Tag: Supreme Court

The Government Robbed Chrysler Creditors

In January 2009, Chrysler stood on the brink of insolvency.  Purporting to act under the Emergency Economic Stabilization Act, the Treasury extended Chrysler a $4 billion loan using funds from the Troubled Asset Relief Program (TARP).  Still in a bad financial situation, Chrysler initially proposed an out-of-court reorganization plan that would fully repay all of Chrysler’s secured debt.  The Treasury rejected this proposal and instead insisted on a plan that would completely eradicate Chrysler’s secured debt, hinging billions of dollars in additional TARP funding on Chrysler’s acquiescence. 

When Chrysler’s first lien lenders refused to waive their secured rights without full payment, the Treasury devised a scheme by which Chrysler, instead of reorganizing under a chapter 11 plan, would sell its assets free of all secured interests to a shell company, the New Chrysler.  Chrysler was thus able to avoid the “absolute priority rule,” which provides that a court should not approve a bankruptcy plan unless it is “fair and equitable” to all classes of creditors. 

Cato joined the Washington Legal Foundation, Allied Educational Foundation, and George Mason law professor Todd Zywicki on a brief supporting the creditors’ petition asking the Supreme Court to review the transaction’s validity.  We argue that the forced reorganization amounted to the Treasury redistributing value from senior, secured creditors to debtors and junior, unsecured creditors. 

The government should not be allowed, through its own self-dealing, to hand-pick certain creditors for favorable treatment at the expense of others who would otherwise enjoy first lien priority.  Further, a lack of predictability and consistency with regard to creditors’ expectations in bankruptcy will result in a destabilization of existing and future credit markets. 

The Court will be deciding whether to hear the case later this fall.  Thanks very much to Cato legal associate Travis Cushman for his help with the brief.

Supreme Court Mulls Gladiators and the “Human Sacrifice Channel”

Following up on David’s post about the Stevens “depictions of animal cruelty” case, my takeaway from this morning’s argument is that there’s not a single vote to uphold the law.  The closest the government came to sympathy for its position came when Chief Justice Roberts wondered whether, if a narrower statute proscribing the “crush videos” that were the ostensible target of this legislation, the Court might uphold this broad statute on its face but also welcome many as-applied challenges in instances of prosecutorial overreach.  (For a pithy discussion of facial versus as-applied challenges, noting that the Court generally favors facial attacks in First Amendment cases, see Roger Pilon’s foreword to this year’s Cato Supreme Court Review.)

A less technical line of questioning involved the constitutionality of a statute banning a hypothetical “human sacrifice channel” or the broadcast of fight-to-the-death gladiatorial battles – from a foreign country where that sort of thing is legal.  (Justice Scalia quipped that the rule cannot be that you satisfy the broad legislation’s “historical value” exception if you dress up as an ancient Roman.)

Much of the analysis about these types of extreme scenarios turns on whether the broadcast/depiction creates a market for such activities – which is the rationale for banning child pornography (i.e., fewer children are subject to sexual abuse if there is not a legal market for pictures and videos of children being sexually abused).  Thus, a narrow statute banning the aforementioned crush videos would be kosher, as it were, but not the broad legislation at issue – which could potentially sweep in, to take one example, promotional videos put out by the Spanish board of tourism that include bullfighting clips.

For a more detailed report, see Lyle Denniston on SCOTUSblog (whom you can also see all week on C-SPAN’s excellent Supreme Court documentary mini-series).  And again, to read Cato’s view, see our amicus curiae brief.

Think Tanks Should Be Able to Opine on Public Policy Without Running Afoul of Campaign Finance Regulations

In 2005, political opponents filed a complaint against the Independence Institute for not complying with the Colorado constitution and other campaign finance regulations when it spoke against a state ballot initiative. These regulations require, among other things, disclosure of the identity of anyone who has donated more than $20 to a cause and imposes registration and contribution limits on groups who have major interests in ballot issues.

The Independence Institute challenged the constitutionality of Colorado’s state ballot issue requirements and the issue is petitioning the Supreme Court for certiorari in Independence Institute v. Buescher. Cato has filed an amicus brief, in cooperation with Wyoming Liberty Group, the Center for Competitive Politics, the Sam Adams Alliance, the Montana Policy Institute, and the Goldwater Institute in support of the Independence Institute. We argue that Colorado’s ballot campaign regulations run roughshod over constitutional protections for political speech and association, which lie at the very heart of the First Amendment—particularly for think tanks and other organizations that regularly comment on public policy matters. Loss of these First Amendment protections will chill think tanks’ future attempts to educate the public about issues that are the subject of ballot campaigns. The Court should thus review this case and ensure that citizens maintain their associational rights—including the right to remain anonymous when donating to non-profits—and associations their freedom of expression.

You can download the entire brief here. A special thanks to Cato Legal Associate Travis Cushman for his assistance on this brief.

First Amendment Exceptions

The Supreme Court today is considering the case of United States v. Stevens, a challenge to a 1999 federal law outlawing depictions of animal cruelty. The government says that such depictions are “unprotected” speech. Many First Amendment advocates and news organizations are supporting the challenge to the law.

It seems an easy enough case to decide, given the plain language of the First Amendment:

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press, except in the case of depictions of animal cruelty.

Right?

For a more substantive discussion of the issues in United States vs. Stevens, see the Cato Institute’s amicus curiae brief.

A New Court Term: Big Cases, Questions About the New Justice

Today is the first Monday in October, and so is First Monday, the traditional start of the Supreme Court term.  The Court already heard one argument – in the Citizens United campaign finance case – but it had been carried over from last year, so it doesn’t really count.

In any event, continuing its trend from last term, the Court has further front-loaded its caseload – with nearly 60 arguments on its docket already.  Fortunately, unlike last year, we’ll see many blockbuster cases, including:

  • the application of the Second Amendment to state gun regulations;
  • First Amendment challenges to national park monuments and a statute criminalizing the depiction of animal cruelty;
  • an Eighth Amendment challenge to life sentences for juveniles; a potential revisiting of Miranda rights;
  • federalism concerns over legislation regarding the civil commitment of “sexually dangerous” persons;
  • a separation-of-powers dispute concerning the agency enforcing Sarbanes-Oxley;
  • judicial takings of beachfront property; and
  • notably in these times of increasing government control over the economy, the “reasonableness” of mutual fund managers’ compensation.

Cato has filed amicus briefs in many of these cases, so I will be paying extra-close attention.

Perhaps more importantly, we also have a new justice – and, as Justice White often said, a new justice makes a new Court.  While Sonia Sotomayor’s confirmation was never in any serious doubt, she faced strong criticism on issues ranging from property rights and the use of foreign law in constitutional interpretation to the Ricci firefighters case and the “wise Latina” speeches that led people to question her commitment to judicial objectivity.  Only time will tell what kind of justice Sotomayor will be now that she is unfettered from higher court precedent – and the first term is not necessarily indicative.

Key questions for the new Court’s dynamics are whether Sotomayor will challenge Justice Scalia intellectually and whether she will antagonize Justice Kennedy and thus push him to the right.  We’ve already seen her make waves at the Citizens United reargument – questioning the scope of corporations’ constitutional rights – so it could be that she will decline to follow Justice Alito’s example and jump right into the Court’s rhetorical battles.

In short, it’s the first day of school and I’m excited.

Supremes to Hear PATRIOT ‘Material Support’ Challenge

As I mentioned in passing in my post yesterday, one of the reforms in Russ Feingold’s JUSTICE Act involves tweaking the USA PATRIOT Act’s definition of “material support” for terrorism to ensure that it doesn’t cover things like humanitarian aid or legal assistance. Today, the Supreme Court agreed to hear a case concerning that very issue:

The key plaintiff in the current appeal is the Humanitarian Law Project, a Los Angeles, California-based non-profit that says its mission is to advocate “for the peaceful resolution of armed conflicts and for worldwide compliance with humanitarian law and human rights law.” HLP sought to help the Kurdistan Workers’ Party, a group active in Turkey. Known as PKK, the party was founded in the mid-1970s and has been labeled a terror organization by the United States and the European Union. Its leaders have previously called for militancy to create a separate Kurdish state in parts of Turkey, Iraq, Syria and Iran, where Kurds comprise a population majority. […]

Another plaintiff is an American physician who wanted to help ethnic Tamils in his native Sri Lanka. Much of the island nation is controlled by the rebel Liberation Tigers of Tamil Eelam, which has also fought for decades to carve an independent state. The government claims the Tamil Tigers have “used suicide bombings and political assassinations in its campaign for independence, killing hundreds of civilians in the process.”

HLP and a group of Tamil doctors say they merely wanted “to provide their expert medical advice on how to address the shortage of medical facilities and trained physicians” in the region but “they are afraid to do so because they fear prosecution for providing material support.”

A federal appeals court agreed with the groups that the statute as written is unconstitutionally vague; the government wants to preserve the current broad language. Arguments won’t take place until early next year, but if you can’t wait for a preview, check out this exchange between David Cole and Paul Rosenzweig on PATRIOT’s material support provision, part of a highly illuminating series of debates on aspects of the law (as originally written) hosted by the American Bar Association.

Supremes Take Gun Rights Issue Nationwide

Supreme CourtWith its decision today to hear the case of McDonald v. Chicago, the Supreme Court should settle the question of whether states must recognize the Second Amendment right to keep and bear arms. In June of 2008, in District of Columbia v. Heller, the Court found, for the first time, that the federal government must recognize the Second Amendment right of individuals, quite apart from their belonging to a militia, to have an operational firearm in their home. But the decision left open the question whether states were similarly bound.

Thus, the so-called incorporation doctrine will be at issue in this case – the question of whether the Fourteenth Amendment “incorporates” the guarantees of the Bill of Rights against the states. The Bill of Rights applied originally only against the federal government. But the Fourteenth Amendment, ratified in 1868, left open the question of which rights states were bound to recognize. The modern Court has incorporated most of the rights found in the Bill of Rights, but the Second Amendment’s guarantees have yet to be incorporated.

Moreover, a question that will arise in this case is whether the Court, if it does decide that the states are bound by the Second Amendment, will reach that conclusion under the Fourteenth Amendment’s Due Process Clause or under its Privileges or Immunities Clause, which has been moribund since the infamous Slaughterhouse Cases of 1873. In its brief urging the Court to hear the McDonald petition, the Cato Institute urged the Court to revive the Privileges or Immunities Clause.