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Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 RUTGERS JOURNAL OF LAW & PUBLIC POLICY VOLUME 8 SPRING 2011 ISSUE 3 Editor-in-Chief MATT MAISEL Executive Editors SCOTT AMITRANO RICHARD BARCA Symposium Editor Managing Technical Editor JONATHAN M. ROMVARY Business Editor Managing Articles Editors ERIC BERG ALEXANDER F. HERSONSKI Managing Research Editor SANU DEV Managing Notes Editors JONATHAN DEVITO CONRAD HABER Submissions Editors Lead Technology Editor JASON FORTENBERRY Marketing Editor Technology Editors NATHAN ECHOLS STEPHEN TUCKER Notes Editors CHRISTOPHER CHANCLER JOSEPH HASSELL DREW PAKETT JENNIFER VOSBIKIAN MICHAEL YOUNKER ELIZABETH ZIMMER LAURA ZULICK THOMAS J. SZYMANSKI SHASHI DHOLANDAS EVAN SAMPSON Articles Editors PETER BYRANT FLETCHER DUDDY CAITLIN EDWARDS YOUNG JUNG PETER KOZLOWSKI ALLISON PAVERO DAVID SOLOMON MATTHEW STREISFELD KYLE VELLUTATO SOHANA BAROT JUSTIN BERNSTEIN AMANDA BOWERS ALYSA CASTRO SARAH CRANSTON AVIO CROCE JOHN DALVET ANDREW DODEMAIDE AUSTIN EDWARDS SHAWN EDWARDS PHILIP L. HARVEY Staff Editors RACHEL FEUERHAMMER ELENA FIKARIS TERESA FINNEGAN WILLIAN HANNA MARISA HERMANOVICH BRIAN HIGGINS KELLY DOUGHERTY MARK LAZAROFF KATIE MANTON ROSS MAZER Faculty Advisors SARAH E. RICKS DANIELLE REISS CHRISTIAN RIDDELL MARIS MCGARVEY ELIZABETH MELAMED DISA MUSLEH BRIAN QUIGLEY WALI RUSHDAN MICHAEL SCARDUZIO ANDREA SCHLAFER JULIE TERSIGNI SAMUEL WALTZER JOCELYN YOUNG DAMON Y. SMITH Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 About the Rutgers Journal of Law & Public Policy The Rutgers Journal of Law and Public Policy (ISSN 1934-3736) is published three times per year by students of the Rutgers School of Law – Camden, located at 217 North Fifth Street, Camden, NJ 08102. The views expressed in the Rutgers Journal of Law & Public Policy are those of the authors and not necessarily of the Rutgers Journal of Law & Public Policy or the Rutgers School of Law – Camden. Form: Citations conform to The Bluebook: A Uniform System of Citation (18th ed. 2005). Please cite the Rutgers Journal of Law & Public Policy as 8 RUTGERS J.L. & PUB. POL’Y __ (2010). Copyright: All articles copyright © 2010 by the Rutgers Journal of Law & Public Policy, except where otherwise expressly indicated. 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WILLIAMS, B.A., J.D., LL.M., LL.M., Distinguished Professor of Law Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 Rutgers Journal of Law & Public Policy VOLUME 8 SPRING 2011 Current Issues in Public Policy © 2010 by Rutgers University School of Law – Camden ISSN 1934-3736 ISSUE 3 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 Rutgers Journal of Law & Public Policy VOLUME 8 SPRING 2011 ISSUE 3 CONTENTS HOW MARRIAGE BECAME OPTIONAL: COHABITATION, GENDER, AND THE EMERGING FUNCTIONAL NORMS ….. 521 J. HERBIE DIFONZO ASSESSING THE EFFECTS OF A “LOSER PAYS” RULE ON THE AMERICAN LEGAL SYSTEM: AN ECONOMIC ANALYSIS AND PROPOSAL FOR REFORM……………………………………….. 567 MARIE GRYPHON WELFARE, INCOME DETECTION, AND THE SHADOW ECONOMY………………………………………………………….. 614 DREW A. SWANK THE CENTRAL REGISTRY STATUTE FOR ABUSE AND NEGLECT MATTERS IS CONSTITUTIONALLY FLAWED…... 651 W. TODD MILLER Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 HOW MARRIAGE BECAME OPTIONAL: COHABITATION, GENDER, AND THE EMERGING FUNCTIONAL NORMS J. Herbie DiFonzo ∗ I. INTRODUCTION In 1953, sociologist Ray E. Baber confidently asserted that the “opportunity which marriage affords for constant and complete companionship with the person most loved, with the full sanction of society, is its greatest single attraction.” 1 Another mid-20th century text, Paul H. Landis’ “Making the Most of Marriage”, referred to the “long-accepted idea that marriage is the natural state for adults.” 2 Landis noted that marriage “has a more prominent place in both our aspirations and realizations than ever before in American history.” 3 His sociology text equated marriage with the drive to establish family life. Several headings in his chapter on “Needs Fulfilled ∗ J. Herbie DiFonzo, Senior Associate Dean for Academic Affairs and Professor of Law, Hofstra University Law School, lawjhd@hofstra.edu. I thank my frequent co-author and best critic, Ruth C. Stern, for her significant contributions to enhance this Article and the larger research project of which it forms a part. I also thank Patricia Kasting, law librarian par excellence, for her assistance at every turn. 1 RAY E. BABER, MARRIAGE AND THE FAMILY 163 (2d. ed. 1953). PAUL H. LANDIS, MAKING original). 2 THE MOST OF MARRIAGE 8 (1955) (emphasis in Id. “It is through a wise marriage that one can be most fully assured of an enduring love in adulthood. . . . There are other kinds of close comradeship, but society recognized none as full, close, and complete as the marriage tie.” See id. at 21 3 521 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 by Marriage” reflected the era’s rock-solid perception that true love and family life always commence at the altar: “Marriage Meets the Need for Love and Emotional Security”; “Marriage Meets the Need for Status and Appreciation for Personal Worth”; “Marriage Answers the Need for Companionship”; and “Marriage Meets the Physiosexual Need for Response.” 4 In the middle of the 20th century, almost half (48.9%) of all women were married by age twenty, and eight out of ten (80.4%) were married by age twenty-five. 5 In 1960, two-thirds (68%) of all Americans in their twenties were married. 6 But by 2008, just over one-quarter of twenty-somethings (26%) were wed. 7 According to the Census Bureau’s American Community Survey, married-couple family households constituted only 49.7% of all households in 2009. 8 The Census Bureau reported in 2009 that 96.6 million Americans eighteen and older were 4 Id. at 15-26. Landis’ final heading in this chapter averred that “Marriage Is Not a Perfect Institution.” Id. at 32. While insisting that “marriage is designed to meet more human needs than is any other institution,” Landis acknowledged that the high expectations which often accompany marriage can be frustrated by human frailty, rendering marriage “more capable of producing misery, human suffering, and personal torture than any other relationship.” Id.; see also J. HERBIE DIFONZO, BENEATH THE FAULT LINE: THE POPULAR AND LEGAL CULTURE OF DIVORCE IN TWENTIETH-CENTURY AMERICA 14 (1997) ( “[The] greater emotional content of family relations elevated the stakes in marriage, making domestic life delightful when it succeed[s] and devastating when it fail[s] . . . .”). 5 LANDIS, supra note 2, at 10 fig.3. Since grooms are typically older than brides, see id. at 9, the percentages for men married at those ages were lower: 17.7% by age twenty and 66.1% by age twenty-five. Id at 10 fig.3. 6 PEW RESEARCH CENTER, THE DECLINE OF MARRIAGE AND RISE OF NEW FAMILIES i (Nov. 18, 2010), http://pewsocialtrends.org/files/2010/11/pewsocial-trends-2010-families.pdf. 7 Id. The overall numbers are not as stark, but reflect the same trend. In 1960, 72% of American adults were married; by 2008, only 52% were married. Id. at 1. 8 2005-2009 American Community Survey 5-Year Estimates, Table S1101: Households and Families, U.S. CENSUS BUREAU, http://factfinder.census.gov/servlet/STTable?_bm=y&qr_name=ACS_2009_5YR_G00_S1101&-geo_id=01000US&ds_name=ACS_2009_5YR_G00_&-_lang=en&-format=&-CONTEXT=s (last visited May 7, 2011) (reporting that of 112,611,029 households in 2009, 55,974,600 were married-couple households). 522 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 unmarried, a group comprising 43% of all U.S. residents eighteen and older. 9 Children’s living arrangements have also undergone substantial change. In the past generation, the percentage of children in the United States who live with two married parents has markedly declined. In 1971, 83% of children under the age of eighteen lived with two married parents, while in 2010 only 66% did so. 10 According to the Census Bureau estimates for 2009, of the 74.2 million children in the United States, 51.8 million lived with two parents, while 19.4 million lived with only one parent. 11 Further, 2.3 million children lived with other relatives, while over 600,000 lived with non-relatives only. 12 The half-century that followed the 1960s has virtually ended the stigma associated with illegitimacy and single parenthood. 13 9 Facts for Features: Unmarried and Single Americans Week Sept. 19-25, 2010, U.S. CENSUS BUREAU NEWS (July 19, 2010), http://www.census.gov/newsroom/releases/pdf/cb10ff-18_single.pdf. 10 See Rose M. Kreider & Diana B. Elliott, The Complex Living Arrangements of Children and Their Unmarried Parents (Population Assoc. of Am., Poster Presentation, May 2, 2009), available at http://www.census.gov/population/www/socdemo/complex-abstract.pdf; Press Release, U.S. Census Bureau, U.S. Census Bureau Reports Men and Women Wait Longer to Marry, (Nov. 10, 2010), http://www.census.gov/newsroom/releases/archives/families_households/cb1 0-174.html. 11 Living Arrangements of Children Under 18 Years Old: 1960 to Present, Table CH-1, U.S. CENSUS BUREAU, http://www.census.gov/population/www/socdemo/hh-fam.html (last visited May 7, 2011). 12 Id. Common law parentage principles aimed to reinforce the central role of marriage. Children born to a married woman were legally the offspring of their biological mother and her husband. See Theresa Glennon, Somebody’s Child: Evaluating the Erosion of the Marital Presumption of Paternity, 102 W. VA. L. REV. 547, 562-65 (2000) (describing the foundations and evolution of paternity determinations at common law). If the child’s mother was unmarried, only she was considered the child’s legal parent. See id. The term applied to an “illegitimate” child, filius nullius (“son of no one”), suggested the law’s disdain for—and simultaneous fear of—these progeny. See id. Acknowledging these children risked upending the regime of marriage, viewed as society’s bedrock. See id. Over the same period that washed away these erstwhile principles delineating legitimate from illegitimate children, the percentage of children born to unmarried mothers has skyrocketed—increasing eightfold from 5% 13 523 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 It also significantly enhanced the status of women, thus increasing the potential for their economic self-sufficiency. 14 These seismic social changes have fundamentally altered our conceptions of what makes a family. In June Carbone’s words, “the dismantling of marriage as the exclusive determinant of family connections . . . [has been] well documented in every discipline that has undertaken the task.” 15 The family now encompasses a collection of diverse, sometimes fragile but usually hearty domestic arrangements that comprise the so-called postmodern family—single mothers, blended families, cohabiting couples, lesbian and gay partners, and multi-generational families, in addition to heterosexual married couples and their children. 16 Consider these items from four recent years, each radically at odds with the predominant view of family life in the mid-20th century: In 2007, almost three in ten (28%) of the unmarried women who gave birth were living with a cohabiting partner. 17 percent in 1960 to 41% percent in 2008. PEW RESEARCH CENTER, supra note 6, at 2. 14 See Janet Radcliffe Richards, Symposium, The Meaning of Marriage: Metaphysics for the Marriage Debate, 42 SAN DIEGO L. REV. 1125, 1135 (2005) (“Sex before marriage is normal, childbearing by single women and unmarried couples is no longer much condemned, men can be held responsible for the support of their children irrespective of whether they are married, and married couples can deal with their tax and incomes separately.”). Robert T. Michael attributed the divorce rate rise beginning in the 1960s not to the liberalization of divorce laws, but to several factors including: the diffusion of contraceptive techniques and the increase in women’s income during this period which reduced their financial dependence on their husbands. See Robert T. Michael, Why Did the U.S. Divorce Rate Double within a Decade?, in 6 RESEARCH IN POPULATION ECONOMICS, 367-99 (T. Paul Schultz ed., 1988). JUNE CARBONE, FROM PARTNERS TO PARENTS: THE SECOND REVOLUTION IN FAMILY LAW 227 (2000). 15 See JUDITH STACEY, IN THE NAME OF THE FAMILY: RETHINKING FAMILY VALUES IN THE POSTMODERN AGE 6-7 (1996) ( “[T]he term postmodern family . . . signal[s] the contested, ambivalent, and undecided character of our contemporary family cultures.”); Barbara Stark, Marriage Proposals: From One-Size Fits-All to Postmodern Marriage Law, 89 CALIF. L. REV. 1479, 1481 n.1 (2001) ( “[T]here is a widespread perception that ‘anything goes’ with respect to contemporary marriage.”). 16 17 JANE LAWLER DYE, FERTILITY OF AMERICAN WOMEN: 2008 1 (U.S. Census Bureau, ed., Nov. 2010), http://www.census.gov/prod/2010pubs/p20-563.pdf. 524 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 In 2008, more than four out of every ten births (41%) were to unmarried women, 18 and more than six out of ten (61%) women with a birth in the past year were in the labor force. 19 In 2009, the Census Bureau reported that 31.7 million Americans lived alone. 20 They comprised 27% of all households, up from 17% in 1970. 21 In 2010, Illinois became the 11th state to pass a “civil union” law which will allow unrelated adults, regardless of gender, to share “the same legal obligations, responsibilities, protections, and benefits as are afforded or recognized by the law of Illinois to spouses . . . .” 22 Although our society still exhibits a “cultural ambivalence about families not based on genetic ties,” 23 social acceptance of a Gretchen Livingston & D’Vera Cohn, The New Demography of American Motherhood, 1 (Pew Research Center ed., 2010), http://pewsocialtrends.org/assets/pdf/754-new-demography-ofmotherhood.pdf. In 1990, only 28% of births were to unmarried women. Id. The substantial rise in births to unmarried women “reflects both their rising birth rates and the shrinking share of adults who are married.” Id. Significantly, the rate of births to unmarried women varies greatly by race and ethnicity. The proportions of births to unmarried women in 2008 included 72% of black births, 53% of Hispanic births, 29% of white births, and 17% of Asian births. Id. at 11-12. 18 19 DYE, supra note 17, at 1. Family Status and Household Relationship of People 15 Years and Over, by Marital Status, Age, and Sex, 2009: Table A2, U.S. CENSUS BUREAU, http://www.census.gov/population/socdemo/hh-fam/cps2009/tabA2-all.xls (last visited May 7, 2011). 20 Press Release, U.S. Census Bureau, Facts for Features: Unmarried and Single Americans Week: Sept. 19-25, 2010 (July 19, 2010), available at http://www.census.gov/newsroom/releases/archives/facts_for_features_speci al_editions/cb10-ff18.html. 21 Illinois Religious Freedom Protection and Civil Union Act, 2010 Ill. Legis. Serv. 96-1513 (West); Monique Garcia, Illinois Civil Unions Signed into Law, CHICAGOTRIBUNE.COM, Jan. 31, 2011, http://articles.chicagotribune.com/201101-31/news/ct-met-quinn-civil-union-signing-20110131_1_civil-unionslesbian-couples-gay-marriage. Note that under this legislation, both homosexual and heterosexual couples may form civil unions, which offer them the same legal rights and obligations as afforded by marriage. 22 Darra L. Hofman, “Mama's Baby, Daddy's Maybe:” A State-By-State Survey of Surrogacy Laws and their Disparate Gender Impact, 35 WM. 23 525 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 wider range of family forms has increased. This multiplicity of family structures means that marriage has become an optional arrangement for creating a family. How did this happen? And where is the American family headed, in both cultural and legal terms? This Article sketches out a framework for analysis of this central social question, and argues that family law is moving in the direction of adopting functional norms for determining family composition and adjudicating family disputes. This Article is part of a larger research project in which I seek to assess the state of families and the family legal system in the 21st century, and to argue that American society is transitioning along the continuum from exclusively sanctioning families based on biological and adoptive bounds to legally recognizing families crafted on functional norms. After this Introduction, Part II of this Article explores the decline of marriage as an institution and how it became an optional route to family formation. Perhaps framing the issue as one of decline is inapt, because many of the millions forming new families have not backed away from marriage as much as they have chosen a more attractive or available alternative. At the same time, many who cohabit in lieu of marriage see their state as a prequel to marriage; some, particularly lesbian and gay male couples, are forbidden in most jurisdictions to choose marriage. Part III turns to cohabitation, which has, to a dramatic extent, replaced marriage as a means to create a family. But cohabitation has not displaced the ideal of marriage in the public mind. Most Americans still strongly desire matrimony and most eventually marry. Living together, is for some, an exploratory prelude to marriage. For others, it is the only readily available alternative to remaining single. For yet another segment, cohabitation is a waiting room for better times, which may or may not arrive. Examining the motivations and characteristics of today’s cohabitants presents a living diagram of evolving social trends in how we shape our forms of intimate association. Part IV examines the elephant in the room of all family structures: the role of gender. Whether the couple marries or MITCHELL L. REV. 449, 452 (2009) (quoting Jean Benward, Lecture at American Society for Reproductive Medicine 2005 Conference, Adoption and Gamete Donation: Similarities and Difference (Oct. 15-16, 2005) (internal quotations omitted)). 526 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 cohabits, gender still plays a determinant role in how the couple relates to each other and in how their family copes within the broader society. While the legal system in the past generation has labored to eliminate different rules for women and men, the pervasiveness of gender continues. Change has occurred on the home front, but very slowly. No discussion of family norms is complete without an attempt to encompass the influence of gender on family decision-making and on the relative financial strength and resources of each member of the couple. Part V considers the emerging functional norms, which are governing the resolution of family law disputes. Until recently, the legal system categorized families according to their biological (or adoptive) ties. But today, in the resolution of legal disputes in blended and upended families, nature is beginning to yield to nurture. The biological parents of children who have not taken a significant role in parenting are losing court battles to adults who lack a genetic tie but who have established an actual parent-child bond. What matters most—in an increasing number of cases—is whether the adult has functioned as a parent in the child’s life. Similarly, the benefits and burdens, which the law once allocated only to marriage, are increasingly applied to those intimate associations that outnumber marriages and whose creation, composition, and dissolution are greatly contested. Behavioral norms are starting to replace longestablished legal rules governing family formation, regulation, and dissolution. But functional norms are not universally accepted. We have a long way to go before we achieve equal legal recognition for all families. II. HOW DID MARRIAGE BECOME AN OPTIONAL ARRANGEMENT FOR CREATING A FAMILY? There is a paradox in Americans’ relationship to marriage. Most Americans, even if they reject the institution entirely or defer their entry into it, still hold up marriage as the ideal. In a 2006 Gallup Poll, 91% reported that they were either married or planned to be so someday. 24 Only 4% had definitely ruled out Lydia Saad, Americans Have Complex Relationship With Marriage, GALLUP.COM, (May 30, 2006), http://www.gallup.com/poll/23041/AmericansComplex-Relationship-Marriage.aspx. 24 527 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 marriage. 25 The ideal of marriage still serves as the pedestal for intimate partnership. National poll results from 2009 reflected strong support for marriage as the exclusive moral framework for sexual relationships and bearing children. 26 Ninety-two percent expressed the belief that an affair between married persons is morally wrong; 45% found it morally wrong to have a baby outside marriage; 40% were of the same opinion regarding sex between unmarried women and men; and, a generation after the no-fault divorce revolution, 30% voiced their opinion that divorce is morally wrong. 27 Marriages also score high marks in satisfaction. Almost two-thirds of respondents who graded their own marriages in a 2006 survey gave their unions an “A.” 28 Id. Yet a quick glance at the recent popular bookshelf suggests a belief in marriage as dispensable, or perhaps unattainable. See, e.g., EMILY DUBBERLEY, I'D RATHER BE SINGLE THAN SETTLE: SATISFIED SOLITUDE AND HOW TO ACHIEVE IT (2006); ROSANNA HERTZ, SINGLE BY CHANCE, MOTHERS BY CHOICE: HOW WOMEN ARE CHOOSING PARENTHOOD WITHOUT MARRIAGE AND CREATING THE NEW AMERICAN FAMILY (2006); JEN SCHEFFT, BETTER SINGLE THAN SORRY: A NOREGRETS GUIDE TO LOVING YOURSELF AND NEVER SETTLING (2007);; LOUISE SLOAN, KNOCK YOURSELF UP: NO MAN? NO PROBLEM: A TELL-ALL GUIDE TO BECOMING A SINGLE MOM (2007). 25 Marriage, GALLUP.COM, (May 2009), http://www.gallup.com/poll/117328/Marriage.aspx. 26 Id. The value placed on marital fidelity is evident in the results of a 2008 poll in which 64% of respondents reported that they would not forgive their spouse for having an affair. Jeffrey M. Jones, Most Americans Not Willing to Forgive Unfaithful Spouse, GALLUP.COM, (Mar. 25, 2008), http://www.gallup.com/poll/105682/Most-Americans-Willing-ForgiveUnfaithful-Spouse.aspx. The stated intention not to forgive does not, of course, necessarily predict the consequences of discovering adultery. Whether forgiven or not, many marriages survive instances of cheating. See, e.g., Benedict Carey & Tara Parker-Pope, Marriage Stands Up for Itself, N.Y. TIMES, June 28, 2009, http://www.nytimes.com/2009/06/28/fashion/28marriage.html?_r=1&emc= eta1(“Infidelity is one of the most common reasons cited by people who divorce. But surveys find the majority of people who discover a cheating spouse remain married to that person for years afterward. Many millions more shrug off, or work through, strong suspicions or evidence of infidelity.”). 27 28 Marriage, supra note 26. 27% graded their marriages as a “B”; 6% a “C”; 1% a “D”; and the remaining 1% either “F” or “No Opinion.” Id.; see also Carey & Parker-Pope, supra note 27 (“Despite strong social riptides working against it— the liberalization of divorce laws, the vanishing stigma of divorce, the continual online temptations of social sites like MySpace or Facebook—the marriage bond is far stronger in 21st-century America than many may assume.”). 528 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 Yet the bonds of marriage are unmistakably weaker today. No-fault divorce was not the cause of the demise of marriage as the mainstay for domestic partnership, but it served as a significant cultural marker. Our culture is simply too diverse, too variable, and increasingly too atomistic to support the traditional framework of life-long marriage. 29 As has been well documented, the rapid rise in divorces in the 1960s preceded the onset of no-fault divorce. In considering which cultural and legal developments have had the greatest impact on marriage in the past half century, the dramatic rise in divorce rates in the wake of the passage of nofault divorce laws has often taken center stage. But a closer look at the divorce statistics suggests that notion to be misleading. In 1960, the divorce rate stood at its postwar low of 2.2 divorces per 1,000 of the population. 30 The rate of divorce then began a dramatic climb in the 1960s, the decade before no-fault divorce, reaching 3.5 divorces per 1,000 of the population in 1970. 31 The divorce rate thus rose 59% during the 1960s, a spectacular and unprecedented rise during peacetime, 32 and one occurring in the face of largely unchanged fault divorce laws. 33 29 See generally MILTON C. REGAN, ALONE TOGETHER: LAW AND THE MEANINGS OF MARRIAGE (1999) (exploring the tensions between spouses as separate individuals with their own aims, and marital partners committed to the joint goals of their union). U.S. CENSUS BUREAU, STATISTICAL ABSTRACT OF THE UNITED STATES: 2006 64 tbl.72 (2006), available at http://www.census.gov/prod/2005pubs/06statab/vitstat.pdf. 30 Id. California’s Family Law Act of 1969, ch. 1608, § 8, 1969 Cal. Stat. 3314, 3324) (codified as amended at CAL. FAM. CODE § 2310 (West, Westlaw through Ch, 20 of 2011 Reg. Sess.) was the nation’s first true no-fault divorce law and constituted “the most radical transformation of divorce law in America history.” James Herbie DiFonzo, Customized Marriage, 75 IND. L.J. 875, 884 (2000). 31 32 War has had a significant impact on the divorce rate, causing a sharp rise in the divorce rate once the conflict ends, then decreases in succeeding years. During the 20th century, the Second World War triggered the largest postwar divorce boom. In 1946, the divorce rate reached 4.4 per thousand, a rate double that of 1960. See PAUL H. JACOBSON, AMERICAN MARRIAGE AND DIVORCE 90 tbl.42 (1959); supra note 30. Although skeptics remain, Andrew Cherlin demonstrated that the surge in national divorce rates began in the early 1960s, prior to the liberalization of 33 529 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 In 1971, the year after the nation’s first no-fault divorce law took effect in California, the national divorce rate stood at 3.7, then climbed through the decade until it reached the 1980 rate of 5.2 divorces per thousand population. 34 This increase of 41% was quite substantial, of course, but it also represented a dramatic slowing of the divorce rate during the first no-fault divorce decade. 35 The divorce rate peaked at 5.3 divorces per 1,000 of the population in 1981, after most of the country had experienced no-fault divorce for several years. 36 The rate then slowly but regularly declined until it settled at 3.6 divorces per 1,000 of the population in 2005. 37 This latter divorce rate matched the rate for 1970-71, the year of the very beginning of no-fault divorce. 38 In short, during the first thirty-five years of no-fault divorce, the divorce rate rose sharply (although not as steeply as in the decade before no-fault divorce) and then fell slowly, and has now returned to the rate experienced before nofault divorce began. 39 divorce law in the 1970s. See generally ANDREW J. CHERLIN, MARRIAGE, DIVORCE, REMARRIAGE (1992). 34 U.S. CENSUS BUREAU, supra note 30. Id. The divorce rate increase in the 1970s (41%) was just over two-thirds (69%) of the divorce rate increase in the 1960s (59%). Id. References suggesting that the 1970s spawned the “greatest divorcing generation” thus need to be understood within the larger context of marital dissolution rates, which peaked in the 1970s after rapidly rising the previous decade. Tara Parker-Pope, What Brain Scans Can Tell Us About Marriage, N.Y. TIMES, June 4, 2010, http://www.nytimes.com/2010/06/06/fashion/06gore.html?hp (quoting economist Betsey Stevenson). 35 U.S. CENSUS BUREAU, STATISTICAL ABSTRACT OF THE UNITED STATES: 2008 63 tbl.77 (2008), available at http://www.census.gov/prod/2007pubs/08abstract/vitstat.pdf. see DiFonzo, supra note 31, at 906 (“By 1977, only three states (Illinois, Pennsylvania, and South Dakota) remained wedded to exclusively fault concepts in marital dissolutions.”) 36 37 U.S. CENSUS BUREAU, supra note 36. 38 Id. 39 Katherine Caldwell is largely correct in maintaining that “[t]he ‘divorce revolution’ of the 1970s was . . . less a revolution than a continuation and expansion of postwar divorce patterns . . . .” Katherine L. Caldwell, Not Ozzie 530 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 Even though no-fault divorce is not the villain many hold it to be, there is no question that the institutional predominance of marriage is now ebbing. While individual couples can hew to a marriage commitment (and millions do), their faith and actions are sustained primarily by themselves and by the support structures they draft into service, not by universal social norms. 40 The lessening of marriage’s hold on the family social structure does not, however, mean that Americans hold families in any less regard. A 2010 nationwide survey by the Pew Research Center summarized key findings on the American public’s views of what constitutes a family: By emphatic margins, the public does not see marriage as the only path to family formation. Fully 86% say a single parent and child constitute a family; nearly as many (80%) say an unmarried couple living together with a child is a family; and 63% say a gay or lesbian couple raising a child is a family. The presence of children clearly matters in these definitions. If a cohabiting couple has no children, a majority of the public says they are not a family. Marriage matters, too. If a childless couple is married, 88% consider them to be a family. 41 No matter what type family one belongs to, the members of that family generally see it in very positive terms. Over threequarters (76%) of Americans in 2010 claimed that their own family “is the most important element of their life.” 42 Seventyand Harriet: Postwar Divorce and the American Liberal Welfare State, 23 LAW & SOC. INQUIRY 1, 47 (1998). See Janet Dolgin, Symposium, Genes and Disability: Defending Health and the Goals of Medicine: The Ideological Contest of the Disability Rights Critique: Where Modernity and Tradition Meet, 30 FLA. ST. U. L. REV. 343, 350 (2003) (describing the recent “vision of family broadly predicated on Enlightenment values, including especially equality and liberty (framed as autonomy),” and noting that adult family member “increasingly . . . view themselves as autonomous individuals free to negotiate the terms of the familial relationships.”) 40 41 PEW RESEARCH CENTER, supra note 6, at ii. 42 Id. 531 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 five percent were “very satisfied” with their family life, and more (85%) affirm that the family they live in now is either as close as (45%) or closer than (40%) the family in which they grew up. 43 Consider families with children born through assisted reproductive technology (“ART”). In this area, the pace of cultural change has truly been dramatic. Donor insemination efforts in the 1950s and 1960s were “viewed with such horror that bills were introduced in state legislatures to ban the procedure.” 44 But by the end of the 20th century, almost threequarters of the states had adopted laws facilitating artificial insemination procedures by declaring the consenting husband 45 of the sperm recipient to be the legal father. The development of in vitro fertilization in the 1970s was similarly greeted initially with horror, then tolerated, and is now both widespread and deemed unremarkable. 46 ART has tremendously increased in complexity and effectiveness in the last few years. 47 A child created through ART “might have a genetic mother, a genetic father, any number of social/intended parents, and a gestational mother.” 48 Many infertile heterosexual couples, gay and lesbian couples, as well as single parents have taken advantage of ART. 49 At the same time, the rise in the number of gestational surrogates—women who bear the genetic children of others—has created another 43 Id. The general public is markedly more optimistic about “[t]he institution of marriage and the family” (67%) than about “[o]ur ability to get along with other countries” (56 %), “[o]ur system of education” (50%), “[t]he economic system over the long run” (46%), and “[m]oral and ethical standards” (41%). Id. at 4. 44 Lori B. Andrews & Nanette Elster, Regulating Reproductive Technologies, 21 J. LEGAL MED. 35, 36 (2000). 45 Id. 46 See id. at 36-40. See Jennifer L. Rosato, The Children of ART (Assisted Reproductive Technology): Should the Law Protect Them From Harm?, 2004 UTAH L. REV. 57, 57-58 (2004). 47 48 Hofman, supra note 23, at 450. 49 Rosato, supra note 47, at 57-58. 532 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 generation of familial and legal dilemmas for our society. 50 Seen as a whole, collaborative reproduction “is forcing a redefinition of family” by “making a biological distinction between gestation and genetics in determining parentage as well as a consideration of intentionality in defining the family.” 51 American society has moved past the freedom to have sex without reproduction, and now considers the choice to reproduce without sex. 52 The increase in the reported number and visibility of samesex couples has also been striking, paralleling the rise in the growth and acceptance of unorthodox family arrangements. 53 Same-sex couples have clearly not achieved equal treatment, either culturally or legally, but they have made tremendous strides in the past few years. Research data indicates that the percentage of Americans who favor allowing gays to adopt children rose from 38% in 1999 to 46% in 2006 to 53% in 2009. 54 A 2009 Gallup Poll reported that 73% believe that See generally J. Herbie DiFonzo & Ruth C. Stern, The Children of Baby M., 39 CAP. U. L. REV. (forthcoming 2011). 50 Andrews & Elster, supra note 44, at 46. See also Michael J. Malinowski, A Law-Policy Proposal to Know Where Babies Come From During the Reproduction Revolution, 9 J. GENDER RACE & JUST. 549, 549-50 (2006) (noting that developments in artificial reproduction are expanding parental choice not only about whether to have children but also about their offspring’s genetic characteristics). See generally JANET L. DOLGIN, DEFINING THE FAMILY: LAW, TECHNOLOGY AND REPRODUCTION IN AN UNEASY AGE (1997). 51 52 See generally JOHN DEWITT GREGORY LAW 163-181 (3d ed. 2005). ET AL., UNDERSTANDING FAMILY 53 The 2000 U.S. Census counted 601,209 gay and lesbian families. DAVID M. SMITH & GARY J. GATES, GAY AND LESBIAN FAMILIES IN THE UNITED STATES: SAME-SEX UNMARRIED PARTNER HOUSEHOLDS 3 (2001), available at http://www.urban.org/UploadedPDF/1000491_gl_partner_households.pdf. This total included 304,148 gay male families, and 297,061 lesbian families. Id. Ten years earlier, the U.S. Census Bureau had reported 145,130 total gay and lesbian families (81,343 male, and 63,787 female). Id. The statistics for 2000 represent a 314% increase. Id. Less Opposition to Gay Marriage, Adoption, and Military Service, PEW RESEARCH CENTER, (Mar. 22, 2006), http://people-press.org/report/273/lessopposition-to-gay-marriage-adoption-and-military-service (data for 1999 and 2006); Press Release, Quinnipiac University, Gays in the Military should be Allowed to Come Out, U.S. Voters Tell Quinnipiac University National Poll; Key is Belief that Being Gay is By Choice or By Birth, (Apr. 30, 2009), 54 533 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 same-sex couples should be entitled to inheritance rights, while 67% say gay and lesbian domestic partners should have access to health insurance and other employee benefits. 55 By a large margin, Americans oppose the denial of federal benefits to spouses in same-sex marriages. 56 57% of Americans favor “allowing gay and lesbian couples to enter into legal agreements with each other that would give them many of the same rights as married couples.” 57 Although still a minority position, the public’s support for gay marriage has increased from 27% in 1996 to 44% in 2010. 58 Moreover, polls suggest that the trend towards legal recognition of samesex couples is more pronounced among younger people. 59 This http://www.quinnipiac.edu/x1295.xml?ReleaseID=1292 [hereinafter 2009 Quinnipiac Poll]. (data for 2009) 55 Jeffrey M. Jones, Majority of Americans Continue to Oppose Gay Marriage, GALLUP.COM, (May 27, 2009), http://www.gallup.com/poll/118378/majority-americans-continue-opposegay-marriage.aspx. 56 54% of Americans polled in 2009 opposed the federal law denying samesex couples access to federal benefits; thirty-nine percent supported their exclusion. 2009 Quinnipiac Poll, supra note 54. 57 Press Release, Pew Research Center, Majority Continues to Support Civil Unions: Most Still Oppose Same-Sex Marriage 1 (Oct. 9, 2009), available at http://pewforum.org/uploadedfiles/Topics/Issues/Gay_Marriage_and_Homo sexuality/samesexmarriage09.pdf (reporting on 2009 Pew Research Center poll). In the same 2009 poll, 37% indicated their opposition to civil unions. Id. The underlying moral issue cannot be ignored in any discussion of the public acceptance of same-sex unions. Homosexual behavior is deemed morally wrong by nearly half of the public (49%), while 9% say it is morally acceptable and 35% say it is not a moral issue. Id. 58 Jeffrey M. Jones, Americans' Opposition to Gay Marriage Eases Slightly, GALLUP.COM, (May 24, 2010), http://www.gallup.com/poll/128291/Americans-Opposition-Gay-MarriageEases-Slightly.aspx (reporting Gallup Poll results). Two Pew Research Center polls in 2010 reported that 42% favor same-sex marriage while 48% are opposed. Support for Same-Sex Marriage Edges Upward: Majority Continues to Favor Guys Serving Openly in Military, PEW RESEARCH CENTER, (Oct. 6, 2010), http://people-press.org/report/662/same-sex-marriage (hereinafter Support for Same-Sex Marriage Edges Upward). 59 Americans born after 1980 favor allowing gays and lesbians to marry legally by a 53% to 39% margin. Support for Same-Sex Marriage Edges Upward, supra note 58. 534 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 latter perception is consistent with survey findings that “the young are much more inclined than their elders to view cohabitation without marriage and other new family forms— such as same sex marriage and interracial marriage—in a positive light.” 60 The last sixty years have seen divorce rates rise and fall. But the more significant cultural signposts are found in the statistics showing the marked decline in the rates for both marriages and births over the same period. As Table 1 shows, the divorce rate rose in the late 1960s, crested in 1980 and has since receded. 61 Data for 2009 indicate that the divorce rate has now dipped slightly below the 1970 level just prior to the spread of no-fault divorce. 62 The marriage rate varied within a range of 8.5% to 10.6% during the first three decades following 1955. 63 It then began a pronounced decline, from 9.8% in 1990 to 6.8% in 2009. 64 The birth rate has steadily decreased from a 1955 high of 25% to a 2009 low of 13.6%, a downturn of nearly 46%. 65 60 PEW RESEARCH CENTER, supra note 6, at i. 61 See infra Table 1. 62 See infra Table 1. 63 See infra Table 1. 64 See infra Table 1. See also Jeremy Greenwood & Nezih Guner, Marriage and Divorce Since World War II: Analyzing the Role of Technological Progress on the Formation of Households 1, (Nat’l Bureau of Econ. Research, Working Paper No. 10772, Sep. 2004), available at http://www.arts.cornell.edu/econ/CAE/guner.pap.pdf (analyzing data to conclude that, out of non-widows between the ages of 18 to 64, in 1950 there were 211 marriages per 1,000 unmarried women as compared with just 82 in 2000). 65 See infra Table 1. 535 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 Table 1. Births, Marriages, and Divorces, 1950-2009: Rate per 1,000 Population 66 Year Births Marriage Divorces s 1950 24.1 11.1 2.6 1955 25.0 9.3 2.3 1960 23.7 8.5 2.2 1965 19.4 9.3 2.5 1970 18.4 10.6 3.5 1975 14.6 10.0 4.8 1980 15.9 10.6 5.2 1985 15.8 10.1 5.0 1990 16.7 9.8 4.7 1995 14.6 8.9 4.4 2000 14.4 8.3 4.1 2005 14.0 7.7 3.7 2009 13.6 6.8 3.4 See U.S. CENSUS BUREAU, STATISTICAL ABSTRACT OF THE UNITED STATES: 2007 63 tbl.76 (2007), available at http://www.census.gov/prod/2006pubs/07statab/vitstat.pdf (providing table data for the years 1950-2000); CTRS. FOR DISEASE CONTROL & PREVENTION, U. S. DEP’T OF HEALTH AND HUMAN SERVS., 56 NATIONAL VITAL STATISTICS REPORTS, BIRTHS, MARRIAGES, DIVORCES, AND DEATHS: PROVISIONAL DATA FOR MARCH 2007 1 tbl.A (Oct. 30, 2007), http://www.cdc.gov/nchs/data/nvsr/nvsr56/nvsr56_04.pdf (providing table data for the year 2005, statistics measured by 12-month period ending in March); CTRS. FOR DISEASE CONTROL & PREVENTION, U. S. DEP’T OF HEALTH AND HUMAN SERVS., 58 NATIONAL VITAL STATISTICS REPORTS, BIRTHS, MARRIAGES, DIVORCES, AND DEATHS: PROVISIONAL DATA FOR AUGUST 2009 1 TBL.A (May 10, 2010), http://www.cdc.gov/nchs/data/nvsr/nvsr58/nvsr58_18.pdf (providing table data for the year 2009, statistics measured by 12-month period ending in August). 66 536 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 Family life no longer centers on married couples and their children. Marriage has become “just one of several permissible choices for individuals who wish to pursue an intimate relationship within the framework of the law.” 67 What about children? Between 1940 and 1955, the percentage of births to unmarried women slowly grew from 3.8% of all births to 4.5%. 68 It then rose more rapidly, and in 2008 over 40% of all births were to unmarried women, as shown in Table 2. 67 Jana B. Singer, The Privatization of Family Law, 1992 WIS. L. REV. 1443, 1453. That marriage had lost its preeminence both culturally and legally became evident a generation ago. Comparing national surveys done in 1957 and 1976, Joseph Veroff and his colleagues reported that the most dramatic of the changes in those two decades came in the “increased tolerance of people who reject marriage as a way of life.” JOSEPH VEROFF ET AL., THE INNER AMERICAN: A SELF-PORTRAIT FROM 1957 TO 1976 191 (1981). That laws regulating households would be required to encompass a great number of these alternatives to conjugality was signaled by the Supreme Court in Moore v. City of E. Cleveland, 431 U.S. 494, 498-99 (1977) (holding that a statute limiting household occupancy was unconstitutional because it intruded upon “freedom of personal choice in matters of marriage and family”). U.S. CENSUS BUREAU, STATISTICAL ABSTRACT OF THE UNITED STATES: 2003 23 tbl.HS-14 (2003), available at http://www.census.gov/statab/hist/HS14.pdf. However, the birth rate per 1,000 unmarried women (15-44 years) increased more rapidly in those years, from 7.1 in 1940 to 19.3 in 1955. Id. 68 537 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 Table 2. Unmarried Childbearing, 1960-2008 69 Year Birth rate per 1,000 unmarried women 15-44 years Percentage all births unmarried women 1960 21.6 5.3 1965 23.4 7.7 1970 26.4 10.7 1975 24.5 14.3 1980 29.4 18.4 1985 32.8 22.0 1990 43.8 26.6 1995 44.3 32.2 2000 44.1 33.2 2008 52.5 40.6 of to Id. (providing table data for years 1960-1985); Table 85. Births to Unmarried Women by Race, Hispanic Origin, and Age of Mother: 1990 to 2006, U.S. CENSUS BUREAU, http://www.census.gov/compendia/statab/2010/tables/10s0085.pdf (last visited May 15, 2011); Table 86, Births to Teens and Unmarried Mothers and Births with Low Birth Weight by Race and Hispanic Origin: 1990 to 2007,U.S. CENSUS BUREAU, http://www.census.gov/compendia/statab/2010/tables/10s0086.pdf (last visited May 15, 2011); National Vital Statistics Reports, Births: Final Data for 2008, CENTERS FOR DISEASE CONTROL, 90 tbl. 15 (Dec. 2010), , http://www.cdc.gov/nchs/data/nvsr/nvsr59/nvsr59_01.pdf . 69 538 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 Not surprisingly, the trend for the percentage of children living in families formed by marriage follows the same pattern as shown by the downward trajectory of marriages, as seen in Table 3. Table 3: Marriage and Children-in-Marriage Statistics, 1970-2000 70 1970 1980 1990 2000 Percent of Adults 71.7 Married 65.5 61.9 59.5 Percent of First 73.3 Marriages Intact 67.7 62.5 58.5 Percent of Births 89.3 to Married Parents 81.6 72.0 66.8 Percent of 68.7 Children Living with Own Married Parents 64.0 60.8 59.7 Percent of 85.2 Children Living with Two Married Parents 76.7 72.5 68.1 Americans are clearly dethroning marriage from its place as the primary adult relationship. But the demographics do not tell the entire story. Millions of couples now cohabit instead of marrying, but is this decision represents something less than an outright rejection of marriage. The next section explores the ramifications of cohabitation’s displacement of marriage. 70 See DAVID BLANKENHORN, THE FUTURE OF MARRIAGE 218 tbl.1 (2007) (data drawn from U.S. Census Bureau statistics). 539 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 III. COHABITATION: MARRIAGE’S ALTERNATIVE OR ITS PREQUEL? Marriage is in decline, but cohabitation rates are soaring. Defined as a man and woman living together in a nonmarital sexual relationship, cohabitation rivals marriage as a means to create a family. It has not, however, dislodged the ideal of marriage in the public mind. The marital state is still very desirable and most do participate in it at some point. 71 For some, living together is an exploratory prelude to marriage. Others view it as the only feasible alternative to remaining alone. Still for others, cohabitation is a period of expectation, hoping for better fortune in the future. Examining the motivations and characteristics of today’s cohabitants presents strong evidence of the evolving social trends in intimate association, since “cohabitation has become the norm for both men and women both as their first form of union and after divorces.” 72 From 1987 to 2002 the percentage of women aged thirty-five to thirty-nine who had ever cohabited doubled, from 30% to 61%. 73 More than half of all marriages occurring between 1990 and 1994 were preceded by cohabitation, a jump of 40% as compared to marriages entered into between 1965 and 1974. 74 Approximately 65% of marital unions between men and women Wendy D. Manning & Pamela J. Smock, Measuring and Modeling Cohabitation: New Perspectives From Qualitative Data, 67 J. MARRIAGE & FAM. 989, 989 (2005). 71 TOM W. SMITH, THE EMERGING 21st CENTURY AMERICAN FAMILY, GSS SOCIAL CHANGE REPORT NO. 42 (Nat’l Op. Research Ctr., ed., Nov. 24, 1999), available at http://cloud9.norc.uchicago.edu/dlib/sc-42.htm. 72 73Marriage and Cohabitation in the United States: A Statistical Portrait Based on Cycle 6 (2002) of the National Survey of Family Growth, CTRS. FOR DISEASE CONTROL & PREVENTION, 4 (Feb. 2010), http://www.cdc.gov/nchs/data/series/sr_23/sr23_028.pdf [hereinafter MARRIAGE AND COHABITATION STATISTICAL PORTRAIT]. 74 Manning & Smock, supra note 71, at 989. 540 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 occurring after 1995 were preceded by cohabitation. 75 Many young adults require an interval of premarital cohabitation in order to assess their compatibility. From their perspective, “marrying without living together first seems quite foolish.” 76 Some of these couples have no immediate wedding plans but have discussed marriage prior to moving in together. Although, for the present moment they have chosen to cohabit rather than marry, they “may believe there should be the potential of marriage as a criterion for cohabitation.” 77 Marriage and cohabitation are not competing choices. Rather, the “decisionmaking calculus” 78 centers on whether to live together or stay single, that is, to live alone with one’s parents or with roommates. Since the Baby Boom Era, men and women have been marrying at increasingly later ages. For men, the average age at first marriage is twenty-seven, while for women it is twenty-five, the oldest in our nation’s history. 79 But while marriage is being postponed, cohabitation has risen to the task of filling in the gap, offsetting and compensating for the vastly slower pace of today’s wedding marches. In a 2010 Pew Research Center survey, nearly two-thirds (64%) of those who have cohabited reported that they “thought of this living arrangement as a step toward marriage.” 80 Marriage is a “highly valued, even if an elusive goal.” 81 Ironically, our reasons for deferring it attest to the Pamela Smock et al., Nonmarital Cohabitation: Current Knowledge and Future Directions for Research, POPULATION STUDS. CENTER, INST. FOR SOC. RES., U. OF MICH. 5 (July 2008), http://www.psc.isr.umich.edu/pubs/pdf/rr08648.pdf. 75 Sam Roberts, Study Finds Cohabiting Doesn’t Make a Union Last, N.Y. TIMES, Mar 2, 2010, http://www.nytimes.com/2010/03/03/us/03marry.html?_r=1&hpw (quoting Pamela J. Smock). 76 77 Manning & Smock, supra note 71, at 999. 78 Id. at 998. 79 Linda Lyons, The Future of Marriage: Part I, GALLUP.COM, July 23, 2002, http://www.gallup.com/poll/6436/future-marriage-part.aspx. 80 PEW RESEARCH CENTER, supra note 6, at iii. Pamela J. Smock, The Wax and Wane of Marriage: Prospects for Marriage in the 21st Century, 66 J. MARRIAGE & FAM. 966, 968 (2004). 81 541 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 extraordinarily high esteem in which we hold it. Many cohabiting couples will delay marriage until they can demonstrate a certain worthiness of it. To seriously consider marrying, cohabiting couples require a sense of financial security and stability, for example, sufficient savings to buy a house or to afford a church wedding and reception. 82 For working and lower middle-class young couples, “marriage signifies the achievement of an enhanced financial status.” 83 Mere decades ago, these young adults would very likely have married, with expectations of having to weather financial hardships, particularly in their first years together. 84 As cultural pressure to marry has receded, cohabitation has become “normative and marriage increasingly decoupled from childbearing.” 85 Matrimony has been re-imagined as a symbol of personal and financial attainment. 86 This view fosters the belief that weddings should be delayed until one’s individual and economic goals have been met, “however defined and unattainable they may be for some social groups.” 87 The connection between economic stability and one’s marital or cohabitation status is “dramatically stratified by race and ethnicity.” 88 A greater percentage of whites are currently married than blacks and Hispanics, and, across all races, men and women with a bachelor’s degree or higher are more likely than those without a high school diploma or GED. 89 The proportion of those who cohabit is highest among those with no 82 Id. at 969. 83 Id. 84 Smock et al., supra note 75, at 14. 85 Id. 86 Id. 87 Id. 88 Pamela J. Smock & Wendy D. Manning, Living Together Unmarried in the United States: Demographic Perspectives and Implications for Family Policy, 26 LAW & POL’Y 87, 99 (2004). 89 MARRIAGE AND COHABITATION STATISTICAL PORTRAIT, supra note 73, at 2 figs.1 & 2. 542 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 high school diploma or GED. 90 Educational achievement often serves “as a proxy for social class,” 91 and cohabitants have lower incomes and higher poverty rates than married couples. 92 Termed a “poor man’s” marriage, 93 cohabitation may function as an “adaptive family strategy,” 94 or as an “alternative to marriage for those with serious economic difficulties.” 95 Cohabitations are, generally, short-term arrangements, half of them ending in marriage and half of them dissolving. 96 More than 50% of first cohabitations are expected to transition to marriage within three years, a probability higher for whites than for blacks and Hispanics. 97 Not surprisingly, those who choose living together as a “stepping stone to marriage” 98 are more likely to seek a more permanent union. Furthermore, there is a greater likelihood that men and women with less education will cohabit. 99 In the United States, about one-third of all births occur outside of marriage. 100 Between the early 1980s and early 1990s, the proportion of births to cohabiting women increased at a considerably higher rate than births to single mothers living without partners. 101 In addition, nonmarital stepfamilies are formed when a custodial parent, generally the mother, joins a 90 Id. at 2. 91 Smock et al., supra note 75, at 7. 92 Smock & Manning, supra note 88, at 96. 93 Id. at 100. 94 Id. 95 Smock et al., supra note 75, at 10. 96 Smock & Manning, supra note 88, at 90. 97 MARRIAGE AND COHABITATION STATISTICAL PORTRAIT, supra, note73, at 3. 98 Smock et al., supra note 75, at 12. 99 MARRIAGE AND COHABITATION STATISTICAL PORTRAIT, supra, note 73, at 13- 14. 100 Smock & Manning, supra note 88, at 91-92. 101 Id. at 92. 543 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 cohabiting relationship. American stepfamilies are now as likely to be built on cohabitation as on marriage. 102 Approximately 40% of all children will spend some time in a cohabiting household before the age of 16. 103 Compared to white children, black and Hispanic children are “over-represented” 104 in cohabiting families and are at greater risk for instability: “Overall, 15% of children born to cohabiting parents experience the end of their parents’ unions by age one, half by age five and two-thirds by age ten.” 105 Children of cohabiting households fare less well, academically and behaviorally than their counterparts in marital families. 106 Further, they are nearly as likely to experience poverty as children in single-mother households and substantially more likely to be poor that children in married families. 107 Research by Manning and Smock reveals just how fluid cohabiting arrangements are. In the absence of a formal wedding ceremony, it is difficult to pinpoint the “defining moment” 108 marking the beginning of the relationship. Most often, these arrangements are formed gradually, and less deliberately than marriage—a girlfriend residing with her parents who spends increasing amounts of time at her boyfriend’s home, a man who arrived for a first date at a woman’s house and “just never went home.” 109 At times, cohabitants “straddle two living quarters at the same time,” 110 102 Id. at 93. 103 MARRIAGE AND COHABITATION STATISTICAL PORTRAIT, supra, note 73, at 4. Pamela Smock et al., supra note 75, at 7. Indeed, “35% of White cohabitors, 54% of black cohabitors and nearly 60% of Hispanic cohabitors have children present in the household.” Smock & Manning,, supra note, 88 at 92. 104 105 Smock & Manning, supra note 88, at 94. 106 MARRIAGE AND COHABITATION STATISTICAL PORTRAIT, supra, note 73, at 5. 107 Smock & Manning, supra note 88, at 94. 108 Manning & Smock, supra note 71, at 994. 109 Id. at 995. 110 Id. 544 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 reluctant to deny themselves “somewhere to land” 111 if the cohabiting relationship breaks up. While it is often assumed that married couples will move into homes of their own, more than 37% of cohabiting couples in Manning and Smock’s study sample were living with roommates, parents or other relatives at some point in their relationship. 112 The lack of a universally recognizable term to refer to one’s cohabiting partner can render social introductions awkward and embarrassing. This absence of commonly understood language to describe cohabiting partnerships is “[o]ne signal that cohabitation is not fully institutionalized.” 113 Premarital cohabitation appears to be associated with instability during marriage and earlier divorce. The probability that a woman’s marriage will last at least ten years is lower for those who cohabit before marriage (60%) than those who do not (66%). 114 One possible explanation is that cohabitants who later marry are a self-selected group whose personal attributes and attitudes toward marriage “make marital stability less likely.” 115 Moreover, having raised the economic threshold for marriage, we have transformed it into a ‘luxury good,” 116 as well as a social ideal. Our exalted expectations of marriage “are part of what is behind the retreat from marriage,” 117 the urge to avoid such commitment “until it is clear that our expectations will be met.” 118 Ultimately, this brand of idealism raises the bar not only for the decision to marry, but for the decision to stay married. 119 111 Id. 112 Id. at 997-8. 113 Id. at 996 (emphasis in the original). 114 MARRIAGE 115 Pamela Smock et al., supra note 75, at 12. 116 Smock & Manning, supra note 88, at 100. 117 Smock, supra note 81, at 971. 118 Id. 119 Id. at 968. 13. AND COHABITATION STATISTICAL 545 PORTRAIT, supra, note 73, at Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 The phenomenal transformation in the number and status of nonmarital intimate associations on the national scale is— perhaps surprisingly—not matched in terms of changes within these domestic unions. The next section considers income differentials between intimate partners. Taking a close look at which member of a heterosexual couple earns what reveals that gender still plays a major—if slowly fading—role. IV. THE CONTINUING PERVASIVE ROLE OF GENDER IN OUR INTIMATE ASSOCIATIONS “[H]usbands were economic providers, disciplinarians, and the heads of families, while wives were nurturers, caretakers, and subservient to their husbands.” 120 Thus gender roles were defined in mid-20th century marriages. Social changes beginning in the 1970s worked the gears of the legal system to erase laws which required and reinforced gender roles. 121 The economic impact of a marital partner’s gender has in some ways been inverted. A few decades ago, marriage generally enhanced the financial status of wives, but it currently provides an economic boon for men. 122 In the 1960s, “the typical man did not gain another breadwinner in his household when he married. Today, he does—giving his household increased earning power that most unmarried men do not enjoy.” 123 Changes in the allocation of decision-making also suggest a gender turnover. A 2008 Pew Research Center survey found that the woman makes decisions in more areas than the man in 120 Martha Albertson Fineman, Progress and Progression in Family Law, 2004 U. CHI. LEGAL F. 1, 2; see also NANCY F. COTT, PUBLIC VOWS: A HISTORY OF MARRIAGE AND THE NATION 7 (2000) (“Marriage decisively differentiated the positions of husband and wife.”). 121 See, e.g., LINDA C. MCCLAIN, THE PLACE OF FAMILIES: FOSTERING CAPACITY, EQUALITY, AND RESPONSIBILITY 60-61 (2006). 122 Press Release, Richard Fry & D’Vera Cohn, Pew Research Ctr., Women, Men and the New Economics of Marriage 1 (Jan. 19, 2010), http://pewsocialtrends.org/files/2010/11/new-economics-of-marriage.pdf. 123 Id. at 1-2. 546 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 43% of all heterosexual couples. 124 Men assume decisionmaking power at home in 26% of all couples; in the remaining 31%, decision-making is split. 125 Indeed, the prevailing norm has shifted away from a breadwinnner/breadmaker marriage. 126 But not too far. Movement toward gender equity in this area has not eliminated the fact that “women continue to perform the lion’s share of the homemaking and caretaking duties.” 127 In fact, whether or not the couple is married, gender still plays a diminishing but still determinant role. 128 Many family law scholars have pointed to changes in gender norms as a significant feature of the “family law revolution.” 129 Indeed, as Marion Crain has reminded us, “[t]he vision of the spouse as equal economic partners in the marriage powerfully influences the law of marital dissolution, dictating presumptions of equal division of assets and liabilities upon divorce.” 130 This vision has led to the elimination of different rules for women and men for purposes of alimony, child custody, property management, and estate oversight. 131 As the U.S. Supreme Pew Social Trends Staff, Social & Demographic Trends: Women Call the Shots at Home; Public Mixed on Gender Roles in Jobs, PEW RESEARCH CENTER, (Sept. 25, 2008), http://pewsocialtrends.org/2008/09/25/women-call-theshots-at-home-public-mixed-on-gender-roles-in-jobs/. 124 125 Id. 126 The evocative phrase is June Carbone’s. See CARBONE, supra note 15, at xiv. 127 Marion Crain, “Where Have All the Cowboys Gone?” Marriage and Breadwinning in Postindustrial Society, 60 OHIO ST. L.J. 1877, 1878 (1999). 128 CARBONE, supra note 15, at 228 (noting the “respective strength of men and women’s bargaining positions in the emerging family order”). See, e.g., Laura A. Rosenbury, Friends with Benefits?, 106 MICH. L. REV. 189, 194 (2007) (“Family law scholars have praised the family law revolution that, over the past forty years, has eliminated most official gender role distinctions within the family.”). 129 130 Crain, supra note 127, at 1888-1889. See Susan Frelich Appleton, Symposium, Same-Sex Couples: Defining Marriage in the Twenty-First Century: Missing in Action? Searching for Gender Talk in the Same-Sex Marriage Debate, 16 STAN. L. & POL’Y REV. 97, 113 (2005). 131 547 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 Court articulated the principle, “neither federal nor state government acts compatibly with the equal protection principle when a law or official policy denies to women, simply because they are women, full citizenship stature—equal opportunity to aspire, achieve, participate in and contribute to society based on their individual talents and capacities.” 132 But the reality on the ground, in the home and at the office, within marriages and after divorce, has changed much more slowly than the legal parameters. The former breadwinners now spend a bit less time earning the bread and do a bit more around the house and with the children. The former breadmakers now bring in a substantial portion of the family’s bread, but continue to do most of the childcare and housework. Dual-earner couples became the norm in the late 20th century. By 1977, 66% of all married or partnered couples lived in dualearner couples. 133 In 2008, that percentage had risen to 79%. 134 But gendered norms remain pervasive, often buttressed by marketplace differentiation. In 1970, women who were in the work force full-time earned annually 59.4% of what their male counterparts earned. 135 The median annual earnings ratio reached 60.2% in 1980 and climbed to 71.6% in 1990. 136 But the pace of narrowing the gap has since slowed and even begun marginally to turn in the opposite direction. The ratio stood at 73.7% in 2000, and moved up to 77.8% in 2007. 137 In 2008, however, it 132 United States v. Virginia, 518 U.S. 515, 532 (1996). 133 Ellen Galinskyet al., 2008 National Study of the Changing Workforce, Times are Changing: Gender and Generation at Work and at Home, FAMILIES & WORK INST. 8 (2009), http://familiesandwork.org/site/research/reports/Times_Are_Changing.pdf. Significantly, the percentage of men living in dual-earner couples rose from 53% to 75% from 1977-2008. Id. The percentage of women in dual-earner couples rose from 85 to 91% in the same period. Id. 134 Id. Fact Sheet: The Gender Wage Gap: 2009, INST. FOR WOMEN’S POL’Y RES., tbl.2 (Sept. 2010), http://www.iwpr.org/publications/pubs/the-genderwage-gap-2009/at_download/file. 135, 136 Id. 137 Id. A similar narrowing of the gap has occurred in hourly wages. In 1979, the hourly pay of women working in hourly jobs was 58% of the hourly pay of men in hourly jobs. Galinsky et al., supra note 133, at 7. In 2007, 548 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 slid to 77.1%, and then edged slightly downward again in 2009 to 77.0%. 138 Recent economic research suggests that weekly or even annual comparisons afford too narrow a window to fairly assess the differences between men’s and women’s earnings over time. A study which utilized a 15-year time frame (1983-1998) concluded that due to lower work hours and time off for childrearing, employed women in their prime earning years earned only 38% of men’s income. 139 Across the study’s decade-and-ahalf, the average working woman earned only $273,592 while her male counterpart earned $722,693 (in 1999 dollars). 140 This long-term calculation yields a 62% gender earnings gap, far more than double the 22.2% median annual wage gap which is more widely acknowledged. 141 women’s hourly wages had risen to 82% of men’s. Id. Younger workers have experienced an even stronger convergence. Employed women 20 to 24 years old in 2007 who were paid on an hourly basis earned 90% of what employed men in that age bracket earned, and female teenagers 16 to 19 years old earned 95% of what their male counterparts earned. Id. at 8. 138 INST. FOR WOMEN’S POL’Y RES., supra note 135, at tbl.2. 139 STEPHEN J. ROSE & HEIDI I. HARTMANN, STILL A MAN’S LABOR MARKET: THE LONG-TERM EARNINGS GAP 9 (2004) ,available at http://www.iwpr.org/publications/pubs/still-a-mans-labor-market-the-longterm-earnings-gap/at_download/file. See Galinsky et al., supra note 133, at 8 ( “‘[A] motherhood penalty’ remains—specifically, that the length of the time that mothers take out of the workforce or work reduced hours to care for their children diminishes their lifetime earnings. . . . [because] [w]omen are more likely than men to be primary caregivers.”). ROSE & HARTMANN, supra note 139, at 9. The study compared the average annual earnings, across 15 years, of prime-age workers between the ages of 26 and 59 years, regardless of how many hours they worked or how many years they had earnings. Id. Women are more likely than men to work part-time, less likely to work year-round, and more likely to have entire years out of the labor force. Id. at 9-11. Fewer than half of all women (48.5%) had earnings in all 15 years of the study compared with six of seven men (84%), and one third of women had four or more years with no earnings compared with only 5% of men. Id. 140 See id. at 9. Further, the study found that among those prime age adults who work every year and average less than $15,000 annually, more than 90 percent are women. Id. at 11. 141 549 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 Moreover, as the U.S. Bureau of Labor Statistics noted, women and men “tend to work in different managerial and professional occupations.” 142 These gendered choices are readily apparent in college students’ choice of majors. In 19992000, female college graduates earned 79% of the degrees in education, 78% of those in psychology, and 73% of those in the health professions. 143 Men earned 82% of the undergraduate degrees in engineering, and 61% of those in mathematics and the physical sciences. 144 As a consequence, women are not well represented in the higher paying professional jobs. In 2007, while 43% of male professionals worked in the high-paying computer and engineering fields, only 9% of female professionals were so employed. 145 Professional women were more likely to work in the education and health care occupations. These lower-paying fields employed 67% of female professionals in 2007, but only 30% of their male counterparts. 146 Wage differences between college-educated women and men occur almost immediately, and worsen over time. One year after college graduation, women working full time earn only 80% as much as their male colleagues earn. 147 Ten years after college, women earn only 69% as much as men earn. 148 In fact, the gender gap among full-time employees “understates the real difference between women’s and men’s earnings” because it omits women who are working part time or who are not in the labor force. 149 Female college graduates who eventually return 142 Highlights of Women’s Earnings in 2005, U.S. BUREAU OF LAB. STAT., U.S. DEP’T OF LABOR, 2 (Sep. 2006), http://www.bls.gov/cps/cpswom2005.pdf. JUDY GOLDBERG DEY & CATHERINE HILL, BEHIND THE PAY GAP 11 (2007), available at http://www.aauw.org/learn/research/upload/behindPayGap.pdf. 143 144 Id. 145 Highlights of Women’s Earnings in 2007, U.S. BUREAU OF LAB. STAT., U.S. DEP’T OF LABOR, 2 (Oct. 2008), http://www.bls.gov/cps/cpswom2007.pdf. 146 Id. 147 DEY & HILL, supra note 143, at 2. 148 Id. 149 Id. 550 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 to full-time employment—as most do—will then have lower wages than similarly-educated males, who have generally remained continuously employed, further worsening the gender wage discrepancy. 150 In this light, the fact that women have been earning more bachelor’s and master’s degrees than men since the early 1980s may mean less than it appears, given the socio-economic context of what women and men do with those degrees. 151 In the paid labor force, women’s and men’s rates of participation have been gradually but significantly converging in the past several decades. In 1950, 82% of men aged eighteen and older were in the labor force, while only 42% of women were employed outside the home, a gap of forty points. 152 In 2007, that difference had narrowed to nine percentage points, with 66% of men and 57% of women over 18 in the paid employment. 153 Strikingly, the labor force participation rate for mothers with children under 18 has risen from 47% in 1975 to 71% in 2007, a higher percentage than both all women and all men over 18. 154 150 Id. In fact, men who did not complete their high school education earn on average more than women with a college degree, $36,021 to $35,338; women with graduate degrees earn only slightly more than men with only a high school diploma: $41,995 for women vs. $40,822 for men. ROSE & HARTMANN, supra note 139 , at 18. See also Vicki Schultz, Life's Work, 100 COLUM. L. REV. 1881, 1894-95 (2000) (“Sociological research suggests that women's lower pay is due mainly to the fact that we are segregated into separate-but-lessremunerative occupations, firms, and jobs (and even to the fact that we are often paid less than men in the same jobs)—not to the fact that we have more family responsibilities.” (footnotes omitted)). 151 See Galinsky et al., supra note 133, at 6. In the 2005-2006 academic year, women earned 58% of all bachelor’s degrees and 60% of master’s degrees. Id. 152 Id. at 3 fig.3. Labor force participation in this calculation includes those employed and those unemployed but looking for jobs. Id. at 23 n.4. 153 Id. Far more women than men work “reduced” weeks, however. Almost one quarter (23.6%) of women work fewer than 35 hours a week, compared to 10.2% of men. Id. at 4. 154 Id. at 5 fig.5. There may be two reasons for this startling statistic. The average age of employed mothers is older than the average ages of employed women and men. Id. at 4-5. Another reason that mothers’ participation is higher may be that many employed women (and men) with children have 551 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 Women’s annual earnings in dual-earner couples have increased compared with the earnings of their spouses/partners in recent years. In 2008, just more than one in four (26%) of women living in dual-earner couples had annual earnings at least 10 percentage points higher than their spouses/partners, up from 15% in 1997. 155 For men, the converse was true. In 2008, 60% of men had annual earnings at least 10 percentage points higher than their spouses/partners, down from 72% in 1997. 156 At home, gender norms continue to regulate the division of labor between parents, which resembles that of previous generations: “Mothers are more likely than fathers (or other women) to work part time, take leave, or take a break from the work force—factors that negatively affect wages.” 157 Women frequently devote more time and effort than men to family responsibilities, but “the choices women and men make in allocating their time between work and family are heavily constrained.” 158 The paucity of subsidized family care options for children and elderly relatives often results in parents having to provide the care themselves. In the typical couple, the woman earns considerably less than her male partner, and so the decision to sacrifice her earnings makes economic sense and is often the family’s only practical alternative. 159 As the primary already finished their educations, and are thus more likely to participate in the labor force. Id. 155 Id. at 8. 156 Id. The proportion of couples earning comparable amounts (within plus or minus 10 percentage points relative to each other) remained steady during this period: 13% in 1997 and 14% in 2008. Id. 157 DEY & HILL, supra note 143, at 2; see also ROSE & HARTMANN, supra note 139, at 26 (“The more years that children are present the more women have: fewer years in the paid labor force, more years with low working hours, and lower annual earnings when working.”). 158 ROSE & HARTMANN, supra note 139, at 33. See id. at 21 (“[B]y the time women are starting families, it often ‘makes economic sense’ for the woman, typically the lower paid partner, to forego work and earnings to take care of the children especially given the lack of suitable alternative care arrangements.”); Allen M. Parkman, Bargaining Over Housework: The Frustrating Situation of Secondary Wage Earners, 63 AM. J. ECON. & SOC. 765,773 (2004), available at 159 552 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 wage earner, the man is in the labor force earlier and more continuously than his female partner, thus securing a higher and more consistent income stream for the family. Also, since higher income jobs are often accompanied by more generous fringe benefits, the man’s employment may already supply important benefits such as health insurance. 160 Multiplied a million-fold, the results will perpetuate gender stratification in employment and wide disparities in income over time. 161 For example, of college students who graduated in 1992-93, 23% of mothers were out of the work force a decade later, and another http://findarticles.com/p/articles/mi_m0254/is_4_63/ai_n7072367 (“While both parents are responsible for the care of their children, viewed incrementally the cost of child care has to be attributed to the employment of the secondary wage earner.”) 160 See Parkman, supra note 159, at 772 (describing the range of economic advantages to a family if the primary wage earners remains in the labor force, rather than the secondary wage earner). 161 Public opinion on the pay gap issue also turns on perceptions of motherhood and fatherhood. While 41% in a 2005 national poll stated their belief that differences in men’s and women’s earnings are due to employer discrimination, an identical percentage opined that the gender pay gap was the result of women’s prioritizing family over work and manifesting a lower level of commitment to their careers. Catherine Hill & Elena Silva, Public Perceptions of the Pay Gap, AM. ASS’N OF UNIV. WOMEN EDUC. FOUND., 3 (Apr. 19, 2005), http://www.aauw.org/learn/research/upload/perceptionsPayGap.pdf (“More than half (56 %) of Americans include employers’ unwillingness to promote young women because they may leave when they have children as either the first (29 %) or second (27 %) most important reason for the pay gap.”). Rose & Hartmann explained that a “perverse internal logic perpetuates a system with a rigid division of labor both in the workplace and in the home.” ROSE & HARTMANN, supra note 139, at 33. Rose & Hartmann further explained: Employers may feel justified in discriminating against women workers if they think they will be less devoted to their jobs because of family responsibilities. They may structure jobs as part-time and dead-end for this reason and many women may accept them because they cannot find betterpaying jobs. Labor market discrimination means lower earnings for women; women’s low earnings mean women spend more time in family care; women’s commitments to family care contribute to discrimination against them. Single mothers especially suffer as they must attempt to support their families on women’s lower wage levels. Id. 553 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 17% were employed part-time. 162 By contrast, less than 2% of fathers were out of the work force, with an equally minuscule percentage working part-time. 163 Tellingly, the United States in 2008 had an estimated 5.3 million “stay-at-home” mothers but only 140,000 “stay-at-home” fathers. 164 Personal choices intertwine with economic choices and consequences, but they are still firmly rooted in gender. In the middle of the twentieth century, a man’s “thrift and industry” 165 were matched against a woman’s “domestic skills,” 166 but their differences were perceived as shrinking. A 1953 sociology text downplayed the economic motive for marriage, arguing quite implausibly that “a single woman can support herself as well as the average husband would support her . . . .” 167 Yet gender largely determined the cultural roles for spouses. A woman in the Eisenhower era needed to accommodate more to marriage than a man: The man goes to shop or office after marriage the same as he did before, and even though he comes home to his own home instead of his parental home or a rooming house, he still comes home as before to someone who provides for his needs in food and rest. 168 A married woman in the 1950s labor force needed to satisfy the needs of her husband and children as well as those of her 162 DEY & HILL, supra note 143, at 2. 163 Id. 164 Press Release, U.S. Census Bureau, As Baby Boomers Age, Fewer Families Have Children Under 18 at Home (Feb. 25, 2009), http://www.census.gov/newsroom/releases/archives/families_households/cb0 9-29.html. 165 LANDIS, supra note 2, at 4. 166 Id. 167 BABER, supra note 1, at 163. 168 Id. at 173. 554 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 boss, and thus faced “the heavy strain of double work.” 169 Women in that era could join the labor force but could never leave their domestic employ. In the evocative words of historian Jessica Weiss, “[a] woman walked up the aisle a bride and back down it a housewife, whether or not she continued to work or study.” 170 Much has changed in the succeeding half-century, but much has not. The socio-economic gap between motherhood and fatherhood is still “particularly stark,” 171 and parental obligations “continue to be assigned on the basis of gender.” 172 Even when both parents are employed, the social mores continue to induce a woman to undertake the lioness’ share in childcare and housework, resulting in the unequal division of labor famously described by Arlie Hochschild and Anne Machung as “The Second Shift.” 173 Id. at 174; see also LANDIS, supra note 2, at 275 (observing in 1955 that the birth of children resulted in far more difficult adjustments for women than for men); ROBERT F. WINCH, THE MODERN FAMILY 411 (rev. ed., 1963) (reporting the general view in the mid-1960s that “in the American family the wife-mother fulfills the role of bandaging up the skinned knees of her children and applying balm to the scarred psyches of her husband and children,” whether or not she is employed outside the home). 169 170 JESSICA WEISS, TO HAVE AND TO HOLD: MARRIAGE, THE BABY BOOM, AND SOCIAL CHANGE 31 (2000). 171 DEY & HILL, supra note 143, at 3. Elizabeth S. Scott, Social Norms and the Legal Regulation of Marriage, 86 VA. L. REV. 1901, 1937 (2000). Prof. Scott adds that the allocation of roles by gender “reinforces women's dependency and, in subtle ways, perpetuates hierarchy in marriage.” Id. 172 See Arlie Hochschild, The Fractured Family, AM. PROSPECT, June 23, 1991, available at http://www.prospect.org/cs/articles?article=the_fractured_family (“[W]e are living in a time of a stalled revolution, a time in which women have changed much faster than the men they live with or the institutions in which both sexes work. This has indeed marginalized family life and turned it into a ‘second shift.’”); Exactly How Much Housework Does a Husband Create?, UNIV. OF MICH. NEWS SERV. (Apr. 3, 2008), http://www.ns.umich.edu/htdocs/releases/story.php?id=6452 (“’There's still a significant reallocation of labor that occurs at marriage—men tend to work more outside the home, while women take on more of the household labor . . . . And the situation gets worse for women when they have children.’”) (quoting Institute for Social Research economist Frank Stafford, who directed a detailed 173 555 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 Hochschild and Machung concluded in 1989 that the gendered tasks of marriage generate an extra month of work per year for women in chores related to home and children. 174 A decade later, a research review article concluded that although men and women now believed that domestic tasks should be shared, “[o]n average, women perform two or three times as much housework as men.” 175 That the gender-driven assumptions behind this 21st century division of labor have been deeply internalized may be seen by the study’s finding that “the vast majority of men, as well as most women” consider the fact that women perform twice or thrice as much housework as men to be fair. 176 The sexes are slowly heading toward equal sharing of child rearing and household work. 177 Very slowly. Between 1965 and study of housework trends). See generally ARLIE HOCHSCHILD & ANNE MACHUNG, THE SECOND SHIFT: WORKING PARENTS AND THE REVOLUTION AT HOME (1989). 174 HOCHSCHILD & MACHUNG, supra note 173, at 3. Scott Coltrane, Research on Household Labor: Modeling and Measuring the Social Embeddedness of Routine Family Work, 62 J. MARRIAGE & FAM. 1208, 1208 (2000) [hereinafter Research on Household Labor]; see also SCOTT COLTRANE, FAMILY MAN: FATHERHOOD, HOUSEWORK, AND GENDER EQUITY 53 (1996) (“[T]he majority of men still make only minimal contributions to those tasks conventionally performed by housewives, such as cooking and cleaning”). 175 176 Research on Household Labor, supra note 175, at 1208. See also Parkman, supra note 159, at 772 (suggesting that the grossly unequal division of household tasks in two-paycheck families may stem from the recognition by wives “that they are limited in their ability to reduce their household activities if they want to keep their spouse happy in the marriage. As a result, they will increase their employment more than they reduce their domestic labor.”); Schultz, supra note 150, at 1892-1919 (arguing that mass-cultural expectations that women be nurturing wives, mothers and daughters shape women's and society's notion of women as “inauthentic workers”). But see Naomi R. Cahn, Gendered Identities: Women and Household Work, 44 VILL. L. REV. 525, 526528 (1999) (arguing that pursuing the domestic tasks expected of them has afforded women a “household power base”). 177 Researchers have pointed to several signs of gender shift within couples since the 1960s: [T]here has been a growing convergence in the hours that both women and men spend in the broad categories of paid work, family work and leisure. Women's paid work time has significantly increased, while that of men has decreased. 556 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 2003, women doubled and men tripled the amount of time they spent in childcare. 178 These trends track those of much of the Western industrial world. Data from 20 industrialized countries covering this same period show an overall increase in men's proportional contribution to family work (including housework, child care and shopping), from less than one-fifth in 1965 to more than one-third by 2003. 179 A 2005 study by University of Michigan’s Institute for Social Research confirmed this emerging trend toward domestic convergence, comparing the average amount of housework done by women and by men in 1976 and 2005. Women’s domestic labor decreased from 26 Correspondingly, women's time devoted to housework has decreased, while the time men spend in family work of all kinds has increased. Oriel Sullivan & Scott Coltrane, Men’s Changing Contribution to Housework and Childcare: A Discussion Paper on Changing Family Roles (Apr. 2008) (citations omitted), available at http://www.contemporaryfamilies.org/marriage-partnershipdivorce/menchange.html(prepared for the 11th Annual Conference of the Council on Contemporary Families) . However, one researcher pointed to “invisible” household work as exposing the extremely uneven progress in sharing domestic labor: When it comes to responsibility for less “visible” aspects of housework than chores or child care, the gender divide remains large in most families. Women still tend to do the “emotional labor,” noticing when things need to be discussed or resolved. They also do most of the “household management” planning, buying presents for birthday parties a child will be attending, scheduling doctor appointments, and marking things that must be done on the calendar on the refrigerator door. Finally, women still tend to do the “kin work,” calling relatives, arranging for holiday gatherings, sending holiday cards and so on. Until men begin to take responsibility for invisible household work, women will continue to shoulder more family work, and therefore to face more constraints in their freedom to engage in paid work. Id. (quoting Pamela J. Smock). 178 Sullivan & Coltrane, supra note 177. 179 Jennifer L. Hook, Care in Context: Men’s Unpaid Work in 20 Countries, 1965-2003, 71 AM. SOC. REV. 639, 650 fig.1 (2006). 557 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 hours per week to 17 hours. 180 The time men spent on household tasks increased from 6 hours to 13 hours per week. 181 But a 2010 U.C.L.A. study found that mothers still spend 27% of their time on housework, compared to 18% of father’s time. 182 But actual convergence of gender roles has not only been elusive, it may be both undesired and unachievable. 183 The percentage of employees “who agree (strongly or somewhat) that it’s better for all involved if ‘the man earns the money and the woman takes care of the home and children’” has indeed dropped substantially over the past thirty years—from 64% in 1977 to 41% in 2008. 184 But that statistic reveals that two of five adults in the paid workforce still subscribe to so-called “traditional” gender roles. 185 Among employees 28 years of age and younger in 2008, over a third (35%) believed that a women’s place is in the home. 186 Even in the 21st century, motherhood “entails substantial economic and personal sacrifices” while fatherhood “appears to engender a ‘wage premium.’” 187 Men spend more time at work after the birth of their children, while women do the reverse. 188 Given the stress See Exactly How Much Housework Does a Husband Create?, supra note 173 (reporting on research). 180 181 Id. The study also found that having a husband created an additional seven hours a week of housework for women, while having a wife reduced men’s housework by approximately one hour. Id. 182 See Benedict Carey, Families’ Every Fuss, Archived and Analyzed, N.Y. TIMES, May 22, 2010, http://www.nytimes.com/2010/05/23/science/23family.html?pagewanted=1 (describing the U.C.L.A. study). See Crain, supra note 127, at 1879 (“While men and women generally agree that the trend toward sharing the breadwinner role and renegotiating caretaking roles in the family sphere has enriched both sexes, many also feel that today's gender-neutral ideal of having it all—a happy marriage, family, and a successful career—is unattainable.”). 183 184 Galinsky et al., supra note 133, at 9. 185 Id. 186 Id. at 11. 187 DEY & HILL, supra note 143, at 3. 188 Id. 558 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 levels of the multi-tasking family, parenting has been aptly limned as “Two people. Three full-time jobs.” 189 And even as we head into the second decade of the 21st century, two of those three jobs are held by a woman. One of the lessons from this data is that while marital unions and cohabitating couples are often seen as the polarities in the decline-of-marriage debate, the issue of gender cuts across marital lines. As historian Hendrik Hartog observed, marriage has always “meant a dyadic relationship between two unequally situated individuals.” 190 That husbands and wives have been succeeded, in millions of instances, by unmarried partners does not re-balance the inequality. Research on same-sex couples is far less extensive than on their heterosexual counterparts. But preliminary studies have found that “same-sex relationships, whether between men or women, were far more egalitarian than heterosexual ones.” 191 The perspective of gender helps to refocus the key issue of family policy into one encompassing all types of family composition. Which families should our legal system recognize? The next section sketches a response, one grounded in functional norms for all families. V. THE EMERGING FUNCTIONAL NORMS Twenty-first century American families have arranged themselves in many different ways. Unmarried couples—both heterosexual and homosexual—are setting the cultural norms for family life, raising children and relating to each other and to the larger community as the members of a family. Married 189 Carey, supra note 182 (quoting Kathleen Christensen of the Alfred P. Sloan Foundation). 190 Hendrik Hartog, What Gay Marriage Teaches About the History of Marriage, HISTORY NEWS NETWORK (Apr. 5, 2004), http://hnn.us/articles/4400.html; see also Scott, supra note 172, at 1934 (“The legal reinforcement of spousal commitment norms was accompanied by an equally powerful validation of hierarchical gender roles and differentiated legal enforcement of commitment obligations.”). Tara Parker-Pope, Gay Unions Shed Light on Gender in Marriage, N.Y. TIMES, (June 10, 2008), http://www.nytimes.com/2008/06/10/health/10well.html (reporting on studies). 191 559 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 couples and their children now form a minority of households. For some years and in thousands of cases, “[t]he citadel of the biological/adoptive family has . . . been besieged by the burgeoning segment of nontraditional families.” 192 But our legal system has not kept pace with this rapid cultural change. Family law statutes still largely envision an Ozzie and Harriet world in which families appear as two heterosexual spouses and their biological children, with all other family units deemed exceptions to this rule. 193 But major changes are stirring as the legal system shifts from biological to functional norms. Not long ago, the legal system would categorize families according to their biological (or adoptive) ties. But nurture has dislodged nature as the primary determinant in the resolution of legal disputes within these new family forms. 194 Adults who lack a genetic tie to children with whom they have established a parent-child bond are scoring victories in court battles over biological parents who seek to exclude these functional parents from the families they helped J. Herbie DiFonzo & Ruth C. Stern, The Winding Road From Form to Function: A Brief History of Contemporary Marriage, 21 J. AM. ACAD. MATRIMONIAL LAW 1, 38 (2008). 192 193 Kris Franklin conceptualizes this as follows: Our cultural ideology assumes that everyone should live in some form of nuclear family, and that the nuclear family is ideally suited to modern American society. Although this form of family has a long history, its primacy as an ideological construct is relatively recent. However, the nuclear family as a cultural ideal does not accurately reflect the reality of many families today, if it ever did. Kris Franklin, Note, “A Family Like Any Other Family:” Alternative Methods of Defining Family in Law, 18 N.Y.U. REV. L. & SOC. CHANGE 1027, 1032 (1991). A minority of scholars believe that the norms of the prototypical 1950s marriage could still function as models for contemporary families. See¸ e.g., Daniel D. Polsby, Ozzie and Harriet Had It Right, 18 HARV. J.L. & PUB. POL'Y 531, 533 (1995) (arguing for the “superiority of the Ozzie-and-Harriet family”); Scott, supra note 172, at 1964 ( “[M]any modern religious and cultural conservatives would like to return to an earlier era of both stable marriage and patriarchal gender roles.”). See, e.g., Katherine R. Allen et al., An Overview of Family Diversity: Controversies, Questions, and Values, in HANDBOOK OF FAMILY DIVERSITY 1 (David H. Demo et al. ed., 2000) (“[A] family is characterized by two or more persons related by birth, marriage, adoption, or choice”). 194 560 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 construct. Increasingly, the central issue is whether the adult has functioned as a parent in the child’s life. At the same time, the benefits and burdens that the law once reserved for marriage are increasingly allocated to those intimate associations which outnumber marriages and whose creation, composition, and dissolution are often hotly contested. The increasing use of assisted reproductive technology has also resulted in the formation of very different families. The central difficulty with contemporary family law is that the subject matter has changed faster and more thoroughly than the formal legal principles. Thus, “the essential purposes of family regulation cannot be fully accomplished when ‘family’ is defined in law to exclude a significant part of the population of actual families.” 195 Because of these changing norms and practices, family governance issues are brought to the courts more frequently than ever. 196 As the number of non-marital families continues to grow, many more families are finding child-rearing issues, financial obligations, and their very legal existence as a family subject to judicial resolution. The Colorado Supreme Court noted the shift in court dockets in observing that “[p]arenthood in our complex society comprises much more than biological ties, and litigants increasingly are asking courts to address issues that involve delicate balances between traditional expectations and current realities.” 197 In resolving these disputes, courts are increasingly turning away from enforcing legal rights and obligations on the basis of pre-determined legal classifications. Instead, they are starting 195 Margaret M. Mahoney, Forces Shaping the Law of Cohabitation for Opposite Sex Couples, 7 J.L. & FAM. STUD. 135, 164 (2005). See also Nancy E. Dowd, Law, Culture, and Family: The Transformative Power of Culture and the Limits of Law, 78 CHI.-KENT L. REV. 785, 789 (2003) ( “Although our dominant legal norm is that family is a heterosexual, marital, biological unit, our social and cultural patterns expose a culture that is largely at odds with that nuclear, marital family norm.”). See Kris Franklin, The “Authoritative Moment”: Exploring the Boundaries of Interpretation in the Recognition of Queer Families, 32 WM. MITCHELL L. REV. 655, 656 (2006) ( “[T]hese cases ask the courts to think about the growing elasticity in cultural understandings of families in the United States, and to make decisions about where to draw the line in defining the legitimacy (or illegitimacy) of different kinds of families.”). 196 197 N.A.H. v. S.L.S., 9 P.3d 354, 359 (Colo. 2000). 561 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 to embrace functional arguments, rationales based upon the actual lived experience and expectations of the parties. Many courts are recognizing, in the words of the Supreme Court of Washington, that “individuals may comprise a legally cognizable family through means other than biological or adoptive.” 198 Behavioral norms are beginning to replace long-established legal rules governing family formation, regulation, and dissolution. But functional norms have not yet conquered the field. Our legal system is in transition and has far to go in realizing equal recognition for all families. 199 Historian Nancy Cott has observed that this transitional period features the “disestablishment” of marriage, since the state no longer effectively supports a single model of marriage and family life. 200 The families whose cases fill the dockets in the nation’s family courts do not, for the most part, adhere to the norms of formal law’s original conception of a married couple and their biological children. Yet family courts do their best to adjust the legal system to these heterodox unions. 201 198 Carvin v. Britain, 122 P.3d 161, 169 (Wash. 2005). 199 See Mahoney, supra note 195, at 165 (“The agenda of reform that would recognize and regulate unmarried cohabiting relationships in the law remains largely unaccomplished.”). 200 COTT, supra note 120, at 212. See also V.C. v. M.J.B., 748 A.2d 539, 55657 (N.J. 2000) (Long, J., concurring) (citation omitted): Those qualities of family life on which society places a premium—its stability, the love and affection shared by its members, their focus on each other, the emotional and physical care and nurturance that parents provide their offspring, the creation of a safe harbor for all involved, the wellspring of support family life provides its members, the ideal of absolute fealty in good and bad times that infuses the familial relationship (all of which justify isolation from outside intrusion)—are merely characteristics of family life that, except for its communal aspect, are unrelated to the particular form a family takes. Those attributes may be found in biological families, step-families, blended families, single parent families, foster families, families created by modern reproductive technology, and in families made up of unmarried persons. What is required is the creation of “an intimate familial relationship that is stable, enduring, substantial and mutually supportive, . . . one that is cemented by strong emotional bonds and provides deep and pervasive emotional security.” 201 See, e.g., COTT, supra note 120, at 212 (“The public willingness [in child support cases] to see marriage-like relationships as marriage is driven by the aim of guaranteeing economic support by family members, thereby minimizing 562 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 Case-by-case lawmaking frequently results in this rapidly changing area of law, leading to a transformation in the scope of marriage and other domestic unions, as well as in the allocation of parenting rights and obligations. These resolutions resist classification, since they occur in every corner of family law, and often result in contradictory holdings. A paradigmatic case demonstrating this trend is the New Jersey Supreme Court’s decision in V.C. v. M.J.B. 202 The court held that the same sex partner of a biological mother who had assumed a parental role in helping to raise the biological mother's child—with the consent and cooperation of the biological parent—had established a “psychological parenthood” with respect to the child and thus had a legal right to petition for custody and visitation. 203 This case exemplifies a trend pivoting away from formal legal principles and toward functional norms. However, as often occurs in a deeply transitional period, uniformity has proven elusive. Maryland’s highest court declined to follow New Jersey’s lead and held that de facto parenthood is not recognized as a legal status. 204 In 2010, the North Carolina Supreme Court held that a biological mother who “intentionally creat[ed] a family unit in which [her lesbian partner] permanently shared parental responsibilities . . . acted inconsistently with her paramount parental status” and thus opened the door for an award of joint legal custody. 205 A selection of recent cases—some of them controversial— illustrates the dimensions of the rift between formal legal sanction and cultural phenomenon in the current construction of family. Although the denouement is not crystal clear, the demands on public assistance, but it also diversifies social views of family relationships.”); DiFonzo & Stern, supra note 192, at 38-39 (“Courts are gradually—and legislatures more gradually still—recognizing the pervasiveness of alternative family forms by allocating legal rights and burdens to ‘equitable parents’ equivalent to biological and adoptive families.”) (citations omitted). 202 V.C. v. M.J.B., 748 A.2d 539 (N.J. 2000). Id. at 551-552. The New Jersey Supreme Court largely adopted the test set out by the Wisconsin Supreme Court in Holtzman v. Knott, 533 N.W.2d 419, 421 (Wis. 1995). 203 204 Janice M. v. Margaret K., 948 A.2d 73, 87 (Md. 2008). 205 Boseman v. Jarrell, 704 S.E.2d 494, 496 (N.C. 2010). 563 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 holdings in these cases flow in the direction of a resolution based on functional norms, on recognizing and preserving “the emotional bonds that develop between family members as a result of shared daily life.” 206 UNDER WHAT CIRCUMSTANCE MAY A WOMAN’S LIVE-IN BOYFRIEND BECOME HER CHILD’S “PSYCHOLOGICAL PARENT”? Courts in Ohio and South Carolina have held that, if the man participated significantly in raising that child over a period of time and with the mother’s consent, he is now a legal parent to the child. 207 Indeed, as the Maine Supreme Court affirmed in 2009, under similar circumstances the state may obtain child support from a man who raised a child but whose paternity test established that he was not the child’s biological father. 208 WHEN DOES THE SAME-SEX DOMESTIC PARTNER OF A BIOLOGICAL PARENT OBTAIN THE RIGHT TO CONTEST CUSTODY OF THE PARENT’S BIOLOGICAL CHILD? Courts in Montana, North Carolina, California, and Pennsylvania have held that when the natural parent voluntarily created and actively fostered a parent-child relationship between her partner and her child, the domestic partner then has the right to seek custody and visitation of the child. 209 That the domestic partner in those states lacked the ability to either marry the parent or even adopt the child was deemed irrelevant. In a 2008 case involving a mother, a biological father, and a de facto parent, an appellate court in Washington approved a plan calling for the child to spend residential time with all three parents. 210 206 V.C. v. M.J.B., 748 A.2d 539, 550 (N.J. 2000) (further citation omitted). 207 Waszkowski v. Lyons, No. 2008-L-077, 2009 WL 224540, at *4 (Ohio Ct. App. 2009); Middleton v. Johnson, 633 S.E.2d 162, 172-73 (S.C. Ct. App. 2006). 208 2009). Dep’t of Health & Human Servs. v. Pelletier, 964 A.2d 630, 636 (Me. Elisa B. v. Superior Court, 117 P.3d 660, 670 (Cal. 2005); Kulstad v. Maniaci, 220 P.3d 595, 609-10 (Mont. 2009); Boseman, 704 S.E.2d at 496; T.B. v. L.R.M., 786 A.2d 913, 919-20 (Pa. 2001). 209 210 In re Parentage of J.A.B., 191 P.3d 71, 72-73 (Wash. Ct. App. 2008). 564 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 A RELATED PROBLEM IS POSED WHEN A STEPFATHER SEEKS CUSTODY OF THE BIOLOGICAL MOTHER'S CHILD AFTER HER DEATH, IN PREFERENCE TO THE BIOLOGICAL FATHER. The Pennsylvania Supreme Court affirmed the award of custody to the stepfather, who had established a close parental bond with the child, even though the stepfather could not adopt the child since the biological father's parental rights had not been terminated. 211 In this area—and in a radical departure from the common law—courts are moving toward a conclusion that finds, in the words of the Washington Supreme Court in 2008, “no principled distinction between a legal parent and a stepparent who assumes all the obligations and exercises all the responsibilities of parenthood . . . .” 212 MAY A SPERM DONOR WHO HAS BEEN INVOLVED IN THE CHILDREN’S LIVES SINCE THEIR BIRTH OBTAIN PARENTING RIGHTS TO THE RESULTING CHILD BORN TO A WOMAN AND HER LESBIAN PARTNER, EACH OF WHOM ALSO HAVE PARENTING RIGHTS? In 2007-2008, Pennsylvania and New Mexico courts said yes, if the sperm donor had established a parent-child relationship with the children. 213 Other courts have ruled in contrary ways; the terrain of family law is quite conflicted. But the cases highlighted above point in the direction of functional norms—those who are doing the job have a right to the title—and represent the vanguard of this legal movement. These functional decisions are in fact conservative, since they aim to preserve, as much as possible, the family structure and composition which the parties themselves adopted when they were actually living life together and not litigating its end. 211 Charles v. Stehlik, 744 A.2d 1255, 1259 (Pa. 2000). 212 Zellmer v. Zellmer, 188 P.3d 497, 505 (Wash. 2008). 213 Mintz v. Zoernig, 198 P.3d 861, 862 (N.M. Ct. App. 2008); Jacob v. Schultz-Jacob, 923 A.2d 473, 481-82 (Pa. Super. Ct. 2007). 565 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 VI. CONCLUSION Marriage remains popular, both as a personal goal and a perceived societal foundation. But the preeminent role of marriage in our society is gone. Unmarried couples and their dependents now compose a majority of families. Yet the legal system treats unmarried adults (and their children) as exceptions to the rule, deviations from the norm. This reluctance to make the legal system reflect the reality of family life is slow to change. Functional norms are best suited to fairly serve our nation’s increasingly diverse families. The drive from form to function in family law is strong and growing stronger, as theory strains to keep pace with the exuberant practice of living families. These contrasting family forms, whether based on marriage or cohabitation, have similar goals: raising children, resolving domestic disputes, and building a life for themselves and their children. Our family law system should value all family configurations, resolving disputes about family composition according to the functional norms that are emerging as more accurate barometers of living American families. 566 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 ASSESSING THE EFFECTS OF A “LOSER PAYS” RULE ON THE AMERICAN LEGAL SYSTEM: AN ECONOMIC ANALYSIS AND PROPOSAL FOR REFORM τ Marie Gryphon * Although the American justice system is derided as expensive, capricious, and prone to abuse, Americans go to court more often—and more expensively—than any other people in the world. 1 The purpose of this paper is to explore the possibility of reducing the incidence of what I will call “abusive litigation” in the United States by replacing the so-called “American rule” requiring each party to a lawsuit to pay her own attorneys, win or lose, with a “loser pays rule,” according to which the losing party to a civil suit must pay the winner’s reasonably incurred legal fees. Loser pays is the default rule for τ An early version of this research appeared as Marie Gryphon, Civil Justice Report 11, Greater Justice, Lower Cost: How a “Loser pays” Rule Would Improve the American Legal System, Civil Justice Report 11, MANHATTAN INST. FOR POL’Y RES. (Dec. 2008), http://www.manhattaninstitute.org/html/cjr_11.htm. Thanks are due to the Manhattan Institute for permission to revise this early work. * Olin-Searle Fellow in Law, Harvard Law School; Adjunct Fellow, Manhattan Institute Center for Legal Policy; B.A., University of Washington; J.D., University of Washington School of law; Ph.D. candidate in public policy, Harvard University. 1 See TOWERS PERRIN TILLINGHAST, U.S. TORT COSTS AND CROSS-BORDER PERSPECTIVES: 2005 UPDATE 4 (2005), available at http://www.towersperrin.com/tillinghast/publications/reports/2005_Tort_Co st/2005_Tort.pdf. 567 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 payment of attorney’s fees in the vast majority of foreign legal systems. 2 While all litigation is costly, litigation of meritorious claims is sometimes necessary in order to compensate damaged victims or parties to broken contracts. Abusive litigation, by definition, is not even close to being legally meritorious. 3 Rather, it is pursued by a plaintiff or attorney who has good reason to believe that she is legally in the wrong, but who sues anyway in order to exact revenge or coerce a settlement from the lawsuit’s target. The American rule makes the civil justice system as a whole unnecessarily costly by encouraging the filing of such lawsuits, which defendants must either settle quickly or defend against at significant cost. Such low-merit legal cases clog the American legal system and raise the cost of goods and services to consumers by forcing businesses that are sued to cover their legal expenses by raising prices. The American rule also makes most legal victories Pyrrhic ones. As Professor Jon Langbein told ABC’s John Stossel, “When you win, you lose under our system. I win, I defeat your claim . . . but it has cost me tens, hundreds of thousands, sometimes millions of dollars. I have a victory that has brought me to the poorhouse.” 4 Our present system is as unfair to a deserving plaintiff as it is to a blameless defendant. In theory, a negligent defendant must “make whole” an injured plaintiff by restoring him as nearly as possible to his position before the injury occurred. In reality, American contingent fees are usually one-third of any recovery, 5 and litigation costs paid by the 2 See generally W. Kent Davis, The International View of Attorney Fees in Civil Suits: Why is the United States the “Odd Man Out” in How It Pays Its Lawyers?, 16 ARIZ. J. INT’L & COMP. L. 361 (1999). 3 I intentionally avoid the term “frivolous” because it has a legal meaning; it refers to the standard under which a court may sanction litigants under Rule 11 of the Federal Rules of Civil Procedure and state law counterparts to Rule 11. See FED. R. CIV. P. 11. Not all abusive lawsuits are frivolous in this sense. To avoid confusion, this paper will not refer to suits as “frivolous” outside of the context of Rule 11. 4 ABC News Special: The Trouble with Lawyers (ABC television broadcast Jan. 2, 1996). HERBERT M. KRITZER, RISKS, REPUTATIONS, AND REWARDS: CONTINGENCY FEE LEGAL PRACTICE IN THE UNITED STATES 39 tbl.2.4 (2004). 5 568 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 plaintiff may soak up a substantial additional percentage of any judgment or settlement. 6 Also, potential plaintiffs with injuries that are significant but worth less than their lawyers’ fees can be denied access to justice entirely. Despite these defects, the American rule has many defenders, who argue that the costs of the current system are exaggerated and that adopting a loser pays rule would replace current injustices and inefficiencies with graver ones. Primary among the concerns of these scholars and commentators is the worry that injured parties might be unwilling to run even a small risk of incurring liability for ruinous attorneys’ fees. 7 Even those not so deterred, this argument goes, could still be induced by veteran defendants to settle for far less than their claim is worth. 8 Such objections are serious and deserve careful attention from reformers who wish to promote a more just and efficient legal order. Loser pays would not be an improvement over the current system if middle-class plaintiffs with strong legal claims became fearful of seeking justice. The case for a loser pays depends on its advocates honestly and convincingly addressing this concern, as this article does extensively in Part IV. Any analysis of a legal reform proposal should begin with a clear statement of the features we want our justice system to have, and it should then evaluate the proposal in light of those features. A viable reform should advance broadly attractive goals, not merely contentious ideological commitments or narrow partisan interests. While the substantive law allocates benefits and burdens that are exogenous to the litigation process, some procedural rules, like those concerning attorneys’ fees, allocate the transaction costs of seeking justice, including exposure to risk. What can we all agree that we want from these 6 WALTER K. OLSON, THE LITIGATION EXPLOSION 44 (1991). 7 See generally Deborah L. Rhode, Too Much Law, Too Little Justice: Too Much Rhetoric, Too Little Reform, 11 GEO. J. LEGAL ETHICS 989, 1005 (1998). 8 John F. Vargo, The American Rule on Attorney Fee Allocation: The Injured Person’s Access to Justice, 42 AM. U. L. REV. 1567, 1609-10 (1993). See generally Rhode, supra note 7. 569 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 rules? This author believes that the following five goals reflect widely shared values about how these rules ought to function. First, procedural reforms should have the effect of promoting compliance with the law, or at least should not discourage compliance. Although the justice of specific substantive laws might be debatable, if a body of law is generally just, the premise that procedural rules should promote legal compliance should be uncontroversial. Second, victims should be fully compensated. All else being equal, a legal procedure is preferable to the extent that wrongfully injured victims are returned as nearly as possible to their uninjured states. We may disagree about how costly such reparation must become before it becomes unduly punitive, but this paper will assume that full compensation for wrongful injuries is generally a desirable goal of procedural reform. Third, all else being equal, transaction costs should be as low as possible. If a given procedure can enforce the law and compensate victims as well as or better than a different procedure, and do so at less cost, then it should be adopted and the alternative rejected. Fourth, the transaction costs associated with litigation should not be allocated to a legally innocent party if otherwise reasonable alternatives are available. In general, a system that imposes heavy costs on a defendant who is not liable is inferior to one that does not do so. By the same token, a system that imposes heavy costs on a deserving plaintiff is inferior to a system that does not. There may be good public policy reasons to subsidize plaintiffs who bring some kinds of losing cases. In such instances, the cost of those subsidies is better shared by the society that benefits from the existence of a system of civil justice rather than concentrated on an individual innocent party. Fifth, procedural rules should not discourage parties with strong legal claims from pursuing justice. In particular, different parties have different levels of risk aversion, and procedural rules should not have the effect of barring the courthouse door to risk-averse parties with good cases. This paper will evaluate the American rule and a loser pays reform proposal on the basis of how well they serve these five broadly attractive criteria. If the loser pays reform proposal is superior to the American rule on these grounds, it ought to command broad support. Part I of this paper describes the 570 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 current state of the legal marketplace and how some of its participants profit from abusing it. Part II summarizes the best theoretical research into what kinds of effects we could expect loser pays to have on litigation. Part III builds on the hypotheses developed in Part II by examining evidence from two important loser pays experiments here in America. Part IV explores the possibility of preserving access to justice for plaintiffs with reasonably strong lawsuits through a system of litigation insurance. Part V offers a specific loser pays reform proposal and guidelines for its implementation. PART I: THE STATUS QUO Reporting on abusive litigation tends to focus on the most outrageous claims, often involving enormous claims for damages, such as a recent $54 million lawsuit that Washington, D.C. Administrative Judge Roy Pearson filed against his local dry cleaner for allegedly losing a pair of slacks. 9 The media also report on cases in which plaintiffs are awarded large sums for injuries they suffered after assuming commonly understood risks, as was situation with the plaintiff who was scalded when she spilled a hot cup of McDonald’s coffee. 10 Other kinds of suits that get major press attention are typically class actions or government-led claims that target companies for selling popular but arguably unhealthy products, such as high-calorie foods or violent video games. Such cases get media attention because they involve particularly bizarre facts, colorful characters, or millions of dollars, or because they potentially affect our lives. But abusive lawsuits that are not so lurid or absurd are not unusual. Most of them cost the individual defendants little; but collectively, they drive up the prices that we pay for groceries, automobiles, health 9 Marc Fisher, Judge Who Seeks Millions for Lost Pants Has His (Emotional) Day in Court, WASH. POST, June 13, 2007, at B1. Studies have indicated that 65-85% of jury-eligible people in the United States believe that there are too many frivolous lawsuits filed. Richard Waites & Jim Lawrence, Juror Perceptions About Lawsuits and Tort Reform, THE ADVOCATES, 2, http://www.theadvocates.com/Juror%20Perceptions%20About%20Lawsuits% 20and%20Tort%20Reform.pdf (last visited Apr. 5, 2011). 10 KRITZER, supra note 5, at 2. 571 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 care, and other goods and services. This section will describe how the legal marketplace currently works, why abusive lawsuits are filed, and how the lawyers who file them make a living. Lawsuits vary in the amount of money they seek, the complexity of the underlying facts (which often determines how many hours a lawyer must spend on a case), and the merits of the case (defined here as the likelihood that the plaintiff will win at trial). Figure 1 Figure 1 depicts the litigation universe in two dimensions by holding the number of hours worked constant. The curved line represents a contingent-fee lawyer’s financial break-even point (or “opportunity cost”) for a given case, assuming that it goes to trial. The higher the financial stakes of a particular case are, the 572 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 lower the legal merit of the case needs to be in order to give a lawyer an economic incentive to file it. A case brought by a severely injured plaintiff against a defendant who is very unlikely to be responsible for her injuries, for example, would be located in the upper left corner of the figure. The most profitable cases, featuring both high financial stakes and high legal merit, are located at the top right corner of the figure. “Abusive lawsuits”—represented by the shaded area in Figure 1—have little legal merit, regardless of the magnitude of the recovery sought. “Lottery suits,” as the term will be used herein, are defined by a combination of low legal merit and very high stakes. Many of these cases meet or exceed a lawyer’s break-even threshold for trials not because they have merit but because there is so much money at stake that a contingent-fee lawyer can make a living by “hitting the jackpot” in only a small minority of these cases. Professor Herbert Kritzer of the University of Wisconsin Law School describes the practices of three lawyers whose behavior can be plotted on Figure 1: “Brown handles mostly larger cases involving significant damages; he prides himself on taking and winning large recoveries in cases that other firms decline as too risky. Adams and Clarke handle a lot of very routine cases, most of which would not be economical to take to trial . . . .” 11 We can infer from Kritzer’s description that Brown at least sometimes takes lottery suits. Adams and Clarke, on the other hand, handle primarily cases below the “break-even” line on Figure 1 for trials—that is, Adams and Clarke would lose money on these cases if forced to litigate them. Some of these cases will be the kinds of small, meritorious claims found in the bottom righthand corner of Figure 1. Others are likely to be “nuisance suits,” a term which will be used herein to refer to lawsuits characterized by modest stakes and little legal merit. 12 Such 11 Id. at 98. 12 Professor Kritzer argued recently in an online forum that most nuisance suits in his data set featured weak evidence of causation rather than weak evidence of a breach of a duty of care. See Rebecca Love Kourlis, Would “Loser Pays” Eliminate Frivolous Lawsuits and Defenses?, NEW TALK (Aug. 19-20, 2008), http://newtalk.org/2008/08/would-loser-pays-eliminate-fri.php (online discussion). For the purpose of this analysis, these weaknesses are interchangeable: both are features of a suit with little legal merit, filed solely for settlement value. 573 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 suits, located in the bottom left-hand corner of Figure 1, are filed for the sole purpose of inducing a defendant to settle them in order to avoid the expense of going to trial. Nuisance suits, by this definition, fall below any contingent-fee lawyer’s break-even threshold for taking a case to trial. Therefore, such cases must be settled early in order to be lucrative enough for the lawyers who file them. This paper will explore the possibility that loser pays reforms can reduce or eliminate abusive lawsuits, especially nuisance suits. PART II: WHO FILES NUISANCE SUITS? We usually imagine that nuisance suits are filed by struggling lawyers operating alone or in a small firm, “chasing ambulances,” or otherwise aggressively marketing their services to disoriented or hesitant clients. We don’t think of them as being filed by the kinds of lawyers who labor at complex, multiyear disputes in elite downtown offices. Economists Eyal Zamir and Ilana Ritov offer a model of the legal marketplace that suggests that these stereotypes are largely correct: there is a clear pecking order among plaintiffs’ lawyers. 13 Contingent fees are fairly uniform within a given geographic area: most plaintiffs’ lawyers charge a percentage of a recovery in any case they take—usually about 33 percent, though in some jurisdictions the going rate is higher. 14 Zamir and Ritov show that standard pricing of contingent-fee legal services is possible in part because simple, strong cases afford lawyers higher effective hourly rates than do complex, weak cases even if the nominal contingent fee is identical. 15 As a result, successful 13 See generally Eyal Zamir & Ilana Ritov, Neither Saints Nor Devils: A Behavioral Analysis of Attorneys’ Contingent Fees, SOCIAL SCIENCE RESEARCH NETWORK (Jan. 22, 2008), http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1085985. 14 Lester Brickman, The Market for Contingent Fee-Financed Tort Litigation: Is It Price Competitive?, 25 CARDOZO L. REV. 65, 78 (2003). See also KRITZER, supra note 5, at 38-40 (reporting that a majority of plaintiffs’ lawyers surveyed charged a one-third contingent fee). Kritzer disagrees that his finding suggests that fees are fairly uniform. See id. 15 Zamir & Ritov, supra note 13, at 6-7. 574 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 lawyers (who can be extremely selective about the cases they take) accept only those cases that can produce very high effective hourly compensation: “[T]he standard rate endures in the market thanks to a process of assortative matching, that is, the process through which plaintiffs with very strong cases contract with the very best lawyers, second-best cases are handled by second-best attorneys, and so forth.” 16 Indeed, most plaintiffs’ lawyers decline most of the cases offered them, and the rate at which the most successful of them turn down cases is far above the average. 17 There is also evidence that an elite subset of lawyers is able to attain exceptionally high effective hourly rates through careful selection of cases. 18 Figure 2 illustrates how, according to Zamir and Ritov, cases and lawyers are matched. 16 Id. 17 KRITZER, supra note 5, at 76. 18 Id. at 75-76. 575 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 Figure 2 The dotted line in the top right corner of Figure 2 delineates a portfolio of highly lucrative cases that would be representative of a top plaintiffs’ lawyer. The Zamir-Ritov model implies that, just as there is an upper echelon within the ranks of plaintiffs’ lawyers, there is also a lower echelon, whose portfolio is defined by the curved series of dashes in the bottom left section of Figure 2. Such “nuisance lawyers” can attract only the weakest cases. Kritzer describes the investment strategy that such a lawyer can be expected to adopt: “[T]he lawyer can be relatively nonselective. Under this approach, the lawyer may want to minimize the investment in most cases. The goal is to achieve lots of small recoveries, with relatively little investment.” 19 19 Id. at 15. 576 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 The most notable exceptions to the rule that only struggling lawyers file dubious suits are low-merit mass torts and class action suits, which attract elite lawyers because they offer enormous efficiencies of scale. 20 These kinds of cases concern hundreds or thousands of similarly injured plaintiffs and are usually settled en masse. 21 Because they require lawyers to spend little or no time on any individual claimant, they can be very profitable for lawyers even if each individual case would have little value on its own. 22 HOW DO NUISANCE LAWYERS REMAIN IN BUSINESS? Experts have struggled to explain how a lawyer can make money by filing lawsuits that cost more money to try than the lawyer can hope to recover in fees. If the defendant knows that the cost to the plaintiff of taking the case to trial is sure to exceed the amount he can recover, it seems to follow that the defendant will refuse to settle, knowing that the plaintiff is likely to drop the case. Nonetheless, nuisance suits often culminate in a settlement offer from a defendant. Economists David Rosenberg and Steven Shavell have shown that a defendant will settle a nuisance suit if the cost of filing an initial response to a complaint is significant, since the cost of replying itself makes settlement attractive. 23 Even for cases in which the initial response is not prohibitively expensive, a defendant may not be able to tell whether a particular suit is a nuisance suit, according 20 See RICHARD A. NAGAREDA, MASS TORTS IN A WORLD OF SETTLEMENT ix (2007) (“One significant facet of the mass tort phenomenon consists of the emergence and operation of an elite segment of the personal injury plaintiffs’ bar.”). 21 See id. at 9. 22 See R.A. Nagareda, Embedded Aggregation in Civil Litigation, 95 CORNELL L. REV. 1105, 1154-55 (2010). 23 D. Rosenberg & S. Shavell, A Model in Which Suits are Brought for Their Nuisance Value, 5 INT’L REV. L. & ECON. 3 (1985). 577 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 to lawyer and economist Lucian Bebchuk. 24 For certain types of claims, like mass torts, this explanation seems particularly compelling: the transaction costs of sifting through thousands of claims to separate the good cases from the bad can exceed the cost to settle each claim. Paradoxically, plaintiffs’ lawyers who file nuisance suits are also helped by ethics rules that prohibit them from withdrawing from cases if doing so would impose a substantial hardship on a client. 25 While the Model Rules of Professional Conduct nominally permit lawyers to withdraw from representing a client if continued representation creates an “unreasonable financial burden” on the lawyer, 26 case law overwhelmingly holds that a client’s refusal of an offer of settlement does not These ethical justify withdrawal under this provision. 27 constraints enable a plaintiff’s lawyer to credibly commit in advance to trying any case that he files on behalf of a client if it is not first settled. Bebchuk and Andrew Guzman have shown that contingentfee arrangements enhance the pretrial bargaining power of plaintiffs themselves by insulating them from almost all the considerable marginal costs of going to trial, which are borne by the contingent-fee attorney and, of course, the defendant. 28 Plaintiffs’ bargaining power would not be enhanced in this way if plaintiffs’ lawyers were free to drop cases that do not settle. 24 See generally Lucian Arye Bebchuk, Litigation and Settlement Under Imperfect Information, 15 RAND J. ECON. 404 (1984). 25 See MODEL RULES OF PROF’L CONDUCT R. 1.16(b)(1) (2009). 26 See MODEL RULES OF PROF’L CONDUCT R. 1.16(b)(6) (2009). 27 See H.M. Erichson & B.C. Zipursky, Consent Versus Closure, 96 CORNELL L. REV. 265, 287-89 (2011). 28 Lucian Arye Bebchuk & Andrew T. Guzman, How Would You Like to Pay for That? The Strategic Effects of Fee Arrangements on Settlement Terms, 1 HARV. NEGOTIATION L. REV. 53, 54 (1996). Kritzer’s survey of contingent-fee lawyers practicing in Wisconsin indicates that lawyers make far less money per hour on cases that are tried than they do on cases that are settled. See KRITZER, supra note 5 tbl.6.2a, 6.2b. 578 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 Still, if a distinct class of lawyers is responsible for most nuisance litigation, as Zamir and Ritov’s research implies, it might seem as though defendants could just identify those lawyers and systematically refuse to settle the cases that they file, at least in cases that do not demand an unusually costly initial response or whose outcome is not highly uncertain. Presumably, the lawyers so targeted would stop filing nuisance cases, since they would not be lucrative enough to justify the cost of going to trial. That defendants have not adopted this strategy on any large scale is explained by a collective-action problem: it is impossible for all frequently-sued individuals and businesses to commit to each other that they will litigate every suit filed by a designated nuisance lawyer. In any individual case, a defendant is motivated to settle early because she knows that, if she holds out, the platintiff’s lawyers will be financially sustained by settlement proceeds from other defendants who have settled, and will settle, other cases, and will therefore be able to continue to press their claim against her. Defendants’ incentive to settle nuisance cases—even those from lawyers who habitually file them—is a version of a classic decision problem that game theorists call the “Stag/Hare game.” 29 Figure 3 illustrates the Stag/Hare game in the context of two defendants who must decide whether to settle or litigate nuisance suits. Each of the four boxes represents a possible outcome for the defendants depending on the decisions they both make. Defendant 1’s outcomes (“best,” “middle,” or “worst”) appear first in each box, while Defendant 2’s outcomes appear second. 29 In the original Stag/Hare game, two hunters must decide whether to pursue a stag or a hare. Killing a stag requires the commitment of both hunters and produces the most meat for each participant. However, because each hunter can’t count on the other to pursue a stag also, the hunters usually decide to pursue hares, which can be killed independently, even though they are less filling. See DOUGLAS G. BAIRD, ROBERT H. GERTNER & RANDAL C. PICKER, GAME THEORY AND THE LAW 35-36 (1994). 579 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 Figure 3 If all defendants take nuisance suits from a particular nuisance lawyer to trial, they will drive that lawyer out of business. This is the best outcome for the defendants, represented by the upper left-hand box in Figure 3. But if some defendants settle, those who do not settle will incur trial expenses unnecessarily. This is the worst outcome, represented by the upper right-hand box for Defendant 1 and by the lower left-hand box for Defendant 2. If either defendant fears that the other will sometimes settle, either due to risk aversion or by strategic mistake, then she will also adopt a strategy of settlement. As a result, defendants generally find themselves participating in a pervasive culture of settlement, even when the suits settled are extremely weak. This outcome, represented by the lower, right-hand box in Figure 3, is the only stable equilibrium in the game. 30 Indeed, the empirical literature shows that the United States has developed a culture of nearly universal settlement. 31 Only 30 See id. at 36. In economists’ parlance, there are two Nash equilibriums in this game: [litigate, litigate] and [settle, settle]. See id. However, [litigate, litigate] is not “trembling hand perfect.” SHAUN H. HEAP, YANIS VAROUFAKIS, GAME THEORY: A CRITICAL INTRODUCTION 68-70 (1995). Therefore, universal litigation is not a stable equilibrium in this game if the players occasionally make errors. Only [settle, settle] survives dominance refinement analysis and is the expected equilibrium in this game. 31 See KRITZER, supra note 5, at 177. 580 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 about 7 to 9 percent of lawsuits filed actually proceed to trial. 32 Lawyers and policymakers praise high settlement rates because settlement avoids the public and private expenses of a trial. It is nonetheless worth noting that many low-merit lawsuits could be deterred if it were possible for defendants to commit in advance to taking them to trial. PART III: WHAT TO EXPECT FROM LOSER PAYS While researchers differ on what some of the effects of a loser pays rule might be—and certainly differ on the overall advisability of adopting one—there is broad consensus that a loser pays rule would reduce the number of nuisance suits. 33 This reduction would occur because defendants would be willing to pay much less to settle low-merit suits under loser pays than they currently do. A simple example will illustrate why a defendant would insist on paying less to settle a nuisance suit under loser pays. Suppose a plaintiff has suffered a loss of $10,000 (an amount that is not in controversy in this example), but his suit has little legal merit because the defendant probably did not cause his injury, giving the plaintiff only a 20 percent chance of winning at trial. Suppose that the plaintiff’s lawyer (who is working under a contingent-fee agreement for 33 percent of any recovery) and the defendant would each have to invest $5,000 worth of legal services in order to try the case. The plaintiff’s 32 See David M. Trubek et al., The Costs of Ordinary Litigation, 31 UCLA L. REV. 72, 89 (1983); Kevin McCabe & Laura Inglis, Using Neuroeconomics Experiments to Study Tort Reform, MERCATUS POL’Y SERIES, Nov. 2007, at 12, available at http://mercatus.org/sites/default/files/publication/20080104_Tort_Final.pdf. 33 For the seminal early work suggesting that a loser pays rule reduces the number of frivolous suits filed, see Steven Shavell, Suit, Settlement, and Trial: A Theoretical Analysis Under Alternative Methods for the Allocation of Legal Costs, 11 J. LEGAL STUD. 55, 59-60 (1982). See also GORDON TULLOCK, TRIALS ON TRIAL: THE PURE THEORY OF LEGAL PROCEDURE 17, 65-67 (1980); Lucian Arye Bebchuk, A New Theory Concerning the Credibility and Success of Threats to Sue, 25 J. LEGAL STUD. 1, 19-20 (1996); McCabe & Inglis, supra note 32, at 17-18. But cf. Ronald Braeutigam, Bruce Owen & John Panzar, An Economic Analysis of Alternative Fee Shifting Systems, 47 LAW & CONTEMP. PROBS. 173, 181-82 (1984) (results ambiguous). 581 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 lawyer could expect a fee of only $667, since 20 percent of $10,000 is $2,000, and 33 percent of $2,000 is $667, for $5,000 worth of work if the case goes to trial. The plaintiff’s lawyer, therefore, plans to settle the case. Under the American rule, he may extract between $2,000 and $7,000 from the defendant in settlement, because the defendant knows that it will have to spend $5,000 on unrecoverable legal costs if it fails to settle and because the case has an additional expected value of $2,000 for the plaintiff. Under loser pays, however, defendants would either refuse to settle or would offer far less in settlement. In our example, the defendant has an expected cost of going to trial of only $3,667 under a loser pays rule, reflecting its 20 percent chance of losing the case and paying damages and both parties’ legal fees. 34 Therefore, the defendant would never pay more than $3,667 to settle this case—just over half of the maximum of $7,000 that a plaintiff could extract from the same suit under the current system. Because loser pays would make nuisance suits less valuable, the effective hourly rates of nuisance lawyers would decline. In the face of reduced earnings, some nuisance lawyers would surely choose to file different kinds of cases (such as meritorious small claims), or they would migrate to other specialties or careers. Loser pays would also have some impact on the settlement prospects of mass-tort claims by deterring some of the thousands of low-merit individual claims that are based on more or less the same facts. Under the American rule, mass-tort lawyers have an incentive to recruit thousands of plaintiffs with dubious claims, since they know that the cost to defendants of ferreting out the weak or even fraudulent cases and taking them to trial is prohibitively high. Under loser pays, mass-tort lawyers would be less able to force settlements by pointing to the enormous transaction costs of conducting thousands of individual trials. Without this leverage, mass-tort lawyers would have less incentive to include weak claims in their portfolios. Loser pays would also reduce the number of low34 This example assumes that the plaintiff’s attorney would recover only his contracted-for fees. If instead the plaintiff’s attorney could recover his actual incurred cost of $5,000, the analysis would not change materially: the expected cost to the defendant would be $4,000, still $3,000 less than under the American rule. 582 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 merit class action lawsuits, but not to the extent that it would individual cases, in which legal fees and expenses are bound to be a higher proportion of a defendant’s total exposure. MORE MERITORIOUS SMALL CLAIMS In addition to reducing the number of nuisance suits, most researchers agree that a loser pays rule would make viable some small, highly meritorious lawsuits that cannot be profitably tried in the current system. 35 Figure 4 shows how a loser pays rule would shift the break-even line for suits taken to trial and therefore, by inference, the viability of all meritorious suits, including those that settle. 36 35 See TULLOCK, supra note 33, at 65-67; Lucian Arye Bebchuk, A New Theory Concerning the Credibility and Success of Threats to Sue, 25 J. LEGAL STUD. 1, 19-20 (1996) (demonstrating mathematically that plaintiff negotiating power is enhanced for suits with a greater than 50% chance of prevailing at trial); Keith N. Hylton, Litigation Cost Allocation Rules and Compliance with the Negligence Standard, 22 J. LEGAL STUD. 457, 464-66 (1993); Avery Katz, Measuring the Demand for Litigation: Is the English Rule Really Cheaper?, 3 J.L. ECON. & ORG. 143, 156-57 (1987); Shavell, supra note 33, at 59-62; Edward A. Snyder & James W. Hughes, The English Rule for Allocating Legal Costs: Evidence Confronts Theory, 6 J.L. ECON. & ORG. 345, 349 (1990). 36 The break-even line for all suits, including those that settle, would shift in tandem with the break-even line for suits reaching trial. This means that what are now “nuisance lawyers” would have to seek higher-merit cases under loser pays in order to maintain their current levels of compensation even if their cases continue to settle at similar rates. 583 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 Figure 4 The increased viability of small, meritorious claims would have both benefits and costs. On one hand, a person with a modest but meritorious claim deserves compensation, and more complete compensation for victims is one of the most important ways in which a loser pays rule could make the U.S. legal system more just. Critics of loser pays who worry that the rule would limit access to the courts often fail to acknowledge that the American rule bars court access for small but strong claims of injury, unless the claims can be grouped into a class action. On the other hand, a significant influx of small, meritorious claims under loser pays might keep the overall amount of litigation, and thus the overall cost of the civil justice system, from decreasing as a result of reform. 584 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 Fortunately, there are reasons to think that the reduction in nuisance suits following the adoption of loser pays would be greater than the increase in small, highly meritorious lawsuits. While it is true that many such claims are too small to be worth taking to trial under the current system, many nuisance claims are small as well. Yet nuisance claims of this kind are filed, anyway, for their settlement value—just as are, undoubtedly, substantial numbers of meritorious claims that are not too insignificant to be worth pursuing to trial. Also, many small claims are currently litigated as class actions. Responses from Kritzer’s survey of contingent-fee lawyers in Wisconsin also suggest that more nuisance suits would be deterred under a loser pays rule than the number of new, highly meritorious claims filed as a result of the adoption of loser pays. 37 Figure 5 shows the relative frequency of various reasons that contingent fee lawyers give when they decide to decline a case. 38 Surveyed plaintiff’s lawyers named only a lack of legal liability as their reason for declining 47 percent of the cases they turned down, and they named both a lack of legal liability and a lack of adequate damages as a reason for declining another 13 percent of rejected cases. 39 Only 19 percent of rejected cases were declined for the sole reason that the expected size of the recovery was too low. 40 37 See Kritzer, supra note 5, at tbl.3.9. 38 Id. 39 Id. 40 Id. 585 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 Figure 5 These responses (combined with statistical principles) imply that of all the cases that lawyers are asked to pursue—on either side of their accept/reject threshold—a greater number have marginal legal merit than have merit but promise only marginally-sized recoveries. 41 If that is so, the number of lowmerit cases that loser pays would discourage should be larger than the number of small, high-merit cases that loser pays encourages. High-merit, low-damages injuries are also unlikely to be litigated to trial under loser pays because defendants would have no financial incentive to resist compensating those they have genuinely harmed. Loser pays should therefore promote immediate, appropriate, handling of small injuries in order to avoid litigation. Under the American rule, defendants are likely to treat small, high-merit claims just like nuisance claims and under-compensate genuinely injured victims. 42 Plaintiffs with small, good claims deserve more prompt and generous 41 Perhaps this is the case because plaintiffs know whether they are injured but lack the specialized knowledge to know whether they are legally in the right. 42 Potential class actions are, of course, an exception to this rule. 586 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 compensation than they currently get, and loser pays would incentivize defendants to provide this immediately. SETTLEMENT RATES Research is deeply split on the issue of whether a loser pays rule would increase or decrease the rate at which lawsuits are settled rather than tried. 43 Loser pays, by increasing the amount of money in dispute in any given case (that is, by “raising the stakes” of litigation), may reduce settlement rates by magnifying differences of opinion between the parties about what each is likely to gain by going to trial. 44 On the other hand, higher stakes could induce risk-averse parties to settle. 45 Experiments designed to predict the effect that a loser pays rule would have on settlement rates have yielded mixed results. Economists Kevin McCabe and Laura Inglis found that loser pays would lower rates of settlement, 46 while two older experiments suggest that settlement rates would increase. 47 43 Some studies suggest that a loser pays rule will raise settlement rates. See, e.g., Michael R. Baye, Dan Kovenock & Casper D. de Vries, Comparative Analysis of Litigation Systems: An Auction-Theoretic Approach, 115 ECON. J. 583, 599 (2005) (“To the extent that America’s reputation for being a litigious society is based on the sheer number of suits brought to trial, a movement toward the Continental or British system might reduce the number of suits and the strain on the court system.”) (footnote omitted); Snyder & Hughes, supra note 35, at 369. Other studies suggest that a loser pays rule would lower settlement rates. See, e.g., Keith N. Hylton, An Asymmetric-Information Model of Litigation, 22 INT’L REV. L. & ECON. 153, 162 (2002) (“[T]he British rule, consistent with earlier analyses, generat[es] the most litigation.”); McCabe & Inglis, supra note 32, at 18; Shavell, supra note 33, at 65-66. 44 See Hylton, supra note 35, at 459. 45 See Shavell, supra note 33, at 68. 46 McCabe & Inglis, supra note 32, at 18. 47 Don L. Coursey & Linda R. Stanley, Pretrial Bargaining Behavior within the Shadow of the Law: Theory and Experimental Evidence, 8 INT’L REV. L. & ECON., 161, 175-76 (1988); Peter J. Coughlan & Charles R. Plott, An Experimental Analysis of the Structure of Legal Fees: American Rule vs. English Rule 36 (Cal. Inst. of Tech. Div. of the Humanities & Soc. Scis., Working Paper No. 1025, 1997). 587 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 The question of the effect of loser pays on settlement rates, however, may not be as consequential as the extent of academic interest in the subject implies. Only about 8% of lawsuits filed go to trial now. 48 The rest are resolved by settlement, by dismissal or summary judgment, or by the plaintiff’s decision to drop the suit. 49 In part because so few cases proceed to trial, most resources devoted to litigation are spent at its earlier stages, including settlement negotiations. Figure 6 is a breakdown of the time that litigation attorneys report spending on various activities related to the resolution of lawsuits. Because attorneys’ fees are by far the largest cost of litigation, these figures are a reasonable proxy for overall legal costs. Importantly, litigation attorneys report that they spend only 8.6% of their time on hearings and trials. Most of their time is devoted to activities that may precede serious settlement discussions: client interviews, case investigation, pretrial motions, and settlement negotiations. While an early settlement would avoid many of these expenses, a settlement on the eve of trial would avoid very few of them. 48 Trubek et al., supra note 32, at 89. 49See id. 588 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 Figure 6 50 All else being equal, therefore, legal reforms that reduce filings are likely to reduce costs more than legal reforms that increase settlement rates, which are already very high. Still, a loser pays rule can and should be carefully designed not only to discourage low-merit filings but also to promote settlement. LITIGATION COSTS PER CASE Critics of loser pays warn that even if the rule should reduce the number of lawsuits filed, the cost of litigation per case may increase because each party no longer necessarily and exclusively bears its own costs. 51 Under a loser pays rule, each dollar of additional spending by either party is discounted by the probability that the other side would assume those costs upon 50Id. at 91, tbl.3. 51 See Baye, Kovenock & de Vries, supra note 43, at 599; Braeutigam, Owen & Panzar, supra note 33, at 180; Katz, supra note 35, at 144. 589 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 losing the case. 52 Whereas $1,000 in additional spending under an American rule would be borne wholly by the party making the decision to spend, a party under a loser pays regime that estimated its chance of winning at 50 percent would only bear $500 of the additional $1,000 spent. 53 Assuming that increased spending on legal services enhances a party’s chances of prevailing, parties will spend more on legal services under loser pays, loser pays critics argue, than they would under a system employing the American rule. This “cost-internalization” critique of loser pays is correct as applied to certain kinds of costs, but the charge that loser pays would increase overall costs per case is probably wrong in light of what we know about the kinds of costs that parties to litigation actually incur. The theoretical studies that predict increased per-case expenditures under loser pays assume that a litigant’s choice to spend more on legal fees does not effectively require the opposing party to match those expenditures in response. If litigation spending induces responsive spending in equal or greater amounts by the opposing party, what economist Avery Katz calls a “provocative expenditure,” then loser pays provides no incentive for the parties to run up these kinds of costs. 54 Katz argues that loser pays would increase trial expenditures, but his argument assumes that legal spending is not provocative. 55 He concedes that if it were, his concerns about loser pays would be misguided. 56 Fortunately, empirical studies suggest that Katz’s assumption about the character of most litigation spending is 52 Katz, supra note 35, at 160 53 Id. 54 Id. at 161 n.28. 55 See id. at 160-61. 56 Id. at 161 n.28 (“[I]f the opponent is somehow bound to respond in kind to marginal expenditure, and if the parties act strategically, so as to take advantage of this, as perhaps may be the case in civil discovery, the English rule may reduce incentives to engage in provocative expenditure.”). Katz explains elsewhere: “For example, if the case were even, and the opponent were expected to react in kind to marginal expenditure on a dollar–for-dollar basis, the English rule might not reduce the marginal cost of expenditure.” Id. at 172. 590 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 wrong. Most decisions to spend money on litigation are provocative because they trigger a litigation event, such as a motion, discovery request, or pretrial conference, which requires the opposing party to undertake a costly activity in response. 57 A leading empirical researcher who collects data on the legal system, Kritzer, seems to agree that litigation expenditures are mostly provocative in nature, though he opposes loser pays reforms. 58 He reports that lawyers’ efforts in litigation are “largely determine[d]” by “the actions of the opposing party,” and that “[e]ach decision to invest additional effort will then influence the defense side, which in turn may make investments that require further investment by the plaintiff’s side.” 59 Data from the Wisconsin Civil Litigation Research Project confirm that case complexity and associated litigation “events,” not the sums at stake, are the main drivers of litigation spending—a result that is at odds with the hypothesis embraced by critics of loser pays that parties under such a regime will be motivated to spend more overall. 60 In fact, the American rule may cause per-case litigation spending to be higher than it would be under loser pays because America has very liberal discovery rules, and discovery requests are a very provocative expenditure. Katz’s own model suggests that the American rule actively encourages any expenditure so provocative that it requires a much larger expenditure from the opposing party in response. 61 This is true of discovery requests: they are far faster and easier to draft than they are to respond to. Plaintiffs’ attorneys in the United States may currently choose to bury defendants in onerous discovery requests, knowing that their clients bear none of the costs of document production. As 57 See Trubek et al., supra note 32, at 102 tbl.8. 58 KRITZER, supra note 5, at 17-18; Herbert M. Kritzer, “Loser Pays” Doesn’t, LEGAL AFF., Nov./Dec. 2005, at 24 (opposing loser pays on the grounds that it would result in increased litigation costs). 59 KRITZER, supra note 5, at 17-18. 60 See Trubek et al., supra note 32, at 102 tbl.8 (indicating that “events” such as motions and discovery requests are the primary driver of costs in the typical case). 61 KRITZER, supra note 5, at 17-18. 591 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 Figure 6 shows, lawyers report that discovery is one of the most time-consuming litigation activities they undertake, so these costs are substantial, and are inflated by the American rule. A loser pays rule would discourage excessive discovery in lowmerit suits. It would also discourage defendants from the wasteful practice of filing standardized motions with little legal merit in order to require plaintiff’s counsel to spend greater time and effort researching and drafting a response. Thus, a close look at the prevalence of different kinds of spending done by parties to a lawsuit suggests that a loser pays rule probably would not increase overall per-case expenditures, and might even have the opposite effect. Nevertheless, critics’ concern that loser pays rules would encourage higher spending remains well founded with respect to certain kinds of litigation costs and therefore should be addressed by reformers when they craft loser pays reform proposals. COMPLIANCE EFFECT The “compliance effect” is one of the most interesting and salutary results of a loser pays rule: potential defendants, facing the risk of having to pay a winning plaintiff’s legal fees, can be expected to try harder to meet legal standards of care when they engage in business activities. In effect, loser pays makes legal compliance cheaper and legal culpability more expensive, motivating businesses and individuals to spend more money to ensure the blamelessness of their behavior. 62 Figure 7 is a decision tree that compares the differing incentives that potential defendants have under the American rule and under a loser pays rule to invest in preventative safety measures. 62 See Hylton, supra note 43, at 154. 592 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 Figure 7 In this simple model, a potential defendant must decide whether to take a specific action at a fixed cost in order to comply with the law, for example, applying a non-skid surface to the front steps of a business. This model assumes that courts sometimes make errors but that they are correct more often than they are wrong (that is, it assumes that: 1 > r > .5 > q > 0). A potential defendant can minimize its expected costs by spending up to the dollar amount represented by the variable m in order to comply with the legal standard of care. For example, a business will choose to install that aforementioned non-skid surface only if doing so costs less than m. The mathematically inclined can solve for the optimal values of m under the American rule and under loser pays by setting the defendant’s expected costs for compliance and noncompliance at trial equal to each other: Finding optimal compliance expenditure under the American rule yields: 593 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 q(-J – C2 – m) + (1 – q) (-C2 – m) = r(-J – C2) + (1 – r) (-C2) ==> m(American)* = J(r – q)] Finding optimal compliance expenditure under a loser pays rule yields: q(-J – C3 – m) + (1 – q) (– m) = r(-J – C3) + (1 – r) (0) ==> m(loser pays)* = J(r - q) + C3(r – q) Because we know that r > q, we can now see that the optimal value of m under a loser pays rule is always higher than the optimal value of m under the American rule. This means that a potential defendant will be motivated to spend more money on safety measures such as non-skid surfaces in a loser pays system. An additional benefit not reflected in this simple model is that, if the prospective defendant complies with the law, a potential plaintiff’s injury is less likely to take place at all, a humanitarian as well as financial benefit. Economist Keith N. Hylton estimated the effect that a loser pays rule would have on legal compliance compared to the American rule. 63 His model assumed that potential defendants would analyze compliance decisions on the basis of the probability of injury; parties’ likelihood of filing suit, settling, or litigating; and likely trial judgment. 64 The results of Hylton’s simulation suggest that a loser pays rule would significantly increase the resources that defendants devote to complying with legal standards, and thus reduce the number of people injured. 65 Hylton also attempted to determine which system maximized overall social welfare by adding up the costs of injury, compliance, and litigation under alternative regimes. Hylton’s model suggested that settlement rates would go down somewhat, but that the costs associated with lower settlement rates were dwarfed by the welfare-enhancing effect of greater 63 Hylton, supra note 43. For his earlier version of the tort liability model, see Hylton, supra note 35. This earlier version did not yield as strong a compliance effect because it failed to capture the effects of fee shifting on settlement offers. Hylton, supra note 43, at 154 n.7. 64 Hylton, supra note 43, at 155-58. 65 Id. at 162. 594 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 legal compliance and increased public safety. 66 Hylton concluded that loser pays was superior to the American rule at conserving resources and avoiding injuries. 67 PART IV: LOSER PAYS IN ACTION Americans litigate far more often than do residents of other nations. The share of our economy spent on litigation is at least twice that of Germany, France, England, and Northern Ireland, respectively. 68 Our outsize litigation rates are driven in part by the fact that the American rule encourages nuisance suits, but myriad other differences between nations make it impossible to determine the size of that effect compared to the many other reasons why litigation rates differ between countries. 69 For example, residents of nations with more comprehensive social insurance systems have fewer otherwise uncompensated costs associated with injuries and therefore may be less motivated to file lawsuits. 70 Therefore, arguments for loser pays in the U.S. should not rely too heavily on international differences in litigation rates uncontrolled by other relevant differences in the laws, politics, and populations of the countries compared. Since controlling for all such differences is impracticable, it is fortunate that there is some domestic evidence about the likely effects of a loser pays rule in the United States. Alaska has always had a loser pays rule, and Florida briefly experimented with a loser pays rule applied only to medical-malpractice suits. 66 See id. 67 Id. at 168. 68 TOWERS PERRIN TILLINGHAST, supra note 1, at 4. 69 See generally RICHARD AND AMERICA 76-79 (1996). A. POSNER, LAW AND LEGAL THEORY IN ENGLAND 70 See Dana A. Kerr, et al., “A Cross-national Study of Government Social Insurance as an Alternative to Tort Liability,” 76 J. OF RISK & INS. 367, 368 (2009). 595 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 THE ALASKAN EXPERIENCE Uniquely among the states, Alaska has had a nearly universal loser pays rule since it became a state in 1900. 71 Rule 82 of the Alaska Rules of Civil Procedure provides: “Except as otherwise provided by law or agreed to by the parties, the prevailing party in a civil case shall be awarded attorney’s fees calculated under this rule.” 72 The rule calculates fee awards for plaintiffs as a percentage of money damages recovered: 20% of the first $25,000 and 10% of any additional sums recovered at trial. 73 Prevailing defendants are awarded 30 percent of their actual attorneys’ fees for tried cases and 20 percent of actual fees for cases terminated by other means. 74 Evidence of the effect of Alaska’s loser pays rule on its rate of civil filings is ambiguous. Alaska recorded 5,793 civil filings per 100,000 inhabitants in 1992. 75 This number was only slightly below the national median of 6,610 per 100,000 that year. 76 The composition of civil filings, though, differs somewhat from the national pattern. 77 Domestic relations and probate matters, which are not governed by loser pays, form a much larger share of total civil litigation in Alaska (where they are 60% and 19% of the total Alaska caseload, respectively) than in the United States generally (where they comprise only 39% and 10% of the total 71 Act of June 6, 1900, ch. 786, §§ 509-28, 31 Stat. 321, 415-18. 72 ALASKA R. CIV. P. 82(a). 73Id. at 82(b)(1). Lesser percentages are recoverable in cases that are settled or are uncontested. See id. 74 Id. at 82(b)(2). Plaintiffs who sue for nonmonetary damages may recover under this provision as well. See id. 75 SUSANNE DI PIETRO ET AL., ALASKA’S ENGLISH RULE: ATTORNEY’S FEE SHIFTING IN CIVIL CASES 79-80 (1995), available at http://www.ajc.state.ak.us/reports/atyfee.pdf. 76 Id. 77 See id. at 84. 596 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 caseload, respectively). 78 By the same token, Alaska’s tort claims constitute a smaller share of Alaska’s litigation mix (5%) than they do in the country as a whole (10%). 79 These statistics suggest, but certainly do not prove, that loser pays may be responsible for more selective filing of tort claims in Alaska than in other jurisdictions. Most attorneys surveyed by the Alaska Judicial Council thought that Alaska’s loser pays rule did not significantly reduce the number of filings of “frivolous” suits because plaintiffs who file most such suits do so for “emotional,” rather than financial, reasons. 80 But the Council’s survey question, in asking about “frivolous” suits, was misleading, since “frivolous” is a legal term of art denoting only truly outlandish legal claims, as opposed to merely weak ones. In fact, the Council concluded, on the basis of interviews with Alaska attorneys, Alaska’s loser pays rule reduced the number of low-merit cases filed by rational, middleincome plaintiffs. 81 The Council’s finding was merely qualitative, not quantitative, but nevertheless important, especially since defendants are able to recover only 20--30% of their actual fees under Alaska’s rule. The Alaska Judicial Council also collected evidence indicating that small meritorious claims, particularly those seeking to collect on an unpaid debt, were filed more frequently in Alaska due to the likely availability of a fee award. 82 This finding is consistent with the theoretical literature. It is difficult to generalize from Alaska’s experience with loser pays on account of Alaska’s unique geography. The state has enormous natural resource reserves, 83 a large indigenous 78 Id. at 83-84. 79 Id. 80 DI PIETRO ET AL., supra note 73, at 132. 81 Id. at 139. 82 Id. at 104-05. 83 See Alaska Dep’t of Labor & Workforce Dev., Alaska Gas Inducement Act Training Strategic Plan: A Call to Action 5 (2009) , available at http://labor.state.ak.us/AGIA_teams/docs-combined/agiaweb.pdf. 597 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 population, 84 and substantially more men than women. 85 Any one of these factors could affect the rate of tort litigation alone or in combination in ways that are not fully understood. For example, there is some evidence that men are more likely than women to be involved in legal disputes. 86 Nonetheless, the available evidence suggests that Alaska has under-implemented a fundamentally sound policy, which better compensates deserving small claimants and discourages the kinds of filings that have a low probability of success. While fee shifting is standard in Alaska, the state’s fee schedules fail to compensate prevailing parties fully for their litigation costs, reducing the rule’s salutary effects. THE FLORIDA EXPERIMENT In 1980, Florida embarked on an important experiment. In response to escalating medical-malpractice insurance rates, the state legislature adopted a loser pays rule exclusively for medical-malpractice lawsuits. 87 The Florida Medical Association and the insurance industry lobbied for the provision, which they hoped would reduce the rate of abusive litigation and thus the insurance premiums paid by doctors and hospitals. 88 However, both groups quickly discovered a problem 84 See Alaska Quick Facts, U.S. CENSUS BUREAU (Nov. 4, 2010 12:46:17 EDT), http://quickfacts.census.gov/qfd/states/02000.html (American Indian and Alaska Native persons make up 15.2% of the population of Alaska and only 1% of the United States population as a whole.) 85 Id. (Women comprise 48.1% of the population of Alaska and 50.7% of the population of the United States as a whole.) 86 See, e.g., Michael J. Goldberg, The Propensity to Sue and the Duty of Fair Representation: A Second Point of View, 41 INDUS. & LAB. REL. REV. 456, 457 (1988). Ch. 80-67, 1980 Fla. Laws 225 (codified at FLA. STAT. § 768.56 (1980)), repealed by ch. 85-175, 1985 Fla. Laws 1225. 87 88 See Avram Goldstein, Lawyer’s $4.4-Million Award Ignites Furor, MIAMI HERALD, Sept. 28, 1982, at A1. 598 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 with the new system—the frequent inability of victorious defendants actually to collect their attorneys’ fees from insolvent plaintiffs 89—and they were taken aback by the multi-million dollar plaintiff’s attorneys’ fee that a Florida doctor who had lost the case against him was ordered to pay. 90 With every interest group lobbying for its repeal, Florida’s loser pays law was wiped from the books in 1985. 91 The first rigorous analysis of the Florida law’s effects was published five years later, and its findings suggest that the loser pays experiment was given short shrift by policymakers and its erstwhile advocates. 92 Economists Edward A. Snyder and James W. Hughes found that 54% of medical malpractice plaintiffs voluntarily dropped their lawsuits under Florida’s loser pays rule, while only 44% of plaintiffs dropped their suits when the American rule was in force both before and after the loser pays rule was in effect. 93 Loser pays also almost halved the share of medical malpractice lawsuits that went to trial—from 11% to 6% (see Figure 8). 94 89 COMM. ON HEALTH CARE & INS., FLA. H.R., STAFF ANALYSIS OF HB 1352, H.R. DOC. NO. PCB85-02/BS, at 8 (1985). 90 B. Richard Young, Comment, Medical Malpractice in Florida: Prescription for Change, 10 FLA. ST. U. L. REV. 593, 608 (1983). 91 See ch. 85-175, 1985 Fla. Laws 1225. 92 See Snyder & Hughes, supra note 35, at 377-78. 93 See id. at 363-64. 94 See id. at 364. 599 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 Figure 8 95 Note: Percentages may not add up to 100 due to rounding. Supporting the hypothesis that more plaintiffs with weak suits dropped them under Florida’s loser pays rule, cases governed by loser pays were settled for higher amounts ($94,489), on average, than were cases governed by the American rule ($73,786). 96 Most notably, settlements of less than $10,000 dropped from 49% of all settled cases under the American rule to less than 37% under loser pays, 97 suggesting that some low-value settlements under the American rule were paid to the sort of nuisance complainant who did not actually file suit or the sort of plaintiff who dropped his lawsuit during the period when loser pays was in force. Similarly, while a smaller percentage of medical-malpractice suits went to trial in the years that the loser pays rule was in effect, the average trial award came close to tripling, from 95 See id. at 363-64. 96 James W. Hughes & Edward A. Snyder, Litigation and Settlement Under the English and American Rules: Theory and Evidence, 38 J.L. & ECON. 225, 243 tbl.7 (1995). 97 Id. 600 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 $25,190 to $69,390 in constant dollars, and plaintiffs more often prevailed at trial. 98 Hughes and Snyder concluded that the higher average was the direct result of the loser pays rule’s elimination of many weak cases: “Having found that plaintiff prospects improve under the English rule, we are able to establish that these effects necessarily reflect an improved selection of claims reaching the settle-versus-litigate stage.” 99 Florida did experience an increase in per-case litigation expenses, both for those that settled and those that proceeded to trial during the loser pays experiment. 100 However, because the average trial award almost tripled during this period as well, 101 it is possible that defendants were simply spending more on each individual case because the pool of cases was smaller but stronger (i.e., the stakes were higher, and therefore the extra effort put into defending them was well worth making). While the evidence from Florida’s ambitious experiment is ambiguous and complex, it confirms to a striking degree predictions made in the theoretical literature: litigants with weak cases were more likely to abandon their claims under loser pays, which allowed lawyers and courts to focus on more meritorious suits. The increased size of the average settlement and judgment under Florida’s temporary loser pays regime also tends to support this view. Litigation expenses per case, including attorneys’ fees, did rise during this period, 102 although it remains possible that expenditures for cases of similar size and merit were unchanged. Did Florida’s version of loser pays work better or worse there than the American rule? The large increase in dropped claims and the lower rate of trials suggest that Florida’s loser pays law was a promising experiment that lawmakers abandoned too quickly. Doctors referred to anecdotal evidence that the rule 98 See id. at 240 tbl.5. 99 Id. at 226. 100 Snyder & Hughes, supra note 35, at 375 tbl.6. 101 See Hughes & Snyder, supra note 96, at 240 tbl.5. 102 Snyder & Hughes, supra note 35, at 375 tbl.6. 601 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 favored losing plaintiffs with few assets, who couldn’t afford to pay the winning defendants’ attorneys’ fees. 103 But, Hughes and Snyder surmise, loser pays actually encouraged plaintiffs with assets to drop weak cases early in order to avoid having to pay a fee award. 104 Be that as it may, at least some percentage of plaintiffs proved judgment-proof, preventing winning defendants from collecting their fees and blunting the incentive effects of the law. In view of Florida’s experience, those advocating loser pays rules should take into account the problem of judgment-proof plaintiffs and consider insurance or other devices to ensure that plaintiffs without assets did not stop the rule from functioning. PART V: PRESERVING ACCESS THROUGH INSURANCE As we have seen, loser pays rule can be expected to reduce the volume of nuisance litigation and more fully compensate plaintiffs who win cases. These gains would come at an unacceptable price, though, if the new rule discouraged injured people of little means from seeking justice out of fear that they might be liable for a ruinous fee award. Proponents of loser pays reforms must explain how their proposals will preserve functional access to justice for poor and middle-income plaintiffs. Loser pays countries usually preserve access by making available a combination of public- and union-funded legal aid programs and legal expenses insurance, all of which indemnify participating plaintiffs for attorneys’ fees in the event of a 103 Florida law formally exempted litigants from liability for their opponent’s attorneys’ fees if they were unable to pay them. FLA. STAT. § 768.56 (1980) (“[A]ttorney’s fees shall not be awarded against a party who is insolvent or poverty-stricken.”), repealed by ch. 85-175, 1985 Fla. Laws 1225. See Snyder & Hughes, supra note 35, at 356 (noting that this provision seldom benefited defendants). 104 See Snyder & Hughes, supra note 35, at 377-78. Their observation is consistent with the finding in Alaska that its loser pays rule reduces low-merit filings by middle-class, but not poor, litigants. See DI PIETRO ET AL., supra note 75, at 102. 602 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 courtroom loss. 105 Because union membership in the United States has declined significantly in recent decades, 106 and because public legal aid in the United States is not funded generously enough to provide legal services to all qualified applicants, 107 legal expenses insurance is the most likely of these mechanisms to play the role of ensuring access to U.S. courts if a loser pays rule is widely adopted. Legal expenses insurance (LEI) takes two common forms in loser pays jurisdictions. The first is traditional LEI, for which a premium is charged every month and which covers any legal expenses of either a future plaintiff or a future defendant that might arise as the result of events, such as an accident, that occur after the policy is in place. These traditional policies pay the legal expenses of suits initiated by the covered party, assuming that the insurance company deems the suit in question to have a solid basis. 108 105 See Neil Rickman, Paul Fenn & Alastair Gray, The Reform of Legal Aid in England and Wales, 20 FISCAL STUD. 261, 262 (1999). 106 Gerald Mayer, Union Membership Trends in the United States 10 (2004), available at http://digitalcommons.ilr.cornell.edu/cgi/viewcontent.cgi?article=1176&contex t=key_workplace&seiredir=1#search="Gerald+Mayer+Union+Membership+Trends". 107 LEGAL SERVICES CORP., DOCUMENTING THE JUSTICE GAP IN AMERICA: THE CURRENT UNMET CIVIL LEGAL NEEDS OF LOW-INCOME AMERICANS 5 (2005), available at http://www.lsc.gov/press/documents/LSC%20Justice%20Gap_FINAL_1001.p df. 108 Anthony Heyes, Neil Rickman & Dionisia Tzavara, 24 INT’L REV. L. & ECON.,107, 108 (2004) (“In principle, the effects of LEI are manifold and will include the signaling associated with an insurer being willing to allow a policyholder to pursue a case (this will usually be done after a merits test) . . . .”). 603 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 The second type of LEI is “after-the-event” (ATE) legal expenses insurance, which a party claiming injury can purchase at the time he files a lawsuit and which will relieve him of the obligation to pay the defendant’s attorneys’ fees out of pocket if his suit is unsuccessful. 109 ATE premiums can be advanced by the plaintiff’s lawyer as costs, or they can take the form of a percentage stake in any recovery; either way, an upfront contribution by the plaintiff, particularly one of limited means, is not required. 110 In some jurisdictions, the ATE premiums that a winning plaintiff has paid can be recovered from a losing defendant. 111 Both types of litigation insurance—traditional LEI and ATE— protect the viability of strong cases while discouraging weak ones by denying coverage or charging higher rates. Insurance coverage spreads the cost of losing a good case across many legitimate claimants, while careful underwriting keeps poor cases from being filed. Some will object to the notion of making insurance companies, in effect, the courts’ gatekeepers. American plaintiffs’ lawyers already screen potential cases as to merit and decline to handle at least half of prospective claims that they are offered. 112 In a competitive insurance market, plaintiff’s lawyers could shop their cases among insurers. And nothing need prevent a plaintiff’s lawyer herself from assuming the risk of paying a defendant’s legal fees—that is, accepting self-insurance, in effect, as an additional contingent cost of taking a case. 113 If a 109 Kritzer, supra note 58. 110 See, e.g., After the Event Products and Services, LEGAL EX, http://www.legalexplus.com/after-the-event-insurance.asp (last visited May 11, 2011) (charging no premium until successful conclusion of case). 111 See John Peysner, A Revolution by Degrees: From Costs to Financing and the End of the Indemnity Principle, WEB J. OF CURRENT LEGAL ISSUES (2001), http://webjcli.ncl.ac.uk/2001/issue1/peysner1.html. 112 See KRITZER, supra note 5, at 71. 113 Legal ethics requirements in some jurisdictions might have to be modified to enable a plaintiff’s attorney to assume a client’s risk of bearing legal expenses. 604 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 claim were denied both ATE coverage and self-insurance by a plaintiff’s attorney, it would be because it was highly unlikely to succeed, 114 making it the very type of claim that loser pays was designed to discourage. The experience of foreign countries suggests that a market for legal expenses insurance could develop rather easily in the United States. Traditional LEI is particularly popular in Germany, where about 42% of all households have policies. 115 By law, it is a stand-alone product there, but it can be offered as an add-on to homeowner’s insurance or auto insurance in other loser pays countries, as it usually is in England. 116 The cost of traditional LEI is generally modest. 117 Some traditional LEI policies cover the hourly fees that the plaintiff owes his attorney (unless, of course, the losing defendant pays them), eliminating the need to hire attorneys on a contingent basis. Such policies also insure plaintiffs against the risk of having to pay an adverse fee award, at least up to some stated If American jurisdictions adopted loser pays, limit. 118 traditional LEI policies would have a market among middleincome Americans who have assets to protect and commonly 114 Certain classes of cases, while unlikely to succeed, might nevertheless have some social merit. Fortunately, the most obvious of these, federal constitutional claims, are set out by separate statute and would be exempted from a general loser pays rule. Other exceptions could be created as appropriate. 115 Matthias Kilian, Alternatives to Public Provision: The Role of Legal Expenses Insurance in Broadening Access to Justice: The German Experience, 30 J.L. & SOC’Y 31, 38 (2003). 116 Id. at 39. 117 A white paper from the Office of the Lord High Chancellor observes: “The premiums, often between £4 and £20, are so small that most people do not realize they have cover in the event that they need to go to law.” LORD HIGH CHANCELLOR, MODERNISING JUSTICE 22 §2.35 (1998). 118 See Jon Robins, Can the Insurance Industry Plug the Justice Gap?, LEGAL ACTION, Jan. 2009, at 10, available at http://www.lag.org.uk/files/92761/FileName/January_LA_10_11. pdf. 605 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 carry other forms of insurance, such as life insurance, homeowner’s insurance, and traditional liability insurance. Recent policy changes in England and Wales have shown that insurers can quickly respond to them by providing needed products. In 1990, Parliament passed a measure legalizing “conditional fee agreements” (CFAs) for personal injury claims and certain other proceedings. 119 Under a CFA, a client need pay his lawyer nothing if his case is lost but must pay a “success fee” (in addition to regular fees recovered from the defendant) if the case is won. 120 In 1998, the government extended the measure to allow CFA agreements in all civil cases except those involving family law. 121 At the same time, Parliament phased out civil legal aid entirely for personal injury plaintiffs and made other forms of aid available to only a small minority of the population. 122 The former eligibility of a majority may have had the effect of artificially stunting the market for legal expenses insurance. These twin reforms—liberalizing CFAs and cutting legal aid— effectively privatized personal injury litigation in England and Wales. Lawyers and insurers, rather than taxpayers, are now underwriting litigation risk for plaintiffs, and a variety of ATE policies have been introduced by more than half a dozen insurance companies, which advertise ATE policies online; 123 at 119 Adrian Walters & John Peysner, Event-Triggered Financing of Civil Claims: Lawyers, Insurers and the Common Law, 8 NOTTINGHAM L.J. 1, 8 (1999). 120 LORD HIGH CHANCELLOR, supra note 117, at 24 §2.42. 121 Id. at 24 §2.43. 122 See Rickman, Fenn & Gray, supra note 105, at 275-76. 123 See, e.g., After the Event Insurance (ATE Insurance), THE JUDGE, http://www.thejudge.co.uk/after-the-event-insurance (last visited Apr. 5, 2011); After the Event Insurance & Litigation Funding – ATE Insurance, 1ST CLASS LEGAL, http://www.ateinsurance.com (last visited May 12, 2011); After the Event Insurance (ATE), Legal Expenses Insurance, Negligence and Litigation, LAWASSIST, http://www.lawassist.co.uk (last visited Apr. 5, 2011); LEGAL EX, supra note 110; Legal & Protection Services, HSBC INSURANCE (Aug. 6, 2007), http://web.archive.org/web/20070806021811/http://www.insurancebrokers.h sbc.com/hsbc/legal_protection (accessed by searching for Insurancebrokers.hsbc.com/hsbc/legal_protection in the Internet Archive index); Legal Expenses, FIRSTASSIST, http://www.legalexpenses.co.uk/ (last 606 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 least two post applications, as well, online. 124 They are four to six pages in length and are filled out by plaintiffs’ attorneys. The premium, which may be as low as £85 and is generally “£100 or more,” can be advanced by the applicant’s lawyer. 125 If the plaintiff prevails, he can also recover from the defendant the premiums he has paid. 126 At least some advertised ATE policies do not charge the premium until the case settles or until a verdict has been rendered in the plaintiff’s favor. 127 In 2003, ATE constituted about 29% of the larger LEI market in Britain and collected some £110 million in premiums. 128 A British trade publication recently estimated that ATE insurance is now purchased for three in four civil lawsuits filed under conditional fee agreements. 129 The rapid growth of the ATE insurance market in England and Wales should help assure observers of the American legal scene that legal expenses insurance can effectively preserve access to justice in loser pays jurisdictions. visited April 5, 2011); Litigation Insurance, STIRLING LEGAL SERVICES (Feb. 10, 2008), http://web.archive.org/web/20080210054758/http://www.stirlinglegal.com/li tigation_insurance.php (accessed by searching for StirlingLegal.com in the Internet Archive index); No Win No Fee Injury Compensation Specialists, ACCIDENT LINE, http://www.accidentlinedirect.co.uk/Pages/Home.aspx (last visited April 5, 2011). 124 See 1ST CLASS LEGAL, supra note 123; THE JUDGE, supra note 123. 125 See Rickman, Fenn & Gray, supra note 105, at 277. 126 Yue Qiao, Legal-Expenses Insurance and Settlement, 1 ASIAN J. L. & ECON., no. 1, 2010, at 13, available at http://www.bepress.com/cgi/viewcontent.cgi?article=1003&context=ajle. 127 See, e.g., LEGAL EX, supra note 123. 128 OFFICE OF FAIR TRADING, THE UK LIABILITY INSURANCE MARKET: A FOLLOW-UP TO THE OFT’S 2003 MARKET STUDY 34 §5.8 (2005), available at http://www.oft.gov.uk/shared_oft/reports/financial_products/oft802.pdf. 129 Katy Dowell, False Economy, THE LAWYER (Feb. 18, 2008), http://www.thelawyer.com/false-economy/131305.article. 607 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 PART VI: IMPLEMENTATION GUIDELINES The Alaska and Florida experiences—and the light they shed on the theoretical literature on fee shifting—suggest that future loser pays reforms should incorporate the following three features. First, the size and percentage of the fee shifted must be large enough to affect the behavior of potential litigants. Alaska’s loser pays rule allows prevailing defendants to be reimbursed only 20% to 30% of their actual legal expenditures, an amount too low to adequately influence a plaintiff’s decision about whether to file suit. Second, loser pays works best if defendants can recover their fees in cases involving plaintiffs with few personal assets. In many nations with loser pays rules, litigation insurance is available to plaintiffs at a reasonable price. The United States should require plaintiffs to purchase insurance, and it should permit plaintiff’s lawyers to advance insurance premiums, as they currently do other litigation costs, in order to preserve access to the courts. Finally, loser pays reforms should be designed to minimize any possible increases in per-case costs and any possible negative effect settlement rates. In order to accomplish this, loser pays should be accompanied by a modified offer-ofjudgment rule (similar to Federal Rule of Civil Procedure 68) that applies to both plaintiffs and defendants. Offer-ofjudgment rules impose court costs on plaintiffs who pass up a settlement offer in favor of obtaining a judgment that turns out to be no more generous. If such rules were extended to include attorneys’ fees, they would encourage timely settlement of claims. PART VII: A PROPOSAL FOR REFORM The following proposal is designed to bring the benefits of loser pays to both the state and federal justice systems. It includes a modified offer-of-judgment device. It is designed to compensate winning litigants more fully and reduce the number of abusive lawsuits, while preserving access to justice for poor and middle-income litigants with strong claims. It should also limit any increases in litigation expenditures and encourage the 608 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 parties to make reasonable settlement offers so as to limit their potential liability for attorneys’ fees. A formal mathematical model of this proposal is included in an appendix to this article for technical readers. PROPOSAL The non-prevailing party in any civil case in which money damages are sought shall indemnify the prevailing party for the costs of litigation and reasonable attorneys’ fees. Fees awarded shall be the lesser of 1) actual fees, or 2) 30% of the difference between the final judgment and the non-prevailing party’s last written offer of settlement tendered within sixty days of the date that the initial complaint was filed in the trial court. DETERMINING THE PREVAILING PARTY: The plaintiff is the prevailing party if it obtains an order for a net total judgment amount (including all substantive claims and counterclaims and excluding costs) in excess of the defendant’s last written offer of settlement tendered within sixty days of the date that the initial complaint was filed in the trial court. Otherwise, the defendant will be deemed the prevailing party. ABILITY TO PAY: Within ninety days of the date that the initial complaint is filed in the trial court, the plaintiff shall file proof that assets are available to pay a judgment awarding costs. Such proof may be a litigation insurance policy. The plaintiff’s attorney may advance the premium for such a policy, and the plaintiff may recover the premium as costs if the plaintiff is the prevailing party. If the plaintiff does not file such proof, the complaint will be dismissed without prejudice. VOLUNTARY DISMISSAL: A plaintiff will be liable for costs as a non-prevailing party under this section if it moves to withdraw a lawsuit more than ninety days after the initial complaint was filed. 609 Spring 2011 Rutgers Journal of Law & Public Policy MAINTENANCE AND Vol 8:3 CHAMPERTY: The provision of litigation insurance in accordance with other applicable law shall not be deemed maintenance or champerty. As previously discussed, greater compliance with the law, more complete compensation for victims, fewer transaction costs, and more equitable distribution of those transaction costs that cannot be avoided are four widely acceptable desiderata of legal procedural reform. 130 This loser pays proposal is designed to promote them all. First, the proposed reform will promote compliance with legal standards of care by making it cheaper for individuals and businesses to take appropriate safety precautions, and by increasing their legal liability when they fail to do so. Because potential defendants will be motivated to invest more resources to ensure public safety, both injuries and litigation should decrease. Businesses and individuals will also, for the same reasons, be more motivated to honor their contractual obligations. Second, this rule should better compensate plaintiffs with strong cases, whether they succeed at trial or negotiate a settlement armed with the enhanced bargaining power of a likely fee award. Legal expenses insurance will play a critical role by preserving access to justice for plaintiffs of modest means who have decent legal claims. The proposed reform includes a provision protecting insurance providers from liability under traditional common-law doctrines of maintenance and champerty, which have traditionally barred some forms of litigation financing in the United States. 131 Reformers in specific jurisdictions should work directly with insurance regulators to remove any other existing barriers to the rapid development of this important market. 130 See supra, Part I. 131 Champerty is: “A bargain between a stranger and a party to a lawsuit by which the stranger pursues the party’s claim in consideration of receiving part of any judgment proceeds; it is one type of ‘maintenance,’ the more general term which refers to maintaining, supporting, or promoting another person’s litigation.” BLACK’S LAW DICTIONARY 231 (6th ed. 1990). 610 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 Third, the proposed reform will lower the overall cost of the civil justice system by reducing the number of low-merit lawsuits filed. Nuisance lawyers would face lower settlement offers in response to weak claims, giving them an incentive to file small, meritorious suits instead or shift to other specialties or professions. The proposed reform’s offer-of-judgment feature, limiting fee-awards to an amount equal to 30% of the difference between the relevant settlement offer of the losing party and the amount recovered at trial, is designed to contain per-case costs by promoting early settlement. Parties will want to make their settlement offers as reasonable as possible, because a party’s settlement offer limits its liability for attorneys’ fees in the event of a loss at trial. The offer-based fee cap will also discourage litigation spending that is out of proportion to the actual stakes of the case. Finally, this proposal will distribute the costs associated with the civil justice system more equitably. Negligent defendants will pay a greater share of these costs than they now do, as will nuisance lawyers and their clients, and the costs associated with arguable cases will be spread more broadly among all payers of litigation insurance premiums, all defendants, and all taxpayers. The United States pays a high price for a system of justice that encourages abusive litigation, but it need not continue to do so. Thoughtful reforms in state and federal law can replace the American rule for attorneys’ fees with a loser pays system without barring the courthouse door to plaintiffs with modest means but legitimate grievances. England’s recent quasiprivatization of civil justice demonstrates that markets for litigation insurance can develop rapidly in response to legal reforms; and reasonable limits to the parties’ exposure to liability for fees, if they are incorporated into an offer-ofjudgment mechanism, can promote early and efficient settlement. 611 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 APPENDIX: A FORMAL MODEL OF A LOSER PAYS REFORM PROPOSAL 132 Let j (nonnegative) represent the size of the judgment for the plaintiff if the lawsuit proceeds to trial. Let P(·) represent the probability distribution of trial outcomes if the lawsuit does not settle. This means that P(ĵ) represents the probability that the net total judgment for the plaintiff at trial will be less than ĵ. Let J represent the expected value of the judgment if the lawsuit goes to trial: J = ∫jdP(j) . Let CΠ and CΔ represent the plaintiff’s and defendant’s total attorneys’ fees and costs, respectively. Let Φ represent the plaintiff’s special settlement offer, and let Ω represent the defendant’s special settlement offer. For the sake of simplicity, assume for the moment that: 1) both parties have the same beliefs about P(·); 2) CΠ > .3(JΩ≤j – Ω); AND 3) CΔ > .3(Φ – Jj< Ω). The plaintiff’s expected gain at trial is: UΠ ≡ J – [CΠ – .3(JΩ≤j – Ω)] – P(Ω)[CΠ + .3(Φ – Jj< Ω)] The defendant’s expected loss at trial is: UΔ ≡ J + [CΔ – .3(Φ – Jj< Ω)] – [1 – P(Ω)] [CΔ + .3(JΩ≤j – Ω)] UΠ is decreasing in Φ, which should encourage the plaintiff to make a modest settlement offer. UΠ is also decreasing in CΠ, meaning that the plaintiff has an incentive to control its litigation costs. Because it is strictly true that CΠ ≥ [CΠ – .3(JΩ≤j – Ω)], this proposal appears to reduce the incentive that the plaintiff has to control its costs. However, in cases in which [CΠ – .3(JΩ≤j – Ω)] ≥ 0 (as will be true in most cases in which expenditures are not already unusually low), the plaintiff’s marginal additional expenditures will be internalized, containing total trial expenditures. Notice also that UΠ increases 132 This model is adapted from a model suggested by Tai-Yeong Chung, Settlement of Litigation under Rule 68: An Economic Analysis, 25 J. LEGAL STUD. 261 (1996). To keep the math as simple as possible, all actors are assumed to be risk-neutral here, but the directional effects are the same if one or both parties are assumed to be risk-averse. 612 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 in J and decreases in P(Ω), which suggests that the proposal will discourage low-merit lawsuits. UΔ is decreasing in Ω, which should encourage the defendant to lower its expected trial costs by making a reasonably generous settlement offer. UΔ is increasing in CΔ, and, as in the plaintiff’s case, the defendant’s marginal expenditure decisions should not be affected by partial indemnity under this loser pays rule (relative to the current American rule) in cases in which [CΔ – .3(Φ – Jj< Ω)] ≥ 0. 613 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 WELFARE, INCOME DETECTION, AND THE SHADOW ECONOMY Drew A. Swank 1 In the spring of 2009 a humorous parody of the MasterCard Credit Card Company advertising campaign circulated on the Internet, showing an actual photograph of the first lady, Michelle Obama, volunteering at a soup kitchen, having her picture taken by a man waiting in line with his cell phone. The caption on photograph states: Cost of a bowl of soup at homeless shelter: $0.00 . .. Michelle Obama [serving] you your soup: $0.00 . . . Snapping a picture of a homeless person who is receiving a government funded meal while taking a picture of the first lady using his $500 Black Berry [sic] cell phone and $100.00 per month cellular service: Priceless. 2 In reality the first lady was volunteering at a private shelter, not a government-funded one, and there is no proof that the individual receiving the meal and taking the first lady’s picture Drew A. Swank is a graduate of the Marshall-Wythe School of Law at the College of William and Mary and is a member of the Virginia Bar. The views expressed herein do not reflect those of the Social Security Administration or the United States government. 1 Barbara Mikkelson & David P. Mikkelson, Real Photograph; Inaccurate Description, SNOPES.COM, http://www.snopes.com/photos/politics/soupkitchen.asp (last updated June 16, 2009) (emphasis added). 2 614 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 was either homeless or that his cellular telephone cost $500. 3 The sentiment that is portrayed by the photograph and its humorous caption nevertheless captures a common perception that there are people getting publicly-funded welfare benefits who, for a variety of reasons, should not be. 4 This concern, that people other than those who actually need help are the ones actually getting it, has been around since the beginning of publicly-funded welfare benefits. In the past two decades, primarily technological means have been used to detect and verify earnings and income information for individuals applying for federal assistance benefits in order to determine whether they meet the eligibility requirements. Over the same period of time, however, there has been an equally valid competing concern – that due to potentially slow, cumbersome application processes, individuals who need the assistance the most are being precluded from receiving the assistance they need and are qualified to receive. To address this concern, there have been a variety of efforts designed to simplify application procedures for many welfare programs, to include, in some cases, requiring little to no verification of income or resources to determine eligibility. These two competing concerns – wanting to ensure that only the people who need the assistance are receiving it versus simplifying application processes to eliminate barriers to welfare program participation – have conflicted in the past and will continue to do so in the future. A problem, however, with the primarily technological approach to detecting income to determine eligibility is that not all of the income that people receive is either reported or otherwise able to be tracked via computer databases. Within every economy there are individuals who work “outside” the reported economy or in the “underground” economy; this sector is now commonly referred to as the “shadow economy.” 5 The 3 Id. 4 See FRIEDRICH SCHNEIDER & DOMINIK H. ENSTE, THE SHADOW ECONOMY – AN INTERNATIONAL SURVEY 174 (2002). Alternative titles for “shadow economy” include “underground,” “informal,” “second,” “cash,” or “parallel.” See SCHNEIDER & ENSTE, supra note 3, at 4 n.9; Friedrich Schneider, Shadow Economies of 145 Countries all over the World: What do we really know?, BROOKINGS INSTITUTION, 3 n.1 (Aug. 2006), http://www.brookings.edu/metro/umi/events/20060904_schneider.pdf. 5 615 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 shadow economy complicates the issue of ensuring that only those individuals who actually meet the eligibility requirements of the welfare programs are the ones who actually receive the benefits. As our welfare rolls and outlays continue to grow with each passing year, the issues of eligibility and income detection become more and more important. This problem is further complicated in that many need-based welfare programs encourage the recipients to work as much as possible, so that they can go off of welfare and be self-supporting. A variety of complicated rules, differing from program to program, govern whether earned income – normally being of a certain amount for a certain period of time – can serve as a basis to terminate welfare benefits. Before those rules can be applied, and before any determination as to whether an individual’s welfare benefits should be continued or not, first and foremost an applicant’s or recipient’s work-related income needs to be reported – either by the individual, the employer, or some other person. The purpose of this article is to propose a series of recommendations that not only should assist the current means of income detection to help with the process of determining need-based welfare program eligibility, but could also serve to assist in detecting otherwise unreported earned income for those who work outside the “normal” economy – income which, if properly reported in the first place, might have prevented the applicant from receiving benefits that he would not be eligible to receive. Ultimately, the article argues that while many efforts to remove barriers to participation in public welfare programs are praiseworthy and should be pursued, the fundamental issue of income eligibility for need-based welfare programs requires not only income detection measures, but also better measures than those already being used. As this article will demonstrate, ensuring that only those individuals who meet the eligibility requirements can participate in the various welfare programs not only benefits the tax-paying public that funds the programs, but ultimately benefits the recipients of the aid as well. To accomplish these goals, this article will examine some of the technological mechanisms that have been devised to detect income and resources to help determine eligibility to participate in these need-based welfare programs, the success (or failure) of these mechanisms, the arguments for eliminating income verification, and a brief overview of the shadow economy. By analyzing these components, this article proposes various steps 616 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 that can be taken not only to help strengthen current efforts of income detection, but can further attempt to tackle the issue of welfare recipients and the shadow economy. A detailed history or overview of existing federal, need-based welfare programs is outside the purview of this article; suffice to say there are a variety of programs in which millions of people receive welfare benefits, costing billions of dollars to fund and operate. More importantly, the number of people participating in these programs has been growing at a rate faster than the population growth of the United States, and the costs of these programs have grown exponentially in some cases. In an average month during 1992, thirty-four million Americans – 13% of the total population – were participating in one or more of the seven welfare programs. 6 In 2006, there were 57,757,000 people – 19% of the total population – receiving Medicaid alone. 7 In twenty-one years, the number of people participating in Medicaid grew by 62%, while the population of the United States grew by only 20%. 8 In fiscal year 2008, over twenty-eight million people participated in the federal food stamp program at a total cost of $37,665,100,000, or $1,326 per person. 9 By Getting a Helping Hand – Long-Term Participants in Assistance CENSUS BUREAU, 1 (Nov. 1995), Programs, U.S. http://www.census.gov/sipp/sb95_27.pdf (citing thirty-four million as participants in Aid to Families with Dependent Children (AFDC), General Assistance, Supplemental Security Income (SSI), Medicaid, food stamps, federal or state rent assistance, and/or public housing assistance). 6 7 Medicaid – Beneficiaries and Payments: 2000 to 2006, U.S. CENSUS BUREAU, http://www.census.gov/compendia/statab/2010/tables/10s0144.pdf (last accessed Feb. 12, 2011). 8 Statistical Abstract of the United States: 2008, U.S. CENSUS BUREAU, 7, http://www.census.gov/prod/2007pubs/08abstract/pop.pdf (last visited Apr. 8, 2011). The population in the United States in 1985 was 238,466,000; in 2006, it was 299,801,000. Id. In 1985, 21,814,000 people received Medicaid benefits. Annual Statistical Supplement, 2008, SOC. SECURITY ADMIN., http://www.ssa.gov/policy/docs/statcomps/supplement/2008/8e.html#table8 .e1 (last visited Apr. 8, 2011). Supplemental Nutrition Assistance Program Participation and Costs, DEP’T OF AGRIC. FOOD & NUTRITION SERVICE, U.S. http://www.fns.usda.gov/pd/SNAPsummary.htm (last modified Mar. 2, 2011). See also Supplemental Nutrition Assistance Program: Average Monthly Participation (Persons), U.S. DEP’T OF AGRIC. FOOD AND NUTRITION SERVICE, http://www.fns.usda.gov/pd/15SNAPpartPP.htm (last modified Mar. 2, 2011). 9 617 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 contrast, in 1969, 2,878,000 people participated for a total cost of $250,500,000 or $87 per person. 10 In the thirty-nine years, the number of participants grew ten times, and the cost of the program increased over 150 times, while the population of the United States grew in the same time period by only 33%. 11 Nearly half of all children in the United States will participate in the food stamp program at some point during their childhood. 12 For demonstration purposes, this article will highlight some of the income detection mechanisms of the largest need-based cash assistance program – the Social Security Administration’s (Administration) Supplemental Security Income (SSI) program. SOCIAL SECURITY DISABILITY PROGRAMS On August 14, 1935, President Franklin Roosevelt signed the Social Security Act into law. 13 The Act was later amended to include the Disability Insurance Benefit (DIB) program, in order to provide monthly monetary benefits to qualified disabled workers and their dependents. 14 Known as Title II, the The federal Food Stamp Program was renamed the Supplemental Nutrition Assistance Program on October 1, 2008. See Supplemental Nutrition Assistance Program (SNAP), U.S. DEP’T OF AGRIC. FOOD AND NUTRITION SERVICE, http://www.fns.usda.gov/snap/snap.htm (last modified July 23, 2009). Supplemental Nutrition Assistance Program Participation and Costs, supra note 8. 10 The population in the United States in 1969 was 202,676,946. 1969, INFOPLEASE.COM, http://www.infoplease.com/year/1969.html (last visited Feb. 12, 2011). In 2006, it was estimated to be 299,801,000. Statistical Abstract of the United States, supra note 6. 11 Lindsey Tanner, Half of US kids will get food stamps, study says, ASSOCIATED PRESS, Nov. 2, 2009, available at http://www.breitbart.com/print.php?id=D9BNKH3O1. 12 Social Security Act, ch. 395, 49 Stat. 620 (1935); Historical Background and Development of Social Security, U.S. SOC. SECURITY ADMIN., http://www.ssa.gov/history/briefhistory3.html (last modified Feb. 9, 2011). 13 Dru Stevenson, Should Addicts Get Welfare? Addiction & SSI/SSDI, 68 Brook. L. Rev. 185, 187-88 (2002) (describing the creation and the development of the “Disability Insurance program.”); Historical Background and Development of Social Security, supra note 12. 14 618 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 eligibility to participate in this program and the benefit amounts paid are determined by the worker’s contributions to Social Security. 15 In December 2007, there were 7.1 million disabled workers receiving Title II benefits, with an additional 1.8 million qualified family members receiving benefits as well. 16 The total amount of Title II benefits paid in 2007 was $99.1 billion, with the average benefit amount per person being $1,004 per month. 17 In 2007, 804,787 disabled workers and 500,875 family members were awarded Title II benefits. 18 While DIB is not a need-based welfare program, it nevertheless has limits on how much an individual can earn from work-related income in order to qualify to receive benefits, and on how much the individual may earn from work-related income after receiving benefits. 19 The Administration also administers the SSI program, known as Title XVI. 20 Established in 1972, it is the nation’s largest needs-based program, providing cash assistance to persons aged sixty-five or older, blind or disabled adults, and blind or disabled children. 21 As of fiscal year 2001, 6.8 million 15 Stevenson, supra note 13, at 188; Historical Background and Development of Social Security, supra note 12. 16 Annual Statistical Supplement, 2008, U.S. SOC. SECURITY ADMIN., http://www.ssa.gov/policy/docs/statcomps/supplement/2008/highlights.html (last visited Feb. 12, 2011). 17 Id. 18 Id. 19 42 U.S.C.A. § 423 (West, Westlaw through Pub. L. No. 112-3). See also What is “Substantial Gainful Activity?” – 2011 Red Book, U.S. SOC. SECURITY ADMIN., http://www.socialsecurity.gov/redbook/eng/overviewdisability.htm#6 (last visited Apr. 12, 2011). 20 Social Security Act § 1601, 42 U.S.C.A. § 1381 (West, Westlaw through Pub. L. No. 111-284). 21 U.S. Soc. Security Admin., Office of the Inspector General, Disabled Supplemental Security Income Recipients with Earnings, U.S. SOC. SECURITY ADMIN., 1 (Apr. 11, 2005), http://www.ssa.gov/oig/ADOBEPDF/A-01-0414085.pdf; U.S. Gov’t Accountability Office, Supplemental Security Income: Progress Made in Detecting and Recovering Overpayments, but Management Attention Should Continue, U.S. GOV’T ACCOUNTABILITY OFF., 1 (Sept. 2002), http://www.gao.gov/new.items/d02849.pdf. 619 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 people were receiving approximately $33 billion in benefits. 22 By 2007, the number of people receiving federally-administered SSI payments was over 7.1 million, 23 with a total of $36.9 billion in benefits being paid with the average per person monthly benefit of $437.06. 24 To determine if an SSI applicant is financially eligible to participate, the Administration performs an initial determination at the time of application and conducts periodic reviews to determine whether the recipient remains eligible. 25 When applying for SSI, individuals are required to report any information that may affect their eligibility for benefits, and once they begin receiving SSI benefits they are required to report events such as changes in income, resources, marital status, or living arrangements to Administration field office staff in a timely manner. 26 The Administration generally relies on matching computerized data from other federal and state agencies to verify that the information is correct. 27 When these computer matches identify discrepancies between data reported by recipients and the data recorded by these agencies, alert notices are sent to Administration field offices which must then determine if the discrepancies impact SSI benefits by contacting and requesting information from the beneficiary. 28 To a 22 U.S. Gov’t Accountability Office, supra note 20, at 1. 23 Annual Statistical Supplement, 2008, supra note 13. 24 Id. U.S. Soc. Security Admin., Office of the Inspector Gen., Review of Controls Over Processing Income Alerts which Impact Supplemental Security Income Payments, U.S. SOC. SECURITY ADMIN., i, 1 (Sept. 2000), http://www.ssa.gov/oig/ADOBEPDF/98-21002.pdf. 25 Id.; U.S. Gov’t Accountability Office, supra note 20, at 3; U.S. Soc. Security Admin., Office of the Inspector Gen., Supplemental Security Income, Recipients with Excess Income and/or Resources, U.S. SOC. SECURITY ADMIN., 2 (July 23, 2008), http://www.ssa.gov/oig/ADOBEPDF/A-01-08-18022.pdf. 26 27 Review of Controls Over Processing Income Alerts which Impact Supplemental Security Income Payments, supra note 24, at i, 1; U.S. Gov’t Accountability Office, supra note 20, at 3-4. 28 See Review of Controls Over Processing Income Alerts which Impact Supplemental Security Income Payments, supra note 24, at i, 1. 620 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 significant extent, the Administration depends on program applicants and recipients to accurately report important eligibility information. 29 The SSI program is vulnerable to overpayments due to a variety of factors, including the fact that as a needs-based program, the recipients’ resources and assets can often change. 30 Today, as will be demonstrated infra, the Administration is able to more accurately verify program eligibility and detect payment errors than it was several years ago. However, weaknesses remain in its debt prevention and deterrence processes; the Administration has made limited progress toward simplifying complex program rules that contribute to payment errors and it is not fully utilizing several overpayment prevention tools, such as penalties and the suspension of benefits for recipients who fail to report eligibility information as required. 31 The program’s means-tested nature requires that individuals’ income, resources, and living arrangements be assessed on a monthly basis so as to determine eligibility and payment amounts. 32 To further ensure that benefits are properly paid, redeterminations of non-medical factors for eligibility to participate are scheduled on a yearly basis or every six years depending on the likelihood of payment error. 33 Redeterminations are one of the Administration’s best tools to detect income and prevent SSI overpayments. 34 If the recipient reports or the Administration discovers information that could make the person ineligible for benefits, the Administration can conduct an unscheduled redetermination. 35 In fiscal year 2004, 29 U.S. Gov’t Accountability Office, supra note 20, at 3. 30 See id at 1. 31 See id. at 4. 32 U.S. Soc. Security Admin., Office of the Inspector Gen., Supplemental Security Income Overpayments, U.S. SOC. SECURITY ADMIN., 1 (Apr. 16, 2004), http://www.ssa.gov/oig/ADOBEPDF/A-01-04-24022.pdf. 33 Disabled Supplemental Security Income Recipients with Earnings, supra note 20, at 2. 34 Supplemental Security Income, Recipients with Excess Income and/or Resources, supra note 25, at 4. 621 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 the Administration processed over 2.2 million periodic redeterminations. 36 Budget constraints, however, have impeded redeterminations conducted by the Administration. 37 In fiscal year 1997, the Administration conducted 1.8 million redeterminations. 38 The next fiscal year it conducted 1.9 million redeterminations (29% of the total number of 6.6 million SSI recipients) with $1.3 billion in overpayments identified. 39 Four years later in fiscal year 2002, there were 2.3 million redeterminations (34% of the 6.8 million SSI recipients) with $1.7 billion in overpayments identified. 40 In fiscal year 2007, however, the Administration only did one million redeterminations despite the proven success redeterminations have had in preventing improper payments. 41 INCOME VERIFICATION IN WELFARE PROGRAMS As stated above, to detect and verify the income of the applicants or recipients for need-based welfare programs, welfare agencies primarily rely on two methods: self reporting, and a host, often differing from program to program of technology-based tools. Over the years, these technologically based tools have increased in number, in part because selfreporting of income was deemed insufficient. To a significant extent, the Administration depends on SSI applicants and recipients to accurately report important eligibility Disabled Supplemental Security Income Recipients with Earnings, supra note 20, at 2. 35 36 Id. 37 Supplemental Security Income, Recipients with Excess Income and/or Resources, supra note 25, at 4. 38 Supplemental Security Income Overpayments, supra note 31, at 5. 39 Id. 40 Id. at 6. 41 Supplemental Security Income, Recipients with Excess Income and/or Resources, supra note 25, at 4. 622 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 information. 42 However, to verify eligibility information the Administration uses computer matches to compare SSI records against recipient information contained in records of third parties, such as other federal and state government agencies. 43 SELF-DECLARATION OF INCOME Several states have, at one time or another, used selfdeclaration of income alone to qualify applicants for Medicaid or other welfare programs. 44 In some of these, unless the statement of verification of income is “questionable” it will be sufficient to qualify the individual or family for health care assistance. 45 If “questionable,” the state agency may attempt to verify it, 46 or merely inform the applicant that for subsequent applications or redeterminations of eligibility will he or she be required to provide proof of income. 47 The logic behind using self-declaration of income is that it both simplifies and accelerates the approval process. 48 42 U.S. Gov’t Accountability Office, supra note 20, at 3. 43 Id. at 3-4. 44 See, e.g., Wisconsin CKF Policy Primer #3: Employer Verification of Insurance and Income in BadgerCare, COVERING KIDS & FAMILIES, 1, http://www.ckfwi.org/documents/PP3-Incomeverification.doc (last visited Feb. 13, 2011). See also Laura Cox, Allowing Families to Self-Report Income, CENTER ON BUDGET & POLICY PRIORITIES (Dec. 28, 2001), http://www.cbpp.org/cms/index.cfm?fa=view&id=1494 (listing thirteen states which accept self-declaration of income). See e.g., Wisconsin CKF Policy Primer #3: Employer Verification of Insurance and Income in BadgerCare, supra note 43. 45 46 Id. 47 E.g., Adult Medicaid Manual MA-2250 – Income, N.C. DEP’T OF HEALTH & HUM. SERVICES (Nov. 1, 2007), http://info.dhhs.state.nc.us/olm/manuals/dma/abd/man/MA2250-03.htm. 48 See generally Cox, supra note 43. 623 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 TECHNOLOGICAL MEANS Over the years, more and more technological approaches have been added to need-based welfare programs to attempt to detect and identify income of their applicants or recipients. This fact is probably the single most convincing piece of evidence that self-reporting of income by applicants or recipients is insufficient; if it were sufficient, there would be no need to have technological means of income detection and verification, nor the need to improve existing technological means and to add new ones. A primary source of income information – in the form of annual wages paid by an employer as reflected on a Form W-2 or self-employment - is provided by the Internal Revenue Service (IRS). 49 In addition to W-2 information, for SSI cases the IRS also provides Form 1099 information depicting wages and other income, to include interest, dividends, retirement, and pension information. 50 Another technology-based income identification measure used by the Administration is the quarterly wage data match maintained by the federal Office of Child Support Enforcement’s new-hire database. 51 The National Directory of New Hires, as a part of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (Act), was designed to help aid enforcement of child support orders. 52 The Act also allowed for this information to be shared with the Administration to help prevent and reduce payment errors by providing information on newly hired employees, quarterly wage information, and quarterly unemployment compensation payments. 53 Prior to 42 U.S.C.A. § 405(c)(2)(A) (West, Westlaw through Pub. L. No. 111-264); Review of Controls Over Processing Income Alerts which Impact Supplemental Security Income Payments, supra note 24, at 1. 49 Review of Controls Over Processing Income Alerts which Impact Supplemental Security Income Payments, supra note 24, at 1. 50 Disabled Supplemental Security Income Recipients with Earnings, supra note 20, at 1-2; Supplemental Security Income Overpayments, supra note 31, at 4, app. E-1. 51 U.S. Soc. Security Admin., Office of the Inspector Gen., Review of the Social Security Administration’s Office of Child Support Enforcement Pilot SECURITY ADMIN., i (May, 2001), Evaluation, U.S. SOC. http://www.ssa.gov/oig/ADOBEPDF/A-01-00-20006.pdf. 52 624 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 receiving this data, the Administration had to rely solely on the self-reporting by SSI applicants of their wage and income information to determine their initial eligibility; only after they started to receive benefits would the Administration be able to use computer match information. 54 Since 1998, with field office online access since 2001, this database has been used by the Administration to determine whether applicants have unreported income during the application period in an effort to improve payment accuracy and, in part, to ensure that individuals ineligible to receive benefits do not do so, ultimately reducing the number of overpayment recovery attempts the Administration must process. 55 It should be noted that the data received from the National Directory of New Hires is not, by itself, used to deny or decrease the payment amounts to a SSI recipient, but rather is used to indicate the need to verify the income information with the claimant or the source of the information. 56 In the month of September 1998, data match information alone prevented an estimated $6.5 million in future overpayments and detected $17.6 million in recoverable overpayments. 57 The Administration has estimated that the use of the National Directory of New Hires database will result in approximately $200 million in overpayment preventions and recoveries per year. 58 In addition to National Directory of New Hires data, the Administration obtains wage, unemployment, and other data from state agencies through a data access system known as Social Security Administration Access to State Records Online (SASRO). 59 As of September 2000, sixty-six state agencies in 53 Id. 54 Id. at 2. 55 Id at i. 56 Id. at 3. 57 Id. at 1. 58 U.S. Gov’t Accountability Office, supra note 20, at 8. 59 Review of the Social Security Administration’s Office of Child Support Enforcement Pilot Evaluation, supra note 51, at ii, 9. 625 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 thirty-seven states were providing information, with twenty-two of the reports being wage and unemployment information. 60 Additional information is provided by: Department of Defense – provides the Administration information to verify military retirement and survivor payments in SSI cases 61 Office of Personnel Management – provides data on Civil Service pensions for use in SSI cases 62 Veteran’s Administration provides data on the benefits it pays to individuals for consideration in SSI cases 63 Department of Treasury, Internal Revenue Service provides current mailing addresses to locate SSI recipients with outstanding overpayments and information on unreported resources and income (other than wages) of SSI recipients 64 Department of the Treasury, Bureau of Public Debt – reports savings bond information for use in determining SSI eligibility 65 THE SHADOW ECONOMY The only agreement by economists regarding the shadow economy 66 seems to be that it is extremely difficult to define, let 60 Id. at 9 n.3. 61 Supplemental Security Income Overpayments, supra note 31, at app. E- 62 Id. 63 Id. 64 Id. 65 Id at app. E-2. 1. 66See supra note 4. 626 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 alone measure. 67 One definition of it is “all currently unregistered economic activities that contribute to the officially calculated (or observed) Gross National Product.” 68 A narrower definition would be all economic activities that would be taxable if they were reported to the government tax authorities. 69 Broader definitions include an “emigration from the established ways of working” 70 and “those economic activities and the income derived from them that circumvent or otherwise [avoid] government regulation, taxation, or observation,” 71 both of which can include criminal activity as well as “informal household economy” activities. 72 The latter includes the value of a parent who foregoes other employment opportunities outside the home in order to care for and raise children. 73 The parent’s efforts have economic value, and as periodic media reports constantly remind us, a dollar amount can be attributed to the value of their labor. 74 The same is true for a family member who cares for an invalid or is performing what would be considered traditional home-maker duties. 75 While the efforts of a stay-at- See Schneider, supra note 4, at 3 n.1; SCHNEIDER & ENSTE, supra note 3, at 4 n.9; MICHAEL PICKHARDT & EDWARD SHINNICK, THE SHADOW ECONOMY, CORRUPTION, AND GOVERNANCE ix (2008). 67 Schneider, supra note 4, at 4. See also PICKHARDT & SHINNICK, supra note 66, at 123. 68 69 Schneider, supra note 4, at 4. 70 SCHNEIDER & ENSTE, supra note 3, at 7. PICKHARDT & SHINNICK, supra note 66, at 123 (internal quotations and further citation omitted). 71 72 Schneider, supra note 4, at 5. 73 Id. 74 See, e.g., Meredith Hanrahan, Six Figure Moms, SALARY.COM, http://www.salary.com/Articles/ArticleDetail.asp?part=par901 (last visited Feb. 13, 2011) (stating that for 2008 the annual cash compensation for a stay-athome parent would be $116,805). 75 See, e.g., Liz Pulliam Weston, What’s a homemaker worth? The shocking truth, MSN MONEY, http://moneycentral.msn.com/content/collegeandfamily/p46800.asp (last visited Nov. 18, 2010) (discussing a variety of methods of calculating the salary 627 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 home parent or homemaker are certainly “work,” and an individual engaged in illegal activity could be said to be engaged in a paying occupation, for the purposes of this article the “shadow economy” will be defined as all labor for which an individual is monetarily compensated which is not reported to a government entity at the local, state, or federal levels. The reasons people are working within the shadow economy are likewise varied, including a desire to avoid paying taxes, to avoid paying social security or other welfare contributions, to avoid labor standards, and to avoid having to comply with certain administrative procedures. 76 The first two – a desire to avoid paying taxes or social security/welfare contributions on the income they earn – have been cited as the two largest motivators behind working in the shadow economy. 77 Added to this list of reasons would undoubtedly be the desire, by some, to continue receiving welfare benefits that if they were to report their economic activities – such as working – they would no longer be entitled to receive. Some welfare recipients have a very strong incentive either to not report their earnings or to work in situations where their earnings are not reported so that their need-based welfare payments are not terminated. 78 Some individuals may attempt to maintain their work efforts at just below the point where earnings income would terminate their disability benefits. 79 Other individuals may choose not to report their work activity out of a mistaken belief that any earnings would automatically terminate their benefits. 80 Welfare programs – such as Social Security disability benefits – allow for a trial work period to equivalent for a homemaker; one such estimate was $30,000 per year based upon the functions performed). 76 Schneider, supra note 4, at 4–5. 77 Id. at 5–6, 9; SCHNEIDER & ENSTE, supra note 3, at 106. 78 SCHNEIDER & ENSTE, supra note 3, at 174. 79 See generally Jacques Chambers, Working When Collecting Disability Benefits, HVC ADVOCATE (July 2005), http://www.hcvadvocate.org/hepatitis/hepC/WORKING%20WHEN%20COLL ECTING%20DISABILITY%20BENEFITS.htm. 80 SCHNEIDER & ENSTE, supra note 3, at 174. 628 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 allow an individual to attempt to reenter the workforce, without their earnings automatically terminating their eligibility for benefits. 81 But because these rules can be complicated and unknown to the worker, they can give some recipients an incentive not to report earnings. Just as there are a variety of definitions and reasons for the shadow economy, there are a variety of estimates, based on various methodologies, of the size of the shadow economy in the United States. These range from 6.7% to 13.9%, 82 8.8% to 9.2%, 83 and 8.4% to 8.7%, 84 with the highest estimate being a whopping 25%. 85 There have been, however, several trends that have surfaced regarding the shadow economy. First, estimates of its size, while varied, have consistently grown over time regardless of the means used to estimate it. 86 In the 1970’s it was estimated to be between 2.6% and 4.6% of the total United States economy, growing to 3.9% to 6.1% in the 1980’s, and 8.8% to 9.4% in the 1990’s. 87 A second consistent feature is that illicit work – work “off the books” – is the largest component of the shadow economy. 88 A third trend is that males are responsible for approximately two-thirds of this illicit work. 89 Finally, the more bureaucracy a country has, with the attendant taxation in varying forms to support it, the greater in proportion is that country’s shadow economy. 90 See, e.g., 20 C.F.R. § 404.1592 (West, Westlaw through Feb. 4, 2011; 76 FR 6365). 81 82 SCHNEIDER & ENSTE, 83 supra note 3, at 35. Id. at 36. 84 Schneider, supra note 4, at 26. See also PICKHARDT & SHINNICK, supra note 66, at 146, 171. 85 SCHNEIDER & ENSTE, 86 Id. at 38-40. 87 Id. at 38. 88 Id. at 13. 89 Id. at 82. 90 Id. at 125–26. supra note 3, at 41. 629 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 What these percentages are measuring, however, is the value of the work attributed to the shadow economy compared to the gross national product, not the number of people performing that work. If the shadow economy equates to 8.9% of the United State’s economy, it would be worth over one trillion dollars a year – specifically $1,171,629,000,000. 91 To put that figure in context, it would be the same as over 80 million 92 people working full-time, 50 weeks a year, at minimum wage. 93 Clearly some people in the shadow economy earn much more than minimum wage, others earn much less, and likewise hours worked would vary from a de minimis amount to well over what is considered “full-time” – e.g., forty hours a week. The number of people in the shadow economy, however, has not been measured. One reason why it is so difficult to both measure the size of the shadow economy and the number of people working within it is because the people participating in it do not want to be identified. 94 It is obvious that there must be a significant number of people who work whose earnings are not accounted for by either employer or employee self-reporting. One, albeit flawed, way to measure the number of individuals in the shadow economy is to compare the known number of individuals in the workforce with the number of tax returns filed. According to the United States Census Bureau, the current estimated population of the United States is 310,888,616. 95 Of See U.S. Dep’t of Commerce, Bureau of Economic Analysis, Real Gross National Product, FED. RES. BANK OF ST. LOUIS: ECON. RES., http://research.stlouisfed.org/fred2/data/GNPC96.txt (last visited Feb. 13, 2011) (stating that the adjusted gross national product of the United States was estimated to be $12,945.5 billion dollars as of January 1, 2009). 91 92 80,802,000 to be exact. Minimum wage is currently $7.25 per hour, effective as of July 24, 2009. Minimum Wage, U.S. DEP’T OF LABOR, http://www.dol.gov/dol/topic/wages/minimumwage.htm (last visited Apr. 10, 2011). Multiplying that amount times forty hours a week (what is traditionally considered full-time), by 50 weeks a year, would equate to a total gross earnings of $14,500. 93 94 Schneider, supra note 4, at 3. U.S. POPClock Projection, U.S. CENSUS BUREAU, http://www.census.gov/population/www/popclockus.html (last visited Feb. 25, 2011). 95 630 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 the total population, as of July 2009, there were 154,504,000 people in the official (documented) workforce of the United States with an additional 14,462,000 documented unemployed workers actively seeking employment. 96 Based on the most recent figures, however, only 131,597,000 Americans filed individual tax returns, 97 almost 23 million people fewer than the number of people working and required by law to file a tax return. There are two reasons why this approach is flawed. First, by definition, not only are there people working in the shadow economy who do not file tax returns, but they also would not necessarily be counted in the official work force by the United States Bureau of Labor. Second, some people, regardless of whether their income is reported or not, just refuse to file for and pay income taxes. SCOPE OF THE PROBLEM It should not be surprising that the exact number of individuals who have applied for or are receiving need-based welfare benefits who are working and not reporting or having their income reported is unknown. From studies and audits that have been done, however, it is possible to see that it is a problem of staggering size. Again, for illustration purposes, it is possible to examine reports from, or regarding, the Social Security Administration’s two disability programs to see the scope of the problem which will be reflective of the problems of the other need-based welfare programs. These reports have two primary sources – the Administration’s own Office of the Inspector General 98 and the Government Accountability Office. Report after report has demonstrated that: 96 Employment Situation News Release, U.S. BUREAU OF LABOR STAT. (Aug. 7, 2009), http://www.bls.gov/news.release/archives/empsit_08072009.htm. 97 Terry Manzi, Projections of Returns That Will Be Filed in Calendar Years 2004-2010, INTERNAL REVENUE SERVICE, 66, http://www.irs.gov/pub/irssoi/04proj.pdf (last accessed Feb. 25, 2011). 98 U.S. Soc. Security Admin., Office of the Inspector Gen., Congressional Response Report: Integrity of the Supplemental Security Income Program, SECURITY ADMIN. (Aug. 8, 2002), U.S. SOC. http://www.ssa.gov/oig/ADOBEPDF/audittxt/A-01-02-22095.htm (noting that since the Office of the Inspector General was established in 1995, it has 631 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 Non-reporting by recipients of eligibility information (wages, resources, living arrangements, etc.) accounts for 71% to 76% of all payment errors; 99 Errors in reporting recipients’ income have historically been the most significant cause for stopping SSI benefits; 100 An estimated 46% of all terminations of welfare benefits were related to income issues; 101 and Unreported income accounts for 22% to 25% of annual SSI overpayments. 102 But what do these percentages mean? Based upon one Inspector General audit, a total of approximately $3.1 billion was overpaid to 173,000 disabled beneficiaries due to their work activity, including the payments made to eligible family members. 103 While the Social Security Administration had identified approximately $1.8 billion of these overpayments to 141,000 beneficiaries, a further $1.3 billion to 49,000 beneficiaries went undetected. 104 Of those, more than half would have been ineligible to receive further disability benefits due to their work activity. 105 A different investigation of just SSI conducted investigations and audits that resulted in almost $6 billion in savings, potential cost avoidance, and inaccurate payments). 99 U.S. Gov’t Accountability Office, supra note 20, at 13. 100 Review of Controls Over Processing Income Alerts which Impact Supplemental Security Income Payments, supra note 24, at 2. 101 Id. 102 U.S. Gov’t Accountability Office, supra note 20, at 8, 10. 103 U.S. Soc. Security Admin., Office of the Inspector Gen., Follow-Up on Disabled Title II Beneficiaries with Earnings Reported on the Master Earnings SOC. SECURITY ADMIN. (Apr. 2009), File, U.S. http://www.ssa.gov/oig/ADOBEPDF/audittxt/A-01-08-28075.html. 104 Id. 105 Id. 632 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 recipients showed that in fiscal year 2000 there was about $477 million of benefits erroneously paid to individuals whose work activity would have disqualified them from receiving SSI benefits. 106 An additional $394 million of SSI benefits was erroneously paid based upon recipients’ unreported financial resources. 107 An additional danger, not addressed in these studies, is that of “snowballing,” where the erroneous receipt of one form of need-based welfare enables the recipient to apply for, and improperly receive, other forms of need-based assistance. An example of “snowballing” is shown in an audit, conducted by the Administration’s Office of the Inspector General, of the Medicare prescription drug plan. The audit found that approximately 13% of all approved applications for the prescription drug plan were for individuals whose income and resources exceeded income and/or resource limits for the Social Security benefits they were receiving. 108 This 13% equates to 276,000 individuals at a cost of $473 million during a twelvemonth period, and an additional $224 million over the following twelve-month period – merely for the prescription drug plan benefits – and does not include the value of the improperly received disability benefits. 109 Unfortunately, the improper payment of benefits has not been an isolated incident. In 1997, after years of reporting specific instances of abuse and mismanagement, increasing overpayments and poor recovery of outstanding SSI debt, the Government Accountability Office designated the SSI program as high-risk. 110 But just as it is clear that improper welfare payments are nothing new, it is equally clear that there have 106 Id. at 10. 107 Id. at 5, 10. 108 U.S. Soc. Security Admin., Office of the Inspector Gen., The Social Security Administration’s Income and Resource Verification Process for Individuals Applying for Help with Medicare Prescription Drug Plan Costs, SECURITY ADMIN., 2 (Feb. 19, 2008), U.S. SOC. http://www.ssa.gov/oig/ADOBEPDF/A-06-06-16135.pdf. 109 Id. at 2-3. 110 Congressional Response Report: Integrity of the Supplemental Security Income Program, supra note 97. 633 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 been multiple efforts over the years to reduce them. A year before the SSI program was identified as being high-risk, the Personal Responsibility and Work Opportunity Reconciliation Act was enacted, prohibiting SSI payments to fugitive felons and parole/probation violators. 111 Three years later the Foster Care Independence Act of 1999 established additional eligibility requirements for SSI payments, including efforts to count for SSI eligibility purposes money held in trust or resources that were disposed of at less than fair market value in an effort to qualify for SSI. 112 In November 2002, Congress enacted the Improper Payments Information Act of 2002, which requires all federal agencies – including the Administration – to report annually on the extent of erroneous payments within their programs and the actions being taken to reduce these payments. 113 Despite these legislative efforts, the problem of improper payments shows no sign of going away. Even when supplied with income information from its own data-match programs, the Administration does not always follow up on the information. 114 In one audit of Social Security Disability Insurance Benefits, the agency’s own Office of the Inspector General discovered that an estimated $1.37 billion in overpayments was paid from 1996 to 2000 to 63,000 recipients due to work activity – work activity which had already been reported to the Social Security Administration. 115 The inspector Supplemental Security Income Overpayments, supra note 31, at 3-4 (citing Personal Responsibility and Work Opportunity Reconciliation Act of 1996, Pub. L. No. 104-193, 110 Stat. 2105 (1996)). 111 Id. at 4 (citing Foster Care Independence Act of 1999, Pub. L. No. 106169, 113 Stat. 1822 (1999)). 112 Id. at 2 (citing Improper Payments Information Act of 2002, Pub. L. No. 107-300, §2, 116 Stat. 2350-51 (2002)). 113 Disabled Supplemental Security Income Recipients with Earnings, supra note 20, at 5. See also The Social Security Administration’s Income and Resource Verification Process for Individuals Applying for Help with Medicare Prescription Drug Plan Costs, supra note 107, at 3. 114 U.S. Soc. Security Admin., Office of the Inspector Gen., Follow-Up on Disabled Title II Beneficiaries with Earnings Reported on the Master Earning SECURITY ADMIN., (Apr. 15, 2009), File, U.S. SOC. http://www.ssa.gov/oig/ADOBEPDF/audittxt/A-01-08-28075.html. 115 634 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 general further discovered instances where these wages, which should have at the very least triggered an investigation as to the propriety of individuals who were working while receiving benefits, were instead used to justify, through a convoluted process, an increase in the benefits being paid to the individuals who were working and receiving benefits. 116 In other instances, the information was investigated, but not very quickly. In one study, it took Administration personnel an average of ten months to complete the development of an income alert in sample cases. 117 The reasons most frequently given by Administration employees for delays in working income alerts were their other workload concerns and the length of time it took to do income verifications. 118 There is a further complication in failing to consider an applicant’s income information in the SSI program. Unless the Administration discovers fraud on the part of the applicant or similar fault, it will not review its determination to pay SSI benefits after two years even if earnings are subsequently discovered which would have prevented the payment of the benefits in the first place. 119 This two year “statute of limitations” is referred to as the rule of “administrative finality.” 120 But for “administrative finality,” an investigation by the Social Security Office of the Inspector General discovered 61,380 SSI recipients were still receiving benefits even though their subsequently-discovered income should have terminated them, totaling over $74.7 million dollars in overpayments. 121 In the same audit, an additional 11,880 recipients were identified who had earnings that had not been considered by the Administration for an additional $12.4 million dollars in overpayments, even though the two year “administrative finality” period had not yet attached. 122 Even 116 Id. 117 Review of Controls over Processing Income Alerts which Impact Supplemental Security Income Payments, supra note 24, at 4. 118 Id. at i-ii. Disabled Supplemental Security Income Recipients with Earnings, supra note 20, at 3. 119 120 Id. 121 Id. 635 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 though the Doctrine of Laches generally does not apply to the government, 123 the Administration has voluntarily hobbled itself with regard to paying benefits in situations where it should not have. What these studies demonstrate is that even if the Administration is provided income information, it might not further investigate that income or otherwise act upon it. Instead, the income may be used to raise the recipient’s benefits, and if enough time passes, regardless of the propriety of decision to pay the benefits, it will not be reconsidered. As a result, millions upon millions of dollars in overpayments are made to individuals who are working. Nor is this problem limited solely to SSI. Thirty-six percent of SSI recipients also receive Disability Insurance Benefits. 124 While the Disability Insurance Benefit program is not need-based, it does have both limits on what a person can earn if working while applying for benefits (substantial gainful activity) and afterwards in order to continue to qualify for benefits. Income that is not reported by either employers or the recipient could likewise result in improper awards of Title II benefits. Furthermore, it should be remembered that these studies only deal with the improper payments that have been discovered, and may not include all that exist. The technological approach to income detection cannot detect income earned within the shadow economy, as there is no electronic data trail to follow. Ultimately, one of the biggest problems is not the lack of income information, but rather the lack of priority given to the legal requirement on the agencies to use that information to investigate and terminate improperly paid benefits. The Administration has often placed a greater priority on quickly processing and paying disability claims with insufficient attention being given to verifying recipient-reported information and controlling program expenditures. 125 In response to the audit of the Medicare Prescription Drug plan cited above, the 122 Id. 123 See generally Nevada v. United States, 463 U.S. 110, 141 (1983). 124 U.S. Gov’t Accountability Office, supra note 20, at 15. 125 Congressional Response Report: Integrity of the Supplemental Security Income Program, supra note 97. 636 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 Administration “stated Congress’ intent was for [the Social Security Administration] to enroll, as quickly as possible, the maximum number of eligible citizens into the prescription drug program. To accomplish this, [the Social Security Administration] developed a streamlined income and resource verification process that relied heavily on applicant attestations. . . .” 126 What this attitude demonstrates are the competing goals at stake in many need-based welfare programs. One goal is to foster as much participation as possible, eliminating as many barriers to participation as possible with the laudable goal of ensuring that as many people that can benefit from the program can do so. This goal, however, is in direct competition with ensuring that only those individuals who truly meet the eligibility criteria – those criteria that are set to ensure that the people who really need the help are the ones getting the help – participate in the program. Stated another way, if society’s goal is to ensure that as many people benefit from a needs-based welfare program as possible, then the means to achieve that goal is to completely eliminate any sort of application procedure or eligibility requirements. Doing so will ensure that everyone who needs benefits will receive them, but so will an inordinate number of people, at great cost, who do not. Yet another complication is the fact that, because many welfare programs have a goal of getting individuals off of welfare rolls and joining the workforce, they will encourage and allow, under often complicated rules, work-related income as long as the income derived is below a certain level for a certain amount of time, without terminating benefits. Some individuals will very carefully work only to the point where they do not endanger having their benefits terminated. 127 The challenge is therefore to separate the people working below that level from those working above that level, but who are not reporting their income. First and foremost, however, the income must be reported; only then can it be analyzed to determine its effect on the receipt of welfare benefits. The identification of workrelated earnings is therefore merely a starting point. 126 The Social Security Administration’s Income and Resource Verification Process for Individuals Applying for Help with Medicare Prescription Drug Plan Costs, supra note 107, at 3. 127 See generally Chambers, supra note 78. 637 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 THE HARM What is the harm of people receiving need-based welfare programs without reporting their income? Who is hurt by them doing so? Undoubtedly, there will be some individuals who have received so little income that it would not disqualify them from receiving need-based welfare benefits whether they reported it or not. Nevertheless, there are three groups of people who suffer from individuals improperly receiving welfare benefits due to unreported income: first, those individuals who do properly qualify for welfare benefits and receive them; second, those individuals who followed the rules and had reported their income and were properly disqualified from receiving assistance; and third, the taxpaying public who pay to support the welfare programs. How is the first group, those who properly qualify for and receive need-based benefits, harmed by those who receive benefits that should not? That fact that there are individuals who receive need-based welfare benefits who are working with incomes that would, had they been reported, disqualified them from receiving those benefits causes a suspicion of all individuals receiving the need-based welfare benefit. For example, the parody of the MasterCard advertisement cited at the beginning of this article questions why the individual photographed was “receiving a free bowl of soup” if he can afford a “$500 cellular telephone.” 128 This parody reflects our society’s concern as to whether certain individuals truly deserve the assistance that is given to them. Because there are people who are receiving welfare benefits who would not qualify to do so had they reported their income, it can stigmatize, in the eyes of society, those who are legitimately receiving benefits. Just how much of a stigma there is overall in receiving welfare assistance is a matter for debate. 129 For instance, since 128 Mikkelson, supra note 1. For a brief overview of the concept of there being a stigma of receiving welfare, see Robert Breunig, Indraneel Dasgupta, Craig Gundersen, Prasanta Pattanaik, Explaining the Food Stamp Cash-Out Puzzle, Food and Nutrition Research Report No. 12, U.S. DEP’T OF AGRICULTURE, ECON. RES. SERVICE, 14-16 (Apr. 2001), http://www.ers.usda.gov/publications/fanrr12/fanrr12.pdf. See also Colleen Flaherty Manchester & Kevin J. Mumford, How Costly is Welfare Stigma? Separating Psychological Costs from Time Costs, AM. ECON. ASS’N, 1 129 638 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 there are over 57 million people in the United States receiving Medicaid (roughly one in every five), 130 there cannot be too large of a stigma attached to it. In a United States Department of Agriculture survey of households eligible to participate in the federal food stamp program, only 7% of the eligible nonparticipating households identified “stigma” as the main reason for their non-participation. 131 At the risk of political noncorrectness, it is entirely possible that the “stigma” of receiving governmental aid is no longer as strong a deterrent as it might have once been. 132 But as the parody cited above shows, the fact that some people cheat the welfare system can lead to suspicion that anyone or even everyone receiving benefits is likewise cheating, which is clearly not true. The second group of people harmed by those who improperly receive benefits are those individuals who, by following the rules and properly reporting their incomes, were denied need-based incomes. While at first glance this may seem as counterintuitive as the first group, from a perspective of fundamental fairness those who do not cheat are harmed by those who do. By individuals not following the rules and not properly reporting income, which would disqualify them from receiving need-based welfare benefits, the system effectively creates two very different standards where there should be only one. It is fundamentally unfair that individuals who intentionally cheat can get benefits, while those who follow the rules may not. Unlike the first two groups, there is nothing counter-intuitive about the harm suffered by the third group. Ultimately, the taxpaying, voting public will only support need-based welfare programs if they believe that those actually in need of aid are the (Dec. 5, 2008), http://www.aeaweb.org/annual_mtg_papers/2009/retrieve.php?pdfid=430 (stating that a substantial fraction of households that are eligible for welfare, or public assistance, do not participate; with non-participation rates ranging from forty to eighty percent) (citations omitted). 130 Medicaid – Beneficiaries and Payments: 2000 to 2006, supra note 6. 131 Janet Currie & Jeff Grogger, Explaining Recent Declines in Food Stamp Program Participation, BROOKINGS INSTITUTION, 6 (Sept. 2000), http://www.brookings.edu/es/events/bwpua/2000/02currie.pdf. 132 See JEB BUSH & BRIAN YABLONSKI, PROFILES IN CHARACTER, 52-55 (1995) (stating that there is no longer a welfare stigma but rather a stigma of working). 639 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 ones actually receiving the aid. The failure to report income by individuals is not only against the law with regard to welfare programs, but it is also illegal under the tax code. All income from any source and any country must be reported to the IRS unless it is exempt under the tax code; there is no minimum amount of income that exempts a taxpayer from filing a return. 133 Besides wages, salaries, and other forms of income reported on tax returns by employers or financial institutions, the IRS also requires cash payments from side work and the fair market value of bartered exchanges of goods and services to be reported as well. 134 The failure to report income, and to pay taxes on that income, creates what is known as the “tax gap.” 135 A consequence of this “tax gap” – especially of individuals who are working in the shadow economy without reporting their income whether or not they are receiving welfare benefits – is to transfer to those working in the official, reported economy an even larger percentage cost of supporting welfare programs. The taxes not paid by those working “under the table” cause those whose income is reported to pay more than their fair share. 136 This is true for all government-provided benefits – schools, police, fire departments, etc. The working but nontaxpaying individual receives the benefit of these services without paying for them. 137 This becomes even more ironic, not to say even more offensive, if the individuals who are working and not reporting their income or paying taxes on it are receiving monetary or other welfare benefits paid for by those who do report their income – which they would be ineligible to receive if they had reported their income in the first place. It is therefore the people who qualify for need-based welfare, those who applied and by following the rules were properly denied benefits, and the people who pay the taxes to provide the welfare assistance (and everything else our government provides 133 Reporting Miscellaneous Income, FS-2007-26, IRS.GOV (Nov. 2007), http://www.irs.gov/newsroom/article/0,,id=175963,00.html. 134 Id. 135 Id. 136 See Schneider, supra note 4, at 8. 137 See SCHEIDER & ENSTE, supra note 3, at 174-75. 640 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 at the local, state, and federal levels) who suffer from individuals who receive need-based welfare benefits to which they would not be entitled had they reported their incomes. In effect these individuals are stealing – they are taking money and other benefits to which they would not be entitled had they followed the law regarding income reporting. ELIMINATING INCOME VERIFICATION Whether stigmatizing or not, there are opportunity costs of applying for welfare benefits, such as the time and effort it takes to apply for benefits. In our free society, it is normally left to individuals to weigh those costs for themselves; if they decide that the costs are prohibitive, they should not apply. Regardless of efforts to lower these opportunity costs, they will always remain to a certain degree. Removing too many barriers, such as requiring no income verification, while reducing costs and in theory raising participation, would likewise by definition increase instances of abuse. Over the years, there have been studies about and efforts to identify and remove barriers between eligibility for various welfare programs and actual participation. Many times these barriers, such as application procedures, may prevent otherwise eligible individuals from receiving the help they need. For example, in a study of Medicaid and state children’s health insurance programs, 72% of the parents who did not complete the application process to receive free health care for their children said it was too difficult to obtain the necessary documentation, while 52% of the parents who did not even attempt to enroll their eligible children said the application process was too long and cumbersome. 138 In other words, for these parents, having to apply at a government office and to provide the necessary documentation for free health care for their children was too onerous. What many parents did indicate, however, is that they would be willing to have their children receive free health care through Timothy W. Westmoreland, Medicaid and State Children’s Health Insurance Program Eligibility Pilots, CENTERS FOR MEDICARE & MEDICAID SERVICES 4 (June 26, 2000), http://www.cms.hhs.gov/smdl/downloads/sho062600.pdf. 138 641 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 Medicaid or a state children’s health insurance program if they could receive the benefits first and then apply. 139 States which administer the Medicaid program are allowed to grant temporary Medicaid benefits based on preliminary information provided, with the beneficiary/applicant being given a month to either complete a full Medicaid application or have the presumptive application serve as their full application. 140 States have great leeway in simplifying their welfare application procedures, to include eliminating or reducing income verification and asset tests used to determine actual eligibility. 141 The logic of granting benefits first and then requiring an application second is that the children need health care to be provided now, and cannot afford to wait for an application process to be completed. This approach, however, maximizes the likelihood that benefits will be provided to those individuals who do not meet the income tests for the need-based aid. For example, it would be impossible to imagine a bank granting loans to individuals before they actually apply for these loans. While efforts to simplify application processes are admirable, they should not be done to the extent whereby those not eligible to receive aid get it inappropriately and thereby undermine the legitimacy of the need-based welfare programs. THE PROBLEM WITH SELF-REPORTING OF INCOME Even if welfare agencies utilize a host of technology-based income reporting measures, a common factor for all need-based welfare programs is the requirement placed on applicants or recipients to report their income from employment. Furthermore, agencies will contact beneficiaries to verify the accuracy of use income and resource data that is received through matching agreements with other agencies prior to using 139 Id. 140 Id. at 5. 141 Id. 642 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 that data to terminate, deny, or reduce a benefit. 142 If there are discrepancies it is the Administration’s policy to accept the individual’s reasonable explanation to reconcile the discrepant information. 143 It is, in effect, asking people seeking benefits if their income or resources are high enough to disqualify them from the benefits they are seeking. Accordingly, there is little monetary incentive for applicants or recipients to honestly report their income, as to do so is to their detriment. While the Administration has the ability to levy sanctions to encourage reporting compliance, the Administration rarely does so. 144 According to the Government Accountability Office, in a multiyear study, over one million recipients of Social Security benefits were overpaid, but only 3,500 recipients were penalized for failing to report eligibility information. 145 Three basic reasons were discovered in the audit for the failure to impose penalties: first, Administration workers believed that the penalty amounts were too low to be effective; second, the Administration workers felt that the process to impose penalties was too administratively burdensome; and third, Administration workers felt that their management officials did not encourage the use of penalties. 146 POSSIBLE SOLUTIONS Despite the calls to eliminate income reporting for needbased welfare programs or to rely solely on self-reporting, the integrity of our need-based welfare programs requires income detection, and as shown above, better income detection than what currently exists. This will be even more relevant as more and more employers utilize non-standard employees who are hired as independent contractors or temporary employees so as 142 The Social Security Administration’s Income and Resource Verification Process for Individuals Applying for Help with Medicare Prescription Drug Plan Costs, supra note 107, at D-2. 143 Id. 144 U.S. Gov’t Accountability Office, supra note 20, at 13. 145 Id. 146 Id. 643 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 to be able to avoid many of the costs incumbent with regular, full-time employees. 147 Ultimately, the solution to this problem rests on a three-prong approach. First, the agencies that run the need-based welfare programs need to do a better job with the information that is already being provided to them to detect and follow-up on reported earnings. For example, while the Administration receives IRS Form 1099 information, which it uses when determining SSI eligibility, it does not use that same information in Disability Insurance Benefits cases to see if an applicant is working even though some employee’s income is not reported on W-2 forms, but only on 1099 forms. 148 Even though the Administration has employment or wage information, it does not necessarily use it. Likewise, welfare agencies need to utilize all of the income information at its disposal and should consider more than just one report of income. Because some individuals’ pay vary from pay-period to pay-period, relying on merely one pay-period report can create a misleading picture of an individual’s actual income. A study by the Office of the Inspector General for the State of Illinois found that relying on only one pay stub led to a 13% error rate in determining an individual’s income. 149 Perhaps one of the best ways to improve using information already in the possession of a welfare agency to detect and investigate work-related income would be to consolidate those efforts within the agency. In 2005, the Social Security Administration successfully tested consolidating the processing of voluntary wage reports to one central office instead of the ten field offices that handled them previously. The centralized approach relieved the field offices of having to process the wage 147 See, e.g., Sarah E. Needleman, Employers Turn to Temporary Help, THE WALL STREET JOURNAL (Nov. 9, 2009), http://online.wsj.com/article/SB125752581635334109.html. 148 See U.S. SOC. SECURITY ADMIN., PROGRAM OPERATIONS MANUAL SYSTEM § SM 00344.001 (2003) (stating that the Detailed Earnings Query, a report used by the Administration to provide specific income information for claimants of disability benefits, only contains self-reported and W-2 reported income; not income reported via IRS Form 1099). See Office of the Inspector Gen., Ill. Dep’t of Healthcare & Family Servs., 15-16 (May 14, 2008), 2007 Annual Report, ILLINOIS.GOV http://www.state.il.us/agency/oig/docs/2007OIGAnnualReportFinalwebsiteco rrection.pdf. 149 644 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 reports and created a centralized cadre whose sole function was to process the reports, creating expertise and consistent application of rules. 150 Ideally, consolidated central offices should be created whose sole function is to detect and report income and employment. This type of specialization can provide for quicker, cheaper, and more effective use of assets as opposed to being merely an additional duty for field office personnel. Second, the government as a whole needs to better share the information obtained by one agency or entity with other welfare agencies at both the state and national levels. A number of need-based welfare programs are duplicating each others’ efforts by monitoring their own applicants and beneficiaries employment and income reporting. Many of these individuals, however, participate in multiple need-based welfare programs, and the different agencies may have information that would benefit other agencies. As shown by the success of the data exchange programs already in place, these type programs have been very effective to date in providing information on earnings. But these efforts to share information are being made between individual agencies, such as the National New Hire database information between the Office of Child Support Enforcement and the Social Security Administration. While each need-based welfare program will likely continue with its own income reporting rules and eligibility requirements, there is no reason why their participants or applicants’ income information should not be shared with all other federal and state agencies which also run need-based welfare programs in a single master database. Information could further be gleaned from agencies outside the need-based welfare programs themselves. For instance, state child support agencies collect employment information from child support hearings, to include income information that is used to calculate child support guidelines. As this information is used as evidence in judicial proceedings, there is a presumption of accuracy, and this income information could be shared with welfare programs. 151 Disabled Supplemental Security Income Recipients with Earnings, supra note 20, at app. B. 150 151 Both administrative and judicial hearings to determine child support guidelines can provide information about non-reported, shadow-economy income as there is normally an individual besides the one working in the 645 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 Finally, beyond the current, primarily technological, means of income detection, what is needed to combat the shadow economy are mechanisms to persuade individuals with knowledge of otherwise unreported income information – whether the applicants, recipients, or third-parties – to provide it. Three possible mechanisms are (1) mandatory monthly telephone reporting of earned income by applicants or recipients, (2) mining bank records and credit reports for employment and income information, and (3) telephone hotlines for third-parties to report applicants’ or recipients’ work activity. Currently, SSI recipients are required to report any change in their resources (such as increased income from working) and may do so by calling a toll-free telephone number. 152 In 2003, the Administration tested a system whereby SSI recipients voluntarily reported their earnings on a monthly basis via telephone instead of merely reporting when there was a Based upon an Administration estimate, change. 153 implementing a full-scale, mandatory implementation of the telephone reporting system would prevent at least $80 million in overpayments each year. 154 While it might seem counterintuitive, as individuals are already required to report income to initially qualify for and continue to qualify for receiving needbased benefits, many people will comply with a legal requirement of reporting income only as long as they are given an easy opportunity to do so. The Administration test could easily be expanded from a voluntary program to a mandatory one – requiring applicants or recipients to report their monthly earnings and the source of those earnings. An automated shadow economy – the other parent – who has knowledge of the shadow economy work, and furthermore an incentive, to provide information about the income of the other earned in the shadow economy for the calculation of child support guidelines. See generally Drew A. Swank, The National Child NonSupport Epidemic, MICH. ST. DCL L. REV. 357 (2003). 152 Electronic Booklets: What You Need to Know When You Get Supplemental Security Income (SSI), U.S. SOC. SECURITY ADMIN. (Mar. 2008), http://www.socialsecurity.gov/pubs/11011.html. 153 Disabled Supplemental Security Income Recipients with Earnings, supra note 20, at app. B. 154 Supplemental Security Income Overpayments, supra note 31, at 9. 646 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 system could be used that would flag only those responses which indicated earnings above a certain level for follow-up investigation. This program would not be overly burdensome for recipients – one toll-free telephone call a month – and it would be possible to have procedures to allow certain applicants or recipients to be excused from the obligation due to special circumstances (such as their age or condition). A failure to report could be used as a basis to impose a penalty; repeated violations could be used to terminate or deny benefits. 155 Obviously, some people could lie about their earnings on a monthly basis, especially if they lied upon applying for benefits. But for those individuals who had not been working when they applied for benefits, and subsequently began working, such a mechanism would provide for inexpensive, effective means of capturing work-related income information, whether or not that work was within the reported or shadow economy. The second mechanism to find work-related income that is not reported by either employers or recipients would be to examine bank records and credit reports. In 2005, the Administration contracted with a third-party vendor to retrieve electronic bank data to detect unreported bank accounts in SSI cases. 156 Bank statements can be especially useful in identifying those cases in need of a redetermination for SSI benefits, as they not only potentially show wages a person has received, but other types of income – gifts, interest, etc. – all of which are resources which for SSI are considered in eligibility determinations. 157 As recommended by the Administration’s own Office of the Inspector General, electronic bank statement information should be obtained to determine additional income and resources as tested for SSI cases. 158 A study conducted by the Office of the Inspector General of bank statement data showed that 7% of SSI recipients had bank accounts reflecting income or resources in excess of the threshold amount that they did not 155 See U.S. Gov’t Accountability Office, supra note 20, at 13. Supplemental Security Income, Recipients with Excess Income and/or Resources, supra note 25, at 2. 156 157 See id. at 2, 4. 158 Id. at 4. 647 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 report to the Administration. 159 Bank data, however, is more complicated than individual earnings reports, as bank accounts may have joint account holders and the reported data may include income or funds for individuals other than the SSI recipient. 160 Sorting out “who owns what assets” in a bank account is very labor-intensive for Administration personnel. 161 Credit reports are another existing information source that can be useful in determining if an applicant for a need-based welfare program has unreported employment or income. The Fair Credit Reporting Act provides that federal agencies can obtain credit reports on individuals, which list both their current employers and former employer. 162 In October 2003, the Social Security Administration began a pilot program to evaluate the use of reports obtained from credit bureaus. 163 Besides using credit reports as a tool to see if individuals are reporting that they are employed (while informing a need-based welfare program that they are not employed), a credit report can indicate an income stream which otherwise might not have been reported. Obviously, both bank records and credit reports do not offer the same level of proof as employer – or self-reported – income from welfare applicants. What they could be used for, however, is to shift the burden onto the person applying for benefits or already receiving benefits to at least explain the discrepancies. The individual’s failure to do so could be used as a basis to deny their application or terminate their benefits. The third mechanism, third-party fraud hotlines, has proven to be an effective source for law enforcement data. The principal is very straight-forward – normally someone, somewhere, knows something about a crime that has been committed. The key is to get them to come forward with their information. Some come forward through a sense of civic duty; others come forward when given the opportunity to profit by it. The federal government already pays individuals for providing information 159 Id. at 3. 160 Id. at App. C-2. 161 See id. 162 15 U.S.C.A. § 1681f (West, Westlaw through P.L. 111-349). 163 Supplemental Security Income Overpayments, supra note 31, at 9. 648 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 on employers who fail to pay their taxes, rewarding the informant with between 15% and 30% of the money recovered, after the payment of taxes, penalties, and interest accrued. 164 Some states already have telephone fraud hotlines. 165 Federal welfare agencies could operate such telephone fraud hotlines, or contract them out to businesses that already provide “intelligence retrieval networks” for state and local law enforcement agencies. 166 This could potentially be one of the strongest tools to combat non-reporting of income by applicants and/or recipients of need-based welfare benefits, even of those working in the shadow economy. This is because those individuals who are working for cash in the shadow economy (or bartering for goods or services) are being paid by someone, and that someone may know or discover that the person is also receiving need-based welfare benefits – and the inducement of receiving a cash bounty for reporting them can be very appealing. For any of the need-based welfare programs that would use such a hotline, it would be imperative that an anonymous tip alone should not, by itself, be the basis for denying an application for benefits or terminating benefits already being paid, but instead should trigger an investigation of the individual. Rewards would be paid only for those tips that resulted in the non-payment of 164 Stephen Ohlemacher, Tips on tax cheats skyrocket with bigger rewards, WHISTLEBLOWERS CENTER (Oct. 1, 2009), NAT’L http://www.whistleblowers.org/index.php?option=com_content&task=view&i d=957&Itemid=141. 165 See, e.g., Ind. Family Soc. Servs. Admin., Fraud Hotline, IN.GOV, http://www.in.gov/fssa/2385.htm (last visited Nov. 9, 2010); Fraud Investigations, WASH. STATE DEP’T OF SOC. AND HEALTH SERVICES, http://www.dshs.wa.gov/fraud/ (last visited Nov. 10, 2010); Welfare Fraud DEP’T OF HUMAN RESOURCES, Complaint Form, MD. http://www.dhr.state.md.us/oig/fraud.htm (last visited Nov. 4, 2010). One such company is “WeTip.” Founded in 1972, WeTip operates an anonymous, toll-free, telephone service in both English and Spanish throughout the entire United States. Dan Mayfield, Diversified Risk Management – On (June 7, 2009, 4:29 PM), WeTip, WETIP http://www.wetip.com/index.php?option=com_content&view=article&id=262 :diversified-risk-management-promotes-wetip&catid=904:promotionalexamples&Itemid=356. Since its founding it has processed over 421,572 tips, leading to 14,786 arrests (4% of all tips), with 7,515 convictions (51% of all arrests made). Id. 166 649 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 benefits, and if benefits had already been paid, a portion of any recouped benefits should be paid as an additional award as well. CONCLUSION Ultimately, all that is being asked of people who apply for need-based welfare is to be truthful on their applications. Unfortunately, as shown by the prosecutions for welfare fraud and administrative termination and recoupment of benefits, not everyone tells the truth when applying for need-based welfare or subsequently reporting their income. Even if 99.9% accuracy was achieved in income detection and reporting, millions of dollars each year will still be lost just due to the immense size of our national need-based welfare programs. Some cheaters will slip through the cracks and others will be able to beat the system effectively regardless of the income detection and verification measures. While absolute perfection is not a possibility, many means of income detection that are fiscally viable (as defined as the benefits of money saved either through preventing erroneous payments or recouping payments already improperly paid is greater than the cost of the detection or verification means) need to be developed and tried to reduce improper payments and to recoup those payments that were already erroneously made. This is necessary to maintain the integrity of, and the public’s trust in, our need-based welfare programs. President Reagan’s dictum regarding arms control efforts with the former Soviet Union is equally applicable to our need-based welfare programs – we need to trust what the applicants and recipients report regarding their work-related income, but we also need to effectively verify that information. 650 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 THE CENTRAL REGISTRY STATUTE FOR ABUSE AND NEGLECT MATTERS IS CONSTITUTIONALLY FLAWED W. TODD MILLER 1 EQUAL PROTECTION AND FUNDAMENTAL FAIRNESS CONCERNS This discussion identifies two perceived flaws with the Central Registry (Registry) maintained by the Department of Children and Families (DCF). 2 I contend that the Registry statute 1) must allow proof of rehabilitation; and 2) intentionally or unintentionally deems parents perpetually unfit to care for children without the necessary proofs to reach such a destructive determination. The focus of this article is on parents against whom administrative allegations of child abuse or neglect have been substantiated but who have not been criminally convicted, who would seek relief from a permanent placement on the Registry. In plain terms, this discussion concerns ordinary parents who make a one-time mistake, or exercise poor judgment while caring for their own children, and find themselves on the Registry for the balance of their lifetime. The author is a New Jersey State Administrative Law Judge who has heard numerous abuse and neglect cases over the years. The opinions herein do not reflect those of the Office of Administrative Law, staff or those who assisted in this article. The author would like to thank Sharon Danks and Susan Baldwin for their skillful assistance and suggestions in writing this article. 1 N.J. STAT. ANN. § 9:6-8.10a (West, Westlaw through L.2011, c. 46 and J.R. No. 2); N.J. STAT. ANN. § 9:6-8.11 (West, Westlaw through L.2011, c. 46 and J.R. No. 2). 2 651 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 It has been my experience that many of the litigants are not sufficiently funded to retain counsel. For these reasons, these cases do not ordinarily find their way to the appellate courts. It has also been my impression and experience that these determinations have enormous implications upon careers or reputations. Indeed, these are administrative proceedings, and yet the penalty or remedy is, in some ways, harsher than penalties imposed in criminal or quasi-criminal proceedings. A finding of substantiated abuse or neglect flows from the facts of the incident as presented by the DCF. But it is a quantum leap to take those very same facts and condemn someone to the Registry in perpetuity. Placing an individual on the Registry for the balance of the individual’s lifetime is comparable to condemning the individual to forever wear a “scarlet letter.” A permanent placement on the Registry suggests that the individual possesses a human defect making the individual a lifetime risk to children. The type of proof required to make such a draconian finding or conclusion is never presented during the administrative process. No medical or expert testimony is ordinarily presented on this issue. I believe that the proofs offered at the administrative proceedings do not constitutionally support this process. The statute mandates placement on the Registry without ever considering rehabilitation, mitigation or fitness. The purpose of this discussion is to evaluate whether there is a constitutional deprivation of the individuals placed on the Registry. I offer for illustration two fact patterns based upon actual cases. These will provide context to highlight the constitutional implications. The actual names have been replaced with fictitious parties. EXAMPLE 1 Steve stated that his daughter, Mary was a difficult and insubordinate child. She was argumentative and did not respond well to verbal discipline. This remained a problem through the date of the hearing. Mary and her sister, Liz, were fighting and bickering. The bickering continued and escalated throughout the day. At one point, Mary was eating ice cream out of the carton and it began 652 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 to leak onto the living room floor. Steve grabbed the carton from Mary and took it into the kitchen. Mary was upset with her father as a result of his actions. Mary and Liz began to fight and argue in the living room. Steve then went to the kitchen area. While in the kitchen, Mary was complaining that she wanted something else to eat. Steve stated that he initially tried to calm his daughter down. However, he became very agitated with her behavior and her insubordination. While standing behind Mary as she was looking in the kitchen cabinets, Steve struck Mary in the low-back area with a closed fist. Steve described the physical contact as a sharp nudge. Steve demonstrated his arm movement for the court. He stated that he was standing approximately six inches behind Mary. They were both standing upright, with Mary facing away from Steve. He pulled his right arm back approximately six inches, at waist level, and moved it forward into Mary’s back. Steve stated that even though his fist was clenched, the action was a “jab” to the back, rather than a punch. Steve is a large adult male, weighing two hundred pounds. If he had intended to punch and hurt his daughter, his action would have been that of a more traditional punch. Steve described a traditional punch as the arm being cocked back and thrust forward with significant velocity. He stated that a traditional punch did not occur and that he simply “jabbed or poked” his daughter in the back out of frustration. He was agitated and wanted to stop her from being disrespectful and insubordinate. He further stated that it was only one jab to the back, and thereafter, he left the room. EXAMPLE 2 Jean and her husband, Bill, had three children between them. As of October 1, 1986, Jean was nineteen years old. The relationship between Jean and Bill was tumultuous. Bill was abusive and had a drug problem. He had been stealing Jean’s money and jewelry to support his drug habit. The Division of Youth and Family Services (DYFS) alleged Jean left her three children unattended. The Initial Response Report stated: 653 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 Last night Jean left children unsupervised while she went out to look for father. She went to other houses looking for Bill because he stole her money to buy drugs. She was upset and left her three children or infants alone. She traveled about the neighborhood looking for Bill. She went to other homes. She believed he was in the neighborhood using drugs. She was engaged in a search for Bill. Her attention was fully taken from her children. Her action left the three infants or toddlers at risk. Jean was charged with neglect, and the charges were sustained. Jean subsequently married a different man and raised all four of her children. She has held employment for twenty years at a State developmental center where severely disabled individuals reside, has risen from a washroom employee in to supervisor with this agency, and has otherwise been law-abiding. Jean wanted to become a foster mother some twenty years later but could not because of the events that occurred when she was nineteen years old and married to a drug addict. She remains on the Registry after more than twenty years. CENTRAL REGISTRY The child abuse registry statute provides that the department shall not issue a certificate or renewal of registration to a prospective or current childcare provider if there is a substantiated charge of abuse or neglect in the Registry against the prospective or current provider or household member. 3 This is a lifetime prohibition. Generally, when an allegation of child abuse or neglect is received by the DCF an investigation ensues. There are two possible outcomes resulting from an abuse or neglect referral: the allegations may be either “substantiated” or “unfounded.” 4 The finding of “unsubstantiated” was eliminated in recent 3 N.J. STAT. ANN. § 30:5B-25.3(d) (West, Westlaw through L.2011, c. 46 and J.R. No. 2). 4 N.J. ADMIN. CODE § 10:129-5.3(a) (West, Westlaw through Jan. 2, 2011; 43 N.J. Reg. No. 1). 654 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 agency amendments. 5 If neglect or abuse is substantiated, the parent or guardian found to have abused or neglected a child is placed on the Registry. 6 The placement is permanent. 7 These statutes do not allow any expungement or rehabilitation action once a finding of abuse or neglect has been confirmed. 8 The reports that are forwarded to the Registry are to remain confidential, 9 but may be disclosed to a myriad of authorized governmental agencies subject to certain restrictions. 10 Release of the Registry information is allowed to entities investigating other allegations of child abuse. 11 Some of those entities include local police, a physician who suspects abuse, the courts or a grand jury, and certain researchers. 12 The Registry is also utilized in conjunction with the “Family Day Care Provider Registration Act.” 13 The Registry may be checked by sponsoring organizations for the names of prospective or current providers or household members of prospective or current providers. 14 N.J. ADMIN. CODE § 10:129A-3.3(a)(3), repealed by 37 N.J. Reg. 5004(b) (Dec. 19, 2005). 5 6 N.J. STAT. ANN. § 9:6-8.10a(e) (West, Westlaw through L.2011, c. 46 and J.R. No. 2); N.J. STAT. ANN. § 9:6-8.11 (West, Westlaw through L.2011, c. 46 and J.R. No. 2). 7 N.J. ADMIN. CODE § 10:129-6.1(b) (West, Westlaw through Feb. 7, 2011; 43 N.J. Reg. No. 3). 8 “Unfounded” findings may be expunged, but not “substantiated” findings. See N.J. STAT. ANN. § 9:6-8.10a(e); N.J. STAT. ANN. § 9:6-8.11 (West, Westlaw through L.2011, c. 46 and J.R. No. 2); N.J. STAT. ANN. § 9:6-8.40a(a) (West, Westlaw through L.2011, c. 46 and J.R. No. 2). 9 N.J. STAT. ANN. § 9:6-8.10a(a) (West, Westlaw through L.2011, c. 46 and J.R. No. 2). 10 § 9:6-8.10a(b)-(g). 11 § 9:6-8.10a(b). 12 Id. 13 N.J. STAT. ANN. § 30:5B-16 to -25.4 (West, Westlaw through L.2011, c. 46 and J.R. No. 2). 14 § 9:6-8.10a(b)(10). See also N.J. STAT. ANN. § 30:5B-25.3a (West, Westlaw through L.2011, c. 46 and J.R. No. 2). 655 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 Such information may also become available when DYFS 15 or the courts evaluate a person as a potential childcare giver. Thus, while the information contained in the Registry is considered confidential, clearly, some courts have observed that a significant number of governmental bodies or their employees and other select groups have access to this stigmatizing information. 16 Moreover employers are at liberty to request registry information on employment applications. Failure to answer these applications truthfully and accurately could result in a loss of employment. And in today’s high-paced electronic world, information, once obtained, can spread quickly and widely, intentionally or unintentionally. Although it might be argued that there is an expectation that the information found by those who have access to the Registry will be kept confidential, even the seemingly most secure government entities, such as the U.S. military, have experienced leaks of highly confidential or sensitive information. 17 Today, confidentiality is a matter of degree, not certainty. PARENTING AND DUE PROCESS In Bohn v. County of Dakota, the court discussed the basic rights associated with parenting: [W]ayne Bohn forcibly interceded to break up a fight between his two sons, one of whom then ran to a neighbor’s house . . . . The incident prompted 15 § 30:5B-25.3a. In re Allegations of Sexual Abuse at E. Park High Sch., 714 A.2d 339, 346 (N.J. Super. Ct. App. Div. 1998). 16 In the most recent high-profile leak of classified material, a website known as WikiLeaks began publishing tens of thousands of diplomatic cables after its founder, Julian Assange, received them from Bradley Manning, a soldier who downloaded the materials to a disc while stationed in Iraq. Massimo Calibresi, WikiLeaks’ War on Secrecy: Truth’s Consequences, TIME (Dec. 2, 2010), http://www.time.com/time/world/article/0,8599,2034276,00.html. 17 656 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 an investigation by the Dakota County Department of Social Services, which concluded that there was “substantial evidence” of child abuse by the [boys’ parents, Wayne and Sharon Bohn]. Although the Bohns disputed this conclusion, the Department assigned a child-protection worker to the case, pursuant to statute, and the social worker met with the Bohns and their children repeatedly in an attempt to remedy the presumed problems stemming from the alleged child abuse. 18 The Bohn court recognized the sanctity and importance of familial relationships, and stated: The privacy and autonomy of familial relationships involved in a case like this are unarguably among the protectible [sic] interests which due process protects. We can conceive of no more important relationship, no more basic bond in American society, than the tie between parent and child. . . . [T]he Supreme Court stated that the interest of a widower “in the children he has sired and raised, undecidedly warrants deference and, absent a powerful countervailing interest, protection.” 19 STIGMA, REPUTATION, AND CONSTITUTIONAL PROTECTION The United States Supreme Court held, in 1971, that a protectable liberty interest may be implicated “[w]here a person’s good name, reputation, honor, or integrity is at stake because of what the government is doing to him.” 20 The Court 18 Bohn v. County of Dakota, 772 F.2d 1433, 1434-35 (8th Cir. 1985) (footnote omitted). Id. at 1435 (emphasis added) (quoting Stanley v. Illinois, 405 U.S. 645, 651 (1972)). But see Croft v. Westmoreland Cnty. Children & Youth Servs., 103 F.3d 1123, 1125 (3d Cir. 1997) (“[The] liberty interest in family integrity is limited by the compelling government interest in the protection of children --particularly where the children need to be protected from their own parents.”). 19 20 Wisconsin v. Constantineau, 400 U.S. 433, 437 (1971). 657 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 reasoned that “where the State attaches a ‘badge of infamy’ to the citizen, due process comes into play.” 21 A year later, the Court suggested that a government employee’s liberty interest would be implicated if he were dismissed based on charges that “imposed on him a stigma or other disability that foreclosed his freedom to take advantage of other employment opportunities.” 22 The case of Valmonte v. Bane involved the question of an individual’s good name and standing, and whether the interest in protecting that reputation constituted a protectable liberty interest. 23 “Valmonte had to prove that her inclusion on the New York State Central Register would result in stigma, that is, in ‘public opprobrium’ and damage to her reputation.” 24 The court found “that the disclosure of Valmonte’s status on the list to prospective employers was enough publication to implicate her reputation.” 25 The court stated that “[t]here is no dispute that Valmonte’s inclusion on the list potentially damages her reputation by branding her as a child abuser, which certainly calls into question her ‘good name, reputation, honor, or integrity.’” 26 The State of New York argued, that “there is no ‘stigma’ attached to [Valmonte’s] inclusion [on the Central Register] because there is no disclosure of information on the Central Register except to authorized state agencies or potential employers in the child care field.” 27 The court rejected this argument, and stated: Dissemination to potential employers, however, is the precise conduct that gives rise to 21 Id. (citation omitted). 22 Bd. of Regents v. Roth, 408 U.S. 564, 573 (1972). 23 Valmonte v. Bane, 18 F.3d 992, 999 (2d Cir. 1994). 24 Id. at 999-1000 (citing Bohn v. County of Dakota, 772 F.2d 1433, 1436 n.4 (8th Cir. 1985)). 25 Id. at 1000 (citation omitted). 26 Id. (quoting Roth, 408 U.S. at 573) (emphasis added). 27 Id. 658 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 stigmatization. In Brandt, we stated that if a plaintiff “is able to show that prospective employers are likely to gain access to his personnel file and decide not to hire him, then the presence of the charges in his file has a damaging effect on his future job opportunities.” In the instant situation, although Valmonte’s presence on the Central Register will not be disclosed to the public, it will be disclosed to any employer statutorily required to consult the Central Register. Since Valmonte states that she will be applying for child care positions, her status will automatically be disclosed to her potential employers. Under Brandt, that dissemination satisfies the “stigma” requirement. 28 New Jersey courts have recognized that one’s reputation could be irrevocably injured when information contained in the Registry is shared with even a few private citizens, and protecting one’s good name and reputation is a protectable private interest under the New Jersey Constitution. 29 MEGAN’S LAW A comparison of Megan’s Law 30 with the abuse and neglect registry statute illustrates well the disparate nature of two laws that seemingly have a similar purpose. Megan’s Law requires registration of sex offenders convicted after its effective date and all prior-convicted offenders whose conduct was found to be repetitive and compulsive. 31 The sexual offenses that trigger the 28 Id. (emphasis added) (citations omitted) (quoting Brandt v. Bd. of Coop. Educ. Servs, 820 F.2d 41, 45 (2d Cir. 1987). 29 See In re Allegations of Sexual Abuse at E. Park High Sch., 714 A.2d 339, 346 (N.J. Super. Ct. App. Div. 1998). 30 Formally known as the Registration Law, N.J. STAT. ANN. § 2C:7-1 (West, Westlaw through L.2011, c. 46 and J.R. No. 2), and the Community Notification Law, N.J. STAT. ANN. § 2C:7-6 to -11 (West, Westlaw through L.2011, c. 46 and J.R. No. 2). 31 N.J. STAT. ANN. § 2C:7-2b (West, Westlaw through L.2011, c. 46 and J.R. No. 2). 659 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 laws for those previously convicted are aggravated sexual assault, sexual assault, aggravated criminal sexual contact, and kidnapping. 32 Also included are various related laws concerning endangering the welfare of a child, luring or enticing, criminal sexual contact if the victim is a minor, and kidnapping, criminal restraint, or false imprisonment if the victim is a minor and the offender not the parent, and in all cases an attempt to commit any of the foregoing. 33 The Community Notification Law, which is part of Megan’s Law, requires the local chief of police to give notification of the registrant’s presence in the community. 34 Such notification is also required if the registrant changes address (presumably whether within or outside of the community, although the statutory language refers only to the latter). 35 The law provides for three levels or tiers of notification. They are: (1) If risk of re-offense is low, law enforcement agencies likely to encounter the person registered shall be notified; (2) If risk of re-offense is moderate, organizations in the community including schools, religious and youth organizations shall be notified in accordance with the Attorney General’s guidelines, in addition to the notice required by paragraph (1) of this subsection; (3) If risk of re-offense is high, the public shall be notified through means in accordance with the Attorney General’s guidelines designed to reach members of the public likely to encounter the person registered, in addition to the notice 32 § 2C:7-2b(1). 33 § 2C:7-2b(2). 34 § 2C:7-6. 35 N.J. STAT. ANN. § 2C:7-7 (West, Westlaw through L.2011, c. 46 and J.R. No. 2). 660 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 required by paragraphs (1) and (2) of this subsection. 36 Notably, all of these are lifetime requirements unless the registrant has been offense-free for fifteen years following conviction or release from a correctional facility (whichever is later) and, on application to terminate these obligations, can persuade the court that he or she is not likely to pose a threat to the safety of others. 37 No such termination provision is included in the “administrative” abuse registry. 38 Undisputedly, a Megan’s Law registrant poses a more serious risk to society than do persons placed on the child abuse registry through an administrative proceeding. Megan’s Law matters involve criminal prosecutions. Many of the offenses are unspeakable and with a risk of recidivism. 39 It could be argued that some Megan’s Law registrants (i.e. sex offenders) suffer from mental illness, in the extreme. 40 Nevertheless, the registrants are afforded two very distinct protections not offered to a DYFS abuse or neglect registrant. First, notification regarding a Megan’s Law registrant is tiered. 41 Second, and more significantly, a Megan’s Law registrant can petition to be removed from the sex offender registry after fifteen years. 42 N.J. STAT. ANN. § 2C:7-8c(1)-(3) (West, Westlaw through L.2011, c. 46 and J.R. No. 2). 36 37 § 2C:7-2f. 38 See N.J. STAT. ANN. § 9:6-8.40a (West, Westlaw through L.2011, c. 46 and J.R. No. 2) (directing the Division of Youth and Family Services to “expunge” a “report, complaint, or allegation” that is deemed “unfounded”). By implication, substantiated reports are not expunged. 39 See N.J. STAT. ANN. § 2C:7-1a (West, Westlaw through L.2011, c. 46 and J.R. No. 2) (citing the “danger of recidivism” by sex offenders and those who commit predatory acts against children). See also Doe v. Poritz, 662 A.2d 367, 374-76 (N.J. 1995). 40 See id. See also N.J. STAT. ANN. § 2C:7-8(b)(5)-(7); N.J. STAT. ANN. § 2C:47-1 (requiring the completion of a psychological evaluation for offenders convicted of certain crimes); In re Civil Commitment of W.X.C., 8 A.3d 174 (N.J. 2010). 41 See § 2C:7-8c. 42 See § 2C:7-2f. 661 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 Administrative abuse or neglect registrants must remain on the Registry for the rest of their lives. 43 And, there is no tiered system to distinguish the levels of conduct. Administrative registrants are placed on the same Registry as criminals. To illustrate, a twenty-one-year-old father who spanks his child too hard may be found, after an administrative hearing, to have committed abuse or neglect. He could be placed on the same registry with criminals, and he must remain on the abuse Registry, with those who are convicted of crimes, for the rest of his life. The disparate treatment of a Megan’s Law registrant compared to that of an abuse/neglect registrant is remarkable, and a violation of equal protection and fundamental fairness. Imagine a Megan’s Law registrant (sex offender) being discharged from one registry, while a mother who excessively spanked her child is perpetually bound to the child abuse registry. This disparity must be examined and appropriately addressed. REHABILITATION, DIVERSIONARY PROGRAMS, AND EXPUNGEMENTS Our criminal and civil justice systems recognize that people periodically make poor decisions, exercise poor judgment, and even commit illegal acts. The criminal justice system permits conditional discharges, 44 pretrial intervention 45 and de minimis motions to dismiss, 46 expungements 47 and rehabilitation. In furtherance of this notion, the Legislature passed the Rehabilitated Convicted Offenders Act, which provides: 43 See § 9:6-8.40a. N.J. STAT. ANN. § 2C:36A-1(West, Westlaw through L.2011, c. 46 and J.R. No. 2). 44 45 N.J. STAT. ANN. § 2C:43-12 to -22 (West, Westlaw through L.2011, c. 46 and J.R. No. 2). 46 N.J. STAT. ANN. § 2C:2-11(West, Westlaw through L.2011, c. 46 and J.R. No. 2). 47 N.J. STAT. ANN. § 2C:52-1 to -32 (West, Westlaw through L.2011, c. 46 and J.R. No. 2). 662 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 The Legislature finds and declares that it is in the public interest to assist the rehabilitation of convicted offenders by removing impediments and restrictions upon their ability to obtain employment or to participate in vocational or educational rehabilitation programs based solely upon the existence of a criminal record. Therefore, the Legislature finds and declares that notwithstanding the contrary provisions of any law or rule or regulation issued pursuant to law, a person shall not be disqualified or discriminated against by any licensing authority because of any conviction for a crime, unless N.J.S. 2C:51-2 is applicable or unless the conviction relates adversely to the occupation, trade, vocation, profession or business for which the license or certificate is sought.48 It is the policy of New Jersey not to discriminate, by law, regulation or otherwise, because of a conviction of a crime, 49 yet that is precisely the impact when someone is administratively placed on the abuse/neglect registry. Indeed, the Registry cases heard at the Office of Administrative Law do not involve crimes. 50 Therefore, a showing of rehabilitation should be permitted. Remarkably, the manual for residential child care facilities permits proofs of rehabilitation for certain criminal offenses. 51 For example, a non-felon is presumptively barred, but may present proof of rehabilitation as follows: 48 N.J. STAT. ANN. § 2A:168A-1 (West, Westlaw through L.2011, c. 46 and J.R. No. 2) (emphasis added). 49 See id. See N.J. STAT. ANN. § 52:14B-2(b) (West, Westlaw through L.2010, c. 103, and J.R. No. 6). 50 N.J. ADMIN. CODE § 10:127-5.6(g) (West, Westlaw through Jan. 3, 2011; 43 N.J. Reg. No. 1) (permitting rehabilitation for certain criminal offenses). Those who are convicted of felonies are permanently barred. See § 10:1275.6(e). 51 663 Spring 2011 Rutgers Journal of Law & Public Policy (g) For crimes and offenses other than those cited in (e) above, an individual may be eligible to receive a certificate or to administer or work at a facility if the individual has affirmatively demonstrated to the Department clear and convincing evidence of rehabilitation. 1. In determining whether an individual has affirmatively demonstrated rehabilitation, the following factors shall be considered: i. The nature and responsibility of the position at the facility that the convicted individual would hold, has held or currently holds, as the case may be; ii. The nature and seriousness of the offense; iii. The circumstances under which the offense occurred; iv. The date of the offense; v. The age of the individual when the offense was committed; vi. Whether the offense was an isolated or repeated incident; vii. Any social conditions that may have contributed to the offense; and viii. Any evidence of rehabilitation, including good conduct in prison or in the community, counseling or psychiatric treatment received, acquisition of additional academic or vocational schooling, successful participation in correctional work-release programs, or the recommendation of those who have had the individual under their supervision. 52 52 § 10:127-5.6(g). 664 Vol 8:3 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 Similarly, the licensing requirements for family child care registration (i.e., daycare operators) permit proof of rehabilitation. 53 These facilities are, in effect, daytime parents. But parents or guardians do not reap the benefits of the rehabilitation policy like those with criminal convictions in an institutional setting. Consider the situation where a daycare provider operates out of his or her home. And assume either the provider or the provider’s spouse has a criminal history. Should the provider be granted a State license? The DCF regulations clearly permit the provider, substitute provider, or alternate provider to present proof of rehabilitation. 54 The DCF must consider evidence of the offender’s rehabilitation. Another clear example of permissible rehabilitation is in the certified nurse aide (CNA) field. CNA’s provide long-term medical care to the infirm and elderly. 55 A CNA may receive a State license even after being convicted of a disqualifying crime. 56 Many elderly CNA clients are as vulnerable as toddlers or infants. A CNA license may be issued, even after a criminal conviction, upon clear and convincing proof of rehabilitation. The CNA elements for rehabilitation state in relevant part: [N]o person shall be disqualified from certification on the basis of any conviction disclosed by a criminal history record background check . . . if the person has affirmatively demonstrated to the Commissioner of Health and Senior Services clear and convincing evidence of the person’s rehabilitation. In determining whether a person has affirmatively demonstrated rehabilitation, the following factors shall be considered: N.J. ADMIN. CODE § 10:126-5.2(a)(10) (West, Westlaw through May 2, 2011; 43 N.J. Reg. No. 9). 53 54 Id. 55 See Nursing and Psychiatric Aides, U.S. BUREAU OF LAB. STAT. (Dec. 19, 2009), http://www.bls.gov/oco/ocos327.htm. 56 N.J. ADMIN. CODE § 8:39-43.2(a) (West, Westlaw through May 2, 2011; 43 N.J. Reg. No. 9). 665 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 (1) the nature and responsibility of the position which the convicted person would hold, has held or currently holds, as the case may be; (2) the nature and seriousness of the offense; (3) the circumstances under which the offense occurred; (4) the date of the offense; (5) the age of the person when the offense was committed; (6) whether the offense was an isolated or repeated incident; (7) any social conditions which may have contributed to the offense; and (8) any evidence of rehabilitation, including good conduct in prison or in the community, counseling or psychiatric treatment received, acquisition of additional academic or vocational schooling, successful participation in correctional work-release programs, or the recommendation of those who have had the person under their supervision. 57 Notably, the above-mentioned regulations address convictions and the amount of latitude criminals are granted for licensing cases, even when the license involves caring for children or the aged and infirm. It is critical to distinguish criminal cases from the present analysis. Parents are not afforded equal rights in administrative cases when it comes to establishing rehabilitation. 57 N.J. STAT. ANN § 26:2H-83(b)(1)-(8) (West, Westlaw through L.2011, c. 46 and J.R. No. 2). 666 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 Consider a young mother who, at age twenty-one, commits neglect while suffering from postpartum depression and is placed on the Registry. Suppose her condition was temporary and she fully recovers. Suppose she raises her own children, they go to college, and at age fifty she wants to work as a daycare provider or wants to be a foster mother. Should she be penalized for a condition related to rearing children that is thirty years in her past? Or should she be able to petition for removal from the Registry, just as criminals are afforded the opportunity to demonstrate rehabilitation? On the surface, perpetual placement of a temporarily ill person on the Registry would also appear to violate the Americans with Disabilities Act 58 or the New Jersey Law Against Discrimination. 59 PUBLIC POLICY One might ask why a child abuser should be helped. We must keep in mind that the types of cases under consideration here do not involve the classic criminal child abuser. These are exclusively administrative charges under discussion. The majority of the administrative cases over which I have presided involve parental discipline or neglect of the registrant’s own child. The events almost always occur within the family unit. In most cases, there is no public threat. Many of the cases involve indigent families. Free lawyers are not assigned. The cases rarely reach the appellate court. How could it be that employment barriers are knocked down by rehabilitation statutes for criminal offenders, 60 but the same barriers remain in place for parents who over-discipline their children? This is contrary to State policy and common sense. 58 42 U.S.C.A. §§ 12101-12112 (West, Westlaw through P.L. 112-9, approved Apr. 14, 2011). 59 N.J STAT. ANN §§ 10:5-1 to -49 (West, Westlaw through L.2011, c. 46 and J.R. No. 2). 60 E.g., N.J STAT. ANN § 2A:168A-1 (West, Westlaw through L.2011, c. 46 and J.R. No. 2). 667 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 EQUAL PROTECTION The right to equal protection of the laws is guaranteed by both the Federal Constitution and State Constitutions. 61 It is incumbent upon the court to apply the constitution as written and ensure the equal protection of the laws to all. Irrational or arbitrary distinctions have no place in our system of justice, for where conspicuously artificial lines are drawn and the law “lays an unequal hand on those who have committed intrinsically the same quality of offense . . . , it has made as an invidious a discrimination as if it had selected a particular race or nationality for oppressive treatment.” 62 The purpose behind the concept of equal protection is the requirement that there be “uniform treatment of persons standing in the same relation to the governmental action questioned or challenged.” 63 In Caviglia v. Royal Tours of America, the New Jersey Supreme Court discussed equal protection and due process by stating: When evaluating substantive due process and equal protection challenges under the New Jersey Constitution, this Court applies a balancing test. That test weighs the nature of the affected right, the extent to which the governmental restriction intrudes upon it, and the public need for the restriction. We require that the means selected by the Legislature bear a real and substantial relationship to a permissible legislative purpose. 64 In short, the constitutional balancing test gleaned from Caviglia consists of weighing (1) the nature of the affected right, U.S. CONST. amend. XIV, § 1 (West, Westlaw through P.L. 112-9, approved Apr. 14, 2011); Caviglia v. Royal Tours of Am., 842 A.2d 125, 132 (N.J. 2004) (recognizing that N.J. CONST. art. 1, para. 1 includes an implied right to equal protection of the laws) (further citation omitted). 61 62 Skinner v. Oklahoma, 316 U.S. 535, 541 (1942) (further citation omitted). 63 Reynolds v. Sims, 377 U.S. 533, 565 (1964). 64 Caviglia, 842 A.2d at 132 (citations and quotations omitted). 668 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 (2) the extent to which the government restriction intrudes upon it, and (3) the public need for the restriction. Typically, equal protection claims are asserted in the context of classifications including race, religion, age, or disability. However, our courts have also found that equal protection was denied when a criminal defendant was denied entry into the pre-trial intervention program (PTI). 65 In State v. Kowitski, a resident of one county whose court system did not have a PTI program sought admission into a neighboring county’s PTI program. 66 He was denied entry into the neighboring county’s PTI because his crime had been committed outside the county. 67 Indeed, a PTI applicant does not fall within the classifications mentioned above. Yet the denial of PTI was nonetheless held to be a violation of equal protection because similarly situated individuals were being treated dissimilarly by the state. 68 A lack of equal access to the PTI program was held to violate due process. 69 CONCLUSION The nature of the affected right at issue here is substantial. Parenting is a highly protected area. Placement on the Registry may prevent a parent from coaching his child 70 or interfere with employment opportunities. Applying the Caviglia criteria to the abuse/neglect Registry, it is clear that the registrant’s equal protection right is violated if the registrant is placed on the Registry as a result of a non-criminal (administrative) case. 71 The affected right (e.g., parenting) has been described as one of 65 See State v. Kowitski, 367 A.2d 459, 463 (N.J. Super. Ct. Law Div.1976). 66 Id. at 460. 67 Id. 68 Id. at 463. Id. at 461-62 (discussing the arbitrary lack of access to PTI on the basis of geographical differences). 69 70 This assumes the local police take action to stop a parent from coaching. 71 Caviglia v. Royal Tours of Am., 842 A.2d 125, 132 (N.J. 2004). 669 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 the most basic protected constitutional rights. 72 Enormous deference must be awarded parents absent a powerful countervailing (public) interest. 73 Parental rights must be afforded more consideration than is granted under the present statutory scheme. Many parents work as teachers, daycare providers, coaches, nurses, and health aides, and in other fields that involve working with children. One unfortunate parenting mistake and they can become unemployed and stigmatized. Criminals are granted considerably more relief through rehabilitation policies, diversionary programs, or expungement proceedings than are ordinary parents that make a parenting mistake. Serious acts of violence against children are resolved through criminal proceedings and in family court. This discussion is about those cases that involve parenting mistakes or errors that fall into the non-criminal domain. There is no public need for the lifetime placement on a registry for parents who commit minor acts of neglect or abuse. Government should not intrude into poor decision-making by a parent to the extent that the resulting governmental action permanently brands the parent. It is an overbroad and arbitrary response that assumes a parent must be designated a permanent risk to children, without any competent proof supporting the designation. This type of conclusion requires significantly more psychiatric, psychological or similar expert proofs. Social, mental and economic factors should be evaluated before an individual is placed on the Registry. The individual’s maturity, history of substance abuse or alcoholism, status as a single parent, experience of unwanted pregnancy, and lack of employment all may be relevant. A long-term placement on the Registry may make sense if certain conditions are proven to exist, but in the absence of such proofs there is no constitutional basis to place an individual on the Registry for the rest of that individual’s lifetime. Greater proofs are necessary to brand someone in perpetuity. Parenting is one of the most rewarding, but also one of the most difficult jobs a person may undertake. Many parenting decisions are made under emotional or stressful circumstances. Parents may believe they are acting in the child’s best interest, 72 Bohn v. Dakota County, 772 F.2d 1433, 1435-36 (8th Cir. 1985). 73 Id. at 1435 (citing Stanley v. Illinois, 405 U.S. 645, 651 (1972)). 670 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 but decide, upon reflection, that their actions were debatable or flat-out wrong. A few examples of these debatable actions include using corporal punishment by hitting a child with a belt for shoplifting; leaving an infant at home to pursue the child’s father, who stole the rent money; or spanking a child for being extraordinarily disrespectful to adults, and, in the process of spanking him, fracturing the child’s thumb. These parents are permanently branded as child abusers if they are placed on the Registry. This remedy is overbroad, unnecessary and excessive. It does not serve any valid governmental purpose when weighed against the harm to the parent. There is no public need to place the non-criminal parent on the same or comparable registry as the criminal parent convicted of child abuse or neglect. Completely dissimilar citizens are being treated in similarly harsh ways (e.g., Megan’s Law registrant versus DYFS neglect registrant). Equal protection is being denied to the parents who committed minor child neglect while other citizens who commit much more serious offenses escape long-term implications through diversionary programs, expungements, and rehabilitation submissions. There is a breakdown in logic or rationale that does not square with due process. Perception is reality when it comes to a stigma created by the Registry scheme. Those who access the Registry presumably cannot, or may not, separate the criminal child abuser (e.g., a sex offender) from the parental abuser (a father who spanked his son). The statutory scheme applies a rigid paradigm and non-discretionary penalty criteria to child rearing, which is an enormously challenging endeavor. Every parent is different, and every child is different. Neither the DCF nor the administrative law judges have any discretion when dealing with poor parental decision-making. 74 Placement on the Registry is the statutory penalty, even for non-criminal or marginal cases of abuse or neglect. 75 I question whether one bad parental decision or one bad parental judgment should be recorded in perpetuity, in a government registry open to government employees and 74 N.J. STAT. ANN. § 9:6-8.11 (West, Westlaw through L.2011, c. 46 and J.R. No. 2). 75 Id. 671 Spring 2011 Rutgers Journal of Law & Public Policy Vol 8:3 government employers, without the opportunity to have the entry removed upon a clear showing of rehabilitation, or removed for some other valid reason. I am mindful that the protection of children is the underlying purpose of the Registry. However, a convicted criminal can have an offense expunged, or can apply for a conditional discharge. 76 Even Megan’s Law registrants are afforded remedial relief from the registry under certain conditions. 77 But once an individual’s name is placed on the abuse or neglect Registry it cannot be removed, even when the placement results from an administrative matter. I contend the creation of a non-removable record in the Registry is an extraordinary remedy and is inconsistent with other areas where the Legislature permits rehabilitation, expungements, and diversionary programs, protects those with disabilities, and protects parenting rights. In its present form, the Registry is unconstitutional. It deprives parents of the right to redemption where others are afforded the same opportunity, for more egregious violations of law. For these reasons, other remedies or procedures affording due process, equal protection and fundamental fairness should be considered at the legislative or appellate level. 76 N.J. STAT. ANN. § 2C:36A-1(West, Westlaw through L.2011, c. 46 and J.R. No. 2); N.J. STAT. ANN. § 2C:52-1 to -32 (West, Westlaw through L.2011, c. 46 and J.R. No. 2). 77 N.J. STAT. ANN. § 2C:7-2(f) (West, Westlaw through L.2011, c. 46 and J.R. No. 2). 672
