Article

Multiple Gatekeepers

In the context of business transactions, gatekeepers are lawyers, investment bankers, accountants and other actors with the capacity to monitor and control the disclosure decisions of their clients – and thereby to deter corporate securities fraud. After each wave of corporate upheaval, including the recent financial crisis, the spotlight of responsibility invariably falls on gatekeepers for failing to avert the wrongs of their clients. A rich vein of literature has considered what liability regime would lead gatekeepers optimally to deter securities fraud, but has overlooked the phenomenon that multiple interdependent gatekeepers act on business transactions and thus form an interlocking web of protection against wrongdoing. To date the literature has adopted a unitary conception of the gatekeeper, assuming that a single gatekeeper acts on a transaction or, where multiple gatekeepers are involved, that each is independently capable of deterring securities fraud.

This article explains the pattern of multiple gatekeeper involvement that characterizes business transactions. It analyzes why gatekeepers exist at all and why corporations turn to a multiplicity of them for most transactions. It then extends gatekeeper liability theory to account explicitly for the possibility that the fraud-deterrence capacity of gatekeepers will be interdependent, and not simply independent. In doing so, the article draws on optimal deterrence theory and analogizes the position of multiple gatekeepers with that of joint tortfeasors. The article also assesses the U.S. federal securities law regime from the perspective of the prescriptions of gatekeeper liability theory, identifying gaps in the regime that arise from the fragmentation of gatekeeping services and suggesting reforms designed to compel cooperation among gatekeepers to fill them. The theory has implications for the post-financial crisis reform proposals that would impose gatekeeper liability on credit rating agencies, which the article specifically considers.

The National Convention Constitutional Amendment Method: Defects, Federalism Implications, and Reform

The amendment provisions of the United States Constitution have a serious defect. Although some commentators claim that the supermajority rules in these provisions are too strict, that is by no means clear. Rather, the clear defect in the amendment provisions is that the only effective way they provide of amending the Constitution requires Congress’s approval and therefore Congress enjoys a veto over all amendments. While the Constitution does formally allow the state legislatures to seek to amend the Constitution through a national convention, that amendment method is broken. Not only has the national convention method never been used to pass an amendment or even to call a convention, the state legislatures are unlikely to ever use this method, because of the state legislatures’ fear of a runaway convention that might seek to enact constitutional amendments that they strongly dislike.

This congressional veto over amendments has significant normative implications. It suggests that the Constitution cannot be amended in a way that will constrain congressional power. It also makes it unlikely that the Constitution can be amended to limit the federal government or to expand state authority, because Congress is unlikely to support these changes. While it has often been assumed that the increased nationalism of the Constitution and government over the course of American history reflects changes in technology and values, a significant portion of this nationalist movement may instead be the result of a biased amendment procedure.

In addition to exploring the normative implications of the broken amendment procedure, the article also proposes a new amendment method. Under this state drafting procedure, an amendment would be enacted when it was approved by two thirds of the state legislatures and was ratified by three quarters of the states through either state conventions or ballot measures. Finally, the article argues that this reform of the amendment procedure could actually be passed under the national convention method and proposes a strategy for enacting it.

Habeas Corpus, Due Process and the Suspension Clause: A Study in the Foundations of American Constitutionalism

Ever since the attacks of September 11, 2001, constitutional scholars have been exploring the controversial issues surrounding the so-called “Emergency Constitution.” One of the very few provisions of the Constitution that explicitly contemplates such emergency situations is Article I, section 9, concerning the writ of habeas corpus. That provision prohibits suspension of the “Great Writ,” except “when in cases of [r]ebellion or [i]nvasion the public [s]afety may require it.”

The writ of habeas corpus has long stood as the primary weapon against the development of tyranny. It enables a court to demand that the executive produce individuals it is detaining and explain the lawful basis for that detention, and to order the detainees’ release if it finds the confinement to be unlawful. Absent the availability of habeas corpus, there would exist no legal means of preventing those in power from arresting any individual they want, for as long as they want, regardless of the legitimacy of the arrest. Yet pursuant to the so-called Suspension Clause, in times of rebellion or invasion the government is authorized to suspend the writ.

Highly respected scholars have recently engaged in an intense debate over the meaning and implications of the Suspension Clause. All of them, however, have seriously missed the mark, because all have assumed the continuing validity of that Clause. In this Article, we argue that the Due Process Clause of the Fifth Amendment effectively repeals the Suspension Clause. We reach this conclusion for two reasons: first, the Suspension Clause indisputably authorizes summary detention without the availability of any form of hearing before a neutral adjudicator. Whatever “due process” means at its outer fringes, there is no doubt that such a practice deprives an individual of liberty without due process of law. Yet the Due Process Clause, on its face, is unlimited in its application; it contemplates no exceptions, when an individual is to be deprived of life, liberty or property. Thus, purely as a matter of textual construction, the Due Process Clause, contained in an amendment, supersedes the Suspension Clause, which appears in the body of the Constitution. Moreover, it is important to recognize that the Suspension Clause authorizes tyrannical practices wholly inconsistent with and undermining of foundational precepts of American Constitutionalism. This concept dictates a governmental commitment to the rule of law and to limited governmental authority over its citizens. The Due Process Clause should be deemed to protect these core values. After establishing the supremacy of the Due Process Clause, the Article carefully explores the manner in which the Due Process Clause should be found to limit coercive governmental authority in times of national crisis.

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