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“Secular Law and Equity in Beth Din Decisions”
Rabbi Shlomo Weissmann
While recently reading the introduction to the fascinating book From Maimonides to Microsoft: The Jewish Law of Copyright Since the Birth of Print, I came across the following passage:
“Rabbinic decisions have employed a variety of direct and indirect mechanisms to marshal external legal constructs when helpful or necessary to resolve a dispute or fill a lacunae in Jewish law. They have included implicit borrowing, occasional explicit reference to foreign law, and giving legal imprimatur to Jewish merchants’ adopting of commercial customs or Jewish lay leaders’ communal enactments, which have not uncommonly reflected non-halakhic [Jewish law] concepts prevailing in the surrounding society. Rabbinic decisions have also created openings for bringing non-Jewish law to bear in adjudicating specific disputes, particularly under the halakhic rule that deference must be accorded to the law of the sovereign state in commercial matters (10-11).”
A footnote to the above proceeds to add that “[p]revailing extra-halakhic norms might also influence rabbinic decisions’ rulings when they exercise the discretion that rabbinic judges are said to enjoy to apply ‘reason and common sense’ in adjudicating disputes, rather than being bound by precedent” (11).
The passage and accompanying footnote are part of an introductory chapter covering the methodology and development of Jewish law generally, and are not oriented specifically to contemporary beit din (rabbinic court) practice. But they immediately caught my attention because they neatly summarize the mechanisms very familiar to me in my work as Director of the Beth Din of America (hereinafter, the “Beth Din”) overseeing the arbitration of business disputes. In this essay, I hope to illustrate the extent to which these mechanisms – adoption by merchants of commercial customs, the doctrine that “the law of the land is the law” (dina dimalchuta dina), and equity (often as per the doctrine of peshara kerova lidin) – are used in contemporary beth din practice. I will reference specific examples from the set of anonymized beth din decisions published on the website of the Beth Din.
Jewish law’s origins lie in the Five Books of Moses, as supplemented by the oral legal tradition that was committed to the text of the Talmud in the first century. Jewish law continued to be interpreted and developed by rabbinic scholars over subsequent centuries, leading to its codification in the Shulchan Aruch in the 1560s. Rabbinic decision makers have penned responsa ever since, in which they have analyzed and ruled upon novel questions posed to them.
Given the rich and detailed corpus of indigenous Jewish laws and principles governing business transactions, it is to be expected that Jewish law itself, without any regard to secular laws, would exclusively govern business disputes. To some extent, this is the case. Some awards issued by the Beth Din are based on unadulterated, black letter Jewish law. Chaya Plaut v. Anshei Troy Synagogue (Decision 12) contains an award of damages for a Hebrew school teacher whose employment was terminated late in the school year, giving her inadequate time to find other employment. The award is based on Jewish law, without even a reference to secular law. Sapphire Financing v. Tower Real Estate LLC (Decision 13) contains a discussion rooted exclusively in the Jewish law equivalent of promissory estoppel.
But simply overlaying classical Jewish law to modern transactions in every case can lead to unexpected, and inequitable, results. Consider the fact that for much of the history of the development of Jewish law, Jews were the invitees of local rulers; did not have primary responsibility to legislate; and did not possess an organized mechanism for legislating. For that reason, modern business structures are creatures of legal systems foreign to Jewish law, not legislated by Jewish law itself. Yet halakhically compliant Jews often conduct their affairs with an eye to local law and custom and structure their transactions accordingly. Creditors and corporate debtors, for example, engage in transactions with an expectation of corporate limited liability. So even if the corporation is a legal construct not expressly recognized in classical Jewish law sources, a corporation’s shareholders are not personally liable for its debts. This is because Jewish law recognizes the enforceability of terms agreed upon by parties (kol tnai she’bimamon kayam). Such recognition holds true even when the agreement is only implied and presumed, as is often the case where a beth din assesses that the parties intended to comply with local law or custom.
Joseph Goldberg v. Aryeh Schwartz (Decision 4) provides one example of how the influence of local custom can play out. The dayanim (arbitrators) write that, “[a]lthough the concept of a corporation, per se, is not indigenous to Jewish law, Jewish law does recognize the ability of debtors and creditors to agree to a limitation of liability. In addition, Jewish law recognizes that when parties conduct business, there is a presumption that the commercial laws and practices of their locale are implicitly adopted by them as terms of their agreement.” The source cited for this proposition is a responsa of Rabbi Moshe Feinstein, the preeminent American rabbinic authority in the 20th century, in which he rules that New York’s rent regulation laws are binding on Jewish parties to a lease, on the theory that such regulations constitute an entrenched commercial custom that every landlord and tenant is presumed to tacitly agree to in their lease agreement even without an express mention of the term.
Jewish law is the primary body of law utilized by rabbinical courts generally and the Beth Din of America in particular. But secular law and custom loom large in the beth din process, and their role should not be underestimated. Colossal Containers, Inc. v. Exquisite Crafts, Inc. (Decision 1) is an exception that proves the rule. The case pertains to claims of defective merchandise, and the decision is based exclusively on Jewish law. Notably, however, the dayanim first go through the trouble of ruling out the possibility that extra-Jewish law considerations are in play: “The Beth Din does not find the industry custom in this case vis-à-vis the relationship between Colossal and Exquisite to be clearly contrary to normal principles of Jewish law. Accordingly, the Beth Din shall utilize principles of halacha in this case.”
To be sure, an agreement of the parties, whether express or implied, is not enforceable in beth din when it contravenes a Jewish law prohibition. In Golan v Schwartz (Decision 5b) the dayanim strike down a late rent charge as violative of the halakhic prohibition of charging interest.
The introduction of secular law and norms through express or implied contract is one example of the versatility of Jewish law dispute resolution. It is complemented by two other tools that allow dayanim to pursue justice in complicated cases and ensure that an ancient legal system is sufficiently flexible to deal with real world situations.
One is the oft-utilized doctrine of equity, or peshara kerova lidin. The same Golan v. Schwartz case featured a lease provision calling for an award of legal fees to a prevailing party. The dayanim discounted their reimbursement award based on equitable considerations. Interestingly, the decision notes that its authority to do so is based not only on “the application of pesharah ha-kerovah la-din,” but also on New York case law holding that “a court’s authority to withhold fees in a particular case is not so closely confined and may turn upon equitable factors or other considerations fact-specific to the litigation.”
The second is the rule of dina dimalchuta dina (“the law of the land is the law”), which mandates acceptance of secular law in some instances even absent a contractual choice of law agreement. In United Savings, LLC v. Dunkirk Center for Health, Inc. and Royal Rehabilitation (Decision 8), the dayanim were forced to grapple with the secular law doctrine of apparent authority. A putative representative of a company signed a contract, but the company claimed that he was not authorized to do so. Here, it became circular to argue that the company had implicitly agreed to follow secular law in this transaction, since the company’s authorized representatives disclaimed any knowledge whatsoever of the transaction. The decision utilized a number of arguments to arrive at the conclusion that the company was bound by the contract. Among them was an expansive understanding of dina dimalchuta dina. “The doctrine of apparent authority,” the dayanim wrote, “allows the market to conduct business in an efficient manner, as it allows its participants to rely on their reasonable perceptions of who is able to bind an entity, without burdening them with the requirement of obtaining detailed corporate documents and certificates to transact routine business. Given the sound policy basis for allowing parties to rely on apparent authority, we feel that, in the case at hand, Chatam Sofer [the early 19th century Jewish legal authority whose writings on dina dimalchuta dina the dayanim cited to] would recognize the binding nature of this doctrine.”
Jewish commercial law, as a religious system, should not be mistaken for an amorphous set of principles and general ethical guidance. To the contrary, it features a highly developed system of rules and doctrines that, in many ways, look very much like modern legal systems. At the same time, dayanim deciding cases consider the norms and realities of the societies and markets in which disputes arise. They have at their disposal, and regularly utilize, an arsenal of tools that includes those described above to ensure sophisticated and just arbitration outcomes. ♦
Rabbi Shlomo Weissmann is the Menahel (Director) of the Beth Din of America. He received rabbinical ordination from RIETS in 2001 and advanced rabbinical ordination (Yadin Yadin) in 2014. He is a graduate of Columbia Law School, where he was a Harlan Fiske Stone Scholar. Prior to his association with the Beth Din of America, Rabbi Weissmann worked as an attorney at several prominent law firms, including Debevoise and Plimpton LLP.
Weissman, Shlomo. “Secular Law and Equity in Beth Din Decisions.” Canopy Forum, April 4, 2022. https://canopyforum.org/2022/04/04/secular-law-and-equity-in-beth-din-decisions/.