Mon, 05/24/2021
This post is a summary of Episode 19 of The Nebraska Governance & Technology Center’s (NGTC) Podcast Series, Tech Refactored. Host Gus Hurwitz, Director of the NGTC was joined by Catherine Baylin Duryea, Assistant Professor of Law at St. John’s University School of Law, and Barak Orbach, Professor of Law at the University of Arizona James E. Rogers College of Law.
In the course of all countries certain events occur which, because of both their suddenness and scale, require a society to respond abruptly to these disruptive events, with only limited time to calibrate appropriate responses. As Hurwitz notes, “these challenge some of our basic desires for the law to make incremental changes based upon thoughtful and deliberate evaluation of data.” This prompted the NGTC to sponsor a series of projects under the heading “Regulation at Scale;” supporting scholars in examining, in Hurwitz’s words, “the challenges that arise when new rules or technologies affect broad swaths of society all at once.”
One such scholar is Catherine Baylin Duryea, whose project was entitled “Crumbs of Judicial Relief: Judicial Review of Price Control During Wartime.” During the Second World War, the US government created the Office of Price Administration that created a vast system of price controls and rationing that limited civilian consumption of an array of goods in an effort to support the war effort and control inflation. This involved an enormous expansion of the role of federal regulators into previously unregulated areas of civilian life, and Duryea’s project examined what sort of judicial oversight was given to that expansion in order to ensure that regulators were “acting fairly and within the scope of the law.”
From a prior experience as a research assistant to a professor during law school, Duryea learned about a special court created in the United States during World War II called the “Emergency Court of Appeals” to hear cases arising out of the system of price and rent controls that were in place at that time. When she returned to the topic years later, Duryea was aware that the creation of specialized courts is very unusual in U.S. history, suggesting to her that there may have been “dynamics at play where perhaps the president wanted to keep those cases out of the regular federal courts.”
Duryea found that the “Emergency Court of Appeals” mainly upheld rationing schemes and price controls, but more interesting was her conclusion that that outcome was entirely by design. “The court was set up to be a very mild check on agency action.” This was apparent because, although these courts exercised jurisdiction over all price control and rationing decisions, prosecutions of individuals caught violating those decisions were brought in conventional US District Courts; there Duryea found that a number of US Federal District Court judges were much more skeptical of the countrols put in place by the Emergency Court of Appeals.
Examining the record, it was clear to Duryea that the membership of the court had been selected because they were reliable “New Dealers,” and could be counted on to uphold the price controls where other federal judges may have been more skeptical. “It became quite clear that the president and congress designed this court so that all of the thousands of cases that arose concerning these regulations would be funneled through this one court that was staffed by three judges (...) who were really predisposed to be pretty sympathetic to the agency and this overall structure of price regulation.”
For Duryea, these results also push back on a narrative in administrative law that ascribes a significant focus on the standard of review (the criteria by which courts are making decisions) rather than what was more relevant in this case, which was “the structure and staffing of the court and these other things that are less tangible and less doctrinal (...) like political culture and even the economic viewpoints of the judges that were sitting on the court.
Hurwitz noted that Duryea’s research also demonstrated one solution to a common problem of regulating at scale, which is enforcement. When a completely new set of circumstances arise, often there are not sufficient institutional enforcement mechanisms, or even manpower, to adequately enforce the law in a way that is proportionate to the scope of the crisis. In this case, the price controls were enforced by “an army of housewives,” that is to say, the Office of Price Adjustment enlisted tens of thousands of everyday American shoppers, who had little books of price lists, in order to ensure that retailers were following the law.
This system of price controls generally resulted in two competing reactions, one which celebrated the system as the American people coming together to do their small part to support the country in wartime and battle inflation — accompanied by language “mobilized against price violators that (compared them) to traitors.” On the other hand, some people criticized the scheme as being dictatorial and “compared it unfavorably with the state-driven economic policies that the US was fighting against in Europe.”
One interesting aspect to this system of courts, that Duryea acknowledges may have had a PR element, was that the judges themselves did not sit in DC, they flew all over the country, almost like old-time circuit court judges, even to hear disputes that concerned very minute sums of money. This gave the system a sense of local legitimacy, rather than being a scheme that was imposed on people by a remote bureaucracy in Washington.
Hurwitz was next joined by Barak Orbach, whose recent work has explored the degree to which corporate directors and officers should be held responsible for anticipating and making preparations against future disasters. Interestingly, his work is informed by two powerful experiences - first, the experience of growing up in Israel in “a generation that was heavily influenced by the Holocaust,” and secondly his experience of viewing the disaster of September 11th through the view of his home window in New York City.
That is the lens through which Orbach then views the question of ascribing liability for disasters that affect a company to corporate officers - are these officers taking these risks seriously enough in terms of their responsibility to shareholders, and from a public policy view, are the existing standards strict enough to ensure that corporate actors make responsible decisions to mitigate the risk of disasters in a way that protects society at large. And the good news, from Orbach’s perspective, is that corporate actors do appear to be taking these risks seriously, and the standards that they are going to be held to in terms of anticipating risk are likely to increase substantially over the coming years.
Orbach’s paper touches on many areas of the law, but when asked to characterize its place within the discipline, he identified it as “an emerging legal field that we call governance, risk management, and compliance.” Orbach is concerned not so much with predicting how corporate officers will respond to given disasters within a given legal framework, but instead with “how corporations actually act within a specific legal context.” And what particularly significant changes has he observed over the last few years? Orbach emphasized how, over the past few years, the Me Too movement and Black Lives Matter have dramatically influenced corporate America, not just on specific issues, but overall as well.
The last several years have presented corporations with an increasing number of paradigm-shifting challenges (e.g. Covid-19 and the exponential rise of ransomware attacks) and that pattern only seems likely to increase, given global interconnectedness and increasing natural disasters related to climate change. Corporate officers will need to be farsighted and agile if they can legitimately claim to be faithfully discharging their duties to contemplate and respond to these emerging threats in a way that adequately discharges their duties as respects shareholders and society.
