Topic: Law and Civil Liberties

ALJs and the Home Court Advantage

The SEC has come under fire lately for its use – some might say overuse – of internal administrative proceedings.  The SEC’s use of administrative proceedings and administrative law judges (ALJs) is by no means unique within the federal government.  Thirty-four agencies currently have ALJs.  Nor is the SEC the heaviest user of administrative proceedings or ALJs; the Social Security Administration has that distinction, with more than 1,300 ALJs according to the most recent data available.  The SEC, by comparison, has only five ALJ positions, two of which are recent additions. 

The SEC’s ALJs have been in the spotlight due to a provision in Dodd-Frank that expands their ability to impose fines.  In the past, the SEC could impose monetary sanctions only on individuals and entities registered with the Commission – typically brokers, investment advisors, and similar entities and their employees.  By registering with the SEC, it was reasoned, these individuals and organizations had submitted to the SEC’s jurisdiction.  Others could be brought before the SEC’s tribunals for violating federal securities laws, and the ALJs could make findings of fact (that is, decide which side’s version of the facts was correct) and issue cease and desist orders, but could not impose fines.  Instead, the SEC’s lawyers would have to bring a separate case in federal district court.  Under Dodd-Frank, registered and unregistered persons are treated the same.

Administrative proceedings have their advantages.  Like a federal judge, an ALJ can issue subpoenas, hold hearings, and decide cases.  Because an ALJ’s cases deal with a very narrow area of law – only that related directly to the ALJ’s agency – the ALJ’s knowledge of that area tends to be deeper than that of a federal judge who hears a broad range of civil and criminal cases.  The proceedings before ALJs tend to be somewhat truncated, with fewer procedural requirements than federal district court, allowing the case to be decided more quickly. 

Appealing President Obama’s Executive Action on Immigration

On November 20, 2014, President Obama unveiled DAPA, an executive policy that would defer the deportation of up to four millions illegal aliens and afford them work authorization. One week later, Texas, joined by 25 other states, filed a lawsuit against this unprecedented expansion of executive power.

Cato, joined by law professors Josh Blackman, Jeremy Rabkin, and Peter Margulies, filed an amicus brief supporting the challenge. While we broadly support comprehensive immigration reform, we argued that DAPA violated the president’s constitutional duty to take care that the laws were faithfully executed because this action went far beyond merely setting priorities on who will be pursued and deported given finite enforcement resources. It was highly unusual for Cato to file in a district court—amicus briefs of any kind are rare at this level—but this was a highly unusual situation.

On February 16, 2015, Judge Andrew Hanen blocked DAPA from going into effect, finding that the executive branch did not follow the proper administrative procedures—such as seeking comments from the public—before implementing what is effectively a substantive change in established immigration law.

Against Racial Preferences in Contracting

Since before the Declaration of Independence, equality under the law has long been a central feature of American identity—and was encapsulated in the Constitution. The Fourteenth Amendment expanded that constitutional precept to actions by states, not just the federal government.

For example, if a state government wants to use race as a factor in pursuing a certain policy, it must do so in the furtherance of a compelling reason—like preventing prison riots—and it must do so in as narrowly tailored a way as possible. This means, among other things, that race-neutral solutions must be considered and used as much as possible.

So if a state were to, say, set race-based quotas for its construction contracts and claim that no race-neutral alternatives will suffice—without showing why—that would fall far short of the high bar our laws set for race-conscious government action.

Yet that is precisely what Montana has done. Montana’s Disadvantaged Business Enterprise (“DBE”) program implements a federal program aimed at remedying past discrimination against minority and women contractors by granting competitive benefits to those groups. While there may be a valid government interest in remedying past discrimination, in its recent changes to the program, Montana blew through strict constitutional requirements and based its broad use of racial preferences on a single study that involved weak anecdotal evidence—a study that recommended more race-neutral alternatives, not fewer.

When Billionaires Play Politics (As Is Their Right), Pundits Can Criticize Them

Free speech can get awfully expensive when billionaires are involved. Just ask the International Crisis Group, a charity that seeks to prevent war and related atrocities by monitoring conditions in the world’s most dangerous regions.

In 2003, ICG published a report on the political and social climate of Serbia following the assassination of Zoran Đinđić, the country’s first democratically elected prime minister after the fall of Slobodan Milošević. One of the issues noted there was the concern of “average Serbs” that powerful businesses were still benefiting from corrupt regulatory arrangements that dated back to the Milošević regime.

One of several oligarchs mentioned was Milan Jankovic, who also goes by the name Philip Zepter. With an estimated net worth of $5 billion, Jankovic is widely believed to be the richest Serb (and one of the 300 wealthiest men in the world). His holdings include Zepter International, which sells billions of dollars of cookware each year and has more than 130,000 employees.

One might think that a man responsible for running a vast business empire would have better things to do than suing a charity, but you’d be wrong. For the last decade, Jankovic has hounded ICG, relentlessly pressing a defamation suit, first in Europe and now in the United States. After 10 years of litigation, the case finally comes down to a single question: Is Milan Jankovic a public figure?

The Supreme Court has long held that the First Amendment’s protection of speech (and political criticism) requires libel plaintiffs who are public figures—like politicians and celebrities—to show that potentially defamatory statements were not only false but also published with “actual malice.” Under this standard, the defendant must have actually known that the statements were false; a negligent misstatement or the innocent repetition of another’s falsehood isn’t enough.

In an amicus brief filed in the U.S. Court of Appeals for the D.C. Circuit, Cato, along with a diverse group of organizations including the Brookings Institution, Council on Foreign Relations, and PEN American Center, argues that while Jankovic is not a politician or other government official, he should still be treated as a public figure for the purpose of this case.

Under the “limited public figure” doctrine, the Supreme Court holds that private citizens become public figures when they “thrust themselves to the forefront of particular public controversies in order to influence the resolution of the issues involved.” As we argue, Jankovic is in his own words one of Serbia’s most powerful and influential citizens, whose vast wealth and political connections gives him a near-unparalleled ability to shape the outcome of public debates. What’s more, Jankovic has played an active role in Serbian politics. He describes himself as one of the men responsible for overthrowing Milošević, and he once hired American lobbyists to represent the Serbian government in Washington. He’s even rumored to have used his own money to fund the government during a budget crisis!

In short, Jankovic is the very definition of a public figure—and criticism of public figures, whether they be elected officials like Frank Underwood or shadowy powerbrokers like Raymond Tusk, must be privileged. Unless the weakest are free to criticize the most powerful, democracy is nothing but a house of cards.

The D.C. Circuit will hear argument in Jankovic v. International Crisis Group later this spring or summer.

Second Circuit Declares NSA’s Telephone Dragnet Unlawful

In a ruling certain to profoundly shape the ongoing debate over surveillance reform in Congress, the U.S. Court of Appeals for the Second Circuit today held that the National Security Agency’s indiscriminate collection of Americans’ telephone calling records exceeds the legal authority granted by the Patriot Act’s controversial section 215, which is set to expire at the end of this month.  Legislation to reform and constrain that authority, the USA Freedom Act, has drawn broad bipartisan support, but Senate Majority Leader Mitch McConnell has stubbornly pressed ahead with a bill to reauthorize §215 without any changes.  But the Second Circuit ruling gives even defenders of the NSA program powerful reasons to support reform.

McConnell and other reform opponents have consistently insisted, in defiance of overwhelming evidence, that the NSA program is an essential tool in the fight against terrorism, and that any reform would hinder efforts to keep Americans safe—a claim rejected even by the leaders of the intelligence community. (Talk about being more Catholic than the Pope!)  Now, however, a federal appellate court has clearly said that no amount of contortion can stretch the language of §215 into a justification for NSA’s massive database—which means it’s no longer clear that a simple reauthorization would preserve the program. Ironically, if McConnell is determined to salvage some version of this ineffective program, his best hope may now be… the USA Freedom Act!

The Freedom Act would, in line with the Second Circuit opinion, bar the use of §215 and related authorities to indiscriminately collect records in bulk, requiring that a “specific selection term,” like a phone number, be used to identify the records sought by the government.  It also, however, creates a separate streamlined process that would allow call records databases already retained by telephone companies to be rapidly searched and cross-referenced, allowing NSA to more quickly obtain the specific information it seeks about terror suspects and their associates without placing everyone’s phone records in the government’s hands.  If the Second Circuit’s ruling is upheld, NSA will likely have to cease bulk collection even if Congress does reauthorize §215.  That makes passage of the Freedom Act the best way to guarantee preservation of the rapid search capability McConnell seems to think is so important—though, of course, the government will retain the ability to obtain specific phone records (albeit less quickly) under either scenario.  With this ruling, in short, the arguments against reform have gone from feeble to completely unsustainable.

In Holding NSA Spying Illegal, the Second Circuit Treats Data as Property

The U.S. Court of Appeals for the Second Circuit has ruled that section 215 of the USA-PATRIOT Act never authorized the National Security Agency’s collection of all Americans’ phone calling records. It’s pleasing to see the opinion parallel arguments that Randy Barnett and I put forward over the last couple of years.

Two points from different parts of the opinion can help structure our thinking about constitutional protection for communications data and other digital information. Data is property, which can be unconstitutionally seized.

As cases like this often do, the decision spends much time on niceties like standing to sue. In that discussion—finding that the ACLU indeed has legal standing to challenge government collection of its calling data—the court parried the government’s argument that the ACLU suffers no offense until its data is searched.

“The Fourth Amendment protects against unreasonable searches and seizures,” the court emphasized. Data is a thing that can be owned, and when the government takes someone’s data, it is seized.

In this situation, the data is owned jointly by telecommunications companies and their customers. The companies hold it subject to obligations they owe their customers limiting what they can do with it. Think of covenants that run with land. These covenants run with data for the benefit of the customer.

Montana Reins in Civil Asset Forfeiture

It’s been a nice few weeks for civil liberties in Montana.  On the heels of the nation’s most comprehensive restrictions on police militarization, Montana Governor Steve Bullock (D) has signed a bill reforming civil asset forfeiture in the state.

HB463 requires a criminal conviction before seized property can be forfeited, requires that seized property be shown by “clear and convincing evidence” to be connected to the criminal activity, and bolsters the defenses for innocent owners by shifting the burden of proof to the government.

The effort was spearheaded by State Representative Kelly McCarthy (D), who credited the work of the Institute for Justice and other civil liberties organizations for bringing the abuses of civil asset forfeiture to light.

McCarthy told the Daily Caller News Foundation:

“After looking into Montana laws and working with the Institute for Justice, we found that our laws provided no greater property rights protections than those states who were identified with rampant abuse, (Texas, Kentucky, Pennsylvania, Virginia, etc.).

From that time I began meeting with stakeholders and working on the bill.”

Montana is now the second state in less than a month to heavily restrict state-level civil asset forfeiture, following New Mexico. It must be noted that the Montana reforms are less robust than those that passed in New Mexico last month. 

Unlike the New Mexico law, the Montana law does not restrict law enforcement agencies’ exploitation of federal forfeiture laws that maintain the lower burdens of proof and the civil proceedings that Montana now restricts at the state level. The bill also allows Montana law enforcement to keep the proceeds of their seizures, whereas the New Mexico law requires that such proceeds be deposited into the general fund, thus depriving police of any profit motive for initiating seizures.

That said, the Montana law represents substantial progress for a state that the Institute for Justice labeled “terrible” on civil asset forfeiture, and all those who worked for its passage should be commended for striking a blow in favor of due process and property rights.

That a traditionally red state like Montana with a Democratic governor and a traditionally blue state like New Mexico with a Republican governor have both passed substantial civil asset forfeiture reforms this year is a testament to the bipartisan consensus building around restricting this inherently abusive practice.