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Bond v. U.S.
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Manhattan Institute Center for Legal Policy intern Meghan Herwig assisted in drafting this post.

Monday's Supreme Court decision in Bond v. United States, which we earlier profiled here, involved a case raising fundamental constitutional questions of federalism and separation of powers. Rather than grappling with these questions, the Court majority ruled on statutory grounds.

Case background
Carol Anne Bond, a Pennsylvania microbiologist, attempted to poison her husband after learning that he had impregnated her best friend. She was convicted of violating a U.S. federal statute enacted to implement the Convention on Chemical Weapons, a 1997 treaty intended to prevent the proliferation of chemical weapons. On appeal, Bond's lawyers argued that the law did not apply to Bond's conduct and second that even if it applied it was unconstitutional.

Key to Bond's constitutional claim was whether a treaty signed by the president and ratified by the Senate can expand Congress's legislative powers beyond those otherwise enumerated in the Constitution. A 1920 Court decision authored by Justice Holmes, Missouri v. Holland, had held that for a valid treaty "there can be no dispute about the validity of the statute under Article I, ยง 8, as a necessary and proper means to execute the powers of the Government" -- without further analysis or authority. A subsequent Court decision, Reid v. Covert, limited this holding such that a treaty obligation could not empower Congress to violate the Bill of Rights. More recent scholarship by Georgetown law professor Nicholas Quinn Rosenkranz has challenged Missouri v. Holland's holding in light of the constitution's text, history, and structure.

Decision
While the Supreme Court unanimously overturned Bond's conviction, Chief Justice Roberts's majority opinion, on behalf of six justices, avoided the constitutional question. Roberts reasoned that the Chemical Weapons Convention was not intended to cover minor, local poisoning incidents and determined that Congress could not have intended such a construction of the convention's implementing statute, which would upset the constitutional balance of power between Congress and the states. Roberts thus construed the law narrowly and concluded that the law could not apply to Bond's crime.

Justices Scalia, Thomas, and Alito each filed separate concurring opinions arguing that the case had to be decided on constitutional rather than statutory grounds. In their view the statute on its face clearly applied to any attempted use of a "toxic chemical" not used for a "peaceful purpose related to an industrial, agricultural, research, medical, or pharmaceutical activity." Justice Scalia's concurrence, joined by Justice Thomas, was particularly specific in its inquiry into the limits of the power given to the President and Senate to "make" treaties -- following significantly the line of argument of Professor Rosenkranz's article -- and called for Missouri v. Holland to be overturned.

SCOTUSblog's Amy Howe ably summarizes the decisions in more detail here.

Analysis
At Volokh, Jonathan Adler suggests that the concurring opinions may signal some discontent on the part of the more conservative justices with the Chief Justice's tendency to embrace strained statutory readings to avoid constitutional questions (the so-called doctrine of "constitutional avoidance"). His co-conspirator Ilya Somin reads the tea leaves and suggests that in a future case where the treaty issue is more explicit, the Court may be disposed to overturn Missouri v. Holland and limit the ability of a treaty to expand Congressional legislative authority, and offers further thoughts on the justices' various positions.

In its embrace of constitutional avoidance, the Court's decision is obviously reminiscent of the Chief Justice's lone opinion in NFIB v. Sebelius, in which he construed the individual mandate of the PPACA (Obamacare) to be an exercise of Congress's taxing power rather than its Commerce Clause power to uphold the law's core provision (though in that opinion, the Chief did observe that the mandate was clearly a penalty, and only reached the "tax" construction as an alternative functional ruling through which Congress could have reached the same end). The Bond decision also brings to mind Justice Ginsburg's opinion in Skilling v. U.S., which effectively rewrote the "honest services fraud" statute (construing the law's vague provision to apply only to bribes and kickbacks) to avoid deciding whether it was unconstitutionally vague.

The Bond and Skilling decisions may signal how the Court will rule in the upcoming Yates v. United States. Yates involves the prosecution of a commercial fisherman accused of violating the Sarbanes-Oxley financial reform law's prohibition on destroying, manipulating, or concealing any "record, document or tangible object" to hinder federal investigations -- in the context of throwing back fish that may have been smaller than the minimum size allowed by regulations. While a fish is certainly a "tangible object," the Sarbanes-Oxley law, passed in the wake of the Enron-era corporate scandals, was clearly contemplating document-shredding and similar destruction of corporate records such as that conducted by Enron's auditor, Arthur Andersen. It will be interesting to watch whether the justices in the Bond majority will continue the trend of narrowing criminal statutes beyond their clear terms when the government is applying a broad statutory provision in the criminal-law context.


Vinny Sidhu
Legal Intern, Manhattan Institute's Center for Legal Policy

For much of the 20th century, the steady growth of the administrative state led to increased calls for the codification of a legal and regulatory framework through which people and industries could be provided a degree of certainty in the course of their day-to-day activities. In the past few years, the scope of change in this field has accelerated, with executive aggrandizement at the center of the discussion. From a constitutional standpoint, the ongoing question remains to what extent the executive branch can increase its power while remaining within the strictures of the separation of powers.

To that end, the Supreme Court recently held 6-2 in Environmental Protection Agency v. EME Homer City Generation, L.P. that the EPA's Cross-State Pollution Rule as interpreted was valid, overturning the D.C. Court of Appeals.

Legally speaking, the reach of the EPA under the Rule turned on the meaning of the phrase "contribute significantly." Section 110(a)(2)(D)(i)(I), dubbed the "good neighbor" provision, says that states must prohibit emissions in amounts that "contribute significantly to nonattainment, or interfere with maintenance by, any other State with respect to any such national primary or secondary ambient air quality standard."

The EPA claimed that, because the statute was ambiguous as to what factors could be used to determine what constitutes "significant," the EPA should have the right to fill the gap with their own cost-benefit analysis; specifically, they wished to use the nature of the technology a given state employed to determine whether the state is meeting its obligations under the good neighbor provision. For example, if a state was using EPA-approved technology to mitigate its pollution, it would be more likely to be deemed to be complying with the good neighbor provision.

The petitioners, which included states and some private companies, claimed that "significant" could not be interpreted this way, because the Clean Air Act only mandates that emissions are to not interfere with other states, and says nothing about the means used to achieve that goal. Therefore, the Rule allowing the EPA to factor in the technological means of emissions reduction would stretch agency authority in violation of the language of the statute.

From a policy perspective, the Court siding with the EPA on a statutory vagueness issue portends other potentially nefarious applications of agency aggrandizement. As the Wall Street Journal notes, the case deals with a novel approach to administrative regulation:

No one disputes the EPA's authority to regulate air pollution across state lines, but for the first time the EPA imposed its standards without giving states a chance to offer their own plans. Also for the first time, the agency imposed a uniform compliance standard regardless of an individual state's contribution to cross-state pollution. This is aimed at Texas and other states that have large coal-fired electric plants and forces higher reductions in emissions than states might otherwise have to implement. It is part of the Administration's agenda of imposing via regulation what it can't get through Congress, even a Democratic Senate.

By favoring certain types of emissions-prevention technologies, the EPA would be able to impose politically-favored regulations on the states in circumvention of individual state legislatures and principles of federalism, all under the guise of an "ambiguity" in a statute when the agency does not agree with the statutorily-stated words. The danger ultimately lies in the precedent being laid out; namely, that an agency is presumptively deemed to be in the best position to resolve statutory ambiguities, and should be allowed to proffer rules to resolve those ambiguities. The safer presumption would lie in placing the benefit of the doubt with the politically-accountable Congress, i.e. assuming that Congress did not include the technology analysis in the statute because it did not wish to do so. Within this approach, Congress could change the statute if it so chose, and the nexus of the policy-making decision would still remain in its rightful place. Moreover, it would prevent agency aggrandizement from potentially spreading to other agencies and becoming a systemic problem.

If the country is to retain its constitutional balance, the separation-of-powers doctrine must be respected as a guiding force, even in the midst of the changing needs and obligations of a modern government.


Another case I'll be watching to see if the Supreme Court decides to take up: Limelight v. Akamai. As noted in The Federalist Society's blog, "Akamai charged Limelight with infringement of its patent on a method for delivering video content to consumers via the Internet." By a one-vote majority, an en banc panel of the Federal Circuit overturned lower court decisions that, under traditional patent principles, Limelight was not infringing on Akamai's business-methods patent by partially but not wholly replicating its competitor's process (Limelight's technology leaves some of the work up to the end-user). An array of businesses (Google, Cisco Systems, Oracle, Red Hat, etc.) and the Solicitor General have filed briefs asking the Court to take up the case (the SG's brief was filed at the Court's request -- and both that fact and the brief's recommendation augur well).

I tend to agree with the companies and the SG's office that the Court should hear this one -- and with the proposition articulated in the SG's brief that the Federal Circuit's broad interpretation of business-methods patent infringement could lead to "a significant expansion of the scope of inducement liability (and a corresponding increase in burdensome litigation)." That's a bad thing, and an increasing problem, as I explained earlier this year in Trial Lawyers, Inc.: Patent Trolls:

[P]atent trolling has emerged as a big and growing business line for what the Manhattan Institute has dubbed Trial Lawyers, Inc., the subset of the plaintiffs' bar that behaves like the biggest of big businesses (with the exception that instead of selling products to willing consumers, the lawyers extract monies from unwilling defendants through their unique access to the courts). . . . The number of patent lawsuits filed by PAEs grew from 466 in 2006 to 2,914 in 2012, an increase of 526 percent in just six years[]. In 2011, 2,150 companies were forced to mount 5,842 defenses against NPE-initiated patent lawsuits--up from only 1,401 defenses in 2005.

See also Gary Shapiro's op-ed on the case at the Washington Examiner.

Postscript: The Supreme Court on Friday granted cert on Limelight. We'll have more to say on the case as it comes before the Court on the merits.


As I discussed in yesterday's Washington Examiner, at tomorrow's conference, the Supreme Court will decide whether to grant certiorari on a pair of companion cases -- Sears v. Butler and Whirlpool v. Glazer, which Ted has previously discussed (here, here, and here).

Both cases involve 21 varieties of energy- and water-efficient "front-load" washing machines manufactured by Whirlpool.

In 2001, Whirlpool released the first of this diverse group of washers that reduced water and energy use by more than two-thirds (cutting $120 from the average family's annual water and power bills).

Whirlpool's washers have been ranked among the best in their class by Consumer Reports and helped the company win multiple "sustainable excellence" awards from the federal Environmental Protection Agency.

Class-action attorneys have pounced on the fact that a small percentage of these washers, like all washing machines, can (if improperly maintained) emit "musty odors" from leftover laundry residues.

Such odors may be marginally more likely in these newer machines than in traditional, less water- and energy-efficient washers.

A decade of call center data from Whirlpool and Sears place the percentage of consumers facing such odors at two to three percent, and a more recent February 2010 examination by the Consumers Union estimates the problem rate at less than one percent.

I agree with Ted and others (e.g., ATRA's Tiger Joyce, Tim Bishop & Joshua Yount, the bulk of the business community filing amicus briefs asking for cert) that these cases have broad-ranging potential implications and that the Supreme Court should take them up to clarify the reach of Wal-Mart v. Dukes and Comcast v. Behrend:

The Supreme Court has taken significant interest of late in limiting the use of class-action remedies. In its 2011 decision in Walmart v. Dukes (involving a gender discrimination claim) and last year's decision in Comcast v. Behrend (involving an antitrust claim), the court has emphasized that for a class of plaintiffs to be approved, the facts have to show a common and specific cause of harm that "predominates."

The washing machine cases certainly fail the Supreme Court's predominance test for class-action litigation.

Let's hope that the Supreme Court decides to step in yet again, because the legal theory underlying these cases is worse than musty -- it stinks.

Update: The Supreme Court neither granted nor denied the cert petitions here -- we'll watch for it at the next conference.


Vinny Sidhu
Legal Intern, Manhattan Institute's Center for Legal Policy

Ever so often, the Supreme Court hears a case that has ramifications for our very constitutional structure.These cases reach into the heart of our government to see what strictures remain between the founding generation and our own.

The Court is currently hearing oral arguments in Bond v. United States, a case dealing with fundamental issues of federalism and separation of powers. Specifically, the issue deals with the extent to which Congress can abrogate state police powers pursuant to the mandates of Congress's treaty obligations.

But in a larger sense, this case speaks to the validity of the framework of analysis the Court has employed since its inception. The presumption of constitutional analysis has always begun on the side of federalism and separation of powers; that is, the Constitution created certain enumerated powers to delegate to the federal government and left the majority to the states, so we begin our analysis from where the nexus of the power was meant to lie. In other words, our underlying premise is always to begin with federalism, and inch towards increasing federal power as circumstances might necessitate.

The Bond court has a chance to take another step towards maintaining the presumption of our Constitution by reaffirming the states' role in criminal prosecutions.

The Wall Street Journal has further details on the salient issues here, and the New York Times has more on the oral arguments here.


Vinny Sidhu
Legal Intern, Manhattan Institute's Center for Legal Policy

A couple of weeks ago, the California Supreme Court decided a potentially very impactful case dealing with the enforceability of arbitration agreements made between companies and their consumers/employees.

In Sonic-Calabasas A, Inc v. Moreno, the court ostensibly agreed with the U.S. Supreme Court's rulings in Concepcion and Italian Colors Restaurant that federal preemption applied over any state rulings that attempted to control the scope of consumer arbitration agreements under a specific formulation of the unconscionability doctrine.

However, the Sonic court then opened up the door to the potential introduction of a new unconscionability standard that would be substantively similar to the previously-discredited standard.

In the prior U.S. Supreme Court rulings, the Court specifically overruled the Discover Bank rule, which mandated that consumer arbitration agreements that did not include clauses allowing for class action suits were effectively unenforceable. The Supreme Court has held that the Federal Arbitration Act's mandates apply, regardless of any state "substantive or procedural policies to the contrary," including any any specific state standards for arbitration applicability.

Andrew J. Pincus and Archis A. Parasharami of the Mayer Brown law firm have written an op-ed discussing the various issues involved.


Vinny Sidhu
Legal Intern, Manhattan Institute's Center for Legal Policy

Floyd Norris, author of the High & Low Finance column for the New York Times, writes about two cases the Supreme Court has decided to hear dealing with fee-shifting in patent infringement cases. The outcomes could potentially deter future, frivolous infringement suits.

Businessweek on class actions
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Businessweek mentions the pending CCAF Marek v. Lane Facebook cy pres certiorari petition (on the calendar for tomorrow) in a larger article about how the Supreme Court is supposedly squelching the class action by issuing rulings against abusive class-action certifications. Public Citizen got to Businessweek apparently, with the author warning that a cert grant could be bad for consumers. It's hard to see how consumers could be made worse off than a $0 settlement; such settlements hurt consumers by raising their costs without any corresponding benefit. Defense attorney John Beisner tells me of being on an American Constitution Society panel and asking the audience to identify a consumer class action where the consumers got more than the attorneys, and no one being able to name one.

One quote stands out as especially poor analysis, though:

Reliable data on class actions are in regrettably short supply because courts don't track them. The only helpful gauge over time measures just a slice of the relevant cases: federal securities fraud claims. The economic consulting firm Cornerstone Research says in the first six months of 2013, 74 securities class actions were filed in U.S. district courts. That's down 22 percent from the 16-year average from 1997 to 2012 and off 42 percent from the peak in the second half of 1998.

The problem here is that the Supreme Court has consistently ruled in favor of plaintiffs in securities cases in the last few years. If securities filings have gone down, it's because the stock market has gone up in the last four years, and securities filings go up and down in inverse correlation to the market direction—which does a lot to demonstrate that securities lawsuits tend to be less about fraud than about rent-seeking. In any event, the direction of securities class actions tells us nothing about the direction of consumer class actions.


Vinny Sidhu
Legal Intern, Manhattan Institute's Center for Legal Policy

This week, the Supreme Court is considering a potentially-transformative case that could alter the range of free speech protection granted under the First Amendment. In McCutcheon v. FEC, the Court must decide whether aggregate limits on the amount a person ($48,600 for direct contributions to candidates; $74,600 for donations to non candidate-affiliated political committees) can donate during an election cycle is constitutionally permissible.

Specifically, the Court's constitutionally-relevant precursor here is Buckley v. Valeo, which held that contributions could be limited due to the fear of perpetuating corruption by allowing a donor to make unlimited donations to a single candidate in exchange for political favors. Ostensibly, this appears to be a legitimate concern, possibly even to the extent of allowing for a qualified restriction on political free speech.

But in a larger sense, the specific principle laid out in Buckley cannot been extended out to encompass an area in which the Court's reasoning does not logically extend. The end as stated in Buckley is to subvert potential political corruption, through the means of restricting the amount an individual can donate to candidates for federal office. If we extend this logic to McCutcheon, the stated proposition would stand as: If we restrict the amount of money an individual can give as an aggregate to various candidates, then we are furthering the end of subverting potential political corruption.

Now, the Federal Election Campaign Act already restricts individual donations to a single candidate to $5,200 ($2,600 for primary; $2,600 for general election). Using the Buckley logic, these means can seem to be tailored towards preventing political corruption by preventing a candidate from being beholden to a donor rather than an idea. However, this logic falls apart when we try to say that a limit on the aggregate amount a donor can make furthers this same end. By this extension, a donor could be restricted from donating even nominal amounts to a candidate if the donor has already hit the aggregate ceiling. In oral arguments, Chief Justice Roberts addressed this exact point:

"The concern," Chief Justice John Roberts noted, "is you have somebody who is very interested, say, in environmental regulation, and very interested in gun control. The current system, the way the anti-aggregation system works, is he's got to choose. Is he going to express his belief in environmental regulation by donating to more than nine people there? Or is he going to choose the gun control issue?"

An aggregate cap stands as a forced rationing of political thought as expressed, ironically, through the Buckley proposition that money in service of political speech is protected by the First Amendment. Because the latter statement is a long-standing legal fact, the logical disconnect becomes more apparent.

Moreover, because we are dealing with First Amendment protections, the means must be given "strict scrutiny" examination. The Buckley court seemingly found donor limits to individual candidates to be narrowly-tailored means to the end of rooting out potential quid pro quos.

In order to extend that to McCutcheon, the Court would have to say that the additional burden on political speech created by aggregation caps is either 1) still narrowly-tailored to the anti-corruption end or 2) come up with a new justification for the aggregation caps that can pass strict scrutiny.

Finally, because Super PACs are largely funded by wealthier donors, the aggregate caps would destroy the influence and impact of smaller donors in a variety of political arenas, while allowing larger donors to increase their influence in the political process; this would abrogate the intention of campaign finance laws in the first place. Considering these legal and policy implications, the Court should take this opportunity to clear the way for free expression of political thought.


Facebook and (disappointingly) Public Citizen tell the Supreme Court that there's no dispute about cy pres in the courts that merits Supreme Court intervention. (Earlier.)

I wish the district courts knew that. In EasySaver, the district court thought nothing about awarding $3 million to local universities (including class counsel's alma mater) in a national class action, even though the class was receiving only $225,000 and worthless coupons.

And just this summer, a district court made an appalling cy pres award in BankAmerica Corp. Securities Litigation. Though the class of shareholders received less than a nickel on the dollar for their alleged damages (and claimants ended up being paid less than a dime on the dollar), the Missouri district court refused to distribute $2.7 million to the class, instead ordering that a local legal aid society that serves only the St. Louis area get the money. CCAF wasn't involved at the district court level, but the class representative retained us as appellate counsel, and last week, we filed a brief in the Eighth Circuit appealing the decision. If the law of cy pres were clear, this wouldn't be remotely a close case, but the district court rejected the correct result out of hand.

At least Cato filed a strong amicus brief in the Facebook case. And some district courts are getting it right: the Northern District of California refused to approve problematic cy pres in a problematic settlement; a Kansas federal court demanded that cy pres recipients be identified in the class notice—something the Third Circuit refused to do in Baby Products.



 

Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.