6 posts from August 2019

Trump Wants to Buy Greenland for the U.S. – But Who Is the Relevant Seller?

posted by Mitu Gulati

(This post draws from my prior work with Joseph Blocher and the many conversations we have had about this topic over the years; he bears no responsibility for errors and sarcasm)

According to a flurry of news reports from the WSJ, CNN, Bloomberg, the NYT and many more, our eminent chief executive has an interest in the possibility of buying Greenland.  Most reactions to this news of DJT’s latest whim have boiled down to incredulity, while also generating a fair amount of mirth (see here, here and here).  What has interested us the most, though, are the articles that have concluded that the U.S. cannot buy Greenland. Bloomberg’s Quick Take ran the title – “Can Trump Actually Buy Greenland – The Short Answer is No”. 

But is that really the case? The relevant international law seems to present no explicit barrier to nations buying and selling territory (here). Indeed, much of today’s United States was acquired through the purchase of territory.  The barrier that most commentators see as insurmountable is not legal, but rather the lack of a willing seller.  Maybe so.  But a handful of quotes from government officials and politicians in Denmark and a few from politicians in Greenland (see here and here) is not necessarily enough to conclude that this trade could never work.

Before jumping to the foregoing conclusion, one needs to first ask how such a sale would work.

Continue reading "Trump Wants to Buy Greenland for the U.S. – But Who Is the Relevant Seller?" »

Coyle on Studying the History of a Contract Provision

posted by Mitu Gulati

The way many of us teach interpretation in Contract Law, there is little role for history (admittedly, this is just based on casual observation). The meaning of a clause is a function of the words that make up that clause.  The parties to the transaction are assumed to have drafted it to document the key aspects of their transaction, to balance risks and rewards blah blah.  If a dispute arises, we might have an argument as to whether a strict textualist reading of the words accurately represent what the parties really meant by them or whether we need to also examine the context of the relationship. What we do not ever do, however, is to delve into the history of the clause from before these parties contemplated using it – that is, of what prior drafters of the original versions of this clause might have meant in using it.

The foregoing makes sense in a world in which the contracts for each deal are drafted from scratch. But does anyone draft contracts from scratch?  What if we live in a world where 99.9% of contracts are made up provisions cut and paste from prior deals; provisions that are assumed to cover all the key contingencies, but not necessarily understood (or even read)? In this latter world, where there are lots of provisions that the parties to the transaction never fully focused on (let alone understood), might there be an argument – in cases where there are interpretive disputes -- for the use of a contract provision’s history? Might that history not sometimes be more relevant than the non-understandings of the parties as to what they did or did not understand they were contracting for? (Among the few pieces that wrestle with this question are these two gems: Lee Buchheit's Contract Paleontology here and Mark Weidemaier's Indiana Jones: Contract Originalist here)

I’m not sure what the answer to the foregoing question is. But it intrigues me.  And it connects to a wonderfully fresh new body of research in Contract Law where a number of scholars have been studying the production process for modern contracts.  The list of papers and scholars here is too long to do justice to and I’ll just end up making mistakes if I try to do a list.  But what unites this group of contract scholars is that for them it isn’t enough to assume that contracts show up fully formed at the time of a deal, purely the product of the brilliant minds of the deal makers who anticipate nearly every possible contingency at the start.  Instead, understanding what provisions show up in a contract, and in what formulation, requires understanding the contract production process. (Barak Richman's delightful "Contracts Meet Henry Ford" (here) is, to my mind, foundational).

It is perhaps too early to tell whether this research will catch on and revolutionize contract law. I hope it does, but I’m biased.

One of my favorite papers in this new body of contract scholarship showed up recently on ssrn. It is John Coyle’s “A History of the Choice-of-Law Clause” (here). I have rarely found a piece of legal scholarship so compelling.  The paper is not only a model of clarity in terms of the writing, but it is brave. It is completely unapologetic in not only taking on an entirely new mode of research (a painstaking documentation of the historical evolution of the most important terms in any and every contract), but in coming up with a cool and innovative research technique for unpacking that history (this project would have been impossible to do without that innovation).

Continue reading "Coyle on Studying the History of a Contract Provision" »

The Fifth Circuit Finds a Way to Make It Even Harder to Discharge Student Loans in Bankruptcy

posted by Bob Lawless

On Tuesday, the United States Court of Appeals for the Fifth Circuit released an opinion that, if anything, makes it even more difficult to discharge student loans in bankruptcy. Writing for a three-judge panel in a case called In re Thomas, Judge Edith Jones reaffirmed the court's commitment to the existing case law and added yet another judicial gloss to the words of the statute. The opinion was a missed opportunity to return to a reasonable standard that allows debtors to discharge student debt in appropriate cases while still protecting the public fisc.

The debtor was over 60 years old, part of the trend of older filers in bankruptcy court. She had taken out $7,000 in student loans for two semesters of community college. Within a year after leaving community college, the debtor developed diabetic neuropathy, which left her unable to work at any job that required standing for any period of time. The debtor had to leave a retail job, a restaurant job, and a job at UPS. She lost a previous job at a call center after it was acquired by another company who then fired her within three months for wearing headphone and listening to music during her lunch break, a determination that probably not so coincidentally meant the debt was ineligible for unemployment insurance.

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How NOT to Regulate ISAs

posted by Adam Levitin

Income-sharing agreements or ISAs are becoming an increasingly popular way to finance higher education. The key problem that ISAs face as a product is uncertainty about their regulatory status. Are ISAs “credit” for various statutory purposes? Or are they something else? Into the regulatory void comes a bipartisan bill, introduced by Senators Mark Warner, Marco Rubio, and Chris Coons, that would set forth a regulatory framework for ISAs. The problem is that the regulatory framework proposed is shamefully bad: it would give a green light to discriminatory financing terms and tie the CFPB’s hands from further regulating ISAs.

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Playing with Fire: The CFPB's Proposed Repeal of the "GSE Patch"

posted by Adam Levitin
CFPB recently put out an advance notice of proposed rulemaking to amend the Qualified Mortgage (QM) Rule by letting the "GSE Patch" expire.  What the Bureau is proposing is potentially very dangerous.  While I haven’t liked some of the Bureau's other proposed rules (including under the Cordray Directorship), none of them were an all-out ideological gamble with the economy. This one, in contrast, is really playing with fire.  

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Biden's Involvement in the Detroit Bankruptcy?

posted by Adam Levitin

In the Democratic Primary debate last night, former Vice-President Joe Biden claimed to have been deeply involved in the Detroit bankruptcy: 

Q (Tapper): What do you say to progressives who worry that your proposals are not ambitious enough to energize the progressive wing of your party, which you will need to beat Donald Trump?

A (Biden): ... Number three, number three, I also was asked, as the mayor of Detroit can tell you, by the president of the United States to help Detroit get out of bankruptcy and get back on its feet. I spent better part of two years out here working to make sure that it did exactly that.

What on earth is Joe Biden talking about? I followed the Detroit bankruptcy case fairly closely and never once heard of any involvement from Biden. A google search for "Biden Detroit bankruptcy" shows an involvement consisting of all of one lunch with the Mayor of Detroit.  Maybe Biden was deeply involved behind the scenes, but I doubt it, as the federal government simply didn’t do anything to help out Detroit. Perhaps he was referring to the GM/Chrysler bankruptcies? If so, there was important federal involvement as a lender, but Joe Biden was not an important player in those cases either as far as I know.

If others know more, it would be interesting to hear, but as far as I can tell, Biden is claiming credit for things that he had no involvement in.  

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