Tag: Supreme Court

Curbing Class Action Settlement Abuses

In 2007, Facebook launched the controversial “Beacon” program, which automatically broadcast purchases made by Facebook users. The disclosures revealed embarrassing movie choices, indulgent spending habits, and even ruined the purchase of a young couple’s engagement ring.

In the subsequent class action lawsuit, a $9.5 million settlement was reached in which Facebook would pay $3 million to cover attorneys’ fees and a remaining $6.5 million would be used to set up a new charitable organization—controlled by Facebook—whose mission would be to educate the public about Internet privacy. The millions of class members, however, would get nothing.

This redistribution of settlement money from the victims to other uses is referred to as cy pres. “Cy pres” means “as near as possible,” and courts have typically used the cy pres doctrine to reform the terms of a charitable trust when the stated objective of the trust is impractical or unworkable. The use of cy pres in class action settlements—particularly those that enable the defendant to control the funds—is an emerging trend that violates the due process and free speech rights of class members.

Accordingly, class members objected to the Facebook settlement, arguing that the district court abused its discretion in approving the agreement and failed to engage in the required rigorous analysis to determine whether the settlement was “fair, reasonable, and adequate.” The San Francisco-based U.S. Court of Appeals for the Ninth Circuit affirmed the settlement, however, and expressed its unwillingness to inquire into the nature of the award because to do so would be “an intrusion into the parties’ negotiations.”

Now that the objecting class members have asked the Supreme Court to review the case, Cato filed an amicus brief arguing that the use of cy pres awards in class actions violates the Fifth Amendment’s Due Process Clause and the First Amendment’s Free Speech Clause. Specifically, due process requires—at a minimum—an opportunity for an absent plaintiff to remove himself, or “opt out,” from the class. Class members have little incentive or opportunity to learn of the existence of a class action in which they may have a legal interest, while class counsel is able to make settlement agreements that are unencumbered by an informed and participating class.

In addition, when a court approves a cy pres award as part of a class action settlement, it forces class members to endorse certain ideas, compelling speech in violation of the First Amendment. When Facebook receives money—essentially from itself—to create a privacy-oriented charity, the victim class members surrender the value of their legal claims in support of a charity controlled by the defendant. Class members are left uncompensated, while Facebook is shielded from any future claims of liability.

The Supreme Court will decide this fall whether to take the case of Marek v. Lane.

NSA Spying in the Courts

The National Security Agency’s collection of every American’s telephone dialing information is hotly contested in the court of public opinion and in Congress. It is now seeing its first test in the courts since its existence was revealed.

The Electronic Privacy Information Center, arguing that it has no other recourse, has filed an extraordinary appeal to the Supreme Court of the order requiring Verizon to turn over telephone calling information en masse to the government. EPIC is a Verizon customer that communicates by telephone with confidential sources, government officials, and its legal counsel.

Cato senior fellow and Georgetown University law professor Randy Barnett joined me this week on a brief to the Court urging it to accept the case so it can resolve statutory and constitutional issues that have “precipitated a juridical privacy crisis.”

The brief first argues that the Foreign Intelligence Surveillance Act does not authorize a sweeping warrant for all communications data. The law requires such a warrant to show relevance to an existing investigation, which is impossible when the data is gathered in support of future, entirely speculative investigations. Not only the text of the statute, but Congress’s intent and the structure of the statute support this interpretation.

Government Can’t Simply Ignore Judicial Rulings It Doesn’t Like

By design, the federal judiciary is the weakest of the three branches of government. While the executive wields the sword, and Congress holds the purse strings, the courts have no temporal power.

To give effect to their decisions and orders, courts depend on popular legitimacy and the cooperation of the other branches. While that cooperation is normally forthcoming when needed to enforce judicial decisions against private citizens, when the subject of a court’s order is the government itself, there’s always a risk that it will be ignored or avoided.

Such is the case in Hornbeck Offshore Services v. Jewell, which began when the Interior Department (DOI) chose to put itself above the courts and above the law. Following the Deepwater Horizon disaster in April 2010, DOI issued a total ban on drilling activity in the Gulf of Mexico. A district court judge held that this drilling moratorium was irrational and not supported by scientific research or other credible evidence. The judge issued an injunction prohibiting DOI from enforcing its ban.

Instead of obeying the injunction — or appealing it — DOI ignored it. The Secretary of the Interior told Congress that as far as he was concerned, the drilling ban was still in effect. DOI then issued a second ban on drilling that was identical to the first. The district judge held DOI in contempt of court, noting that “each step the government took following the Court’s imposition of a preliminary injunction showcase[d] its defiance” of the court’s authority.

On appeal, a panel of the New Orleans-based U.S. Court of Appeals for the Fifth Circuit sided 2-1 with the DOI’s position that the contempt finding was improper because the issuance of a second (identical) drilling ban was not technically disallowed by the text of the injunction — which explicitly prohibited only enforcement of the initial ban. Cato has filed an amicus brief urging the Supreme Court to hear the case because the appellate court’s ruling undermines the rule of law and the judiciary’s independent authority.

Under the Fifth Circuit’s rule, government agencies will be able to legally avoid court orders with bureaucratic trickery. If only the explicit text of an injunction — and not any of its spirit or clear purpose — binds the federal government, Congress or the executive could simply rename whatever statute or regulation has been declared unconstitutional and continue enforcing the substantively unconstitutional rule. Such an overly technical rule would force district court judges into the role of mind-readers, trying to predict how the government could weasel its way out of a ruling.

Without an effective contempt power to punish the violation of its orders, even the Supreme Court would be unable to enforce its important rulings, such as ending the District of Columbia’s unconstitutional ban on handguns, and striking down section 3 of DOMA. In both of those recent cases, the sort of semantic game-playing endorsed by the Fifth Circuit here would have resulted in hollow victories for liberty and an evisceration of the idea that in our constitutional republic, the government is bound by the same (if not stricter) rules as the rest of us.

Government Should Bear the Burden of Showing Why You Can’t Exercise Your Right to Bear Arms

For anyone who has watched The Wire, it’s no surprise that Maryland (Baltimore, in particular) has one of the highest rates of violent crime in the country. In an alleged effort to address this persistent problem, the state requires an applicant for a license to carry a handgun to demonstrate “a good and substantial reason to wear, carry, or transport a handgun as a reasonable precaution against apprehended danger.”

Under this prove-it-to-use-it standard, Baltimore County resident Raymond Woollard, who had had a license to carry for six years (after a violent home invasion), was denied a license renewal because he could not document that he had been threatened recently. The fact that he had been attacked by his son-in-law seven years earlier, an event to which it took law enforcement two-and-a-half hours to respond, was insufficient to meet Maryland’s special-need requirement.

Woollard, along with the Second Amendment Foundation, thus brought suit challenging the law under the Supreme Court’s recent decisions in District of Columbia v. Heller (2008) and McDonald v. Chicago (2010). Although the district court ruled for Woollard, finding that Maryland’s restriction violated the Second Amendment, the U.S. Court of Appeals for the Fourth Circuit overturned the lower court and reinstated the law. The court purported to apply “intermediate scrutiny,” which allows a challenged statute to survive only if it is “substantially related to the achievement of an important governmental interest,” but in fact, hardly applied any scrutiny at all. The court’s analysis was both circular and contemptuous of Heller, finding that a regulation is “substantially related” to the valid government interest of curtailing criminal gun violence if it merely reduces the number of citizens lawfully carrying handguns, thus accepting the state’s implicit argument that the right to bear arms was itself the problem, one that should not be overcome without “a good and substantial” reason.

“Libertarianism Has Won Over the Supreme Court Conservatives”

So says the subtitle of provocative new essay in The New Republic by my friend and sometime antagonist Simon “Si” Lazarus.  Si’s argument boils down to the following:

  1. Legal experts are puzzled. The “most conservative” Court issued major rulings this term supporting gay rights and declined to toss out the University of Texas’s racial preferences, among other iconoclastic opinions.
  2. The public seems to think that the Court is either liberal or “middle of the road,” while the media line is that the Court is still “inching to the right.” What’s going on?
  3. The Court may well be “inching right,” but the “right” isn’t made up solely of social conservatives or business types.  There’s also libertarians!
  4. It’s precisely this libertarian flavor of conservatism that’s now ascendant, as evidenced by, among other things, Cato’s success this year. [Cabin the issue of whether libertarians/Cato are part of the Right, the conservative movement, or anything else that better fits on a two-dimensional political spectrum.]
  5. This rising libertarian influence isn’t all good news to progressives, despite our alliance over same-sex marriage.  Remember, it’s they, even more than traditional conservatives, who are leading the charge to roll back the New Deal, Great Society, and everything else that’s good and holy in the modern progressive pantheon.

Well, it’s nice to be noticed, I guess, and while there are kernels of truth here – see my piece in the Huffington Post earlier this month – Si does overstate the point.  In other words, yes, a combination of Justice Kennedy’s faint-hearted libertarianism, some outlandish assertions of federal power at the Supreme Court, and a president who wants to govern despite constitutional checks and balances, does put us in a bit of a “libertarian moment.”  But we have a long way to go before we undo the damage of the last 75 years’ worth of bad legal doctrine

As Ilya Somin puts it:

Even if conservatives and libertarians prevail in every single one of the cases [Lazarus] mentions, the federal government would still retain massive regulatory authority over almost every aspect of the economy and society. Obviously, it’s possible to characterize any decision to strike down or limit “regulatory legislation” on structural grounds as “junking the New Deal settlement.” But that’s like saying that any decision enforcing even modest constitutional limits on law enforcement amounts to junking the criminal justice system.

Still, we shouldn’t pooh-pooh libertarian achievements even if we recognize that libertarian legal nirvana isn’t just over the horizon.  As Randy Barnett comments:

… the political mood of a significant segment of country does appear to be trending libertarian to some degree at the moment, due in part to the threat to constitutionally-limited government posed by the Obama administration that this segment now perceives — combined with a general war weariness that makes national security conservative dismissals of libertarian noninterventionism less politically effective.  …  Recent developments on such hot-button social issues as legalizing marijuana and recognizing gay marriage also show a more libertarian trend in the body politic at the moment.  We all know these trends have always influenced [the Court] whether legal arguments made to the Court seem “off the wall” or “on the wall.”

So I take Lazurus’s essay to be another sign that libertarianism is trending up at the moment, perhaps more so than at any time in my lifetime.  There is good reason for libertarians to worry that all this is “too little too late” in the face of the Obama administration’s success in expanding the welfare-administrative state in his first two years, and defending the gains over the past 2 years, combined with its embrace of the surveillance state that was expanded under the Bush administration.

But you can’t win, if you don’t play.  And libertarians are now certainly in the game.

Yes we are. Though I don’t think, as the cheeky url of the Lazarus piece suggests, that it’s “supreme-court-libertarianism-ron-pauls-bench.”  

Moreover, whatever’s going on behind the scenes at the Supreme Court, it’s not that “Alito Shrugged,” as the article’s title would have it.  However much the Court becomes libertarian – as a whole, on average, in fits and starts – I don’t think that Justice Alito, let alone Justice Scalia, or Justice Ginsburg for that matter, is more libertarian than he was five or ten or twenty years ago.

Community Associations Have Property Rights Too

The U.S. housing market has seen a major shift in the past 30 years: the rise of the community association. In 1970, only 1 percent of U.S. homes were community association members; today, more than half of new housing is subject to association membership, including condominium buildings. These organizations provide substantial benefits, including community facilities, maintenance, and rules designed to preserve property values, in exchange for assessment fees.

Accordingly, Mariner’s Cove Townhomes Association v. United States affects the rights of the more than 60 million Americans currently living in these associations. This case arises from the federal government’s taking 14 of 58 townhouses from one development in the wake of Hurricane Katrina. Mariner’s Cove owned a right to collect dues that was appended to those 14 townhomes, and sued the government for extinguishing that valuable right without just compensation under the Fifth Amendment’s Takings Clause.

In contrast to most lower courts, however, the U.S. Court of Appeals for the Fifth Circuit held that “the right to collect assessments, or real covenants generally” are not subject to Takings Clause analysis. In other words, the government can take those rights without paying anything to the owners. Cato and a group of esteemed professors, including Richard Epstein, James W. Ely Jr., and Ilya Somin, has submitted an amicus brief supporting Mariner’s Cove and arguing that the Supreme Court should take the case to clarify whether community association fees are compensable property under the Fifth Amendment.

Without such clarification, these beneficial private communities will be undercut. Such associations often shoulder the burden of providing and maintaining infrastructure, services, and utilities, which allows for more diverse and customizable amenities for homeowners than if those decisions were left with remote municipal governments. Because of these benefits, and because they increase the tax base, local governments are increasingly requiring developers to structure developments as community associations.

The perverse implications of the Fifth Circuit’s ruling are clear: it would allow for local governments to require he creation of a community association, benefit from the resulting private delivery of services while collecting taxes from its members, and later take the property without even paying back the very fees that enabled the government’s benefit. And the Fifth Circuit’s holding affects more than simply community associations. The court’s reference to “real covenants generally” implicates conservation easements, for example, which restrict the development and use of land for preserving the land’s natural, historic, or ecological features. This precedent would make association land an attractive option for uncompensated government takings.

The ruling also clashes with the Supreme Court’s recent decision in Koontz v. St. John’s River Water Management District: that an income stream from real property is a compensable interest under the Fifth Amendment. For these reasons, we urge the Supreme Court to take the case and to recognize the compensable property rights of the Mariner’s Cove Townhomes Association and the millions of other Americans choosing—and paying—to live in a community association.

Requiring Equal Protection Doesn’t Violate the Equal Protection Clause

It’s unusual that the Supreme Court would choose to review an affirmative action case even though Fisher v. UT-Austin was still pending. Ordinarily, when faced with a second case on the same legal issue, the justices “hold” it until they decide the first, then either send the second one back to the lower court to apply the newly announced rule or, perhaps, schedule it for oral argument on any additional issues that need to be addressed. Yet Schuette v. Coalition to Defend Affirmative Action is no ordinary case. 

Schuette asks whether a ban on racial preferences — or at least how that ban was enacted — violates the Equal Protection Clause, whereas Fisher asked whether their use does. In Schuette, 58% of Michigan voters approved Proposal 2 (a.k.a. the Michigan Civil Rights Initiative), a state constitutional amendment that prohibited racial preferences in public education, employment, or contracting. That ban was challenged by a coalition of groups and individuals who support the continued use of affirmative action, particularly at institutions of higher education.

A federal district court upheld the ban, but then a panel of the U.S. Court of Appeals for the Sixth Circuit struck it down by a 2-1 vote. The full Sixth Circuit then agreed that Prop 2 was unconstitutional, in a contentious 8-7 ruling that produced five separate dissenting opinions. Now before the Supreme Court, Cato has joined the Pacific Legal Foundation and four other organizations on an amicus brief arguing that Michigan voters have acted constitutionally by prohibiting race- and sex-based discrimination or preferential treatment in public university admissions.

We contend that Prop 2 doesn’t violate the Equal Protection Clause under the Court’s “political structure” precedent, which outlaws subtle distortions of governmental processes in a way that places special burdens on the ability of minority groups to achieve beneficial legislation. The measures struck down in under that line of precedent differ marked from Prop 2 because, unlike in those older cases, minorities now have more protections against discrimination. Moreover, these protections apply across all levels of state government, not just discrete functions like housing and school busing.

Furthermore, Prop 2 creates no racial classifications so it cannot trigger “strict scrutiny” review. The simple fact that Prop 2 deals with race does not imply that it somehow disenfranchises racial minorities. If the Court finds that the “political structure” doctrine prohibits Prop 2, that precedent must be overruled as inconsistent with the text of the U.S. Constitution — though this is probably unnecessary given more modern precedent.

Interestingly, the California Civil Rights Initiative, known as Proposition 209, has been upheld repeatedly by the (notoriously left-wing) Ninth Circuit. Indeed, there is a wealth of evidence showing that minorities are succeeding under that system, which also prohibits the consideration of skin color in college admissions — and has led to higher attendance and graduation rates.

We urge the Supreme Court to side with Michigan’s voters and hold their ban on racial preferences (which the Court itself has admitted to be on shaky constitutional ground) to be constitutional.

The Court will hear the Schuette case in October or November.