Volume 68, Number 7 – April 2019

Articles

Clause Construction: A Glimpse into Judicial and Arbitral Decision-Making
David Horton
PDF

For decades, the U.S. Supreme Court has insisted that forcing a plaintiff to arbitrate—rather than allowing her to litigate—does not affect the outcome of a dispute. Recently, the Court has invoked this “parity assumption” to expand arbitral jurisdiction. Reasoning that it does not matter whether an arbitrator or a judge resolves a particular issue, the Justices have allowed arbitrators to decide important questions about the arbitral proceeding itself.

The parity assumption has proven impossible to test. First, cases that are arbitrated differ from those that end up in the judicial system, complicating efforts to compare outcomes from each sphere. Second, arbitral awards are rarely published and thus remain shrouded in mystery.

However, one important topic defies these limitations. Jurisdictions are divided over whether courts or arbitrators should perform a task known as “clause construction”—determining whether an arbitration clause that does not mention class actions permits such procedures. As a result, both judges and arbitrators have been weighing in on the same question. Moreover, because class members are entitled to notice of rulings that impact their rights, the American Arbitration Association requires arbitral clause-construction awards to be available to the public. For once, then, it is possible to assess how the two kinds of decisionmakers resolve the same issue.

This Article capitalizes on this opportunity by analyzing a dataset of 150 recent judicial and arbitral clause-construction decisions. Its logit regression analysis concludes that arbitrators are nearly 64 times more likely than judges to allow class actions. This Article then uses its findings to propose a solution to the circuit split over clause construction and to inform the broader debate over the boundaries between judicial and arbitral power.

Norming in Administrative Law
Jonathan S. Masur & Eric A. Posner
PDF

How do regulatory agencies decide how strictly to regulate an industry? They sometimes use cost-benefit analysis or claim to, but more often the standards they invoke are so vague as to be meaningless. This raises the question whether the agencies use an implicit standard or instead regulate in an ad hoc fashion. We argue that agencies frequently use an approach that we call “norming.” They survey the practices of firms in a regulated industry and choose a standard somewhere within the distribution of existing practices, often no higher than the median. Such a standard burdens only the firms whose practices lag the industry. We then evaluate this approach. While a case can be made that norming is appropriate when a regulatory agency operates in an environment of extreme uncertainty, we argue that on balance norming is an unwise form of regulation. Its major attraction for agencies is that it minimizes political opposition to regulation. Norming does not serve the public interest as well as a more robust standard like cost-benefit analysis.

Notes

Strange Bedfellows: Native American Tribes, Big Pharma, and the Legitimacy of Their Alliance
Daniel C. Kennedy
PDF

Lost in the cacophony surrounding the debate about high drug prices is the fundamental principle that pharmaceutical innovation will not occur without the prospect of outsized returns enabled through market exclusivity. Biopharmaceutical patents are currently under siege, subject to challenge both in inter partes review (“IPR”) proceedings and in Hatch-Waxman actions. These twin assaults threaten to eliminate the incentives necessary for biotechnological innovation—particularly for discoveries made upstream in the innovation pipeline—thus imperiling the development of new drug therapies. But a fascinating solution has emerged: invoking tribal immunity to shield pharmaceutical patents from IPR before the Patent Trial and Appeal Board (“PTAB”). This serves two critically important objectives: promoting tribal self-sufficiency, and encouraging investment in life-saving and life-improving new drugs. Contractual partnerships between Native American tribes and pharmaceutical companies not only provide the tribes with a steady stream of royalty revenue, but also insulate biopharmaceutical patents from challenge in IPR proceedings through the invocation of long-established principles of tribal sovereign immunity. This Note is the first piece of scholarship to comprehensively analyze, and advocate for, the right to invoke tribal sovereign immunity in IPR proceedings.

Write This Down: A Model Market-Share Liability Statute
Logan L. Page
PDF

The 1980s featured a remarkable series of lawsuits: the DES cases. The women who brought these cases had been harmed by a drug—DES—that their mothers had taken while the future plaintiffs were in utero. Hundreds of companies manufactured DES, each unit of DES sold was chemically identical, and the harmed women were generally unable to identify the manufacturer who had filled their mothers’ prescriptions. Many of the plaintiffs could not prove causation as to a specific manufacturer and so could not bring traditional tort suits.

To provide relief, some courts forged ahead with a new tort theory: market-share liability. Under this theory, plaintiffs who were harmed by a fungible product and unable to identify the manufacturer who produced the unit that harmed them could sue all manufacturers of the product and collect from each of them according to their market share. But not every court recognized this new theory. And among the courts that did, disagreement emerged as to doctrinal determinations and mechanical considerations.

This Note is the first survey of both the legal and practical questions surrounding claims based on market-share liability, from whether a prospective plaintiff qualifies for such a cause of action to determining the relevant market to pleading requirements. It asserts that market-share liability furthers the purposes of tort and products-liability law, critiques existing state statutory schemes, and proposes a model statute for state legislatures to consider.

Volume 68, Number 7 – April 2019

Articles

Clause Construction: A Glimpse into Judicial and Arbitral Decision-Making
David Horton
PDF

For decades, the U.S. Supreme Court has insisted that forcing a plaintiff to arbitrate—rather than allowing her to litigate—does not affect the outcome of a dispute. Recently, the Court has invoked this “parity assumption” to expand arbitral jurisdiction. Reasoning that it does not matter whether an arbitrator or a judge resolves a particular issue, the Justices have allowed arbitrators to decide important questions about the arbitral proceeding itself.

The parity assumption has proven impossible to test. First, cases that are arbitrated differ from those that end up in the judicial system, complicating efforts to compare outcomes from each sphere. Second, arbitral awards are rarely published and thus remain shrouded in mystery.

However, one important topic defies these limitations. Jurisdictions are divided over whether courts or arbitrators should perform a task known as “clause construction”—determining whether an arbitration clause that does not mention class actions permits such procedures. As a result, both judges and arbitrators have been weighing in on the same question. Moreover, because class members are entitled to notice of rulings that impact their rights, the American Arbitration Association requires arbitral clause-construction awards to be available to the public. For once, then, it is possible to assess how the two kinds of decisionmakers resolve the same issue.

This Article capitalizes on this opportunity by analyzing a dataset of 150 recent judicial and arbitral clause-construction decisions. Its logit regression analysis concludes that arbitrators are nearly 64 times more likely than judges to allow class actions. This Article then uses its findings to propose a solution to the circuit split over clause construction and to inform the broader debate over the boundaries between judicial and arbitral power.

Norming in Administrative Law
Jonathan S. Masur & Eric A. Posner
PDF

How do regulatory agencies decide how strictly to regulate an industry? They sometimes use cost-benefit analysis or claim to, but more often the standards they invoke are so vague as to be meaningless. This raises the question whether the agencies use an implicit standard or instead regulate in an ad hoc fashion. We argue that agencies frequently use an approach that we call “norming.” They survey the practices of firms in a regulated industry and choose a standard somewhere within the distribution of existing practices, often no higher than the median. Such a standard burdens only the firms whose practices lag the industry. We then evaluate this approach. While a case can be made that norming is appropriate when a regulatory agency operates in an environment of extreme uncertainty, we argue that on balance norming is an unwise form of regulation. Its major attraction for agencies is that it minimizes political opposition to regulation. Norming does not serve the public interest as well as a more robust standard like cost-benefit analysis.

Notes

Strange Bedfellows: Native American Tribes, Big Pharma, and the Legitimacy of Their Alliance
Daniel C. Kennedy
PDF

Lost in the cacophony surrounding the debate about high drug prices is the fundamental principle that pharmaceutical innovation will not occur without the prospect of outsized returns enabled through market exclusivity. Biopharmaceutical patents are currently under siege, subject to challenge both in inter partes review (“IPR”) proceedings and in Hatch-Waxman actions. These twin assaults threaten to eliminate the incentives necessary for biotechnological innovation—particularly for discoveries made upstream in the innovation pipeline—thus imperiling the development of new drug therapies. But a fascinating solution has emerged: invoking tribal immunity to shield pharmaceutical patents from IPR before the Patent Trial and Appeal Board (“PTAB”). This serves two critically important objectives: promoting tribal self-sufficiency, and encouraging investment in life-saving and life-improving new drugs. Contractual partnerships between Native American tribes and pharmaceutical companies not only provide the tribes with a steady stream of royalty revenue, but also insulate biopharmaceutical patents from challenge in IPR proceedings through the invocation of long-established principles of tribal sovereign immunity. This Note is the first piece of scholarship to comprehensively analyze, and advocate for, the right to invoke tribal sovereign immunity in IPR proceedings.

Write This Down: A Model Market-Share Liability Statute
Logan L. Page
PDF

The 1980s featured a remarkable series of lawsuits: the DES cases. The women who brought these cases had been harmed by a drug—DES—that their mothers had taken while the future plaintiffs were in utero. Hundreds of companies manufactured DES, each unit of DES sold was chemically identical, and the harmed women were generally unable to identify the manufacturer who had filled their mothers’ prescriptions. Many of the plaintiffs could not prove causation as to a specific manufacturer and so could not bring traditional tort suits.

To provide relief, some courts forged ahead with a new tort theory: market-share liability. Under this theory, plaintiffs who were harmed by a fungible product and unable to identify the manufacturer who produced the unit that harmed them could sue all manufacturers of the product and collect from each of them according to their market share. But not every court recognized this new theory. And among the courts that did, disagreement emerged as to doctrinal determinations and mechanical considerations.

This Note is the first survey of both the legal and practical questions surrounding claims based on market-share liability, from whether a prospective plaintiff qualifies for such a cause of action to determining the relevant market to pleading requirements. It asserts that market-share liability furthers the purposes of tort and products-liability law, critiques existing state statutory schemes, and proposes a model statute for state legislatures to consider.