Federalist Society Conference Recap

In this Kosmos podcast, I'm joined by Anthony Deardurff, Deputy Director of the Federalist Society Faculty Division, recapping the Federalist Society Conference that was held in Washington, D.C. We talk about the various panels that were held and some of the major ideas that were presented at the conference.

For short interviews with some of the paper and panel presenters at the conference, see:

Jeanne Hoffman:        Welcome to this Kosmos Online Podcast. I'm Jeanne Hoffman. Today I'm with Anthony Deardurff, Deputy Director of the Federalist Society Faculty Division, recapping the Federalist Society Conference that was held in Washington DC. Welcome Anthony and thanks for being on our podcast.

Anthony Deardurff:     Thank you for that kind introduction.

JH:       Now for our listeners who aren’t fully aware of what the Federalist Society does could you talk a little bit about the Federalist Society and then the role of the faculty division within that?

AD:      Sure I'll be happy to. The Federalist Society for Law and Public Policy Studies is a group of conservatives and libertarians interested in the current state of legal order. The society is founded on principles that the state exists to preserve freedom, that the separation of governmental powers is central to our Constitution, and that it is emphatically the providence and the duty of the judiciary to say what the law is, not what it ought to be. We seek both to promote an awareness of these principles and to further their application through our activities.

Now structurally the society contains a number of different divisions of which one is the faculty division, my division, and our programs are designed to foster dialogue among law faculty interested in the original understanding of the Constitution, the separation of powers and the importance of property rights and free markets to a successful society. We also strive to promote discussion with critics of these ideas to help all involved to learn from each other.

JH:       And now this conference that I went to in DC recently that you guys put on was your annual faculty conference. Could you describe that a little bit, please?

AD:      Sure the annual faculty conference is actually one of our most popular programs and basically to make it convenient for law professors to attend we typically will hold it in the vicinity of wherever the American Association of Law Schools is having it's annual conference and this year that took place in Washington DC so that is where we were too. We actually set a record for attendance this year. We had more than a 100 law professors from 65 different law schools participating and we were extremely pleased to have the Institute for Humane Studies sponsor an evening reception there for all our attendees. They enjoyed a lot of fellowship and fruitful conversation with you. We don’t typically organize our faculty conference around a particular theme, but there are several main components that every faculty conference will contain and those  break down into three I would say: one is panel discussions, the second is paper presentations and the third is a luncheon debate.

JH:       Now I know some of the events were recorded or described in your website. Could you just let our listeners know where they could find that information?

AD:      Sure of course, yes we have recorded almost everything in video and audio and we are in the process of making that available on our website at www.fed-soc.org and there will be a link on the main page fairly soon, I think.

JH:       And there will be a link under this podcast to that too.

AD:      Great.

JH:       Now could you talk about any highlights from the panels that you really enjoyed?

AD:      Yeah sure. I did like all of our panels though I suppose I'm a little biased on that front. I mean and sure we had  three organized as panel discussions, one was on we call that "the sovereign shareholder, government ownership and corporate law post bail-out" and the second panel was on "public sector unions" and our third and final panel was on "judicial ethics." So I can give a bit of a brief overview of those panels if you would like?

JH:       Great that would be fantastic!

AD:      The first panel, the sovereign shareholder panel, addressed the effect on corporate law of having the United States as a major shareholder in the financial and automotive sectors in the wake of the 2008 bail-outs and Dean Donald Weidner of Florida State University College of Law was our moderator. We had three different panelists, each offered a bit of a different perspective; Professor David Zaring of the University of Pennsylvania's Wharton School of Business gave  a bit of a background picture of what had been happening in the bailout. His point of view was that government takeovers are  hardly a new occurrence and that perhaps if we look closer at the government's actions they are actually not all that different from what a private equity company would have done. Since the 1930s the government has seized and nationalized failing banks in order to resolve their affairs and in his, Professor's Zaring's view banks that operate under FDIC supervision, which is great many banks essentially agree to allow this kind of quick takeover in return for access to cheap money and protection from runs on their banks, so this is just  the trade off as Professor Zaring sees at it, if as a private company you want access to low interest lending at the Federal Reserve Discount Window which will probably provide a lower than market lending rate and in fact, he pointed out that many investment and commercial banks did go to the Discount Window during the crisis, then the flipside of that is that the government can come in and sell these companies for $2 a share if they become insolvent.

Next up, we had Professor Lynn Stout, who is from the UCLA School of Law and she took a bit of a different approach to this. She feels that there is a form of government intervention that hasn’t really been talked about very much and she describes that as the subsidy that government provides when it permits certain kinds of economic activity and particularly judicial enforcement of contracts made in relation to that activity. In her view permitting derivatives trading was the government essentially subsidizing a form of gambling and people say how can that be, derivatives are  complex why would that be gambling?

And I think the way she described it was that what at its core derivative is, is an agreement between two people that one will pay the other a certain amount of money depending on what happens in the future based on some particular event. When these derivatives are used to ensure against pre-existing economic risks, like when a home owner purchases a fire insurance they are economically beneficial because they allow the spreading of the risk. In other words, the insurance company is better equipped to handle the risk if your house actually does burn down. In that case, you  as she put it "win the bet” that your house of course is going to burn down, but of course you lose your house and that is why you wanted the company to take on the risk. Her problem with derivatives is that they can also be used to take on new risk, not pre-existing risks so you just start making large bets that your prediction about a future event is going to be more accurate than the other party's prediction and that you will make the profit. This she argues is a zero sum game and one side can only win with the other side loses so when mutual funds and hedge managers made these big derivative bets half of them inevitably did suffer massive losses with significant economic and social consequences that were quite negative.

Professor Stout’s proposed solution is to re-invigorate what she calls the old rule on gambling which is that you are in fact allowed to bet, but the courts will not enforce these kinds of contracts because they are not mutually beneficial, in other words it is the "zero sum game" and without access to the courts for enforcement, people will turn to private ordering and just as with casinos now people will rarely be permitted to big bets without proof of fund that they can actually pay up.

Our final panelist, Professor J.W. Verret of George Mason University School of Law which is very well known in these parts I think and nationwide in fact, had a bit of a different take, he  challenged Professor Stout’s treatment of derivatives and said he didn’t necessarily see a big difference between her description of derivatives as bad as say stocks because in buying a stock you may be betting that there will be a beneficial merger in the future or the company may be managed better in the future. So he sees that as not as "zero sum game" because some companies will actually manage risks better than others.

He also pointed out that derivatives can allow companies to do something called obtaining price discovery and to effectively increase their liquidity which allows them to take actions that they could not otherwise afford to do whether that  development or other corporate purposes. He noted that there is also unique cost to government ownership. The government tends to be passive in managing its shares, but it still exercises soft power, by which he means that once the government has a controlling stake in the company people become very focused on pleasing the government and not necessarily on running the company for the benefit of the shareholders overall. There is also transparency and manipulation concerns, Professor Verret pointed out that in his view for example the government basically changed some shares in companies that held from preferred to common equity merely to game bank stress tests that it set up, in other words the government gamed these tests to make it look like the companies were doing better than they actually were under the government system.

What alternative would he propose? Professor Verret proposes that we stop giving preferential treatment to sovereign debt, that we reform our bankruptcy process to resolve the uncertainty that remains present and that we link credit default swaps to federal regulatory policy so that regulators will have to act if value drops below a certain threshold and this he thinks will be  an early warning system. So I would say that is where the first panel went in terms of the discussion.

JH:       So your second panel is really interesting in light of what happened with the public sector unions in Wisconsin, right?

AD:      Yes it was very timely in that respect, I think that is one reason why there was so much interest in it and we had some very strong academics on this panel particularly Professor John McGinnis of Northwestern University School of Law is well known and has been writing on this issue recently. This panel was moderated also by another Northwestern law professor, James Lindgren who is well known in the empirical fields. We had a variety of perspectives on public sector unions which is something we strive to do in the Federalist Society is present multiple view points and let folks look at things from different angles, I find I always learn something interesting this way and it is also useful because people will actually from time-to-time disagree on important factual questions. I can talk a little more about this panel if you would like?

JH:       Sure how about just a brief overview of the issues that were discussed?

AD:      Sure, so there was some discussion about the recent events in Wisconsin and Ohio where collective bargaining rights were restricted or in large part eliminated and our first speaker Professor Joseph Slater who is from the University of Toledo College of Law argued that while this may have been presented it as a way of protecting state budgets it was really politically motivated and designed to cripple the unions and thereby crippled the democratic party in those states and he pointed to the various examples one of which is that the new laws require unions to represent non-union employees but they also protect and even prevent those employees from paying a share of union dues, so it  creates this free rider problem, specifically to hamper the unions. He also noted that some states have higher budget deficits even though they are not union states.

Professor McGinnis  took a different attack. He said that they are separate from those points, there are still two big problems with public sector unions, one is that they are not subject to the constraints imposed by competition which private unions are. The second and probably even worse problem is that private unions negotiate with shareholders who are not connected to or aligned with the union. Public sector unions negotiate with politicians for whom they ultimately become a special interest group and so that is not  the level of adversity that would be there in a competitive market and this puts the unions in a position to degrade the delivery of public services which often in his view results in reduced or even denied services to lower income folks who are most in need of them. He then pointed to teaching unions, public teachers unions specifically as an example of this not because for example charter schools are necessarily better. I think all our panels agreed that data on chartered schools was mixed, but Professor McGinnis's view is that the unions are very reluctant to experiment with new techniques in education or you know new hiring or evaluation approaches and this causes problems.

Our final panelist wanted to make Burkean case in favor of public sector unions which was an interesting approach I think. His basic arguments were, well it is really better to resolve disputes over union rights outside the courts because these are very politically sensitive issues, so too much judicial focus results in one side or the other feeling delegitimized and having developing structural distrust of various branches of our government. The second point he tried to make is that there are limits to what collective bargaining and reform can accomplish. His view is that it is this really civil service laws passed by state legislatures, not union agreements that are the main impediment to say firing poor performing teachers who are union members and yes, he is in favor of reforming pensions, but he notes that public sector union pensions are not actually subject to collective bargaining. So he had a real diversity of view points on this issue, a vigorous discussion, we had some very strong opinions expressed in the audience, but I think that is part of what makes the conference fun to be at.

JH:       And I think that is the first time I have heard of a Burkean case in favor of public sector unions.

AD:      Perhaps the first and only time, we’ll see.

JH:       And then your last panel was on judicial ethics, could you just give an overview because that one seemed to me to have a variety of issues instead of just a debate about one issue?

AD:      I think that is right, there were a couple of different I think strands of thought running through this debate. One of them was of course the recent controversies about Justices Thomas and Kagan with respect to the healthcare litigation pending before the Supreme Court and you know should they recuse, should they not recuse. That was certainly part of the discussion, but there was also some talk about just procedural issues that arise. I’ll just note our panelists here, they were: the honorable A. Raymond Randolph who is a judge on the US Court of appeals for the DC circuit, then Professor Charles Geyh of Indiana University at Bloomington School of Law, Professor Ronald Rotunda at Chapman University School of Law and Professor Stephen Gillers of New York University School of Law, all of whom are quite well recognized in this field and our moderator was the Honorable Deanell Tacha of Pepperdine University School of Law who was until recently a Tenth Circuit Judge I believe and decided to move on to become of Dean at Pepperdine. She very ably moderated this panel, but in addition to this recusal controversies there were some discussions about the actual recusal procedure because, I think one thing that might not be generally known is that Federal District Judges, The Trial Judges, and perhaps even Appellate Judges I don’t know that for sure, but certainly the district judges if they receive a motion asking them to recuse they are the first ones to decide that motion so that the judge who is allegedly biased is still deciding the motion that is saying he is too biased to hear the case and Professor Geyh felt that this put everybody in kind of an awkward situation and suggested there were several alternatives for dealing with that.

I think there was actually a surprising amount of agreement among our panelists that much of the current controversy about Justices Thomas and Kagan are overblown and very politically motivated. None of the panelists based on facts disclosed to date saw grounds to force a recusal of either Justice Thomas or Justice Kagan, although I think Professor Rotunda made the case that, what happens with Justice Kagan may depend on what information we get if any from the Justice Department about what exactly she was involved with during her tenure at the Justice Department. Certainly a number of our panelists including Professor Gillers favored broad disclosure by the Justice Department of those kinds of documents. But, all in all I think there was  a general view that, number one the current controversies about recusal are bit overblown they do not justify broad sweeping changes in our judicial code which has served us pretty well for over 100 years. I guess I should say the current code I think is Judge Randolph pointed out dates back to the late 60s, but the view of judicial ethics that we have traces back a good deal further than that, it has been with us since early in our history.

I think that the second case was that although we don’t need sweeping changes maybe there are some tweaks that would be useful, there was some disagreement I think about that. I think the third strand of discussion was with respect to disclosure. how much disclosure should be required and really should the Supreme Court formally adopt a code and say we are not going to take the code in it's entirety the way it applies to other judges but we are going to take these particular aspects and we are going to bind ourselves to that and there was some disagreement as to whether that is a good idea or not, some analysts favored it, some thought it was  an unnecessary step.

JH:       Possibly my favorite part of the entire conference and maybe unbiased since we work in similar areas with this is the two sessions that involved workshopping people's papers.

AD:      Sure.

JH:       So I was wondering if you could go into what those two different sessions were and also a little bit about how people could get involved with that for the next conference if it sounds like something they would like to do?

AD:      Of course. Sure. So there is as you pointed out that we have two different sessions that allow for paper presentations, a lot of our faculty have expressed a desire to present their work to their colleagues and get good, solid feedback, but sometimes also maybe a more sympathetic hearing than they would receive elsewhere. So it is kind of a place where they feel they can share their works in progress or before they are finally completed. There are two different sessions in this regard, the first is our young legal scholar's paper competition and this is to allow junior scholars or aspiring academics to present nearly complete, competitively selected papers and receive critical feedback from senior faculty commenters. By junior scholars generally we mean to encompass people who, if they have an academic appointment, have not yet completed their seventh year of teaching so generally they will not be tenured and it also can include exceptionally strong potential academics, people who haven’t gotten any academic appointment yet, but are actively pursuing one.

The second paper presentation event we have, we call the 7-minute presentations of works in progress and it is kind of pretty much what I just said, it is a 7-minute presentation by usually five faculty members of a work that they are  currently working on. It is a quick overview of what do they think the problem is that they are addressing, what are they proposing and how does that relate to their particular field as a whole and then they  get some ideas or critical feedback from the audience through question and answer and those presentations are by and large by tenured faculty. That can be by junior faculty but usually it is by tenured faculty and occasionally as we did this time by one or two aspiring academics.

JH:       And I noticed you used Professor Eugene Volokh as a commentator for the first session and as a moderator for the second session, and for people who weren’t there he offered extremely good feedback, in both of those sessions even when he wasn’t a commentator.

AD:      Yes you are very right. We are grateful to Professor Volokh for his help and also actually to our other commenters who were Professor Todd Henderson of the University of Chicago Law School and let's see Professor Nicholas Quinn Rosenkranz was our moderator and very helpful as well, but Professor Volokh certainly spends a not-insignificant amount of time helping young scholars, both I think on a personal basis and in providing helpful guidance, written guidance on how to write a good article, how to organize a paper, he even had very helpful  framework for our 7-minute presenters to make sure that people could come to the presentation with no background in their field and still start to understand what they were getting at.

JH:       Okay and then your luncheon debate I understand was put on through a co-sponsorship for that event?

AD:      That's correct, yes we were very pleased to have as a co-sponsor for the debate this year The American Society of International Law and in fact their executive director Elizabeth Anderson was the moderator for the debate and did a fabulous job I think. The luncheon debate I would say is usually a highlight of our conference, I will talk about this year's luncheon debate in a minute, but I should note that last year we had a debate on the constitutionality of the individual mandate and the healthcare legislation and that was also very well attended, very exciting debate between Randy Barnett of Georgetown University Law Center and Orin Kerr of The George Washington University Law School. That was outstanding or normal affair I would say.

This year we also had a very, very well attended luncheon debate, over a 100 people came on the Alien Tort Statute, international law and the judiciary and this was  a very broad topic, but we had  multiple back and forth question and answer, issue by issue session with our debaters Eugene Kontorovich of Northwestern University School of Law and Stephen Vladeck of American University, I think it is Washington College of Law and the debaters  agreed that this  heretofore little known statute except to say international law, public international law people known as the Alien Tort Statute, that does not mean space aliens, that means essentially a  non-citizen, non-residents. The Alien Tort Statute grants jurisdiction to US Courts to hear certain kinds cases alleging violations of the Law of Nations and this has become an issue because various aliens have brought claims of torture or other injuries against a variety of entities including corporate entities saying that that these corporate entities colluded with the governments of other countries to mistreat them in some fashion or otherwise persecute them in pursuit of some kind of profit.

So there is a case pending before the Supreme Court that involves the question of whether a corporation can be held liable under this Alien Tort Statute and so while our debaters agree that the statute did give a grant of jurisdiction to US Courts there was  this disagreement, this back and forth on can a corporation really be held liable. Professor Kontorovich I think was arguing that the way Supreme Court reads the statute and reads  our background laws that you really have to look to customary international law, norms of international law to see whether corporations are generally held liable and his argument is that there really isn’t a tradition of corporate liability in most international law, and he is something of an expert in piracy actually so he actually talked a bit about the sense of a pirate as holding owned by the crew as a whole which was not something one normally hears about, I would say it was quite interesting. By contrast Professors Vladeck's view was no probably we can have corporate liability because that kind of question is not something that the court really intended to be decided under international law instead that is something we should look to our own  general norms about and apply ordinary principles of Tort law and those favor corporate liability so we had some very good back and forth on that and some very interesting follow ups in the question and answer session.

JH:       Okay that was a great conference, so thank you guys for putting it on and I can't wait until next year.

AD:      Oh thank you, we really enjoyed the reception that you sponsored and look forward to working with the institute in the future.

JH:       And thank you for joining us today Anthony.

AD:      It is my pleasure, thank you.

JH:       And for more conference recaps visit KosmosOnline.org, providing career advice and intellectual resources for academics and this is Jeanne Hoffman, signing off.

 

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