Topic: Law and Civil Liberties

A Tyranny of Silence: One Journalist’s Battle Against Modern-Day Restrictions on Free Speech

In their effort to provide the public with information about controversial yet important world events, journalists face constant intimidation. Whether it takes an extreme form—such as beheading or death threats—or a less violent one—like government censorship or enforced political correctness—it nonetheless constricts their ability to convey truthful information about key issues.

No one knows this better than Flemming Rose.

In 2006,  the Danish newspaper Jyllands-Posten published 12 cartoons of the prophet Muhammad, stoking the fires of a worldwide debate about what limits—if any—should constrain freedom of speech in the 21st century.

Rose, then the paper’s culture editor, defended the decision to print the drawings, quickly becoming the target of death threats and more, all of which he recounts in his new book, published by the Cato Institute.

In The Tyranny of Silence: How One Cartoon Ignited a Global Debate on the Future of Free Speech, Rose provides a personal account of an event that has shaped the global debate about what it means to be a citizen in a democracy and how to coexist in a world that is increasingly multicultural, multireligious, and multiethnic. Rose writes about the people and experiences that have influenced his understanding of the crisis—including meetings with dissidents from the former Soviet Union and ex-Muslims living in Europe—and takes a hard look at the slippery slope of attempts to limit free speech.

Rose’s message clearly resonates with lovers of liberty around the world. A special one-on-one conversation between Rose and Jonathan Rauch of the Brookings Institution, hosted at the Cato Institute in mid-November, saw over 100 in-person attendees with another 53 people tuning in online.

That impressive showing, however, was far outpaced by the mass response to Cato’s very first Reddit AMA, featuring Rose, which has been viewed well over 200,000 times since it was first published on November 13th, and continues to draw thousands of Reddit viewers every hour, almost two weeks later.

Rose’s AMA, entitled “I am a journalist and free speech advocate who has received hundreds of death threats since 2006. AMA,” quickly broke into the top ten discussions on the iAMA forum that week. As questions continues pouring in, Rose sat down for a second full hour session the day after the original session was scheduled.

You should definitely read the AMA yourself, but here are some highlights:

Enjoyed the discussion? You can read the whole thing here. And, of course, don’t forget to buy the book to read all of Rose’s harrowing tale.

Will the Third Time Be the Charm as the Supreme Court Again Takes Up a Controversial Theory of Racial “Discrimination”?

Title VIII of the Civil Rights Act, also known as the Fair Housing Act (FHA), makes it illegal to deny someone housing on the basis of race and other protected characteristics. Applicable to governments, private entities, and individuals, the FHA prohibits racially discriminatory practices in most if not all transactions relating to housing.

For example, a landlord can’t refuse to rent an apartment to an otherwise qualified tenant, solely on the basis of race. Similarly, banks and credit unions can’t take a borrower’s race into account when deciding whether and on what terms to extend credit for the purpose of buying a home.

While it’s clear that the FHA bars such discriminatory intent, it remains an open question whether it covers claims of “disparate impact,” where a neutral policy disproportionately harms members of the protected class. Under this theory, a landlord insisting that all applicants pass a credit check could be held liable if it turns out that applicants from one protected group are disproportionately unlikely to have a sufficiently high credit score. That landlord would be held liable even though a satisfactory credit score is required of all potential tenants, regardless of race, and the landlord’s only intent was the (perfectly legal) desire to avoid tenants who would get behind on their rent—not to deny housing to any particular group.

In the decades since the FHA was passed, disparate impact has been used by the government and private litigants to exact tens of millions of dollars in fines and settlements from banks and developers whose facially neutral policies were alleged to have excluded members of a protected class from the housing market. The problem is that unlike with other anti-discrimination laws, such as the Americans with Disabilities Act—which expressly prohibits policies that have a disparate impact—the text of the FHA explicitly forbids only intentional discrimination.

Obama’s Executive Action Is Good Policy, Bad Law, and Terrible Precedent

In an excellent speech combining reasoned policy arguments, appeals to American ideals, touching anecdotes, and well-selected Scripture, President Obama launched significant positive reforms to an immigration (non-)system that I’ve long called the worst part of the U.S. government (at least before Obamacare). Unfortunately, the centerpiece of this action, the legalization of around five million people who are in the country illegally—mostly the parents of U.S. citizens and green-card holders—is beyond the powers of the president acting alone.

To be sure, the relevant statutes give executive branch officials very broad discretion in how they enforce immigration laws. For example, Section 212(d)(5)(A) gives the Secretary of Homeland Security the “case-by-case” discretion to “parole” for “urgent humanitarian reasons or significant public benefit” an alien applying for admission. The authorization for “deferred action”—a decision not to seek deportation and concomittant authorization to reside and work legally, which was the basis for Obama’s 2012 Deferred Action for Childhood Arrivals program—is similarly broad.

And all modern presidents, from both parties, have used such discretionary powers. President Ronald Reagan’s Justice Department issued regulations to comport with the family-unity provisions of the 1986 Immigration Reform and Control Act. President George H.W. Bush temporarily expanded the category of undocumented children and spouses eligible to stay in the country before Congress formalized their status. President Bill Clinton deferred action on illegal immigrants from Haiti during that country’s convulsions in the 1990s—one example of many relating to executive discretion regarding nationals of war-torn nations—while President George W. Bush took various actions regarding illegal aliens in areas affected by Hurricane Katrina. These are just a few examples, but they’re all different from what President Obama is doing, both qualitatively—discrete and temporary versus open-ended and potentially timeless—and quantitatively. (See here and here for contrasts between Reagan/Bush and Obama.)

But don’t take it from me. Here are a few solid arguments that were made by a noted constitutional lawyer over the last several years:

  • “Comprehensive reform, that’s how we’re going to solve this problem…. Anybody who tells you it’s going to be easy or that [the president] can wave a magic wand and make it happen hasn’t been paying attention to how this town works.” (March 10, 2010)
  • “America is a nation of laws, which means [the President is] obligated to enforce the law…. With respect to the notion that [the president] can just suspend deportations through executive order, that’s just not the case, because there are laws on the books that Congress has passed…. [W]e’ve got three branches of government. Congress passes the law. The executive branch’s job is to enforce and implement those laws. And then the judiciary has to interpret the laws. There are enough laws on the books by Congress that are very clear in terms of how we have to enforce our immigration system that for me to simply through executive order ignore those congressional mandates would not conform with [Obama’s] appropriate role as President.” (March 28, 2011)
  • “If this was an issue that [the president] could do unilaterally, [Obama] would have done it a long time ago…. The way our system works is Congress has to pass legislation. [The president] then get[s] an opportunity to sign it and implement it.” (Jan. 30, 2013)

Government Must Honor Its Contracts

Virtually every aspect of government’s work depends on contracts, whether they be with manufacturers of naval ships, civilian contractors, the companies that sell office supplies, or the landlords who lease the office space that houses the vast bureaucracy. These contracts, like any contract, only work when both parties have legal certainty; each must be able to depend on the promises made by the other.

That said, federal contractors do have to assume less certainty when dealing with the government because the Supreme Court has held that contracts can’t bind Congress from passing new legislation, or agencies from adopting new regulations. For example, while the government could enter into a contract promising to buy 100 widgets, Congress could pass a law making it illegal to manufacture or sell widgets—effectively voiding the agreement.

In the case of Century Exploration v. United States, an energy company leased the rights to an oil field in the Gulf of Mexico owned by the government for $23 million dollars up front, and $50,000 per year of the lease. Because oil drilling is a heavily regulated industry, Century only felt safe spending that kind of money because the lease contained a promise that Century wouldn’t be subject to any changes to the law that the government might make in the future, except for a specific class of regulations created under the authority of a single statute, the Outer Continental Shelf Lands Act (OSCLA). Without this promise, there would have been nothing to stop the government from taking Century Exploration’s money and then outlawing drilling in the Gulf of Mexico, or passing new regulations that would make it prohibitively expensive for Century to make use of the leased plot.

Unfortunately, the government did the very thing it promised not to. Under the Oil Pollution Act (OPA), drilling companies have to calculate the volume of oil that would be released in a “worst case scenario” and prove that they have the financial resources to fund cleanup efforts. The method for calculating the amount of oil, and the cost of cleanup, are governed by regulations issued under the OPA. Two years into Century’s lease, however, a civil servant in the Interior Department sent the company an email demanding a recalculation of the “worst case scenario” using a more extreme methodology contained in an attached FAQ. Using that new method, the cost of cleaning up a hypothetical spill increased from $4.5 million to $1.8 billion. Because Century couldn’t prove that it would have $1.8 billion on-hand in the event of a disaster, it could no longer operate on the leased plot.

Century appealed to the courts, relying on a 2000 case called Mobil Oil in which the Supreme Court interpreted a nearly identical lease to mean that the government would breach its contract if it tried to apply new laws or regulations to the leaseholders (except, again, for regulations under OSCLA). Under Mobil Oil, unilaterally changing the method of calculating the volume and cost of a spill would be just such a breach; the regulatory changes were made under the OPA, not OSCLA, and the changes were made by email, not by formal regulation. The government insisted it had done no wrong and, remarkably, the U.S. Court for the Federal Circuit agreed.

Cato has filed an amicus brief urging the Supreme Court to review this case and make clear that the government can’t violate contractual obligations with impunity. We make two key points:

There’s Room for Direct Democracy in a Republic

Not many people know that there’s a clause in the Constitution that charges Congress with guaranteeing every state a “republican form of government.” Even fewer people are aware of exactly what that means.

Historically, the Guarantee Clause is considered to have been a measure the Framers included to ensure that the governments of the states—which used to have far greater autonomy—didn’t devolve into monarchies or other despotic forms. But the clause’s legal effect has never been fully fleshed out. Not that there haven’t been opportunities; claims based on the Guarantee Clause are peppered throughout U.S. history. Courts have typically disposed of them by invoking the political question doctrine, which they use to avoid deciding an issue they believe is more appropriately left to the elected branches. Since there’s no legally binding definition of “republican,” a court applying the Guarantee Clause has little to work with, also contributing to the tendency to treat such cases as non-justiciable.

Accordingly, when a group of legislators and citizens groups supporting big government banded together to attack Colorado’s Taxpayer Bill of Rights (TABOR) based on a Guarantee Clause claim, it seemed like a longshot. Their theory was that the state no longer had a republican form of government because the TABOR—a voter-approved state constitutional amendment—restricts the legislature’s ability to raise taxes without approval from the people of Colorado.

Colorado Gov. John Hickenlooper (D), defending the state’s constitution, moved to dismiss the case in federal district court but, surprisingly, lost the motion. Even more surprisingly, a panel of the U.S. Court of Appeals for the Tenth Circuit affirmed that denial, which meant that the plaintiffs’ claims could go to trial and jeopardize the continued existence of the state’s popular anti-tax measure. Colorado has one more chance, however, to prevent poorly constructed Guarantee Clause claims from being heard in federal courts and thus jeopardizing the dozens of state constitutional measures that use popular input: the Supreme Court.

Governor Hickenlooper has filed a petition for certiorari requesting that the Supreme Court, among other things, put to bed the erroneous notion that elements of direct popular participation and direct democracy can’t exist in a republican government. Joined by the Independence Institute, Reason Foundation, and Individual Rights Foundation, Cato has filed a brief supporting Colorado’s petition. We argue that the Court should hear the case so it can inform the lower courts that pretextual Guarantee Clause claims don’t belong in federal courts.

We give three reasons for this position. First, the plaintiffs’ complaint fails to provide a court with legal standards coherent enough to decide the case under the Guarantee Clause. Second, under Supreme Court precedent, the idea that initiatives and referenda are incompatible with republican government was resolved (and rejected) when Congress admitted states that used these popular procedures into the union. Third, even a brief look at the history of the Founding Era’s understanding of the words “republic” and “republican” dispels the myth on which the plaintiffs base their claim: that direct popular participation is incompatible with the republican form. Our brief provides that historical context.

In sum, the suggestion that the Guarantee Clause—meant to ensure that state governments would remain governments “of the people” and wouldn’t revert to despotic monarchies—could be used to wrest greater control of the taxing power from the people makes the plaintiffs’ claims risible. The Supreme Court should take this opportunity to hear Hickenlooper v. Kerr and put an end to this case.

Freedom of Contract in Corporate Governance: Let Bylaws Be Bylaws

To the extent America has made progress in recent years in rolling back the extreme litigiousness of earlier years, one main reason has been the courts’ increased willingness to respect the libertarian and classical liberal principle of freedom of contract. Most legal disputes arise between parties with prior dealings, and if they have been left free in those dealings to specify who bears the risks when things go wrong, the result will often be to cut off the need for expensive and open-ended litigation afterward. Thus the courts’ willingness to enforce agreements to arbitrate disputes, rather than run to court, has played a major role in curbing what once looked like an ever-rising tide of workplace and consumer class action litigation. “Shrinkwrap” or “clickwrap” disclaimers of liability, despite their occasional absurdities, serve the very practical function of ensuring that when information technology or online services go wrong the result is not to sink providers in limitless liability over the consequences of data loss to buyers. And recognizing libertarian principles of free contract would be among the most promising ways to reduce the glaring costs and injustices of medical liability litigation, as Richard Epstein argued in his very early (1976!) paper, Medical Malpractice: The Case for Contract.  

In May, in a case named ATP Tour v. Deutscher Tennis Bund, the Delaware Supreme Court decided to enforce as written a corporate bylaw adopted by an enterprise incorporated in Delaware providing for a loser-pays rule in cases of claims against it by shareholders. Almost at once, the community of practicing Delaware corporate litigators, as well as plaintiff’s class action lawyers across the country, protested loudly: such a rule, by putting claimants at risk of their own money, would discourage all but the strongest claims (and, not incidentally, cut into counsels’ own livelihood of prosecuting and defending such claims). They demanded that the Delaware legislature step in to ban such bylaws and restore the legal status quo ante, along with its accompanying flow of litigation. Within weeks, the legislature was on the verge of passing such a ban, only to pull back when the national business community raised an uproar of its own to defend letting the bylaw experiment go forward

Prof. Steve Bainbridge, a leading corporate law expert at UCLA, has now published a two-part post on why lawmakers and regulators should leave freedom of contract alone when it comes to such bylaws. In Part One, he recounts the evidence for believing that the business of private class-action shareholder litigation generally serves the interests of the lawyers who run it and not that of investors, transferring money from corporate treasuries (ultimately, from investors themselves) to an essentially identical class of investors following a large haircut of legal fees and costs. Deterrence of fraud, self-dealing, and managerial shirking, while an important objective, is poorly served by the class-action mechanism both because guilty individuals seldom pay and because transactions such as mergers and businesses in volatile markets are routinely sued, and made to pay legal toll, whether their managers have misbehaved or not. The result is a less competitive capital market from which internationally mobile companies and investors are increasingly retreating to more predictable legal regimes in other countries.

In Part Two, Bainbridge brings public choice analysis to bear, noting that Delaware’s sought-after corporate law regime is heavily shaped by the interests of repeat-player lawyers, who want to keep Delaware law efficient enough to keep attracting national businesses to incorporate there, yet not so efficient that it does away with the litigation and advisory opportunities that make for their own livelihood. What constrains them from yielding entirely to self-interest is that there is competition between states. Legislators in Oklahoma have moved to authorize loser-pays bylaws for companies incorporated there, and although it would take a lot to get companies to consider departing Delaware as a preferred state of incorporation, a few episodes like this might do it. Inevitably, hints are now in the air of federal action to put Oklahoma in its place: Sen. Richard Blumenthal (D-CT), a frequent ally of plaintiff’s lawyers, has asked the federal Securities and Exchange Commission to step in to squash the option.

I agree with Bainbridge’s bottom line: approving fee shifting bylaws “is the right answer from a policy perspective.” It’s also the answer that is most respectful of contractual liberty.

The Coming Globalization of the Marijuana Industry

A couple years ago, I speculated about eventual free trade in marijuana. That was before legalization in Colorado and Washington state. The case for trade and globalization of this industry looks stronger now. 

The Economist had a good article recently, taking into account this legalization, and thinking about what the future of the industry looks like. Right now, it’s just a bunch of small companies searching for the right market strategy, but they see consolidation eventually:

As happened with alcohol after the end of Prohibition, and has also happened with tobacco, the pot industry would probably come to be dominated by a few giant corporations.

They note that the tobacco industry has looked into the marijuana sector in the past, and might be well-positioned to run things, although it really could be anyone.

Assuming the current trend of increased acceptance continues, it seems inevitable that the marijuana industry will begin to look like other industries. There will be a few major global players, possibly based in the countries where legalization first happened. There will also be trade and investment disputes, just as there are in industries such as steel, cotton, and aircraft. No doubt the industry will be highly regulated, and regulations often given rise to these complaints.

For example, as the article notes, “Both Colorado and Washington have imposed residency requirements on the owners of marijuana businesses—including anyone with an equity stake.” Why restrict investments from foreigners and others who are not residents of the jurisdiction? No doubt the regulators have some rationale for this, but whether it’s a good one or complies with the various international investment obligations that are now in effect is up for debate.