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  Holmes was the first thinker to see that the legal assumptions behind the existence of a competitive regime were fundamentally incompatible with conceptions of absolute property rights. And more than any other set of issues, the conflict between competition and property influenced the fundamental structure of Holmes's legal thought during the 189os.

  When Holmes wrote The Common Law, orthodox legal thought was growing ever more conceptualist. The aspiration of judges and jurists was to develop a small group of fundamental conceptions-fault, will, property rights-from which one could logically deduce virtually all legal rules and doctrines. When Holmes proclaimed in The Common Law that "[t)he life of the law has not been logic: it has been experience," 151 he was directly confronting this growing tendency toward conceptualism.

  Holmes's first attack on conceptualism had been made a year earlier when he acidly described Harvard Law School Dean Christopher Columbus Langdell as "the greatest living legal theologian." 152 But the most important of his anticonceptualistic aphorisms was his declaration that "General propositions do not decide concrete cases." 153 As prevailing legal thought came to be based on a series of supposedly logical deductions from an abstract conception of absolute property rights, 154 Holmes's attack on the absoluteness of property was also a challenge to the dominant form of deductive legal reasoning. If property rights were not absolute, but relative, if the right to property had to be weighed against other competing claims, it was no longer possible to engage in legal discourse as if it were syllogistic reasoning.

  The typical structure of argument in Tite Common Law for Holmes is to identify two intellectual extremes or poles in a particular field of law, to show why some small group of cases falls within one or the other extreme, and then to demonstrate that the rest of the cases-most of the significant everyday stuff of the law-falls on the continuum between the extremes. The problem for the legal thinker was how to locate legal problems on the spectrum between the extremes.

  While rejecting conceptualism, Holmes nevertheless seemed quite confident in The Common Law that there was an underlying rational basis for the distribution of different legal rules and doctrines along the spectrum. Viewed from the vantage point of a legal anthropologist, one could demonstrate how the doctrines developed and how their placement on the continuum was related to the function that the doctrine was called on to serve. With some exceptions, therefore, the evolution of law by and large proceeded according to functional rationality.

  By the time we come to "Privilege, Malice and Intent" and "The Path of the Law," however, all that is left are the contradictions between the poles. There is no longer an organic customary principle to mediate the contradictions. Turning his back on his own quest in The Common Law, Holmes regarded it as "theoretically wrong" 155 to believe, for example, that the conflict between strict liability and negligence is capable of logical solution. Now it could be solved only by "a concealed, half conscious battle on the question of legislative policy. . . 156 "Such matters," he concluded, "really are battle grounds where the means do not exist for determinations that shall be good for all time, and where the decision can do no more than embody the preference of a given body in a given time and place." 157 For Holmes the customary theory of law had collapsed. Law is the product of social struggle. Nothing stands between the state and the individual.

  Let us turn to the first crucial moment in Holmes's shift-his essay "Privilege, Malice and Intent" (1894). 118 The essay has been largely ignored because it seems merely technical and because, to the practical minded, it deals only with ancient controversies that have been relegated to pre-history, to the period before the Wagner Act of 1935 removed labor law from common law control. In "Privilege, Malice and Intent," Holmes posits the existence of a fundamental contradiction in the law between the accepted notions of property and competition and, for the first time, expresses doubt whether there is any methodology capable of rationally reconciling the two.

  The specific subject of the most important part of his essay was a series of latenineteenth-century labor cases in which the English courts had limited the right of unions to engage in various forms of economic struggle. 159 The problem had been "suggested, and brought to greater prominence," he wrote, by cases dealing with "boycotts, and other combinations f more or less similar purposes. . . ." 160 It was the legal response to the struggle between labor and capital that produced Holmes's essay.

  Holmes had addressed this problem before, in more general terms, as the conflict between absolute property rights and competition. In fact, immunity from liability for competitive injury provided Holmes with one of the important conceptual "extremes" in his organization of legal ideas in The Common Law. It was an example-at first glance paradoxical-of a situation in which "the law does not even seek to indemnify a man from all harms. . . . He may establish himself in business where he foresees that the effect of his competition will be to diminish the custom of another shop-keeper, perhaps to the ruin of him." 161 Here, the law permits competitive injury to property on grounds of "policy without reference to any kind of morality." 16z Competition was the most prominent example in The Common Law of a legal system's allowing a person to injure another's property, even intentionally, with impunity.

  But the problem of competitive injury was only a minor theme in The Common Law. By the time he wrote "Privilege, Malice and Intent," the general ques tion of the nature and limits of economic struggle had moved to the center of his consciousness due to two major developments.

  The first arose from the question of economic concentration. To what extent was the rapid organization and concentration of economic power in both England and America legitimate and to be supported by law? In this connection, were there ways in which common law judges could (or should) distinguish fair from unfair competition based on the size or power of the units of competition?

  A second and more immediate question involved the growing struggle between labor and capital. To what extent was labor organization the same as (or different from) business concentration? Should legal rules pertaining to business competition be applied to economic struggles between labor and capital?

  In his section on "privilege," Holmes first spelled out those reasons of public policy that he had said in The Common Law justified allowing injury from competition as well as other privileges to injure. Judicial determinations of when to allow privileges to inflict harm could not be arrived at by "merely logical deduction" 163 from absolute conceptions of rights, Holmes declared. Since rights were in conflict, decisions must inevitably be based on "distinctions of degree." 164 The two rights "run against one another, and a line has to be drawn." 165

  Notice the structure of his argument. A balancing test must replace syllogistic reasoning because there is a conflict between property and competition. Whenever the rights of capital conflict with those of labor, "a line has to be drawn" based on "distinctions of degree." While this analysis of when to permit a privilege to inflict injury was simply a reaffirmation of the external standard proposed in The Common Law, it did constitute a far more developed attack on prevailing theories of absolute property rights. Above all, it is the first time, I believe, that a fully articulated balancing test has entered American legal theory. 166 Because of this development, perhaps it is the moment we should identify as the beginning of modernism in American legal thought.

  After rgro in many fields of law, a balancing test overthrew the earlier system of legal reasoning based on logical deduction from general premises. 167 The triumph of the balancing test marks the demise of the late-nineteenth-century system of legal formalism. And more than any other figure, it was Holmes who provided the intellectual ammunition for the subversion of the earlier dominant system of thought. Moreover, now for the first time, Holmes also sought to define the limits of the scope of legitimate economic struggle, prompted, as he said, by the decisions of the English courts outlawing the labor boycott.

  He turned to the recent English boycott case of Temperton v. Russ
ell (1893)," in which members of a trade union had struck after their employer had supplied goods to a non-union buyer. The buyer-plaintiff successfully sued the officer of the union. "So," Holmes concluded with some irony, "the right to abstain from contracting is not absolutely privileged as against interference with business." 169 There were, he was insisting, legal rights on both sides, including the right of the union members to refuse to work. Yet one year earlier in the Mogul Steamship Company Case,17° the English judges had allowed a cartel of merchants to offer unprofitable rates and rebates to their customers on the condition that the latter would not deal with a competitor. "The defendants" in Mogul Steamship, Holmes wrote, "meant to benefit themselves by making the plaintiff submit, just as, in the other case [of the labor boycott], the defendants meant to benefit themselves by driving the plaintiff away." 171

  How could the English courts have reached such different conclusions regarding two so similar forms of economic coercion? "The ground of decision," Holmes wrote,

  really comes down to a proposition of policy of rather a delicate nature concerning the merit of the particular benefit to themselves intended by the defendants, and suggests a doubt whether judges with different economic sympathies might not decide such a case differently when brought face to face with the issue. 171

  Here, for the first time, Holmes suggests that there may be no neutral way of deciding between the claims of labor and of capital.

  There was also a similar problem "in distinguishing between the combination of great powers in a single capitalist, not to speak of a corporation, and the other form of combination," 173 the labor union. These distinctions involved "very serious legislative considerations which have to be weighed," with "[t]he danger . . . that such considerations should have their weight in an inarticulate form as unconscious prejudice or half conscious inclination." 174

  Here was the problem that a completely external or objective standard presented. How could judges, without a theory of absolute rights, and absent evidence of general customary norms, decide these "distinctions of degree" on any other basis but their preference for labor or capital? Since all forms of economic struggle are inherently coercive, 175 what criteria could distinguish legitimate from illegitimate forms of coercion?

  Holmes continued to hold out the unexplained hope that through "training which the practice of the law does not insure" 176 as well as "freedom from prepossessions which is very hard to attain," 177 "the highest powers of a judge" 178 might still be called forth. Yet he now recognized for the first time the problem inherent in an external standard-that judges might be forced simply to choose between labor and capital. Three years later, Holmes picked up this theme in "The Path of the Law":

  When socialism first began to be talked about, the comfortable classes of the community were a good deal frightened. I suspect that this fear has influenced judicial action both here and in England, yet it is certain that it is not a conscious factor in the decisions to which I refer.179

  Attempting to mitigate this problem, Holmes sought in the concept of "malice" a mediating force that custom could no longer provide. In so doing, he retreated substantially from his insistence on objective external standards in law.

  The basic position of "Privilege, Malice and Intent" is that sometimes, though rarely, the privilege to injure expresses a clear right on one side with no corre sponding right on the other. Such a situation represents an easy though infrequent case, where an external standard can decide whether the defendant is privileged to invade the plaintiff's right. But once rights are regarded as relative, Holmes declared, "[i]t is entirely conceivable that motive . . . should be held to affect all, or nearly all, claims of privilege." 180 "There is no general policy in favor of allowing a man to do harm to his neighbor for the sole pleasure of doing harm." 18'

  This position represented a complete about-face for Holmes. In The Common Law, he had consistently denied that malicious motives were relevant to finding legal liability. His chapter on "Fraud, Malice, and Intent" was, above all, designed "to prove that actual wickedness . . . is not an element in the civil wrong to which the words are applied."182 Indeed, he specifically denied that "the plaintiff may meet [that is, defeat] a claim of privilege . . . by proving actual malice, that is actual intent to cause the damage complained of."'83 Holmes had even gone so far as to maintain that the frequent use of the word "`malice' in the law, including the criminal law, had "not the same meaning as in common speech";"' it meant neither "actual intent to cause the damage complained of" nor "malev- olence."18S Instead, it could be reduced to "foresight of consequences"-what the reasonable man, as judged by external standards, could foresee. 186

  Clearly, Holmes's acceptance of the malice test in "Privilege, Malice and Intent" marks a major retreat from the idea of the external objective standard that Holmes had always regarded as his major contribution to legal theory. Only the most pressing intellectual conflict could have produced such a reversal.

  Just after "Privilege, Malice and Intent" was published, Holmes was presented with a suit for a labor injunction that permitted him to elaborate his legal theories in one of his most famous dissenting opinions. Vegelahn v. Guntner (1896)187 was an appeal from a narrowly drawn injunction that Holmes had issued against labor picketing. The employer charged that the strikers "have conspired to prevent the plaintiff from getting workmen, and . . . carrying on his business" 188 unless he agreed to a schedule of wages. While Holmes agreed to enjoin the workers from making "threats of personal injury or unlawful harm . . . to persons seeking employment or employed," 189 he refused to bar peaceful picketing that produced "persuasion and social pressure" 190 even though it might be "sufficient to affect the plaintiff disadvantageously. . . ."191

  A majority of the Supreme Judicial Court of Massachusetts overturned Holmes's injunction on the ground that "[i]ntimidation is not limited to threats of violence or of physical injury to person or property. It has a broader signification, and there also may be a moral intimidation."192

  In his dissent, Holmes treated the majority opinion as an example of an unsound conception of absolute rights. He wrote:

  [I]n numberless instances, the law warrants the intentional infliction of temporal damage because it regards it as justified.. . . [T]he policy of allowing free competition justifies the intentional inflicting of temporal damage, including the damage of interference with a man's business . . . as an instrumentality in reaching the end of victory in the battle of trade.

  I have seen the suggestion made that the conflict between employers and employed is not competition. But I venture to assume that none of my brethren would rely on that suggestion. If the policy on which our law is founded is too narrowly expressed in the term free competition, we may substitute free struggle for life. Certainly the policy is not limited to struggles between persons of the same class competing for the same end. It applies to all conflicts of temporal interests. 193

  Finally, Holmes argued that competition was not limited to struggle between individuals:

  [I]t is plain from the slightest consideration of practical affairs, or the most superficial reading of industrial history, that free competition means combination, and that the organization of the world, now going on so fast, means an ever increasing might and scope of combination. It seems to me futile to set our faces against this tendency. Whether beneficial on the whole, as I think it is, or detrimental, it is inevitable. . . .194

  This opinion, which perhaps more than any up to that point made Holmes a hero to the Progressives, explicitly emphasized one group of the views he had articulated in "Privilege, Malice and Intent"-the attack on absolutist conceptions of rights. Though it was implicit in the lines he had drawn in the injunction, Holmes had no occasion to mention that malice could defeat the privilege to picket. Indeed, his dissenting colleague, Chief Justice Field, took the far more radical position, eventually adopted by the English House of Lords,'95 that picketing is not enjoinable "whatever the motive may be." 196 But Holmes r
emained troubled about defining the legal limits to economic struggle, and it began to dawn on him that the problem was made more acute by the collapse of deductive and self-executing conceptions of absolute rights.

  Five years after publishing "Privilege, Malice and Intent," Holmes commented again on the English labor cases.197 The decision banning a union boycott in Temperton v. Russell, he declared, "confirms opinions which I have had occasion to express judicially, and commands my hearty assent." 198 Still, he continued, the "discussion which took place" was "inadequate." 199

  [E]minent judges intimated that anything which a man has a right to do he has a right to do whatever his motives, and this has been hailed as a triumph of the principle of external standards in the law, a principle which I have done my best to advocate as well as to name. zoo

  But Holmes remained skeptical. "Now here the reasoning starts from the vague generalization Right, and one asks himself at once whether it is definite enough to stand the strain."201

  If the scope of the right is already determined as absolute and irrespective of motive, cadit quaestio, there is nothing to argue about. So if all rights have that scope. But if different rights are of different extent, if they stand on different grounds of policy and have different histories, it does not follow that because one right is absolute, another is-and if you simply say all rights shall be so, that is only a pontifical or imperial way of forbidding discussion.zoz

  Holmes was articulating the reasons that led him to retreat to motive in "Privilege, Malice and Intent." Without a conception of bright-line boundaries based on pre-existing absolute rights or empirically determinable customary norms, it was difficult, if not impossible, to construct external standards to distinguish between legitimate and illegitimate forms of competition. As Holmes had observed, to the extent that clear boundaries existed, an inquiry into motives was unnecessary for determining the extent of a privilege to coerce. But where coercion is recognized as an inevitable and legitimate part of economic struggle for which one can only identify "distinctions of degree," 203 privileges can be assigned in either of two ways.