Private Supreme Courts
Public law scholars often consider how to separate power among and within governmental entities in order to encourage these entities to use that power effectively. However, public law scholars only rarely bring the insights they have developed about the separation of powers to bear on questions of how private law should regulate private business firms. But, in order to encourage compliance with their own fundamental objectives, these firms often diffuse authority among their officials, a private separation of powers.
This Article considers an emerging form of the private separation of powers: a private supreme court-like institution internal to a single firm. The consistent application of firm rules may be commercially valuable in some contexts, and private supreme courts can help provide firms with that kind of consistency. Courts and commentators have considered other forms of private separation of powers but have largely failed to consider how the law should treat these court-like institutions. We pattern our discussion of a court-like structure on the Oversight Board created by Facebook (now Meta) in 2018. The Oversight Board has largely been considered for what it means for speech, but we are interested in what it means for private institutional design more generally. We consider the economic value of this private supreme court-like structure in generating a consistent application of firm rules that attracts customers and manages regulators. Private supreme courts can generate costs for firms as well, so after we consider what these institutions can do, we then discuss when and how private supreme courts can act to be the most useful.
We consider the case for private supreme courts from the perspective of one illustrative example: sports leagues, and, in particular, the National Basketball Association (“NBA”). We argue that the NBA should create a “Basketball Court,” a somewhat independent adjudicatory body that uses the tools of judicial decision-making to interpret league rules in a consistent way that can provide commercial value to the NBA.
