Article

The Myth of Efficient Breach: New Defenses of the Expectation Interest

We defend contract law’s preference to protect the expectation with a liability rule against prominent doctrinal and moral critics who argue that a promisee should have a right to specific performance or to a restitutionary remedy. These critics argue that liability rule protection limited to contractual expectations unjustifiably favors promisors, by allowing a promisor to capture the entire gain from unilaterally exiting a contract as long as she compensates her promisee for the profit he would have realized had he received the goods or services the contract described. The critics prefer to vindicate contractual expectations with a property rule or restitution.

We show that a promisee’s gross payoff under the typical contract is invariant to the remedy the law accords him. Current defenders and critics focus on gross payoffs. In this analytic universe, no remedy can be shown to be superior to any other remedy. We argue below that the promisee’s net payoff, for transaction cost reasons, is higher under a contract that protects his expectation with a liability rule. This claim supports the dual performance hypothesis, which holds that promisees typically give their promisors discretion either to trade the goods or services at issue or to make a transfer to the promisee in lieu of trade. A promisor who transfers rather than trades therefore does not breach; rather, she breaches only when she rejects both trade and transfer. On this view of the law, a promisee’s suit to recover his expectation is a specific performance action to enforce the contract’s transfer term. We further explain that this approach renders contract law coherent; it is consistent with the law’s immanent normativity; and it is consistent also with the morality of promising.

A Course Unbroken: The Constitutional Legitimacy of the Dormant Commerce Clause

The dormant Commerce Clause, though a longstanding feature of American constitutional law, is of dubious legitimacy. Or so some argue (and many have come to believe). The Clause is the target of frequent attack by justices and commentators, usually of an originalist bent. They claim the Clause is without textual support, has “no basis” in Founding-era history, and is the platform for an unjustified intrusion of the federal judiciary into the affairs of the states.

But they’re wrong. This Article provides a comprehensive response to the dormant Commerce Clause Skeptics from an historical and originalist perspective. Far from lacking legitimacy, the Clause has deep roots in Founding history. It addresses one of the central problems that drew the Framers to the Philadelphia Convention, and it employs the very device for reviewing state legislation the Framers preferred, judicial review. From a historical perspective, the Court’s modern dormant Commerce Clause doctrine is actually far more respectful of state authority than the understanding of the Clause likely held at the time of the Framing. But looking with presentist eyes, the Skeptics miss this entirely. The story of the dormant Commerce Clause is one of many twists and turns, nearly inscrutable doctrine, and political manipulations. But no matter what other problems the doctrine may suffer, its fundamental legitimacy is not among them.

Globalized Corporate Prosecutions

In the past, domestic prosecutions of foreign corporations were not noteworthy. Federal prosecutors now advertise a muscular approach targeting major foreign firms and even entire industries. High-profile prosecutions of foreign firms have shaken the international business community. Not only is the approach federal prosecutors have taken novel, but corporate criminal liability is itself a form of American Exceptionalism, and few other countries hold corporations broadly criminally accountable. To study U.S. prosecutions of foreign firms, I assembled a database of publicly reported corporate guilty plea agreements from the past decade. I analyzed U.S. Sentencing Commission data archives on federal corporate prosecutions and also data concerning federal deferred and non-prosecution agreements with corporations. Not only are large foreign firms prosecuted with some frequency, but they typically plead guilty, are convicted, and then receive far higher fines than otherwise comparable domestic firms. In this Article, I develop how foreign corporate convictions have become common in distinct substantive criminal areas, and how they share important features. The prosecutions are concentrated in crimes prosecuted by Main Justice, and international treaties and cooperation agreements have facilitated extraterritorial prosecutions. Larger and public foreign firms are prosecuted, and the typical resolution involves not only higher fines, but also a guilty plea and not pre-indictment leniency. I argue that due to their new prominence, we should consider foreign corporation prosecutions as a group so that we can better evaluate and define the emerging prosecution approach.


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