Tuesday, February 22, 2011
Is "Intellectually Vacuous" the Right Expression for Veil-Piercing Doctrine?
Over at his blog, Steve Bainbridge endorsed a view, inspired by comments from Steve Bradford (Nebraska) at Business Law Prof Blog to the effect that every time he got to teaching "veil-piercing," he was reminded again how "intellectually vacuous" the doctrine was.
I sympathize. I have the same reaction when I teach veil-piercing. Why? It's the tempest in a teapot problem that affects much of what commercial and business lawyers learn in school, on one hand, and what they practice, on the other. Were you inside the teapot of an idiosyncratic case that ends up as an appellate decision on veil-piercing, it would seem like a Category 5 hurricane. You read five or six cases with outrageous facts and try to reconcile how the doctrine for why corporations legitimately exist (individual use them to shield themselves from liability) is exactly the same as the doctrine under which individuals can be tagged (individuals used them to shield themselves from liability). Blow winds and crack your cheeks, rage, blow! But piercing cases are rare, idiosyncratic, and usually marked by some outrageous conduct that makes the decision, in retrospect, not particularly surprising.
But I disagree that the proper description of the problem is intellectual vacuity. The problem is trying to reduce to propositions something that propositions can't reduce. I've been teaching first year contracts and I've encountered this same "vacuity" problem every time the standard is "justice" (as in promissory estoppel), unconscionability, or mistake. Analogical reasoning doesn't work because it is inductive analogy - the cases are supposed to describe a rule - rails in a Wittgensteinian sense - that point you to the next result, and there are no rails, or there are too many rails, or they aren't parallel (metaphorically speaking). The better way to approach this is to understand that (a) we have a non-propositional conception of the prototypes of corporate legitimacy and corporate legerdemain, (b) the prototypes sit in polar opposition on a continuum, and (c) the rationalizing propositions follow the non-propositional and intuitive metaphoric leap from the specific case before us to a prototype. Another in my series of Venn representations of this kind of polarity is at left - this on unconscionability.
Shameless self-promotion alert: I discuss this cognitive process at length (giving credit where credit is due - I didn't make this stuff up) in three recent papers: Metaphor, Models, and Meaning in Contract Law; The Financial Crisis of 2008-09: Capitalism Didn't Fail But the Metaphors Got a "C" (Minn. L. Rev., forthcoming), and The Venn Diagram of Business Lawyering Judgments (46 Seton Hall L. Rev. 1 (2011), forthcoming).
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Interesting chart, I may try using something like it some time. At the moment, my approach is to go over case law, and point out the problems with the "following corporate formalities" line of cases, and then to suggest that Easterbrook was right.
Posted by: Kaimi Wenger | Feb 24, 2011 2:44:32 AM