HASTINGS LAW JOURNAL

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1 HASTINGS LAW JOURNAL UNIVERSITY OF CALIFORNIA HASTINGS COLLEGE OF THE LAW ARTICLES CONTEXTUAL HEALING: WHAT TO DO ABOUT SCANDALOUS TRADEMARKS AND LANHAM ACT 2(A) Megan M. Carpenter THE DEFINE AND PUNISH CLAUSE AND THE POLITICAL QUESTION DOCTRINE Lyle D. Kossis THE NEW INSIDERS : RETHINKING INDEPENDENT DIRECTORS TENURE Yaron Nili FAR FROM THE MADDING CROWD: A STATUTORY SOLUTION TO CROWD CRUSH Tracy Hresko Pearl NOTES A BRIDGE OVER THE PATENT TROLLS: USING ANTITRUST LAWS TO REIN IN PATENT AGGREGATORS Eric Young VOL. 68, NO. 1 DECEMBER 2016

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3 STATEMENT OF OWNERSHIP,MANAGEMENT AND CIRCULATION (Section 3685, Title 39, United States Code) 1. Title of Publication: Hastings Law Journal, Publication No , ISSN Date of Filing: October 1, Frequency of Issue: Six times yearly (Dec., Feb., April, May, June, and Aug.) 4. Location of Known Office of Publication O Brien Center for Scholarly Publications 100 McAllister Street San Francisco, California Complete Mailing Address of Headquarters or General Business Offices of the Publishers: O Brien Center for Scholarly Publications University of California, Hastings College of the Law 200 McAllister Street San Francisco, California Names and complete Addresses of Publisher, Editor, and Managing Editor: O Brien Center for Scholarly Publications University of California, Hastings College of the Law 200 McAllister Street San Francisco, California Editor-in-Chief: Amy Holtz; Executive Managing Editor: Alyssa Coley 7. Owner: University of California, Hastings College of the Law 200 McAllister Street San Francisco, California There are no known bondholders, mortgagees, or other security holders owning or holding 1 percent or more of total amount of bond, mortgages or other securities. 9. The purpose, function, and nonprofit status of this organization and the exempt status for Federal income tax purposes have not changed during the preceding 12 months. Average No. Copies Each Issue Single Issue During Preceding Nearest to 12 Months Filing Date A. Total No. Copies Printed (net press run) B. Paid and/or Requested Circulation 1. Paid Outside-County Mail Subscriptions Paid In-County Mail Subscriptions Sales through Dealers and Carriers, Street Vendors, Counter Sales and Other Non-USPS Paid Distribution Other Classes Mailed Through the USPS 0 0 C. Total Paid and/or Requested Circulation D. Free Distribution by Mail (including samples, complimentary, and other free) 1. Outside-County In-County Other Classes Mailed Through the USPS Free Distribution Outside the Mail 14 8 E. Total Free Distribution F. Total Distribution G. Copies Not Distributed H. Total Distribution I. Percent Paid and/or Requested Circulation 75.6% 79.5%

4 Hastings Law Journal UNIVERSITY OF CALIFORNIA HASTINGS COLLEGE OF THE LAW Published six times a year by the students of the University of California, Hastings College of the Law. The Hastings Law Journal (ISSN ) is published by theuniversity of California, Hastings College of the Law, 200 McAllister Street, San Francisco, CA in December, February, April, May, June and August. Periodicals Postage Paid at San Francisco,California, and at additional mailing offices. Mailing Address: 200 McAllister Street, San Francisco, CA Editorial offices located at 100 McAllister Street, 23rd Floor. (415) hlj@hastingslawjournal.org. POSTMASTER: Send address changes to O Brien Center for Scholarly Publications, 200 McAllister Street, San Francisco, CA Subscription price is $70.00 per year (US$80.00 foreign). Special rates areavailable to subscription agencies. Domestic claims for nonreceipt of issues should be made in writing within 90 days of the month of publication, overseas claims within 120 days of publication. Thereafter, the single issue rate will be charged for replacement. Submit claims to scholarp@uchastings.edu. Single issues of the current and previous volumes and symposium issues areavailable from the Hastings Law Journal at $50.00 per copy (US$60.00 foreign). Back issues for Volumes 1 62 of the Hastings Law Journal are available and reprints of single articles are available from the O Brien Center for Scholarly Publications, scholarp@uchastings. Citations generally conform to The Bluebook (20th ed., 2015), copyright by the Columbia, Harvard, and University of Pennsylvania law reviews and the Yale Law Journal. The Journal gladly considers unsolicited manuscripts for publication. The Journal also welcomes both formal and informal responses to articlesappearing in the Journal and will consider such responses for publication. Articles must be single-spaced, printed double-sided on 8.5 by 11 paper,with footnotes in the body of the manuscript. Copyright 2016 U.C. HASTINGS COLLEGE OF THE LAW

5 HASTINGS COLLEGE OF THE LAW DIRECTORS THOMAS GEDE, B.A., J.D., Chair... Davis CARL W. CHIP ROBERTSON, B.A., M.B.A., J.D., Vice Chair... Los Angeles DONALD BRADLEY, B.A., J.D., LL.M.... Pleasanton TINA COMBS, B.A., J.D.... Oakland MAUREEN E. CORCORAN, B.A., M.A., J.D.... San Francisco MARCI DRAGUN, B.A., J.D....Burlingame CARIN T. FUJISAKI, B.A., J.D.... Walnut Creek CLAES H. LEWENHAUPT, B.A., LL.M., J.D.*... Fort Irwin MARY NOEL PEPYS, B.A., J.D.... San Francisco BRUCE L. SIMON, A.B., J.D....Hillsborough SANDI THOMPSON, B.A., J.D.... Woodside *Great-grandson of Hon. Serranus Clinton Hastings, Founder of Hastings College of the Law DIRECTORS EMERITI MARVIN R. BAXTER, B.A., J.D.... Fresno WILLIAM R. CHANNELL, B.A., J.D., Retired Justice... Lafayette JOSEPH W. COTCHETT, B.S., LL.B....Hillsborough MYRON E. ETIENNE, JR., B.S., J.D.... LOIS HAIGHT HERRINGTON, A.B., J.D.... Walnut Creek MAX K. JAMISON, B.A., J.D.... JOHN T. KNOX, A.B., J.D.... Richmond JAMES E. MAHONEY, B.A., J.D.... Los Angeles BRIAN D. MONAGHAN, B.S., J.D.... San Diego CHARLENE PADOVANI MITCHELL, B.A., M.A., J.D.... San Francisco JOHN A. SPROUL, A.B., J.D....El Cerrito ADMINISTRATION AND INSTRUCTION DAVID L. FAIGMAN, B.A., M.A., J.D.... INTERIM Chancellor and Dean and John F. Digardi Distinguished Professor of Law ELIZABETH HILLMAN, B.S.E.E., J.D., PH.D.... Provost and Academic Dean, and INTERIM Associate Dean for Library Services, and Professor of Law JEFFREY A. LEFSTIN, Sc.B., J.D., Ph.D.... Associate Academic Dean and Professor of Law ELISE K. TRAYNUM, B.A., J.D.... General Counsel and Secretary of the Board of Directors DAVID SEWARD, B.A., M.B.A.... Chief Financial Officer GINA BARNETT, B.A., M.A.....Registrar, Director of Institutional Research DEBORAH TRAN, B.A., M.A.... Controller RICHARD A. BOSWELL, B.A., J.D.... Associate Dean for Global Programs and Professor of Law REUEL SCHILLER, B.A., J.D., PH.D.... Associate Dean for Research and Professor of Law NANCY STUART, B.S., J.D.... Associate Dean for Experiential Learning and Clinical Professor of Law RUPA BHANDARI, J.D..... Assistant Dean of Student Services TONI YOUNG, B.A., J.D....Assistant Dean of Legal Research & Writing, and Moot Court SARI ZIMMERMAN, B.S.F.S., J.D.... Assistant Dean for the Office of Career and Professional Development VICTOR HO... Director of Financial Aid STEVEN BONORRIS... Interim Executive Director of the Center for State and Local Government Law and the Public Law Research Institute ROBIN FELDMAN, B.A., J.D.... Director of the Law and Bioscience Project and Professor of Law MIYE GOISHI, B.A., J.D.... Director of the Civil Justice Clinic and Clinical Professor of Law JAN JEMISON, B.S., M.B.A., J.D.... Director of the Legal Education Opportunity Program and Adjunct Assistant Professor of Law JAIME KING, B.A., J.D., Ph.D.... Director of UCSF/UC Hastings Consortium on Law, Science & Health Policy KAREN B. MUSALO, B.A., J.D.... Director of the Center for Gender and Refugee Studies, and Director of the Refugee and Human Rights Clinic, and Clinical Professor of Law LISA NOSHAY PETRO, B.P.S., J.D.... Director of the Disability Resource Program ROBERT S. PETTIT...Executive Director of Human Resources

6 SHEILA R. PURCELL, B.A., J.D.... Director of the Center for Negotiation and Dispute Resolution, and Clinical Professor of Law ALEX A. G. SHAPIRO, M.F.A.... Director of Exernal Relations JOAN C. WILLIAMS, B.A., M.C.P., J.D.... Distinguished Professor of Law and Director of the Center for Worklife Law LAURIE ZIMET, B.A., J.D.... Director of the Academic Support Program PROFESSORS EMERITI OF LAW MARK N. AARONSON, A.B., M.A., J.D., PH.D.... Professor of Law, Emeritus MARGRETH BARRETT, B.A., M.A., J.D.... Professor of Law, Emeritus GAIL BOREMAN BIRD, A.B., J.D.... Professor of Law, Emeritus GEORGE E. BISHARAT, A.B., M.A., PH.D., J.D.... Professor of Law, Emeritus MARSHA N. COHEN, B.A., J.D.... Hon. Raymond L. Sullivan Professor of Law, Emeritus RICHARD B. CUNNINGHAM, B.S., J.D., LL.M.... Professor of Law, Emeritus BRIAN GRAY, B.A., J.D.... Professor of Law, Emeritus JOSEPH GRODIN, B.A., J.D., PH.D.... Professor of Law, Emeritus GEOFFREY C. HAZARD, JR., B.A., LL.B.... Thomas E. Miller Distinguished Professor of Law, Emeritus WILLIAM T. HUTTON, A.B., J.D., LL.M.... Professor of Law, Emeritus DAVID J. JUNG, A.B., J.D.... Professor of Law, Emeritus MARY KAY KANE, A.B., J.D.... Emerita Dean and Chancellor, and Distinguished Professor of Law, Emeritus CHARLES L. KNAPP, B.A., J.D.... Professor of Law, Emeritus FREDERICK LAMBERT, A.B., J.D.... Professor of Law, Emeritus JOHN LESHY, A.B., J.D.... Professor of Real Property Law, Emeritus DAVID I. LEVINE, A.B., J.D.... Professor of Law, Emeritus STEPHEN A. LIND, A.B., J.D., LL.M.... Professor of Law, Emeritus JOHN MALONE, B.S., LL.B.... Lecturer in Law, Emeritus SHAUNA I. MARSHALL, A.B., J.D., J.S.M.... Professor of Law, Emeritus CALVIN R. MASSEY, A.B., M.B.A., J.D.... Professor of Law, Emeritus JAMES R. MCCALL, B.A., J.D.... Professor of Law, Emeritus BEATRICE MOULTON, J.D., LL.M.... Professor of Law, Emeritus MELISSA LEE NELKEN, B.A., M.A., J.D.... Professor of Law, Emeritus JENNI PARRISH, B.A., M.L.S., J.D.... Professor of Law, Emeritus STEPHEN SCHWARZ, A.B., J.D.... Professor of Law, Emeritus HON. WILLIAM W. SCHWARZER, A.B., LL.B.... Professor of Law, Emeritus KEVIN H. TIERNEY, A.B., M.A., LL.B., LL.M.... Professor of Law, Emeritus GORDON VAN KESSEL, A.B., LL.B.... Professor of Law, Emeritus WILLIAM K. S. WANG, B.A., J.D.... Professor of Law, Emeritus C. KEITH WINGATE, B.S., J.D.... Professor of Law, Emeritus PROFESSORS OF LAW ALICE ARMITAGE, A.B., M.A., J.D.... Associate Professor of Law HADAR AVIRAM, LL.B., M.A., J.D... Professor of Law ALINA BALL, J.D.... Associate Professor of Law DANA BELDIMAN, M.A., J.D., LL.M.... Professor in Residence AARON BELKIN, B.A., Ph.D.... Visiting Professor of Law KATE BLOCH, B.A., M.A., J.D.... Professor of Law RICHARD A. BOSWELL, B.A., J.D.... Associate Academic Dean for Global Programs and Professor of Law ABRAHAM CABLE, B.A., J.D.... Associate Professor of Law JO CARRILLO, B.A., J.D., J.S.D.... Professor of Law PAOLO CECCHI DIMEGLIO, J.D., LL.M., MAGISTÉRE-DJCE, PH.D....Permanent Affiliated Scholar JOHN CRAWFORD, B.A., M.A., J.D.... Associate Professor of Law A. GREGORY COCHRAN, B.A., M.D.... Associate Director, UCSF/UC Hastings Health Policy and Law Degree Program, and Lecturer in Law BEN DEPOORTER, M.A., J.D., PH.D., J.S.D., LL.M.... Professor of Law JOHN L. DIAMOND, B.A., J.D.... Professor of Law REZA DBADJ, J.D....Visiting Professor of Law SCOTT DODSON, B.A., J.D....Professor of Law VEENA DUBAL Ph.D., J.D.... Associate Professor of Law JENNIFER TEMPLETON DUNN, B.A., J.D.... Lecturer in Law JARED ELLIAS, A.B., J.D.... Associate Professor of Law

7 DAVID L. FAIGMAN, B.A., M.A., J.D.... John F. Digardi Distinguished Professor of Law LISA FAIGMAN, B.S., J.D.... Lecturer in Law ROBIN FELDMAN, B.A., J.D.... Director of the Law and Bioscience Project and Professor of Law HEATHER FIELD, B.S., J.D.... Professor of Law CLARK FRESHMAN, B.A., M.A., J.D.... Professor of Law AHMED GHAPPOUR, J.D.... Visiting Assistant Professor of Law MIYE GOISHI, B.A., J.D.... Clinical Professor of Law and Director of the Civil Justice Clinic KEITH J. HAND, B.A., M.A., J.D.... Associate Professor of Law ELIZABETH HILLMAN, B.S.E.E., J.D., PH.D.... Provost and Academic Dean, and Professor of Law CAROL IZUMI... Clinical Professor of Law PETER KAMMINGA, LL.B., J.D., LL.M., PH.D....Permanent Affiliated Scholar PETER KEANE... Visiting Professor of Law CHIMENE KEITNER, A.B., D.PHIL., J.D.... Professor of Law JAIME KING, B.A., J.D., Ph.D.... Director of UCSF/UC Hastings Consortium on Law, Science & Health Policy, and Professor of Law EUMI K. LEE, B.A., J.D.... Clinical Professor of Law EVAN TSEN LEE, A.B., J.D.... Professor of Law JEFFREY A. LEFSTIN, Sc.B., J.D., Ph.D.... Associate Academic Dean and Professor of Law RORY K. LITTLE, B.A., J.D.... Professor of Law CHRISTIAN E. MAMMEN, J.D.... Lecturer in Law RICHARD MARCUS, B.A., J.D....Horace O. Coil ( 57) Chair in Litigation and Distinguished Professor of Law LEO P. MARTINEZ, B.S., M.S., J.D....Albert Abramson Professor of Law UGO MATTEI, J.D., LL.M.... Alfred and Hanna Fromm Chair in International and Comparative Law and Distinguished Professor of Law SETSUO MIYAZAWA, M.A., M.PHIL., PH.D., LL.B., LL.M., J.S.D....Senior Professor of Law STEFANO MOSCATO, B.A., J.D.... Lecturer in Law KAREN B. MUSALO, B.A., J.D.... Director of the Center for Gender and Refugee Studies, and Director of the Refugee and Human Rights Clinic, and Professor of Law OSAGIE K. OBASOGIE, B.A., J.D., PH.D.... Professor of Law DAVE OWEN, B.A., J.D.... Visiting Professor of Law ROGER C. PARK, A.B., J.D.... James Edgar Hervey Chair in Litigation and Distinguished Professor of Law JOEL PAUL, B.A., M.A.L.D., J.D.... Professor of Law ASCANIO PIOMELLI, A.B., J.D.... Professor of Law ZACHARY PRICE, J.D.... Visiting Assistant Professor of Law HARRY G. PRINCE, B.A., J.D.... Professor of Law SHEILA R. PURCELL, B.A., J.D.... Director of the Center for Negotiation and Dispute Resolution, and Clinical Professor of Law RADHIKA RAO, A.B., J.D.... Professor of Law AARON RAPPAPORT, B.A., J.D.... Professor of Law MORRIS RATNER, B.A., J.D.... Associate Professor of Law TRACEY ROBERTS, A.B., J.D., LL.M.... Visiting Professor of Law DORIT RUBENSTEIN REISS, LL.B., PH.D.... Professor of Law NAOMI ROHT-ARRIAZA, B.A., J.D., M.P.P.... Professor of Law MICHAEL B. SALERNO, J.D.... Clinical Professor of Law and Associate Director of the Center for State and Local Government Law REUEL SCHILLER, B.A., J.D., PH.D.... Associate Dean for Research and Professor of Law LOIS W. SCHWARTZ, B.A., M.A., M.L.S., J.D.... Senior Lecturer in Law ROBERT SCHWARTZ, B.A., J.D....Visiting Professor of Law ALFRED C. SERVER, M.D., PH.D.... Affiliated Scholar JODI SHORT, B.A., J.D., PH.D.... Associate Professor of Law GAIL SILVERSTEIN, B.A., J.D.... Clinical Professor of Law JOANNE SPEERS, J.D., M.P.P.... Affiliated Scholar MAI LINH SPENCER, B.A., J.D.... Visiting Clinical Professor of Law and Academic Director of Lawyers for America NANCY STUART, B.S., J.D.... Associate Dean for Experiential Learning and Clinical Professor of Law JOHN SYLVESTER, J.D.... Visiting Professor of Law DAVID TAKACS, B.S., M.A., J.D., LL.M., PH.D.... Associate Professor of Law YVONNE TROYA, B.A., J.D.... Clinical Professor of Law

8 JOANNA K. WEINBERG, J.D., LL.M.... Senior Lecturer in Law MANOJ VISWANATHAN, S.B., S.M., J.D., LL.M.... Associate Professor Designate D. KELLY WEISBERG, B.A., M.A., PH.D., J.D.... Professor of Law LOIS WEITHORN, PH.D., J.D....Professor of Law JOAN C. WILLIAMS, B.A., M.C.P., J.D.... Distinguished Professor of Law, UC Hastings Foundation Chair and Director of the Center for Worklife Law FRANK H. WU...Distinguished Professor of Law TONI YOUNG, B.A., J.D.... Assistant Dean of Legal Research & Writing and Moot Court MICHAEL ZAMPERINI, A.B., J.D.... Visiting Professor of Law LAURIE ZIMET, B.A., J.D.... Director of the Academic Support Program RICHARD ZITRIN, A.B., J.D.... Lecturer in Law ADJUNCT FACULTY GARY ALEXANDER, J.D.... Assistant Professor of Law ROY BARTLETT, J.D.... Assistant Professor of Law MARK BAUDLER, J.D.... Assistant Professor of Law BRANDON BAUM, B.A., J.D.... Assistant Professor of Law KARENJOT BHANGOO RANDHAWA, J.D.... Assistant Professor of Law JAMES BIRKELUND, J.D.... Assistant Professor of Law CORY BIRNBERG, B.A., J.D.... Assistant Professor of Law DANIEL BLANK, J.D.... Assistant Professor of Law YISHAI BOYARIN, J.D.... Assistant Professor of Law DARSHAN BRACH, J.D.... Assistant Professor of Law CHARLES R. BREYER, J.D.... Assistant Professor of Law JOHN BRISCOE, J.D.... Assistant Professor of Law JILL BRONFMAN, B.A., M.A., J.D.... Program Director of the Privacy and Technology Project at the Institute for Innovation Law and Adjunct Professor of Law in Data Privacy DANIEL BROWNSTONE, J.D.... Assistant Professor of Law EMILY BURNS, J.D.... Assistant Professor of Law MICHAEL CARBONE, J.D.... Assistant Professor of Law KAREN CARRERA, J.D.... Assistant Professor of Law CARL W. CHAMBERLIN, A.B., J.D.... Assistant Professor of Law ANDREW Y. S. CHENG, B.A., J.D.... Assistant Professor of Law HENRY CHENG, J.D.... Assistant Professor of Law KARL CHRISTIANSEN, J.D.... Assistant Professor of Law RICHARD COHEN, B.A., J.D.... Assistant Professor of Law PAMELA COLE, J.D.... Assistant Professor of Law MATTHEW COLES, J.D.... Assistant Professor of Law JAMES CORBELLI... Assistant Professor of Law MARGARET CORRIGAN, J.D.... Assistant Professor of Law PAUL CORT, J.D.... Assistant Professor of Law JAMES CREIGHTON, J.D.... Assistant Professor of Law MARK D ARGENIO, B.A., J.D.... Assistant Professor of Law PATRICIA DAVIDSON... Assistant Professor of Law JOHN DEAN, J.D.... Assistant Professor of Law SHASHIKALA DEB, J.D.... Assistant Professor of Law BURK DELVENTHAL, J.D.... Assistant Professor of Law LOTHAR DETERMANN, J.D.... Assistant Professor of Law TERRY KAY DIGGS, B.A., J.D.... Assistant Professor of Law JAMES R. DILLON, J.D., PH.D.... Assistant Professor of Law ROBERT DOBBINS, J.D., LL.M.... Assistant Professor of Law TOM DULEY, J.D.... Assistant Professor of Law JAMES B. ELLIS, B.S., J.D... Assistant Professor of Law RANDALL S. FARRIMOND, B.S., M.S., J.D.... Assistant Professor of Law TAMARA FISHER, J.D.... Assistant Professor of Law JOHN FORD, J.D.... Assistant Professor of Law ROBERT FRIES, B.A., J.D.... Assistant Professor of Law MICHAEL GAITLEY, J.D.... Assistant Professor of Law STACEY GEIS... Assistant Professor of Law MICHAEL GOWE, J.D.... Assistant Professor of Law JOSEPH GRATZ, J.D.... Assistant Professor of Law

9 CHARLES TAIT GRAVES, J.D.... Assistant Professor of Law RICHARD GROSBOLL, J.D.... Assistant Professor of Law JONATHAN GROSS, J.D.... Assistant Professor of Law PAUL GROSSMAN, J.D.... Assistant Professor of Law THEDA HABER, B.A., M.A., J.D.... Assistant Professor of Law GEOFFREY A. HANSEN, B.A., J.D.... Assistant Professor of Law HILARY HARDCASTLE, B.A., J.D., M.L.I.S.... Assistant Professor of Law DIANA HARDY, B.A., J.D.... Assistant Professor of Law SARA HARRINGTON, J.D.... Assistant Professor of Law STEVE HARRIS... Assistant Professor of Law SARAH HAWKINS, B.A., J.D.... Assistant Professor of Law HOWARD A. HERMAN, A.B., J.D.... Assistant Professor of Law DENNIS HIGA, B.A., J.D.... Assistant Professor of Law MONICA HOFMANN, J.D.... Assistant Professor of Law SARAH HOOPER J.D.... Assistant Professor of Law ROBERT HULSE, B.S., M.S., J.D.... Assistant Professor of Law TERI L. JACKSON, B.A., J.D.... Assistant Professor of Law MORRIS JACOBSON, B.A., J.D.... Assistant Professor of Law OKSANA JAFFE, B.A., M.A., J.D., LL.M.... Assistant Professor of Law PEEYUSH JAIN, B.A., J.D.... Assistant Professor of Law MARIA-ELENA JAMES, B.A., J.D.... Assistant Professor of Law JULIA MEZHINSKY JAYNE, J.D.... Assistant Professor of Law JAN JEMISON, B.S., M.B.A., J.D.... Director of the Legal Education Opportunity Program and Adjunct Assistant Professor of Law STEPHEN JOHNSON, J.D.... Assistant Professor of Law ORI KATZ, B.A., J.D.... Assistant Professor of Law S. MICHAEL KERNAN, J.D.... Assistant Professor of Law TAL KLEMENT, B.A., J.D., M.PP.... Assistant Professor of Law ARLENE KOSTANT, B.A., M.A., J.D.... Assistant Professor of Law DAVID KOSTINER, B.A., J.D.... Assistant Professor of Law MANISH KUMAR... Assistant Professor of Law WILLIAM LAFFERTY, J.D.... Assistant Professor of Law CAROL M. LANGFORD, J.D.... Assistant Professor of Law CLIFFORD T. LEE, J.D.... Assistant Professor of Law JONATHAN U. LEE, J.D.... Assistant Professor of Law R. ELAINE LEITNER, B.S., J.D.... Assistant Professor of Law GARY LEWIS, B.SC., J.D.... Assistant Professor of Law STEPHEN LIACOURAS, B.A., J.D.... Assistant Professor of Law FRANK LIND, J.D.... Assistant Professor of Law ELIZABETH LINK, J.D.... Assistant Professor of Law EUGENE LITVINOFF, J.D.... Assistant Professor of Law ALLISON MACBETH, B.A., J.D.... Assistant Professor of Law CECILY MAK, J.D.... Assistant Professor of Law CHRISTIAN E. MAMMEN, J.D., PH.D.... Assistant Professor of Law HARRY MARING, B.A., J.D.... Assistant Professor of Law ALEXIIUS MARKWALDER, J.D.... Assistant Professor of Law JACK MCCOWAN, J.D.... Assistant Professor of Law MARY MCLAIN, J.D.... Assistant Professor of Law JOANNE MEDERO, B.A., J.D.... Assistant Professor of Law JASON MEEK, J.D.... Assistant Professor of Law ALAN MELINCOE, J.D.... Assistant Professor of Law SAMUEL R. MILLER, J.D.... Assistant Professor of Law THERESA DRISCOLL MOORE, B.A., J.D.... Assistant Professor of Law JESSICA NOTINI, B.A., J.D.... Assistant Professor of Law DANIELLE OCHS, B.A., J.D.... Assistant Professor of Law MARI OVERBECK, B.A., J.D.... Assistant Professor of Law ROGER PATTON, B.S., J.D.... Assistant Professor of Law RICHARD PEARL, B.A., J.D.... Assistant Professor of Law JAMES PISTORINO, J.D.... Assistant Professor of Law RACHEL PROFFITT, J.D.... Assistant Professor of Law ERIC QUANDT, J.D.... Assistant Professor of Law

10 CHARLES RAGAN, J.D.... Assistant Professor of Law ROBIN REASONER, J.D.... Assistant Professor of Law JENNIFER A. REISCH, B.A., J.D.... Assistant Professor of Law CHRISTOPHER RIES, B.S., J.D.... Assistant Professor of Law HON. A. JAMES ROBERTSON, J.D.... Assistant Professor of Law KEVIN ROMANO, J.D.... Assistant Professor of Law DAVID ROSENFELD, B.A., J.D.... Assistant Professor of Law KATHRYN ROSS, B.A., J.D.... Assistant Professor of Law ROBERT RUBIN, J.D.... Assistant Professor of Law DOUGLAS SAELTZER, J.D.... Assistant Professor of Law ROBERT SAMMIS, B.A., J.D.... Assistant Professor of Law JOACHIM SCHERER... Assistant Professor of Law JONATHAN SCHMIDT, J.D.... Assistant Professor of Law JAMES SCHURZ, J.D.... Assistant Professor of Law NINA SEGRE, J.D.... Assistant Professor of Law BAHRAM SEYEDIN-NOOR, J.D.... Assistant Professor of Law ROCHELLE SHAPELL, B.A., M.P.H., J.D.... Assistant Professor of Law ANN SHULMAN, B.S., J.D., LL.M.... Assistant Professor of Law ERIC SIBBITT, A.B., J.D., LL.M.... Assistant Professor of Law LARRY SIEGEL, M.A., J.D.... Assistant Professor of Law JEFFREY SINSHEIMER, A.B., J.D.... Assistant Professor of Law ROCHAEL SOPER, J.D., LL.M.... Assistant Professor of Law MATTHEW SOTOROSEN, J.D.... Assistant Professor of Law MARK SPOLYAR, B.S.E., J.D.... Assistant Professor of Law THOMAS E. STEVENS, B.A., J.D.... Assistant Professor of Law AURIA STYLES, J.D.... Assistant Professor of Law KIM SWAIN, J.D.... Assistant Professor of Law ROBERT TERRIS, M.A., M.S., J.D.... Assistant Professor of Law ABIGAIL TRILLIN, J.D.... Assistant Professor of Law JEFF UGAI... Assistant Professor of Law GLEN R. VAN LIGTEN, B.S., J.D.... Assistant Professor of Law BRUCE WAGMAN, B.S., J.D.... Assistant Professor of Law JAMES WAGSTAFFE, B.A., J.D.... Assistant Professor of Law CRAIG WALDMAN... Assistant Professor of Law LISA WALKER, J.D.... Assistant Professor of Law VAUGHN WALKER... Assistant Professor of Law ALLISON JANE WALTON, J.D.... Assistant Professor of Law DAVID WARD, B.A., M.A., J.D.... Assistant Professor of Law ANTON WARE B.A., M.A., J.D.... Assistant Professor of Law JEFFREY WILLIAMS, A.B., J.D.... Assistant Professor of Law JOHN D. WILSON, B.A., J.D.... Assistant Professor of Law JOHN S. WORDEN, B.A., J.D.... Assistant Professor of Law PAUL ZAMOLO., A.B., M.P.P., J.D.... Assistant Professor of Law

11 A Message from the Editor-in-Chief The rapid advancement of technology over recent decades has led to a very dynamic time for the legal landscape in the United States as new technology constantly gives rise to novel legal issues. A famous Supreme Court decision rendered in 1967 illustrates just how rapidly this advancement has occurred. The year 2017 marks the fiftieth anniversary of Katz v. United States, in which the Court addressed what was then a very contentious issue: the reasonable expectation of privacy individuals have in the protection of communications made in a public phone booth. 1 Just fifty years later, the legal debate has progressed from addressing privacy expectations in now-obsolete public phone booths to privacy expectations in various forms of electronic communications. More specifically, there is an ongoing national debate concerning how the law should or should not regulate the use of encryption and decryption technology. 2 This controversy is often framed in terms of the impact such technology could have on privacy and security concerns in a variety of contexts, 3 and in large part seeks to address the following question: How much encryption and decryption technology is desirable, and at what point, if any, could it become dangerous? 4 One of the most commonly voiced concerns about the potential for too much encryption relates to the possible effects it could have on law enforcement investigations and national security. 5 To the contrary, the primary concerns about too much decryption technology or the lack of encryption focus on the individual privacy rights of users of electronic communication storing devices. 6 With these divergent interests in mind, the Hastings Law Journal recognizes that the resolution of this debate will likely touch the lives of all American citizens. Thus, the importance of this issue has motivated the Journal to participate in the debate in a variety of ways. For example, the Journal recently facilitated a noteworthy presentation and discussion on cybersecurity issues at the national and global levels that was delivered by Eric Greenwald, who served as former Special Assistant to the President and Director for Cybersecurity at the White House, among other high-ranking government positions. 1. Katz v. United States, 389 U.S. 347 (1967). 2. See Ellen Nakashima & Barton Gellman, As Encryption Spread, U.S. Grapples with Clash Between Privacy, Security, Wash. Post (Apr. 10, 2015), security/as-encryption-spreads-us-worries-about-access-to-data-for-investigations/2015/04/10/7c1c7518- d401-11e4-a62f-ee745911a4ff_story.html. 3. See Cong. Research Serv., Encryption and the Going Dark Debate (2016). 4. See Nakashima & Gellman, supra note 2; Cong. Research Serv., supra note Nakashima & Gellman, supra note 2; Cong. Research Serv., supra note 3; see Kristin Finklea et al., Court-Ordered Access to Smart Phones: In Brief (2016) (discussing the encryption dispute between Apple, Inc. and the FBI arising from an iphone found by the FBI during its investigation of the San Bernardino terrorist attacks in 2015). 6. Finklea et al., supra note 5, at 2 3.

12 Further, the Journal looks forward to hosting a spring symposium focused on the modern encryption debate. It will discuss the rapid progress technology has made post-katz and the effect it has had on the Fourth Amendment expectation of privacy. The symposium will further address related legal issues surrounding encryption and decryption, such as the protection of consumer information. 7 Special thanks to professor and faculty advisor to the Journal, Rory Little, for his assistance in developing the topic of this symposium and for sharing his constitutional expertise at the event in the coming months. The Journal will also hold a second symposium in collaboration with UC Berkeley s California Constitution Center, which will focus on contemporary constitutional issues in California. The Journal is thrilled to host California Supreme Court Chief Justice Tani Cantil-Sakauye as well as Justices Werdegar, Corrigan, and Kruger, all of whom will provide commentary at this event. Many thanks to the California Supreme Court Justices and the California Constitution Center for the opportunity to collaborate on this initiative. Particularly, thank you to David Carrillo, Director of the Constitution Center, for all of his efforts and guidance in the planning and execution of this symposium. Finally, I would like to sincerely thank the entire Hastings Law Journal team not only for their hard work and excellent editing, but also for the energy and positivity they constantly bring to the Journal. I am grateful for the opportunity to work alongside such dedicated individuals whose unique experiences and diverse perspectives constantly impress me and add so much value to the Journal as a whole. In particular, I would like to recognize the efforts of the Volume 68 executive board: Jonathan Goldstein, Alyssa Coley, Isabella Langone, Paige Zielinski, Annie Mercer, M. Jake Feaver, and Kat Rodarte. Thank you also to our engaged alumni board and faculty advisors, as well as to UC Hastings Director of Scholarly Publications, Tom McCarthy, for all of their invaluable expertise, guidance, and support. And last, but certainly not least, thank you to the Volume 67 editorial board for the wonderful example they set and for all of the mentoring they have provided. It is with the utmost pride and excitement that I present Volume 68 of the Hastings Law Journal. Amy Leah Holtz Editor-in-Chief 7. See Dave Shackleford, Regulations and Standards: Where Encryption Applies 1 (2007).

13 TABLE OF CONTENTS Articles Contextual Healing: What to Do About Scandalous Trademarks and Lanham Act 2(a) Megan M. Carpenter... 1 The Define and Punish Clause and the Political Question Doctrine Lyle D. Kossis The New Insiders : Rethinking Independent Directors Tenure Yaron Nili Far from the Madding Crowd: A Statutory Solution to Crowd Crush Tracy Hresko Pearl Notes A Bridge over the Patent Trolls: Using Antitrust Laws to Rein in Patent Aggregators Eric Young

14 Articles Contextual Healing: What to Do About Scandalous Trademarks and Lanham Act 2(a) Megan M. Carpenter* Offensive trademarks have come to the forefront of trademark policy and practice in recent years. While it was once true that more attention had been paid to Lanham Act section 2(a) in the pages of law reviews than in the courts, 1 recent cases have focused attention on the ban on registration of offensive marks and the widespread impact of this ban on trademark owners, including a case before the Supreme Court this term. 2 In this Article, I answer the fundamental question: Given the problems previous research has identified, what should be done about the 2(a) bar for scandalous marks? 3 This Article argues, as a preliminary matter, that the registration bar for scandalous marks be removed from the Lanham Act because morality is outside the function and purpose of trademark law. Furthermore, removal of the bar would be in line with other forms of intellectual property, which have moved away from regulating morality. Finally, removing the bar would resolve concerns about the constitutionality of section 2(a). However, if the 2(a) bar remains part of the Lanham Act, it should be applied in a way that is fair and effective within the legal framework of trademark law. Specifically, this Article argues that trademark examiners should evaluate offensiveness in the same way other bars to registration and content in broadcast media are evaluated: by considering the context of the marketplace. * Professor of Law and Founder and Co-Director of the Center for Law and Intellectual Property at Texas A&M University School of Law. I am indebted to the research assistance of Mary Garner, as well as to the participants in the Chicago Intellectual Property Colloquium (2016), Intellectual Property Scholars Conference (Chicago, 2015), Fordham Intellectual Property Conference (2016), and Works in Progress in Intellectual Property Conference (Arlington, 2015) for helpful feedback and commentary. 1. Christine Haight Farley, Stabilizing Morality in Trademark Law, 63 Am. U. L. Rev. 1019, 1020 (2014). Additional articles on the topic include, e.g., Megan M. Carpenter & Kathryn T. Murphy, Calling Bulls**t on thelanham Act, 49 U. Louisville L. Rev. 465 (2011); Jasmine Abdel-Khalik, To Live in In- Fame -Y: Reconceiving Scandalous Marks as Analogous to Famous Marks, 25 Cardozo Arts & Ent. L.J. 173 (2007); Megan M. Carpenter & Mary Garner, NSFW: An Empirical Study of Scandalous Trademarks, 33 Cardozo Arts & Ent. L.J. 321 (2015); Anne Gilson LaLonde & Jermone Gilson, Trademarks Laid Bare: Marks That May Be Scandalous or Immoral, 101 Trademark Rep (2011); Michelle B. Lee, Section 2(a) of the Lanham Act as a Restriction on Sports Team Names: Has Political Correctness Gone Too Far?, 4 Sports Law. J. 65 (1997); Regan Smith, Trademark Law and Free Speech: Protection for Scandalous and Disparaging Marks, 42 Harv. C.R. C.L. L. Rev. 451 (2007). 2. See, e.g., In re Tam, 808 F.3d 1321 (Fed. Cir. 2015); Pro-Football, Inc. v. Blackhorse, 112 F. Supp. 3d 439 (E.D. Va. 2015). 3. In my previous scholarship on the subject, I discussed problems with both the application and interpretation of the ban and completed an empirical study of rejections under section 2(a). Carpenter & Murphy, supra note 1; Carpenter & Garner, supra note 1. [1]

15 2 HASTINGS LAW JOURNAL [Vol. 68:1 Table of Contents Introduction... 3 I. Historical Development of Trademark Function... 6 A. Trademarks Have Developed Throughout History to Protect Source Quality, Not Moral Quality Trademarks Developed as Source Identifiers Trademarks Have Evolved to Identify Quality... 8 II. Removal of the 2(a) Bar for Scandalousness A. Other Forms of Intellectual Property Have Moved Away from Conditioning Protection on Morality Morality and Copyright Law a. Historical Morality Bars in Copyright Law b. Modern Copyright Law Rejects Bars Based on Morality Morality and Patent Law a. Historical Morality Bars in Patent Law b. Modern Patent Law Avoids the Moral Utility Theory as a Basis for Rejection of Patent Rights c. Design Patents Retain a Morality Bar but It Is Infrequently Applied in Practice B. Like Other Forms of Intellectual Property, Trademarks Should Move Away from Conditioning Protection on Morality C. The Morality Bar for Scandalous and Immoral Marks May Be Unconstitutional III. Contextual Healing A. The Morality Bar Would Be More Effectively Applied If Trademark Examiners Considered Contextual Factors in Their Analysis The Determination of Scandalousness Should Be Made in the Context of the Relevant Marketplace Trademark Examiners Typically Do Not Consider Contextual Factors in a Refusal Based on Scandalousness, Regardless of the Marketplace or Goods at Issue... 26

16 December 2016] SCANDALOUS TRADEMARKS AND LANHAM ACT 2(A) 3 IV. Relevance of Context in Trademark Registration A. The Section 2(d) Bar for Likelihood of Confusion Centers on an Analysis of Contextual Factors Examiners Routinely Consider the Appearance of Marks in the Context of Information Contained in the Application Examiners Routinely Consider the Goods and Services Identified in the Application Examiners Routinely Consider Channels of Trade Examiners Routinely Consider the Consumer Base B. Other Bases for Refusal Regularly Consider Contextual Factors Throughout the Registration Process C. Like Other Bases for Refusal, the Bar to Registration of Scandalous Marks Should Consider Contextual Factors V. Context in Other Forms of Content Regulation A. History of Regulation of Broadcast Content and Morality There Has Been a Consistent Increase in the Use of Context to Determine Regulation of Broadcast Content Based on Offensiveness Conclusion Introduction Section 2(a) of the Lanham Act prohibits registration of trademarks that are scandalous or immoral. In my previous research, I have identified two relevant questions regarding this aspect of the 2(a) bar: First, can (and does) the Lanham Act effectively bar registration of scandalous and immoral marks? Second, should it do so? The first question was the central inquiry of two articles on the subject. Calling Bulls**t on the Lanham Act discussed some initial practical problems with the interpretation and application of 2(a). 4 The second piece provided an in-depth, empirical study of this prohibition. 5 In order to best normatively evaluate the effectiveness of the bar and to determine 4. See generally Carpenter & Murphy, supra note 1 (discussing practical problems with the interpretation and application of section 2(a)). 5. See generally Carpenter & Garner, supra note 1 (providing an empirical study of the prohibition on scandalous or immoral trademark registration).

17 4 HASTINGS LAW JOURNAL [Vol. 68:1 whether it should be removed, it is critical to know how the provision is being applied in practice throughout the registration process. While many scholars have written on the morality provisions of the Lanham Act, this was the first empirical study of scandalous marks. Through an examination of the trademark records for 232 marks, the project examined why marks were being rejected for scandalousness, what evidence was being used in the rejections, what inconsistencies exist throughout the process, and what the practical impact of these rejections may be on the use of trademarks in the marketplace, either by the original applicants or otherwise. 6 This empirical project demonstrated that the application of the 2(a) bar for scandalous marks is inconsistent and ineffective. This Article tackles the second question head-on. First, it argues that the 2(a) bar should be removed because the Lanham Act should not bar registration of trademarks that are deemed scandalous or immoral. 7 The bar is inconsistent with both the object and purpose of trademark law and the evolution of morality bars in intellectual property law generally, and it may be unconstitutional. However, there are reasons to think that the bar may not be overturned. If that is the case, how can it be applied in a way that is effective, fair, and in harmony with the body of trademark law? In response to this question, the bulk of this Article argues that 2(a) would be more effectively applied if trademark examiners considered limited contextual factors in their analysis of trademark registration applications; consideration of context is consistent with other bases for rejection and other forms of content regulation. Specifically, this Article argues that trademark examiners should conduct a 2(a) analysis for scandalousness by considering the mark in the context of the relevant marketplace. This solution is in line with the overarching body of trademark law, which evaluates trademarks in context. Marks are often rejected for being scandalous in the abstract based on dictionary definitions that note a particular term is offensive or vulgar. These refusals fail to consider whether a mark is scandalous in the context of the relevant marketplace for goods and services identified in the application, which should be a material aspect of the inquiry. This Article s proposal would bring the morality bar in line with the general body of trademark law, which focuses on trademark rights not as rights in gross, but rights appurtenant to a particular business. 8 Context is 6. Id. 7. See In re Tam, 808 F.3d at United Drug Co. v. Theodore Rectanus Co., 248 U.S. 90, 97 (1918) ( The asserted doctrine is based upon the fundamental error of supposing that a trade-mark right is a right in gross.... There is no such thing as property in a trade-mark except as a right appurtenant to an established business or trade in connection with which the mark is employed. ).

18 December 2016] SCANDALOUS TRADEMARKS AND LANHAM ACT 2(A) 5 a common consideration throughout the registration process, and examining attorneys routinely consider contextual factors in other areas of trademark registration, most notably in a likelihood of confusion analysis, but also for refusals on a variety of bases, including descriptiveness, functionality, and deceptiveness. 9 In fact, it is unusual not to consider marketplace context in the application process. If we are going to prohibit registration of marks that are scandalous or immoral, that evaluation should consider context in the same way that other registration bars do. This Article proceeds in five parts. Part I traces the role and function of trademarks over time, and identifies core functions of trademarks as source identifiers and mechanisms for consumer protection. These functions support the efficiency of consumer search costs and incentivize producers to invest in the goodwill of their goods and services. Part II argues that the bar on registration of scandalous marks should be removed; in order to stay in line with its core function and developments in intellectual property law generally, trademark law should move away from considering scandalousness as a bar to registration. This would be consistent with recent case law on disparaging marks, and with other forms of intellectual property, which have moved away from regulating morality. While in the past copyright and patent regimes conditioned acquisition or maintenance of rights on the morality of works or inventions, they no longer do so. The second half of this Article contemplates the retention of 2(a) within the Lanham Act. Part III proposes that while the registration bar is in existence, it would be more effectively applied if trademark examiners considered contextual factors in their analysis. So long as the bar is in effect, we should interpret and apply it in a way that is effective, fair, and in harmony with the body of trademark law. Consideration of context is further consistent with other forms of content regulation. Part IV discusses the relevance of context in trademark registration, particularly with regard to likelihood of confusion the key DuPont factors considered by examiners in a likelihood of confusion analysis of an application, for example, all focus on aspects of context. Similarly, other registration bars, such as descriptiveness and functionality, focus on aspects of context. Finally, Part V demonstrates that this proposed change would be consistent with other forms of content regulation, which have evolved to accommodate context. 9. See U.S. Patent & Trademark Office, TMEP 1207 (Apr. 2016).

19 6 HASTINGS LAW JOURNAL [Vol. 68:1 I. Historical Development of Trademark Function A. Trademarks Have Developed Throughout History to Protect Source Quality, Not Moral Quality The type of consumer protection at the base of trademark law is not a moral one. Trademarks serve to identify a source of goods and services and to distinguish them from others. Toward that end, trademarks have a strong qualitative component. However, the quality with which trademark law is concerned is source quality; moral quality is not part of the core function and purpose of trademark law, and it should not be. 1. Trademarks Developed as Source Identifiers The historical development of trademarks demonstrates a focus on source quality. While trademark law is a relatively recent phenomenon, trademarks as identifying marks of ownership or source predate reading and writing. Cave paintings in Europe and wall paintings in Egypt, dating from the late Stone Age or early Bronze Age, both show the act of cattle branding, which was likely the first use of a trademark. 10 The verb to brand, in fact, is derived from the Old English brand or brond, meaning firebrand or piece of burning wood. 11 In 1552, the word brand signified identifying mark made by a hot iron, but by 1827, this use had broadened to a particular make of goods. 12 Trademarks worldwide have historically served to identify a source of goods and services. Pottery found in Greece and Rome usually had the maker s name inscribed on the handle. 13 Chinese porcelain had date marks, and sometimes a maker s mark, the place of manufacture, or the destination of the particular piece. 14 Bricks and tiles from Egypt have been found that contain identifying marks, including the inscription or symbol of the monarch, and the particular building project for which the bricks and tiles were to be used. 15 Egyptian signboards, with distinct marks and sometimes rebuses, have also been discovered. 16 Hindu goods 10. Sidney A. Diamond, The Historical Development of Trademarks, 65 Trademark Rep. 265, (1975). 11. Brand, Online Etymology Dictionary, allowed_in_frame=0 (last visited Nov. 7, 2016). 12. Id. 13. Diamond, supra note 11, at 267; Gerald Ruston, On the Origin of Trademarks, 45 Trademark Rep. 127, 132 (1955); Benjamin G. Paster, Trademarks Their Early History, 59 Trademark Rep. 551, 553 (1969). 14. Diamond, supra note 11, at 267; Paster, supra note 14, at Diamond, supra note 11, at 268; Paster, supra note 14, at ; see also Ruston, supra note 14, at Diamond, supra note 11, at 272.

20 December 2016] SCANDALOUS TRADEMARKS AND LANHAM ACT 2(A) 7 dated from 1300 B.C. were traded between India and Asia Minor and regularly utilized trademarks to indicate source. 17 Over time, trademarks grew to represent the goodwill of their producers. Historian Sidney Diamond notes the proliferation of potters marks used on Roman goods, particularly oil lamps, during the period 35 B.C. to 265 A.D. approximately 1000 marks have been identified as in use during that period of time. 18 Since then, trademarks have been an integral aspect of trade. After a decline in the Dark Ages, the Medieval Period saw the development of personal marks, proprietary marks, and geographical appellations. 19 Personal marks included coats of arms, seals, and house marks. 20 House marks identified a family in residence and were literally affixed to a house. If a member of that family became a business owner, the house mark became a way of signifying the source of the business, as well. 21 Sometimes house marks were also placed on goods, either of a particular family business or of the household generally. 22 Proprietary marks on goods enabled individuals to identify their tools and other articles, including farm animals, in the event they were lost or stolen. 23 Geographical indications were often placed on goods that were likely to be part of a broader stream of commerce, such as tapestries and cloth. 24 Some tapestries also contained what would be the equivalent of a certification mark, certifying a particular level of quality for the goods. 25 It is also claimed that during this period, in 1544, Charles V pronounced by edict that marks identifying the city of origin and maker were required on tapestries. 26 The punishment for trademark infringement was amputation of the right hand Id. at Id. at 271; see also Paster, supra note 14, at Of particular success was the FORTIS brand; FORTIS brand oil lamps have been found as far away as France, Germany, Holland, England, and Spain. The wide range of brand distribution may be attributed not only to the success of the FORTIS brand, but also to other incidental novelties. Brian J. Winterfeldt, Historical Trademarks: In Use Since... 4,000 B.C., Int l Trademark Ass n Bull., Mar. 2002, InUseSince4000BC.aspx; Rossella Lorenzi, Roman Factory Town for Oil Lamps Found, NBC News (Dec. 5, 2008, 1:27 PM), (discussing the discovery of pottery center where oil lamps used in the ancient Roman Empire were made). Perhaps the FORTIS brand was one of the first broad trademark counterfeiting operations. Or, perhaps the mark FORTIS became the first generic designation, signifying a particular type of oil lamp rather than a brand. 19. Paster, supra note 14, at Diamond, supra note 11, at 272; Ruston, supra note 14, at Diamond, supra note 11, at ; see Ruston, supra note 14, at ; Paster, supra note 14, at Diamond, supra note 11, at 273; Ruston, supra note 14, at Diamond, supra note 11, at Id. 25. Id. 26. Id. at Id. Diamond points out that the dates recorded for the identifying marks edict and the punishment conflict, the former documented as occurring in 1544 with the latter documented in 1554.

21 8 HASTINGS LAW JOURNAL [Vol. 68:1 Ironically, between the invention of the printing press and the development of the concept of copyright, it was the trademark that governed original works fixed in a tangible medium. That is, where works were not protected by copyright, their indication of source was often determinative of their value. The trademark, for example, sat at the center of competition in the publishing trade. Printers and publishers competed for the most accurate version of a particular work, and in that regard used trademarks as an identification of source. 28 Trademarks served as the mechanism for protection of visual art, as well. In 1512 Albrecht Dürer brought a complaint against an individual who was copying his works. 29 Rather than complaining about the copying of the work per se, however, Dürer asked that the individual be prevented from using AD as a source-identifying mark. 30 The Council of Nuremberg complied. 31 Using trademarks as an indicator of source became commonplace during the Industrial Revolution. 32 From English pewter to French porcelain to American silversmithing, trademarks became widely used in the marketplace. 33 In 1783, an English court held that to infringe a trademark was fraud, and damages would be assessed accordingly Trademarks Have Evolved to Identify Quality From the cattle-brands of Egypt in the late Stone Age to the proprietary and house marks in England during the Medieval Ages, trademarks worldwide were clearly placed on goods to identify a particular source. As the characteristics and functions of trademarks have evolved over time, however, the property interest in trademarks has grown stronger. In Gilson on Trademarks, Gilson notes that the distinction between how a trademark operates and why it should be protected is often blurred by courts, and, furthermore, that courts, legislatures, and commentators have differed in their views over time with changes in economy and culture. 35 It is possible this discrepancy was due to a typographical error. Diamond further notes that there is no documented evidence of enforcement; that is, no indication that any infringer s right hand was actually cut off. Id. at See Ruston, supra note 14, at 141 (dating Charles V s edict regarding punishment of an infringer to 1554). 28. Diamond, supra note 11, at 275; Ruston, supra note 14, at 139; Paster, supra note 14, at In fact, the works of Livy, published by Aldus of Venice, contain a warning against imitations in the preface of the book. Diamond, supra note 10, at Diamond, supra note 11, at Id. 31. Id.; Paster, supra note 14, at See Diamond, supra note 11, at ; Paster, supra note 14, at Diamond, supra note 11, at Singleton v. Bolton (1783) 99 Eng. Rep. 661 (K.B.). Yet, there was no explicit law of trademarks, and no provision to try a case for trademark infringement Anne Gilson LaLonde, Gilson on Trademarks 1.03 (92nd rev. ed. 2016).

22 December 2016] SCANDALOUS TRADEMARKS AND LANHAM ACT 2(A) 9 During the Industrial Revolution and ensuing developments of economy and culture in the twentieth century, consumers became further removed from the producers of goods. With technology and transportation enabling mass production of goods, consumers drifted far downstream from manufacturers in the stream of commerce. Furthermore, others shared the waters suppliers and merchants, both wholesale and retail, were integrated into the supply chain. As consumers could no longer rely exclusively on the trademark to identify a known producer of goods, they began to rely on marks to identify a particular quality of goods and/or services, for example, through the sales from a particular merchant. In the United States, case law in the first half of the 1900s demonstrates this shift from trademarks as exclusively source identifiers to trademarks as identifiers of quality. 36 In Hanover Star Milling Co. v. Metcalf, for example, the Court held that [t]he primary and proper function of a trade-mark is to identify the origin or ownership of the article to which it is affixed. 37 The Court reasoned that the core of trademark function is to designate goods as being from a particular producer, and that consequently, trademark law bars others from applying the same mark to the same goods, because to do so would in effect represent their goods to be of his production and would tend to deprive him of the profit he might make through the sale of the goods which the purchaser intended to buy. 38 The Court summarized: The essence of the wrong consists in the sale of the goods of one manufacturer or vendor for those of another. 39 It was only slightly more than a decade later that Frank Schechter, in his article The Rational Basis of Trademark Protection, argued that the public had come to rely on a trademark not for the origin of goods or services, but as a measure of quality, and that trademark law should accommodate this shift in function. 40 In the latter half of the twentieth century, courts and trademark owners honed in on the function of trademarks as a signifier of quality in addition to source. Controlling quality began to be seen as one of the key functions of the Lanham Act See, e.g., United Drug Co. v. Theodore Rectanus Co., 248 U.S. 90 (1918); Hanover Star Milling Co. v. Metcalf, 240 U.S. 403 (1916); Columbia Mill Co. v. Alcorn, 150 U.S. 460 (1893); Canal Co. v. Clark, 80 U.S. 311 (1871) (supporting the idea that trademarks identify a particular source of goods); see also In re Polar Music Int l AB, 714 F.2d 1567 (Fed. Cir. 1983) (acknowledging a material shift from reliance on trademarks as source identifiers to quality identifiers). 37. Hanover Star Milling Co., 240 U.S. at Id. 39. Id. at Frank I. Schechter, The Rational Basis of Trademark Protection, 40 Harv. L. Rev. 813, 824 (1927), reprinted in 60 Trademark Rep. 334 (1970). 41. For example, various cases discuss how ensuring quality is an important function of the Lanham Act. El Greco Leather Prods. Co. v. Shoe World, Inc., 806 F.2d 392, 395 (2d Cir. 1986); Gorenstein Enters., Inc. v. Quality Care-USA, Inc., 874 F.2d 431, 435 (7th Cir. 1989). El Greco Leather also specifically states that [o]ne of the most valuable and important protections afforded by the Lanham Act

23 10 HASTINGS LAW JOURNAL [Vol. 68:1 This principle is enshrined in two separate places in the Lanham Act. Of primary importance is the definition of a trademark itself, which provides that a trademark can be any symbol that indicates the source of goods even if that source is unknown. 42 Also, section 45 of the Lanham Act provides that a trademark may be adopted and used by a manufacturer or merchant. 43 This provision recognizes that the trademark does not always identify the producer of goods, and instead can identify other entities in the stream of commerce. Lanham Act provisions on trademark licensing support this shift from source to quality, as well. Under the Act, the owner of a federal trademark application or registration can license the right to use the mark to another party, provided that the trademark owner retains control over the nature and quality of the goods or services sold by the licensee under the mark. 44 As long as the trademark owner has adequate quality-control mechanisms in place, he or she does not even have to use the mark, and use by the licensee inures to his or her benefit. 45 In the consumer marketplace, these functions are at base a form of consumer protection. When a consumer purchases a particular good or service, associated trademarks serve as both an indicator of source and an indicator of quality, facilitating and/or encouraging purchasing decisions. This type of consumer protection, however, should not be mistaken for one that safeguards the morality of consumers or shields them in any way from offensive content. While trademarks have a strong qualitative component, the quality with which trademark law is concerned is source quality, not moral quality. II. Removal of the 2(a) Bar for Scandalousness In order to remain consistent with the core function and purpose of trademark law, the registration bar for scandalous marks should be removed. This would align with the movement of intellectual property law generally, which has shifted away from regulating morality, and with recent case law on disparaging marks. As previously mentioned in Part I, while copyright and patent regimes once conditioned acquisition or maintenance of rights on the morality of works or inventions, they no longer do so. In addition, recent case law suggests that the 2(a) is the right to control the quality of the goods.... El Greco Leather, 806 F.2d at 395 (citing Menendez v. Faber, Coe & Gregg, Inc., 345 F. Supp. 527 (S.D.N.Y. 1972), aff d in relevant part and modified, 485 F.2d 1355 (2d Cir. 1973) and Alfred Dunhill of London, Inc. v. Republic of Cuba, 425 U.S. 682 (1976)). It goes on to also state that the actual quality of the goods is irrelevant; it is the control of quality that a trademark holder is entitled to maintain. Id. (citing Prof l Golfers Ass n of Am. v. Bankers Life & Cas. Co., 514 F.2d 665, (5th Cir. 1975)) U.S.C (2016). 43. Id. 44. Id Id.

24 December 2016] SCANDALOUS TRADEMARKS AND LANHAM ACT 2(A) 11 registration bar for scandalous and immoral marks may be unconstitutional. A. Other Forms of Intellectual Property Have Moved Away from Conditioning Protection on Morality There has been a trend toward eliminating morality-based restrictions in copyright and patent law. The prohibition on registration for scandalous and immoral trademarks sets trademark law apart from other forms of intellectual property by maintaining distinctions based on morality. 1. Morality and Copyright Law While Congress has generally construed the term writings found in the Intellectual Property Clause of the Constitution broadly to cover almost every type of literary property, obscene works were denied copyright protection until fairly recently. 46 The Miller test for obscenity paved the way for the modern view of copyrightability for obscene works. The Miller test asks: (1) whether the average person, applying contemporary community standards, would find that the work, taken as a whole, appeals to the prurient interest; (2) whether the work depicts or describes, in a patently offensive way, sexual conduct specifically defined by the applicable state law; and, (3) whether the work, taken as a whole, lacks serious literary, artistic, political, or scientific value. 47 The Court later defined community as the community of the individual juror; 48 the average person to include both sensitive and insensitive adults; 49 and prurient to mean any lust that is not normal See Hoffman v. Le Traunik, 209 F. 375, 379 (N.D.N.Y. 1913) (holding that works must be free from illegality or immorality to obtain copyright protection); contra Mitchell Bros. Film Grp. v. Cinema Adult Theater, 604 F.2d 852 (5th Cir. 1979), cert. denied, 445 U.S. 916 (1980) (removing immoral standard). Throughout history, courts have formulated different definitions of and tests for obscenity. The Supreme Court first attempted to define obscenity by attending Movie Day, where the justices would gather together with their clerks to view the adult films that were the subject matter of the obscenity cases before the Court. Christopher Thomas McDavid, Note, I Know It When I See It: Obscenity, Copyright, and the Cautionary Tale of the Lanham Act, 47 U. Louisville L. Rev. 561, 563 n.11 (2009) (noting that neither Justice William Douglas nor Justice Hugo Black ever attended Movie Day, as they rejected the argument that any expression could be banned. Black famously commented, If I want to go see that film, I should pay my money. (citing Bob Woodward & Scott Armstrong, The Brethren 198 (1979))). 47. Miller v. California, 413 U.S. 15, 24 (1973). 48. Hamling v. United States, 418 U.S. 87, 105 (1974). 49. Pinkus v. United States, 436 U.S. 293, (1978). 50. Brockett v. Spokane Arcades, Inc., 472 U.S. 491, 498 (1985).

25 12 HASTINGS LAW JOURNAL [Vol. 68:1 a. Historical Morality Bars in Copyright Law In the past, copyright protection was denied to offensive works because they failed to progress science and the useful arts. The common law bar to copyright of obscene works is thought to have originated in England, when a publisher sought damages for the unauthorized sale of his work by a subsequent publisher. 51 In Stockdale v. Onwhyn, the court held that the work in question was libelous and licentious and that it would be a disgrace to the common law should a court of justice protect from piracy a work on an indecent nature. 52 The California Circuit Court in Martinetti v. Maguire adopted the Stockdale doctrine when it denied relief in an infringement action because the work in question did not fit within the boundaries of the Intellectual Property Clause. 53 Because the play featured scant and meaningless dialogue, the exhibition of women in novel dress or no dress, and consisted mainly of women lying about loose, it did not promote science or the useful arts. 54 The court elaborated: To call such a spectacle a dramatic composition is an abuse of language, and an insult to the genius of the English drama. 55 Although the judge denied that he was acting as a conservator of public morality by denying copyright, he contradicted himself by concluding, it is the duty of all courts to uphold public virtue, and [to] discourage and repel whatever tends to impair it. 56 Songs containing obscene lyrics were also ineligible for copyright protection because they did not progress the arts as required by the Intellectual Property Clause. 57 A California court held that the song Dora Dean was not useful (and, implicitly obscene) because it contained the lyric the hottest thing you ever seen in reference to an attractive woman. 58 The court noted that hot could be defined as 51. McDavid, supra note 47, at 564; Stockdale v. Onwhyn (1826) 108 Eng. Rep. 65 (K.B.). 52. Stockdale, 108 Eng. Rep. at 66. The work in question was the Memoirs of Harriett Wilson, a story of the exploits of a notorious courtesan. Kurt L. Schmalz, Problems in Giving Obscenity Copyright Protection: Did Jartech and Mitchell Brothers Go Too Far?, 36 Vand. L. Rev. 403, 404 (1983). In Stockdale, the court observed that English equity courts frequently refused to grant injunctive relief to stop piracy of morally objectionable works. This equity-focused view was based on the doctrine of unclean hands, which prevents an author tainted by the illegality of publishing an obscene work from enjoying the protection of the court s authority. Id. at Martinetti v. Maguire, 16 F. Cas. 920 (C.C.D. Cal (no. 9173)). The case concerned an infringement action regarding the play Black Crook, which the author slightly modified the characters and dialog in creating Black Rook. The court held that both plays lacked originality, and thus neither was entitled to copyright protection. Id. at Id. at Id. 56. Id. 57. Broder v. Zeno Mauvais Music Co., 88 F. 74, 79 (C.C.N.D. Cal. 1898). 58. Id.

26 December 2016] SCANDALOUS TRADEMARKS AND LANHAM ACT 2(A) 13 lustful, lewd, or lecherous, and concluded that the obscene lyrics were not copyrightable. 59 Throughout the 1900s, however, courts began to erode the bar for obscene works. In 1925, in a case that serves as an exemplar for changing mores, a court echoed the morality requirement for copyright protection, but failed to apply it. 60 A district court in New York held that the play White Cargo infringed upon the novel Hell s Playground, even though the works were unnecessarily coarse and highly sensual. 61 The novel and the play both depicted an Englishman s affair with a West African native in the French Congo. The court did not find the work in question immoral, but stated that copyright would have been invalid if it were. 62 The difficulty of applying morality to copyright was acknowledged in litigation over the movie When Tomorrow Comes, a movie in which a couple engaged in indecent and vulgar acts before a church altar. 63 Interestingly, the court in this case did not apply the Martinetti rule to invalidate the copyright. 64 Rather, the court applied the U.S. Post Office s definition of obscenity that was used to keep pornography out of the mail. This test considers the works as a whole and proscribes the work if it has a direct tendency to corrupt morals. 65 The court determined that the work was not obscene because the woman who desecrated the altar was killed at the end of the film, and thus cured the film of any possible immorality. 66 The last gasp of moral regulation in copyright occurred when the New York Supreme Court refused to allow copyright on a plaintiff s satirical strip-tease dance because it failed to promote the objectives of copyright. 67 Although the decision was not based on moral outrage, as was the focus in earlier decisions, the court denied copyright because the dance failed to promote the progress of science and useful arts. 68 The court reasoned: [N]ot everything [that is] put on the stage can be subject to copyright. While plaintiff s performance was no doubt amusing and entertaining to many, it does not fall within the purview of the statute as a production tending to promote the progress of science and useful arts Id. 60. Simonton v. Gordon, 12 F.2d 116, 124 (S.D.N.Y. 1925). 61. Id. 62. Id. 63. Cain v. Universal Pictures Co., 47 F. Supp. 1013, 1018 (S.D. Cal. 1942). 64. See id. 65. Id. 66. Id. 67. Dane v. M. & H. Co., 1963 WL 8060, at *4 (N.Y. Sup. Ct. Jan. 25, 1963). 68. Id. 69. Id. ( Where a performance contains nothing of a literary, dramatic or musical character which is calculated to elevate, cultivate, inform or improve the moral or intellectual natures of the audience, it does not tend to promote the progress of science or the useful arts. ).

27 14 HASTINGS LAW JOURNAL [Vol. 68:1 b. Modern Copyright Law Rejects Bars Based on Morality Although neither Congress nor the Supreme Court has explicitly weighed in, the modern view is to afford all eligible works copyright protection, regardless of the (im)morality of the content. 70 The Fifth and Ninth Circuits have expressly held that obscene works are copyrightable, reasoning that the need for national copyright protection outweighs the state and federal public policies against obscenity. 71 This is the approach taken by the Copyright Office today. In 1979, the Fifth Circuit held in Mitchell Brothers Film Group v. Cinema Adult Theater that works could not be excluded from copyright because of obscene content. 72 In Mitchell Brothers, copyright owners of the adult film Behind the Green Door brought an infringement suit against a group of theater owners showing the film without permission. 73 Defendants argued that the copyright holders brought suit with unclean hands, and that equity should uphold obscenity as an affirmative defense to infringement. 74 The Fifth Circuit did not agree, rejecting the moral conservator theory of copyright invalidation, 75 the property interest theory, 76 and the unclean hands equitable doctrine. 77 The court reasoned that Congress had intentionally omitted, and therefore did not intend, a bar for immoral or obscene works. 78 The court further argued that denying copyright to obscene works was contrary to the Intellectual Property Clause s purpose of promoting creativity, 79 and reasoned that the market was the appropriate arbiter in determining if a work is fit for 70. See 1 2 Nimmer on Copyright 2.17 (Mitchell expressly held that a work is not excluded from copyright protection by reason of its obscene content. This holding may be taken as the currently prevailing view, although [in the past], a number of previous courts took the view that obscene works are not eligible for copyright. ). 71. Schmalz, supra note 53, at Mitchell Bros. Film Grp. v. Cinema Adult Theater, 604 F.2d 852, 862 (5th Cir. 1979). 73. Id. at Id. 75. See id. at See id. 77. See id. 78. Id. at ( We can only conclude that we must read the facially all-inclusive 1909 copyright statute as containing no explicit or implicit bar to the copyrighting of obscene materials, and as therefore providing for the copyright of all creative works, obscene or non-obscene, that otherwise meet the requirements of the Copyright Act. ). Id. at Id. at 856 (reserving copyright for only moral works would be antithetical to [the] promotion of creativity. The pursuit of creativity requires freedom to explore into the gray areas, to the cutting edge, and even beyond. ) The court also cited books banned under obscenity laws as further evidence of stifled creativity. Id. at 857. See, e.g., Commonwealth v. Delacey, 171 N.E. 455 (Mass. 1930) (finding Lady Chatterley s Lover by D.H. Lawrence obscene); Commonwealth v. Friede, 171 N.E. 472 (Mass. 1930) (finding An American Tragedy by Theodore Dreiser obscene); Besig v. United States, 208 F.2d 142(9th Cir. 1953) (finding Henry Miller s Tropic of Cancer and Tropic of Capricorn obscene).

28 December 2016] SCANDALOUS TRADEMARKS AND LANHAM ACT 2(A) 15 public consumption. 80 The Ninth Circuit followed the reasoning of the Fifth Circuit in Jartech v. Clancy, a case decided three years after the Mitchell Brothers decision and the first major copyright-morality case under the Copyright Act of The issue of copyrightability of obscene material has remained untouched at the appellate level since Jartech. Perhaps the most definitive evidence that modern copyright law does not contain a morality bar is a simple search of issued U.S. Copyrights via the Copyright Office s Internet database. 82 The amount of potentially obscene or scandalous material that has obtained copyright protection is voluminous, and the copyright holders of pornographic and adult material regularly engage with the Copyright Act to enforce their exclusive rights under section Morality and Patent Law The treatment of morality in patent law is parallel to that of copyright law. Patents were once invalidated based on a theory of moral utility, which is a theory that an invention designed for an immoral purpose should not be patentable. This theory has not been used in many years, a fact that has led scholars to characterize it as a relic of the past. a. Historical Morality Bars in Patent Law Utility patents were once subject to restrictions based on morality like the ones that trademarks are subject to today. Patent law required that the invention should not be frivolous or injurious to the well-being, good policy, or sound morals of society. The word useful, therefore, is incorporated into the act in contradistinction to mischievous or 80. Mitchell Bros. Film Grp., 604 F.2d at 855 (stating copyright is best served by allowing all creative works... to be accorded copyright protection regardless of subject matter or content, trusting to the public taste to reward creators of useful works and to deny creators of useless works any reward. ). 81. Jartech v. Clancy, 666 F.2d 403 (9th Cir. 1982). See Schmalz, supra note 53, at Search available at Public Catalog, U.S. Copyright Off., Pwebrecon.cgi?DB=local&PAGE=First (last visited Nov. 7, 2016). For example, a search for incest provided 221 unique registrations. Id. 83. Gabe Friedman, The Biggest Filer of Copyright Lawsuits? This Erotica Web Site, New Yorker (May 14, 2014), Tony Pipitone & Sandra Esquivel, Porn Company Sues Thousands Claiming Copyright Infringement, NBC Miami (May 4, 2014), Thousands-Claiming-Copyright-Infringement html; Claire Sudath, Prenda Law, the Porn Copyright Trolls, Bloomberg Businessweek (May 30, 2013, 1:51 PM), news/articles/ /prenda-law-the-porn-copyright-trolls; Kashmir Hill, How Porn Copyright Lawyer John Steele Has Made a Few Million Dollars Pursuing (Sometimes Innocent) Porn Pirates, Forbes (Oct. 15, 2012, 2:09 PM),

29 16 HASTINGS LAW JOURNAL [Vol. 68:1 immoral. 84 Under this definition, immoral or mischievous inventions were not patentable because those uses were not beneficial to society. Justice Story cited inventions designed to poison people, promote debauchery, or facilitate private assassination as examples of immoral inventions that did not perpetuate the public good. 85 This moral utility requirement was typically applied in two distinct situations: one in which the public was likely to be deceived, and the other where the invention would enable immoral behavior. Courts invalidated patents based on artifice, where a process for treating plain leaf tobacco plants made their leaves spotted, because cigar smokers believed that spotted tobacco leaves were of better quality, which enabled the inventor to sell counterfeit tobacco for a higher price. 86 The court denied patent protection because the invention did not improve the tobacco leaf or the cigar smoking process, and because its sole purpose was to deceive the public. 87 Similarly, in Scott & Williams, Inc. v. Aristo Hosiery Co., the Second Circuit denied patent protection for a seamless stocking that featured an imitation seam on one side. 88 The prevailing thought of the time was that seamed stockings were of higher quality. 89 Again, the court denied patent protection because its design was deceptive. 90 This invention was useful in a particular way that is, it allowed people who were unable to purchase seamed stockings to obtain the appearance of the expensive alternative. However, the court focused on the underlying artifice and refused registration. 91 By the time the Federal Circuit rejected the immorality and mischief bars in 1999, they had already become somewhat of a relic, and courts rarely implicated the moral utility theory at all. 92 In the landmark case Juicy Whip, Inc. v. Orange Bang, Inc., the patent in question created the illusion that liquid was being dispensed from a container above a spout when it was really pumped from a container hidden below the counter. 93 When Juicy Whip sued a competitor for infringement, the competitor claimed that the patent was invalid because it lacked utility due to its 84. Lowell v. Lewis, 15 F. Cas. 1018, 1019 (C.C.D. Mass. 1817) (No. 8568); see also Llewellyn Joseph Gibbons, Semiotics of the Scandalous and the Immoral and the Disparaging: Section 2(A) Trademark Law After Lawrence v. Texas, 9 Marq. Intell. Prop. L. Rev. 187, 205 n.88 (2005). 85. Lowell, 15 F. Cas. at Rickard v. Du Bon, 103 F. 868, 869 (2d Cir. 1900). 87. Id. at Scott & Williams, Inc. v. Aristo Hosiery Co., 7 F.2d 1003, 1004 (2d Cir. 1925). 89. Id. 90. Id. 91. Id. 92. Juicy Whip, Inc. v. Orange Bang, Inc., 185 F.3d 1364, (Fed. Cir. 1999) ( [B]ut the principle that inventions are invalid if they are principally designed to serve immoral or illegal purposes has not been applied broadly in recent years. ). 93. Id. at 1365; U.S. Patent No. 5,575,405 (filed Apr. 18, 1996).

30 December 2016] SCANDALOUS TRADEMARKS AND LANHAM ACT 2(A) 17 deceptiveness. 94 The district court found the patent invalid because its purpose was to increase sales by deception, but the Second Circuit reversed. 95 The court reasoned that [t]he fact that one product can be altered to make it look like another is in itself a specific benefit sufficient to satisfy the statutory requirement of utility. 96 The court subsequently described several issued patents that had utility because they were designed to represent something that they were not. 97 Patents were once invalid if they enabled an immoral behavior, but courts no longer do so based on the theory that the U.S. Patent and Trademark Office ( USPTO ) should not be the arbiter of morality. The evolution of disregarding morality as a basis for patentability is well illustrated in the context of gambling. In 1889, devices related to gambling were found to lack utility, and thus were unpatentable. 98 However, an invention solely used for gambling was granted a patent in In Ex parte Murphy, the Board stated that the USPTO should not be the agency which seeks to enforce a standard of morality with respect to gambling, by refusing, on the ground of lack of patentable utility, to grant a patent. 100 Since that time, no court has relied on the moral utility doctrine in rejecting a patent. 101 We can see a similar evolution away from morality in other areas of patent law as well. A patent for a novelty keyhole finder was invalidated by the U.S. Court of Customs and Patent Appeals ( CCPA ) in the 1950s when it was discovered that the device gave the appearance of female genitalia. 102 However, patents have been granted in recent decades on countless sexually explicit inventions including: an oral prophylactic, 103 a contraceptive and flavor delivery system, 104 a unisex condom, 105 interactive 94. Juicy Whip, Inc., 185 F.3d at Id. 96. Id. at Id.; see, e.g., U.S. Patent No. 5,762,968 (filed Mar. 12, 1996) (method for producing imitation grill marks on food without using heat); U.S. Patent No. 5,899,038 (Apr. 22, 1997) (laminated flooring imitating wood); U.S. Patent No. 5,571,545 (Jan. 23, 1996) (imitation hamburger). The court also referred to cubic zirconium, imitation gold leaf, and imitation leather. Juicy Whip, Inc., 185 F.3d at Nat l Automatic Device Co. v. Lloyd, 40 F. 89, (C.C.N.D. Ill. 1889). 99. Ex parte Murphy, 200 U.S.P.Q. (BNA) 801, (T.T.A.B. 1977) Id. at 803. [W]hile some may consider gambling to be injurious to the public morals and thegood order of society, we cannot find any basis in 35 U.S.C. 101 or related sections which justify a conclusion that inventions which are useful only for gambling ipso facto are void of patentable utility. Id. at Cynthia M. Ho, Splicing Morality and Patent Law: Issues Arising from Mixing Mice and Men, 2 Wash. U. J.L. & Pol y 247, 249 (2000) U.S. Patent No. 2,632,266 (filed May 2, 1950) U.S. Patent No. 4,949,731 (filed Aug. 27, 1987) (claiming both oral contraception and protection from paint entering the mouth when painting with the mouth) U.S. Patent No. 4,919,149 (filed July 8, 1988) U.S. Patent No. 4,966,165 (filed Aug. 12, 1988).

31 18 HASTINGS LAW JOURNAL [Vol. 68:1 lingerie, 106 a female garment with enfolding labia majora, 107 couples intimacy reciprocating and pivoting two seat assembly, 108 a method and device for interactive virtual control of sexual aids using digital computer networks, 109 and a penis pump. 110 b. Modern Patent Law Avoids the Moral Utility Theory as a Basis for Rejection of Patent Rights In recent years, the USPTO has had the opportunity to revisit the moral utility theory, but has chosen not to do so as a basis for rejection of patent rights. The filing of patent applications for life-related patents raised the question of morality as a basis for determining patentable subject matter when cellular biologist Stewart Newman attempted to obtain a method patent for producing a half human, half animal species. 111 Newman s application was not filed to acquire a patent on his invention, but was rather a de facto petition to the USPTO to clarify its stance on the patentability of life. 112 When Newman s application was publicized, the USPTO reacted quickly with an advisory stating that all patent applications must meet strict patentability requirements and the USPTO does not discriminate against fields of technology. 113 It also stated that courts have interpreted the utility requirement to exclude inventions that are deemed to be injurious to the well being, good policy, or good morals of society. 114 While this raised the spectre of resurrection of the moral utility theory, the USPTO did not use it as a basis for rejecting the Newman s application. Instead, the USPTO rejected the patent on the basis that it failed to claim statutory subject matter. 115 The USPTO has more recently acknowledged that with regard to 106. U.S. Patent No. 5,086,519 (filed Feb. 7, 1991) U.S. Patent No. 5,285,531 (filed Sept. 4, 1992) U.S. Patent No. 5,385,154 (filed Nov. 4, 1993) U.S. Patent No. 6,368,268 B1 (filed Aug. 17, 1998) U.S. Patent No. 7,651,463 B2 (filed Sept. 2, 2005). Note that some of these were issued much earlier than 1999, further suggesting that the requirement was not uniformly implemented before being formally rejected. For a more in-depth look at sexual inventions, see generally Hoag Levins, American Sex Machines: The Hidden History of Sex at the U.S. Patent Office (1996). Also note that some of the patents would more readily offend some than others, and that some would probably have been more offensive earlier in history than they are now See Group Faults PTO for Issuing Patent on Method of Producing Cloned Mammal, 64 Pat. Trademark & Copyright J. 81 (2002); Benjamin D. Enerson, Note, Protecting Society from Patently Offensive Inventions: The Risk of Reviving the Moral Utility Doctrine, 89 Cornell L. Rev. 685, 693 (2004) Seán M. Coughlin, The Newman Application and the USPTO s Unnecessary Response: Patentability of Humans and Human Embryos, 5 Chi.-Kent J. Intell. Prop. 90, 90 (2006). Newman is generally against patenting life, and sought to spur debate about the ethics of genetic engineering and patenting life forms. Id. at Press Release, U.S. Patent and Trademark Office, Facts on Patenting Life Forms Having a Relationship to Humans (Apr. 1, 1998), Id. (citing Lowell v. Lewis, 15 F. Cas (C.C.D. Mass. 1817) (No. 8568)) See id.; U.S. Pat. & Trademark Off., Vol (No. 3), Off. Gaz. Pat. & Trademark Office 8 (1987) ( A claim directed to or including within its scope a human being will not be considered to be

32 December 2016] SCANDALOUS TRADEMARKS AND LANHAM ACT 2(A) 19 DNA sequences it is without authority to deny a patent based on morality. The USPTO has stated: The scope of subject matter that is eligible for a patent, the requirements that must be met in order to be granted a patent, and the legal rights that are conveyed by an issued patent, are all controlled by statutes which the USPTO must administer.... Congress creates the law and the Federal judiciary interprets the law. The USPTO must administer the laws as Congress has enacted them and as the Federal courts have interpreted them. Current law provides that when the statutory patentability requirements are met, there is no basis to deny patent applications c. Design Patents Retain a Morality Bar but It Is Infrequently Applied in Practice U.S. law provides modified patent protection for inventions of new, original and ornamental design for an article of manufacture Unlike utility patents, design patents are barred for subject matter that could be offensive to any race, religion, sex, ethnic group, or nationality. 118 However, this bar is infrequently used. While rejections of design patent applications are not published, and no statistics on design patent rejections are publicly available from the USPTO, it is at least some indication that there are no appeals on record for rejections on this basis. 119 In addition, there are many examples of existing design patents for material that may reasonably be found offensive to a race, religion, sex, ethnic group, or nationality: Bottle with frontal female nudity 120 Buddha golf head cover 121 A.R. Conner Flag (flag depicting an African-American caricature, along with a watermelon, a chicken, and a rat) 122 Pasta box depicting the Last Supper 123 patentable subject matter under 35 U.S.C. [ ] 101. ). Enerson, supra note 113, at 693; U.S. Patent & Trademark Office, Non-final Office Action Summary of App. No. 08/993,56, at 17 (Oct. 7, 2003) (presenting a new standard: Claims embracing humans and human embryos are not patentable) Utility Examination Guidelines, 66 Fed. Reg. 1092, 1095 (Jan. 5, 2001). The Utility Examination Guidelines are instructions to be used by USPTO examiners when assessing the patentability of a claimed invention U.S.C. 171 (2012) See U.S. Pat. & Trademark Off., MPEP (e) (8th ed. Rev. 7, July 2008) In addition, correspondence with USPTO Patent Attorney David Gerk, who specializes in design patent applications, supports this conclusion. Regarding rejection of design patents for offensiveness, he states: [T]his is not something I understand comes up frequently. from David Gerk, Patent Attorney, Office of Policy & Int l Affairs, U.S. Patent & Trademark Office, to Megan Carpenter, Professor of Law, Tex. A&M Univ. Sch. of Law, and Author of this Article (Feb. 3, 2015, 8:40 AM) (on file with author) U.S. Patent No. D721,974 S (filed June 28, 2013) (issued Feb. 3, 2015) U.S. Patent No. D465,821 S (filed Dec. 4, 2001) (issued Nov. 19, 2002) U.S. Patent No. D35,985 (filed June 9, 1902) (issued Aug. 5, 1902) (flag picturing an African- American caricature along with a watermelon, chicken, and a rat).

33 20 HASTINGS LAW JOURNAL [Vol. 68:1 B. Like Other Forms of Intellectual Property, Trademarks Should Move Away from Conditioning Protection on Morality While trademark rights are distinct in certain ways from other forms of intellectual property, trademarks are part of the body of intellectual property law, and the development of copyright and patent law can be insightful. 124 Intellectual property law generally provided a starting point for consideration of the vesting of trademark rights and the interpretation of trademark doctrine, including registration of marks and federal legislation. 125 While there was some resistance to bringing trademarks within the umbrella of intellectual property law, trademarks are now categorically considered to be a form of human creativity that may be treated as an asset. Central to the initial resistance was the claim that trademarks were not a form of property, but rather a device to prevent forgery or fraud: [I]t should be remembered that there was this important difference between patents and trade marks, that copying or infringing the latter was really analogous to forgery, while the infringement of a patent was merely interfering with a private right of property. 126 Trademarks are now commonly considered a form of intellectual property right, even if that right is an instrumental one, as described in Hanover Star Milling Co., 127 and United Drug v. Theodore Rectanus. 128 In evaluating priority and territorial limitations of the individual uses, the Court in Hanover treated the trademark at issue as a property right to the extent that it served as an instrumentality to a trade reputation and the goodwill that flows from that. The Court stated that the property interest in a trademark exists, but is limited to that appurtenant to an established business or trade in connection with which the mark is used. 129 The property interest, thus, inheres in connection with the goodwill of an existing business, and a trademark s ability to signify that source U.S. Patent No. D627,661 S (filed Jan. 4, 2010) (box of pasta depicting the Last Supper on the box). Although the scene appears to be accurately depicted, the existence of the Last Supper on a pasta box may offend someone, and copyright protection might be more appropriate See Diamond, supra note 10, at 288; Paster, supra note 13, at 566; Rudolf Callmann, Unfair Competition Without Competition? The Importance of the Property Concept in the Law of Trade- Marks, 95 U. Pa. L. Rev. 443, (1947); see also In re Trade-Mark Cases, 100 U.S. 82 (1879); Millington v. Fox (1838) 40 Eng. Rep Brad Sherman & Lionel Bently, The Making of Modern Intellectual Property Law (1999) Id. at Hanover Star Milling Co. v. Metcalf, 240 U.S. 403, 411 (1916) In Hanover Star Milling Co., three entities all had separate claims to the mark TEA ROSE as applied to flour. Id United Drug Co. v. Theodore Rectanus Co., 248 U.S. 90, 97 (1918) Hanover Star Milling Co., 240 U.S. at United Drug Co., 248 U.S. at 97. This case also focused on the territorial scope of trademark protection, and supports this view of trademarks as an instrumentality, stating that the notion of a trademark as a right in gross or at large is a fundamental error. Id. Trademarks are, rather, a means

34 December 2016] SCANDALOUS TRADEMARKS AND LANHAM ACT 2(A) 21 Trademarks are one of the main forms of intellectual property, therefore it is worth considering the development of the other forms of intellectual property when advancing its development. Like trademark law, copyright and patent law once conditioned acquisition or maintenance of rights on its subjects morality. As previously discussed, copyright was denied to offensive works because those types of works failed to promote the progress of science and the useful arts. Patent rights were once conditioned on the moral utility of an invention. However, both forms of intellectual property have moved away from using morality as a basis on which to deny protection, because doing so would be outside the core functions of those bodies of law. Because regulating morality is also outside the core function of trademark law, it should also remove these bars. C. The Morality Bar for Scandalous and Immoral Marks May Be Unconstitutional As discussed previously, removing the 2(a) bar for registration of scandalous and immoral trademarks would be in line with the function and purpose of trademark law, and with other forms of intellectual property. In addition, the Federal Circuit has held that a bar on registration of scandalous and immoral trademarks is unconstitutional as a content-based restriction on speech it denies certain benefits to scandalous and disparaging speech that it provides to non-scandalous and non-disparaging speech. 131 As a content-based restriction of private speech, the bar is presumptively invalid and subject to strict scrutiny the focus of the government action is on the expressive, not commercial, functions of the particular speech involved. To overcome this presumption of invalidity, a restriction must be narrowly tailored to serve a compelling state interest. 132 If scandalous marks rise to the level for facilitating the protection of one s good-will in trade, and the accompanying rights grow out of the use of a mark, not the adoption of it. Id. at 98. The Court grounded trademark law in the law of unfair competition. Id. at 97. The Lanham Act, the comprehensive federal trademark act which came into force in 1947, supports this perspective and provides the core of trademark law even today. The Lanham Act was principally drafted by Edward S. Rogers of Chicago, and introduced into Congress by Texas Congressman Fritz Lanham. Edward S. Rogers, The Lanham Act and the Social Function of Trade-Marks, 14 L. & Contemp. Probs. 173, 180 (1949) (arguing that the purpose of the Lanham Act was to protect trade-marks and to repress unfair competition, as well as to encourage the use of trademarks and thus recognize their social value) (citing Edward S. Rogers, Introduction to Daphne Robert, The New Trade-Mark Manual: A Handbook on Protection of Trade-Marks in Interstate Commerce xiv (1947)) In re Tam, 808 F.3d 1321, 1329 (Fed. Cir. 2015) (stating that this provision in the Lanham Act serves as a content-based restriction on speech) The Federal Circuit recently held in In re Tam that the bar on registration of disparaging marks does not serve a compelling state interest, given the viewpoint-based nature of the restriction. The registration bar for scandalous marks would not constitute viewpoint-based discrimination, however, because it does not value one perspective over another. Id.

35 22 HASTINGS LAW JOURNAL [Vol. 68:1 of obscenity, the government would have sufficient interest in restricting them and would be able to overcome the presumption. However, if scandalous marks only rise to a lesser standard, such as vulgarity or offensiveness, the registration bar would be more likely to be unconstitutional. The Trademark Manual of Examining Procedure ( TMEP ), case law, and empirical research all indicate that the standard for scandalousness is below the obscenity standard. The TMEP states: [T]he threshold is lower for what can be described as scandalous than for obscene. 133 Under current case law, a mark is scandalous if multiple dictionaries indicate a proposed mark is vulgar and the applicant s use is limited to the vulgar meaning. 134 Vulgarity and offensiveness, in fact, are used as the standard in the majority of rejections based on scandalousness. 135 My research has found that dictionary definitions noting that a word is vulgar or offensive were used as a primary source of support for a rejection based on scandalousness ninety-one percent of the time, and that examiners used only the dictionary in seventy percent of such refusals. 136 Thus, their regulation is unlikely to rise to the level of a compelling state interest. Courts have long assumed that the 2(a) registration bar is constitutional based on In re McGinley, 137 a 1981 case that held without much analysis that the registration bar did not violate the First Amendment because no conduct is proscribed, and no tangible form of expression is suppressed. Courts have only recently analyzed the issue, and the Federal Circuit in In re Tam recently considered the constitutionality of the 2(a) bar for disparaging marks at length. The court held that the bar was subject to, and could not withstand, strict scrutiny. In light of this opinion, arguments for the constitutionality of 133. U.S. Patent & Trademark Office, TMEP (Apr. 2016). However, the TMEP states: Refusal to register immoral or scandalous matter has been found not to abridge First Amendment rights, because no conduct is proscribed and no tangible form of expression is suppressed. Also, the term scandalous has been held sufficiently precise to satisfy due process requirements under the Fifth Amendment. See In re McGinley, 660 F.2d 481, (C.C.P.A. 1981) TMEP (citing In re Boulevard Entm t, 334 F.3d 1336, 1341 (Fed. Cir. 2003) (holding JACK-OFF and JACK OFF scandalous, where all dictionary definitions of jack-off were considered vulgar )); Bos. Red Sox Baseball Club Ltd. P ship v. Sherman, 88 U.S.P.Q.2d 1581 (T.T.A.B. 2008) (basing scandalousness of SEX ROD mark on dictionary definitions designating the term ROD as being vulgar, and applicant s admission that SEX ROD had a sexual connotation); In re Red Bull GmbH, 78 U.S.P.Q.2d 1375, (T.T.A.B. 2006) (finding BULLSHIT scandalous because dictionary definitions indicate it is obscene, vulgar, usually vulgar, vulgar slang, or rude slang, which constitutes a prima facie showing that the term is offensive to the conscience of a substantial composite of the general public ). See Carpenter & Garner, supra note 1, for a comprehensive discussion of the evidence used to reject marks for scandalousness See generally all sources cited, supra note Carpenter & Garner, supra note 1, at In re McGinley, 660 F.2d at 484.

36 December 2016] SCANDALOUS TRADEMARKS AND LANHAM ACT 2(A) 23 the registration bar for scandalous marks may be unpersuasive. 138 For example, some argue that this provision of the Lanham Act regulates commercial speech, and is therefore not subject to strict scrutiny. 139 However, In re Tam found that with regard to disparaging marks, the mark s expressive nature subjects it to rejection. 140 This is also true for scandalous marks. A mark s scandalous nature is not part of its sourceidentifying function any more than a disparaging mark would be. Like disparaging marks, the expressive component is precisely the prohibition s target. 141 The argument that the registration bar is constitutional because registration is government speech is similarly unpersuasive. The Federal Circuit affirmed that trademark registration is not government speech because it is merely a regulatory activity, like registration of copyright. 142 Finally, the constitutionality of 2(a) may not be salvaged on the basis that trademark owners can still use a mark. A trademark owner receives substantial benefits from trademark registration, and denial of those benefits creates a chilling effect on use of those types of marks. 143 Furthermore, there is uncertainty regarding the enforceability under section 43(a) of the Lanham Act of marks that have been refused registration based on policy reasons. 144 In addition, the Model State Trademark Act keeps 2(a) intact and prevents trademark owners from registering scandalous marks under state law. 145 III. Contextual Healing As discussed above, removing the registration bar would be in line with the core function of trademark law, other forms of intellectual property, and fundamental constitutional principles. However, on a practical level, Congress and the courts may be unlikely to displace the Lanham Act s morality bar See generally In re Tam, 808 F.3d 1321 (2016) If trademark registration is commercial speech, the standard would be evaluated on a basis of intermediate scrutiny. Cent. Hudson Gas & Elec. Corp. v. Pub. Serv. Comm n, 447 U.S. 557, (1980) In re Tam, 808 F.3d at See id. at Id. at (holding that the does not convert trademark into government speech any more than a converts a copyrighted work into government speech) See id. at Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 768 (1992) ( [I]t is common ground that 43(a) protects qualifying unregistered trademarks and that the general principles qualifying a mark for registration under 2 of the Lanham Act are for the most part applicable in determining whether an unregistered mark is entitled to protection under 43(a). ); see Renna v. County of Union, N.J., 88 F. Supp. 3d 310 (D.N.J. 2014) (holding that a mark denied registration based on policy grounds is not enforceable under 43(a)) Model State Trademark Bill (Int l Trademark Ass n 1992); In re Tam, 808 F.3d at

37 24 HASTINGS LAW JOURNAL [Vol. 68:1 A. The Morality Bar Would Be More Effectively Applied If Trademark Examiners Considered Contextual Factors in Their Analysis We should interpret and apply existing law in an effective and fair way that is in harmony with the body of trademark law. However, as currently applied, the registration bar is ineffective and vague. Both trademark examiners and applicants need clearer guidance in this area. One way to effectuate trademark policy is to ensure that trademark examiners consider context when evaluating marks that may be scandalous or immoral. When evaluating the eligibility of marks for registration generally, trademark law often considers subject marks in context. While scandalous marks are also in principle to be evaluated in the context of the marketplace, trademark examiners do not typically consider contextual factors. Considering contextual factors while determining scandalousness would lead to a more effective and fair result throughout the application process. As previous research has acknowledged, application of this provision of the Lanham Act is inconsistent at best and nonsensical at worst. 146 Despite the fact that scandalousness is supposed to be determined according to the context of contemporary attitudes and the relevant marketplace for goods and services identified in the application, 147 context is not considered with regard to targeted consumers, goods and services, or the marketplace. Marks are often rejected on the basis of a dictionary definition without consideration of contextual factors. Despite the lack of meaningful analysis, marks containing the same terms on similar goods and services may end up both rejected and approved without additional explanation. Whether a mark is rejected or registered often depends on the particular trademark examiner, and responses to office actions are rarely if ever successful, because in the absence of relevant analysis, there is nothing to argue against. 148 Furthermore, the standards for scandalousness and immorality are unclear: To the extent that there are standards, they are often erroneously conflated with disparagement. Requiring consideration of context will also provide trademark applicants and examiners with clearer guidance throughout the registration process Carpenter & Murphy, supra note 1; Carpenter & Garner, supra note In re Mavety Media Grp. Ltd., 33 F.3d 1367, 1371 (Fed. Cir. 1994); In re McGinley, 660 F.2d 481, (C.C.P.A. 1981) See Carpenter & Garner, supra note 1.

38 December 2016] SCANDALOUS TRADEMARKS AND LANHAM ACT 2(A) The Determination of Scandalousness Should Be Made in the Context of the Relevant Marketplace A mark must be evaluated in the context of contemporary attitudes, and the determination of whether a mark is scandalous should be made in the context of the relevant marketplace for the goods or services identified in the application. 149 This is ascertained from the standpoint of not necessarily a majority, but a substantial composite of the general public. 150 To support a refusal on these grounds, an examiner must provide evidence that a substantial portion of the general public would consider the mark scandalous in the context of contemporary attitudes and the relevant marketplace. 151 Thus, a determination that a mark is scandalous because it is used in a scandalous marketplace is a misapplication of the law. Rejecting a mark on the basis that mark s use on sexually explicit goods reinforces the vulgarity of its intended meaning is not just circular reasoning, but is incorrect. It creates a situation where a mark on a good sold in a specific marketplace cannot be registered, even though the good may not be considered scandalous in the context of that specific marketplace. Further, even though that marketplace may not be frequented by or accessible to the general public, the mark still may not be registered if the general public could find the term abstractly vulgar. The proper inquiry, however, is not an abstract one it is whether a substantial composite of the general public would find the mark scandalous for the particular marketplace. Yet, context of any sort was considered in fewer than half of refusals based on scandalousness or immorality. 152 At the same time, scandalous has been held to encompass matter that is merely vulgar. 153 Evidence of the opinions of a substantial composite of the general public can include magazine articles, newspaper articles, and dictionary definitions. 154 Accordingly, the Federal Circuit has held that dictionary definitions alone can be sufficient to establish scandalousness where multiple dictionaries indicate a word is vulgar and the applicant s mark indicates the vulgar meaning of the word. 155 What this means in practical terms is that, in the majority of rejections, a 149. In re Mavety Media Grp. Ltd., 33 F.3d at In re McGinley, 660 F.2d at 485; In re Wilcher Corp., 40 U.S.P.Q.2d 1929 (T.T.A.B. 1996); Greyhound Corp. v. Both Worlds, Inc., 6 U.S.P.Q.2d 1635, 1639 (T.T.A.B. 1988); U.S. Patent & Trademark Office, TMEP (Apr. 2016) In re Mavety Media Grp. Ltd., 33 F.3d at In re Mavety Media Grp., 33 F.3d at See Carpenter & Garner, supra note 1, at Vulgar has been defined as lacking in taste, indelicate, morally crude. U.S. Patent & Trademark Office, TMEP (citing In re Runsdorf, 171 U.S.P.Q. 443, 444 (T.T.A.B. 1971)) TMEP The applicant s use must be limited to the vulgar meaning of the word. In re Boulevard Entm t, Inc., 334 F.3d 1336 (Fed. Cir. 2003) (finding the marks JACK-OFF and JACK OFF were scandalous where multiple dictionary definitions indicated the term jack off was vulgar).

39 26 HASTINGS LAW JOURNAL [Vol. 68:1 dictionary definition indicating a word is offensive or vulgar is the only evidence used to reject the mark. The lack of clear standards causes problems for USPTO examiners who are under pressure to process applications quickly and efficiently. When considering whether a particular mark is scandalous, an examining attorney can either ascertain the meaning of a mark in the context of the current attitudes of the day or perform a quick dictionary search and reject an application if the particular term is vulgar. According to the USPTO Performance Appraisal Plan, a trademark examiner must meet quarterly quotas. To be considered fully successful, examiners must complete 425 to 549 balanced disposals 156 of applications per quarter. 157 To be outstanding, an examiner should have completed at least 515 to 575 balanced disposals. 158 If trademark examiners average 500 working hours per quarter, an outstanding trademark examiner must process more than one application per hour. Unsurprisingly, the examiners in the majority of applications refused on the basis of scandalousness fail to consider the context of the marketplace or the goods and services listed in the application. 2. Trademark Examiners Typically Do Not Consider Contextual Factors in a Refusal Based on Scandalousness, Regardless of the Marketplace or Goods at Issue Trademark examiners are highly unlikely to consider contextual factors in a refusal based on the scandalous or immoral nature of a mark. Refusals frequently mention the relevance of context de jure but disregard it de facto. 159 The vast majority of applications that are rejected 156. A Balanced Disposal means that either a first Office Action has issued, the application has been approved for publication after examination, or the application has been abandoned. See, e.g., U.S. Patent & Trademark Office, Trademark Public Advisory Committee Annual Report 5 (2014), uspto.gov/about/advisory/tpac/tpac_annual_report_2014.pdf Performance Plan, Progress Review and Appraisal Record (GS-9, GS-11, and GS-12), Nat l Treasury Emps. Union, (last visited Nov. 7, 2016) [hereinafter Performance Plan (GS-9, GS-11, and GS-12)]; Performance Plan, Progress Review and Appraisal Record (GS-13 and GS-14), Nat l Treasury Emps. Union, (last visited Nov. 7, 2016) [hereinafter Performance Plan (GS-13 and GS-14)]; see also Memorandum of Understanding Between the Nat l Treasury Emps. Union Chapter 245 & the U.S. Patent & Trademark Office Regarding Implementation of a Pilot Award for Comprehensive Excellence (ACE Award) (Mar. 18, 2010), Performance Plan (GS-9, GS-11, and GS-12), supra note 157; Performance Plan (GS-13 and GS-14), supra note For various example, see Carpenter & Garner, supra note 1, at This frequently occurred with regard to [refusals based on words typically considered] profan[e]. In a significant number of rejections, examiners (1) cited the rule that trademarks must be evaluated in the context of current attitudes; (2) noted that profanity was more common in current society; and then (3) concluded that acceptance of profanity makes words no less profane. The examiner then rejected the marks without any additional supporting evidence. Id. at 344.

40 December 2016] SCANDALOUS TRADEMARKS AND LANHAM ACT 2(A) 27 on the basis of scandalousness are rejected because they are listed as vulgar in the dictionary. 160 My previous research indicated that dictionary definitions were used as a primary source of support for a rejection based on scandalousness ninety-one percent of the time. 161 Seventy percent of rejections exclusively used the dictionary for support. 162 The use of dictionary definitions as exclusive or primary evidence for a refusal based on scandalousness is consistent across various marketplaces, including niche markets such as adult entertainment. 163 For adult-oriented markets, dictionary definitions served as the only basis for rejection in the majority of refusals. 164 When examiners did consider contextual information in these niche markets, they only did so as an argument against registration. That is, use of a mark in an adult-oriented marketplace was used as further evidence of the mark s scandalous nature. 165 For example, an examiner rejected the mark POST-TITS because the general public would find it scandalous, despite the trademark owner s assertion that the relevant market was controlled and narrow. 166 This is often the case when the application contains a reference to adult material. 167 Most 160. Id. at Id. at Id Id. at 338. In marks targeting an adult marketplace, only five Office Actions referenced context of the marketplace at all. Id. at 338 n Id. at See, e.g., U.S. Trademark Application Serial No. 76/484,466 (filed Jan. 22, 2003) (TOKYO CREAMPIE) (Third Office Action dated Aug. 15, 2003); U.S. Trademark Application Serial No. 78/788,383 (filed Jan. 10, 2006) (GAYFACIALSXXX) (Office Action dated July 15, 2006) U.S. Trademark Application Serial No. 76/536,775 (filed July 22, 2003) (Office Action dated May 20, 2004) See Carpenter & Garner, supra note 1, at 339 (citing e.g., U.S. Trademark Application Serial No. 78/853,993 (filed Apr. 4, 2006) (TITTY CITY) (claiming services in class 41 for entertainment ); U.S. Trademark Application Serial No. 85/253,332 (filed Feb. 28, 2011) (FAT COCK BEER); U.S. Trademark Application Serial No. 76/484,466 (filed Jan. 22, 2003) (TOKYO CREAMPIE); U.S. Trademark Application Serial No. 76/490,572 (filed Feb. 19, 2003) (JAPANESE CREAMPIE); U.S. Trademark Application Serial No. 76/639,548 (filed May 25, 2005) (NIGGA); U.S. Trademark Application Serial No. 77/281,745 (filed Sept. 18, 2007) (THIZZ JUICE); U.S. Trademark Application Serial No. 76/675,279 (filed Apr. 10, 2007) (TITTIGYM); U.S. Trademark Application Serial No. 77/600,723 (filed Oct. 26, 2008) (COCAINE ENERGY); U.S. Trademark Application Serial No. 85/264,154 (filed Mar. 11, 2011) (SOCK MY COCK); U.S. Trademark Application Serial No. 78/829,207 (filed Mar. 3, 2006) (COCAINE); U.S. Trademark Application Serial No. 77/118,639 (filed Feb. 28, 2007) (COCAINE CUT THE LEGAL ALTERNATIVE); U.S. Trademark Application Serial No. 77/119,448 (filed Mar. 1, 2007) (COCAINE FREE THE LEGAL ALTERNATIVE); U.S. Trademark Application Serial No. 78/750,399 (filed Nov. 9, 2005) (METH); U.S. Trademark Application Serial No. 76/536,775 (filed July 22, 2003) (POST-TITS); U.S. Trademark Application Serial No. 78/558,043 (filed Feb. 1, 2005) (HEEB); U.S. Trademark Application Serial No. 78/904,458 (filed June 9, 2006) (BONER BATS ROCK HARD WOOD); U.S. Trademark Application Serial No. 78/682,282 (filed July 31, 2005) (YOU CUM LIKE A GIRL); U.S. Trademark Application Serial No. 78/631,791 (filed May 17, 2005) (MY SH!T D*N T STINK); U.S. Trademark Application Serial No. 77/600,222 (filed Oct. 24, 2008) (SHAKE THOSE TITTIES); U.S. Trademark Application Serial No. 78/078,534 (filed Aug. 9, 2001) (SHITBEGONE); U.S. Trademark Application Serial No. 78/716,443 (filed Sept. 20, 2005) (TALKING COCK)).

41 28 HASTINGS LAW JOURNAL [Vol. 68:1 often trademark examiners consider whether a substantial composite of the general public would find the mark scandalous without considering the market at issue. 168 Google searches are common contextual evidence used to demonstrate a mark is scandalous. 169 Examiners are also unlikely to consider the context of goods and services in rejections of scandalous marks. Like the above findings regarding the marketplace, examiners are unlikely to consider the context of goods and services identified in the application. Use of a mark on adult-oriented goods is often used as evidence of the fact that a mark is scandalous. 170 Use of a mark that may be vulgar on goods sold to the general public is also used as evidence that a mark is scandalous. 171 A lack of clarity in the guidelines for refusals based on scandalousness sometimes leads to bizarre results. In at least one instance, an examiner refused registration of a mark in part because scandalous information would be found while searching for the stated vulgar terms, rather than because the mark would be found while searching for more innocent things. 172 That examiner also mentioned that the relevant audience is irrelevant to an analysis of whether a mark is scandalous or immoral because that would help people attempting to register such marks. 173 The examiner reasoned that if the appropriate test were the relevant population, no mark would ever be refused on 2(a) grounds since the applicant would not adopt a mark which would drive the relevant 168. Id. at For example, an examiner rejected the mark FAT COCK BEER in part based on the results of a Google search indicating that fat cock is vulgar slang, concluding the mark was therefore scandalous to the general public. U.S. Trademark Application Serial No. 85/253,332 (filed Feb. 28, 2011). TITTY PRETTIES was similarly rejected in part because of a Google search showing that the word titty can be used in an offensive and disgraceful manner. U.S. Trademark Application Serial No. 78/524,781 (filed Nov. 30, 2004) (Office Action dated July 11, 2005) For a list of examples, see Carpenter & Garner, supra note 1, at U.S. Trademark Application Serial No. 78/879,965 (filed May 9, 2006) (rejecting TIT-MITT on the basis that its use on bras would ensure people would know that tit was used to reference a breast); U.S. Trademark Application Serial No. 78/631,791 (filed May 17, 2005) (rejecting MY SH!T D*N T STINK because shit rendered the mark scandalous even if the term is relevant and not being used in the vulgar sense); see also U.S. Trademark Application Serial No. 77/883,100 (filed Dec. 1, 2009) (TOUCH YOUR TITS for shirts); U.S. Trademark Application Serial No. 76/675,279 (filed Apr. 10, 2007) (TITTIGYM for an adult health and fitness club); U.S. Trademark Application Serial No. 77/866,123 (filed Nov. 5, 2009) (DOUCHEBAG AWARD) (stating that because the mark is clearly not referencing the personal hygiene meaning of the word, use of the mark supports the vulgar meaning) Office Action, U.S. Trademark Application Serial No. 78/643,827 (Office Action Aug. 24, 2006) (FUCK.XXX). The examiner used the fact that he found other scandalous websites while searching for the mark as support for the proposition that anyone may come across these goods and services: The examining attorney himself, in searching for the term FUCKXXX readily encountered a number of sites where, even if not directly entered, clearly displayed a scandalous connotation of the term in relation to sexual activity. Id. The examining attorney did not address the consideration that he encountered those websites while specifically searching for the term fuck.xxx U.S. Trademark Application Serial No. 78/643,827 (filed June 5, 2005) (FUCK.XXX).

42 December 2016] SCANDALOUS TRADEMARKS AND LANHAM ACT 2(A) 29 purchasers or audience away from using or purchasing the applicant s identified goods or services. 174 Compounding the confusion is a lower burden of proof for egregious marks, which is an undefined and inconsistently applied standard. Under In re Wilcher Corp., the amount of proof required to support a refusal based on scandalousness depends upon the nature of the mark, with less evidence required for more egregious marks. 175 This standard is applied inconsistently when it is applied at all, and often no information is given to permit either the current applicant or any further applicants to determine what constitutes egregious. 176 Examining attorneys frequently provide no explanation as to why a particular mark is considered egregious. 177 The word fuck appears most likely to be found egregious, but is also equally likely not to be held egregious. 178 Even when a reason is provided, there does not appear to be consistency in the reasoning. For example, in two marks involving the term donkey punch, egregiousness was based on the implication of a violent sex act. Additionally, egregiousness was found in the mark THE COCK MEAT 174. Id. The examiner stated that websites are ubiquitous and can be accessed by anyone noting that the attorney found several other scandalous sites while searching for the term fuckxxx. Id. The examiner uses this to support the proposition that anyone may come across these goods and services, but does not seem to take into consideration that s/he was specifically searching for the term fuckxxx on the internet. Office Action, U.S. Trademark Application Serial No. 78/643,827 (Office Action Aug. 24, 2006) In re Wilcher Corp., 40 U.S.P.Q.2d 1929, 1996 WL (T.T.A.B. 1996). The Board stated that inclusion in a mark of a readily recognizable representation of genitalia certainly pushes the mark a substantial distance along the continum [sic] from marks which are relatively innocuous to those which are most egregious. Id. at * U.S. Trademark Application Serial No. 78/864,664 (filed Apr. 19, 2006) (MR. HORSE COCK); U.S. Trademark Application Serial No. 77/605,025 (filed Oct. 31, 2008) (IMMANASSHOLE); U.S. Trademark Application Serial No. 77/079,909 (filed Jan. 10, 2008) (FUCKTUBE); (FUCK CANCER); U.S. Trademark Application Serial No. 78/703,973 (filed Aug. 31, 2005) (FUCK EVERYBODY); U.S. Trademark Application Serial No. 78/955,927 (filed Aug. 19, 2006) (FUCK OFF); U.S. Trademark Application Serial No. 78/ (filed Aug. 31, 2006) (A NIGGER FOR LIFE); U.S. Trademark Application Serial No. 78/666,012 (filed Jul. 7, 2005) (SCHLONG WEAR); U.S. Trademark Application Serial No. 77/485,121 (filed May 28, 2008) (ASSHOLE); U.S. Trademark Application Serial No. 78/643,827 (filed Jun. 5, 2005) (FUCK.XXX); U.S. Trademark Application Serial No. 78/631,791 (filed May 17, 2005) (MY SH!T D*N T STINK); U.S. Trademark Application Serial No. 78/866,347 (filed Apr. 20, 2006) (FUGLY) See all examples cited, supra note U.S. Trademark Application Serial No. 77/618,080 (filed Nov. 19, 2008) (FUCKSTRONG) (fuck is a highly offensive, vulgar slang word); U.S. Trademark Application Serial No. 77/928,592 (filed Feb. 4, 2010) (DRUNK DUMB FUCKS) (fucks and fuck are obscene and therefore egregiously scandalous). But, see the following trademark application records that do not contian a rejection including egregiousness: U.S. Trademark Application Serial No. 86/744,789 (filed Sept. 2, 2015) (FUCK YOU PAY ME); U.S. Trademark Application Serial No. 86/958,035 (filed Mar. 3, 2016) (FUCK YEAH) (action suspended pending Supreme Court review of In re Tam, 808 F.3d 1321 (Fed. Cir. 2015)).

43 30 HASTINGS LAW JOURNAL [Vol. 68:1 SANDWICH SHOP, because there was no other meaning for the phrase at issue. 179 Initial refusals evaluating a mark out of context have serious implications for the ultimate dispensation of the application. Applicants are unlikely to respond to a refusal based on scandalousness. 180 Research has indicated that of those applicants who did file an Office Action response, contextual factors were the most common argument used in support of registration. 181 In fact, context was argued in sixty-four percent of all responses in a dataset created for one of my previous works. 182 These arguments, however, are unlikely to succeed: out of 232 records reviewed, only two such arguments were ultimately successful. 183 Further, examiners were no more likely to address contextual factors in subsequent Office Actions even when an applicant had filed a response containing an argument based on context. 184 IV. Relevance of Context in Trademark Registration Trademarks are nothing without context. Context is a central aspect of trademark law, and is critical in defining the very existence of trademark rights and their scope. As previously discussed, trademark rights are not rights in gross, but rights appurtenant to a particular business. They only exist in so far as they identify the source of particular goods and services. Marketplace context is a significant consideration at each stage of the trademark lifecycle, including acquisition, scope, maintenance, and termination of rights. The very scope of trademark rights depends on contextual factors such as the appearance of the mark, the goods or services involved, the relevant marketplace, and the channels of trade. In stark contrast to the 179. U.S. Trademark Application Serial No. 86/936,441 (filed Mar. 10, 2016) (DONKEY PUNCH) (refers to a sexual practice that involves violent physical abuse); U.S. Trademark Application Serial No. 78/856,809 (filed Apr. 20, 2016) (donkey punch) (term is considered to be associated with violence and violent sex); U.S. Trademark Application Serial No. 85/038,983 (filed May 14, 2010) (THE COCK MEAT SANDWICH SHOP) (there are no other meanings for the phrase at issue) Carpenter & Garner, supra note 1, at (finding that more than three-quarters of applicants whose marks were refused for scandalousness failed to respond to the Office Action) Id. at Id Id. at 350 n.127 ( Because of the vague standard and the little evidence required to sustain a rejection for scandalousness (dictionary definitions), it is very difficult for applicants to overcome a rejection on this basis in the registration process. The only marks that have overcome a rejection based on scandalousness are WHITE ASS, and FUGLY FRUITS. U.S. Trademark Application Serial No. 85/100,568 (filed Aug. 5, 2010) (WHITE ASS); U.S. Trademark Application Serial No. 78/736,643 (filed Oct. 19, 2005) (FUGLY FRUITS). PHAG was initially rejected and abandoned, but when revived went through with no apparent rejection. U.S. Trademark Registration No. 4,135,694. The applications for WHITE ASS and FUGLY FRUITS were later abandoned for other reasons. ) Id. at 355. While sixty-four percent of Office Action responses argued contextual factors, when the examiner had not discussed context in the initial Office Action, subsequent Office Actions were only fifty percent likely to address the contextual argument. Id.

44 December 2016] SCANDALOUS TRADEMARKS AND LANHAM ACT 2(A) 31 application of the registration bar for scandalous marks, contextual factors are regularly considered throughout the trademark registration process with respect to other bases for rejection, including likelihood of confusion, descriptiveness, functionality, and distinctiveness. The application of contextual factors to other registration bars provides a template for doing so with regard to scandalous marks. The discussion in the following Subparts highlights the ways in which examiners apply contextual factors throughout the registration process, in particular with regard to the section 2(d) bar for likelihood of confusion. A. The Section 2(d) Bar for Likelihood of Confusion Centers on an Analysis of Contextual Factors The proper focus of a likelihood of confusion analysis is the overall impression of a mark as it is likely to be perceived by prospective purchasers. 185 Core to the likelihood of confusion analysis is the mantra that a mark must be examined in the context in which it appears in the marketplace to the ordinary consumer. 186 In fact, the substantive DuPont factors cited as most relevant in an ex parte examination evaluate a mark in light of the overall market context. Those factors include: (1) appearance, sound connotation, and commercial impression of the marks; (2) goods or services at issue; (3) established, likely-to-continue trade channels; (4) conditions under which and buyers to whom sales are made; and (5) other uses of similar marks in the marketplace Examiners Routinely Consider the Appearance of Marks in the Context of Information Contained in the Application In contrast to refusals based on scandalousness, refusals based on likelihood of confusion typically evaluate the mark in context. Because the likelihood of confusion analysis looks to the actual use of marks, a comparison of the texts of two marks alone is insufficient if the marks 185. Paula Payne Prods. Co. v. Johnson Publ g Co., 473 F.2d 901, 902 (C.C.P.A. 1973) (holding that SPRAY N GLOW mark on hair conditioner and hair brightener spray were sufficiently similar to mark SPRAY N STAY for hair spray, so as to create likelihood of confusion). For an analysis of this principle in the infringement context, see Sun-Fun Prods., Inc. v. Suntan Research & Dev., Inc., 656 F.2d 186, 192 (5th Cir. 1981); Dreyfus Fund Inc. v. Royal Bank of Canada, 525 F. Supp. 1108, 1112 (S.D.N.Y. 1981) Restatement (Third) of Unfair Competition 21(a)(i) (Am. Law. Inst. 1995) U.S. Patent & Trademark Office, (Apr. 2016). The other factor is a valid consent agreement between the applicant and the owner of the previously registered mark. (citations omitted). Id. In re Majestic Distilling Co., 315 F.3d 1311, 1315, 65 U.S.P.Q.2d 1201, 1204 (Fed. Cir. 2003) ( Not all of the DuPont factors may be relevant or of equal weight in a given case, and any one of the factors may control a particular case, In re Dixie Rests., Inc., 105 F.3d 1405, , 41 U.S.P.Q.2d 1531, 1533 (Fed. Cir. 1997). ).

45 32 HASTINGS LAW JOURNAL [Vol. 68:1 have different appearances in the marketplace. 188 In an infringement context, the comparison of marks seeks to replicate the appearance of the mark under the market conditions in which the marks are encountered by prospective purchasers. 189 In the registration context, the comparison of marks seeks to do the same to the extent possible based on the information contained in and inferred from the application. 190 For example, the mark SPRAY N STAY was found to sufficiently resemble SPRAY N GLOW for hair care products, despite the different meanings of the words stay and glow, because the connotation to the average purchaser of the goods could lead them to believe that they come from the same source. 191 Conversely, the marks DIGIRAD and DIGIRAY were found to have different connotations so as not to create a likelihood of confusion because the particular purchasers of the products could easily distinguish based on the connotations of -RAY and -RAD in connection with the respective parties goods. 192 Considering what the overall commercial impression of 188. See Luigino s, Inc. v. Stouffer Corp., 170 F.3d 827, 830 (8th Cir.1999); Elvis Presley Enters., Inc. v. Capece, 141 F.3d 188, 198 (5th Cir.1998); Lois Sportswear, U.S.A., Inc. v. Levi Strauss & Co., 799 F.2d 867, 872 (2d Cir.1986) See, e.g., Wynn Oil Co. v. Thomas, 839 F.2d 1183, 1187 (6th Cir. 1988); Calvin Klein Cosmetics Corp. v. Lenox Labs., Inc., 815 F.2d 500, 504 (8th Cir. 1987). A side-by-side comparison is warranted if the products are viewed together in the marketplace. See Lever Bros. Co. v. Winzer Co., 326 F.2d 819 (C.C.P.A. 1964). However, a comparison is improper in the isolated circumstances of the marketplace. See Am. Auto. Ass n v. AAA Ins. Agency, 618 F. Supp. 787, 792 (W.D. Tex. 1985). See, e.g., Levi Strauss & Co. v. Blue Bell, Inc., 632 F.2d 817, 819 (9th Cir. 1980); James Burrough Ltd. v. Sign of Beefeater, Inc., 540 F.2d 266 (7th Cir. 1976), appeal after remand, 572 F.2d 574 (7th Cir. 1978) See, e.g., Paula Payne Prods. Co. v. Johnson Publ g Co., 473 F.2d 901 (C.C.P.A. 1973); In re Max Capital Grp. Ltd., 93 U.S.P.Q.2d 1243 (T.T.A.B. 2010); In re Cynosure, Inc., 90 U.S.P.Q.2d 1644 (T.T.A.B. 2009) (citing Sealed Air Corp. v. Scott Paper Co., 190 U.S.P.Q. 106, 108 (T.T.A.B. 1975)) Paula Payne Prods. Co., 473 F.2d at In re Digirad Corp., 45 U.S.P.Q.2d 1844, 5 (T.T.A.B. 1998). A comparison based on a dissection of the designations is normally improper in a likelihood of confusion analysis. Chevron Chem. Co. v. Voluntary Purchasing Grps, Inc., 659 F.2d 695, 704 (5th Cir. 1981), cert. denied, 457 U.S (1982). The dominant elements of a mark may strongly impact the general commercial impression. See, e.g., Burger Chef Sys., Inc. v. Sandwich Chef, Inc., 608 F.2d 875 (C.C.P.A. 1979); J & J Snack Foods Corp. v. McDonald s Corp., 932 F.2d 1460, 1462 (Fed. Cir. 1991) (noting that a common characteristic of a family of marks used by the plaintiff may itself become associated with the trademark owner). The court specifically found that McPRETZEL created a likelihood of confusion with the McDonald s family of trademarks. Id. at Particularly, when the distinctiveness of the other s designation is weak, the addition of the defendant s house mark may avoid confusion. See Bristol-Myers Squibb Co. v. McNeil-P.P.C., Inc., 973 F.2d 1033, (2d Cir. 1992); Gen. Mills, Inc. v. Kellogg Co., 824 F.2d 622, 626 (8th Cir. 1987). However, in some circumstances the use of a house mark may not alleviate the likelihood of confusion. See, e.g., Banff, Ltd. v. Federated Dep t Stores, Inc., 638 F. Supp. 652, 656 (S.D.N.Y. 1986), aff d, 841 F.2d 486 (2d Cir. 1988) (noting that Defendant s name is listed in such small print as to lead to the conclusion that it is not the company name which [the company] is relying to sell these goods but rather the mark which is so similar to that previously used by the plaintiff. Moreover, the use of a defendant s own name in conjunction with an otherwise similar mark does not generally excuse the infringement since it may instead simply increase the misappropriation by linking the defendant s own name to the plaintiff s good will established by its

46 December 2016] SCANDALOUS TRADEMARKS AND LANHAM ACT 2(A) 33 a mark is in the eyes of targeted consumers is key to a likelihood of confusion analysis. In finding a likelihood of confusion between CITY GIRL and CITY WOMAN, the Board emphasized that purchasers of CITY GIRL goods would likely assume that CITY WOMAN was a new line of products from the same source, or was connected with CITY GIRL in some way. 193 Even with regard to sound, there is some concern for methods of pronunciation of the public exposed to particular marks. 194 Marketplace context is a key focus for the first factor in a 2(d) rejection. 2. Examiners Routinely Consider the Goods and Services Identified in the Application As previously discussed, refusals to register a mark based on scandalousness often fail to consider relevant information related to the goods or services in question. However, as a trademark is only a right appurtenant to a particular business, the goods or services at issue are an important consideration when evaluating the registrability of a trademark. This consideration can weigh heavily in a likelihood of confusion analysis. Indeed, the scope of necessary relatedness of goods or services varies contextually according to the similarity of the marks. The more similar the marks, the less similar the goods or services need to be in order to create a likelihood of confusion in the marketplace. 195 In a section 2(d) analysis, examining attorneys consider the relatedness of the goods based on their identification in the application. 196 The operative question is whether consumers would relate the goods of the relevant marks, which can occur even where goods are not used together or related in kind. 197 In In re Davey, the Trademark Trial and Appeal Board ( TTAB ) determined that the goods need only be trademark. ). Id. (internal citations omitted); see also W. E. Bassett Co. v. Revlon, Inc., 435 F.2d 656, 662 (2d Cir. 1970); Miles Shoes, Inc. v. R. H. Macy & Co., 199 F.2d 602, 603 (2d Cir. 1952) In re M. Serman & Co., 223 U.S.P.Q. (BNA) 52 (T.T.A.B. 1984) See Kabushiki Kaisha Hattori Tokeiten v. Scuotto, 228 U.S.P.Q. 461, 462 (T.T.A.B. 1985) (noting that similarity of sound can be challenging because there is no per se correct method for determining how the relevant public will pronounce the mark). Here, the Board refused to register the mark, holding that the word portion of applicant s mark SEYCOS, [sic] is virtually the phonetic equivalent of opposer s SEIKO mark and is, in fact, the phonetic equivalent of the plural of opposer s mark. Id Gen. Mills, Inc. v. Fage Dairy Processing Indus. S.A., 100 U.S.P.Q.2d 1584, 1597 (T.T.A.B. 2011); In re Iolo Techs., LLC, 95 U.S.P.Q.2d 1498, 1499 (T.T.A.B. 2010); In re Davey Prods. Pty Ltd., 92 U.S.P.Q.2d 1198 (T.T.A.B. 2009) In re Toshiba Med. Sys. Corp., No , 2009 WL , at *5 (T.T.A.B. June 18, 2009) Id. (considering that the market factor in this analysis was whether the same facilities could purchase the equipment to be used in the diagnosis of the same patients). [G]oods that are neither used together nor related to one another in kind may still be related in the mind of the consuming public as to the origin of the goods. It is this sense of relatedness that matters in the likelihood of confusion analysis. Id.

47 34 HASTINGS LAW JOURNAL [Vol. 68:1 sufficiently related so that consumers would be likely to assume, upon encountering the goods under similar marks, that the goods originate from, are sponsored or authorized by, or are otherwise connected to the same source. In cases where the applicant s mark is identical to the registered mark cited, the degree of relatedness between the respective goods that is necessary to support a finding that the goods are related is less than it would be if the marks were not identical there need be only a viable relationship between the respective goods. 198 If goods or services are related in some manner in the minds of the consumers, marks that are similar may give rise to a likelihood of confusion. 199 For example, the TTAB affirmed the rejection of a travel agency s application for VOGUE based on the likelihood of confusion with VOGUE magazine. 200 VOGUE magazine successfully asserted that the travel agency s goods were related in such a way as to create confusion in the marketplace, because most of its readers are highly interested in travel, and the magazine had been running travel articles for seventy years Examiners Routinely Consider Channels of Trade Also, unlike the analysis involved in assessing potentially scandalous marks, a likelihood of confusion analysis looks at the marketing methods and channels of distribution used. The significance of trade channels is based upon where they lead to and whether at the end certain classes of persons are exposed to the marks in issue under circumstances likely to 198. In re Davey Prods. Pty Ltd., 92 U.S.P.Q.2d at 4 (finding by the examining attorney that it is not necessary that the respective goods be identical or even competitive in order to find that they are related for purposes of our likelihood of confusion analysis.... the issue is not whether consumers would confuse the goods themselves, but rather whether they would be confused as to the source of the goods. (citing In re Rexel Inc., 223 U.S.P.Q. 830 (T.T.A.B. 1984))) Weider Publ ns, LLC v. D & D Beauty Care Co., No , 2014 WL , at *10 (T.T.A.B. Jan. 21, 2014) (finding that an applicant s attempt to register SHAPE for not only cosmetics, but also health spa services and wellness, would likely cause confusion with the magazine SHAPE where those types of services were featured and advertised). It is sufficient that the respective goods and/or services of the parties are related in some manner, and/or that the conditions and activities surrounding the marketing of the goods and/or services are such that they would or could be encountered by the same persons under circumstances that could, because of the similarity of the marks, give rise to the mistaken belief that they originate from the same source. Id. Joel Gott Wines, LLC v. Rehoboth Von Gott, Inc., , 2013 WL , at *8 (T.T.A.B. June 26, 2013) (finding that GOTT LIGHT for various non-alcoholic drinks was likely to be confused by consumers with the wine marks: GOTT and JOEL GOTT). The Board stated that [t]he goods need only be sufficiently related that consumers would be likely to assume, upon encountering the goods under similar marks, that the goods originate from, are sponsored or authorized by, or are otherwise connected to the same source. Id See Conde Nast Publ ns Inc. v. Vogue Travel Inc., 205 U.S.P.Q. (BNA) 579, 1979 WL (T.T.A.B. 1979) Id. at *2 (providing an account of how many articles related to travel were published each year and what kind of travel-related phrases such as VOGUE to Go, PASSIONATE TRAVELER, Travel Egypt, or Vogue s Travelog were used).

48 December 2016] SCANDALOUS TRADEMARKS AND LANHAM ACT 2(A) 35 result in confusion. 202 This factor is significant in illuminating what actually happens in the marketplace and, where other factors are not particularly probative, channels of distribution become of special importance. 203 Even when the marks are used in the same venues, a proper likelihood of confusion analysis will consider goods sold in different departments and targeted at different purchasers. 204 A likelihood of confusion analysis can narrow the focus of the marketplace to particular areas where the goods are sold, or where two marks may overlap. For example, an exclusive distributorship which in turn sells to the public exclusively through boutique or specialty stores can overlap with a mass marketed product sold through specialty shops, discount stores, drug stores, and other retail outlets. 205 When sold in the same stores, competing products with similar trade dress may easily be confused if proximately located or actually intermixed. The consumer may not even realize the opportunity for comparison and differentiation. 206 On the other hand, it has become a common practice for retailers to shelve 202. See, e.g., Jeanne-Marc, Inc. v. Cluett, Peabody & Co., 221 U.S.P.Q. 58, 61 (T.T.A.B. 1984); TCPIP Holding Co. v. Haar Commc ns, Inc., 244 F.3d 88, 91 (2d Cir. 2001) (targeting similar buyers); Motion Picture Ass n of Am. Inc. v. Respect Sportswear, Inc., 83 U.S.P.Q.2d 1555, 1562 (T.T.A.B. 2007) ( [E]ncountered by the same persons.... ) Homeowners Grp., Inc. v. Home Mktg. Specialists, Inc., 931 F.2d 1100, 1110 (6th Cir. 1991) ( This factor... consists of considerations of how and to whom the respective goods or services of the parties are sold. ). For example, if similar marks are used on goods sold through the same marketing channels, the probability of confusion may be higher than if the goods are marketed through separate channels. See Interpace Corp. v. Lapp, Inc., 721 F.2d 460 (3d Cir. 1983) (noting that similar sales contexts can enhance the likelihood of confusion); see, e.g., Bos. Athletic Ass n v. Sullivan, 867 F.2d 22, 28 (1st Cir. 1989) (noting that identical nature of sales outlets and advertising methods supported a finding of infringement). Thus, dissimilarities between the retail outlets for, and the predominant customers of, plaintiff s and defendant s goods lessen the possibility of confusion, mistake, or deception. Ross Bicycles, Inc. v. East Coast Cycles, Inc., 224 U.S.P.Q. 725, 728 (N.D. Fla. 1984), aff d, 765 F.2d 1502, 1507 (11th Cir.1985), cert. denied, 475 U.S (1986). Accordingly, similar marks used on goods sold through single-brand distributors may be less confusing than when used on goods sold through multibrand stores, and goods sold only at discount outlets might not be confused with goods sold only in specialty shops Vitarroz Corp. v. Borden, Inc., 644 F.2d 960, (2d Cir. 1981). There is no rule that separation avoids confusion. Rather, the degree of physical proximity between two products in different sections of the same stores is relevant only to the extent it involves the consumer s reliance on memory or affects the consumer s perceptions of the relatedness of the products. Plus Prods. v. Plus Disc. Foods, Inc., 722 F.2d 999, (2d Cir. 1983). Helene Curtis Indus., Inc. v. Suave Shoe Corp., 13 U.S.P.Q.2d 1618, 1624 n.30 (T.T.A.B. 1989) ( The crucial question here is whether source confusion is likely. As to that, whether or not the goods are displayed close together or far apart in the same store is immaterial. ) Pignons S. A. de Mecanique de Precision v. Polaroid Corp., 657 F.2d 482, 488 (1st Cir. 1981) Roulo v. Russ Berrie & Co., 886 F.2d 931, 937 (7th Cir. 1989); Storck USA, L.P. v. Farley Candy Co., 785 F. Supp. 730, (N.D. Ill. 1992); P.T.C. Brands, Inc. v. Conwood Co., L.P., 28 U.S.P.Q.2d 1895, 1904 (W.D. Ky. 1993); see Ty, Inc. v. Jones Grp., 237 F.3d 891, (7th Cir. 2001).

49 36 HASTINGS LAW JOURNAL [Vol. 68:1 national brand products side-by-side with private brands having similar packaging features. 207 The analysis looks at trade channels specifically enough that a likelihood of confusion may be found even on non-competing goods. Targeting of a relatively narrow universe of potential purchasers through a specific trade channel may lead to confusion even if the goods do not compete. 208 Conversely, likelihood of confusion has been avoided where the senior and junior marks appear on products sold in professional, wholesale, or industrial channels as opposed to ordinary consumer retail channels. 209 The channels may be such that the only persons in a position to confuse the marks would be those familiar with one mark in their trade or industry that happen to encounter the other mark in their business or perhaps when doing their personal retail shopping. Such persons may be relatively sophisticated at least as to the industrial goods and less likely to be confused Examiners Routinely Consider the Consumer Base Likelihood of confusion analysis also considers the level of sophistication of the targeted consumer base. Examining attorneys consider consumers sophistication relative to relevant trade channels. Their analysis recognizes that people who are sophisticated purchasers of a product in one trade channel may be ordinary consumers of a product in another channel. 211 The fact that a product or service is expensive, or sold to a more specialized group of consumers, does not necessarily mean that such sophisticated consumers are immune to confusion. 212 When products may be purchased by both sophisticated and unsophisticated consumers, the examining attorney will likely look at the group of consumers that is least sophisticated and base the decision on the 207. Conopco, Inc. v. May Dep t Stores Co., 46 F.3d 1556, (Fed. Cir. 1994); cf. Kroger Co. v. Johnson & Johnson, 570 F. Supp 1055 (S.D. Ohio 1983); Gray v. Meijer, Inc., 295 F.3d 641, 650 (6th Cir. 2002) (finding no confusion because store brands grouped separately from independent brands, albeit in the same basic area of the store) See Marathon Mfg. Co. v. Enerlite Prods. Corp., 767 F.2d 214, 226 (5th Cir. 1985) (restricted market, very similar marks) Am. Cyanamid Co. v. S.C. Johnson & Son, Inc., 729 F. Supp. 1018, 1028 (D.N.J. 1989) (insecticide sold at retail and to exterminators); In re Shipp, 4 U.S.P.Q.2d 1174, 1176 (T.T.A.B. 1987) (retail dry cleaning services and commercial dry cleaning machine filters) In re Shipp, 4 U.S.P.Q.2d at However, an applicant may not restrict the scope of the goods covered in the cited registration; rather, trademark owners are limited to the identification of goods and services contained in the application. In re Davey Prods. Pty Ltd., 92 U.S.P.Q.2d 1198, 1204 (T.T.A.B. 2009) ( [I]t is the identification of goods that controls, not what extrinsic evidence may show about the specific nature of the goods.... An applicant may not restrict the scope of the goods covered in the cited registration by argument or extrinsic evidence. (citing In re Peregrina Ltd., 86 U.S.P.Q.2d 1645, 1646 (T.T.A.B. 2008))) See id.; In re Toshiba Med. Sys. Corp., 91 U.S.P.Q.2d 1266, 1272 (T.T.A.B. 2009); In re N.A.D. Inc., 754 F.2d 996, (Fed. Cir. 1985).

50 December 2016] SCANDALOUS TRADEMARKS AND LANHAM ACT 2(A) 37 examination of the potential for likelihood of confusion within that group. 213 Circumstances indicating that consumers would exercise care when purchasing relevant goods tend to minimize the likelihood of confusion. 214 The appropriate consumer base is considered in conjunction with relevant trade channels. As such, it may include people who are not targeted by the trademark owner but who are exposed to the mark in question. For example, in Stone Lion Capital Partners v. Lion Capital the examining attorney found that even though the company providing financial services targeted only sophisticated investors, unsophisticated consumers seeking financial advice would also likely be exposed to the trademark. 215 In another case, the Federal Circuit found a high level of sophistication where medical products would be purchased only in consultation with anesthesiologists or other professionals with technical knowledge. 216 B. Other Bases for Refusal Regularly Consider Contextual Factors Throughout the Registration Process Contextual factors are key to the application of other registration bars as well, including, among others, descriptiveness, genericism, and functionality. Trademarks are typically evaluated with reference to the goods and services at issue. As a baseline, trademarks must be distinctive; distinctiveness is measured by evaluating the mark in relation to the specific goods or services listed in the application. 217 Marks that are merely descriptive of the goods or services thus cannot be registered on the principal register absent a showing of secondary meaning, which is evaluated pursuant to further contextual information what is in the minds of consumers. 218 The determination of whether a mark is merely 213. Stone Lion Capital Partners, L.P. v. Lion Capital LLP, 746 F.3d 1317, (Fed. Cir. 2014); see also Gen. Mills, Inc. v. Fage Dairy Processing Indus. S.A., 100 U.S.P.Q.2d 1584, 1600 (T.T.A.B. 2011), judgment set aside on other grounds, 110 U.S.P.Q.2d 1679 (T.T.A.B. 2014); cf. Ford Motor Co. v. Summit Motor Prods., Inc., 930 F.2d 277, 293 (3d Cir. 1991) (stating, in the context of a trademark infringement case, that when a buyer class is mixed, the standard of care to be exercised by the reasonably prudent purchaser will be equal to that of the least sophisticated consumer in the class. ) In re Homeland Vinyl Prods., Inc. 81 U.S.P.Q.2d 1378, 1380 (T.T.A.B. 2006) Stone Lion Capital Partners, 746 F.3d at The Federal Circuit held that, because the services could be consumed by sophisticated and unsophisticated consumers alike, the TTAB correctly found likelihood of confusion. Id. at In re N.A.D., 754 F.2d at U.S.C (2006) ( No trademark by which the goods of the applicant may be distinguished from the goods of others shall be refused registration on the principal register on account of its nature unless it... (e) Consists of a mark which (1) when used on or in connection with the goods of the applicant is merely descriptive or deceptively misdescriptive of them... ); U.S. Patent & Trademark Office, TMEP (Apr. 2016) (citing Remington Prods., Inc. v. N. Am. Philips Corp., 892 F.2d 1576, 1580 (Fed. Cir. 1990)) U.S.C. 1052(f); TMEP (b); TMEP 1212 et seq.

51 38 HASTINGS LAW JOURNAL [Vol. 68:1 descriptive must be made in relation to the goods or services, not in the abstract: This requires consideration of the context in which the mark is used or intended to be used in connection with those goods/services, and the possible significance that the mark would have to the average purchaser of the goods or services in the marketplace. 219 Like a merely descriptive mark, a generic mark cannot be registered because it fails to function as a trademark. 220 The two-part test to determine whether or not a trademark is generic is a contextual one. It looks at the class of goods or services at issue, and asks whether the relevant public understands the designation primarily to refer to that class of goods or services. 221 Marks cannot be registered at all if they are found to be generic. Generic terms are understood by the relevant purchasing public to be the common or categorical name for the goods or services. 222 Functional elements cannot be protected as a trademark or as trade dress. 223 Like the other bases for refusal of registration, the test for functionality is highly based on contextual factors. 224 A proper assessment of functionality includes evidence both within and beyond the trademark application. 225 A mark will be functional where it is essential to the use or purpose of the product or if it affects the cost or quality of the device. 226 The examining attorney must establish a prima facie case for functionality, which can then be rebutted by the applicant. 227 Contextual evidence is key, and may include: (1) the existence of a utility patent whose claims cover the features sought to be registered; (2) promotional material touting the utilitarian advantages of the design; (3) availability of alternative designs for competitors; and (4) whether the design is 219. TMEP (b) U.S.C The statute requires that a mark distinguish the applicant s goods or services in order to be registered; because a generic term refers to an entire class of goods, it cannot be distinctive TMEP (c)(1) (citing H. Marvin Ginn Corp. v. Int l Ass n of Fire Chiefs, Inc., 782 F.2d 987, 990 (Fed. Cir. 1986)) Id (c) (noting that [g]eneric terms are terms that the relevant purchasing public understands primarily as the common or class name for the goods or services. In re Dial-A-Mattress Operating Corp., 240 F.3d 134i, 57 USPQ2d 1807, 1811 (Fed. Cir. 2001). (citations omitted)) U.S.C. 1052(e)(5) TMEP (a)(v) (Apr. 2016) ( In general terms, trade dress is functional, and cannot serve as a trademark, if a feature of that trade dress is essential to the use or purpose of the article or if it affects the cost or quality of the article. Qualitex Co. v. Jacobson Prods. Co., 514 U.S. 159, 165, 34 USPQ2d 1161, [sic] (1995) (quoting Inwood Labs. v. Ives Labs., Inc., 456 U.S. 844, 850, n.10, 214 USPQ 1, 4, n.10 (1982)). ) Id (a)(v) Qualitex Co., 514 U.S. at TMEP (a)(iv) (citing Textron, Inc. v. U.S. Int l Trade Comm n, 753 F.2d 1019, 1025 (Fed. Cir. 1985)).

52 December 2016] SCANDALOUS TRADEMARKS AND LANHAM ACT 2(A) 39 comparatively simple, efficient, or inexpensive. 228 Context is so important to the functionality analysis that examining attorneys are instructed not to just examine the specimen(s) submitted by the applicant, but to ask the applicant to submit contextual information outside the application, 229 and to conduct independent research to find advertising or promotional material. 230 C. Like Other Bases for Refusal, the Bar to Registration of Scandalous Marks Should Consider Contextual Factors For a rejection based on morality, trademark examiners should do what they do across the spectrum of trademark law: evaluate the trademark in light of the overall market context in which the mark is used. Trademark examiners are accustomed to this analysis; they do it regularly to evaluate whether a mark is eligible for registration, including considering the goods and services in the context of the relevant marketplace, channels of trade, and the relevant purchasing public in some situations, such as an evaluation of functionality, going well beyond information contained in the application. Consideration of these contextual factors would lead to better results for refusals based on scandalousness as they do for other registration bars. V. Context in Other Forms of Content Regulation Consideration of context for scandalous marks would be consistent with other forms of content regulation. The Federal Communications Commission ( FCC ) has moved toward consideration of context in its broadcast regulations. The FCC regulation of broadcast content has often been criticized by popular culture and the media, perhaps best known through George Carlin s 1972 monologue, Filthy Words. 231 However, even within these oft-criticized regulations there is a move away from a categorical judgment based on the seven words and toward some consideration of the general context and market for the broadcast content. Furthermore, the Supreme Court and the FCC have very clearly stated that whether something is patently offensive is 228. In re Morton-Norwich Prods., Inc., 671 F.2d 1332, (C.C.P.A. 1982); see TMEP (a)(v) TMEP (a)(v) ( T]he examining attorney should: (1) ask the applicant to provide copies of any patent(s) or any pending or abandoned patent application(s); (2) ask the applicant to provide any available advertising, promotional, or explanatory material concerning the goods/services; (3) inquire of the applicant whether alternative designs are available; and (4) inquire whether the feature makes the product easier or cheaper to manufacture. ) Id F.C.C. v. Pacifica Found., 438 U.S. 726, (1978) (transcript of monologue); George Carlin, 7 Dirty Words, YouTube (Jan. 11, 2014), (discussing the following seven words: shit, piss, fuck, cunt, cocksucker, motherfucker, and tits).

53 40 HASTINGS LAW JOURNAL [Vol. 68:1 determined in the context of the specific broadcast and market, rather than in the abstract. A. History of Regulation of Broadcast Content and Morality The FCC regulates broadcast content based on both obscenity and indecency. 232 The FCC has separate categories for each of these types of content; obscenity is flatly prohibited while indecency is regulated. 233 Indecent broadcasts, which contain content that would be subject to a 2(a) rejection for scandalousness or immorality if contained in a trademark, are statutorily permitted between the hours of 10:00 p.m. and 6:00 a.m. 234 Obscene material, on the other hand, is subject to a threepronged test in an effort to determine whether the material is of a prurient nature and lacking in literary, artistic, political, or scientific value. 235 When determining indecency, the focus is mainly on the material s effect on children and whether the material is patently offensive. 236 In both cases, when determining if material is prurient or patently offensive, the proper standard is that of the contemporary community which is non-geographical and includes the average broadcast viewer or listener There Has Been a Consistent Increase in the Use of Context to Determine Regulation of Broadcast Content Based on Offensiveness Although a general definition of indecency was adopted a few years before, the standard for regulation of morality in broadcast content was established in The Pacifica standard focused on the legendary seven words and a prohibition on indecent content between the hours C.F.R (1995) ( Enforcement of 18 U.S.C (restrictions on the transmission of obscene and indecent material) ); Obscene, Indecent and Profane Broadcasts, F.C.C., guides/obscenity-indecency-and-profanity (last updated June 30, 2016); Regulation of Obscenity, Indecency and Profanity, F.C.C., (last visited Nov. 7, 2016) Obscene, Indecent and Profane Broadcasts, supra note 232; Regulation of Obscenity, Indecency and Profanity, supra note 232; 47 C.F.R ( (a) No licensee of a radio or television broadcast station shall broadcast any material which is obscene. (b) No licensee of a radio or television broadcast station shall broadcast on any day between 6 a.m. and 10 p.m. any material which is indecent. ) C.F.R Obscene, Indecent and Profane Broadcasts, supra note 232; 47 C.F.R (1994) ( Obscene language ) Pacifica Found., 438 U.S. at Id Id. (holding that the government can constitutionally regulate indecent broadcasts, and providing the foundation for FCC enforcement of indecent material).

54 December 2016] SCANDALOUS TRADEMARKS AND LANHAM ACT 2(A) 41 of 6:00 a.m. and 10:00 p.m. 239 A decade later, the FCC determined that this interpretation of the Pacifica standard was too narrow and needed to accommodate contextual considerations. 240 The FCC reiterated the original indecency standard: language that describes in terms patently offensive as measured by contemporary community standards for the broadcast medium, sexual or excretory activities and organs. 241 The FCC also emphasized that the focus was on impact on children and repetition of expletives, indicating that fleeting or isolated use weighed against but did not prohibit a finding of indecency. 242 In 2001, the FCC issued a policy statement clarifying the indecency standard and stating a factor test for determining if something is indecent. 243 The three main factors, though these are non-exhaustive and the FCC or courts may take into account other factors, are as follows: (1) the explicitness or graphic nature of the description or depiction... ; (2) whether the material dwells on or repeats at lenghth [indecent] descriptions... ; (3) whether material appears to pander or is used to titillate, or whether the material appears to be presented for shock value. 244 The focus is on the contextual meaning; innuendo and double entendres can be indecent if the meaning is clear and unmistakable. 245 Toward that end, the FCC reiterated that fleeting or isolated use would weigh against a finding of indecency, but would not preclude it Id In re Citizen s Complaint Against Pacifica Found., 56 F.C.C.2d. 94, 98 (1975) (providing that the definition of indecent language is language that describes in terms patently offensive as measured by contemporary community standards for the broadcast medium, sexual or excretory activities and organs ) Id The FCC also sought to do away with strict time periods, because children could still be exposed after 10 p.m. In 1995, in response to congressional and court rulings, the 10:00 p.m. to 6:00 a.m. rule was reinstated and codified at 47 C.F.R (1995) Industry Guidance on Interpreting 18 U.S.C. 1464, 16 FCC Rcd (2001) Id. at Under this standard, fleeting or single use would weigh against a finding of indecency, but may still be indecent where other factors contribute to a finding of patent offensiveness, such as broadcasting references to sexual activities with children and material that is graphic or explicit Id. at See F.C.C. v. Fox Television Stations, Inc., 556 U.S. 502, 509 (2009). In 2003, the FCC initially found that isolated use of the word fuck in a Golden Globes broadcast, because it was used as an expletive rather than descriptor of sex, and because the word was isolated rather than repeated, was not indecent. In 2004, the FCC appeals panel overturned that ruling, finding that fuck was one of the most vulgar, graphic and explicit descriptions of sexual activity in the English language and any use of that word... inherently has a sexual connotation, thus, isolated use of such a word does not preclude a finding of indecency. Id. at This removed the requirement that a broadcast must dwell on or repeat an expletive in order to be found indecent. Complaints Against Various Broadcast Licensees Regarding the Golden Globe Awards, 18 FCC Rcd (2003).

55 42 HASTINGS LAW JOURNAL [Vol. 68:1 Overall, the definitions of what is indecent or obscene have not changed, but enforcement has become broader. 247 The focus within enforcement is primarily on protecting children, but context is key. 248 The analysis includes the time and place that the program is aired, the place 247. The Motion Picture Association of America ( MPAA ), on the other hand, does appear to have altered what it determines to meet each category over time. Complaints Against Various Licensees Regarding the Golden Globe Awards, 19 FCC Rcd (2004). Harvard published a report in 2004 indicating ratings creep and that, over the previous decade, the amount of sex and violence permitted in lower ratings categories had increased. Violence appears to be the primary beneficiary, lower ratings having larger amounts of violence than before, while sex and sexual references are still considered more scandalous and more likely to garner a higher rating (though still more acceptable at lower ratings than previously). Kimberly H. Thompson & Fumie Yokota, Violence, Sex, and Profanity in Films: Correlation of Movie Ratings with Content, Medscape Gen. Med. (2004), Press Release, Harvard Sch. of Pub. Health, Study Finds Ratings Creep : Movie Ratings Categories Contian More Violence, Sex, Profanity than Decade Ago (July 13, 2004), Nell Minow, Movie Ratings Creep Means PG-13 Isn t What It Used to Be, Chicago Tribune (Aug. 13, 2004), 13/features/ _1_potentially-objectionable-content-mpaa-ratings-movie; Sharon Waxman, Study Finds Film Ratings Are Growing More Lenient, N.Y. Times (July 14, 2004), /07/14/movies/study-finds-film-ratings-are-growing-more-lenient.html; Mike Snider, Harvard Study Is First to Measure Ratings Creep, USA Today (July 13, 2004, 11:06 PM), life/movies/news/ harvard-ratings-creep_x.htm; Assoc. Press, Ratings Creep Found Prevalent, L.A. Times (July 15, 2004), The Entertainment Software Ratings Board ( ESRB ) has seen a similar shift in what is acceptable for different levels of ratings though to a lesser extent than the MPAA. For example, blood was previously not allowed in the Teen category but is now permitted so long as it is static and not gratuitous. However, the ESRB also acknowledges that, though it has shifted what is acceptable based on contemporary views, violence is more acceptable than sex as far as ratings. The TV Parental Guidance system is actually done by the broadcasters themselves resulting in inconsistencies in application. Interestingly, in the case of television it appears that ratings have increased due to a decrease in the stigma of a show with a higher rating. However, with no centralized ratings board it is hard to say if there has been a shift in what falls under which category. ESRB Ratings Guide, Ent. Software Ratings Board, (last visited Nov. 7, 2016); see also Telephone Interview with Patricia Vance, President, Entm t Software Ratings Board (Sept. 16, 2014); HeatherNewman, Twenty Years of ESRB: More Blood, Less Hassle for Developers (Interview), VentureBeat (Sept. 16, 2014, 3:00 AM), (providing transcription of Patricia Vance s interview with VentureBeat); Kyle Orland, 20 Years, 20 Questionable Game Ratings: A Timeline of ESRB Oddities, Arstechnica (Sept. 16, 2014, 2:00 PM), Matt Matthews, This Game Is Not yet Rated: Inside the ESRB Ratings System, Gamasutra (Oct. 16, 2007), game_is_not_yet_rated_inside_.php?print=1 (describing the ratings process and how context is taken into account) See F.C.C. v. Pacifica Found., 438 U.S. 726, 733 (1978); Action for Children s Television v. F.C.C., 58 F.3d 654 (D.C. Cir. 1995) (noting that safe harbor is 10:00 p.m. to 6:00 a.m. because there is no relationship between the distinction of commercial v. noncommercial stations and the compelling governmentt interest); see also Enforcement of Prohibitions Against Broadcasting Indecency, 8 FCC Rcd. 704 (1993); 58 Fed. Reg (Jan. 25, 1993) (mandating 12:00 a.m. to 6 a.m. safe harbor instead of 10:00 p.m. to 6:00 a.m., overruled by Action for Children s Television v. F.C.C., 11 F.3d 170, 171 (D.C. Cir. 1993)); In re Sagittarius Broadcasting Corp., 8 FCC Rcd. 3600, 3600 (1993) (noting that audience poll not enough to demonstrate lack of child audience because broadcast was outside new safe harbor limits); Letter to The Rusk Corp., 8 FCC Rcd. 3228, 3229 (1993) (arguing that the prevalence of sexual content doesn t make the content less indecent, because rules are for protecting children and not about what adults consider decent for an adult audience).

56 December 2016] SCANDALOUS TRADEMARKS AND LANHAM ACT 2(A) 43 of viewing, and the greater context of the broadcast, including the surrounding content. 249 The Supreme Court has established that, to be obscene, material must meet a three-pronged test, based on contemporary community standards: (1) An average person, applying contemporary community standards, must find that the material, as a whole, appeals to the prurient interest; (2) the material must depict or describe, in a patently offensive way, sexual conduct specifically defined by applicable law; and (3) the material, taken as a whole, must lack serious literary, artistic, political or scientific value. 250 The FCC has defined broadcast indecency as language or material that, in context, depicts or describes, in terms patently offensive as measured by contemporary community standards for the broadcast medium, sexual or excretory organs or activities. 251 Indecent programming contains patently offensive sexual or excretory material that does not rise to the level of obscenity. 252 Courts have held that indecent material is protected by the First Amendment and cannot be banned entirely. 253 It may, however, be restricted in order to avoid its broadcast during times of the day when there is a reasonable risk that children may be in the audience. 254 Currently, even a single utterance of an expletive the seven words from Carlin have been stated as examples rather than an exhaustive list can still be ruled indecent depending on the other context of the material. However, there is now a statutory safe harbor time between 10:00 p.m. to 6:00 a.m. 255 The FCC has defined profanity as including language so grossly offensive to members of the public who actually hear it as to amount to a nuisance. 256 In making obscenity, indecency, and profanity determinations, context is key. The FCC staff must analyze what was actually aired, the meaning of what was aired, and the context in which it was aired See Obscene, Indecent and Profane Broadcasts, supra note 232; Regulation of Obscenity, Indecency and Profanity, supra note 232; 47 C.F.R (1995) Miller v. California, 413 U.S. 15, 24 (1973) (redefining obscenity from the previous standard of utterly without redeeming social value to something that lacks serious literary, artistic, political, or scientific value ) (emphasis omitted) In re Citizen s Complaint Against Pacifica Foundation, 56 F.C.C.2d. 94, 98 (1975) See Obscene, Indecent and Profane Broadcasts, supra note Cohen v. California, 403 U.S. 15, 25 (1971) (finding indecent speech protected by the First Amendment and famously noting that it is often true that one man s vulgarity is another s lyric ) F.C.C. v. Pacifica Found., 438 U.S. 726, 749 (1978); Bethel Sch. Dist. v. Fraser, 478 U.S. 675, 684 (1986) C.F.R (1995) Obscene, Indecent and Profane Broadcasts, supra note Id.

57 44 HASTINGS LAW JOURNAL [Vol. 68:1 Conclusion The registration bar for scandalous marks should be removed from the Lanham Act. It should be removed because morality is outside the function and purpose of trademark law; the consumer protection at the heart of trademark law is one of source quality, not moral quality. Removal of the registration bar would be more consistent with other forms of intellectual property, which have moved away from regulating morality. It would also resolve concerns about the provision s constitutionality. However, if the bar remains in the Lanham Act, it should be applied in a way that is fair and effective within the legal framework of trademark law. In re Mavety Media indicates that scandalousness should be evaluated in the context of the current attitudes of the day and the marketplace identified in the application. 258 However, if the particular mark contains words that are listed as vulgar in the dictionary, that is sufficient for a 2(a) rejection. Examining attorneys are given these general guidelines, but they are not very helpful in practical terms. Examining attorneys should treat a 2(a) question based on scandalousness or immorality the same way they treat most other issues in trademark law: through an assessment of the mark in the context of the marketplace. This would be consistent with other bars to registration found in the Lanham Act, and forms of content regulation in broadcast media In re Mavety Media Grp. Ltd., 33 F.3d 1367, 1370 (Fed. Cir. 1994).

58 The Define and Punish Clause and the Political Question Doctrine Lyle D. Kossis* The Constitution gives Congress the power to define and punish... Offences against the Law of Nations. 1 Congress has used this power to enact various criminal statutes that proscribe certain violations of international law. In some cases, criminal defendants argue that these statutes are unconstitutional because Congress has incorrectly defined the law of nations. Federal courts routinely entertain this argument. But the political question doctrine prevents federal courts from resolving a question when the Constitution entrusts the political branches with providing an answer. The Define and Punish Clause gives Congress, not the courts, the power to define the law of nations. Accordingly, federal courts should be barred from determining whether Congress has properly defined international law. No court or scholar to date has pursued this argument in detail. This Article takes the first step. The Article begins by describing the historical underpinnings of the Define and Punish Clause and the contemporary version of the political question doctrine. The Article then explains why the proper definition of international law under the Define and Punish Clause is a political question. It reviews the Clause s text, structure, and history, applicable Supreme Court precedent, and a variety of practical arguments to illustrate why federal courts have no authority to second-guess Congress s definition of the law of nations. Finally, the Article concludes by situating its central thesis within the current framework of both constitutional and non-constitutional law. It explains that the Supreme Court has never used international norms to limit Congress s power under the Define and Punish Clause. It also argues that although Congress has the sole power to define the law of nations, legislative power will remain meaningfully limited, and courts will remain free to interpret other sources of international law. * Associate, McGuireWoods LLP; J.D., 2013, University of Virginia School of Law. For insightful comments on prior drafts, I thank Richard Schragger, Caleb Nelson, Archith Ramkumar, Katherine Mims-Crocker, Grayson Lambert, Cameron Norris, Edward Wenger, and Andrew Smith. Any errors that remain are my own. Lyle Kossis. 1. U.S. Const. art. I, 8, cl. 10. [45]

59 46 HASTINGS LAW JOURNAL [Vol. 68:45 Table of Contents INTRODUCTION I. BACKGROUND A. THE DEFINE AND PUNISH CLAUSE B. THE POLITICAL QUESTION DOCTRINE II. THE POWER TO DEFINE INTERNATIONAL LAW AS A POLITICAL QUESTION A. TEXT, STRUCTURE, AND HISTORY B. U.S. SUPREME COURT PRECEDENT C. PRACTICAL CONSIDERATIONS III. PRECEDENT, LIMITS ON LEGISLATIVE POWER, AND OTHER SOURCES OF INTERNATIONAL LAW A. THE U.S. SUPREME COURT AND THE DEFINE AND PUNISH CLAUSE B. MEANINGFUL LIMITS ON LEGISLATIVE POWER C. TREATIES AND OTHER SOURCES OF INTERNATIONAL LAW CONCLUSION Introduction Modern legal thought teaches that the two principal sources of international law are treaties and customary international law. 2 A treaty is essentially a contract between or among sovereign nations, 3 and its enforcement generally depends on the interest and the honor of the governments which are parties to it. 4 By contrast, customary international law is law that results from a general and consistent practice of states followed by them from a sense of legal obligation. 5 Although there is no written code of customary international law, commentators believe that it has the same binding force as treaty law. 6 To avoid repetition, I use 2. Curtis A. Bradley & Jack L. Goldsmith, Customary International Law as Federal Common Law: A Critique of the Modern Position, 110 Harv. L. Rev. 815, 817 (1997). This is the definition of public international law, which primarily governs the conduct of nation states. See Restatement (Third) of the Foreign Relations Law of the United States 101 (Am. Law. Inst. 1987). By contrast, private international law generally deals with conflict of law principles. Id. 101 cmt. c. This Article is concerned only with public international law. 3. Trans World Airlines, Inc. v. Franklin Mint Corp., 466 U.S. 243, 262 (1984). 4. Edye v. Robertson, 112 U.S. 580, 598 (1884). 5. Restatement (Third) 102(2). 6. Id. 102(2) cmt. j ( Customary law and law made by international agreement have equal authority as international law. ).

60 December 2016] DEFINE AND PUNISH & POLITICAL QUESTION 47 international law and customary international law interchangeably throughout this Article. The U.S. Constitution has two principal mechanisms for incorporating international law into federal law. One mechanism is the Treaty Clause, which empowers the President, by and with the Advice and Consent of the Senate, to make Treaties Once a treaty has been properly ratified and executed, it becomes binding federal law under the Supremacy Clause. 8 The other way to incorporate international law into federal law is through the Define and Punish Clause. That constitutional provision gives Congress the power to define and punish... Offences against the Law of Nations. 9 The law of nations was the Founding equivalent of what we view today as customary international law (although it may also include treaties). 10 A federal statute enacted under the Define and Punish Clause like any other federal statute is binding federal law. 11 There has been an amplified focus on the Define and Punish Clause as of late. 12 Some scholars, for example, have recently explored the original meaning of the Clause and the roles that Congress and the courts play in defining the law of nations. 13 Nevertheless, there remains a dearth of scholarship addressing how the Clause fits within modern American jurisprudence. 14 While the historical understanding of the Clause is undoubtedly important, we should also explore how the Clause affects the jurisdictional rules that prescribe the power of federal courts. Essentially, we must not only know who gets to define international law, 7. U.S. Const. art. II, 2, cl See id. art. VI, cl. 2; Fellows v. Blacksmith, 60 U.S. (19 How.) 366, 372 (1856) ( [A] treaty, after executed and ratified by the proper authorities of the Government, becomes the supreme law of the land.... ). Presidents may also enter into executive agreements with foreign nations, which require no ratification by the Senate or approval by Congress. Am. Ins. Ass n v. Garamendi, 539 U.S. 396, 415 (2003). The Supreme Court has approved of these agreements because they are particularly longstanding. Id. 9. U.S. Const. art. I, 8, cl Bradley & Goldsmith, supra note 2, at 819; see also Sarah H. Cleveland & William S. Dodge, Defining and Punishing Offenses Under Treaties, 124 Yale L.J. 2202, 2211 (2015) ( [T]he eighteenthcentury conception of the law of nations was significantly different from the modern concept of customary international law and encompassed as many as four different categories of international law, including treaties. ). 11. U.S. Const. art. VI, cl See Eugene Kontorovich, Discretion, Delegation, and Defining in the Constitution s Law of Nations Clause, 106 Nw. U. L. Rev. 1675, 1676 (2012) ( Never in the nation s history at least not since the Neutrality and Alien Acts debacles of the 1790s has the scope and meaning of Congress s power to define and punish... Offences against the Law of Nations mattered as much. (internal citation omitted)). 13. See, e.g., J. Andrew Kent, Congress s Under-Appreciated Power to Define and Punish Offenses Against the Law of Nations, 85 Tex. L. Rev. 843 (2007). 14. See id. at 844 ( There are few scholarly works about the [Define and Punish] Clause; Congress, the Supreme Court, and the Executive Branch have seldom interpreted the Clause, and even then they have done so in a cursory and contradictory manner. ).

61 48 HASTINGS LAW JOURNAL [Vol. 68:45 but also how a federal court can answer that question as a matter of federal constitutional law. An example might help crystallize the point. Suppose that a federal statute enacted under the Define and Punish Clause makes it unlawful to assault a foreign ambassador in the United States. Further suppose that a defendant prosecuted under this statute believes that it is unconstitutional because it incorrectly defines customary international law. To make his case, the defendant points the court to various sources of customary international law allegedly showing that he, rather than Congress, has properly defined the law of nations. If the court agrees with the defendant, then it will declare the federal statute unconstitutional because it is inconsistent with the judicial (and the defendant s) definition of international law. Can a federal court do this? Some already have. 15 But the plain text of the Define and Punish Clause seems inconsistent with this practice. By virtue of its placement in Article I of the U.S. Constitution, the Clause provides that Congress, not the judiciary, has the power to define international law. Because the Constitution has explicitly allocated the power of definition to the legislature, federal courts should not be able to decide whether Congress s definition is correct. This conclusion is bolstered by the political question doctrine, which provides that federal courts have no authority to resolve a legal question where there is a textually demonstrable constitutional commitment of the issue to a coordinate political department By giving Congress the power to define the law of nations, the Constitution has textually committed the definition of international law to the legislature. 17 No court or scholar has linked the Define and Punish Clause and the political question doctrine in this way. This Article intends to fill that void. 15. See, e.g., Al Bahlul v. United States, 792 F.3d 1, 15 (D.C. Cir. 2015) ( Congress cannot, pursuant to the Define and Punish Clause, declare an offense to be an international war crime when the international law of war concededly does not. ); United States v. Bellaizac-Hurtado, 700 F.3d 1245, 1247 (11th Cir. 2012) (concluding that because drug trafficking is not an Offence[ ] against the Law of Nations.... Congress cannot constitutionally proscribe [that] conduct under the [Define and Punish] Clause.... ). 16. Zivotofsky ex rel. Zivotofsky v. Clinton, 132 S. Ct. 1421, 1427 (2012) (internal citations omitted). 17. This Article focuses only on federal courts because the political question doctrine does not apply to state courts. See Goldwater v. Carter, 444 U.S. 996, 1005 n.2 (1979) (Rehnquist, J., concurring) ( This Court, of course, may not prohibit state courts from deciding political questions, any more than it may prohibit them from deciding questions that are moot.... ). This remains true even in cases where state courts adjudicate federal claims arising under the U.S. Constitution. ASARCO Inc. v. Kadish, 490 U.S. 605, 617 (1989) ( We have recognized often that the constraints of Article III do not apply to state courts, and accordingly the state courts are not bound by the limitations of a case or controversy or other federal rules of justiciability even when they address issues of federal law.... ). Nevertheless, state courts have previously applied their own version of the political question doctrine in certain cases. See Tara Leigh Grove, The Lost History of the Political Question Doctrine, 90 N.Y.U. L. Rev. 1908, (2015).

62 December 2016] DEFINE AND PUNISH & POLITICAL QUESTION 49 Part I reviews the history of the Define and Punish Clause and the development of the political question doctrine. It explains that under the Articles of Confederation, the Founders were acutely aware of the federal government s inability to punish violations of customary international law. The absence of this authority became particularly troubling when the federal government could not remedy two assaults against foreign ambassadors that occurred on American soil. Of importance, as the Founders debated the propriety of the Define and Punish Clause, they generally thought that the remedy for international law s indefiniteness was to give Congress the power to define the law of nations. Part I then proceeds to trace the history of the political question doctrine. It describes the modest origins of the doctrine and how it has evolved into a far-reaching tool that regulates federal jurisdiction in multiple contexts. It also highlights that the doctrine has generally been invoked in cases that affect foreign relations as any case involving the Define and Punish Clause would. Part II argues that under the Define and Punish Clause, the proper definition of customary international law is a political question. It explains that this result follows logically from the Clause s text, structure, and history. If Congress has the sole power to define international law, then federal courts cannot redefine it in order to strike down a federal statute. Moreover, the two key Supreme Court cases that address the law of nations and the political question doctrine both underscore the fact that Congress should have the final say on the proper definition of customary international law. To complete the discussion, I offer four practical reasons why federal courts should avoid redefining international law once Congress has already done so. The discussion focuses on the institutional competence of the judiciary vis-à-vis customary international law, as well as the legal status of international law under the Supremacy Clause. Part III situates the Article s central thesis within the existing framework of both constitutional and non-constitutional law. It explains that the Supreme Court has never used international norms to limit Congress s power under the Define and Punish Clause. It also argues that legislative power will remain meaningfully limited even if federal courts cannot review Congress s definition of international law. For example, Congress may use the Define and Punish Clause to enact only criminal legislation, and the political question doctrine does not prevent federal courts from policing the boundary between civil and criminal laws. What s more, Congress is subject to constitutional, political, and electoral checks that discourage it from abusing its authority under the Define and Punish Clause. All of these limits will continue to bind Congress whether or not the definition of international law is a political question. Part III then concludes by explaining that even if federal courts

63 50 HASTINGS LAW JOURNAL [Vol. 68:45 cannot define international law once Congress has already done so, they remain free to interpret and apply other sources of international law. I. Background The Define and Punish Clause and the political question doctrine have never been analyzed in tandem. To best understand their relationship, this Part provides essential background. Subpart A summarizes the history of the Define and Punish Clause, with a focus on the events that led to its inclusion in the Constitution. Subpart B then describes the political question doctrine, paying special attention to how the Supreme Court has developed the doctrine over time. A. The Define and Punish Clause The federal government of the United States was first organized under the Articles of Confederation. That instrument gave the federal government modest authority over foreign relations, such as the sole and exclusive power of sending and receiving ambassadors and entering into treaties and alliances. 18 But the Articles did not give the fledgling national government any power to proscribe and punish violations of international law. 19 While this omission might seem unimportant, it became particularly troublesome during the Longchamps affair. In 1784, an agitator named Charles Julian de Longchamps physically assaulted the Consul General of France while he was traveling in Pennsylvania. 20 Under the Articles of Confederation, the federal government had neither the jurisdiction nor the resources to prosecute Longchamps, so he was tried for assault in a Pennsylvania state court. 21 Longchamps was convicted by a jury and sentenced to two years in prison, but France insisted on Longchamps s extradition so that he could be further reprimanded by French authorities. 22 Although French officials ultimately dropped their demand for extradition, they expressed their displeasure that the federal government could not guarantee the safety of foreign ambassadors. 23 The ambassador Longchamps assaulted even requested that Congress pass Resolutions asserting the Rights of Ministers and recommending to the States to pass Laws to punish Violations of [said 18. Articles of Confederation of 1777, art. IX, para Kontorovich, supra note 11, at 1692 ( The Articles of Confederation did not contain any reference to offenses against the law of nations. ). 20. Curtis A. Bradley, The Alien Tort Statute and Article III, 42 Va. J. Int l L. 587, 638 (2002). 21. See Respublica v. De Longchamps, 1 U.S. (1 Dall.) 111 (1784). 22. Id. at Kent, supra note 13, at

64 December 2016] DEFINE AND PUNISH & POLITICAL QUESTION 51 Resolutions]. 24 Congress assented and passed resolutions that encouraged the states to enact criminal laws protecting ambassadors. 25 Few responded. 26 The Longhcamps incident was not the last affront to an ambassador on American soil. In 1787, a New York constable broke into the Dutch ambassador s home and arrested one of his servants. 27 After the incident, John Jay had to defuse the situation and mollify Dutch government officials. Due to Jay s prodding, the Mayor of New York City arrested the constable so that he could stand trial. 28 Nevertheless, the Mayor warned that because neither Congress nor our [State] Legislature have yet passed any act respecting a breach of the privileges of Ambassadors, the constable s punishment would depend solely on the common law. 29 The assaults and affronts to foreign ambassadors in the United States highlighted one of the key deficiencies of the Articles of Confederation. 30 When the Framers met in Philadelphia to draft the Constitution, they thought that the federal government should be able to punish violations of international law. 31 Indeed, in proposing the Virginia Plan at the Constitutional Convention, Edmund Randolph criticized the Articles of Confederation because they could not cause infractions of treaties or of the law of nations[] to be punished. 32 He bemoaned the fact that [i]f the rights of an ambassador be invaded by any citizen it is only in a few States that any laws exist to punish the offender Journals of the Continental Congress ( ) (John C. Fitzpatrick ed., vol. XXIX 1785). 25. Id. at Charles D. Siegal, Deference and its Dangers: Congress Power to Define... Offenses Against the Law of Nations, 21 Vand. J. Transnat l L. 865, 874 nn (1988) (citing Letter from Edmund Randolph to the Speaker of the Va. House of Delegates (Oct. 10, 1787), reprinted in Herbert J. Storing, The Anti-Federalist 86, 88 (1981)). 27. See William R. Casto, The Federal Courts Protective Jurisdiction over Torts Committed in Violation of the Law of Nations, 18 Conn. L. Rev. 467, 494 (1986). 28. Id. 29. See Bradley, supra note 20, at Kontorovich, supra note 12, at ; Kenneth C. Randall, Federal Jurisdiction over International Law Claims: Inquiries into the Alien Tort Statute, 18 N.Y.U. J. Int l L. & Pol. 1, (1986). 31. See Finzer v. Barry, 798 F.2d 1450, 1455 (D.C. Cir. 1986) ( The need for [the Define and Punish Clause] was, of course, one of the reasons a new constitution was desired, and the power was placed among the great powers granted to the new government. Implementation of the law of nations by the American government was seen as crucial to the conduct of our foreign relations, a subject of pervasive concern in the Constitution. ), aff d in part, rev d in part sub nom. Boos v. Barry, 485 U.S. 312 (1988); Siegal, supra note 26, at I The Records of the Federal Convention of (Max Farrand ed., 1966). It is worth noting that some scholars have questioned the accuracy of the records from the Constitutional Convention. The records are based on James Madison s notes, and he may have changed them over time to reflect his evolving views of the U.S. Constitution. See generally Mary Sarah Bilder, Madison s Hand: Revising the Constitutional Convention (2015) (questioning the accuracy of James Madison s notes from the Constitutional Convention). 33. I The Records of the Federal Convention of 1787, supra note 32, at 25.

65 52 HASTINGS LAW JOURNAL [Vol. 68:45 Consequently, the delegates to the Convention set out to draft a clause that would give the federal government this badly needed authority. The first version of what is now the Define and Punish Clause, drafted at the Constitutional Convention, gave Congress the power [t]o declare the law and punishment of piracies and felonies committed on the high seas, and the punishment of counterfeiting the coin of the United States, and of offences against the law of nations The delegates were dissatisfied with this provision and subsequently engaged in multiple debates regarding the words declare, define, and punish. 35 They decided to move the counterfeiting provision to a different clause and limit the Offenses Clause to piracies, felonies, and offenses against the law of nations. The revised draft gave Congress the power [t]o define & punish piracies and felonies on the high seas, and punish offences against the law of nations. 36 In assessing the latest revision, Gouverneur Morris and James Wilson engaged in an important debate. Morris first moved to strike out punish before the words offenses agst. the law of nations[] so as to let these be definable as well as punishable. 37 Wilson thought that this was ill-advised because [t]o pretend to define the law of nations which depended on the authority of all the Civilized Nations of the World, would have a look of arrogance[] that would make us ridiculous. 38 Morris disagreed because define is proper when applied to offences in this case; the law of nations being often too vague and deficient to be a rule. 39 Morris s motion passed with a vote of 6-5, meaning that Congress was empowered to define offenses against the law of nations. 40 The Clause, as finally adopted, gives Congress the power to define and punish Piracies and Felonies committed on the High Seas, and Offences Against the Law of Nations[.] 41 The Clause received little attention during the state ratifying conventions. 42 The best discussion of it is likely Federalist Number 42. In that essay, James Madison placed the Define and Punish Clause among those powers which regulate the intercourse with foreign nations. 43 It was important that these powers reside in the federal government because [i]f we are to be one nation in any respect, it clearly ought to be 34. II The Records of the Federal Convention of (Max Farrand ed., 1966). 35. Cleveland & Dodge, supra note 10, at II The Records of the Federal Convention of 1787, supra note 34, at Id. 38. Id. at Id. 40. Id. 41. U.S. Const. art. I, 8, cl Siegal, supra note 26, at The Federalist No. 42, at 231 (James Madison) (E.H. Scott ed., 1898).

66 December 2016] DEFINE AND PUNISH & POLITICAL QUESTION 53 in respect to other nations. 44 Madison also thought it was significant that the Clause gave Congress the power of definition. Felony, Madison explained, was a term of loose signification, even in the common law of England. 45 To account for this, Madison believed that neither the common, nor the statute law... of any other nation could define a felony for purposes of federal law unless previously made its own by Legislative adoption. 46 Madison s theory that foreign law became binding federal law only through legislative adoption was consistent with his notes from the Constitutional Convention. When debating an early version of the Define and Punish Clause, Madison remarked, no foreign law should be a standard farther than is expressly adopted by Congress. 47 He also argued that failing to give Congress the power to define felonies and offences would force individuals to rely on the vague common law. 48 Madison thought that the remedy for this problem was to vest the power proposed by the term define in the Natl. legislature. 49 According to Madison, international obligations did not become binding federal law until they were defined by Congress through its normal lawmaking procedures. 50 We inevitably lean on Madison s comments because they are a rare example of the Founding generation explicitly discussing the powers (and limits) inherent in the Define and Punish Clause. Even the Supreme Court has yet to consider the Clause at length. Many scholars and federal courts cite United States v. Arjona as the most thorough exposition of the Clause, but that case actually said little about defining international law. 51 The central issue in Arjona was whether Congress could criminalize 44. Id. at Id. at Id. 47. I The Records of the Federal Convention of 1787, supra note 32, at Id. 49. Id. 50. The Supreme Court chipped away at this reasoning in United States v. Smith, 18 U.S. (5 Wheat.) 153 (1820). There, Congress enacted a criminal law that punished anyone who upon the high seas, commit[s] the crime of piracy, as defined by the law of nations.... Id. at 157. The defendant argued that the law was unconstitutional because it did not specify the elements of piracy, but rather defined the crime as generally understood by the law of nations. Id. at 158. The Court found no constitutional infirmity because the meaning of piracy was well-settled: There is scarcely a writer on the law of nations, who does not allude to piracy as a crime of a settled and determinate nature.... Id. at 161. Smith, however, is not necessarily inconsistent with Federalist Number 42, because Madison contemplated that piracy could be defined by reference to the law of nations. See The Federalist No. 42, supra note 42, at 233 ( The definition of piracies might, perhaps, without inconvenience, be left to the law of nations.... ). Additionally, the Court in Smith carefully limited its holding to the definition of piracy, and it did not suggest that Congress could enact a criminal statute that simply prohibited all violations of international law. See Smith, 18 U.S. (5 Wheat.) at ; infra note United States v. Arjona, 120 U.S. 479 (1887).

67 54 HASTINGS LAW JOURNAL [Vol. 68:45 counterfeiting foreign securities as a violation of international law. 52 The Court held that it could, noting that every government must use due diligence to prevent a wrong being done within its own dominion to another nation, and one such wrong was counterfeit[ing] the money of another nation. 53 Given this principle, Congress could plainly use international law to punish anyone who produced counterfeit foreign securities within the United States. Indeed, the United States could oblige other nations to guarantee the integrity of American financial instruments abroad. 54 Therefore, it followed that other nations may require the same from the United States because international obligations are of necessity reciprocal in their nature. 55 Arjona, however, can hardly be viewed as the formative discussion of the Define and Punish Clause. The case applied settled principles of international law to facts that were not in dispute. The result was a holding that left few surprised and many questions unanswered. The Supreme Court has since discussed the Define and Punish Clause only tangentially in a few cases, and it has not seriously considered whether the Clause places any limits on Congress s power to define criminal violations of customary international law. Indeed, the Court has never considered whether the judiciary can decide if Congress has properly defined the law of nations. If the Supreme Court were to take up that question, it would inevitably confront the political question doctrine. B. The Political Question Doctrine The political question doctrine began where much of constitutional law began: Marbury v. Madison. 56 Toward the end of his term, President John Adams signed a commission that appointed William Marbury as justice of the peace for Washington County. 57 Marbury s commission, however, was never delivered to him. 58 Marbury thought that he was entitled to delivery and asked the Supreme Court to compel the 52. Id. at Id. at Id. 55. Id. at See Marbury v. Madison, 5 U.S. (1 Cranch) 137 (1803). Even before Marbury, Alexander Hamilton anticipated the political question doctrine in the Federalist Papers. See The Federalist No. 78, at (Alexander Hamilton) (E.H. Scott ed., 1898) (arguing that particular provisions in the Constitution indicate that the legislative body are themselves the constitutional judges of their own powers and that the construction they put upon them is conclusive upon the other departments ). And before he became Chief Justice of the Supreme Court, John Marshall argued on the floor of the U.S. House of Representatives that, [b]y extending the judicial power to all cases in law and equity, the Constitution had never been understood to confer on that department any political power whatever. Speech of the Hon. John Marshall (Mar. 7, 1800), printed in 10 Annals of Cong. 606 (1800). 57. Marbury, 5 U.S. (1 Cranch) at Id.

68 December 2016] DEFINE AND PUNISH & POLITICAL QUESTION 55 Secretary of State to deliver his commission. 59 The Court held that Marbury had a vested legal right to his commission and that he was entitled to its delivery. 60 The Court also concluded that a writ of mandamus was warranted, and that a federal statute purported to give the Court jurisdiction to issue it. 61 But the key question was whether the federal statute providing mandamus jurisdiction was unconstitutional. The Court held that it was, thereby confirming the judiciary s ability to disregard laws that conflict with the Constitution. 62 In the words of Chief Justice John Marshall, [i]t is emphatically the province and duty of the judicial department to say what the law is. 63 Buried within Marbury is also the first acknowledgment of the political question doctrine. The Court noted that the Constitution vests the President with certain important political powers, in the exercise of which he is to use his own discretion, and is accountable only to his country in his political character, and to his own conscience. 64 While federal courts normally adjudicate the rights of individuals, they cannot enquire how the executive, or executive officers, perform duties in which they have [] discretion. 65 Hence, the Court held that decisions on [q]uestions, in their nature political,... can never be made in this court. 66 While Marbury recognized the basic contours of the political question doctrine, subsequent cases have refined and applied it to new circumstances. The doctrine has played a prominent role in cases involving the validity of governmental entities. In Luther v. Borden, for example, the Court was confronted with a case that involved rival government factions in Rhode Island. 67 Martin Luther sued Luther Borden for trespass because Borden and others broke into his home. Borden argued, however, that he could lawfully enter and search Luther s home because the state was under martial law. 68 Whether this 59. Id. 60. Id. 61. Id. at Id. at Id. at Id. at Id. at Id. Some scholars believe that the political question doctrine is illegitimate. See, e.g., Martin H. Redish, Judicial Review and the Political Question, 79 Nw. U. L. Rev. 1031, 1060 (1984). Other scholars believe that political questions are really disguised determinations on the merits. See, e.g., Linda Champlin & Alan Schwarz, Political Question Doctrine and Allocation of the Foreign Affairs Power, 13 Hofstra L. Rev. 215, (1985). Despite these academic criticisms, I take the political question doctrine as given. See Grove, supra note 16, at (summarizing the deep roots of the traditional political question doctrine). Similarly, there is good reason to believe that deciding whether a case presents a political question is different than deciding the merits of a constitutional claim. See Rachel E. Barkow, More Supreme than Court? The Fall of the Political Question Doctrine and the Rise of Judicial Supremacy, 102 Colum. L. Rev. 237, 245 n.20 (2002). 67. Luther v. Borden, 48 U.S. (7 How.) 1, (1849). 68. Id. at 34.

69 56 HASTINGS LAW JOURNAL [Vol. 68:45 defense was valid turned on which faction was the lawful government of Rhode Island. The Court held that deciding whether one state government had been displaced presents a political question. 69 Only political officials can resolve the legitimacy of state governments, and once they do, the judicial department would be bound to take notice of [their decision] as the paramount law of the State The Court buttressed its holding by pointing to the Republican Guarantee Clause in the U.S. Constitution. 71 That Clause obligates the federal government to guarantee each state a Republican Form of Government, 72 and Congress must necessarily decide what government is established in the State before it can determine whether it is republican or not. 73 The lesson is that once Congress or a state government has designated an entity as the lawful sovereign, the judiciary is powerless to second-guess that decision. The Court has also employed the political question doctrine in cases that involve the validity of legislative votes. In Coleman v. Miller, a group of Kansas legislators disputed whether the state legislature had actually ratified the proposed Child Labor Amendment to the U.S. Constitution. 74 The legislators argued that any ratification was invalid because too much time had passed between the Amendment s proposal and the state legislature s vote more than thirteen years. 75 Chief Justice Hughes s opinion recognized that in proposing constitutional amendments, Congress may fix a reasonable time for ratification. 76 That did not mean, however, that when Congress failed to specify a deadline, the Court should take upon itself the responsibility of deciding what constitutes a reasonable time Determining how long is too long presented a political question because the deadline for adopting an amendment lies within the congressional province. 78 Therefore, once Congress accepts a state s ratification as timely, its decision would not be subject to review by the courts Id. at Id. 71. See U.S. Const. art. IV, Id. 73. Luther, 48 U.S. (7 How.) at 42; see also Pac. States Tel. & Tel. Co. v. Oregon, 223 U.S. 118, 133 (1912) (holding that a claim to enforce the Republican Guarantee Clause is political in character, and therefore not cognizable by the judicial power ). 74. Coleman v. Miller, 307 U.S. 433, (1939). 75. Id. at Id. at 452. I use Chief Justice Hughes s opinion rather than the Court because it is unclear whether the opinion in Coleman commanded a majority of Justices. See Ariz. State Legislature v. Ariz. Independent Redistricting Comm n, 135 S. Ct. 2652, (2015) (Scalia, J., dissenting); John Harrison, Legislative Power, Executive Duty, and Legislative Lawsuits, 31 J.L. & Pol. 103, 137 n.51 (2015). 77. Coleman, 307 U.S. at Id. at Id.

70 December 2016] DEFINE AND PUNISH & POLITICAL QUESTION 57 By the time the Court decided Coleman, it had confronted the political question doctrine in numerous contexts. But it still had not provided a detailed explanation of which facts or circumstances generally triggered the doctrine. Devising a coherent theory of political questions is an admittedly delicate enterprise. Courts have a virtually unflagging obligation... to exercise the jurisdiction given them, so they must be careful to ensure that the political question doctrine does not become a convenient excuse to duck difficult or controversial cases. 80 To provide federal courts with more guidance, the Supreme Court provided an extended discussion of the doctrine in Baker v. Carr. 81 Baker involved the supposed mal-apportionment of legislative districts in Tennessee. 82 The Supreme Court had to decide whether the district court had subject matter jurisdiction and whether the case presented a nonjusticiable political question. 83 After concluding that the lower courts had jurisdiction, the Court stated that there were six factors that indicate whether a case presents a political question: [1] a textually demonstrable constitutional commitment of the issue to a coordinate political department; [2] or a lack of judicially discoverable and manageable standards for resolving it; [3] or the impossibility of deciding without an initial policy determination of a kind clearly for nonjudicial discretion; [4] or the impossibility of a court s undertaking independent resolution without expressing lack of the respect due coordinate branches of government; [5] or an unusual need for unquestioning adherence to a political decision already made; [6] or the potentiality of embarrassment from multifarious pronouncements by various departments on one question. 84 The Court also emphasized that political questions often arise in cases that implicate foreign relations. 85 True, not every case that touches foreign relations lies beyond judicial cognizance. 86 But cases related to foreign affairs frequently turn on standards that defy judicial application, 80. Colo. River Water Conservation Dist. v. United States, 424 U.S. 800, 817 (1976). 81. Baker v. Carr, 369 U.S. 186 (1962). 82. Id. at Although the Court separately considered subject matter jurisdiction and the political question doctrine, it is well-settled today that the political question doctrine is a jurisdictional bar. See, e.g., Massachusetts v. EPA, 549 U.S. 497, 516 (2007) ( It is therefore familiar learning that no justiciable controversy exists when parties seek adjudication of a political question.... ); Spectrum Stores, Inc. v. Citgo Petroleum Corp., 632 F.3d 938, (5th Cir. 2011); Carmichael v. Kellogg, Brown & Root Servs., Inc., 572 F.3d 1271, 1280 (11th Cir. 2009); Corrie v. Caterpillar, Inc., 503 F.3d 974, (9th Cir. 2007). 84. Baker, 369 U.S. at 217. The Supreme Court has noted that [t]hese tests are probably listed in descending order of both importance and certainty. Vieth v. Jubelirer, 541 U.S. 267, 278 (2004) (plurality opinion); see also Spectrum Stores, Inc., 632 F.3d at 950 ( The dominant consideration in any political question inquiry is whether there is a textually demonstrable constitutional commitment of the issue to a coordinate political department. (quoting Saldano v. O Connell, 322 F.3d 365, 369 (5th Cir. 2003)). Some scholars argue that the last four considerations in the Baker test should be abandoned altogether. See Barkow, supra note 66, at Baker, 369 U.S. at Id.

71 58 HASTINGS LAW JOURNAL [Vol. 68:45 [] involve the exercise of a discretion demonstrably committed to the executive or legislature, or uniquely demand single-voiced statement of the Government s views. 87 The Court ultimately ruled that the malapportionment of state legislative districts did not present a political question. 88 Today, the Baker framework remains the standard inquiry for assessing whether a case presents a political question. 89 Since Baker, the Court has not returned to an in-depth discussion of the political question doctrine. Most of the Court s decisions in this area have been couched in the specific facts of individual cases. The Court has held, for example, that training the militia 90 and trying federal officers in the U.S. Senate after impeachment 91 present political questions, but that determining whether the U.S. House of Representatives properly excluded a member-elect does not. 92 Yet some of the Court s decisions have tried to create rules of general applicability in political question cases. One such rule is that the constitutionality of a federal statute generally does not present a political question. The Supreme Court briefly discussed this principle in two cases, 93 but it received enhanced attention in a recent case addressing the President s authority to recognize foreign countries. In Zivotofsky ex rel. Zivotofsky v. Clinton, 94 a federal law allowed American citizens born in Jerusalem to list Israel as the place of birth on their passports. The Department of State, however, had a longstanding policy to abstain from recognizing whether Israel or Jordan exercised territorial sovereignty over Jerusalem. 95 The Department refused to follow the law because it believed that the statute infringed 87. Id. 88. Id. at Some scholars have argued that Baker represents a break from the past because it created an entirely new political question doctrine. For example, commentators argue that while early cases treated the political question doctrine as nonjurisdictional, Baker treated the presence of a political question as a jurisdictional defect warranting dismissal. See Grove, supra note 16, at ; see also John Harrison, The Political Question Doctrines 46 (Univ. Va. Sch. of Law, Pub. Law & Legal Theory Research Paper Series, Paper No. 59, Oct. 1, 2015), (arguing that since Baker, lower courts have seriously misunderstood the Supreme Court s political question doctrine by treating it as a jurisdictional bar). Scholars also argue that while early political question cases treated the doctrine as reinforcing judicial restraint, the modern doctrine is a vehicle for asserting [the judiciary s] supremacy over constitutional law. Grove, supra note 17, at Gilligan v. Morgan, 413 U.S. 1, (1973). 91. Nixon v. United States, 506 U.S. 224, 226 (1993). 92. Powell v. McCormack, 395 U.S. 486, (1969). 93. See Japan Whaling Ass n v. Am. Cetacean Soc y, 478 U.S. 221, 230 (1986) ( [I]t goes without saying that interpreting congressional legislation is a recurring and accepted task for the federal courts. ); INS v. Chadha, 462 U.S. 919, (1983) ( No policy underlying the political question doctrine suggests that Congress or the Executive, or both acting in concert... can decide the constitutionality of a statute; that is a decision for the courts. ). 94. Zivotofsky ex rel. Zifvotofsky v. Clinton, 132 S. Ct. 1421, 1424 (2012). 95. Id. at 1425.

72 December 2016] DEFINE AND PUNISH & POLITICAL QUESTION 59 the President s constitutional power to recognize which foreign nation exercises sovereignty over foreign territory. When individuals sued the Department for not following this law, the Department argued that the case presented a political question. 96 The Court disagreed. It emphasized that it could decide whether the statute was constitutional without playing politics: The federal courts are not being asked to supplant a foreign policy decision of the political branches with the courts own unmoored determination Rather, the plaintiff sought to enforce a statutory right, and determining whether a statute is constitutional is a familiar judicial exercise. 98 Some Justices concurred, however, to note their disagreement with this reasoning. Justice Sotomayor wrote that, while the political question doctrine did not apply in Zivotofsky, [t]hat is not to say... that no statute could give rise to a political question. 99 Justice Alito made the same point. 100 Overall, the recent development in Zivotofsky should not obscure how little the political question doctrine has evolved since Baker. Federal courts still use Baker s six-factor test as the benchmark for the political question inquiry. And while it seems that federal courts can always adjudicate the constitutionality of a statute (political question doctrine notwithstanding), this development took shape only recently. All of this is to say that how the political question doctrine interacts with the Define and Punish Clause will be answered on a fairly clean slate. II. The Power to Define International Law as a Political Question Any analysis of whether a constitutional provision presents a political question must begin with the text of the provision. After all, Baker recognized that the clearest indication of a political question is a textually demonstrable constitutional commitment to a coordinate branch of government. 101 Nevertheless, the analysis would not be complete without also considering applicable Supreme Court precedent and the compelling practical considerations inherent in defining international law. 102 Accordingly, this Part proceeds in three Subparts. Subpart A analyzes the text, structure, and history of the Define and Punish 96. Id. at Id. at Id. 99. Id. at 1435 (Sotomayor, J., concurring in part and concurring in the judgment) Id. at 1436 (Alito, J., concurring in the judgment) ( Under our case law, determining the constitutionality of an Act of Congress may present a political question.... ) Baker v. Carr, 369 U.S. 186, 217 (1962) See Jamal Greene, On the Origins of Originalism, 88 Tex. L. Rev. 1, 8 (2009); Vicki C. Jackson, Multi-Valenced Constitutional Interpretation and Constitutional Comparisons: An Essay in Honor of Mark Tushnet, 26 Quinnipiac L. Rev. 599, (2008).

73 60 HASTINGS LAW JOURNAL [Vol. 68:45 Clause. 103 Subpart B then analyzes the key Supreme Court precedents on international law and the political question doctrine. Finally, Subpart C explains why practical concerns suggest that the proper definition of international law under the Define and Punish Clause is a political question. A. Text, Structure, and History The Constitution gives Congress the power to define and punish... Offences against the Law of Nations. 104 Whether Congress has the exclusive power to define international law turns on the meaning of define. In 1792, define meant to explain a thing by its qualities and to circumscribe; to mark the limits. 105 The word means much the same today: to discover and set forth the meaning or to fix or mark the limits. 106 The dictionary definitions of define indicate that the Constitution gives Congress the power to specify precisely what conduct violates international law. When Congress uses the Define and Punish Clause to enact criminal legislation, it discover[s] the contours of international law and mark[s] the limits of legal liability. The power to define, therefore, is an essential part of the process: no one can be punished for violating international law until Congress has explained what international law is. 107 If federal courts can measure statutes against their own definition of international law, then Congress s power to define seems close to meaningless. Consider a typical example: a criminal defendant is charged with violating a statute that Congress enacted under the Define and Punish Clause. The defendant argues that the statute is unconstitutional because he believes that Congress has incorrectly defined customary international law. The court cannot address the defendant s argument without defining international law for itself. That is, the court can only decide whether Congress got it right by first identifying the precise rule of international 103. I consider originalist evidence because all modern schools of constitutional interpretation use this evidence to some extent. See Kontorovich, supra note 11, at 1690 ( To be sure, the relevance of the text and the original meaning of a constitutional provision is common ground to all major schools of constitutional interpretation. ); Andrew Kent, A Textual and Historical Case Against a Global Constitution, 95 Geo. L.J. 463, 472 (2007) ( Most ways of reading the Constitution begin with the text, purposes, and historical understandings.... ); Kent, supra note 13, at and n U.S. Const. art. I, 8, cl Define, A Dictionary of the English Language (10th ed. 1792); see also Define, The Royal Standard English Dictionary 188 (1st U.S. ed. 1788) (define means to explain, mark out; decide, determine ) Define, Merriam-Webster Dictionary Online, define (last visited Nov. 7, 2016) See Al-Bihani v. Obama, 619 F.3d 1, 13 (D.C. Cir. 2010) (Kavanaugh, J., concurring in the denial of rehearing en banc) ( The important role Congress plays in defining international law is apparent from the text of the Constitution, which specifically authorizes Congress to define and punish... Offences against the Law of Nations. (quoting U.S. Const. art. I, 8, cl. 10)).

74 December 2016] DEFINE AND PUNISH & POLITICAL QUESTION 61 law at issue. But this contravenes constitutional text, which places the power to define in Article I, not Article III. 108 This approach would turn statutory definitions of international law into placeholders for the judiciary a result that flips the meaning of define on its head. 109 Additionally, allowing federal courts to rewrite or cast aside the congressional definition of customary international law appears inconsistent with other textual clues in the Constitution. Recall that in the two constitutional provisions addressing foreign sources of law, the Constitution contemplates that Congress will play a substantial role. Under the Define and Punish Clause, it is Congress that must enact a statute that codifies customary international law. 110 Under the Treaty Clause, the U.S. Senate must approve any treaty before it can become binding federal law. 111 Both clauses indicate that the political branches of the federal government should decide which international legal norms will bind American actors. Allowing the judiciary to rewrite or invalidate Congress s definition of international law removes the legislature from this process. In practice, it has the same effect as taking away in its entirety Congress s power to define international law. As Judge Easterbrook has remarked, it is contra-constitutional for the judiciary to insist that... the political branches of the national government[] conform to international norms and understandings that do not meet the requirements of the Treaty Clause or the Law of Nations Clause. 112 Admittedly, this is an unusual outcome in constitutional law. It is well accepted that federal courts have the ultimate authority to say what the law is. 113 When courts define key constitutional terms and thereby limit legislative power, few think that the judiciary has usurped constitutional authority. Take the Interstate Commerce Clause, for example. The Constitution gives Congress the power to regulate Commerce... among the several States. 114 Under this provision, the Supreme Court has limited Congress to regulating the channels and 108. Al Odah v. United States, 321 F.3d 1134, 1147 (D.C. Cir. 2003) (Randolph, J., concurring) (stating that the text of the Define and Punish Clause makes it abundantly clear that Congress not the Judiciary is to determine, through legislation, what international law is and what violations of it ought to be cognizable in the courts. ). Although Judge Randolph s opinion reaches the same conclusion as this Article, it does not tie its reasoning to the political question doctrine. Accordingly, his concurring opinion only partially considers how to fit the Define and Punish Clause within the existing body of U.S. constitutional law Frank H. Easterbrook, Foreign Sources and the American Constitution, 30 Harv. J.L. & Pub. Pol y 223, 229 (2006) ( There is no [] power in the judiciary to make any norm of international law binding within the United States.... Why empower Congress to define offenses against international law if judges do so in common-law fashion? ) U.S. Const. art. I, 8, cl Id. art. II, 2, cl Easterbrook, supra note 109, at Marbury v. Madison, 5 U.S. (1 Cranch) 137, 177 (1803) U.S. Const. art. I, 8, cl. 3.

75 62 HASTINGS LAW JOURNAL [Vol. 68:45 instrumentalities of interstate commerce, as well as those activities having a substantial relation to interstate commerce. 115 By defining interstate commerce for purposes of constitutional law, the Court has cabined Congress s regulatory power to a limited subset of commercial activities. That is unremarkable the Constitution does not give Congress a general power to define key constitutional terms. 116 This default rule should give way, however, when interpreting the Define and Punish Clause. That Clause specifically mentions the power to define, and it is the only time that word appears in the Constitution. 117 While judicial review presumes that courts have the sole power to definitively interpret constitutional terms, that presumption is rebutted if the Constitution specifically allocates the power of definition. 118 Alexander Hamilton expressed this point in the Federalist Papers. He argued that the Constitution creates a natural presumption in favor of judicial review that could be rebutted by particular [constitutional] provisions. 119 In the limited context of the Define and Punish Clause, judicial review has been rebutted by the Framers conscious choice to give Congress the power to define customary international law. Of course, this is not a proposal to eliminate judicial review as we know it. Rather, this argument claims that the default rule of judicial review can be overcome if the Constitution tells us which governmental body should define the key constitutional terms. 120 This reading of the Define and Punish Clause is also buttressed by structural inferences from the Constitution, 121 which lodges authority over foreign affairs primarily in the political branches. 122 The Supreme 115. United States v. Lopez, 514 U.S. 549, (1995) Ittai Bar-Siman-Tov, The Puzzling Resistance to Judicial Review of the Legislative Process, 91 B.U. L. Rev. 1915, (2011) (noting that substantive judicial review requires courts to define key constitutional terms to determine whether the content of legislation is in accordance with the Constitution ); see also Saikrishna B. Prakash & John C. Yoo, The Origins of Judicial Review, 70 U. Chi. L. Rev. 887, (2003) (explaining how courts must define key constitutional terms because the Constitution is enforceable federal law) Kontorovich, supra note 11, at The Federalist No. 78, supra note 55, at Id Robert J. Pushaw Jr., Judicial Review and the Political Question Doctrine: Reviving the Federalist Rebuttable Presumption Analysis, 80 N.C. L. Rev. 1165, 1196 (2002) ( The Constitution creates a powerful yet rebuttable presumption in favor of judicial review. This presumption can be overcome only when government officials exercise certain powers (e.g., the veto, impeachment, appointments, and military and foreign policy decisions) that do not fit within the usual framework of making, executing, and judging the law.... (internal citation omitted)) Cf. Steven G. Calabresi, The Political Question of Presidential Succession, 48 Stan. L. Rev. 155, 157 (1995) ( [T]he argument for each and every political question exception to Marbury-style review must... be largely one of structural inference supported by history and tradition. ) U.S. Const. art. I, 8, cls. 3, 4, 5, 10, 11; id. art. II, 2; Oetjen v. Cent. Leather Co., 246 U.S. 297, 302 (1918); Schneider v. Kissinger, 412 F.3d 190, 194 (D.C. Cir. 2005) ( Article I is richly laden with delegation of foreign policy and national security powers. ).

76 December 2016] DEFINE AND PUNISH & POLITICAL QUESTION 63 Court acknowledged this shortly after the Founding. Chief Justice Marshall remarked that questions of foreign policy belong to the political branches, who can place the nation in such a position with respect to foreign powers as to their own judgment shall appear wise; to whom are entrusted all its foreign relations The Court repeated this principle more than a century later: The conduct of the foreign relations of our Government is committed by the Constitution to the executive and legislative the political departments The Court even acknowledged in Baker that political questions are usually found in cases touching foreign relations. 125 While not all cases that theoretically affect foreign affairs present political questions, federal courts have repeatedly expressed an institutional aversion to meddling with foreign policy. 126 The Court s decision in Fong Yue Ting v. United States highlights these structural considerations. 127 There, three Chinese laborers were arrested for not having certificates of residence. 128 To forestall removal from the United States, the laborers filed writs of habeas corpus, arguing that the statute allowing the President to remove them was unconstitutional. 129 The Court balked at their argument. It held that the power to forbid the entrance of foreigners or to admit them in certain circumstances is vested in the national government, to which the constitution has committed the entire control of international relations, in peace as well as in war. 130 The Court arrived at this conclusion by drawing structural inferences from the Constitution s division of powers. It noted that the President is vested with the executive power and named the commander in chief of the armed forces. 131 The Court also listed the Article I powers that give Congress nearly plenary authority over international relations, including the Define and Punish Clause. 132 Although no constitutional provision spoke explicitly to removing aliens, the Court thought that removing aliens plainly affect[ed] international relations. 133 Accordingly, the Court inferred from the Constitution s 123. United States v. Palmer, 16 U.S. (3 Wheat.) 610, 634 (1818) (emphasis added) Oetjen, 246 U.S. at 302; see also United States v. Pink, 315 U.S. 203, (1942) ( [T]he conduct of foreign relations is committed by the Constitution to the political departments of the Federal Government;... the propriety of the exercise of that power is not open to judicial inquiry.... ); Fong Yue Ting v. United States, 149 U.S. 698, 731 (1893); Holmes v. Jennison, 39 U.S. (14 Pet.) 540, 575 (1840) Baker v. Carr, 369 U.S. 186, 211 (1962) See Haig v. Agee, 453 U.S. 280, 292 (1981) ( Matters intimately related to foreign policy... are rarely proper subjects for judicial intervention. ) Fong Yue Ting, 149 U.S. at Id. at Id. at Id. at 705 (emphasis added) Id. at Id. at Id. at 713.

77 64 HASTINGS LAW JOURNAL [Vol. 68:45 structure that the validity of the President s removal order presented a political question. 134 The lesson from Fong Yue Ting is structural the judiciary rarely adjudicates decisions that are intimately connected to foreign policy. 135 The Define and Punish Clause fits comfortably within the realm of international relations because it is difficult to separate the definition of customary international law from the substance of American foreign policy. 136 Given that the management of foreign affairs has been structurally committed to Congress and the President, the proper definition of international law is a political question. 137 The historical underpinnings of the Define and Punish Clause further bolster this argument. Recall that at the Constitutional Convention, a question arose over whether Congress should have the power to define offences against the law of nations. 138 James Wilson argued that Congress had no power to define international law because only international consensus can create international obligations. 139 Gouverneur Morris disagreed because the law of nations, standing alone, was often too vague and deficient to be a rule. 140 In other words, Morris believed that the morass of international policy, custom, and usage that compose customary international law could not supply binding legal obligations on its own. International law did not become binding federal law until Congress put pen to parchment. Morris s 134. Id. at See Barkow, supra note 65, at ( [T]he theory of deference to the political branches that has been with us throughout our nation s history a theory that, at its extreme, includes the political question doctrine reflects not only the structure and text of the Constitution, but a very pragmatic determination that some questions should be decided by the political branches because of their accountability and institutional competence. ) Finzer v. Barry, 798 F.2d 1450, (D.C. Cir. 1986) ( Defining and enforcing the United States obligations under international law require the making of extremely sensitive policy decisions, decisions which will inevitably color our relationships with other nations. ); see infra notes and accompanying text Much of this discussion has focused on the use of define as evidence of a textual commitment to a coordinate branch of government. But the ambiguity of international law also highlights that there is a lack of judicially discoverable and manageable standards for courts to use to define international law. Baker v. Carr, 369 U.S. 186, 217 (1962). See First Nat l City Bank v. Banco Nacional de Cuba, 406 U.S. 759, 788 (1972) (Brennan, J., dissenting) (finding the existence of a political question based in part on the absence of consensus on the applicable international rules ); Callejo v. Bancomer, S.A., 764 F.2d 1101, (5th Cir. 1985) ( [I]nternational law generally does not provide judicially discoverable and manageable standards for resolving cases. ). Here, the absence of judicially discoverable and manageable standards for defining international law only strengthen[s] the conclusion that there is a textually demonstrable commitment to a coordinate branch. Nixon v. United States, 506 U.S. 224, 224 (1993) II The Records of the Federal Convention of 1787, supra note 34, at Id Id. at 615.

78 December 2016] DEFINE AND PUNISH & POLITICAL QUESTION 65 argument prevailed, giving Congress the power to define the law of nations. 141 James Madison expressed similar thoughts both in Federalist Number 42 and at the Constitutional Convention. As discussed above, he wrote in the Federalist Papers that Felonies in the Define and Punish Clause was a term of loose signification. 142 While foreign sovereigns defined felony in different ways, Madison argued that felony could not be defined by the common [or] the statute law of any other nation unless Congress implemented it through Legislative adoption. 143 This parallels the arguments that he made at the Constitutional Convention. There, he said that when interpreting the Define and Punish Clause, no foreign law should be a standard farther than is expressly adopted by Congress. 144 Madison was evidently concerned about binding American citizens to international legal norms that were not ratified by U.S. constitutional actors. Justice Story followed the same script in his Commentaries on the Constitution. Like Gouverneur Morris and James Madison, Justice Story 141. Some courts and scholars argue that under the Define and Punish Clause, Congress cannot create new criminal violations of international law out of whole cloth. See United States v. Bellaizac- Hurtado, 700 F.3d 1245, 1250 (11th Cir. 2012); Kontorovich, supra note 11, at (arguing that the specific power to enforce the law of nations [was] understood as needing to be consistent with an externally determined body of law ). Yet there is evidence from the Constitutional Convention that the Framers took a broad view of Congress s power to define the law of nations. Early drafts of the Define and Punish Clause did not give Congress the power of definition, so James Madison and Edmund Randolph moved to insert the word define. II The Records of the Federal Convention of 1787, supra note 34, at In debating this motion, Gouverneur Morris said that he preferred designate to define because the latter is limited to the preexisting meaning of the common law. Id. at 316. Other delegates reassured Morris that define was not so limiting. They said that define is applicable to the creating of offences also, and therefore suited the case both of felonies & of piracies. Id. (emphasis added). Everyone then agreed to insert the word define in the provision. Id. The juxtaposition between creating offenses and preexisting limitations is critical. It appears that the Framers chose the word define on the understanding that it would empower Congress to create offenses that had no support in a preexisting body of external law. Moreover, even if Congress s definition of international law is limited by an externally determined body of law, it is unclear how that limit should be enforced. Kontorovich, supra note 11, at Whether the Define and Punish Clause limits Congress is a separate question from whether federal courts can enforce that limit. That is, it is possible to believe that Congress is limited by an external body of law when defining the law of nations and also believe that federal courts cannot decide whether Congress exceeded that limit. There is some support for this position in James Madison s response to the Alien and Sedition Acts. In the 1790s, some legislators argued that the Alien and Sedition Acts were supported by the Define and Punish Clause. Id. at Madison disagreed. He thought that the Act s requirement to expel neutral aliens from the United States went beyond the law of nations. Id. at To make his case, he drafted a resolution for the Virginia legislature that explained his reasoning in detail. Id. at In effect, Madison waged a political battle to convince others that Congress had disregarded a constitutional limit. Madison s choice provides some support for the argument that the proper definition of international law is a political question The Federalist No. 42, supra note 43, at Id II The Records of the Federal Convention of 1787, supra note 34, at 316.

79 66 HASTINGS LAW JOURNAL [Vol. 68:45 saw international law as a fuzzy collection of norms and customs with little definite meaning. He wrote that the law of nations cannot with any accuracy be said to be completely ascertained and defined, in any public code recognized by the common consent of nations. 145 Because offences against the law of nations resisted easy definition, Justice Story thought that there was a peculiar fitness in giving to congress the power to define. 146 He also emphasized that the Framers thought carefully about the power of definition. The need for a uniform definition of international law had very great weight with the convention[] in producing the phraseology of the clause. 147 This historical evidence reveals that key Founders often thought of international law as too imprecise to provide legal rules with definite content. The cure for this ailment was to vest Congress with the power to define offenses against the law of nations. That choice is inconsistent with allowing the judiciary to override Congress s definition of international law. If a court wants to discover international law apart from federal treaties or federal statutes, where does it look? To the same muddle of international norms, customs, and policies that Gouverneur Morris and a majority of delegates to the Constitutional Convention thought was too vague and deficient to be a rule. 148 The fact that international norms are often vague and indefinite is precisely why Congress was given the power to define customary international law in the first place. It makes little sense to believe that Congress needs the power to define international law because it is indefinite, and then conclude that federal courts can easily distill rules of international law that cabin Congress s constitutional authority. The more sensible reading of the Define and Punish Clause is that international law does not 145. Joseph Story, Commentaries on the Constitution of the United States Vol. II 1163 (3d ed. 1858) Id Id II The Records of the Federal Convention of 1787, supra note 34, at The historical evidence also indicates that the word define applies to the law of nations as well as offences. Because the Define and Punish Clause empowers Congress to define Offences against the Law of Nations, one might think that Congress has the sole power to define offences, but not the law of nations. Under this reading, Congress has unreviewable authority to decide which offenses are cognizable under federal law, but federal courts can decide whether Congress has improperly defined the elements of such an offense under customary international law. The historical evidence, however, suggests that this reading is untenable. When the delegates were debating the Define and Punish Clause at the Constitutional Convention, Gouverneur Morris argued that define is proper when applied to offences in this case; the law of (nations) being often too vague and deficient to be a rule. Id. at 615 (third emphasis added). This argument was the basis for phrasing the Define and Punish Clause as it currently appears in the Constitution. As is evident from Morris s comments, the focus was on the ambiguity of international law, not offences. Because the delegates inserted the word define to account for indefiniteness, their concern that international law was vague and ambiguous indicates that the power to define includes both offenses and the law of nations.

80 December 2016] DEFINE AND PUNISH & POLITICAL QUESTION 67 become our law until Congress and the President incorporate it into a treaty or a federal statute. 149 Of course, the Framers never explicitly considered whether international law under the Define and Punish Clause should be defined by judges or by legislators. When they had to choose, however, who would define customary international law, they only ever mentioned Congress. 150 Justice Story remarked that there was a peculiar fitness in giving to congress the power to define customary international law. 151 And in 1810, Congress debated a bill that would have delegated the power to define international law to the President. 152 It rejected the bill after Representative John Jackson of Virginia argued that the power to define the law of nations is a legislative power, which we cannot transfer; and if we could, it would be inexpedient to do so. 153 Concededly, there are some historical statements from the Founding generation that suggest that Congress is limited by an external body of international law when acting under the Define and Punish Clause. 154 In delivering a grand jury instruction, James Iredell stated that [e]ven the Legislature cannot rightfully controul [the law of nations] James Wilson made a similar statement when he too instructed a grand jury: no state or states can... alter or abrogate the law of nations See Al-Bihani v. Obama, 619 F.3d 1, 17 (D.C. Cir. 2010) (Kavanaugh, J., concurring in the denial of rehearing en banc) ( Customary-international-law norms become part of domestic U.S. law only if the norms are incorporated into a statute or self-executing treaty. ) See, e.g., II The Records of the Federal Convention of 1787, supra note 34, at ; The Federalist No. 42, supra note 43, at Story, supra note 145, 1163 (emphasis added) Annals of Cong (1810) Id Kontorovich, supra note 12, at James Iredell s Charge to the Grand Jury of the Circuit Court for the District of South Carolina, Gazette of the United States (May 12, 1794), reprinted in 2 The Documentary History of the Supreme Court of the United States: (Maeva Marcus et al. eds., 1988) [hereinafter Documentary History]. Professor Kontorovich cites this statement as support for using an external body of international law to limit Congress under the Define and Punish Clause. Kontorovich, supra note 12, at Iredell s statement, however, was far more ambiguous than Professor Kontorovich lets on. The full jury instruction read: Even the Legislature cannot rightfully controul [the law of nations], but if it passes any law on such subjects [it] is bound by the dictates of moral duty to the rest of the world in no instance to transgress them, although if it in fact doth so it is entitled to actual obedience within the sphere of its authority. Documentary History, supra, at 467 (emphasis added). The latter part of Iredell s jury instruction contemplates a sovereign s law that transgresses the law of nations. In that circumstance, Iredell appeared to believe that the law would remain binding within the sovereign s territory despite the fact that it was inconsistent with international law. In other words, even if a statute enacted under the Define and Punish Clause was inconsistent with the law of nations, the statute would remain binding federal law within the United States Documentary History, supra note 155, at 179. As with Iredell s grand jury charge, Wilson s statement was somewhat ambiguous. Cf. Kontorovich, supra note 12, at Wilson did state that a

81 68 HASTINGS LAW JOURNAL [Vol. 68:45 One reading of these sentiments suggests that some Framers thought that the Define and Punish Clause was limited by the existing body of customary international law. There is reason, however, to give these views limited weight when interpreting the Define and Punish Clause. After all, James Wilson presented this very argument at the Constitutional Convention. After Gouverneur Morris moved to give Congress the power to define international law, James Wilson objected because, [t]o pretend to define the law of nations which depended on the authority of all the Civilized Nations of the World, would have a look of arrogance[] that would make us ridiculous. 157 Wilson thought that Congress had no authority to define customary international law because it does not emanate from a single sovereign, but only from the collective will of the Civilized Nations of the World. 158 Morris thought that this argument was deficient because international law was hopelessly ambiguous. 159 A majority of delegates agreed with Morris and voted to give Congress the power to define customary international law. 160 Nonetheless, it is difficult to view the historical evidence as dispositive. The Founders undoubtedly had different opinions as to the effect of international law within the United States. But key statements from influential Framers suggest that the judiciary could not decide whether the legislative definition of international law complied with a set of international rules as determined by federal judges. While some contrary views persisted, they were aired and rejected in the key debate at the Constitutional Convention over the power to define international law. Combined with constitutional text and structure, the historical evidence lends support to the argument that the proper definition of international law under the Define and Punish Clause is a political question. single nation cannot alter or abrogate the law of nations, but he also said that this principle is not an inflexible rule: True it is, that, so far as the law of nations is voluntary or positive, it may be altered by the municipal legislature of any state, in cases affecting only its own citizens. True it also is, that, by a treaty, the voluntary or positive law of nations may be altered so far as the alteration shall affect only the contracting parties. But equally true it is, that no state or states can; by treaties or municipal laws, alter or abrogate the law of nations any farther. Documentary History, supra note 155, at 179 (third emphasis added). Wilson apparently thought that countries could alter or disregard the law of nations in relation to their own citizens. Thus, this grand jury charge does not suggest that Congress is limited by an external body of international law when it uses its powers under the Define and Punish Clause II The Records of the Federal Convention of 1787, supra note 34, at (emphasis in original) Id Id Id.

82 December 2016] DEFINE AND PUNISH & POLITICAL QUESTION 69 B. U.S. Supreme Court Precedent The Supreme Court has never addressed whether the proper definition of international law is a political question. 161 But, in 2004, the Court provided an extended discussion of the Alien Tort Statute ( ATS ), which gives federal district courts original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States. 162 When defining the meaning of the law of nations in the ATS, the Court discussed the relationship between Congress and the judiciary in defining international law. 163 In Sosa v. Alvarez-Machain, the Drug Enforcement Administration coordinated the kidnapping of a Mexican citizen named Humberto Alvarez-Machain. 164 After he was kidnapped, Alvarez-Machain stood trial in the United States and was ultimately acquitted. 165 He then returned to Mexico and filed a lawsuit against the federal government agents that coordinated his kidnapping. 166 One of his claims sought damages for the kidnapping under the ATS. 167 The Ninth Circuit held that Alvarez-Machain properly stated a cause of action under the ATS because there was a universally recognized norm prohibiting arbitrary arrest and detention. 168 The Supreme Court reversed. After reviewing the statute s history, the Court concluded that the ATS was intended... to furnish jurisdiction for a relatively modest set of actions alleging violations of the law of nations. 169 Indeed, the Court assume[d] that no development since Congress enacted the ATS has categorically precluded federal courts from recognizing a claim under the law of nations as an element of common law. 170 As such, the Court held that it is appropriate, as a matter of federal common law, to create a limited number of causes of action under the ATS that are based on the present-day law of nations. 171 Nevertheless, it concluded that the Ninth Circuit erred because the supposed right to be free from arbitrary arrest and detention was framed 161. Only one reported decision has suggested that the proper definition of international law might present a political question, but that case dealt with the Alien Tort Statute (28 U.S.C (1948)), not the Define and Punish Clause. See Tel-Oren v. Libyan Arab Republic, 726 F.2d 774, 775 (D.C. Cir. 1984) (per curiam); id. at 803 (Bork, J., concurring); id. at 823 (Robb, J., concurring) U.S.C (1948) Sosa v. Alvarez-Machain, 542 U.S. 692, 698 (2004) Id Id Id Id Alvarez-Machain v. United States, 331 F.3d 604, 620 (9th Cir. 2003) (en banc) Sosa, 542 U.S. at Id. at Id. at 725.

83 70 HASTINGS LAW JOURNAL [Vol. 68:45 so broadly that it exceeds any binding customary rule having the specificity we require. 172 The Court also accompanied its holding with repeated invocations of caution and restraint. It noted that there are good reasons for a restrained conception of the discretion a federal court should exercise in considering a new cause of action under customary international law. 173 The Court acknowledged that it has no congressional mandate to seek out and define new and debatable violations of the law of nations The Court also listed [a] series of reasons [that] argue for judicial caution when considering the kinds of individual claims that would arise under the ATS. 175 These statements, coupled with the Court s historical observations, reveal the substantially unresolved tension in Sosa. Although the Court recognized a common law power to create new causes of action under international law, it indicated that this power should rarely (if ever) be invoked. There is, however, a key statement in Sosa that bears on whether the Define and Punish Clause presents a political question. Although the Court insisted that federal courts have some residual authority to create new causes of action under international law, it recognized that Congress is the ultimate arbiter of international obligations: [N]othing Congress has done is a reason for us to shut the door to the law of nations entirely. It is enough to say that Congress may do that at any time (explicitly, or implicitly by treaties or statutes that occupy the field), just as it may modify or cancel any judicial decision so far as it rests on recognizing an international norm as such. 176 The Court emphasized that federal courts may define international law only at the legislature s pleasure. 177 Congress may shut the door whenever it wants, and the Court stressed that it has no power to push the door ajar again. Most important, the Court held that Congress can modify or cancel any judicial decision recognizing an international norm. 178 Admittedly, Sosa was principally concerned with whether, as a matter of federal common law, courts could recognize a civil cause of action under international law that Congress has not yet articulated in a statute. The proposition that Congress retains final authority over the existence and scope of federal causes of action is unremarkable. Nevertheless, it is plausible that Sosa s reasoning extends beyond this limited realm. Congress might, for example, implicitly overrule the 172. Id. at Id. at Id. at Id. at Id. at 731 (emphasis added) Id Id.

84 December 2016] DEFINE AND PUNISH & POLITICAL QUESTION 71 Court s definition of international law (as represented in the cause of action it recognized) by enacting a criminal statute that redefines the applicable rule of decision under international law. In other words, by defining customary international law in response to a judicial ruling, Congress is either explicitly or implicitly shut[ting] the door to the law of nations. 179 It would be unworkable, as a matter of federal statutory law, to believe that Congress s definition of the law of nations for creating a cause of action is unreviewable, but that the very same statutory definition used to specify criminal liability under the Define and Punish Clause may be disregarded by federal courts. Such a result is especially odd considering that the ATS the statute the Court confronted in Sosa is historically linked to the Define and Punish Clause. 180 Justice Scalia s concurring opinion in Sosa provides some support for this claim. 181 His opinion, joined by Chief Justice Rehnquist and Justice Thomas, noted that while the majority cabined its discretion to recognize new causes of action, it skip[ped] over the antecedent question of authority. 182 Federal courts have long refrained from using jurisdictional statutes as a springboard for crafting substantive law. 183 While the majority correctly identified the perils of creating causes of action under international law, Justice Scalia believed that these warning signs belied an absence of authority. 184 To him, no measure of caution and restraint can justify the exercise of power without authority. 185 Thus, international law could become binding federal law only after governmental branches subject to democratic election enact it. 186 Although Sosa remains the seminal case on the role of Congress and the judiciary in defining international law, the Court did not address the political question doctrine. Sosa s invocation of deference to the legislature, however, suggests that the proper definition of international law is committed to Congress. For purposes of the political question analysis, the key to this argument is the use of define in the Define and Punish Clause. Some might think that a political question cannot be 179. Id Cleveland & Dodge, supra note 10, at Sosa, 542 U.S. at 739 (Scalia, J., concurring in part and concurring in the judgment) Id. at Id. at Id. at Id. at Id. at 751.

85 72 HASTINGS LAW JOURNAL [Vol. 68:45 premised on the meaning of a single word in the Constitution. 187 But that argument was endorsed by the Court in Nixon v. United States. 188 Walter Nixon was a federal district judge who was convicted of making false statements to a grand jury. 189 After his conviction, the U.S. House of Representatives adopted three articles of impeachment against Nixon, and the U.S. Senate convicted him of the first two. 190 Nixon, however, believed that the Senate s procedure for receiving testimony during his impeachment trial was unconstitutional because the Constitution gives the Senate the sole Power to try all Impeachments. 191 A Senate Rule charged a committee of Senators with receiv[ing] evidence and tak[ing] testimony in an impeachment trial. 192 Nixon believed that the entire Senate, not just a committee, had to receive evidence in order to try him in accordance with the Constitution. 193 Nixon filed suit in federal district court, arguing that the Senate s impeachment procedures were unconstitutional. 194 His case eventually made its way to the Supreme Court. The Court held that the case presented a political question. 195 The Court thought that the dictionary definitions of try did not indicate whether evidence must be heard by a committee or the entire Senate. 196 Given the lack of guidance, the Court thought that it was futile to craft a judicially manageable standard for reviewing the Senate s impeachment procedures. 197 Additionally, the Court focused on the use of sole in the Senate Impeachment Clause. That word was of considerable significance because sole means to function independently and without assistance or interference. 198 If courts may review the actions of the Senate in order to determine whether that body tried an impeached official, then the Senate would not be functioning [ ] independently and without assistance or interference. 199 The Court bolstered its reasoning by referencing history. It explained that during the Constitutional Convention, the Framers 187. But see Holmes v. Jennison, 39 U.S. (14 Pet.) 540, (1840) ( In expounding the Constitution of the United States, every word must have its due force, and appropriate meaning; for it is evident from the whole instrument, that no word was unnecessarily used, or needlessly added. ) Nixon v. United States, 506 U.S. 224 (1993) Id. at Id. at U.S. Const. art. I, 3, cl Nixon, 506 U.S. at 227 (citing Senate Impeachment Rule XI, reprinted in Senate Manual, S. Doc. No , at 186 (1989)) Id. at Id Id. at Id. at Id. at Id. at (quoting Webster s Third New International Dictionary 2168 (1971)) Id. at 231.

86 December 2016] DEFINE AND PUNISH & POLITICAL QUESTION 73 thought carefully about which branch of government should try individuals for impeachment. 200 The Framers chose the Senate over the Supreme Court because the Court was too small in number. 201 The Court also looked to the Federalist Papers, where Hamilton argued that Congress should wield the power of impeachment because impeachment was designed to be the only check on the Judicial Branch by the Legislature. 202 If federal courts could review the Senate s impeachment procedures, then Congress s only check on the judiciary would be eviscerate[d]. 203 Therefore, based on text, structure, and history, the Court held that the proper scope of the Senate s impeachment power presented a political question. 204 Nixon is noteworthy for its interpretive methodology. It analyzed key words in the Senate Impeachment Clause and looked to dictionary definitions to illuminate their meaning. It also used those definitions to create counterfactuals, by asking whether the Senate would have the sole power to try impeachments if federal courts could review the structure of impeachment trials. Moreover, the Court looked to the Federalist Papers and the debates at the Constitutional Convention to better understand the original meaning of the Senate Impeachment Clause. It also used those historical sources to glean insight into the Constitution s structure. Read as a whole, Nixon suggests that text, structure, and history are the dispositive considerations when determining whether a constitutional provision presents a political question. 205 Apart from methodology, Nixon s reasoning tracks the argument that the proper definition of international law is a political question. Nixon focused on particular words in the Senate Impeachment Clause sole and try. 206 The same is true for the Define and Punish Clause the use of define is important. If federal courts can disregard a statute because it is inconsistent with their definition of international law, then Congress does not wield the power of definition. Indeed, the Court in Nixon noted that the use of sole was significant because it appeared only twice in the Constitution 207 so too with define. In fact, the use of define is even more important under Nixon s reasoning because it appears only once in the Constitution. 208 What s more, Nixon is also telling because of the historical evidence that it reviewed. When deciding whether the judiciary could review the Senate s impeachment 200. Id. at Id. at Id. at 235 (emphasis in original) Id Id. at Id. at Id. at Id. at Kontorovich, supra note 12, at 1703.

87 74 HASTINGS LAW JOURNAL [Vol. 68:45 procedures, the Court turned to the debates at the Constitutional Convention and the arguments in the Federalist Papers. 209 Those are the same historical sources that shed the most light on the Define and Punish Clause. 210 The upshot is that Nixon and Sosa share an important similarity: they both reaffirmed the primacy of Congress. Although those cases confronted different subject matter, the Court held in both that a different branch of the federal government has the final say on questions of law. That similarity becomes particularly noticeable when analyzing the Define and Punish Clause and the political question doctrine. Together, they suggest that a federal court cannot declare a statute unconstitutional simply because the court would have defined international law differently than Congress. C. Practical Considerations Some believe that text, structure, history, and precedent are the only legitimate tools of constitutional interpretation. 211 Others find it helpful to discuss policy arguments and practical considerations when analyzing constitutional questions. 212 To make the analysis complete, this Subpart provides four practical reasons why the definition of international law under the Define and Punish Clause should be considered a political question. First, international law is difficult to define. Scholars have called it overly indeterminate and malleable, 213 relatively amorphous, 214 fogg[y], 215 and incompletely specified. 216 Louis Henkin famously described customary international law as having a soft, indeterminate character. 217 Some federal judges have remarked that international law is discerned from myriad decisions made in numerous and varied international and domestic arenas, and that the relevant evidence of customary international law is generally unfamiliar to lawyers and 209. Nixon, 506 U.S. at See supra notes and accompanying text See Ariz. State Legislature v. Ariz. Independent Redistricting Comm n, 135 S. Ct. 2652, 2678 (Roberts, J., dissenting) ( The Court s position has no basis in the text, structure, or history of the Constitution, and relies on naked appeals to public policy. ); Greene, supra note 102, at 8; Jackson, supra note 102, at See Greene, supra note 102, at 14 18; Jackson, supra note 102, at ; Ilya Somin, Book Review, Active Liberty and Judicial Power: What Should Courts Do to Promote Democracy?, 100 Nw. U. L. Rev. 1827, (2006) Kent, supra note 13, at Bradley & Goldsmith, supra note 2, at Michael Stokes Paulsen, The Constitutional Power to Interpret International Law, 118 Yale L.J. 1762, 1800 (2009) Kontorovich, supra note 12, at Louis Henkin, International Law: Politics and Values 29 (1995).

88 December 2016] DEFINE AND PUNISH & POLITICAL QUESTION 75 judges. 218 Another federal judge noted that [m]any international-law norms are vague, contested, or still evolving. 219 To further complicate matters, international law is often created by the general customs and practices of nation states. 220 This constant churn of state practice and opinio juris cannot be easily monitored or deciphered by judges. 221 While Congress and the President can stay abreast of state practice and international custom without much trouble, 222 defining international law requires federal courts to engage in a starkly foreign (no pun intended) task. 223 The difficulty of defining international law is important. Courts regularly shy away from interpretive tasks when the guideposts for responsible decisionmaking in [an] unchartered area are scarce and open-ended. 224 That is so because much of the judiciary s legitimacy hinges on the perception that it is performing a judicial task the interpretation of legal texts based on neutral and reasoned principles. 225 The Supreme Court is aware of this: The Court s power lies... in its legitimacy, a product of substance and perception that shows itself in the people s acceptance of the Judiciary as fit to determine what the Nation s law means and to declare what it demands. 226 The judiciary s legitimacy is strained when it resolves sensitive questions of foreign policy that stretch beyond its ken. 227 The practical consequences in the short-term will be the cost of engaging in a 218. Flores v. S. Peru Copper Corp., 414 F.3d 233, (2d Cir. 2003) Al-Bihani v. Obama, 619 F.3d 1, 40 (D.C. Cir. 2010) (Kavanaugh, J., concurring in the denial of rehearing en banc) Id Id. at 6 (Brown, J., concurring in the denial of rehearing en banc) Zivotofsky ex rel. Zivotofsky v. Kerry, 135 S. Ct (2015) (cataloguing the President s broad authority over U.S. diplomatic affairs); Kevin L. Cope, Congress s International Legal Discourse, 113 Mich. L. Rev. 1115, , 1172 (2015) (cataloguing Congress s power to monitor and create international law); Tyler J. Harder, Time to Repeal the Assassination Ban of Executive Order 12,333: A Small Step in Clarifying Current Law, 172 Mil. L. Rev. 1, 30 (2002) ( Congress is now more involved with foreign affairs and, if it chooses, intelligence activities. ) Al-Bihani, 619 F.3d at 7 (Brown, J., concurring in the denial of rehearing en banc) ( [C]onsulting international sources... is not something judges have in their interpretive toolbox. ); John F. Coyle, The Case for Writing International Law into the U.S. Code, 56 B.C. L. Rev. 433, (2015); Bradley & Goldsmith, supra note 2, at 855 ( [International law] is often unwritten, the necessary scope and appropriate sources of state practice are unsettled, and the requirement that states follow customary norms from a sense of legal obligation is difficult to verify. ); Harold G. Maier, The Role of Experts in Proving International Human Rights Law in Domestic Courts: A Commentary, 25 Ga. J. Int l & Comp. L. 205, 205 (1995) ( [M]ost judges in the United States... have, at the most, a superficial familiarity with the theory of law creation in the international legal system and only the vaguest notion of how the system functions. ) Washington v. Glucksberg, 521 U.S. 702, 720 (1997) (internal citation omitted) Planned Parenthood of Se. Pa. v. Casey, 505 U.S. 833, 866 (1992) (plurality opinion); see also Or Bassok, The Sociological-Legitimacy Difficulty, 26 J.L. & Pol. 239, (2011); Nancy Scherer, Diversifying the Federal Bench: Is Universal Legitimacy for the U.S. Justice System Possible?, 105 Nw. U. L. Rev. 587, (2011) Planned Parenthood of Se. Pa., 505 U.S. at Chicago & S. Air Lines, Inc. v. Waterman S.S. Corp., 333 U.S. 103, 111 (1948).

89 76 HASTINGS LAW JOURNAL [Vol. 68:45 difficult task. 228 The long-term implications could be much more serious. Repeated confrontations with the political branches over the definition of international law can significantly undercut the public s perception of the judiciary. 229 Second, a judicial definition of international law is inconsistent with American principles of representative democracy. 230 A federal court that gives effect to international law apart from federal statutes and treaties is applying law that has not been made by American political actors. As previously noted, customary international law is defined by the customs and practices of the difficult-to-discern international community. The political actors in the international community are neither representative of the American political community nor responsive to it. 231 It is one thing to use global norms to answer questions on which the American political branches have no opinion. But it is quite different for federal courts to use customary international law to disregard a federal statute an enactment that has received the assent of both political branches. 232 If Congress and the foreign legal community disagree on a question of international law, American principles of representative democracy suggest that courts should adhere to the people s elected representatives. 233 Third, federal courts should refuse to second-guess Congress s definition of international law because their rulings on the subject can engender grave foreign policy consequences. In Sosa, the Court recognized that the definition of international law is inextricably tied to the development of American foreign policy. The Court noted that defining international law can raise risks of adverse foreign policy 228. See Bradley & Goldsmith, supra note 2, at Sosa v. Alvarez-Machain, 542 U.S. 692, 748 (2004) (Scalia, J., concurring in part and concurring in the judgment) (allowing the judiciary to define international law leads us[] directly into confrontation with the political branches ); Jide Nzelibe, The Uniqueness of Foreign Affairs, 89 Iowa L. Rev. 941, 990 (2004) ( [F]ar from getting popular support in the event of a confrontation with the political branches, it is more likely that the courts will face public criticism for intervening improperly in foreign affairs or jeopardizing national security. ); cf. Dames & Moore v. Regan, 453 U.S. 654, 662 (1981) (noting the never-ending tension between the President and the judiciary in foreign affairs cases) Bradley & Goldsmith, supra note 2, at Phillip R. Trimble, A Revisionist View of Customary International Law, 33 UCLA L. Rev. 665, 721 (1986) Id.; see also Easterbrook, supra note 109, at 229 ( [I]t is quite something else for the judiciary to insist that the government itself is bound by norms from outside our borders, and which our elected representatives have not adopted and are not allowed to change. ) Al Odah v. United States, 321 F.3d 1134, 1148 (D.C. Cir. 2003) (Randolph, J., concurring) ( To have federal courts discover [customary international law] among the writings of those considered experts in international law and in treaties the Senate may or may not have ratified is anti-democratic and at odds with principles of separation of powers. ).

90 December 2016] DEFINE AND PUNISH & POLITICAL QUESTION 77 consequences While federal courts normally enforce constitutional limits on American governments, it is quite another [thing]... to claim a limit on the power of foreign governments over their own citizens That, however, is the stark consequence of defining legal obligations under international law. Federal courts would be well-served to recognize that the way in which the United States defines international law is equivalent to devising American foreign policy. 236 The relationship between foreign policy and the definition of international law is not novel. The Framers understood it well and appreciated the concept. In his Commentaries on the Constitution, Justice Story remarked that defining the law of nations has an intimate connection and relation with the power to regulate commerce and intercourse with foreign nations, and the rights and duties of the national government in peace and war In other words, judges cannot overrule Congress s definition of international law without disturbing the balance of power in American foreign affairs. That was true in 1789 and it remains true today. 238 Justice Story once again articulated that political reality quite well: As the United States are responsible to foreign governments for all violations of the law of nations, and as the welfare of the Union is essentially connected with the conduct of our citizens in regard to foreign nations, Congress ought to possess the power to define and punish all such offences, which may interrupt our intercourse and harmony with, and our duties to them. 239 It should be plain, at this point, that a court s definition of international law can hamstring American diplomatic efforts. 240 These 234. Sosa, 542 U.S. at ; see The Federalist No. 42, supra note 42, at 231 (arguing that the Define and Punish Clause is one of the constitutional powers which regulate the intercourse with foreign nations ) Sosa, 542 U.S. at See Tel-Oren v. Libyan Arab Republic, 726 F.2d 774, 805 (D.C. Cir. 1984) (Bork, J., concurring); Anthony J. Bellia Jr. & Bradford R. Clark, The Law of Nations as Constitutional Law, 98 Va. L. Rev. 729, 802 (2012) (noting that enforcing rules of international law can create friction between nations); Kent, supra note 13, at 852 (arguing that the Define and Punish Clause was designed to give Congress the power to punish foreign nations by deploying a wide range of national coercive powers ); Nzelibe, supra note 229, at 993 ( [T]he courts are incapable of predicting whether foreign nations may be affected by a judicial decision, or how such nations may react to such a decision. ) Story, supra note 145, John M. Rogers, The Alien Tort Statute and How Individuals Violate International Law, 21 Vand. J. Transnat l L. 47, 58 (1988) ( Determining international law issues means, in effect, determining whether the United States or a foreign state has violated international law. Such a determination affects, at least indirectly, the conduct of foreign affairs. ) Story, supra note 145, See Tel-Oren, 726 F.2d at 818 (Bork, J., concurring) ( Nations rely chiefly on diplomacy and other political tools in their dealings with each other, and these means are frequently incompatible with declarations of legal rights. ); Donald J. Kochan, Note, Constitutional Structure as a Limitation on the Scope of the Law of Nations in the Alien Tort Claims Act, 31 Cornell Int l L.J. 153, 187 (1998)

91 78 HASTINGS LAW JOURNAL [Vol. 68:45 grave consequences should give federal courts pause before they supplant Congress s definition of international law with their own. Finally, federal courts should not use customary international law to invalidate federal statutes because customary international law is not binding federal law under the Supremacy Clause. Up to this point, the discussion has assumed that even if federal courts may disregard federal statutes that they think have wrongfully defined international law, there are compelling prudential reasons for the judiciary to avoid treating it as binding U.S. law. But what if customary international law is not binding? What if it is not a true legal constraint, but chiefly a policy consideration of international relations? 241 Professor Michael Paulsen makes this argument, and it rests on a series of remarkably simple propositions. 242 The Supremacy Clause describes the supreme sources of law that bind American governmental actors: This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States The Supremacy Clause does not mention customary international law. Standing alone, it can never supersede the Constitution, duly enacted federal statutes, or properly ratified and executed treaties. 244 Viewed in this light, federal courts have no power to invalidate federal statutes based on their interpretation of an international common law. 245 Professor Paulsen specifically discusses the legal import of customary international law in the United States. As explained earlier, customary international law can become binding federal law only if it is incorporated into a treaty or a federal statute. 246 But international law, apart from a statute or a treaty, does not supply a binding federal legal rule of decision in U.S. courts that ever prevails over other [federal] law. 247 That does not mean, however, that international law is irrelevant; the flagrant disregard of the law of nations could have serious consequences for American foreign policy. But those are policy considerations that the political branches consider when making ( If the judiciary looks to an international law, not so defined by Congress, the risk exists that the judiciary will apply an international norm with which Congress disagrees.... ) Paulsen, supra note 215, at See id. at U.S. Const. art. VI, Paulsen, supra note 215, at Id. at Id Id. at 1801; see Kent, supra note 103, at 509 ( The primacy of the political branches [in defining international law] is seen in the fact that the Constitution expressly makes treaties negotiated by the President and approved by the Senate the supreme law of the land, while omitting any mention of customary international law. ).

92 December 2016] DEFINE AND PUNISH & POLITICAL QUESTION 79 discretionary decisions. 248 International law cannot be binding on the United States as a matter of U.S. constitutional law, because it is not part of the binding law identified in the Supremacy Clause. 249 The logical conclusion of this argument is blunt: international law is international relations or international politics dressed up as law. 250 This reasoning has substantial implications for statutes enacted under the Define and Punish Clause. Because customary international law is not binding on its own, judges may not use it to impose substantive limits on Congress s power to define and punish offenses against the law of nations. In other words, the regime of international law may not dictate to Congress what those offenses may or must be. 251 This follows naturally from the inclusion of the Define and Punish Clause in the Constitution. If the Framers believed that customary international law legally bound American actors before it was incorporated into federal law, there would have been no need to have granted Congress the power [t]o define and punish... Offences against the Law of Nations. 252 Although this interpretation of the Clause vests Congress with seemingly sweeping power, that is the import of the Supremacy Clause. At bottom, there are powerful reasons to believe that customary international law is not binding federal law of its own force. It may become binding federal law if it is codified in a treaty or a statute, but not all international law obligations automatically constitute binding federal law enforceable in United States courts. 253 The corollary point is that federal courts have no authority to disregard federal statutes based on their interpretation of international custom, practice, and usage. 254 Of course, as catalogued above, there are practical reasons for courts to avoid defining international law under the Define and Punish Clause apart from whether they have the authority to do so. But the antecedent question of authority looms large after considering how our constitutional structure makes international law legally irrelevant. A straightforward reading of the Supremacy Clause leaves little room for federal courts to use their definition of customary international law to police the boundaries of the Define and Punish Clause Paulsen, supra note 215, at Id Id. at Id. at Id. at 1831 (quoting U.S. Const. art. I, 8, cl. 10) Medellin v. Texas, 552 U.S. 491, 504 (2008); see also Paulsen, supra note 215, at See Kent, supra note 103, at 509 ( [T]he Constitution allows the political branches to punish violations of the customary law of nations, but makes no explicit provision for the political branches to be punished by courts for violations of customary international law. ) See id.

93 80 HASTINGS LAW JOURNAL [Vol. 68:45 III. Precedent, Limits on Legislative Power, and Other Sources of International Law Part II of this Article argued that the proper definition of international law under the Define and Punish Clause is a political question. This Part situates that argument within the existing framework of both constitutional and non-constitutional law. Subpart A explains that the Supreme Court has never used international norms to restrict Congress s power under the Define and Punish Clause. Subpart B describes why there will still be meaningful limits on congressional power even if the proper definition of international law is a political question. And Subpart C explains why courts can still apply treaties and other sources of international law even if they cannot define customary international law once Congress has already done so. A. The U.S. Supreme Court and the Define and Punish Clause When courts or scholars claim that the Supreme Court has limited Congress s power under the Define and Punish Clause, they point to two cases in particular. The first is United States v. Furlong. 256 There, the federal government charged John Furlong and other defendants with piracy. 257 Furlong s case presented unusual facts: he was a British subject charged with murdering another British subject aboard a British vessel. 258 Additionally, the statute he was charged under defined piracy to include robbery on the high seas and murder. 259 While piracy was traditionally defined as robbery on the high seas, it had not been thought to include murder. 260 The central dispute was whether Congress could punish a murder with no connection to the United States by calling it piracy. 261 The Court held that it could not. 262 All nations can punish robbery on the high seas without regard to the location of the crime because that is considered as an offence within the criminal jurisdiction of all nations. 263 Murder, on the other hand, is too abhorrent to the feelings of man to fall within a sovereign s universal jurisdiction. 264 The apparent impetus for the Court s holding was its desire to limit the territorial reach of federal criminal law. If by calling murder piracy, [Congress] might assert a jurisdiction over that offence committed by a foreigner in a foreign 256. United States v. Furlong, 18 U.S. (5 Wheat.) 184 (1820) Id. at Id. at Id. at See United States v. Smith, 18 U.S. (5 Wheat.) 153, 162 (1820) Furlong, 18 U.S. (5 Wheat.) at Id. at Id Id.

94 December 2016] DEFINE AND PUNISH & POLITICAL QUESTION 81 vessel, what offence might not be brought within [Congress s] power by the same device? 265 Federal courts have seized the latter language as authority to review Congress s definition of international law. 266 The key concern in Furlong, however, was preventing Congress from punishing crimes that have no connection to the United States. The Court worried that if piracy included murder, then Congress could punish murder committed by a foreigner in a foreign vessel. 267 In other words, the Court was concerned with maintaining the territorial limits on the federal government s criminal jurisdiction. Most courts and scholars read Furlong as addressing only that issue. 268 Today, we think of Furlong s concern as a due process problem. Federal courts have held that in order to apply a federal criminal statute extraterritorially that is, to a foreigner in a foreign vessel outside U.S. territory there must be a sufficient nexus between the defendant and the United States so that applying the criminal statute to him would not be arbitrary or fundamentally unfair. 269 Thus, modern due process jurisprudence addresses the issue in Furlong, and the political question doctrine generally does not prevent federal courts from adjudicating a criminal defendant s due process claim (or any other claim based on an individual right). 270 If one accepts this reading of Furlong, then the opinion s relevance to the Define and Punish Clause is diminished. Arjona is the second case that supposedly allows courts to review the legislative definition of international law. 271 Recall that the question there was whether Congress could punish counterfeiting foreign securities as a violation of international law. In considering the statute at issue, the Court stated that [w]hether the offense as defined is an offense against the law of nations depends on the thing done, not on any 265. Id. at See Al Bahlul v. United States, 792 F.3d 1, (D.C. Cir. 2015); United States v. Bellaizac- Hurtado, 700 F.3d 1245, 1249 (11th Cir. 2012) Furlong, 18 U.S. (5 Wheat.) at United States v. Cardales-Luna, 632 F.3d 731, 744 (1st Cir. 2011) ( [Furlong] held that Congress could not punish the murder of a foreigner by a foreigner on a foreign vessel in international waters. ); John H. Knox, A Presumption Against Extrajurisdictionality, 104 Am. J. Int l L. 351, 364 (2010) (describing Furlong as holding that while piracy was within the acknowledged power of Congress to punish, as was murder by U.S. nationals committed on foreign ships, murder by foreigners on foreign ships on the high seas was not. ); A. Mark Weisburd, Due Process Limits on Federal Extraterritorial Legislation?, 35 Colum. J. Transnat l L. 379, 419 (1997) (arguing that Furlong addressed whether a statute criminalizing piracies and felonies at sea should be read as applying to murders committed by aliens against alien victims upon non-american ships. ) United States v. Al Kassar, 660 F.3d 108, 118 (2d Cir. 2011); see also United States v. Brehm, 691 F.3d 547, 552 (4th Cir. 2012); United States v. Ibarguen-Mosquera, 634 F.3d 1370, (11th Cir. 2011); Untied States v. Davis, 905 F.2d 245, (9th Cir. 1990) See Boos v. Barry, 485 U.S. 312 (1988) (adjudicating First Amendment challenge to statute enacted under the Define and Punish Clause) See supra notes

95 82 HASTINGS LAW JOURNAL [Vol. 68:45 declaration to that effect by congress. 272 Some courts invoke this statement as evidence that they can review whether Congress has properly defined international law under the Define and Punish Clause. 273 But that obscures what the Court actually said in Arjona. The Court was considering whether it is necessary, in order to define the offense against the law of nations, that it be declared in the statute itself to be an offense against the law of nations. 274 The Court held that this was unnecessary. The Court s statement in full is as follows: This statute defines the offense, and if the thing made punishable is one which the United States are required by their international obligations to use due diligence to prevent, it is an offense against the law of nations. Such being the case, there is no more need of declaring in the statute that it is such an offense than there would be in any other criminal statute to declare that it was enacted to carry into execution any other particular power vested by the constitution or its people by counterfeiting its money.... Whether the offense as defined is an offense against the law of nations depends on the thing done, not on any declaration to that effect by congress. 275 Reading the language in context makes plain that Arjona did not limit legislative power. The Court was simply addressing the narrow argument presented in that case whether a statute punishing a violation of international law had to specifically state that the conduct was punished as an offense against the law of nations. The Court sensibly refused to impose this requirement, and in reaching that conclusion, it showed Congress considerable respect by emphasizing that the legislature need not use magic words when defining customary international law. This highlights the pointed irony in citing Arjona as support for limiting Congress s power. The Court emphatically refused to place needless obstacles in front of Congress when it defines international law. An important word of caution is also in order when discussing cases with substantial age. Older cases analyzing international law did so against the backdrop of a legal regime that viewed the law in a different light than we do today. From the time of the Founding through the early twentieth century, federal judges recognized and applied the general common law. 276 The general common law was a body of law not attached to any particular sovereign, but that instead existed by common practice and consent among a number of sovereigns. 277 The law of nations was considered part of the general common law, which meant 272. United States v. Arjona, 120 U.S. 479, 488 (1887) See Al Bahlul v. United States, 792 F.3d 1, 15 (D.C. Cir. 2015); United States v. Bellaizac- Hurtado, 700 F.3d 1245, 1249 (11th Cir. 2012) Arjona, 120 U.S. at 488 (quoting U.S. Const. art. I, 8, cl. 10) Id William A. Fletcher, The General Common Law and Section 34 of the Judiciary Act of 1789: The Example of Marine Insurance, 97 Harv. L. Rev. 1513, 1517 (1984) Id.

96 December 2016] DEFINE AND PUNISH & POLITICAL QUESTION 83 that international law was applied in federal courts of its own force as part of this nebulous body of unwritten law. 278 Critics of the general common law became increasingly vocal over time. For example, Justice Holmes said that the general common law perpetrated the fallacy and illusion that there was a transcendental body of law outside of any particular State but obligatory within it unless and until changed by statute The Supreme Court altered how federal courts treated general law in Erie Railroad Co. v. Tompkins. There, the Court held that, [e]xcept in matters governed by the Federal Constitution or by acts of Congress, the law to be applied in any case is the law of the state.... There is no federal general common law. 280 This substantially changed how federal courts conceptualized the law. Erie stated that law in the sense in which courts speak of it today does not exist without some definite authority behind it. 281 That definite authority is a sovereign government, and at least on matters governed by state law, Erie obligated federal courts to follow the applicable rule of decision adopted by state law, rather than the indefinite body of general law. 282 The paradigm shift wrought by Erie should affect how we interpret older decisions applying international law. In some cases predating Erie, the Supreme Court suggested that customary international law was part of our law. 283 But these statements arose against a legal backdrop that considered the unwritten law of nations to be nearly as authoritative as federal statutes or treaties. 284 When earlier cases equated international law with federal law, they were likely making the (at the time) uncontroversial point that the general law of nations could apply in federal court of its own force. 285 This did not mean, however, that international law was a super-statutory body of law that courts could use 278. See, e.g., Oliver Am. Trading Co. v. United States of Mexico, 264 U.S. 440, (1924); Huntington v. Attrill, 146 U.S. 657, 683 (1892); Swift v. Tyson, 41 U.S. (16 Pet.) 1, 19 (1842); Bradley & Goldsmith, supra note 2, at Black & White Taxicab & Transfer Co. v. Brown & Yellow Taxicab & Transfer Co., 276 U.S. 518, 533 (1928) (Holmes, Brandeis, & Stone, JJ., dissenting); see also Beth Stephens, Federalism and Foreign Affairs: Congress s Power to Define and Punish... Offenses Against the Law of Nations, 42 Wm. & Mary L. Rev. 447, 463 (2000) ( The Constitution was written by a prepositivist generation who believed that unwritten laws were binding on nations and individuals alike. ) Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938) Id. at Id.; see also Caleb Nelson, The Persistence of General Law, 106 Colum. L. Rev. 503, 506 (2006) See, e.g., The Paquete Habana, 175 U.S. 677, 700 (1900) ( International law is part of our law, and must be ascertained and administered by the courts of justice.... ); The Antelope, 23 U.S. (10 Wheat.) 66, (1825) (consulting general law to conclude that the slave trade was permitted by the law of nations, and therefore, that Congress could not pass a statute defining the slave trade as piracy) Bradford R. Clark, Federal Common Law: A Structural Reinterpretation, 144 U. Pa. L. Rev. 1245, and n.169 (1996) Id.; John F. Manning, Textualism and the Equity of the Statute, 101 Colum. L. Rev. 1, 98 n.382 (2001).

97 84 HASTINGS LAW JOURNAL [Vol. 68:45 to disregard legislative enactments. To the contrary, it was widely acknowledged throughout the nineteenth century that statutes could always modify the general law. 286 As such, early cases discussing international law tell us little about the Define and Punish Clause, and even less about what the judiciary can do once Congress has defined an offense against the law of nations in a statute. 287 Since Erie there have been only two Supreme Court cases that indirectly addressed the Define and Punish Clause: Ex parte Quirin 288 and Yamashita v. Styer. 289 Both cases grew out of prisoner-of-war controversies during World War II. Yamashita involved a captured Japanese army general who was charged with violating the law of war and was sentenced to death. 290 Quirin involved captured German spies who were also charged with violating the law of war and sentenced to death. 291 The petitioners in both cases filed writs of habeas corpus, arguing that the United States could not try them in military commissions for violating the law of war. 292 Quirin did not address Congress s power to define the law of war (which is a subset of the law of nations more generally). 293 Instead, the focus there was on whether the President had complied with the law of war in authorizing military commissions. At the time, a collection of statutes known as the Articles of War authorized the President to use military commissions as an appropriate tribunal for the trial and punishment of offenses against the law of war. 294 Through these statutes, Congress incorporated the law of war into federal law and authorized trial of offenses against the law of war before such [military] commissions. 295 Against this backdrop, the question was not whether 286. Caleb Nelson, A Critical Guide to Erie Railroad Co. v. Tompkins, 54 Wm. & Mary L. Rev. 921, 925 (2013); Kent, supra note 103, at 508 ( [I]f it is true that the Founders viewed the law of nations as a form of general common law, to be applied by courts interstitially, it is significant that the Founders generally also believed that common law was subject to legislative modification or override. ) I have tried to avoid any suggestion that Erie ended the federal courts reliance on unwritten law. That is, after all, the conventional summary of the case. See, e.g., Louise Weinberg, The Curious Notion That the Rules of Decision Act Blocks Supreme Federal Common Law, 83 Nw. U. L. Rev. 860, 867 (1989) ( [P]ost-Erie positivism has cleansed American courts of law lacking an identifiable sovereign source.... ). As Caleb Nelson has demonstrated, this narrative over-reads Erie. See generally Nelson, supra note 282; see also Caleb Nelson, The Legitimacy of (Some) Federal Common Law, 101 Va. L. Rev. 1 (2015). Instead, the principal takeaway from Erie for purposes of this Article is not that it delegitimized unwritten law, but that cases decided pre-erie discussed international law as part of our law only because of how federal courts treated the general law Ex parte Quirin, 317 U.S. 1 (1942) Yamashita v. Styer, 327 U.S. 1 (1946) Id. at Ex parte Quirin, 317 U.S. at Id. at 9; Yamashita, 327 U.S. at Madsen v. Kinsella, 343 U.S. 341, 354 (1952) Yamashita, 327 U.S. at Quirin, 317 U.S. at 29.

98 December 2016] DEFINE AND PUNISH & POLITICAL QUESTION 85 Congress had improperly defined the law of war. Rather, the question was whether the President had complied with the law of war because that was the legal standard selected by Congress in the governing statutes. 296 Indeed, when framing the case, the Court stated that the [p]etitioners main contention is that the President is without any statutory or constitutional authority to order the petitioners to be tried by military tribunal Quirin never held that an external body of law imposes judicially enforceable limits on the Define and Punish Clause. Yamashita followed a similar path. As in Quirin, Congress authorized military commissions to try enemy combatants in accordance with the law of war. 298 The question was whether the military commission that tried the petitioner acted consistently with that body of law. 299 The Court reviewed various sources of international law to determine whether the petitioner s charge was supported by the law of war, 300 but it never held that Congress was limited by an external body of law. In fact, the Court said just the opposite: We do not make the laws of war but we respect them so far as they do not conflict with the commands of Congress or the Constitution. 301 One final point about the Supreme Court s jurisprudence bears mentioning. In Zivotofsky, the majority opinion suggested that deciding whether a statute is unconstitutional can never present a political question. 302 The import of this reasoning is that the constitutionality of a statute enacted under the Define and Punish Clause also cannot present a political question. For all intents and purposes, Zivotofsky announced this categorical rule. But not all Justices agree with it, 303 and there is some tension in the Court s cases that was not discussed in Zivotofsky. Recall that in Nixon, a law directed a Senate committee, rather than the entire Senate, to collect evidence during impeachment trials. 304 Nixon argued that this law was unconstitutional because the Constitution s use of try meant that the entire Senate had to collect evidence. 305 Despite 296. Id Id. at 24 (emphasis added) Yamashita, 327 U.S. at Id. at Id. at Id. at 16 (emphasis added). Some scholars also cite Hamdan v. Rumsfeld, 548 U.S. 557 (2006), as a case where the Court used international law to limit Congress under the Define and Punish Clause. See Kontorovich, supra note 12, at Hamdan, however, did no such thing. The relevant question there was whether the law of war permitted the government to try the defendant for conspiracy. Hamdan, 548 U.S. at 600. The Court explicitly noted that it was not considering the Define and Punish Clause: There is no suggestion that Congress has, in exercise of its constitutional authority to define and punish... Offences against the Law of Nations, positively identified conspiracy as a war crime. Id. at 601 (internal citation omitted) (emphasis added) Zivotofsky ex rel. Zivotofsky v. Clinton, 132 S. Ct. 1421, 1427 (2012) See supra notes Nixon v. United States, 506 U.S. 224, 227 (1993) Id. at 228.

99 86 HASTINGS LAW JOURNAL [Vol. 68:45 the fact that Nixon was challenging a written law as unconstitutional, the Court held that the case presented a political question. 306 Of course, the command in Nixon was embodied in a Senate Rule rather than a statute. 307 That, however, should make no difference for purposes of the political question doctrine. Whether the case involves a statute or a Senate Rule, the inquiry before a federal court is the same: is a written rule adopted by a separate branch of government unconstitutional? The fact that a decree is not formally codified in a statute says more about form than either substance or function. Likewise, consider the following puzzle. There is little doubt that the House and Senate could pass, and the President could sign, a statute that establishes the same procedure for impeachment trials as the Senate Rule in Nixon. 308 If that statute were challenged as unconstitutional, would the Court decide that it could now review the Senate s impeachment procedures because it was confronted with a statute? That result seems highly unlikely. The tension between Zivotofsky and Nixon is even more pronounced if one considers Gilligan v. Morgan. 309 The plaintiffs there alleged that the training and deployment of the National Guard was unconstitutional. 310 The Court held, however, that their claim presented a political question. 311 It noted that the Constitution gives Congress the power [t]o provide for organizing, arming, and disciplining, the Militia. 312 The Court thought that this provision was important because it indicated that Congress, not the judiciary, was ultimately responsible for managing the National Guard. 313 The Court even observed that Congress has enacted appropriate legislation to do just that. 314 This observation is significant. If the constitutionality of a statute cannot present a political question, then the Court would not have cited appropriate legislation to buttress its political question analysis. Gilligan breaks from Zivotofsky s reasoning because it did not tie the justiciability of the case to whether it turned on the constitutionality of a statute. What mattered to the Court was that the plaintiffs challenged the type of governmental action that was intended by the Constitution to be left to the political branches directly responsible as the Judicial Branch is not to the electoral process. 315 This broad theoretical 306. Id. at Id. at See Zivotofsky ex rel. Zivotofsky v. Clinton, 132 S. Ct. 1421, 1435 (Sotomayor, J., concurring) Gilligan v. Morgan, 413 U.S. 1 (1973) Id. at Id. at Id. at 6 (quoting U.S. Const. art. I, 8, cl. 16) Id Id Id. at 10.

100 December 2016] DEFINE AND PUNISH & POLITICAL QUESTION 87 consideration rather than the presence or absence of a statute was at the center of Gilligan s reasoning. The upshot is that, considered together, Nixon, Gilligan, and Zivotofsky highlight an unresolved and unexplored tension in the Court s political question jurisprudence. That tension suggests that Zivotofsky s holding might not be as inflexible or uncontroversial as it appears at first blush. If that is true, there may still be room in the Court s case law to hold that the proper definition of customary international law under the Define and Punish Clause is a political question. B. Meaningful Limits on Legislative Power Some might worry that if federal courts cannot review the legislative definition of international law, then Congress will use the Define and Punish Clause as the purported basis for every law that it enacts. This would make all federal statutes immune to challenges that Congress exceeded its Article I authority. Thus, the argument goes, giving Congress unreviewable authority to define customary international law under the Define and Punish Clause has the potential to dramatically narrow the scope of judicial review. 316 That worst-case scenario, however, is not possible. Congress is permitted only to define and punish... Offences against the Law of Nations. 317 The use of punish and Offences denote criminal legislation. The 1755 edition of Samuel Johnson s Dictionary of the English Language defines offence to be crime. 318 Likewise, the same dictionary defines punish as to chastise; to afflict with penalties or death for some crime. 319 To the Founding generation, offences and punishment garnered images of criminal activity. That meaning remains true today: Black s Law Dictionary defines offense to be [a] violation of the law; a crime. 320 The Constitution and the Bill of Rights also use offence and punish in provisions that relate only to criminal proceedings. 321 Apart from the Define and Punish Clause, offence appears in Article II s 316. See United States v. Bellaizac-Hurtado, 700 F.3d 1245, 1250 (11th Cir. 2012) ( If Congress could define any conduct as... an offence against the law of nations, its power would be limitless and contrary to our constitutional structure. ). But see Paulsen, supra note 215, at 1809 (arguing that the Define and Punish Clause gives Congress the extraordinarily sweeping enumerated legislative power to enact federal laws defining and punishing what it fairly considers to be violations of international natural law. ) U.S. Const. art. I, 8, cl. 10 (emphasis added) Offence, Dictionary of the English Language (2d ed. 1755) Punish, Dictionary of the English Language (2d ed. 1755) Offense, Black s Law Dictionary (10th ed. 2014) Ariz. State Legislature v. Ariz. Independent Redistricting Comm n, 135 S. Ct. 2652, 2680 (2015) (Roberts, J., dissenting) ( When seeking to discern the meaning of a word in the Constitution, there is no better dictionary than the rest of the Constitution itself. ).

101 88 HASTINGS LAW JOURNAL [Vol. 68:45 pardon provision 322 and in the Fifth Amendment s Double Jeopardy Clause. 323 Both of those provisions apply only to criminal proceedings. One cannot be pardoned without the imposition of criminal penalties, 324 and the Double Jeopardy Clause only applies to sequential criminal prosecutions (or multiple punishments) for the same crime. 325 Likewise, the Constitution uses punish only when talking about criminal penalties. Article I states that an impeached federal officer shall nevertheless be liable and subject to Indictment, Trial, Judgment and Punishment, according to Law. 326 The Constitution also gives Congress the power [t]o provide for the Punishment of counterfeiting 327 and the power to declare the Punishment of Treason. 328 The constitutional link among treason, counterfeiting, and indicted federal officials is the presence of criminal liability. 329 Similarly, the Eighth Amendment s prohibition on cruel and unusual punishments is a limitation that applies only to criminal not civil proceedings. 330 In short, when the Constitution speaks of offences and punishments, it does so in the context of imposing criminal penalties U.S. Const. art. II, 2, cl. 1 ( The President... shall have Power to grant Reprieves and Pardons for Offences against the United States, except in Cases of Impeachment. ) Id. amend. V ( No person shall be subject for the same offence to be twice put in jeopardy of life or limb. ) Schick v. Reed, 419 U.S. 256, 260 (1974) (stating that the power to pardon is the power to commute criminal sentences (emphasis added)); see also Ex parte Grossman, 267 U.S. 87, 111 (1925) (pardons available only for criminal, not civil, contempt); Robert J. Delahunty & John C. Yoo, Dream On: The Obama Administration s Nonenforcement of Immigration Laws, the DREAM Act, and the Take Care Clause, 91 Tex. L. Rev. 781, 842 (2013) ( [T]he Pardon Clause... concerns crimes, not civil violations. ) Hudson v. United States, 522 U.S. 93, 99 (1997) ( The [Double Jeopardy] Clause protects only against the imposition of multiple criminal punishments for the same offense.... ) U.S. Const. art I, 3, cl Id. art. I, 8, cl Id. art. III, 3, cl See United States v. Comstock, 560 U.S. 126, 135 (2010) (noting that the Constitution speaks explicitly about the creation of federal crimes... related to counterfeiting.... (quoting U.S. Const. art. I, 8, cl. 6)); Morissette v. United States, 342 U.S. 246, 265 (1952) (noting that treason is the one crime deemed grave enough for definition in our Constitution (emphasis added)); United States v. Isaacs, 493 F.2d 1124, 1142 (7th Cir. 1974) (stating that subjecting impeached federal officials to indictment and punishment was meant to assure that after impeachment a trial on criminal charges is not foreclosed by the principle of double jeopardy (emphasis added)) U.S. Const. amend. VIII; see Browning-Ferris Indus. of Vermont, Inc. v. Kelco Disposal, Inc., 492 U.S. 257, 262 (1989) ( Given that the [Eighth] Amendment is addressed to bail, fines, and punishments, our cases long have understood it to apply primarily, and perhaps exclusively, to criminal prosecutions and punishments. ); Marrero-Rodriguez v. Municipality of San Juan, 677 F.3d 497, 501 (1st Cir. 2012) (holding that Eighth Amendment claim was not viable because this case does not involve a formal adjudication of guilt or a criminal prosecution... ); Schiavo ex rel. Schindler v. Schiavo, 403 F.3d 1289, 1295 (11th Cir. 2005) (holding that the Cruel and Unusual Punishments Clause applies only to punishments inflicted after conviction for crimes ) But see U.S. Const. art. I, 5, cl. 2 ( Each House may... punish its Members for disorderly Behaviour.... ). Although it is not clear whether this reference relates only to criminal proceedings, courts have discussed it in the context of criminal prosecutions. See, e.g., United States v. Traficant, 368

102 December 2016] DEFINE AND PUNISH & POLITICAL QUESTION 89 Limiting the Define and Punish Clause to criminal legislation finds further support in both history and precedent. During the constitutional ratification debates, the Anti-Federalists argued that the Constitution granted the federal government the extraordinary power to punish commonplace crimes. 332 The Federalists responded by noting that the new Congress could only punish a few crimes, and pointed specifically to the Define and Punish Clause as an example. 333 Similarly, James Iredell argued that Congress has the power to define and punish piracies and felonies committed on the high seas, and offences against the law of nations. They have no power to define any other crime whatever. 334 And in debating the constitutionality of the Alien Enemies Act, James Madison said that referring the alien act to the power of Congress to define and punish offences against the law of nations indicates that the act is of a penal, not merely of a preventive operation. 335 All of these historical references link the Define and Punish Clause to criminal activity. Precedent tells the same story. The Supreme Court recently reiterated that [t]he term offense is most commonly used to refer to crimes. 336 Justice Thomas has also explained that punishment at the time of the Founding was synonymous with criminal penalties. 337 Taken together, it should be no surprise that the Supreme Court has consistently referred to the Define and Punish Clause as a source for criminal legislation. The Court has said that the Constitution does not give Congress the power to provide for the punishment of crimes, except piracies and felonies on the high seas, offences against the law of nations, treason, and counterfeiting the securities and current coin of the United States. 338 In discussing the criminal jurisdiction of the federal courts, the Court has said that Congress can punish only a limited class of well known offences, including counterfeiting U.S. currency, treason, and offenses against the law of nations. 339 And in discussing the extent of F.3d 646, 650 (6th Cir. 2004) (discussing whether punishment by the House of Representatives counts as a criminal prosecution for purposes of the Double Jeopardy Clause) Kent, supra note 13, at Id. (providing additional citations to relevant sources at footnote 304) Statement of James Iredell (July 29, 1788), reprinted in 4 The Debates in the Several State Conventions on the Adoption of the Federal Constitution as Recommended by the General Convention at Philadelphia in (Jonathan Elliot ed., 2d ed. 1891) (emphasis added) Id. at 556 (emphasis added) Kellogg Brown & Root Servs., Inc. v. United States ex rel. Carter, 135 S. Ct. 1970, 1972 (2015). A leading treatise makes the same point. See 22 C.J.S. Criminal Law: Substantive Principles 3 (2013) ( The terms crime, offense, and criminal offense are all said to be synonymous, and ordinarily used interchangeably. (internal citation omitted)) Wilkins v. Gaddy, 559 U.S. 34, 41 (2010) (per curiam) (Thomas, J., concurring in the judgment) ( At the time the Eighth Amendment was ratified, the word punishment referred to the penalty imposed for the commission of a crime. (internal citation omitted)) Logan v. United States, 144 U.S. 263, 283 (1892) (emphasis added) United States v. Hall, 98 U.S. 343, 345 (1878).

103 90 HASTINGS LAW JOURNAL [Vol. 68:45 power to punish crime expressly conferred by the Constitution, the Court specifically referenced the Define and Punish Clause. 340 The Court s overall discussion of the Clause lends ample support to the claim that it can be invoked to support only criminal legislation. 341 Unlike defining international law, courts can distinguish between civil and criminal laws without running afoul of the political question doctrine. There is no textual commitment of this question in the Constitution because the charter does not state who gets to decide whether a law is civil or criminal. 342 Likewise, courts have crafted an extensive body of judicially manageable standards to distinguish between civil and criminal penalties in various contexts. 343 What s more, there is little prudential reason to avoid deciding whether a law is civil or criminal such an inquiry does not risk undermining American diplomatic efforts or jeopardizing American foreign policy in the way that defining international law does. The political question doctrine, then, does not bar federal courts from deciding whether a law qualifies as criminal legislation. In addition to policing the criminal-civil divide, federal courts remain free to adjudicate other constitutional challenges to statutes enacted under the Define and Punish Clause. Courts can determine, for example, whether a statute that defines international law is inconsistent with the First Amendment or some other individual right. 344 Courts may also adjudicate a defendant s procedural objections that turn on the familiar requirements of the Fourth, Fifth, and Sixth Amendments. Yet all that being said, federal courts still remain powerless to disregard a criminal statute because a defendant believes that it improperly defines international law. It is not unusual, however, to say that federal courts lack the authority to entertain certain arguments raised by criminal defendants. In some instances, defendants lack standing to challenge the 340. Legal Tender Cases, 79 U.S. (12 Wall.) 457, (1870) Many scholars believe that the Define and Punish Clause cannot be used to support civil or regulatory legislation. See, e.g., Kent, supra note 13, at 882 ( The conventional account of the text of the [Define and Punish] Clause is that its key terms ( punish and offences ) sound in individual criminal law. ); Geoffrey R. Watson, The Passive Personality Principle, 28 Tex. Int l L.J. 1, 33 (1993) ( The power to define and punish crimes against the Law of Nations extends only to war crimes, genocide, and other especially serious crimes, not to simple murder, assault, and similar common crimes. ); Siegal, supra note 26, at 867 (stating that the Define and Punish Clause permits Congress to define violations of customary international law as domestic crimes ). But see Stephens, supra note 279, at (arguing that the Define and Punish Clause can be used to enact non-criminal legislation) Baker v. Carr, 369 U.S. 186, 217 (1962) Id.; see Kansas v. Hendricks, 521 U.S. 346, 362 (1997) ( The existence of a scienter requirement is customarily an important element in distinguishing criminal from civil statutes. ); Dep t of Revenue of Montana v. Kurth Ranch, 511 U.S. 767, (1994) (distinguishing between civil and criminal laws for purposes of the Double Jeopardy Clause) See, e.g., Boos v. Barry, 485 U.S. 312, 315 (1988) (adjudicating free speech challenge to a federal statute that was enacted under the Define and Punish Clause).

104 December 2016] DEFINE AND PUNISH & POLITICAL QUESTION 91 validity of a search that turned up incriminating evidence. 345 In other instances, courts may not adjudicate a defendant s argument if he attempts to use collateral estoppel to restrict the proof the government might use at trial. 346 On still other occasions, federal courts have no authority to entertain a defendant s argument that Congress improperly defined customary international law under the Define and Punish Clause. Nevertheless, Congress is unlikely to enact statutes that contain absurd definitions of international law because Congress is limited by our abiding system of checks and balances. The principal feature of this system is that the legislature remains constantly subject to structural checks from the President. If Congress abuses its power to define international law, the President may decline to enforce the statute. 347 The President may also undermine the legislature through his power to negotiate treaties, appoint ambassadors, and exercise broad authority over foreign commerce and international affairs. 348 All of these tools can disrupt the legislative plan for punishing violations of international law. Indeed, courts and scholars have recognized this dynamic: questions of foreign policy are rarely adjudicated by federal courts because the political branches are well equipped to erect roadblocks in front of one another. 349 The fact that federal judges cannot overrule Congress s definition of international law does not mean that the President is similarly handcuffed. Perhaps even more meaningful than structural checks from the President are electoral checks from the people. Members from both houses of Congress must periodically seek their constituents consent to continue governing. 350 If Congress has passed legislation imposing sweeping criminal liability for spurious violations of international law, then reelection becomes difficult. And if Congress uses the Define and Punish Clause to justify legislation with no rational connection to 345. Rakas v. Illinois, 439 U.S. 128, (1978) United States v. Wittig, 575 F.3d 1085, 1096 (10th Cir. 2009) Morrison v. Olson, 487 U.S. 654, 711 (1988) (Scalia, J., dissenting) (providing that one check against the legislature is that the executive can decline to prosecute under unconstitutional statutes ); United States v. Navarro-Vargas, 408 F.3d 1184, 1203 (9th Cir. 2005) ( [I]f the president or the attorney general determines that a law is either unwise or unconstitutional, he may decline to enforce the law.... ); Frank H. Easterbrook, Presidential Review, 40 Case W. Res. L. Rev. 905, (1990). See generally Presidential Authority to Decline to Execute Unconstitutional Statutes, 18 U.S. Op. O.L.C. 199 (1994) (describing instances where the President may decline to enforce a statute he views as unconstitutional) U.S. Const. art. II, 2; see Am. Ins. Ass n v. Garamendi, 539 U.S. 396, 414 (2003) ( [T]he historical gloss on the executive Power vested in Article II of the Constitution has recognized the President s vast share of responsibility for the conduct of our foreign relations. ) See Schneider v. Kissinger, 412 F.3d 190, (D.C. Cir. 2005); Louis Henkin, Foreign Affairs and the Constitution 32 (1972) U.S. Const. art. I, 2, cl. 1; id. art. I, 3, cl. 1.

105 92 HASTINGS LAW JOURNAL [Vol. 68:45 international relations, reelection becomes more difficult still. It is not novel nor should it be controversial to suggest that periodic elections are a significant check on any congressional tendency to legislate without authority. 351 Congress is also unlikely to exploit the Define and Punish Clause because of potential international ramifications. As should be clear, the definition of international law is an element of American foreign policy. 352 That means that Congress ignores global legal norms at its own peril. 353 The consequences of such ignorance can be dramatic: sanctions against the United States, diminished standing in the international community, and retaliation against American personnel stationed abroad. 354 Ignoring international norms also weakens the principle of reciprocity that lies at the heart of international law. If Congress makes a habit of thumbing its nose at international rules, then there is little reason for foreign sovereigns not to do the same to American interests. 355 Congress knows that its actions have consequences, and those consequences make it costly to wander astray from settled principles of international law. The structural, electoral, and international checks that confront Congress are powerful forces. Even so, federal courts can hear plenty of challenges to statutes that were enacted under the Define and Punish 351. Bogan v. Scott-Harris, 523 U.S. 44, 53 (1998) ( [T]he ultimate check on legislative abuse is the electoral process. ); United States v. Bishop, 66 F.3d 569, 577 (3d Cir. 1995) ( [T]he primary check upon Congressional action is its direct responsibility to the will of the people. ); Berkley v. Common Council of Charleston, 63 F.3d 295, 310 (4th Cir. 1995) (Wilkinson, J., dissenting) ( The democratic process relies on the voters, not the courts, as the first line of defense against legislative excess. ); Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1, 197 (1824) ( The wisdom and the discretion of Congress, their identity with the people, and the influence which their constituents possess at elections, are,... the sole restraints on which they have relied, to secure them from its abuse. ); cf. Julie R. O Sullivan, The Interaction Between Impeachment and the Independent Counsel Statute, 86 Geo. L.J. 2193, 2229 (1998) ( [E]lectoral accountability is the ultimate check by which Congress s abuse of its otherwise externally unchecked power of impeachment may be constrained. ) See supra notes and accompanying text See Boos v. Barry, 485 U.S. 312, 323 (1988) ( [T]he United States has a vital national interest in complying with international law. The Constitution itself attempts to further this interest by expressly authorizing Congress [t]o define and punish... Offenses against the Law of Nations. ) Id. at (protecting foreign ambassadors in the United States ensures that similar protections will be accorded those that we send abroad to represent the United States, and thus serves our national interest in protecting our own citizens. ); Al-Bihani v. Obama, 619 F.3d 1, 11 (D.C. Cir. 2011) (Kavanaugh, J., concurring in the denial of rehearing en banc) Boos, 485 U.S. at 323 (noting the concept of reciprocity that governs much of international law ); Michael P. Scharf, International Law in Crisis: A Qualitative Empirical Contribution to the Compliance Debate, 31 Cardozo L. Rev. 45, (2009) ( If the United States ignores or interprets away a rule of international law, the precedent will be used by other States in the international community... thereby weakening the general rule of law and rendering the international system less stable. ); Farhad Malekian, The System of International Law: Formation, Treaties, Responsibility 56 (1987) ( Common consent appears to be the main reason for obedience to the rules of international law.... In fact, it is a matter of reciprocal interest for states to obey the accepted rules. ).

106 December 2016] DEFINE AND PUNISH & POLITICAL QUESTION 93 Clause. They can decide whether the statute actually imposes criminal penalties, and determine whether it unlawfully intrudes on individual constitutional rights. All of these limits demonstrate that legislative power will be meaningfully checked even if the proper definition of international law under the Define and Punish Clause is a political question. C. Treaties and Other Sources of International Law While the judiciary cannot declare a statute unconstitutional because it improperly defines customary international law, courts remain free to interpret and apply other sources of international law. As mentioned in the Introduction of this Article, one half of international law is customary international law. Congress can make those rules binding federal law by incorporating them into federal statutes. But international law also includes treaties, and treaties are different from customary international law in two important respects. 356 First, treaties are created through a specific constitutional mechanism separate and apart from the Define and Punish Clause. 357 Second, the Supremacy Clause explicitly lists treaties as supreme federal law (while saying nothing at all about customary international law). 358 These differences highlight that the ability to interpret customary international law is not tied to the judiciary s ability to interpret and apply treaties. 359 This is especially true because treaties generally do not require federal courts to define international law. When a dispute turns on the interpretation of a treaty, a court reads the treaty as it would a contract to decipher the parties intent. 360 Interpreting a legal text to determine what its signatories meant is something that federal courts do all of the time. 361 Indeed, contractual interpretation does not pose the same obstacles that defining customary international law does the treaty itself will typically specify the binding rule of international law. The result is that any limitations inherent in the Define and Punish Clause should not affect how federal courts interpret treaties Bradley & Goldsmith, supra note 2, at See U.S. Const. art. II, 2, cl See id. art. VI, cl. 2; Paulsen, supra note 215, at See Karinne Coombes, Universal Jurisdiction: A Means to End Impunity or a Threat to Friendly International Relations?, 43 Geo. Wash. Int l L. Rev. 419, 432 n.69 (2011); Siegal, supra note 26, at BG Grp. PLC v. Republic of Arg., 134 S. Ct. 1198, 1208 (2014) ( As a general matter, a treaty is a contract.... Its interpretation normally is, like a contract s interpretation, a matter of determining the parties intent. ) See Japan Whaling Ass n v. Am. Cetacean Soc y, 478 U.S. 221, 230 (1986); Spectrum Stores, Inc. v. Citgo Petroleum Corp., 632 F.3d 938, 951 (5th Cir. 2011) ( Adjudication of the claims before us would require that we review the considered foreign policy of the political branches, which... is not codified in a treaty that we are merely asked to interpret. ); Christopher A. Whytock, Domestic Courts and Global Governance, 84 Tul. L. Rev. 67, 105 (2009) ( U.S. courts routinely interpret treaties in transnational litigation. ).

107 94 HASTINGS LAW JOURNAL [Vol. 68:45 Courts may also continue to interpret a limited number of federal statutes that reference the law of nations as a rule of decision. 362 For example, one statute authorizes the President to detain a ship when there is reasonable cause to believe that it will assist ships of a foreign belligerent nation in violation of the... obligations of the United States under the law of nations. 363 Many of these statutory references, however, do not contemplate that federal courts will define international law. Some statutes refer to piracy as defined by the law of nations, 364 which the Supreme Court held long ago is carefully limited to robbery upon the sea. 365 Other statutes mention the law of nations as a source of jurisdiction for federal courts. 366 Another group of statutes reference the law of nations to indicate that they apply only during wartime. 367 And still other statutes reference international law to describe the President s regulatory authority. 368 Many of these statutes do not invite or even require federal courts to define a rule of international law. Furthermore, even for those statutes that do call for the court to define international law, there is a meaningful difference between defining international law pursuant to a congressional mandate and disregarding a federal statute because the judiciary thinks that Congress got it wrong. 369 The Court in Sosa noted this distinction. It recognized 362. See, e.g., 18 U.S.C. 756, 957, 967, 1651, 2274, 3058 (1948); 22 U.S.C. 406, 462, 5605 (1917); 28 U.S.C. 1350, 2241 (1948); 33 U.S.C. 384, 385 (1948) U.S.C. 967(a) (1948) See id. 1651, 3185(14); 33 U.S.C. 384, United States v. Smith, 18 U.S. (5 Wheat.) 153, 162 (1820) See 28 U.S.C. 1350, 2241(c)(4) (1948) See 18 U.S.C. 756 (1942) (discussing prisoners of war who are interned in the United States in accordance with the law of nations ); id See 16 U.S.C. 1435(a) (President must comply with international law when managing national marine sanctuaries); 22 U.S.C. 462 (1917) (President can either detain or remove vessels that have violated the law of nations or the treaties of the United States ); id (President may sanction foreign countries that have used chemical or biological weapons in violation of international law ); 30 U.S.C (1980) (President must comply with international law when issuing permits for deepwater mining operations); 42 U.S.C (President must comply with international law when issuing permits for ocean thermal energy conversion facilities) One might wonder whether federal courts may define international law under the Define and Punish Clause if Congress has not yet defined the precise rule of decision. This situation, however, is unlikely to ever arise. As explained previously, I believe that the Define and Punish Clause may be used to enact only criminal legislation. See supra Part III.B. If Congress has not codified the relevant rule of international law in a criminal statute, then there is no basis for imposing criminal liability. Indeed, it is bedrock law that federal courts may not impose criminal liability based on an unwritten rule, whether as part of the general law, federal common law, or customary international law. See United States v. Gooding, 25 U.S. (12 Wheat.) 460, 474 (1827); United States v. Hudson, 11 U.S. (7 Cranch) 32, (1812); Screws v. United States, 325 U.S. 91, 152 (1945) (Roberts, J., dissenting) ( Federal prosecutions must be founded on delineation by Congress of what is made criminal. To base federal prosecutions on the shifting and indeterminate decisions of courts is to sanction prosecutions for crimes based on definitions made by courts. This is tantamount to creating a new body of federal criminal common law. (internal citation omitted)). Accordingly, if Congress has not enacted a statute

108 December 2016] DEFINE AND PUNISH & POLITICAL QUESTION 95 that [w]e have no congressional mandate to seek out and define new and debatable violations of the law of nations. 370 But when a statute explicitly references the law of nations, it is plausible to suppose that Congress has given the judiciary a mandate to define international law in that limited circumstance. One criminal statute, for example, proscribes certain conduct that is in violation of the rights and obligations of the United States under the law of nations. 371 The key point is that a statute s invitation to define international law for limited purposes does not relate to judicial review under the Define and Punish Clause. Finally, it is significant that nearly all of the federal statutes that reference the law of nations were originally enacted before Erie. 372 That is unsurprising, because the pre-erie legal regime viewed the law of nations as part of the general common law. 373 As such, jurists in the nineteenth century had substantial freedom to independently assess the meaning of the law of nations because of the unique status of general law. 374 Modern legal thought, however, insists that once a sovereign has prescribed a rule of decision for example, by defining the elements of an offense against international law judges may not undermine that rule by relying on a reservoir of non-constitutional unwritten law. Accordingly, one should be hesitant to rely on statutes enacted before Erie to resolve the proper role of Congress and the judiciary under the Define and Punish Clause. defining and punishing an offense against the law of nations, federal courts may not fill the void because they have no criminal common law powers Sosa v. Alvarez-Machain, 542 U.S. 692, 728 (2004) U.S.C (1948); see also id. 957, 967. These statutes likely violate the Fifth Amendment s Due Process Clause. A criminal statute is unconstitutional if it is so vague that it fails to give ordinary people fair notice of the conduct it punishes, or so standardless that it invites arbitrary enforcement. Johnson v. United States, 135 S. Ct. 2551, 2556 (2015). Criminal statutes that impose liability simply for violating the law of nations (or the United State s obligations there under) provide no description of what conduct is actually prohibited. A statute that refers only to rights and obligations under international law, without more, can hardly provide fair notice to ordinary people. See Hamdan v. United States, 696 F.3d 1238, 1250 n.10 (D.C. Cir. 2012) ( A general prohibition against violations of international law or the law of nations or the law of war may fail in certain cases to provide the fair notice that is a foundation of the rule of law in the United States. ), overruled on other grounds by Al Bahlul v. United States, 767 F.3d 1 (D.C. Cir. 2014) (en banc) Act of Sept. 24, 1789, ch. 20, 1 Stat. 77 (codified as amended at 28 U.S.C (2006)); Act of Mar. 3, 1819, ch. 77, 3 Stat. 513 (codified as amended at 33 U.S.C. 384 (2006)); Act of Aug. 5, 1861, ch. 48, 12 Stat. 314 (codified as amended at 33 U.S.C. 385 (2006)); Rev. Stat. 753 ( ) (codified as amended at 28 U.S.C (2006)); Act of Mar. 4, 1909, ch. 321, 35 Stat (codified as amended at 22 U.S.C. 462 (2006)); Act of June 15, 1917, ch. 30, 40 Stat. 220 (codified as amended at 18 U.S.C (2006)); id. 40 Stat. 221 (codified as amended at 18 U.S.C. 967 (2006)); id. 40 Stat. 223 (codified as amended at 18 U.S.C. 756 (2006)); id. (codified as amended at 18 U.S.C (2006)); id. 40 Stat. 225 (codified as amended at 22 U.S.C. 406 (2006)); id. 40 Stat. 230 (codified as amended at 18 U.S.C. 957 (2006)) See supra notes and accompanying text Nelson, supra note 282, at

109 96 HASTINGS LAW JOURNAL [Vol. 68:45 Conclusion There is much to consider in deciding whether the proper definition of international law under the Define and Punish Clause is a political question. The analysis turns on principles of federal jurisdiction, the institutional competence of different branches of government, and the details of customary international law. All of these considerations must take place within a complex constitutional inquiry into the meaning of a clause that is rarely written about. In light of this, it should be unsurprising that no one has yet considered in detail the relationship between the Define and Punish Clause and the political question doctrine. Nevertheless, courts have invalidated federal statutes that they believe are not faithful to the correct definition of customary international law. It is unclear why this practice has persisted. An obvious explanation is that the presence of judicial review creates a powerful presumption that federal courts can decide whether Acts of Congress are unconstitutional. This makes sense as a general proposition. Marbury s declaration that federal courts must say what the law is 375 represents one of the pillars on which our constitutional tradition is built. But it is equally fundamental that there are some legal questions the judiciary cannot answer. As the Court has said, [t]he judicial power of the United States... is not an unconditioned authority to determine the constitutionality of legislative or executive acts. 376 If a plaintiff lacks standing or a dispute turns on a political question, we do not see this as a problem in need of a solution. Rather, we say that there are some questions the courts have no business deciding. 377 In this Article, I have endeavored to show that the proper definition of international law under the Define and Punish Clause is a question that federal courts have no business deciding. This question will continue to resurface in federal courts given the explosion of human rights litigation and the increasingly common criminal prosecution of enemy combatants. In these cases, federal courts must refrain from deciding whether Congress has defined international law as the global community would have it. Adhering to this principle would bring clarity to the muddied issue of how international law binds American actors. It would also remain faithful to the legal hierarchy embodied in the Supremacy Clause. If supreme federal law consists only of the Constitution, federal statutes, and federal treaties, then international rules neither ratified nor adopted by the people s elected representatives are not really law in any sense of the word Marbury v. Madison, 5 U.S. (1 Cranch) 137, 177 (1803) Valley Forge Christian Coll. v. Am. United for Separation of Church and State, Inc., 454 U.S. 464, 471 (1982) DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 341 (2006).

110 The New Insiders : Rethinking Independent Directors Tenure Yaron Nili* Director independence is a cornerstone of modern corporate governance. Regulators, scholars, companies, and shareholders have all placed a strong emphasis on director independence as a means to ensure that investors interests in their companies are well served. But what makes a director independent? While regulators and stock exchanges have tackled this elusive standard in different ways, the end goal is always the same ensuring that the director is able to exercise truly independent judgment and further the best interests of shareholders. Surprisingly, these regulatory bodies have failed to consider the impact board tenure might have on director independence. This Article seeks to fill this void, highlighting the potential effect director tenure has on director independence. Providing novel empirical data that reveals a significant rise in director tenure over the last decade, the Article then strives to place this trend in the larger context of transformations in board structure. Specifically, this Article suggests that the trend of increased director tenure reflects a market attempt to push back against the regulatory emphasis on board independence that has forced companies to remove many high ranked executives from the boardroom. This reaction is manifest in the increased prevalence of the new insider, a hybrid board member who complies with current independence requirements but at the same time, through longer tenure and other attributes, possesses many of the traits that corporate insiders previously brought to the board table. Coupling this market movement with its potential impact on board independence, this Article then explores the benefits and risks of this new insider model and proposes a potential regulatory solution that would address director tenure without sacrificing the benefits that tenure can provide. * Assistant Professor of Law, University of Wisconsin Law School. LL.B. Hebrew U., 2006; M.B.A. Hebrew U., 2007; LL.M. Harvard Law School, 2008; S.J.D. Harvard Law School, I would like to thank Ehud Barak, Lucian Bebchuk, Jesse Fried, Scott Hirst, Kobi Kastiel, Mark Roe, Ed Rock, Roy Shapira, Holger Spamann, the participants of the Law and Economics seminar at Harvard Law School, the Bar Ilan Law School faculty seminar, Wisconsin Law School faculty workshop, Rutgers Law School faculty workshop, University of Maryland School of Law faculty workshop, and the participants at the Corporate Governance Fellows lunch group for helpful comments. I would also like to thank Matt Forssman for valuable research assistance. I am grateful for the support of the Considine Family Foundation and the Harvard Law School John M. Olin Center for Law, Economics and Business. [97]

111 98 HASTINGS LAW JOURNAL [Vol. 68:97 Table of Contents Introduction I. The Evolution of Boards of Directors of U.S. Public Companies A. Corporate Governance and the Board of Directors B. The Board s Dual Role as Monitor and Adviser, and the Move Toward Independent Boards of Directors The Board of Director's Role in the Governance of the Corporation The Impact of the Shareholder Franchise Approach C. Mandating Independent Directors: SOX and Dodd Frank s Contribution to the Shift in Board Composition and Roles Mandating Independence Part I: The Sarbanes-Oxley Act Mandating Independence Part II: Dodd-Frank and the Expansion of Director Independence D. Voluntary Changes Leading to Greater Independence of Board Members E. The Implications II. Theory Versus Reality: How Current Rules Fail to Fulfill the Intent Behind the Independence Standard A. Are All Independent Directors Created Equal? The Lack of Uniformity and Consistency B. Are All Independent Directors Created Equal? The Inadequate Attention to Board Tenure Tenure, Social Connections, and Structural Bias Tenure, Human Capital, and Financial Stake Tenure and Reelection Can Tenure Strengthen Independence? C. Anecdotal Evidence Illustrating the Potential Impact of Tenure on Governance Long Tenure and Compromised Independence: The Enron Case The Impact of Reduction in Board Tenure: The Citi Case

112 December 2016] RETHINKING INDEPENDENT DIRECTORS TENURE 99 III. The Rise in Average Tenure and Other Changes to Board Composition A. Rising Board Tenure: An Empirical Examination B. Similar Trends in Audit and Compensation Committee Member Tenure C. Other Trends Reflecting a Move Toward Longer Tenure IV. Can the Market Self-Correct? A. Majority Voting, Director Interlocks, and Remuneration: Voluntary Movements by Companies That Fail to Sufficiently Resolve Concerns About Director Independence B. Private Ordering and Board Tenure The Companies Themselves Institutional Investors Proxy Advisors Externalities and Collective Action Issues V. The New Insiders VI. Rethinking Independent Directors Tenure A. The General Framework B. Limited in Scope C. Limited in Length D. Means of Implementation Conclusion Introduction Over the last few decades the composition of U.S. public firms boards of directors has transformed dramatically. Boardrooms predominantly controlled by company employees, commonly referred to as insiders, 1 have been replaced with boardrooms that are considered to be independent. 2 In many of these boardrooms, the CEO is the lone true insider in the room See Jeffrey N. Gordon, The Rise of Independent Directors in the United States, : Of Shareholder Value and Stock Market Prices, 59 Stan. L. Rev. 1465, (2007). 2. The use of the term independent in this Article carries two distinct and separate meanings. On the one hand, current rules frame one meaning of independence a term of art defined by what regulators and stock exchanges have deemed to constitute independence. On the other hand, this Article also uses the term independent to stand for its intrinsic value whether a director is truly independent from management in the common sense of the term. While these two meanings often overlap, this Article s main assertion is that the former meaning of the term director independence,

113 100 HASTINGS LAW JOURNAL [Vol. 68:97 This ongoing shift by public companies, from a board structure that relies on a strong presence of directors who are considered insiders to a board that is considered independent by regulatory standards, has accelerated in the last decade. 4 Academic discourse, the trend toward the shareholder franchise approach, and corporate scandals that brought about regulatory reforms have all led to this push toward more independent boards. 5 In turn, these changes have further fortified public and market expectations regarding the independence of the board, leading companies to surpass regulatory requirements in an effort to meet these expectations. 6 Indeed, regulators, stock exchanges, academic discourse, and corporate practices have all placed a heavy premium on the notion of director independence. 7 What is often lacking in the discussion, however, is an acknowledgment of the disparity between true director independence a notion that is meant to ensure the ability of the board to effectively scrutinize management s actions and how current rules and practices actually define independence. Exemplifying this disparity is the failure to consider the impact of director tenure on the independence of boards. Although legislation, listing rules, and state law mandate director independence, none of these rules take into account director tenure. 8 But, while the current definitions of director independence ignore director tenure, investors are becoming increasingly concerned with the potential negative impact that long tenure of directors may have on their independence. In a recent survey, Institutional Shareholder Services, Inc. ( ISS ) found that seventy-four percent of investors were concerned with the negative impact that long tenure may have on independent directors. 9 Similarly, several institutional investors have recently amended their voting policies and guidelines to address the issue of director tenure. 10 meaning the regulatory definition, fails to truly ensure the latter the true independence of the directors. 3. See Spencer Stuart, Board Index Survey 15 (2014) (noting that in fifty-eight percent of S&P 500 companies the CEO is the only company employee in the boardroom). 4. See discussion and sources cited infra Part II.D. 5. See Gordon, supra note 1, at See infra Part I.D (reviewing the voluntary shift in the composition of boards that went beyond the regulatory requirements). 7. See discussion and sources cited infra Part I.C (reviewing the regulatory emphasis on director independence). 8. See discussion and sources cited infra Part II. 9. See Institutional S holder Servs., Director Tenure (US and Canada) (2014), See Howard B. Dicker, Weil, Gotshal & Manges LLP, 2016 Proxy Season: Engagement, Transparency, Proxy Access, Harv. L. Sch. F. on Corp. Governance & Fin. Reg. (Feb. 4, 2016),

114 December 2016] RETHINKING INDEPENDENT DIRECTORS TENURE 101 This Article highlights the importance and impact board members tenure may have on their independence. The Article first delineates the key channels through which long director tenure may impact director independence and how this impact is overlooked in the current regulatory and self-governing regimes. The story does not end at arguing that long tenure may, in itself, directly impact the efficacy of current standards for board independence. This Article provides new empirical evidence reflecting a steady increase in the average tenure of board members of public companies. This documented increase in average tenure, juxtaposed against additional changes to board structure such as the increased hiring of directors with strong insider background, including retired executives and insiders from other corporations further underscores the importance of addressing the issue of board tenure and its potential impact on director independence. In addition to arguing that rising board tenure in and of itself may be a concerning development in the context of actual board independence, this Article situates rising board tenure within the larger context of the general transformation of the board as an institution and the goals it seeks to achieve. As this Article contends, by gradually removing insiders from the boardroom in favor of independent directors, public companies have now replaced these true insiders with directors who meet the regulatory definition of independence, but who serve for longer periods of time and often have a strong preexisting insider background elsewhere. This Article terms and refers to these hybrid board members as the new insiders. By allowing directors to accumulate specific business knowledge and to develop social and professional investment in the firm, public companies can now retain many of the benefits that inside directors brought to the table, while still appeasing regulatory and public requirements. At the same time, however, these long tenures and insider backgrounds might also erode the true independence of the board that the independence rules were intended to ensure. This transformation in the composition of corporate boardrooms and the need for truly independent directors in some key positions begs a rethinking of current independence standards. As this Article suggests, limiting the tenure of directors who are considered independent with respect to specific positions on the board, while allowing them to remain on the board in other capacities, could ensure that the rationale for mandating the independence of directors is safeguarded while at the same time allowing companies to preserve the value that longer tenured directors can provide. The organization of the remainder of this Article is as follows. Part I provides normative and historical background on the role, function, and

115 102 HASTINGS LAW JOURNAL [Vol. 68:97 evolution of the board of directors in the United States and describes the emphasis that board independence has received over the last decade. Part II highlights the importance of tenure as a factor when assessing true director independence and the failure of regulators, stock exchanges, and investors to properly account for it when considering independence requirements. Part III provides empirical evidence that board tenure in public U.S. companies is on the rise and highlights other changes in board structure that, as a whole, are indicative of an overlooked, overarching trend among U.S. companies. Part IV addresses the potential lack of ability, will, and effectiveness of the market to address director tenure justifying a potential need for regulatory intervention. Part V suggests a possible explanation for this trend: the move toward a new hybrid board member, the new insider. Finally, part VI discusses the normative implications of the trend toward this new insider model and the possible means to address the concerns it entails. The Article concludes by tying together the importance of director independence, the impact of director tenure on director independence, and the need for a rethinking of the current independence standards to appropriately address this issue. I. The Evolution of Boards of Directors of U.S. Public Companies A. Corporate Governance and the Board of Directors The dispersed ownership structure of U.S. publicly held corporations 11 presents an acute agency cost between management and shareholders. 12 Shareholders lack of incentive to supervise management due to their dispersed ownership, coupled with free riding concerns, effectively leads to a managerial controlled corporate structure. Having no significant monitoring or removal concerns, managers can divert corporate resources into their own hands, receive high compensation that is not correlated with their performance, 13 and engage in inefficient activities such as empire building Adolf A. Berle, Jr. & Gardiner C. Means, The Modern Corporation and Private Property 6 (1934). 12. Agency cost can be defined as the costs of structuring, monitoring, and bonding a set of contracts among agents with conflicting interests. See Eugene F. Fama & Michael C. Jensen, Separation of Ownership and Control, 26 J.L. & Econ. 301, 304 (1983). 13. See Lucian Bebchuk & Jesse Fried, Pay Without Performance: The Unfulfilled Promise of Executive Compensation 6 7 (2004) (arguing that executives pay is not adequately correlated with their true performance, enabling them to benefit from industry success rather than their own work). 14. Empire building is the phenomenon of managers wishing to expand the corporate group under their control by mergers and acquisitions ( M&A ) or other methods, even when it is not to the benefit of shareholders. See David J. Denis et al., Agency Problems, Equity Ownership, and Corporate Diversification, 52 J. Fin. 135, 136 (1997); Paul Gompers et al., Corporate Governance and Equity

116 December 2016] RETHINKING INDEPENDENT DIRECTORS TENURE 103 Thus, the dispersed ownership structure of the widely held U.S. corporation and the agency cost it creates has become a principal concern of many academics, legislatures, and courts over the last several decades. 15 During that time there have been several different approaches developed to address these concerns. Some have relied upon free market mechanisms such as the market for corporate control, 16 the capital market for new shares 17 as well as for trading shares, 18 the market for managers, 19 and the product market, 20 as outside mechanisms to minimize this agency cost. Some have relied on debt as an effective constraint on this agency concern by reducing the free cash flow a manager can play with, and subordinating managers to debtors rights. 21 Some scholars think that the increasing involvement of traditional institutional Prices, 118 Q. J. Econ. 107, (2003); Sharon Hannes, Private Benefits of Control, Antitakeover Defenses, and the Perils of Federal Intervention, 2 Berkeley Bus. L.J. 263, 283 (2005). 15. See Ronald J. Gilson & Charles K. Whitehead, Essay, Deconstructing Equity: Public Ownership, Agency Costs, and Complete Capital Markets, 108 Colum. L. Rev. 231, (2008). Gilson and Whitehead refer to the seminal paper by Michael Jensen and William Meckling as the starting point of this ongoing academic debate. See, e.g., Michael C. Jensen & William H. Meckling, Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure, 3 J. Fin. Econ. 305, 308 (1976). 16. See Henry G. Manne, Mergers and the Market for Corporate Control, 73 J. Pol. Econ. 110, 112 (1965); Frank H. Easterbrook & Daniel R. Fischel, The Proper Role of a Target s Management in Responding to a Tender Offer, 94 Harv. L. Rev. 1161, 1164 (1981). While the market for corporate control might have played an important role until the mid-eighties, it has weakened substantially after Delaware courts allowed the combined use of poison pills and staggered boards and the ability of the board to just say no (that is, to reject offers of hostile bidders). It seems that increasing shareholders involvement in the corporate life becomes even more of a crucial issue than it used to be due to the ineffectiveness of the hostile takeover market under the new antitakeover mechanisms. See Lucian A. Bebchuk & Alma Cohen, The Costs of Entrenched Boards, 78 J. Fin. Econ. 409, 412 (2005); Lucian Arye Bebchuk et al., The Powerful Antitakeover Force of Staggered Boards: Theory, Evidence, and Policy, 54 Stan. L. Rev. 887, 890 (2002). 17. See Lucian A. Bebchuk, Essay, The Myth of the Shareholder Franchise, 93 Va. L. Rev. 675, 715 (2007). 18. See Kent Greenfield, The Place of Workers in Corporate Law, 39 B.C. L. Rev. 283, (1998). For a general review of the efficient capital market hypothesis, see Ronald J. Gilson et al., The Law and Finance of Corporate Acquisitions (2d ed. 1995). Professor Bebchuk criticizes the validity of this argument. See Bebchuk, supra note 17, at See Michael P. Dooley, Two Models of Corporate Governance, 47 Bus. Law. 461, 525 (1992); Arthur R. Pinto, Corporate Governance: Monitoring the Board of Directors in American Corporations, 46 Am. J. Comp. L. (Supplement) 317, 330 (1998). 20. See Daniel R. Fischel, The Corporate Governance Movement, 35 Vand. L. Rev. 1259, (1982) (noting that inability to compete in the product market will lead corporations to be pushed out of their business altogether). 21. Michael C. Jensen, Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers, 76 Am. Econ. Rev. 323, (1986). Jensen went a step further, asserting that the leveraged buyouts of the eighties are the starting point of the eclipse of the public widely held corporation altogether. See generally Michael C. Jensen, Eclipse of the Public Corporation, 67 Harv. Bus. Rev. 61 (1989) (arguing that in many industries publicly held corporations are being eclipsed by private corporations that rely on debt through the leveraged buyout process, because this new structure reduces the agency conflict between managers and shareholders).

117 104 HASTINGS LAW JOURNAL [Vol. 68:97 investors 22 in the capital markets could mitigate these agency costs. 23 Then, when all of those institutions failed to do so, some thought that the emergence of innovative financial institutions could bring about the desired results. 24 Finally, some relied on improved financial incentives given to upper management, in a fashion that would align their interests with shareholders interests. 25 With efforts spanning from improving market forces to direct regulation, one of the first institutions asked to mitigate this agency issue was the board of directors. 26 In the United States, with its widely held public corporations, the board of directors serves a major role in the governance of the modern corporation. 27 The board, in the context of agency concerns, has been expected to represent shareholders interests vis-à-vis management, curtailing management s ability to extract private benefits or act in a suboptimal way with respect to shareholder interests. 28 As this Article will describe in detail, in order to facilitate these expectations the board itself has gone through dramatic changes, both in 22. In the Article, I distinguish between traditional institutional investors, such as pension funds (public and corporate), mutual funds, insurance companies, and the new institutions: hedge funds and private equity firms. 23. See Bernard S. Black, Agents Watching Agents: The Promise of Institutional Investor Voice, 39 UCLA L. Rev. 811, 861 (1992); Ronald J. Gilson & Reinier Kraakman, Reinventing the Outside Director: An Agenda for Institutional Investors, 43 Stan. L. Rev. 863, 867 (1991). 24. For a more comprehensive analysis, see Mark J. Roe, A Political Theory of American Corporate Finance, 91 Colum. L. Rev. 10, 10 (1991) (arguing that the American public corporation is as much a political adaptation as an economic or technological necessity); Edward B. Rock, The Logic and (Uncertain) Significance of Institutional Shareholder Activism, 79 Geo. L.J. 445 (1991) (exploring the logic of collective action, shifting dynamics of institutional structure, and the divergence between principals and agents to understand the changes in the distribution of shareholdings and increase in shareholder activism); Marcel Kahan & Edward B. Rock, Hedge Funds in Corporate Governance and Corporate Control, 155 U. Pa. L. Rev (2007) (examining the nature of hedge fund activism, how and why it differs from institutional investors, and its implications for corporate governance and regulatory reform). 25. See, e.g., Bebchuk & Fried, supra note 13; Lucian Arye Bebchuk et al., Managerial Power and Rent Extraction in the Design of Executive Compensation, 69 U. Chi. L. Rev. 751, 753 (2002) ( Executive compensation has long attracted a great deal of attention from academics, the media, Congress, and the public at large.... [The] rise in academic work on the subject... has outpaced even the growth rate of executive compensation. ); Xavier Gabaix & Augustin Landier, Why Has CEO Pay Increased so Much?, 123 Q. J. Econ. 49, 52 (2008); Steven N. Kaplan, Executive Compensation and Corporate Governance in the U.S.: Perceptions, Facts and Challenges (Nat l Bureau of Econ. Research, Working Paper No , 2012). 26. See generally Gordon, supra note 1 (describing the role of boards of directors in mitigating agency problems). 27. See Stephen M. Bainbridge, The New Corporate Governance in Theory and Practice 155 (2008) (detailing the role of the board and its importance in the governance of the firm). 28. See Michelle M. Harner, Corporate Control and the Need for Meaningful Board Accountability, 94 Minn. L. Rev. 541, (2010) (focusing on boards broader duties in the context of a controlling shareholder); Arthur B. Laby, The Fiduciary Obligation as the Adoption of Ends, 56 Buff. L. Rev. 99, 135 (2008) (describing directors fiduciary duty to adopt shareholders ends).

118 December 2016] RETHINKING INDEPENDENT DIRECTORS TENURE 105 the functions it is expected to serve as well as in its structure and the composition of its members. B. The Board s Dual Role as Monitor and Adviser, and the Move Toward Independent Boards of Directors 1. The Board of Director s Role in the Governance of the Corporation The board of directors is one of the core organs of the modern corporation. 29 As such, it has been entrusted with several important roles in the governance of the corporation. First, while most of the operational decisionmaking can be, and is, delegated to management, the board is still required to be an active participant in some of the more important managerial business decisions, such as mergers, stock issuance, and change of company governance documents. 30 Second, the board is a resource for management to utilize, providing insight and advice as well as networking benefits, and facilitating the firm s access to various resources. 31 Third, the board is charged with a monitoring role, making sure that shareholder interests are fully served, in an effort to constrain the agency costs associated with a managerial centric corporation model. 32 While each board serves all of these functions, the primary role and purpose of the board in the governance of the corporation has changed significantly over the years. While in the early twentieth century the board s main function and expectation was to serve in an advisory role, providing insight and guidance to management along with networking benefits, the last few decades have seen the emergence of the monitoring board structure. 33 This board structure, in which the board s primary role is monitoring management, has become the predominant model for boards in the United States. 34 The tipping of the scales, moving from a predominantly advisory role to a predominantly monitoring function, has also led to a rethinking of the proper composition of the board. 35 Because the 29. Melvin Aron Eisenberg, Legal Models of Management Structure in the Modern Corporation: Officers, Directors, and Accountants, 63 Calif. L. Rev. 375, 376 (1975). 30. See Stephen M. Bainbridge, Corporate Governance After the Financial Crisis 45 (2012). 31. Id. at See Bainbridge, supra note 27, at 155 (detailing the role of the board monitoring management). 33. See Melvin Aron Eisenberg, The Structure of the Corporation: A Legal Analysis (1976); see also Bainbridge, supra note 27, at 155 (detailing the emergence of the monitoring structure over the last few decades). 34. See 1 Principles of Corporate Governance: Analysis and Recommendations 3.03(a) (Am. Law Inst. 1984); Stephen M. Bainbridge, Independent Directors and the ALI Corporate Governance Project, 61 Geo. Wash. L. Rev. 1034, 1035 (1993) (reviewing these principles in detail); Bainbridge, supra note 27, at See, e.g., Sanjai Bhagat & Bernard Black, The Uncertain Relationship Between Board Composition and Firm Performance, 54 Bus. Law. 921, (1999).

119 106 HASTINGS LAW JOURNAL [Vol. 68:97 different functions of the board also require different attributes from its members, a corresponding change in the composition of the board has taken place. 36 The ability to provide networking opportunities, business advice, and other insight is no longer the most valued set of skills. Rather, the ability to or at the very least the perception of an ability to effectively scrutinize management has become increasingly important. As such, the presence of directors perceived by the corporation and the public to be independent has become essential The Impact of the Shareholder Franchise Approach The shift in the perception and expectations of the board from an advisory institution at the disposal of management, to a watchdog and final decisionmaker 38 defending shareholders interests has evolved against a larger backdrop of a shift in corporate thinking, toward a shareholder franchise approach 39 and a greater reliance on stock markets to reflect accurate information. As part of the conceptual movement of the narrative of U.S. corporate governance discourse to a shareholder centric model, where the firm s end is to maximize the return to its shareholders, a natural step has been to contemplate means of empowering shareholders vis-à-vis management. Under current law, and because of the structure of shareholders equity interests, shareholders face several obstacles. 40 These obstacles often result in a passive approach that leaves incumbent management free to maximize its own interests. However, some shareholders try to challenge the ultimate discretion held by the board of directors and management by actively using their rights to create some form of checks and balances. The shareholder franchise movement has embraced this notion, calling for the breakdown of some of the barriers limiting shareholder intervention in corporate governance. Among these barriers are the legal 36. Id. See Gordon, supra note 1 and accompanying text. 37. Indeed, calls for board independence were embraced in the American Law Institute Principles of Corporate Governance. For example, requiring that independent directors comprise a majority of the board and, that as a matter of good corporate practice, the independent directors should not have outside employment or other commitments that would interfere with the performance of their duties. As detailed by Eisenberg and Bainbridge, the monitoring model required directors to take on an active role in the corporation, but one that was to monitor the performance of the senior executives of the company. Eisenberg, supra note 33; Bainbridge, supra note 32. For a description of a competing approach, see Miriam Hechler Baer, Corporate Policing and Corporate Governance: What Can We Learn from Hewlett-Packard s Pretexting Scandal?, 77 U. Cin. L. Rev. 523, 540 (2008) (describing the cultural theory of corporate governance). 38. Section 141(a) of the Delaware Corporate Code states that [t]he business and affairs of every corporation organized under this chapter shall be managed by or under the direction of a board of directors.... Del. Code Ann. tit. 8, 141(a) (West 2016). 39. See Bebchuk, supra note In this regard, examples include: the proxy rules and reimbursement policies, the lack of binding power of shareholder resolutions, and costs related to nominating board candidates. See id. at 688.

120 December 2016] RETHINKING INDEPENDENT DIRECTORS TENURE 107 and proxy rules regarding board elections and shareholders resolutions, 41 the staggered board and poison pill, 42 and other legal barriers limiting shareholder involvement. The proponents of breaking down these barriers, led by Professor Bebchuk, 43 assert that giving shareholders an effective say in the governance of the corporation will limit managerial slack and lead to more efficient corporations. Indeed, recent years have seen some successes on behalf of such movements. The SEC has implemented a reform to its proxy rules that eases the ability of shareholders to voice their opinion, 44 while Congress has passed an extensive bill that furthers the impact shareholders can have on the governance of the corporation. 45 The convergence of these movements, the view of the board as an internal watchdog of management actions, and the larger shift in the perception of the role of shareholders in corporate governance has led public companies to gradually move from a board that was dominated by insiders to a board that is mostly classified as independent according to current regulatory standards. Indeed, while in the 1950s forty-nine 41. See id. at ; see also Lucian Arye Bebchuk, The Case for Shareholder Access to the Ballot, 59 Bus. Law. 43, (2003); Melvin Aron Eisenberg, Access to the Corporate Proxy Machinery, 83 Harv. L. Rev. 1489, (1970); Brett H. McDonnell, Shareholder Bylaws, Shareholder Nominations, and Poison Pills, 3 Berkeley Bus. L.J. 205, 263 (2005); William K. Sjostrom, Jr. & Young Sang Kim, Majority Voting for the Election of Directors, 40 Conn. L. Rev. 459, (2007). 42. The combination of the staggered board (that is, a charter provision that provides for the replacement of only a portion of the board, usually one third, in each annual shareholders meeting) and a poison pill (a mechanism that prevents a hostile buyer from taking control by giving cheap purchase options to all shareholders other than the bidder, thus diluting his share in the corporation) that can only be revoked by the board of directors leads a hostile bidder, even if he has the support of shareholders, to wait for two to three years until he gains control of the board, a fact that in reality prevents the hostile takeover (without the consent of the board) altogether. 43. Professor Bebchuk has published several papers advocating this change. See Bebchuk, supra note 17; Lucian Arye Bebchuk, The Case for Increasing Shareholder Power, 118 Harv. L. Rev. 833, 836 (2005); Lucian A. Bebchuk, Reply, Letting Shareholders Set the Rules, 119 Harv. L. Rev. 1784, (2006); see also Brief for Harv. Law Sch. et al. as Amici Curiae Supporting Appellants, at 2 3, Am. Fed n of State, Cty., & Mun. Emps., Emps. Pension Plan v. Am. Int l Grp., Inc., 462 F.3d 121 (2d Cir. 2006) (No cv); Michael S. Kang, Shareholder Voting as Veto, 88 Ind. L.J. 1299, 1300 (2013) (reviewing and defending some aspects of the calls for greater voting power for shareholders). 44. See Facilitating Shareholder Director Nominations, 75 Fed. Reg. 56,668 (Sept. 16, 2010) (to be codified at 17 C.F.R. pts. 200, 232, 240, 249); see also Press Release, Sec. & Exch. Comm n, SEC Adopts New Measures to Facilitate Director Nominations by Shareholders (Aug. 25, 2010), press/2010/ htm; Bus. Roundtable v. SEC, 647 F.3d 1144, 1149 (D.C. Cir. 2011). 45. Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No , 124 Stat (codified at various sections of 12 U.S.C. (2010)). For a review of the main provisions of the Act, see U.S. House Comm. on Fin. Servs. Democrats, Wall Street Reform and Consumer Protection Act: Summary, (last visited Nov. 7, 2016); David Skeel, The New Financial Deal: Understanding the Dodd-Frank Act and Its (Unintended) Consequences 1 (2011). For a critical review of the Act, see Stephen M. Bainbridge, Dodd-Frank: Quack Federal Corporate Governance Round II, 95 Minn. L. Rev. 1779, (2011).

121 108 HASTINGS LAW JOURNAL [Vol. 68:97 percent of board members were company insiders, by 2005 only approximately twenty-five percent remained insiders. 46 C. Mandating Independent Directors: SOX and Dodd Frank s Contribution to the Shift in Board Composition and Roles While the movement toward independent boards was mainly 47 market driven until the early 2000s, 48 and to that point was not mandated by the regulator or by self-regulating bodies, this shift was further driven by the corporate scandals of the early 2000s. The backlash from the Enron and WorldCom scandals led to the enactment of the Sarbanes-Oxley Act of 2002 ( SOX ) 49 and subsequent stock exchange listing standards. The 2008 financial crisis led to similar reactive legislation in the form of the Dodd-Frank Wall Street Reform and Consumer Protection Act ( Dodd- Frank Act ). 50 These legislative acts and listings standards have not only transformed the voluntary shift in board composition into a mandatory one, but have also laid increasing responsibilities at the board s feet, further cementing its primary role as a monitor and not as an adviser Mandating Independence Part I: The Sarbanes-Oxley Act In the aftermath of the Enron scandal, the regulatory requirements for public corporations were overhauled by comprehensive legislation, SOX. 52 The empowerment of the board and the need to ensure its effectiveness as a monitor were an important part of the reform See Gordon, supra note 1, at 1473; see also Urska Velikonja, The Political Economy of Board Independence, 92 N.C. L. Rev. 855, 865 (2014). 47. State law has developed to require the approval of self-dealing transactions by disinterested directors, often independent directors. This requirement, along with the need for special independent committees, pushed companies to include more independent directors in their boardroom. 48. See Gordon, supra note 1, at 1473 (showing a decrease in the percentage of inside directors, from forty-one percent in 1950 to twenty-one percent in 1995, and to sixteen percent in 2000, well before the SOX requirements were put in place) U.S.C (2012). 50. See Dodd-Frank Wall Street Reform and Consumer Protection Act, 124 Stat For example, SOX mandated the creation of an audit committee of the board that has greater powers and many more responsibilities than ever before, such as working with external auditors of internal controls. See Melissa Maleske, 8 Ways SOX Changed Corporate Governance, InsideCounsel (Jan. 1, 2012), sl%20return= &page=6&slreturn= See John C. Coates IV, The Goals and Promise of the Sarbanes Oxley Act, 21 J. Econ. Persp. 91, (2007); Larry E. Ribstein, Market vs. Regulatory Responses to Corporate Fraud: A Critique of the Sarbanes-Oxley Act of 2002, 28 J. Corp. L. 1, (2002); Roberta Romano, Does the Sarbanes-Oxley Act Have a Future?, 26 Yale J. on Reg. 229, 235 (2009); Roberta Romano, The Sarbanes-Oxley Act and the Making of Quack Corporate Governance, 114 Yale L.J. 1521, 1523 (2005). 53. See Dana Brakman Reiser, Director Independence in the Independent Sector, 76 Fordham L. Rev. 795, (2007); see Stephen M. Bainbridge, A Critique of the NYSE s Director Independence Listing Standards (UCLA Sch. of Law, Research Paper Series, Paper No , 2002) (quoting Editorial, The Capitalist Cavalry, Wall St. J., June 7, 2002, at A10 (regarding the corporate governance proposals

122 December 2016] RETHINKING INDEPENDENT DIRECTORS TENURE 109 SOX directly regulated several aspects of the audit committee of the board, 54 mandating independent audit committees that are comprised of independent directors, and prohibiting members of such committees from accepting any consulting, advisory, or other compensatory fee from the company except for directors fees. 55 In addition, all major exchanges, including the New York Stock Exchange ( NYSE ) and NASDAQ, were required to amend their listing requirements to mandate that a majority of the members of the board of directors of listed companies be independent, 56 to expand the duties and powers of the independent directors, in particular in the context of the audit committee, and to reformulate their definition of independence. 57 Accordingly, in its post-sox listing standards, the NYSE mandated that all listed companies must have a majority of independent directors 58 with a specific definition of independence, which will be discussed below. In addition, listed companies are required to have an audit committee comprised solely of independent directors. 59 The committee has to have at least three members, all of whom are to be financially literate and at least one of whom has to have expertise in accounting or financial management. 60 Finally, the NYSE requires that, [t]o empower nonmanagement directors to serve as a more effective check on management, the non-management directors of each listed company must meet at regularly scheduled executive sessions without management. 61 Related, in July 2006, the SEC amended its disclosure rules to require disclosure of the following: (1) whether each director and person by the New York Stock Exchange, stating that they anointed boards of directors, especially independent directors as the capitalist cavalry )). 54. See 17 C.F.R. 228, 229, 240, 249, 274 (2012); Annemarie K. Keinath & Judith C. Walo, Audit Committee Responsibilities: Focusing on Oversight, Open Communication, and Best Practices, 74 CPA J. 22 (2004); Ganesh M. Pandit et al., Audit Committee Reports Before and After Sarbanes- Oxley, 75 CPA J. 42 (2005). 55. See 17 C.F.R A-3. For a detailed analysis of the stock exchange rules prior to and after SOX, see Bainbridge, supra note 27, at This is true unless a company is a controlled company, a limited partnership, is in bankruptcy proceedings, or lists only preferred or debt securities. See SEC Approves NYSE and NASDAQ Proposals Relating to Director Independence, FindLaw, (last visited Nov. 7, 2016). 57. See 17 C.F.R. 228, 229, 240, 249, 274 (2012). 58. N.Y. Stock Exch., Listed Company Manual 303A.01 (amended 2009), nyse.com/lcmtools/platformviewer.asp?selectednode=chp_1_4&manual=%2flcm%2fsections%2flcmsections%2f. 59. Id. 303A Id. 61. Id. 303A.03 (explaining that while no mandatory number of meetings is required, in practice such meetings take place regularly). See Bainbridge, supra note 27, at 178 (referring to a 1996 Korn/Ferry survey that found that the boards of sixty-two percent of respondents met in executive session at least once a year and that by 2005 that figure rose to ninety-four percent).

123 110 HASTINGS LAW JOURNAL [Vol. 68:97 nominated is independent of management; (2) any transactions, arrangements, or other relationships considered by the board of directors in determining if an individual satisfied the applicable independence standards; and (3) the names of any members of the audit, nominating, or compensation committees who are not independent. 62 The NASDAQ standards are substantially similar. 63 The post-sox stock exchange listing standards also strived to tighten the definition of director independence as compared to the standard that existed under state law. State corporations law has traditionally used a fairly vague standard to decide if a given director is independent of management, inquiring whether through personal or other relationships the directors are beholden to [management]. 64 In contrast, the new NYSE and NASDAQ listing requirements enacted post-sox adopt rules for deciding whether a director is adequately independent to be counted toward the requisite majority, each of which include both specific requirements 65 as well as a determination by the board that a nominee has no material direct or indirect relationship with the listed company. 66 Finally, while post-sox all listed companies were required to have an audit committee, 67 the NYSE also mandated the establishment of a nominating and corporate governance committee 68 and a compensation committee Press Release, Sec. & Exch. Comm n, SEC Votes to Adopt Changes to Disclosure Requirements Concerning Executive Compensation and Related Matters (July 26, 2006), news/press/2006/ htm. 63. However, NASDAQ expressly states an expectation that executive sessions of the outside directors will be held at least twice a year. NASDAQ, Stock Market Listing Rules , 2, %2Fnasdaq%2Fmain%2Fnasdaq-equityrules%2F (last visited Nov. 7, 2016). 64. Edward P. Welch et al., Folk on the Delaware General Corporation Law (5th ed. 2006) (citing the Delaware court decision In re Odyssey Partners, LP. v. Fleming Cos., 735 A.2d 386 (Del. Ch. 1999)). 65. Among the specific requirements are that directors are not allowed to be an employee of the listed company or an immediate family member of an individual who has been an executive officer within the last three years or is to receive more than $120,000 in direct compensation from the listed company, other than in director and committee fees. N.Y. Stock Exch., supra note 58, 303A Id. 303A.02(a)(i); NASDAQ, supra note 63, 4200(a)(15). 67. While state law allows the board to set up committees, it does not mandate formation of any specific one. See, e.g., Del. Code Ann. tit. 8, 141(c)(2) (West 2016). 68. See N.Y. Stock Exch., supra note 58, 303A.04. The nominating committee is in charge of nominating director candidates and often selects new CEOs and peer directors for the other board committees. While some treat the formation of an independent nominating committee as a weakening of the power management has over director election, in reality, company management still holds significant power over the board nomination process. See Bebchuk et al., supra note 25; Joseph V. Carcello et al., CEO Involvement in Selecting Board Members, Audit Committee Effectiveness, and Restatements, 28 Contemp. Acct. Res. 396, 401 (2011). 69. The compensation committee is tasked with setting the compensation of senior executives and generally oversees the corporation s compensation policies. Under NYSE Listing Rules, the

124 December 2016] RETHINKING INDEPENDENT DIRECTORS TENURE Mandating Independence Part II: Dodd-Frank and the Expansion of Director Independence In the wake of the 2009 collapse of the financial industry, Congress reacted with the Dodd-Frank Act. Some might call the Act a catch-all legislative reform dealing with various, and seemingly unrelated, issues: from the regulation of the financial industry and the shadow banking system to derivative trading and whistle-blowing. 70 Part of the reform addressed the issues of compensation committee independence, its authority to retain and be directly responsible for the consultants and advisers it retains, its analysis of the independence of compensation consultants and advisers, and the disclosure of any conflicts of interest concerning compensation consultants. 71 Accordingly, the stock exchanges have filed with the SEC suggested listing rules 72 that comply with the new requirements without going beyond them. 73 The SEC rules and the proposed listing requirements of the stock exchanges require boards to take into consideration the following when assessing the independence of compensation committee members: (1) the source of compensation of the director, including any consulting, advisory, or other compensatory fee paid by the issuer to the director; and (2) whether the director is affiliated with the issuer, its subsidiaries, or their affiliates. 74 These requirements are specific to the compensation committee must be comprised solely of independent directors. N.Y. Stock Exch., supra note 58, 303A For a critique of the Dodd-Frank Act, see Bainbridge, supra note 30. For a more general critique of legislation in the wake of a crisis, see Roberta Romano, Regulating in the Dark, in Regulatory Breakdown: The Crisis of Confidence in U.S. Regulation (Cary Coglianese ed., 2012). 71. Section 952 of the Dodd-Frank Act and Rule 10C-1 of the Securities Exchange Act of 1934 direct the national securities exchanges to adopt new listing standards applicable to compensation committees and compensation advisers. See 17 C.F.R C-1 (2012). 72. NASDAQ required executive compensation decisions to be determined either by (1) a compensation committee comprised of independent directors; or (2) independent directors constituting a majority of the board s independent directors. NASDAQ s Proposed Standards provided that listed companies be required to have a compensation committee comprised of two or more independent directors. Summary of NASDAQ Corporate Governance Proposal: As of October 10, 2002, NASDAQ (Oct. 10, 2002), ls.pdf C.F.R C-1 directs the SEC to require the National Securities Exchanges and Associations to adopt listing rules that implement the requirements of Rule 10C-1. On September 25, 2012, NYSE and NASDAQ each filed proposed listing rules with the SEC, collectively referred to throughout this commentary as the Proposed Standards, to implement the requirements of Rule 10C-1. In general, the Proposed Standards closely track section 952 and do not contain major changes or heightened requirements to the SEC s Rule 10C These two factors are specific to the compensation committee members and are in addition to the so called bright-line independence tests currently required by the respective exchanges. NYSE s Standards require that the two above factors be considered with all other relevant factors in determining whether a director has a relationship to the listed company which is material to that director s ability to be independent from management in connection with the duties of a compensation committee member. NASDAQ s Standards prohibit a compensation committee member from

125 112 HASTINGS LAW JOURNAL [Vol. 68:97 committee and are added to the general rules as to director independence that were described previously. 75 Indeed, through private ordering and legislative and listing rules, director independence has become a cornerstone of modern corporate governance of public firms. 76 This emphasis on independence is reflected in not only the requirement of having a majority of independent directors on the board as a whole and mandating independence of specific committees of the board, but also in the more detailed, brightline component of the definition of director independence. 77 D. Voluntary Changes Leading to Greater Independence of Board Members As discussed above, the last decade has seen major transformations in the structure of the board of directors. Aside from the mandatory and listing rules requiring a minimum threshold presence of directors considered to be independent, S&P 500 companies have voluntarily contributed to this ongoing shift in board structure by taking further steps to enhance the perceived independence of the board. These overall trends are recited by practitioners and academics alike when discussing the increased movement toward director independence and accountability to shareholders. 78 This voluntary shift toward enhanced board independence has manifested itself in several structural changes to the public U.S. board. First, while only a majority of the board is required to be independent in order to comply with regulatory requirements, independent directors, as currently defined, now make up eighty-four percent of all board accepting directly or indirectly any consulting, advising, or compensatory fee from the issuer (subject to certain limited exemptions). NASDAQ s Standards further provide that the board must also consider whether the director is affiliated with the company and whether such affiliation would impair the director s judgment as a member of the compensation committee. NASDAQ, supra note See supra notes and accompanying text. 76. See, e.g., Daniele Marchesani, The Concept of Autonomy and the Independent Director of Public Corporations, 2 Berkeley Bus. L.J. 315, 377 (2005); Arthur Levitt, Chairman, Sec. & Exch. Comm n, Remarks Before the Conference on the Rise and Effectiveness of New Corporate Governance Standards (Dec. 12, 2000), See infra note 98 and accompanying text. 78. See, e.g., Bainbridge, supra note 27; Gordon, supra note 1; Independence Requirements for Board Members, Morrison & Foerster (Apr. 6, 2004), independence-requirements-for-board-members; Considering Director Independence, Covington & Burling LLP (July 12, 2007), Jay P. Lefkowitz, Director Independence: Interplay Between Delaware Law and Exchange Rules, Harv. L. Sch. F. on Corp. Governance & Fin. Reg. (Oct. 7, 2013), Theo Francis & Joann S. Lublin, Boards Get More Independent, but Ties Endure, Wall St. J. (Jan. 19, 2016, 3:16 PM), com/articles/boards-get-more-independent-but-ties-endure

126 December 2016] RETHINKING INDEPENDENT DIRECTORS TENURE 113 members the highest share ever. 79 This percentage reflects an ongoing increase in the ratio of independent directors to non-independent directors, from 3.6:1 a decade ago to 5.4:1 today. In addition, the number of fully independent boards in the S&P 500, where the CEO is the only non-independent director, have radically increased from twenty-two percent in 2000 and thirty-nine percent in 2005 to nearly fifty-nine percent of boards today. 80 Second, in 2014 forty-seven percent of S&P 500 boards had separate CEO and chair roles, up from twenty-three percent in 2000, and twentyeight percent of chairs were independent, versus just nine percent in Third, board members dependency on the confidence and approval of shareholders 82 has dramatically risen in the last decade due to the increased rate of majority voting requirements and declassification of boards: Currently eighty-four percent of the companies in the S&P 500 have a majority voting and majority resignation policy in place, up from seventy-nine percent in 2011, sixty-five percent in 2009, and fifty-six percent in The percentage of boards serving one-year terms has also risen every year and currently stands at ninety-three percent, more than double what it was a decade ago (forty percent). 84 Fourth, only twenty-two percent of the directors who started their tenure in 2014 are active CEOs, which is down from fifty-three percent a decade ago, a trend that is also true with respect to other executives. 85 Fifth, director compensation has been on the rise, enabling and incentivizing directors to truly engage in their role. 86 Sixth, restrictions on other corporate directorships are increasingly becoming the norm. 87 In light of the time and 79. Data used in this Part was collated from several reports. See, e.g., Spencer Stuart, supra note 3, at 9; Shearman & Sterling LLP, 10th Annual Survey: Corporate Governance of the Largest US Public Companies 5 (2012); PwC, Annual Corporate Directors Survey: Insights from the Boardroom (2012); Rajeev Kumar, 2014 Corporate Governance Review, Harv. L. Sch. F. on Corp. Governance & Fin. Reg. (Oct. 30, 2014) Korn Ferry Inst., 33rd Annual Board of Directors Study 30 (2008). 80. All sources cited supra note Id. 82. The greater dependence of directors on the approval of shareholders is perceived as another sign of increased independence and responsiveness to shareholders. See infra note 119 and accompanying text. 83. See supra note 79 and accompanying text. 84. Id. The Author has served as counsel at the Shareholder Rights Project at Harvard Law School, a clinical program that represented institutional investors in an effort to declassify boards. 85. Fewer active executives are coming onto boards as well. In 2012, the ratio of active to retired new directors was 59:41, and in 2006, it was 66:34. See Spencer Stuart, supra note See infra note 175 and accompanying text. However, as discussed later, while standing on its own this may be a positive trend, in the context of increased tenure, higher compensation may aggravate the concern for director independence. See infra note 174 and accompanying text. 87. Such limitations include a cap (which ranges from two to five other positions) on the number of additional boards for all directors or only for directors employed by public companies, or a request that directors notify the chairman in advance of accepting an invitation to join another company board. See Spencer Stuart, supra note 3.

127 114 HASTINGS LAW JOURNAL [Vol. 68:97 commitment required for effective service, seventy-five percent of S&P 500 companies now limit other corporate directorships, versus twentyseven percent in Finally, the financial literacy of the board has improved. In 2003, only twenty-one percent of boards reported having a financial expert while today, every S&P 500 board reports having at least one financial expert, and the percentage of chief financial officers, treasurers, or other financial executives serving as audit committee chairs increased from four percent in 2002 to thirty-seven percent in E. The Implications The transition that the board of directors has made in recent years, from an advisory focused role to a monitoring oriented role, and from an insiders board to an independent board raises two separate issues. First, a question arises as to whether the right balance between the advisory role and the monitoring role has been struck. Second, the question arises as to whether current independence criteria actually serve the monitoring role of the board well. As further developed in Parts III and IV, this Article suggests that the answer to both of these questions might be less certain than commonly assumed. II. Theory Versus Reality: How Current Rules Fail to Fulfill the Intent Behind the Independence Standard The regulatory emphasis on independence as a corporate governance cornerstone raises a question as to the effectiveness of current regulation and listing standards in achieving the goal of director independence. As discussed in the following Parts, current definitions of director independence suffer from numerous flaws that jeopardize the realization of the legislative intent behind mandating director independence. First, current definitions suffer from lack of uniformity and consistency, as state law and listing rules differ as to the exact definition of director independence, and both sets of rules leave too much interpretive room to the board itself in determining its independence. Second, current definitions of director independence ignore the impact that long tenure potentially has on director independence which is the main argument developed in the Article. A. Are All Independent Directors Created Equal? The Lack of Uniformity and Consistency As previously described, federal law and listings rules have developed to require the presence of independent directors on several of 88. Id. 89. Id.

128 December 2016] RETHINKING INDEPENDENT DIRECTORS TENURE 115 the board committees as well as to require that a majority of directors on the board be considered independent. 90 However, SOX and Dodd-Frank were not the first to require board independence in certain contexts. Rather, the term independent directors arose out of a larger backdrop of existing state laws requiring director independence in numerous situations, such as the approval of interested transactions and in derivative suits and litigation committees. For instance, Delaware law requiring independent directors approval of related party transactions in order to preserve the applicability of the business judgment rule has treated the issue of director independence as a factual issue to be determined on a case by case basis. Specifically, Delaware law examines whether the director s decision is based on the corporate merits of the subject before the board, rather than extraneous considerations or influences, 91 or whether a director is, for any substantial reason, incapable of making a decision with only the best interests of the corporation in mind. 92 This in turn could, and indeed has, led to different outcomes in particular cases depending on procedural issues such as the burden of proof, the specifics of the case, and the availability of admissible facts. 93 Most important, Delaware law suggests that even when a director is independent as to some issues, she might not be for others See N.Y. Stock Exch., supra note 58, 303A. 91. Beam ex rel. Martha Stewart Living Omnimedia, Inc. v. Stewart, 845 A.2d 1040, 1049 (Del. 2004); see Maureen S. Brundage & Oliver C. Brahmst, Director Independence: Alive and Well Under Delaware Law, in Global Corporate Governance Guide 2004: Best Practice in the Boardroom (2004); Usha Rodrigues, The Fetishization of Independence, 33 J. Corp. L. 447, 469 (2008). 92. In re Oracle Corp. Derivative Litig., 824 A.2d 917, 938 (Del. Ch. 2003) (defining independence such that a director s decision is based on the corporate merits of the subject before the board rather than extraneous considerations or influences. (quoting Parfi Holding AB v. Mirror Image Internet, Inc., 794 A.2d 1211, 1232 (Del. Ch. 2001))). 93. For instance, in the Oracle case it was determined that personal connections rose to the level of impeding independence, while in the Martha Stewart case the opposite was held. See id. Similarly, the In re MFW Shareholders Litigation court stated that: Even in the context of personal, rather than financial, relationships, the materiality requirement does not mean that the test cannot be met. For example, it is sometimes blithely written that mere allegations of personal friendship do not cut it. More properly, this statement would read mere allegations of mere friendship do not qualify. If the friendship was one where the parties had served as each other s maids of honor, had been each other s college roommates, shared a beach house with their families each summer for a decade, and are as thick as blood relations, that context would be different from parties who occasionally had dinner over the years, go to some of the same parties and gatherings annually, and call themselves friends. In re MFW S holders Litig., 67 A.3d 496, 509 n.37 (Del. Ch. 2013). 94. Under Delaware law, there is a presumption that directors are independent. See In re Aronson v. Lewis, 473 A.2d 805, 815 (Del. 1984). To show that a director is not independent, a plaintiff must show that the directors are beholden to the [controlling party] or so under [the controller s] influence that [the director s] discretion would be sterilized. See In re Rales v. Blasband, 634 A.2d 927, 936 (Del. 1993) (citing Aronson, 473 A.2d at 815). Thus, Delaware law has treated the issue of independence as an ad hoc factual issue, as opposed to the more specified requirements of the stock exchanges and federal law,

129 116 HASTINGS LAW JOURNAL [Vol. 68:97 Compared to the ad hoc nature of state law independence standards, which require independence to be assessed on a case by case basis, based on numerous factors, it is no surprise that the stock exchange rules following SOX and Dodd-Frank are widely perceived as brightline rules. 95 They contain specific prerequisites for director independence, explicitly prohibiting directors from being considered independent if they were employees of the company, received compensation over a certain threshold that is not a director fee, had ties to the company s auditor, or had business or compensation interlocks with the company above a certain threshold. 96 However, while these prerequisites are effective in eliminating doubt in specific, common instances, the mere fact that a director does not fall into one of the listed disqualifications in the listing rules does not automatically render him or her to be independent, even under the current stock exchanges definition of independence. The listing standards start with a general requirement that [n]o director qualifies as independent unless the board of directors affirmatively determines that the director has no material relationship with the listed company The question of what is a material relationship was left to the board to decide, thus, in practice, leaving a considerable gray zone as to the definition of this term and discretion as to the classification of a director as independent by the company. 98 Thus, the lack of uniformity and consistency in defining independence that allows different companies to adopt different standards stems not only from the fact that state law and listings requirements differ on some of the specific prerequisites for independence, but is also exacerbated by the fact that each definition ultimately leaves the question of who is independent to the judgment of the board or the court. The use of standards such as material relationship or control invariably leads to questions of examining whether the director s decision is based on the corporate merits of the subject before the board, rather than extraneous considerations or influences. Beam ex rel. Martha Stewart, 845 A.2d at (Del. 2004) (discussing whether a director is, for any substantial reason, incapable of making a decision with only the best interests of the corporation in mind ); see also In re Oracle Corp. Derivative Litig., 824 A.2d at See Bainbridge, supra note 34; see also N.Y. Stock Exch., supra note For a more detailed commentary on each requirement, see Commentary on NYSE Rulemaking, Sec. & Exchange Commission (Apr. 11, 2003), For further explanation, see SEC Approves NYSE and NASDAQ Proposals, supra note N.Y. Stock Exch., supra note 58, 303A.02(a)(i). 98. The case of Penny Pritzker, one of America s richest and most powerful businesswomen, provides a nice illustration of this gray zone. She was an independent director of Hyatt Hotels until her status changed. See John R. Emshwiller & Alexandra Berzon, Hyatt Director Gets a Status Makeover, Wall St. J. (Aug. 24, 2010, 12:01 AM), For a more detailed critique, see Governance Center Blog: Just What Is an Independent Director Anyway?, Conf. Board (Sept. 10, 2010),

130 December 2016] RETHINKING INDEPENDENT DIRECTORS TENURE 117 judgment and fact finding, and when such judgment lies with the board different companies can vary in their outcomes. 99 B. Are All Independent Directors Created Equal? The Inadequate Attention to Board Tenure Aside from the diversity in prerequisites and standards of different regulatory bodies and the way in which the application of the same standard by these different bodies can lead to different outcomes, this Article seeks to turn the spotlight to a separate issue relating to the definition of director independence. While prior work has critiqued the perception of independence and the effectiveness of monitoring by independent directors, 100 these critiques have also approached independence as a snap-shot in time rather than treating it as an ongoing evaluation. While tenure of board members has been explored to some extent in academic literature, 101 academic discourse has mainly focused on its impact on board performance. 102 The potential impact of board tenure on board independence has not been adequately explored in academic literature, and up until recently has escaped the public eye. 103 In addition, despite its potential importance to independence, the issue of tenure has escaped the legal reforms of SOX and Dodd-Frank and the ensuing listing requirement s definitions of independence, as well as the state law definition of independence. The following Part seeks to explore the impact that director tenure potentially has on director independence. 99. Although courts might have final say on these matters, if challenged, their tendency to interfere with such judgment calls is likely to be limited See Lisa M. Fairfax, The Uneasy Case for the Inside Director, 96 Iowa L. Rev. 127, (2010) (describing a myriad of factors that might make independent directors less effective in their expected role as monitors); Rodrigues, supra note 91 (arguing that director independence should be examined on a case-by-case basis, and highlighting the limited value of outside directors aside from the monitoring function) See, e.g., Bhagat & Black, supra note 35; Chandra S. Mishra & James F. Nielsen, Board Independence and Compensation Policies in Large Bank Holding Companies, 29 Fin. Mgmt. 51, (2000) (finding that tenure and pay for performance incentives are substitutional in improving a firm s accounting, and that when pay for performance arrangements are set the value of insiders increases); Nikos Vafeas, Length of Board Tenure and Outside Director Independence, 30 J. Bus. Fin. & Acct (2003) (examining the impact of tenure on board structure attributes and directors positions inside the board for a sample of companies in 1994) See Sterling Zhenrui Huang, Zombie Board: Board Tenure and Firm Performance (Sing. Mgmt. Univ., Sch. of Acct., Working Paper No , 2013); see also Vafeas, supra note See infra note 131 and accompanying text.

131 118 HASTINGS LAW JOURNAL [Vol. 68:97 1. Tenure, Social Connections, and Structural Bias Social ties are already considered a potential disqualifying factor under Delaware state law, but are missing from the bright-line prerequisites for independence in stock exchange rules, which instead focus on directors financial ties to the corporation. 104 While preexisting social ties to the upper management of the corporation is an issue that in itself could threaten true independence, long tenure could also exacerbate the impact that such ties have on director independence. Additionally, even without preexisting ties, long tenure could result in the cultivation of newly formed relationships with management to the point where they might undermine independence. Similarly, tenure could also impact the intra-board environment. As directors spend more time on the board, they not only gain experience and knowledge, but also foster social interaction with their peers on the board and with upper management. As tenure increases, these ties are likely to grow stronger, leading to a structural bias: the bias resulting from board members interactions with one another after joining the board. 105 This bias could potentially compromise directors ability to act independently of their social ties, or at the very least, such close ties might cloud directors ability to detect wrongdoing. Importantly, tenure potentially affects not only preexisting and newly formed social ties with management, but also increases this structural bias, making it less likely that any single director would be willing to voice an opinion if such opinion might jeopardize the close-knit atmosphere of the boardroom. Indeed, anecdotally, congressional investigation into the Enron and WorldCom cases the scandals that jumpstarted the increased attention to board independence concluded that Enron s CEO, Conrad Black, had longstanding social, business, and political ties with directors that undermined the directors ability to be diligent and detect the CEO s fraud See Lisa M. Fairfax, Sarbanes-Oxley, Corporate Federalism, and the Declining Significance of Federal Reforms on State Director Independence Standards, 31 Ohio N. U. L. Rev. 381, 402 (2005) (discussing the Oracle and Beam cases in the context of Delaware courts willingness to consider social and professional ties in the independence inquiry); see also Beam ex rel. Martha Stewart Living Omnimedia, Inc. v. Stewart, 845 A.2d 1040 (Del. 2004) (focusing on social and professional ties); In re Oracle Corp. Derivative Litig., 824 A.2d 917, 938 (Del. Ch. 2003) (holding that the independence analysis should pay heed to personal and social relationships among directors, and finding that such relationships negated directors independence) See Julian Velasco, Structural Bias and the Need for Substantive Review, 82 Wash. U. L. Q. 821, (2004) See Richard C. Breeden, Restoring Trust: Report to the Hon. Jed S. Rakoff on Corporate Governance for the Future of MCI, Inc (2003). Regarding the issue of board dynamics and fraud, see Hatice Uzun et al., Board Composition and Corporate Fraud, Fin. Analysts J. 33, 41 (2004).

132 December 2016] RETHINKING INDEPENDENT DIRECTORS TENURE 119 Granted, social science 107 and corporate governance 108 literature has pointed out that a close-knit board can be beneficial for board performance, by increasing trust and openness between board members. However, the same social science literature has also acknowledged that these benefits do come with a price tag of decreased independence and increased difficulty in impartially assessing another director s work. 109 Perhaps more important, a close-knit board can tend to avoid conflict if and when action would undermine the friendship the members have formed. 110 While critics of current definitions of director independence have already voiced concern over the impact that social interaction might have on independence and while Delaware law has acknowledged the potential effect it might have on independence (although in a very limited fashion) 111 the impact of tenure on the equation has evaded a similar treatment. Since tenure in not a fixed element, but rather, it increases with time, the impact of social ties, both preexisting and newly formed, is expected to grow as the tenure of any director grows longer. A 107. See James D. Westphal & Edward J. Zajac, Defections from the Inner Circle: Social Exchange, Reciprocity, and the Diffusion of Board Independence in U.S. Corporations, 42 Admin. Sci. Q. 161, (1997) See John F. Olson & Michael T. Adams, Composing a Balanced and Effective Board to Meet New Governance Mandates, 59 Bus. Law. 421, (2004) See Victor Brudney, The Independent Director Heavenly City or Potemkin Village?, 95 Harv. L. Rev. 597, , (1982); see also Marleen A. O Connor, The Enron Board: The Perils of Groupthink, 71 U. Cin. L. Rev (2003) See Karen A. Jehn & Priti Pradhan Shah, Interpersonal Relationships and Task Performance: An Examination of Mediating Processes in Friendship and Acquaintance Groups, 72 J. Personality & Soc. Psychol. 775, 778 (1997); Janine Nahapiet & Sumantra Ghoshal, Social Capital, Intellectual Capital, and the Organizational Advantage, 23 Acad. Mgmt. Rev. 242, 245 (1998); Reed E. Nelson, The Strength of Strong Ties: Social Networks and Intergroup Conflict in Organizations, 32 Acad. Mgmt. J. 377, 380 (1989); Jerry Goodstein & Warren Boeker, Turbulence at the Top: A New Perspective on Governance Structure Changes and Strategic Change, 34 Acad. Mgmt. J. 306 (1991) (finding that the longer the members of a board of directors have worked together, the more likely they are to resist change); Stanley C. Vance, Corporate Leadership: Boards, Directors, and Strategy (Keith Davis & Fred Luthans eds., 1983) (finding that the longer the members of a board of directors have worked together, the more likely they are to tolerate poor performance on the part of senior management); Rita D. Kosnik, Effects of Board Demography and Directors Incentives on Corporate Greenmail Decisions, 33 Acad. Mgmt. J. 129 (1990) See Beam ex rel. Martha Stewart Living Omnimedia, Inc. v. Stewart, 845 A.2d 1040, 1050 (Del. 2004) (emphasizing that evidence regarding social, professional, or business relationships would normally be insufficient to discredit a director s independence); see also Litt v. Wycoff, No. Civ.A NC, 2003 WL , at *4 (Del. Ch. Mar. 28, 2003) (noting that even longstanding personal friendships would not impede a director s independence); Crescent/Mach I Partners, L.P. v. Turner, 846 A.2d 963, (Del. Ch. 2000) (stating that a fifteen-year personal relationship is insufficient to impact an independence inquiry); In re Walt Disney Co. Derivative Litig., 731 A.2d 342, 352 (Del. Ch. 1998) (establishing that Ovitz and Michael Eisner, the CEO of Walt Disney, had been friends for twenty-five years before Eisner recruited Ovitz to serve as president and director, but reasoning that such friendship did not impact Eisner s ability to be deemed independent for purposes of assessing the derivative action against Ovitz).

133 120 HASTINGS LAW JOURNAL [Vol. 68:97 board member who has served with the same close group for ten or twelve years is likely to suffer from more social bias than when she had served for two or five years. As tenure increases, old social ties grow stronger and new social ties are formed, all of which exacerbate the potential threat to independence. A related issue stems not from the direct impact tenure has on the independence of a long-tenured director, but rather, from the impact long-tenured directors have on the independence of incoming directors and the ability of the boardroom to foster an open to all ideas atmosphere. Since longer tenured directors arguably carry more clout and influence in the boardroom, they might inhibit and restrain, intentionally or inadvertently, the ability and willingness of the less tenured directors to act independently, encouraging conformity to group thinking. 112 Although in many cases a unified board could better counter managerial entrenchment, in cases where tenured members of the board are captured by management or in cases where the interests of shareholders might diverge from the interests of some board members, such unity could pose a serious threat to effective and objective decisionmaking. 2. Tenure, Human Capital, and Financial Stake While courts and regulators treat financial ties with a company as an important factor in assessing director independence, they do not consider director fees as part of such financial ties. 113 This approach would seem to be reasonable when compensation is given nominally for the service a director provides, as proper compensation could better incentivize a director to invest the required amount of time in the job. However, true financial dependency cannot be narrowed to just ties outside of director fees. Indeed, some academics have already voiced concern that the nontrivial payments to directors might incentivize them to hold on to their seat at the price of voicing their opinion if those two choices were to clash. 114 Director tenure exacerbates this concern. As further detailed in Part V, director compensation has not only risen in absolute terms in recent years, but has also changed in structure, moving from cash payments to 112. See Einer Elhauge, Are Term Limits Undemocratic?, 64 U. Chi. L. Rev. 83, 125 (1997) (describing the impact tenure has on power, clout, and influence in the political sphere) For a critique of the exemption of director fees, see J. Robert Brown Jr., The Myth of Director Independence Under Delaware Law: The Payment of $376,733 Does Not Result in a Loss of Director Independence, theracetothebottom (Apr. 25, 2011, 6:00 AM), independent-directors/the-myth-of-director-independence-under-delaware-law-the-pay.html. For the regulatory landscape, see Fairfax, supra note 104 (detailing Delaware and federal treatment of fees) See Brown Jr., supra note 113.

134 December 2016] RETHINKING INDEPENDENT DIRECTORS TENURE 121 equity compensation in the form of options and restricted stock. 115 These trends of increased compensation in general, and equity compensation in particular, are widely regarded as good governance practices better aligning directors with shareholder interests. However, when factoring tenure into the equation, serious concerns as to director independence can arise. As directors serve on the board for longer periods, they accumulate an increasing portion of the company s equity, some of which they can only sell when they leave the board. 116 Having their human capital and reputation invested in the corporation and also possessing an increased financial stake in the corporation might put their willingness to act independently at risk if such action could significantly damage the value of their equity. In other words, while equity compensation will generally incentivize directors to maximize firm value, directors might refrain from acting diligently and independently when such actions would have a negative impact on firm value and in turn on their equity, in the short to intermediate term, even if such action would potentially improve long-term value. Moreover, one can argue that one of the main duties of a director is to assure the accurate conveyance of information to the market, 117 regardless of the impact such information would have on firm value. Tying director compensation to performance is counter effective in ensuring the fulfillment of such duty, and tenure, as detailed above, further exacerbates this concern. Finally, in assessing director compensation, one must also factor in executive compensation. When both managers and directors hold sizable equity interests in the corporation, their interests might be better aligned to maximize firm value. However, at the same time, aligning managers and directors interests might also put shareholders interests at risk by over aligning the monitor s interests (the board) with management s interests, carrying the risk that such over-alignment would lead to cases of earnings management 118 and a monitoring failure For anecdotal evidence regarding director compensation and the proportion of equity compensation with respect to Apple, Inc., Wal-Mart Stores, Inc., General Electric Company, and other large corporations, see Austin Chambers, The Director Compensation Project: AT&T (T), theracetothebottom (Feb. 11, 2016, 6:00 AM), For a review of director compensation trends and the increased use of restricted stock, see Steve Pakela & John Sinkular, Trends in Board of Director Compensation, Harv. L. Sch. F. on Corp. Governance & Fin. Reg. (Apr. 13, 2015), Robert K. Herdman, Chief Accountant, Sec. & Exch. Comm n, Making Audit Committees More Effective (Mar. 7, 2002), Management of earnings is the use of accounting techniques to produce financial reports that may paint an overly positive picture of a company s business activities and financial position. See, e.g., Biao Xie et al., Earnings Management and Corporate Governance: The Role of the Board and the Audit Committee, 9 J. Corp. Fin. 295 (2003). Similar concerns of conflicts of interests have been raised

135 122 HASTINGS LAW JOURNAL [Vol. 68:97 3. Tenure and Reelection While directors must earn shareholder approval in order to be elected to the board though in some cases the approval threshold for reelection is very minimal 119 their true dependency lies with management and their peers. Because the overwhelming majority of director elections are uncontested, inclusion in the company s ballot is paramount to a director s ability to be elected and to subsequently hold her seat. 120 Moreover, in some instances, incumbent directors may continue to hold their seat, despite shareholder lack of support, if their peers on the board so determine. 121 This current structure of director election, where management effectively controls director nomination, puts directors in a potentially compromised position, and forces them to consider the ramifications for their reelection if they choose to confront management or their peer directors. Ironically, the recent trend toward annual elections, 122 a positive trend in itself from a governance perspective, might aggravate with respect to the firm s outside auditor. See, e.g., Tamar Frankel, Accountants Independence: The Recent Dilemma, 2000 Colum. Bus. L. Rev. 261, (2000) In many U.S. firms the standard of election is a simple plurality resulting in a need for minimal support. Even in those firms that adopted majority rules, the lack of a slate of challenging candidates, as is usually the case, leads to very rare instances where directors are not elected. Even in those cases, the board usually retains the power to keep such director on the board nonetheless. For a review of the issues with current director voting, see Letter from Edward J. Durkin, Dir. of Corp. Affairs, United Bhd. of Carpenters, to Elizabeth M. Murphy, Sec y, U.S. Sec. & Exch. Comm n (May 20, 2011), see also Jay Cai et al., A Paper Tiger? An Empirical Analysis of Majority Voting, 21 J. Corp. Fin. 119 (2013) (questioning the impact of current majority voting policies); Yonca Ertimur et al., Does the Director Election System Matter? Evidence from Majority Voting, 20 Rev. Acct. Stud. 1, (2015) (finding that majority voting is associated with abnormal return in comparison to the plurality system); City of Westland Police v. Axcelis Techs., Inc., No VCN, 2009 WL , at *5 (Del. Ch. 2009) (finding that the refusal of a board of directors to accept the resignation of a director who fails to obtain a majority vote under a Pfizer-style majority vote resignation policy is largely immune from judicial review). For an analysis of City of Westland Police, see Lawrence Hamermesh, Delaware Decision Defers to Retention of Directors Under a Majority Vote Resignation Policy, Harv. L. Sch. F. on Corp. Governance & Fin. Reg. (Oct. 30, 2009), For example, in 2013 there were only thirty-five contested elections in companies in the Russell 3000, and only fourteen of those elections were in companies with a market cap exceeding one billion dollars. See Chart of the Week: Proxy Contests by Index and Reason, Conf. Board, conference-board.org/retrievefile.cfm?filename=tcb-cw-032.pdf&type=subsite (last visited Nov. 7, 2016); see also John Lovallo, Proxy Contests on the Rise Activists Emboldened by Success, JDSupra, (last visited Nov. 7, 2016) (analyzing the 2013 proxy season); see also Bebchuk, supra note 17, at ( [M]ost elections will likely be uncontested.... Under existing default arrangements, shareholders do not have any meaningful power to veto candidates put forward by the board in an uncontested election. ) In most cases, even under a majority election system, the board retains the power to reject a director s resignation. See Cai et al., supra note See, e.g., Re-Jin Guo et al., Activism and the Move Toward Annual Director Elections, Director Notes (The Conf. Board), Dec. 2011, at 3; Spencer Stuart, supra note 3 and accompanying text.

136 December 2016] RETHINKING INDEPENDENT DIRECTORS TENURE 123 this concern. If in the past most directors were guaranteed a three-year term due to the staggered board structure that prevailed in the S&P 500, due to the declassification of most boards they now face annual elections. 123 The continued dependency on management, and the current lack of reforms to the proxy system, could potentially make these directors even more concerned about their reelection and securing management and peer support, as they now are granted only one-year terms. While tenure might not seem directly relevant to this issue of dependency on management support, it does have an indirect effect. In a world where directors may serve indefinite terms, their willingness to risk their position would be smaller than in a world where directors terms are finite. Because director elections in the United States are rarely contested, each director not only controls the level of her pay but also the duration of it so long as she stays in the good graces of her peers and management. This provides directors with higher expected value for the position, since they can decide for how long they will get the pay stream it entitles. In a world where tenure is restricted, the expected value of a director position is smaller. Having less at stake may incentivize directors to act in the best interests of shareholders. Similarly, limiting tenure may also foster more scrutiny from directors nearing the end of their term. Just as presidents tend to be more active on controversial issues in their second term, when they can no longer run for reelection, directors might be willing to be more proactive in confronting issues if their term is limited. 4. Can Tenure Strengthen Independence? While it is clear that tenure can impact director independence, some argue that it is not always the case that such impact is negative, as tenure may strengthen director independence in certain cases. 124 As a board member s tenure grows, her confidence, networking, and knowledge of the company may make her more independent, the argument goes. 125 This argument is often raised in the context of the relationship between 123. See Spencer Stuart, supra note 3 and accompanying text William M. Libit & Todd E. Freier, Director Tenure: The Next Boardroom Battle, Corp. Board (Chapman & Cutler LLP), Mar./Apr. 2015, at 7, Chapman_Director_Tenure_Next_Boardroom_Battle_ pdf ( Longer-tenured directors may be more likely to criticize and challenge management (compared to newer, more deferential board members), and may have a better ability to evaluate management. ); see, e.g., David A. Katz, Renewed Focus on Corporate Director Tenure, Harv. L. Sch. F. on Corp. Governance & Fin. Reg. (May 22, 2014), ( It is often the case that older directors are among the savviest and most skilled board members, and that longtenured directors may be in the best position to manage a powerful chief executive by virtue of their shared history and many years of building trust and collegiality together. ) Katz, supra note 124.

137 124 HASTINGS LAW JOURNAL [Vol. 68:97 the board and the CEO. 126 Since CEO tenure is, on average, shorter than that of a director, an argument can be made that the more tenured directors are more independent vis-à-vis the CEO, and not the other way around. This might be particularly true when a director remains on the board after the CEO who has appointed her has departed. However, while in theory this argument may seem appealing, it falls short of resolving the issue. First, treating the benefits of tenure as a linear function is misguided. While a first year director may need time to immerse herself in the corporation, and thus may be expected to act less independently or effectively than a fifth-year director, after some number of years the marginal benefit of tenure decreases as tenure increases. In other words, past a certain point the benefits tenure provides in the context of a director s ability to act independently decrease. At the same time, the marginal costs of increased tenure, as just described, rise. Second, while tenure might lead a director to feel more entrenched, and thus act more independently vis-à-vis a particular member of management, it must not be confused with her ability to be independent from management as a whole. While a director may feel less threatened by an incoming CEO if she is long-tenured, it does not mean that the director is independent of management as a whole nor does it mean that the director is empowered to act independently from the company. As detailed previously, many of the factors that threaten director independence are not tied directly to a single relationship, but rather, to organizational concerns. Compensation, social ties, and nomination are not a function of any single individual and thus lack of attachment of a director to any single CEO does not translate to lack of attachment to director peers on the board or the company as a whole. Third, while many directors see more than one CEO during their tenure, it does not mean that the incoming CEO is not already strongly connected to the board. In many cases CEOs are promoted from within, making a tenured director more likely to have a preexisting relationship with the CEO. Even in cases where the incoming CEO is hired from outside the company, she often enters the company from a negotiating position of power and not weakness, and is often granted the leeway to shape the board as she sees fit, making such tenured directors less likely to stir the pot. Finally, even if we accept that tenure may, in limited instances, strengthen director independence, it is still likely to reduce independence in a number of other instances, as argued previously. Thus, tenure warrants proper recognition and examination Id.

138 December 2016] RETHINKING INDEPENDENT DIRECTORS TENURE 125 C. Anecdotal Evidence Illustrating the Potential Impact of Tenure on Governance While social science theory suggests that board tenure could play an important role in the way the board acts, it is also important to illustrate the potential impact of tenure in a real-world setting. Two contrasting examples one in which long tenure brought about one of the biggest corporate scandals of the last decade and one in which reducing board tenure contributed to a potentially positive ousting of management illustrate the core argument made in this Article: that tenure is an important factor in considering director independence. 1. Long Tenure and Compromised Independence: The Enron Case The Enron scandal was a pivotal turning point in public and regulatory views on corporate America and corporate governance. 127 As previously detailed, the Enron case led to significant changes to the regulatory regime of publicly traded companies. On December 2, 2001, Enron Corporation, then the nation s seventh largest corporation, declared bankruptcy following months of shareholder and regulatory rage over accounting fraud that had been uncovered. 128 The ensuing months revealed many details about Enron s practices and the failure of the safeguards that were aimed at preventing such activities from happening. One of these safeguards was Enron s board of directors. On paper, Enron had a model board, even by current standards. It was comprised predominantly of outsiders with significant ownership stakes and a talented audit committee. 129 Enron s May 1, 2001 proxy statement listed fourteen board members, only two of whom were internal executives (Chairman of the Board and former CEO Kenneth L. Lay, and President and CEO Jeffrey K. Skilling), and twelve of whom were non-employee outsiders. 130 Enron s board structure was also ahead of its time, with audit and compliance, compensation, management development, executive, finance, and nominating and corporate governance subcommittees, a practice that was not common among large firms at that time. 131 Similarly, the audit, compensation, and nominating committees were comprised solely of outside directors Jeffery N. Gordon, What Enron Means for the Management and Control of the Modern Business Corporation: Some Initial Reflections, 69 U. Chi. L. Rev. 1233, 1234 (2002) Stuart L. Gillan & John D. Martin, Financial Engineering, Corporate Governance, and the Collapse of Enron 1 (Univ. of Del. Ctr. for Corp. Governance, Working Paper No , 2002) See Gordon, supra note Id. at During the late 1990s, fewer than sixty percent of large firms had separate nominating committees, fewer than half (forty-six percent) had a separate finance committee, and fewer than twenty-five percent had corporate governance committees. See Gillan & Martin, supra note 128, at 21.

139 126 HASTINGS LAW JOURNAL [Vol. 68:97 However, in reality most of the outside directors were not independent at all. A special report by the U.S. Senate issued in 2002 detailed the many failures of the board of Enron and expressed concern as to its independence. 132 Among the findings were significant financial ties 133 to Enron and high equity holdings of Enron s stock as part of the director compensation plan. 134 Notably, Enron had five directors who had served on the board since the merger that created it in 1985 tenure of sixteen years. In addition, only four of the remaining board members had tenure of less than nine years, resulting in an average board tenure of 11.6 years at the time of the collapse (the S&P 500 averaged 7.65 years at that time). 135 The special committee report indicated that despite the board s wealth of sophisticated business and investment experience and considerable expertise in accounting, derivatives, and structured finance, 136 management s earning manipulation was not detected. Accordingly, the report questioned the board s independence and willingness to challenge management and found that the board routinely relied on Enron management and Andersen [the outside auditor] representations with little or no effort to verify the information provided, that readily approved new business ventures and complex transactions, and that exercised weak oversight of company operations. 137 In addition, the report found that [h]igh risk accounting practices, extensive undisclosed off-the-books transactions, inappropriate conflict of interest transactions, and excessive compensation plans were known to and authorized 138 with little to no challenge from the Enron board. The report also delved in detail into the board s personal relationships and decisionmaking, describing a reality in which dissenting 132. See Sub-comm. on Investigations of the S. Comm. on Governmental Affairs, 107th Cong., The Role of the Board of Directors in Enron s Collapse 3 4 (Comm. Print 2002) The U.S. Senate investigation into the role of the Enron board of directors in the company s collapse highlighted numerous financial ties between Enron and six directors who had potential conflicts of interest through financial ties with the company: Where they were paid consulting fees in addition to board fees, where there were transactions with entities in which directors played a major role, and where there were donations to groups with which directors were affiliated. Id. at 14, Directors owned significant amounts of Enron stock ranging in value from $266,000 to $706,000,000, and it has been suggested that some board members financial interests may have attenuated any inclination to aggressively monitor management s practices practices that sought to preserve the firm s debt ratings, supplement reported earnings, and maintain the firm s growth and stock price through the use of complex derivative transactions. See Gillan & Martin, supra note 128; see also Joann S. Lublin, Enron Audit Panel Is Scrutinized for Its Cozy Ties with the Firm, Wall St. J. (Feb. 1, 2002, 11:59 PM), Calculations were done manually by the Author using data derived from Enron s publicly available proxy statements. See generally EDGAR Company Filings, Sec. & Exch. Comm n, searchedgar/companysearch.html (last visited Nov. 7, 2016) See Sub-comm. on Investigations, supra note 132, at Id. at Id.

140 December 2016] RETHINKING INDEPENDENT DIRECTORS TENURE 127 opinions from directors were almost nonexistent. 139 Equally important, the report portrayed the board as overly trusting of management, with whom some directors had strong personal relationships: Enron board members uniformly described internal Board relations as harmonious. They said that Board votes were generally unanimous and could recall only two instances over the course of many years involving dissenting votes. The Directors also described a good working relationship with Enron management. Several had close personal relationships with Board Chairman and Chief Executive Officer (CEO) Kenneth L. Lay. All indicated they had possessed great respect for senior Enron officers Finally, the report also refuted the claim that the mismanagement by Enron officers came as a true surprise to the board. 141 The report listed more than a dozen incidents over the three-year period prior to the collapse that should have raised concerns about the activities of the company, yet the board did not act or investigate any of these issues. 142 The Enron case epitomizes the need for true monitoring in the boardroom. It is also a clear reminder of what happens when directors, even those regarded as independent, suffer from potentially compromising factors affecting their independence. While there were many factors that reduced the independence of the Enron board, and it is impossible to segregate one from the other, the role of the Enron directors tenure, as an amplifying factor, cannot be ignored. If the large equity stakes in the company, which increase with tenure, and the close personal relationships with management, which also strengthen over time, influenced the board s ability to ask the right questions, then the long tenure of the majority of the board played an important role in bringing about Enron s demise. 2. The Impact of Reduction in Board Tenure: The CitiGroup Case In an abrupt move in October 2012, after CitiGroup reported that its underlying profits in the third quarter were strong and its outlook was improving, then CEO Vikram Pandit surprised both Wall Street and bank employees when he stepped down and relinquished his seat on the board. 143 It is a common practice to allow the CEO to portray resignation 139. Id. at 8 ( Board votes were generally unanimous and could recall only two instances over the course of many years involving dissenting votes. ) Id. at Id. at Id. at Steven Mufson & Danielle Douglas, Citigroup CEO Vikram Pandit Quits, Wash. Post (Oct. 16, 2012), 9c33e1a e cf5305eddf60_story.html; Jessica Silver-Greenberg & Susanne Craig, Citi Chairman Is Said to Have Planned Chief s Exit over Months, N.Y. Times (Oct. 25, 2012), html?_r=1; see Adam Shell & Matt Krantz, Citigroup CEO Pandit Steps Down, USA Today (Oct. 16, 2012, 7:47 PM),

141 128 HASTINGS LAW JOURNAL [Vol. 68:97 as his own initiative, and several reports have attributed the move to a demand from the Chairman of the board, Michael O Neill, for Pandit to tender his resignation. 144 While many reports focused on the power play the relatively new Chairman had orchestrated, it is also important to highlight the boardroom landscape that allowed this maneuver to happen. O Neill joined the board in 2009, after Pandit was already serving as CEO, and was appointed as Chairman in April 2012, just six months before asking Pandit to step down. 145 Pandit was not his choice, and a number of other board members were relatively new as well. Table 1 below details the average tenure of Citi s board since 1999, showing an increasing tenure on the board until the financial crisis in 2008 and then a drop in tenure from an average of years during the first year of Pandit s tenure in 2008 to 3.44 years at the time he was ousted. Table 1: CitiGroup s Average Board Tenure Since Date Average Board Tenure Citigroup Inc Citigroup Inc Citigroup Inc Citigroup Inc Citigroup Inc Citigroup Inc Citigroup Inc Citigroup Inc Citigroup Inc Citigroup Inc Citigroup Inc Carrick Mollenkamp et al., Citi CEO Pandit Exits Abruptly After Board Clash, Reuters (Oct. 26, 2012), Mufson & Douglas, supra note 143; Silver-Greenberg & Craig, supra note 143. See Shell & Krantz, supra note Data was derived manually from the company s proxy statements. Those statements for each individual year 2003 through 2013 can be found at the following link: browseedgar?action=getcompany&cik= &type=def&dateb=&owner=exclude&count=40. For example, the proxy statement for 2012 can be found at the following link: edgar/data/831001/ /d291341ddef14a.htm (last visited Nov. 7, 2016); and the proxy statement for 2013 can be found at the following link: / /d291341ddef14a.htm; and all years are accessible at the following link: (last visited Nov. 7, 2016). See generally EDGAR Company Filings, supra note 135.

142 December 2016] RETHINKING INDEPENDENT DIRECTORS TENURE 129 Table 2 compares the tenure of the Citi directors considered to be independent in October 2012 versus October This table reflects not only an average tenure of 3.44 years roughly one third of the average tenure in an S&P 500 firm (9.8 years) when Pandit was ousted, but also that in 2012, only one director had served for more than five years, which was the tenure of the CEO Pandit. In comparison, in 2008, seven out of twelve directors had served for longer than five years, making the Citi board in 2012 particularly suitable for such action against management. Table 2: Board Members Tenure in October 2012 vs. October Directors in 2012 Tenure Directors in 2008 Tenure Franz Humer 0.6 Alain J.P. Belda 11 Bob Joss 3.1 Winfried Bischoff 1 Michael O'Neill 3.6 Kenneth T. Derr 19 Larry Ricciardi 4 John M. Deutch 12 (+6 years prior) Judith Rodin 8 Roberto H Ramirez 7 Robert Ryan 5.1 Andrew N. Liveris 3 Anthony Santomero 3.6 Anne M. Mulcahy 4 Joan Spero 0.6 Richard D. Parsons 12 Diana Taylor 3.1 Judith Rodin 4 Bill Thompson Jr 3.6 Robert E. Rubin 9 Ernesto de Leon 2.6 Robert L. Ryan 2 Franklin A. Thomas 38 Michael Armstrong 19 The data shown above implies that when O Neill took over as the Chairman the board had only two directors appointed with or before Pandit, and thus could avoid the problem of fairly evaluating someone they had chosen and in whom they were invested professionally and personally. It seems then that at least in part, injecting new blood into the boardroom proved critical to the move to force out the CEO. While one can argue about the full spectrum of factors behind a decision to oust an incumbent CEO, the reality is that it is not that often that the board chooses to act in such an aggressive way, shocking Wall Street and bank employees alike. It is also likely that this move would not have happened so swiftly and decisively with a board that felt attached to a CEO it had elected and fostered relationships with. 148 Indeed, the Citi case was 147. Data was derived manually from the company s proxy statements. Those statements for each individual year 2008 through 2012 can be found at the following link: browseedgar?action=getcompany&cik= &type=def&dateb=&owner=exclude&count=40. See generally EDGAR Company Filings, supra note Ben W. Heineman, Jr., Citigroup: A Symbol of Board Resurgence?, Harv. Bus. Rev. (Nov. 5, 2012),

143 130 HASTINGS LAW JOURNAL [Vol. 68:97 considered as according to a Wall Street Journal report an extraordinary flexing of boardroom muscle at Citigroup, a company that until recently had a board stocked with directors handpicked by former CEO Sanford Weill who rarely challenged management decisions. 149 While the shake-up took the market by surprise, it was generally welcomed as a positive and needed change to Citi s management, coming after a series of missteps that left some directors feeling that the company was not being managed effectively and that the board was not kept adequately informed. 150 Citigroup shares dropped eighty-nine percent during Pandit s tenure, although the financial crisis contributed greatly to such drop, and the company was hit by a shareholder revolt over executive pay by the Federal Reserve s rejection of its plan to buy back stock and by a $2.9 billion write-down of a brokerage joint venture with Morgan Stanley. Since Pandit s exit, Citi stock has gone from trading at levels of thirty-eight dollars to trading at fifty-two dollars at the end of 2013, a forty-one percent return. While many factors play into company performance, it is noteworthy that Citi stock outperformed both the S&P 500 (forty-one percent versus eighteen percent) and the BKX banking index (forty-one percent versus thirty percent) for the October 20, 2012 to July 20, 2013 time period. 151 The Enron and Citi cases both serve as examples of the potential impact of tenure on the corporate governance of a firm. While tenure may not have been the sole or even the main force behind either of these examples, it appears that it was at the very least a contributing factor. Further, not only is tenure an underutilized factor when assessing board independence, as discussed previously, tenure on U.S. boards has in fact increased since the independence requirements were mandated as part of SOX. This trend, coupled with other changes in board structure, is explored in Part IV David Enrich et al., Pandit Is Forced out at Citi: Clash with Board Followed Stumbles over Pay and Rejected Plan for Buybacks, Wall St. J. (Oct. 17, 2012, 6:14 AM), SB html Id.; see Jessica Silver-Greenberg & Susanne Craig, Citigroup s Chief Resigns His Post in Surprise Step, N.Y. Times (Oct. 17, 2012, 8:19 AM), Data was manually taken from Yahoo Finance by the Author. Citigroup Inc. (C), Yahoo Fin., (last visited Nov. 7, 2016) (utilizing Yahoo finance historical data for CitiGroup and BKX banking index).

144 December 2016] RETHINKING INDEPENDENT DIRECTORS TENURE 131 III. The Rise in Average Tenure and Other Changes to Board Composition Thus far, this Article has focused on the common perception in academic and public discourse alike of the transformation of boards of directors in the United States into predominantly independent organs. In doing so, this Article has described the shift in the job description of the board and the recent trends and regulatory changes epitomizing this shift, trends that are commonly regarded as enhancing director independence. This Article has also highlighted the potential impact director tenure might have on director independence and the lack of current attention to this potential impact. This Part seeks to provide empirical data on board tenure in recent years as well as to highlight other recent trends in the structure of public U.S. boards. By presenting a more nuanced and complete picture of the transformation board structure has undergone, this Article posits that regulatory and public demands might have forced public firms to reach an undesirable equilibrium in their board structure. The Article further suggests that, as a result, these firms have created a modified version of the old-structure insider board while still meeting current regulatory requirements and public demand. A. Rising Board Tenure: An Empirical Examination The change in board structure with insiders being replaced by directors who meet the regulatory independence requirements is not the only trend that has occurred in boardrooms over the last decade. While independent directors share of the boardroom has increased, so has the average tenure of directors overall. As reflected in Table 3 below, tenure has been on the rise, and interestingly, not only as a temporary spike after the regulatory shocks of SOX and Dodd-Frank, but rather, as an ongoing trend with a greater magnitude over the last five years.

145 132 HASTINGS LAW JOURNAL [Vol. 68:97 Table 3: Average Board Tenure by Year for S&P 500 Firms 152 Year Average Board Tenure in S&P 500 Firms (years) 2001* *Based on hand collected data of a limited sample of 300 companies of the S&P 500. Indeed, the rise in tenure in the years 2003 through 2013 does not reflect a simple market correction or a regression to the mean after SOX regulatory demands came into effect. One might hypothesize that the rising tenure is a byproduct of a large turnover of board members caused by SOX requirements in 2002 and 2003 that led to an initial, temporary sharp decrease in boards average tenure, and then a subsequent period of slowly increasing tenure. However, using hand collected data of over 300 companies of the S&P 500, I found that the average board tenure in 2001, prior to the Enron fallout and the SOX discussions, was years, which is very similar to the average tenure in 2003 of years. Accordingly, SOX did not lead to a sudden decrease in average board tenure, and the upward trend is not a mere return to average. Similarly, since the average board size has remained approximately the same, standing at eleven seats and even decreasing slightly in recent years, the documented increase in tenure cannot be attributed to an increase in the average board size. 153 The rise in the average tenure is even more striking when taking the skewed distribution of tenure into consideration. Specifically, when director turnover occurs, the departing director s tenure is replaced with 152. Data was obtained from the BoardEx database and is valid through March 28, The BoardEx data file contains various statistics on all public companies in the United States, including average board tenure for the years 2003 through BoardEx Data, BoardEx, (last visited Nov. 7, 2016). This data was further corroborated by similar data that was obtained from the Risk-Metrics data file for the years 2007 through ISS (formerly RiskMetrics), Wharton Res. Data Servs., (last visited Nov. 7, 2016) Id.; see Spencer Stuart, supra note 3, at 8 (stating that the average board size has been stable for ten years).

146 December 2016] RETHINKING INDEPENDENT DIRECTORS TENURE 133 tenure of zero years by the incoming director. The fact that the introduction of a new director, by definition, resets tenure to zero means that the loss of longer tenured directors cannot be smoothed out by the appointment of a director with similar tenure. In practice, this means that an increase in the average tenure of the board, as a whole, is even more significant. Examining the data from a different perspective, the number of directors in the S&P 500 with very long tenure is also significant. As Figure 1 shows, for the year 2013, the number of S&P 500 directors with tenure exceeding fifteen years was 775, which was approximately 14.6% of the directors sampled. Figure 1: Director Tenure in the S&P 500 for the Year This data for 2013 represents an increase from earlier years in the number of long-tenured directors, as reflected in Figure 2. While in directors among S&P 500 companies had tenure exceeding fifteen years, that number rose to 698 in 2011, an increase of close to twenty percent, and 775 in 2013, reflecting an increase of over thirty-one percent. Similarly, the number of S&P 500 directors with tenure of over ten years rose by thirty-five percent from 2007 to Data was calculated manually by the Author using the Director Data Set of RiskMetrics and the BoardEx data set. BoardEx Data, supra note 152; ISS (formerly RiskMetrics), supra note 152.

147 134 HASTINGS LAW JOURNAL [Vol. 68:97 Figure 2: S&P 500 Director Tenure by Year ( ) This ongoing trend is further corroborated by running regressions on the average board tenure for the S&P 500 companies for the years 2001 through As Table 4 illustrates, the regression confirms that tenure has been increasing over time with a coefficient of , meaning that the average board tenure for an S&P 500 company has been increasing by slightly over a month each year. This correlation is highly significant. In addition, while the yearly average reflects that tenure increased more significantly after 2008, another regression over the interval 2001 to 2007 reaffirms the results for the entire duration with a coefficient of (which is significant), meaning that even for this interval, board tenure in the S&P 500 went up by over a month per year Data was obtained from the BoardEx database and is valid through March 28, The BoardEx data file contains various statistics on all public companies in the United States, including average board tenure for the years 2003 through BoardEx Data, supra note 152. In order to prevent distortions to the regression analysis related to annual turnover in the S&P 500 due to initial public offerings ( IPOs ) on the one hand, and going private or bankruptcy transactions on the other, only companies that were in the S&P 500 throughout this time period were included in the regression.

148 December 2016] RETHINKING INDEPENDENT DIRECTORS TENURE 135 Table 4: Regression Results Entire Sample For the period (Intercept) *** *** Time *** ** Number of observations 4,114 2,618 (in company years observations) Adjusted R-squared Table 4: This Table presents results from ordinary least squares ( OLS ) regressions where the dependent variable is a board s average tenure. The first column presents OLS results for all company years. The second column focuses on the years 2001 through *** (**, *) indicates significance at the 1% (5%, 10%) levels. Table 5 reports the results of the regression model controlling for firm size and industry effects, showing that firm size is not a driving force in the increase in the average board tenure. Additionally, when separating the average tenure of insiders and independent directors in each company s board, the results further show that a connection between the tenure of insiders and independent directors exists. Specifically, an increase of one year in the average tenure of the insiders would result in a year increase in the average tenure of the independent directors on the board. Table 5: Regression Results Controlling for Firm Size, Industry, and Directors Independence Total Board Tenure Total Board Tenure Independent Directors Tenure Independent Directors Tenure Company Market Cap (0.00) (0.00) (0.00) (0.00) TimeBrd *** *** (0.02) (0.02) Year FE Yes Yes Yes Yes Industry FE Yes Yes Yes Yes constant *** *** *** *** (0.22) (1.13) (0.22) (0.68) R-sqr N BIC Table 5: This Table presents results from OLS regressions where the dependent variable is a board s average tenure. A two-way fixed effect linear regression model, controlling for year and industry dummies fixed effects with standard errors clustered by firms was performed. The first and second columns present OLS results for the total board tenure. The third and fourth columns focus only on the average tenure of the independent directors on the board. *** (**, *) indicates significance at the 1% (5%, 10%) levels.

149 136 HASTINGS LAW JOURNAL [Vol. 68:97 B. Similar Trends in Audit and Compensation Committee Member Tenure The upward trend in board tenure is not limited to the board as a whole. Key committees of the board, where independence is particularly important, such as audit and compensation committees, have also experienced increases in their average tenure. As Figure 3 below shows, the average tenure of audit committee members in the S&P 500 has increased from 7.38 years to 7.85 years over a seven-year period. Figure 3: S&P 500 Audit Committee Director Tenure by Year ( ) 156 Looking more closely at the data in addition to the rise in the average tenure of audit committee members, the number of companies in the S&P 500 with average audit committee tenure above the average is also on the rise. This is particularly important since this data rules out the possibility that the rise in audit committee members individual tenure could be attributed to a few outlier directors. As Figure 4 demonstrates, the number of companies in the S&P 500 with average audit committee members tenure (the average of all members of the company s audit committee) that is above the average tenure has been increasing over time, from 34.6% in 2007 to 46.4% in While the percentage of companies with over 1.5 or two times the average has slightly declined over time, their absolute numbers are still significant, as close to twelve percent of S&P 500 companies have average audit committee tenure of over 11.8 years and three percent have an average that is over 15.7 years Data was calculated manually by the Author using the Director Data Set of RiskMetrics and the BoardEx data set. BoardEx Data, supra note 152; ISS (formerly RiskMetrics), supra note 152.

150 December 2016] RETHINKING INDEPENDENT DIRECTORS TENURE 137 Figure 4: S&P 500 Audit Committee Director Tenure Trends by Year ( ) 157 Numerous companies have exemplified this phenomenon. For example, in 2011 ACE LTD s audit committee chair had served for twenty years while two other members of the committee had served for twenty and twenty-five years respectively. 158 In 2013, one of the directors left, leaving the committee with a chair with tenure of twenty-two years and one member with tenure of twenty-seven years, along with the newcomer. Similarly, Actavis PLC had four directors on its audit committee in 2013 with tenures of twenty-eight, twenty-seven, nineteen, and thirteen years. In 2010, The Coca-Cola Company had four audit committee members with tenures of thirty-one, twenty-nine, twenty-four, and nineteen years. 159 In 2013, only one member had retired, leaving the committee with three members with tenures of thirty-two, twenty-seven, and twenty-two years, in addition to a newcomer with two years tenure. These examples may be outliers in the overall statistics, but they illustrate how some companies may have audit committees with extremely long-tenured members, raising all of the concerns that long tenure may entail Data was calculated manually by the Author using the Director Data Set of RiskMetrics and the BoardEx data set. BoardEx Data, supra note 152; ISS (formerly RiskMetrics), supra note Data was calculated manually by the Author using the Director Data Set of RiskMetrics and the BoardEx data set. BoardEx Data, supra note 152; ISS (formerly RiskMetrics), supra note 152. For example, see Definite Proxy Statement: Ace Limited, U.S. Sec. & Exch. Comm n, data/896159/ /ddef14a.htm#tx145199_2 (last visited Nov. 7, 2016) Data was calculated manually by the Author using the Director Data Set of RiskMetrics and the BoardEx data set. BoardEx Data, supra note 152; ISS (formerly RiskMetrics), supra note 152. For example, see Filing Detail: Coca-Cola Company, U.S. Sec. & Exch. Comm n, / / index.htm (last visited Nov. 7, 2016).

151 138 HASTINGS LAW JOURNAL [Vol. 68:97 As Figure 5 illustrates, a similar trend is also observed among compensation committee members, where the average tenure of an S&P 500 director who serves on a compensation committee rose by six months from 2007 to 2013, from 8.3 to 8.84 years. Cases of extreme tenure are present here as well. Ametek, Inc., for example, had committee members with tenure of thirty-three, twenty-six, and nineteen years, and Urban Outfitters, Inc. had members with thirty-seven, twenty-eight, and eleven years of service. 160 Figure 5: S&P 500 Compensation Committee Director Tenure by Year ( ) 161 Therefore, it is clear from the data that the rise in board tenure is a trend that has been present not only on boards as a whole, but also on key board committees such as the audit and compensation committees. While the federal regulators and stock exchanges have focused on the independence of these committees as part of the SOX and Dodd-Frank reforms, signaling the importance of true independence on these committees because of their performance of vital monitoring functions, the effect of rising tenure on the independence of these committees has not been addressed. C. Other Trends Reflecting a Move Toward Longer Tenure The empirical findings in regard to tenure are further supported by other trends in board structure, reflecting and corroborating the tendency on the part of companies to keep directors for longer periods of time Data was calculated manually by the Author using the Director Data Set of RiskMetrics and the BoardEx data set. BoardEx Data, supra note 152; ISS (formerly RiskMetrics), supra note Data was calculated manually by the Author using the Director Data Set of RiskMetrics and the BoardEx data set. BoardEx Data, supra note 152; ISS (formerly RiskMetrics), supra note 152.

152 December 2016] RETHINKING INDEPENDENT DIRECTORS TENURE 139 First, the average turnover of board members and appointment of new directors has decreased in recent years. Indeed, the number of new appointees has dropped by twelve percent over the past five years and by twenty-seven percent over the past ten years. 162 Initially, as boards recruited additional independent directors and financial experts in order to comply with SOX requirements there was an increase in the number of new directors added to S&P 500 boards, peaking in 2004 with a total of 443 new independent directors. 163 By 2012, however, the number of new independent directors fell to 291, the lowest number documented since 2001, and in 2014 the number was still low, standing at In addition, while nearly three quarters of S&P 500 boards have adopted mandatory retirement policies for directors up from fifty-eight percent in 2000 the retirement age is rising. Of S&P 500 companies, seventy-three percent currently set mandatory retirement at seventy-two or older versus thirty-seven percent in 2000, and thirty percent at seventy-five or older, versus one percent in Similarly, and not surprisingly, considering the rising tenures of boards, the average age of independent directors on S&P 500 boards is also on the rise and currently stands at 63.1 years of age, three years higher than a decade ago. 166 The average age of the board as a whole is also higher: forty-five percent of all S&P 500 boards have an average age of sixty-four or older, almost triple the share ten years ago. 167 In addition, while seventy-three percent of all S&P 500 boards up from fifty-eight percent in 2000 set a mandatory retirement age for directors, many retain the discretion to make exceptions to the rule. 168 Finally, the average size of S&P 500 boards stands at 10.8 directors, about the same as in recent years but down from 11.5 in Since smaller boards combined with longer tenure of the existing members reduces the chances of new blood entering the boardroom, this in turn further exacerbates the independence concerns raised above See Spencer Stuart, supra note Id See id. Indeed, potential alternative explanation attributes the decline in the number of new director appointments in recent years to rising retirement ages, fewer voluntary resignations due to lingering effects of economic uncertainty, and less urgency to appoint new directors with Sarbanes- Oxley compliance requirements having been fulfilled in the mid-2000s Id. at Id Id Id Id.

153 140 HASTINGS LAW JOURNAL [Vol. 68:97 IV. Can the Market Self-Correct? So far this Article has detailed the importance of director independence to the governance of the firm, the potential impact board tenure may have on director independence, and the recent rise in board members average tenure. Of course, a critical reader of this Article may ask why, as a practical matter, tenure is of concern. If the market were to value shorter tenure, one would expect that companies would move toward such arrangements on their own. Similarly, some voluntary movements by companies could be construed to mitigate the impact an increase in director tenure might have on board independence. However, as will be further developed below, there are several reasons for concern as to the awareness and willingness of the market to address director tenure, as well as to the effectiveness of other market trends in mitigating the issue, making regulatory intervention potentially necessary. A. Majority Voting, Director Interlocks, and Remuneration: Voluntary Movements by Companies That Fail to Sufficiently Resolve Concerns About Director Independence As previously discussed, recent years have seen many changes to the composition of the board. While many of them contribute to board independence, some of them fail to mitigate, and may even exacerbate the impact the increasing tenure of directors has on their independence. The issue of majority voting has been gaining steam in corporate governance, 170 and some institutional investors consider it to be the focal point of their governance strategy. Making directors more accountable to shareholders not only by having the entire board stand for election annually, but also by presenting a realistic possibility of directors losing their seat is an important corporate governance tool. While majority voting has been successfully promoted by several institutional actors such as the California State Teachers Retirement System ( CalSTRS ) and the United Brotherhood of Carpenters, its true effectiveness is in question since directors can still be retained by the company even if their resignation is tendered. 171 Since management s support is still the best way to secure such majority support, and board support is needed in cases where the director fails to receive a majority of the votes, the perception of greater dependence on shareholder approval, and thus 170. Roughly eighty percent of the S&P 500 has a majority voting policy in place. See Holly J. Gregory, Trends in Director Elections: Key Results from the 2012 Proxy Season, 2012 Prac. L.J For a critique regarding the current affair of majority voting, see Letter from Jeff Mahoney, Gen. Counsel, Council of Institutional Inv rs, to Edward Knight, Exec. Vice President & Gen. Counsel, NASDAQ OMX (June 20, 2013), letter_nasdaq_majority_voting.pdf. Recent empirical studies are conflicted as to whether majority voting in its current form even carries value. See Spencer Stuart, supra note 3.

154 December 2016] RETHINKING INDEPENDENT DIRECTORS TENURE 141 more accountability, might not be fully accurate, as directors may feel an increased need to appease management and their peers. An examination of the issue of director interlocks reveals a similar dissonance between the benefits of this trend and the particular negative impact it might have in the context of board independence and tenure. More boards are setting explicit limits on the number of other public company directorships their directors and CEOs may hold. Seventy-five percent of S&P 500 companies now limit other corporate directorships in some way, versus just twenty-seven in While director interlocks pose concerns of conflicts of interest and call into question the amount of time directors can dedicate to each of the companies on whose boards they serve, the fact that the ability to serve on numerous boards has decreased leads to more dependence on the part of directors on the board position that they do hold. Since the ability to diversify one s human and equity investment in board positions is now reduced, if a director holds only one position instead of a few she is much more likely to have greater dependence and stronger motives to maintain her position for a longer period of time. Finally, similar concerns lie with the remuneration for the positions a director holds. While, as afore-mentioned, a director needs to earn a sufficient amount to encourage monitoring, 173 higher compensation also leads to greater dependence of the director on her compensation in what is termed in behavioral economics as loss aversion. 174 This is further exacerbated by the way compensation is awarded. As further detailed in Table 6, the majority of the average director compensation package is paid in equity that is tied directly to the company s performance as stock grants and options. This equity position in the company serves as a good incentive to improve value for shareholders. However, it might also reduce the ability and willingness of directors to take steps that might be value reducing in the short-term, even if important to the long-term health of the company. Moreover, in extreme cases, on the order of Enron and WorldCom, where the company might collapse if a director were to act as diligently as she should, directors might be unwilling or at the very least disincentivized to dig deep into potential misconduct of management See Spencer Stuart, supra note See supra Part II.B In economics and decision theory, loss aversion refers to people s tendency to strongly prefer avoiding losses to acquiring gains. Some studies suggest that losses are twice as powerful, psychologically, as gains. See Daniel Kahneman & Amos Tversky, Choices, Values, and Frames, 39 Am. Psychol. 341, (1984).

155 142 HASTINGS LAW JOURNAL [Vol. 68:97 Table 6: Non-Employee Director Compensation Total average compensation $263,748 $242,385 $211,179 n/a Average annual retainer $107,383 $96,649 $68,560 $39,538 Boards paying board meeting 25% 33% 52% 70% fee Average board meeting fee $2,229 $2,224 $2,027 $1,596 Boards offering stock option program for directors Boards paying equity in addition to retainer 18% 25% 42% 77% 76% 76% 72% 42% B. Private Ordering and Board Tenure Still, if tenure is an important factor in assessing independence as this Article contends, then why is the market unable to address it directly? As will be detailed later, there is a strong reason to believe that private ordering will not suffice in this instance. First, the vast majority of companies deliberately choose not to address tenure, and even the very small portion of the S&P 500 companies that do address tenure do it in a limited and potentially ineffective way. Second, private players who could pressure companies to address tenure have just recently begun to acknowledge the impact tenure might have on independence but have mainly bundled it with other factors, making it a case-by-case decision and casting doubt that the market will self-correct. 1. The Companies Themselves Some S&P 500 companies do recognize the impact board tenure may have on director independence. The problem however is that despite the increased attention to board tenure, only three percent of S&P 500 companies specify term limits for directors in their corporate governance guidelines. 176 Of the remaining companies, sixty-five percent explicitly say they do not have term limits, and thirty-one percent do not 175. Data for this table was taken from the Spencer Stuart Board Index See Spencer Stuart, supra note See id.

156 December 2016] RETHINKING INDEPENDENT DIRECTORS TENURE 143 mention term limits at all. 177 These figures have actually declined over the past five years (sixteen companies currently have these arrangements, down from twenty-four companies in 2010), making it appear unlikely that companies would address it on their own. 178 Even in the small subset of companies that have addressed board tenure, the design of the arrangements varies significantly. Of the sixteen boards that do specify term limits, five set the limit at fifteen years, four at ten years, two at twelve years, and the rest range from eighteen to thirty years. Therefore, the instances in which a director must leave due to a term limit provision may be limited given an average tenure of less than nine years. In addition, many of these companies provide for exceptions to the term limits that can be invoked by the board at its discretion. 179 For example, Varian Medical Systems, Inc. has the following selfimposed limitation on tenure: The Board has adopted a guideline for director retirement that provides that a director should not serve on the Board for more than fifteen years or after a director reaches the age of about seventy-five. This guideline may be adjusted as the Board deems appropriate. 180 However, while Varian uses this limitation on tenure as an argument in favor of its governance standards and, in particular, in an effort to battle proposals for board declassification, 181 in reality this arrangement is very limited as directors can still serve on the board for up to fifteen years, roughly double the average board tenure in the S&P 500 (or even longer if the board chooses to adjust the policy). Furthermore, while a few companies acknowledge the impact of tenure by limiting the tenure of the chairman of the board, they refrain from expanding this policy to the other directors on the board or to any of its committees. For example, Pepco Holdings corporate governance guidelines limit a chairman s tenure to five years, but have no limitations on the tenure of other directors. 182 In sum, while tenure limits due to private ordering can be found among some S&P 500 companies, they are scarce. More important, even when such arrangements are adopted they vary greatly in their length and design, and their potential effectiveness Id Id Information in this paragraph was obtained from the Spencer Stuart Board Index See id See Sec. & Exch. Comm n, Definitive Proxy Statement: Varian Medical Systems, Inc. 1, 17, (last visited Nov. 7, 2016) See id. at 16 (including board recommendation against a shareholder proposal to declassify the board and stating that such policy ensures directors accountability to shareholders) See Corporate Governance Guidelines: Pepco Holdings, Pepco Holdings, Inc., pepcoholdings.com/corporate-governance-guidelines-/ (last visited Nov. 7, 2016).

157 144 HASTINGS LAW JOURNAL [Vol. 68:97 2. Institutional Investors Similarly, institutional investors voting policies generally fail to address board tenure. A 2014 survey by the Institutional Shareholder Services ( ISS ) found that seventy-four percent of investor respondents indicated that long director tenure is problematic, and sixty-three percent indicated that lengthy director tenure can diminish a director s ability to serve as an independent steward. 183 Yet these concerns have not been fully translated to voting policies and standards. Surveying the corporate governance standards of some of the major institutional investors reveals that the majority of these institutions ignore tenure as a factor that is important to corporate governance. In surveying the voting policies of the top fifty U.S. pension funds 184 and the top fifty U.S. mutual funds, this Article found that only thirty percent of the mutual funds have a policy regarding board tenure (up from twenty-four percent in 2013). Of that thirty percent, most have policies that decline to support shareholder proposals for limiting director tenure. The justification for such opposition to term limits almost always stems from a concern that good directors would be forced out. However, as will be further developed later, this is not necessarily the case, even with some limitation on tenure in place. Similarly, only fifty percent of the pension funds surveyed have a policy in place regarding board tenure. 185 Of those funds with a policy in place, only three have a policy supporting term limits while twenty-two oppose such limits based on similar arguments to the ones asserted by mutual funds. Table 7: Voting Policies of Institutional Investors Support Term Limits Proposals Against Ignore Mutual Funds 3 (but only if management supports) Pension Funds Interestingly, a closer look at the minority of institutional investors that do address tenure reveals that they view term limits as a means to refresh the board rather than as a tool to protect board independence. For instance, BlackRock states the following basis for its objection to term limits: While we support regular board refreshment, we are not opposed 183. See Institutional S holder Servs., supra note Author has manually collected information on the policies of each fund. For a detailed list of those policies, please see the record that is on file with Hastings Law Journal Supra note 184 and accompanying text.

158 December 2016] RETHINKING INDEPENDENT DIRECTORS TENURE 145 in principle to long-tenured directors nor do we believe that long board tenure is necessarily an impediment to director independence. 186 In the limited cases where an institutional investor does acknowledge the importance of tenure, their approach is often tentative and discretionary. For example, CalSTRS adopted a case-by-case approach to tenure: Director Tenure: An effective board should have both short- and longtenured directors to ensure that fresh perspectives are provided and that experience, continuity and stability exist on the board. CalSTRS does not support limiting director tenure but believes the board should review the director s years of board service as part of the annual board review. 187 Although this approach is noteworthy in its recognition of the importance of tenure, it leaves the discretion to limit tenure to the board itself, and raises issues of evaluation and uniformity. Recently in a positive development, several institutional investors have amended their voting policies and guidelines to address the issue of director tenure. For instance, the Council of Institutional Investors ( CII ) now encourages boards to weigh whether a seasoned director should no longer be considered independent. 188 State Street amended its voting guidelines to now state that it may withhold votes from directors when overall average board tenure is excessive and/or individual director tenure is excessive. 189 Similarly, on December 16, 2015, the California Public Employees Retirement System ( CalPERS ) Global Governance Policy Ad Hoc Subcommittee approved proposed revisions to the pension fund s Global Governance Principles to require that companies take a comply-or-explain approach on the issue of long-tenured directors. 190 Under the proposed revised principles, a company would have two options with respect to a director who has served on the board for more than twelve years: either classify the director as nonindependent or annually disclose a basis for continuing to deem him or her independent. 191 Therefore, while more and more institutional investors have recognized the importance of tenure and its impact on director independence as exemplified by the CII s 2013 statement that it may soon urge shareholders and boards to look more skeptically at the 186. BlackRock, Proxy Voting Guidelines for U.S. Securities (Feb. 2015) Cal. State Teachers Ret. Sys., Corporate Governance Principles (Apr. 2016) Martin Lipton et al., Some Thoughts for Boards of Directors in 2014, Harv. L. Sch. F. on Corp. Governance & Fin. Reg. (May 22, 2014), State St. Glob. Advisors, Proxy Voting and Engagement Guidelines: United States (Mar. 2016), Engagement-Guidelines-US pdf See Dicker, Weil, Gotshal & Manges LLP, supra note See Brad W. Pacheco, CalPERS Revises Governance Policy, Adopts 12 Years as Threshold for Director Independence on Corporate Boards, CalPERS (Mar. 14, 2016) newsroom/calpers-news/2016/calpers-revises-governance-policy.

159 146 HASTINGS LAW JOURNAL [Vol. 68:97 independence of long-serving directors 192 and the subsequent changes to the voting policies of the CII, State Street, and CalPERS to date, this recognition has not translated into wide scale policy changes within the institutional investor community. 3. Proxy Advisors One of the prominent shareholder proxy advisory firms, the ISS, has just recently moved away from a longstanding policy of ignoring tenure. After soliciting input regarding the potential inclusion of tenure as a factor in its voting recommendations, ISS has decided to recognize the impact of tenure albeit in a very limited fashion, through the following: Vote against management proposals to limit the tenure of outside directors through term limits. However, scrutinize boards where the average tenure of all directors exceeds 15 years for independence from management and for sufficient turnover to ensure that new perspectives are being added to the board. 193 Although this policy is praiseworthy for its recognition of the importance of director tenure it holds very little power in reality, because: (1) ISS requires that the average tenure of the entire board would be over fifteen years and therefore allows for some directors to serve for extremely long periods as long as the average of the entire board is fifteen years or less; and (2) even then, ISS only promises to scrutinize the board. 194 ISS has also modified its quick score for companies governance practices. The quick score grades companies on several parameters. 195 In its latest iteration, the quick score will consider non-executive directors with tenure that is greater than nine years. 196 Glass Lewis, another leading shareholder advisory firm, presents a stark contrast by outright objecting to the inclusion of a limitation on board tenure: 192. See Joann S. Lublin, The 40-Year Club: America s Longest-Serving Directors, Wall St. J. (July 16, 2013, 7:45 PM), See Institutional S holder Servs., United States Summary Proxy Voting Guidelines: 2016 Benchmark Policy Recommendations (last updated Mar. 4, 2015), file/policy/2016-us-summary-voting-guidelines-dec-2015.pdf Id The ISS quick score grades companies on four categories: board structure, executive compensation, shareholder rights, and audit-related practices. For a full description, see Institutional S holder Servs., ISS Governance QuickScore 3.0: Overview and Updates quickscore_techdoc.pdf (last visited Nov. 7, 2016) See Institutional S holder Servs. QuickScore Methodology, solutions/iss-analytics/quickscore/ (last visited Nov. 7, 2016).

160 December 2016] RETHINKING INDEPENDENT DIRECTORS TENURE 147 Glass Lewis believes that director age and term limits typically are not in shareholders best interests. Too often age and term limits are used by boards as a crutch to remove board members who have served for an extended period of time. When used in that fashion, they are indicative of a board that has a difficult time making tough decisions. Some shareholders support term limits as a way to force change when boards are unwilling to do so. While we understand that age limits can be a way to force change where boards are unwilling to make changes on their own, the long-term impact of age limits restricts experienced and potentially valuable board members from service through an arbitrary means. 197 Therefore, while some advisory firms such as the ISS have recognized the importance of board tenure, that recognition is far from universal and, even in the case of ISS, has only resulted in voting recommendations that address tenure in a very limited fashion. Importantly, while the private market in the United States has yet to fully and effectively address the issue of director tenure and director independence, tenure has been recognized as an important governance factor elsewhere in the world and institutional investors and advisory firms do consider tenure in the context of their foreign investments. For example, the United Kingdom has adopted term limits for independent directors and, indeed, the average tenure in the United Kingdom is half that of the United States. 198 Several other E.U. countries as well as Asian countries have also added term limits for independent directors. 199 Therefore, there are real concerns as to the private market s current ability to address board tenure in the United States. Most investors are either agnostic to tenure as a governance issue or even oppose such limitations. While changes in policy and perceptions have started to percolate, they are limited in scope and seem to fail to truly tackle the issue. 4. Externalities and Collective Action Issues Even if the impact of tenure on independence was fully acknowledged by shareholders, the question would still remain as to whether we could rely on shareholders to correctly value the impact of tenure on independence. Significantly, private ordering might be challenging since the value of true director independence is not easily observable. Since tenure interacts with other factors, private players might not be able to fully observe its impact on independence and may 197. See Glass, Lewis & Co. LLC, Proxy Paper Guidelines 2015 Proxy Season: An Overview of the Glass Lewis Approach to Proxy Advice 1, 21 (2015) See David A. Katz & Laura McIntosh, Renewed Focus on Corporate Director Tenure, Harv. L. Sch. F. on Corp. Governance & Fin. Reg. (May 22, 2014), Id.

161 148 HASTINGS LAW JOURNAL [Vol. 68:97 prefer to focus on the benefits of tenure, such as experience and knowledge (as they currently do). Moreover, even if tenure s impact on independence were fully observable, there is a question as to whether the market would fully internalize the cost of long tenure. Since director independence and tenure are not necessarily associated with performance, the market might undervalue the long-term benefits of independence in favor of the short-term benefits of long tenure. Indeed, such market failure was what necessitated mandating independence in the first place through SOX. Additionally, tenure could reflect collective action issues, particularly what is termed in political science literature as the seniority clout penalty. 200 In cases where a board s composition reflects a compromise between different factions of management, shareholders, or unions, or even direct representation of these factions, it is likely that directors would continue to be nominated and reelected even if all parties agreed that new directors would be the better choice. This phenomenon occurs because the replacement of a long-tenured director with a new director entails loss of clout within the boardroom, and therefore, each interested party has an incentive to maintain their relative power by re-nominating or reelecting the more tenured director, even when that director is no longer fully aligned with their interests. Finally, and perhaps most significantly, in the overwhelming majority of cases the organ of the company with the authority to adopt a resolution limiting tenure is the board itself. Asking directors to voluntarily limit their own tenure is a complicated task. Even if such a move were desirable for investors, the board s self-interest could result in failure to adopt it. V. The New Insiders The documented increase in director tenure, as the previous Part argued, has gone largely unaddressed by market participants. Coupled with the increasing tendency of firms to hire directors with preexisting insider backgrounds, many so-called independent directors have turned into what this Article terms the new insiders. While these directors are independent by the black letter of the law, as they are not employed by the company and do not have direct business connections with the company, they do bear a remarkable resemblance to the old corporate insiders. First, these directors are increasingly current or retired corporate insiders in other firms. In fact, only twenty-one percent of new independent directors are first-timers on outside public company 200. See Elhauge, supra note 112.

162 December 2016] RETHINKING INDEPENDENT DIRECTORS TENURE 149 boards. 201 While corporate governance reports praise the reduction in the number of active CEOs serving on other companies boards, these spots are being filled with more retired CEOs and lower level executives. 202 Additionally, while more of the new incoming directors are retired, overall forty-seven percent of the new independent directors are still active executives or professionals. 203 The demand is particularly high for active CEOs and COOs followed by retired CEOs and COOs. 204 In having these individuals on their board, companies maintain the firm control that corporate insider background has on board membership. While every company has different corporate culture and dynamics, being a corporate executive is the type of common denominator that carries vast implications for a board s member interaction with, and monitoring of, the firm s management. Second, directors long tenure makes their resemblance to the traditional corporate insiders even more robust. Their intimate knowledge of the corporation, the attachment they develop to the corporation and to its culture, and the intimate connections that have been built over time with peer directors and with company executives move long-tenured directors even closer to a state of mind of an insider employee. Finally, increased tenure also aligns the financial stake an insider has in the corporation with that of a long-tenured board member. Since longer tenure increases the amount of equity a director holds in the company, it further deepens the ties with the corporation and, in some cases, the dependency 205 that such directors may have on the corporation. The increasing presence of these new insiders on corporate boards throughout the country begs the question of what may explain this trend and why companies may be effecting these changes in their boards. This Article posits that the increasing use of board members who serve for longer periods and come with a predisposed background as corporate insiders elsewhere is not accidental, but is in fact an effort on the part of companies to import the benefits that an insider board 201. See Spencer Stuart, supra note See id. (stating that fifty-four percent of all S&P 500 CEOs do not serve on an outside board, and that only twenty-five percent of the 2012 new directors are active CEOs, down from fifty-three percent a decade ago). However, new appointees include more retired CEOs (seventeen percent, up from nine percent in 2000) and more division presidents and functional leaders (eighteen percent, up from ten percent). Id Id Id. According to the Spencer Stuart Board Index 2014, active CEOs and COOs are in the highest demand, with fifty-eight percent of respondents saying they sought active executives for board seats. Id. Executives retired from these roles are also in demand, although not to the same degree. Thirty-five percent of respondents said their boards seek to recruit retired CEOs and COOs. Id While any employee of a corporation invests and risks her human capital in the corporation s successes, it is usually the case that the employee diversifies her savings and the capital equity and thus bears less risk than if all of her capital were to be invested in the company in addition to her human equity (her employment and name).

163 150 HASTINGS LAW JOURNAL [Vol. 68:97 would have produced but that were removed with the shift to an independent board that was stripped of the traditional insiders presence. Indeed, situating the new insiders trend within the larger context of the board s place and function as a corporate organ, it is likely that by having directors who are regarded by state law and stock exchange rules as independent but at the same time serve sufficient time in their roles to accumulate specific business knowledge and understanding relating to the company, while also developing a social and professional investment in the firm, public companies try to gain many of the benefits the insider directors brought to the table in the advisory role of the board while still appeasing regulatory and public requirements. The value of tenure perceived by companies is further corroborated by the recent ISS survey finding that while institutional investors are increasingly concerned with the impact of tenure, albeit without much action, 206 companies sentiments are strikingly different, with eighty-four percent of surveyed companies indicating that a director s tenure should not be presumed to indicate anything problematic. 207 This trend toward longer director tenure, when viewed as a potential reaction on the part of companies to director independence requirements, raises the question of whether current regulation mandating the preference of independent directors over insiders has gone too far, potentially pushing public corporations to find second best solutions to their missing insiders in the boardroom. The same question also suggests that it may be necessary to think carefully about how to structure any effort to restrict tenure so as to preserve the value companies see in long-tenured directors. VI. Rethinking Independent Directors Tenure This Article has highlighted the importance of board tenure in relation to director independence and the potential adverse impact of long tenure on independence. Through the empirical data presented, this Article demonstrated that tenure has not remained constant in the wake of the regulatory reforms that were aimed at improving director independence, but rather, has increased over the last decade, further promoting the need for attention to board tenure. Coupling the rise of board tenure with other trends in board structure, this Article has sought to offer a potential explanation for these trends, arguing that in the wake of the mandated push for director independence, companies have begun to push back, appointing directors who fulfill these independence 206. See Institutional S holder Servs., supra note Id.

164 December 2016] RETHINKING INDEPENDENT DIRECTORS TENURE 151 requirements but also carry with them some of the attributes of the inside directors who once dominated U.S. boardrooms. As discussed, this in turn calls for a rethinking of director tenure, balancing the goals and benefits of longer tenure with the concerns it may entail. This Part suggests that unlike some of the approaches that are currently offered, such as ignoring tenure all together, capping it indiscriminately, or using an ad hoc assessment that is hard to apply uniformly, any solution must balance not only the impact tenure may have on independence, but also the importance of tenure to the other functions of the board, and specifically the advising and decisionmaking role. Therefore, this Part strives to reconcile these two opposing forces with a proposal that on the one hand ensures that the regulatory emphasis on board independence is fulfilled, but at the same time takes into account what the market has been signaling regarding the importance of the old, advisory function of the board. A. The General Framework The changes to board structure and tenure and the introduction of the new insiders, as detailed previously, carry positive attributes, allowing companies to compensate for the loss of the advisory role of the board in the early years of the transformation toward independent boards. However, taking the importance of true director independence as a given, 208 the trend toward new insiders carries with it several concerns that might require intervention. Indeed, this private market adjustment may come at the expense of ensuring that the other role of the board monitoring would remain uncompromised. If policymakers were to conclude, as advocated by this Article, that tenure is more likely to compromise independence than to strengthen it, then a case can be made for some restriction on director tenure as part of director independence requirements. Of course, if policymakers were to believe the opposite that tenure actually improves independence then an opposite case could be advanced, introducing tenure as a prerequisite to some positions on the board. However, even if tenure negatively impacts independence, any proposed limitation on tenure should be structured in a way that is limited both in its scope and in the chosen threshold. Such a structure will serve the goal of preserving director independence but at the same time ensuring that the general benefits that long tenure may provide to 208. Some doubt the impact independent directors have on firm performance. See Sanjai Bhagat & Bernard Black, The Non-Correlation Between Board Independence and Long-Term Firm Performance, 27 J. Corp. L. 231, (2002). The impact of board tenure on firm performance is also in dispute. See supra note 73 and accompanying text.

165 152 HASTINGS LAW JOURNAL [Vol. 68:97 directors contributions to the company are not fully surrendered. Thus, minimizing the impact on the ability of firms to structure their board in a manner that also provides for the lost role of advising becomes a pivotal focal point in any suggested reform. B. Limited in Scope While board independence is important and mandating limitations on board terms could aid in achieving greater independence, a full scale cap on tenure for the board as a whole would carry too many costs. Boards would have to lose qualified members even if they are still valuable members of the board, and companies might again lose the elusive insider attribute they were trying to mimic by extending tenure. Similarly, costs of training and familiarizing directors with the company would increase. If however a tenure restriction for director independence purposes was limited to the audit and compensation committees, such costs would be minimized, while the lion s share of the motivation behind independence requirements would still be achieved. Specifically, any director who serves on these committees and would like to be considered independent would have to satisfy a tenure requirement. Importantly, while a director who does not satisfy the tenure requirement would not count as an independent director, she could still serve as a nonindependent director on the committee (if permissible under the governing regulations and the company s rules) and would be fully able to continue to serve on the board. The rationale for limiting the tenure requirement to these two committees is two-fold. First, as will be discussed in detail, these committees are at the heart of the monitoring function of the board and were the focus of the regulatory reforms ushered in by SOX and Dodd- Frank. Second, the costs associated with higher turnover on these committees are significantly smaller than for the other committees or for the board as a whole. The audit committee is the cornerstone of the monitoring role of the board. Examining financial reports and certifying them is not only important in the intra-company setting but it also carries great importance for the general public and investors. It is no surprise then that SOX has focused its attention on the audit committee and that the firms outside auditor has already been required to have a mandatory cap on tenure. By ensuring that the audit committee is as independent as possible, the monitoring role of the board would be properly fortified.

166 December 2016] RETHINKING INDEPENDENT DIRECTORS TENURE 153 Indeed, recent empirical studies have shown that an independent audit committee is the most effective means of curtailing corporate fraud. 209 Similarly, the compensation committee has been targeted in the Dodd-Frank reform as an organ of the board that requires independence. Limiting excessive pay and optimizing executive incentives through proper compensation is a cornerstone of good governance. As detailed in Part III of this Article, long tenure could jeopardize the ability of directors to effectively scrutinize management s actions as well as their ability to negotiate and set management s compensation at an optimal level. At the same time, limiting the scope of a tenure restriction to independent directors on the audit and compensation committees, each of which usually include three directors, would allow the company to retain seasoned directors whether they previously served on the audit and compensation committees and have hit the tenure restriction or not. This ability to retain directors who can provide the necessary insider input, but not at all costs, could properly balance the dual hats of a board monitoring and advising and the need for different types of directors to function in each role. Limiting the restrictions on director tenure to the audit committee provides additional benefits. Audit committee members already possess, and in some respects are required to possess, specific skills that are important to their role. While a cap on their tenure would force audit members to leave their position, and thus will inevitably require a learning curve for an incoming director, their skill set is much more transferable than the skill set of other board members. Indeed, every company is different and every industry is different, but audit guidelines and general practices are the same across the board. This uniformity in audit practice would reduce the associated costs of mandating a tenure restriction with respect to both the company and the director. On the company side, companies will be able to quickly replace a departing director s audit knowledge with that of a director selected from a pool of directors who have either served as audit committee members elsewhere a pool that is expected to be larger if a tenure cap is put in place or with a new director with an extensive background in accounting. While company-specific attributes are important, the learning curve for audit members could still be expected to be lower. The directors themselves would also mitigate their costs by having a skill set that would easily translate into a productive role in 209. Vikramaditya S. Khanna et al., CEO Connectedness and Corporate Frauds (Mich. Law, Ross Sch. of Bus. Pub. Law & Legal Theory Research Series, Working Paper No. 1209, Series Paper No. 283, 2013),

167 154 HASTINGS LAW JOURNAL [Vol. 68:97 other companies, in the same industry (which will even reduce costs further), or elsewhere. In addition, having a healthy circulation of audit members could actually improve firms quality of financial reporting in the long run. While knowledge of company-specific attributes cannot be discounted, neither can the value of fresh eyes and fresh approaches. Making sure that directors on the audit committee are not serving for too long ensures that their understanding of the business does not turn into color blindness to some accounting issues and further ensures that new directors with more current knowledge of accounting are infused into the committee, further strengthening the review of the financial reports and the work of the auditing firm. C. Limited in Length The effect of tenure on director independence increases with time. Thus, in theory limiting the tenure of audit and compensation committee members to a low number of years would result in the least dependence of directors on management and thus provide maximum independence. However, the costs associated with such a limit may outweigh the benefits. By setting the tenure threshold in a manner that best balances the need for impartial monitoring and the advantage of knowledge and a productive relationship with the company, such an outcome could be avoided. While average board tenure has been on the rise, the outliers are of the greatest concern. Directors who serve for twelve, fifteen, twenty, or forty years 210 are much more likely to be complacent than directors who serve for shorter periods. Since average tenure is skewed due to the effect of incoming directors, in many cases the presence of a very tenured director could be camouflaged and offset by newly appointed directors when looking at board tenure averages. Thus, setting the exact limit on tenure is a delicate task. One potential solution is to set the limit at the current average tenure of directors or at some multiplier of it (such as 1.3 of the average). On the one hand, cases of extremely long tenure would be prevented, while on the other hand, the majority of directors would not even face the restriction, as they would depart before such limit is ever reached. An alternative solution would allow each company to select and set, with shareholder approval, a specific limit from a predetermined range allowing for different limits for different industries and different companies (such as mature companies versus high-growth, recently public companies) See Lublin, supra note 192 (featuring the longest tenured directors in the S&P 500).

168 December 2016] RETHINKING INDEPENDENT DIRECTORS TENURE 155 Finally, a comply-or-explain rule could be chosen, setting limits on tenure as a default rule while allowing companies to opt-out by explaining why such a restriction would not benefit its shareholders, with shareholder approval. As a starting point, regulators should strongly consider setting the term limit at one and a half times the current average tenure (thirteen years), which would capture only directors who exceed the average by fifteen percent. As part of this requirement, regulators should allow companies, with the approval of their shareholders, to deviate from this figure, going as low as eight years and as high as fifteen years allowing for better sensitivity to market demands. The combination of mandated term limits for audit and compensation committee members and a reasonable and flexible limit in length should result in a relatively small number of directors who currently serve on boards that would be required to step down from the audit or compensation committees, while at the same time enhancing the monitoring role the board is entrusted with. D. Means of Implementation While a case for limited tenure restrictions can be made, the question then turns to what extent such restrictions should be mandatory. One potential critique of mandating tenure caps would revolve around the private ordering option. However, as discussed above, the private ordering argument suffers from several flaws potentially making mandatory arrangement necessary. The most promising option for voluntary adoption lies with proxy advisory firms. These firms have the ability to change the current landscape in the boardroom in a manner that can alleviate many of the private market failures. By adopting voting policies that reflect the impact tenure has on independence they could push the majority of institutional investors to act on their concerns. Moreover, these voting policies are independent of any specific company and thus can more accurately internalize the value of independence to shareholders as a group. While companies would still not be likely to initiate effective term limits, these voting guidelines could effectively create such limits by providing a negative recommendation to specific long-tenured directors, thus reducing their likelihood of reelection. This could provide an effective, shareholder driven mechanism for curbing director tenure. Importantly, this would also allow shareholders the ability to weigh the specific company s circumstances when voting, providing a less rigid and more sensitive tool. However, as previously noted, so far current proxy advisors have either disregarded tenure altogether (Glass Lewis), or have adopted policies that are too lenient and thus ineffective (ISS).

169 156 HASTINGS LAW JOURNAL [Vol. 68:97 If proxy advisors maintain their current guidelines, mandatory implementation then becomes more necessary. Granted, mandatory requirements passed through legislative action are potentially costly, and the outcome of legislative action could be unsatisfactory due to political compromise. However, legislative measures are not necessarily needed in order to cap tenure. Since current independence standards are not only set by federal and state law but also in the listing rules, a simple amendment to such rules by the stock exchanges would cause a similar result. Adding a provision on tenure to the prerequisite for director independence would be fairly simple, and similar changes to the definition of director independence have already been implemented in the past. Such a process could be fairly quick and cost effective. Moreover, an actual change to the listing rules might not even be necessary. Current independence requirements, as set by the stock exchanges, already contain general language requiring the board to ascertain that a director is independent. Issuing a rule interpretation advisory alerting companies that the stock exchange considers tenure to be a factor in determining independence could be a sufficient first step in achieving this goal. Conclusion Independent directors have become a cornerstone of modern corporate governance in the United States. Their importance to the corporate governance landscape and to regulators is reflected in the words of SEC Chairman Arthur Levitt in 1999: [W]ithout strong independent directors, accountability is nothing more than a word on a page. 211 Despite the strong public sentiment favoring board independence and the regulatory push toward independent directors, true independence is still an elusive goal. While recent years have seen significant progress in delineating the factors that could help determine director independence, the quest for true director independence is far from over. By providing theoretical arguments as to the importance of tenure as a factor that may impact director independence and by providing empirical evidence documenting a recent rise in board tenure, this Article has stressed the importance of directing regulatory attention to board tenure. This Article has strived to place these trends in the larger context of board structure transformations, viewing the rise in board tenure along with other recent trends in board structure as a market 211. See Arthur Levitt, Chairman, Sec. & Exch. Comm n, Opening Remarks at the SEC Roundtable on the Role of Independent Investment Company Directors (Feb. 23, 1999), speech/speecharchive/1999/spch253.htm.

170 December 2016] RETHINKING INDEPENDENT DIRECTORS TENURE 157 attempt to push back against the regulatory emphasis on director independence. This reaction, this Article argues, is manifest in the introduction of a new hybrid board member who complies with the black letter of the independence requirements but at the same time possesses many of the attributes corporate insiders brought to the board table the new insider. Coupling this market movement with the impact it might have on board independence, this Article has explored the benefits and risks of the new insider model as well as the potential need for regulatory intervention. Specifically, this Article suggests a more nuanced approach to director term limits: calling for term limits only for members of the audit and compensation committees that are calibrated in their tenure restrictions to allow companies to retain worthy, long-tenured directors, but at the same time safeguard the independence of the audit and compensation committees who serve as the monitoring arm of the board. Such an approach would pave the way for the strong independent directors regulators envisioned when mandating their presence in U.S. boardrooms.

171 158 HASTINGS LAW JOURNAL [Vol. 68:97 ***

172 Far from the Madding Crowd: A Statutory Solution to Crowd Crush Tracy Hresko Pearl* The future belongs to crowds. Don DeLillo 1 Crowd-related injuries and deaths occur with surprising frequency in the United States. In recent years, crowd members in the United States have sustained significant injuries and even fatalities at concerts, sporting events, doorbuster sales, nightclubs, and large festivals. While some of these incidents have prompted victims to file negligence suits against event organizers and venue owners, common law has proven to be ineffective at addressing crowd crush. Indeed, courts have repeatedly held for defendants in these cases, making a series of scientific and legal errors in their analysis and providing little incentive for organizers and owners to improve their crowd management practices. Additionally, ad hoc crowd management efforts on the part of a few concerned promoters and venues have done little to reduce the risk of crowd-related injuries in cities and states as a whole. This Article argues that state and local adoption of crowd management statutes is the only remaining solution that can effectively reduce the number of crowd crush injuries and fatalities in the United States each year. Because there are currently no such laws in this country, this Article proposes a model statute that draws upon fundamental principles of crowd science in requiring event organizers and venue owners to take a series of simple steps before and during large gatherings that will drastically reduce the likelihood of crowd crush. * Associate Professor of Law, Texas Tech University School of Law. J.D., Boston College Law School, 2006; M.Sc., Comparative Social Policy, Oxford University, 2003; A.B., Public Policy, Duke University, I presented this Article at the Second Annual International & Comparative Urban Law Conference at the Sorbonne Law School in Paris, France. I am extraordinarily grateful to Dr. G. Keith Still, Professor of Crowd Science at Manchester Metropolitan University, for his unparalleled expertise as well as his input on this Article. I am also indebted to my fantastic research assistants, Amanda Kraynok, Kristyn Urban, and Joseph Brandler, for their excellent work. Many thanks, also, to Professor Alex Pearl, Professor Victoria Sutton, Michele Thaetig, and Brady Norvall for their feedback and support. 1. Don Delillo, Mao II 16 (1991). [159]

173 160 HASTINGS LAW JOURNAL [Vol. 68:159 Table of Contents Introduction I. Crowd Crush in the United States II. Crowd Science & Preventing Crowd Crush A. Crowd Density B. Physical Space Movement Spaces & Bottlenecks Assembly Spaces & Festival Seating III. The Failure of Common Law A. Capacity Errors B. Demographic Analysis Errors C. Causation Errors D. Assumption of the Risk Errors E. Consequences IV. AD HOC Approaches to Crowd Crush A. Municipal Festival Seating Bans B. Location-Specific Renovations C. Event-Specific Reforms V. A Statutory Response A. Crowd Management Plans Routes: Ingress, Egress & Circulation Area(s) Crowds Will Occupy Movement of the Crowd over Time Profile of the Crowd B. Crowd Control Measures Real-Time Monitoring Communication C. Festival Seating Ban VI. A Model Statute Conclusion Introduction In the early morning hours of November 28, 2008, over 2000 people gathered outside of the front entrance of a Wal-Mart in Valley Stream, New York. 2 Even though the sun had not yet risen and the store was not due to open for several hours, the force of the anxious and enthusiastic 2. Robert D. McFadden & Angela Macropoulos, Wal-Mart Employee Trampled to Death, N.Y. Times (Nov. 28, 2008),

174 December 2016] A STATUTORY SOLUTION TO CROWD CRUSH 161 crowd which stretched all the way back across the large parking lot began to push members at the front up against the sliding-glass double doors of the store. 3 Despite the pleas of the local police officers who had responded to the scene, the crowd continued to press forward, and the doors at the front entrance began to bow inward from the weight of the crowd. 4 Some workers inside tried to reinforce the doors by pushing back, but their efforts were fruitless. 5 Suddenly, the glass doors shattered, a metal portion of the doorframe crumpled inward like an accordion, and the crowd surged into the store, rushing to secure the Black Friday sale items that the store had heavily advertised over the prior weeks. 6 Jdimytai Damour, a temporary Wal-Mart employee hired for the holiday season, was thrown backward onto the tile floor and trampled by some number of the thousands of people who streamed in through the front doors. 7 He did not survive. 8 A subsequent autopsy revealed the trampling caused the thirty-four-yearold employee to die of asphyxiation. 9 Though Mr. Damour was the only fatality that resulted from the incident, four other people were hurt in the stampede and treated at the hospital, including a twenty-eight-year-old woman who was eight months pregnant. 10 Their injuries ranged from a broken ankle to complaints of pain Three other shoppers reported experiencing harassment during the stampede to the police. 12 All of the injuries and complaints appear to have originated from the crowd s initial surge through the front entryway of the store. In the aftermath of the incident, the general public and some of the shoppers themselves were quick to place the blame for Mr. Damour s death squarely on the members of the crowd. 13 One of them, Kimberly Cribbs of Queens, said the crowd had acted like savages. Shoppers behaved badly even as the store was being cleared, she recalled. 14 Another wrote to the New York Times to condemn the 3. Id. 4. Id. 5. Id. 6. Id.; Victoria C. Dawson, Who Is Responsible When You Shop Until You Drop: An Impact on the Use of the Aggressive Marketing Schemes of Black Friday Through Enterprise Liability Concepts, 50 Santa Clara L. Rev. 747, (2010). 7. McFadden & Macropoulos, supra note Dawson, supra note 6, at Id. at McFadden & Macropoulos, supra note Dawson, supra note 6, at Id. 13. See id. at McFadden & Macropoulos, supra note 2.

175 162 HASTINGS LAW JOURNAL [Vol. 68:159 barbarians who rushed the door. 15 Yet another referred to the crowd members as a bunch of animals. 16 What was missing from those early reactions, however, was an understanding of crowd science: a branch of physics dedicated to understanding the physical dynamics of large groups of people moving through physical space. What crowd science reveals about the Wal-Mart crowd crush and the thousands of other crowd crushes like it that occur every year is something far different than the commentators would have had the general public believe: The crowd members themselves were not responsible for their actions. They likely had no ability to control their own movements and were instead propelled through the entryway of the store by the force of the crowd behind them. Crowd science also supplies another surprising and legally relevant fact about incidents like this one: they are foreseeable and almost entirely preventable with even minimal preparation. Crowd science, therefore, would suggest that the blame for Mr. Damour s death lies not on the crowd members who trampled him, but on Wal-Mart s negligence in attracting a large crowd to their store while simultaneously doing nothing to prevent a crowd crush from occurring. Indeed, as discussed at length below, Wal-Mart is virtually the only entity that could have taken effective preparations to prevent a crowd crush, not the employees working the Black Friday sale, not local law enforcement officers, and certainly not the crowd members themselves. The law, however, does not require Wal-Mart or any other store, venue, or event promoter to prepare a crowd management plan. Despite the tremendous risks of injury and death posed by large crowds, the United States currently does not have a single law in any jurisdiction state, local, or federal requiring any entity to engage in significant crowd management preparations, even when planning a large event. While most states and municipalities have passed statutes requiring event planners to provide ample trash receptacles, have an ambulance on site, and keep event sounds below a particular decibel level, not one statute requires event planners to have a crowd management plan, to ensure safe and proper ingress and egress routes for event attendees, or to arrange event seating and standing areas in a manner that minimizes the risk of stampedes. As a result, crowd crush incidents are surprisingly common in the United States 17 and have been for almost one hundred years. 18 Indeed, 15. Michael Pravica, Letter to the Editor, A Black Friday Sale Shouldn t Make Us Barbarians N.Y. Times (Dec. 1, 2008), Angel13, comment to On Long Island, Black Friday Crowd Kills Wal-Mart Employee, SILive (Nov. 28, 2008), (last visited Nov. 7, 2016).

176 December 2016] A STATUTORY SOLUTION TO CROWD CRUSH 163 one crowd scientist estimates that the United States is responsible for thirty-seven percent of the concert-related crowd injuries that occur each year worldwide. 19 In the last several years, for instance, crowd crushes have occurred at concerts by Beyoncé, 20 Eminem, 21 and less famous acts. 22 Crowd crushes have also occurred in other situations: at doorbuster sales, 23 sporting events, 24 and in and around large transportation venues. 25 Such incidents, moreover, seem to be increasing over time 26 as the population increases and our public venues grow in size to accommodate larger masses. 27 Up to this point, the United States has relied on common law, mostly through negligence lawsuits, to address its crowd crush issues and compensate victims. As I detail at length in my earlier work, however, common law has proven to be a remarkably poor vehicle for doing so. 17. See Lawrence M. Friedman & Joseph Thompson, Total Disaster and Total Justice: Responses to Man-Made Tragedy, 53 DePaul L. Rev. 251, 276 (2003). 18. See id. 19. A Trust Betrayed: Safety Became the Twelfth Victim, Crowd Mgmt. Strategies, crowdsafe.com/cafe/who20.html (last visited Nov. 7, 2016). 20. Eliana Dockterman, Beyoncé Sued by Fans Trampled at Concert, Time (Apr. 2, 2014), com/46879/fans-sue-beyonce-after-being-trampled-before-concert/. 21. Tanika White, 30 Hurt in Concert Crush at Washington Stadium, Balt. Sun (May 26, 2002), See Assoc. Press, Arizona Concert Stampede Leaves Two Minors Critical and Dozens Injured After Crowd Rushed the Stage During Reggae Show, Daily Mail (Sept. 27, 2015, 3:53 AM), Electric Daisy Carnival: More than 100 Hospitalized During LA Festival, Huffington Post (June 28, 2010, 4:50 PM), Dawson, supra note 6, at 749, See, e.g., P. Scraton et al., No Last Rights: The Denial of Justice and the Promulgation of Myth in the Aftermath of the Hillsborough Disaster (1995); Cynthia Schuster, 20 Years Later, Lessons Still Relevant from Camp Randall Stampede, Wis. Pub. Radio (Oct. 25, 2013, 2:00 AM), Joseph Berger, The Crush at City College; An Inquiry Spreads Blame for Deaths at a New York Gym, N.Y. Times (Jan. 16, 1992), Alexopoulos v. Metro. Transp. Auth., 838 N.Y.S.2d 50 (N.Y. App. Div. 2007). 26. See, e.g., G. Keith Still, Introduction to Crowd Science 1 (2014) ( Around the world, event organisers are planning increasingly large, challenging events while also trying to minimize expenditure, recoup costs and maximise profits. With larger events comes the potential for larger incidents, and, sadly, we are seeing an increase in crowd-related incidents around the world. ); Luke Ellis, Note, Talking About My Generation: Assumption of Risk and the Rights of Injured Concert Fans in the Twenty-First Century, 80 Tex. L. Rev. 607, 608 (2002) ( The number of concert-goers seriously injured or killed at concerts in recent years has increased drastically. ); James L. Curtis et al., Holiday Shopping and Crowd Management Safety Guidelines for Retailers, Envtl. & Safety L. Update (Nov. 13, 2012), ( Holiday shopping is increasingly becoming associated with violence and hazards. ). 27. See John J. Fruin, The Causes and Prevention of Crowd Disasters 1 (2002), crowdsafe.com/fruincauses.pdf ( A major sporting or entertainment event can attract 70,000 avid fans. Large transportation terminals such as New York Grand Central Terminal and Pennsylvania Station accommodate 200,000 passengers each weekday. ).

177 164 HASTINGS LAW JOURNAL [Vol. 68:159 Existing crowd crush jurisprudence presents significant issues, including: (1) it relies on assumptions about crowd dynamics that contravene basic principles of crowd science; (2) it strongly disadvantages plaintiffs; and, (3) it has done nothing to either incentivize or require venue owners or events managers to employ even simple crowd management techniques because the success rate for plaintiffs has been so low. 28 As a result, crowd crushes continue to occur in the United States in growing numbers. This Article argues that a statutory response to crowd crush is the most appropriate and effective way to reduce the number of crowdrelated injuries and deaths in the United States each year and to ensure that mass gatherings remain safe for participants. Given the common law s failure to address this issue adequately, states and municipalities should pass statutes that require event organizers and venue owners to undertake certain basic crowd management preparations in advance of events likely to attract large numbers of people. This Article concludes with a proposal for a model crowd control statute designed to address these issues. Part I of this Article examines crowd crush in the United States, discussing some of the most prominent crowd incidents in U.S. history, and analyzing how often it occurs. Part II provides a brief overview of the basic principles of crowd science and what they teach us about preventing crowd-related injuries and deaths. Part III analyzes why the common law has failed to prevent crowd crush incidents thus far and why it is unlikely to do so in the future. Part IV addresses the ad hoc approaches both governments and event organizers have taken in response to the problems of crowd crush and why they, too, have had limited success in combating crowd incidents. Part V examines what crowd science suggests effective crowd management and crowd control entails. Finally, in Part VI, I propose a statutory response to the problem and provide a model statute designed for states and municipalities interested in reducing crowd-related risks within their borders. I. Crowd Crush in the United States The United States has a long and somewhat storied history with crowd crush. While a close investigation of local news reports throughout the country reveals that crowd-related injuries occur with great frequency, they tend to do so on a smaller scale, with only small numbers of individuals sustaining minor to moderate injuries. 29 Over the last one 28. See Tracy Hresko Pearl, Crowd Crush: How the Law Leaves American Crowds Unprotected, 104 Ky. L.J. 1, 5 (2015). 29. See Fruin, supra note 27, at 1 ( The lethal potential of crowds is illustrated by descriptions of major crowd incidents. This sampling shows that crowd incidents occur in a wide variety of venues and

178 December 2016] A STATUTORY SOLUTION TO CROWD CRUSH 165 hundred years, however, this steady stream of smaller crowd incidents has been punctuated with horrific crowd disasters that have shocked the public and captured national attention for some time before falling off of the proverbial radar and being replaced with other news stories. A quick look at some of the most prominent ones, however, demonstrates how long the United States has experienced such disasters: Cocoanut Grove: In 1942, a fire at the Cocoanut Grove nightclub in Boston, Massachusetts caused a crowd crush that killed 492 people. 30 Most of the exits on the premises were locked, so patrons were forced to attempt to exit through the revolving door at the front entrance, which was not designed to handle a mass exodus. 31 The door jammed while bodies piled up as the crowd continued to attempt to flee. 32 The Who Concert: In 1979, eleven people were killed in a crowd crush that occurred outside of a rock concert by The Who in Cincinnati, Ohio. 33 Managers of the venue opened only two doors into the venue even though 8000 people were gathered outside still waiting to enter. 34 When the warm-up band began to play, many in the crowd believed the concert had begun and began to push toward the two entrances. 35 People died due to asphyxiation from the pressure of the crowd around them and due to injuries sustained from being trampled. 36 City College: In 1991, a crowd crush killed nine people and injured countless others at the City College of New York. Over 5000 people showed up to attend a celebrity basketball game organized by rap promoter and artist Sean Puff Daddy Combs. 37 Only one entrance into the venue was open, and the large crowd was forced to navigate a small interior vestibule, a second set of doors, a narrow stairwell, and then a single door into the gym. 38 As the crowd surged through these bottlenecks, individuals were trapped at the bottom of the stairwell and suffocated to death. 39 different circumstances. Minor incidents resulting in crowd induced falls and other injuries occur much more frequently. ). 30. Jack Thomas, The Cocoanut Grove Inferno, Bos. Globe (Nov. 22, 1992), web/ / 31. Id. 32. Id. 33. Fruin, supra note 27, at 3; see also Berger, supra note Fruin, supra note 27, at Id. 36. Id. 37. Berger, supra note Milton Mollen, A Failure of Responsibility : Report to Mayor David N. Dinkins on the December 28, 1991 Tragedy at City College of New York 25 (1992). After the situation in and around the 138th Street entrance became desperate, officials opened one additional entrance the 136th Street entrance but that, too, became quickly overwhelmed by the large number of people attempting to enter the facility. Id. at Id. at 42.

179 166 HASTINGS LAW JOURNAL [Vol. 68:159 Camp Randall: In 1993, a crowd crush hospitalized over seventy people at Camp Randall Stadium in Madison, Wisconsin. 40 After the University of Wisconsin football team beat their rivals, the University of Michigan, during a critical game, thousands of fans attempted to storm the field, but were met with a chain-link fence at the bottom of the student section of the stadium. 41 The barrier caused a crush at the front of the crowd that then rippled back into the stands. 42 E2: In 2003, a crowd crush killed twenty-one people and injured countless others at a nightclub in Chicago, Illinois. 43 After a fight broke out on the dance floor and a security guard discharged pepper spray, a large crowd tried to flee the club. 44 The crowd obstructed all but one of the club s three exits, so the entire crowd was forced to descend a narrow front stairwell in order to leave through the club s main entrance. 45 Tragically, the front door at the bottom of the stairwell failed to open, and crowd members became trapped in the stairwell, suffocating to death as individuals at the back of the crowd who were unaware of what was happening at the front continued to push forward to escape the pepper spray. 46 One report notes that by the end of the crush, a pile of bodies more than six feet high had accumulated immediately inside the front entrance. 47 Great White Concert: Three days after the tragedy at the E2 nightclub, similar circumstances killed 100 people and injured over 200 at a Great White concert at The Station nightclub in West Warwick, Rhode Island. 48 After a fire broke out on stage, the crowd of more than 400 people attempted to exit, but two of the four exits were locked, while another possible exit the stage door was blocked by venue security. 49 The vast majority of the crowd, therefore, was forced to attempt to exit through the front door, creating a deadly bottleneck Gil Fried & Robert Metchick, Case Study, Camp Randall Memorial Stadium Case Study: University of Wisconsin October 30, 1993, 15 J. Legal Aspects Sport 139, 140 (2005). 41. Wisconsin Victory Celebration Turns Dangerous, N.Y. Times (Oct. 31, 1993), com/1993/10/31/sports/college-football-wisconsin-victory-celebration-turns-dangerous.html. 42. Id. 43. Fifth Anniversary of the E2 Nightclub Tragedy; All but Forgotten in Chicago?, Crowd Mgmt. Strategies, (last updated Aug. 11, 2016). 44. E2 Nightclub Tragedy 9th Anniversary: It s Not over Until It s over, Crowd Mgmt. Strategies, (last updated Aug. 11, 2016). 45. Id. 46. Id. 47. Eric Herman, Some Laughed in E2 Stampede: Patrons Did Not Know They Were Shoving Others to Their Deaths, Chi. Sun-Times (Jan. 19, 2007), Great White Concert Tragedy: Tenth Anniversary, Crowd Mgmt. Strategies, (last updated Aug. 11, 2016). 49. Pat Pemberton, The Great White Nightclub Fire: Ten Years Later, Rolling Stone (July 15, 2013), Id.

180 December 2016] A STATUTORY SOLUTION TO CROWD CRUSH 167 Electric Daisy Music Festival: In 2010, [m]ore than 200 people were injured and more than 100 were taken to hospitals during a two-day electronic music festival and rave at the Los Angeles Memorial Coliseum and Exposition Park. 51 Large numbers of festival attendees became trapped in a narrow passageway as they attempted to move from the bleachers to the VIP section on the field, 52 as shocking video footage of the incident reveals. 53 As noted in the introduction to Part I of this Article, these are only some of the most prominent crowd crush incidents in recent U.S. history. Most incidents are either not reported or, if they are, receive little attention from the general public. Indeed, one scholar estimates that only one out of every ten crowd injuries associated with doorbuster sales is reported. 54 Another notes that the vast number of concert injuries... go unreported because of the inadequate measures used to gather concertinjury information. 55 No government agency or non-governmental organization currently monitors crowd-related injuries in the United States, and the press has seemed disinclined to report on anything other than the most extreme crowd disasters. In the absence of such reporting, crowd scientists have a difficult time estimating how many crowd-related injuries occur in the United States each year. The worldwide numbers, however, are instructive. One study calculated that, in the ten-year period between 1992 and 2002, there were 232 deaths and over 66,000 injuries in crowd crush incidents worldwide. 56 Another crowd expert estimates that between 20,000 and 40,000 people seek medical attention for crowd-related injuries each year. 57 If the United States accounts for only a small portion of those injuries and, with one scholar calculating that thirty-seven percent of all concert injuries occur in this country, 58 a small portion might be unduly conservative it seems both fair and cautious to estimate that several thousand crowd-related injuries occur in the United States annually. 51. Electric Daisy Carnival, supra note Electric Daisy Carnival Stampede Sends 114 to Hospital, Inside Edition (June 29, 2010, 2:00 PM), People Crushed During the Electric Daisy Carnival, YouTube (July 4, 2010), youtube.com/watch?v=nbytfh27r6q. 54. Dawson, supra note 6, at Ellis, supra note 26, at Steven A. Adelman, Won t Get Fooled Again, 40 Trial 18, 18 (2004). 57. Eleventh Rock Concert Safety Survey: 20 Die at Concerts and Festivals in 2002, Crowd Mgmt. Strategies 1 (2003). 58. See A Trust Betrayed, supra note 19.

181 168 HASTINGS LAW JOURNAL [Vol. 68:159 II. Crowd Science & Preventing Crowd Crush Crowd science is the branch of physics that seeks to understand the movement and behavior of crowds a crowd being defined as a large number of persons collected into a somewhat compact body without order. 59 Over the last twenty-five years, using a combination of case studies and computer simulation and modeling techniques, crowd scientists have acquired a strong understanding of how crowd risks develop into incidents and how incidents can escalate into disasters In the process, they have also developed real-world, practical techniques and methodologies to reduce those risks and enhance crowd safety. 61 These findings are encouraging, as they have shown that many crowd disasters could have been avoided by simple advance planning and management techniques, rather than complex, expensive, or time-consuming efforts. 62 They also show that certain basic scientific principles are key to understanding the root causes of crowd crushes. A. Crowd Density The key to understanding crowd incidents lies in understanding crowd density: the number of people per square meter in a given crowd. 63 Crowd density is an extremely good predictor of the likelihood of crowd crush injuries or death occurring in a given crowd. 64 Low crowd densities those below roughly five people per square meter are lowrisk from a crowd management perspective. 65 At those densities, there is virtually no likelihood of a crowd-related injury or death occurring because individuals can move about freely and without making physical contact with other crowd members. 66 However, at high crowd densities those above roughly five people per square meter individuals lose the ability to move freely, crowd members are in almost constant contact with others around them, and the risk of injury or death increases dramatically. 67 One crowd scientist notes: 59. Je Anna Lanza Abbott & Morgan W. Geddie, Event and Venue Management: Minimizing Liability Through Effective Crowd Management Techniques, 6 Event Mgmt. 259, 260 (2001). 60. Still, supra note 26, at Id. at xv. 62. Fruin, supra note 27, at See, e.g., Mehdi Moussaïd et al., How Simple Rules Determine Pedestrian Behavior and Crowd Disasters, 108 Proc. Nat l Acad. Sci. U.S. Am. 6884, 6885 (2011); Dirk Helbing et al., Crowd Turbulence: The Physics of Crowd Disasters, Fifth Int l Conf. on Nonlinear Mechanics (Shanghai) (2007); Ris S. C. Lee & Roger L. Hughes, Exploring Trampling and Crushing in a Crowd, 131 J. Transp. Engineering 575, 581 (2005); Fruin, supra note Pearl, supra note 28, at See Lee & Hughes, supra note 63, at See Dirk Oberhagemann, Technical Report: Static and Dynamic Crowd Densities at Major Public Events (1st ed. 2012). 67. See Lee & Hughes, supra note 63, at 576; Helbing et al., supra note 63, at 967.

182 December 2016] A STATUTORY SOLUTION TO CROWD CRUSH 169 When crowd density equals the plan area of the human body [(the amount of space a single person typically occupies)], individual control is lost, as one becomes an involuntary part of the mass. At occupancies of about 7 persons per square meter the crowd becomes almost a fluid mass. Shock waves can be propagated through the mass sufficient to lift people off of their feet and propel them distances of 3 m (10 ft) or more. People may be literally lifted out of their shoes, and have clothing torn off. Intense crowd pressures, exacerbated by anxiety, make it difficult to breathe. The heat and thermal insulation of surrounding bodies cause some to be weakened and faint. Access to those who fall is impossible. Removal of those in distress can only be accomplished by lifting them up and passing them overhead to the exterior of the crowd. 68 Indeed, when analyzing high-density crowds, scientists use [p]hysics based models like particle, gas and fluid dynamics methods... to model movements of [crowd members] One scientist explains that [p]eople caught in a crowd crush behave as a liquid. No individual can control his or her movement or assist others close by. 70 In essence, the crowd itself takes on a life of its own and the individuals caught within it are at its mercy. The forces exerted by high-density crowds in these kinds of situations can be fatal, exerting more than 1000 pounds of pressure at a time on individual crowd members. 71 The most common cause of death in these situations is compressive asphyxiation, a phenomenon in which the life is literally squeezed out of a person by the pressure of the crowd members around them. 72 Death from trampling is also a possibility. 73 Therefore, effective crowd management is almost synonymous with effective management of crowd density. 74 Ensuring that crowds do not reach a density above five people per square meter can virtually eliminate the risks of crowd-related fatalities and injuries. 75 This requires event planners and venue owners to pay close attention to the physical space in which crowds may move or gather. 76 B. Physical Space There are two kinds of physical spaces that are relevant from a crowd science and crowd management perspective: (1) the spaces through which 68. Fruin, supra note 27, at Soo Chin Pin et al., Applying TRIZ Principles in Crowd Management, 49 Safety Sci. 286, 287 (2011). 70. Adelman, supra note 56, at Fruin, supra note 27, at Lee & Hughes, supra note 63, at Id. 74. See John J. Fruin, Crowd Dynamics and Auditorium Management, Crowd Safety & Risk Analysis (2015), See Lee & Hughes, supra note 63, at See infra Part I.B.

183 170 HASTINGS LAW JOURNAL [Vol. 68:159 crowds must move, and (2) the spaces in which crowds may assemble for some period of time. Within the first category movement spaces are areas such as entryways and exits, hallways and corridors, and stairways and escalators. Crowds move through these kinds of spaces on an almost entirely transient basis. We do not expect large numbers of crowd members to stop and linger in these areas, as there is little reason to do so. They are designed almost entirely for pedestrian travel. The second category of physical spaces assembly spaces are those in which we would expect a crowd to linger or settle: the stands in a sporting venue, the floor of a stadium during a rock concert, or the large grassy field in front of a stage at a festival. Crowds move toward these spaces at the beginning of an event, spend the bulk of the event within them, and then exit them following the event s conclusion. Whereas constant crowd movement marks the first category of spaces, crowds tend to be more static in this second category. The differences between these two types of spaces are significant from a crowd management perspective because they pose substantially different risks and issues. 1. Movement Spaces & Bottlenecks The biggest risk to a crowd in movement spaces are bottlenecks, which are areas that require a moving crowd to compress itself inward to traverse a given space. As I note in my earlier writing about crowd crush: Problematic physical spaces that may result in bottleneck phenomena include narrow hallways and stairwells, insufficient numbers of entrances and exits, the use of escalators (which force crowds to funnel themselves into the narrow entryways onto escalator steps), and corridors that require crowds to make tight turns. They may also include smaller and more temporary features of a facility: barricades, holiday decorations, trashcans, concession tables, artistic sculptures, or even random pieces of trash or debris that a crowd must move around. As one crowd expert notes, even [m]inor design deficiencies that present no apparent problems under normal traffic conditions can be accentuated in crowds, potentially triggering more dangerous, domino effect accidents. 77 Bottlenecks are dangerous because they dramatically increase the likelihood that a crowd will reach a high density and experience a crowd crush. 78 Worse, bottleneck crushes can intensify quickly, heightening the number of injuries and fatalities, because although only a portion of the crowd [may be] slowed and compressed at a precarious location, the crowd behind it continues to press ahead because it has no knowledge of 77. Pearl, supra note 28, at 10 (quoting John J. Fruin, Crowd Dynamics and Auditorium Management, Crowd Safety & Risk Analysis (Mar. 1, 2015, 2:42 PM), Support/crowd-flow/fruin/Fruin3.html). 78. Moussaïd et al., supra note 63, at 6886; Fruin, supra note 74.

184 December 2016] A STATUTORY SOLUTION TO CROWD CRUSH 171 what conditions are at the bottleneck. 79 Pressure from behind the bottleneck increases the pressure the crowd exerts on the portion of the crowd tightly packed in at the bottleneck, causing more injuries and fatalities. 2. Assembly Spaces & Festival Seating Festival seating is a high-risk configuration in assembly spaces that drastically increases the risk of crowd-related injuries and death. Festival seating, utilized frequently at concert venues and other large festivals or events, can take one of two forms: (1) festival seating in which the entire event is standing room only, and there are either no or only a limited number of reserved seats for attendees; and (2) general admission seating, in which there are seats available for crowd members but most or all of them are unreserved. In both of these arrangements, valuable space within a given venue is up for grabs. 80 Although entertainers typically like the use of festival seating many acts, like U2, will not agree to perform at venues that do not permit it 81 both types of seating are risky from a crowd control perspective for two reasons. 82 First, due to the absence of assigned seats, crowd members are forced to compet[e] for favorable seats or standing positions close to entertainers, creating a rush to obtain some highly valued objective. 83 As a result, high-density crowds may assemble outside of the venue well before the official start of the program with the hopes of being at the front of the line when the doors open so that crowd members can maximize their chances of obtaining their desired location once inside. 84 This precise phenomenon occurred immediately before the deadly Who concert crowd crush that occurred in Cincinnati. 85 Second, once inside the venue and (loosely) situated, a crowd crush can occur when crowd members toward the back of the festival seating zone push forward toward the source of the entertainment once the 79. Pearl, supra note 28, at Id. at 11; see also About The Who Concert Tragedy Task Force Report, Crowd Mgmt. Strategies, (last visited Nov. 7, 2016). 81. Adelman, supra note 56, at Id.; Fruin, supra note 27, at Fruin, supra note 27, at See generally Ellis, supra note 26 (discussing the increasing numbers of concert-related injuries and deaths); Adelman, supra note 56, at 18 (describing the phenomenon of crowds converging to find seats during events with festival seating). 85. About The Who Concert Tragedy, supra note 80 ( For more than 14,000 fans out of approximately 18,500 the only viewing options inside the [venue] were festival seating... or general admission.... That is why thousands of loyal Who fans came to the concert hours early to stand in the chilled wintry evening. They knew that the best concert viewing positions would be up for grabs once the doors opened. Anticipation ran high as the friendly crowd amassed. ).

185 172 HASTINGS LAW JOURNAL [Vol. 68:159 performance or festival has begun. 86 This pressure from the back of the crowd causes the density at the front of the crowd to increase rapidly, potentially reaching dangerous levels and injuring or killing those at the very front. For instance, ten to twelve people were injured and nine people were hospitalized including two juveniles with life-threatening injuries in September 2015, after a festival seating crowd pushed toward the stage at a music festival. 87 Witnesses reported that the crowd surged forward when the reggae band Rebelution began its set and that people who were at the front of the stage had trouble breathing. 88 Two women at the front of the crowd collapsed after apparently suffering seizures. 89 Thus, despite the entertainment industry s continued push for festival seating, it remains a risky way to configure audiences at concerts and festivals. 90 Indeed, most crowd science experts believe that the use of festival seating is the principal culprit in most crowd crush cases, 91 and [o]ne estimate suggests that ninety percent of all concert injuries occur at festival-seating and general-admission concerts. 92 III. The Failure of Common Law Due to the absence of statutory law pertaining to crowd management in the United States, when an individual is injured by crowd crush they (or their estate) must rely on a common law cause of action if they wish to seek legal recourse. 93 In virtually every case their cause of action is negligence, and the plaintiff s primary assertion is that the defendants breached their duty to implement adequate crowd control measures. 94 The defendants usually include some combination of the owner and operator of the venue in which the crowd crush injury occurred, the promoter or producer of any event occurring on the 86. See Thomas D. Selz et al., 2 Entertainment Law 3d: Legal Concepts and Business Practices 10:36, Westlaw (database updated Dec. 2015) ( More often than not, the fans choose to get as close to the performers on stage as possible. This can result in the crowd attempting to get closer to the stage, crushing the fans towards the front of the crowd. ). 87. Several Concert-Goers Injured After Crowd Rushes Stage at Arizona Festival, Fox News (Sept. 27, 2015), Id. 89. Id. 90. Nat l Fire Prot. Ass n, Life Safety Code Handbook A (Ron Cote & Gregory E. Harrington eds., 9th ed. 2003) (suggesting that festival seating at live entertainment events should be expected to result in overcrowding and high audience density that may compromise public safety ). 91. Adelman, supra note 56, at Ellis, supra note 26, at 611 (internal citation omitted). 93. Adelman, supra note 56, at See Louis R. Frumer & Melvin I. Friedman, Personal Injury Actions, Defenses, Damages (rev. ed. 2016).

186 December 2016] A STATUTORY SOLUTION TO CROWD CRUSH 173 premises at the time, the security company on duty during the incident, and/or the performer on stage at the time of the crush. 95 Duty is typically easy for plaintiffs to establish in these cases because [u]nder traditional premises liability law, those who enter venues as paying customers or audience members (e.g. concertgoers, sports spectators, etc.) are considered invitees to whom a duty of reasonable care is owed. 96 The most contentious components of the litigation usually revolve around the remaining elements of negligence: breach and causation. 97 As I discuss at length in my earlier work about crowd crush, however, [d]espite the frequency with which crowd crush injuries occur, the jurisprudence surrounding liability for these injuries is remarkably sparse and inconsistent. 98 Despite decades of crowd crush litigation, common law in this area of torts remains underdeveloped, 99 with courts taking a mostly ad hoc approach to these cases. 100 Instead of relying on crowd science and crowd scientists as expert witnesses, courts have instead largely us[ed] a combination of conventional wisdom about crowds and general principles of tort law to rule on liability. 101 Relying on conventional wisdom and general principles of tort law has resulted in confusion in the law and some unresolved issues in crowd crush litigation, including whether crowd crushes are foreseeable; 102 whether the acts of individual crowd members are intervening, superseding causes of plaintiffs injuries; 103 and whether individuals assume the risk of injury 95. See Pearl, supra note 28, at Id. 97. See infra notes Pearl, supra note 28, at 15 n.124 ( The inconsistencies between the individual negligence cases with sufficient cohesiveness among the plaintiffs and injuries derived out of the same type of event or course of conduct by the retailers all resulted in different outcomes under the negligence regime. ); see also Ellis, supra note 26, at 609; Frumer & Friedman, supra note 94 ( Courts in Illinois and New York have reached the same result on similar facts. This view is not unanimous, however, as the courts of other states have denied liability on analogous facts. (quoting Victoria C. Dawson, Who Is Responsible When You Shop Until You Drop: An Impact on the Use of the Aggressive Marketing Schemes of Black Friday Through Enterprise Liability Concepts, 50 Santa Clara L. Rev. 747, (2010))). 99. Ellis, supra note 26, at Frumer & Friedman, supra note 94, 42.01(3)(b) ( Cases of injury caused by a panicking crowd demonstrate how often crowd control matters are decided on their facts. ) Pearl, supra note 28, at Compare Rotz v. City of New York, 532 N.Y.S.2d 245, 247 (N.Y. App. Div. 1988) ( Our point of departure with the IAS Court is its summary determination that the danger here was not foreseeable and that, as a matter of law, the injuries to plaintiff were caused by an unforeseeable, intervening event. ), with Haley v. May Dept. Stores Co., 287 S.W.2d 366, 368 (Mo. Ct. App. 1956) ( But even if the crowd did become unruly after plaintiff boarded the escalator, defendant cannot be held to have been negligent in failing to anticipate such conduct. ) Compare Rotz, 532 N.Y.S.2d at 249 (referencing a lower court opinion which found that acts of individual crowd members were intervening, superseding causes of plaintiff s crowd crush injuries), with Myers v. Kansas City Junior Orpheum Co., 73 S.W.2d 313, 321 (Mo. App. 1934) ( The plaintiff s

187 174 HASTINGS LAW JOURNAL [Vol. 68:159 when they enter a crowd, 104 among other issues. 105 As argued in my earlier work, [c]rowd science arguably provides extremely clear and straightforward answers to these questions in most cases and yet... this body of science has been almost entirely overlooked by courts in the United States. 106 Crowd crush litigation is not only marked by underdevelopment and confusion, but it is also marked by a significant amount of precedent that runs contrary to available crowd science. 107 Four mistakes, in particular, are worth discussing. 108 Each will be addressed in the following four Subparts. A. Capacity Errors First, courts in crowd crush cases are prone to look at compliance with set capacity numbers instead of crowd density estimates in assessing whether a venue was dangerously overcrowded. 109 While there is an appealing logic to this approach in analyzing liability in these cases, capacity numbers are only a weak stand-in for the scientifically relevant inquiry in crowd crush cases: Whether the crowd reached a high-risk density prior to the plaintiff s injury. 110 Indeed, while evidence that a venue had grossly exceeded its set capacity number may be persuasive evidence that the crowd within the given venue was at a high density, the converse is not also true. Under-capacity venues may, in fact, experience testimony, in its entirety, is not open to the construction that she was pushed over the rope, not by the pressure of the crowd, but merely by one or two persons who began pushing in an effort to get next to the door into the theater or auditorium proper. But even if the pressure against plaintiff was by the pushing of two or more, yet if that was the result of the pressure of the congested crowd in the ropedoff space, it would not exculpate defendant, since those coming directly in contact with plaintiff under those circumstances could be regarded as merely an intervening, though not an independent, cause. ) Compare Rossman v. K-Mart Corp., 701 F. Supp. 1127, 1132 (M.D. Pa. 1988), aff d, 866 F.2d 1413 (3d Cir. 1988) ( While Mrs. Rossman became part of a crowd that ultimately became testy and unruly, there is no evidence that she subjectively knew that K Mart Corporation would fail to take proper precautions to control the crowd, or to provide a reasonably safe method for distribution of the dolls. Nor could Mrs. Rossman have anticipated that K Mart employees would take actions that would cause the unruly crowd to stampede. ), with Klish v. Alaskan Amusement Co., 109 P.2d 75, 76 (Kan. 1941) ( Crowds are common at theaters and other places of amusement. That there may be some jostling in such crowds is inevitable. That someone may fall and sustain injury, or cause injury to others, always is a possibility. These conditions are so common that those who attend such places are presumed to know of them. ) Pearl, supra note 28, at Id. at See id. at See generally id. (discussing these mistakes in-depth). This Subpart draws heavily on my prior work on this topic, Crowd Crush: How the Law Leaves American Crowds Unprotected. For a more extended discussion of this topic found in that piece, see id. at Id Id. at 20.

188 December 2016] A STATUTORY SOLUTION TO CROWD CRUSH 175 crowd crushes, and have certainly experienced such in the past. 111 Crowd crush in under-capacity venues occurs because under-capacity crowds may still reach high densities in and around bottlenecks or near locations of value within the venue like the stage, concession stands, or restrooms. 112 B. Demographic Analysis Errors Second, courts have also had a tendency to look closely at the demographic characteristics of crowd members in assessing liability in crowd crush cases. While courts have not been as explicit about their reasoning behind this approach, the theory seems to be that crowdrelated injuries and deaths are more foreseeable amongst certain types of crowds than others. 113 As with the mistake surrounding reliance on capacity numbers, there is an attractive logic behind this approach, although it too is scientifically problematic. The physical space within a given venue, as well as the use of festival seating, appear to be overwhelmingly more predictive of high-risk densities developing within a given crowd. 114 Additionally, once a high-risk density develops, the demographics of individual crowd members become almost entirely irrelevant as crowd members lose the ability to control their movements or the movements of those around them. 115 In those situations, no crowd member of any demographic persuasion is likely to be able to increase or decrease the risk of injury or death to himself or anyone else around him See, e.g., Custini v. Radio City Prods., LLC, No /2006, slip op. at 2 4 (N.Y. Sup. Ct. July 27, 2009) (ruling on liability in a crowd crush at an under-capacity Radio City Music Hall); White, supra note 21 (describing a crowd crush at an under-capacity Eminem concert at RFK Stadium); Complaints of Crush at Fintona Country Music Concert, BBC News (Nov. 4, 2013), news/uk-northern-ireland-foyle-west (describing a crowd crush at an under-capacity venue in County Tyrone, Ireland) See Custini v. Radio City Prods., LLC, No /06, slip op. at 3 4 (N.Y. App. Div. July 27, 2009); Selz et al., supra note See Heenan v. Comcast Spectacor & Spectrum Arena Ltd. P ship, No , 2006 Phila. Ct. Com. Pl. LEXIS 138, at *10 (Pa. C. P. Mar. 6, 2006), aff d, 915 A.2d 155 (Pa. Super. Ct. 2006); Phoenix Amusement Co. v. White, 208 S.W.2d 64, 66 (Ky. 1948); Prettyman v. Trenton Transp. Co., 73 Pa. Super. 353, 358 (Pa. Super. Ct. 1920); Adelman, supra note 56, at See supra notes Adelman, supra note 56, at 19; Helbing et al., supra note 63, at 967; Fruin, supra note 27, at See Pin et al., supra note 69, at 287.

189 176 HASTINGS LAW JOURNAL [Vol. 68:159 C. Causation Errors Third, courts have also erroneously ruled that crowd members themselves, rather than venue owners or event organizers, were the cause of crowd crush injuries. 117 This mistake is not particularly surprising in light of the common tropes used in media reports and commentary following crowd crushes: that crowd members behaved like barbarians, 118 or animals, 119 or were otherwise the root cause of the disaster. 120 Again, however, physical space configurations like bottlenecks and festival seating, rather than crowd members, are the most likely causes of high-density crowd situations that are likely to cause injury or death. 121 Moreover, once crowds reach high densities, the ability of individual crowd members to volitionally cause anything to happen is almost entirely absent. 122 Thus, placing liability on individual crowd members makes little sense. D. Assumption of the Risk Errors Fourth, courts have mistakenly found that crowd crush victims impliedly assumed the risk of injury. 123 Courts in a significant number of cases have ruled that individuals who freely [become] part of [a] crowd... assume[] the risk of the hazard it produce[s]. 124 One court explained: Crowds are common at theaters and other places of amusement. That there may be some jostling in such crowds is inevitable. That someone may fall and sustain injury, or cause injury to others, always is a possibility. These conditions are so common that those who attend such places are presumed to know of them. 125 Crowd science, however, exposes the error in this type of legal reasoning by demonstrat[ing] that the risks of crowd crush injuries are neither (a) inherent in crowds nor (b) obvious to individuals joining a crowd, the two theories behind a successful implied assumption of the 117. See Glatfelter v. Delta Air Lines Inc., 558 S.E.2d 793, (Ga. Ct. App. 2002); Rotz v. City of New York, 532 N.Y.S.2d 245 (N.Y. App. Div. 1988) Pravica, supra note Berger, supra note 24, at See McFadden & Macropoulos, supra note See supra notes See Pin et al., supra note 69, at See Little v. Butner, 348 P.2d 1022, 1030 (Kan. 1960) (citing Klish v. Alaskan Amusement Co., 109 P.2d 75 (Kan. 1941)); George v. Ayesh, 295 P.2d 660, 662 (Kan. 1956); Glenn v. Montgomery Ward & Co., 163 P.2d 427, 431 (Kan. 1945); Hickey v. Fox-Ozark Theatres Corp., 131 P.2d 671, 674 (Kan. 1942); Snyder v. Salwen, 177 A. 789, 790 (Pa. 1935); Rincon v. Berg Co., 60 S.W.2d 811, (Tex. Civ. App. 1933); Fenasci v. S. H. Kress & Co., 134 So. 779, 781 (La. Ct. App. 1931); F. W. Woolworth & Co. v. Conboy, 170 F. 934, 936 (8th Cir. 1909) Little, 348 P.2d at 1030 (citing Klish v. Alaskan Amusement Co., 109 P.2d 75, 75 (Kan. 1941)); Hickey, 131 P.2d at 674; Glenn, 163 P.2d at 427; George, 295 P.2d at 662; F. W. Woolworth & Co., 170 F. at 936; Fenasci, 134 So. at 781; Snyder, 177 A. at 790; Rincon, 60 S.W.2d at Klish v. Alaskan Amusement Co., 109 P.2d 75, 76 (Kan. 1941).

190 December 2016] A STATUTORY SOLUTION TO CROWD CRUSH 177 risk defense. 126 To begin with, crowds with a density below five people per meter have an extremely low risk of injury or death associated with them. 127 An individual joining one of these types of crowds is assuming minimal risk of crowd crush injury. 128 Additionally, because crowd crush injuries are eminently preventable, individuals should not have to assume the risk of injury when attending sporting events, concerts, and other large events. 129 Indeed, unlike other activities in which courts have found that individuals assume a risk of injury baseball game spectatorship, for example, where the risk of getting hit by a ball is a customary part of the sport 130 getting injured by a crowd is neither customary nor so likely that individuals would (or should) anticipate injury. 131 E. Consequences The underdevelopment of the law in this area along with the common mistakes courts tend to make in these cases have combined to create two extremely troubling situations. First, because courts have been willing to find that: (1) crowd members themselves were the cause of a crush; and (2) crowd members assumed the risk of said crush; and/or (3) that crushes are unforeseeable in situations in which a venue is below its official capacity, the common law does virtually nothing to incentivize event organizers and venue owners to take preventative measures against crowd crush injuries and deaths. Moreover, these are the only parties that can effectively take such measures: [B]oth the lack of communication between the fronts and backs of crowds and the extremely limited ability of crowd members to influence the events around them mean that crowd members themselves cannot protect crowds as a whole from reaching high-risk densities. The preventative measures that owners and managers should take, moreover, need not be expensive or sophisticated. Basic precautions such as opening more entrance and exit doors, removing physical objects that could create bottlenecks from within the venue, and eliminating the use of festival or general admission seating arrangements can go a tremendously long way in reducing, if not eliminating, the chances of a crowd crush occurring. 132 However, because courts have been so unwilling to find that these parties breached their duty of due care in crowd crush cases, there is little risk of liability for owners and managers that do nothing to manage the crowds on their premises. 133 This minimal risk of liability, in turn, does 126. Pearl, supra note 28, at Oberhagemann, supra note 66, at 13; Lee & Hughes, supra note 63, at See Oberhagemann, supra note 66, at 11 12; Lee & Hughes, supra note 63, at See Fruin, supra note Adelman, supra note 56, at 22 (quoting Gallagher v. Cleveland Browns Football Co., 638 N.E.2d 1082, 1089 (Ohio Ct. App. 1994)) Id Pearl, supra note 28, at Id. at 19.

191 178 HASTINGS LAW JOURNAL [Vol. 68:159 nothing to decrease the chances of future crowd injuries and deaths. Discussing the risks posed by Black Friday sales and other doorbuster sale events, for instance, one scholar observes: No lawsuit has been able to impact safety measures, nor curtail or abolish the aggressive marketing schemes associated with Black Friday. No single plaintiff or claimant has been able to penetrate the entire retail industry and the related trade associations, which adhere to what is essentially a dangerous industry-wide practice. Shoppers continue to drop, and are even killed, as a result of the industry-wide Black Friday marketing practice. 134 These risks, moreover, may increase over time as venues are built to better accommodate larger and larger crowds and factors like population growth and better marketing of events increase event turnout. Second, the underdeveloped and error-laden jurisprudence surrounding crowd crush in this country makes it overly difficult for plaintiffs to recover. 135 As discussed in the introduction to Part III of this Article, these errors often occur in court analysis of two of the most difficult elements of negligence to prove in mass-injury situations: breach and proximate causation. 136 And, even if the plaintiff manages to prove his prima facie case, the court may find that he assumed the risk of injury. 137 Further compounding the difficulties confronting plaintiffs, the defendants are often extremely wealthy and powerful: large venues, wealthy performers, and other media behemoths that can spend lavishly to defend their policies. 138 These issues almost always compel plaintiffs to settle, which in turn perpetuates a cycle that contributes to the law s underdevelopment in this area. Because there is an absence of concrete law, parties feel pressured to settle rather than take their chances at trial. And because most cases never reach trial, courts miss the opportunity to establish guiding precedent Dawson, supra note 6, at See Pearl, supra note 28, at 16; Ellis, supra note 26, at See all sources cited supra note See all sources cited supra note Adelman, supra note 56, at Ellis, supra note 26, at 609.

192 December 2016] A STATUTORY SOLUTION TO CROWD CRUSH 179 IV. AD HOC Approaches to Crowd Crush Much like reliance on the tort system, ad hoc approaches to crowd crush have been similarly unavailing in significantly reducing the risk of crowd crush both in the United States and abroad. 140 Several of these approaches are of particular note. A. Municipal Festival Seating Bans One jurisdiction in the United States experimented with, and then ultimately abandoned, an outright ban on the use of festival and general admission seating. In 1979, in the wake of the tragic Who concert crush, the city of Cincinnati passed City Ordinance No which banned the use of festival seating and general admission seating in all theaters, arenas, operas, concert halls and other places of assembly when the seating capacity of the facility is 2,000 or more. 141 However, the ordinance exempted high school and college athletic events, religious events, and business expositions consisting of stationary exhibits from the ban. 142 The statute also established consistent policies for door openings prior to show time and authorized police to use emergency powers at major events if necessary. 143 From a crowd science perspective, banning the use of festival or general admission seating is an exceptionally wise choice. As discussed previously, this type of crowd arrangement is incredibly dangerous, so much so that the National Fire Protection Administration has stated that festival seating at live entertainment events should be expected to result in overcrowding and high audience density that may compromise public safety. 144 Similarly, [l]eading authorities have named festival seating the principal culprit in most crowd crush cases. 145 One scholar estimates that ninety percent of all concert injuries occur at festival-seating and general-admission concerts. 146 The banning of festival seating, therefore, should be expected to dramatically reduce the risk of crowd crush. 147 Indeed, it appears from the absence of media reports or litigation that Cincinnati did not experience another episode of crowd crush after it enacted its festival seating ban in See infra notes Cincinnati, Ohio, Mun. Code (1979) Id James Henke, Cincinnati Curbs Festival Seating in Wake of Who Disaster, Rolling Stone (Feb. 7, 1980), Adelman, supra note 56, at 18 (emphasis added) Id Ellis, supra note 26, at Helbing et al., supra note 63, at 967.

193 180 HASTINGS LAW JOURNAL [Vol. 68:159 Unfortunately, in the absence of a broader and more overarching state or municipal crowd control scheme, outright bans on practices such as festival seating appear to be incredibly susceptible to industry pressure, particularly lobbying efforts on the part of the entertainment industry. 148 Festival seating is an appealing practice in this industry because it allows performers to maximize profits and minimize costs by packing as many people as possible into one venue. 149 Thus, despite the huge risks posed by festival seating, industry representatives continue to pressure venues to allow it. 150 Industry pressure is precisely what caused Cincinnati to revoke its festival seating ban. In 2004, despite continued evidence that festival seating was continuing to cause crowd-related injuries and deaths at concerts and other public gatherings both in other parts of the United States and worldwide, the city lifted its 23-year ban on festival seating at the insistence of mainstream rock-and-roll icon Bruce Springsteen. 151 One report explains: Inspired by the band U2 which sells out stadiums and arenas around the world and will not sign a contract with any venue unless it permits festival seating Springsteen decided he could raise his performances to new heights if more of his fans were closer to him. He really liked the energy, liked the vibe at a U2 show, explained the general manager of the Cincinnati arena where Springsteen performed. 152 Accordingly, Springsteen refused to perform in Cincinnati unless and until it repealed its ban. 153 Therefore, on August 4, 2004, the city passed an emergency ordinance repealing the festival seating ban. 154 The ordinance stated that it was an emergency measure necessary for the immediate preservation of the public peace, welfare and safety of the city, and that the festival seating ban was no longer needed because another city ordinance required venue owners and event planners to obtain public assembly permits before holding a public assembly. 155 That section of the city code permits festival seating but requires doors to be open for such events at least ninety minutes before their publicized start. However, it says nothing about crowd safety once the crowd is assembled. 156 When performers pressure venues to permit festival seating, they place their personal preferences and economic motivations above the 148. Adelman, supra note 56, at See Abbott & Geddie, supra note 59, at See Adelman, supra note 56, at Id. at Id Id Cincinnati, Ohio, Mun. Code (2004) Id Id.

194 December 2016] A STATUTORY SOLUTION TO CROWD CRUSH 181 safety of fans, and yet this trade-off is typically ignored, downplayed, or justified with weak explanations or excuses. For example: A typical comment [defending festival seating] comes from the editor of a concert industry magazine, defending U2 s use of festival seating by saying that it is a problem only for some bands: If there is a band that can pull off festival seating safely, it is U2. Their crowd isn t going to be as volatile as, say, a Red Hot Chili Peppers crowd. 157 This, of course, is a scientifically unsupportable statement for reasons previously discussed: Once a crowd reaches a high density, the relevance of the demographic characteristics of its members whether they are U2 or Red Hot Chili Peppers fans drops to virtually zero. 158 Yet, these justifications, tortured explanations, and excuses continue to convince venues to permit festival seating at concerts. Venues have little hope of booking big name acts if they do not. 159 Similarly, industry trade groups have done virtually nothing to support local governments in their (very limited) efforts to make large gatherings safer. The International Association of Auditorium Mangers ( IAAM ), for instance, represents tens of thousands of managers and senior executives from auditoriums, arenas, convention centers, exhibit halls, stadiums, performing arts centers, university complexes, and amphitheaters. 160 In the aftermath of the Who concert crush, the organization pledged to undertake a comprehensive study on crowd behavior and management for the purposes of developing guidelines for the facility-management professionals and related organizations. 161 IAAM never fulfilled that promise: Quietly, and behind the scene, the IAAM retreated from its bold visions and abandoned its pledges. Instead of working toward industry standards, or producing a definitive crowd management study, IAAM detoured to a lower road and began sponsoring well choreographed conferences and seminars that steered away from discussions addressing comprehensive safety studies and standards. 162 The IAAM s failure to act on this issue, combined with pressure from performers and the entertainment industry to maintain unsafe crowd management practices, have kept outright bans on practices like festival seating either out of the attention of lawmakers and/or incredibly unpopular. Those municipalities who attempt to enact such bans in the absence of a more comprehensive and thoughtful crowd management 157. Adelman, supra note 56, at See supra notes See Adelman, supra note 56, at About Us, Int l Ass n of Venue Managers, (last visited Nov. 7, 2016) The IAAM Press Release, Crowd Mgmt. Strategies, iaam_press_release.html (last visited Nov. 7, 2016) A Trust Betrayed, supra note 19.

195 182 HASTINGS LAW JOURNAL [Vol. 68:159 scheme are likely to face tremendous pressure to reconsider from some of the country s most popular performers or risk limiting the types of acts the locale can attract. 163 As will be argued later in this Article, state-based comprehensive crowd management schemes are likely to be significantly more effective than municipal bans on particularly problematic venue practices. 164 More comprehensive schemes can target and address greater numbers of crowd risks. Festival seating, for instance, may only be one of multiple significant crowd risks at an event such that a festival seating ban would only partially decrease the overall risk of crowd crush. Moreover, when passed by states rather than cities or municipalities, such crowd control schemes are likely to be more successful at withstanding industry pressure over time. 165 Bruce Springsteen risks little by boycotting a single city that has banned festival seating. He is significantly less likely, however, to boycott performing in an entire state. Thus, any threats he might make to do so would be significantly less credible. B. Location-Specific Renovations When either a particularly large crowd crush or multiple crowd crushes have occurred in a single location over time, venue owners or local governments have sometimes undertaken crowd safety-oriented renovations of that particular space. 166 For instance, Jamarat Bridge, a stop on the Hajj, the religious pilgrimage to Mecca that occurs in Saudi Arabia each year, has been the site of a truly stunning number of crowd crush injuries over the years: 1426 fatalities in 1990, 270 in 1994, 180 in 1998, 244 in 2004, and 360 in 2006, to name just a few. 167 Originally, the bridge had two levels. Individuals participating in the pilgrimage would enter one of the levels and then pause on the bridge to participate in a ritualistic stoning of the Jamarat, a stone pillar, as a sign of obedience to God. 168 This stoning is one of the duties of the Hajj and is thus critical to each of the pilgrims participating. 169 As the number of pilgrims on the annual Hajj increased over time, however, the bridge became insufficient to handle the crowd flow, increasing crowd density on each of the two levels and causing crowd crushes. 170 In 2006, therefore, 163. See Adelman, supra note 56, at See infra notes See id See infra notes Alex Olorenshaw et al., Hajj Pilgrimage Stampede: A Visual Guide to the Fatal Crush near Mecca, Guardian (Sept. 24, 2015, 11:37 AM), The Jamarat Bridge Project: An Exceptional Achievement of Crowd Control, King Abdul Aziz Pub. Lib., (last visited Nov. 7, 2016) Id See id.

196 December 2016] A STATUTORY SOLUTION TO CROWD CRUSH 183 the government of the Kingdom of Saudi Arabia decided to demolish the existing bridge and build a new multilevel structure capable of accommodating greater numbers of pilgrims and thereby facilitating stoning of the pillars in a safe and effective manner. 171 The resulting bridge now has five rather than two levels. In addition, [t]o facilitate movement, the bridge has 12 entrances and 12 exits, distributed among all four directions, in addition to emergency exits. 172 There are also surveillance cameras that assist authorities in determining areas within the crowd where fast intervention and provision of emergency medical assistance is necessary. 173 These renovations allow the bridge to now accommodate 300,000 pilgrims per hour. 174 Similarly, after a massive crowd crush occurred at the Camp Randall Stadium in Madison, Wisconsin in October 1993, which was described in Part I of this Article, the University of Wisconsin renovated the facility to reduce the likelihood that a similar crush would occur in the future. 175 That crush, which was the result of spectators attempting to storm the field, left dozens and dozens seriously injured or hospitalized. 176 Consequently, the university made a number of changes in the days and months following the tragedy: The stadium railings were rebuilt with breakaway gates, another aisle was added in the student section, and the chain link fence that had caused the crush was removed. 177 While certainly a helpful first step in reducing the risks of crowd crush, location-specific renovations are also limited solutions at best for several reasons. First, location-specific renovations are necessarily static, improving only some limited portion of physical space(s). Crowds, however, are dynamic, moving through spaces and changing quite rapidly over time. 178 Indeed, when a venue or event attracts a large crowd, the crowd does not materialize instantaneously at that venue and then disappear from it once the event is over. Instead, we would reasonably expect and practical experience shows that the areas around the venues also experience the presence of crowds before, during, and after the event. Thus, improvements to one given area of a venue or perhaps even the entire venue itself can only partially reduce the risk of crowd crush. For example, despite the significant renovations to Jamarat Bridge, 171. Id Id Id Id Dan Simmons, Camp Randall Crush Remembered as Frightening Call for Stadium Changes, Wis. St. J. (Oct. 30, 2013), Wisconsin Victory Celebration Turns Dangerous, supra note Simmons, supra note See G. Keith Still, Visualising Risk Assessment for Crowd Safety, 2 Int l Ctr. Sport Security J. 1, (last visited Nov. 7, 2016).

197 184 HASTINGS LAW JOURNAL [Vol. 68:159 a devastating crowd crush occurred in September 2015 and killed more than 700 people at this same phase of the Hajj. 179 This time, the crowd crush did not occur on the bridge itself but on streets which lead to the bridge, as two massive lines of pilgrims converged on each other at right angles. 180 A more comprehensive crowd management scheme beyond simply renovating Jamarat Bridge itself is clearly needed to reduce the risk associated with this portion of the Hajj. Second, in the absence of a more comprehensive crowd management scheme, crowds may still reach high densities in spite of any renovations of the physical venue, and thus crowd crush injuries may still occur. Even in situations in which renovations are specifically designed to accommodate large crowds, they may be insufficient. As previously discussed, highdensity crowds are capable of exerting significant amounts of pressure, and have even bent steel guardrails on occasion; 181 indicating that even the most careful of physical renovations may be inadequate. This was the case with the renovations at the Camp Randall Stadium just discussed: In 2010, after another significant football victory, a startlingly similar crowd crush occurred in spite of the changes the university had made to the stadium. 182 As students rushed the field, fans in three separate sections of the stadium had visible difficulties moving and, in some cases, breathing when fans from the upper levels of the sections compressed the lower levels. 183 Some people, moreover, were pinned against the fence line, mirroring what had happened in the 1993 crowd crush. 184 Thus, physical renovations of venues are, at best, only limited solutions to the problem of crowd crush. Even when thoughtfully planned and executed, they are necessarily limited to the specific physical space in which they are made and are ill suited to fully accommodate the dynamic and ever-changing nature of crowds. C. Event-Specific Reforms Despite the lack of statutory law prescribing crowd management activities, some event organizers in the United States have taken it upon themselves to employ crowd scientists and consultants to minimize the risk of crowd crush at their events. For example, the organizers of South by Southwest (commonly referred to as SXSW ), an Austin, Texas-based festival dedicated to celebrat[ing] the convergence of the interactive, 179. Christine Jeavans, Hajj: Jamarat Bridge, a Deadly Pinch Point, BBC News (Sept. 25, 2015), Id Fruin, supra note 27, at Ryan Rainey & Jen Zettel, Students Rush Field, Memories of 1993 Crush Fizzle, Badger Herald (Oct. 17, 2010), Id Id.

198 December 2016] A STATUTORY SOLUTION TO CROWD CRUSH 185 film, and music industries 185 hired preeminent crowd scientist, Professor G. Keith Still, to teach festival organizers and local first responders the most important principles of crowd management and safety. 186 The Walt Disney Corporation takes it one step further and employs full-time staff members at its parks to monitor and react to crowd issues in real time. 187 While event-specific reforms are arguably the most effective and comprehensive type of non-governmental, ad hoc crowd management efforts, often involving the use of multiple methods of keeping crowd densities low, such reforms do not offer a sufficient response to the problem of crowd crush in the United States as a whole or even within smaller jurisdictions. First, these types of reforms necessarily rely upon venue owners and event organizers to be proactive about crowd control. Because event-specific reforms are both forward-looking designed to reduce the likelihood of crowd-related injuries and deaths at future dates and impose some element of cost on the entity making them, venue owners and event managers must have concerns about crowd crush motivating such reforms. We would not expect, for instance, venues or events that do not attract crowds to engage in crowd management reforms. What practical experience shows, however, is that one of two things is typically true if a venue owner or event planner is taking proactive steps to minimize the risk of crowd crush: (1) the venue has already experienced a crowd safety issue, or (2) the venue has a specific business interest in keeping crowds well-managed. On the one hand, SXSW only employed the services of a crowd management expert after disaster struck at their March 2014 festival: a suspected drunk driver crashed through a barrier and into a street crowded with festival attendees Four people were killed and over twenty more were injured. 189 That tragedy seemingly inspired festival organizers to take crowd control and crowd safety much more seriously 185. About SXSW, SXSW, LLC, (last visited Nov. 7, 2016) Still, supra note 26, at See, e.g., Hugo Martin, Disneyland Prepares for Crush of Visitors During 60th Anniversary Celebration, L.A. Times (May 19, 2015, 5:00 AM), ( Disneyland has formed a team of three managers to oversee guest flow. The managers will keep in contact with workers throughout the park via radios to react to choke points and gridlock. ); Brooks Barnes, Disney Tackles Major Theme Park Problem: Lines, N.Y. Times (Dec ), ( [Disney] has spent the last year outfitting an underground, nerve center to address that most low-tech of problems, the wait. Located under Cinderella Castle, the new center uses video cameras, computer programs, digital park maps and other whiz-bang tools to spot gridlock before it forms and deploy countermeasures in real time. In one corner, employees watch flat-screen televisions that depict various attractions in green, yellow and red outlines, with the colors representing wait-time gradations. ) Assoc. Press, 4th Person Dead from SXSW Crash, N.Y. Post (Mar. 27, 2014, 6:51 PM), nypost.com/2014/03/27/4th-person-dead-from-sxsw-crash/ Id.

199 186 HASTINGS LAW JOURNAL [Vol. 68:159 going forward and to enact measures to keep crowd density low in order to avoid mass injury or death crises in the future. 190 Disney, on the other hand, has a strong business incentive to keep crowds well managed: To handle over 30 million annual visitors many of them during this busiest time of year for the megaresort Disney World long ago turned the art of crowd control into a science. But the putative Happiest Place on Earth has decided it must figure out how to quicken the pace even more. A cultural shift toward impatience fed by video games and smartphones is demanding it, park managers say. To stay relevant to the entertain-me-right-this-second generation, Disney must evolve. 191 Long lines, dense crowds, and unhappy visitors are harmful to Disney s proverbial bottom line both in the moment and going forward. Visitors who are spending long periods of time standing in line or stuck in the middle of crowds are not spending money on concessions or souvenirs in those moments, and if the Disney parks garner the reputation of being overcrowded, unmanageable, or unsafe, ticket sales would almost certainly drop. 192 Disney admitted as much in a 2010 New York Times article: The primary goal of the [crowd control] command center, as stated by Disney, is to make guests happier because to increase revenue in its $10.7 billion theme park business, which includes resorts in Paris and Hong Kong, Disney needs its current customers to return more often. Giving our guests faster and better access to the fun, said Thomas O. Staggs, chairman of Walt Disney Parks and Resorts, is at the heart of our investment in technology. Disney also wants to raise per-capita spending. If we can also increase the average number of shop or restaurant visits, that s a huge win for us, Mr. Holmes said. 193 Disney, therefore, has a strong business incentive to keep crowds flowing smoothly, quickly, and safely on a day-to-day basis. Other event organizers, however, may have little incentive to engage in crowd management reforms. Those that have not yet experienced crowd-related injuries or deaths may not harbor any concerns about these issues. As previously discussed, this is particularly because the likelihood of being found liable under common law for any injuries that do occur in the future seems so low. 194 Additionally, unlike Disney and its amusement parks, most event organizers have very little financial incentive to keep crowd densities low and may, in fact, have the opposite incentive. Unlike the Disney parks, where dense crowds usually mean long lines for attractions and thus diminished guest satisfaction, for 190. See Still, supra note 26, at Barnes, supra note See id Id See Pearl, supra note 28, at 1; Ellis, supra note 26, at 624.

200 December 2016] A STATUTORY SOLUTION TO CROWD CRUSH 187 concert, musical festival, and sports event planners, dense crowds usually mean large ticket sales and higher profits. Second, since event-specific reforms are discretionary on the part of event organizers, they are not a reliable method of reducing the risk of crowd crush across an entire state or municipality. SXSW, for instance, is an Austin-based event, and yet there is currently no indication that its event reforms have inspired similar changes on the part of other event organizers in the area, despite the fact that Austin is purportedly the Live Music Capital of the World, hosting more live music events per capita than anywhere else. 195 Thus, given the failure of both common law and ad hoc crowd management measures to mitigate the risk of crowd-related injuries and deaths in any significant way in the United States, as well as the evidence that crowd crush incidents continue to occur and may even be increasing within our borders, a statutory response is warranted. V. A Statutory Response Currently, the United States lacks any statutory law that directly pertains to crowd management. 196 While most states and municipalities typically have fire code regulations that contain requirements or restrictions relating to entrances, exits, and official venue capacity numbers (and may otherwise set venue standards that loosely relate to crowd management), these codes have been largely ineffective at preventing crowd crush. Indeed, existing statutes that do apply to public gatherings are concerned with public sanitation and health rather than crowd safety. 197 For example, West Virginia Health and Safety Code section requires event promoters to file a permit application with the judge of the county in which a mass gathering will be held. 198 That application must include, among other things, the maximum number of persons the promoter will allow to attend the gathering, a description of each step the promoter has taken to ensure that minimum standards of sanitation and health will be maintained during the mass gathering, a description of traffic control preparations being taken, and assurances that adequate medical and nursing care will be provided at the event. 199 The statute says nothing, however, about crowd management. Similarly, Oregon s mass 195. Live Music Capital of the World, Austin Relocation Guide, com/2012/live-music-capital-of-the-world/ (last updated Aug. 25, 2016) See Ellis, supra note 26, at See, e.g., Ind. Code Ann (2012); Me. Rev. Stat. Ann. tit. 22, 1602 (2011); N.C. Gen. Stat. 130A-254 (2013); Nev. Rev. Stat (2013); Or. Rev. Stat (2013); Tex. Health & Safety Code Ann (West 2012); Wyo. Stat. Ann (West 2013) Health & Safety Code (a) Id (b).

201 188 HASTINGS LAW JOURNAL [Vol. 68:159 gathering statute requires the Oregon Health Authority to promulgate rules related to adequate water supplies, toilet facilities, refuse storage and disposal, food, emergency medical facilities, fire protection, and security and traffic control at mass gatherings but requires no rule promulgation around issues of crowd management and control. 200 Even the few U.S. statutes that purport to be about crowd control are designed neither to prevent nor even address crowd-related injuries and deaths. Instead, these statutes are concerned with public order injuries injuries arising from riots, fights, and other forms of lawlessness. New York s crowd control statute, for instance, requires operators of places of public assembly to establish a plan to be used for the purposes of crowd control in the event of a riot. 201 While certainly matters of public concern that warrant advance preparation, these types of injuries are distinct from crowd crush injuries because they arise, for example, from drunkenness, drug use, other forms of antisocial conduct, and civil unrest, rather than from high crowd densities. Further, these crowd control statutes either do not define crowd control or mandate only that police be on hand at mass gatherings to provide crowd protection and policing. They do not require event organizers to utilize more scientific crowd management techniques before or during an event. 202 Indeed, because police crowd control training appears to be overwhelmingly geared toward prevention of public order injuries, police officers are not well situated to reduce the risk of crowd crush. Accordingly, existing crowd control statutes are insufficient to reduce the risk of crowd crush. Given what we understand about crowds from the body of crowd science that has arisen over the last few decades, a comprehensive and effective statute should address and require two distinct types of crowd safety activities: (1) the creation of crowd management plans in advance of an event, and (2) the use of crowd control measures during an event. Though closely interrelated, these two modalities require two different types of planning and action: [Crowd management] includes the facilitation, employment, and movement of crowds, while [crowd control] comprises steps taken once a crowd (or sections of it) has begun to behave in a disorderly or dangerous manner. Crowd management procedures involve planning an event, training employees, forming scenarios, and collecting data. Crowd control techniques include creating situation models and decision-making processes needed for the successful direction of equipment and manpower under a unified command Or. Rev. Stat (2013) N.Y. Lab. Law 475(b)(2) (McKinney 2009) See, e.g., Wash. Rev. Code (b) (2011); N.C. Gen. Stat. 130A-257(3) (2013); Cal. Bus. & Prof. Code (f) (2008) Abbott & Geddie, supra note 59, at 259.

202 December 2016] A STATUTORY SOLUTION TO CROWD CRUSH 189 In short, crowd management involves advance planning to minimize the risk of crowd crush before a crowd has gathered, and crowd control involves crisis management if and when an assembled crowd begins to exhibit signs that a crush may be or already is in the process of occurring. 204 Ideally, if the crowd management phase is sufficient, there should be little need for crowd control measures. This is, by far, the preferable scenario. One notable crowd scientist points out that once a situation escalates from crowd management to crowd control, officials often have a real problem on their hands. 205 He explains further, [i]t s like trying to push an egg back into a chicken.... It s going to hurt, the chicken s going to end up squawking, and something s going to break. 206 A. Crowd Management Plans Given the importance of advance planning in ensuring crowd safety, a comprehensive and effective crowd management statute should require the preparation of a crowd management plan in advance of events that are likely to draw crowds in order to protect employees from crowdrelated injuries. 207 In the wake of the Wal-Mart crowd crush, for instance, the Occupational Safety and Health Administration ( OSHA ) sent a letter to the CEOs of fourteen major retail companies, urging the development of crowd management plans prior to future events in order to protect employees from crowd-related injuries. 208 Other crowd experts are also in agreement that crowd management plans are an important factor in reducing the risk of crowd crush. 209 In fact, one expert concludes that the primary factor in assuring a safe and comfortable environment for large crowds is the planning for their management. 210 These crowd management plans, in turn, should consider and account for four distinct elements of an upcoming event and any risks 204. See id Erin Blakemore, What If the Pope s Mass Turns into Mass Chaos? A Crowd Management Scientist Weighs in, Wash. Post (Sept. 22, 2015), 09/22/what-if-the-popes-mass-turns-into-mass-chaos-a-crowd-management-scientist-weighs-in/ Id David Michaels, Crowd Management Is Something to Be Grateful for, U.S. Dep t of Lab. Blog (Nov. 19, 2012), see also G. Keith Still, Crowd Simulation: For the Trained Eye, 2 Int l Ctr. for Sport Security J. 76, 76 (2014) ( Crowd safety has always been the reason for developing safety concepts and robust crowdmanagement plans for places of public assembly. ) Curtis et al., supra note See, e.g., Crowd Management: Report of the Task Force on Crowd Control and Safety, City of Cincinnati 12 (1980) ( As the task force sought information on crowds and public safety, it became increasingly clear that the primary factor in assuring a safe and comfortable environment for large crowds is the planning for their management. There is considerable emphasis in this report on crowd management planning and implementation because the Task Force believes that it is the key to providing safe events in Cincinnati. ) Id. (emphasis added).

203 190 HASTINGS LAW JOURNAL [Vol. 68:159 that may be implicit therein: Routes, Areas, Movement, and Profile of the crowd 211 ( RAMP ). The use of this RAMP analysis is strongly advocated by noted crowd science professor G. Keith Still as a methodical, systematic and rigorous method of captur[ing] specific event information, compar[ing] and contrast[ing] different events and develop[ing] a clearer understanding of the dynamics of [crowd] risk prior to, during, and post event. 212 Each portion of the four-part analysis is designed to identify and address different sources of potential risk Routes: Ingress, Egress & Circulation First, venue owners and event organizers should consider the likely crowd routes involved with an event. Routes are the directions the crowds take to get to the [event] site, move around the site and leave the site (under both normal and emergency situations) and are thus typically referred to as ingress, egress, or circulation routes. 214 A strong understanding of the routes a given crowd will travel is a vital component of an adequate and comprehensive crowd management plan because a significant number of the crushes that have occurred in recent decades have taken place in and around ingress and circulation issues. The Who concert tragedy in Cincinnati, for instance, occurred on the ingress route into the concert arena, 215 as did the more recent Beyoncé crowd crush. 216 The Hillsborough soccer stadium crowd crush that killed ninety-six people in 1989 in the United Kingdom also occurred during ingress into the stadium. 217 And, as previously discussed at length, the recent Hajj crowd crush occurred during crowd circulation through one particular portion of the pilgrimage. 218 Advance planning can significantly reduce the likelihood of routerelated crushes. 219 For instance, if event planners can determine which routes are most likely to be taken by event attendees, they can determine the routes most likely to experience crushing and take preventative measures accordingly, such as reducing bottlenecks along the route or opening more entry or exit points in order to accommodate more people. Professor G. Keith Still explains: 211. Still, supra note 26, at Id See id. at Id. at Adelman, supra note 56, at Dockterman, supra note Lord Justice Taylor, The Hillsborough Stadium Disaster: Interim Report 11 (1989) Jeavans, supra note See Still, supra note 26, at

204 December 2016] A STATUTORY SOLUTION TO CROWD CRUSH 191 For example, an emergency along the [ ] route [in which 80% of the crowd is expected to travel] could give us some difficulty if we stop the crowds along that route, it could quickly build up into a high-density crowd.... Clearly, the route with 80% of the crowd has less resilience and less space to handle an incident (such as a medical emergency). This can indicate that we need to provide different levels of management, monitoring and first responders proportionately. 220 Similarly, careful consideration of circulation routes both during and after the event can help event planners reduce the risk of crowd incidents. Routes between an arena and its exits, or between seating areas and restrooms or concessions, can be sources of crowd-related injuries and deaths and thus warrant careful planning. 221 For example, a crowd crush occurred at Radio City Music Hall in and around a concession stand after large portions of a crowd left the main theater after a show cancellation. 222 Planning for mid- and post-event crowd movements can thus also significantly eliminate crowd-related risks. This sort of planning need not be particularly sophisticated or timeconsuming. Professor Still recommends something as simple as drawing a map of the event location and its surrounding areas on paper and marking likely crowd routes. He concludes that [b]y systematically mapping ingress, circulation and egress under both normal and emergency situations, and using low-cost materials and a little bit of time to think through the site, [planners] will focus [their] attention on the time, location, severity and duration of crowd-related risks and be able to respond appropriately to these risks in advance of the event Area(s) Crowds Will Occupy Second, venue owners and event organizers should consider the areas crowds will occupy during a given gathering or event, the likely crowd densities (low, medium, or high) of those areas, and the risks on site relating to those locations. 224 Owners and organizers should further distinguish between areas in which the crowd will be static (not moving) and those in which the crowd will be dynamic (moving). For example, static areas would be front-of-stage at a concert, queuing spaces, bars and so forth. Dynamic areas would be circulating corridors, entry points and the like. 225 A static area might attract a crowd of a higher density than a dynamic one but raise fewer concerns about crowd crush because the crowd is standing still as opposed to attempting to travel through the 220. Id. at See id. at Custini v. Radio City Prods., LLC, No /06, slip op. at 3 4 (N.Y. App. Div. July 27, 2009) Still, supra note 26, at Id. at Id.

205 192 HASTINGS LAW JOURNAL [Vol. 68:159 area. A dynamic area, however, may be more prone to bottlenecks, and thus need to stay at a lower crowd density point to minimize the risk of crushing. By identifying these areas and the crowd density levels that they (1) are likely to attract; and (2) need to maintain to remain safe, event organizers and staff can identify early warning signs of crowd crush at the event itself when, for instance, they notice higher than expected density in unanticipated locations. 226 Again, this need not be an involved or time-consuming process. Simply mapping out the event by hand provides a valuable insight about use and utilization of an event space. 227 Organizers can see where crowds move, where they do not move, where congestion and queuing can occur, and where the moving (dynamic) areas may overlap the queuing (static) areas and lead to congestion. 228 Knowing these features in advance of an event, in turn, allows needed crowd safety measures to be taken before the crowd s arrival. 3. Movement of the Crowd over Time Third, venue owners and event organizers should consider the likely movements of the crowd before, during, and after the event. Movement is the rate of passage through the various parts of the system, such as the rate at which crowds are processed through a ticket or search area and is expressed in terms of flow rates, which indicate how many people are expected to move through a given location over a given time period. 229 Assessment of flow rates in advance of an event or gathering can reduce the risk of bottlenecks (and thus crowd crush) by identifying venue locations in which the crowd can flow towards the narrowest point on that route more quickly than it can flow through that point, and giving venue owners and event planners an opportunity to mitigate those risks in advance of the event. 230 This is a critical component of crowd management given the risk that bottlenecks pose in a given venue: If the rate of the arriving crowds exceeds the rate at which they can enter, a queue will develop. If that queue develops too quickly, the space will become overcrowded and, if left unchecked, can be fatal. The same principle applies to all parts of a system in which crowds move into, move around or exit an event. If the number of people arriving at any part of a system exceeds the throughput of that part of the system, the risk of overcrowding, crushing and subsequent injury increases over time Id Id. at Id Id. at 122, Id. at Still, supra note 178, at 50.

206 December 2016] A STATUTORY SOLUTION TO CROWD CRUSH 193 Reducing such bottlenecks need not be expensive or complex. There are several key ways of doing so. Opening multiple entry and exit points for crowd members throughout a given venue reduces the flow rate at each point. 232 This principle may be counterintuitive at first: Event managers and venue owners often purposely lock down all access points except one or two based on the theory that doing so will make it easier to control the crowd and enhance security. 233 A prominent crowd management expert, however, explains why that theory is flawed: The efficient movement of ticket holders is critical in preventing crowds from gathering outside a facility. Limiting entrances and using fewer doors, or opening and closing doors to control crowd movement are very dangerous practices. They only serve to increase anxiety in a crowd and make it more difficult to manage. It is much more effective to separate people... [by] the proper ratio of ticket takers and doors to patrons. Dispersing entering crowds through multi-entrances is particularly effective in processing people efficiently into a facility. 234 Dispersing entryways and exits lowers crowd density both at those access points and amongst the crowd as a whole, significantly reducing the risk of crowd crush. 235 Similarly, clearly marking passageways to entry and exit points and ensuring direct lines of access to them eliminates ingress- and egress-related bottlenecks. One scholar advises: Welldesigned auditoriums characteristically have direct lines of patron flow and clear lines of sight. Circuitous and narrow passageways, dogleg routes, obscured doorways and stairs, and ambiguous pathways create confusion, and in an emergency flight response situation, have the potential for disaster. 236 Poorly designed venues, however, utilize confusing and irregular pathway choices, 237 which can slow down the rate of ingress and egress and increase crowd density. 238 Lastly, in situations in which multiple entry and exit points either do not exist, cannot be created, or cannot be utilized for some reason, event planners and venue owners can utilize time-based strategies to reduce the risk of crowd crushes occurring at bottlenecks within a given space. 239 For example, the popular King Tut exhibit tour that traveled the world utilized time-of-arrival ticket[s], which regulate[d] patron arrivals by 232. Fruin, supra note 27, at 8 ( Arrangements that result in unbalanced use of egress or ingress routes, dead ends, or similar confusing and irregular pathway choices, are not acceptable. Dispersed and equally balanced ingress and egress points are preferred over a single centralized location. The influence of external facilities on the volume and direction of movement must be considered. ) See Teresa Anderson, Unmasking the Secrets of Mardi Gras Security, 39 Security Mgmt. 40 (1995) Crowd Management, supra note 209, at See Fruin, supra note Id Fruin, supra note 27, at See Crowd Management, supra note Fruin, supra note 27.

207 194 HASTINGS LAW JOURNAL [Vol. 68:159 spreading them over a longer time period. 240 The airline industry utilizes a similar type of approach to safely manage the aircraft boarding process: grouped seating. Instead of allowing all passengers to attempt to board the plane all at once a situation rife with the possibility of crowd crush given the large numbers of people that must traverse the narrow jet way and the (typically) small single entrance onto the plane passengers are divided into smaller groups and then staggered with regard to their permissible entry time onto the plane. 4. Profile of the Crowd Fourth, venue owners and event organizers should consider the profile of the crowd that is likely to attend a given event: their age/demographic, mix (male/female ratio), family group and others, and any intelligence that may assist in the management of the crowd. 241 While, as discussed above, the demographics of a crowd have virtually no impact on the likelihood of a crowd crush once a crowd has reached a high density, crowd profile characteristics may be relevant to event preparations and crowd management strategies. 242 A crowd profile, for instance, can reveal important information, such as that a given performers fans are known to arrive very early for events and camp out on the streets or that male restrooms will be in higher demand than female restrooms. 243 Much like the other three factors involved in the RAMP analysis, creating a crowd profile should be a fairly easy task in most circumstances. Event organizers and venue owners can scour fan-based websites and discussion forums, media reports and reviews of previous events. 244 Additionally, performers (or agents) may also provide information that could be relevant to management styles. 245 In sum, crowd management plans are an effective and reasonable method of significantly reducing the risk of crowd crush at large gatherings, and thus, crowd management statutes should require their preparation in advance of an event. 246 Mandating that event organizers or venue owners prepare such plans requires them to consider many elements critical to crowd safety that they might not otherwise consider, either because of simple ignorance about crowd dynamics or because they lack the inclination to do so. Additionally, mandating that crowd 240. Fruin, supra note Still, supra note 26, at See supra Part III.B See Still, supra note 26, at Id Id Fruin, supra note 27, at 9 ( The crowd incident model and its derivative guidelines show that many crowd disasters could have been avoided by simple advance planning and management techniques. ).

208 December 2016] A STATUTORY SOLUTION TO CROWD CRUSH 195 management plans be filed with local governmental authorities and be available to members of the general public allows law enforcement officers and citizens to know the levels of crowd management to expect at a given event, and to plan or respond accordingly. 247 B. Crowd Control Measures Although, in theory, adequate and comprehensive crowd management plans should eliminate the risk of crowd crush, event organizers and venue owners should also be statutorily-mandated to enact real-time crowd control measures if and when a given crowd on the premises begins to exhibit signs that its density is moving toward high-risk levels. These measures entail preparation to both monitor crowds in real time and deploy effective and efficient mitigation techniques to any growing risk of crowd crush. 1. Real-Time Monitoring Crowd experts are in agreement that [c]onstant monitoring of crowd behavior is necessary for good crowd management. 248 Because crowd crushes can develop extremely quickly, [a] proactive type of management is required, anticipating and resolving problems before they occur, rather than reacting when it could be too late. 249 Accordingly: Real time information about the status of crowd conditions in large assembly spaces is critical. A centralized crowd management and communications center should be set up for this purpose. The ideal center would provide a maximum view of the venue, supplemented by video camera access to blind spaces, pressure points, and major movement pathways. Full communications coordination should be provided between all venue staff, local police, fire, and emergency medical services, and any on-site radio or television media. Radio frequencies, telephone numbers, and similar communications information and related procedures should be in a printed form distributed to all staff. 250 Such real-time monitoring gives venue and event staff the ability to respond quickly and alleviate any crowd pressure points that arise. In these types of situations, for instance, staff could make real-time decisions that entrances and exits be opened earlier or closed later than originally 247. Crowd Management, supra note 209, at Fruin, supra note 27, at 6; Richard Giulianotti, In Place of Barriers: Mobility and Security at Major Events, 2 Int l Ctr. Sport Security J. 24, 28 (2014) ( Over the past two decades or so, in most Western European countries there has been an increasing focus on the mobile monitoring and surveillance of sport crowds, for example in tracking such crowds by using plain-clothes police officers, cars and helicopters, and also by using CCTV cameras that are arranged throughout city centres. ) Fruin, supra note 27, at Id.

209 196 HASTINGS LAW JOURNAL [Vol. 68:159 planned to reduce the possibility of overcrowding. 251 These preemptive actions, in turn, greatly enhance crowd safety. 252 This real-time monitoring can be highly sophisticated, using sensorenabled entry points or computer vision technologies to calculate the number of people moving through a given space. 253 It can also be as simple as using closed-circuit cameras or posting event staff to monitor the movements and state of the crowd. 254 Indeed, while sophisticated density calculations are clearly very helpful to crowd monitoring, simple rules of thumb can serve as useful stand-ins for more precise numbers. Professor Still, for instance, notes that when all crowd members are physically touching (such as standing shoulder-to-shoulder or pressed up against one another), crowd density must be above safe limits. 255 A human monitor would be able to detect this density easily. 2. Communication Event organizers and venue owners also need a reliable method of communicating both with the crowd and with event staff and law enforcement during events. With regard to communicating with the crowd itself, the need to ensure effective communication to them from the controlling agencies is clear. The requirement for good quality public address systems which can be accessed by those coordinating either the control or the rescue function is imperative. 256 People in crowds usually have very poor sources of information as to what is happening around them. 257 Consequently, unless authoritative information is received from a reliable source, crowd members will act on the speculations of others nearby. If there is a perception of danger, the human flight response can cause the sudden type of movement that unleashes the massed energy of the crowd. 258 Crowd scientists theorize, for example, that quick communication during severe crowd crushes such as the one that occurred at the Hillsborough soccer stadium could have reduced the number of casualties Abbott & Geddie, supra note 59, at Helbing et al., supra note 63, at 969. Crowd turbulence is potentially life-threatening and experienced in hundreds of crowd-intensive events each year. Determining warning signs in advance of crowd disasters [ ] will enable anticipative crowd control measures. This can significantly enhance crowd safety in the future. Id Pin et al., supra note 69, at See Giulianotti, supra note 248, at from G. Keith Still, Professor of Crowd Science, Manchester Metro. Univ., to Tracy H. Pearl, Assoc. Professor of Law, Tex. Tech Univ. Sch. of Law (Feb. 17, 2015, 11:43 AM) (on file with author) Dominic Elliott & Denis Smith, Football Stadia Disasters in the United Kingdom: Learning from Tragedy?, 7 Indus. & Envtl Crisis Q. 205, (1993) See Helbing et al., supra note 63, at Fruin, supra note Id.

210 December 2016] A STATUTORY SOLUTION TO CROWD CRUSH 197 Communication between event organizers, event staff, law enforcement, and even performers must also be consistent and reliable to reduce the risk of crowd crush. Without a centralized method of communication, these entities may also have a difficult time discerning what is happening with the crowd as a whole and may thus react either too slowly to rising risks of crowd crush or react in a manner that may actually enhance that risk. For example, during the Who concert crush, law enforcement officers who were on site failed to perceive the deadliness of the situation in and among the crowd and resisted efforts on the part of crowd members who attempted to alleviate some of the pressure of the growing crush: Although most patrons who were interviewed defined the efforts to get through the doors as flights to safety, police officers and security guards continued to see them as gate-crashing efforts after the surge had begun. For instance, two officers reported trying to secure a door... forced open by gate-crashers..., but a 27-year-old male patron described in detail how the door was opened from the inside by two men trying to prevent injury to two young girls [who] had been banging on that door for 20 minutes.... Similarly, a couple referred to a friend who, once inside, tried to shove open some more doors with his foot and immediately two ushers came up, one of them grabbed him, shoved him back in line and told him to either get in line or get back out. He then began to beg and plead with the usher, he said, people are getting hurt, people were down.... The actual motives of those trying to open the doors are not as relevant as the fact that definitions of the situation differed markedly among patrons, police, and Coliseum workers. 260 Similarly, after a deadly June 2000 crowd crush at a Pearl Jam concert in Roskilde, Denmark, during which nine people died, band members maintain[ed] that if they had just been made aware of what was happening sooner, lives could have been saved by stopping their performance. 261 Indeed, [n]o one from festival security or the organizational side could seem to agree on how long it took to communicate the situation in the mosh pit [where the crush was occurring] to the stage, and why it took as long as it did. 262 Thus, having a reliable method of communication with law enforcement officers, event staff, and performers, and conveying real-time information to these parties enables them to react quickly and appropriately to potential crowd crush situations and mitigate the risk of injury or death Norris R. Johnson, Panic at The Who Concert Stampede : An Empirical Assessment, 34 Soc. Probs. 362, (1987) Ryan O Connell, Fifteen Years Later, How the Roskilde Tragedy Changed Pearl Jam Forever, UPROXX (June 30, 2015), (internal citations omitted) Id Fruin, supra note 27, at 9 ( Reliable real-time communication between those responsible for crowd management, and authoritative communication with the crowd, are also critical elements in defusing a potentially lethal crowd incident. These strategies are also the least costly means of preventing crowd disasters. ).

211 198 HASTINGS LAW JOURNAL [Vol. 68:159 C. Festival Seating Ban Any comprehensive and effective crowd management statute should also contain a ban on festival seating, much like the one passed (and later repealed) by the City of Cincinnati. 264 As discussed at length, festival seating is the culprit behind a significant number of crowd crushes in the United States and drastically increases the risk of injury and death to crowd members. 265 Moreover, there does not appear to be any way of utilizing true festival seating arrangements safely at large gatherings. Instead, as previously quoted, such crowd configurations should be expected to result in overcrowding and high audience density that may compromise public safety. 266 Given its history and the tremendous risk that it poses, an outright ban on festival seating is warranted. While performers and other entertainment industry officials may strongly oppose such a ban, arguing that it necessarily limits ticket sales and reduces the energy level at shows, 267 there are other crowd configurations available that can achieve much of the same things without creating nearly as much risk. At the annual New Year s Eve celebration in Times Square, for instance, crowd members are segregated into pens, each holding a set number of people. 268 While, like festival seating, these pens are standing-room-only, they are markedly safer than festival seating for several reasons: (1) they prevent the crowd as a whole from reaching a high-risk density; (2) they eliminate the ability of dangerous shockwaves to ripple through the crowd; and (3) they make it significantly easier for event staff and law enforcement officers to monitor and control the activities of crowd members. 269 Use of pens allows event organizers to place nearly the same number of people in a given space, but eliminates the risk of crowd crush. Banning the use of festival seating will necessitate using these safer methods of crowd management and control. VI. A Model Statute This final Part now sets forth the following model crowd management and control statute incorporating all of the elements set out above that cities, counties, or states could enact as a significant first step toward enhancing crowd safety and minimizing the risk of crowd crush: 264. Adelman, supra note 56, at Id. at Id See id. at Assoc. Press, New York Police: New Year s Eve Party in Times Square Will Be Safest Place in the World, Fox News (Dec. 29, 2015), See John Seabrook, Crush Point: When Large Crowds Assemble, Is There a Way to Keep Them Safe?, New Yorker (Feb. 7, 2011),

212 December 2016] A STATUTORY SOLUTION TO CROWD CRUSH 199 XXX. Crowd Management & Crowd Control (a) As used in this section: 270 (1) Live entertainment performance means any live musical performance, any live dramatic performance, any live speech, and any live variety show with respect to which the primary intent of the audience can be construed to be viewing the performers. A live entertainment performance does not include any form of entertainment with respect to which the holder of a ticket routinely participates in amusements as well as views performers. (2) Concert means a musical performance of which the primary component is a presentation by persons singing or playing musical instruments, that is intended by its organizers mainly, but not necessarily exclusively, for the listening enjoyment of the audience, and that is held in a facility. A concert does not include any performance in which music is merely a part of the presentation in which acting, dancing, a motion picture, an athletic event, an exhibition, or a speech is the primary attraction. (3) Live athletic event means any live event involving physical exertion and athletic skill that is governed by a set of rules or customs and often undertaken competitively, or any live event involving the hosting of a sports competition intended to be viewed by spectators, and that is held in a facility. A live athletic event does not include any sports competition to which the holder of a ticket is also routinely a competitor in the sports competition. (4) Doorbuster sale means any live, in-store promotional event in which a retailer is using a limited-time-only or limited-stock-only marketing or sales strategy to attract a high volume of customers into a store during an anticipated period of less than twenty-four hours. (5) Facility means any structure that has a roof or partial roof or that has walls that wholly surround the area on all sides, including, but not limited to, a stadium, hall, arena, armory, auditorium, ballroom, exhibition hall, convention center, or music hall. (b) Except as otherwise provided in this section, event organizers, promoters, or managers (hereinafter referred to as event organizers ) hosting an actual or anticipated live entertainment performance, concert, live athletic event, or doorbuster sale (hereinafter collectively referred to as event ) of five hundred (500) or more persons shall file with the local government a crowd management plan in writing at least fifteen (15) days in advance of such assembly. 271 The crowd management plan shall contain and disclose the following information: 270. This definition section is closely modeled after the excellent definition section in an Ohio statute regarding safety at live entertainment performances. Ohio Rev. Code Ann (LexisNexis 2011) The proper authority to which a crowd management plan should be filed (for instance, county commission, state department of public health & safety, etc.) will necessarily vary depending on the political entity enacting the statute. I have inserted local government here as a placeholder.

213 200 HASTINGS LAW JOURNAL [Vol. 68:159 (1) Identification of the applicant; identification of any other person, persons, or entity responsible for organizing, holding, or managing the event; a description of the event; the location of the event and a description of the property; the identification of the owner of the property on which the event will be held; the estimated maximum number of persons reasonably expected to be in attendance at any time; the dates and times that the event will be held; the maximum number of persons which the applicant shall permit to assemble at the event at any time; (2) The likely ingress and egress routes crowds will take before and after the event, and the likely circulation routes that the crowd will travel during the event; any obstructions or bottlenecks likely to impede crowd flow along these routes; the steps taken by event organizers to eliminate or mitigate those obstructions; (3) The areas crowds will occupy during the event, including the main entertainment venue, areas around concessions, restrooms, lobbies, and parking lots, and the likely crowd densities (low, medium, or high) of those areas; the risks on site relating to those locations; the steps taken by event organizers to eliminate or mitigate those risks; (4) The flow rate at which crowds can be expected to pass through entrances and exits, ticket booths and security areas, and other critical areas of the venue, and whether that flow rate can safely and efficiently accommodate the number of crowd members anticipated to attend; (5) The profile of the crowd expected to attend the event, including age and demographic information, male to female ratio, and other characteristics that may impact the crowd s movement and behavior during the event, as well as what preparations are being taken by event staff to accommodate these characteristics where appropriate; (6) The ways in which event organizers will monitor crowds both within and immediately outside the facility on a real-time basis; and (7) The methods by which event organizers intend to communicate with the crowd, with event staff, with local law enforcement, and with performers on a real-time basis before, during, and after the event. (c) Except as otherwise provided in this section, festival or general admission seating wherein persons are admitted without assigning them a particular reserved seat is hereby prohibited at any live entertainment, concert, or live athletic event involving an anticipated crowd of five hundred (500) or more persons 272 unless festival or general admission seating is limited to designated and confined pens to each of which no more than one hundred (100) persons may be admitted at a given time. (d) This section shall not apply to high school affiliated live entertainment or live athletic events, religious events sponsored by bona fide religious organizations, nor to events where the sponsor has applied for and received a specific exemption from one or all of the provisions of this section This section is modeled closely upon Cincinnati s prior ban on festival seating. Cincinnati, Ohio, Mun. Code (1979) See id.

214 December 2016] A STATUTORY SOLUTION TO CROWD CRUSH 201 Conclusion Crowd crush continues to be a surprisingly common occurrence in the United States. Year after year, what crowd scientists estimate to be thousands of people are injured or killed by crowd forces at concerts, festivals, sporting events, doorbuster sales, and other large gatherings. Fortunately, crowd scientists understand extremely well both what causes crowd crushes and what can prevent them from occurring. Studies of crowd dynamics have repeatedly demonstrated that crowd density is the single best predictor of crowd-related injuries and deaths, and that physical space and spectator configurations such as bottlenecks and festival seating significantly increase the likelihood that a given crowd will reach a high-risk density. Unfortunately, neither common law nor statutory law have required or even incentivized event organizers and venue owners to take any actions to manage crowds effectively. Court that have ruled on the common law claims arising out of crowd crush incidents have repeatedly made a series of scientific and legal errors that make it overly difficult for crowd crush victims or their estates to win these cases. These errors include assessing breach solely in the context of compliance with set capacity numbers, ascribing an unwarranted amount of significance to crowd demographics, and viewing crowd members themselves as intervening, superseding causes of a plaintiff s injuries. Furthermore, the lack of any comprehensive statutory law in the United States pertaining to crowd management or control has left plaintiffs with common law claims as the only possible causes of action available for recovery. Ad hoc approaches to preventing crowd crush have been similarly unavailing. Industry pressure has caused statutory bans on festival seating to be repealed. Venue renovations have offered only enhanced crowd safety on a very limited, localized basis. And event-specific reforms, though commendable, are unlikely to be adopted by the vast majority of venues or other events hosting large gatherings. Indeed, the extent to which crowd control and crowd management are presently factored into the overall event process is debatable. 274 Event organizers and venue owners are faced with strong temptations to ignore dangers and underestimate challenges in their efforts to maximize profits and minimize costs. 275 In light of these failures, states or municipalities should enact statutory crowd control laws. These laws should require event organizers and venue owners to do both of the following: (1) prepare and file crowd management plans prior to a large gathering that assess crowd routes, areas, movements, and profiles; and (2) provide adequate and efficient 274. Abbott & Geddie, supra note 59, at Id.

215 202 HASTINGS LAW JOURNAL [Vol. 68:159 crowd control during large gatherings by both monitoring crowds in realtime and communicating with the crowd, event staff, law enforcement, and performers. Such basic steps will go a long way toward drastically reducing the thousands of preventable crowd crush injuries and deaths that occur each year in this country.

216 Notes A Bridge over the Patent Trolls: Using Antitrust Laws to Rein in Patent Aggregators Eric Young* Patents, by their very nature, are a type of monopoly, and are so important to our country s intellectual and technological advancement that the Founding Fathers granted Congress the power to promote the progress of science and useful arts, by securing for limited times to... inventors the exclusive right to their respective... discoveries. 1 But in recent decades, that imperative has lost its footing. Mass patent aggregators, companies that compile, hoard, and assert patent rights without contributing products to the world have contorted that vision. Patent Trolls assemble portfolios of weak patents to corner and dominate technological spaces, crowding out innovators and demanding extortionate licensing fees from unsuspecting targets. Federal antitrust laws forbid improper accumulation and assertion of monopoly power, which is precisely how trolls business model operates. And yet, courts traditionally have not found a patent portfolio to constitute a relevant market under the Sherman Act. This Note explains why they should, and in doing so examines two cases between identical litigants, the latter of which may provide a roadmap for pursuing antitrust counterclaims against serial patent assertion entities. * J.D. Candidate, University of California Hastings College of the Law, This Note is dedicated to my loving wife Jackie for being an unbending source of reassurance and guidance, and to my daughter Brier for all of her help throughout law school. I could not have done it without them. I would also like to thank Professors Robin Feldman and Samuel Miller for their sage advice as well as our family for their love and support. 1. U.S. Const. art. I, 8, cl. 8. [203]

217 204 HASTINGS LAW JOURNAL [Vol. 68:203 Table of Contents Introduction I. The Problem II. The Lay of the Land and the Laws That Govern III. The IV V. CAPITAL ONE Tug-of-War A. Battleground I: Eastern District of Virginia B. Battleground II: The District of Maryland Relevant Market Monopoly Power Unlawful Acts of Monopolization Conclusion Introduction Article I of the U.S. Constitution grants Congress the power to 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. 2 In including patent rights in the Constitution, 3 the Founders envisioned a system that encouraged thinkers and tinkerers to strive for the new and novel, and to seek advances for our society as a whole. 4 That vision led to the passage of the Patent Act in 1790, 5 just a year after the Founders ratified the Constitution and organized a new government. The Patent Act granted a patentee the sole and exclusive right and liberty of making, constructing using, and vending to others to be used of his or her invention. 6 But somewhere along the way, and perhaps most conspicuously since 1972 with the explosion of software patents, 7 that vision has been obscured. For better or worse, depending on one s perspective, the patent litigation landscape is changing due to Non-Practicing Entities ( NPEs ), or what are known more pejoratively in Silicon Valley as the dreaded Patent Trolls. 8 This Note discusses the harms NPEs pose to the philosophical basis the patent system stands on, and how antitrust laws may represent a tool 2. Id. 3. Id. 4. See Mazer v. Stein, 347 U.S. 201, 219 (1954), reh g denied, 347 U.S. 949 (1954). 5. See Patent Act of 1790, ch. 7, 2 Stat. 110 (1790) (defining its purview as any useful art, manufacture, engine, machine, or device, or any improvement therein not before known or used ). 6. Id. 7. See Gottschalk v. Benson, 409 U.S. 63, 72 (1972). 8. See This American Life: When Patents Attack!, National Public Radio (July 22, 2011), thisamericanlife.org/radio-archives/episode/441/when-patents-attack.

218 December 2016] A BRIDGE OVER THE PATENT TROLLS 205 to defend against sham patent litigation. This Note argues that the emergence of the patent aggregators effective monopoly power makes them vulnerable to the antitrust laws in the United States. In doing so, this Note explores two divergent opinions from district courts in the Fourth Circuit one dismissing antitrust counterclaims, and the other allowing amendment to include nearly identical counterclaims in cases involving identical parties. 9 The NPE model as it exists today is tantamount to the hijacking of certain industry-standard markets, and tightly couching those markets will be key to convincing courts that the Sherman, Clayton, and Cartwright Acts proscribe such conduct. The technicalities of Federal Rule of Civil Procedure 12(b) and section 2 of the Sherman Act have allowed courts to do away with defensive antitrust claims for years, but early adjudication without discovery of an NPE s practices or the merits of a Sherman section 2 claim allows NPEs to abuse the patent system and shirk their responsibilities under the antitrust laws. Encouragingly, recent federal court decisions point to an evolution of the doctrine and a reassessment of the lay of law. Litigants should follow these recent examples and submit pleadings with firm definitions as to relevant markets and specific information on how an NPE s patent aggregation methods have adversely affected those defined markets, which constitute only the technologies controlled by the patents-in-suit. In turn, courts should take the baton and more readily permit antitrust counterclaims past the 12(b)(6) stage or at least not punt them simply because relevant markets in the patent space are nebulous by definition allowing a more academic and meritorious discussion in later stages of litigation. I. The Problem NPEs account for a staggering sixty-two percent of all recently filed patent litigation in federal courts. 10 Typically, these entities own a patent or patents, but do not produce a product that incorporates that patented technology or idea. 11 Rather, these entities are set up with the enforcement of patents as a business model. The business model of 9. Compare Intellectual Ventures I LLC v. Capital One Fin. Corp., No. 1:13-cv-00740, 2013 WL (E.D. Va. Dec. 18, 2013) (dismissing antitrust claims), with Intellectual Ventures I LLC v. Capital One Fin. Corp., 127 F. Supp. 3d 506 (D. Md. 2015) (granting motion to amend to add antitrust claims). 10. See Mark S. Popofsky & Michael D. Laufert, Antitrust Attacks on Patent Assertion Entities, 79 Antitrust L.J. 445, 445 (2014) (citing Comments of Google, BlackBerry, Earthlink & Redhat to the Federal Trade Commission and U.S. Department of Justice on Patent Assertion Entities 1 (Apr. 5, 2013), see also 2015 Patent Dispute Report (Dec. 31, 2015), (reporting that NPEs accounted for about two-thirds of all patent lawsuits, and two-thirds of patent lawsuits are filed in the technology sector). 11. See Popofsky & Laufert, supra note 10, at 445 n.2.

219 206 HASTINGS LAW JOURNAL [Vol. 68:203 [NPEs] focuses on purchasing and asserting patents against manufacturers already using the technology, rather than developing and transferring technology. 12 The loudest complaint, perhaps, concerns these entities proclivity for locking in to particular technologies by buying up patents in a certain field (including those involving industry standards), and imposing enormous innovation-sapping costs without producing corresponding social benefits. 13 NPEs typically target companies in a certain technological space, or even businesses that might use something as basic as a wireless router to provide Wi-Fi to customers. 14 They allege infringement of their patent(s), threatening massively expensive and protracted litigation, and extorting exorbitant licensing fees as a less expensive alternative. The U.S. Patent and Trademark Office ( USPTO ) has been inundated with weak patents containing broad claims over various swathes of technology, and many are granted due to a simple lack of technical understanding and available resources to conduct adequate review. Thus, an entity with enough patents in one area can essentially monopolize a technology space, and the more patents and resources it acquires, the more intimidating its demand letters become. Enter the patent mass-aggregator. This relatively new form of patent monetization entity amasses patents at an alarming rate, pooling the rights in various markets that control certain technological sectors. The largest and most shrouded of these entities is Intellectual Ventures ( IV ). 15 Aggregators, IV famously included among them, often create subsidiaries to manage their acquired intellectual property portfolios, or transfer their rights to third parties who purchase patents to assert on behalf of the parent company. 16 Research shows that IV, as an indicative case study, has accumulated somewhere in the neighborhood of 30,000 to 60,000 patents worldwide within the last ten years, giving it one of the largest patent portfolios in the world. 17 It is unclear exactly how many 12. Id. 13. Id. at 446; see also Fed. Trade Comm n, The Evolving IP Marketplace: Aligning Patent Notice and Remedies with Competition 8 (2011), See In re Innovatio IP Ventures, LLC Patent Litig., 921 F. Supp. 2d 903, (N.D. Ill. 2013). 15. There are many mass-aggregators in the market, including Acacia Research Corporation, Transpacific IP, Ltd., RPX, and Round Rock Research. See Tom Ewing & Robin Feldman, The Giants Among Us, 2012 Stan. Tech. L. Rev. 1, Another model involves a company reverse engineering the monetization process by funding a company like Rockstar Consortium, who studies manufacturer s products looking for ways to claim infringement. See Robin Feldman, Intellectual Property Wrongs, Stan. J.L. Bus. & Fin. 250, 267 (2013) (citing Robert McMillan, How Apple and Microsoft Armed 4,000 Patent Warheads, Wired (May 21, 2012), See Feldman, supra note 15, at See Ewing & Feldman, supra note 15, at 1.

220 December 2016] A BRIDGE OVER THE PATENT TROLLS 207 shell and holding companies IV has; many are empty offices that exist only in vacant office space and in government corporate records. 18 Aggregators like IV argue that their methods in fact foster innovation by facilitating an inventor s monetization of a patent that the inventor may not have adequate capital to affect himself. 19 Even if, assuming arguendo, the force of massive portfolios behind extortionate litigation does improve a patent s chances of success in a lawsuit of attrition, this Note suggests that this mechanism for enforcing patents is fundamentally out of line with the overarching and original purpose of the Patent Act innovation for the betterment of society. The Federal Trade Commission ( FTC ) has stated that, while the benefits of NPEs are uncertain, they can distort competition in technology markets, raise prices and decrease incentives to innovate. 20 So what tools do the government or citizens themselves have at their disposal to combat these tactics? II. The Lay of the Land and the Laws That Govern Federal antitrust laws (which state laws often emulate 21 ) are codified in the Sherman and Cartwright Acts. Section 2 of the Sherman Act makes it an offense to monopolize, attempt to monopolize, or combine or conspire to monopolize any part of the nation s interstate foreign commerce. 22 The Department of Justice ( DOJ ) additionally enforces section 2 through civil actions in the federal district courts. 23 Likewise, private parties have extensive civil enforcement powers by way of treble damages actions 24 and injunctive suits. 25 Section 2 extends antitrust claims beyond concerted conspiracy misconduct covered by section 1, further proscribing unilateral conduct. 26 It has, thus, played a pivotal role in antitrust actions where concerted action between multiple parties was either not present or difficult to prove Cases brought under section 2 have generally fallen into four broad categories, though only three are relevant: (1) Actual monopolization, in which a firm acquires or retains actual monopoly power through competitively unreasonable practices; (2) [a]ttempted monopolization, in which a firm not yet in possession of actual monopoly power engages in competitively 18. See This American Life, supra note See Ewing & Feldman, supra note 15, at Fed. Trade Comm n, supra note 13, at See, e.g., Cal. Bus. & Prof. Code (West 2016). 22. See 15 U.S.C. 2 (2016). 23. See id See id Id Id William Holmes & Melissa Mangiaracina, Antitrust Law Handbook 3:2, Westlaw (database updated Nov. 2015).

221 208 HASTINGS LAW JOURNAL [Vol. 68:203 unreasonable practices that create a dangerous probability of monopoly power being achieved; and (3) [i]ncipient conspiracies to monopolize, in which parties not yet in possession of monopoly power conspire to seize monopoly control of a market, but where monopoly power has not yet actually been reached. 28 Put bluntly, patent acquisitions are subject to antitrust laws. 29 Patents are no different from other assets, and thus, the use of antitrust laws to rein in the monopolization of technologies that inflate consumer prices is not a novel idea. 30 The misuse of patent pools, cross-licenses, and vast networks of shell and holding companies for the assertion of patent rights has been at the forefront of antitrust law for over a hundred years. 31 For example, in the 1912 case Standard Sanitary Manufacturing Co. v. United States, the Supreme Court condemned the pooling of patents by competitors for the purpose of restraining competition, holding that the added element of the patent in the case at bar cannot confer immunity from the antitrust laws, which act as a limitation of [patent] rights, rights which may be pushed to evil consequences, and [must] therefore [be] restrained. 32 Standard Sanitary Manufacturing Co. remains good law. 33 In United States v. New Wrinkle, Inc., the Supreme Court opined that two or more patentees in the same patent filed may (not) legally combine their valid patent monopolies to secure mutual benefits for themselves through contractual agreements, between themselves and other licensees, for control of the sale price of the patented devices. 34 By law, a single patent owner is allowed to exert market power for the patent only to promote inventions. 35 However, as the Supreme Court has made patently clear, that narrow monopoly exception does not apply to agreements between two or more parties. 36 Thus, when patent aggregators like IV enter into license or sale agreements for the use and rights in a patent, it moves outside of the patent monopoly exception and into the zone of antitrust law. 37 The concept of acquiring and pooling patents to corner market power is hardly 28. Id. 29. See SCM Corp. v. Xerox Corp., 645 F.2d 1195, 1205 (2d Cir. 1981) ( Patent acquisitions are not immune from the antitrust laws. ). 30. See J. Robert Robertson & Logan M. Breed, United States v. Widget Co., Newco, and Patent Aggregator Plus LLC: A Hypothetical Closing Argument, 79 Antitrust L.J. 527, 529 (2014). 31. Id. 32. See id. (citing Standard Sanitary Mfg. Co. v. United States, 226 U.S. 20, 49 (1912)). 33. See FTC v. Actavis, Inc., 133 S. Ct. 2223, (2013), rev g FTC v. Watson Pharm., Inc., 677 F.3d 1298 (2012) (citing Watson Pharm., Inc., 677 F.3d at 1312; United States v. Line Materials Co., 333 U.S. 287, 308 (1948); United States v. Singer Mfg. Co., 374 U.S. 174, (1963)). 34. United States v. New Wrinkle, Inc., 342 U.S. 371, 379 (1952) (quoting Line Materials Co., 333 U.S. at 305). 35. See Robertson & Breed, supra note 30, at 530 (citing Actavis, Inc., 133 S. Ct. at 2232). 36. See id. 37. Id.

222 December 2016] A BRIDGE OVER THE PATENT TROLLS 209 a new mechanism, and has been illegal for decades. 38 The accumulation of large patent portfolios by companies like IV enables those entities to obtain[] royalties in excess of the market value of whatever technology niche they have targeted, which is the hallmark of market power. 39 Section 7 of the Clayton Act is designed to stop anticompetitive harm in its incipiency meaning in its earliest beginnings when the effect of an acquisition may be substantially to lessen competition, or tend to create a monopoly. 40 NPEs acquisition of hundreds or thousands of patents and the technology boom of the past thirty years have spawned an explosion of potential and therefore cornerable technology markets. Society increasingly relies on many of these technologies every day, and the appurtenant advances continue to push innovation to new heights. The case of United States v. Baker Hughes Inc. explains each party s burdens when an NPE asserts its portfolio against an allegedly infringing company. 41 Once [a plaintiff can] show that an acquisition [or] in this case, hundreds of acquisitions creates undue concentration, we have established a presumption that the transaction will substantially lessen competition. The burden then shifts to the defendants to rebut the presumption by show[ing] that the market share statistics give an inaccurate account of the [merger s] probable effects on competition in the relevant market. 42 Additionally, section 7 does not require proof that a merger or other acquisition has caused higher prices in the affected market. All that is necessary is that the merger, or collection of patents, in IV s case, create an appreciable danger of such consequences in the future. 43 Aggregators often raise some of the same defenses when accused of abusing their portfolios for improper market share or diminishing innovation. IV often claims that its revenues are passed on to inventors to encourage more innovation. 44 IV also argues that patent enforcement by [NPEs] creates significant efficiencies that offset any potential anticompetitive effect. 45 However, the original inventor/owner/practitioner 38. Id. (citing New Wrinkle, 342 U.S. at 379). 39. Id. (quoting Fiona Scott-Morton, Deputy Assistant Attorney Gen. Econ. Analysis, Antitrust Div., U.S. Dep t of Justice, Presentation at the Fifth Annual Searle Conference on Antitrust Economics and Competition Policy: Patent Portfolio Acquisitions An Economic Analysis (Sept. 21, 2012), Id. at 531 (citing 15 U.S.C. 18; United States v. E.I. du Pont de Nemours & Co., 353 U.S. 586, 589 (1957)). 41. See United States v. Baker Hughes Inc., 908 F.2d 981, 982 (D.C. Cir. 1990). 42. Robertson & Breed, supra note 30, at 531 (citing Baker Hughes Inc., 908 F.2d at 982; United States v. Citizens & S. Nat l Bank, 422 U.S. 86, 120 (1975)). 43. Id. at (quoting Hosp. Corp. of Am. v. FTC, 807 F.2d 1381, 1389 (7th Cir. 1986)); see also FTC v. CCC Holdings Inc., 605 F. Supp. 2d 26, 35 (D.D.C. 2009) (holding that the government must show that harm is sufficiently probable, not that it will happen) (internal citations omitted). 44. See, e.g., This American Life, supra note Robertson & Breed, supra note 30, at 532.

223 210 HASTINGS LAW JOURNAL [Vol. 68:203 of a patent is fully capable of enforcing or licensing a patent without the assistance of a middle-man; the presence of such an intervener would only add dollars to the transaction(s) in the form of higher costs for competitors or the build-in of legal expenses to the cost of a product on the market that is, passing the licensing or litigation costs right on to the consumer. 46 Large portfolios can shield weak patents and raise total royalties through a mechanism that can be described as achieving strength in numbers or safety in numbers. In certain circumstances, the more patents a[n NPE] brings under common ownership (relative to circumstances where each patent is individually owned), the greater both the [NPE s] incentive to assert each patent and an enforcement target s willingness to pay to terminate the litigation. 47 The value of this technique to the aggregator is obvious: Bringing patents under common ownership can enhance litigation leverage and thereby increase in some cases radically incentives to assert even very weak patents. 48 In essence, where an individual patent owner considers asserting her monopoly rights, her cost/benefit analysis only contemplates her own prospect of victory, which is balanced against the expenditure of cost and time. By its nature, a patent has ill-defined boundaries (especially in the context of software patents), and lacks quick and inexpensive methods for resolving that uncertainty, significantly amplifying costs of assertion. 49 An aggregator, however, asserts many patents against a single usage or by casting a wide net to extract licensing deals from competitors, and may therefore consider the prospect of achieving any victory. 50 Pooling ten patents in this way can increase the prospect of victory from ten percent to sixty-five percent, whereas pooling five hundred patents, even if each has only a one percent chance of prevailing on its own, can increase the likelihood of victory from one percent to ninety-nine percent. 51 Aggregation is a demonstrably powerful tool that drastically alters the analysis as to whether to bring a suit, and what companies (or in most cases, how many companies) to assert the patents against. Under such circumstances, a rational company may opt to settle rather than face those odds and expense of litigation. 52 Some scholars argue that the definitions of relevant markets in the technology/antitrust space makes the anticompetitive provisions in 46. See id. 47. Popofsky & Laufert, supra note 10, at Id. 49. See Feldman, supra note 15, at Popofsky & Laufert, supra note 10, at Id. 0.9 to the 10th power is 0.348, which is the prospect that the [NPE] will lose on all its patents. Id. at 448 n to the 500th power is , which is the prospect that each of the 500 patent suits fail. Id. at 449 n See Feldman, supra note 15, at 16.

224 December 2016] A BRIDGE OVER THE PATENT TROLLS 211 the Sherman and Clayton Acts dull or inefficient tools for reining in patent mass-aggregators and extortionate lawsuits. 53 But that is not necessarily so. Such doubters claim that while the Acts and state antitrust laws can prohibit discreet acquisitions that threaten to create or anticompetitively facilitate the exercise of market power, those laws do not impose a general prohibition on the alienability of property. 54 The argument suggests that while antitrust laws can condemn the assertion of intellectual property rights, 55 the Noerr-Pennington doctrine 56 places certain enforcement activities outside the Sherman Act s purview. 57 This theory rests on two premises. First, companies seeking to assert Sherman and Clayton Act affirmative defenses when faced with an assertion lawsuit deal with the reality that patents enjoy a presumption of validity. 58 Second, bringing... patents under common ownership can produce efficiencies. 59 However, the major hurdle, the argument 53. See, e.g., Popofsky & Laufert, supra note 10, at ( [T]he antitrust laws, we further posit, likely do not ban one particular PAE model that has garnered significant attention mass aggregators. ). 54. Id. at Id. (citing Walker Process Equip. v. Food Mach. & Chem. Corp., 382 U.S. 172, 177 (1965) (finding a potential Sherman Act violation in the enforcement of a patent that was obtained through intentionally defrauding the USPTO); Handgards, Inc. v. Ethicon, Inc., 601 F.2d 986, 996 (9th Cir. 1979) (disapproving of what was deemed to be a bad faith and objectively baseless patent assertion made by a monopolist)). 56. The Noerr-Pennington Doctrine instructs that, in general, one attempting to influence the exercise of government power, even for the purpose of gaining an anticompetitive advantage, does not create liability under the antitrust laws. See generally E. R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961) (holding that a publicity campaign directed toward obtaining governmental action adverse to the interests of trucking companies was not illegal ). In In re Innovatio IP Ventures, LLC Patent Litig., 921 F. Supp. 2d 903 (N.D. Ill. 2013), alleged patent infringing defendants brought counterclaims under the RICO, California unfair competition, and civil conspiracy laws based on plaintiff s patent assertion methods. However, while the district court s decision discusses antitrust claims, it does so to explore the application of Noerr-Pennington outside the antitrust context. So it may inform litigants on the use of RICO and other claims to combat questionable patent claims, but it is not relevant to this Note s focus. In another interesting case, a patent owner brought antitrust claims against a licensee for engaging in improper hub-and-spoke use of a purported defensive patent aggregator or anti-troll affiliate to lower the cost of acquiring the patentee s portfolio. Cascades Comput. Innovation LLC v. RPX Corp., No. 12-CV-1143 YGR, 2013 WL , at *1 2 (N.D. Cal. Dec. 3, 2013). There, the district court allowed plaintiff s amended complaint to get past a pair of concurrent motions to dismiss, finding that while the court was wary of the patents validity, plaintiffs had successfully raised an inference of a conspiracy to force sub-competitive pricing for Cascades patent licenses by monopolizing the market therefor. Id. at *1. The antitrust claims focused on section 1 of the Sherman Act for conspiracy, and as an argument over licensing discussions, it is not as instructive to our instant discussion as some other cases. 57. See, e.g., Q-Pharma, Inc. v. Andrew Jergens Co., 360 F.3d 1295, (Fed. Cir. 2004) ( A patent owner who brings a suit for infringement, without more, is generally exempt from the antitrust laws for that action.... ). 58. See 35 U.S.C. 282 (2016). 59. See Popofsky & Laufert, supra note 10, at 450 n.25 ( The Cournot-complements effect arises when multiple input owners each charge more than marginal cost for their input, thereby raising the price of the downstream product and reducing sales of that product. Effectively, each input supplier imposes a negative externality on other suppliers when it raises its price, because this reduces the

225 212 HASTINGS LAW JOURNAL [Vol. 68:203 suggests, is the relevant market requirement. 60 A viable antitrust theory whether under Section 1 or 2... of the Sherman Act, or section 7 of the Clayton Act likely would need to identify a particular relevant market adversely affected by the [NPE s] amassing of patents. 61 Aggregators shielding of weak patents through combined assertion methods does not require an increase in concentration in any particular market, making it difficult to concretely identify a detrimentally affected relevant market. 62 And therein lays the problem. In one of the two cases examined below, the Eastern District of Virginia agreed that IV s patent portfolio could not constitute a relevant market for antitrust purposes. 63 There are counterarguments, of course, and a competing implication from within the Fourth Circuit. 64 This Note suggests that a defendant can meet the market definition element through specific and exhaustive pleading, and that future counterclaimants should focus their efforts on elucidating the facts surrounding a plaintiff s entry into the market and how the collection of patents essentially creates a market for these technology spaces. This would allow courts to at least curtail the deluge of patent infringement suits by mass-aggregators, or otherwise weed out frivolous and extortionate suits by putting the aggregators on notice that antitrust defenses are available to, and a viable protective weapon for, defendants. Market definition is merely a tool that courts use to analyze whether a proposed acquisition is likely to harm competition in the future. 65 But, in many cases, there is no need for hypothetical analysis because there is primary evidence of actual anticompetitive effects. 66 In such a case, the analysis should be whether the acquisitions of thousands of patents in a given market or technological space significantly increased the aggregator s ability to get a higher price than what previous owners would have received when they held the patent rights individually. 67 number of units of the downstream product that are sold. (quoting Mark A. Lemley & Carl Shapiro, Patent Holdup and Royalty Stacking, 85 Tex. L. Rev. 1991, (2007) (emphasis added))). 60. See J. Douglas Richards, Is Market Definition Necessary in Sherman Act Cases When Anticompetitive Effects Can Be Shown with Direct Evidence?, 26 Antitrust 53, 53 (2012) (stating that the proper definition of the market is a necessary predicate to determining whether the effect of a merger may substantially be to lessen competition, or to tend to create a monopoly, in any line of commerce, in the context of a suit seeking to enjoin a proposed merger. (quoting Brown Shoe Co. v. United States, 370 U.S. 294, 335 (1962))). 61. Popofsky & Laufert, supra note 10, at See id. at See Intellectual Ventures I LLC v. Capital One Fin. Corp., No. 1:13-cv-00740, 2013 WL , at *10 (E.D. Va. Dec. 18, 2013) (granting motion to strike antitrust counterclaims). 64. See Intellectual Ventures I LLC v. Capital One Fin. Corp., 99 F. Supp. 3d 610, 610 (D. Md. 2015) (granting motion to amend to add antitrust claims). 65. Robertson & Breed, supra note 30, at Id. 67. See id.

226 December 2016] A BRIDGE OVER THE PATENT TROLLS 213 Further, evidence of such an increase would not be hard to come by in cases where the intent or practice is anticompetitive, or where adhesive licensing deals include weak or tenuously related patents that are built into the lump sum the aggregator demands. For example, if none of the manufacturers in a given case has ever paid for a license for any of the patents they are accused of infringing, and if those patents had previously been available at fair, reasonable, and nondiscriminatory ( FRAND ) rates, 68 it takes elementary arithmetic to ascertain whether or not the market for that technology or patent has been adversely affected. 69 Defining the scope of the relevant market therefore fades from relevancy, and the courts can place the import where it belongs: on how that artificially inflated cost has become incorporated into the price the manufacturer charges American consumers. The word may in section 7 of the Clayton Act 70 creates a very low standard for finding anticompetitive conduct in a multiparty transaction, 71 and [a]chieving market power to raise prices as a result of an acquisition more than satisfies [the] incipiency test. Market power exists if the defendant can raise price without a total loss of sales. 72 Therefore, if an acquisition or a series of IP acquisitions may create market power, then Section 7 has been violated. 73 Further, the Supreme Court has held that any agreement between two or more persons to unreasonably restrain trade is a violation of section 1 of the Sherman Act, even if the agreement involves patent licenses. 74 With these arguments in mind, we turn to two real-world applications, conveniently arising from the same circuit. If the concern is whether antitrust claims might limit the carnage NPEs suits wreak in innovative communities or on consumer prices for software and electronics, the underlying question is whether such claims fit the pleading standards our legal system has set in place. The divergence in the Fourth Circuit illuminates the state of the argument, and this Note suggests that the pleading stage is not the correct place for adjudication. 68. See generally Anne Layne-Farrar et al., Pricing Patents for Licensing in Standard-Setting Organizations: Making Sense of FRAND Commitments, 74 Antitrust L.J. 671 (2007) (discussing the ways courts evaluate behavior and whether that behavior complies with FRAND commitments). 69. See, e.g., Robertson & Breed, supra note 30, at U.S.C. 18 ( [T]he effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly. ). 71. Robertson & Breed, supra note 30, at Id. (quoting 2b Phillip E. Areeda et al., Antitrust Law 501, at 109 (3d ed. 2009)). 73. Id. (citing In re Montedison S.p.A., 119 F.T.C. 676 (1995)). 74. See FTC v. Actavis, Inc., 133 S. Ct. 2223, (2013).

227 214 HASTINGS LAW JOURNAL [Vol. 68:203 III. The IV V. CAPITAL ONE Tug-of-War To sufficiently plead a claim for monopolization under section 2 of the Sherman Act, a party must allege facts that could plausibly lead to a determination that: (1) the other party has a monopoly in a relevant market; and (2) they engaged in anticompetitive conduct to acquire or maintain that monopoly. 75 A cause of action also exists under section 2 for attempted monopolization, for which a claimant must plead: (1) the use of anticompetitive conduct, (2) with specific intent to monopolize, and (3) a dangerous probability of success. 76 A. Battleground I: Eastern District of Virginia Capital One Financial Corporation ( Capital One ) is a bank holding company specializing in credit cards, loans, and banking products, 77 and IV has a portfolio of back-end technologies used across the banking industry in its holdings. IV filed its first of two lawsuits against Capital One and a handful of related companies, accusing the defendants of infringing five patents, three of which were quickly removed from the case. 78 In its complaint, IV broadly alleged that: Capital One provides online banking services and other systems and services via electronic means including, but not limited to, the website In connection with these online banking services and other systems and services, Capital One infringes one or more claims of [the patents-in-suit]. 79 The patents relate to online banking and electronic banking systems and methods. IV alleged that various products and services, including envelope-free ATMs, online banking account alerts, bill pay, and others, were infringing upon those patents. 80 IV has brought similar claims against several other banks across the country. 81 Capital One filed an answer and amended answer, appending counterclaims for monopolization 82 as well as attempted monopolization under section 2 of the Sherman Act, 83 unlawful asset acquisition in violation of section 7 of the Clayton Act, 84 and a defense for patent misuse that included claims of impermissible collection 75. United States v. Grinnell Corp., 384 U.S. 563, (1966). 76. E. I. du Pont de Nemours & Co. v. Kolon Indus., Inc., 637 F.3d 435, 453 (4th Cir. 2011). 77. Captial One, (last visited Nov. 4, 2016). 78. See David McAfee, Capital One Escapes Patent Co. s Online Banking Patent Suit, Law360 (Ap. 16, 2014, 8:17 PM), Complaint at 6, Intellectual Ventures I LLC v. Capital One Fin. Corp., No. 1:13-cv (E.D. Va. June 19, 2013), 2013 WL Id. at See McAfee, supra note 78, at Answer to Complaint at 26 34, Intellectual Ventures I LLC v. Capital One Fin. Corp., No. 1:13-cv (E.D. Va. Oct. 14, 2013), 2013 WL Id. at Id. at

228 December 2016] A BRIDGE OVER THE PATENT TROLLS 215 of royalties and unlawful monopolization. 85 In its most robust claim, alleging Sherman Act section 2 monopolization, Capital One let loose a litany of accusations regarding IV s pattern of secrecy, misdirection, and obfuscation, its use of shell companies, and its status as a nonpractitioner of its patent portfolios. 86 It went on to cite Department of Justice hearings and presidential opinions on the company and its ilk, concluding that: [B]y accumulating patents that serve as a crutch for its anticompetitive scheme, not building any goods or services that might make it vulnerable to claims of patent infringement, hiding its patent accumulation using thousands of shell companies, and not telling its targets what patents are in its portfolio, Intellectual Ventures acquires monopoly power where there was previously none. Intellectual Ventures creates an inescapable threat by aggregating so many weak patents that it can attack successful products and redesigned alternatives. Intellectual Ventures thus eliminates competition and cuts off escape avenues for the innovators it attacks. [It] further bolsters its monopoly power by asserting sham patent-infringement suits, entirely without regard to their substantive merits, for the subjective, improper purpose of using the legal process itself as a weapon to pummel its targets into submission. 87 Capital One went on to allege that IV had engaged in exclusionary and anticompetitive conduct to obtain and maintain its monopoly power in the relevant market that is, the ex post market for common banking industry business processes by acquiring huge numbers of patents ostensibly related to banking services, aggregating those patents, forcing licensing agreements on banks, and initiating sham infringement suits. 88 IV promptly filed a motion to dismiss Capital One s antitrust counterclaims for failure to state a cognizable claim. 89 IV s argument against the monopolization claims can be broken down into three parts: (1) Capital One s Sherman Act monopolization claim failed because it could not allege a plausible relevant market; 90 (2) Capital One could not plausibly allege the required market share necessary for such a claim; 91 and (3) the conduct Capital One alleged acquisition of large patent portfolios, using the portfolios to force licensing, and sham litigation were not unlawful monopolization acts. 92 IV also attacked the 85. Id. at See id. at Id. at Id. at See generally Plaintiff/Counterclaimants Opening Brief in Support of Motion to Strike or Dismiss Amended Antitrust Counterclaims 11, 12 and 13 and Motion to Dismiss Eighth Affirmative Patent Misuse Defense, Intellectual Ventures I LLC v. Capital One Fin. Corp., No. 1:13-cv (E.D. Va. Oct. 28, 2013), 2013 WL See id. at See id. at See id. at

229 216 HASTINGS LAW JOURNAL [Vol. 68:203 complaint for its alleged failure to state any antitrust injury, 93 arguing that Capital One suffered no antitrust injury as a result of any alleged anticompetitive act of Intellectual Ventures because any injury to Capital One was caused by the patents themselves, and not Intellectual Ventures ownership of them. 94 IV s motion then attempted to undermine the Clayton Act section 7 claim for unlawful patent acquisition, contending that legality of patent acquisition is measured at the time of acquisition, and must, at that time, be demonstrably injurious to competition. 95 At oral argument on IV s motion, IV asserted that the crux of Capital One s counterclaims was not about antitrust, monopolization, or market power. Rather, IV asserted that it was about a petulant company accustomed to infringing at will, upset that it could not counter with patent infringement claims of its own because IV was, by definition, a non-practicing entity. 96 IV went on to argue that there has been no effect on price, and without such an effect, there is no foundation for a monopolization claim, no relevant market, and no detrimental effect on said market. 97 Finally, in what appeared to be the major push, IV argued that the number of patents it possessed did not equate to any cognizable market share, and for those reasons, the antitrust counterclaims faltered and failed to meet the requisite pleading requirements. 98 However, it was the number of patents and the way IV acquired them that went directly to the issue of market power and anticompetitive acts: What matters is that [IV] operates in an upstream market where people buy and sell intellectual property. It s that aggregation of the property and that upstream market that they are now using to control prices and eliminate competition in the downstream market. The consumers of that intellectual property, the banks This is another element for a monopolization claim. Prohibited monopolization must be directed toward competitors and must be intended to injure competition. Intergraph Corp. v. Intel Corp., 195 F.3d 1346, 1353 (Fed. Cir. 1999) (dismissing monopolization and attempted monopolization claims because Intel and Intergraph were not competitors). 94. See Plaintiff/Counterclaimants Opening Brief in Support of Motion to Strike, supra note 89, at 25 ( Thus, the anticompetitive act of purchasing Mechaneer did not cause the plaintiff s alleged injury. The patents were an impenetrable barrier to the plaintiff s entry before Micafil purchased Mechaneer, and they remained as great a barrier afterwards. (quoting Axis, S.p.A. v. Micafil, Inc., 870 F.2d 1105, 1107 (6th Cir. 1989)). 95. See id. at 27 (citing SCM Corp. v. Xerox Corp., 645 F.2d 1195, (2d Cir. 1981)). 96. Transcript of Hearing on Plaintiffs Motion to Strike or Dismiss Amended Antitrust Counterclaims at 7:20 8:22, Intellectual Ventures I LLC v. Capital One Fin. Corp., No. 1:13-cv (E.D. Va. Dec. 2, 2013). 97. See id. at 10:16 11: See id. at 12: Id. at 24:15 21.

230 December 2016] A BRIDGE OVER THE PATENT TROLLS 217 Capital One argued that such a scheme was analogous to a price fixing case where all the competitors could get together and price fix and raise the prices for consumers. 100 That harm to consumers is still monopolization. Essentially, it is the act of aggregation that leads to increased market share and anticompetitive conduct. Capital One argued that IV s market share did not exist before IV had the patents, but does exist now following IV s acquisition. 101 Capital One also argued that a patent s chance of success in an infringement suit increases exponentially when a plaintiff asserts several patents along with it, 102 as this Note touched upon infra. Before IV, no one has offered to license these patents.... They ve changed the market with this business model and made it profitable to acquire a large number of weak patents and assert those, not based on their merits, but based on their probability of success. 103 The district court entered a boilerplate order granting IV s motion to dismiss the monopolization and other antitrust claims at the pleading stage with no explanation as to which of IV s arguments it found compelling, or which Capital One arguments it found lacking. 104 Spectators are thus left to rely on the positions that the parties presented at oral argument and to assume that the court found persuasive IV s contention that amassing patents, even in a particular field, does not in and of itself offend the antitrust statutes because it is difficult to define a relevant market, and because the number of patents and how they interact do not affect prices and do not create market share. 105 Given the Court s succinct order, the window for analysis is small. While the Eastern District of Virginia Court found antitrust to be the wrong tool to dispose of the lawsuit, in the end, the court ruled in Capital One s favor, holding that the remaining two patents were invalid for claiming only abstract ideas. 106 The court further opined that certain claims of the patents-in-suit were insolubly ambiguous, rendering the patents unenforceable. 107 And while it is not clear why the court ruled the way it did regarding the counterclaims, the final adjudication of weak patents may echo in other cases for patent infringement against the banking industry. Perhaps the problem was simply a matter of robust 100. Id. at 24: Id. at 25:19 26: Id. at 27: Id. at 28: See Order re Plaintiffs/Counterclaim Defendants Motion to Strike of Dismiss Amended Antitrust Counterclaims 11, 12, and 13, and Eight Affirmative Patent Misuse Defense, Intellectual Ventures I LLC v. Capital One Fin. Corp., No. 1:13-cv (E.D. Va. Dec. 5, 2013) See Transcript of Hearing on Plaintiffs Motion to Strike or Dismiss, supra note 96, at 17:10 22: See McAfee, supra note Id.

231 218 HASTINGS LAW JOURNAL [Vol. 68:203 pleading, as this Note suggests will be the case as more and more defendants stand up to the NPEs. B. Battleground II: The District of Maryland In January 2014, IV filed another case against Capital One in the District Court for the Federal District of Maryland, 108 propounding fresh allegations that Capital One infringed four patents covering mobile banking and security technologies. 109 Following its complaint and two amendments, Capital One filed a motion to amend a third time in order to include antitrust counterclaims. 110 Once again, Capital One alleged that IV, along with a few of its subsidiaries, had amassed monopoly power in violation of section 2 of the Sherman Act. 111 Capitol One based these new counterclaims on much of the same conduct as cited in the Virginia case, but included a vastly more robust set of allegations and background facts to support its antitrust claims against IV. 112 The motion also sought to add new counterdefendants. 113 Further, Capital One filed a third-party complaint against the IV companies, which included the same three antitrust claims that Capital One presented as counterclaims, with small additions. 114 The adjudication standards for Federal Rule of Civil Procedure 15, leave to amend, and Rule 12(b)(6), dismissal under Iqbal/Twombly, are admittedly different. However, the court s grant of the motion nonetheless strongly indicated that the monopolization and acquisition claims had merit. 115 On such a motion, the standard analysis investigates whether an amendment would be futile. 116 Having learned from the Virginia case, for its Sherman Act section 2 claim, Capital One immediately established and defined the relevant market for the patents-in-suit as the licensing market for the patents in 108. See generally Complaint, Intellectual Ventures I LLC v. Capital One Fin. Corp., No. 8:14-cv PWG, 2014 WL (D. Md. Jan. 14, 2014) Id See Defendant s Motion for Leave to File Third Amended Answer, Defenses, and Counterclaims at 1 2, Intellectual Ventures I LLC v. Capital One Fin. Corp., 8:14-cv PWG (D. Md. Sept. 18, 2014) Id See generally id. It is worth noting that much of this additional pleading has been redacted in the public docket subject to a protective order. Perhaps Intellectual Ventures was not so keen in this round to have its business model revealed to the general public Id See generally Third Party Counter-complaint, Intellectual Ventures I LLC v. Capital One Fin. Corp., No. 8:14-cv PWG (D. Md. Mar. 27, 2015) See Memorandum Opinion at 29, Intellectual Ventures I LLC v. Capital One Fin. Corp., No. 8:14-cv PWG (D. Md. Mar. 2, 2015) See Katyle v. Penn Nat l Gaming, Inc., 637 F.3d 462, 471 (4th Cir. 2011).

232 December 2016] A BRIDGE OVER THE PATENT TROLLS 219 IV s financial-services portfolio. 117 It alleged that there were no substitutes for licenses to the portfolio because IV had removed the original patentees from the market, forcing banks to engage IV either in licensing discussions or infringement lawsuits. 118 As this Note argues, this should be the guiding law on market definition. Essentially, the allegations suggest that IV eliminated banks access to substitutes for an IV license, both in the form of other patent licenses and bankingproduct designs, through a carefully orchestrated campaign of patent aggregation, concealment, and sham litigation. 119 Capital One went on at length in a preliminary section of its brief entitled Facts Supporting Capital One s Antitrust Counterclaims, delving into great detail about IV s history, methods, portfolios, and litigation tactics. 120 That section concluded that IV s monopoly power stemmed from its accumulation of 3500 patents to create a portfolio that is essential to conduct commercial banking, including patents that it claims are standard-essential Capital One was also careful to allege specific antitrust injury flowing from IV s monopolistic practices, citing a choice between paying IV s ransom licensing fees or leaving the banking industry. 122 Interestingly, Capital One also included alter ego and agency allegations to connect the disparate and hidden shell corporations IV used to assert its various portfolios. 123 Once again, based perhaps on its success in the Virginia case, IV filed a motion to dismiss. 124 IV maintained that Capital One could not establish the existence of the 3500-patent portfolio, a novel argument in the prior disputes between the two parties. 125 In doing so, IV insisted that the several IV companies against whom Capital One leveled its accusations were separate legal entities with separate portfolios. 126 IV argued for dismissal on essentially three grounds: (1) the counterclaims still did not allege a plausible relevant market; (2) they likewise did not allege sufficiently that IV had monopoly power in that market; and (3) 117. Defendant s Third Amended Answer, Defenses, and Counterclaims to Original Complaint at 51 52, Intellectual Ventures I LLC v. Capital One Fin. Corp., No. 8:14-cv PWG (D. Md. Mar. 2, 2015) Id Id. at See id. at Id. at Id E.g., id. at 16; see also This American Life, supra note See Memorandum in Support of Plaintiff s Motion to Dismiss Amended Antitrust Counterclaims, Intellectual Ventures I LLC v. Capital One Fin. Corp., No. 8:14-cv PWG (D. Md. Mar. 19, 2015) Id See [Plaintiff/Counter-defendants ] Motion to Dismiss Amended Antitrust Counterclaims 12, 13, and 14, at 8 9, Intellectual Ventures I LLC v. Capital One Fin. Corp., No. 8:14-cv PWG (D. Md. Mar. 19, 2015).

233 220 HASTINGS LAW JOURNAL [Vol. 68:203 that none of the purportedly unlawful acts of monopolization Capital One alleged were actually unlawful. 127 The court dealt with each in turn. 1. Relevant Market Failure to plead a relevant market rarely establishes grounds for dismissal at the pleading stage because the market definition inquiry is deeply fact-intensive, and often requires discovery. 128 Dismissal is still an option, however, when a glaring deficienc[y] exists, where, for example, a plaintiff fails to plead such a market at all. 129 The issue then becomes whether a relevant market can consist of (or be limited to) the patents in IV s portfolio. [A] single brand of product or service may be a relevant market under the Sherman Act if no substitute exists for that brand s products or services. 130 The district court in Maryland cited the case of Eastman Kodak v. Image Technical Services, Inc. In Eastman Kodak, Kodak limited the availability of certain parts for its machines, making it more difficult for independent servicers of the machines to sell their services and forcing some contractors out of business, thus leaving customers with no option but to go to Kodak for repairs. 131 In defining the relevant market, the Supreme Court held that [t]he relevant market for antitrust purposes [was] determined by the choices available to Kodak equipment owners. 132 In other words, the service and parts were not interchangeable with other manufacturers equipment, and the Court saw the relevant market from the perspective of the equipment owner as composed of, and limited to, the companies that serviced Kodak machines. 133 The district court in the IV- Capital One case drew a parallel conclusion, holding that the banks had no choice but to pay licensing fees the same way Kodak customers had no option but to get service from Kodak. 134 Capital One similarly alleged that IV s financial services portfolio in the United States constituted a relevant licensing market because IV demands that banks license the portfolio to continue their commercial banking services, threatening and suing those banks that resist. 135 However, [b]ecause Intellectual Ventures sought and obtained such a 127. Memorandum Opinion, supra note 115, at Id. at 12 (quoting E. I. du Pont de Nemours & Co. v. Kolon Indus. Inc., 637 F.3d 435, 443 (4th Cir. 2011)) E. I. du Pont de Nemours & Co., 637 F3d at 444 (quoting Allen v. Dairy Farmers of Am., Inc., 748 F. Supp. 2d 323, 339 (D. Vt. 2010)) Intellectual Ventures I LLC v. Capital One Fin. Corp., 99 F. Supp. 3d 610, 620 (D. Md. Mar. 2, 2015) Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 U.S. 451, (1992) Id. at Id. at See Memorandum Opinion, supra note 115, at Defendant s Third Amended Answer, supra note 117, at 52.

234 December 2016] A BRIDGE OVER THE PATENT TROLLS 221 large portfolio, banks do not have the option to license alternative portfolios The Maryland court also addressed the case of Meredith Corp. v. SESAC LLC, drawing on other strong parallels. 137 In Meredith Corp., the plaintiffs claimed that the relevant market was the market for television performance rights that the defendant licensed in an anticompetitive manner. 138 In denying summary judgment, the Meredith Corp. court observed that market definition is a highly factual one best allocated to the trier of fact. 139 The case involved rights to use music, and the court concluded, in short, that because radio stations are required to have licenses to play music, and because the rights to the music were controlled by just three organizations, the stations had no choice but to pay licensing to each. 140 And when the defendant, SESAC, significantly increased its prices, local stations [did] not respond[] to SESAC s price increases by replacing SESAC licenses with alternative licenses. 141 Similar to the organizations in Meredith that amassed distinct collections of music and the license rights thereto, 142 IV also created a single licensing source thereby eliminat[ing] all competition between patentees that would otherwise compete with each other for financial-services licensing opportunities. 143 In reaching a decision, the Maryland District Court ultimately relied on the additional pleadings and specifics regarding the relevant market that Capital One appended in its Third Amended Counterclaims allegations that were absent in the Virginia case (where the court dismissed largely for failure to establish exactly that element of a Sherman Act section 2 claim). 144 This additional pleading led the court to conclude that there were sufficient allegations to find a relevant market, an element on which a great deal of future antitrust litigation against NPEs may now turn. 2. Monopoly Power The Maryland court next addressed the second issue in the Virginia case: monopoly power. A party can establish monopoly power either through direct evidence of supracompetitive prices and restricted 136. Id See Memorandum Opinion, supra note 115, at Meredith Corp. v. SESAC LLC, 1 F. Supp. 3d 180, 218 (S.D.N.Y. 2014) Id. at See id. at Id. at See Memorandum Opinion, supra note 115, at Defendant s Third Amended Answer, supra note 117, at The Virginia court opined that the relevant market as Capital One pleaded was defined in terms of what a business necessity was for the complaining business lawful operations. The only business necessity the court saw from the allegations was Capital One s need to avoid future litigation, leaving the technology itself largely irrelevant. Intellectual Ventures I LLC v. Capital One Fin. Corp., No. 1:13-cv-00740, 2013 WL , at *5 (E.D. Va. Dec. 18, 2013).

235 222 HASTINGS LAW JOURNAL [Vol. 68:203 output or by inference from the structure and composition of the relevant market. 145 Monopoly power must be substantial enough to create a barrier to entry into a market such that it constrains the normal operation of the market to the extent that the problem is not likely to correct itself. 146 Patents can be barriers, as they were in Eastman Kodak, where the Ninth Circuit found meaningful barriers in the form of Kodak s 220 patents and its control of its designs and tools. 147 Capital One similarly argued that the portfolio was a barrier to entry into that technological space, and IV s use of the patents was evidence of IV s market power. 148 Whereas in the Virginia case, Capital One had relied heavily on direct evidence of market power for its Sherman Act section 2 claim, it took a different avenue in the Maryland case. In the Maryland case, Capital One alleged circumstantial evidence, to wit, that IV has 100 percent share of the relevant market because it alone sells a license to what it contends to be an indispensable body of patents, and licenses to patents held by other entities cannot halt IV s activities Capital One theorized that by controlling one hundred percent of the market without any supply- or demand-side constraints over how it priced its licenses, IV had monopoly power. 150 This was a relatively novel argument in pursuing a monopoly claim against a patent aggregator, and the Maryland court agreed that Capital One had sufficiently met its pleading burden. 151 Thus, Capital One was allowed to amend a third time to include these newly beefed-up claims as an added weapon against an NPE patent suit Unlawful Acts of Monopolization Finally, the Maryland court addressed the second element in a Sherman Act section 2 claim: the requirement that a (counter)claimant allege not only the existence of market power, but also the unlawful wielding of that power. 153 In other words, Capital One had to allege that IV use[d] [its] monopoly power to foreclose competition, to gain a competitive advantage, or to destroy a competitor, 154 or acquired or maintained that power willfully, and not from growth or development as a consequence of a superior product, business acumen, or historic 145. Broadcom Corp. v. Qualcomm Inc., 501 F.3d 297, 307 (3d Cir. 2007) Image Tech. Servs., Inc. v. Eastman Kodak Co., 125 F.3d 1195, 1208 (9th Cir. 1997) See id Defendant s Third Amended Answer, supra note 117, at Id. at Id Memorandum Opinion, supra note 115, at Id See Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 U.S. 451, (1992) Id. at (quoting United States v. Griffith, 334 U.S. 100, 107 (1948)).

236 December 2016] A BRIDGE OVER THE PATENT TROLLS 223 accident. 155 IV countered this allegation by arguing that once a patent is legally acquired, the analysis is complete. But the Maryland court took the analysis another step, holding that even properly acquired rights cannot be used as levers for obtaining objectives proscribed by the antitrust laws. 156 Ultimately, the court found that IV had no market share at all before acquiring the alleged 3500 patents. 157 And, because products practicing the patents were already in place in the banking industry, Capital One had sufficiently alleged that IV had, at least, willfully acquired its monopoly power, meeting the final element of a Sherman Act section 2 claim. 158 Capital One was thus allowed to amend for a third time to add its antitrust claims, 159 in what may well set the groundwork for future patent defense cases against gargantuan patent aggregators. As a closing note on the Maryland action, IV eventually filed a motion to dismiss, arguing many of the same positions it did in the Virginia case, even in the face of the newly strengthened allegations. Capital One further filed a third-party complaint against several new IV companies, alleging the same three antitrust claims that it had presented as counterclaims against the original IV companies. 160 The original IV companies filed a motion to dismiss the counterclaims, which the court denied, based principally on the same grounds on which it granted the motion to amend, finding that Capital One had sufficiently pled its Sherman Act section 2 claim. 161 In a renewed motion, however, IV raised another argument that the IV companies are separate legal entities undermining Capital One s alter ego and agency allegations. 162 The court granted the motion without prejudice, allowing Capital One to amend yet again, and did so on a ground that does not disturb the previous, novel decisions regarding the monopoly allegations. 163 The case remains open, as does the question of whether the survival of Capital One s antitrust claims makes IV any more inclined to settle. Or perhaps they will simply throw more patents into the fray Id. at 481 (quoting United States v. Grinnell Corp., 384 U.S. 563, (1966)) See Memorandum Opinion, supra note 115, at (quoting Ford Motor Co. v. United States, 405 U.S. 562, 576 n.11 (1972)) Id. at Id. at Id. at Plaintiff s Motion to Dismiss and Strike Antitrust Counterclaims, supra note See Memorandum Opinion and Order at 1 2, Intellectual Ventures I LLC v. Capital One Fin. Corp., No. 8:14-cv PWG (D. Md. Jan. 14, 2016) Id Id. at 14.

237 224 HASTINGS LAW JOURNAL [Vol. 68:203 Conclusion Many critics argue that the patent system, even in its purest and most noble permutations, is broken, and that those fundamental cracks allow NPEs and patent aggregators like IV to thrive without adding anything to society s collective advancement or consciousness. This Note does not suggest that the patent system is or is not flawed, or what solutions might exist for its repair. Two conflicting decisions from the Fourth Circuit perhaps provide an anvil against which to hold abusers of the system, and certainly a reason for courts to reconsider their tack on anti-aggregator antitrust counterclaims. While the antitrust claims faltered in the Virginia case, their subsequent success in Maryland hints at several lessons for potential NPE aggregator targets. First, one can establish a relevant market limited only to the patents-in-suit or the area/practice/industry for which the NPE asserts them. Second, however, such allegations must be fleshed out, alleging at least circumstantially that the aggregator has acquired one hundred percent or some other hefty market share through its acquisition of industry standard technology. Ignoring this step could mean practitioners will be held hostage by licensing deals (read: prices) that remain unaffected by the normal market forces. And third, the element requiring actual, detrimental use of monopoly power can be met by demonstrating that the patents were in use before some patent land-grab acquisition took place, and it was only by that acquisition that an aggregator had any market share at all. These lessons will surely take some time to impact aggregators models and methods, but the antitrust laws are alive and well, and the implication seems to be that they are a weapon defendants can hone over time to stem the tide of abusive patent litigation. Ideally, with another tool in the anti-sham patent litigation repertory, the courts will see some respite, and both the patent and antitrust systems will settle back and serve their longstanding and noble purposes.

238 HASTINGS LAW JOURNAL UNIVERSITY OF CALIFORNIA HASTINGS COLLEGE OF THE LAW Recent and Forthcoming Recent: Vol. 67, No. 6 Articles Apple Pay, Bitcoin, and Consumers: The ABCs of Future Public Payments Law by Mark Edwin Burge An Act of God? Rethinking Contractual Impracticability in an Era of Anthropogenic Climate Change by Myanna Dellinger Preventing Opioid Misuse with Prescription Drug Monitoring Programs: A Framework for Evaluating the Success of State Public Health Laws by Rebecca L. Haffajee Miranda Overseas: The Law of Coerced Confessions Abroad by David Keenan Notes California Charter School Teachers: Flexibility in the Classroom, Vulnerability as an Employee by Jennifer Hom Chen Forthcoming: Vol. 68, No. 2 Articles Patriarchy, Not Hierarchy: Rethinking the Effect of Cultural Attitudes in Acquaintance Rape Cases by Eric R. Carpenter How the Constitution Became Christian by Jared A. Goldstein Smart Cities, Big Data, and the Resilience of Privacy by Janine S. Hiller and Jordan M. Blanke Trade Secret Precautions, Possession and Notice by Deepa Varadarajan Notes Correcting Computer Vision: The Case for Human Eyes After Lenz by Jake Feaver Changing Tides for Captive Marine Mammals: What the Future Holds for Captive Care Requirements by Isabella Langone Simplicity v. Reality in the Workplace: Balancing the Aims of Vance v. Ball State University and the Fair Employment Protection Act by Elizabeth Lee Editing Embryos: Considering Restrictions on Genetically Engineering Humans by Anna Zaret

239 SELECTED WRITINGS OF ROGER J. TRAYNOR Chief Justice Traynor of the California Supreme Court was acclaimed by scholars everywhere as eminently deserving the American Bar Association s gold medal award, which described him as one of the great judges in United States history. Justice Traynor left a legacy of papers and memorabilia to Hastings College of the Law as a nucleus for new scholarship, and the first public collection of Traynor material opened at Hastings in October A great teacher as well as a great jurist, Justice Traynor wrote a number of essays on law and the judicial process. Hastings Law Journal takes pride in presenting this special collection of Traynor writings. Five hundred numbered hardbound copies of this sampling of Traynor writings are available, as well as softbound copies. To order your copies please mail the following form to: O Brien Center for Scholarly Publications Hastings College of the Law 200 McAllister Street San Francisco, CA Phone: (415) FAX: (415) Name Address City State Zip Number of copies requested: Numbered hardbound at $30.00 each Softbound at $18.00 each Enclosed is my check in the amount of $

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241 H A S T I N G S C O N S T I T U T I O N A L L A W Q U A R T E R L Y RECENT AND NOTABLE CLQ ARTICLES AND NOTES Articles Peggy M. Tobolowsky, Different Path Taken: Texas Capital Offenders' Post- Atkins Claims of Mental Retardation, CLQ Volume 39 Peter Nicholas, I'm Dying to Tell You What Happened : The Admissibility of Testimonial Dying Declarations Post- Crawford, CLQ Volume 37 David Shelledy, Autonomy, Debate, and Corporate Speech, CLQ Volume 18 Daniel Mandelker, Land Use Takings: The Compensation Issue, CLQ Volume 8 Notes Ameet Kaur Nagra, A Higher Protection for Scholars Faced with Defamation Suits, CLQ Volume 41 Debra Burns, Too Big to Fail and Too Big to Pay: States, Their Public- Pension Bills, and the Constitution, CLQ Volume 39 David T. Gibson, Spreading the Wealth: Is Asset Forfeiture the Key to Enticing Local Agencies to Enforce Federal Drug Laws?, CLQ Volume 39 Subscription price: $45.00 per year (US $55.00 foreign) Single issue price: $35.00 each (US $40.00 foreign) Hastings Constitutional Law Quarterly UC Hastings College of the Law 200 McAllister Street San Francisco, CA Phone: (415) ; Facsimile: (415)

242 Comm/Ent HASTINGS COMMUNICATIONS AND ENTERTAINMENT LAW JOURNAL Recent Articles from Volume 37, Issue 1: The Costs and Benefits of Regulatory Intervention in Internet Disputes: Lessons from Broadcast Signal Retransmission Consent Negotiations by Rob Frieden Evaluating Intent in True Threats Cases: The Importance of Context in Analyzing Threatening Internet Messages by P. Brooks Fuller You Can Use Hidden Recorders in Florida by Thomas R. Julin with Jamie Z. Isani & Paulo R. Lima Note: Talent Managers Acting as Agents Revisited: An Argument for California s Imperfect Talent Agencies Act by Myles Gutenkunst Note: Digital Music Garage Sale: An Analysis of Capitol Records, LLC v. ReDigi Inc. and a Proposal for Legislative Reform in Copyright Enabling a Secondary Market for Digital Music by Nicholas Costanza For subscriptions and reprints please contact: O Brien Center for Scholarly Publication Hastings College of the Law 200 McAllister Street San Francisco, CA Telephone: (415) Fax (415) Single issues: $40.00 (US $45.00 Foreign) One year subscription: $50.00 (US $60.00 Foreign)

243 HASTINGS INTERNATIONAL AND COMPARATIVE LAW Review Out Now: Volume 38, No. 1 Winter 2015 MEASURING CONSTITUTIONAL ISLAMIZATION: THE ISLAMIC CONSTITUTION... Dawood I. Ahmed and Moamen Gouda Relying on Govnerment in Comparison: What can the United States Learn from Abroad in Relation to Administrative Estoppel?... Dorit Rubinstein Reiss Recent Articles and Commentary: CHANGING LANES:INTELLECTUAL PROPERTY RIGHTS,TRADE AND INVESTMENT... Julie Chaisse and Punneth Nagaraj Legitimacy and Independence of International Tribunals: An Analysis of the European Court of Human Rights...Kanstantsin Dzehtsiarou and Donal K. Coffey Applying the Doctrine of Superior Responsibility to Corporate Officers: A Theory of Individual Liability for International Human Rights Violations... Brian Seth Parker Transforming Accountability: A Proposal for Reconsidering How Human Rights Obligations Are Applied to Private Military Security Firms... Lauren Groth Please send subscription requests to: HICLR, UC HASTINGS COLLEGE OF THE LAW 200 McAllister Street San Francisco, CA USA Please enter or renew my subscription for year(s) for the HASTINGS INTERNATIONAL AND COMPARATIVE LAW REVIEW Subscriptions are $43.00 per year (US$53.00 foreign). Single issues are $33.00 each (US$38.00 foreign). Enclosed is a check for US$. Please bill me. Name: Address: City: State/Province: ZIP Code: Country:

244 Hastings West-Northwest Journal of Environmental Law and Policy University of California, Hastings College of the Law From WNW Volume 19, Number 2: The Fair Share Concept in Takings Law Joseph L. Sax From WNW Volume 20, Number 2: Anti-monopoly and the Radical Lockean Origins of Western Water Law Michael C. Bloom The Draft Bay Delta Conservation Plan: Assessment of Environmental Performance and Governance Jeffrey Mount, William Fleenor, Brian Gray, Bruce Herbold, and Wimm Kimmerer From WNW Volume 21, Number 1: Getting to Zero: A Roadmap to Energy Transformation in California Under the Clean Air Act Paul Cort The Definitive Guide to Tree Disputes in California Ellis Raskin West-Northwest publishes twice a year, winter and spring, exclusively online: west-northwest/index.php Hastings West-Northwest Journal of Environmental Law and Policy University of California Hastings College of the Law 200 McAllister Street San Francisco, CA Telephone: wnw@uchastings.edu

245 Hastings West-Northwest Journal of Environmental Law and Policy s ANTHOLOGY THE VERY BEST IN ENVIRONENTAL LAW SCHOLARSHIP FROM WEST-NORTHWEST VOLUME 1 THROUGH VOLUME 13 INCLUDING: Understanding Transfers: Community Rights and the Privatization of Water, article by Joseph Sax Natural Community Conservation Planning: A Targeted Approach to Endangered Species Conservation, article by Steve Johnson The Federal Role in Managing the Nation s Groundwater, artcile by John D. Leshy The Shape of Things to Come: A Model Water Transfer Act for California, article by Brian E. Gray Water Markets and the Cost of Improving Water Quality in the San Francisco Bay/ Delta Estuary, article by David Sunding, David Zilbermann, and Neal MacDougall Global Climate Change: Water Supply Risks and Water Management Opportunities, article by Brian E. Gray Climate Change and the Law of the River- A Southern Nevada Perspective, article by Patricia Mulroy TO ORDER A COPY OF WEST-NORTHWEST S GREATEST HITS AT THE SPECIAL, LIMITED-TIME-ONLY PRICE OF $15.00 PLEASE SEND YOUR NAME AND MAILING ADDRESS TO SCHOLARP@UCHASTINGS.EDU

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247 The Hastings Race and Poverty Law Journal is committed to promoting and inspiring discourse in the legal community regarding issues of race, poverty, social justice, and the law. This Journal is committed to addressing disparities in the legal system. We will create an avenue for compelling dialogue on the subject of the growing marginalization of racial minorities and the economically disadvantaged. It is our hope that the legal theories addressed in this Journal will prove useful in remedying the structural inequalities facing our communities. The Hastings Race and Poverty Law Journal is published twice per year: Fall and Spring exclusively online: index.php. Hastings Race & Poverty Law Journal University of California Hastings College of the Law 200 McAllister Street San Francisco, CA (415)

248 HASTINGS BUSINESS LAW Journal Current Issue: Summer 2015 Volume 7 No. 2 Articles Access to United States Courts by Purchasers of Foreign Listed Securities in the Aftermath of Morrison v. Australia National Bank Ltd. - Roger W. Kirby Paying for Daniel Webster: Critiquing the Contract Model of Advancement of Legal Fees in Criminal Proceedings - Regina Robson Towards a Stakeholder-Shareholder Theory of Corporate Governance: A Comparative Analysis - Katherine V. Jackson Article Submissions Comment An Unstoppable Force: The Offshore World in a Modern Global Economy - Michael J. Burns & James McConvill Student Notes Webcaster II: A Case Study of Business to Business Rate Setting by Formal Rulemaking - Andrew D. Stephenson Protecting Title in Continental Europe and the United States Restriction of a Market - Peter Soskin Submissions may be in Microsoft Word format or printed double-spaced, with footnotes at the end of the article. Citations should conform to The Bluebook: A Uniform System of Citation (20th ed. 2015). Please send articles by regular mail (see address below) or by to hbljsbms@uchastings.edu. O Brien Center for Scholarly Publications University of California, Hastings College of the Law 200 McAllister Street San Francisco, CA scholarp@uchastings.edu Hastings Business Law Journal publishes exclusively online:

249 HASTINGS SCIENCE AND TECHNOLOGY LAW JOURNAL RECOGNITION OF THE IMPORTANCE OF THE RELA TIONSHIP BETWEEN SCIENCE AND TECHNOLOGY AND THE LAW, AND THE BENEFITS TO BE DERIVED FROM EXPLORING THE DEVELOPMENT OF THIS AREA OF LAW, has prompted the genesis of the Hastings Science and Technology Law Journal. Among the diverse subjects to which the Journal will address itself are the legal issues concerning science, scientific methodology, technology, biotechnology, bioethics, patents, trade secrets, and health. Our goal is twofold: first, to provide legal practitioners, judges, policy makers, scientists and engineers with intellectually stimulating and scholarly material concerning current issues in the field; and sec-ond, to introduce students to the array of unique issues presented in the nexus of law, science and technology. WE INVITE SUBMISSIONS OF ARTICLES, COMMENTARIES, AND PAPERS. Hastings Science and Technology Law Journal UC Hastings College of the Law 200 McAllister Street San Francisco, CA Hastings Science and Technology Law Journal publishes exclusively online: websites/science-technology/index.php.

250 Hastings College of the Law: The First Century by Thomas Garden Barnes This centennial celebration of Hastings College of the Law, published in 1978 at the 100th anniversary of the college, tracing the development of an extraordinary instituttion, born in pre-gold Rush San Francisco,. It is the story of a maverick law school and of the distinctive personalities who have driven its long and colorful history. Hardcover, US$10.00 including shipping and handling. To order: For more information: scholarp@uchastings.edu