A few more thoughts to supplement Josh’s fine posting on the transcript of oral argument in Leegin.

I don’t understand Justice Breyer. He recognizes that there are at least some circumstances in which RPM helps consumers. Why isn’t that enough for Dr. Miles to be overruled?

Justice Breyer regards this as a “close case” (presumably for reasons of stare decisis rather than on the merits) and asks “what has changed?”

What has changed is our state of economic understanding. When Dr. Miles was decided in 1911, the proconsumer aspects of RPM were not yet recognized. And that was largely true even in 1966, a year that Justice Breyer has focused upon, given the publication that year of an academic book criticizing RPM, which seems (so far as Justice Breyer can tell) to have made all of the same arguments against RPM that are now being made today. But it was not and could not have been argued back in 1966 that it would be inconsistent to exempt some vertical restraints from the per se rule but not others. Only once the late 1970s came, when Continental overruled Schwinn, did it become clear how foolish Dr. Miles is. Now that we allow (subject to the rule of reason) non-price vertical restraints, it seems entirely crazy not to allow RPM as well. As then-Professor Posner argued back in the 1970s, RPM is likely in many cases to be a more efficient vertical restraint than the now permissible non-price ones. So banning RPM across the board on a per se basis does not seem to make any sense. And while many of the same arguments against RPM could have been made in 1966, there are some new ones now that didn’t exist then. Anyway, Dr. Miles was decided in 1911, not 1966. It’s not as though the Court considered overruling Dr. Miles in 1966 and decided not to. The Court is now squarely addressing whether Dr. Miles should be overruled for the first time. So any post-1911 developments in economic science are fair game; there’s no basis for excluding from debate what happens to have been known in 1966!

Justice Breyer is impressed by Professor Scherer’s examples of cases where RPM has been harmful to consumers. But how can these examples justify a per se rule? If Professor Scherer can persuasively demonstrate the benefits of banning RPM in the market, say, for blue jeans, then RPM should be banned in that context under the rule of reason. But this does not come close to showing that RPM is”always or almost always” harmful to consumers such that a per se rule is justified.

But enough about Justice Breyer. I also don’t understand Justice Stevens. What on earth does a horizontal conspiracy among New York distributors have to do with this case? As Justice Scalia said, what possible procompetitive benefit could be associated with a horizontal agreement on price? It’s very hard to think of one. But if Justice Stevens can think of one, then sure: apply the rule of reason in that context too!

Predictions are hard to make. But I don’t think Shubha Ghosh is right about Dr. Miles definitely have four votes in the bag. I say it’s one, not four. Justice Breyer says it’s a close case and may well come around. Justice Souter seems altogether uncertain. Justice Ginsberg if anything seems to be leaning the other way–given her interest about what arguments would be available to the plaintiff on remand assuming (as she appears to think likely) a loss in the Supreme Court. As I read the transcript, Dr. Miles can be confident only about Justice Stevens’ vote.

Bill Henderson has a nice post on Chief Justice Roberts’ claim that judicial pay has reached the point of creating a “constitutional crisis.” Lots of bloggers (see, e.g., my colleague Ilya Somin at VC) have made the point that they are not impressed with the data the Chief has mustered in favor the assertion that the quality of the federal bench is likely to suffer as the gap between judicial pay and pay in private practice widens (or that a shift in composition of the federal bench towards fewer lawyers from private practice is a demonstrably bad thing, much less constitutional crisis). Most of this discussion has involved pointing out weaknesses in the Chief’s empirical evidence in support of his claim and some educated guesswork about the relevant elasticities of supply for high quality judicial candidates with respect to pay.  Though I think it it is very difficult to say something meaningful about these elasticities without data.

In any event, I think Bill’s post adds something new by attempting to reframe the debate a bit and raising some issues I had not thought about in relation to the Chief Justice’s plea for more compensation.  The first is that federal judges make much higher salaries than their state counterparts and so, as Bill writes, “it appears that we also have several dozen ‘constitutional cris[es]’ at the state level.” Second, Bil notes that while Am Law 50 partner and CLO salaries have grown dramatically as of late, both federal judiciary and solo/ small firm compensation has not done nearly as well. Bill asks why this gap in pay does not trigger the same sorts of concern over the independence of lawyers more generally?

These are both interesting points. With respect to state court judges, I presume that Chief Justice Roberts (if confronted with the data) would be more than happy to advocate for higher salaries in state court as well. But Bill is certainly right that if a gap in judicial / private pay creates constitutional crisis, we may be in the middle of more crises than we knew!  With respect to the plight of the solo/small firm practitioner, however, I’m not sure I follow what Bill is getting at. One obvious difference between judicial pay and practitioner pay is that the latter is set in the market in response to economic forces rather than by Congress in response to political forces. In other words, if the market sets much higher compensation levels for big law lawyers than solo practitioners — this is a valuable signal about the best use of lawyerly resources. In that setting, it is difficult to understand the sense in which these attorneys are underpaid, or why the gap would be problematic at all.
Third, Bill writes that:

“district and appellate judges working in large metropolitan areas will likely live in smaller homes or endure longer commutes. And the Judge’s kids may have to apply for loans to pay for college or law school, including federal Stafford loans, which are the lifeblood of higher education. In other words, their problems will be more like 98% of the American electorate, albeit still very much at the high end. Why is this a “constitutional crisis”? Some of us might call it “sensible policy.”"

While I think that my prior is to agree with Bill’s punchline (and the position taken by most bloggers I’ve read) that this is not a constitutional crisis, I’m not quite sure that I agree with this third point. It depends who is on the margin doesn’t it?  And that depends, again, on the relevant elasticities. One possibility is that in expensive metropolitan areas the marginal candidate will be the one Bill describes. It is also quite possible that the marginal candidate in such areas is sufficiently wealthy such that the pay cut in going to the federal bench has little effect on the family’s financial well-being (though the Luttig examples suggests the former certainly does occur).  In any event, my point is only that it is really hard to talk about prospective changes in the composition of the pool of candidates without better data than we have (and are likely to have given the nature of these decisions) on candidates.

GMU will celebrate Constitution Day today with a debate between Professors Neomi Rao and Todd Zywicki (of VC fame). Here are the details:

Worth Wining About!  Should You Have a Constitutional Right to be Your Own Wine Importer?

A lively discussion of Granholm v. Heald.

Featuring Professors Neomi Rao and Todd Zywicki.
Moderated by Professor Ron Rotunda.
Friday, September 15
4:00 -5:00 p.m.
Room 121

For those who missed last year’s Constitution Day at GMU, a discussion between Professors Rotunda and Nelson Lund as to “whether it is constitutional for Congress to use its spending power to reach down into the curriculum and culture of every school in the country and dictate what shall be taught, celebrated, or memorialized — and when,” I leave you with my colleague Nelson Lund’s Green Bag essay on the topic, “Is Constitution Day Constitutional?”

Here’s a taste:

If the Internet Gambling Prohibition Act is approved, it will become a precedent for congressional control over other aspects of the Internet and an important loss in our liberty. Let’s follow the money and ask who benefits should the law be passed. What about legal gambling establishments in Las Vegas, Atlantic City and elsewhere? From their revenue point of view, they’d be happy to see less online gambling competition.

What about federal, state and local governments? Online gambling, most of which is offshore, doesn’t create any tax revenue for them. The bill focuses on online games such as poker, blackjack and sports betting but exempts taxable state-regulated gambling such as lotteries and horse racing.

If people want to gamble online, they are going to gamble online. The only thing the act will accomplish is, like Prohibition, make criminals out of otherwise law-abiding people. It will turn banks and other financial institutions into government snoops. Rep. Barney Frank, D-Mass., said, “If an adult in this country, with his own money, wants to engage in an activity that harms no one, how dare we bar it.” I second that and add, since protection of “the children” often serves as an excuse to restrict our liberties, that if children get involved, let their parents, not Congress, deal with it.

Check it out. Christine Hurt also offers some thoughts here and here.

A few weeks ago, I predicted here that Anna Nicole Smith would win her case in the Supreme Court. That prediction has now come true. Justice Ginsberg’s opinion for a unanimous court holds that state probate law cannot divest federal bankruptcy courts of jurisdiction over the claims of a bankruptcy estate against a probate estate beneficiary.

It will be interesting to see how this result will be spun by the lawyers and legal commentators who earlier suggested that this was a close case (see here).

I suppose that I ought to say something about the Anna Nicole Smith case that was argued today in the Supreme Court, given that I participated in the case (together with 14 other bankruptcy scholars) by filing an amicus brief on Anna Nicole’s side. For all the talk about how arcane the case is (see, e.g., Lyle Denniston’s fine account of today’s argument at SCOTUSblog.com), the issue is really quite straightforward: did the bankruptcy court have jurisdiction over a tort claim by Smith’s bankruptcy estate against Pierce Marshall (Smith’s late husband’s son)? The answer is plainly yes, and here’s why.

Title 28 confers federal bankruptcy jurisdiction over any claim that is “related to” a bankruptcy case–that is, any claim that will have an impact on the disposition of the bankruptcy estate. The Smith estate’s claim clearly meets this description, because any assets this claim recovers will directly benefit her bankruptcy estate. The claim is thus “related to” the bankruptcy case. To be sure, a bankruptcy court could always abstain from hearing a claim like this one. But the statute makes clear that abstention in this context is permissive, not mandatory. “Because the statute says so” is thus the short answer to why there’s federal jurisdiction here.

Here’s the complication. Marshall’s lawyers argue that notwithstanding the plain language of Title 28, there is a judicially-crafted “probate exception” to federal jurisdiction that applies not only in diversity cases but also in bankruptcy. But that is not so. The only Supreme Court decision ever holding that there is no bankruptcy jurisdiction over assets in probate is Harris v. Zion Savings Bank, 317 U.S. 447 (1943), a case decided under the old Bankruptcy Act that is readily distinguishable.

The reason for the result in Harris is that there the debtor and the decedent were one and the same person. Once the debtor dies, there is no longer any need for bankruptcy jurisdiction. That is why Congress in 1978 explicitly made decedents ineligible to file for bankruptcy. Here, however, we are dealing with a bankruptcy debtor who is not dead. Anna Nicole Smith is very much alive. And unlike the assets at issue in Harris, the assets comprising Smith’s bankruptcy estate are not coextensive with those of the probate estate. The creditors in Harris had standing to assert claims against the estate in probate. But Smith’s creditors did not have standing to assert claims in the Marshall probate proceeding. All they could do was assert their claims in the bankruptcy forum. The possibility of bankruptcy jurisdiction is therefore necessary to protect creditor interests that are not legally cognizable in probate.

It is nonsense to suppose that bankruptcy jurisdiction over claims like the one asserted by Smith’s estate improperly “interferes” with state probate proceedings. For one thing, the Smith estate’s claim is only against an heir, not against the probate estate. Moreover, the fact is that probate estates are hardly strangers to bankruptcy. No one, not even Marshall, suggests that a probate estate can’t be a creditor in a bankruptcy case, or that a bankruptcy estate couldn’t recover a preferential or fraudulent transfer from a probate estate. Such litigation is not an “interference” with probate; it is simply a way of sorting out some of a probate estate’s assets and liabilities. A probate court’s jurisdiction need not be exclusive. And if any state’s law so provides, federal bankruptcy law trumps it. Granted, a bankruptcy court might be well-advised to abstain with respect to issues concerning which the probate court has relatively greater expertise and competence (e.g., interpreting a will, perhaps). But the statute makes such abstention only permissive, not mandatory.

It will be interesting to see the Court’s opinion in this case. I will be very surprised if Anna Nicole Smith does not win.