The battle looked to be over; the smoke had all but cleared. Vermont Yankee—wherein the Supreme Court announced that the APA established the “maximum” procedural requirements for informal rulemaking—ostensibly brought the steady advance of judicial innovation and oversight in the regulatory state to a halt. Since Vermont Yankee was decided, however, the D.C. Circuit has continued the offensive and treated the case as a mere bridgehead. More specifically, the D.C. Circuit remains steadfast in its use of the pre-Vermont Yankee case Portland Cement to oblige agencies engaged in notice-and-comment rule making to abide by disclosure rules that cannot be found in the text of the APA or any other organic statute. Judge Brett Kavanaugh of the D.C. Circuit recently examined this apparent conflict and determined that Portland Cement stands on “shaky legal foundation” due to its dearth of statutory roots. Judge Kavanaugh’s assessment is not sui generis. In fact, few other seemingly inconsistent decisional lineages have sparked as much commentary on the APA. In an attempt to further pollinate the landscape of the current battleground, this Note journeys along the path laid down by Judge Kavanaugh and discovers a textually grounded alternative to Portland Cement. If the D.C. Circuit heeds Judge Kavanaugh’s advice and overturns Portland Cement, interested parties could simply file FOIA requests to obtain the information Portland Cement requires agencies to disclose. The goal of this Note is to explore and uncover the practical and legal consequences of a disclosure regime anchored in FOIA, and with any luck change the stakes of the debate.
Volume 102
The Failure of Liability in Modern Markets
This Article argues that the liability framework governing securities trading is unable to effectively deter and compensate harms in algorithmic markets. Theory underscores the significance of robust laws to safeguard information flows and the trading process. Without this assurance, investors internalize the costs of privately policing markets and will rationally discount the capital they invest. A detailed body of regulation seeks to ensure that markets function safely, benchmarking compliance using the three familiar standards grounding liability: (1) intent, (2) negligence, and (3) strict liability. This Article shows that this framework is ineffective in markets that rely on algorithms—or preprogrammed computerized instructions—for trading. It makes two claims. First, a basic level of error is endemic to the operation of algorithmic markets. Especially when designed to trade in fractions of a second, algorithms must be programmed in advance of trading and anticipate how markets are likely to behave. This predictive dynamic means that error and imprecision are inevitable, irrespective of constraints that liability imposes. Second, liability standards fare poorly in high-speed algorithmic markets where errors can spread rapidly across multiple exchanges and security types. Even small, “reasonable,” risk taking can give rise to outsized harms, diminishing the protection provided under the negligence standard. Strict liability also fails. With error inextricably a part of predictive, preset algorithms, liability can arise too frequently to function as an informative signal of bad behavior. Further, small errors can create large-scale losses that may be too high for any single firm to pay. Finally, punishing only intentional bad actors leaves a swath of the market unsanctioned for careless behavior. With each standard falling short, the current design of the liability framework can leave markets facing pervasive costs of mistake, manipulation and disruption. In concluding, this weakening of laws points to a need for structural solutions in automated markets. This Article explores avenues for reform to institutionalize better behavior and fill the gaps left by the law.
Executive Federalism Comes to America
This Article proposes a different way of thinking about contemporary American governance, looking to an established foreign practice. Executive federalism—“processes of intergovernmental negotiation that are dominated by the executives of the different governments within the federal system”—is pervasive in parliamentary federations, such as Canada, Australia, and the European Union. Given the American separation of powers arrangement, executive federalism has been thought absent, even “impossible,” in the United States. But the partisan dynamics that have gridlocked Congress and empowered both federal and state executives have generated a distinctive American variant.
Viewing American law and politics through the lens of executive federalism brings four key features into focus. First, executives have become dominant actors at both the state and federal levels. They formulate policy and manage intergovernmental relations. Although executive negotiations have shaped American federalism at least since the New Deal, Congress once superintended them. Today, from healthcare to marijuana to climate change, federal and state executives negotiate without Congress. Second, there is a substantial degree of mutuality among these executives, much more than is suggested by the federal government’s legal supremacy. Federal and state actors turn to state law as well as federal law to further their agendas; sometimes this amplifies conflict, but it also enables officials to find paths to compromise. Third, national policy frequently comes to look different across the states as a result of executive negotiations. Some states more strongly press a position shared by the federal executive, while others offer competing views. Finally, horizontal relationships among the states are critical in setting national policy, as the federal executive builds on interstate agreements and reshapes them in turn.
In charting the emergence of executive federalism in the United States, this Article seeks to identify a distinctive approach to national policymaking and to offer a qualified defense of the phenomenon.