Wake Forest Law Review
29Sep

ESPN Bets Big with Sportsbook Agreement

Categories: Current Issues Blog
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John C. Fresco

On August 8, 2023, ESPN announced a ten-year, $2 billion agreement with PENN Entertainment[1] to launch ESPN BET, an ESPN-branded sportsbook that will grant access to online sports betting in the sixteen legalized betting states where PENN Entertainment is licensed.[2] ESPN is the world’s leading sports platform with eight US television networks, the leading sports app, streaming platform, ESPN+, and premiere sports social media platforms.[3] In 2022, the brand expanded its total paid subscribers by forty-two percent to an audience of 24.3 million, averaged 106.7 million unique visitors per month to its digital platforms, and led the sports media category in fan engagement for the year with 6.8 billion interactions across its social media channels.[4]

In its agreement with PENN Entertainment, ESPN now has the ability to leverage its industry-leading multi-platform reach with the product operations and expertise of PENN Entertainment, a company with the “largest and most diverse gaming footprint in North America.”[5] PENN Entertainment is a global provider of “integrated entertainment, sports content, and casino gaming experiences.”[6] According to Jimmy Pitaro, Chairman of ESPN, “PENN Entertainment is the perfect partner to build an unmatched user experience for sports betting.”[7] Since entering this agreement, PENN Entertainment CEO, Jay Snowden, said in an earnings call that the expectation is for PENN Entertainment to immediately grab a twenty percent market share of the sports betting market with the addition of ESPN branding and integration.[8]

Prior to its agreement with PENN Entertainment, ESPN had progressively been filling its programing with advertising from sports betting companies like DraftKings, PointsBet, and FanDuel,[9] and launching new sports betting programs, such as Daily Wager and Bet with Erin Dolan.[10] ESPN had also been integrating sports betting into some of their iconic programs, including College Gameday, with segments such as “Bear’s Picks” with sports betting analyst Chris “The Bear” Fallica and “Winners” with SportsCenter anchor Scott Van Pelt.[11] While this agreement may appear to be a tremendous opportunity for two companies to remedy their downward trajectories,[12] it also presents a potentially contentious conflict of interest:[13] ESPN produces “the sports on which betting occurs”[14] and PENN Entertainment “facilitate[s] … betting by the general public.”[15] This new agreement raises questions in two key areas: potential antitrust violations[16] within the sports data market[17] and ESPN’s ethical obligations to sports journalism[18] and its shareholders’ interests.[19]

Sports gambling has been prevalent as long as sports have existed.[20] While sports betting in the modern era has always relied on game results to determine winners and losers, the more recent technological accessibility to online betting platforms has created a demand for faster data.[21] In order to maximize profits, “sportsbooks rely on sports data companies to collect, process, monitor, and deliver data.”[22] Off the field, analysts, commentators, and fans use data constantly in a multitude of ways, from sports betting to game predictions.[23] For a long time, data analysts were disliked by coaches and front offices because they represented a new approach to organizational management; however, it is now common for data analysts to populate sports teams and media staffs.[24]

Today, ESPN serves as one of the premiere sports data experts with 4,600 worldwide employees, including the predominant sports insiders in all major sports.[25] ESPN employees and professional sports league insiders like Adam Schefter, Adrian Wojnarowski, and Jeff Passan have the means to directly impact odds and betting markets with a single social media post.[26]

For example, ESPN’s leading NBA insider, Adrian Wojnarowski dramatically impacted the sports betting lines for the 2022 NBA rookie draft with just two tweets to his five million followers on Twitter.[27]  Approximately twelve hours before the first pick, Wojnarowski reported that, per sources, the first, second, and third picks of the NBA Draft were likely to be, “Jabari Smith to Orlando, Chet Holmgren to Oklahoma City, and Paolo Banchero to Houston.”[28] The sports gambling world immediately reacted to this information as bettors changed their bets and sportsbooks adjusted their betting lines, resulting in a dramatic shift in Banchero’s, the previous expected top pick’s, odds.[29] Yet just a few minutes before the first pick, Wojnarowski reported live on television that Banchero was once again the front-runner for the first pick, and he inevitably was.[30] This change in information dramatically hurt the majority of bettors as over twenty percent of all wagered money was on Smith to be drafted first, due in large part to Wojnarowski’s initial report.[31] This event from the 2022 NBA Draft highlights the potential financial impact of ESPN insiders’ ability to artificially generate profits for ESPN.[32]

In light of the ESPN and PENN agreement, has there been a violation of antitrust law? The current answer is no; however, as the agreement begins to take shape, and ESPN BET is officially launched, the question will certainly remain.[33] Generally, antitrust laws preserve fair market conditions and protect consumers against “unfair or deceptive acts or practices.”[34] As demonstrated by Adrian Wojnarowski’s impact on the 2022 NBA Draft betting market, ESPN insiders certainly have the capacity to manipulate betting market conditions through a single report.[35] Now, through their strategic partnership, ESPN and PENN have the capacity to profit significantly on similar market shifts.[36] 

Regardless of whether the agreement violates antitrust law, a subsequent question emerges regarding the duties of a media agency to ensure ethical journalism over shareholder profits.[37]

Constitutional rights that protect freedom of speech make it nearly impossible to impose a standard of ethics or professional protocols for journalists.[38] Consequently, there is no uniform system in journalism for enforcing ethical behavior.[39] Nonetheless, journalists generally adhere to standards of professionalism.[40] and are subjected to the pressures of meeting expectations of employers and advertisers.[41] As a media outlet, ESPN is not exempt from these pressures.[42]

Furthermore, as a subsidiary of the Walt Disney Company, a publicly traded company, ESPN has the additional pressure of meeting the expectations of shareholders.[43] This pressure seemingly hit a boiling point this past summer when Disney CEO, Bob Iger, discussed the possibility that the Walt Disney Company might considering selling their interest in ESPN if they were unable to find “a new strategic partner that can either help [ESPN] with distribution or content.”[44] While once a cash cow for Disney, ESPN had become an economic burden due to cable companies paying less for ESPN broadcasts and ESPN paying higher fees for the exclusive broadcast rights of major league sports.[45] ESPN eventually responded to this pressure by laying off approximately twenty percent of its television personalities in an attempt to manage costs and hit its financial targets.[46]

So, how does ESPN balance its ethical obligations as a media outlet and its obligations to shareholders to maximize profits? In Dodge v. Ford Motor Co., the Michigan Supreme Court held that:

“A business corporation is organized and carried on primarily for the profit of the stockholders. The powers of the directors are to be employed for that end. The discretion of directors is to be exercised in the choice of means to attain that end, and does not extend to a change in the end itself, to the reduction of profits, or to the non-distribution of profits among stockholders in order to devote them to other purposes.”[47]

The Delaware Supreme Court made a similar pronouncement in Revlon v. MacAndrews & Forbes Holding.[48] Applying Dodge and Revlon, courts have unequivocally endorsed the notion that corporations have an obligation to maximize profits without regard to consideration of other groups.[49] In accordance with these decisions, ESPN and PENN Entertainment likely have an obligation to utilize their insiders and data to maximize the profits of ESPN BET.

An alternative school of thought stems from the 2020 Davos Manifesto.[50] In an attempt to improve corporate governance and corporation’s fiduciary responsibilities, the World Economic Forum proposed “[t]hat the purpose of a company is to engage all its stakeholders in shared and sustained value creation.”[51] In creating such value, a company serves not only its shareholders, but all its stakeholders – employees, customers, suppliers, local communities and society at large.[52] Under this approach, “[t]he best way to understand and harmonize the divergent interests of all stakeholders is through a shared commitment to policies and decisions that strengthen the long-term prosperity of a company.”[53]

Ultimately,  there does not appear to be clear guidance governing how ESPN’s directors will balance the interests of their shareholders and the interests of their customer base.[54] Each of the two competing schools of thought—that outlined by Dodge and Revlon and that proposed by the World Economic Forum—have their own merits.[55] The decision will ultimately come down to one of public perception and whether ESPN can maximize its profits without alienating the public.      

The creation of ESPN BET through the partnership of ESPN and PENN Entertainment unifies one of the nation’s largest online betting platforms[56] with the global leader in sports data.[57] Accordingly, the new platform has the capability to monopolize sports insider information[58]. With this information—and at the risk of anti-trust violations[59]–ESPN may withhold or deceptively report sports information in a manner to direct bettor behavior.[60] By effectively controlling betting behavior through such control over data and media coverage, ESPN would be able to maximize their profits for their shareholders.[61] However, with such power comes tremendous responsibility, and ESPN will have to balance the interests of its other stakeholders with the interests of its shareholders to obtain an equitable outcome for its agreement.

[1] David Ramsey et al., Can ESPN Crack Betting Market, Front Office Sports (Aug. 9, 2023), https://frontofficesports.com/newsletter/can-espn-crack-betting-market/.

[2] John R. Manzo, ESPN to Launch ESPN BET in a New Agreement with PENN Entertainment, ESPN Press Room (Aug. 8, 2023), https://espnpressroom.com/us/press-releases/2023/08/espn-to-launch-espn-bet-in-a-new-agreement-with-penn-entertainment/.

[3] ESPN, ESPN, Inc. Fact Sheet, ESPN Press Room (Aug. 2, 2023), https://espnpressroom.com/us/espn-inc-fact-sheet/.

[4] ESPN, ESPN, Inc.: 2022 in Review, ESPN Press Room (2022), https://espnpressroom.com/us/2022-yir/.

[5] PENN Entertainment, About PENN Entertainment, PENN Entertainment, https://www.pennentertainment.com/.

[6] Press Release, PENN Entertainment, PENN Entertainment and ESPN Enter into Long-Term Exclusive Strategic Alliance for U.S. Online Sports Betting (Aug. 8, 2023), https://www.pennentertainment.com/corp/corp/-/media/project/png-tenant/corporate/png-corp/PENN-ESPN-FINAL%208-8-23.

[7] See Manzo, supra note 2.

[8] Erich Richter, Why Penn National Doubling Down on ESPN Bet is so Risky, New York Post (Aug. 10, 2023, 2:10 PM), https://nypost.com/2023/08/10/why-penn-national-doubling-down-on-espn-bet-is-so-risky/.

[9] Karen Weaver, ESPN’s $2 Billion Deal with PENN Entertainment Creates New Challenges for College Athletics, Forbes (Aug. 11, 2023, 9:43 AM), https://www.forbes.com/sites/karenweaver/2023/08/11/espns-2-billion-deal-with-penn-entertainment-creates-new-challenges-for-college-athletics/?sh=2650f1fe3368.

[10] John R. Manzo, ESPN Expands Sports Betting Content Portfolio, ESPN Press Room (Sept. 8, 2022), https://espnpressroom.com/us/press-releases/2022/09/espn-expands-sports-betting-content-portfolio/.

[11] Id.

[12] Tomi Kilgore, Penn National Stock has Fallen Far Enough for Defiantly Bearish Deutsche Bank Analyst to Stop Saying Sell, MarketWatch (Nov. 12, 2021, 3:01 PM),

https://www.marketwatch.com/story/penn-national-stock-has-fallen-far-enough-for-defiantly-bearish-deutsche-bank-analyst-to-stop-saying-sell-11636747272.

[13] William Skipworth, ESPN Gambling Deal Faces Criticism Of Conflict Of Interest, Forbes (Aug. 9, 2023, 1:40 PM), https://www.forbes.com/sites/willskipworth/2023/08/09/espn-gambling-deal-faces-criticisms-of-conflict-of-interest/?sh=6f1b0bb676c9.

[14] Mike Florio, Report: Penn National Will Pay ESPN $1.5 Billion Over 10 Years for “ESPN BET”, NBC Sports (Aug. 8, 2023, 11:54 PM), https://www.nbcsports.com/nfl/profootballtalk/rumor-mill/news/report-penn-national-will-pay-espn-1-5-billion-over-10-years-for-espn-bet.

[15] Id.

[16] Federal Trade Commission, The Antitrust Laws, Federal Trade Commission, https://www.ftc.gov/advice-guidance/competition-guidance/guide-antitrust-laws/antitrust-laws.

[17] Marc Edelman & John T. Holden, Monopolizing Sports Data, 63 Wm. & Mary L. Rev. 97 (2021).

[18] Michael McCarthy, Moving The Lines: How Will ESPN Insiders Play Into ESPN Bet?, Front Office Sports (Aug. 8, 2023, 7:47 PM), https://frontofficesports.com/moving-the-lines-how-will-espn-insiders-play-into-espn-bet/.

[19] Evan Bleier, ESPN’s Gambling Pivot Compromises Even More of Its Integrity, InsideHook (Aug. 9, 2023, 11:50 AM), https://www.insidehook.com/daily_brief/sports/espns-sportsbook-pivot-compromises-more-integrity-barstool.

[20] See Edelman & Holden, supra note 17,at 96.

[21] Id.  

[22] See Florio, supra note 14.

[23] Alyssa Schroer & Matthew Urwin, How Sports Analytics Are Used Today, by Teams and Fans, built in (Aug. 16, 2022, https://builtin.com/big-data/big-data-companies-sports.

[24] Id.

[25] See Manzo, supra note 3.

[26] See Florio, supra note 14.

[27] Ben Strauss, How a ‘Woj Bomb’ Blew up NBA Draft Lines and Cost Bettors, Washington Post (June 29, 2022, 4:30 AM), https://www.washingtonpost.com/sports/2022/06/29/nba-draft-betting-woj/.

[28] Adrian Wojnarowski (@wojespn), Twitter (June 23, 2022, 8:41 AM), https://twitter.com/wojespn/status/1539951821405429761.

[29] See Manzo, supra note 3.

[30] Id.

[31] Id.

[32] See Florio, supra note 14.

[33] Peter Foye, Thomas Mitchell, Abigail Singley, & Melissa Jameson, Sports Betting and AML – Don’t Gamble on Compliance, PWC (Sept. 2019), https://www.pwc.com/us/en/industries/financial-services/library/pdf/pwc-sports-betting-and-aml.pdf.

[34] See Federal Trade Commission, supra note 16.

[35] See Florio, supra note 14.

[36] See Manzo, supra note 10.  

[37] See Ramsey et al., supra note 1.

[38] Purdue Online Writing Lab, Media Ethics, Purdue University, https://owl.purdue.edu/owl/subject_specific_writing/journalism_and_journalistic_writing/media_ethics.html.

[39] Id.

[40] Id.

[41] David Ingram & Peter Henshall, Chapter 58: Pressures on Journalists, The News Manual (2019), https://thenewsmanual.net/Manuals%20Volume%203/volume3_58.htm.

[42] Aditya Shastri, Complete Marketing Strategy of ESPN – A Detailed Analysis, IIDE (July 30, 2022), https://iide.co/case-studies/marketing-strategy-of-espn/.

[43] See ESPN, supra note 3.

[44] Samrhitha Arunasalam & Pooja Desai, Disney Wants to Keep ESPN, Could Offload Some Traditional TV Assets, Iger Says, Reuters (July 13, 2023, 11:49 AM), https://www.reuters.com/business/media-telecom/disney-wants-keep-espn-will-look-strategic-partners-ceo-iger-2023-07-13/.

[45] Id.

[46] See Manzo, supra note 10.

[47] Dodge v. Ford Motor Co., 170 N.W. 668 (Mich. 1919).

[48] Lisa M. Fairfax, Business Organizations: An Integrated Approach 79 (Robert C. Clark et al. eds., 1st ed. 2019).

[49] Id. at 80.

[50] Klaus Schwab, Davos Manifesto 2020: The Universal Purpose of a Company in the Fourth Industrial Revolution, World Economic Forum (Dec. 2, 2019), https://www.weforum.org/agenda/2019/12/davos-manifesto-2020-the-universal-purpose-of-a-company-in-the-fourth-industrial-revolution/.

[51] Id.

[52] Id.

[53] Id.

[54] See Manzo, supra note 10; see also Fairfax, supra note 48, at 75-89.

[55] See Fairfax, supra note 48, at 75-89.

[56] See Press Release, supra note 6.

[57] Id.

[58] See Bleier, supra note 19.

[59] See Federal Trade Commission, supra note 16.

[60] See Strauss, supra note 27.

[61] See Manzo, supra note 10; see also Fairfax, supra note 48, at 79.

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26Jan

Can AI Take Over the Practice of Law?

Categories: Current Issues Blog
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By Ivey Fidelibus

A few times within each generation, an invention is so novel and powerful that it changes not only a certain profession or specific task, but society itself.[1]  For example, consider the debut of Facebook in 2004 and the ensuing rise of social media[2] or Apple’s launch of the first iPhone in 2007.[3]  Now, a new technology has arisen that threatens to change the way we learn, research, communicate, and work.

ChatGPT is a “deep-learning software that can generate new text once trained on massive amounts of existing written material.”[4]  In plain words, ChatGPT engages in human-like conversation in response to user prompts.  It was released by OpenAI, a San Francisco AI research and deployment company whose self-proclaimed mission is to “ensure that artificial general intelligence (AGI)—by which we mean highly autonomous systems that outperform humans at most economically valuable work—benefits all of humanity.”[5]  For a few examples of ChatGPT’s functionality, I had ChatGPT respond to the following prompts, with answers ranging in novelty and accuracy:

“write a song in the style of dolly parton about the rule against perpetuities,”[6] “write a short judicial opinion in the style of chief justice john marshall about whether a hot dog is a sandwich,”[7] and “write a law school essay exam question for a decedents’ estates and trusts class about the rule against perpetuities”[8]

An avalanche of discourse has fallen describing how ChatGPT may cause, or contribute to, the demise of high school English classes,[9] college essays,[10] and democracy.[11]  ChatGPT must also affect the teaching and practice of law, considering that the legal profession hinges on effective written communication, such as motions, briefs, research memoranda, and contracts.  As to law school, ChatGPT seems to already both aid and hinder learning.[12]  As demonstrated, ChatGPT can equally produce questions to test student knowledge and the plagiarized answers to student assessments.  However, educators may be able to fight students’ plagiarism by AI with their own artificial intelligence programs that detect when text is written by chatbots.[13]

As to the practice of law, the future is completely uncertain, and questions remain unanswered about ChatGPT’s efficacy.[14]  Though the chatbot was able to pass certain sections within the multistate multiple-choice section of the bar exam, [15] as of now, ChatGPT is severely limited.  OpenAI describes some of the chatbot’s limitations as: “writ[ing] plausible-sounding but incorrect or nonsensical answers,” “often [being] excessively verbose and overus[ing] certain phrases,” and “guess[ing] what the user intended,” instead of asking “clarifying questions.”[16]  Another critical issue for lawyers is ChatGPT’s inability to “explain the source(s) of the information it provides.”[17]  Further, the chatbot “is not connected to the internet” and has “limited knowledge of world and events after 2021,”[18] so even if ChatGPT did cite its sources, an attorney would risk the exclusion of the most recent precedents and could not fully Shepardize the sources cited.

Further, even if ChatGPT could produce sufficiently accurate, complex legal writing, attorneys must tread carefully to avoid a breach of confidentiality.  “The attorney-client privilege is recognized in every state and federal jurisdiction in the United States . . . with over five hundred years of recognition at common law.”[19]  This privilege is based in part on “the attorney’s moral duty to maintain confidentiality of the client relationship or respect for autonomy of the client through protection of the fiduciary nature of the attorney’s role.”[20]  Therefore, attorneys have the “duty to protect the confidentiality of the communications to preserve the privilege.”[21]  Attorneys face a range of punishments for violating the ethical requirements of confidentiality, including discipline by states’ disciplinary processes, claims of malpractice by the client against the attorney, and waiver of attorney-client privilege or work-product protection.[22]

Attorneys already risked breaches of confidentiality when using common Internet programs and websites like Google, because of the rise of data monitoring and tracking.[23]  ChatGPT elevates these risks, in part because it users likely will need to input a greater volume and specificity of data to produce a well-informed, complex AI output.  Further, OpenAI openly admits that the company “review[s]” conversations to improve [its] systems and to ensure the content complies with [its] policies and safety requirements” and users’ “conversations may be reviewed by [its] AI trainers to improve [its] systems.” [24]  OpenAI also makes clear that specific prompts from users’ histories cannot be deleted, and the company pleads that users “[p]lease don’t share any sensitive information in [their] conversations.”[25]

Therefore, even if ChatGPT produced perfect outputs, data-storing AI programs still would likely be unusable because they would require attorneys to input sensitive information into a nonconfidential forum.  It seems like ChatGPT Esq. will have to wait.

[1] See James Fallows, The 50 Greatest Breakthroughs Since the Wheel, Atlantic (Nov. 2013), https://www.theatlantic.com/magazine/archive/2013/11/innovations-list/309536/.

[2] See Sarah Phillips, A brief history of Facebook, Guardian (Jul. 25, 2007), https://www.theguardian.com/technology/2007/jul/25/media.newmedia.

[3] See Rani Molla, How Apple’s iPhone changed the world: 10 years in 10 charts, Vox (Jun. 26, 2017), https://www.vox.com/2017/6/26/15821652/iphone-apple-10-year-anniversary-launch-mobile-stats-smart-phone-steve-jobs.

[4] Ian Bogost, ChatGPT is Dumber Than You Think, Atlantic (Dec. 7, 2022), https://www.theatlantic.com/technology/archive/2022/12/chatgpt-openai-artificial-intelligence-writing-ethics/672386/.

[5] OpenAI, About, https://openai.com/about/ (last visited Jan. 18, 2023).

[6] “Verse 1:

In the land of property law, there’s a rule that you should know

It’s the rule against perpetuities, and it’s been around for centuries

It says that an interest in land can’t last forever, it’s got to end

Otherwise it’s a perpetuity, and that’s not how it should bend

 

Chorus:

So let the land be free, for future generations to see

Don’t tie it up for all time, let it breathe, let it shine

The rule against perpetuities, it’s there for a reason

To keep the land from being locked up, without any good reason

 

Verse 2:

Some folks might try to get around it, but they’ll find it’s not so easy

The rule’s been tested and true, it’s not something you can breezy

So if you’re thinking about a trust, or a lease that never ends

Just remember the rule against perpetuities, and how it bends

 

Chorus:

So let the land be free, for future generations to see

Don’t tie it up for all time, let it breathe, let it shine

The rule against perpetuities, it’s there for a reason

To keep the land from being locked up, without any good reason

 

Outro:

So let’s all respect the rule, and keep the land in motion

For future generations to enjoy, with no undue devotion.

[7] “It is the opinion of this Court that a hot dog is not a sandwich. The common understanding of a sandwich, as defined by Merriam-Webster, is ‘two or more slices of bread or a split roll having a filling in between.’ A hot dog, however, is comprised of a bun and a sausage, with the option of various toppings. The bun and sausage are not ‘in between’ slices of bread, and therefore do not fit the definition of a sandwich. We find that a hot dog is a distinct and separate food item, and should not be classified as a sandwich.”

[8] “In the state of XYZ, a testator created a trust in her will for the purpose of providing income to her granddaughter for her lifetime. Upon the granddaughter’s death, the trust was to be distributed to the testator’s great-grandchildren. The trust instrument provided that the trust was to last for 21 years after the death of the granddaughter.

 

However, after the testator’s death, it was discovered that one of the great-grandchildren was not born at the time the will was executed and would not reach the age of majority for more than 21 years after the granddaughter’s death.

 

Analyze the validity of the trust under the rule against perpetuities. Would the trust be valid if the state of XYZ has the common law rule against perpetuities or the wait and see approach? Explain your reasoning and cite any relevant case law or statutes.”

[9] Daniel Herman, The End of High-School English, Atlantic (Dec. 9, 2022), https://www.theatlantic.com/technology/archive/2022/12/openai-chatgpt-writing-high-school-english-essay/672412/.

[10] Stephen Marche, The College Essay Is Dead, Atlantic (Dec. 6, 2022), https://www.theatlantic.com/technology/archive/2022/12/chatgpt-ai-writing-college-student-essays/672371/.

[11] Nathan E. Sanders & Bruce Schneier, How ChatGPT Hijacks Democracy, N.Y. Times (Jan. 15. 2023), https://www.nytimes.com/2023/01/15/opinion/ai-chatgpt-lobbying-democracy.html?campaign_id=39&emc=edit_ty_20230116&instance_id=82847&nl=opinion-today&regi_id=78377744&segment_id=122655&te=1&user_id=71ef53aec7c806778d2d3ec87228434a.

[12] Karen Sloan, Some Law Professors Fear ChatGPT’s Rise as Others See Opportunity, Reuters (Jan. 10, 2023, 7:19 PM), https://www.reuters.com/legal/legalindustry/some-law-professors-fear-chatgpts-rise-others-see-opportunity-2023-01-10/.

[13] Emma Bowman, A College Student Created an App that Can Tell Whether AI Wrote an Essay, NPR (Jan. 9, 2023, 5:01 AM), https://www.npr.org/2023/01/09/1147549845/gptzero-ai-chatgpt-edward-tian-plagiarism.

[14] Bailey Schulz, DoNotPay’s ‘First Robot Lawyer’ to Take on Speeding Tickets in Court Via AI. How It Works, USA Today (Jan. 10, 2023, 2 PM), https://www.usatoday.com/story/tech/2023/01/09/first-ai-robot-lawyer-donotpay/11018060002/; Jenna Greene, Will ChatGPT make lawyers obsolete? (Hint: be afraid), Reuters (Dec. 9, 2022, 2:33 PM), https://www.reuters.com/legal/transactional/will-chatgpt-make-lawyers-obsolete-hint-be-afraid-2022-12-09/.

[15] Michael J. Bommarito II and Daniel Martin Katz, GPT Takes the Bar Exam, SSRN (Dec. 29, 2022), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4314839.

[16] OpenAI, Blog, https://openai.com/blog/chatgpt/ (last visited Jan. 18, 2023).

[17] Oliver Jeffcott. ChatGPT and legal services, Lexology (Jan. 10, 2023), https://www.lexology.com/library/detail.aspx?g=dd045cf9-4dd7-4ff8-b17d-f4250a6e1a04.

[18] OpenAI, FAQ, https://help.openai.com/en/articles/6783457-chatgpt-faq (last visited Jan. 18, 2023).

[19] Anne Klinefelter, When to Research Is to Reveal: The Growing Threat to Attorney and Client Confidentiality from Online Tracking, 16 Va. J. L. & Tech. 1, 22 (2011).

[20] Id. at 23.

[21] Id.

[22] See id. at 34.

[23] See id. at 4-5.

[24] OpenAI, FAQ, https://help.openai.com/en/articles/6783457-chatgpt-faq (last visited Jan. 18, 2023).

[25] Id.

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10Feb

Judicial Non-Recusal: An Opportunity for Reform

Categories: Current Issues Blog
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By: Chandler Reece

Since ancient times, people have recognized the need for judges to be impartial.[1]  On a related topic, Alexander Hamilton wrote that the “complete independence of the courts of justice is peculiarly essential in a limited constitution.”[2]  Two recent North Carolina cases have revealed areas for reform to further ensure impartiality in the North Carolina judicial system.

Lake v. State Health Plan for Teachers and State Employees[3] concerns a class action lawsuit by retired state employees challenging reforms to state health care laws.[4]  On appeal, five justices on the North Carolina Supreme Court disclosed that close family members or their estates could be class members and, therefore, interested in the suit.[5]  The North Carolina Supreme Court is composed of seven justices, and four of them are needed to constitute a quorum.[6]  The quorum requirement would mandate a dismissal if all of these justices recused.[7]  The court invoked the common law rule of necessity to hear the case despite the ethical rules otherwise mandating their recusal.[8]

North Carolina State Conference of the National Association for the Advancement of Colored People v. Moore[9] concerns litigation challenging two 2018 North Carolina constitutional amendments on the grounds that the amendments were invalid ab initio because members of the General Assembly were elected from racially gerrymandered districts.[10]  When the case went to the North Carolina Supreme Court, the NAACP moved to have two justices, Phil Berger, Jr. and Tamara Barringer, disqualified from the case.[11]  The plaintiff argued that Justice Barringer needed to recuse herself because she voted for the amendments.[12]  It also argued that Justice Berger needed to recuse because he is the son of Senate President Pro Tempore, Phil Berger, who voted in favor of the amendments and is a defendant.[13]  Justices Berger and Barringer declined to recuse themselves in separate orders.[14]

North Carolina does not have a system where alternates can fill in for a recused or disqualified justice or statutes creating a panel to hear a case where a quorum is not available.[15]  The state does have a statute that allows for an alternate justice to serve whenever a justice is determined to be incapacitated.[16] 

Lake and Moore reveal the flaws in ethical rules where justices cannot elect to have alternatives chosen.  Given that ethics are involved, there are no easy answers to these questions.  For instance, one justice may decide that the North Carolina Code of Judicial Conduct requires that she recuse herself because her participation may create too much of a risk of the public thinking that judges will unscrupulously decide cases based on pecuniary, familial, or partisan interest.[17]  Another justice may decide to hear the case notwithstanding these concerns over public reception because of a recusal’s potential to act as a de facto vote against the petitioner.[18]  Rather than forcing justices into these precarious dilemmas, some variation of the following reforms should be adopted in North Carolina.

The first proposal for reform is to have a standing panel of alternative justices ready to hear cases where too many justices are disqualified and a quorum is not possible.[19]  The second is to authorize the summoning of a number of retired judges from that panel or a predetermined list that reflects the partisan makeup of the court to hear a case wherein the justices are disqualified from participating but a quorum would still be present.[20]

Two other potential reforms exist, but an issue with them illustrates what the proposed reforms should account for.  One of them would be to allow the North Carolina Supreme Court to certify to the governor that all or some of its justices are disqualified, after which the governor would commission the requisite number of justices.[21]  Another would be to allow the North Carolina Supreme Court to summon retired or currently serving trial or appellate judges to serve on the court.[22]  The issue with either of these reforms is that whoever chooses these ad hoc alternate justices would have an incentive to pick people likely to rule the way they want because they would know about the case causing the conflict of interest.[23]  Due to this problem with ad hoc appointments, recusal reforms should focus on commissioning a panel or list of retired judges to be on call whenever cases like Lake arise—where too many justices are disqualified from participating, but the panel should be constituted before any of those cases arise.

Composing this panel of retired judges and justices would be more desirable than composing it of practicing attorneys or legal scholars because former judges will have experience in deciding cases on legal, as well as factual bases.[24]  Still, a panel of scholars or practicing attorneys might be more desirous because conflicts of interest affecting all judges—like laws regarding judicial salaries and retirement benefits—might not affect them.[25]  Perhaps the legislature could get the advantages of both approaches by having two panels or lists, one consisting of retired judges and another consisting of practicing attorneys and legal scholars, and the circumstances would dictate from which panel or list to draw the alternates.  The nuances involved in balancing these benefits and other questions—like who chooses the members of the panel or list—should be weighed by the state legislature in choosing which approach to take, but it should choose a system where the alternate justices are chosen before any cases arise.

Regarding cases like Moore where there would be a quorum despite the potential recusals, a statute should still be enacted to authorize the summoning of justices from a standing panel or predetermined list.  Without such a provision, justices might justify their decision not to recuse, despite a valid reason to do so, because they fear their recusal would be a de facto vote to affirm the lower court’s decision.[26]  This panel or list should be representative of the current partisan makeup of the court to prevent the following issue that can motivate a justice not to recuse.[27]  Without such a provision, the justice might fear that their recusal might cause the partisan makeup of the justices hearing the case to be too biased in favor of either party.[28]  The current partisan constitution of the North Carolina Supreme Court and how Moore implicated partisanship illustrate this point. 

Four justices on the North Carolina Supreme Court are Democrats and three of them are Republicans.[29]  Justices Berger and Barringer are two of the Republicans.[30]  Even though Berger and Barringer did not raise the following concern in their motions to deny recusal,[31] justices in this position would be justified in thinking that at least one of the Democratic justices could be convinced to vote with the Republican ones.[32]  If one of these justices were so convinced, then the outcome of the case would be dictated by the justices’ recusal.[33]

Even though the two proposed reforms would not affect the outcomes of Lake or Moore, these two cases illustrate the need for them because the current incentive structure is for justices not to recuse even where they are mandated by law or where one could argue they should as an ethical matter.  Rather than force justices into these ethical dilemmas, the legislature should, as argued above, create a panel system of alternative justices to serve when a quorum would otherwise be denied and allow for members of that panel or members of a list of alternative justices to fill in for a disqualified or recused justice.

[1] See Exodus 23:8 (“Neither shalt thou take bribes, which even blind the wise, and pervert the words of the just”); Code Just. 3.5.1 (Valens, Gratian, and Valentinian 376) (Fred H. Blume trans., n.d.), http://www.uwyo.edu/lawlib/blume-justinian/_files/docs/Book-3PDF/Book%203-5.pdf (stating judges cannot decide their own cases).

[2] The Federalist No. 78, at 429 (Alexander Hamilton) (George Stade ed., 2006).

[3] 861 S.E.2d 335 (N.C. 2021).

[4] See generally Lake v. State Health Plan for Tchrs. & State Emps. (Lake I), 12–CVS–1547, slip op. (N.C. Super. Ct. Oct. 11, 2016), https://lakeclasscase.com/wp-content/uploads/2016/09/59.Order-Granting-Motion-for-Class-Certification.2016-10-11.pdf (class certification); Lake v. State Health Plan for Tchrs. & State Emps. (Lake II), 825 S.E.2d 645, 648–49 (N.C. App. 2019) (other factual and procedural history).

[5] Lake v. State Health Plan for Tchrs. & State Emps. (Lake III), 852 S.E.2d 888, 889–90 (N.C. 2021); see also N.C. Code of Jud. Conduct Canon 3C(d)(iii) (stating that judges are disqualified from participating in a case where a family member “within the third degree of relationship” to the judge or his spouse has an “interest that could be substantially affected by the outcome of the proceeding).

[6] N.C. Gen. Stat. § 7A-10(a).

[7] Lake III, 852 S.E.2d 888, 890 (N.C. 2021).

[8] Lake v. State Health Plan for Tchrs. & State Emps. (Lake IV), 861 S.E.2d 335, 336 (N.C. 2021).  Under the rule of necessity, a judge must hear a case if “disqualification would result in the lack of any competent court or tribunal.” Rule of Necessity, Black’s Law Dictionary (11th ed. 2019).  Nothing in this article is intended to suggest that invoking the rule of necessity in Lake was unethical or immoral in itself, only that the situation as a whole illustrates the need for reform.

[9] 849 S.E.2d 87 (N.C. App. 2020).

[10] N.C. State Conf. of the NAACP v. Moore, 849 S.E.2d 87, 89 (N.C. App. 2020).

[11] Motion to Disqualify Justice Barringer and Justice Berger, N.C. Conf. of the NAACP v. Moore, No. 261A18–3 (N.C. Jul. 23, 2021).

[12] Id. at 5.

[13] Id. at 2. (citations omitted).  In fairness to Justice Berger, Senator Berger was being sued in his official and not his personal capacity, Moore, 849 S.E.2d at 87 (caption), and suits against an official in her official capacity are suits against the government or her office itself, Estate of Long v. Fowler, 861 S.E.2d 686, 691 (N.C. 2021) (the state); Will v. Mich. Dep’t of State Police, 491 U.S. 58, 71 (1989) (the official’s office or “the state itself”).

[14] N.C. State Conf. of the NAACP v. Moore, No. 261A18–3, 2022 N.C. LEXIS 18, at *6 (N.C.  Jan. 7, 2022) (Berger, J.); N.C. State Conf. of the NAACP v. Moore, No. 261A18–3, 2022 N.C. LEXIS 17, at *4 (N.C. Jan. 7, 2022) (Barringer, J.).  As noted above with Lake, nothing in this post is intended to argue that the decisions not to recuse are unethical or immoral in themselves, only that they illustrate opportunities for reform.

[15] See N.C. Gen. Stat. § 7A-4; § 7A-5.

[16] N.C. Gen. Stat. § 7A-39.5(a).

[17] See N.C. Code of Jud. Conduct Canon 2A (stating judges should act “in a manner that promotes public confidence in the integrity and impartiality of the judiciary”); id. Canon 3C(1) (noting that a judge should disqualify herself “in a proceeding in which the judge’s impartiality may reasonably be questioned”); In re Stone, 838 S.E.2d 165, 171 (N.C. 2020) (citing In re Edens, 226 S.E.2d 5 (1976)) (describing that whether conduct is judicial misconduct depends on what an “objective observer” would deem conduct harming “the public esteem for the judicial office”).

[18] See Cheney v. U.S. Dist. Ct. for the Dist. of Columbia, 541 U.S. 913, 916 (2004) (Scalia, J.) (“The petitioner needs five votes to overturn the judgment below, and it makes no difference whether the needed fifth vote is missing because it has been cast for the other side, or because it has not been cast at all.”).

[19] See Skylar Reese Croy, Comment, Step One to Recusal Reform: Find an Alternative to the Rule of Necessity, 2019 Wis. L. Rev. 623, 623, 658–60 (2019) (proposing an amendment to create a panel of professors and lawyers).

[20] Id. at 654 (arguing that a mostly conservative or liberal panel of alternative justices reflecting the composition of the real state supreme court is a benefit because it reflects what the voters desired).

[21] See Tenn. Const. art. VI, § 11.

[22] See Minn. Const. art. VI, § 2, cl. 3 (allowing currently serving judges to serve, not retired judges).

[23] See Croy, supra note 19, at 645; The Federalist No. 78, supra note 2, at 433–434 (arguing periodical judicial appointments will cause judges to focus on pleasing or not angering whoever has the appointing power, rather than deciding based on the law).  These issues with ad hoc appointments are less potent when a justice is temporarily incapacitated because it is not a particular case that gives rise to the inability to act, but rather a situation concerning the justice himself that disqualifies him from fulfilling all of his duties, and not just the ability to hear a particular case.  See N.C. Gen. Stat. § 7A-39.5(a).

[24] See N.C. Gen. Stat. § 7A-39.3(a) (requiring that justices have “12 years of creditable services” under the Uniform Judicial Retirement Act before they can apply to be emergency justices).

[25] See United States v. Will, 449 U.S. 200, 202 (1980) (constitutionality of congressional modifications of cost-of-living adjustments for judicial compensation); Long v. Watts, 110 S.E. 765, 767 (N.C. 1922) (constitutionality of applying state income tax to judicial salaries); Lake v. State Health Plan for Tchrs. & State Emps. (Lake II), 825 S.E.2d 645, 648, 650 (N.C. App. 2019) (constitutionality of adjustments to retirement benefits).

[26] See Cheney v. U.S. Dist. Ct. for the Dist. of Columbia, 541 U.S. 913, 916 (2004) (Scalia, J.).

[27] See supra note 19.

[28] See Croy, supra note 19, at 645 (noting the collective action problem partisan divisions create for recusal).

[29] The Republican justices are Chief Justice Newby and Justices Berger and Justice Barringer. 11/03/2020 Official Local Election Results – Statewide: NC Supreme Court Chief Justice Seat 01 (Vote for 1), N.C. State Bd. of Elections, https://er.ncsbe.gov/?election_dt=11/03/2020&county_id=0&office=JUD&contest=1375 (last visited Feb. 4, 2022) (Chief Justice Newby); 11/03/2020 Official Local Election Results – Statewide: NC Supreme Court Associate Justice Seat 02 (Vote for 1), N.C. State Bd. of Elections, https://er.ncsbe.gov/?election_dt=11/03/2020&county_id=0&office=JUD&contest=1358 (last visited Feb. 4, 2022) (Justice Berger); 11/03/2020 Official Local Election Results – Statewide: NC Supreme Court Associate Justice Seat 04 (Vote for 1), N.C. State Bd. of Elections, https://er.ncsbe.gov/?election_dt=11/03/2020&county_id=0&office=JUD&contest=1386 (last visited Feb. 4, 2022) (Justice Barringer).  The Democratic justices are Justices Earls, Hudson, Ervin, and Morgan. 11/06/2018 Official General Election Results – Statewide: NC Supreme Court Associate Justice Seat 1 (Vote for 1), N.C. State Bd. of Elections, https://er.ncsbe.gov/?election_dt=11/06/2018&county_id=0&office=JUD&contest=1376 (last visited Feb. 4, 2022) (Justice Earls); Robin Hudson, Ballotpedia, https://ballotpedia.org/Robin_Hudson (last visited Feb. 4, 2022); Sam Ervin, Ballotpedia, https://ballotpedia.org/Sam_Ervin (last visited Feb. 4, 2022); Michael R. Morgan (North Carolina), Ballotpedia, https://ballotpedia.org/Michael_R._Morgan_(North_Carolina) (last visited Feb. 4, 2022).

[30] See supra note 29.

[31] See N.C. State Conf. of the NAACP v. Moore, No. 261A18–3, 2022 N.C. LEXIS 18, at *4–5, 6 (N.C.  Jan. 7, 2022) (Berger, J.) (denying motion because the case is a suit against the state and not his father personally); N.C. State Conf. of the NAACP v. Moore, No. 261A18–3, 2022 N.C. LEXIS 17, at *3–4, 4 (N.C. Jan. 7, 2022) (Barringer, J.) (denying motion because of Barringer’s oath to serve and not “recus[e] [her]self or be[] disqualified to avoid controversy” and the tradition of numerous state legislators having served on the court throughout North Carolina history).  

[32] This belief would be warranted because decisions where judges do not side with their “ideological wing” are not unheard of. See, e.g., Maryland v. King, 569 U.S. 435, 438 (2013) (joining statement); Yates v. United States, 574 U.S. 528, 530 (2015) (joining statement).

[33] This belief would be logical due to the following math.  If the justices recuse, the decision for party A would be 3-2.  If the justices do not recuse, then the decision for party B would be 4-3.

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