  media  are  given  the  freedom  to  flourish,  while  old  media  are  given  a  reason 
to  catch  up. 

A  regulation  compelling  the  broadcast  coverage  of  presidential  debates  is  a 
fitting  forum  to  welcome  the  new  First  Amendment  rights  of  broadcasters.  While 
remnants  of  scarcity  concerns  still  control,  federal  oversight  of  the  debates  is 
appropriate.  As  the  broadcast  marketplace  of  ideas  begins  to  rely  on  the 
economic  market,  the  legal  and  scientific  gap  that  separates  Twentieth  Century 


328.  Post-election  news  coverage  of  presidential  politics  supports  this  trend.  On  November 
8,  2001,  President  George  W.  Bush  delivered  his  second  televised  address  to  the  nation  regarding 
the  United  States'  war  on  terrorism.  Despite  the  obvious  importance  of  the  event,  only  ABC  carried 
the  speech  live.  Bush  Loses  in  Network  Battle  of  "Survivor",  available  at  http://www.cnn.com/ 
2001/showbiz/TV/ll/08/networks.snub.bush/index.html(lastvisitedNov.  8,2001).  NBC  and  CBS 
each  decided  to  air  their  popular  prime  time  properties  "Friends,"  and  "Survivor,"  while  FOX  left 
the  programming  decision  to  the  local  affiliates.  Id. 

329.  The  importance  of  televised  debates  is  gradually  emerging  in  other  countries  as  well.  See 
Steven  Erlanger,  German  Candidates  Unscathed  After  First  Televised  Duel,  N.Y.  TIMES,  Aug.  26, 
2002,  at  A3. 

330.  Roger  M.  Golden,  Gauging  Michael  Powell:  What  Can  Business  Expect  from  a  New 
FCC  Chairman  Promising  Change?,  LEGAL  TIMES,  May  1 8, 200 1 ,  at  32.  Chairman  Powell  stated 
that  "[w]ith  increasingly  converged  services,  it  is  difficult  to  rationally  label  and,  thus,  assign 
regulatory  treatment  to  an  innovative  provider,  product  or  service."  Id. 

331.  Yochi  J.  Dreazen,  FCC 's  Powell  Quickly  Marks  Agency  as  His  Own,  WALL  St.  J.,  May 
1,  2001,  at  A28.  Chairman  Powell  has  criticized  the  FCC's  public  interest  doctrine  as  "about  as 
empty  a  vessel  as  you  can  accord  a  regulatory  agency  and  ask  it  to  make  meaningful  judgments." 
Id.  In  contrast,  FCC  Commissioner  Gloria  Tristani  saw  no  ambiguity  in  the  agency's  duty,  citing 
"70  years  of  good,  clear  case  law  about  the  public  interest  standard."  Id. 


2003]  REGULATION  OF  PRESIDENTIAL  DEBATES  1 47 


jurisprudence  from  Twenty-first  Century  technology  can  be  crossed.  Compelled 
debate  broadcasts,  like  scarcity,  must  ultimately  give  way  to  the  reality  of  a 
converged  media.  That  future  will  validate  the  First  Amendment's  core 
commitment  to  public  debate  and  usher  in  a  new  era  of  digital  democracy. 


Indiana  Law  Review 

Volume  36  2003  Number  1 


NOTES 


Creating  an  Uncomfortable  Fit  in  Applying 
THE  ADA  TO  Professional  Sports 


Jeffrey  Michael  Cromer* 

Fact  is,  every  day  your  body  feels  a  little  different  and  golf  is  such  a 
finite  game  that  a  little  off  can  translate  into  a  lot.  One  or  two  degrees 
here  and  there  can  mean  from  four  to  seven  yards.  That's  not  a  whole  lot 
but  it's  magnified  due  to  the  precision  the  game  demands.' 

Introduction 

In  May  2001,  the  Supreme  Court  had  the  opportunity  to  determine  how 
several  provisions  of  the  Americans  with  Disabilities  Act  (ADA),^  specifically 
"public  accommodation,"  "fundamental  alteration,"  and  "private  entity"  should 
fit  into  athletic  competition  when  it  decided  PGA  Tour,  Inc.  v.  Martin?  Instead, 
the  Supreme  Court  imposed  the  ADA  on  professional  sports  organizations 
without  appreciating  the  basics  of  the  game  of  golf — or  the  law.  The  Supreme 
Court's  expansive  interpretations  of  "reasonable  accommodation"  and 
"fundamental  alteration"  under  the  ADA,  as  well  as  the  Court's  assumption  that 
nine  reclusive  jurists  could  decide  what  constitutes  a  fundamental  alteration  to 
a  professional  sport,  have  potential  implications  on  how  the  laws  governing 
disabled  Americans  relate  to  competitive  sports  at  all  levels  of  society,  from  mere 
recreation  and  exercise  to  professional  athletics.  These  potential  implications 
cannot  be  what  Congress  intended  when  passing  the  bill  in  1990. 

This  Note  examines  Casey  Martin's  case  against  the  PGA  Tour  as  a 
foundation  for  analyzing  the  application  of  the  ADA  to  professional  sports, 
arguing  that  courts  must  distinguish  competitive  sports  from  forms  of  recreation 
and  exercise  when  determining  fundamental  alterations.  Martin  is 
distinguishable  from  typical  reasonable  accommodation  and  fundamental 
alteration  cases.  In  professional  golf,  as  in  all  professional  sports,  the  essence  of 
the  activity  is  competition."^  When  a  governing  authority  is  forced  to  alter  an 


*     J.D.  Candidate,  2003,  Indiana  University  School  of  Law — Indianapolis;  B.A.,  1998, 
Wabash  College,  Crawfordsville,  Indiana. 

1 .  Tiger  Woods,  Tiger  Woods:  How  I  Play  Golf  9  (200 1 ). 

2.  42U.S.C§  12101(1994). 

3.  532  U.S.  661  (2001). 

4.  Brief  for  the  ATP  Tour,  Inc.  and  the  Ladies  Professional  Golf  Ass'n,  Amici  Curiae  at  3, 


150  FNDIANA  LAW  REVIEW  [Vol.  36:149 


existing  rule  of  a  sport  in  order  to  accommodate  the  disabled,  that  change,  no 
matter  how  small,  will  often  result  in  a  ftindamental  alteration  of  the  event.  This 
rule  change,  mandated  by  a  court  unfamiliar  with  the  rules  of  the  sport  and  the 
role  they  play  in  competition,  creates  a  scenario  where  other  participants  are  at 
a  competitive  disadvantage  due  to  the  waiver  of  a  rule  for  a  single  participant. 

When  the  Court  fails  to  consider  competition  as  an  integral  part  of  the  sport, 
as  opposed  to  mere  recreation  or  exercise,  the  ADA  ceases  to  be  fair  to  fellow 
competitors.  The  purpose  of  the  ADA,  after  all,  is  to  provide  equal  access,  not 
equal  opportunities  to  win.  Admittedly,  there  are  circumstances  when  the  ADA 
may  be  applied  in  competitive  settings:  the  ADA  will  never  allow  a  complete 
denial  of  access  to  a  sport.  Access  is  either  denied  to  an  individual  or  it  is  not, 
and  if  it  is  denied,  the  ADA  applies.  The  question  the  courts  must  face  becomes 
how  to  properly  weigh  the  other  side  of  the  equation:  the  impact  on  the  affected 
activity — in  this  instance,  professional  golf.  Courts  must  attempt  to  balance  the 
nature  of  the  impairment  on  the  disabled  player  as  against  the  nature  of  the 
impairment  on  the  quality  of  play  and  the  nature  of  the  sport — ^whether  there  is 
a  fundamental  alteration.  Courts  must  be  sensitive  to  the  potential  implications 
a  reasonable  accommodation  may  create  in  competitive  settings,  where  if  applied 
to  only  one  individual,  it  may  affect  the  nature  of  play  to  the  detriment  of  all 
competitors. 

This  Note  is  not  meant  to  discredit  the  purpose  of  the  ADA  and  the  many 
successes  it  has  had  in  providing  disabled  Americans  opportunities  they  would 
otherwise  not  have  had.  Nor  is  the  purpose  of  this  Note  to  argue  that  the  ADA 
should  never  be  applied  to  professional  sports.  Instead,  this  Note  uses  Casey 
Martin's  three-year  battle  against  the  PGA  Tour  as  a  foundation  to  promote  two 
separate  arguments.  First,  under  the  provisions  of  the  ADA,  the  PGA  Tour  does 
not  qualify  as  a  place  of  public  accommodation.  The  goal  of  the  ADA  is 
commendable,  but  extending  it  to  private  organizations  and  clubs  like  the  PGA 
Tour  is  not.^  The  Supreme  Court  must  distinguish  between  providing  mere 
accessibility  on  the  public  golf  course  and  changing  the  rules  and  nature  of  the 
sport's  highest  level  of  competition.^  The  public  golf  course  operator  can  and 
should  expect  to  make  reasonable  accommodations  for  those  disabled  and 
desiring  access  to  the  sport.^  However,  an  otherwise  private  organization  should 
not  change  its  rules  simply  because  it  operates  a  course  for  a  very  limited  period 


PGA  Tour,  Inc.  v.  Martin,  532  U.S.  661  (2001)  (No.  00-24),  noting  that 

[ajthletic  competition  is  based  on  nothing  more  than  an  agreed-upon  set  of  uniform 
rules,  all  of  which,  in  interplay  with  one  another,  define  the  game.  At  bottom,  the 
singularity  of  a  sports  competition  and  the  autonomy  of  its  rules  compel  the  conclusion 
that  any  court-imposed  modification  or  abrogation  of  a  rule  of  how  the  game  is  played 
changes  its  fundamental  nature.  Such  fundamental  alteration  is  not  required  by  the 
ADA. 

5 .  Nikos  Leverenz,  Americans  with  Disabilities  Act  Must  Not  Be  Used  to  Change  the  Rules 
of  Professional  Sports,  at  http://www.pacificlegal.org. 

6.  Id. 

7.  Id 


2003]  APPLYING  THE  ADA  IN  PROFESSIONAL  SPORTS  1 5 1 


of  time.* 

Second,  the  Court  failed  to  distinguish  adequately  the  applicability  of  the 
ADA  to  competitive  settings  from  its  applicability  to  recreational  exercise  when 
it  determined  what  constitutes  a  fundamental  alteration  under  the  ADA. 
Specifically,  the  Supreme  Court  failed  to  recognize  that  the  nature  of  a 
professional  golf  event  is  based  solely  on  competition.  By  applying  the  ADA's 
reasonable  accommodation  requirement  to  the  PGA  Tour,  courts  will 
inadvertently  erode  the  fundamental  fairness  of  competition  and  alter  the  sport 
in  a  way  only  those  competitors  directly  involved  can  recognize.  An  elite  group 
of  golfers  has  the  "total  package"  to  play  at  a  level  worthy  of  earning  millions  of 
dollars  and  travel  throughout  the  world  to  compete.'  Professional  play  takes 
place  at  a  vastly  more  elevated  level  than  that  of  recreational  golfers.  Only 
professional  golfers  know  what  is  needed  and  what  changes  affect  their  level  of 
competition.  Only  their  sport's  governing  body  has  the  expertise  and  ability  to 
dictate  the  rules  and  truly  recognize  what  is  essential  to  a  sport,  and  determine 
what  "fundamentally  alters"  an  event. 

For  these  reasons,  this  Note  discusses  why  the  ADA  does  not  comfortably 
fit  in  professional  sports  and  explores  possible  implications  of  Martin's 
expansive  interpretation  in  other  professional  and  competitive  sport  settings.  Part 
I  of  this  Note  first  analyzes  the  history  and  purpose  of  the  ADA,  specifically  Title 
III,  which  is  most  applicable  to  Martin  and  professional  sports  settings.'^  This 
analysis  gives  the  proper  background  to  explain  why  the  PGA  Tour  should  not 
have  been  considered  a  public  accommodation  under  the  ADA.  Part  II  explains 
the  story  of  Casey  Martin  and  sets  out  the  legal  history  of  his  case  against  the 
PGA  Tour.  Part  III  of  this  Note  examines  how  courts  have  historically  applied 
the  ADA  in  competitive  sports  settings.  Part  IV  discusses  the  recent  decision  of 
the  Supreme  Court,  examining  the  strengths  and  oversights  of  the  majority  and 
dissent. 

After  this  background  of  the  ADA  and  the  Supreme  Court's  decision  in 
Martin,  Part  V  of  this  Note  examines  and  critiques  the  Supreme  Court's 
expansive  interpretation  in  three  respects:  1)  the  scope  of  "reasonable 
accommodation"  as  it  applies  to  the  PGA  Tour  and  other  professional  sports 
organizations,  2)  what  constitutes  a  "fundamental  alteration"  in  a  professional 


8.  Id 

9.  Brief  for  the  ATP  Tour,  Inc.  and  the  Ladies  Professional  Golf  Ass'n,  Amici  Curiae  at  1 0, 
Martin  (No.  00-24),  stating, 

the  fact  that  Martin  was  substantially  disadvantaged  by  application  of  this  uniform  rule 
is  precisely  the  point:  athletes  who,  for  whatever  reason,  cannot  perform  as  well  as 
others  when  measured  against  the  uniform  rules  of  the  game  are  not  supposed  to  win! 
In  fact,  if  their  particular  physical  traits  (e.g.,  height,  weight,  strength,  endurance)  or 
psychological  characteristics  (e.g.,  ability  to  concentrate,  risk  aversion,  "mental 
toughness")  create  sufficient  barriers,  they  may  not  be  able  to  compete  effectively  at  all. 
The  "game"  is  designed  to  test  for  those  characteristics  and  to  make  them  outcome 
determinative,  not  to  compensate  for  individual  differences. 
10.   See  42  U.S.C.  §  12182(a)  (1995). 


1 52  INDIANA  LAW  REVIEW  [Vol.  36: 149 


sports  setting,  and  3)  what  body  is  in  the  best  position  to  determine  what 
constitutes  a  fundamental  alteration.  This  section  includes  a  discussion  of  why 
such  decisions  should  be  entrusted  to  the  sport's  own  governing  body  for  reasons 
of  institutional  competence.  Finally,  Part  VI  discusses  the  potential  implications 
of  the  Supreme  Court's  decision  in  Martin  on  professional  sports  organizations 
and  other  levels  of  athletic  competition.  This  part  also  discusses  the  Supreme 
Court's  application  of  the  ADA  in  a  recent  case  and  its  attempt  to  potentially 
narrow  the  reach  of  the  ADA  in  all  areas  of  law,  including  athletic  competitions. 
The  ADA  does  not  fit  as  comfortably  into  competitive  settings  as  into 
traditional  employment  and  recreational  applications.  As  Tiger  Woods  observed, 
a  small  change  may  not  seem  like  much  to  the  spectator,  but  every  change  is 
magnified  for  the  player  due  to  the  precision  of  the  game,"  often  resulting  in  a 
fundamental  alteration  that  only  those  familiar  with  the  sport  can  sense. '^ 
Athletics  played  at  the  sport's  highest  level  are  clearly  different  than  sports 
played  for  recreation,  exercise,  or  as  a  hobby. *^  Professional  sports  are  games  of 
precision  and  are  decided  by  the  slightest  of  margins.  The  Court  should 
recognize  this  distinction  and  apply  the  ADA  accordingly. 

I.  Background  OF  THE  ADA 

A.  General  Purpose 

Congress  enacted  the  Americans  with  Disabilities  Act*"*  in  1990  to  "assure 
equality  of  opportunity."'^  The  purpose  of  the  ADA  was  to  "provide  a  clear  and 
comprehensive  national  mandate  for  the  elimination  of  discrimination  against 
individuals  with  disabilities."'^  The  ADA  prohibits  discrimination  based  on 
disability.  Unlike  the  ADA,  other  employment  discrimination  laws  forbid 
employers  to  take  into  account  a  particular  disability  of  an  employee,'^  while  the 


1 1 .  Brief  for  Petitioner  at  37  n.25,  PGA  Tour,  Inc.  v.  Casey  Martin,  532  U.S.  661  (2001 )  (No. 
00-24)  (noting  "the  effect  need  not  be  great  to  have  a  significant  impact  on  the  competition.  In 
1997,  for  example,  the  difference  in  average  score  betw^een  the  number  one  and  number  100  PGA 
TOUR  scoring  leaders  was  2.32  strokes  per  round  over  the  course  of  the  entire  year."). 

1 2.  Woods,  supra  note  1 . 

1 3 .  Brief  for  the  ATP  Tour,  Inc.  and  the  Ladies  Professional  Golf  Ass'n,  Amici  Curiae  at  3, 
Martin,  (No.  00-24)  (noting  "[ajthletic  competition  is  supposed  to  favor  the  more  skilled  and 
physically  able.  It  is  a  test  of  who  is  the  'best'  at  mastering  the  game  as  defined  by  its  rules,  and  it 
is  this  characteristic  that  makes  it  compelling  to  both  competitors  and  spectators."). 

14.  ^-ee  42  U.S.C.  §12101. 

15.  Alex  B,  Long,  A  Good  Walk  Spoiled:  Casey  Martin  and  the  ADA's  Reasonable 
Accommodation  Requirement  in  Competitive  Settings,  77  OR.  L.  REV.  1337, 1342  (1998)  (quoting 
136  Cong.  Rec.  S9694  (daily  ed.  July  13,  1990)). 

16.  Martin  v.  PGA  Tour,  Inc.,  994  F.  Supp.  1242,  1247  (D.  Or.  1998)  (quoting  42  U.S.C.  § 
12101(b)(1)  (1995)). 

17.  See  Title  VII  of  the  Civil  Rights  Act  of  1964,  42  U.S.C.  §§  2000e  (1994);  see  also  Age 
Discrimination  in  Employment  Act,  29  U.S.C.  §§  621-34  (1994). 


2003]  APPLYING  THE  ADA  IN  PROFESSIONAL  SPORTS  1 53 


ADA  expressly  requires  employers  to  make  reasonable  accommodations  for 
disabled  employees.'* 

Title  I  of  the  ADA  pertains  to  discrimination  in  the  workplace.'^  Since  its 
passage  in  1990,  Title  I  of  the  ADA  has  impacted  labor  law,  preventing  covered 
entities  from  discriminating  against  a  disabled  individual  in  the  areas  of  job 
hiring,  advancement,  and  other  facets  of  employment.^° 

"Title  II  is  targeted  at  public  entities,  making  it  unlawful  for  them  to 
discriminate  against  or  exclude  qualified,  disabled  individuals  from  participating 
in  or  receiving  the  benefits  of  their  services,  programs,  or  activities."^'  The 
definition  section  provides  that  Title  II  is  meant  for  those  "who,  with  or  without 
reasonable  modifications  to  rules,  policies,  or  practices,  the  removal  of 
architectural,  communication,  or  transportation  barriers,  or  the  provision  of 
auxiliary  aids  and  services,  meets  the  essential  eligibility  requirements  for  the 
receipt  of  services  or  the  participation  in  programs  or  activities  provided  by  a 
public  entity."^^  Title  III  applies  to  private  entities  providing  places  of  public 
accommodation,^^  and  Title  IV  relates  to  telecommunications.^'*  Title  IV  applies 
to  the  Federal  Communications  Commission,  and  addresses  the  retaliation, 
coercion,  state  immunity  and  discrimination  in  that  area.^^ 

1.  Title  III. — Title  III  is  the  most  relevant  section  of  the  ADA  for  the  Martin 
case  and  other  situations  involving  disabled  Americans  and  competitive  settings. 
Title  III  constitutes  "perhaps  the  most  ambitious  section  of  the  ADA,  granting 
rights  to  disabled  customers  who  would  not  otherwise  have  been  permitted  to 
participate  in  the  central  activities  of  mainstream  society  ."^^  Title  III  prohibits 
discrimination  against  disabled  persons  in  the  "full  and  equal  enjoyment  of  the 
goods,  services,  facilities,  privileges,  advantages,  or  accommodations  of  any 
place  of  public  accommodation  by  or  any  person  who  owns,  leases  (or  leases  to), 
or  operates  a  place  of  public  accommodation."^^  Private  clubs  are  exempt  from 
Title  III  provisions,  a  vital  and  often  overlooked  argument  presented  by  the  PGA 
Tour  in  Martin?^  Discrimination  is  defined  in  these  circumstances  as  the  use  of 
any  eligibility  requirement  that  as  a  result  screens  out  disabled  persons  from  their 
equal  enjoyment  of  the  public  accommodation.^^  Title  III  also  covers  the  failure 


18.  See    Long,    supra    note    15,    at    1343    (citing    42    U.S.C.    §§    12112(b)(5)(A), 
12182(b)(2)(A)(ii)). 

19.  42  U.S.C.  §  12181(7). 

20.  Christopher  M.  Parent,  A  Misapplication  of  the  Americans  with  Disabilities  Act,  26  J. 
Legis.  123,129(2000). 

21.  /^.  at  131. 

22.  Id. 

23.  42  U.S.C.  §  12182(a)  (2002). 

24.  Id.  §  12201-12213. 

25.  Id 

26.  Parent,  supra  note  20,  at  1 3 1 . 

27.  42  U.S.C.  §  12182(a)  (2002). 

28.  Id  §  12187. 

29.  Id  §  12182(b)(2)(a)(I). 


154  INDIANA  LAW  REVIEW  [Vol.  36:149 


to  make  reasonable  accommodations  to  the  disabled  person  in  situations  that  are 
necessary  to  provide  services  and  goods  to  the  disabled  individual. ^°  The  only 
defense  by  employers  or  clubs  under  Title  III,  which  was  an  argument  by  PGA 
Tour  in  the  case  of  Martin,  is  if  they  can  demonstrate  that  such  a  modification 
would  "fundamentally  alter"  the  nature  of  such  goods  or  services.^' 

A  "private  entity"  under  Title  III  is  "any  entity  other  than  a  public  entity."^^ 
A  "public  entity"  is  "any  State  or  local  government;  any  department,  agency, 
special  purpose  district,  or  other  instrumentality  of  a  State  or  States  or  local 
govemment."^^  If  that  were  the  extent  of  what  constitutes  a  public  entity,  there 
would  not  have  been  a  question  as  to  whether  the  PGA  Tour  must  accommodate 
Martin.  Instead,  immediately  following  the  public  entity  section.  Title  III  lists 
various  private  entities  that  the  ADA  will  consider  public  for  purposes  of 
providing  accommodations  to  disabled  Americans.  This  list  contains,  among 
other  places,  hotels,  restaurants,  movie  theatres  and  stadiums.^"*  This  list 
concludes  by  expressly  naming  golf  courses  as  private  entities  that  the  ADA 
considers  a  public  entity.^^ 

Titles  I  and  III  of  the  ADA  also  state  that  private  entities  must  make 
reasonable  modifications  "unless  the  entity  can  demonstrate  that  taking  such 
steps  would  fundamentally  alter  the  nature  of  the  good,  service,  facility, 
privilege,  advantage,  or  accommodation  being  offered  or  would  result  in  an 
undue  burden. "^^  A  public  entity's  claim  of  fundamental  alteration  or  undue 
burden  is  the  only  defense  a  public  entity  can  claim  from  the  requirements  of  the 
ADA.  Is  walking  a  golf  course  a  fundamental  alteration  to  the  game?  Arguably, 
yes.  More  importantly,  should  a  non-profit,  private  entity,  which  merely  uses  a 
public  golf  course  for  four  days  a  year  and  prohibits  the  public  from  access  to  the 
playing  areas,  be  considered  a  public  entity?  The  Supreme  Court  found  so,  to  the 
surprise  of  many  spectators  of  the  sport  and  the  Court  alike. 

II.  Golf  and  Legal  History  of  Casey  Martin 

On  May  29, 2001 ,  Casey  Martin  prevailed  over  the  PGA  Tour  when  the  U.S. 
Supreme  Court  ruled  that  Martin  was  entitled  to  use  a  golf  cart  while  playing  on 


30.  Id  §  12182(b)(2)(a)(ii). 

31.  Id. 

32.  42U.S.C.  §  12181(6). 

33.  /^.  §  I2131(1)(A),(B). 

34.  Scotta  A.  Weinberg,  Analysis  o/Martin  v.  Professional  Golvers'  Ass'n,  Inc. — Applying 
the  ADA  to  the  PGA  is  a  Hole  in  One  for  Disabled  Golfer,  38  Brandeis  L.J.  757  (2000)  (citing  42 
U.S.C.§  12181(7)  (2002)). 

35.  Id  (citing  42  U.S.C.  §  12181(7)(L)). 

36.  42  U.S.C.  §  12182(2)(A)(iii);  Parent,  supra  note  20,  at  132  (noting  that  "Titles  I  and  III 
are  closely  linked  as  they  demand  many  of  the  same  requirements  on  the  covered  entity,  primarily 
that  'reasonable  accommodations'  be  made  and  that  any  eligibility  criteria  intended  to  screen  out 
an  individual  with  a  disability  are  eliminated."). 


2003]  APPLYING  THE  ADA  IN  PROFESSIONAL  SPORTS  1 55 


the  PGA  Tour.^^  PGA  Tour,  Inc.  v.  Martin  was  the  first  case  in  which  a  party 
asked  the  Supreme  Court  to  apply  the  ADA  to  a  competitor  in  a  professional 
sports  organization. 

Casey  Martin  suffers  from  Klippel-Trenaunay-Weber  Syndrome,  a  rare 
vascular  congenital  defect  that  causes  a  lack  of  blood  circulation  leading  to  bone 
deterioration  and  muscle  atrophy  wherever  the  disease  is  found.^^  Martin  suffers 
from  this  disease  in  his  right  leg,  which  causes  severe  pain  and  discomfort  while 
walking.^^  Martin's  defect  has  progressed  to  the  point  at  which  it  is  unsafe  for 
him  to  walk  for  any  significant  period  of  time  without  the  possibility  of 
fracturing  his  leg/^ 

Casey  Martin  can  hit  golf  balls  well  enough  to  be  part  of  an  elite  group  of 
players  throughout  the  world  able  to  earn  a  living  playing  golf  at  its  highest  level. 
There  is  no  dispute  Martin  is  a  very  talented  golfer  and  has  the  ability  to  compete 
with  other  professional  athletes  on  the  PGA  Tour.  However,  Martin's 
degenerative  leg  condition  substantially  limits  the  amount  of  walking  he  is 
capable  of  doing,  especially  the  amount  of  walking  necessary  to  compete  on  the 
PGA  Tour.  An  average  PGA  Tour  event  normally  involves  walking  twenty  to 
twenty-five  miles  over  the  four  day  period."*'  When  Martin  played  collegiate  golf 
at  Stanford  University,  he  was  noticeably  in  pain  from  walking  according  to  his 
competitors."*^  Even  his  opposition  begged  their  coaches  to  lift  the  mandatory- 
walking  rule  so  that  Martin  could  ride  a  cart."*^  The  coaches  allowed  Martin  to 
ride  a  golf  cart  while  his  competitors  walked  the  course,  and  the  National 
Collegiate  Athletic  Association  agreed  with  the  waiver."*"*  Upon  winning  the 
1994  NCAA  Championship  with  Stanford,  Martin  pursued  a  career  as  a 
professional  golfer  at  the  highest  level  of  competition,  the  PGA  Tour."*^ 

With  a  chance  to  play  on  the  PGA  Tour,  Martin  decided  to  challenge  the 
PGA  Tour's  rule  requiring  all  competitors  to  walk  the  course  during  all 
tournaments.  Martin  requested  to  use  a  golf  cart  during  a  qualifying  tournament 
and  the  PGA  Tour  denied  his  request."*^    Martin  sought  and  was  granted  a 


37.  PGA  Tour,  Inc.  v.  Martin,  532  U.S.  661  (2001). 

38.  Martin  v.  PGA  Tour,  Inc.,  994  F.  Supp.  1242,  1243  (D.  Or.  1998)  (summary  of  Casey 
Martin's  disorder  and  its  side  effects). 

39.  Id 

40.  Id 

41.  Brief  for  Petitioner  at  4,  Martin  (No.  00-24)  (noting  that  "during  four  days  of 
competition,  a  golfer  typically  must  walk  twenty  to  twenty-five  miles,  often  in  intense  heat,  in 
inclement  weather,  or  over  hilly  terrain.  The  cumulative  fatigue  resulting  from  this  requirement 
may,  and  frequently  does,  affect  golfers'  concentration,  shot-making  ability,  and  overall 
performance."). 

42.  Marcia  Chambers,  The  Martin  Decision,  GOLF  DIGEST,  Aug.  2001 ,  at  60. 

43.  Id 

44.  Martin,  532  U.S.  at  668. 

45.  Id 

46.  Mat 662. 


1 56  INDIANA  LAW  REVIEW  [Vol.  36: 1 49 


preliminary  injunction  allowing  him  to  use  a  golf  cart/^  After  qualifying  for  the 
Nike  Tour,  a  tour  co-sponsored  by  the  PGA  and  governed  by  PGA  rules,  the 
United  States  District  Court  for  Oregon  extended  the  preliminary  injunction  for 
the  first  two  tournaments  on  the  Nike  Tour."*^  By  qualifying  for  this  PGA 
sponsored  tour,  which  complies  with  mandatory- walking  rule  of  the  PGA  Tour, 
Martin  was  able  to  bring  an  ADA-based  suit  against  the  PGA  Tour.'*^  Martin 
contended  that  by  failing  to  provide  him  with  a  cart  while  playing,  the  PGA  Tour 
failed  to  make  its  tournaments  accessible  to  individuals  with  disabilities,  in 
violation  of  the  ADA.^° 

The  PGA  Tour  is  a  non-profit  entity  that  was  formed  in  1968.^'  The  PGA 
Tour  is  made  up  of  three  annual  tours,  the  PGA  Tour,  the  Nike  Tour  (currently 
the  "Buy.com  Tour")  and  the  Senior  PGA  Tour,  which  use  sponsors  and  co- 
sponsors  to  fund  their  various  tournaments  throughout  the  year.  Approximately 
200  golfers  participate  on  the  PGA  Tour,  roughly  1 70  on  the  Buy.com  Tour  and 
about  1 00  on  the  Senior  PGA  Tour.^^  The  PGA  Tour  operates  tournaments  that 
are  mostly  four-day  events  and  played  on  courses  leased  and  operated  by  the 
PGA  Tour.^^  Spectators  are  able  to  purchase  tickets  to  the  tournaments,  but  their 
access  is  strictly  limited.  Only  PGA  Tour  players,  caddies,  and  various  officials 
are  allowed  "between  the  ropes." 

There  are  several  ways  for  competitors  to  gain  entry  into  the  three  PGA- 
sponsored  tours.^"*  If  a  player  wins  three  Buy.com  Tour  events  in  the  same  year, 
or  is  among  the  top  fifteen  money  winners  on  the  Buy.com  Tour,  he  earns  a 
"PGA  Tour  Card."^^  This  simply  means  that  he  has  earned  the  right  to  play  in  all 
the  tournaments  provided  by  the  PGA  Tour.  A  golfer  may  obtain  a  spot  in  an 
individual  tournament  through  "competing  in  'open'  qualifying  rounds,  which  are 
conducted  the  week  before  each  toumament."^^ 

However,  the  most  common  method  of  earning  a  PGA  Tour  Card  is  by 
competing  in  a  three  stage-qualifying  tournament  known  as  "Q-School.""  Any 
member  of  the  public  whose  "golf  handicap"  is  below  a  set  standard  may  enter 
Q-School  by  paying  a  $3000  entry  fee  and  submitting  two  letters  of  reference. ^^ 
This  fee  covers  the  player's  cost  to  play  and  use  of  golf  carts,  which  are 
permitted  during  the  first  two  stages  of  Q-School,  but  have  been  prohibited 


47.  PGA  Tour,  Inc.  v.  Martin,  984  F.  Supp.  1320,  1327  (D.  Or.  1998). 

48.  Parent,  supra  note  20,  at  133. 

49.  Mat  132. 

50.  Id.  at  133. 

51.  iVfar/m,  532  U.S.  at  665. 

52.  Id. 

53.  Id 

54.  Id 

55.  Id 

56.  Id 

57.  Mat 665. 

58.  Id 


2003]  APPLYING  THE  ADA  IN  PROFESSIONAL  SPORTS  1 57 


during  the  final  stage  since  1997.^^  Over  a  thousand  participants  enter  the  first 
stage,  and  only  168  enter  the  final  stage.  From  the  final  stage,  only  a  quarter 
qualify  for  PGA  Tour  membership,  while  those  remaining  enter  the  Buy.com 
Tour.^' 

Everyone  would  like  to  see  someone  with  Martin's  talent  and  persistence 
achieve  success  at  the  highest  level  of  his  profession.^^  Putting  aside  the  human 
dimension  of  the  case,  though,  and  basing  the  argument  solely  on  the  legal  issues, 
the  PGA  Tour  was  correct  in  rejecting  Martin's  request  to  use  a  golf  cart  during 
the  PGA  Tour  events.  Though  Martin  could  drive,  chip,  and  putt  as  well  as  other 
players  on  the  PGA  Tour,  he  lacked  the  ability  to  walk  the  course,  a  prerequisite 
for  all  players  competing  at  golfs  highest  level.^^  Whether  this  ability  is  as 
essential  to  the  game  as  driving,  putting  and  chipping  is  not  the  issue.  Rather,  in 
a  game  where  the  slightest  alteration  to  the  rules  and  a  change  in  the  way  one 
person  is  allowed  to  play  is  made,  the  results  are  magnified  due  to  the 
quantifiable  numbers  used  to  determine  who  wins.  Following  this  logic, 
permitting  Casey  Martin  to  ride  a  golf  cart  during  tournaments  fundamentally 
alters  the  competitive  nature  of  the  game. 

III.  Prior  ADA  Applications  in  Competitive  Settings 

Martin  was  the  first  opportunity  for  the  Supreme  Court  to  interpret  some  of 
the  basic  provisions  of  the  ADA  as  they  apply  to  professional  sports 
organizations.  However,  several  recent  decisions  show  that  courts  must  be 
careful  when  attempting  to  make  a  reasonable  accommodation  for  a  disabled 
athlete  without  fundamentally  altering  an  athletic  competition.^^ 

In  Slaby  v.  Berkshire  the  U.S.  District  Court  of  Maryland  addressed  a  similar 
situation  to  that  of  Casey  Martin.^  Members  of  a  golf  club  brought  suit  when  the 
club  erected  rope  barriers  around  the  golf  course  and  enacted  rules  limiting  carts 
on  the  course.  Mr.  Slaby  was  required  to  use  a  golf  cart  to  play  golf  because  he 
had  three  heart  operations,  was  diabetic,  suffered  from  hypertension,  and  was 
classified  as  permanently  disabled  by  Social  Security."  The  court  held  that  the 
rope  barriers  were  only  a  minor  inconvenience  for  the  golfers  and  did  not  prevent 
the  other  members  from  playing  golf,  which  is  all  that  is  required  under  the  ADA 
in  this  application.^ 

Sandison  v.  Michigan  High  School  Athletic  Ass  *n^''  demonstrates  that  an 


59.  Id. 

60.  Id. 

61 .  Parent,  supra  note  20,  at  1 36  (noting  Martin  took  part  in  Nike's  recent  golf  advertising 
campaign  with  inspirational  messages  such  as  "I  can''  and  ''Anything  is  possible."). 

62.  /c^.  at  145. 

63.  Long,  supra  note  15,  at  1359. 

64.  928  F.  Supp.  613  (D.  Md.  1996). 

65.  Mat 614. 

66.  Mat 615. 

67.  64  F.3d  1026,  1035  (6th  Cir.  1995). 


158  INDIANA  LAW  REVIEW  [Vol.  36:149 


exception  to  an  established  rule  of  a  sport  organization  would  not  only  create  a 
fundamental  alteration  to  the  nature  of  the  event,  but  would  constitute  an  undue 
burden  on  the  governing  body.^*  In  Sandison,  plaintiffs  were  two  disabled  high 
school  students  who  were  two  years  behind  in  school,  leaving  them  nineteen 
years  old  in  their  senior  year.^^  Both  were  prevented  from  competing  in  cross- 
country events  because  the  Michigan  High  School  Athletic  Association 
(MHSAA)  prohibited  any  student  over  nineteen  from  competing/^  The  Sixth 
Circuit  held  that  the  effect  of  allowing  these  students  to  compete  would  create 
both  a  fundamental  alteration  to  the  event  as  well  as  an  undue  administrative 
burden  because  no  one,  including  the  MHSAA,  can  make  the  determination  of 
whether  something  is  unfair  to  other  competitors  without  creating  an  undue 
burden/" 

Finally,  perhaps  the  most  pertinent  language  used  in  recent  case  law 
regarding  the  applicability  of  the  ADA  to  professional  sports  was  in 
Stoutenboroughv.  National  Football  League. ^^  In  Stoutenborough,  a  citizen  with 
a  hearing  impairment  claimed  that  individuals  with  hearing  impairments  were 
effectively  prevented  from  listening  to  blacked-out  football  games  over  the  radio 
and  were  denied  access  to  the  games7^  Though  the  Sixth  Circuit  held  that  there 
was  no  statutory  basis  for  the  claim,  it  provided  important  language  when 
referring  to  Stoutenborough's  Title  III  claim.^"*  The  court  found  that  the  NFL  was 
not  covered  by  the  ADA7^  The  Sixth  Circuit  found  that  although  football  games 
are  played  in  a  place  of  public  accommodation  and  can  be  viewed  on  television 
in  other  places  of  public  accommodation,  these  circumstances  do  not  support  a 
Title  III  claim 7^  Because  Stoutenborough  did  not  involve  the  ADA  being  applied 
directly  to  an  athlete,  its  application  is  limited  with  regard  to  Martin;  however, 
its  language  is  still  persuasive  and  applicable  to  Martin.  Despite  tournaments 
being  played  on  a  place  of  public  accommodation  and  being  viewed  on 
televisions  in  similar  places,  under  Stoutenborough  the  PGA  Tour  should  not  be 
considered  a  place  of  public  accommodation. 

The  most  important  lesson  from  theses  cases  and  Martin  is  the  importance 


68.  Long,  supra  note  15,  at  1363. 

69.  Mat  1362. 

70.  Id. 

71.  Id. 

[I]n  order  to  conclude  that  the  plaintiffs'  age  would  not  provide  them  with  an  unfair 
advantage,  coaches  and  physicians  would  have  to  consider  the  skill  level  of  each 
member  of  an  opposing  team,  the  overall  skill  level  of  each  opposing  team,  and  the  skill 
level  of  each  student  whom  the  older  student  displaced  from  the  team.  Therefore, 
permitting  older  students  to  compete  would  fundamentally  alter  the  nature  of  the 
program  and  constitute  an  undue  administrative  burden. 

72.  59  F.3d  580  (6th  Cir.  1995). 

73.  /c/.  at  582. 

74.  Id 

75.  Id 

76.  Id 


2003]  APPLYING  THE  ADA  IN  PROFESSIONAL  SPORTS  1 59 


of  courts'  awareness  that  the  ADA's  reasonable  accommodation  requirement 
within  the  employment  (Title  I)  and  recreational  settings  must  be  distinguished 
from  competitive  and  professional  sport  settings  in  order  to  effectively  determine 
whether  the  accommodation  is  creating  a  fundamental  alteration  to  the  event. 
Courts  must  recognize  that  although  a  change  in  a  recreational  setting  may  not 
alter  the  nature  of  the  event,  the  same  change  may  distort  the  rules  and  strategies 
of  a  competitive  setting. 

There  may  be  occasions  where  the  ADA  will  be  correctly  applied  to  athletic 
competitions.  The  ADA  was  intended  to  apply  and  will  be  applied  to  remove 
artificial,  man-made  barriers,  such  as  the  lack  of  wheelchair  ramps  or  arbitrary 
physical  requirements.  Martin's  condition  that  made  him  unable  to  play, 
however,  was  his  disease,  not  neutrally  applied  rules.  The  application  of  the 
ADA  in  this  sense  is  analogous  to  equal  protection  law.  In  Washington  v.  Davis, 
the  Supreme  Court  stated  "we  have  not  held  that  a  law,  neutral  on  its  face  and 
serving  ends  otherwise  within  the  power  of  government  to  pursue,  is  invalid 
under  the  Equal  Protection  Clause  simply  because  it  may  affect  a  greater 
proportion  of  one  race  than  of  another."^^  Discriminatory  impact  alone,  without 
proof  of  invidious  intent,  raises  no  constitutional  issue.^*  The  law  must  and  does 
recognize  that  not  all  participants  are  similarly  situated.  In  fact,  that  is  the  very 
premise  of  competition. 

IV.  Supreme  Court's  Decision 

The  PGA  Tour  did  not  argue  that  Casey  Martin  was  not  a  person  with  a 
disability  covered  by  the  ADA.^^  Rather,  its  initial  argument  was  that  the  PGA 
Tour  does  not  constitute  a  "place[]  of  public  accommodation"  as  defmed  under 
Title  III  of  the  ADA.^°  Secondly,  the  PGA  Tour  argued  that  walking  the  golf 
course  is  essential  to  the  game  of  golf  at  the  PGA  Tour  level  and  to  allow  Martin 
to  ride  a  golf  cart  would  fundamentally  alter  the  game  at  that  level.  ^' 

This  is  the  first  time  the  Supreme  Court  has  been  asked  to  apply  the  ADA  to 
a  professional  sports  setting.  There  is  little  precedent  as  to  not  only  how  the 
Court  should  apply  the  ADA  to  Martin,  but  perhaps  more  importantly,  as  to  what 
role,  if  any,  the  Court  should  play  in  determining  whether  riding  a  golf  cart 
would  be  a  fundamental  alteration. 

Although  the  Supreme  Court  had  not  dealt  with  athletic  competitors  and  the 
ADA  prior  to  Martin,  the  Supreme  Court  had  indicated  a  desire  to  interpret  the 
ADA  in  a  very  broad  manner  in  prior  decisions.^^  In  Bragdon  v.  Abbott,  a  dentist 


77.  426  U.S.  229,  242  (1976). 

78.  Id. 

79.  Tim  A.  Baker,  The  Law  and  the  Links:  How  Casey  Martin  Prevailed  in  His  Legal  Battles 
with  the  PGA  Tour,  RES  GESTAE,  Sept.,  2001,  at  17. 

80.  Id 

81.  Id 

82.  Id 


160  INDIANA  LAW  REVIEW  [Vol.  36: 149 


refused  to  treat  a  patient  who  was  infected  with  HIV.*^  The  Court  concluded  that 
HIV  was  an  impairment  from  the  moment  of  infection  that  substantially  limited 
respondent's  ability  to  reproduce,  which  was  a  major  life  activity.^  The  Court 
held  that  a  person  diagnosed  with  HIV  is  a  disabled  person  under  the  ADA  even 
though  the  patient's  infection  had  not  yet  progressed  to  the  symptomatic  phase.*^ 

Further,  the  Court  unanimously  held  in  Pennsylvania  Department  of 
Corrections  v.  Yeskey  that  state  prisons  and  prisoners  are  included  within  the 
coverage  of  the  ADA.*^  In  Yeskey,  respondent  prisoner  was  eligible  for  the 
Pennsylvania  Motivational  Boot  Camp  under  a  Pennsylvania  statute.^^  However, 
because  petitioner  Department  of  Corrections  refused  his  admission  to  the 
program  due  to  his  hypertension,  respondent  brought  action  challenging 
petitioner's  denial  of  his  access  to  the  boot  camp  as  a  violation  of  the  ADA.** 
Petitioner  claimed  that  the  ADA  did  not  govern  it  or  the  program.*^  The  Court 
held  that  state  prisons  were  clearly  subject  to  the  ADA,  and  that  the  boot  camp 
was  an  ADA-protected  voluntary  program  by  virtue  of  its  definition  in  the 
Pennsylvania  statute.^ 

Despite  the  trend  of  a  broad  reading  of  the  ADA,  the  Supreme  Court  has 
never  applied  the  ADA  to  an  organization  that  is,  arguably,  a  private  entity. 
Additionally,  the  Court  has  never  delved  into  an  area  where  any  modification  of 
the  rules  would  fundamentally  alter  the  landscape  of  a  sporting  event  allowing 
one  person  to  change  the  playing  field  and  putting  fellow  competitors  at  an 
inherent  disadvantage  that  directly  affects  their  livelihood. 

A.  Brief  Summary  of  the  Majority  Opinion 

The  Supreme  Court  decided  two  distinct  issues  in  holding  that  the  PGA  Tour 
was  required  to  allow  Casey  Martin  to  ride  a  golf  cart:  "1)  whether  the  ADA 
protects  access  to  professional  golf  tournaments  by  a  qualified  entrant  with  a 
disability;  and  2)  whether  a  disabled  contestant  may  be  denied  the  use  of  a  golf 
cart  because  it  would  'fundamentally  alter  the  nature'  of  the  tournaments. . .  ."^' 

The  PGA  Tour  first  argued  that  because  "Title  III  [of  the  ADA]  is  concerned 
with  discrimination  against  'clients  and  customers'  seeking  to  obtain  'goods  and 
services'  at  places  of  public  accommodation,"  Martin  could  not  bring  a  Title  III 
claim  because  he  was  not  such  a  client  or  customer  of  the  PGA  Tour.^^  Title  III 
states  "the  term  'individual  or  class  of  individuals'  refers  to  the  clients  or 


83.  524  U.S.  624(1998). 

84.  Id. 

85.  Id 

86.  524  U.S.  206(1998). 

87.  Mat 208. 

88.  Id 

89.  Id 

90.  Mat 210. 

91 .  Baker,  supra  note  79  (quoting  PGA  Tour,  Inc.,  v.  Martin,  532  U.S.  661, 664-65  (2001)). 

92.  Id  (citing  Martin,  532  U.S.  at  678). 


2003]  APPLYING  THE  ADA  IN  PROFESSIONAL  SPORTS  161 


customers  of  the  covered  public  accommodation  that  enters  into  the  contractual, 
licensing  or  other  arrangement."^^  The  majority  held,  however,  that  [the  PGA 
Tour]  offers  the  public  the  privilege  of  both  watching  the  golf  competition  and 
competing  in  it.  "Although  the  latter  is  more  difficult  and  more  expensive  to 
obtain  than  the  former,  it  is  nonetheless  a  privilege  that  the  PGA  Tour  makes 
available  to  members  of  the  general  public."^'* 

The  second  issue  decided  by  the  majority  was  whether  the  use  of  a  golf  cart 
fundamentally  alters  the  nature  of  professional  golf  tournaments.  The  majority 
concluded  that  the  essence  of  golf  has  always  been  "shot-making."^^  The 
majority  rejected  testimony  from  the  district  court  that  stressed  the  history  and 
tradition  of  walking  the  course  in  the  highest  level  of  golf  competition.^^  The 
majority  ruled  that  the  fatigue  factor  involved  was  not  a  large  enough  factor  to 
create  a  fundamental  alteration  of  the  sport.^^  Finding  that  "shot-making"  was 
the  essence  of  golf,  the  Court  found  that  allowing  Martin  to  use  a  cart  would  not 
fundamentally  alter  the  game  of  golf. 

B.  Brief  Summary  of  the  Dissent 

In  his  dissent,  Justice  Scalia,  joined  by  Justice  Thomas,  made  clear  that  he 
did  not  necessarily  believe  that  Casey  Martin  should  not  be  able  to  ride  a  golf 
cart.^^  According  to  Justice  Scalia,  the  legal  principles  on  which  the  majority 
decided  the  case  were  flawed.  To  begin,  the  majority's  opinion,  in  Scalia's  view, 
was  not  based  on  the  legal  principles,  but  instead  were  based  on  the  Court's 
morals  and  compassion  for  the  disabled  golfer.^ 

According  to  Justice  Scalia,  "The  [Americans  with  Disabilities  Act]  seeks 
to  assure  that  a  disabled  person's  disability  will  not  deny  him  equal  access  to 
(among  other  things)  competitive  sporting  events — not  that  his  disability  will  not 
deny  him  an  equal  chance  to  win  competitive  sporting  events."^°°  Everyone 
should  have  the  right  to  not  only  be  able  to  play  golf  on  public  golf  courses,  but 
everyone  should  have  the  right  to  try  to  compete  at  the  sport's  highest  level.  In 
Justice  Scalia's  view,  the  law  does  not  permit  someone  to  have  equal  opportunity 


93.  42U.S.C.  12182(b)(l)(A)(iv). 

94.  Martin,  532  U.S.  at  680. 

95.  Mat 683. 

96.  Mat 685. 

97.  Mat 683. 

98.  Jd  at  704  ("My  belief  that  today 's  judgment  is  clearly  in  error  should  not  be  mistaken  for 
a  belief  that  the  PGA  TOUR  clearly  ought  not  allow  respondent  to  use  a  golf  cart.  That  is  a  close 
question,  on  which  even  those  who  compete  in  the  PGA  TOUR  are  apparently  divided,  but  it  is  a 
different  question  from  the  one  before  the  Court.")  (Scalia,  J.,  dissenting). 

99.  Id.  at  691  ("[T]oday's  opinion  exercises  a  benevolent  compassion  that  the  law  does  not 
place  within  our  power  to  impose.")  (Scalia,  J.,  dissenting);  id.  at  704  ("I  have  no  doubt  Congress 
did  not  authorize  misty-eyed  judicial  supervision  of  such  a  revolution.")  (Scalia,  J.,  dissenting). 

100.   Mat 703. 


1 62  INDIANA  LAW  REVIEW  [Vol.  36: 1 49 


to  win  at  that  level  and,  in  essence,  level  the  playing  field. '°'  Competition,  at  its 
core,  is  created  by  people  of  different  abilities.  To  take  away  that  inherent 
competition  and  level  the  playing  field,  Justice  Scalia  concluded,  is  to  destroy  the 
essence  of  golf  and  all  of  competitive  athletics. '*^^ 

V.  ANALYSIS  OF  Supreme  Court's  Opfnion 

Casey  Martin's  story  of  overcoming  adversity  is  inspirational  for  all  people 
with  or  without  a  disability,  regardless  of  whether  one  is  an  athlete. 
Unfortunately,  the  Supreme  Court's  broad  interpretation  of  the  ADA  in  Martin 
has  expanded  the  intent  of  the  ADA,  which  was  to  ensure  that  disabled 
Americans  receive  equal  access  to  everyday  activities.  While  pursuing  golf 
simply  as  recreation  or  at  the  highest  level  as  a  professional  is  a  right  that  ought 
to  be  guaranteed  to  all  citizens,  playing  on  the  PGA  Tour  is  not.  Rather,  it  is  a 
privilege  that  ought  to  be  granted  only  to  those  who  meet  all  of  the  necessary 
qualifications,  and  the  private  governing  body  ought  to  have  the  authority  to 
determine  what  those  necessary  qualifications  are.'^^  As  stated  in  the  brief  of  the 
PGA  Tour: 

Individual  competitors  may  or  may  not  be  able  to  compensate  for  those 
physical  disadvantages,  but,  if  they  cannot,  the  resulting  "inequality"  is 
not  discrimination  in  any  meaningful  sense  (including  the  sense 
contemplated  by  Title  III),  but  simply  a  reflection  of  the  varying 
challenges  faced,  to  a  greater  or  lesser  degree,  by  all  athletes  in  elite 
athletic  competitions.  Those  competitions  reward  superior  physical 
performance,  without  adjusting  the  standards  from  competitor  to 
competitor  to  allow  for  more  equal  results.'^"* 

The  Court  did  try  to  narrow  the  scope  of  its  ruling,  stating  that  its  holding 
pertained  specifically  to  Martin  using  a  golf  cart  on  the  PGA  Tour,  and  not  the 
general  use  of  carts  on  the  PGA  Tour.'°^  Regardless  of  the  Court's  intent,  their 
application  of  the  ADA  shows  that  "few  human  activities  are  currently  beyond 


10  L   Id.  ("[T]he  very  nature  of  competitive  sport  is  the  measurement,  by  uniform  rules,  of 
unevenly  distributed  excellence.")  (Scalia,  J.,  dissenting). 

102.  Id.  ("[B]y  giving  one  or  another  player  exemption  from  a  rule  that  emphasizes  his 
particular  weakness  ...  is  to  destroy  the  game.")  (Scalia,  J.,  dissenting). 

1 03 .  Brief  for  the  ATP  Tour,  Inc.  and  the  Ladies  Professional  Golf  Ass'n,  Amici  Curiae  at  3, 
Martin,  (No.  00-24),  noting, 

A  competition  judicially  managed  to  eliminate  this  or  that  "unfairness"  may  appear  more 
"fair"  in  the  view  of  a  court  because  less  skilled  or  less  able-bodied  individuals  may  be 
able  to  compete,  but  it  is  not  the  same  athletic  competition  envisioned  by  the  creators 
and  fans  of  the  game.  The  fundamental  fairness  of  the  game — i.e.,  that  all  the  rules 
apply  equally  to  all  competitors — has  changed,  2ind  we  no  longer  have  a  competition 
that  tests  who  is  the  "best"  at  that  particular  game. 

1 04.  Brief  for  Petitioner  at  33-34,  Martin  (No.  00-24). 

105.  Leverenz,  supra  note  5. 


2003]  APPLYING  THE  ADA  IN  PROFESSIONAL  SPORTS  1 63 


scope  of  either  legislative  regulation  or  judicial  incursion."'^ 

Three  issues  arise  out  of  the  Martin  case.  The  first  issue,  and  arguably  the 
most  overlooked  aspect  of  the  decision,  was  the  holding  by  the  Supreme  Court 
that  the  PGA  Tour  was  not  a  private  club  for  purposes  of  the  ADA  and  therefore 
not  immune  from  its  coverage. '°^  The  second  issue,  the  Court's  conclusion 
requiring  the  PGA  to  accommodate  Martin  by  allowing  him  to  ride  in  a  golf  cart 
because  it  would  not  alter  the  fundamental  nature  of  the  competition,  drew  wide 
praise  and  criticism. '°^  Golfing  traditionalists  and  historians  criticized  the 
Supreme  Court's  rulings  while  the  general  public  found  the  requirement  to  be  the 
proper  application  of  the  ADA.  Finally,  the  issue  left  open  by  the  majority  is 
what  role,  if  any,  the  governing  body  should  have  in  determining  fundamental 
alterations  in  competitive  settings,  including  the  PGA  Tour  and  other 
professional  organizations.  Did  the  Supreme  Court  go  beyond  its  reach  and 
decide  an  issue  better  left  to  the  sport's  governing  body? 

A.  Critique  of  Court 's  Reasonable  Accommodation  Interpretation 

The  most  common  debate  stemming  from  the  Martin  decision  was  the 
Court's  determination  that  allowing  the  use  of  a  cart  was  not  a  fundamental 
alteration  of  the  sport.  Many  golf  and  sport  enthusiasts  at  all  levels  of 
competition  were  upset  at  the  determination  that  an  organization  designed  to 
establish  the  rules  of  a  game,  an  organization  that  has  had  that  sole  authority 
since  its  inception,  could  be  required  by  the  judicial  system  to  alter  those  rules. 
On  the  other  hand,  many  were  inspired  by  Martin's  persistence  and  agreed  that 
Martin  was  a  perfect  example  of  how  the  ADA  can  serve  its  original  purpose. 

The  issue  of  whether  the  PGA  Tour  was  a  place  of  public  accommodation  or 
a  private  entity  is  a  question  that  the  majority  superficially  addressed.  The  issue 
of  whether  riding  a  golf  cart  is  a  fundamental  alteration  will  always  be  debated. 
However,  the  issue  of  whether  the  PGA  Tour  should  even  be  held  to  the  ADA 
standards  is,  arguably,  the  tougher  issue  for  the  majority  to  defend. 

The  Supreme  Court  established  what  constituted  a  "private  club"  in  Moose 
Lodge  No.  107  V.  Irvis.^^  There,  the  Supreme  Court  created  a  list  of  factors  to 
determine  whether  a  club  is  private:  1)  whether  the  club  has  well-defined 
requirements  for  membership;  2)  whether  the  club  conducts  all  of  its  activities 
in  a  privately  owned  building  or  grounds;  3)  whether  it  is  not  publicly  funded; 
and  4)  whether  only  members  and  guests  are  permitted  in  the  club  and  may 
become  a  member  upon  invitation.' '°  Under  these  general  guidelines  and  another 


106.  Id. 

107.  Long,  supra  note  15,  at  1338. 

108.  Id. 

1 09.  Todd  A.  Hentges,  Driving  in  the  Fairway  Incurs  No  Penalty:  Martin  v.  PGA  Tour,  Inc. 
and  the  Discriminatory  Boundaries  in  the  Americans  with  Disabilities  Act.,  18  LAW  &  INEQ.  131, 
1 58  (2000)  (citing  Moose  Lodge  No.  107  v.  Irvis,  407  U.S.  163  (1965)). 

1 10.  Moose  Lodge  No.  107,  407  U.S.  at  171. 


164  INDIANA  LAW  REVIEW  [Vol.  36:149 


private  membership  test  set  forth  by  the  Ninth  Circuit/"  the  PGA  Tour  could 
quite  easily  be  considered  a  private  club.  The  PGA  Tour  provides  no  services  to 
the  public  and  membership  to  the  PGA  Tour  is  based  solely  on  the  golf  score  a 
player  shoots."^  In  the  majority  opinion,  Justice  Stevens  focused  on  the  Q- 
School  factor,  which  allows  any  member  of  the  public  to  enter  Q-School  if  they 
pay  $3000  and  have  two  letters  of  reference."^  By  allowing  the  public  access  to 
Q-School,  the  PGA  Tour  does  provide  access  to  the  public  that  classifies  the 
PGA  Tour  as  a  place  of  public  accommodation. 

This  reasoning  by  the  majority  does  not  put  the  issue  of  Q-School  in  the 
proper  perspective.  The  majority  later  found  that  the  essence  of  the  game  of  golf 
is  shot-making,  and  that  there  is  restricted  access  to  the  playing  areas  during 
competition.''"*  The  use  of  Q-School  to  gain  entry  to  the  PGA  Tour  is  analogous 
to  professional  baseball  teams  holding  open  tryouts  to  the  public.  These  tryouts 
occur  throughout  the  year  and  in  various  parts  of  the  country.  As  long  as  an 
applicant  falls  within  the  age  range  that  the  specific  team  sets  forth,  anyone  may 
try  out  to  play  professional  baseball.  Is  this  the  customary  way  to  gain  access  to 
professional  baseball?  Absolutely  not.  Just  as  in  golf,  there  are  several  other 
ways  to  make  a  team  and  be  considered  a  professional.  Under  this  law, 
professional  baseball  should  be  held  to  the  same  standards,  though  it  is  not. 
Therefore,  the  public's  participation  in  the  Q-School  hardly  establishes  the  PGA 
Tour  as  a  place  of  public  accommodation.  The  access  to  the  playing  areas  only 
by  the  competitors  should  play  a  more  important  factor  in  determining  what 
constitutes  a  place  of  public  accommodation. 

To  be  clear,  the  PGA  Tour  did  not  claim  that  it  was  a  private  club  altogether 
exempt  from  Title  Ill's  coverage."^  The  PGA  Tour  admitted  that  its  tournaments 
take  place  at  places  of  public  accommodation.''^  This  argument  is  worthy  of 
elaboration,  though  it  was  not  addressed  by  either  party.  Instead,  the  issue 
presented  by  the  PGA  Tour  was  that  "the  competing  golfers  are  not  members  of 
the  class  protected  by  Title  III.  . .  .""^  In  supporting  its  position  that  it  is  not  a 
public  accommodation  under  the  ADA,  the  PGA  Tour  argued  that  Title  III  is 
concerned  with  discrimination  against  "clients  and  customers"  seeking  to  obtain 
"goods  and  services"  at  places  of  public  accommodation,"*  and  Title  I  applies 


111.  Hentges,  supra  note  1 09,  at  1 58  (citing  Richard  v.  Friar's  Club,  1 24  F.3d  212,217  (9th 
Cir.  1997)  (defining  the  test  of  a  private  club  as  whether  the  organization:  1)  is  a  club  in  the 
ordinary  sense  of  the  word,  2)  is  private,  and  3)  requires  meaningful  conditions  of  limited 
membership)). 

112.  Id.  (noting  that  membership  in  the  PGA  Tour  is  highly  selective  and  based  on  criteria  that 
is  clearly  quantifiable  and  does  not  allow  for  any  type  of  discrimination). 

113.  PGA  Tour,  Inc.  v.  Martin,  532  U.S.  661,  680  (2001). 

114.  /i/.  at  683. 

115.  Mat 677. 

116.  Id. 

117.  Mat 678. 

118.  42U.S.C.  12182(b)(l)(A)(iv). 


2003]  APPLYING  THE  ADA  IN  PROFESSIONAL  SPORTS  1 65 


to  the  people  who  work  at  these  public  accommodations.*  '^  "Title  111  is  intended 
to  confer  enforceable  rights  on  clients  and  customers  of  places  of  public 
accommodation,  not  on  persons  working  to  provide  those  clients  and  customers 
with  the  relevant  goods  and  services." '^^  The  majority  held,  however,  that  the 
PGA  Tour's  argument  fails  in  this  respect  because  it  offers  the  public  the 
privilege  of  both  watching  the  golf  competition  and  competing  in  it.'^' 

This  reasoning  is  flawed  for  a  number  of  reasons.  First,  the  ADA  should  not 
be  applicable  "inside  the  ropes"  because  the  paying  public  is  not  allowed  in  any 
playing  area.  There  is  exclusivity  between  the  clients  and  customers  and  the 
players. '^^  The  customers,  as  the  public,  are  forced  to  stay  "outside  the  ropes," 
clearly  distinguishing  clients  and  customers  from  professional  golfers  such  as 
Casey  Martin. '^^  The  PGA  Tour  distinguished  areas  of  play  from  areas  outside 
the  boundaries  of  play  "by  noting  that  in  a  typical  ballpark,  the  stands  must  be 
accessible  to  the  disabled  because  this  is  where  the  public  is  allowed.  On  the 
contrary  .  .  .  dugouts  are  not  subject  to  the  ADA  because  the  public  is  not 
allowed  there."''" 

"Golf  courses  are  specifically  mentioned  in  Title  III  because  disabled 
individuals  should  be  provided  with  the  opportunity  to  engage  in  the  recreation 
of  their  choice."''^  The  ADA  was  enacted  to  provide  the  Casey  Martins  of  the 
world  the  opportunity  to  play  golf  at  courses  throughout  the  country.''^   The 


119.  Id. 

120.  Brief  for  Petitioner  at  1 1,  Martin  (No.  00-24)  (noting  that  respondent  is  not  in  the 
category  of  customer,  *'[l]ike  a  concert  hall  performer,  or  actor  in  a  theatre  production,  respondent 
is  helping  to  supply  the  entertainment  at  Tour  events,  not  seeking  to  enjoy  it."). 

121 .  Martin,  532  U.S.  at  680  ("Although  the  latter  is  more  difficult  and  more  expensive  to 
obtain  than  the  former,  it  is  nonetheless  a  privilege  that  petitioner  makes  available  to  members  of 
the  general  public"). 

1 22.  Brief  for  the  ATP  Tour,  Inc.  and  the  Ladies  Professional  Golf  Ass'n,  Amici  Curiae  at  4, 
Martin  (No.  00-24),  noting. 

Simply  because  the  sections  of  the  course  set  aside  for  the  gallery  are  open  to  the  public 
does  not  render  the  competitive  area  where  the  public  is  not  permitted  (such  as  the 
playing  area  of  an  LPGA  golf  tournament,  or  the  field  of  a  professional  baseball  league, 
or  the  tennis  courts  at  the  National  Tennis  Center  during  the  U.S.  Open,  or  a  bob-sled 
track  during  the  Olympics)  subject  to  the  public  accommodations  provisions  of  Title  III. 

123.  Martin,  532  U.S.  at  693  (As  Justice  Scalia pointed  out  in  his  dissent,  Title  III  covers  only 
clients  and  customers  of  places  of  public  accommodation.  First,  "[t]he  persons  'recreat[ing]'  at  a 
'zoo'  are  presumably  covered  [by  the  ADA],  but  the  animal  handlers  bringing  in  the  latest  panda 
are  not.").  Id.  Justice  Scalia  continued,  "To  be  sure,  professional  ballplayers  participate  in  the 
games,  and  use  the  ball  fields,  but  no  one  in  his  right  mind  would  think  that  they  are  customers  of 
the  American  League  or  of  Yankee  Stadium.  They  are  themselves  the  entertainment  that  the 
customers  pay  to  watch.  And  professional  golfers  are  no  different."  Id.  at  695. 

1 24.  Weinberg,  supra  note  34  (quoting  Martin  v.  PGA  Tour,  Inc.,  984  F.  Supp.  1 320,  1 326-7 
(D.  Or.  1998)). 

125.  Parent,  supra  note  20,  at  137. 

126.  Martin,  532  U.S.  at  699.  "If  a  shoe  store  wishes  to  sell  shoes  only  in  pairs  it  may;  and 


166  INDIANA  LAW  REVIEW  [Vol.  36:149 


ADA  does  not  provide  the  opportunity  to  compete  at  the  highest  level  of  a  sport, 
governed  by  a  private  entity,  so  long  as  he  can  fulfill  the  majority  of  the 
requirements  needed  to  abide  by  the  rules.  The  ADA  only  states  that  places  of 
public  accommodation  include,  but  are  not  limited  to,  "a  gymnasium,  health  spa, 
bowling  alley,  golf  course,  or  other  places  of  exercise  or  recreation."'^^  Similarly 
in  Slaby,  the  court  found  that  the  golf  course  was  not  denying  Slaby  the  right  to 
exercise  or  recreate.  He  was  allowed  on  the  golf  course  as  much  as  he  wanted; 
the  club  was  not  infringing  on  his  right  to  exercise  or  recreate  at  the  club.'^^ 

Casey  Martin  was  not  using  the  golf  course  to  exercise  or  recreate;  rather,  he 
was  using  the  golf  course  to  compete  at  the  sport's  highest  level  and  earn  a 
living.'^^  Just  because  "golf  courses"  are  specifically  listed  in  the  ADA,  the 
Court  should  not  automatically  hold  that  a  golf  course  is  a  place  of  public 
accommodation.'^*'  Instead,  it  should  consider  the  purpose  of  use  and  the  nature 
of  the  competition.  The  PGA  Tour  did  not  deny  Martin  the  right  to  exercise  or 
recreate  on  the  golf  course.  It  did  deny  him  the  right  to  compete  at  the  highest 
level,  which  does  not  violate  the  ADA. 

The  PGA  Tour  is  not  itself  a  golf  course  and  so  is  not  among  the  items  listed 
as  public  accommodations  under  the  ADA.  The  PGA  Tour  is  a  membership 
organization  that  sponsors  events  open  only  to  those  who  are  qualified  to 
participate.  "Other  than  ensuring  that  particular  courses  used  by  the  PGA  Tour 
meet  its  strict  standards  and  regulations  during  the  event,  the  Tour  cares  little 
about  how  those  courses  operate  during  the  rest  of  the  year.'"^'  The  ADA  also 
requires  an  individualized  inquiry  to  determine  whether  a  specific 
accommodation  for  a  specific  person's  disability  would  be  reasonable  under  the 
specific  circumstances,  without  fundamentally  altering  the  nature  of  the  sport. '^^ 
The  ADA'S  requirement  that  each  individual's  case  be  considered  on  its  own 
facts  and  not  governed  by  blanket  rules  was  a  factor  in  the  Court's  holding  that 
the  PGA  Tour  must  comply  with  the  ADA.  After  finding  that  the  ADA  covered 


if  a  golf  tour  (or  a  golf  course)  wishes  to  provide  only  walk-around  golf,  it  may.  The  PGA  TOUR 
cannot  deny  respondent  access  to  that  game  because  of  his  disability,  but  it  need  not  provide  him 
a  game  different  (whether  in  its  essentials  or  in  its  details)  from  that  offered  to  everyone  else." 

127.  42U.S.C.  §  12181  (7)(L). 

128.  928  F.  Supp.  613,  615  (D.  Md.  1996). 

129.  Martin,  532  U.S.  at  695.  Justice  Scalia  pointed  out  in  his  dissent,  Casey  Martin  "did  not 
seek  to  'exercise'  or  'recreate'  at  the  PGA  TOUR  events;  he  sought  to  make  money  (which  is  why 
he  is  called  ?l  professional  golfer)." 

1 30.  Brief  for  the  ATP  Tour,  Inc.  and  the  Ladies  Professional  Golf  Ass'n,  Amici  Curiae  at  1 3, 
Martin,  (No.  00-24),  noting, 

notwithstanding  that  they  may  be  specifically  identified  on  the  ADA's  list  of  public 
accommodations,  places  that  are  purely  private  in  nature  are  not  regulated  places  of 
public  accommodation.  For  example,  although  a  "library"  is  included  on  the  list,  a 
private  library  in  an  individual  home  is  not  a  place  of  public  accommodation  because 
it  is  not  a  "place  of  public  display." 

131.  Parent,  supra  note  20,  at  1 37. 

132.  Baker,  supra  note  79  (citing  42  U.S.C.  §  12182(b)(2)(A)(ii)). 


2003]  APPLYING  THE  ADA  IN  PROFESSIONAL  SPORTS  1 67 


the  PGA  Tour  and  that  walking  the  course  was  not  fundamental  to  the  game,  the 
Court  examined  Martin's  personal  circumstances.'" 

The  Court  criticized  the  PGA  Tour  for  failing  to  look  at  Martin's  individual 
circumstances.'^"*  However,  because  the  PGA  Tour  originally  believed  it  was  not 
covered  by  the  ADA,  there  was  no  need  to  evaluate  the  specific  circumstances 
of  Casey  Martin.  There  was  no  reason  compelling  the  PGA  Tour  to  do  so  under 
these  circumstances,  since  it  considered  itself  a  private  entity  under  the  ADA 
standards. '^^  To  criticize  the  PGA  Tour  for  overlooking  Casey  Martin  is  to 
overlook  the  valid  defense  raised  by  the  Tour,  exempting  it  from  the 
requirements  of  the  ADA. 

B.  Critique  of  Court 's  Fundamental  Alteration  Interpretation 

As  the  first  case  to  apply  the  ADA  to  professional  sports,  ""Martin  had  the 
opportunity  to  address  the  shortcomings  of  the  statute  in  such  a  setting  and  to 
help  define  the  contours  of  what  ^reasonable  accommodation'  means  in  a 
situation  that  produces  clear  winners  and  losers  based  on  quantifiable 
performance."'^^ 

The  most  apparent  flaw  in  the  majority's  decision  in  Martin  was  the  Court's 
failure  to  fully  address  the  inherent  difference  between  recreational  settings,  and 
the  case  presented  here — ^the  highest  level  of  competition — a  professional  sports 
organization.  This  distinction  turns  on  the  fact  that  a  fundamental  alteration  is 
much  more  apparent  and  can  be  determined  by  a  court  more  easily  when 
presented  with  a  general  place  of  recreation,  or  a  place  intended  for  exercise,  as 
the  ADA  intended.'"  However,  in  the  case  at  bar  and  other  cases  involving  high 
levels  of  competition,  a  court  must  be  intimately  familiar  with  the  nuances  of  the 
sport  and  must  be  sensitive  to  any  slight  change  in  the  rules  that  will  alter  the 
landscape  of  a  level  playing  field  for  professional  players,  among  whom  there  is 
so  little  disparity  in  performance.'^*  Simply  put,  the  Court  is  ill-equipped  to 
decide  what  constitutes  a  "fundamental  alteration." 


133.  Mar^m,  532  U.S.  at  690. 

134.  Id 

135.  Brief  for  the  ATP  Tour,  Inc.  and  the  Ladies  Professional  Golf  Ass'n,  Amici  Curiae  at  9, 
10,  Martin,  (No.  00-24),  noting  the  Ninth  Circuit's  failure 

to  appreciate  fully  the  essential  characteristics  of  athletic  competition  is  nowhere  more 
obvious  than  in  its  conclusion  that  an  "individualized  inquiry"  is  necessary  to  determine, 
on  a  competitor-by-competitor  basis,  whether  a  relaxation  or  modification  of  a  rule  of 
the  game  for  a  disabled  competitor  would  fundamentally  alter  the  game,  or  give  a 
particular  disabled  competitor  an  advantage. 

1 36.  Long,  supra  note  1 5,  at  1 339. 

137.  42U.S.C.  §  12181(7)(L). 

138.  Martin,  532  U.S.  at  699.  "[R]ules  are  the  rules.  They  are  (as  in  all  games)  entirely 
arbitrary,  and  there  is  no  basis  on  which  anyone — not  even  the  Supreme  Court  of  the  United  States- 
-can  pronounce  one  or  another  of  them  to  be  'nonessential'  if  the  rule  maker  (here  the  PGA  TOUR) 
deems  it  to  be  essential."  (Scalia,  J.,  dissenting). 


168  INDIANA  LAW  REVIEW  [Vol.  36:149 


The  slightest  unfairness  could  have  "major  quantifiable  results  for  other 
competitors  that  are  lacking  in  noncompetitive  settings."'^^  The  ADA  requires 
the  Court,  not  the  PGA  Tour,  to  determine  the  fatigue  of  Casey  Martin  and 
compare  that  to  the  "normal"  fatigue  of  walking  the  course.  For  reasons  of 
institutional  incompetence,  however,  the  Court  is  not  the  proper  referee  for  this 
call;  instead,  it  should  defer  to  the  PGA  to  determine  what  is  a  fundamental 
alteration  to  this  private  and  specialized  enterprise. '"^^ 

The  essential  question  in  determining  what  constitutes  a  fundamental 
alteration  in  golf  depends  on  the  definition  of  professional  golf.  This  deceptively 
simple  question  can  be  debated  among  golfers  just  as  passionately  as  it  was 
before  the  Supreme  Court.  Professional  golf  consists  of  detail-specific  rules  that 
one  must  learn  before  he  can  simply  go  out  and  tee  off  on  the  PGA  Tour.  From 
rules  regulating  the  number  of  clubs  a  player  may  have  in  a  golf  bag  to  rules 
stating  who  may  carry  the  bag,  professional  golf  is  more  than  just  "shot-making." 
A  player  must  be  familiar  with  the  rules,  strategic  in  his  club  selection,  and 
mentally  prepared  just  to  be  able  to  play  on  the  PGA  Tour.  Regardless  of  one's 
interpretation  and  definition  of  professional  golf,  the  sport  differentiates  winners 
and  losers  based  on  a  specific  number — ^the  number  of  shots  an  individual  takes 
throughout  the  tournament — ^which  is  a  culmination  of  stamina,  weight,  weather, 
swing,  equipment,  and  of  course,  skill.  Recreational  golf,  on  the  other  hand,  is 
simply  playing  golf  for  enjoyment  and  trying  to  improve  your  game.  Whether  a 
player  is  riding  a  cart  or  walking,  the  bottom  line  is  pleasure,  not  worrying  about 
conforming  with  specific  rules  and  competing  for  money.  Recreational  golf  not 
only  differs  in  degree  from  professional  golf,  but  also  in  kind,  where  the  many 
nuances  at  the  professional  level  ultimately  determine  the  final  results. 

C   Critique  of  the  Judiciary 's  Role  in  Determining  What  Constitutes  a 

Fundamental  Alteration 

Unless  the  ruling  body  who  determines  what  is  a  fundamental  alteration  has 
the  ability  to  differentiate  a  professional  competitive  setting,  where  a  very  slight 
change  will  result  in  a  fundamental  alteration,  from  a  pure  recreational  setting, 
where  it  would  take  a  more  substantial  change  to  constitute  a  fundamental 
alteration,  simply  applying  the  ADA  to  professional  settings  will  be  a 
misapplication  of  this  far-reaching  statute.  Accordingly,  the  PGA  Tour  should 
be  its  own  governing  body. 

The  PGA  considers  professional  golf  a  test  of  not  only  ball  striking  but  also 
competition  where  the  element  of  physical  stress  and  fatigue  are  added  with  the 
addition  of  the  walking  rule.**'  The  PGA  believed  "the  overall  purpose  of  Title 


1 39.  Long,  supra  note  1 5,  at  1 378. 

1 40.  Id.  (noting  that  the  difficulty  in  dealing  with  the  reasonable  accommodation  requirement 
of  the  ADA  in  competitive  settings  is  that  "the  ADA  essentially  requires  a  court  to  measure  an 
unquantifiable  factor  'the  level  of  Casey  Martin's  fatigue  vs.  the  fatigue  of  able-bodied  golfers'  in 
a  program  based  on  quantification  (professional  tournament  golf)")- 

141 .  Brief  for  Petitioner  at  4,  Martin  (No.  00-24),  noting,  "[tjhe  extent  of  such  fatigue  is 


2003]  APPLYING  THE  ADA  IN  PROFESSIONAL  SPORTS  1 69 


III  .  .  .  was  to  insure  that  *public'  spaces  are  accessible  to  the  disabled — not  to 
regulate  the  entirely  private  areas  and  activities  to  which  the  public  does  not  have 
access."*"*^  By  suing  for  a  waiver  of  a  rule  that  applies  to  every  other  athlete, 
Martin  is  trying  to  force  the  private  entity  to  change  its  competitions  into  a 
different  kind  of  competition,  one  which  will  fundamentally  alter  the  play  and 
possibly  the  outcome. 

The  majority  looked  to  the  three  sets  of  rules  that  generally  govern  golf.  The 
"Rules  of  Golf,"  the  "hard  card,"  and  the  "Notices  for  Competitors"  all  set  out 
general  guidelines  for  professional  golfers. ^'^^  The  Court  relied  on  the  fact  that 
the  rules  never  expressly  prohibit  the  use  of  golf  carts  during  competition.  The 
majority  stated,  "There  is  nothing  in  the  Rules  of  Golf  that  either  forbids  the  use 
of  carts,  or  penalizes  a  player  for  using  a  cart."'"*"* 

More  than  any  other  point,  this  finding  by  the  Court  demonstrates  its 
unfamiliarity  with  golf  in  particular  and  competitive  sports  in  general, 
underscoring  the  need  for  an  expert  sports  body  to  properly  determine  what 
constitutes  a  fundamental  alteration.  Within  all  sports,  and  especially  at  the 
highest  level  of  competition,  there  are  rules  and  understandings  derived  from  the 
nature  of  play  and  the  essence  of  competition  created,  in  arguably  an  arbitrary 
manner,  by  a  governing  body.'"*^  "And  that  of  course  is  part  of  the  majesty  of 
sport;  it  is  anything  the  designers  of  the  rules  want  it  to  be,  autonomous  and, 
within  its  realm,  sovereign.  As  such,  each  variation  heralds  a  new  form  of 
competition,  a  new  game.""*^  Nowhere  in  the  rules  of  baseball,  for  example,  does 
it  state  that  a  catcher  cannot  sit  on  a  stool  in  front  of  the  umpire  at  times  when  his 
knees  are  hurting.  ^"^^  Nor  do  the  rules  of  football  prohibit  a  player  from  riding  a 
golf  cart  on  kickoff  returns.  Just  because  an  activity  is  not  prohibited  by  the  rule 
book  does  not  make  it  permitted.    In  such  gray  areas,  only  an  expertise  in  and 


impossible  to  quantify  but  will  vary  from  golfer  to  golfer,  depending  upon  factors  like  weather 
conditions,  temperature,  the  terrain  of  the  golf  course,  different  golfers'  psychological  ability  to 
cope  with  stress,  the  golfers'  age  and  extent  of  physical  conditioning,  and  so  forth." 

1 42.  Brief  for  the  ATP  Tour,  Inc.  and  the  Ladies  Professional  Golf  Ass'n,  Amici  Curiae  at  10, 
Martin  (No.  00-24). 

143.  Martin,  532  U.S.  at  666-67. 

144.  /i/.  at  685. 

145.  Brief  for  the  ATP  Tour,  Inc.  and  the  Ladies  Professional  Golf  Ass'n,  Amici  Curiae  at  5, 
Martin  (No.  00-24),  noting, 

every  competition  or  "game"  is,  in  the  end,  nothing  but  a  set  of  manufactured  rules,  with 
each  rule  contributing  to,  and  therefore  defining,  the  nature  of  the  competition.  Who  can 
recall,  or  even  know,  why  bases  are  ninety  feet  apart?  Who  can  explain  why  a  tennis 
player  who  touches  the  net  during  play  automatically  loses  the  point?  These  are  simply 
the  rules,  and  the  point,  of  course,  is  that  every  rule  of  athletic  competition  is,  by 
definition,  fundamental  to  that  game,  whatever  that  game  might  be. 

1 46.  Brief  for  the  ATP  Tour,  Inc.  and  the  Ladies  Professional  Golf  Ass'n,  Amici  Curiae  at  6, 
Martin  (No.  00-24),  noting,  "Indeed,  the  rules  of  athletic  competition  are  simply  designed  to 
provide  a  standard  against  which  to  distinguish  among  competitors." 

147.  Leverenz,  5wprfl  note  5. 


170  INDIANA  LAW  REVIEW  [Vol.  36:149 


sensitivity  to  the  nuances  of  the  sport  empowers  the  decision-maker  to  consider 
whether  the  play  has  been  fundamentally  altered. 

The  argument  that  golf  carts  are  used  by  all  public  courses  throughout  the 
country  by  the  average  golfer  shows  that  walking  is  not  a  fundamental  part  of  the 
game  is  simply  not  a  correct  analysis.  When  the  same  rule  is  applied  to 
professionals,  it  changes  the  entire  landscape.  The  players  are  competing  for  a 
living  and  any  fundamental  change  will  make  the  playing  field  uneven.  The 
nature  of  golf  played  by  the  average  fan  who  is  out  for  a  nice  stroll  with  friends 
on  the  public  course  is  much  different  than  the  game  that  is  played  by  the  game's 
elite,  competing  on  the  finest  courses  in  the  world  for  millions  of  dollars  before 
countless  spectators.  This  version  of  golf  is  played  by  professionals  who  have 
worked  all  their  lives  to  play  the  game  as  a  means  to  make  money.  Golf  is  a 
game  that  decides  who  wins  based  on  concrete  numbers  -  the  competitor  with  the 
lowest  score  wins.  To  alter  the  rules  for  an  individual,  in  a  game  that  is  decided 
by  the  slightest  of  margins,  inherently  puts  other  competitors  at  a  disadvantage, 
constituting  a  fundamental  alteration. 

Finally,  the  holding  in  Sandison  applies  to  the  Martin  case  as  well.  In  order 
to  determine  the  fatigue  factor  and  the  way  it  applies  to  walking  the  course 
during  tournaments  would  also  constitute  an  undue  burden  on  the  PGA  Tour.  In 
Sandison,  the  Sixth  Circuit  held  it  would  create  an  undue  burden  to  require  the 
MHSAA  to  compare  the  Plaintiffs  effect  on  competition  to  each  competitor  as 
well  as  to  each  competing  team.*"*^  Applying  that  standard  to  this  case,  it  would 
require  the  PGA  Tour  to  compare  the  fatigue  factor  of  Martin  to  each  of  the  other 
competitors  and  determine  whether  allowing  Martin  to  ride  a  cart  would  put 
another  competitor  at  a  disadvantage.  Would  a  chronic  back  problem  warrant  an 
exemption  from  the  rule  or  disadvantage  other  players  by  justify  ing  use  of  a  cart? 
Each  one  of  these  cases  would  require  the  PGA  Tour  to  evaluate  how  that 
disability  effects  every  other  competitor.  That  is  simply  an  undue  burden  and  not 
required  under  the  ADA. 

VI.  Possible  Implications  on  Professional  Sports 

According  to  the  PGA  Tour,  all  competitors  are  required  to  walk  during  the 
four-day  tournaments.  The  exhaustion  that  results  from  walking  is  intended  to 
be  part  of  the  physical  demands  of  the  game.  If  a  golfer  does  not  experience  that 
taxing  part  of  the  tournament  others  are  forced  to  endure,  he  has  gained  a 
physical  advantage.  This  advantage  will  lead  to  better  shots  and  lower  scores. 
Every  aspect  of  the  game  that  may  not  seem  important  to  the  recreational  golfer 
may  be  essential  to  professional  play  and  can  only  be  determined  by  those  who 
play  at  that  elite  level. 

It  was  clear  from  the  beginning  of  Casey  Martin's  case  against  the  PGA  Tour 
in  1 998  that  other  professional  sports  organizations  were  concerned  that  a  ruling 
in  favor  of  Martin  would  be  detrimental  to  their  organizations  as  well.''*^  What 


148.  64F.3datl035. 

1 49.  Brief  for  the  ATP  Tour,  Inc.  and  the  Ladies  Professional  Golf  Ass'n,  Amici  Curiae  at  1 , 


2003]  APPLYING  THE  ADA  IN  PROFESSIONAL  SPORTS  1 7 1 


impact  the  Martin  decision  will  have  on  the  Judicial  landscape  and  as  a  precedent 
for  allowing  the  judiciary  to  control  fundamental  rules  of  a  sport  is  still  largely 
unclear.'^^  Although  persistence  and  overcoming  adversity  is  admirable  and 
everyone  deserves  the  opportunity  to  play  golf,  playing  golf  on  a  professional 
tour  is  a  privilege  only  an  elite  group  can  achieve. 

"The  true  challenge  courts  face  in  addressing  the  ADA  in  competitive 
situations  is  .  .  .  attempting  to  balance  the  fundamental  notion  of  fair  play  in 
competition  with  the  ADA's  fundamental  goal  of  full  participation.'"^'  There  is 
a  fine  line  the  courts  must  not  cross.  "However  laudable  it  might  be  for  courts  to 
create  new  sporting  competitions,  with  constantly  adapting  rules  so  that  disabled 
individuals  might  be  able  to  compete  more  effectively,  doing  so  is  clearly  beyond 
the  intended  scope  of  the  ADA."'^^  While  trying  to  achieve  the  goals  of  the 
ADA,  they  should  not  alter  fundamental  aspects  of  a  sport  and  not  put  other 
competitors  at  an  inherent  disadvantage  by  trying  to  give  more  than  equal  access 
to  an  individual. 

To  prevent  future  cases  where  the  ADA  places  an  individual  at  a  competitive 
advantage  over  others,  all  parties  have  new  responsibilities  as  a  result  of  this 
decision.  First,  the  judicial  system  should  differentiate  the  application  of  the 
reasonable  accommodation  requirement  between  the  traditional  employment 
sphere  and  competitive  athletic  settings. '^^  Secondly,  organizations  must  make 
their  rules  clear  and  consistent  at  all  levels  of  play. '^'^  As  shown  in  this  case, 
courts  may  interpret  different  rules  for  different  levels  of  play  as  non-essential 
to  the  sport.  Although  these  strategies  may  not  seem  like  the  best  way  of 
promoting  athletics,  it  appears  this  is  the  only  way  for  a  governing  authority  to 
protect  itself  from  judicial  interference.'^^ 


Martin  (No.  00-24),  noting  that 

The  ATP  Tour  and  the  LPGA  are  similar  to  the  PGA  TOUR  as  that  organization  is  the 
governing  body  in  men's  professional  golf  in  the  United  States.  The  ATP  Tour  and  the 
LPGA  have  an  interest  in  how  the  Americans  With  Disabilities  Act  (the  "ADA")  is 
applied  to  professional  sports  competitions. 

1 50.  Parent,  supra  note  20,  at  145.  "There  are  indications,  however,  that  it  has  helped  foster 
a  sentiment  within  society  that  becoming  a  professional  is  a  right  to  those  who  work  hard,  rather 
than  a  privilege  offered  to  those  who  possess  all  of  the  necessary  qualifications." 

151.  Long,  supra  note  1 5,  at  1 377. 

1 52.  Brief  for  the  ATP  Tour,  Inc.  and  the  Ladies  Professional  Golf  Ass'n,  Amici  Curiae  at  11 , 
Martin  (No.  00-24). 

153.  Long,  supra  note  1 5,  at  1 380.  "When  one  leaves  the  sphere  and  enters  more  competitive 
settings — settings  in  which  there  are  clearly  defined  winners  and  losers  and  in  which  an  artificial 
advantage  for  one  participant  necessarily  means  a  disadvantage  for  others — issues  of  fundamental 
fairness  become  more  troubling."  Id. 

154.  PGA  Tour,  Inc.  v.  Martin,  532  U.S.  661,  705  (2001).  "The  lesson  the  PGA  Tour  and 
other  sports  organizations  should  take  from  this  case  is  to  make  sure  that  the  same  written  rules  are 
set  forth  for  all  levels  of  play,  and  never  voluntarily  to  grant  modifications.  The  second  lesson  is 
to  end  open  tryouts."  (Scalia,  J.,  dissenting). 

155.  Id.   "I  doubt  that,  in  the  long  run,  even  disabled  athletes  will  be  well  served  by  these 


172  INDIANA  LAW  REVIEW  [Vol.  36:149 


Many  anticipate  the  opening  of  the  "floodgates"  as  a  direct  result  of  this 
decision  by  the  Supreme  Court.  Athletes  from  all  sports  with  various  disabilities 
may  attempt  to  change  the  rules  of  competitive  settings  and  thereby  change  the 
nature  of  competitive  sports.  That  should  not  be  a  concern  as  a  result  of  Martin. 
First,  the  ADA  specifically  defines  "disability"  and  limits  what  courts  may 
consider  as  a  disability  under  the  statute. ^^^  The  court  looks  at  "the  nature  and 
severity  of  the  impairment,  the  duration  or  expected  duration  of  the  impairment, 
and  the  permanent  or  long  term  impact,  or  the  expected  permanent  or  long  term 
impact  of  or  resulting  from  the  impairment"  to  determine  whether  a  given 
disability  restricts  the  manner  in  which  a  person  can  participate  in  a  major  life 
activity. '^^  Minor  disabilities  will  not  be  recognized  by  the  ADA,  essentially 
eliminating  any  risk  of  a  litigation  frenzy.  After  all,  the  PGA  Tour  never  argued 
that  Martin  was  not  "disabled"  under  the  ADA.  The  real  issue  was  whether  the 
PGA  Tour  should  be  held  to  the  ADA  standards  as  a  specialized,  private  entity. 

A  recent  decision  by  the  Supreme  Court,  despite  falling  under  Title  I  of  the 
ADA,  may  narrow  the  reach  of  the  ADA  and  prevent  the  floodgates  of  litigation 
from  opening  as  a  result  of  Martin.  In  January,  2002,  the  Supreme  Court  held  in 
Toyota  Motor  Manufacturing,  Kentucky,  Inc.  v.  Williams^^^  thsiV'the  [ADA]  only 
covers  impairments  that  affect  a  person's  daily  life  and  does  not  apply  to 
conditions  that  prevent  a  worker  from  performing  a  specific  job-related  task."'^^ 
Ella  Williams  stated  that  she  was  fired  from  a  Toyota  plant  in  Kentucky  because 
a  painful  repetitive- stress  injury  to  her  arms  and  hands  prevented  her  from  doing 
her  job:  sponging  500  cars  a  day.  The  Court  stated  that  "[m]erely  having  an 
impairment  does  not  make  one  disabled  for  purposes  of  the  ADA."'^^ 

The  Supreme  Court  had  to  decide  what  an  employee  must  prove  to 
demonstrate  that  she  is  substantially  limited  in  performing  manual  tasks.  The 
Court  found  that  it  is  not  enough  for  an  employee  to  show  that  she  cannot 
perform  the  manual  tasks  her  job  requires.  "To  be  substantially  limited  in  the 
specific  major  life  activity  of  performing  manual  tasks, ...  an  individual  must 
have  an  impairment  that  prevents  or  severely  restricts  the  individual  from  doing 
activities  that  are  of  central  importance  to  most  people's  lives.  The  impairment's 
impact  must  also  be  permanent  or  long-term."^^'  The  Court  pointed  out  that  some 
jobs  require  unique  manual  tasks  that  are  not  necessarily  an  important  part  of 
most  people's  lives  and  to  say  that  people  who  cannot  perform  these  tasks  are 


incentives  that  the  Court  has  created."  (Scalia,  J.,  dissenting). 

1 56.  Weinberg,  supra  note  34,  at  773  (citing  42  U.S.C.  §  12102(2)  (defining  "disability"  as 
"(A)  a  physical  or  mental  impairment  that  substantially  limits  one  or  more  of  the  major  life  activities 
of  such  individual;  (B)  a  record  of  such  impairment;  or  (C)  being  regarded  as  having  such  an 
impairment.")). 

157.  Id.  (citing  28  CF.R.  §  36.104(1)). 

158.  2002  WL  15402  (U.S.  2002). 

1 59.  Edward  Walsh,  Supreme  Court  Narrows  Reach  of  Disability  Law,  WASH.  POST,  Jan.  8, 
2002,  available  at  http://www.washingtonpost.com/wp-dyn/articIes/A13467-2002Jan8.html. 

160.  Toyota,  2002  WL  15402,  at  ^8. 

161.  Id.dt*\. 


2003]  APPLYING  THE  ADA  IN  PROFESSIONAL  SPORTS  1 73 


disabled  would  expand  the  reach  of  the  ADA  beyond  what  Congress  intended 
when  it  passed  the  law.'^^ 

Toyota  focused  on  what  constitutes  a  disability  under  the  ADA.  Martin,  on 
the  other  hand,  never  addressed  whether  Martin  was  disabled  under  the  statute 
and  the  issue  was  never  challenged  by  the  PGA  Tour.  While  the  Martin  decision 
did  not  influence  Toyota,  the  ruling  in  Toyota  will  severely  impact  the  potential 
lawsuits  from  various  athletes  requesting  a  waiver  of  a  rule  under  the  ADA.  The 
initial  danger  of  the  floodgates  opening  to  more  lawsuits  within  athletic 
competitions  that  many  people  expected  after  Martin  should  no  longer  be  a  major 
concern  after  Toyota.  Unlike  Martin,  athletes  will  first  have  to  prove  to  the  court 
that  the  ADA  covers  their  disability  before  they  attempt  to  argue  the  issues 
presented  in  Martin. 

Potential  implications  resulting  from  Martin,  therefore,  should  not  be  the  fear 
of  more  golfers  wanting  permission  to  ride  carts  during  competition.  Instead,  the 
most  dangerous  implication  of  the  Martin  decision  is  the  role  the  judiciary  plays 
in  deciding  whether  a  waiver  of  a  sports  rule  would  fundamentally  alter  the 
nature  of  the  competition.  If  nothing  more,  Martin  demonstrates  how  this 
expansive  power  of  the  Court  to  decide  what  is  fundamental  to  a  sport  is  beyond 
the  Court's  judicial  expertise  and  should  be  beyond  its  reach  as  well.'^^  Does  a 
Plaintiff  have  a  disability  under  the  ADA?  Is  a  private  entity  considered  a  place 
of  public  accommodation  under  Title  III,  and,  if  so,  what  are  its  duties  under  the 
various  provisions  of  the  ADA?  These  are  all  questions  that  only  a  court  can 
decide.  It  must,  however,  give  ample  deference  to  a  governing  body  on  what 
constitutes  a  fundamental  alteration  in  this  self-contained  universe  of  sports.'^ 


162.  Id 

1 63.  Brief  for  the  ATP  Tour,  Inc.  and  the  Ladies  Professional  Golf  Ass'n,  Amici  Curiae  at  7, 
8,  Martin  (No.  00-24),  noting, 

only  those  charged  by  tradition  or  agreement  with  enforcing  the  rules  of  the  game  may 
amend  them,  else  the  game  itself  is  fundamentally  changed.  Since  the  game  is  but  a 
collection  of  its  rules,  it  is,  in  the  end,  only  what  those  in  charge  say  it  is.  The  "keepers" 
of  the  game  must  therefore  have  ultimate  control  over  what  does  or  does  not  affect  the 
nature  of  the  competition,  much  the  same  way  an  umpire  or  referee  is,  by  tradition  and 
agreement,  the  final  arbiter  of  an  on-field  dispute.  It  is  not  so  much  whether  the  runner 
stealing  a  base  was  "safe  at  second,"  or  whether  the  tennis  ball  hit  the  line,  as  whether 
the  umpire  thought  it  so.  In  other  words,  the  rule-making  is  itself  part  of  the  game,  and 
its  impact  cannot  be  measured  by  objective  criteria  (or  even,  in  the  case  of  the  stolen 
base  or  the  long  forehand,  by  absolute  truth).  It  is  only  the  convention  that  all  will 
follow  the  same  rules,  determined  by  the  same  governing  body,  that  gives  meaning  to 
the  game. 

164.  PGA  Tour,  Inc.  v.  Martin,  532  U.S.  661,  689  (2001).  In  asserting  that  the  condition  of 
walking  is  a  substantive  rule  of  competition  and  that  waiving  it  as  to  any  individual  would 
fundzunentally  alter  the  nature  of  the  competition,  the  PGA  Tour's  evidence  included  the  testimony 
of  the  greatest  golfers  in  history.  Arnold  Palmer,  Jack  Nicklaus,  and  Ken  Venturi  explained  that 
fatigue  can  be  a  critical  factor  in  a  tournament,  particularly  on  the  last  day  when  psychological 
pressure  is  at  a  maximum.  They  explained  to  the  Court  that  allowing  one  person  to  use  a  cart  might 


1 74  INDIANA  LAW  REVIEW  [Vol.  36: 1 49 


The  power  the  Court  gave  itself  in  making  this  decision  is  a  dangerous  trend  for 
all  professional  organizations,  which  in  turn  will  affect  the  rules  of  the  sport  at 
all  levels  of  competition. 

Conclusion 

The  ADA  is  an  essential  statute  that,  when  applied  correctly,  can  provide 
opportunities  to  disabled  individuals  and  not  put  other  employees  or  competitors 
at  an  inherent  disadvantage.  However,  as  Tiger  Woods,  the  world's  greatest 
golfer,  observed,  the  slightest  change  can  have  a  large  impact  in  a  game  where 
small  changes  are  magnified. '^^  Courts  must  distinguish  between  recreational 
applications  of  the  ADA  and  those  associated  with  professional  and  competitive 
settings. 

The  ADA,  for  all  its  good  intentions,  should  have  only  limited  applicability 
to  professional  sports.  As  long  as  the  ADA  does  not  fundamentally  alter  the 
nature  of  the  event — a  question  to  be  decided  in  the  first  instance  by  the 
governing  body  that  has  the  expertise  and  intimate  perspective  on  the  sport — ^the 
ADA  is  needed  to  provide  equal  access.  It  is  essential,  however,  that  when 
applying  the  ADA  to  professional  sports,  courts  understand  that 

[t]he  long  consistent  history  of  requiring  adherence  to  uniform  rules, 
both  in  golf  and  in  other  sports,  reflects  a  shared  understanding  of  what 
high-level  athletic  competition  is  all  about:  a  test  of  physical  proficiency 
for  different  competitors  under  identical  rules.  It  follows,  therefore,  that 
any  waiver  of  a  substantive  rule  for  a  given  competitor  is  out  of  keeping 
with  the  fundamental  premise  of  professional  sports.*^ 

It  is  when  equal  access  turns  into  an  equal  opportunity  to  win  that  the  ADA  is 
misapplied  and  the  spirit  of  competition  is  crushed.  Without  fair  and  equal  rules, 
the  once-level  playing  field  of  competition  is  altered,  to  the  detriment  of  all 
players,  no  matter  their  ability. 


give  a  player  an  advantage  over  other  players  who  must  walk. 

1 65.  Woods,  supra  note  1 . 

1 66.  Brief  for  Petitioner  at  34,  Martin  (No.  00-24). 


Permitted  Use  of  Patented  Inventions  in  the 

United  States:  Why  Prescription  Drugs 

Do  Not  Merit  Compulsory  Licensing 


KiRBY  W.  Lee* 


Introduction 

On  October  16,  2001,  in  the  wake  of  several  mail  anthrax  cases.  Attorney 
General  John  Ashcroft  and  U.S.  Senator  Charles  Schumer  (D-NY)  urged  the 
federal  government  to  sanction  the  generic  manufacture  of  an  antibiotic  to 
combat  the  disease,  despite  existing  patent  rights  on  the  drug.'  Bayer  AG 
manufactures  ciprofloxacin,  known  commonly  as  Cipro,  and  has  a  patent  on  the 
drug.  "One  [sixty]-day  supply  of  Cipro  costs  just  under  $700  in  the  United 
States,  while  a  [sixty]-day  supply  of  generic  ciprofloxacin — ^not  allowed  until 

2003  in  the  United  States — costs  about  $20  in  other  countries "^  Although 

Bayer  pledged  to  increase  production  of  this  antibiotic  threefold  in  response  to 
the  recent  threats  of  bioterrorism,  some  public  officials  still  insisted  on  more 
action.^  Senator  Schumer  initiated  talks  with  three  generic  drug  manufacturers 
over  the  possible  expedited  approval  of  generic  ciprofloxacin,  believing  that  the 
federal  government  does  have  the  power  to  override  Bayer's  patent  rights."*  A 
spokesman  for  the  Department  of  Health  and  Human  Services,  however, 
hesitated  at  such  dramatic  action,  stating  "[w]e  have  to  be  careful  about  patent 
protections — ^there's  a  balance  there."^ 

In  August  2001,  the  Brazilian  government  announced  plans  to  disregard 
patent  rights  granted  to  the  Swiss  pharmaceutical  company  Roche  for  an  AIDS 
drug.^  Viracept,  the  brand  name  for  nelfmavir,  is  an  expensive  drug  often  used 
in  AIDS  cocktail  treatments.  Brazil  purportedly  spends  $88  million  annually  on 
Viracept  alone,  which  accounted  for  over  a  quarter  of  the  country's  AIDS 
program  budget.'  Under  mounting  pressure  to  lower  the  cost  of  the  drug  and 


*  J.D.  Candidate,  2003,  Indiana  University  School  of  Law— Indianapolis;  B.S.,  1997, 
Purdue  University,  West  Lafayette,  Indiana.  The  author  is  a  patent  agent  at  Eli  Lilly  and  Company. 
The  views  expressed  herein  are  those  of  the  author  and  not  necessarily  those  of  Eli  Lilly  and 
Company.  The  author  would  like  to  thank  Mr.  Robert  A.  Armitage,  Senior  Vice  President  and 
General  Counsel,  Eli  Lilly  and  Company,  for  his  invaluable  guidance. 

1 .  See  N.  Y.  's  Schumer  Wants  Anthrax  Drug  for  Government  Use  Despite  Patent, 
CNNmoney,  Oct.  16,  2001,  available  at  http://money.cnn.com/2001/10/16/news/generic_cipro/ 
[hereinafter  Schumer  Wants  Anthrax  Drug]. 

2.  Julie  Rovner  &  April  Fulton,  Senate  Panel  Approves  Bill  On  Generic  Drug  Availability^ 
N AT'L  J.  's  CongressDaily,  Oct.  1 8, 200 1 ,  available  at  LEXIS,  News  Group  File,  http://lexis.com. 

3.  See  id 

4.  See  Schumer  Wants  Anthrax  Drug,  supra  note  1 . 

5.  Id 

6.  See  Brazil  Plans  to  Ignore  Patent  on  AIDS  Drug,  THE  GLOBE  AND  MAIL,  Aug.  23, 200 1 , 
available  at  LEXIS,  News  File,  http://lexis.com. 

7.  See  Anthony  Faiola,  Brazil  to  Ignore  Patent  on  AIDS  Drug,  WASH.  POST,  Aug.  23 ,  200 1 , 
at  A20. 


1 76  INDIANA  LAW  REVIEW  [Vol.  36:175 


increased  criticism  from  AIDS  activists  worldwide,  Roche  eventually  reached  an 
agreement  with  Brazil  to  lower  the  price  to  roughly  thirty  percent  of  the  price  in 
the  United  States.*  Merck  &  Company,  a  U.S.  pharmaceutical  company,  also 
reduced  the  price  on  two  of  its  AIDS  drugs,  indinavir  and  efavirenz,  by 
approximately  sixty  percent  in  anticipation  of  similar  pressure.^ 

Brazil  is  not  the  only  country  to  exhibit  such  a  dismissive  attitude  toward 
international  protection  of  intellectual  property,  particularly  with  respect  to 
prescription  AIDS  drugs.  Previously,  South  Africa  faced  the  same  situation  with 
its  own  national  AIDS  crisis,  in  which  approximately  70,000  HIV-positive 
children  are  bom  each  year.'°  Pleas  to  pharmaceutical  companies  created  a  stir 
among  intellectual  property  authorities  and  human  rights  activists  alike." 

Due  at  least  in  part  to  events  in  Brazil  and  South  Africa,  U.S.  Representative 
Sherrod  Brown  (D-OH)  introduced  The  Affordable  Prescription  Drugs  and 
Medical  Inventions  Act.'^  This  legislation  seeks  to  amend  existing  patent  laws 
and  allow  compulsory  licenses  potentially  applicable  to  "any  invention  relating 
to  health  care."'^  That  is,  the  govemment  would  permit  the  use  of  patented 
inventions,  forcing  those  patent  holders  to  either  proactive ly  negotiate  licenses 
or  claim  reparations  after  the  permitted  use. 

Although  the  United  States  has  avoided  similar  proposals  in  the  past  and 
public  health  emergencies  have  been  thought  to  be  solely  third- world  concerns, 
the  recent  anthrax  scare  has  revived  compulsory  licensing  arguments  with 
renewed  vigor  and  urgency.  On  November  6,  2001,  Representative  Brown 
appropriately  reintroduced  his  compulsory  licensing  proposal  under  a  different 
title,  The  Public  Health  Emergency  Medicines  Act."^  Deriving  many  of  its 
provisions  from  H.R.  1708,  this  new  bill  marks  an  attempt  to  capitalize  on  the 
threat  of  bioterrorism  and  feared  public  health  disaster  to  usher  in  a  compulsory 
licensing  scheme  within  the  U.S.  patent  system.  Public  sentiment  regarding  the 
rising  costs  of  health  care  brings  prescription  drug  prices,  pharmaceutical  patent 
rights,  and  compulsory  licensing  to  the  forefront  of  medical,  ethical,  and 
economic  debate. 

This  Note  argues  that  compulsory  licensing  for  prescription  drugs  under 
these  proposed  bills  is  not  warranted.  It  further  discusses  the  rationales  that 
support  compulsory  licensing  and  how  they  are  already  addressed  by  other 
legislative  and  judicial  means.  Part  I  of  this  Note  provides  an  overview  of  United 
States  patent  law  and  the  transactional  interests  of  government  and  inventors  in 


8.  Jennifer  L.  Rich,  Business/Financial  Desk,  Roche  Reaches  Accord  on  Drug  with  Brazil, 
N.Y.  Times,  Sept.  1,2001. 

9.  See  id. 

10.    Bamaby  Phillips,  South  Africa  Sued  Over  Aids  Drugs,  BBC  News,  Mar.  1 5,  2001,  at 
http://news.bbc.co.uk/hi/english/world/africa/newsid_l  502000/1 5025 1  S.stm. 
n.    See  id. 

1 2.  H.R.  1 708, 1 07th  Cong.  (2001 ).  Representative  Brown  introduced  an  earlier  version  of 
this  bill,  entitled  the  Affordable  Prescription  Drugs  Act,  H.R.  2927,  106th  Cong.  (1999). 

13.  H.R.  1708 

14.  H.R.  3235,  107th  Cong.  (2001). 


2003]  COMPULSORY  PATENT  LICENSING  1 77 


a  patent  system.  Part  II  explores  the  general  arguments  regarding  compulsory 
licensing  within  the  United  States  patent  system.  Part  III  examines  de  facto 
compulsory  licensing  in  the  United  States,  including  existing  statutory  exceptions 
such  as  the  Drug  Price  Competition  and  Patent  Term  Restoration  Act  of  1984'^ 
and  government  use  of  intellectual  property.  Further,  Part  III  will  discuss  judicial 
actions  that,  under  special  circumstances,  essentially  result  in  a  compulsory 
licensing  arrangement.  Part  IV  compares  U.S.  legislation  with  current  existing 
international  treaties  and  agreements  governing  patented  inventions,  especially 
provisions  therein  that  allow  compulsory  licensing.  Finally,  Part  V  addresses  the 
motivation  behind  both  The  Affordable  Prescription  Drugs  and  Medical 
Inventions  Act  and  the  Public  Health  Emergency  Medicines  Act,  analyzes  the 
arguments  for  compulsory  licensing  of  pharmaceutical  drugs,  and  discusses  why 
these  reasons  fail  in  light  of  other  currently  available  avenues  for  the  permitted 
use  of  patented  inventions. 

I.  Transactional  Interests  of  Government  and  Inventors  in 
United  States  Patent  Law 

United  States  patent  law  finds  its  roots  in  the  Constitution,  which  empowers 
Congress  "[t]o  promote  the  Progress  of  Science  and  useful  Arts,  by  securing  for 
limited  Times  to  Authors  and  Inventors  the  exclusive  Right  to  their  respective 
Writings  and  Discoveries.'"^  When  the  U.S.  government  issues  a  patent,  it 
includes  "a  grant . . .  of  the  right  to  exclude  others  from  making,  using,  offering 
for  sale,  or  selling  the  invention  throughout  the  United  States  or  importing  the 
invention  into  the  United  States  .  .  .  ."'^  In  order  to  stimulate  technological 
growth  and  advances,  the  government  essentially  grants  a  limited  period  of 
exclusivity  to  inventors  who  bring  forth  and  disclose  their  work.*^  Government 
provides  this  as  an  incentive  for  inventors  to  invest  time,  resources,  and  money 
into  the  innovation  process  that  is  often  costly.  In  theory,  the  public  benefits 
from  the  introduction  of  this  new  and  useful  invention;  inventors,  on  the  other 
hand,  benefit  from  a  period  of  exclusivity  during  which  they  can  seek  to  recoup 
their  investments  and  profit  from  their  rights. 

A.  Contract  Theory  of  Patent  Law 

Many  judges  and  scholars  have  regarded  the  modern  U.S.  patent  systems  as 
a  type  of  contract  between  government  and  the  inventor.'^  The  inventor  presents 


15.  Pub.  L.  No.  98-4 1 7, 98  Stat.  1 585  (codified  at  as  amended  in  scattered  sections  of  1 5, 2 1 , 
28,  and  35  U.S.C). 

16.  U.S.  Const,  art.  I,  §  8,  cl.  8. 

17.  35  U.S.C.  §  154(a)(1)  (2000). 

1 8.  See  Lisa  A.  Huestis,  Patent  and  Antitrust  Law:  The  Second  Circuit  Strives  Toward 
Accommodation,  SCM  Corporation  v.  Xerox  Corporation,  48  BROOK.  L.  Rev.  767,  773  (1982). 

1 9.  See  Kewanee  Oil  Co.  v.  Bicron  Corp.,  416  U.S.  470, 489  (1974)  (stating  that  a  patent  is 
a  social  contract  or  bargain,  granting  exclusive  rights  in  return  for  public  disclosure);  see  also  In 
re  Bayer,  568  F.2d  1357  (C.C.P.A.  1978);  In  re  Tenney,  254  F.2d  619,  623  (C.C.P.A.  1958) 


1 78  INDIANA  LAW  REVIEW  [Vol.  36: 1 75 


to  the  public  something  that  is  useful,^^  novel,^'  and  unobvious;^^  this  public 
disclosure  is  his  consideration  in  the  bargain.  In  return,  the  government  provides 
consideration  of  exclusive  rights  to  the  claimed  invention  for  a  limited  time.^^ 
Under  this  construction,  invoking  theories  of  contract  law,  courts  have  found 
patents  invalid  on  the  grounds  that  inventors  did  not  contribute  to  the  public 
domain  anything  that  was  not  already  known,  thus  amounting  to  a  failure  of 
consideration. ^"^  As  the  inventor's  part  of  the  bargain  is  unsatisfied,  courts 
effectively  revoke  the  government's  consideration  and  are  unwilling  to  enjoin  an 
allegedly  infringing  party  based  on  the  fatally  deficient  contract.^^  On  the  other 
hand,  compulsory  licensing  has  been  viewed  as  a  failure  of  consideration  on  the 
part  of  the  government.  So,  even  though  the  inventor  satisfied  the  bargain  by 
publicly  divulging  his  invention,  the  government's  consideration  of  patent 
exclusivity  is  revoked.^^ 

Impliedly,  however,  a  patent  holder  is  under  no  obligation  to  make,  use,  sell, 
or  import  this  invention.  Neither  the  Constitution  nor  statutory  law  explicitly 
requires  that  the  patentee  make  use  of  the  invention  or  ensure  that  the  invention 
is  used  to  its  fullest  potential.  However,  some  scholars  argue  that  utilization  and 
practical  application  of  the  invention  is  also  part  of  the  patent  bargain,  so  that 
non-use  would  be  a  failure  of  the  inventor's  consideration  in  the  patent  bargain. 
They  argue  that  strict  enforcement  of  the  patent  right  to  exclude,  in  cases  of  non- 
use,  does  not  truly  further  the  spirit  of  the  Patent  Clause  in  the  promotion  of  the 
useful  arts. 

B.  Is  Non-use  a  Failure  of  Consideration? 

Early  in  the  Twentieth  Century,  the  U.S.  Supreme  Court  recognized  the 
rights  of  patentees  to  exclude  others  even  if  the  patentee  himself  was  not  using 
the  invention. ^^  At  the  time,  circuit  courts  were  split  over  the  effect  of  patent 
non-use  with  regard  to  enforcement  of  a  patentee's  exclusive  rights.^^  Some 
circuits  insisted  that  use  of  the  patented  invention  was  an  incumbent 
responsibility  of  the  inventor;  if  an  inventor  did  not  use  the  invention,  other 
parties  were  free  to  practice  the  invention  without  threat  of  an  action  for  patent 


(stating  that  an  inventor  must  give  to  the  public  something  it  does  not  already  have  in  consideration 
for  exclusive  patent  rights).  Donald  S.  Chisum,  Patents  (1997). 

20.  ^ge  35  U.S.C.  §  101(2000). 

21.  See  id.  §102. 

22.  See  id.  §  103. 

23 .  Patents  are  generally  subject  to  a  grant  of  rights  extending  for  a  period  of  twenty  years 
from  first  filing  a  patent  application.  See  id.  §  154(a)(l)-(2). 

24.  See  Tenney,  254  F,2d  at  622-24. 

25.  Id 

26.  See  id  at  622-23. 

27.  Continental  Paper  Bag  Co.  v.  Eastern  Paper  Bag  Co.,  210  U.S.  405  (1908). 

28.  See  id  ^t  425-26. 


2003]  COMPULSORY  PATENT  LICENSING  1 79 


infringement.^^  In  Continental  Paper  Bag  Co.  ,^°  the  petitioner  alleged  that  non- 
use  of  a  patent  was  sufficient  grounds  to  overcome  the  inventor's  protection  of 
exclusive  rights.  Writing  for  the  majority,  Justice  McKenna  disagreed  with  this 
premise,  recognizing  instead  that  a  patent  holder  is  under  no  obligation  either  to 
use  the  invention  himself  or  license  the  invention  to  others.^' 

If  he  [a  patentee]  sees  fit,  he  may  reserve  to  himself  the  exclusive  use  of 
the  invention  or  discovery.  If  he  will  neither  use  his  device  nor  permit 
others  to  use  it,  he  has  but  suppressed  his  own, ...  his  title  is  exclusive, 
and  so  clearly  within  the  constitutional  provisions  in  respect  to  private 
property  that  he  is  neither  bound  to  use  his  discovery  himself  or  permit 
others  to  use  it.^^ 

The  Court  explained  that  the  right  to  exclude  others  was  independent  of  the 
patent  holder's  own  use  or  non-use  of  the  patented  subject  matter.^^  Furthermore, 
a  patent  holder  is  not  obligated  to  license  the  invention  to  other  interested  parties 
should  he  choose  not  to  make,  use,  sell,  or  import  the  invention  himself.^* 

The  Court  did,  however,  acknowledge  that  some  forms  of  non-use  could  be 
directed  at  wrongful  purposes  and  that  such  non-use  might  merit  revocation  of 
exclusionary  patent  rights."  Although  the  Court  did  not  expressly  identify  these 
situations  at  the  time,  several  of  these  reasons  have  since  developed  as  new  and 
evolving  technology  continues  to  challenge  the  foundation  of  patent  rights  in 
U.S.  law. 

II.  ARGUMENTS  FOR  AND  AGAINST  COMPULSORY  LICENSING  IN 

THE  UNITED  STATES 

This  section  will  focus  on  two  leading  arguments  supporting  compulsory 
licensing  of  patented  inventions:  economic  benefit  and  public  interest. 
Advocates  of  compulsory  licensing  highlight  the  supposed  economic  advantages 
of  compulsory  licensing  and  the  evils  of  perceived  monopolistic  and 
anticompetitive  behavior  that  the  patent  system  encourages.  Additionally,  with 
particular  respect  to  prescription  drugs,  arguments  in  favor  of  compulsory 
licensing  generally  emphasize  moral  and  ethical  concerns,  citing  such 
circumstances  as  the  crippling  spread  of  certain  diseases,  unavailability  of  critical 
lifesaving  medication,  and  high  yet  preventable  mortality  rates. 


29.  See  id. 

30.  210  U.S.  405  (1908). 

31.  Mat 427-29. 

32.  Id.  at  425  (alteration  in  original)  (quoting  Bement  v.  NatM  Harrow  Co.,  1 86  U.S.  70,  90 
(1902)). 

33.  Id  at  429.  See  also  Hartford-Empire  Co.  v.  United  States,  323  U.S.  386,  432  (1945) 
(holding  that  a  patent  owner  is  under  "no  obligation ...  to  use  [the  patented  invention]  or  to  grant 
its  use  to  others."). 

34.  Continental  Paper  Bag  Co. ,  2 1 0  U.S.  at  429.  See  also  Chisum,  supra  note  1 9. 

35.  Id  at  428-29. 


1 80  INDIANA  LAW  REVIEW  [Vol.  36:175 


A.  Economic  Rationale 

One  aspect  of  exclusive  patent  rights  that  draws  criticism  is  that  a  patent 
holder  may  be  incapable  of  meeting  demand  for  the  invention.  Although  this 
reality  may  appear  on  its  face  to  support  the  introduction  of  other  suppliers  in  a 
market  via  compulsory  licensing,  the  basis  for  this  argument  may  be  rebutted  by 
exploring  the  economic  impact  of  granted  patent  rights. 

Allowing  a  competitor  to  enter  a  market  destroys  the  fundamental  principle 
of  patent  protection:  exclusivity  to  compensate  for  innovation  expenses. 
Theoretically,  a  "monopolist  reduces  output  below  the  level  that  would  be  found 
in  a  perfectly  competitive  industry."^^  A  patent  holder  may  intentionally 
undersupply  goods  to  maximize  profits.  Introducing  another  competitor  into  a 
given  market  would  reduce  the  patent  holder's  incentive  to  undersupply  and 
would  thus  more  fully  utilize  and  commercialize  the  invention.^^  However, 
increasing  access  to  patented  inventions  to  the  detriment  of  patentees  would 
undermine  the  incentive  to  innovate  and  would  deter  research.  In  fact,  the  mere 
possibility  of  compulsory  licensing  may  reduce  the  incentive  for  innovation.^^ 
In  high-risk  areas  of  research  and  development,  brand-name  pharmaceutical 
companies  (also  referred  to  as  "innovator"  companies)  often  seek  to  recoup  costs 
associated  not  only  with  the  invention  itself,  but  also  with  the  many  other  ideas 
that  require  resources  and  fail.  Diminishing  the  return  on  such  research  and 
development  by  the  threat  of  compulsory  licenses  could  potentially  stifle 
investment  in  these  areas.^' 

The  term  "monopoly"  is  used  liberally  in  patent  law  to  describe  the  position 
of  a  patentee  in  a  given  market.  However,  a  more  precise  definition  of  the 
relevant  market  is  necessary  to  understand  a  patentee's  market  power.  In  one 
instance,  Eli  Lilly  &  Co.  (Lilly),  a  pharmaceutical  corporation  in  Indianapolis, 
Indiana,  had  exclusivity  over  the  compound  nizatidine  (Axid®),  a  histamine  H2- 
receptor  antagonist  useful  for  treating  such  gastrointestinal  maladies  as  heartburn 
or  stomach  ulcers.'*^  Lilly  could  be  thought  to  have  had  a  theoretical  "monopoly" 
over  the  relevant  market,  but  this  market  would  be  limited  to  nizatidine.  Instead, 
a  more  practical  analysis  of  the  situation  reveals  that  the  relevant  market  cannot 
be  defined  simply  as  the  nizatidine  market,  but  rather  as  all  histamine  H2-receptor 
antagonists.  This  includes  competitors'  drugs  such  as  cimetidine  (Tagamet®), 
famotidine  (Pepcid®),  and  ranitidine  (Zantac®).  Shrewd  adherence  to 
monopolistic  practices  by  any  one  of  these  competitors  could  likely  have  an 
adverse  effect,  dissuading  consumers  from  one  product  and  shifting  market  share 


36.  P.  Samuelson  &  W.  NORDHAUS,  ECONOMICS  166  (16th  ed.  1998). 

37.  Ward  S.  Bowman,  Jr.,  Patent  and  Antitrust  Law  3  (1 973). 

38.  See  id. 

39.  See  Kevin  Rhodes,  Comment,  The  Federal  Circuit's  Patent  Nonobvious  Standards: 
Theoretical  Perspectives  on  Recent  Doctrinal  Changes,  85  Nw.  U.  L.  REV.  1051,  1076  (1991). 

40.  See  Axid®:  nizatidine  capsules,  Axid®  product  label,  available  at  http://www.reliantrx. 
com/pdfs/AxidPI.pdf  (last  visited  Nov.  26,  200 1 ). 


2003]  COMPULSORY  PATENT  LICENSING  1 8 1 


to  other  available  alternatives.  Overly  zealous  exercise  of  a  patentee's  monopoly 
position  in  a  competitive  industry  can  actually  encourage  more  aggressive 
"design-around"  efforts  by  competitors/'  This  is  one  example  in  which  the 
supposed  "monopolistic"  rights  of  a  patent  holder  translate  into  a  much  less 
powerful  economic  force  when  viewed  in  context  of  a  different  "relevant 
market."  Thus,  a  narrow  perspective  can  easily  overestimate  the  true  economic 
power  of  a  patent. 

B.  Public  Interest 

The  general  premise  behind  this  policy  rationale  is  that  patent  rights, 
although  important,  are  not  absolute.  The  essential  needs  of  the  society  as  a 
whole  may  outweigh  the  exclusive  rights  of  an  individual  patentee.  Arguments 
for  overriding  patent  rights  in  the  public  interest  typically  address  matters  of 
public  health  and  welfare.'*^  Also,  matters  of  national  security  and  defense  are 
considered  to  impact  the  public  at  large  and  are  often  treated  similarly ."^^  For 
example,  judicial  determination  of  public  interest  has  balanced  the  health  and 
economic  interests  of  citizens  against  the  exclusive  rights  of  a  patent  holder/"^ 

The  arguments  allowing  use  of  patented  inventions  for  the  public  good  are 
admittedly  not  without  merit.  As  an  analogy,  an  individual's  rea/ property  rights, 
although  generally  respected  and  held  in  high  regard,  are  not  absolute. 
Throughout  history,  society  has  recognized  certain  situations  in  which  the 
interests  of  the  many  outweigh  the  rights  of  the  individual.  For  example,  in  early 
Seventeenth  Century  England,  it  was  acknowledged  that  the  King's  intrusion  on 
a  citizen's  private  land  to  mine  saltpeter  was  permitted."*^  Because  the  act  was 
for  the  defense  of  the  all  the  King's  people,  the  right  to  enter  the  private  land 
trumped  the  individual's  interest  in  property ."^^  Likewise,  a  large  urban  fire 
necessitated  one  city's  fire  department  to  destroy  an  individual's  house  to  spare 
countless  other  homes  and  lives."*^  In  that  case,  the  court  held  that  "[a]t  such 
times  [of  emergency],  the  individual  rights  of  property  give  way  to  the  higher 


4 1 .  See  Rebecca  S.  Eisenberg,  Proprietary  Rights  and  the  Norms  of  Science  in  Biotechnology 
Research,  97  YALE  L.J.  177,  206-07  (1987). 

42.  See,  e.g.,  Plant  Variety  Protection  Act,  7  U.S.C.  §  2404  (2000)  (mandating  a  compulsory 
license  if  necessary  to  ensure  an  adequate  supply  of  food);  Clean  Air  Act,  42  U.S.C.  §§  7401-7626 
(2000)  (requiring  licensing  under  reasonable  terms  of  technology  to  prevent  and  control  air 
pollution). 

43.  See,  e.g..  Atomic  Energy  Act,  42  U.S.C.  §  2183  (2000)  (citing  the  public  interest  as 
justification  for  licensing  of  patented  atomic  energy  inventions). 

44.  See  City  of  Milwaukee  v.  Activated  Sludge,  Inc.,  69  F.2d  577  (7th  Cir.),  cert,  denied,  293 
U.S.  576(1934). 

45.  See  The  King's  Prerogative  in  Saltpetre,  12  CI.  12  (Eng.  1607)  (stating  that  the  King's 
trespass  onto  private  land  was  privileged  and  that  no  compensation  was  owed  to  the  owner). 

46.  Id 

47.  Suroccov.  Geary,  3  Cal.  69(1853). 


1 82  INDIANA  LAW  REVIEW  [Vol.  36: 1 75 


laws  of  impending  necessity.""**  So,  too,  have  intellectual  property  rights  of  the 
individual  in  limited  circumstances  yielded  to  the  benefit  of  society. 

However,  an  analogous  application  of  a  doctrine  of  necessity  to  intellectual 
property  rights  is  not  as  straightforward.  The  immediate  difficulty  with  this 
rationale  is  the  inconsistency  in  establishing  what  is  in  the  public  interest.  The 
definition  of  public  interest  may  be  subject  to  change,  even  within  a  given 
country,  in  light  of  economic  and  social  values  at  any  given  time."*^  Variation  in 
this  definition  among  different  courts  is  common,  and  among  nations,  the 
disparity  is  even  more  pronounced.^°  The  recent  events  in  the  United  States 
involving  anthrax  and  Cipro  are  an  excellent  illustration  of  the  susceptibility  of 
the  public  interest  argument  to  impulsive  or  irrational  reactions  to  perceived 
emergencies.  Although  proponents  of  compulsory  licensing  are  quick  to  point 
out  the  benefits  of  such  a  flexible  measure,  the  more  troubling  outcome  of 
compulsory  licensing  is  the  potential  for  abuse  and  manipulation  of  vague 
standards.^'  Governments  intend  compulsory  licensing  as  a  means  for  increasing 
access  to  critical  patented  inventions."  However,  the  consequence  of  such 
licensing  may  be  the  deterrence  of  companies  to  invest. 

III.  De  Facto  Compulsory  Licensing  in  the  United  States 

Over  the  past  century,  several  exceptions  have  been  carved  into  the 
exclusivity  that  patentees  enjoyed.  In  the  United  States,  three  broad  categories 
permitting  use  of  patented  inventions  have  emerged:  statutory  exceptions, 
sovereign  immunity  for  governmental  entities  under  the  Eleventh  Amendment, 
and  judicial  remedies.  This  section  details  the  erosion  of  patent  rights  and 
explains  how  competing  interests  of  government,  inventors,  and  the  public  are 
resolved  by  current  U.S.  laws.  Furthermore,  this  section  argues  that  these 
exceptions  to  exclusive  patent  rights  are  based  upon  factors  that  are  outside  the 
realm  of  the  pharmaceutical  industry  and  therefore  are  unnecessary  for 
prescription  drugs  in  the  current  U.S.  patent  system. 

A.  Statutory  Exceptions 

Congress  has  seized  upon  certain  priorities  that  serve  the  public  interest, 
passing  legislation  that  provides  for  compulsory  licensing  of  patents  necessary 
to  further  efforts  in  designated  fields  of  technology .  For  example,  the  Atomic 
Energy  Act^^  deals  with  national  defense  and  security  in  nuclear  materials.^"* 


48.  Mat 73. 

49.  See  generally  Paul  S.  Haar,  Revision  of  the  Paris  Convention:  A  Realignment  of  Private 
and  Public  Interests  in  the  International  Patent  System,  8  BROOK.  J.  INT'L  L.  77  (1982). 

50.  See  id. 

5 1 .  See  id. 

52.  Cole  M.  Fau  ver,  Compulsory  Patent  Licensing  in  the  United  States:  An  Idea  Whose  Time 
Has  Come,  8  J.  iNTL.  L.  Bus.  666,  671  (1988). 

53.  42  U.S.C.  §2183(2000). 

54.  This  statute  states,  in  pertinent  part, 


2003]  COMPULSORY  PATENT  LICENSING  1 83 


Enacted  in  1954,^^  the  law  reflects  the  national  importance  of  nuclear  power  in 
post- World  War  II  times.  A  further  instance  is  the  Plant  Variety  Protection  Act, 
which  states  that  a  compulsory  license  is  mandatory  if  necessary  to  ensure  an 
adequate  supply  of  food.^^  A  compulsory  sale  from  farmers  of  saved  seed  to 
other  farmers  is  mandatory.^^  Although  Congress  intended  to  preserve 
compelling  societal  interests — vital  national  security  matters  and  humanitarian 
concerns — ^the  effect  and  necessity  of  these  statutory  compulsory  licensing 
provisions  are  still  questioned  today.  Indeed,  despite  these  examples,  the  debate 
surrounding  statutory  compulsory  licensing  is  far  from  settled. 

A  leading  example  of  the  ambiguity  of  compulsory  licensing  statutes  is  the 
Clean  Air  Act,^*  passed  in  1970  amid  an  escalating  international  fuel  crisis  and 
a  rising  trend  of  ecological  awareness.  Concerned  about  pollutants,  increasing 
vehicle  emissions,  and  overall  air  quality  levels,  Congress  proposed  "a  national 
research  and  development  program  to  achieve  the  prevention  and  control  of  air 
pollution."^^  Additionally,  if  technology  existed  that  was  vital  to  an  industry  to 
meet  the  goals  of  the  Act,  as  determined  by  government  officials,  a  court  order 
could  be  sought,  "requiring  the  person  who  owns  such  patent  to  license 
it  on  such  reasonable  terms  and  conditions  as  the  court,  after  hearing ,  may 
determine "^° 

At  the  time,  the  compulsory  licensing  provision  in  the  Clean  Air  Act 
garnered  very  little  attention.^'  It  was  believed  that  Congress  had  feared  that 
companies  could  control  important  pollution  control  patents  and  strategically 
build  monopolies  by  exercising  patent  rights  in  view  of  harsh  penalties  for 
violations.^^  Since  its  inception,  however,  the  compulsory  licensing  provision 
has  seen  little  litigation  in  the  courts;  arguments  concerning  its  impact  have 
generally  been  relegated  to  academia.^^  Unfortunately,  lack  of  resolution  in  the 
courts  has  brought  cries  of  victory  from  commentators  of  both  sides  of  the 
debate.    Advocates  for  compulsory  licensing  cite  the  compulsory  licensing 


[w]henever  any  patent  has  been  declared  affected  with  the  public  interest, ...  (1)  the 
Commission  is  hereby  licensed  to  use  the  invention  or  discovery  covered  by  such  patent 
in  performing  any  of  its  powers  under  this  Act;  and  (2)  any  person  may  apply  to  the 
Commission  for  a  nonexclusive  patent  license  to  use  the  invention  or  discovery  covered 
by  such  patent .... 
Id.  §  2183(b). 

55.  Pub.  L.  No.  703,  68  Stat.  919  (1954). 

56.  7  U.S.C  §  2404  (2000). 

57.  See  id. 

58.  42  U.S.C  §§7401-7626  (2000). 

59.  Id  §  7401(b)(2). 

60.  Id  §  7608. 

61 .  See  Jeffry  C.  Gerber  &  Peter  W.  Kitson,  Compulsory  Licensing  of  Patents  Under  the 
Clean  Air  Act  of  1970,  54  J.  PAT.  OFF.  SOC'Y  650  (1972). 

62.  See  id. 

63.  See  Kenneth  J.  Nunnenkamp,  Compulsory  Licensing  of  Critical  Patents  Under 
CERCLA?,  J.  Nat.  Resources  &  Envtl.  L.  397, 406  (1994). 


1 84  INDIANA  LAW  REVIEW  [Vol.  36:175 


provision  as  an  example  of  a  provision  that  ensures  that  future  advances  in 
pollution  control  are  appropriately  managed  to  avoid  monopolistic  control.^ 
They  assert  that  such  a  clause  provides  for  adequate  protection  with  no  apparent 
adverse  effects.  On  the  other  hand,  critics  point  out  that  the  immeasurable  loss 
of  research  and  development  greatly  outweigh  any  benefits  of  the  licensing 
provision.^^  It  is  unclear  how  such  a  provision  may  have  deterred  investment  in 
pollution  control.  Also  untold  are  the  number  of  settlements  or  voluntary 
licensing  arrangements  motivated  by  parties  seeking  to  avoid  compulsory 
licenses,  which  are  usually  less  favorable  to  patentees. 

In  1 996,  Congress  enacted  changes  to  the  patent  statutes  entitled  "Limitation 
on  Patent  Infringements  Relating  to  a  Medical  Practitioner's  Performance  of  a 
Medical  Activity"  that  limited  the  enforceability  of  some  medical  procedures 
patents.^^  This  statute  severely  limits  the  exclusivity  of  patents  claiming  medical 
or  surgical  procedures.  The  language  of  the  statute  is  explicit:  "[w]ith  respect 
to  a  medical  practitioner's  performance  of  a  medical  activity  that  constitutes  an 
infringement[,]  .  .  .  [certain  remedial  provisions]  of  this  title  shall  not  apply 
against  the  medical  practitioner  or  against  a  related  health  care  entity  with  respect 
to  such  medical  activity."^^  In  essence,  patentees  of  such  procedures  are  denied 
any  remedy  from  infringing  physicians  or  hospitals.  Remedies  that  would  enjoin 
practitioners  from  practicing  the  invention  and  enable  patentees  to  recover 
damages  are  among  those  that  this  statute  eliminates.^^  In  approving  this 
statutory  exception,  Congress  was  especially  persuaded  by  the  medical 
profession '  s  argument  that  doctors  have  the  ethical  and  professional  duty  to  share 
knowledge  of  new,  effective  treatments  with  their  patients.^^  Protecting  medical 
procedures  through  the  patent  system,  proponents  argued,  would  encourage 
secrecy  and  inhibit  the  development  of  life-saving  techniques.^° 

It  is  critical  to  note,  however,  that  this  statute  targets  only  procedures. 
Congress  expressly  exempted  pharmaceutical  drugs  and  medical  devices  from  the 
effects  of  this  Act.^' 

[T]he  term  "medical  activity"  .  .  .  shall  not  include  (i)  the  use  of  a 
patented  machine,  manufacture,  or  composition  of  matter  in  violation  of 
such  patent,  (ii)  the  practice  of  a  patented  use  of  a  composition  of  matter 
in  violation  of  such  patent,  or  (iii)  the  practice  of  a  process  in  violation 


64.  See  Leroy  Whitaker,  Compulsory  Licensing — Another  Nail  in  the  Coffin,  2  AM.  INTELL. 
Prop.  L.  Ass'n  Q.  J.  155, 163-65  (1974). 

65.  See  Nunnenkamp,  supra  note  63,  at  406-07. 

66.  See  Omnibus  Consolidated  Appropriations  Act  of  1997,  Pub.  L.  No.  104-208  §  616 
(1996). 

67.  35  U.S.C.  §  287(c)(1)  (2000). 

68.  Id.  §  287(c). 

69.  Cynthia  M.  Ho,  Patents.  Patients,  and  Public  Policy:  An  Incomplete  Intersection  at  35 
U.S.C.  § 287(c),  33  U.C.  Davis L.  Rev.  601,  606  (2000). 

70.  See  id 

71.35  U.S.C.  §  287(c)(2)(A)  (2000). 


2003]  COMPULSORY  PATENT  LICENSING  1 85 


of  a  biotechnology  patent^^ 

Congress  was  careful  to  craft  this  exemption  very  narrowly  around  medical  and 
surgical  procedures.  Patented  new  chemical  entities  ("NCEs")  and  medical 
devices  were  outside  the  intended  scope  of  the  amendment.  Lawmakers 
acknowledged  that  the  pharmaceutical  sector  is  unique  in  its  reliance  on 
investment-backed  expectations.^^  Medical  and  surgical  procedures  are  more 
likely  to  advance  through  dissemination  to  other  physicians,  hospitals,  and 
universities.^"*  On  the  other  hand,  the  same  reasoning  does  not  apply  to  the 
exploratory  and  speculative  nature  of  drug  research.  The  highly  competitive  and 
costly  industry  of  drug  research  and  development  is  one  that  would  not  be  as 
productive  but  for  the  patent  incentive  for  innovation  and  investment.^^ 

Perhaps  the  statutory  reference  most  relevant  to  pharmaceutical  drugs, 
experimental  use,  rests  in  the  Hatch- Waxman  Act.^^  This  legislation  was  the 
direct  congressional  response  to  an  infringement  lawsuit  before  the  Court  of 
Appeals  for  the  Federal  Circuit.  In  Roche  Products,  Inc.  v  Bolar  Pharmaceutical 
Co.  ,^^  a  generic  manufacturer  used  the  innovator  company 's  approved  compound 
in  studies  for  its  version  of  the  drug  to  seek  approval  from  the  Food  and  Drug 
Administration  ("FDA").^^  The  Federal  Circuit  acknowledged  that  the  purely 
experimental  use  of  a  patented  invention,  independent  of  commercial  gain, 
should  be  exempt  from  infringement  liability .^^  However,  despite  recognition  of 
this  permitted  "experimental  use,"  the  court  narrowly  interpreted  the  statutory 
provisions  that  allowed  for  this  type  of  experimentation.^^  The  infringing  act  was 
to  be  independent  of  activities  directed  to  commercial  gain,  and  should  have  been 
limited  "for  amusement,  to  satisfy  idle  curiosity,  or  for  strictly  philosophical 
inquiry."^'  Thus,  under  strict  interpretation  of  the  existing  statute,  the  submission 
of  data  to  regulatory  agencies  fell  outside  the  scope  of  permitted  use.  The 
Federal  Circuit  reversed  the  district  court  decision  for  the  generic  company, 
holding  that  the  use  of  a  patented  drug  by  a  generic  drug  company  regardless  of 
purpose  was  an  act  of  infringement.^^    Effectively,  "innovator"  companies 


72.  Id.  The  term  "composition  of  matter"  is  recognized  as  patentable  subject  matter  under 
35  U.S.C  §  101  (2000). 

73.  See  Bloomberg  et  al..  Patenting  Medical  Technology:    "To  Promote  the  Progress  of 
Science  and  Useful  Arts,  "317  NEW  Eng.  J.  MED.  565,  566-67  (Aug.  27,  1987). 

74.  See  Wendy  W.  Yang,  Note,  Patent  Policy  and  Medical  Procedure  Patents:  The  Case  for 
Statutory  Exclusion  from  Patentability,  1  B.U.  J.  Sci.  &  TECH.  L.  5,  If  51  (1995). 

75.  Seeidy^SZ-SA. 

76.  Pub.  L.  No.  98-41 7, 98  Stat.  1 585  (codified  at  as  amended  in  scattered  sections  of  1 5, 2 1 , 
28,  and  35  U.S.C). 

77.  733  F.2d  858  (Fed.  Cir.),  cert,  denied,  469  U.S.  856  (1984). 

78.  /^.  at  864. 

79.  Id.  at  860-61.  See  also  Chisum,  supra  note  19,  §  16. 

80.  ^ee  733  F.2d  at  864. 

81.  /^.  at  863. 

82.  Id. 


1 86  INDIANA  LAW  REVIEW  [Vol.  36: 1 75 


garnered  an  extended  period  of  exclusivity  because  generic  manufacturers  were 
forced  to  wait  until  after  a  drug's  patent  expired  before  work  could  start  on 
regulatory  approval,  a  process  that  could  take  several  years.^^ 

Immediately  following  the  Roche  decision,  Congress  quickly  enacted  the 
Drug  Price  Competition  and  Patent  Term  Restoration  Act  of  1984,  known 
commonly  as  the  Hatch- Waxman  Act.*"*  As  a  compromise  between  the  generic 
drug  industry  and  innovator  pharmaceutical  companies,  the  amendment  included 
provisions  that  would  directly  override  the  Federal  Circuit  holding.  Congress 
changed  the  patent  infringement  laws  to  permit  use  of  patented  inventions  "solely 
for  uses  reasonably  related  to  the  development  and  submission  of  information 
under  a  Federal  law  which  regulates  the  manufacture,  use,  or  sale  of  drugs  or 
veterinary  biological  products."*^  Generic  companies  then  were  allowed  to 
practice  patented  inventions,  including  patented  drugs,  in  order  to  satisfy 
regulatory  submission  requirements. 

The  experimental  use  exception  was  based  on  two  general  principles 
intended  to  further  technological  advances.  It  was  necessary  to  work  patented 
subject  matter  1)  to  test  the  feasibility  of  another's  claimed  invention,  and  2)  to 
continue  to  innovate  and  build  upon  others'  work.  In  the  spirit  of  "promoting  the 
useful  arts,"  Congress  had  weighed  the  innovator  companies'  interest  in 
protection  of  drug  research  investment  against  the  public  interest  of  speeding 
generic  drugs  to  market.*^  Through  the  Hatch- Waxman  Act,  Congress  had 
chipped  away  at  the  protection  of  patented  pharmaceutical  drugs  and  lessened  the 
effective  period  of  exclusivity  necessary  to  recoup  the  cost  of  years  of  drug 
research  investment. 

B.  Federal  and  State  Government  Use  of  Intellectual  Property 

A  second  general  area  of  permitted  use  of  patented  inventions  involves 
federal  or  state  governmental  action.  If  the  federal  government  infringes  a 
patent,  the  infringement  may  amount  to  a  "taking"  under  the  Fifth  Amendment, 
and  the  patentee  is  entitled  to  compensation  for  the  infringing  use.*'  Because 


83 .  See  Ralph  A.  Lewis,  Comment,  The  Emerging  Effects  of  the  Drug  Price  Competition  and 
Patent  Term  Restoration  Act  of  1984,  8  J.  CONTEMP.  HEALTH  L.  &  POL'Y  361  (1992). 

84.  Pub.  L.  No.  98-4 1 7, 98  Stat.  1 585  (codified  at  as  amended  in  scattered  sections  of  1 5, 2 1 , 
28,  and  35  U.S.C.).  The  Federal  Circuit  decided  Roche  in  May  1 994.  In  response  to  heavy  pressure 
from  the  pharmaceutical  industry,  including  both  generic  and  innovator  manufacturers,  Congress 
quickly  enacted  the  Hatch- Waxman  Act  in  October  1994. 

85.  35  U.S.C.§  271(e)(1)  (2001). 

86.  See  H.R.  REP.  No.  98-857,  pt.  2,  at  30  (1984),  reprinted  in  1984  U.S.C.C.A.N.  2686, 
27 1 4.  It  is  important  to  note  that  the  Hatch- Waxman  Act  was  the  product  of  much  deliberation  and 
compromise  between  innovator  pharmaceutical  companies  and  the  generic  drug  industry. 

87 .  See  generally  Lionel  Marks  Lavenue,  Patent  Infringement  Against  the  United  States  and 
Government  Contractors  Under  28  U.S.C  §  1498  in  the  United  States  Court  of  Federal  Claims, 
2  J.  INTELL.  Prop.  L.  389  (1995)  (stating  that  the  "takings"  clause  is  an  appropriate  analysis  for 
government  infringement  of  patented  inventions). 


2003]  COMPULSORY  PATENT  LICENSING  1 87 


patent  rights  are  conferred  upon  inventors  by  the  United  States  government,  a 
sovereign  nation,  these  granted  rights  are  subject  to  the  eminent  domain  of  the 
federal  government.  As  an  individual's  real  property  rights  are  subject  to 
eminent  domain,  so  too  are  intellectual  property  rights  in  an  analogous  Fifth 
Amendment  "takings"  analysis.^*  In  a  suit  against  the  federal  government  for 
unlicensed  use  of  a  patent,  a  patent  holder  may  recover  "reasonable  and  entire 
compensation."^^  However,  absent  from  the  statute  is  equitable  injunctive  relief; 
injunctions  are  not  available  to  patent  holders  against  the  federal  government.^^ 
The  infringing  use  of  patented  inventions  by  the  states  presents  a  different 
problem  for  patent  holders. 

Recent  Supreme  Court  cases  have  directly  addressed  the  issue  of  sovereign 
immunity  of  states.  In  1996,  the  U.S.  Supreme  Court  in  Seminole  Tribe  of 
Florida  v.  Florida^^  debated  the  limits  on  Congress'  power  to  relinquish  the 
sovereign  immunity  of  the  states.  Invoking  the  Eleventh  Amendment,  Congress 
had  attempted  to  regulate  commerce  between  states  and  the  Indian  tribes  under 
the  Indian  Commerce  Clause.^^  The  Court  determined  that  Congress  did  not  have 
the  power  pursuant  to  the  Commerce  Clause  to  abrogate  states'  sovereign 
immunity  under  its  Article  I  powers.  Unless  a  state  consented  to  suit,  it  could 
claim  sovereign  immunity  and  avoid  liability.'^  The  Supreme  Court  did  discuss, 
however,  Congress'  power  under  the  Fourteenth  Amendment  to  discharge  state 
sovereign  immunity.^"*  The  Court  recognized  that  the  Fourteenth  Amendment 
"expand  [ed]  federal  power  at  the  expense  of  state  autonomy, . . .  alter[ing]  the 
balance  of  state  and  federal  power  struck  by  the  Constitution."^^ 

The  Court  revisited  this  issue  within  a  patent  infringement  context  in  Florida 
Prepaid  Postsecondary  Education  Expense  Board  v.  College  Savings  Bank  and 
United  States. ^^  In  that  case,  College  Savings  Bank  had  patented  a  method  of 
guaranteeing  sufficient  funds  to  cover  college  tuition  costs.^^  It  marketed  this 
method  in  the  form  of  certificates  of  deposit,  named  CollegeSure  CDS,  which 
were  "essentially  annuity  contracts  for  financing  future  college  expenses."^* 
Florida  Prepaid,  a  state-created  entity,  imitated  the  idea  and  created  a  comparable 
system  for  state  universities.  College  Savings  Bank  initiated  a  lawsuit  for  patent 
infringement  under  the  Patent  and  Plant  Variety  Protection  Remedy  Clarification 
Act,^^  and  Florida  Prepaid  moved  for  dismissal  on  the  grounds  of  state  sovereign 


88. 

Id  at  393-94. 

89. 

28  U.S.C.§  1498(a)  (2000). 

90. 

Id.  §  1498. 

91. 

517  U.S.  44  (1996). 

92. 

Id  at  47. 

93. 

Id 

94. 

Id  at  59. 

95. 

Id 

96. 

527  U.S.  627  (2000). 

97. 

Mat  630-31. 

98. 

Id  at  630. 

99. 

35  U.S.C.  §§271,296(1994). 

1 88  INDIANA  LAW  REVIEW  [Vol.  36: 1 75 


immunity.  The  Supreme  Court  reversed  the  holdings  of  two  lower  courts  in 
deciding  that  Congress  had  improperly  annulled  states'  sovereign  immunity  by 
passing  this  act.  As  a  rationale,  the  majority  noted  that  the  state  use  of  immunity 
in  federal  suits  was  rare,  and  that  it  was  similarly  uncommon  that  a  state  would 
deprive  a  patent  owner  of  property  without  a  state  remedy.'^ 

Since  the  decision  in  Florida  Prepaid^  commentators  have  indicated  that  the 
holding  will  be  problematic  for  patentees,  as  state  jurisdictions  remain  the  only 
surviving  venue  for  patent  infringement  suits  against  state  government  entities.  '^' 
For  example,  pharmaceutical  research  strategists  may  weigh  the  high-stakes  risks 
of  drug  development,  and  indeed  could  turn  away  from  universities  and  research 
institutions,  as  these  entities  derive  partial  funding  from  state  governments.  Not 
only  would  the  holding  of  Florida  Prepaid  be  applicable  to  the  states  themselves, 
but  conceivably  the  argument  could  be  extended  to  state  actors  and  other 
peripheral  organizations  that  derive  their  authority  or  funding  from  state 
governments.  Florida  Prepaid  VQpTQSQnts  a  culmination  of  High  Court  decisions 
that,  in  light  of  larger  federalism  and  sovereign  immunity  ideals,  opens  the  door 
for  state  use  of  patented  inventions  and  further  erode  the  sanctity  of  patentees' 
property  rights. 

C  Judicial  Action  Resulting  in  Compulsory  Licensing  Arrangements 

Even  if  an  infringing  party  cannot  find  relief  in  statutory  infringement 
exceptions  or  within  sovereign  immunity  concerns,  the  federal  court  system  may 
craft  remedies  for  the  patent  holder  that  result  in  a  compulsory  licensing 
relationship.  Although  the  United  States  Patent  and  Trademark  Office 
determines  patentability  through  the  examination  and  prosecution  process, 
validity  is  not  fmally  decided  until  a  matter  is  litigated  before  a  federal  court.^°^ 
Federal  judges  have  many  options  in  the  complex  case  of  a  patent  infringement 
lawsuit.  A  patentee  may  ask  for  injunctive  relief,  that  the  defendant  be  enjoined 
from  conducting  the  infringing  acts.  In  such  a  prayer  for  remedy,  the  courts  may 
consider  aspects  of  equity.  On  the  other  hand,  the  patentee  may  seek  monetary 
damages  for  infringement.  The  statutory  provisions  for  patent  infringement 
remedies  are  explicit,  as  permissive  language  surrounds  injunctive  relief,'^^  while 
compensatory  damages  are  written  with  imperative  language.'^ 


1 00.  Florida  Prepaid,  527  U.S.  at  647. 

101.  See  Peter  S.  Menell,  Economic  Implications  of  State  Sovereign  Immunity  From 
Infringement  of  Federal  Intellectual  Property  Rights,  33  LOY.  L.A.  L.  REV.  1399  (2000). 

1 02.  See  Fauver,  supra  note  52,  at  667. 

1 03 .  The  statute  reads  in  pertinent  part:  "The  several  courts  having  jurisdiction  of  cases  under 
this  title  may  grant  injunctions  in  accordance  with  the  principles  of  equity  to  prevent  the  violation 
of  any  right  secured  by  patent,  on  such  terms  as  the  court  deems  reasonable."  35  U.S.C.  §  283 
(2000)  (emphasis  added). 

104.  The  law  providing  for  compensatory  damages  is  written  differently:  "Upon  finding  for 
the  claimant  the  court  shall  award  the  claimant  damages  adequate  to  compensate  for  the 
infringement,  but  in  no  event  less  than  a  reasonable  royalty  for  the  use  made  of  the  invention  by  the 


2003]  COMPULSORY  PATENT  LICENSING  1 89 


1.  Injunctive  Relief. — Courts  have  exercised  discretion  by  withholding 
injunctive  relief  in  certain  cases,  even  if  infringement  is  found  on  the  part  of  the 
defendant.  The  Federal  Circuit  has  cautioned  that  injunctive  relief  is  not 
necessarily  granted  once  infringement  is  decided.'^^  In  determining  remedies  for 
injured  patentees,  courts  sitting  in  equity  have  considered  the  rationale  of 
economic  concerns  and  public  interest,  as  well  as  the  equitable  conduct  of  the 
patentee  himself. 

"A  patent  owner  prevailing  on  the  merits  of  a  patent  infringement  claim  will 
usually  be  granted  a  permanent  injunction  against  future  infringement  unless  the 
public  interest  otherwise  dictates."'^^  Courts  have  weighed  the  public  interest 
against  interests  of  the  patent  holder.  In  City  of  Milwaukee  v.  Activated  Sludge, 
Inc.,^^"^  the  courts  analyzed  the  impact  of  injunctive  relief,  balancing  the  health 
and  economic  consequences  the  public  would  suffer  against  the  protection 
afforded  a  patent  holder.  The  patentee  in  that  case  sought  an  injunction  to  stop 
the  city  from  further  working  a  patented  method  and  apparatus  for  sewage 
purification.  The  appellate  court  affirmed  the  trial  court's  findings,  but  refused 
to  allow  an  injunction.  That  court  considered  the  severe  health  risk  caused  by 
lack  of  sewage  treatment  should  an  injunction  be  enforced  in  reaching  its 
decision.  ^^^  Even  today,  City  of  Milwaukee  represents  the  leading  case  in  which 
public  interest  was  found  to  be  compelling  in  itself  to  justify  denial  of  injunctive 
relief. '°' 

Courts  may  also  balance  the  detriment  to  the  infringing  party  against  the 
benefit  to  be  gained  by  the  patent  holder  when  granting  an  injunction. "° 
Furthermore,  a  compulsory  license  may  be  a  possible  remedy  for  an  aggrieved 
plaintiff  when  the  defendant  is  guilty  of  antitrust  violations.'' '  The  nature  of  the 


infringer,  together  with  interest  and  costs  as  fixed  by  the  court."  35  U.S.C.  §  284  (2001 )  (emphasis 
added). 

105.  See  Roche  Prods.,  Inc.  v.  Bolar  Pharm.  Co.,  733  F.2d  858,  865-67  (Fed.  Cir.),  cert. 
i/^me^,  469  U.S.  856(1984). 

1 06.  Chisum,  supra  note  1 9,  §  20  (footnote  omitted). 

107.  69  F.2d  577  (7th  Cir.),  cert,  denied,  293  U.S.  576  (1934). 

108.  /£/.  at593. 

1 09.  See  also  Vitamin  Technologists,  Inc.  v.  Wis.  Alumni  Research  Found.,  1 46  F.2d  94 1 ,  945 
(9th  Cir.  1944)  (concluding  that  the  public  interest  of  production  of  oleomargarine,  the  "butter  of 
the  poor,"  outweighed  the  patent  holder's  interest  in  retaining  exclusive  rights);  Hybritech,  Inc.  v. 
Abbot  Labs.,  4  U.S.P.Q.2d  1001  (CD.  Cal.  1987)  (denying  patentee  injunctive  relief  despite 
infringement  because  it  was  in  public  interest  to  continue  production  of  infringing  medical  test  kits 
that  patentee  was  not  itself  marketing).  Cf.  Wis.  Alumni  Research  Found,  v.  Gen.  Elec.  Co.,  880 
F.  Supp.  1266,  1277  (E.D.  Wis.  1995)  (granting  a  permanent  injunction  because  of  the  public 
interest  in  preventing  infringement  of  valid  patents).  Courts  have,  however,  construed  the  term 
"public  interest"  to  include  the  guarantee  of  certainty  and  enforceability  to  patent  holders. 

1 10.  See  Am.  Safety  Device  Co.  v.  Kurland  Chem.  Co.,  68  F.2d  734  (2d  Cir.  1934). 

111.  See  United  States  v.  U.S.  Gypsum  Co.,  340  U.S.  76  (1950);  United  States  v.  Hartford- 
Empire  Co.,  46  F.  Supp.  541  (N.D.  Ohio  1942)  (granting  compulsory  licenses  as  a  remedy  for 
antitrust  violations);  see  also  Carlisle  M.  Moore,  A  Study  of  Compulsory  Licensing  and  Dedication 


190  INDIANA  LAW  REVIEW  [Vol.  36:175 


claim  of  injunctive  relief  allows  a  court  flexibility  in  deciding  the  most 
appropriate  sanction  in  a  successful  infringement  lawsuit.  This  equitable 
determination  is  a  suitable  measure  for  permitting  use  of  patented  inventions 
while  avoiding  the  overly  broad  and  generalized  reach  of  a  compulsory  licensing 
statute. 

2.  Damages  in  a  Patent  Infringement  Action, — In  a  patent  infringement 
action,  a  plaintiff  may  elect  to  seek  damages.  Statutory  provisions  require  "in  no 
event  less  than  a  reasonable  royalty"  for  infringement."^  Beyond  reasonable 
royalties,  however,  a  patentee  may  seek  lost  profit  damages  for  infringement. 

To  recover  lost  profits,  "a  patent  owner  must  prove  a  causal  relation  between 
the  infringement  and  its  loss  of  profits."  The  Federal  Circuit  stated  that 

a  patentee  receives  a  reasonable  royalty  for  any  of  the  infringer's  sales 
not  included  in  the  lost  profit  calculation.  Thus,  a  patentee  may  obtain 
lost  profit  damages  for  that  portion  of  the  infringer's  sales  for  which  the 
patentee  can  demonstrate  "but  for"  causation  and  reasonable  royalties  for 
any  remaining  infringing."^ 

Moreover,  during  the  damages  stage  of  a  patent  infringement  action,  a 
judicial  determination  of  de  minimis  infringement  damages  may  further  limit  the 
relief  to  which  a  patentee  is  entitled.  In  Embrex,  Inc.  v.  Service  Engineering 
Corp.^''^  the  defendant  was  accused  of  infringing  a  patented  process  for  injecting 
a  vaccine  into  an  avian  egg.  After  affirming  the  trial  court's  finding  of 
infringement,  the  Federal  Circuit  vacated  the  awarded  damages  of  $500,000. 
"Because  the  only  cognizable  infringement  in  this  case  [was]  the  testing  and 
those  tests  were  not  shown  to  cause  any  loss  of  profits  to  Embrex,"'  '^  the  Federal 
Circuit  remanded  the  case  to  the  trial  court  for  a  finding  of  reasonable 
royalties."^  Therefore,  in  cases  concerning  mere  testing,  a  patentee  may  find  it 
difficult  to  establish  sufficient  evidence  to  compute  a  reasonable  royalty.  This 
holding  furthers  the  patent  system  goal  of  promoting  scientific  inquiry  by 
protecting  and  encouraging  research. 

IV.  The  TRIPS  Agreement  and  Its  Compulsory  Licensing  Provisions 

Representative  Brown's  compulsory  licensing  bills  include  reference  to  the 
Agreement  on  Trade-Related  Aspects  of  Intellectual  Property  Rights 
("TRIPs").''^     This  international  treaty  of  the  World  Trade  Organization 


of  Patents  as  Relief  Measures  in  Antitrust  Cases,  lA  GEO.  WASH.  L.  Rev.  223  (1955). 

112.  35  U.S.C.  §  284  (2000). 

113.  Crystal  Semiconductor  Corp.  v.  Tritech  Microelectronics  Int'l,  Inc.,  246  F.3d  1 336, 1 353- 
54  (Fed.  Cir.  1996)  (quoting  BIC  Leisure  Prods.,  Inc.  v.  Windsurfing  Int'l,  Inc.,  1  F.3d  1214, 1218 
(Fed.  Cir.  1993)). 

114.  216  F.3d  1343  (Fed.  Cir.  2000). 

115.  /^.  at  1350. 

116.  Id. 

117.  Agreement  on  Trade-Related  Aspects  of  Intellectual  Property  Rights 


2003]  COMPULSORY  PATENT  LICENSING  1 9 1 


("WTO")  promotes  uniformity  among  member  nations  by  introducing  standards 
for  patent  protection  worldwide.  This  section  details  the  compulsory  licensing 
provisions  of  TRIPs  and  how  the  proposed  legislation  is  unnecessarily  redundant. 

The  TRIPs  agreement  does  provide  for  compulsory  licensing  of  patented 
inventions.  The  criteria  for  such  compulsory  licensing  circumstances  exist  in 
Article  31  of  the  TRIPs  document.  Most  notably,  Article  31(b)  allows 
compulsory  licensing  of  patented  inventions  in  situations  of  national  emergency 
or  extreme  urgency."*  Article  3 1(g)  provides  that  use  of  the  patented  invention 
under  the  license  may  continue  only  so  long  as  the  original  need  exists."^ 

There  exists  an  ongoing  dispute  between  developed  countries  possessing  key 
patented  technology  and  those  bearing  "developing  nation"  status  that  typically 
claim  the  greatest  need.  Developed  nations  such  as  the  United  States  generally 
possess  advanced  medical  technology  and  resources,  and  they  advocate  a  narrow 
interpretation  of  the  TRIPs  compulsory  licensing  provisions.  Criticism  of  TRIPs 
compulsory  licensing  provisions  centers  on  the  ambiguity  and  latitude  in 
interpretation.  Terms  such  as  "circumstances"  and  "purpose"  could  lead  to 
inconsistent  application.'^^  Nations  still  may  exercise  sovereign  power  by 
declaring  "national  emergency."  There  are  few  guidelines  that  indicate  standards 
for  such  events,  and  this  section  of  the  TRIPs  agreement  has  not  been  challenged 
to  an  authoritative  body.'^'  Developing  nations,  however,  argue  for  an  expansive 
reading  of  Article  31,  and  present  humanitarian  issues  such  as  AIDS  crises  and 
other  public  health  concerns  as  justification.  Pharmaceutical  companies  are 
placed  in  the  awkward  position:  on  one  hand,  they  want  to  avoid  arguing  that 
widespread  diseases  are  not  a  matter  of  public  interest,  but  on  the  other,  they  are 
wary  of  importation  or  foreign  infringement  that  would  result  from  enactment  of 
compulsory  licensing  provisions. '^^ 

Article  3 1(c)  of  TRIPs  limits  licensing  of  patented  inventions  to  the  original 
purpose  for  which  the  license  was  granted. '^^  This  condition  within  the  treaty 
addresses  the  concern  of  developed  nations  that  appropriation  of  patented 
inventions  may  be  abused  beyond  the  national  emergency  or  circumstances  that 
created  the  justification  for  a  compulsory  license.  Specifically,  the  concern  is 
that  even  after  the  emergency  need  is  met,  rogue  companies  will  inundate  the 
international  market  illegally. 

Clarification  from  the  WTO  regarding  the  terminology  of  TRIPs  and  the 
boundaries  of  the  compulsory  licensing  provisions  is  needed  to  provide  a 


[hereinafter  TRIPs],  available  at  http://www.wto.org/english/ciocs_e/legal_e/final_e.htm  (last 
visited  Jan.  3,  2003). 

118.  /J.  Part  II,  sec.  5,  art.  3 1  (b). 

119.  /^.  art.  31(g). 

120.  See  145  CONG.  Rec.  H6027  (daily  ed.  July  21,  1999). 

121.  See  Robert  J.  Gutowski,  Comment,  The  Marriage  of  Intellectual  Property  and 
International  Trade  in  the  TRIPs  Agreement:  Strange  Bedfellows  or  a  Match  Made  in  Heaven?^ 
47  BUFF.  L.  Rev.  713,  720-24  (1999). 

122.  See  145  CONG.  Rec.  H6027  (daily  ed.  July  21,  1999). 

1 23 .  TRIPS,  supra  note  1 1 7,  art.  3 1  (c). 


192  INDIANA  LAW  REVIEW  [Vol.  36:175 


meaningful  international  agreement.  For  example,  in  the  case  of  patented  AIDS 
pharmaceutical  drug  therapies,  the  United  States  and  South  Africa  argued  over 
the  precise  application  of  the  TRIPs  agreement.'^"*  However,  despite  the 
weaknesses  of  TRIPs,  it  does  present  background  for  analysis  of  domestic 
compulsory  licensing  laws.  The  following  section  analyzes  the  current 
legislative  proposals  before  the  U.S.  House  of  Representatives. 

V.  Proposed  Compulsory  Licensing  of  Health  Care  Inventions 

The  proposed  legislation  sponsored  by  Representative  Sherrod  Brown  seeks 
to  "use  market  competition  to  bring  down  the  cost  of  prescription  drugs."'^^ 
Supporters  of  these  bills  eagerly  cite  the  success  of  compulsory  licensing 
provisions  in  the  Clean  Air  Act.'^^  They  insist  that  the  rising  costs  of  health  care 
may  be  curbed  by  licensing  measures  for  expensive  prescription  drugs,  prices  of 
which  "bear[]  no  resemblance  to  pricing  norms  for  other  industries." '^^  The 
broad  sweeping  language  of  this  proposed  legislation  relates  to  "any  invention 
related  to  health  care,"'^^  which  encompasses  any  drug  or  device,  any  biological 
product,  or  any  technology  or  process  to  the  extent  the  technology  or  process  is 
applied  to  health  or  health  care.  '^^  It  is  unclear,  however,  whether  Representative 
Brown's  bills  strike  the  proper  balance  between  public  access  to  drug  inventions 
and  research  incentive. 

A.  H.R.  1708:  The  Affordable  Prescription  Drugs  and  Medical  Inventions  Act 

This  bill  bestows  to  both  the  Secretary  of  Health  and  Human  Services  and  the 
Federal  Trade  Commission  "the  right  to  establish  other  use  of  the  subject  matter 
of  the  patent  without  authorization  of  the  right  holder"'^^  for  any  invention 


1 24.  See  Office  of  the  United  States  Trade  Representative,  Executive  Office  of  the  President, 
United  States-South  Africa  Understanding  on  Intellectual  Property,  available  at  http://www.ustr. 
gov/releases/1 999/09/99-76.html  (last  visited  October  1 5, 200 1 ).  Interestingly,  both  nations  agreed 
to  resolve  the  dispute  over  intellectual  property  rights  privately  as  opposed  to  seeking  adjudication 
from  the  WTO's  Dispute  Settlement  Board,  perhaps  for  concern  of  an  unfavorable  interpretation 
of  the  treaty  provisions. 

i  25.  U.S.  Representative  Sherrod  Brown  (D-OH),  The  Affordable  Prescription  Drugs  Act,  Bill 
Summary,  available  at  http://www.house.gov/sherrodbrown/rxdrugsumm.htm  (last  visited  October 
15,2001). 

1 26.  Representative  Brown  refers  to  the  precedent  established  in  the  Clean  Air  Act,  discussed 
supra,  which  provides  for  compulsory  licensing  of  patented  pollution  control  devices  deemed 
necessary  by  government  to  the  success  of  the  Act.  Medicare  Prescription  Drugs:  Hearings  Before 
the  House  Subcomm.  on  Health  and  the  Environment,  105th  Cong.  (1 999)  [hereinafter  Hearings] 
(statement  of  Rep.  Brown,  Member,  House  Comm.  on  Energy  and  Commerce),  available  at 
http://www.house.gov/sherrodbrown/  medpresdrg.htm  (last  visited  Oct.  15,  2001). 

127.  Hearings,  supra  notQ\26. 

128.  H.R.  1708,  §  2,  107th  Cong.  (2001). 

129.  Id 

130.  Id 


2003]  COMPULSORY  PATENT  LICENSING  1 93 


related  to  health  care.  In  order  for  the  government  agencies  to  invoke  these 
licensing  rights,  such  invention  must  fulfill  at  least  one  of  five  determinative 
factors.  '^'  The  bill  further  provides  for  "adequate  remuneration  for  the  use  of  the 
patent,"'^^  and  claims  consistency  with  existing  international  treaty  provisions.'" 

The  determinative  factors  in  the  proposed  bill  are  directly  analogous  to 
existing  theories  supporting  compulsory  licensing.  The  first  item  relates  to  the 
argument  that  non-use  of  a  patented  invention  may  be  grounds  for  compulsorily 
licensing  the  invention.  If  "[t]he  patent  holder  .  .  .  has  not  taken,  or  is  not 
expected  to  take  within  a  reasonable  time,  effective  steps  to  achieve  practical 
application  of  the  subject  invention  in  a  field  of  use,"'^"*  then  the  patented 
invention  may  be  subject  to  a  compulsory  license  under  this  bill.  The  proposition 
that  licensing  is  mandated  should  the  patent  holder  fail  to  use  the  patented 
invention  himself  is  the  very  concept  dismissed  by  the  U.S.  Supreme  Court  in 
Continental  Paper  Bag  CoP^  Non-use  of  patented  inventions  has  not  been 
upheld  as  a  valid  justification  for  compulsorily  licensing  subject  matter  of  any 
kind,  and  the  rationale  should  fail  when  targeting  health  care  inventions 
specifically.  Moreover,  ambiguous  terms  such  as  "reasonable  time,"  "effective 
steps,"  and  "practical  application"  are  subject  to  a  wide  range  of  judicial 
interpretations  that  could  lead  to  deterring  inconsistencies  in  enforcement. 

Two  additional  factors  invoke  the  public  interest  or  public  health  argument. 
A  compulsory  license  option  may  be  triggered  if  "[t]he  invention  claimed  in  the 
patent  is  needed  for  research  purposes  that  would  benefit  the  public  health,  and 
is  not  licensed  on  reasonable  terms  and  conditions,"  or  if  "use  of  the  subject 
matter  of  the  patent  is  necessary  to  alleviate  health  or  safety  needs  which  are  not 
adequately  satisfied. "'^^  This  rationale  could  be  extended  to  reach  many  different 
types  of  technologies  so  long  as  a  tie  to  public  health  could  be  established. 
Furthermore,  the  impetus  of  "research  purposes"  was  addressed  directly  in  the 
experimental  use  provisions  of  the  Hatch- Waxman  Act.  '^^  Recent  decisions  from 
the  Court  of  Appeals  for  the  Federal  Circuit  have  indicated  that  this  argument  is 
disfavored,  deferring  instead  to  respect  of  the  patentee's  intellectual  property 
rights.  The  limitation  of  reasonable  licensing  terms  is  also  questionable.  It  is 
conceivable  that  new  and  unobvious  innovations  in  a  particular  field  may  indeed 
merit  terms  favorable  for  the  patentee;  this  is  the  nature  of  pioneer  inventions. 
By  regulating  the  terms  by  which  parties  seek  licenses.  Congress  may  very  well 
inhibit  the  incentive  to  invest  in  an  industry  as  costly  and  research-intensive  as 
pharmaceuticals. 

Another  factor  reflects  the  judicial  denial  of  equitable  relief  in  cases  of 


131.  Id. 

132.  Id. 

133.  Id.  The  bill  refers  to  the  TRIPs,  discussed  supra,  and  the  Uruguay  Round  Agreements 
Act,  §  101(d)(15). 

134.  H.R.  1708,  §2. 

135.  210  U.S.  405,  429  (1908). 

136.  H.R.  1708,  §  2,  107th  Cong.  (2001). 

137.  See  supra?2ai\\\A. 


194  FNDIANA  LAW  REVIEW  [Vol.  36:175 


anticompetitive  behavior.  Traditionally,  the  United  States  has  frowned  upon 
antitrust- like  behaviors,  a  paradigm  often  forced  into  conflict  by  the  exclusionary 
nature  of  the  patent  system. '^^  The  bill  permits  compulsory  licensing  in  the  event 
that  "the  patented  invention  is  priced  excessively  relative  to  the  median  price  for 
developed  countries  or  by  other  reasonable  standards,  and  that  such  pricing 
contravenes  the  public  interest."'^^  The  United  States  is  responsible  for  a  great 
majority  of  the  total  costs  for  drug  research  and  development.  This  portion  of  the 
proposed  bill  aims  to  target  the  perceived  unfairness  in  pricing  relative  to  other 
developed  nations.  However,  advocates  for  the  innovator  pharmaceutical 
companies  point  out  that  the  United  States  often  reaps  the  benefit  of  life-saving 
therapies  years  ahead  of  other  nations.  They  defend  discrepancies  in  drug  pricing 
compared  to  other  industrialized  nations  by  citing  the  advances  of  the  U.S.  health 
care  system  and  the  higher  standard  of  living  enjoyed  by  the  average  U.S.  citizen. 
In  fact,  this  type  of  pricing  comparison  would  be  difficult  to  weigh  practically 
and  even  more  difficult  to  implement. 

The  final  factor  permits  compulsory  licensing  if  "[a]n  invention  covered  by 
a  [second]  patent  .  .  .  cannot  be  exploited  without  infringing  upon  the  [first] 
patent  .  .  .  ,  insofar  as  the  invention  claimed  in  the  second  patent  involves  an 
important  technical  advance."*'*^  This  factor  relates  to  the  patent  misuse  doctrine, 
a  common  law  principle  raised  during  litigation.  Patent  misuse  is  available  as  an 
affirmative  defense  in  a  patent  infringement  action,  as  alleged  patent  infringers 
assert  that  the  plaintiff-patentee  has  abused  the  patent  grant.  The  allegation  is 
that  the  patentee  has  overreached  and  attempted  to  extend  its  exclusivity  to  items 
that  are  not  within  the  scope  of  the  patent.'"*'  If  successful,  the  affirmative 
defense  can  result  in  the  denial  of  equitable  relief'"*^ 

The  determinative  factors  cited  in  The  Affordable  Prescription  Drugs  and 
Medical  Inventions  Act  are  wholly  redundant  and  unnecessary.  It  may  be  argued 
that  these  considerations  merely  represent  the  codification  of  common  law 
principles.  However,  application  of  these  remedies  under  the  aforementioned 
circumstances  is  by  no  means  universal  or  automatic  in  patent  infringement 
cases,  and  health  care  inventions  do  not  merit  special  consideration  of  this 
option.  H.R.  1708  presents  a  backwards  step  for  pharmaceutical  innovation  and 
public  health  concerns. 


138.  See  Philip  Girard,  Impact  of  United  States  Antitrust  Laws  on  Territorially-Limited 
International  Patent  Licensing  Agreements,  11  U.  S.F.  L.  REV.  640  (1977).  Judges  have,  on 
occasion,  considered  the  anticompetitive  behavior  of  the  patent  holder  in  determining  appropriate 
sanctions  for  the  infringing  party.  See  United  States  v.  U.S.  Gypsum  Co.,  340  U.S.  76  (1950); 
United  States  v.  Hartford-Empire  Co.,  46  F.  Supp.  541  (N.D.  Ohio  1942)  (granting  compulsory 
licenses  as  a  remedy  for  antitrust  violations). 

139.  H.R.  1708,  §2. 

140.  fd 

141.  See  Chisum,  supra  note  1 9,  §  1 9. 

142.  See  Morton  Salt  Co.  v.  G.S.  Suppiger  Co.,  3 14  U.S.  488  (1942).  The  Patent  Act  of  1952 
revised  the  statutory  law  to  limit  the  patent  misuse  doctrine  to  tying  agreements  involving  staple 
products.  See  Dawson  Chem.  Co.  v.  Rohm  &  Haas  Co.,  448  U.S.  176,  209  (1980). 


2003]  COMPULSORY  PATENT  LICENSING  1 95 


B.  H.R.  3235:  The  Public  Health  Emergency  Medicines  Act — 
An  Even  Broader  Approach  to  Compulsory  Licensing 

Less  than  two  months  following  the  tragic  and  shocking  events  of  September 
11,  2001,  Representative  Sherrod  Brown  introduced  H.R.  3235,  a  statutory 
measure  directed  to  the  threat  of  bioterrorism."'^  This  revised  legislation  also 
aspires  to  establish  compulsory  licensing  of  patented  inventions,  but  in  a  much 
broader  sense  than  H.R.  1708.  The  proposed  statute  reads: 

In  the  case  of  any  invention  relating  to  health  care[,]  the  Secretary  of 
Health  and  Human  Services  shall  have  the  right  to  authorize  use  of  the 
subject  matter  of  the  patent  without  authorization  of  the  patent  holder  or 
any  licensees  of  the  patent  holder  if  the  Secretary  makes  the 
determination  that  the  invention  is  needed  to  address  a  public  health 
emergency.''^'* 

Absent  from  H.R.  3235  are  the  determinative  factors  of  H.R.  1708,  which 
provided  at  minimum  some  measure  of  guidance  for  a  reasonable  assessment  of 
applicability.  In  the  case  of  the  Public  Health  Emergency  Medicines  Act, 
however,  any  invention  related  to  heaflth  care  would  be  implicated  provided  that 
a  public  health  emergency  exists.  It  is  not  difficult  to  conceive  of  the  multitude 
of  patented  inventions  this  includes,  making  this  overly  broad  proposal 
unrealistic  and  infeasible. 

Representative  Brown  remarked  that  his  bill  "would  address  the 
compensation  issue  [of  use  of  patented  inventions],  precluding  endless  court 
battles  and  unnecessary  government  spending."'"*^  He  cited  "[u]nencumbered 
access  to  drugs  [as]  an  essential  element  in  [the]  response  to  bioterrorism."'"**^ 
Yet,  he  also  conceded  that  "[t]he  links  between  antibiotic  resistance  and 
bioterrorism  are  clear. . . .  We  can  only  assume  that  anthrax,  and  other  bacterial 
agents,  could  also  be  engineered  to  resist  antibiotics — including  drugs  like 
Cipro."'"*^  Under  a  compulsory  licensing  scheme  as  proposed  by  Representative 
Brown,  the  incentives  under  the  current  U.S.  patent  system  are  severely 
weakened  so  that  the  next  generation  of  drug  therapies  may  never  arrive. 

Conclusion 

Compulsory  licensing  of  patented  inventions  is  not  merited  for 
pharmaceutical  drugs.  Proposed  bills  such  as  the  Affordable  Prescription  Drugs 
and  Medical  Inventions  Act  and  the  Public  Health  Emergency  Medicines  Act  do 


143.  See  H.R.  3235,  §  2,  107th  Cong.  (2001). 

144.  Id. 

145.  U.S.  Representative  Sherrod  Brown  (D-OH),  Remarks  on  the  Public  Health  Emergency 
Medicines  Act,  available  at  http://www.house.gov/sherrodbrown/bioterrorl  1 15.htm  (last  visited 
Feb.  25,  2002). 

146.  Id. 

147.  Id 


196  INDIANA  LAW  REVIEW  [Vol.  36: 175 


not  take  into  account  the  present  range  of  legislative  and  judicial  avenues  for 
relief  that  are  available.  Existing  remedies  already  satisfy  arguments  concerning 
the  public  interest  and  economic  reasons.  These  arguments  are  too  easily 
influenced  by  contemporary  sentiment.  The  recent  events  in  the  United  States 
involving  Cipro  and  the  threat  of  anthrax  present  a  prime  example  of  this 
phenomenon.  Proponents  of  compulsory  licensing  are  too  quick  to  point  to 
perceived  health  emergencies  and  urgent  needs  while  ignoring  the  deterrence  on 
innovation  and  the  continued  erosion  of  patent  rights.  In  past  legislation, 
Congress  has  correctly  recognized  the  unique  incentive-backed  investment 
expectations  of  the  pharmaceutical  industry  and  should  wisely  avoid  these  broad, 
sweeping  compulsory  licensing  bills.  Without  the  preservation  of  exclusionary 
patent  rights  for  pharmaceuticals,  there  may  not  be  a  next  generation  of  critical 
drugs  to  meet  future  needs. 


"Duel''  Banking  System? 

State  Bank  Parity  Laws:  An  Examination 

OF  Regulatory  Practice,  Constitutional 

Issues,  and  Philosophical  Questions 


John  J.  Schroeder' 


Introduction 

Depository  financial  institutions  in  the  United  States,  including  banks,  credit 
unions,  and  thrifts,  are  unique  in  that  their  incorporators  and/or  management  have 
a  choice  between  state  and  federal  charters,  regulatory  authorities,  and  governing 
statutes.  No  other  industry  has  separate  and  distinct  laws  governing  its  powers, 
regulation,  and  organizational  structure.  This  phenomenon  is  known  as  the  "dual 
banking  system."'  Every  state  has  an  agency,  or  agencies,  that  charter  and 
regulate  these  three  types  of  financial  services  providers.^  Alternatively,  federal 
charters  for  banks,  thrifts,  and  credit  unions  are  provided  by  the  Office  of  the 
Comptroller  of  the  Currency  ("OCC"),  the  Office  of  Thrift  Supervision  ("GTS"), 
and  the  National  Credit  Union  Administration  ("NCUA"),  respectively.^  For 
reasons  that  will  be  discussed  below,  the  availability  of  this  choice  of  charters 
has  contributed  greatly  to  the  industry  innovations  and  the  expansion  of  powers 
that  financial  institutions  have  experienced  in  this  country.  It  has  also  provided 
necessary  "checks  and  balances,"  ensuring  against  oppressive  regulation. 
Further,  the  system  fosters  a  competitive  environment  between  state  and  federal 
regulators.  This  healthy  competition  and  the  "level  playing  field""^  it  fosters  are 
essential  to  the  survival  of  the  dual  banking  system. 

State  bank  parity  laws  have  been  one  means  by  which  states  have  striven  to 
provide  a  charter  choice  that  meets  the  needs  of  its  regulated  banks,  is 


*  J.D,  Candidate,  2003,  Indiana  University  School  of  Law — Indianapolis;  B.S.,  1986, 
Indiana  University  Kelley  School  of  Business,  Indianapolis,  Indiana.  The  author  is  the  Supervisor 
of  the  Administration  Division  for  the  Indiana  Department  of  Financial  Institutions.  The  views  and 
opinions  of  the  author  are  his  own,  and  do  not  necessarily  reflect  those  of  the  Indiana  Department 
of  Financial  Institutions. 

1 .  See  generally  Arthur  E.  Wilmarth,  Jr.,  The  Dual  Banking  System — A  Legal  History  (Sept. 
30,  1991)  (unpublished  paper  presented  at  the  Education  Foundation  of  State  Bank  Supervisors 
(EFSBS)  Seminar  for  State  Banking  Department  Attorneys,  on  file  with  author). 

2.  Christian  A.  Johnson,  Wild  Card  Statutes,  Parity,  and  National  Banks — The  Renascence 
of  State  Banking  Powers,  26  LOY.  U.  Chi.  L.J.  351,  357  (1995);  Raquel  Maria  Prieguez,  Federal 
Common  Law  and  the  Need  for  Uniformity  in  the  Regulation  of  Federal  Savings  and  Loan 
Associations  and  Federal  Credit  Unions,  29  San  DiegoL.  Rev.  743,  751,  755  (1992). 

3.  Jerry  W.  Markham,  Banking  Regulation:  Its  History  and  Future,  4  N.C.  BANKING  iNST. 
221,  228  (2000);  Prieguez,  supra  note  2,  at  749,  786-88. 

4.  Kenneth  F.  Ehrlich,  Gramm-Leach-Bliley:  Federal  Preemption  of  Massachusetts  Bank 
Insurance  Sales  Rules?,  20  ANN.  Rev.  BANKING  L.  121,  125  (2001)  (describing  the  intention  of 
1997  federal  legislation  to  foster  competition  and  equality  between  national  and  state  charters).  Id. 


198  INDIANA  LAW  REVIEW  [Vol.  36:197 


competitive  with  the  federal  alternative,  and  promotes  "safety  and  soundness"^ 
in  the  industry.  Parity  laws  provide  state  regulators  and  lawmakers  a  flexible  and 
timely  method  of  expanding  and/or  amending  the  permissible  powers  of  state- 
chartered  banks  in  response  to  newly  adopted  federal  initiatives.^  This 
adaptability  is  particularly  important  given  the  fact  that  the  legislatures  in  many 
states  are  in  session  only  part-time.^  The  ability  for  states  to  adapt  has  become 
increasingly  important  in  recent  years,  as  federal  regulators  have  aggressively 
interpreted  their  authority  to  expand  the  powers  of  federally  chartered  financial 
institutions.^  While  many  of  the  issues  to  be  addressed  in  this  Note  apply  equally 
to  all  three  types  of  traditional  depository  institutions — banks,  thrifts,  and  credit 
unions — in  order  to  keep  the  topic  manageable,  1  will  concentrate  specifically  on 
the  bank  charter. 

Part  I  of  this  Note  provides  a  brief  history  of  the  "dual  banking  system"  in  the 
United  States.  Included  will  be  a  discussion  of  the  positive  effects  this  system 
has  had  on  the  country's  banking  industry.  Part  II  consists  of  an  analysis  of 
existing  state  bank  parity  laws  and  the  various  means  of  their  application 
throughout  the  fifty  states.^  Included  in  this  section  is  a  discussion  of  the  extent 
to  which  the  parity  laws  preempt  or  simply  supplement  other  state  laws,  and 
whether  the  powers  are  afforded  automatically,  or  are  subject  either  to  the 


5.  See  Ralph  E.  Sharpe,  Prompt  Regulatory  Action  and  Safety  and  Soundness  Tripwires 
Under  FDICIA,  625  PRACTICING  LAW  iNST.— COMMERCIAL  LAW  2 1 7, 236-44  ( 1 992).  "Safety  and 
soundness"  is  the  general  standard  under  which  bank  regulators  review  the  operations  of  banking 
companies.  This  article  describes  the  standards  and  criteria  used  in  determining  banks'  conformity 
to  safe  and  sound  practice. 

6.  See  Letter  from  James  B.  Kauffman,  Jr.,  Acting  Secretary  of  Banking,  State  of 
Pennsylvania,  to  all  Pennsylvania  State-Chartered  Banks,  Banks  and  Trust  Companies,  Savings 
Banks,  and  Trust  Companies  (Nov.  29,  2000)  (announcing  the  adoption  of  their  parity  provision, 
opining  that  it  would  ensure  "a  level  playing  field  on  which  Pennsylvania  State-Charters  can 
continue  to  successfully  compete")  (on  file  with  author);  see  also  Press  Release,  New  York 
Governor  George  E.  Pataki  (July  23,  1998)  (recognizing  a  growing  "competitive  imbalance"  and 
hailing  New  York's  parity  law  as  ensuring  "the  State  banking  charter  will  remain  attractive  and 
competitive")  (on  file  with  author). 

7.  John  Devlin,  Toward  a  State  Constitutional  Analysis  of  Allocation  of  Powers:  Legislators 
and  Legislative  Appointees  Performing  Administrative  Functions,  66  TEMP.  L.  REV.  1205,  1229 
(1993).  Though  the  frequency  and  length  of  state  legislative  sessions  vary,  their  part-time  nature 
can  leave  significant  lapses  of  time  between  enactments  of  federal  law  and  consideration  by  state 
lawmakers. 

8.  See  Arthur  E.  Wilmarth,  Jr.,  Recent  Developments  Related  to  the  Preemption  of  State 
Laws  by  the  Office  of  the  Comptroller  of  the  Currency  ("OCC")  and  the  Office  of  Thrift 
Supervision  ("OTS")  (July  3 1 ,  200 1 )  (unpublished  paper  presented  at  the  Conference  of  State  Bank 
Supervisors  ("CSBS")  Legal  Seminar)  (on  file  with  author). 

9.  Information  compiled  from  a  survey  of  state  banking  department  representatives, 
telephone  interviews,  e-mail  correspondence,  and  independent  research,  represented  in  Table 
I — Summary  of  State  Bank  Parity  Laws,  included  infra  [hereinafter  Survey  Results]  (on  file  with 
author). 


2003]  STATE  BANK  PARITY  LAWS  199 


discretion  of  the  state  regulator,  or  to  specific  legislative  constraints.  Following 
is  a  discussion  of  the  various  types  of  powers  and  authorities  that  have  been 
requested  under  parity  provisions.  Included  in  Part  II  is  an  analysis  of  the 
interplay  between  the  parity  provisions  and  the  "incidental  and  proper"  clauses 
that  are  also  common  in  state  banking  codes.  These  "incidental  and  proper" 
clauses,  which  sometimes  require  regulatory  approval,  provide  banks  the  ability 
to  exercise  powers  that  are  not  enumerated  but  are  deemed  "incidental  and 
proper"  to  banking.  When  regulatory  agencies  interpret  these  "incidental  and 
proper"  clauses  broadly,  they  can  serve  to  expand  permissible  bank  powers  even 
in  the  absence  of  parity  provisions.'^  Although  parity  provisions  are  designed  to 
promote  a  "level  playing  field,"  particularly  between  state  and  national  charters, 
"incidental  and  proper"  clauses  can  be  used  to  seek  powers  that,  while  arguably 
incidental  to  the  business  of  banking,  are  not,  as  yet,  available  to  national  banks. 

Part  III  of  this  Note  discusses  parity  laws  from  a  constitutional  perspective. 
This  question  first  arises  in  the  form  of  a  potential  abdication  or  delegation  of 
lawmaking  authority  by  state  legislatures  when  they  provide  for  the  "automatic" 
extension  of  theretofore-unauthorized  powers  to  state  banks  at  the  discretion  of 
federal  lawmakers,  or  arguably  worse  yet,  federal  regulators."  This  concern  is 
heightened  even  further  when  the  power  that  is  extended  to  state  banks  was  not 
previously  simply  unauthorized,  but  specifically  prohibited  by  state  law.  A 
second  question  of  delegation  involves  the  constitutionality  of  a  statute  that 
allows  a  state  executive  branch  agency  the  latitude  to  unilaterally  expand  a 
theretofore  legislatively  enacted  list  of  permissible  bank  powers. 

These  issues  lead  to  a  discussion  of  philosophical  issues  in  Part  IV.  Banks, 
while  not  public  entities,  certainly  raise  significant  public  policy  concerns  and 
benefit  from  public  support,  i.e.,  federal  deposit  insurance.  They  are  in  the 
business  of  accepting  citizens'  money  in  the  form  of  deposits  and  investing  it  in, 
for  example,  loans,  securities,  and  real  estate.  For  these  reasons,  states  have 
always  had  a  strong  interest  in  the  powers  and  activities  afforded  to  banks. 
Banks  historically  could  only  engage  in  specifically  enumerated  powers.'^  For 
better  or  worse,  parity  provisions  can  significantly  alter  this  regulatory  structure 
by  expanding  these  powers  beyond  those  adopted  legislatively.  In  the  case  of 
parity  provisions  that  automatically  allow  a  state  bank  to  engage  in  an  activity 


1 0.  The  wording  of  these  "incidental  and  proper"  clauses  varies  from  state  to  state.  Examples 
include,  "[d]o  any  business  and  exercise  any  powers  incident  to  the  business  of  banks,"  Ala.  Code 
§  5-5A-18(12)  (1990  &  Supp.  2001);  "exercise  all  powers  incidental  and  proper ...  in  carrying  on 
a  general  banking  business,"  IND.  Code  §  28-1-1 1-3. 1(a)  (1998  &  Supp.  2001);  "all  powers 
incidental  to  the  conduct  of  banking  business,"  Pa.  Stat.  Ann.  tit.  7,  §  315(1)  (1995  &  Supp. 
2001). 

11.  As  noted  supra,  note  3,  the  OCC  is  the  chartering  and  regulatory  authority  for  national 
banks.  In  that  role,  it  is  charged  with  interpreting  the  National  Banking  Act,  and  thus  determining 
permissible  powers  for  national  banks.   12  U.S.C.  §  24  (2000). 

1 2 .  See  Karol  K.  Sparks,  Banking  and  Insurance:  One  Year  After  Gramm-Leach-Bliley,  SF57 
A.L.I.-A.B.A.  667,  671  (2001)  (discussing  the  effect  this  new  law  will  have  on  available  bank 
powers). 


200  INDIANA  LAW  REVIEW  [Vol.  36:197 


that  was  previously  unauthorized,  or  even  specifically  prohibited,  the  question 
becomes,  "Why  is  it  a  safe  business  practice  now?"  This  inquiry  brings  the 
whole  historical  practice  of  specifically  enumerating  bank  powers  into  question. 

A  second  philosophical  issue  is  the  importance  of  consistency,  or  lack 
thereof,  among  the  various  states  in  the  adoption  and  application  of  parity 
provisions.  In  this  age  of  interstate  banking,  seamless  regulation  is  viewed 
favorably  by  large  banking  organizations.  However,  any  lockstep  effort  by  states 
could  also  be  viewed  as  an  endorsement  of  a  national  regulatory  environment  and 
an  undermining  of  the  dual  banking  system. 

Parity  provisions  have  played  an  important  role  in  both  the  evolution  of  bank 
powers  and  the  continued  viability  of  the  dual  banking  system.  Their  near- 
unanimous  adoption  throughout  the  country  is  evidence  of  their  importance. 
Given  the  consistent  state  interest  in  protecting  the  safety  and  soundness  of 
financial  institutions,  particularly  in  an  interstate  environment,  an  effective 
argument  can  be  made  for  a  more  universal  application  of  parity  laws  across  state 
lines.  Further,  while  the  constitutionality  of  parity  provisions  can  be  debated, 
there  have  been  no  significant  challenges  to  them.  This  is  not  likely  to  change 
given  their  utility  and  widespread  acceptance. 

I.  Dual  Banking  System  History 

A.  Structure  of  Bank  Regulation  in  the  United  States 

A  dual  banking  system  has  existed  in  this  country  since  the  enactment  of  the 
National  Banking  Act  in  1863.'^  Prior  to  this  time,  other  than  the  First  and 
Second  Banks  of  the  United  States,  only  state  banks  existed.  This  structure  had 
spawned  several  hundred  state  banks,  each  issuing  their  own  currency.  National 
banks  were  authorized  in  1863  primarily  due  to  the  need  to  establish  a  uniform 
currency  to  fund  the  Civil  War."^  The  OCC  serves  as  the  primary  regulator  and 
chartering  authority  for  national  banks,  and  the  executive  branch  of  each  state 
maintains  an  agency  charged  with  chartering  and  regulating  state  banks. 

In  addition,  all  national  banks  and  virtually  all  state  banks  are  insured  by  the 
Federal  Deposit  Insurance  Corporation  ("FDIC"),  resulting  in  an  additional 
regulator  for  most  state  banks,  and  in  some  instances,  for  national  banks. '^ 
Further,  all  national  banks  and  many  state  banks  are  members  of  the  Federal 


1 3.  Markham,  supra  note  3,  at  228  (referencing  the  National  Banking  Act  at  12  U.S.C.  §  24 
(2000)). 

14.  Thomas  Mayer  et  al.,  Money,  Banking,  and  the  Economy  35-42  (1981 ). 

1 5.  See  Johnson,  supra  note  2,  at  358-61 ;  see  also  Press  Release,  FDIC  Chairman  Donald 
Powell,  Statement  on  FDIC  Board  Approval  of  Special  Examination  Activities  (Jan.  29,  2002) 
(introducing  an  interagency  regulatory  agreement  entitled  "Coordination  of  Expanded  Supervisory 
Information  Sharing  and  Special  Examinations")  (on  file  with  author).  The  agreement  was 
negotiated  between  the  FDIC,  the  OCC,  the  Federal  Reserve  Board,  and  the  OTS,  and  it  expands 
the  circumstances  under  which  the  FDIC  will  conduct  examinations  of  banks  not  directly  supervised 
by  the  FDIC. 


2003]  STATE  BANK  PARITY  LAWS  20 1 


Reserve  System  that  can  result  in  additional  regulation.'^  Also,  all  banking 
companies  that  have  adopted  a  bank  holding  company  structure  are  subject  to 
regulation  by  the  Federal  Reserve  Board  ("FRB")-*^  While  the  regulatory 
presence  of  the  FDIC  and  FRB  are  not  considered  a  part  of  the  dual  banking 
phenomena,  the  existence  of  this  multitude  of  regulators,  together  with  their 
respective  regulations,  can  complicate  the  regulatory  process  for  both  bankers 
and  regulators. 

B.  Effects  of  the  Dual  Banking  System 

The  dual  banking  system  provides  a  charter  choice  for  bank  management  to 
exercise  based  on  available  powers,  geographic  concerns,  accessibility  of 
regulators,  regulatory  philosophy,  and  costs.  Generally  speaking,  the  larger 
interstate  or  international  companies  have  tended  to  hold  national  charters. 
Smaller,  community  bankers  often  choose  to  operate  under  the  more  local 
regulatory  environment  provided  by  the  state  regulator.  While  these 
characterizations  are  only  generalities,  the  numbers  tend  to  support  them.  As  of 
December  31,  2001,  there  were  8080  commercial  banks  in  the  United  States.'^ 
Of  these,  2137  were  national  banks  and  5943  were  state  banks. '^  The  average 
size  of  the  national  banks  was  $1.7  billion,  while  the  average-sized  state  bank 
held  $494  million  in  assets.^^ 

Historically,  the  existence  of  the  dual  system  has  provided  for  innovation  in 
products  and  services  in  the  industry.  The  competitive  nature  of  the  dual  banking 
system  has  prompted  individual  states  to  be  responsive  to  the  needs  of  their 
constituent  bankers,  thereby  resulting  in  new  products  and  powers.  When  these 
responsive  innovations  are  multiplied  by  the  fifty  state  chartering  authorities,  the 
result  actually  belies  the  "dual"  banking  system  name  and  creates  numerous 
opportunities  for  experimentation.  Among  innovations  attributed  to  the  state 
system  are  checking  accounts,  branching,  real  estate  lending,  deposit  insurance, 
and  trust  services.^'  The  OCC  has  also  been  responsive,  increasingly  so  in  recent 
years,  in  authorizing  additional  national  bank  powers.  National  banks,  through 
OCC  authorization,  have  introduced  or  expanded  powers  in  the  areas  of 
insurance  brokerage,  travel  agencies,  operating  subsidiaries,  leasing,  and  data 
processing  services.^^  More  recently,  OCC  interpretations  have  provided 
expanded  geographical  opportunities  for  national  banks  (branching  powers),  as 


1 6.  Johnson,  supra  note  2,  at  359. 

17.  Mat 358-61. 

18.  Federal  Deposit  Insurance  Coqjoration,  FDIC — Statistics  on  Depository  Institutions 
Report,  Assets  and  Liabilities,  at  http://www2.fdic.gov/sdi/rpt_Financial.asp  (last  visited  May  1 5, 
2002). 

19.  Id. 

20.  Id. 

2 1 .  Arthur  E.  W  i  Imarth,  Jr. ,  The  Expansion  of  State  Bank  Powers,  the  Federal  Response,  and 
the  Case  for  Preserving  the  Dual  Banking  System,  58  FORDHAM  L.  REV.  1 133,  1 156  (1 990). 

22.  ;^.  at  1157-58. 


202  INDIANA  LAW  REVIEW  [Vol.  36:197 


well  as  the  ability  to  increasingly  engage  in  additional  financial  services  such  as 
insurance  and  securities  brokerage.^^ 

The  dual  banking  system  also  provides  protection  against  oppressive 
regulation.  Bankers  may  feel  that  their  regulator  is  overbearing  and  that 
regulatory  mandates  are  negatively  affecting  their  ability  to  manage  their  bank. 
Bank  executives  sometimes  argue  that  regulators  cross  the  line  between 
regulation  of  the  institution  and  management  of  the  institution.  While  these 
concerns  may  at  times  provide  a  scenario  for  a  charter  conversion,  in  most  cases 
it  is  likely  that  the  regulator,  be  it  state  or  national,  was  addressing  legitimate 
"safety  and  soundness"  concerns,  and  the  banker  will  not  find  a  safe  haven  with 
an  alternative  regulator.  Further,  though  many  state  banking  departments 
regulate  multi-billion  dollar  banking  companies,  not  all  state  agencies  have 
experience  with  such  large  and  complex  institutions.  For  this  reason,  some  large 
interstate  or  international  companies  may  opt  for  OCC  regulation,  believing  the 
national  regulator  will  be  more  understanding  of  their  operational  issues  and 
challenges.  Alternatively,  some  bankers  prefer  a  more  provincial  regulatory 
approach,  expecting  local  regulators  to  be  more  sympathetic  to,  and  familiar 
with,  local  economic  issues  and  idiosyncrasies.^"* 

II.  Current  State  Parity  Laws 

A.  Near-Unanimous  Adoption  of  Some  Parity  Provision,  Commonly  in 
Conjunction  with  "Incidental  and  Proper"  Clauses 

Nearly  every  state  has  enacted  some  form  of  parity  provision.  In  fact,  only 
two  states,  Iowa  and  North  Carolina,  have  not.^^  Of  the  forty-eight  states  that  do 
have  state  bank  parity  statutes,  the  vast  majority  of  their  banking  codes  also 
include  some  type  of  "incidental  and  proper"  provisions  that  can  also  serve  to 
expand  upon  the  powers  that  are  specifically  enumerated  by  the  legislatures.^^ 
These  clauses  have  been  subject  to  both  narrow  and  broad  interpretations,  not 
unlike  the  application  of  the  "incidental  powers"  clause  contained  in  the  National 
Bank  Act.^^  The  Chief  Counsel  of  the  OCC,  Julie  L.  Williams,  has  proclaimed 
a  broad  interpretation  of  this  clause,  describing  the  "business  of  banking" 
authorized  for  national  bank  charters  as  "an  evolving  activity  that  could  be 


23.  Mat  1158. 

24.  See  Heidi  Mandanis  Schooner,  Recent  Challenges  to  the  Persistent  Dual  Banking  System, 
41  St.  Louis  U.  L.J.  263, 273  (1996);  see  also  Michael  L.  Stevens,  Vice  President  of  Education  for 
the  Conference  of  State  Bank  Supervisors,  Editorial:  Examiners  Get  Thorough  Training  for  a  Bank 
Career,  AM.  BANKER,  Jan,  25,  2002,  at  16. 

25.  See  Survey  Results,  infra;  see  also  Conference  of  State  Bank  Supervisors — 2000  Profile 
of  State-Chartered  Banking,  Table — Wildcard  Authority  &  Parity  Statutes — Part  1  (on  file  with 
author). 

26.  Survey  Results,  infra. 

27.  See  Julie  L.  Williams  &  Mark  P.  Jacobsen,  The  Business  of  Banking:  Looking  to  the 
Future,  50  Bus.  LAW.  783, 786  (1995);  see  also  the  National  Banking  Act,  12  U.S.C.  §  24  (2000). 


2003]  STATE  BANK  PARITY  LAWS  203 


responsive  to  developments  in  the  financial  marketplace  and  the  needs  of  banks' 
customers."^^  The  breadth  of  the  OCC's  interpretation  of  national  bank  powers 
is  further  expressed  in  her  statement  that  "[t]he  incidental  powers  granted 
national  banks  to  conduct  activities  that  are  'incidental'  to  banking  are  a  separate 
source  of  authority  to  undertake  activities  that  are  inherently  not  part  of  the 
business  of  banking."^^  The  OCC  periodically  updates  its  list  of  permissible 
activities.  The  most  recent  issuance  is  dated  February  2001  .^° 

Williams'  confidence  in  making  such  statements  stems  from  the  United 
States  Supreme  Court  decision  in  NationsBank  of  North  Carolina  v.  Variable 
Annuity  Life  Insurance?^  The  Court,  in  considering  "whether  national  banks  may 
serve  as  agents  in  the  sale  of  annuities,"  supported  the  OCC's  determination  that 
this  activity  was  "incidental  to  the  'business  of  banking. '"^^  The  opinion 
reiterated  the  Court's  prior  holding  that  "[i]t  is  settled  that  courts  should  give 
great  weight  to  any  reasonable  construction  of  a  regulatory  statute  adopted  by  the 
agency  charged  with  the  enforcement  of  that  statute"  and  stated  that  the  OCC 
"warrants  the  invocation  of  this  principle.""  The  Court  further  held  that  "the 
'business  of  banking'  is  not  limited  to  the  enumerated  powers"  and  that  the  OCC 
"has  discretion  to  authorize  activities  beyond  those  specifically  enumerated. "^^ 

While  state  bank  parity  laws  are  generally  thought  to  provide  a  level  playing 
field  between  state  and  national  banks,  some  of  the  states  have  expanded  the  idea 
of  parity  beyond  federal  institutions.  For  example,  the  Michigan  parity  provision 
provides  its  state-chartered  banks  with  powers  granted  to  all  financial  service 
providers  chartered  not  just  by  the  federal  government,  but  also  by  any  other  state 
or  political  subdivision.^^  Further  broadening  this  parity  provision  is  the  fact  that 
the  term  "financial  service  providers"  is  not  defined.  Georgia's  parity  statute 
also  goes  beyond  federal  financial  institutions,  and  includes  "others  providing 
financial  services  in  this  state  existing  under  the  laws  of  the  United  States,  other 
states,  or  foreign  governments."^^ 

It  was  noted  earlier  that  neither  Iowa  nor  North  Carolina  contain  parity 
provisions  in  their  banking  codes.  While  neither  of  these  states  have  statutes  that 
specifically  provide  for  parity  with  respect  to  national  banks,  representatives 


28.  Julie  L.  Williams  &  James  F.E.  Gillespie,  Jr.,  The  Business  of  Banking:  Looking  to  the 
Future—Part  H  52  BUS.  LAW.  1279,  1281-82  (1997). 

29.  Id.  at  1282. 

30.  Office  of  the  Comptroller  of  the  Currency,  Activities  Permissible  for  a  National  Bank 
(Feb.  2001),  available  at  http://www.occ.treas.gov.  The  preamble  to  this  most  recent  issuance 
states:  "The  business  of  banking  is  an  evolving  concept  and  the  permissible  activities  of  [national 
banks]  similarly  evolve  over  time.  Accordingly,  this  list  is  not  exclusive."  Id. 

31.  513  U.S.  251(1995). 

32.  /^.  at  254. 

33.  Id.  at  256  (quoting  Clarke  v.  Sec.  Indus.  Ass'n,  479  U.S.  388, 403-04  (1987)  and  Inv.  Co. 
Inst.  V.  Camp,  401  U.S.  617,  626-27  (1971)). 

34.  /^.  at  258. 

35.  Mich.  Comp.  Laws  Ann.  §  487.14101(2)(b)  (1998  8l  Supp.  2001). 

36.  Ga.  Code  Ann.  §  7-l-61(a)(l)  (1997  &  Supp.  2001). 


204  INDIANA  LAW  REVIEW  [Vol.  36: 1 97 


from  both  states  expressed  strong  opinions  that  other  available  legislative 
provisions  serve  to  provide  their  respective  state  banks  with  all  necessary  and 
desired  powers.^^  Specifically,  Iowa  has  two  provisions  that  are  used  in  lieu  of 
a  parity  provision.  The  first  provides  that  state  banks  "have  and  exercise  all 
powers  necessary  and  proper  to  effect  any  or  all  of  the  purposes  for  which  the 
state  bank  is  organized."^*  The  second  and  more  readily  invoked  provision 
provides  that  Iowa  banks  may  exercise  "[a] II  other  powers  determined  by  the 
superintendent  to  be  appropriate  for  a  state  bank."^^  According  to  Donald  G, 
Senneff,  Assistant  Attorney  General  and  General  Counsel  to  the  Iowa  Division 
of  Banking,  their  agency  prefers  this  approach  to  ensuring  competitive  parity  for 
two  reasons:  1)  the  state's  enumerated  powers  already  provide  the  ability  to 
engage  in  the  majority  of  desired  activities,  and  2)  the  regulators  wanted  to  avoid 
conflicts  with  state  laws.  He  expressed  a  concern  that,  in  effect,  delegating 
authority  to  Congress  or  the  OCC  could  be  viewed  as  a  "slap  in  the  face"  to  the 
Iowa  legislature.'*^ 

North  Carolina  statutes  provide  an  even  broader  powers  provision.  The 
enumerated  powers  list  in  the  "General  Powers"  article  of  the  state  banking  code 
is  prefaced  with  this  introduction:  "In  addition  to  the  powers  conferred  by  law 
upon  private  corporations,  banks  shall  have  the  power  .  .  .  ."'*'  L.  McNeil 
Chestnut,  Special  Deputy  Attorney  General  of  the  North  Carolina  Department  of 
Justice,  points  out  that  this  broad  provision  precludes  the  need  for  a  parity  clause. 
He  notes  that,  while  banks  are  not  required  to  seek  approval  prior  to  exercising 
new  powers,  most  do  so.**^  The  North  Carolina  Commissioner  of  Banks,  in  its 
regulation  of  the  institutions'  "safety  and  soundness,"  retains  the  power  to 
oversee,  and  if  necessary,  terminate  powers  or  practices  deemed  unsafe.'*^  On  an 
annual  basis,  the  Commissioner  publishes  a  report  detailing  the  various  powers 
engaged  in  by  state  banks.*^ 


37.  See  Survey  Results,  infra.,  Telephone  Interview  with  Donald  G.  Senneff,  Assistant 
Attorney  General  and  General  Counsel,  Iowa  Division  of  Banking  (Feb.  5,  2002)  [hereinafter 
Senneff  Telephone  Intervie\v];  Telephone  Interview  with  L.  McNeil  Chestnut,  Special  Deputy 
Attorney  General,  North  Carolina  Department  of  Justice  (Feb.  5,  2002)  [hereinafter  Chestnut 
Telephone  Interview]. 

38.  IowaCodeAnn.  §524.801(10) (2001). 

39.  Id.  §  524.801(14). 

40.  See  Senneff  Telephone  Interview,  supra  note  37. 

41.  N.C.  GEN.  Stat.  §53-43  (1999  &Supp.  2001). 

42.  See  Chestnut  Telephone  Interview,  supra  note  37. 

43.  N.C.  Gen.  Stat.  §  53-104  (1999  &  Supp.  2001). 

44.  See  State  of  North  Carolina — Commissioner  of  Banks,  2000  Survey  of  Revenue 
Producing  Services,  available  at  http.7/www.banking.state.nc.us/forms/banks/20revnsv.pdf  (last 
visited  Jan.  31,  2003);  see  also  State  of  Illinois — Office  of  Banks  and  Real  Estate,  Comparison  of 
Powers  of  Illinois  State  Commercial  Banks  and  Savings  Banks  with  Powers  of  Federal  Savings 
Associations  and  National  Banks,  available  at  http://www.obre.state.il.us/CPT/COMCL/POSB/ 
TBLCOM/HTM  (last  visited  Jan.  31,  2003). 


2003]  STATE  BANK  PARITY  LAWS  205 


B.  Most  Parity  Laws  Require  Some  Type  of  Notice  or  Approval 

Of  the  forty-eight  states  with  parity  laws,  thirty-two  require  the  state  bank 
regulatory  agency  to  approve  the  specific  powers  before  the  bank  may  engage  in 
them/^  This  authority  is  most  commonly  vested  in  the  agency's  chief  executive, 
and  less  often,  in  the  agency  board/^  Another  eight  states,  while  not  specifically 
requiring  approval,  provide  for  notification  by  the  bank,  and  allow  the  banking 
agency  to  disapprove  the  practice  within  a  short  period  of  time — generally  thirty 
to  sixty  days/^  While  not  technically  an  approval  process,  the  effective  results 
can  be  the  same.  In  another  seven  states,  the  state  banks  may  automatically 
exercise  the  power  held  by  national  banks  within  their  states/^  In  the  remaining 
state  (Kentucky),  sometimes  the  power  is  automatically  extended,  based  on  the 
condition  of  the  bank."*^  Specifically  Kentucky,  banks  with  "CAMELS"^^  ratings 
of  1  or  2  may  exercise  parity  rights  without  seeking  approval.^ • 


45.  Survey  Results,  infra. 

46.  Id. 

47.  Id.\  see  also  Warsame  v.  State,  659  A.2d  1271,  1272  (Md.  1995);  State  v.  Union  Tank 
CarCo.,439So.2d377(La.  1983);  State  v.  Thompson,  627  S.W.2d  298  (Mo.  1982).  \n  Warsame, 
a  Maryland  appellate  court  examined  a  state  narcotics  law,  stating  that  "[a]ny  new  substance  which 
is  designated . . .  under  federal  law  shall  be  similarly  controlled . . .  unless  the  Department  objects" 
and  further  noting  that  the  state  agency's  ability  to  "object"  to  the  incorporation  of  federal 
provisions  into  a  state  statute  supported  the  constitutionality  of  a  Maryland  state  law.  659  A.2d  at 
1 273.  Generally  this  line  of  cases  points  to  the  need  for  the  legislation  to  both  require  state  agency 
approval  (or  lack  of  objection)  and  provide  defined  criteria  for  consideration. 

48.  Survey  Results,  infra.  In  Nebraska,  one  of  the  states  that  allows  for  the  adoption  of 
national  bank  powers  without  the  requirement  for  state  agency  review,  the  powers  are  limited  to 
those  available  to  national  banks  at  the  time  of  the  annual  update  of  state  law.  See  Neb.  Rev.  Stat. 
§  8-1,140  (1997  &  Supp.  2001).  Thus,  the  Nebraska  law  is  not  prospective  in  nature,  and  only 
references  existing  federal  law.  In  essence  then,  the  Nebraska  legislature  is  arguably  only  choosing 
to  incorporate  federal  language  by  reference,  rather  than  drafting  separate  state  language,  for  powers 
that  it  has  deemed  appropriate  for  Nebraska  banks. 

49.  Survey  Results,  infra. 

50.  See  Federal  Deposit  Insurance  Corporation,  Keeping  the  Promise:  Recommendations  for 
Deposit  Insurance  Reform,  n.4  (Apr.  2001 ),  at  http://www.fdic.gov.  This  document  describes  the 
components  of  the  CAMELS  rating  system  to  include  an  analysis  of  capital  adequacy,  jsset  quality, 
management,  earnings,  jiquidity,  and  sensitivity  to  market  risk.  Each  of  these  components  is  rated 
from  one  (best)  through  five  (worst),  and  a  composite  score  is  awarded  for  each  institution. 
CAMELS  ratings  are  generated  from  on-site  examinations  of  the  institutions,  generally  on  an 
eighteen-month  cycle.  State  banking  agencies  and  the  OCC,  as  the  banks'  chartering  authorities, 
utilize  a  range  of  corrective  actions  in  attempts  to  rehabilitate  troubled  institutions.  These  actions 
begin  with  requiring  resolutions  of  the  bank's  board  to  make  certain  changes  and  can  continue  if 
necessary  to  the  closing  of  the  bank.  See,  e.g..  Office  of  the  Comptroller  of  the  Currency,  An 
Examiner's  Guide  to  Problem  Bank  Identification,  Rehabilitation,  and  Resolution  27-61  (Jan. 
2001),  at  http://www.occ.treas.gov/prbbnkgd.pdf 

51 .  Ky.  Rev.  Stat.  Ann.  §  287.102(2)  (1998  &  Supp.  2001). 


206  INDIANA  LAW  REVIEW  [Vol.  36: 197 


Thus,  in  approximately  eighty-three  percent  of  instances,  the  state  banking 
department  retains  the  right  to  either  deny,  or  disapprove,  the  desired  activity. 
In  essence,  these  state  executive  branch  agencies  have  been  delegated  the  power 
by  their  state  legislatures  to  determine  when  federal  bank  powers  should  be 
extended  to  state  banks.  In  the  remaining  seventeen  of  the  states,  the  state 
legislatures  have,  under  most  circumstances,  and  likely  unknowingly  or 
inadvertently,  delegated  this  authority  to  either  Congress,  or  to  the  OCC,  acting 
through  its  interpretation  of  the  National  Banking  Act. 

It  is  important  to  note  that  in  twenty  of  the  states  that  provide  for  agency 
approval,  the  statute  calls  for  extension  of  the  powers  by  either  rulemaking  or 
regulation."  The  implications  of  this  requirement,  and  its  relevance  with  respect 
to  the  constitutional  question  of  legislative  delegation,  is  further  considered  in 
Part  III  of  this  Note. 

C.  Many  Provide  No  Specific  Guidance  for  Approval 

Fifteen  of  the  forty  states  that  empower  their  banking  agencies  (either  always 
or  sometimes)  with  the  authority  to  deny  or  disapprove  parity  requests  contain 
no  specific  criteria  for  the  decision-making.^^  In  essence,  the  determination  is 
left  to  the  discretion  of  the  state  regulator,  heightening  the  constitutional 
question.^"*  Twelve  states  require  a  determination  that  the  new  power,  if  granted, 
will  not  threaten  the  "safety  and  soundness"  of  the  institution.^^  Another  eleven 
of  the  states,  in  recognition  of  the  competition  between  state  and  national 
charters,  require  a  consideration  of  the  resulting  effect  on  bank  competition  and 
the  dual  banking  system  if  the  power  is  not  extended  to  state  banks.^^  The 
remaining  two  states  consider  the  contemplated  power's  consistency  with  the 
state  banking  code,  and  the  general  public  interest,  in  determining  whether  to 
allow  the  practice.^^  The  presence  or  absence  of  such  consideration  criteria,  and 
the  nature  and  extent  of  the  criteria,  is  further  discussed  in  Part  Ill's  analysis  of 
the  constitutional  question. 


52.  Survey  Results,  infra. 

53.  Id. 

54.  Hans.  A.  Linde,  Structure  and  Terms  of  Consent:  Delegation,  Discretion,  Separation  of 
Powers,  Representation,  Participation,  Accountability?,  20  Cardozo  L.  Rev.  823,  850  (1999). 
Linde  states  that  "[u]nconditional  delegation  of  open-ended  lawmaking  power  to  a  single  executive, 
elected  or  not,  amounts  to  legislative  abdication.   It  is  the  essence  of  modern  dictatorships  and 
incompatible  v/ith  a  republican  form  of  government."  Id.  (footnote  omitted). 

55.  Survey  Results,  infra. 

56.  Id.  As  discussed  in  Part  IV  infra,  these  concepts  of  competition  and  parity  raise  a 
somewhat  circular  philosophical  issue.  Namely,  state  banks,  through  parity  provisions,  seek  the 
powers  granted  to  national  banks,  yet  the  more  homogenized  the  charters  become,  the  less 
significance  is  attached  to  the  inherent  characteristics  of  the  dual  banking  system. 

57.  Id 


2003]  STATE  BANK  PARITY  LAWS  207 


D.  Most  Parity  Provisions  Override  Even  Specific  State  Law  Prohibitions 

In  thirty-five  states,  if  the  parity  law  provisions  are  met,  the  federal  law 
preempts  even  state  laws  that  specifically  prohibit  particular  powers  or 
products.^^  Eight  other  state  parity  laws  contain  only  minor  exceptions  to  this 
blanket  preemption.^^  Thus,  in  only  five  states  did  the  legislature  limit  the  parity 
law  provisions  to  allow  only  for  additional  powers  that  are  consistent  with, 
and/or  not  prohibited  by,  existing  state  law.^  These  findings  appear  to  represent 
a  significant  departure  from  a  regulatory  environment  that  has  historically  only 
allowed  financial  institutions  to  exercise  powers  that  were  specifically 
enumerated  in  state  law.^' 

The  wording  used  in  the  various  states'  parity  provisions,  with  respect  to 
powers  otherwise  prohibited  by  state  law,  varies  significantly.  In  some  states, 
such  as  Alabama,  the  intent  of  the  legislature  is  very  clear.^^  The  parity  clause 
and  the  provision  overriding  contrary  state  law  are  contained  within  the  same 
paragraph.^^  Further,  the  wording,  "[t]he  provisions  of  this  section  shall  take 
priority  over,  and  be  given  effect  over,  any  other  general  or  specific  provisions 
of  the  Alabama  law  relating  to  banking  to  the  contrary"  leaves  little  room  for 
debate.^'*  Other  state  statutes  are  less  specific,  but  just  as  clear  by  introducing  the 
parity  provision  with  a  phrase  such  as  "[n]otwithstanding  other  provisions  of 
state  law "^^ 

Other  statutes  are  not  constructed  with  such  clarity.  Indiana's  parity 
provision  states,  in  part:  "A  bank  that  intends  to  exercise  any  rights  and 
privileges  that  are:  ( 1 )  granted  to  national  banks;  but  (2)  not  authorized  for  banks 
under  the  Indiana  Code  (except  for  this  section) . . .  shall  submit  a  letter  to  the 
department  describing  ...  the  requested  rights  and  privileges  . . .  that  the  bank 
intends  to  exercise. "^^  The  question  is  whether  the  phrase  "not  authorized"  was 
intended,  and  should  be  read,  to  include  "prohibited."  Certainly  all  prohibited 
powers  are  not  authorized,  but  it  is  less  clear  that  the  phrase  "not  authorized"  was 
intended  to  include  previously  prohibited  powers.  In  other  words,  it  is  clear  the 
provision  is  meant  to  grant  a  power  to  state  banks  that  had  not  previously  been 
addressed  in  state  law.  It  is  less  clear  that  this  was  intended  to  reach  issues  that 
were  previously  addressed,  and  proscribed,  by  the  legislature.  As  this  question 
arises  as  a  product  of  the  unique  interplay  of  dual  regulation/legislation, 
specifically  enumerated  powers,  parity  provisions,  and  the  particular  wording  of 


58.  Id. 

59.  Id. 

60.  Id.  These  states  are  Arizona,  Colorado,  Massachusetts,  Minnesota,  and  Montana. 

6 1 .  Johnson,  supra  note  2,  at  357. 

62.  Ala.  Code  §  5-5A-18.1  (1975  &  Supp.  2001). 

63.  Id 

64.  Id 

65.  See,  e.g. ,  ALASKA  STAT.  §  06.0 1 .020  (2001 );  Cal.  FlN.  CODE  §  753(b)(  1 )( 1 999  &  Supp. 
2002);  Idaho  Code  §  26-1 101(3)  (2000  &  Supp.  2001 );  205  III.  Comp.  Stat.  AhfN.  5/5(  1 1 ). 

66.  IND.  Code  §  28-1-1  l-3.2(b)  (1998  &  Supp.  2001)  (emphasis  added). 


208  INDIANA  LAW  REVIEW  [Vol.  36: 1 97 


the  Indiana  Code,  there  is  no  definitive  answer  to  this  question.  Subsection  (f), 
following  four  paragraphs  later,  provides  additional  guidance:  "The  exercise  of 
rights  and  privileges  by  a  bank  in  compliance  with  and  in  the  manner  authorized 
by  this  section  is  not  a  violation  of  any  provision  of  the  Indiana  Code."^'  While 
this  wording  appears  to  reach  previously  prohibited  powers,  a  simple  phrase  such 
as  "notwithstanding  any  other  state  law"  would  have  been  clearer. 

In  any  event,  the  delegation  of  authority  that  allows  state  banks  to  engage  in 
a  power,  or  offer  a  product,  that  was  previously  specifically  prohibited  by  state 
law,  appears  to  represent  the  strongest  case  for  the  position  that  at  least  some 
state  bank  parity  laws  represent  an  unconstitutional  abdication  of  lawmaking 
responsibility  by  state  legislators. 

E.  Parity  Provisions  Have  Been  Used  to  Extend  a  Variety  of  Bank  Powers 

Through  the  years,  parity  provisions  have  been  invoked  to  provide  a  wide 
variety  of  previously  unauthorized  powers  to  state  banks.^^  Many  have  afforded 
additional  options  or  further  definitions  for  core  bank  products  and  services.  For 
example,  they  have  provided  for  amendments  and/or  additions  to  the  types  of 
lending  activities  in  which  banks  may  engage,  as  well  as  adjustments  to  the 
calculation  of  the  banks'  legal  lending  limits.^^  The  lists  of  statutorily  acceptable 
investment  securities  for  bank  purchase  have  also  been  expanded,^^  and  some 
states  have  expanded  the  banks'  ability  to  purchase  bank-owned  life  insurance.^' 
The  provisions  have  also  been  used  to  expand  the  banks'  ability  to  invest  in 
subsidiaries,  and  to  expand  the  powers  in  which  bank  subsidiaries  may  engage.^^ 
These  types  of  state  statute  amendments  that  extend  federal  powers  to  state  banks 
would  be  viewed  as  falling  within  a  historically  narrow  interpretation  of  powers 
that  are  incidental  to  the  business  of  banking. 

The  parity  provisions  have  also  been  used  to  expand  powers  that  were 
traditionally  outside  of  the  scope  of  the  business  of  banking.^^  Common  among 
these  are  additional  powers  relative  to  insurance  sales,  securities  brokerage,  and 
investment  advice.  Additional  powers  not  previously  enumerated  by  state 
legislatures  include  courier  services,  travel  agency  services,  real  estate  holdings 
and  leasing,  tax  preparation  service,  title  insurance  powers,  and  the  ability  to 
purchase  Federal  Home  Loan  Bank  Stock.^'*  While  not  necessarily  incidental  to 
the  business  of  banking,  these  powers  and  products  have  come  to  be  considered 
complimentary  to  the  basic  financial  services  previously  offered  by  banks,  thus 
satisfying  the  parity  provisions  of  many  states,  and  allowing  for  greater  equality 


67.  Id. 

68.  See  Survey  Results,  infra. 

69.  Id. 

70.  Id. 

71.  Id. 

72.  Id. 

73.  Id. 

74.  Id. 


2003]  STATE  BANK  PARITY  LAWS  209 

with  the  national  charter. 

III.  CONSTITUTIONALITY  OF  STATE  BANK  PARITY  LAWS 

A.  Concerns  for  Abdicating  Lawmaking  to  the  Federal 
Legislature  and/or  Regulators 

Despite  the  fact  that  "all  enactments  enjoy  a  strong  presumption  of 
constitutionality,"^^  an  argument  can  be  made  that  state  bank  parity  laws,  which 
extend  the  powers  of  national  banks  to  state-chartered  banks,  represent  an 
unconstitutional  delegation  of  lawmaking  powers  by  a  state  legislature  to 
Congress.  The  primary  argument  is  that  parity  laws  go  well  beyond  the  generally 
accepted  practice  of  the  incorporation  of  certain  federal  language,  and  amount 
to  the  delegation  of  authority  that  is  significant  and  integral  to  the  states' 
regulation  of  their  financial  institutions.  In  practice,  this  question  of  delegation 
reaches  even  further  since  it  is  the  OCC,  rather  than  Congress,  whose 
interpretations  and  actions  often  expand  national  bank  powers.  This  concern  is 
heightened  when  the  powers  are  extended  automatically,  without  the  satisfaction 
of  specified  criteria,  and  heightened  further  when  they  override  a  theretofore- 
specific  prohibition  in  state  law. 

The  United  States  Supreme  Court,  regarding  the  constitutionality  of 
congressional  delegation  of  legislative  powers,  considers  whether  Congress  "has 
attempted  to  abdicate,  or  to  transfer  to  others,  the  essential  legislative  functions 
with  which  it  is  vested  by  the  Constitution."^^  While  the  applicability  of  the 
analysis  of  congressional  delegation  to  the  issue  of  state  legislative  delegation 
has  been  debated,  in  the  absence  of  a  Supreme  Court  opinion  directly  on  point, 
such  precedent  remains  "entitled  to  respectful  attention  and  may  be  relied 
upon."^^  The  questions  remain,  "what  constitutes  'essential  legislative 
functions?'"  and  further,  "what  type  of  legislative  delegation  amounts  to  an 
abdication  of  these  functions?"  When  state  legislators  have  traditionally 
provided  specifically  enumerated  bank  powers,  it  can  at  least  be  argued  that  the 
maintenance  of  this  list  is  an  "essential  legislative  function."  Further,  the 
delegation  of  the  ability  to  expand  this  list  of  approved  powers  to  include 
activities  that  were  previously  specifically  prohibited  by  prior  legislation  can  be 
argued  to  represent  an  abdication  of  legislative  function  and  responsibility. 

Many  of  the  state  supreme  court  decisions  that  have  considered  the 


75.  State V. Gill, 584N.E.2d  1200, 1201  (Ohio  1992).  Seealso Indep. Cmty. Bankers Ass'n 
of  S.D.  V.  State  By  &  Through  Meierhenry,  346  N.W.2d  737,  739  (S.D.  1984)  (stating  that  "[a]ny 
legislative  act  is  accorded  a  presumption  in  favor  of  constitutionality  and  that  presumption  is  not 
overcome  until  the  unconstitutionality  of  the  act  is  clearly  and  unmistakenly  shown  and  there  is  no 
reasonable  doubt  that  it  violates  fundamental  constitutional  principles."). 

76.  Currin  v.  Wallace,  306  U.S.  1,  15  (1939). 

77.  Devlin,  supra  note  7,  at  1 220  (cautioning  against  consideration  of  federal  precedent  when 
the  state  constitutional  provisions  were  uniquely  structured,  reflecting  local  history  or  culture,  and 
not  consistent  with  typical  constitutional  language). 


210  FNDIANA  LAW  REVIEW  [Vol.  36:197 


constitutional  question  of  whether  legislative  delegation  by  state  legislators  to 
Congress  or  federal  agencies  was  constitutional  have  involved  the  simple 
incorporation  of  some  federal  legislative  language  in  state  law.^*  In  such  cases, 
the  courts  have  generally  upheld  the  constitutionality  of  the  state  law  on  the 
grounds  that  reference  to  a  federal  defmition  (in  this  case,  in  the  state's  revenue 
code)  "does  not  constitute  an  unconstitutional  delegation  of  legislative  power 
where  the  prospective  recognition  is  only  incidental  to  the  administration  of  the 
statute  . . .  and  not  likely  to  frustrate  the  purpose  of  the  statute."^^  Similar  results 
have  been  reached  when  the  deference  to  federal  law  was  only  with  respect  to  the 
defmition  of  terms,  such  as  "bank  holding  company."^"  This  type  of  language 
incorporation  exercised  by  state  legislatures  can  serve  to  ensure  consistency  and 
can  reduce  misunderstandings,  especially  in  areas  of  interstate  commerce. 
Adoption  of  certain  standard  defmitions  and  terminologies  can  promote 
efficiency  without  sacrificing  or  abdicating  state  lawmaking  powers  or  state 
autonomy. 

However,  while  from  a  practical  standpoint  it  can  be  argued  that  it  is  both 
expedient  and  convenient  to  tie  state  bank  powers  to  federal  powers,  it  also 
introduces  a  very  slippery  slope.  In  rebuking  what  it  found  to  be  an 
unconstitutional  delegation  of  state  lawmaking  power  to  the  federal  government 
in  a  labor  contract  matter,  the  court  in  DeAgostina  v.  Parkshire  Ridge 
Amusements  stated  that  "[a]ssuming ...  the  means  adopted  is  more  practical  and 
convenient  than  the  establishment  by  the  state  of  its  own  code  authorities 
modeled  after  the  federal  system,  that  alone  presents  no  justification  for  what  has 
been  done"  and  warned  "if  the  state's  power  to  delegate  governmental  functions 
to  a  foreign  agency  is  sanctioned,  there  can  be  no  legitimate  limits  to  its 
exercise."^'  This  statement  recognizes  potential  pitfalls  of  the  temptation  to 
enact  state  legislation  that,  by  incorporating  substantive  federal  law,  puts  the 
value  of  convenience  and  timeliness  above  the  need  to  address  the  specific 


78.  First  Fed.  Sav.  &  Loan  Ass'n  of  New  Haven  v.  Connelly,  1 15  A.2d  455,  492  (Conn. 
1955);  State  v.  Johnson,  173  N.W.2d  894,  895  (S.D.  1970). 

79.  Miller  v.  State  Dept.  of  Treasury,  188  N.W.2d  795,  808  (Mich.  1971)  (holding  that  the 
simple  adoption  of  the  federal  calculation  of  "taxable  income"  did  not  amount  to  an  abdication  of 
lawmaking  by  the  state  legislators). 

80.  Indep.  Cmty.  Bankers  Ass  'n,  346  N.W.2d  at  743.  In  the  case,  the  defmition  used  by  the 
court  was  two  and  one-half  pages  long,  arguably  reason  enough  to  incorporate  by  reference  rather 
than  spell  out  similar  wording  in  the  state  law.  Id.  at  744.  Interestingly,  the  plaintiff  in  this  case 
also  challenged  the  constitutionality  of  the  delegation  because  the  state  law  referred  to  "the  Bank 
Holding  Company  Act  of  1 956,  as  amended.''  Id.  at  743  (emphasis  added).  That  court,  citing  State 
V.  Julson,  202  N.  W.2d  145  (N.D.  1972),  distinguished  between  the  phrases  "and  all  amendments" 
and  "as  amended,"  and  declared  that  "as  amended"  referred  to  the  past  tense,  meaning  that  it 
included  amendments  to  the  Bank  Holding  Company  Act  enacted  prior  to  the  incorporation  of  this 
defmition  into  state  law.  Indep.  Cmty.  Bankers  Ass'n,  346  N.W.2d  at  743-44.  Thus  the 
incorporation  of  a  federal  law,  as  amended,  into  a  state  statute,  is  not  necessarily  a  prospective 
delegation,  and  may  be  limited  to  then-existing  federal  law. 

81.  278  N.Y.S.  622,  629-30  (N.Y.  Sup.  1935). 


2003]  STATE  BANK  PARITY  LAWS  211 


legislative  issues  of  the  individual  state. 

The  prospective  nature  of  the  delegation  afforded  by  parity  provisions 
provides  additional  pause  as  in  most  cases  the  state  legislature  is  providing  for 
the  adoption  of  powers  not  yet  enacted  by  Congress.  This  was  addressed  by  the 
court  in  Independent  Community  Bankers  Ass  'n  when  it  stated,  "[s]tatutes 
adopting  laws  or  regulations  of .  .  .  the  federal  government .  .  .  effective  at  the 
time  of  adoption  are  valid,  but  attempted  adoption  of  future  laws,  rules  or 
regulations  of  .  .  .  the  federal  government  .  .  .  generally  have  been  held 
unconstitutional.'*^^  The  Washington  Supreme  Court  echoed  this  position  in  State 
V.  Dougali  v/hen  it  declared  a  state  narcotics  law  unconstitutional  as  it  permitted 
"future  federal  designation  ...  by  means  of  Board  inaction  or  acquiescence."*^ 
The  vast  majority  of  the  states'  bank  parity  laws  provide  for  true  prospective 
delegation,  as  they  do  not  limit  the  provisions  only  to  existing  federal  legislation 
or  regulations,  thus  heightening  the  constitutional  question.*'* 

A  further  concern  in  bank  regulation  exists  due  to  the  aggressive  and 
arguably  liberal  interpretations  of  national  bank  powers  being  extolled  by  the 
OCC.  In  effect,  such  liberal  interpretations  extend  the  abdication  issue  one  step 
further — from  the  federal  legislature  to  an  agency  of  the  Department  of  the 
Treasury.  National  bank  powers  can  arise  from  one  or  more  of  three  means:  clear 
legislative  authority,  prescribed  rulemaking  procedures  by  the  OCC,*^  or  through 
administrative  fiat  exercised  by  the  Comptroller.  These  OCC  interpretations  can 
result,  and  arguably  have  resulted,  in  the  automatic  extension  of  a  power  to  a 
state  bank  that  was  contemplated  neither  by  state  nor  federal  lawmakers. 
Indication  that  the  OCC  has  interpreted  the  National  Banking  Act  in  a  manner  not 
foreseen  by  Congress  was  evidenced  in  a  1994  congressional  reprimand  of  the 
OCC  for  "'inappropriately  aggressive'  preemption."*^ 

The  Louisiana  Supreme  Court,  in  State  v.  Rodriguez,  addressed  the 
constitutionality  of  a  state  law  that  effectively  delegated  authority  to  an  agency 
of  the  federal  government.*^    The  state  law  stated,  "The  secretary  of  the 


82.  346  N.W.2d  at  744  (quoting  Schryver  v.  Schirmer,  171  N.W.2d  634,  636-37  (S.D. 
1 969));  see  also  Miller,  1 88  N.  W.2d  at  801  ("It  is  well  settled  that  incorporation  by  reference  of  an 
existing  Federal  law  in  a  state  statute  does  not  render  that  statute  constitutionally  infirm"). 

83.  570P.2d  135,  138  (Wash.  1977). 

84.  One  exception,  as  noted  supra,  note  48,  is  the  Nebraska  parity  provision  that  extends  only 
federal  powers  existing  at  the  time  of  the  enactment  of  state  law.  Another  is  the  current  South 
Dakota  parity  statute  that  seeks  to  extend  parity  only  to  federal  "powers  and  authorities  conferred 
asof  January  1, 1999."  S.D.CodifiedLaws§51A-2-14.1  (1990  &Supp.  2001).  While  these  two 
states'  laws  appear  to  avoid  prospective  delegation  to  federal  law,  they  also  appear  to  minimize  the 
utility  of  the  parity  provisions  as  a  means  of  providing  for  statutory  amendments  between  state 
legislative  sessions. 

85.  See  Office  of  the  Comptroller  of  the  Currency,  OCC  Standards  for  Developing 
Regulations  (Nov.  20,  200\)  available  at  http://www.occ.treas.gov. 

86.  Stacy  Mitchell,  Rogue  Agencies  Gut  State  Banking  Laws,  THE  NEW  RULES,  Fall  200 1 , 
at  4  (quoting  Congress's  1994  reprimand  at  pp.  H6625-H6642  of  the  Congressional  Record). 

87.  379So.2dl084(La.  1980). 


212  INDIANA  LAW  REVIEW  [Vol.  36:197 


Department  of  Health  and  Human  Resources  shall  add  a  substance  as  a  controlled 
dangerous  substance  if  it  is  classified  as  a  controlled  dangerous  substance  by  the 
Drug  Enforcement  Administration  of  the  United  States  govemment."^^  While  at 
first  glance  this  statement  appears  to  be  a  delegation  to  the  secretary  of  the  state 
agency,  the  word  "shall"  effectively  ties  that  official's  hands.  The  state  law 
provides  for  the  automatic  inclusion  of  narcotics  if  designated  by  the  DEA.  In 
striking  the  law  down  as  unconstitutional,  the  court  said  that  the  legislature  may 
confer  powers  "upon  executive  agencies  if  it  supplies  adequate  standards  to 
execute  legislative  policy;  however,  it  cannot  surrender  the  legislative  power 
itself  to  determine  what  the  law  shall  be."^^  In  this  criminal  case,  the  prospective 
nature  of  the  delegation  was  significant.  Once  the  DEA  added  the  controlled 
substance  to  its  list,  Louisiana  likewise  added  it,  and  introduced  state  legislation 
to  incorporate  the  substance  into  their  criminal  code.  However,  the  plaintiff  was 
arrested  and  charged  with  possession  between  the  time  the  substance  was  added 
to  the  agency's  list  and  the  time  it  was  legislatively  incorporated  into  state  law. 
Upon  these  facts,  the  prosecution  was  dismissed.^^ 

In  1994,  the  Texas  Department  of  Banking  ("TDB")  found  itself  in  the 
unusual  position  of  promoting  a  revised  parity  statute  in  an  effort  to  limit  the 
ability  of  state  banks  to  undertake  powers  authorized  for  national  banks.  The 
TDB 's  efforts  were  due  to  the  existence  of  a  state  constitutional  provision,  added 
in  1984,  that  stated,  "A  state  bank . . .  notwithstanding  any  other  provision  of  this 
section,  has  the  same  rights  and  privileges  that  are  or  may  be  granted  to  national 
banks  of  the  United  State  domiciled  in  this  State."^'  In  her  testimony  before  the 
Texas  House  of  Representatives,  former  TDB  Commissioner  Catherine  A. 
Ghiglieri  stated  the  agency's  position  that  "state  bank  regulation  would  be 
chaotic  and  unpredictable  if  Section  16(c)  is  fully  self-activating,  and  would 
damage  the  dual  banking  system. "^^  Conversely,  she  noted  that  if,  instead,  the 
constitutional  provision  was  viewed  as  "fully  permissive,  the  Legislature  through 
laws, . . .  or  the  Banking  Commissioner  through  opinions  or  policies  would  have 
to  authorize  the  activity  before  a  state  bank  could  exercise  a  national  bank 
right."^^  Ultimately  a  parity  provision  was  enacted  that  provided  a  means  for 
state  banks  to  "have  the  same  rights  and  privileges  as  national  banks"  while 
establishing  "an  orderly  system  of  implementation  .  .  .  essential  to  regulatory 
control."^' 


88.  Mat  1085. 

89.  W.  at  1087. 

90.  Id. 

91.  Tex.  Const,  art.  XVI,  §  16(c). 

92.  Proposed  Legislation  to  Modernize  the  Texas  Banking  Code  of  1943,  Supplement  to 
Testimony  Presented  to  the  Committee  on  Investments  &  Banking,  Texas  House  of  Representatives 
(Sept.  22,  1994)  (written  testimony  of  Catherine  A.  Ghiglieri)  (on  file  with  author). 

93.  Id. 

94.  Id.;  Tex.  Rev.  Civ.  Stat.  Ann.  art.  342-3.010  (1973  &  Supp.  1996). 


2003]  STATE  BANK  PARITY  LAWS  2 1 3 


B.   Concerns  for  Abdicating  Lawmaking  to  Executive  Branch  Officials 

Parity  provisions  that  delegate  the  ultimate  determination  of  the  extension  of 
federal  banking  powers  to  officials  within  the  executive  branch  of  state 
governments,  specifically  the  state  banking  departments,  raise  another 
constitutional  issue.  These  provisions  can  serve,  in  varying  degrees  according 
to  their  wording  and  parameters,  to  provide  state  banking  agencies  with 
legislative-type  authority.  This  concern  is  exacerbated  by  parity  laws  that 
provide  little  or  no  criteria  to  be  considered  by  the  agency  in  determining 
whether  or  not  to  allow  for  the  extensions  of  bank  powers.  The  lack  of 
established  consideration  criteria  raises  the  question  of  the  line  between 
administrative  and  legislative  powers.  In  discussing  this  issue,  the  Kansas 
Supreme  Court  noted  that  "[a]dministrative  power  is  the  power  to  administer  or 
enforce  a  law,  as  opposed  to  the  legislative  power  to  make  a  law,"  and  the 
determination  between  the  administration  and  the  making  of  law  "depends  upon 
the  amount  of  specific  standards  included  within  the  delegation."^^  The 
importance  of  legislative  standards  for  the  executive  agency  was  echoed  by  the 
high  court  of  New  York  when  it  found  "no  constitutional  prohibition  against  the 
delegation  of  power,  with  reasonable  safeguards  and  standards,  to  an 
agency  ...  to  administer  the  law  as  enacted  by  the  legislature."^^  It  is  necessary, 
of  course,  that  executive  agencies  retain  sufficient  latitude  to  effectively 
administer  statutes,  and  it  is  clearly  impossible  for  state  legislative  bodies  to 
anticipate  all  potential  ramifications  of  newly  enacted  legislation.  While  this 
inability  to  predict  all  potential  ramifications  of  new  statutes  presents  an 
argument  for  legislation  lacking  in  specificity,  the  New  Jersey  Supreme  Court 
cautioned  that  while  "exigencies  of  modem  government  have  increasingly 
dictated  the  use  of  general,  rather  than  minutely  detailed  standards"  in  legislation, 
it  is  necessary  that  statutes  "provide  adequate  restraints  on  the  discretion"  of  the 
agency  .^^ 

While  delegation  of  certain  administrative  duties  and  interpretations  to 
executive  branch  agencies  is  commonplace,^*  the  delegation  of  the  types  of 
determinations  encompassed  by  parity  provisions  is  arguably  different. 
Delegation  within  parity  provisions  does  not  involve  simply  allowing  the 
agencies  the  authority  to  draft  policies  and  procedures  for  the  implementation  of 
statutes.  Instead,  the  agencies  are  given  the  charge  of  determining  whether  or  not 
to,  in  effect,  augment  and  expand  powers  that  are  otherwise,  and  have  historically 
been,  specifically  enumerated. 


95.  Citizens'  Util.  Ratepayer  Bd.  v.  State  Corp.  Comm'n,  956  P.2d  685,  707  (Kan.  1998). 
The  court  went  on  to  say  that,  with  respect  to  criteria  provided  to  administrative  agencies,  "the 
standards  only  have  to  be  sufficiently  reasonable  and  definite."  Id.  at  71 1 . 

96.  Boreali  v.  Axelrod,  517  N.E.2d  1350,  1354  (N.Y.  1987). 

97.  Roe  V.  Kervick,  199  A.2d  834,  857  (N.J.  1964). 

98.  See  Curry  v.  State,  649  S.W.2d  833, 835  (Ark.  1983)  (noting  that  "the  limitation  against 
the  delegation  of  lawmaking  power  does  not  prevent  the  General  Assembly  from  authorizing  boards 
or  commissions  to  determine  facts  upon  which  the  law  would  be  put  into  execution"). 


214  INDIANA  LAW  REVIEW  [Vol.  36:197 


An  argument  in  favor  of  this  type  of  delegation  is  found  in  Citizens,  a  case 
unrelated  to  banking,  where  the  court  noted  that  a  "modern  trend,  which  we 
ascribe  to,  is  to  require  less  detailed  standards  and  guidance  to  the  administrative 
agencies  in . . .  areas  of  complex  social  and  economic  problems."^^  Certainly  the 
regulation  of  banks  can  be  argued  to  encompass  complex  social  and  economic 
problems.  Further,  experienced  bank  regulators  are  undoubtedly  better  qualified 
than  are  state  legislators  to  determine  which  bank  powers  and  products  are 
prudent.  These  regulators  are  also  much  more  familiar  with  the  federal  powers 
that  might  become  subject  to  parity  provisions.  However,  this  can  be  argued  to 
be  the  case  in  many  legislative  matters.  Certainly  state  health  officials 
understand  medical  matters  more  fully  than  legislators.  It  is  in  recognition  of  this 
fact  that  our  legislators  do  not  draft  legislation  in  vacuums,  but  instead  solicit  and 
consider  significant  input  from  industry  professionals  and  community  groups. 
State  legislatures  cannot  simply  delegate  all  lawmaking  authority  in  complex 
matters  in  the  interests  of  efficiency  and  convenience.  Though  not  dealing 
specifically  with  the  issue  of  delegation,  the  United  States  Supreme  Court,  in 
Immigration  and  Naturalization  Service  v.  Chadha  et  al ,  cautioned,  "the  fact  that 
a  given  law  or  procedure  is  efficient,  convenient,  and  useful  in  facilitating 
functions  of  government,  standing  alone,  will  not  save  it  if  it  is  contrary  to  the 
Constitution.  Convenience  and  efficiency  are  not  the  primary  objectives  ...  of 
democratic  government."'^ 

Even  in  the  cases  where  the  state  legislatures  have  included  criteria  for 
consideration  by  the  regulatory  agency,  some  of  the  criteria  tend  to  be  somewhat 
vague  and  nebulous.  Though  the  phrase  "safety  and  soundness"  might  be  argued 
to  fit  this  description,  those  in  the  bank  regulatory  profession  view  "safety  and 
soundness"  as  a  clear,  concrete  measure  of  a  bank's  operational  integrity, 
performance,  and  condition.  Many  well-defined  criteria  are  considered  in 
determining  whether  a  bank  is  operating  in  a  safe  and  sound  manner. '°'  Further, 
all  bank  regulators  utilize  a  standard  component  rating  system  known  as 
"CAMELS"  in  assessing  the  current  and  future  risk  associated  with  banks' 
operations. '°^  Thus,  if  the  ability  to  adopt  additional  power  through  parity  is 
based  on  the  determination  of  the  "safety  and  soundness"  of  the  activity,  well 
defined  measures  are  available  to  banking  agencies.  It  is  important  to  note  that 
"safety  and  soundness"  analysis  is  applied  to  both  the  overall  condition  of  the 


99.   956P.2dat7n. 

1 00.  462  U.S.  9 1 9, 944  ( 1 983);  see  also  Royce  C.  Lamberth,  Reflections  on  Delegation  in  the 
Chevron  Era,  56  FOOD  &  DRUG  J.  11,  13  (2001)  (stating,  "[o]n  the  one  hand,  delegation  is  a 
practical  necessity  for  our  country;  on  the  other  hand,  it  is  at  odds  with  our  democratic  roots"). 

101.  See  Sharpe,  supra  note  5,  at  236-44  (describing  the  prescribed  standards  to  be  considered 
in  evaluating  "safety  and  soundness,"  as  required  by  the  Federal  Deposit  Insurance  Corporation 
Improvement  Act  of  1991,  Pub.  L.  No.  102-242  (1991)  (codified  at  12  U.S.C.  §  1831a  (2000)). 
Included  among  the  factors  that  must  be  considered  are:  internal  controls;  loan  documentation, 
underwriting,  and  quality;  interest  rate  risk;  asset  growth;  earnings;  capital  adequacy,  and,  other 
measures  deemed  appropriate.  Sharpe,  supra  note  5,  at  236-37. 

1 02.  See  supra  note  50. 


2003  ]  STATE  BANK  PARITY  LAWS  2 1 5 


bank,  and  to  particular  activities  engaged  in  by  the  bank.'"^  When  a  bank  engages 
in  an  "unsafe  and  unsound"  practice,  it  is  subject  to  an  order  from  its  regulator 
to  "cease  and  desist"  from  that  practice.'^  When  the  overall  condition  of  the 
bank  deteriorates  and  is  deemed  "unsafe  and  unsound,"  this  will  be  reflected  in 
the  bank's  CAMELS  rating,  and  will  prompt  appropriate  regulatory  action. '^^  By 
providing  for  state  banking  agency  consideration  of  "safety  and  soundness" 
issues  prior  to  granting  powers  through  parity,  state  legislatures  have  attempted 
to  ensure  that  powers  are  only  extended  when  they  represent  a  prudent  banking 
practice,  and  only  to  banks  that  are  in  a  condition  that  is  conducive  to 
undertaking  new  powers. 

On  the  other  hand,  some  of  the  criteria  included  for  consideration  in  state 
parity  laws,  such  as  "public  convenience  and  necessity,"  "competitive  equality," 
and  "public  interest,"  while  relevant,  do  not  provide  very  specific  guidance. 
Thus,  even  when  such  criteria  are  applicable,  determinations  by  the  agency 
remain  effectively  discretionary.  The  level  of  discretion  afforded  the  agency  has 
been  a  primary  determining  factor  in  state  court  decisions  that  have  considered 
this  constitutional  issue.  Courts  have  looked  for  specific  criteria  to  be  evaluated 
by  the  executive  branch  agency.  In  Curry  v.  State^  the  Arkansas  Supreme  Court 
found  delegation  to  an  administrative  agency  constitutional  because  the  statute 
enumerated  several  criteria  to  be  considered  in  determining  whether  federal 
designations  for  controlled  substances  should  be  incorporated  into  state 
actions.  ^^'^  In  contrast,  the  Ohio  Supreme  Court  in  State  v.  Lyman  found  an 
unconstitutional  delegation  stating,  "it  is  quite  clear  that  no  standards  . . .  were 
incorporated  in  the  statute,  or  so  far  as  we  can  discover,  in  any  other  law."'°^ 

Though  the  United  States  Supreme  Court  has  not  specifically  addressed  this 
constitutional  issue  as  it  relates  to  state  legislatures,  insight  can  be  gleaned  from 
their  decisions  regarding  similar  congressional  questions.  While  in  Panama 
Refining  Co.  v.  Ryan,  the  Court  found  unconstitutional  delegation,  stating, 
"Congress  . . .  declared  no  policy[,] . . .  established  no  standard[,] . . .  laid  down 
no  rule[,] ...  no  requirement,  no  definition  of  circumstances  and  conditions"  for 
application, ^°^  this  decision  is  not  consistent  with  the  majority  of  the  Court's 
opinions.  The  prevailing  position  both  before  and  after  Panama  provides 
Congress  more  latitude,  requiring  only  that  Congress  "lay  down  ...  an 
intelligible  principle  to  which  the  person  or  body  authorized  to  [make  rule]  is 
directed  to  conform  .  .  .  ."'^  Further,  the  Court  has  determined  "[i]t  is  not 
necessary  that  Congress  supply  administrative  officials  with  a  specific  formula 
for  their  guidance  in  a  field  where  flexibility  and  the  adaptation  of  the 
congressional  policy  to  infinitely  variable  conditions  constitute  the  essence  of  the 


1 03.  See  Sharpe,  supra  note  5,  at  222-23. 

104.  Mat 223-24. 

105.  Id. 

106.  649  S.W.2d  833,  836  (Ark.  1983). 

107.  1987  WL  19033,  5  (Ohio  Ct.  App.  1987). 

108.  293  U.S.  388,430(1935). 

109.  Hampton  &  Co.  v.  United  States,  276  U.S.  394,  409  (1928). 


216  INDIANA  LAW  REVIEW  [Vol.  36: 197 


program.""*^ 

This  question  of  delegation  to  executive  agencies  can  be  of  particular 
concern  in  certain  political  environments.  In  most  states,  the  senior  officials  of 
the  state  banking  agencies  are  subject  to  political  appointments,  and  often  change 
based  on  gubernatorial  elections.'"  This  is  especially  true  of  the  agency's  chief 
executive  officer,  but  can  also  extend  to  chief  deputy  and  general  counsel 
positions.  When  agencies  experience  significant  executive-level  turnover,  they 
can  lose  valuable  "institutional  knowledge.""^  The  loss  of  this  perspective  that 
was  previously  provided  by  such  experience  and  expertise  would  limit  the 
agency's  ability  to  make  prudent  decisions  that  are  sensitive  to  longer-term 
industry  and  regulatory  concerns. '  '^  This  type  of  agency  turnover  at  the  decision- 
making level  can  minimize  the  argument  for  providing  significant  latitude  when 
legislation  deals  with  "areas  of  complex  social  and  economic  problems,"' "'  since 
the  assumed  expertise  and  experience  may  be  lacking. 

As  noted  earlier,  the  fact  that  many  of  the  states'  parity  laws  provide  for 
extension  of  federal  powers  only  through  administrative  regulation  or  rulemaking 
may,  to  a  certain  extent,  obviate  concerns  arising  from  the  delegation  to 
executive  agencies.  Certainly  this  action  by  the  respective  state  legislatures 
clearly  bolsters  the  argument  that  sufficient  parameters  and  standards  are  in 
place.  And  while  the  rulemaking/regulation  process  is  not  entirely  consistent 
from  state  to  state,  its  requirements  for  publication,  public  hearings,  and  other 
democratic  features  at  least  afford  a  significant  safeguard  against  the  exercise  of 
administrative  fiat  by  the  executive  branch."^  The  existence  of  such  a 
rulemaking  requirement  was  cited  as  persuasive  by  the  Missouri  Supreme  Court 
in  their  finding  of  constitutional  delegation  to  an  administrative  agency  in  State 
V.  Thompson}^^    This  position  was  echoed  by  the  supreme  courts  of  both 


1 10.  Lichter  v.  United  States,  334  U.S.  742,  785  (1948). 

111.  Conference  of  State  Bank  Supervisors,  2000  Profile  of  State-Chartered  Banking, 
Table — State  Bank  Supervisors — Part  I  (on  file  with  author). 

112.  Sen.  George  V.  Voinovich,  Crisis  in  the  Federal  Workforce:  Challenges,  Strategies,  and 
Opportunities,  48-OCT.  FED.  LAW.  30,  31  (2001)  (discussing  the  potential  loss  of  "an 
unquantifiable  wealth  of  experience,"  or  "institutional  knowledge,"  by  the  federal  government  in 
the  next  few  years). 

113.  Id 

1 14.  Citizens'  Util.  Ratepayer  Ed.  v.  State  Corp.  Comm'n,  956  P.2d  685,  707  (Kan.  1998), 

1 1 5.  Arthur  Ear!  Bonfield,  The  Federal  APA  and  State  Administrative  Law,  72  Va.  L.  Rev. 
297,  316  (1986)  (noting  that  the  model  state  administrative  law  followed  the  general  notice  and 
comment  principles  as  the  federal  law).  The  article  describes  the  model  law  as  being  "modeled  on 
the  representative,  political  process  of  the  legislative  branch  of  government.  In  theory,  agency 
rulemaking  in  a  representative,  popularly  responsible  government,  should  produce  the  same  result 
as  if  the  action  in  question  has  occurred  through  action  of  the  legislature."  Id.  at  319  (footnotes 
omitted). 

1 1 6.  627  S.  W.2d  298, 301  (Mo.  1 982).  This  court  further  noted  the  importance  of  the  statute's 
language  that  listed  "eight  specific  factors  expressed  as  mandatory  considerations  ...  in  making  a 
determination"  of  whether  to  add  certain  substances  to  its  controlled  substance  schedules,  and  an 


2003]  STATE  BANK  PARITY  LAWS  217 


Alabama  and  Minnesota,  in  Ex  parte  McCurley^^^  and  State  v.  King,^^^ 
respectively. 

An  issue  involving  the  interplay  among  state  bank  powers,  delegation,  and 
constitutionality  recently  arose  in  Georgia,  stemming  from  a  1997  approval  by 
the  Georgia  Department  of  Banking  and  Finance  ("GDBF").  At  that  time,  the 
agency's  commissioner,  relying  on  the  state's  "incidental  and  proper"  provision 
rather  than  its  parity  clause,  approved  the  acquisition  of  a  real  estate  brokerage 
business  by  a  state  bank."^  The  commissioner's  decision  was  based,  in  part,  on 
the  fact  that  "federal  thrifts,  federal  credit  unions  . . .  and  banks  in  twenty-five 
other  states"  were  so  authorized. '^°  In  early  2002,  the  Georgia  Association  of 
Realtors  argued  that  Georgia  state  banks  may  not  lawfully  engage  in  real  estate 
brokerage  services,  and  cited  the  Georgia  Supreme  Court  case  Independent 
Insurance  Agents  v.  Department  of  Banking  &  Finance^^^  in  support  of  their 
position. '^^  Independent  Insurance  Agents  involved  a  GDBF  decision  to 
authorize  a  state  bank  to  operate  an  insurance  agency  on  the  basis  of  Georgia's 
then-existing  "incidental  and  proper"  provision. '^^  The  provision  authorized  "all 
incidental  powers  as  shall  be  necessary  to  carry  on  the  banking  or  trust 
business."'^"^  Invoking  the  principle  of  ejusdem  generis, ^^^  the  court  determined 
that  the  insurance  brokerage  business,  though  arguably  "convenient  or  useful"  for 
the  bank,  was  not  sufficiently  "similar  in  nature"  to  an  "express  power"  to  meet 
their  interpretation  of  the  "necessary"  test.'^^  Indicating  concerns  with 
constitutional  issues  relative  to  separation  of  powers  and  delegation  authority,  the 
court  concluded  by  saying  that  if  insurance  powers  for  banks  are  needed,  "the 
proper  forum  to  obtain  this  power  is  the  legislature."^^^ 

Leslie  A.  Bechtel,  Deputy  Commissioner  for  Legal  and  Consumer  Affairs 


additional  three  findings  to  add  a  substance  to  Schedule  IV.  Id.  at  302.  The  importance  of  the 
inclusion  of  these  "statutory  standards"  was  emphasized  by  the  court.  Id.  at  302-03. 

117.  390  So.2d  25  (Ala.  1980). 

118.  257  N.W.2d  693  (Minn.  1977). 

119.  See  Telephone  Interview  with  Leslie  A.  Bechtel,  Deputy  Commissioner  for  Legal  & 
Consumer  Affairs,  Georgia  Department  of  Banking  and  Finance  (Feb.  19,  2002)  [hereinafter 
Bechtel  Telephone  Interview]. 

120.  Notice  accompanying  Petition  for  Declaratory  Ruling  to  Department  of  Banking  & 
Finance,  Georgia  Association  of  Realtors,  Georgia  Bankers  Association,  &  Community  Bankers 
Association  of  Georgia  (Feb.  8, 2002),  available  a/ http://www.ganet.org/dbf/dbf  html  (on  file  with 
author). 

121.  285  S.E.2d  535  (Ga.  1982). 

122.  See  Bechtel  Telephone  Interview,  supra  note  1 19. 

123.  /^.  at  536. 

124.  Id.  (emphasis  added). 

1 25 .  This  term  means  "[a]  canon  of  construction  that  when  a  general  word  or  phrase  follows 
a  list  of  specific  persons  or  things,  the  general  word  or  phrase  will  be  interpreted  to  include  only 
persons  or  things  of  the  same  type  as  those  listed."  Black's  Law  Dictionary  535  (7th  ed.  1999). 

126.  Indep.  Ins.  Agents,  285  S.E.2d  at  537. 

127.  Id. 


2 1 8  INDIANA  LAW  REVIEW  [Vol.  36: 197 


with  the  GDBF,  notes  that  the  holding  in  Independent  Insurance  Agents  was 
argued  despite  the  fact  that  Georgia's  "incidental  and  proper"  provision  has 
changed  significantly  since  1982.'^^  The  current  law  grants  "all  powers 
necessary,  convenient,  or  incidental  to  effect  any  and  all  purposes  for  which  the 
bank  or  trust  company  ...  is  organ ized."'^^  The  statute  further  includes  such 
powers  needed  to  "carry  on  banking,  trust,  or  other  activities  determined  by  the 
commissioner  to  hQ  financial  in  nature  or  incident  or  complementary  to  such 
financial  activities,^'  '^°  clearly  broadening  the  legislative  grant  of  power. 
Despite  the  questionable  precedent  oi Independent  Insurance  Agents  due  to  the 
change  in  statutory  language,  and  in  part  to  avoid  jeopardizing  the  GDBF's  future 
ability  to  expand  state  bank  powers,  the  Department  issued  a  declaratory  ruling 
stating  that  it  would  not  approve  additional  real  estate  brokerage  activities  until 
such  powers  are  granted  to  national  banks. '^'  In  the  event  national  banks  are 
granted  this  power,  the  GDBF  can  approve  the  extension  of  real  estate  brokerage 
powers  through  its  parity  provision  as  a  means  of  remaining  competitive  with  the 
national  charter. 

IV.  Philosophical  and  Public  Policy  Issues 

A.  States '  Interest  in  Limiting  Bank  Powers 

Banks  gather  money  in  the  form  of  customer  deposits  and  invest  that  money 
in  loans,  securities,  real  estate,  etc.  These  institutions  also  benefit  from  the 
availability  of  federal  deposit  insurance,  a  safety  net  that  assists  them  in 
attracting  deposits.  Because  the  citizens  of  each  state  are  placing  their  trust  and 
deposits  with  banks,  a  compelling  state  concern  arises,  and  every  state  maintains 
banking  laws  and  banking  agencies  for  the  purpose  of  promoting  prudent  banking 
practices.  A  primary  means  of  controlling  the  level  of  risk  inherent  in  banking 
has  been  limitations  of  permissible  activities,  products,  and  services.  Thus,  the 
parity  issue  has  significant  ramifications  on  the  safety  of  the  banking  system.  It 
is  essential  that  parity  provisions  do  not  promote  "an  unproductive  competition 
in  laxity"  among  regulators. ^^^  Indeed,  in  recognition  of  the  danger  of 
burgeoning  bank  powers,  and  in  the  wake  of  the  numerous  thrift  and  bank 
failures  of  the  1980s  and  early  1990s,  Congress  enacted  the  Federal  Deposit 
Insurance  Corporation  Improvement  Act  of  1991  ("FDICIA"),  which  curtailed 
the  ability  of  state  legislatures  and  banking  departments  to  expand  state  bank 


1 28.  See  Bechtel  Telephone  Interview,  supra  note  1 1 9. 

129.  Ga.  Code  Ann.  §  7-1-261(1 1)  (1997  &  Supp.  2001)  (emphasis  added). 

130.  Id.  (emphasis  added). 

131.  See  Bechtel  Telephone  Interview,  supra  note  1 1 9;  Declaratory  Ruling  of  the  Georgia 
Department  of  Banking  &  Finance  (Feb.  1 3, 2002)  available  at  http://www.ganet.org/dbf/dbf.html. 

1 32.  Henry  N.  Butler  &  Jonathan  R.  Macey,  The  Myth  of  Competition  in  the  Dual  Banking 
System,  73  CORNELL  L.  REV.  677,  680  (1988)  (referring  to  the  competition  for  charters  between 
state  and  national  regulators). 


2003]  STATE  BANK  PARITY  LAWS  2 1 9 


powers. '^^  These  concerns  remain  today,  and  are  arguably  heightened  by 
subsequent  federal  legislation  that  has  brought  additional  competition  for  banks 
and  resultant  increased  pressure  on  bank  earnings  performance. 

Financial  institution  failures  in  the  early  1980s  were  in  large  part  due  to 
institutions  actively  pursuing  newly  granted  powers  without  the  necessary 
expertise  to  adequately  assess  and  control  risk.'^'*  Many  thrifts  entered  into  the 
commercial  real  estate  development  business,  departing  from  the  safer  but 
generally  less  profitable  home  mortgage  industry. '^^  With  the  advent  of  new 
available  powers  for  banks,  particularly  insurance  and  securities  underwriting, 
it  will  be  necessary  for  regulators  to  ensure  that  institutions  do  not  exercise  these 
powers  without  a  clear  understanding  of  the  risk.'^^  Expansion  of  powers  by 
means  of  parity  provisions  in  such  an  environment  raises  concerns  that  did  not 
exist  prior  to  this  period  of  unprecedented  expansion  of  bank  powers  that  has 
come  to  be  known  as  "financial  modernization."'^^ 

While  parity  provisions  can  be  viewed  as  something  akin  to  "emergency 
legislation,"  with  the  potential  for  legislative  review  and  possible  revision  during 
the  succeeding  legislative  session,  practice  has  not  borne  this  out.  Most  state 
legislatures  do  not  meet  throughout  the  entire  year.  Thus  while  these  parity 
provisions  provide  for  immediate  response  to  federal  legislative  initiatives,  none 
of  the  parity  provisions  require  the  legislatures  to  ratify  the  adopted  powers, 
thereby  statutorily  adding  them  to  the  previously  enumerated  list  of  permissible 
activities.'^*  California's  law  comes  the  closest,  promoting  legislative 
review/action  by  including  a  "sunset"  provision.  The  statute  provides  that  "any 
regulation . . .  shall  expire  ...  on  December  3 1  of  the  year  following  the  calendar 
year  in  which  it  became  effective."'^^  Thus,  legislative  action  is  necessary  if  the 
grant  of  power  is  to  be  permanent.  In  addition,  some  of  the  states'  parity  laws 
include  procedures  to  promote  legislative  review  of  powers  granted  through 


133.  Pub.  L.  No.  102-242  (1991)  (codified  at  12  U.S.C  §  1831a(2000)). 

134.  Federal  Deposit  Insurance  Corporation,  An  Examination  of  the  Banking  Crises  of  the 
1980s  and  Early  1990s  9-10  (1997),  at  http://www.fdic.gov/bank/historical/history/voIl.html 
(describing  legislative  initiatives  that,  in  hindsight,  were  poor  public  policy,  as  they  focused  on 
deregulating  "the  product  and  service  powers  of  thrifts  and  to  a  lesser  extent  of  banks . . .  generally 
unaccompanied  by  actions  to  restrict  the  increased  risk  taking  they  made  possible"). 

1 35.  See  Markham,  supra  note  3,  at  245. 

136.  See  generally  Federal  Reserve  Bank,  Chicago  Supervision  &  Regulation  Department, 
Financial  Modernization — A  Guide  to  the  Gramm-Leach-Bliley  Act  (2000)  (on  file  with 
author).  In  the  report's  cover  letter  dated  April  6,  2000,  addressed  to  all  Seventh  District  state 
member  banks  and  bank  holding  companies,  John  J.  Wixted,  Jr.,  Senior  Vice  President  of  the 
Federal  Reserve  Bank  of  Chicago,  summarized  the  act  as  permitting  "banks,  insurance  companies, 
securities  firms,  and  other  financial  institutions  to  affiliate  under  common  ownership  and  offer  their 
customers  a  complete  range  of  financial  services  which  were  previously  prohibited."  Id. 

\  37.  A  search  of  Westlaw's  Text  &  Periodicals  Combined  (TP-ALL)  database  yielded  389  hits 
for  the  tenn  since  January  1,  1996.  (last  viewed  Feb.  23,  2002). 

1 38.  See  Butler  &  Macey,  supra  note  1 32,  at  705;  Survey  Results,  infra. 

139.  Cal.  Fin.  Code  §  753(c)(4)  (1999  &  Supp.  2002). 


220  INDIANA  LAW  REVIEW  [Vol.  36: 197 


parity.  This  legislative  review  is  generally  accomplished  by  the  submission  to 
the  legislature  of  a  summary  of  parity  actions  taken  by  the  state  banking 
department  during  the  prior  year."*°  In  practice,  once  a  bank  is  granted  powers, 
the  subsequent  rescission  of  those  powers  could  result  in  significant  fmancial 
hardship  on  the  bank.  This  is  especially  true  since  virtually  all  of  these  adopted 
powers  would  involve  contractual  relationships  with  customers  of  the  bank,  and 
in  many  cases  third-party  providers  and  servicers.  For  instance,  if  a  bank  were 
granted  the  right  to  conduct  some  type  of  real  estate  development,  contractual 
relationships,  both  long  and  short  term,  would  arise  among  potential  tenants, 
architecture  firms,  construction  management  firms,  real  estate  brokerage  firms, 
telecommunications  firms,  utilities,  and  a  myriad  of  others.  In  addition,  prior  to 
entering  a  new  venture,  the  bank  would  have  to  expand  its  staff  to  include 
employees  with  particular  expertise  in  the  business.  These  personnel  expenses 
would  be  just  one  of  many  "sunk  costs"  incurred  by  the  bank  in  undertaking  a 
new  operation.  For  these  reasons,  it  is  simply  not  reasonable  to  contemplate  that 
power  and  authority,  once  granted  to  a  bank,  can  readily  be  rescinded. 

B.  Necessity  and/or  Desirability  of  Consistency  in  State  Laws  Nationwide 

As  noted,  in  many  respects,  the  parity  laws  "are  neither  similar  nor 
uniform."''*'  Since  the  primary  responsibility  of  each  of  the  regulators  is  to 
ensure  safe  and  sound  bank  operations,  is  this  inconsistency  illogical?  Is  it 
necessary  or  even  desirable  for  the  states  to  consider  adopting  model  legislation 
as  suggested  by  Johnson?'"*^ 

Organizational  and  corporate  structures  differ  from  one  interstate  banking 
organization  to  another.  From  the  company's  perspective,  strategic  and 
operational  planning  is  much  more  efficient  when  the  company  does  not  have  to 
consider  separate  and  different  legislative  and  regulatory  constraints  in  each 
state. "*^  In  an  interstate  environment,  the  state  charter  can  only  remain 
competitive  with  a  national  charter  by  providing  a  "seamless  regulatory" 
environment."^"*  Anything  less  would  preclude  the  necessary  "level  playing 
field."  Recognition  of  this  principle  is  evidenced  in  agreements  among  state 
banking  agencies  made  in  efforts  to  streamline  interstate  regulation: 


140.  See,  e.g.,  Kan.  Stat.  Ann.  §  9-1715  (1991  &  Supp.  2000);  Mass.  Gen.  Laws  Ann.  ch. 
167F,  §  2(31)  (1997  &  Supp.  2001);  N.H.  Rev.  Stat.  Ann.  §  394-A:7(IX)  (1998  &  Supp.  2001). 

141.  Johnson,  supra  note  2,  at  402. 

142.  Id. 

1 43 .  See  Press  Release,  Conference  of  State  Bank  Supervisors,  Announcement  of  the  Adoption 
of  the  Nationwide  Cooperative  Agreement  (July  25, 1997)  (on  file  with  author).  The  press  release 
hailed  the  adoption  of  a  "single  regulatory  point  of  contact  at  both  state  and  federal  levels,"  and  the 
provision  by  the  agreement  of  "increased  regulatory  certainty  and  more  uniformity." 

144.  See  Frequently  Asked  Questions,  Legislative  Affairs,  Conference  of  State  Bank 
Supervisors  website,  at  http://www.csbs.org/govemment/legislative  (last  visited  Feb.  17,  2002) 
(describing  the  "single  point  of  contact"  concept  as  setting  up  a  "seamless  system  of  supervision 
for  a  state  chartered  bank  that  wishes  to  operate  interstate."). 


2003]  STATE  BANK  PARITY  LAWS  22 1 


The  goals  of  the  parties  of  this  Agreement  are  to  promote  a 
comprehensive  nationwide  system  for  safety  and  soundness  of  financial 
institutions,  to  supervise  and  examine  multi-state  banks  in  cooperation 
with  other  states,  to  foster  effective  coordination  and  communication 
among  the  parties  to  facilitate  the  process  of  supervision  and 
examination  with  the  least  burden  to  multi-state  banks,  and  to  enhance 
responsiveness  to  local  needs  and  interests  in  an  interstate  banking  and 
branching  environment.''*^ 

The  question  of  "seamless  regulation"  is  of  concern  for  all  interstate  banking 
companies,  but  it  is  of  particular  concern  for  the  companies  that  chose  to  operate 
individual  state-chartered  banks  in  more  than  one  state.  Each  bank  subsidiary  in 
a  multi-bank  holding  company  maintains  its  own  bank  charter,  and  is  thus  subject 
to  regulation  and  examination  by  its  individual  chartering  authority  (state  agency 
or  the  OCC).  Consistency  of  laws,  regulations,  and  regulatory  practices  is  an 
integral  consideration.  Absent  the  type  of  agreement  discussed  above,  the 
national  bank  charter  would  hold  a  significant  competitive  advantage  over  the 
state  charter. 

While  states  must  be  cognizant  of  the  operational  requirements  of  banks,  and 
while  the  survival  of  the  dual  banking  system  requires  that  national  and  state 
charters  be  competitive,  the  decision  to  provide  seamless  regulation  could 
arguably  also  lead  to  the  demise  of  the  dual  banking  system.  As  noted  in  Part  I, 
one  of  the  primary  advantages  of  the  dual  banking  system  throughout  banking 
history  has  been  the  innovation  fostered  by  its  competitive  nature.  This 
innovation  has  been  a  product  of  the  existence  of  fifty  individual  state  banking 
codes  and  state  regulators,  in  addition  to  the  federal  banking  laws  and  regulator. 
The  more  the  state  regulators  and  state  banking  codes  become  homogenized,  the 
less  justification  there  is  for  the  continuation  of  the  dual  banking  system.  In  a 
1 994  law  review  article.  Professor  Norman  Silber  argued  that  too  much  deference 
to  federal  law  by  state  legislatures  amounts  to  "one  small  step  backward  for 
federalism,  and  a  move  forward  for  federalization."'"^ 

Conclusion 

Nearly  all  states  have  recognized  the  need  for  the  adoption  of  state  bank 
parity  laws.  Failure  to  do  so,  or  to  apply  "incidental  and  proper"  provisions  in 
the  absence  of  parity  laws,  can  result  in  an  unlevel  playing  field  with  respect  to 
national  banks. 

Though  most  states  have  parity  provisions,  the  various  laws  are  quite 


145.  Article  I,  Section  2.2  of  the  Nationwide  Cooperative  Agreement  coordinated  by  the 
Conference  of  State  Bank  Supervisors  to  foster  regulatory  cooperation  among  state  banking 
agencies,  (on  file  with  author). 

146.  Norman  Silber,  ^Vhy  the  U.C.C.  Should  Not  Subordinate  Itself  to  Federal  Authority: 
Imperfect  Uniformity,  Improper  Delegation,  and  Revised  Section  3-1 02(C),  55  U.  PlTT.  L.  REV. 
441,444(1994). 


222  INDIANA  LAW  REVIEW  [Vol.  36: 197 


different  in  their  drafting  and  application.  While  the  need  for  a  model  parity  law 
can  be  debated,  it  is  logical  that  certain  parity  law  provisions  should  be  consistent 
given  the  collective  states'  interest  in  promoting  safe  and  sound  banking 
practices.  Among  the  issues  that  would  benefit  the  system  through  greater 
consistency  are  the  extent  and  applicability  of  state  banking  agency  review, 
criteria  and  procedure  for  the  review,  and  treatment  of  theretofore  prohibited 
powers. 

While  arguments  can  be  made  that  parity  laws  result  in  unconstitutional 
delegation  of  lawmaking  by  state  legislatures,  contrary  positions  are  also 
compelling.  An  argument  for  the  parity  provisions  is  the  need  for  banking 
organizations  to  be  afforded  new  powers  in  a  timely  and  efficient  fashion.  It  is 
necessary  that  state-chartered  financial  institutions  remain  functionally 
competitive  with  their  federal  counterparts.  The  opposite  position  is  that, 
particularly  in  an  era  of  rapid  "financial  modernization,"  a  more  thoughtful, 
legislative  consideration  of  the  associated  risks  might  be  more  appropriate. 
Further,  state  supreme  court  cases,  while  endorsing  the  constitutionality  of 
simple  definitional  references  to  federal  law,  have  not  endorsed  deference  to 
federal  law  in  substantive  matters.  And  while  state  high  courts  have  held 
constitutional  legislation  that  delegates  certain  authority  to  executive  agencies, 
this  endorsement  has  generally  been  based,  in  part,  upon  the  existence  of 
sufficient  criteria  for  consideration  by  the  state  agency.  In  any  case,  state  bank 
parity  provisions  have  been  in  existence  for  many  years  and  they  have  yet  to  be 
challenged. 

State  legislatures,  and  state  bank  regulators  will  need  to  continue  to  monitor 
the  fine  line  between  providing  seamless  regulation  for  interstate  banking 
companies,  and  the  autonomy  and  independence  that  have  been  the  hallmark  of 
the  dual  banking  system.  Despite  the  opinions  of  some  commentators  that  the 
dual  banking  system  is  without  merit  and  results  in  regulatory  duplication, ^''^  the 
survival  of  the  system  is  not  presently  in  doubt.  Many  bankers  will  continue  to 
desire  to  work  with  a  local  regulatory  presence,  irrespective  of  the  debate  on  the 
merits  of  other  dual  banking  system  attributes. 


1 47.   See  generally  Butler  &  Macey,  supra  note  1 32. 


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Unn*d  States  Postal  Strvte* 

Statement  of  Ownership,  Management,  and  Circulation 


1.  Publication  TW* 

2.  Puliation  Number                               ] 

3.  FiOng  Dole 

Indiana  Lav  Review 

0  0 

9     0   _ 

4 

1     9     8 

9-16-02 

4.  issue  Frequency 
Quarterly 

5.  Number  of  Issues  PubQshed  Annually 
Four 

S.  Annual  Subscription  Price 
$30.00 

7.  Compleie  MaHirg  Address  of  Known  Office  of  Publlcetion  (Notprinttr)  (SIreat.  city,  county,  stare.  andZIP-i-4) 

Contact  Person 
Chrla  Paynter 

530  W.   New  York  St.,    Indianapolis,   Marlon,    Indiana     46202 

-3225 

Telephone 
317-274-4440 

8.  Complete  MalHng  Address  d  Headquarters  or  General  Business  Office  of  Publisher  (Notprtnttr) 

530  W.  New  York  St.,  Indianapolis,  Marlon,  Indiana  46202-3225 


9.  Full  Names  end  Complete  Mailing  Addtassea  of  Publisher,  Editor,  end  Managinc  Editor  (Do  not  laav«  btwtk) 
Pub»atw(Nvm»nacomfHaiemaiKiv»<i(lnu)in^lg^aa  University  School  of  Law  -  Indianapolis 

530  U.   New  York  St. 

Indianapolis,  Indiana  46202-3225 


Editor  (Name  and  complata  mailing  addraas) 


Klrby  Lee 

530  W.  New  York  St. 

Indianapolis,  Indiana  46202-3225 


Managing  Editor  (Nama  and  oomftata  mailing  addnaa) 

Briaji  K.  Groemminger 

530  W.    New  York-'St. 

Tnri1flnflnnH«.    Tnd<ana      4^202-3225  

10.  Ovimer  ^Do  nof  toaw  bton*.  tf  tfw  po«k»(ton /«  oiwnad  by  a  oorpc«ttoa  p^»  fhe  name  and  adkJ^asa  or  tf»  ^^ 

namasand  addnsaoa  of  aU  stockttoMars  owning  or  holding  1  pamant  or  mora  of  (ha  total  amount  et  aloak  If  not  owned  t>y  a  cOrporwHon.  ghalha 
namas  and  addraasaaotVralnaviau^  omwr9.lt  (fimxad  t^  a  partnanhip  or  othar  urilrMXtrperatedfIrm,  gNalt*  rmrna  a^ 
Mcn  mdividiiai  otyrwr.  IfIha  fnnbilcallon  la  outtllahad  by  a  nonprofit  ofganlxMHon,  ghm  Hz  nama  and  addraaa.) 


Full  Name 

Complete  JMamng  Address 

Indiana  University  Board  of  Trustees 

Indiana  University  -  BloomlnRton 

Indiana  Memorial  Union  Room  005 

Bloomlneton.    In<Hi»n/i      LlLCt^ 

11.  KnoMm  Bondholders,  Mortgagees,  and  Other  Security  Holders  Owning  or 
Holding  1  Percent  or  Mora  of  Total  Amount  of  Bonds,  Mortgaoes.  or 
Other  Securities.  H  none,  check  box     — __ 

■ — ^d^None 

Full  Name 

Complete  Mailing  Addraas 

NONE 

NONE 

; 

12.  Tax  Status  (For  completion  by  nonpnAlt  organttaUana  suthotizad  lo  maH  at  nonprofit  ratea)  (Check  otto) 

The  purpose,  function,  and  nonprofit  status  of  tMs  organization  and  the  exempt  status  for  federal  income  tax  purposes: 

Kl  Has  Not  Changed  During  Preceding  12  Months 

a  Has  Changed  During  Preceding  12  Months  (PubHahar  must  aubmh  explanation  of  change  with  this  atalament) 


PS  Form  3526,  October  1999 


(Sae  Inatmetiona  on  Ravarsa) 


13.  PublicaUon  Trtle                                                                                           1 
Indiana  Law  Review 

4.  Issue  Date  for  Circulation  Date  Below 
Seotember   2002 

Extent  and  Nature  of  Circulation 

Average  No.  Copies  Each  Issue        No.  Copies  of  Single  Issue 
During  Preceding  12  Months            Published  Nearest  to  Filing  Date 

a.     Total  Number  of  Copies  (Nat  press  run) 

1110 

l66ue  35:4 
1365 

(1) 

Peid/Requestcd  Oulslde-County  Mail  SubscripUons  Stated  on 
Form  3541.  (Include  adverttser's  prooland  exchange  copies) 

732 

729 

b.  Paid  and/or 

(2) 

Paid  In-County  Subscriptions  Stated  on  Fonn  3541 
(Include  advertiser's  proof  and  exchange  copies) 

-0- 

-n- 

Requested 
Circulation 

(3) 

Sales  Through  Dealers  and  Caniera,  Street  Vendors, 
Counter  Sales,  and  Other  Non-USPS  Paid  Distribution 

150 

500 

(4) 

Other  Classes  Mailed  Through  the  USPS 

10 

25 

<=•  Total  PakS  and/or  Requested  Circulation                                               v 
[Sum  of  15b.  (1).  (2),(3},an()  (4)]                                                          r 

892 

1254 

^free 
Distribution 

(1) 

Outside-County  as  Stated  on  Fonm  3541 

-0- 

-0- 

by  Mail 

{Samples, 

compliment 

(2) 

in-County  as  Stated  on  Form  3541 

-0- 

-0- 

ary.and 
other  free) 

(3) 

Other  Classes  Mailed  Through  the  USPS 

15 

10 

'  Free  Distribution  Outside  the  Mail 
{Carriers  or  other  means) 

140 

80 

Total  Free  Distribution  (Sum  of  I5d.  and  ISe.)                                        ^ 

155 

90 

*■  Total  Distribution  (Sum  of  f  5c.  and  15f)                                                ^ 

1047 

1^44 

h. 

Copies  not  Distributed 

63 

21 

yo{a\  (Sum  of  1Sg.  and  h.)                                                                  ^ 

1110 

1365 

i-   Percent  Paid  and/or  Requested  Circulation 
(15a  divided  by  1Sg.  times  100) 

85Z 

931 

16.  Publication  of  Statement  of  Ownership 
S  •  Publication  required.  Will  ba  printed  in  the . 


36:1 


,  issue  of  this  pubOcatton. 


O  Publication  not  required. 


Hor.  Publisher.  Business  Manager,  or  Owner 


Editorial   Speciallst/Busln^ps  Managt»T 


Date 


9-16-02 


i  dMf^a!  all  information  wnished  on  this  form  is  true  and  complete.  I  understand  that  anyone  who  furnishes  false  or  misleading  Information  on  this  form 
or  who  omits  materiel  or  infomiatlon  requested  on  the  form  may  be  8ut>|ect  to  criminal  sanctions  (Including  fines  and  Imprlaonme  nt)  and/or  civil  sanctions 
(Including  cMI  penalties). ______^______________^__ 

Instructions  to  Publishers 

1.  Complete  end  file  one  copy  of  this  form  with  your  postmaster  annually  on  or  before  October  1.  Keep  a  copy  of  the  completed  form 
for  your  records. 

2.  In  cases  where  the  stockholder  or  security  holder  is  a  trustee.  Include  In  Items  10  and  11  the  name  of  the  person  or  corporation  for 
whom  the  trustee  is  acting.  Also  include  the  names  and  addresses  of  indh/lduals  who  are  stockholders  who  own  or  hold  1  percent 
or  more  of  the  total  amount  of  bonds,  mortgages,  or  other  securities  of  the  publishing  corporation.  In  item  11,  If  none,  check  the 
box.  Use  blank  sheets  if  more  space  is  required. 

3.  Be  sure  to  furnish  all  circulation  information  called  for  in  item  15.  Free  circulation  must  be  shown  In  items  15d,  e,  and  f. 

4.  Item  15h.,  Copies  not  Distributed,  must  include  (1)  newsstand  copies  originally  stated  on  Form  3541,  and  returned  to  the  publisher, 
(2)  estimated  returns  from  news  agents,  and  (3),  copies  for  office  use,  leftovers,  spoiled,  and  all  other  copies  not  distributed. 

5.  If  the  publication  had  Periodicals  authorization  as  a  general  or  requester  publication,  this  Statement  of  Ownership.  Management, 
and  Circulation  must  be  published;  it  must  be  printed  in  any  issue  in  October  or,  if  the  publication  Is  not  published  during  October, 
the  first  issue  printed  after  October. 

6.  In  item  16,  indicate  the  date  of  the  issue  in  which  this  Statement  of  Ownership  will  be  published. 

7.  Item  1 7  must  be  signed. 

Failure  to  file  or  publish  a  statement  of  ownership  may  lead  to  suspension  of  Periodicals  authorization. 


PS  Form  3526,  October  1999  (Reverse) 


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