Instructions:

1. The exam consists of 7 pages, including this cover sheet. Please check now to ensure your copy is complete.
   
2. The exam is entirely open book; however, additional research is discouraged. Full credit is obtainable using concepts discussed in class or contained in the assigned course materials. To the extent you rely on the course materials, formal references are not necessary.
3. You may not communicate with any person about the contents of the exam while it is being administered, even if you have turned in or not yet picked up your own copy. If during the exam you have any questions regarding its administration, you should contact the office of Academic Services and they will contact me if necessary.
   
4. Your exam is due 24 hours after you pick it up, or at 4 pm on Thursday, May 10, whichever is earlier. You must return your exam in person, and also must return your copy of the exam questions at the same time.
   
5. There are three questions on the exam, each with a separate word limit. You may not use any leftover space from one question in answering another; and any attempt to use shorthand or nonstandard abbreviations will be counted as if full words were used. To ensure compliance with the word limit, you must provide a word count for each question. Answers exceeding the word limit will be penalized by reducing their score in proportion to the excess.
   
6. Follow the instructions for each question carefully, concentrating on the role you are asked to assume and the audience for your response. If you feel that any of your answers depend on facts not provided in the question, you should say so, and state clearly any additional assumptions you are making.
   
7. To ensure that you receive full credit for your answer, please: (a) write or print your exam ticket number on all pages of your exam; (b) begin your answer to each question on a new sheet of paper; (c) use double spacing and 1-inch margins, so that I have enough room to make notations on your exam; (d) if you write your exam by hand, write legibly.
8. I will post grades on the class website as soon as they are ready, and will post a feedback memo as soon as possible after that. Good luck on the exam; and have a good summer.

QUESTION 1:  a of exam, 1000 word limit

In Circuit City Stores Inc. v. Adams, 121 S. Ct. 1302; 149 L. Ed. 2d 234 (2001), a 5-4 majority of the U.S. Supreme Court held that the Federal Arbitration Act (FAA), which requires enforcement of valid arbitration agreements, applies to most employment contracts and exempts only contracts involving interstate transportation workers. In the specific dispute, the majority opinion held that an employer can, as a condition of applying for employment, require that a potential employee agree to waive the right to bring any and all claims against the employer in state or federal court, and instead to settle any such claims exclusively by private binding arbitration. The clause in question specifically indicated that it covered Federal claims such as those arising under employment discrimination statutes, as well as any state law contract or tort claims. In approving the use of this clause, the majority also indicated in dicta that the FAA would pre-empt state employment laws restricting the use of arbitration agreements, but left unresolved important questions about what rights workers might retain under other federal laws, such as the right to punitive damages and legal fees under anti-discrimination law.

You are a policy analyst for a non-profit advocacy group that lobbies and litigates on behalf of employees on issues relating to workplace regulation. Your organization is currently considering initiating an advocacy campaign aimed at producing legislation that would amend the F AA to overturn the Supreme Court's decision. While your expertise up till now has been primarily in the area of workplace safety and health, you have been asked to assist on this project because of your general background in policy analysis, with the understanding that many of the issues with which you have experience may be relevant to the arbitration issue as well.

Your specific assignment is to draft a 1000-word memo outlining how your organization should respond to a report that is currently being prepared by a prominent economist on behalf of a rival advocacy group that typically argues against government regulation and in favor of management prerogative. While you have not seen the economist's report, you have encountered her work in a number of prior settings, including that of workplace safety and health; and you expect her to emphasize the following points:

1) As a matter of fairness and efficiency, the government ought to remain neutral on the substance of employment contract terms, letting workers and employers choose the mix of wage and non-wage terms they most prefer;

2) Mandatory arbitration clauses are an effective way to reduce the costs of litigation and dispute resolution, which are too high and which detract from productivity and from wages. The benefits of these savings will be shared by workers and employers alike.

3) To the extent that particular groups of workers value the right to go to court above the material savings achievable through mandatory arbitration, they remain free to insist on retaining this right, if they are willing to sacrifice the wage gains and other benefits that arbitration would make possible.

Draft the memo. In doing so, you need not respond to the economist's arguments point-by-point (since in fact, you don't know what they are yet). But because the memo is for internal use, you should indicate in which respects you think the economist's arguments are likely to be on strongest grounds, and in which respects you think they are likely to be weakest.

QUESTION 2:  a of exam, 1000 word limit


The Mental Health Parity Act ("MHPA"), passed by Congress and signed into law by President Clinton in 1996, became effective January 1, 1998. This Act amended the Employee Retirement Income Security Act of 1974 ("ERISA") for the purpose of creating parity between mental health benefits and medical and surgical benefits in circumstances in which aggregate lifetime or annual limits are applied to insurance coverage. Under MHPA, group health insurance plans that offer both physical and mental health benefits may not discriminate between the two types of benefits with regard to annual or lifetime caps. However, MHPA permits substantial differences between physical and mental health benefits in other respects. Plans remain free to place limits on the number of treatments beneficiaries may receive, and may set co-payment amounts for mental health benefits higher than those required for physical benefits. Indeed, there is no requirement that mental health benefits be offered at all, as MHPA covers only those health plans that voluntarily decide to offer such benefits as part of their overall package. In addition, the statute by its terms does not apply to small employers ( defined as those with at least two, but no more than fifty employees), to treatment of substance abuse and chemical dependency, or in cases where an increase in costs of one percent or greater can be shown. (In this last regard, the Congressional Budget Office initially projected a premium increase of four percent for typical indemnity plans attempting compliance with MHPA.)

Since the passage of MHPA, however, the issue of mental health parity has attracted additional political attention at both the state and federal levels. Thirty-two states now have laws that in some way address such insurance disparities, and many large corporations provide equal coverage for their employees, although critics of the current system allege that most state laws include so many restrictions (including exemptions for small businesses or those in which costs would increase beyond a set percentage, or limitation to a narrow list of mental illnesses) as to have little impact. The concept of parity was also endorsed by both President George W. Bush and former Vice President Gore during their presidential campaigns last year. And earlier this year, acting on an executive order issued by President Clinton in the last days of his administration, the private health plans that offer insurance coverage for over nine million federal employees, dependents, and retirees were barred from imposing higher co-payments or deductibles for mental health services, or setting limits on outpatient visits or hospital days for mental disorders that are lower than those applied to general medical or surgical care.

Most significant for present purposes is that MHPA contains a sunset provision that requires the statute to come up for re-authorization in September 2001. The original sponsors, Senator Pete Domenici, Republican of New Mexico, and Senator Paul Wellstone, Democrat of Minnesota, have announced that they hope to persuade Congress to close some loopholes and expand the legislation, though they admit privately that complete parity may not be politically realistic at this time.

You are legislative director for a moderate, independent-minded U.S. senator who is up for reelection in November 2002, and who, has at varying times expressed concern for the fairness issues involved in mental health parity, for more narrow cost concerns, and for the larger political implications of the issue. Your boss will soon have to take a stand on the re-authorization issue, and has accordingly asked you for a confidential 1000-word memo that discusses whether MHPA should be renewed, and if so, on what terms.

Your memo should focus primarily on the policy implications of the issue, but you are invited as part of your analysis to address the political consequences for your boss of supporting or opposing renewal.

QUESTION 3:  a of exam, 1000 word limit

In March of this year, President George W. Bush announced that his administration would not attempt to regulate power plants' emissions of carbon dioxide (CO₂), one of a number of heat-trapping "greenhouse" gases that have been associated by many scientists with the phenomenon of global warming. In making this announcement, which reversed an earlier campaign pledge, the President cited a recent Energy Department study that had concluded that regulating CO₂ emissions would have significantly increased electricity prices, at a time of already rising prices and increased concerns about energy availability. Writing to four Republican senators who had criticized his earlier position on the issue, Mr. Bush stated, "[W]e must be very careful not to take actions that could harm consumers. This is especially true given the incomplete state of scientific knowledge of the causes of, and solutions to, global climate change and the lack of commercially available technologies for removing and storing carbon dioxide."

This announcement was interpreted by many observers, including administration officials who spoke off the record, as foreshadowing the Bush administration's opposition to the 1997 Kyoto Protocol, an international climate treaty that would require the United States and 37 other industrial countries to cut emissions of greenhouse gases to 5 percent below 1990 emission levels by the year 2012. The Kyoto Protocol has been signed by more than 100 countries, including the U.S., but has not yet been ratified and many of its details remain to be negotiated. Recent negotiations had revealed significant differences between the U.S., the European Union, and other signatories over the application of the treaty to developing as well as industrialized countries, and over American proposals that called for trading in credits for emissions reductions and for granting credit for planting forests and crops as an alternative to reducing emissions, among other issues.

In its March 14, 2001 article on the President's announcement, the New York Times reported:

Some moderate Republicans who had been preparing to introduce legislation later this week supporting a power plant cleanup including carbon dioxide also expressed frustration with the sudden shift. They and some owners of coal-fired plants had supported the idea of regulating all four emissions from power plants at once, to avoid uncertainty and confusion in years to come. The pressure to make the decision came in part from lobbyists for coal companies and utilities dependent on coal and from the conservative wing of the Republican Party, which saw any move to regulate carbon dioxide as an implicit endorsement of the goals of the Kyoto Protocol. . . . Many senators, particularly Jesse Helms, Republican of North Carolina, and Chuck Hagel, Republican of Nebraska, oppose [the Kyoto Protocol] as a potential harm to the economy and because it would allow American energy policy, in essence, to be governed by an international treaty . . .

Mr. Bush's earlier embrace of the plan had won him praise from environmental leaders, who described the approach as an indication that the administration might be more sympathetic than they had expected. The representatives of environmental organizations denounced Mr. Bush's turnabout. "Bush is turning his back not only on his campaign pledge, but on his administrator of the EPA and the world's scientists, who warn this problem is more serious than we previously thought," said Daniel A. Lashof, a senior scientist for the Natural Resources Defense Council. In the offices of industry lobbyists and conservative Republican congressmen, on the other hand, there was a strong sense of triumph. Glenn Kelly, the executive director of the Global Climate Coalition, which represents industry groups, said the White House had received "a lot of communications" from those critical of any attempt to regulate emissions that are viewed as contributing to global warming. "Fortunately, the president responded quickly," Mr. Kelly said. Mr. Bush's earlier position had been more far-reaching even than that of his campaign opponent, former Vice President AI Gore, who had called for strong incentives to encourage voluntary moves by industry to reduce emissions.

The letter from Mr. Bush came in response to a letter sent last week by Senator Hagel, requesting that Mr. Bush clarify his stance. Mr. Hagel has repeatedly said in recent months that he believes global warming is at least partly caused by emissions of gases from human activities, but he has opposed both the Kyoto Protocol and legislative moves to limit carbon dioxide emissions. Tonight, Mr. Hagel said he welcomed Mr. Bush's response. A number of members of Congress, including Senators James M. Jeffords, Republican of Vermont, and Joseph I. Lieberman, a Connecticut Democrat, are preparing various power plant bills that would have included carbon dioxide among regulated emissions. Tonight staff for the bill sponsors said identical bills would still be introduced in the Senate and House on Thursday, but they conceded that there was little hope, at least for now, that such measures could succeed.

You are policy director for an independent organization that commissions and publishes public policy studies in a variety of regulatory areas, including environmental and natural resource policy. You have just been invited to an international conference entitled "Global Warming After Kyoto." Those in attendance will include other independent policy analysts, some representatives of governmental agencies from both industrialized and non-industrialized countries, as well as a few policy-minded academic researchers. While the conference has been planned for some time, you anticipate that much of its discussion will focus on recent events, and on the consequences of the Bush administration's recent policy decision.

You have decided in your formal remarks to outline three possible regulatory strategies that could now be undertaken at the national or international level to deal with the problem of CO₂ and other greenhouse gas emissions, and the main advantages and disadvantages of each. Your remarks must be brief, however, since you have only a limited time in which to address the assembled conferees. Fortunately, the audience consists of specialists and you do not need to spend much time rehearsing facts with which they are familiar. Using no more than 1000 words, write out what you plan to say.