Tag: amicus briefs

Statutes of Limitations Apply Especially to Government Agencies

Statutes of limitations exist for good reason: Over time, evidence can be corrupted or disappear, memories fade, and companies dispose of records. Moreover, people want to get on with their lives and not have legal battles from their past come up unexpectedly. Plaintiffs thus have a responsibility to bring charges within a reasonable time of injury so that the justice system can operate efficiently and effectively – and that’s doubly so when the would-be plaintiff is the government, with all its tools for investigation and enforcement.

There’s a general federal statute of limitations, therefore, 28 U.S.C. § 2462, which protects liberty by prohibiting government actions “for the enforcement of any civil fine, penalty, or forfeiture … unless commenced within five years from the date when the claim first accrued.” In April 2008, however, the Securities & Exchange Commission sued the managers of Gabelli Funds LLC, a mutual fund, for civil penalties relating to conduct that ceased in August 2002, more than five years earlier. The SEC alleged that Gabelli Funds defrauded investors by failing to disclose that the fund was allowing a favored investor to engage in “market timing” – buying and selling mutual fund shares in a manner designed to exploit short-term price swings.

The U.S. Court of Appeals for the Second Circuit ruled that the SEC’s claim was nevertheless valid because courts should read into § 2462 an implicit “discovery rule” – a common exception to statutes of limitations that prevents fraud-based claims from accruing (“stops the clock” on the limitations period) until the plaintiff discovers, or with reasonable diligence should have discovered, the basis for the claim. Because of the allegedly fraudulent nature of the defendants’ actions, the court found that the government’s claim accrued not when their conduct ceased but a year later, when the violation was actually discovered.

The Supreme Court decided to review the case, and Cato filed an amicus brief supporting the defendants. We make three points:

First, Congress could not have intended a discovery rule to be implicit here because at the time the operative language in § 2462 was enacted, case law explicitly rejected a discovery rule – and since then Congress enacted numerous statutes with explicit discovery rules that would be superfluous if a discovery rule had already existed implicitly.

Second, reading a discovery rule into § 2462 violates the principle of separation of powers by judicially changing the statute’s meaning: When judges rewrite laws, those laws fail to meet the constitutional requirement of bicameralism and presentment (“how a bill becomes a law”).

Third, even if courts could alter rather than merely interpret the meaning of statutes, there’s no basis for creating a discovery rule for government enforcement actions. Government agencies with broad investigatory powers – indeed, whose purpose is to monitor regulatory compliance – don’t face the same difficulty as private plaintiffs in identifying causes of action which give rise to the discovery rule. Adding a discovery rule to § 2462 would create an indefinite threat of government lawsuits and invite agencies to review decades of past conduct of selectively disfavored companies and individuals – inevitably chilling innocent and valuable economic activity.

To preserve individual liberty in the face of an ever-burgeoning regulatory state and ensure constitutional separation of powers, we urge the Court to reverse the Second Circuit’s decision and hold that no discovery rule applies in Gabelli v. SEC.  The case will be argued at the Supreme Court on January 8.

States Shouldn’t Discriminate Against Out-of-State Retailers

The National Association of Optometrists & Opticians represents eyewear manufacturers and distributors in California, where state officials have been myopic with respect to business regulation.

Under California’s Business and Professions Code, state-licensed optometrists and ophthalmologists are allowed to conduct eye exams and sell glasses at their place of business, while commercial retailers—such as the national eyewear chains represented by the NAOO—are barred from furnishing onsite optometry services. Since consumers have a strong preference for “one stop shopping”—buying their glasses at the same place where they have their eye exams—California’s law gives instate retailers a crucial competitive advantage. Businesses that cannot co-locate their services have quickly vanished from the market.

The NAOO thus sued California officials for discriminating against out-of-state retailers in violation of the “dormant” Commerce Clause, which prohibits states from imposing unjustifiable burdens on interstate commerce. The district court ruled in the group’s favor, concluding that the relevant statutes have a widespread and unjustified discriminatory effect that can’t be reconciled with Supreme Court precedent. The U.S. Court of Appeals for the Ninth Circuit reversed, however, holding that state-licensed optometrists and out-of-state retailers aren’t similarly situated competitors—even though they compete for the same customers in the same market.

On the case’s second round in the Ninth Circuit, the court scrutinized the California law under a more lenient balancing test and again upheld the ban on co-location by out-of-staters. Cato now joins the Opticians Association of America and five individual optometrists on an amicus brief urging the Supreme Court to take the case (supporting a petition for review filed by former solicitor general Paul Clement).

We argue that California’s laws are unconstitutional because their true purpose—as revealed through legislative history and the scheme’s hollow public health rationale—was merely to protect in-state business interests. California’s protectionist regime also has an adverse impact on poor and minority consumers, who confront increased costs and diminished access to eye care while also being disproportionately afflicted with visual impairments.

Not only does the Ninth Circuit’s ruling stifle competition, restrict consumer choice, and increase prices, it also encourages state and local governments to evade scrutiny of discriminatory regulations by relying on superficial distinctions between in- and out-of-state businesses that warp the meaning of “similarly situated competitors.”  The Supreme Court should intervene to prevent any further erosion of its dormant Commerce Clause jurisprudence and uphold the anti-protectionism principles envisioned by the Founders when they abandoned the Articles of Confederation in favor of the Constitution.

The Court will decide whether to take up National Association of Optometrists & Opticians v. Harris later this year or in early 2013.

We Support Gay Marriage but Oppose Forcing People to Support It

Elane Photography, a Christian-identified business in Albuquerque, N.M., declined to photograph Vanessa Willock’s same-sex commitment ceremony based on the business owners’ personal beliefs. New Mexico law prohibits any refusal to render business services because of sexual orientation, however, so Willock filed a claim with the New Mexico Human Rights Commission.  She argued that Elane Photography is a “public accommodation,” akin to a hotel or restaurant, that is subject to the state’s anti-discrimination law.

The commission found against Elane and ordered it to pay $6,600 in attorney fees.  Elane Photography’s owners appealed the ruling, arguing that they are being denied their First Amendment right to the free exercise of religion (and a similar provision in the state constitution).  Furthermore, New Mexico’s Religious Freedom Restoration Act defines “free exercise” as “an act or a refusal to act that is substantially motivated by religious belief” and forbids government from abridging that right except to “further a compelling government interest.”

The state trial and appellate courts affirmed the commission’s order.  Elane Photography v. Willock is now before the New Mexico Supreme Court, where Cato has joined UCLA law professor Eugene Volokh and University of Minnesota law professor Dale Carpenter—who, like Cato, support gay marriage—in filing an amicus brief siding with Elane Photography on free speech grounds.

Our brief explains that photography is an art form protected by the First Amendment because clients seek out the photographer’s method of staging, posing, lighting, and editing.  Photography is thus a form of expression subject to the First Amendment’s protection, unlike many other wedding-related businesses (e.g., caterers, hotels, limousine drivers).

The U.S. Supreme Court has already ruled in Wooly v. Maynard that photography is protected speech—even if it’s not political and even if the photos are used for commercial value—and that speech compulsions (forcing people to speak) are just as unconstitutional as speech restrictions.  The First Amendment “includes both the right to speak freely and the right to refrain from speaking at all.”  Moreover, unlike true cases of public accommodation, there are abundant opportunities to choose other photographers in the same area.

The New Mexico Supreme Court should thus reverse the lower court’s ruling and allow Elane Photography to be free to choose the work it desires.

Lawyers Can’t Game the Class-Action System at the Expense of Would-Be Plaintiffs

To discourage plaintiffs’ lawyers from trying to keep class-action lawsuits in state courts that have a reputation for trial awards and settlements that benefit those same lawyers, Congress passed the Class Action Fairness Act of 2005.

In relevant part, CAFA provides defendants with the right to move class actions to federal court where the claim for damages against them exceeds $5 million.  But can clever lawyers keep these cases out of federal court by simply “stipulating” that potential damages are less than $5 million — and before the named plaintiff is even authorized to represent the alleged class?

In The Standard Fire Insurance Co. v. Knowles, the named plaintiff in a putative insurance-recovery class action in Arkansas state court tried to avoid that removal to federal court by stipulating that his not-yet-certified class would not seek more than $5 million in damages at trial.  Notably, the stipulation is worded in such a way that it will not apply if the class definition is later altered.  Treating this stipulation as “binding,” however, implicates the Fifth Amendment due process rights of the would-be class members who are thus far absent from and unaware of the lawsuit.

After the lower federal courts denied removal, the Supreme Court took the case to determine whether a plaintiff in a class action may indeed defeat a defendant’s statutory right to federal removal under CAFA simply by stipulating to a limit on the amount in controversy.  On Monday, Cato filed an amicus brief arguing that the plaintiff and his attorneys are violating the due process rights of absent class members who would be bound by the judgment in a lawsuit that, if allowed to proceed, would end their right to sue over the same claims while simultaneously limiting their compensation under those claims.

CAFA was enacted specifically to discourage attorneys from “forum shopping” (seeking friendlier courts) and attempting to keep cases out of federal court. Lawyers who game the system by agreeing to cap damages in an effort to keep cases in more favorable state courts violate the federal due process rights of absent would-be class members, thereby flouting CAFA.

The Supreme Court will hear the case in early 2013.

Cato Files Brief in the First Federal Appeal Regarding the Contraception Mandate

In January, when the Department of Health and Human Services announced that qualifying health insurance plans under Obamacare would have to cover contraceptives and “morning after” pills, many religious institutions — most notably the Catholic Church — vehemently objected to being forced to fund health care that violates their religious beliefs.

More than 30 lawsuits challenging the contraceptive mandate have now been filed across the country by various individuals and religious institutions.  Two of those suits have now been consolidated for the first appellate argument on the issue: one brought by Wheaton College, a Christian liberal arts college in Wheaton, Illinois, and another brought by Belmont Abbey College, a North Carolina college based around a Benedictine abbey.

The legal point here is somewhat technical, but incredibly important for anyone who thinks his freedom of conscience may be violated by the government in the future (a category that includes essentially everyone).  As originally promulgated, the contraception mandate included a narrow exemption for religious institutions, one that wasn’t available to religiously affiliated colleges.  After the strong backlash against the mandate, HHS issued a “safe harbor statement,” saying that the government wouldn’t enforce the mandate for one year against certain non-profit organizations religiously opposed to covering contraception. 

In other words, the contraception mandate is still in place but just won’t be enforced — but only for a year and individuals are still free to sue to enforce it against their religiously opposed employers.  HHS also issued an Advance Notice of Proposed Rulemaking that announced the department’s consideration of more permanent methods of accommodating religious institutions.

Because of the safe harbor notice and the ANPRM, the district court dismissed the colleges’ lawsuits for lack of standing and ripeness — holding that the colleges aren’t currently suffering any injury and it was too early to challenge the proposed rule.  Now at the U.S. Court of Appeals for the D.C. Circuit – considered to be the second-most important federal court because of its role in reviewing executive branch actions – the colleges argue that they are in fact suffering a current injury and that the mere possibility of a future rule that may accommodate them in some way is too remote to terminate their case.

Last Friday, Cato joined the Center for Constitutional Jurisprudence and the American Civil Rights Union in filing an amicus brief supporting the colleges.  We argue that the trial court misapplied the constitutional test for standing by not focusing on the facts that existed at the outset of the case; subsequent government actions, such as the ANPRM, are irrelevant to the preliminary question of standing.  We also argue that the trial court’s ruling compromises the principle of separation of powers by giving the executive branch the power to strip a court of jurisdiction merely by issuing a safe harbor pronouncement and an ANPRM (which doesn’t legally bind an agency to act in any way).

It is thus entirely speculative whether the agency will alleviate the harms that the colleges are suffering.  Without intervention from the courts, therefore, the colleges are left in legal limbo while facing immediate and undeniable harms to their religious freedom:  On one hand, they can’t challenge the constitutionality of a final regulation. On the other, they can’t very well rely on a proposed regulatory amendment that may be offered at some unknown point in the future.

The trial court rulings in the Wheaton College and Belmont Abbey College cases are frightening examples of judicial abdication that permit the expansion of executive power far beyond its constitutional limits.  The D.C. Circuit will hear argument in these consolidated cases later this fall.

Renters Have Privacy and Property Rights Too

Cato legal associate Sophie Cole co-authored this blog post.

A person’s home is his castle and thus affords certain protections and immunities — including the right to exclude unwanted visitors — that apply whether you own or rent.

Unfortunately, ordinances authorizing general administrative searches of rental properties have been increasingly adopted by local authorities with little protection for privacy interests. These inspections reach the whole of the buildings and all of the activity that occurs within, opening up every aspect of people’s lives to the government: political and religious affiliations, intimate relationships, and even all those Justin Bieber posters and Fifty Shades of Gray books you hide when people come over.

For the past five years, the city of Red Wing, Minnesota, has been enforcing such a rental property inspection program whereby landlords and tenants must routinely open their doors to government agents. These searches take place even if both the landlord and tenant believe it not to be necessary. The owner of the property even has to pay a fee for the unwanted search to receive a rental license!

The city sometimes makes initial requests for consent, but these are mere courtesy because the city proceeds with an administrative warrant in the event of a refusal — without a showing of probable cause to believe there’s a housing code violation or other problem. The inspection ordinance doesn’t even attempt to prevent the disclosure of information revealed during the search; the whole neighborhood may find out that you have five different facial cleansers and an unusual amount of apple sauce.

A group of landlords and tenants have thus challenged the inspection program, arguing that several alternatives are available to meet what legitimate interests local governments have. They successfully opposed three applications made for administrative warrants and now seek a court order that the rental inspection ordinance is unconstitutional.

Unfortunately, the U.S. Supreme Court has read the Fourth and Fourteenth Amendments as not prohibiting such legislation, but of course states are free to offer more protection for individual rights. The Red Wing plaintiffs have thus invoked Article I, Section 10 of the Minnesota Constitution, which contains language similar to the federal Fourth Amendment.

Cato has joined the Reason Foundation, Libertarian Law Council, Minnesota Free Market Institute at the Center of the American Experiment, and Electronic Frontier Foundation in filing an amicus brief urging the Minnesota Supreme Court to take the Red Wing case and confirm that no Minnesotan should be subjected to an intrusive invasion of privacy when there has been no showing of some cognizable public health or safety issue within the home subject to inspection.

The Minnesota Supreme Court should be the first to decide that its state’s constitution provides greater protections against warrantless home inspections than even the Fourth Amendment (as construed by the U.S. Supreme Court). No other state judiciary has substantively ruled on constitutional protections against administrative searches in residential contexts, so this case presents an opportunity to set a benchmark for liberty.

The Minnesota Supreme Court will decide whether to take the case of McCaughtrey v. City of Red Winglater this fall.

You Shouldn’t Have to Give Up Your Health Insurance When You Take Social Security

This blogpost and the amicus brief it references were co-authored by Trevor Burrus and Kathleen Hunker.

When Brian Hall, former House Majority Leader Dick Armey, and other over-65 retirees requested to opt out of Medicare’s hospital insurance coverage (because they preferred their existing private coverage), the Social Security Administration didn’t thank them for saving taxpayers’ money. Instead, the SSA explained that, because of a guideline in its “Program Operations Manual System”—essentially a manual that explains how to operate the Social Security system—anyone who declined Medicare benefits would lose Social Security.

That is, Hall and the others could disclaim their Medicare hospital insurance coverage, but only if they forfeited all of their future claims to Social Security and repaid whatever benefits they already had received — roughly $280,000 altogether. The plaintiffs challenged the linking of Social Security and Medicare as being beyond the SSA’s statutory authority. Neither the Social Security Act nor the Medicare Act allows administrative agencies to precondition benefits under one program on acceptance of benefits from other. Instead, the plain language of both statutes states that petitioners are “entitled” to benefits, which according to legal and general usage describes someone who is “legally qualified” and thus has the option of claiming benefits.

The district court disagreed and the U.S. Court of Appeals for the D.C. Circuit, in a split decision, affirmed the trial court’s result but declined to grant the POMS rules deference. The court then unanimously denied a petition for rehearing. Recognizing that the D.C. Circuit ruling, if left in place, could encourage future encroachments on congressional power by administrative agencies, Cato filed an amicus brief supporting Hall’s request that the Supreme Court take the case and enforce the statute as it was written.

We note that administrative agencies have no powers not granted to them by Congress and that regulations must be anchored in the operative statute—as well as the agency’s fair and considered judgment—in order to warrant judicial deference. The POMS regulation fails this standard because Congress’s use of the word “entitled” was clear and unambiguous. Combined with the fiscal irresponsibility of forcing citizens to accept costly benefits in an economic recession, the POMS rule appears to be an arbitrary power grab rather than a faithful effort to implement the will of Congress. We conclude by reminding the Court that agency overreach imperils the separation of powers and therefore liberty.

When Congress fails to counter an unauthorized expansion of power by an administrative agency, the judiciary has a duty to uphold the Constitution by enforcing the relevant statute as written.

The Supreme Court will decide later this fall whether to take the case of Hall v. Sebelius.