Wednesday, November 26, 2014

Law Professors Producing Value?

I readily admit I pay little attention to what legal academics are doing.  There are a few exceptions, and they all involve professors who actually come down from the ivory tower and rub elbows with us grubbies (the folks over at Credit Slips, for example).  A recent example is John Pottow, the bankruptcy professor at my alma mater the University of Michigan (An aside here: Christopher Brumm, senior counsel for Major League Baseball and also a UM grad, recently remarked that he regretted not having taken a bankruptcy course.  When I was at UM, there was no such animal.  Too low class.  Respectable corporations didn't discuss such things.  Now bankruptcy is just another management tool.).  About three years ago, the SCOTUS made complete hash of bankruptcy law (which it does about every time it decides a bankruptcy case) in Stern vs. Marshall, which threatened to gut the bankruptcy courts' power to rule on any issue involving state law (Frankly, this decision was just part of the right side of the Court's ongoing effort to restrict judicial powers using Scalia's curious [some might call it "cherry-picking"] approach to original intent.  Needless to say, I don't agree with this reasoning, but I'll leave it for another day, or two, or three.  It would be nice, though, to get bankruptcy courts to at least look at jurisdictional issues with regard to standing in improperly securitized mortgage cases.).  In EBIA vs. Arkison, Professor Pottow handled the appeal and got the Supremes to back away a bit from the precipice they had created.  So kudos.

Also at UM, Professor Carl Schneider has recently co-authored a book that offers hard evidence of what many of us have believed for some time: Disclosure statements don't inform anybody about anything.  Whether it's informed consent at the doctor's office, a securities prospectus, or the multiple disclosures in real estate closings, it's too much and too convoluted, and the "discloser" rushes the disclosee through at warp speed.  Professor Schneider advocates adopting real, behavioral regulations instead of pretending there is value to disclosure.  Professor Schneider also advocates that we drop the disclosures now regardless of whether the new regulations are being passed.  I'm not convinced that's a good idea, and I'm doubly not convinced any disclosures will fall by the wayside.  This is because of another campaign based on Scalia's cherry-picking, the attack on protections against adhesion contracts.  Adhesion contracts are biased contracts crammed down the throat of the weaker party by the stronger party, usually in consumer transactions.  Scalia and his camp, in true Lochner fashion, see no problem with this and routinely override efforts to balance contracts, holding that if it's in the contract and you signed it, you're bound.  Given that backdrop, I expect companies to keep "disclosing" 50 pages of agate type in five minutes and then arguing later that the buyer was fully aware of any risks.  Sorry, Carl, it's Contracttown.


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