Sen. Elizabeth Warren (D‑Mass.), as the business press reports, “is calling on the Securities and Exchange Commission to investigate several critics of the Department of Labor’s fiduciary rule, claiming they misled investors through duplicitous statements.” It seems several large financial businesses have decried the pending rule as unworkable and seriously harmful to the retirement industry, but have also, in conference calls with investors, said they expected continued growth and profitability even if the rules go through. In a typically aggressive move, Warren cited by name four companies she wanted investigated for these statements, and wrote: “Corporate interests have become accustomed to saying whatever they want about Washington policy debates, with little accountability when their predictions prove to be inaccurate.”
It’s unsettling, to start with — as critics were prompt to note — that a powerful Senator should seek legal consequences for private actors whose “predictions” in Washington policy debates “prove to be inaccurate.” Predictions about effects are the standard way of arguing about public policy — one side predicts, say, that a certain change in policy will cause a slowdown in business or make some good more costly, the other side predicts it won’t, and eventually we find out who was wrong. Pundits, social scientists, and Senators themselves regularly offer predictions that prove wildly inaccurate, yet ordinarily without legal as distinct from reputational consequences.
Let’s assume — okay, let’s pretend — that Warren’s goal here is not to chill the speech of companies that are vocally criticizing one of her own pet policy projects. Let’s imagine that her sole concern is for the well-being of the SEC’s formal constituency, investors. (It’s like pretending that when the Attorney General of New York investigates ExxonMobil for not telling investors that fossil fuel use is destroying the world, it’s really shareholder welfare that’s on his mind.) Would it actually make her happy if the four financial companies dropped the happy talk with Wall Street and said, yes, the Labor rule could mess up our business in important ways that we can’t fully understand or predict? Even if that increased the volume of opposition to the rule by causing shareholders to take alarm?
Unless readers have long memories, they’re probably not aware that Warren is not inventing a new tactic for trying to chill business speech: she’s reviving an old one. Way back in 1980, the magazine Regulation — now a Cato publication, then published by our friends at the American Enterprise Institute — ran an opinion editorial on precisely this issue, provocatively titled “Two Lies Are Better Than One.” While the piece was unsigned, its puckish humor and close knowledge of the legalities of the agency rulemaking process suggest that it was written by a close co-thinker (at least) of then-Regulation editor, and later Supreme Court justice, Antonin Scalia.
The proposal to prohibit “crosstown hypocrisy,” as it was catchily nicknamed, was filed before the SEC back then by none other than Ralph Nader and the Nader-founded group Public Citizen. After noting the proposal’s surface plausibility, and its element of redundancy (since trial lawyers can already sue over material misstatements made to investors, whether or not the SEC acts), the Regulation author goes on to speculate about the unlikelihood of such a principle being applied in other legal contexts: “To take only one of many possible examples: plaintiffs in tort suits might be required to present their courtroom descriptions of their disabling injuries to all prospective employers.” But the author then identifies a weightier problem: the proposal ignores the very nature of the adversary system that defines lawyers’ professional role in agency rulemakings as elsewhere. In the adversary process, it is not only tolerated but expected that lawyers for a party will marshal a case so as to select those bits of evidence and emphasize that combination of hopes and fears that place the sought-after outcome in its most favorable light. It is not, of course, only the business participants in rulemaking debates that put the best or worst face on their cases; lawyers representing consumer, labor, environmentalist, and other advocates all do so too. The piece concludes:
Unless the Nader proposal is changed to include some appropriate remedy for such noncorporate hyperbole, it represents not a radical abandonment of the adversary system but, to the contrary, one of the classic gambits in the book of adversary strategy, to be found under the heading “handicapping one’s opponent.”
And so with Sen. Warren’s proposal.
