Habeas and GITMO

There was an important habeas ruling from the D.C. Court of Appeals yesterday.  The Bush administration likes to deflect questions about its policies with rhetoric like “terrorists shouldn’t be clogging our courts with complaints about bad food at Guantanamo.”  The legal stakes are actually quite serious and will affect not only aliens imprisoned outside the United States but Americans as well.  As the report notes, the legal action will move up to the Supreme Court eventually. 

For Cato work related to the writ of habeas corpus, go here and here (pdf).

Prior coverage of this matter here and here.

Philip Morris v. Williams and Class Actions

Yesterday, the Supreme Court decided–five to four–to strike down a punitive damage judgment against Philip Morris under the Due Process Clause.  (Cato, for the record, filed this brief in the case, written by deterrence theorists Steven Shavell and A. Mitchell Polinsky). For commentary on the case, see here and here.  You can watch me talk about the case on CNBC here.

For my money, the most interesting, and potentially far-reaching, implication of the decision is for class actions seeking punitive damages.  

On page 5 of the slip opinion, the Court says that “the Due Process Clause” prohibits a State from punishing an individual “without first providing that individual with ‘an opportunity to present every available defense.’”

That quoted language (from a non-punitives decision, Lindsey v. Normet) hasn’t appeared in the Supreme Court’s other punitive damage cases.  Its appearance here is significant, because Lindsey’s broad, bright-line language is often invoked by defendants in very large class actions, even those that don’t involve punitive damages.  Their argument goes like this:  When courts ”certify” (authorize) a very large class action, they violate due process if the very scale of the suit prevents defendants from raising individualized defenses that are otherwise available under the statute.  Expect Williams to be cited extensively by class action defendants, particularly in class actions seeking punitive damages.

It’s fairly easy to see why Williams is such a boost for these defendants by looking at the Ninth Circuit’s recent decision in Dukes v. Wal-Mart–which upholds a trial court order certifying 1.5 million gender discrimination claims, seeking $11.5 billion in punitive damages and lost pay. 

As the trial court acknowledged, individualized hearings on employees’ claims—the usual practice in later stages of Title VII cases—were impractical in a class action of the mammoth scale envisioned.  The trial court therefore allowed liability and remedies to be proven based on statistical evidence and formulas, barring defendants from making individualized showings that particular employees weren’t discriminated against in fact.   

Wal-Mart, in turn, argued its due process rights had been violated, because it had been deprived of defenses to which it was entitled.  ”In an individual case,” said Wal-Mart, it could present individualized evidence “to establish a complete defense to liability or preclude the entry of a backpay or punitive damage award.” The Rules Enabling Act guarantees the availability of that kind of defense in a class action to the same extent it is available in an individual case.  Given the punitive damage request, Wal-Mart argued, due process prohibited the court from depriving Wal-Mart of its entitlement to raise such individualized defenses.

Williams gives Wal-Mart much more ammunition than past punitive cases to argue this point on appeal to the Supreme Court.  To be sure, the Court’s aside that “it may be appropriate to consider the reasonableness of a punitive damages award in light of the potential harm the defendant’s conduct could have caused” (emphasis added) throws a possible lifeline to the Dukes plaintiffs.  That allows them to argue that a “rough” statistical measure of the harm that “could have been caused” to individual class members is all the proof necessary to anchor punitive damages in large antidiscrimination classes.  Indeed, the trial court in Dukes envisions exactly such a probabilistic measure at the remedies stage of the trial:  “[O]nly those class members who can make a showing that they were either actually harmed by the discriminatory policy or were at least ‘a potential victim of the proved discrimination’ are eligible to recover [lost pay and, therefore, punitive damages].”

This expansive reading of “potential harm” is, however, inconsistent with the Supreme Court’s careful caveat in BMW v. Gore.  There, the Court said that “potential harm” that can anchor a punitive damages award is confined to additional harm to persons who have actually been injured – for example, added harm that was “likely to result” if a defendant’s wrongful scheme hadn’t been prematurely interrupted.  That’s quite a bit narrower than the expansive concept of “potential harm” used in Dukes, which embraces guesstimates about whether any injury occurred at all.

As a result, Willliams, read in the context of previous cases, scores trouble for large-scale punitive damage classes.

Fine-Tuning Competition

The Washington Post reports today that the Justice Department has ordered Arcelor Mittal (the world’s biggest steel company) to sell off its Sparrows Point mill in Baltimore “to preserve competition in the eastern U.S. tin mill market.” 

Prior to the Arcelor-Mittal merger last year, three firms supplied most of the tin mill products (steel used for food, paint, and aerosol cans, etc.) consumed in the eastern United States: U.S. Steel, Mittal, and a Canadian subsidiary of Arcelor.  Post-merger, only two firms supply most of the tin to that market and the Justice Department deems that to be a threat to competition. 

Interestingly, just eight months ago, the U.S. International Trade Commission voted to continue antidumping restraints against tin mill products from Japan, citing a domestic industry that was vulnerable to a recurrence of injury from imports in the foreseeable future. 

So, while the Justice Department forces companies to break up to promote competition, the ITC sanctions duties to quell it.  If both agencies took long sabbaticals, I suspect the competition thing would resolve itself.

European Nations Fail to Ease Regulatory Burdens

The European Commission is notorious for cranking out new red tape, so it is somewhat ironic that the bureaucrats have been lecturing member nations to reduce their regulatory burdens. Presumably, the Commission thinks that supra-national regulations are good, whereas national regulations are bad. This does not make much sense, but it is a bit of a moot issue since national governments are refusing to make binding commitments for deregulation. As the EU Observer reports, the economic costs of excessive regulation are substantial:

EU industry ministers have dealt a blow to the European Commission’s “better regulation” agenda by refusing binding targets to cut national bureaucracy which accounts for half of the bloc’s administrative costs. … The commission believes red tape reduction would boost the EU economy with the equivalent of 3.5 percent of GDP and free up an estimated €150 billion for investment. But although there has been a lot of rhetoric in favour of the initiative, it is proving difficult to implement both at EU and national level. … While the UK, the Netherlands, Sweden and Denmark argued in favour of the national red tape cuts, most other delegations were against any fixed goals. Mr Verheugen admitted the commission has no power to force the governments into anything more than they have agreed - given that national legislation and competences are at stake.

War of the Amateur Education Analysts

Here’s Apple’s Steve Jobs on education policy:

“I believe that what is wrong with our schools in this nation is that they have become unionized in the worst possible way,” the Apple CEO told a school-reform conference in Texas on Saturday. “This unionization and lifetime employment of K-12 teachers is off-the-charts crazy.”

But it’s not a news story.  This is from a column by Wired’s Leander Kahney, who goes on to say: 

Jobs knows a lot about schools; he’s been selling computers to them for more than 30 years. But don’t you love it when a billionaire who sends his own kids to private school applies half-baked business platitudes to complex problems like schools? I’m surprised Jobs didn’t suggest we outsource education to the same nonunion Chinese factories that build his iPods.

It’s amazing to see a thoughtful technology writer heap derision on education reform as if the innovation and creativity in the highly competitive technology field somehow can’t happen elsewhere.  Schools have “complex problems” … .  Designing and marketing consumer electronics is pat-a-cake?

Luckily, Tim Lee is on the case.  Writing at Technology Liberation Front, he says:

In his conclusion, Kahney chalks up our poor educational performance to “enormous economic inequality and the total absence of social safety nets.” I wonder if it’s occurred to Kahney that one of the major contributors to economic inequality is our quasi-feudal education system, in which access to a good school is tied to your parents’ ability to purchase a home in a good school district (or to afford tuition at a private school)? The whole point of school choice is to give low-income parents the same opportunities that wealthier parents now enjoy—to send their children to the school that works best for their own child. If Mr. Kahney is concerned about inequality, supporting school choice should be a no-brainer.

Don’t Fly the Unfriendly English Skies

One of the benefits of tax competition is that there is a feedback mechanism that tells politicians they made a mistake. If taxes are too high in one jurisdiction, politicians lose money as economic activity shifts to another jurisdiction. The latest example of this liberalizing process comes from the United Kingdom. The Labour government just imposed new taxes on airline travel that will boost ticket prices by as much as $159 – even if London is the hub for travel elsewhere. As the Wall Street Journal explains, this is good news for other nations since airline customers now are looking to use cities such as Amsterdam as their gateway to Europe:

You may want to steer clear of London. Thanks to a new U.K. ticket tax that took effect February 1, passengers who fly into or through London airports will pay new taxes and fees that can add up to $159 to the cost of a ticket. This levy was the brainchild of Chancellor of the Exchequer Gordon Brown and is being applied retroactively. So even if you bought your plane ticket last year, you’ll get socked with the tax surcharge. The tax has infuriated both U.S. and British airlines, to say nothing of their passengers. “It’s a major league headache for all our air carriers who fly to London and are trying to collect this retroactive tax,” says Jim May of the U.S. Air Transport Association. A spokesman for British Airways, which has been struggling financially, calls the new tax “completely unfair.” Ryanair’s Web site describes Mr. Brown as “greedy Gordon” and his tax as “the great plane robbery.” The new tax comes on the heels of other highly publicized problems at Heathrow, including a breakdown in the baggage handling system and security delays. Consumeraffairs.com reports that one consequence is that more and more American travelers are investigating Amsterdam as an alternative hub for discount flights in and out of Europe.

Swiss People and Swiss Cantons Reject Fiscal Interference from Brussels

The Neue Zuricher Zeitung reports that an overwhelming majority of Swiss voters are opposed to attacks on their nation’s fiscal sovereignty. The story also quotes Switzerland’s Finance Minister, who notes that the European Union would have a hard time getting unanimous agreement in order to impose sanctions: 

A new survey shows that…[t]hree-quarters said they opposed any interference from Brussels… The poll of more than 1,000 people was commissioned by the SonntagsZeitung newspaper. …Many EU countries are angry that tax revenues are being lost as companies relocate to Switzerland - mainly to small cantons which offer low levies. …The survey results also hinted that the latest dispute has put the EU in a worse light among the Swiss. Only 41 per cent said they favoured providing financial aid for the latest EU member states, Romania and Bulgaria, as requested by the EU earlier this year. …[Swiss Finance Minister Merz] said Brussels would need unanimity from its member states to succeed with its attack on Switzerland’s tax regime, but that, he said, was unlikely since some EU countries also offer similar tax breaks. Merz said Switzerland did not want to set a dangerous precedent. “It could reach the point where the EU demands that we double the rate of our Value Added Tax so it’s in line with the EU average,” he warned.

Equally important, Swissinfo.org reports that cantonal governments also reject meddling by the European Commission. And since any change to Swiss policy would require approval from a majority of voters and a majority of cantons, the Euro-crats face an uphill battle in their campaign to hinder tax competition:

Swiss cantons say the latest European Commission attack on Swiss corporate tax breaks will fail without a referendum to end the cantons’ financial independence. …The report was presented to the Swiss federal authorities, but central government would be powerless to make the cantons cooperate even if ministers changed their position of defending the system. “The Commission clearly does not understand our political system. The federal authorities have no say in this matter,” Kurt Stalder, secretary of the Conference of Cantonal Finance Directors, told swissinfo ahead of the EC report. “It is written into our laws that cantons set their own taxes and there must be a national referendum to change this. The people have had numerous invitations to make a change in the last few years but they have always voted to accept the system.” Stalder added that the 26 cantonal finance heads had voiced a unanimous resolution to resist pressure from Europe during a recent meeting of the Commission.