The government’s response to the financial crisis was dramatic, enormous, and unprecedented, and nothing about it has been overseen by the courts. In our federal system, the courts are supposed to put the policies of presidents and congresses to the test of judicial review, to evaluate decisions by the executive to sanction individuals for wrongdoing, and to resolve disputes between private parties. But during and after the financial crisis, there has been almost none of that sort of judicial review of government; few sanctions, especially criminal ones, on the private sector for conduct during the crisis for the courts to scrutinize; and a private dispute process that, while increasingly active, has resulted in settlements, rather than trials or verdicts. This Article tells the story of the marginal role of courts in the financial crisis, evaluates the costs of that role, and provides suggestions to ensure a real, if not all-encompassing, judicial role during the next economic emergency.
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The New Local
The smallest level of government in American law was always the local—the city, the school district, the zoning commission, the police department, etc. Yet over the last few decades, this smallest of government levels has been further localized: now, in many fields of law, bodies such as the neighborhood, the individual school, the police beat, and sometimes simply the adjacent residents, are meaningful legal actors. These entities are located underneath local governments and often lack the traditional traits of government units—most prominently, a unitary decision-making body. They have been were legally recognized and empowered through an array of seemingly unrelated judicial, legislative, and administrative acts, adopted on the federal, state, and local levels. Such disparate and uncoordinated moves have created a patchwork of intersecting bodies, rights, and powers. Until now, this new level and form of governing—dubbed by this Article “micro-local”—has escaped detection and analysis. Most troublingly, micro-local reforms have proceeded with no critical appraisal. Most judges, legislators, and commentators embrace decisions that directly or indirectly further localize local government since they adhere to a utopian and simplistic assumption that further localized government is always better—that is, more efficient and more democratic—than traditional local government. This Article replaces this assumption with a more rigorous theoretical framework enabling lawmakers and scholars to appraise whether any given micro-local reform actually promotes economic efficiency and democratic participation. An application of this framework to several examples of the new local, in the fields of education law and land use law, results in unsettling findings. Some of the most consequential and widespread, albeit heretofore unnoticed, recent legal reforms in these areas of law not only fail to promote economic efficiency and democratic participation, but actually defeat these normative values.
Transactionalism Costs
Modern civil litigation is organized around the “transaction or occurrence,” a simple and fluid concept that brings together logically related claims in one lawsuit. It was a brilliant innovation a century ago, but its time has passed. Two inherent defects always lurked within transactionalism, but modern litigation realities have exacerbated them. First, transactionalism represents a crude estimate about the most efficient structure of a lawsuit. Often that estimate turns out to be wrong. Second, the goals of transactionalism are in tension. To function properly, the transactional approach must be simultaneously flexible (when structuring a lawsuit at the beginning of litigation) and predictable (when enforcing preclusion doctrine on the back end of litigation). But frequently it is neither.
I propose abandoning the transactional approach in favor of one that actually achieves transactionalism’s goals. In essence, the parties must put forward all of their claims and then, with the court, negotiate the appropriate structure of the lawsuit. Preclusion will apply only to the claims that the parties and the court choose to include in the litigation package (and that the parties failed to plead initially). The proposal will achieve three main goals. First, it will give parties and courts true flexibility to determine the most efficient structure of their specific lawsuit. Second, it will give parties new autonomy—the power to shape preclusion doctrine. Finally, it will offer certainty and predictability that parties never have had before—knowing exactly how broadly preclusion will apply.