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Story of Bleistein v. Donaldson Lithographing Company: Originality as a Vehicle for Copyright Inclusivity (Copyright)
Diane L. Zimmerman
On February 2, 1903, with the wife of the President of the United States seated as his guest in the audience, Oliver Wendell Holmes, Jr., newly appointed to the United States Supreme Court, delivered the opinion of the Court in Bleistein v. Donaldson Lithographing Company. The reverberations set off by that succinct and elegant little opinion continue to echo in the copyright case law more than a century later. Bleistein at its inception was, from the viewpoint of a modern reader, an unpreposessing case, involving a garden-variety claim of copyright infringement. The plaintiffs’ company had designed and printed advertising posters for a traveling circus, and when the circus ran short of them, it asked the defendant to make some more. Donaldson Lithographing did so, using the plaintiffs’ designs as its models. For this, 78 the plaintiffs sought damages of one dollar per illicitly copied sheet. But as the litigation progressed from district to circuit to Supreme Court, an aspect of the case, one not hinted at in the complaint, answer, or the questions and answers during testimony at the trial, emerged that gave the dispute its legal gravitas and rendered it memorable. There are many ways to characterize what the Bleistein case was “about” by the time it reached the Supreme Court. Perhaps the simplest thing to say is that the case had morphed by that stage into a debate over the kind of a contribution to “science and useful arts” a claimant had to make to be eligible, as a constitutional matter, for protection by copyright. Although the problem is sometimes said to be deciding how high the threshold of originality should be set to qualify for a copyright, this description does not entirely capture the issue that either the lower courts or the Justices of the Supreme Court understood themselves to be facing when they endeavored to resolve the Bleistein dispute. What separated the majority opinion of the Supreme Court from the decisions below—and from Justices Harlan and McKenna in dissent—was Holmes’s profound skepticism about the propriety of any attempt by judges to engage in qualitative line-drawing to decide which sorts of contributions were or were not copyrightable.
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Who Put the Right in the Right of Publicity?
Diane L. Zimmerman
“Newbom” common law causes of action, like children, are infinitely lovable and promising at birth, but as their characters develop with age, their appeal may lessen and their apparent potential may never be achieved. At first blush, the right of publicity seems not to have followed that sad and common path; barely half a century old, it is widely credited with exceeding even optimistic expectations for its future. The publicity right, for those who are unfamiliar with this area of tort law, creates a property interest in elements of personal identity, allowing individuals or their successors and assignees to exert legal control over when, whether and how their various personal characteristics (at a minimum, their names and actual likenesses) can be used by others for commercial ends. Some measure of disagreement exists among its advocates about the appropriate profile of the right—for example, how long it should last, or the range of attributes and associations that should be protected by it—and doubts are sporadically voiced about whether or not federal copyright preemption doctrine acts as a significant limit on the ability of states to offer this kind of protection. These concerns, however, are marginal blips that seem not to disturb the otherwise serene sense among a significant cross-section of the legal community—judges, legislators, and academics alike–that publicity rights are a valuable addition to the law and an accepted part of our legal landscape. The development of a publicity right has occurred over a few decades. As recently as 1950, “personality” (that is, some cluster of identifying personal characteristics) was protected, if at all, solely as a personal interest subsumed under the law of privacy. The plaintiff, to state a case, had to show that her name or likeness had been appropriated without her consent and used for commercial purposes by the defendant. But the presumed gravamen of the harm was not a deprivation of property; rather, it was the desire of the plaintiff not to receive this form of public exposure. Only the affected individual could sue, and the duration of the cause of action was coextensive with the duration of the claimant's life. Today, however, personality has become a recognized commodity—something to be exploited (or not) according to the preference of the subject or of those who inherit or buy her rights. As the previous sentence suggests, these personal attributes frequently continue as marketable goods long after their source is dead and buried. Personality as a valid form of property has been recognized by the American Law Institute in its RESTATEMENT (THIRD) OF UNFAIR COMPETITION and, recently, it has even been touted as a possible candidate for federal statutory protection. That is not to say that these developments have generated no protesters (I admit at the outset to being one of them). Critics and skeptics, however, are frequently written off by those who believe in publicity rights as a fringe group of cranks and ideologues whose objections are difficult to take seriously. One supporter of the tort, for example, expressed his annoyance at current scholarship critical of publicity rights in the following terms: “It has recently been suggested that ‘the fundamental case for a right of publicity seems to be undergoing a critical reappraisal in the United States.’ It would perhaps be more accurate to say that a very few voices have been raised questioning the legitimacy of the right….[T]he difficulty with this attempt to reopen that which has been rather clearly settled is that the current academic attempt to destroy the right rests at best on marginal issues not seriously implicated by the right of publicity as it has been developed and at worst on an ad hoc and self-referential ‘deconstruction’ of judicial thinking. Indeed, much of the criticism has its roots in a more general Critical Legal Studies attack on intellectual property . . ., as well as in an earlier work that viewed ‘the growth of intellectual property [as] uncontrolled to the point of recklessness’….” Another engaged in verbal headscratching over what would prompt a prominent federal judge, Alex Kozinski, to write a scathing and highly publicized dissent attacking the tort in a recent case. Ultimately, this commentator decided that he had to write off the Judge's ire as a reflection of his personal and idiosyncratic view of the first amendment. Judge Kozinski, the commentator noted, does not believe that commercial speech should be subject to less favorable treatment under the constitution than political commentary. “This view is not the law,” the writer concluded, “and I personally doubt that it will ever be the law.” Frankly, it seems to me to be a little premature to describe the character of the right of publicity as “established” or to conclude that its critics are ideologues—either lacking in sufficient discernment to be able to distinguish marginal from crucial issues, or enthralled by wrongheaded visions of the first amendment. For one thing, a glance through a recent, comprehensive survey of the law in this area indicates that claims that the shape and substance of publicity rights are “clearly settled” cannot be substantiated. Many states have rarely or never entertained cases of any kind involving commercial appropriations of identity, and have, therefore, had little opportunity to think through the kind and extent of protection they want to offer plaintiffs in this area. Furthermore, although it has been estimated that as many as half the states in the United States recognize a right of publicity, a careful head count reveals that only about a dozen have taken unambiguous steps to create a true property right while most of the other continue to offer protections for personality that are either indistinguishable from, or actually still are governed by, the rules of the older privacy tort of commercial appropriation. Although winning a place in the RESTATEMENT (THIRD) OF UNFAIR TRADE PRACTICES will undoubtedly push the tort toward more uniform definition and broader adoption (state courts and legislators alike having a tendency to treat restatements as if they were a kind of ur-law), it can nevertheless be argued that reports of publicity as established law, like reports of Mark Twain's death, have been greatly exaggerated. What is also exaggerated, I would argue, is the characterization of the questions that persist about the value and validity of the publicity right as the rearguard indulgence of a few cranky academics and an eccentric judge or two. This branch of tort law, celebrated though it may be by many, continues to bear comparison for a respectable minority to the character of the questionable Dr. Fell—the one who was, as you may remember, simply unlikable. But whereas the poet could not tell us what was so disturbing about Dr. Fell, critics of the right of publicity have identified many reasons that the publicity tort leaves a bad aftertaste. Considerations of time, space and the patience of my readers do not permit a thorough reexamination of those reasons here. Rather, I would like to focus on one particular issue that has not, in my view, received adequate consideration by those on either side of the debate. Much of the law of publicity seems to hinge on the bet, expressed by the second of the two passages quoted earlier in this piece, that Judge Kozinski's view of the commercial speech doctrine is not and never will be the law. If that bet were to be lost, and I would argue that, to a substantial extent, it has been, then the foundations of a right of publicity would have to be rethought. If commercial speech were to receive the same level of protection as a novel or a film, or even something close to it, the judiciary would be required to subject publicity rights to a level of rigorous scrutiny that, up until now, they have largely escaped. The result, I suspect, could reduce much, although certainly not all, of the current law to the status of roadkill on the path of legal history. To defend this proposition, however, a bit of preliminary discussion may be useful.
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Professional Independence and the Corporate Lawyer
William T. Allen and Geoffrey P. Miller
Quickly following the shock and anger engendered by the collapse of the Enron Corporation came the accusations. Directed principally to the senior officers and auditors of the company, the accusations rippled out: “Where was the board?” “Where was the SEC?” As famously put by Judge Stanley Sporkin years earlier, when confronted with the evidence that Charles Keating had operated Lincoln Savings & Loan as a massive fraud, “Where were the lawyers?” The charge against Enron’s auditor was easy to grasp: Arthur Andersen’s independence appeared to have been fatally infected, both by the huge audit fee that Enron generated and by the steady and substantial flow of nonaudit services. The auditor was seduced into complicity by large fees. Independence is the sine qua non of a public auditor, and when it is gone, the utility of the auditor’s service dissipates. Lawyers are different, and that difference has spared them from much of the criticism that has been directed at auditors. The core duty of a lawyer runs not to the public or to public markers but to the lawyer’s client. The conception of the lawyer that dominates all others is that of the “zealous advocate.” Under this ideal of undivided loyalty, the attorney is bound to defend the client with every legitimate means at his disposal. This conception of a lawyer’s duty has powerfully beneficial social effects. We value these benefits most keenly in the setting of a criminal prosecution. There the power of the state is arrayed against a single individual, and the liberty or even the life of that single person may stand in the balance. The ideal of pure and energetic loyalty originates with the lawyer in his role of defender of those under attack. As zealous advocates, lawyers are viewed in their most romantic and selfless state (John Adams defending British soldiers for acts at Bunker Hill; the heroic lawyers who stood against racial and ethnic prejudice in the Scottsboro Boys trial, or in the defense of the ill-fated Leo Franks). But the mentality of the zealous advocate that inspires our admiration in some settings can lead to unprofessional conduct in others. In the litigation setting, the lawyer’s imaginative arguments will be tested in a process that provides a range of counterbalances, from the discovery processes and cross-examination to informed counterarguments before a disinterested and expert arbiter. Removed from these safeguards and inserted into the process of the corporate lawyer in advising about prospective actions, this mentality can prove damaging to lawyer and client alike. To be sure, in giving such advice, lawyers are under an ethical constraint. An attorney may assist a client in carrying out a course of action that skirts the edge of the permissible only so long as the attorney believes in good faith that the action is, in fact, legally valid and the client is aware of the legal risks. The effectiveness of this restraint, however, depends largely upon the business lawyer’s own willingness to make it effective. Therefore, the conditions under which the business lawyer practices are highly relevant to the profession’s ability and willingness to act as a constraint on corporate clients’ assuming unreasonable degrees of legal risk. There is good reason to believe that under the profession’s present circumstances, business lawyers—those who represented Enron, Worldcom, Tyco, HealthSouth, and their banks—have been forced by circumstances and zeitgeist to take the narrowest possible zealous advocate view of their duty to the law itself. We suggest that the evolution of the legal profession over the last half century—from what we call a “club” form to a “market” form of organization—has produced conditions that (1) atrophied the profession’s acknowledgment of a duty to respect the discernible animating the positive law (for this one way we articulate the duty of good faith) and (2) reduced the leverage of practicing lawyers to influence their clients’ willingness to assume unreasonable legal risks. In this summary of a longer piece in process, we outline the changes in the environment that have produced these effects and suggest a few governance modifications, both in corporate clients’ governance and in law firm organization,that may restore a bit of the lost ability of business lawyers to act with professional independence. It should be stated, however, that we do not intend for our generalizations concerning the effects of a changing environment on business lawyers’ incentives to be understood as a charge against the moral character of business lawyers as a class.
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Assessing the Strengths and Weaknesses of the European Social Charter’s Supervisory System
Philip G. Alston
The principal objective of this chapter is to identify a range of initiatives that might be considered in order to make the Charter's supervisory arrangements more effective and more likely to be able to respond to the various challenges which it confronts. This chapter is divided into several parts. The first seeks to locate the European Social Charter (ESC) and its supervisory system within the overall European human rights regime. The second introduces an element of comparison with the International Covenant on Economic, Social and Cultural Rights, on the assumption that the latter might have some useful lessons for the Charter system. The third, and perhaps the most important part of the chapter, seeks to contextualize the ESC system by examining its strengths and weaknesses through the lens of a detailed case study of the Charter's operation in practice.
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Labour Rights as Human Rights: The Not So Happy State of the Art
Philip G. Alston
The main concern of this chapter is with the institutional arrangements by which effect can be given to labour rights, whether at the national or international level. Most of the chapters in this volume focus on the actual or potential role of various organizations in promoting a concept of labour rights as human rights and then providing the institutional support to make such a vision effective. While the perspectives given in the various chapters vary significantly, it must be acknowledged that they are united by an acceptance of the view that labour rights warrant certain forms of protection within the framework of the emerging global economic system. They also agree that the institutions that are the focus of the analyses have important roles to play in that regard.
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The Contribution of the EU Fundamental Rights Agency to the Realisation of Economic and Socials Rights
Philip G. Alston
Broadly stated, the Fundamental Rights Agency will have a mandate to monitor respect for fundamental rights within the EU. Since the list of rights reflected in the EU Charter of Fundamental Rights includes certain economic and social rights it can reasonably be assumed that these rights will constitute at least part of the new Agency’s mandate. But, as noted below, this proposition cannot in fact be taken for granted. Assuming, however, that the Agency will concern itself to some extent with these rights, then a number of important issues must be addressed. Thus the main focus of the present chapter is on the following questions: which economic and social rights should be included within the new Agency’s mandate; what role will economic and social rights standards contained in international instruments other than the EU Charter play; how should the role of the FRA be conceptualized, and more specifically what is involved in ‘monitoring’; what, if anything, can the FRA learn from the experience of the other principal international procedures which already play a role in monitoring the enjoyment of economic and social rights in Europe; and what are the main considerations which should guide the Agency in shaping its approach to these rights.
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The ‘Not-a-Cat’ Syndrome: Can the International Human Rights Regime Accommodate Non-State Actors?
Philip G. Alston
When one of my daughters was eighteen months old she deftly transcended her linguistic limitations by describing a rabbit, a mouse, or a kangaroo as a ‘not-a-cat’. In the arenas of international law and human rights an almost identical technique is pervasive. Civil society actors are described as non-governmental organizations. Terrorist groups or others threatening the state’s monopoly of power are delicately referred to as non-state actors. But so too are transnational corporations and multinational banks, despite their somewhat more benign influence. International institutions, including those which wield immense influence while disavowing all pretensions to exercise authority per se, such as the International Monetary Fund (IMF) and the World Bank, are classified either as non-state entities or as non-state actors.
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Human Rights and Public Goods: Education as a Fundamental Right in India
Philip G. Alston and Nehal Bhuta
This chapter examines some of the main issues that come up in the context of efforts to bring the discourses of human rights and development closer together. It concentrates on the right to education, and in particular on an unusually interesting and instructive case study of India. The Indian experience with the right to education demonstrates both the central issues that arise in association with resource constraints and the role played by key actors in relation to economic and social human rights, including civil society, the judiciary, and the legislature. It also addresses the practical effects of entrenching education as a legally enforceable right. The main factors of the Indian case study is the formal constitutional recognition of the right set out in the 1949 Constitution, the role of civil society in insisting that substance be given to that commitment, the contribution of sustained analytical critiques of the state of education, and the political salience of these demands.
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The Challenges of Ensuring the Mutuality of Human Rights and Development Endeavours
Philip G. Alston and Mary Robinson
The focus of this volume is on ways in which the strengths, resources, and support of the international human rights and development communities can be mobilized in order to reinforce one another in their efforts to achieve shared goals. Endeavours to promote meaningful and productive linkages between the agendas of these two communities are hardly new. Indeed, one of the main achievements of the first World Conference on Human Rights, held in Teheran in 1968, was precisely its assertion that ‘the achievement of lasting progress in the implementation of human rights is dependent upon sound and effective national and international policies of economic and social development’. Almost a decade later, in 1977, the UN Commission on Human Rights gave a new impetus to these efforts by proclaiming the existence of a human right to development. That in turn led to the launching of a major push by developing countries to broaden the focus of international human rights debates to include a range of economic and other issues which had previously been considered to lie squarely and exclusively within the domain of the national and international development agencies.
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African Studies and the Concept of Knowledge
Kwame Anthony Appiah
This article summarizes my views on epistemological problems in African studies as I have expressed them previously in different contexts, mainly my book In My Father’s House (1992), to which I refer the reader for further details. I start with an attempt to expose some natural errors in our thinking about the traditional-modern polarity, and thus help understand some striking and not generally appreciated similarities of the logical problem situation in modern western philosophy of science to the analysis of traditional African epistemic procedures. This similarity rests upon both types of analysis dealing with procedures crucially hinging upon knowledge claims.
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Beyond Master-Servant: A Critique of Vicarious Liability
Jennifer H. Arlen and W. Bentley MacLeod
In order to regulate risk-taking efficiently, tort liability rules governing organizations' liability for torts by their agents must ensure that organizations both want their agents to take cost-effective precautions and benefit from using all cost-effective mechanisms to regulate agents. This chapter shows that vicarious liability, the current the rule governing organizations' liability for their agents' torts, does not satisfy these objectives. By holding organizations liable for torts committed by employees, but not by independent contractors, vicarious liability discourages organizations from asserting direct control over agents, even when control is the efficient way to induce optimal care. Organizations governed by vicarious liability also do not employ all cost-efficient tools available to them to induce efficient care-taking by independent contractors because organizations do not maximize profits by inducing efficient care. Indeed, vicarious liability encourages organizations to undermine the effect of individual tort liability by hiring judgment-proof independent contractors.
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Criminal Trials
Rachel E. Barkow
This guide is the first of its kind, and presents the U.S. Constitution as never before, including a clause-by-clause analysis of the document, each amendment and relevant court case, and the documents that serve as the foundation of the Constitution.
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Congress and Civil Rights Policy: An Examination of Endogenous Preferences
David W. Brady, John A. Ferejohn, and Jeremy C. Pope
In economics the fundamental methodological starting point is to look for explanation in structure rather than in preferences. Thus in partial equilibrium theories, economists examine comparative statics propositions—descriptions of shifting choices as wealth, prices, or technology change, holding preferences constant. The reason for starting with these parameters is not that preferences are unimportant for the explanation—the overall choice pattern will depend on preferences, after all. But many have argued (or assumed) that not much can be said as to how preferences are likely to change during processes of choice. We think this view is overdrawn. We believe that many important preference change phenomena might be approached with standard analytical tools or minor variants thereof. Indeed, we believe that there is already more explicated preference formation within standard models and descriptions than is commonly recognized. We also believe that models with endogenous preferences might best be approached incrementally from within established modeling and descriptive traditions. Here we attempt such an analysis by examining the dramatic political changes associated with the passage and support for civil rights legislation beginning in the late 1950s. Previous explanations and descriptions of these events implicitly take account of changing popular and legislative preferences, thus this seems a fertile area to begin an analysis of preference change. We try to account for the different reasons legislators update their beliefs inducing new public policy preferences, and compare this account with a simple electoral change model of induced preferences in which legislator preferences—and thus public policy—shift merely through replacement.
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ADR and the Culture of Litigation: The Example of the United States of America
Oscar G. Chase
A puzzling and controversial shift in dispute processing in late twentieth century America was the turn to Alternative dispute resolution. Both official and informal disputing were profoundly affected. How can this change be explained? Was there a motivating «crisis» in the courts? If so, what were its ingredients? The rise of ADR presents an opportunity to examine the way in which cultural change interacts with more specific social forces to affect disputing. I will argue that quite apart from a perceived litigation crisis the move to ADR in the late twentieth century had institutional, political, and cultural ingredients. More specifically, that it was dependent on the sometimes conflicting late twentieth century value shifts involving distrust of government and privatization, humanization of large-scale institutions, social progress through individual improvement, and post-modern scepticism about an objective reality. These cultural currents were reflected in—or exploited by—political and institutional actors. In Part I of this paper I will sketch out the rise of ADR in the last quarter of the twentieth century. Part II provides a historical perspective on the use of ADR. In part III I will explain the institutional, cultural and political changes that gave life to the ADR movement. Part IV takes up the claim of some adherents that ADR will make us a better people. Preliminarily, «ADR» takes many different forms because the generic concept includes any process that is an «alternative» to judicial adjudication. In the US, ADR has included a potpourri of processes--negotiation, mediation, arbitration, med-arb (a combination of mediation and arbitration), early neutral evaluation, and summary jury trials. In this paper I will use the tern to refer only to arbitration and mediation. These are themselves very different processes in that arbitration involves a decision by a third party, whereas in mediation the third party assists the disputants in negotiating and reaching their own resolution. The two processes have therefore attracted support from different sectors of society and have served different if overlapping functions in the American legal system. Mediation, because of its emphasis on consensual problem solving, has appealed to reformers for whom the values of communitarianism and self-actualization or determination rank high. Arbitration has often been embraced by business interests for its supposed cost savings over adjudication and because of its reliance on decision makers knowledgeable about the type of dispute to be resolved. Court administrators have established court-annexed programs that employ both forms of ADR in the hope that they will ease judicial caseloads.
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Reflections on Civil Procedure Reform in the United States: What Has Been Learned? What Has Been Accomplished?
Oscar G. Chase
My contribution to this conference—to describe recent procedural reform in the United States—is daunting. As readers are no doubt aware, in the U.S. we have not one but fifty-one different judicial systems—fifty “sovereign” states and the federal judicial system. An American speaker at a gathering such as this is more likely than not to focus on the federal courts. This is in part because the federal judiciary is (wrongly in my view) thought to be more worthy of serious study. Although it is certainly true that federal law is supreme over state law whenever they conflict, the reality is that such conflicts are rare, largely because the states continue to control most of private law—the law of tort and contract. And if one looks at sheer volume—it is no contest. The courts of New York State alone handle geometrically more cases than all of the federal district courts together. Perhaps the primary reason for the comparative lack of scholarly attention to the state courts is an information gap. It is virtually impossible for anyone to keep an eye on all of these jurisdictions, whereas all serious American civil procedure scholars can and do follow federal developments. Too, there is a greater institutional capacity for, and commitment to, self-examination manifested in the federal system. It is this latter reality that leads me to discuss the federal situation in this paper. I will not, however, attempt a comprehensive review of the changes made in federal procedure in the last decade. Most of them have been at a level of detail not likely to be of interest here. Instead, I will focus on the empirical methodology that increasingly informs procedural reform at the federal level. I will consider some specific reforms, but my primary purpose is to illustrate the strengths and weaknesses of the empirical work that lies behind them. I justify this interest in methodology in part because of its potential for trans-national applicability. Procedural reformers cannot be indifferent to the availability of information about tools of analysis. My turn to methodology was inspired as well by the themes explored at the recent XIIth World Congress of the International Association of Procedural Law in Mexico City: culture and science. I thus return to questions I raised then—what are the goals of our reforms and how can we go about informing ourselves as to the best means of achieving them 1?
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The Rise of ADR in Cultural Context
Oscar G. Chase
Another puzzling and controversial shift in American dispute processing was the turn away from the formal courtroom adjudication described in chapter 4, and towards Alternative Dispute Resolution. ADR took off later in the twentieth century than the expansion of discretion described in the last chapter and was responsive to societal currents that only partially overlapped those described there. Was it the result of a “crisis” in the courts? If so, what were its ingredients? I will argue that quite apart from a perceived litigation crisis, the move to ADR in the late twentieth century had institutional, political, and cultural causes. More specifically,it was dependent on the sometimes conflicting late-twentieth-century value shifts involving distrust of government, privatization, humanization of large-scale institutions, social progress through individual improvement, and postmodern skepticism about an objective reality. These themes echo the broader categories discussed in chapter 4 and identified there as fundamental to American culture: liberty, individualism, populism, egalitarianism, and laissez-faire. Developments in these cultural currents were reflected in — or exploited by — political and institutional actors.
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The Story of Tufts: The "Logic" of Taxing Nonrecourse Transactions
Laura E. Cunningham and Noël B. Cunningham
It should come as no surprise to students of the income tax that the presence of liabilities in property transactions can cause enormous complications. In no area is this more true than in the partnership setting, where partnership liabilities are included in the partners’ bases in their partnership interests (i.e., their “outside bases”) under the complex set of rules and regulations under Code § 752. Under those rules, each partner is treated as contributing cash in an amount equal to her share of the partnership liabilities. On the other hand, if a partner’s share of partnership liabilities decreases, the partner is deemed to have received a cash distribution in that amount. As complicated as these rules are, they draw upon and are consistent with the basic rules learned in income tax: When a taxpayer borrows funds, he does not have income because of his equal and offsetting liability, and when he repays the loan he is not given a deduction. The only time a borrowing transaction generates any taxable income is when the taxpayer is discharged from all or part of his obligation to make repayment. If borrowed funds are used to purchase property, they are included in the basis of the purchased property: Taxpayers receive basis credit not only for what they have paid for the property but what they have promised to pay. If the property is depreciable, the owner will compute his depreciation deductions on the full basis so computed: Because we assume that the loan will be paid we assume that any losses represented by those deductions will in fact be borne by the taxpayer when he repays the loan. And when the taxpayer sells the property, he must include in his amount realized from the sale the amounts he uses to repay the loan.
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The Story of Tufts: The “Logic” of Taxing Nonrecourse Transactions
Laura E. Cunningham and Noël B. Cunningham
It should come as no surprise to students of the income tax that the presence of liabilities in property transactions can cause enormous complications. In no area is this more true than in the partnership setting, where partnership liabilities are included in the partners' bases in their partnership interests (i.e., their “outside bases”) under the complex set of rules and regulations under Code § 752. Under those rules, each partner is treated as contributing cash in an amount equal to her share of the partnership liabilities. On the other hand, if a partner's share of partnership liabilities decreases, the partner is deemed to have received a cash distribution in that amount. As complicated as these rules are, they draw upon and are consistent with the basic rules learned in income tax: When a taxpayer borrows funds, he does not have income because of his equal and offsetting liability, and when he repays the loan he is not given a deduction. The only time a borrowing transaction generates any taxable income is when the taxpayer is discharged from all or part of his obligation to make repayment.2 If borrowed funds are used to purchase property, they are included in the basis of the purchased property: Taxpayers receive basis credit not only for what they have paid for the property but what they have promised to pay. If the property is depreciable, the owner will compute his depreciation deductions on the full basis so computed: Because we assume that the loan will be paid we assume that any losses represented by those deductions will in fact be borne by the taxpayer when he repays the loan. And when the taxpayer sells the property, he must include in his amount realized from the sale the amounts he uses to repay the loan. To illustrate, assume that A buys a piece of property for $100, borrowing the entire purchase price from a bank. He sells the property two years later for $120 cash. Assume first that the property is not depreciable. A's basis is $100, on sale he includes the full $120 in his amount realized, even though he must use $ 100 to pay back the bank. His gain is $20, representing the increase in the property's value over A's period of ownership. Assume now that the property is depreciable, and during the two years he owns it, A deducts a total of $20 depreciation. A's initial $100 basis will be reduced to $80 by depreciation, and on sale A will report a gain of $40: representing not only the increase in the property's value, but the $20 in depreciation previously taken. It turns out the property did not decline in value as predicted by the depreciation system, and it is appropriate for A to report an offsetting amount of income at the time it becomes clear he will not economically suffer the losses represented by those deductions. All of the foregoing rules apply regardless of whether A uses the purchased property as security for the loan, and if he does, regardless of whether A has personal liability for the loan (recourse), or whether the lender's recourse in the event of foreclosure is limited to the value of the property securing the loan (nonrecourse). In each case, the income tax essentially ignores the loan transaction: Neither the borrowing nor the repayment of the loan are taxable events, and no distinction is made between tax-paid funds taken from A's bank account to purchase property and funds borrowed from the bank, which are untaxed. The rules get a little more complicated if A sells the property for $20 cash to a buyer who either assumes or takes the property subject to the existing $100 loan. In either case, A is in the same economic position as he would have been if he had sold the property for $I20 and paid off the loan himself, and the rule of the Crane case tells us to tax A consistently: His amount realized on the sale includes the debt relief, whether recourse or not. The harder case arises when the value of the property falls below the balance of the outstanding loan. Assume that A's non-depreciable property drops in value to $70, and that the loan is recourse. No sensible buyer will undertake personal liability for A's personal loan for $100, so assume that A transfers the property to the lender in lieu of foreclosure. This is clearly a disposition of the property and A's amount realized is $70, the amount of the liability that is satisfied as a result of the transfer; therefore A has a loss of $30 on the property. In addition, A may have discharge of indebtedness income from the transaction depending on whether the lender pursues A for the $30 shortfall. If the lender does and A pays the outstanding balance as the tax law assumed he would do, then there are no further tax consequences. All appropriate. If, on the other hand, the lender does not force A to pay the $30 shortfall, then A must include that amount in income: Because he was not taxed when he first borrowed the funds, when it turns out he doesn't have to repay them he must have income at that time, income from discharge of indebtedness.
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The Financial War on Terrorism
Kevin E. Davis
In the aftermath of 9/11 many facets of counter-terrorism legislation have come under intensive scrutiny. Provisions granting state officials enhanced investigative powers, greater authority to withhold information from the public and broader powers to detain people without trial have all been hotly debated around the world. In contrast, relatively little attention has been paid to the provisions aimed at controlling the financing of terrorism. Yet these provisions have the potential to affect an extremely broad range of economic activity, both legitimate and illegitimate, and for that reason are worthy of scrutiny. This chapter is designed to provide an introduction to the legal instruments designed to counter financing of terrorism and the policy concerns that they raise. Part I describes three main types of legal provisions designed to combat the financing of terrorism (prohibitions, provisions authorizing deprivations of property and monitoring provisions), different approaches that have been taken to the design of those provisions, and the advantages and disadvantages of each approach. The central objective of this Part is to discuss the range of actors and transactions that are likely to be affected by the various legal initiatives, with particular attention to the degree of proximity to actual terrorist activity that is required and whether legitimate commercial activity is likely to be affected.
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New Modes of Governance and the Protection of Human Rights
Gráinne de Búrca
This chapter examines the operation of agencies as an element of the emerging “new modes of governance” in the EU, and considers whether such modes of governance are in tension with the requirements of human rights protection. Most of the other chapters in this collection begin from the perspective of human rights protection, and proceed to consider how an agency dealing with fundamental rights might operate within the EU system. This chapter, by way of contrast, begins by looking at the particular character of EU governance, and more specifically at the recent rise in the establishment and use of agencies at European level, situating this development in the more general context of changing approaches to regulation in the EU. Thus the chapter begins with a brief discussion of the notion of ‘new modes of governance’ and specifically with the trend towards greater use of such modes in the European Union context. It moves on to consider how the rise of agencies can be understood as one aspect of this broader trend. Focusing then on the subject of human rights protection, the possible reasons for embracing certain new governance modes in this area in the EU as well as the possible reasons for caution or concern in so doing will be set out. Finally, the chapter will focus on the proposal to establish an EU fundamental rights agency by extending the mandate of the Vienna Monitoring Centre on Racism and Xenophobia (EUMC), looking both at the Commission’s communication and at the decision of the European Council to this effect. It concludes by considering how the new institution might operate, and whether this ‘new governance tool’ is likely to be a positive move in the area of EU human rights protection and whether it is likely to contribute to the EU’s emerging human rights policy.
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Towards European Welfare?
Gráinne de Búrca
The story of the European Union has been one of steadily expanding powers, of an incremental extension of policy capacity across many aspects of economic, political, and social life. And yet there are areas in which the states retain primary competence and the EU's influence is indirect or relatively minor. The regulation of social welfare is often described as one of this kind, in which responsibility for the regulation and delivery of welfare lies largely with each state. This chapter argues that even though the EC for many years has had legal power to regulate aspects of employment, the remit of the EU's social policy remains closely tied to labour-market participation, leaving the broader field of welfare provision and regulation essentially to the states.
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The Future of Social Rights Protection in Europe
Gráinne de Búrca and Joanne Scott
The focus of this book is on the protection of social rights in Europe—‘social rights’ being used broadly to refer to the category of rights which concern economic and social well-being, and ‘Europe’ referring primarily to the overlapping systems of the European Union (EU) and the Council of Europe. The profile of social rights has been raised in recent years by the debates during the drafting of the EU's Charter of Fundamental Rights and during the Convention leading to the drafting of an EU Constitution about the status of social rights within the European economic and social model. The term ‘social rights’ is used here in a broad sense to include many kinds of economic and social rights, and the choice of case studies —while necessarily selective and inevitably vulnerable to the criticism of under-inclusiveness or specific emphasis—has deliberately been made with this broader category in mind.
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Introduction: Addressing the Challenges Confronting the EU Fundamental Rights Agency
Olivier De Schutter and Philip G. Alston
Human rights depend for their protection on adequate legislative and regulatory frameworks, as well as on the possibility of effective judicial enforcement. They depend on the allocation of adequate resources. What this collection of essays illustrates is how the realisation of human rights depends also on appropriate governance mechanisms designed to ensure that human rights are taken fully into account, especially in the preliminary stages of policy setting and law-making, and on the participation of the relevant stakeholders in the design and implementation of these policies. This third dimension is of particular importance in the context of the European Union. The present study of the potential contribution to be made by a new EU Fundamental Rights Agency not only considers how best it might perform its work; taking this debate as its departure point, it also identifies, more broadly, the challenges that face all such agencies in the human rights field.
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Obligation of Contract
Richard A. Epstein
This guide is the first of its kind, and presents the U.S. Constitution as never before, including a clause-by-clause analysis of the document, each amendment and relevant court case, and the documents that serve as the foundation of the Constitution.
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