Still Searching for University Democracy

David Pozen

Jan 6th as Bastille Day

Gerard N. Magliocca

I guess that's the official theory anyway. The French Revolutionary government gave the rioters medals, cash awards, and (in some cases) pensions.

By the way, while I'm sure that the so-called settlement is unlawful under the Appropriations Clause, I've not made up my mind about how Section 4 of the Fourteenth Amendment might apply. One sticking point is that Confederate veterans received state pensions for decades, though those were appropriated by state legislatures. I need to think through the relevance of that practice.

Is the New “Weaponization” Compensation Fund Lawful?

David Super

     President Trump, his older sons, and his business have filed several claims against the United States Government that he controls.  On May 18, 2026, the Department of Justice announced that plaintiffs’ lawyers, whom President Trump controls, and defendants’ lawyers, whom he also controls, have settled some claims.  Under this agreement, the Government would establish a fund to pay compensation to individuals who allege they were victims of improper “weaponization” of the federal government during President Biden’s administration.  Although widely reported to be for persons who were tried and convicted for crimes relating to the January 6, 2021, assault on Congress, the settlement agreement does not specifically mention that attack and allows anyone who feels they were victimized to file a claim.  The agreement does not designate any amount of money to go to this fund, although Acting Attorney General Todd Blanche’s announcement says it will receive $1.776 billion.  (The settlement also, unconvincingly, tries to shield the payments it makes from taxation.)  The Administration has made clear it does not intend to seek approval or an appropriation from Congress.  This post examines the legality of this arrangement.

     One simple answer is that section 4 of the Fourteenth Amendment declares that “neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States … but all such debts, obligations and claims shall be held illegal and void.”  The unprecedented attack on Congress on January 6 was an “insurrection or rebellion against the United States”.  Any purported debts perpetrators might file likely were incurred in aid of that insurrection and therefore that are “illegal and void”.  To be sure, the purported debts are not for the costs of the insurrection itself but rather to compensate for the lawful punishment the insurrectionists subsequently suffered for their acts.  The sequence, however, should not matter:  the law long has recognized liability for acts assisting perpetrators of crimes occurring entirely after the crimes were committed. 

     To be sure, some people who did not participate in the January 6 insurrection may claim to have been victims of other federal abuses.  Section 4 would not bar relief for them.  Nonetheless, they – as well as the January 6 claimants – would be barred from receiving money from this fund for other reasons. 

     Article I, section 9, clause 7 of the U.S. Constitution provides that “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law”.  Similarly, the Anti-Deficiency Act provides that “Except as specified in this subchapter or any other provision of law, an officer or employee of the United States Government or of the District of Columbia government may not…make or authorize an expenditure or obligation exceeding an amount available in an appropriation or fund for the expenditure or obligation”.  Violations of the Anti-Deficiency Act carry criminal penalties.  Therefore, Justice Department officials involved in creating or administering the proposed fund would face serious personal jeopardy if they cannot identify a congressional appropriation permitting these expenditures or feel confident they will be included in a future pardon. 

     Acting Attorney General Blanche’s statement declares that the Administration will make these payments under the Judgment Fund, a permanent uncapped appropriation for paying judgments against the United States Government.  The drafting of the settlement agreement, however, may preclude that.  Section IV.A directs Acting Attorney General Blanche to issue an order within 30 days of the agreement that “shall establish funding” for the program.  Section VII then states that the settlement agreement and the accompanying orders of the Attorney General “constitute[] the entire agreement of the Parties, and no prior statement, representation, agreement, or understanding, oral or written, that is not contained herein, will have any force or effect.”  Thus, the settlement agreement does not require any particular level of funding and any side agreement on the $1.776 billion figure has no legal effect.  Acting Attorney General Blanche could have fully complied with the settlement agreement by designating one dollar for the fund.  His voluntary choice to provide more than was obligated was not necessary to settle these cases and hence is not covered by the Judgment Fund. 

     Yet even without these technical blunders, the Administration’s broader theory cannot withstand scrutiny.  It is arguing, in essence, that the mere act of filing a lawsuit against the Government allows President Trump to fully circumvent the Appropriations Clause and the Anti-Deficiency Act by “settling” for any spending he desires.  He thus could file a meritless lawsuit against the Government he controls and then “settle” for taxpayers’ dollars to build his ornate ballroom, to fund his grand “Arc d’Trump”, or even to pay for foreign wars that Congress declines to fund. 

     As in the case of other Administration legal theories that purport to confer transformative powers onto the President, we should ask ourselves whether the Framers, or Congress, or the courts, have really left such a spectacular loophole in our system of checks and balances.  In some instances, the answer may be that our forebears failed to imagine presidential power being exercised with such blatant dishonesty and bad faith.  But often close examination of the controlling legal materials shows that the purported sweeping powers are a phantom. 

     The Judgment Fund provides an appropriation to pay a “judgment, award, or settlement” under any of ten specified federal laws or a decision of a board of contract appeals.  Six of the enumerated statutes are obviously inapplicable to this situation.  Section 2677 allows settlement of claims under section 1346(b), but the latter strictly limits recoveries to “injury or loss of property, or personal injury or death”, a much narrower set of harms than the settlement agreement contemplates, and further limits recoveries by persons incarcerated after felony convictions.  Section 2672 is similarly limited to claims for “injury or loss of property or personal injury or death”.  Section 2517 is limited to judgments of the Court of Federal Claims, not settlements. 

     That leaves section 2414.  That section, too, primarily addresses court judgments.  It does, however, provide that “[e]xcept as otherwise provided by law, compromise settlements of claims referred to the Attorney General for defense of imminent litigation or suits against the United States, or against its agencies or officials upon obligations or liabilities of the United States, made by the Attorney General or any person authorized by him, shall be settled and paid in a manner similar to judgments in like causes and appropriations or funds available for the payment of such judgments are hereby made available for the payment of such compromise settlements.”  This is the only possible basis for accessing the Judgment Fund here. 

     Section 2414’s permission to pay settlements of claims, however, is subject to limits in other laws.  One such federal statute is section 1359 of Title 28, which provides that “[a] district court shall not have jurisdiction of a civil action in which any party, by assignment or otherwise, has been improperly or collusively made or joined to invoke the jurisdiction of such court.”  President Trump suing the U.S. Government, which he completely controls under the Unified Executive Theory he has tirelessly invoked, would strike many as a collusive attempt to invoke the jurisdiction of the federal court to facilitate a settlement of his liking.  President Trump acknowledged that this litigation appears to be brought against himself.

     Another such statute is section 530B(a) of Title 28, which provides that “An attorney for the Government shall be subject to State laws and rules, and local Federal court rules, governing attorneys in each State where such attorney engages in that attorney's duties, to the same extent and in the same manner as other attorneys in that State.”

     Florida Bar Rule 4-3.1 prohibits meritless or frivolous litigation; Rule 4-3.3 requires candor toward the tribunal.  District of Columbia Rules 3.1 and 3.3 are similar.  Litigation in which the same individual controls both sides is inherently misleading to the court and does not call for the adversarial resolution of any questions of fact or law. 

     As the U.S. Supreme Court has said, litigation in which the same person controls both sides “is not in any real sense adversary. It does not assume the ‘honest and actual antagonistic assertion of rights’ to be adjudicated – a safeguard essential to the integrity of the judicial process”.  The Supreme Court of Florida has cautioned against “connivance in [the] defeat” of a party, which certainly occurs when the plaintiff has full control over the defense.  It warned that “[t]he fairness of the system is undermined when the alignment of interests in the litigation is not what it appears to be.”

     Acting Attorney General Blanche’s press release cites a settlement the Obama Administration made with Native Americans as precedent for its actions here.  That case, and many others, did settle litigation against the federal government with moneys from the Judgment Fund.  That settlement, however, did not result from litigation where the same individual controlled both sides of the litigation.  And that settlement was approved by a judge while the settlement of President Trump’s litigation was hustled through this week to save the parties from having to file briefs the court sought on whether they have sufficient adversity to secure federal jurisdiction.

     A series of memoranda from the Justice Department’s Office of Legal Counsel make clear that the Judgment Fund is not available to pay collusive settlements.  As summarized in a 2023 memorandum from the Associate Attorney General (with citations omitted):

A settlement must conform to any applicable statutory limitations and serve the "best interests" of the United States.  The President's constitutional obligation to take care that the laws be faithfully executed "necessarily serves to limit the exercise of the Attorney General's settlement authority so that it does not become a dispensing power." OLC has therefore concluded that the Department may compromise claims only if the Department makes a "good faith assessment" that a court could find the government liable. Further, the Judgment Fund is available for the payment of a settlement only if "the cause ofaction that gave rise to the settlement could have resulted in a final money judgment." And, relatedly, the Judgment Fund may not be used to pay for the settlement of claims that, if they resulted in a judgment against the government, would "impose costs on the government, but [would] not require the United States to make specific cash disbursements" to certain parties, such as a "judgment[] that required the United States to furnish subsidized housing, or that required the United States to correct structural defects in housing." These strictures ensure that the potential use of the Judgment Fund does not "encourage settlements that would not otherwise be in the interest of the United States."

OLC has cautioned that we should “not lightly attribute to Congress an intent to create a structure that might encourage settlements that would not be in the interest of the United States.”  Tapping the Judgment Fund to pay for settlements of non-adversarial litigation does that with a vengeance.

     When extravagant legal theories that defy logic and the Constitution seem too good to be true, they often are.

     @DavidASuper1 @DavidASuper.bsky.social

Does the Appropriations Clause Have Bite?

Gerard N. Magliocca

Article One, Section Nine, Clause Seven states in part:

"No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by law . . ."

Let's say a President asks Congress for $1 billion to fund a project that he's keen on. Congress declines the request. The President then sues the United States on some fictitious claim of injury and the US "settles" the case for $1 billion. The President then uses that money to fund the project that he wanted.

Structurally, this must be forbidden. The power of the purse would be gravely weakened. But what is the textual basis for such a bar? I think it would be the Appropriations Clause, on the theory that a collusive lawsuit or settlement is not law. But I must admit that I do not know much about the original meaning or the application of the Appropriations Clause. Might be worth a closer look. 

Don't Look Now, but the War Powers Resolution is Working

Stephen Griffin

When I researched my book on war powers (Long Wars and the Constitution), I noticed a shift in opinion had occurred with respect to the WPR by the end of the Clinton administration.  Before then, it was commonly claimed that the WPR was washed up, even legally defunct.  During the 1988 episode in which the U.S. took military action and reflagged oil tankers toward the end of the Iran-Iraq war, senators seemed to despair about whether the WPR even applied.  But by Clinton’s 1999 intervention in Kosovo, members of Congress were actively using the WPR as a reference point in evaluating the administration’s actions, criticizing Clinton for going beyond the 60-day limit.  Perhaps it took a Democratic presidency for both parties to care about the WPR.

Be that as it may, it is striking that that the WPR’s doubting critics have never come up with criteria to support a judgment that it is legally irrelevant.  But since so many still seem skeptical, let’s turn that inquiry around – how would we know that the WPR is working?  One criterion, advocated by the eminent legal philosopher H.L.A. Hart, is when a normative requirement is a basis for criticism when it is violated.  The existence of Hart’s famous “internal point of view” shows that the requirement in question is in fact accepted as a norm – in the case of the WPR, as binding law.  The WPR has been used multiple times in this way since at least the Kosovo intervention and probably well before.  And, by the way, it is false that “every” president has regarded the WPR as unconstitutional – not that this would make any difference.  Passed by a congressional supermajority over President Nixon’s veto and backed by overwhelming public support, it has all the legal authority it needs.

The fact is that until “Mr. Trump’s war” – a historical designation that seems to have unaccountably gone out of style – every major military action since Vietnam had been legally approved by legislative Authorizations to Use Military Force (AUMFs).  This method of legality is specifically contemplated by the WPR and, one might add, by the Constitution itself.  This certainly highlights the difference between Trump’s Iran War and the 1990 Gulf War, the 2001 9/11 War, and the 2003 Iraq War, but fully supports the legal relevance of the WPR.

And don’t look now, but Congress, controlled by Mr. Trump’s party, is creeping ever closer to influencing his ability to take further military action.  Whether Trump personally regards this as a “war” is irrelevant.  Members of Congress of both parties, guided by the norms in the WPR, regard it as such.

The WPR has clearly disappointed many people who are looking for an automatic shut off valve to use against a wayward executive branch.  But within the context of the nation’s foreign policy in which military action is just one element, this was never very likely.  Absent a more favorable reception by the executive (no president has even so much suggested useful reforms to the WPR), it nonetheless has become a meaningful tripwire for the exercise of congressional responsibility.

The Ominous Texas Ten Commandments Case

Andrew Koppelman

Suppose a state mandated that signs be posted in every public school classroom declaring “Jesus is Lord.”   Wouldn’t that violate the First Amendment’s ban on establishments of religion?  Until this week the answer was clearly yes.  But after a decision last week by the Fifth Circuit Court of Appeals, who knows?  That court has announced, and likely sent toward a sympathetic Supreme Court, a previously unheard-of interpretation that practically nullifies the Establishment Clause.

I explain in a new column at The Hill.

Pardon as Contract

Ian Ayres

A week ago Sunday, Jeanine Pirro, the U.S. attorney in Washington, told CNN’s State of the Union that she would appeal the order voiding grand jury subpoenas against Federal Reserve Chair Jerome Powell and further indicated a willingness to pursue the case against Powell anew.  But less than two weeks earlier, on April 24, the Department of Justice had announced it was dropping that same criminal investigation.  It appears that any commitment the President makes today can be rescinded tomorrow.

That credibility problem is now blocking the normal transition of leadership at the Fed.  The President wants Jerome Powell out as a Fed Governor, because Powell’s seat, which runs through early 2028, gives Powell a vote against the interest-rate cuts that the President desperately wants.

But resignation strips Powell of the institutional protection that has, so far, kept the Justice Department at bay.  Federal district judge James Boasberg quashed the original grand jury subpoenas — for alleged misstatements to Congress about the Fed's headquarters renovation — because their “dominant (if not sole) purpose is to harass and pressure Powell either to yield to the president or to resign and make way for a Fed chair who will.”  That improper-motive finding evaporates the moment Powell is no longer at the Fed.  The DOJ has pursued former FBI director James Comey twice since he left government service; nothing in the law would stop the DOJ from coming after Powell after he resigns. 

Powell can be forgiven for wanting assurance, before resigning, that the criminal investigation is “well and truly over with finality and transparency.” 

A conditional pardon might give both sides what they want.  Such a pardon, conditioned on Powell’s prompt governorship resignation, would credibly discharge Powell’s exposure to prosecution, while simultaneously giving conceding to the President an additional appointment to the Board of Governors.

Presidential pardons are not self-executing.  Like contractual offers, they can be rejected by the potential pardonee.  Moreover, a President is free to attach conditions to acceptance.  As my colleague Stephen Carter has summarized, “One who accepts the pardon agrees to the conditions; and those conditions, unless they demand an illegal act or are impossible to perform, become legally binding.”

Conditional pardons of this sort are hardly a modern invention.  Presidents have used them since the early Republic to attach strings to clemency.  In 1829, Andrew Jackson pardoned one recipient on the condition that he learn “some beneficial trade” — essentially, that he get work and become self-supporting.  Other presidential pardons have required recipients to serve in the military, leave the country, or otherwise accept limits on their freedom as the price of forgiveness.

Presidents would do well to continue this tradition more deliberately.  For example, President Biden did his son and the public no favors when he granted Hunter a “full and unconditional” pardon.  Hunter Biden has publicly acknowledged a history of addiction, and federal law bars gun possession by users of controlled substances.  The President’s pardon could have made Hunter’s agreement not to purchase or possess firearms a condition of clemency.

A meaningful concern is whether offering Powell a conditional pardon would look like asking an innocent man to confess.  The Supreme Court observed in Burdick v. United States that a pardon "carries an imputation of guilt; acceptance a confession of it." Moreover, accepting this pardon might set a harmful precedent of normalizing a kind of presidential extortion.

To be clear, in putting forth the possibility of a conditional pardon, I am not suggesting that Powell broke the law.  Indeed, to my mind, the public record supports Judge Boasberg’s conclusion that “the government has offered no evidence whatsoever that Powell committed any crime other than displeasing the president.” 

But the possibility of vindictive prosecution is unfortunately no longer a hypothetical possibility.  The realistic question is not whether to engage with the President's leverage, but whether to convert it into something binding.

We tend to think of pardons as presidential largess, which, like mercy, “droppeth as the gentle rain from heaven.”  But in this case, a pardon would be a commitment device that would tie the president’s own hands.  Once accepted, the president could not rescind it, the Justice Department cannot revisit it, and Powell would exit with the protection that resignation alone would otherwise strip away. 

Powell might choose to reject an offered conditional pardon.  He has indicated that he might stay on even if the criminal investigation were dropped once and for all, saying that his decision would be guided by what he believes would be in “the best interest of the institution and the people we serve.” 

Recent Fed chairs have honored the tradition of stepping down from their governorships when their terms as Chair end.  A conditional pardon would grant Powell the opportunity to continue that tradition gracefully — and would turn the abused executive power that created this credibility problem into an instrument that resolves it.

Birthright Citizenship and Apophatic Interpretation

Guest Blogger

Carolina Núñez and Lucy Williams

For the last 15 months, the entire legal academy has fixated on five words: “subject to the jurisdiction thereof.”  These words are the only limitation in the Fourteenth Amendment’s broad grant of citizenship to “[a]ll persons born or naturalized in the United States.”[1]  They are also the words that the Trump administration seized upon in its executive order denying citizenship to children of undocumented immigrants.  Since that EO issued, legal scholars have expended considerable effort debating what, exactly, “subject to the jurisdiction” requires.  These debates have been so exhaustive (and so exhausting) that when the oral arguments in Trump v. Barbara finally rolled around, it was hard to imagine that those arguments might produce anything new. 

And for the most part, they didn’t.  The oral arguments largely tracked the parties’ briefs, which themselves draw heavily on the academic literature.  Because of this, the arguments were relatively predictable, exploring the same ideas and questions that legal academics have been feuding about since Trump’s second inauguration.  The Court asked, and the advocates answered, familiar questions about allegiance, domicile, original public meaning, and precedent.  For initiated listeners, not much was new. 

Near the end of the argument, though, counsel for the respondents Cecillia Wang said something that did feel new.  When asked whether there is “any way that there might be a different answer [to the question of birthright citizenship] with respect to the children of people who are here unlawfully,”[2] Ms. Wang answered, “[The framers of the Fourteenth Amendment] had an intuition that was consistent with the founding aversion to inherited rights and disabilities.”[3]  Though she did not elaborate further, she seemed to be suggesting something novel: The government’s position is untenable not only because it is inconsistent with the Fourteenth Amendment’s text or history or original public meaning, but also because it embraces something (inherited civic status) that the Fourteenth Amendment rejects. 

Ms. Wang’s comment echoes an argument we have made in our working paper “Apophatic Inquiry, Birthright Citizenship, and the Anti-Aristocratic Constitution.”   Our central claim is that constitutional interpreters ought to consider not only what the Constitution affirmatively says, but also the things it omits, rejects, and negates.  This approach, which we call “apophatic interpretation,” is modeled after apophatic theology, which seeks understanding through negation—by focusing on what something is not rather than what it is.  It is not, itself, a freestanding method of constitutional interpretation, and it does not supplant or displace the familiar interpretive modes.  Instead, it simply re-frames the question that existing interpretive modes seek to answer—from “What do these words mean?” to “What meanings do these words preclude?” 

The Ten Commandments Case: Constitutional Erastianism

Guest Blogger

Arvind Kurian Abraham

When the Fifth Circuit upheld Texas's law mandating the display of the Ten Commandments in public school classrooms, most legal scholars will reach for the obvious reference points: Establishment Clause, the separation of church and state, the ghost of school prayer. The dissenting judges have dutifully explained the legal flaws of the Court's opinion. Few, however, will think about Erastianism. They probably should.

Erastianism, the 16th-century doctrine associated with the Swiss theologian Thomas Erastus, holds that the state possesses supremacy over the church in ecclesiastical affairs, including the power to determine matters of religious doctrine and belief. It is a doctrine most Americans would instinctively recoil from. And yet it is precisely what the Fifth Circuit has quietly endorsed.

Balkinization Symposium on Stephen Skowronek, The Adaptability Paradox-- Collected Essays

JB

Here are the collected essays for our Balkinization symposium on Stephen Skowronek, The Adaptability Paradox: Political Inclusion and Constitutional Resilience (University of Chicago Press, 2025).

1. Jack Balkin, Introduction to the Symposium

2. Emily Zackin, Too Much or Too Little Adaptation?

3. Sandy Levinson, “Adaptability” as a constitutional norm (and problem): Reflections on a Skowronekian Constitution

4. Rogers M. Smith, The New American Adaptability Paradigm: Empire or Federation?

5. Noah A. Rosenblum, The Avoidant Constitution?

6. Andrea Scoseria Katz, Skowronek on American Democracy: Gridlock, Presidentialism, and Democratic Faith

7. Richard H. Pildes, The Era of Democratic Dissatisfaction

8. Jeremy Kessler, The Material Foundations of American Constitutional Development

9. Elizabeth Beaumont, Reexamining the Civil Rights Revolution: Partial Adaptation and the Rise of a Civil and Social Rights State

10. Elizabeth Beaumont, The Unbound Constitution Reconsidered: Skowronek’s Framework and History of Constitutional Reordering

11. Elizabeth Beaumont, Confronting Current Constitutional Dysfunctions: Civic Constitutionalism and the Adaptability Paradox 

12. Nikolas Bowie, Who's Afraid of a Constitutional Convention 

13. Stephen Skowronek, Has American Democracy Outstripped Its Constitutional Accommodations?-- Part One

14. Stephen Skowronek, Has American Democracy Outstripped Its Constitutional Accommodations?-- Part Two

A Miscarriage of Justice?

Ian Ayres

Barbara Fried’s recent post on Substack, to my mind, lays out a devastating critique of the prosecution’s misappropriation theory of criminal liability in the trial of her son, Sam Bankman-Fried.  If you think the evidence is open and shut that SBF stole client money, you should think again.  Margin accounts like those offered by FTX are very different from traditional (spot) brokerage accounts at, say, Vanguard or Fidelity.  As John Donohue and I emphasized in a comment we posted to SSRN:

The whole purpose of a margin exchange is to permit customers to finance a portion of their purchases on the exchange with assets borrowed from other customers. FTX’s terms of service authorized such loans with regard to its margin account customers who opted for FTX margin accounts. A substantial majority of the funds deposited on FTX came from customers who opted into the margin trading program. To do so, they had to agree to Section 16.4 of the terms of service, which governed margin traders. The provision clearly stated that:

“Under certain market conditions, it may become difficult or impossible to liquidate a position [and] there is no assurance or guarantee that any such program activities will be sufficient or effective in liquidating your position. As a result, you may lose all of your Assets or incur a negative balance in your Account. In addition, even if you have not suffered any liquidations or losses, your Account balance may be subject to clawback due to losses suffered by other Users.”

Donohue and I emphasized this provision because FTX didn’t misappropriate client funds if the margin account holders gave FTX permission to loan their funds to other clients, including Alameda.  The final clawback provision is especially relevant because it warns margin clients that they may be subject to risk of loss due to losses suffered by other users, which only makes sense if the assets of margin users could be loaned to other account holders.

So what is the best interpretation of Section 16.4?  John and I pointed out:

The terms of service were expressly governed by English law. But the judge refused to admit expert testimony about what was permissible under FTX's terms of service. A defendant's expert, Lawrence Akka, was prepared to testify that under UK law, the loans to Alameda—and the uses that Alameda made of the funds—were permissible. To quote Akka: “FTX was obliged to honour customer withdrawals (i.e. to repay the debt of fiat currency that it owed), but was not constrained to use fiat currency for any particular purpose in the interim.” This doesn’t rule out the possibility that FTX breached its civil duty to its margin customers by allowing for excessive lending to Alameda—albeit now satisfied by the full payments in bankruptcy—but it does refute the idea that any borrowing of customer funds was blatant theft under criminal law.

As Fried points out, the fact that the prosecution sought to bar admission of Section 16.4 of the Terms of Service in a pretrial motion might be taken to indicate that they, too, believed that interpretation was at least plausible. 

Kaplan justified his ruling blocking Lawrence Akka from testifying about the meaning of the Terms of Service under UK law by stating that he (Kaplan) was competent to instruct the jury on foreign law himself.  Fried’s Substack post details what happened next: 

At the charge conference Kaplan announced he was going to instruct the jury [on the meaning of the Terms of Service] under US law instead. . . . His stated reason was that the defense had failed to introduce any evidence concerning UK law [!]

But then he gave the jury no instructions [under US or any other law] on the most important legal issue in determining whether the funds in question were misappropriated (stolen): whether the Terms of Service authorized the loans from FTX to Alameda. . . . 

Instead, as Fried states, he “invit[ed the jury] to conclude that the terms of the contract were irrelevant because this ‘is a criminal wire fraud case. It is not a civil case for breach of contract.’” (Transcript, p. 3155)  The fact that the crime was charged under a federal wire fraud statute has no relevance to whether an underlying crime was committed.  It merely states the method of communication used in its alleged commission.  The contract at issue here, on the other hand, has everything to do with whether a crime was committed.  Contracts can authorize one party to use another party’s assets and thereby change what would otherwise be criminal conversion into a commonplace, perfectly lawful transaction.  When I drive Avis’s car off the rental lot, I am not stealing it, because my contract with Avis authorizes me to do so.  The jury’s instruction should have allowed the jury to conclude that the terms of service authorized FTX to lend the funds of margin account holders to Alameda.  Indeed, the judge might have reached such a determination as a matter of law.

In seeking to justify his decision not to instruct the jury on the legal import of the express provisions of the terms of service, the judge dismissed them as an “idle communication.” (Transcript, 2853-54)  Fried appropriately concludes:

In a single sentence, Kaplan negated the legal relevance of contract terms, inviting the jury to supply the terms of a private contract from—what? general principles of law? customs of the trade? their own beliefs about what these parties ought to have agreed to? 

There are still important questions about whether SBF might be criminally liable for representations that FTX and he made at various points in time.  (In an earlier post, Fried questioned whether the alleged misrepresentations could plausibly support a criminal conviction, let alone a 25-year prison term.)  But in my view, she lays out a devastatingly persuasive case that the prosecution should not have been allowed to argue to the jury, dozens of times during the trial, that the defendant stole billions of dollars of client funds – at least without much more careful attention to whether the terms of service allowed those funds to be lent.

Before ending, I should mention there are ad hominem reasons why you might discount the foregoing.  As I have disclosed before, I am a friend and coauthor of both Barbara Fried and Joe Bankman, the parents of Sam Bankman-Fried.  

Requiem

Ian Ayres

After a strenuous bike ride in Patagonia last week, I summoned the energy to crank out the first draft of an opinion piece that was published just a couple of days later in the Yale Daily News.  The piece raises several questions about the Committee on Trust in Higher Education’s recommendation to amend Yale’s mission statement.  Turns out, it is a good thing I didn’t wait to speak on this issue, because as I was waiting to board my return flight to JFK, I learned that the University had already adopted the Committee-recommended mission statement.

As a procedural matter, the speed of adoption might be questioned.  The President could have allowed a bit more time for community response.  After my YDN piece appeared, I received a surprisingly large number of emails and texts from colleagues, students, and alumni thanking me for writing it.  This outreach suggests to me that the President’s swift action foreclosed spirited and productive discussion that could otherwise have taken place.  It is now a fait accompli – especially with students and faculty dispersing for the summer.

Nonetheless, I write here to amplify two of the questions I raised initially.

What Knowledge?

With one large exception (which I will discuss below), I predict very little will change at Yale under the new mission statement.  Still, it would have been helpful if the Committee report had gone a bit further in defining what types of knowledge are worthy to create, disseminate, and preserve.  Notwithstanding the deemphasis on improving the world, Yale resources should continue to support scholarship that makes prescriptive arguments.  Novel normative claims is knowledge worthy of University support.

[I am personally reluctant to teach “oughts” in my law classes.  I focus more on what the law “is.”  I try to present and challenge normative arguments of myself and others and let students decide what is best – sometimes papering over normative claims with expedient frames (“Efficiency-minded lawmakers would prefer …”).  In contrast, my scholarship, like most legal scholarship, is awash with prescriptions and suggestions for legal reform, and is worthy of University support.]

And given that the central purpose of the Committee’s work was to restore public trust, it would have been useful for their report to clearly affirm that Yale supports the creation and dissemination of knowledge -- even if it reduces the public’s trust in us.  The math department will not be teaching the President’s new approach to calculating percentage reductions (also adopted by the Secretary of Health and Human Services) even if going along with the White House might have increased  public trust.

What Change?

As I said in my original piece, mission statements can inspire, but they can also meaningfully constrain how an institution deploys its resources.  One might reasonably ask the President how, if the old mission statement was misguided, University resources have been misdeployed in the past, and how the new mission statement is likely to change projects and initiatives going forward.

I predict very little will change.  We will not shutter or diminish the schools’ programs in ethics or leadership – notwithstanding those subjects’ deemphasis in the amended statement.  Likewise, I hope we will not shackle the good work of various clinical programs that teach students by applying their talents toward improving the world.

The one substantial change that has been taking place – both at Yale and at peer institutions– is the dismantling or rebranding of all University programs related to diversity, equity, or inclusion.  The Office of Diversity & Inclusion is now the office for “Employee Engagement & Workplace Culture.”  The Buckley Institute reports that, across the University, Yale has “changed the names of 9 DEI-related offices.”  The current administration has overseen what one might characterize as a 1000% reduction in the number of employees with the word inclusion in their title.

It would be unfair to call Maurie McInnis the Neville Chamberlain of university presidents.  But a central purpose of the new mission statement seems to be a further scrubbing the term inclusion from the University’s website.  Indeed, putting this word to bed may be the only concrete consequence spurred by the changed mission.  A reasonable person might accordingly view the new mission statement not as an effort to enhance public trust, but as a further form of pro-active appeasement.