Rethinking the Principal-Agent Theory of Judging

AuthorJonathan Remy Nash - Rafael I. Pardo
PositionProfessor of Law, Emory University School of Law - Robert T. Thompson Professor of Law, Emory University School of Law
Pages331-362
Rethinking the Principal–Agent
Theory of Judging
Jonathan Remy Nash & Rafael I. Pardo ∗∗
ABSTRACT: This Essay offers new ins ights into understanding the
relationship between higher and lo wer courts and responds to the extant
literature that has characteri zed the relationship as one inv olving a
principal and an agent. We challeng e the underpinnings of the principal
agent understanding of judicial hierarchies and identify problems with the
theory’s applicability in this context. While principals o rdinarily select their
agents, higher court judges usually do not select lower court judges.
Moreover, while lower court judges may cast votes with a n eye to the
possibility of elevation to a hig her court, the higher court judges wh o review
the lower court’s decisions usu ally do not decide whether to eleva te a judge
from that court to a higher position.
Rather than dismiss the principalagent th eory of judging out of hand, th is
Essay empirically examines w hether judicial actors behave a s the theory
suggests they would in a setting that h as been overlooked by the extant
literature and where applicati on of the theory should be at its a pexthe
federal bankruptcy litigation system . Bankruptcy court judges who sit as
trial judges are appointed for renewable time-limited terms by the court of
appeals. Moreover, the court of appeal s provides a second intermediate level
of appellate review of bankruptcy court decisions. Initially, such decisions
are appealed to a bankruptcy appellate panel (BAP) if the circ uit has
created one. The circuit’s judic ial council, over which the co urt of appeals
has dominant sway, selects BAP judg es from among the circuit’s bankruptcy
court judges. If the principalagent theory of judging has tra ction, evidence
Professor of Law, Emory University School of Law.
∗∗ Robert T. Thompson Professor of Law, Emory University School of Law.
For valuable comments, we are grateful to Tom Clark, Micheal Giles, Margaret Lemos,
Cherie Metcalf, Joseph Ura, John Walson, Kathryn Watts, and participants in a graduate
seminar on research design in the Emory Political Science Department. This Essay also
benefited greatly from the commenta ry of participants at the 2012 Annual Conference of the
Southern Economic Association, the 2012 Annual Meeting of the Canadian Law and
Economics Association, the 2012 Annual Meeting of the Midwestern Law and Economics
Association, the 2012 Annual Meeting of the Midwe st Political Science Association, the 2013
Annual Meeting of the American Law and Economics Association, and faculty colloquia at
Emory University School of Law and the University of Florida Levin College of Law.
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332 IOWA LAW REVIEW [Vol. 99:331
of it should exist in this setting, which pro vides a stronger principalagent
relationship than the one typicall y found in other judicial hierarchies.
Our study focuses on the voting behavior of circ uit court judges and
bankruptcy judges (both as tria l judges and as appellate judges when sitting
on the BAP) in stude nt-loan-discharge proceedings i n consumer bankruptcy
cases. While our findings indicate tha t the ideological preferences of the
circuit court judges predict their voting behavior, we d o not find evidence of
voting behavior by bankruptcy judges that would suggest se nsitivity to the
potential for circuit court monito ring and conformity to circu it court
preferences. Thus, our findings ca st doubt on the principalagent theory of
judging.
INTRODUCTION .................................................................................... 333
I. MODELS OF JUDICIAL BEHAVIOR .......................................................... 335
A. THE ATTITUDINAL MODEL .............................................................. 335
B. STRATEGIC CONSIDERATIONS ........................................................... 336
C. PRINCIPAL–AGENT JUDICIAL HIERARCHICAL MODELS ....................... 337
II. THE FEDERAL BANKRUPTCY LITIGATION SYSTEM .................................. 338
III. EMPIRICALLY INVESTIGATING THE PRINCIPAL–AGENT THEORY OF
JUDGING ............................................................................................... 341
A. THEORETICAL CONSIDERATIONS ...................................................... 341
1. The Strength of the PrincipalAgent Relationship in the
Federal Bankruptcy Litigation System ................................. 342
2. The Heightened Incentive and Ability for Courts of
Appeals to Monitor BAPs Relative to Bankruptcy C ourts ... 342
B. RESEARCH DESIGN .......................................................................... 345
C. IDEOLOGY OF THE PRINCIPAL: THE VOTING BEHAVIOR OF CIRCUIT
COURT JUDGES IN STUDENT-LOAN-DISCHARGE DETERMINATIONS ....... 350
D. SEARCHING FOR EVIDENCE OF AGENT-BASED VOTING: THE VOTING
BEHAVIOR OF BAP JUDGES AND BANKRUPTCY COURT JUDGES IN
STUDENT-LOAN-DISCHARGE DETERMINATIONS ................................. 353
IV. INTERPRETATION AND IMPLICATIONS ................................................... 354
CONCLUSION ....................................................................................... 360
APPENDIX ............................................................................................. 361
2013] RETHINKING THE PRINCIPALAGENT THEOR Y OF JUDGING 333
INTRODUCTION
Many commentators argue that a principalagent model is helpful to
understanding judicial hierarchies. Under the traditional principalagent
paradigm, the principal, having a set of goals in mind, selects an agent to
fulfill them. The agent has a tendency to shirk rather than fulfill the
principal’s goals; the principal monit orsand can punish and even
dischargethe agent to the extent that the agent observably fails to follow
through on the principal’s wishes.
Scholars have tried to fit the principalagent paradigm to the sett ing of
judicial hierarchies, describing lower courts a s agents of their higher court
principals.1 A superior c ourt reviews a lower court in order to minimize
shirking.2 It also crafts judicial holdings that will constrain the lower court’s
freedom to decide cases contrary to the supe rior court’s preferences.3
In this Essay, we challenge the underpinnings of the principal–agent
understanding of judicial hierarchies. Specifically, we argue that the fit of
the principalagent model to this setting is worse than common wisdom
would suggest. We begin by questioning the theoretical justification for
applying the paradigm to judicial hierarchies. We then empirically examine
whether judicial actors behave as the model suggests that they would, in a
setting where application of the paradigm sh ould be at its apex. We do not
find evidence of such behavior.
Consider initially the weakness of the theoretical argument in favor of
importing principalagent understandings to most judicial hierarchies.
There are two reasons that this simple story is insufficient to describe the
real relationship between higher and lower court judges. Fi rst, while
principals ordinarily select the ir agents, higher court judges usually do not
select lower court judges. Rath er, in the case of the federal judiciary , higher
court judges are stuck with lower co urt judges that the President has
appointed with the advice and consent of the Senate.
1. See, e.g., Clifford J. Carrubba & Tom S. Clark, Rule Creation in a Political Hierarchy, 106
AM. POL. SCI. REV. 622 (2012) (theore tical and empirical analyses); Tom S. Cl ark, A Principal-
Agent Theory of En Banc Review, 25 J.L. ECON. & ORG. 55 (2008) (treating en banc court of
appeals as principal to individual panels as agents); Micheal W. Giles, Thomas G. Walker &
Christopher Zorn, Setting a Judicial Agenda: The Decision to Grant En Banc Review in the U.S. Courts
of Appeals, 68 J. POL. 852 (2006) (same); Donald R. Songer et al. , The Hierarchy of Justice: Testing
a Principal-Agent Model of Supreme CourtCircuit Court Interactions, 38 AM. J. POL. SCI. 673 (1994)
(describing the Supreme Court as a principal and the lower federal courts as agents); see also
Pauline T. Kim, Beyond PrincipalAgent Theories: Law and the Judicial Hierarchy, 105 NW. U. L. REV.
535, 535 n.1 (2011) (citing example s of judicial politics scholarship that de scribes the federal
judicial hierarchy in terms of a principalagent relationship).
2. E.g., Songer et al., supra note 1 .
3. E.g., Jeffrey R. Lax, Political Constraints on Legal Doctrine: How Hierarchy Shapes the Law,
74 J. POL. 765 (2012).

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