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ILE Distinguished Jurist lecturer argues that judicial restraint and respect for tradition equals equity

February 17, 2012

 By Anna Pan C’14

ls2-15speaker7.jpgOn February 15, an alumnus of Penn Law, Leo E. Strine, Jr. L’88, Chancellor of the Delaware Court of Chancery, addressed students, faculty, and jurists in Penn Law’s Levy Conference Center to take on the issue of judicial restraint versus judicial activism. His speech, titled “Regular Order as Equity,” was hosted by the Law School’s Institute for Law & Economics’ (ILE) as part of their annual Distinguished Jurist lecture series.

Chancellor Strine, an adjunct professor at the Law School, Harvard and Vanderbilt Law, joined the Court as Vice Chancellor in 1998 at the age of 34, and was named Chancellor last June. The Delaware Court of Chancery is recognized as the world’s preeminent forum for business and corporate law and dispute resolution.

Strine began his address with a wry explanation of why he believed ILE should change its name.

“The law and economics movement has basically been dominated by anybody from the law side who knows nothing about the traditions of the law,” he said. “And people on the economics side who know nothing about lessons of economics or history. And they came in with ideas and sold them to the nation, and it brought you what you now know as the financial crisis,” he noted to a chuckling audience.
But, he added, “what distinguishes [the Penn ILE] is its special commitment to realizing the lessons of history and both disciplines, and bringing real world facts to bear on policy issues.”
Strine then shifted topics, speaking in favor of the “judicial mindset that favors regular order over the episodic judicial grant of exemptions from required procedural expectations and the need to secure contractual runs at the bargaining table,” he said.

Strine noted that while judges use “imperfect tools,” he asserted “we have to try to provide justice equitably” by using such methods as standards of review and principles of interpretation “consistently in like cases, and to avoid deviating from them when political pressures or other factors create a temptation for one-off situational departures.”

By adhering to regular order, Strine said, “the judiciary does the most equity, because it upholds the reasonable expectations of citizens in a society governed under law that accords a high level of procedural due process, and that now enables all its citizens a fair opportunity” to participate in a democracy.

Equity emerged in the law, he explained, “as a gap-filler to do justice in a world of unevolved institutions, and where not all people were treated the same way in similar circumstances.” And it continues to play “a vital role as a gap-filler and as a key default protection in relationships where one party is given broad discretionary authority over the property and rights of others,” Strine said.

Chancellor Leo E. Strine, Jr. L'88
Chancellor Leo E. Strine, Jr. L’88

But, he argued, an “equitable impulse” is not license for judges to impose personal views of what the “right” outcome in cases should be, “thereby [enabling] litigants who have failed to follow procedural rules or to obtain the contract they wanted at the bargaining table, to get a result from a court that is at odds with what regular order would have produced.”

Moving into the realm of civil procedure, Strine noted, “I do not grasp the equity of excusing litigants from compliance with the rules.”

Equity, Strine said, “demands that all litigants follow the normal rules. Otherwise, courts will be unable to afford everyone the same equal treatment.” For example, he noted “the more adamant and resourced a litigant is, the more he will demand.”
Strine asserted, “That is not equity, it is the exact problem equity arose to address.”

One context where a judge’s “personal predilections to do situational justice” presents a danger of inequity, he said, is when judges are asked “to address claims that a commercial party’s conduct, despite not being prohibited by the express terms” of a contract, is instead prohibited by its interstices, or gaps.

“When judges twist interpretative doctrine to shape case-specific results, they do not do equity in its true sense,” Strine said. “They give certain parties more than is due to them, and undermine the reliability of voluntary contracts for all.”

In the corporate law context, Strine explained that the “equitable overlay to American corporate law is part of its genius,” and is “the key to allowing directors to manage corporations under broad enabling statutes rather than highly prescriptive codes.”

But because much of corporate law “involves judicial articulations of fiduciary duty principles,” he said, “judges caught up in the moment sometimes mistake their role.”
Strine argued that judges who condemn “a legally permissible act on the grounds of inequity,” or who are “moved by the moment or feeling political pressures, untether themselves from that disciplinary prerequisite and occasionally spew forth what I consider the oxymoronic statutes of judge-made equity law.”
Strine also spoke of the business judgment rule, which “exists in a large measure to constrain judges like me from second-guessing disinterested business decisions, and thereby stifling the willingness of corporate fiduciaries to innovate, to be creative, to be bold - the essence of what fuels important new sources of economic growth. When judges forget that, and concepts such as gross negligence, financial interest and good faith… they undermine the rule.”
While recalling the many key moments in American history when the judiciary has played vital roles in promoting a more equitable society, he highlighted the dangers when judges “second-guess policy decisions made by the legislative and executive branches of government.”

Strine said “judges who do not show respect to the legitimate authority of the legislative and executive branches threaten equity in a fundamental way, by undermining the rule of law itself.”

Policy battles, Strine asserted, “should be won at the ballot box, in the electoral and legislative process.”
Strine concluded his lecture by noting “regular order may not always be popular, and it sure isn’t sexy. But you sign up to wear the black robe, you’re not signing up to be a Victoria’s Secret model.”
The Q&A session with audience members following his address provided a moment to call these issues into high relief. Strine recounted the half-dozen times he’s been involved in orders of executions, either during his tenure as former Delaware Governor Carper’s policy director, or in his current role as member of Delaware’s Board of Pardons. “I hate the death penalty,” Strine said, “but I know it’s Constitutional.”
“I’ll never forget those executions,” he said.

During his introduction of the speaker Penn Law Dean Michael A. Fitts described Strine, a former Law School student of Fitts’, as “one of the leading corporate law figures in the United States and respected judges on the bench.”