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June 2012 Archives

Jarrett Dieterle
Legal Intern, Manhattan Institute's Center for Legal Policy

Last week, on the last day of its session, the New York State Legislature pushed through a bill that extends the time period for filing lawsuits against municipalities and local government entities.

In a carefully engineered 11th-hour move last week, the New York State Legislature passed a bill making it easier for plaintiffs to sue the municipalities and public entities of New York. The bill was rushed through committee and ordered directly to the floor, where it passed both houses without a single word of debate. Few legislators ever read the bill, and even fewer fully understood its impact.

The bill, innocuously titled the "Uniform Notice of Claims Act," extends the time period for filing certain lawsuits against public entities and centralizes the filing of claims with the secretary of state. With tens of thousands of lawsuits filed against our public institutions each year, it is easy to see how the secretary of state's office could be quickly overwhelmed with pending litigation, and delay actual notice to the defendant municipalities.

The bill has been described as a "gift-wrapped, election-year favor to trial lawyers," which ultimately will put taxpayers on the hook for financing the increase in lawsuits against local governments that the legislation enables. With the bill having passed both houses in the state legislature, the ball is now in Gov. Cuomo's court.

Jarrett Dieterle
Legal Intern, Manhattan Institute's Center for Legal Policy

After the oral arguments in the Obamacare case this past April, we invited Michael Rosman, general counsel of the Center for Individual Rights, and Nadine Strossen, professor of law at New York Law School and former President of the ACLU, to participate in podcasts to gauge their reactions. After yesterday's decision by the Court, we invited them both back again for podcasts to analyze the outcome.

Despite upholding Obamacare, Strossen emphasized the significant ways in which the Court cut back on federal power:

[The case can be described as] winning the battle but losing the war for expanded federal power... Because the holding on the taxing clause was so extremely narrow it comes extremely close to saying - as the Court did in Bush v. Gore - that this holding applies only to this particular statute. It is written in a way that has very, very little, if any, precedential effect. In contrast, the Court cut back on the scope of three power-granting clauses in the Constitution... While the immediate impact is to uphold this particular exercise of federal power, the long-range impact may well be a cutback on significant federal power.
Michael Rosman commented on the Court placing limits on the federal government's Spending Clause power:

There is some limit, but what it is gosh only knows... If coercion is the idea that states don't really have a choice, hasn't Medicaid sort of always been coercive in that regard? Hasn't, for example, Title VI and any other statute in which the receipt of federal funds includes college loans, always been to a substantial degree coercive? As witnessed by the fact that there is no state, I believe, that doesn't participate in those statutes. So yeah, there is a limit; where exactly we're going to draw the line is not entirely clear.

Strossen and Rosman also both participated in our Featured Discussion on the Obamacare decision, which includes analysis from various prominent constitutional commentators.

The implications
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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.

In the wake of the Supreme Court's ObamaCare ruling, the Manhattan Institute is hosting a panel discussion on the implications of the decision this evening. The panel will include Manhattan Institute scholars Avik Roy, Paul Howard, and Jim Copland, as well as attorney Eric Jaffe, an experienced appellate litigator who has been involved in over 80 Supreme Court cases.

Live stream of the event can be found here.

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.

Two senses of federalism
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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.

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.

James R. Copland

While everyone has understandably been focused on the Supreme Court's decision on the constitutionality of the 2010 Patient Protection and Affordable Care Act, as well as its decision overturning in part and upholding in part Arizona's controversial immigration law, SB 1070, it's worth drawing attention to the Court's short per curium decision in American Tradition Partnership v. Bullock overturning the Montana Supreme Court's decision upholding a state-law ban on independent political expenditures by corporations. In essence, the Court said, "We meant what we said in Citizens United."

Of course, most companies won't be making direct independent political expenditures but rather participating in the political process the way they have historically, i.e., through lobbying, PAC donations, and trade associations. These historic mechanisms, as demonstrated powerfully in Rob Shapiro and Doug Dowson's new Manhattan Institute report, Corporate Political Speech: Why the New Critics Are Wrong, have generally increased share value, the claims of certain shareholder activists notwithstanding. That's doubtless why, despite the efforts of those like Bruce Freed at the Center for Political Accountability, shareholders on the whole have been rejecting shareholder proposals seeking limits or greater disclosure of corporate political spending or lobbying.

As of today, among the Fortune 200 companies in our Proxy Monitor database, shareholder proposals concerning corporate political spending or lobbying have received the support of only 17.8 percent of shareholders in 2012, down from 23.0 percent in 2011. Looking solely at the political spending proposal being pushed by Freed and the CPA, only 22.7 percent of Fortune 200 shareholders have backed the proposal in 2012, down from 26.6 percent in 2011.

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."

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.

by 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.

Tim Carney has an excellent column about the strategic attempt of the Left to make conservative ideas and thought entirely discredited. Today's ACA decision, if it comes down in favor of giving the Commerce Clause teeth, will be a huge part of this strategy; though the Commerce-Clause interpretation was adopted by a lower-court judge appointed by Clinton as well as some appointed by Republicans, any Supreme Court decision to the same effect will be a "coup." (No one accused the Court of a coup on Monday when it struck down much of Arizona's SB 1070 or the murder penalties of dozens of states.) A recent Bloomberg poll of law professors found 19 of 21 thinking the ACA was constitutional; on such a close question (and close only because of the incoherence of the last eighty years of Commerce Clause jurisprudence), doesn't this say more about the legal academy than the Supreme Court?

S. 3317, introduced by Al Franken, is intended to undo Wal-Mart v. Dukes, but is largely an incoherent mess that strips both plaintiffs and defendants of important constitutional protections through a "group action" process replacing Rule 23; it is of dubious constitutionality. As Andrew Trask points out in a similar critique,

it appears that the primary benefit of this bill is rhetorical: it allows Democratic legislators to claim that they are standing up for civil rights, while not really standing a chance of amending Rule 23 in any significant way. Instead, they can claim that they tried to address the primary talking points of Dukes critics, and were stymied.

So Senator Franken's proposal is a competent political tactic, but would make for a lousy solution to civil rights problems.

The bill does effectively create a substantive right to quotas by essentially prohibiting any other defense to an employment discrimination claim in front of the wrong judge.

Ed Whelan demolishes the self-parodic sputtering of E.J. Dionne calling for Justice Scalia's resignation, which in turn is no doubt a preview of the Left's planned attack on the Court should they decide that the Commerce Clause means something and strike down the Affordable Care Act.

To Whelan's fine points, one might note that Dionne wasn't calling for Justice Ginsburg's resignation when she used the occasion of the Ledbetter decision to attack the majority and call for Congressional action in a vituperative and misguided attack.

Jarrett Dieterle
Legal Intern, Manhattan Institute's Center for Legal Policy

In the wake of the oral arguments in Arizona v. United States earlier this year, Ilya Shapiro, senior fellow in constitutional studies at the Cato Institute and editor-in-chief of the Cato Supreme Court Review, discussed his views on the case as part of our podcast series. We have invited Shapiro to participate in another podcast now that the case has been decided, this time to gauge his reaction to the decision.

In the podcast, Shapiro analyzes the provisions in the Arizona bill that were being contested and notes that both sides are likely to claim victory in the wake of the decision:

At the end of the day, both sides obviously are going to be spinning this in their favor. Arizona is going to say most of our law is already in place and this most controversial one - the so-called "your papers, please" thing that was demagogued - it's legal, it's constitutional. On the other hand the Administration is going to say we prevailed on three of the four, this is clearly a slap in the face to Arizona and all these other states that are taking the law into their own hands. But it's really a mixed message. [Pre-emption analysis] is very technical ... you have to really look at the technical statutory language of the state law and the federal law.

In summarizing his reaction to the decision, Shapiro emphasized the importance of federal engagement on the issue of immigration:

The broader point here is simply that ... real immigration reform has to come from Congress and from the lawmaking capacity of the federal government. Immigration is a national issue and requires a national solution. States are not capable, practically or legally, in dealing with it.

Yesterday, we featured another post-decision podcast on Arizona v. United States with Adam Freedman, a contributor at Ricochet.com and author of the forthcoming book The Naked Constitution. As the Supreme Court completes its term this Thursday, stay tuned for upcoming analysis and podcasts regarding the Court's decision on the constitutionality of ObamaCare.

According to government mortality tables, an 85-year-old male has a life expectancy of another 5.65 years. Unfortunately for Bobbie Izell, who worked in construction in the 1960s and 1970s, he was diagnosed with mesothelioma when he was 85, so his expectancy is a couple of years shorter. A year later, this month, a Los Angeles jury decided that this entitled him to $30 million in "compensatory" damages from ten defendants; coincidentally, the jury also found that the five defendants who were bankrupt or had otherwise settled were only 5% responsible collectively, while the deepest pocket, Union Carbide, was 65% responsible. Another $18 million in punitive damages were awarded against Union Carbide, on the theory that it should have unilaterally stopped selling asbestos in 1967, but didn't do so until 1985. Union Carbide denies liability entirely; the press coverage doesn't give any evidence on that one way or the other, or bother to explain the defendant's likely legitimate grievance. (Though precedent pretends otherwise, a jury that awards an irrational amount of damages almost certainly assigned irrational amounts of liability.) But the $30 million compensatory damages, nearly all of which is non-economic damages, is obviously absurd. What's the point of constitutional limits on punitive damages if the jury can effectively assess punishment twice under the guise of compensatory damages? [Similar on POL in 2006; law.com/NLJ]

Note that we have apparently gotten to the point where a $48 million verdict is dog-bites-man, and not especially newsworthy; this didn't make the Los Angeles Times or national news coverage other than specialty legal papers; the only blogs to cover it are the splogs that are advertising for asbestos attorneys.

The attorneys were from Baron & Budd; press coverage doesn't indicate whether they'd be sharing what would be millions of dollars of their fee with a "chicken catcher" lawyer who did nothing but recruit the client and pass along the file. Press coverage also doesn't indicate whether Izell has made paid claims with asbestos bankruptcy trusts inconsistent with the claims made at trial, or whether the defendants were able to obtain discovery from the trusts.

Jarrett Dieterle
Legal Intern, Manhattan Institute's Center for Legal Policy

As the Supreme Court's current term winds to an end, much attention has been focused on the Arizona immigration case as well as the fate of ObamaCare. Last week, however, the Court issued a significant ruling in FCC v. Fox Television Stations, holding that Fox was not guilty of "indecency" because the FCC had not given Fox fair notice that the content it aired was, in fact, indecent.

Hans Bader, senior attorney and counsel for special projects with the Competitive Enterprise Institute, analyzed the case and the Court's reasoning behind its decision last week:

In its decision in FCC v. Fox Television Stations, the Supreme Court overturned the FCC's finding that Fox Television was guilty of 'indecency,' ruling that Fox wasn't on notice that it could be held liable for "indecency" over fleeting instances of vulgarity or nudity. In doing so, the Justices clarified that the Constitution protects against vague laws, especially laws that regulate speech, even when those laws don't contain any criminal penalties... The Supreme Court struck down the FCC's finding that Fox was guilty of indecency based on brief instances of vulgarity or nudity, since at the time they happened FCC policy was that only "deliberate and repetitive use" of vulgarity or nudity was punishable "indecency." Because of this, holding the broadcasters responsible violated the Due Process Clause 'void for vagueness' doctrine.

Bader also discussed what the Court's ruling portends for other laws and regulations that potentially suffer from vagueness:

The Supreme Court's ruling has broad implications for businesses subject to civil penalties under federal and state regulations -- and for many federal agencies located here in Washington, D.C. that regulate speech in the workplace or by businesses (such as securities regulations that restrict corporate communications with investors or the public)... If it is not permissible for the FCC to expand its definition of "indecency" to hold Fox responsible based on speech that previously didn't qualify as "indecency", then it certainly should be impermissible for federal bureaucrats or judges to hold employers liable for sexual or racial "harassment" based on speech that previously didn't constitute "harassment" until "harassment" was expansively redefined to include such speech.

Jarrett Dieterle
Legal Intern, Manhattan Institute's Center for Legal Policy

Yesterday, the Supreme Court issued its ruling in Arizona v. United States, the case involving Arizona's controversial SB 1070 bill on immigration. By a 5-3 vote, the Supreme Court struck down three of the four provisions that were being challenged in the Arizona law, but unanimously upheld the controversial "check your papers" provision [Section 2(B)].

Adam Freedman, a contributor at Ricochet.com and author of the forthcoming book The Naked Constitution, posted a guest commentary on Point of Law reacting to the decision. He also agreed to discuss the case as part of our podcast series.

During the podcast, Freedman discussed the rationale behind the majority's decision to strike down three of the four challenged provisions:

The way the majority reached its decision was by taking a very broad view of preemption. First of all, they weren't just talking about the federal power over naturalization, which is what the Constitution gives Congress ... The majority held that the federal government by virtue of its power over foreign affairs has to have this sort of all-encompassing power over the status of all aliens within our borders. ... What was really shocking was that the Court held that the federal government couldn't conduct foreign policy if states were allowed to adopt laws that might upset foreign governments, or that might inconvenience foreign governments by having to track 50 state laws rather than simply having one-stop shopping and being able to go to the federal government. So the decision really had very little to do with the fundamental structure of federalism; it had more to do with this imagined federal prerogative over foreign policy.

After analyzing the majority and dissenting opinions, Freedman offered this unique take-away:

I think it's a bad day for federalism. Unfortunately, there has been a trend going back for some decades - and it waxes and wanes - but there has been this idea that the federal government can invade state powers by using its foreign affairs prerogative ... Here a court is simply speculating why Congress might need to have exclusive powers for the benefit of the executive branch's foreign affairs powers. I think that's a very dangerous road to go on.

Check back this week for another podcast with Ilya Shapiro, senior fellow in constitutional studies at the Cato Institute and editor-in-chief of the Cato Supreme Court Review, on his reactions to the Arizona v. United States decision.

...you can consider that its part-owner, Ranaan Katz, is someone who uses his money to hire attorneys to sue critics in attempts to shut down criticism (or even just less-than-perfectly-flattering photos) of him; the latest legal maneuver seeks a prior restraint on a blogger. [Popehat; Miami New Times; Pixiq; Randazza brief opposing injunction]

Justice Kennedy's majority opinion in Arizona v. US suggests that the biggest problem with the Arizona immigration measure (SB 1070) is that it conflicts with Congress's (non-existent) right to control what foreigners think of us.

The majority recognizes (as did the Obama administration) that SB 1070 isn't trumped by Congress's constitutional power to establish a "uniform rule of Naturalization." The Ariz. law does not change the rules of naturalization (who can enter the country and under what conditions can they stay); rather, it adds certain state penalties to what are already violations of federal law.

Instead, the majority relies on a mythical all-encompassing federal power over "the status of aliens" -- a power which, according to the majority, flows from the executive's power over foreign affairs. Thus, the federal executive branch must have exclusive control over the mechanisms for enforcing immigration law because of the "fundamental" requirement that foreign countries concerned about the "status, safety, and security of their nationals" must be able to deal with one government, not 50. Justice Kennedy cites the amicus brief filed by Argentina (I kid you not) for the proposition that the federal government must control the "perceptions" that aliens have of this country.

Even assuming that it is a worthwhile goal to give foreign governments the convenience of one-stop shopping and a more friendly "perception" of the US, these considerations must yield to the Constitution. As usual, the money quote is from Scalia's dissent:

The Constitution gives all those on our shores the protections of the Bill of Rights--but just as those rights are not expanded for foreign nationals because of their countries' views . . . neither are the fundamental sovereign powers of the States abridged to accommodate foreign countries' views. Even in its international relations, the Federal Government must live with the inconvenient
fact that it is a Union of independent States, who have their own sovereign powers.

By ignoring this "inconvenient fact," the majority casts aside the most basic aspect of state sovereignty: the right to control a state's borders. In the founding era, and for many decades thereafter, the operative assumption was that the states had the exclusive power to exclude undesirable aliens. Jefferson and Madison objected to President Adams' Alien Acts (part of the "Alien and Sedition Acts") on the grounds that the power to determine whether aliens are "dangerous" belonged to the states and had never been delegated to the federal government. In Mayor of New York v. Miln (1837), the Court upheld a New York statute that gave the City the power to turn away any passengers arriving in the Port of New York who the Mayor thought might become a burden on the City.

What we're seeing today is another example of the Court's tendency to interpret the Constitution in a way that the Justices imagine will be most congenial to foreign (mainly European) sensibilities. This approach has already done violence to federalism (e.g., through holdings that the president can invade states' rights via the treaty power); and of course has turned the Eighth Amendment into a mere appendage of the UN Charter.

Jonathan Adler and Michael Cannon remind us that the administration has other legal problems with the poorly-drafted Affordable Care Act, even if it survives Supreme Court scrutiny this week. Earlier.

Solicitor General Donald Verrilli had a tough round of questioning when he argued for the government defending PPACA in the healthcare litigation, and liberals were infuriated that the case turned out not to be the slam-dunk the Obama administration said it was, and made Verrilli a scapegoat for the administration's indefensible litigation position. Adam Serwer at the left-wing Mother Jones called his argument "one of the most spectacular flameouts in the history of the court." Liberal law professor Barry Friedman told the New York Times that Verrilli's performance was "disappointing." Liberal Jeffrey Toobin called it a train wreck on CNN and was otherwise harsh in a Politico story.

In contrast, conservatives were sympathetic to Verrilli. Miguel Estrada in the same NY Times story said that the criticism of Verrilli was "uninformed and unjustified." I defended Verrilli on Twitter.

Somehow, however, when the ABA Journal does a profile of Donald Verrilli, here's how they characterized the kerfuffle over the March oral argument:

It's customary for the solicitor general to show up on opinion days, and Verrilli appeared perfectly upbeat despite all the attention in March to what some perceived as his subpar performance arguing the Affordable Care Act cases. (Some of the criticism was ideologically motivated by critics of the health care law.)

What media bias?

Around the web, June 23
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  • EPA fines oil refiners for failing to use nonexistent biofuel that doesn't even reduce carbon emissions. [Hot Air]

  • Plaintiffs' firms jockey for lucrative roles on executive committee in gigantic privacy MDL in Northern District of California, but don't jockey so hard that they offer to compete with lower fees to their putative class clients. Defendant Carrier IQ complains that setting up an executive committee adds delay and fees to litigation. [Recorder/law.com]
  • Oklahoma trial lawyers back stalking-horse candidates in Republican primaries. Unclear whether they expect bipartisan support for bogus "Seventh Amendment" arguments against civil justice reform, or are hoping to sabotage Republican races to improve chances of Democrats being elected. [Tulsa World]
  • No surprise to POL readers: the well-publicized $10k small-claims court win against Honda was overturned on appeal. [ABAJ]

  • Expand the Supreme Court to 19 justices to reduce influence of individual "swing" justices, stakes of individual nominations? Another side benefit would be more labor to write more opinions. [Turley @ WaPo]
  • Questionable claim of executive privilege by Obama administration. [Hinderaker]
  • Warren smears Cherokee women who protest her lies. [Jacobson]
  • Corporate welfare for GM and GE at the expense of taxpayers and productive economic activity. [Kibbe @ Forbes]

James Copland, director of Manhattan Institute's Center for Legal Policy, seeks to dispel the myths about corporate political expenditures:

It's presidential campaign season, so, predictably, we're seeing lots of media and activist attention on political spending. This year, much of the hype surrounds spending by corporations -- again, predictably, in light of the Supreme Court's 2010 Citizens United decision that political expenditures by organizations such as corporations and labor unions constituted free speech protected by the First Amendment. Most of that hype is downright disingenuous.

It simply isn't the case, as is often alleged, that corporate dollars flowing into the super-PACs that have dominated this political season are undisclosed. And the inconvenient truth for critics of corporate political speech is that among the largest such committees spending money during the Republican nominating campaigns, less than 1 percent of the funds came from publicly traded corporations.

Jim builds a strong and comprehensive argument in the full version of his op-ed.

The legal system that is Europe
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Europe's highest court, the Court of Justice of the European Union, based in Luxembourg, has ruled that workers who get sick during their vacation time are entitled to new vacation time and to credit the sickness to sick days. [NYT, in a surprisingly free-market-sympathetic article, concluding "The ruling does not apply to the 25 percent of the Spanish labor force that is currently unemployed."]

Alex Tabarrok predicts there will be a lot more sickness during vacation.

Jarrett Dieterle
Legal Intern, Manhattan Institute's Center for Legal Policy

This past Wednesday, Manhattan Institute's Center for Legal Policy hosted a conference on the topic of overcriminalization, titled Overcriminalizing the Empire State? Criminal-Law Trends in New York and the Threat to Liberty and Commerce.

The conference featured a keynote speech by Hon. Robert S. Smith, an associate judge on the New York Court of Appeals. Judge Smith discussed, amongst other topics, potential overcriminalization in the realm of child pornography prosecutions; namely, should those who simply view - rather than produce or distribute - child pornography be held criminally responsible?

The event also included a panel discussion on overcriminalization trends in New York with Gerald Lefcourt (president of the Criminal Justice Foundation of the National Association of Criminal Defense Lawyers), James McGuire (former associate justice in the First Judicial Department of New York State's Appellate Division and former chief counsel for New York governor George Pataki), Mike Miller (former assistant DA in the Manhattan District Attorney's office), and Daniel Richman (the Paul K. Kellner Professor of Law at Columbia Law School). The panel was moderated by Manhattan Institute's own Jim Copland.

Thompson Reuters legal reporter Carlyn Kolker covered the event:

Among the theories that moderator James Copland of the Manhattan Institute posited during "Overcriminalizing the Empire State? Criminal-law Trends in New York and the Threat to Liberty and Commerce" is one that today's laws go beyond traditional notions of criminality (think rape, murder, assault) and into new territory, such as regulatory crimes. Many criminal laws suffer from vagueness, says Copland, which gives prosecutors broad discretion in how to apply them.

Against that backdrop, the panelists -- a collection of judges, practitioners and a professor -- delved into deep questions, such as whether New York state's Martin Act, which governs financial fraud cases, is overly broad. Has the law, which vests the state's attorney general with deep powers, been abused? Overly used? There were few hard conclusions.

The Center for Legal Policy will continue its efforts in the area of overcriminalization and plans to host more events on the subject in the future.

Jarrett Dieterle
Legal Intern, Manhattan Institute's Center for Legal Policy

Earlier this week, we discussed the possibility of binding "say on pay" votes being enacted in the U.K. In particular, we highlighted a BIS report that proposed several policies which would empower shareholders with regard to executive compensation. Although binding "say on pay" votes had been discussed, no official legislation was being considered by the British Parliament.

That is, until now. On Wednesday, U.K. Business Secretary Vince Cable introduced a plan to Parliament that would give shareholders binding votes on executive compensation, as well as requiring companies to annually publish a "simple figure" disclosing how much top executives were paid in the past year.

Shareholders would have an annual binding vote on executive-director pay unless a company leaves its policy unchanged, in which case the vote will take place every three years. Investors also will vote on exit payments.

The plan still has to go through Parliament, although it is widely expected to pass. The push for binding say on pay votes gained renewed traction in Britain this spring after several high-profile disputes between shareholders and executives at large companies.

Executive pay has become a major issue in recent months in the U.K., with shareholders increasingly unwilling to allow bosses to receive high salaries when their companies underperform. The debate also has reverberated in the U.S., where some companies have failed to get majority support for their executive-pay plans this year.

In 2010, Dodd-Frank mandated say on pay votes in the U.S., but they remain advisory rather than binding - at least for now.

Lawsuit challenges Dodd-Frank
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C. Boyden Gray spoke out nearly two years ago against the constitutionality of Dodd-Frank, and is now counsel of record (along with CEI) in a lawsuit putting those ideas into play, along with a challenge to the recess appointment of Richard Cordray. The lawsuit focuses on Titles 1 and 10, rather than the entire statute. Kudos to the State National Bank of Big Spring for sticking its neck along the line against an administration known to retaliate. [Gray/Purcell @ WSJ; more at CEI; American Banker; Powerline; WSJ ($); Bloomberg (with an ironic quote from Public Citizen attorney expressing skepticism over standing argument); Compliance Week; The Hill via Zieve; Reuters]

Since at least the 1984 nomination of Frank Easterbrook, the Senate has used the summer of a presidential election year to refuse to confirm nominations to the appellate branch, and this Senate is no different. The American Bar Association, however, for the third straight year, is lobbying Congress to confirm specific judicial nominees, something they never did during the Bush administration, giving some confirmation to the accusations of the Bush administration that the ABA judicial-nominee rating process was highly partisan and biased. [Kerr; Whelan]

In its 2000 decision in Apprendi v. New Jersey, the Supreme Court held that any fact that increases the maximum term of incarceration faced by a criminal defendant must be proved to a jury beyond a reasonable doubt. Prior to Apprendi, judges found many of those facts in sentencing, after the jury was dismissed. Today, in Southern Union Co. v. United States, the Court extended Apprendi's rule to facts determining the maximum amount of a criminal fine.

In Southern Union, the defendant was found guilty of a criminal violation of the Resource Conservation and Recovery Act ("RCRA") for improperly storing mercury. RCRA imposes a maximum fine of $50,000 per day for such a violation. After the company was convicted, prosecutors argued for a maximum fine of $38.1 million, asserting that the company had improperly stored mercury for 762 days. However, the jury had not been asked to determine the precise duration of the violation, and had been told that a violation of only one day was sufficient for conviction. Therefore, Southern Union argued, Apprendi permitted a maximum fine of $50,000. The Supreme Court agreed, in a decision that will have a particularly significant effect on corporate criminal defendants, who often plead guilty in the face of potentially ruinous fines. By requiring the government to prove to the jury every fact necessary to support a fine, Southern Union will give corporations charged with crimes new leverage, both in plea bargaining and at trial.

Written by Adam Freedman
Contributor, Ricochet.com

This morning, the Supreme Court ruled that public sector unions have to get "affirmative consent" from non-members if they want to charge them for things like political spending. This groundbreaking precedent will have a huge impact on the ongoing debate on just how far public sector unions can impinge on the free speech rights of workers.

The case, Knox v. Service Employees International Union (SEIU), involves California state employees. They are free not to join SEIU, but they can't escape having SEIU represent them in collective bargaining; thus, the non-joining employees must pay a "fair share" fee to the union to defray the cost of collective bargaining (expensive work, all that bargaining). There are similar arrangements in other states, where unions are allowed to charge non-members annual fees to cover expenses that purportedly benefit the non-members.

Such arrangements, however, are at odds with First Amendment guarantees against "compelled speech." Why? Because in order to work for the State, people either have to join a union or subsidize a union that may take positions with which they disagree. The Supreme Court has previously held that non-members must have an opportunity to object to paying any "non-chargeable fees" - i.e., those not directly related to collective bargaining - but the Court has blessed the use of "opt-out" procedures, which puts the burden on the non-member to object to the fee. (Teachers v. Hudson).

In 2005, the California SEIU issued its annual "Hudson Notice" giving non-members 30 days to opt out of non-chargeable fees. After the opt-out period was over, the union abruptly announced that it would increase the assessment across the board to help fund a "Political Fight Back Fund" to buy advertisements, etc. against two ballot initiatives that were disadvantageous to the union - including one (Prop 75) that would have limited unions' ability to charge employees for political purposes. In other words, people who never wanted to join the union in the first place were being compelled to speak in opposition to a ballot initiative that would have expanded their right to object to compelled speech. A number of employees filed a class action on behalf of the 28,000 nonunion employees who were forced to contribute to the Fightback Fund.

The Ninth Circuit ruled in favor of SEIU. By a vote of 7 to 2, the Supreme Court reversed. The majority opinion, written by Justice Alito, notes that the ability of unions to put the onus on non-members to "0pt-out" 0f the n0n-chargeable portion of their dues "represents a remarkable boon for unions" and one that approaches "the limit of what the First Amendment can tolerate." The majority did not disturb existing precedent that allows public sector unions to use an opt-out mechanism for annual dues; however, the Court held that anything beyond the annual dues, i.e., "any special assessment or dues increase," must be subject to an "opt-in" procedure. Significantly, the holding applies to any mid-year assessment, whether it is to be used for political speech (as was the case here) or otherwise. In a concurring opinion, Justices Sotomayor and Ginsburg argue that the holding should apply only to assessments for political purposes. As Justice Alito points out, however, any additional assessment will free up union money to be spent for political purposes.

Justice Breyer dissented, along with Justice Kagan. Breyer evidently felt so strongly that he read his dissent aloud; an unusual move these days. Breyer notes that the rationale of the majority's holding would seem to support an 0pt-in requirement for regular annual dues and not just special assessments. Although that troubles Justice Breyer, it should give the rest of us hope that in time today's ruling will be expanded to all public sector union assessments of non-members. Such assessments are, after all, an affront to the citizen's freedom to choose when and how to speak and associate with other citizens.

Jarrett Dieterle
Legal Intern, Manhattan Institute's Center for Legal Policy

Even when a company wins a proxy battle against activist shareholders, it often still endures significant losses. The American Banker reported Tuesday that costs associated with proxy battles are on the rise. Proxy fights can cost companies well over $100,000, with SEC filing fees alone costing up to $25,000. Comparatively, activist investors often spend anywhere from $100,000 to upwards of a million dollars in their efforts to successfully wage a proxy battle against a company.

Two of the three banks involved in recent proxy battles have disclosed some of their costs. Harvard Illinois Bancorp said it paid $100,000 in the first quarter alone to successfully fight off Stilwell Group. And Cardinal Bankshares reported that its legal fees doubled in the first quarter from a year earlier, to nearly $100,000 ... These expenses are expected to increase in the second quarter as the banking companies stepped up efforts leading to their annual meetings.

Furthermore, it should be noted, monetary costs are not the only harm companies suffer from contentious proxy battles.

There are other intangible costs that can be far more damaging to a bank. Observers say a dug-in battle creates more uncertainty, making it hard for a bank to plan and implement a growth strategy. 'The main costs is not the dollars and cents; it's the time, the distraction, the tension and all the mental fatigue factor that's the cost,' Weismann [a partner at Luse Gorman Pomerenk & Schick] says.

Thus, on account of the substantial monetary and opportunity costs involved, even companies that successfully defend themselves against activist proxy efforts can potentially suffer significant losses in the end.

A Law Week Colorado story (via Amazon Post), looks at the role of Stratus Consulting in the gigantic Lago Agrio verdict, and Chevron's suit against the firm. Greenwire reports that Stratus is currently receiving federal taxpayer money for consulting work.

Facebook privacy settlement
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I'm quoted in a Reuters story on the settlement of the Facebook privacy suit, claiming legal problems with Facebook's use of "like"s to portray users as commercially endorsing products or services to their friends. I note that the cy pres provisions, at least as currently publicized, don't provide any protection to class members that the cy pres will not be misused. There's been no publicity about how much the lawyers will profit; the fee structure could be grounds for further objections if the lawyers profit at the expense of the class.

Brian Fitzpatrick is quoted in the story as defending the settlement because "The important thing is the defendant is forced to pay someone... That creates the deterrence to prevent a company from doing something like this in the first place." That seems to me to be missing the point.

Plaintiffs brought a suit claiming $750 statutory damages/class member. They're settling it for $0.10 per class member (over a period of time, no less), and the class members won't even get the money, undetermined third parties will.

If the underlying suit has even a 2% chance of success, that indicates that class members should be getting in the range of $15 each, with some discount to reflect certainty versus risk and the time value of money. If the claims are even more meritorious than that, then the ripoff to the class is even larger, and the attorneys are selling their clients out for a guaranteed fee.

But it could very well be that the parties have correctly valued the suit as having only a 0.01% chance of success. If a suit with a 1-in-7500 chance isn't a frivolous abuse of the civil justice system, what is? Perhaps just bringing a bad case isn't enough to merit sanctions under our current law. But how do attorneys get the right to collect a full fee for doing so? Why do we want to "deter" Facebook if there's a 7499-in-7500 chance they haven't done anything wrong?

The best counterargument is that implicit in Fitzpatrick's analysis, which centers on the difficulty of class certification: the claims aren't frivolous, and have some value, but it would be too hard to prosecute the case as a class action. But that doesn't imply settlement is appropriate; that implies that the appropriate course for ethical counsel is to dismiss the suit and preserve individual class members' claims. Class counsel would be breaching its fiduciary duty to the class in insisting on waiving the class's right to seek relief to justify its own fee.

Jim Copland, director of Manhattan Institute's Center for Legal Policy, authored an op-ed in today's New York Post warning of legislation that grants to New York prosecutors an alarming degree of discretion and authority. In particular, Copland focuses on the Martin Act, which former governor Eliot Spitzer revived and bolstered to combat purported "financial fraud."

He writes:

In the wake of the 2008 financial crisis, New York politicians and judges have been itching to broaden the Empire State's Martin Act, which governs securities frauds. And this comes amid an explosion of criminal laws in this state.

It may sound like warranted crackdown, but don't be fooled: It's really part of a move to shift power to pols and prosecutors -- and it leaves average Joes befuddled and at risk of turning into accidental criminals.

The proliferation of criminal statutes undermines a key principle: that folks know in advance what conduct could land them in prison.

It's obvious that crimes like murder, burglary, rape will be criminally punishable. But other laws have increasingly attempted to criminalize violations of government regulations, which often span volumes, leaving the average citizen unsure of what actions might be considered criminal.

Worse, many modern criminal laws are vague or ambiguous, ensuring that we're never truly on notice of what is or isn't a crime.

Both economic and individual liberty is threatened when legislative initiatives don't comport with traditional precepts of criminal law. Collectively dubbed overcriminalization, this phenomenon is also a vehicle through which legislators and others seek to regulate by prosecution. As Copland notes in his full article, this is a serious problem with dangerous consequences.

A new Manhattan Institute legal policy report titled Corporate Political Spending: Why the New Critics Are Wrong, authored by economists Robert Shapiro and Doug Dowson, finds that "corporate political efforts generally have positive effects on a firm's market value and its shareholder returns." Shapiro, a former Under Secretary of Commerce for Economic Affairs under then-president Bill Clinton, and his present-day colleague Doug Dowson at the economic advisory firm Sonecon, LLC., closely examine academic literature on the topic of corporate political spending and conduct their own analysis.

As reported in the Wall Street Journal today:

Mr. Shapiro and Mr. Dowson looked at studies covering corporate political spending from 1974 to 2011, when most corporate political spending flowed through political action committees. Not surprisingly, the heaviest political spending was done by companies in industries that were heavily regulated, highly concentrated or when they received much of their revenue from government.

Corporate political spending yields a variety of benefits, such as lower taxes, more favorable regulation or in some cases earmarks that help the business. This improves returns for shareholders by 2% to 5% a year, depending on the study, but the authors find "no credible evidence" that political activity harms firms.

The report responds generally to the renewed interest taken by activists in political spending by corporations in the wake of the Citizens United decision. Shapiro and Dawson respond specifically and directly however, to three recent studies, two by John Coates and one by Rajesh Aggarwal, purporting to show that political expenditures by corporations harm share value.

Some recent studies have claimed evidence of harm, but Messrs. Shapiro and Dowson looked at the same data and found methodological and other errors.

For example, Harvard Law School's John Coates argues in recent studies that corporations become involved in politics mainly because their executives want to. They then become distracted and lose their strategic business focus. But Messrs. Shapiro and Dowson found problems in the studies with causation and selection bias, and they conclude that Mr. Coates's evidence fails to prove any negative effect on shareholder value and occasionally supports the opposite conclusion.

In a better world, corporations wouldn't have to devote money and time to politics. This would have the added benefit of less rent-seeking via earmarks and tax preferences. But politicians have created a gargantuan state that is so intrusive that businesses have no alternative than to spend money to defend themselves and their shareholders from such arbitrary looting as the medical device tax in ObamaCare. Liberals want business to disarm unilaterally.

Our own Jim Copland, director of Manhattan Institute's Center for Legal Policy followed up with Shapiro in a podcast interview to discuss the report in greater depth. Even on the surface however, this study strongly refutes a budding trend responsible for a significant increase in activist shareholder efforts to stifle corporate speech.

Jarrett Dieterle
Legal Intern, Manhattan Institute's Center for Legal Policy

Manhattan Institute's Proxy Monitor project tracks, among other things, shareholder votes on executive compensation packages. These so-called "say on pay" votes are now mandated under Dodd-Frank. Even before Dodd-Frank however, say on pay votes became more popular in the U.S., borrowed in large part from the established British practice.

Like in the U.S., say on pay votes are merely advisory in Britain - but moving forward this could change. The Wall Street Journal reported last week that some 60% of shareholders of the British advertising agency WPP voted against the company's 2011 executive compensation package. As the article goes on to note, "[The] U.K. government is consulting on plans to give investors more control over pay."

These plans appear to stem from a Department for Business Innovation and Skills (BIS) "consultation document," which recommends making say on pay votes in Britain binding. The BIS report advances the following proposal:

The Government proposes to address the shortcomings of the current advisory vote by giving shareholders a binding vote on a company's remuneration policy. Companies will have to set out, at the start of the year, a proposed pay policy for the year ahead, including potential payouts and the performance measures that will be used. This will be put to an annual shareholder vote. Any proposed changes to remuneration policy for the forthcoming year will be contingent on the resolution being carried and companies will be required to act within the scope of the remuneration policy agreed by shareholders at the start of the year.

While it is unclear whether Britain will ultimately adopt binding shareholder votes, Prime Minister David Cameron has indicated support for the idea in the past.

In an address at AEI, Senator Mitch McConnell defends the First Amendment and warns of those who attack Citizens United with the intent of silencing political opposition.

For years, Howard Kieffer -- a California resident -- held himself out as a criminal defense attorney, although he had never attended law school or passed any bar. He registered a domain name with a Virginia company, which also hosted the web site. Federal prosecutors charged him with wire fraud, asserting that the web site he maintained, which was accessed by two of his victims, in Colorado and Tennessee, was a "wire communication in interstate commerce" sufficient to establish jurisdiction under the federal wire fraud statute. In United States v. Kieffer, the United States Court of Appeals for the Tenth Circuit,recognized that the victims could have accessed Kieffer's website from local host servers in Colorado and Tennessee, in which case the "communication" made directly to them would not have traveled in interstate commerce. However, the court noted that before the website could reach the local host server, it had been uploaded by Kieffer to the Virginia company, and then transmitted from Virginia to Colorado and Tennessee. The court held that "[t]he presence of end users in different states, coupled with the very character of the internet" permitted the jury to infer transmission across state lines. Under Kieffer, an allegation that a web site was used to perpetrate fraud would give rise to federal wire fraud jurisdiction in nearly every case. Given "the very character of the internet," it is unlikely that a defendant will reside in the same state as his web site host and victims. If other courts follow Kieffer -- and indeed, unless other courts reject it -- there is likely to be a surge in federal wire fraud prosecutions.

A 5-4 decision upholding the Ninth Circuit's ruling that SmithKline was entitled to classify the plaintiffs as outside salesman exempt from the FLSA wage-and-hour requirements. The Department of Labor had adopted a lawsuit-friendly interpretation of the law that the Ninth Circuit rejected. [SCOTUSblog page; Chamber of Commerce amicus]

None of the big opinions were released today, so there will be ten opinions issued Monday, or a second opinion day scheduled.

End-of-term Monday
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Today and June 25 are the days when the Supreme Court will release its biggest decisions of the year. The Obamacare and Arizona immigration law decisions are obviously much in the news, but Point of Law readers will also be interested in First American Federal v. Edwards, a decision about the ability of Congress to create federal causes of action in the absence of injury to the plaintiff. Such "harm-less" class actions are the source of many of the most lawyer-friendly class actions and settlements, because the attorneys can bring expensive suits against deep pockets and then justify settlements that benefit no consumers at all by pointing out that their clients weren't suffering any injury in the first place. I'm quoted in a Chris Rizo story on the subject.

When attorneys affiliated with CCAF first objected on behalf of Professor Michael Krauss in the Classmates.com settlement, that case paid $52,000 to class members and over a million dollars to the attorneys and the class representatives (while falsely characterizing it as a $9.5 million settlement); Gregg Easterbrook of ESPN called it the worst class action settlement of the year. We objected, and the court struck down the settlement. The parties went back to the drawing board without including us in the process, and they came back with a settlement that guaranteed $2.5 million for class members, while still paying the attorneys over a million dollars. The settlement, as we pointed out in a second objection, still overpaid the attorneys and had Bluetooth reversion problems to boot: any fee reduction, notwithstanding clear sailing, would go to the defendant rather than the class. The parties quickly eliminated the kicker: now any fee reduction would go to the class, and the judge agreed with us at the fairness hearing that there should be a fee reduction.

Given that we had won over $2 million for the class, we thought we might be entitled to a token fee award; given our non-profit status, we planned to ask for something in the $40,000 to $50,000 range, reflecting both the benefit to the class and a sub-lodestar amount for multiple rounds of briefing, two trips to Seattle for fairness hearings, and the cost of hiring local counsel. But before we even put pen to paper on the fee request briefing, class counsel retaliated against us for our success in objecting by hitting us with super-burdensome fishing-expedition subpoenas, on, inter alia, a conspiracy theory of cross-referencing our donors with donors to institutions where Professor Krauss had performed work, such that someone paid Cato ten years ago to have Krauss write a paper so that he would successfully object ten years later represented by attorneys affiliated with CCAF to a settlement of a lawsuit against a company that didn't even exist yet. (Dozens of class members contacted us about this bad settlement. As we were figuring out who would be the best objector, Professor Krauss contacted us, and we agreed to represent him within minutes because he taught legal ethics, which added a modicum of ethos to our objection.) We were already overextended with appellate briefing schedules, so we had a choice: we could spend tens of thousands of dollars on outside counsel to resist facially invalid subpoenas requiring a response over the Christmas holidays, and be faced with an additional discovery bill of tens of thousands of dollars if we lost (and thus be put in a position where we might be worse off for requesting fees) or drop the fee request rather than prejudice our other clients. Professor Krauss was generous enough to give us permission to drop the fee request, and we did so. But we asked the court to award sanctions against class counsel on behalf of the class for the abuse of the discovery process to deter future abuses against objectors.

The court did so, deducting $100,000 from the class counsel's fee request and awarding it to the class. So if you're keeping score, class counsel tried to abuse the discovery process to prevent us from collecting a $40,000 fee, and ended up costing themselves $100,000 (plus whatever attorney time they wasted having to defend themselves in the sanctions motion and on their own discovery) in the process. The class will get $2.753 million in cash instead of $0.052 million in cash; the attorneys and class representatives will get $253,000 less than they originally planned. The opinion by Judge Richard Jones (who's rapidly becoming one of my favorite district-court judges) generously praises us for being the attorneys most interested in class recovery. Congratulations to our patient client, Professor Krauss, and to attorney Dan Greenberg, who argued at the second fairness hearing.

(The Center for Class Action Fairness is not affiliated with the Manhattan Institute.)

ATMs and the ADA
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The Americans with Disabilities Act requires banks to make ATMs accessible to the visually impaired, and lawyers are finding it profitable to sue the stragglers. [American Banker]

This is less a problem with the court system than with Congress creating an unfunded mandate costing hundreds of millions of dollars. Heck, if I had a visually impaired friend, I'd hire runners to figure out which ATMs are out of compliance, have her bring suit, and cash in on my private-attorney-general windfalls; come to think of it, I should probably advertise for a visually impaired friend and hire a couple of unemployed law graduates and just run the mill. Congress creates so many statutes that are effectively Lawyers Full Employment Acts that I simply don't understand why any recent law graduates are complaining about the lack of jobs.

Perhaps we as a society want to incur hundreds of millions of dollars of additional costs to ensure that the visually impaired don't feel left out because of the inconvenience of an ATM not especially designed for them. But one wishes that that was more of a conscious decision than the one being made by legislators to just create the requirement without thought to the costs and benefits.

Cartoonist Matthew Inman of the profane site "The Oatmeal" snarked at a for-profit site, "Funnyjunk," where users regularly plagiarized his work without credit. In response, Funnyjunk hired an attorney, Charles Carreon, who claimed Internet savviness; Carreon sent Inman a threatening letter demanding $20,000 in payment not to be sued for bad-mouthing Funnyjunk.

Inman responded by publicizing the letter and hosting a fundraiser to raise $20,000 for charity. It has already generated over $100,000. [Popehat; MSNBC; Randazza; more links at OL]

As both Daniel Fisher and the Economist documented recently, the percentage of M&A transactions worth over $500 million that result in shareholder derivative suits has risen from 39% to 96%. [Fisher; Economist; Reuters (quoting me); OL; see also Johnson @ SSRN]

It's surely not the case that every merger is the result of a breach of fiduciary duty. What's happening is that entrepreneurial lawyers have discovered a profitable means of rent-seeking: with the help of a cooperative shareholder, bring a meritless shareholder derivative suit on some technical ground or the other, threaten to impose millions of dollars of discovery expenses and hassle on the officers and directors of the company, and collect an attorneys' fee for settling the case for a token change of no benefit to the shareholders. As I told Reuters in 2011, "Judges should consider whether these provisions actually create value for shareholders, or amount to a rearranging of the deck chairs to create the illusion of value to justify attorneys' fees."

Under FRCP 23.1(a) and its state-law equivalents, a shareholder derivative suit isn't supposed to proceed unless the shareholders bringing the suit adequately represent the shareholders. If the suit is meant to profit the plaintiffs' lawyers at the expense of the corporation (and thus the shareholders), how can the bringers of a strike suit be adequate representatives of the shareholders? I've thus argued that the correct role for courts in such situations is to throw these cases out entirely (or approve the settlement but award only a token amount in attorneys' fees).

I found myself the "beneficiary" of one of these $0 strike-suit settlements in Robert F. Booth Trust v. Crowley; the settlement would have paid the attorneys $925,000 under a clear-sailing clause, and, when the district court rejected my attempt to intervene to dismiss the suit, I appealed to the Seventh Circuit.

Yesterday, I won a complete victory with a landmark Frank Easterbrook opinion that I hope will provide protection for shareholders against future shareholder derivative strike suits. The suit, the Court said, "serves no goal other than to move money from the corporate treasury to the attorneys' coffers.... It is an abuse of the legal system to cram unnecessary litigation down the throats of firms ... and then use the high costs ... to extort settlements (including undeserved attorneys' fees) from the targets." It thus reversed the district court's denial of my motion to intervene, and remanded with instructions to dismiss the case, as I had asked below. [Reuters; Fisher @ Forbes; analysis by Wolfman; WSJ Law Blog (failing to recognize that the case involves a lawyer they profiled in October); Bashman; Overlawyered; Litigation Daily ($) ("Ted Frank, the indefatigable scourge of underwhelming class action settlements, scored a remarkable win on Wednesday"); Volokh on a punctuational quirk]

(The Manhattan Institute did not participate in the suit, and is not affiliated with the Center for Class Action Fairness.)

The case of Carlos DeLuna
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(Bumped from June 11 to reflect correction, update.)

Speaking of capital punishment...

Death penalty opponents are very excited about the case of Carlos DeLuna as an argument against the death penalty. [Guardian] Twelve law students and a Columbia Law professor, based on several years of research and witness interviews about events decades ago, argue relatively convincingly that it was the late Carlos Hernandez (who died in prison after being convicted of another knife attack), not the executed Carlos DeLuna, who murdered Wanda Lopez in 1983 in a Corpus Christi Shamrock gas station. But I'm less persuaded that it demonstrates DeLuna's innocence, and less persuaded still that it tells us anything about capital punishment.

21-year-old eighth-grade dropout DeLuna, who was allegedly of "childlike intelligence" (a contention disputed by Texas), was six weeks out of prison on February 4, 1983, for a previous violent attack on a friend's mother in May 1982 (!) (this time only a couple of days out of prison, breaking several of her ribs in an unsuccessful rape); he also allegedly had a history of drug and alcohol abuse according to his habeas attorneys. According to the new narrative, DeLuna was physically present when his cousin, Hernandez, who looked strikingly like DeLuna, started stabbing Lopez to death. DeLuna decided his best course of action was to run a short distance away and hide under a truck; he was arrested when found there 40 minutes later; police didn't investigate his implausible claims that it was Hernandez who did it, given DeLuna's suspicious behavior, criminal record, the fact that he had an amount of money in his pocket nearly the same as that stolen from the gas station, and two witness identifications who testified they saw DeLuna with a knife or stabbing Lopez. At trial, DeLuna testified as to support for his an alibi (he was at a skating rink with Mary Ann Perales), but Perales testified to refute DeLuna's claim. Today's forensic testing for DNA wasn't available in 1983, and DeLuna was executed in 1989 after several rounds of appeals failed, none of which contended his innocence.

You'll get no argument from me that state courts in Corpus Christi aren't very good. But I don't see the relevance to capital punishment as a whole. If the argument is that a mistake is possible in the one-in-a-million case too implausible for "Law & Order" where a violent recidivist is physically present at a scene and acts in a suspicious manner afterwards and is mistaken by witnesses for his lookalike cousin who cannot be found, that weighs in favor of the Scalia/Thomas argument that the error rate in death penalty cases is not a reason to oppose the death penalty. As one blog notes, "The number of death row inmates who are there because an airtight case convicted them of a crime their doppleganger committed has got to pretty close to zero."

If Lopez were murdered ten years later, the skin under her fingernails would have been tested for DNA, supporting or refuting the case for DeLuna's guilt; if the death penalty were not available in Texas in 1983, DeLuna would have sentenced to life without parole, and would have already died in prison or still be there without anyone spending several person-years re-investigating his case. If DeLuna was really of childlike intelligence and he had been arrested in 2003 instead of 1983, his 21st-century attorneys would have finagled an IQ test under 70, and blocked his execution. (Given that DeLuna was able to make a complex pro se motion demanding to dismiss his attorneys, I am skeptical of the claims that he was so mentally retarded to preclude execution today.)

Moreover, given that DeLuna was admittedly friends and family with Hernandez and admittedly saw Hernandez start to stab Lopez, even if Hernandez wielded the fatal stab wound, it is not necessarily the case DeLuna had nothing to do with Lopez's murder. It's entirely within the realm of possibility that he agreed to participate in an armed robbery that got out of hand, which would still make him eligible for capital felony-murder charges; this is certainly consistent with a decision to run away and hide instead of seek police or medical help. Police may have botched the investigation and let a criminal get away with murder, but it doesn't make DeLuna innocent of a capital crime. Tison v. Arizona, 481 U.S. 137 (1987). The claim that there is dispositive evidence that DeLuna did not commit a capital crime simply isn't true; he might not have committed the crime he was convicted of, but no one has made (or, at this late date, can make) the case that he is not guilty of capital felony murder. (Moreover, the prosecutor claims that DeLuna confessed at one point. I'm skeptical, but it does muddy the Liebman claim that DeLuna always contended his innocence.)

Of course, DeLuna, who had two attempted rapes, a violent assault on an older woman that broke several ribs, and the use of a motor vehicle without permission on his record, was unlikely to have only served three years in prison in Texas by the age of 21 with that criminal record today. As injustices in the American criminal justice system in the last thirty years go, the fact that career criminal DeLuna died in prison in 1989 instead of possibly later doesn't even make the top thousand, even if the claim that it was Hernandez who killed Lopez is true.

We're already seeing the story being manipulated for political purposes: the Daily Beast falsely claims that DeLuna had a nonviolent past—attempting to rape a woman, threatening to kill her, and breaking her ribs doesn't count, apparently. Given DeLuna spent less than two months of his adult life out of confinement, it seems much more likely to me that the reason for his lack of a more extensive violent crime record is the lack of opportunity.

Liebman is quoted by the Huffington Post that there's no evidence the gas station was robbed; this is false, as the gas station owner testified as to missing money corresponding to what was found in DeLuna's pocket. You can accuse him of perjury, but you can't say there was a lack of evidence.

Unsurprisingly, there has been very little skepticism of the James Liebman report on the web or media, capital punishment defenders are rarely quoted. [Sentencing Law & Policy; Dallas Morning News; NYT]

Kent Scheidegger reminds us of reason to be skeptical of Liebman on this subject, given his previous choices in presenting disingenuous arguments against the death penalty.

Update, June 13:

Reuters reports on this post, but the six hours between when the reporter emailed me at 4:51 PM and when I responded wasn't quick enough to get my comments in the story.

1. In preparing this post, I relied on a Guardian article that referred to DeLuna and Hernandez as related to the same witness. From that, I misremembered the two as distant cousins. In fact, the witness was an in-law of DeLuna and was a stepmother of a niece of Hernandez. I regret the error, which was immaterial to my analysis.

2. Professor Liebman criticizes me for saying that DNA testing was not available in 1983. But it wasn't: the first US criminal trial to use DNA evidence was in 1987, and Liebman's own report acknowledges this on page 955.

3. The same reporter complains that I'm delving into the hypothetical. But I'm not speculating any less than Liebman is. The only people who know what DeLuna did at the Shamrock—Lopez, Hernandez, and DeLuna—are dead. (Jurors speculate all the time in the absence of video evidence.) Liebman infers from the forensic evidence (and long-after-the-fact confessions) that Hernandez wielded the knife that killed Lopez, and from that infers DeLuna is innocent, but the latter conclusion does not necessarily follow given the felony-murder rule. Texas Penal Code s7.02, "felony murder," and "felony-murder" are all entirely absent from the 451 pages of the Liebman report. The felony-murder explanation is more consistent with DeLuna's perjury at trial and decision to hide than the Liebman hypothesis that DeLuna told the truth about what happened at the Shamrock.

4. One of the matters underreported both by the press and my original post is the degree to which utter community dysfunctionality contributed to DeLuna's execution. DeLuna refused to help his lawyers identify Hernandez, giving up only the common name on the eve of trial without any additional information to help the attorneys (who spent wasted money on private investigators) track Hernandez down. (One can hardly blame DeLuna's lawyers for ineffective assistance given the lack of cooperation from their lying story-shifting client.) What helped Liebman's investigators unravel the mystery is the degree to which Hernandez repeatedly bragged about killing Lopez after DeLuna's conviction, and no one Hernandez bragged to bothered to mention it to anyone until Liebman's investigators showed up.

5. I wasn't aware of it, but one of DeLuna's attorneys also believes that DeLuna participated in the Shamrock robbery; the news story reporting that interview doesn't mention or appear aware of the felony-murder rule.

6. Lopez's family sued the Shamrock for her murder, and, according to Liebman, received a substantial settlement from the third party for the intentional crime of another. When politicians complain that businesses won't invest in high-poverty areas, think of civil lawsuits like that one.

TSA head John Pistole defends the utter waste of his agency by noting that it no longer asks people over the age of 75 to remove their shoes when going through screening. This is utter nonsense. If screening shoes is a necessary step to preventing terrorism, then a 75-year-old's shoes are no less of a risk to security than a 74-year-old's shoes. One thus correctly concludes that there is no reason for any passengers to be removing their shoes in the first place. (Similarly, there's no difference to the risk of an aircraft from a personal computer than from an iPad, but security theater has us going through the inconvenience of removing laptops from bags.)

The fact that the TSA will not permit Bruce Schneier to testify in front of Congress is further evidence that the TSA policy is not empirically defensible. Related from Popehat citing our earlier criticism.

I long ago predicted that the expansion of the 9/11 Victim Compensation Fund would lead to fraud and giveaways at the expense of taxpayers, and, unfortunately, I'm being proven right. Despite the complete lack of scientific evidence that the WTC site dust causes cancer, NIOSH director is letting politics trump science and opening the fund to claims from 50 different types of cancer. Oddly, the same Lancet studies that earlier showed no statistically significant evidence (no non-smoking firefighters have come down with lung cancer out of the 9000 firefighters who worked at Ground Zero) are being used to justify this raid on the federal fisc. The New York Times highlights the case of Ernest K. Matthews, who blames his lung cancer on cleaning Merrill Lynch elevators instead of on his smoking, and will be making a claim at taxpayers' expense. Similarly, Patricia Workman implausibly claims her 2001-03 exposure to Ground Zero caused her 2007 myeloma and skin cancer. The brief exposures of Ground Zero workers to common toxic substances are being used to rationalize the payments, though "Dr. Neugut, who is a principal investigator with the Long Island Breast Cancer Study Project, which was set up to look at environmental causes of breast cancer on Long Island, added that most studies of cancer risks 'are based on workers exposed for eight or nine hours a day to mammoth amounts of these things for 30 years. Even then it is hard to demonstrate a clear excess in cancer risk.'" This junk science should be a bigger scandal.

Tyler Cowen notes that Intrade prices the probability of the ACA mandate being struck down at 71%, up substantially over the last few months, and suspects a leak.

I don't suspect a leak. Supreme Court clerks don't leak. But there's a rational reason for the Intrade price to increase. The Supreme Court issues all of its opinions by the end of June. Historically, the most contentious decisions are released in the very last days of the term. If, as several law professors sneered, the case against the ACA mandate was frivolous, it would be upheld by a wide or unanimous margin and the opinion likely would have already issued. As we get closer to the end of June, it becomes more and more apparent that the Supreme Court is not treating this as an easy case, it becomes more and more likely that there will be a 5-4 decision, and the more likely there is a 5-4 decision, the more likely the mandate is overturned. An intelligent Bayesian infers increased odds of reversal from the delay in releasing the opinion. (That said, that 71% figure seems high. There are four votes to uphold the mandate, which means that five justices with varying views on the Commerce Clause have to all break the same way.) George Will protests the campaign to demonize the justices who might strike down the law.

Daniel Fisher finds some other tea leaves that cut the other way. In Armour v. Indianapolis, the local government permitted homeowners to pay an assessment for a sewer system in a lump sum in advance, or with a smaller monthly fee over several years. Several homeowners paid in advance; then Indianapolis repealed the requirement for the monthly fee—but refused to refund the homeowners that had already paid. In a 6-3 opinion, the Supreme Court rejected an Equal Protection challenge to this remarkable ripoff on the grounds that the city's proffered rationale that it would be too much of a bother to provide the refund satisfied "rational basis review." Chief Justice Roberts's dissent was in stronger language than is normal for the reserved jurist. Fisher speculates: does this indirectly reflect upset about another pending decision where a majority might rely upon the highly deferential rational basis review? (Meanwhile, another moral is: never pay the government in advance, because you can't expect them to treat you fairly.)

Spoilers on "Prometheus" after the fold, as I discuss problems of corporate law in 2091.

We've previously noted the extent of the problem of asbestos bankruptcy trusts being used as trial-lawyer piggy banks to fund litigation against third parties on legal and fact theories different than those used to obtain recovery from the trusts. The May 10 hearing on the subject created some fireworks when Democratic Rep. Steve Cohen called chicken-catcher attorneys who contacted him about a potential case "parasites." [LNL; ILR; Professor Todd Brown testimony; more from ILR; unpersuasive SE Texas Record editorial]

Anti-death-penalty courts in California and the Ninth Circuit routinely misapply criminal law and the law of habeas corpus to prevent the execution of prisoners on death row. Combined with backlogs in those courts and the mandatory nine levels of review, which can turn into even more levels of review if multiple habeas petitions are permitted.

How bad is the situation? A recent AP story on a Death Row suicide gives useful data:

  • 723 inmates on death row;
  • Thirteen executed since 1978;
  • Zero executed since 2006;
  • 57 inmates have died of natural causes; and
  • 20 inmates have committed suicide.

The disingenuous nature of the legal arguments against the death penalty is demonstrated in part by the fact that unnamed opponents are claiming the delays—almost entirely the work of death penalty opponents—are in themselves cruel and unusual punishment.

Walter v. Hughes Communications
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A class action brought on behalf of California consumers alleging inferior speeds of Hughes Internet service and unfair charges of early termination fees. As most class actions do, this case has settled. Though the parties know who the class members are, there's a burdensome claims process instead of simply writing checks to class members: the parties mail a postcard to class members, the class members enter a claims number from the postcard into a website, and then fill out a claim form. So we have a settlement designed to benefit the attorneys while the defendant gets off cheap: even if 10% of the class makes claims, the attorneys' $630,000 fee will outstrip the class relief. And it's doubtful that 10% of the class will make claims. Ironically, the court had refused to approve an earlier iteration of the settlement, correctly viewing with skepticism an implausible valuation of the injunctive relief. it's hard to see how this settlement is much better.

The settlement class is "All persons and entities residing in the United States of America who, during any time between May 15, 2005 and March 2, 2012, were subscribers to any one of the one of the following satellite broadband internet service plans offered by Hughes: Hughes Home, Pro, Pro Plus, Small Office, Business Internet, Elite, ElitePlus, ElitePremium, Basic, Power 150, or Power 200 (together "Hughes Consumer Service Plans")." (Why do attorneys bringing a class action on behalf of California consumers get to settle on behalf of a national class? You tell me.) The case number is 09-cv-2136 SC (N.D. Cal.).

A June 1 House hearing on class actions included testimony from Professor Martin Redish and John Beisner. Both cited the CCAF victory in Nachshin in discussing the problems of cy pres; Beisner also cited CCAF victories in True v. Honda and Sobel v. Hertz in discussing the additional scrutiny given to coupon settlements under the Class Action Fairness Act. Of course, some parties are evading CAFA scrutiny by simply not calling their coupons coupons. Earlier on cy pres. [Legal Newsline; BLT]

Freeman v. Quicken Loans
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The Supreme Court unanimously rejects an interpretation of RESPA by regulators that ignored the statutory text, once again striking down aggressive plaintiff use of RESPA. [SCOTUSblog; WSJ]

The Wall Street Journal correctly notes that the main beneficiary of the so-called "Paycheck Fairness Act" will be lawyers; the law creates liability even in the absence of discriminatory intent, and makes it more expensive to hire workers.

The Journal focuses on the unfairness to employers, but the largest effects of the bill, if passed, will be felt by employees. It's very much a wealth transfer from regular employees to the 1% who are in the trial bar: wages will go down to reflect the fact that the litigation expense per employee is going up. Earlier on POL.

Amending the Constitution
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Sandy Levinson criticizes the Constitution as too hard to amend, pointing to the lack of meaningful amendments over the last century. But, as Mike Rappaport points out, the complaint ignores the post-1937 judicial philosophy that permits judges to ignore the Article V limits on amending the Constitution, dissipating any political pressure to issue such amendments. The Equal Rights Amendment was mooted by Supreme Court decisions granting everything the ERA asked for; there's no movement to amend the Constitution to require recognition of gay marriage because everyone views a Supreme Court decision creating the right by fiat as inevitable. Of more concern is that there are four justices on the Supreme Court willing to write the First and Second Amendments out of the Bill of Rights as inconvenient to their preferred public policy goals of regulating political speech and self-defense, and a fifth could be appointed in the next presidential term.

As to the difficulty of policy change without consensus, that's a feature, not a bug.

James Copland, director of the Manhattan Institute's Center for Legal Policy and editor of the ProxyMonitor.org website, interviews former SEC commissioner, Paul Atkins, on the top trends in shareholder activity.

The Texas Public Policy Foundation recently published 12 Steps for Overcoming Overcriminalization. Among its suggestions: identify and amend laws with weak or nonexistent mens rea requirements; establish a default mens rea for criminal statutes silent on this issue; enact the Rule of Lenity -- a canon of statutory construction -- as a statute; and eliminate the delegation to administrative agencies of the power to make criminal offenses of rules violations.

Judge Frank Easterbrook, honored at Swarthmore, speaks out (via @andrewgrossman) on the claims that the 5-4 decisions of the Supreme Court reflect a failure of Chief Justice Roberts to avoid politicization of the Court:

We have about a month to go in the Supreme Court's current term. Many 5-4 decisions are impending. The press will bemoan the Justices' inability to agree and assert that the Justices' ideology explain the divisions. Those of you who have encountered the attitudinal model in class will nod sagely. You, and the press, will be wrong.

Suppose the Justices who are usually called "conservative" were to resign tomorrow and be replaced by President Obama. The reconstituted Court still would find lots of cases to be hard. It would grant review of those hard cases and decide many of them five to four. Cases that the Roberts Court finds hard and decides 5-4, this hypothetical Court would find easy and decide 9-0; lawyers would stop presenting those disputes. But they would bring more and more of the disputes that divide the new Court.

To those who specialize in economic analysis of law, the effect is known as selection pressure in litigation. The choices made by lawyers, and the judges themselves, ensure substantial disagreement even when there is no ideological difference among the judges - which also makes it hard to blame politics for the disagreement we actually observe. The rate of disagreement among the Justices has been stable for more than 70 years. The Court had the same rate of dissent in 1945 as in 2005, though in 1945 eight of the nine Justices had been appointed by a single President. Selection pressure is responsible for this stability.

Turn from law to science. Is Pluto a planet? Astronomers answered no by a closely divided vote. Is Einstein's theory of general relativity right, or should it be replaced by modified Newtonian dynamics (MOND)? Should string theory replace the approach known as the standard model? Scientists disagree about these and many other questions. There's no need to resort to ideology or politics to understand disagreement among specialists who tackle a discipline's hardest questions - which is what the Supreme Court does.

Given selection pressure in litigation, the puzzling feature of the judicial system is agreement. There is much more agreement than the attitudinal model - or anyone who has read Wittgenstein and other language skeptics - can explain.

Judges of my court agree in 97 percent of all appeals. The Supreme Court decides about 40 percent of its cases unanimously - and these are the hardest cases in the legal system, which usually reach the Court because judges of other courts were at odds. It isn't just technical disputes that end unanimously. Last January the Court decided Perry v. Perez, a reapportionment case that concerned how many districts in Texas would be drawn to favor Hispanic candidates. All nine Justices rejected the contentions of both the Obama Administration (representing the political Left's perspective) and the State of Texas (espousing the Right's perspective). Both state and national politicians, and editorial writers, had strongly disagreed about what should be done in Perry; the Justices resolved the case unanimously.

Here's another example. Last Monday, the Supreme Court considered whether a child conceived through in vitro fertilization, after the father's death, is entitled to benefits on the father's account under the Social Security program. This question had divided appellate judges. Many articles in the press - the legal press and legal blogs as well as the popular press - depicted the case as an opportunity for the Justices to express their preferences about religious versus scientific views of conception and family status. But the Justices saw it only as a dispute about the meaning of statutory language. The case was resolved unanimously.

In the news, June 1
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Hans Bader, senior attorney and counsel for special projects with the Competitive Enterprise Institute, followed up on our recent post discussing the Supreme Court's ruling in Blueford v. Arkansas.

Bader writes:

The Supreme Court recently weakened constitutional protections against double jeopardy in Blueford v. Arkansas, a homicide case. The 6-to-3 decision was written by Chief Justice Roberts. It allowed a defendant to be retried for murder -- not just manslaughter -- even though the jury forewoman had reported that the jurors had unanimously rejected murder charges and were deadlocked on the lesser manslaughter count.

In the Blueford decision, more of the liberal justices were protective of double jeopardy protections than conservative justices. But in other contexts, liberals are even more eager to sacrifice constitutional protections against double jeopardy -- even where a jury has rejected not just some charges (as in the Blueford case) but all charges against the defendant.

In 2009, a liberal Congress passed, and President Obama signed into law, an expansion of federal hate crimes law partly designed to enable federal prosecutors to reprosecute people who had already been acquitted of hate crimes in state court. (This is permitted under a loophole in double-jeopardy protections known as the "dual sovereignty" doctrine). Liberal Supreme Court Justices had earlier proved less sympathetic than conservative justices to defendants subjected to federal prosecutions after a state court acquittal in Koon v. United States (1996), a case with racial overtones. The defendants' convictions in that case were sustained based on "dual sovereignty," but the Court reduced their sentences, citing the successive prosecutions. In politically charged cases, some people just can't accept a not-guilty verdict or dropped prosecution. As law professor Gail Heriot has noted, some supporters of the 2009 federal hate crimes law "even called for federal prosecution of the Duke University lacrosse team members-despite strong evidence of their innocence."

In a new installment of Point of Law's regular podcast series, James Copland and Ted Frank discuss the John Edwards trial and the potential overcriminalization and regulatory overreach involved.

The podcast was taped before the verdict was announced, as reported today:

In a blow to the government, the 12 jurors acquitted the former North Carolina senator on one count related to a donation in 2008 from his friend, wealthy banking heiress Rachel "Bunny" Mellon. That count, one of six, was considered to be the weakest, because that payment to an Edwards aide was made as Mr. Edwards's presidential campaign was winding down.

The jurors in federal court here then said they were unable to reach a verdict on the remaining five counts, which included a conspiracy charge and two charges related to donations from another wealthy donor, the late Fred Baron.

Yesterday, the Wall Street Journal followed up on their recent piece which revealed the ineffectiveness of the activist tactic to suppress corporate speech vis-à-vis the corporate proxy process. This time they were bolstered by quantitative data released by the Manhattan Institute's Proxy Monitor project and our very own Jim Copland's new mid-term report.

Citing Copland's new finding, the Wall Street Journal reported:

It's halftime in the shareholder proxy season, so how's that big push to limit corporate political spending working out? According to new findings from the Manhattan Institute's ProxyMonitor, the campaign is something short of a tour de force.

Among the 150 Fortune 200 companies that had held their annual meetings by May 29, 21% of shareholder proposals were related to corporate political spending or political lobbying, making it the largest proxy category. Overall, companies had a 30% likelihood of encountering a political spending proposal this year, up from between 9% and 11% from 2006 to 2009.

For all of that effort, the unions and liberals can't be loving the results. While the number of political spending proposals was up some 50% over last year, the percentage of shareholders voting in favor fell slightly, to 20% in 2012 from 22% in 2011.

Among proposals calling for corporate political spending disclosure, the fall was steeper, to 22% in 2012 from 26% in 2011. Proposals calling for a "shareholder advisory vote on political spending" or an outright ban on corporate political spending won the support of only between 4% and 6%.

Oh, and not a single political spending or lobbying proposal passed.

We will continue to track the trends as reported by the Proxy Monitor database and regular findings. As a side note, George Will authored a very interesting piece in the Washington Post on Wednesday which pointed out that "Through March 31, the eight leading super PACs supporting Republican presidential candidates received contributions totaling $96,410,614. Of this, $83,220,167 (86.32 percent) came from individuals, only $13,190,447 (13.68 percent) from corporations, and only 0.81 percent from public companies." This very important statistic significantly undermines much of the politicized rhetoric critical of the Citizens United decision.



Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.