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Isaac Gorodetski Archives


Amy Kjose

Since the onset of the tobacco litigation in the late 1990's when state attorneys general and private attorneys teamed up to sue the tobacco industry, back-door partnerships have become increasingly more common between power-yielding state AGs and profit-rather-than-citizen-motivated private attorneys. The Manhattan Institute's new Trial Lawyers Inc. report acutely zeros in on the potential for improper relationships and perceptively highlights the likely prime offenders, while fairly noting that not all attorneys general fall under this category.

To lessen at least the appearance of impropriety and to shed light on these lucrative and possibly nepotistic contracts, the American Legislative Exchange Council has developed its model Private Attorney Retention Sunshine Act, which is referenced in the Report. This model legislation owes its popularity to its use of the good government principles of transparency, disclosure and oversight to safeguard these large-dollar contracts against improper quid pro quo.

2011 saw the introduction of sunshine legislation in ten states, with the end of the year bringing the total number of states with similar laws on the books to ten. With the increase in AG-private-attorney litigation--particularly over state pension funds,-- state legislators and the public should be ever more interested in keeping an eye on the relations between state attorneys general and their campaign-donating attorney friends to protect state awards from excessively high legal fees. 2012 is shaping up to be another year during which state legislatures around the country will look to transparency to promote good governance and safeguard taxpayer dollars.

Victor Schwartz

Fortunately, the practice of state attorneys general hiring contingency fee lawyers is on the decline. There is an old saying that "nothing cleans better than sunlight." Through good work of the Manhattan Institute's Center for Policy Research, the U.S. Chamber of Commerce's Institute for Legal Reform, the American Tort Reform Association, the Heritage Foundation, and other groups interested in civil justice reform, the unsound public policy surrounding state attorneys general hiring of contingency fee counsel has received attention from the media, legislatures, courts, and the public. In that regard, state attorneys general have a duty to the people of their state to protect the public interest. Personal injury lawyers have a different concept of their duties, which include maximizing profit and moving tort law to its most pro-plaintiff extreme. There is nothing inherently wrong with those goals; they are perfectly compatible with our capitalist system. The problem is that the goals of plaintiffs' lawyers often conflict with a state official's duty to protect the public interest.

There has been effort, through amicus or "friend of the court" briefs, to explain to state supreme courts how state attorney general delegation of responsibilities to contingency fee lawyers runs counter to the public interest. For instance, the Supreme Court of Rhode Island was quite clear in requiring that contingent fee agreements between the state and private lawyers must include "exacting limitations" that ensure that the Office of Attorney General "retains absolute and total control over all critical decision-making" and that the case-management authority of the Attorney General is "final, sole and unreviewable." Rhode Island v. Lead Indus. Ass'n, 951 A.2d 428, 475-76 (R.I. 2008).

There have also been efforts by state legislatures through the Private Attorney Retention Sunshine Act (PARSA), Transparency in Private Attorney Contracting Act (TIPAC), and similar legislation to place sunlight on state attorney generals' hiring practices. Such legislation helps to assure that if contingency fee lawyers are employed, the process takes place in the open with competitive bidding, and the agreement does not delegate too great of authority to the private counsel or result in their excessive profiteering. In the past two years, Arizona, Florida, and Indiana have enacted laws that help fulfill these goals.

A final important, and sometimes overlooked, area with respect to state attorney general delegations of authority occurs in federal legislation. Congress, in enacted legislation such as the Consumer Product Safety Improvement Act and financial reform act, and in pending legislation such as the Personal Data Privacy and Security Act of 2011, has empowered state attorneys general to enforce federal law. This process brings with it two very unsound public policy repercussions: first, this empowerment is often not accompanied by adequate supervision at the federal level to assure consistent state enforcement of federal law throughout the United States, and, second, Congress has not restricted attorneys general from delegating this newfound power to private contingency fee lawyers. What is ironic in Congress's action is that the Executive Branch of the federal government is prohibited, through Executive Order 13433, for reasons of public policy, from hiring contingency fee lawyers. Thus, Congress empowers state attorneys general to hire contingency fee lawyers where the Attorney General of the United States would be prohibited from doing so.

More sunlight needs to be placed on Congress to stop this inappropriate delegation of federal enforcement power to totally private interests. When this has occurred in the past, it should be changed by federal law. While advancements have been made to curb this unsound practice, continued efforts are needed to protect the public. The Manhattan Institute's Center for Legal Policy is to be commended for continuing the spotlight on this important issue.

Lisa A. Rickard

State Attorneys General (AGs) often receive financial and other political support from fellow attorneys. Generally, that makes sense - AG candidates often are well-known among the legal community, and lawyers as a group tend to be highly engaged in politics. Public confidence in government can be undermined, however, when private lawyers are hired to pursue claims on behalf of the state by AGs to whom they have made substantial campaign contributions. Such arrangements look particularly bad when work is awarded on a no-bid basis or involves a contingency fee arrangement in which the private attorney stands to recover a share of a multi-million award pursued on behalf of the state and its citizens.

An Increasingly Common Practice or Exception to the Norm?

AGs increasingly have turned to outside counsel to supplement their limited staff and resources, and this trend has made more prominent those instances in which lawyers who contributed to an AG's campaign later have been hired to pursue claims on behalf of the state. For example, in a recent five-year span, one AG's office retained 27 law firms to represent the state in 20 separate lawsuits after partners at those firms contributed more than $500,000 to the AG's reelection campaigns. Another AG received $50,000 in campaign contributions from a particular law firm, and within two years had extended the law firm's contract to represent the state in litigation against a pharmaceutical company without soliciting any bids. Yet another AG hired outside counsel who had contributed to his campaigns on a contingency fee basis for a 2001 lawsuit against a pharmaceutical company, resulting in more than one-third of a $10 million settlement going to the private attorneys.

It may be the case that these examples are exceptions, and it further may be the case that hiring private lawyers in these instances was, in fact, the AG's best means of pursuing the interests of his or her respective state and constituents. But AGs play a unique role and have a unique responsibility in our legal and political system - they must balance effective law enforcement and the interest of their respective states with preserving public confidence in the integrity of their offices. Accordingly, the potential that public trust might be undermined when an AG hires a donor to serve as plaintiff's counsel for the state requires that safeguards be put in place to preserve fairness and faith in the rule of law.

The Need for More Standards and Disclosure

To ensure that AGs exercise their power in a manner that is consistent and fair, the standards and policies that guide AGs' conduct should be clearly articulated and transparent. In 2007, the U.S. Chamber Institute for Legal Reform (ILR) identified a set of "best practices" for AGs in the form of a proposed Code of Conduct, the goal of which is to enhance transparency, consistency, predictability, and fairness in the activities of an AG's office. The guide covers the gamut of issues facing AGs, from public statements concerning pending investigations or litigation, to conflicts of interest, to multi-state activities. Key among the issues addressed in ILR's best practices is AGs hiring private counsel they hire to pursue claims on their states' behalf. As pointed out by the Wall Street Journal:

"State prosecutors are supposed to be motivated by a sense of public responsibility for the interests of justice. Law firms have other motivations, and no-bid contingency fee deals encourage lawyers with a financial stake in a case to try meritless claims or ask for exorbitant awards. That serves neither taxpayers nor justice..." Wall Street Journal, "The State Lawsuit Racket," April 8, 2009.

Notably, a bipartisan group of four AGs released an important report in December 2010 to serve as guidance for newly-elected AGs. The report, Practical Considerations For Approaching Key Issues in the Office of Attorney General - A Publication for New Attorneys General, incorporated many of the concepts advanced in ILR's Code of Conduct, including best practices for hiring private counsel to pursue claims on behalf of the state.

In some states, legislators have taken it upon themselves to implement by statute measures to promote transparency when the AG hires private attorneys to pursue claims on the state's behalf, particularly on a contingency fee basis. A prime example of such legislation is the Florida Transparency in Private Attorney Contracting Act, which passed with the support of then-AG Bill McCollum in 2010. This law, as well as several others passed in 2011, requires that arrangements between an AG and private counsel retained by the state must be in the public interest, be transparent and open to competitive bidding, and include reasonable limitations on fees - either flat fee or contingency-based - that private counsel may recover.

It is critical for AGs to recognize the importance of and lend their support to such guidelines and state legislation. As an increasing number of attorneys solicit AGs and other government officials to allow them to bring cases on behalf of the state, laws and procedures must be in place to make sure that these arrangements are fair and do not compromise public trust in government. Even AGs who do not use outside counsel can still appreciate the value in establishing good governance for their successors.

Tiger Joyce

Kudos to Jim Copland and all our allies at the Manhattan Institute's Center for Legal Policy. Their latest edition of Trial Lawyers Inc. (TLI) appropriately turns up the heat on certain state attorneys general (AGs), whose mutually beneficial relationships with private sector personal injury lawyers raise serious ethical questions and blur the line between self-interest and the public interest.

With increasing regularity, some AGs are hiring personal injury lawyers - often by way of a cozy, no-bid agreement ̶ to prosecute lawsuits on behalf of their states against deep-pocketed defendants. Resulting contingency fees can sometimes be worth hundreds of millions of dollars in state funds. TLI continues the important work of documenting these arrangements, which the Wall Street Journal and others have characterized as "pay to play," wherein outside counsel express their thanks for the lucrative legal work with generous campaign contributions to the AGs who hired them.

My organization, the American Tort Reform Association also seeks to educate policymakers and the taxpaying public about these unsavory AG-outside counsel relationships and the need for standards of public accountability. In 2007, ATRA published its Transparency Code for AGs, comprising the following good-government principles:

DISCLOSURE All contracts with outside counsel to perform legal work in the name of the state should be posted on the Internet for public inspection.

VALUE In every instance, the attorney general should seek to provide the highest quality services at the best value to state citizens when contracting with outside counsel. Unless an extraordinary situation requires assistance from a specific legal expert with technical or scientific experience not generally available, every effort should be made to competitively bid contracts for outside counsel.

OVERSIGHT Given that contingent fee-based contracts are often used when attorneys general are pursuing litigation that potentially has a significant public policy or regulatory impact, such contracts should be subject to review by the Legislature.

REPORTING Outside counsel providing services to the attorney general on behalf of a state's citizens and taxpayers on a contingent fee basis shall be required to disclose detailed information on the hours worked, services performed, and fees received from the state, as long as this reporting does not undermine the attorney-client privilege.

ACCOUNTABILITY All monies recovered by the attorney general in excess of $250,000 as a result of lawsuits won or settled by the state should be deposited in the state treasury for appropriation by the legislature unless a settlement with the attorney general's office stipulates that the funds shall be allocated to a specific entity. At no time, shall an attorney general enter into a settlement that allows the office of the attorney general to disseminate funds at its discretion.

A number of states have already incorporated some or all of these important principles into law, including Arizona, Indiana and Missouri just this year. And with help from the Manhattan Institute, the American Legislative Exchange Council and others, ATRA will continue to urge additional states to do the same.

James R. Copland

On October 20, our friends at the Cato Institute published a study by Cato adjunct scholar Shirley Svorny claiming that existing empirical evidence suggests that "medical malpractice awards do track actual damages" and that noneconomic damage caps and other "policies that reduce liability or shield physicians from oversight by carriers may harm consumers." An economics professor at California State University, Northridge, Svorny has since publicized her findings in outlets such as the Huffington Post, in which she not only argued against the medical-malpractice reform provision of the Jobs Through Growth Act but also suggested that "[r]educing liability, as caps do, is rarely a good idea in any situation."

Needless to say, Svorny's position is at odds with that we've generally taken here at Point of Law (see back posts here), including our former editor, Svorny's Cato colleague Walter Olson (see, e.g., here, here, here, here). (See also this seminal contribution by MI visiting scholar Richard Epstein and this Manhattan Institute study by libertarian economist Alex Tabarrok.)

This week, Professor Svorny has graciously agreed to come to Point of Law to discuss her paper with MI adjunct fellow and PoL editor Ted Frank. The featured discussion will be available below; please check back throughout the week as the discussion continues.

Note: Ted Frank comments on the discussion further here (and see also here).

Liability Protects Patients

December 6, 2011 10:14 AM

Shirley Svorny

The medical professional liability insurance industry takes actions that improve patient safety in this country. It is liability that motivates efforts of underwriters to assess the practice risk of individual physicians and to penalize those who present such high risk, and it is liability that motivates medical professional liability insurers to take what steps they can to reduce practice risk.

If the court system were as random as some people think, there would be no reward to efforts to identify high risk physicians, to identify practices that result in bad outcomes, or to create incentives to encourage physicians to reduce their practice risk. Yet the insurance companies all make these efforts, at significant expense. Each year, underwriters at medical professional liability insurance companies review applications for insurance. They have access to a physician's entire claims history and they use professionals to evaluate the validity of the claims. Why would they do this if court decisions were random?

Admitted carriers, those approved by the state, put surcharges on the premiums of some physicians and offer credits to those who are claims free. If the level of underwriting needed to assess a physician's risk is high, the physician will be denied insurance by an admitted carrier and forced into the surplus lines market. Premiums in the surplus lines market are up to five times those in the admitted market. When new, risky procedures are introduced, the surplus lines carriers are heavily involved in assessing physician training and practice risk. The level of oversight is so high as to, where warranted, include visits to offices of physicians to assess and reduce practice risk.

The insurance industry publishes research findings based on studies of claims that highlight where risk is highest in various areas of medical practice. These findings are used by hospitals and other providers to reduce the likelihood of bad outcomes for patients. Physicians are rewarded (with premium credits) for participating in risk management courses based on these findings.

If the system is haphazard, why is all of this going on? And, why would the vast majority of cases settle before they reach trial? In a haphazard system, the potential return to a court trial would be random, not be a function of the actual negligence.

As things are, it appears that most cases that go to court are based on the mistaken belief of the plaintiff that negligence was involved when it was not, given that plaintiffs lose in the majority of cases.

We know that liability creates the kind of incentives that motivate appropriate behaviors to reduce bad outcomes. For years, it has been said that the medical malpractice industry did not create the appropriate incentives. It has been the conventional wisdom that malpractice insurance premiums were not experience rated. I found that this is not true; the industry charges risky physicians higher premiums than their same-specialty, same-location peers.

And I found much more. It turns out that not only are premiums set to encourage clinicians to reduce their practice risk (the only path to a lower premium) but the industry does a lot of other things that are likely to reduce practice risk and protect consumers.

The point is that liability works to protect consumers and that caps will reduce liability. This is especially important in this industry because consumers believe any state-licensed physician is competent. Consumers are not protected by state licensing boards (see my 2008 Cato Policy Analysis) but, instead, by an interconnected private system of oversight based primarily on liability.

Let me address two specific points that Frank makes in his post. Frank quotes an empirical study by Morris, et al., which concludes there is "no rational link between the tort system and the reduction of adverse events." If you read the article you will see that this is conclusion is not supported by the evidence. Morris and his colleagues find more system failures in cases where plaintiffs received awards. That sounds like a rational link to me. The best article I've read about the litigation process is by Henry Farber and Michelle White (RAND Journal of Economics, 1991). They describe a system that works to penalize negligence.

Frank says anesthesiologists were "unnecessarily killing scores of patients" and that he is "not aware of other branches of medicine that would benefit to the same extent." Well, no one was aware - other than, perhaps, the insurers. Many people argue it was high medical malpractice claims and premiums that gave anesthesiologists an incentive to figure out what was going on, making anesthesiology that much safer.

Join the debate! Please send your questions and commentary via Twitter, #PoLdiscussion.

No system is entirely rational

December 8, 2011 8:00 AM

Shirley Svorny

I do not believe, as Mr. Frank summarizes my view, that the system is entirely rational. No system is entirely rational. As Mr. Frank points out, researchers have looked at the tort system. Using the numbers in Mr. Frank's original post, if there is no negligence in 40 percent of claims and, of those, 28 percent result in awards, then 11 percent of claims are both bogus and result in damages.

It is hard to say whether that incidence is too high--we wouldn't expect any system to be error free-- but perhaps the focus should be on getting that number down. Proposals to change how the courts work, such as substituting medical experts for lay jurors have been touted as a way to improve outcomes, but Neil Vidmar cites several reputable studies that find jury verdicts on negligence are similar to assessments made by medical experts. [Vidmar, p. 369]

There are real benefits to liability that cannot be swept under the rug by laws that limit liability. Just because my students cannot sue me for educational malpractice, it does not mean it does not exist and that students are not harmed. If students could sue their professors, the outcome would probably be a lot like that for medical malpractice, but even fewer cases would move forward as educational malpractice would likely be harder to prove than medical malpractice. But, in a liability regime, education would be more expensive, many professors would take greater care in preparing their courses, and the most egregious teachers would be out of a job.

Mr. Frank mentions New Zealand as an example of a country that has no-fault insurance and people there don't seem to be dying left and right. Perhaps they have other protections in place, but it is hard to imagine what protections could be as efficient as private liability. It may be, as it was with anesthesia and hospital infections, that a level of injury is thought reasonable when, in fact, at fairly low cost, there could be significant improvements. In a 2006 paper, Linda Gorman (see p. 17) cited a study published in the Canadian Medical Association Journal that found adverse events more common in New Zealand than in the U.S. (see p. 17). Of course other factors, such as income, might explain the difference in outcomes across countries; it may not be malpractice liability.

As Mr. Frank notes, the costs of a system may outweigh the benefits. Right now we don't have much to go on to make this determination. My research on the medical professional liability insurance industry identified a benefit previously missed by analysts. Would going to a no-fault insurance system (the extreme case of caps) save enough money to offset the benefits forgone from the loss of oversight by the medical professional liability insurance industry?

The right question to ask is whether we can improve the current system in a way that reduces costs more than benefits.

Join the debate! Please send your questions and commentary via Twitter, #PoLdiscussion.

Agreements and disagreements

December 9, 2011 8:10 AM

Ted Frank

I'm surprised that Svorny is so unwilling to concede that educational malpractice liability is unquestionably a bad idea. There seems to be a fundamental disagreement between us about the transactions costs of the legal system. It's easy to think, as a theoretical matter, that legal adjudication is frictionless, but that leads to dramatic policy mistakes by courts, legislators, and regulators. (I've seen first-hand someone drag out a frivolous libel suit for two years without resolution of a straightforward legal issue.) I'm happy to agree to disagree about the merits of uncapping liability for educational malpractice, and let readers decide for themselves who has the grasp of the facts that better reflects the realities of legal-system transactions costs.

Svorny pushes her research on experience rating as demonstrating benefits to the system, but she draws the wrong conclusions from her data. There are high-risk doctors, to be sure, and low-risk doctors: why can't the surgeons be more like the pediatricians who never get sued? That sort of classification does not do much to protect good surgeons, however, since nearly all surgeons end up getting sued. And, sure enough, even Svorny's own numbers show that intra-practice experience rating doesn't make much difference: the Massachusetts insurer she looked at most closely charged 98.6% of physicians within the same 25% range, with only a tiny percentage of those getting any surcharges at all. (And even then, all she found was that the small percentage who are charged outside of that 25% range are being charged "surcharges" that sometimes reflect factors other than experience rating.) Little wonder: there does not seem to be any empirical evidence that previous claims experience predicts future claims experience once one controls for the riskiness of the practice. That's first-hand evidence of haphazardness: if medical malpractice were predictable, we'd see more effective experience rating. (Life insurance and car insurance certainly don't operate within a 25% band.) But Svorny again works with a binary metric: if it's not the case that insurers never experience rate (another strawman), then there isn't a problem with uncapped damages because insurers can always experience rate. She never asks why, if efficient experience rating is possible, it has so little effect on insurance rates.

I'm pleased to see that Svorny agrees with me that the medical malpractice legal system is not producing perfect results. I can agree with Svorny that we should look to reforms that reduce the error rate of the legal system.

What she has failed to recognize in her paper, however, is that non-economic damages caps can work to reduce the error rate of the legal system. Svorny considers only the false negatives, the cases where a cap might result in undercompensation; she never looks at the costs of the false positives, the cases where the lack of a cap results in overcompensation.

The error rate is not just the "11%" Svorny calculates in her most recent post. It's the uncompensated costs put on doctors when meritless malpractice suits are brought in the hopes of jackpot justice—another 29% of the cases. But that the other 60% of cases supposedly have merit (and, as we've seen, merit is often judged with hindsight bias, whether by lay or expert evaluators) does not mean that they're not also imposing erroneous costs. Even where an individual doctor commits malpractice, a shotgun complaint might bring in another dozen entities in the hopes of extorting a settlement. And the biggest cost of all comes from the outlier verdicts that caps are intended to address.

The problem is that the legal system is poorly situated to make judgment calls about complex medical decisions. Returning to the anesthesiologists again, even expert witnesses suffer from extraordinary hindsight bias when evaluating the quality of medical care: we can hardly be surprised when lay juries, encouraged by attorneys with an incentive to slant the evidence do not do any better. Uncapped economic damages present gigantic opportunities for injustice: John Edwards by himself won tens of millions of dollars in verdicts based on junk science. When non-economic damages are uncapped, a single outlier judgment can impose tremendous disproportionate costs that get spread across all doctors. Obstetricians or neurologists facing uncapped noneconomic damages (and the hospitals that employ them) are always at risk of an eight-digit award.

When damages are uncapped, obstetricians are playing a game of Russian roulette. If ten meritless cerebral palsy cases are brought, and jackpot-justice litigators can get a $20 million or more judgment when they win, a legal system that gets it right "only" 90% of the time will have disastrous consequences: the one error more than overwhelms the effect of the nine cases where the system got it right. A noneconomic damages cap limits the false-positive error rate of any single outlier jury. Such caps also reduce the incentive to bring low-merit/high-potential-damages cases that impose other costs on the system. Caps have benefits as well as costs. It's one thing to say that one's research shows that caps have a marginal cost that has previously been unconsidered (though the "unconsidered" part of that is questionable, as I argued about it with reform opponents six years ago); it's another to leap to the conclusion that therefore caps are always a bad idea when one admittedly hasn't evaluated the relative costs and benefits.

It's always tempting to oversell incremental improvements in data collection as having far-reaching policy implications. I've been critical of this problem before, including with papers Svorny relies upon. In this case it results in a non sequitur. The bottom-line conclusions of Svorny's paper are not supported by the data or the analysis.

Join the debate! Please send your questions and commentary via Twitter, #PoLdiscussion.

Shirley Svorny

Health economists and others have said medical professional liability insurance premiums are not experience rated. This led observers to conclude the system did not penalize malfeasant physicians. In that case, there would be little to lose if awards were capped. My contribution has been to point out that not only are premiums experience rated, but liability insurers take other steps to reduce practice risk. This is an important observation in a discussion over the value of caps. It is also an important observation with respect to state licensing of medical professionals.

For years, I have argued that state licensing is used by medical professionals to limit entry and does little to protect consumers. I have argued that consumers are protected by private efforts to reduce liability and that is what led me to look more closely at how the medical professional liability insurance industry works. The information presented in my paper was drawn from conversations with insurance industry professionals and a comprehensive review of state insurance filings. Physicians denied coverage by admitted carriers must seek insurance from surplus lines carriers who specialize in underwriting "hard-to-place" physicians. Few companies have those skills. And few physicians end up in that market. But those who do pay significantly more for medical professional liability insurance than their same-specialty, same-location peers.

If, as Mr. Frank suggests, once one controls for a physician's specialty, previous claims experience does not predict future claims experience, then medical professional liability underwriters are wasting a great deal of time and money evaluating individual physician's claims histories and practice risk. In pointing out that the few bogus claims are rewarded, I did not mean to suggest it is the only cost associated with the current system, my point was that the level of error in the system will never be zero or even close to zero. What we know is that the level of error in awards based on claims is relatively low. Most meritless claims do not move forward.

Whether the costs of the system are greater than the benefits is not something we have a handle on. From an economic perspective, it only makes sense to reduce costs-as caps would-if benefits do not fall more than costs. Any list of the costs and benefits of the medical malpractice system should include the benefits to consumers associated with the oversight and risk management provided by medical professional liability insurance companies. Mr. Frank asserts "the legal system is poorly situated to make judgment calls about complex medical decisions." As I mentioned before, Farber and White's evaluation of the tort system suggests it is well-situated to make judgment calls.

Mr. Frank mentions that my point is not new; he has participated in previous discussions that have addressed the negative consequences caps might have on medical practice risk. However economists and health policy analysts must not have been invited because they consistently, mistakenly, express the view that physicians are sheltered from liability by malpractice premiums that are not experience rated. It is important to clear up this mistaken impression if we are to have a fruitful discussion over whether the legal system works to deter malfeasance.

Mr. Frank is convinced that the costs of the current system outweigh the benefits and has credited me with the view that they don't. Then he writes that the conclusions of my paper are not supported by the data and the analysis. He is giving me credit for conclusions I did not draw. I do not conclude that the benefits of the tort system outweigh the costs. My paper points to a benefit of medical malpractice liability that had been overlooked in the economics and health policy literature due to the mistaken view that medical professional liability insurance premiums have not been experience rated.

James R. Copland

On January 4, President Obama invoked executive recess appointment authority to place former Ohio attorney general Richard Cordray as the first director of the new Consumer Financial Protection Bureau, as well as to place three new members of the National Labor Relations Board. Senate Republicans had previously refused to permit a confirmation vote on Cordray and one of the president's NLRB appointments.

The president's action was controversial because the Senate was technically not in recess -- having held "pro forma" sessions that appeared to prevent the President from exercising his constitutional recess appointment authority. White House lawyers advised the president that he had the constitutional authority to make recess appointments while the Senate is hosting "pro forma" sessions only for the purpose of blocking those appointments. The Department of Justice defended the legal authority of the President in a memorandum.

Various legal scholars in turn reacted to the president's action: Professors John Yoo and Laurence Tribe, on opposite sides of the issue, examined the scope of executive authority and congressional authority under a separation of powers framework; and Professor Richard Epstein looked to the text of the Recess Appointment Clause and challenged not just President Obama's appointments but the current practice of recess appointments more broadly.

This week on Point of Law, we are fortunate enough to host a lively back-and-forth discussion with Jason Mazzone, Gerald Baylin Professor of Law at Brooklyn Law School and Andrew M. Grossman, visiting legal fellow in The Heritage Foundation's Center for Legal and Judicial Studies and litigator at Baker & Hostetler. Mr. Mazzone and Mr. Grossman will explore the constitutionality of the president's controversial recess appointments, exploring legal arguments that have been advanced in the debate and others not yet expressed. The featured discussion will be available below; please check back throughout the week as the discussion continues.

Jason Mazzone
Gerald Baylin Professor of Law, Brooklyn Law School

Earlier this month, President Obama, invoking his power to make recess appointments, named Richard Cordray director of the Consumer Financial Protection Bureau and added three members to the National Labor Relations Board. Critics contend that these appointments were unconstitutional because the Senate was not in recess: although virtually all Senators were out of town and no business was being conducted, the chamber was kept open through pro-forma sessions.

I am no fan of recess appointments particularly when, as here, they are used to put into office nominees the Senate has had before it but has refused to advance to a vote. Nonetheless, the President was on solid constitutional ground when he determined that not withstanding the pro-forma sessions, he could make use of his appointment power. To see why requires shifting the focus from the CFPB and the NLRB and onto the bigger stakes.

The Constitution is a document for times of war as well as times of peace. Many of the Constitution's provisions are explicitly directed at matters of national security; many other provisions serve a security function. The President's "Power to fill up all Vacancies that may happen during the Recess of the Senate" is a power that plays an important national security role by ensuring that even in times of war or other national crises high-level governmental offices remain staffed and functional. The power is located in section 2 of Article II of the Constitution, along with other presidential powers (to act as Commander in Chief, to make Treaties, to appoint Ambassadors, public Ministers and Consuls) that secure the nation. Early interpreters of the power emphasized its security role. For example, in 1823, Attorney General William Wirt, invoking military analogies, explained that were the President dependent upon the resumption of the Senate, a vacancy could "paralyze a whole line of action in some essential branch of our internal police."

Allowing the Senate to block presidential use of the appointment power with pro-forma sessions (the equivalent of an "In Session" sign on the door of a vacant chamber) would have grave security implications. In assessing President Obama's recent use of the power, we should ask about the scenario that is at the heart of the Recess Appointments Clause.

Consider this: While most Senators are in their home states, terrorists attack Washington, DC, with a dirty bomb. Cabinet officials and heads of federal agencies charged with the response effort are killed. A lone Senator bangs the gavel in an otherwise empty chamber and calls the body into pro-forma session. It would be foolish to say that the Senate has not recessed and thus the Constitution prohibits the President from replacing dead and wounded federal officers.

To be sure, the security of the nation does not depend upon staffing the CFPB and the NLRB. But the President's recess appointment power extends to filling "all Vacancies." And, as with other constitutional provisions, it is a mistake, and a danger, to measure that power by judging its perceived necessity in times of peace.


Andrew M. Grossman
Heritage Foundation Visiting Legal Fellow


Professor Mazzone's clever argument that, due to national-security interests, the President has the power to decree that Congress is in recess and make such appointments as he wishes explains too much, but unfortunately not the two things that matter: the constitutional text and structure.

Let's start with the text. Article II, section 2, provides that the President "shall nominate, and by and with the advice and consent of the Senate, shall appoint ambassadors, other public ministers and consuls, judges of the Supreme Court, and all other officers of the United States." The subsequent clause provides that the "President shall have power to fill up all vacancies that may happen during the recess of the Senate, by granting commissions which shall expire at the end of their next session." Yes, as Prof. Mazzone observes, these provisions in the same section as clause declaring the President "commander in chief"; for what it's worth, so are the provisions authorizing the President to seek written opinions of his cabinet and to "grant reprieves and pardons." Proximity only proves so much.

The challenge of interpreting the Constitution's "odd clauses" is to give them meaning consistent with text and history, without rendering any a nullity. Prof. Mazzone, as well as the Obama Administration, run aground on a few well-marked shoals:

First, let's start with the big-picture view: if Congress can pass a bill, it must be in session. Congress did, in fact, pass a bill during one of the "pro-forma sessions" that the President now claims may actually be a recess. But guess who signed that bill into law . . . . (And once before, in August.) For purposes of passing legislation that he supported, the President accepted pro-forma sessions as what they purport to be: active sessions. Either that, or he simply deferred to Congress's view on the matter.

Second is the requirement in Article I that neither chamber shall, "without the consent of the other, adjourn for more than three days." The House craftily wielded this provision to deny the Senate permission to adjourn. But the President's action, if upheld, would render it a nullity--the Senate could adjourn whenever it likes. Up until now, pro-forma sessions had always been considered sufficient to satisfy this requirement, as well as to satisfy the Twentieth Amendment's mandate that Congress assemble each year on January 3.

Third is the inconvenient case of the "pocket veto." Although a bill passed by Congress but not signed by the President becomes law "within ten days (Sundays excepted) after it shall have been presented to him," that same bill is regarded as vetoed when "the Congress by their adjournment prevent its return." Does a pro-forma session prevent a President from exercising a pocket veto? Yes, most certainly, so long as Congress made arrangements to receive messages from the President. (Wouldn't a parallel requirement go a long way toward satisfying Prof. Mazzone's national-security concerns?)

Fourth, what about Congress's power to "determine the rules of its proceedings"? Typically, the other branches honor its determinations and judgments as to its own actions. For example, when Congress certifies that a particular bill has been enrolled, the courts will presume that Congress observed the requisite procedures in passing it. To be sure, this power isn't absolute--Congress couldn't, for example, originate a tax bill in the Senate--but this is not a circumstance where Congress attempts to act in a manner plainly opposed to constitutional mandate.

Prof. Mazzone's suggestion that the Recess Appointments Clause must be construed broadly in light of the President's responsibility for national security does not answer these points. Nor does it account for the existence of that provision of Article II, section 3, which provides that the President may adjourn the House and Senate "to such time as he shall think proper"--a power that no President has exercised due to its enormous political costs outside the unusual type of crisis context that Prof. Mazzone conjures up. (Then again, others differ in their evaluation of the political costs.)

But let me conclude with two questions for Prof. Mazzone. First, is your reading of the Recess Appointments Clause limited, as some say the text requires and as your rationale would seem to imply, to vacancies that arise during a recess? And second, let's modify the hypothetical: the terrorists attack when every single member of Congress is in town, but partisan discord is such that the Senate, meeting six days each week, is unable to confirm a single nominee over a period of months. In that case, can the President cite national-security needs and make a recess appointment late on a Saturday night, when not even the C-Span cameras are stirring? And please no cop-outs that it's non-justiciable, because I don't buy it.

Recess Appointments: Who Decides?

January 25, 2012 8:15 AM

Jason Mazzone
Gerald Baylin Professor of Law, Brooklyn Law School

I appreciate Andrew Grossman's thoughtful comments on my remarks on Recess Appointments and National Security. Yet I searched those comments in vain for a plausible solution to the problem I raised: unless the President can make use of the Recess Appointments Clause, the pro-forma Senate, in which Senators are dispersed and no business is conducted, will leave the country unable to respond effectively to security problems or other national crises.

The sole specific suggestion that Andrew (if I may) offers is a pocket-veto-like scenario, with no basis in the text of the Constitution, in which the Senate would transmit appropriate messages to the President. In other words, rather than expeditiously appoint the people to distribute the gasmasks, the iodine pills, and the vaccines, the President should wait for the Senate to send word that when it said it was in pro-forma session it was only kidding. This is not a basis on which the Republic is secured.

In place of confronting the security origins of the Recess Appointments Clause and the security implications of his vision of a permanently-in-session Senate, Andrew returns the interpretive task to ordinary politics. His Constitution is one for the vast bureaucratic state in which constitutional interpretation should focus on the selection and control of peacetime functionaries. My Constitution is one that begins instead with the first duty of government, security. For without well-functioning mechanisms to ensure the security of the state and of the people, there is little point talking about which bureaucrat will head the CFPB or serve on the NLRB.

Andrew's peacetime Recess Clause is a dangerous creature for another reason. The failure to take account of security concerns risks generating constitutional rules and theories that are impractical when emergencies do arise, lending unintended legitimacy to government officials who ask to suspend normal constitutional constraints in response to security risks.

Andrew asks two questions. The first, whether the President's power is limited to vacancies that arise during a recess, is one many others have discussed and I will leave for another day. The second, in which Andrew proposes his own hypothetical security scenario, leads me to a broader issue, one that has received less attention and with which it is useful to end.

Given that there are plausible arguments on both sides about the constitutionality of recess appointments during pro-forma sessions, we are left with a puzzle: who decides whether the Senate was in fact in session? Andrew's arguments assign that decision at various points to the Senate, the House, the courts, and even--with Andrew's invocation of the payroll tax cut extension--President Obama himself. (I suspect the last of these is accidental.)

In instances such as the recent events on which this debate is focused, I would defer to the President on the question of whether the Senate is in session. The reason is simple. While government officials deciding upon the scope of their own powers present some obvious dangers, the Recess Appointments Clause contains its own check on executive abuses: commissions that the President grants pursuant to his recess power expire at the end of the next senatorial session. The Clause therefore protects to a large degree the interests of the Senate.

There is a further lesson. The expiration date underscores the temporary, emergency nature of the Recess Appointments Clause. This, as I have urged, is the essential feature that any account of the President's recess power must confront.

If the Professor insists...

January 26, 2012 8:25 AM

Andrew M. Grossman
Heritage Foundation Visiting Legal Fellow

The Constitution is the operating manual for a political machine, a federal government. Why, then, should we be surprised when the answer to some really hard question is to let politics run its course?

I'd say we shouldn't, because the Constitution leaves most things to politics, and that's true for Prof. Mazzone's insistent hypothetical. To recapitulate: Congress is out of town, terrorists kill the federal officials who would have led our response to a terror attack, and the Senate is holding pro-forma sessions to block nominations. Whatever does the President do?

To Prof. Mazzone, this conundrum proves that the President can declare that Congress is out of session--no matter what Congress thinks of the matter--and make whatever appointments he wants.

Well, I offered one out to Prof. Mazzone, but he didn't bite. Article II provides that, if the two chambers of Congress can't agree on when to adjourn--as happened in December and this month--the President can "adjourn them to such time as he shall think proper." Doesn't this power directly answer Prof. Mazzone's hypo? (Let's put aside, for the moment the question of whether an "adjournment appointment" is just as good as a "recess appointment.") The only problem is the President would have to accept the political cost, but he has no constitutional right to avoid that.

But let's tweak the hypo a bit. Maybe the House and Senate are politically aligned against the President, so there's no disagreement on adjournment. Or let's say the Supreme Court ruled just last week that "recess appointments" can't be made during adjournments (i.e., within sessions) but only during recesses (between sessions). We're doomed, right?

I wouldn't see why. Isn't the obvious answer either that (1) Congress would vote to recess immediately so the President could do what needs to be done or (2) the Senate would stream back to Washington to confirm the President's nominees so quickly they'd get whiplash?

It's silly to assume that it would be otherwise, but it's even sillier to use that mistaken assumption to justify putting a thumb on the scale of constitutional interpretation, where the President gets to override all because, well, one day his political opponents would block him from doing very important things. Congress could hobble our national security just as well--if not better!--by denying appropriations for defense, deauthorizing the national security programs, and even sending home the troops. Defunding might only take half of the House or a third of the Senate, while the others might require a two-thirds vote to override the inevitable veto. But if you've got two-thirds on your side, why not go ahead and impeach the President?

So if I understand Prof. Mazzone's "commander-in-chief canon" of construction correctly, this means that, notwithstanding the text of the Constitution, the President gets to make appropriations (remarkably, President Obama toyed with the idea of claiming this power to himself, albeit for very important reasons other than national security), authorize federal activities, muster an army and a navy, and ignore his own impeachment--all because Congress otherwise might prevent him, one day, from responding to a terrorist attack.

One plus is that this canon is really easy to apply--much easier than trying to unravel original meaning!--but it also transforms our federal government into precisely what it was not meant to be: a monarchy.

Of course, I don't really think that's what Prof. Mazzone was getting at. But the point is that he isn't applying a workable neutral principle of constitutional interpretation.

So I will: interpret the constitutional text as it was originally understood, with an eye to structure and purpose. In this view, there's no real indication that the Recess Appointments Clause was intended at all as a means for the President to check Congress's power but was just a gap-filler, an answer to the question of how the President might make an appointment when Congress was gone for months on end. This was a specific and narrow exception to the general rule that the Senate gets to vote on the President's nominees.

This doesn't mean that the President is powerless to act in times of emergency and senatorial intransigence. He has an extremely powerful check over the Senate: a political check. That, in some instance, the President may not wish to spend his political capital on getting his nominees confirmed is no good reason to turn the constitution on its head.

James R. Copland

On Tuesday of this week, the Supreme Court will hear oral arguments in Kiobel v. Royal Dutch Petroleum, a case that will test the extent to which U.S. law enables litigation in American courts against multinational corporations for allegedly facilitating human-rights abuses in foreign nations in violation of international law norms.

The operative statute, the Alien Tort Statute or Alien Tort Claims Act (codified at 28 U.S.C. § 1350), was a part of the original Judiciary Act of 1789, which reads, "The district courts shall have original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States."

In Kiobel, Nigerian nationals are attempting to invoke the Alien Tort Statute to sue oil companies that the plaintiffs allege worked with the Nigerian military to suppress local opposition to oil exploration. A divided panel of the Second Circuit rejected the Kiobel claim by reasoning that corporate liability was not customary international law, such that the claim lay outside the Alien Tort Statute's jurisdiction.

To discuss these issues, we are lucky to have two distinguished international law professors who each signed amicus briefs in the case, on either side. Julian Ku of Hofstra Law School signed a brief for professors of international law, foreign relations law and federal jurisdiction (PDF) that argued both that the original meaning of the Alien Tort Statute was far narrower than its current application and that the Kiobel suit was unwarranted based on Supreme Court precedent. David Weissbrodt, the Regents Professor and Fredrikson & Byron Professor of Law at the University of Minnesota Law School, signed a brief for international law scholars (PDF) that argued, conversely, that the suit was a legitimate application of international law through the Alien Tort Statute, and that the Second Circuit had misconstrued the international law in this case.

We welcome Professors Ku and Weissbrodt to Point of Law to discuss this important case. The featured discussion will be available below; please check back throughout the week as the discussion continues.

Julian Ku

Professor of Law at the Maurice A. Deane School of Law at Hofstra University. Professor Ku focuses his research on the intersection of international and domestic law. His forthcoming book, Taming Globalization: International Law, the U.S. Constitution, and the New World Order (with John Yoo), is being published by Oxford University Press.

Thanks to Point of Law for inviting me to share my thoughts on the Supreme Court's consideration of the Alien Tort Statute (ATS) in Kiobel v. Royal Dutch Petroleum.

I will use two recent op-eds on the upcoming case to launch our discussion. Each op-ed reflects how the disputants in Kiobel would like to frame their argument to the Supreme Court and to the public.

In the NYT, Peter Weiss, formerly of the Center for Constitutional Rights, focuses on the importance of the ATS in holding human rights offenders accountable and the general unfairness of excluding corporations from ATS lawsuits.

In the Washington Post, former Bush Administration State Department Legal Advisor John Bellinger, argues that ATS lawsuits are being used to harass corporations into settlements, to interfere with other nation's domestic affairs, and to embroil the United States in disputes with important foreign allies like the United Kingdom, the Netherlands, and Germany.

I think Bellinger has a very strong argument (I have joined an amicus brief in this case making very similar arguments) and I haven't seen the petitioners in this case or their amici make a very persuasive response to it. If the Supreme Court rules against the Kiobel plaintiffs, I am betting some version of this argument will be in the majority opinion.

But it is also noteworthy that Bellinger does not respond to Weiss' claim about the unfairness of excluding corporations. He doesn't do so because the "corporations are not liable under the ATS," is the kind of rigidly formalistic argument that rarely succeeds at the Supreme Court and has almost no appeal to the general public. The NYT headline to Weiss' op-ed, "Should Corporations Have More Leeway to Kill Than People Do?," neatly captures the difficulty that the Shell defendants face in making this argument.

But just because the argument is unattractive, doesn't mean it is wrong. As I argued at some length in the Virginia Journal of International Law, the question of corporate liability under the ATS is NOT about whether corporations should be held liable for aiding in humanitarian atrocities. Of course they should. But they should be held liable under the domestic law of the country where the alleged atrocities occurred, under the domestic law of the corporate defendant's place of business or registration, or under an international treaty specifying their duties and obligations.

Instead of worrying about corporate accountability generally, the question for the Supreme Court is whether Congress has granted the federal courts the broad lawmaking authority to extend international law norms to corporate entities for actions that have the most tenuous of connections to the United States. As I detail in my VJIL article and in my amicus brief, the precedents for extending international law to corporate entities ranges from few to embarrassingly few. The international precedents are so thin that the pro-ATS Obama Justice Department does not even try to make this argument in their amicus brief otherwise supporting the petitioners.

Instead, the petitioners (and the Obama Administration) have emphasized that the question of corporate liability under the ATS is a question of domestic federal common law rather than of international law. Federal courts should be allowed to impose such liability as part of their general common lawmaking powers.

I think this argument has problems, which I may discuss in subsequent posts, but it is definitely the petitioner's strongest argument. And this strongly suggests that, at least for now, international law doesn't impose duties directly on corporate entities after all. Which means that the most unattractive argument for the defendants is probably correct, even though it won't do them much good.

David Weissbrodt

Regents Professor of Law and Fredrikson & Byron Professor of law at the University of Minnesota.(1)

Thanks for inviting me to participate in an on-line discussion of the Alien Tort Statute (ATS) and the Supreme Court's oral argument in Kiobel v. Royal Dutch Petroleum, scheduled for Tuesday, February 28, 2012.

The principal issue in the Kiobel case is in interpreting a U.S, law, the Alien Tort Statute (ATS), 28 U.S.C. § 1350, which provides a unique basis of federal court jurisdiction:

The district courts shall have original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.

The statute says nothing about the category of defendant and my colleagues interpreting the history of the statute have found that when the law was enacted (in 1789), corporations were subject to suit, and "to read a corporate exemption into the ATS would be inconsistent with the statute's plain text and contrary to congressional intent." Amicus Brief of Professors of Legal History.

The argument that corporations are not liable under the ATS is not only "unattractive," but it is a mistaken interpretation of the law. This error in legal interpretation is demonstrated in the parallel statement that a corporation "should be held liable...under the domestic law of the corporate defendant's place of business."

When the Supreme Court last considered an Alien Tort case involving a corporation, it held that the ATS "did not distinguish between the category of defendants." Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428 (1989).

The Supreme Court authoritatively interpreted the ATS in Sosa v. Alvarez-Machain, 542 U.S. 692 (2004)., and held that any ATS claim must "rest on a norm of international character accepted by the civilized world and defined with sufficient "specificity," 542 U.S. at 725. As the United States has observed in its brief for the Kiobel case, the ATS claim pertains to the international-law norm itself and not to whether (or how) that norm should be enforced in a suit under the ATS. The latter question is a matter to be determined by federal courts cautiously exercising their "residual common law discretion" in holding human rights offenders accountable and the general unfairness of excluding corporations from ATS lawsuits.

In nearly every case in which an ATS claim has been presented against a corporation the courts have held that corporations can be held liable. The U.S. Court of Appeals for the Second Circuit was the first and only circuit court to hold that corporations cannot be held responsible under the ATS. Four other circuits (D.C., 7th, 9th, and 11th) have held corporations responsible under the ATS. Judges writing opinions finding corporate liability under the ATS have included Judith Rogers in Doe v. Exxon and Richard Posner in Flomo v. Firestone.

On the policy questions identified in the first post on the concerns of foreign governments, U.S. courts have been receptive to the opinions of foreign governments on a case-by-case basis where that particular case challenges the legitimate act of that government (the act of state doctrine). While a foreign government might prefer that no corporation with which it has a connection might be sued in the United States, if that corporation does business in the U.S. our laws state that the corporation is subject to suit. There is no basis to single out ATS claims for a different rule on jurisdiction. With regard to the argument about suits brought for harassment, not even one example is provided and this silence speaks volumes.

(1) Thanks to Professor Jennifer Green of the University of Minnesota Law School for her assistance in preparing this post.

Julian Ku


SULLIVAN: The crucial question that is at the threshold is which law determines whether corporations are liable.

JUSTICE BREYER: I think you are right on that point.

- From the Kiobel v. Royal Dutch Shell, Oral Argument Transcript, February 28, 2012 at 32.

This exchange between Kathleen Sullivan, the attorney for respondents Royal Dutch Shell in Kiobel, and Justice Breyer highlights the importance of the "choice of law" question to this case. The "choice of law" question is whether international law or domestic law governs the question of corporate liability.

The importance of the "choice of law" question might seem surprising. After all one might expect that a leading international human rights lawyer like Kiobel's attorney, Paul Hoffman, and a leading scholar of international human rights law like Professor David Weissbrodt, would invoke international law to justify holding corporations accountable for humanitarian atrocities. Yet both (along with the Obama Justice Department) are insisting the question of corporate liability is a matter for domestic and not international law.

The reasons for this insistence, as I argued in my prior post, is that the international law precedents for holding corporations liable for violations of customary international law are embarrassingly thin. They are so thin that the Petitioners barely mentioned them, and that the Obama Justice Department didn't even invoke them. They are so thin that Professor Weissbrodt, who spearheaded the important U.N. effort to develop norms governing the behavior of transnational corporations, does not make this argument either.

Justice Breyer's comment therefore suggests that if international law governs the question of corporate liability, the plaintiffs will lose. And that the only way plaintiffs will prevail is if they convince a majority of the Court (meaning Justice Kennedy), that the question of corporate liability is really a question of remedies, and that is a matter left to the domestic common law of the U.S.

On this "crucial" point, I still find the Petitioner's argument lacking. I don't find Amereda Hess particularly compelling, since the language Professor Weissbrodt cites in that decision was made in the context of rejecting ATS jurisdiction over a particular class of defendant (a sovereign state).

Moreover, I am surprised to hear so many distinguished international law scholars argue that the class of defendant makes no difference to the applicability of an international law norm. As several justices pointed out today during argument, this is not true with respect to international law claims against sovereign states, which are usually barred due solely to the identity of the defendant (as in Amerada Hess).

It is also not true with respect to natural persons, who may be held liable under customary international law only for the most serious jus cogens violations (as the Second Circuit in Kadic v. Karadzic held). In other words, international law usually takes quite seriously the identity of the defendant when determining whether international law norms are applicable. Depending on the identity of the defendant, the norm might or might not apply. This is not an "exemption," this is simply how international law works.

Why this approach should be different for corporations is something I don't quite understand. Certainly, there is nothing in the text of the Alien Tort Statute, or in the Supreme Court's decision in Sosa, which requires departing from the typical practice of taking into account the identity of the defendant in determining the applicability of an international law norm.

David Weissbrodt

The oral argument that occurred Tuesday, February 28th, for the Kiobel v. Royal Dutch Petroleum case focused on the application of the Alien Tort Statute (ATS) to corporations. In my first post of this series, I explained the Supreme Court's discussion of the Alien Tort Statute in Sosa, to identify an international law violation justiciable under the ATS, and I will not repeat that discussion here.

As several justices noted at yesterday's argument, however, courts have looked to international law to define the actions violating international law, and to federal common law for other matters such as the remedial structure, including the parameters of corporate liability. See Sosa, 542 U.S. at 724, 731. In Flomo v. Firestone, one of the cases I mentioned in my previous post, Judge Richard Posner stated, "International law imposes substantive obligations and the individual nations decide how to enforce them." This approach is the proper way to analyze the question, not because of a dearth of authority under international law that courts look to federal common law.

As stated in an Amicus Curiae brief, however, which I signed as one of several International Law Scholars, both under federal common law and international law, corporations are responsible for their violations of the law of nations..

To further elaborate, there is ample authority under international law for the responsibility of corporations for human rights violations, Examples include the Universal Declaration of Human Rights, which is the primary source and definition of international human rights law and provides, inter alia, "a common standard of achievement for all peoples and all nations, to the end that every individual and every organ of society...," which includes corporations. Following the Universal Declaration, the United Nations adopted two Covenants that comprise the most authoritative and comprehensive prescription of human rights obligations. The International Covenant on Civil and Political Rights, entered into force Sept. 8, 1992, with regard to the United States), similarly includes corporations in its Article 5: "Nothing in the present Covenant may be interpreted as implying for any State, group or person any right to engage in any activity or perform any act aimed at the destruction of any of the rights and freedoms recognized herein . . .". (emphasis added)

Another prominent human rights treaty, International Convention on the Elimination of All Forms of Racial Discrimination, entered into force Sept. 8, 1992, with regard to the United States), also applies to racial discrimination "by any persons, group or organization . . . ." The Convention on the Elimination of All Forms of Discrimination against Women, contains an even more explicit reference to corporations in obliging governments "to eliminate discrimination against women by any person, organization or enterprise . . .." The Convention on the Prevention and Punishment of the Crime of Genocide, entered into force Feb. 23. 1989, with regard to the United States) applies to "Persons committing genocide or any of the other acts enumerated in article III . . . whether they are constitutionally responsible rulers, public officials or private individuals" which, under international law, would include corporations and corporate officers.

The Brief of Yale Law School Center for Global Legal Challenges at 9, cites to the International Court of Justice, which has discussed "persons or entities" that committed the acts of genocide at Srebrenica. 2007 I.C.J. 43, para 393, and the International Criminal Tribunal for Rwanda found that a corporate entity, a radio station, violated the prohibition against genocide. See Yale Law School Brief at 10. Other clear examples of norms extending to corporations include the international prohibitions against torture, extrajudicial killing, war crimes, slavery and piracy.

The U.N. Sub-Commission Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights, provide in paragraph 18 that "Transnational corporations and other business enterprises shall provide prompt, effective and adequate reparation to those persons, entities and communities that have been adversely affected by failures to comply with these Norms through, inter alia, reparations, restitution, compensation and rehabilitation for any damage done or property taken. In connection with determining damages in regard to criminal sanctions, and in all other respects, these Norms shall be applied by national courts and/or international tribunals, pursuant to national and international law." Most recently in its Guiding Principles on Business and Human Rights: Implementing the United Nations "Protect, Respect and Remedy" Framework, U.N. Doc. A/HRC/17/31, paragraph 7 (Mar. 21, 2011), the U.N. Human Rights Council called for attention to "gross human rights abuses" and indicated that States "should take appropriate steps to address them. This may include exploring civil, administrative or criminal liability for enterprises . . . that commit or contribute to gross human rights abuses."

There are a number of other treaties and instruments on human rights, corruption, environmental pollution, etc. that include corporations. Altogether these treaties and other instruments establish customary international law that corporations and other persons are responsible for their human rights and similar violations within the realm of the Alien Tort Statute.

Thanks to Professor Jennifer Green of the University of Minnesota Law School for her assistance in preparing this post.

Julian Ku

It is worth emphasizing why I think the "choice of law" question is so crucial to resolving this case (and why Justice Breyer agrees with me on this point). In its 2004 decision, Sosa v. Alvarez-Machain, the Supreme Court decided that the Alien Tort Statute authorized the recognition of causes of action that were "specific, universal, and obligatory." In that case, the Court actually rejected the norm of "arbitrary detention" as insufficiently universal as applied to the facts of that case.

The idea behind the Sosa standard, the Court emphasized, is that federal courts should only be allowing lawsuits over norms that are uncontroversial and which other countries would not dispute. Reaching out and creating "disputable" causes of action overstepped the narrow mandate the federal courts have under the Alien Tort Statute, and raised the potential of federal courts causing conflicts with the President and Congress on the one hand, or with foreign countries on the other.

This baseline standard is important to keep in mind when evaluating Professor Weissbrodt's arguments in favor of a general international law duty for business corporations. Althought Professor Weissbrodt marshals some interesting precedents, I seriously doubt they would satisfy Sosa's "specific, universal, and obligatory" standard.

For instance, the Convention Against Genocide itself, which Professor Weissbrodt cites, reflects ambiguities as to whether it applies to corporations. Article IV, for instance, states:

Persons committing genocide or any of the other acts enumerated in article III shall be punished, whether they are constitutionally responsible rulers, public officials or private individuals.

(Emphasis added). As you can see, the language Professor Weissbrodt quotes does not apply generally under the Convention and, in fact, this language illustrates that the Convention does not impose any duties directly on corporations that are "specific, universal, and obligatory." The phrase "private individuals" generally refers to natural persons.

Moreover, the history of the drafting of the Rome Statute of the International Criminal Court and the trials of Nazis after World War II reflect hesitation about imposing duties directly on corporations. The drafters of the Rome Statute debated, and then decided not to adopt a civil remedy and, further, not to bring corporations within its jurisdiction. The victorious WWII powers considered, but ultimately did not bring any corporations to trial (although the owners or officers of the corporations were prosecuted). It is therefore not surprising that countries such as the UK and the Netherlands have filed amicus briefs in this case arguing that there is no general norm imposing duties on corporations under international law.

I do not doubt that corporations could, via a formal act of lawmaking such as an amendment to the Alien Tort Statute or formal treaty, acquire duties for violating certain international law obligations. This would be a deliberate decision by the Congress or the President and Senate to take a side in the development of international law norms. But that decision, which is fraught with complicated policy considerations, should be left to the Congress or the President and Senate. It should not be left wholly within the discretion of federal courts acting pursuant to a deeply ambiguous statutory mandate.

I want to thank Point of Law again for hosting this great discussion, and to Professor Weissbrodt for his participation.

David Weissbrodt (1)

The Supreme Court set forth in Sosa v. Alvarez-Machain (2004) the basic standard for recognizing whether an alien has under the Alien Tort State asserted a "civil action . . . for a tort only, committed in violation of the law of nations or a treaty of the United States." Courts have looked to international law to define actions violating international law, and to federal common law for other matters such as the remedial structure, including the parameters of corporate liability. See Sosa, 542 U.S. at 724, 731. As I previously noted, Judge Posner in Flomo v. Firestone, stated the proper analysis quite concisely: "International law imposes substantive obligations and the individual nations decide how to enforce them" The correct reading of the history of the Alien Tort Statute shows that corporations were a proper subject of tort sanctions under the ATS. See a Brief of Former United States Government Counterterrorism and Human Rights Officials as Amici Curiae in Support of Petitioners; Brief of Amici Curiae Professors of Legal History in Support of Petitioners.

As to international law, the Supreme Court decided that the Alien Tort Statute authorized the recognition of causes of action that were "specific, universal, and obligatory." The Court did not reject arbitrary detention as a norm insufficiently universal and thus not cognizable under the ATS. Instead, the Court held that a single detention of less than a day followed by due process was not sufficient to establish a violation of the law of nations under the ATS. If Alvarez-Machain had been the subject of prolonged arbitrary detention, torture, or other grave abuses of human rights, there would likely have been a different result.

Nowhere in Sosa did the Court say that norms must be "uncontroversial and which other countries would not dispute." Instead, the Sosa Court cited favorably the approach which the seminal case of Filartiga v. Peňa-Irala used to find that torture qualifies as a violation of the law of nations. Adopting this analysis, in a case involving genocide by a corporation, should result in a holding that genocide qualifies as a violation of the law of nations under the ATS. The prohibition of genocide constitutes an erga omnes and a jus cogens norm, and international law clearly recognizes that such norms are applicable to all actors, including governments, heads of state, individuals, and corporations. Barcelona Traction, Light and Power Company, Limited (Belgium v. Spain), IC.J. Rep. 3, 32 (paras. 33-35).

Furthermore, the Convention against Genocide provides erga omnes criminal responsibility for "rulers, public officials or private individuals," which would, under international law, include corporations and corporate officers. The Brief of Yale Law School Center for Global Legal Challenges at 9, cites to the International Court of Justice, which has discussed "persons or entities" that committed the acts of genocide at Srebrenica. 2007 I.C.J. 43, para. 393, and the International Criminal Tribunal for Rwanda found that a corporate entity, a radio station, violated the prohibition against genocide. See Yale Law School Brief at 10. The Yale brief also extensively discusses the sources of customary international law which extend to corporations the prohibitions against crimes against humanity, torture, extrajudicial killings, war crimes, slavery, and piracy.

The international criminal tribunal at Nuremberg and the Rome Statute are important authority under international law but they are not the only way of establishing responsibility in tort under the ATS. As concisely summarized by Judge Judith Rogers in Doe v. Exxon, the decisions of judicial tribunals are a secondary source of customary international law and the practice of nations is a primary source. Treaties and other instruments qualify as the practice of nations including corporate responsibility, as I mentioned in my second post on the Kiobel case. Actions that the D.C. Circuit considered significant were the actions taken under international law to dismantle I.G. Farben and other corporations aiding and abetting the Nazi Holocaust. In her opinion in Doe v. Exxon, Judge Rogers of the U.S. Court of Appeals for the District of Columbia wrote: "[T]he Allies determined that I.G. Farben had committed violations of the law of nations and therefore destroyed it. Judge Richard Posner also adapted this analysis, stating "At the end of the Second World War the allied powers dissolved German corporations that had assisted the Nazi war effort, along with Nazi government and party organizations--and did so on the authority of customary international law." See also Amicus Brief of Nuremberg Scholars in Support of Petitioners.

And, as noted by the United States Amicus Brief and one prominent scholar of the international tribunals, the central point is that "nothing in the history of the Nuremberg proceedings suggests that juridical persons could never be held accountable (through criminal prosecution or otherwise) for violating international law" [citing Jonathan A. Bush, The Prehistory of Corporations and Conspiracy in Criminal Law: What Nuremberg Really Said, 109 COLUM. L. REV. 1094, 1239 (2009)

As to the exclusion of corporate criminal liability in the Rome Statute (for the International Criminal Court), the brief by Ambassador David Scheffer makes clear, the negotiators' decisions "had nothing to do with customary international law and everything to do with a complex and diverse application of criminal (as opposed to civil) liability for corporate conduct in domestic legal systems around the globe." There was no civil liability imposed because it was considered outside the jurisdiction of a criminal court, and it was never "thoroughly discussed." Brief of Ambassador David J. Scheffer at 18, fn 6.

Briefs of interested nations, such as Netherlands and the United Kingdom where the Royal Dutch Shell Company is located, do not qualify as persuasive authority in establishing the practice of nations.

Ultimately, the question posed by the Kiobel case is: Is there any basis under federal common law or international law to exempt corporations from responsibility for their tortious conduct in violation of the law of nations? In examining the text, history, and context of the Alien Tort Statute, as well as the provisions of international law, the answer to that question is, "No."

I want to thank Point of Law for hosting this discussion and to Professor Ku for inviting me to participate.

(1) Thanks to Professor Jennifer Green of the University of Minnesota Law School for her assistance in preparing this post.

James R. Copland

As the Supreme Court holds oral arguments to consider challenges to the 2010 Patient Protection and Affordable Care Act on constitutional grounds, Point of Law is hosting a featured discussion that we hope will help shed light on the legal issues involved, as well as those that seem to be of particular interest to the justices. We're delighted to welcome the following legal scholars and analysts--among the leaders in their fields--to Point of Law:


Erwin Chemerinsky, University of California, Irvine School of Law

Richard Epstein, New York University Law School

Orin Kerr, George Washington Law School

Gillian Metzger, Columbia University Law School

Michael Rosman, General Counsel of the Center for Individual Rights

Nadine Strossen, New York Law School, formerly president of the American Civil Liberties Union


On Tuesday, March 27, after one day's oral argument, we'll be kicking off with comments from Professor Chemerinsky, Professor Strossen, and Mr. Rosman. Our discussion will continue over the next two weeks--come back and visit what promises to be an exceptional conversation.

Erwin Chemerinsky
Dean and Distinguished Professor of Law,
University of California, Irvine School of Law

Under current constitutional law, the federal health care law is clearly constitutional. I predict that the Court will uphold the Act and that the decision will not be close.

Perhaps the most important question before the Supreme Court is whether Congress has the authority to require that individuals either purchase health insurance or pay a penalty. This is constitutional under Congress's power, pursuant to Article I, section 8 of the Constitution to regulate commerce among the states.


Michael E. Rosman
General Counsel, The Center for Individual Rights

I'm going to focus on the constitutionality of the "individual mandate" (the requirement that almost everyone have insurance meeting certain "minimum essential requirements"). And I'd like to open the discussion by suggesting that some of the better arguments regarding the Commerce Clause are somewhat unprecedented because they focus on somewhat different text.

The Commerce Clause gives Congress the power "[t]o regulate commerce with foreign Nations, and among the several States, and with the Indian tribes." In past Commerce Clause cases, it was pretty clear what was being regulated, and the question was whether that something was regulable under the Commerce Clause. For example, in United States v. Lopez, 514 U.S. 549 (1995), Congress was regulating the possession of guns within 1000 feet of a school. In United States v. Morrison, 529 U.S. 598 (2000), it was gender-based, animus-motivated violent crimes.

Nadine Strossen
Professor of Law, New York Law School
President, American Civil Liberties Union (ACLU), 1991-2008

Although today's argument focused on a threshold issue about the timing of this litigation, U.S. Solicitor General Donald Verilli used it as an opportunity to preview tomorrow's argument about the most controversial substantive issue: whether Congress had power to pass the minimum coverage provision. At the very outset of his argument today, Verilli asserted that this provision "is an exercise of Congress's taxing power as well as its commerce power."

What is the link between the core constitutional issue of Congress's power and the seemingly disparate, technical issue on today's agenda: Whether an 1867 federal law, the Anti-Injunction Act (AIA), requires the Court to dismiss the litigation as premature? The AIA bars any "suit for the purpose of restraining the assessment or collection of any tax." Its purpose was well-captured in the opening argument by attorney Robert Long: it "imposes a pay first, litigate later rule that is central to Federal tax assessment and collection."

Gillian Metzger
Vice Dean and Stanley H. Fuld Professor of Law, Columbia Law School

Erwin Chemerinsky's post well-states the argument for the constitutionality of the individual mandate---the requirement that individuals purchase health insurance or pay a penalty---under the Commerce Clause. I agree that the mandate falls well within the existing scope of Congress's commerce power: It is a regulation of quintessential economic activity, specifically individuals' actions in accessing and paying for health care. As Judge Sutton put it, "No one is inactive when deciding to pay for health care, as self-insurance and private insurance are two forms of action for addressing the same risk. Each requires affirmative choices; one is no less active than the other; and both affect commerce." Thomas More Law Center v. Obama, 651 F.3d 529, 561 (6th Cir. 2011). And while Michael Rosman argues that requiring insurance is not the same thing as regulating how people pay for health care, I think the link between the two is plainly sufficient to fall within the broad deference given to Congress when it is addressing economic activity that substantially affects interstate commerce.

Richard A. Epstein
Laurence A. Tisch Professor of Law, New York University School of Law

Professor Erwin Chemerinsky pushes all the right buttons for the government in making out the claim that the imposition of the individual mandate is in his words "clearly constitutional" under today's law. I have written here and here that the current Commerce Clause jurisprudence of the Supreme Court is wholly inconsistent with the original vision of the Constitution as giving the federal government few and enumerated powers.

With ObamaCare, the Congress has stretched that overbroad power even further, by allowing the government to impose taxes on individuals who have not engaged in any form of activity at all. Chemerinsky takes the view that this benign intervention is intended to make sure that individuals who will always be in the need of health care will be prevented from free riding on the system by showing up without insurance coverage or cash at an emergency room.

Orin Kerr
Professor of Law, George Washington Law School

What a day. The challengers need to sweep all four of the Republican nominees who are potentially in play -- Roberts, Alito, Scalia, and Kennedy. Based on today's argument, it looks like all four of those Justices accepted the basic framing of the case offered by the challengers to the mandate. In particular, they all seem to accept that a legal requirement of action is quite different from a legal requirement regulating action, and that therefore the expansive Commerce Clause precedents like Raich did not apply to this case. That was the key move Randy Barnett introduced, and the four key Justices the challengers needed seemed to accept it. That was an enormous accomplishment for the challengers.

It's the Kennedy Court

March 29, 2012 8:05 AM

Erwin Chemerinsky
Dean and Distinguished Professor of Law,
University of California, Irvine School of Law

Two hours of oral arguments on Tuesday about the constitutionality of the individual mandate leave little doubt of what everyone expected all along: the outcome almost surely depends on Justice Anthony Kennedy. Justice Kennedy asked tough questions of both sides that allow either to be optimistic or pessimistic.

At one point, Justice Kennedy asked Paul Clement, the attorney for the states challenging the law, why the individual mandate was beyond the scope of Congress's power since it clearly could create a national health care system, tax people to fund it, and exempt those with health insurance. Justice Sotomayor expressed this forcefully when she said to Clement: "Could we have an exemption? Could the government say everybody pays a shared health care responsibility payment to offset all the money that we're forced to spend on health care, we the government; but anybody who has an insurance policy is exempt from that tax? Could the government do that?"

It's not about individual liberty

March 29, 2012 8:24 AM

Nadine Strossen
Professor of Law, New York Law School
President, American Civil Liberties Union (ACLU), 1991-2008

Many critics of the health care law's minimum coverage provision have invoked libertarian rhetoric, including their chosen, intendedly stigmatizing, label for it: "the individual mandate." They have trotted out a "parade of horribles," arguing that if the federal government can enforce this provision, then it could also subject us to countless intrusive regulations. "Broccoli" now connotes this alleged government power even to dictate what we ingest into our own bodies - as invoked several times during Tuesday's argument.

As a civil libertarian, I would be delighted if the challenge to the minimum coverage provision actually advanced individuals' rights to remain free from unwarranted government regulation. But Tuesday's arguments underscored that this is not the concern of either the challengers or the Justices who indicated support for their position.

The Limits of Limiting Principles

March 29, 2012 8:30 AM

Michael E. Rosman
General Counsel, The Center for Individual Rights

Today, I'd like to discuss General Verrilli's effort to define a limiting principle to his theories.

When pressed, General Verrilli insisted that his theories had one and relied on the tried and true commerce clause formulation that Congress must be regulating economic activity with a substantial effect on interstate commerce. (Tr. 30.) But if not buying something was "economic activity," that still left open the possibility that Congress could require people to purchase any product at all, a suggestion that made some Justices uncomfortable. To avoid that possibility, General Verrilli insisted (until he summed up and perhaps slipped a little) that Congress was not regulating the purchase and sale of insurance, and not mandating a purchase or creating commerce, but rather regulating the financing and payment associated with existing health care transactions. (Tr. 4-5, 16-17, 18, 20, 42.)

Richard A. Epstein
Laurence A. Tisch Professor of Law, New York University School of Law

In this post, I want to highlight the issue that I ducked the first time around, which deals with the relationship of ObamaCare to the original design of the Constitution. To many this little exercise could be regarded as an exploration into lost causes, but I think that it is instructive because it shows you how subtle permutations in arguments can lead, under the guise of the living constitution, to a massive revision of the basic constitutional structure--for the worse.

To do so, let me take two sentences, one from Gillian Metzger's instructive post on the taxation question, and one from Erwin Chemerinsky on the scope of the Commerce Clause. The common thread that links these together is that the Constitutional charter as now understood gives Congress a broad range of authority over both taxation and regulation that easily legitimates the scope of both the individual mandate and the Medicaid extension. But note the moves that it takes to do this. Thus Professor Metzger says with regrettable correctness that in dealing with the taxing power "there's no constitutional prohibition on forcing the young and healthy to help subsidize the old and infirm." That proposition is surely true, along with its converse, which is that there is no constitutional prohibition in asking the rich, who are elderly, to help subsidize, the poor who are not. Indeed, there is nothing in the current system of constitutional law that prevents multiple redistributive taxes working at cross purposes with each other.

But what does the spending clause actually say. Namely this:

The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; . . .
The question is how to get from this text to the conventional wisdom that Metzger accurately conveys. It is not possible except by sleight of hand. Obviously, the taxing power was new to the Constitution. The general welfare is mentioned after the repayment of debts and the common defence. These are classic public goods that must be supplied to all if they are supplied to any persons. The basic theory is that government could tax to deal with those issues to overcome a collective action problem. The general welfare is linked to these, and it bound at the end by reference to the words "of the United States," which refers to the entity whose general welfare is at stake. The system of madcap redistribution is the antithesis of a public good, because far from benefiting everyone uniformly to the extent institutions can do so, it authorizes transfer payments that help some and hurt others. The redefinition of general welfare to include transfer payments is of stupendous importance. It expands the definition of a public good a thousand-fold, and opens the door to factional strife in the bargain.

Professor Chemerinsky is equally casual with the original Constitution design. His view of the living Constitution led him to observe that "[t]he framers could not have anticipated a country with 50 million people without health insurance or the enormous costs that imposes on the economy." Actually, they did, after a fashion, because they knew the dangers of any major departure from fundamental principles.

What Chemerinsky fails to ask is why there are 50 million uninsured. It is not a brute or necessary fact of nature. It is in fact a function of the very failed policies that he continues to support. Introduce a system of limited federal powers, and strong protections for economic liberties, and you don't get into the box where state and federal regulations and mandates can close down the voluntary market. And you certainly do get to unsustainable system of government rigged exchanges that are all too likely to increase the number of persons who will be forced to do with no or inferior health care.

Perhaps the living constitution allows this nation to move rapidly in reverse, but the laws of supply and demand are not so malleable. So when the government chooses a system that raises costs to produce and clamps down on their revenues, it is destined to fail. The correct intellectual response is not an apology for ObamaCare, but a sober understanding that the living constitution (which always evolves, alas, in collectivist fashion) is fraught with political and economic risks that will lead to the long-term decline of the United States. Striking down the ACA is a good way in which to reaffirm the founding principles, which by any standard of political wisdom and social welfare beat the living constitution hands down in any head-to-head competition.

Gillian Metzger
Vice Dean and Stanley H. Fuld Professor of Law, Columbia Law School

The argument on Tuesday made two key points clear. First, the five more conservative Justices are worried that allowing Congress to require individuals to buy health insurance before they seek healthcare would mean Congress's power has no bounds. Second, and as important, these Justices appear to accept that Congress could require individuals to obtain insurance when they do seek healthcare---presumably, because at that point, individuals are engaging in economic activity on their own volition. Indeed, both Paul Clement and Michael Carvin agreed that Congress could require insurance as a condition of getting healthcare.

Put these two points together, and the facial challenge to the mandate has to fail---even if a majority of the Court rejects the argument that everyone is active in the market for healthcare because everyone will seek healthcare at some point in their lives. That's because tens of millions of uninsured currently seek healthcare each year---57% of the 40 million uninsured, to quote a leading study. On the reasoning above, the mandate is constitutional as applied to this substantial group of people. Whether the test for a facial challenge is that it can only succeed if there's no constitutional application, or that it can succeed only when a challenged provision lacks any plainly legitimate sweep, the mandate meets it. As a result, the Court plainly should reject the facial challenge, and at most hold the mandate unconstitutional as applied to individuals who do not use healthcare in a given year.

Of course, that's assuming the Court adheres to its current doctrine that facial challenges are disfavored and that courts should avoid invalidating more of a statute than necessary. Resistance to facial challenges has been a pronounced characteristic of the Roberts Court. But the arguments on both Tuesday and Wednesday suggested that adherence to current doctrine isn't exactly the Court's paramount concern in these cases. The conservative Justices seemed unconcerned about the mandate's central role in ensuring the effectiveness of the ACA's regulation of insurers, even though in 2005 they sustained regulation of local noneconomic activity in Gonzales v. Raich on these grounds. They also seemed undeterred by the Court's repeated acceptance of conditional spending arrangements. If the Court is willing to cast aside core doctrines that have governed its assessment of congressional power challenges since the New Deal, asking for consistency on the facial challenges front may well be unrealistic.

Orin S. Kerr
Professor of Law, George Washington Law School

Based on this week's oral arguments, there is a very real chance that the Supreme Court might strike down the Affordable Care Act in whole or in part. What might change if that happens, beyond the obvious difference that the invalidated parts of the law would no longer be in effect?

Many have speculated about how such a decision might impact the 2012 race. I don't think there's an easy answer. On the Democratic side, such a decision might help because it lets Obama run against the Supreme Court; it might hurt because it denies Obama his most significant legislative accomplishment. On the Republican side, such a decision might help because it helps sell the narrative that Obama has gone too far; it might hurt because it takes away an unpopular law that Republicans could run against. Which of these possibilities are strongest? I just don't know.

The decision might also help reorient the basic constitutional narratives of the two parties. Since the Nixon Era, politicians from the two parties have each generally sounded a simple theme. Democrats generally endorse some form of a living Constitution and an active Supreme Court; Republicans generally endorse some form of strict construction and not legislating from the bench. There have been many variations from this theme over time. But, for the most part, that basic narrative has held its rhetorical force. If the Supreme Court strikes down the ACA on a 5-4 vote, however, those two sides just might flip. We may see Democrats come to extol judicial restraint and Republicans come to celebrate judicial power.

Finally, a decision striking down the ACA would inject the Supreme Court into the political arena in a way we haven't seen in many years. Remember the timing. The basic theory for why the ACA might be unconstitutional wasn't articulated until around the time the legislation was enacted. That theory quickly became an article of faith on one side of the aisle and the object of derision on the other side. If the Court uses those theories to knock down the legislation on a party line vote of 5 Republican nominees to 4 Democratic nominees, many will view the decision as politics masquerading as constitutional law - sort of a Bush v. Gore but with more lasting impact on constitutional law.

Nadine Strossen
Professor of Law, New York Law School
President, American Civil Liberties Union (ACLU), 1991-2008

At the conclusion of his argument in the Court's final session last Wednesday afternoon, U.S. Solicitor General Donald Verilli moved beyond the specific Medicaid expansion issue then on the Court's agenda, to argue more broadly that the Medicaid expansion, as well as the minimum coverage provision and other core aspects of the new law, will promote the equal "opportunity to enjoy the blessings of liberty." As Verilli urged, "it's important that we not lose sight of" the important ways in which the law advances liberty and equality, especially because its detractors have demonized the minimum coverage provision as violating both core constitutional concerns.

Three major national civil liberties and civil rights organizations - the American Civil Liberties Union, the NAACP Legal Defense & Educational Fund, and the Leadership Conference on Civil and Human Rights -- filed a friend of the court brief in the Supreme Court precisely to make the case that the minimum coverage provision has an overall positive impact on the intertwined constitutional guarantee of individual liberty and equal opportunity. For example, the ACLU summarized its "substantial interest in" this issue as being due to "its potential impact on the ability of millions of uninsured Americans to participate more fully in the economic, political, and social life of the Nation." This important perspective hasn't received as much attention as it deserves.

Numerous studies have documented that the uninsured are less likely to obtain adequate health care, thereby suffering many lost opportunities, which decreases both the quality and length of their lives. For example, children with untreated health problems are less likely to attend and to perform well in school. Being uninsured also correlates with other adverse educational outcomes, including failing to graduate from high school or to attend college.

The burdens of costly health care, and of being uninsured, are imposed disproportionately on members of our society who are relatively disempowered within the political system, including people of color, people with disabilities, low-income families, women, and senior citizens. Individuals in these groups inordinately experience unemployment, jobs that do not offer health insurance, and lower incomes that make insurance premiums unaffordable. The United Nations Committee that oversees compliance with the international Convention on the Elimination of all Forms of Racial Discrimination - to which the U.S. is a party -- recently noted its concern that in our country, "a large number of persons belonging to racial, ethnic, and national minorities still remain without health insurance and face numerous obstacles to access to adequate health care."

In sum, by lowering the cost of health insurance, the minimum coverage provision will make health care more affordable and accessible, thus enhancing liberty and equality for the millions of uninsured Americans. In contrast, this provision imposes only minimal burdens on individual liberty.

First, although its detractors refer to the minimum coverage provision as a "mandate," it does not in fact require anyone to purchase insurance. Rather, anyone may opt instead to pay a financial penalty, which is enforced through an offset of any tax refund that the government would otherwise have to pay. This arrangement certainly does not constitute direct government compulsion, and in many situations may well exert only limited influence on an individual's choice whether to buy insurance.

More fundamentally, this provision doesn't implicate any liberty interest that the Court has deemed constitutionally protected. For example, it doesn't force anyone to undergo any medical treatment or to receive any health services - which would infringe on fundamental freedoms of bodily integrity and medical decision-making. Instead, because the minimum coverage provision is an economic regulation, the asserted right to resist it is akin to the long-repudiated "liberty of contract" that the pre-1937 Supreme Court had read into the Constitution, substituting its own laissez-faire economic philosophy for our elected officials' policy choices.

Such judicial invalidation of economic regulations designed to promote equal access to health and welfare for the most vulnerable groups in our society, in the service of a judge-created "freedom of contract," has long been discredited as inappropriate judicial activism. If the Roberts Court resuscitated this approach, it would be promoting not individual liberty, but rather, judicial hegemony.

Michael E. Rosman
General Counsel, The Center for Individual Rights

Under the Necessary & Proper Clause, Congress has the power "to make all laws which shall be necessary and proper for carrying into execution the foregoing powers." The N&P Argument for the individual mandate is fairly straightforward, and perhaps the government's best argument. Congress relied on its Commerce Clause authority to regulate insurance company practices in the individual market, requiring the companies to adhere to "guaranteed issue" and "community rating" principles. (Everyone gets a policy and those with health issues cannot be charged more because of them.) With those principles, the argument goes, people might wait until they get sick before buying a policy; with only the sick buying policies, the costs to insurers will skyrocket and they will charge more for each policy, making the policies themselves much more expensive. The individual mandate precludes people from gaming the system like that, and thus is a "necessary and proper" addition to the insurance company regulations.

To this, the challengers reply that Congress cannot create the problem that requires fixing, or its powers would be unlimited. As the private challengers noted, Congress could "compel the purchase of any product burdened in any way by federal regulation, which is every product." The challengers and their amici focused on the requirement that laws must be "for carrying into execution the foregoing powers." One can fully execute a law by eliminating barriers to its enforcement, not by regulating third parties outside of the original regulation who can help lower the burdens of that initial law. They argue that the insurance company regulations (and, thus, Congress's Commerce Clause authority) could be perfectly executed without the individual mandate. The N&P Clause may give Congress the authority to punish insurers who fail to comply with its regulations, but it does not give Congress the authority to regulate outside of the enumerated powers solely to make the insurance regulations more desirable.

The authors of a recent scholarly book on the history and origins of the N&P Clause added their own enlightening amicus brief. According to them, the "necessary" requirement meant an "inferior" power deemed a necessary or customary means of executing a greater power - e.g., creating a national bank to collect revenues and make expenditures or adopting criminal laws or civil fines to deter violation of another law. The "proper" requirement invoked certain kinds of fiduciary responsibilities like impartiality and good faith. Under the proper understanding of the clause, they argued, the "individual mandate" failed to meet either requirement.

So the Court has much to choose from in analyzing whether the individual mandate is justified under the Necessary & Proper Clause. We can only hope that its decision will at least address some of the arguments noted here.


* * *

I want to close by responding briefly to Professor Metzger's suggestion that the Court cannot declare the statute facially unconstitutional under its precedents. This ignores the unique posture of Commerce Clause cases in which Congress's power to regulate activities "substantially affecting commerce" are decided. As Professor Metzger's well-known Columbia Law Review article itself noted, the Court's "class of activities" test in that area has rendered as-applied challenges "in practice impossible." (105 Col. L. Rev. at 906.) Moreover, Alfonso Lopez was actually being paid to deliver a gun and Christy Brzonkala (the private plaintiff in Morrison) argued strenuously that the statute there could be upheld as applied because it affected financial transactions she would have made with her college. If the Court ignores any "as applied" possibilities here, it will be nothing new. To the contrary, it will be consistent with its practice in this area.

Thanks to Point of Law and the Manhattan Institute for letting me participate in this excellent discussion!

Gillian Metzger
Vice Dean and Stanley H. Fuld Professor of Law, Columbia Law School

One well-established federalism argument was notably absent for most of the oral argument last week: the role that political accountability plays in checking Congress. Political accountability repeatedly appears in congressional power decisions, going back to Chief Justice Marshall's decisions in McCulloch v. Maryland and Gibbons v. Ogden. In more recent years, the Court famously invoked political accountability as a reason for the Court to not exempt the states from generally applicable legislation in Garcia v. San Antonio Metropolitan Transit Authority, and then subsequently as a justification for the Court to protect states from federal commandeering in New York v. United States and Printz v. United States.

But political accountability barely surfaced in the argument on the individual mandate, raised primarily by Justice Breyer who described political accountability as "the greatest limiting principle of all" on Congress, but one "which not too many accept." (Tr. 76). It was not until midway through the last ACA argument, on the Medicaid expansion, that the topic of political accountability was more fully engaged. Political accountability was Paul Clement's answer when Justice Kennedy asked "[h]ow are the interests of federalism concerned if ... there are huge Federal bureaucracies doing what this bill allows the state bureaucracies to do?" (Tr. 37). Justice Kennedy then pushed Solicitor General Verrilli on the subject, asking "do you agree that there still is ... necessary for the idea of federalism, that there be a clear line of accountability so the citizen knows that it's the Federal or the State government who should be held responsible for their program?"(Tr. 65-66).

This largely one-sided invocation of political accountability on behalf of the ACA's challengers should be surprising. To begin with, political accountability would seem to count in favor of the Medicaid expansion. Political pressure from their citizens is a major reason that the states feel compelled to participate in Medicaid; turning down the substantial federal funds offered to subsidize healthcare for poor state residents is not a popular political choice. Thus, what the states are seeking is to be freed from political accountability for such a decision, rather than to have their accountability enhanced. Nor does the claim that state voters are confused about which government to blame for features of federally-funded state programs fit recent experience. States have had no difficulty pointing the finger at the feds for the impact Medicaid requirements have on state budgets, or for the testing and accountability measures mandated by No Child Left Behind's conditions on federal educational funds.

As important, this one-sided approach obscures the extent to which the ACA is a product of longstanding political debate over how to assure individuals and families in this nation affordable access to healthcare.The rejection of the "public option" in favor of a model based on private insurance reflected, in part, the judgment of Congress that the former would constitute too dramatic and intrusive move on the part of the federal government. Political pressure is also responsible for the central role accorded to the states in key reforms, such as the reliance on state health exchanges and state insurance regulators. Recognizing that the political safeguards of federalism still have potency does not mean that the Court should stay out and leave federalism enforcement to Congress. But it underscores that Congress is not simply out to expand its own powers, and that its legislative judgments about how best to balance federal and state functions need to be taken seriously.

Finally, in response to my earlier post on facial challenges, Michael Rosman argues that sustaining a facial challenge to the mandate is consistent with the Court's commerce clause precedent in United States v. Lopez and United States v. Morrison. In fact, the opposite conclusion follows. Rosman is correct that in those cases the Court sustained facial challenges. But it did so after concluding that the class of activities regulated by the legislation at issue in those cases was noneconomic activity that fell outside of the scope of the commerce power. The point I was highlighting is that a similar conclusion is hard to justify here, given the seeming agreement that a broad swath of the activity regulated by the mandate would indeed fall within Congress's power. Put differently, as a regulation of the class of activity of accessing and financing healthcare, the mandate is facially constitutional. If the Court views Lopez and Morrison as limiting it to facial resolution in the commerce power context, then it should stop there; the tests for facial invalidation simply are not met. Moreover, the Roberts Court has repeatedly emphasized that facial challenges should be viewed with disfavor, which should counsel heavily against suddenly switching to a more lenient approach to facial challenges.

Many thanks for the chance to participate in this engaged debate.

Ideologies of Federalism

April 3, 2012 11:59 AM

Erwin Chemerinsky
Dean and Distinguished Professor of Law,
University of California, Irvine School of Law

Since the country's earliest days, federalism has been used as a political argument primarily in support of conservative causes. During the early 19th century, John Calhoun argued that states had independent sovereignty and could interpose their authority between the federal government and the people to nullify federal actions restricting slavery.

In the early 20th century, federalism was successfully used as the basis for challenging federal laws regulating child labor, imposing the minimum wage, and protecting consumers. During the depression, conservatives objected to President Franklin Roosevelt's proposals, such as Social Security, on the ground that they usurped functions properly left to state governments.

During the 1950s and the 1960s, objections to federal civil rights efforts were phrased primarily in terms of federalism. Southerners challenged Supreme Court decisions mandating desegregation and objected to proposed federal civil rights legislation by resurrecting the arguments of John Calhoun. Segregation and discrimination were defended not on the grounds that they were desirable practices, and more in terms of the states' rights to choose their own laws concerning race relations.

In the 1980s, President Ronald Reagan proclaimed a "new federalism" as the basis for attempting to dismantle federal social welfare programs. In his first presidential inaugural address, President Reagan said that he sought to "restore the balance between levels of government." Federalism was thus employed as the basis for cutting back on countless federal programs.

Hindsight reveals that federalism has been primarily a conservative argument used to resist progressive federal efforts, especially in the areas of civil rights and social welfare. It is no surprise, then, that in their questioning of the lawyers, the conservative justices expressed great skepticism about the constitutionality of key aspects of the Affordable Care Act.

But after reading the transcripts of the oral arguments (and listening to much of them), I remain convinced that this should be an easy case for the Court. The individual mandate is no different from social security tax that allows an exemption for those with their own retirement account. It is hard to imagine how Congress cannot regulate under its commerce power a segment of the economy that is $2.6 trillion, especially as Justices Scalia and Kennedy acknowledged because those who do not purchase insurance directly affect the rates of those who do. If Congress, under its commerce power, can regulate Angela Raich growing marijuana for her own personal use, surely it can regulate health insurance.

Nor should the constitutionality of the increased burden on the states to participate in the Medicaid program be a difficult question. No state is required to participate in the Medicaid program. If it chooses to do so, it must meet certain conditions. This is true of countless federal programs. Under the current Medicaid law, the federal government pays between 50 and 80% of a state's costs. But under the Affordable Care Act, the federal government initially pays 100% and in 2021 it becomes 90%. If the burden on the states under the Affordable Care Act violates the Tenth Amendment, then why doesn't the current law? There is a difference between forcing the states to do something and given them a strong financial inducement.

The oral arguments gave no clear sense of what the Court will do, except perhaps that there does not seem to be a majority to dismiss the case based on the Anti-Injunction Act. The justices asked hard questions of both sides and pundits offering predictions are just picking the ones that most support their views.

Every lower federal court judge appointed by a Republican President, with two exceptions, voted to strike down the law. Every lower federal court judge appointed by a Democratic President, with one exception, voted to uphold the law. The crucial question is whether the Supreme Court justices will see it any other way. Will the historic liberal and conservative divide over states' rights determine the outcome of this case? We'll know in June.

Richard A. Epstein
Laurence A. Tisch Professor of Law, New York University School of Law

The excellent posts by Gillian Metzger and Erwin Chemerinsky go beyond the particulars of the Affordable Care Act to address more general considerations of federalism. Stated in a nutshell, their view of the subject is that broad conceptions of political accountability afford the one key check that is needed on adventuresome legislation by which the federal government is respectful of the role that the states play in the structure of the political system. To Gillian Metzger, for example, the Medicaid expansion program should be approved because the states have to take political accountability for their decisions. She writes:

Political pressure from their citizens is a major reason that the states feel compelled to participate in Medicaid; turning down the substantial federal funds offered to subsidize healthcare for poor state residents is not a popular political choice.

This argument misses the force of the case against the Medicaid expansion. Why not divide the states into two classes? Those states that want to accept the program should, in my view, be entitled to participate even if key portions of the Medicaid expansions are cut. By the same token, the states that don't want to accept the program should be free to turn it down without having to sacrifice all the funds that are now contributed by the federal government to allow the states to run their programs for persons whose income is below poverty levels.

Put otherwise, the only objection here is to the unprecedented--to use everyone's favorite term--conditions that the federal government uses to bully states into the program. They are not allowed to reorganize the delivery of their services for the below-poverty line populations. And they must incur the very heavy administrative costs of running the expanded Medicaid program for new individuals.

In addition, Metzger's argument has to do work not only for this particular iteration of the Medicaid expansion, but also has to carry the day if the federal government added new burdens or new conditions to the Medicaid expansion. A state like California receives some $25 billion in Medicaid money for its current recipients. It will, as a moral certainty, be driven into the new program so long as its conditions cost it less than the money it forfeits.

We should, moreover, reject the reply that the loss of funds goes to the individual recipients and not to the state. But so what? This is not a condition wherein the federal government says to California that if you do not play along, then we shall take the money from Medicaid recipients in Oregon. Clearly the target was to drive the state which has all sorts of special obligations to its own citizens. One might as well say that there is no coercion involved when the gun man says give me your wallet or I will kill your mother.

None of these dire conclusions are softened by the political accountability doctrine.Taken to its limits, the doctrine means that the Constitution imposes no limits whatsoever on what the federal government can do in its relationships with the state by taxation, regulation and spending. Indeed, it goes so far that the terrible decision in South Dakota v. Dole is needlessly protective of the state because there is no such thing as coercion in the use of any of its powers. Yet if the doctrine does not go that far, then just how far does it go? Neither Metzger, nor any other defender of the doctrine explain its limits.

Indeed the situation is worse than this, because Metzger offers no explanation as to why there is not tremendous political exposure to those states that wish to reject the funds, just as there is to those states that want to accept them. This is one of the major decisions that state governments have to make, and if they make the wrong one, they will pay a price. Put otherwise, there is always political accountability. The key question therefore, is to get the federalism arrangements correct. It is not to use this doctrine as a trump that obviates the need to make a closer review of the overall situation.

Space does not permit a full examination of the Chemerinsky post that engages in too much name-calling and not enough analysis. There are many uses and abuses of federalism in dealing with federal state relationships. There are also many explicit limitations that the Constitution places on the states through the Fourteenth Amendment that it authorizes the Congress to enforce against the states by appropriate legislation. John Calhoun no longer walks the halls of Congress, and indeed the great sin of the Reconstruction period was its narrow construction of the Privileges or Immunities Clause, which allowed southern states exclusive and abusive control over the criminal justice system.

What that has to do with the current issue is anyone's guess. For different, the invocation of competitive federalism in connection with the child labor laws raises other issues, only here competitive federalism worked far better than a national standard. Chemerinsky is so committed to progressive causes that he is blind to the way in which his own brand of politics is used to sanctify the New Deal transformation of a Constitution of limited federal powers into one that allows federal force to control markets where it ought not to enter. It is, alas, too late to turn back the clock on Wickard v. Filburn. It is high time to recognize its massive errors by refusing to extend its logic one inch further.

Let us hope that the Supreme Court will exorcize the political accountability doctrine, and strike down both Title I and Title II of the ACA.

A Sense of Deja Vu

April 4, 2012 11:51 AM

Orin S. Kerr
Professor of Law, George Washington Law School

Five years ago, I participated in an online debate much like this one with several of the participants in our exchange today. The discussion focused on a pending case, the then-recent decision of the Fourth Circuit in al-Marri v. Wright. Al Marri had held that a suspected al Qaeda terrorist who was seized in the United States could not be held in military detention. Erwin Chemerinsky weighed in, as did Richard Epstein and myself.

Five years later, the band is back together. Or at least some of us are. A different President is in power, and the political stakes have changed. It's a different website. And this time around we're discussing the scope of Congressional power, not the detention power. Judicial power has switched from a liberal position to a conservative one, and judicial restraint from a conservative position to a liberal one. But the debate seems to be similar, even though many analysts have changed sides.

I drew the comparison earlier, but I think it's worth revisiting. In both the health care and the detention debates, the general disagreement boils down to judicial deference versus adherence to constitutional norms seen as embedded in the text. In the detention cases the text was the Habeas Clause, and the norm was that the Great Writ must guarantee judicial review of detention. In the case of the health care litigation, the text is the Commerce Clause, and the norm is that the federal government must be a government of limited powers. In both cases, the opposing side acknowledges the basic principle but concludes that it does not require invalidating the law or practice at issue, especially in light of the need to defer to the elected branches. It's not exactly the same question, of course. But I think there are some very interesting similarities.

However the Court rules, I suppose we can all look forward to 2017, when we'll be back to debate the next round in the separation of powers battle among the three branches.

James R. Copland
Director of Manhattan Institute's Center for Legal Policy

We're proud to have Ted Frank as a Manhattan Institute adjunct fellow and editor of Point of Law, but most of our readers also know that Ted's primary job these days is running the Center for Class Action Fairness, a non-profit entity Ted founded that challenges class action settlements that, in Ted's view, unfairly compensate plaintiffs' counsel at the expense of the class. Scholars at the Manhattan Institute's Center for Legal Policy (CLP) have long worried about abuses of the modern American class action, which have become ubiquitous since Rule 23 of the Federal Rules of Civil Procedure was changed in 1966 to treat all potential class members as class litigants unless they affirmatively opted out of litigation.

In 2002, CLP visiting scholar Richard Epstein, now of NYU law school, articulated the merits and pitfalls of class action practice in a Civil Justice Report and concluded that "we cannot make a uniform assessment of the overall effects of class action practices," since they are "benevolent in some cases and harmful in others." In his 2010 book Lawyer Barons, CLP visiting scholar Lester Brickman, of Cardozo Law School, discussed in depth the degree to which class counsel, operating without a true client, can collude with defendant companies to expropriate unjust fees in class action settlements, in many cases negotiating away plaintiffs' legitimate legal rights.

Like Professor Epstein, Ted is not opposed to all class actions, but he's particularly concerned about the fee abuses Professor Brickman highlights. Other legal scholars, however, have defended current class action practice, including fee awards, as essential to deterring corporate misconduct. Foremost among these academics is Brian Fitzpatrick of Vanderbilt Law School, who has argued that class counsel should receive as much as 100% of awards as fees in small stakes cases. Ted and Brian have been sparring about this issue recently in many live forums, and we are happy to welcome Professor Fitzpatrick to Point of Law to debate the issue here, with our editor.

Brian T. Fitzpatrick

I am honored once again to be paired with Mr. Frank for a discussion of our class action system. As he anticipated, I agree with much of what he had to say. Like all humans, the participants in our class action system--class members, class action lawyers, defendants, judges--are self interested. As in all human endeavors, that self interest can be channeled for good or for bad. Which one we get depends on how carefully we design the system.

One of the biggest design concerns with the present system is the one Mr. Frank has spent so much time trying to ameliorate: the near total absence of adversarial testing of class action settlements. Without such testing, the self interest of all involved, as Mr. Frank noted, can lead to socially-detrimental outcomes. Although I do not agree with all of the objections to class action settlements that Mr. Frank has filed--I do not agree, for example, with his comments about the settlement in the Bank of America Overdraft Litigation, as I note below--I do appreciate the important role he serves as a devil's advocate.

Ted Frank

Fitzpatrick points to his study showing $5 billion of fees for $33 billion of recovery. But that analysis is flawed in several ways. First, most acknowledge that fees should be smaller for megafund cases, but when you add megafund cases to tiny cases, the statistical effect of the megafund case is to overwhelm the overpayments in the smaller cases. If attorneys collected $4 billion for a $30 billion settlement, that would be too high: it's not 1000 times more difficult to bring a $30 billion case than a $30 million case; meanwhile the other $3 billion from several hundred cases would result in $1 billion of fees, which is also too high. So "only" 15% recovery may well be too high, depending on what the mix of cases looks like.

Second, the study mixes apples and oranges. Securities cases, which make up the larger share of class action settlements, generally have lower percentage fees than consumer-fraud class actions. That's because securities cases are more likely to have sophisticated lead plaintiffs, and better distribution of settlement funds to class members. That ends up supporting my argument more than Fitzpatrick's: securities cases are harder to bring, and are more likely to lose on a motion to dismiss because of higher pleading standards. Yet, with even the minimal constraints provided by the PSLRA, securities attorneys end up getting a much smaller percentage than consumer-class attorneys, showing how much the consumer-class attorneys are getting overpaid. But the securities attorneys are overpaid, too. First, the PSLRA requires fees to be a reasonable percentage of the amount actually paid to the class, but this statutory language is generally ignored by the settling parties and the courts: in the Franklin Templeton Mutual Fund settlement, the attorneys are asking for almost as much money as the amount that will actually be paid to the class, because they include payments to third-parties such as the settlement administrator in their denominator, against the express language of the PSLRA. Second, the PSLRA forbids courts from using the Vaughn Walker method of requiring class counsel to bid for lead-counsel status, but we know from experience that that market constraint results in multiple bids from experienced counsel that are much lower than what class counsel tend to get in securities cases today. So Fitzpatrick's study hides how much attorneys are being overpaid.

Third, Fitzpatrick's study hides how much attorneys are being overpaid in another way, by exaggerating the denominator. That "$33 billion" figure is fictional: it includes "injunctive relief" that doesn't actually benefit the class. The Fitzpatrick study would count the Blessing v. Sirius XM settlement as worth $180 million, when it actually pays zero to the class. (I'm filing a reply brief in the Second Circuit in that case.) And in securities cases, much of the settlement fund is coming out of the pockets of class members who bought-and-held the defendant's shares: those payments from the right-hand pocket to the left-hand pocket are a loss, not a gain, for shareholders. (Such settlements really raise 23(a)(4) questions when they don't bring in new money from third parties.) But the full amount counts in the denominator, even though it didn't win the class anything.

The cases where the lawyers are abusing the system are not an anomaly. When the Center for Class Action Fairness is deciding whether to take a case, it's almost always deciding between cases where the attorneys are abusing the system a little, or whether they're abusing the system a lot.

More facts on attorney fees

April 19, 2012 8:25 AM | No Comments

Brian T. Fitzpatrick

It is true, as Mr. Frank notes, that courts generally award smaller fee percentages in bigger settlements, but, even still, the data do not support the conventional wisdom that the lawyers are making out with everything: the mean and median fee awards in class action settlements are only 25%, and the highest fee percentage awarded in any case over the two years in my study was 47%. Even 47%--which was an outlier by any measure--is far from everything.

Mr. Frank claims that these numbers are misleading, but I think his criticisms miss the mark. He says that my numbers are driven down by securities fraud settlements because courts tend to award lower percentages in those settlements; he suggests that the numbers are "much" higher in other areas. My study did show that percentages in securities cases are lower than the percentages in some of the other subject areas, but the percentages are not "much" different: as Tables 8 and 12 of my study show, the percentages in other areas are only two or three points higher. (Mr. Frank thinks that even this is perverse because he thinks securities fraud class actions are much more difficult to bring in light of their stricter pleading standards. But Mr. Frank forgets that it is much easier to certify a securities fraud class action than it is to certify most other class actions due, among other things, to the fraud-on-the-market presumption of reliance. Overall, I suspect it is actually less risky to bring a securities fraud class action.)

Mr. Frank also claims that my numbers are misleading because they are based on exaggerated denominators: class action lawyers, he says, ask for a percentage of the value of the injunctive relief they win as well as the cash they recover, and the values they place on these injunctions are not real. Class action lawyers may ask for it, but my study did not give it to them: my study included valuations of injunctions in the denominator only when the valuations were by courts rather than lawyers (and this was not very often). All told, only 4% of the $33 billion denominator in my study comes from valuations of non-cash relief. Even if this amount is thrown out, the share taken by class action lawyers barely budges: it is still right around 15%.

The final word on fees

April 23, 2012 8:20 AM | No Comments

Brian T. Fitzpatrick

Mr. Frank criticized the methodology in my study because it is based on settlement amounts approved by district courts rather than settlement amounts actually distributed to class members. He's right about that, but, again, it turns out not to make much of a difference to the portion that attorney's take from settlements. The vast majority of the money approved by courts is distributed pro rata--meaning it is all distributed, and how much each class member gets depends on how many others submit claims. Thus, even if we were to ask what portion of distributed money goes to class action lawyers, the answer would be about the same.

This is not to say that there aren't isolated examples where the only ones defendants end up paying are the lawyers. But it is to say that these cases are not representative. It is almost unheard of for undistributed settlements to revert back to defendants these days. If they cannot be distributed to class members, they at least go to third parties like charities; either way, the deterrence gained is the same.

Mr. Frank returned to the Bank of America settlement, but, again, I do not understand why. In one breath, he says the lawyers there did not take on any risk, but in the next he acknowledges that Bank of America had already settled the same claims for a fraction of a cent on the dollar. The fact that the new lawyers managed to persuade Back of America to resettle the case for over ten times the original amount is not just good lawyering, it is remarkable lawyering. They deserved to be paid handsomely. So what if they made a multiple of their hourly rate? The lodestar method fell into disfavor in class action litigation previously because it rewarded lawyers for dragging things out rather than getting results. The percentage method rewards results, and remarkable results should be rewarded with remarkable fees.

I will close on one point on which Mr. Frank and I agree. The optimal method for awarding fees is not to do so ex post by trying to divide some fair percentage of the settlement. It is to do so ex ante by auction. But until courts warm up to that, we will continue with the second best. And that is the percentage method, not the lodestar

James R. Copland

Anyone who's been following the news cycle even casually has heard about Harvard Law professor and U.S. Senate candidate Elizabeth Warren's ill-documented claims of (trace) Native American ancestry. Harvard faculty, including Reagan solicitor general Charles Fried, have been quick to claim that Warren's appointment was based on her academic and teaching credentials, rather than to further faculty "diversity"--a claim that at least on the surface seems to undercut the legitimacy of diversity hirings in the first instance.

As someone who was a student and active campus participant at elite academic institutions in the 1990s, I saw first-hand the significant pressure placed on administrators by students eager to diversify faculties that were overwhelmingly white and male (a composition one would expect in that era for bodies of lifetime-appointed professors). At the University of North Carolina, a key rallying cry for campus activists in the early 90s--and a regular agenda item on the student advisory committee to the Dean of the College of Arts and Sciences, on which I served--was the call for a "Native American faculty member." Any member, in any discipline, with essentially any record. At Yale Law School, which sponsored a free-speech wall in which students could voice their signed opinions in the days before blogs, Internet message boards, and social media, certain students grabbed a significant portion of the available space by blowing up the profile pictures of the entire faculty to emphasize its whiteness and maleness. (My bold red counter-poster, "diversity is more than skin deep," asked how many of the faculty were registered Republicans, Evangelical Christians or Latin-Mass Catholics, or the like? It proved provocative, though it did highlight the "dirty little secret" of the true agenda of those calling for diversity.) As vigorous as the student protesters were at my own alma maters, they had nothing on the student protesters at Harvard Law School around the time Elizabeth Warren was offered tenure, who stormed the dean's office and won a seat at the table with the faculty appointments committee.

To discuss the issue of faculty diversity, particularly as it relates to law schools, we're thrilled to welcome back our founding editor, my friend and former colleague Walter K. Olson. Since leaving MI for the Cato Institute in 2010, Walter has released his fourth book, Schools for Misrule: Legal Academia and an Overlawyered America, which as its title suggests makes him eminently qualified to opine on this subject.

In addition to Olson, we are excited to welcome the Competitive Enterprise Institute's Hans Bader, where he serves as senior attorney and counsel for special projects. Hans was formerly a senior counsel with the Center for Individual Rights, which has led many of the legal challenges to government affirmative-action programs.

Opposite Olson and Bader, we are happy to welcome Texas Law professor Gerald Torres, a former president of the Association of American Law Schools and a leading proponent of Critical Race Theory. Among Professor Torres's many writings about race and diversity is his 2002 book, co-authored with Lani Guinier, The Miner's Canary: Enlisting Race, Resisting Power, Transforming Democracy.

We hope you will visit back over the ensuing days to see what our distinguished participants have to say, in what promises to be a fascinating discussion.


Walter K. Olson

Little-known fact: Harvard lawprof Elizabeth Warren once gave a speech to a Manhattan Institute luncheon crowd on the topic of asbestos bankruptcy trusts. As I recall, she gave a deft account of this abstruse but important subject, and I much doubt it would have improved anything had the Institute asked her to address the topic from the special vantage point of a female scholar. Much less did anyone imagine that Warren might bring some special insight to bear from her family tradition of remote Cherokee lineage, which has lately furnished so much grist for critics.
For many readers, the Warren-as-Cherokee brouhaha has been their first close look at the matrix of identity politics in which law schools operate. When HLS administrators began to claim Warren as a minority hire, they were under intense pressure for not having any female minority professors. These days, the relevant pressure is likely to take the form not so much of student occupiers but of relentlessly screw-turning accreditation agencies, a process well described by Gail Heriot.

Is this a mere identity spoils system, or does it amount to something nobler and more high-minded? The strong claim I want to focus on here is that diversity hiring improves the quality of scholarship in the traditional law curriculum by bringing distinctive minority insights that straight white Anglo abled males would not or could not have contributed. (I will leave for another post the question of how it might influence scholarly development on topics that do relate to identity, such as discrimination law.)

There's no definitive way to resolve this claim, I suppose, without agreeing on how to evaluate the now-vast literature advancing (e.g.) feminist approaches to torts, the "queering" of intellectual property law, and so on. I can only say that I must not be reading the right papers in this genre, because the papers I've read haven't impressed me. Given that criticizing identity-studies literature seems to be a good way to get fired from one's writing gig, I'd better stop there.

To me, time has vindicated the basic position staked out by Stephen Carter of Yale in his Reflections of an Affirmative Action Baby. Carter writes of the "Dear Minority Colleague" letters presuming he holds correct views on various topics, and the resentment aimed at minority faculty like himself who choose to specialize in scholarly topics having little or nothing to do with identity. Twenty years later it remains true that many of the minority lawprofs to have made the biggest impact on the outside world have been those who've largely avoided identity themes in their intellectual work, such as Carter himself and Stanford's William Gould, to whose number might be added Elizabeth Warren (to the extent she counts as minority) and Chicago's Barack Obama.

As I put it in reviewing Carter's book: "It doesn't take a white or a black mind to explode a fallacy: it takes a mind."


Professor Gerald Torres

There are many claims in Walter Olson's brief post, some empirical, some not, most simply unexceptional. Let's agree that the dust up around Professor Warren has to be understood in the context of a partisan political contest for the US Senate and a bureaucratic choice by one law school or another. So, for purposes of the discussion about diversity in the workplace it is a non-issue.

Let's also agree that the faculty members of color in American law schools are scarcely of one mind on any subject except perhaps the idea that having a more diverse academy is good for the academy and the profession. Even on this one there is probably little agreement about what the exact contours of diversity entail. Nonetheless, the question of whether having a diverse faculty and a diverse student body is a net good might revolve around any number of poles really, but certainly at least two. Those two poles are central to the mission of law schools and they are whether such diversity is better for training lawyers and whether it improves the quality of legal scholarship. Again, the answers to these questions are empirical and I think it is clear that where the empirical investigation is undertaken (and unfortunately here the bulk of the evidence comes from the business school and business literature), it tends to point in the direction of supporting diverse learning environments. Why would this be true?

Scott E. Page, a professor of complex systems at the University of Michigan, suggests a number of compelling reasons for maintaining a diverse learning environment. When looking at the ways groups solve problems Professor Page noticed something we all intuitively understand: if you approach a problem with a wide variety of tools the chances of achieving an optimal solution are increased. When people with diverse perspectives work together and capitalize on their individual expertise, they are more likely to produce innovative solutions to complex problem than do lone thinkers.

The key to Professor Page's analysis is what he calls toolbox diversity. Without suggesting that race or ethnicity is a way to predict in advance how any particular person might think, it is not a stretch at all to think that how someone grows up might affect how he or she approaches problems. Thus taking those facts into account as you construct a group will help produce a richer problem solving, learning and teaching environment. For example, growing up Indian on a reservation might give you a different perspective on the meaning of sovereignty than growing up in Washington, D.C. or growing up in one of the fifty states or Puerto Rico.

Consider another example paraphrased from Scott Page: if you can only hire two people and three people apply and you give them all a test in which John gets seven of ten questions right, and Ryan gets six of the ten questions right and Jamal gets five of the ten questions right, you might not want merely to rely on the number of questions the applicants got right. If, for example, Jamal got the three questions right that John got wrong, it might make more sense to hire John and Jamal, even though Jamal got the fewest answers correct than it would be to hire John and Ryan if those two missed the same questions. By hiring John and Jamal you have increased the tool box diversity of your group. This improves the likelihood that your group will be able to solve the problem confronting them as well as to solve a greater range of problems.


Hans Bader

Elizabeth Warren's campaign claimed she was 1/32 Cherokee, although the documentary evidence cited for this claim turned out to be non-existent. Ironically, Warren is descended from a militiaman who helped round up the Cherokee in the notorious trail of tears, in which perhaps 1/3 of the Cherokee died in one of the most infamous episodes of ethnic cleansing in American history. People on the law-school hiring committees that selected Warren unsurprisingly claim they didn't take her race into account, only her qualifications. But they would say that even if it weren't true.

Like the character in Casablanca who claimed to be shocked to find gambling in a casino, race-conscious hiring officials invariably claim they didn't consider race when they hired a particular colleague. It's legally risky to admit discriminating. It also devalues the credentials of the beneficiary of the discrimination. Admitting you hired a colleague based on her race would be viewed as rude, insulting, and stigmatizing. But for some reason, many journalists and bloggers are taking at face value claims by a couple members of law school hiring committees that law professor Elizabeth Warren's purported Native American ancestry played no role in their decision to hire her.

After earlier denying that she ever claimed to be Native American in professional circles, Warren has now admitted doing so, supposedly just to "make friends," a claim that a law professor at Cornell says doesn't "add up." Warren's only basis for claiming to be Native American was a great-great-great grandmother, which would have made her at most 1/32 Native American (assuming that ancestor had been a full-blooded Indian). Claiming Native American ancestry based on such a thin reed is absurd. I have reviewed thousands of college applications and admissions decisions, and never saw a candidate get a plus in admissions based on so little Native American ancestry, especially one with Warren's lack of cultural ties to any tribe (unless you count her bogus "Native-American" crab recipes that were apparently plagiarized from a French restaurant in Manhattan). Moreover, the press routinely characterizes people with far more non-white ancestry than Warren as white.

Warren did not "tell the truth," says the University of Virginia political analyst Larry Sabato "It's pretty obvious she was using (the minority listing) for career advancement." Paul Bedard of the Washington Examiner has argued that Warren's race was likely a factor in her hiring at Harvard, since no one with her non-prestigious alma mater in fact ended up at a place like Harvard. Harvard Law School was under heavy pressure to hire women and minorities at the time that Warren was hired, as I described earlier. As law professor Ann Althouse observes, "Harvard was under a lot of pressure at that time to do something about the lack of racial diversity on the faculty, and I'm skeptical of the claim that Warren's minority status never came up during the hiring process."

While a few members of these hiring committees may not have taken her purported race into account, most probably did, given the pervasive presence of affirmative action in law school hiring (as I noted earlier, one law school had large preferences for Native American applicants), and the demand by law school accreditors that law schools engage in affirmative action. But if they are smart, hiring committee members won't publicly admit it, because of the legally unsettled nature of how much you can use race in hiring to promote "diversity." Unlike using race in admissions (which the Supreme Court has blessed, to a certain extent, in its University of Michigan decisions, which upheld a law school's affirmative action policy, but struck down the undergraduate affirmative action policy at the very same university for using race too heavily), using race in hiring to promote diversity is still a legal gray area. Civil-rights agencies favor using race, and the American Bar Association pressures schools to use race, but two federal appeals courts have rejected it.

At the same time, however, if school officials publicly admit they used race in hiring, that could trigger a reverse discrimination lawsuit by whites. A school board that used race as a tie-breaker in layoffs, resulting in the layoff of a white teacher,was found guilty of racial discrimination in Taxman v. Board of Education of Piscataway Township, 91 F.3d 1547 (3d Cir. 1996). For people involved in law school hiring to admit Elizabeth Warren's race was a factor in her hiring could expose them to liability for reverse discrimination (including personal liability, under 42 U.S.C. 1981, which allows not just institutions, but individual college decision makers to be held liable for damages, and which my former employer, the Center for Individual Rights, once used to sue individual school officials for reverse discrimination.

Sad to say, the safest path for some college hiring committee members in liberal areas of the country is to consider race in hiring, but lie about it. Using race appeases liberal civil-rights bureaucrats and law-school accreditors, but not admitting it effectively prevents lawsuits by critics of affirmative action like the Center for Individual Rights (CIR), which lack the resources to sue over anything but the most blatant and obvious forms of reverse discrimination. Although there are many civil-rights agencies and liberal interest groups that favor affirmative action, there are only a small number of entities like CIR that sue over affirmative action


Walter Olson

In our different ways, Prof. Torres and I both aim to advance diversity -- in my case, diversity between institutions. If universities were made genuinely autonomous tomorrow, I expect some would extend systematic preferences to minorities, others none at all. Some (as with Hastings in the old days) would develop a specialty in older faculty hires, others the young and inexpensive, and so forth. The resulting competitive institutional ecology might help test some of the business-school and HR theories about whether a specific kind of demographic diversity is uniquely suited to collegial achievement in scholarship (I suspect it isn't, since some great intellectual institutions over the centuries have been hyper-diverse, others hyper-un-diverse, and many in between.) At the same time, were competing approaches to diversity permitted, newcomers would be more likely to find an institution that suits their own desired experience: some would seek a pledge that advancement would be race- and sex-blind, others an assurance of encountering colleagues from backgrounds very different from their own.

Of course that's not the world we live in. In our actual world, all law schools must conform to a prescribed format. Accreditation officials will haul up any institution that tries to be race-blind, and HLS will scramble to claim hiring credit for Prof. Warren's vague family lore of Cherokee ancestry.

Should outsiders care? One reason to care might be if the prevalence of identity politics tends to reinforce the problem (assuming it is a problem) of ideological imbalance in the legal academy. In Schools for Misrule I conclude that it does, though only as one of many contributing factors.

One clue is that the ideological tilt varies so much from field to field. As Prof. Leiter's citation rankings confirm, there is much closer to a left-right balance (or, alternatively, a lack of strong political identification) in such fields as tax, business law, inheritance, and intellectual property. The closer one approaches to the identity-politics minefields, the stronger the liberal-to-Left dominance: in a field like employment discrimination law, setting aside one book by Richard Epstein, there is far less visible a bench of "defense-oriented" writers than there is in torts or antitrust. Are any rising academics doing work on disabled rights or Indian law that's systematically skeptical of expansive ADA interpretations or tribal powers? I hope Prof. Torres can name them, because I can't.

To be sure, a fair number of legal academics do write in opposition to the claims of feminism and gay rights. But since most of them are clustered at institutions like Brigham Young, Notre Dame, and Regent, I'd call that an exception that tends to confirm the pattern: religion has successfully managed to stake out its own identity-politics turf.

I'm not one to join the doomsayers. My book argues that identity politics in the law schools has tended to loosen its grip over the past decade or two, and that over the same period schools have opened themselves to more diversity of viewpoint. I hope that trend continues.


Gerald Torres

First, I would like to thank Mr. Olson for making my point. Without his response I would not have seen how he fundamentally misunderstood the point I was making. This is evident in his second paragraph where he responds to an argument I didn't make or assumes that I share views in common with people with whom he has disagreed in the past. Without this diversity of viewpoints I would not have understood this. Moreover, it suggests a line of conversation that might enlighten us both. Here I am imagining a discussion informed by the work of Professor Banaji on implicit bias, for example.

Second, as to the claims Mr. Olson makes in his first paragraph I can only conclude that he is unfamiliar with the experimental and cognitive psychology studies that would provide the data he is seeking. He needs but to look. I would recommend the work of Professor Sommers on juries, Professor Loyd and Phillips on the impacts of diversity on group process and information sharing, or the work of Professor Claude Steele as well as the previously referenced work by Professor Page. There is a great deal of research being done right now. It is useful and instructive even if not completely dispositive.

James Copland

In March, concurrent with the historic three-day oral argument before the Supreme Court considering the constitutionality of the 2010 Patient Protection and Affordable Care Act, we hosted a discussion of the issues in play, including Erwin Chemerinsky, Richard Epstein, Orin Kerr, Gillian Metzger, Michael Rosman, and Nadine Strossen. With the Court announcing its decision today, we've invited these guests back to share their opinions, if they wish, alongside those of the Manhattan Institute's own scholars.

Adam Freedman

I'm not quite glass-half-full on the ObamaCare decision, but it does have its silver linings. I agree with the dissenters on all points, including the point that Roberts' re-characterization of the "penalty" provision as a tax is essentially an activist decision, for reasons I'll get to below.

On the good news front, the Court struck down (for the first time) a scheme of conditional federal grants as being unduly coercive against the states -- that would be ACA's Medicaid expansion which threatened to pull the plug on all Medicaid dollars for states that don't march in lockstep with the feds.

Also good -- very good -- is the fact that the Court rejected the administrations two primary arguments: that the individual mandate is justified under the Commerce Clause and the Necessary and Proper Clause. So now we know: Congress cannot use its regulatory power to compel activity. There must be some pre-existing activity (and it has to be of an "economic" nature) for Congress to be able to regulate.

But then the bad -- very bad -- news: Roberts accepted the validity of the mandate as a "tax" imposed to promote the "general welfare." As a matter of original meaning, this conclusion is incoherent. Everything we know about the original understanding of the text tells us that it was not meant to authorize Congress to use its taxing power to achieve ends that it could not do under its enumerated powers. Unfortunately, however, that conclusion is supported by precedent going back to the 1937 Helvering v. Davis. It is the Hamiltonian view of "general welfare." I don't buy it, but it was not likely that the Court was going to revive the Madisonian (correct) view of general welfare at this date.

So, Congress cannot compel you to enter into commerce, but it can tax you if you refuse to enter into commerce. What are the limits to this doctrine? As far as I can tell they are:

  • The tax cannot be so high that people have no choice but to purchase health insurance [or whatever product or service Congress decides to mandate next];
  • Congress cannot attach any other "negative legal consequences" to the failure to engage in commerce; e.g., Congress cannot impose criminal or civil penalties for failing to buy health insurance.
  • The tax must be imposed regardless of intent, thus, Congress can't impose a tax only on those who "intentionally refuse to buy health insurance."
  • The tax must be collected in the same manner as other taxes, ie, via the IRS.

The dangerous part of his decision is not that he expanded the scope of the "taxing power" (as I explain above, existing precedents already did that) but he greatly expanded the Court's power to reclassify a regulatory measure as a "tax." Roberts relies on the principle that if courts are faced with differing interpretations of a law, they should choose the interpretation that upholds the law. But that assumes that the competing interpretations are plausible. Here, Congress was absolutely crystal clear in categorizing the "shared responsibility payment" as a "penalty," i.e., a means to enforce a regulatory command, and not a tax. The President who signed the law emphatically denied it was a tax.

A Court re-writing a statute to achieve a certain result is the very definition of judicial acitivism. For the Court to rewrite a law so as to impose a tax is doubly disturbing. As the dissenters say: "Imposing a tax through judicial legislation inverts the constitutional scheme, and places the power to tax in the branch of government least accountable to the citizenry."

Ted Frank

The second-silliest reactions coming from today's ACA opinion are the conservatives comparing Bush II's nomination of Roberts to Bush I's nomination of Souter. This is hardly fair. Roberts has been a sound fifth conservative vote on critically important First and Second Amendment issues; he's consistently refused to abuse the Eighth Amendment to strike down legitimate exercises of state legislative power in criminal law; he's consistently enforced Congress's limitations on habeas relief. And today, he signed onto both the broadest restrictions of Congress's Commerce Clause power in decades and the first teeth in South Dakota v. Dole, limiting the ability of the federal government to bully the states. (The silliest reaction? The retroactive wishes for Justice Harriet Miers—which would be objectively silly even if it wasn't for the historical fact that Miers was nominated for Alito's seat, not Roberts's.)

One can be dismayed about the broad scope of the taxing power implicated by today's decision, but that is not anything new; for example, you've been paying extra taxes for failing to buy an electric car since at least the 2001 tax year, and extra taxes for not having a residential mortgage for even longer. (These are called tax credits, rather than penalties or taxes, but they're economically indistinguishable at the margin or otherwise, somewhat refuting Richard Epstein's complaint.)

The complaint is perhaps whether the "penalty" should be called a "tax" when Congress refused to call it a "tax"; the dissent would hold Congress to its language, while Roberts, alone, looks purely at the economics of the matter. Both arguments are colorable: after all, the Court has previously characterized "taxes" as "penalties" when they held the character of penalties, so why not vice versa? To which the Scalia dissent responds that this is the first time the Court has done so, and it is the finest of hair-splitting to say that a penalty isn't a tax for purposes of the Anti-Injunction Act, but is for purposes of the Taxing Power inquiry.

I've previously been unhappy with Roberts's tendencies to blue-line rewrite statutes to avoid tough constitutional questions; the canon of constitutional avoidance is one thing, but creating non-existent text to fix problems just seems to me outside the Article III power. We saw this in Free Enterprise Fund, NAMUDNO, and Wisconsin Right to Life. With it happening again today both in the construction of the penalty as a tax and the rewrite of the Medicaid penalties to the states, we can officially note an unhappy trend in the Chief Justice Roberts jurisprudence.

ACA opponents have an out in the Roberts opinion: it remains prohibited for the taxing power to be excessively punitive, a matter not well raised in the briefs. "Because the tax at hand is within even those strict limits, we need not here decide the precise point at which an exaction becomes so punitive that the taxing power does not authorize it" (slip op. 43). But ACA imposes marginal income "taxes" of over 100% on certain members of the middle class who are in a particular donut-hole of income. Expect to see a new challenge in the future on this, and on other aspects of ACA.

Update: Typos in the Scalia dissent—which repeatedly refer to the "Ginsburg dissent"—show that it was originally meant as a majority opinion? [DeLong; see also Bernstein @ Volokh] One hopes very much that the Roberts flip was a sincere decision consistent with his previous overbroad canon of constitutional avoidance, rather than a "switch in time to save nine" prompted by the offensive degree of lobbying and attacks on the Court's integrity by the Obama administration and its allies.

Nadine Strossen
Professor of Law, New York Law School
President, American Civil Liberties Union (ACLU), 1991-2008

The Court's decision is hard to summarize in a simple headline because of its multiple holdings, which were supported by majority votes comprised of differing subsets of the Justices. To be sure, the bottom-line result of the Court's central holding was to sustain Congressional power to enact the Affordable Care Act's minimum coverage requirement. However, the Court's overall analysis and multiple subsidiary holdings, viewed as a whole, actually endorse a notable reining-in of the federal government's power in several respects. This was underscored by the partial dissent that Justice Ginsburg authored on behalf of the Court's four more "liberal" Justices, objecting to these holdings.

The decision's cutbacks on federal power were reflected in the following holdings, which were supported by the Court's more "conservative" Justices:

  • The Court rejected the central rationale of the U.S. and other proponents of the Act -- that Congress had the power to pass it under the Commerce Clause and/or the Necessary and Proper Clause.

  • For only the third time since 1937, the Court held that Congress had exceeded its Commerce Clause power.

  • The Court substantially cut back on the very broad construction it has consistently given to the Necessary and Proper Clause, including in recent rulings.

  • The Court partially invalidated the "Medicaid expansion" provision - which grants additional federal funds to states to expand Medicaid coverage, on the condition that the states comply with certain federal requirements for such coverage - holding that this provision exceeded Congress's power under the Taxing and Spending Clause. The Court has repeatedly held that Congress may condition its financial grants to states on a range of requirements. While the Court has in the past nodded to the possibility that some conditions might hypothetically be so onerous as to overstep Congress's power and unduly constrain states' autonomy, this was the first time the Court has ever struck down any federal funding program on that basis.

In sum, the above holdings explicitly reined in Congress's powers under three separate power-granting constitutional clauses: the Commerce Clause, the Necessary and Proper Clause, and the Taxing and Spending Clause.

Nor are these power-restricting holdings likely to be offset, in terms of federal power in future contexts, by the Court's holding that the minimum coverage provision was authorized by Congress's taxing power. That's because the Court framed this holding extremely narrowly in several ways, including by anchoring it to the specific facts of this unique case.

In short, while the Court did uphold federal power in this case, its specific rationales may well have a net impact of limiting federal power in future contexts.

Richard Epstein
Laurence A. Tisch Professor of Law, New York University School of Law
Visiting Scholar, Manhattan Institute's Center for Legal Policy

There are many oddities in the decision of the United States Supreme Court, but there is one trend that seems clearly to have been strengthened by the split decision in National Federation of Independent Business v. Sebelius. On the one hand it looks as though the ability of the federal government to impose direct regulations on individuals has been increased by the decision. There is nothing in the case that cuts back on the scope of Wickard v. Filburn that deals with the ability of the government to regulate all sorts of activities, no matter how small, that have some substantial effect on commerce in the aggregate. That power is the source of great mischief because it permits the federal government to organize cartels in agriculture that the states themselves could never put together.

Yet at the same time, this new found tax is an expansion of the taxing power to cover an odd set of activities including not buying health care insurance. So add the two points together, and there is more direct power in the federal government over individuals than before the case, or at least there is not less.

Yet the Court also struck down the Medicaid extension as coercive against the states. That decision rested on the view that it is not permissible to take away all Medicaid money from states that do not choose to agree to the Medicaid expansion. What it suggests is that the exercise of federal power in commandeering the states is now more limited than we had previously expected. After all, every lower court rejected the challenge that was accepted 7 to 2.

It will take a long time to sort out the relative strength of the two decisions. But make no mistake about it, knocking down a multi-billion dollar initiative is no small potatoes.


Michael E. Rosman
General Counsel, The Center for Individual Rights

Today's decision demonstrates how both difficult and fascinating enumerated powers cases can be. Much can be said, but I would like to address one brief issue. Was there a holding today that the Individual Mandate was not a proper exercise of Congress's Commerce Clause and Necessary and Proper ("N&P") Clause powers?

The Chief claimed that there was, and he did so in Part III-C, which was designated as part of the Opinion of the Court (joined by Ginsburg, et al). Roberts Op. at 41-42 ("The Court today holds that our Constitution protects us from federal regulation under the Commerce Clause so long as we abstain from the regulated activity.") (emphasis added). Really? It is true that five Justices concluded that the Individual Mandate could not be justified under that constitutional power (and the N&P Clause), but four of them (Scalia, Alito, Kennedy, and Thomas) were in dissent (at least as to the constitutionality of the Individual Mandate issue). In United States v. Morrison, the Court specifically rejected the proposition that the conclusion of six Justices in United States v. Guest -- three in a concurrence and three in dissent - that Congress could reach private conduct under Section 5 of the Fourteenth Amendment, was a binding holding of the Court. U.S. v. Morrison, 529 U.S. 598, 624 (2000) ("This is simply not the way that reasoned constitutional adjudication proceeds.").

Today, Justice Ginsburg chided the Chief for even reaching the Commerce Clause question, which she thought was unnecessary given his opinion on the Tax Power. (She was right, of course, but the same thing could have been said about her own opinion.) Did she, and those joining her opinion, nonetheless think that the Court had held that the Individual Mandate was unconstitutional under the Commerce and N&P Clauses, as Part III-C of the Chief's opinion (for the Court, remember, joined by Ginsburg, et al.) says? Isn't unnecessary legal analysis what we call dicta? Curious, then, that the Reporter of Decision, in the summary of the decision, does not identify Part III-A of the Chief's opinion (in which he discusses the Commerce and N&P Clauses) as part of the opinion for the Court. Nor does the heading above the Chief's opinion (parts of which say "Opinion of the Court" and other parts of which say "Opinion of Roberts, C.J.").

So, was there a Commerce Clause holding? Maybe, but I doubt any subsequent Court that wants to ignore it will have difficulty doing so.

The Implications

June 29, 2012 9:41 AM | No Comments

Erwin Chemerinsky
Dean and Distinguished Professor of Law,
University of California, Irvine School of Law

Now that the anticipation is over and the decision has been read (all 193 pages), attention must focus on how, if at all, the Court's decision has changed the law. There were three major conclusions to the Court's decision.

First, the individual mandate is within the scope of Congress taxing power. This, unquestionably, is the most important aspect of the Court's decision and it doesn't change the law at all. The Court's conclusion that the individual mandate is a tax breaks no new ground. The Supreme Court previously had said that the label used in not determinative. Nor is it at all surprising that this was treated as a tax. It is in every way functionally a tax: it is collected by the IRS, it is calculated by a percentage of income (or a flat rate), and it generates revenue for the federal government. Not one federal tax has been declared unconstitutional since 1937 and so upholding this one is not remarkable in terms of the law.

Second, five justices said that the individual mandate is outside the scope of the commerce power. From one perspective, this is just dicta because the Court upheld the individual mandate on other grounds. But Chief Justice Roberts said that he needed to decide this in order to justify interpreting the individual mandate as a tax. That seems a dubious justification for his addressing the commerce power or making his discussion a holding. But putting that aside, five justices said that Congress cannot regulate inactivity. This seems highly questionable as applied here because everyone is engaged in activity with regard to health care; they are either purchasing health insurance or self-insuring. Congress was regulating the latter. Still, it is not clear how much this will matter in the future since it is rare for Congress to require activity.

The third holding is the most important in changing the law: the Supreme Court said that the burden on the states with regard to Medicaid funding exceeded the scope of Congress's spending power because it was too coercive. This is the first time in American history that conditions on federal spending have been declared unconstitutional as being unduly coercive. Many federal spending programs impose conditions on states taking federal money. There likely will be many challenges after the Court's decision. But the Court did not give any criteria as to how to decide when conditions are so coercive as to violate the Constitution.

Overall, the decision must be seen as following 75 years of Supreme Court decisions upholding federal social welfare legislation. If the Court had done anything else, that would have been a very dramatic change in the law.

James Copland

In my estimation, the most significant part of yesterday's Obamacare ruling was not its handling of the individual mandate but its limitation on Congress's power to coerce states through federal funding--a holding that will become critical as the health-care law is implemented and in many other cases in the future.

To uphold the ACA's "individual mandate" and its private-insurance reforms, the Chief Justice somewhat brazenly rewrote a regulatory penalty as a tax - a reading his opinion itself admitted was not the most common-sense reading of the statutory language. The Chief's reading was hardly a model of statutory construction, but it was motivated by the conservative doctrine of "constitutional avoidance": the principle, first embraced by Chief Justice Marshall in the 1833 case Ex parte Randolph, that given the "delicacy" of the courts overturning the acts of coordinate branches (and the difficulty of amending the constitution), "a just respect for the legislature requires, that the obligation of its laws should not be unnecessarily and wantonly assailed" through the judiciary's application of the constitutional power of judicial review.

The Chief Justice was very likely motivated by institutional concerns, as outlined persuasively by Charles Krauthammer. As Krauthammer notes, as Chief Justice, Roberts wears "dual hats," and in his role as "custodian of the court" he is "acutely aware that the judiciary's arrogation of power has eroded the esteem in which it was once held." Krauthammer is right that most of this arrogation occurred during the liberal era of Earl Warren and William Brennan, but also that the Court's decision in Bush v. Gore to halt the recount in Florida in a presidential election--however necessary to avoid a constitutional crisis being engendered by an irresponsible Florida judiciary--substantially eroded the Court's public perception, particularly given that case's 5-4 ideological split. The president had already shown an unhealthy willingness to demagogue the Court over its Citizens United decision and had signaled an intention to do the same should the Court overturn his administration's signature legislative accomplishment on constitutional grounds. Roberts was almost certainly haunted by the specter of Schechter Poultry, in which the Court in 1935 overturned the National Industrial Recovery Act (a signature of Roosevelt's New Deal, however misguided), and proceeded to provoke a showdown with the president that culminated in FDR's threat to "pack the Court" with new appointees.

Thus, the Chief Justice turned to perhaps disingenuous statutory construction to uphold the law in question. In the process, however, he labored to lay out some conservative markers that set boundaries on Congressional power and signal that the federal government is not one of unlimited powers under the constitution. To be sure, the taxing power is broad, but as Ted Frank suggested, that was already the law of the land before yesterday. (As I noted in my instant reaction to the case over at NRO, "Congress already can and does penalize us for acting or not acting in hosts of areas, including such sacred realms as getting married or having children.") But Nadine Strossen is right (in her analysis if not its normative framing): when you look at this decision in terms of constitutional interpretation, rather than statutory construction, you see a Court sketching out definitive limits on the application of Congressional power through the Commerce Clause, Necessary and Proper Clause, and Spending Clause.

Indeed, like Jay Cost, I see echoes of Chief Justice Marshall in Roberts's gambit here. In Marbury v. Madison, Marshall gave Jefferson what he wanted (he refused to order that Jefferson issue mandates to the remaining Federalist judges appointed under the Judiciary Act of 1801) even as he laid down the principle of judicial review. That decision paved the way for Fletcher v. Peck--when the Court assumed the power of judicial review over states--as well as the Court's broader readings of the Commerce Clause (Gibbons v. Ogden) and Necessary and Proper Clause (McCullough v. Maryland) that were to come. While yesterday's rulings didn't get us all the way back to Gibbons and McCullough, they clearly insisted that there's an outer bound to what Congress can do under those grants of power.

More significant still is the Court's decision to place limits on Congress's ability to coerce states to act through conditional use of the federal spending power. The 1987 case South Dakota v. Dole left a gaping hole that ran through the 1990s federalism decisions that kept Congress from applying the Commerce Clause to non-economic activity (Lopez and Morrison), kept Congress from applying the Commerce Clause to create private rights of action against states (Seminole Tribe and Alden), and prohibited Congress from "commandeering" states to act according to federal dictate (New York and Printz): what's the functional point of prohibiting Congress from "commandeering the states" if they can effectively coerce/induce the states to conform to Congress's will through the virtually untrammeled grants of federal money? While Dole suggested that there was a theoretical limit to Congress's ability to influence states through the Spending Clause--in which "inducement" became "coercion"--neither the Supreme Court nor lower courts had ever found an occasion to do so.

Until yesterday. Richard Epstein noted the importance of the Spending Clause question, but most other analysts ignored it, as did the lower courts, in keeping with post-Dole jurisprudence. But if it's not "plainly coercive" to condition state receipt of Medicaid funds on state compliance with Congressional dictates--noting that Medicaid is second only to education spending in most state budgets--then when would it ever be? In the minds of Justices Ginsburg and Sotomayor, the answer is essentially never, but the real constitutional problem under the Spending Clause is laid bare by the fact that the conservatives on the Court were joined in this part of the case by Justice Kagan, President Obama's former solicitor general, and Justice Breyer, Senator Ted Kennedy's former staffer.

Yes, the Court permitted Congress to condition the Medicaid expansions on state compliance--thus making this holding an outer bound rather than a major check on Congressional influence over the states through the Spending Clause. But expect more litigation in the future. At a minimum, Congress will have to check itself when it invokes the Spending Clause.

And although Obamacare survives, the ability for states to opt out of the Medicaid provisions is the greatest prospect for reining in the statute's excesses if it isn't repealed. As my colleagues Avik Roy and Paul Howard noted in our panel discussion of the decision last night (around minute 33- of the videotaped program), there is the real prospect that some states could shift costs onto the federal government by opting out, so that even if most states won't do so (and they won't), the threat of exit could increase state bargaining power to negotiate waivers of some of the new law's most overreaching provisions.

At a minimum, through this decision, the Court holds onto the premise that the federal government (at least outside the taxing power) is one of limited, enumerated powers--and in the process reifies and amplifies its 1990s federalism decisions. From a constitutional law standpoint, there's something in there for conservatives to cheer.

To be sure, it's only the outer bounds that come into play in such constitutional judgments--because constitutional law is largely about boundary limits (which is why it's a bit odd that so many legal thinkers focus on it so obsessively--at the expense of the nitty-gritty questions of civil litigation, criminal prosecution, and corporate governance that we primarily concern ourselves with at the Center for Legal Policy, where real outcomes are at play). As Alex Bickel understood, in a democratic republic, elected majorities will ultimately get their way; and we're unlikely to see a return to the era in which the Progressive and New Deal courts turned back the tide of popular opinion. (We may or may not one day be able to get rid of Wickard v. Filburn, but we won't get rid of Helvering v. Davis or bring back Panama Refining v. Ryan and Schechter Poultry, and therein lie the heart of the welfare and regulatory state.) Elections matter--and that's where the fate of Obamacare will ultimately rest.

James R. Copland

On Wednesday, February 27, the Supreme Court will hear oral arguments in American Express v. Italian Colors, the latest in a string of recent cases in which the Court tackles arbitration and the class action device. To preview, react to, and assess the argument, we are happy to welcome Cardozo law professor Myriam Gilles alongside our own Ted Frank.

Italian Colors involves an asserted antitrust claim filed by a class of vendors against American Express, alleging that the AmEx "accept all cards" policy constitutes an illegal "tying arrangement" by linking the card company's less-desirable credit-card customers with its more desirable charge-card clientele. The Second Circuit determined that AmEx could not invoke its contractual arbitration clause because individual arbitrations would make the expert witness necessary to assert the antitrust claim cost-ineffective--in the court's view, denying the plaintiffs the ability to vindicate a federal statutory remedy. Five judges dissented from the denial of a rehearing in banc, led by Chief Judge Jacobs's blistering dissent, joined by Judges Cabranes and Livingston, which accused the panel of substituting its public-policy preferences for Supreme Court precedents on the enforceability of arbitration clauses' waiver of class-action remedies, most recently in AT&T Mobility v. Concepcion.

Professor Gilles--who teaches torts, advanced torts, class actions, and aggregate litigation--has criticized Concepcion, warning that "most class cases will not survive the impending tsunami of class action waivers" in the decision's wake. In contrast, Frank--the founder of the Center for Class Action Fairness as well as a Manhattan Institute adjunct fellow and editor of Point of Law--has argued that such concerns are "overwrought," and that post-Concepcion, "many forms of class action lawsuits will continue, and those that are replaced by individual arbitration will generally lead to greater consumer protection, not less." It is my pleasure to welcome Professor Gilles, and I trust that her discussion with Ted will prove illuminating.

By Myriam Gilles

After seven years of appellate litigation, including three rounds at the Second Circuit and two trips to the Supreme Court, in the final footnote of its Reply Brief, American Express has abandoned - stunningly - its primary policy argument. Amex has consistently argued that a ruling for the merchants would open the floodgates to a torrent of challenges to its and other companies' arbitration clauses, and that an "Amex exception" would swallow the "Concepcion rule." The merchants, meanwhile, have said "No, the floodgates are already slamming shut as companies enact liberal, vindication-enabling arbitration agreements - and especially, agreements that allow prevailing arbitral claimants to shift the cost of expert witnesses."

Now, in footnote 8 of Amex's Reply Brief on the merits, comes the bombshell: Amex has just recently promulgated a new version of its merchant agreement with an arbitration provision that shifts the costs of expert witnesses in favor of a prevailing arbitral claimant. Never again can a merchant complain (as the merchants here do) that the unavailability of both collective action and cost-shifting, combined with proscriptions against sharing information across arbitrations, precludes them from being able to vindicate their rights in arbitration. While footnote 8 makes clear that "Petitioners do not rely on this amendment in their challenge to the decision below," the fact is that in future cases the Amex clause will allow cost-shifting. The merchants' proffered test is whether the proven non-recoupable costs exceed the recovery sought. If all costs are recoupable, the inquiry is over before it starts. For this corporate defendant, the floodgate is closed.

By Myriam Gilles

Ted Frank's posting starts off on an agreeable enough note: it turns out we concur that the vindication-of-rights doctrine does, in fact, exist, and that Amex's lead argument rejecting the doctrine is "extreme." Sad times that we celebrate agreement on such a basic concept. Assuming Frank acknowledges that the earth is round, there are now at least two things that we agree upon.

But these are sad times at the Supreme Court. Having sat through the rough and nasty argument in the Voting Rights Act case - where the conservative Justices seemed flummoxed by the suggestion that egregious acts of discrimination in voting were still an especial problem in the South, and where Justice Scalia characterized legislative protection of the franchise "a racial entitlement in perpetuity" - I was prepared for just about anything. So I rejoiced that the Justices appeared to agree that the vindication-of-rights doctrine is alive and well - Justice Breyer described the doctrine as "well-established," and no other Justice seemed to question is basic premises. Whew! The earth is round.

Beyond that basic agreement, however, the argument was a mess. Justices Kennedy and Breyer wondered why it would be prohibitively expensive for small merchants to engage economic experts to opine on issues such as relevant market definition or anticompetitive effects - despite the fact that this Court's own antitrust jurisprudence has exponentially increased the costs of lodging antitrust claims. When the merchants' lawyer, Paul Clement, observed that antitrust guru Herbert Hovenkamp submitted an amicus brief arguing that expensive expert testimony is indispensable, Justice Breyer countered that if Professor Hovenkamp or Justice Breyer were the arbitrator, then no experts at all would be required. (I wonder what Justice Breyer's day rate would be).

But the biggest source of confusion - and the issue that might ultimately cause the Court to dismiss certiorari as improvidently granted or possibly remand for further elucidation - involved Amex's late-in-the-game assertion that its air-tight confidentiality clause did not actually bar Respondents from freely sharing information across arbitral proceedings, such that merchants could "share an expert between multiple plaintiffs." Justice Kagan specifically and repeatedly asked Mr. Kellogg, Amex's lawyer, whether Respondents would "violate the confidentiality agreement of this clause" if they all decided to "get together and produce one report." And each time, Kellogg answered that Amex's confidentiality clause did not bar Respondents from doing so.

This is new, and possibly changes things. It's new because when the confidentiality clause came up at the Second Circuit, Amex did not make this concession. Rather, the company stood by its clause, which broadly provides that "all testimony, filings, documents and any information relating to or presented during the arbitration proceedings shall be deemed to be confidential information not to be disclosed to any other party." Based on this, the panel below correctly ruled that Amex's "confidentiality provision effectively block[ed]" claimants from sharing information such that they could develop (and informally pass the hat to pay for) one, single expert report that could be used in multiple arbitrations.

And this late-breaking concession that the confidentiality clause doesn't mean what it says possibly changes things because perhaps Respondents can now seek to vindicate their rights via individual arbitrations of their antitrust claims - hundreds and hundreds of individual arbitrations, using the same expert report, that over time, create a momentum that might match or surpass traditional notions of collateral estoppel in the arbitral fora.

It may be a while before we get to witness any such activity, though, because my guess is the Court will remand the case, as it seems awfully late in the day for Amex to suddenly make this important concession. As Malcolm Stewart of the Solicitor General's office argued on Respondents' behalf, Amex seems to have engaged in certiorari bait-and-switch, seeking Supreme Court review "on the important legal question whether the inefficacy of arbitration procedures is a basis for invalidating the agreement," but then once before the Court, arguing that "it would, in fact, have been feasible to pursue these claims through individualized arbitration." These facts about the violability of the confidentiality provision were simply not in the record, and for that reason alone, the case may prove difficult to decide.

[And, to be clear, Frank and I agree on little else. I think it begs reality to assert Amex's arbitration clause doesn't completely preclude the vindication of federal antitrust claims. If Respondents cannot share information, shift the extremely high costs of an expert report, or do both via a class action in court, they simply cannot bring their Sherman Act claims. Even less rooted in reality is Frank's floodgates argument - i.e., that droves of displaced class claimants will scale the arbitration barricades and overwhelm the citadel proclaiming their inability to vindicate statutory rights. If the only question is whether non-recoupable costs exceed the recovery sought, it should be clear that few camels will make it through the eye of this needle.
And I won't take the time to address the uninformed views on the underlying antitrust claim. After all, the Amex case hasn't even gotten to the merits stage because of 8 years of litigation over the arbitration clause. But it should suffice to note that the Justice Department has filed suit against Amex on similar grounds, and that Visa/Mastercard recently settled a related antitrust case for $7.25 billion dollars (a settlement in which Frank and his cohort have not lodged their typical objections).]

by Isaac Gorodetski

The traditional common-law principle of "Ignorantia juris non excusat,"--Latin for "ignorance of the law" does not excuse--prevented a criminal defendant from escaping liability by claiming that he was unaware that his conduct was unlawful. When most crimes were malum in se--meaning inherently wrong according to the generally accepted moral code--the concept of "ignorance is no excuse" went unchallenged. That was all before the phenomenon of overcriminalization, before criminal codes and regulatory provisions were flooded with new criminal offenses, many of which were vague, ambiguous, duplicative and well-beyond the scope of the traditional common-law-based criminal justice system.

by William G. Otis

The reach of criminal law to enforce the regulatory state poses serious questions. Regulatory crimes tend to be "strict liability" offenses. That is, they do not require that that the defendant be found to have had bad intent in order to convict and punish him.

This is a relatively new and potentially ominous development. The Founders contemplated criminal punishment for, roughly, "bad actors" -- those who do something a person with common sense and ordinary intelligence would intuitively think of as criminal. Generally, criminal behavior up to now has been defined by people who either don't control their temper; want to make a quick buck; or range from extremely non-empathetic to malevolent.


by Paul J. Larkin, Jr.

A millennium ago, the criminal law was simple. If you knew the Decalogue, you knew what not to do: don't murder, steal, or lie. As a result, the law did not exonerate someone who claimed to believe that what he did was not a crime, since no one could reasonably believe that those immoral actions were not also illegal. Today, however, the criminal law has expanded to Brobdingnagian proportions. There are approximately 4,500 federal crimes alone. Atop that, use of administrative agencies to define criminal statutes (or their terms) exacerbates the problem. Congress may use a broadly defined term (e.g., "solid waste") in a statute (e.g., the Resource Conservation and Recovery Act) that delegates to an agency (e.g., the EPA) the power to define its terms (e.g., "hazardous waste") by creating a list of specific examples (e.g., "listed hazardous wastes") or by specifying exemptions (e.g., "recyclable materials"). The result is that there are perhaps 300,000 potentially relevant regulations. No one--no law enforcement officer, no lawyer, no law professor, no judge--could honestly claim to know them all.

by William G. Otis

Defenses that on paper look perfectly reasonable can morph into something entirely different in the hands of a creative counselor.

Lack of bad intent is -- as it should be -- a long-accepted defense to criminal charges. We would think grossly unfair a system that provided no such defense. Little did we suspect, however -- until it actually happened -- that garden-variety criminal intent could be flummoxed out the jury's mind by defense counsel's claim that his client ate too many Twinkies. But exactly that happened because of the inventive approach authored by the attorney for Dan White, the San Francisco city supervisor who killed Harvey Milk. White beat the murder wrap, and got punished only for manslaughter, because his lawyer convinced the jury that excess Twinkie consumption had deepened his "depression."

This is not an isolated example. The invention currently in vogue is "urban survival syndrome." This "syndrome" is now used to convince juries that the defendant is a victim, not a bad guy. In the hands of a smooth-talking defense lawyer, more than one jury has been persuaded that the client more nearly resembles a counseling patient than, as it used to be known, a thug.

There is a lesson here as we contemplate expanding the mistake of law defense. In the era of the gargantuan regulatory state, quite properly we want to help defendants who never had a bad heart -- or, worse, may never have known or had reason to know that their conduct was criminal at all. Expanding the mistake of law defense thus has understandable appeal. But like so many modern inventions of the law, there is the danger of unintended consequences. The danger here is that the mistake of law defense will sooner rather than later shed the limitations we build into it, incrementally nibble away at what is left of responsible commercial life, and become the corporate reincarnation of too many Twinkies.


by Paul J. Larkin, Jr.

Bill Otis, a highly respected former prosecutor and now a law professor, argues that a mistake of law defense would hamper the government's ability to enforce the criminal law. I respect Bill and always value his opinions, but this time he is mistaken.

Bill notes that regulatory crimes are problematic because administrative officials are not directly accountable to the electorate. That is true, but there is an additional and bigger problem: Regulatory offenses oftentimes involve a network of one or more intricately worded statutes and a boatload of hyper-complex regulations. It is easy to understand a law prohibiting a street crime, but far harder to comply with a regulatory offense because the line between lawful and unlawful regulated conduct can be indistinct. No amount of murder is permissible, and no one can obtain a license to steal, but a party can obtain a license to dispose of used oil and other types of waste that are the unavoidable byproduct of legitimate business activities. In fact, administrative laws assume that some regulated conduct is permissible; those laws just limit when, where, how often, and by whom certain it can be done. The problem lies in knowing what can and cannot be done. Is this used oil a "waste"? If so, is it a "hazardous waste"? Or is it a "recyclable material"? Agencies need complex rules, oftentimes requiring considerable scientific or technical knowledge, to regulate industrialization. But those same complex rules can be impossible for the average lawyer--let alone the average person--to understand. A mistake of law defense forces the government clearly to define crimes before someone can be held liable for committing one.

Bill argues that a mistake of law defense would enable crooked defendants, aided by unscrupulous lawyers, to escape responsibility for conduct that any reasonable person would have known was unlawful. The concern with manufactured defenses is legitimate, but overstated. If a government civil inspector notifies someone that his conduct is unlawful, the government can use that notice as proof of guilt if the defendant repeats that conduct. Also, if you place the burden of proof on the defendant, you effectively compel him to testify at trial to establish a mistake-of-law defense. Once he testifies, the prosecution can cross-examine him, and the jury can decide if he is a con artist who connived with a shyster. If the judge finds that a mistake of law defense is incredible--that is, no reasonable person could buy it--the judge need not instruct the jury on it. Finally, if corporate wrongdoing is a concern, a mistake of law defense can be limited to individuals and exclude corporations. In sum, Bill's concern can be met without turning every reasonable mistake of law into a crime.

 

 

 

FEATURED DISCUSSION ARCHIVE:


Obamacare Decision: Reactions, July 2012
Law School Faculty Diversity, May-June 2012
Class Actions, May 2012
Constitutionality of Individual Mandate, March 2012
Human Rights and International Law, February-March 2012
The constitutionality of President Obama's recess appointments, January 2012
Do caps on medical malpractice damages hurt consumers?, December 2011
Trial Lawyers Inc.: State Attorneys General, October 2011
Wal-Mart v. Dukes, April 2011
Kagan Supreme Court nomination, May-June 2010
Election roundtable, November-December 2006
Who's the boss, September 2006
Medical judgement, July 2006
Lawyer Licensing, May 2006
Contingent claims, April 2006
Smoking guns, July 2004

Rafael Mangual
Project Manager,
Legal Policy
rmangual@manhattan-institute.org

Katherine Lazarski
Manhattan Institute
klazarski@manhattan-institute.org

Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.